Orlando-based REIT Parkway Properties, Inc. (NYSE:PKY) has entered into an agreement to acquire its co-investor’s 70 percent interest in three office properties in the Westshore submarket of Tampa, FL owned by Parkway Properties Office Fund II, L.P., and has entered into a purchase and sale agreement to acquire a 75 percent interest in the US Airways Building, a 225,000 square foot office building located in the Tempe submarket of Phoenix, AZ.
Tampa Fund II Assets
The three Tampa Fund II 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% as of March 1, 2013 and are expected to generate an initial full-year cash net operating income yield of approximately 8.1%. Closing is expected to occur by the end of the first quarter 2013, subject to customary closing conditions.
The agreed-upon gross valuation of the Tampa Fund II Assets is $139.3 million. Parkway’s purchase price for its co-investor’s 70% interest in the Tampa Fund II Assets is $97.5 million, which will be funded at closing using approximately $56.8 million of cash (subject to closing prorations and other customary adjustments) and the assumption of $40.7 million of in-place mortgage indebtedness that is secured by the properties, which represents its co-investor’s 70 percent share of the approximately $58.1 million of current in-place mortgage indebtedness.
US Airways Building
The agreed-upon gross valuation of the US Airways Building is $56.0 million. Parkway’s purchase price for the approximate 75% interest is $41.8 million. US Airways will retain the remaining 25% 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% leased to US Airways through April 2024 with a current in place net rent of $17.50 per square foot.
US Airways has the option to terminate its lease on December 31, 2016 or December 31, 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%.
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.