By Lorna Pappas

He once cut grass during his high school summers for one of the founding partners of Highwoods Properties (NYSE: HIW). Today, Ed Fritsch has taken charge as president and CEO of the 30-year-old, self-administered UPREIT. Since the day Fritsch stepped up from maintenance to management trainee, he's been involved in every aspect of the firm while being mentored by Temple Sloan, one of Highwoods' founding investment partners and its current chairman, and Ron Gibson, founding CEO.

A humble leader who loves his work and thrives on time spent with his wife and children, Fritsch says he's very fortunate to have been a part of Highwoods' growth trajectory, from a small, North Carolina-based real estate company to one of the largest owners and operators of suburban office properties in the Southeast, with a total market capitalization of approximately $4 billion, as of Mar. 31, 2008.

Fritsch's focus since becoming CEO in September 2004 has been to improve the quality of Highwoods' portfolio, strengthen the balance sheet and enhance the company's platform for earnings growth. He's achieved these goals by "surrounding myself with people who are smarter than I am," he says, and with a strategic plan that touches each person and property throughout the firm.


Portfolio: What is Highwoods Properties' long-term strategic plan?

Fritsch: We are focused and driven by a long-term strategic plan with core, concrete imperatives and measurable goals that are enduring in concept and relentlessly pursued.

In developing this 130-page document in 2004, we shined a bright light on all aspects of our company: Every process, person and street address was extensively evaluated as we examined opportunities for improvement.

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Age: 49 Education: Bachelor of Science in Business Administration, University of North Carolina at Chapel Hill Family: Wife and two children Favorite Book: "Good to Great: Why Some Companies Make the Leap . . . and Others Don't," by Jim Collins Hobbies: Being with family Favorite Sports Team: University of North Carolina Tar Heels Favorite Vacation Spot: Wherever my family is Professional Activites: Chair of the University of North Carolina Board of Visitors; Member of NAREIT's Board of Governors; Member of Wachovia's North Carolina Regional Advisory Board; Trustee of St. Timothy's Episcopal School; and Director of YMCA of the Triangle. Previous involvement with the Institution of Real Estate Management, Triangle Area Office Building Association, St. Francis of Assisi School Board and Make-A-Wish Foundation.

Introduced in 2005, the plan encompasses many goals—short-term and rolling, primary and marginal—that fall under four categories: people, portfolio, balance sheet and communications. Its overriding objective is to enhance shareholder value. Each target is specific in nature because we firmly believe that you are what you measure. We know every day where we stand against these goals.

Since adopting this measurable strategy, we've started $610 million of new development in 12 markets and increased our occupancy to over 90 percent. We've sold more than $760 million of older, non-differentiating assets at an average cap rate of 6.7 percent, sold $100 million of non-core land for an FFO gain of over $31 million. We've also redeemed or retired about a quarter of a billion dollars of expensive preferred stock and unencumbered a significant amount of our NOI from secured debt. We've seen core FFO grow 9 percent in 2007 over 2006, and we expect core 2008 FFO to grow by 5 percent over 2007 at the mid-point of our guidance.

We are excited about our future and confident that our strategic plan provides the best framework for the long-term, future growth and stability of Highwoods Properties.


Portfolio: The office market represents 83.1 percent of your annualized revenues. In the current cycle, what's in store for this segment?

Fritsch: We expect 2008 results to be at or better than 2007, despite a pullback in the economy and fallout in the credit markets.

We see a disparity between what's occurring on Wall Street and the volume of capital transactions on our Southeastern main streets, where we're clearly bullish on long-term trends. Every part of this industry has cycles, and every cycle creates opportunity. We feel fortunate to take advantage of the opportunities here in the Southeast, where employment and cost of living are better than the national average, the volume of new construction as a percent of the overall market is quite manageable and there's no oversupply and no disproportionate amount of sublease space coming available.


Portfolio: What are the primary developments now underway at Highwoods?

Fritsch: We are about to deliver the tallest building in Raleigh. RBC Plaza features a mix of retail, parking, office and residential condominium space, and is anchored by RBC Bank. The 33-story, CBD building truly redefines the skyline of our hometown, and we hope our shareholders see it as a touchstone of their company's success.

In May 2008 we announced Triad Centre III in Memphis, a $29.2 million, 148,000-square-foot sevenstory, class-A office building, which is the city's first LEED-certified office building.

We hope to capitalize on similar opportunities as this part of the cycle unfolds. We have dry powder, an energized team, a strong balance sheet, and we are actively looking for the right opportunities. We have no debt maturities in 2008, and a nominal amount in 2009, so we won't need to accrue cash or find other debt instruments for replacement, which is a significant advantage.

In the past three years there have been many street addresses that we did not acquire; we stayed on the sidelines while disposing of properties at a price that far exceeded our highest expectations. Today we are preferred buyers making select acquisitions. But, no matter what we do—sell, buy or develop—we will remain disciplined stewards of our shareholders' money.


Portfolio: You've worked at Highwoods since 1982. Please describe your progress within the company.

Fritsch: During high school summers, I did maintenance work for CEO Ron Gibson when he was developing a Raleigh office park for another firm. Shortly after graduating from college, I was hired by Ron as a management trainee in Highwoods' predecessor company—Highwoods Properties Company. I moved into property management in 1986, then to director of development in 1993, and I was a partner when we went public as Highwoods Properties, Inc., in 1994. I became vice president of operations in 1995, chief operating officer in 1998, president in 2003 and CEO in September 2004.

I take this job very seriously, but never take myself too seriously. We have sense of humor here, and enjoy each other and our work. This is a great company in an exhilarating industry. Anyone in real estate who's getting bored is doing something wrong.


Portfolio: Please share some facts about your family and background.

Fritsch: Growing up in rural North Carolina was a great experience. My parents provided wonderful examples of hard work, responsibility and integrity, often stressing that "you get what you earn, and earn what you get." These are among the lessons my wife and I are passing along to our 12-year-old son and 14-year-old daughter.

I'm a reformed tri-athlete, but stopped competing after marriage and Highwoods' IPO. In my free time now, my first choice is to be with family, either traveling to soccer games, water skiing, hiking, cycling or enjoying collective downtime.

As a former athlete, and today as a chief executive, I clearly understand that there is no finish line in business; there are always opportunities to make our performance better today than it was yesterday.