HIW's $223M Bet on 6Hundred at Legacy Union: Time to Buy the Stock?

Core Insights - Highwoods Properties (HIW) is planning to acquire the 6Hundred at Legacy Union, a 411,000-square-foot Class AA office tower in Charlotte, which is currently about 84% leased with a weighted average lease term exceeding 12 years [1][8] Investment Details - The acquisition is valued at approximately $223 million, positioning Highwoods to enhance its presence in Charlotte's strong BBD, with the property offering embedded upside and long-term cash-flow potential [2][8] - The deal is expected to close within the next 30 days [2] Strategic Fit in the Portfolio - The property is part of the Legacy Union mixed-use campus, where Highwoods already owns adjacent assets, including the Bank of America Tower and SIX50 South Tryon, expanding its footprint to roughly 1.6 million square feet of Class AA office space [3][8] - This concentrated campus in a high-demand urban location allows for operational efficiencies, shared amenities, and stronger leasing leverage [3] Financial Outlook & Growth Opportunity - Highwoods anticipates stabilized annual net operating income (NOI) of about $17.5-$18.5 million, with stabilization projected by 2027 on a GAAP basis and 2028 on a cash basis [4] - The 6Hundred at Legacy Union is expected to yield approximately $10 million of GAAP NOI in 2026 [4] Funding Strategy - The acquisition will be funded in a leverage-neutral manner through proceeds from non-core asset sales, preserving balance-sheet flexibility [5] - In-place rents are over 20% below market, indicating significant upside potential as leases roll and market rents reset [5] Bottom Line for Investors - The acquisition represents a strategic upgrade for investors focused on office-REIT credit and CRE transition plays, acquiring a high-quality asset in a top Sunbelt city with embedded rental growth potential [6] - Execution will be crucial, but the acquisition aligns with the company's strategy to invest in best-in-class business-district office assets while divesting less favorable non-core properties [6] Market Performance - Over the past three months, Highwoods shares have declined by 5.7%, contrasting with a 1.0% increase in the industry [7] - Despite this, Highwoods shares are currently considered undervalued, as indicated by a Value Score of B [7]