Parkway has entered the local office market with the purchase of a two-building, 305,000-sf, 94%-leased office complex in the emerging Southbank submarket for $34.1 million or $112 per sf. The acquisition includes a four-story, 507-space parking deck adjacent to 20-year-old, 197,000-sf, 10-story 1200 Riverplace and a surface 345-space parking lot adjacent to 24-year-old, 108,000-sf, eight-story 1300 Riverplace.
In a prepared statement, Steven G. Rogers, Parkway Properties' president and CEO, says the properties were actually acquired for $29.3 million plus $4.8 million in closing costs and anticipated capital expenditures and leasing commissions during the first two years of ownership. Rogers didn't identify the seller.
The purchase was funded with the REIT's existing lines of credit. "Based upon current combined occupancy, the properties are expected to produce an initial unleveraged yield or going-in cash capitalization rate of approximately 8.3% in the first 12 months of operations," Rogers says.
He says one factor that attracted Parkway to the Southbank submarket was the area's "significant improvement" and the development of three high-rise residential towers totaling 670 new units adjacent to 1300 Riverplace.
Stein Mart Inc., a 261-store department chain with 2004 net sales of $1.5 billion, occupies 98,700 sf as its national headquarters site at the Riverplace complex. The Stein Mart lease expires in December 2010. The second largest user is the US Postal Service with 26,000 sf on a lease that ends in March 2008. The average asking class A rent in Jacksonville is $13.36 per sf, according to Marcus & Millichap's National Office Report.
Parkway owns or has an interest in 64 office properties in 11 states with a total 11.9 million sf of leasable space.
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