Highwoods Enters Dallas Market
Highwoods Properties has formed a 50/50 joint venture with Granite Properties to enter the Dallas market, targeting two major developments: Granite Park Six and 23Springs. The total anticipated investment for both projects is approximately $660 million. Granite Park Six, located in the Frisco/Plano area, is set to have a 422,000 square-foot office space, while 23Springs in Uptown will feature 642,000 square feet of office and retail space. The company plans to fund this entry through the sale of its Pittsburgh assets, contributing to a strategic shift towards high-growth markets.
- Entry into the Dallas market, a high-growth area with strong economic prospects.
- Significant anticipated investment of $660 million for infrastructure development.
- Joint ventures with reputable partners, enhancing market presence and expertise.
- Projects are pursuing sustainability certifications, potentially attracting eco-conscious tenants.
- The Pittsburgh asset sales are uncertain, posing risks to funding plans.
- A non-FFO impairment charge of $35 million due to asset revaluation in Pittsburgh.
- Pre-leased percentages of only 12% and 17% for Granite Park Six and 23Springs, respectively, raise concerns about demand.
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Forms 50/50 Joint Ventures with Granite Properties for
Trophy Developments in Two Dallas BBDs
| Project | BBD | Own % | SF | Pre- Leased % | Estimated Completion Date | Estimated Stabilization Date | ||
| Granite Park Six | Frisco/Plano | 50 | % | 422,000 | 12 | % | 4Q2023 | 1Q2026 |
| 23Springs | Uptown | 50 | % | 642,000 | 17 | % | 1Q2025 | 1Q2028 |
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Plans to Exit Pittsburgh Market
Dallas Market Entry Expected to be Funded Through
Pittsburgh Asset Sales Over Next Few Years
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RALEIGH, N.C., July 19, 2022 (GLOBE NEWSWIRE) -- Highwoods Properties, Inc. (NYSE:HIW) has entered the Dallas market through the formation of joint ventures with Granite Properties for Granite Park Six, a multi-customer office development comprising 422,000 square feet in the vibrant Frisco/Plano BBD, and 23Springs, a mixed-use development encompassing 626,000 square feet of multi-customer office and 16,000 square feet of retail in the heart of the dynamic Uptown Dallas BBD. Highwoods owns a
Construction of Granite Park Six, which is
On a combined basis, the total anticipated investment for the projects is expected to be approximately
Ted Klinck, President and CEO, stated, “Today’s announcement is consistent with our long-term strategic plan of owning the highest quality office buildings in the BBDs of markets with favorable economic and demographic trends. With its strong, diverse and growing economy, Dallas has been at the top of our list for future market expansion. We are excited about the opportunity to build and grow a strong presence in Dallas with our combination of proven development expertise, strong asset management platform and highly-regarded brand.
We are also thrilled to partner with Granite Properties on the Granite Park Six and 23Springs developments. Granite Properties is a prestigious privately-held commercial real estate investment, development and management company with deep roots in Dallas and, like us, a winner of NAIOP’s Developer of the Year award. Most importantly, we share the same vision of creating extraordinary customer experiences through mixed-use environments, rich amenities, customer-centric service and innovative wellness features – what we call work-placemaking.”
The Company’s long-term plan is to fund its entry into Dallas, including funding its share of Granite Park Six and 23Springs, by exiting the Pittsburgh market. The Company’s Pittsburgh assets, which consist of 2,155,000 square feet of office that was
Mr. Klinck stated “Our plan is to effectively fund our initial entry into Dallas, a high-growth market with significant future upside opportunities, by selling our assets in Pittsburgh over the next few years. Importantly, once completed, the stabilization of our new development projects in Dallas and our Pittsburgh market exit, coupled with anticipated G&A savings, is expected to be roughly leverage-neutral and accretive to our cash flows, while improving the quality of our portfolio and providing higher growth over time.”
The Company can provide no assurances, however, that it will dispose of any of its assets in Pittsburgh on favorable terms, or at all, because the dispositions are subject to the negotiation and execution of sale agreements and would then be subject to the buyers’ completion of satisfactory due diligence and other customary closing conditions. Because the Company will now classify its assets in Pittsburgh as non-core, the Company’s net income in the second quarter of 2022 will include a non-FFO impairment charge of
A presentation highlighting these investment activities can be accessed through the link below and in the Investors section of the Company’s website at www.highwoods.com.
About Highwoods Properties
Highwoods Properties, headquartered in Raleigh, North Carolina, is a publicly traded (NYSE:HIW) real estate investment trust (“REIT”) and a member of the S&P MidCap 400 Index. The Company is a fully-integrated office REIT that owns, develops, acquires, leases and manages properties primarily in the BBDs of Atlanta, Charlotte, Dallas, Nashville, Orlando, Pittsburgh, Raleigh, Richmond and Tampa. For more information about Highwoods Properties, 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 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 actual results to differ materially from Highwoods' current expectations include, among others, the following: buyers may not be available and pricing may not be adequate with respect to the planned dispositions of non-core assets; comparable sales data on which we based our expectations with respect to the sales price of the non-core assets may not reflect current market trends; the extent to which the ongoing COVID-19 pandemic impacts our financial condition, results of operations and cash flows depends on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic and its impact on the U.S. economy and potential changes in customer behavior that could adversely affect the use of and demand for office space; the financial condition of our customers could deteriorate or further worsen, which could be further exacerbated by the COVID-19 pandemic; our assumptions regarding potential losses related to customer financial difficulties due to the COVID-19 pandemic 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 2021 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
What is the anticipated investment for Highwoods Properties' Dallas ventures?
What percentage ownership does Highwoods have in the new joint ventures?
When is the estimated completion of Granite Park Six?
What are the pre-leased percentages for Granite Park Six and 23Springs?
How will Highwoods fund its entry into the Dallas market?
