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Rating Upgrade at Highwoods

Zacks Equity Research

Real estate investment trust (:REIT) Highwoods Properties Inc. (HIW) received a rating upgrade from Fitch Ratings. The company now enjoys senior debt rating of BBB from BBB- with a stable outlook.

The rating upgrade of Highwoods is encouraging. In fact, this plays a major role in preserving investor confidence in the stock and helps boost its creditworthiness in the market.

Notably, this represents the third upgrade in the past nine months – the first was made last June by Moody’s Investors Service, the rating unit of Moody's Corp. (MCO) and the second in last July by Standard & Poor’s Ratings Services.  

Last month, Highwoods declared fourth-quarter 2013 funds from operations (:FFO) of 74 cents per share, beating the Zacks Consensus Estimate by a cent. Improved results came on the back of higher revenue growth. At the end of the year, the company’s leverage (including preferred stock) was 41.4% and it accomplished more than $1 billion of capital activity.

Highwoods has been focusing on shifting its portfolio mix to high growth markets and offloading its asset base in non-core markets. We believe that this portfolio repositioning efforts will aid Highwoods to boost its bottom-line growth in the future. However, the tepid recovery of the office market remains a concern.

Highwoods presently has a Zacks Rank #3 (Hold). Investors interested in the REIT industry may consider stocks like Cousins Properties Inc. (CUZ) and Liberty Property Trust (LPT). Both these stocks carry a Zacks Rank #2 (Buy).

Note: Funds from operations, a widely accepted and reported measure of REITs performance, are derived by adding depreciation, amortization and other non-cash expenses to net income.

Read the Full Research Report on HIW
Read the Full Research Report on LPT
Read the Full Research Report on MCO
Read the Full Research Report on CUZ

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