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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the fiscal year ended December 31, 1996
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission file number 1-13100
HIGHWOODS PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
Maryland 56-1871668
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3100 Smoketree Court, Suite 600
Raleigh, N.C. 27604
(Address of principal executive offices) (Zip Code)
919-872-4924
(Registrant's telephone number, including area code)
Securities registered pursuant to section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
Common stock, $.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
NONE
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment of this
Form 10-K. [X]
The aggregate market value of the shares of common stock held by
non-affiliates (based upon the closing sale price on the New York Stock
Exchange) on March 14, 1997 was approximately $1,258,010,021. As of March 14,
1997, there were 35,857,950 shares of common stock, $.01 par value, outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Proxy Statement in connection with its Annual
Meeting of Shareholders to be held April 29, 1997 are incorporated by reference
in Part III Items 10, 11, 12 and 13.
HIGHWOODS PROPERTIES, INC.
TABLE OF CONTENTS
Item No. Page No.
PART I
1. Business............................................................................... A-3
2. Properties............................................................................. A-8
3. Legal Proceedings...................................................................... A-21
4. Submission of Matters to a Vote of Security Holders.................................... A-21
X. Executive Officers of the Registrant................................................... A-21
PART II
5. Market for Registrant's Common Shares and Related Stockholder Matters.................. A-22
6. Selected Financial Data................................................................ A-23
7. Management's Discussion and Analysis of Financial Condition and Results of
Operations........................................................................... A-24
8. Financial Statements and Supplementary Data............................................ A-32
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure... A-32
PART III
10. Directors and Executive Officers of the Registrant..................................... A-33
11. Executive Compensation................................................................. A-33
12. Security Ownership of Certain Beneficial Owners and Management......................... A-33
13. Certain Relationships and Related Transactions......................................... A-33
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form 10-K....................... A-34
2
PART I
ITEM 1. BUSINESS
General
Highwoods Properties, Inc. (the "Company") is a self-administered and
self-managed real estate investment trust ("REIT") that began operations through
a predecessor in 1978. Originally founded to oversee the development, leasing
and management of the 201-acre Highwoods Office Center in Raleigh, North
Carolina, the Company has since evolved into one of the largest owners and
operators of suburban office and industrial properties in the southeastern
United States. Historically, the Company's real estate operations have been
focused in the Raleigh-Durham, North Carolina market, an area also known as the
Research Triangle, one of the nation's premier business centers. On June 14,
1994, the Company completed an initial public offering of 8,510,000 shares of
Common Stock in connection with the reorganization of the Company's predecessor,
whereby the Company succeeded to the ownership of 36 suburban office buildings,
four service center properties, one warehouse facility and 94 acres of
undeveloped land (the "Formation Transaction"). As of December 31, 1996, the
Company owned a portfolio of 292 in-service office and industrial properties
(the "Properties") and owned 238 acres (and had agreed to purchase an additional
311 acres) of undeveloped land suitable for future development (the "Development
Land"). An additional 14 properties (the "Development Projects"), which will
encompass approximately 1.0 million square feet, are currently under
development. The Properties consist of 181 suburban office properties and 111
industrial properties (including 74 service centers) located in 16 markets in
North Carolina, Florida, Tennessee, Georgia, Virginia, South Carolina and
Alabama.
The Company conducts substantially all of its activities through, and
substantially all of its properties are held directly or indirectly by,
Highwoods/Forsyth Limited Partnership (the "Operating Partnership"). The
Operating Partnership is controlled by the Company as its sole general partner
and, as of March 14, 1997, the Company owned approximately 84% of the limited
partnership interests (the "Units") in the Operating Partnership. The remaining
Units are owned by limited partners (including certain officers and directors of
the Company). Each Unit may be redeemed by the holder thereof for the cash value
of one share of Common Stock, or, at the Company's option, one share (subject to
certain adjustments) of Common Stock. With each such exchange, the number of
Units owned by the Company and, therefore, the Company's percentage interest in
the Operating Partnership, will increase.
In addition to owning the Properties, the Development Projects and the
Development Land, the Company provides leasing, property management, real estate
development, construction and miscellaneous tenant services for the Properties
as well as for third parties. The Company conducts its third-party fee-based
services through Highwoods Services, Inc. and Forsyth Properties Services, Inc.,
which are subsidiaries of the Operating Partnership. During the year, the
Company sold its third-party brokerage business in the Research Triangle and the
Piedmont Triad and currently provides such brokerage services only in Nashville,
Tennessee.
The Company was formed in North Carolina in 1994. The Company's executive
offices are located at 3100 Smoketree Court, Suite 600, Raleigh, North Carolina
27604, and its telephone number is (919) 872-4924. The Company also maintains
regional offices in Winston-Salem and Charlotte, North Carolina; Richmond,
Virginia; Nashville and Memphis, Tennessee; Atlanta, Georgia; and Tampa and Boca
Raton, Florida.
Business Objectives and Strategy of the Company
The Company seeks to maximize the total return to its stockholders (i)
through contractual increases in rental rates from existing leases, (ii) by
renewing or re-leasing space with expiring leases at higher effective rental
rates, (iii) by increasing occupancy levels in properties, (iv) by acquiring new
properties, (v) by developing new properties, including properties on the
Development Land, and (vi) by providing a complete line of real estate services
to the Company's tenants and to third parties. The Company believes that its
in-house development, acquisition, construction management, leasing
3
and management services allow it to respond to the many demands of its existing
and potential tenant base, and enable it to provide its tenants cost-effective
services such as build-to-suit construction and space modification, including
tenant improvements and expansions. In addition, the breadth of the Company's
capabilities and resources provides it with market information not generally
available and gives the Company increased access to development, acquisition and
management opportunities. The Company believes that the operating efficiencies
achieved through its fully integrated organization also provide a competitive
advantage in setting its lease rates and pricing its other services.
The Company's strategy has been to focus its real estate activities in
markets where it believes its extensive local knowledge gives it a competitive
advantage over other real estate developers and operators. As the Company has
expanded into new markets, it has continued to maintain this localized approach
by combining with local real estate operators with many years of development and
management experience in their respective markets. Also, in making its
acquisitions, the Company has sought to employ those property-level managers who
are experienced with the real estate operations and the local market relating to
the acquired properties, resulting in 87% of the portfolio currently being
managed on a day-to-day basis by personnel that has had previous experience
managing, leasing and/or developing those properties for which they are
responsible.
The Company seeks to acquire suburban office and industrial properties at
prices below replacement cost that offer attractive returns, including
acquisitions of underperforming, high-quality assets in situations offering
opportunities for the Company to improve such assets' operating performance. In
evaluating potential acquisition opportunities, the Company will continue to
rely on the extensive experience of its management and its research capabilities
in considering a number of factors, including: (i) the location of the property,
(ii) the construction quality and condition of the property, (iii) the occupancy
and demand of properties of a similar type in the market and (iv) the ability of
the property to generate returns at or above levels of expected growth. (See
" -- Recent Developments" for a discussion of the Company's acquisition and
development activities during 1996.) The Company also believes that the 549
acres of Development Land should provide it with a competitive advantage in its
future development activities.
The Company may from time to time acquire properties from property owners
through the exchange of Units in the Operating Partnership for the property
owner's equity in the acquired property. As discussed above, each Unit received
by these property owners is redeemable for cash from the Operating Partnership
or, at the Company's option, shares of Common Stock. In connection with the
transactions, the Company may also assume outstanding indebtedness associated
with the acquired properties. The Company believes that this acquisition method
may permit it to acquire properties at attractive prices from property owners
wishing to enter into tax-deferred transactions. The Company has acquired 115
properties using the foregoing method since its inception, comprising 7.4
million rentable square feet.
The Company is also committed to maintaining a capital structure that will
allow it to grow through development and acquisition opportunities. As part of
this commitment, the Company intends to operate with a ratio of debt to total
market capitalization below 40%. At March 14, 1997, the ratio of debt to total
market capitalization (based on a Common Stock price of $35.50 per share) was
approximately 26%. The Company believes that this debt level improves its
ability to borrow funds at attractive rates. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources."
4
Recent Developments
Merger and Acquisition Activity
The following table summarizes the mergers and acquisitions completed
during the year ended December 31, 1996 (dollars in thousands):
Number of Rentable Initial
Property Location Properties Square Feet Cost
Eakin & Smith Nashville 7 856,000 $ 85,100(1)
Aetna Building Richmond 1 99,000 10,800
Westshore I & II Richmond 2 46,500 4,400
Century City I Nashville 1 56,000 4,500
Live Oak Charlotte 1 86,000 6,800
Crocker Southeast 70 5,700,000 545,000(2)
Ayers Portfolio Nashville 2 138,000 13,300
Harpeth III & IV Nashville 2 160,000 16,750
Cary Street Richmond 1 17,000 900
Atrium Memphis 2 84,000 7,750
Aerial Center Research Triangle 1 25,000 2,700
Liberty Mutual Richmond 1 58,000 6,000
Total 91 7,325,500 $ 704,000
(1) Excludes Highwoods Plaza One, which was then under development, development
land and contingent purchase price, which total $14,900,000.
(2) Net of approximately $21 million of cash held by Crocker.
A significant portion of the Company's growth during 1996 resulted from its
expansion into new markets. The Company entered 12 new markets and established
five divisional offices as a result of the Crocker and the Eakin & Smith
transactions (both transactions are described below).
Eakin & Smith Transaction
On April 1, 1996, the Company completed a merger with Eakin & Smith, Inc.
and its affiliates ("Eakin & Smith") combining their property portfolios,
management teams and business operations (the "Eakin & Smith Transaction").
Through the combination, the Company succeeded to the ownership of seven
suburban office buildings totaling 848,000 square feet, a 103,000-square-foot
suburban office development project, 18 acres of development land and Eakin &
Smith's brokerage and property management operations. All the properties and
development land are located in Nashville, Tennessee. The aggregate cost to the
Company of the Eakin & Smith Transaction, including the completion of the
in-process development project, was approximately $98.5 million payable through
the issuance of 537,138 Units and 489,421 shares of Common Stock, the assumption
of $37 million of indebtedness (with a weighted average fixed rate of 8.0%), and
cash payments of approximately $33 million. The cost excludes options to
purchase 105,000 shares of Common Stock at a price of $27.50 per share and
warrants to purchase 150,000 shares of Common Stock at a price of $28.00 per
share, as well as deferred payments of up to 54,056 shares of Common Stock,
which are attributable to Eakin & Smith's brokerage and property management
operation.
Crocker Transaction
On September 20, 1996, the Company completed its merger (the "Merger") with
Crocker Realty Trust, Inc. ("Crocker"). As a result of the Merger, the Company
acquired 58 suburban office properties and 12 service center properties (the
"Crocker Properties") located in 15 southeastern markets in Florida, North
Carolina, South Carolina, Tennessee, Georgia, Virginia and Alabama. The Crocker
Properties encompass 5.7 million rentable square feet. The total cost of the
acquisition of all the outstanding shares of Crocker Realty Trust, Inc. was
approximately $565.8 million, which included cash payments for stock and
outstanding options and warrants of $322.8 million and the assumption of
5
$243 million of debt with an average rate of 8.6%. This indebtedness included a
$140 million mortgage note with a fixed rate of 7.9% (the "7.9% Mortgage Note").
With the exception of the 7.9% Mortgage Note, the Company has repaid
substantially all of such assumed indebtedness. The Company believes that the
merger offered a unique investment opportunity for future growth by allowing the
Company to expand and diversify its operations to growth-oriented markets
throughout the Southeast. In addition, the merger enhanced the Company's
opportunities to engage in development projects and accretive acquisitions, such
as the 1997 Century Center and Anderson transactions (see "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Recent Developments"), due to the inherent cost savings of
previously established local real estate management and infrastructure.
Development Activity
The following table summarizes the 12 development projects placed in
service during the year ended December 31, 1996 (dollars in thousands):
Completed
Rentable Initial
Property Location Square Feet Cost
Hewlett Packard Piedmont Triad 15,000 $ 1,700
Global Software Research Triangle 93,000 7,600
Regency One Piedmont Triad 128,000 3,300
Healthsource Research Triangle 180,000 14,400
Highwoods One Richmond 128,000 12,800
Situs One Research Triangle 58,000 5,100
Inacom Piedmont Triad 12,000 900
MSA Research Triangle 55,000 6,200
Highwoods Plaza I Nashville 103,000 11,500
Regency II Piedmont Triad 96,000 2,800
Centerpoint II Columbia 81,000 7,600
Parkway Plaza Six Charlotte 35,000 3,100
Total 984,000 $77,000
The Company had 12 suburban office properties and two industrial properties
under development totaling 1.0 million square feet of office and industrial
space at December 31, 1996. The following table summarizes these development
projects (dollars in thousands):
Development in process
Cost at
Rentable December 31, Pre-Leasing Estimated
Property Location Square Feet Budgeted Cost 1996 Percentage Completion
Office:
One Shockoe Plaza Richmond 118,000 $15,400 $ 13,388 100% 1Q97
Simplex Piedmont Triad 12,000 900 137 62 2Q97
Center Point V Columbia 19,000 1,700 727 34 2Q97
North Park Research Triangle 43,000 4,000 2,135 38 2Q97
Sycamore Research Triangle 70,000 6,400 2,331 32 2Q97
Two AirPark East Piedmont Triad 57,000 4,600 1,071 0 2Q97
Highwoods Plaza II Nashville 103,000 10,300 2,771 0 3Q97
Highwoods Two Richmond 74,000 7,000 922 11 3Q97
Grove Park I Richmond 20,000 1,600 897 0 3Q97
West Shore III Richmond 55,000 5,300 1,002 29 3Q97
Southwind III Memphis 69,000 7,000 -- 66 4Q97
ClinTrials Research Triangle 185,000 21,500 3,427 100 2Q98
825,000 $85,700 $ 28,808 52%
Industrial:
Highwoods Airport Ctr Richmond 145,000 $ 5,500 $ 1,668 0% 2Q97
R.F. Micro Devices Piedmont Triad 45,000 7,000 710 100 4Q97
190,000 $12,500 $ 2,378 24%
1,015,000 $98,200 $ 31,186 46%*
* Letters of intent improve the pre-leasing to 61%.
6
Financing Activity
In June 1996, the Company completed a 11,500,000-share public offering of
Common Stock (including 1,500,000 shares issued pursuant to the underwriters'
over allotment option). The net proceeds of the offering totaled $292.9 million
and were used primarily to fund the acquisition of Crocker.
In July 1996, the Company sold an additional 250,000 shares of Common Stock
to underwriters who participated in the Company's 11,500,000-share offering. The
net proceeds from this offering were approximately $6.8 million.
On September 27, 1996, the Company replaced a $140 million credit facility
with a $280 million unsecured revolving line of credit (the "Revolving Loan")
from a syndicate of lenders. The Revolving Loan requires monthly payments of
interest only with the balance of all principal and accrued but unpaid interest
due on October 31, 1999. The interest rate on the Revolving Loan at year end was
LIBOR plus 135 basis points and will adjust based on the Company's senior
unsecured credit rating within a range of LIBOR plus 100 basis points to LIBOR
plus 175 basis points.
On December 2, 1996, the Operating Partnership issued $100 million of
6 3/4% notes due December 1, 2003, and $110 million of 7% notes due December 1,
2006. The proceeds were used to reduce amounts outstanding on the Revolving
Loan, to repay mortgage debt and to settle an interest rate swap agreement.
In December 1996, the Company completed a public offering of 2,587,500
shares of Common Stock (including 337,500 shares issued pursuant to the
underwriters' over allotment option) and a concurrent non-underwritten public
offering of 1,093,577 shares of Common Stock with an institutional investor. The
net proceeds from the two offerings totaled approximately $96.7 million.
In connection with 1996 acquisitions, the Company issued 807,608 Units and
489,421 shares of restricted Common Stock valued at $35.6 million (based on the
agreed-upon valuation of a share of Common Stock at the time of the
acquisition).
Competition
The Properties compete for tenants with similar properties located in the
Company's markets primarily on the basis of location, rent charged, services
provided and the design and condition of the facilities. The Company also
competes with other REITs, financial institutions, pension funds, partnerships,
individual investors and others when attempting to acquire properties.
Employees
As of December 31, 1996, the Company employed 270 persons, as compared to
124 at December 31, 1995. The increase is primarily a result of the Company's
geographic expansion.
7
ITEM 2. PROPERTIES
General
The following table sets forth certain information about the Properties at
December 31, 1996 (dollars in thousands):
Percent
of Percent
Total of Total
Rentable Rentable Annualized Annualized
Office Industrial Total Square Square Rental Rental
Properties Properties (1) Properties Feet Feet Revenue (2) Revenue
Research
Triangle.............. 66 4 70 4,491,492 25.7% $ 59,532 31.2%
Piedmont
Triad................. 23 80 103 4,521,062 25.9 28,377 14.9
Nashville............... 13 3 16 1,640,855 9.4 22,032 11.6
Tampa................... 20 -- 20 1,155,483 6.6 14,953 7.8
Charlotte............... 14 16 30 1,380,173 7.9 12,765 6.7
Boca Raton.............. 3 -- 3 506,834 2.9 9,818 5.1
Richmond................ 16 1 17 826,905 4.7 9,077 4.8
Memphis................. 7 -- 7 466,354 2.7 8,631 4.5
Greenville.............. 5 2 7 687,322 3.9 7,651 4.0
Atlanta................. 2 3 5 706,479 4.1 5,088 2.7
Columbia................ 6 -- 6 403,363 2.3 5,068 2.7
Orlando................. 2 -- 2 200,796 1.2 2,107 1.1
Birmingham.............. 1 -- 1 114,539 0.7 1,692 0.9
Norfolk................. 1 1 2 178,827 1.0 1,583 0.8
Asheville............... 1 1 2 124,177 0.7 1,121 0.6
Jacksonville............ 1 -- 1 50,513 0.3 1,107 0.6
Total............ 181 111 292 17,455,174 100.0% $ 190,602 100.0%
Office Industrial Total or
Properties Properties (1) Average
Total Annualized Rental Revenue (2).............. $ 165,313 $ 25,289 $ 190,602
Total rentable square feet....................... 12,350,593 5,104,581 17,455,174
Percent leased................................... 93%(3) 90%(4) 92%
Average age (years).............................. 9.4 9.6(5) 9.5
(1) Includes 74 service center properties.
(2) Annualized Rental Revenue is December 1996 rental revenue (base rent plus
operating expense pass throughs) multiplied by 12.
(3) Includes 41 single-tenant properties comprising 2.6 million rentable square
feet and 144,767 rentable square feet leased but not occupied.
(4) Includes 26 single-tenant properties comprising 1.5 million rentable square
feet and 48,136 rentable square feet leased but not occupied.
(5) Excludes Ivy Distribution Center. Ivy is a 400,000-rentable square foot
warehouse, which was constructed in stages. A portion of the building was
built in 1930; major expansions took place in the mid-1940s, mid-1950s and
1981. In 1989, the entire property was renovated to convert it from a
manufacturing facility to a warehouse.
8
The following table sets forth certain information about the portfolio of
in-service and development properties as of December 31, 1996 and 1995:
December 31, 1996 December 31, 1995
Percent Percent
Number of Rentable Leased/ Number of Rentable Leased/
Properties Square Feet Pre-leased Properties Square Feet Pre-leased
In-Service
Office...................... 181 12,350,600 93% 87 4,921,400 95%
Industrial.................. 111 5,104,600 90 104 4,293,800 94
Total.................... 292 17,455,200 92% 191 9,215,200 95%
Under Development
Office...................... 12 825,000 52% 6 590,700 71%
Industrial.................. 2 190,000 24 1 127,600 100
Total.................... 14 1,015,000 46% 7 718,300 76%
Total
Office...................... 193 13,175,600 93 5,512,100
Industrial.................. 113 5,294,600 105 4,421,400
Total.................... 306 18,470,200 198 9,933,500
Tenants
The Properties are leased to approximately 1,800 tenants, which engage in a
wide variety of businesses including computers, healthcare, telecommunications,
finance, insurance and electronics. The following table sets forth information
concerning the 20 largest tenants of the Properties as of December 31, 1996
(dollars in thousands):
Percent
of Total
Annualized
Number Annualized Rental
Tenant of Leases Rental Revenue (1) Revenue
1. Federal Government............................................ 14 $ 5,557 2.9%
2. IBM Corporation............................................... 7 4,842 2.5
3. First Citizens Bank & Trust................................... 8 2,747 1.4
4. BellSouth..................................................... 6 2,279 1.2
5. MCI Telecommunications........................................ 6 1,879 1.0
6. International Paper Company................................... 6 1,825 1.0
7. Jacobs-Sirrene Engineers, Inc................................. 1 1,802 0.9
8. Barclays American............................................. 3 1,712 0.9
9. Healthsource.................................................. 1 1,629 0.9
10. Sears, Roebuck and Company.................................... 3 1,553 0.8
11. Aetna Life Insurance Corp..................................... 6 1,534 0.8
12. Blue Cross & Blue Shield of SC................................ 5 1,530 0.8
13. Duke University............................................... 4 1,450 0.8
14. Clintrials of North Carolina.................................. 4 1,436 0.8
15. Kraft Company................................................. 4 1,386 0.7
16. Volvo GM Heavy Truck Corp..................................... 4 1,318 0.7
17. Pharmacy Management Services, Inc............................. 2 1,261 0.7
18. A T & T....................................................... 3 1,216 0.6
19. Glaxo Wellcome, Inc........................................... 3 1,193 0.6
20. GTE Data Services, Inc........................................ 1 1,182 0.6
91 $ 39,331 20.6%
(1) Calculated by multiplying December 1996 rental revenue (base rent plus
operating pass throughs) by 12.
9
The following tables set forth certain information about the Company's
leasing activities for the years ended December 31, 1996 and 1995.
1996 1995
Office Industrial Office Industrial
Net Effective Rents Related to Re-Leased Space:
Number of lease transactions (signed leases)........ 306 240 145 97
Rentable square footage leased...................... 1,158,563 2,302,151 655,546 586,748
Average per rentable square foot over the lease
term:
Base rent......................................... $ 15.00 $ 4.68 $ 15.39 $ 5.54
Tenant improvements............................... (0.93) (0.15) (0.29) (0.06)
Leasing commissions............................... (0.31) (0.10) (0.31) (0.12)
Rent concessions.................................. -- -- (0.01) --
Effective rent.................................... $ 13.76 $ 4.43 $ 14.78 $ 5.36
Expense stop...................................... (3.36) (0.39) (4.36) (0.32)
Equivalent effective net rent..................... $ 10.40 $ 4.04 $ 10.42 $ 5.04
Average term in years............................... 4 2 4 3
Rental Rate Trends:
Average final rate with expense pass throughs....... $ 13.64 $ 4.41 $ 14.63 $ 5.41
Average first year cash rental rate................. $ 14.46 $ 4.68 $ 15.12 $ 6.02
Percentage increase................................. 6.01% 6.12% 3.35% 11.28%
Capital Expenditures Related to
Re-leased Space:
Tenant Improvements:
Total dollars committed under signed leases....... $4,496,523 $ 685,880 $1,604,591 $ 115,097
Rentable square feet.............................. 1,158,563 2,302,151 655,546 586,748
Per rentable square foot.......................... $ 3.88 $ 0.30 $ 2.45 $ 0.20
Leasing Commissions:
Total dollars committed under signed leases....... $1,495,498 $ 470,090 $ 770,614 $ 169,929
Rentable square feet.............................. 1,158,563 2,302,151 655,546 586,748
Per rentable square foot.......................... $ 1.29 $ 0.20 $ 1.18 $ 0.29
Total:
Total dollars committed under signed leases....... $5,992,021 $1,155,970 $2,375,205 $ 285,026
Rentable square feet.............................. 1,158,563 2,302,151 655,546 586,748
Per rentable square foot.......................... $ 5.17 $ 0.50 $ 3.62 $ 0.49
10
The following tables set forth scheduled lease expirations for executed
leases as of December 31, 1996, assuming no tenant exercises renewal options.
Office Properties:
Average
Annual
Total Percentage of Annual Rents Rental Rate Percentage of
Rentable Leased Square Footage Under Per Square Leased Rents
Year of Lease Number of Square Feet Represented by Expiring Foot for Represented by
Expiration Leases Expiring Expiring Leases Leases (1) Expirations (1) Expiring Leases
1997 400 1,574,595 13.9% $ 21,523,277 $ 13.67 13.1%
1998 286 1,936,670 17.1 27,305,206 14.10 16.7
1999 300 1,608,604 14.2 23,500,305 14.61 14.3
2000 256 1,773,532 15.6 26,544,059 14.97 16.2
2001 202 1,717,446 15.2 27,706,704 16.13 16.9
2002 68 811,054 7.2 12,209,094 15.05 7.5
2003 33 622,660 5.5 9,382,358 15.07 5.7
2004 13 185,635 1.6 2,246,979 12.10 1.4
2005 13 406,609 3.6 4,307,218 10.59 2.6
2006 12 535,478 4.7 7,055,661 13.18 4.3
Thereafter 11 154,058 1.4 2,193,726 14.24 1.3
Total or
average 1,594 11,326,341 100.0% $ 163,974,587 $ 14.48 100.0%
Industrial Properties:
Average
Annual
Total Percentage of Annual Rents Rental Rate Percentage of
Rentable Leased Square Footage Under Per Square Leased Rents
Year of Lease Number of Square Feet Represented by Expiring Foot for Represented by
Expiration Leases Expiring Expiring Leases Leases (1) Expirations (1) Expiring Leases
1997 188 1,417,501 30.4% $ 7,273,732 $ 5.13 27.5%
1998 120 825,438 17.7 5,161,532 6.25 19.6
1999 112 960,979 20.6 5,439,511 5.66 20.6
2000 40 578,220 12.4 3,888,141 6.72 14.7
2001 37 330,512 7.1 2,406,518 7.28 9.1
2002 8 361,162 7.7 1,170,620 3.24 4.4
2003 1 3,375 0.1 18,428 5.46 0.1
2004 2 34,569 0.8 288,074 8.33 1.1
2005 3 23,722 0.5 189,850 8.00 0.7
2006 1 127,600 2.7 575,476 4.51 2.2
Thereafter 0 -- 0.0% -- -- 0.0
Total or
average 512 4,663,078 100.0% $ 26,411,882 $ 5.66 100.0%
(1) Includes operating expense pass throughs and excludes the effect of future
contractual rent increases.
11
Table of Properties
The following table and the notes thereto set forth information regarding
the Properties at December 31, 1996:
Percent Percent
Leased at Occupied at
Building Year Rentable December 31, December 31,
Property Type (1) Built Square Feet 1996 1996
Research Triangle, NC
Highwoods Office Center
Amica O 1983 20,708 100% 100%
Arrowood O 1979 58,743 100 100
Aspen O 1980 36,666 95 95
Birchwood O 1983 12,748 100 43
Cedar East O 1981 40,017 100 100
Cedar West O 1981 39,781 85 85
Cottonwood O 1983 40,150 100 100
Cypress O 1980 39,004 100 100
Dogwood O 1983 40,613 100 100
Global Software O 1996 92,720 86 86
Hawthorn O 1987 63,797 100 100
Highwoods Tower O 1991 185,222 99 99
Holly O 1984 20,186 100 100
Ironwood O 1978 35,695 97 97
Kaiser O 1988 56,975 100 100
Laurel O 1982 39,382 100 100
Leatherwood O 1979 36,581 96 96
Smoketree Tower O 1984 150,341 98 98
Rexwoods Office Center
2500 Blue Ridge O 1982 61,864 100 100
Blue Ridge II O 1988 20,673 100 100
Rexwoods Center O 1990 41,686 100 100
Rexwoods II O 1993 20,845 100 100
Rexwoods III O 1992 42,484 100 100
Rexwoods IV O 1995 42,331 100 100
Triangle Business Center
Bldg. 2A O 1984 102,400 60 60
Bldg. 2B S 1984 32,000 0 0
Bldg. 3 O 1988 135,382 100 100
Bldg. 7 O 1986 126,728 91 91
Progress Center
Cape Fear O 1979 41,293 79 79
Catawba O 1980 40,578 100 100
Pamlico (CompuChem) O 1980 105,540 0 0
North Park
4800 North Park O 1985 168,016 100 100
4900 North Park O 1984 32,002 75 75
5000 North Park O 1980 74,786 96 96
Creekstone Park
Creekstone Crossing O 1990 59,299 100 100
Riverbirch O 1987 60,163 100 100
Willow Oak O 1995 88,783 100 100
Research Commons
EPA Administration O 1966 46,718 100 100
EPA Annex O 1966 145,875 100 100
4501 Bldg. O 1985 56,566 100 100
4401 Bldg. O 1987 115,526 77 77
4301 Bldg. O 1989 90,894 100 100
4201 Bldg. O 1991 83,731 100 100
Hock Portfolio
Fairfield I O 1987 52,070 91 91
Fairfield II O 1989 59,954 79 79
Qualex O 1985 67,000 100 100
4101 Roxboro O 1984 56,000 100 100
4020 Roxboro O 1989 40,000 100 100
Tenants Leasing 25% or More
of Rentable Square Feet at
Property December 31, 1996
Research Triangle, NC
Highwoods Office Center
Amica Amica Mutual Insurance
Company
Arrowood First Citizens Bank & Trust
Aspen N/A
Birchwood USAA, Southlight, Inc.
Cedar East Amerimark Building Products
Cedar West N/A
Cottonwood First Citizens Bank & Trust
Cypress GSA-Army Recruiters
Dogwood First Citizens Bank & Trust
Global Software Global Software Inc.
Hawthorn Carolina Telephone
Highwoods Tower Maupin, Taylor, Ellis &
Adams
Holly Capital Associated
Industries
Ironwood First Citizens Bank & Trust
Kaiser Kaiser Foundation
Laurel Microspace Communications,
First Citizens Bank & Trust
Leatherwood GAB Robins North America,
Inc.
Smoketree Tower N/A
Rexwoods Office Center
2500 Blue Ridge Rex Hospital, Inc.
Blue Ridge II McGladrey & Pullen
Rexwoods Center N/A
Rexwoods II Raleigh Neurology Clinic
(2), Miller Building
Corporation
Rexwoods III Piedmont Olsen Hensley, Inc.
Rexwoods IV N/A
Triangle Business Center
Bldg. 2A Harris Corporation,
Bldg. 2B N/A
Bldg. 3 N/A
Bldg. 7 Broadband Technologies, Inc.
Progress Center
Cape Fear N/A
Catawba GSA -- EPA
Pamlico (CompuChem) N/A
North Park
4800 North Park IBM-PC Division
4900 North Park N/A
5000 North Park N/A
Creekstone Park
Creekstone Crossing N/A
Riverbirch Digital Equipment
Corporation, Quintiles, Inc.
Willow Oak AT&T Corporation
Research Commons
EPA Administration Environmental Protection
Agency
EPA Annex Environmental Protection
Agency
4501 Bldg. Martin Marietta
4401 Bldg. Ericsson
4301 Bldg. Glaxo Wellcome, Inc. (3)
4201 Bldg. Environmental Protection
Agency
Hock Portfolio
Fairfield I Reliance
Fairfield II Qualex
Qualex Qualex
4101 Roxboro Duke -- Cardiology
4020 Roxboro Duke -- Pediatrics
Duke -- Cardiology
12
Percent Percent
Leased at Occupied at
Building Year Rentable December 31, December 31,
Property Type (1) Built Square Feet 1996 1996
Six Forks Center
Six Forks Center I O 1982 33,867 100% 100%
Six Forks Center II O 1983 55,603 94 94
Six Forks Center III O 1987 60,786 99 99
ONCC
Phase I S 1981 101,127 92 91
"W" Building O 1983 91,335 100 100
3645 Trust Drive O 1984 50,652 58 58
5220 Green's Dairy Road O 1984 29,869 100 100
5200 Green's Dairy Road O 1984 18,317 82 82
5301 Departure Drive S 1984 84,899 100 100
Other Research Triangle
Properties
Aerial Center O 1992 25,330 0 0
Colony Corporate Center O 1985 52,011 100 100
Concourse O 1986 131,645 99 99
Cotton Building O 1972 40,035 100 100
Expressway One Warehouse I 1990 59,600 44 44
Healthsource O 1996 180,000 100 100
Holiday Inn O 1984 30,000 100 100
Lake Plaza East O 1984 71,254 92 76
MSA O 1996 55,219 100 100
Phoenix O 1990 26,449 88 88
Situs I O 1996 57,784 73 73
South Square I O 1988 56,401 86 86
South Square II O 1989 58,793 100 100
Total or Weighted Average 4,491,492 91% 91%
Piedmont Triad, NC
Airpark East
Highland Industries S 1990 12,500 100% 100%
Service Center 1 S 1985 18,575 100 100
Service Center 2 S 1985 18,672 99 99
Service Center 3 S 1985 16,498 100 100
Service Center 4 S 1985 16,500 100 100
Copier Consultants S 1990 20,000 100 100
Service Court S 1990 12,600 99 99
Bldg. 01 O 1990 24,423 100 100
Bldg. 02 O 1986 23,827 100 100
Bldg. 03 O 1986 23,182 96 96
Bldg. A O 1986 56,272 100 100
Bldg. B O 1988 54,088 98 98
Bldg. C O 1990 134,893 83 78
Sears Cenfact O 1989 49,504 100 100
Hewlett Packard O 1996 15,000 95 95
Inacom O 1996 12,620 100 100
Warehouse 1 I 1985 64,000 81 81
Warehouse 2 I 1985 64,000 88 88
Warehouse 3 I 1986 57,600 93 91
Warehouse 4 I 1988 54,000 100 100
Airpark North
DC-1 I 1986 112,000 100 100
DC-2 I 1987 111,905 100 100
DC-3 I 1988 75,000 67 67
DC-4 I 1988 60,000 100 100
Airpark West
Airpark I O 1984 60,000 100 100
Airpark II O 1985 45,680 100 0
Airpark IV O 1985 22,612 99 99
Airpark V O 1985 21,923 60 60
Airpark VI O 1985 22,097 94 94
Tenants Leasing 25% or More
of Rentable Square Feet at
Property December 31, 1996
Six Forks Center
Six Forks Center I Centura Bank, NY Life Ins.
Co.
Six Forks Center II N/A
Six Forks Center III EDS
ONCC
Phase I Monolith Corporation
"W" Building International Business
Machines Corp.
3645 Trust Drive Customer Access Resources,
Inc.
5220 Green's Dairy Road N/A
5200 Green's Dairy Road Carolina Power & Light
Company
5301 Departure Drive ABB Power T&D Co., Inc.,
Cardiovascular Diagnostics,
Inc.
Other Research Triangle
Properties
Aerial Center N/A
Colony Corporate Center Rust Environmental &
Infrastructure, Fujitsu
Concourse ClinTrials
Cotton Building Cotton Inc., Associated
Insurances Inc.
Expressway One Warehouse N/A
Healthsource Healthsource N.C.
Holiday Inn Holiday Inns, Inc.
Lake Plaza East N/A
MSA Management Systems Assoc.
Phoenix Computer Intelligence, Inc.
Situs I BellSouth
South Square I Blue Cross and Blue Shield
South Square II Coastal Healthcare Group,
Inc.
Total or Weighted Average
Piedmont Triad, NC
Airpark East
Highland Industries Highland Industries, Inc.
(4)
Service Center 1 Genetic Design
Service Center 2 Genetic Design
Service Center 3 ECPI
Service Center 4 Genetic Design
Copier Consultants Copier Consultants
Service Court Genetic Design
Bldg. 01 Health & Hygiene
Bldg. 02 United States Postal Service
Bldg. 03 Time Warner, Martin Marietta
Bldg. A N/A
Bldg. B United States Postal Service
Bldg. C John Hancock
Sears Cenfact Sears Roebuck & Company
Hewlett Packard Hewlett Packard Co.
Inacom Inacom Business Centers Inc.
Warehouse 1 Guilford Business Forms,
Inc., Safelite Glass Corp.
Warehouse 2 Volvo GM Heavy Truck Corp.,
State Street Bank Realty
Warehouse 3 US Air, Inc., Garlock, Inc.
Warehouse 4 First Data Resources, Inc.,
Microdyne
Airpark North
DC-1 VSA, Inc.
DC-2 Sears Roebuck & Co., New
Breed Leasing, Electric
South
DC-3 Continuous Forms & Checks,
Inc.
DC-4 RSVP Communications, Inc.
Airpark West
Airpark I Volvo GM Heavy Truck Corp.
Airpark II Mohawk Carpet Corporation
Airpark IV Max Radio of Greensboro
Airpark V N/A
Airpark VI Brookstone College, Anacomp
13
Percent Percent
Leased at Occupied at
Building Year Rentable December 31, December 31,
Property Type (1) Built Square Feet 1996 1996
West Point Business Park
BMF Warehouse I 1986 240,000 100% 100%
WP-11 I 1988 89,600 85 85
WP-12 I 1988 89,600 100 100
WP-13 I 1988 89,600 100 100
WP-3 & 4 S 1988 18,059 100 100
WP-5 S 1995 25,200 65 65
Fairchild Bldg. I 1990 89,000 100 66
LUWA Bahnson Bldg. O 1990 27,000 100 100
University Commercial Center
W-1 I 1983 44,400 100 100
W-2 I 1983 46,500 100 100
SR-1 S 1983 23,112 97 97
SR-2 01/02 S 1983 17,282 100 100
SR-3 S 1984 23,825 70 70
Bldg. 03 O 1985 37,077 66 66
Bldg. 04 O 1986 34,470 94 94
Ivy Distribution Center (5) I 1930- 400,000 79 79
1980
Knollwood Office Center
370 Knollwood O 1994 90,315 100 100
380 Knollwood O 1990 164,141 98 98
Stoneleigh Business Park
7327 W. Friendly Ave. S 1987 11,180 81 81
7339 W. Friendly Ave. S 1989 11,784 100 100
7341 W. Friendly Ave. S 1988 21,048 94 94
7343 W. Friendly Ave. S 1988 13,463 100 100
7345 W. Friendly Ave. S 1988 12,300 100 100
7347 W. Friendly Ave. S 1988 17,978 100 100
7349 W. Friendly Ave. S 1988 9,840 88 88
7351 W. Friendly Ave. S 1988 19,723 98 98
7353 W. Friendly Ave. S 1988 22,826 100 100
7355 W. Friendly Ave. S 1988 13,296 88 88
Spring Garden Plaza
4000 Spring Garden St. S 1983 21,773 100 100
4002 Spring Garden St. S 1983 6,684 100 100
4004 Spring Garden St. S 1983 23,724 62 62
Pomona Center -- Phase I
7 Dundas Circle S 1986 14,184 100 100
8 Dundas Circle S 1986 16,488 93 93
9 Dundas Circle S 1986 9,972 90 75
Pomona Center -- Phase II
302 Pomona Dr. S 1987 16,488 75 75
304 Pomona Dr. S 1987 4,344 100 100
306 Pomona Dr. S 1987 9,840 100 100
308 Pomona Dr. S 1987 14,184 96 96
5 Dundas Circle S 1987 14,184 100 100
Westgate on Wendover -- Phase I
305 South Westgate Dr. S 1985 4,608 83 83
307 South Westgate Dr. S 1985 12,672 91 91
309 South Westgate Dr. S 1985 12,960 89 89
311 South Westgate Dr. S 1985 14,400 80 80
315 South Westgate Dr. S 1985 10,368 89 89
317 South Westgate Dr. S 1985 15,552 100 100
319 South Westgate Dr. S 1985 10,368 100 100
Tenants Leasing 25% or More
of Rentable Square Feet at
Property December 31, 1996
West Point Business Park
BMF Warehouse Sara Lee Knit Products, Inc.
WP-11 N.C. Record Control Centers,
Walt Klein & Assoc.
WP-12 Norel Plastics, Sara Lee
WP-13 Sara Lee Knit Products, Inc.
WP-3 & 4 Tri-Communications, Inc.,
Rayco Safety, Inc.
WP-5 N/A
Fairchild Bldg. Fairchild Industrial
Products
LUWA Bahnson Bldg. Luwa Bahnson, Inc.
University Commercial Center
W-1 Lagenthal Corp.
W-2 Paper Supply Company
SR-1 N/A
SR-2 01/02 Decision Point Marketing
SR-3 Decision Point Marketing
Bldg. 03 N/A
Bldg. 04 Somur, Inc.
Ivy Distribution Center (5) N/A
Knollwood Office Center
370 Knollwood Krispy Kreme, Prudential
Carolinas Realty
380 Knollwood N/A
Stoneleigh Business Park
7327 W. Friendly Ave. American Telecom, Salem
Imaging
7339 W. Friendly Ave. Medical Endoscopy Service,
R.F. Micro Devices
7341 W. Friendly Ave. R.F. Micro Devices
7343 W. Friendly Ave. Executone
7345 W. Friendly Ave. Rule Manuf.
7347 W. Friendly Ave. Law Engineering, Winship
7349 W. Friendly Ave. Anderson & Assoc.
7351 W. Friendly Ave. General Transport, ACT
MEDIA, Inc.
7353 W. Friendly Ave. Office Equipment, Windsor
Door
7355 W. Friendly Ave. R.F. Micro Devices
Spring Garden Plaza
4000 Spring Garden St. N/A
4002 Spring Garden St. Jordan Graphics
4004 Spring Garden St. N/A
Pomona Center -- Phase I
7 Dundas Circle N/A
8 Dundas Circle N/A
9 Dundas Circle Netcom, Conservatop
Corporation
Pomona Center -- Phase II
302 Pomona Dr. N/A
304 Pomona Dr. Fortune Personnel
Consultants, OSC Fluid
306 Pomona Dr. AEL Defense Corporation,
Aqua Science
308 Pomona Dr. Hering North America
5 Dundas Circle N/A
Westgate on Wendover -- Phase I
305 South Westgate Dr. Alarmguard, The Computer
Store
307 South Westgate Dr. Anders Lufvenholm
309 South Westgate Dr. GEODAX Technology, Inc.,
McRae Graphics
311 South Westgate Dr. N/A
315 South Westgate Dr. N/A
317 South Westgate Dr. N/A
319 South Westgate Dr. N/A
14
Percent Percent
Leased at Occupied at
Building Year Rentable December 31, December 31,
Property Type (1) Built Square Feet 1996 1996
Westgate on Wendover -- Phase II
206 South Westgate Dr. S 1986 17,376 100 100
207 South Westgate Dr. S 1986 26,448 100 100
300 South Westgate Dr. S 1986 12,960 100 100
4600 Dundas Circle S 1985 11,922 29 29
4602 Dundas Circle S 1985 13,017 61 61
Radar Road
500 Radar Rd. I 1981 78,000 100 100
502 Radar Rd. I 1986 15,000 100 100
504 Radar Rd. I 1986 15,000 98 98
506 Radar Rd. I 1986 15,000 100 100
Holden/85 Business Park
2616 Phoenix Dr. I 1985 31,894 100 100
2606 Phoenix Dr. -- 100 S 1989 15,000 100 100
2606 Phoenix Dr. -- 200 S 1989 15,000 100 100
2606 Phoenix Dr. -- 300 S 1989 7,380 67 67
2606 Phoenix Dr. -- 400 S 1989 12,300 90 90
2606 Phoenix Dr. -- 500 S 1989 15,180 90 90
2606 Phoenix Dr. -- 600 S 1989 18,540 90 90
Industrial Village
7906 Industrial Village Rd. I 1985 15,000 100 100
7908 Industrial Village Rd. I 1985 15,000 57 57
7910 Industrial Village Rd. I 1985 15,000 100 100
Other Piedmont Triad Properties
6348 Burnt Poplar I 1990 125,000 100 100
6350 Burnt Poplar I 1992 57,600 100 100
Deep River I O 1989 78,094 97 97
Forsyth I O 1985 51,236 41 41
Regency One I 1996 127,600 100 100
Regency Two I 1996 96,000 50 50
Stratford O 1991 135,533 96 96
Chesapeake I 1993 250,000 100 100
3288 Robinhood O 1989 19,599 87 87
Total or Weighted Average 4,521,062 93% 91%
Nashville, TN
Maryland Farms
Eastpark 1 O 1978 29,797 100% 100%
Eastpark 2 O 1978 85,516 100 100
Eastpark 3 O 1978 77,480 100 100
Harpeth II O 1984 78,283 100 100
Harpeth III O 1987 78,989 95 95
Harpeth IV O 1989 77,730 100 100
Highwoods Plaza I O 1996 102,000 58 58
EMI/Sparrow O 1982 59,656 100 100
5310 Maryland Way O 1994 76,615 100 100
Tenants Leasing 25% or More
of Rentable Square Feet at
Property December 31, 1996
Westgate on Wendover -- Phase II
206 South Westgate Dr. Home Care of the Central
Carolinas
207 South Westgate Dr. Health Equipment Services
300 South Westgate Dr. Health Equipment Services
4600 Dundas Circle Aquaterra, Inc.
4602 Dundas Circle Four Seasons Apparel
Radar Road
500 Radar Rd. United States Postal Service
502 Radar Rd. East Texas Distributing
504 Radar Rd. Triad International
Maintenance, Dayva
Industries
506 Radar Rd. Triad International
Maintenance, American
Coatings
Holden/85 Business Park
2616 Phoenix Dr. Pliana, Inc.
2606 Phoenix Dr. -- 100 Piedmont Plastics, Rexham
Corp.
2606 Phoenix Dr. -- 200 REHAU, Inc., Underground
Utility Locating
2606 Phoenix Dr. -- 300 N/A
2606 Phoenix Dr. -- 400 Spectrum Financial Services
2606 Phoenix Dr. -- 500 The Record Exchange
2606 Phoenix Dr. -- 600 AT&T, Faith & Victory Church
Industrial Village
7906 Industrial Village Rd. Texas Aluminum
7908 Industrial Village Rd. Air Express
7910 Industrial Village Rd. Wadkin North America, Inc.
Other Piedmont Triad Properties
6348 Burnt Poplar Sears Roebuck & Co.
6350 Burnt Poplar Industries for the Blind
Deep River I N/A
Forsyth I N/A
Regency One New Breed Leasing Corp.
Regency Two N/A
Stratford BB&T
Chesapeake Chesapeake Display &
Packaging
3288 Robinhood N/A
Total or Weighted Average
Nashville, TN
Maryland Farms
Eastpark 1 Brentwood Music, Volunteer
Credit Corp.
Eastpark 2 PMT Services, Inc.
Eastpark 3 N/A
Harpeth II N/A
Harpeth III Alcoa Fujikura Ltd.
Harpeth IV USF&G, L.M. Berry Co.
Highwoods Plaza I TCS Management Group, Inc.
EMI/Sparrow EMI
5310 Maryland Way BellSouth
15
Percent Percent
Leased at Occupied at
Building Year Rentable December 31, December 31,
Property Type (1) Built Square Feet 1996 1996
Grassmere
Grassmere I S 1984 87,902 100% 92%
Grassmere II S 1985 140,617 100 100
Grassmere III S 1990 103,000 100 100
Other Nashville Properties
Century City Plaza I O 1987 56,161 100 100
Lakeview O 1986 99,722 100 100
3401 Westend O 1982 253,010 99 99
BNA O 1985 234,377 97 97
Total or Weighted Average 1,640,855 99% 99%
Tampa, FL
Sabal Park
Atrium O 1989 129,855 80 80
Sabal Business Center VI O 1988 99,136 100 100
Progressive Insurance O 1988 83,648 100 100
Sabal Business Center VII O 1990 71,248 100 100
Sabal Business Center V O 1988 60,578 100 100
Registry II O 1987 58,781 96 94
Registry I O 1985 58,319 90 88
Sabal Business Center IV O 1984 49,368 100 100
Sabal Tech Center O 1989 48,220 100 100
Sabal Park Plaza O 1987 46,758 97 97
Sabal Lake Building O 1986 44,533 100 100
Sabal Business Center I O 1982 40,698 88 88
Sabal Business Center II O 1984 32,660 64 64
Registry Square O 1988 26,568 85 85
Expo Building O 1981 25,600 100 100
Sabal Business Center III O 1984 21,300 100 100
Benjamin Center
Benjamin Center #7 O 1991 30,960 100 100
Benjamin Center #9 O 1989 38,405 76 76
Other Tampa Properties
Tower Place O 1988 180,848 91 91
Day Care Center O 1986 8,000 100 100
Total or Weighted Average 1,155,483 93% 93%
Charlotte, NC
Steele Creek Park
Bldg. A I 1989 42,500 100% 100%
Bldg. B I 1985 15,031 100 100
Bldg. E I 1985 39,300 98 98
Bldg. G-1 I 1989 22,500 44 44
Bldg. H I 1987 53,614 100 100
Bldg. K I 1985 19,400 100 100
Highwoods/Forsyth Business Park
4101 Stuart Andrew Blvd. S 1984 12,185 95 95
4105 Stuart Andrew Blvd. S 1984 4,528 96 96
4109 Stuart Andrew Blvd. S 1984 15,212 97 97
4201 Stuart Andrew Blvd. S 1982 19,333 98 98
4205 Stuart Andrew Blvd. S 1982 23,401 98 98
4209 Stuart Andrew Blvd. S 1982 15,901 98 98
4215 Stuart Andrew Blvd. S 1982 23,372 96 96
4301 Stuart Andrew Blvd. S 1982 40,601 85 85
4321 Stuart Andrew Blvd. S 1982 12,774 94 94
Tenants Leasing 25% or More
of Rentable Square Feet at
Property December 31, 1996
Grassmere
Grassmere I Contel Cellular of
Nashville, Inc.
Grassmere II N/A
Grassmere III Harris Graphics Corporation
Other Nashville Properties
Century City Plaza I N/A
Lakeview The Kroger Co. (6), Centex
3401 Westend N/A
BNA N/A
Total or Weighted Average
Tampa, FL
Sabal Park
Atrium GTE Data Services, Inc.
Sabal Business Center VI Pharmacy Management
Services, Inc.
Progressive Insurance Progressive American
Insurance Co.
Sabal Business Center VII Pharmacy Management
Services, Inc.
Sabal Business Center V Lebhar-Friedman Inc.
Registry II N/A
Registry I N/A
Sabal Business Center IV Phillips Educational Group
of Central Florida, Inc.,
TGC Home Health Care, Inc.
Sabal Tech Center National RX Services, Inc.
Sabal Park Plaza State of Florida Department
of Revenue, ERM South, Inc.
Sabal Lake Building Warner Publisher Services,
Inc.
Sabal Business Center I N/A
Sabal Business Center II Owen Ayres and Associates,
Inc.
Registry Square Proctor & Redfern, Inc.
Expo Building Exposystems, Inc.
Sabal Business Center III Eli Witt Co.
Benjamin Center
Benjamin Center #7 Basetec Office Systems,
Inc., Baers Construction
Benjamin Center #9 First Image Management
Company
Other Tampa Properties
Tower Place N/A
Day Care Center Telesco Enterprises, Inc.
Total or Weighted Average
Charlotte, NC
Steele Creek Park
Bldg. A Terrell Gear Drives, Inc.
Bldg. B Pump Parts & Services (7)
Bldg. E Bradman-Lake, Inc.
Bldg. G-1 Safewaste Corp.
Bldg. H Sugravo Rallis Engraving,
Eurotherm Drives, Inc.
Bldg. K Aptech, Inc.
Highwoods/Forsyth Business Park
4101 Stuart Andrew Blvd. N/A
4105 Stuart Andrew Blvd. Re-Directions, Transit &
Level Clinic, Bell/Sysco
Food
4109 Stuart Andrew Blvd. N/A
4201 Stuart Andrew Blvd. N/A
4205 Stuart Andrew Blvd. Sunbelt Video, Inc.
4209 Stuart Andrew Blvd. N/A
4215 Stuart Andrew Blvd. Cleaning Services Group,
Rodan, Inc.
4301 Stuart Andrew Blvd. Circle K
4321 Stuart Andrew Blvd. Communications Technology
16
Percent Percent
Leased at Occupied at
Building Year Rentable December 31, December 31,
Property Type (1) Built Square Feet 1996 1996
Parkway Plaza
Building 1 O 1982 58,263 93% 93%
Building 2 O 1983 88,227 76 76
Building 3 O 1984 82,307 94 94
Building 6 O 1996 40,330 41 41
Building 7 (8) O 1985 60,722 100 100
Building 8 (8) O 1986 40,615 100 100
Building 9 (8) I 1984 110,000 0 0
Oakhill Business Park
Twin Oaks O 1985 97,652 94 94
Water Oak O 1985 90,853 90 90
Scarlet Oak O 1982 76,584 100 85
English Oak O 1984 54,865 100 100
Willow Oak O 1982 38,448 0 0
Laurel Oak O 1984 38,448 85 85
Live Oak O 1989 85,993 50 50
Other Charlotte Properties
First Citizens O 1989 57,214 100 100
Total or Weighted Average 1,380,173 79% 78%
Boca Raton, FL
One Boca Place O 1987 277,630 99% 93%
Highwoods Square O 1989 148,944 90 90
Highwoods Plaza O 1980 80,260 98 98
Total or Weighted Average 506,834 96% 95%
Richmond, VA
Innsbrook Office Center
Liberty Mutual O 1990 57,915 100% 100%
Markel American O 1988 38,427 100 100
Proctor-Silex O 1986 58,366 100 100
Vantage Place I O 1987 13,514 100 100
Vantage Place II O 1987 14,895 100 100
Vantage Place III O 1988 14,389 100 100
Vantage Place IV O 1988 13,411 100 100
Vantage Point O 1990 62,918 100 90
Innsbrook Tech I S 1991 18,350 100 100
DEQ Technology Center O 1991 53,847 84 84
DEQ Office O 1991 70,423 100 100
Aetna O 1989 99,209 100 100
Highwoods One O 1996 128,222 92 92
Technology Park
Virginia Center O 1985 119,754 83 75
Other Richmond Properties
Westshore I O 1995 18,775 100 100
Westshore II O 1995 27,625 98 98
East Cary Street O 1987 16,865 69 69
Total or Weighted Average 826,905 97% 95%
Greenville, SC
Brookfield Corporate
Center
Brookfield-Jacobs-Sirrine O 1990 228,345 100% 100%
Brookfield Plaza O 1987 116,800 78 78
Brookfield-YMCA S 1990 15,500 46 46
Patewood Business Center S 1983 103,302 100 100
Patewood Plaza Office Park
Patewood V O 1990 100,187 100 100
Patewood IV O 1989 61,649 100 100
Patewood III O 1989 61,539 100 100
Total or Weighted Average 687,322 95% 95%
Tenants Leasing 25% or More
of Rentable Square Feet at
Property December 31, 1996
Parkway Plaza
Building 1 BASF Corporation
Building 2 International Paper
Building 3 N/A
Building 6 Hewlett-Packard
Building 7 (8) Northwest Mortgage
Building 8 (8) Greenpoint Financial Corp.
Building 9 (8) N/A
Oakhill Business Park
Twin Oaks Springs Industries, Inc.
Water Oak N/A
Scarlet Oak Krueger Ringier, Inc.
English Oak The Employers Association of
the Carolinas
Willow Oak N/A
Laurel Oak Paramount Parks Inc.,
Woolpert Consultants
Live Oak CHF Industries
Other Charlotte Properties
First Citizens Volvo Car Finance, Inc.
Total or Weighted Average
Boca Raton, FL
One Boca Place N/A
Highwoods Square N/A
Highwoods Plaza N/A
Total or Weighted Average
Richmond, VA
Innsbrook Office Center
Liberty Mutual Capital One, Liberty Mutual
Markel American Mark IV
Proctor-Silex Proctor-Silex, Inc.
Vantage Place I Rountrey and Associates
Vantage Place II Hastings-Tapley
Vantage Place III Stenrich Group, Inc.
Vantage Place IV Corvel Healthcare,
Cemetary Mgmt.
Vantage Point EDS, Colonial Inc.
Innsbrook Tech I Air Specialists of VA, Hobbs
& Assoc.
DEQ Technology Center Virginia State Gov., First
Health
DEQ Office Circuit City
Aetna N/A
Highwoods One N/A
Technology Park
Virginia Center N/A
Other Richmond Properties
Westshore I Snyder Hunt Corp.
Westshore II Hewlett-Packard Co.
East Cary Street Butler, Macon Et. Al.
Total or Weighted Average
Greenville, SC
Brookfield Corporate
Center
Brookfield-Jacobs-Sirrine Jacobs-Sirrine Engineers,
Inc.
Brookfield Plaza DowBrands, Inc.
Brookfield-YMCA Kids & Company at Pelham
Falls, Inc.
Patewood Business Center N/A
Patewood Plaza Office Park
Patewood V Bell Atlantic Mobile
Systems, Inc., PYA/Monarch,
Inc.
Patewood IV MCI Telecommunications Corp.
Patewood III MCI Telecommunications Corp.
Total or Weighted Average
17
Percent Percent
Leased at Occupied at
Building Year Rentable December 31, December 31,
Property Type (1) Built Square Feet 1996 1996
Memphis, TN
Atrium I O 1984 42,124 100% 100%
Atrium II O 1984 42,099 100 100
International Place Phase II O 1988 208,006 98 98
Southwind Office Center "A" O 1991 62,179 100 100
Southwind Office Center "B" O 1990 61,860 100 100
Kirby Centre O 1984 32,007 100 100
Medical Properties, Inc. O 1988 18,079 100 100
Total or Weighted Average 466,354 99% 99%
Atlanta, GA
Oakbrook
Oakbrook I S 1981 106,662 94% 94%
Oakbrook II S 1983 141,938 73 56
Oakbrook III S 1984 164,246 95 95
Oakbrook IV O 1985 89,223 98 98
Oakbrook V O 1985 204,410 100 100
Total or Weighted Average 706,479 94% 92%
Columbia, SC
Fontaine Business Center
Fontaine I O 1985 97,576 97% 97%
Fontaine II O 1987 73,225 84 84
Fontaine III O 1988 57,888 100 100
Fontaine V O 1990 21,107 100 100
Other Columbia Properties
Center Point I O 1988 72,567 100 95
Center Point II O 1996 81,000 46 46
Total or Weighted Average 403,363 86% 85%
Orlando, FL
Metrowest I O 1988 102,019 94% 94%
Southwest Corporate Center O 1984 98,777 100 100
Total or Weighted Average 200,796 97% 97%
Birmingham, AL
Grandview I O 1989 114,539 100% 100%
Norfolk, VA
Battlefield I S 1987 97,633 100% 100%
Greenbrier Business Center O 1984 81,194 100 100
Total or Weighted Average 178,827 100% 100%
Asheville, NC
Ridgefield 300 O 1989 63,500 100% 100%
Ridgefield 200 S 1987 60,677 100 100
Total or Weighted Average 124,177 100% 100%
Jacksonville, FL
Towermarc Plaza O 1991 50,513 99% 99%
Total or Weighted Average
of All Properties 17,455,174 92% 92%
Tenants Leasing 25% or More
of Rentable Square Feet at
Property December 31, 1996
Memphis, TN
Atrium I Baptist Memorial Health Care
Atrium II Mueller Streamline Co.
International Place Phase II AC Humko Corp.,
International Paper Company
Southwind Office Center "A" Promus Hotels, Inc.
Southwind Office Center "B" Check Solutions, Inc.
Kirby Centre Financial Federal Savings
Bank, Union Central Life
Insurance Co.
Medical Properties, Inc. Health Tech Affiliates, Inc.
Total or Weighted Average
Atlanta, GA
Oakbrook
Oakbrook I N/A
Oakbrook II N/A
Oakbrook III N/A
Oakbrook IV N/A
Oakbrook V N/A
Total or Weighted Average
Columbia, SC
Fontaine Business Center
Fontaine I Blue Cross and Blue Shield
of S.C.
Fontaine II Blue Cross and Blue Shield
of S.C.
Fontaine III Companion Health Care
Fontaine V Roche Biomedical
Laboratories, Inc.
Other Columbia Properties
Center Point I Sedgewick James of South
Carolina, Inc., Alltel
Mobile Communication
BellSouth Mobility, Inc.
Center Point II BellSouth
Total or Weighted Average
Orlando, FL
Metrowest I N/A
Southwest Corporate Center Walt Disney World Co.
Total or Weighted Average
Birmingham, AL
Grandview I Computer Sciences
Corporation
Norfolk, VA
Battlefield I Kasei Memory Products, Inc.
Greenbrier Business Center Canon Computer Systems,
Inc., Roche Biomedical
Laboratories, Inc.
Total or Weighted Average
Asheville, NC
Ridgefield 300 N/A
Ridgefield 200 Memorial Mission Hospital,
Inc.
Total or Weighted Average
Jacksonville, FL
Towermarc Plaza Aetna Casualty
Total or Weighted Average
of All Properties
18
(1) I = Industrial, S = Service Center and O = Office.
(2) Raleigh Neurology Clinic has an option to purchase 33% of the Property in
December 1998 for cash at the then current fair market value, as to be
determined by an independent appraiser.
(3) Glaxo Wellcome has the option to purchase the Property from March 1997 to
the earlier of lease termination (currently March 2000) or March 2003 for
cash at the then current fair market value to be determined by an appraiser
chosen by the Company, provided the terms of such purchase are acceptable to
the Company and Glaxo Wellcome.
(4) Highland Industries, Inc., which entered into a 10-year lease beginning
January 1991, has the option during the term of its lease to purchase the
Property for a price of $1,034,000 during each of the first five years and,
thereafter, at decreasing amounts through the tenth year of the lease term
when the price will be $926,000.
(5) Ivy Distribution Center enables the Company to establish relationships with
potential tenants that need large blocks of affordable storage space,
frequently on a short-term basis. With the exception of 1989 when the
building was renovated to convert it from a manufacturing facility to a bulk
warehouse facility, Ivy Distribution Center has produced a positive cash
flow every year since its acquisition in 1978.
(6) Kroger Co. has an option to purchase the Property through January 2001. The
purchase price under the option is $10.0 million through January 1999 (and
$10.8 million from January 1999 through January 2001) subject to all
encumbrances, plus unamortized tenant improvements funded by the Company and
unamortized leasing commissions.
(7) Pump Parts & Services, Inc. has an option to purchase the Property for a
purchase price of $39.24 per square foot ($589,793) (as of August 1996)
subject to a minimum increase in the per square foot purchase price of 5%
per year.
(8) Properties subject to ground lease expiring December 31, 2082. The Company
has the option to purchase the land during the lease term at the greater of
$35,000 per acre or 85% of appraised value.
Development Land
As of December 31, 1996, the Company owned 238 acres and had committed to
purchase over the next six years an additional 311 acres of land for
development. The following table sets forth the location, acreage, build-out
capacity and estimated construction costs with respect to the Development Land
(dollars in thousands):
Estimated
Developable Square Footage Construction
Business Park: Location Acreage Office Industrial Total Costs (1)
Owned:
NationsFord Business Park Charlotte 15 -- 170,000 170,000 $ 3,920
Airpark East Greensboro 7 -- 50,000 50,000 1,150
Airpark North Greensboro 10 20,000 -- 20,000 1,600
Airport Center Drive Greensboro 20 241,000 -- 241,000 21,690
Highwoods Forsyth Park Greensboro 6 -- 60,000 60,000 3,600
West Point Business Park Winston-Salem 26 -- 286,000 286,000 8,712
Lakeview Ridge Nashville 18 200,000 -- 200,000 17,500
Grassmere Nashville 19 450,000 -- 450,000 29,250
Highwoods North Research Triangle 18 310,000 -- 310,000 26,350
Highwoods South Research Triangle 45 525,000 -- 525,000 44,625
Capital Center Research Triangle 10 110,000 -- 110,000 9,500
Creekstone Park Research Triangle 12 132,000 -- 132,000 11,220
Research Commons Research Triangle 10 100,000 -- 100,000 8,500
NorthPark Research Triangle 12 150,000 -- 150,000 12,750
Innsbrook Richmond 10 110,000 -- 110,000 7,200
238 2,348,000 566,000 2,914,000 $207,567
To be acquired:
Weston Research Triangle 243 2,700,000 -- 2,700,000 $248,000
Innsbrook Richmond 50 500,000 -- 500,000 50,000
Raleigh Corporate Center Research Triangle 15 300,000 -- 300,000 27,000
Maryland Farms Nashville 3 90,000 -- 90,000 9,000
311 3,590,000 -- 3,590,000 $334,000
Total 549 5,938,000 566,000 6,504,000 $541,567
(1) With respect to Development Land to be acquired, includes costs to acquire
land.
19
All of the Development Land is zoned and available for office or industrial
development, substantially all of which has utility infrastructure already in
place. The Company believes that the cost of developing the Development Land
could be financed with the funds available from the Company's existing credit
facility, additional borrowings and offerings of equity and debt securities. The
Company believes that its commercially zoned and unencumbered land in existing
business parks gives the Company an advantage in its future development
activities over other commercial real estate development companies in the
Research Triangle, the Piedmont Triad, Richmond, Nashville and Charlotte. Any
future development, however, is dependent on the demand for industrial or office
space in the area, the availability of favorable financing and other factors,
and no assurance can be given that any construction will take place on the
Development Land. In addition, if construction is undertaken on the Development
Land, the Company will be subject to the risks associated with construction
activities, including the risk that occupancy rates and rents at a newly
completed property may not be sufficient to make the property profitable,
construction costs may exceed original estimates and construction and lease-up
may not be completed on schedule, resulting in increased debt service expense
and construction expense.
Option Land
The Company has options to purchase or rights of first refusal to purchase,
lease or develop a total of 166 acres of undeveloped land (the "Option Land") at
locations adjacent to Properties in two existing business parks. The Company has
long-term rights of first refusal to purchase, lease or develop: (i) 147 acres
in the Expressway Commerce Center, which is targeted for development of
warehouses and service center facilities and (ii) 19 acres adjacent to
Creekstone Park, which is targeted for service center development. No assurance
can be given that any of the Option Land will be purchased or developed by the
Company.
20
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to a variety of legal proceedings arising in the
ordinary course of its business. The Company believes that it is adequately
covered by insurance and indemnification agreements. Accordingly, none of such
proceedings are expected to have a material adverse effect on the financial
position or results of operations of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM X. EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information with respect to the
executive officers of the Company:
Name Age Position and Background
Ronald P. Gibson 52 Director, President and Chief Executive Officer. Mr. Gibson is a founder of the
Company and has served as President or managing partner of its predecessor since
its formation in 1978.
William T. Wilson III 42 Director and Executive Vice President. Mr. Wilson joined Forsyth Properties in
1982 and served as its president from 1993 until its merger with the Company.
Mr. Wilson is responsible for the operations in the Piedmont Triad, Charlotte
and South Carolina.
John L. Turner 50 Director, Vice Chairman of the Board of Directors and Chief Investment Officer.
Mr. Turner co-founded the predecessor of Forsyth Properties in 1975.
John W. Eakin 42 Director and Senior Vice President. Mr. Eakin is responsible for operations in
Tennessee, Florida and Alabama. Mr. Eakin was a founder and president of Eakin &
Smith, Inc. prior to its merger with the Company.
Thomas F. Cochran 42 Senior Vice President. Mr. Cochran manages the Charlotte and Greenville regions.
Mr. Cochran served as senior vice president for Crocker prior to its acquisition
by the Company in 1996.
Edward J. Fritsch 38 Senior Vice President and Secretary. Mr. Fritsch is responsible for the
operations of the Company's Research Triangle division. Mr. Fritsch joined the
Company in 1982.
Carman J. Liuzzo 36 Vice President, Chief Financial Officer and Treasurer. Prior to joining the
Company in 1994, Mr. Liuzzo was vice president and chief accounting officer for
Boddie-Noell Enterprises, Inc. and Boddie-Noell Restaurant Properties, Inc. Mr.
Liuzzo is a certified public accountant.
John E. Reece II 37 Vice President. Mr. Reece is responsible for the operations of the Company's
Piedmont Triangle area properties. Mr. Reece joined the Company in connection
with the Company's merger with Forsyth Properties.
In addition, on February 12, 1997, Gene H. Anderson was appointed to the
Board of Directors and joined the Company as a senior vice president. Mr.
Anderson is responsible for the operations of the Company's Atlanta properties.
Mr. Anderson was the founder and president of Anderson Properties. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Recent Developments."
Employment Agreements
The Company's executive officers generally have employment agreements with
the Company with a three-year duration. Messrs. Gibson and Fritsch have
employment agreements through June 1997, Messrs. Turner, Wilson, Reece and
Liuzzo have employment agreements through February 1998, Mr. Eakin's employment
agreement runs through April 2000 and Mr. Anderson's employment agreement is
through February 2000. Each contract includes provisions restricting the
officers from competing with the Company during employment and, except in
certain circumstances, for a limited period of time after termination of
employment. Each of the employment contracts provides for severance payments in
the event of termination by the Company without cause equal to the officer's
base salary for the later of one year from the date of termination or the
expiration of the three-year employment agreement.
21
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
Market Information and Dividends
The Common Stock has been traded on the NYSE under the symbol "HIW" since
the Company's initial public offering. The following table sets forth the
quarterly high and low sales prices per share reported on the NYSE for the
periods indicated and the distributions paid per share for each such period.
Period or
Quarter 1996 1995 1994
Ended: High Low Distribution High Low Distribution High Low Distribution
March 31............... $30.50 $27.75 $ 0.45 $22.00 $19.88 $0.425 -- -- --(1)
June 30................ 30.25 26.88 0.48 25.50 21.25 0.45 $21.68 $19.68 0.075(2)
September 30........... 30.38 27.00 0.48 26.88 23.88 0.45 21.13 19.75 0.425
December 31............ 33.75 28.50 0.48 28.38 25.50 0.45 21.68 18.50 0.425
(1) Prior to the Company's June 14, 1994, initial public stock offering.
(2) No distribution was paid during this period. The accrued distribution of
$0.075 per share was paid on November 16, 1994 at the time the Company paid
its initial distribution for the period from inception to September 30,
1994.
On March 14, 1997, the last reported sale price of the Common Stock on the
NYSE was $35.50 per share. On March 14, 1997, the Company had 654 stockholders
of record.
The Company intends to continue to pay regular quarterly distributions to
holders of shares of Common Stock and holders of Units. Although the Company
intends to maintain its current distribution rate, future distributions by the
Company will be at the discretion of the Board of Directors and will depend on
the actual funds from operations of the Company, its financial condition,
capital requirements, the annual distribution requirements under the REIT
provisions of the Internal Revenue Code of 1986 and such other factors as the
Board of Directors deems relevant.
During the year ended 1996, the Company's distributions totaled $48,259,000
of which $9,081,000 represented return of capital for financial statement
purposes. The minimum per share distribution required to maintain REIT status
was approximately $1.44 per share in 1996, $1.55 per share in 1995 and $.48 per
share in 1994.
The Company has instituted a Dividend Reinvestment and Stock Purchase Plan
under which holders of Common Stock may elect to automatically reinvest their
distributions in additional shares of Common Stock and may make optional cash
payments for additional shares of Common Stock. The Company may issue additional
shares of Common Stock or repurchase Common Stock in the open market for
purposes of financing its obligations under the Dividend Reinvestment and Stock
Purchase Plan.
Sales of Unregistered Securities
The Company issued 489,421 shares of Common Stock in connection with the
merger of Eakin & Smith, Inc. into the Company on April 1, 1996. As a result of
the merger, the Company succeeded to the third-party management and brokerage
business of Eakin & Smith. The merger was part of the larger Eakin & Smith
Transaction described above at "Business -- Recent Developments."
The shares were issued to the three principals of Eakin & Smith, including
John W. Eakin, who became an officer and director of the Company upon
consummation of the transaction. The shares were issued pursuant to an exemption
from the registration requirements of the Securities Act of 1933 (the
"Securities Act") under Rule 506. Each of the three principals of Eakin & Smith
are "accredited investors"