Why Should You Retain Highwoods (HIW) Stock in Your Portfolio?

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].