Highwoods’ FFO Increases

Highwoods Properties, Inc., (HIW: 28.24 +0.39 +1.40%), a real estate investment trust (REIT) that owns suburban office, industrial and retail properties in the Southeastern and Midwestern U.S., reported fourth quarter 2009 FFO (fund from operations) of $31.7 million or $0.42 per share compared to $13.2 million or $0.19 in the year-earlier quarter. Fund from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
 
For full year 2009, Highwoods reported FFO of $175.0 million or $2.43 per share compared to $143.5 million or $2.26. Both quarterly and fiscal FFO figures included impairment charges on non-core depreciable assets. Excluding non-recurring items, FFO for fourth quarter and full year 2009 was $0.60 and $2.61 per share, respectively.
 
Total revenues during the quarter were $113.7 million compared to $114.4 million in the year-earlier quarter. For full year 2009, revenues were $454 million versus $450 million in 2008. Average in-place cash rental rates during the quarter increased 2.0% and 2.2% across the entire portfolio and office portfolio respectively compared to the year-ago quarter. Overall occupancy in the wholly-owned portfolio was 88.8% at year-end 2009.
 
During the fourth quarter, first and second generation leasing activity was approximately 1.3 million square feet, including 796,000 square feet of office space. Two long-term government leases were signed during the quarter, including a 226,000 square feet renewal lease and 54,000 square feet expansion at Century Center in Atlanta, and a 68,000 square feet lease in Raleigh. 

For full year 2009, Highwoods leased 4.6 million square feet of first and second generation space compared to 4.7 million square feet in 2008.
 
Highwoods sold two small retail properties and two non-core office buildings for $20 million during the quarter. The office buildings were, on average, 26 years old and 100% occupied. For full year 2009, Highwoods sold $88.8 million of non-core properties at an average cap rate of 8.5%. These properties were, on average, 37 years old and 83.8% occupied. During the year, the company also acquired a Class A office building (93% occupied) in Tampa for a total investment of $24.7 million. 
 
During the quarter, Highwoods obtained a new $400 million unsecured revolving credit facility from a consortium of 12 banks. The new credit facility is scheduled to mature in Feb 2013, and replaced the existing $450 million credit facility that was scheduled to mature in May 2010.
 
Highwoods currently has no outstanding debt under the new credit facility. At year-end 2009, the company had $23.7 million of cash and cash equivalents. In addition, the company has only $138 million of debt maturing through year-end 2011. This provides Highwoods with the financial flexibility to utilize the available cash on strategic acquisitions and build-to-suit development opportunities.
 
For full year 2010, Highwoods expects FFO in the range of $2.31 to $2.49 per share. The outlook is based on a year-end occupancy of 87.0% to 89.0% and a cash net operating income growth of 0% to 1.0%.