Parkway Announces Increased Capital Recycling Activity And Updates 2015 Outlook
Gross year-to-date asset sales, both completed and under contract, total approximately $535 million, exceeding Parkway's disposition guidance range of $375 million to $425 million
Sale proceeds have been used to strengthen Parkway's balance sheet and fund select off-market acquisitions, including the recent purchase of Harborview Plaza in Tampa
ORLANDO, Fla., Oct. 1, 2015 /PRNewswire/ -- Parkway Properties, Inc. (NYSE: PKY) announced today that it has completed the sale of two additional non-core assets and has reached an agreement to sell 7000 Central Park, located in the Central Perimeter submarket of Atlanta, Georgia. Additionally, the Company completed the purchase of Harborview Plaza, a Class A office property located in the Westshore submarket of Tampa, Florida. As a result of increased net disposition activity, Parkway has also updated its 2015 Funds from Operations (FFO) outlook range.
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"Parkway has successfully executed its 2015 capital recycling strategy at both an accelerated pace and at robust economics," stated James R. Heistand, President and Chief Executive Officer of Parkway. "As a result of year-to-date dispositions, we have sold the majority of our remaining non-core assets, while generating outsized returns at other properties where we believe we have maximized value. Additionally, we have lowered our Houston market exposure by approximately 1.0 million square feet, which has further minimized the risk of near-term expirations and better positioned our local operators to focus on the lease-up of our core portfolio."
"Our ability to effectively prune the portfolio has also enabled us to retire higher-cost secured debt and improve our cost of capital. In addition, a portion of sale proceeds were used to fund our recent off-market purchase of Harborview Plaza in Tampa, which represents a unique opportunity to aggregate additional scale in the Westshore submarket of Tampa at an attractive basis."
Asset Dispositions:
On August 26, 2015, Parkway reached an agreement to sell 7000 Central Park, a 416,000 square foot office building located in Atlanta, Georgia, for a gross sale price of $85.3 million. 7000 Central Park is owned by a joint venture in which Parkway owns a 40% interest. Parkway expects to recognize a gain on the sale of 7000 Central Park of approximately $10.6 million at closing, which is anticipated to occur in the fourth quarter of 2015, subject to customary closing conditions.
On September 3, 2015, Parkway completed the sale of Squaw Peak I & II, a 290,000 square foot office complex comprised of two buildings located in Phoenix, Arizona, for a gross sale price of $51.3 million. Parkway expects to recognize a gain on the sale of Squaw Peak I & II of approximately $13.3 million in the third quarter of 2015.
On September 11, 2015, Parkway completed the sale of One Commerce Green, a 341,000 square foot office building located in Houston, Texas, for a gross sale price of $47.5 million. Parkway expects to recognize a loss on the sale of One Commerce Green of approximately $5.1 million in the third quarter of 2015.
The gross sale prices of these two asset sales and one pending sale total $184.1 million, of which $132.9 million is Parkway's share, and represent an estimated forward twelve-month gross blended cash net operating income yield of approximately 5.9%.
Additionally, Parkway completed its previously announced sales of the Comerica Bank Building in Houston, Texas and City Centre in Jackson, Mississippi, for a combined gross sale price of $37.6 million.
Year-to-date, Parkway has completed or is under contract to sell 17 assets for approximately $535 million, of which approximately $412 million is Parkway's share. Parkway's year-to-date asset sales, excluding City Centre, represent an estimated forward twelve-month gross blended cash net operating income yield of approximately 6.3%.
Asset Acquisitions:
On September 25, 2015, Parkway acquired Harborview Plaza, a 205,000 square foot office building located in the Westshore submarket of Tampa, Florida, for a gross purchase price of $49 million, or approximately $239 per square foot. The seven-story property was constructed in 2002 and offers water views of Tampa Bay. The asset was 96.0% occupied as of September 25, 2015 and is expected to generate an estimated forward twelve-month cash net operating income yield of approximately 7.3%.
Parkway has experienced a delay in completing the previously announced acquisition of Two Buckhead Plaza, located in the Buckhead submarket of Atlanta, Georgia. The Company is awaiting satisfaction of certain conditions associated with the assumption of the mortgage secured by the asset. Parkway expects the closing of the acquisition of Two Buckhead Plaza to occur in the fourth quarter of 2015, subject to customary closing conditions, including successful assumption of the mortgage secured by the asset.
2015 Revised Outlook
After considering the Company's year-to-date performance and expected results for the remainder of the year, as well as recently announced disposition activity, Parkway is adjusting its 2015 FFO outlook to a range of $1.29 to $1.33 per diluted share for Parkway Properties LP's real estate portfolio, in which Parkway owns an interest (the "Parkway Portfolio") and adjusting its earnings per diluted share ("EPS") outlook to a range of $0.54 to $0.58 for the Parkway Portfolio. The adjustment to 2015 FFO outlook was precipitated principally by Parkway's net disposition activity and a delay in the closing of its Two Buckhead Plaza acquisition, which negatively impacted assumptions regarding full-year recurring cash net operating income. Additionally, net disposition activity has contributed to a further decrease in Parkway's full-year capital expenditure assumptions. Lastly, Parkway expects full-year G&A to exceed previous assumptions, which is primarily attributable to transaction costs related to the acquisition of Harborview Plaza.
The reconciliation of projected EPS to projected FFO per diluted share is as follows:
| Outlook for 2015 |
Range |
|
| Fully diluted EPS |
$0.54 - $0.58 |
|
| Parkway's share of depreciation and amortization |
$1.49 - $1.49 |
|
| Impairment loss on depreciable real estate |
$0.05 - $0.05 |
|
| Gain on sale of real estate |
($0.79 - $0.79) |
|
| Reported FFO per diluted share |
$1.29 - $1.33 |
| 2015 Core Operating Assumptions |
Revised 2015 Outlook |
Previous 2015 Outlook |
|||
| Recurring cash NOI |
$192,500 - $ 198,500 |
$195,000 - $ 201,000 |
|||
| Straight-line rent and amortization of above market rent |
$ 53,000 - $ 55,000 |
$ 53,000 - $ 55,000 |
|||
| Lease termination fee income |
$ 1,000 - $ 1,000 |
$ 1,000 - $ 1,000 |
|||
| Management fee after-tax net income |
$ 4,000 - $ 5,000 |
$ 4,000 - $ 5,000 |
|||
| General and administrative expense |
$ 34,000 - $ 35,500 |
$ 33,000 - $ 34,000 |
|||
| Share based compensation expense included in G&A above |
$ 6,500 - $ 7,000 |
$ 6,500 - $ 7,000 |
|||
| Acquisition costs included in G&A above |
$ 2,800 - $ 3,300 |
$ 1,800 - $ 1,800 |
|||
| Mortgage and credit facilities interest expense |
$ 66,500 - $ 67,500 |
$ 66,000 - $ 67,000 |
|||
| Debt and swap termination fees included in interest expense above |
$ 4,000 - $ 4,000 |
$ 4,000 - $ 4,000 |
|||
| Non-cash adjustment for interest rate swap in interest expense above |
$ 500 - $ 500 |
$ 0 - $ 0 |
|||
| Non-cash loan cost amortization included in interest expense above |
$ 2,000 - $ 2,500 |
$ 2,000 - $ 2,500 |
|||
| Amortization of mortgage interest premium included in interest expense above |
$ 12,000 - $ 13,000 |
$ 12,000 - $ 13,000 |
|||
| Recurring capital expenditures for building improvements, tenant improvements and leasing commissions |
$ 38,000 - $ 43,000 |
$ 50,000 - $ 55,000 |
|||
| Recurring same-store GAAP NOI |
2.5% - 3.5% |
2.5% - 3.5% |
|||
| Portfolio ending occupancy |
90.0% - 91.0% |
90.0% - 91.0% |
|||
| Weighted average annual diluted common shares/units |
116,703 – 116,703 |
116,600 – 116,600 |
|||
Variance within the outlook range may occur due to variations in the recurring revenue and expenses of the Company, as well as certain non-recurring items. The earnings outlook does not include the impact of possible future gains or losses on early extinguishment of debt, possible future acquisitions or dispositions and related costs other than those currently under contract, possible future capital markets activity, the impact of fluctuations in the Company's stock price on share-based compensation, possible future impairment charges or other unusual charges that may occur during the year, except as noted. It has been and will continue to be the Company's policy not to issue quarterly earnings guidance or revise the annual earnings outlook unless a material event occurs that impacts the Company's reported FFO outlook range. This policy is intended to lessen the emphasis on short-term movements that do not have a material impact on earnings or long-term value of the Company.
Forward Looking Statements
Certain statements in this press release that are not in the present or past tense or that discuss the Company's expectations (including any use of the words "anticipate," "assume," "believe," "estimate," "expect," "forecast," "guidance," "intend," "may," "might," "outlook," "plan," "potential," "project," "should," "will" or similar expressions) are forward-looking statements within the meaning of the federal securities laws and as such are based upon the Company's current beliefs as to the outcome and timing of future events. There can be no assurance that actual future developments affecting the Company will be those anticipated by the Company. Examples of forward-looking statements include projections relating to fully diluted EPS, share of depreciation and amortization, gain on sales of real estate, reported FFO per share, recurring FFO per share, nonrecurring items, net operating income, cap rates, internal rates of return, dividend payment rates, FFO accretion, capital improvements, expected sources of financing, the timing of closing of acquisitions, dispositions or other transactions and descriptions relating to these expectations. 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 actual or perceived impact of U.S. monetary policy; competition in the leasing market; the demand for and market acceptance of the Company's properties for rental purposes; oversupply of office properties in the Company's geographic markets; the amount and growth of the Company's expenses; customer financial difficulties and general economic conditions, including increasing interest rates, as well as economic conditions in the Company's geographic markets; defaults or non-renewal of leases; risks associated with joint venture partners; risks associated with the ownership and development of real property, including risks related to natural disasters; risks associated with property acquisitions; the failure to acquire or sell properties as and when anticipated; termination or non-renewal of property management contracts; the bankruptcy or insolvency of companies for which the Company provides property management services or the sale of these properties; the outcome of claims and litigation involving or affecting the Company; the ability to satisfy conditions necessary to close pending transactions and the ability to successfully integrate businesses compliance with environmental and other regulations, including real estate and zoning laws; the Company's inability to obtain financing; the Company's inability to use net operating loss carry forwards; the Company's failure to maintain its status as a real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended; and other risks and uncertainties detailed from time to time in the Company's SEC filings. Should one or more of these risks or uncertainties occur, or should underlying assumptions prove incorrect, the Company's business, financial condition, liquidity, cash flows and financial results could differ materially from those expressed in the Company's forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise over time, and it is not possible for us to predict the occurrence of those matters or the manner in which they may affect us. The Company does not undertake to update forward-looking statements except as may be required by law.
About Parkway Properties
Parkway Properties, Inc. is a fully integrated, self-administered and self-managed real estate investment trust specializing in the acquisition, ownership, development and management of quality office properties in higher growth submarkets in the Sunbelt region of the United States. Parkway owns or has an interest in 44 office properties located in seven states with an aggregate of approximately 16.2 million square feet of leasable space at July 1, 2015. Fee-based real estate services are offered through wholly owned subsidiaries of the Company, which in total manage and/or lease approximately 4.2 million square feet for third-party owners at July 1, 2015.
Contact:
Ted McHugh
Director of Investor Relations
(407) 650-0593
SOURCE Parkway Properties, Inc.
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