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Highwoods (HIW) Continues Assets Sale With $98M Dispositions

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Highwoods Properties, Inc. (HIW - Free Report) recently announced $98 million of non-core asset sales. The move comes as part of Highwoods’ disciplined capital-recycling strategy that entails disposing of non-core assets and redeploying the proceeds in premium asset acquisitions and accretive development projects.

Particularly, HIW sold the FBI Tampa Field Office, which is a 138,000 square feet office building, for $70.4 million. It was built-to-suit for the FBI in 2005 and was renewed in 2020 under a long-term lease.

Moreover, the company is expected to clock in the sale of the remainder office buildings in Greensboro for $20.3 million, either later in the current quarter or in early third quarter this year. The buildings encompass 299,000 square feet with an occupancy of 88.2%.

In total, these properties were projected to generate $6.3 million of annual GAAP net operating income and $5.7 million of annual cash net operating income, inclusive of the effect of free rent, in 2022.

Additionally, the company has disposed an 8.9-acre non-core land parcel next to its One Independence office building in Tampa’s Westshore BBD for $6.9 million. It was sold off to a developer who intends to construct apartment units. As a result, Highwoods expects to record $2.3 million of land sale gains (included in FFO) in the second quarter.

According to Ted Klinck, president and CEO of Highwoods “With these sales, we will have sold $464 million of non-core properties since we announced our acquisition of a portfolio of office properties from PAC in mid-2021 and remain on pace to return our balance sheet to pre-acquisition metrics by the middle of 2022.”

Highwoods’ well-diversified tenant base and its efforts to expand in the high-growth markets, sell non-core assets and invest the proceeds in further expansion bode well for long-term growth. HIW is seeing a recovery in demand for its high-quality, well-placed office properties as highlighted by a rebound in the new leasing volume.

A large part of its portfolio is concentrated in high-growth Sun Belt markets, which have long-term favorable demographic trends and are expected to continue experiencing above-average job growth. This will likely support Highwoods’ rent growth over the long term.

Highwoods currently carries a Zacks Rank #3 (Hold). Its shares have lost 12.9% against the industry’s decline of 4.3% over the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Key Picks

Some better-ranked stocks from the REIT sector are Prologis (PLD - Free Report) , Extra Storage Space (EXR - Free Report) and OUTFRONT Media (OUT - Free Report) .

The Zacks Consensus Estimate for Prologis’ 2022 funds from operations (FFO) per share has moved 1.8% upward in the past month to $5.15. PLD presently carries a Zacks Rank of 2 (Buy).

The Zacks Consensus Estimate for Extra Storage Space’s ongoing year’s FFO per share has been raised 1.1% over the past month to $8.01. EXR carries a Zacks Rank #2, currently.

The Zacks Consensus Estimate for OUTFRONT Media’s current-year FFO per share has moved 35% northward in the past month to $2.09. OUT carries a Zacks Rank of 2 at present.

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