JACKSON, Miss., Dec. 21 /PRNewswire-FirstCall/ -- Parkway Properties,
Inc. (NYSE: PKY) announced today the purchase of a 190,000 square foot
office property in Memphis, Tennessee by the Parkway Properties Office
Fund, L.P. (the "Fund"). Renaissance Center, located in the East Memphis
submarket within the Poplar Avenue Corridor, is an eight-story office
property constructed in 2000 and located on approximately seven acres of
land. The property includes 448 parking spaces in a three-level parking
garage, with an additional 213 surface parking spaces. The building is
currently 96.6% leased.
(Logo: http://www.newscom.com/cgi-bin/prnh/20030513/PARKLOGO )
The building was acquired for a purchase price of $37.6 million. The
Fund expects to spend an additional $1.4 million for closing costs,
building improvements, leasing costs and tenant improvements during the
first two years of ownership. As part of the purchase, the Fund assumed the
existing first mortgage of $17.2 million with a fixed interest rate of
5.23% that matures in June of 2012, and represents approximately 46% of the
initial purchase price. The target debt to purchase price ratio for the
Fund when all of its assets are included is approximately 60%. The ratio on
any specific asset within the Fund may be above or below this target.
Parkway's initial equity contribution of $5.1 million was provided by
advances under the Company's existing lines of credit and proceeds from the
recent sale of assets.
On a stand alone basis, the property is expected to yield the Fund a
going in capitalization rate ("cap rate") of 7.2% in the first twelve
months of operations and a leveraged internal rate of return ("IRR") of
approximately 10.0%. 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 10.3%, an unleveraged IRR of 12.5%,
and a leveraged IRR of approximately 15.4%, based upon existing 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 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 and leasing
services for the property.
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 acquisition
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 $125.6
million and the Fund owns six assets with a combined total of 805,000
square feet that is 92.4% leased as of December 21, 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
63 office properties located in 11 states with an aggregate of
approximately 12.7 million square feet of leasable space as of December 21,
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.
CONTACT: Steven G. Rogers
President & Chief Executive Officer
William R. Flatt
Chief Financial Officer
(601) 948-4091
Renaissance Center Acquisition for Discretionary Fund
Supplemental Information
Property Information
Location: Memphis, TN
Size: 190,000
% leased as of December 21, 2006: 96.6%
Year built: 2000
Purchase price: $37,553,000
Initial improvements during first two years $1,450,000
Return Information from Property
Projected net operating income(initial 12 months) $2,802,000
Initial cap rate (initial 12 months) 7.2%
Leveraged internal rate of return 10.0%
Return Information to Parkway
Projected net operating income (25% of total)
(initial 12 months) $700,000
Fee income (initial 12 months) $306,000
Initial cap rate 10.3%
Leveraged internal rate of return 15.4%
Financial Information
Purchase price paid to seller $37,553,000
Principal balance of 1st mortgage assumed $17,221,000
Initial total equity investment $20,332,000
25% Equity investment from Parkway $5,083,000
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.
4. Construction managmeent 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.
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
http://www.prnewswire.com/comp/103115.html/
CONTACT:
Steven G. Rogers, President & Chief Executive
Officer, or William R. Flatt, Chief Financial Officer,
+1-601-948-4091, both of Parkway Properties, Inc.
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