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Analyst Blog

Raleigh, NC-based real estate investment trust (REIT), Highwoods Properties Inc. (HIW - Analyst Report) inked a lease deal with a new customer for 28,000 square foot of space at Green V in Nashville. The transaction reflects the decent demand for the company’s properties in this area.

This space was previously occupied by  Lifepoint Hospitals Inc. (LPNT - Snapshot Report) (vacated in Feb 2014) for which Highwoods constructed a 203,000 square foot build-to-suit facility, earlier this year. Notably, with this new lease deal, Highwoods managed to relet 94% of the former LifePoint space. Last month, the company inked a lease deal with an existing customer for 91,000 square foot of space at Highwoods Plaza II in Nashville. Notably, Highwoods Plaza II is one of the two buildings LifePoint used to occupy, apart from Green V.

As a matter of fact, the Nashville market is recuperating well from a tepid economy and is experiencing growth in population as well as employment. Its economy is diverse and has significant growth potential. Wage income is also improving while there is a rising demand for premium office space.

Highwoods' efficiency in releting space is encouraging and we believe this will help improve its tenant base and pave the way for bottom-line growth in the future. Particularly, the company has been focusing on shifting its portfolio mix to high growth markets and offloading its asset base in non-core markets.

Highwoods currently carries a Zacks Rank #3 (Hold). Investors interested in the REIT industry may also consider stocks like Duke Realty Corporation (DRE - Analyst Report) and SL Green Realty Corp. (SLG - Snapshot Report). Both stocks carry a Zacks Rank #2 (Buy).

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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