Highwoods Properties Inc. (HIW Quick QuoteHIW - Free Report) reported fourth-quarter 2023 funds from operations (FFO) per share of 99 cents, outpacing the Zacks Consensus Estimate of 91 cents. The figure was also above the prior-year quarter’s 96 cents.

Quarterly results reflect rent growth. However, a fall in occupancy and higher operating expenses acted as dampeners. It also issued its outlook for 2024.

Rental and other revenues came in at $206.9 million, lagging the Zacks Consensus Estimate of $207.3 million.

On a year-over-year basis, although rental and other revenues fell 2.3%, FFO per share improved 3.1%.

According to Ted Klinck, president and CEO of HIW, “Leasing activity accelerated during the quarter with the year’s highest quarterly volume of new leasing, and 2024 is off to a similarly strong start.”

In 2023, Highwoods reported an FFO per share of $3.83, which decreased 5% from the prior year’s $4.03. However, the figure outpaced the Zacks Consensus Estimate of $3.75. Rental and other revenues of $833.9 million missed the consensus mark of $840.2 million and were marginally up year over year.

Quarter in Detail

Highwoods leased 698,000 square feet of second-generation office space in the fourth quarter, including 267,000 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 32% pre-leased on a dollar-weighted basis.

Operating expenses were $160.7 million, up 4.1% on a year-over-year basis. We estimated the metric to be $153.9 million.

The average in-place cash rent was up 5.5% per square foot from the prior-year quarter, while the dollar-weighted average term was 6.6 years.

At the end of the reported quarter, HIW’s in-service portfolio occupancy (consolidated) declined 220 basis points year over year to 88.8%. We estimated the same to be 88.7%.

The same-property cash net operating income (NOI) increased marginally year over year to $130.8 million.

During the fourth quarter, Highwoods disposed a non-core office building for $32 million in Nashville and a non-core land for $19.0 million in Tampa.

Balance-Sheet Position

The company exited the fourth quarter with $25.1 million of cash and cash equivalents, up from $16.9 million reported as of Sep 30, 2023.

The reported net debt-to-adjusted EBITDAre ratio was 6.13 compared with 6 at the end of Sep 30, 2023.

2024 Guidance

Highwoods issued guidance for 2023.

For 2024, the company expects FFO per share to be in the range of $3.46-$3.64. The Zacks Consensus Estimate for the same is currently pegged at $3.58.

HIW expects same-property cash NOI, excluding termination fees, to be between 0% and 2%. The average occupancy is anticipated between 87% and 89%.

Highwoods currently carries a Zacks Rank #4 (Sell).

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 Welltower (WELL Quick QuoteWELL - Free Report) and SBA Communications (SBAC Quick QuoteSBAC - Free Report) , which are slated to report their results on Feb 13 and Feb 26, respectively.

The Zacks Consensus Estimate for Welltower’s fourth-quarter 2023 FFO per share is pegged at 94 cents, implying a year-over-year increase of 13.3%. WELL currently carries a Zacks Rank of #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for SBA Communications’ fourth-quarter 2023 FFO per share is pegged at $3.32, suggesting year-over-year growth of 6.8%. SBAC currently carries a Zacks Rank #3.

Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.