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Parkway Reports Second Quarter 2013 Results

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ORLANDO, Fla., Aug. 5, 2013 /PRNewswire/ -- Parkway Properties, Inc. (NYSE: PKY) today announced results for its second quarter ended June 30, 2013. 

(Logo: http://photos.prnewswire.com/prnh/20030513/PARKLOGO )

Highlights for Second Quarter 2013 and Recent Events

  • FFO of $0.22 per share and recurring FFO of $0.32 per share
  • FAD of $0.28 per share
  • Occupancy of 89.9%, with portfolio 90.6% leased
  • Leased over 1.0 million square feet in the last four months
  • Closed on $120 million unsecured term loan
  • Sold three non-core assets for total gross proceeds of approximately $53 million

"We have made significant progress executing our leasing strategy over the past several months, leasing over 1.0 million square feet since the end of the first quarter," stated James R. Heistand, President and Chief Executive Officer of Parkway.   "We had an 84.7% customer retention rate during the quarter, our occupancy increased 120 basis points from the prior quarter, and the average rental rates for this leasing activity were well above our recent historical averages.  Our investments in several of our key, targeted submarkets are now nearly fully leased, including most of our recently acquired value-add investments, which we believe positions us to achieve further rental rate growth and improving lease economics.  We are seeing the direct benefits of having a strong regional presence in each of our core markets, concentration within targeted submarkets, and a higher-quality portfolio.  We believe these recent results demonstrate the Company's ability to not only acquire the right assets and grow effectively, but also to operate these assets at a high level." 

For the second quarter 2013, funds from operations ("FFO") available to common shareholders was $15.0 million, or $0.22 per diluted share.  Recurring FFO was $22.0 million, or $0.32 per diluted share, and funds available for distribution ("FAD") was $19.0 million, or $0.28 per diluted share.  Reported FFO during the second quarter 2013 includes the negative impact of a one-time, non-cash charge totaling $6.6 million, or $0.10 per share, related to the redemption of the Company's 8.00% Series D Cumulative Redeemable Preferred Stock.  A reconciliation of FFO, recurring FFO and FAD to net income is included on page 13.  Net income, FFO, recurring FFO, and FAD for the second quarter 2013 and year-to-date, as well as a comparison to the prior-year period, are as follows:

 


(Amounts in thousands, except per share)




Three Months Ended June 30


Six Months Ended June 30


2013


2012


2013


2012


Amount

Per

Share


Amount

Per

Share


Amount

Per

Share


Amount

Per

Share

Net Income (Loss)

$

(14,946)

$

(0.22)


$

(948)

$

(0.04)


$

(18,825)

$

(0.30)


$

1,046

$

0.05

Funds From Operations

$

14,962

$

0.22


$

7,944

$

0.32


$

32,244

$

0.51


$

18,079

$

0.75

Recurring Funds From Operations

$

21,974

$

0.32


$

9,256

$

0.38


$

40,700

$

0.65


$

19,589

$

0.82

Funds Available for Distribution

$

19,012

$

0.28


$

2,567

$

0.10


$

31,473

$

0.50


$

6,279

$

0.26

Wtd. Avg. Diluted Shares/Units

68,620




24,628




62,753




24,003























 

On a year-over-year basis, FFO and Recurring FFO increased on a gross basis but decreased on a per share basis. This is primarily the result of: (i) a repositioning of the portfolio, with $1.1 billion in asset acquisitions and $663.8 million of asset dispositions since the end of 2011; (ii) significant capital markets activities, including the issuance of 45.1 million shares of common stock in public and private offerings since the beginning of 2012 for gross proceeds of $608.7 million; and (iii) significant deleveraging of the Company.  Parkway's repositioned portfolio has resulted in improved asset quality and location, which in turn has led to greater average gross rent per square foot, less capital expenditures per square foot per lease year, higher operating margins and higher customer retention rates. 

Operational Results

Occupancy at the end of the second quarter 2013 was 89.9%, compared to 88.7% at the end of the prior quarter.  Including leases that have been signed but have yet to commence, the Company's leased percentage at the end of the second quarter 2013 was 90.6%.

Parkway's share of recurring same-store net operating income ("NOI") was $15.6 million on a GAAP basis during the second quarter 2013, which was a decrease of $846,000, or 5.2%, as compared to the same period of the prior year.  On a cash basis, the Company's share of recurring same-store NOI increased 17.6% to $16.0 million as compared to the same period of the prior year.

The Company's portfolio GAAP NOI margin was 60.5% during the second quarter 2013, as compared to 61.1% during the same period of the prior year. 

Leasing Activity

During the second quarter 2013, Parkway signed a total of 578,000 square feet of leases at an average rent per square foot of $28.13 and an average cost of $4.78 per square foot per year.

New & Expansion Leasing – During the second quarter 2013, the Company signed 95,000 square feet of new leases at an average rent per square foot of $23.39 and at an average cost of $6.04 per square foot per year.  Expansion leases during the quarter totaled 84,000 square feet at an average rent per square foot of $28.46 and at an average cost of $5.13 per square foot per year.

Renewal Leasing – Customer retention during the second quarter 2013 was 84.7%.  The Company signed 399,000 square feet of renewal leases at an average rent per square foot of $29.18, representing a 6.5% rate increase from the expiring rate.  The average cost of renewal leases was $4.35 per square foot per year.

Significant operational and leasing statistics for the quarter as compared to prior quarters is as follows:


For the Three Months Ended


06/30/13


03/31/13


12/31/12


09/30/12


06/30/12

Ending Occupancy

89.9%


88.7%


88.0%


89.6%


87.4%

Customer Retention

84.7%


78.2%


68.9%


76.0%


63.2%

Square Footage of Total Leases Signed (in thousands)

578


501


413


439


394

Average Revenue Per Square Foot of Total Leases Signed

$28.13


$25.03


$25.35


$21.78


$19.60

Average Cost Per Square Foot Per Year of Total Leases Signed

$4.78


$3.42


$4.74


$3.68


$2.93

 

Additionally, as previously disclosed, since the end of the second quarter, Parkway has signed a total of 452,000 square feet of leases as of July 29, 2013, resulting in a total of over 1.0 million square feet leased in the last four months. The additional 452,000 square feet of leases that have been signed as of July 29, 2013, consists of 111,000 square feet of new leases, 231,000 square feet of renewal leases and 110,000 square feet of expansion leases.  Leases signed but not yet commenced are generally subject to customary conditions to commencement.

Acquisition and Disposition Activity

On June 3, 2013, the Company purchased an approximate 75% interest in the US Airways building, a 225,000 square foot office property located in the Tempe submarket of Phoenix, Arizona, for a purchase price of $41.8 million.  US Airways retained the remaining approximate 25% interest in the property.  The US Airways Building was built in 1999 and is LEED® Gold Certified.  It is located adjacent to Parkway's Hayden Ferry Lakeside and Tempe Gateway assets and shares a parking garage with Tempe Gateway.  The property is 100% leased to US Airways through April 2024.  US Airways has the option to terminate its lease on December 31, 2016 or December 31, 2021 with 12 months prior written notice. 

On July 10, 2013, the Company sold its Waterstone and Meridian office properties, which represented 190,000 square feet in the aggregate in Atlanta, Georgia, for a combined gross sales price of $10.2 million.  During the second quarter 2013 the Company recorded an impairment loss of $4.6 million associated with the sale of these assets.  The Company received $9.5 million in net proceeds from the sale, which was used to reduce amounts outstanding under the Company's revolving credit facility. 

On July 17, 2013, the Company sold Bank of America Plaza, a 436,000 square foot office property located in Nashville, Tennessee, for a gross sales price of $42.8 million and expects to record a gain of approximately $11.9 million during third quarter of 2013.  The Company received $40.8 million in net proceeds from the sale, which was used to reduce amounts outstanding under the Company's revolving credit facilities.

Capital Structure

At June 30, 2013, the Company had $68.0 million outstanding under its revolving credit facility, $245.0 million outstanding under its unsecured term loans and held $30.2 million in cash and cash equivalents, of which $16.2 million of cash and cash equivalents was Parkway's share.  Parkway's share of secured debt totaled $493.9 million at June 30, 2013.

On April 25, 2013, the Company redeemed all of its outstanding Series D Preferred using proceeds from its underwritten public offering of common stock.  The Company paid $136.3 million to redeem these shares, which includes a $135.5 million liquidation value and accrued dividends of $723,000.  The Company recorded a $6.6 million non-cash charge during the second quarter 2013, which represents the difference between the costs associated with the issuance, including the price at which such shares were paid, and the redemption price.

On May 31, 2013, the Company modified the existing $22.5 million first mortgage secured by Corporate Center Four at International Plaza, a 250,000 square foot office property located in the Westshore submarket of Tampa, Florida.  The modified first mortgage carries a principal balance of $36 million, a weighted average fixed interest rate of 4.6% and matures in April 2019.  In conjunction with the modification, the Company executed a floating-to-fixed interest rate swap fixing the interest rate on the additional $13.5 million in loan proceeds at 3.3%. 

On June 3, 2013, an affiliate of the Company issued a $13.9 million mortgage loan to a wholly owned subsidiary and an affiliate of US Airways, which is secured by the US Airways building.  The interest rate on the loan is 3.0% and it matures December 2016.  Parkway's share of the mortgage loan has been eliminated in the Company's consolidated financial statements.

The Company closed a $120 million unsecured term loan on June 12, 2013.  The term loan has a maturity date of June 11, 2018, and has an accordion feature that allows for an increase in the size of the term loan to as much as $250 million.  Interest on the term loan is based on LIBOR plus an applicable margin, initially 1.5%.  Parkway has also executed a floating-to-fixed interest rate swap totaling $120 million, locking LIBOR at 1.6% for five years and resulting in an initial all-in interest rate of 3.1%.  The term loan will have substantially the same operating and financial covenants as required by the Company's current unsecured revolving credit facility.  Wells Fargo Bank funded the entire amount of the term loan.  The term loan had an outstanding balance of $120 million at June 30, 2013.

Simultaneous with the closing of the term loan, the Company repaid two first mortgages totaling $55.0 million which were secured by Cypress Center, a 286,000 square foot office complex in Tampa, Florida, and NASCAR Plaza, a 394,000 square foot office property in Charlotte, North Carolina.  The two mortgages had a weighted average interest rate of 3.6% and were schedule to mature in 2016.

On June 28, 2013, the Company modified the existing mortgage secured by Hayden Ferry Lakeside II, a 299,000 square foot office property located in the Tempe submarket of Phoenix, Arizona.  The loan modification eliminates quarterly principal payments of $625,000.  As a result of the modification, loan payments are now interest only through February 2015.  The mortgage bears interest at LIBOR plus an applicable spread which ranges from 250 to 350 basis points.  The Company entered into an interest rate swap which fixed LIBOR on the original loan at 1.5% through January 2018.  Effective August 1, 2013, the Company entered into a second interest rate swap which fixes LIBOR at 1.7% through January 2018 on the additional principal associated with the loan modification.  This loan is cross-defaulted with Hayden Ferry Lakeside I, III, IV and V.

At June 30, 2013, the Company's net debt to EBITDA multiple was 6.2x, using the quarter's annualized EBITDA after adjusting for the impact of acquisitions and dispositions completed during the period, as compared to 4.8x at March 31, 2013, and 4.6x at June 30, 2012.  At June 30, 2013, the Company's net debt plus preferred to EBITDA multiple was 6.2x, as compared to 5.9x at March 31, 2013, and 6.2x at June 30, 2012.  The Company's net debt to EBITDA increased during the second quarter of 2013 due to additional borrowings used to fund the purchase of the US Airways building and to redeem the Company's Series D Preferred Stock.  The Company anticipates its leverage at June 30, 2013, will be reduced given that the proceeds from the sale of the three non-core office properties that closed in July were used to repay amounts outstanding on the Company's credit facilities.

The Company remains under contract to acquire Lincoln Place, a 140,000 square foot office building located in the South Beach submarket of Miami, Florida, in exchange for the assumption of the existing secured first mortgage, which has a current outstanding balance of approximately $49.6 million, a fixed interest rate of 5.9% and a maturity date of June 11, 2016, and the issuance of 900,000 shares of operating partnership units. Closing is expected to occur by the end of the third quarter 2013, subject to customary closing conditions.

Common Dividend

The Company's previously announced second quarter cash dividend of $0.15 per share, which represents an annualized dividend of $0.60 per share, was paid on June 26, 2013 to shareholders of record as of June 12, 2013. 

2013 Revised Outlook

After considering the Company's recently announced leasing activity, corporate services transition and sale of three non-core office properties, Parkway is revising its 2013 FFO outlook from $1.10 to $1.20 per share to $1.00 to $1.10 per share and adjusting its earnings (loss) per share ("EPS") to ($0.28) to ($0.18).  The Company's revised 2013 FFO outlook includes the negative impact of its office closing in Jackson, Mississippi and the recently announced non-core asset sales, partially offset by recent leasing activity.  Excluding the impact of two significant one-time items related to the (i) redemption of the Company's preferred stock totaling $6.6 million and (ii) the transition of its Jackson office operations totaling approximately $3.7 million, the Company's guidance would be increased to $1.16 to $1.26.  The reconciliation of projected EPS to projected FFO per diluted share is as follows:  

Outlook for 2013


Range

Fully diluted EPS


($0.28-$0.18)

Parkway's share of depreciation and amortization


$1.40-$1.40

Impairment loss on real estate


$0.07-$0.07 

Gain on sale of real estate


($0.19-$0.19)

Reported FFO per diluted share


$1.00-$1.10

The revised 2013 outlook is based on the core operating, financial and investment assumptions described below.  These assumptions reflect the Company's expectations based on its knowledge of current market conditions and historical experience.  All dollar amounts presented for the revised 2013 outlook and the previous 2013 outlook are at Parkway's share and dollars and shares are in thousands.

 

2013 Core Operating Assumptions


Revised

2013

Outlook


Previous

2013

Outlook


Recurring cash NOI


$120,500 - $122,500


$121,500 - $123,500

Straight-line rent and amortization of above market rent


$  10,500 - $  11,500


$  10,500 - $  11,500

Lease termination fee income


$       400 - $       400


$       300 - $       300

Management fee after-tax net income


$    7,000 - $    7,500


$    7,500 - $    8,500

Recurring capital expenditures for building improvements, tenant   improvements and leasing commissions


$  16,500 - $  18,000


$  18,000 - $  19,000

Total general and administrative ("G&A") expense


$  24,000 - $  25,500


$  19,000 - $  20,500

Share based compensation included in G&A expense


$    5,000 - $    6,000


$    4,500 - $    5,500

Mortgage and credit facilities interest expense


$  33,500 - $  34,000


$  33,500 - $  34,000

Original issue costs – redemption of preferred stock


$    6,600 - $    6,600


$    6,600 - $    6,600

Portfolio ending occupancy


88.5% - 89.5%


87.5% - 88.5%

Weighted average annual diluted common shares/units


66,200 - 66,200


66,200 - 66,200











Variance within the outlook range may occur due to variations in the recurring revenue and expenses of the Company, as well as certain non-recurring items.  The earnings outlook does not include the impact of possible future gains or losses on early extinguishment of debt, possible future acquisitions or dispositions and related costs, the impact of fluctuations in the Company's stock price on share-based compensation, possible future impairment charges or other unusual charges that may occur during the year, except as noted.  It has been and will continue to be the Company's policy to not issue quarterly earnings guidance or revise the annual earnings outlook unless a material event occurs that impacts our original reported FFO outlook range.  This policy is intended to lessen the emphasis on short-term movements that do not have a material impact on earnings or long-term value of the Company.

Webcast and Conference Call

The Company will conduct its second quarter earnings conference call on Tuesday, August 6, 2013 at 9:00 a.m. Eastern Time.  To participate in the conference call, please dial 877-407-3982, or 1-201-493-6780 for international participants, at least five minutes prior to the scheduled start time.  A live audio webcast will also be available on the Company's website (www.pky.com).  A taped replay of the call can be accessed 24 hours a day through August 20, 2013, by dialing 877-870-5176, or 1-858-384-5517 for international callers, and using the passcode 417088. 

About Parkway Properties

Parkway Properties, Inc. is a fully integrated, self-administered and self-managed real estate investment trust ("REIT") specializing in the acquisition, ownership and management of quality office properties in higher growth submarkets in the Sunbelt region of the United States.  Parkway owns or has an interest in 46 office properties located in eight states with an aggregate of approximately 13.3 million square feet at July 1, 2013.  Parkway also offers fee-based real estate services which manage and/or lease approximately 11.8 million square feet for third parties as of July 1, 2013.  Additional information about Parkway is available on the Company's website at www.pky.com.   

Forward Looking Statement

Certain statements in this press release that are not in the present or past tense or that discuss the Company's expectations (including any use of the words "anticipate," "assume," "believe," "estimate," "expect," "forecast," "guidance," "intend," "may," "might," "outlook," "project", "should" or similar expressions) are forward-looking statements within the meaning of the federal securities laws and as such are based upon the Company's current beliefs as to the outcome and timing of future events. There can be no assurance that actual future developments affecting the Company will be those anticipated by the Company.  Examples of forward-looking statements include projected 2013 fully diluted EPS, share of depreciation and amortization, reported FFO per share, projected net operating income, cap rates, internal rates of return, future dividend payment rates, forecasts of FFO accretion, projected capital improvements, expected sources of financing, expectations as to the timing of closing of acquisitions, dispositions and other potential transactions and descriptions relating to these expectations.  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 ability of the Company to enter into new leases or renewal leases on favorable terms; 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; risks associated with the ownership and development of real property; termination of property management contracts; the bankruptcy or insolvency of companies for which Parkway provides property management services or the sale of these properties; the outcome of claims and litigation involving or affecting the Company; the ability to satisfy conditions necessary to close pending transactions and the ability to successfully integrate pending transactions; applicable regulatory changes; and other risks and uncertainties detailed from time to time in the Company's SEC filings. Should one or more of these risks or uncertainties occur, or should underlying assumptions prove incorrect, the Company's business, financial condition, liquidity, cash flows and financial results could differ materially from those expressed in the Company's forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made.  New risks and uncertainties arise over time, and it is not possible for us to predict the occurrence of those matters or the manner in which they may affect us.  The Company does not undertake to update forward-looking statements except as may be required by law. 

Company's Use of Non-GAAP Financial Measures

FFO, FAD, NOI and EBITDA, including related per share amounts, 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 the Company. Management believes that FFO, FAD, NOI 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.  Non-GAAP measures have limitations in that they do not reflect all of the amounts associated with the Company's results of operations determined in accordance with GAAP.  FFO, FAD, NOI 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, NOI 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.  The Company's calculation of these non-GAAP measures may not be comparable to similarly titled measures reported by other companies.

FFO – 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 GAAP, reduced by preferred dividends, excluding gains or losses on depreciable real estate, plus real estate related depreciation and amortization.  Adjustments for Parkway's share of partnerships and joint ventures are included in the computation of FFO on the same basis.  On October 31, 2011, NAREIT issued updated guidance on reporting FFO such that impairment losses on depreciable real estate should be excluded from the computation of FFO for current and prior periods presented.   

Recurring FFO – In addition to FFO, Parkway also discloses recurring FFO, which considers Parkway's share of adjustments for non-recurring lease termination fees, gains and losses on extinguishment of debt, gains and losses, acquisition costs, fair value adjustments or other unusual items. Although this is a non-GAAP measure that differs from NAREIT's definition of FFO, the Company believes it provides a meaningful presentation of operating performance.

FAD – There is not a generally accepted definition established for FAD.  Therefore, the Company's measure of FAD may not be comparable to FAD reported by other REITs.  Parkway defines FAD as FFO, excluding the amortization of share-based compensation, amortization of above and below market leases, straight line rent adjustments, gains and losses, acquisition costs, fair value adjustments, gain or loss on extinguishment of debt, amortization of loan costs, non-cash charges and reduced by recurring non-revenue enhancing capital expenditures for building improvements, tenant improvements and leasing costs.  Adjustments for Parkway's share of partnerships and joint ventures are included in the computation of FAD on the same basis.

EBITDA – Parkway defines EBITDA, a non-GAAP financial measure, as net income before interest expense, amortization of financing costs, amortization of share-based compensation, income taxes, depreciation, amortization, acquisition costs, gains and losses on early extinguishment of debt, other gains and losses and fair value adjustments.  Adjustments for Parkway's share of partnerships and joint ventures are included in the computation of EBITDA on the same basis.  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 GAAP, 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.

NOI, Recurring NOI, Same-Store NOI and Recurring Same-Store NOI – NOI includes income from real estate operations less property operating expenses (before interest expense and depreciation and amortization).  In addition to NOI, Parkway discloses recurring NOI, which considers adjustments for non-recurring lease termination fees or other unusual items.  The Company's disclosure of same-store NOI and recurring same-store NOI includes those properties that were owned during the entire current and prior year reporting periods and excludes properties classified as discontinued operations.

Contact:
Parkway Properties, Inc.
Thomas E. Blalock
Vice President of Finance and Capital Markets
Bank of America Center                                               
390 N. Orange Ave., Suite 2400                                    
Orlando, FL 32801                                                        
(407) 650-0593
www.pky.com

PARKWAY PROPERTIES, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)






June 30


December 31


2013


2012


(Unaudited)



Assets




Real estate related investments:




Office and parking properties

$         1,952,276


$         1,762,566

Accumulated depreciation

(223,184)


(199,849)


1,729,092


1,562,717





Land available for sale                         

250


250


1,729,342


1,562,967





Receivables and other assets:




Rents and fees receivable, net

4,905


2,309

Straight line rents receivable

41,017


34,205

Other receivables

7,459


2,755

Unamortized lease costs

67,683


62,978

Unamortized loan costs

8,594


7,183

Escrows and other deposits

11,811


7,606

Prepaid assets

7,636


3,612

Investment in preferred interest

3,500


3,500

Fair value of interest rate swaps

2,455


-

Other assets

683


543

Intangible assets, net

120,704


118,097

Assets held for sale

9,831


-

Management contracts, net

15,437


19,000

Cash and cash equivalents

30,241


81,856

Total assets

$         2,061,298


$         1,906,611













Liabilities




Notes payable to banks

$            313,000


$            262,000

Mortgage notes payable         

724,090


605,889

Accounts payable and other liabilities:




Corporate payables

1,300


1,930

Deferred tax liability - non-current

824


1,959

Accrued payroll

1,915


2,980

Fair value of interest rate swaps

9,501


16,285

Interest payable

3,406


2,653

Property payables:




Accrued expenses and accounts payable

15,293


13,111

Accrued property taxes

14,040


6,868

Prepaid rents

10,492


9,488

Deferred revenue

138


315

Security deposits

4,892


4,680

Unamortized below market leases

26,055


22,390

Other liabilities

-


57

Liabilities related to assets held for sale

325


-

Total liabilities

1,125,271


950,605













Equity




Parkway Properties, Inc. stockholders' equity:




8.00% Series D preferred stock, $.001 par value, 5,421,296 




shares authorized, issued and outstanding in 2012

-


128,942

Common stock, $.001 par value, 120,000,000 and 114,578,704 




shares authorized in 2013 and 2012, respectively, 68,572,111 




and 56,138,209 shares issued and outstanding in 2013 and 




2012, respectively

69


56

Additional paid-in capital               

1,097,788


907,254

Accumulated other comprehensive loss

(814)


(4,425)

Accumulated deficit             

(375,138)


(337,813)

    Total Parkway Properties, Inc. stockholders' equity

721,905


694,014

Noncontrolling interests

214,122


261,992

    Total equity

936,027


956,006

Total liabilities and equity

$         2,061,298


$         1,906,611





 

 

PARKWAY PROPERTIES, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(In thousands, except per share data)


















Three Months Ended


Six Months Ended


June 30


June 30


2013


2012


2013


2012


(Unaudited)


(Unaudited)









Revenues








Income from office and parking properties

$               71,598


$               48,655


$             138,781


$               93,135

Management company income

4,480


4,973


8,832


10,405

Total revenues

76,078


53,628


147,613


103,540









Expenses and other








Property operating expense

28,259


18,940


53,573


36,607

Depreciation and amortization

31,471


19,106


60,764


36,566

Change in fair value of contingent consideration

-


-


-


216

Management company expenses

4,591


4,226


8,981


8,760

General and administrative 

4,690


3,918


8,905


7,517

Acquisition costs

511


506


1,646


1,332

Total expenses and other

69,522


46,696


133,869


90,998









Operating income

6,556


6,932


13,744


12,542









Other income and expenses








Interest and other income

82


44


185


141

Interest expense

(11,304)


(8,536)


(21,774)


(17,780)









Loss before income taxes

(4,666)


(1,560)


(7,845)


(5,097)









Income tax benefit (expense)

384


11


891


(150)









Loss from continuing operations

(4,282)


(1,549)


(6,954)


(5,247)

Discontinued operations:








Income (loss) from discontinued operations

(4,387)


(374)


(4,682)


3,076

Gain on sale of real estate from discontinued operations

-


3,197


542


8,772

Total discontinued operations

(4,387)


2,823


(4,140)


11,848









Net income (loss)

(8,669)


1,274


(11,094)


6,601

Net (income) loss attributable to noncontrolling interests - unit holders

-


73


2


(16)

Net loss attributable to noncontrolling interests - real estate partnerships

1,049


1,426


2,304


893









Net income (loss) for Parkway Properties, Inc.

(7,620)


2,773


(8,788)


7,478

Dividends on preferred stock

(722)


(2,710)


(3,433)


(5,421)

Dividends on convertible preferred stock

-


(1,011)


-


(1,011)

Dividends on preferred stock redemption

(6,604)


-


(6,604)


-

Net income (loss) attributable to common stockholders

$              (14,946)


$                  (948)


$              (18,825)


$                1,046









Net income (loss) per common share attributable to Parkway Properties, Inc.:








Basic:








Loss from continuing operations attributable to Parkway Properties, Inc.

$                 (0.16)


$                 (0.15)


$                 (0.23)


$                 (0.31)

Discontinued operations

(0.06)


0.11


(0.07)


0.36

Basic net income (loss) attributable to Parkway Properties, Inc.

$                 (0.22)


$                 (0.04)


$                 (0.30)


$                  0.05

Diluted:








Loss from continuing operations attributable to Parkway Properties, Inc.

$                 (0.16)


$                 (0.15)


$                 (0.23)


$                 (0.31)

Discontinued operations

(0.06)


0.11


(0.07)


0.36

Diluted net income (loss) attributable to Parkway Properties, Inc.

$                 (0.22)


$                 (0.04)


$                 (0.30)


$                  0.05









Weighted average shares outstanding:








Basic

68,526


23,440


62,720


22,504

Diluted

68,526


23,440


62,720


22,504









Amounts attributable to Parkway Properties, Inc. common stockholders:








Loss from continuing operations attributable to Parkway Properties, Inc.

$              (10,516)


$               (3,449)


$              (14,655)


$               (7,128)

Discontinued operations

(4,430)


2,501


(4,170)


8,174

Net income (loss) attributable to common stockholders

$              (14,946)


$                  (948)


$              (18,825)


$                1,046









 

 

 

PARKWAY PROPERTIES, INC.

STATEMENT OF OPERATIONS AT PARKWAY'S SHARE

(In thousands, except per share data)










 Three Months Ended 


 Six Months Ended 


 June 30 


 June 30 


2013


2012


2013


2012


 (Unaudited) 


 (Unaudited) 









Revenues








Income from office and parking properties

$               56,198


$               30,669


$             104,996


$               58,182

Management company income

5,885


6,573


11,950


13,520

Total revenues

62,083


37,242


116,946


71,702









Expenses and other








Property operating expense

22,272


12,201


40,622


23,268

Depreciation and amortization

25,098


11,053


46,535


20,629

Change in fair value of contingent consideration

-


-


-


216

Management company expenses

4,548


4,182


8,902


8,671

General and administrative expense 

4,978


4,130


9,571


7,877

Acquisition costs

515


510


1,645


750

Total expenses and other

57,411


32,076


107,275


61,411









Operating income

4,672


5,166


9,671


10,291









Other income and expenses








Interest and other income

84


42


185


139

Interest expense 

(8,330)


(5,020)


(15,367)


(10,960)









Income (loss) before income taxes

(3,574)


188


(5,511)


(530)









Income tax benefit (expense)

384


11


891


(150)









Income (loss) from continuing operations

(3,190)


199


(4,620)


(680)

Discontinued operations:








Income (loss) from discontinued operations

(4,430)


(100)


(4,712)


3,240

Gain on sale of real estate from discontinued operations

-


2,601


542


4,934

Total discontinued operations

(4,430)


2,501


(4,170)


8,174









Net income (loss)

(7,620)


2,700


(8,790)


7,494

Net (income) loss attributable to noncontrolling interests - unit holders

-


73


2


(16)









Net income (loss) attributable to Parkway Properties, Inc.

(7,620)


2,773


(8,788)


7,478

Dividends on preferred stock

(722)


(2,710)


(3,433)


(5,421)

Dividends on convertible preferred

-


(1,011)


-


(1,011)

Dividends on preferred stock redemption

(6,604)


-


(6,604)


-

Net income (loss) available to common stockholders

$              (14,946)


$                  (948)


$              (18,825)


$                1,046

















Net income (loss) per common share attributable to Parkway Properties, Inc.:








Basic:








Loss from continuing operations attributable to Parkway Properties, Inc.

$                 (0.16)


$                 (0.15)


$                 (0.23)


$                 (0.31)

Discontinued operations

(0.06)


0.11


(0.07)


0.36

Basic net income (loss) attributable to Parkway Properties, Inc.

$                 (0.22)


$                 (0.04)


$                 (0.30)


$                  0.05

Diluted:








Loss from continuing operations attributable to Parkway Properties, Inc.

$                 (0.16)


$                 (0.15)


$                 (0.23)


$                 (0.31)

Discontinued operations

(0.06)


0.11


(0.07)


0.36

Diluted net income (loss) attributable to Parkway Properties, Inc.

$                 (0.22)


$                 (0.04)


$                 (0.30)


$                  0.05









Weighted average shares outstanding:








Basic

68,526


23,440


62,720


22,504

Diluted

68,526


23,440


62,720


22,504









 

 

PARKWAY PROPERTIES, INC.

RECONCILIATION OF FUNDS FROM OPERATIONS AND FUNDS AVAILABLE

FOR DISTRIBUTION TO NET INCOME AT PARKWAY'S SHARE

(In thousands, except per share data)










Three Months Ended


Six Months Ended


June 30


June 30


2013


2012


2013


2012


(Unaudited)


(Unaudited)









Net income (loss) for Parkway Properties, Inc.

$           (7,620)


$            2,773


$           (8,788)


$            7,478









Adjustments to net income (loss) for Parkway Properties, Inc.:








Preferred dividends

(722)


(2,710)


(3,433)


(5,421)

Convertible preferred dividends

-


(1,011)


-


(1,011)

       Dividends on preferred stock redemption

(6,604)


-


(6,604)


-

Depreciation and amortization

25,308


11,566


47,013


21,951

Noncontrolling interest - unit holders

-


(73)


(2)


16

Impairment loss on depreciable real estate

4,600


-


4,600


-

Gain on sale of real estate 

-


(2,601)


(542)


(4,934)

FFO available to common stockholders

$           14,962


$            7,944


$           32,244


$           18,079









Adjustments to derive recurring FFO:








Change in fair value of contingent consideration

-


-


-


216

Non-recurring lease termination fee income 

(49)


(635)


(195)


(1,231)

Loss on early extinguishment of debt

572


491


572


779

Non-cash adjustment for interest rate swap

(630)


(77)


(630)


(215)

       Dividends on preferred stock redemption

6,604


-


6,604


-

Acquisition costs

515


510


1,645


758

Realignment expenses

-


1,023


460


1,203

Recurring FFO

$           21,974


$            9,256


$           40,700


$           19,589









Funds available for distribution 








FFO available to common stockholders 

$           14,962


$            7,944


$           32,244


$           18,079

Add (Deduct) :








Straight-line rents

(1,931)


(3,262)


(4,649)


(5,878)

Amortization of above market leases

129


354


169


650

Amortization of share-based compensation

1,232


47


1,321


204

Acquisition costs

515


510


1,645


758

Amortization of loan costs

602


402


1,001


844

Non-cash adjustment for interest rate swap

(630)


(77)


(630)


(215)

       Dividends on preferred stock redemption

6,604


-


6,604


-

Loss on early extinguishment of debt

572


491


572


779

Change in fair value of contingent consideration

-


-


-


216

Recurring capital expenditures:








Building improvements

(700)


(556)


(2,211)


(1,013)

Tenant improvements - new leases

(603)


(983)


(795)


(3,883)

Tenant improvements - renewal leases

(735)


(294)


(2,075)


(1,513)

Leasing costs - new leases

(204)


(854)


(260)


(1,359)

Leasing costs - renewal leases

(801)


(1,155)


(1,463)


(1,390)

Total recurring capital expenditures

(3,043)


(3,842)


(6,804)


(9,158)

Funds available for distribution 

$           19,012


$            2,567


$           31,473


$            6,279









Diluted per common share/unit information (**)








FFO per share 

$              0.22


$              0.32


$              0.51


$              0.75

Recurring FFO per share

$              0.32


$              0.38


$              0.65


$              0.82

FAD per share

$              0.28


$              0.10


$              0.50


$              0.26

Dividends paid

$              0.15


$            0.075


$              0.30


$              0.15

Dividend payout ratio for FFO

70.0%


23.4%


58.4%


19.9%

Dividend payout ratio for recurring FFO

46.9%


19.7%


46.3%


18.4%

Dividend payout ratio for FAD

53.6%


75.0%


59.8%


57.3%









Other supplemental information
















Recurring capital expenditures 

$            3,043


$            3,842


$            6,804


$            9,158

Upgrades on acquisitions

4,218


1,655


7,844


2,987

Total real estate improvements and leasing costs 

$            7,261


$            5,497


$           14,648


$           12,145









**Information for diluted computations:








Basic common shares/units outstanding

68,527


24,612


62,721


23,417

Dilutive effect of other share equivalents

93


16


32


586

Diluted weighted average shares/units outstanding

68,620


24,628


62,753


24,003









 

PARKWAY PROPERTIES, INC.


EBITDA, COVERAGE RATIOS AND CAPITALIZATION INFORMATION


(In thousands, except per share data, percentage and multiple data)














06/30/13


03/31/13


12/31/12


09/30/12


06/30/12













Net income (loss) for Parkway Properties, Inc.

$          (7,620)


$          (1,168)


$       (49,002)


$           2,129


$           2,773













Adjustments at Parkway's share to net income (loss) for Parkway Properties, Inc.:











Interest expense

7,787


6,638


4,830


4,661


5,035


Amortization of financing costs

602


399


523


348


401


Non-cash adjustment for interest rate swap

(630)


-


-


-


(77)


Loss on early extinguishment of debt

572


-


-


117


491


Acquisition costs

515


1,130


1,281


88


510


Depreciation and amortization

25,308


21,705


14,626


13,781


11,567


Amortization of share-based compensation

1,232


89


61


167


47


Gain on sale of real estate and other assets

-


(542)


(3,172)


(527)


(2,601)


Non-cash losses

4,600


-


51,167


-


-


Tax expense (benefit)

(384)


(507)


118


(8)


(11)


EBITDA 

$         31,982


$         27,744


$         20,432


$         20,756


$         18,135
























Interest coverage ratio

4.1


4.2


4.2


4.5


3.6













Fixed charge coverage ratio (1)

3.1


2.5


2.2


2.3


2.0













Modified fixed charge coverage ratio (1)

3.8


3.0


2.7


2.8


2.3
























Capitalization information











Mortgage notes payable

$       724,090


$       768,005


$       605,889


$       549,429


$       551,564


Mortgage notes payable-held for sale

-


-


-


-


29,597


Notes payable to banks

313,000


125,000


262,000


125,000


111,267


Adjustments for noncontrolling interest in real estate partnerships:











     Mortgage notes payable

(230,213)


(230,885)


(272,215)


(272,880)


(295,740)


Parkway's share of total debt

806,877


662,120


595,674


401,549


396,688


Less:  Parkway's share of cash

(16,249)


(46,235)


(55,968)


(30,096)


(12,669)


Parkway's share of net debt

790,628


615,885


539,706


371,453


384,019


Series D Preferred stock (liquidation value)

-


135,532


135,532


135,532


135,532


Parkway's share of net debt plus preferred stock (1)

$       790,628


$       751,417


$       675,238


$       506,985


$       519,551













Shares of common stock and operating units outstanding

68,563


68,767


56,140


41,499


28,037


Stock price per share at period end

$           16.76


$           18.55


$           13.99


$           13.37


$           11.44


Market value of common equity

$   1,149,116


$   1,275,628


$       785,399


$       554,842


$       320,743


Series D preferred stock (liquidation value)

-


135,532


135,532


135,532


135,532


Series E convertible preferred stock (liquidation value)

-


-


-


-


151,700


Total market capitalization (including net debt)

$   1,939,744


$   2,027,045


$   1,460,637


$   1,061,827


$       991,994


Net debt as a % of market capitalization

40.8%


30.4%


37.0%


35.0%


38.7%













EBITDA - annualized

$       127,928


$       110,976


$         81,728


$         83,024


$         72,540


Adjustment to annualize investment activities (2)

278


16,490


19,368


(141)


11,824


EBITDA - adjusted annualized

$       128,206


$       127,466


$       101,096


$         82,883


$         84,364


Net debt to EBITDA multiple

6.2


4.8


5.3


4.5


4.6


Net debt plus preferred to EBITDA multiple

6.2


5.9


6.7


6.1


6.2













(1)  Impact of Series E Cumulative Convertible Preferred Stock is not included in the fixed charge coverage ratio, modified fixed charge coverage ratio or Parkway's share of net debt plus preferred at June 30, 2012, as the shares were converted to common stock on July 31, 2012.   Had the Series E Cumulative Convertible Preferred Stock been included in these ratios then the fixed charge coverage ratio, modified fixed charge coverage ratio and Parkway's share of net debt plus preferred for the second quarter of 2012 would have been 1.8, 2.1 and 8.3 times, respectively.

(2)  Adjustment to annualized EBITDA represents the implied annualized impact of any acquisition or disposition activity for the period.















 

PARKWAY PROPERTIES, INC.

SAME-STORE NET OPERATING INCOME

THREE MONTHS ENDED JUNE 30, 2013 AND 2012

(In thousands, except number of properties data)

















Average





Net Operating Income


Occupancy



Number of

Percentage







Square Feet

Properties

of Portfolio (1)

2013

2012


2013

2012










Same-store properties:









Wholly owned 

5,344

24

31.95%

$       13,848

$       12,704


89.1%

88.9%

Fund II

3,372

9

30.25%

13,109

15,583


91.9%

88.6%

Total same-store properties

8,716

33

62.20%

$       26,957

$       28,287


90.2%

88.8%

Net operating income from all









office and parking properties

13,265

46

100.00%

$       43,339

$       29,715






















(1)  Percentage of portfolio based on 2013 net operating income.


































The following table is a reconciliation of net income (loss) to SSNOI and Recurring SSNOI:


























Three Months Ended

Six Months Ended





June 30


June 30





2013

2012


2013

2012










Net income (loss) for Parkway Properties, Inc.


$        (7,620)

$         2,773


$        (8,788)

$         7,478

Add (deduct):









Interest expense




11,304

8,536


21,774

17,780

Depreciation and amortization




31,471

19,106


60,764

36,566

Management company expenses




4,591

4,226


8,981

8,760

Income tax expense (benefit)




(384)

(11)


(891)

150

General and administrative expenses


4,690

3,918


8,905

7,517

Acquisition costs


511

506


1,646

1,332

Change in fair value of contingent consideration


-

-


-

216

Net loss attributable to noncontrolling interests - real estate partnerships

(1,049)

(1,426)


(2,304)

(893)

Net income (loss) attributable to noncontrolling interests - unit holders

-

(73)


(2)

16

(Income) loss from discontinued operations

4,387

374


4,682

(3,076)

Gain on sale of real estate from discontinued operations

-

(3,197)


(542)

(8,772)

Management company income

(4,480)

(4,973)


(8,832)

(10,405)

Interest and other income 

(82)

(44)


(185)

(141)

Net operating income from consolidated office and parking properties

43,339

29,715


85,208

56,528

Less:  Net operating income from non same-store properties

(16,382)

(1,428)


(32,618)

(3,015)

Same-store net operating income (SSNOI)

26,957

28,287


52,590

53,513

Less: non-recurring lease termination fee income

(56)

(685)


(255)

(1,329)

Recurring SSNOI




$       26,901

$       27,602


$       52,335

$       52,184










Parkway's share of SSNOI




$       15,622

$       17,036


$       31,591

$       33,009










Parkway's share of recurring SSNOI



$       15,572

$       16,418


$       31,421

$       31,892










 

SOURCE Parkway Properties, Inc.



RELATED LINKS
http://www.pky.com

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