Highwoods Properties, anticipating downturn, offers $350M in unsecured notes

Raleigh-based office landlord Highwoods Properties is taking pre-emptive measures to fortify itself against a potential economic downturn.

The company, which owns office properties in southern cities such as its home base Raleigh as well as Atlanta, Dallas, Tampa and Charlotte, among others, is looking to raise capital and enhance liquidity by offering $350 million in unsecured notes, with a closing date of last week, the Triangle Business Journal reported.

The move is part of Highwoods’ strategy to pay down existing debt within the real estate investment trust.

Highwoods CFO Brendan Maiorana outlined that the proceeds from the note offering — which will carry a 7.65 percent interest rate and mature on February 1, 2034 — will be used to repay a $200 million unsecured loan acquired in October 2022.

The initial loan served purposes such as debt payments, acquisitions, working capital and development activities. Maiorana clarified that the move doesn’t escalate the company’s overall debt but involves exchanging short-term debt for long-term debt. 

The remaining funds will be directed toward Highwoods’ $750 million unsecured revolving credit facility, nearly zeroing out the outstanding balance.

The decision to raise capital comes against the backdrop of a challenging lending market and rising interest rates, making it tougher for commercial real estate borrowers to secure funding. Highwoods aims to de-risk its future capital raising needs, signaling confidence in the availability of capital and support from bond investors.

The move, as Maiorana indicated, positions the company to potentially avoid the need for capital raises for a few years.

Highwoods reported an 88.7 percent overall occupancy rate as of the end of September in its third quarter, outpacing the national average. Despite a challenging real estate market, the company generated a net income of $22.1 million and funds from operations totaling $99.8 million in the same period.

With $270 million still earmarked for its development pipeline, Highwoods is strategically managing its financial position amid broader market uncertainties. The company’s stock, however, has experienced a decline of over 35 percent this year, closing at $18.08 on Wednesday.

— Ted Glanzer