Highwoods Properties (HIW) Closes Portfolio Sale Worth $43M
Highwoods Properties, Inc. HIW recently announced the sale of its non-core asset in north Tampa for $43 million. The company will use the proceeds from the sale of its non-core assets to fund growth endeavors.
The property sold — Preserve VII — a single customer building which encompasses an area of 115,000 square feet. It is fully occupied, and is estimated to generate annual cash net operating income (NOI) and annual GAAP NOI of $2 million and $2.4 million, respectively, for the current year. Further, the company expects to realize non-funds from operations (FFO) gains of $22.8 million in the second quarter from the sales.
Highwoods has been making efforts to expand its footprint in high-growth markets and improve portfolio quality. In sync with such initiatives, it is following a disciplined capital-recycling strategy that entails disposing of non-core assets, and investing the proceeds in premium asset acquisitions and for undertaking accretive development projects.
In April, Highwoods agreed to acquire four Class-A office assets from Preferred Apartment Communities. The company’s total investment, including the estimated value of the non-core assets, is expected to be $769 million, which includes $28 million of near-term building improvements and $5 million of transaction costs. In sync with this, Highwoods has announced its plan to accelerate non-core asset disposition amounting to $500-$600 million by mid 2022 to match-fund the acquisition and expects half of its sale disposition to close by this year’s end. The acquisition, expected to close during third-quarter 2021, will enable Highwoods to enter two high-barrier-to-entry BBDs of SouthPark in Charlotte and North Hills in Raleigh.
Per Ted Klinck, president and CEO of Highwoods Properties, “This sale is the first closing in our plan to substantially fund our planned portfolio acquisition from PAC with proceeds from non-core asset sales.
The disposition of non-core assets and investing the proceeds for further expansion will bode well for the company’s long-term growth. Notably, Highwoods expects to return its balance-sheet metrics to the March 31, 2021 levels by mid-2022.
This Zacks Rank #3 (Hold) company has underperformed its industry over the past six months. Shares of Highwoods have appreciated 18.3%, while the industry has rallied 22.1% during this period. However, the trend in estimate revisions for 2021 FFO per share indicates a favorable outlook for the company as it has been revised marginally upward over the past two months.
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Key Industry Picks
Industrial Logistics Properties Trust’s ILPT Zacks Consensus Estimate for 2021 funds from operations (FFO) per share moved up 5% over the past two months. The company currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Geo Group Inc’s GEO Zacks Consensus Estimate for the current-year FFO per share moved marginally upward in a month’s time. The company carries a Zacks Rank of 2, at present.
BRAEMAR HOTELS & RESORTS INC.’s BHR FFO per share estimate for the ongoing year has been revised upward by 4.5% in the past month. The company carries a Zacks Rank of 2, currently.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs
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