Highwoods Properties, Inc. · NYSE:HIW
Highwoods Properties — Q3 2024 Earnings Presentation
28 slides from Highwoods Properties's earnings presentation, October 2024
Slide 1: Quality. Resiliency. Growth.
i! ALITY RESILIENCY. GROWTH. giHigtiwoods: | /PTOGETHER J
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: Attractive Markets & Portfolio, Resilient Leasing, Strong Balance Sheet, Capital Recycling, Future Growth
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 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. 27.4M 88.0% 2003 5.4 SQUARE FEET OC
Slide 5: Attractive Markets & Portfolio: BBD Exposure by Market
ATTRACTIVE MARKETS & PORTFOLIO CBD PITTSBURGH BBD EXPOSURE BY MARKET 5% (% of NOI*) RICHMOND ~90% CBD NASHVILLE Suburban 3% RALEIGH Infill 2% NOI* IN TOP 20 CHARLOTTE Suburban CBD Suburban CBD ULI MARKETS 9% 9% Infill 8% 5% 4% CBD 6% Infill ATLANTA 8% Suburban 1% DALLAS Infill Suburban 1% 14% CBD 5%
Slide 6: Demographic & Market Trends
ATTRACTIVE MARKETS & PORTFOLIO 2.0% DEMOGRAPHIC & MARKET TRENDS 1.8% 4.0% OFFICE EMPLOYMENT 1.6% 3.5% POPULATION 1.4% 3.0% 1.2% 2.5% 1.0% 2.0% 0.8% 1.5% 0.6% 0.4% 1.0% 0.2% 0.5% 0.0% 0.0% HIW Proforma Sunbelt HIW US Gateway HIW Proforma HIW Sunbelt US Gateway 4.0% 16.0% 3.5% 14.0% NET ABSORPTION 3.0
Slide 7: Flight to Quality
HIW ATTRACTIVE MARKETS & PORTFOLIO 75.0% 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 2015 Q2 Source: CoStar, Company filings 2015 Q3 2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016 Q4 2017 Q1 2017 Q2 HIW Occupancy 2017 Q3 2017 Q4 2018 Q1 2018 Q2 HIW BBDs 2018
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: Industry and Customer Diversification
RESILIENT LEASING & OPERATIONS INDUSTRY DIVERSIFICATION (% of Annualized Revenue) CUSTOMER DIVERSIFICATION Finance and Banking % of Annualized Legal and Accounting Services 15% Top 10 Customers Insurance 19% GAAP Revenue** 4% Architectural, Engineering, Professional Services Bank of America 3.7% 5%
Slide 11: Resilient Leasing & Operations: Rent, NOI Growth, Occupancy
RESILIENT LEASING & OPERATIONS $/SF AVERAGE RENT FOR ALL IN-PLACE LEASES % SAME PROPERTY CASH NOI GROWTH 8 34 7 32 6 30 5 28 4 26 3 Outlook range 24 2 22 1 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 3Q24 *2019 excludes bal
Slide 12: Lease Stratification and New Leasing
RESILIENT LEASING & OPERATIONS Count LEASE STRATIFICATION SF M Count SIGNED LEASE COUNT BY LOCATION 1,600 7 600 1,400 6 500 1,200 5 400 1,000 4 300 800 3 200 600 2 100 400 200 1 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 YTD* 0 0 0 - 10K SF 10 - 25K SF 25 - 50K SF 50 - 100K SF > 100K S
Slide 13: Consistent Financial Outperformance
STRONG BALANCE SHEET & FINANCIALS CONSISTENT FINANCIAL OUTPERFORMANCE 95.0% OCCUPANCY 30% "CORE" FFO PER SHARE GROWTH** (at 9/30/2024*) 20% (2024 Consensus vs. 2019) 90.0% 10% 0% 85.0% -10% -20% -30% 80.0% -40% -50% 75.0% -60% NGW4 GW2 NGW5 NGW2 HIW GW5 GW6 NGW1 GW1 GW4 NGW3 GW3 NGW4 GW4 GW2 GW5 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 Includes building improvement HIW Operating Cash Flow 350 & HIWtizing capital* 300 2023 leasing capex Includes 100% of leasing capital* 20% > LT average Includes 100% of building improvement (back of house) capital* 2023 C
Slide 16: Embedded FFO Growth Potential
STRONG BALANCE SHEET & FINANCIALS EMBEDDED FFO1 GROWTH POTENTIAL Low Occupied, In-Service2 $M Development Completed, Not Stabilized $M (GlenLake III and Granite Park Six) 40 16 35 14 30 12 25 10 20 8 15 6 10 4 5 2 0 0 2025E Stabilized Current3 Stabilized HIW 1Calculated as NOI less corresponding int
Slide 17: 2024 FFO per Share Outlook
STRONG BALANCE SHEET & FINANCIALS As of 10/22/2024 ACTUAL Low High 2023 2024 FFO per Share Outlook $3.59 $3.63 $3.75* Effects Assumed in FFO Outlook Growth in Same Property Cash NOI 1.0% 2.0% 0.5% Straight-Line Rental Income $10.0 $14.0 $23.1 G&A Expenses $41.0 $42.0 $42.9 Average Occupancy 87.0% 89
Slide 18: Strong Balance Sheet
STRONG BALANCE SHEET & FINANCIALS STRONG BALANCE SHEET (as of 9/30/2024) 41.8% 6.1x 4.5% 9.8% Debt + Preferred as Net Debt to Weighted Average Secured Debt as % of Gross Assets EBITDAre Interest Rate % of Gross Assets Strong Access to Capital 13.7% • • $245M secured debt raised $350M bonds issued Ba
Slide 19: Consolidated Maturity Ladder
STRONG BALANCE SHEET & FINANCIALS CONSOLIDATED MATURITY LADDER (as of 9/30/2024) $M AVERAGE 5.87% 4.48% 4.66% 4.40% 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 $84 $20 $37 $0 $0 $0 $0 $0 2010 2011 2012 2013 20
Slide 21: Efficient Capital Recycling: Acquisitions
EFFICIENT CAPITAL RECYCLING ALLIANCE CENTER (2012/2013) ATLANTA MCKINNEY & OLIVE (2022) DALLAS TRUIST PLACE (2015) TAMPA ACQUISITIONS 150 FAYETTEVILLE (2021) CAPTRUST TOWER (2021) RALEIGH RALEIGH HIW SYMPHONY PLACE (2013) CHARTER SQUARE (2016) MORROCROFT CENTRE (2021) NASHVILLE RALEIGH CAPITOL TOWER
Slide 22: 2024 Non-Core Dispositions
EFFICIENT CAPITAL RECYCLING 2024 NON-CORE DISPOSITIONS COMPLETED $84M 2024 NON-CORE DISPOSITION OUTLOOK Up to Additional $150M INCLUDES NON-CORE ASSETS AND NON-OFFICE USE LAND PARCELS 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: Non-Office Land as a Source of Capital
EFFICIENT CAPITAL RECYCLING NASHVILLE | GULCH CENTRAL|3 ACRES OWNED TAMPA | INDEPENDENCE PARK | TOTAL ACRES 23 16 ACRES | SOLD $26.9M TAMPA | BAY CENTER 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 25: Future Growth: In-Process Development
FUTURE GROWTH 23Springs* $230M 642K 60% Granite Park Six* $100M 422K 28% Midtown East* $42M 143K 35% 2028 Stabilization Investment Square Feet Leased 2026 Stabilization Investment Square Feet Leased 2026 Stabilization Investment Square Feet Leased IN-PROCESS DEVELOPMENT (at HIW share) $514M $164M ~$
Slide 26: 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 HIW $165M 26
Slide 27: Environmental Social Governance
ENVIRONMENTAL SOCIAL GOVERNANCE 2026 SUSTAINABILITY GOALS FROM A 2016 BASELINE Directors serve one-year terms ENERGY USE CARBON EMISSIONS WATER USE GOAL 20% GOAL 20% GOAL 10% Majority vote director resignation policy 2023 30% 2023 38% 2023 32% Vigorous cash and equity clawback policy SUSTAINABLE TEC
Slide 28: 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