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Highwoods (HIW) Continues Assets Sale With $98M Dispositions

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Highwoods Properties, Inc. HIW recently announced $98 million of non-core asset sales. The move comes as part of Highwoods’ disciplined capital-recycling strategy that entails disposing of non-core assets and redeploying the proceeds in premium asset acquisitions and accretive development projects.

Particularly, HIW sold the FBI Tampa Field Office, which is a 138,000 square feet office building, for $70.4 million. It was built-to-suit for the FBI in 2005 and was renewed in 2020 under a long-term lease.

Moreover, the company is expected to clock in the sale of the remainder office buildings in Greensboro for $20.3 million, either later in the current quarter or in early third quarter this year. The buildings encompass 299,000 square feet with an occupancy of 88.2%.

In total, these properties were projected to generate $6.3 million of annual GAAP net operating income and $5.7 million of annual cash net operating income, inclusive of the effect of free rent, in 2022.

Additionally, the company has disposed an 8.9-acre non-core land parcel next to its One Independence office building in Tampa’s Westshore BBD for $6.9 million. It was sold off to a developer who intends to construct apartment units. As a result, Highwoods expects to record $2.3 million of land sale gains (included in FFO) in the second quarter.

According to Ted Klinck, president and CEO of Highwoods “With these sales, we will have sold $464 million of non-core properties since we announced our acquisition of a portfolio of office properties from PAC in mid-2021 and remain on pace to return our balance sheet to pre-acquisition metrics by the middle of 2022.”

Highwoods’ well-diversified tenant base and its efforts to expand in the high-growth markets, sell non-core assets and invest the proceeds in further expansion bode well for long-term growth. HIW is seeing a recovery in demand for its high-quality, well-placed office properties as highlighted by a rebound in the new leasing volume.

A large part of its portfolio is concentrated in high-growth Sun Belt markets, which have long-term favorable demographic trends and are expected to continue experiencing above-average job growth. This will likely support Highwoods’ rent growth over the long term.

Highwoods currently carries a Zacks Rank #3 (Hold). Its shares have lost 12.9% against the industry’s decline of 4.3% over the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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Key Picks

Some better-ranked stocks from the REIT sector are Prologis PLD, Extra Storage Space EXR and OUTFRONT Media OUT.

The Zacks Consensus Estimate for Prologis’ 2022 funds from operations (FFO) per share has moved 1.8% upward in the past month to $5.15. PLD presently carries a Zacks Rank of 2 (Buy).

The Zacks Consensus Estimate for Extra Storage Space’s ongoing year’s FFO per share has been raised 1.1% over the past month to $8.01. EXR carries a Zacks Rank #2, currently.

The Zacks Consensus Estimate for OUTFRONT Media’s current-year FFO per share has moved 35% northward in the past month to $2.09. OUT carries a Zacks Rank of 2 at present.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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