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ATLANTA AND CHARLOTTE, N.C. — Parkway Properties has taken control of three distressed office properties and subsequently sold them to one of its investment funds. The three buildings total 561,000 square feet and sold for $33 million. They include Carmel Crossing, a 326,000-square-foot property located in Charlotte; Lakewood II, a 128,000-square-foot property located in Atlanta; and Falls Pointe, a 107,000-square-foot property also located in Atlanta. The portfolio has an average occupancy rate of 75.7 percent.

In July, Parkway Properties purchased the first mortgage note for the three properties from its joint venture with Rubicon US REIT. Earlier this month, Parkway foreclosed on the two Atlanta buildings and has closed on the sale of them to Parkway Properties Office Fund II, an investment fund controlled by itself and joint venture partner Teacher's Retirement System of Texas. The sale price was $8 million. Last week, Parkway Properties foreclosed on Carmel Crossing and is under contract to sell it to the fund for $25 million. The anticipated closing date is November 10.

Parkway expects that an additional $7.3 million will be invested to cover closing costs, building improvements, leasing costs and tenant improvements. Parkway controls a 30 percent equity interest in the investment fund, which equates to proceeds of $9.9 million from the sale.

Parkway Properties Office Fund II was formed in May 2008. The purpose of the fund is to acquire multi-tenant office properties in markets that include Atlanta; Austin, Texas; Charlotte, N.C.; Chicago; Fort Lauderdale, Fla.; Houston; Jacksonville, Fla.; Memphis, Tenn.; Nashville, Tenn.; Orlando; Phoenix; San Antonio; and Tampa/St. Petersburg, Fla.

“The sale of these three assets to Fund II not only presents an opportunity to achieve attractive returns for Parkway and our fund partner, but also represents cash consideration to Parkway in the amount of approximately $22.5 million,” said Steven Rogers, president and CEO of Parkway, in a statement. “Parkway also expects to receive additional proceeds once a first mortgage is placed on Carmel Crossing.”

— Coleman Wood

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