Highwoods (HIW) Q4 2025 Earnings Call Transcript

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Wednesday, Feb. 11, 2026 astatine 11 a.m. ET

• Chief Executive Officer — Theodore J. Klinck

• President — Brian M. Leary

• Chief Financial Officer — Brendan Maiorana

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Theodore J. Klinck: Thanks, Brendan, and bully morning, everyone. Before I speech astir our 4th fourth and outlook for 2026, I'd similar to statesman by highlighting immoderate of the reasons wherefore we're upbeat astir the adjacent fewer years for Highwoods Properties, Inc. First, the cardinal backdrop crossed our halfway Sunbelt BBDs is arsenic beardown arsenic it's been successful galore years. There's constricted to nary caller proviso crossed our markets, and dwindling blocks of disposable high-quality space. New users proceed to migrate to the Sunbelt. And adjacent with mixed signals astir the wellness of the wide economy, galore existing companies successful our footprint proceed to turn their businesses.

This dynamic has created rental complaint maturation not conscionable successful look rates, but maturation successful nett effectual rents, including rent spikes successful our champion BBDs. Given constricted improvement starts forecasted for the foreseeable future, well-capitalized landlords with high-quality bureau successful BBD locations successful the Sunbelt are positioned to thrust meaningful maturation successful rents. Second, the convergence of occupancy gains, rental complaint growth, and stabilization of our improvement pipeline should alteration Highwoods to present outsized NOI and net maturation successful the adjacent fewer years. We expect to thrust occupancy higher by astir 200 ground points from 2025 to 2026. Plus, our improvement properties are projected to present year-over-year maturation successful each of the adjacent 3 years.

For the past fewer quarters, we've been emphasizing astir $50 cardinal to $60 cardinal of NOI maturation imaginable crossed 8 buildings: 4 existing operating properties and 4 developments. We volition recognize immoderate of this maturation successful 2026, but astir volition payment our NOI trajectory successful 2027 and beyond. Third and finally, we are positioned to put astatine charismatic risk-adjusted returns. Future investments are besides apt to thrust further growth. We've invested astir $800 cardinal oregon astir $600 cardinal astatine our stock implicit the past 12 months.

These acquisitions, which were successful the strongest BBDs of Charlotte, Raleigh, and Dallas, person a weighted mean vintage of 4 years, an archetypal lease complaint of 93.5%, waltz of 9 years, rents astir 15% beneath market, and projected stabilized currency yields of astir 8%. The operation of beardown fundamentals for high-quality BBD bureau and constricted purchaser pools creates an fantabulous accidental for america to deploy superior astatine charismatic risk-adjusted returns. These items combined with our proven way grounds and beardown equilibrium expanse springiness america assurance that we're well-positioned to turn for the foreseeable future. Our archetypal 2026 FFO outlook is 5.7% higher astatine the midpoint than our archetypal 2025 outlook. Now turning to our 4th quarter.