HIW Net Income Jumps 23.6% on Property Sales, Revenue Dips

TL;DR

**HIW's net income looks good on paper, but dig deeper: property sales are masking a dip in core rental revenue and operating cash flow, making it a cautious hold.**

AI Summary

HIGHWOODS PROPERTIES, INC. (HIW) reported a mixed financial performance for the nine months ended September 30, 2025. Net income increased significantly to $132.9 million, up from $107.5 million in the prior year, representing a 23.6% increase. This was largely driven by a substantial rise in gains on disposition of property, which surged to $87.9 million from $42.6 million in 2024. However, rental and other revenues decreased by 2.8% to $602.8 million from $620.3 million. Operating expenses saw a slight decrease to $455.2 million from $459.0 million, primarily due to lower depreciation and amortization. The company also recorded an impairment of real estate assets of $8.8 million in 2025, compared to none in 2024. Cash provided by operating activities decreased by 13.4% to $259.5 million from $299.9 million, while net cash used in investing activities increased to $239.4 million from $205.0 million, largely due to $248.0 million in investments in acquired real estate. Net cash used in financing activities decreased substantially to $12.1 million from $92.5 million, driven by increased borrowings on the revolving credit facility and proceeds from common stock issuance.

Why It Matters

HIW's significant increase in net income, primarily from property dispositions, suggests a strategic shift towards optimizing its real estate portfolio, which could be a positive for long-term shareholder value. However, the decline in rental revenue and operating cash flow indicates potential headwinds in its core business, raising questions about sustainable growth. Investors should scrutinize whether these property sales are one-off gains or part of a broader, value-accretive strategy. In a competitive real estate market, HIW's ability to generate consistent rental income and manage its debt, which increased to $3.4 billion, will be crucial for its competitive positioning and market perception.

Risk Assessment

Risk Level: medium — The risk level is medium due to declining rental and other revenues, which fell by $17.6 million (2.8%) for the nine months ended September 30, 2025, compared to the prior year. Additionally, cash provided by operating activities decreased by $40.3 million (13.4%) to $259.5 million. These factors, coupled with an $8.8 million impairment of real estate assets, suggest potential challenges in core operational performance despite higher net income driven by asset sales.

Analyst Insight

Investors should closely monitor HIW's future rental revenue trends and occupancy rates, as the current net income boost from property sales may not be sustainable. Evaluate the quality and strategic rationale behind the $248.0 million in acquired real estate to ensure it will generate strong, recurring income. Consider a 'hold' position until clearer signs of organic revenue growth emerge.

Financial Highlights

revenue

$602.8M

total Assets

$6.14B

total Debt

$3.40B

net Income

$132.9M

cash Position

$26.3M

revenue Growth

-2.8%

Revenue Breakdown

Key Numbers

• $132.9M — Net Income (Increased 23.6% for the nine months ended September 30, 2025, from $107.5M in 2024.)
• $87.9M — Gains on Disposition of Property (Increased from $42.6M in 2024, significantly contributing to net income.)
• $602.8M — Rental and Other Revenues (Decreased 2.8% for the nine months ended September 30, 2025, from $620.3M in 2024.)
• $259.5M — Net Cash Provided by Operating Activities (Decreased 13.4% for the nine months ended September 30, 2025, from $299.9M in 2024.)
• $248.0M — Investments in Acquired Real Estate (New investment for the nine months ended September 30, 2025, impacting investing cash flow.)
• $8.8M — Impairments of Real Estate Assets (Recorded in 2025, compared to zero in 2024, indicating asset value adjustments.)
• $3.4B — Mortgages and Notes Payable, net (Increased from $3.29B at December 31, 2024, reflecting higher debt levels.)
• 109,893,942 — Common Stock Outstanding (As of October 21, 2025, indicating shareholder base.)

Key Players & Entities

• HIGHWOODS PROPERTIES, INC. (company) — registrant and parent company
• Highwoods Realty Limited Partnership (company) — operating partnership
• New York Stock Exchange (regulator) — exchange where HIW Common Stock is registered
• $132,928,000 (dollar_amount) — Net income for the nine months ended September 30, 2025
• $107,452,000 (dollar_amount) — Net income for the nine months ended September 30, 2024
• $87,889,000 (dollar_amount) — Gains on disposition of property for the nine months ended September 30, 2025
• $42,581,000 (dollar_amount) — Gains on disposition of property for the nine months ended September 30, 2024
• $602,756,000 (dollar_amount) — Rental and other revenues for the nine months ended September 30, 2025
• $620,336,000 (dollar_amount) — Rental and other revenues for the nine months ended September 30, 2024
• $8,800,000 (dollar_amount) — Impairments of real estate assets for the nine months ended September 30, 2025

FAQ

Risk Factors

• Real Estate Asset Impairment [medium — financial]: The company recorded an impairment of real estate assets of $8.8 million for the nine months ended September 30, 2025. This indicates a reduction in the carrying value of certain properties, potentially due to market conditions or specific asset performance issues, contrasting with no such impairments in the prior year.
• Increased Debt Levels [medium — financial]: Mortgages and notes payable, net, increased to $3.4 billion as of September 30, 2025, from $3.29 billion at December 31, 2024. This rise in leverage could increase financial risk, especially in a rising interest rate environment.
• Decreased Operating Cash Flow [medium — financial]: Cash provided by operating activities decreased by 13.4% to $259.5 million for the nine months ended September 30, 2025, from $299.9 million in the prior year. This reduction in cash generation from core operations could impact the company's ability to fund investments and service debt.
• Increased Investment in Real Estate [medium — financial]: Net cash used in investing activities increased to $239.4 million, largely due to $248.0 million in investments in acquired real estate for the nine months ended September 30, 2025. While strategic, significant acquisitions can strain liquidity and increase financial risk if not managed effectively.

Industry Context

The real estate investment trust (REIT) sector, particularly office REITs like Highwoods Properties, faces evolving market dynamics. Trends include a shift towards flexible work arrangements, increased demand for modern, amenity-rich spaces, and a bifurcation between high-quality, well-located assets and older, less desirable properties. Competition remains intense, with companies vying for tenants through property upgrades and flexible lease terms.

Regulatory Implications

As a publicly traded REIT, Highwoods Properties is subject to SEC regulations and accounting standards (GAAP). Compliance with reporting requirements, fair disclosure, and accurate financial statement preparation are critical. Changes in tax laws or real estate regulations could also impact the company's operations and profitability.

What Investors Should Do

1. Monitor rental revenue trends and occupancy rates closely.
2. Analyze the drivers of increased debt and investment activity.
3. Evaluate the impact of real estate impairments.
4. Assess the sustainability of net income growth.

Glossary

Gains on disposition of property

Profits realized from selling real estate assets. These are typically one-time events and can significantly impact net income in a given period. (A substantial increase in these gains ($87.9M in 2025 vs $42.6M in 2024) significantly boosted net income, but masks underlying operational revenue trends.)

Impairment of real estate assets

A reduction in the book value of a real estate asset when its fair value is determined to be less than its carrying amount on the balance sheet. (The $8.8 million impairment recorded in 2025 indicates a potential decline in the value of certain company properties, impacting profitability.)

Accrued straight-line rents receivable

Rent revenue that has been earned but not yet received, recognized on a straight-line basis over the lease term, regardless of the actual cash payment schedule. (This represents a significant asset ($317.1M as of Sep 30, 2025), reflecting future rental income recognized in advance.)

Noncontrolling interests in the Operating Partnership

The portion of equity in a subsidiary that is not owned by the parent company. In this case, it represents the ownership stake in Highwoods Realty Limited Partnership not held by Highwoods Properties, Inc. (This impacts the consolidated equity and net income attributable to the parent company's shareholders.)

Distributions in excess of net income available for common stockholders

A contra-equity account that reflects cumulative distributions paid to common stockholders that exceed the net income available to them over time. (A negative balance ($-843.8M) indicates that the company has distributed more cash to common stockholders than it has generated in net income available to them, potentially through other sources like debt or asset sales.)

Year-Over-Year Comparison

For the nine months ended September 30, 2025, Highwoods Properties reported a 23.6% increase in net income to $132.9 million, primarily driven by a substantial rise in gains from property dispositions ($87.9 million vs. $42.6 million). However, core rental and other revenues saw a 2.8% decline to $602.8 million. Operating cash flow decreased by 13.4% to $259.5 million, while debt levels increased to $3.4 billion. A new risk emerged with an $8.8 million impairment of real estate assets, absent in the prior year.

Filing Documents

• hiw-20250930.htm (10-Q) — 1843KB
• hiw09302025ex311.htm (EX-31.1) — 9KB
• hiw09302025ex312.htm (EX-31.2) — 9KB
• hiw09302025ex313.htm (EX-31.3) — 9KB
• hiw09302025ex314.htm (EX-31.4) — 9KB
• hiw09302025ex321.htm (EX-32.1) — 4KB
• hiw09302025ex322.htm (EX-32.2) — 4KB
• hiw09302025ex323.htm (EX-32.3) — 4KB
• hiw09302025ex324.htm (EX-32.4) — 4KB
• hiw-20250930_g1.jpg (GRAPHIC) — 2KB
• 0000921082-25-000044.txt ( ) — 8988KB
• hiw-20250930.xsd (EX-101.SCH) — 55KB
• hiw-20250930_cal.xml (EX-101.CAL) — 109KB
• hiw-20250930_def.xml (EX-101.DEF) — 354KB
• hiw-20250930_lab.xml (EX-101.LAB) — 691KB
• hiw-20250930_pre.xml (EX-101.PRE) — 566KB
• hiw-20250930_htm.xml (XML) — 1225KB

- Controls and Procedures; and

Item 4 - Controls and Procedures; and

- Certifications of CEO and CFO Pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act

Item 6 - Certifications of CEO and CFO Pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act. HIGHWOODS PROPERTIES, INC. HIGHWOODS REALTY LIMITED PARTNERSHIP QUARTERLY REPORT FOR THE PERIOD ENDED SEPTEMBER 30, 2025 TABLE OF CONTENTS Page

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 3 HIGHWOODS PROPERTIES, INC.: Consolidated Balance Sheets as of September 30, 2025 and December 31, 2024 3 Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2025 and 2024 4 Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2025 and 2024 5 Consolidated Statements of Equity for the Three and Nine Months Ended September 30, 2025 and 2024 6 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2025 and 2024 8 HIGHWOODS REALTY LIMITED PARTNERSHIP: Consolidated Balance Sheets as of September 30, 2025 and December 31, 2024 10 Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2025 and 2024 11 Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2025 and 2024 12 Consolidated Statements of Capital for the Three and Nine Months Ended September 30, 2025 and 2024 13 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2025 and 2024 15 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 17

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 31 Disclosure Regarding Forward-Looking Statements 31 Executive Summary 32 Results of Operations 35 Liquidity and Capital Resources 38 Critical Accounting Estimates 41 Non-GAAP Information 41

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 44

CONTROLS AND PROCEDURES

ITEM 4. CONTROLS AND PROCEDURES 44

- OTHER INFORMATION

PART II - OTHER INFORMATION

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS 45

EXHIBITS

ITEM 6. EXHIBITS 45 2 Table of Contents

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS HIGHWOODS PROPERTIES, INC. Consolidated Balance Sheets (Unaudited and in thousands, except share and per share data) September 30, 2025 December 31, 2024 Assets: Real estate assets, at cost: Land $ 594,825 $ 570,286 Buildings and tenant improvements 6,017,574 5,826,603 Development in-process 3,657 — Land held for development 214,467 221,048 6,830,523 6,617,937 Less-accumulated depreciation ( 1,883,882 ) ( 1,796,586 ) Net real estate assets 4,946,641 4,821,351 Real estate and other assets, net, held for sale 10,490 55,409 Cash and cash equivalents 26,262 22,412 Restricted cash 15,481 11,265 Accounts receivable 30,344 28,287 Mortgages and notes receivable 6,211 11,064 Accrued straight-line rents receivable 317,072 308,853 Investments in and advances to unconsolidated affiliates 497,002 485,726 Deferred leasing costs, net of accumulated amortization of $ 165,547 and $ 170,312 , respectively 225,307 209,967 Prepaid expenses and other assets, net of accumulated depreciation of $ 23,897 and $ 20,626 , respectively 64,683 75,021 Total Assets $ 6,139,493 $ 6,029,355 Liabilities, Noncontrolling Interests in the Operating Partnership and Equity: Mortgages and notes payable, net $ 3,404,707 $ 3,293,559 Accounts payable, accrued expenses and other liabilities 283,905 304,551 Total Liabilities 3,688,612 3,598,110 Commitments and contingencies Noncontrolling interests in the Operating Partnership 65,042 65,791 Equity: Preferred Stock, $ .01 par value, 50,000,000 authorized shares; 8.625 % Series A Cumulative Redeemable Preferred Shares (liquidation preference $ 1,000 per share), 26,691 and 28,811 shares issued and outstanding, respectively 26,691 28,811 Common Stock, $ .01 par value, 200,000,000 authorized shares; 109,553,557 and 107,623,777 shares issued and outstanding, respectively 1,096 1,076 Additional paid-in capital 3,200,251 3,144,130 Distributions in excess of net income avai

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