Parkway Properties, Inc. (PKY) recently announced that it has entered into an agreement to sell 111 East Wacker Drive in Chicago, IL for approximately $150.6 million. The transaction is expected to close by the fourth quarter of 2011.
111 East Wacker is a 1.0 million square foot office property located in downtown Chicago. The property currently serves as the collateral for a $148.5 million non-recourse mortgage loan with a fixed interest rate of 6.3% and expected to mature in July 2016.
This transaction is a strategic move on the company’s part as it helps the company to reap some financial benefits going forward. With the disposition of this property, Parkway Properties will reduce its balance sheet .
The company is undertaking an asset recycling program and the sale of several non-core assets has led to a downward adjustment in its reported funds from operations (FFO) outlook but has improved its balance sheet.
Funds from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.
The company revised its reported FFO outlook per share from the range of $1.80-$1.95 to $1.60-$1.75 for FY11.
Parkway Properties is a self-administered real estate investment trust (REIT) specializing in the operation, leasing, acquisition, and ownership of office properties. As of June 30, 2011, the company had an outstanding balance of $166.2 million under its credit facility and held $33.4 million in cash and cash equivalents, of which $13.9 million of cash and cash equivalents was Parkway’s share.
Parkways Properties currently retains a Zacks #3 Rank, which translates into a short-term Hold rating. We are also maintaining our long-term Neutral recommendation on the stock. One of its competitors, Brandywine Realty Trust (BDN) also holds a Zacks #2 Rank, which translates into a short term Buy rating.
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