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MEMPHIS-Parkway Properties Office Fund, LP has acquired the eight-story Renaissance Center for $37.6 million. Located at 1715 Aaron Brenner Dr., the 190,000-sf asset is 96.6% occupied.

Renaissance Center, built in 2000, is situated on seven acres in the East Memphis submarket. The property also features 448 parking spaces in a three-level parking garage and 213 surface parking spaces. In addition to the sale’s price, the fund expects to spend $1.4 million for closing costs, building improvements, leasing costs and tenant improvements over the next two years, according to Jackson, MS-based Parkway Properties officials.

Parkway Properties officials did not name the seller; however, according to published reports DBSI Group purchased the property from the developer Weston Cos. in 2005 for $27.1 million.

The acquisition includes the assumption of a $17.2-million first mortgage with a 5.23% fixed interest rate, maturing in June 2012. According to a Parkway statement, “on a stand-alone basis, the property is expected to yield the fund a going in capitalization rate of 7.2% in the first 12 months of operations and a leveraged internal rate of return of approximately 10%. Parkway’s annual return is comprised of 25% property income, which represents its pro-rata share, as well as market-based fees for asset and property management, leasing and construction supervision services. Adding these fees to the property economics increases the return to Parkway to an initial cap rate of 10.3%, an unleveraged IRR of 12.5%, and a leveraged IRR of approximately 15.4%, based upon existing debt. The supplemental information table that follows outlines this fee structure as it relates to this asset.”

Parkway Realty Services will take over management and leasing services. According to Parkway’s website, there is currently 2,048 sf available on the second floor and 3,723 sf available on the third floor, both with an annual rent of $27.50 per sf.

Formed in July 2005, Parkway Properties Office Fund is a $500-million discretionary fund focused on acquiring high-quality, multi-tenant office properties. Parkway is a 25% investor in the fund, which will be capitalized with approximately $200 million of equity capital and $300 million of non-recourse, fixed-rate first mortgage debt. The fund has invested $125.6 million to date. Its portfolio contains six assets with a total of 805,000 sf that is 92.4% leased as of Dec. 21, according to a release.

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