UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------------------------
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
-----------------------------------
For Quarterly Period Ended March 31, 1997
Commission File Number 1-11533
Parkway Properties, Inc.
- -----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 74-2123597
- ------------------------------ ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
One Jackson Place Suite 1000
188 East Capitol Street
P. O. Box 24647
Jackson, Mississippi 39225-4647
- -------------------------------------- -------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (601) 948-4091
------------------
Parkway Properties, Inc.
300 One Jackson Place
188 East Capitol Street
P. O. Box 24647
Jackson, Mississippi 39225-24647
- -----------------------------------------------------------------
Former name, former address and former fiscal year,
if changed since last report
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
------- -------
6,287,130 shares of common stock, $.001 par value, were
outstanding at May 14, 1997.
PARKWAY PROPERTIES, INC.
FORM 10-Q
TABLE OF CONTENTS
FOR THE QUARTER ENDED MARCH 31, 1997
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Pages
-----
Part I. Financial Information
Item 1. Financial Statements
Consolidated balance sheets, March 31, 1997 and
December 31, 1996 3
Consolidated statements of income for the three months
ended March 31, 1997 and 1996 4
Consolidated statements of cash flows for the
three months ended March 31, 1997 and 1996 5
Consolidated statements of stockholders' equity for the
three months ended March 31, 1997 and 1996 7
Notes to consolidated financial statements 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 18
Signatures
Authorized signatures 19
PARKWAY PROPERTIES, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands except share and per share data)
March 31 December 31
1997 1996
--------- -----------
(Unaudited)
Assets
Real estate related investments:
Office buildings....................... $191,220 $132,309
Land held for development.............. 1,721 -
Accumulated depreciation............... (10,441) (9,507)
-------- --------
182,500 122,802
Real estate held for sale:
Land................................. 5,187 5,664
Operating properties................. 1,492 3,675
Other non-core real estate assets.... 295 381
Mortgage loans......................... 348 350
Real estate partnership................ 313 319
-------- --------
190,135 133,191
Interest, rents receivable and other
assets................................. 5,182 5,791
Cash and cash equivalents................ 4,686 8,053
-------- --------
$200,003 $147,035
======== ========
Liabilities
Mortgage notes payable without recourse.. $ 62,260 $ 62,828
Accounts payable and other liabilities... 6,552 6,299
-------- --------
68,812 69,127
-------- --------
Stockholders' Equity
Common stock, $.001 par value, 69,424,000
shares authorized and 6,287,130 and
4,257,534 shares issued and outstanding
in 1997 and 1996, respectively......... 6 4
Additional paid-in capital............... 103,665 52,356
Retained earnings........................ 27,520 25,548
-------- --------
131,191 77,908
-------- --------
$200,003 $147,035
======== ========
PARKWAY PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
Three Months Ended
March 31
---------------------
1997 1996
--------- --------
(Unaudited)
Revenues
Income from office properties...... $ 8,030 $ 3,037
Income from other real estate
properties....................... 306 438
Interest on mortgage loans......... 16 564
Management company income.......... 134 279
Interest on investments............ 301 99
Dividend income.................... 86 66
Deferred gains and other income.... 33 51
-------- --------
8,906 4,534
-------- --------
Expenses
Office properties:
Operating expense................ 3,420 1,308
Interest expense:
Contractual.................... 1,255 644
Amortization of loan costs..... 17 11
Depreciation and amortization.... 925 418
Minority interest................ 27 (28)
Other real estate properties:
Operating expense................ 217 369
Interest expense on bank notes:
Contractual...................... 24 -
Amortization of loan costs....... 36 -
Interest expense on wrap mortgages. - 120
Management company expense......... 87 239
General and administrative......... 860 669
-------- --------
6,868 3,750
-------- --------
Income before gains (losses)....... 2,038 784
-------- --------
Gain (loss) on sales
Gains on real estate held
for sale and mortgage loans...... 1,506 193
Loss on securities................. - (190)
-------- --------
1,506 3
-------- --------
Net income......................... $ 3,544 $ 787
======== ========
Net income per share............... $ .62 $ .26
======== ========
Weighted average shares
outstanding...................... 5,718 3,012
======== ========
Dividends paid per share........... $ .25 $ .11
======== ========
PARKWAY PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended
March 31
---------------------
1997 1996
-------- --------
(Unaudited)
Operating Activities
Net income............................ $ 3,544 $ 787
Adjustments to reconcile net
income to net cash provided by
operating activities:
Equity in earnings.................. (12) (4)
Distributions from operations of
unconsolidate subsidiaries........ 18 17
Depreciation an amortization........ 925 418
Amortization of discounts,
deferred gains and other.......... (1) (19)
Gains on real estate held for
sale and mortgage loans........... (1,506) (193)
Loss on securities.................. - 190
Changes in operating assets
and liabilities:
Decrease (increase) in receivables 836 (38)
Increase in accounts payable
and accrued expenses............ 253 607
-------- --------
Cash provided by operating activities. 4,057 1,765
-------- --------
Investing Activities
Payments received on mortgage loans... 2 218
Purchase of real estate related
investments......................... (60,420) (7,393)
Purchase of mortgage loans............ - (600)
Proceeds from sale of real estate
held for sale and mortgage loans.... 4,334 148
Proceeds from sale of real estate
securities.......................... - 799
Improvements to real estate related
investments......................... (512) (344)
-------- --------
Cash used in investing activities..... (56,596) (7,172)
-------- --------
Financing Activities
Principal payments on mortgage
notes payable....................... (568) (898)
Proceeds from borrowings on
mortgage notes payable.............. - 4,800
Proceeds from bank borrowings......... 7,939 -
Principal payments on bank borrowings. (7,939) -
Stock options exercised............... 91 47
Dividends paid........................ (1,572) (341)
Proceeds from sale of stock........... 51,221 -
-------- --------
Cash provided by financing activities. 49,172 3,608
-------- --------
Decrease in cash and cash equivalents. (3,367) (1,799)
Cash and cash equivalents at
beginning of period................ 8,053 6,044
-------- --------
Cash and cash equivalents at
end of period..................... $ 4,686 $ 4,245
======== ========
PARKWAY PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(In thousands)
Three Months Ended
March 31
--------------------
1997 1996
-------- --------
(Unaudited)
Common stock, $.001 par value
Balance at beginning of period...... $ 4 $ 2,008
Stock options exercised............. - 3
Shares issued - stock dividend...... - 1,006
Shares issued - stock offering...... 2 -
-------- --------
Balance at end of period............ 6 3,017
-------- --------
Additional paid-in capital
Balance at beginning of period...... 52,356 32,882
Stock options exercised............. 90 44
Shares issued - stock dividend...... - (1,006)
Shares issued - stock offering...... 51,219 -
-------- --------
Balance at end of period............ 103,665 31,920
-------- --------
Retained Earnings
Balance at beginning of period...... 25,548 13,729
Net income.......................... 3,544 787
Cash dividends declared and paid.... (1,572) (341)
-------- --------
Balance at end of period............ 27,520 14,175
-------- --------
Unrealized gain on securities
Balance at beginning of period...... - 592
Unrealized gain on securities....... - 118
-------- --------
Balance at end of period............ - 710
-------- --------
Total stockholders' equity............ $131,191 $ 49,822
======== ========
Notes to Consolidated Financial Statements (Unaudited)
March 31, 1997
(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.
Effective January 1, 1997, the Company elected to be taxed
as a real estate investment trust (REIT) under the Internal
Revenue Code of 1986, as amended.
(2) Reclassifications
Certain reclassifications have been made in the 1996
financial statements to conform to the 1997 classifications.
(3) 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.
Three Months Ended
March 31
-----------------------
1997 1996
---------- ----------
Cash paid for interest.......... $1,278,000 $501,000
(4) Acquisitions and Dispositions
On January 7, 1997, the Company purchased the Forum II and
III office buildings in Memphis, Tennessee. The two buildings
contain an aggregate of approximately 177,250 square feet of
leasable space. The purchase price for the buildings of
$16,425,000 was funded with existing cash reserves and advances
under bank lines of credit.
On January 28, 1997, the Company purchased the Ashford II
office building in Houston, Texas. The building has
approximately 58,511 net rentable square feet and was purchased
for $2,207,000 with existing cash reserves.
On March 6, 1997, the Company purchased the Courtyard at
Arapaho office buildings in Dallas, Texas. Courtyard at Arapaho
has approximately 200,726 net rentable square feet consisting of
a two-story atrium office building with approximately 155,974
square feet and two single-story service center buildings
totaling 44,752 square feet. The development is situated on
10.58 acres in the Telecom Corridor submarket in suburban North
Dallas. The purchase price of $15,125,000 was funded by
existing cash reserves.
On March 18, 1997, the Company purchased the Charlotte Park
Executive Center in Charlotte, North Carolina for $14,350,000.
This three-building office park is a 30 acre master-planned
office park with approximately 187,207 net rentable square feet.
It is located in the Southwest/I-77 corridor, Charlotte's largest
office submarket. The Company also purchased 17.64 acres of
development land in the office park for $1,721,000. The Company
has no immediate plans to begin developing the property. The
total purchase price of $16,071,000 was funded with existing cash
reserves.
On March 31, 1997, the Company purchased the Meridian
Building in Atlanta, Georgia. The Meridian Building is a five-
story office building consisting of approximately 100,932 net
rentable square feet with an attached 330 space three-level
parking deck. It is located in the Northwest submarket of
Atlanta near the intersection of I-75 and I-285. The purchase
price of $10,500,000 was funded with existing cash reserves.
(5) Subsequent Events
On April 4, 1997, the Company purchased the Vestavia Centre'
in Birmingham, Alabama. The Vestavia Centre' office building is
approximately 75,880 net rentable square feet. The purchase
price of $4,650,000 was funded with existing cash reserves.
On May 1, 1997, the Company purchased the Sugar Grove office
building in the Sugar Land/Southwest Houston, Texas submarket.
The Sugar Grove office building is a six-story building with
approximately 122,682 net rentable square feet. The purchase
price of $7,730,000 was funded with existing cash reserves.
(6) Impact of Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board
issued Statement No. 128, Earnings per Share, which is required
to be adopted on December 31, 1997. At that time, the Company
will be required to change the method currently used to compute
earnings per share and to restate all prior periods. Under the
new requirements for calculating primary earnings per share, the
dilutive effect of stock options will be excluded. The impact of
Statement No. 128 on the calculation of primary and fully diluted
earnings per share for these quarters is not expected to be
material.
(7) Capital Transactions
On January 22, 1997, the Company completed the sale of
2,012,500 shares of common stock at $27.00 per share under its
existing shelf registration to a combination of retail and
institutional investors with net proceeds to the Company of
$51,221,000.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Financial Condition
Comments are for the balance sheet dated March 31, 1997 compared
to the balance sheet dated December 31, 1996.
In 1997, Parkway is continuing the application of the
Company's strategy of aggressively acquiring office properties
and liquidating non-core assets. During the first quarter of
1997, the Company purchased five office properties and sold two
non-core assets with total assets increasing $52,968,000, and
office properties (before depreciation) increasing $58,911,000 or
45%.
Parkway's direct investment in office buildings and land
held for development increased $59,698,000 net of depreciation to
a carrying amount of $182,500,000 at March 31, 1997 and consisted
of 20 properties. During the three months ending March 31, 1997,
Parkway purchased five office buildings as follows (in
thousands):
Purchase Purchase
Office Building Location Price Date
- --------------- ---------------- -------- --------
Forum II & III Memphis, TN $ 16,425 01/07/97
Ashford II Houston, TX 2,207 01/28/97
Courtyard at Arapaho Dallas, TX 15,125 03/06/97
Charlotte Park Executive
Center Charlotte, NC 14,350 03/18/97
Meridian Atlanta, GA 10,500 03/31/97
--------
$ 58,607
========
In connection with the Charlotte Park Executive Center
purchase, the Company also purchased 17.64 acres of development
land in the same office park for $1,721,000. The Company
currently has no plans to begin development on the site.
During the quarter, the Company also capitalized building
improvements and additional purchase expenses of $379,000 and
recorded depreciation expense of $925,000.
Parkway sold two non-core assets during the quarter that
resulted in gains for financial reporting purposes of $1,506,000
and net proceeds of $4,334,000. The non-core assets sold during
the quarter were 162 acres of land in Katy, Texas and an 180 unit
apartment complex in Winter Park, Florida. At March 31, 1997,
non-core assets other than mortgage loans totaled $6,974,000.
The Company expects to continue its efforts to liquidate these
assets.
Scheduled principal payments of $568,000 were made during
the quarter on existing notes payable without recourse. The
Company expects to continue seeking fixed rate, non-recourse
mortgage financing at fully-amortizing terms ranging from twelve
to fifteen years on select office building investments as
additional capital is needed. The Company plans to maintain a
ratio of debt to total market capitalization from 25% to 40%.
Shareholders' equity increased $53,283,000 during the
quarter ended March 31, 1997 as a result of the following factors
(in thousands):
Increase (Decrease)
-------------------
Net income $ 3,544
Dividend declared and paid (1,572)
Exercise of stock options 90
Shares issued-stock offering 51,221
-------
$53,283
=======
On January 22, 1997, the Company completed the sale of
2,012,500 shares of common stock at $27.00 per share under its
existing shelf registration to a combination of retail and
institutional investors with net proceeds to the Company of
$51,221,000.
RESULTS OF OPERATIONS
Comments are for the three months ended March 31, 1997 compared
to the three months ended March 31, 1996.
Net income for the three months ended March 31, 1997 was
$3,544,000 ($.62 per share) as compared to $787,000 ($.26 per
share) for the three months ended March 31, 1996.
The primary reason for the increase in the Company's net
income for 1997 and 1996 is the reflection of the operations of
the following office buildings subsequent to the date of
purchase:
Building Purchase Date Sq. Feet
---------------------- ------------- --------
One Park 10 Plaza 03/07/96 161,243
400 North Belt 04/15/96 220,934
Woodbranch 04/15/96 109,481
Cherokee Business Center 07/09/96 53,838
8381 and 8391 Courthouse Road 07/09/96 94,929
Falls Pointe 08/09/96 105,655
Roswell North 08/09/96 57,715
BB&T Financial Center 09/30/96 238,919
Tensor 10/31/96 92,017
Forum II & III 01/07/97 177,250
Ashford II 01/28/97 58,511
Courtyard at Arapaho 03/06/97 200,726
Charlotte Park Executive Center 03/18/97 187,207
Meridian Building 03/31/97 100,932
Operations of office building properties are summarized
below (in thousands):
Three Months Ended
March 31
-------------------
1997 1996
-------- --------
Income.......................... $ 8,030 $ 3,037
Operating expense............... (3,420) (1,308)
------- -------
4,610 1,729
Interest expense................ (1,272) (655)
Depreciation and amortization... (925) (418)
Minority interest............... (27) 28
------- -------
$ 2,386 $ 684
======= =======
In addition to the direct investments in office properties,
the Company owns the Wink Office Building in New Orleans,
Louisiana through a 50% ownership in the Wink-Parkway
Partnership. Income from the partnership of $12,000 and $10,000
was recorded on the equity method of accounting during the three
months ended March 31, 1997 and 1996, respectively.
The effect on the Company's operations related to One
Jackson Place included in the operations of office buildings is
as follows (in thousands):
Three Months Ended
March 31
--------------------
1997 1996
-------- --------
Revenue......................... $ 963 $ 937
Operating expenses.............. (312) (368)
Interest expense................ (358) (394)
Depreciation.................... (165) (213)
Minority interest income........ (27) 28
----- -----
Net income (loss)............... $ 101 $ (10)
===== =====
The results of operations for the following properties
included in the operations of office buildings are for the three
months ending March 31, 1997 only due to the acquisition of these
properties during the first quarter of 1997 (in thousands).
Three Months Ended March 31, 1997
-----------------------------------------
Forum Courtyard Charlotte
BB&T II & III at Arapaho Park
-------- -------- ---------- ---------
Revenue ...........$1,094 $ 682 $ 157 $ 104
Operating expenses. (356) (254) (57) (42)
Depreciation....... (138) (86) (24) (12)
------ ------ ------ ------
Net income.........$ 600 $ 342 $ 76 $ 50
====== ====== ====== ======
Operations of other real estate properties held for sale are
summarized below (in thousands):
Three Months Ended
March 31
------------------
1997 1996
-------- --------
Income from real estate properties..... $ 306 $ 438
Real estate operating expense.......... (217) (369)
-------- --------
$ 89 $ 69
======== ========
At March 31, 1997, the Company had one non-office operating
property held for sale known as Plantation Village, a 57,000
square foot shopping center located in Lake Jackson, Texas with a
carrying value of $1,492,000.
The Company also has the following parcels of undeveloped
land held for sale at March 31, 1997 (dollars in thousands).
Description Location Size Book Value
- ------------------- --------------- --------- -----------
Bullard Road New Orleans, LA 80 acres $3,799
Sugar Land Triangle Sugar Land, TX 7 acres 868
Sugar Creek Center Sugar Land, TX 4 acres 520
------
$5,187
======
The decrease in interest income on mortgage loans is due primarily
to sales of mortgage loans during 1996. In May 1996, the Company
sold 157 mortgage loans. In December 1996, the Company sold its
only wrap mortgage loan with a principal balance of $16,529,000
and 8.58% interest rate and subsequently repaid the associated
wrap debt on that mortgage loan, accounting for the decrease in
interest expense on wrap notes. At March 31, 1997, the Company
has three mortgage loans totaling $348,000 with an average
interest rate of 10%.
The increase in interest on investments reflects higher cash
balances invested in interest bearing accounts for the three
months ended March 31, 1997 compared to the three months ended
March 31, 1996.
The increase in general and administrative expenses is
primarily due to the increased costs related to the asset growth
of the Company over the past year.
LIQUIDITY AND CAPITAL RESOURCES
Statement of Cash Flows
Cash and cash equivalents were $4,686,000 and $8,053,000 at
March 31, 1997 and December 31, 1996, respectively. The Company
generated $4,057,000 in cash flows from operating activities
during the three months ending March 31, 1997 compared to
$1,765,000 for the same period of 1996, an increase primarily
attributable to the significant increase in the number of office
properties owned by the Company. The Company experienced
significant investing activity during the three months ending
March 31, 1997 with a net of $56,596,000 being invested. In
implementing its investment strategy, the Company used
$60,328,000, not including closing costs and certain capitalized
expenses, to purchase office properties and development land
while receiving net cash proceeds from the sale of non-core
assets of $4,334,000. The Company also spent $512,000 to make
capital improvements at its office properties and non-core operating
real estate properties. The Company also received net proceeds
of $51,221,000 from the sale of 2,012,500 shares of common stock.
Cash dividends of $1,572,000 ($.25 per share) were paid to shareholders
and principal payments of $568,000 were made on mortgage notes payable
during the three months ending March 31, 1997.
Capitalization
At March 31, 1997, the Company had available $45,000,000 on
its acquisition line of credit and $10,000,000 on its 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, proceeds from the sale of non-core assets and cash
balances to fund those acquisitions. At March 31, 1997, the
lines of credit had an interest rate equal to the 90-day LIBOR
rate plus 1.75% (adjusted quarterly), interest due monthly and
annual commitment fees of .125%. In addition, both lines of
credit have fees of .125% on the unused balances due quarterly.
Prior to March 27, 1997, the interest rates on both lines of
credit equaled the 90-day LIBOR rate plus 2.35% adjusted
quarterly. The interest rate on the notes was 7.5625% as of May
14, 1997. The acquisition line of credit matures June 30, 1998
and the working capital line of credit matures June 30, 1997.
At March 31, 1997, the Company had $62,260,000 of non-
recourse fixed rate mortgage notes payable with an average
interest rate of 8.01% secured by office properties. Based on
the Company's total market capitalization of approximately
$213,151,000 at March 31, 1997 (using the March 31, 1997 closing
price of $24.00 per share) the Company's debt represented
approximately 29.2% of its total market capitalization. The
Company plans to maintain a ratio of debt to total market
capitalization from 25% to 40%.
Purchases of office buildings subsequent to March 31, 1997
include the following (in thousands):
Purchase Purchase
Office Building Location Price Date
------------------ ------------- -------- --------
Vestavia Centre' Birmingham, AL $ 4,650 04/04/97
Sugar Grove Houston, TX $ 7,730 05/01/97
The Company presently has plans to make capital improvements
at its office properties in 1997 of approximately $5,500,000.
These expenses included tenant improvements, capitalized
acquisition costs and capitalized building improvements.
Approximately $2,500,000 of these improvements relate to upgrades
on properties acquired in 1996 and 1997. All such improvements
are expected to be financed by cash flow from the properties and
advances on bank lines of credit.
The Company anticipates that its current cash balance,
operating cash flows and borrowings (including borrowings under
the working capital line of credit) will be adequate to pay the
Company's (i) operating and administrative expenses, (ii) debt
service obligations, (iii) distributions to shareholders, (iv)
capital improvements, and (v) normal repair and maintenance
expenses at its properties both in the short and long term.
Funds From Operations
Management believes that funds from operations ("FFO") is an
appropriate measure of performance for equity REITs. Funds from
operations is defined by the National Association of Real Estate
Investment Trusts (NAREIT) as net income or loss, excluding gains
or losses from debt restructuring and sales of properties, plus
depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures. In March 1995,
NAREIT issued a clarification of the definition of FFO. The
clarification provides that amortization of deferred financing
costs and depreciation of non-real estate assets are not to be
added back to net income to arrive at FFO. Funds from operations
does not represent cash generated from operating activities in
accordance with generally accepted accounting principles and is
not an indication of cash available to fund cash needs. Funds
from operations should not be considered an alternative to net
income as an indicator of the Company's operating performance or
as an alternative to cash flow as a measure of liquidity.
The following table presents the Company's FFO for the three
months ended March 31, 1997 and 1996 (in thousands):
Three Months Ended
March 31
-------------------
1997 1996
-------- --------
Net income........................ $ 3,544 $ 787
Adjustments to derive
funds from operations:
Depreciation & amortization..... 925 418
Minority interest depreciation.. (35) (50)
Equity in earnings.............. (12) (4)
Distributions from
unconsolidated subsidiaries... 18 17
Gain on real estate & mortgages. (1,506) (193)
Loss on securities.............. - 190
Amortization of discounts,
deferred gains and other...... (1) (19)
------- -------
Funds from operations........... $ 2,933 $ 1,146
======= =======
NAREIT has recommended supplemental disclosure concerning
capital expenditures, leasing costs and straight-line rents which
are given below (in thousands):
Three Months Ended
March 31
-------------------
1997 1996
-------- --------
Straight-line rents............... $ 62 $ (39)
Building improvements............. 165 108
Tenant improvements:
New leases...................... 85 36
Lease renewals.................. 37 101
Leasing commissions:
New leases...................... 89 31
Lease renewals.................. 114 -
Non-core asset improvements....... 22 68
Inflation
In the last five years, inflation has not had a significant
impact on the Company because of the relatively low inflation
rate in the Company's geographic areas of operation. Most of the
leases require the tenants to pay their pro rata share of
operating expenses, including common area maintenance, real
estate taxes and insurance, thereby reducing the Company's
exposure to increases in operating expenses resulting from
inflation. In addition, the Company's leases typically have
three to five year terms, which may enable the Company to replace
existing leases with new leases at a higher base if rents on the
existing leases are below the then-existing market rate.
Forward-Looking Statements
In addition to historical information, certain sections of
this Form 10-Q may contain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934, such as those
pertaining to the Company's capital resources, profitability and
portfolio performance. Forward-looking statements involve
numerous risks and uncertainties. The following factors, among
others discussed herein, could cause actual results and future
events to differ materially from those set forth or contemplated
in the forward-looking statements: defaults or non-renewal of
leases, increased interest rates and operating costs, failure to
obtain necessary outside financing, difficulties in identifying
properties to acquire and in effecting acquisitions, failure to
qualify as a real estate investment trust under the Internal
Revenue Code of 1986, as amended (the "Code"), environmental
uncertainties, risks related to natural disasters, financial
market fluctuations, changes in real estate and zoning laws and
increases in real property tax rates. The success of the Company
also depends upon the trends of the economy, including interest
rates, income tax laws, governmental regulation, legislation,
population changes and those risk factors discussed elsewhere in
this Form 10-Q. Readers are cautioned not to place undue
reliance on forward-looking statements, which reflect
management's analysis only as the date hereof. The Company
assumes no obligation to update forward-looking statements. See
also the Company's reports to be filed from time to time with the
Securities and Exchange Commission pursuant to the Securities
Exchange Act of 1934.
PARKWAY PROPERTIES, INC.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Reports on Form 8-K
(1) Filed January 7, 1997
Reporting the sale of the Virginia Beach
mortgage loan including Pro Forma
Consolidated Financial Statements of Parkway
Properties, Inc.
(2) Filed January 9, 1997
Reporting the purchase of the Tensor
Building.
(3) Filed January 7, 1997
Reporting the purchase of Forum II and III
and One Park 10 Plaza and the proposed
acquisitions of Charlotte Park Executive
Center and Ashford II and IV including
Audited Statements of Rental Revenue and
Direct Operating Expenses on Forum II and
III, One Park 10 Plaza and Charlotte Park
Executive Center and Pro Forma Consolidated
Financial Statements of Parkway Properties,
Inc.
(4) Filed January 22, 1997
Reporting the sale of shares of Common Stock
under its existing shelf registration.
(5) Filed March 6, 1997
Reporting the purchase of Courtyard at
Arapaho.
(6) Filed March 18, 1997
Reporting the purchase of Charlotte Park
Executive Center including Pro Forma
Consolidated Financial Statements of Parkway
Properties, Inc.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
DATED: May 15, 1997 PARKWAY PROPERTIES, INC.
/s/ Regina P. Shows
Regina P. Shows, CPA
Controller
/s/ Sarah P. Clark
Sarah P. Clark, CPA
Vice-President,
Chief Financial Officer,
Treasurer and Secretary
