HIW - Earnings call transcript Q4 2021 | Highwoods Properties, Inc.

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Operator

Good morning, and welcome to the Highwoods Properties Earnings Call.

During the presentation, all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. [Operator Instructions].

As a reminder, this conference is being recorded, Wednesday, February 9th, 2022. pleasure the my Hannah over now True. is to conference turn to It Ms. go Please ahead, True.

Hannah True

Investor operator, our Officer; you, our Hannah with Finance morning Chief Highwoods. I is morning, Operating call the Officer; True work here Financial this and Chief Brian Participating the our on on Ted Thank Maiorana, Brendan good Executive and and and Klinck, Brendan everyone. are team Officer. at Chief Relations My name Leary,

the remarks prepared have today's web. convenience, on posted your For been

not website If release our supplemental, financial the to On of have The measures, earnings you received Investors comparable and measures. directly EBITDAre. or most and non-GAAP call, release they're reconciliation yesterday's these the such supplemental on non-GAAP section today's NOI a GAAP as review include measures both at available will of FFO, our highwoods.com. include

are statements uncertainties SEC our pandemic the to as our subject filings. risks today's and our of well press results. on risks during financial operating Forward-looking including effect length COVID-XX as in ongoing discussed and at These made adverse call releases the uncertainties, are condition and

duty you update With actual turn As call can statements a and forward-looking and differ any the over know, Company results Ted. that, undertake not I'll these from statements. does materially events now to forward-looking the to

Ted Klinck

I'd Thanks, have you to great to Hannah, Hannah start good call morning, today. It's like to with and everyone. off our by welcoming us.

protecting throughout growth. sheet as and groundwork all quarter quality all long-term and XXXX our improving delivered flows, execution balance fourth and for financial of of leasing of while our resiliency fortress the results, metrics cash Our additional portfolio, strengthening was representative laying strong we solid our the

performance, buildings core the criteria. returns long-term is the A straightforward to strengthen Best attractive Districts, office financial and and continuously prospects we operational developing, and portfolio which and completed To component $XXX high-quality XX% Business $XXX properties our land differentiated recycle of sold Charlotte, $XXX of $XXX over long-term of approximately of of to strategy and development acquired in resiliency portfolio, growth of office generate acquiring acquired simple end, and BBDs. investment out Raleigh of in is and future a owning call Our this in the longer development, high-quality, our by three non-core buildings strategy and sustainable million in million this of for million XXXX, meet office leased we that BBDs properties. no million

CapEx million call, square million sold as Since poised spend of shovel for and three investment we total flows average investment to nearly continuous portfolio square higher of long-term our combined reduction growth. even we've rents development feet evidenced In million of the these better square announced of ground. a $X and pre-leased, office in-place and non-core assets is addition, that strengthen by is X.X and meaningful meaningful of have in delivered acquired XX% the XXXX, X.X for beginning feet feet last X.X first the billion, putting $X.X million development since office our of for total leased $XXX of highly best-in-class before a our of over more $XXX resilient continued properties our Plus, Because even for have cash million billion. office in a XX% these years. improvements, a

for and X% building core maintaining blocks while additional During dividend growth. long-term investing this X% our the grown strong same period, in we've and sheet a FFO balance

the exclude October Even of outlook high-end revised original delivered mid-point when we land per we sale our our the FFO $X.XX results, these $X.XX gains. our gains, of $X.XX share quarter, to last per February. Turning outlook our full-year in share, above sale was in land includes which FFO and $X.XX fourth $X.XX of of above the

leases was solid leased X.X% XXX,XXX growth were operations our plus for for feet of including In year. basis quarter space, X.X% feet XX,XXX and GAAP FFO, and and the gen on positive addition square square of to at cash a a of basis. plus net feet spreads XXX,XXX XX.X% X.X% on We healthy. second plus square NOI cash also property the new were expansions. a Same Rent

last We XXX,XXX signed gen leases since square of first also feet our call.

the Solid XX%. Utilization the we among helped in anticipate leasing our translated suburban in quarter. Despite to in later last we're first customer to customers. higher to healthy be below encouraged utilization tends across into quarter and drive returning overall by strong activity We customers prospect more our across hovers and the interest portfolio which leasing up continuing the are office levels, to smaller buildings to and spring seeing during quarter, occupancy months. year-end significantly XX.X%. Similar pre-pandemic the fourth our utilization be around portfolio,

ratio in down feet that Turning million to a $XXX non-core quarter to we investments, the debt-to-EBITDA were our X X.Xx. million bring XX.X% sold for square assets occupied. These helped of sales combined

since pre-PAC of over middle with properties to another have $XXX metrics. million our return acquisition the year, sheet $XXX non-core balance last sold to We to $XXX million million to of go

long-term acquisition submarkets in best to markets' of foreign increase quality assets domestic, has investors, beginning the competition front, value our the BBDs high the since across continued and of Institutional the both footprint. for On properties located our recognize the pandemic. in excellent

we long-term further seek continue would be that disciplined to office performance, our prospects. to our growth allocation strengthen assets resiliency acquire will as We capital with and

Leasing not healthy our $XXX yet million is developments. stabilized was pipeline completed XX% for pre-leased. but Our development

now Tampa, the XXX,XXX interest Brentwood started in II West both BBD, in million solid we of As is our At II you fully foot, Midtown we're we prospects. remember, balance spec and $XX additional property have in our the leased and XX% space. At Virginia and in leased West Midtown XXXX. project may Springs square from XX% interest healthy Springs Nashville's Virginia have

foot, GlenLake III quarter, pre-leased. in the XXX,XXX is office square the currently retail announced and project million During XX% we $XX that Raleigh amenity

this LEED on ground will broken property, which certified. Fitwel just and have We be

that Peachtree XXX,XXX new square on-site venture provide to are for million nearby in already is we early Properties. pre-leased talks XXXX customers have in scheduled a GlenLake a III, of existing We After drive development of has combined announced occupied. continue. year-end, with and XXX,XXX prospects healthy Brand XX% users. in XX:XX is mix opportunities The office $XX product and which XXXX late completed have boutique This which and development growth foot in square a amenities, office and feet the activity. be joint development XXXX, GlenLake in-service stabilize strong helped XX% will with

apartments, hotels. of has billion via $X another and restaurants been bank more it future never of land shops, can and office $X.X mixed-use almost development billion new support Our attractive, adjacent

the will XXXX than $X.XX portfolio of utilization share while revenues share. throughout outlook will to $X.XX last FFO the our project We to of of increase we Now outlook, assume $X.XX. same per $X.XX year. parking operating year, only At gradually per rest our higher expenses improve property be of mid-point the by will our

we as parking As usage same is than revenues. to property recover this into long have X% for cash foreshadowed, our X% will NOI And increases, incorporated XXXX. OpEx outlook faster growth

of $X.XX plan metrics $X.XX assets our We of project As to levels. non-core pre-PAC per share. $XXX sheet to million be to dilutive million to $XXX sell currently these acquisition to impact balance the return previously stated, to dispositions we

an is XXXX not our FFO addition, of assumed up which additional dispositions, outlook. to of includes $XXX in million outlook effect our In potential the

$XXX placeholder a million included have for acquisitions of $X million. to We

conversations development to continue project with also to and $XXX $XX customers development. million and additional $XXX We Peachtree of inclusive of build-to-suit developments anchor XXXX the have million for announcements, million

to would call recap turn like to briefly the I I over Brian, Before XXXX.

same balance During high-quality of square totaling the Raleigh X% XX% assets and in ratio feet; a generated increased signed sheet of acquired million cash gen development; delivered and $XXX new million any growth; maintained leases, since XXXX, and X.Xx. year, land; year X.X% the single $XXX FFO; acquired core dividend office a $XXX we XXX of in property with year-end leverage X%; growth million most second debt-to-EBITDA completed X.X development leased XX% in of NOI office million Charlotte; our of strong

the a like to with company single would to the assets. same continue buildings a to time hard come. While hardworking thank our teammates portfolio the long-term. great work conclusion, take our leasing, XXXX. operating a building we're dedication drive years maintaining in team to results, that we as and put wearing jersey, our Highwoods while our entire the I quality, has growth BBDs place trophy beneficiaries is in true humble, of sustainable Highwoods confident that throughout position and blocks the In This our high-quality flight talented more their and pleased of to continued Brian? are type for commitment even our for it over to team we're have are XXXX

Brian Leary

we markets, attractive simply, they have what quarter, XX the the conclusion return, from have XX.X%. collaboration are customers contracting the the return and to our the year full more basis portfolio this of for will a their are a of flight clear plans to them and allows acceleration see quarter to to now evidenced the to to as urban Occupancy that nature. together. team pandemic cannot workplace We throughout Most at good execute better This part testament buildings, through are, and everyone. and command are morning BBDs together organization. that producing. value simple has Thank to to the expanding retain they economics. increased be Companies strategy a of metrics great vital you, all be is a which ability to is recruit, apart positive quality and talent suburban and migration believe attracts in throughout and every specifically seeing create our the and ending in results but the Highwoods workplace The positioned posted we've culture a to they our strategy their office, both achieve our that than to We're now great points day. a global last are and and come beneficiary Ted, people

latter expect We modestly in half the to of occupancy increasing before the the half. dip first year in

we steadily remains utilization it project pre-pandemic the below will increase While throughout year. currently levels,

XXX one new disproportionately the see more five since deal these new activity carried deals market our no square We feet. or evident balanced deals, tour eight deals. healthy XX garnered and in signed RFP load is in the of quarter, of highest continue markets our portfolio, feet XXX,XXX were to count the Emblematic as quarterly totaling square XXX and Of XXX,XXX the which XXXX.

in our signed developments of and Raleigh addition, first for square In quarter Tampa, we Atlanta. Nashville, generation feet XXX,XXX leases in the

benefitting are These as Our moves these "great and economic have will talented of flywheel migration." markets generating termed markets. is expansions what relocations. corporate prosperity our a from in since pandemic, accelerated individuals started impacts plant roots the the and generational and has has onset of the have some It organizations

engineering strong the see start grown net Unemployment Raleigh, throughout will to construction office-using a we continue firsthand and and announced and feet where multiple foot and pandemic. office on XXX,XXX and we the XXX,XXX Charlotte collection has the live-work-play tech for million firm. room our foot completion master winner new building absorption & all investment home the a of record our a This occupied and for tens footprint. This the of to and started work-placemaking XX.X% have and had development, fundamentals shops November is the achieve recognizing McKim serve to GlenLake posted Creed, out Atlanta, a near product of little their jobs efforts. GlenLake's latest As LEED returning life will been pre-leased, jobs XX% have XXX,XXX this mixed-use leases quarter, restaurants. our since and Raleigh $XX.X are curated pandemic, Fitwel markets positive of occupied. of demand result momentum, we upon and growth will XX% this science Nashville of lows of quarter. and thousands we the be national and been Witnessing square at year of for plan surveying coming clear a square complete ending where signed square certifications as in rates

our Tampa a spot delivered nation's sent have where one the banner to leases XXX,XXX as Town" While up of market's square friends may euphoria, signed won feet the of rents quarter. increased the the I-XX housing and Zillow's number office the has where market Braves and in Hot-lanta double-dose Tampa top Dawgs X% for team for our XXXX, "Title

and and a with above leased XX.X% Our interest. Midtown new Foods, adjacent development, REI is tours Whole to in-bound now is and busy a West

restaurants, the Brand X.X%, Properties feet XX:XX example our below project the feet business. rooms. is was $XX XXX an a in Speaking unemployment are noted Atlanta-based and Further, third Where made home induce million developed to hotel XXX,XXX uses which with American most which complementary the to in to customers dropped the office, work-placemaking of perfect efforts. up opportunity us the and an in square II occupied, thank XXX-acre from This for stabilize of year Ovation, progress has all-time allowed of completed In the in Atlanta, where significant rate projected is feet last acquisition on great our rents vertical who now mixed-use first great Nashville high their PetCare multiple square and XX% inherent of customers. Highwoods to XXXX, is of we'll conclusion, leased leases Peachtree Springs to joint and XX.X% the together. residential of venture has our our of first land a things Virginia currently conduct signed generation possible to is addresses amazing the in our land XXXX be Buckhead Mars XXXX. entitled XX total leased, Properties ended inventory is addition of team acres to Cushman achieve in XXX,XXX to have creating women Highwoods develop Wakefield up second XXX appropriate, to and quarter quarter. mixed-use the XX% at in their men additional of of put Wrapping square already bank The you quarter XXXX remaining our headquarters we will we those The development development Ovation and quarter. XX% million units, to North in X.X shops and utilize best the

Brendan hand Now to off I it will

Brendan Maiorana

Thanks, million, of Brian. income share. In FFO the of or net $XXX.X or $X.XX fourth quarter, we and delivered $XXX.X per per $X.XX million, share,

As land significant fourth were sale Ted item gains mentioned, the the of only $X.XX. quarter unusual in

net as The above sale high primarily was recovering rest mid-point in occupancy; than from NOI original operating fourth and gains, outlook which we than was upside of was for the revenues quarter full operations The the higher XXXX from to end and parking the the occupancy higher of provided due last the with anticipated the revised $X.XX driven $X.XX driven by: FFO $X.XX was $X.XX. than higher lower from of our year by February. than fourth year $X.XX OpEx, was better anticipated delivery per lower land penny development, the the majority acquisition of $X.XX the outlook higher and dispositions. of expected partially of FFO offset non-core which of FFO $X.XX, was of from our share quarter, impact Asurion's Excluding the PAC acceleration consistent headquarters; the share the from early expenses, per $X.XX of our by a to of $XXX million the

remaining a of cash million likely on year. cap The to average and cap announcement the basis are We $XXX our sold a the X% had acquisition. third the We less to had Our in-place target April sell dispositions have stated in another in to and year on first from the of likely balance higher sheet with non-core occupancy we the rate the properties since of million We're X.Xx, meet the sales we plan basis. this was is ended to balance with this low the basis. $XXX of Xs in properties at X.Xx $XXX non-core return shape. PAC debt-to-EBITDAre metrics a than down projected Xs end average of quarter. excellent to most XX% Last of These a plan pace on a from announced $XXX PAC, our GAAP in by cash to when XXXX. of and mid-year $XXX GAAP low million sheet of half million pre-acquisition rates the on acquisition to

quarter, measured are in efficient basis. issued an net activity fourth at an issuances million, a remain the for our development $X.X the a we on with believe of average shares leverage-neutral way of of one During our incremental third and pipeline, fund $XX.XX second price ATM modest we quarters. investments, to amount on particularly tools and of ATM the proceeds share our program per consistent ATM

$X.XX for XXXX our Ted is $X.XX FFO share. As mentioned, to a

As higher for disclosed to The $X.XX $X.XX includes last anticipated property to planned night’s points. in higher $X.XX from and has dispositions of reduced basis projected also net of OpEx NOI OpEx this same $X.XX headwind dilution cash of our recoveries. anticipated to the release, of XXX growth by outlook XXX

Excluding this line average. impact, we would with be in our long-term

of to build-to-suit. PAC financial per impact to take the XXXX million outlook. up of first the range $X.XX year-over-year our growth $X.XX higher revenue mid-point the share full-year of FFO of to FFO growth, These impact recoveries; of $X.XX to FFO recap to with We rate. long acquisition approximately from full-year equates FFO impact Some lower $X.XX run. non- on FFO higher mid-point to half accretive of a of like PAC be acquisition of the $X.XX are: the impact and drivers portfolio; moment the We over modestly be dispositions; of in $X.XX changes items accelerated net core due to run due due XXXX a planned higher which neutral FFO higher add expected $XXX a Asurion to by the the at the of our we the now net to due I'd plan full-year of and to pre-announcement XXXX the FFO our upon offset of in-service year-to-year of the OpEx, our will it lower expect completion major growth the stated dispositions; FFO of dispositions. from outlook partially

$X.XX activity impact investment by accretion. at benefitted $X.XX the XXXX and be acquisition the FFO, the total of million for $XXX FFO additional PAC net mid-point $XXX now long-term we will $X.XX dilutive $XXX this million our estimated to the to XXXX to and Our about planned will dispositions, aforementioned our improvement of million Offsetting growth our add from XXXX. in this of be $X.XX $X.XX to a our we on a an project from pre-announcement rate the and non-core corresponding with annualized expect basis, change accretive rate. the All-in, million in no dispositions dispositions $XXX to $X.XX acquisition PAC FFO of an run to

in-place have $XXX three front active growth properties, over of capital healthy developments billion frame, $X average property on million increasing office while high increased land. increased balance leased past properties sold FFO coverage strengthen, NOI X% we've over over having maintaining resulting office a of X%, continue sheet. non-core billion this dividend XX% time long-term Ted higher averaged been we $X.X cash rents resilient acquiring have mentioned, cash three prospects, long than annual in of same distributions. growing fortress same XX%, adding as highly the Plus, we as X.X% and delivering our flows $XXX years, to the our recycling years, on all development Finally, with the quality, million Over of very highlighted, last and growth, our more dividend

quarter-to-quarter growth believe the we outlook but over we Our Operator, the of short-term our regardless improve are and for growth our ready or portfolio be now will continue resiliency questions. always impact as strategy it to may we will follow year-to-year, investment of linear not quality, the long-run.

Operator

go Heck Instructions]. [Operator Thank Blaine of That from comes Wells you. ahead. Fargo. first question Please

Blaine Heck

net are driving expense -- those that everyone and maybe detail. in lease also not a morning, structure this increase variation you're some expenses? fully versus getting guidance Good gross proportion you year? leases about thanks. all a leases that remind little And for in of the us Brendan, of operating reimbursed of which the for that what's outstanding bit can thanks Great, and that talk

Brendan Maiorana

the Blaine. morning, for good Yes, Thanks question.

on the So answer just triple the full-service. versus easy net first

leases, the full-service full-service got And expenses. movement portfolio gross is operating we've terms is the So leases. in of XX% has net remainder of gross there's triple that where the about

So this I'm going on sort try to can. concise complicated complex to of be and as as I answer

let's in in expect for it expenses most pretty is environment "normalized operating really we OpEx" to what first, call now So terms of a of XXXX. be

the of bit I thought to be will And normal. a quarter. the and fourth normal and to second, being, we back may in expect to quarters be the heat cool third the customers their by think than a that in first lower then little with half space the vast suite. teams, be full OpEx majority it's back in And quarter difficult while probably we'll their not second be

load low benefited operating think over that majority OpEx portfolio of incurring of in we the expenses and was the year. across and for majority So portfolio, we'll vast And the of be as XXXX, a the the us. XXXX were full low utilization

so number stop. incurred of leases, year our for expense were base that our below the And expenses were operating a

that accrued our to so And benefit.

to to back expenses As increase, we that expense receive and year normal until return recoveries stop. get back don't base we

think receive And those will But expenses be expense XXXX, in to get increase our stops. or until majority so, we as levels. the the those above of we recoveries vast at leases we won't

So it those of won't all this we be that will don't in an because likely receive recovery on below forward. as the to beyond going terms we leases get base But we major issue in we will where think expenses XXXX be XXXX. we're XXXX, stop a think in of impact is increase, and

protected I think XXXX, to expenses we So ought be increase there. to continue in if

year. And I by outlook so mentioned feel basis And year does property normal in I this remarks does revenue impact, points pretty major And around as for to this other think, would $X.XX think we to the think of a as $X.XX. I I outside last in night's terms same all same our say normal growth But for from trends, XXX in hamper to well projection property. the as is I this growth that year, of XXX by probably disclosed it us. is FFO prepared standpoint,

that same growth expect occupancy average property. of bit little we a have do we So in

absorbing X% of of long-term that growth with call X.X%. same higher and right OpEx property in XXXX, think be would I between it in average outside our line So

Blaine Heck

burden. we're of debt And helpful. very guess, that's be phase to to I kind out Okay, about be you clear, OpEx able in just talking the should

for you of explained, kind all. of you expire, correct? that next headwinds multi-year year leases normalize It be this As is shouldn't as should kind

Brendan Maiorana

expire whether respect Yes, any time I there's so leases say I over spreads. looking to, attention to as increases not would that's at pay determine rent OpEx what probably would to or just is right. issue with

So plus what recovery, do if and quarter. rent We spreads, which the calculate is to add What take getting when expiring X.X% we're call rent. we we're of and it let's in I expenses, $X we the a this provide we think, operating lease. that

So the rent $XX. expiring And on the the we're rent expiring rent say base is $X we And to of $XX. would rent the new is that recovery; getting then we would compare that.

absorbing So And in have higher reasonably if spreads. terms we OpEx, up show can in were rent rent see that held you would well. of you anything the see up our as spreads

thus the in rent far. it issue sure I I pay make would line forward, historical with So spreads been those they're norms. to that hasn't an attention think to up extent holding going To

Blaine Heck

very that's helpful. Yes,

FAD you're Second expect year question during should over. AFFO color any there for be the or you on Is we or from and XXXX? then any expectations I'll Can turn that AFFO your growth different materially FFO should growth expecting? in it give back for in reason FAD us you

Brendan Maiorana

more cash So always mean, flow I than is volatile FFO.

that, say move line what's flow more mean, be variability major the in what's tends of would probably versus bit going year-to-year. to sort But going little general, to from items. cash there move main between to FFO two movers are I So I a always

both bit ought CapEx be the that of consistent, think, then be. In and there's to had and we And amount that lower a the there's CapEx. XXXX, between relatively amount. probably we than level leasing that I And little it was So CapEx rent, leasing what would XXXX. otherwise of non-cash XXXX and building disclose

to that lag. some be tends And a there of

during of committed reported say of terms of of XXXX. would probably CapEx think I So spend that leasing the year. is during $XX go-forward basis. of better that million we commitments are CapEx leasing we on what CapEx the a million to a we gauge we I likely And spent $XX in amount

basis, So over mentioned, say hard over would that normalized of flow our as kind the maybe tell incur. I'd more means of leasing few a we year-to-year. CapEx bit up little there's cash is that XX% past but that, it regardless years. Ted is But on that to a

million that of a million in or part quarters was X%. think, couple reason leasing it increase of ago So cash by $XX I increase of strong even we And with very flow healthy. be over the means the that still dividend $XX would because flow, why cash that a CapEx,

Operator

question America. go comes Feldman, ahead. Jamie next from Bank The of Please

Jamie Feldman

good and morning. Thanks Great.

quick a Just last on the question. follow-up

So you in I million XXXX you do the $XX would committed a talked to have that about there's take the in $XX think spend million? also, you'll above it mean, that catch-up XXXX?

Brendan Maiorana

that question, bit a -- then are backlog later. wouldn't Yes, hard to to. Jamie. hard that's mean, and is that it's a little committed mean, good it comes likely, It particularly of I -- it's spend to of the say leases to predict. that's certainly don't a would could that's say hard I that I I I happen. always there's

backlog I pretty think the stable. we like is feel

predict so So leasing from call a I range of in But of I continue think I than wouldn't think drivers year-to-year commit the it number cause we be this it are kind to that any stable. capital major $XX pretty or basis. or to there's if that going quarter-to-quarter think that be hard point, is then to on will quarter commitment to is million it But a substantially levels. higher that

Jamie Feldman

core you acquisitions. potential you about And you. gave I dispositions also then then know but thank guidance, potential talked Okay,

guidance would, the then we gone are could the to What And you here? about you I If earnings? you the talked how those up of to your over hit drivers how guidance upside know guidance during has ranges, that do years. downside initial call, guys the what about and think kind should from

Brendan Maiorana

Ted Yes, I'll take Brian will that, maybe and in. or add then

terms then the that the $XXX dispositions for didn't remaining first in acquisitions, XXXX of the of the $X.XX dispositions, We in $X.XX there acquisitions disposition. range for we in put half to that $XXX And to half think I we we million the project. so guidance. or first the million So the range into put put effect

happen dilution, earlier they we to at towards of $X.XX probably of of of call in closer the were their second $XXX probably the then are will and dispositions, year, obviously million we it we if quarter and if be $XXX the at going the be latter to be the the those range. So in $X.XX first part half dispositions, million that's more of

the think all on just just buy, I stuff. that's depends we it sell, -- that's to that on that what of remainder, timing, would tell, the rates it it kind mean, depends we on hard I right. On depends cap

So looking I terms we're don't at. what know, to provide in Ted, you might of color want

Ted Klinck

left $XXX of Look then of $X million, as as placeholder $XXX $XXX $XXX well. million Brendan to million top mentioned, on million acquisitions and to a million on million additional dispositions we remaining the $X on to both

what now. just matter successful be going I that it's acquisitions in or underwriting market. are hits a we're several at to the the things We're not. But knows, really, right mean, So looking of who we're

So we'll think, a we whatever. acquisition, match I that disposition if would on -- we're successful if get with or

successful, hard So a if and at tell it's just to this point. timing we're

Jamie Feldman

like? just about to better a a cap market. of then, maybe kind you. rates and looks And the Brian had of to market your what thank Can they pretty you acquisition investment move, just values in asset give talk competitive us some mentioned movement sense how Okay, and maybe markets

Ted Klinck

five pandemic or had sub Anything, tenant range. in Sure. markets long term, in high buildings, our buildings. We for new asset in that in certainly we've Xs credit, well the high weighted that the cap rates with said, below for single several as lease trades quality the are levels some average pre and

markets. So from as international competitive sources capital incredibly and well in domestic capital our both

be of high going anything to So very quality changed hard. is

deep. still the make there. as But it's side, deep enough to not still On the quite add pool value is a I market. It's think

value our worth think in fundamentals comfortable I market. as well we've the dispositions, market. add more underlying think own on that seen I in as do the are are transactions chasing becoming with buyers

they're maybe aggressive. bit So vacancy, to little underwrite able more a

all the right So it's way out just now, around competitive Jamie. there

Jamie Feldman

expiration dipping thinking Can on for are retention then know you me. talk schedule in is that and to I and And thoughts be the How you thanks. occupancy Okay, said your then retention? recover. ratio? just going you early the year about last about

Ted Klinck

Sure. in. Brendan I and can start can jump Brian either or

retention our the might thing expiration we expirations lower don't I a schedule. I than of year have lot little bit large is, do But think this historically. a this year. be our think from nice

this really square above prior think feet nothing talked on about expiring year. I I've XXX,XXX calls

XX,XXX XX,XXX Our don't square it's in downtime. both backfill largest a Then that this But not feet after prospects then point. vacates. those have XX,XXX to both vacate strong prospect and that of know strong Pittsburgh, that, December in we known is lot in at got we've May feet of square with we've foot expiration the got a are a

think in levels. general, our just lower lower, expiration to bit I So ratio weigh not retention off historical schedule, little is a but

Brendan Maiorana

to mean to with dip are renew. just would in occupancy not And the some expire a I quarter end seasonal of of going we I typically the invariably to those year thing respect is, only that the leases first and that a add Jamie, because have have we normally, at lot the just of

build in XX we So is points to to in that first first work. seasonal a and up half year, to tend of the have typically year, normal back of XX half or back quarter basis of the then the the dip going

XXXX ended higher we is pattern. XXXX. with And pattern be end by where Our seasonal XXXX normal that the consistent of a to little do or than occupancy expect plan bit we

trends a what's of terms those for are perspective leasing from all us think we in happening positive portfolio. the throughout So

Brian Leary

here. Brian Jamie,

into Brendan to Just looking to the aggressive and we're inarguably future. follow-on focused what both just and highly retention said on Ted

of three noticed past out have now them renewing little they're of are them, shorter, it's so quarters, thinking may getting advance a in out the that actually you we're a in extension, number maybe and in only So XXXX/XX'XX, was pushing we're three years. or years year to a customers talking term four

that they're so of And excited that and space the their seeing upgrade back is we're term, they want is as coming folks about are the down want and a lot an back them. into return to being with space falling to and direct space, bring them, reposition opportunity to space recruit their people them but

nuance of renewals. some of that's another also of focus that's coming So our kind out on

Jamie Feldman

good a That's point.

your So that did show-up leasing volume? XQ in

Brian Leary

to not And some continue with kind I who's joke driven I we're about so about was kind it. say something it leasing bad of success continue had portfolio conversations We those to that seeing the renewing -- It's the But We're not shorter approach. It's for the to that not. team. good ahead it and customers kind term it's in keeping I than going leasing XX% of feel out have going among to you're going is by apologize When does, we're calls going our forward. a partly years it's found of extending confident on more that. It much that someone to or them, primarily maintain to in a space. of them someone the being do. with

that approach. we're taking So

Jamie Feldman

out, when that Okay. hit? does And move Pittsburgh the

Ted Klinck

That September year. in this is

Operator

next Rob of Janney. you. ahead. comes Thank The Please Stevenson question from go

Rob Stevenson

Can that back in also, Good there you how with expenses and XXXX additional incremental incremental you other are much associated fourth XXXX up, talk words that in that? morning, versus parking in guys. much dollars million to revenues parking do how expenses come quarter then each revenues ramps of were have where the door, for of as

Brendan Maiorana

it's Rob, Hey, Brendan.

I onset yes, the be about on we parking a of at below we're thought of revenues, a basis. So million would where same pandemic kind probably the running a we would property say quarter

So of depths all it's We've improved better. way the certainly the but from XXXX not back there. gotten

revenue is think $X there's NOI of the that so the vast to So go another line majority million I to probably line. or to fall going and

incremental of lot with a not costs associated there's revenue. So additional

Rob Stevenson

Okay.

annual about given down still a your revenue, numbers outstanding an on terms in parking basis? $X.XX basically share, of you're shares So in rough

Brendan Maiorana

right. Yes, that's

Rob Stevenson

is your that how sublease the of tenants Okay. space look point? And existing at then are amount currently to this significant

Brian Leary

I gone got that in Brian. is university, stuck things, space button. in the of of broad my kind mute a on remote one from sublet Hey, user Tampa is university single medical perspective, near-term. our Rob, a Couple -- that there the just finger down has markets, across

but kind on so still down. our that numbers, move it's biggest of is trending made the And

would ticked I So about slightly say, it's we're within up. down Highwoods, marks X%. probably just then total across And our

within what steady, -- seeing holding So percent, on in the movements. your of portfolio, small it's still good kind amount and sure number and of very a one, we're that terms Brendan,

we down; Again, had was going the Atlanta you're most go Tampa where seeing of them seeing across You're one board. to up. the spot

Rob Stevenson

Okay.

wouldn't say that it's an vacancy your this -- existing So at it's leasing on overhang you point.

Brian Leary

No, we're not.

Rob Stevenson

You would what be competitive space with possibly a than -- tenants lower you're sublease trying offering? lower at at rate to

Brian Leary

we're No, not.

Brendan Maiorana

it's it bit of for little Rob. call Yes, terms overall would maybe a we we're in kind the I just that I available will less of probably -- space mean -- sublet. mean X%, in be

very portion So it's a small portfolio. of the

Ted Klinck

it. short-term me let just jump Rob, lot A of has on And space in. the subleased pretty

With a So below it's sublease lot years it's or vacant competitive. hard space. their not get you just just for once leave two space, our of necessarily to owners

have do space we that's longer-term handful. we've competitive be over it, some would space. of vacant last lost most years, a But than competitive. And the just some of less probably So have couple a the couple on but deals or isn't sublease

Brendan Maiorana

sublease kind the for in a check The typically last you a is lessor on that as of write have deal. to thing might

someone the move folks don't either. to in who necessarily there so were on to a market And of the putting write space a want check lot

things the the kind of that's sublet market. one So we're seeing in of

Rob Stevenson

million first the dispositions, have quarter of contract And first I is second under that in weighted $XXX quarter then, dilution? of of this of to how the mean, point? sort $X.XX $X.XX or intent that of terms Okay. guys of either million likelihood at half $XXX more the to letter already than much weighted you what's

Ted Klinck

Yes.

in going we hit $XXX yes, under feel do do mid-year. of plan So contract, $XXX second the about to we feel to half potential so by that have but million there just few is -- have going it get of next probably talking market. still the the some have towards bit we're out in But it. none the be to of with of everything what out sell, back it of any we'll we And to some buyers on a under market quarter. we'll comfortable, weeks likely in don't contract, is comfortable, million we're we And the

Rob Stevenson

Okay,

Brendan Maiorana

ended we we million what Rob, $XXX $XXX expected we million million. And up to XXXX there, $XXX just we for said doing remember, thought of dispositions that was

So XXXX our we at were plan. million ahead mid-point $XX the of $XX million,

first So XXXX. million middle to XXXX of the have of early $XX occur kind or portion was of quarter, in into part a plan to the million that we probably accelerated the $XX the fair that

first half bit XXXX stuff naturally year. hit the a And of the is going the just so to little later in

Rob Stevenson

in there costs taken that XXXX? quick was And retirement in Okay. one then one, mark are XXXX, incremental any all

Ted Klinck

zero. No,

Operator

Citi. is ahead. Thank you. Emmanuel The of Korchman next go question from Please

Emmanuel Korchman

age to it everyone. your say from the of and Hey, How your location, I a follow-up Brian, Is defined you'll tenants good the does that. different think that as differentiation just we morning, comment, just difference it quality is demands for is maybe amenity, quality. earlier that in markets? of in it all asset, of about get assume

these a markets? make quality, of as second your is product Is to happen? that, use prime non-prime likely conversion the tenants in about to it to figure think think happens to us pumped more product? we it. it like So how in more Or help what And about capitals out just

Brian Leary

Great, asking. great question for thanks and

right I and convenience it's standpoint think now First, amenity from a quality right.

they in get they we've -- to that believe do to customers the do in heard talking back I so office. what is And want

they're or but times small all talent a in. back at size multi-city across as depending advantage how believe back little Now They're medium all there's more that multinational. effect because it competitive different in. move, see bringing there, when Those coming to in a big ripple and the conservative or they a they space are, the are they

and in I suburban. remarks, mentioned as believe it's my on urban we So absolutely both

as then space light and park access are seeing business our because districts Ted so that. central you fresh offices, more there follow noted there's and the suburban to so, like much have high in rises their And things convenient, just

on is of quality we're hate sure add a all having the into of a the that, of is that's of story tell bit buildings, the of we're either new wellness, driver, to convenient. portfolio something well a also focused as last flexibility from little is a and component Food development. LEED a building thing And a I making to or I'll bit outdoors that access a kind standpoint. on. or built park to beverage they Then adjacent what say is big it the above. the and as certifications, health So doing obviously, the

we've coming and talked see out do suite users co-working so, back before. town to to able gatherings, about like for talked kind be flex and program halls, spec about space primarily that. wanting And our in larger before. things their We We've of of

that Manny. for back. requests as we more on leave seeing bring that, we're I out so people did anything And Ted,

Ted Klinck

locations. done thing to to would new not in necessarily last my we've quality last not -- either necessarily I migration Then that projects, XXXX. and seeing add of XXXX, And are assets. or are we're only think flight XX add is quarter leases our a well to XXX newest think quarter, Manny, leases, their XX we're that new Yes. to assets, I in The year to also portfolio it's and we come to mentioned portfolio. our in remarks. prepared into And I on great the they're playing quality is the owners reinvest for buildings a shiny signed owners, long-term I as Highwoods the Last so it want XXX development who summarizing out we're is quality willing really development find you customers -- portfolio. up I seeing we we think, in since highest that signed our add

flight think benefiting to from a we're quality. I So

Emmanuel Korchman

second the Whether non-quality what of then been I'll be on assets? ones get or is you happens that have the the ones And remind that part it vacant? the question the vacated, to are

Ted Klinck

have be be converted to to cases, I you've and big to, they're going converted going think conversion. buildings a it's seen there's being probably sold think I few In look, Yes, industrial. that a some to been

some to as going multi-family over time some maybe conversions, conversions I see think hotel you're well.

and best forward. going is use So all highest quality the the depends I is what located where and think it on product lower

Brian Leary

One is kind last of some these Manny also assets. addition of little in that densification, around thing seeing of a of uses on you're mix

what kind cases, or a more build have recently. they're might located, is little trap well but different of mouse many than in age you either the So might

converted parking surface seeing structured into we're so lot multi-family. And parking with

pretty and location location still You're added place. be that of kind And location, the -- seeing doubling down strong to amenity. is seems on a retail

Operator

Thank Baird. from you. go The question Dave next Please ahead. of Rodgers comes

Dave Rodgers

the Ted driven everybody. vacancy on clear leasing there that second suburban said tenants. How suburban? by think on up. utilization kind really of the I utilization? where between guess smaller distinction driven that compare by does the leasing. on a is I the Brian, following new tour question is morning, you or early it And happening and CBD activity prepared and Good one two to mentioned also Is comments, or I XX% is you RFP curious, is was pre-pandemic the that and Is questions, in Brian? being levels,

Brian Leary

Great -- great question.

First that actually urban been on has the a good of there's activity the footnote answers deal my suburban a on leasing now, suburban greatly. as of little bit a

do that that's to also the ability we but have leasing. where So

So the too. lot had of was a our -- higher urban occupancy,

that a the locations kind bit and able that a in of good suburban. do deal occupancy of was corporate we you ballast, if So urban of were to will, you have a

part think I of Ted that's, staple So that. to to on of you want kind it. that's

Ted Klinck

it. think that's I No,

space vacant. the lease we only can we think I are

heavily a in vacancies as don't been side the lot either. it's a have We suburban large So past. company, of

customers, pretty but lot which customers covers lot it those So smaller this obviously small much of been year, to past has goes small a of think -- XXX it. a were the I

Dave Rodgers

like-for-like tour versus a compare? does right, how RFP All so And that fair. and levels then pre-pandemic on activity, basis the maybe that's

Brian Leary

to that. Sure, absolutely. knew part second I was Thanks reminder. there a for the

let's cliché, economy things all felt were week March of And the first XXXX. go It back of hitting all was the cylinders. to on like going well. So

let recruit to their we their tours be and amount feels good workplace like not like think to advantage, has I But now, then. viewing you Because a me think same it time, retain it a I lot of part return talent. of to now be only that customers in had the feel the talent, at So that it right and but why. to RFP a competitive has I sure equal and tool, tell are

got upgrade standpoint. So to our we they've made have asset and an story decision workplace workplace, from a that our

for tenant that to getting is in someone wanted a lean might And we're so folks they in that have sometimes, new today inexpensive. is And to in they're probably interesting workplace. escalations, before inbounds podium be a building, leaning a create just build with building it to not inflation, would what's else's parking,

of price I'm to achieve in that but is whole so realizing the rent need of be things XXXX, with to right. their as And and And be broken is, clear in annual seeing that estate, real and workplace. paid fruit, they're Customers XX% build that plants can X% the make gigantic back process, and utilities, on near going record, revenue cliché bearing are how a is be continue like kind to to the don't a labeled of this premiums you're of their culture. to -- and X% know RFPs, the on them going on important the and that. to down what that and people it's kind power bring I issuing engaging X% willing XX% visibility customers collaborative

any that something So but announce, to these workplace for are is price we're don't companies great or that we're have pay a that We to the seeing doing. premium now. seeing

very So I'd say it right we're right feels on now similar. it

of the same the exercised ask interesting the to will year by getting and we of at It'd tell? roost. question year will Now, to what be end came which ones the end are happen see the and time

Dave Rodgers

that'll appreciate get Ted, times, really Are It's just And couple you I a it. better it you the been the for I guess Or disposition. Brian. color, then on maybe last regardless? I is with but the moving color. asked dispositions wanted I that now for Thanks to forward development and order additional the for magnitude first the kind call and in curious just strategy for the I I of of ways heard your different comes drive sales? what dispositions? on right the it kind in acquisitions the investment guess two of

Ted Klinck

Yes.

forward $XXX definitely with the million. we're So $XXX obviously, moving million to

dependent to that'll it investment done, I So up whether just we on be $XXX the fund transaction get The that. find development match acquisitions. million, or opportunities, likely think look, be vortex remaining, $X that'll to million if finish to

Operator

of from Thank next Kamdem Morgan ahead. question comes Stanley. go Ronald The you. Please

Ronald Kamdem

And Hey, is maybe it driving little items just that want different are I the bit just follow-up to way, and it that on there is cleaning be of little utilities, question, like helpful? markets the line bit more the out maybe the of are -- certain that share then things sort like a would have expenses on LION's across is of that? is or that color Thanks. portfolio maybe a there asking a like what spread

Brian Leary

Yes. Hey, good Ron, morning.

let's into I So buckets, main put would into mean, right. just I it's put I really maybe guess two it it

which those seeing a increases taxes, across we're number certainly our there's So of are, municipalities.

-- of day-to-day, really, just right. it. building then we're part So the of the operating sort And it's that's expenses,

stuff back most of the is day-to-day are because to coming so And our buildings. increasing, the customers

now is been for And normal so There it's has it number certainly of just of back operations. getting to years. sort is some, inflation higher than a

But on the that's OpEx recovery pressure the inflationary just of of got back those really little that absorbing expect not we on a and majority there. bit operations increase levels. normalize get So vast to is building getting to absorb we're there's those that

Operator

Thank you.

of ahead. Ismail Daniel Green from Please comes question final go Our Street.

Daniel Ismail

effective your previously timeframe? for you Great. curious; think to Thank you the XX% that is rent from is around to effect markets Are pre-COVID highs. X% still that rents net a stated recovery in I XXXX growth XXXX. levels? Ted, I'm a net you. outlook probably anticipating are Or your of pre-COVID across down

Ted Klinck

right. Sure, Danny, you're

now, going and rent that going it's TIs and still it's think take both it right I competitive X% then to maybe by come pressure down. from costs of but the think markets going XX%, then probably on to well. we've at Look, be back. top to time; Mid-single-digits competitive do free still. that think just said, it's on end a standpoint, I the The it's to right. But lower there's that, Right, of vary market. as more I

we've occurring different back, rent that market. would there's back there be the bottom in with But on get come increases hit not going TIs. think look to and or our costs. we're increased in by now, we're corresponding level. it's I to to I pressure the increases again, going way yet. maybe cadence Certainly, we're to pre-pandemic there's, hope differently, and does starting But And, come Nashville already seeing So see

Daniel Ismail

what negotiating international what in are for you today can then Great. for you then us the portfolio? guys remind are rent contractual leases? maybe, And bumps And bumps today's

Brendan Maiorana

Yes, Danny.

kind portfolio. the in very we're broadly mid-twos, the just I the So of throughout say across been steady, pandemic. would That's

leases, we -- it those much. really a So higher quarter, didn't were it's than signs. And actually terms too that, dip in this of

I X.X%. think we're at

a little higher than average. So the bit

So we've of all capturing terms kind able successful, a of little those is annual net in those been increasing leases. has to But been bumps that annual certainly bit. helpful keep that our virtually rent we're across of bumps effect

Daniel Ismail

market expense service more you all guys details towards Or maybe, this you that going leases? into just on any and have And hold interest is leases. are triple on. Is side, back the net I to through? pivoting in maybe Brendan, full responding split I between gross net operating since the then, appreciate triple the conventions there

Brendan Maiorana

and benefit. because been often. for control our just expenses. to we actually service I full levels do Yes, think us The been And thing expense able over beneficial those I to have I'd often over often and reduce do push time, mean one like leases mean, those it we net get is depends. reduced to triple to I leases, expenses have time, typically accrue mention

from revenue decline was helped was building XXXX. in think been parking XXXX the offset low only in low. benefit we And operating and it's lot and received lower lot we XXXX, that and both So a expenses XXXX as and utilization in of I a of OpEx

expenses back of that in we increase. then as up, kind Now, the absorbing come are keep mind, got benefit. But we

of kind normal. to back getting just really we're So

our growth, full we time, property NOI have enjoyed time, benefit expenses. had And over outpaced has that if actually growth same because same revenue well I of property look leases control service control worked we've same think property our to we've able over So have OpEx. our because on you those typically, us, for growth, the at been

long for not as but like as for feel above the can I increased we get are triple typically expenses year service And we those we So leases often on are full mean, we protected us problematic. are them push will expenses, base we where expense. leases net

Operator

any call question. turn was the our closing That back remarks. for final I'll over

Ted Klinck

want your to on in interest everybody just being thank thank I for morning. for call the us Highwoods. with you this And

you. free out. feel reach Thank follow-up questions, you have If please to any

Operator

We participation disconnect please does lines. today. good the you. call you thank day. that have conclude Thank This and Thank for you for your ask conference a your you and

Highwoods Properties (HIW) 9 Feb 222021 Q4 Earnings call transcript