SAN FRANCISCO (Thomson Financial) - Parkway Properties Inc. (News) Friday said it will form a $750 million discretionary fund with the Teacher Retirement System of Texas.

The fund will acquire high-quality multi-tenant office properties in Texas, Florida and Tennessee, as well as Chicago, Atlanta, Phoenix and Charlotte, S.C. It will be capitalized with around $375 million of equity capital and $375 million of non-recourse, fixed-rate first mortgage debt, Parkway said.

Parkway Properties, a Jackson, Miss.-based real estate investment trust, expects the fund, Parkway Properties Office Fund II LP, to have a 10-year life.

The retirement system will be a 70% investor and Parkway a 30% investor.

Parkway expects to revise its earnings outlook once the timing of acquisitions becomes more certain, it said.

The Teacher Retirement System of Texas has total assets of about $110 billion and 1.2 million participants.

Parkway shares fell 1.5% to $38.55.

Brigid Gaffikin

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