Highlights - Forms $750.0 million fund with the Teacher Retirement System of Texas
JACKSON, Miss., Aug. 4 /PRNewswire-FirstCall/ -- Parkway Properties, Inc.
(NYSE: PKY) today announced results for its second quarter ended June 30,
2008.
(Logo: http://www.newscom.com/cgi-bin/prnh/20030513/PARKLOGO )
Steven G. Rogers, President and Chief Executive Officer stated, "For the
second quarter 2008, our operating and financial performance was in line with
our expectations. We were also pleased to announce during the quarter the
formation of our second discretionary fund, a new $750 million partnership
with the Teacher Retirement System of Texas ("Texas Teachers Fund II"). We
believe this new fund should provide Parkway with significant FFO growth
opportunities over the next few years. Additionally, even with the continuing
uncertainty surrounding the U.S. economy, our leasing velocity and embedded
rent growth has continued to increase. We are also making good progress on
our disposition goals, completing the sale of Town Point Center in Norfolk
during July 2008. This disposition, along with other planned asset
dispositions in non-strategic markets or at optimal values, will provide
Parkway additional capital to fund our equity in Texas Teachers Fund II and
reduce debt."
Consolidated Financial Results
-- FFO available to common shareholders totaled approximately
$15.6 million, or $1.03 per diluted share, for the three months ended
June 30, 2008, as compared to approximately $14.8 million, or $0.94 per
diluted share, for the three months ended June 30, 2007. For the six
months ended June 30, 2008, FFO totaled $29.9 million, or $1.98 per
diluted share, compared to $31.0 million, or $1.96 per diluted share
for the six months ended June 30, 2007. Included in FFO per diluted
share are the following amounts (in thousands, except average rent per
square foot and average occupancy):
YTD YTD
Description Q2 2008 Q2 200720082007
Unusual Items:
Non-cash purchase accounting
adjustment $- $-$(657) $-
Net gain/(loss) on extinguishment
of debt $388$(494)$(13) $(370)
Other Items of Note:
Lease termination fees (1) $214 $354 $1,281 $548
Straight-line rent (1) $416 $238 $632 $1,197
Amortization of above market rent (1) $(245) $(430) $(385) $(856)
Gain on sale of land $- $- $- $50
Portfolio Information:
Average rent per square foot(2)(3) $22.12 $20.93 $21.93 $20.81
Average occupancy (2)(4) 90.6%91.3%90.8%91.2%
Total office square feet under
ownership (2) 14,126 12,917 14,126 12,917
Total office square feet under
management (5) 15,938 14,979 15,938 14,979
(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.
-- Funds available for distribution ("FAD") totaled approximately
$10.3 million for the three months ended June 30, 2008, as compared to
approximately $10.2 million for the three months ended June 30, 2007.
FAD totaled $20.5 million for the six months ended June 30, 2008,
compared to $21.7 million for the six months ended June 30, 2007.
-- Net loss available to common shareholders for the three months ended
June 30, 2008, was approximately $3.1 million, or $0.21 per diluted
share, as compared to net income available to common shareholders of
approximately $18.0 million, or $1.14 per diluted share, for the three
months ended June 30, 2007. Net loss available to common shareholders
for the six months ended June 30, 2008, was $6.9 million, or $0.46 per
diluted share as compared to net income available to common
shareholders of approximately $17.3 million, or $1.09 per diluted
share, for the six months ended June 30, 2007. Net gains on the sale
of real estate of approximately $20.3 million were included in net
income available to common shareholders for the three months and six
months ended June 30, 2007.
Asset Recycling
-- On July 15, 2008, the Company sold the Town Point Center, a 131,000
square foot office property in Norfolk, Virginia, for a gross sales
price of approximately $12.8 million. Parkway received net cash
proceeds from the sale of approximately $12.0 million, which were used
to reduce amounts outstanding under the Company's line of credit. The
Company will recognize a gain on the sale of approximately $1.6 million
in the third quarter of 2008.
-- Subsequent to June 30, 2008, the Company executed respective purchase
and sale agreements, with $3.0 million in combined non-refundable
deposits, on Capitol Center in Columbia, South Carolina, and Wachovia
Plaza in St. Petersburg, Florida. Gross sales proceeds are estimated
to be $73.5 million with estimated gains to be recorded of
approximately $21.0 million. The net proceeds from the sales will be
used to reduce the Company's line of credit and to retire the existing
mortgage debt on Capitol Center of approximately $18.2 million. The
Company will incur a debt prepayment penalty of approximately
$2.2 million in connection with the early extinguishment of the Capitol
Center mortgage. 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 late third quarter of
2008.
Operations and Leasing
-- The Company's average rent per square foot increased 5.7% to
$22.12 during the second quarter 2008 as compared to $20.93 for the
second quarter 2007 and increased 5.4% to $21.93 during the six months
ended June 30, 2008, as compared to $20.81 for the six months ended
June 30, 2007. On a same-store basis, the Company's average rent per
square foot increased 3.1% to $21.92 during the second quarter 2008 as
compared to $21.26 during the second quarter 2007 and increased 2.7% to
$21.82 during the six months ended June 30, 2008, as compared to $21.24
during the six months ended June 30, 2007.
-- The Company's average occupancy for the second quarter 2008 was 90.6%
as compared to 91.3% for the second quarter 2007 and was 90.8% for the
six months ended June 30, 2008, as compared to 91.2% for the six months
ended June 30, 2007. This occupancy decline was primarily due to the
purchase of three office investments for the fund 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 second
quarter 2008 was 90.5% as compared to 90.9% for the second quarter
2007. For the six months ended June 30, 2008, same-store average
occupancy was 90.8% as compared to 90.7% for the six months ended
June 30, 2007.
-- At July 1, 2008, the Company's office portfolio occupancy was 91.3% as
compared to 90.3% at April 1, 2008, and 91.6% at July 1, 2007. Not
included in the July 1, 2008, occupancy rate are 34 signed leases
totaling 117,000 square feet, which commence in the third and fourth
quarters of 2008. Including these leases, the Company's portfolio was
92.1% leased at July 14, 2008.
-- Parkway's customer retention rate was 87.1% for the quarter ending
June 30, 2008, as compared to 57.6% for the quarter ending March 31,
2008, and 81.0% for the quarter ending June 30, 2007. Customer
retention for the six months ended June 30, 2008, and 2007, was 73.7%
and 69.2%, respectively.
-- During the second quarter 2008, 99 leases were renewed or expanded on
718,000 rentable square feet at an average rent per square foot of
$22.04, representing a 6.3% increase, and at a cost of $1.68 per square
foot of the lease term in annual leasing costs. Included in these
leases are a 193,000 square foot renewal in Atlanta at a cost of $0.96
per square foot per year of the lease term and a 112,000 square foot
renewal in Houston at a cost of $1.24 per square foot per year of the
lease term. These two leases represent 42.5% of the total renewal and
expansion leases for the second quarter 2008. During the six months
ending June 30, 2008, 170 leases were renewed or expanded on
1.1 million rentable square feet at an average rent per square foot of
$21.77, representing a 4.7% increase, and at a cost of $2.66 per square
foot per year of the lease term in committed leasing costs.
-- During the second quarter 2008, 47 new leases were signed on 124,000
rentable square feet at an average rent per square foot of $21.75 and
at a cost of $4.80 per square foot of the lease term in annual leasing
costs. During the six months ending June 30, 2008, 74 new leases were
signed on 211,000 rentable square feet at an average rent per square
foot of $21.66 and at an average cost of $4.62 per square foot per year
of the lease term in committed leasing costs.
-- On a same-store basis, the Company's share of net operating income
("NOI") increased $426,000 or 1.5% for the second 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 increased $227,000 or
0.8% for the second quarter 2008 as compared to the same period of the
prior year. The increase in same-store cash NOI is primarily
attributable to an increase in same-store average rental rates of 3.1%
for the second quarter 2008 as compared to the second quarter 2007.
The Company's share of same-store NOI for the six months ending
June 30, 2008 increased $164,000 or 0.3% compared to the same period of
2007 on a GAAP basis and $627,000 or 1.1% on a cash basis.
Capital Structure and Private Equity
-- On May 2, 2008, the Company completed a $60.0 million recourse mortgage
loan related to the refinance of a $41.4 million mortgage that was
scheduled to mature in September 2008. The loan is secured by the
Company's Capital City Plaza building in Atlanta, Georgia. The
interest rate on the loan is a variable rate based on LIBOR plus 165
basis points. The loan has a two-year term, with a one-year extension
option at the Company's discretion. The excess loan proceeds of
$18.4 million were used to pay down the Company's line of credit. As
previously disclosed, during the second quarter 2008, the Company
recorded a net gain on the extinguishment of debt of $388,000
associated with the prepayment of the maturing loan. The prepaid
mortgage represented the Company's only outstanding maturity in 2008.
-- On May 14, 2008, Parkway formed Parkway Properties Office Fund II, L.P.
("Texas Teachers Fund II"), a $750.0 million discretionary fund with
the Teacher Retirement System of Texas ("TRS"), for the purpose of
acquiring high-quality multi-tenant office properties. TRS will be a
70% investor, and Parkway will be a 30% investor in the fund, which
will be capitalized with approximately $375.0 million of equity capital
and $375.0 million of non-recourse, fixed-rate first mortgage debt.
Texas Teachers Fund II will target investments in office buildings in
Houston, Austin, San Antonio, Chicago, Atlanta, Phoenix, Charlotte,
Memphis, Nashville, Jacksonville, Orlando, Tampa/St. Petersburg,
Ft. Lauderdale, as well as other growth markets to be determined at
Parkway's discretion.
Parkway will serve as the general partner of Texas Teachers Fund II and
will provide asset management, property management, and leasing and
construction management services for which it will be paid market-based
fees. Parkway will have four years to identify and acquire properties,
with funds contributed as needed to complete acquisitions. The Company
currently anticipates a ten-year life for Texas Teachers Fund II.
Parkway will exclusively represent the fund in making acquisitions
within the target markets and within certain predefined criteria.
Under certain conditions, Parkway may continue to make fee-simple
acquisitions in markets outside of the target markets which do not meet
the investment interests of the TRS or acquire properties within the
target markets that do not meet Texas Teachers Fund II's specific
criteria.
-- During the second quarter 2008, the Company entered into the following
interest rate swaps:
-- Interest rate swap agreement with Regions Bank for a $100.0 million
notional amount that fixes the 30-day LIBOR interest rate at 3.635%,
which equates to a total interest rate of 4.935%, for the period
January 1, 2009, through March 31, 2011. The swap agreement serves
as a hedge of the variable interest rates on a portion of the
borrowings under the Company's $311.0 million line of credit.
-- Interest rate swap agreement with US Bank for a $23.5 million
notional amount that fixes the 30-day LIBOR interest rate at 4.05%,
which equates to a total interest rate of 5.55%, for the period
January 1, 2009, through December 1, 2014. The swap agreement serves
as a hedge of the variable interest rates on the borrowings under
the Pinnacle at Jackson Place Senior New Market Tax Credits mortgage
loan.
-- On June 30, 2008, the Company owed $238.9 million related to its
$311.0 million line of credit. The Company is in compliance with all
covenants under the line of credit and has no remaining debt maturities
for 2008. Additionally, the Company's FAD covered its dividend in 2007
and for the first six months of 2008. For 2009, the Company has
$21.8 million in debt maturities related to three assets in Houston,
Texas, that are currently 98.6% leased.
-- The Company's previously announced cash dividend of $0.65 per diluted
share for the quarter ended June 30, 2008, represents a payout of
approximately 63.3% of FFO per diluted share. The second quarter
dividend was paid on June 25, 2008, and equates to an annualized
dividend of $2.60 per share, a yield of 7.4% on the closing stock price
on July 31, 2008 of $35.29. This dividend is the 87th consecutive
quarterly distribution to Parkway's common stock shareholders.
-- At June 30, 2008, the Company's debt-to-total market capitalization
ratio was 61.3% based on a stock price of $33.73 per share as compared
to 59.3% at March 31, 2008, based on a stock price of $36.96 per share
and 48.3% at June 30, 2007, based on a stock price of $48.03 per share.
Outlook for 2008
The Company is revising its 2008 initial FFO outlook of $4.00 to $4.20 per
diluted share to $3.80 to $3.90 per diluted share due to projected third
quarter 2008 dispositions and associated debt prepayment expense. The
reconciliation of forecasted earnings per diluted share ("EPS") to forecasted
FFO per diluted share is as follows:
Outlook for 2008 Range
Fully diluted EPS $0.60 - $0.70
Plus: Real estate depreciation and amortization $5.83 - $5.85
Plus: Depreciation on unconsolidated joint ventures $0.05 - $0.05
Less: Gain on sale of real estate ($1.49 - $1.49)
Less: Minority interest depreciation and amortization ($1.19 - $1.21)
Revised FFO per diluted share $3.80 - $3.90
The revised FFO guidance is based on the following Company assumptions:
-- The sale of Town Point Center in Norfolk, Virginia, on July 15, 2008
for gross proceeds of $12.8 million, resulting in a gain of
approximately $1.6 million.
-- The anticipated sales of Capitol Center in Columbia, South Carolina,
and Wachovia Plaza in St. Petersburg, Florida, on September 1, 2008.
The gross sales proceeds and estimated gains for the two properties are
$73.5 million and $21.0 million, respectively. Net proceeds will be
used to reduce the Company's line of credit and to retire the existing
mortgage debt on Capitol Center of approximately $18.2 million. The
Company will also incur debt prepayment expense in connection with the
early extinguishment of the Capitol Center mortgage of approximately
$2.2 million, or $0.14 per diluted share.
-- Average occupancy for 2008 is now estimated to be in the range of 91.0%
to 92.0%.
GEAR UP
On January 1, 2006, the Company initiated a new operating plan that will
be referred to as the "GEAR UP" Plan. At the heart of the GEAR UP Plan are
Great People transforming Parkway through Equity Opportunities and Asset
Recycling from an owner-operator to an operator-owner. Our long-standing
commitment to Retain our Customers and provide an Uncompromising Focus on
Operations remains steadfast. We believe that by accomplishing these goals we
can deliver excellent Performance to our shareholders. Performance for the
GEAR UP Plan will be measured as the sum of adjusted funds available for
distribution, as defined by the Company, cumulative over the three years of
the plan. The goal for cumulative adjusted FAD is $7.18 per diluted share.
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 68 office properties located in 11
states with an aggregate of approximately 14.0 million square feet of leasable
space as of August 4, 2008. Included in the portfolio are 21 properties
totaling 3.8 million square feet that are owned jointly with other investors,
representing 27.1% of the portfolio. Under the Company's GEAR UP plan, which
started January 1, 2006, and ends December 31, 2008, it is the Company's
strategy to transform from an owner-operator to an operator-owner. The
strategy highlights the Company's strength in providing excellent service in
the operation of office properties in addition to its direct ownership of real
estate assets. Fee-based real estate services are offered through the
Company's wholly owned subsidiary, Parkway Realty Services, which also manages
and/or leases approximately 1.8 million square feet for third-party owners as
of August 4, 2008.
Additional Information
The Company will conduct a conference call to discuss the results of its
second quarter operations on Tuesday, August 5, 2008, at 11:00 a.m. Eastern
Time. The number for the conference call is 888-690-2899. A taped replay of
the call can be accessed 24 hours a day through August 15, 2008, by dialing
888-203-1112 and using the pass code of 2034284. 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 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 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 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.
FOR FURTHER INFORMATION:
Steven G. Rogers
President & Chief Executive Officer
J. Mitchell Collins
Chief Financial Officer
(601) 948-4091
PARKWAY PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
June 30December 31
2008 2007
(Unaudited)
Assets
Real estate related investments:
Office and parking properties $1,753,108$1,551,707
Office property held for sale 10,203 -
Office property development 29,21714,686
Accumulated depreciation(277,969) (251,791)
1,514,559 1,314,602
Land available for sale1,467 1,467
Mortgage loan 7,250 7,001
Investment in unconsolidated joint
ventures 11,09111,236
1,534,367 1,334,306
Rents receivable and other assets 112,661 119,457
Intangible assets, net 91,45770,719
Cash and cash equivalents14,18711,312
$1,752,672$1,535,794
Liabilities
Notes payable to banks $238,861 $212,349
Mortgage notes payable 875,743 714,501
Accounts payable and other liabilities 86,33688,496
1,200,940 1,015,346
Minority Interest
Minority Interest - unit holders 3334
Minority Interest - real estate partnerships135,24380,506
135,27680,540
Stockholders' Equity
8.00% Series D Preferred stock, $.001 par
value, 2,400,000 shares authorized, issued
and outstanding 57,97657,976
Common stock, $.001 par value, 67,600,000
shares authorized, 15,290,003 and 15,223,350
shares issued and outstanding in 2008 and
2007, respectively 1515
Common stock held in trust, at cost, 85,800
and 104,500 shares in 2008 and 2007,
respectively(2,914) (3,540)
Additional paid-in capital 427,058 425,221
Accumulated other comprehensive income (loss) 471 (358)
Accumulated deficit (66,150) (39,406)
416,456 439,908
$1,752,672$1,535,794
PARKWAY PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
Three Months Ended
June 30
2008 2007
(Unaudited)
Revenues
Income from office and parking properties $68,684 $60,523
Management company income 410 431
Total revenues69,09460,954
Expenses
Property operating expense 32,68328,573
Depreciation and amortization23,26919,022
Management company expenses 432 276
General and administrative2,092 1,601
Total expenses58,47649,472
Operating income 10,61811,482
Other income and expenses
Interest and other income30672
Equity in earnings of unconsolidated joint
ventures289 243
Gain on sale of real estate-20,260
Interest expense (15,352) (14,052)
Income (loss) before minority interest and
discontinued operations (4,139) 18,005
Minority interest - real estate partnerships 2,063 1,016
Income (loss) from continuing operations (2,076) 19,021
Discontinued operations:
Income from discontinued operations 140 219
Net income (loss)(1,936) 19,240
Dividends on preferred stock (1,200) (1,200)
Net income (loss) available to common
stockholders $(3,136) $18,040
Net income (loss) per common share:
Basic:
Income (loss) from continuing operations $(0.22)$1.14
Discontinued operations 0.01 0.01
Net income (loss) $(0.21)$1.15
Diluted:
Income (loss) from continuing operations $(0.22)$1.13
Discontinued operations 0.01 0.01
Net income (loss) $(0.21)$1.14
Dividends per common share$0.65 $0.65
Weighted average shares outstanding:
Basic 15,02415,672
Diluted 15,02415,847
PARKWAY PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
Six Months Ended
June 30
2008 2007
(Unaudited)
Revenues
Income from office and parking properties $134,136 $121,500
Management company income 907 764
Total revenues 135,043 122,264
Expenses
Property operating expense 64,10856,482
Depreciation and amortization45,26238,079
Management company expenses 921 544
General and administrative4,388 3,247
Total expenses 114,67998,352
Operating income 20,36423,912
Other income and expenses
Interest and other income674 218
Equity in earnings of unconsolidated
joint ventures 547 548
Gain on sale of real estate-20,310
Interest expense (30,873) (27,136)
Income (loss) before minority interest
and discontinued operations (9,288) 17,852
Minority interest - real estate partnerships 4,550 1,487
Income (loss) from continuing operations (4,738) 19,339
Discontinued operations:
Income from discontinued operations 207 329
Net income (loss)(4,531) 19,668
Dividends on preferred stock (2,400) (2,400)
Net income (loss) available to common
stockholders $(6,931) $17,268
Net income (loss) per common share:
Basic:
Income (loss) from continuing operations $(0.47)$1.08
Discontinued operations 0.01 0.02
Net Income (loss) $(0.46)$1.10
Diluted:
Income (loss) from continuing operations $(0.47)$1.07
Discontinued operations 0.01 0.02
Net Income (loss) $(0.46)$1.09
Dividends per common share$1.30 $1.30
Weighted average shares outstanding:
Basic 15,01315,644
Diluted 15,01315,831
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, 2008 AND 2007
(In thousands, except per share data)
Three Months Ended Six Months Ended
June 30 June 30
2008 2007 2008 2007
(Unaudited) (Unaudited)
Net Income (Loss) $(1,936) $19,240 $(4,531) $19,668
Adjustments to Net Income (Loss):
Preferred Dividends (1,200) (1,200) (2,400) (2,400)
Depreciation and Amortization 23,26919,02245,26238,079
Depreciation and Amortization -
Discontinued Operations 169 147 344 301
Minority Interest Depreciation
and Amortization (4,898) (2,284) (9,108) (4,675)
Adjustments for Unconsolidated
Joint Ventures 179 161 355 322
Gain on Sale of Real Estate- (20,260)- (20,260)
Funds From Operations Available to
Common Shareholders (1)$15,583 $14,826 $29,922 $31,035
Funds Available for Distribution
Funds From Operations Available
to Common Shareholders $15,583 $14,826 $29,922 $31,035
Add (Deduct) :
Adjustments for Unconsolidated
Joint Ventures (127) (147) (181) (231)
Adjustments for Minority
Interest in Real Estate
Partnerships738 352 1,380 770
Straight-line Rents (1,046) (507) (1,820) (1,805)
Straight-line Rents -
Discontinued Operations 1 1 2(4)
Amortization of Above/Below
Market Leases 190 346 247 698
Amortization of Share Based
Compensation464 374 918 727
Capital Expenditures:
Building Improvements(936) (2,014) (1,873) (2,932)
Tenant Improvements - New
Leases(1,619) (657) (2,721) (1,694)
Tenant Improvements -
Renewal Leases(1,800) (1,457) (3,040) (3,084)
Leasing Costs - New Leases (608) 61 (798) (380)
Leasing Costs - Renewal
Leases (541) (1,005) (1,565) (1,400)
Funds Available for
Distribution (1) $10,299 $10,173 $20,471 $21,700
Diluted Per Common Share/Unit
Information (**)
FFO per share $1.03 $0.94 $1.98 $1.96
Dividends paid $0.65 $0.65 $1.30 $1.30
Dividend payout ratio for FFO 63.28%69.48%65.80%66.32%
Weighted average shares/units
outstanding 15,17015,84815,14615,832
Other Supplemental Information
Upgrades on Acquisitions $4,059 $13,556$9,232 $15,502
Gain on Non Depreciable
Assets $-$-$- $50
**Information for Diluted
Computations:
Basic Common Shares/Units
Outstanding 15,02515,67315,01515,645
Dilutive Effect of Other
Share Equivalents 145 175 131 187
(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, 2008 AND 2007
(In thousands)
Three Months Ended Six Months Ended
June 30 June 30
2008 2007 2008 2007
(Unaudited) (Unaudited)
Net Income (Loss) $(1,936) $19,240 $(4,531) $19,668
Adjustments to Net Income (Loss):
Interest Expense 15,31413,26829,98826,183
Amortization of Financing Costs 426 290 872 583
Prepayment (Income) Expense -
Early Extinguishment of Debt (388) 49413 370
Depreciation and Amortization 23,43819,16945,60638,380
Amortization of Share Based
Compensation464 374 918 727
Gain on Real Estate and Non
Depreciable Assets- (20,260)- (20,310)
Tax Expense-92 - 105
EBITDA Adjustments -
Unconsolidated Joint Ventures 310 292 614 583
EBITDA Adjustments - Minority
Interest in Real Estate
Partnerships (8,043) (3,841) (14,926) (7,470)
EBITDA (1) $29,585 $29,118 $58,554 $58,819
Interest Coverage Ratio:
EBITDA $29,585 $29,118 $58,554 $58,819
Interest Expense:
Interest Expense $15,314 $13,268 $29,988 $26,183
Capitalized Interest 18737 34337
Interest Expense -
Unconsolidated Joint Ventures 129 128 254 255
Interest Expense - Minority
Interest in Real Estate
Partnerships (3,077) (1,520) (5,689) (2,723)
Total Interest Expense $12,553 $11,913 $24,896 $23,752
Interest Coverage Ratio2.36 2.44 2.35 2.48
Fixed Charge Coverage Ratio:
EBITDA $29,585 $29,118 $58,554 $58,819
Fixed Charges:
Interest Expense $12,553 $11,913 $24,896 $23,752
Preferred Dividends1,200 1,200 2,400 2,400
Principal Payments (Excluding
Early Extinguishment of Debt) 3,458 4,008 7,250 8,059
Principal Payments -
Unconsolidated Joint Ventures13122624
Principal Payments - Minority
Interest in Real Estate
Partnerships(86) (81) (172) (146)
Total Fixed Charges $17,138 $17,052 $34,400 $34,089
Fixed Charge Coverage Ratio1.73 1.71 1.70 1.73
Modified Fixed Charge Coverage
Ratio:
EBITDA $29,585 $29,118 $58,554 $58,819
Modified Fixed Charges:
Interest Expense $12,553 $11,913 $24,896 $23,752
Preferred Dividends1,200 1,200 2,400 2,400
Total Modified Fixed Charges$13,753 $13,113 $27,296 $26,152
Modified Fixed Charge Coverage
Ratio 2.15 2.22 2.15 2.25
The following table reconciles
EBITDA to cash flows provided by
operating activities:
EBITDA $29,585 $29,118 $58,554 $58,819
Amortization of Above Market
Leases 190 346 247 698
Amortization of Mortgage Loan
Discount (126)- (249)-
Operating Distributions
from Unconsolidated Joint
Ventures279 265 661 670
Interest Expense (15,314) (13,268) (29,988) (26,183)
Prepayment Income (Expense) -
Early Extinguishment of Debt388 (494) (13) (370)
Tax Expense- (92)- (105)
Change in Deferred Leasing Costs (1,638) (944) (4,694) (1,780)
Change in Receivables and Other
Assets (509) (4,660)9,894(2,434)
Change in Accounts Payable and
Other Liabilities 7,749 8,545(4,833)1,171
Adjustments for Minority
Interests 5,980 2,82510,376 5,983
Adjustments for Unconsolidated
Joint Ventures (599) (535) (1,161) (1,131)
Cash Flows Provided by Operating
Activities $25,985 $21,106 $38,794 $35,338
(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, 2008 AND 2007
(In thousands, except number of properties data)
Net Operating Average
Income Occupancy
Number of Percentage of
Properties Portfolio(1) 2008 20072008 2007
Same-store
properties (2):
Wholly-owned 47 74.39% $26,783 $26,541 90.5% 90.7%
Parkway Properties
Office Fund LP9 12.29% 4,4253,743 91.5% 93.0%
Other consolidated
joint venture 1 1.57% 565 545 88.0% 87.6%
Total same-store
properties 57 88.25% 31,773 30,829 90.5% 90.9%
2007 acquisitions 2 1.96% 707 164 92.5% N/A
2008 acquisitions 3 9.76% 3,512- 84.8% N/A
Office property
development - -0.01% (5) (57) N/AN/A
Assets sold - 0.04% 141,014 N/AN/A
Net operating income
from office and
parking properties 62 100.00% $36,001 $31,950
(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 June 30, 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 Six Months Ended
June 30June 30
2008 2007 2008 2007
Net Income (loss) $(1,936) $19,240 $(4,531) $19,668
Add (deduct):
Interest expense15,352 14,052 30,873 27,136
Depreciation and amortization 23,269 19,022 45,262 38,079
Management company expenses432 276 921 544
General and administrative expenses 2,0921,6014,3883,247
Equity in earnings of unconsolidated
joint ventures (289)(243)(547)(548)
Gain on sale of real estate and other
assets-(20,260) -(20,310)
Minority interest - real estate
partnerships (2,063) (1,016) (4,550) (1,487)
Income from discontinued operations (140)(219)(207)(329)
Management company income (410)(431)(907)(764)
Interest and other income (306) (72)(674)(218)
Net operating income from office and
parking properties 36,001 31,950 70,028 65,018
Less: Net operating income from non
same-store properties (4,228) (1,121) (7,151) (2,226)
Same-store net operating income$31,773 $30,829 $62,877 $62,792
SOURCE Parkway Properties, Inc.
