Highwoods Pares Its Government Leased Property Portfolio

Highwoods Properties, Inc. (NYSE: HIW) has announced that it has sold three government leased properties encompassing 553,000 square feet for $86.5 million or $156.42 PRSF.  While the pricing may appear somewhat low on a PRSF basis, it equates to a respectable 7.05% cap rate.  The properties were build-to-suits developed by Highwoods and are currently 100% leased.  The portfolio has an average remaining lease term of 11.5 years, and was projected to generate NOI of approximately $6.1 million in 2012.

The three properties sold are:

4712 Southpark Boulevard, Ellenwood, GA – a 352,064 SF warehouse facility constructed for the National Archives and Records Administration (NARA) under what appears to be a direct lease with NARA (which had delegated leasing authority at that time).

1220 Echelon Parkway, Jackson, MS – a 109,819 FBI field office completed in 2009 and leased for 15 years.

180 Spring Street, SW, Atlanta, GA – a 90,688 SF office building completed in 2007 and leased for 15 years to U.S. Immigration and Customs Enforcement.

Eric Fritsch, President and CEO of Highwoods stated that “While our remaining federal government build-to-suits are core holdings, these three properties were relative outliers for us. NARA was by far our largest industrial asset in Atlanta; DHS is located in downtown Atlanta, a non-core submarket for us; and the [FBI] field office was our only asset in the State of Mississippi.”

By our count the sale takes Highwoods from the 17th largest owner of GSA-leased properties to the 30th.  This sale, coupled with a separate, five building (484,000 square feet), non-government leased portfolio sale, amounts to approximately 1 million square feet of dispositions for Highwoods in the month of July alone.

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UPDATE: We originally reported that Highwoods ranking dropped to 40th as a result of this sale but, limiting the ranking to owners of just GSA-leased properties, Highwoods current rank is really 30th.