Highwoods Properties, Inc. · NYSE:HIW
Highwoods Properties — Investor Presentation (April 2019)
70 slides from Highwoods Properties's investor presentation, Apr 10, 2019
Slide 1: Safe Harbor
SAFE HARBOR Certain matters discussed in this presentation are forward-looking statements within the meaning of the federal securities laws, such as the expected cost, timing and impact of our development activity. These statements are distinguished by use of the words "will", "expect", "intend" and
Slide 2: Tennessee
TENNESSEE Vea ms SIZE 42K MILES? (34" largest) POPULATION 6.8M ie" largest) LARGEST CITY Nashville NICKNAME The Volunteer State MOTTO Agriculture & Commerce
Slide 3: Nashville
NASHVILLE CITY y~ Cl NORTH John & NASHVILLE sine Alport —— ‘AIRPORT, Lockeland - Springs -O- | WEST END S Cumberang so 3 ad ® °e eo ad Belle Meade Berry airport GREEN HILLS/ SOUTH WEST NASHVILLE Oak Hill Bellevue Forest Hills 3 BRENTWOOD Brentwood COOL SPRINGS Franklin Nolensville NORTH Hermitage An
Slide 4: Nashville: Buildings, Square Feet, Investment
NASHVILLE BUILDINGS SQUARE FEET INVESTMENT 1996 7 | 853K =| SI00M 2018 2006, «43M SIB
Slide 5: Highwoods 2018 Annualized Revenue by Market
APE Ce EOF Sire HIGHWOODS PIE 2018 ANNUALIZED REVENUE BY MARKET NASHVILLE
Slide 6: Welcome to Nashville
Slide 7: Nashville: The 'It' City
\ NASHVILLE THE ‘IT’ CITY & “No. 7 fastest-growing “No. 1 metro y? s ©6©American City” creating » A a the most nf “ g : 5 7 , a I Forbes, ss Sate yy business and f Pape sala), “3 iol ia “anh professional z m ~~ “No. 6 Best U.S. City for & services jobs.” Young Professionals” _—_— Forbes, January 201
Slide 8: Nashville: Nashvegas
NASHVILLE NASHVEGAS ~_WASHINGTON.DC 20M SAN FRANCISCO 25M ATLANTA 35M NYC 60M
Slide 9: Nashville: Music City
NASHVILLE MUSICCI Source: Nashville Area Chamber of Commerce Music Industry Impact}
Slide 10: Nashville: Live Performance Venues
NASHVILLE en oe amp hae ‘ 4 ‘ LIVE PERFORMANCE a EVERY DAY OF VENUES THE WEEK Source: Nashville Chamber of ! ~
Slide 11: Nashville: Higher Education Hub
N A SHE SISSIES: HIGHER EDUCATION HUB aes STUDENTS GRADUATES GRADUATES (ol UNIVERSITY STATE UNIVERSITY REMAIN IN NASHVILLE 7 - 4 Source: Nashville Chamber of Commerce Fi - | a
Slide 12: Nashville: Sports and 2019 NFL Draft
NASHVTULE SMASHV LUE — ae 2019 NFL DRAFT OO@PEOPLE EXPECTED (STANLEY cup FINALS ECS. oe PENG & a ‘NHL ALLSTARS, - ss ee oe il es 2016 ‘a Nashville ° Tennessee Nashville Nashville , Predators Sp * Titans SC [) Sounds NHL MLS (Begins in 2020) “MLB (Triple-A)
Slide 13: Median Household Income and Median Home Price
$297,000 MEDIAN HOUSEHOLD MEDIAN HOME PRICE INCOME io = 5 1, 20 Americans
Slide 14: Nashville: Hotel Rooms
NASHVILLE 31,500 EXISTING ROOMS PIPELINE 16,400 ROOMS
Slide 15: Most Units Produced Within a Year in North America
MOST UNITS PRODUCED ~~ WITHIN A YEAR IN NORTH AMERICA Se 018 Tennessee Department OF —— on
Slide 16: Nashville Economic Impact
NASHVILLE ECONOMIC IMPACT JOBS ANNUAL IMPACT 250,000 oe — oy $38.88 60,000 | litle $10.08 82,100 i saan Tia _ $9.5B e700 J) ema 578 Sources: 2018 Nashville Regional Economic Development Guide; Fortune 2078; Nashville Health Care Council
Slide 17: Nashville Population Growth
NASHVILLE POPULATION GROWTH 22 20 18 16 14 12 10 8 6 4 i 0 & & Ss Cey gs & S oF es e @ 2010-2017 MSA Population Growth % Source: Nashville Chamber of Commerce; US. Census Bureau, Population Division
Slide 18: Nashville Cost of Living
NASHVILLE COST OF LIVING YC a 223 SAN FRANC SCO i 193 WASHINGTON 0, i 152 DENVER a 115 ATLANTA i 99 AUSTIN i 98 NASHVILLE i 97 RALEIGH i 96 CHARLOTTE x «96 DALLAS i 95 TAMPA [i 95 Source: Nashville Chamber of Commerce
Slide 19: Nashville Fortune HQ 2018
NASHVILLE FORTUNE 500 HQ 2018
Slide 20: Nashville Major Employers
NASHVILLE MAJOR EMPLOYERS MAJOR EMPLOYERS V (HQs) MEDICAL CENTER NISSAN HCA 20K 1K NK HCA HEALTHCARE D Saint Thomas ennessee Re vveneiry t Piealth a fo Government DOLLAR GEN FRBL 7K 6K 24K COMMUNITY = HEALTH SYSTEMS ia “a ENVISION HEALTHCARE DELEK US HOLDINGS LIFEPOINT HEALTH TRACTOR SUPPLY
Slide 21: Major Office Job Announcements
ae on MAJOR OFFICE JOB »~ JOBS bn ANNOUNCEMENTS "aa INTHE PAST2 MONTHS amazon ee ~~) wil Ls EAST COAST [4] BERNSTEIN OPERATIONS HUB EY vuicins a better working world +5,000 | +2,000 LARGEST JOB ANNOUNCEMENT IN TENNESSEE HISTORY +1,000 +600
Slide 22: Nashville Unemployment
NASHVILLE UNEMPLOYMENT % 12 10 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘09 10 —Nashville ——U.S. dvisors, Bureau of Labor Statistics ai} 12 13 14 5 16 7 18
Slide 23: Nashville Office Employment Growth
NASHVILLE OFFICE EMPLOYMENT GROWTH ; Zien Ae ‘ol «= '02—i 03's 04.05 06S '07-—is '08=S 09S 10 Nl 12 13 "4 15 16 7 18 —Nashville ——U.S. Source: GreenStreet Advisors, Bureau of Labor Statistics
Slide 24: CBD Employee Growth
NASHVILLE CBD EMPLOYEE GROWTH % 60 50 40 30 20 : : 0 Nashville Austin Charlotte Raleigh 2008 vs 2018 \ustin.com
Slide 25: Nashville Office Market
NASHVILLE OFFICE MARKET 38.6M SF INVENTORY 10% VACANCY RATE 946K SF AVERAGE NET ABSORPTION PER YEAR 3.9M SF UNDER CONSTRUCTION 51% PRE-LEASED
Slide 26: Office Submarkets
OFFICE SUBMARKETS Ee ernitage NASHVILLE ot ‘AIRPORT AVG. VACANCY | = non BBD CLASS A Ss WEST END oo RENTS % 61M 32.—«172 oe = ‘ : pan Bale Meade pars — AIRPORT BRENTWOOD 6.3M 32 11.5 per : 1 SOUTH Oak Hil 3.8M 34 4.3 Foret ie Anton 9.4M 35 79 BRENTWOOD 7 = COOL SPRINGS senme @ Source: CBRE pil
Slide 27: Office Market Supply & Demand
OFFICE MARKET SUPPLY & DEMAND % OF STOCK 6 ™ Deliveries = Net Absorption 5 4 3 ] ‘sual i 10 I 12 3 14 5 16 7 18 Source: GreenStreet Advisors
Slide 28: Class A Rent Trends
OFFICE MARKET CLASS A RENT TRENDS $/SF 35 33 3 29 27 25 23 2 19 7 15 10 1 2 'B 4 15 16 7 18 19 Source: CBRE
Slide 29: Rent per SF
OFFICE MARKET RENT PER SF 32 Average for All Classes 30 28 26 24 22 20 18 16 10 Nl 12 13 "4 15 16 7 18 Cool Springs Brentwood West End CBD Nashville Source: CBRE
Slide 30: Inventory vs Vacancy
OFFICE MARKET INVENTORY VS VACANCY M SF Source: CBRE 40 39 38 37 36 35 34 33 32 3 30 10 1 12 3 14 15 lm Nashville Office — Nashville Vacancy 16 7 18
Slide 31: Net Absorption
OFFICE MARKET NET ABSORPTION M SF 1.6 14 12 946K Average Net Absorption 1.0 6 4 2 0 "7 8 Source: CBRE
Slide 32: Under Construction
OFFICE MARKET UNDER CONSTRUCTION M SF 18 1.6 14 1.2 1.0 8 ON BOD 19 '20 ‘2l Wi TotalSF Ml Unleased 2 Shadow Space Source: Highwoods CBRE
Slide 33: Office Submarket Supply Pipeline
OFFICE SUBMARKET SUPPLY PIPELINE M SF 4.0 3.5 3.0 25 2.0 15 1.0 5 0 Source: Highwoods =CBD UNDER CONSTRUCTION = Cool Springs AVAILABLE _ Brentwood © % of Stock mUnleased SF m Shadow Space @ % of Stock 12 10
Slide 34: Office Submarket Net Absorption
OFFICE SUBMARKET NET ABSORPTION M SF 3.0 25 2.0 15 1.0 , Cool Springs Source: CBRE Brentwood 2013 - 2018 West End CBD
Slide 35: Office Submarket Replacement Costs
OFFICE SUBMARKET REPLACEMENT COSTS $/SF 00) 4.4% CAGR 45.8% CAGR =CBD m Suburban
Slide 36: Cool Springs Submarket Overview
= @ 100% PRE-LEASED = 224K SF | 1.2M SF UNDER DEVELOPMENT CONSTRUCTION POTENTIAL 6.1M SUBMARKET PREIGESE 88.8% SUBMARKET OCCUPANCY 14.8% OF SUBMARKET HIGHWOODS OWNED 900K HIGHWOODS SF (5 BUILDINGS) 93.7% including development
Slide 37: Cool Springs Historical Occupancy
HISTORICAL OCCUPANCY 6.1M SUBMARKET OFFICE SF 100 0 88.8% SUBMARKET 95 OCCUPANCY 900K — BSN 90 5 Bl atte ) 93.7% 85 HIGHWe ae 80 10 Nl 12 13 "4 15 16 7 18 ——HIW Cool Springs Cool Springs
Slide 38: Cool Springs Historical Rent/SF
HISTORICAL RENT/SF _.....-- $/SF 30 28 26 24 22 20 18 10 ai} 12 13 14 5 16 7 18 —HIW Cool Springs* ——Cool Springs *In-Place Cash Rent/SF Source: CBRE; Highwoods
Slide 39: Cool Springs Pre-Leased Development
f i PRE-LEASED | q = et ih age ak Sh ’ a 24
Slide 40: Cool Springs Under Construction
UNDER CONSTRUCTION | K SF SF 800 700 600 500 400 300 200 100 19 70) 7A) ™Deliveries mUnleased Shadow HB Under Construction [ll Unleased i Pre-Leased @ Shadow Space Source: CBRE
Slide 41: Brentwood Submarket Overview
(fe ive ean OPE PE £ SUBMARKETS ENTWOOD Seri % 89.8% HIGHWOODS OCCUPANCY o& 4 6.3M SUBMARKET OFFISE*SE | 108K SF DEVELOPMENT POTENTIAL SUBMARKET OF SUBMARKET OCCUPANCY HIGHWOODS OWNED 4 LF Eli ag b 4 r - 1. TTB ©. HIGHWOODS. | HIGHWOODS ‘J SF BUILDINGS 88.5% 20". excluding development
Slide 42: Brentwood Historical Occupancy
BRENTWOOD HISTORICAL OCCUPANCY 6.3M SUBMARKET OFFICE SF 100 88.5% SUBMARKET OCCUPANCY 95 iF 9M ne sHWOOD 90 + 89 i HIGHW 85 CUPA ce 80 10 ai} 12 13 14 5 16 7 18 —HIW Brentwood ——Brentwood
Slide 43: Brentwood Historical Rent/SF
BRENTWOOD HISTORICAL RENT/SF ...cscne $/SF 30 28 26 24 22 20 18 10 Nl 12 3 "4 15 16 7 18 —HIW Brentwood* —=Brentwood *In-Place Cash Rent/SF Source: CBRE; Highwoods
Slide 44: Brentwood Under Construction
BRENTWOOD UNDER CONSTRUCTION 250 200 150 100 50 HB Under Construction [ll Unleased m Deliveries mUnleased @ Shadow Space Il Pre-Leased SF @ Shadow Space Source: CBRE
Slide 45: Hill Center Brentwood
HILL CENTER cc BUILDINGH== 50% PREZEEASED = BAK SF qi Brentwood, 120K SF 0% PRE-LEASED
Slide 46: West End Submarket Overview
3.8M 95.7% SUBMARKET | SUBMARKET OFFICE* Sis | OCCUPANCY ‘excluding development
Slide 47: West End Historical Occupancy
WEST END HISTORICAL OCCUPANCY 3.8M 100 SUBMARKET OFFICE SF 5 95.7% SUBMARKET OCCUPANCY a“ 466K © - SHV » £3.0% HIGHWOC UPAR Ic Y 80 10 Nl 12 13 "4 15 16 7 18 ——HIW WestEnd — West End
Slide 48: West End Historical Rent/SF
WEST END HISTORICAL RENT/SF ...cscne $/SF 32 30 28 26 24 22 20 18 10 Nl 12 13 "4 15 16 7 18 —HIW Midtown/West End* ——Midtown/West End *In-Place Cash Rent/SF Source: CBRE; Highwoods
Slide 49: West End Under Construction
WEST END UNDER CONSTRUCTION K SF 250 200 150 100 0) 19 '20 ‘21 @ Shadow Source: CBRE
Slide 50: CBD Submarket Overview
9.4M. 92.2%" 10.6%" | 1.0m SUBMARKET | SUBMARKET OFFICE SF OCCUPANCY | excluding clevelopment
Slide 51: CBD Historical Occupancy
CBD HISTORICAL OCCUPANCY _,,, SUBMARKET OFFICE SF m 92.2% SUBMARKET OCCUPANCY 95 1.0M HIGHWOODS SF 90 (2 BUILDINGS) 98% PRE-LEASED 553K SF 85 UNDER CONSTRUCTION 80 3 4 15 6 "7 18 —HIWCBD —CBD Source. CBRE; Highwoods
Slide 52: CBD Historical Rent/SF
CBD HISTORICAL RENT/SF ...cscne $/SF 36 34 OO 32 30 28 26 24 2 20 18 13 4 15 ‘16 7 18 —HIW CBD» —cBD *In-Place Cash Rent/SF Source: CBRE; Highwoods
Slide 53: CBD Under Construction
CBD UNDER CONSTRUCTION K SF Se 1,200 1,000 800 600 400 200 19 '20 ‘2l ™ Deliveries mUnleased 2 Shadow I Pre-Leased @ Shadow Space Mi Under Construction Ml Unleased Source: CBRE
Slide 54: Underway
UNDERWAY yi * | ; ‘ . o = = 4 : SE gages 100% ~ eis my 0% PRE-LEASED PRE-EBASED PRE-LEASED
Slide 55: Pre-Leased Developments
asuRON HG H ae wut bd ‘arta emBLIRHE a * val ae mah 4 il Anette RELEASED
Slide 56: Nashville Division Overview
DIV 1S VOON lise vt Ate -, | | eA uh om vile Far ee ay 1996 4.3M SIB 26 93.9% 170+ S416M. 65 ACRES ENTERED SQUARE INVESTED BUILDINGS OCCUPANCY | CUSTOMERS UNDER LAND INVENTORY MARKET. BEET: DEVELOPMENT as of 2/31/18
Slide 57: Division Overview: Historical Occupancy
DIVISION OVERVIEW HISTORICAL OCCUPANCY 100 0) 85 80 Source: CBRE: Highwoods 10 ai} 12 13 14 —HIW NAS —=NAS 15 16 7 18
Slide 58: Division Overview: Historical Rent/SF
DIVISION OVERVIEW HISTORICAL RENT/SF ...cscne $/SF 30 25 20 15 10 ai} 12 13 14 15 16 7 18 —=HIW NAS Rate/SF* ——=NAS Rate/SF *In-Place Cash Rent/SF Source: CBRE: Highwoods
Slide 59: Division Overview: Same Store NOI Growth
DIVISION OVERVIEW SAME STORE NOI GROWTH % 19.4 10 a 5 ; AVG = +3.1% C) A LU | | e ©) e (10) 10 Nl 12 13 "4 "5 16 7 18 m@CashNO!Growth @ Annual Occupancy Change Source: Highwoods
Slide 60: Division Overview: Mark to Market
DIVISION OVERVIEW MARK TO MARKET Source: Highwoods 18 16 14 12 10 oN FF DD C NAS PORTFOLIO MTM = +9% Cool Springs Brentwood West End CBD
Slide 61: Division Overview: Expirations by Year
DIVISION OVERVIEW EXPIRATIONS BY YEAR Source: Highwoods 500 450 400 350 300 250 200 19 70) ‘21 mExpirations @ % of Total '22
Slide 62: Division Overview: Investment Activity
DIVISION OVERVIEW INVESTMENT ACTIVITY $M 250 200 150 100 ‘05 ‘06 ‘07 ‘08 ‘09 10 ai} 12 13 14 15 16 7 18 m Acquisition mDevelopment Announcements m™ Disposition Source: Highwoods
Slide 63: Division Overview: Valuation Time Series
DIVISION OVERVIEW VALUATION TIME SERIES ASSET VALUE (2) > $1,658 2009 8 Acquisition* Ml Disposition* Mi Development* (1) Based on 2009 NOI for operating properties (owned at year-end) valued at 6.5% cap rate. (2) Based on 2018 NOI for operating properties (owned at year-end) valued at 6.5% cap rate,
Slide 64: Division Overview: Value Creation
DIVISION OVERVIEW VALUE CREATION > $525M ~ Hi Acquisition i Operations Hl Development Operations = 6.5% cap rate applied to all properties for base year (2009) and end year (2018), and adjusted for NOI less cost of carry (using WACC), G&A expenses, capex (leasing and Bl) for years 2009-2018. Acquisi
Slide 65: Future Development on Existing Land Bank
DIVISION OVERVIEW FUTURE =: DEVELOPMEN ON EXISTING LAND BANK UP TO 2.5M SF BUILDABLE Belews UP TO $1.1B FUTURE INVESTMENT x Hermitage METRO- NORTH CENTER NASHVILLE cBD upto 1.2M SF wot AIRPORT -$630M Joa NORTH 4 — oe, _ Bate Meade pars — =\_ AIRPORT GREEN HILLS/ SOUTH WEST NASHVILLE sy , Forest His.
Slide 66: Division Overview: Going Forward
DIVISION OVERVIE GOING FORWARD HISTORICAL
Slide 67: Highwoods Delivered
HIGHWOODS DELIVERED’
Slide 68: Add $34M INVESTMENT CHANGE TO 113K
Add $34M INVESTMENT CHANGE TO 113K
Slide 69: Add $38M INVESTMENT 83%; REMOVE “PRE”
Add $38M INVESTMENT 83%; REMOVE “PRE”
Slide 70: Delivered
Add $200M INVESTMENT REMOVE “PRE” 513K DELIVERED
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