Highwoods Properties(US:HIW)2024-07-24 19:54Financial Data and Key Metrics Changes - The company reported FFO of $0.98 per share, representing a 4% year-over-year growth and raised its full year FFO outlook to $3.54 to $3.62 per share, implying a $0.045 increase at the midpoint compared to prior outlook [13][52] - The balance sheet remains strong with a debt-to-EBITDA ratio of 5.8 times at quarter end, and $27 million of available cash with nothing drawn on the $750 million revolving credit facility [29][102] Business Line Data and Key Metrics Changes - The company signed 909,000 square feet of second-generation leases, including over 350,000 square feet of new leases, marking the third consecutive quarter of strong new leasing volume [14] - Occupancy remained steady at 88.5%, which does not yet fully reflect the strong leasing activity over the past few quarters [15] Market Data and Key Metrics Changes - The majority of leasing activity occurred in Nashville, Raleigh, Atlanta, and Richmond, which accounted for almost 80% of the total leasing volume for the quarter [45] - In Nashville, the company signed 271,000 square feet, including 157,000 square feet of new leases, indicating a significant increase in leasing activity [74] Company Strategy and Development Direction - The company is focused on stabilizing its rent roll before reintroducing to the mortgage market, aiming for attractive loan terms [2] - The development pipeline is robust, with a $506 million pipeline now 45% leased, and ongoing projects like GlenLake III and Granite Park 6 expected to bolster cash flow and earnings [16][68] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term outlook, citing strong demand for the Sunbelt BBD portfolio and the expectation of meaningful growth in occupancy and NOI following a trough in early 2025 [39][107] - The company anticipates that the leasing environment will continue to improve, with larger deals becoming more common [98][119] Other Important Information - The company has successfully monetized non-core assets, selling $80 million worth in the year-to-date, and plans to continue this strategy to improve portfolio quality and cash flow [66][40] - The company expects to face some headwinds in the third quarter due to higher utility costs but remains optimistic about the overall performance [106] Q&A Session Summary Question: Can you discuss the expenses and the lower rental expenses this quarter? - Management noted that lower rental expenses were influenced by seasonality and a one-time tax refund that did not recur in the second quarter [84] Question: What is the outlook for mark-to-market trends? - Management expects mark-to-market to remain flat over the next few quarters due to a challenging leasing environment [89] Question: Can you provide details on the Tivity backfill lease and its impact? - Management indicated that the backfill lease would not significantly impact the commencement timeline and that there are healthy prospects for the space [93][95] Question: What are the expectations for leasing activity in the second half of the year? - Management reported strong leasing activity and a healthy pipeline, with larger deals becoming more common, indicating a positive outlook for the second half [98][119] Question: How does the company view potential acquisitions? - Management is considering various acquisition opportunities but remains patient, focusing on high-quality assets that can generate attractive risk-adjusted returns [62][143]