Highwoods looks to raise $133 million with stock offering

dbracken@newsobserver.comAugust 8, 2013 

Highwoods Properties is seeking to raise $133.1 million from a stock offering as it looks to ramp up acquisition and development activity in the second half of the year.

The Raleigh real estate investment trust priced its offering of 3.75 million shares on Thursday. The underwriters have the option to purchase an additional 562,500 shares, meaning Highwoods could raise a total of $153 million from the sale. The offering is expected to close Aug. 13.

CEO Ed Fritsch said Thursday that the funds will be used to reduce the company’s overall debt level while it continues to acquire properties and pursue development projects for specific tenants.

“We don’t want the debt to go up, we want it to go down knowing that we’re spending money on not only acquisitions but also development,” he said.

Highwoods, the Triangle’s largest office landlord, last month increased its acquisitions and new development outlook for the year and now expects to spend as much as $550 million. The company acquired nearly $350 million in office properties during the first half of the year while selling $68.4 million in assets and announcing nearly $60 million in new development projects.

Fritsch said the company is increasingly confident that it will end the year at the high-end of its guidance for spending on new acquisitions and development.

Although there have been several speculative office buildings moving forward in the Triangle in recent months, Fritsch said Highwoods is mostly looking at build-to-suits – development projects for specific tenants.

“We are not allergic to some dose of spec space but we want to be very deliberate in how we decide where that is and what it is and how much of it there would be,” he said.

Late last month, Cary officials approved a Highwoods proposal for the Weston Lakefront Offices, a 40-acre development that would include three office buildings and 223,500 square feet. The proposal fits the requirements for MetLife, which earlier this year announced plans to open a technology hub in Cary that will employ 1,200 people.

MetLife hasn’t confirmed or denied rumors that it will occupy the Weston site, and Fritsch declined to comment Thursday when asked about the company.

In recent years, Highwoods has made major acquisitions in Florida, Atlanta and Pittsburgh while also announcing a large development project in Nashville. Fritsch said the company is always looking for opportunities to expand its portfolio in the Triangle.

“It’s one of our top five markets,” he said. “Raleigh is home and it’s certainly a place where we want to invest.”

Fritsch said Raleigh is doing all the right things, and he’s hopeful the city will attract a few more Fortune 500 headquarters in the near future.

“I’m hopeful we can make that happen and there are three or four more towers downtown,” he said. Highwoods owns the PNC Plaza building on Fayetteville Street.

Next week’s stock sale is Highwoods’ first offering of a block of shares since May 2009. But Highwoods has raised about $385 million since May 2011 under an at-the-market offering program that allows companies to raise capital over time.

Highwoods has used those proceeds to pay down debt even as it spent hundreds of millions of dollars acquiring trophy office towers in Atlanta and Pittsburgh. The company’s attention to its balance sheet led both Moody’s and Standard & Poor’s to upgrade the company’s credit rating in recent months.

Highwoods stock sale priced at $35.50 per share. The stock, which began trading Thursday at $36.31, was down about 2 percent in afternoon trading.

Bracken: 919-829-4548

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