2nd Gen Leasing Activity Continues to be Strong 738,000 SF of Leases Signed to Date in Third Quarter Includes over 400,000 SF of New Leases RALEIGH, N.C., Sept. 09, 2024 (GLOBE NEWSWIRE) -- Highwoods Properties, Inc. (NYSE:HIW) announced it has signed 738,000 square feet of second generation leases since July 1, 2024, including over 400,000 square feet of new leases. Included in the quarterly activity is a long-term lease for 104,000 square feet at Two Alliance Center in Atlanta's Buckhead BBD with a new cu ...

Shares of Highwoods Properties (HIW) have rallied 31.9% year to date, outperforming the industry's growth of 2.3%. This office real estate investment trust (REIT) is well-positioned to benefit from the growing demand for its premier office properties concentrated in high-growth Sun Belt markets. Its disciplined capital-recycling program and accretive development projects are other tailwinds. A healthy balance sheet position augurs well for long-term growth. Later in July 2024, HIW reported second-quarter 20 ...

Core Viewpoint - Highwoods Properties Inc. (HIW) reported a strong second quarter in 2024, with an increase in funds from operations (FFO) per share and an optimistic outlook for the remainder of the year, despite some challenges in rental revenues and rising interest expenses [19][10][6]. Financial Performance - HIW's FFO per share for the second quarter of 2024 was 98 cents, exceeding the Zacks Consensus Estimate of 90 cents and up from 94 cents in the prior year [19]. - The company raised its 2024 FFO per share guidance to a range of $3.54-$3.62, compared to the previous range of $3.46-$3.61 [10]. - Same-property cash net operating income (NOI) increased by 3.3% year-over-year to $140.8 million [7]. Leasing Activity - The development pipeline totals $506 million at HIW's share, with 45% pre-leased [1]. - During the second quarter, HIW signed 61,000 square feet of first-generation leases and completed 909,000 square feet of second-generation leasing activity, including 352,000 square feet of new leases [1][15]. - The average in-place cash rent increased by 4.8% per square foot compared to the prior year [7]. Balance Sheet and Expenses - HIW's rental property and other expenses were $64.6 million, down 2.6% year-over-year, while interest expenses rose to $35.9 million, an increase of 5.4% [8]. - The company ended the second quarter with $27 million in cash and cash equivalents, up from $16.4 million at the end of the first quarter [9]. - The net debt-to-adjusted EBITDAre ratio improved to 5.8 from 6.09 at the end of the first quarter [17]. Market Outlook - The average occupancy rate is expected to remain stable between 87% and 89% [3]. - HIW's balance sheet is described as being in excellent shape, with low leverage and no debt maturities until mid-2026, positioning the company for future growth opportunities [7].

The reported revenue represents a surprise of -1.96% over the Zacks Consensus Estimate of $208.83 million. With the consensus EPS estimate being $0.90, the EPS surprise was +8.89%. Since these metrics play a crucial role in driving the top- and bottom-line numbers, comparing them with the year-ago numbers and what analysts estimated about them helps investors better project a stock's price performance. Occupancy: 88.5% versus 88.5% estimated by two analysts on average. Rental and other revenues- Lease termi ...

Core Viewpoint - Highwoods Properties reported a quarterly FFO of $0.98 per share, exceeding the Zacks Consensus Estimate of $0.90 per share, indicating a positive performance trend in the real estate investment trust sector [7]. Financial Performance - Highwoods Properties generated revenues of $204.74 million for the quarter ended June 2024, which was 1.96% below the Zacks Consensus Estimate and a decrease from $207.29 million in the same quarter last year [2]. - The company has surpassed consensus revenue estimates twice in the last four quarters [2][8]. - The current consensus FFO estimate for the upcoming quarter is $0.90 on revenues of $207.78 million, and for the current fiscal year, it is $3.56 on revenues of $836.97 million [5]. Stock Performance - Highwoods Properties shares have increased approximately 22.6% since the beginning of the year, outperforming the S&P 500's gain of 16.7% [3]. - The stock currently holds a Zacks Rank of 3 (Hold), suggesting it is expected to perform in line with the market in the near future [11]. Industry Context - The REIT and Equity Trust - Other industry is currently ranked in the top 39% of over 250 Zacks industries, indicating a favorable outlook compared to the bottom 50% [12]. - The performance of Highwoods Properties may be influenced by the overall industry outlook, as research indicates that the top 50% of Zacks-ranked industries outperform the bottom 50% by more than 2 to 1 [12].

Company Overview - Highwoods Properties, Inc. is a publicly-traded real estate investment trust (REIT) listed on NYSE under the ticker HIW [2] - The company is headquartered in Raleigh and focuses on owning, developing, acquiring, leasing, and managing properties primarily in the best business districts (BBDs) of major cities including Atlanta, Charlotte, Dallas, Nashville, Orlando, Raleigh, Richmond, and Tampa [2] Business Strategy - Highwoods is engaged in the work-placemaking business, aiming to create environments and experiences that enable collaboration among the best talent [2] - The company believes that fostering such environments can deliver greater value to customers, their teams, and stakeholders [2] Financial Results - Highwoods Properties has released its second quarter 2024 results, which can be accessed through the investors section of their website [1]

Occupancy and Leasing - Average occupancy in the office portfolio decreased from 88.9% as of December 31, 2023, to 88.5% as of June 30, 2024, with expectations to range from 87.0% to 88.0% for the remainder of 2024[128] - Annualized rental revenues from new and renewal leases signed in the second quarter were $31.00 per rentable square foot, representing a 9.4% increase compared to previous leases in the same office spaces[130] - The average term for new leases signed in the second quarter was 8.3 years, while renewals had an average term of 4.5 years[129] Financial Performance - Consolidated same property net operating income (NOI) was $1.5 million, or 1.1%, higher in the second quarter of 2024 compared to 2023, driven by an increase in same property revenue[133] - NOI was $0.8 million, or 0.6%, lower in the second quarter of 2024 compared to 2023, primarily due to lost NOI from property dispositions[134] - The company expects same property NOI to be lower for the remainder of 2024 due to anticipated increases in same property expenses and lower average occupancy[133] - Rental and other revenues decreased by $2.6 million, or 1.2%, in Q2 2024 compared to Q2 2023, primarily due to property dispositions, which resulted in a $4.4 million revenue loss[147] - Operating expenses for rental properties were $1.7 million, or 2.6%, lower in Q2 2024 compared to Q2 2023, mainly due to a $1.3 million decrease from property dispositions[148] - Interest expense increased by $1.8 million, or 5.4%, in Q2 2024 compared to Q2 2023, primarily due to higher average interest rates[151] - Other income rose by $6.3 million in Q2 2024 compared to Q2 2023, mainly due to a $5.8 million refund of Tennessee franchise taxes[152] - Gains on property dispositions increased by $15.7 million in Q2 2024 compared to Q2 2023[153] - Net income for Q2 2024 was $64,770,000, compared to $43,870,000 in Q2 2023, representing a 47.5% increase[202] - Same property net operating income for Q2 2024 was $144,449,000, up from $142,892,000 in Q2 2023, reflecting a 1.1% growth[202] - Same property cash net operating income for Q2 2024 reached $140,755,000, compared to $136,206,000 in Q2 2023, indicating a 3.9% increase[202] - Total net operating income for the first half of 2024 was $281,019,000, down from $288,005,000 in the same period of 2023, a decrease of 2.8%[202] Capital Structure and Liquidity - The leverage ratio as of June 30, 2024, was 41.5%, with approximately $21 million in existing cash and $82.0 million drawn on a $750.0 million revolving credit facility[139] - The company maintains a conservative balance sheet and believes it has ample liquidity to fund operations and growth prospects[139] - The company anticipates that available cash and cash equivalents will be adequate to meet short-term liquidity requirements, including operating expenses and capital expenditures[141] - As of June 30, 2024, there was no amount outstanding under the revolving credit facility, with an unused capacity of $749.9 million[176] - The company modified its $750.0 million unsecured revolving credit facility, now maturing in January 2028, with an interest rate of SOFR plus a spread adjustment of 10 basis points and a borrowing spread of 85 basis points[175] - The company incurred $7.7 million in debt issuance costs during Q1 2024, which will be amortized over the term of the new revolving credit facility[175] - The company had $27.0 million in cash and cash equivalents as of June 30, 2024[186] - The company is currently in compliance with financial covenants and expects to remain compliant for at least the next year[177] - The company’s financial covenants allow lenders to accelerate borrowings upon an event of default, which could adversely affect operational funding[178] Dividends and Shareholder Returns - The company declared a cash dividend of $0.50 per share of Common Stock on July 17, 2024, payable on September 10, 2024[183] - Funds from operations (FFO) for the three months ended June 30, 2024, were $106.6 million, with FFO available for common stockholders at $105.9 million, translating to $0.98 per share[198] Property Development and Sales - The company is developing 0.8 million rentable square feet of office properties, with a total estimated investment of $543 million[173] - The company sold seven buildings in Raleigh for $62.5 million, recording a gain of $35 million on the disposition[170] - The company anticipates selling up to $150 million of non-core properties during the remainder of 2024[189] Expenses and Other Financial Metrics - General and administrative expenses for the first half of 2024 totaled $21,856,000, compared to $21,795,000 in the same period of 2023, a marginal increase of 0.3%[202] - Depreciation and amortization expenses for Q2 2024 were $73,745,000, down from $75,018,000 in Q2 2023, a decrease of 1.7%[202] - Interest expense for Q2 2024 was $35,904,000, slightly higher than $34,063,000 in Q2 2023, marking a 5.4% increase[202] - Equity in earnings of unconsolidated affiliates showed a loss of $(1,120,000) in Q2 2024, compared to a loss of $(798,000) in Q2 2023, indicating a worsening performance[202] - The company reported a total of $9,177,000 in same property net operating income from unconsolidated joint ventures for the first half of 2024, down from $9,415,000 in the same period of 2023, a decrease of 2.5%[202]

Core Viewpoint - Highwoods Properties, Inc. has declared cash dividends for both its preferred and common stock, indicating a commitment to returning value to shareholders [1][3]. Group 1: Dividend Announcements - The Board of Directors declared a cash dividend of $21.5625 per share for the 8 5/8% Series A Cumulative Redeemable Preferred Stock, payable on September 3, 2024, to holders of record as of August 15, 2024 [1]. - A cash dividend of $0.50 per share for common stock was announced for the quarter ended June 30, 2024, which translates to an annualized dividend of $2.00 per share, payable on September 10, 2024, to holders of record as of August 19, 2024 [3]. Group 2: Company Overview - Highwoods Properties, Inc. is a publicly-traded fully-integrated office real estate investment trust (REIT) based in Raleigh, focusing on owning, developing, acquiring, leasing, and managing properties in prime business districts across several major cities [2]. - The company emphasizes creating environments that foster collaboration and innovation, aiming to deliver greater value to customers and stakeholders [2].

Core Viewpoint - Highwoods Properties (HIW) is well-positioned to benefit from increasing demand for its office properties in high-growth Sun Belt markets, supported by a disciplined capital-recycling program and a healthy balance sheet, although competition and high interest rates present challenges [1][4][6]. Group 1: Demand and Leasing Activity - Highwoods is experiencing a recovery in demand for its office properties, evidenced by a new leasing volume of 922,167 square feet in Q1 2024, which includes 422,889 square feet of new leases [2]. - The company is expected to benefit from favorable demographic trends and job growth in the Sun Belt markets, which will support long-term rent growth [6][13]. Group 2: Financial Position - Highwoods maintains a strong financial position with investment-grade ratings of BBB/Baa2 from S&P and Moody's, allowing access to debt markets at favorable rates [3]. - As of April 16, 2024, the company had approximately $17 million in available cash and $10 million drawn from its $750 million revolving credit facility, with no consolidated debt maturities until Q2 2026 [7]. Group 3: Challenges and Market Conditions - Elevated interest rates pose a concern for Highwoods, leading to high borrowing costs and affecting its ability to purchase or develop real estate, with a net debt of approximately $3.31 billion as of March 31, 2024 [4]. - The overall office demand in some markets may remain subdued in the near term, with increased development activities likely to create new supply, potentially straining occupancy levels, which management anticipates will average between 87-89% in 2024 [8]. Group 4: Stock Performance - Over the past three months, Highwoods' shares have increased by 22.0%, outperforming the industry's growth of 14.6% [15].

This Raleigh, NC-based office real estate investment trust (REIT) is well-positioned to benefit from the growing demand for its premier office properties concentrated in high-growth Sun Belt markets. Its disciplined capitalrecycling program and accretive development projects are other tailwinds. A healthy balance sheet position augurs well for long-term growth. Image Source: Zacks Investment Research Highwoods has a large part of its portfolio concentrated in high-growth Sun Belt markets, and the company is ...