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Citi maintains Neutral stance on Highwoods with $31 target

EditorLina Guerrero
Published 09/30/2024, 02:00 PM
HIW
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On Monday, Citi reiterated its Neutral rating on Highwoods Properties Inc. (NYSE:HIW) with a steady price target of $31.00. The firm's stance remains unchanged following a non-deal roadshow with the company's senior management, including CFO Brendan Maiorana. During the event, discussions centered around Highwoods' leasing environment, growth opportunities, and development pipeline.

The analyst from Citi shared a cautiously optimistic outlook for the office Real Estate Investment Trust (REIT), noting an improving fundamental picture in Highwoods' Sunbelt markets. This positive shift is attributed to a stronger push for in-person office attendance and a rise in tenant demand. Despite an expected dip in occupancy in the second half of 2024, Highwoods' effective leasing strategies are anticipated to pave the way for a recovery in 2025.

Highwoods' markets have seen concessions stabilize, although they remain higher than pre-pandemic levels. However, the company has managed to increase face rents and achieve favorable mark-to-market rates in several sought-after submarkets. This demonstrates Highwoods' resilience and adaptability in a changing real estate landscape.

While overall transaction activity in the sector is low, Highwoods is actively evaluating potential deals. The company's proactive approach and belief in its strategic position suggest readiness to seize opportunities as they emerge. This forward-looking perspective signals Highwoods' commitment to growth and adaptability in the face of market fluctuations.

In other recent news, Highwoods Properties has made significant strides in its leasing activity, signing leases totaling 738,000 square feet in the third quarter of 2024. Over 400,000 square feet of this total represents new leases. One of the noteworthy transactions includes a long-term lease for 104,000 square feet at Two Alliance Center in Atlanta's Buckhead Business District, set to commence in 2026.

Highwoods Properties also reported a 4% year-over-year growth in Funds From Operations (FFO) per share in Q2 2024, reaching $0.98. Following this positive performance, the company has raised its full-year FFO outlook.

Truist Securities has revised its outlook for Highwoods Properties, raising the real estate company's price target to $33.00 from the previous $29.00, while maintaining a Buy rating. The adjustment comes after a reassessment of Highwoods Properties' financial forecast, with expectations of a decrease in FFO for the second half of 2024 and the full year of 2025.

On the other hand, BofA Securities has increased its price target on the company's shares from $23.00 to $25.00, maintaining a neutral rating. This decision follows Highwoods Properties' recent quarterly results, which met expectations with a 32% rise in leasing activity above the average for the past four quarters.

InvestingPro Insights

Highwoods Properties Inc. (NYSE:HIW) demonstrates resilience in the face of market challenges, as evidenced by both the Citi analyst's report and recent InvestingPro data. The company's market cap stands at $3.63 billion, with a P/E ratio of 23.83, indicating investor confidence in its earnings potential.

InvestingPro Tips highlight Highwoods' strong financial position and market performance. The company has maintained dividend payments for 31 consecutive years, showcasing its commitment to shareholder returns. This aligns with the current dividend yield of 6.08%, which may be attractive to income-focused investors in the REIT sector.

Furthermore, Highwoods' liquidity position is robust, with liquid assets exceeding short-term obligations. This financial stability supports the company's ability to navigate the evolving office real estate market and potentially capitalize on growth opportunities, as discussed in the Citi roadshow.

The stock's recent performance has been particularly noteworthy, with a 73.27% price total return over the past year and a 27.13% return in the last three months. Trading near its 52-week high at 98.91% of that mark, Highwoods appears to be outperforming despite the challenges in the office REIT sector.

For investors seeking a deeper understanding of Highwoods Properties, InvestingPro offers 8 additional tips that could provide further insights into the company's prospects and valuation.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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