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Highwoods (HIW) Recasts & Expands Credit Facility, Lowers Cost

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Highwoods Properties, Inc. HIW recently enhanced its balance-sheet strength by recasting its unsecured revolving credit facility, increasing the total capacity by $150 million to $750 million. This apart, the move replaces the company’s existing revolving credit facility secured in 2017, and has enabled reduction in cost of debt.

There is also an accordion option in the agreement for increasing the credit facility capacity by up to $550 million, as compared to the previous accordion option of $400 million. While annual facility fees have remained unchanged at 20 basis points (bps), borrowing cost has been reduced from LIBOR+ 100 bps to LIBOR+ 90 bps.

Moreover, the credit facility is set to mature in March 2025, as compared with the earlier facility that was scheduled to expire in January 2022. Also, with two six-month unilateral extension rights, the maturity of the credit facility can be further extended.

Per management, “We are pleased to have recast our revolving credit facility, increasing our overall borrowing capacity, extending the term for four more years and lowering our all-in borrowing cost. Our bank group’s support and partnership has provided us the financial flexibility needed to pursue our strategic objectives, and this recast further strengthens our balance sheet and improves our liquidity.”

The credit facility expansion is a strategic fit as it supports Highwoods’ growth endeavors. This recast of credit facility offers the company a cheaper line of credit and helps reduce annualized interest expenses. Moreover, extended debt maturities will help it improve its maturity profile and enjoy greater liquidity for day-to-day operations. The move will also preserve its cash flow and alleviate the bottom-line pressure. Hence, the borrowing cost reduction offers greater financial flexibility and will strengthen Highwoods’ balance sheet.

Shares of this Zacks Rank #3 (Hold) company have gained 10.8% over the past three months compared with the industry’s growth of 6%.

However, amid the pandemic, the company expects asset utilization across its portfolio to remain low in the first half of 2021 and gradually improve in the third and fourth quarters. Accordingly, operating expenses are expected to increase while parking revenues are not expected to show significant improvement, hindering net operating income for 2021.

Stocks to Consider

Alpine Income Property Trust, Inc.’s PINE funds from operations (“FFO”) per share estimates for the current year have moved up 3.8% to $1.61 in the past month. The company sports a Zacks Rank of 1 (Strong Buy), currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Extra Space Storage Inc.’s EXR Zacks Consensus Estimate for 2021 FFO per share has moved up 8.1% to $5.97 in the past month. The company currently carries a Zacks Rank of 2 (Buy).

Global Net Lease, Inc. GNL has a Zacks Rank of 2 at present. The Zacks Consensus Estimate for 2021 FFO per share has been revised 4% upward to $2.10 in a month’s time.

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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Highwoods Properties, Inc. (HIW) : Free Stock Analysis Report

Extra Space Storage Inc (EXR) : Free Stock Analysis Report

Global Net Lease, Inc. (GNL) : Free Stock Analysis Report

Alpine Income Property Trust, Inc. (PINE) : Free Stock Analysis Report

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