Parkway Properties to Pay $475M for 22 Office Assets, Then Sell Most
- Sep 23, 2014
Parkway Properties Inc. is about to grow its office holdings by about 2.1 million square feet. The office REIT has entered into an agreement to acquire a 22-property group of Class A assets spanning six states in the Sunbelt region for $475 million. But that’s not the end of the story. Parkway will keep only three of the properties– Corporate Center I, II, and III at International Plaza in Tampa, Fla.–and dispose of the rest.
“The three Corporate Center assets are in the Westshore market of Tampa, and we’re very bullish on that submarket; it’s the strongest in the city,” Ted McHugh, Parkway’s director of investor relations, told Commercial Property Executive. “Westshore has outperformed other Tampa submarkets in rental rate and vacancy.”
Parkway has a highly targeted investment strategy focusing on Class A properties in the central business districts of higher growth submarkets. While the 19 properties that will be sold are of high quality, they simply don’t fit with the REIT’s current strategy.
At present, Parkway owns four properties, including Corporate Center IV, in Westshore, where it began establishing a footprint in 2011 and made its most recent purchase in late 2012. And the company can point to a strong track record of boosting the tenant roster at those properties. “The leased percentage of these buildings has increased 16 percentage points compared to their occupancy when Parkway acquired them,” McHugh noted. Vacancy at the Corporate Center buildings is 69.7 percent, including the impending vacating of a total of approximately 50,000 square feet over the next 12 months. “Our current Westshore portfolio is 95 percent leased. If we can replicate what we did there on the new acquisitions, there’s significant value to be created,” he said.
The Corporate Center buildings are particularly appealing to Parkway due to their location adjacent to the International Plaza Mall, a popular 1.2 million-square-foot upscale shopping destination, and the Tampa International Airport. “From an amenities standpoint, if you’re going to have an office, you’re going to want to be in the Westshore market, and if you need to be in and out of Tampa, the Westshore market is where you’re going to want to be located,” added McHugh
Parkway intends to sell the remaining 19 buildings in the soon-to-be-acquired portfolio simultaneously with the portfolio purchase or within 12 months of the transaction’s closing. The majority of the properties are sited in Tampa outside of the Westshore submarket, as well as in Orlando, Atlanta and Houston.
And Parkway has a plan in place for financing its latest acquisition. In conjunction with the announcement of the planned purchase, the REIT released news of a secondary equity offering of 10 million shares. The net proceeds will be a major piece of funding the acquisition, which is on track to close during the fourth quarter of this year.