Highwoods Properties (HIW) Q2 2024 earnings summary

Executive summary

• Delivered strong Q2 2024 results with FFO of $0.98 per share, up 4% year-over-year, and net income of $0.59 per share, exceeding prior FFO outlook by $0.02 per share.

• Signed 909,000 sq ft of second-gen leases, including 352,000 sq ft of new deals, with a weighted average lease term of 6.0 years.

• Development pipeline totals $506 million and is 45% leased, with significant progress at GlenLake III, Granite Park Six, and 23Springs.

• Balance sheet remains strong, with debt to EBITDA at 5.8x, no debt maturities until Q2 2026, and no draws on the $750 million revolver.

• Monetized $80 million of non-core assets year-to-date, with up to $150 million more in dispositions included in outlook.

Financial highlights

• Q2 2024 net income was $62.9 million ($0.59 per share); FFO was $105.9 million ($0.98 per share), both up from Q2 2023.

• Q2 2024 rental and other revenues were $204.7 million, down 1.2% year-over-year, mainly due to property dispositions.

• Received a $5.8 million non-recurring tax refund, partially offset by a $1 million non-recurring charge, netting a $4.8 million benefit.

• Updated 2024 FFO outlook to $3.54–$3.62 per share, a $0.045 increase at midpoint from prior outlook.

• Same property cash NOI grew 3.3% year-over-year; outlook for 2024 is 0.5%–2% growth.

Outlook and guidance

• Management expects lower revenues and NOI for the rest of 2024 due to property dispositions and lower average occupancy, partially offset by development properties placed in service.

• Expect occupancy to trough in early 2025 and recover thereafter, with potential to return to pre-pandemic stabilized occupancy of 92–93% over several years.

• No significant non-recurring items expected in the second half of 2024.

• Lower quarterly FFO anticipated in the second half due to seasonality, cessation of interest capitalization, and known move-outs.

• No new development starts planned for the remainder of 2024.