Highwoods Properties’ North Carolina Assets Reel In $233M

As part of its Greensboro-area exit strategy, the REIT sold a 2.8 million-square-foot industrial portfolio and arranged the disposition of a 250,000-square-foot office complex.
Greensboro, N.C. Image courtesy of Next City

Highwoods Properties Inc. has made major progress in its Greensboro, N.C., exit strategy with two deals totaling $233.4 million. The REIT has recently sold a 2.8 million-square-foot industrial portfolio for $193.4 million and has arranged to complete the disposition of the 250,000-square-foot The Knollwood office complex for $40 million by February 15.

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The industrial portfolio consists of single-story flex buildings and The Knollwood features two mid-rise office structures. Together, the industrial and office properties boast an average occupancy level of 93.8 percent. Highwoods relied on CBRE to market the collection. “Interest in the Triad assets was high,” Mark Mulhern, CFO at Highwoods Properties Inc., told Commercial Property Executive. “CBRE ran a very competitive process for these high-quality properties and we had multiple offers at attractive prices to evaluate.”

While Highwoods has deemed the Triad—Greensboro, Winston-Salem and High Point—a non-core location for its purposes, the area remains a target market for many investors. The industrial sector is thriving, with a vacancy rate of just 4.8 percent in the third quarter of 2019, and positive net absorption went on a notable upswing in the office sector, according to research by CBRE. 

Entries and exits

Highwoods announced a new investment strategy in August 2019, revealing a two-phase plan to sell assets and recycle the capital into its new area of focus: The best business districts of high-growth markets like Charlotte, N.C.  The company completed the $436 million acquisition of the approximately 868,000-square-foot Bank of America Tower at Legacy Union in Charlotte in November 2019. “In connection with that market entry, we elected to exit the Greensboro and Memphis markets, which have lower future growth prospects than Charlotte or our other markets,” Mulhern said.

The first phase of Highwoods’ departure from metropolitan Greensboro and Memphis entails the sale of select assets in the areas by mid-2020, with a target disposition total approximating the price of the Bank of America Tower purchase. In December, the REIT sold three Memphis office buildings encompassing 332,000 square feet for $89.6 million. The second phase of the plan, for which there is no set completion date, will consist of the sale of the remaining Greensboro and Memphis assets.