Highwoods Acquires Assets - Analyst Blog

Highwoods Properties, Inc. (HIW), a leading real estate investment trust (REIT), has recently acquired ‘Independence Park' – a 33-acre multi-building development site in the Westshore submarket of Tampa for $4.9 million. The property can facilitate construction of office space spanning 524,000 square feet  and is the largest remaining development tract in the Westshore submarket.

Highwoods also acquired a vacant office building totaling 117,000 square feet of space on an additional 11 acres of land for $12.7 million. The building's common areas were renovated in 2009 and the individual floors were entirely demolished. Consequently, the office building will be classified as a development project and is expected to be completed in the first quarter of 2013.

The acquisition provides a compelling opportunity for Highwoods to own core development land in the best submarkets of Tampa at an attractive price. The long-term outlook of the Westshore submarket in particular and Tampa in general, is also positive and the transaction enables the company to capitalize on future growth potential.

The property is strategically located in close proximity to the airport and offers favorable communication facilities to attract the highest quality tenants at a premium rent.

Based in Raleigh, North Carolina, Highwoods owns and operates its properties through its wholly-owned subsidiary, Highwoods Realty Limited Partnerships. The company has interests in office, industrial, retail and service center properties, including development projects and apartment units. It also provides customer-related and fee-based real estate management services for its properties and third-party clients.

Highwoods is the largest owner and operator of suburban office properties in the Southeast. As of September 30, 2010, Highwoods had interests in 329 in-service office, industrial holdings and retail properties spanning 32.3 million square feet of gross leasable space, out of which 14 office buildings totaling 2.2 million square feet is located in the Westshore submarket. Highwoods also owns 581 acres of developable land, out of which 53 acres is located in Tampa.

Currently, Highwoods is in the process of repositioning its portfolio to focus on stronger long-term markets and newer assets. A large part of the company's portfolio is now concentrated in high-growth Sun Belt markets, such as Atlanta, Nashville and Tampa, which should exhibit above-average job growth due to positive demographic trends.

We maintain our ‘Neutral' recommendation on Highwoods, which presently has a Zacks #3 Rank that translates into a short-term ‘Hold' recommendation and indicates that the stock is expected to perform in line with the overall U.S. equity market for the next 1–3 months. We also have a ‘Neutral' rating and a Zacks #3 Rank for Cousins Properties Inc. (CUZ), a competitor of Highwoods.