Highwoods Banks on Acquisitions, Boosts Long-Term Growth Trajectory

Highwoods Properties HIW recently provided an update on its investment activities to support its long-term growth strategy. The company has acquired Bloc83 in the central business district (CBD) of Raleigh and The Terraces in Preston Center, located in the best business district (BBD) of Dallas.

Highwoods owns 10% interest in Bloc83, acquired in a joint venture (JV) with the North Carolina Investment Authority. The total investment amount is pegged at around $210.5 million. The mixed-use asset spans 492,000 square feet, comprising two 10-story best-in-class office buildings. With 27,000 square feet of ground-floor retail, the property is equipped with amenities like a rooftop terrace, customer lounge, fítness center, and interactive sports room with a golf simulator. As of Dec. 31, 2025, the asset was 97% leased with a weighted average lease term of 6.5 years.

Highwoods owns 80% interest in The Terraces, acquired in a JV with Granite, an existing long-time partner. The total investment amount is pegged at around $109.3 million. The company also contributed $12.9 million of preferred equity to the joint venture. Encompassing 173,000 square feet, the 12-story best-in-class office building was 98% leased as of Dec. 31, 2025, with a weighted average lease term of seven years. Located in the most supply-constrained market, this asset addition to HIW’s portfolio positions it aptly for long-term rent growth.

HIW intends to fund the above acquisitions through the sale of a select portfolio of non-core assets, making them leverage-neutral. The buyouts are expected to be immediately accretive to cash flows and neutral to near-term FFO run rate for the company.

For 2026, Highwoods expects to generate a GAAP net operating income (NOI) of close to $9 million and cash NOI of $7.5 million through its above investments. An additional $0.8 million is expected on HIW’s preferred equity investment in The Terraces.

Final Take on Highwoods

Highwoods’ disciplined capital-recycling strategy — shedding non-core assets and redeploying capital into premium properties — directly enhances portfolio quality and positions the company for sustained growth.

In the fourth quarter of 2025, HIW acquired 6Hundred at Legacy Union in Charlotte for $223.1 million. During the same period, it sold non-core assets worth combined gross proceeds of $65.9 million.

However, competition from developers, owners and operators of office properties, and a significant development outlay are likely to weigh on Highwoods. The high debt burden adds to the company’s concerns.

Over the past month, shares of this Zacks Rank #4 (Sell) office REIT have lost 8.9% compared with the industry’s fall of 0.2%.

Analysts, too, seem bearish on this stock, with the Zacks Consensus Estimate for 2025 FFO per share having been revised southward marginally to $3.43 over the past two months. The same for 2026 has been trimmed marginally to $3.55 over the past two months.

Stocks to Consider

Some better-ranked stocks from the broader REIT sector are Prologis Inc. PLD and Host Hotels & Resorts HST, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for PLD’s 2025 and 2026 FFO per share is pinned at $5.80 and $6.08, respectively. This calls for year-over-year growth of 4.3% for 2025 and 4.7% for 2026.

The Zacks Consensus Estimate for HST’s 2025 and 2026 FFO per share is pegged at $2.05 and $2.04, respectively. This implies year-over-year growth of 4.1% for 2025 and a marginal fall for 2026.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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This article originally published on Zacks Investment Research (zacks.com).

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