The new owners of the portfolio anticipate spending an additional $901,000 for closing costs, building improvements, leasing costs and tenant improvements during the first two years of ownership. A $14.4-million, 10-year first mortgage at a rate of 5.9% was obtained for the property. During the first five years of the loan, the owners will make interest-only payments.

Parkway's initial equity contribution of $2.4 million for the purchase was provided by advances under the company's existing line of credit. On a stand-alone basis, the properties are expected to yield the fund a cap rate of 7.1% in the first year of operations and an IRR of approximately 12%.

The buildings were purchased on behalf of the $500-million Parkway Properties Office Fund, LP, of which Parkway Properties is a 25% investor. As of May 1, $56.6 million of the fund had been invested. The fund owns four properties with a combined total of 410,000 sf. "This acquisition raises the investment in the discretionary fund to 11% of the total allocation. Having achieved early leasing success at our first fund acquisition in Orlando, and with this addition, we believe we are assembling a portfolio designed to deliver the stated return objectives of our objectives," says Parkway president and CEO Steven Rogers, in a prepared statement.

Parkway Realty Services will provide property management and renewal leasing services for the portfolio. New leasing services will be provided by an unaffiliated third-party leasing agency. Parkway Properties Inc. is a member of the S&P Small Cap 600 Index and is REIT specializing in the acquisition, ownership, management and leasing of office properties. Other properties in Jacksonville owned by the company include Riverplace South, a 108,301-sf office building at 1300 Riverplace Blvd., and the Stein Mart Building, a 196,470-sf building at 1200 Riverplace Blvd.