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Highwoods expects to expand in Charlotte after new tower deal

Highwoods Properties Inc. pursued other assets in Charlotte, N.C., before it landed the Bank of America Tower at Legacy Union, the centerpiece of its new market rotation plan, and the company expects to expand further in the city, company executives said Aug. 22.

CEO Edward Fritsch described on a conference call a multi-pronged rationale for pursuing the course of action it outlined Aug. 21: The plan, which will facilitate the real estate investment trust's entry into Charlotte and its exit from the Greensboro, N.C., and Memphis, Tenn., markets, will be accretive, is leverage-neutral, and will improve the overall quality of the Highwoods portfolio.

Additionally, the market rotation plan will simplify operations and improve portfolio efficiency via a drawdown of the company's overall property and lease count, significantly reducing capital outlays.

"We believe this market rotation will enhance our long-term same-property [net operating income] growth prospects," Fritsch said.

President Ted Klinck, who will succeed Fritsch as CEO on Sept. 1, said Charlotte has been the company's top prospective new market for some time, and Highwoods bid on multiple assets in the market over the last few years.

"We've chased other assets. We didn't get them for one reason or another they just didn't meet our underwriting and return thresholds," Klinck said on the call, later adding, "This isn't the only one we chased by any stretch, but we just happened to be successful on this one, and it gives us great scale."

During the Q&A segment of the call, Fritsch described healthy demand for the Greensboro and Memphis assets it plans to sell to help fund its acquisition of Bank of America Tower at Legacy Union.

"The number of unsolicited calls that we've received for ... the industrial portfolio, the medical buildings that we own in Greensboro, [International Place IV in Memphis] and others, adds to our comfort level on ... being able to transact on these at attractive numbers, and in the appropriate time window," he said.