Highwoods (HIW) Inks Leases at 23Springs Amid Solid Demand
Highwoods Properties, Inc. HIW recently announced the signing of 129,000 square feet of additional leases at 23Springs, which the company is developing in a 50/50 joint venture with Granite Properties.
Located in the heart of the Uptown Dallas BBD and comprising 626,000 square feet of multi-customer office and 16,000 square feet of retail space, this Class AA development is now 53% pre-leased.
The construction of 23Springs started in the second quarter of 2022 and is expected to be completed by the first quarter of 2025, with a pro forma stabilization date by the first quarter of 2028. A total of approximately $460 million (at 100%) is expected to be invested in 23Springs.
Designed with commitment to sustainability and wellness, the development is pursuing LEED and Fitwel certifications and is likely to lure tenants. Per Ted Klinck, president and CEO, “23Springs is a perfect example of the vision we share with Granite Properties to create extraordinary customer experiences through mixed-use environments, rich amenities, customer-centric service and innovative wellness features – what we call work-placemaking.”
In addition to Dallas, throughout HIW’s entire portfolio, leasing activity continues to be strong, according to management. Apart from solid leasing of first-generation space in its development pipeline, since Jan 1, 2024, the company has leased more than 700,000 square feet of second-generation office space, including more than 300,000 square feet of new leases. Moreover, Highwoods leased 698,000 square feet of second-generation office space in fourth-quarter 2023, including 267,000 square feet of new leases.
Highwoods follows a disciplined capital-recycling strategy, through which it disposes of non-core assets and redeploys the proceeds in premium asset acquisitions and accretive development projects. To improve the quality of its overall portfolio, HIW has been undertaking measures to expand its footprint in the high-growth BBD markets.
The company is also focused on development projects in key markets, which are likely to generate considerable annual net operating income upon completion and stabilization. The present development, which covers around 1.6 million square feet, aggregates $518 million (at the company’s share) and is 32.0% pre-leased on a dollar-weighted basis.
Moreover, 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’ top-line growth over the long term. However, competition from other industry players is likely to limit its pricing power in the market.
Over the past three months, shares of this Zacks Rank #3 (Hold) company have gained 21.7% compared with the industry's upside of 2.5%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks from the REIT sector are Iron Mountain IRM and Lamar Advertising LAMR, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for IRM’s 2024 funds from operations (FFO) per share is pegged at $4.38, suggesting year-over-year growth of 6.3%.
The Zacks Consensus Estimate for LAMR’s 2024 FFO per share stands at $7.74, indicating an increase of 3.6% from the year-ago quarter.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Iron Mountain Incorporated (IRM) : Free Stock Analysis Report
Highwoods Properties, Inc. (HIW) : Free Stock Analysis Report
Lamar Advertising Company (LAMR) : Free Stock Analysis Report
