Core Insights - Highwoods Properties Inc. (HIW) reported Q4 2025 funds from operations (FFO) per share of 90 cents, exceeding the Zacks Consensus Estimate of 84 cents and up from 85 cents in the prior-year quarter [1][10] - The company experienced healthy leasing activity with a GAAP rent growth of 15.4% and achieved record net effective rents, which were 19% higher than the previous peak in 2022 [4][10] - For full-year 2024, FFO per share was $3.48, lower than $3.61 in the prior year but above the consensus estimate of $3.42 [2] Financial Performance - Rental and other revenues for Q4 2025 were $203.4 million, below the consensus estimate of $208.3 million and down 1.1% year over year [1] - For the full year 2024, rental and other revenues decreased by 2.4% to $806.1 million, missing the consensus mark of $817.6 million [2] Leasing Activity - Highwoods' average in-place cash rent increased by 1.6% per square foot compared to the prior-year quarter, with an occupancy rate of 85.3% remaining unchanged from the previous quarter [3] - The company signed 526,000 square feet of second-generation leases in Q4, including 221,000 square feet of new leases, with a dollar-weighted average term of 5.6 years [4] Development Pipeline - The current development pipeline totals $474 million (at HIW share) and is 78% pre-leased, with 95,000 square feet of first-generation leases signed from late October 2025 through the end of Q4 [5] Portfolio Activity - Highwoods acquired a newly delivered 411,000-square-foot Class AA office tower, 6Hundred at Legacy Union, for approximately $223 million and sold non-core assets for gross proceeds of $65.9 million during Q4 [6] - Post-quarter, the company acquired Bloc83 in Raleigh and The Terraces in Dallas for $108.4 million [6] Balance Sheet Position - As of January 30, 2026, Highwoods had $46 million in cash and $580 million available on its revolving credit facility, with a net debt-to-adjusted EBITDAre ratio of 6.6, up from 6.4 in the previous quarter [7] 2026 Guidance - Highwoods expects 2026 FFO per share to be in the range of $3.40 to $3.68, with the Zacks Consensus Estimate at $3.55 [8] - The company anticipates same-property cash NOI growth between -1.0% and 1.0% and average occupancy of 86.5% to 88.5% [8]

Financial Data and Key Metrics Changes - Core FFO per diluted share for Q3 2025 was $0.35, a decrease from $0.36 in Q3 2024, attributed to the sale of three projects and higher net interest expense, offset by growth in operations due to higher economic occupancy and rental rate growth [25][26][27] - FFO generated during Q3 2025 was approximately $26.5 million [26] - The company narrowed its 2025 annual core FFO guidance to a range of $1.40 to $1.42 per diluted share [28] Business Line Data and Key Metrics Changes - The company executed approximately 724,000 square feet of total leasing during the quarter, including over half a million square feet of new tenant leases, marking the largest amount of new tenant leasing in a single quarter in over a decade [9][10] - The weighted average starting cash rent was nearly $42 per square foot, unchanged from the previous quarter, with net effective rents increasing to $21.26 per square foot, reflecting a 2.5% increase [17][18] - The leasing capital spent was $6.76 per square foot, slightly up compared to the trailing 12 months [17] Market Data and Key Metrics Changes - Five of the operating markets experienced positive absorption, with Washington, D.C. and Boston being exceptions [5] - The overall leasing volume in the U.S. reached about 105 million square feet in Q3 2025, nearing the 2015-2019 national quarterly average of approximately 115 million square feet [5][6] - The out-of-service portfolio was over 50% leased and approaching 70% leased, with significant demand in Minneapolis and Orlando [11][20] Company Strategy and Development Direction - The company aims to strengthen its brand as the landlord of choice, driving leasing demand and increasing rental rates across its portfolio [8][31] - The strategy includes focusing on high-quality office spaces and enhancing service models to attract tenants [7][30] - The company is also looking to prune non-core assets while exploring acquisition opportunities in high-demand markets like Dallas [24][54] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving mid-single-digit FFO growth in 2026 and 2027, driven by strong leasing momentum and a robust pipeline [14][29] - The broader macro factors, along with successful portfolio repositioning, are expected to continue driving the company's ability to grow FFO organically [14] - Management noted that the office sector is turning a corner, with increased demand for high-quality spaces despite a generally uncertain economic outlook [6][10] Other Important Information - The company achieved a five-star rating and Green Star recognition from GRESB, placing it in the top decile of all participating listed U.S. companies [14] - The company has approximately $435 million of availability under its revolving line of credit and no final debt maturities until 2028 [27] Q&A Session Summary Question: Clarification on expansion versus contraction within the portfolio - Management noted that expansions exceeded contractions for five consecutive quarters, with 16 expansions versus two contractions in the last quarter, indicating a net positive of 40,000 square feet [36] Question: Conviction level for earnings growth next year - Management clarified that the projected earnings growth is based on organic growth within a static portfolio, assuming no acquisitions or refinancings [44] Question: Status of non-core asset dispositions - Management indicated that the market remains challenging for selling non-core assets, but they continue to focus on pruning these assets [54] Question: Details on the $75 million of cash rent pending - Management estimated that about 70% of the $75 million would be realized in 2026, with a significant portion expected to commence in the middle of the year [62] Question: Reconciliation of leasing demand with job market conditions - Management observed that despite layoffs, there is still strong demand for upgrading office space, as companies seek to enhance collaboration and innovation [65]