Highwoods Properties(US:HIW)2024-07-23 20:05Occupancy 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]