Earnings call transcript Q2 2023

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Operator

Good morning, ladies and gentlemen. Welcome to the Highwoods Properties Q2 2023 Earnings Call. My name is Juc Pietr. I will be your moderator for today's call. All lines will be muted during the presentation portion of the call, with an opportunity for question-and-answer at the end. now Hannah pass Corporate True, please ahead. would to conference Strategy, I go host, your Manager Instructions] like the to over Hannah, [Operator Finance and

Hannah True

good Thank morning, operator, and you, everyone.

Brian morning on me Klinck, Executive Operating Chief Maiorana, the and this Financial Leary, Joining are Officer. Chief our call our Ted Chief Brendan our Officer; Officer;

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

at received are section have not yesterday's website both of on you or they earnings If supplemental, Investors available the our highwoods.com. release

call, The include today's measures and of measures comparable will such as non-GAAP On directly non-GAAP our include release GAAP review FFO, these financial to most NOI a EBITDAre. the supplemental measures. and reconciliation

discussed during Forward-looking press risks are our uncertainties. our at releases today's as to well are filings. subject length call statements as in These made and SEC uncertainties risks and

As from actual not any materially results these company can a forward-looking forward-looking duty you differ does events the update to undertake and know, and statements. statements,

to turn the With Ted. call that, I'll over

Ted Klinck

Hannah, everyone. Thanks, and morning, good

the sheet with During improved the and We activity resiliency once quality healthy. financial results strong FFO interest million portfolio our We solid had balance operational was again results. flows. face posted selling non-core and of cash assets. further $XX demonstrated of and Leasing quarter, in higher rates, our by second we we

top number compared of Our its state to ranking had major other to higher. U.S. in eight growth for outsized the its which or cities. core job annual market continue markets recently operate and attract talent by business, as ranked population we CNBC published every seen states

we the biggest eight. six Texas behind Raleigh the ranked and Georgia straight that Tennessee It's one our state, share Virginia, Charlotte, home Florida two, for and the metros, number our of NOI at secret and which was growth while was largest our number followed majority of number North of total right no and North economic state's where revenues and XX% the generate for the second three year. Carolina, Carolina. generate X four, garners

benefits trends, the U.S. life. the high low highlighted demographic quality Southeastern long cost its strong with environments, We've of of living of and business-friendly

In has double growth pre-pandemic accounted of since Southeast the job early thirds its all across Bloomberg, almost country share. fact, according for XXXX, to the two

The how these translate into consecutive for years. and property main and national at a demographics our question, for Let's growth however, positive cash performance. step generated is do take We've trends look results Highwoods? NOI back same XX

is than Our year total NOI quarters over XXXX. four last full XX% higher the

Our of quarters of our net effective at XXXX outlook, the than implies the the per our over And share rents XXXX on despite X% is four leases signed higher interest growth headwind X.X% last average. higher midpoint over our XXXX FFO rates.

highs, space absorbed. our cyclical should the months past five-year governs lower of particularly in reduced at according average to are an stock users unprecedented to rates on BBD office office and prefer strongly quality over sublease space, to starts annual supply down lead plays space compared amount with to office directly and are These of XX% XX get continues to strengths available landlords. the high-quality JLL, being availability While construction locations is well-capitalized a This prior out pace. taken after

leases leases of these growth across which Most small- footprint, market. be users continue our demonstrated quarter medium-sized spot. XX job and sweet to is Population from to our strong by this new are signed to

the determining their continue to customers to needs. increasingly space back they Our office, talent are long-term bring their and

square XX%, in the with far square including new As renewals leases. strong sizable gen of this leasing end, we of second expirations, XXX,XXX an leased their they was XXX,XXX At advance feet maintained lease and quarter increased six of was example, space, or quarter space. signed feet volume occupancy

leases. new with robust was including XXX signed Our count leasing total XX leases,

trailing rental healthy. to were rates net spreads Average cash X% portfolio plus and average effective in X% in XX.X% than our economics rents were our one X.X% basis basis XXXX. our were a higher higher pre-pandemic a cash almost average plus Rent on year higher and basis GAAP on on four-quarter were a and ago. XX% Leasing than compared

to We share delivered $X.XX Turning our quarter. second FFO in per of results. the

As temporary cash on expected, higher X.X% and NOI Tivity same-property downtime former the lower by driven minus space. absorbed OpEx was growth as we occupancy the

not As take of we property same vacant do buildings reminder, a out our pool.

buildings locations. we non-BBD a X% proceeds total front, $XX.X office and investment three Tampa, in On GAAP Raleigh of combined million the sales rate. were for at sold cap in non-core These

Given to environment, $XXX million, to disposition lowering date. including sold assets of we the are capital our outlook XXXX current markets a total

Our $XXX time and progress pre-leased on projects until at well to projected million across our on all development least XX% We're two spec of with all stabilization budget. years projects. pipeline with continues

annualized have project we left upon We $XXX million of fund, NOI and to $XX stabilization. million

Raleigh, in square seeing an completion. seeing interest We're activity XX,XXX this our prospect are projects. and user we At as project development nears good foot Glenlake increased signed III across

We XX by have Atlanta expect demand year-end. Peachtree stabilize at strong in XXXX in we Uptown and Dallas, to springs

earlier XXXX. market Following development until seeing ground. the the interest are East only the just Midtown Midtown entire early deliver construction year, and lease-up is Tampa West of and in of quarter East, under Midtown which doesn't only office broken Tampa this to XXX% first is we in

FFO to $X.XX headwind despite project rate full Turning past April a meaningful $X.XX in the XX our of We from flat outlook. outlook year in the XXXX now interest per at our days. midpoint to share,

interest hybrid office the for Brian, to work, sector, I the office facing buildings higher Before call turn obtaining do want acknowledge difficulty I today. financing to over of challenges rates, the including currently the

cyclical market, a jobs when or are demand headwinds a office into resilient recession the despite heading impacted environment. addition, by owners In low-growth the

their they their space rents As businesses the its likely own until regains office and occupancy cautious needs. become net pressure become about more cautious more about This typically prospects, footing. market will growth effective

and Belt country portfolio in is job region our confident of growth. the because demographics Sun we the remain over term However, strongest the a long with

in office a we that to portfolio will high-quality BBD the locations outperform continue market. believe have We

should by whether in us operational past the Our over purposeful office to enable market, deliver which the it sector strongest size, several customer by been industry, diversification, be the resilient has years. by by among lead performance or

$XXX and million remainder balance development our will Brian? maturities stabilizes and pipeline Our NOI with it of the meaningful as and is our debt liquidity all development fund delivers strong sheet until XXXX. generate ample to spending

Brian Leary

Thank good you, and everyone. Ted, morning,

feet enduring in our feet XXX,XXX demand is business for in line highlighted, above Ted showcases over districts our robust XX which five-quarter square of count in performance the premium team and This quarter average As Sun for the Belt's signed and the average. deals, leasing our our XXXX XXX,XXX quarter XX% new space new office where years deal second with XXXX. the quarterly and includes square for best

Our diverse was with quarter. leasing among law industries and activity the firms for engineering activity leading

customers see from maintain physical our medium-sized to continued our core which healthy interest highest to small the levels of businesses, our continue We to occupancy throughout footprint.

regard into new JLL half trend, square enacted Delivering significant reported is for voids inbound another this policies million of workers companies year-to-date, attendance X.X the X.X generating with and requirements to to inventory. our on delivering and and office and budget, on recently BBDs across markets, generally is new in XXXX. activity have X in pipeline competitive second time, our markets million development foot that five face expected Echoing similar million

and campus. one year CNBC's remained filed a square absorption the of plans Carolina, number Apple Starting market The using saw state row. quarter average, in positive for growth for feet to the CBRE. Raleigh national XXX-acre with on business its above net Office announced the begin second work for XXX,XXX to previously North according employment

signed of of Our XXX,XXX XX.X%. second-generation leases team square with GAAP rent feet spreads

Moving quarter. to for completion schedule development, III on our remain where Glenlake the in third we

XX,XXX bringing up the to our leasing the lease market as Our team experienced noted XX%. for XX%. In CBRE, net BBDs percentage Charlotte, absorption overall signed activity was and by feet, over positive quarter-over-quarter square

feet the X million we our During XX.X% is signed square portfolio square foot occupied. XXX,XXX quarter, in

Heading their announced square Eastern HQX XXX,XXX and in City, Amazon quarterly positive highlighted downtown office occupied Burger square-foot west feet. Mainstay, market's in territory to In-N-Out absorption their they Music would XXX,XXX California CBRE Nashville, be building of net Franklin. the

XX%. team leased the feet XX,XXX spreads positive quarter square GAAP of rent Our in with

and tour of pandemic. Brentwood the Highwoodtizing We Springs are buildings, the completing saw the of since start greatest the we activity Cool our

I has over and should to in South filling have points work at occupied the is basis Nashville's hard also been XX.X% additional up teammates that leasing their XXX momentum Orlando pipeline. now note the of portfolio, which in

aren't we're off we immune future sublease good the while start a conclusion, third prevalence for to In quarter. space work, the the economic a headwinds, or of of to hybrid global

deliver the results are is continue trophy their to the Brendan? is from commute the capital to experiences assets, believe of worthy our leasing and benefiting have. the and it We Our positive ability occurring pipeline quality we and commitment to healthy, deliver because in people are our we marketplace. and we greatest flight

Brendan Maiorana

$XX.X per in with income In Thanks, items. the Results Brian. of $X.XX of our FFO million were net second or we quarter, with share share. expectations $X.XX million significant line unusual per $XXX or no and delivered

items Tivity expenses. FFO revenue with which to was by expense top occupancy move-out operating last lower interest from added the by $X.XX. partially line The our quarter first higher in reduction $X.XX This This of the an by forward which decreased due to quarter. FFO due $X.XX, $X.XX the line to Higher these and by increase a sequential quarter, in net driven $X.XX Rolling second NOI in to by NOI, reduction FFO FFO the lower total reduced was primarily reduced reduced for SOFR driven of combination $X.XX. average from G&A, lower forecast. reduced offset from

the several our We the rates. completed solid, healthy not Brian leasing largely to over it's continued our rents were And asset from mentioned, headwind leasing -- the and interest active despite flows net resiliency Cash Ted is showing remain attributable the asset years. to our significant higher stats. the past of flows recycling As resilience. believe effective cash quarterly we've stats just with

less non-core higher sold growth of have and are XXXX, capital-intensive buildings newer we've billion Since billion into properties rate. that a of and recycled $X.X long-term CapEx-intensive $X.X

process flexible has balance time. is several we've we years, uneven While strengthening may This while expect from the earnings more result maintaining quarters cash believe similar assets we're be sheet the with and liquidity. with to pleased all in an what progress past over a buildings, portfolio a therefore, high-quality over but made, additional with to NOI long-term some we sell improvement of portfolio ample resilient perspective, the occurred will a result continuous

times, joint our pipeline Olive with X net and selling our to equity I of sheet. the continue we We $XX development to headwinds from NOI net QX McKinney quarter $XX debt-to-EBITDAre balance a received had attributable just our and venture. we the to investment Turning million lower we EBITDA of nearly and flat the our improved fund from ended though mentioned. in liquidity the properties Further, & preferred million of by non-core repayment even

$XX provide did for on financing Park We XX% X. X-month sale million a term of of at seller Indi our LTV

fourth loan March and more which We XXXX. expect our maturities repaid of commitments, We now quarter. current our to the than revolving totaled all this spending including have development roughly in liquidity, $XXX nearly fund enough of expiration capital to existing be million $XXX credit total of in the and million debt through facility

do allows We future liquidity patient. us opportunistic our and potentially year or position proceeds later be quarters and disposition expect capital debt be next, raise we in but this to additional may strong

previously XXXX. lowered updated until reason XXXX. change to we've to projected We've the year-end, of to which before estimate it's we forecast the commence in would is XX%. no is the range per This changes has metric point expect always were Otherwise, challenging given for our on there midpoint Ted no last major year. impacted $X.XX to to $X.XX the FFO our with is not a outlook outlook. FFO certain of straight-line the a early range, their reduction the This their of officially customers XX.X% commence leases mentioned, for day but projected occupancy year-end As now our Part now timing changes share. to our to leases outlook where

to A in forward. items couple mind of keep going

higher was was QX to and originally largely QX anticipated, which in OpEx. lower margin than operating our First, attributable

operating half year. second lower the expect in the margins We of

Some also expect of normal while repairs this and some half. increased maintenance is spending the second seasonality, we in

cause million We to up reduce recycling other date. could notable to includes outlook to FFO include outlook initiatives. full or to whether disposition our pursue for additional the that year, million raising items Other change $XX capital which the did $XXX capital a our we closed

not As reminder, included and a metrics. are Any dispositions would bolster improve any our disposition in FFO our future our proceeds balance outlook. sheet further liquidity

year, operating of the half challenges compete we're resilience and facing continued capital for and of in with our over financial performance we lack the the few many has In Further, strong our past the summary, us new against, development the we're years. portfolio first encouraged pleased office landlords and by positions the exhibited of performance.

our strategy quality, maintaining properties consistently liquidity locations Sun why is improving a grow of increasing in balance been sheet We in believe year flexible upgrading BBD the our our we've while rate earnings high-quality and Belt portfolio after owning year resiliency. to growth our able ample with long-term simultaneously while

for Operator, we are questions. now ready

Operator

Absolutely. [Operator from Instructions] of with The Bank Bonnel first America. the Camille question of comes line

You proceed. may

Camille Bonnel

Hello.

do stabilized So Atlanta you at has market expect never where Or above in achieve you Do gone can here? has levels the occupancy key occupancy for been trending XX%. see higher been your where a really has market? you portfolio this level

Ted Klinck

has its is get to We've move-outs. we some had But we do in what very to a is XX% large challenges that. good with rollover years. Buckhead had I in of I expect couple Like XX%. can market, would we and to which the it fully I think think think meet portfolio, some to similar last the Atlanta can

Camille Bonnel

Okay. expansion Can net an activity. about And past, quarter? update you've get this talked just for the great. In we

Ted Klinck

expansions had, contractions. again, Yeah, outweigh we

lose I square this a negative two think wise. quarter, bit a did of to it's one we but footage little

a negative on we maybe were We renegotiated couple the decline. of And XX,XXX reasons one Pittsburgh. that feet. the had of those occupancy we contracted. deals occupancy in couple downsizes that Both of think you'll XX,XXX that I actually see was a square are to our when of

Really, as the customers. quarter, company really renewed Pittsburgh. exception In our quarter-over-quarter Pittsburgh the of in pretty downsized we occupancy was over flat with the a and two

They took took sorry, feet. -- about back a we renewed back the really XX,XXX customer. was and feet First early, long-term we XX,XXX we and second XXX credit about long-term renewal, took customer, back one I'm

six was knew one a years. going the vacancy space was that for happen it or we their several for vacancy, They've again, last subleasing So years. upcoming to been seven

already in total, tower, a on footage which five in quarter. floors. and the activity was got our other back few in Pittsburgh, one But reason for good so floors, lease for a square signed we that we've outweighing great PPG, took So expansions space our floor, this big is a we've X contract

Camille Bonnel

you where the you're Thank Novelis in space have sublet a space. XXXX. large color. having last the question. you latest tenant discussions final the out is on the Can space is expiring believe for moved And talk and and being you about subleasing leases its year I EQT some of

any plans? is how And leasing updates are So there on Bass Berry's activity been there?

Ted Klinck

Sure. Yeah.

hit Let me of each those.

our expirations, 'XX. So third lease of large you [indiscernible] quarter mentioned

XXX,XXX They move First, they're when subleasing space today. feet. The street across September. feet is end vacant the square did XX,XXX out. of the rest about of moved Novelis They that only

customer ongoing. direct that's still to We're are that with to discussions subleasing. go discussions in able those hope them, We be but with

So update really no quarter last from there.

EQT, leaving. we no respect there. update With XXXX. EQT, assuming October are next year that's really of Again, to they're

in basis that. We're 'XX. planning we'll our great then to is able but bit from a space significant going a really two out, February back away moving -- early. They're competitive building. be We're right still Berry think upgrade to that on expiration. Bass still that offer rates, we no months about update is little it's that and and of now And we're get definitely So amenity

we some Highwoodtize planning are amenities. than other to there update no building and that add So in active

Camille Bonnel

Thank you for taking my questions.

Ted Klinck

Thank you.

Operator

Wells next comes line the Blaine you. question Heck Thank The of from with Fargo.

proceed. may You

Blaine Heck

Great. Good Thanks. morning.

maybe I and on in into at whether those move-in the hoping expecting far the just move-ins commence? was has leases And was why are a XXXX, to those change of the bit touch little all? how changed touch to delayed more size occupancy guidance. I guess So on you

Brendan Maiorana

it's I'll Blaine, start. Hey, Brendan.

I point combination So year. a on yes, it's prepared of a outlook there to to that in is year-end it's always that because day -- metric one that a occupancy as difficult the just we things probably impacted the on remarks, And a have. that's metric guide mentioned

in a before be was of maturity kind the really, it leases what we was we project projected was took a occupancy a to had we that with early proactive the to And them in extension the in space do expiration. downsize change then we back that early mid-XXXX that vast We proactively now had So took XXXX. few attributable of where that probably customer. year-end, long-term different that Pittsburgh to

of talked majority we a occupancy combination about. really those the make So target two year-end of kind things decline in the the that up of

timing the there. we decision given just a that long-term up was kind felt of good take-back credit proactive long-term for a locked it user from but good for in that like issue a We really felt issue a then term. like building timing the is perspective, And big us Pittsburgh a not long user

Blaine Heck

leases that changed? just Okay. in clear, to the situation, size Pittsburgh that of moving not And excluding be are those has

Brendan Maiorana

is That correct.

Blaine Heck

Okay. Great.

Just about another dispositions lower offset with rates? midpoint to then the guys along interest despite allowed potential talk lower keep the just guidance you you you occupancy straight-line unchanged and one on guidance. incorporating the some positive completed the Can of higher guys rent,

Brendan Maiorana

Yeah.

at I to And which the by I compared were probably the where mean, you probably, we was So penny that us the is, $X.XX rent then if to at where say we in straight-line just in from hurt kind project of of interest. $X.XX a respect change really if with a let's how interest probably That look two. that, it high we call April. or would generally kind occupancy look to level, is curve, SOFR at rates

$X.XX in $X.XX kind sort versus months headwinds were we now of of neighborhood the where we're of So of talking ago. to three

helps call was maybe enough of something let's probably, but it, we kind not that that that or to we that, like have move range. penny there's Offsetting same-store, felt probably two

in up the down the then another kept that we've And from not still to X%. within pool, got kind of XX so penny, And items of another, also were it, that call are points same-store we that's then of NOI call basis probably let's range positive we got you is So kind outside NOI versus April. penny of line. the or other of where it, income

of other on of items. the same, a felt P&L the And if couple we comfortable the are So of there keeping those outlook FFO out. kind really, midpoint each even line kind the things within the of all canceled movements some of so

there's the a I paying versus to but of And cost proceeds debt say were with cap rates disposition not those. really where the headwind, of incremental much impact. little bit nothing kind respect the would with off noteworthy of from

Blaine Heck

which Okay. Great. Thanks, all being you're converted lower seeing expand you so, really in pace. things then taken quality [ph]. an other your than out there space office alternatively, on guess, Brendan. are And helpful. Ted, remarks, seeing being And it Can pace lastly, happen a faster then Is to, at just if what's markets buildings converted? you mentioned That's that? at are of stock prepared that space? this being in of any I you that And are unprecedented demolition

Ted Klinck

put really comment is that out Yeah, recently. some research JLL

a it comment. think was I global So

a conversion in -- lot some of few our or conversions then have be that a So markets, that markets few little in started buildings that seen are the just lower-quality conversions to we're think converted on in be talk apartments a action our what markets. we're the sort a of been There to sitting at the -- seeing in homes but of looking market haven't townhomes, may our getting vacant but I understanding of the it's have Blaine, apartment it bit is to being think there been accelerate. town going of and are We're yet. terms scraped some right now, whole I here it's redeveloped office

Blaine Heck

Great. you, Okay. guys. Thank

Operator

Michael comes next The the Griffin of with from Citi. you. Thank line question

You may proceed.

Michael Griffin

then an for sense back and you rents expecting Thanks. maybe Ted, half kind effective remarks, the prepared net and expectations this in year of heading a talked the of portfolio are occupancy net rents. where your and about effective into pressure you you're in XXXX? have Do of

Ted Klinck

a lumpy I be. where have our good signed it's the and quarter-to-quarter as in? well? up, building, net quarter just going this depending We is it's What's It market pretty releases it right? effective quarter. had Michael, expiring the can to on hard predict rents what's be to look, What So Yeah, what think held space? rents

today, think downturns, during I digits know mid-single I be going little downturns COVID, to a at TIs just net down pressure went in for higher. general bit you look if on effective office, are higher they concessions portfolio. think our back economic rents. I there's And are

As rents hold we've able in markets. grow rents face face some been said, and we've to even

-- market. be job tenant downward because just done it's been it a more we've in it's So pressure of quarter-to-quarter. But good again, can there's pretty think general, I and we've a -- lumpy

Michael Griffin

Great. Thanks.

consensus of to some came from items elevated being add about or improvements. I in one, AFFO I second-gen thinking those bit particularly the a But related you helpful. quarter. this there thoughts components some any Next line noticed be that that are on run-rate coverage dividend just a in are know would that, around on lumpier worries below how And tenant you perspective? can there's

Brendan Maiorana

Brendan. it's Michael, Hey,

So of on that. I things would a say couple

So million the quarter, at prior higher as In the which, of we million. spent right? you five than $XX quarter if in you spent be of That's $X what we capital leasing, lumpy, can terms was. this that average noted, amount look

going was number around. And number that bounce that higher. to So is

expect in So going that that a bit little I be to more number is normalized a would quarter, lower.

quarter where we we this So about that that think a normalized versus has quarter. as a in were benefit

year far is then to is that line amount go our straight of down can it's terms going incurred guidance see thus likely the of rent of straight-line half of well. that year compared kind you to first And the straight-line what the we similarly, in that guidance the in as kind full from the of have

that's cash in. that, coming think flow you as more that's So about

that's amount even flow us would commission of in So in quarter leasing higher with feel I the think still cash higher of to that compared what those straight-line all this we of TI spending things combination of And for makes outlook. the flow quarter this the pretty that, constructive and quarters. say of cash context and terms think kind future a good having I cover in

Michael Griffin

for the That's Great. time. me. it Thanks for

Operator

Thank comes Mizuho. the of next Dinkov you. The line Georgi question from with

You proceed. may

Georgi Dinkov

any the work thank positive, for can was remote you I and on Hi, in just my paid examples utilization can tenant question. your moderating given of you wondering, assessing you -- to taking the needs recent trends portfolio? give comment

Ted Klinck

got outweighed the we've mentioned, a -- several as No, our quarters have for numbers Sure. -- we've contractions. perspective, we've expansions from our last

have lot of So we a growing customers.

Now a lot of last not those are X,XXX-X,XXX-XX,XXX feet. not an taken -- floors, floor. an they're XX,XXX engineering taking additional but they're We two another had quarter, not feet. They're just taking firm taking take

And it's across so board. it's -- the

right law We've firms firms, law growing now. some got footprints their that are several

fairly there. So it's here and take, large again, it's chunks But them not broad-based. seeing chunks, we're smaller again,

Brian Leary

about market pulled Brian. chunks the and putting we're add you to space. portfolio, large that some contemplating off we've people had the who is within occupy I customers to side, might on now the returning large on seen it's think have within they're that sublease Georgi, or on sublease that their back our markets and the because

and been reported of vacated up weeks buildings. other in in AT&T the one number Atlanta, case, one leased building. came whole in And last In couple that's of a fact, widely a back

do that sure. as see So we for positive

Georgi Dinkov

some if months, can up? color in just your And you give in picked has trends utilization that recent on the portfolio, the

Brian Leary

we yes, seen utilization, to Regarding pick have continue that up.

employees Labor of have of as work policies remarks had at the gotten there's portfolio, kind have of number end with the in the national to the talking we're our within -- JLL about adjust of mentioned return but you the kind X.X policies that of million post the is or public announced a of attendance is another this pretty year. think out there end of not to X summer to Day, there, year, million I momentum kind to new starting only

Georgi Dinkov

just for one me. And Great. Okay. last

what know I occupancy quarters? and point guess today, is two Given the next same-store no move-ins. NOI what growth until you and in outs the over low move

Brendan Maiorana

quarter is kind we But around be that strokes, occupancy there broad with to I is probably respect the -- are would now of Brendan. of likely -- say to it's I expect of Georgi, least be in Hey, to out. see where in kind third we'll would where XXXX. could kind at below, probably line shakes

in thing terms growth. same NOI same-property then And of

comp had a us the we second that versus quarter last always think I difficult forecast for of going 'XX be was quarter second the quarter year. -- to given

expenses if of think expenses. trended regard the become in comps compared second in are kind half the easier of you year at where of look I in that where to much the last terms they now,

So of improvement back the the property on in go we little see forward do a we of year. as bit same half

Operator

you. from of Thank comes The next question with Janney. the line Rob Stevenson

You may proceed.

Rob Stevenson

reconfiguring Good when the larger any users what's in in did space that decision? and sizable expirations about their the material renew renewals forward, the far advance way. are in two morning, that that Curious guys. of in Ted, talked they your going different driving it comments, for you renewals doing anything advance with space that

Ted Klinck

what Well, seeing, I think that's you're Rob. exactly

do look, office. to to they we of space, like both that, away. our reconfigure to years a we'd came several so to them So TI. get our people of to we bit back And need expirations us And saying, were had the that and want little

conversations we the was that had. So

They really it's type -- more collaborative space.

they what doing are when biggest when it collaborative meet them just space more trend in But huddle a the group the of space, Some on areas more doing But office. is the like. the few to depends it less looks rooms, offices. the general, more offices. in -- other few come is a Actually, one so

Rob Stevenson

Okay. last Or basis foot that have anything of than changing terms TI pressure a square there? today That's helpful. guess I years? upward of you the dollars then in couple more one. on on follow-up a And Are any you seeing over per the

Ted Klinck

couple to I more it don't but just in customer last the last last tenant become years, couple months, a three of of six years, think market. think it's seen yes. over we've I a anymore the as the certainly of or

of in on So upward competitive just the think only it's and clearly, But also submarket up, there's market because market by submarket. there's up. pressure are construction costs TIs, general, I are by costs but yeah, look, nature, not

why of we're of that's face just But is -- yeah, keep years. general. the been So able because upwards reasons in we've and cost structure and the to seeing one last the couple of rates pressure

Rob Stevenson

But back of versus half XXXX nothing in different materially 'XX? the

Ted Klinck

so. think don't I No,

Rob Stevenson

Okay. And the going another quarter? you and under guys that about quarter or million third close $XXX you to the that will the dispositions you may fourth to Brendan, do back that be is be do contract the thinking if in year? half of impact year, now then this have the weighted, of we mostly stuff that How on up should

Brendan Maiorana

that I I Rob. it's fourth additional pricing in fair most here and kind to is that yes, certainly of say terms -- it would closes on anything obviously be if stuff. timing, all of closing, depends likely And likely. would think and Yeah, quarter

impact So could negligible would on have something be notable have that that. and pricing all on FFO sort could of timing depending a have and could -- obviously

Rob Stevenson

or number what you et do What's the money? cetera? -- one with debt $XXX one would down bullet proceeds. development, terms the either And of paying that on today What's funding pro list number in the of with million disposition to-do

Brendan Maiorana

Yeah.

million And quarter $XXX end, are loans So credit the penalty. think XXX prepayable then I that at we of got had facility. term we've got on without outstanding -- we've

some money our of be spending would the expenditures. pipeline, two. facility credit it those the are obviously, So using those portion to And fund combination of development we on

combination. would So it be some

due proceeds. consider term the amount the piece or in use a of those next the one loan we'd of not would two pay and down coming timing would it of whether we whether likely we just to repaid facility, kind think of maybe credit of terms have be or I be but that's

Rob Stevenson

it. Appreciate Okay. Thanks, guys.

Operator

The you. next Thillman line comes Nick Thank with the Baird. question of from

You may proceed.

Nick Thillman

a activities. guys. renewal in morning, big It pretty seems good like Hey, pickup

of wanted -- like just I or there's So on early beginning been rent tenants of then discussions, an And you're on has curious renewal tenants the of any the update on some how discussions. those there? like wanted just if larger TI kind preference space, there those free refresh the changes from any but the component in

Ted Klinck

at -- much renewals try to think -- can on right? Nick, sort Ted. as and customer, as I work how their larger in earlier discussions. But all Brian we if return is add. renewal general, Look, plan the they can, it of depends the it's anything what start tenant, we outreach depends I their on do coming the they're and looking timing general, it and Typically, start but in they're it. the has to

don't I has changed So think anything from standpoint. that really

rent, In and or they looking toggle do Or their again, to need Do think it's free I like? save rent. individualized concession they upgrade costs free the tenant. space to a not? rather terms does TIs of to to the What look significant versus a are very

seeing I for. don't So necessarily on a customer It of trend. we're what and they're looking think just sort depends the

Brian Leary

not more renewals early add will market tenants Nick, don't landlord it who on in we're self-inflict a if in but know color, from someone pain much I maybe a any to looking market. started

However, we have that BBDs a our fairly in our is unique in captive markets. portfolio audience our in

upstream. with clients, is their We maybe have to a looking looking brokerage community be helpful hungry who

point, Ted's to for sure. so it's And varied

what saying, the of amenity they're of believe renegotiate in door and We're really knocking on that our We it. any to it. coming And us Charlotte this happened Pittsburgh about, up talked we great you need space. space. in to hey, to office a want We But in We're committed hey, invest firm. to everyone we want say, sometimes to not by the and to stretch? necessarily

of didn't and the take They're happy I out to some They things. term with push their upgrade want space. any just additional want space. to

commitments occupancy mix, that captive we a a now secure bit to but So of embedded future we it's right been see is with. a have audience

Nick Thillman

helpful. is square like That's like total lease square looks leasing, feet. around new leases the X,XXX around like relative volume foot the it maybe to signed just new X,XXX on then like And

a the like behavior these larger we're that's months? have saw low you looking small a the market, Or will think tenants like you in So in at And -- back they as basis. to I do be at market? in any XX very But the going next come 'XX, large changes there? to you eventually some slight you of said uptick, granted you expirations tenant do seen a from that it looking think continue in like think be

Ted Klinck

we our shoot, for and butter Yeah, prospects. a and foot some development pipeline, -- in range. even That's XX,XXX foot there's are to square has And bread has our prospects. been square prospects sure. medium-sized small any XXX,XXX But say, our over then Look, green activity there's XX,XXX been that, if time. long clearly, seeing in there's

So again, bit the a large prospects larger decision-making, the but slower are taking activity on little prospects. longer and a little starting see we're of to

Nick Thillman

Brendan. me And helpful. for for That's maybe last then one

function some when there of Or in lend the they'll comes Your to next XX that is debt say, more is more disposition on months? capital, line. expected from, pressure activity it additional amount a the on muted like the comments banks

there. comments some for looking Just

Brendan Maiorana

No, to I I it's window and think or whether there. it's say, be not when just want opportunistic more, would we

think -- I So are we've comfortable I feel we think certainly, with bank we of where to a kind manage group I got from mean, perspective.

about fixed our I investors. where we outstanding feel is think good income with

good to to access So that I and think capital. we've we to ensure access want capital maintain got that

feel opportunity, a we proactive will we prepared and I I no for there's the as there's come remarks, need consider in nothing, like there's that. us if an market. to think So us mentioned to reason But be to for certainly

purely we and if So like opportunity. there from felt it good sense made was a be it would

Nick Thillman

Thanks me. guys. That's it for

Operator

Street. the you. question Thank Burzinski from Green next The line of comes Dylan with

may You proceed.

Dylan Burzinski

over it Hi, at comments what's for fundamentals? construction you your risk improvement to do construction of in call three and sort Appreciate said under years, taking further a slowing, as Thanks next what's deliver property looking starts to guys. question. view on this sort two guys of but just the the to today

Ted Klinck

the under There's -- guess right? know we've yes, markets. our Look, -- got answer nothing in of you got really I I -- I Dylan. construction. general, If several is think don't

-- the Orlando, in nothing that's think in and nothing we've we're I risk. got other developing nothing coming But building Certainly, a always Nashville. Tampa than there's deliveries there's certainly, Raleigh, Atlanta Richmond. in

are happened is boats, any about which do throughout think rents what's top-of-the-market that all rising I just the rental necessary cycle. title Now are is rates

deal it's a as it's in of we So while see deal risk, -- we I with also and all it our we'll it. think significant. it's I markets, But with don't something

Brian Leary

of is about The under Brian here it's X.X%. on construction side, from that's that. a amount stock Dylan, to clipping competitive

think single decade, standpoint, macro you be just a from time big over individual don't the think of has we that started. is to for just buildings, about first a nothing a a sure. that which construction probably But So Charlotte, few even headwind, but going in buildings under

So that competition. of delivering is when into we voids do are development seeing our pipeline us slowdown. And believe we delivering absolutely

Dylan Burzinski

comments to then outsized population your guys at you and some That's you all years? slowdown the the across what back around coastal just of with helpful. several from made any any Or inbound you associated And over we relative of going are markets, growth seeing job markets? or new-to-market are those guys to trends continue the last tenants start coming some seeing saw

Ted Klinck

has or many while year with and last stopped office Yeah. in than development many, The last that during in mean accelerated I meet folks migration of inbounds over overall decades, -- slowed the ago. But pandemic our here markets been six two and economic they're sit today the really for months. as the a with active, do occurring years, economy there's the then I'd South it's nine the doesn't couple either. were look, less we there to of say, it it's the think we just I today incredibly

is pictures just making they're fewer. So

those the the up five up a versus new having offices was sector this leases leases said were the company opening signed in office. in new new quarter, XX But XX manufacturing opening of activity Most our as industrial -- and today markets, markets. economic inbound is And we different we XX. it that, signed more in

the think continuing see we're Yeah, but slowed? very still in-migration I it So positive. has to it's

Brian Leary

New within York portfolio instance, spec We to from take opens their kind footnote. they They door we of firm law the the where our then and have shop that for here, take next and of Charlotte just in little we When one occupancy Charlotte, floor. to time. Dylan, nurture suites. Brian first for one good in a have, the anecdotal move full evidence

moving I we so this hundreds of population point start people to And are has every even to see last markets the actually different population, ramped your over migration quarter day. these actually first many to more think how up as on

year. will we effect. that there, XXX,XXX So ripple to think Ted's the a announcement strong hire you a a are busy, in do they're they've believe XXX-acre Raleigh, that's people Apple's have converting point, X,XXX and the to average what doing salary that here that like see committed We economic and developers about pretty campus mover of

Dylan Burzinski

details, Great. Appreciate the guys. you. Thank

Operator

of from with line question comes Morgan the The Stanley. next Ronald you. Thank Kamdem

You may proceed.

Ronald Kamdem

Hey, good morning, guys.

driven in like seems the to by It Just decline occupancy sticking Richmond. just was the of numbers. and most Pittsburgh occupancy

we that? next there about we in be should are else other as mindful EQT but Just look expirations year, out future, just the understanding any markets into those beyond if anything

Ted Klinck

in in couple certainly I XXXX, And Specifically But in Richmond or of any other will deal other EQT, to not in into We've terms Richmond ramp rest that what October as don't we think beyond expirations Richmond year. we're expirations the have in flow similar large see I'm getting of Ron, a markets, starting really, this think those looking really I have of looking up through the new there. which got year I this two think at is XXXX, than later our you. XXXX. things in

not in So markets. no, those two

Ronald Kamdem

Is And then think and trending Makes those about talk into to is $X.XX positive 'XX should Glenlake you Park about we developments and Got two those then, talked late just leasing I Six financial can completions? And how impact just near-term think Brendan, 'XX? all it. how the for of related you NOI sense. nonsame-store at Granite relative of III that expectations. about to and

Brendan Maiorana

Yeah.

non-same-store Springs out on So in Nashville. in pool, activity had Six good Glenlake at activity and West of at I Granite say good kind Tampa II Trion had the some III. Virginia XXX South nothing Park Charlotte, of in some would or Midtown

non-same-store of the a So things XXXX. those have pool, are primary outside probably where in kind better ones gotten of the bit little

about versus those. with Park whether as associated development Granite of probably the Glenlake of terms XXXX kind I you potential happens projects, costs capitalizing kind some or the for III think with Six, is in it's respect what think of to just lease there up

probably but a bit outlook of little little two of of on us -- lot benefits to numbers probably there's but do not and a If the we of up lease up bit those a likely is. to we're get that lease but NOI, relative impact if in it's positive 'XX slower, 'XX, faster, downside, So kind major terms 'XX be where -- if in some be those least could able at to projects.

Ronald Kamdem

just And Great. then one. last

about would be or think secured You a sense give unsecured? about half debt of trade-off back year. that how Would And the raising you talked that potentially just guys of there? us

Brendan Maiorana

a Yeah. balance I I expirations sheet near-term well, without say think I have mean we -- have would a lot what liquidity. of and guess unsecured I we is largely there --

in be to us flexible. opportunistic that puts be So and can we position

So no a think I And the think for bit if options us. another think like little would There's there to are market. be I increase I liquidity mentioned But is need we this we feel question. a response available to us to in to and good I window, more. in like

us. to I think that is available

that not in think or it is But now. as we'll balance or because could that, financing sheet of the could whether secured we're pursue see. certainly -- our but paying So stands to we unsecured pursue I certainly shape pursue attention it,

Ronald Kamdem

Thank you, guys. it. Got

Operator

the you. Abramowitz The next from line question of with Jefferies. Peter comes Thank

proceed. may You

Peter Abramowitz

in the are behavior you. any that And tenant bringing reflected landing equity being market? to that narrative back I to of in impact tenant potentially of becoming the Thank psychology. is baseline ask to just about here. about soft better is Yes, terms having markets they wanted it's kind tenant the that behavior, Is Certainly, feeling anyone things?

Ted Klinck

we tour despite talk when typically leaders, really any to slowdown, a you being of still our mid-summer good it's busy. our market yeah, I activity, we're see Look, if summer mean,

thing on come the almost seeing is people It's standpoint back weekly office. basis. behavior to we're biggest tenant think a the a I more So from

had back One they're large leaders on that market customer, sublease leasing weeks they're and ago, back. as keep months our and and over market it folks we property define their we to it that hearing sublease managers a feet coming had the And they're off going just their We're three pulled it. and people because going need they being more the they are space few XXX,XXX bringing said more example, from all large a market. to ago, companies and

Brian on headlines. went which think one the and overcontracted question in AT&T, square earlier back mentioned and is They feet. another XXX,XXX I the leased an

standpoint, revenues behavior buildings think the to be tenant return or seeing office, a the as see more we're in from I our to it parking companies continuing well. populated. We're through So to more come

it's Our base continue the do tenant well more as anything to really -- of restaurants are so behavior at much think else. the I to buildings, is the just a of as return work

Brian Leary

a return then saying, it's do when too in not give you these I we're more back, little the bringing much to necessarily their -- their and bringing work that a of sticking they conviction got those to the think folks them a back I to as already carrot head there's very been folks hearing. they're We're nuance have. Little think approach. sand we're stay. It's stick larger reason the are and hearing space -- customers to okay,

really we how that experience around that making are some and And different all conversations differentiate those and we programming those things the of we of around and beverage so workplace that's deliver. food the do efforts the having the

Peter Abramowitz

out there attractive would Are adjusting? freed little expectations seller that that sellers just other bit debt prices Thanks. assets proceeds at know probably if you're a one the one. as capital are reduction. the more are that is up, right desk are now But excess you. be opening then things more come had And looking Got at you things I up underwriting, there on things focus for today? across your

Ted Klinck

there's a there's -- spread bid-ask going Look, on today. certainly,

still is, there a we're but got with pleased dispositions discovery on there's of goal middle price buyers line, that today. the difference think still in over and Certainly, that. the I we there's sellers the we're expectation an three big

as So think patient well. going we're we're stay and disciplined looking everything, but I to at be

the we raising are lot as as bit to little little Fed well I they And When once once now maybe a of up the buyers to see I open we it bit going that, want lending more. the things going a I is wait to lenders, up a more. what think going opens and interest the stop rates? see And think -- -- once pick do. think to right

So and that But disciplined we're versus right. if being acquisitions. really on patient priced general, that and it -- nice patient asset going change liquidity disciplined. today see focus a and to But we're if out there's be and we if can comes and in

Peter Abramowitz

it. you. Got Thank

Operator

waiting additional this at you. Thank are There questions no time.

the turn additional questions. to now to management team any would like So back call the over I for

Ted Klinck

morning. for being Well, thanks, call everybody, this the on

with have us. quarter. feel to talk we'll questions, you please additional you Thank you, free next to any any of up and follow If

Operator

conference your for That Thank you call. concludes participation. today's

You may now disconnect your lines.

Highwoods Properties (HIW) 26 Jul 232023 Q2 Earnings call transcript