Parkway Announces Purchase of Tampa Asset, Completion of 111 East Wacker Sale, and Sale of Fund II Asset in Atlanta

ORLANDO, Fla., Jan. 11, 2012 /PRNewswire/ -- Parkway Properties, Inc. (NYSE: PKY) announced today the purchase of The Pointe in Tampa on behalf of Parkway Properties Office Fund II, L.P. ("Fund II"), the completion of the previously announced sale of 111 East Wacker Drive ("111 East Wacker") in Chicago, and the sale of Falls Pointe in Atlanta on behalf of Fund II.

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James R. Heistand, President and Chief Executive Officer of Parkway stated, "The Pointe is a landmark asset in the Westshore submarket and includes a strong tenant base consisting of high-quality national and regional credit customers.  With this purchase, Parkway now owns an interest in over 788,000 square feet and manages an additional 299,000 square feet for third-party owners in the Westshore submarket, which provides Parkway with important critical mass in this primarily urban infill area.  The sale of 111 East Wacker accelerates Parkway's portfolio repositioning as well as positions our balance sheet for future growth.  Additionally, the sale of 111 East Wacker completes Parkway's exit from Chicago, which we have identified as a non-core market.  With the removal of this highly leveraged asset from our balance sheet, Parkway's leverage will be materially reduced, which should provide better financial flexibility.  Also, Parkway will realize significant savings in projected leasing capital costs as a result of the sale given the amount of leasing required at the property to reach stabilization."

Purchase of The Pointe by Fund II

The Pointe is a 252,000 square foot office building and has an irreplaceable waterfront location on the tip of Rocky Pointe Island within the Westshore submarket of Tampa, Florida.  The Property is currently 88.4% leased to 28 customers.  The gross purchase price for The Pointe was $46.9 million and Parkway's ownership share is 30%.

Simultaneous with the purchase, Fund II closed a $23.5 million first mortgage with a fixed interest rate of 4.0%, an initial 42-month interest only period, and a maturity date of February 2019.  Parkway's equity contribution of $7.0 million was initially funded through availability under the Company's existing revolving credit facility. 

Sale of 111 East Wacker

111 East Wacker is a 1.0 million square foot office property located in the central business district of Chicago and was 80.5% occupied as of December 1, 2011.  The gross sale price for 111 East Wacker was $150.6 million.

The buyer assumed the $147.9 million non-recourse mortgage loan, which has a fixed interest rate of 6.3% and maturity date in July 2016.  In connection with the sale, the Company recorded a non-cash impairment loss in the third quarter of 2011 totaling $18.8 million.  Parkway expects to record a gain on the sale of 111 East Wacker of approximately $500,000 in the first quarter of 2012.  Parkway received approximately $2.8 million in net proceeds at closing, which were used to reduce amounts outstanding under the Company's credit facility.

Sale of Falls Pointe

Falls Pointe is a 107,000 square foot office property located in the Central Perimeter submarket of Atlanta, Georgia.  The building was 100.0% occupied by one customer as of December 1, 2011.  The gross sale price for Falls Pointe was $6.0 million and Parkway's ownership share was 30%.  Fund II acquired Falls Pointe in October 2010 as part of a three-asset portfolio, with an original investment strategy to sell the asset after a short-term hold period.  The sale of this asset provides Fund II with capital to reinvest into assets more consistent with Fund II's strategy, specifically multi-tenant office properties.  The Company expects to record a gain on the sale of Falls Pointe for financial reporting purposes of approximately $1.3 million, of which approximately $400,000 is Parkway's share, in the first quarter of 2012.

The property was unencumbered with debt at the time of the sale.  Fund II received approximately $4.3 million in net proceeds at closing, of which approximately $1.3 million was Parkway's share.

About Fund II

Fund II is a $750.0 million discretionary fund formed in May 2008 for the purpose of acquiring high-quality, multi-tenant office properties.  Parkway is a 30% investor in Fund II, which, when fully invested, is expected to be capitalized with non-recourse, fixed rate mortgage debt at an initial 50% debt to total capitalization.  Fund II targets investments in office buildings in Houston, Austin, San Antonio, Chicago, Atlanta, Phoenix, Charlotte, Memphis, Nashville, Jacksonville, Orlando, Tampa/St. Petersburg, and Ft. Lauderdale, as well as other growth markets to be determined at Parkway's discretion.  As of January 11, 2012, Fund II owns 11 assets with a combined total of 3.9 million square feet.  Fund II currently has $55.8 million of its initial $750.0 million capital commitment remaining to be invested.

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 ownership of office properties.  Parkway owns or has an interest in 57 office properties located in 11 states with an aggregate of approximately 11.7 million square feet of leasable space at January 11, 2012.  Fee-based real estate services are offered through wholly-owned subsidiaries of the Company, which in total manage and/or lease approximately 11.9 million square feet for third-party owners at January 11, 2012.

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 Statements

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, will, believe, forecast, intends, expects, estimates, projects, 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 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; termination of property management contracts; the bankruptcy or insolvency of companies for which Parkway provides property management services or the sale of these properties; 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 business, financial condition, liquidity, cash flows, and results could differ materially from those expressed in the forward-looking statements. The Company does not undertake to update forward-looking statements, except as may be required by law.

SOURCE Parkway Properties, Inc.