Highwoods Announces Charlotte Market Expansion
Agrees to acquire 650 South Tryon from Legacy Union in CBD
Total investment of $203 million, 367,000 square feet
Adjacent to Highwoods-owned Bank of America Tower at Legacy Union
Closing scheduled for 3rd Trimester
Agrees to acquire mixed-use development site in South End
$27 million purchase price
Planned for approximately 300,000 square feet of office space and
Closing scheduled for 2n/a Trimester
RALEIGH, North Carolina, May 09, 2022 (GLOBE NEWSWIRE) — Highwoods Properties, Inc. (NYSE: HIW) announces two planned acquisitions that will further strengthen its presence in the Best Business District (“BBD”) and its development prospects in the Charlotte market.
First, the company has agreed to acquire 650 South Tryon at Legacy Union in Charlotte’s Uptown CBD submarket for a total planned investment of $203 million, including $3.9 million in planned rental capital expenditures. to stabilize the property. 650 South Tryon, which was delivered in late 2020 and is currently 78% leased, is a 367,000 square foot award-winning, LEED Gold-certified office building. 650 South Tryon is immediately adjacent to and connected to Highwoods-owned Bank of America Tower at Legacy Union, an 841,000 square foot LEED Gold-certified office building that was delivered in 2019.
The Company’s total investment is net of $5.1 million of free rent and other rent-related credits expected to be received from the vendor at closing. The Company noted that under GAAP these credits are accounted for as a reduction in investment cost rather than as rental income. The company estimates annual GAAP net operating income and cash to be approximately $11.2 million and $10.8 million, respectively, after stabilization, which is expected to occur in 2024.
The acquisition of 650 South Tryon, which is subject to customary closing conditions, is expected to close in the third quarter. The Company is depositing a deposit in the amount of $22.5 million which is non-refundable, except in limited circumstances.
Second, the company has agreed to acquire a mixed-use development site at 1426 South Tryon Street in the heart of Charlotte’s vibrant South End submarket for $27 million. 1426 South Tryon is tentatively planned for a mixed-use development consisting of approximately 300,000 square feet of future office space and 250 apartments. The site’s existing low-rise building totaling 24,000 square feet is 57% leased to customers under short-term leases.
The acquisition of 1426 South Tryon, which is also subject to customary closing conditions, is expected to close in the second quarter. The Company has deposited a deposit in the amount of $6.1 million which is non-refundable except in limited circumstances.
Ted Klinck, President and CEO, said:Less than three years ago, we announced our intention to enter the dynamic Charlotte market, which was high on the list for future market expansion. With the acquisition of 650 South Tryon from Legacy Union, our high-quality Charlotte portfolio, which includes nearly 2.0 million square feet in two BBDs, Uptown and SouthPark, will represent more than 10% of our overall NOI. Additionally, with a very well-located mixed-use development site in the heart of the South End BBD, we are now poised to use our proven development expertise to capitalize on Charlotte’s future growth.
Highwoods Properties, Inc., headquartered in Raleigh, is a publicly traded real estate investment trust (“REIT”) (NYSE: HIW) and member of the S&P MidCap 400 Index. company that owns, develops, acquires, leases and manages properties primarily in the best business districts (BBDs) of Atlanta, Charlotte, Nashville, Orlando, Pittsburgh, Raleigh, Richmond and Tampa. For more information about Highwoods, please visit our website at www.highwoods.com.
Certain matters discussed in this press release are forward-looking statements within the meaning of federal securities laws, such as: acquisitions contemplated on the terms described in this press release; anticipated sales of non-core assets and expected prices and impact of such sales, including the tax impact of such sales; the expected total investment, projected leasing activity, estimated replacement cost and expected net operating income of properties acquired and properties to be developed; and the expected future leverage of the Company. These statements are distinguished by the use of the words “will”, “expect”, “intend”, “plan”, “anticipate” and words of similar meaning. Although Highwoods believes that the expectations reflected in these forward-looking statements are based on reasonable assumptions, it cannot guarantee that its expectations will be achieved.
Factors that could cause actual results to differ materially from Highwoods’ current expectations include, but are not limited to, the following: Closing of planned acquisitions may not occur on the terms described in this press release or at all ; buyers may not be available and prices may not be adequate in relation to anticipated disposals of non-core assets; comparable sales data on which we have based our expectations regarding the sale price of non-core assets may not reflect current market trends; the extent to which the ongoing COVID-19 pandemic affects 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 extent, the severity and duration of the pandemic and its impact on the US 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 worsen further, which could be further exacerbated by the COVID-19 pandemic; our assumptions regarding potential losses related to customer financial hardship due to the COVID-19 pandemic may prove to be incorrect; counterparties under our debt securities, in particular our revolving credit facility, may attempt to avoid their obligations thereunder, which, if successful, would reduce our available cash; we may not be able to lease or re-let second-generation space, defined as previously occupied space that becomes available for rental, quickly or on terms as favorable as previous leases; we may not be able to lease newly constructed properties as quickly or on as favorable terms as originally anticipated; we may not be able to complete development, acquisition, reinvestment, divestiture or joint venture projects as quickly or on as favorable terms as anticipated; development activity in our existing markets could result in excess supply relative to customer demand; our markets may experience declines in economic growth and/or office employment; unexpected increases in interest rates could increase our debt servicing costs; unexpected increases in operating expenses could adversely affect our results of operations; natural disasters and climate change could negatively impact our cash flow and results of operations; we may not be able to meet our cash requirements or obtain capital on favorable terms to fund our working capital needs and growth initiatives or repay or refinance outstanding indebtedness to deadline ; and the Company could lose key executives.
However, this list of risks and uncertainties is not intended to be exhaustive. You should also review the other caveats we make in the “Risk Factors” section set out 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 release the results of any revisions to these forward-looking statements to reflect future events or circumstances or to reflect the occurrence of unforeseen events.
Executive Vice President and Chief Financial Officer