UPDATE: Stifel Nicolaus Upgrades Parkway Properties To Hold

Stifel Nicolaus is upgrading Parkway Properties PKY to Hold from Sell based on its just announced transaction, transition to the operator-owner model with an increased focus on large, institutional joint ventures, selling out of smaller markets at an accelerated pace and building the third party management business. PKY announced a $462mm transaction which included acquiring portions of the six asset portfolio acquisition totaling $94.2mm plus $14.9mm in transaction costs less debt assumed of $47.1 mm; a net cash outlay of roughly $62mm. Stifel's concerns are the transaction is dilutive by $0.04-$0.10/sh, even after an expected highly accretive low multiple management business, investing in a lower quality income stream. The benefits are higher quality assets were acquired in higher growth markets, the management team was expanded, EBITDA-based leverage is expected to decline. PKY is trading higher at $17.06