Q4-02 Cash available for distribution ("CAD") was $31.7 million, or $0.53 per diluted share [vs a dividend of $0.59], versus CAD of $42.5 million, or $0.70 per diluted share, for the quarter ended December 31, 2001. Full year 2002 CAD was $165.1 million, or $2.72 per diluted share, a decline from 2001 CAD of $185.0 million, or $2.98 per diluted share. For the full year , FFO before minority interest and before non-recurring compensation expense and litigation reserve was $208.2 million, or $3.43 per diluted share, a 10.4% per diluted share decline from FFO of $238.0 million, or $3.83 per diluted share, reported for 2001.
For the year ending December 31, 2003, Highwoods is currently estimating FFO to be $3.00 to $3.25 per share.
For 2003, the Company anticipates disposition activity to be between $75.0 million and $175.0 million. The Company currently has assets under letter of intent, contract for sale or held for sale totaling $145.5 million. [And $145 million = $2.68/share - given 54 million shares]
SOOOO - even presuming that 03 is as bad as Q4-02 was - and HIW nets a CAD of $.53 a quarter - they well have plenty of money from sales [$.67 per quarter] to make up for the short-fall on the dividend [59 - 53 = $.06 per quarter].
Even if you presume the 02 trend continues into 03 - and CAD drops another 25% - HIW nets a CAD of $.40 a quarter - they well have plenty of money even if half the sales are completed [$.33 per quarter] to make up for the short-fall on the dividend [59 - 40 = $.19 per quarter]. [If CAD drops another 25%, I am probably selling, if HIW has not dropped another 40% before they release that number]
This is the way I see it - and I really need to be told if I am seeing it wrong.
I forgot - in my calculations - that the property to be sold has a mortgage - THUS - selling the property will probably net cash equall to about 50% of the net worth of the property - and 50% will go to debt reduction (that is presuming that the purchaser will assume the mortgage).
I think that an accurate forecast of CAD for 2003 is virtually impossible. The $.53 for the fourth quarter may or may not be representative of expected quarterly CAD for 2003. HIW indicated that leasing activity in the fourth quarter was the highest in awhile. That will be reflected in all four quarters of 2003. On the other hand, how many current leases will not be renewed in 2003? What unexpected events will take place in 2003 (like more bankruptcies)? Will the Worldcom and US Air situations be resolved favorably or unfavorably for HIW? These payments are already being accounted for on a cash basis. If cash is received in one quarter and not in the next then that would affect quarterly CAD. Will HIW use some of that cash from asset sales to buy back shares? That would raise CAD per outstanding share and decrease the total dividend payout.
The above possibilities are why I think a 2003 forecast of CAD is like throwing darts. No one knows where it will land. Your guess at 2003 CAD is as good as anyone elses. Unfortunately there is no way to come up with an accurate forecast.
But how do you know what TI will be? And how do you know there won't be further BK's and further space letting by the BK's? And how do you know of and factor in sublease space and it's downward presure on lease renewals? And how do you know there will be the anticipated asset sales in this deteriating economy -- even those under letter? I think a terrorist strike on US soil would spell the end to pending deals. And how do you know they'll choose to pay the dividend out of asset sales even if they can?
If you ask me, and you did (I really need to be told if I am seeing it wrong.), a lot of ifs! But I admire your accurate bean counting!!!