HIGHWOODS PROPERTIES, INC. Q1 FY2025 earnings call

• Robust investment activity: Recycled $145 million of non-core proceeds into the acquisition of Advance Auto Parts Tower, a Class AA building in Raleigh's North Hills BBD.
• Development progress: Placed in service 2827 Peachtree, 94% leased and 88% occupied; development pipeline of $474 million is 63% leased.
• Leasing activity: Signed 97,000 square feet of first-gen leases; leased 700,000 square feet of second-gen office, with net effective rents up over 20% from prior five quarters.
• Lease-up efforts: Lease-up efforts at four core buildings to drive 25 million of NOI growth above 2025 outlook, with over 40% of future upside already locked in.
• Asset recycling: Since 2019, sold over $1.5 billion of non-core properties and recycled proceeds into higher-quality, higher-growth office buildings.

Highwoods Properties had robust investment activity, with $145 million of non-core disposition proceeds recycled into the $138 million acquisition of Advance Auto Parts Tower. They placed in service 2827 Peachtree, a 79,135-square-foot development in Atlanta's Buckhead BBD, which is 94% leased and 88% occupied. The development pipeline of $474 million is 63% leased, up 5% from the previous quarter. They leased 700,000 square feet of second-gen office space, with net effective rents more than 20% higher than the prior five-quarter average.

• Raised the midpoint of 2025 FFO outlook by $0.04 to a range of $3.31 to $3.47 per share.
• No new development projects expected in 2025 due to high construction costs, elevated vacancy, and risk-adjusted yield requirements.
• Continue asset recycling strategy, actively prepping additional non-core assets for sale.

• Macro-economic uncertainty impacting decision-making for tenants and investors.
• Tariffs potentially escalating construction costs for office fit-ups.
• Near-term refinancing challenges for some office owners, creating both opportunities and risks.

Q: Would do significant incremental dispositions without corresponding acquisition lined up?

A: Yes, prepping a few non-core assets for sale, with closings expected in the second half of 2025.

Q: Reluctance from tenants on 2026 expirations?

A: No, deal flow, tour activity unchanged; haven't seen any impact on leasing.

Q: Occupancy cadence?

A: First half likely low in occupancy and FFO, then growth late in the year; year-end occupancy expected to be in the range of 86% to 87%.

Q: Tenant shifts in relocation/expansion?

A: Expansions outnumber contractions 4 to 1 this quarter, with 20 expansions and only 5 contractions; customers are expanding and willing to make space commitments.

Q: Leasing capital impact on AFFO?

A: Capital spend is lumpy, but focused on driving risk-adjusted free cash flow higher over time.

Q: Rents at Symphony Place?

A: Essentially flat compared to prior rents.

Q: Capital markets transaction side?

A: Office capital markets starting to open up, debt capital markets thawing, helping deal flow.

Q: 2026 renewal activity?

A: Constructive, back to normalized levels of retention relative to late 2024 and 2025.

Q: Pittsburgh assets and acquisitions?

A: No update on Pittsburgh assets; underwriting acquisitions but no specific deals to discuss.

Q: Same store cadence?

A: Likely week in Q2 and Q3 due to anniversaring against prior quarters, better performance expected in Q4.