$143-million portfolio sale

"Our goal, as outlined in our Strategic Management Plan, is to sell between $450 million and $550 million of non-core assets between 2005 and 2007," Highwoods president and CEO Ed Fritsch said in a recent statement. To date, the company has sold 4.4 million sf of office and industrial properties for a total of $336 million. It has used a portion of these proceeds to pay off $270 million of high-coupon debt and preferred stock and to fund its development pipeline.

"Assuming no additional dispositions, upon the closing of this transaction in January, the company would have completed 13 sales transactions in seven markets since January 2005, generating approximately $479 million of gross proceeds," the statement continued.

"There is a little bit of a value-add play in some of the properties," Dennis Mitchell, VP of investment sales for Atlanta-based Colliers Cauble & Co., tells GlobeSt.com. Mitchell and his team represented Highwoods in the transaction, which officially closed Monday, Jan. 9. "The buyer's goal was to buy high-quality properties in Atlanta, Tampa and Columbia. A few value-add properties came along with the portfolio."

In round numbers, he says, the portfolio's occupancy is "in the 70s." Capital Partners represented itself in the deal. Also playing a key role in the due diligence process was San Diego-based Real Capital Markets.

The deal delivers 21 assets, totaling 1.2 million sf, in the Atlanta area. The Tampa holdings, some 465,000 sf, total five buildings. In Columbia, Capital Partners winds up with 173,000 feet in three buildings.

From War Room to Closing Table

By the time Highwoods Properties and Capital Partners achieved a meeting of the minds on the $143-million Southeastern portfolio deal, they had already had a number of meetings in Cyberspace. In fact, the expediting agent in this case was Carlsbad, CA-based Real Capital Markets. Founder and president Steve Alter describes his 17-year-old firm as an "online bridge between institutional real estate owners, investors and the capital markets."

What that means in specific terms of the newly closed deal, according to Dennis Mitchell of Atlanta-based Colliers Cauble & Co., is insurance: an online location for all interested, screened buyers to access all necessary documents and a supplemental marketing push. Real Capital Markets "provided an electronic war room for the deal process as well as a buyer marketing push that supplemented our own internal marketing," he says. "It ensured that we were covering the buyer market."

The war room is, at its core, an online posting service for all relevant documentation. "We had 1,485 files in the war room that were accessible for everyone involved in this transaction--all at different levels of controlled access," says Mitchell, who's firm represented Highwoods in the deal. "Title work, surveys, leases, financial statements, everything you can imagine was posted there, and it has worked flawlessly."

In a separate transaction, Cornish & Carey/Oncor International SVP Bob Feld also found the war room critical to his firm's recent 1,000 acre land sale in Folsom, CA. "We were able to post new information and reports onto the web page and send an email alert to all those who had signed a confidentiality agreement," explains the Sacramento-based Feld. "So right away, we were able to distribute to 1600 potential buyers we identified as potential candidates.

"We can look at who specifically is going to the website and who's downloading what materials," Feld continues. "We had about 120 people who had accessed all the information and appeared to be interested. So we started our call list. We went from the virtual connection to making targeted marketing calls. After six weeks, we ascertained that big players who we thought might be interested and scads of people who we never thought would be interested were all ready to go. We could tell right then that the time was right to call for bids."

But there was a major surprise. Part way through the marketing effort, a no-growth initiative stalled the sale for a six-month stretch. Once the measure was thrown out, "We were able to get right back into the marketing—with a single email," Feld reports.

The seller, Carpenter Ranch Partners, closed the deal with Fawler Acquisitions in September of last year. While Feld was mum on the price, local sources put the final price tag at more than $70 million.

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John Salustri

John Salustri has covered the commercial real estate industry for nearly 25 years. He was the founding editor of GlobeSt.com, and is a four-time recipient of the Excellence in Journalism award from the National Association of Real Estate Editors.