Core Insights - The SCCM Small Cap Value Equity Strategy reported a strong performance in Q3 2025, with a return of 14.4% gross and 14.2% net, outperforming the Russell 2000 and Russell 2000 Value indices which returned 12.4% and 12.6% respectively [1] - The positive performance was attributed to Fed rate cuts, economic resilience, and increased investor risk appetite [1] Company Insights - Highwoods Properties, Inc. (NYSE:HIW) experienced a one-month return of -1.87% and a 52-week decline of 14.08%, closing at $27.88 with a market capitalization of $3.064 billion as of November 26, 2025 [2] - The SCCM Small Cap Value Equity Strategy noted that Highwoods Properties contributed positively to the portfolio, with a return of +4.1% due to stable occupancy and disciplined expense management [3] - Highwoods Properties is not among the 30 most popular stocks among hedge funds, with 20 hedge fund portfolios holding the stock at the end of Q2 2025, down from 22 in the previous quarter [4]

Core Insights - Highwoods Properties, Inc. has completed the acquisition of 6Hundred at Legacy Union, a 24-story Class AA office tower in Charlotte, for a total expected investment of $223 million [1][2] - The property is currently 84% leased with a weighted average lease term exceeding 12 years and encompasses 411,000 square feet [2] - The acquisition will be funded on a leverage-neutral basis over the next six months using proceeds from non-core asset sales, with $37 million in non-core assets sold since October 1, 2025 [3] Investment Details - The total investment includes $8.5 million for planned near-term building improvements and leasing capital expenditures, net of $15.7 million in free rent and other credits received from the seller [1] - The building is designed to achieve LEED gold certification and features in-building parking for 832 vehicles [2] Company Overview - Highwoods Properties, Inc. is a publicly-traded, fully-integrated office real estate investment trust (REIT) focused on owning, developing, acquiring, leasing, and managing properties in major business districts across several cities [5] - The company's mission emphasizes creating exceptional environments and experiences to deliver greater value to customers and shareholders [5]

Core Insights - Highwoods Properties (HIW) is planning to acquire the 6Hundred at Legacy Union, a 411,000-square-foot Class AA office tower in Charlotte, which is currently about 84% leased with a weighted average lease term exceeding 12 years [1][8] Investment Details - The acquisition is valued at approximately $223 million, positioning Highwoods to enhance its presence in Charlotte's strong BBD, with the property offering embedded upside and long-term cash-flow potential [2][8] - The deal is expected to close within the next 30 days [2] Strategic Fit in the Portfolio - The property is part of the Legacy Union mixed-use campus, where Highwoods already owns adjacent assets, including the Bank of America Tower and SIX50 South Tryon, expanding its footprint to roughly 1.6 million square feet of Class AA office space [3][8] - This concentrated campus in a high-demand urban location allows for operational efficiencies, shared amenities, and stronger leasing leverage [3] Financial Outlook & Growth Opportunity - Highwoods anticipates stabilized annual net operating income (NOI) of about $17.5-$18.5 million, with stabilization projected by 2027 on a GAAP basis and 2028 on a cash basis [4] - The 6Hundred at Legacy Union is expected to yield approximately $10 million of GAAP NOI in 2026 [4] Funding Strategy - The acquisition will be funded in a leverage-neutral manner through proceeds from non-core asset sales, preserving balance-sheet flexibility [5] - In-place rents are over 20% below market, indicating significant upside potential as leases roll and market rents reset [5] Bottom Line for Investors - The acquisition represents a strategic upgrade for investors focused on office-REIT credit and CRE transition plays, acquiring a high-quality asset in a top Sunbelt city with embedded rental growth potential [6] - Execution will be crucial, but the acquisition aligns with the company's strategy to invest in best-in-class business-district office assets while divesting less favorable non-core properties [6] Market Performance - Over the past three months, Highwoods shares have declined by 5.7%, contrasting with a 1.0% increase in the industry [7] - Despite this, Highwoods shares are currently considered undervalued, as indicated by a Value Score of B [7]

Core Insights - Highwoods Properties (HIW) is experiencing growth driven by a diversified tenant base, expansion in high-growth markets, a robust capital-recycling program, and a strong balance sheet [1][10] Acquisition and Leasing Activities - HIW recently acquired the 6Hundred at Legacy Union for $223 million, a 24-story Class AA office tower in Charlotte, which is currently 84% leased with an average lease term exceeding 12 years [1][10] - In Q3 2025, HIW's second-generation leasing activity reached 1.0 million square feet, including 326,000 square feet of new leases, indicating a recovery in demand for its office properties [5][10] Financial Performance and Projections - The Zacks Consensus Estimate for HIW's 2025 funds from operations (FFO) per share has increased to $3.43, reflecting positive analyst sentiment [2] - HIW's average in-place cash rent grew by 1.6% per square foot year over year during Q3 2025, supported by favorable demographic trends in its Sun Belt market portfolio [3] Capital Recycling and Development - HIW follows a disciplined capital-recycling strategy, having completed asset dispositions worth $161 million and $1.3 million in the first nine months of 2025 [6] - The company completed acquisitions totaling $249.5 million in the same period and has a development pipeline valued at $474.2 million, which is 71.9% pre-leased [7] Balance Sheet Strength - As of September 30, 2025, HIW maintains a healthy balance sheet with no consolidated debt maturities until Q1 2027, $26.3 million in available cash, and $529.9 million in unused capacity under its revolving credit facility [8] - The company generated 85.2% unencumbered NOI, allowing for potential access to additional secured debt capital if needed [8]

Core Insights - Highwoods Properties, Inc. has agreed to acquire 6Hundred at Legacy Union, a Class AA office tower in Charlotte, for a total expected investment of $223 million [2][3] - The property is 84% leased with a weighted average lease term exceeding 12 years and encompasses 411,000 square feet [3] - The acquisition is expected to close within the next 30 days, with a non-refundable earnest money deposit of $10 million already posted [7] Financial Overview - The total investment includes $8.5 million for near-term building improvements and leasing capital expenditures, net of $15.7 million in anticipated rent-related credits from the seller [4] - Upon stabilization, estimated annual net operating income (NOI) is projected to be between $17.5 million and $18.5 million on both GAAP and cash basis, with stabilization expected in 2027 on a GAAP basis and 2028 on a cash basis [4] - For 2026, the property is expected to generate approximately $10 million of GAAP net operating income [4] Strategic Positioning - The acquisition will increase Highwoods' portfolio at Legacy Union to 1.6 million square feet of Class AA office space, enhancing its presence in a high-demand area [3][6] - The company plans to fund the acquisition on a leverage-neutral basis using proceeds from non-core asset sales, having already sold $37 million of such assets since October 1, 2025 [5][7] - The CEO expressed confidence that the acquisition will be neutral to 2027 funds from operations (FFO) and accretive to cash flow, while improving portfolio quality [6][7]

Core Viewpoint - Highwoods Properties, Inc. has announced a $350 million offering of unsecured notes with a yield of 5.431%, set to close on November 14, 2025, to fund various corporate activities [1][2]. Group 1: Offering Details - The notes are priced at 5.350% and are due on January 15, 2033 [1]. - The offering is expected to close on November 14, 2025, pending customary closing conditions [1]. Group 2: Use of Proceeds - The net proceeds from the sale of the notes will be used to repay outstanding debt, including amounts under a $750 million unsecured revolving credit facility, fund property acquisitions and development, and for general corporate purposes [2]. Group 3: Management and Underwriters - The offering is managed by Wells Fargo Securities, BofA Securities, J.P. Morgan Securities, and others, with various firms serving in different capacities [3]. Group 4: Company Overview - Highwoods Properties, Inc. is a publicly-traded REIT that operates primarily in major business districts across several cities, including Atlanta, Charlotte, and Dallas [6].

Company Overview - Highwoods Properties, Inc. (HIW) is a Real Estate Investment Trust (REIT) that specializes in developing and managing high-quality office properties primarily located in top business districts across the United States [1]. Investment Focus - The company has experienced significant stock volatility, indicating fluctuating investor sentiment and market conditions [1]. Analyst Background - The analyst has over 10 years of experience in researching various companies, covering a wide range of sectors including commodities, technology, and emerging markets, which enhances the depth of analysis provided [1].

Company Overview - Highwoods Properties, Inc. (HIW) is a Real Estate Investment Trust (REIT) that specializes in developing and managing high-quality office properties primarily located in top business districts across the United States [1]. Investment Focus - The company has experienced significant stock volatility, indicating fluctuating investor sentiment and market conditions [1]. Analyst Background - The analyst has over 10 years of experience in researching various companies, covering a wide range of sectors including commodities, technology, and emerging markets, which enhances the depth of analysis provided [1].

Financial Data and Key Metrics Changes - The company reported FFO of $0.86 per share, with a net income of $12.9 million or $0.12 per share for the quarter [23][24] - The midpoint of the FFO outlook for 2025 was raised by $0.08, marking the third consecutive quarter of increases [10][26] - The debt to EBITDA ratio was 6.4x at quarter end, with expectations for improvement as signed leases convert to occupancy [24][25] Business Line Data and Key Metrics Changes - The company signed over 1 million sq ft of second-generation leasing volume, including 326,000 sq ft of new leases, marking strong leasing activity for eight consecutive quarters [5][10] - The lease percentage for the development pipeline increased to 72%, up from 64% in the previous quarter [7][15] - Net effective rents reached a new high, 18% above the 2019 average, indicating strong pricing power [7][14] Market Data and Key Metrics Changes - Dallas, Nashville, Charlotte, and Tampa were highlighted as standout markets, with Dallas experiencing significant in-migration and corporate expansions [16][18][20] - Nashville's unemployment rate was reported at 2.9%, the lowest among the company's markets, with asking rates up more than 11% year-over-year [18][19] - Charlotte saw a 77% year-over-year increase in leasing activity, with a strong demand for Class A space [20] Company Strategy and Development Direction - The company is focused on securing embedded NOI growth by leasing key vacancies and recycling non-core assets into higher quality properties [4][11] - The strategy includes maintaining a strong balance sheet while pursuing acquisitions and dispositions to enhance portfolio quality [10][11] - The company plans to provide its 2026 outlook in February, indicating a forward-looking approach to growth [27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the leasing pipeline and the potential for significant NOI growth from signed leases [12][24] - The company anticipates elevated capital expenditures due to leasing activity but expects cash flow levels to improve as occupancy builds [41][43] - Management noted that the capital markets environment is improving, which could facilitate future acquisitions and dispositions [66] Other Important Information - The company has $625 million of available liquidity and extended the maturity on its $200 million variable rate term loan to 2031 [25] - The acquisition of the Legacy Union Parking Garage for $111.5 million was funded on a leverage-neutral basis, demonstrating the company's financial strategy [9][26] Q&A Session Summary Question: Outlook on potential acquisitions or dispositions - Management indicated that acquisition opportunities are focused on existing markets, with ongoing portfolio rotation to trim non-core assets [31][32] Question: Financing for potential acquisitions - The plan is to primarily use disposition proceeds for funding acquisitions, with ATM issuance as a secondary option [33] Question: Market migration trends - Dallas is currently leading in tenant migration, with Charlotte and Nashville also experiencing significant activity [36][38] Question: Impact of elevated capital expenditures on cash flow - Elevated CapEx is expected to continue through 2026, but strong NOI growth is anticipated to improve cash flow levels [41][43] Question: Pricing expectations for sold assets - Pricing for dispositions is generally meeting or exceeding initial expectations, with more institutional capital entering the market [66]

Financial Data and Key Metrics Changes - The company reported FFO of $0.86 per share, with the midpoint of the FFO outlook raised by $0.08 compared to the initial outlook provided in February [10][25] - Net income for the quarter was $12.9 million or $0.12 per share, with net effective rents reaching a historical high [22][23] - The debt to EBITDA ratio was 6.4 times at quarter end, with expectations for improvement as signed leases convert into occupancy [23][24] Business Line Data and Key Metrics Changes - The company signed over 1 million square feet of second-generation leasing volume, including 326,000 square feet of new leases, marking strong leasing activity for eight consecutive quarters [5][14] - The lease percentage for the development pipeline increased to 72%, up from 64% in the previous quarter, with 122,000 square feet of leases signed [7][15] - The company acquired the Legacy Union parking garage for $111.5 million and sold a non-core property for $16 million, demonstrating active investment activity [8][9] Market Data and Key Metrics Changes - Dallas, Nashville, Charlotte, and Tampa were highlighted as standout markets, with Dallas experiencing significant in-migration and corporate expansions [16][18] - In Nashville, asking rates increased by more than 11% year over year, reflecting strong demand and limited supply [18] - Charlotte's leasing activity was up 77% year over year, with a portfolio occupancy of 96% [19][20] Company Strategy and Development Direction - The company is focused on securing embedded NOI growth by leasing up key vacancies and recycling non-core assets into higher quality properties [4][11] - The strategy includes maintaining a strong balance sheet while pursuing acquisitions and dispositions to enhance portfolio quality [10][11] - The company plans to provide its 2026 outlook in February, indicating a forward-looking approach to growth [26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the leasing pipeline and the potential for significant NOI growth from signed leases that have not yet commenced [12][23] - The company anticipates a clear pathway to higher earnings and cash flow as occupancy increases [12][23] - Management noted that the capital markets are improving, which could facilitate future acquisitions and dispositions [64] Other Important Information - The company has $625 million of available liquidity and only $96 million left to complete its development pipeline [24] - The acquisition of the Legacy Union parking garage is expected to provide excellent risk-adjusted returns due to limited CapEx associated with garage ownership [9] Q&A Session Summary Question: Potential for increased acquisitions or dispositions - Management indicated that acquisition opportunities are focused on existing markets and enhancing current holdings, with several assets already in the market for disposition [30][31] Question: Financing assets for potential acquisitions - The plan is to primarily use disposition proceeds for funding acquisitions, with ATM equity issuances as a secondary option [32] Question: Market migration trends - Dallas is currently leading in tenant migration, followed by Charlotte and Nashville, with strong demand across the portfolio [36][37] Question: Impact of elevated capital expenditures on cash flow - Elevated CapEx is expected to continue through next year, but significant NOI growth is anticipated to improve cash flow levels [40][41] Question: Pricing expectations for sold assets - Pricing for dispositions is generally meeting or exceeding initial expectations, with more institutional capital entering the market [64][65] Question: Update on non-core assets - The company continuously evaluates its portfolio, with some previously core assets now considered non-core due to changing growth trends [66] Question: Update on Ovation project - The company has control over the entire site and plans to begin vertical construction in 2027, with a focus on mixed-use development [73][74]