<PAGE>
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): N/A
-----------------
PARKWAY PROPERTIES, INC.
- -----------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Maryland 1-11533 74-2123597
- -----------------------------------------------------------------
(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
- -----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (601) 948-4091
---------------
- ------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
FORM 8-K
PARKWAY PROPERTIES, INC.
Item 5. Other Events.
From time to time, we may make forward-looking statements
(within the meaning of Section 27A of the Securities Act of 1933
(the "Securities Act") and Section 21F of the Securities Exchange
Act of 1934 (the "Exchange Act")), in documents filed under the
Securities Act, the Exchange Act, press releases or other public
statements. If we make forward-looking statements, we assume no
obligation to update forward-looking statements. Shareholders
should not place undue reliance on forward-looking statements as
they involve numerous risks and uncertainties that could cause
actual results to differ materially from the results stated or
implied in the forward-looking statements. In addition to
specific factors that may be disclosed simultaneously with any
forward-looking statement, some of the factors related to us and
our businesses that could cause actual results to differ
materially from a forward-looking statement are set forth below.
We have existing debt and refinancing risks. We currently
have both fixed and variable rate indebtedness and may incur
indebtedness in the future, including borrowings under our credit
facilities, to finance possible acquisitions and for general
working purposes. As a result, we are and expect to be subject
to the risks normally associated with debt financing including:
o interest rates may rise; and
o we may be unable to refinance or repay the debt as it
becomes due.
We have substantial debt obligations and some of our
properties secure our mortgage debt. As of December 31, 1999, 29
of our properties secured our $214,736,000 of nonrecourse
mortgage indebtedness. Future acquisitions may also be used to
secure our debt. If we are unable to repay indebtedness as
payments are required during the term of the loan or at maturity,
we may have to sell properties to repay our debt, or properties
may be foreclosed upon or otherwise transferred to the mortgagee
which would cause us to lose income and asset value.
Fluctuations in interest rates may adversely affect our
operations. As of December 31, 1999, we had approximately
$86,640,000 of variable interest rate debt. We may also incur
indebtedness in the future that bears interest at a variable rate
or we may be required to refinance our debt at higher rates.
Accordingly, increases in interest rates could adversely affect
our financial condition and our ability to pay expected
distributions to stockholders.
No limitation on debt could result in our becoming more
highly leveraged. As of December 31, 2000, our ratio of debt to
total market capitalization was approximately 46%. Our governing
documents do not limit the amount of indebtedness we may incur.
Accordingly, our Board of Directors could alter our current debt
structure and would do so, for example, if it were necessary to
<PAGE>
maintain our status as a REIT. We might become more highly
leveraged as a result, and our financial condition and cash
available for distribution to stockholders might be negatively
affected and the risk of default on our indebtedness could
increase.
Our real estate investments are subject to risks particular
to real estate investments. Our investments are generally made in
office properties. We are, therefore, generally subject to risks
incidental to the ownership of real estate. These risks include:
o changes in general or local economic conditions;
o changes in supply of or demand for office properties or
tenants for such properties in an area in which we have
buildings;
o changes in interest rates and in the availability, cost and
terms of mortgage financings which may render the sale or
financing of a property difficult or unattractive;
o the impact of present and future environmental protection
laws;
o the ongoing need for capital improvements;
o changes in real estate tax rates and other operating
expenses;
o changes in tax, real estate and zoning laws;
o changes in governmental rules and fiscal policies; and
o civil unrest, acts of war, acts of God, including
earthquakes and other natural disasters (which may result in
uninsured losses) and other factors beyond our control.
Should any of these events occur, our financial condition
and our ability to make expected distributions to stockholders
could be adversely affected.
The economic conditions of our primary markets affect our
operations. Substantially all of our properties are located in
the Southeastern United States and Texas and, therefore, our
financial condition and ability to make expected distributions to
our stockholders is linked to economic conditions in these
markets as well as the market for office space generally.
Tenant defaults could adversely affect our operations.
Substantially all of our revenues and income come from rental
income from real property. As such, our revenues and income
could be adversely affected if a significant number of our
tenants defaulted under their lease obligations. Our ability to
manage our assets is also subject to federal bankruptcy laws and
state laws that limit creditors' rights and remedies available to
real property owners to collect delinquent rents. If a tenant
becomes insolvent or bankrupt, we cannot be sure that we could
recover the premises from the tenant promptly or from a trustee
or debtor-in-possession in any bankruptcy proceeding relating to
that tenant. We also cannot be sure that we would receive rent
<PAGE>
in the proceeding sufficient to cover our expenses with respect
to the premises. If a tenant becomes bankrupt, the federal
bankruptcy code will apply and, in some instances, may restrict
the amount and recoverability of our claims against the tenant.
A tenant's default on its obligations to us could adversely
affect our financial condition and the cash we have available for
distributions to our stockholders.
Illiquidity of real estate may limit our ability to vary our
portfolio. Real estate investments are relatively illiquid. Our
ability to vary our portfolio in response to changes in economic
and other conditions will therefore be limited. In addition, the
Internal Revenue Code of 1986, as amended (the "Code"), limits
our ability to sell our properties. If we must sell an
investment, we cannot assure that we will be able to dispose of
the investment in the time period we desire or that the sales
price of the investment will recoup or exceed our cost for the
investment.
We are exposed to potential environmental liability. Our
operating costs may be affected by the obligation to pay for the
cost of complying with existing environmental laws, ordinances
and regulations, as well as the cost of complying with future
legislation. Under various federal, state and local
environmental laws, ordinances and regulations, a current or
previous owner or operator of real property may be liable for the
costs of removal or remediation of hazardous or toxic substances
on, under, or in such property. These laws often impose
liability whether or not the owner or operator knew of, or was
responsible for, the presence of the hazardous or toxic
substances. In addition, the presence of hazardous or toxic
substances, or the failure to remediate the property properly,
may adversely affect the owner's ability to borrow by using such
real property as collateral. Any person who arranges for the
transportation, disposal or treatment of hazardous or toxic
substances may also be liable for the costs of removal or
remediation of those substances at the disposal or treatment
facility, whether or not the facility is or ever was owned or
operated by that person. Certain environmental laws and common
law principles could be used to impose liability for releases of
hazardous materials, including asbestos-containing materials
("ACMs"), into the environment, and third parties may seek
recovery from owners or operators of real properties for personal
injury associated with exposure to released ACMs or other
hazardous materials. We do not know of any material ACM issues
at our properties. However, there can be no assurance that ACMs
do not exist at our properties. If there are ACMs at the
properties that require removal or other remediation, the cost
could be substantial and could have an adverse effect on the
value of the property.
Environmental laws may also impose restrictions on the
manner in which a property may be used or transferred or in which
businesses may be operated, and these restrictions may require
expenditures. In connection with the ownership and operation of
our properties, we may be potentially liable for any costs. The
cost of defending against claims of liability or remediating
contaminated property and the cost of complying with
environmental laws could materially adversely affect our results
of operations and financial condition and our ability to make
expected distributions to stockholders.
Phase I environmental site assessments ("ESAs") have been
conducted at all of our properties by qualified independent
<PAGE>
environmental engineers. The purpose of Phase I ESAs is to
identify potential sources of contamination at the properties and
to assess the status of environmental regulatory compliance.
Except as described in the next paragraph, ESAs have not revealed
any environmental liability or compliance concerns. It is
possible, however, that these ESAs did not reveal all
environmental liabilities or compliance concerns or that material
environmental liabilities or compliance concerns exist of which
we are currently unaware. We have not been notified by any
governmental authority, and we have no other knowledge of any
material noncompliance, liability or claim relating to hazardous
or toxic substances or other environmental substances in
connection with any of our properties. We intend to perform
additional Phase I ESAs with respect to all properties acquired
in the future.
Competition affects our operations. All of our properties
are located in developed areas where there are many other office
properties and real estate companies that compete with us for
tenants and for acquisition and development opportunities. Some
of our competitors are larger than we are and have greater
financial resources than we do. This competition could:
o make it difficult for us to rent space at our properties;
o make rents currently charged lower than we expect and the
terms of renewal or re-lease (including the cost of required
renovations or concessions to tenants) less favorable to us than
the prior lease; and
o cause the cost of properties we wish to purchase to rise.
Uninsured and underinsured losses may adversely affect
operations. We, or in certain instances, tenants of our
properties, carry commercial general liability, fire and extended
coverage insurance with respect to our properties. This coverage
has policy specifications and insured limits that we believe are
customarily carried for similar properties. We plan to obtain
similar coverage for properties we acquire in the future.
However, certain types of losses, generally of a catastrophic
nature, such as earthquakes and floods, may be either uninsurable
or not economically insurable. Should a property sustain damage,
we may incur losses due to insurance deductibles, to co-payments
on insured losses or to uninsured losses. In the event of a
substantial property loss, the insurance coverage may not be
sufficient to pay the full current market value or current
replacement cost of the property. In the event of an uninsured
loss, we could lose some or all of our capital investment, cash
flow and anticipated profits related to one or more properties.
Inflation, changes in building codes and ordinances,
environmental considerations, and other factors also might make
it infeasible to use insurance proceeds to replace a property
after it has been damaged or destroyed. Under such
circumstances, the insurance proceeds we receive might not be
adequate to restore our economic position with respect to such
property.
<PAGE>
Increases in property taxes could adversely affect our
distributions to stockholders. Our properties are subject to
real property taxes. The real property taxes on the properties
may increase or decrease as property tax rates change and as the
value of the properties are assessed or reassessed by taxing
authorities. If property taxes increase, our ability to make
distributions to our stockholders could be adversely affected.
Cost of compliance with and potential liability under the
Americans with Disabilities Act could be substantial. Under the
Americans with Disabilities Act of 1990, as amended, all public
accommodations are required to meet certain federal requirements
related to access and use by disabled persons. Compliance with
the public accommodations provision of the ADA could require the
removal of access barriers, and noncompliance could result in the
imposition of fines, awards of damages to private litigants
and/or a court order to remove access barriers. Additional
legislation may impose further burdens or restrictions on owners
with respect to access by disabled persons. In many instances,
the applicability and requirements of the ADA are not clear.
Accordingly, the cost of compliance with the ADA or such
legislation is not currently ascertainable, and, while such costs
are not expected to have a material adverse effect on our
financial condition, such costs could be substantial. We have
not undertaken ADA studies of all of our properties and, as to
those properties with respect to which we have not undertaken ADA
studies, possible costs of compliance could arise.
Our Chairman serves as the Chairman of another REIT. Leland R.
Speed serves as our Chairman and as the Chairman of EastGroup
Properties, Inc., a REIT with a focus on industrial properties
principally in the Sunbelt area of the United States.
EastGroup's offices are separate from ours and we have no other
common directors or officers. As we both carry out our strategic
plans, our management and the management of EastGroup have each
stated their intentions not to transfer properties between our
two companies, and we each intend to pursue our distinct
corporate plan. There can be no assurance that conflicts of
interest will not arise between EastGroup and us in the future.
Limitations on the ownership of our Common Stock and our
Stockholder Rights Agreement may preclude the acquisition of our
control. Certain provisions contained in our Charter and Bylaws,
our Stockholder Rights Agreement, and certain provisions of
Maryland law may have the effect of discouraging a third party
from making an acquisition proposal for us and may thereby
inhibit a change of control. Provisions of our Charter are
designed to assist us in maintaining our qualification as a REIT
under the Code by preventing concentrated ownership of our
capital stock that might jeopardize REIT qualification. Among
other things, these provisions provide that, if a transfer of our
stock or a change in our capital structure would result in any
person (as defined in the Charter) directly or indirectly
acquiring beneficial ownership of more than 9.8% (in value or in
number, whichever is more restrictive) of our outstanding capital
stock excluding Excess Stock, our outstanding shares being
constructively or beneficially owned by fewer than 100 persons,
or our being "closely held" within the meaning of Section 856 of
the Code, then:
o any proposed transfer will be void ab initio and we will not
recognize such transfer;
<PAGE>
o we will have the right to redeem the shares proposed to be
transferred; and
o the shares proposed to be transferred will be automatically
converted into and exchanged for shares of a separate class of
stock, the Excess Stock.
Excess Stock has no dividend or voting rights but holders of
Excess Stock do have certain rights in the event of our
liquidation, dissolution or winding up. Our Charter provides
that we will hold the Excess Stock as trustee for the person or
persons to whom the shares are ultimately transferred, until the
time that the shares are retransferred to a person or persons in
whose hands the shares would not be Excess Stock and certain
price-related restrictions are satisfied. These provisions may
have an anti-takeover effect by discouraging tender offers or
purchases of large blocks of stock, thereby limiting the
opportunity for stockholders to receive a premium for their
shares over then-prevailing market prices.
In addition, we have a stockholder rights plan. Under the
terms of the plan, we declared a dividend of rights on our Common
Stock. The rights issued under the plan will be triggered, with
certain exceptions, if and when any person or group acquires, or
commences a tender offer to acquire, 15% or more of our shares.
The rights plan is intended to prevent abusive hostile takeover
attempts by requiring a potential acquirer to negotiate the terms
with our Board of Directors. However, it could have the effect
of deterring or preventing our acquisition, even if a majority of
our stockholders were in favor of such acquisition, and could
have the effect of making it more difficult for a person or group
to gain control of us or to change existing management.
There are certain risks associated with our REIT status and
additional risks if we fail to qualify as a REIT. We believe
that we have operated in a manner so as to qualify as a REIT
under the Code for each of our taxable years since 1997. To
qualify as a REIT we must satisfy numerous requirements (some on
an annual and quarterly basis) established under the highly
technical and complex Code provisions, which include:
o maintaining ownership of specified minimum levels of real
estate related assets;
o generating specified minimum levels of real estate related
income;
o maintaining certain diversity of ownership requirements with
respect to our shares; and
o distributing at least 95% (90% for tax years beginning after
December 31, 2000) of all real estate investment taxable income
on an annual basis.
Only limited judicial and administrative interpretations
exist of these rules. In addition, qualification as a REIT
involves the determination of various factual matters and
circumstances not entirely within our control.
If we fail to qualify as a REIT, we will be subject to
federal income tax (including any applicable alternative minimum
tax) on our taxable income at corporate rates. In addition,
<PAGE>
unless entitled to relief under certain statutory provisions, we
will be disqualified from treatment as a REIT for the four
taxable years following the year during which we failed to
qualify. This treatment would reduce net earnings available for
investment or distribution to stockholders because of the
additional tax liability for the year or years involved. In
addition, we would no longer be required to make distributions to
our stockholders. To the extent that distributions to
stockholders had been made based on our qualifying as a REIT, we
might be required to borrow funds or to liquidate certain of our
investments to pay the applicable tax.
As a REIT, we have been and will continue to be subject to
certain federal, state and local taxes on our income and
property.
<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: April 6, 2000 PARKWAY PROPERTIES, INC.
BY: /s/Regina P. Shows
Regina P. Shows
Senior Vice President,
Chief Accounting Officer,
Controller and Treasurer
