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Highwoods Properties Inc. (HIW - Free Report) reported second-quarter 2024 funds from operations (FFO) per share of 98 cents, which beat the Zacks Consensus Estimate of 90 cents. The figure was also higher than the prior-year quarter’s 94 cents.
Quarterly results reflect a decline in rental property and other expenses year over year and improving leasing activity. However, interest expenses were up year over year. HIW raised its outlook for 2024.
Rental and other revenues came in at $204.7 million, down 1.2% on a year-over-year basis. The figure also missed the Zacks Consensus Estimate of $208.8 million.
According to Ted Klinck, the president and CEO of HIW, “Our excellent first half financial performance combined with improved leasing volumes has given us the confidence to increase our FFO outlook by over $0.04 per share at the midpoint. Plus, our balance sheet is in excellent shape with low leverage and no debt maturities until mid-2026, which positions us to capitalize on future growth opportunities.”
Quarter in Detail
Highwoods’ average in-place cash rent was up 4.8% per square foot from the prior-year quarter. At the end of the reported quarter, the in-service portfolio occupancy (at HIW share) declined 40 basis points year over year to 88.5%. The same-property cash net operating income (NOI) increased 3.3% year over year to $140.8 million.
Highwoods’ second-generation leasing activity included 909,000 square feet of space in the second quarter, including 352,000 square feet of new leases. The dollar-weighted average term is six years.
Moreover, the present development pipeline aggregates $506 million (at HIW share) and is 45% pre-leased. During the second quarter, the company also signed 61,000 square feet of first-generation leases.
Rental property and other expenses were $64.6 million, down 2.6% on a year-over-year basis. However, its interest expenses were $35.9 million, up 5.4% on a year-over-year basis.
During the second quarter, Highwoods disposed of seven non-core office buildings aggregating $62.5 million in Raleigh, NC.
Balance Sheet Position
The company exited the second quarter with $27 million of cash and cash equivalents, up from $16.4 million reported as of Mar 31, 2024.
The reported net debt-to-adjusted EBITDAre ratio was 5.8 compared with 6.09 at the end of Mar 31, 2024.
2024 Guidance
Highwoods raised its guidance for 2024. The company now expects FFO per share in the range of $3.54-$3.62, up from the prior guided range of $3.46-$3.61. The Zacks Consensus Estimate for the same is currently pegged at $3.56.
The company’s updated 2024 outlook includes a $4.8 million net impact of non-recurring items mainly related to prior-year tax refunds recorded in the second quarter of 2024, around $2.5 million of which was anticipated in the prior outlook.
HIW expects growth in same-property cash NOI to be between 0.5% and 2%. The average occupancy is anticipated between 87% and 89%, unchanged from the prior guided range.
We are looking forward to the earnings releases of other REITs like Welltower (WELL - Free Report) and Cousins Properties (CUZ - Free Report) , which are slated to report their results on Jul 29 and Jul 25, respectively.
The Zacks Consensus Estimate for Welltower’s second-quarter 2024 FFO per share is pegged at $1.0, which implies a year-over-year increase of 11.1%. WELL currently carries a Zacks Rank of #3.
The Zacks Consensus Estimate for Cousins Properties’ second-quarter 2024 FFO per share is pegged at 66 cents, which suggests a year-over-year decline of 76%. CUZ 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.
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Highwoods' (HIW) Q2 FFO Beats Estimates, '24 View Raised
Highwoods Properties Inc. (HIW - Free Report) reported second-quarter 2024 funds from operations (FFO) per share of 98 cents, which beat the Zacks Consensus Estimate of 90 cents. The figure was also higher than the prior-year quarter’s 94 cents.
Quarterly results reflect a decline in rental property and other expenses year over year and improving leasing activity. However, interest expenses were up year over year. HIW raised its outlook for 2024.
Rental and other revenues came in at $204.7 million, down 1.2% on a year-over-year basis. The figure also missed the Zacks Consensus Estimate of $208.8 million.
According to Ted Klinck, the president and CEO of HIW, “Our excellent first half financial performance combined with improved leasing volumes has given us the confidence to increase our FFO outlook by over $0.04 per share at the midpoint. Plus, our balance sheet is in excellent shape with low leverage and no debt maturities until mid-2026, which positions us to capitalize on future growth opportunities.”
Quarter in Detail
Highwoods’ average in-place cash rent was up 4.8% per square foot from the prior-year quarter. At the end of the reported quarter, the in-service portfolio occupancy (at HIW share) declined 40 basis points year over year to 88.5%. The same-property cash net operating income (NOI) increased 3.3% year over year to $140.8 million.
Highwoods’ second-generation leasing activity included 909,000 square feet of space in the second quarter, including 352,000 square feet of new leases. The dollar-weighted average term is six years.
Moreover, the present development pipeline aggregates $506 million (at HIW share) and is 45% pre-leased. During the second quarter, the company also signed 61,000 square feet of first-generation leases.
Rental property and other expenses were $64.6 million, down 2.6% on a year-over-year basis. However, its interest expenses were $35.9 million, up 5.4% on a year-over-year basis.
During the second quarter, Highwoods disposed of seven non-core office buildings aggregating $62.5 million in Raleigh, NC.
Balance Sheet Position
The company exited the second quarter with $27 million of cash and cash equivalents, up from $16.4 million reported as of Mar 31, 2024.
The reported net debt-to-adjusted EBITDAre ratio was 5.8 compared with 6.09 at the end of Mar 31, 2024.
2024 Guidance
Highwoods raised its guidance for 2024. The company now expects FFO per share in the range of $3.54-$3.62, up from the prior guided range of $3.46-$3.61. The Zacks Consensus Estimate for the same is currently pegged at $3.56.
The company’s updated 2024 outlook includes a $4.8 million net impact of non-recurring items mainly related to prior-year tax refunds recorded in the second quarter of 2024, around $2.5 million of which was anticipated in the prior outlook.
HIW expects growth in same-property cash NOI to be between 0.5% and 2%. The average occupancy is anticipated between 87% and 89%, unchanged from the prior guided range.
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
Upcoming Earnings Releases
We are looking forward to the earnings releases of other REITs like Welltower (WELL - Free Report) and Cousins Properties (CUZ - Free Report) , which are slated to report their results on Jul 29 and Jul 25, respectively.
The Zacks Consensus Estimate for Welltower’s second-quarter 2024 FFO per share is pegged at $1.0, which implies a year-over-year increase of 11.1%. WELL currently carries a Zacks Rank of #3.
The Zacks Consensus Estimate for Cousins Properties’ second-quarter 2024 FFO per share is pegged at 66 cents, which suggests a year-over-year decline of 76%. CUZ 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.