JACKSON, MISS., AND ORLANDO — Jackson-based Parkway Properties has entered into a definitive agreement to merge with Orlando-based Eola Capital. Parkway will acquire a 2.5 million-square-foot office portfolio as well as Eola's property management business for approximately $462 million.
The portfolio comprises six properties. They include Two Ravinia Drive in Atlanta; 245 Riverside in Jacksonville, Fla.; Bank of America Center in Orlando; Two Liberty Place in Philadelphia; and two Tampa properties: Cypress Center I, II and III as well as International Plaza Four. The portfolio's combined occupancy was 85.4 percent at the time of the closing.
The property purchase will be completed for $380 million, equating to a 7.4 percent capitalization rate. The portfolio will be contributed to Parkway Properties Office Fund II, which will be 75 percent committed once the acquisitions are completed. Two of the properties, International Plaza Four and 245 Riverside, have already closed. The remainder of the portfolio is expected to close when the rest of the transaction is completed by the end of the second quarter.
“We see a combination as an attractive alternative to pursuing an IPO,” says James Heistand, the current chairman of Eola Capital.
In addition to acquiring Eola's property management business — which will nearly double the amount of office space Parkway has under management — Parkway will take on several of the Eola's executives. Heistand will be named executive chairman of Parkway's board of directors. He will succeed Leland Speed, who will step down as chairman but remain a member of the board. In addition, Eola COO Henry Pratt III will become executive vice president and head of asset management and third party services for Parkway.
“With the economic recovery under way, we view it as the right time to pursue opportunities for growth,” said Steven Rogers, president and CEO of Parkway Properties.
The deal represents the next step in Parkway's expansion plans. Once the acquisiton is complete, the company will have entered two new markets — Tampa and Philadelphia. In a conference call announcing the transaction, Parkway mentioned that its new investment strategy will focus on more acquisitions in fewer markets. The company is seeking to sell off some of its non-core assets including 233 North Michigan in Chicago, whose proceeds, when sold, will be used to partly fund the Eola transaction. In addition, Parkway has received a fixed-price, short-term option to purchase the general partner interest and/or fee simple interest in three Class A properties totaling 1.5 million square feet from Eola's principals. The principals have also agreed to assist Parkway in obtaining three additional Class A properties totaling 579,000 square feet. Details were not disclosed
— Coleman Wood