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Highwoods Acquires Nashville's Pinnacle for $152M

607,000 SF Trades in Downtown CBD
September 9, 2013
Highwoods Properties, Inc. (NYSE: HIW) has acquired The Pinnacle at Symphony Place, located at 150 3rd Ave. S in Nashville, TN, for $152 million, or about $292 per square foot.

The 29-story, 520,000-square-foot, class A office tower was built in 2009 on 1.6 acres in downtown Nashville's CBD, within walking distance of the new 1.2 million-square-foot Music City Convention Center, the Schermerhorn Symphony Center, Bridgestone Arena, LP Field, the Country Music Hall of Fame, and the brand-new, 800-room Omni Nashville hotel. The LEED Gold-certified and Energy Star-rated building features an on-site health and wellness center, a one-acre rooftop terrace garden, covered parking garage, and is home to upscale restaurant The Southern Steak & Oyster.

The asset is currently 84.9 percent leased to multiple tenants including Bass Berry & Sims, Pinnacle Financial Partners, and Butler Snow. It is expected to generate full-year 2014 cash of $8.8 million and net operating income (NOI) of $10.7 million for a 7.0% CAP rate, according to the buyer.

Barry Real Estate Companies developed the building with Everton Oglesby Architects and Pickard Chilton & Associates.

Highwoods' has announced nearly $1 million in planned near-term building improvements, bringing its total investment to $152.8 million, a full seven percent below replacement costs, net of $1.3 million in closing credits from the seller for free rent, which under GAAP is recorded as a reduction in investment cost rather than rental income. The Pinnacle is on a ground lease with 93 years remaining and 2014 rent of $600,000.

Ed Fritsch, president and chief executive officer of Highwoods, stated, "The Pinnacle, the finest class A CBD office building in all of Tennessee, is an outstanding addition to our portfolio. The building has an average remaining lease term of 11 years, with less than two percent expiring in the next five years, and we forecast occupancy at The Pinnacle to 93 percent within two years."

The company's Nashville holdings now total 3.1 million square feet with an average occupancy of 93.8 percent. Portfolio wide, the fully-integrated, self-administered REIT owns or holds interest in 321 office, industrial and retail properties totaling 34.3 million square feet in addition to 634 acres of development land as of June 2013.

The buyer funded this acquisition with proceeds from recent equity issuances, non-core disposition proceeds, and borrowing from its revolving credit facility. No debt was assumed secured by the property. Additionally, $400,000 in acquisition costs will be expensed in the third quarter. The company's leverage ratio, including preferred stock, remains under 44 percent.

Please see CoStar COMPS #2830576 for additional information on this transaction.

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