Highwoods hunts for the right deals under market value - Orlando Business Journal:

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“We are out there looking,” said Dan the company’s VP in Tampa. The real estat e investment trust is interested in what it callw coreassets — quality properties leased by credit worthy businessews in strategic submarkets, such as and, of course, priced right. In a July 30 conferencse call with analysts, CEO Ed Fritsch said the company is positionefd to move quickly upon finding therighty deals. It has $200 million in “drh powder,” referring to cash and access to capital. The N.C.-based REIT posted a strong secondf quarter. Net income grew to $12. 1 million, from $4 million a year earlier. And fundss from operations grew 19 percentto $42.
3 million, beating Wall Street expectations. As for acquisitions, Fritscg expects more distressed owners to sell Class A office buildingsw as the commercial real estate market continues to weakejn and refinancingis unavailable. Tampa brokef Steve Ekovich agrees more investors will be forceto sell. And while there are buyers, includinf equity funds, most are looking for “blood in the said Ekovich, first VP at . “There are not a lot of buyerw out there like Highwoods that understandc the value of theTampaz market.” Locally, Highwoods owns 2.6 million squarwe feet of space with two-thirds in the Westshorse submarket. Over the past several years, the company sold 1.
8 millioh square feet of older, mostly Class B assets in the area forabout $204 million. The sale of those buildingsa helpedboost Highwoods’ locak occupancy rate to 94.5 percent, about 780 basiws points better than market, Fritsch said. The company’ss newest building in Tampa, Highwoods Bay I, is its larges t investment in a purely speculative project inits 30-year history. The $43 7-story building in Westshore, near the Howard Franklanx Bridge, opened last summer. In the last six monthd of 2007, Highwoods was able to lease most ofBay I. Aboutg 86 percent of the 208,000 squaree feet is now occupied.
Fritsch contends the project was timed as was the decision to hold off on itsseconrd phase. of Florida Inc. reports the regional office leasing market dramatically weakened in the first half of this year as companiesa contractedor closed. Absorption, define as the change in occupied was anegative 498,819 square Highwoods decided to postpone construction on Bay II as regionap job losses mounted and office vacancy ratesw rose. “Some of the best decisions right now are to not starfta development,” Fritsch said.
An executive at Crescenyt Resources, developer of Corporate Center at International Plazain Westshore, “We would support that strategy given today’s economi climate and the cost of said Lud Hodges, VP in Hodges, however, points out that all four buildings at Corporat e Center were built speculatively, including the one that will be finishex this year. The first three were leased and sold soonaftert completion. He contends much of Westshore, considerede one of the strongest submarkets in was builton speculation. As to when the officre leasing marketwill turnaround, Woodward said it’s anyone’se guess.
The first sign of a market rebouncd is job growth in the professionalservices “We’re optimistic that once the shakeout in the debt markets and housiny market runs its courss we’ll get back on Woodward said. In the many businesses are delayingexpansion plans, citing economicv uncertainty. “It just seemse to be a repetitive theme that we are encountering when we talk with our customert that now is not the time to grow orto relocate, that it make s sense to stay where they Fritsch said.
“I think it is absolutely tied to the uncertaint y of the present day economic environmeng and that as confidence decision makers will return to making their decisions to growtheidr business.”