Parkway Properties Announces Acquisition of One Orlando Center

Parkway Properties, Inc. PKY announced today that it has acquired One Orlando Center, a Class A office building located in Orlando, Florida, and simultaneously restructured the existing first mortgage loan. One Orlando Center is a 19-story, 356,000 square foot, officer tower located in the Orlando central business district. The asset was built in 1987 and includes an 8-story structured parking garage. The property is 81.3% occupied and is expected to generate an initial full-year cash net operating income yield of 7.0%. James R. Heistand, Parkway's President and Chief Executive Officer, stated, "The acquisition of One Orlando Center represents a creatively structured, off-market transaction that enables Parkway to strengthen its portfolio in a targeted submarket at an attractive basis. The Orlando CBD continues to show signs of an early-stage recovery in office fundamentals, and with this acquisition, Parkway will own approximately 23% of the entire Class A inventory in that submarket." Parkway has taken ownership of the asset by making an $8.0 million equity investment that will be held in lender reserve accounts to fund the leasing and repositioning of the asset. Simultaneous with the equity investment, the existing $68.3 million first mortgage note was restructured into a new $54.0 million first mortgage and $16.4 million B-note, which is subordinated to Parkway's equity investment. The restructured $54.0 million first mortgage has a fixed interest rate of 5.9%, matures in May 2017, is interest only through maturity, and includes an option to extend for an additional year. Upon the sale or recapitalization of the property, proceeds are to be distributed first to the lender up to the amount of outstanding principal of the first mortgage note; second, to Parkway up to its equity investment; third, to Parkway until it receives a 12% annual return on its equity investment; fourth, 60% to Parkway and 40% to the lender until the subordinated B-Note is repaid in full; and fifth to Parkway at 100%. Parkway's equity investment will provide for 100% ownership and management of the asset.