Good morning. Thank you for attending today's Highwoods Properties Q4 2024 Earnings Call. My name is Tamia, and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call. I would now like to pass the conference over to your host, Brendan Maiorana, Chief Financial Officer. You may proceed.

Thank you, operator and good morning everyone. Joining me on the call this morning are Ted Klinck, our Chief Executive Officer; and Brian Leary, our Chief Operating Officer. For your convenience, today's prepared remarks have been posted on the web. If you have not received yesterday's earnings release or supplemental, they're both available on the Investors section of our website at highwoods.com. On today's call, our review will include non-GAAP measures such as FFO, NOI and EBITDAR. The release and supplemental include a reconciliation of these non-GAAP measures to the most directly comparable GAAP financial measures. Forward-looking statements made during today's call are subject to risks and uncertainties. These risks and uncertainties are discussed at length in our press releases as well as our SEC filings. As you know, actual events and results can differ materially from these forward-looking statements, and the company does not undertake a duty to update any forward-looking statements. With that, I'll turn the call over to Ted.

Thanks, Brendan, and good morning, everyone. Before I talk about our exceptional fourth quarter and full year of leasing, I’d like to start by outlining the significant growth potential we have over the next few years. First, we have significant upside potential in our core operating portfolio. For several years, we have been transparent about large customer move-outs that we knew would be occurring in late 2024 and early 2025. These are now upon us, which has driven occupancy well below stabilized levels and resulted in temporarily low NOI, FFO and cash flow. Importantly, the bulk of this vacancy is concentrated in four core buildings, some of which we have already backfilled but where occupancy hasn’t yet commenced and others where we have good prospect activity. Compared to our 2025 outlook, these four buildings have over $25 million of stabilized annual NOI upside and even more meaningful growth in annual cash flow. Second, we have significant upside potential as our development pipeline continues to deliver and stabilize. We have two development properties that have delivered, but haven’t yet stabilized, GlenLake Three in Raleigh and Granite Park Six in Dallas, where leasing activity is robust with 142,000 square feet signed in the last quarter alone and strong prospects for additional space. The annual NOI upside upon stabilization of these two high-quality development projects, compared to our 2025 outlook, is nearly $10 million. Importantly, because we are no longer capitalizing any costs on these projects, all NOI growth will drop to bottom-line FFO and cash flow. Plus, we have two additional developments, 23Springs in Uptown Dallas and Midtown East in Tampa’s Westshore BBD, that will deliver this year and are projected to generate over $20 million of annual NOI upon stabilization. Third, we have significant upside potential from future investments. We believe there will be compelling acquisition opportunities during 2025. As you know from last Monday’s press release, in late 2024 and early 2025 we proactively raised $215 million with non-core dispositions and equity issued through our ATM program to bolster our dry powder. We expect to deploy this capital during the year by acquiring high-quality assets with strong cash flows and meaningful long-term upside. None of this potential future growth is included in our initial 2025 FFO outlook. Given the embedded upside within our operating portfolio and development pipeline combined with meaningful dry powder, we could not be more excited about the next few years. Now, turning to our fourth quarter and full year 2024 performance. The fourth quarter was a repeat of the first three quarters of 2024. Solid financial results coupled with very strong leasing activity set the foundation for growth in late 2025 and beyond. In the fourth quarter, we delivered FFO of $0.85 per share, in-line with our outlook, including $0.01 of non-cash write-offs that were not in our outlook. For the full year, FFO was $3.61 per share, almost 2% higher than the midpoint of our original outlook provided last February despite selling over $100 million of non-core properties and interest rates that remained higher than expected, neither of which were included in our original outlook. Our robust leasing volume and economics were the standout of the fourth quarter and full year. During the quarter, we leased 1.3 million square feet of second generation space, including 370,000 square feet of new leases, plus nearly 100,000 square feet of net expansions. Our total second generation leasing volume for the year was 4 million square feet and our weighted average lease term was 7.5 years, the highest in our history. This strong volume combined with lengthy terms demonstrates that businesses are willing to commit to their in-office workplace strategy if they can secure commute-worthy buildings in BBD locations with financially strong landlords. To this end, during the year we signed second generation leases that equate to total cash rent of $1 billion, which is another record for Highwoods, and we signed an additional $140 million of total rent through first generation deals. During the fourth quarter, we renewed our two largest remaining 2026 expirations, both in Raleigh, for over 200,000 square feet combined. Securing these two renewals leaves us with limited large roll in 2026. Starting with the second half of 2025 and extending over the next several years, our rollover exposure is very manageable with very few known move-outs. This optimistic outlook, coupled with the significant volume of signed leases in 2024 that haven’t yet commenced, gives us confidence that we will see meaningful growth in occupancy, NOI and cash flow as we get into late 2025 and beyond. Turning to investments, last week we announced the sale of $166 million of non-core properties in Tampa and Raleigh. These include a 170,000 square foot non-core office building in North Raleigh for $21.4 million in the fourth quarter and three non-core buildings comprising 616,000 square feet in Tampa for $145 million in early February. These properties, which were 88% occupied and 36 years old on average, sold for a combined cash cap rate of 7.8% on projected 2025 NOI. These disposition proceeds are an attractive source of capital, as we look to recycle into new investments over time. We are targeting up to $150 million of additional non-core dispositions this year. Any future sales are not likely to close until after mid-year and are not included in our FFO outlook. In December, we acquired fee simple title to the land underneath our Century Center assets in Atlanta, which consist of 1.7 million square feet of office and 13 acres of developable land. Fee simple ownership provides us long-term flexibility and certainty. We believe there will be attractive acquisition opportunities over the next few years for well-capitalized owners, such as Highwoods. As always, we will be disciplined allocators of shareholder capital. You can expect any new investments will improve our overall portfolio quality, enhance our long-term growth rate and strengthen our cash flows. Our development pipeline is now 59% leased, up from 49% last quarter as we signed 161,000 square feet of first generation leases. We are seeing the most activity at our two completed, but not yet stabilized properties, GlenLake Three in Raleigh and Granite Park Six in Dallas. These properties, which are still a year away from projected stabilization, are a combined 52% leased with healthy prospect activity. Our initial 2025 FFO outlook is $3.26 to $3.44 per share. The outlook includes the approximate $0.10 per share short-term dilutive effect from the $166 million of recent asset sales, the $52 million of equity raised in late 2024 and the purchase of the ground at Century Center. Our same property cash NOI growth outlook is negative 2% to negative 4%. We believe 2025 will be a temporary trough before resuming our trajectory of consistent same-store growth. Before I turn the call over to Brian, I want to further highlight why we are so optimistic about the next few years for Highwoods: first, the long-term outlook for our markets and BBDs is strong. As you know, there is limited new supply expected to be added over the next few years and high-quality blocks of space are being absorbed. Our well-located high-quality portfolio, reputation as a best-in-class operator and strong financial sponsorship positions us to gain market share. Second, the volume of leasing completed over the last several quarters, combined with limited rollover in late 2025 through 2027, has us positioned to grow occupancy, NOI and cash flow as we move into late 2025 and thereafter. Third, we have several core assets with significant NOI growth potential where we have signed leases that won’t contribute meaningfully to 2025 or where prospect activity is strong. Fourth, our development pipeline will deliver and stabilize over the next few years, which we project will result in $30+ million of NOI above our 2025 outlook. And finally, our balance sheet is well-positioned to take advantage of attractive acquisition opportunities we believe will materialize this year. To wrap up, we are not only optimistic because of our markets, portfolio and balance sheet, but also because of our engaged, hard-working and talented teammates who drive our consistent success. I would like to thank our entire Highwoods team for their commitment and tireless dedication. It is their effort that has positioned us so well for the future.

Thank you, Ted. Good morning everyone. Office market fundamentals continue to strengthen, with office employment reaching an all-time high and the return-to-office movement in full swing. Nationally, CBRE reported improvement in the U.S. office market in the fourth quarter, marking the first decline in the overall vacancy rate in three years. For the second consecutive quarter, net absorption outpaced construction completions, with demand for high-quality space in prime locations remaining strong. Notably, sublease availability also decreased as space was either reoccupied by sublessors or absorbed directly into the broader market. CBRE also highlighted a 24% quarter-over-quarter and 23% year-over-year increase in national leasing activity, with the highest quarterly net absorption total in three years. Leasing momentum remained strong across Highwoods' markets. For the first time since the pandemic, positive net absorption for the year surpassed 1 million square feet. The under construction development pipeline has significantly diminished, with few anticipated starts in 2025. The current construction pipeline represents approximately 1% of existing inventory and is 63% pre-leased on average, while the inventory continues to shrink due to conversions and redevelopments. Within our own portfolio and for the full-year, we signed 4 million square feet of second generation leases, including 1.6 million square feet of new deals and 302,000 square feet of expansions. The weighted average lease-term reached a record-high of 7.5 years. We ended the year at 87.1% occupancy, over 700 basis points higher than our markets, and including signed but not yet-commenced leases on vacant space, we ended the year at 89.9% leased. As expected, year-end occupancy dipped due to known fourth quarter expirations. However, the strong leasing activity throughout 2024 positions us for occupancy growth following our long-telegraphed trough in the first half of 2025. As Ted noted previously, total rental revenue from second-generation leases signed was the highest in our history, which combined with signed first generation leases, represents over $1.1 billion and is 140% of our current annualized lease revenue. This robust leasing activity provides a strong foundation for the future. Focusing on the quarter, we signed 106 second generation leases totaling 1.3 million square feet, including 370,000 square feet of new leases. This body of work represented nearly $300 million in contracted revenue. 58% of the fourth quarter’s deal volume were either new leases or expansions. Being proactive with regard to our forward lease roll proved successful in Q4, with major renewals of our largest remaining 2025 and 2026 expirations totaling approximately 300,000 square feet in Nashville and Raleigh. Following our long-communicated occupancy low ahead in 2025, we have only one expiration larger than 100,000 square feet through year-end 2027. On the lease economics front, we achieved net effective rents, which include all leasing costs and concessions, that were 3.6% higher than the previous five-quarter average. Raleigh led our leasing volume in the 4th quarter, with 285,000 square feet of second generation leases signed at an average nine-year term and 17.6% GAAP rent growth. Additionally, first-generation leasing at our GlenLake Three development drove the asset’s leased rate from 34% to 56%. While Ted highlighted our 1.6 million square foot development pipeline’s positive leasing momentum, core to our portfolio’s commute-worthy success is our commitment to being a redeveloper as well. The significant redevelopment or Highwood-tizing of our core portfolio is yielding attractive returns and we are highly focused on deploying this playbook when and where needed. To this end, the Highwood-tizing we’ve completed in Atlanta and Nashville at Two Alliance and the former Tivity building respectively has driven the substantial relet of those buildings. Our planned Highwood-tizing of Symphony Place in downtown Nashville is being well-received by the market. Symphony Place remains an iconic tower on the Nashville skyline, is built to the highest architectural standards and is the beneficiary of a location with unparalleled regional access and connectivity to all that makes Nashville such a compelling destination for talented organizations and individuals. When our redevelopment is completed in the next year, Symphony Place will feature a collection of curated and talent-supportive amenities unmatched in the market. We are encouraged by the early interest in the building and prospect tours. From an operations standpoint, 2025 will be a year of unyielding focus on organic growth within the portfolio by leaning in to gain market share and occupancy via our competitive capital advantage – both in lease economics and the ability to reinvest and redevelop our BBD portfolio. Increased occupancy is the clearest pathway for organically growing NOI and driving meaningful FFO growth. We closed the year with strong leasing momentum, record-setting lease revenue, and a solid foundation for growth. Our strategic investments in redevelopment and proactive leasing initiatives continue to differentiate Highwoods as a leading office owner and operator in our markets. With competitive development pipelines at historic lows and market vacancy peaking, we are well-positioned to capitalize on market opportunities through our resilient portfolio, ongoing redevelopment efforts, strong balance sheet, and our owner-operator advantage. For all of these reasons, we believe the outlook for Highwoods is bright, as we drive long-term value for our stakeholders.

Thanks, Brian. In the fourth quarter, we posted a net loss of $3.7 million, or $0.03 per share, which included a $24.6 million impairment charge for 625 Liberty Avenue, formerly known as EQT Plaza, in Pittsburgh. FFO was $92.2 million, or $0.85 per share which does not include the impairment but does include a $1 million non-cash write-off of pre-development costs. Excluding this write-off, which was not factored into our FFO outlook provided in October, our FFO would have been $0.86 per share, at the high-end of our range. Our balance sheet is in excellent shape. We have no debt maturities until a $200 million floating rate term-loan matures in the second quarter of 2026 and we have no other maturities until 2027. During the quarter, we proactively raised just over $50 million of equity through our ATM program at an average gross price of $32.71 per share. In addition, we sold $166 million of non-core properties in late 2024 and early 2025, including $145 million that closed after year-end. We also invested a little over $50 million to consolidate fee simple ownership of the ground underneath our Century Center properties in Atlanta. Each of these items creates dry powder for the future. With the $145 million of proceeds received from our non-core asset sales in Tampa last week, today we have no balance outstanding on our $750 million revolving line of credit, giving us ample liquidity for future investments and reducing our pro forma debt-to-EBITDA ratio to 6.1 times from 6.3 times at year-end. A few items of note about our recent non-core dispositions. The $166 million combined sale price equates to a cash cap rate of 7.8% on projected 2025 NOI and a GAAP cap rate slightly above 8%. The immediate use of proceeds was to reduce the balance on our revolving line of credit, which is temporarily dilutive to near-term FFO pending redeployment into new investments. Despite the short-term FFO drag, we view these proceeds as an efficient source of capital as the assets sold were older vintage, capital intensive properties in non-BBD locations. Following these dispositions, we expect our cash flows and long-term growth rates to be higher while improving the long-term resiliency and quality of our portfolio. Now on to our 2025 outlook. Our same property cash NOI outlook is minus 2% to minus 4%. Included in our same property pool are four buildings that are projected to be significantly under-occupied with a sharp decline in NOI during 2025. Our historical practice is to keep buildings in the same property pool unless there is a change of use or redevelopment that is so extensive that we move the building to our development page in the supplementary. The effect of keeping these four properties in our same store pool and the sale of the Tampa assets has reduced our 2025 same property growth projection by approximately 500 basis points. As a reminder, we have grown same property cash NOI for 13 consecutive years without taking office buildings out of service, and we believe 2025 will be a temporary trough before resuming our trajectory of consistent same store growth. Our average occupancy outlook is 85% to 86.5%. Similar to NOI, we expect occupancy will dip during the first half of the year given the well-telegraphed moveouts Ted mentioned. Occupancy is projected to decrease around 200 basis points from 4Q’24 to 1Q’25 and then grow later in the year. While we do not provide a year-end occupancy range in our outlook, somewhere between 86% to 87% by year-end is a likely landing spot for our portfolio. Excluding the recently sold properties in Tampa and the four significantly under-occupied buildings I just mentioned, our average occupancy for 2025 would be approximately 350 basis points higher. As Ted mentioned, our FFO range is $3.26 to $3.44 per share. I will start with Q4’24 as a base for modeling 2025. We reported $0.85 per share of FFO, or $0.86 per share excluding the non-cash predevelopment write-offs. Annualizing Q4 and adjusting for traditionally higher G&A in the first quarter due to the expensing of annual equity grants, the Q4 run rate would imply FFO per share for 2025 to be in the low $3.40s. As noted in the release, the recent dispositions, Century Center ground lease acquisition and equity issuances are expected to have an approximate $0.10 dilutive impact on our 2025 FFO. Since the vast majority of the announced dispositions occurred subsequent to year-end, only a modest amount of the dilution was baked into the fourth quarter of 2024. To clarify, these items will reduce the annualized fourth quarter run rate by approximately $0.07 to $0.08 per share. NOI is expected to be lower, particularly in the first half of the year due to the occupancy trajectory I mentioned earlier, but this should be offset by some other income items projected to occur at various points throughout the year. Putting all of those items together would get us to the mid-point of our 2025 outlook. To be clear, we expect occupancy, NOI and FFO to start low and improve later in 2025, which should place us on a strong trajectory as we exit the year and move on to 2026. In summary, as Ted mentioned at the beginning of his remarks, we have significant growth potential from three primary areas. First, we have significant organic growth potential through the lease-up of high-quality core operating properties in strong BBD locations. Second, our development pipeline is projected to drive meaningful NOI and FFO growth with limited Highwoods funding left before completion. Third and finally, our balance sheet is in excellent shape and well-positioned to deploy capital. This doesn’t account for the strong fundamental backdrop we see across our core BBDs. For all of these reasons, we are optimistic about the next several years for Highwoods. Operator, we are now ready for questions.

Thank you. We will now begin the Q&A session. The first comes from Michael Griffin with Citi. You may proceed.

Great. Thanks. Appreciate the color on the leasing outlook. It seems like it's pretty optimistic heading into 2025. Just wanted to get maybe some more color and context on those larger vacancies, whether it is at EQT, Alliance, the properties in Nashville, does your leasing expectations for '25 assume any of those properties have leases executed there? And then would you really need to see that to continue to push positive net absorption within the portfolio?

Michael, it's Brendan. I'll start and then I'll turn it over to Ted and Brian to provide more details. There isn't any leasing included in the occupancy outlook for the core assets with significant vacancies, which are Alliance Center, Symphony Place, Westwood South, and Cool Springs V. There are some leases that have already been completed that will be recognized later in the year. However, the largest law firm deal we secured at Alliance Center is not set to begin until 2026.

Yes, thanks Brendan. Let me just add some details. On each of these core properties, we're referring to the facility in Buckhead, which is the former Novelis space. As you know, we have filled most of that space, but it won't begin until 2026. The next property is the former Tivity building in Cool Springs V. We have signed a lease for 35% of that building and have strong prospects for another 30%. We also have enough potential tenants looking at the remaining space, so we feel we're making great progress there as well. While some activity will happen this year, a lot will occur next year. Westwood South, with its 128,000 square feet, recently had a tenant move out. The space is in excellent condition, and the building is very appealing. We currently have one significant prospect and several smaller ones, which collectively exceed the building's total area. Although it's early, we see promising opportunities there. Lastly, Symphony Place, our property in downtown Nashville, had Bass, Berry vacate in early February, and Pinnacle Bank is set to leave in the third quarter of this year. Our planning for renovations is finalized, and since Bass, Berry has moved out, we will begin construction in the next month. Once completed, as Brian mentioned, it will be one of the most amenitized buildings in Nashville. We have a solid investment in these assets, which positions us well for customers. Tower activities are increasing, which also gives us encouragement.

Thanks, Ted. Appreciate all the color there. Then I think it's encouraging you guys are looking to pivot to offense and these acquisition opportunity sets that you highlighted. Can you give us a sense of the type of buildings that you are targeting for potential acquisitions? Are they more stabilized? Could there be a value-add component if you use your Highwoodtizing secret sauce? And then as it relates to proceeds to fund these acquisitions? Obviously, you've got the disposition proceeds and the equity. I guess my question there, and it's probably better for Brendan, but why not maybe execute on more non-core sales as opposed to issuing equity, just given where you all are trading relative to NAV?

Hi, Michael, I'll start off and then turn it over to Brendan on the funding. So on the acquisition side, I think you are probably aware, we look at everything that's out there from core to opportunistic. We always just look at the risk-adjusted returns and how comfortable we are with wherever the acquisition may be. So we've seen some high-quality buildings trade in the last few months. We've also seen some have gotten pulled because the sellers haven't achieved their pricing expectations. But we think there are going to be opportunities out there, whether it be core or opportunistic that meet our expectations on that. So we're pretty excited about it. It's going to be a similar playbook as we used coming out of the GFC, where we bought a lot of stabilized assets, as well as some opportunistic assets. We're looking to improve the quality of the portfolio, improve our growth rate and improve our cash flows.

Then Michael, just in terms of the capital that we'd be comfortable investing and why not disposition proceeds versus equity. I think we looked at it from a balanced approach. I think we had good visibility in terms of the sale that closed that we announced last week. So that's good proceeds. But then I think we also felt like given the opportunity set that was in front of us, it made sense to create a little bit more dry powder late in the year. And so we went ahead and did that. And I think we think there will be likely opportunities, as we said and we think that source of capital will be attractive relative to the use of those proceeds, hopefully later in the year.

Great. That’s it for me. Thanks for the time.

Thank you. The following comes from Ronald Kamdem with Morgan Stanley. You may proceed.

Hi, just a couple of quick ones. So on the impairment charge taken on 625. Just sort of curious, any updated thinking of a sale for that asset or what the business plan is going to be for the next couple of years? Thanks.

Ron, there is really no update. As you know, we announced our exit from Pittsburgh a few years ago, and around the same time, the capital markets became quite difficult. EQT is a non-core asset for us, and we have a long-term goal of leaving Pittsburgh. However, financing for significant assets in secondary markets continues to be challenging. It's still on our list for disposal at the right moment, but we plan to be patient.

Great. And then just my second one, I know the focus is on leasing this year, both on the core four, as well as some of the development assets. Just wondering if any sort of changes in strategy this year, whether it's more TIs or going after smaller users? Like any sort of big picture changes to the leasing strategy this year versus last year? Thanks.

Not really. I think we'll take what we can get out there. We have a very successful spec suite program that targets small customers wanting to reduce their time to occupy space. This program has worked well for us. However, our main focus remains on users in the 5,000 to 15,000 square foot range. In recent years, we've seen larger prospects returning, companies eager to make decisions if they can access quality buildings. We've experienced strong leasing over the past five quarters and are optimistic that this trend will continue. I believe there’s no reason it shouldn’t. Towards the end of last year, we did have a few significant deals that may have boosted our stats a bit. Our pipeline is strong, tour activity is healthy, and we expect this year to mirror the last few.

Great. That’s it for me. Thank you.

Thank you. Our next question comes from Rob Stevenson with Janney Montgomery. You may proceed.

Good morning, guys. I think the federal government's 2.5% of your revenue, can you just talk about what the biggest leases are there and if any of that stuff is in the departments that are on the Trump must hit list at this point?

Rob, it's Ted. We have a fairly diverse exposure, around 2.5% to 2.6%, which you can see in the Standard Operating Procedures. This includes over 30 leases with various agencies, the largest being with the CDC. I’m not sure if that’s on the list, but we are encouraged because we believe most of it involves essential agencies, and there are many firm terms as well. Therefore, from our perspective, we don’t have significant exposure. Those 30-plus leases are spread across five different markets, so overall, it’s not a lot of exposure.

Okay. That's helpful. And then can you tell about the core markets where you're expecting the best relative operating performance in '25 and which markets are likely to be a little bit more challenged at least relatively in '25 in your view?

Sure. As we assess our markets, we see that all of them are in a recovery phase, though the recovery will take different paths. Suburban Nashville, in particular, has been performing well for us. However, downtown Nashville has experienced some softness as supply has matched demand. Despite this, we are noticing increased activity in Symphony Place. Charlotte continues to be a strong market and remains fully occupied with minimal construction. It’s also essential to look into specific submarkets. Although headlines suggest that Dallas is soft, the uptown area and the developments in Plano and Frisco are thriving. For instance, the progress we made with Granite Park Six in the last quarter significantly boosted occupancy for that project. Dallas, overall, is managing to stay steady. We are also experiencing good leasing activity in Tampa, which allowed us to sell the BayCare portfolio at a favorable time. Orlando is stable, while Raleigh has shown some softness, but that trend is improving in recent months. Overall, we believe all our markets are recovering, though they will do so at varying rates.

All right. That's extremely helpful. And then last one for me. Can you talk about what drove the land purchase decision at Century Center? Was that an option that you needed to exercise? And what does this purchase allow you to do going forward development-wise that you wouldn't have been able to do otherwise?

The Century Center allows us to consolidate our ownership of the land and buildings. We proactively approached the landowner to make this happen. This gives us significant long-term flexibility and creates liquidity for those assets. Over the past year, we've successfully leased a lot there, adding considerable value, and acquiring the land will help us unlock some of that value. Additionally, there are 13 acres of undeveloped land that we can monetize. Given the leasing success and the value we've established, we believe this is an opportune moment to proceed with the purchase.

Okay. That’s helpful. Thanks guys. I appreciate that.

Thank you.

Thank you. The next question comes from Michael Lewis with Truist Securities. You may proceed.

So Ted might have already answered this, I apologize if you did. But to get from 97% at the end of the year occupancy down 200 basis points to 85. By my math, Bass, Berry sense is about 90 bps. That remaining 110 bps, are there any large tenant spaces in that? Or is it kind of a confluence of smaller move-outs?

Yes, there are some significant tenants. For instance, there is a full building user in Nashville at the Westwood South building, which is approximately 125,000 square feet, making it quite sizable. We also have Pinnacle Bank, which we mentioned earlier as another substantial exploration. Additionally, there are a few other tenants that are somewhat smaller in size. Overall, out of the remaining 2.7 million square feet of expirations, about $2 million will vacate. We have around 1.1 million square feet of leases signed that will start soon, some of which will involve currently occupied space moving out, while others pertain to vacant spaces moving in. There is also a mix of speculative leasing in our forecast, along with approximately 100,000 square feet of net drag from the sale of the Tampa assets that occurred after year-end. Consequently, we anticipate that by the end of the year, our occupancy will be higher than the average for the year, likely between 86% and 87% if everything goes as planned.

Okay, I understand. This question relates to capital expenditures. The dividend was not covered by free available cash this quarter. I recognize that with substantial leasing activities, capital expenditures can be high, but I can see a growth trajectory that will enable us to cover the dividend. Looking ahead, will capital expenditures be inconsistent? Should we expect some fluctuations in quarters, similar to this quarter's elevated spending, or how will capital expenditure fluctuate going forward?

Yes, it's a good question. The CapEx is likely to be elevated. And to be clear, it was elevated in 2024 as well just from all of the leasing that we did. And for the year, still had good positive dividend coverage. And I would say, over the past four years really since the onset of the pandemic, I think our cumulative dividend coverage has been north of $200 million. So that is going to bounce around. But I think as you get to a point where you're building occupancy and you're signing leases, you get the capital spend before you get the corresponding increase in rents and NOI, and that just takes time to kind of play through. So I think to your point, the coverage is going to be kind of lumpy from quarter-to-quarter and even for a year or two. But that's a good problem to have as that's going to bring us to stabilization and drive significantly higher NOI and cash flow as we reach those stabilized levels.

And then just one more for me. The press release said development start is unlikely this year. Could you just maybe talk about how far above market the rents would have to be to start a development? That might give us kind of a sense? I assume it's fair that if you can't make the math work almost nobody probably can. So how far away are we from the math working on a development?

I believe it depends on the product type. A high-rise product will differ from a suburban surface park, so the percentage could range around 20% to 30%. We're currently evaluating several proposals. Recently, we lost a couple of potential clients who were not satisfied with our numbers. However, it’s positive that we continue to receive inquiries, and we are in the process of working on a few build-to-suit projects. These are expected to command top-of-the-market rents, similar to what we've seen over the past several years. The spread might be slightly wider now compared to what we experienced seven or eight years ago, but new buildings still tend to deliver top-of-the-market rents.

Okay. Thank you. The next question comes from Nick Thillman with Baird. You may proceed.

Hi, good morning. Maybe starting off with either Brian or Ted, in the first half of last year, you guys were a little bit more positive on the amount of leasing you were doing, but you thought it was going to kind of taper off at the year-end, obviously, kind of outperformed that today. I guess looking at your pipeline today, is it logical or do you guys have confidence that you could continue to sort of trend on the new leasing front, like the 400,000 square feet of new leasing per quarter? Do you have the right sort of vacancies or where the tenant is today to tailor towards that demand?

Just in general, I mean look, I'm optimistic about 2025. If you think about the confluence of return-to-work is continuing, which is going to help leasing. We've got a favorable economic backdrop continuing and job and population growth in migration continues in our markets. Very little new construction. There is a sublease space starting to come down, vacancy rates are up, and there is still a bifurcation in the market between the haves and have-nots, and we've been able to gain market share against some of the have-not buildings that are still being sort of stuck in the mud there. I think you put all that together, I'm still optimistic that we're going to see very positive leasing. We've got some big holes we got to fill. So we still got a lot of work to do. But talking to our leasing agents, the tour activity is good. Our spaces show well. And so I think I'm very optimistic for 2025.

Yes, I would like to add to that. To clarify, we do not have 400,000 square feet of new or 1.6 million square feet of new in our business plan. If we can replicate the levels from 2024 into 2025, that would significantly increase occupancy beyond what we projected for year-end and likely result in a faster growth rate in 2026 than we have anticipated. Our business plan assumes a slowdown in leasing, but I share Ted's cautious optimism that 2025 could perform similarly to last year.

No, that's very helpful. And maybe following up, I kind of have a two-parter on just kind of historic demand or retention. You guys outlined only one tenant over 100,000 square feet expiring here to '26 now. What's like the historic retention rate you have on kind of those smaller tenants? And then also of the 1.1 million square feet that is signed yet to commence, do you have a rough weighted average of when those leases are expected to commence?

Yes, Nick. So if you look over time, the rough renewal percentage doesn't change too much between large, medium and small users. We are at around somewhere between 60% to 65%. Now obviously, the closer that you get to exploration and you haven't renewed them early, then the likelihood of renewal goes down. So as we mentioned, we signed our two largest remaining 2026 expirations this quarter. Those are now out of the 2026 numbers, but those have been renewed. So that kind of gives you some color. I do think 2025 happens to be a particularly low retention year for us, and we think 2026 will happen to be a particularly high retention year for us, just given the uniqueness of the rent roll in those two particular years. So I think we're optimistic that we'll see that occupancy build kind of late this year and then into 2026 that will continue. In terms of the 1.1 million square feet when that moves in, it is more back half weighted than it is in the front half of the year, which is why we think that the occupancy will be low in the beginning part of the year and then build back kind of late in the year.

That’s it for me. Thank you.

Thank you. The next question comes from Tom Catherwood with BTIG. You may proceed.

Thanks, and good morning everyone. Maybe following up on an earlier question on acquisitions. And obviously, it's impossible to handicap timing, but can you touch on either the markets or submarkets where you see the most potential? And any chance we could see you do a discounted note purchase to get access to target properties?

Hi Tom, it’s Ted. Yes, we are exploring opportunities in all of our markets, particularly in Dallas, Charlotte, and Nashville, among others. We're noticing some potential in several markets, which makes us optimistic. However, not all opportunities have been successful in selling. We've had a few deals sell recently, but several have been withdrawn because the sellers' expectations were not met. When sellers see low cap rates on transactions, they often assume their assets will sell at similar rates. There's still a gap between what buyers are willing to pay and what sellers expect for many assets. I believe this situation will improve over the next couple of quarters. We prefer to acquire assets rather than debt, but if there's a clear opportunity to acquire assets, we would certainly consider it. However, short-term note acquisitions are not something we are interested in pursuing.

Understood. Second question for maybe, Brian, you had mentioned in your prepared remarks targeting improved lease economics and this showed up in higher net effective rents in 4Q. Where are you having the most success on the negotiation front? Is it pulling back on free rent and TIs or are you also able to push face rents in specific markets?

Tom, thanks for the question. I think to your last point, we are seeing the ability to push face rents. Our customers that are committed to being back in the office are kind of using that calculus of what the rent is compared to having their people back and the productivity they're getting. So I think they are able to underwrite those rents, but I do believe the concession curve is flattening as vacancy has peaked across the markets. Now we're not here to spike the football or anything like that, because every deal takes longer, every deal is getting negotiated details we hadn't thought of before. But I do think, as Ted mentioned, there's core markets, suburban and urban, Nashville, Tampa, Charlotte, where we've seen the ability to grow those. Even Atlanta is in Buckhead being able to push rents. Different customers have different levels or knobs that they're more focused on. Some need to finance their TI and fit up more so through the lease, others have cash and don’t want to necessarily do that.

Great. Appreciate the answers. Thanks everyone.

Thank you. The following question comes from Dylan Burzinski with Green Street. You may proceed.

Hi guys. Thanks for taking the question. Appreciate you guys providing where you think you'll end this year in terms of occupancy and obviously not trying to get too much into 2026. But as you sort of think about the trajectory of that recovery in occupancy, hearing now with your comment, Brendan, about having or likely having a strong amount of retention next year given some of the renewals pairing that with continuation of strong new leasing activity. I mean is this a scenario where you can sort of get back to the high 80s, low 90s sometime in 2026? Or just how should we be sort of thinking about how quickly you guys are able to recoup some of the lost occupancy this year given the known move-outs?

Yes, Dylan, that's a great question. I don't want to commit to specific guidance for 2026, but I do believe that the latter part of 2025 and 2026, and even into 2027, look promising for us. This all depends on the economic environment and the assumption that leasing activity remains strong across our markets, which we have no reason to doubt at this point. However, a couple of years is a significant timeframe. If everything aligns, we are in a good position to steadily increase occupancy over the next two to two and a half years.

Great. Appreciate that detail. And then I guess switching over to the dispositions, specifically the Tampa one, obviously great execution there. Given your comments around the sort of being older assets with deferred CapEx, let us call it. I mean can you kind of talk about the buyers of those assets? Is this a good indication that things are sort of tightening or do you guys sort of see this as more one-off and maybe high net worth money that like, that they are going yield that was sort of paying what is optically a tighter cap rate than one might expect given the characteristics of these assets?

Sure. Specifically regarding the Tampa assets, they were sold to a buyer whose main campus is right next to the property. This purchase serves as an expansion for their future growth. Generally, over the past few years, we have noticed that the buyer pool for many of our sales is primarily non-institutional. These buyers are typically high net worth individuals or private syndicators with strong banking relationships or the ability to pay cash. However, from our discussions with brokers and observations in the market, we see a significant amount of institutional capital waiting on the sidelines. Recently, they have begun to pursue some high-quality office buildings. Therefore, I anticipate that as we progress through 2025, more institutional capital will be looking for opportunities.

Perfect, thanks Ted.

Thank you. The following question comes from Young Ku with Wells Fargo. You may proceed.

Yes. Great. Thank you. Just a couple of quick ones for me. Brendan, are there any termination fees or land sale gains baked into '25 guidance?

Yes, Young, thanks for the question. There's always a little bit of term fee stuff that we have in there. So I would say nothing that's particularly unusual. There aren't any land sale gains included in the guidance, but there are some what I would call miscellaneous items that are in there. Again, we tend to have that stuff kind of every year. They'll be a little bit episodic by quarter and maybe a little lumpy. But those are all in there, but I would say it's nothing that is uncommon for us on a full-year basis.

Got you. Okay. Thank you for that. And just in terms of same-store guidance, I appreciate the kind of the progression that you provided on occupancy. What kind of growth in OpEx is baked into the same-store outlook?

OpEx on same-store is pretty inflationary. So I wouldn't think that there's nothing, I would say particularly unusual in the same-store outlook with respect to OpEx that tends to track. I think obviously, the downdraft in terms of the same-store outlook is largely driven by occupancy. The other thing that I will mention is we guide to cash same-store NOI. That number is low for the reasons that we talked about for this year. The positive indicator is it is very rare to have GAAP same-property NOI to be higher than cash same-property NOI, you just have a structural disadvantage with first-generation leases that are there through development or acquisition because those leases don't provide any year-over-year growth on a GAAP basis but grow on average for us, call it, about 2.5% on a cash basis year-over-year. And that's about one-third of our portfolio. For this year, we actually expect that GAAP same-property NOI will be higher than cash same-property NOI, which is a good forward indicator of what future same-property NOI growth should be.

Okay. Got it. Okay, thank you.

Thank you. The final question comes from Vikram Malhotra with Mizuho. You may proceed.

Thanks for taking the questions. I just wanted to go back to sort of the confidence in the recovery in the second half, both for Highwoods, but also just the markets you referenced activity picking up. Can you share perhaps any large requirements, perhaps by sector or any public tenants you may? And I ask because I know there have been a couple of big requirements that have gone to these economic associations that I know you are in touch with. So I just want to get a sense of how deep is this and how large is the pipeline, not just for Highwoods, but broadly in the market?

Hi Vikram, it's Brian. I'll take a shot at this one. Towards the end of the year, big inbounds kind of coded. They kind of got quiet. I think people are waiting to see what happened with the election. But I think we're seeing now first quarter, Nashville, Charlotte, particularly have a number of corporate relo-headquarter locations that are looking both urban and suburban. So we're receiving inquiries selling out the potential RFP kind of information. So we take that as a positive one. A number of those are relocations in from outside of the markets, maybe from gateway coastal into our markets. So we do see that as a positive move.

Thanks for the color. And then just, I guess, specifically to the underlying, I guess, NOI and FFO trajectory, Brendan, I think you referenced, but I just want to be clear. So as you lose the occupancy, I'm assuming there's margin pressure, pressure on the NOI growth through the first half and then you're saying you would trough in the second half and then ultimately, given the leasing, the cash flow will pick up in '26. Is that correct?

Yes, Vikram. That's roughly correct. I would say, I mean, I think trough from an occupancy standpoint, and that probably flows into as well is kind of in the first half of the year and then I think some build back as you kind of get later into the year. From an underlying cash flow perspective, that does tend to lag. I would say, what your FFO trajectory is just given the spend and then commencement of cash rent. So I think your view on '26 is correct.

And then just, for the last clarification, obviously, you've telegraphed all the known move outs last year, this year. Anything in '26 that's maybe sizable even like 50,000 plus that's on the fence that may be a needle mover to the slight recovery into '26 view? Thanks.

Thanks. So, Vikram, it's Ted. I'll try to take that one. We've exceeded 50,000, but we really only have four above 50,000 for 2026. So it's not a lot. Our largest one is just over 100,000 in 2027, and that’s the only one above a hundred thousand. Therefore, over the next two years, considering both the size and our projection on renewal versus vacate, we believe retention will be somewhat higher for those larger ones in the upcoming years, at least based on what we know today.

Thank you. There are currently no more questions at this time. I will pass it back over to the team for closing remarks.

Well, I want to thank everybody for joining on the call today, and thank you for your interest in Highwoods, and we look forward to next quarter, if not seeing you all beforehand. Thank you.

This concludes today's conference call. Thank you for your participation. You may now disconnect your line.