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Highwoods Properties, Inc. HIW has completed the sale of two non-core office buildings for $119.7 million. With such moves, the company will prune its portfolio, enhance the overall portfolio quality and fund growth initiatives.
The property sold encompasses an 87,000-square-foot single-customer building, Stony Point VI, in Richmond and a 356,000-square-foot building, Crescent Center in Memphis. While the Richmond property was sold for $52.2 million, the Memphis property was disposed for $67.5 million.
The two office buildings encompass a total of 443,000 square feet and were a combined 80% occupied. They are projected to generate $6.5 million of annual cash net operating income and $7.5 million of annual GAAP net operating income in 2021.
Highwoods has been making efforts to expand its footprint in the high-growth markets and improve portfolio quality. In sync with such initiatives, it is following a disciplined capital-recycling strategy that entails disposing of non-core assets, and investing the proceeds in premium asset acquisitions and for undertaking accretive development projects.
In July, Highwoods acquired a portfolio of office properties from Preferred Apartment Communities APTS for $683 million. The company plans to accelerate the non-core asset disposition amounting to $500-$600 million by mid-2022, in order to match-fund the acquisition and expects half of its disposition to close by this year’s end. This acquisition has offered Highwoods the scope to enter two high-barrier-to-entry BBDs of SouthPark in Charlotte and North Hills in Raleigh.
Per management, “We have now sold $163 million of non-core properties since we announced our plan to acquire a portfolio of assets from PAC, placing us well on our way to meeting our disposition goal for 2021.”
With the sale, the company expects to record non-funds from operations gains of $37.3 million in the third quarter of 2021. Highwoods expects to return its balance-sheet metrics to the Mar 31, 2021 levels by mid-2022.
This Zacks Rank #2 (Buy) company has underperformed its industry over the past six months. Shares of Highwoods have appreciated 4%, while the industry has rallied 6.4% during this period. However, the trend in estimate revisions for 2021 FFO per share indicates a favorable outlook for the company.
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Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Highwoods Properties, Inc. (HIW) : Free Stock Analysis Report
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