HIGHWOODS PROPERTIES, INC.HIW
HIGHWOODS PROPERTIES, INC. Fair Value Disclosure
Disclosure About Fair Value of Financial Instruments
The following summarizes the levels of inputs that we use to measure fair value.
Level 1. Quoted prices in active markets for identical assets or liabilities.
Our Level 1 asset is our investment in marketable securities that we use to pay benefits under our non-qualified deferred compensation plan. Our Level 1 liability is our non-qualified deferred compensation obligation. The Company’s Level 1 noncontrolling interests in the Operating Partnership relate to the ownership of Common Units by various individuals and entities other than the Company.
Level 2. Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities.
Our Level 2 assets include the fair value of our mortgages and notes receivable. Our Level 2 liabilities include the fair value of our mortgages and notes payable and interest rate swaps.
The fair value of mortgages and notes receivable and mortgages and notes payable is estimated by the income approach utilizing contractual cash flows and market-based interest rates to approximate the price that would be paid in an orderly transaction between market participants. The fair value of interest rate swaps is determined using the market standard methodology of netting the discounted future fixed cash receipts and the discounted expected variable cash payments. The variable cash payments of interest rate swaps are based on the expectation of future interest rates (forward curves) derived from observed market interest rate curves. In addition, credit valuation adjustments are considered in the fair values to account for potential nonperformance risk, but were concluded to not be significant inputs to the calculation for the periods presented.
Level 3. Unobservable inputs that are supported by little or no market activity and are significant to the fair value of the assets or liabilities.
Our Level 3 assets include any real estate assets recorded at fair value on a non-recurring basis as a result of our quarterly impairment analysis, which are valued using unobservable local and national industry market data such as comparable sales, appraisals, brokers’ opinions of value and/or the terms of definitive sales contracts. Significant increases or decreases in any valuation inputs in isolation would result in a significantly lower or higher fair value measurement.
The following table sets forth our assets and liabilities and the Company’s noncontrolling interests in the Operating Partnership that are measured or disclosed at fair value within the fair value hierarchy:
| Level 1 | Level 2 | Level 3 | |||||||||||||||||||||
| Total | Quoted Prices in Active Markets for Identical Assets or Liabilities | Significant Observable Inputs | Significant Unobservable Inputs | ||||||||||||||||||||
| Fair Value as of December 31, 2025: | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
Mortgages and notes receivable, at fair value (1) | $ | 12,228 | $ | — | $ | 12,228 | $ | — | |||||||||||||||
Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets) | 1,396 | 1,396 | — | — | |||||||||||||||||||
| Total Assets | $ | 13,624 | $ | 1,396 | $ | 12,228 | $ | — | |||||||||||||||
| Noncontrolling Interests in the Operating Partnership | $ | 52,777 | $ | 52,777 | $ | — | $ | — | |||||||||||||||
| Liabilities: | |||||||||||||||||||||||
Mortgages and notes payable, net, at fair value (1) | $ | 3,471,003 | $ | — | $ | 3,471,003 | $ | — | |||||||||||||||
Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and other liabilities) | 1,396 | 1,396 | — | — | |||||||||||||||||||
| Total Liabilities | $ | 3,472,399 | $ | 1,396 | $ | 3,471,003 | $ | — | |||||||||||||||
| Fair Value as of December 31, 2024: | |||||||||||||||||||||||
| Assets: | |||||||||||||||||||||||
Mortgages and notes receivable, at fair value (1) | $ | 11,064 | $ | — | $ | 11,064 | $ | — | |||||||||||||||
Marketable securities of non-qualified deferred compensation plan (in prepaid expenses and other assets) | 2,295 | 2,295 | — | — | |||||||||||||||||||
| Impaired real estate assets | 26,740 | — | — | 26,740 | |||||||||||||||||||
| Total Assets | $ | 40,099 | $ | 2,295 | $ | 11,064 | $ | 26,740 | |||||||||||||||
| Noncontrolling Interests in the Operating Partnership | $ | 65,791 | $ | 65,791 | $ | — | $ | — | |||||||||||||||
| Liabilities: | |||||||||||||||||||||||
Mortgages and notes payable, net, at fair value (1) | $ | 3,097,323 | $ | — | $ | 3,097,323 | $ | — | |||||||||||||||
Non-qualified deferred compensation obligation (in accounts payable, accrued expenses and other liabilities) | 2,295 | 2,295 | — | — | |||||||||||||||||||
| Total Liabilities | $ | 3,099,618 | $ | 2,295 | $ | 3,097,323 | $ | — | |||||||||||||||
__________
(1) Amounts are not recorded at fair value on our Consolidated Balance Sheets as of December 31, 2025 and 2024.
The Level 3 impaired real estate assets measured at a fair value of $19.6 million in the third quarter of 2025 consisted of two non-core, out-of-service assets at Century Center in Atlanta. For one of the Century Center assets, the impairment resulted from a change in our assumptions about the use of the asset. We determined that the highest and best use of this asset is residential and that the existing out-of-service office building will ultimately be demolished, either by us or an eventual buyer of the site. We estimated the fair value of this asset by using the sales comparison method, net of estimated demolition costs from construction bids received, as observable inputs were not available. For the other Century Center asset, the impairment resulted from a decrease in our estimate of fair value based on the market approach, as observable inputs were not available.
The Level 3 impaired real estate assets measured at a fair value of $26.7 million in the fourth quarter of 2024 included 625 Liberty, a non-core office building in CBD Pittsburgh. This impairment resulted from a change in our assumptions about the use of the asset. We estimated the fair value using a discounted cash flow analysis. We also used information from a broker’s opinion of value, which incorporates an income approach, as observable inputs were not available. Key assumptions used in the impairment calculation were an estimated discount rate ranging from 16.7% to 19.9% and an estimated terminal capitalization rate of 9.5%.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 10, 2026 | Showing above |
| 2024 | Feb 11, 2025 | |
| 2023 | Feb 6, 2024 | |
| 2022 | Feb 7, 2023 | |
| 2021 | Feb 8, 2022 | |
| 2020 | Feb 9, 2021 | |
| 2019 | Feb 4, 2020 | |
| 2018 | Feb 5, 2019 | |
| 2017 | Feb 6, 2018 | |
| 2016 | Feb 7, 2017 | |
| 2015 | Feb 9, 2016 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.