UPDATE: BMO Capital Markets Raises PT on Parkway Properties on Positive Outlook

In a report published Monday, BMO Capital Markets analyst Richard C. Anderson reiterated an Outperform rating on Parkway Properties (NYSE: PKY), and raised the price target from $19.00 to $22.00.In the report, Anderson noted, “PKY continues to deploy its improved equity cost of capital (implied cap rate of 6.8%, vs. 10%+ 18 months ago) and balance sheet (~5.5x debt/EBITDA) into suburban and increasingly CBD office sunbelt acquisitions. Among the high-profile deals recently announced are the US Airways Building in Tempe and Lincoln Place in South Beach, Miami – the latter a new market for PKY. While leasing continues to show positive signals with 1Q13 occupancy up 70 bps, reshaping the portfolio through acquisitions and dispositions (PKY exited Columbia, SC during 1Q), remains the driving force, in our view. We note that the US Airways and Lincoln Place acquisitions are both 100% occupied by a single tenant (US Airways and LNR, respectively), presenting PKY with unique negotiating scenarios in future periods – elevated execution risk that appears thoroughly underwritten by management. Overall, we like PKY not because we think suburban office is on the verge of becoming a darling property type, but because we think management is investing smartly and making money for shareholders while the sector remains out of favor.”Parkway Properties closed on Friday at $18.90.