Highwoods Properties, Inc. · NYSE:HIW
Highwoods Properties — Q1 2024 Earnings Presentation
29 slides from Highwoods Properties's earnings presentation, May 2024
Slide 1: Highwoods Investor Presentation May 2024
‘usury. RESILIENCY. GROWTH.” = WHighwoods: | # TOGETHER MAY 2024
Slide 2: Forward-Looking Statements
FORWARD-LOOKING STATEMENTS Some of the information in this presentation 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 assumptio
Slide 3: Highwoods Investment Themes
ATTRACTIVE RESILIENT LEASING STRONG BALANCE EFFICIENT CAPITAL FUTURE MARKETS & PORTFOLIO & OPERATIONS SHEET & FINANCIALS RECYCLING GROWTH HIW 3
Slide 4: Attractive Markets & Portfolio
ATTRACTIVE MARKETS & PORTFOLIO 27.6M 88.5% 2003 5.6 SQUARE FEET OCCUPANCY AVG YEAR BUILT WALT (YEARS) (As of 3/31/24) (As of 3/31/24) (Value Weighted Average) (As of 3/31/24) 1.6M SF 95% 1.9x 3.0x DEVELOPMENT PIPELINE SUNBELT EMPLOYMENT GROWTH POPULATION GROWTH (As of 3/31/24) (As of % of NOI) (vs U
Slide 5: BBD Exposure by Market
ATTRACTIVE MARKETS & PORTFOLIO BBD EXPOSURE BY MARKET CBD PITTSBURGH (% of NOI*) 5% RICHMOND 90% CBD Suburban 4% NASHVILLE Infill 2% RALEIGH NOI* IN TOP 20 CBD CHARLOTTE CBD Suburban Suburban ULI MARKETS 10% 9% Infill 8% 5% 4% CBD 6% Infill ATLANTA 8% DALLAS Suburban Suburban 2% 1% CBD Infill 5% 13%
Slide 6: Demographic & Market Trends
ATTRACTIVE MARKETS & PORTFOLIO DEMOGRAPHIC & MARKET TRENDS 1.8% 4.0% 1.6% OFFICE EMPLOYMENT 3.5% 1.4% 3.0% POPULATION 1.2% 2.5% 1.0% 0.8% 2.0% 0.6% 1.5% 0.4% 1.0% 0.2% 0.5% 0.0% 0.0% HIW Proforma HIW Sunbelt US Gateway HIW Proforma HIW Sunbelt US Gateway 4.0% 16.0% 3.5% 14.0% NET ABSORPTION (As a %
Slide 7: Flight to Quality
HIW ATTRACTIVE MARKETS & PORTFOLIO 80.0% 85.0% 90.0% 95.0% 2013 Q1 2013 Q2 2013 Q3 2013 Q4 2014 Q1 2014 Q2 2014 Q3 2014 Q4 2015 Q1 Source: CoStar, Company filings 2015 Q2 2015 Q3 2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1 HIW Occupancy 2017 Q2 2017 Q3 2017 Q4 2018 Q1 2018 Q2 HIW BBDs 2018 Q3 WE
Slide 8: Continuous Reinvestment in Existing Portfolio (Completed)
ATTRACTIVE MARKETS & PORTFOLIO BEFORE BEFORE CONTINUOUS REINVESTMENT IN EXISTING PORTFOLIO (COMPLETED) HIW BEFORE BEFORE 8
Slide 9: Continuous Reinvestment in Existing Portfolio (Planned)
ATTRACTIVE MARKETS & PORTFOLIO BEFORE BEFORE CONTINUOUS REINVESTMENT IN EXISTING PORTFOLIO (PLANNED) BEFORE BEFORE HIW 9
Slide 10: Resilient Leasing & Operations: Diversification
RESILIENT LEASING & OPERATIONS WELCOME TO HIGHWOODS INDUSTRY DIVERSIFICATION (% of Annualized Revenue) CUSTOMER DIVERSIFICATION Finance and Banking Legal and Accounting Services % of Annualized 15% Top 10 Customers Insurance 19% GAAP Revenue** Health Care and Social Assistance 4% Bank of America 3.9
Slide 11: Rents, NOI Growth, Rent Growth and Occupancy
RESILIENT LEASING & OPERATIONS $/SF 34 WELCOME TO HIGHWOODS AVERAGE RENT FOR ALL IN-PLACE LEASES % 8 SAME PROPERTY CASH NOI GROWTH 7 32 6 30 5 28 4 Outlook 26 3 range 24 2 1 22 0 20 2013 2014 2015 2016 2017 2018 2019* 2020 2021 2022 2023 2024 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 1Q
Slide 12: Lease Stratification, New Leasing and Net Effective Rents
RESILIENT LEASING & OPERATIONS Count 1,600 WELCOME TO HIGHWOODSLEASE STRATIFICATION SF M 7 Count 600 SIGNED LEASE COUNT BY LOCATION 1,400 6 500 1,200 5 400 1,000 4 800 300 3 600 200 2 400 100 200 1 0 0 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 1Q24 0 - 10K SF 10 - 25K SF 25 - 50K SF 5
Slide 13: Consistent Financial Outperformance
STRONG BALANCE SHEET & FINANCIALS 95.0% CONSISTENT FINANCIAL OUTPERFORMANCE OCCUPANCY "CORE" FFO PER SHARE GROWTH** 20% (at 3/31/2024*) (2024 Consensus vs. 2019) 90.0% 10% 0% -10% 85.0% -20% -30% 80.0% -40% -50% 75.0% -60% NGW4 GW6 HIW NGW2 GW1 NGW5 NGW1 GW2 GW5 GW4 NGW3 GW3 NGW4 GW4 GW2 GW5 GW1 HIW
Slide 14: Consistent Cash Flow Growth
STRONG BALANCE SHEET & FINANCIALS $ 000s CONSISTENT CASH FLOW GROWTH 300,000 250,000 200,000 150,000 100,000 50,000 HIW 0 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Cash Available for Distribution Average shares *Cash Available for Distribution means FFO as adjusted for no
Slide 15: Transparent Operating Cash Flows
STRONG BALANCE SHEET & FINANCIALS TRANSPARENT OPERATING CASH FLOWS $M 400 350 Includes building improvement & HIWtizing capital* HIW Operating Cash Flow 300 2023 leasing capex 20% > LT average Includes 100% of leasing capital* 2023 Core FFO 250 200 Includes 100% of building improvement (back of
Slide 16: Embedded FFO Growth Potential
STRONG BALANCE SHEET & FINANCIALS EMBEDDED FFO1 GROWTH POTENTIAL $M 40 35 30 25 Under Construction 20 Completed Not Stabilized Dev'l Low Occupied In Service 2 15 10 5 0 HIW 2024 Upon Stabilization 1Calculated as NOI less corresponding interest expense applicable to each development (assumes cessatio
Slide 17: 2024 FFO per Share Outlook
STRONG BALANCE SHEET & FINANCIALS As of 4/23/2024 ACTUAL Low High 2023 2024 FFO per Share Outlook $3.46 $3.61 $3.75* Effects Assumed in FFO Outlook Growth in Same Property Cash NOI 0.5% 2.0% 0.5% Straight-Line Rental Income $10.0 $14.0 $23.1 G&A Expenses $39.0 $41.0 $42.9 Average Occupancy 87.0% 89.
Slide 18: Strong Balance Sheet
STRONG BALANCE SHEET & FINANCIALS STRONG BALANCE SHEET (as of 3/31/2024) 41.9% 6.1x 4.6% 10.0% Debt + Preferred as Net Debt to Weighted Average Secured Debt as % of Gross Assets EBITDAre Interest Rate % of Gross Assets Strong Access to Capital 12.8% • • $245M secured debt raised $350M bonds issued B
Slide 19: Consolidated Maturity Ladder
STRONG BALANCE SHEET & FINANCIALS CONSOLIDATED MATURITY LADDER (as of 3/31/2024) $M AVERAGE 6.35% 4.64% 4.66% 4.38% 3.24% 2.65% 3.50% 7.85% 3.73% INTEREST 800 RATES 700 600 No maturities 500 until 2Q 2026 400 300 200 100 0 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2037 Secured Unsecured
Slide 20: Acquisitions & Dispositions
EFFICIENT CAPITAL RECYCLING ACQUISITIONS & DISPOSITIONS ACQUISITIONS $3.6B TOTAL ACQUISITION DALLAS DISPOSITIONS $3.0B TOTAL $821 Outlook $695 range $549 $491 $447 $436 $374 $400 $309 $296 $286 $150 $158 $179 $165 $149 $125 $127 $133 $104 $65 $84 $85 $79 $20 $37 $0 $0 $0 $0 $0 2010 2011 2012 2013 20
Slide 21: Efficient Capital Recycling: Acquisitions
ALLIANCE CENTER (2012/2013) MCKINNEY & OLIVE (2022) TRUIST PLACE (2015) EFFICIENT CAPITAL RECYCLING ATLANTA DALLAS TAMPA 150 FAYETTEVILLE (2021) ACQUISITIONS CAPTRUST TOWER (2021) RALEIGH RALEIGH HIW THE PINNACLE AT SYMPHONY PLACE (2013) CHARTER SQUARE (2016) MORROCROFT CENTRE (2021) NASHVILLE RALEI
Slide 22: Efficient Capital Recycling: Development
MIDTOWN WEST (2019) BRIDGESTONE TOWER (2014) MARS PETCARE (2017) EFFICIENT CAPITAL RECYCLING TAMPA NASHVILLE NASHVILLE ASURION GULCH HUB (2018) DEVELOPMENT METLIFE (2013 & 2017) VIRGINIA SPRINGS II (2019) NASHVILLE RALEIGH NASHVILLE HIW 22
Slide 23: Market Exits at Attractive Valuations
KANSAS CITY (2016) GREENSBORO (2019 – 2020) GREENSBORO (2019 – 2020) EFFICIENT CAPITAL RECYCLING MARKET EXITS AT ATTRACTIVE VALUATIONS MEMPHIS (2019 – 2021) MEMPHIS (2019 – 2021) MEMPHIS (2019 – 2021) HIW 23
Slide 24: 2024 Non-Core Dispositions
EFFICIENT CAPITAL RECYCLING 2024 NON-CORE DISPOSITIONS COMPLETED $79M 2024 NON-CORE DISPOSITION OUTLOOK Up to Additional $150M INCLUDES NON-CORE ASSETS AND NON-OFFICE USE LAND PARCELS HIW 24
Slide 25: Non-Office Land as a Source of Capital
NASHVILLE | GULCH CENTRAL|3 ACRES OWNED TAMPA | INDEPENDENCE PARK | TOTAL ACRES 23 TAMPA | BAY CENTER EFFICIENT CAPITAL RECYCLING 16 ACRES | SOLD $26.9M 3 ACRES | SOLD $9.6M ASURION 7 ACRES OWNED GULCH HUB NON-OFFICE LAND AS A SOURCE OF CAPITAL HIW RICHMOND | NORTH END | 22 ACRES | SOLD $14.4M NASHV
Slide 26: Future Growth: In-Process Development
FUTURE GROWTH 23Springs* $230M 642K 54% Granite Park Six* $100M 422K 19% Midtown East* $42M 143K 16% 2028 Stabilization Investment Square Feet Leased 2026 Stabilization Investment Square Feet Leased 2026 Stabilization Investment Square Feet Leased IN-PROCESS DEVELOPMENT (at HIW share) $506M $207M ~$
Slide 27: Future Growth: Development Potential
FUTURE GROWTH DEVELOPMENT POTENTIAL (existing core land bank) RICHMOND $115M RALEIGH NASHVILLE CHARLOTTE $490M $1.0B $165M ATLANTA $330M *Consists of residential, retail and hotel. Residential SF based upon an average of 1,000 SF per unit. ORLANDO $40M TAMPA $165M HIW 27
Slide 28: Environmental Social Governance
ENVIRONMENTAL SOCIAL GOVERNANCE Directors serve one-year terms Majority vote director resignation policy Vigorous cash and equity clawback policy No employment contracts OUR PEOPLE ARE OUR Double trigger change-in-control contracts No poison pill TROPHY ASSETS 89% independent directors w/ 50% female
Slide 29: Thank You
WE BELIEVE THAT, IN CREATING ENVIRONMENTS AND EXPERIENCES WHERE THE BEST AND BRIGHTEST CAN ACHIEVE TOGETHER WHAT THEY CANNOT APART, HIGHWOODS CAN DELIVER GREATER VALUE TO OUR CUSTOMERS, THEIR TEAMMATES AND, IN TURN, OUR SHAREHOLDERS. THANK YOU HIW