Highwoods sheds most area assets

REIT is also selling south Fla. holdings in bid to raise capital

Analyst praises move

Commercial real estate

May 11, 1999|By Kristine Henry | Kristine Henry,SUN STAFF

Less than two years after buying Timonium-based Riparius Development Corp. for nearly $94 million, Highwoods Properties Inc. said yesterday that it has found buyers for virtually all of its assets in the Baltimore area.

The North Carolina-based real estate investment trust has been under pressure from Wall Street to generate higher returns, and the sale fits in with the REIT's plan to raise capital after spending $2 billion on expansion in 1997 and 1998.

Highwoods, which is also shedding its south Florida holdings for $323.2 million, would not identify the purchasing parties because the deal has not been finalized. The transactions are expected to close by the end of next month.

In Baltimore, two parties will buy seven in-service properties totaling 612,000 square feet, a 125,000-square-foot office property that is under development and 10.5 acres of development land in Baltimore for a total of $82.2 million.

Another property, the Old Court Medical Building in Pikesville, will be marketed separately, said spokeswoman Gail Rosenberg. Additionally, she said, Highwoods will keep its 23 percent share in another building in Owings Mills that is co-owned with a German firm.

The company said it expects to record a $6 million gain on the Florida and Baltimore transactions after taking into account the estimated $750,000 in costs related to closing offices. Additionally, the company expects to save $1.2 million in general and administrative expenses as a result of the sales.

Rosenberg said she could not estimate the number of jobs that could be lost, because the purchasers may hire Highwoods employees. Highwoods employs 13 people in Baltimore, she said.

Brenda S. Wood, a securities analyst at BT Alex. Brown Inc., said the move is wise and mirrors those made by many REITs recently.

"Especially when they have investments in many markets, it makes sense, because the corporate overhead gets to be quite a bit," she said.

For the first quarter of the year, Highwoods reported funds from operations of $60.8 million, or 87 cents per diluted share, vs. the $45.1 million, or 75 cents per diluted share, reported for the corresponding period a year ago.

Shares of Highwoods closed at $26.125 yesterday, up 50 cents.

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