Highwoods Restructures its Portfolio - Analyst Blog

By
A A A

Highwoods Properties Inc. ( HIW ) declared the acquisition of its joint venture (JV) partner's interests in 2 Atlanta-based Class Aoffice properties. Concurrently, the company revealed the divestiture of its Tampa-based non-core office asset. These moves are part of the company's ongoing portfolio enhancement activity.

Acquisition Details

In particular, Highwoods bought its JV partner's 57% interest in 10-story office buildings - Glenlake North and Glenlake South - positioned in Atlanta's Central Perimeter submarket. The 82% leased properties, spanning 505,000 square feet, were acquired for $45.4 million.

With the valuation at $80.6 million, including planned near-term building improvements worth $1.0 million, the assets have a value per square foot of $159, signifying a 30+% discount to the estimated replacement cost. Moreover, the total incremental investment is projected to be around $46.0 million. Management expects the acquired properties to generate full-year cash and GAAP net operating income of $5.1 million and $6.0 million, respectively.

The assumed secured debt portion for the property is projected to be around $37.6 million. The company funded the remaining equity portion, worth $24.0 million, of the purchase price with proceeds generated from its recent equity offering of shares, non-core divestitures and borrowings under its revolving credit facility. Notably, management projects about $0.2 million of acquisition costs to be expensed in the third quarter of 2013.

Divestiture Details

Highwoods divested a 2-story non-core office building - Anchor Plaza - in Tampa. The 56% leased asset, spanning 98,000 square feet, was sold for $11.6 million and generated a non-FFO gain of $1.2 million.

Conclusion

We expect Highwoods' portfolio repositioning activity to boost the company's occupancy growth and strengthen its position in one of the best office markets of the U.S. Year-to-date, Highwoods has vended non-core assets worth $80 million and acquired high-quality properties worth $396 million. Moreover, the company has another $129 million in its in-process development pipeline (93% pre-leased).

Highwoods currently carries a Zacks Rank #2 (Buy). Other better performing REITs include Winthrop Realty Trust ( FUR ), SL Green Realty Corp ( SLG ) and EastGroup Properties ( EGP ). While Winthrop carries a Zacks Rank #1 (Strong Buy), SL Green and EastGroup both have a Zacks Rank #2.  



EASTGROUP PPTYS (EGP): Free Stock Analysis Report

WINTHROP REALTY (FUR): Free Stock Analysis Report


HIGHWOODS PPTYS (HIW): Free Stock Analysis Report

SL GREEN REALTY (SLG): Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.




This article appears in: Investing , Business , Stocks

Referenced Stocks: EGP , FUR , HIW , SLG

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

Most Unique Homes for Sale
Most Unique Homes for Sale          

Stocks

Referenced

Most Active by Volume

76,389,843
  • $16.11 ▲ 1.13%
54,914,450
  • $128.95 ▲ 3.04%
49,328,034
  • $14.15 ▲ 5.44%
37,951,947
  • $16.54 ▲ 4.88%
36,958,408
  • $37.84 ▼ 2.87%
35,690,832
  • $48.655 ▲ 0.03%
35,241,746
  • $6.50 ▼ 1.22%
34,734,899
  • $8.07 ▲ 5.08%
As of 5/1/2015, 04:15 PM


Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com