(By Balaseshan) Highwoods Properties Inc. (NYSE:HIW) said it has purchased Two Alliance Center, a 492,000 square foot, Class A office building located in the heart of the Buckhead submarket of Atlanta.
The company's all-in investment is expected to be $146.7 million, or $298 per square foot, which includes $0.8 million of planned near-term building improvements. The building has an average remaining lease term of ten years and no lease expiration until 2017, when less than 24,000 square feet is scheduled to expire.
Two Alliance Center is 90% occupied and is expected to generate full year 2013 GAAP net operating income of $11.1 million. The company also noted that about $0.6 million of acquisition costs will be recorded in the third quarter.
The company's all-in investment is determined by deducting $6.4 million ($13 per square foot) of closing credits received from the seller, consisting of $5.3 million ($11 psf) for free rent and $1.1 million ($2 psf) for committed future tenant improvements under certain existing leases, from the $152.3 million ($310 psf) gross price stated in the contract.
Highwoods noted that under GAAP, free rent credits from a seller are recorded as a reduction in the investment cost rather than as rental income.
The company funded the acquisition of Two Alliance Center with proceeds from its ATM programs, borrowings under its revolving credit facility and available cash. Subsequent to its second quarter earnings on July 26, the company has sold 2.37 million shares of common stock, raising net proceeds of $77.5 million, under its ATM programs.
"We remain committed to maintaining a strong balance sheet and growing our company on a leverage-neutral basis. We are pleased with the equity raised in advance of the Two Alliance closing and expect to end the third quarter with our leverage ratio under 44%," said Ed Fritsch, president and chief executive officer of Highwoods.
HIW is trading up 1.23% at $32.83 on Friday. The stock has been trading between $25.64 and $35.78 for the past 52 weeks.