Highwoods Properties Inc. (HIW) reaped $40.7 million in total proceeds and $17.7 million in gains from the sale of 11 multi-customer office buildings in Richmond in two separate deals. The asset sale comes as part of the company’s strategy to shed its non-core, non-differentiating properties.
Spanning over 359,000 square feet and most of them single-storey, these properties were leased 90.6% on average. Presently, the company owns or has stake in 26 Richmond-based office properties, covering 2.3 million square feet and having an average occupancy rate of 95%.
As a matter of fact, Highwoods is making concerted efforts to expand its footprint in the high-growth markets through premium-assets acquisitions and developments. To support its growth needs, the company is disposing non-core assets and investing the proceeds for further expansions. Consequently, the company sold $103.4 million of non-core buildings, realizing a gain of $29.4 million year-to-date.
Such moves have helped the company to build a portfolio largely concentrated in the high-growth Sun Belt markets, which have long-term favorable demographic trends and are expected to drive above-average job growth.
Notably, after dampening results in the prior quarter, Highwoods repositioned itself on the winning track with encouraging second-quarter results. The company posted a positive earnings surprise of 9.6% on the back of higher revenue growth, a rise in occupancy rate and substantial leasing activity.
In particular, this real estate investment trust (REIT) declared funds from operations (FFO) of 80 cents per share, surpassing the Zacks Consensus Estimate by 7 cents and the prior-year quarter figure by a dime.
Highwoods currently carries a Zacks Rank #3 (Hold). Investors interested in REITs may consider other stocks like, DCT Industrial Trust Inc. (DCT), Extra Space Storage Inc. (EXR) and Gladstone Commercial Corp. (GOOD). All these stocks have a Zacks Rank #2 (Buy).
Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
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