Despite inflation and interest rate volatility, another commercial real estate company’s earnings report shows the multifamily market continues to thrive.
Highwoods Properties, based in Raleigh, N.C., reported fourth-quarter earnings of $103.1 million, or 96 cents per share, beating Wall Street expectations. The company earned $27.6 million in net income or 26 cents per share. During the period, the REIT generated $211.7 million in revenue.
Highwoods Properties owns, acquires, develops, manages, and leases properties primarily in Best Business Districts (BBDs) of Raleigh, Charlotte, Atlanta, Dallas, Orlando, Nashville, Pittsburgh, Tampa, and Richmond.
At this week’s earnings call, Ted Klinck, president, CEO, and director of the REIT, provided shareholders with an overview of the fourth quarter results. Commercial real estate showed strong performance despite inflation, he noted. Furthermore, he provided an overview of their clients: Bank of America, their largest customer, is less than 4%; the very wide-ranging professional, technical, and scientific services category, their largest industry, is less than 30%; their top 20 customers account for less than 30%; and they lease less than 15,000 square feet on average.
The top executive also detailed how their high-quality portfolio, purposeful diversification, and continued population and job growth across their markets contributed to strong fourth-quarter results. The company signed a 312,000-square-foot lease renewal at a 50-50 Richmond JV property that boded well for the bottom line. The renewal consisted of a roll-up in cash rents and limited TIs for 100% of the customer’s prior space.
Among the other deals he described was the 99% leased development of roughly $100 million, the development of over $400 million in Atlanta, Charlotte, Tampa, and Dallas, and the sale of $133 million in non-core land and buildings. In addition to their scale of work, they also possess a high-quality office portfolio across the Sun Belt in some of the strongest BBDs.
Executive vice president and chief operating officer Brian Leary noted in the fourth-quarter corporate narrative that a successful fourth quarter capped off a strong year in 2022 and a successful three-year run through the pandemic that saw the team and portfolio overcome every challenge.
