Highwoods Properties Inc. (HIW - Analyst Report) recently inked a build-to-suit deal with MetLife, Inc. (MET - Analyst Report) for construction of offices for MetLife’s global technology and operations hub in the mixed-use Weston planned unit development (PUD) in Cary, N.C. Weston spans 1,000 acres and is centrally positioned in the Research Triangle, which houses several high-tech firms.
The deal will strengthen Highwoods’ cash flow position and its ties with MetLife. Notably, Highwoods – the declarant of Weston mixed-use PUD – currently owns 8 operating assets (95.7% occupied) that span around 747,000 square feet in Weston.
Highwoods plans to invest about $110 million (which includes the value of existing owned land), for development of this 100% pre-leased project. As per the deal, the company will construct 2 LEED-certified office buildings, spanning 213,500 square feet each, on 26.5 acres of a 40-acre Highwoods-owned site. This site is located in proximity to I-40 and Raleigh-Durham International Airport. The construction is expected to commence in late 2013 and will be completed during the first half of 2015.
Management remains upbeat about the long-term lease with a high-end customer like MetLife. This will provide steady rental revenues going forward. Moreover, the company expects to develop a third building on the 13.5 acres of waterfront land located nearby.
Including this build-to-suit project with MetLife, Highwoods’ total development pipeline (96% pre-leased) now has 928,000 square feet of wholly-owned projects and 215 multi-family units, in a 50% owned joint venture. The total investment now stands at approximately $238 million.
We expect the above-mentioned deal to drive the company’s top-line growth and strengthen its position in one of the most vibrant office markets of the U.S.
Highwoods currently carries a Zacks Rank #2 (Buy). Other better performing REITs include SL Green Realty Corp (SLG - Analyst Report) and EastGroup Properties (EGP - Snapshot Report). Both these stocks have the same Zacks Rank as Highwoods.