Highwoods Recasts Credit Facility

Rhea-AI Summary

Highwoods Properties, Inc. (NYSE:HIW) has executed a recast of its unsecured revolving credit facility, replacing the existing facility obtained in 2021. The new facility extends the maturity date to January 2029, with unilateral extension options. The amount remains at $750M, with a SOFR borrowing spread of 85 bps and an annual facility fee of 20 bps. This move strengthens the company's balance sheet, improves liquidity, and provides financial flexibility to pursue strategic objectives.

Financial Analyst

The recasting of Highwoods Properties' unsecured revolving credit facility represents a strategic financial maneuver that offers several advantages. The extension of the maturity date from March 2025 to January 2028, with options to extend further to 2029, provides the company with a longer time horizon to manage its liabilities. This move could be interpreted as a signal of financial prudence, as it mitigates the short-term liquidity risk and refinancing risk associated with the previous facility's earlier maturity date.

From a financial structure standpoint, maintaining the borrowing capacity at $750 million while keeping the borrowing spread and annual facility fee unchanged suggests that the company has secured favorable terms despite potential market volatility. The statement that consolidated debt maturities are deferred until May 2026 and that floating rate debt constitutes less than 15% of total debt indicates a conservative debt profile, which could be favorable in the eyes of investors and credit rating agencies.

Overall, this recast may be perceived positively by the market, as it demonstrates the company's ability to negotiate with its bank group and maintain financial flexibility. However, investors should monitor the company's use of this facility to ensure that it supports strategic growth initiatives and does not simply defer financial obligations without corresponding growth in revenue or assets.

Market Research Analyst

The involvement of several prominent financial institutions as Joint Lead Arrangers and Bookrunners, including Bank of America and Wells Fargo, indicates Highwoods Properties' strong standing in the financial community. The support from a diverse bank group may enhance investor confidence in the company's creditworthiness and its ability to secure funding under favorable conditions.

Furthermore, the real estate sector often relies on credit facilities for liquidity and capital for development projects. By extending the maturity of its credit facility, Highwoods Properties is likely positioning itself to take advantage of potential real estate market opportunities or to buffer against market downturns. This strategic financial planning is essential for real estate companies, especially in an environment where interest rates and market dynamics can shift quickly.

Investors with interests in the real estate sector or in Highwoods Properties specifically should consider how this recast might impact the company's operational strategy and its ability to capitalize on market trends. Additionally, the company's approach to managing its debt profile could serve as an indicator of its long-term financial health and stability.

Economist

The decision by Highwoods Properties to recast its unsecured revolving credit facility should be viewed in the context of the broader economic environment, particularly interest rate trends and economic forecasts. With the SOFR (Secured Overnight Financing Rate) as the benchmark for the borrowing spread, the company's cost of borrowing is tied to the fluctuations in this rate. Given that SOFR is a measure of the cost of borrowing cash overnight collateralized by Treasury securities, it is a reflection of the Federal Reserve's monetary policy.

In a rising interest rate environment, locking in a borrowing spread now could shield the company from future increases in borrowing costs. Additionally, the absence of consolidated debt maturities until May 2026 provides the company with a buffer against potential economic downturns or tighter credit conditions in the near term. This could be a strategic move to ensure liquidity and operational flexibility regardless of economic headwinds.

Investors and stakeholders should consider how this financial strategy aligns with the company's long-term economic outlook and the potential impact of macroeconomic factors on its financial commitments. The recast could be seen as a proactive step in managing the company's capital structure in anticipation of future economic conditions.

Maintains Borrowing Capacity
Extends Maturity Date

RALEIGH, N.C., Jan. 25, 2024 (GLOBE NEWSWIRE) -- Highwoods Properties, Inc. (NYSE:HIW) has executed a recast of its unsecured revolving credit facility, which replaces the Company’s existing revolving credit facility obtained in 2021.

	New Facility	Old Facility
Amount	$750M	$750M
SOFR Borrowing Spread (1)	85 bps	85 bps
Annual Facility Fee	20 bps	20 bps
Maturity Date before Extension Options	January 2028	March 2025
Unilateral Extension Options	Two 6-Month	Two 6-Month

(1) The borrowing spread excludes a SOFR-related spread adjustment of 10 basis points.

Ted Klinck, President and Chief Executive Officer of Highwoods Properties, said, “We appreciate the confidence shown in Highwoods by our bank group. We are pleased to have extended the term of our credit facility out to 2029, with the extension options. We now have no consolidated debt maturities until May 2026 and our floating rate debt is well under 15%. Our bank group’s support and partnership has provided us the financial flexibility needed to pursue our strategic objectives, and this recast further strengthens our balance sheet and improves our liquidity.”

BofA Securities, Inc., Wells Fargo Securities, LLC, PNC Capital Markets LLC, Truist Securities, Inc., U.S. Bank National Association and TD Bank, N.A. served as Joint Lead Arrangers on the new credit facility, with BofA Securities, Inc., Wells Fargo Securities, LLC and PNC Capital Markets LLC serving as Joint Bookrunners. Bank of America, N.A. is Administrative Agent and Wells Fargo Bank, National Association and PNC Bank, National Association are Co-Syndication Agents.

About Highwoods
Highwoods Properties, Inc., headquartered in Raleigh, is a publicly-traded (NYSE:HIW), fully-integrated office real estate investment trust (“REIT”) that owns, develops, acquires, leases and manages properties primarily in the best business districts (BBDs) of Atlanta, Charlotte, Dallas, Nashville, Orlando, Raleigh, Richmond and Tampa. Highwoods is in the work-placemaking business. We believe that by creating environments and experiences where the best and brightest can achieve together what they cannot apart, we can deliver greater value to our customers, their teammates and, in turn, our stakeholders. For more information about Highwoods, please visit our website at www.highwoods.com.

Forward-Looking Statements

Some of the information in this press release may contain forward-looking statements. Such statements include statements about the Company’s liquidity and future growth opportunities. You can identify forward-looking statements by our use of forward-looking terminology such as “may,” “will,” “expect,” “anticipate,” “estimate,” “continue” or other similar words. Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, we cannot assure you that our plans, intentions or expectations will be achieved.

Factors that could cause our actual results to differ materially from Highwoods’ current expectations include, among others, the following: the financial condition of our customers could deteriorate; our assumptions regarding potential losses related to customer financial difficulties could prove to be incorrect; counterparties under our debt instruments, particularly our revolving credit facility, may attempt to avoid their obligations thereunder, which, if successful, would reduce our available liquidity; we may not be able to lease or re-lease second generation space, defined as previously occupied space that becomes available for lease, quickly or on as favorable terms as old leases; we may not be able to lease newly constructed buildings as quickly or on as favorable terms as originally anticipated; we may not be able to complete development, acquisition, reinvestment, disposition or joint venture projects as quickly or on as favorable terms as anticipated; development activity in our existing markets could result in an excessive supply relative to customer demand; our markets may suffer declines in economic and/or office employment growth; unanticipated increases in interest rates could increase our debt service costs; unanticipated increases in operating expenses could negatively impact our operating results; natural disasters and climate change could have an adverse impact on our cash flow and operating results; we may not be able to meet our liquidity requirements or obtain capital on favorable terms to fund our working capital needs and growth initiatives or repay or refinance outstanding debt upon maturity; and the Company could lose key executive officers.

This list of risks and uncertainties, however, is not intended to be exhaustive. You should also review the other cautionary statements we make in “Risk Factors” set forth in our 2022 Annual Report on Form 10-K and subsequent SEC filings. Given these uncertainties, you should not place undue reliance on forward-looking statements. We undertake no obligation to publicly release the results of any revisions to these forward-looking statements to reflect any future events or circumstances or to reflect the occurrence of unanticipated events.

Contact:	Brendan Maiorana
	Executive Vice President and Chief Financial Officer
	brendan.maiorana@highwoods.com
	919-872-4924

What is the ticker symbol for Highwoods Properties, Inc.?

The ticker symbol for Highwoods Properties, Inc. is HIW.

What is the amount of the new credit facility?

The amount of the new credit facility is $750 million.

What is the maturity date of the new credit facility?

The maturity date of the new credit facility is January 2029.

Who are the joint lead arrangers on the new credit facility?

BofA Securities, Inc., Wells Fargo Securities, LLC, PNC Capital Markets LLC, Truist Securities, Inc., U.S. Bank National Association, and TD Bank, N.A. served as Joint Lead Arrangers on the new credit facility.

What is the role of Bank of America, N.A. in the new credit facility?

Bank of America, N.A. is the Administrative Agent in the new credit facility.