Steven G. Rogers, President and Chief Executive Officer stated, "We are pleased to report that we exceeded our internal expectations by realizing funds from operations ("FFO") of $0.86 per diluted share, while maintaining average portfolio occupancy and average rent per square foot at the high end of our earnings outlook. We also completed an $85.0 million common stock offering during the second quarter 2009 that should give the Company sufficient future borrowing capacity to handle our debt maturities through 2013. While initially dilutive to FFO, we believe that this common stock offering helps solidify our balance sheet and should allow the Company to exit this recession in a position of greater strength. We also continued our non-core asset recycling program by selling 1717 St. James Place, a 110,000 square foot office building built in 1975 located in Houston, Texas, for net cash proceeds of $8.4 million."
Consolidated Financial Results
FFO available to common shareholders totaled $16.8 million, or $0.86 per diluted share, for the three months ended June 30, 2009, as compared to $15.6 million, or $1.03 per diluted share, for the three months ended June 30, 2008. For the three months ended June 30, 2009, the Company recorded an unusual item of approximately $279,000, or $0.01 per diluted share, related to the partial recognition of a gain on involuntary conversion from Hurricane Ike. For the six months ended June 30, 2009, FFO totaled $32.7 million, or $1.89 per diluted share, compared to $29.9 million, or $1.98 per diluted share for the six months ended June 30, 2008. For the six months ended June 30, 2009, the Company recorded an unusual item of approximately $742,000, or $0.04 per diluted share, related to the partial recognition of a gain on involuntary conversion from Hurricane Ike. Included in FFO per diluted share are the following amounts (in thousands, except average rent per square foot and average occupancy):
Description Q2 2009 Q2 2008 YTD 2009 YTD 2008
-------------------------------------------------------------------------
Unusual Items:
Gain on involuntary
conversion from
Hurricane Ike $279 $- $742 $-
Non-cash purchase
accounting
adjustment $- $- $- $(657)
Net gain/(loss) on
extinguishment of
debt $- $388 $- $(13)
Other Items of Note:
Lease termination
fees (1) $39 $214 $80 $1,281
Straight-line rent (1) $1,255 $426 $2,343 $647
Amortization of above
market rent (1) $(117) $(245) $(147) $(385)
Bad debt expense (1) $(650) $(202) $(1,268) $(638)
Portfolio
Information:
Average rent per
square foot (2)(3) $23.07 $22.12 $22.93 $21.93
Average occupancy
(2)(4) 89.4% 90.6% 89.7% 90.8%
Same-store average
rent per square foot
(2)(3) $23.17 $22.50 $22.80 $22.19
Same-store average
occupancy (2)(4) 89.5% 90.1% 90.0% 90.7%
Total office square
feet under ownership
(2) 13,353 14,126 13,353 14,126
Total office square
feet under
management (5) 14,764 15,938 14,764 15,938
These items include 100% of amounts from wholly-owned assets plus the Company's allocable share of these items recognized from the assets held in consolidated joint ventures and unconsolidated joint ventures.
These items include total office square feet of wholly-owned assets, consolidated joint ventures and unconsolidated joint ventures.
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.
Average occupancy is defined as average occupied square feet divided by average total rentable square feet.
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.
Funds available for distribution ("FAD") totaled $10.6 million, or $0.54 per diluted share, for the three months ended June 30, 2009, as compared to $10.3 million, or $0.68 per diluted share, for the three months ended June 30, 2008. FAD totaled $20.3 million, or $1.18 per diluted share, for the six months ended June 30, 2009, compared to $20.5 million, or $1.35 per diluted share for the six months ended June 30, 2008.
Net loss available to common shareholders for the three months ended June 30, 2009, was $280,000, or $0.01 per diluted share, as compared to net loss available to common shareholders of $3.1 million, or $0.21 per diluted share, for the three months ended June 30, 2008. Net loss available to common shareholders for the six months ended June 30, 2009, was $2.3 million, or $0.13 per diluted share as compared to net loss available to common shareholders of $6.9 million, or $0.46 per diluted share, for the six months ended June 30, 2008.
Asset Recycling
On June 1, 2009, the Company closed on the non-core asset sale of 1717 St. James Place, a 110,000 square foot office building built in 1975 in Houston, Texas, for gross sales proceeds of $8.7 million and received net cash proceeds from the sale of $8.4 million. The Company recognized a gain on the sale of $540,000 in the second quarter 2009.
On July 8, 2009, the contract to sell Atrium at Stoneridge in Columbia, South Carolina, a non-core office building, was terminated due to the inability of the proposed buyer to raise sufficient equity to complete the purchase. The Company has received $350,000 in non-refundable earnest money in connection with the proposed sale of this asset that will be recorded as other income in the third quarter 2009.
Operations and Leasing
The Company's average rent per square foot increased 4.3% to $23.07 during the second quarter 2009 as compared to $22.12 for the second quarter 2008 and increased 4.6% to $22.93 during the six months ended June 30, 2009, as compared to $21.93 for the six months ended June 30, 2008. On a same-store basis, the Company's average rent per square foot increased 3.0% to $23.17 during the second quarter 2009 as compared to $22.50 during the second quarter 2008, and increased 2.8% to $22.80 during the six months ended June 30, 2009, as compared to $22.19 during the six months ended June 30, 2008.
The Company's average occupancy for the second quarter 2009 was 89.4% as compared to 90.6% for the second quarter 2008, and was 89.7% for the six months ended June 30, 2009, as compared to 90.8% for the six months ended June 30, 2008. On a same-store basis, the Company's average occupancy for the second quarter 2009 was 89.5% as compared to 90.1% for the second quarter 2008. For the six months ended June 30, 2009, same-store average occupancy was 90.0% as compared to 90.7% for the six months ended June 30, 2008.
At July 1, 2009, the Company's office portfolio occupancy was 88.7% as compared to 89.2% at April 1, 2009, and 91.3% at July 1, 2008. Not included in the July 1, 2009, occupancy rate are 26 signed leases totaling 153,000 square feet, which commence in the third quarter of 2009 through the first quarter of 2010. Including these leases, the Company's portfolio occupancy was 89.8% leased at July 10, 2009.
Parkway's customer retention rate was 68.8% for the quarter ending June 30, 2009, as compared to 54.1% for the quarter ending March 31, 2009, and 87.1% for the quarter ending June 30, 2008. Customer retention for the six months ended June 30, 2009, and June 30, 2008, was 62.9% and 73.7%, respectively.
During the second quarter 2009, 71 leases were renewed or expanded on 531,000 rentable square feet at an average rent per square foot of $19.96, representing a 10.0% decrease, and at a cost of $2.48 per square foot of the lease term in annual leasing costs. Included in these leases are a 106,000 square foot renewal in Atlanta at a cost of $3.80 per square foot per year of the lease term, two renewals totaling 89,000 square feet renewal in Houston at a cost of $0.21 per square foot per year of the lease term and a 49,000 square foot renewal in Jacksonville at a cost of $1.77 per square foot per year of the lease term. These leases represent 46.0% of the total renewal and expansion leases for the second quarter 2009. During the six months ending June 30, 2009, 126 leases were renewed or expanded on 820,000 rentable square feet at an average rent per square foot of $20.47, representing a 7.7% decrease, and at a cost of $2.25 per square foot per year of the lease term in annual leasing costs.
During the second quarter 2009, 25 new leases were signed on 202,000 rentable square feet at an average rent per square foot of $21.67 and at a cost of $4.36 per square foot of the lease term in annual leasing costs. During the six months ending June 30, 2009, 48 new leases were signed on 308,000 rentable square feet at an average rent per square foot of $20.66 and at an average cost of $4.32 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") increased $351,000 or 1.3% for the second quarter 2009 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 $356,000 or 1.3% for the second quarter 2009 as compared to the same period of the prior year. The Company's share of same-store NOI for the six months ending June 30, 2009, decreased $253,000 or 0.5% compared to the same period of 2008 on a GAAP basis and decreased $1.6 million or 2.9% on a cash basis. The decrease in same-store NOI is primarily attributable to a decrease in lease termination fees of $1.1 million, an increase in ad valorem taxes of $1.2 million, partially offset by an increase in rent income of $1.7 million due to a 2.8% increase in average rent per square foot for the six months ending June 30, 2009, as compared to the same period of 2008.
Subsequent to the second quarter 2009, the Company announced the expansion of its wholly-owned subsidiary, Parkway Realty Services, LLC in Houston, Texas and the addition of commercial leasing veteran Mark Preston to the Houston team. Mr. Preston will be responsible for leasing and business development as the Company expands its third party business in the Houston market.
Capital Structure
On April 28, 2009, the Company sold 6.25 million shares of common stock to UBS Investment Bank at a gross offering price of $13.71 per share and a net price of $13.56 per share. The Company used the net proceeds of approximately $84.5 million to reduce outstanding borrowings under the Company's line of credit and for general corporate purposes.
On May 4, 2009, the Company placed an $18.5 million seven-year non-recourse first mortgage with a fixed interest rate of 7.6% per annum, and the proceeds were used to reduce borrowings under the line of credit. The mortgage is secured by two office buildings in Houston, Texas totaling 303,000 square feet.
On June 30, 2009, the Company owed $100.0 million related to its $311.0 million line of credit and has $28.5 million in cash and cash equivalents. The Company has no outstanding debt maturities in 2009 and $126.4 million in 2010. Included in the 2010 debt maturities is a $60.0 million mortgage related to its Capital City Plaza asset, which is currently 94.0% leased. The mortgage on Capital City Plaza has a one-year extension option at the Company's discretion. Assuming the extension option is exercised, the Company's total maturities for 2010 would be $66.4 million, and its existing line of credit capacity could be utilized to pay such debt maturities.
The Company's previously announced cash dividend of $0.325 per share for the quarter ended June 30, 2009, represents a payout of approximately 37.7% of FFO per diluted share for the quarter. The second quarter dividend was paid on June 24, 2009. The dividend was the ninety-first (91st) consecutive quarterly distribution to Parkway's shareholders of Common Stock, representing an annualized dividend rate of $1.30 per share and a yield of 9.2% based on the closing stock price on July 31, 2009 of $14.17.
At June 30, 2009, the Company's debt to EBITDA multiple was 6.5 times as compared to 7.3 times at March 31, 2009, and 7.8 times at June 30, 2008. The decrease in the debt to EBITDA multiple at June 30, 2009 is primarily due to the reduction in debt as a result of the $85.0 million common stock offering.
Outlook for 2009
The Company is reiterating its 2009 FFO outlook of $2.80 to $3.15 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 ($0.50-$0.15)
Plus: Real estate depreciation and $4.19-$4.19
amortization
Plus: Depreciation on unconsolidated
joint ventures $0.04-$0.04
Less: Noncontrolling interest depreciation
and amortization ($0.93-$0.93)
-------------
FFO per diluted share $2.80-$3.15
=============
The 2009 earnings outlook was based on an original earnings outlook issued on December 11, 2008 and adjusted for the impact of the April 28, 2009 common stock offering.
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 65 office properties located in 11 states with an aggregate of approximately 13.4 million square feet of leasable space at August 3, 2009. Included in the portfolio are 21 properties totaling 3.9 million square feet that are owned jointly with other investors, representing 28.8% 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 1.4 million square feet for third-party owners at August 3, 2009.
Additional Information
The Company will conduct a conference call to discuss the results of its second quarter operations on Tuesday, August 4, 2009, at 11:00 a.m. Eastern Time. The number for the conference call is 888-245-1030. A taped replay of the call can be accessed 24 hours a day through August 14, 2009, by dialing 888-203-1112 and using the pass code of 3461387. 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 2009 second quarter supplemental financial and property information package is available by accessing the Company's website, emailing your request to rjordan@pky.com or calling Rita Jordan at 601-948-4091. Please participate in the visual portion of the conference call by accessing the Company's website and clicking on the "2Q Call" icon.
Additional information on Parkway Properties, Inc., including an archive of corporate press releases and conference calls, is available on the Company's website. The Company's second quarter 2009 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.
Company's Use of FFO, FAD and EBITDA
FFO, FFO per diluted share, FAD 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 and FFO per diluted share, FAD 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.
PARKWAY PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
June 30 December 31
2009 2008
--------- -----------
(Unaudited)
Assets
Real estate related investments:
Office and parking properties $1,721,367 $1,737,549
Office property held for sale 6,824 -
Real estate development 609 609
Accumulated depreciation (309,324) (282,919)
-------- --------
1,419,476 1,455,239
Land available for sale 750 750
Mortgage loan 7,812 7,519
Investment in unconsolidated joint
ventures 11,326 11,057
------ ------
1,439,364 1,474,565
Rents receivable and other assets 109,469 118,512
Intangible assets, net 71,121 79,460
Cash and cash equivalents 28,467 15,318
------ ------
$1,648,421 $1,687,855
========== ==========
Liabilities
Notes payable to banks $100,000 $185,940
Mortgage notes payable 859,704 869,581
Accounts payable and other
liabilities 86,487 98,894
------ ------
1,046,191 1,154,415
--------- ---------
Equity
Parkway Properties, Inc. shareholders' equity
8.00% Series D Preferred stock, $.001 par value,
2,400,000 shares authorized, issued and
outstanding 57,976 57,976
Common stock, $.001 par value,
67,600,000 shares authorized,
21,621,052 and 15,253,396 shares
issued and outstanding in 2009 and
2008, respectively 22 15
Common stock held in trust, at cost,
71,255 and 85,300 shares in 2009 and
2008, respectively (2,399) (2,895)
Additional paid-in capital 514,100 428,367
Accumulated other comprehensive loss (5,547) (7,728)
Accumulated deficit (83,770) (69,487)
------- -------
Total Parkway Properties, Inc.
shareholders' equity 480,382 406,248
Noncontrolling interest - real
estate partnerships 121,848 127,192
------- -------
Total equity 602,230 533,440
------- -------
$1,648,421 $1,687,855
========== ==========
PARKWAY PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
Three Months Ended
June 30
-------
2009 2008
---- ----
(Unaudited)
Revenues
Income from office and parking properties $66,113 $65,376
Management company income 731 410
--- ---
Total revenues 66,844 65,786
------ ------
Expenses
Property operating expense 31,381 31,173
Depreciation and amortization 21,720 22,443
Management company expenses 632 432
General and administrative 1,369 2,092
----- -----
Total expenses 55,102 56,140
------ ------
Operating income 11,742 9,646
Other income and expenses
Interest and other income 309 306
Equity in earnings of unconsolidated
joint ventures 227 289
Gain on involuntary conversion 279 -
Gain on sale of real estate 540 -
Interest expense (14,050) (14,972)
------- -------
Loss from continuing operations (953) (4,731)
Discontinued operations:
Income from discontinued operations 236 732
--- ---
Net loss (717) (3,999)
Net loss attributable to noncontrolling
interest - real estate partnerships 1,637 2,063
----- -----
Net income (loss) for Parkway
Properties, Inc. 920 (1,936)
Dividends on preferred stock (1,200) (1,200)
------ ------
Net loss available to common
stockholders $(280) $(3,136)
===== =======
Net loss per common share attributable
to Parkway Properties, Inc.:
Basic:
Loss from continuing operations $(0.02) $(0.26)
Discontinued operations 0.01 0.05
---- ----
Net loss $(0.01) $(0.21)
====== ======
Diluted:
Loss from continuing operations $(0.02) $(0.26)
Discontinued operations 0.01 0.05
---- ----
Net loss $(0.01) $(0.21)
====== ======
Dividends per common share $0.325 $0.65
====== =====
Weighted average shares outstanding:
Basic 19,457 15,024
====== ======
Diluted 19,457 15,024
====== ======
PARKWAY PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
Six Months Ended
June 30
-------
2009 2008
---- ----
(Unaudited)
Revenues
Income from office and parking properties $133,483 $127,608
Management company income 1,146 907
----- ---
Total revenues 134,629 128,515
------- -------
Expenses
Property operating expense 65,102 61,032
Depreciation and amortization 45,276 43,649
Management company expenses 1,133 921
General and administrative 2,951 4,388
----- -----
Total expenses 114,462 109,990
------- -------
Operating income 20,167 18,525
Other income and expenses
Interest and other income 611 674
Equity in earnings of unconsolidated
joint ventures 427 547
Gain on involuntary conversion 742 -
Gain on sale of real estate 470 -
Interest expense (28,101) (30,110)
------- -------
Loss from continuing operations (5,684) (10,364)
Discontinued operations:
Income from discontinued operations 414 1,283
--- -----
Net loss (5,270) (9,081)
Net loss attributable to noncontrolling
interest - real estate partnerships 5,401 4,550
----- -----
Net income (loss) for Parkway Properties,
Inc. 131 (4,531)
Dividends on preferred stock (2,400) (2,400)
------ ------
Net loss available to common stockholders $(2,269) $(6,931)
======= =======
Net loss per common share attributable to
Parkway Properties, Inc.:
Basic:
Loss from continuing operations $(0.15) $(0.55)
Discontinued operations 0.02 0.09
---- ----
Net loss $(0.13) $(0.46)
====== ======
Diluted:
Loss from continuing operations $(0.15) $(0.55)
Discontinued operations 0.02 0.09
---- ----
Net loss $(0.13) $(0.46)
====== ======
Dividends per common share $0.65 $1.30
===== =====
Weighted average shares outstanding:
Basic 17,262 15,013
====== ======
Diluted 17,262 15,013
====== ======
PARKWAY PROPERTIES, INC.
RECONCILIATION OF FUNDS FROM OPERATIONS AND
FUNDS AVAILABLE FOR DISTRIBUTION TO NET INCOME
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2009 AND 2008
(In thousands, except per share data)
Three Months Ended Six Months Ended
June 30 June 30
------- -------
2009 2008 2009 2008
---- ---- ---- ----
(Unaudited) (Unaudited)
Net Income (Loss) $920 $(1,936) $131 $(4,531)
Adjustments to Net Income
(Loss):
Preferred Dividends (1,200) (1,200) (2,400) (2,400)
Depreciation and
Amortization 21,720 22,443 45,276 43,649
Depreciation and
Amortization
- Discontinued
Operations - 995 24 1,957
Noncontrolling Interest
Depreciation and
Amortization (4,316) (4,898) (10,314) (9,108)
Adjustments for
Unconsolidated
Joint Ventures 213 179 409 355
Gain on Sale of Real Estate (540) - (470) -
--- --- --- ---
Funds From Operations
Available to Common
Shareholders (1) $16,797 $15,583 $32,656 $29,922
======= ======= ======= =======
Funds Available for
Distribution
Funds From Operations
Available to Common
Shareholders $16,797 $15,583 $32,656 $29,922
Add (Deduct) :
Adjustments for
Unconsolidated
Joint Ventures (394) (127) (518) (181)
Adjustments for
Noncontrolling Interest
in Real Estate
Partnerships 1,314 738 2,383 1,380
Straight-line Rents (1,896) (1,071) (3,173) (1,874)
Straight-line Rents -
Discontinued Operations (12) 26 (58) 56
Amortization of Above/
Below Market Leases 129 190 (90) 247
Amortization of Share-
Based Compensation 620 464 1,281 918
Capital Expenditures:
Building Improvements (1,200) (936) (1,878) (1,873)
Tenant Improvements -
New Leases (1,689) (1,619) (3,850) (2,721)
Tenant Improvements -
Renewal Leases (1,056) (1,800) (2,916) (3,040)
Leasing Costs - New
Leases (785) (608) (975) (798)
Leasing Costs -
Renewal Leases (1,258) (541) (2,540) (1,565)
------ ---- ------ ------
Funds Available for
Distribution (1) $10,570 $10,299 $20,322 $20,471
======= ======= ======= =======
Diluted Per Common
Share/Unit
Information (**)
FFO per share 0.86 $1.03 $1.89 $1.98
FAD per share $0.54 $0.68 $1.18 $1.35
Dividends paid $0.325 $0.65 $0.65 $1.30
Dividend payout ratio
for FFO 37.74% 63.28% 34.42% 65.80%
Dividend payout ratio
for FAD 59.97% 95.75% 55.31% 96.18%
Weighted average
shares/units
outstanding 19,505 15,170 17,292 15,146
Other Supplemental
Information
Upgrades on
Acquisitions $1,965 $4,059 $4,519 $9,232
Gain on Involuntary
Conversion $279 $- $742 $-
**Information for Diluted
Computations:
Basic Common Shares/
Units Outstanding 19,458 15,025 17,263 15,015
Dilutive Effect of
Other Share
Equivalents 47 145 29 131
(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 SIX MONTHS ENDED JUNE 30, 2009 AND 2008
(In thousands)
Three Months Ended Six Months Ended
June 30 June 30
------- -------
2009 2008 2009 2008
---- ---- ---- ----
(Unaudited) (Unaudited)
Net Income (Loss) $920 $(1,936) $131 $(4,531)
Adjustments to Net Income
(Loss):
Interest Expense 13,316 15,314 26,876 29,988
Amortization of Financing
Costs 734 426 1,225 872
Prepayment (Income) Expense
- Early Extinguishment of
Debt - (388) - 13
Depreciation and Amortization 21,720 23,438 45,300 45,606
Amortization of Share-Based
Compensation 620 464 1,281 918
Net Gain on Real Estate and
Involuntary Conversion (819) - (1,212) -
Tax Expense (16) - - -
EBITDA Adjustments -
Unconsolidated Joint Ventures 341 310 665 614
EBITDA Adjustments -
Noncontrolling Interest in
Real Estate Partnerships (7,451) (8,043) (16,587) (14,926)
------ ------ ------- -------
EBITDA (1) $29,365 $29,585 $57,679 $58,554
======= ======= ======= =======
Interest Coverage Ratio:
EBITDA $29,365 $29,585 $57,679 $58,554
======= ======= ======= =======
Interest Expense:
Interest Expense $13,316 $15,314 $26,876 $29,988
Capitalized Interest - 187 - 343
Interest Expense -
Unconsolidated Joint
Ventures 125 129 250 254
Interest Expense -
Noncontrolling Interest
in Real Estate
Partnerships (3,065) (3,077) (6,134) (5,689)
------ ------ ------ ------
Total Interest Expense $10,376 $12,553 $20,992 $24,896
======= ======= ======= =======
Interest Coverage Ratio 2.83 2.36 2.75 2.35
==== ==== ==== ====
Fixed Charge Coverage Ratio:
EBITDA $29,365 $29,585 $57,679 $58,554
======= ======= ======= =======
Fixed Charges:
Interest Expense $10,376 $12,553 $20,992 $24,896
Preferred Dividends 1,200 1,200 2,400 2,400
Principal Payments
(Excluding Early
Extinguishment of Debt) 3,381 3,458 6,611 7,250
Principal Payments -
Unconsolidated Joint
Ventures 40 13 73 26
Principal Payments -
Noncontrolling Interest
in Real Estate Partnerships (274) (86) (416) (172)
---- --- ---- ----
Total Fixed Charges $14,723 $17,138 $29,660 $34,400
======= ======= ======= =======
Fixed Charge Coverage Ratio 1.99 1.73 1.94 1.70
==== ==== ==== ====
Modified Fixed Charge
Coverage Ratio:
EBITDA $29,365 $29,585 $57,679 $58,554
======= ======= ======= =======
Modified Fixed Charges:
Interest Expense $10,376 $12,553 $20,992 $24,896
Preferred Dividends 1,200 1,200 2,400 2,400
----- ----- ----- -----
Total Modified Fixed Charges $11,576 $13,753 $23,392 $27,296
======= ======= ======= =======
Modified Fixed Charge
Coverage Ratio 2.54 2.15 2.47 2.15
==== ==== ==== ====
The following table reconciles EBITDA to cash flows provided by
operating activities:
EBITDA $29,365 $29,585 $57,679 $58,554
Amortization of Above
(Below) Market Leases 129 190 (90) 247
Amortization of Mortgage
Loan Discount (148) (126) (293) (249)
Operating Distributions from
Unconsolidated Joint Ventures 162 279 323 661
Interest Expense (13,316) (15,314) (26,876) (29,988)
Prepayment Income (Expense)
- Early Extinguishment of
Debt - 388 - (13)
Tax Expense 16 - - -
Change in Deferred Leasing
Costs (2,332) (1,638) (4,463) (4,694)
Change in Receivables and
Other Assets (7,808) (509) 5,753 9,894
Change in Accounts Payable
and Other Liabilities 8,352 7,749 (4,430) (4,833)
Adjustments for Noncontrolling
Interests 5,814 5,980 11,186 10,376
Adjustments for Unconsolidated
Joint Ventures (568) (599) (1,092) (1,161)
---- ---- ------ ------
Cash Flows Provided by
Operating Activities $19,666 $25,985 $37,697 $38,794
======= ======= ======= =======
(1) Parkway defines EBITDA, a non-GAAP financial measure, as net income
before interest expense, income taxes, depreciation, amortization, losses
on early extinguishment of debt and other gains and losses. EBITDA, as
calculated by us, is not comparable to EBITDA reported by other REITs that
do not define EBITDA exactly as we do. EBITDA does not represent cash
generated from operating activities in accordance with generally accepted
accounting principles, and should not be considered an alternative to
operating income or net income as an indicator of performance or as an
alternative to cash flows from operating activities as an indicator of
liquidity.
PARKWAY PROPERTIES, INC.
NET OPERATING INCOME FROM OFFICE AND PARKING PROPERTIES
THREE MONTHS ENDED JUNE 30, 2009 AND 2008
(In thousands, except number of properties data)
Net Operating Average
Income Occupancy
------------- -------------
Number of Percentage of
Properties Portfolio(1) 2009 2008 2009 2008
---------------------------------------------------------
Same-store
properties (2):
Wholly-owned 43 66.65% $24,958 $24,600 89.4% 89.8%
Parkway
Properties
Office
Fund LP 13 22.86% 8,561 8,733 87.7% 89.4%
Other
consolidated
joint
venture 1 1.54% 578 565 87.6% 88.0%
Unconsolidated
joint
ventures 7 7.25% 2,713 2,728 96.4% 96.3%
--------------------------------------- -------------
Total same-store
properties 64 98.30% 36,810 36,626 89.5% 90.1%
Office property
development 1 1.27% 475 (5) 80.3% N/A
Assets sold - 0.43% 160 310 N/A N/A
--------------------------------------- -------------
Net operating
income from
office and
parking
properties 65 100.00% $37,445 $36,931
---------------------------------------
(1) Percentage of portfolio based on 2009 net operating income.
(2) Parkway defines Same-Store Properties as those properties that were
owned for the entire three-month periods ended June 30, 2009 and 2008 and
excludes properties classified as discontinued operations. Same-Store
net operating income ("SSNOI") includes income from real estate
operations less property operating expenses (before interest and
depreciation and amortization) for Same-Store Properties. SSNOI as
computed by Parkway may not be comparable to SSNOI reported by other
REITs that do not define the measure exactly as we do. SSNOI is a
supplemental industry reporting measurement used to evaluate the
performance of the Company's investments in real estate assets. The
following table is a reconciliation of net income to SSNOI:
Three Months Ended Six Months Ended
June 30 June 30
--------------- ----------------
2009 2008 2009 2008
--------------- ----------------
Net income (loss) for
Parkway Properties, Inc. $920 $(1,936) $131 $(4,531)
Add (deduct):
Interest expense 14,050 14,972 28,101 30,110
Depreciation and amortization 21,720 22,443 45,276 43,649
Management company expenses 632 432 1,133 921
General and administrative
expenses 1,369 2,092 2,951 4,388
Equity in earnings of
unconsolidated joint
ventures (227) (289) (427) (547)
Gain on involuntary
conversion (279) - (742) -
Gain on sale of real estate (540) - (470) -
Net loss attributable to
noncontrolling interests -
real estate partnerships (1,637) (2,063) (5,401) (4,550)
Income from discontinued
operations (236) (732) (414) (1,283)
Management company income (731) (410) (1,146) (907)
Interest and other income (309) (306) (611) (674)
------------------ ------------------
Net operating income from
consolidated office and
parking properties 34,732 34,203 68,381 66,576
Net operating income from
unconsolidated joint
ventures 2,713 2,728 5,272 5,433
Less: Net operating income
from non same-store
properties (635) (305) (4,744) (2,466)
------------------ ------------------
Same-store net operating
income $36,810 $36,626 $68,909 $69,543
------------------ ------------------
FOR FURTHER INFORMATION:
Steven G. Rogers
President & Chief Executive Officer
J. Mitchell Collins
Chief Financial Officer
(601) 948-4091
www.pky.com
