Highwoods Properties, Inc. (NYSE: HIW), the largest owner and operator of suburban office properties in the Southeast and NAIOP’s 2009 Developer of the Year, today announced that it has sold, in separate transactions, Madison Park, a non-core office park in Winston-Salem, for $12.9 million, and Chimney Rock, a non-core industrial park in Greensboro, for $12.0 million. Inclusive of these dispositions, Highwoods has sold $125 million of non-core assets in 2010, in-line with its previously stated guidance of $50 million to $150 million.
Ed Fritsch, President and Chief Executive Officer of Highwoods Properties, said, “We are pleased to complete the sale of these non-core assets and further focus our resources on infill locations in core markets. One of our long-stated goals has been to exit Winston-Salem and, since January 2005, inclusive of the Madison Park sale, we have reduced the square footage we own in Winston-Salem from 2.8 million square feet to 818,000 square feet, a 71% reduction. We are also pleased to have sold our Chimney Rock assets as these older, industrial buildings were not strategic to our core Greensboro holdings. Today, our remaining industrial holdings in Greensboro include 35 buildings encompassing 2.5 million square feet that are adjacent to the airport and are, on average, 14 years old and 92.9% occupied.
Madison Park consists of seven office buildings encompassing 472,200 square feet that are, on average, 25 years old and 51% occupied. Madison Park was expected to generate $1.2 million of net operating income for full year 2010.As part of the Madison Park transaction, Highwoods received $4.5 million in cash and provided $8.4 million in non-recourse first mortgage seller financing. The three-year, interest-only note carries a 6.0% average interest rate. Assuming no default exists, the note can be extended by the buyer for two additional one-year periods, subject to an increase in the interest rate to 7.0% in the fourth year and to 8.0% in the fifth year. Additionally, Highwoods provided a secured credit facility of up to $1.65 million to be used to fund 50% of future leasing-related capital expenditures for currently vacant space. This facility has the same terms as the $8.4 million first mortgage financing plus is fully recourse to the buyer. The approximate $0.4 million gain on the sale of Madison Park will be deferred until the seller financing is repaid. Highwoods will provide property management services for these assets for customary fees.