Parkway Sells Office Property
Parkway Properties Inc. (NYSE:PKY), a real estate investment trust (REIT), has recently sold an office property in Richmond, Virginia, as part of its corporate strategy to restructure its portfolio as well as to improve its liquidity. With the deal, the company has completed over $211 million worth of asset sale transactions during the current fiscal, thereby significantly improving its balance sheet.
Parkway sold GlenForest – an 81,000 square foot office property with about 99.1% occupancy, for a gross sale price of $9.3 million at a cap rate of approximately 8.8%. The cap rate is based on projected in-place cash net operating income for the 12 month period following the date when the transaction is completed, including the impact of contractual rent abatements. Parkway realized net proceeds of $8.9 million from the asset sale, bulk of which was utilized to repay debt under it credit facility.
Combining with its recent acquisition spree, the asset sale has enabled Parkway to lower the average age of its portfolio, improve the overall quality of assets, and increase the percentage of assets in central business districts and other urban infill locations.
Parkway primarily leases, acquires, and owns office properties in Southeast and Southwest U.S. and Chicago. Presently, the company owns 68 office properties spanning approximately 14.8 million square feet of leasable space. These include 26 joint venture properties totaling 6.6 million square feet, representing 44.6% of the total portfolio. The company also offers fee-based real estate services through wholly-owned subsidiaries, which in turn manage and lease approximately 13.0 million square feet for third-party owners.
We currently have a ‘Neutral’ recommendation for Parkway, which presently has a Zacks #3 Rank that translates into a short-term ‘Hold’ rating. We also have a Neutral recommendation and a Zacks #2 Rank (short-term ‘Buy’) for Boston Properties Inc. (NYSE:BXP), one of the peers of Parkway.