JACKSON, Miss., Dec. 22, 2010 /PRNewswire-FirstCall/ -- Parkway Properties, Inc. (NYSE: PKY) announced today that it is under contract to purchase 3344 Peachtree (the "Property") on behalf of Parkway Properties Office Fund II, L.P. ("Fund II") for a total purchase price of $167.3 million. The due diligence period has expired and Fund II's $6 million earnest money deposit is non-refundable. Final closing and all earnest money are contingent upon customary closing conditions and the successful assumption by Fund II as borrower of an existing $90 million non-recourse first mortgage loan on the Property. Final closing is expected to occur in late January 2011.
Located in the heart of the Buckhead submarket of Atlanta, Georgia, 3344 Peachtree is the office and retail portion of a 50-story, vertical mixed-use development with remarkable amenities and access not replicated elsewhere in the Atlanta market. 3344 Peachtree contains approximately 484,000 square feet of office and retail space and includes an adjacent eleven-story parking structure. The residential component of the project, known as SOVEREIGN, contains 82 high-quality residential condominiums and is not a part of Fund II's pending investment. The Property is located directly on Peachtree Road within a block of the MARTA Buckhead Station and is within walking distance of a number of hotels, retail venues, and restaurants. Major customers located at 3344 Peachtree include Jones Lang LaSalle, Weinberg, Wheeler, Hudgins Gunn & Dial, LLC, Littler Mendelson, SPANX, Fifth Third Bank, Hodges Ward Elliott, The Buckhead Club, Barclays, and Bistro Niko. The office and retail space is currently 93% leased to 26 customers. The project was developed in 2008 by Regent Partners, LLC and was designed by Smallwood, Reynolds, Stewart, Stewart & Associates.
Steven G. Rogers, President and Chief Executive Officer at Parkway, stated, "We are proud of the prospect of adding an asset of the stature of 3344 Peachtree to our portfolio. We are very familiar with the Buckhead market given our long-term investment in One Capital City Plaza directly next door to this Property, and we are confident that our team will maintain the highest level of operational excellence that the current owners have established. At 93% leased and with an average remaining lease term of over seven years, this investment is expected to provide steady cash flows to Fund II and will improve the profile of Parkway's Atlanta portfolio."
Fund II's investment in the Property will total $160 million, and Parkway Properties, LP will fund the remaining $7.3 million. Parkway's ownership share in Fund II is 30%, resulting in an effective ownership interest in the Property by Parkway of 33.0%. The in-place mortgage loan that Fund II plans to assume has a fixed interest rate of 4.75% and a maturity date of October 1, 2017. Parkway's equity contribution in the investment is expected to be $25.5 million and will be initially funded through availability under the Company's existing revolving credit facility. On a property level basis, 3344 Peachtree is expected to yield a going-in cash capitalization rate ("cap rate") in the first year of the investment of 6.5%. Not including the impact of $816,000 of contractual rent concessions during the first year of the investment, the cap rate is 7.0%. More comprehensive financial details about the investment will be provided upon final closing. The financial impact to 2011 earnings will be disclosed along with the Company's planned fourth quarter 2010 earnings release on February 7, 2011.
Fund II is a $750 million discretionary fund formed in May 2008 for the purpose of acquiring high-quality, multi-tenant office properties. Parkway is a 30% investor in the Fund which will be capitalized with approximately $375 million of equity capital and $375 million of non-recourse, fixed-rate first mortgage debt. This represents a target debt to total capitalization of approximately 50% for the Fund once the Fund is completely invested. The Fund targets acquisitions in Houston, Austin, San Antonio, Chicago, Atlanta, Phoenix, Charlotte, Memphis, Nashville, Jacksonville, Orlando, Tampa/St. Petersburg, and Ft. Lauderdale.
About Parkway Properties
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 64 office properties located in 11 states with an aggregate of approximately 13.2 million square feet of leasable space as of December 22, 2010. Included in the portfolio are 20 properties totaling 3.7 million square feet that are owned jointly with other investors, representing 28.0% of the portfolio. Fee-based real estate services are offered through the Company's wholly-owned subsidiary, Parkway Realty Services, which also manages and/or leases approximately 2.5 million square feet for third-party owners at December 22, 2010.
Parkway Properties, Inc.'s press releases and additional information about the Company are available on the Company's website at www.pky.com.
Forward Looking Statement
Certain statements in this release that are not in the present or past tense or discuss the Company's expectations (including the use of the words anticipate, believe, forecast, intends 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; risks associated with joint venture partners; the risks associated with the ownership and development of real property; the failure to acquire or sell properties as and when anticipated; the outcome of claims and litigation involving or affecting the Company; 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 results could differ materially from those expressed in the forward-looking statements. The Company does not undertake to update forward-looking statements.
Steven G. Rogers
President & Chief Executive Officer
Richard G. Hickson IV
Chief Financial Officer
SOURCE Parkway Properties, Inc.