• FFO (Funds From Operations): $0.85 per share for Q4 2024; $3.61 per share for the full year 2024.
• Net Loss: $3.7 million or $0.03 per share for Q4 2024, including a $24.6 million impairment charge.
• Leasing Volume: 1.3 million square feet of second-gen space leased in Q4 2024; 4 million square feet for the full year.
• Weighted Average Lease Term: 7.5 years, the highest in company history.
• Occupancy Rate: Ended 2024 at 87.1%; 89.9% leased including signed but not yet commenced leases.
• Development Pipeline Leasing: 59% leased, up from 49% last quarter.
• 2025 FFO Outlook: $3.26 to $3.44 per share.
• Same Property Cash NOI Growth Outlook: Negative 2% to negative 4% for 2025.
• Recent Asset Sales: $166 million of non-core properties sold with a cash cap rate of 7.8% on projected 2025 NOI.
• Equity Raised: Over $50 million through ATM program at an average price of $32.71 per share.
• Debt Maturities: No maturities until 2026, with a $200 million term loan due.

• Warning! GuruFocus has detected 9 Warning Signs with HIW.

Release Date: February 12, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Highwoods Properties Inc (NYSE:HIW) has significant upside potential in its core operating portfolio, with over $25 million of stabilized annual NOI upside in four core buildings.
• The development pipeline is robust, with two properties expected to generate nearly $10 million of annual NOI upon stabilization.
• The company has raised $215 million through non-core dispositions and equity issuance, providing capital for future acquisitions.
• Highwoods Properties Inc (NYSE:HIW) achieved record leasing volumes in 2024, with 4 million square feet of second-generation leases signed.
• The balance sheet is strong, with no debt maturities until 2026, providing financial flexibility for future investments.

Negative Points

• Occupancy levels are expected to dip in the first half of 2025 due to known move-outs, impacting NOI and FFO.
• The same property cash NOI growth outlook for 2025 is negative, ranging from -2% to -4%.
• Recent asset sales and equity issuances are expected to have a short-term dilutive impact on 2025 FFO.
• The company faces challenges in leasing up four core assets with significant vacancy, impacting short-term financial performance.
• The office market remains challenging, with high vacancy rates and a slow recovery trajectory in some markets.

Q & A Highlights

Q: Can you provide more context on the larger vacancies, such as EQT and Alliance properties in Nashville, and how they impact your leasing expectations for 2025? A: Brendan Maiorana, CFO, explained that the occupancy outlook does not include significant leasing in the four core assets with large vacancies. Theodore Klinck, CEO, added that while some leases are signed, they won't commence until 2026. For properties like Cool Springs Five and Westwood South, there are strong prospects and ongoing negotiations, but financial impacts will be seen in 2026.

Q: What types of buildings are you targeting for potential acquisitions, and why not focus more on non-core sales instead of issuing equity? A: Theodore Klinck, CEO, stated that they are looking at both core and opportunistic acquisitions, aiming to improve portfolio quality and growth rates. Brendan Maiorana, CFO, added that they are taking a balanced approach to capital, using both disposition proceeds and equity to create dry powder for future opportunities.

Q: What is the strategy for the EQT Plaza in Pittsburgh following the impairment charge? A: Theodore Klinck, CEO, mentioned that EQT Plaza is a non-core asset, and the long-term plan is to exit Pittsburgh. However, due to challenging financing conditions for large assets in secondary markets, they will be patient with the disposition.

Q: Are there any changes in leasing strategy this year, such as targeting smaller users or offering more tenant improvements? A: Theodore Klinck, CEO, stated that there are no major changes in strategy. They continue to focus on their successful spec suite program for small customers and maintain their sweet spot with 5,000 to 15,000 square foot users. Larger prospects are also returning, and leasing activity remains robust.

Q: Can you discuss the potential impact of regulatory changes on demand-supply fundamentals in your markets? A: Brian Leary, COO, emphasized that their markets are business-friendly with low costs and right-to-work policies. He highlighted ongoing public-private partnerships and infrastructure investments in markets like Nashville and Charlotte, which are expected to positively impact demand.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.