Highwoods Properties, Inc. - 10-Q Summary (Period Ended June 30, 2026)
Business Context and Reporting Period
This report covers the quarterly period ended June 30, 2026, for Highwoods Properties, Inc. (the "Company") and Highwoods Realty Limited Partnership (the "Operating Partnership"). The Company is a fully integrated office Real Estate Investment Trust (REIT) owning, developing, and managing properties in the best business districts of Atlanta, Charlotte, Dallas, Nashville, Orlando, Raleigh, Richmond, and Tampa. As of June 30, 2026, the portfolio included 27.7 million rentable square feet of in-service properties and 0.6 million square feet under development.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2026 | Six Months Ended June 30, 2026 |
|---|---|---|
| Rental and Other Revenues | $216.4 million | $430.4 million |
| Net Income | $96.8 million | $130.1 million |
| Net Income Available for Common Stockholders | $93.5 million | $124.8 million |
| Diluted EPS | $0.85 | $1.13 |
| Funds from Operations (FFO) Available for Common Stockholders | $100.7 million | $194.7 million |
| FFO Per Share | $0.90 | $1.74 |
| Net Operating Income (NOI) | $146.2 million | $289.1 million |
| Cash and Cash Equivalents | $145.4 million (as of June 30, 2026) | N/A |
| Total Debt (Mortgages and Notes Payable, net) | $3.52 billion | N/A |
| Revolving Credit Facility Availability | $749.9 million (undrawn) | N/A |
Material Changes vs. Prior Period
- Revenue Growth: Rental and other revenues increased 7.9% ($15.8 million) in Q2 2026 compared to Q2 2025, driven by acquisitions in Raleigh, Charlotte, and Dallas, higher same-property revenues, and new development completions. This was partially offset by a $6.4 million decrease from property dispositions.
- Profitability Surge: Net income available for common stockholders jumped from $18.3 million in Q2 2025 to $93.5 million in Q2 2026. This significant increase was primarily due to $79.0 million in gains on disposition of property (a Nashville building and Richmond land) compared to zero in the prior year.
- Operating Expenses: Rental property expenses rose 10.2% due to acquisitions and higher same-property costs (utilities, repairs). Interest expense increased 10.7% due to higher average debt balances.
- Cash Flow: Net cash provided by operating activities increased to $188.1 million for the six months ended June 30, 2026, up from $162.9 million in the prior year period.
Guidance, Outlook, and Risks
- Occupancy Outlook: Portfolio occupancy increased to 85.7% as of June 30, 2026. Management expects average occupancy to range from 86.0% to 87.0% for the remainder of 2026.
- Investment Activity: The Company expects to close two non-core sales totaling $73.5 million prior to August 15, 2026. For the remainder of 2026, it anticipates selling an additional $100 million to $250 million of non-core assets, commencing up to $400 million in new development, and acquiring up to $250 million of properties.
- Capital Actions: A new stock repurchase program authorizing up to $250.0 million was announced in Q2 2026, though no shares were repurchased during the quarter. A quarterly dividend of $0.50 per share was declared on July 22, 2026.
- Risks: Key risks include the potential failure to lease second-generation space on favorable terms, the impact of work-from-home trends on office demand, interest rate increases affecting debt service, and the uncertainty of closing planned non-core asset dispositions.
Investor Verification Checklist
- Disposition Gains: Verify the sustainability of earnings given the $79.0 million gain on property sales in Q2 2026, which significantly boosted net income compared to the prior year.
- Debt Maturities: Confirm the refinancing strategy for the $289.1 million in unsecured notes maturing in March 2027.
- Leasing Velocity: Monitor the execution of the 86.0%–87.0% occupancy guidance against the backdrop of office market trends and work-from-home adoption.
- Non-Core Sales: Track the closing of the planned $73.5 million in non-core sales and the subsequent $100–$250 million pipeline to ensure capital recycling targets are met.
- Joint Venture Financing: Review the terms and impact of recent joint venture financings, such as the $100 million loan for Granite Park Six and the $44.8 million loan for Midtown East.