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 50% interest in each of the joint
ventures.
Construction of Granite Park Six, which is 12%
pre-leased, began in the fourth quarter of 2021 with a scheduled
completion date in the fourth quarter of 2023 and a pro forma
stabilization date in the first quarter of 2026. Construction of
23Springs, which is 17% pre-leased, began in the second quarter of
2022 with a scheduled completion date in the first quarter of 2025
and a pro forma stabilization date in the first quarter of 2028.
23Springs and Granite Park Six are designed with a commitment to
sustainability and wellness and are pursuing LEED and Fitwel
certifications.
On a combined basis, the total anticipated
investment for the projects is expected to be approximately $660
million (at 100%). The joint ventures have obtained construction
loans for both projects for approximately 60% of the anticipated
development costs. The Company’s 50% share of the equity required
to fund the development projects is approximately $130 million.
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 92.9% occupied as of March 31, 2022, represent
approximately 6% of the Company’s overall GAAP net operating
income.
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 $35.0 million to lower the carrying amount of
certain assets (including accrued straight-line rents receivable
and deferred leasing costs) in Pittsburgh to their estimated fair
value less cost to sell.
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.
HIW Enters Dallas Market
About Highwoods
PropertiesHighwoods 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 StatementsSome
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 |
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