PARKWAY PROPERTIES INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - May 9, 2011

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8-K - 8K 223 NM SALE - PARKWAY PROPERTIES INCf8ksaleof233nm.htm
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Exhibit 99.1
PARKWAY PROPERTIES, INC.

Pro Forma Consolidated Financial Statements
(Unaudited)


       The following unaudited pro forma consolidated balance sheet as of March 31, 2011 and pro forma consolidated statements of operations of Parkway Properties, Inc. ("Parkway") for the years ended December 31, 2010, 2009 and 2008, as well as the three months ended March 31, 2011 and 2010 give effect to the sale of the 233 North Michigan Avenue office property located in Chicago, Illinois (the “Sale of 233NM”).   The pro forma consolidated financial statements have been prepared by management of Parkway based upon the historical financial statements of Parkway and the adjustments and assumptions in the accompanying notes to the pro forma consolidated financial statements.

       The pro forma consolidated balance sheet sets forth the effect of the Sale of 233NM as if it had been consummated on March 31, 2011.

       The pro forma consolidated statements of operations set forth the effects of the Sale of 233NM as if it had been consummated on January 1, 2008.

       Parkway is providing the unaudited pro forma consolidated financial information for informational purposes only.  The unaudited pro forma consolidated financial information does not purport to represent the results that actually would have occurred if the Sale of 233NM had occurred on the dates indicated nor do they purport to project our results of operations for any future period as of any future date.  The unaudited pro forma consolidated financial information should be read in conjunction with the consolidated financial statements and related notes of Parkway included in its reports filed under the Securities Exchange Act of 1934, as amended.

 

 

 

 
Page 1 of 9
 


PARKWAY PROPERTIES, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 2011
(Unaudited)
           
           
 
Parkway
  
 Pro Forma
  
 Parkway
 
Historical
  
 Adjustments (1)
 Pro Forma
 
(In thousands, except share data)
           
           
Assets
          
Real estate related investments:
          
Office and parking properties
 $       1,917,773
  
 $         (177,567)
  
 $      1,740,206
Land held for development
                        609
      
                        609
Accumulated depreciation
            (380,490)
  
                 38,269
  
            (342,221)
 
1,537,892
  
             (139,298)
  
          1,398,594
 
          
Land available for sale
                        750
      
                        750
Mortgage loans
                  10,533
      
                 10,533
Investment in unconsolidated joint ventures
                     1,767
      
                    1,767
 
          1,550,942
  
             (139,298)
  
            1,411,644
           
Rents receivable and other assets
                138,100
  
                (17,978)
  
               120,122
Intangible assets, net
                   61,613
  
                    (8,131)
  
                53,482
Cash and cash equivalents
                  74,160
  
                   (1,224)
  
                72,936
 
 $       1,824,815
  
 $          (166,631)
  
 $       1,658,184
           
           
           
Liabilities
          
Notes payable to banks
 $            166,581
  
 $           (74,439)
  
 $             92,142
Mortgage notes payable
               876,617
  
               (85,487)
  
               791,130
Accounts payable and other liabilities
                 79,275
  
                  (9,333)
  
                69,942
 
           1,122,473
  
             (169,259)
  
              953,214
           
Equity
          
Parkway Properties, Inc. stockholders' equity:
          
8.00% Series D Preferred stock, $.001 par value,
          
4,374,896 shares authorized, issued and outstanding
102,787
      
              102,787
Common stock, $.001 par value, 65,625,104 shares
          
authorized, 21,962,564 shares issued and outstanding in 2011
                           22
      
                           22
Common stock held in trust, at cost, 10,009 shares in 2011
                       (271)
      
                       (271)
Additional paid-in capital
               516,275
      
              516,275
Accumulated other comprehensive loss
                    (1,914)
      
                   (1,914)
Accumulated deficit
             (136,004)
  
                    2,628
  
            (133,376)
    Total Parkway Properties, Inc. stockholders' equity
              480,895
  
                    2,628
  
             483,523
Noncontrolling interest - real estate partnerships
               221,447
      
              221,447
    Total equity
              702,342
  
                    2,628
  
             704,970
 
 $       1,824,815
  
 $          (166,631)
  
 $       1,658,184
           
           
           
           
           
           
See accompanying notes.


 
 
Page 2 of 9
 



PARKWAY PROPERTIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2011
(Unaudited)
           
           
 
Parkway
  
 Pro Forma
  
 Parkway
 
Historical
  
 Adjustments (2)
 Pro Forma
 
(In thousands, except per share data)
           
           
           
Revenues
          
Income from office and parking properties
 $         67,180
  
 $              (7,087)
 (a)
 $        60,093
Management company income
                  338
      
                 338
Total revenues
            67,518
  
                 (7,087)
  
           60,431
 
 
        
Expenses
 
        
Property operating expense
            31,010
  
                 (3,922)
 (a)
           27,088
Depreciation and amortization
            24,900
  
                 (1,815)
 (a)
           23,085
Management company expenses
                  877
      
                 877
General and administrative
1,807
  
                      156
 (b)
              1,963
Acquisition costs
2,349
      
              2,349
Total expenses
            60,943
  
                 (5,581)
  
           55,362
           
Operating income
              6,575
  
                 (1,506)
  
              5,069
           
Other income and expenses
          
Interest and other income
                  324
      
                 324
Equity in earnings of unconsolidated joint ventures
                    35
      
                   35
Interest expense
          (14,724)
  
                   2,102
 (c)
          (12,622)
           
Income (loss) from continuing operations
             (7,790)
  
                      596
  
            (7,194)
Net loss attributable to noncontrolling interest - real estate partnerships
              3,195
      
              3,195
Dividends on preferred stock
             (2,187)
      
            (2,187)
Income (loss) from continuing operations attributable to common stockholders
 $         (6,782)
  
 $                   596
  
 $         (6,186)
           
Loss from continuing operations per common share (3)
        
Basic
 $            (0.32)
      
 $           (0.29)
Diluted
 $            (0.32)
      
 $           (0.29)
           
Weighted average shares outstanding:
          
Basic
21,476
      
           21,476
Diluted
21,476
      
           21,476
           
           
           
           
           
           
See accompanying notes.

 
Page 3 of 9
 



PARKWAY PROPERTIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2010
(Unaudited)
           
           
 
Parkway
  
 Pro Forma
  
 Parkway
 
Historical
  
 Adjustments (2)
 Pro Forma
 
(In thousands, except per share data)
           
           
           
Revenues
          
Income from office and parking properties
 $        68,911
  
 $               (7,530)
 (a)
 $        61,381
Management company income
                 410
      
                 410
Total revenues
           69,321
  
                   (7,530)
  
            61,791
 
 
        
Expenses
 
        
Property operating expense
           30,951
  
                   (4,019)
 (a)
            26,932
Depreciation and amortization
           22,622
  
                   (1,912)
 (a)
            20,710
Management company expenses
                 744
      
                 744
General and administrative
2,008
  
                        243
 (b)
              2,251
Total expenses
           56,325
  
                   (5,688)
  
            50,637
           
Operating income
           12,996
  
                   (1,842)
  
            11,154
           
Other income and expenses
          
Interest and other income
                 385
      
                 385
Equity in earnings of unconsolidated joint ventures
                 105
      
                 105
Interest expense
         (13,695)
  
                    1,953
 (c)
          (11,742)
           
Income (loss) from continuing operations
               (209)
  
                        111
  
                  (98)
Net loss attributable to noncontrolling interest - real estate partnerships
             2,587
      
              2,587
Dividends on preferred stock
            (1,200)
      
            (1,200)
Income (loss) from continuing operations attributable to common stockholders
 $          1,178
  
 $                    111
  
 $           1,289
           
Income from continuing operations per common share (3)
        
Basic
 $            0.05
      
 $             0.06
Diluted
 $            0.05
      
 $             0.06
           
Weighted average shares outstanding:
          
Basic
21,390
      
            21,390
Diluted
21,509
      
            21,509
           
           
           
           
           
           
See accompanying notes.

 
Page 4 of 9
 

PARKWAY PROPERTIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2010
(Unaudited)
           
 
 
        
 
Parkway
  
 Pro Forma
  
 Parkway
 
Historical
  
 Adjustments (2)
 Pro Forma
 
(In thousands, except per share data)
  
           
           
           
Revenues
          
Income from office and parking properties
 $      254,611
  
 $           (29,587)
 (a)
 $      225,024
Management company income
              1,652
      
              1,652
Total revenues
          256,263
  
              (29,587)
  
          226,676
 
 
        
Expenses
 
        
Property operating expense
          117,935
  
              (14,684)
 (a)
          103,251
Depreciation and amortization
            92,190
  
                 (8,034)
 (a)
            84,156
Impairment loss on real estate
              4,120
      
              4,120
Management company expenses
              3,961
      
              3,961
General and administrative
7,382
  
                      932
 (b)
              8,314
Total expenses
          225,588
  
              (21,786)
  
          203,802
           
Operating income
            30,675
  
                 (7,801)
  
            22,874
           
Other income and expenses
          
Interest and other income
              1,487
      
              1,487
Equity in earnings of unconsolidated joint ventures
                  326
      
                  326
Gain on involuntary conversion
                    40
      
                    40
Interest expense
          (54,647)
  
                  7,862
 (c)
          (46,785)
           
Income (loss) from continuing operations
          (22,119)
  
                        61
  
          (22,058)
Net loss attributable to noncontrolling interest - real estate partnerships
            10,789
      
            10,789
Dividends on preferred stock
             (6,325)
      
             (6,325)
Income (loss) from continuing operations attributable to common stockholders
 $       (17,655)
  
 $                     61
  
 $       (17,594)
           
Loss from continuing operations per common share (3)
          
Basic
 $            (0.82)
      
 $            (0.82)
Diluted
 $            (0.82)
      
 $            (0.82)
           
Weighted average shares outstanding:
          
Basic
21,421
      
            21,421
Diluted
21,421
      
            21,421
           
           
           
           
           
           
See accompanying notes.

 

 
Page 5 of 9
 



PARKWAY PROPERTIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2009
(Unaudited)
           
 
 
        
 
Parkway
  
 Pro Forma
  
 Parkway
 
Historical
  
 Adjustments (2)
  
 Pro Forma
 
(In thousands, except per share data)
           
           
           
Revenues
          
Income from office and parking properties
 $     262,951
  
 $             (32,567)
 (a)
 $       230,384
Management company income
             1,870
      
               1,870
Total revenues
        264,821
  
                (32,567)
  
          232,254
 
 
        
Expenses
 
        
Property operating expense
        126,343
  
                (15,814)
 (a)
          110,529
Depreciation and amortization
          92,126
  
                (10,825)
 (a)
            81,301
Management company expenses
             2,299
      
               2,299
General and administrative
6,108
  
                       999
 (b)
               7,107
Total expenses
        226,876
  
                (25,640)
  
          201,236
           
Operating income
          37,945
  
                  (6,927)
  
            31,018
           
Other income and expenses
          
Interest and other income
             1,609
      
               1,609
Equity in earnings of unconsolidated joint ventures
                445
      
                  445
Other-than-temporary impairment loss on investment
          
in unconsolidated joint ventures
           (8,817)
      
             (8,817)
Gain on involuntary conversion
                823
      
                  823
Gain on sale of real estate
                470
      
                  470
Interest expense
         (55,044)
  
                    8,033
 (c)
           (47,011)
           
Income (loss) from continuing operations
         (22,569)
  
                    1,106
  
           (21,463)
Net loss attributable to noncontrolling interest - real estate partnerships
          10,562
      
            10,562
Dividends on preferred stock
           (4,800)
      
             (4,800)
Income (loss) from continuing operations attributable to common stockholders
 $     (16,807)
  
 $                 1,106
  
 $       (15,701)
           
Loss from continuing operations per common share (3)
          
Basic
 $          (0.87)
      
 $            (0.81)
Diluted
 $          (0.87)
      
 $            (0.81)
           
Weighted average shares outstanding:
          
Basic
19,304
      
            19,304
Diluted
19,304
      
            19,304
           
           
           
           
           
           
See accompanying notes.

 
Page 6 of 9
 


PARKWAY PROPERTIES, INC.
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2008
(Unaudited)
           
 
 
        
 
Parkway
  
 Pro Forma
  
 Parkway
 
Historical
  
 Adjustments (2)
 Pro Forma
 
(In thousands, except per share data)
           
           
           
Revenues
          
Income from office and parking properties
 $    260,229
  
 $           (35,503)
 (a)
 $      224,726
Management company income
            1,936
      
              1,936
Total revenues
        262,165
  
              (35,503)
  
         226,662
 
 
        
Expenses
 
        
Property operating expense
        124,409
  
              (14,949)
 (a)
         109,460
Depreciation and amortization
          91,224
  
              (10,694)
 (a)
           80,530
Impairment loss on real estate
            2,542
      
              2,542
Management company expenses
            1,947
      
              1,947
General and administrative
9,725
  
                  1,021
 (b)
           10,746
Total expenses
        229,847
  
              (24,622)
  
         205,225
           
Operating income
          32,318
  
              (10,881)
  
           21,437
           
Other income and expenses
          
Interest and other income
            1,332
      
              1,332
Equity in earnings of unconsolidated joint ventures
                894
      
                 894
Interest expense
        (58,766)
  
                  8,584
 (c)
          (50,182)
           
Loss from continuing operations
        (24,222)
  
                (2,297)
  
          (26,519)
Net loss attributable to noncontrolling interest - real estate partnerships
          11,369
      
           11,369
Dividends on preferred stock
           (4,800)
      
            (4,800)
Loss from continuing operations attributable to common stockholders
 $     (17,653)
  
 $             (2,297)
  
 $      (19,950)
           
Loss from continuing operations per common share (3)
        
Basic
 $          (1.17)
      
 $           (1.33)
Diluted
 $          (1.17)
      
 $           (1.33)
           
Weighted average shares outstanding:
          
Basic
15,023
      
           15,023
Diluted
15,023
      
           15,023
           
           
           
           
           
 
See accompanying notes.


 
Page 7 of 9
 
 

PARKWAY PROPERTIES, INC.
Notes to Pro Forma Consolidated Financial Statements
(Unaudited)


1.        On May 5, 2011, Parkway Properties, Inc. (the “Company”) entered into a Purchase and Sale Agreement (the “Agreement”) to sell 233 North Michigan for a gross sale price of $162.2 million and has received a $17.0 million non-refundable earnest deposit. 233 North Michigan is a 1.1 million square foot office property located in the central business district of Chicago, Illinois. Closing is expected to occur later this month and is subject to customary closing conditions. The Company plans to repay the $84.6 million first mortgage that is secured by the property upon closing.  Parkway expects to receive net cash proceeds from the sale after the repayment of the first mortgage of approximately $75.5 million, which the Company expects to use to reduce amounts outstanding under the Company's revolving credit facility. The Company estimates that it will recognize a gain on the sale of approximately $2.6 million in the second quarter of 2011.

2.        The pro forma adjustments to the Consolidated Statement of Operations for the years ended December 31, 2010, 2009 and 2008 and the three months ended March 31, 2011 and 2010 set forth the effects of the contract to sell the 233 North Michigan office property (the “Sale of 233NM”) as if the sale had been consummated on January 1, 2008.

These pro forma adjustments are detailed below for the years ended December 31, 2010, 2009 and 2008 and the three months ended March 31, 2011 and 2010.

(a)  The effect on income and expenses from real estate properties due to the above transactions is as follows for the periods noted in the table below (in thousands):


 
Revenue
Expenses
 
Income From
Real Estate Owned
 
Office and Parking
Operating
Depreciation
Sale of 233NM
Properties
Expense
Expense
Three Months Ended March 31, 2011
$    (7,087)  
$    (3,922) 
$    (1,815) 
Three Months Ended March 31, 2010
$    (7,530)  
$    (4,019) 
$    (1,912) 
Year Ended December 31, 2010
$  (29,587)  
$  (14,684) 
$    (8,034) 
Year Ended December 31, 2009
$  (32,567)  
$  (15,814) 
$  (10,825) 
Year Ended December 31, 2008
$  (35,503)  
$  (14,949) 
$  (10,694) 


(b)  The pro forma effect of the allocation of intercompany management fees in connection with the Sale of 233NM is an increase in general and administrative expense of $156,000 and $243,000 for the three months ended March 31, 2011 and 2010, respectively, and $932,000, $999,000 and $1,021,000 for the years ended December 31, 2010, 2009 and 2008, respectively.

(c)  Pro forma interest expense reflects the reduction in interest expense as a result of the repayment of the $84.6 million non-recourse mortgage loan secured by the 233 North Michigan office property upon sale as well as interest savings on the reduction in credit facility borrowings as if the liabilities were reduced on January 1, 2008.  The pro forma effect of the reduction in interest expense is approximately $2.1 million and $2.0 million for the three months ended March 31, 2011 and 2010, respectively, and approximately $7.9 million, $8.0 million, and $8.6 million for the years ended December 31, 2010, 2009, and 2008, respectively.
 
 
Page 8 of 9
 

 
3.        Earnings per share is calculated in accordance with Topic 260 – “Earnings Per Share” in the ASC.  The guidance requires allocation of preferred stock dividends to income from continuing operations.  Income or loss attributable to noncontrolling interests is included in the computation as well.

Diluted loss from continuing operations per common share as reported for the three months ended March 31, 2011 was $0.32 based on weighted average diluted shares outstanding of approximately 21.5 million.  Diluted income from continuing operations per common share as reported for the three months ended March 31, 2010 was $0.05 based on weighted average diluted shares outstanding of approximately 21.5 million.  Diluted loss from continuing operations for the years ended December 31, 2010, 2009 and 2008 was $0.82, $0.87 and $1.17, respectively, based on weighted average diluted shares outstanding of approximately 21.4 million, 19.3 million and 15.0 million, respectively.

           Pro forma diluted loss from continuing operations per common for the three months ended March 31, 2011 was $0.29 based on weighted average diluted shares outstanding of approximately 21.5 million.  Pro forma diluted income from continuing operations per common share as reported for the three months ended March 31, 2010 was $0.06 based on weighted average diluted shares outstanding of approximately 21.5 million.  Pro forma diluted loss from continuing operations for the years ended December 31, 2010, 2009 and 2008 was $0.82, $0.81 and $1.33, respectively, based on weighted average diluted shares outstanding of approximately 21.4 million, 19.3 million and 15.0 million, respectively.



 
Page 9 of 9
 

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