Highwoods Properties, Inc.

Good morning and welcome to the Highwood Properties First Quarter 2026 Earnings Call. All participants are in a listen-only mode. After the speaker's remarks, we will conduct a question and answer session. To ask a question at this time, you'll need to press star followed by the number one on your telephone keypad. As a reminder, this conference call is being recorded. I would now like to turn the call over to Brendan Majorana, Executive Vice President and Chief Financial Officer. Thank you. Please go ahead.

Thank you, Operator, and good morning, everyone. Joining me on the call this morning are Ted Klink, our Chief Executive Officer, and Brian Leary, our Chief Operating Officer. For your convenience, today's prepared remarks have been posted on the web. If you have not received yesterday's earnings release or supplemental, they're both available on the Investors section of our website at highwoods.com. On today's call, our review will include non-GAAP measures such as FFO, NOI, and EBITDAIR. The release and supplemental include a reconciliation of these non-GAAP measures to the most directly comparable GAAP financial measures. Forward-looking statements made during today's call are subject to risks and uncertainties. These risks and uncertainties are discussed at length in our press releases as well as our SEC filings. As you know, actual events and results can differ materially from these forward-looking statements, and the company does not undertake a duty to update any forward-looking statements. With that, I'll turn the call over to Ted.

Thanks, Brendan, and good morning, everyone. We had an excellent quarter executing on our key initiatives. Leasing volume was strong across our in-service and development properties. This is clear from the 50 basis point increase in our lease rate on our in-service portfolio and 800 basis point increase in our lease rate on our developments. Both of these will deliver meaningful upside in NOI, cash flow, and FFO over the next few years as occupancy ramps. During the quarter, we invested $108 million in best-in-class, commute-worthy properties in BBD locations in Dallas and Raleigh through joint ventures and sold $42 million of non-core properties in Richmond. All of this activity improves our portfolio and further cements the foundation for pushing our growth rate and cash flows meaningfully higher and will result in long-term value creation for our shareholders. Even with our strong performance in the quarter, we recognize the broader narrative that advances in AI could reshape the workforce and therefore affect long-term office demand. The range of potential outcomes is wide and varied, And at this point, there are many unknowns. What we do know, however, is that customers and prospects haven't diminished their appetite for space and are making long-term commitments to their in-office strategies. And activity across our portfolio, our markets, and our BVDs is strong. Leasing was solid in the quarter. Our leasing pipeline remains robust. High-quality space across our BBDs is dwindling, and there's little to no new supply expected during the foreseeable future. This flight-to-quality dynamic creates a strong backdrop for occupancy gains and rent growth, both of which we experienced in the first quarter. Additionally, creditworthy customers are willing to make long-term commitments, as evidenced by our weighted average lease term on second-gen lease volume seven and a half years, more than one year longer than our recent average lease term. Further, demographic trends across our footprint are favorable, with business relocations and expansions re-accelerating, driving healthy population and job growth. We firmly believe high-quality, commute-worthy properties in BBD locations owned by well-capitalized landlords are our best position to capture increasing demand and improving economics. Turning to the quarter, we delivered solid financial performance with FFO of 84 cents per share, and we maintained our outlook for the year. Our leasing performance was excellent. We signed 958,000 square feet of second-gen leases, including over 300,000 square feet of new leases. We delivered gap rent growth of 19.4% and cash rent growth of 4.8%. Net effective rents were the second highest in company history and 9% higher than the prior five-quarter average. Expansions, which we include as renewals, outpaced contractions at a ratio of nearly two to one. In addition, we signed 107,000 square feet of first-gen leases across our development properties. Customers and prospects recognize the blocks of high-quality, BBD-located office space with well-capitalized owners are diminishing across our footprint, which gives us strong pricing power in the best submarkets. We placed in service more than 200 million of 87% leased development properties during the quarter. Glen Lake III, which comprises 203,000 square feet of office, and 15,000 square feet of retail is now 94% leased. Across the street, we delivered Glen Lake II retail, which is 100% leased to Crooked Hammock Brewery. The addition of 24,000 square feet of food and beverage options elevates Glen Lake's offerings and complements the nearly 1 million square feet of office we have here. This has supported our ability to push rents across this park in West Raleigh. We also placed in service Granite Park 6 and Dallas's legacy BBD. This 422,000-square-foot best-in-class office property is 80% leased. We also made strong progress leasing up our two remaining development properties. 23 Springs, our 642,000-square-foot development project in Uptown Dallas, continues to garner strong activity with the lease rate now 83%. up from 75% last quarter and 62% 12 months ago. We have strong prospects to bring our leased rate at 23 springs into the 90s. In Tampa's West Shore BBD, our 143,000 square foot Midtown East development is now 95% leased, up from 76% last quarter and 39% 12 months ago. The office component at Midtown East is 100% leased. On a combined basis, the properties placed in service during the first quarter and in our remaining development pipeline are 86% leased, but only 48% occupied. As the leases commence, we will capture significant growth in NOI, cash flow, and FFO. We are starting to receive interest from build-a-suit and sizable anchor prospects for potential new It's still early, and it's hard to say whether any of these discussions will result in new projects, but the increased interest is encouraging and signifies the limited inventory companies face when searching for large blocks of high-quality space. On the disposition front, we sold a non-core portfolio in Richmond for $42 million. As reflected in our outlook, we expect to sell roughly $200 million of additional non-core assets by the middle of this year, and are marketing other assets for sale. We believe we will be able to redeploy capital from non-core asset and land sales on a leveraged neutral basis that will further strengthen our cash flows and result in higher growth. As we announced last week, we may also use non-core disposition proceeds to repurchase up to 250 million of outstanding shares of our common stock on a leveraged neutral basis. We continue to evaluate acquisition opportunities and highly pre-leased developments, but repurchasing our shares is another capital deployment option we now have in our arsenal. Before turning the call over to Brian, I want to reiterate the priorities we have highlighted over the past few years that will drive long-term value creation for our shareholders. First, we will continue to drive occupancy towards stabilized levels in our operating portfolio. Second, we will deliver and stabilize our development pipeline. Third, we will improve our portfolio quality and long-term growth rate by recycling out of non-core CapEx intensive assets in non-BBD locations and invest in properties with better cash flows and higher long-term growth rates. And fourth, we will do all this while maintaining a strong and flexible balance sheet. We made meaningful progress on each of these priorities during the first quarter. We believe the focus on these four areas, combined with a strong fundamental backdrop in our core BBDs due to the healthy demand and limited new supply, will drive significant growth in cash flow and long-term value over the next several years. Brian?