Highwoods Sheds Richmond Office Assets, Gains $17.7 million


Highwoods Properties Inc. (HIW) reaped $40.7 million in total proceeds and $17.7 million in gains from the sale of 11 multi-customer office buildings in Richmond in two separate deals. The asset sale comes as part of the company’s strategy to shed its non-core, non-differentiating properties.

Spanning over 359,000 square feet and most of them single-storey, these properties were leased 90.6% on average. Presently, the company owns or has stake in 26 Richmond-based office properties, covering 2.3 million square feet and having an average occupancy rate of 95%.

As a matter of fact, Highwoods is making concerted efforts to expand its footprint in the high-growth markets through premium-assets acquisitions and developments. To support its growth needs, the company is disposing non-core assets and investing the proceeds for further expansions. Consequently, the company sold $103.4 million of non-core buildings, realizing a gain of $29.4 million year-to-date.

Such moves have helped the company to build a portfolio largely concentrated in the high-growth Sun Belt markets, which have long-term favorable demographic trends and are expected to drive above-average job growth.

Notably, after dampening results in the prior quarter, Highwoods repositioned itself on the winning track with encouraging second-quarter results. The company posted a positive earnings surprise of 9.6% on the back of higher revenue growth, a rise in occupancy rate and substantial leasing activity.

In particular, this real estate investment trust (:REIT) declared funds from operations (:FFO) of 80 cents per share, surpassing the Zacks Consensus Estimate by 7 cents and the prior-year quarter figure by a dime.

Highwoods currently carries a Zacks Rank #3 (Hold). Investors interested in REITs may consider other stocks like, DCT Industrial Trust Inc. (DCT), Extra Space Storage Inc. (EXR) and Gladstone Commercial Corp. (GOOD). All these stocks have a Zacks Rank #2 (Buy).

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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