GLOBAL - An office building investment fund backed by the Teacher Retirement System of Texas has completed its first investment.

Parkway Properties Office Fund II has closed on the purchase of two properties and will be buying another property shortly for a total of $33m (€23.4m).

The three properties in the transaction are the 107,000 square foot Falls Pointe and 128,000 square foot Lakewood II in Atlanta, and the 326,000 square foot Carmel Crossing in Charlotte, North Carolina.

Office Fund II is managed by Parkway Properties, a publicly traded real estate investment trust.

The REIT purchased the first mortgage note secured by the three properties at the end of July. 

RubiconPark I, a joint venture between Rubicon US REIT and Parkway Properties, had owned these properties.

Parkway, acting as the note holder, subsequently foreclosed on Falls Pointe and Lakewood II on 5 October.  These properties have now been sold to Office Fund II for $8m.

Parkway foreclosed on Carmel Crossing on 28 October and is under contract to sell Carmel Crossing to the fund for $25m.

The anticipated closing date for the Carmel Crossing sale is 10 November.

Steven Rogers, president and chief executive at Parkway, said: "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 $22.5m. 

"Parkway also expects to receive additional proceeds once a first mortgage is placed on Carmel Crossing."

On a stand-alone basis, the portfolio is expected to yield a going in cap rate of 6.1% in the first 12 months of operations and a leveraged internal rate of return of approximately 18%.

Parkway Properties formed Office Fund II in May of 2008, and there is a total of $375m of equity in the fund. 

Texas Teachers supplied $262.5m or 70% of the equity, with the balance coming from the REIT. 

Office Fund II buys office buildings in the US South and Southwest, including Houston, Atlanta, Phoenix, Orlando and Tampa.

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