Highwoods (HIW) Q4 FFO Beat Estimates, '24 View Issued
Highwoods Properties Inc. HIW reported fourth-quarter 2023 funds from operations (FFO) per share of 99 cents, outpacing the Zacks Consensus Estimate of 91 cents. The figure was also above the prior-year quarter’s 96 cents.
Quarterly results reflect rent growth. However, a fall in occupancy and higher operating expenses acted as dampeners. It also issued its outlook for 2024.
Rental and other revenues came in at $206.9 million, lagging the Zacks Consensus Estimate of $207.3 million.
On a year-over-year basis, although rental and other revenues fell 2.3%, FFO per share improved 3.1%.
According to Ted Klinck, president and CEO of HIW, “Leasing activity accelerated during the quarter with the year’s highest quarterly volume of new leasing, and 2024 is off to a similarly strong start.”
In 2023, Highwoods reported an FFO per share of $3.83, which decreased 5% from the prior year’s $4.03. However, the figure outpaced the Zacks Consensus Estimate of $3.75. Rental and other revenues of $833.9 million missed the consensus mark of $840.2 million and were marginally up year over year.
Quarter in Detail
Highwoods leased 698,000 square feet of second-generation office space in the fourth quarter, including 267,000 square feet of new leases. Moreover, the present development pipeline, which covers around 1.6 million square feet, aggregates $518 million (at HIW share). It is 32% pre-leased on a dollar-weighted basis.
Operating expenses were $160.7 million, up 4.1% on a year-over-year basis. We estimated the metric to be $153.9 million.
The average in-place cash rent was up 5.5% per square foot from the prior-year quarter, while the dollar-weighted average term was 6.6 years.
At the end of the reported quarter, HIW’s in-service portfolio occupancy (consolidated) declined 220 basis points year over year to 88.8%. We estimated the same to be 88.7%.
The same-property cash net operating income (NOI) increased marginally year over year to $130.8 million.
During the fourth quarter, Highwoods disposed a non-core office building for $32 million in Nashville and a non-core land for $19.0 million in Tampa.
Balance-Sheet Position
The company exited the fourth quarter with $25.1 million of cash and cash equivalents, up from $16.9 million reported as of Sep 30, 2023.
The reported net debt-to-adjusted EBITDAre ratio was 6.13 compared with 6 at the end of Sep 30, 2023.
2024 Guidance
Highwoods issued guidance for 2023.
For 2024, the company expects FFO per share to be in the range of $3.46-$3.64. The Zacks Consensus Estimate for the same is currently pegged at $3.58.
HIW expects same-property cash NOI, excluding termination fees, to be between 0% and 2%. The average occupancy is anticipated between 87% and 89%.
Highwoods currently carries a Zacks Rank #4 (Sell).
Highwoods Properties, Inc. Price, Consensus and EPS Surprise
Highwoods Properties, Inc. price-consensus-eps-surprise-chart | Highwoods Properties, Inc. Quote
Upcoming Earnings Releases
We are looking forward to the earnings releases of other REITs like Welltower WELL and SBA Communications SBAC, which are slated to report their results on Feb 13 and Feb 26, respectively.
The Zacks Consensus Estimate for Welltower’s fourth-quarter 2023 FFO per share is pegged at 94 cents, implying a year-over-year increase of 13.3%. WELL currently carries a Zacks Rank of #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for SBA Communications’ fourth-quarter 2023 FFO per share is pegged at $3.32, suggesting year-over-year growth of 6.8%. SBAC currently carries a Zacks Rank #3.
Note: Anything related to earnings presented in this write-up represents FFO — a widely used metric to gauge the performance of REITs.
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