Parkway to purchase Tampa Fund II assets and Tempe office property
Parkway Properties has entered into a purchase and sale agreement to acquire its co-investor's 70 per cent interest in three office properties located in the Westshore submarket of Tampa, Florida owned by Parkway Properties Office Fund II.
The firm has also entered into a purchase and sale agreement to acquire a 75 per cent interest in the US Airways Building, a 225,000 square foot office building located in the Tempe submarket of Phoenix, Arizona.
James R Heistand, Parkway's president and chief executive officer, says: "Our Fund II assets in Tampa have performed well since they were acquired by Fund II, and we believe there is still plenty of opportunity for upside in these properties through both occupancy gains and rental rate growth. The US Airways Building gives us further scale in the Tempe submarket with a high-quality core asset that we believe will generate stable cash flows for a number of years. Our investment strategy is focused on gaining a critical mass in targeted submarkets throughout the Sunbelt that we expect to outperform the overall market. Each of these acquisitions fits well within this approach and complements our blended portfolio of core, core-plus and value-add investments."
Parkway is under contract to acquire its co-investor's 70 per cent interest in three office properties located in the Westshore submarket of Tampa, Florida owned by Fund II. The agreed-upon gross valuation of the Tampa Fund II assets is USD139.3m. Parkway's purchase price for its co-investor's 70 per cent interest in the Tampa Fund II assets is USD97.5m, which will be funded at closing using approximately USD56.8m of cash (subject to closing prorations and other customary adjustments) and the assumption of USD40.7m of in-place mortgage indebtedness that is secured by the properties, which represents its co-investor's 70 per cent share of the approximately USD58.1m of current in-place mortgage indebtedness. The three assets include Corporate Center IV at International Plaza, Cypress Center I, II and III, and The Pointe. The Tampa Fund II assets had a combined occupancy of 93.5 per cent as of 1 March 2013 and are expected to generate an initial full-year cash net operating income yield of approximately 8.1 per cent. Closing is expected to occur by the end of the first quarter 2013, subject to customary closing conditions.
Parkway is under contract to acquire a 75 per cent interest in the US Airways Building in the Tempe submarket of Phoenix, Arizona. The agreed-upon gross valuation of the US Airways Building is USD56.0m. Parkway's purchase price for the approximate 75 per cent interest is USD41.8m. US Airways will retain the remaining 25 per cent interest in the property. The US Airways Building was built in 1999 and is LEED Gold Certified. It is located adjacent to Parkway's Hayden Ferry Lakeside and Tempe Gateway assets and shares a parking garage with Tempe Gateway. The property is 100 per cent leased to US Airways through April 2024 with a current in place net rent of USD17.50 per square foot. US Airways has the option to terminate its lease on 31 December 2016 or 31 December 2021 with 12 months prior written notice. The property is expected to generate an initial full-year cash net operating income yield of approximately 7.0 per cent. Closing is expected to occur by the end of the second quarter 2013, subject to customary closing conditions and Parkway's satisfactory completion of due diligence.
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