Highwoods (HIW) Misses on Q3 FFO, Collects 99.7% October Rents

Highwoods Properties, Inc. HIW third-quarter 2020 funds from operations (FFO) per share of 86 cents missed the Zacks Consensus Estimate of 88 cents. The figure includes 5 cents from debt extinguishment charges and non-cash straight-line credit losses. Nonetheless, the reported figure improved 3.6% from the 83 cents reported in the year-ago period.

Rental and other revenues of $181 million in the third quarter decreased 3.4% year over year. Moreover, the reported figure marginally missed the Zacks Consensus Estimate of $181.7 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, management announced that it has collected 99.7% of the contractually-required rents for the July-September quarter. Since Mar 1, 2020, rent deferrals granted to tenants represented 1.2% of its annualized rental revenues. The company also informed that it has collected 99.7% of October rental receipts.

Quarter in Detail

Highwoods leased 660,000 square feet of second-generation office space during the third quarter, including 190,000 square feet of new leases. Rents were up 5% on a cash basis.

At the end of the reported quarter, occupancy was 90.2%, shrinking 20 basis points sequentially.

Excluding the $1-million negative impact of temporary rent deferral agreements, same-property cash NOI increased 2.2% year over year.

As of Sep 30, 2020, Highwoods had $118.7 million of cash and cash-equivalents compared with $9.5 million reported as of Dec 31, 2019. The company exited the reported quarter with full availability of funds under its $600-million credit facility and a net debt-to-adjusted EBITDAre ratio of 5X.

In the third quarter, the company sold two non-core office buildings in Memphis for $23.3 million.


Highwoods revised the current-year FFO per share guidance to $3.59-$3.61 from the $3.59-$3.68 guided earlier. The Zacks Consensus Estimate for the same is $3.61.

The company’s updated outlook included the impact of some assumptions. These include a $3.7-million debt extinguishment charge, $1.5-million non-cash credit losses of straight-line rent receivables and $1.3 million of estimated dilutive impact of planned non-core dispositions.

Same-property cash NOI is projected at 1-2% for 2020, while year-end occupancy is estimated to be 89-91%. Dispositions in 2020 (excluding the completed phase-one dispositions under the market rotation plan) are expected to be $151 million, while acquisitions are likely to be up to $200 million.

Highwoods Properties, Inc. Price, Consensus and EPS Surprise

Highwoods Properties, Inc. Price, Consensus and EPS Surprise

Highwoods Properties, Inc. price-consensus-eps-surprise-chart | Highwoods Properties, Inc. Quote

Highwoods currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other REITS

Prologis, Inc. PLD reported third-quarter 2020 core FFO per share of 90 cents, beating the Zacks Consensus Estimate of 88 cents. However, results compared unfavorably with the year-ago figure of 97 cents. Excluding net promote income, core FFO per share came in at 92 cents in the quarter, up from the prior-year period’s 79 cents.

Alexandria Real Estate Equities, Inc. ARE delivered third-quarter FFO as adjusted of $1.83 per share, up 4.6% from the year-ago quarter’s $1.75.  The reported figure is in line with the Zacks Consensus Estimate.

Mack-Cali Realty Corporation CLI is slated to report earnings results on Nov 4.

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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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