Highwoods Properties Inc. (HIW) declared fourth-quarter 2014 funds from operations (“FFO”) of 74 cents per share, which came in line with both the Zacks Consensus Estimate and the prior-year quarter figure. The results were attributable to improvement in revenues and leasing activities.
Total revenue for the quarter climbed 3.8% year over year to $154.6 million. However, it missed the Zacks Consensus Estimate of $155 million.
Excluding acquisition and debt extinguishment costs, for 2014, Highwoods reported FFO of $2.91 cents per share, which beat the Zacks Consensus Estimate by a penny and the prior year figure by 10 cents.
Also, total revenue for 2014 rose 9.3% year over year to $608.5 million, surpassing the Zacks Consensus Estimate of $606 million.
Quarter in Details
Highwoods leased around 966,964 square feet of office space during the quarter. Same property average occupancy increased 80 basis points (bps) sequentially to 91.9%.
Same property rental revenues grew 4.4% year over year to $123.0 million. On the other hand, same property cash net operating income (“NOI”), excluding term fees, increased 4.5% to $77.1 million from the year-ago quarter.
During the quarter, Highwoods acquired 3 office properties totaling $165 million. These include a 374,000 square feet office in CBD Raleigh for $92.3 million, a 66,000 square feet office in Insbrook, Richmond for $4.4 million and another office spanning 246,000 square feet in CBD Orlando for $68.3 million. Also, the company disposed non-core assets worth $26 million in the quarter. In addition, it announced development activities worth $200 million which are 99% pre-leased.
As of Dec 31, 2014, Highwoods had $8.8 million of cash and cash equivalents, as compared to $11.6 million as of Sep 30, 2014.
2015 Outlook Provided
Highwoods provided 2015 FFO per share guidance in the range of $2.95–$3.06. The Zacks Consensus Estimate for the same is currently pegged at $3.02.
The outlook is based on the expectations of same property cash NOI growth (excluding termination fees) of 5.5–6.5% and year-end occupancy of 92.5–93.5%.
Our Viewpoint
Improving revenues from operating properties promise better prospects for the company, going forward. In particular, Highwoods has been focusing on shifting its portfolio mix toward high-growth Sun Belt markets, which have long-term favorable demographic trends and are expected to drive above-average job growth.
Highwoods currently carries a Zacks Rank #3 (Hold). Presently, we look forward to the results of other REITs like Vornado Realty Trust (VNO), Cousins Properties Incorporated (CUZ) and Host Hotels & Resorts, Inc. (HST), which are going to report in the upcoming days.
Note: Funds from operations, 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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