UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): November 15, 2011
PARKWAY PROPERTIES, INC.
(Exact Name of Registrant as Specified in its Charter)
| Maryland | 1-11533 | 74-2123597 |
| (State or Other Jurisdiction | (Commission File Number) | (IRS Employer |
| Of Incorporation) | | Identification No.) |
One Jackson Place, Suite 1000, 188 East Capitol Street, Jackson, MS 39225-4647
(Address of Principal Executive Offices, including zip code)
(601) 948-4091
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| 0 | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| 0 | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| 0 | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| 0 | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 8.01. Other Events.
During the period January 1, 2011 through September 30, 2011, Parkway Properties, Inc. (the “Company” or “Parkway”) and Parkway Properties Office Fund II, LP (“Fund II”) acquired in separate transactions an interest in 8 properties consisting of approximately 3.2 million square feet of office space together for an aggregate investment of approximately $586.7 million (the “Acquisitions”). The Company also sold 5 office properties consisting of approximately 1.8 million square feet of office space for an aggregate total of $230.7 million and is under contract to sell one office property during the fourth quarter of 2011 (the “Dispositions”). Set forth in Item 9.01 are pro-forma financial statements considering the impact of a majority of Acquisitions, none of which individually are considered significant within the meaning of Rule 3-14, as well the impact of the Dispositions.
On January 21, 2011, Parkway and Fund II purchased the office and retail portion of 3344 Peachtree located in the Buckhead submarket of Atlanta for $167.3 million. 3344 Peachtree contains approximately 484,000 square feet of office and retail space and includes an adjacent eleven-story parking structure. Fund II’s investment in the property totaled $160.0 million, with Parkway funding the remaining $7.3 million. Due to Parkway’s additional investment, the Company’s effective ownership in the property is 33.03%. An additional $2.6 million is expected to be spent for closing costs, building improvements, leasing costs and tenant improvements during the first two years of ownership. Simultaneous with closing, Fund II assumed the $89.6 million existing non-recourse first mortgage loan, which matures on October 1, 2017, and carries a fixed interest rate of 4.8%. In accordance with generally accepted accounting principles (“GAAP”), the mortgage loan was recorded at $87.2 million to reflect the value of the instrument based on a market interest rate of 5.25% on the date of purchase. Parkway's equity contribution in the investment is $25.5 million and was initially funded through availability under the Company's credit facility.
On April 8, 2011, Fund II purchased Corporate Center Four at International Plaza (“Corporate Center Four”) located in the Westshore submarket of Tampa, Florida for $45.0 million. Corporate Center Four contains approximately 250,000 square feet of office space. An additional $5.6 million is expected to be spent for closing costs, building improvements, leasing costs and tenant improvements during the first two years of ownership. In connection with the purchase, Fund II placed a $22.5 million non-recourse first mortgage loan secured by the property with an initial thirty-six month interest only period and a maturity date of April 8, 2019. The mortgage loan has a stated rate of LIBOR plus 200 basis points. In connection with the mortgage loan, Fund II entered into an interest rate swap agreement that fixes the interest rate at 5.4% through October 8, 2018. Parkway’s equity contribution of $6.8 million was funded through availability under the Company’s credit facility. Parkway’s effective ownership interest in this asset is 30%.
On May 11, 2011, the Company sold 233 North Michigan, a 1.1 million square foot office property in Chicago, Illinois, for a gross sales price of $162.2 million. At closing, the Company repaid the $84.6 million first mortgage secured by the property that was scheduled to mature in July 2011. Parkway received net cash proceeds after repayment of the mortgage loan of $74.0 million, which were used to reduce amounts outstanding under the Company’s credit facility.
The Company recognized a gain on extinguishment of debt of $302,000, which is classified as income from discontinued operations and a gain on the sale of real estate from discontinued operations of $4.3 million during the second quarter of 2011.
On May 18, 2011, Fund II and an institutional investor purchased Two Liberty Place for $180.4 million. Two Liberty Place is a 941,000 square foot office property located in the central business district of Philadelphia, Pennsylvania. An additional $4.7 million is expected to be spent on closing costs, building improvements, leasing costs and tenant improvements during the first two years of ownership. In connection with the purchase, Fund II placed a $90.2 million non-recourse first mortgage loan on the property with an initial 48-month interest only period and a maturity date of June 10, 2019. The mortgage has a stated interest rate of 5.3%. Parkway’s equity contribution of $20.4 million was funded through availability under the Company’s credit facility. Parkway’s effective ownership in the property is 19%.
In assessing 3344 Peachtree, Corporate Center Four and Two Liberty Place, the Company considered each property’s revenue sources including those which have been affected and are expected to be affected in the future by factors including, but not limited to, demand, supply and competitive factors present in the local and national markets for commercial office space and the ability of tenants to make payments when due. The Company also considered each property’s expenses including, but not limited to, utility costs, tax rates and other expenses, and the portion of such expenses which may be recovered from tenants.
On July 19, 2011, the Company sold Greenbrier Towers I & II, two office properties totaling 172,000 square feet in Hampton Roads, Virginia, for a gross sale price of $16.7 million. The sale represented the Company’s exit from this market. The properties were unencumbered by debt at the time of the sale. Parkway received $16.1 million in net proceeds at closing, which were used to reduce amounts outstanding under the Company's credit facility. The Company recognized a gain on the sale of real estate from discontinued operations of $1.2 million during the third quarter of 2011.
On August 16, 2011, the Company sold Glen Forest, an 81,000 square foot office property in Richmond, Virginia, for a gross sale price of $9.3 million. The property was unencumbered by debt at the time of the sale. Parkway received $8.9 million in net proceeds at closing, which were used to reduce amounts outstanding under the Company's credit facility. The Company recognized a gain on the sale of real estate from discontinued operations of $1.1 million during the third quarter of 2011.
On September 8, 2011, the Company sold Tower at 1301 Gervais, a 298,000 square foot office property in Columbia, South Carolina, for a gross sale price of $19.5 million. The property was unencumbered by debt at the time of the sale. Parkway received $17.9 million in net proceeds at closing, which were used to reduce amounts outstanding under the Company's credit facility. The Company recognized a total non-cash impairment loss of $2.7 million during the nine months ended September 30, 2011. This impairment loss was classified in loss from discontinued operations.
The Company is under contract to sell 111 East Wacker, a 1.0 million square foot office property located in the central business district of Chicago, Illinois, for a gross sale price of $150.6
million. The property currently serves as collateral for a $148.5 million non-recourse mortgage loan with a fixed interest rate of 6.3% and maturity date in July 2016. As of September 22, 2011, the buyer has concluded its due diligence and has deposited earnest money of $2.4 million. The sale is expected to close during the fourth quarter of 2011, subject to the buyer’s successful modification and assumption of the existing mortgage loan and customary closing conditions. The Company recognized a non-cash impairment loss of $18.8 million during the third quarter of 2011. The impairment loss was classified in loss from discontinued operations.
After reasonable inquiry, the Company is not aware of any other material factors relating to these properties that would cause the reported financial information not to be necessarily indicative of future operating results.
The Company and its operations are, however, subject to a number of risks and uncertainties. For a discussion of such risks, see the risks identified in the Company’s Annual Reports on Form 10-K for the fiscal year ended December 31, 2010 under Item 1A Risk Factors and in Forms 10-Q for the quarters ended March 31, 2011, June 30, 2011, and September 31, 2011, along with the other reports filed by the Company with the Securities and Exchange Commission.
Item 9.01. Financial Statements and Exhibits.
| (a) Pro-forma Financial Statements | |
| | |
| The following unaudited Pro Forma Consolidated Financial Statements of Parkway for the year ended December 31, 2010 and as of and for the nine months ended September 30, 2011 are attached hereto: | |
| | Page |
| Pro Forma Consolidated Financial Statements (Unaudited) | F-1 |
| Pro Forma Consolidated Balance Sheet (Unaudited) - As of September 30, 2011 | F-2 |
| Pro Forma Consolidated Statement of Operations (Unaudited) - | |
| for the Year Ended December 31, 2010 | F-3 |
| Pro Forma Consolidated Statement of Operations (Unaudited) - | |
| for the Nine Months Ended September 30, 2011 | F-4 |
| Notes to Pro Forma Consolidated Financial Statements (Unaudited) | F-5 |
As these properties are directly or indirectly owned by entities that have elected to be treated as a real estate investment trust (as specified under sections 856-860 of the Internal Revenue Code of 1986) for Federal income tax purposes, a presentation of estimated taxable operating results is not applicable. | |
| | |
| | |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this amended report to be signed on its behalf by the undersigned hereunto duly authorized.
| | PARKWAY PROPERTIES, INC. | |
| | | | |
| Date: November 15, 2011 | By: | /s/ Mandy M. Pope | |
| | | Executive Vice President and Chief Accounting Officer | |
| | | | |
| | | | |
PARKWAY PROPERTIES, INC.
Pro Forma Consolidated Financial Statements
(Unaudited)
The following pro forma consolidated balance sheet (unaudited) as of September 30, 2011 and pro forma consolidated statements of operations (unaudited) of Parkway Properties, Inc. (the “Company” or "Parkway") for the year ended December 31, 2010 and nine months ended September 30, 2011, give effect to the purchase of office properties by Parkway and Parkway Properties Office Fund II, LP (“Fund II”) of 3344 Peachtree, Corporate Center Four, and Two Liberty Place (the “Properties”). Additionally, the pro forma consolidated statements of operations give effect to the disposition of 233 North Michigan, Greenbrier Towers I & II, Glen Forest, Tower at 1301 Gervais for the periods stated. In addition, the pro forma consolidated statements of operations gives effect to the pending sale of 111 East Wacker which was classified as held for sale as of September 30, 2011. The pro forma consolidated financial statements have been prepared by management of Parkway based upon the historical financial statements of Parkway and the adjustments and assumptions in the accompanying notes to the pro forma consolidated financial statements.
The pro forma consolidated balance sheet sets forth the effect of the sale of 111 East Wacker as if it had been consummated on September 30, 2011.
The pro forma consolidated statements of operations set forth the effect of the Properties as if all purchases and dispositions had been consummated on January 1, 2010.
These pro forma consolidated financial statements may not be indicative of the results that actually would have occurred if the transaction had occurred 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, 2010.
| PARKWAY PROPERTIES, INC. |
| PRO FORMA CONSOLIDATED BALANCE SHEET |
| SEPTEMBER 30, 2011 |
| (Unaudited) |
| | | | | | |
| | Parkway | | Pro Forma | | Parkway |
| | Historical | | Adjustments | | Pro Forma |
| | (In thousands, except share data) |
| | | | | | |
| Assets | | | | | |
| Real estate related investments: | | | | | |
| Office and parking properties | $ 1,685,906 | | $ - | | $ 1,685,906 |
| Office property held for sale | 134,963 | | (134,963) | | - |
| Land held for development | 609 | | - | | 609 |
| Accumulated depreciation | (275,729) | | - | | (275,729) |
| | 1,545,749 | | (134,963) | | 1,410,786 |
| | | | | | |
| Land available for sale | 750 | | - | | 750 |
| Mortgage loans | 1,500 | | - | | 1,500 |
| | 1,547,999 | | (134,963) | | 1,413,036 |
| | | | | | |
| Rents receivable and other assets | 133,799 | | - | | 133,799 |
| Intangible assets, net | 116,736 | | - | | 116,736 |
| Other assets held for sale | 31,983 | | (31,983) | | - |
| Management contracts, net | 50,714 | | - | | 50,714 |
| Cash and cash equivalents | 32,951 | | (2,879) | | 30,072 |
| | $ 1,914,182 | | $ (169,825) | | $ 1,744,357 |
| | | | | | |
| | | | | | |
| | | | | | |
| Liabilities | | | | | |
| Notes payable to banks | $ 113,852 | | $ (4,293) | | $ 109,559 |
| Mortgage notes payable | 830,709 | | - | | 830,709 |
| Accounts payable and other liabilities | 123,409 | | - | | 123,409 |
| Liabilities held for sale | 165,340 | | (165,340) | | - |
| | 1,233,310 | | (169,633) | | 1,063,677 |
| | | | | | |
| Equity | | | | | |
| Parkway Properties, Inc. stockholders' equity: | | | | | |
| 8.00% Series D Preferred stock, $.001 par value, 5,421,296 and | | | | | |
| 4,374,896 shares authorized, issued and outstanding in | 128,942 | | - | | 128,942 |
| 2011 and 2010, respectively | | | | | |
| Common stock, $.001 par value, 64,578,704 and 65,625,104 | | | | | |
| shares authorized in 2011 and 2010, respectively, 22,118,817 | | | | | |
| and 21,923,610 shares issued and outstanding in 2011 and | | | | | |
| 2010, respectively | 22 | | - | | 22 |
| Common stock held in trust, at cost, 12,070 and 58,134 | | | | | |
| shares in 2011 and 2010, respectively | (309) | | - | | (309) |
| Additional paid-in capital | 517,527 | | - | | 517,527 |
| Accumulated other comprehensive loss | (5,704) | | - | | (5,704) |
| Accumulated deficit | (209,732) | | (192) | | (209,924) |
| Total Parkway Properties, Inc. stockholders' equity | 430,746 | | (192) | | 430,554 |
| Noncontrolling interest - real estate partnerships | 250,126 | | | | 250,126 |
| Total equity | 680,872 | | (192) | | 680,680 |
| | $ 1,914,182 | | $ (169,825) | | $ 1,744,357 |
| | | | | | |
| PARKWAY PROPERTIES, INC. |
| PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS |
| FOR THE TWELVE MONTHS ENDED DECEMBER 31, 2010 |
| (Unaudited) |
| | | | | | |
| | Parkway | | Pro Forma | Parkway |
| | Historical | | Adjustments | Pro Forma |
| | (In thousands, except per share data) |
| | | | | | |
| | | | | | |
| Revenues | | | | | |
| Income from office and parking properties | $ 182,747 | | $ 45,237 | | $ 227,984 |
| Management company income | 1,652 | | - | | 1,652 |
| Total revenues | 184,399 | | 45,237 | | 229,636 |
| | | | | | |
| Expenses and other | | | | | |
| Property operating expense | 86,931 | | 17,128 | | 104,059 |
| Depreciation and amortization | 65,117 | | 20,008 | | 85,125 |
| Impairment loss on real estate | 4,120 | | - | | 4,120 |
| Management company expenses | 3,961 | | - | | 3,961 |
| General and administrative | 7,382 | | - | | 7,382 |
| Total expenses and other | 167,511 | | 37,136 | | 204,647 |
| | | | | | |
| Operating income | 16,888 | | 8,101 | | 24,989 |
| | | | | | |
| Other income and expenses | | | | | |
| Interest and other income | 1,487 | | - | | 1,487 |
| Equity in earnings of unconsolidated joint ventures | 326 | | - | | 326 |
| Gain on involuntary conversion | 40 | | - | | 40 |
| Interest expense | (40,677) | | (7,829) | | (48,506) |
| | | | | | |
| Loss from continuing operations | (21,936) | | 272 | | (21,664) |
| Net loss attributable to noncontrolling interest - real estate partnerships | 10,789 | | 3,287 | | 14,076 |
| Dividends on preferred stock | (6,325) | | - | | (6,325) |
| Loss from continuing operations attributable to common stockholders | $ (17,472) | | $ 3,559 | | $ (13,913) |
| | | | | | |
| Loss from continuing operations per common share (4) | | | | | |
| Basic | $ (0.82) | | | | $ (0.65) |
| Diluted | $ (0.82) | | | | $ (0.65) |
| | | | | | |
| Weighted average shares outstanding: | | | | | |
| Basic | 21,421 | | | | 21,421 |
| Diluted | 21,421 | | | | 21,421 |
| | | | | | |
| | | | | | |
| PARKWAY PROPERTIES, INC. |
| PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS |
| FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 |
| (Unaudited) |
| | | | | | |
| | Parkway | | Total Pro Forma | Parkway |
| | Historical | | Adjustments | | Pro Forma |
| | (In thousands, except per share data) |
| | | | | | |
| | | | | | |
| Revenues | | | | | |
| Income from office and parking properties | $ 170,244 | | $ 12,509 | | $ 182,753 |
| Management company income | 9,990 | | - | | 9,990 |
| Total revenues | 180,234 | | 12,509 | | 192,743 |
| | | | | | |
| Expenses and other | | | | | |
| Property operating expense | 79,156 | | 4,880 | | 84,036 |
| Depreciation and amortization | 64,519 | | 4,823 | | 69,342 |
| Impairment loss on real estate | 107,240 | | - | | 107,240 |
| Impairment loss on mortgage loan receivable | 9,235 | | - | | 9,235 |
| Change in fair value of contingent consideration | (12,000) | | - | | (12,000) |
| Management company expenses | 8,398 | | - | | 8,398 |
| General and administrative | 5,380 | | - | | 5,380 |
| Acquisition costs | 16,754 | | (485) | | 16,269 |
| Total expenses | 278,682 | | 9,218 | | 287,900 |
| | | | | | |
| Operating income (loss) | (98,448) | | 3,291 | | (95,157) |
| | | | | | |
| Other income and expenses | | | | | |
| Interest and other income | 849 | | - | | 849 |
| Equity in earnings of unconsolidated joint ventures | 65 | | - | | 65 |
| Gain on sale of real estate | 743 | | - | | 743 |
| Interest expense | (37,280) | | (558) | | (37,838) |
| | | | | | |
| Income (loss) before income tax expense | (134,071) | | 2,733 | | (131,338) |
| Income tax expense | (50) | | - | | (50) |
| | | | | | |
| Income (loss) from continuing operations | (134,121) | | 2,733 | | (131,388) |
| Net loss attributable to noncontrolling interest - real estate partnerships | 84,112 | | (212) | | 83,900 |
| | | | | | |
| Dividends on preferred stock | (7,341) | | - | | (7,341) |
| Income (loss) from continuing operations attributable to common stockholders | $ (57,350) | | $ 2,521 | | $ (54,829) |
| | | | | | |
| Loss from continuing operations per common share (4) | | | | | |
| Basic | $ (2.67) | | | | $ (2.55) |
| Diluted | $ (2.67) | | | | $ (2.55) |
| | | | | | |
| Weighted average shares outstanding: | | | | | |
| Basic | 21,489 | | | | 21,489 |
| Diluted | 21,489 | | | | 21,489 |
| | | | | | |
PARKWAY PROPERTIES, INC.
Notes to Pro Forma Consolidated Financial Statements
(Unaudited)
1. The Company is under contract to sell 111 East Wacker, a 1.0 million square foot office property located in the central business district of Chicago, Illinois, for a gross sale price of $150.6 million. The property currently serves as collateral for a $148.5 million non-recourse mortgage loan with a fixed interest rate of 6.3% and maturity date in July 2016. As of September 22, 2011, the buyer has concluded its due diligence and has deposited earnest money of $2.4 million. The sale is expected to close during the fourth quarter of 2011, subject to the buyer’s successful modification and assumption of the existing mortgage loan and customary closing conditions. The Company recognized a non-cash impairment loss of $18.8 million during the third quarter of 2011. The impairment loss was classified in loss from discontinued operations in the historical pro forma consolidated statements of operations for the nine months ended September 30, 2011.
The pro forma adjustments to the Consolidated Balance Sheet as of September 30, 2011, set forth the effects of Parkway’s disposition of 111 East Wacker as if it had been consummated on September 30, 2011. The pro forma adjustments consist of the following (in thousands):
| Office and parking properties | $ | 134,963 |
| Other assets | | 31,983 |
| Cash | | 2,879 |
| Total assets | $ | 169,825 |
| | | |
| Liabilities held for sale | $ | 165,340 |
| Total liabilities | $ | 165,340 |
| | | |
A total of $4.3 million will be used to pay down the outstanding balance on the Company's credit facility which consists of $2.9 million of existing cash along with proceeds that will be received at closing.
2. On January 21, 2011, Parkway Properties, Inc. (the “Company” or “Parkway”) and Parkway Properties Office Fund II, LP (“Fund II”) purchased the office and retail portion of 3344 Peachtree located in the Buckhead submarket of Atlanta for $167.3 million. 3344 Peachtree contains approximately 484,000 square feet of office and retail space and includes an adjacent eleven-story parking structure. Fund II’s investment in the property totaled $160.0 million, with Parkway funding the remaining $7.3 million. Due to Parkway’s additional investment, the Company’s effective ownership in the property is 33.03%. An additional $2.6 million is expected to be spent for closing costs, building improvements, leasing costs and tenant improvements during the first two years of ownership. Simultaneous with closing, Fund II assumed the $89.6 million existing non-recourse first mortgage loan, which matures on October 1, 2017, and carries a fixed interest rate of 4.8%. In accordance with generally accepted accounting principles (“GAAP”), the mortgage loan was recorded at $87.2 million to reflect the value of the instrument based on a market interest rate of 5.25% on the date of purchase. Parkway's equity contribution in the investment is $25.5 million and was initially funded through availability under the Company's credit facility.
On April 8, 2011, Fund II purchased Corporate Center Four at International Plaza (“Corporate Center Four”) located in the Westshore submarket of Tampa, Florida for $45.0 million. Corporate Center Four contains approximately 250,000 square feet of office space. An additional $5.6 million is expected to be spent for closing costs, building improvements, leasing costs and tenant improvements during the first two years of ownership. In connection with the purchase, Fund II placed a $22.5 million non-recourse first mortgage loan secured by the property with an initial thirty-six month interest only period and a maturity date of April 8, 2019. The mortgage loan has a stated rate of LIBOR plus 200 basis points. In connection with the mortgage loan, Fund II entered into an interest rate swap agreement that fixes the interest rate at 5.37% through October 8, 2018. Parkway’s equity contribution of $6.8 million was funded through availability under the Company’s credit facility. Parkway’s effective ownership interest in this asset is 30%.
On May 18, 2011, Fund II and an institutional investor purchased Two Liberty Place for $180.4 million. Two Liberty Place is a 941,000 square foot office property located in the central business district of Philadelphia, Pennsylvania. An additional $4.7 million is expected to be spent on closing costs, building improvements, leasing costs and tenant improvements during the first two years of ownership. In connection with the purchase, Fund II placed a $90.2 million non-recourse first mortgage loan on the property with an initial 48-month interest only period and a maturity date of June 10, 2019. The mortgage has a stated interest rate of 5.33%. Parkway’s equity contribution of $20.4 was funded through availability under the Company’s credit facility. Parkway’s effective ownership in the property is 19%.
The pro forma adjustments to the Consolidated Statement of Operations for the year ended December 31, 2010 and nine months ended September 30, 2011 set forth the effects of Parkway’s purchase of the Properties as if the purchase had been consummated on January 1, 2010.
The pro forma adjustments are detailed below for the year ended December 31, 2010 and nine months ended September 30, 2011.
The effect of the 2011 dispositions has already been reflected in the historical pro forma financial statements for the year ended December 31, 2010, except for interest savings on the Company’s credit facility. The effect of the purchase of the Properties on income and expenses from real estate properties is as follows:
(a) For the year ended December 31, 2010 (in thousands):
| | 3344 Peachtree | Corporate Center Four | Two Liberty Place | Sold Properties | Pro Forma Adjustments |
| Income from office and parking properties | $ | 15,518 | $ | 3,612 | $ | 26,107 | $ | - | $ | 45,237 |
| | | | | | |
| Property operating expenses | 4,430 | 1,856 | 10,842 | - | 17,128 |
| Depreciation and amortization | 7,622 | 1,995 | 10,391 | - | 20,008 |
| Total expenses | 12,052 | 3,851 | 21,233 | - | 37,136 |
| Operating income (loss) | 3,466 | (239) | | 4,874 | | | 8,101 |
| Interest expense | (5,660) | (1,592) | | (5,736) | 5,159 | | (7,829) |
| Income (loss) from continuing operations | (2,194) | (1,831) | (862) | 5,159 | 272 |
| Net loss attributable to noncontrolling interests | 1,383 | 1,266 | 638 | - | 3,287 |
| Loss from continuing operations attributable to common stockholders | $ | (811) | $ | (565) | $ | (224) | $ | 5,159 | $ | 3,559 |
Depreciation and amortization is provided by the straight-line method over the estimated useful life of the asset as defined below:
| | Estimated Useful Life |
| Building and garage | 40 years |
| Building improvements | 15 years |
| Tenant improvements | Remaining term of lease |
| Lease in place value | Remaining term of lease including expected renewals |
| Lease costs | Remaining term of lease |
| Above and below market leases | Remaining term of lease |
(b) The effect of the 2011 dispositions has already been reflected in the historical pro forma financial statements for the nine months ended September 30, 2011, except for interest savings on the Company’s credit facility. For the nine months ended September 30, 2011 (in thousands):
| | 3344 Peachtree | Corporate Center Four | Two Liberty Place | Sold Properties | Pro Forma Adjustments |
| Income from office and parking properties | $ | 1,029 | $ | 1,370 | $ | 10,110 | $ | - | $ | 12,509 |
| | | | | | |
| Property operating expenses | 281 | 539 | 4,060 | - | 4,880 |
| Depreciation and amortization | 357 | 538 | 3,928 | - | 4,823 |
| Acquisition costs | (228) | (92) | (165) | - | (485) |
| Total expenses | 410 | 985 | 7,823 | - | 9,218 |
| Operating income | 619 | 385 | 2,287 | - | 3,291 |
| Interest expense | (335) | (446) | (2,216) | 2,439 | (558) |
| Income (loss) from continuing operations | 284 | (61) | 71 | 2,439 | 2,733 |
| Net (income) loss attributable to noncontrolling interests | (204) | 22 | (30) | - | (212) |
| Income (loss) from continuing operations attributable to common stockholders | $ | 80 | $ | (39) | $ | 41 | $ | 2,439 | $ | 2,521 |
Depreciation is provided by the straight-line method over the estimated useful life of the asset as defined in (a) above.
The adjustment for acquisition costs represents nonrecurring direct and incremental costs that have been reflected in the Parkway Historical Statement of Operations.
(c) Pro forma effect of interest expense on real estate owned reflects interest on non-recourse debt placed upon purchase as if in place January 1, 2010 and is detailed below (in thousands).
| | | | Nine |
| Property/Placement | | Year Ended | Months Ended |
| Date/Rate | Debt | 12/31/10 | 09/30/11 |
| Debt assumed in 3344 Peachtree | | | |
| 01/11 5.25% | $ | 87,225 | $ | 4,579 | $ | 258 |
| Debt placed on Corporate Center Four | | | | | | |
| 04/11 5.37% | $ | 22,500 | $ | 1,208 | $ | 326 |
| Debt placed on Two Liberty Place | | | | | | |
| 05/11 5.33% | $ | 90,200 | $ | 4,804 | $ | 1,828 |
The pro forma effect of the placement of non-recourse debt on loan cost amortization was $68,000 for the year ended December 31, 2010 and $30,000 for the nine months ended September 30, 2011.
The pro forma effect of the acquisitions and dispositions on interest savings related to a net reduction on the Company’s notes payable to banks was $2,830,000 for the year ended December 31, 2010 and $1,884,000 for the nine months ended September 30, 2011.
3. No additional income tax expenses were provided because of the Company's net operating loss carryover and status as a REIT.
4. Diluted net loss from continuing operations per share as reported for the year ended December 31, 2010 and nine months ended September 30, 2011 was $0.82 and $2.67, respectively, based on diluted weighted average shares outstanding of 21,421,000 and 21,489,000, respectively.
Pro forma diluted net loss from continuing operations per share as reported for the year ended December 31, 2010 and the nine months ended September 30, 2011 was $0.65 and $2.55 respectively, based on diluted weighted average shares outstanding of 21,421,000 and 21,489,000, respectively.
