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Highwoods Closes Offering, Gets $151M

Zacks Equity Research

In order to enhance its financial flexibility, Highwoods Properties Inc. (HIW), announced the closure of its public offering of around 4.31 million common shares, including 0.56 million shares sold to underwriters to cover over-allotments. The company garnered approximately $150.9 million – after considering underwriting commissions and discounts as well as offering expenses – from this offering.

In particular, this real estate investment trust (:REIT) intended to use the proceeds from this offering to pay off the outstanding debt under its $475 million unsecured revolving credit facility. Further, the remaining amount is planned to be used in financing 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) served as underwriters of the equity offering.

Though this public offering leads to share dilution for Highwoods, the payment of debt is encouraging as it will reduce interest expenses. Moreover, strategic investments will help the company to enhance its portfolio quality, which in turn, will be accretive to its earnings, going forward.

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. The company exited the second quarter with $10.1 million of cash and cash equivalents.

Moreover, on the back of accretive acquisitions, Highwoods’ expectation for the rest of the year increased and it raised the full-year FFO per share guidance for 2013. The guidance was revised to the range of $2.76–$2.84 (prior being $2.68–$2.81).

Highwoods currently carries a Zacks Rank #2 (Buy). Another REIT that is performing well is Winthrop Realty Trust (FUR), which has a Zacks Rank #1 (Strong 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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