Highwoods Properties (HIW) is making a significant move to enhance its portfolio with the planned acquisition of 6Hundred at Legacy Union, a newly completed 411,000-square-foot Class AA office tower located in Charlotte’s Uptown CBD. The property is currently approximately 84% leased and boasts a weighted average lease term of over 12 years. This investment, estimated at around $223 million, positions Highwoods to strengthen its presence in the thriving business district of Charlotte, highlighting the growth potential of the property and its long-term cash-flow possibilities. The acquisition is expected to finalize within the next 30 days.
This new addition aligns well with Highwoods’ existing portfolio in the Legacy Union mixed-use campus, where it already oversees adjacent properties such as the Bank of America Tower and SIX50 South Tryon. Following this acquisition, Highwoods will expand its footprint in Legacy Union to approximately 1.6 million square feet of Class AA office space, complemented by over 4,200 structured parking spaces. A concentrated presence in a high-demand urban area not only fosters operational efficiencies but also enhances leasing leverage and shared amenities.
From a financial perspective, Highwoods anticipates annual net operating income (NOI) to stabilize between $17.5 million and $18.5 million, estimated on both GAAP and cash bases, with stabilization projected for 2027 and 2028 respectively. In the short term, 6Hundred at Legacy Union is expected to generate approximately $10 million in GAAP NOI by 2026.
To finance this acquisition, Highwoods plans to adopt a leverage-neutral strategy, utilizing proceeds from the sale of non-core assets, thereby maintaining balance-sheet flexibility. Notably, with in-place rents more than 20% below current market rates, there exists significant potential for rental growth as leases are renewed.
For investors interested in office REIT credit and commercial real estate strategies, this acquisition signifies a strategic enhancement for Highwoods. Acquiring such a high-quality asset in a leading Sunbelt city offers the promise of embedded rental growth and immediate scalability. While execution of this acquisition will be crucial, it is well-aligned with Highwoods’ strategic objective to channel capital into premium business-district office assets while divesting less favorable properties.
In recent months, shares of Highwoods have decreased by 5.7%, contrasting with a 1.0% gain in the industry. Nevertheless, analysts note that Highwoods shares remain undervalued, as indicated by their Value Score of B, presenting a potentially appealing opportunity for investors.
Additionally, investors might also consider other top-rated stocks within the broader REIT sector, such as Digital Realty Trust (DLR) and Public Storage (PSA), both currently holding a Zacks Rank of #2 (Buy). Recent consensus estimates for DLR indicate an upward revision of 14 cents for its 2025 funds from operations (FFO) per share, now projected at $7.35, while PSA’s estimate has also seen a slight increase of 2 cents to $16.87 for the same period.
Overall, Highwoods’ proactive strategy in the current real estate market not only underscores its commitment to growth but also reflects opportunities for investors looking towards a future of promising returns in quality commercial assets.