Highwoods Properties Inc. HIW reported fourth-quarter 2024 funds from operations (FFO) per share of 85 cents, in line with the Zacks Consensus Estimate. However, the figure was lower than the prior-year quarter’s 99 cents. 

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Quarterly results reflect healthy leasing activity with rent growth amid rising demand for highly amenitized premium office spaces. However, higher interest expenses undermine the results to an extent. HIW provided its outlook for 2025.

Rental and other revenues came in at $205.5 million, surpassing the Zacks Consensus Estimate of $204.2 million. However, the figure was slightly below the prior-year quarter tally of $206.9 million.

According to Ted Klinck, the president and CEO of HIW, “Our high-quality portfolio in the BBDs of our Sun Belt markets continues to generate outsized demand from customers and prospects. He added, “Our strong fourth quarter leasing caps an exceptionally strong 2024, during which we delivered our highest 2nd gen new leasing volume in the past decade. Plus, our weighted average lease term for full year 2024 was the highest in our Company’s history.”

For full-year 2024, the FFO per share came in at $3.61, lower than the prior-year tally of $3.83 but in line with the Zacks Consensus Estimate. However, rental and other revenues decreased 1% to $825.9 million, below the consensus mark of $828.9 million.

HIW’s Fourth Quarter in Detail

Highwoods’ average in-place cash rent was up 3.1% per square foot from the prior-year quarter. At the end of the reported quarter, the in-service portfolio occupancy (at HIW share) declined 90 basis points from the prior quarter to 87.1%. The same-property cash net operating income (NOI) decreased 0.5% year over year to $134.4 million.

Highwoods’ second-generation leasing activity encompassed 1.3 million square feet of space in the fourth quarter, including 370,000 square feet of new leases. The dollar-weighted average term is 6.8 years. GAAP rent growth was 12.2%, while net effective rents were 3.6% higher than the previous five-quarter average.

The present development pipeline aggregates $514 million (at HIW share) and is 58.8% pre-leased. During the fourth quarter, the company also signed 161,000 square feet of first-generation leases.

Rental property and other expenses were $71.5 million, up 2.8% on a year-over-year basis. Interest expenses were $37.3 million, up 5.6% on a year-over-year basis.

Portfolio Activity of HIW

During the quarter, Highwoods sold a 170,000-square-foot non-core office building in Raleigh, NC, for $21.4 million. Meanwhile, it acquired fee simple title to land beneath Century Center assets in Atlanta, GA, for $50.6 million.

Following the quarter-end, Highwoods sold 616,000 square feet of non-core office buildings in Tampa, FL, for $145.0 million.

HIW’s Balance Sheet Position

The company’s total available liquidity amounted to more than $900 million, including cash on hand, availability on the revolving credit facility and pro rata share of undrawn joint venture construction loans. The reported net debt-to-adjusted EBITDAre ratio was 6.29 compared with 6.13 at the end of Dec. 31, 2023. 

HIW’s 2025 Guidance

Highwoods expects 2025 FFO per share in the range of $3.26-$3.44. The Zacks Consensus Estimate is currently pegged at $3.43 and lies within this range.

HIW expects growth in same-property cash NOI between -4.0% and -2.0% and average occupancy of 85% to 86.5%. On an adjusted basis, same-property cash NOI is expected to grow between 1% and 3%, while average occupancy is projected in the range of 88.5%-90%.

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

Highwoods Properties, Inc. Price, Consensus and EPS Surprise

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

Performance of Other Office REITs

BXP Inc.’s BXP fourth-quarter 2024 FFO per share of $1.79 was in line with the Zacks Consensus Estimate. BXP’s quarterly results reflected better-than-anticipated revenues on healthy leasing activity. However, higher interest expenses during the quarter marred its year-over-year FFO per share growth. Quarterly lease revenues were $798.2 million, up 3.8% year over year. The Zacks Consensus Estimate was pegged at $795.3 million. 

SL Green Realty Corp. SLG reported a fourth-quarter 2024 FFO per share of $1.45, which missed the Zacks Consensus Estimate of $1.53. The company had reported an FFO of 72 cents per share in the previous year. Results reflected lower-than-anticipated revenues despite decent leasing activity in its Manhattan portfolio. Also, higher interest expenses and lower same-store NOI acted as dampeners.

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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