JACKSONVILLE, FL—Parkway Properties is buying a portfolio of eight office properties spanning 1 million square feet from Florida East Coast Industries for $130 million. The office assets are in Jacksonville’s Deerwood submarket.
“This sale is consistent with our strategy to monetize stabilized assets in order to redeploy capital into higher yielding opportunities, primarily the development of more commercial real estate,” Vincent Signorello, president of Florida East Coast Industries, tells GlobeSt.com. “Pro forma the sale, we will continue to be one of the largest commercial real estate owners in Jacksonville with a portfolio in excess of three million square feet.”
Developed in phases from 1996 through 2005, the office properties are a combined 93.7% occupied. The average in place gross rent per square foot of $19.11. The Deerwood submarket offers about 3.5 million square feet. The direct vacancy rate there is 9.7%, according to CBRE.
“We believe the Deerwood portfolio offers a stable, core investment with strong occupancy and a high-quality rent roll,” says James R. Heistand, Parkway’s president and CEO. “The Deerwood submarket has been a targeted growth area for Parkway given its prime location and the many amenities it offers, attracting a multitude of institutional and strong credit tenants to the area.”
Parkway expects the Deerwood Portfolio to generate an initial full-year cash net operating income yield of approximately 9%. Parkway will own 100% of the portfolio and plans to place secured financing on the properties simultaneous with closing totaling up to 65% of the purchase price. Parkway plans to fund the remaining equity using borrowings from its revolving credit facility.
“Parkway will have a critical mass in this submarket, owning approximately 29% of the total office inventory, which should provide us with operational efficiencies and leasing advantages,” Heistand says. “In addition, our attractive cost basis of $128 per square foot represents a significant discount to estimated replacement cost.”
Parkway also just completed the previously announced purchase of Tower Place 200, a 260,000 square foot office tower located in the Buckhead submarket of Atlanta for $56 million. Tower Place 200 was built in 1998 and is a 13-story, class A office tower that shares a parking garage with Parkway’s neighboring 3344 Peachtree asset. The building is approximately 82.9% occupied with an average in place gross rent per square foot of $26.37.