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Highwoods Properties' Q3 FFO Beats Estimates, '24 View Raised

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Highwoods Properties Inc. (HIW - Free Report) reported third-quarter 2024 funds from operations (FFO) per share of 90 cents, which beat the Zacks Consensus Estimate of 88 cents. However, the figure was lower than the prior-year quarter’s 93 cents.

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Quarterly results reflect healthy leasing activity with rent growth amid rising demand for highly amenitized premium office spaces. However, higher interest expenses undermine the results to an extent. HIW raised its outlook for 2024.

Rental and other revenues came in at $204.3 million, down 1.3% year over year. The figure also narrowly missed the Zacks Consensus Estimate of $205.3 million.

According to Ted Klinck, the president and CEO of HIW, “Our high-quality portfolio continues to generate strong demand from customers and prospects.” He added, “The solid demand we’re seeing from current and future customers who are committing to long-term leases at healthy rents signifies the strength of high-quality office buildings owned by well-capitalized landlords across our BBD footprint.”

Highwoods Properties, Inc. Price, Consensus and EPS Surprise

Highwoods Properties, Inc. Price, Consensus and EPS Surprise

Highwoods Properties, Inc. price-consensus-eps-surprise-chart | Highwoods Properties, Inc. Quote

HIW’s Third Quarter in Detail

Highwoods’ average in-place cash rent was up 3.9% per square foot from the prior-year quarter. At the end of the reported quarter, the in-service portfolio occupancy (at HIW share) declined 70 basis points year over year to 88%. The same-property cash net operating income (NOI) increased 2.4% year over year to $140.5 million.

Highwoods’ second-generation leasing activity included 906,000 square feet of space in the third quarter, including 530,000 square feet of new leases. The dollar-weighted average term is 10.4 years.

The present development pipeline aggregates $514 million (at HIW share) and is 49.2% pre-leased. During the third quarter, the company also signed 61,000 square feet of first-generation leases.

Rental property and other expenses were $65.7 million, down 2.2% on a year-over-year basis. However, interest expenses were $37.5 million, up 9.4% on a year-over-year basis.

HIW’s Balance Sheet Position

The company exited the third quarter with total available liquidity of $788 million, including cash on hand, availability on the revolving credit facility and pro rata share of undrawn joint venture construction loans. The figure rose from $777 million reported as of June 30, 2024.

The reported net debt-to-adjusted EBITDAre ratio was 6.1 compared with 5.8 at the end of June 30, 2024.

HIW’s 2024 Guidance

Highwoods raised its guidance for 2024. The company now expects FFO per share in the range of $3.59-$3.63, up from the prior guided range of $3.54-$3.62. The midpoint for FFO per share is 6 cents higher than its initial outlook. The Zacks Consensus Estimate is currently pegged at $3.60.

HIW expects growth in same-property cash NOI between 1% and 2%, up from the previously guided range of 0.5%-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.

Upcoming Earnings Releases

We now look forward to the earnings releases of other REITs like Cousins Properties (CUZ - Free Report) and Healthpeak Properties, Inc. (DOC - Free Report) , slated to report on Oct. 24.

The Zacks Consensus Estimate for Cousins Properties’ third-quarter 2024 FFO per share stands at 67 cents, which indicates 3.1% growth year over year. CUZ currently has a Zacks Rank #3.

The Zacks Consensus Estimate for Healthpeak Properties’ third-quarter 2024 FFO per share is pegged at 44 cents, which implies a 2.2% year-over-year decrease. DOC 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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