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Highwoods' Rotation Plan on Track, Sells Memphis Assets

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Highwoods Properties (HIW - Free Report) recently announced sale of four office buildings comprising 599,000 square feet in the Poplar corridor submarket of Memphis. The move marks the closing of the first phase of its market-rotation plan, which entails exiting the Greensboro and Memphis markets, and fortifying its portfolio in the Best Business Districts (“BBD”) of higher-growth markets.

The company sold a select portfolio of assets in Greensboro and Memphis, for a total price of $428 million since its initial announcement of this two-pronged strategy last August. The amount approximates the company’s total investment for Bank of America Tower at Legacy Union in Charlotte made last November.

The buyout marks the company’s entry into the CBD Charlotte and an iconic asset addition in a prime infill location in a top-tier submarket, offering the company a solid footing in a higher-growth market and platform to expand its presence.The rest of the assets in Greensboro and Memphis will be sold in the second phase, which has no schedule as of now.

Highwoods has been making prudent moves to expand its footprint in high-growth markets and enhance portfolio quality. The company is following a disciplined capital-recycling strategy that entails disposing of non-core assets and investing the proceeds in premium asset acquisitions, and undertaking accretive development projects. It is currently focused on developing office properties in BBDs and therefore, the market-rotation plan will likely help Highwoods ride on its growth trajectory over the long run.

Moreover, the completion of the first phase of the company’s market-rotation plan will help simplify its business model and strengthen financial position. This is much needed given the challenges that the economy is facing due to the coronavirus outbreak and the nationwide measures being taken to contain its spread.

Presently, with more than $600 million of available liquidity with cash on hand and borrowing capacity under its revolving credit facility, the company seems well poised to navigate through the current turbulence.

However, reflecting the broader market sentiment over the outbreak’s impact on the economy, shares of this Zacks Rank #3 (Hold) company have declined 19.4% in the past six months, wider than its industry fall of 18.4%.You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.



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SBA Communications Corporation (SBAC - Free Report) currently carries a Zacks Rank of 2 (Buy). The current-year projected growth rate for funds from operations (FFO) is 10.4%.

Plymouth Industrial REIT (PLYM - Free Report) carries a Zacks Rank of 2, currently. The Zacks Consensus Estimate for the ongoing-year FFO per share moved 1.5% north to $2.08 over the past month.

Piedmont Office Realty Trust (PDM - Free Report) also carries a Zacks Rank of 2, at present. The company’s FFO per share estimate for 2020 moved up 3.2% to $1.96 in two months’ time.

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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