Highwoods Offers Shares to Repay Debt

Zacks

Highwoods Properties Inc. (HIW) – a real estate investment trust (:REIT) – recently announced the offering of 3.75 million equity shares to repay debt. In addition, to cover any over-allotments, the company decided to provide a 30-day option to underwriters to buy an additional 0.56 million shares.

Highwoods expects to use the proceeds from this offering to pay off the outstanding debt under its unsecured revolving credit facility worth $475 million. Further, the company intends to use the remaining amount to finance proposed strategic acquisitions and developments as well as for meeting other corporate needs.

Notably, Wells Fargo Securities, LLC, an investment banking division of Wells Fargo & Company (WFC), and Jefferies LLC, a wholly-owned subsidiary of Leucadia National Corporation (LUK) will serve as underwriters of the equity offering.

This offering will enable Highwoods to attain financial flexibility and position it favorably to pursue investment opportunities and acquisitions. This will consequently go a long way in enhancing top-line growth. Notably, Highwoods exited the second quarter with $10.1 million of cash and cash equivalents.

Last month, Highwoods reported second-quarter 2013 core funds from operations (:FFO) of 70 cents per share, beating the Zacks Consensus Estimate by a penny. Decent results came on the back of strong leasing and efficient capital deployment activity as well as cash NOI growth. Moreover, on the back of accretive acquisitions, Highwoods’ expectation for the rest of the year increased and it was prompted to raise its full-year FFO per share guidance for 2013.

Highwoods’ effort to enhance its liquidity position and improve portfolio quality has been recognized by rating agencies in recent times as well. The company received a senior debt rating upgradation from Standard & Poor's Ratings Services (raised to BBB, from BBB-, with a stable outlook in July) as well as Moody's Investors Service, the rating arm of Moody's Corporation (MCO) (Baa2, from Baa3, with a stable outlook in June). These activities preserve investor confidence in the stock and helps boost its creditworthiness in the market.

Highwoods currently carries a Zacks Rank #2 (Buy).

Note: Funds from operations, a widely accepted and reported measure of REITs performance, are derived by adding depreciation, amortization and other non-cash expenses to net income.

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