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Parkway Advances Capital Recycling, Updates 2016 Outlook

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Orlando-based office real estate investment trust ("REIT") Parkway Properties Inc.PKY recently announced that it has reached an agreement to divest 80% holding in Courvoisier Centre, an office property located in Miami. The divestiture is in sync with the company's capital-recycling strategy, wherein it focuses on selling legacy properties as well as recently acquired assets whose values have increased.

Since the Courvoisier Centre was acquired in Apr 2014, Parkway is most likely looking to reap benefits from appreciation in the asset's value. Notably, the company acquired the asset at a gross purchase price of $145.8 million, and is now selling 80% of the property at a gross asset value of $175 million.

Per the agreement, Parkway, holding 20% interest in the property, will enter into a joint venture with a foreign capital source, and provide property management and leasing services for the same. As such, the company expects to "realize significant value appreciation in the asset, meaningfully participate in its future growth and create a partnership that could be used to accelerate growth in Miami and other markets."

Additionally, the new joint venture will encumber the asset with a mortgage debt, with an estimated loan to value ratio of 60%. The transaction is expected to close in the first quarter of 2016.

Taking into account the effects of this transaction, management revised its 2016 funds from operations ("FFO") guidance. The company presently expects FFO within $1.28−$1.38 per share against its previous projection of $1.32−$1.42 (as of Nov 2). The Zacks Consensus Estimate for the same falls in the revised range.

Parkway currently holds a Zacks Rank #4 (Sell).

Investors interested in the Office REIT space can consider Mack-Cali Realty Corp. CLI sporting a Zacks Rank #1 (Strong Buy); as well as Alexandria Real Estate Equities, Inc. ARE and Apple Hospitality REIT, Inc. APLE , both holding a Zacks Rank #2 (Buy).

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MACK CALI CORP (CLI): Free Stock Analysis Report

PARKWAY PPTY (PKY): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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