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Highwoods Properties Inc. (HIW - Free Report) reported fourth-quarter 2022 funds from operations (FFO) per share of 96 cents, in line with the Zacks Consensus Estimate. The figure compared unfavorably with the prior-year quarter’s $1.06. We estimated FFO per share for fourth-quarter 2022 to be 96 cents.
Quarterly results reflect better-than-anticipated revenues on robust leasing activity and improvement in rents. However, higher operating expenses were a headwind in the quarter.
Rental and other revenues came in at $211.7 million, outpacing the Zacks Consensus Estimate of $209.3 million. The figure increased 4.2% from the prior-year quarter’s $203.2 million. Our estimate for the same was pegged at $209.2 million.
According to Ted Klinck, president and CEO of HIW, “We delivered strong financial and operating results in the fourth quarter. Leasing activity remained robust, with new leasing volume of 1.5 million square feet, our highest in any year since 2014. Importantly, strong leasing volume was combined with strong economics, as net effective rents on 2022 lease deals were our highest ever.”
In 2022, Highwoods reported an FFO per share of $4.03, improving 4.4% from the prior year’s $3.86. The figure matched the Zacks Consensus Estimate. We projected the same to be $4.03. Total revenues of $828.9 million beat the consensus mark of $827.1 million and were up 7.9% year over year. Our estimate was pegged at $826.4 million.
Quarter in Detail
Highwoods leased 924,000 square feet of second-generation office space in the fourth quarter, including 337,000 square feet of new leases. Moreover, the present development pipeline, which covers around 1.6 million square feet, aggregates $518 million (at HIW share). It is 20.9% pre-leased on a dollar-weighted basis.
Operating expenses were $154.4 million, up 7.6% on a year-over-year basis. We estimated the same to be $152.6 million.
The average in-place cash rent was up 3% per square foot from the prior-year quarter, while the dollar-weighted average term was 5.6 years.
As of Dec 31, 2022, HIW’s in-service portfolio occupancy increased 30 basis points sequentially to 91%. We projected the same to be 90.8%.
Excluding the net impact of temporary rent deferral repayments, the same-property cash NOI declined marginally year over year to $114.05 million.
Portfolio Activity
During the fourth quarter, Highwoods acquired McKinney & Olive in Uptown Dallas, a trophy mixed-use asset spanning 557,000 square feet, in a 50/50 joint venture (JV) interest. The JV’s total investment aggregated $395 million, with HIW’s share being $197 million. The property is 99% leased.
HIW placed in service Midtown West in Tampa, a 152,000 square feet office property in the mixed-use Midtown Tampa development, in which it owns 80% JV interest. Out of the total investment totaling $71 million for the property, the company’s share aggregated $57 million. As of the fourth-quarter end, the property was 97.4% leased.
Further, HIW announced the development of Midtown East in Tampa, in which it owns a 50% JV interest. The 143,000 square feet office property in Midtown Tampa has a total investment of $83 million, of which HIW’s share is $42 million.
Balance-Sheet Position
Highwoods exited the fourth quarter with $21.4 million of cash and cash equivalents, down from $23.1 million reported on Sep 30, 2022. The reported net debt-to-adjusted EBITDAre ratio was 5.9 compared with 5.6 at the end of Sep 30, 2022.
2023 Guidance
Highwoods issued guidance for 2023.
For 2023, the company predicts FFO per share to lie in the range of $3.66-$3.82. The Zacks Consensus Estimate for the same is currently pegged at $3.83.
HIW expects same-property cash NOI, excluding termination fees and the net impact of temporary rent deferrals for the current year, to be between -1% and 1%. The year-end occupancy is anticipated between 89% and 91%.
SL Green Realty Corp. (SLG - Free Report) reported fourth-quarter 2022 FFO per share of $1.46, lagging the Zacks Consensus Estimate of $1.48. The figure fell 3.9% from the year-ago quarter’s $1.52.
SLG’s results reflected lower-than-anticipated revenues and a fall in occupancy. However, same-store cash NOI improved year over year.
Alexandria Real Estate Equities, Inc. (ARE - Free Report) reported fourth-quarter 2022 AFFO per share of $2.14, surpassing the Zacks Consensus Estimate by a cent. The reported figure also compared favorably with the year-ago quarter’s $1.97.
ARE’s results reflected decent leasing activity and rental rate growth during the quarter.
Boston Properties Inc.’s (BXP - Free Report) fourth-quarter 2022 FFO per share of $1.86 outpaced the Zacks Consensus Estimate of $1.84. The figure increased 18.7% year over year.
The quarterly figure also exceeded the mid-point of the company’s fourth-quarter guidance by a cent, reflecting portfolio outperformance. In addition, BXP experienced solid leasing activity in the quarter. The company revised its 2023 outlook for FFO per share.
Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.
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Highwoods' (HIW) Q4 FFO Matches Estimates, Revenues Beat
Highwoods Properties Inc. (HIW - Free Report) reported fourth-quarter 2022 funds from operations (FFO) per share of 96 cents, in line with the Zacks Consensus Estimate. The figure compared unfavorably with the prior-year quarter’s $1.06. We estimated FFO per share for fourth-quarter 2022 to be 96 cents.
Quarterly results reflect better-than-anticipated revenues on robust leasing activity and improvement in rents. However, higher operating expenses were a headwind in the quarter.
Rental and other revenues came in at $211.7 million, outpacing the Zacks Consensus Estimate of $209.3 million. The figure increased 4.2% from the prior-year quarter’s $203.2 million. Our estimate for the same was pegged at $209.2 million.
According to Ted Klinck, president and CEO of HIW, “We delivered strong financial and operating results in the fourth quarter. Leasing activity remained robust, with new leasing volume of 1.5 million square feet, our highest in any year since 2014. Importantly, strong leasing volume was combined with strong economics, as net effective rents on 2022 lease deals were our highest ever.”
In 2022, Highwoods reported an FFO per share of $4.03, improving 4.4% from the prior year’s $3.86. The figure matched the Zacks Consensus Estimate. We projected the same to be $4.03. Total revenues of $828.9 million beat the consensus mark of $827.1 million and were up 7.9% year over year. Our estimate was pegged at $826.4 million.
Quarter in Detail
Highwoods leased 924,000 square feet of second-generation office space in the fourth quarter, including 337,000 square feet of new leases. Moreover, the present development pipeline, which covers around 1.6 million square feet, aggregates $518 million (at HIW share). It is 20.9% pre-leased on a dollar-weighted basis.
Operating expenses were $154.4 million, up 7.6% on a year-over-year basis. We estimated the same to be $152.6 million.
The average in-place cash rent was up 3% per square foot from the prior-year quarter, while the dollar-weighted average term was 5.6 years.
As of Dec 31, 2022, HIW’s in-service portfolio occupancy increased 30 basis points sequentially to 91%. We projected the same to be 90.8%.
Excluding the net impact of temporary rent deferral repayments, the same-property cash NOI declined marginally year over year to $114.05 million.
Portfolio Activity
During the fourth quarter, Highwoods acquired McKinney & Olive in Uptown Dallas, a trophy mixed-use asset spanning 557,000 square feet, in a 50/50 joint venture (JV) interest. The JV’s total investment aggregated $395 million, with HIW’s share being $197 million. The property is 99% leased.
HIW placed in service Midtown West in Tampa, a 152,000 square feet office property in the mixed-use Midtown Tampa development, in which it owns 80% JV interest. Out of the total investment totaling $71 million for the property, the company’s share aggregated $57 million. As of the fourth-quarter end, the property was 97.4% leased.
Further, HIW announced the development of Midtown East in Tampa, in which it owns a 50% JV interest. The 143,000 square feet office property in Midtown Tampa has a total investment of $83 million, of which HIW’s share is $42 million.
Balance-Sheet Position
Highwoods exited the fourth quarter with $21.4 million of cash and cash equivalents, down from $23.1 million reported on Sep 30, 2022. The reported net debt-to-adjusted EBITDAre ratio was 5.9 compared with 5.6 at the end of Sep 30, 2022.
2023 Guidance
Highwoods issued guidance for 2023.
For 2023, the company predicts FFO per share to lie in the range of $3.66-$3.82. The Zacks Consensus Estimate for the same is currently pegged at $3.83.
HIW expects same-property cash NOI, excluding termination fees and the net impact of temporary rent deferrals for the current year, to be between -1% and 1%. The year-end occupancy is anticipated between 89% and 91%.
Highwoods currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Highwoods Properties, Inc. Price, Consensus and EPS Surprise
Highwoods Properties, Inc. price-consensus-eps-surprise-chart | Highwoods Properties, Inc. Quote
Performance of Other REITs
SL Green Realty Corp. (SLG - Free Report) reported fourth-quarter 2022 FFO per share of $1.46, lagging the Zacks Consensus Estimate of $1.48. The figure fell 3.9% from the year-ago quarter’s $1.52.
SLG’s results reflected lower-than-anticipated revenues and a fall in occupancy. However, same-store cash NOI improved year over year.
Alexandria Real Estate Equities, Inc. (ARE - Free Report) reported fourth-quarter 2022 AFFO per share of $2.14, surpassing the Zacks Consensus Estimate by a cent. The reported figure also compared favorably with the year-ago quarter’s $1.97.
ARE’s results reflected decent leasing activity and rental rate growth during the quarter.
Boston Properties Inc.’s (BXP - Free Report) fourth-quarter 2022 FFO per share of $1.86 outpaced the Zacks Consensus Estimate of $1.84. The figure increased 18.7% year over year.
The quarterly figure also exceeded the mid-point of the company’s fourth-quarter guidance by a cent, reflecting portfolio outperformance. In addition, BXP experienced solid leasing activity in the quarter. The company revised its 2023 outlook for FFO per share.
Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.