JACKSON, Miss., Nov. 1, 2010 /PRNewswire-FirstCall/ --
Highlights
- Reports FFO of $0.63 per share and recurring FFO of $0.61 per share
- Reports current occupancy of 85.7%, with portfolio 87.4% leased
- Received $45.0 million in net proceeds from Series D Preferred Stock offering
- Obtained lender commitments for a new $200.0 million revolving credit facility
- Sold two assets and under contract for the sale of a third asset to Texas Fund II for $33.0 million
- Revises 2010 FFO earnings outlook to $2.82 to $2.92 per share
Parkway Properties, Inc. (NYSE: PKY) today announced results for its third quarter ended September 30, 2010.
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Steven G. Rogers, President and Chief Executive Officer stated, "During the quarter we continued to build positive leasing momentum by signing over 1.0 million square feet of new, renewal and expansion leases in a tough leasing environment, and we raised approximately $45.0 million through our Series D Preferred Stock offering. Additionally, since the end of the third quarter we made significant progress on finalizing a new revolving credit facility, and sold two assets to our discretionary fund with the Teacher Retirement System of Texas with a third asset to be sold in November."
Consolidated Financial Results
- Funds from operations ("FFO") available to common shareholders totaled $13.6 million, or $0.63 per diluted share, for the three months ended September 30, 2010, as compared to $16.2 million, or $0.76 per diluted share, for the three months ended September 30, 2009. Recurring FFO totaled $13.1 million, or $0.61 per diluted share for the three months ended September 30, 2010, as compared to $15.9 million, or $0.74 per diluted share for the three months ended September 30, 2009. For the nine months ended September 30, 2010, FFO totaled $47.7 million, or $2.22 per diluted share, as compared to $48.9 million, or $2.62 per diluted share, for the nine months ended September 30, 2009. Recurring FFO totaled $41.5 million, or $1.93 per diluted share for the nine months ended September 30, 2010, as compared to $47.7 million, or $2.55 per diluted share for the nine months ended September 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 |
||||||||
Description |
Q3 2010 |
Q3 2009 |
2010 |
2009 |
|||||
Unusual Items: |
|||||||||
Gain on involuntary conversion |
$ |
40 |
$ |
- |
$ |
40 |
$ |
742 |
|
Loss on extinguishment of debt |
$ |
- |
$ |
- |
$ |
(189) |
$ |
- |
|
Reserve and expenses related to litigation |
$ |
(174) |
$ |
- |
$ |
(719) |
$ |
- |
|
Other Items of Note: |
|||||||||
Non-recurring lease termination fees (1)(6) |
$ |
633 |
$ |
349 |
$ |
7,078 |
$ |
429 |
|
Straight-line rent (1) |
$ |
324 |
$ |
1,398 |
$ |
3,299 |
$ |
3,741 |
|
Amortization of (above) below market rent (1) |
$ |
95 |
$ |
(49) |
$ |
(74) |
$ |
(196) |
|
Bad debt expense (1) |
$ |
(93) |
$ |
(384) |
$ |
(1,007) |
$ |
(1,652) |
|
Portfolio Information: |
|||||||||
Average rent per square foot (2)(3) |
$ |
23.07 |
$ |
23.12 |
$ |
23.04 |
$ |
22.99 |
|
Average occupancy (2)(4) |
86.0% |
88.7% |
85.9% |
89.4% |
|||||
Same-store average rent per square foot (2)(3) |
$ |
23.08 |
$ |
23.14 |
$ |
23.05 |
$ |
23.03 |
|
Same-store average occupancy (2)(4) |
86.0% |
88.6% |
85.9% |
89.3% |
|||||
Total office square feet under ownership (2) |
13,195 |
13,362 |
13,195 |
13,362 |
|||||
Total office square feet under management (5) |
14,012 |
14,179 |
14,012 |
14,179 |
|||||
(1) These items include 100% of amounts from wholly-owned assets plus the Company's allocable share of amounts 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 nine months ended September 30, 2010 were $8.1 million, of which $1.0 million was included in recurring revenue as it represents the rental revenue during the period after the prior lease was terminated and the space was being prepared for the new customer during the first quarter of 2010. |
|||||||||
- Funds available for distribution ("FAD") totaled $5.2 million, or $0.24 per diluted share, for the three months ended September 30, 2010, as compared to $7.3 million, or $0.34 per diluted share, for the three months ended September 30, 2009. FAD totaled $21.9 million, or $1.02 per diluted share, for the nine months ended September 30, 2010, as compared to $26.9 million, or $1.44 per diluted share for the nine months ended September 30, 2009.
- Net loss available to common shareholders for the three months ended September 30, 2010, was $3.6 million, or $0.17 per diluted share, as compared to net loss available to common shareholders of $2.8 million or $0.13 per diluted share, for the three months ended September 30, 2009. Net income available to common shareholders for the nine months ended September 30, 2010, was $3.4 million, or $0.16 per diluted share as compared to net loss available to common shareholders of $5.0 million, or $0.27 per diluted share, for the nine months ended September 30, 2009. Gain on the sale of real estate from discontinued operations of $8.5 million was included in net income available to common shareholders for the nine months ended September 30, 2010. Gain on the sale of real estate of $470,000 was included in net loss available to common shareholders for the nine months ended September 30, 2009.
Asset Recycling
- As previously announced, on July 30, 2010, the Company purchased a first mortgage loan secured by three properties owned by RubiconPark I, LLC ("Rubicon JV"), a joint venture between Rubicon US REIT and Parkway, for a net purchase price of $33.0 million. The loan was secured by Carmel Crossing, a 326,000 square foot office complex located in Charlotte, North Carolina, Falls Pointe, a 107,000 square foot office property in Atlanta, Georgia, and Lakewood II, a 128,000 square foot office property also in Atlanta, Georgia. As of September 30, 2010, this mortgage loan was accounted for as real estate related to office and parking properties on the Company's consolidated balance sheet. During October 2010, the Company, as holder of the mortgage, foreclosed on the three properties which served as collateral for the associated loan.
- On October 29, 2010, the Company sold the two Atlanta assets previously owned by the Rubicon JV and described above for $8.0 million to Parkway Properties Office Fund II, LP ("Texas Fund II"), the Company's $750.0 million discretionary fund with Teacher Retirement System of Texas. Carmel Crossing is under contract to be sold to Texas Fund II for $25.0 million and is subject only to North Carolina law which requires the creditor to allow additional offers to be accepted on foreclosed properties for a period of 10 days following the foreclosure sale date. The anticipated closing date for Carmel Crossing is November 10, 2010. The Texas Fund II plans to place a non-recourse first mortgage on Carmel Crossing in the amount of approximately 50% of the value of the property. The total sale of these three assets is expected to result in Parkway receiving $22.5 million in cash at closing. Parkway will have a 30% ownership interest in these properties, following the sale to Texas Fund II.
- During the third quarter of 2010, the Company acquired its partner's 25% interest in Parkway Moore, LLC and Moore Building Associates, LP for $2,500. These entities were established for the purpose of owning the Toyota Center, a 175,000 square foot office property in Memphis, Tennessee. Upon closing, the Company owned 100% of these entities and the Toyota Center.
Operations and Leasing
- The Company's average rent per square foot decreased 0.2% to $23.07 during the third quarter 2010 as compared to $23.12 for the third quarter 2009 and increased 0.2% to $23.04 during the nine months ended September 30, 2010, as compared to $22.99 for the nine months ended September 30, 2009. On a same-store basis, the Company's average rent per square foot decreased 0.3% to $23.08 during the third quarter 2010 as compared to $23.14 during the third quarter 2009, and increased 0.1% to $23.05 during the nine months ended September 30, 2010, as compared to $23.03 during the nine months ended September 30, 2009.
- The Company's average occupancy for the third quarter 2010 was 86.0% as compared to 88.7% for the third quarter 2009, and was 85.9% for the nine months ended September 30, 2010, as compared to 89.4% for the nine months ended September 30, 2009. On a same-store basis, the Company's average occupancy for the third quarter 2010 was 86.0% as compared to 88.6% for the third quarter 2009. For the nine months ended September 30, 2010, same-store average occupancy was 85.9% as compared to 89.3% for the nine months ended September 30, 2009.
- At October 1, 2010, the Company's office portfolio occupancy was 85.7% as compared to 85.4% at July 1, 2010 and 88.3% at October 1, 2009. Not included in the October 1, 2010, occupancy rate are 29 signed leases totaling 228,000 square feet, which commence during the period from the fourth quarter of 2010 through the second quarter of 2012. Including these leases, the Company's portfolio was 87.4% leased at October 7, 2010.
- Parkway's customer retention rate was 75.0% for the quarter ended September 30, 2010, as compared to 58.0% for the quarter ended September 30, 2009, and 69.7% for the quarter ended June 30, 2010. Customer retention for the nine months ended September 30, 2010 and 2009, was 67.5% and 61.0%, respectively.
- During the third quarter 2010, 50 leases were renewed totaling 711,000 rentable square feet at an average rent per square foot of $19.51, representing a 15.3% rate decrease, and at a cost of $2.32 per square foot per year of the lease term. The major driver of the decrease in rental rates was the U.S. Cellular lease in Chicago, Illinois. The rental rate decrease for renewal leasing activity during the third quarter is negative 7.6% excluding this lease. During the nine months ended September 30, 2010, 172 leases were renewed totaling 1.5 million rentable square feet at an average rent per square foot of $19.18, representing a 10.1% rate decrease, and at a cost of $1.84 per square foot per year of the lease term.
- During the third quarter 2010, 17 expansion leases were signed totaling 87,000 rentable square feet at an average rent per square foot of $20.57 and at a cost of $2.95 per square foot per year of the lease term. During the nine months ended September 30, 2010, 40 expansion leases were signed totaling 168,000 rentable square feet at an average rent per square foot of $20.27 and at an average cost of $3.08 per square foot per year of the lease term.
- During the third quarter 2010, 33 new leases were signed totaling 203,000 rentable square feet at an average rent per square foot of $21.40 and at a cost of $4.17 per square foot per year of the term. During the nine months ended September 30, 2010, 86 new leases were signed totaling 459,000 rentable square feet at an average rent per square foot of $19.23 and at an average cost of $3.88 per square foot per year of the lease term.
- For the third quarter 2010, the Company's share of reported same-store net operating income ("NOI") as compared to the same period of the prior year decreased $1.8 million or 6.3% on a GAAP basis and decreased $886,000 or 3.2% on a cash basis. Also, for the third quarter of 2010, Parkway's share of recurring same-store NOI compared to the same period of the prior year decreased $2.1 million or 7.4% on a GAAP basis and decreased $1.2 million or 4.3% on a cash basis. For the nine months ended September 30, 2010, the Company's share of reported same-store NOI as compared to the same period of the prior year increased $1.7 million or 2.0% on a GAAP basis and increased $1.9 million or 2.3% on a cash basis. Also, for the nine months ended September 30, 2010, Parkway's share of recurring same-store NOI as compared to the same period of the prior year decreased $5.0 million or 5.9% on a GAAP basis and decreased $4.8 million or 5.8% on a cash basis. The decrease in same-store NOI is primarily attributable to a decrease in rental income associated with a 340 basis point reduction in average occupancy for the nine months ended September 30, 2010.
- On September 14, 2010, the Health Care Service Corporation (BCBS), a 230,000 square foot customer at 111 East Wacker in Chicago, exercised the early termination option on 168,000 square feet, revising the expiration date from March 2017 to March 2012. In connection with the termination option, the customer will pay a total termination fee of $7.3 million, which will be recognized as income from the notice date through March 2012. The Company will record $1.4 million as lease termination fee income in 2010. In addition to the termination fee, the customer will continue to occupy the space and pay contractual rent obligations through the lease termination date of March 2012.
Capital Structure
- As of September 30, 2010, the Company owed $100.0 million related to its $311.0 million line of credit and held $29.1 million in cash and cash equivalents.
- On July 8, 2010, the Company obtained a $12.0 million non-recourse first mortgage loan secured by the Stein-Mart building, a 196,000 square foot office property in Jacksonville, Florida. The mortgage loan has a fixed interest rate of 6.5% and a term of ten years. The proceeds were used to reduce amounts outstanding under the line of credit.
- On October 8, 2010, the Company repaid a $7.6 million mortgage loan secured by One Jackson Place, a 220,000 square foot office building in Jackson, Mississippi. The mortgage loan has a fixed interest rate of 7.9% and was scheduled to mature on October 10, 2010. The Company repaid the mortgage loan using available proceeds under the line of credit.
- The Company's only remaining debt maturity during 2010 is a $31.0 million mortgage loan secured by Squaw Peak Corporate Center, a 290,000 square foot office complex located in Phoenix, Arizona. The Company plans to repay this loan utilizing available cash balances and/or available proceeds under the line of credit.
- On August 9, 2010, the Company issued 1.97 million additional shares of its 8.0% Series D Cumulative Redeemable Preferred Stock at a price of $23.757 per share equating to a yield of 8.500% (excluding accrued dividends). Wells Fargo Securities, LLC and Banc of America Securities LLC acted as joint book-running managers on the transaction. The Company used the net proceeds of approximately $45.0 million to reduce amounts outstanding under the Company's line of credit and for general corporate purposes.
- As of October 27, 2010, the Company obtained aggregate commitments from eight lenders totaling $320.0 million for a new unsecured revolving credit facility (the "Credit Facility"), which was well in excess of the Company's target aggregate commitment of $190.0 million. The new Credit Facility would replace the existing unsecured revolving credit facility and term loan scheduled to mature on April 27, 2011. Additionally, the Company obtained a $10 million commitment for a new working capital revolving credit facility under substantially the same terms and conditions as the new Credit Facility. Closing of the new credit facilities totaling $200.0 million is expected during the fourth quarter of 2010, and is subject to normal and customary documentation and closing conditions. The Company also has a $100.0 million interest rate swap associated with its current credit facility that expires March 31, 2011, which locks LIBOR at 3.635%. The Company does not anticipate an extinguishment of this interest rate swap prior to its stated expiration. Wells Fargo Securities LLC and JP Morgan Securities, LLC are acting as Joint Lead Arrangers and Joint Book Runners on the Credit Facility. In addition, Wells Fargo Bank will act as Administrative Agent and JPMorgan Chase Bank, N.A. is acting as Syndication Agent. Other lenders providing commitments include PNC Bank, Bank of America, N.A., US Bank, Trustmark Bank, First Tennessee Bank, and BancorpSouth. The working capital revolving credit facility will be provided solely by PNC Bank.
- The Company's previously announced cash dividend of $0.075 per share for the quarter ended September 30, 2010, represented a payout of approximately 11.8% of FFO per diluted share for the quarter. The third quarter dividend was paid on September 29, 2010. The dividend was the ninety-sixth (96th) consecutive quarterly distribution to Parkway's shareholders of Common Stock, representing an annualized dividend of $0.30 per share.
- At September 30, 2010, the Company's net debt to EBITDA multiple was 6.0 times as compared to 6.1 times at June 30, 2010 and 6.4 times at September 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 revising its 2010 reported FFO outlook from $2.72 to $2.92 per diluted share to $2.82 to $2.92 per diluted share and recurring FFO outlook from $2.40 to $2.60 per diluted share to $2.47 to $2.57 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 |
$(0.05)- $0.05 |
||
Plus: Real estate depreciation and amortization |
$4.05 - $4.05 |
||
Plus: Depreciation on unconsolidated joint ventures |
$0.02 - $0.02 |
||
Less: Gain on sale of real estate |
($0.40 - $0.40) |
||
Less: Noncontrolling interest depreciation/amortization |
($0.80 - $0.80) |
||
Reported FFO per diluted share |
$2.82 - $2.92 |
||
Less: Non-recurring lease termination fee income |
($0.39 - $0.39) |
||
Plus: Loss on early extinguishment of debt |
$0.01 - $0.01 |
||
Plus: Reserve and expenses related to litigation |
$0.03 - $0.03 |
||
Recurring FFO per diluted share |
$2.47 - $2.57 |
||
The revised earnings outlook for 2010 is based on the Company's actual reported and recurring FFO for the nine months ended September 30, 2010 and the Company's 2010 fourth quarter forecast. These assumptions reflect the Company's expectations based on its knowledge of current market conditions and historical experience. Below please find the major assumptions to the Company's revised 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 5.0% to 8.0% on a GAAP and cash basis.
- Non-recurring lease termination fee income of approximately $8.3 million or $0.39 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.
- The issuance of 1.97 million additional shares of Series D Cumulative Redeemable Preferred Stock at a price of $23.757 per share, equating to a yield of 8.500%, with net proceeds of approximately $45.0 million on August 9, 2010.
- A $33.0 million asset contribution to the discretionary fund with the Teacher Retirement System of Texas in the fourth quarter of 2010. The fee simple sale of One Park Ten for gross sales proceeds of $15.7 million and a gain on the sale of real estate from discontinued operations of $8.5 million on April 15, 2010. No 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 November 1, 2010. Included in the portfolio are 20 properties totaling 3.7 million square feet that are owned jointly with other investors, representing 28.0% 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 2.6 million square feet for third-party owners at November 1, 2010.
Additional Information
The Company will conduct a conference call to discuss the results of its third quarter operations on Tuesday, November 2, 2010, at 11:00 a.m. Eastern Time. The number for the conference call is 888-670-2253. An audio replay of the call can be accessed 24 hours a day through November 12, 2010, by dialing 888-203-1112 and using the pass code of 7940057. An audio replay will be archived and indexed in the investor relations section of the Company's website at www.pky.com. A copy of the Company's 2010 third quarter supplemental financial and property information package is available by accessing the Company's website, emailing your request to [email protected] 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 "3Q 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 third 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.
FOR FURTHER INFORMATION: |
|
Steven G. Rogers |
|
President & Chief Executive Officer |
|
Richard G. Hickson IV |
|
Chief Financial Officer |
|
(601) 948-4091 |
|
PARKWAY PROPERTIES, INC. |
||||
CONSOLIDATED BALANCE SHEETS |
||||
(In thousands, except share data) |
||||
September 30 |
December 31 |
|||
2010 |
2009 |
|||
(Unaudited) |
||||
Assets |
||||
Real estate related investments: |
||||
Office and parking properties |
$ 1,776,281 |
$ 1,738,040 |
||
Land held for development |
609 |
609 |
||
Accumulated depreciation |
(373,789) |
(336,759) |
||
1,403,101 |
1,401,890 |
|||
Land available for sale |
750 |
750 |
||
Mortgage loans |
10,148 |
8,126 |
||
Investment in unconsolidated joint ventures |
2,805 |
2,512 |
||
1,416,804 |
1,413,278 |
|||
Rents receivable and other assets |
123,836 |
116,437 |
||
Intangible assets, net |
51,326 |
61,734 |
||
Cash and cash equivalents |
29,099 |
20,697 |
||
$ 1,621,065 |
$ 1,612,146 |
|||
Liabilities |
||||
Notes payable to banks |
$ 100,000 |
$ 100,000 |
||
Mortgage notes payable |
815,452 |
852,700 |
||
Accounts payable and other liabilities |
97,595 |
88,614 |
||
1,013,047 |
1,041,314 |
|||
Equity |
||||
Parkway Properties, Inc. stockholders' equity: |
||||
8.00% Series D Preferred stock, $.001 par value, |
||||
4,374,896 and 2,400,000 shares authorized, issued and |
||||
outstanding in 2010 and 2009, respectively |
102,873 |
57,976 |
||
Common stock, $.001 par value, 65,625,104 and 67,600,000 |
||||
shares authorized in 2010 and 2009, respectively, 21,920,720 |
||||
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 |
515,747 |
515,398 |
||
Accumulated other comprehensive loss |
(4,457) |
(4,892) |
||
Accumulated deficit |
(113,555) |
(111,960) |
||
Total Parkway Properties, Inc. stockholders' equity |
498,734 |
454,145 |
||
Noncontrolling interest - real estate partnerships |
109,284 |
116,687 |
||
Total equity |
608,018 |
570,832 |
||
$ 1,621,065 |
$ 1,612,146 |
|||
PARKWAY PROPERTIES, INC. |
||||
CONSOLIDATED STATEMENTS OF OPERATIONS |
||||
(In thousands, except per share data) |
||||
Three Months Ended |
||||
September 30 |
||||
2010 |
2009 |
|||
(Unaudited) |
||||
Revenues |
||||
Income from office and parking properties |
$ 61,567 |
$ 65,617 |
||
Management company income |
585 |
340 |
||
Total revenues |
62,152 |
65,957 |
||
Expenses |
||||
Property operating expense |
29,332 |
31,172 |
||
Depreciation and amortization |
21,126 |
23,240 |
||
Management company expenses |
858 |
577 |
||
General and administrative |
1,817 |
1,783 |
||
Total expenses |
53,133 |
56,772 |
||
Operating income |
9,019 |
9,185 |
||
Other income and expenses |
||||
Interest and other income |
355 |
672 |
||
Equity in earnings of unconsolidated joint ventures |
61 |
48 |
||
Gain on involuntary conversion |
40 |
- |
||
Interest expense |
(13,669) |
(13,672) |
||
Loss from continuing operations |
(4,194) |
(3,767) |
||
Discontinued operations: |
||||
Income from discontinued operations |
6 |
105 |
||
Net loss |
(4,188) |
(3,662) |
||
Net loss attributable to noncontrolling interest - real estate partnerships |
2,356 |
2,107 |
||
Net loss for Parkway Properties, Inc. |
(1,832) |
(1,555) |
||
Dividends on preferred stock |
(1,737) |
(1,200) |
||
Net loss available to common stockholders |
$ (3,569) |
$ (2,755) |
||
Net loss per common share attributable to Parkway Properties, Inc.: |
||||
Basic: |
||||
Loss from continuing operations attributable to Parkway Properties, Inc. |
$ (0.17) |
$ (0.13) |
||
Discontinued operations |
- |
- |
||
Basic net loss attributable to Parkway Properties, Inc. |
$ (0.17) |
$ (0.13) |
||
Diluted: |
||||
Loss from continuing operations attributable to Parkway Properties, Inc. |
$ (0.17) |
$ (0.13) |
||
Discontinued operations |
- |
- |
||
Diluted net loss attributable to Parkway Properties, Inc. |
$ (0.17) |
$ (0.13) |
||
Weighted average shares outstanding: |
||||
Basic |
21,438 |
21,313 |
||
Diluted |
21,438 |
21,313 |
||
PARKWAY PROPERTIES, INC. |
||||
CONSOLIDATED STATEMENTS OF OPERATIONS |
||||
(In thousands, except per share data) |
||||
Nine Months Ended |
||||
September 30 |
||||
2010 |
2009 |
|||
(Unaudited) |
||||
Revenues |
||||
Income from office and parking properties |
$ 192,614 |
$ 198,210 |
||
Management company income |
1,331 |
1,486 |
||
Total revenues |
193,945 |
199,696 |
||
Expenses |
||||
Property operating expense |
89,978 |
95,767 |
||
Depreciation and amortization |
65,257 |
68,246 |
||
Management company expenses |
2,243 |
1,710 |
||
General and administrative |
5,537 |
4,734 |
||
Total expenses |
163,015 |
170,457 |
||
Operating income |
30,930 |
29,239 |
||
Other income and expenses |
||||
Interest and other income |
1,105 |
1,283 |
||
Equity in earnings of unconsolidated joint ventures |
253 |
475 |
||
Gain on involuntary conversion |
40 |
742 |
||
Gain on sale of real estate |
- |
470 |
||
Interest expense |
(41,051) |
(41,450) |
||
Loss from continuing operations |
(8,723) |
(9,241) |
||
Discontinued operations: |
||||
Income from discontinued operations |
194 |
309 |
||
Gain on sale of real estate from discontinued operations |
8,518 |
- |
||
Total discontinued operations |
8,712 |
309 |
||
Net loss |
(11) |
(8,932) |
||
Net loss attributable to noncontrolling interest - real estate partnerships |
7,581 |
7,508 |
||
Net income (loss) for Parkway Properties, Inc. |
7,570 |
(1,424) |
||
Dividends on preferred stock |
(4,137) |
(3,600) |
||
Net income (loss) available to common stockholders |
$ 3,433 |
$ (5,024) |
||
Net income (loss) per common share attributable to Parkway Properties, Inc.: |
||||
Basic: |
||||
Loss from continuing operations attributable to Parkway Properties, Inc. |
$ (0.25) |
$ (0.29) |
||
Discontinued operations |
0.41 |
0.02 |
||
Basic net income (loss) attributable to Parkway Properties, Inc. |
$ 0.16 |
$ (0.27) |
||
Diluted: |
||||
Loss from continuing operations attributable to Parkway Properties, Inc. |
$ (0.25) |
$ (0.29) |
||
Discontinued operations |
0.41 |
0.02 |
||
Diluted net income (loss) attributable to Parkway Properties, Inc. |
$ 0.16 |
$ (0.27) |
||
Weighted average shares outstanding: |
||||
Basic |
21,413 |
18,627 |
||
Diluted |
21,413 |
18,627 |
||
PARKWAY PROPERTIES, INC. |
||||||||
RECONCILIATION OF FUNDS FROM OPERATIONS AND |
||||||||
FUNDS AVAILABLE FOR DISTRIBUTION TO NET INCOME |
||||||||
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 |
||||||||
(In thousands, except per share data) |
||||||||
Three Months Ended |
Nine Months Ended |
|||||||
September 30 |
September 30 |
|||||||
2010 |
2009 |
2010 |
2009 |
|||||
(Unaudited) |
(Unaudited) |
|||||||
Net Income (Loss) |
$ (1,832) |
$ (1,555) |
$ 7,570 |
$ (1,424) |
||||
Adjustments to Net Income (Loss): |
||||||||
Preferred Dividends |
(1,737) |
(1,200) |
(4,137) |
(3,600) |
||||
Depreciation and Amortization |
21,126 |
23,240 |
65,257 |
68,246 |
||||
Depreciation and Amortization - Discontinued Operations |
- |
161 |
121 |
455 |
||||
Noncontrolling Interest Depreciation and Amortization |
(4,011) |
(4,625) |
(12,837) |
(14,939) |
||||
Unconsolidated Joint Ventures Depreciation and Amortization |
85 |
221 |
253 |
630 |
||||
Gain on Sale of Real Estate |
- |
- |
(8,518) |
(470) |
||||
Funds From Operations ("FFO") Available to Common Stockholders (1) |
$ 13,631 |
$ 16,242 |
$ 47,709 |
$ 48,898 |
||||
Adjustments to Derive Recurring FFO: |
||||||||
Gain on Involuntary Conversion |
(40) |
- |
(40) |
(742) |
||||
Non-Recurring Lease Termination Fee Income (2) |
(633) |
(349) |
(7,078) |
(429) |
||||
Loss on Early Extinguishment of Debt |
- |
- |
189 |
- |
||||
Reserve and Expenses Related to Litigation |
174 |
- |
719 |
- |
||||
Recurring FFO |
$ 13,132 |
$ 15,893 |
$ 41,499 |
$ 47,727 |
||||
Funds Available for Distribution |
||||||||
FFO Available to Common Stockholders (1) |
$ 13,631 |
$ 16,242 |
$ 47,709 |
$ 48,898 |
||||
Add (Deduct) : |
||||||||
Adjustments for Unconsolidated Joint Ventures |
(118) |
(70) |
(236) |
(588) |
||||
Adjustments for Noncontrolling Interest in Real Estate Partnerships |
3,055 |
1,179 |
5,211 |
3,562 |
||||
Straight-line Rents |
(143) |
(2,083) |
(3,869) |
(5,258) |
||||
Straight-line Rents - Discontinued Operations |
- |
(20) |
(22) |
(76) |
||||
Amortization of Above/Below Market Leases |
(166) |
(8) |
(147) |
(98) |
||||
Amortization of Share-Based Compensation |
486 |
659 |
877 |
1,940 |
||||
Net Non-Cash Gains |
(40) |
- |
(40) |
(742) |
||||
Recurring Capital Expenditures: |
||||||||
Building Improvements |
(788) |
(1,668) |
(3,258) |
(3,546) |
||||
Tenant Improvements - New Leases |
(3,710) |
(3,227) |
(11,899) |
(7,077) |
||||
Tenant Improvements - Renewal Leases |
(2,207) |
(845) |
(5,501) |
(3,761) |
||||
Leasing Costs - New Leases |
(1,329) |
(1,304) |
(2,794) |
(2,279) |
||||
Leasing Costs - Renewal Leases |
(3,461) |
(1,537) |
(4,175) |
(4,077) |
||||
Funds Available for Distribution (1) |
$ 5,210 |
$ 7,318 |
$ 21,856 |
$ 26,898 |
||||
Diluted Per Common Share/Unit Information (**) |
||||||||
FFO per share |
$ 0.63 |
$ 0.76 |
$ 2.22 |
$ 2.62 |
||||
Recurring FFO per share |
$ 0.61 |
$ 0.74 |
$ 1.93 |
$ 2.55 |
||||
FAD per share |
$ 0.24 |
$ 0.34 |
$ 1.02 |
$ 1.44 |
||||
Dividends paid |
$ 0.075 |
$ 0.325 |
$ 0.225 |
$ 0.975 |
||||
Dividend payout ratio for FFO |
11.84% |
42.91% |
10.15% |
37.28% |
||||
Dividend payout ratio for Recurring FFO |
12.29% |
43.85% |
11.67% |
38.19% |
||||
Dividend payout ratio for FAD |
30.99% |
95.24% |
22.15% |
67.76% |
||||
Weighted average shares/units outstanding |
21,522 |
21,445 |
21,515 |
18,694 |
||||
Other Supplemental Information |
||||||||
Recurring Consolidated Capital Expenditures Above |
$ 11,495 |
$ 8,581 |
$ 27,627 |
$ 20,740 |
||||
Consolidated Upgrades on Acquisitions |
144 |
1,104 |
1,964 |
5,623 |
||||
Consolidated Major Renovations |
990 |
- |
1,359 |
- |
||||
Total Consolidated Real Estate Improvements and Leasing Costs Per Cash Flow |
$ 12,629 |
$ 9,685 |
$ 30,950 |
$ 26,363 |
||||
Parkway's Share of Recurring Capital Expenditures |
$ 8,456 |
$ 5,708 |
$ 23,457 |
$ 11,418 |
||||
Parkway's Share of Upgrades on Acquisitions |
105 |
1,042 |
1,070 |
2,627 |
||||
Parkway's Share of Major Renovations |
990 |
- |
1,359 |
- |
||||
Parkway's Share of Total Real Estate Improvements and Leasing Costs |
$ 9,551 |
$ 6,750 |
$ 25,886 |
$ 14,045 |
||||
Gain on Involuntary Conversion |
$ 40 |
$ - |
$ 40 |
$ 742 |
||||
Net Gain Included in FFO |
$ 40 |
$ - |
$ 40 |
$ 742 |
||||
**Information for Diluted Computations: |
||||||||
Basic Common Shares/Units Outstanding |
21,412 |
19,458 |
21,401 |
17,263 |
||||
Dilutive Effect of Other Share Equivalents |
110 |
1,987 |
114 |
1,431 |
||||
(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 nine months ended September 30, 2010 were $8.1 million, of which $1.0 million were included in recurring revenue as it represents the rental revenue during 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 NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 |
||||||||
(In thousands) |
||||||||
Three Months Ended |
Nine Months Ended |
|||||||
September 30 |
September 30 |
|||||||
2010 |
2009 |
2010 |
2009 |
|||||
(Unaudited) |
(Unaudited) |
|||||||
Net Income (Loss) |
$ (1,832) |
$ (1,555) |
$ 7,570 |
$ (1,424) |
||||
Adjustments to Net Income (Loss): |
||||||||
Interest Expense |
13,276 |
13,288 |
39,862 |
40,164 |
||||
Amortization of Financing Costs |
393 |
547 |
1,317 |
1,772 |
||||
Loss on Early Extinguishment of Debt |
- |
- |
189 |
- |
||||
Depreciation and Amortization |
21,126 |
23,401 |
65,378 |
68,701 |
||||
Amortization of Share-Based Compensation |
486 |
659 |
877 |
1,940 |
||||
Net Gain on Real Estate Investments and Involuntary Conversion |
(40) |
- |
(8,558) |
(1,212) |
||||
Tax Expense |
59 |
2 |
176 |
2 |
||||
EBITDA Adjustments - Unconsolidated Joint Ventures |
122 |
349 |
363 |
1,014 |
||||
EBITDA Adjustments - Noncontrolling Interest in Real Estate Partnerships |
(6,987) |
(7,769) |
(22,036) |
(24,356) |
||||
EBITDA (1) |
$ 26,603 |
$ 28,922 |
$ 85,138 |
$ 86,601 |
||||
Interest Coverage Ratio: |
||||||||
EBITDA |
$ 26,603 |
$ 28,922 |
$ 85,138 |
$ 86,601 |
||||
Interest Expense: |
||||||||
Interest Expense |
$ 13,276 |
$ 13,288 |
$ 39,862 |
$ 40,164 |
||||
Interest Expense - Unconsolidated Joint Ventures |
37 |
126 |
110 |
376 |
||||
Interest Expense - Noncontrolling Interest in Real Estate Partnerships |
(2,911) |
(3,075) |
(8,995) |
(9,209) |
||||
Total Interest Expense |
$ 10,402 |
$ 10,339 |
$ 30,977 |
$ 31,331 |
||||
Interest Coverage Ratio |
2.56 |
2.80 |
2.75 |
2.76 |
||||
Fixed Charge Coverage Ratio: |
||||||||
EBITDA |
$ 26,603 |
$ 28,922 |
$ 85,138 |
$ 86,601 |
||||
Fixed Charges: |
||||||||
Interest Expense |
$ 10,402 |
$ 10,339 |
$ 30,977 |
$ 31,331 |
||||
Preferred Dividends |
1,737 |
1,200 |
4,137 |
3,600 |
||||
Principal Payments (Excluding Early Extinguishment of Debt) |
3,600 |
3,472 |
10,794 |
10,083 |
||||
Principal Payments - Unconsolidated Joint Ventures |
8 |
35 |
24 |
108 |
||||
Principal Payments - Noncontrolling Interest in Real Estate Partnerships |
(189) |
(279) |
(762) |
(695) |
||||
Total Fixed Charges |
$ 15,558 |
$ 14,767 |
$ 45,170 |
$ 44,427 |
||||
Fixed Charge Coverage Ratio |
1.71 |
1.96 |
1.88 |
1.95 |
||||
Modified Fixed Charge Coverage Ratio: |
||||||||
EBITDA |
$ 26,603 |
$ 28,922 |
$ 85,138 |
$ 86,601 |
||||
Modified Fixed Charges: |
||||||||
Interest Expense |
$ 10,402 |
$ 10,339 |
$ 30,977 |
$ 31,331 |
||||
Preferred Dividends |
1,737 |
1,200 |
4,137 |
3,600 |
||||
Total Modified Fixed Charges |
$ 12,139 |
$ 11,539 |
$ 35,114 |
$ 34,931 |
||||
Modified Fixed Charge Coverage Ratio |
2.19 |
2.51 |
2.42 |
2.48 |
||||
The following table reconciles EBITDA to cash flows provided by operating activities: |
||||||||
EBITDA |
$ 26,603 |
$ 28,922 |
$ 85,138 |
$ 86,601 |
||||
Amortization of Below Market Leases |
(166) |
(8) |
(147) |
(98) |
||||
Amortization of Mortgage Loan Discount |
(180) |
(154) |
(522) |
(447) |
||||
Operating Distributions from Unconsolidated Joint Ventures |
- |
69 |
- |
392 |
||||
Interest Expense |
(13,276) |
(13,288) |
(39,862) |
(40,164) |
||||
Loss on Early Extinguishment of Debt |
- |
- |
(189) |
- |
||||
Tax Expense |
(59) |
(2) |
(176) |
(2) |
||||
Change in Deferred Leasing Costs |
(4,801) |
(2,950) |
(7,543) |
(7,413) |
||||
Change in Receivables and Other Assets |
(2,496) |
(3,073) |
(8,129) |
2,680 |
||||
Change in Accounts Payable and Other Liabilities |
12,396 |
11,070 |
10,750 |
6,640 |
||||
Adjustments for Noncontrolling Interests |
4,631 |
5,662 |
14,455 |
16,848 |
||||
Adjustments for Unconsolidated Joint Ventures |
(183) |
(397) |
(616) |
(1,489) |
||||
Cash Flows Provided by Operating Activities |
$ 22,469 |
$ 25,851 |
$ 53,159 |
$ 63,548 |
||||
(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 SEPTEMBER 30, 2010 AND 2009 (In thousands, except number of properties data) |
||||||||
Average |
||||||||
Net Operating Income |
Occupancy |
|||||||
Number of |
Percentage |
|||||||
Properties |
of Portfolio (1) |
2010 |
2009 |
2010 |
2009 |
|||
Same-store properties (2): |
||||||||
Wholly-owned |
45 |
73.42% |
$ 24,828 |
$ 26,064 |
87.8% |
88.6% |
||
Parkway Properties Office Fund LP |
13 |
21.93% |
7,416 |
8,375 |
81.9% |
88.0% |
||
Unconsolidated joint ventures |
7 |
4.68% |
1,583 |
1,951 |
80.5% |
90.9% |
||
Total same-store properties |
65 |
100.03% |
33,827 |
36,390 |
86.0% |
88.6% |
||
Assets sold |
- |
-0.03% |
(9) |
6 |
N/A |
N/A |
||
Net operating income from |
||||||||
office and parking properties |
65 |
100.00% |
$ 33,818 |
$ 36,396 |
||||
(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 September 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 |
Nine Months Ended |
|||||
September 30 |
September 30 |
|||||
2010 |
2009 |
2010 |
2009 |
|||
Net income (loss) for Parkway Properties, Inc. |
$ (1,832) |
$ (1,555) |
$ 7,570 |
$ (1,424) |
||
Add (deduct): |
||||||
Interest expense |
13,669 |
13,672 |
41,051 |
41,450 |
||
Depreciation and amortization |
21,126 |
23,240 |
65,257 |
68,246 |
||
Management company expenses |
858 |
577 |
2,243 |
1,710 |
||
General and administrative expenses |
1,817 |
1,783 |
5,537 |
4,734 |
||
Equity in earnings of unconsolidated joint ventures |
(61) |
(48) |
(253) |
(475) |
||
Gain on involuntary conversion |
(40) |
- |
(40) |
(742) |
||
Gain on sale of real estate |
- |
- |
- |
(470) |
||
Net loss attributable to noncontrolling interests - real estate partnerships |
(2,356) |
(2,107) |
(7,581) |
(7,508) |
||
Income from discontinued operations |
(6) |
(105) |
(194) |
(309) |
||
Gain on sale of real estate from discontinued operations |
- |
- |
(8,518) |
- |
||
Management company income |
(585) |
(340) |
(1,331) |
(1,486) |
||
Interest and other income |
(355) |
(672) |
(1,105) |
(1,283) |
||
Net operating income from consolidated office and parking properties |
32,235 |
34,445 |
102,636 |
102,443 |
||
Net operating income from unconsolidated joint ventures |
1,583 |
1,951 |
5,766 |
7,223 |
||
Less: Net operating income (loss) from non same-store properties |
9 |
(6) |
(48) |
(484) |
||
Same-store net operating income |
$ 33,827 |
$ 36,390 |
$ 108,354 |
$ 109,182 |
||
SOURCE Parkway Properties, Inc.
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