Highwoods, the largest owner and operator of suburban office properties in the Southeast, raised its FFO projections for the year based on its management's view of current and future market conditions, including rental rates, occupancy levels, and gains from land and other property sales. The company leased 1.4 million square feet during the second quarter, up 67% from the first quarter.
"We were pleased with our second quarter results and continue to benefit from recently delivered, well-leased development projects as well as improved operating efficiencies across our portfolio," says Ed Fritsch, Highwoods president and CEO. He notes that occupancy in its office portfolio declined only slightly in the last quarter to 89%.
"This was also a quarter of significant accomplishments for Highwoods," Fritsch stated in a conference call Thursday morning. "We further strengthened our balance sheet, disposed of older, non-core assets and continued to benefit from lower operating and G&A expenses."
Second-quarter highlights for the publicly traded REIT include the sale of three non-core community retail centers totaling 416,000 square feet for $62.1 million at an 8.7% cap rate and $20.9 million gain, and obtaining $162 million in secured loan commitments at a 7.1% weighted average rate. It also raised $144 million in a successful common stock offering and paid off a $107-million secured loan.
Highwoods most recently benefited from a joint-venture contract by the federal government, its largest tenant, to build a $45-million field office in Charlotte for the Federal Bureau of Investigation. Highwoods is partnering with USAA Real Estate on the 171,000-square-foot project and will have 10% ownership in the JV.
Even though it is in a strong position to be a buyer, Fritsch says Highwoods has no current acquisitions pending. "Opportunistic yet deliberate remains our mantra," he says.
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