Highwoods (HIW) Beats on Q2 FFO, Collects 99% July Rents
Highwoods Properties Inc.’s HIW second-quarter 2020 funds from operations (FFO) per share of 93 cents surpassed the Zacks Consensus Estimate of 89 cents. The figure also improved 7% from the 87 cents reported in the year-ago period.
Rental and other revenues of $183.2 million in the quarter decreased marginally year over year. Moreover, the reported figure missed the Zacks Consensus Estimate of $185 million.
The company updated the full-year outlook in the wake of the coronavirus pandemic and the prevalent dismal market conditions.
With regard to its rental receipts for July and for the second quarter, management announced that it has collected 99% of the contractually-required rents, with rent deferrals granted to tenants, representing 1.2% of its annualized rental revenues.
The company expects its rental revenues will be hurt due to sluggish speculative leasing for the remainder of 2020. This will be partially offset by higher renewal activity.
Quarter in Detail
Highwoods leased 821,000 square feet of second-generation office space during the second quarter, including 91,000 square feet of new leases and 48,000 square feet of expansion leases. Rents were up 5.5% on a cash basis.
Same-property cash net operating income (NOI) increased 2.4% year over year, excluding the impact of temporary rent deferral agreements.
As of Jun 30, 2020, Highwoods had $4.8 million of cash and cash-equivalents compared with $12.7 million reported as of Mar 31, 2020. The company exited the reported quarter with about $586 million availability of funds under its revolving credit facility, scheduled to mature in January 2022, and a net debt-to-adjusted EBITDAre ratio of 4.90X. The company has no debt maturities in the next 12 months.
Highwoods revised the current year FFO per share guidance to $3.59-$3.68 from $3.55-$3.68 guided earlier in light of the pandemic. The Zacks Consensus Estimate for the same is currently pegged at $3.33.
The company has updated its outlook based on some assumptions. Firstly, it expects revenues for the remainder of the year from parking and related activities to be $5-$9 million lower than the original forecast. However, this will be partially offset by about $6-$8 million of net operating expense savings.
Highwoods also expects lost rental revenues from customers experiencing financial difficulties due to bankruptcies or default as well as non-cash credit losses of straight line receivables.
Highwoods currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Highwoods Properties, Inc. Price and EPS Surprise
We, now, look forward to the earnings releases of other REITs like CBRE Group CBRE, Mack-Cali Realty Corporation CLI and Vornado Realty Trust VNO. While CBRE Group is slated to report quarterly numbers on Jul 31, Mack-Cali Realty Corporation and Vornado Realty Trust will release results on Aug 3.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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