Highwoods Properties Inc. (HIW) has been focusing on shifting its portfolio mix to high growth markets and offloading its asset base in non-core markets. Also, the company is aiming to strengthen the leasing business and enhance its tenant base.
In recent times, there has been a spate of portfolio repositioning deals to gear up these efforts. Earlier this month, Highwoods acquired One Bank of America Plaza office building in CBD Raleigh and sold 14 non-core buildings (read: Highwoods Buys Raleigh Asset, Sells Non Core). Also, the company inked a build-to-suit lease deal with Laser Spine Institute for constructing a property in Tampa (read: Highwoods Inks Build-to-Suit Deal in Tampa). Moreover, Highwoods successfully exited the Greenville market and disclosed its expansion plans in the Nashville market (read: Highwoods Exits Greenville Market, Expands in Nashville).
Backed by its strategic portfolio repositioning plan, a large part of Highwoods’ portfolio is now concentrated in the high-growth Sun Belt markets, which provide above-average job growth prospects owing to long-term demographic trends. .
Encouragingly, in July, Highwoods posted strong results in second-quarter 2014 with a positive earnings surprise of 9.6%. This came on the back of higher revenue growth, a rise in occupancy rate and notable leasing activity.
Although Highwood’s large development pipeline is encouraging for its future growth, it increases operational risks. Also, the current sluggish office environment and persistent space efficiency trends remain a concern for the company. Alongside, the company faces intense competition from developers, owners and operators of office properties as well as other commercial real estate, which restricts its ability to attract and retain tenants at relatively higher rents than its competitors.
To gain deeper insight into Highwoods, you can refer to our updated research report, which was issued on Sep 23, 2014.
Over the last 60 days, the Zacks Consensus Estimate for 2014 FFO per share upped by 3 cents to $2.93. Also, for 2015, in moved north by a penny to $3.06. The stock currently has a Zacks Rank #3 (Hold).
Stocks That Warrant a Look
Investors interested in REITs may consider better-ranked stocks like DCT Industrial Trust Inc. (DCT), DiamondRock Hospitality Co. (DRH) and Gladstone Commercial Corp. (GOOD). All three stocks have a Zacks Rank #2 (Buy).
Note:FFO, a widely used metric to gauge the performance of REITs, are obtained after adding depreciation, amortization and other non-cash expenses to net income.
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