Highwoods Properties Inc.
) - a real estate investment trust (REIT) - reported
second-quarter 2013 core funds from operations (FFO) of 70 cents
per share, beating the Zacks Consensus Estimate by a penny.
However, this was in line with the prior-year quarter figure of
Decent results came on the back of strong leasing and
efficient capital deployment activity as well as cash NOI growth.
This increased Highwoods' expectation for the rest of the year,
on the back of accretive acquisitions, thereby prompted it to
raise full-year FFO per share guidance for 2013.
Including the non-core items' impact, FFO was $60.6 million or
70 cents per share, up from the $54.1 million or 69 cents in the
Total revenue for the second quarter jumped 9.3% to $138.5
million from $126.7 million in the year-ago quarter. Moreover,
total revenue came well ahead of the Zacks Consensus Estimate of
Inside the Headlines
During the reported quarter, same property rental revenues
increased 0.9% year over year to $118.9 million from $117.8
million. On the other hand, same property cash net operating
income (NOI) excluding term fees climbed 2.8% year over year to
$76.4 million from $74.4 million.
Same-store average occupancy fell 40 basis points (bps) to
90.0% from 90.4% in the prior-year quarter. Moreover, during the
said quarter, Highwoods inked leases for space spanning over 1
million square feet in second-generation office assets with an
average term of 4.7 years.
During the reported quarter, Highwoods bought One Alliance
Center - the sister building of Two Alliance Center - in Buckhead
submarket of Atlanta for $143.4 million. Moreover, the company
divested Atlanta industrial assets for $48.0 million.
Subsequent to the quarter-end, on Jul 23, Highwoods acquired
its joint venture partner's 60% interest in HIW-KC Orlando, LLC
for $113.3 million. The acquired portfolio included 5 office
buildings, spanning 1.3 million square feet, in CBD Orlando.
Notably, year to date, Highwoods has acquired $349.7 million
worth Class A office assets. Additionally, the company has sold
$68.4 million of non-core assets so far.
As of Jun 30, 2013, Highwoods had $10.1 million of cash and cash
equivalents, compared with $12.1 million as of Mar 31, 2013.
During the quarter, Highwoods issued 1.76 million of common
shares under its at-the-market (ATM) equity program and generated
net proceeds of $66.3 million. Moreover, subsequent to
quarter-end, the company sold 0.52 million shares for net
proceeds of $17.9 million. Consequently, year to date, Highwoods
raised $130.2 million though its ATM equity program.In addition,
following the JV interest buyout, the company's leverage
(including preferred shares) is under 45%.
2013 Outlook Reiterated
Impressed with second-quarter results, Highwoods revised its
FFO per share guidance for full-year 2013 in the range of
$2.76-$2.84, up from $2.68-$2.81 forecasted earlier. The optimism
reflects the company's solid operating performance in the quarter
and opportune JV interest acquisition.
Highwoods' decent results reflect the successful
implementation of its strategic plan. Moreover, a strong and
flexible balance sheet poises Highwoods to better capitalize on
new acquisition opportunities to boost top-line growth. Also, the
raised outlook by Highwoods reflects the company's confidence
about its accretive purchases, which is encouraging. However, the
weak office market scenario at present remains a plausible
concern for the company.
Highwoods currently carries a Zacks Rank #3 (Hold).
We are looking forward to the results of other REITs that are
scheduled to report next week after the market closes. These
Plum Creek Timber Co. Inc.
PS Business Parks Inc.
American Capital Agency Corp.
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
AMER CAP AGENCY (AGNC): Free Stock Analysis
HIGHWOODS PPTYS (HIW): Free Stock Analysis
PLUM CREEK TMBR (PCL): Free Stock Analysis
PS BUSINESS PKS (PSB): Free Stock Analysis
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