Highwoods Properties, Inc. (NYSE:HIW) Q4 2022 Earnings Call Transcript

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Dave Rodgers: And then last for me on the dispositions. Ted you mentioned in your last comment maybe some land and maybe not Pittsburgh as kind of a full exit this here. So what do you anticipate being able to sell this year? And I guess maybe the point of the question really is if you’re selling $400 million how dilutive is that relative to the debt cost as you think about late 2023 into 2024?

Ted Klinck: Sure. I’ll take maybe the first part and Brendan can jump in. So the mix of assets it is it’s a couple of land deals. And then we’ve got a couple of single tenant transactions in the market, but it’s going to be a mix of typically what we’ve done in the last two or three large transactions where we go out and sell — go out and buy an asset like we did in McKinney & Olive flex up a little bit and then pay off bring the balance sheet back down over time. So it’s going to be a mix of single tenant some land some multi-tenant assets. Again assets that maybe have a lower growth profile going forward. So it’s not unlike other stuff we’ve seen. Pittsburgh, it may be in there. We’ll see but it is a large transaction and larger deals are harder to get done these days in terms of dilution. Brendan do you want to take that?

Brendan Maiorana: Sure, Dave. So what I would say is, I mean, I think the marginal cost of borrowing on what we would pay off if you look at our forecast for 2023 you’re probably in the mid to kind of upper 5s. So you can, kind of, apply the cap rates that you think versus those numbers. What I would say is from a cash flow perspective, which is where we have focused. Clearly there’s CapEx associated with — on going CapEx associated with the assets that we plan to sell. When we pay down the debt all of that interest savings falls to the bottom-line. There’s no CapEx associated with that obviously. So from a cash flow perspective it’s much less dilutive. And then when we staple on to that the development deliveries that come online that’s where we do think over time our cash flows will continue to get better even with the planned dispositions that we have.

Dave Rodgers: Right. Thank you.

Operator: Our next question comes from the line of Dylan Burzinski with Green Street. Please go ahead.

Dylan Burzinski: Hi, guys. Thanks for taking the question. Just curious, sort of, if you can kind of touch on the development leasing pipeline and where it stands today?

Ted Klinck: Sure, Dylan. Good morning. Yes, let me just walk — maybe walk through each of them. And maybe I’ll start in order of when they deliver. So the 2827 Peachtree just a reminder that’s now topped out. It delivers third quarter of this year. So it’s come together nicely. And we do have a stabilization date of first quarter 2025 and that. At the end of the year we were 75% leased and we’ve got a couple I’d say very strong prospects to get us somewhere in the mid-80s prior to delivery so we feel good about that one. GlenLake III here in Raleigh also delivers third quarter of this year stabilization as first quarter 2025. We did — if you remember we started that with 15% pre-leased we have not signed anyone else throughout so far.

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