The Isles at Wellington Lakefront Home For Rent | 4122 Bluff Harbor Way Wellington FL 33449
SAFE HARBOR - s3.us-east-1.amazonaws.com · rent collection & relief. 2020 outlook. balance sheet &...
Transcript of SAFE HARBOR - s3.us-east-1.amazonaws.com · rent collection & relief. 2020 outlook. balance sheet &...
Some of the information in this presentation may contain forward-looking statements. Such statements include, in particular, statements about our plans, strategies andprospects such as the following: the expected financial and operational results and the related assumptions underlying our expected results, including but not limited topotential losses related to customer difficulties, anticipated building usage and expected economic activity due to COVID-19; the continuing ability to borrow under theCompany’s revolving credit facility; the anticipated total investment, projected leasing activity, estimated replacement cost and expected net operating income of acquiredproperties and properties to be developed; and expected future leverage of the Company. You can identify forward-looking statements by our use of forward-lookingterminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue” or other similar words. Although we believe that our plans, intentions and expectationsreflected in or suggested by such forward-looking statements are reasonable, we cannot assure you that our plans, intentions or expectations will be achieved.
When considering such forward-looking statements, you should keep in mind important factors that could cause our actual results to differ materially from thosecontained in any forward-looking statement. Currently, one of the most significant factors that could cause actual outcomes to differ materially from our forward-lookingstatements is the potential adverse effect of the COVID-19 pandemic, and federal, state, and/or local regulatory guidelines to control it, on our financial condition,operating results and cash flows, our customers, the real estate market in which we operate, the global economy and the financial markets. The extent to which theCOVID-19 pandemic impacts us and our customers will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including thescope, severity and duration of the pandemic, the direct and indirect economic effects of the pandemic and containment measures, and potential changes in customerbehavior, among others.
Additional factors, many of which may be influenced by the COVID-19 pandemic, that could cause actual outcomes or results to differ materially from those indicated inthese statements include: the financial condition of our customers could deteriorate or further worsen; our assumptions regarding potential losses related to customerfinancial difficulties due to the COVID-19 pandemic could prove incorrect; counterparties under our debt instruments, particularly our revolving credit facility, may attemptto avoid their obligations thereunder, which, if successful, would reduce our available liquidity; we may not be able to lease or re-lease second generation space, definedas previously occupied space that becomes available for lease, quickly or on as favorable terms as old leases; we may not be able to lease newly constructed buildings asquickly or on as favorable terms as originally anticipated; we may not be able to complete development, acquisition, reinvestment, disposition or joint venture projects asquickly or on as favorable terms as anticipated; development activity in our existing markets could result in an excessive supply relative to customer demand; our marketsmay suffer declines in economic and/or office employment growth; unanticipated increases in interest rates could increase our debt service costs; unanticipated increasesin operating expenses could negatively impact our operating results; we may not be able to meet our liquidity requirements or obtain capital on favorable terms to fundour working capital needs and growth initiatives or repay or refinance outstanding debt upon maturity; and the Company could lose key executive officers.
This list of risks and uncertainties, however, is not intended to be exhaustive. You should also review the other cautionary statements we make in “Business – Risk Factors”set forth in our 2019 Annual Report on Form 10-K and “Risk Factors” in our second quarter 2020 Quarterly Report on Form 10-Q. Given these uncertainties, you should notplace undue reliance on forward-looking statements. We undertake no obligation to publicly release the results of any revisions to these forward-looking statements toreflect any future events or circumstances or to reflect the occurrence of unanticipated events.
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TABLE OF CONTENTS
OPERATIONSRENT COLLECTION & RELIEF2020 OUTLOOKBALANCE SHEET & LIQUIDITYINVESTMENTSDEVELOPMENTMARKET ROTATION PLANGEOGRAPHIC MIXSUSTAINABILITY
MARS PETCARE HQ | NASHVILLE
HIGHWOODS | AT-A-GLANCE | 2Q201
OPERATIONS
COVID-19 RESPONSE• Existing Business Continuity Plan (BCP)
• BCP created in 2012 and updated annually• Overseen by Executive Leadership• Led by Asset Management (including Customer Service) and Local Teams• Supported by HR, Marketing, Legal and Technology Teams• Customer and employee focused
• Health and wellbeing of employees, customers and guests is primary priority
• Results to-date• All buildings have remained open• Disinfected all impacted areas when there has been virus exposure or
suspected exposure• Developed return-to-work protocols consistent with CDC and local
government guidelines
HIGHWOODS | AT-A-GLANCE | 2Q202
OPERATIONS
RENT COLLECTIONS• Collected 99% of 2Q’20 rents• Collected 99% of July rents• Rent deferral agreements for 1.2% of annualized rent• Multi-functional team across HIW responsible for following up with
late payers• Led by COO, Legal and Local Teams• Supported by Finance and Executive Management
• Objective to protect HIW interests and maximize long-term benefit to HIW• HIW working closely with customers with need-based requests
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2013 2014 2015 2016 2017 2018 2019* 2020**Same Prop Growth Change in Y/Y Avg Occ
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2013 2014 2015 2016 2017 2018 2019 2Q20
Net Effective Rent*** Payback Ratio
%
%
HIGHWOODS | AT-A-GLANCE | 2Q203
AVERAGE IN-PLACE CASH RENT
GAAP RENT GROWTH
SAME PROPERTY AND AVERAGE OCCUPANCY
*2Q20 - trailing twelve months
Outlook range
$/SF
*2019 Same property NOI growth excludes impact from LSI’s sudden closure in Q1’19**2020 outlook range includes 125 basis point impact related to rent deferrals and abatements due to COVID-19
$/SF %LEASE ECONOMICS
***Net effective rent defined as cash rent due over the term less operating expenses and leasing capital expenditures (TI/LC)
OPERATIONS
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2013 2014 2015 2016 2017 2018 2019 2Q20
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2012 2013 2014 2015 2016 2017 2018 2019 2020
2.5 Year 3.5 Year
EXPIRATIONS > 100K SF
HIGHWOODS | AT-A-GLANCE | 2Q204
EXPIRATIONS > 100K SFCustomer Market Expiration SF Comments
2020FAA Atlanta Holdover 100K Finalizing terms
T-Mobile Tampa 3Q 116K Vacated 7/31/2020
2021 None remaining
2022 None remaining
RENEWALS
COMPLETEDOVER THE LAST 2 YEARS
>100K SF
CUMULATIVE FORWARD EXPIRATIONS*PERCENT OF REVENUE
3.5 year avg
2.5 year avg
*As of Q2 for each year
Georgia Building Authority
%
OPERATIONS
23%
18%
12%10%
9%
6%
5%
18%
Professional Services
Finance/Banking
Health & Social Care
Insurance
Manufacturing
Government
Real Estate
Remaining (10 industries)
INDUSTRY DIVERSIFICATION
HIGHWOODS | AT-A-GLANCE | 2Q205
RENT COLLECTION & RELIEF
Need-Based Requests # SF Annualized
Rent %
Deferral as % Annualized
RentAgreed-upon & In-process deals 140 1,991,414 7.8% 1.2%
TOP 10 CUSTOMERS BY % OF RENT*Federal Government 4.9%Bank of America 3.9%Bridgestone Americas 2.6%Metropolitan Life Insurance 2.5%Mars Petcare 1.5%PPG Industries 1.5%EQT Corporation 1.2%Vanderbilt University 1.2%Tivity 1.1%Bass, Berry & Sims 1.1%TOTAL Top 10 Customers 21.4%
SMALL HEALTHCARE PRACTICE
1.7%RESTAURANTS/
RETAIL
1.5%1.3%COWORKING
*Based on annualized cash revenue as of June 2020
2Q’20 RENTSCOLLECTED
99%RENT RELIEF DEALS
JULY RENTSCOLLECTED
99%
2.00
2.50
3.00
3.50
4.00
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019* 2020F**
CHANGES TO FFO OUTLOOK NON-FFO CHANGES TO OUTLOOK$ millions
Outlook midpoint Outlook midpoint
HIGHER PROJECTED
2020 CASH FLOW
***Rent deferral agreements as of July 2020
1.50
1.60
1.70
1.80
1.90
2.00
2016 2017 2018 2019 2020
ANNUALIZED DIVIDEND PER SHARE$
HIGHWOODS | AT-A-GLANCE | 2Q206
FFO PER SHARE
2020 OUTLOOK
*2019 FFO excludes balance sheet write-offs associated with LSI’s sudden closure in Q1’19 and one-time costs associated with the Market Rotation Plan.
HISTORICAL FFO PER SHARE Outlook midpoint
$
**Outlook excludes potential lost revenues and non-cash straight line rent credit losses due to COVID-19.
FFO OUTLOOK REDUCED
<1% AT THE OUTLOOK
MIDPOINT
Outlook as of Feb 4, 2020 Low High$3.60 $3.72
COVID-19 Impacts and Business UpdateRental revenue ($0.04) ($0.02)Parking revenue ($0.09) ($0.05)OpEx savings $0.08 $0.06 G&A savings $0.01 $0.01 Dispositions and miscellaneous items ($0.01) ($0.01)Other $0.04 ($0.03)
Outlook as of July 28, 2020* $3.59 $3.68 *The Company expects it will incur losses during the remainder of 2020 related to customer financial difficulties relates COVID-19. Given the fluidity of the pandemic and its uncertain impacts such losses are too speculative and therefore not included in the outlook as of July 28, 2020.
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2020 2021* 2022* 2023 2024 2025 2026 2027 2028 2029 2030 2031Unsecured Variable Secured
*Proforma maturity ladder assumes net proceeds from offering expected to close August 13, 2020 will be used for the tender offer for June 2021 notes ($150M) and repayment of term loans ($100M) due in 2022
$ millions
HIGHWOODS | AT-A-GLANCE | 2Q207
BALANCE SHEET & LIQUIDITY
36.8% 4.9x 3.47%
1.6% 96.8% Baa2 BBB
Weighted AverageInterest Rate
Net Debt toAnnualized EBITDAre
Debt + Preferredas % of Gross Assets
Secured Debtas % of Gross Assets Unencumbered NOI
STRONG BALANCE SHEET
GREATER THAN
OF PROFORMALIQUIDITY
$750MPROFORMA MATURITY LADDER*
3.78% 4.06% 4.30% 3.24%3.62%1.58% AVERAGE INTEREST RATES 2.65%
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x DEBT/EBITDAre As of 6/30/2020
Proforma liquidity assumes:• $150M notes tendered• $100M payoff of 2022 term loan • Cash on hand remaining after planned August 2020 financing transactions
3.36%
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INVESTMENTS
HIGHWOODS | AT-A-GLANCE | 2Q208
ACQUISITIONS $2.4B TOTAL
DISPOSITIONS $2.2B TOTAL
DEVELOPMENT ANNOUNCEMENTS
ACQUISITIONS & DISPOSITIONS$ millions
$ millions
DEVELOPMENTS $1.5B TOTAL
ACQUISITIONTAMPA
ACQUISITIONRALEIGH
DEVELOPMENTNASHVILLE
DISPOSITIONGREENSBORO
0100200300400500600700800
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Acquisitions Dispositions
Market Acres Office SF Potential Investment
Nashville 58 1,934,000Tampa* 37 1,413,000Raleigh 32 1,093,000Richmond 23 350,000Orlando 2 451,000Atlanta 1 175,000Pittsburgh - 58,000Charlotte - 40,000Total 153 5,514,000
HIGHWOODS | AT-A-GLANCE | 2Q209
DEVELOPMENT PIPELINE
DEVELOPMENT
Current Pipeline Market Invst ($M)
SF(K)
Pre-leased
(%)
ProformaStabilization 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q
MetLife III Raleigh 65 219 100 2Q21
GlenLake Seven Raleigh 44 126 100 1Q21
Midtown One Tampa 71 150 0 4Q22
Virginia Springs II Nashville 38 111 0 3Q22
Asurion HQ Nashville 285 553 98 1Q22
Market Under Construction(SF in millions) Projects % of Stock
Competitive SetPre-leased
(%)
Atlanta 5.2 21 5.1 60
Raleigh 2.4 9 5.6 39
Nashville 1.7 5 5.3 30
Charlotte 1.2 5 4.4 27
Pittsburgh 1.1 7 2.7 43
Tampa 1.0 3 3.6 0
Richmond 0.4 5 1.5 42
PROFORMA DEVELOPMENT CASH RENT COMMENCEMENT
COMPETITIVE SET CONSTRUCTION
FUTURE HEADQUARTERS DELIVERIES
MARTIN MARIETTA2021 Stabilization
ASURION2022 Stabilization
GLENLAKE SEVEN
RALEIGH$44M
Investment
126KSquare Feet
100%Leased
POTENTIAL FUTURE PROJECTS
RALEIGH
RALEIGH PITTSBURGH
TAMPA
NASHVILLE
NASHVILLE
$503MInvestment
1.2MSquare Feet
77%Pre-leased
ASURION HQ NASHVILLE
$285MInvestment
553KSquare Feet
98%Leased
20222020
FUTURE DEVELOPMENT POTENTIAL | LAND BANK
*Includes 600K SF potential at Midtown Tampa not on HIW-owned land
$2.2BTOTAL
2021
HIGHWOODS | AT-A-GLANCE | 2Q2010
FFO NeutralIncreases Cash FlowLeverage NeutralImproves Portfolio QualityImproves Portfolio EfficiencySimplifies OperationsEnhances Future Growth
PHASE ONE COMPLETE
PHASE TWO IN PROGRESSAttractive Properties
MARKET ROTATION PLAN
• Greensboro and Memphis MOB Portfolio• Memphis Office Properties along Poplar Corridor• Greensboro Office PropertiesClosed $23M July 2020
BANK OF AMERICA TOWER | CHARLOTTE
$72M under contract; expected to close in 2020$55M in various stages of sale process
GEOGRAPHIC MIX
GREATER THAN
REVENUEIN TOP ULI MARKETS
PITTSBURGH8%
CHARLOTTE4%
ATLANTA19%
ORLANDO7%
TAMPA13%
NASHVILLE21%
RALEIGH18%
RICHMOND6%
HIGHWOODS | AT-A-GLANCE | 2Q2011
2020 TOP REAL ESTATE MARKETSAustinRALEIGH/DURHAMNASHVILLECHARLOTTEBostonDallas/Fort WorthORLANDOATLANTALos AngelesSeattleTAMPA/ST. PETERSBURG
80%Based on annualized cash revenue as of June 2020 including stabilization of current development pipeline
*Represents remaining properties in Greensboro and Memphis. The Company plans to exit these markets as part of phase two of the market rotation plan.
OTHER*4%
1.2.3.4.5.6.7.8.9.
10.11.
HIGHWOODS | AT-A-GLANCE | 2Q2012
SUSTAINABILITY 2020 SUSTAINABLE GOALSFROM A 2016 BASELINE
20% REDUCTIONenergy intensity
20% REDUCTIONcarbon emissions
10% REDUCTIONwater use
CURRENT GOAL PROGRESSION TO DATESINCE 2016
11.0% reduction to date
11.6%reduction to date
14.9% reduction to date
ADDITIONAL PROGRESS
3.5%energy reduction
In 2019
3.6%GHG emissions
reductionIn 2019
2.4%water reduction
In 2019
67.5average Energy
Star scoreIn 2019
$43Minvested in energy efficiency projects
Since 2006
100%of managed buildings
benchmarked in energy star portfolio
managerSince 2013
100%of eligible core
portfolio achieved energy star certification
68 certifications in 2019
100%of new development
office portfolio(2M SF) LEED
certifiedSince 2013