Highwoods Properties Inc. HIW declared second-quarter 2015 funds from operations (“FFO”) of 77 cents per share, beating the Zacks Consensus Estimate by a penny. However, the bottom line came in 3 cents lower than the prior-year quarter tally. Results reflected strong same net operating income (“NOI”) and occupancy growth.
Total revenue for the quarter climbed 5.5% year over year to $161.1 million. Further, the top line surpassed the Zacks Consensus Estimate of $160 million.
Quarter in Detail
Highwoods leased around 1.2 million square feet of office space during the quarter. Same property average occupancy increased 200 basis points (bps) year over year to 92.8%; while same property cash net operating income (“NOI”) rose 5.3% year over year.
During the quarter, Highwoods acquired a 168,300-square foot office building in Orlando from its joint venture partner for $22.3 million. Further, the company announced the development of Riverwood 200, a 12-story office building situated close to Riverwood 100.
As of Jun 30, 2015, Highwoods had $4.9 million of cash and cash equivalents, down from $8.8 million as of Dec 31, 2014.
2015 Outlook
Highwoods updated the FFO guidance range for 2015 to $3.00–$3.06 from $2.97–$3.07.
Our Viewpoint
Improving revenues from operating properties promise bright prospects for the company. In particular, Highwoods has been focusing on shifting its portfolio mix toward high-growth Sun Belt markets, which, with long-term favorable demographic trends, are expected to drive above-average job growth.
Highwoods currently carries a Zacks Rank #3 (Hold). Investors interested in the REIT industry may consider stocks like Ashford Hospitality Trust, Inc. AHT, CoreSite Realty Corporation COR and Getty Realty Corp. GTY. All these stocks sport a Zacks Rank #1 (Strong Buy).
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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