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Is it Wise to Retain Highwoods (HIW) Stock in Your Portfolio?
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Highwoods Properties, Inc.’s (HIW - Free Report) premium portfolio of office properties concentrated in the high-growth markets of the Sun Belt region, with favorable demographic trends, positions it well amid the recovering United States office real-estate market.
With the gradual return of the workforce to offices, Highwoods has been witnessing a recovery in demand for its high-quality office properties, reflected by the rebound in new leasing volume. Notably, the new leasing volume for third-quarter 2022 was the highest since 2014.
More so, the next cycle of office-space demand will likely be driven by an inbound business migration and significant investments being made by office occupiers to expand their footprint in the Sun Belt regions. This is expected to boost the demand for HIW’s high-quality portfolio of office assets in the forthcoming quarters.
A well-diversified tenant base assures stable rental revenues for the company. Highwoods has been making concerted efforts to expand its footprint in the high-growth best business districts (BBD) markets and enhance its portfolio quality on acquisitions and development. Its development projects in key markets seem encouraging.
This December, the company, in a 50/50 joint venture (JV) with Granite Properties, announced the acquisition of McKinney & Olive, a trophy mixed-use asset spanning 557,000 square feet situated in the heart of Uptown Dallas.
In the same month, it formed a 50/50 JV with The Bromley Companies to construct Midtown East in Tampa’s Westshore submarket as part of the efforts to expand in the high-growth BBD markets.
Highwoods’ aggressive capital-recycling program augurs well for its long-term growth and relieves its balance-sheet pressure.
The company had around $32 million of available cash and $137 million drawn on its $750-million revolving credit facility as of Oct 18, 2022. Also, investment-grade ratings of BBB/Baa2, with a stable outlook from S&P and Moody’s render the company favorable access to the debt market. With enough financial flexibility, HIW is well-positioned to capitalize on growth opportunities.
The company’s trailing 12-month return on equity (ROE) is 9.93% compared with the industry’s average of 4.65%, indicating that it is more efficient in using shareholders’ funds than its peers.
However, a rise in the supply of office properties weighs on Highwoods. Intense competition from developers, owners, and operators of office properties and other commercial real estate, including sublease space available from its tenants, limits its ability to increase rents and/or backfill tenant move-outs and vacancies.
Highwoods’ extensive development pipeline, although encouraging in the long run, exposes it to various risks, such as construction cost overruns and delays in project deliveries.
Interest rate hikes are likely to increase borrowing costs, affecting the company’s ability to purchase or develop real estate.
The Zacks Consensus Estimate for VICI Properties’ current-year FFO per share is pegged at $1.92. VICI currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Lamar Advertising’s 2022 FFO per share is pegged at $7.34. LAMR has a Zacks Rank of 2 at present.
The Zacks Consensus Estimate for Equity Commonwealth’s ongoing year’s FFO per share is pegged at 33 cents. EQC presently sports a Zacks Rank #1.
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.
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Is it Wise to Retain Highwoods (HIW) Stock in Your Portfolio?
Highwoods Properties, Inc.’s (HIW - Free Report) premium portfolio of office properties concentrated in the high-growth markets of the Sun Belt region, with favorable demographic trends, positions it well amid the recovering United States office real-estate market.
With the gradual return of the workforce to offices, Highwoods has been witnessing a recovery in demand for its high-quality office properties, reflected by the rebound in new leasing volume. Notably, the new leasing volume for third-quarter 2022 was the highest since 2014.
More so, the next cycle of office-space demand will likely be driven by an inbound business migration and significant investments being made by office occupiers to expand their footprint in the Sun Belt regions. This is expected to boost the demand for HIW’s high-quality portfolio of office assets in the forthcoming quarters.
A well-diversified tenant base assures stable rental revenues for the company.
Highwoods has been making concerted efforts to expand its footprint in the high-growth best business districts (BBD) markets and enhance its portfolio quality on acquisitions and development. Its development projects in key markets seem encouraging.
This December, the company, in a 50/50 joint venture (JV) with Granite Properties, announced the acquisition of McKinney & Olive, a trophy mixed-use asset spanning 557,000 square feet situated in the heart of Uptown Dallas.
In the same month, it formed a 50/50 JV with The Bromley Companies to construct Midtown East in Tampa’s Westshore submarket as part of the efforts to expand in the high-growth BBD markets.
Highwoods’ aggressive capital-recycling program augurs well for its long-term growth and relieves its balance-sheet pressure.
The company had around $32 million of available cash and $137 million drawn on its $750-million revolving credit facility as of Oct 18, 2022. Also, investment-grade ratings of BBB/Baa2, with a stable outlook from S&P and Moody’s render the company favorable access to the debt market. With enough financial flexibility, HIW is well-positioned to capitalize on growth opportunities.
The company’s trailing 12-month return on equity (ROE) is 9.93% compared with the industry’s average of 4.65%, indicating that it is more efficient in using shareholders’ funds than its peers.
However, a rise in the supply of office properties weighs on Highwoods. Intense competition from developers, owners, and operators of office properties and other commercial real estate, including sublease space available from its tenants, limits its ability to increase rents and/or backfill tenant move-outs and vacancies.
Highwoods’ extensive development pipeline, although encouraging in the long run, exposes it to various risks, such as construction cost overruns and delays in project deliveries.
Interest rate hikes are likely to increase borrowing costs, affecting the company’s ability to purchase or develop real estate.
Shares of this Zacks Rank #3 (Hold) company have gained 4.4% in the quarter-to-date period compared with its industry’s growth of 2.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the REIT sector are VICI Properties (VICI - Free Report) , Lamar Advertising (LAMR - Free Report) and Equity Commonwealth (EQC - Free Report) .
The Zacks Consensus Estimate for VICI Properties’ current-year FFO per share is pegged at $1.92. VICI currently carries a Zacks Rank #2 (Buy).
The Zacks Consensus Estimate for Lamar Advertising’s 2022 FFO per share is pegged at $7.34. LAMR has a Zacks Rank of 2 at present.
The Zacks Consensus Estimate for Equity Commonwealth’s ongoing year’s FFO per share is pegged at 33 cents. EQC presently sports a Zacks Rank #1.
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.