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Highwoods (HIW), Brand Properties Team Up for 2827 Peachtree

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Highwoods Properties, Inc. (HIW - Free Report) has partnered with Brand Properties, LLC for the development of a 135,000-square-foot, multi-customer office building in one of Atlanta’s Best Business Districts (BBD).

Referred to as 2827 Peachtree, this development at Buckhead is 62% preleased to multiple customers, reflecting strong demand for the property. Its attractive location in Buckhead, on-site amenities and several restaurants within a short walk along with its boutique design are likely to have garnered solid interest among tenants, driven its preleasing activity and lured additional prospects.

The joint venture, in which Highwoods owns a 50% interest, has anticipated a total investment of $79 million for this development. Its construction is projected to start in the first quarter of 2022 and is slated for completion in the third quarter of 2023. Further, its pro forma stabilization date is in the first quarter of 2025.

Highwoods has a well-diversified tenant base that includes several bellwethers. Despite the COVID-19 crisis, its rent collections have been strong consistently. Further, large part of its portfolio is concentrated in the high-growth Sun Belt markets, which have long-term favorable demographic trends and are expected to continue experiencing above-average job growth. Going forward, the next cycle of office-space demand will likely be driven by inbound migration and significant investments announced by office occupiers to expand footprint in Sun Belt regions as well as additional hiring plans in the company’s markets.

Highwoods has been making concerted efforts to expand its footprint in high-growth BBD markets and improve the quality of the overall portfolio with acquisitions and development. As part of its strategy to fortify its presence in targeted markets, in November, HIW announced that it will develop GlenLake III in Raleigh, NC for a projected investment of $94.4 million. Moreover, with the addition of 2827 Peachtree, Highwoods development pipeline has grown to $283 million, encompassing 615,000 square feet, and is 49% preleased.

Highwoods is also focused on a capital-recycling strategy for enhancing its presence in the targeted high-growth markets. Also, match-fund acquisitions with non-core asset dispositions augur well. Recently, Highwoods announced the sale of non-core office assets in Richmond, VA and Raleigh, NC for $56 million.

Highwoods currently carries a Zacks Rank #3 (Hold). HIW’s shares have rallied 3.7%, underperforming its industry’s growth of 7.4% over the past six months. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Stocks to Consider

Some better-ranked stocks from the REIT sector include Terreno Realty Corporation (TRNO - Free Report) , CubeSmart (CUBE - Free Report) and Rexford Industrial Realty (REXR - Free Report) .

Terreno Realty holds a Zacks Rank of 2 (Buy) at present. Terreno Realty’s 2021 FFO per share is projected to increase 19.4% year over year.

Also, the Zacks Consensus Estimate for TRNO’s 2022 FFO per share has been revised marginally upward in the past two months.

The Zacks Consensus Estimate for CubeSmart’s 2021 FFO per share has moved 2.4% north to $2.10 over the past two months.

Currently, CubeSmart carries a Zacks Rank of 1. CUBE's long-term growth rate is projected at 11.2%.

The Zacks Consensus Estimate for Rexford Industrial’s 2021 FFO per share has moved 1.2% north to $1.63 over the past two months.

Currently, Rexford Industrial carries a Zacks Rank of 2. REXR's long-term growth rate is projected at 12.9%.

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.