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HIW Sells Assets to Exit Atlanta Industrial Mkt

Zacks Equity Research

Highwoods Properties Inc. (HIW) disclosed the sale of 16 industrial buildings spanning 1.7 million square feet as well as 13 usable acres of industrial-zoned land in Atlanta for $91.6 million. With this sale, the company finally exited its Atlanta industrial portfolio. The company would record a gain of around $37 million in the third quarter from this disposition.

Notably, Highwoods vended $140 million Atlanta industrial assets spanning 2.7 million square feet and 28 usable acres of industrial-zoned land, year-to-date, and gained around $50 million.

As a matter of fact, Highwoods is actively repositioning its portfolio and shedding off non-core assets. Amid a strong pricing environment, the company exited the Atlanta industrial market in order to shift its portfolio mix and build a high-quality office assets portfolio by leveraging the growing office market fundamentals in the region.

In its second-quarter 2013 conference call, management announced that growth in jobs in the Atlanta market has resulted in almost 5 million square feet of office absorption in the past two years.

Therefore, along with asset divestitures, Highwoods acquired $376 million of trophy office assets in Atlanta over the past two years, Alliance Center towers and Riverwood 100 being the noteworthy ones.

The Buckhead region, in particular, has witnessed a significant recovery driven by organic growth as well as corporate relocations from other states and other Atlanta submarkets. This is leading to a rise in effective rents and Highwoods stands to capitalize on it given its wholly-owned space of over 1 million square feet there.

We expect these strategic dispositions and opportunistic buyouts to help the company strengthen its position in vibrant office markets of the U.S. and ride on the growth curves.

Highwoods currently carries a Zacks Rank #2 (Buy). Other promising stocks include Sotherly Hotels Inc. (SOHO), Sovran Self Storage Inc. (SSS) and SL Green Realty Corp (SLG). While Sotherly carries a Zacks Rank #1 (Strong Buy), Sovran Self Storage and SL Green Realty have a Zacks Rank #2 (Buy).

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