UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the
Securities Exchange Act of 1934
Date of Report (Date earliest event reported): March 24, 1999
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PARKWAY PROPERTIES, INC.
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(Exact name of Registrant as specified in its charter)
Maryland 1-11533 74-2123597
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(State or other (Commission File Number) (IRS
Employer
jurisdiction of
Identification
incorporation) Number)
One Jackson Place Suite 1000
188 East Capitol Street
P. O. Box 24647
Jackson, Mississippi 39225-4647
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Registrant's telephone number, including area code: (601) 948-4091
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(Former name or former address, if changed since last report)
<PAGE>
PARKWAY PROPERTIES, INC.
Item 5. Other Events.
On March 31, 1998, the Company purchased the Southtrust Bank
Building in St. Petersburg, Florida for $17,440,000. The
Southtrust Bank Building is a seventeen-story 196,000 rentable
square foot office building overlooking Tampa Bay in downtown St.
Petersburg. The building has an attached parking garage
accommodating 192 spaces. The purchase was funded with advances
under then existing bank lines of credit with Deposit Guaranty
National Bank.
On May 1, 1998, the Company purchased the 73,000 square foot
River Oaks Office Plaza in Jackson, Mississippi for $4,400,000.
The project consists of two garden-style, two-story buildings
constructed in 1981 and includes 326 surface parking spaces.
River Oaks Office Plaza is located in the Lakeland Drive sub-
market of Jackson. The purchase was funded with advances under
then existing bank lines of credit with Deposit Guaranty National
Bank.
On July 1, 1998, the Company purchased a partnership owning
the 172,000 square foot 111 East Capitol Building in Jackson,
Mississippi for $11,350,000 including 1,318 operating partnership
units of Parkway Properties LP and the assumption of a $5,647,000
mortgage note payable. This acquisition has been accounted for
using the purchase method of accounting. The total purchase
price has been allocated on the basis of fair values of the
assets acquired and liabilities assumed. The mortgage note
payable, which has a stated rate of 8% has been recorded at
$5,962,000 to reflect it at fair value based on the Company's
current incremental borrowing rate of 7%. The building was
constructed in 1983 and includes an attached 200-space two-level
parking garage. The 111 East Capitol Building is located in the
Central Business District of Jackson. The purchase was funded
with advances under then existing bank lines of credit with
Deposit Guaranty National Bank.
On December 18, 1998, the Company purchased the Winchester
Building in Richmond, Virginia for $11,680,000. The three-story,
128,000 square foot office building was constructed in 1987 and
is currently 88% leased. The purchase was funded with advances
under existing bank lines of credit with a consortium of 14 banks
with Chase Bank of Texas, National Association serving as the
lead agent.
Item 7. Financial Statements and Exhibits.
(a) Financial Statements
(1) The following audited financial statement of the
Southtrust Bank Building for the year ended December 31, 1997 is
attached hereto. Also included is the unaudited financial
statement for the three months ended March 31, 1998.
Page
----
Report of Independent Auditors 4
Statement of Rental Revenue and
Direct Operating Expenses 5
Notes to Statement of Rental Revenue
and Direct Operating Expenses 6
<PAGE>
(2) The following audited financial statement of River Oaks
Office Plaza for the year ended December 31, 1997 is attached
hereto. Also included is the unaudited financial statement for
the four months ended April 30, 1998.
Page
----
Report of Independent Auditors 8
Statement of Rental Revenue and
Direct Operating Expenses 9
Notes to Statement of Rental Revenue
and Direct Operating Expenses 10
(3) The following audited financial statement of the 111
East Capitol Building for the year ended December 31, 1997 is
attached hereto. Also included is the unaudited financial
statement for the six months ended June 30, 1998.
Page
----
Report of Independent Auditors 12
Statement of Rental Revenue and
Direct Operating Expenses 13
Notes to Statement of Rental Revenue
and Direct Operating Expenses 14
(4) The following audited financial statement of the
Winchester Building for the year ended December 31, 1997 is
attached hereto. Also included is the unaudited financial
statement for the nine months ended September 30, 1998.
Page
----
Report of Independent Auditors 16
Statement of Rental Revenue and
Direct Operating Expenses 17
Notes to Statement of Rental Revenue
and Direct Operating Expenses 18
(b) Pro Forma Consolidated Financial Statements
The following unaudited Pro Forma Consolidated Financial
Statements are attached hereto.
Page
----
Pro Forma Consolidated Financial Statements (Unaudited) 19
Pro Forma Consolidated Balance Sheet (Unaudited) -
As of September 30, 1998 21
Pro Forma Consolidated Statement of Income (Unaudited) -
For the Year Ended December 31, 1997 22
Pro Forma Consolidated Statement of Income (Unaudited) -
For the Nine Months Ended September 30, 1998 23
Notes to Pro Forma Consolidated Financial
Statements (Unaudited) 24
(c) Exhibits
(23) Consent of Independent Auditors
<PAGE>
Report of Independent Auditors
The Board of Directors
Parkway Properties, Inc.
We have audited the accompanying statement of rental revenue and
direct operating expenses of the Southtrust Bank Building for the
year ended December 31, 1997. This statement is the
responsibility of management. Our responsibility is to express
an opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the statement of rental revenue and direct operating expenses is
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the statement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall statement presentation. We
believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement was prepared for the purpose of
complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in Form 8-K of Parkway
Properties, Inc., as described in Note 2, and is not intended to
be a complete presentation of the Southtrust Bank Building's
revenue and expenses.
In our opinion, the statement of rental revenue and direct
operating expenses referred to above presents fairly, in all
material respects, the rental revenue and direct operating
expenses described in Note 2 of the Southtrust Bank Building for
the year ended December 31, 1997, in conformity with generally
accepted accounting principles.
We have compiled the accompanying statement of rental revenue and
direct operating expenses of the Southtrust Bank Building for the
three months ended March 31, 1998 in accordance with the
Statement on Standards for Accounting and Review Services issued
by the American Institute of Certified Public Accountants. A
compilation is limited to presenting in the form of a financial
statement information that is the representation of management.
We have not audited or reviewed the statement of rental revenue
and direct operating expenses of the Southtrust Bank Building for
the three months ended March 31, 1998 and, accordingly, do not
express an opinion or any other form of assurance on the
statement.
Jackson, Mississippi /s/ Ernst & Young LLP
March 19, 1999
<PAGE>
Southtrust Bank Building
Statement of Rental Revenue
and Direct Operating Expenses
Year Ended Three MonthsEnded
December 31, 1997 March 31, 1998
------------------ ------------------
(unaudited)
Rental revenue:
Minimum rents ............... $2,545,811 $ 643,702
Reimbursed charges and
other income............... 205,639 62,241
---------- ----------
2,751,450 705,943
Direct operating expenses
(Note 2):
Utilities................... 315,466 85,966
Real estate taxes........... 227,396 56,750
Maintenance services
and supplies.............. 104,239 26,275
Janitorial services
and supplies.............. 33,163 35,246
Management fees (Note 3).... 79,828 22,100
Salary and wages............ 244,957 52,784
Administrative and
miscellaneous expenses.... 199,662 24,140
---------- ----------
1,204,711 303,261
---------- ----------
Excess of rental revenue over
direct operating expenses... $1,546,739 $ 402,682
========== ==========
See accompanying notes.
<PAGE>
Southtrust Bank Building
Notes to Statement of Rental Revenue
and Direct Operating Expenses
December 31, 1997
1. Organization and Significant Accounting Policies
Description of Property
On March 31, 1998, Parkway Properties, Inc. (the "Company")
purchased the Southtrust Bank Building (the "Building") in Tampa,
Florida from an unrelated party. This seventeen-story building
contains a total of approximately 196,000 (unaudited) square feet
of rentable area.
The Building's 1998 unaudited rental revenues and direct
operating expenses have been included in the accompanying
financial statement for the period prior to being acquired by the
Company.
Rental Revenue
Minimum rents from leases are accounted for ratably over the
term of each lease. Tenant reimbursements are recognized as
revenue as the applicable services are rendered or expenses
incurred.
The future minimum rents on noncancelable operating leases at
December 31, 1997 are as follows:
Year Amount
--------------------------------
1998 $ 2,681,000
1999 2,567,000
2000 2,482,000
2001 2,373,000
2002 1,890,000
Thereafter 2,428,000
-----------
$14,421,000
===========
The above amounts do not include tenant reimbursements for
utilities, taxes, insurance and common area maintenance.
2. Basis of Accounting
The accompanying statement of rental revenue and direct
operating expenses is presented on the accrual basis. The
statement has been prepared in accordance with the applicable
rules and regulations of the Securities and Exchange Commission
for real estate properties acquired. Accordingly, the statement
excludes certain expenses not comparable to the proposed future
operations of the Building such as depreciation and mortgage
interest expense. Management is not aware of any material
factors relating to the Building that would cause the reported
financial information not to be necessarily indicative of future
operating results.
<PAGE>
3. Management Fees
Management fees of approximately 3% of revenues received from
the operations of the Building were paid to an unrelated
management company.
<PAGE>
Report of Independent Auditors
The Board of Directors
Parkway Properties, Inc.
We have audited the accompanying statement of rental revenue and
direct operating expenses of River Oaks Plaza for the year ended
December 31, 1997. This statement is the responsibility of
management. Our responsibility is to express an opinion on this
statement based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the statement of rental revenue and direct operating expenses is
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the statement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall statement presentation. We
believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement was prepared for the purpose of
complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in Form 8-K of Parkway
Properties, Inc., as described in Note 2, and is not intended to
be a complete presentation of River Oaks Plaza's revenue and
expenses.
In our opinion, the statement of rental revenue and direct
operating expenses referred to above presents fairly, in all
material respects, the rental revenue and direct operating
expenses described in Note 2 of River Oaks Plaza for the year
ended December 31, 1997, in conformity with generally accepted
accounting principles.
We have compiled the accompanying statement of rental revenue and
direct operating expenses of River Oaks Plaza for the four months
ended April 30, 1998 in accordance with the Statement on
Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants. A compilation
is limited to presenting in the form of a financial statement
information that is the representation of management. We have
not audited or reviewed the statement of rental revenue and
direct operating expenses of River Oaks Plaza for the four months
ended April 30, 1998 and, accordingly, do not express an opinion
or any other form of assurance on the statement.
Jackson, Mississippi /s/ Ernst & Young LLP
March 18, 1999
<PAGE>
River Oaks Plaza
Statement of Rental Revenue
and Direct Operating Expenses
Year Ended Four Months Ended
December 31, 1997 April 30, 1998
----------------- -----------------
(unaudited)
Rental revenue:
Minimum rents ............... $956,669 $313,712
Reimbursed charges and
other income............... 18,281 18,423
-------- --------
974,950 332,135
-------- --------
Direct operating expenses
(Note 2):
Utilities................... 136,847 50,683
Real estate taxes........... 41,071 13,692
Maintenance services
and supplies.............. 33,970 20,069
Janitorial services
and supplies.............. 53,922 17,841
Management fees (Note 3).... 40,817 12,988
Administrative and
miscellaneous expenses.... 44,077 14,628
-------- --------
350,634 129,901
-------- --------
Excess of rental revenue over
direct operating expenses... $624,316 $202,234
======== ========
See accompanying notes.
<PAGE>
River Oaks Plaza
Notes to Statement of Rental Revenue
and Direct Operating Expenses
December 31, 1997
1. Organization and Significant Accounting Policies
Description of Property
On May 1, 1998, Parkway Properties, Inc. (the "Company")
purchased River Oaks Plaza (the "Building") in Jackson,
Mississippi, from an unrelated party. The Building consists of
two garden-style, two-story buildings which contain approximately
73,000 (unaudited) square feet of rentable area.
The Building's 1998 unaudited rental revenues and direct
operating expenses have been included in the accompanying
financial statement for the period prior to being acquired by the
Company.
Rental Revenue
Minimum rents from leases are accounted for ratably over the
term of each lease. Tenant reimbursements are recognized as
revenue as the applicable services are rendered or expenses
incurred.
The future minimum rents on noncancelable operating leases at
December 31, 1997 are as follows:
Year Amount
--------------------------------
1998 $ 875,000
1999 605,000
2000 468,000
2001 361,000
2002 329,000
Thereafter 473,000
----------
$3,111,000
==========
The above amounts do not include tenant reimbursements for
utilities, taxes, insurance and common area maintenance.
Two tenants, whose leases expire May 1999 and December 1999
and two tenants whose leases expired during 1998, accounted for
approximately 78% of the Building's 1997 rental revenue.
2. Basis of Accounting
The accompanying statement of rental revenue and direct
operating expenses is presented on the accrual basis. The
statement has been prepared in accordance with the applicable
rules and regulations of the Securities and Exchange Commission
for real estate properties acquired. Accordingly, the statement
excludes certain expenses not comparable to the proposed future
operations of the Building such as depreciation and mortgage
interest expense. Management is not aware of any material
factors relating to the Building that would cause the reported
financial information not to be necessarily indicative of future
operating results.
<PAGE>
3. Management Fees
Management fees of approximately 4% of revenues received from
the operations of the Building were paid to a subsidiary of the
Company.
<PAGE>
Report of Independent Auditors
The Board of Directors
Parkway Properties, Inc.
We have audited the accompanying statement of rental revenue and
direct operating expenses of 111 East Capitol Building for the
year ended December 31, 1997. This statement is the
responsibility of management. Our responsibility is to express
an opinion on this statement based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the statement of rental revenue and direct operating expenses is
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the statement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall statement presentation. We
believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement was prepared for the purpose of
complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in Form 8-K of Parkway
Properties, Inc., as described in Note 2, and is not intended to
be a complete presentation of 111 East Capitol Building's
revenues and expenses.
In our opinion, the statement of rental revenue and direct
operating expenses referred to above presents fairly, in all
material respects, the rental revenue and direct operating
expenses described in Note 2 of 111 East Capitol for the year
ended December 31, 1997, in conformity with generally accepted
accounting principles.
We have compiled the accompanying statement of rental revenue and
direct operating expenses of 111 East Capitol for the six months
ended June 30, 1998 in accordance with the Statement on Standards
for Accounting and Review Services issued by the American
Institute of Certified Public Accountants. A compilation is
limited to presenting in the form of a financial statement
information that is the representation of management. We have
not audited or reviewed the statement of rental revenue and
direct operating expenses of 111 East Capitol Building for the
six months ended June 30, 1998 and, accordingly, do not express
an opinion or any other form of assurance on the statement.
Jackson, Mississippi /s/ Ernst & Young LLP
March 19, 1999
<PAGE>
111 East Capitol Building
Statement of Rental Revenue
and Direct Operating Expenses
Year Ended Six Months Ended
December 31, 1997 June 30, 1998
----------------- ----------------
(unaudited)
Rental revenue:
Minimum rents ............... $2,037,243 $1,046,334
Reimbursed charges and
other income............... 409,668 103,108
---------- ----------
2,446,911 1,149,442
---------- ----------
Direct operating expenses
(Note 2):
Utilities................... 296,599 111,818
Real estate taxes........... 308,513 154,257
Maintenance services
and supplies.............. 132,397 75,615
Janitorial services
and supplies.............. 92,488 53,095
Management fees (Note 3).... 94,763 45,547
Administrative and
miscellaneous expenses.... 206,706 95,278
---------- ----------
1,131,466 535,610
---------- ----------
Excess of rental revenue over
direct operating expenses... $1,315,445 $ 613,832
========== ==========
See accompanying notes.
<PAGE>
111 East Capitol Building
Notes to Statement of Rental Revenue
and Direct Operating Expenses
December 31, 1997
1. Organization and Significant Accounting Policies
Description of Property
On July 1, 1998, Parkway Properties, Inc. (the "Company")
purchased 111 East Capitol Building (the "Building") in Jackson,
Mississippi from an unrelated party. The five-story building
contains approximately 172,000 (unaudited) square feet of
rentable area.
The Building's 1998 unaudited rental revenues and direct
operating expenses have been included in the accompanying
financial statement for the period prior to be acquired by the
Company.
Rental Revenue
Minimum rents from leases are accounted for ratably over the
term of each lease. Tenant reimbursements are recognized as
revenue as the applicable services are rendered or expenses
incurred.
The future minimum rents on noncancelable operating leases at
December 31, 1997 are as follows:
Year Amount
--------------------------------
1998 $2,049,000
1999 1,060,000
2000 786,000
2001 770,000
2002 702,000
Thereafter 922,000
----------
$6,289,000
==========
The above amounts do not include tenant reimbursements for
utilities, taxes, insurance and common area maintenance.
Three tenants, whose leases expired or will expire September
1998, June 1999 and January 2002, accounted for approximately 49%
of the Building's 1997 rental revenue.
2. Basis of Accounting
The accompanying statement of rental revenue and direct
operating expenses is presented on the accrual basis. The
statement has been prepared in accordance with the applicable
rules and regulations of the Securities and Exchange Commission
for real estate properties acquired. Accordingly, the statement
excludes certain expenses not comparable to the proposed future
operations of the Building such as depreciation and mortgage
interest expense. Management is not aware of any material
factors relating to the Building that would cause the reported
financial information not be necessarily indicative of future
operating results.
3. Management Fees
Management fees of approximately 4% of revenues received from
the operations of the Building were paid to an unrelated
management company.
<PAGE>
Report of Independent Auditors
The Board of Directors
Parkway Properties, Inc.
We have audited the accompanying statement of rental revenue and
direct operating expenses of The Winchester Building for the year
ended December 31, 1997. This statement is the responsibility of
management. Our responsibility is to express an opinion on this
statement based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the statement of rental revenue and direct operating expenses is
free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in
the statement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall statement presentation. We
believe that our audit provides a reasonable basis for our
opinion.
The accompanying statement was prepared for the purpose of
complying with the rules and regulations of the Securities and
Exchange Commission for inclusion in Form 8-K of Parkway
Properties, Inc., as described in Note 2, and is not intended to
be a complete presentation of The Winchester Building's revenues
and expenses.
In our opinion, the statement of rental revenue and direct
operating expenses referred to above presents fairly, in all
material respects, the rental revenue and direct operating
expenses described in Note 2 of The Winchester Building for the
year ended December 31, 1997, in conformity with generally
accepted accounting principles.
We have compiled the accompanying statement of rental revenue and
direct operating expenses of The Winchester Building for the nine
months ended September 30, 1998 in accordance with the Statement
on Standards for Accounting and Review Services issued by the
American Institute of Certified Public Accountants. A compilation
is limited to presenting in the form of a financial statement
information that is the representation of management. We have
not audited or reviewed the statement of rental revenue and
direct operating expenses of The Winchester Building for the nine
months ended September 30, 1998 and, accordingly, do not express
an opinion or any other form of assurance on the statement.
Jackson, Mississippi /s/ Ernst & Young LLP
March 17, 1999
<PAGE>
The Winchester Building
Statement of Rental Revenue
and Direct Operating Expenses
Year Ended Nine Months Ended
December 31, 1997 September 30,1998
----------------- ------------------
(unaudited)
Rental revenue:
Minimum rents ............... $1,499,991 $1,208,853
Reimbursed charges and
other income............... 141,120 156,039
---------- ----------
1,641,111 1,364,892
---------- ----------
Direct operating expenses
(Note 2):
Utilities................... 195,500 156,841
Real estate taxes........... 93,715 74,253
Maintenance services
and supplies.............. 99,914 73,615
Janitorial services
and supplies.............. 86,207 70,697
Management fees (Note 3).... 39,216 35,926
Wages....................... 37,162 28,973
Administrative and
miscellaneous expenses.... 25,586 19,965
---------- ----------
577,300 460,270
---------- ----------
Excess of rental revenue over
direct operating expenses... $1,063,811 $ 904,622
========== ==========
See accompanying notes.
<PAGE>
The Winchester Building
Notes to Statement of Rental Revenue
and Direct Operating Expenses
December 31, 1997
1. Organization and Significant Accounting Policies
Description of Property
On December 18, 1998, Parkway Properties, Inc. (the
"Company") purchased The Winchester Building (the "Building") in
Richmond, Virginia, from an unrelated party. The three-story
building contains approximately 128,000 (unaudited) square feet
of rentable area,
Rental Revenue
Minimum rents from leases are accounted for ratably over the
term of each lease. Tenant reimbursements are recognized as
revenue as the applicable services are rendered or expenses
incurred.
The future minimum rents on noncancelable operating leases
at December 31, 1997 are as follows:
Year Amount
--------------------------------
1998 $1,612,000
1999 1,410,000
2000 999,000
2001 589,000
2002 430,000
Thereafter 142,000
----------
$5,182,000
==========
The above amounts do not include tenant reimbursements for
utilities, taxes, insurance and common area maintenance.
2. Basis of Accounting
The accompanying statement of rental revenue and direct
operating expenses is presented on the accrual basis. The
statement has been prepared in accordance with the applicable
rules and regulations of the Securities and Exchange Commission
for real estate properties acquired. Accordingly, the statement
excludes certain expenses not comparable to the proposed future
operations of the Building such as depreciation and mortgage
interest expense. Management is not aware of any material
factors relating to the Building that would cause the reported
financial information not be necessarily indicative of future
operating results.
3. Management Fees
Management fees of approximately 2.5% of revenues received
from the operations of the Building were paid to an unrelated
management company.
<PAGE>
PARKWAY PROPERTIES, INC.
Pro Forma Consolidated Financial Statements
(Unaudited)
The following unaudited pro forma consolidated balance sheet
as of September 30, 1998 and pro forma consolidated statements of
income of Parkway Properties, Inc. ("Parkway") for the year ended
December 31, 1997 and the nine months ended September 30, 1998
give effect to the recent purchases of Parkway listed below for
the periods stated. 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 Parkway's purchase of the Winchester Building, as if it
had been consummated on September 30, 1998.
The pro forma consolidated statements of income sets forth
the effects of Parkway's purchases of the buildings listed below
as if they had been consummated on January 1, 1997.
BUILDING DATE OF PURCHASE
Winchester Building 12/18/98
111 East Capitol Building 07/01/98
River Oaks Plaza 05/01/98
Southtrust Bank Building 03/31/98
Brookdale Portfolio 02/25/98
Schlumberger Building 01/21/98
Greenbrier Towers 11/25/97
Raytheon Building 11/17/97
First Little Rock Plaza 11/07/97
Hightower Centre 10/01/97
Morgan Keegan Tower 09/30/97
First Tennessee Plaza 09/18/97
Fairway Plaza 08/12/97
NationsBank Tower 07/31/97
Lakewood II 07/10/97
Sugar Grove 05/01/97
Vestavia Centre 04/04/97
Meridian 03/31/97
Charlotte Park Executive Center 03/18/97
Courtyard at Arapaho 03/06/97
Ashford II 01/28/97
Forum II & III 01/07/97
In addition to the purchases listed above, the pro forma
consolidated statement of income sets forth the effect of the
sale of 1,750,000 shares of Common Stock on January 22, 1997,
262,500 shares of Common Stock on February 19, 1997, 3,000,000
shares of
<PAGE>
Common Stock on September 24, 1997, 450,000 shares of Common
Stock on October 6, 1997, 451,128 shares of Common Stock on
February 3, 1998, 855,900 shares of Common Stock on March 11, 1998,
2,400,000 shares of 8.75% Series A Cumulative Redeemable Preferred
Stock on April 28, 1998 and 250,000 shares of 8.75% Series A
Cumulative Redeemable Preferred Stock on May 6, 1998 as
if these transactions had occurred January 1, 1997.
These pro forma consolidated financial statements may not be
indicative of the results that actually would have occurred if
the purchases, sales and/or financings had been in effect on the
dates indicated or which may be obtained in the future. The pro
forma consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes
of Parkway included in its annual report on Form 10-K for the
year ended December 31, 1997.
<PAGE>
PARKWAY PROPERTIES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
September 30, 1998
Parkway Pro Forma Parkway
Historical Adjustments Pro Forma
---------- ----------- ---------
(In thousands)
Assets (1-5)
Real estate related investments:
Office buildings.............$565,383 $ 11,680 $577,063
Land held for development.... 1,721 - 1,721
Accumulated depreciation.....(23,499) - (23,499)
-------- -------- --------
543,605 11,680 555,285
Land held for sale........... 3,903 - 3,903
Mortgage loans............... 896 - 896
Real estate partnership...... 333 - 333
-------- -------- --------
548,737 11,680 560,417
Interest, rents receivable
and other assets............. 14,459 - 14,459
Cash and cash equivalents...... 809 (809) -
-------- -------- --------
$564,005 10,871 574,876
======== ======== ========
Liabilities
Notes payable to banks..........$ 14,025 $ 10,871 $ 24,896
Mortgage notes payable
without recourse..............203,986 - 203,986
Accounts payable and other
liabilities................... 18,451 - 18,451
-------- -------- --------
236,462 10,871 247,333
-------- -------- --------
Stockholders' Equity
8.75% Series A Preferred stock,
$.001 par value, 2,750,000
shares authorized and
2,650,000 shares issued and
outstanding................... 66,250 - 66,250
Common stock, $.001 par value,
70,000,000 shares authorized,
10,106,710 shares issued and
outstanding .................. 10 - 10
Additional paid-in capital......223,885 - 223,885
Retained earnings............... 37,398 - 37,398
-------- -------- --------
327,543 - 327,543
-------- -------- --------
$564,005 $ 10,871 $574,876
======== ======== ========
See accompanying notes.
<PAGE>
PARKWAY PROPERTIES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(In thousands, except per share data)
Parkway Pro Forma Parkway
Historical Adjustments Pro Forma
---------- ----------- ---------
(Unaudited) (1-6)
Revenues
Income from office properties..$45,799 $43,808(a) $89,607
Income from other real estate
properties.................... 722 - 722
Interest on mortgage loans...... 63 - 63
Management company income....... 539 - 539
Interest on investments......... 373 - 373
Dividend income................. 388 - 388
Deferred gains and other income. 203 - 203
------- ------- -------
48,087 43,808 91,895
------- ------- -------
Expenses
Office properties
Operating expense.............19,697 18,938(a) 38,635
Interest expense:
Contractual................. 5,486 3,266(c) 8,752
Amortization................ 95 - 95
Depreciation and amortization. 6,033 6,656(a) 12,689
Minority interest............. 59 - 59
Other real estate properties
Operating expense............. 462 - 462
Interest expense on bank notes:
Contractual................... 810 (810)(d) -
Amortization.................. 187 - 187
Management company expense...... 362 - 362
General and administrative...... 3,312 - 3,312
------- ------- -------
36,503 28,050 64,553
------- ------- -------
Income before gains and
minority interest.............11,584 15,758 27,342
Gain on real estate held for
sale and mortgage loans....... 2,907 - 2,907
------- ------- -------
Net income......................14,491 15,758 30,249
Dividends on preferred stock.... - 5,797 5,797
------- ------- -------
Net income available to common
stockholders.................$14,491 $ 9,961 $24,452
======= ======= =======
Net income per common share:
Basic........................$ 2.05 $ 2.42(3)
======= =======
Diluted......................$ 2.01 $ 2.39(3)
======= =======
Weighted average shares
outstanding
Basic......................... 7,078 10,107(3)
======= =======
Diluted....................... 7,214 10,246(3)
======= =======
See accompanying notes.
<PAGE>
PARKWAY PROPERTIES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
(Unaudited)
Parkway Pro Forma Parkway
Historical Adjustments Pro Forma
---------- -------------- ---------
(In thousands, except per share data)
(1-6)
Revenues
Income from office properties...$69,464 $ 5,591(b) $75,055
Interest on mortgage loans...... 97 - 97
Management company income....... 391 - 391
Interest on investments......... 113 - 113
Dividend income................. 44 - 44
Deferred gains and other income. 183 - 183
------- ------- -------
70,292 5,591 75,883
------- ------- -------
Expenses
Office properties
Operating expense.............29,249 2,387(b) 31,636
Interest expense:
Contractual................. 7,767 209(c) 7,976
Amortization of loan cost... 89 - 89
Depreciation and amortization.10,205 1,031(b) 11,236
Other real estate properties
Operating expense............. 84 - 84
Interest expense on bank notes:
Contractual................... 3,153 (5)(d) 3,148
Amortization of loan costs.... 785 - 785
Management company expense...... 299 - 299
General and administrative...... 2,579 - 2,579
------- ------- -------
54,210 3,622 57,832
------- ------- -------
Income before gains and
minority interest.............16,082 1,969 18,051
Gain on real estate held for
sale and mortgage loans....... 4,886 - 4,886
Minority interest - unit holders (1) - (1)
------- ------- -------
Net income......................20,967 1,969 22,936
Dividends on preferred stock.... 2,464 1,884 4,348
------- ------- -------
Net income available to common
stockholders..................$18,503 $ 85 $18,588
======= ======= =======
Net income per common share
Basic........................$ 1.74 $ 1.84(3)
======= =======
Diluted......................$ 1.72 $ 1.81(3)
======= =======
Weighted average shares
outstanding
Basic.........................10,619 10,107(3)
======= =======
Diluted.......................10,758 10,246(3)
======= =======
See accompanying notes.
<PAGE>
PARKWAY PROPERTIES, INC.
Notes to Pro Forma Consolidated Financial Statements
(Unaudited)
1. On March 31, 1998, the Company purchased the Southtrust Bank
Building in St. Petersburg, Florida for $17,440,000. The
Southtrust Bank Building is a seventeen-story 196,000
rentable square foot office building overlooking Tampa Bay
in downtown St. Petersburg. The building has an attached
parking garage accommodating 192 spaces.
2. On May 1, 1998, the Company purchased the 73,000 square foot
River Oaks Office Plaza in Jackson, Mississippi for $4,400,000.
The project consists of two garden-style, two-story buildings
constructed in 1981 and includes 326 surface parking spaces.
River Oaks Office Plaza is located in the Lakeland Drive sub-
market of Jackson.
3. On July 1, 1998, the Company purchased a partnership owning
the 172,000 square foot 111 East Capitol Building in Jackson,
Mississippi for $11,350,000 including 1,318 operating partnership
units of Parkway Properties LP and the assumption of a $5,647,000
mortgage note payable. This acquisition has been accounted for
using the purchase method of accounting. The total purchase price
has been allocated on the basis of fair values of the assets
acquired and liabilities assumed. The mortgage note payable,
which has a stated rate of 8% has been recorded at $5,962,000 to
reflect it at fair value based on the Company's current
incremental borrowing rate of 7%. The building was constructed in
1983 and includes an attached 200-space two-level parking garage.
The 111 East Capitol Building is located in the Central Business
District of Jackson.
4. On July 1, the Company sold the four-building Dallas
Portfolio for $53,250,000. The Company recorded a gain for
financial purposes of $3,292,000 on the sale.
5. On December 18, 1998, the Company purchased the Winchester
Building in Richmond, Virginia for $11,680,000. The three-story,
128,000 square foot office building was constructed in 1987 and
is currently 88% leased.
<PAGE>
6. The pro forma adjustments to the historical Consolidated
Statement of Income for the year ended December 31, 1997 and
the nine months ended September 30, 1998 set forth the
effects of Parkway's purchases of the following buildings as
if they had been consummated on January 1, 1997.
BUILDING DATE OF PURCHASE
Winchester Building 12/18/98
111 East Capitol Building 07/01/98
River Oaks Plaza 05/01/98
Southtrust Bank Building 03/31/98
Brookdale Portfolio 02/25/98
Schlumberger Building 01/21/98
Greenbrier Towers 11/25/97
Raytheon Building 11/17/97
First Little Rock Plaza 11/07/97
Hightower Centre 10/01/97
Morgan Keegan Tower 09/30/97
First Tennessee Plaza 09/18/97
Fairway Plaza 08/12/97
NationsBank Tower 07/31/97
Lakewood II 07/10/97
Sugar Grove 05/01/97
Vestavia Centre 04/04/97
Meridian 03/31/97
Charlotte Park Executive Center 03/18/97
Courtyard at Arapaho 03/06/97
Ashford II 01/28/97
Forum II & III 01/07/97
<PAGE>
(a) The pro forma adjustments to the Consolidated Statement of
Income are detailed below by property for the year ended
December 31, 1997.
Revenue Expenses
--------------------------------------
Income From Real Estate Owned
Real Estate Operating Depreciation
Properties Expense Expense*
----------- ------------ ------------
Purchases:
Charlotte Park $ 505,000 $ 208,000 $ 69,000
Ashford II 54,000 37,000 4,000
Courtyard at
Arapaho 366,000 164,000 58,000
Meridian 354,000 123,000 59,000
Vestavia 240,000 91,000 26,000
Sugar Grove 309,000 165,000 43,000
Lakewood II 977,000 447,000 129,000
NationsBank Tower 2,392,000 1,003,000 271,000
Fairway Plaza 859,000 379,000 94,000
First Tennessee
Plaza 4,253,000 2,080,000 477,000
Morgan Keegan
Tower 3,327,000 1,665,000 618,000
Hightower Centre 833,000 333,000 113,000
Raytheon Building 2,417,000 1,072,000 315,000
First Little Rock 1,298,000 517,000 191,000
Greenbrier Towers 1,913,000 835,000 330,000
Schlumberger 2,260,000 817,000 275,000
Brookdale Portfolio 20,543,000 9,108,000 3,668,000
Southtrust Bank Bldg. 2,751,000 1,205,000 392,000
River Oaks Plaza 975,000 351,000 99,000
111 East Capitol 2,447,000 1,131,000 255,000
Sale of Dallas
Portfolio (6,906,000) (3,370,000) (1,093,000)
Winchester 1,641,000 577,000 263,000
----------- ----------- -----------
$43,808,000 $18,938,000 $ 6,656,000
=========== =========== ===========
*Depreciation is provided by the straight-line method over
the estimated useful lives of the buildings (40 years).
<PAGE>
(b) The pro forma adjustments to the Consolidated Statement of
Income are detailed below by property for the nine months
ended September 30, 1998.
Revenue Expense
----------------------------------------
Income From Real Estate Owned
Real Estate Operating Depreciation
Properties Expense Expense*
----------- ------------ ------------
Purchases:
Schlumberger $ 125,000 $ 45,000 $ 15,000
Brookdale Portfolio 3,139,000 1,392,000 560,000
Southtrust Bank Building 706,000 303,000 98,000
River Oaks Plaza 332,000 130,000 33,000
111 East Capitol 1,149,000 536,000 128,000
Sale of Dallas Portfolio(1,225,000) (479,000) -
Winchester 1,365,000 460,000 197,000
----------- ----------- ------------
$ 5,591,000 2,387,000 $ 1,031,000
=========== ============ ============
*Depreciation is provided by the straight-line method over
the estimated useful lives of the buildings (40 years).
(c) Pro forma interest expense on real estate owned reflects the
non-recourse debt placed on certain buildings acquired in
1997 and 1998 and debt assumed upon purchase at the actual
amounts and rates by property as if in place January 1, 1997
and is detailed below.
Property/Placement Year Ended
Date/Rate Debt 12/31/97
------------------ ----------- ----------
Lakewood II*
7/97 8.08% $ 6,910,000 $ 294,000
BB&T
11/97 7.3% 15,000,000 958,000
Raytheon Building*
11/97 8.125% 7,958,000 566,000
First Tennessee
Plaza
12/97 7.17% 15,000,000 1,031,000
111 East Capitol*
7/98 7% 5,962,000 417,000
----------
$3,266,000
==========
*Assumed in purchase.
<PAGE>
(d) The pro forma effect of the building purchases, the
placement of non-recourse debt, the sales of Common Stock
and the sale of the Dallas portfolio on interest expense
on notes payable to banks was $819,000 for the year ended
December 31, 1997 and $614,000 for the nine months ended
September 30, 1998.
7. The pro forma basic and diluted earnings per share for the
year ended December 31, 1997 reflect the sale of 1,750,000
shares of Common Stock on January 22, 1997, 262,500 shares
of Common Stock on February 19, 1997, 3,000,000 shares of
Common Stock on September 24, 1997, 450,000 shares of Common
Stock on October 6, 1997, 451,128 shares of Common Stock on
February 23, 1998, 855,900 shares of Common Stock on March
11, 1998 and the purchase of 992,681 shares of Common Stock
in the third quarter of 1998.
8. No income tax expenses were provided because of the
Company's net operating loss carryover and status as a REIT.
<PAGE>
FORM 8-K
PARKWAY PROPERTIES, INC.
SIGNATURES
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 hereunto duly authorized.
DATE: March 24, 1999 PARKWAY PROPERTIES, INC.
BY: /s/Sarah P. Clark
Sarah P. Clark
Senior Vice President,
Chief Financial Officer,
Treasurer and Secretary
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference in the
Registration Statement, as amended, (Form S-3, No. 333-
48161) and related Prospectus dated April 8, 1998 of Parkway
Properties, Inc. and the Registration Statement (Form S-8 on
Form S-3, No. 333-00311) pertaining to The Parkway Company
1994 Stock Option Plan, The Parkway Company 1991 Incentive
Plan, and The Parkway Company 1991 Directors Stock Option
Plan of our reports dated March 19, 1999 on the statements
of rental revenue and direct operating expenses included in
Parkway Properties, Inc.'s Current Report of Forms 8-K dated
March 24, 1999.
Ernst & Young LLP
Jackson, Mississippi
March 24, 1999
