Highwoods Announces Recent Investment and Financing Activity

Rhea-AI Summary

Highwoods Properties (NYSE:HIW) has announced several key transactions in Q4 2024 and early 2025. The company completed the sale of non-core properties in Raleigh and Tampa for $166.4 million, including one office building in North Raleigh (170,000 sq ft) and three buildings in Tampa's Westshore submarket (616,000 sq ft). These properties were 88% occupied with projected 2025 GAAP net operating income of $13.6 million.

Additionally, HIW acquired fee simple title to the land underneath its Century Center assets for $50.6 million. The Century Center is a 12-building office park in Atlanta's Chamblee/N. Druid Hills submarket, spanning 1.7 million square feet with 13 acres of developable land.

The company also raised $51.3 million through the sale of 1.59 million shares of common stock at an average price of $32.71 per share in Q4 2024.

Positive

• Sale of non-core assets generated $166.4 million in gross proceeds
• Acquisition of Century Center land provides increased operational flexibility
• Raised $51.3 million through equity offering, strengthening balance sheet
• Created financial flexibility for future growth opportunities in 2025

Negative

• Loss of $13.6 million in annual GAAP net operating income from sold properties
• Potential shareholder dilution from 1.59 million new shares issued

Insights

Financial Analyst

The recent series of transactions by Highwoods Properties reveals a strategic repositioning effort with significant financial implications. The $166.4M disposition of non-core assets at an implied cap rate of approximately 7.8% (based on projected cash NOI of $13.0M) suggests a disciplined approach to portfolio optimization. This cap rate indicates these assets were likely mature properties with growth potential, making their disposition timely in the current market environment.

The $50.6M acquisition of the Century Center land is particularly strategic. By eliminating the ground lease structure, Highwoods removes future escalating ground rent obligations and gains complete control over 1.7 million square feet of office space plus 13 acres of developable land. This consolidation enhances the company's flexibility for future redevelopment or repositioning opportunities in the growing Chamblee/N. Druid Hills submarket of Atlanta.

The equity raise of $51.3M at $32.71 per share, while slightly dilutive, strengthens the balance sheet and provides dry powder for future opportunities. Combined with the disposition proceeds, Highwoods has accumulated nearly $220M in deployable capital. This substantial liquidity position enables the REIT to act opportunistically in 2025, particularly as distressed office assets may become available at attractive valuations.

The timing of these transactions appears strategic, as the company is positioning itself to potentially take advantage of market dislocations while simultaneously reducing exposure to non-core assets that may face headwinds in the challenging office market environment. The focus on balance sheet strength and portfolio quality improvement indicates a conservative yet opportunistic approach to navigating the current market cycle.

RALEIGH, N.C., Feb. 03, 2025 (GLOBE NEWSWIRE) -- Highwoods Properties, Inc. (NYSE:HIW) is today announcing investment and financing transactions that closed during the fourth quarter of 2024 and to date in early 2025.

First, the Company has sold in a series of transactions non-core buildings in Raleigh and Tampa for combined gross proceeds of $166.4 million. Gross proceeds from dispositions closed in the fourth quarter of 2024 totaled $21.4 million with the remainder closing early in the first quarter of 2025. The sold properties include one office building encompassing 170,000 square feet in North Raleigh and three buildings encompassing 616,000 square feet in the Westshore submarket of Tampa. On a combined basis, these properties are 88% occupied and were projected to generate $13.6 million of GAAP net operating income and $13.0 million of cash net operating income in 2025.

Second, in the fourth quarter of 2024, the Company acquired fee simple title to the land underneath its Century Center assets for $50.6 million. The Company previously held most of its buildings in Century Center, a 12-building office park encompassing 1.7 million square feet and 13 acres of developable land in the Chamblee/N. Druid Hills submarket of Atlanta, pursuant to a long-term ground lease with a third party who owned fee simple title to the land.

Third, in the fourth quarter of 2024, the Company sold 1.59 million shares of its common stock at an average gross sales price of $32.71 per share, raising net proceeds of $51.3 million.

Ted Klinck, President and Chief Executive Officer, stated, “Our recent disposition activity demonstrates our continuing ability to execute on our long-standing strategy of selling non-core assets with limited future upside and ultimately using the proceeds to recycle into higher-quality buildings. The nearly $220 million of proceeds from these non-core dispositions and equity raised during the fourth quarter, further bolsters our already strong balance sheet and creates dry powder for future external growth opportunities in 2025.”

“Acquiring the land underneath our Century Center assets consolidates our ownership of the buildings and the land, which provides us with more long-term flexibility and certainty,” added Mr. Klinck.

About Highwoods
Highwoods Properties, Inc., headquartered in Raleigh, is a publicly-traded (NYSE:HIW), fully-integrated office real estate investment trust (“REIT”) that owns, develops, acquires, leases and manages properties primarily in the best business districts (BBDs) of Atlanta, Charlotte, Dallas, Nashville, Orlando, Raleigh, Richmond and Tampa. Highwoods is in the work-placemaking business. We believe that by creating environments and experiences where the best and brightest can achieve together what they cannot apart, we can deliver greater value to our customers, their teammates and, in turn, our stakeholders. For more information about Highwoods, please visit our website at www.highwoods.com.

Forward-Looking Statements
Some of the information in this press release may contain forward-looking statements. Such statements include, in particular, statements about our plans, strategies and prospects such as the following: the expected financial and operational results and the related assumptions underlying our expected results; the planned sales of non-core assets and expected pricing and impact with respect to such sales, including the tax impact of such sales; the anticipated total investment, projected leasing activity, estimated replacement cost and expected net operating income of acquired properties and properties to be developed; and expected future leverage of the Company. You can identify forward-looking statements by our use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue” or other similar words. Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, we cannot assure you that our plans, intentions or expectations will be achieved.

Factors that could cause our actual results to differ materially from Highwoods’ current expectations include, among others, the following: the financial condition of our customers could deteriorate; our assumptions regarding potential losses related to customer financial difficulties could prove incorrect; counterparties under our debt instruments, particularly our revolving credit facility, may attempt to avoid their obligations thereunder, which, if successful, would reduce our available liquidity; we may not be able to lease or re-lease second generation space, defined as previously occupied space that becomes available for lease, quickly or on as favorable terms as old leases; we may not be able to lease newly constructed buildings as quickly or on as favorable terms as originally anticipated; we may not be able to complete development, acquisition, reinvestment, disposition or joint venture projects as quickly or on as favorable terms as anticipated; development activity in our existing markets could result in an excessive supply relative to customer demand; our markets may suffer declines in economic and/or office employment growth; unanticipated increases in interest rates could increase our debt service costs; unanticipated increases in operating expenses could negatively impact our operating results; natural disasters and climate change could have an adverse impact on our cash flow and operating results; we may not be able to meet our liquidity requirements or obtain capital on favorable terms to fund our working capital needs and growth initiatives or repay or refinance outstanding debt upon maturity; and the Company could lose key executive officers.

This list of risks and uncertainties, however, is not intended to be exhaustive. You should also review the other cautionary statements we make in “Risk Factors” set forth in our 2023 Annual Report on Form 10-K. Given these uncertainties, you should not place undue reliance on forward-looking statements. We undertake no obligation to publicly release the results of any revisions to these forward-looking statements to reflect any future events or circumstances or to reflect the occurrence of unanticipated events.

Contact:        
Brendan Maiorana                                  
Executive Vice President and Chief Financial Officer        
Brendan.Maiorana@highwoods.com
919-872-4924

FAQ

How much did Highwoods Properties (HIW) receive from its recent property sales in Q4 2024 and early 2025?

Highwoods Properties received total gross proceeds of $166.4 million from property sales, with $21.4 million in Q4 2024 and the remainder in early 2025.

What was the occupancy rate of the properties HIW sold in Raleigh and Tampa?

The sold properties in Raleigh and Tampa had a combined occupancy rate of 88%.

How many shares did HIW sell in Q4 2024 and at what price?

HIW sold 1.59 million shares of common stock at an average gross sales price of $32.71 per share, raising net proceeds of $51.3 million.

What was the purchase price for the Century Center land acquisition by HIW?

HIW acquired the fee simple title to the Century Center land for $50.6 million in Q4 2024.

What is the size of HIW's Century Center office park in Atlanta?

Century Center is a 12-building office park encompassing 1.7 million square feet and includes 13 acres of developable land.