JACKSON, Miss., Dec. 4 /PRNewswire-FirstCall/ -- Parkway Properties,
Inc. (NYSE: PKY) announced today the purchase of a 206,000 square foot
office property in Schaumburg, Illinois on behalf of Parkway Properties
Office Fund, L.P. (the "Fund"). Chatham Centre, located in Chicago's
Northwest Suburban office market at the southeast intersection of the
Northwest Tollway (I-90) and Roselle Road, is an 11-story office property
constructed in 1989 and includes 288 parking spaces in an adjacent parking
structure, with an additional 309 surface parking spaces. The building is
currently 89.6% leased.
(Logo: http://www.newscom.com/cgi-bin/prnh/20030513/PARKLOGO )
The building was acquired for a purchase price of $28.25 million. The
Fund expects to spend an additional $1.7 million for closing costs,
building improvements, leasing costs and tenant improvements during the
first two years of ownership. The Fund has a commitment for a $17.1 million
10-year first mortgage that will be placed subsequent to closing at a fixed
interest rate of 5.56%. Payments during the term of the mortgage will be on
an interest-only basis. Parkway is a 25% investor in the Fund. Parkway's
initial equity contribution of $2.8 million was provided by advances under
the Company's existing lines of credit.
On a stand alone basis, the property is expected to yield the Fund a
going in capitalization rate ("cap rate") of 6.4% in the first twelve
months of operations and a leveraged internal rate of return ("IRR") of
approximately 11.3%. 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 9.4%, an unleveraged IRR of 12.4% and
a leveraged IRR of approximately 20.4%. 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 achieves 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 services for
the property. Initially, leasing services will be provided by an
unaffiliated third-party leasing agency.
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. The Fund targets acquisitions
in Houston, Phoenix, Atlanta, Chicago, Charlotte, Orlando, Tampa/St.
Petersburg, Ft. Lauderdale, Jacksonville, and Memphis. Immediately
following the purchase, the total amount invested by the Fund was $86.6
million and the Fund owns five assets with a combined total of 615,000
square feet that is 91.1% leased as of December 1, 2006.
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
68 office properties located in 11 states with an aggregate of
approximately 13 million square feet of leasable space as of December 4,
2006. 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.
Chatham Centre Acquisition for Discretionary Fund
Supplemental Information
Property Information
Location: Schaumburg, IL
Size: 206,000
% leased as of December 1, 2006: 89.6%
Year built: 1989
Purchase price: $28,250,000
Initial improvements during first two years $1,700,000
Return Information from Property
Projected net operating income (initial 12 months) $1,918,000
Initial cap rate (initial 12 months) 6.4%
Leveraged internal rate of return 11.3%
Return Information to Parkway
Projected net operating income
(25% of total) (initial 12 months) $480,000
Fee income (initial 12 months) $223,000
Initial cap rate 9.4%
Leveraged internal rate of return 20.4%
Financial Information
Purchase price paid to seller $28,250,000
Proceeds from 1st mortgage $17,100,000
Initial total equity investment $11,150,000
25% Equity investment from Parkway $2,788,000
Notes:
1. Asset management fees are calculated annually based on .95% of invested
equity capital.
2. Property management fees are calculated based on 3.00% of gross
revenue.
3. Leasing fees are included at market-based rates on projected renewal
leases after the initial 24 months of ownership.
4. Construction management fees are calculated as 4.00% of projected
capital expenditures.
5. In accordance with generally accepted accounting principles these
properties 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
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PRN Photo Desk, photodesk@prnewswire.com
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CONTACT:
Steven G. Rogers, President & Chief Executive
Officer, or William R. Flatt, Chief Financial Officer,
+1-601-948-4091, of Parkway Properties, Inc.
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