PARKWAY PROPERTIES INC 
By ORLANDO, Fla., Jan. 5, 2012 /PRNewswire/ -- Parkway Properties, Inc. (NYSE: PKY) announced today that it is under contract to sell a portfolio of 15 non-core assets (the "Non-Core Portfolio") in Jackson, Memphis and Richmond for a gross sale price of $147.5 million. The Company has also completed the sale of its interest in nine assets owned by Parkway Properties Office Fund, L.P. ("Fund I") to its existing partner in the fund.
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James R. Heistand, President and Chief Executive Officer of Parkway stated, "Part of Parkway's new strategy, which will be outlined in its entirety during our fourth quarter earnings conference call, is to pursue an efficient exit from certain non-core markets. As a result of the thorough review of all of our markets, we determined that Jackson, Memphis and Richmond were non-core markets. A portfolio sale of these assets allows us to quickly realign our overall portfolio and focus our resources and capital on building critical mass in our remaining core markets. Additionally, I am encouraged by the first closing of a major portion of the Fund I assets, which helps advance several key objectives of the Company. The sale of these Fund I assets significantly contributes to our exit from Chicago, improves our balance sheet, and reduces the gap between Parkway's projected FFO and FAD, as the Fund I portfolio required significant capital costs to re-lease it to stabilization. While the sale of both the Non-Core Portfolio and the Fund I properties will be dilutive to our FFO per share in the near term, we expect to reinvest net proceeds into newer, higher quality assets in our core markets with stronger long-term growth prospects."
The Non-Core Portfolio Sale
The Non-Core Portfolio consists of approximately 1.9 million square feet located in Jackson, Memphis, and Richmond. The buyer has concluded its due diligence and the sale is expected to close during the first quarter of 2012, subject to the buyer's successful assumption of certain existing mortgage loans and customary closing conditions.
Upon the completion of the sale of the Non-Core Portfolio and other announced pending sales, Parkway would have one remaining asset located in Jackson totaling 267,000 square feet, one remaining asset located in Memphis totaling 337,000 square feet, and completed its exit from Richmond. The remaining assets in Jackson and Memphis will continue to be marketed for sale.
The Non-Core Portfolio was 75.8% occupied as of September 30, 2011. The estimated 2011 recurring cash net operating income for the Portfolio was approximately $13.5 million, of which $12.4 million was Parkway's share. The properties have a total of approximately $41.7 million in mortgage loans, of which $32.0 million represents Parkway's share. These mortgage loans have a weighted average interest rate of 5.4%.
The Company estimates that for financial reporting purposes it will recognize a non-cash impairment loss of approximately $58 to $60 million in the fourth quarter of 2011 related to the Non-Core Portfolio as well as the two remaining assets in Jackson and Memphis; however, this is only an estimate and could change based primarily upon the ultimate timing of the sale.
The Non-Core Portfolio consists of the following properties:
(dollars in
000's)
Market /
Property Name Square Parkway
Feet Occupancy(1) Mortgage Ownership
Balance
(PKY Share)(1)
--- -------------
Jackson
-------
One Jackson
Place 221,293 75.3% $0 100.0%
111 Capitol
Building 187,129 62.0% 0 100.0%
Pinnacle at
Jackson
Place(2) 189,085 86.5% 29,501 100.0%
Parking at
Jackson Place
(3) 81,868 38.6% 0 N/A
UBS Building /
River Oaks
Place 167,401 83.8% 2,449 20.0%
------- ----
Subtotal /
Wtd. Avg. 846,776 73.0% $31,950
Memphis
-------
Falls Building 155,061 68.9% $0 100.0%
Forum I 162,556 80.0% 0 100.0%
Forum II & III 179,930 78.0% 0 100.0%
Toyota Center 174,700 87.5% 0 100.0%
Subtotal /
Wtd. Avg. 672,247 78.9% $0
Richmond
--------
Boulders
Centers 140,858 73.2% $0 100.0%
Moorefield I 46,638 72.0% 0 100.0%
Moorefield II 46,756 65.7% 0 100.0%
Moorefield III 51,838 96.7% 0 100.0%
Winchester
Building 126,867 78.2% 0 100.0%
Subtotal /
Wtd. Avg. 412,957 76.7% $0
Grand Total /
Wtd. Avg. 1,931,980 75.8% $31,950
(1) Occupancy and mortgage balances shown are as of September 30, 2011.
(2) In connection with the assumption of the Pinnacle at Jackson Place mortgage, the Company estimates that it will record a one-time charge to interest expense related to the interest rate swap currently in place of approximately $2.5 million in the first quarter of 2012.
(3) Square Feet and Occupancy shown for Parking at Jackson Place only includes the office and retail space in the parking garage.
Partial Closing of Fund I Asset Sales
The completed sale of Fund I assets included nine properties totaling approximately 2.0 million square feet in five markets, representing a majority of the Fund I assets. The sale of the remaining four assets in the Fund I portfolio is expected to close during the first quarter of 2012, subject to obtaining necessary lender consents in connection with the existing mortgage loans and customary closing conditions. The gross sale price for all Fund I assets, including the properties that have yet to close, is $344.3 million. The properties were 81.4% occupied as of September 30, 2011.
The completed and pending Fund I sales are as follows:
Completed Fund I Sales
(dollars in
000's)
Property
Name Location Square Occupancy(1) Mortgage Parkway
Feet Balance Ownership
(PKY Share)(1)
--- -------------
US Cellular
Plaza Chicago 609,597 83.8% $23,162 40.0%
Chatham
Centre Chicago 205,852 89.4% 4,275 25.0%
1401
Enclave
Pkwy Houston 209,185 69.9% 7,000 25.0%
BellSouth
Building
(2) Jacksonville 92,272 100.0% 1,841 25.0%
Centurion
Centre (2) Jacksonville 87,600 94.8% 1,748 25.0%
555
Winderley Orlando 101,656 60.3% 2,056 25.0%
Gateway
Center Orlando 228,241 85.8% 8,191 25.0%
Maitland
100 Orlando 128,154 83.8% 2,175 25.0%
Desert
Ridge
Corporate
Center Phoenix 293,161 89.2% 12,942 26.5%
------- ---- ------
Total /
Wtd. Avg. 1,955,718 84.0% $63,390
(1) Occupancy and mortgage balances shown are as of September 30, 2011.
(2) BellSouth Building and Centurion Centre have a cross-collateralized mortgage loan. The mortgage balances shown for these properties are allocated based on square footage.
Pending Fund I Sales
(dollars in
000's)
Property Name Location Square Feet Occupancy(1) Mortgage Parkway
Balance Ownership
(PKY Share)(1)
--- -------------
100 Ashford
Center (2) Atlanta 160,154 72.8% $3,739 25.0%
Overlook II Atlanta 260,467 70.3% 7,875 25.0%
Peachtree Ridge
(2) Atlanta 160,434 80.9% 3,745 25.0%
Renaissance
Center Memphis 189,580 78.3% 3,945 25.0%
------- ---- -----
Total / Wtd. Avg. 770,635 75.0% $19,304
(1) Occupancy and mortgage balances shown are as of September 30, 2011.
(2) 100 Ashford Center and Peachtree Ridge have a cross-collateralized mortgage loan. The mortgage balances shown for these properties are allocated based on square footage.
The estimated 2011 recurring cash net operating income for Fund I, including the properties that have yet to close, was approximately $26.3 million, of which $7.6 million was Parkway's share. The properties have a total of $293.1 million in non-recourse mortgage loans, of which $82.7 million is Parkway's share, with a weighted average interest rate of 5.6%. In connection with the completed and planned sale of the Fund I assets, the Company recorded an impairment loss in the third quarter of 2011 totaling $100.2 million, of which $28.0 million was Parkway's share. Parkway received approximately $11.3 million in net proceeds upon the completed partial closing and the net proceeds were used to reduce amounts outstanding under the Company's credit facility.
Fourth Quarter 2011 Earnings Release & Conference Call
Parkway will release its 2011 fourth quarter earnings on Monday, February 6, 2012, and will hold its fourth quarter conference call on Tuesday, February 7, 2012, at 11:00 a.m. Eastern Time. The Company's earnings release and supplemental information package will be posted to the Company's website prior to the conference call.
In addition, management will discuss the results of its recent evaluation of the Company's business plan, including its markets, assets, and operational focus, as well as outline the Company's long-term strategic and financial objectives.
To participate in Parkway's fourth quarter earnings conference call, please dial 800-857-4978 at least five minutes prior to the scheduled start time and use the verbal passcode "PARKWAY." A live audio webcast will also be available by selecting the "4Q Call" icon on the Company's website at www.pky.com. A taped replay of the call can be accessed 24 hours a day through February 21, 2012, by dialing 866-413-9234 and using the passcode 9285. An audio replay will also be archived and indexed on the Corporate section of the Company's website.
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 ownership of office properties. Parkway owns or has an interest in 58 office properties located in 12 states with an aggregate of approximately 12.6 million square feet of leasable space at January 5, 2012. Fee-based real estate services are offered through wholly-owned subsidiaries of the Company, which in total manage and/or lease approximately 11.9 million square feet for third-party owners at January 5, 2012.
Parkway Properties, Inc.'s press releases and additional information about the Company are available on the Company's website at www.pky.com.
Forward Looking Statements
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, will, believe, forecast, intends, expects, estimates, projects, or similar expressions) are forward-looking statements within the meaning of the federal securities laws and as such are based upon the Company's current belief as to the outcome and timing of future events. There can be no assurance that future developments affecting the Company will be those anticipated by the Company. These forward-looking statements involve risks and uncertainties (some of which are beyond the control of the Company) and are subject to change based upon various factors, including but not limited to the following risks and uncertainties: changes in the real estate industry and in performance of the financial markets; the demand for and market acceptance of the Company's properties for rental purposes; the amount and growth of the Company's expenses; tenant financial difficulties and general economic conditions, including interest rates, as well as economic conditions in those areas where the Company owns properties; risks associated with joint venture partners; the risks associated with the ownership and development of real property; the failure to acquire or sell properties as and when anticipated; termination of property management contracts; the bankruptcy or insolvency of companies for which Parkway provides property management services or the sale of these properties; the outcome of claims and litigation involving or affecting the Company; and other risks and uncertainties detailed from time to time in the Company's SEC filings. Should one or more of these risks or uncertainties occur, or should underlying assumptions prove incorrect, the Company's business, financial condition, liquidity, cash flows, and results could differ materially from those expressed in the forward-looking statements. The Company does not undertake to update forward-looking statements, except as may be required by law.
CONTACT: JAMES R. HEISTAND
PRESIDENT & CHIEF EXECUTIVE
OFFICER
RICHARD G. HICKSON IV
CHIEF FINANCIAL OFFICER
(407) 650-0593
SOURCE Parkway Properties, Inc.
