Highwoods Provides Leasing Update

Rhea-AI Summary

Highwoods Properties (NYSE:HIW) has reported strong second-generation leasing activity, signing 738,000 square feet of leases since July 1, 2024, including over 400,000 square feet of new leases. A notable highlight is a long-term lease for 104,000 square feet at Two Alliance Center in Atlanta's Buckhead BBD with a new customer, set to commence in 2026. This lease will significantly backfill space vacated by a customer in Q3 2024.

CEO Ted Klinck emphasized that office users are favoring high-quality buildings with well-capitalized landlords. Highwoods has seen a 37% increase in new deals compared to all of 2023, with the majority of these leases expected to benefit the company from mid-2025 onwards. The company remains optimistic about its leasing pipeline momentum.

Positive

• 738,000 square feet of second-generation leases signed since July 1, 2024
• Over 400,000 square feet of new leases signed
• Long-term lease for 104,000 square feet at Two Alliance Center in Atlanta
• 37% increase in new deals compared to all of 2023
• Strong leasing pipeline momentum reported

Negative

• Benefits from new leases largely deferred until mid-2025 and beyond
• Significant customer vacancy at Two Alliance Center in Q3 2024

Real Estate Analyst

Highwoods Properties' leasing update reveals strong momentum in the office real estate sector, particularly for high-quality assets. The signing of 738,000 square feet of second-generation leases, including over 400,000 square feet of new leases, indicates robust demand. This is especially noteworthy given the challenges faced by the office market post-pandemic.

The 104,000 square foot lease at Two Alliance Center in Atlanta's Buckhead BBD is a significant win, demonstrating the company's ability to attract new tenants to premium locations. This lease will help mitigate the impact of a recent vacancy, showcasing effective asset management.

The 37% increase in new deals compared to 2023 suggests a potential turning point in office space demand. However, investors should note that the financial benefits of these leases will largely materialize from mid-2025 onwards, indicating a lag in revenue recognition. This positive leasing activity could potentially lead to improved occupancy rates and rental income in the medium term, but short-term financial impact may be

Financial Analyst

While the leasing update from Highwoods Properties is encouraging, it's important to consider the financial implications. The company's ability to secure 738,000 square feet of leases, with over half being new leases, suggests potential for revenue growth. However, the timing of these leases, with many not commencing until 2025 or later, means that immediate financial impact will be

Investors should focus on the company's occupancy rates and net operating income (NOI) in upcoming quarters. The backfilling of vacated space, such as at Two Alliance Center, is positive for maintaining steady cash flows. However, it's important to monitor any concessions or tenant improvement costs associated with these new leases, as these could impact short-term profitability.

The increased leasing activity compared to 2023 is a positive indicator, but it's essential to consider broader economic factors that could affect office demand and rental rates. Investors should also assess Highwoods' debt levels and interest coverage ratios to ensure the company can sustain its operations and dividend payments during this transitional period.

2^nd Gen Leasing Activity Continues to be Strong
738,000 SF of Leases Signed to Date in Third Quarter
Includes over 400,000 SF of New Leases

RALEIGH, N.C., Sept. 09, 2024 (GLOBE NEWSWIRE) -- Highwoods Properties, Inc. (NYSE:HIW) announced it has signed 738,000 square feet of second generation leases since July 1, 2024, including over 400,000 square feet of new leases.

Included in the quarterly activity is a long-term lease for 104,000 square feet at Two Alliance Center in Atlanta’s Buckhead BBD with a new customer for Highwoods. The lease, which is expected to commence in 2026, will backfill a significant portion of a customer who vacated the building in the third quarter of 2024.    

Ted Klinck, President and Chief Executive Officer, stated, “Leasing activity continues to be robust across our portfolio as office users are gravitating towards the highest quality buildings with the best capitalized landlords. This volume of work will largely benefit the Company starting in mid-2025 and thereafter. Thus far in 2024, we’ve signed 37% more new deals than all of 2023, and we remain encouraged by the momentum in our leasing pipeline.”  

About Highwoods
Highwoods Properties, Inc., headquartered in Raleigh, is a publicly-traded (NYSE:HIW), fully-integrated office real estate investment trust (“REIT”) that owns, develops, acquires, leases and manages properties primarily in the best business districts (BBDs) of Atlanta, Charlotte, Dallas, Nashville, Orlando, Raleigh, Richmond and Tampa. Highwoods is in the work-placemaking business. We believe that by creating environments and experiences where the best and brightest can achieve together what they cannot apart, we can deliver greater value to our customers, their teammates and, in turn, our stakeholders. For more information about Highwoods, please visit our website at www.highwoods.com.

Forward-Looking Statements
Some of the information in this press release may contain forward-looking statements. Such statements include, in particular, statements about our plans, strategies and prospects such as the following: the expected financial and operational results and the related assumptions underlying our expected results; the planned sales of non-core assets and expected pricing and impact with respect to such sales, including the tax impact of such sales; the anticipated total investment, projected leasing activity, estimated replacement cost and expected net operating income of acquired properties and properties to be developed; and expected future leverage of the Company. You can identify forward-looking statements by our use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue” or other similar words. Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, we cannot assure you that our plans, intentions or expectations will be achieved.

Factors that could cause our actual results to differ materially from Highwoods’ current expectations include, among others, the following: the financial condition of our customers could deteriorate; our assumptions regarding potential losses related to customer financial difficulties could prove incorrect; counterparties under our debt instruments, particularly our revolving credit facility, may attempt to avoid their obligations thereunder, which, if successful, would reduce our available liquidity; we may not be able to lease or re-lease second generation space, defined as previously occupied space that becomes available for lease, quickly or on as favorable terms as old leases; we may not be able to lease newly constructed buildings as quickly or on as favorable terms as originally anticipated; we may not be able to complete development, acquisition, reinvestment, disposition or joint venture projects as quickly or on as favorable terms as anticipated; development activity in our existing markets could result in an excessive supply relative to customer demand; our markets may suffer declines in economic and/or office employment growth; unanticipated increases in interest rates could increase our debt service costs; unanticipated increases in operating expenses could negatively impact our operating results; natural disasters and climate change could have an adverse impact on our cash flow and operating results; we may not be able to meet our liquidity requirements or obtain capital on favorable terms to fund our working capital needs and growth initiatives or repay or refinance outstanding debt upon maturity; and the Company could lose key executive officers.

This list of risks and uncertainties, however, is not intended to be exhaustive. You should also review the other cautionary statements we make in “Risk Factors” set forth in our 2023 Annual Report on Form 10-K. Given these uncertainties, you should not place undue reliance on forward-looking statements. We undertake no obligation to publicly release the results of any revisions to these forward-looking statements to reflect any future events or circumstances or to reflect the occurrence of unanticipated events.                                             

Contact:	Hannah True
	Manager of Finance and Corporate Strategy
	hannah.true@highwoods.com
	919-872-4924

FAQ

How many square feet of leases has Highwoods Properties (HIW) signed in Q3 2024?

Highwoods Properties (HIW) has signed 738,000 square feet of second-generation leases since July 1, 2024, including over 400,000 square feet of new leases.

What significant lease did Highwoods Properties (HIW) secure at Two Alliance Center in Atlanta?

Highwoods Properties (HIW) secured a long-term lease for 104,000 square feet at Two Alliance Center in Atlanta's Buckhead BBD with a new customer, expected to commence in 2026.

How does Highwoods Properties' (HIW) new deal volume in 2024 compare to 2023?

Highwoods Properties (HIW) has signed 37% more new deals thus far in 2024 compared to all of 2023.

When will Highwoods Properties (HIW) start seeing benefits from the recent leasing activity?

According to the press release, Highwoods Properties (HIW) will largely benefit from the recent leasing activity starting in mid-2025 and thereafter.