JACKSON, Miss., Aug. 2 /PRNewswire-FirstCall/ --
Highlights -- Reports FFO of $0.66 per share and recurring FFO of $0.64 per share -- Reports current occupancy of 86.1%, with portfolio 87.1% leased -- Purchases RubiconPark I, LLC note receivable for $33.0 million -- Reaffirms 2010 earnings outlook
Parkway Properties, Inc. today announced results for its second quarter ended June 30, 2010.
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Steven G. Rogers, President and Chief Executive Officer stated, "Since the end of the first quarter, we have signed 1.1 million square feet in new, renewal and expansion leases; we sold one asset for $15.7 million; we acquired the Rubicon note for a net $33.0 million; we paid off two mortgage loans totaling $27.8 million that encumbered four assets; and we closed two new mortgage loans for a total of $35.0 million. We are pleased to report that our key operating metrics are in line with our earnings outlook for the year. I am particularly pleased to report that included in the leasing activity are the early renewal of three major customers totaling 521,000 square feet, which were previously scheduled to expire in 2011. Additionally, the Rubicon note represents our first new investment in over two years, and we were able to acquire the note at a 35% discount to the outstanding principal balance."
Consolidated Financial Results -- Funds from operations ("FFO") available to common shareholders totaled $14.3 million, or $0.66 per diluted share, for the three months ended June 30, 2010, as compared to $16.8 million, or $0.86 per diluted share, for the three months ended June 30, 2009. Recurring FFO totaled $13.8 million, or $0.64 per diluted share for the three months ended June 30, 2010, as compared to $16.5 million, or $0.84 per diluted share for the three months ended June 30, 2009. For the six months ended June 30, 2010, FFO totaled $34.1 million, or $1.58 per diluted share, as compared to $32.7 million, or $1.89 per diluted share, for the six months ended June 30, 2009. Recurring FFO totaled $28.4 million, or $1.32 per diluted share for the six months ended June 30, 2010, as compared to $31.8 million, or $1.84 per diluted share for the six months ended June 30, 2009.
Included in FFO per diluted share are the following amounts (in thousands, except average rent per square foot and average occupancy):
YTD YTD Q2 Q2 Description 2010 2009 2010 2009 ----------- ----- ----- ---- ---- Unusual Items: Gain on involuntary conversion $ - $279 $ - $742 Loss on extinguishment of debt $(136) $ - $(189) $ - Insurance deductible on contingent liabilities $ - $ - $(545) $ - Other Items of Note: Lease termination fees (1)(6) $581 $40 $6,445 $80 Straight-line rent (1) $1,617 $1,255 $2,997 $2,343 Amortization of above market rent (1) $(3) $(117) $(169) $(147) Bad debt expense (1) $(425) $(650) $(914) $(1,268) Portfolio Information: Average rent per square foot (2)(3) $23.04 $23.07 $23.02 $22.93 Average occupancy (2)(4) 85.5% 89.4% 85.9% 89.7% Same-store average rent per square foot (2)(3) $23.05 $23.11 $23.03 $22.98 Same-store average occupancy (2)(4) 85.5% 89.4% 85.8% 89.6% Total office square feet under ownership (2) 13,194 13,353 13,194 13,353 Total office square feet under management (5) 14,174 14,764 14,174 14,764 (1) These items include 100% of amounts from wholly-owned assets plus the Company's allocable share of these items recognized from the assets held in consolidated joint ventures and unconsolidated joint ventures. (2) These items include total office square feet of wholly-owned assets, consolidated joint ventures and unconsolidated joint ventures. (3) Average rent per square foot is defined as the weighted average annual gross rental rate, including escalations for operating expenses, divided by occupied square feet. (4) Average occupancy is defined as average occupied square feet divided by average total rentable square feet. (5) Total office square feet under management includes wholly-owned assets, consolidated joint ventures, unconsolidated joint ventures and third-party management agreements at the end of the period. (6) Total lease termination fees recognized during the six months ended June 30, 2010 were $7.4 million, of which $1.0 million was included in recurring revenue as it represents the rental revenue that related to the period after the prior lease was terminated and the space was being prepared for the new customer. -- Funds available for distribution ("FAD") totaled $2.6 million, or $0.12 per diluted share, for the three months ended June 30, 2010, as compared to $10.3 million, or $0.53 per diluted share, for the three months ended June 30, 2009. FAD totaled $16.6 million, or $0.77 per diluted share, for the six months ended June 30, 2010, as compared to $19.6 million, or $1.13 per diluted share for the six months ended June 30, 2009. -- Net income available to common shareholders for the three months ended June 30, 2010, was $5.7 million, or $0.26 per diluted share, as compared to net loss available to common shareholders of $280,000, or $0.01 per diluted share, for the three months ended June 30, 2009. Net income available to common shareholders for the six months ended June 30, 2010, was $7.0 million, or $0.33 per diluted share as compared to net loss available to common shareholders of $2.3 million, or $0.13 per diluted share, for the six months ended June 30, 2009. Gain on the sale of real estate of $8.5 million was included in net income available to common shareholders for the three months and six months ended June 30, 2010. Asset Recycling -- On April 15, 2010, the Company closed on the fee simple sale of One Park Ten, a 163,000 square foot office property built in 1982 in Houston, Texas, for gross sales proceeds of $15.7 million and received net cash proceeds of $4.8 million, which were used to reduce amounts outstanding under the Company's line of credit. The $8.7 million first mortgage secured by One Park Ten was assumed by the buyer, and Parkway also provided a $1.5 million seller financing loan, which bears interest at 7.25% per annum with interest-only payments through maturity on June 1, 2012. The Company recognized a $136,000 loss on extinguishment of debt and a gain on the sale of $8.5 million during the second quarter of 2010. Additionally, the Company retained management of the property. Operations and Leasing -- The Company's average rent per square foot decreased 0.1% to $23.04 during the second quarter 2010 as compared to $23.07 for the second quarter 2009 and increased 0.4% to $23.02 during the six months ended June 30, 2010, as compared to $22.93 for the six months ended June 30, 2009. On a same-store basis, the Company's average rent per square foot decreased 0.3% to $23.05 during the second quarter 2010 as compared to $23.11 during the second quarter 2009, and increased 0.2% to $23.03 during the six months ended June 30, 2010, as compared to $22.98 during the six months ended June 30, 2009. -- The Company's average occupancy for the second quarter 2010 was 85.5% as compared to 89.4% for the second quarter 2009, and was 85.9% for the six months ended June 30, 2010, as compared to 89.7% for the six months ended June 30, 2009. On a same-store basis, the Company's average occupancy for the second quarter 2010 was 85.5% as compared to 89.4% for the second quarter 2009. For the six months ended June 30, 2010, same-store average occupancy was 85.8% as compared to 89.6% for the six months ended June 30, 2009. -- At July 1, 2010, the Company's office portfolio occupancy was 85.4% as compared to 85.6% at April 1, 2010 and 88.7% at July 1, 2009. Including the July 2010 commencement of the 99,000 square foot Combined Insurance lease, occupancy is currently 86.1%. Not included in the July 1, 2010, occupancy rate are 19 signed leases totaling 224,000 square feet, which commence in the third and fourth quarters of 2010. Including these leases, the Company's portfolio was 87.1% leased at July 13, 2010. -- Parkway's customer retention rate was 69.7% for the quarter ended June 30, 2010, as compared to 68.8% for the quarter ended June 30, 2009, and 57.2% for the quarter ended March 31, 2010. Customer retention for the six months ended June 30, 2010 and 2009, was 61.8% and 62.9%, respectively. -- During the second quarter 2010, 78 leases were renewed or expanded on 345,000 rentable square feet at an average rent per square foot of $18.90, representing a 6.7% decrease, and at a cost of $2.43 per square foot of the lease term in annual leasing costs. During the six months ending June 30, 2010, 145 leases were renewed or expanded on 848,000 rentable square feet at an average rent per square foot of $18.97, representing a 4.0% decrease, and at a cost of $1.51 per square foot per year of the lease term in annual leasing costs. Subsequent to quarter end, the Company signed three renewal leases totaling 521,000 square feet at an average cost of $2.66 per square foot per year in annual leasing costs and an average term of 4.6 years. -- During the second quarter 2010, 35 new leases were signed on 191,000 rentable square feet at an average rent per square foot of $16.70 and at a cost of $3.54 per square foot of the lease term in annual leasing costs. During the six months ending June 30, 2010, 53 new leases were signed on 257,000 rentable square feet at an average rent per square foot of $17.50 and at an average cost of $3.59 per square foot per year of the lease term in annual leasing costs. -- On a same-store basis, the Company's share of reported net operating income ("NOI") decreased $1.5 million or 5.1% for the second quarter 2010 as compared to the same period of the prior year on a GAAP basis and decreased $2.0 million or 7.1% on a cash basis. Parkway's share of recurring same-store NOI on a GAAP basis decreased $2.0 million or 7.0% for the second quarter 2010 compared to the same period of the prior year and decreased $2.5 million or 9.1% on a cash basis. The Company's share of reported same-store NOI for the six months ended June 30, 2010, increased $3.6 million or 6.3% compared to the same period of 2009 on a GAAP basis and increased $2.9 million or 5.2% on a cash basis. Parkway's share of recurring same-store NOI on a GAAP basis decreased $2.8 million or 4.9% for the six months ended June 30, 2010, as compared to the same period of 2009 and decreased $3.5 million or 6.4% on a recurring cash basis. The decrease in NOI is primarily attributable to a decrease in rental income associated with a 380 basis point reduction in average occupancy for the six months ended June 30, 2010, compared to the same period of 2009. Capital Structure -- On June 30, 2010, the Company owed $124.1 million related to its $311.0 million line of credit and had $20.7 million in cash and cash equivalents. -- On April 30, 2010, the Company paid off a $17.2 million mortgage note payable secured by two office properties in Houston, Texas, and one office property in Atlanta, Georgia, utilizing its line of credit. The mortgage had an interest rate of 5.3% and was scheduled to mature on May 1, 2010. -- On May 28, 2010, the Company placed a $23.0 million ten-year, non-recourse first mortgage with a fixed interest rate of 6.3%, and the proceeds were used to reduce borrowings under the line of credit. The mortgage is secured by Citrus Center, a 261,000 square foot office building in Orlando, Florida. -- Upon maturity, on June 1, 2010, the Company paid off its share and its partner's share of a $10.6 million mortgage note payable secured by the Toyota Center, a 175,000 square foot office property in Memphis, Tennessee, utilizing the line of credit. The mortgage had an interest rate of 7.9%. -- On July 8, 2010, the Company placed a $12.0 million ten-year, non-recourse first mortgage with a fixed interest rate of 6.5%, and the proceeds were used to reduce borrowings under the line of credit. The mortgage is secured by the Stein-Mart building, a 196,000 square foot office property in Jacksonville, Florida. -- The Company's remaining proportionate share of debt maturities in 2010 is $38.6 million, and the Company plans to either refinance this debt with non-recourse, first mortgages or utilize the line of credit to pay the debt maturities. -- On July 30, 2010, the Company purchased a first mortgage loan secured by three properties owned by RubiconPark I, LLC from Special Servicer J. E. Robert Co. Inc. for $35.0 million. Rubicon US REIT owns an 80% interest in RubiconPark I, LLC, and Parkway Properties, LP owns the remaining 20%. The loan has a $2.0 million rollover reserve which was credited to Parkway at closing, for a net purchase price of $33.0 million. This loan was originated by Bear Stearns Commercial Mortgage, Inc. and had a principal balance of $51.0 million at July 30, 2010. The purchase of the loan was funded using Parkway's line of credit. The loan is secured by two office properties in Atlanta, Georgia, totaling 235,000 square feet and a three-building office complex in Charlotte, North Carolina, totaling 326,000 square feet. The loan matures on January 1, 2012, and bears interest at a stated rate of 4.9%. -- The Company's previously announced cash dividend of $0.075 per share for the quarter ended June 30, 2010, represented a payout of approximately 11.3% of FFO per diluted share for the quarter. The second quarter dividend was paid on June 30, 2010. The dividend was the ninety-fifth (95th) consecutive quarterly distribution to Parkway's shareholders of Common Stock, representing an annualized dividend of $0.30 per share. -- At June 30, 2010 and March 31, 2010, the Company's net debt to EBITDA multiple was 6.1 times as compared to 6.4 times at June 30, 2009. FOCUS
On July 1, 2010, we initiated our newest strategic and operating plan that will be referred to as the "FOCUS" Plan, which is centered on accomplishing a set of specific goals that we believe will lead to a 12% compounded annual total return to our shareholders over a three-year period. FOCUS is an acronym that details the actions we are currently taking and expect to take during the Plan, which began July 1, 2010 and will end June 30, 2013. We view Fund and Fund-Like Investments as the highest priority of our capital allocation, because it gives our shareholders the highest risk adjusted return as measured by internal rate of return, cap rate, and accretion per share. We plan to continue our transformation to an Operator/Owner through these investments as well as the expansion of Parkway Realty Services, with the goal of being a majority operator/owner at the end of the Plan. Capital Allocation Discipline is a two-fold goal that refers to balance sheet strength as well as investment capital, including the goal to exit non-strategic markets and sell properties that no longer meet our acquisition criteria in core markets through the continuation of our Asset Recycling program. We believe that our Uncompromising Focus on Operations is what sets Parkway apart from other office property owners, and the accomplishment of these goals will contribute to the ultimate goal of the Plan, which is to maximize Shareholder Returns.
Outlook for 2010
The Company is reiterating its 2010 reported FFO outlook of $2.72 to $2.92 per diluted share and recurring FFO outlook of $2.40 to $2.60 per diluted share. The reconciliation of budgeted earnings per diluted share ("EPS") to budgeted FFO per diluted share and recurring FFO per diluted share is as follows:
Outlook for 2010 Range ---------------- ----- Fully diluted EPS $0.12-$0.32 Plus: Real estate depreciation and amortization $3.72-$3.72 Plus: Depreciation on unconsolidated joint ventures $0.04-$0.04 Less: Gain on sale of real estate ($0.40-$0.40) Less: Noncontrolling interest depreciation/ amortization ($0.76-$0.76) ------------- Reported FFO per diluted share $2.72-$2.92 Less: Non-recurring lease termination fee income ($0.32-$0.32) ------------- Recurring FFO per diluted share $2.40-$2.60
The 2010 earnings outlook is based on the original earnings outlook issued on February 8, 2010. Below please find the major assumptions to the Company's 2010 earnings outlook.
2010 Earnings Outlook Major Assumptions -- An average annual same-store occupancy range of 85% to 87%. -- An average annual same-store rental rate per square foot of $22.00 to $23.00. -- Parkway's share of recurring same-store net operating income decrease of 2.5% to 5.5% on a GAAP basis. On a recurring cash basis, Parkway's share of annual same-store net operating income is expected to decline by 5.0% to 8.0%. -- Non-recurring lease termination fee income of approximately $7.0 million or $0.32 per diluted share has been included in the 2010 earnings outlook. -- Net general and administrative expenses are expected to be in the range of $7.7 million to $8.2 million. -- The Company is estimating its proportionate share of total recurring capital expenditures for building improvements, tenant improvements and leasing commissions in the range of $38.0 million to $43.0 million. -- No investments for the discretionary fund with the Teacher Retirement System of Texas or additional sales or joint ventures of existing properties are included in the earnings outlook. About Parkway Properties
Parkway Properties, Inc., a member of the S&P Small Cap 600 Index, is a self-administered real estate investment trust specializing in the operation, leasing, acquisition, and ownership of office properties. The Company is geographically focused on the Southeastern and Southwestern United States and Chicago. Parkway owns or has an interest in 64 office properties located in 11 states with an aggregate of approximately 13.2 million square feet of leasable space at August 2, 2010. Included in the portfolio are 21 properties totaling 3.9 million square feet that are owned jointly with other investors, representing 29.3% of the portfolio. Fee-based real estate services are offered through the Company's wholly-owned subsidiary, Parkway Realty Services, which also manages and/or leases approximately 2.8 million square feet for third-party owners at August 2, 2010.
Additional Information
The Company will conduct a conference call to discuss the results of its second quarter operations on Tuesday, August 3, 2010, at 11:00 a.m. Eastern Time. The number for the conference call is 888-631-3392. A taped replay of the call can be accessed 24 hours a day through August 13, 2010, by dialing 888-203-1112 and using the pass code of 9198411. An audio replay will be archived and indexed in the investor relations section of the Company's website at http://www.pky.com/. A copy of the Company's 2010 second quarter supplemental financial and property information package is available by accessing the Company's website, emailing your request to rjordan@pky.com or calling Rita Jordan at 6019484091. Please participate in the visual portion of the conference call by accessing the Company's website and clicking on the "2Q Call" icon.
Additional information on Parkway Properties, Inc., including an archive of corporate press releases and conference calls, is available on the Company's website. The Company's second quarter 2010 Supplemental Operating and Financial Data, which includes a reconciliation of Non-GAAP financial measures, is available on the Company's website.
Forward Looking Statement
Certain statements in this release that are not in the present or past tense or discuss the Company's expectations (including the use of the words anticipate, believe, forecast, intends or project) are forward-looking statements within the meaning of the federal securities laws and as such are based upon the Company's current belief as to the outcome and timing of future events. There can be no assurance that future developments affecting the Company will be those anticipated by the Company. These forward-looking statements involve risks and uncertainties (some of which are beyond the control of the Company) and are subject to change based upon various factors, including but not limited to the following risks and uncertainties: changes in the real estate industry and in performance of the financial markets; the demand for and market acceptance of the Company's properties for rental purposes; the amount and growth of the Company's expenses; tenant financial difficulties and general economic conditions, including interest rates, as well as economic conditions in those areas where the Company owns properties; risks associated with joint venture partners; the risks associated with the ownership and development of real property; the failure to acquire or sell properties as and when anticipated; the outcome of claims and litigation involving and affecting the Company and other risks and uncertainties detailed from time to time on the Company's SEC filings. Should one or more of these risks or uncertainties occur, or should underlying assumptions prove incorrect, the Company's results could differ materially from those expressed in the forward-looking statements. The Company does not undertake to update forward-looking statements.
Company's Use of FFO, Recurring FFO, FAD and EBITDA
FFO, FFO per diluted share, FAD, FAD per diluted share and EBITDA are used by management, investors and industry analysts as supplemental measures of operating performance of equity REITs and should be evaluated along with GAAP net income and income per diluted share (the most directly comparable GAAP measures), as well as cash flow from operating activities, investing activities and financing activities, in evaluating the operating performance of equity REITs. Management believes that FFO, FFO per diluted share, FAD, FAD per diluted share and EBITDA are helpful to investors as supplemental performance measures because these measures exclude the effect of depreciation, amortization and gains or losses from sales of real estate, all of which are based on historical costs which implicitly assumes that the value of real estate diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, these non-GAAP measures can facilitate comparisons of operating performance between periods and among other equity REITs. FFO, FAD and EBITDA do not represent cash generated from operating activities in accordance with GAAP and are not necessarily indicative of cash available to fund cash needs as disclosed in the Company's Consolidated Statements of Cash Flows. FFO, FAD and EBITDA should not be considered as an alternative to net income as an indicator of the Company's operating performance or as an alternative to cash flows as a measure of liquidity.
In addition to FFO, Parkway also discloses Recurring FFO, which considers adjustments for non-recurring lease termination fees, gains and losses on extinguishment of debt, non-cash gains and losses or other unusual items. Although this is a non-GAAP measure that differs from NAREIT's definition of FFO, we believe it is an appropriate measure for the Company and that it provides a meaningful presentation of operating performance.
PARKWAY PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share data) June 30 December 31 2010 2009 ---- ---- (Unaudited) Assets Real estate related investments: Office and parking properties $1,738,019 $1,738,040 Land held for development 609 609 Accumulated depreciation (359,991) (336,759) 1,378,637 1,401,890 Land available for sale 750 750 Mortgage loans 9,968 8,126 Investment in unconsolidated joint ventures 2,731 2,512 1,392,086 1,413,278 Rents receivable and other assets 119,160 116,437 Intangible assets, net 54,265 61,734 Cash and cash equivalents 20,674 20,697 $1,586,185 $1,612,146 ========== ========== Liabilities Notes payable to banks $124,142 $100,000 Mortgage notes payable 807,052 852,700 Accounts payable and other liabilities 84,848 88,614 1,016,042 1,041,314 --------- --------- Equity Parkway Properties, Inc. stockholders' equity: 8.00% Series D Preferred stock, $.001 par value, 2,400,000 shares authorized, issued and outstanding 57,976 57,976 Common stock, $.001 par value, 67,600,000 shares authorized, 21,584,145 and 21,624,228 shares issued and outstanding in 2010 and 2009, respectively 22 22 Common stock held in trust, at cost, 58,134 and 71,255 shares in 2010 and 2009, respectively (1,896) (2,399) Additional paid-in capital 515,383 515,398 Accumulated other comprehensive loss (4,640) (4,892) Accumulated deficit (108,164) (111,960) Total Parkway Properties, Inc. stockholders' equity 458,681 454,145 Noncontrolling interest -real estate partnerships 111,462 116,687 Total equity 570,143 570,832 $1,586,185 $1,612,146 ========== ========== PARKWAY PROPERTIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) Three Months Ended June 30 ------- 2010 2009 ---- ---- (Unaudited) Revenues Income from office and parking properties $62,272 $66,516 Management company income 336 731 Total revenues 62,608 67,247 ------ ------ Expenses Property operating expense 29,648 31,548 Depreciation and amortization 21,510 21,720 Management company expenses 641 632 General and administrative 1,712 1,369 Total expenses 53,511 55,269 ------ ------ Operating income 9,097 11,978 Other income and expenses Interest and other income 365 309 Equity in earnings of unconsolidated joint ventures 87 227 Gain on involuntary conversion - 279 Gain on sale of real estate 8,518 540 Interest expense (13,846) (14,050) ------- ------- Income (loss) from continuing operations 4,221 (717) Net loss attributable to noncontrolling interest -real estate partnerships 2,638 1,637 Net income for Parkway Properties, Inc. 6,859 920 Dividends on preferred stock (1,200) (1,200) Net income (loss) available to common stockholders $5,659 $(280) ====== ===== Net income (loss) per common share attributable to Parkway Properties, Inc.: Basic net income (loss) attributable to Parkway Properties, Inc. $0.26 $(0.01) ===== ====== Diluted net income (loss) attributable to Parkway Properties, Inc. $0.26 $(0.01) ===== ====== Weighted average shares outstanding: Basic 21,410 19,457 ====== ====== Diluted 21,515 19,457 ====== ====== PARKWAY PROPERTIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) Six Months Ended June 30 ------- 2010 2009 ---- ---- (Unaudited) Revenues Income from office and parking properties $132,041 $134,277 Management company income 746 1,146 Total revenues 132,787 135,423 ------- ------- Expenses Property operating expense 61,014 65,458 Depreciation and amortization 44,252 45,300 Management company expenses 1,385 1,133 General and administrative 3,720 2,951 Total expenses 110,371 114,842 ------- ------- Operating income 22,416 20,581 Other income and expenses Interest and other income 750 611 Equity in earnings of unconsolidated joint ventures 192 427 Gain on involuntary conversion - 742 Gain on sale of real estate 8,518 470 Interest expense (27,699) (28,101) ------- ------- Income (loss) from continuing operations 4,177 (5,270) Net loss attributable to noncontrolling interest -real estate partnerships 5,225 5,401 Net income for Parkway Properties, Inc. 9,402 131 Dividends on preferred stock (2,400) (2,400) Net income (loss) available to common stockholders $7,002 $(2,269) ====== ======= Net income (loss) per common share attributable to Parkway Properties, Inc.: Basic net income (loss) attributable to Parkway Properties, Inc. $0.33 $(0.13) ===== ====== Diluted net income (loss) attributable to Parkway Properties, Inc. $0.33 $(0.13) ===== ====== Weighted average shares outstanding: Basic 21,400 17,262 ====== ====== Diluted 21,512 17,262 ====== ====== PARKWAY PROPERTIES, INC. RECONCILIATION OF FUNDS FROM OPERATIONS AND FUNDS AVAILABLE FOR DISTRIBUTION TO NET INCOME FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009 (In thousands, except per share data) Three Months Ended June 30 ------- 2010 2009 ---- ---- (Unaudited) Net Income $6,859 $920 Adjustments to Net Income: Preferred Dividends (1,200) (1,200) Depreciation and Amortization 21,510 21,720 Noncontrolling Interest Depreciation and Amortization (4,480) (4,316) Unconsolidated Joint Ventures Depreciation and Amortization 85 213 Gain on Sale of Real Estate (8,518) (540) Funds From Operations ("FFO") Available to Common Stockholders (1) $14,256 $16,797 Adjustments to Derive Recurring FFO: Gain on Involuntary Conversion - (279) Non-Recurring Lease Termination Fee Income (2) (581) (40) Loss on Early Extinguishment of Debt 136 - Insurance Deductible Related to Contingent Liabilities - - Recurring FFO $13,811 $16,478 ======= ======= Funds Available for Distribution FFO Available to Common Stockholders (1) $14,256 $16,797 Add (Deduct) : Adjustments for Unconsolidated Joint Ventures (50) (394) Adjustments for Noncontrolling Interest in Real Estate Partnerships 1,259 1,314 Straight-line Rents (1,877) (1,908) Amortization of Above/Below Market Leases (84) 129 Amortization of Share-Based Compensation 328 620 Net Non-Cash Gains - (279) Recurring Capital Expenditures: Building Improvements (1,056) (1,200) Tenant Improvements -New Leases (7,340) (1,689) Tenant Improvements -Renewal Leases (1,252) (1,056) Leasing Costs - New Leases (1,044) (785) Leasing Costs - Renewal Leases (560) (1,258) ------ Funds Available for Distribution (1) $2,580 $10,291 ====== ======= Diluted Per Common Share/Unit Information (**) FFO per share $0.66 $0.86 Recurring FFO per share $0.64 $0.84 FAD per share $0.12 $0.53 Dividends paid $0.075 $0.325 Dividend payout ratio for FFO 11.32% 37.74% Dividend payout ratio for Recurring FFO 11.68% 38.47% Dividend payout ratio for FAD 62.54% 61.59% Weighted average shares/units outstanding 21,517 19,505 Other Supplemental Information Recurring Consolidated Capital Expenditures Above $11,252 $5,988 Consolidated Upgrades on Acquisitions 536 1,965 Consolidated Major Renovations 333 - Total Consolidated Real Estate Improvements and Leasing Costs Per Cash Flow $12,121 $7,953 ======= ====== Parkway's Share of Recurring Capital Expenditures $10,396 $5,708 Parkway's Share of Upgrades on Acquisitions 296 1,042 Parkway's Share of Major Renovations 333 - Parkway's Share of Total Real Estate Improvements and Leasing Costs $11,025 $6,750 ======= ====== Gain on Involuntary Conversion $- $279 Net Gain Included in FFO $- $279 === ==== **Information for Diluted Computations: Basic Common Shares/Units Outstanding 21,412 19,458 Dilutive Effect of Other Share Equivalents 105 47 Six Months Ended June 30 ------- 2010 2009 ---- ---- (Unaudited) Net Income $9,402 $131 Adjustments to Net Income: Preferred Dividends (2,400) (2,400) Depreciation and Amortization 44,252 45,300 Noncontrolling Interest Depreciation and Amortization (8,826) (10,314) Unconsolidated Joint Ventures Depreciation and Amortization 168 409 Gain on Sale of Real Estate (8,518) (470) Funds From Operations ("FFO") Available to Common Stockholders (1) $34,078 $32,656 Adjustments to Derive Recurring FFO: Gain on Involuntary Conversion - (742) Non-Recurring Lease Termination Fee Income (2) (6,445) (80) Loss on Early Extinguishment of Debt 189 - Insurance Deductible Related to Contingent Liabilities 545 - Recurring FFO $28,367 $31,834 ======= ======= Funds Available for Distribution FFO Available to Common Stockholders (1) $34,078 $32,656 Add (Deduct) : Adjustments for Unconsolidated Joint Ventures (118) (518) Adjustments for Noncontrolling Interest in Real Estate Partnerships 2,156 2,383 Straight-line Rents (3,748) (3,231) Amortization of Above/Below Market Leases 19 (90) Amortization of Share-Based Compensation 391 1,281 Net Non-Cash Gains - (742) Recurring Capital Expenditures: Building Improvements (2,470) (1,878) Tenant Improvements -New Leases (8,189) (3,850) Tenant Improvements -Renewal Leases (3,294) (2,916) Leasing Costs - New Leases (1,465) (975) Leasing Costs - Renewal Leases (714) (2,540) ---- ------ Funds Available for Distribution (1) $16,646 $19,580 ======= ======= Diluted Per Common Share/Unit Information (**) FFO per share $1.58 $1.89 Recurring FFO per share $1.32 $1.84 FAD per share $0.77 $1.13 Dividends paid $0.15 $0.65 Dividend payout ratio for FFO 9.47% 34.42% Dividend payout ratio for Recurring FFO 11.38% 35.31% Dividend payout ratio for FAD 19.39% 57.40% Weighted average shares/units outstanding 21,513 17,292 Other Supplemental Information Recurring Consolidated Capital Expenditures Above $16,132 $12,159 Consolidated Upgrades on Acquisitions 1,820 4,519 Consolidated Major Renovations 369 - Total Consolidated Real Estate Improvements and Leasing Costs Per Cash Flow $18,321 $16,678 ======= ======= Parkway's Share of Recurring Capital Expenditures $15,001 $11,418 Parkway's Share of Upgrades on Acquisitions 965 2,627 Parkway's Share of Major Renovations 369 - Parkway's Share of Total Real Estate Improvements and Leasing Costs $16,335 $14,045 ======= ======= Gain on Involuntary Conversion $- $742 Net Gain Included in FFO $- $742 === ==== **Information for Diluted Computations: Basic Common Shares/Units Outstanding 21,401 17,263 Dilutive Effect of Other Share Equivalents 112 29 (1) Parkway computes FFO in accordance with standards established by the National Association of Real Estate Investment Trusts ("NAREIT"), which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition. FFO is defined as net income, computed in accordance with generally accepted accounting principles ("GAAP"), excluding gains or losses from the sales of properties, plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. There is not a standard definition established for FAD. Therefore, our measure of FAD may not be comparable to FAD reported by other REITs. We define FAD as FFO, excluding the amortization of restricted shares, amortization of above/below market leases, straight line rent adjustments and non- cash gains/losses, and reduced by recurring non revenue enhancing capital expenditures for building improvements, tenant improvements and leasing costs. Adjustments for unconsolidated partnerships and joint ventures are included in the computation of FAD on the same basis. (2) Parkway's share of total lease termination fees recognized during the six months ended June 30, 2010 were $7.4 million, of which $1.0 million were included in recurring revenue as it represents the rental revenue that related to the period after the prior lease was terminated and the space was being prepared for the new customer. PARKWAY PROPERTIES, INC. CALCULATION OF EBITDA AND COVERAGE RATIOS FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009 (In thousands) Three Months Ended June 30 ------- 2010 2009 ---- ---- (Unaudited) Net Income $6,859 $920 Adjustments to Net Income: Interest Expense 13,295 13,316 Amortization of Financing Costs 415 734 Loss on Early Extinguishment of Debt 136 - Depreciation and Amortization 21,510 21,720 Amortization of Share-Based Compensation 328 620 Net Gain on Real Estate Investments and Involuntary Conversion (8,518) (819) Tax Expense 100 (16) EBITDA Adjustments -Unconsolidated Joint Ventures 121 341 EBITDA Adjustments -Noncontrolling Interest in Real Estate Partnerships (7,583) (7,451) EBITDA (1) $26,663 $29,365 ======= ======= Interest Coverage Ratio: EBITDA $26,663 $29,365 ======= ======= Interest Expense: Interest Expense $13,295 $13,316 Interest Expense -Unconsolidated Joint Ventures 36 125 Interest Expense -Noncontrolling Interest in Real Estate Partnerships (3,033) (3,065) Total Interest Expense $10,298 $10,376 ======= ======= Interest Coverage Ratio 2.59 2.83 ==== ==== Fixed Charge Coverage Ratio: EBITDA $26,663 $29,365 ======= ======= Fixed Charges: Interest Expense $10,298 $10,376 Preferred Dividends 1,200 1,200 Principal Payments (Excluding Early Extinguishment of Debt) 3,601 3,381 Principal Payments -Unconsolidated Joint Ventures 8 40 Principal Payments -Noncontrolling Interest in Real Estate Partnerships (279) (274) Total Fixed Charges $14,828 $14,723 ======= ======= Fixed Charge Coverage Ratio 1.80 1.99 ==== ==== Modified Fixed Charge Coverage Ratio: EBITDA $26,663 $29,365 ======= ======= Modified Fixed Charges: Interest Expense $10,298 $10,376 Preferred Dividends 1,200 1,200 Total Modified Fixed Charges $11,498 $11,576 ======= ======= Modified Fixed Charge Coverage Ratio 2.32 2.54 ==== ==== The following table reconciles EBITDA to cash flows provided by operating activities: EBITDA $26,663 $29,365 Amortization of Above (Below) Market Leases (84) 129 Amortization of Mortgage Loan Discount (173) (148) Operating Distributions from Unconsolidated Joint Ventures - 162 Interest Expense (13,295) (13,316) Loss on Early Extinguishment of Debt (136) - Tax Expense (100) 16 Change in Deferred Leasing Costs (1,684) (2,332) Change in Receivables and Other Assets (7,567) (7,808) Change in Accounts Payable and Other Liabilities 13,981 8,352 Adjustments for Noncontrolling Interests 4,945 5,814 Adjustments for Unconsolidated Joint Ventures (208) (568) Cash Flows Provided by Operating Activities $22,342 $19,666 ======= ======= Six Months Ended June 30 ------- 2010 2009 ---- ---- (Unaudited) Net Income $9,402 $131 Adjustments to Net Income: Interest Expense 26,586 26,876 Amortization of Financing Costs 924 1,225 Loss on Early Extinguishment of Debt 189 - Depreciation and Amortization 44,252 45,300 Amortization of Share-Based Compensation 391 1,281 Net Gain on Real Estate Investments and Involuntary Conversion (8,518) (1,212) Tax Expense 117 - EBITDA Adjustments -Unconsolidated Joint Ventures 241 665 EBITDA Adjustments -Noncontrolling Interest in Real Estate Partnerships (15,049) (16,587) EBITDA (1) $58,535 $57,679 ======= ======= Interest Coverage Ratio: EBITDA $58,535 $57,679 ======= ======= Interest Expense: Interest Expense $26,586 $26,876 Interest Expense -Unconsolidated Joint Ventures 73 250 Interest Expense -Noncontrolling Interest in Real Estate Partnerships (6,084) (6,134) Total Interest Expense $20,575 $20,992 ======= ======= Interest Coverage Ratio 2.84 2.75 ==== ==== Fixed Charge Coverage Ratio: EBITDA $58,535 $57,679 ======= ======= Fixed Charges: Interest Expense $20,575 $20,992 Preferred Dividends 2,400 2,400 Principal Payments (Excluding Early Extinguishment of Debt) 7,194 6,611 Principal Payments -Unconsolidated Joint Ventures 16 73 Principal Payments -Noncontrolling Interest in Real Estate Partnerships (573) (416) Total Fixed Charges $29,612 $29,660 ======= ======= Fixed Charge Coverage Ratio 1.98 1.94 ==== ==== Modified Fixed Charge Coverage Ratio: EBITDA $58,535 $57,679 ======= ======= Modified Fixed Charges: Interest Expense $20,575 $20,992 Preferred Dividends 2,400 2,400 Total Modified Fixed Charges $22,975 $23,392 ======= ======= Modified Fixed Charge Coverage Ratio 2.55 2.47 ==== ==== The following table reconciles EBITDA to cash flows provided by operating activities: EBITDA $58,535 $57,679 Amortization of Above (Below) Market Leases 19 (90) Amortization of Mortgage Loan Discount (342) (293) Operating Distributions from Unconsolidated Joint Ventures - 323 Interest Expense (26,586) (26,876) Loss on Early Extinguishment of Debt (189) - Tax Expense (117) - Change in Deferred Leasing Costs (2,742) (4,463) Change in Receivables and Other Assets (5,667) 5,753 Change in Accounts Payable and Other Liabilities (1,612) (4,430) Adjustments for Noncontrolling Interests 9,824 11,186 Adjustments for Unconsolidated Joint Ventures (433) (1,092) Cash Flows Provided by Operating Activities $30,690 $37,697 ======= ======= (1) Parkway defines EBITDA, a non-GAAP financial measure, as net income before interest expense, income taxes, depreciation, amortization, losses on early extinguishment of debt and other gains and losses. EBITDA, as calculated by us, is not comparable to EBITDA reported by other REITs that do not define EBITDA exactly as we do. EBITDA does not represent cash generated from operating activities in accordance with generally accepted accounting principles, and should not be considered an alternative to operating income or net income as an indicator of performance or as an alternative to cash flows from operating activities as an indicator of liquidity. PARKWAY PROPERTIES, INC. NET OPERATING INCOME FROM OFFICE AND PARKING PROPERTIES THREE MONTHS ENDED JUNE 30, 2010 AND 2009 (In thousands, except number of properties data) Number of Percentage of Portfolio Properties (1) ---------- ------------- Same-store properties (2): Wholly-owned 44 70.80% Parkway Properties Office Fund LP 13 21.18% Other consolidated joint venture 1 1.65% Unconsolidated joint ventures 7 5.84% --- ---- Total same-store properties 65 99.47% Assets sold - 0.53% ---- Net operating income from office and parking properties 65 100.00% --- ------ Net Operating Income -------------------- 2010 2009 ---- ---- Same-store properties (2): Wholly-owned $24,531 $25,279 Parkway Properties Office Fund LP 7,337 8,560 Other consolidated joint venture 572 578 Unconsolidated joint ventures 2,022 2,713 ----- ----- Total same-store properties 34,462 37,130 Assets sold 184 551 Net operating income from office and parking properties $34,646 $37,681 ------- ------- Average Occupancy --------- 2010 2009 ---- ---- Same-store properties (2): Wholly-owned 86.6% 89.2% Parkway Properties Office Fund LP 82.8% 87.7% Other consolidated joint venture 87.5% 87.6% Unconsolidated joint ventures 81.6% 96.4% ---- ---- Total same-store properties 85.5% 89.4% Assets sold N/A N/A Net operating income from office and parking properties (1) Percentage of portfolio based on 2010 net operating income. (2) Parkway defines Same-Store Properties as those properties that were owned for the entire three-month periods ended June 30, 2010 and 2009 and excludes properties classified as discontinued operations. Same- Store net operating income ("SSNOI") includes income from real estate operations less property operating expenses (before interest and depreciation and amortization) for Same-Store Properties. SSNOI as computed by Parkway may not be comparable to SSNOI reported by other REITs that do not define the measure exactly as we do. SSNOI is a supplemental industry reporting measurement used to evaluate the performance of the Company's investments in real estate assets. The following table is a reconciliation of net income to SSNOI: Three Months Ended Six Months Ended June 30 June 30 ------- ------- 2010 2009 2010 2009 ---- ---- ---- ---- Net income for Parkway Properties, Inc. $6,859 $920 $9,402 $131 Add (deduct): Interest expense 13,846 14,050 27,699 28,101 Depreciation and amortization 21,510 21,720 44,252 45,300 Management company expenses 641 632 1,385 1,133 General and administrative expenses 1,712 1,369 3,720 2,951 Equity in earnings of unconsolidated joint ventures (87) (227) (192) (427) Gain on involuntary conversion - (279) - (742) Gain on sale of real estate (8,518) (540) (8,518) (470) Net loss attributable to noncontrolling interests - real estate partnerships (2,638) (1,637) (5,225) (5,401) Management company income (336) (731) (746) (1,146) Interest and other income (365) (309) (750) (611) ---- ---- ---- ---- Net operating income from consolidated office and parking properties 32,624 34,968 71,027 68,819 Net operating income from unconsolidated joint ventures 2,022 2,713 4,183 5,272 Less: Net operating income from non same-store properties (184) (551) (192) (882) ---- ---- ---- Same-store net operating income $34,462 $37,130 $75,018 $73,209 ------- ------- ------- ------- FOR FURTHER INFORMATION: Steven G. Rogers President & Chief Executive Officer Richard G. Hickson IV Chief Financial Officer http://www.pky.com/ (601) 948-4091
http://photos.prnewswire.com/prnh/20030513/PARKLOGO
Parkway Properties, Inc.
CONTACT: Steven G. Rogers, President & Chief Executive Officer, or
Richard G. Hickson IV, Chief Financial Officer, +1-601-948-4091
Web Site: http://www.pky.com/
