ハイウッズ・プロパティーズ (HIW) 2026年第3四半期決算説明会：FFO見通しを引き上げ

要点

• ハイウッズ・プロパティーズが発表した2026年第3四半期決算は、純利益が3,180万ドル（1株当たり0.29ドル）、FFO（事業キャッシュフロー）が1億10万ドル（1株当たり0.89ドル）となった。
• 同社は2026年通期の1株当たりFFO見通しを3.51〜3.70ドルに引き上げた。中間値は前回の見通しから0.025ドル、当初の通期見通しから0.065ドル上昇した。
• 賃貸契約は堅調を維持しており、ハイウッズは120万平方フィート超の既存物件（セカンドジェネレーション）賃貸契約を完了し、GAAPベースの賃料成長率は29%、キャッシュベースの賃料成長率は4%となった。
• ポートフォリオの入居率は第2四半期末から130ベーシスポイント上昇し、契約済み率は前四半期比で50ベーシスポイント上昇して90.1%となった。署名済みで未発効の賃貸契約は合計で約80万平方フィートに上る。
• ハイウッズは当四半期中に8,500万ドル、年初来で3億8,600万ドルの非中核資産を売却した。経営陣は年末までにさらに1億〜2億5,000万ドルの売却を見込んでいる。
• デット/EBITDAre倍率は2026年年初の6.7倍から6.1倍に低下した。同社は約2億8,000万ドルの現金を保有しており、7億5,000万ドルのリボルビング信用枠の借入残高はゼロとなっている。

主要財務データ

事業および業績

ハイウッズによると、サンベルト地域のビジネス街において利用可能な供給が減少傾向にある中、高品質なオフィススペースへの需要は引き続き堅調である。既存物件の新規賃貸契約は計30万平方フィートに達し、契約済み率を90%超へ引き上げる要因となった。

シャーロット、ダラス、ナッシュビルが最も好調な市場となった。シャーロットでは、アップタウンおよびサウスパークのポートフォリオ全体で、GAAPベースで77%、キャッシュベースで19%の賃料引き上げを記録した。ダラスではプレストンセンターとアップタウンに需要が集中し、経営陣は空室率の低さと募集賃料の上昇を挙げた。

ナッシュビルは24件・計45万5,000平方フィートの賃貸実績を記録し、そのうち11万1,000平方フィートが新規賃貸契約であり、賃貸面積を牽引した。ナッシュビルにおける年初来の賃貸面積は100万平方フィート近くに達した。ウエストウッド・サウスの契約済み率は2026年年初の0%から88%に達した。

アトランタでは11万1,000平方フィートの賃貸契約が成立し、キャッシュベースで10%、GAAPベースで25%の賃料上昇を達成した。ローリーでは15件・計10万5,000平方フィートの実績を記録し、GAAPベースの賃料は15%上昇した。

経営陣はポートフォリオのキャッシュベースでのマーク・ツー・マーケット（時価評価差額）を前年同期のほぼ横ばいから約7%と試算した。市場賃料は前年比で約10%上昇したと推定され、既存契約における年約3%の賃料スライド条項によって一部相殺された。

ダラスにある総工費4億6,000万ドル、面積64万2,000平方フィートの開発物件「23 Springs」は契約済み率が95%となった。ハイウッズはジョイントベンチャー権益の50%を保有しており、2027年第2四半期までに同物件の稼働が安定化すると見込んでいる。

経営陣の見通し（ガイダンス）

ハイウッズは2026年通期の1株当たりFFO見通しを3.51〜3.70ドルに引き上げた。上限値には1株当たり最大0.14ドルの土地売却益が含まれているが、下限値には含まれていない。2026年に計上済みの土地売却益を除くと、見通しの中間値は0.045ドル引き上げられたと同社は説明した。

同社は年末時点の入居率見通しのレンジを87.0%〜88.0%に絞り込んだが、中間値の87.5%は維持した。経営陣は、四半期ごとに約25万平方フィートの新規賃貸契約が成立すれば、契約満了や更新動向にもよるものの、2027年中にさらに約100ベーシスポイントの入居率上昇を後押しできると期待している。

ハイウッズは年末までにさらに1億〜2億5,000万ドルの非中核資産の売却を完了する見込みである。仮に上限の2億5,000万ドル全額を売却した場合、加重平均キャップレート（還元利回り）は9%台前半から半ばになると経営陣は示唆した。

また見通しには、2026年残りの期間における1億〜4億ドルの新規開発計画の発表可能性が含まれている。経営陣は、対象プロジェクトとしてオーダーメイド型（ビルド・トゥ・スーツ）の物件や大型アンカーテナントが入居予定の開発案を挙げたが、建設期間は通常2〜4年に及ぶと注記した。

投資活動がレバレッジに対して中立的であり続けると仮定した場合、経営陣はデット/EBITDAre倍率が年末にかけて緩やかに低下し、2027年を通じて低下傾向が続くと見込んでいる。

リスクと注視点

金利の上昇により取引プロセスが遅延し、買収資金の調達が困難になっている。経営陣によると、買収に求められるリターン水準はわずかに上昇したほか、売りに出されていた一部の物件が撤回された。

賃貸関連の設備投資額（賃貸CapEx）は年初来で1億4,000万ドルを超え、2026年通期でも高水準が続く見込みである。ハイウッズは入居率の安定に伴い、巡航ベースの年間賃貸CapExが約1億1,000万〜1億2,000万ドルに向けて減少すると予想しているが、経営陣はキャッシュフローが巡航水準に戻るのは2028年以降になるとみている。

GAAPベースとキャッシュベースのNOIの乖離は、直近の賃貸契約に伴うフリーレント期間を反映したものである。テナントによる現金支払いが始まるにつれてキャッシュベースNOIは改善すると経営陣は見込んでいるが、一部の契約については2027年または2028年まで開始されない、あるいは現金支払い状態へ移行しない。

売却代金が再投資されるまでの短期的には、さらなる資産売却が業績を希薄化させる可能性がある。ハイウッズは、2026年に想定を上回る資産売却が行われたことで、1株当たり約0.04ドルの希薄化が生じたと試算している。

アナリストQ&Aの主なポイント

経営陣は、残る1億〜2億5,000万ドルの売却見通しに含まれるすべての物件が契約済みであり、デューデリジェンスが進行中であると述べた。ただし、金利上昇の影響により資金調達およびクロージングの手続きに時間がかかっている。

ハイウッズは2026年において、リスク調整後の要求リターンを満たす買収案件を見出していない。経営陣は現在、物件買収のキャップレートと比較して開発事業のリターンの方が魅力があると捉えているが、建設期間中の金利等の負担費用（キャリングコスト）や賃貸リスクを含めた上でプロジェクトを評価することを強調した。

同社は「Bloc83」における所有比率を現在の10%から最大50%に引き上げるオプションを行使する見込みである。経営陣は、この意思決定について意向の有無ではなく時期の問題であり、資産売却代金や開発へのコミットメントを一部考慮して判断すると説明した。

署名済みの賃貸契約のうち約80万平方フィートが未発効である。経営陣はこのバックログ（未発効の契約残高）が今後数四半期にわたり入居率を支えると期待しており、2027年に向けて判明している大規模な退去の増加予定はないとしている。

高品質な物件の稀少性が増す中、大型テナントが契約満了の3〜5年前から更新交渉を開始するケースが増えているとも経営陣は指摘した。早期更新やテナントの増床は、維持率の向上や将来の賃貸動向の変動抑制につながる可能性がある。

決算説明会（電話会議）トランスクリプト全文

決算説明会の完全なトランスクリプト

経営陣による説明

Operator

Hello, everyone. Thank you for joining us, and welcome to the Highwoods Properties Q3 2026 Earnings Call. [Operator Instructions]

I will now hand the conference over to Brendan Maiorana, Executive Vice President and Chief Financial Officer. Brendan, please go ahead.

Brendan Maiorana

Thank you, operator, and good morning, everyone. Joining me on the call this morning are Ted Klinck, 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 are 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 EBITDAre. 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.

Theodore Klinck

Thanks, Brendan, and good morning, everyone. This quarter's operating results reflect the strengthening fundamentals we have anticipated across our portfolio and our markets. Demand for high-quality office space continues to be strong while supply continues to shrink. A powerful combination. The lack of high-quality office space with limited to no new construction in the strongest BBDs across the Sunbelt is driving a significant rent growth and higher occupancy in our portfolio.

During the quarter, we posted GAAP rent growth of 29% and cash rent growth of 4% on over 1.2 million square feet of second-gen leases, and delivered the second highest second-gen net effective rents in our company's history. Further, our portfolio occupancy increased 130 basis points since the end of June, and our lease rate is now over 90%. Strong lease economics, combined with a positive occupancy trajectory, bolsters our positive outlook for organic NOI growth over the foreseeable future.

In addition to our robust operating performance, we also made progress improving our portfolio quality during the quarter by selling $85 million of noncore properties in Richmond, Atlanta, and Raleigh. Year-to-date, we have sold $386 million of properties at an average cap rate below 8%. This total is approximately $150 million more than our original target at the beginning of the year. Plus, we continue to market additional noncore assets for sale and expect to close at least $100 million more by year-end. These disposition proceeds provide us with meaningful dry powder for future investments.

As we continue to recycle out of older, non-BBD located properties and invest in commute-worthy office buildings in the strongest locations across the Southeast, we expect a corresponding increase in our long-term FFO and cash flow growth rates.

Turning to our financial results, we delivered FFO of $0.89 per share, and once again increased our outlook for the full year, which is now $3.51 to $3.70 per share. At the midpoint, this is $0.025 higher than our prior outlook and $0.065 higher than the beginning of the year. We are especially pleased with the increase in our outlook since the beginning of the year, given $0.04 of higher than anticipated dilution due to increased disposition activity. With our strong operating results, our GAAP same-property NOI outlook has also strengthened. These strong trends illustrate the quality of our portfolio and the health of our markets, and gives us confidence the gains we've made during the past several quarters will sustain into future periods.

As I mentioned earlier, our leasing performance was excellent in terms of both volume and economics. We once again posted strong net effective rents. In the past 5 quarters, we have recorded 3 of our 4 highest net effective rent quarters in our company's history. New leasing volume was healthy with 300,000 square feet of new second-gen deals, which helped drive the lease rate to 90.1%. Our high lease rate, combined with limited expirations and known move-outs, gives us confidence we'll continue to drive occupancy higher.

On the disposition front, we sold $85 million of noncore properties in the third quarter. We sold a portfolio in Richmond for $53 million, a building in our Century Center park in Atlanta for more than $20 million, and 2 buildings in Raleigh for nearly $12 million. As reflected in our outlook, we expect to sell an additional $100 million to $250 million of noncore assets by the end of the year. Going forward, we will continue to prune our portfolio and redeploy that capital into higher quality, more resilient investments.

Turning to development, we are finishing up our current development pipeline with 23 Springs. Our $460 million, 642,000 square foot office tower in Dallas is Uptown BBD, where we have a 50% JV interest. 23 Springs is now 95% leased and projected to stabilize by the second quarter of next year. We expect to replenish our pipeline and have included $100 million to $400 million of new development announcements in our outlook for the remainder of the year. To this end, we have received interest from build-to-suit and sizable anchor prospects for potential new projects, which is further evidence of the lack of available high-quality blocks across our markets.

Companies are willing to pay premium rents, in many instances, substantially more than current top of market rents, to secure space they need to recruit and retain their talent. With construction time lines typically extending 2 to 4 years, any near-term development announcements will take time to show up in our financial results. However, in the current environment, we believe new development with manageable leasing risks presents attractive risk-adjusted returns that will lead to higher FFO and cash flows, a faster growth rate, and better quality portfolio over the long run. We remain active in identifying and evaluating potential acquisitions. To date, we haven't found opportunities with strong risk-adjusted returns like last year, when we closed on nearly $600 million of best-in-class properties across Dallas, Raleigh, and Charlotte.

Before I turn the call over to Brian, I want to reiterate the priorities we are focused on to 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 capture strong rent growth and attractive economics on second-gen leasing. Third, we will recycle out of noncore 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 of this while maintaining a strong and flexible balance sheet.

We made meaningful progress on each of these priorities during the first 3 quarters of the year and believe we have an opportunity to significantly improve our growth rate, BBD mix, and portfolio quality over the next few years. We believe the focus on these 4 areas, combined with a strong fundamental backdrop in our core BBDs due to healthy demand, limited new supply, and increasing rents, will drive significant growth in cash flow and long-term value over the next several years. Brian?

Brian Leary

Thanks, Ted, and good morning, everyone. Kudos to our team for another standout quarter. Ted touched on the supply and demand setup in our BBDs, and the national data shows just how broad it has become. Major brokerage houses are now telling the same story. Nationally, CBRE reported a 10th consecutive quarter of positive net absorption, with vacancy declining for a fifth straight quarter to 18.2%, and national asking rents growing 3.1% year-over-year, the fastest pace since 2016. JLL added that each of the past 4 quarters saw more leasing than any single quarter since 2019, with tenants now growing their footprints by an average of 13%.

At the same time, the office supply pipeline has all but dried up. CBRE projects 2026 will deliver 76% less square feet year-over-year and would represent the lowest year of deliveries since it began tracking the figure in 1990. Piling on, JLL reported that 9.6 million square feet was removed from the national inventory this quarter alone, and a total of more than 45 million square feet has been taken out of service since late 2023, describing landlord leverage in the trophy and new construction segments as extreme. The result is pricing power for what Cushman & Wakefield calls, "workplaces that are driving engagement and facilitating employee development." Or what Highwoods defines as commute-worthy environments and experiences. Amidst this backdrop, our team posted its largest quarterly leasing volume since 2024, and coupled with greater renewal success and consistent new leasing, our occupancy gains continue to track ahead of our original guidance earlier this year.

Turning to our markets, 3 once again stood out: Charlotte, Dallas, and Nashville. In Charlotte, the flight to quality is turning into a scramble for space in the nation's fastest growing city per the Census Bureau. Of the region's 2.9 million people, approximately 1 million live in the city of Charlotte, almost doubling in size since 2000. CBRE reported the fourth consecutive quarter of positive net absorption, 456,000 square feet. And for the second quarter in a row, every class of office posted occupancy gains. At the top of the market, what CBRE calls prime vacancy has dropped more than 650 basis points year-over-year to 7.7%, while asking rents in turn have climbed nearly 20%. With more than 1 million square feet of already leased space set to take occupancy market wide over the next year, and new construction 78% pre-leased, Charlotte is essentially out of the very best space. Our Uptown and SouthPark portfolio is capturing that scarcity directly, as evidenced by GAAP roll-ups of 77% and cash roll-ups of 19% during the quarter.

In Dallas, demand keeps getting stronger. Following nearly 920,000 square feet absorption last quarter, CBRE reported more than 1 million square feet of positive net absorption in the third quarter. Demand is most concentrated in the BBDs we've built our Dallas strategy around. Preston Center posted the lowest vacancy in all of Dallas-Fort Worth at 5.2%. Uptown was among the market's absorption leaders, and average asking rents in both submarkets are now well above $60 a square foot triple net.

Third to Nashville, which was once again our leasing volume leader and where we signed 455,000 square feet across 24 deals in the third quarter. 15 of these represents 111,000 square feet of new leasing, furthering the occupancy build back Nashville is achieving this year. Year-to-date, our Nashville team has now signed nearly 1 million square feet of leases, including more than 360,000 square feet across 41 new deals. The quarter was buoyed by 2 renewals, a 203,000 square foot commitment in Brentwood, and a 77,000 square foot lease in the West End. At Westwood South in Brentwood, a building we've highlighted on recent calls, we signed 38,000 square feet of new leases in the quarter and are now 88% leased, up from 0% at the beginning of the year. Our leasing activity in Music City is happening amid the recurring refrain of a dwindling supply in development pipeline. Last quarter, we noted active construction was limited to 450,000 square feet. Today, CBRE notes that same pipeline has shrunk to just 60,000 square feet across the entire market, while prime asking rents rose nearly 8% in a single quarter to $62 a square foot. With virtually nothing new on the way, commute-worthy space across our core BBDs of Downtown, West End, Brentwood, and Cool Springs is becoming scarce, reinforcing the organic growth embedded in our Nashville portfolio and pipeline.

We also saw encouraging results in Atlanta and here at home in Raleigh. In Atlanta, we signed 111,000 square feet across 12 deals, with cash roll-ups of 10% and GAAP roll-ups of 25%. And in Raleigh, we signed 105,000 square feet across 15 deals, with GAAP rents up 15% and net effective rents above our portfolio average. With no new construction underway in either Atlanta or the Triangle, our well-located assets in both markets are positioned to benefit.

In summary, with a commute-worthy portfolio, a vanishing supply picture, and a trophy asset team operating in the nation's most business-friendly states and markets, Highwoods is well positioned to keep delivering on occupancy gains, rental growth, and long-term value creation.

I'll now turn the call over to Brendan.

Brendan Maiorana

Thanks, Brian. In the third quarter, we delivered net income of $31.8 million, or $0.29 per share, and FFO of $100.1 million, or $0.89 per share. It was a relatively clean quarter, as we did not record any land sale gains, and there were no significant or unusual items to highlight.

Our balance sheet is in excellent shape. We made significant progress lowering our debt-to-EBITDAre ratio from 6.7x at the beginning of the year to 6.1x in the third quarter. We have nearly $280 million of cash on hand and nothing drawn on our $750 million revolving credit facility. During the quarter, we closed a $56 million secured mortgage at our 50/50 Midtown East JV, repatriating over $44 million from this recently stabilized development back to Highwoods. We also closed a $370 million delayed draw secured mortgage at our 50/50 23 Springs joint venture, which refinanced an existing construction loan at the joint venture level and repatriated an additional $55 million back to Highwoods. The only debt maturity we have between now and Q1 2028 is our March 2027 bond, which has a remaining balance of $286 million. This debt can be repaid at par starting on December 1 of this year. Given our strong cash position, we don't anticipate the need to raise capital to address this maturity.

We are working on 1 additional JV financing that we expect to close later this year or early next year, which will repatriate even more capital back to Highwoods and further strengthen our liquidity and unencumbered debt-to-EBITDAre ratio. Based on our current projections for NOI growth, we expect debt-to-EBITDAre to be modestly lower at year-end and continue to decline throughout 2027, assuming otherwise leverage-neutral investment activities.

We agreed to sell 1,056,000 shares on a forward basis through our ATM program at an average gross price of $32.24 per share for total net proceeds of $33.5 million. Given our strong cash position and no balance outstanding on our revolving credit facility, we have not yet settled these forward sale agreements. We expect to use this dry powder as we deploy capital into future investments.

As Ted mentioned, our occupancy improved 130 basis points from the end of Q2, and our lease rate is now 90.1%, up 50 basis points sequentially. We tightened our year-end occupancy outlook to 87.0% to 88.0%, with the midpoint remaining 87.5%. Given our significant backlog of signed, but not yet commenced leases, we remain confident occupancy will move higher by year-end. As you know, for the past few years, we have set a 300,000 square feet in new leasing second-gen volume as a good quarterly marker for us to drive occupancy higher. Given our lease rate is now above 90% and we have a more manageable forward lease expiration schedule with limited large known move-outs, we expect new leasing volumes will moderate going forward. We expect to continue pushing occupancy higher in future years, although it will obviously be more difficult to replicate the 250 basis points of improvement we expect in 2026.

As Ted discussed, we had strong financial and operating results during the quarter, with FFO of $0.89 per share. Same-property NOI growth, occupancy, and rent growth are all trending better than we originally anticipated. As expected, cash flow has been below normalized levels during 2026 as we spend upfront leasing capital to build occupancy before realizing the benefit of higher cash revenues. This is a normal part of the office business cycle. As occupancy increases, free rent periods will burn off, and leasing CapEx will normalize and ultimately result in a significant jump in free cash flow and dividend coverage more in line with our annual metrics earlier this decade.

Before I turn the call back to the operator for questions, I'd like to give some color on our financial outlook. We updated our 2026 FFO outlook to $3.51 to $3.70 per share, which is up $0.025 per share at the midpoint since our prior outlook in July, and includes the possibility of $0.14 per share of land sale gains at the high end and none at the low end. We have 1 possible transaction that could close prior to year-end and result in a large gain. At this point, it's difficult to know whether this transaction will close in 2026 or move into a future year. Excluding land sale gains already recorded this year, we've increased the midpoint of the outlook by $0.045. Stripping out all land sale gains, the midpoint of our outlook implies FFO of more than $0.90 per share for the fourth quarter, which puts us in strong position as we head into 2027. Consistent with our typical practice, we plan to provide our 2027 FFO outlook in February at the same time that we report fourth quarter 2026 results.

Our Q4 outlook obviously doesn't factor in the potential impact of any capital recycling activities. As Ted mentioned, we have $100 million to $250 million of potential additional dispositions that could close by year-end.

Overall, given our implied FFO outlook for the end of 2026, combined with ample cash on hand available for future deployment, we're upbeat about the trajectory of FFO and cash flow for the foreseeable future.

Operator, we are now ready for questions.

Operator

[Operator Instructions] Your first question comes from the line of Seth Bergey with Citi.

質疑応答

Seth Bergey

I just wanted to gather your comments about kind of the potential to do more dispositions and then continue to recycle capital into higher quality acquisitions. Just given the movement in the 10-year, can you just talk a little bit about the transaction environment? Have pricing expectations changed? And as debt costs have gone up, how do you kind of think about your required return expectations?

Theodore Klinck

Seth, thanks for the question. Yes, look, as we mentioned, we have about $100 million to $250 million more of dispo. That's the guidance through the rest of this year. And look, I think everything's -- with the interest rates going up, I think everything's just taking more time, right? And I think just the uncertainty there, but I will tell you every one of the deals is under contract and we're working through due diligence. So we haven't lost anything. Nothing's been dropped yet. And it's really a mix of assets. It's Atlanta, Raleigh, Nashville, Tampa, Richmond, and 1 asset in Pittsburgh as well. So we've got a pretty good insight in what's going on, just given the number of transactions we have. So I think we're waiting and seeing, but so far everything's holding together. It's just taking longer to line up the capital stack from a disposition standpoint.

Now in acquisitions, I think it has slowed down. I think some of the assets around the market have been pulled, and I think, again, just everything is harder. So I think our return requirements have probably gone up a little bit, but not materially, but we continue to look. We just haven't found anything this year. Last year, we successfully bought about $600 million of assets. We just haven't found acquisitions that made our risk-return requirement this year, which is again, one of the reasons we're sort of shifting towards development where we think there's better risk-return requirements.

Seth Bergey

And then maybe kind of one more on your comments towards the end of the prepared remarks around just kind of the CapEx spend, just for us kind of where you are in the office leasing cycle. How should we kind of think about the levels of CapEx as we think about the fourth quarter and then just maybe as we think about the trajectory into 2027 relative to 2026?

Brendan Maiorana

Seth, it's Brendan. Maybe I'll take that one. So yes, we have been spending a lot of capital on the leasing side in 2026, kind of as expected. I think year-to-date, I believe we're north of $140 million of total leasing CapEx. That number is high. And I think it will moderate a little bit in the fourth quarter from where we've been for the first 3 quarters of the year, but still be pretty elevated for all of 2026. We still think that on a normalized basis, as occupancy stabilizes, and then as we look at the forward lease expiration schedule that we have, that -- our leasing CapEx, both in terms of TIs and leasing commissions, is going to moderate kind of into the low $100 million range. So probably $110 million, $115 million, maybe $120 million. So that reduction in leasing CapEx on a go forward basis, combined with the significant embedded cash NOI growth that we have as leases commence and cash commence, is going to create a pretty big jump in terms of free cash flow over time. So we feel good about that.

My expectation in terms of '27 is it'll be an okay year from a cash flow perspective, but certainly not back to what we think of as normalized levels. We think that that's more likely in 2028 and thereafter.

Operator

Your next question comes from the line of Blaine Heck with Wells Fargo.

Blaine Heck

With 23 Springs now essentially stabilized and the outlook contemplating up to $400 million of development announcements, can you just talk about what yields you're targeting given today's construction costs and whether the interest rate elevation and volatility is impacting your decision to commit to a development?

And then maybe just expand on how you weigh the delayed NOI from developments against acquisitions where you're getting immediate contribution. Do you think you can achieve enough of a spread in development yield versus cap rates to compensate you for that delayed NOI recognition?

Theodore Klinck

Blaine, this is Ted. Maybe I'll take the first part, and then Brendan can jump in. Look, I do think higher interest rates, it's impacting our decisions a little bit, or at least we're weighing it. I do think that the headwinds of the higher interest rates are somewhat offset by tailwinds of just the fundamentals. I think the demand is so good that we're seeing out there, since we've started looking at some of these developments that we're feeling a lot of conviction that we can meet our underwritten yields. So it sort of weighs off each other a little bit. But in general, I think it's not going to stop us from doing anything, at least right now. Again, our developments that we're looking at are, some of them are build-to-suit and they're open book. So really, there's no real interest rate risk on that because it is an open book contract with the developer or with the tenant.

And then on the multi-tenant deals, again, the fundamentals seem really, really strong to us. Again, as we look at the yields, the development yields we can achieve relative are far in excess of acquisition cap rates. So we like that spread that's there today.

Brendan Maiorana

And then Blaine, it's Brendan. Just in terms of how we think about the NOI near-term with acquisitions relative to development, where obviously the time cycle on development takes time for that NOI to show up in financial results. We really look at risk-adjusted returns and think about where the highest risk-adjusted returns are, including everything associated with development and acquisitions. Those development returns that we look at include that carry that we have over the time frame. So we think about that there. We don't get too hung up in terms of the near-term financial impact if the risk-adjusted returns are higher on development.

The one thing that I would point out, though, is we've sold $150 million more in terms of dispositions this year than what we thought at the beginning of the year. That capital is sitting in cash, has not been reinvested, and at the same time, we've increased our outlook for FFO as we've migrated throughout the year. So I don't think we're too concerned about the negative impact, the negative carry in terms of disposition assets being recycled into development in the near-term if we feel like those are going to be good projects and good risk-adjusted returns upon delivery and stabilization.

Brian Leary

Blaine, Brian. One little thing on maybe coloring of the users or anchors who we're talking to about potential developments or build-to-suits. The question comes up as to the rate volatility impacting their strategic capital decisions and what we continue to hear, and I know I'm a bit of a broken record on this is that, it's really a strategic talent decision as much as it is a capital decision, which is their greatest investment. And this week, everyone's down in Miami for ULI, and the emerging trends report has come out, and the #7 trend that they highlighted is AI and the human premium. And so, we are seeing that while the interest rates are definitely impacting the broader economy, folks who are pretty convicted around getting their people under one roof and growing. They're not rate agnostic per se, but they're not rate sensitive in getting their folks together.

Blaine Heck

Brendan, maybe sticking with you. Same-property cash NOI was essentially flat at 0.2%, while GAAP NOI grew 4.1%. Straight line rent jumped to $14 million versus $5.5 million a year ago. I guess, can you just walk us through how much of that gap is the free rent associated with the large amount of new leasing you've done and whether there are any specific leases where the free rent burn-off is going to meaningfully change that cash same-store trajectory?

Brendan Maiorana

Yes, Blaine. I mean, most of that delta is attributable to the occupancy build that you've seen, which initially carries that free rent that's there. So the delta between GAAP and cash is principally driven by that. And we've said this before, but there's a structural advantage or that cash NOI growth, cash same-property NOI growth has over GAAP same-property NOI growth, principally because of development, a little bit because of acquisitions. So anytime GAAP is higher than cash, that is a very strong indicator that cash NOI growth is set to increase meaningfully in future periods. So we expect that will be the case as we go forward as a number of these leases that are under free rent today, that free rent burns off, and then they start cash paying. So we've got -- there's a number that are out there, that will move into cash pay in '27, and then there's even some that will commence in '27 that will be in '28. But I think we feel good about the outlook in terms of cash same-property NOI growth for the foreseeable future.

Operator

Your next question comes from the line of Rob Stevenson with Huntington.

Robert Stevenson

Ted, if you exclude the noncore markets, how much of the portfolio today is outside of your BBDs and are likely recycling candidates over time?

Theodore Klinck

Let me -- maybe I'll answer it a different way. I think, if we get -- we have this $250 million or so that we want to get. Most of it's under contract or all of it's under contract. And then, once we get done with that, so that is $250 million, we'll have still a few remaining assets in our Century Center in Atlanta. And those are -- one is a long-term single-tenant deal, government-leased building, and a couple of multi-tenant buildings. And then it's really what we have in Pittsburgh, and PPG primarily. And so, after that, I think it's the $250 million, and then it's Century Center in Pittsburgh.

Robert Stevenson

And then given Brian Leary's positive comments on Raleigh and access to capital from the sales, is there any reason why you wouldn't exercise your option of Bloc83?

Theodore Klinck

No. The answer is no. I think the nice thing about it is, we do have -- it's an ongoing option. So we can just -- it's based on timing. Again, it works if we can get some of the dispo proceeds in the door and if we can figure out these development opportunities. So it's really more just a timing thing. We will -- absolutely, we've been thrilled with that acquisition and how it's performed over the past year. So it's definitely going to happen. It's just a timing thing.

Robert Stevenson

And then last one for me. Brendan, what's the magnitude of the signed not commenced backlog that you talked about in your comments?

Brendan Maiorana

It's about 800,000 square feet. So that will come on over time. But again, I mean, I would -- don't expect that occupancy is going to move to 90% over the next several quarters, like in line with that lease rate, right? There's going to be puts and takes that come there. But I think the spread, which is 310 basis points today is wide versus where we historically operate. Usually, it's 200 or less. So we expect that that lease to occupied spread will narrow over time. But we do feel good just given that we've got roughly 800,000 square feet of new leases that are set to come into occupancy over time. And we think that creates a positive trajectory in terms of our occupancy outlook as we go forward over the next several quarters.

Robert Stevenson

I guess, 1 follow-up to that would be, any sort of incremental known move-outs at this point versus what you guys have talked about in the past that we need to be aware of as we're thinking about '27?

Brendan Maiorana

Nothing major. I mean, I think we feel good about the expiration outlook, and we've talked about this before, in terms of kind of -- and I think often you and others ask about retention levels. I think we feel good about the retention levels both for where we are for fourth quarter and then as we think about 2027. What's remaining there, which excludes all of the early renewals that we've done and pushed out into future years, I think we're around 50% or so for retention on the remaining expirations for the next 5 quarters. That's higher than where we historically are. So that feels good to us, and is another reason why we feel optimistic about the occupancy trajectory as we go forward.

Operator

Your next question comes from the line of Nick Thillman with Baird.

Nicholas Thillman

Maybe commenting a little bit and looking into '27 for a run rate, adjusting for these potential disposition bucket. Ted, you made the comment that blended sales today are around 8% on a cap rate basis. You kind of alluded to some of the markets like Richmond, Century Center. I guess, how should we be thinking about the bucketed assets in that $100 million to $250 million of potential sales in fourth quarter for a cap rate basis? Is it closer to that 8%? Is it lower than that with the Bridgestone assets? Or is it more to that upper end of the low double digits that we saw in the third quarter?

Theodore Klinck

Nick, really, it's all of that. As I mentioned, it's really -- the $250 million is really in 6 different markets. It's a mix of assets. I think if we sold all $250 million, the cap rate would be, call it low- to mid-9s, just a tick below mid-9s cap rate.

Nicholas Thillman

And then Brendan, you made the comment on new leasing. You had put that bogey out there, 300,000 per quarter to continue to build occupancy. But now with the progress you've made on that front, that number might be a little bit lower just given availability within the portfolio. I guess, what's the target that we should be looking at here? Is it closer to 200? Just some commentary there would be helpful.

Brendan Maiorana

Yes, Nick. It's probably, I think, to achieve the occupancy levels that we talked about a quarter ago, which is kind of, let's say, up 100 basis points or so as we migrate throughout '27, so we're 87.5%, give or take, at the end of this year, kind of in that 88.5% context by the end of next year. It's probably around 250 a quarter, give or take. Again, depends probably a little bit on where some of the expirations fall and whether or not we're able to renew those. But I think 250 is probably a pretty good bogey -- lower bogey to continue to drive occupancy higher.

Nicholas Thillman

And then maybe just following up on a question Blaine asked earlier on development yields. If we look at maybe your newer acquisitions with market rents, say maybe Bloc83 or The Terraces, I guess, how do those rents compare to the rents that you're talking with on build-to-suit projects? Is the differential 20%, 25%? I'm just trying to get a gauge on some of the opportunity there to push rate.

Theodore Klinck

Yes, Nick. So our most recent acquisitions where we've done subsequent leasing, I would tell you, 600 Tryon we acquired roughly a year ago. So we leased up that vacancy. I think the building was like 83% leased when we bought it, and we're now in the mid-90s. We leased it up quicker and at much higher rents, over 10% higher rents than what we underwrote. So the market rents are really moving quickly. And I'd tell you today, if we did a lease today, it'd be even quite a bit higher than that.

Then The Terraces, I think we've just done 1 lease, and it's like 23% or 24% higher than our underwriting. Again, we bought that building in January. So rents continue to move both in Charlotte and Dallas very quickly. Different cadence through all of our markets, but more so in Dallas and Charlotte.

In Raleigh, we just did 1 renewal there, and I think it was maybe 4% or 5% higher. Not quite the level of Dallas and Charlotte.

Brian Leary

Maybe one clip on is that's just to our underwriting, but to mark-to-market's even more than that, right, Ted, in terms of that?

Operator

Your next question comes from the line of Peter Abramowitz with Deutsche Bank.

Peter Abramowitz

So you've seen a nice acceleration in pricing power as reflected through the leasing spreads over the past couple of quarters. Just wondering if you could talk about your updated thoughts on how you see mark-to-market across the portfolio, and specifically, if you could help us frame how you're thinking about that in terms of lease trade-offs for 2027 and how that will impact the earnings trajectory.

Brendan Maiorana

Peter, it is Brendan. Maybe I'll take that. So just to answer the question directly, it's probably up about, let us call it about plus 10%. I think -- plus 7% mark-to-market across the portfolio. I think if you look at market rents across our portfolio, we're probably up about 10% kind of year-on-year. And then we've got in-place annual escalators that are, call it up around 3%. So you take that 3% off of kind of the in-place that has gone up that much versus 10% of market rents, and you kind of get to about a plus 7% compared to roughly flat a year ago. That's on a cash basis.

Cash spreads in any given quarter are going to kind of bounce around a little bit. So we'll see where those numbers shake out as we go forward. Obviously, on a GAAP basis, we've been successful pushing term out longer, and we've been successful with pushing annual bumps. So -- and free rent has come down a little bit. So all of those things benefit the GAAP spread. So I think that's part of the reason why you've seen those GAAP spreads accelerate faster than where we've seen the cash rent spreads.

Operator

Your next question comes from the line of Tom Catherwood with U.S. Bancorp.

William Catherwood

Just wanted to go back to your answer to Nick's question and get a little bit more specific on the development rents. So maybe in your strongest markets, like your Nashvilles and Dallas and Charlottes, what rents do you need to justify new development, and what is that gap to kind of the market rents right now?

Theodore Klinck

Sure. Look, Dallas is currently getting market rents in that, call it, $100 net, call it maybe $90 to $100 net, or $85 to $100 net rate, and that is what you need to justify new development today. So Dallas, we are there, right? So second, Charlotte probably needs $90 on a more of a gross basis, $90 to $95, probably. Highest rents achieved probably in the 70s, low 70s today. So what's that? Maybe 20% off, if you will. And then Nashville is probably in that same ballpark as well.

William Catherwood

And then last one for me. In general, with space getting tighter in your markets, how much are tenants coming to you for early renewals? And could that have a benefit to cash flow in the coming years if you are able to do more renewals instead of new leasing?

Theodore Klinck

Yes, look, you hit on a trend that we're seeing. I might even mentioned it, I cannot remember if it was last quarter. But we are absolutely seeing customers that have expirations. Typically, the larger customers have expirations. It used to be maybe 2 years out. Now, I would say it's 3 to 5 coming to us, and they're seeing that there's not going to be any new supply in the next several years. So they want to renew, probably lock in favorable economics, but also make sure they've got space that accommodates their needs if they want to upgrade their space. So without a doubt, we are seeing, and we are renewing, certain customers that have expirations that are well before the natural expiration date.

Brian Leary

Tom, it's Brian here real quick. I think we've mentioned this in the past. We haven't been shy about being proactive kind of in this space where the majority of our assets are unsecured with regard to debt. We don't have a debt partner. We can reach forward with certain anchors and larger customers to secure them now and extend them. At the same time, many of them are expanding, too, so they want to go ahead and take care of that before they run out of space.

Operator

Your next question comes from the line of Dylan Burzinski with Green Street.

Dylan Burzinski

Brendan, I think you mentioned -- I joined late, so excuse me if I'm misquoting you, but I think you mentioned market rents are up 10% year-over-year across the portfolio. Ted, I know you sort of walked through some of the markets versus underwriting, but could you walk through sort of how that 10% shapes up across the various markets in which you own assets in?

Theodore Klinck

Sure. Look, I think our strongest 2 markets where you've seen well in excess of 10%, again, it's Dallas and Charlotte. And I'd say Nashville's moving at a pretty good pace as well. And then after that, I think Tampa, we're seeing some real movement there. The interesting thing about Tampa is, there's no new space, new first-gen space. That may temper some of the rent growth for a bit. But again, despite the quality, so I think owners are going to have a good headwind or tailwind there as well.

And then I think you're seeing smaller rent increases in maybe Atlanta, Raleigh, and Orlando, I would say. But I think you're going to start seeing. We're starting to see a lot of momentum in Raleigh. There just happen to be a lot of first-gen spaces still being absorbed, but the demand has been pretty good, so I think that's going to pick up. So again, all of our markets are increasing. It's just the pace is different across the markets.

Dylan Burzinski

And I guess with that in mind, I know a lot of focus on the capital markets environment has been related to higher rates. But as you think about or as you look at or as you've seen buyer underwriting, right, as you guys are out in the market, are you seeing people lean into that rent growth story as they look out the next two, three years, and how has that maybe impacted pricing?

Theodore Klinck

No, I think they have, Dylan. Again, we look at all the acquisitions that are out there and the pricing that we've seen on the deals that we've pursued. We just haven't matched up with our pricing expectations. So I think there's buyers out there that have got a pretty good view of -- or opinion of rent growth. They may be right at the end of the day. But we've seen some fairly aggressive pricing on some high-quality assets.

Operator

Your next question comes from the line of Ronald Kamdem with Morgan Stanley.

Ronald Kamdem

Just looking for some breadcrumbs on same-store NOI as we're thinking about sort of this year and how it could play out. Obviously, occupancy's been building, so it should be a tailwind next year. Just curious if you could provide some high-level comments on either any known expirations or commencements or free rents. Like how do we think about the puts and takes with same-store NOI as we start to flip the calendar?

Brendan Maiorana

Ron, it's Brendan. Yes, I mean, I think the biggest indicator, as I mentioned earlier is just when GAAP is high and it's higher than cash, then that's a strong signal that you're going to see cash have a corresponding increase in future periods. So there is likely to be a lot of conversion of current free rent, noncash rent into cash. This year, I think our straight line guidance is mid-$40 million range. That number is normally low to mid-20s, so that gives you a pretty good indication of how much higher we are in terms of noncash rent to free rent. So a lot of that will come online, combined with some occupancy gains, I think will drive same-property outlook on a cash basis. And probably in all likelihood, on a GAAP basis next year to above trend levels would be expectations, at least as we sit here today.

Ronald Kamdem

And then my second one, and sorry if this was asked, but on the acquisitions, the potential, obviously, number went down. The ones that slipped away, what happened there? Was it pricing? Was it competition? Just curious what happened to those deals that you guys thought could be possible but are no longer possible.

Theodore Klinck

Yes, Ron, you might be referring to when we took the guidance down from $85 million at the low end to 0, and that is solely the timing of the acquisition on Bloc83, where we have an option -- ongoing option to acquire. We currently own 10% of that asset with our partner. We have an option to buy up to 50%, and it's really just a timing issue. We don't know if we will actually exercise that option late this year or sometime next year. There is not a question of if, it's just when right now.

Ronald Kamdem

And that's what drove the revision downwards.

Operator

There are no further questions at this time. I will now turn the call back to Ted Klinck for closing remarks.

Theodore Klinck

Well, thank you all for joining the call this morning, and thank you for your continued interest in Highwoods. We look forward to seeing everybody at NAREIT, and we will be having a bus tour. So if you are interested, just reach out to Brendan and get on the schedule. Thanks, everybody.

Operator

This concludes today's call. Thank you for attending. You may now disconnect.