Highwoods Properties (HIW) Q3 2024 earnings summary

Executive summary

• Delivered Q3 2024 financial and operating results ahead of expectations, with strong leasing and cash flow performance, and a portfolio spanning 27.4M sq ft at 88.0% occupancy as of 9/30/24.

• 95% of NOI is generated from Sunbelt markets, with strong demographic and employment growth outpacing US averages.

• Signed 1.3 million sq ft of new second-generation leases YTD, with a development pipeline now 49–51% leased.

• No WeWork exposure and less than 1% of revenues from co-working, with top 10 customers accounting for 20.5% of annualized revenue.

• ESG leadership recognized by multiple certifications and ratings, with aggressive sustainability goals for 2030.

Financial highlights

• Q3 net income was $14.6 million ($0.14 per share); FFO was $97.1 million ($0.90 per share); rental and other revenues were $204.3M, down 1.3% year-over-year.

• Core FFO per share for 2023 was $3.63; 2024 outlook ranges from $3.59 to $3.75, excluding certain one-time items.

• Net effective rents and average lease terms reached all-time highs, with over $340 million of total lease revenue from second-gen lease signings.

• Cash rent spreads were 10.4% and GAAP rent spreads 22.4% for the quarter.

• Same property NOI increased 0.3% year-over-year in Q3 2024; total NOI was $138.6M for Q3 2024.

Outlook and guidance

• Updated 2024 FFO guidance is $3.59–$3.75 per share, excluding $0.13/share land sale gains and other one-time items.

• Average occupancy is expected between 86.0% and 89.0% for the remainder of 2024.

• Up to $150M in additional non-core asset dispositions anticipated by early 2025.

• No new development starts expected for the remainder of 2024; focus remains on leasing up the current $514 million, 1.6 million sq ft pipeline.

• 23Springs project is ahead of schedule at 60% leased, with revenue contribution expected in the latter half of 2025.