Real estate investment trust – Highwoods Properties Inc. (HIW) – has been selected by Biologics, Inc., a privately-held oncology services company, to construct the latter’s new headquarters in the mixed-use Weston planned unit development (PUD) in Cary, N.C. A long-term build-to-suit lease deal has already been penned by Highwoods with Biologics in this context.
This 100% pre-leased development project is expected to be accomplished in the second quarter of 2015. It will span 75,000 square foot and consists of a three-story Class A office building with surface parking. Highwoods plans to make an investment of around $14.9 million.
With Biologics expanding rapidly, we believe the deal is a strategic fit for Highwoods to augment its top line. Highwoods has a growing property portfolio in Weston and currently owns 8 buildings spanning 745,000 square feet in this area. On an average, occupancy at these buildings stand at 95%.
Moreover, the company is constructing MetLife, Inc.’s (MET) estimated $110 million, 100% pre-leased Global Technology & Operations Hub in Weston. This includes 2 buildings comprising 427,000 square feet. An additional 94 acres of development land in Weston is also owned by Highwoods.
Including the Biologics project, Highwoods’ development pipeline now comprises 1.0 million square feet. This reflects an investment worth $227 million and this pipeline is 85.6% pre-leased. Clearly, the strong pre-leasing activity reflects the high demand for the company’s properties.
Highwoods is scheduled to release its 2013 fourth-quarter results on Feb 10, after the market closes. The Zacks Consensus Estimate for fourth-quarter funds from operations (FFO) is currently pegged at 73 cents per share, representing a year-over-year increase of 7.35%.
The Earnings ESP for Highwoods is +1.37 %. This is because the Most Accurate estimate stands at 74 cents while the Zacks Consensus Estimate is lower at 73 cents. In addition, Highwoods’ Zacks Rank #3 (Hold) enhances the predictive power of ESP. This combination of its Zacks Rank and Earnings ESP makes us confident of an earnings surprise call in the to-be-reported quarter.
Investors interested in the REIT industry may also consider stocks like Getty Realty Corp. (GTY) and Pebblebrook Hotel Trust (PEB). Both these stocks carry a Zacks Rank #1 (Strong Buy).
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