Highwoods Properties Inc.
) bought a Class A office property - One Alliance Center - in
Buckhead submarket of Atlanta. Notably, this is the sister
building of Two Alliance Center, which the company acquired in
A Premium Property
One Alliance Center is located in close proximity to two
upscale malls titled Phipps Plaza and Lenox Square Mall, and
luxury hotels such as Ritz-Carlton of
Marriott International, Inc.
) and Mandarin Oriental.
Moreover, the building is easily accessible by various modes
of public transport - one of the prerequisites of an office
property that is likely to employ a sizeable number of workers.
Besides its strategic location, the property offers a host of
amenities including a fitness center, conference facilities and a
Currently 67% leased, One Alliance Center is expected to
generate first year cash net operating income (NOI) of $6.2
million (before $1.1 million of free rent) and GAAP NOI of $7.0
million from existing tenants, according to the company.
Highwoods' total investment in One Alliance Center is
projected to be $143.4 million ($259 per square foot). It
includes the purchase price plus investment worth $2.9 million in
planned near-term building improvements as well $0.4 million in
tenant improvements committed under existing leases. In total,
Highwoods invested about $278 per square foot (including planned
building improvements) in One and Two Alliance Center, a 15%
discount to the estimated replacement cost.
Highwoods funded the transaction from the proceeds of its
at-the-market (ATM) stock offering programs, borrowings under its
revolving credit facility, non-core divestiture and available
cash. Since Highwoods' earnings conference call on May 1, 2013,
the company has reportedly sold nearly 1.7 million shares under
its ATM programs, raising net proceeds of $63.0 million.
With this above-mentioned property, Highwoods now owns around
1,045,000 contiguous square feet of Class A office space, at the
center of Buckhead submarket of Atlanta. Moreover, the
company expects occupancy at One Alliance Center to exceed 93% in
the coming three years, provided the planned refurbishment of the
property is accomplished.
Hence, we remain upbeat with this acquisition in one of the
most active office markets of Atlanta. Notably, a large part of
the company's portfolio is now concentrated in the high-growth
Sun Belt markets, which provide above-average job growth owing to
its long-term demographic trends.
Highwoods currently carries a Zacks Rank #3 (Hold). Better
performing REITs that deserve a look include
Sunstone Hotel Investors Inc.
), both of which carry a Zacks Rank #1 (Strong Buy).
COMMONWEALTH RE (CWH): Free Stock Analysis
HIGHWOODS PPTYS (HIW): Free Stock Analysis
MARRIOTT INTL-A (MAR): Free Stock Analysis
SUNSTONE HOTEL (SHO): Free Stock Analysis
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