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CHICAGO-Parkway Properties Inc. has closed on the $198-million purchase of One Illinois Center at 111 E. Wacker Dr. The company has retained Wachovia Securities to market the property together with the company’s Two Illinois Center property located at 233 N. Michigan Ave.

Parkway completed the acquisition of One Illinois Center, which includes plus closing costs and transfer taxes of approximately $1.6 million; anticipated building improvements of $3.7 million; and projected leasing costs of $12.1 million during the first two years of ownership. The total purchase price equates to $215.4 million, or $215 per sf. According to Parkway officials, the purchase price represents an estimated 23% discount to the current estimated replacement cost of $280 per sf.

Using first-year estimated net operating income of $13.5 million and the total purchase price, the property is expected to generate an initial unleveraged yield or going-in cash capitalization rate of approximately 6.3% in the first twelve months of operations. The buy was funded by a $148.5 million non-recourse first mortgage at a fixed interest rate of 6.29% with interest-only payments for five years and a 10-year maturity.

Additional purchase funding was provided by a $33.7-million mezzanine loan with a six-month term at an interest rate of LIBOR plus 130 basis points, proceeds from the recent $105.5-million sale of Viad Corporate Center in Phoenix and amounts drawn under existing lines of credit.

Parkway expects to retain an ownership interest of approximately 25% and to close the two-property sale in late 2006. Proceeds from the deal will be used to reduce amounts outstanding under bank lines of credit.

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