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CHICAGO-The local office market is among nine targets for a $500-million fund recently formed by Jackson, MS-based Parkway Properties Inc. and Ohio Public Employees Retirement System. Acquisitions here, as well as Atlanta, Charlotte, Houston, Phoenix and four Florida markets, could be completed by the end of the year, according to the REIT.

A 25% partner in the fund, Parkway Properties has been looking to add to its local portfolio, which still includes a single asset--1.1-million-sf 233 N. Michigan Ave. While being the only market outside of the Sunbelt, Chicago's job growth is expected to exceed the national average, explains president and chief executive officer Steven G. Rogers, and Parkway Properties' building is outperforming the local market with a 90.7% occupancy rate. The building within the Illinois Center development is anchored by Young & Rubicam, the fifth-largest tenant in the REIT's portfolio with annual rent of $4.2 million for its 122,078 sf.

The fund's acquisition requirements are cash-on-cash returns greater than 7% coupled with a leveraged internal rate of return above 11%. Rogers adds the REIT will not create potential conflicts of interests with Ohio Public Employees Retirement System, meaning purchases in the Chicago area will be limited to the fund unless they are outside the funds' criteria. In addition to the returns, size of acquisitions will be limited to $80 million.