Parkway Buys Phoenix Corporate Center for $81M
- Feb 04, 2008
Parkway Properties Inc. has acquired Desert Ridge Corporate Center on behalf of its Parkway Properties Office Fund L.P. in an $81.6 million deal. Parkway will own a 26.5 percent share of the property and receive a commensurate share of income. The property will carry a $49.2 million first mortgage. The complex consists of two, four-story Class A office buildings totaling 275,000 square feet and one 18,000 square foot multi-tenant specialty retail building. Completed in phases between 2006 and 2007, the property is part of a 5,700-acre master-planned community called Desert Ridge. It includes a 765-space parking structure and a 596-space surface parking area. The buildings are 89.2 percent leased to 39 tenants. According to a recent Grubb & Ellis Co. research report on the Phoenix office market, the vacancy rate for the city’s Class A office properties rose to 15.1 percent from 14.3 percent in the fourth quarter of last year. In the fourth quarter, the asking rate for Phoenix metro office space rose to $26.28 per square foot, up from $24.70 a year before. Desert Ridge Corporate Center is expected to yield a going in capitalization rate of 5.5 percent and a leveraged internal rate of return (IRR) of about 12.7 percent. Parkway’s share of the asset is expected to generate an initial cap rate of 7.6 percent and an unleveraged IRR of 11.6 percent This is the third Phoenix office property acquired by Jackson, Miss.-based Parkway. The other two are the Squaw Peak Corporate Center, a 287,400-square-foot, three story building in the Squaw Peak/Camelback submarket, and the Mesa Corporate Center, a 105,170-square foot, two story building in the Southeast Valley submarket. As a REIT specializing in office properties, Parkway focuses primarily on the Southeastern and Southwestern United States and Chicago. All told, the company owns or has an interest in 68 office properties located in 11 states.