HIW

Highwoods is a Sun Belt-focused office REIT trading at $28.91, a 19.9x P/E that looks reasonable for a REIT but masks a fundamentally stagnant top line. Revenue has gone backward from $834M in FY2023 to $806M in FY2025 (-2.4% YoY), and operating cash flow fell 11.0% to $359M — the real story for a REIT, where reported net income is distorted by $295M of D&A. The FY2025 EPS jump to $1.45 (+54.3%) is almost certainly non-recurring gains on dispositions rather than core earnings power; MD&A explicitly flags up to $250M of additional non-core asset sales planned for the remainder of 2026, which will continue to flatter EPS while shrinking the rent base.

The balance sheet is workable but tightening. Liabilities grew 6.7% to $3.84B against just 0.8% equity growth, pushing leverage to 1.61x. The 10-K discloses $3.20B of fixed-rate debt (up $341M YoY) and $375M of unhedged variable-rate debt — a 100bp move costs $3.8M annually, manageable but a real headwind in a higher-for-longer regime. Cash is a thin $27.4M, with $725M of revolver capacity already drawn down to $580M by January 30, 2026 — that $145M draw in one month is worth watching. Retained earnings sits at -$870M and worsened, meaning dividends ($217M paid, against $359M OCF) consume ~60% of operating cash, leaving little organic capital for growth.