On Jan 8, 2014, we maintained our long-term Neutral
Highwoods Properties Inc.
). Our stance was based on recent guidance increase for 2013,
decent third-quarter results and portfolio restructuring
activities. However, weak office market scenario and stiff
competition remain concerns.
Highwoods is making concerted efforts to enhance its portfolio
quality through premium assets acquisitions and non-core assets
dispositions. Moreover, the company is taking measures to expand
its leasing business. As part of this, in December, Highwoods
announced the divestiture of several non-core assets worth
$88.8 million and an agreement to fully lease the 4301 Research
Commons laboratory/office building. It has also slightly raised
its funds from operations (FFO) per share outlook for 2013.
Highwoods' third-quarter 2013 core FFO per share of 71 cents
beat the Zacks Consensus Estimate by a penny and the prior-year
quarter figure by a nickel. Decent results came on the back of
higher revenue growth, strong leasing and efficient capital
The company maintains a solid balance sheet and is focused on
improving its liquidity position by infusing more capital from
time to time. Consequently, In November, Highwoods executed a
recast of its $475 million unsecured revolving credit
facility and $200 million unsecured bank term
loan. The move helped enhance its financial flexibility to
capitalize on strategic acquisitions and build-to-suit
However, the weak office market scenario at present and
intense competition from commercial property developers remains
headwinds for Highwoods. Moreover, rise in consumer purchases
through catalogs and the Internet could hurt demand for its
retail properties and negatively affect its overall income.
Over the last 60 days, the Zacks Consensus Estimate for 2013
FFO per share remained stable at $2.80. For 2014, it rose by a
penny to $2.89. Hence, the stock currently has a Zacks Rank #3
Other Stocks to Consider
Investors interested in the REIT industry may consider stocks
Getty Realty Corp.
National Health Investors Inc.
). All these stocks carry a Zacks Rank #1 (Strong Buy).
FFO, a widely used metric to gauge the performance of REITs,
is obtained after adding depreciation and amortization and other
non-cash expenses to net income.
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