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Highwoods Properties Inc. (HIW - Free Report) reported second-quarter 2023 funds from operations (FFO) per share of 94 cents, in line with the Zacks Consensus Estimate. However, the figure was lower than the prior-year quarter’s $1.
The company’s quarterly results reflect lower operating expenses and rent growth. However, a fall in occupancy acted as a dampener. It also revised its outlook for 2023.
Rental and other revenues came in at $207.3 million, missing the Zacks Consensus Estimate of $209.8 million.
On a year-over-year basis, although rental and other revenues improved 1.7%, FFO per share fell 6%.
According to Ted Klinck, president and CEO of HIW, “We increased our liquidity during the quarter and have ample existing capital sources to fund our remaining development spend and repay our consolidated debt maturities through year-end 2025.”
Quarter in Detail
Highwoods leased 918,000 square feet of second-generation office space in the second quarter, including 222,000 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 23.4% pre-leased on a dollar-weighted basis.
Operating expenses were $150.7 million, down 14.7% on a year-over-year basis. We estimated the same to be $150.3 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 5.4 years.
At the end of the reported quarter, HIW’s in-service portfolio occupancy (consolidated) declined 170 basis points year over year to 88.9%. We estimated the same to be 89.6%.
The same-property cash net operating income (NOI) decreased 1.1% year over year to $132.7 million.
During the second quarter, Highwoods disposed three non-core buildings for $51.3 million, which comprises One Independence Park in Tampa for $19.5 million, Riverbirch and 5000 North Park in Raleigh for $20.7 million and $11 million, respectively.
Balance-Sheet Position
The company exited the second quarter with $17 million of cash and cash equivalents, up from $15.7 million reported as of Mar 31, 2023.
The reported net debt-to-adjusted EBITDAre ratio was 5.98 compared with 5.92 at the end of Mar 31, 2023.
Revised 2023 Guidance
Highwoods revised its guidance for 2023.
The company now expects FFO per share to be in the range of $3.69-$3.81, revised from the prior guided range of $3.68-$3.82. The Zacks Consensus Estimate for the same is currently pegged at $3.79, which is within the guided range.
HIW expects its same-property cash NOI, excluding termination fees and the net impact of temporary rent deferrals for the current year, to be between -0.5% and 1%. The year-end occupancy projection is expected to be in the range of 88.5-90%, revised from the prior guided range of 89-91%.
Highwoods currently carries a Zacks Rank #3 (Hold).
Highwoods Properties, Inc. Price, Consensus and EPS Surprise
We are looking forward to the earnings releases of other REITs like SBA Communications (SBAC - Free Report) and Host Hotels & Resorts (HST - Free Report) , which are slated to report their results on Jul 31 and Aug 3, respectively.
The Zacks Consensus Estimate for Host Hotels & Resorts’ second-quarter 2023 FFO per share is pegged at 56 cents, implying a year-over-year decrease of 3.5%. HST currently carries a Zacks Rank of #3.
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) Q2 FFO Beat Estimates, Revises '23 View
Highwoods Properties Inc. (HIW - Free Report) reported second-quarter 2023 funds from operations (FFO) per share of 94 cents, in line with the Zacks Consensus Estimate. However, the figure was lower than the prior-year quarter’s $1.
The company’s quarterly results reflect lower operating expenses and rent growth. However, a fall in occupancy acted as a dampener. It also revised its outlook for 2023.
Rental and other revenues came in at $207.3 million, missing the Zacks Consensus Estimate of $209.8 million.
On a year-over-year basis, although rental and other revenues improved 1.7%, FFO per share fell 6%.
According to Ted Klinck, president and CEO of HIW, “We increased our liquidity during the quarter and have ample existing capital sources to fund our remaining development spend and repay our consolidated debt maturities through year-end 2025.”
Quarter in Detail
Highwoods leased 918,000 square feet of second-generation office space in the second quarter, including 222,000 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 23.4% pre-leased on a dollar-weighted basis.
Operating expenses were $150.7 million, down 14.7% on a year-over-year basis. We estimated the same to be $150.3 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 5.4 years.
At the end of the reported quarter, HIW’s in-service portfolio occupancy (consolidated) declined 170 basis points year over year to 88.9%. We estimated the same to be 89.6%.
The same-property cash net operating income (NOI) decreased 1.1% year over year to $132.7 million.
During the second quarter, Highwoods disposed three non-core buildings for $51.3 million, which comprises One Independence Park in Tampa for $19.5 million, Riverbirch and 5000 North Park in Raleigh for $20.7 million and $11 million, respectively.
Balance-Sheet Position
The company exited the second quarter with $17 million of cash and cash equivalents, up from $15.7 million reported as of Mar 31, 2023.
The reported net debt-to-adjusted EBITDAre ratio was 5.98 compared with 5.92 at the end of Mar 31, 2023.
Revised 2023 Guidance
Highwoods revised its guidance for 2023.
The company now expects FFO per share to be in the range of $3.69-$3.81, revised from the prior guided range of $3.68-$3.82. The Zacks Consensus Estimate for the same is currently pegged at $3.79, which is within the guided range.
HIW expects its same-property cash NOI, excluding termination fees and the net impact of temporary rent deferrals for the current year, to be between -0.5% and 1%. The year-end occupancy projection is expected to be in the range of 88.5-90%, revised from the prior guided range of 89-91%.
Highwoods currently carries a Zacks Rank #3 (Hold).
Highwoods Properties, Inc. Price, Consensus and EPS Surprise
Highwoods Properties, Inc. price-consensus-eps-surprise-chart | Highwoods Properties, Inc. Quote
Upcoming Earnings Releases
We are looking forward to the earnings releases of other REITs like SBA Communications (SBAC - Free Report) and Host Hotels & Resorts (HST - Free Report) , which are slated to report their results on Jul 31 and Aug 3, respectively.
The Zacks Consensus Estimate for SBA Communications’ second-quarter 2023 FFO per share is pegged at $3.14, suggesting year-over-year growth of 2.3%. SBAC currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Host Hotels & Resorts’ second-quarter 2023 FFO per share is pegged at 56 cents, implying a year-over-year decrease of 3.5%. HST currently carries a Zacks Rank of #3.
Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.