JACKSON, Miss., Feb. 9 /PRNewswire-FirstCall/ -- Parkway Properties, Inc.
(NYSE: PKY) today announced results for its fourth quarter ended December 31,
2008.
(Logo: http://www.newscom.com/cgi-bin/prnh/20030513/PARKLOGO )
Steven G. Rogers, President and Chief Executive Officer stated, "We are
pleased to announce that we met the $7.18 cumulative adjusted funds available
for distribution ("FAD") goal established three years ago for our GEAR UP
Plan. We accomplished many other qualitative goals of the plan, but achieving
the financial goal of the plan in a tough economic environment is a testament
to the dedication of our team. We finished 2008 reporting funds from
operations ("FFO") of $3.67 per diluted share for the full year. Included in
our reported FFO were several unusual items that totaled a net reduction of
$3.4 million, or $0.23 per diluted share. The unusual items include large
lease termination fees, losses on extinguishment of debt, non-cash impairment
losses, restricted stock expense related to the GEAR UP Plan, a non-cash
purchase accounting adjustment and Hurricane Ike expenses. We have also signed
contracts to sell two non-strategic assets for gross proceeds of $15.5
million, and we intend to use the net proceeds to pay down borrowings under
our line of credit."
Consolidated Financial Results
-- FFO available to common shareholders totaled approximately $11.6
million, or $0.77 per diluted share, for the three months ended December 31,
2008, as compared to approximately $16.5 million, or $1.08 per diluted share,
for the three months ended December 31, 2007. For the year ended December 31,
2008, FFO totaled $55.6 million, or $3.67 per diluted share, compared to $62.5
million, or $4.00 per diluted share for the year ended December 31, 2007.
Included in FFO per diluted share are the following amounts (in thousands,
except average rent per square foot and average occupancy):
Q4 Q4 YTD YTD
Description 2008 2007 2008 2007
Unusual Items:
Non-cash purchase accounting
adjustment $- $- $(657) $-
Loss on extinguishment of debt $- $- $(2,153) $(370)
Hurricane Ike expense $263 $- $(377) $-
Non-cash impairment loss on
real estate $(2,542) $- $(2,542) $-
GEAR UP restricted stock
expense $(1,395) $- $(1,395) $-
Other Items of Note:
Lease termination fees (1) $89 $796 $3,722 $1,412
Straight-line rent (1) $918 $1,066 $1,896 $2,297
Amortization of above market
rent (1) $(49) $(257) $(586) $(1,269)
Bad debt expense (1) $(542) $(359) $(1,543) $(526)
Portfolio Information:
Average rent per square
foot (2)(3) $22.53 $21.35 $22.16 $21.04
Average occupancy (2)(4) 90.4% 92.3% 90.8% 91.6%
Same-store average rent per
square foot (2)(3) $22.24 $21.82 $22.16 $21.62
Same-store average
occupancy (2)(4) 90.4% 91.7% 90.6% 90.9%
Total office square feet under
ownership (2) 13,539 12,999 13,539 12,999
Total office square feet under
management (5) 15,351 14,719 15,351 14,719
(1) These items include 100% of amounts from wholly-owned assets plus the
Company's allocable share of these items recognized from the assets
held in consolidated joint ventures.
(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.
-- FAD totaled approximately $4.4 million for the three months ended
December 31, 2008, as compared to approximately $10.1 million for the three
months ended December 31, 2007. FAD totaled $32.3 million for the year ended
December 31, 2008, as compared to $42.4 million for the year ended December
31, 2007. FAD includes a $2.5 million non-cash impairment loss on real estate
for the three months and year ended December 31, 2008.
-- The financial goal of the three-year GEAR UP Plan was the achievement
of cumulative adjusted FAD of $7.18 per diluted share. Parkway achieved an
actual cumulative adjusted FAD for the plan of $7.20 per diluted share. As a
result of achieving this goal, the Company recorded approximately $1.4 million
in restricted stock expense during the fourth quarter 2008. This reflects the
vesting of approximately 30,500 restricted shares, which were valued under
generally accepted accounting principles ("GAAP") as of the date of the stock
grant at the beginning of the GEAR UP Plan. At December 31, 2008, the value
of these shares was $547,000.
-- Net loss available to common shareholders for the three months ended
December 31, 2008, was $7.1 million, or $0.47 per diluted share, as compared
to net loss available to common shareholders of $282,000, or $0.02 per diluted
share, for the three months ended December 31, 2007. Net income available to
common shareholders for the year ended December 31, 2008, was $4.5 million, or
$0.30 per diluted share as compared to $14.9 million, or $0.95 per diluted
share, for the year ended December 31, 2007. Net gains on the sale of real
estate of approximately $22.6 million and $20.3 million were included in net
income available to common shareholders for the years ended December 31, 2008
and 2007, respectively.
Asset Recycling
-- The Company has entered into contracts to sell two non-strategic office
properties, with $325,000 in combined non-refundable deposits, on Lynnwood
Plaza in Hampton Roads, Virginia, and Atrium at Stoneridge in Columbia, South
Carolina. Gross sales proceeds are estimated to be $15.5 million, and the net
proceeds from the sales will be used to reduce borrowings under the Company's
line of credit. In connection with the sale of Atrium at Stoneridge, the
Company expects to seller finance a $5.4 million note receivable that will
bear interest at 6.75% per annum on an interest-only basis through maturity in
2014. In accordance with GAAP, non-cash impairment losses totaling $1.8
million associated with the two assets were recorded in the fourth quarter
2008. The asset sales are subject to customary final closing requirements and
due diligence documentation, and the Company expects that these sales will be
completed in the first quarter 2009.
-- A non-cash impairment loss of $717,000 was recorded in the fourth
quarter of 2008 in connection with the valuation of approximately 12 acres of
land available for sale in New Orleans, Louisiana, based on a change in the
estimated fair value of the land.
Operations and Leasing
-- The Company's average rent per square foot increased 5.6% to $22.53
during the fourth quarter 2008 as compared to $21.35 for the fourth quarter
2007 and increased 5.3% to $22.16 for the year ended December 31, 2008, as
compared to $21.04 for the year ended December 31, 2007. On a same-store
basis, the Company's average rent per square foot increased 1.9% to $22.24
during the fourth quarter 2008 as compared to $21.82 during the fourth quarter
2007 and increased 2.5% to $22.16 during the year ended December 31, 2008, as
compared to $21.62 during the year ended December 31, 2007.
-- The Company's average occupancy for the fourth quarter 2008 was 90.4%
as compared to 92.3% for the fourth quarter 2007 and was 90.8% for the year
ended December 31, 2008, as compared to 91.6% for the year ended December 31,
2007. This occupancy decline was primarily due to the sale of three assets
during the third quarter of 2008, which had an average occupancy of 98.3%, and
the purchase of three office investments for Fund I with Ohio PERS in the
first quarter 2008, which had an average occupancy of 84.6%. On a same-store
basis, the Company's average occupancy for the fourth quarter 2008 was 90.4%
as compared to 91.7% for the fourth quarter 2007 and was 90.6% for the year
ended December 31, 2008, as compared to 90.9% for the year ended December 31,
2007.
-- At January 1, 2009, the Company's office portfolio occupancy was 90.1%
as compared to 90.4% at October 1, 2008, and 92.0% at January 1, 2008. Not
included in the January 1, 2009, occupancy rate are 16 signed leases totaling
93,000 square feet, which commence in the first and second quarters of 2009.
Including these leases, the Company's portfolio occupancy was 90.8% leased at
January 16, 2009.
-- Parkway's customer retention rate was 67.7% for the quarter ending
December 31, 2008, as compared to 66.7% for the quarter ending September 30,
2008, and 77.2% for the quarter ending December 31, 2007. Customer retention
for the year ended December 31, 2008 and 2007 was 70.7% and 72.0%,
respectively.
-- During the fourth quarter 2008, 60 leases were renewed or expanded on
418,000 rentable square feet at an average rent per square foot of $22.09,
representing a 6.6% increase, and at a cost of $2.19 per square foot of the
lease term in annual leasing costs. During the year ending December 31, 2008,
307 leases were renewed or expanded on 2.0 million rentable square feet at an
average rent per square foot of $21.78, representing a 5.0% increase and at a
cost of $2.35 per square foot per year of the lease term in annual leasing
costs.
-- During the fourth quarter 2008, 34 new leases were signed on 94,000
rentable square feet at an average rent per square foot of $20.99 and at a
cost of $5.32 per square foot of the lease term in annual leasing costs.
During the year ended December 31, 2008, 145 new leases were signed on 466,000
rentable square feet at an average rent per square foot of $21.66 and at an
average cost of $4.28 per square foot per year of the lease term in annual
leasing costs.
-- On a same-store basis, the Company's share of net operating income
("NOI") decreased $664,000 or 2.4% for the fourth quarter 2008 as compared to
the same period of the prior year on a GAAP basis. On a cash basis, the
Company's share of same-store NOI decreased $594,000 or 2.2% for the fourth
quarter 2008 as compared to the same period of the prior year. The decrease
in same-store NOI is primarily attributable to a decrease in lease termination
fees of $727,000 in the fourth quarter 2008 as compared to the fourth quarter
2007. The Company's share of same-store NOI for the year ended December 31,
2008, increased $545,000 or 0.5% compared to the same period of 2007 on a GAAP
basis and $807,000 or 0.8% on a cash basis.
Capital Structure
-- On December 31, 2008, the Company owed $185.9 million related to its
$311.0 million line of credit. The Company is in compliance with all
covenants under its line of credit. The Company has $21.8 million in debt
maturities in 2009 related to three assets in Houston, Texas that are
currently 96.7% leased.
-- The Pinnacle development in Jackson, Mississippi, opened on December 8,
2008, at a total cost of approximately $50.4 million, which includes the value
of the adjacent parking facility. The development consists of an 189,000 net
rentable square foot Class-A office building and the 1,734 space parking
facility that is leased from the City of Jackson for a period of 90 years.
The property is secured by $29.5 million in combined debt at a fixed interest
rate of 5.35% per annum. The building is currently 82% leased with
approximately 20,000 square feet of remaining lease up to achieve a stabilized
occupancy rate. At stabilized occupancy, the property produces a
capitalization rate of approximately 7.4%.
-- On December 23, 2008, the Company renewed and extended its $15.0
million line of credit with PNC Bank. The $15.0 million line is unsecured and
now matures in April 2011. The $15.0 million line has a current interest rate
equal to the 30-day LIBOR rate plus 200 basis points. The Company paid an
up-front fee of $52,500 and will pay fees on the unused portion of the line of
25 basis points.
-- The Company's previously announced cash dividend of $0.325 per share
for the quarter ended December 31, 2008, represents a payout of approximately
42.1% of FFO per diluted share for the quarter. Cash dividends of $2.275 per
share for the year ended December 31, 2008, represents a payout of
approximately 62.0% for the year. The fourth quarter dividend was paid on
December 24, 2008. The dividend was the ninetieth (90th) consecutive quarterly
distribution to Parkway's shareholders of Common Stock, representing an
annualized dividend rate of $1.30 per share and a yield of 7.9% based on the
closing stock price on February 6, 2009.
-- At December 31, 2008, the Company's debt-to-total market capitalization
ratio was 71.9% based on a stock price of $18.00 per share as compared to
56.7% at September 30, 2008, based on a stock price of $37.86 per share and
56.8% at December 31, 2007, based on a stock price of $36.98 per share.
FOCUS
On January 1, 2009, the Company initiated an operating plan that is
referred to as the FOCUS Plan. The FOCUS Plan is our strategy to concentrate
on the key drivers of profitability and the key elements of balance sheet
stability during the four year period 2009-2012 with our FOCUS on delivering
superior returns to our stakeholders. The Company anticipates announcing the
financial goals and details on modeling assumptions at a later date.
Outlook for 2009
The Company is reiterating its 2009 FFO outlook of $3.50 to $3.85 per
diluted share. The reconciliation of forecasted earnings per diluted share
("EPS") to forecasted FFO per diluted share is as follows:
Outlook for 2009 Range
Fully diluted EPS ($0.75-$0.40)
Plus: Real estate depreciation and amortization $5.36-$5.36
Plus: Depreciation on unconsolidated joint ventures $0.05-$0.05
Less: Minority interest depreciation and amortization ($1.16-$1.16)
FFO per diluted share $3.50-$3.85
The 2009 earnings outlook was based on an original earnings outlook issued
on December 11, 2008. Below please find the major assumptions to the
Company's 2009 earnings outlook.
2009 Earnings Outlook Assumptions
-- An average annual occupancy range of 88.5% to 89.5%.
-- An average rental rate per square foot of $21.85 to $22.85.
-- Recurring same-store net operating income decrease of (2.0%) to 0.0% on
a GAAP basis. On a recurring cash basis, annual same-store net
operating income is expected to decline by (3.5%) to (1.5%).
-- Net general and administrative expenses are expected to be in the range
of $6.8 to $7.2 million.
-- The Company is estimating its proportionate share of average
outstanding long-term debt to be $835.0 million to $840.0 million,
versus $863.0 million in 2008. The average interest rate on total debt
is estimated to average from 5.4% to 5.6%.
-- The Company is estimating total capital spending for building
improvements, tenant improvements and leasing commissions in the range
of $20.0 million to $25.0 million, as compared to $24.0 million in
2008.
-- No investments for the discretionary fund with the Teacher Retirement
System of Texas or 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 67 office properties located in 11
states with an aggregate of approximately 13.5 million square feet of leasable
space as of February 9, 2009. Included in the portfolio are 21 properties
totaling 3.8 million square feet that are owned jointly with other investors,
representing 28% 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 1.3 million square feet for
third-party owners as of February 9, 2009.
Additional Information
The Company will conduct a conference call to discuss the results of its
fourth quarter operations on Tuesday, February 10, 2009, at 11:00 a.m. Eastern
Time. The number for the conference call is 888-208-1507. A taped replay of
the call can be accessed 24 hours a day through February 19, 2009, by dialing
888-203-1112 and using the pass code of 9007274. An audio replay will be
archived and indexed in the investor relations section of the Company's
website at http://www.pky.com. A copy of the Company's 2008 fourth quarter
supplemental financial and property information package is available by
accessing the Company's website, emailing your request to rjordan@pky.com or
calling Rita Jordan at 601-948-4091. Please participate in the visual portion
of the conference call by accessing the Company's website and clicking on the
"4Q 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 fourth quarter 2008 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;
the risks associated with the ownership and development of real property; the
failure to acquire or sell properties as and when anticipated; 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.
Parkway Properties, Inc. FOR FURTHER INFORMATION:
188 E. Capitol Street, Suite 1000 Steven G. Rogers
Jackson, MS 39201 President & Chief Executive Officer
http://www.pky.com J. Mitchell Collins
(601) 948-4091 Chief Financial Officer
PARKWAY PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
December 31 December 31
2008 2007
(Unaudited)
Assets
Real estate related investments:
Office and parking properties $1,737,549 $1,551,707
Real estate development 609 14,686
Accumulated depreciation (282,919) (251,791)
1,455,239 1,314,602
Land available for sale 750 1,467
Mortgage loan 7,519 7,001
Investment in unconsolidated joint
ventures 11,057 11,236
1,474,565 1,334,306
Rents receivable and other assets 118,512 119,457
Intangible assets, net 79,460 70,719
Cash and cash equivalents 15,318 11,312
$1,687,855 $1,535,794
Liabilities
Notes payable to banks $185,940 $212,349
Mortgage notes payable 869,581 714,501
Accounts payable and other liabilities 98,862 88,496
1,154,383 1,015,346
Minority Interest
Minority Interest - unit holders 32 34
Minority Interest - real estate partnerships 127,192 80,506
127,224 80,540
Stockholders' Equity
8.00% Series D Preferred stock, $.001 par
value, 2,400,000 shares authorized, issued
and outstanding 57,976 57,976
Common stock, $.001 par value, 67,600,000
shares authorized, 15,253,396 and 15,223,350
shares issued and outstanding in 2008 and
2007, respectively 15 15
Common stock held in trust, at cost, 85,300
and 104,500 shares in 2008 and 2007,
respectively (2,895) (3,540)
Additional paid-in capital 428,367 425,221
Accumulated other comprehensive loss (7,728) (358)
Accumulated deficit (69,487) (39,406)
406,248 439,908
$1,687,855 $1,535,794
PARKWAY PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
Three Months Ended
December 31
2008 2007
(Unaudited)
Revenues
Income from office and parking properties $65,331 $59,843
Management company income 580 409
Total revenues 65,911 60,252
Expenses
Property operating expense 30,461 27,269
Depreciation and amortization 25,057 18,657
Management company expenses 594 301
General and administrative 3,282 1,493
Total expenses 59,394 47,720
Operating income 6,517 12,532
Other income and expenses
Interest and other income 313 220
Equity in earnings of unconsolidated joint
ventures 92 226
Impairment loss on real estate (2,542) -
Interest expense (14,472) (13,204)
Loss before minority interest and
discontinued operations (10,092) (226)
Minority interest - unit holders (1) -
Minority interest - real estate partnerships 4,235 599
Income (loss) from continuing operations (5,858) 373
Discontinued operations:
Income (loss) from discontinued operations (35) 545
Total discontinued operations (35) 545
Net income (loss) (5,893) 918
Dividends on preferred stock (1,200) (1,200)
Net loss available to common stockholders $(7,093) $(282)
Net loss per common share:
Basic:
Loss from continuing operations $(0.47) $(0.06)
Discontinued operations (0.00) 0.04
Net loss $(0.47) $(0.02)
Diluted:
Loss from continuing operations $(0.47) $(0.06)
Discontinued operations (0.00) 0.04
Net loss $(0.47) $(0.02)
Dividends per common share $0.325 $0.65
Weighted average shares outstanding:
Basic 15,033 15,138
Diluted 15,033 15,138
PARKWAY PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
Year Ended
December 31
2008 2007
(Unaudited)
Revenues
Income from office and parking properties $263,475 $233,304
Management company income 1,936 1,605
Total revenues 265,411 234,909
Expenses
Property operating expense 126,169 107,990
Depreciation and amortization 91,716 74,379
Management company expenses 1,947 1,188
General and administrative 9,725 6,602
Total expenses 229,557 190,159
Operating income 35,854 44,750
Other income and expenses
Interest and other income 1,333 528
Equity in earnings of unconsolidated joint
ventures 894 1,008
Gain on sale of real estate and other assets - 20,307
Impairment loss on real estate (2,542) -
Interest expense (59,426) (52,546)
Income (loss) before minority interest and
discontinued operations (23,887) 14,047
Minority interest - unit holders (1) (2)
Minority interest - real estate partnerships 11,369 3,174
Income (loss) from continuing operations (12,519) 17,219
Discontinued operations:
Income (loss) from discontinued operations (795) 2,473
Gain on sale of real estate from discontinued
operations 22,588 -
Total discontinued operations 21,793 2,473
Net income 9,274 19,692
Dividends on preferred stock (4,800) (4,800)
Net income available to common stockholders $4,474 $14,892
Net income (loss) per common share:
Basic:
Income (loss) from continuing operations $(1.15) $0.80
Discontinued operations 1.45 0.16
Net income $0.30 $0.96
Diluted:
Income (loss) from continuing operations $(1.14) $0.79
Discontinued operations 1.44 0.16
Net income $0.30 $0.95
Dividends per common share $2.275 $2.60
Weighted average shares outstanding:
Basic 15,023 15,482
Diluted 15,131 15,648
PARKWAY PROPERTIES, INC.
RECONCILIATION OF FUNDS FROM OPERATIONS AND
FUNDS AVAILABLE FOR DISTRIBUTION TO NET INCOME
FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2008 AND 2007
(In thousands, except per share data)
Three Months Ended Year Ended
December 31 December 31
2008 2007 2008 2007
(Unaudited) (Unaudited)
Net Income (Loss) $(5,893) $918 $9,274 $19,692
Adjustments to Net Income (Loss):
Preferred Dividends (1,200) (1,200) (4,800) (4,800)
Depreciation and Amortization 25,057 18,657 91,716 74,379
Depreciation and Amortization
- Discontinued Operations - 844 1,873 3,196
Minority Interest Depreciation
and Amortization (6,525) (2,940) (20,644) (10,414)
Adjustments for Unconsolidated
Joint Ventures 195 241 750 732
Minority Interest - Unit Holders 1 - 1 2
Gain on Sale of Real Estate - - (22,588) (20,260)
Funds From Operations Available to
Common Shareholders (1) $11,635 $16,520 $55,582 $62,527
Funds Available for Distribution
Funds From Operations Available
to Common Shareholders $11,635 $16,520 $55,582 $62,527
Add (Deduct) :
Adjustments for Unconsolidated
Joint Ventures (38) (200) (335) (547)
Adjustments for Minority Interest
in Real Estate Partnerships 442 390 2,495 1,456
Straight-line Rents (1,147) (1,192) (3,837) (3,186)
Straight-line Rents -
Discontinued Operations - (5) 61 (46)
Amortization of Above/Below
Market Leases (153) 34 45 788
Amortization of Share Based
Compensation 895 407 2,276 1,521
Capital Expenditures:
Building Improvements (985) (1,839) (4,043) (6,663)
Tenant Improvements - New
Leases (1,737) (862) (5,958) (3,172)
Tenant Improvements -
Renewal Leases (2,518) (1,081) (8,103) (5,446)
Leasing Costs - New Leases (948) (210) (2,713) (1,094)
Leasing Costs - Renewal
Leases (1,086) (1,850) (3,161) (3,758)
Funds Available for
Distribution (1) $4,360 $10,112 $32,309 $42,380
Diluted Per Common Share/Unit
Information (**)
FFO per share $0.77 $1.08 $3.67 $4.00
Dividends paid $0.325 $0.65 $2.275 $2.60
Dividend payout ratio for FFO 42.13% 60.10% 61.94% 65.07%
Weighted average shares/units
outstanding 15,083 15,274 15,132 15,649
Other Supplemental Information
Upgrades on Acquisitions $4,401 $5,172 $16,676 $26,824
Gain (Loss) on Non
Depreciable Assets and
Impairment Losses $(2,542) $- $(2,542) $47
**Information for Diluted
Computations:
Basic Common Shares/Units
Outstanding 15,034 15,139 15,024 15,483
Dilutive Effect of Other
Share Equivalents 49 135 108 166
(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 and straight line
rent adjustments, and reduced by 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.
PARKWAY PROPERTIES, INC.
CALCULATION OF EBITDA AND COVERAGE RATIOS
FOR THE THREE MONTHS AND YEAR ENDED DECEMBER 31, 2008 AND 2007
(In thousands)
Three Months Ended Year Ended
December 31 December 31
2008 2007 2008 2007
(Unaudited) (Unaudited)
Net Income (Loss) $(5,893) $918 $9,274 $19,692
Adjustments to Net Income (Loss):
Interest Expense 13,969 13,285 58,616 52,527
Amortization of Financing Costs 503 304 1,825 1,202
Prepayment Expense - Early
Extinguishment of Debt - - 2,153 370
Depreciation and Amortization 25,057 19,501 93,589 77,575
Amortization of Share Based
Compensation 895 407 2,276 1,521
Gain on Real Estate and Non
Depreciable Assets 2,542 - (20,046) (20,307)
Tax Expense - (156) 2 (27)
EBITDA Adjustments -
Unconsolidated Joint Ventures 325 373 1,270 1,255
EBITDA Adjustments - Minority
Interest in Real Estate
Partnerships (9,683) (4,690) (32,750) (16,709)
EBITDA (1) $27,715 $29,942 $116,209 $117,099
Interest Coverage Ratio:
EBITDA $27,715 $29,942 $116,209 $117,099
Interest Expense:
Interest Expense $13,969 $13,285 $58,616 $52,527
Capitalized Interest 235 127 836 242
Interest Expense -
Unconsolidated Joint Ventures 127 130 509 513
Interest Expense - Minority
Interest in Real Estate
Partnerships (3,087) (1,705) (11,837) (6,133)
Total Interest Expense $11,244 $11,837 $48,124 $47,149
Interest Coverage Ratio 2.46 2.53 2.41 2.48
Fixed Charge Coverage Ratio:
EBITDA $27,715 $29,942 $116,209 $117,099
Fixed Charges:
Interest Expense $11,244 $11,837 $48,124 $47,149
Preferred Dividends 1,200 1,200 4,800 4,800
Principal Payments (Excluding
Early Extinguishment of Debt) 3,159 3,810 13,640 15,580
Principal Payments -
Unconsolidated Joint Ventures 14 13 54 50
Principal Payments - Minority
Interest in Real Estate
Partnerships (87) (84) (337) (313)
Total Fixed Charges $15,530 $16,776 $66,281 $67,266
Fixed Charge Coverage Ratio 1.78 1.78 1.75 1.74
Modified Fixed Charge Coverage
Ratio:
EBITDA $27,715 $29,942 $116,209 $117,099
Modified Fixed Charges:
Interest Expense $11,244 $11,837 $48,124 $47,149
Preferred Dividends 1,200 1,200 4,800 4,800
Total Modified Fixed Charges $12,444 $13,037 $52,924 $51,949
Modified Fixed Charge Coverage Ratio 2.23 2.30 2.20 2.25
The following table reconciles
EBITDA to cash flows provided by
operating activities:
EBITDA $27,715 $29,942 $116,209 $117,099
Amortization of Above Market
Leases (153) 34 45 788
Amortization of Mortgage Loan
Discount (138) (71) (518) (71)
Operating Distributions from
Unconsolidated Joint Ventures 187 134 1,042 1,036
Interest Expense (13,969) (13,285) (58,616) (52,527)
Prepayment Expense - Early
Extinguishment of Debt - - (2,153) (370)
Tax Expense - 156 (2) 27
Change in Deferred Leasing Costs (2,211) (2,638) (8,738) (7,080)
Change in Receivables and Other
Assets (3,833) 1,624 (274) (5,736)
Change in Accounts Payable and
Other Liabilities (4,061) 2,742 (2,165) 11,491
Adjustments for Minority
Interests 5,449 4,091 21,382 13,537
Adjustments for Unconsolidated
Joint Ventures (417) (599) (2,164) (2,263)
Cash Flows Provided by Operating
Activities $8,569 $22,130 $64,048 $75,931
(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 DECEMBER 31, 2008 AND 2007
(In thousands, except number of properties data)
Net Operating
Number of Percentage of Income
Properties Portfolio(1) 2008 2007
Same-store properties (2):
Wholly-owned 46 75.24% $26,235 $26,399
Parkway Properties Office Fund LP 10 13.18% 4,597 5,585
Other consolidated joint venture 1 0.84% 292 630
Total same-store properties 57 89.26% 31,124 32,614
2008 acquisitions 3 10.62% 3,703 -
Office property development 1 0.02% 6 (10)
Assets sold - 0.10% 37 (30)
Net operating income from
office and parking properties 61 100.00% $34,870 $32,574
Average
Occupancy
2008 2007
Same-store properties (2):
Wholly-owned 90.4% 91.3%
Parkway Properties Office Fund LP 90.8% 94.1%
Other consolidated joint venture 88.2% 87.6%
Total same-store properties 90.4% 91.7%
2008 acquisitions 84.7% N/A
Office property development N/A N/A
Assets sold N/A N/A
Net operating income from
office and parking properties
(1) Percentage of portfolio based on 2008 net operating income.
(2) Parkway defines Same-Store Properties as those properties that were
owned for the entire three-month periods ended December 31, 2008 and
2007 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 Year Ended
December 31 December 31
2008 2007 2008 2007
Net income (loss) $(5,893) $918 $9,274 $19,692
Add (deduct):
Interest expense 14,472 13,204 59,426 52,546
Depreciation and amortization 25,057 18,657 91,716 74,379
Management company expenses 594 301 1,947 1,188
General and administrative
expenses 3,282 1,493 9,725 6,602
Equity in earnings of
unconsolidated joint ventures (92) (226) (894) (1,008)
Gain on sale of real estate and
other assets - - - (20,307)
Impairment loss on real estate 2,542 - 2,542 -
Minority interest - unit holders 1 - 1 2
Minority interest - real estate
partnerships (4,235) (599) (11,369) (3,174)
(Income) loss from discontinued
operations 35 (545) 795 (2,473)
Gain on sale of real estate from
discontinued operations - - (22,588) -
Management company income (580) (409) (1,936) (1,605)
Interest and other income (313) (220) (1,333) (528)
Net operating income from office
and parking properties 34,870 32,574 137,306 125,314
Less: Net operating (income) loss
from non same-store properties (3,746) 40 (14,671) (2,113)
Same-store net operating income $31,124 $32,614 $122,635 $123,201
