Adam Jackson
Stocks for Highwoods Properties Inc. (NYSE: HIW) ticked up early Wednesday morning over positive financial results as the company sees its highest volume of new leasing since 2014.
The real estate investment trust released its third-quarter report card ending Sept. 30.
Net income was $38.3 million, or $0.36 per diluted share, for the third quarter, a 46% drop versus a net income of $72.1 million, or $0.69 per diluted share, for the same period last year.
Funds from operations (FFO) was $111.6 million, or $1.04 per share, an 8% slump versus $102.8 million in the third quarter in 2021. This beat the Zacks Investment Research average analyst estimate of $0.97 per share. The FFO includes $72.3 million worth of depreciation and amortization of real estate assets.
Highwoods posted revenue of $207 million in the period, in line with the Yahoo Finance average analyst estimate of $207.93 million.
The REIT‘s top executive said that he felt good about the company’s quarterly results, as filings showed that it has leased more than 1 million square feet of second-generation office space and 518,000 square feet of new leases this year.
“Our third quarter performance reflects the strong activity we continue to see across our markets…” said president and CEO Ted Klinck. “Importantly, we substantially backfilled our largest 2023 lease expiration. In addition to healthy operating metrics, we once again delivered excellent financial results, with FFO of $1.04 per share, and continued to strengthen our cash flows. This strong performance validates the ongoing quality and resiliency of our portfolio, platform, and strategy.”
Highwoods saw its average in-place cash rents rise 5.9% per square foot year-over-year, ending the quarter with in-service occupancy of 90.7%. The company also had net effective rents that were more than 20% above its prior five-quarter average.
The company said that it achieved a dollar-weighted average term of 7.4 years and delivered GAAP rent growth of 13.4% and cash rent growth of 0.3%. It also secured net effective rents 22.4% higher than the prior five-quarter average.
Highwoods during the quarter acquired a 367,000 square foot office property in Uptown Charlotte for $203 million. The company also sold a $23 million mixed-use land parcel in Richmond.
The REIT’s current total development pipeline is $533 million.
The company maintained “ample” liquidity with $640 million available on the company’s $750 million revolving credit facility at the end of the quarter.
Highwoods obtained a $200 million unsecured bank term loan scheduled to mature in October 2025, which also includes a one-year extension option. Unsecured notes worth $250 million that were scheduled to mature in January 2023 were prepaid without penalty, the company said, with last remaining debt maturity until the fourth quarter of 2025.
