Thanks a bunch for your reply. Let me use the worst case scenario in my following analysis. With $20M excess this year, divie will be cut to $1.80 to achieve 90% payout. If we assume continued struggle in the office arena and thus no growth in the next 3 years, can you please tell me why HIW is still trading above $18 (10% yield benchmark for no growth REIT)?
MLynch did a report recently where at $20 they suggested that regardless of the barriers to entry that HIW's office and industrial assets were being discounted too much. Take that for what it is worth. I do not recall the numbers but I did run them by a bud of mine in the NC research triangle area who is heavy into real estate there and he confirmed that those per sq ft amounts were in fact quite discounted.
I don't have a good answer for you. On the one hand the SE United States has always been a lead economic indicator seeing some of the first post recession job growth. It appears that may not be so this time depending on how much of the area was related to the bubble economy. On the other hand I continue to admire HIW mgmt for its tenacity and knowledge of its individual core markets. The depth of years experience as it relates to their personnel in these core markets and that they do appear to "know where all the bones are buried".
Just when you start to feel bad about HIW you get positive news on durable goods last week though today's ISI number was a little short. Employment is a lagging indicator with 417K rolling being above the benchmark 400K. HOWEVER, Torto Wheaten is signaling that they believe the bottom has been achieved in most major office/industrial markets. There will be a lag of course before we go from bottom to seeing some strength. Torto Wheaten has a report on their website this week showing a job recovery back to the peak before last recession occuring in q1 04. If that is the case most office reits should start seeing gradual strengthening as the year progresses.
Where is all this blather by me going?...................... Oh yeah. Where I am going is if the office reits next qtr or 2 start reporting positive net absorption, definite bottoming, gaining advantage in terms of TI and commissions on new lease signings..... In other words, visability going forward. I believe the market would reach a point where it would accept HIW's negative payout over the near term as long as it didn't last too long AND as long as HIW delayed any future dividend increase to compensate the company back for the negative payout during this period of time.
In other words its possible we can hold close to these levels on a yield basis and would only go lower if say next qtr's news is bad AND no good visability going forward.
ferdie, I just want to point out one thing. While it is possible (like you said) for HIW to have a negative payout in the near term, it is also possible for it to stop paying out dividends until it reaches a positive payout.