HIW - Earnings call 3 2023 | Highwoods Properties, Inc.

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Operator

Hello, and welcome to the Highwoods Q3 2023 Earnings Call. My name is Alex. I'll be coordinating the call today. [Operator Instructions]

I'll now hand over to your host Brendan Maiorana, CFO, to begin.

Brendan Maiorana

good and operator, you, morning, everyone. Thank

and on our Chief me Operating Hannah of the weather. under Leary, call Klinck, Ted Officer; Finance Manager our are morning True, Strategy Executive Chief is the this our Joining Corporate Officer; Brian and

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

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

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

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

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

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

Theodore Klinck

Thanks, good everyone. Brendan, morning, and

once results the balance solid ample third had financial quarter, the liquidity. in the operational strongest that we sheet credit sector with and metrics During healthy a and again is maintaining while among

year, of environment for At would extended challenged in time. the office we particularly the predicted sector, remain the the an of period capital beginning markets, operating for

on playing expected. out So believe far, this is balance We operations remain sheet meaningful investment as opportunities surface. laser-focused new and the and management will eventually

With backdrop, our are this priorities. these

disciplined healthy. CapEx. end, on those being aggressively and we're focusing on more remain that strong rents addressing role, To outsized operations ample with flow assets in maintaining portfolio opportunity proactively effective discretionary by lease our reinvesting ensuring to even First, net cash returns, future drive

challenging, able believe will sell stabilized especially buyers non-core be assets. ready, deals. currently but continue we to and to there bite-size Second, for assets, willing, Obviously, this continuing is

markets our bolstering sheet increasing canvassing already opportunities. finally, And our future further growth strong by for Third, liquidity. balance

next us BBDs to lasts having well high-quality, Sun this capital-constrained portfolio the and in current strength positions sheet We environment will in weather on inevitably even opportunities long-term several the markets growth firmly believe with if balance resilient the years. that cycle, to this the and more capitalize best a Belt come cycle

quarter. albeit feet than $X.XX per cash square leases, FFO the share XX% of XXX,XXX NOI to and trailing same-property steady, second-gen We X%. We in office X-quarter average. signed volume modest, lower across Turning start with customer to fourth grew to our With of delivered solid Day. increase since our We're a Labor so return the the far a leasing quarter. our in base off

to watermark continue Our be resilient pace and our our prior net on XXXX as rents high by exceed average effective surpass to X%. is year-to-date

garner spreads pleased rent lease While more the access to long remained by strong, headlines, effective the of have considering rents to We're also to to the just quality assets not quality, believed it's flight result leasing performance to but important net flight have entirety have who a flight direct we owners more of measure economics. capital. quality

is pandemic. companies has differentiator more sponsorship this making and the decisions, leasing Our since important true become are a only when

building impacting on XX,XXX customer some cash by leases experienced business challenging has and a building. another this I execution, Tivity a square and Last Unfortunately, that substantially with the signing the we Nashville. customer conditions feet since flow. that square lease in are unforeseen growth Highwoods their plans provide in currently want single former year, to XXX,XXX backfilled update lease foot building an that

our interest best modify currently the most both are long-term with for going early what it's possible lease commence which in ultimately we about forward them. and for our makes is customer to may decide discussions sense We in their in scheduled Highwoods It's to XXXX.

to and investment with combined of total that at bring XX% XXXX pre-leased, is completed to X projected We the front. a have projects investment property were Peachtree the pre-leased. LOI an our XX% on quiet was million quarter XX%. $XXX The development share, we

X a strong aren't signed seeing lease Dallas XXXX. square projected III other stabilize of We foot to GlenLake interest and The until in we're Tampa, Raleigh XX,XXX additional and Six in Park development, early Midtown Granite projects, foot East in pre-leased XXXX completed we which be until will mid-XXXX. XXX,XXX bring our LOIs Uptown At scheduled in XXSprings, stabilized until tower isn't XX%. over have that and to square to rate Dallas, the this and

quarter, close smaller is didn't dispositions in close we marketing obviously the deals current cautiously sale. coming environment challenging, any additional we'll non-core active but While the The a during few we've for properties we're months. remained optimistic

opportunities in there but on quiet the assets believe in the Lenders been with future development mentioned our patient will consistently be across future. there is these to of it arise. and significant in We're being system, owners, and acquisition list footprint. owners take this are will discussions time announcements earlier, with stress opportunities we We've generally year. for I wish

expense. The FFO NOI midpoint. of masks by interest our the XXXX Our is at outlook of to To X% revised better-than-anticipated midpoint the we end, plus FFO same-property range offset that to steadiness unchanged increased higher a this NOI being cash X%. outlook year's outlook of

periods call about Highwoods. like business office as The in top I on future during access well we positioned to the dislocations sector. a flows, whole the cash office et over to leasing, why rise eventually the capital, stress, to Brian, We're companies metrics, and cetera. under the of to at positioned turn I'd thrive. capitalize the portfolio is summarize Before to are stress; But best optimistic

portfolio BBDs. is Sun best the in Belt markets located and high-quality Our

sector, sheet cycle-tested is the the and that is the in balance excited our Our and team about strongest opportunities arise. future among will

Brian?

Brian Leary

everyone. morning, Ted, you, Thank good and

contractions largest the quarter quarter occurred square believe this workplace quarter. XX% over in suburban and for experiences and business districts. both XXX,XXX of and Our strategy supports our In steadfast the signed signing delivering of leasing XXX,XXX we the outnumbering leasing BBDs. activity aggregate, the suburban We our in year-to-date X for continued square markets feet best urban trend of X:X simple XX% commute-worthy and team expansions for with the feet. each over our was active

of lowest only quarter was third of third the the XX% XXXX, the lowest Our the rent free since of while was XXXX. ratio X.X% cash term, the quarter payback since

translated economics trending leasing healthy net into strong rents these our effective mentioned, Ted average. pre-pandemic As above

are lower we phase Labor quarter. with uptick headwinds cyclical next the occupancy financial return of and seeing telecom initiatives, While in of to growth physical services environment, Day activity the insurance, an mark the office a the for leading demand

to third feet well to volume the down, for year XX% since absorption let's turn X where growth. Tampa our of have the best Tampa there year-over-year Office million are XXX,XXX Tampa State, for net with saw had and occupied. quarter consecutive national our feet portfolio XXXX. that ended particular, is positive looking team the the signed, with absorption Vacancy in quarter average job Now employment the market the markets, positive the in Sunshine in over quarter pace and prospects square highlighted Orlando highest above CBRE first remains for the our and metro the is ranking in growth space. and on Florida square for

our West This lease-up our market, As XX,XXX seeing building East, building Westshore of construction in foot in square customer and above underwriting. follows portfolio signed Midtown XXX,XXX at development square completion evidenced successful XX,XXX,XXX rents there. activity foot square now the the the new our Tampa our foot recently XXX% Midtown only occupied to by as is good under our new the inbound BBD

to square quarter, development brings CBRE. budget the and Carolina, square of feet in absorption our overall team total square on which development XXX,XXX positive square million the signed according III completed time our GlenLake foot In our Raleigh feet and achieved XXX,XXX nearly North GlenLake We market feet. XXX,XXX net to mixed-use on X

and foot leased. to XXX,XXX building now sublease space the now our is occupied stabilization upon year, XX% XX.X% estimate picking that with South healthy to inbound JLL. leased. seeing leased continued is in Charlotte, adjacent was amenities. activity million square leased Tryon, underexposed compared corporate Bank Prospect up foot equal the and is market Last tour square and acquisition and XXXX. the I-XX and our market availability other quarters to is portfolio Down XXX to recent overall acquired space ability Tower, early of we to with activity, added X markets America of to XX% being XX-story relocations in amounts in and including according XX.X% We The a is

lower-than-average is We team simple in believe Atlanta if XXXX Peachtree, before with and Alliance Buckhead, Buckhead strategy was foot Two even quarter Novelis's the of early out and stabilize well forma leasing bear and stats stabilization XXXX. quarter's our feet quarter at on expected to third pre-leased the overall and end, across subsequent budget time XXXX in also and leasing XXX,XXX to our portfolio, the volume. feet delivered ink date XX.X% of signed, at resilient on pro backfill square expiration. The was XX,XXX square our busy square bolstering development additional an XXX,XXX QX

between where together. consensus when to and evolving they continue We managers workers witness on will better the be and

today's are the point, the Self-performing of position and choppy through then there portfolio To the real-time into existing across subleasing, depth leasing, at customers previously the of us majority footprint. across the signal property maintenance to and waters. and downsize, increase our of a given management unique has renew pandemic then a to this XXX% ultimately the entertained our breadth portfolio evolutions relationships their where customer

witness to roof our performance under relative bearing this BBDs is and to our within one Our markets approach.

believe meaningful the our committed thrive via future new remain future. workplaces delivering development are our in to and to positioned a We proactive our one continued addressing portfolio and ability in resilient will lease commute-worthy create roll, yields pipeline revenue to

Brendan?

Brendan Maiorana

Thanks, Brian.

a were and our wasn't in quarter, $XX.X In driven no significant FFO second expense. share and of by FFO with and slight $X.XX higher we from per a the line income $X.XX dispositions full higher OpEx net of quarter the quarter the second $X.XX sequentially. There Results impact items. The million overall NOI unusual quarter million down interest share. delivered with lower of much change $XX.X of third change with the modestly completed attributable expectations or to in or was

highlighting flows cash benefits a to challenges of are We've a the recycling when asset of but become Our benefits for face exhibit rates. interest program even apparent, been more the these years, year in obvious. our continue in more higher few resilience

So our Olive only preferred the and net development disposition repayment invested million of from in another in million our over venture. pipeline far this year, joint our $XX proceeds investment receiving $XXX million & McKinney equity $XX we've while of

in and a NOI upon NOI the been balance investing debt expect pipeline. net of development at doesn't monetizing keeping of we debt-to-EBITDA metrics the approximate providing isn't million income-producing garner to $X.X $XX flat at while our while this we've holding assets investor our that essentially differently, unchanged And development stabilization Said yet billion. overall count Xx

we maintaining year. our to addition strengthened strong further metrics, In leverage the throughout liquidity

The X.XX%. closed the net proceeds our credit million press at development last joint release, for our fixed powder liquidity mortgage rate used West As million Midtown $XX evening's our This disclosed pay now improves in and were venture of from million a venture received down a joint interest to to facility. over ample expenditures. $XXX our of gives remaining fund further $XXX current dry which X-year us is

over proactively by beginning investment reducing of increased the total million. $XXX the Since by liquidity million available $XXX while our year, we obligations future

Our we near-term with do healthy quarters. liquidity, disposition expect additional provides and combined limited flexibility, us maturities, future current debt in proceeds

mentioned we be capital and this last However, debt opportunistic later as quarter, next. year raise may or additional

share. As FFO we've $X.XX change no midpoint is per outlook to updated now with which of $X.XX mentioned, range to Ted our the our

items unchanged, Given that we we are plus our the same-property upward our to towards year, end to performance to cash X%. line X% to of occupancy will range. low NOI revised note expect be outlook the I other All year-end impact but FFO date outlook this

challenging As year. estimate we've mentioned point the a the it's a before, forecast to metric on this last is day of given

in of quarter. for keep items mind the couple A to fourth

average the pushing expense First, the OpEx interest margins Midtown in increase West. new rate due late we expected second, SOFR lower to expect to mortgage operating due higher at is year. fixed into And to rates some discretionary

when would are as to you I in like Finally, XXXX we results. there some we In our our interim, provide highlight. know, release quarter to outlook plan items the February fourth

absorb we in First, portfolio to future as utilization items inflation and pre-pandemic closer operating higher may move impact line our across of the OpEx major margins years average increases.

be Second, likely interest would may we raising expense. additional result in debt opportunistic which capital, higher

over be though short Finally, flow. net months the a close we which the could cash are few additional would likely to in dispositions optimistic that headwind next benefit a term, FFO to be we'll

the encouraged past we're portfolio and in and our by we're future. resilience over XXXX exhibited summary, of have flows years, In the about and cash the few excited

current have right balance turns. and We team portfolio, once weather excel the the sheet to environment the cycle and

for Operator, we are ready now questions.

Operator

from of comes America. Bonnel question today Camille [Operator for Instructions] from Our Bank first

Jing Xian Tan

overall the process, for talk general this from but seems can decision-making seeing had to weighing hubs portfolio your what in to healthy, but is HQs? I and imagine relocation Retention leasing with in tenants more slow. companies are seeing up coastal you you're set them start you their to volumes conversations your on -- continue economy plans your who to on back markets, focus pull

Theodore Klinck

morning, and anything Good start can if Camille, Ted, Brian it's and to I add. has

post Look, in to continue general, certainly tour I Labor activity, think leasing, have we steady Day.

think seeing is delayed. that I us been longer. It's the we're has for biggest just thing the taking decision-making just

wait situation. ended short-term of in. So I seeing done thought deals a going the up actually economic backdrop, did just and we to think having environment sort CEO just to hesitation, some were the economic CEOs lose We the pulling up couple they're out current the doing we're renewals -- are some that general back end of the and we get

to So we inbound. see continue

our signed XX markets small new hubs markets. You with X inbound across had opening companies really who mentioned come new new are -- to XX in different leases customers We markets. up our

So we continue but to see longer. decision-making the definitely is that taking in-migration,

Brian Leary

one would enthusiasm of and to add-on and we are question, getting say Ted, which back a on maybe I posting the kind answer Brian of their very last little is folks headquarters. no. point the up that momentum Camille, was are Sun your changing retrenching to coastal the sense Belt relocation or here,

hub. are seen Just We out operations, relocations continue. occurring. whole there relocating in are in corporations even gateway. not moving it just general, Charlotte, in still Dallas their We've These see of it

the So to not just mean reversion occurred has yet. that

Jing Xian Tan

Okay. office appreciate a downsizing? the likeliness what's that same still they And you But remain do the on it's situation. see risk Tivity, Or in them developing footprint? potentially of

Theodore Klinck

very it's again, early. Camille, Yes,

XX,XXX good at of they've with They for a to feet customer us feet. quickly years. grew and XX,XXX look, a So started ours been few out

So very fast-growing company. it's a

think it's still fluid, so situation. And I the

have we'll situation they're in. met with to we'll more. of hopefully, their understand them months. couple We've So coming hopefully, And times, a more report the in and the business have

Jing Xian Tan

Okay. And final question.

well. termed out sheet balance the You've

thoughts thinking rate So can rate around how your about you we provide a in this on if persist exposure higher variable environment? latest update managing your you're

Brendan Maiorana

Camille, it's Brendan.

take that. So I'll

So year, would to say our is this strategy do we've I on be would focus the is I improving liquidity. think what which what more done

million So increased throughout $XXX by we've liquidity proactively this year.

up Now by some development. through that $XXX of used million got

think would from have improvement million. that $XXX of X the improve So on but and year floating out now we continuing exposure. to kind the say, which up over-worrying focus debt focus. will versus the any fixed of net push for liquidity to liquidity beginning the I that is maturities, And would be I about near-term don't we years,

probably rate of fixed However, side rate that, are the the capital than more opportunities say with would raising side. that on the I variable all

to be continue that think really, you see as to liquidity So on variable I current But migrate rate variable. opposed focus do our would will downward. versus focusing increase to fixed more

Operator

from Our of Michael comes Citi. next question Griffin

Avery Tiras

Griffin. for on Tiras Avery Michael is This

can are you thinking on in the West or a mortgage? on you of And to how Midtown well encumbrances clearly, the covenants. pool just if I mean, Highwoods close expand percent with decision compliance as generally, wondering Just about NOI? asset its the JV's

as see if a credit? guess continue that drawing or floor your the have how wondering a we debt if percent So line on to market encumbrances on and secured I NOI of you could you you balance of tap And debt? just versus

Brendan Maiorana

Brendan. I'll It's that. take

facility building, pro is that with the I building. And it -- on had forma. at think NOI as typical given beyond some is put partner would the think permanent like occupied. success I financing our we yes, that XXX% they above is longer-term that financing, So some JV, right, to a construction

it's we go very fact and building So our on pattern started decision in with a There a mortgage and on up leased spec throughout put that that. to COVID. XXXX the good made was late we a ahead X-year partner --

it to improves So that lot a Highwoods, was overall. of decision, so an repatriated easy back gets that and capital our liquidity that's

probably say probably would preference, I our additional where is isn't financing do that I with stand question, now. over there would is, There your we room part secured to second but of say that think, I unsecured? the

NOI. terms probably move as the to So sources on our I the opposed unsecured think be we're bit, we a look to the of mid-XXs for secured unsecured while little And in in of number our preference could that capital pool pool. would

Avery Tiras

That is makes sense. And my question follow-up sublease just space. on

the had return from sublease takers. in last past market quarter requirements space on you've these some believe given resulting renewed So originally few about AT&T pulling talked space quarters, to you talked the they space put about office larger basically mandate. just I

this seeing if Sun any space sublease of markets? your just in and wondering just Belt you're faring how examples additional is So generally

Brian Leary

Avery, Brian this one. here. take I'll

still coast there's subleasing for watermark a to of national coast. from look, So kind high standpoint,

seen We have actually of of our our seen in decrease across off. the We've kind that. portfolio within subleasing submarkets level addition of it doing own folks

exact your downsizing, and example who remarks, one last amount. my back prepared for in had bought space submarket. nice about before, and I of market. XX,XXX one in talked our Finance renewed not we That's on they foot it full mentioned in new-to-market they another the Then So quarter, office Tampa. Tampa's opening the a sublease square from chunk had Mitsubishi, Not for was taking there and square a offices, that opened operator building buildings, a big United Westshore they're XX,XXX in foot in out. Group came

happen. we So seeing that are

it's for moves initial moving is across the of across of kind are vacancy We space same, we its the not out is expirations some again, it So lease of general, feel markets. right? that kind through now. own But to its as like, the lease, over board, seeing, also all in sublease leveling do with

Operator

Fargo. Yang question Ku from ] [ next of Wells comes Our

Unknown Analyst

guidance line increased be think It about guidance but same-store could looks different like didn't occupancy items? and change. year-end quarter, talk discrepancy this this you. straight Could you I FFO your the between for Brendan,

Brendan Maiorana

Yes.

little toggle overall. I mean And little bit I really between a a just better then think that's bit higher. interest NOIs So a is probably expense

So bit, move but straight-line just those probably maybe two kind the kept number one -- things of tightened the could have little another. We outlook a that offset same.

a So to range, more but a in just bit that a little there on the end might bit ourselves line that towards item. of particular coming lower bias little we give decided towards keep the that range, little number room of be

Unknown Analyst

improvement the better-than-expected of Okay. Is of a to kind part due OpEx?

Brendan Maiorana

Yes, that's back even think, beginning to of go the it's we certainly of year. the it, part part probably driver, if biggest I the

So about comment. talked us. know onset yes, that forecasting that is OpEx fair we've a the the I of really this since challenging has been pandemic for

predicted So had beginning better the we've on OpEx what of part we at done than the year.

So opposed that, probably driver as yes, that's topline. to given the biggest

Unknown Analyst

we then looking you just Okay. but think OpEx in know on about that the I next the has yet, haven't And how guys year. of should guidance terms margin, provided out impact utilization into magnitude?

Brendan Maiorana

good to kind what where but talked what year haven't have about, a let's question. we've do mean, XX are out, we're is look of it's margins would I kind that XXXX. we and the kind guess given not versus it, I and Yes, where see say we've you're trended guidance neighborhood seen XXXX of morning. of quarter lower down. to We'll this XXX this shakes basis if I margins in And at points probably of right. you fourth prepared the call that

that as of utilization, -- you kind increased has and compared to out, So 'XX point 'XX. throughout

a has Inflation it. of driver higher. little a been bit that's been So

do recoup but the outlook. recovery, hurt lot does it a we that margin of still Now through

be remains compare over inflation to that I been the we as has it high several mentioned as migrate margin given utilization in next especially X prepared and you could ago. relatively picking we when X quarters up, I believe to remarks, the some So there pressure think quarters

of there's that think headwind do I that that So exists. some

Unknown Analyst

one last just question. And

any of I in kind talk conversations next are think terms that of years this potential guys about be of what for are you the federal expiring of leases size could couple and them having your Ted. government whether renewal? over Could ones renewing there with you've been and larger

Theodore Klinck

Sure.

the we've got building in out Department lease the a to XXX,XXX that So XXXX. RFP to we've talked have think Atlanta state of square do We've -- we've really that. and they put expires that's is decent that about so government leaving And feet and we've they're in another at we confident one -- the in, a place. to an got And end still they're them, we've we just talked of downsize, Revenue. but terms we're expiring of it's in government. biggest about, about pretty that move got be shot the or talked keeping It's that process building, about going

that's So our exposure. biggest

were still couple We've XX,XXX in XX,XXX got couple about there. don't XXXX. probably another the that's early one in That just what's or to going renewed know last happen quarters. feet, Nashville that's -- of square We've XX,XXX a feet that

markets So than of just tenants it's next the government a a then small and ones. after bunch years the really X several across that, few big smaller for our role of other exploration

Unknown Analyst

And GSA Ted, is that that lease? in 'XX XX,XXX square early feet a

Theodore Klinck

Yes.

Operator

Stevenson of comes question next Robert from Janney. Our

Robert Stevenson

Are up? there coming move-outs last any from of known quarter size incremental

Theodore Klinck

No, I of them. about all we've talked think

Robert Stevenson

And your today point? staying landlords bolster your core terms relatively Okay. in core Or at still in how this TI dollars rational aggressive then markets are of are to occupancy? markets

Theodore Klinck

days, Nashville, by really. there competition you a there's more fewer deal, it because varies market, are these -- some which very submarket if Brentwood Charlotte, ones markets, our and maybe I tight markets. South there's in large a by on obviously, markets Look, customers It's Park by Yes. to go -- in certainly are think big top but the

TI So packages is competitive I and Buckhead. think as aren't in the as maybe it concessions

vacancy now, right demand the is Buckhead think higher. lower, is I

So it's a competitive situation. more

So varies submarket -- it just very deal. by market, and really

Robert Stevenson

like thinking more dispositions that does stock the used about I months. remainder close have reduce at you market to able currently on the going And today? the to you sell few you next talked additional up? pipeline? any debt? be to that going this just can you going what fund be and point, appetite to enough, market Okay. to to teed And development And to over then dispositions mean now deep able the you're than guys repurchase Is be have enough. are with Are fluid $XX? it under What the proceeds

Theodore Klinck

Yes. know the especially But for -- really proceeds. this markets a of maybe in think part obviously, function rates environment. I'll constrained capital use property rates that, all office. look, of I are but for And today, I jump challenging interest types, Brendan think the on take first can you incredibly that's the lending of,

an I think to it's difficult very office loan get today.

market, estate and we as real a healthy to the the all a now, need to you their know, lenders are So fully office. banking wanting functioning market reduce investment sales right And exposure system.

the was So we the cash, assets deals million. so are across have banking worth getting in They X sold high financing. X buyers, of hard maybe not assets out having net in it's to buyers, far, lot sold but that largely sold the a levered going goal find of did X today, -- We've them and $XX And line capital. We one cases, market X have very and today. be relationships. or to largely all levered they're

think a is deals banking having I done. get incredibly to today important relationship

assets So today. to market those what get more capital we sold. out difficult in bite-size thing have nice it's there and is any are And generally deals is for very the the

Brendan Maiorana

of of Brendan. I'll use proceeds it's Rob, that. side of -- just kind for

that's hold to you good going at -- sort where think there, I that X So so feel do rates. would cash kind go development would the be spending is it pay things. has we down of I higher we I debt, would think margin, of continued extremely But mean, well say, up I we have toggle interest could flow but even in of to the face those

we NOI funding contribution with projects. to from construction good complete done any significant that. modest development very left financing get -- And don't So of get we left feel fairly under to done received we the even or about to is that haven't a level those

provides a door. like feel flows given a there's well, we up us to respect development embedded pipeline the cash pretty lot lot held have growth of in think it that optionality the that I disposition of So good dollars in and come with

Operator

Dinkov Our next question of Georgi comes from Mizuho.

Georgi Dinkov

Can about by talk today? -- you by this And varies the portfolio sorry, mark-to-market just how market?

Brendan Maiorana

maybe say which kind give Georgi, Brendan. let is spreads think rent cash and basis, this Brian start Ted it, call where I you've I'll that of flat, would which views in mean, market. overall, I just strokes on over roughly seen many on it's color past on a broad is is and -- be But let's the we the cash their quarters.

think probably that's the we is. So that where portfolio of representative

positive, If pin to market. had long-term you are there are say we'd us place that leases it's below down, modestly some in but

guidepost see different as is flat give over think I some and on turn any, good to So color I'll a markets. or enough we Brian, as Ted maybe it to how the

Theodore Klinck

to Tampa. seeing look, is Yes, of inbound I a I good mean, our -- We're I'll jump market markets migration in think first. now. Tampa a great for lot right us

I'd well the And to mentioned on State prepared as continue the sort remarks, of very do do Charlotte well his to Sunshine and continue then well. and Nashville us. Orlando, put Tampa So Brian for

I more perspective, Look, sublease think I think from a a Raleigh in Raleigh. space there's little

as percent a of market amount construction new that a stock. fair of So in

markets. So historically our one is X of Raleigh been I top think

a then now, Atlanta, And softness think think I I is right in soft there's as in more Raleigh. little probably well. I bit Buckhead bit a mentioned little

a occupancy outs then had the Richmond. is amount got or actually of and activity, move a is our It vacancy roughly XX% fair fair down couple the amount last just Richmond down quarters. so So and happens so. in Richmond about in we of -- of market has Pittsburgh but

So be well, will we we're rebounding -- hopefully, in Richmond.

Georgi Dinkov

tenant of And seen in profile? size just and in terms of what have terms you demand,

Theodore Klinck

well. trend several the it's see we've the starting smaller this back to -- activity that interest and lot our really is I went that seeing still had definitely of contractions, it Fed We are think users contractions been but them small customer And quarter, and X,XXX the butter. our come X:X this been is a It's number XX,XXX it's square as most foot quarters a users bigger bread rates -- and to expansion raising with fall, when sidelines but active. probably think, now. that that's we're the of of out small I or Last really now, medium-sized started who's that expansions growing. for just is had some our of companies to majority

Brian Leary

the insurance, sectors bit about, a are users. of nature of telecom, sectors general in financial services, just back, see as kind the TAM fire of of there, but the little talked coming we Georgi, I the too, kind

Operator

Our of Street. from next comes Green question Dylan Burzinski

Dylan Burzinski

with other the on commentary the Tivity But there's guys curious the appreciate larger about if rent any going tenants a on ability pay to that worried from situation are I or perspective? credit just guess you backfill. I

Brendan Maiorana

I No, process. pretty process got credit don't we've review the that's a Brendan. it's case. robust watch think I Dylan, mean and

would I a ones was will, large has certainly or credit over are that quarters, what it you level. is the -- say bit has there that what past debt overall out The negligible up picked I -- picked would risk a are up expense, So -- kind there. effectively little from of several bad no it's but if say

percentage exposure modest. is from change level of minimis de the large it's a feels increase even relatively if like sort any So a dollar overall

onset That's to the continued pandemic. greater rents every So that's been seen. collect We've since of what than month. the kind of of XX% we've consistent

say there I bit, change little So I said debts effectively are a from, X levels. real big would a there. as earlier, But been hasn't bad that up but

Dylan Burzinski

in looking the you to But they're seeing provided capitulate you're to sort the net prepared if and market of appreciate just at rents that guys start I maybe going lower looking the asking just remarks rent on to rents. growth. landlords any curious certain achieve effective then in or buildings? then And comments

Theodore Klinck

right? more is to up, It costs a spaces these days. have out I think held general, face in rates general build comment

higher. are TIs So

of So I think understand a that. customers lot

one that's economics, again, on rent, the lease net reasons It's rents. focus free we everything so -- of into throw face rents. it And effective the be TIs, whether

lowering face held the gotten So on where really more Are well. general, face rents some rate. getting They're have up really aggressive. in versus instances free have landlords aggressive the pretty there rent

generally rents. but effective again, up, attention net we pay to So holding

Brian Leary

to flight the we to on seeing just might I Brian. flight this. flight of a philosophical, quality, it's to but come little Dylan, across add more landlord. are capital, Might bifurcation

and is of I that getting And so leasing competing are are assets relative commute that And they're Yes, that pool those rates more getting desperate, and a argue worthy. not certain a probably aren't effective. face of there up but net either. those keeping would they are bifurcation

it leave that. I'll So at

Operator

next question from Peter Abramowitz from comes Jefferies. Our

Peter Abramowitz

if I to to a of little rents? you was in and we wondering impact about bit could the should 'XX the just kind medium markets your near and how market talk for term just your to supply about think occupancy outlook

Theodore Klinck

And that's deliveries? on new

Peter Abramowitz

Yes, yes.

Theodore Klinck

as you're one way of Yes. silver That's starts construction think, seeing down. I linings, go the

construction. of several not. really construction. if Orlando, only For building markets the very little, new there's under it's we're our any, Tampa, spec

coming. there's be Nashville, construction. more mentioned is Nashville XX go You in Midtown Atlanta, have Raleigh next under about months. don't to XX supply to where really There supply in really will new still only any Raleigh, They got and we is presence, some I delivering coming the downtown. you've on

less supply difficult has new today. very in finance lot general, out to ground, construction I the new there's the think of to going been years. a several coming than So on is in get last Nothing there

demand anything I is going So the a when lease XX between to really that's next now think the delivering back. up window and to starts have coming months

save last demand markets, for maybe an Nashville. So it in issue is in not Downtown and as years Raleigh big has general, been several our the

Peter Abramowitz

table about considered? then the secured that of that talk kind that right you decision of in And just what route? to now, in Got drove ultimately then what's it. markets that the capital deal go terms of were of avenues And attractiveness just at other relative financing available I you Midtown, the a little guess on can the bit

Brendan Maiorana

Peter. Yes,

a to Midtown property, So that that's decision right? is a at JV not sold is of kind that Highwoods. West, So

we've our So venture. got of partner that the to for work with the appropriate is in terms capital

the the going it's venture for mean, secured the term I or So for either to to construction the route equity of loan, it's out kind partners.

an was So was regard, at felt like partner our financing the option West felt an attractive I and think option. that Midtown attractive we like that in

So there. the that was decision

market, of that used that thinking we've I the about market, go term those you several kind bond to options a years if loan a we've back in few back over at the with respect been as go made the and avenues, terms the we We've and that yes, think liquidity if prepared past have forward we've the the bank gone years. years, go secured and I in securing you to remarks gone looking we few of route. additional

each certain of challenges So all present those that sort are kind benefits still of there. and they is but of available,

access will of that in the evaluate, see makes sources sense what and believe but most us we've long to across we kind So for got we'll think we I of number a capital we term. different the do think

And mention, disposition I think that's out mentioned as we well. I source Ted -- capital as there also of proceeds should I also are and another mentioned,

to there, So addition just debt that's additional of in capital. raising kind option that's another too,

Operator

Our Kamdem of Morgan from next question Ronald comes Stanley.

Tamim Sarwary

some use sense bit asset Kamdem. just you remarks about It's for whatever the Can Just little a of for us what Tamim dilution a of cap might in potential the the relative and on be guys Maybe rates not. you credit? Ron sense what on talk the sales. a prepared from guys line dilution of give to incremental

Brendan Maiorana

hard they're the It's as over a mean the stands more of in I'll terms little But Ted capital the challenged little of half in were markets. Brendan. let It's now. it selling give $XX -- obviously, the right maybe year. color successful We a million I -- first

rate of carried I an think those X%. cap average

maybe could so paying do which term flow of we've a the much impactful line dispositions be the of is have balance the It forward, in on lot it, get seen on basis. past you or that that numbers, basis. FFO of done we've been the will rate What XXX off, going years done accretive be math actually kind rough loans, is we call cap is debt would I depending kind where to one which deals see at relative So largely probably a plus, mean, our that SOFR you'd of what would an be cash on there. points, several more basis over the a

So we'll see.

count a where and metrics finish until over deal out. the shake we'll gets anything You'd never see line, deal those

Tamim Sarwary

-- But just to Makes it's then occupancy to how the in sense. the pinpoint point just understand at time of guidance. it quarter. the And of kind I year-end end tough just guys Just maintained? that range and the thinking high you about moving the was low of are wide what's there? driving there end the or end pieces that range the any

Brendan Maiorana

Yes. it this It December vice from I mean because meaningfully day because there move about on versa, or you we it's January the -- as I know move good last to numbers pretty commencement And yes, quarter the is hard talking the it's can question. point a and a last -- a about we're talked well. year. estimate of

we stuff and like out finish in close feel some were done. that deals to confident alluded a the to felt then I couple Ted moved we as line, quarter, there's but we that last it, there of which those don't think getting deals were So

stuff on always just bit number to that of to the it's some year conservatism kind the the there the day the like But So wide respect comments a pinpoint fairly keep -- trying challenging. year-end because outlook. range is some a little of of of it's with caused said, and we always last I a

Operator

time, questions. no this we further At currently have

for Klinck Ted further remarks. to back hand any I So

Theodore Klinck

Thanks today. to in of a for joining you we out in everybody, forward weeks. L.A. Highwoods. And of in the Thanks, many look for your again. Thanks couple seeing for interest NAREIT call

Operator

you for joining call. today's Thank

You may your lines. now disconnect

Highwoods Properties (HIW) 25 Oct 232023 Q3 Earnings call transcript