JACKSON, Miss., Jan. 2 /PRNewswire-FirstCall/ -- Parkway Properties,
Inc. (NYSE: PKY) announced today the purchase of a 262,000 square foot
office property in Atlanta, Georgia by the Parkway Properties Office Fund,
L.P. (the "Fund") on December 27, 2006. Overlook II, located in the Vinings
submarket in Northwest Atlanta, is a 13-story office property constructed
in 1985. The property includes 794 parking spaces in a five-level parking
garage. The building is currently 91.5% leased.
(Logo: http://www.newscom.com/cgi-bin/prnh/20030513/PARKLOGO )
The building was acquired for a purchase price of $44.6 million. The
Fund expects to spend an additional $2.3 million for closing costs,
building improvements, leasing costs and tenant improvements during the
first two years of ownership. The Fund expects to place a 10-year first
mortgage on the property of approximately $31.5 million on or before
January 31, 2007. Payments during the term of the mortgage are expected to
be on an interest- only basis. Parkway's equity contribution was provided
by advances under the Company's existing lines of credit and proceeds from
the December 2006 common stock offering.
On a stand alone basis, the property is expected to yield the Fund a
going in capitalization rate ("cap rate") of 6.3% in the first twelve
months of operations and a leveraged internal rate of return ("IRR") of
approximately 13.2%. Parkway's annual return is comprised of 25% property
income, which represents its pro-rata share, as well as market-based fees
for asset and property management, leasing and construction supervision
services. Adding these fees to the property economics increases the return
to Parkway to an initial cap rate of 8.5%, an unleveraged IRR of 11.3%, and
a leveraged IRR of approximately 21.1%, based upon the projected debt. The
supplemental information table that follows outlines this fee structure as
it relates to this asset.
In addition, Parkway is eligible for a performance based incentive fee
at the end of the Fund's life if the Fund exceeds an annual cumulative
preferred return of 10%. Due to the uncertainty of achievement of this
hurdle, this performance fee has not been included in the return to Parkway
presented in this release.
Parkway Realty Services will provide property management and renewal
leasing services for the property. Services related to new leases will be
provided by an unaffiliated third-party leasing agent.
The Fund is a $500 million discretionary fund formed in July 2005 for
the purpose of acquiring high-quality multi-tenant office properties.
Parkway is a 25% investor in the Fund, which will be capitalized with
approximately $200 million of equity capital and $300 million of
non-recourse, fixed-rate first mortgage debt. This represents a target debt
to total capitalization of approximately 60% for the Fund once all assets
are purchased and the Fund is fully capitalized. The debt ratio on any
specific asset within the Fund may be above or below this target. The Fund
targets acquisitions in Houston, Phoenix, Atlanta, Chicago, Charlotte,
Orlando, Tampa/St. Petersburg, Ft. Lauderdale, Jacksonville, and Memphis.
As of January 1, 2007, the total amount invested by the Fund was $224.7
million and the Fund owns nine assets with a combined total of 1,380,000
square feet that is 92.1% leased.
Parkway Properties, Inc., a member of the S&P Small Cap 600 Index, is a
self-administered real estate investment trust specializing in the
operation, acquisition, ownership, management, and leasing of office
properties. The Company is geographically focused on the Southeastern and
Southwestern United States and Chicago. Parkway owns or has an interest in
66 office properties located in 11 states with an aggregate of
approximately 13.3 million square feet of leasable space as of January 2,
2007. The Company also offers fee- based real estate services through its
wholly owned subsidiary, Parkway Realty Services, to its owned properties
and to its third party and minority interest properties.
Parkway Properties, Inc.'s press releases and additional information
about the Company are available on the World Wide Web at
http://www.pky.com.
Certain statements in this release that are not in the present tense or
discuss the Company's expectations (including the use of various forms of
the words anticipate, forecast or project) are forward-looking statements
within the meaning of the federal securities laws and as such are based
upon the Company's current belief as to the outcome and timing of future
events. There can be no assurance that future developments affecting the
Company will be those anticipated by the Company. These forward-looking
statements involve risks and uncertainties (some of which are beyond the
control of the Company) and are subject to change based upon various
factors, including but not limited to the following risks and
uncertainties: changes in the real estate industry and in performance of
the financial markets; the demand for and market acceptance of the
Company's properties for rental purposes; the amount and growth of the
Company's expenses; tenant financial difficulties and general economic
conditions, including interest rates, as well as economic conditions in
those areas where the Company owns properties; the risks associated with
the ownership of real property; the risks associated with joint venture
investments; and other risks and uncertainties detailed from time to time
on the Company's SEC filings. Should one or more of these risks or
uncertainties occur, or should underlying assumptions prove incorrect, the
Company's results could differ materially from those expressed in the
forward- looking statements. The Company does not undertake to update
forward-looking statements.
Overlook II Acquisition for Discretionary Fund
Supplemental Information
Property Information
Location: Atlanta, GA
Size: 262,000
% leased as of January 1, 2007: 91.5%
Year built: 1985
Purchase price: $44,555,000
Initial improvements during first two years $ 2,263,000
Return Information from Property
Projected net operating income (initial 12 months) $2,969,000
Initial cap rate (initial 12 months) 6.3%
Leveraged internal rate of return 13.2%
Return Information to Parkway
Projected net operating income
(25% of total) (initial 12 months) $742,000
Fee income (initial 12 months) $258,000
Initial cap rate 8.5%
Leveraged internal rate of return 21.1%
Financial Information
Purchase price paid to seller $44,555,000
Projected proceeds from first mortgage $31,500,000
Total equity investment $13,055,000
25% Equity investment from Parkway $3,264,000
Notes:
1. Asset management fees are calculated annually based on .95% of invested
equity capital.
2. Property management fees are calculated based on 2.75% of gross
revenue.
3. Leasing fees are included at market-based rates on projected renewal
leases.
4. Construction managmeent fees are calculated as 4.00% of projected
capital expenditures.
5. In accordance with generally accepted accounting principles, this
property will be included in Parkway's consolidated financial
statements.
6. Each quarter the Company will provide information about debt, results
of operations and FFO related to the Fund properties in the Company's
Supplemental Financial and Property Information Package.
Contact: Steven G. Rogers
President & Chief Executive Officer
William R. Flatt
Chief Financial Officer
(601) 948-4091
SOURCE Parkway Properties, Inc.
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Related links:
http://www.pky.com/
Photo Notes:
NewsCom: http://www.newscom.com/cgi-bin/prnh/20030513/PARKLOGO
AP Archive: http://photoarchive.ap.org
PRN Photo Desk, photodesk@prnewswire.com
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CONTACT:
Steven G. Rogers, President & Chief Executive
Officer, or William R. Flatt, both of Parkway Properties, Inc.,
+1-601-948-4091
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