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Highwoods Sheds Non-Core Assets to Improve Portfolio Mix

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Highwoods Properties, Inc. (HIW - Free Report) recently announced the disposition of $54.5 million of non-core buildings. The move comes as part of the company’s concerted efforts to improve portfolio mix and beef up its long-term cash flow growth.

Specifically, the office properties included a 124,000-square-foot building in Alpharetta, GA - Two Point Royal, and a 199,000-square-foot, single customer building in northeast Tampa - Highwoods Preserve I. The asset sales led to reaping of combined gross proceeds of $54.5 million. However, in exchange for customary fees, Highwoods will continue to serve as property manager of Highwoods Preserve I. With regard to the sales, the company is slated to record non-FFO gains of around $20.7 million in the fourth quarter of 2018.

Highwoods has been making immense efforts to expand its footprint in high-growth markets and improve portfolio quality. In addition, the company is following a disciplined capital-recycling strategy that entails disposing off non-core assets and investing the proceeds in premium asset acquisitions and undertaking accretive development projects. The company is currently focused on Class A properties in BBD locations. In fact, the company sold a non-core industrial land parcel in Atlanta, spanning 24 acres for $2.1 million, in third-quarter 2018.

Moreover, encouragingly, a large part of the company’s portfolio is now concentrated in high growth Sun Belt markets, which have long-term favorable demographic trends and are expected to witness above-average job growth. This bodes well for Highwoods’ long-term growth.

Highwoods currently has a Zacks Rank #3 (Hold). The company’s shares have lost 16% of its value in three months’ time against the industry’s decline of 5.1%.



Stocks to Consider

Better-ranked stocks from the real-estate space include Lamar Advertising Company (LAMR - Free Report) , PS Business Parks, Inc. and Cousins Properties Incorporated (CUZ - Free Report) . Each of these stocks carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Lamar’s FFO per share estimates for 2019 has been revised 1.4% upward to $5.89 in the last 30 days.

PS Business Parks’ Zacks Consensus Estimate for 2019 FFO per share moved 0.5% north to $6.58 in the past two months.

Cousins Properties’ FFO per share estimates for 2019 has remained unchanged in a month’s time at 64 cents.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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