JACKSON, Miss., Feb. 1 /PRNewswire-FirstCall/ -- Parkway Properties,
Inc. (NYSE: PKY) announced today the purchase of Desert Ridge Corporate
Center (the "Property") on behalf of Parkway Properties Office Fund, L.P.
(the "Fund"), for a purchase price of $81.6 million on January 31, 2008.
Located on 14.8 acres in the North Central submarket of Phoenix, Arizona,
the Property consists of two four-story Class A office buildings totaling
275,000 square feet and one 18,000 square foot multi-tenant specialty
retail building. The Property was completed in phases between 2006 and 2007
and is part of the 5,700 acre premier master-planned community of Desert
Ridge. The Property includes an adjacent 765-space structured parking
facility, as well as a 596-space surface parking area. Desert Ridge
Corporate Center is strategically located directly on Loop 101 near its
intersection with SR51, which provides exceptional visibility, easy access
to all areas of Greater Phoenix, and proximity to world class amenities.
The Property is currently 89.2% leased to thirty-nine customers.
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An additional $2.25 million is expected to be spent for closing costs,
building improvements, leasing costs and tenant improvements during the
first two years of ownership. Simultaneous with the purchase, a $49.2
million first mortgage was funded through Babson Capital Management LLC
with a fixed interest rate of 5.77%, an initial thirty-six month interest
only period, and a maturity date of January of 2016. Parkway's equity
contribution of $8.6 million was provided by advances under the Company's
existing lines of credit. Parkway's effective ownership interest in the
Property is 26.5%.
On a stand alone basis, Desert Ridge Corporate Center is expected to
yield a going in capitalization rate ("cap rate") of 5.5% and a leveraged
internal rate of return ("IRR") of approximately 12.7%. Parkway's annual
return is comprised of 26.5% 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's economics increases the expected return to Parkway to an initial
cap rate of 7.6%, an unleveraged IRR of 11.6%, and a leveraged IRR of
approximately 18.7%. The supplemental information table that follows
outlines this fee structure as it relates to these assets.
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, renewal and
expansion leasing services, and construction supervision services for the
Property. Services related to new leases will be provided by an
unaffiliated third-party leasing agent.
In addition to Desert Ridge Corporate Center, the Company has
contracted to purchase one additional office property on behalf of the Fund
with a purchase price of approximately $100 million. Earnest money is
currently at risk, and the purchase is expected to close during the first
quarter 2008. A commitment has been received from Babson Capital Management
LLC for first mortgage financing of approximately 60% of the purchase price
on this investment which is expected to close simultaneously with the
purchase. The interest rate on the mortgage is locked at a fixed interest
rate of 5.53% with various terms to be disclosed upon closing.
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 the Fund is
completely invested. The Fund targets acquisitions in Houston, Phoenix,
Atlanta, Chicago, Charlotte, Orlando, Tampa/St. Petersburg, Ft. Lauderdale,
Jacksonville, and Memphis. As of January 31, 2008, the total amount
invested by the Fund was $411.6 million and the Fund owns twelve assets
with a combined total of 2.1 million square feet that is 91.2% 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, leasing, acquisition, and ownership of office properties. The
Company is geographically focused on the Southeastern and Southwestern
United States and Chicago. Parkway owns or has an interest in 68 office
properties located in 11 states with an aggregate of approximately 13.5
million square feet of leasable space as of February 1, 2008. Included in
the portfolio are 20 properties totaling 3.2 million feet that are owned
jointly with other investors, representing 24% of the portfolio. Under the
Company's GEAR UP plan, which started January 1, 2006, and ends December
31, 2008, it is the Company's strategy to transform from an owner-operator
to an operator-owner. The strategy highlights the Company's strength in
providing excellent service in the operation of office properties in
addition to its direct ownership of real estate assets. Fee-based real
estate services are offered through the Company's wholly owned subsidiary,
Parkway Realty Services, which also manages and/or leases approximately 1.8
million square feet for third party owners as of February 1, 2008.
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.
Desert Ridge Corporate Center
Supplemental Information
Property Information Desert Ridge Corporate Center
Location: Phoenix, AZ
Size: 293,000
% leased as of January 31, 2008: 89.2%
Year built: 2006-2007
Purchase price: $81,600,000
Initial improvements during first two years $ 2,250,000
Return Information from Property
Projected net operating income (initial 12 months) $ 4,650,000
Initial cap rate 5.5%
Leveraged internal rate of return 12.7%
Return Information to Parkway
Projected net operating income (initial 12 months)
(26.5% of total) $ 1,232,000
Fee income (initial 12 months) $ 460,000
Initial cap rate 7.6%
Leveraged internal rate of return 18.7%
Financial Information
Purchase price paid to seller $81,600,000
Projected proceeds from first
mortgage $49,200,000
Initial total equity investment $32,400,000
26.5% Equity investment from
Parkway $ 8,600,000
Notes:
1. Asset management fees are calculated annually based on .95% of the
Fund's 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
and expansion leases.
4. Construction management fees are calculated as 4.00% of the Fund's
projected capital expenditures.
5. In accordance with generally accepted accounting principles, the
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
MANDY M. POPE
CHIEF FINANCIAL OFFICER
(601) 948-4091
SOURCE Parkway Properties, Inc.
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Related links:
http://www.pky.com
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CONTACT:
Steven G. Rogers, President & Chief Executive
Officer, or Mandy M. Pope, Chief Financial Officer, both of
Parkway Properties, Inc., +1-601-948-4091
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