Highwoods Properties Inc.
) - a real estate investment trust (REIT) - declared
first-quarter 2014 core funds from operations (FFO) of 66 cents
per share, missing the Zacks Consensus Estimate by a nickel and
the prior-year quarter figure by 2 cents.
Bad weather conditions and the company's retirement plan
related expenses were the dampeners. Also, including the non-core
items' impact, FFO per share was 66 cents, down from 67 cents in
the year-ago period.
However, total revenue for the quarter jumped 13.9% year over
year to $148.5 million and came marginally above the Zacks
Consensus Estimate of $148 million. The company also experienced
decent leasing activity and its shares were up 2.10% during the
trading session on NYSE on Apr 30.
In the reported quarter, same property rental revenues upped
marginally (by 0.4%) year over year to $121.9 million. However,
same property cash net operating income (NOI) excluding term fees
moved south 2.7% to $75.0 million from the year-ago quarter.
Highwoods inked leases for around 1.4 million square feet of
second generation space in the quarter. However, same property
average occupancy declined 150 basis points (bps) year over year
to 89.6%. Also, during the quarter, Highwoods declared a $14.9
million build-to-suit agreement with Biologics, Inc.
As of Mar 31, 2014, Highwoods had $13.3 million of cash and
cash equivalents, up from $10.2 million as of Dec 31, 2013.
During the quarter, the company received a rating upgrade from
Fitch Ratings and now enjoys senior debt rating of BBB from BBB-
with a stable outlook.
2014 Outlook Narrowed
Highwoods narrowed the guidance for 2014 FFO per share and now
expects it in the range of $2.86 - $2.94 (prior range being $2.82
- $2.94). This is well above the Zacks Consensus Estimate for the
same of $2.79.
The outlook is based on expectation of same property cash NOI
growth (excluding termination fees) of 0.5% - 1.5%; and year-end
occupancy of 91.3% - 92.5%.
Although one-time expenses hampered Highwoods' FFO per share
in the first quarter, we note that on the back of a successful
implementation of its strategic plan, a large part of the
company's portfolio is now concentrated in the high-growth Sun
Belt markets, which provide above-average job growth prospects
owing to long-term demographic trends. A strong and flexible
balance sheet further enables Highwoods to capitalize on
potential acquisition opportunities to fuel its top-line growth.
Yet, the current weakness in the office market remains a
Currently, Highwoods has a Zacks Rank #3 (Hold). Investors
interested in the REIT industry may consider stocks like
Duke Realty Corporation
Cousins Properties Incorporated
SL Green Realty Corp.
). All stocks carry a Zacks Rank #2 (Buy).
Funds from operations, 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.
COUSIN PROP INC (CUZ): Free Stock Analysis
DUKE REALTY CP (DRE): Free Stock Analysis
HIGHWOODS PPTYS (HIW): Free Stock Analysis
SL GREEN REALTY (SLG): Free Stock Analysis
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