U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB/A
AMENDMENT TO FORM 10-QSB
Filed Pursuant to
THE SECURITIES EXCHANGE ACT OF 1934
PARKWAY PROPERTIES INC.
(Exact name of registrant as specified in its charter)
AMENDMENT NO. 1
The undersigned registrant hereby amends the following
items, financial statements, exhibits or other portions of its
Form 10-QSB for the quarter ended June 30, 1996 as set forth in
the pages attached hereto:
Item 1. Consolidated Financial Statements
Item 2. Management's Discussion
and Analysis of Financial Condition
and Results of Operations
Item 6. Exhibits and Reports on
Form 8-K
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this amendment to be
signed on its behalf by the undersigned, thereunto duly
authorized.
Date: August 30, 1996 PARKWAY PROPERTIES, INC.
By /s/ Sarah P. Clark
Sarah P. Clark, Vice President
Chief Financial Officer,
Treasurer and Secretary
CONSOLIDATED BALANCE SHEETS
(In thousands)
June 30 December 31
1996 1995
---------- -----------
Assets
Real estate related investments
Office buildings....................... $ 79,608 $ 59,406
Accumulated depreciation............... (8,039) (7,122)
-------- --------
71,569 52,284
Real estate held for sale
Land................................. 7,828 8,441
Operating properties................. 3,982 3,990
Mortgage loans......................... 6,176 11,161
Real estate securities................. 1,796 2,866
Real estate partnerships and
corporate joint venture.............. 607 685
-------- --------
91,958 79,427
Interest and rents receivable and other
assets................................. 3,674 2,572
Cash and cash equivalents................ 24,765 6,044
-------- --------
$120,397 $ 88,043
======== ========
Liabilities
Mortgage notes payable without recourse.. $ 39,218 $ 29,336
Mortgage notes payable on wrap mortgages. 4,539 5,368
Accounts payable and other liabilities... 4,425 3,834
Deferred gain............................ - 294
-------- --------
48,182 38,832
-------- --------
Shareholders' Equity
Common stock, $1.00 par value, 10,000,000
shares authorized, 4,168,962 and
2,007,658 shares issued in 1996
and 1995, respectively................. 4,169 2,008
Additional paid-in capital............... 47,332 32,882
Retained earnings........................ 20,087 13,729
-------- --------
71,588 48,619
Unrealized gain on securities............ 627 592
-------- --------
72,215 49,211
-------- --------
$120,397 $ 88,043
======== ========
- ------------------------------------------------------------------
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
------------------- -------------------
1996 1995 1996 1995
-------- -------- -------- --------
(In thousands, except per share data)
Revenues
Income from real estate
properties...........$ 4,609 $ 1,948 $ 8,084 $ 3,731
Management company
income............... 141 245 420 480
Interest on mortgage
loans................ 539 341 1,103 493
Equity in earnings:
Real estate
companies.......... - - - 135
Real estate partner-
ships and corporate
joint venture....... 66 30 70 47
Gain (loss) on
securities........... 62 125 (128) 101
Interest on invest-
ments................ 84 33 183 35
Deferred gains and
other income......... 26 161 73 216
Dividend income........ 42 210 108 261
Gain on real estate
and mortgage loans... 5,507 713 5,700 836
-------- -------- -------- --------
11,076 3,806 15,613 6,335
-------- -------- -------- --------
Expenses
Real estate owned:
Operating expense.... 2,272 1,079 3,949 2,056
Interest expense..... 704 535 1,331 1,072
Depreciation and
amortization....... 526 282 944 563
Minority interest.... 4 (33) 4 (70)
Interest expense:
Notes payable to
banks.............. 94 26 94 111
Notes payable on wrap
mortgages.......... 110 29 230 29
Management company
expenses............. 123 153 362 323
Other expenses......... 807 530 1,476 973
-------- -------- -------- --------
4,640 2,601 8,390 5,057
-------- -------- -------- --------
Income before taxes.... 6,436 1,205 7,223 1,278
-------- -------- -------- --------
Income tax provision... 23 - 23 -
-------- -------- -------- --------
Net income.............$ 6,413 $ 1,205 $ 7,200 $ 1,278
======== ======== ======== ========
Net income per share...$ 2.00 $ .43 $ 2.31 $ .50
======== ======== ======== ========
Weighted average shares
outstanding.......... 3,213 2,790 3,111 2,570
======== ======== ======== ========
- ------------------------------------------------------------------
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
June 30
---------------------
1996 1995
-------- --------
(In thousands)
Operating Activities
Net income............................... $ 7,200 $ 1,278
Adjustments to reconcile net income
to net cash provided by operating
activities:
Equity in earnings..................... (70) (182)
Dividends received..................... - 76
Distributions from operations of
real estate partnership and
corporate joint venture.............. 148 161
Depreciation and amortization.......... 944 549
Amortization of discounts, deferred
gains and other...................... (22) (97)
Gain on real estate and
mortgage loans...................... (5,700) (836)
Loss (Gain) on securities.............. 128 (101)
Minority interest depreciation......... (90) (104)
Changes in operating assets and
liabilities:
Decrease (increase) in
receivables........................ (63) 262
Increase in accounts payable and
accrued expenses................... 589 878
-------- --------
Cash provided by operating activities.. 3,064 1,884
-------- --------
Investing Activities
Payments received on mortgage loans...... 395 724
Purchases of investments in real
estate companies....................... - (992)
Purchase of mortgage loans............... (600) -
Purchase of real estate properties....... (21,587) -
Proceeds from sale of real estate
properties............................. 2,307 667
Proceeds from sale of mortgage loans..... 9,888 -
Proceeds from sale of investments in
real estate companies.................. 975 1,218
Improvements to real estate owned........ (663) (148)
Proceeds from merger of EB, Inc. - 2,702
-------- --------
Cash provided by (used in) investing
activities.............................. (9,285) 4,171
-------- --------
Financing Activities
Principal payments on long-term debt..... (1,247) (94)
Proceeds from borrowings on
mortgage notes payable................. 10,420 -
Proceeds from bank borrowings............ 10,194 1,498
Principal payments on bank borrowings.... (10 194) (5,312)
Stock options exercised.................. (1) -
Dividends paid........................... (842) (568)
Proceeds from private placement
of stock............................... 16,612 -
-------- --------
Cash provided by (used in) financing
activities.............................. 24,942 (4,476)
-------- --------
Increase in cash.......................... 18,721 1,579
Cash and cash equivalents at beginning
of period............................... 6,044 320
-------- --------
Cash and cash equivalents at end of
period.................................. $ 24,765 $ 1,899
======== ========
- ------------------------------------------------------------------
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands)
Six Months Ended
June 30
--------------------
1996 1995
-------- --------
(In thousands)
Common stock, $1.00 par value
Balance at beginning of period...... $ 2,008 $ 1,563
Shares issued in merger with
EB, Inc........................... - 429
Exercise stock options.............. 15 -
Shares issued - stock dividend...... 1,006 -
Shares issued - private placement... 1,140 -
------- -------
Balance at end of period............ 4,169 1,992
------- -------
Additional paid-in capital
Balance at beginning of period...... 32,882 26,847
Shares issued in merger with
EB, Inc........................... - 5,941
Exercise stock option............... (16) -
Stock dividend...................... (1,006) -
Shares issued private placement..... 15,472 -
------- -------
Balance at end of period............ 47,332 32,788
------- -------
Retained Earnings
Balance at beginning of period...... 13,729 3,158
Net income.......................... 7,200 1,278
Cash dividends declared............. (842) (568)
------- -------
Balance at end of period............ 20,087 3,868
------- -------
Unrealized gain on securities
Balance at beginning of period...... 592 670
Unrealized gain on securities....... 35 1,868
------- -------
Balance at end of period............ 627 2,538
------- -------
Total shareholders' equity............ $72,215 $41,186
======= =======
- ---------------------------------------------------------------
See notes to consolidated financial statements
Notes to Consolidated Financial Statements (Unaudited)
June 30, 1996
(1) Basis of Presentation
The accompanying financial statements reflect all adjustments
which are, in the opinion of management, necessary for a fair
statement of the results for the interim periods presented. All
such adjustments are of a normal recurring nature. The financial
statements should be read in conjunction with the annual report
and the notes thereto.
(2) Reclassifications
Certain reclassifications have been made in the 1995
financial statements to conform to the 1996 classifications.
(3) Stock Split
On April 30, 1996, the Company completed a 3 for 2 common
stock split effected as a dividend of one share for every two
shares outstanding. Per share information for all periods
presented reflects the stock split.
(4) Supplemental Cash Flow Information
The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.
Six Months Ended
June 30
-----------------------
1996 1995
---------- ----------
Cash paid for interest....... $1,308,000 $ 612,000
Cash paid for income taxes... 13,000 2,000
(5) Acquisitions and Dispositions
On March 8, 1996, Parkway Texas Corporation, a wholly-owned
subsidiary of the Company purchased the One Park 10 Plaza Office
Building in Houston, Texas from a major insurance company. One
Park 10 Plaza is an eight-story office building with
approximately 161,000 square feet of rentable area and 609
parking spaces located in the Katy Freeway/Energy Corridor office
submarket of Houston. The $6,700,000 purchase price was funded
with existing cash reserves.
On April 15, 1996, Parkway Houston, Inc., a wholly-owned
subsidiary of the Company purchased the 400 North Belt Centre'
Office Building and the Woodbranch Office Building in Houston,
Texas from a major insurance company. The 400 North Belt Centre'
Office Building is a 12-story Class A office building with
approximately 220,000 square feet of rentable area and a 723
space parking garage located in the Greenpoint/North Belt office
submarket of Houston near the Houston Intercontinental Airport.
The Woodbranch Office Building is a 6-story office building with
approximately 110,000 square feet of rentable area and a 352
space parking garage located in the Katy Freeway/Energy Corridor.
The total purchase price for these two buildings was $13,900,000
and was funded with existing cash reserves and advances on the
Company's acquisition line of credit and working capital line of
credit. At June 30, 1996, no amounts were owed on these lines.
On May 31, 1996, the Company sold 157 mortgage loans which
resulted in a gain of $4,760,000 and net cash proceeds of
$9,888,000.
(6) Subsequent Events
On July 9, 1996, Parkway Virginia, Inc. a wholly-owned
subsidiary of the Company purchased three office buildings in
northern Virginia from a major insurance company. The 8381 and
8391 Courthouse Road Buildings are each three-story buildings
connected by a common courtyard located in Tysons Corner,
Virginia. The two buildings contain an aggregate of approximately
94,929 square feet of rentable area and have a 333 space parking
area. The Cherokee Business Center is a three-story office
building located in Alexandria, Virginia containing approximately
53,710 square feet of rentable area and a 221 space parking area.
The purchase price for this three-building portfolio of
$11,050,000 was funded with existing cash reserves.
On July 10, 1996, the Company received funds totaling
$14,700,000 from the placement of non-recourse mortgage financing
on three office properties recently purchased in Houston, Texas.
The three loans are fully amortizing over a 15-year period at an
average rate of 8.28% and are detailed as follows:
Property Term Rate Amount
--------------------- ------- ----- ----------
One Park 10 Plaza 15 yrs. 8.35% $4,700,000
400 North Belt Centre' 15 yrs. 8.25% $6,750,000
Woodbranch Building 15 yrs. 8.25% $3,250,000
On July 23, 1996, the Company sold 62,000 shares of common
stock in EastGroup Properties that will result in a gain in the
third quarter of $429,000 and cash proceeds of $1,306,000.
On August 9, 1996, Parkway Atlanta, Inc., a wholly-owned
subsidiary of the Company, purchased two office buildings in
Atlanta, Georgia. The Falls Pointe Building contains
approximately 105,655 square feet of rentable area and has a 420
space surface parking area. The Roswell North Building contains
approximately 57,715 square feet of rentable area and has a 232
space two level parking deck. The $14,000,000 purchase price for
the two building portfolio was funded from existing cash
reserves.
(7) Capital Transactions
On June 14, 1996, the Company sold an aggregate of
1,140,000 shares of common stock at $15.25 per share in a private
placement transaction to seven institutional investors for an
aggregate cash purchase price of $17,385,000. Expenses of the
transaction were $773,000, resulting in net cash proceeds of
$16,612,000. On August 16, 1996, this transaction was modified
as described under "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Financial
Condition".
Effective August 2, 1996, The Parkway Company merged with
and into its recently organized, wholly-owned subsidiary, Parkway
Properties, Inc., a Maryland corporation, pursuant to the
Agreement and Plan of Merger dated as of July 17, 1996. As a
result of the merger, each stockholder received one share of
common stock of Parkway Properties, Inc. in exchange for one
share of common stock of The Parkway Company. Additionally,
Parkway Properties, Inc. succeeded to all the rights and
properties, and became subject to all the obligations and
liabilities, of The Parkway Company.
PARKWAY PROPERTIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
- -------------------
(Comments are for the balance sheet dated June 30, 1996 compared
to the balance sheet dated December 31, 1995.
Total assets of the Company were $120,397,000 at June 30,
1996, a increase of $32,354,000 from December 31, 1995.
Liabilities increased $9,350,000 to $48,182,000 during the same
period. Book value per share increased from $16.34 at December
31, 1995 to $17.32 at June 30, 1996.
Office building investments increased a net $19,285,000
during the six months ended June 30, 1996. This is primarily due
to the March 7, 1996 purchase of the One Park 10 Plaza Building
("One Park 10 Plaza") in Houston, Texas for $6,721,000, including
closing costs and the April 15, 1996 purchase of the 400 North
Belt Centre' and Woodbranch Office Buildings ("400 North Belt"
and "Woodbranch") in Houston, Texas for $14,189,000, including
closing costs. One Park 10 Plaza is an eight-story Class A
building with 609 parking spaces. The building was 97% leased at
July 31, 1996. The 400 North Belt Centre' Office Building is a 12-
story Class A office building with approximately 220,000 square
feet of rentable area and a 723 space parking garage located in
the Greenpoint/North Belt office submarket of Houston near the
Houston Intercontinental Airport. The Woodbranch Office Building
is a 6-story office building with approximately 110,000 square
feet of rentable area and a 352 space parking garage located in
the Katy Freeway/Energy Corridor. The buildings were 95% and 89%
leased at July 31, 1996, respectively.
During the quarter, the Company also purchased an additional
5% ownership interest in the One Jackson Place office building
from its limited partner for $5,000 cash plus assumption of its
pro rata share of liabilities. Other net changes in office
building investments include capital improvements of $488,000 and
depreciation of $917,000.
Real estate held for sale decreased a net $621,000 during
the six months ended June 30, 1996. Land held for sale decreased
$613,000 and is due to the sale of seven residential lots and 11
acres of land, as well as writedowns of $445,000 taken to reflect
current market prices, as evidenced by signed contracts with
third-party purchasers on certain properties. The sales
mentioned above resulted in gains of $178,000 with net cash
proceeds of $346,000. Operating properties held for sale
decreased a net $8,000 during the six months. On March 26, 1996,
the Company purchased the minority owner's interest in two
properties received in the EB, Inc. merger. The Company
purchased an additional 16% interest in the Club at Winter Park
for $404,000 and an additional 13% interest in the Oak Creek
Apartments for $268,000. On June 15, 1996, the Company sold its
53% investment in Oak Creek Apartments having a basis of $826,000
which resulted in a gain of $998,000 with net cash proceeds of
$1,824,000. During the quarter, the Company also sold six
townhomes located in Corpus Christi, Texas which resulted in a
gain of $66,000 with net cash proceeds of $137,000. Other
increases in operating properties held for sale for the six
months include improvements of $175,000 and the foreclosure of
one mortgage loan with a net basis of $43,000.
Mortgage loans decreased a net $4,985,000 during the six
months. In March 1996, the Company purchased a portfolio of 10
mortgage loans with a principal balance of $648,000 for $600,000
and a current yield to the Company of 10%. In connection with
the purchase, the Company received repayment of notes receivable
from a former affiliate of $177,000. On May 31, 1996, the
Company sold 157 mortgage loans, including the ten loans
discussed above, which resulted in a gain of $4,760,000 and net
cash proceeds of $9,888,000. Mortgage loans also decreased
$395,000 due to principal payments received and increased $19,000
due to the amortization of interest rate valuations on mortgage
loans. The Company foreclosed on one mortgage loan during the
six months with a net balance of $30,000 and recognized $143,000
in gains on collection of mortgage loans. At June 30, 1996, the
Company's investment in mortgage loans totaled $6,176,000 and
consisted of 5 mortgage loans.
The investment in real estate securities decreased a net
$1,070,000 during the six months ended June 30, 1996, primarily
due to the sale of an investment in a real estate investment
trust that resulted in a loss of $190,000 and cash proceeds of
$799,000. The Company also sold 8,000 shares of common stock in
EastGroup Properties that resulted in a gain of $62,000 and cash
proceeds of $176,000. The Company recorded a net increase in
unrealized gains for the six months of $35,000.
The net decrease in real estate partnerships and corporate
joint venture for the six months was $78,000. The Company
recorded equity in earnings of real estate partnerships and
corporate joint venture of $70,000 and received distributions of
$148,000.
During the quarter ended June 30, 1996, the Company advanced
and subsequently repaid $964,000 on the working capital line of
credit and $9,230,000 on the acquisition line of credit. No
balances were owed on these lines at June 30, 1996.
Notes payable without recourse increased a net $9,882,000
largely due to the placement of $4,800,000 in long term financing
on the IBM Building on February 15, 1996 and $5,620,000 on the
Waterstone Building on June 4, 1996. The IBM Building note is a
15-year fully amortizing loan with a fixed interest rate of 7.70%
and maturity date of March 2011. The Waterstone note is a 15-
year fully amortizing loan with a fixed interest rate of 8% and
maturity date of July 2011. Decreases of $538,000 in notes
payable without recourse reflect scheduled principal payments.
Mortgage notes payable on wrap mortgages decreased $829,000
due to the payoff of one wrap note totaling $698,000 and
scheduled principal payments of $131,000.
Deferred gain of $292,000 was recognized upon the sale of
157 mortgage loans discussed previously.
Shareholders' equity increased $23,004,000 during the
comparison period as a result of the following factors:
Increase (decrease)
-------------------
(In thousands)
Net income $7,200
Dividends declared and paid (842)
Increase in unrealized gains 35
Exercise of stock options (1)
Shares issued - private placement 16,612
-------
$23,004
=======
On April 30, 1996, the Company completed a 3 for 2 common
stock split, effected in the form of a stock dividend of one
share for every two shares outstanding. Common stock and
additional paid-in capital for June 30, 1996 reflect the stock
split.
On June 14, 1996, the Company sold an aggregate of 1,140,000
shares of common stock at $15.25 per share in a private placement
transaction to seven institutional investors for an aggregate
cash purchase price of $17,385,000. Expenses of the transaction
were $773,000, resulting in net cash proceeds of $16,612,000. On
August 16, 1996, the Company modified this private placement by
having two of the institutional investors who subscribed to the
private placement amend their subscriptions to accept in lieu of
shares of Common Stock an equal number of shares of the Company's
non-voting Class A Preferred Stock, $.001 par value ("Preferred
Stock"). This modification of the private placement was done to
bring the private placement in compliance with a technical rule
of the NASDAQ National Market (the market upon which the
Company's Common Stock was traded at the time of the private
placement) that restricts a listed company's ability to engage in
private placements for more than 20% of a listed company's
outstanding voting securities at a price less than the Company's
book value per share. In connection with the issuance of the
Preferred Stock, the Company agreed to use its best efforts to
call a meeting of its stockholders on or before October 31, 1996
at which meeting the Company's stockholders will vote upon
approval of a further amendment to these institutional investors'
subscriptions, which amendment will allow such investors to
exchange all of their Preferred Stock for Common Stock on a share-
for-share basis (the "Exchange Right"). The Company and the
investors will enter into the agreement providing for the
Exchange Right only in the event that the Company's shareholders
approve the Exchange Right. In the event the Exchange Right is
not approved by the Company's stockholders, the investors shall
have the right, exercisable for 30 days after notification to
investors by the Company of the results of the stockholder vote,
to rescind its purchase of the Preferred Stock. In the event an
investor elects to rescind the purchase of the Preferred Stock,
the Company will pay $15.25 for each share of Preferred Stock
plus any accrued and unpaid dividends on the Preferred Stock from
the date of the last record date for payment of such dividends
through the date the Company receives notice of rescission.
After the issuance of the Preferred Stock to the investors, the
Company sold 564,000 shares of Common Stock and 576,000 shares of
Preferred Stock in the Private Placement for net proceeds as set
forth above. The holders of Preferred Stock have no voting
rights. Dividends on shares of Preferred Stock will be declared
and paid simultaneously with any dividends payable on the Common
Stock, and, for all dividends paid and declared on or before
December 31, 1996, such dividend will be paid at a per share
dividend rate of the greater of (i) twenty-four cents ($0.24) per
share per quarter or (ii) the per share dividend declared and
paid on Common Stock for the same quarter, as adjusted for stock
dividends, stock splits or similar capital changes. For all
dividends paid and declared on Preferred Stock after December 31,
1996, such dividends will be paid at a per share dividend rate of
the greater of (i) thirty-eight cents ($0.38) per share per
quarter or (ii) the per share dividend declared and paid on
Common Stock for the same quarter, as adjusted for stock
dividends, stock splits or similar capital changes. No dividend
will be paid or declared, nor any distribution made on any other
class of stock (other than a dividend payable in stock of the
same class) nor will any shares of Common Stock be acquired for
consideration by the Company unless all accrued dividends on the
Preferred Stock for all past dividend periods have been paid.
Effective August 2, 1996, The Parkway Company merged with
and into its recently organized, wholly-owned subsidiary, Parkway
Properties, Inc., a Maryland corporation, pursuant to the
Agreement and Plan of Merger dated as of July 17, 1996. As a
result of the merger, each stockholder received one share of
common stock of Parkway Properties, Inc. in exchange for one
share of common stock of The Parkway Company. Additionally,
Parkway Properties, Inc. succeeded to all the rights and
properties, and became subject to all the obligations and
liabilities of The Parkway Company.
RESULTS OF OPERATIONS
- ---------------------
(Comments are for the three months and six months ended June 30,
1996 compared to the three months and six months ended June 30,
1995.)
Operations of office buildings properties are summarized
below:
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1996 1995 1996 1995
------- ------- ------- -------
(In thousands)
Income from real
estate properties.. $ 4,093 $ 1,270 $ 7,130 $ 2,550
Real estate
operating expense.. (1,866) (509) (3,174) (1,001)
------- ------- ------- -------
2,227 761 3,956 1,549
Interest expense on
real estate
properties....... (704) (526) (1,331) (1,053)
Depreciation and
amortization....... (526) (251) (944) (503)
Minority interest.... (4) 33 (4) 70
------- ------- ------- -------
$ 993 $ 17 $ 1,677 $ 63
======= ======= ======= =======
The operations in 1996 reflect increases as compared to 1995
as a result of the purchase of Mtel Centre' in July 1995, IBM
Building in October 1995, Waterstone in December 1995, One Park
10 Plaza in March 1996 and 400 North Belt Centre' and Woodbranch
Office Building in April 1996.
Operations of other real estate properties held for sale are
summarized below:
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1996 1995 1996 1995
------- ------- ------- -------
(In thousands)
Income from real
estate properties.. $ 516 $ 678 $ 954 $ 1,181
Real estate
operating expense.. (406) (570) (775) (1,055)
------- ------- ------- -------
110 108 179 126
Interest expense on
real estate
properties......... - (9) - (19)
Depreciation and
amortization....... - (31) - (60)
------- ------- ------- -------
$ 110 $ 68 $ 179 $ 47
======= ======= ======= =======
The effect on the Company's operations related to One
Jackson Place included in the operations of office buildings
above is as follows:
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1996 1995 1996 1995
------- ------- ------- -------
(In thousands)
Revenue $ 941 $ 943 $ 1,878 $ 1,842
Operating expenses (356) (354) (724) (681)
Interest expense (364) (518) (730) (1,036)
Depreciation (215) (224) (428) (450)
Minority interest
income (4) 33 (4) 70
------- ------- ------- -------
Net income (loss) $ 2 $ (120) $ (8) $ (255)
======= ======= ======= =======
The effect on the Company's operations related to Mtel
Centre' included in the operations of office buildings above is
as follows:
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1996 1995 1996 1995
------- ------- ------- -------
(In thousands)
Revenue $ 977 $ - $ 1,946 $ -
Operating expenses (372) - (785) -
Interest expense (212) - (427) -
Depreciation (82) - (162) -
------- ------- ------- -------
Net income $ 311 $ - $ 572 $ -
======= ======= ======= =======
The increase in interest on mortgage loans of $610,000 for
the six months ended June 30, 1996 as compared to 1995 is due
primarily to $890,000 of interest income recorded on the mortgage
loans received in the April 27, 1995 merger with EB, Inc. and
loans made to facilitate sales in 1995. This is offset by
decreases in interest income due to payoffs of loans received in
1995 and the sale of 157 mortgage loans on May 31, 1996.
Interest income on the loans sold during 1996 and prior to the
date of the sale was $438,000.
Equity in earnings of real estate companies for the six
months ended June 30, 1995 reflects $135,000 recognized on the
Company's investment in EB, Inc. prior to the April 27, 1995
merger of EB with a wholly-owned subsidiary.
Equity in earnings of real estate partnerships and corporate
joint venture consists of the following:
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1996 1995 1996 1995
------- ------- ------- -------
(In thousands)
Golf Properties, Inc. $ 49 $ 28 $ 43 $ 30
Wink/Parkway
Partnership 17 2 27 17
------- ------- ------- -------
Net income $ 66 $ 30 $ 70 $ 47
======= ======= ======= =======
The net loss on sale of securities for the six months ending
June 30, 1996 is due to the sale of shares in a real estate
investment trust for $799,000 net of closing costs with a basis
of $989,000 resulting in a loss of $190,000 and the sale of 8,000
shares of common stock in EastGroup Properties for $176,000 net
of closing costs with a basis of $114,000 resulting in a gain of
$62,000 in the three months and six months ended June 30, 1996.
The gain on securities of $101,000 for the six months ended June
30, 1995 is due to a gain of $125,000 on the sale of an
investment for $1,018,000 with a basis of $893,000 in the three
months ending June 30, 1995 and a loss on the sale of securities
of $24,000 for $202,000 with a basis of $226,000 during the six
month period ending June 30, 1995.
The increase in interest on investments reflects higher cash
balances invested in interest bearing accounts in 1996 as
compared to 1995.
Gain on real estate and mortgage loans consists of the
following:
Three Months Ended Six Months Ended
June 30 June 30
------------------ ----------------
1996 1995 1996 1995
------- ------- ------- -------
(In thousands)
Sales:
Land $ 86 $ 302 $ 178 $ 362
Other operating
properties 1,064 73 1,064 112
Mortgages 4,760 - 4,760 -
Writedowns to land (445) - (445) -
Gains recognized
on collection of
mortgage loans 42 338 143 362
------- ------- ------- -------
$ 5,507 $ 713 $ 5,700 $ 836
======= ======= ======= =======
The sales shown above provided net cash proceeds of
$12,047,000 and $12,195,000 during the three months and six
months ended June 30, 1996, respectively.
Interest expense on notes payable on wrap mortgages for the
six months ending June 30, 1996 of $230,000 reflects interest on
notes received in the April 27, 1995 merger with EB, Inc.
Interest expense on notes payable to banks of $94,000 for the
three months and six months ending June 30, 1996 reflects
interest on borrowings under bank lines of credit.
The increase in other expenses is primarily due to an
increase in general and administrative costs associated with
recent mergers and acquisitions. The EB, Inc. merger was
effective April 30, 1995, therefore, general and administrative
expenses of EB, Inc. for only two months have been included in
the six months ended June 30, 1995 compared to six months of
expenses included in the six months ended June 30, 1996.
Professional fees also increased $98,000 as compared to 1995,
reflecting primarily the $65,000 cost of conducting an odd-lot
program to reduce the number of shareholders owning less than 100
shares of stock as a result of the recent mergers. The EB, Inc.
merger resulted in over 4,000 new shareholders for the Company
which also contributed to an $82,000 increase in shareholder
reporting expenses. Other increases in legal and accounting fees
were due to the Company's recent growth.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Funds provided by operations, mortgage loan receivable
payments, proceeds from the sale of investments in real estate
securities, sales of real estate, sales of mortgage loans,
proceeds from long term financing and proceeds from a private
placement of securities were the primary sources of funds for the
Company during the six months ended June 30, 1996. Funds
provided by these sources and cash balances were sufficient to
cover repayment of long-term debt, dividends paid to
shareholders, improvements to real estate properties, the payment
of operating expenses and the purchase of real estate properties
and mortgage loans. At June 30, 1996, the Company had available
$24,765,000 in cash and short-term investments. Management
believes that funds generated from operations, borrowings on
lines of credit and cash on hand will be sufficient to cover long
and short-term operating cash requirements.
At June 30, 1996, the Company had available a $45,000,000
acquisition line of credit and a $10,000,000 working capital line
of credit with Deposit Guaranty National Bank in Jackson,
Mississippi. The Company plans to continue actively pursuing the
purchase of office building investments that meet the Company's
investment criteria and intends to use these lines of credit and
cash balances to fund those acquisitions. Both lines of credit
have an interest rate equal to the 90-day LIBOR rate plus 2.35%
(adjusted quarterly), interest due monthly and commitment fees of
.125% due upon acceptance. In addition, both lines of credit
have fees of .125% on the unused balances due quarterly. The
acquisition line of credit matures June 30, 1998 and the
$10,000,000 line of credit matures June 30, 1997.
On July 9, 1996, Parkway Virginia, Inc. a wholly-owned
subsidiary of the Company purchased three office buildings in
northern Virginia from a major insurance company. The 8381 and
8391 Courthouse Road Buildings are each three-story buildings
connected by a common courtyard located in Tysons Corner,
Virginia. The two buildings contain an aggregate of
approximately 94,929 square feet of rentable area and have a 333
space parking area. The Courthouse Road Buildings are currently
97% leased. The Cherokee Business Center is a three-story office
building located in Alexandria, Virginia containing approximately
53,710 square feet of rentable area and a 221 space parking area.
The Cherokee Business Center is currently 94% leased. The
purchase price for this three-building portfolio of $11,050,000
was funded with existing cash reserves.
On July 10, 1996, the Company received funds totaling
$14,700,000 from the placement of non-recourse financing on three
office properties recently purchased in Houston, Texas. The
three loans are fully amortizing over a 15-year period at an
average rate of 8.28% and are detailed as follows:
Property Term Rate Amount
---------------------- ------- ----- ----------
One Park 10 Plaza 15 yrs. 8.35% $4,700,000
400 North Belt Centre' 15 yrs. 8.25% $6,750,000
Woodbranch Building 15 yrs. 8.25% $3,250,000
On July 23, 1996, the Company sold 62,000 shares of common
stock in EastGroup Properties that will result in a gain in the
third quarter of $429,000 and cash proceeds of $1,306,000.
On August 9, 1996, Parkway Atlanta, Inc., a wholly-owned
subsidiary of the Company, purchased two office buildings in
Atlanta, Georgia. The Falls Pointe Building contains
approximately 105,655 square feet of rentable area and has a 420
space surface parking area. The Roswell North Building contains
approximately 57,715 square feet of rentable area and has a 232
space two level parking deck. The purchase price for the two
building portfolio was $14,000,000 which was funded from existing
cash reserves.
Item 6. Exhibits and reports on Form 8-K
--------------------------------
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K
(1) Filed April 30, 1996
Reporting the April 15, 1996
acquisition of the 400 North Belt Centre'
Office Building and the Woodbranch Office
Building from The Penn Mutual Life Insurance
Company.
(2) Filed June 14, 1996
Reporting the May 31, 1996
sale of a portfolio of 157 mortgage loans to
MTGLQ Investors, LP.
(3) Filed June 28, 1996
Amendment to Form 8-K filed
April 30, 1996 reporting "Item 7. Financial
Statements and Exhibits".
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