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Highwoods Properties Acquires Trophy Assets in Recent Years

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Acquires properties in best business districts

Highwoods Properties (HIW) acquires properties in the best business districts to strengthen its competitive position in the market. The company targets quality properties to attract high-profile corporate tenants. Such properties are expected to generate higher occupancy and rental revenues for the company. The company disposes of properties that do not suit its strategic goals or are not considered core assets due to their location, age, or quality.

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Property acquisitions

Highwoods Properties has acquired numerous properties over the past five years. In 2010, the company acquired properties comprising a rentable area of 336,000 square feet, and in 2013, the company acquired a rentable area of 3.4 million square feet. In the past five years, Highwoods Properties has acquired a total rentable area of 8 million square feet.

Trophy assets

In 3Q15, the company acquired several high-rise buildings, namely Monarch Tower and Monarch Plaza in Buckhead, Atlanta, and SunTrust Financial Centre in Tampa’s central business district. Monarch Tower and Monarch Plaza comprised a total of 896,000 square feet and were acquired for $303 million, 20% below replacement cost. SunTrust Financial Centre comprised a rentable area of 528,000 square feet and was acquired for $124 million, 40% below replacement cost.

Shoring up net operating income

The company expects these properties to provide higher occupancy levels and rental rates, which would contribute substantially to the company’s net operating income. The company aims to fund these acquisitions by disposing of its Country Club Plaza assets in Kansas City.

Other major office REITs such as Alexandria Real Estate Equities (ARE), SL Green Realty (SLG), and Boston Properties (BXP) are also active in property acquisitions and dispositions. The SPDR Dow Jones Global Real Estate ETF (RWO) invests ~0.4% of its portfolio in Highwoods Properties. Continue to the next part of this series for a discussion on Highwoods Properties’ strategy.

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