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Here's Why It is Wise to Retain Highwoods (HIW) Stock Now

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  • HIW
  • CDR

Highwoods Properties, Inc.’s HIW portfolio is concentrated in high-growth Sun Belt markets with long-term favorable demographic trends. Also, HIW has a well-diversified tenant base. This bodes well for its long-term growth.

Highwoods continues to make concerted efforts to expand its footprint in the high-growth best business districts markets and improve the quality of its overall portfolio on the back of acquisitions and development. As part of its strategy to fortify its presence in the targeted markets, in July, HIW acquired four Class-A office assets, spanning 1.63 million square feet in Charlotte and Raleigh, from Preferred Apartment Communities.

HIW is focused on development projects in the key markets that are likely to generate a considerable annual net operating income (NOI) upon completion and stabilization.

Highwoods has a well-diversified tenant base that includes several bellwethers. Going forward, the next cycle of office-space demand will likely be driven by an inbound migration and significant investments announced by the office occupiers to expand their footprint in the Sun Belt regions. Also, additional hiring plans in HIW’s markets will drive the said demand.

Moreover, HIW is seeing an increasing number of tenants returning to offices or announcing plans to report to work. This development too will likely support office real-estate fundamentals.

HIW has adequate liquidity from cash in hand, cash flows from operating activities and other financing sources to meet its short-term liquidity needs.

The REIT exited the third quarter of 2021 with $27.9 million of cash and cash equivalents. Debt maturities are well-laddered with no debt maturities until November 2022. Also, Highwoods generates 91.3% unencumbered NOI, providing scope for tapping additional secured debt capital if required.

Shares of currently Zacks Rank #3 (Hold) HIW have outperformed its industry in the past three months. The stock has rallied 3%, while the industry has gained 2.7%.

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Zacks Investment Research

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However, Highwoods faces intense competition from developers, owners and operators of office properties as well as other commercial real estates, including sublease space available from its tenants. This restricts its ability to attract and retain tenants at relatively higher rents than its competitors and hinders its leasing activity.

Also, an extensive development pipeline exposes it to various operational risks, such as construction cost overruns and delays in development.

Key Picks

Some better-ranked stocks from the REIT sector are Cedar Realty Trust CDR, OUTFRONT Media OUT and Apple Hospitality REIT APLE.

The Zacks Consensus Estimate for Cedar Realty Trust’s current-year fund from operations (FFO) per share has been raised 2.6% in the past month. CDR currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Over the last four quarters, Cedar Realty’s FFO per share surpassed the consensus estimate on two occasions and missed the mark on the remaining two, the average surprise being 6.40%. Shares of CDR have appreciated 58.4% in the past six months, outperforming the industry’s rally of 8.3%.

The Zacks Consensus Estimate for OUTFRONT Media’s 2021 FFO per share has been raised 13.8% over the past month. OUT carries a Zacks Rank 1, currently.

Over the last four quarters, OUTFRONT Media’s FFO per share surpassed the consensus estimate thrice and reported in-line results once. OUT delivered a surprise of 44.87%, on average. Shares of OUT have appreciated 14.9% in the past six months, outperforming the industry’s rally of 8.4%.

The Zacks Consensus Estimate for Apple Hospitality REIT’s 2021 FFO per share has moved 4.9% north in the past month. APLE currently carries a Zacks Rank #2 (Buy).

Over the last four quarters, Apple Hospitality’s FFO per share surpassed the consensus mark thrice and missed the same once, the negative surprise being 14.2%. Shares of APLE have appreciated 9.3% in the past three months, outperforming the industry’s rally of 2.7%.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Highwoods Properties, Inc. (HIW) : Free Stock Analysis Report

Cedar Realty Trust, Inc. (CDR) : Free Stock Analysis Report

OUTFRONT Media Inc. (OUT) : Free Stock Analysis Report

Apple Hospitality REIT, Inc. (APLE) : Free Stock Analysis Report

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