Highwoods Properties Acquires One Alliance Center in Atlanta
Highwoods Properties, Inc. (NYSE: HIW)
One Alliance Center
$143.4 Million Total Investment, $259 per Square Foot
Leverage Ratio Remains Under 44%
$63.0 Million of Equity Raised Since May 1st Earnings Call
Highwoods Properties, Inc. (NYSE: HIW) has acquired One Alliance Center, the sister building to Two Alliance Center, which the Company acquired in September 2012. The Company now wholly owns 1,045,000 contiguous square feet of Class A office space in the heart of the Buckhead submarket of Atlanta. On a combined basis, the Company's total investment in One and Two Alliance Center, including planned building improvements, is $278 per square foot, a 15% discount to estimated replacement cost.
The Company's total investment in One Alliance Center is expected to be $143.4 million, or $259 per square foot, which consists of the purchase price plus $2.9 million of planned near-term building improvements and $0.4 million of future tenant improvements committed under existing leases. One Alliance Center is currently 67% occupied and is expected to generate first year cash net operating income from existing customers of $6.2 million, before $1.1 million of free rent. First year GAAP net operating income from existing customers is expected to be $7.0 million. The Company also noted that approximately $0.5 million of acquisition costs will be expensed in the second quarter.
Ed Fritsch, president and chief executive officer of Highwoods, stated, "We are excited to now own both One Alliance and Two Alliance. Alliance Center is one of the most competitively-advantaged locations in Buckhead given its controlled and easy access to Georgia 400 and Peachtree Road, walkability to the Buckhead Marta Rail Station and close proximity to Phipps Plaza and Lenox Square Mall, two upscale malls.
The acquisition of One Alliance more than doubles our presence in Buckhead where we now wholly-own over one million square feet of contiguous Class A office space. This is a rapidly tightening submarket and we forecast leasing at One Alliance to exceed 93% within three years. In addition, we see opportunities to "Highwoodtize" the property and expect to garner operating and leasing synergies by owning both Alliance Center towers through shared parking, shared amenities, shared vendor agreements and customer expansions to name a few."
The Company funded the acquisition of One Alliance Center with proceeds from its ATM program, non-core dispositions and borrowings under its revolving credit facility. No debt was assumed in connection with this transaction. Following closing, the Company's leverage ratio, including preferred stock, remains under 44%.