UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________
FORM 8-K/A
Amendment No. 1
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): October 31, 2012
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.) |
Bank of America Center, Suite 2400, 390 North Orange Avenue, Orlando, FL 32801
(Address of Principal Executive Offices, including zip code)
(407) 650-0593
(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)) |
Explanatory Note
On December 31, 2012, Parkway 550 South Caldwell, LLC (the "Buyer"), an affiliate of Parkway Properties, Inc. (the "Company" or "Parkway"), completed the acquisition of NASCAR Plaza, a 390,000 square foot office tower located in the central business district of Charlotte, North Carolina for $99.9 million. In connection with the acquisition, the Company assumed the existing first mortgage secured by the property with a stated value of $42.6 million, a fixed interest rate of 4.7% and a maturity date of March 30, 2016.
On November 1, 2012, the Company filed a Current Report on Form 8-K (the "Initial Report") with regard to the execution of the purchase and sale agreement for the acquisition of the NASCAR Plaza.
This amendment is being filed for the sole purpose of filing the financial statements prepared pursuant to Rule 3-14 of Regulation S-X and pro forma financial information required by Item 9.01 of Form 8-K, and should be read in conjunction with the Initial Report.
After reasonable inquiry, the Company is not aware of any other material factors relating to this property 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 Report on Form 10-K for the fiscal year ended December 31, 2011 and Form 10-Q for the quarter ended September, 30, 2012 under Item 1A Risk Factors and in the other reports filed by the Company with the Securities and Exchange Commission.
Item 9.01 Financial Statements and Exhibits.
| (a) Financial Statements of Selected Acquisition Properties. | |
| |
| The following audited financial statement of NASCAR Plaza for the year ended December 31, 2011 is attached hereto. | |
| Page |
| Independent Auditors' Report | F-1 |
| Statements of Revenues and Certain Expenses | F-2 |
| Notes to Statements of Revenues and Certain Expenses | F-3 |
| |
| |
| |
| |
| |
(b) Pro forma financial information. | |
| The following unaudited Pro Forma Consolidated Financial Statements of Parkway for the year ended December 31, 2011 and as of and for the nine months ended September 30, 2012 are attached hereto: | |
| |
| Pro Forma Consolidated Financial Statements (Unaudited) | F-4 |
Pro Forma Consolidated Balance Sheet (Unaudited) – As of September 30, 2012 Pro Forma Consolidated Statements of Operations and Comprehensive Income | F-5 |
| (Unaudited) – for the Year Ended December 31, 2011 | F-6 |
| Pro Forma Consolidated Statements of Operations and Comprehensive Income | |
| (Unaudited) – for the Nine Months Ended September 30, 2012 | F-7 |
| Notes to Pro Forma Consolidated Statements of Operations and Comprehensive Income (Unaudited) | F-8 |
As this property is directly owned by an entity that has 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. | |
| (d) Exhibits | |
| |
| 23.1 Consent of Ernst & Young LLP | |
| |
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.
Date: February 6, 2013
PARKWAY PROPERTIES, INC.
BY: /s/ Jeremy R. Dorsett
Jeremy R. Dorsett
Executive Vice President and
General Counsel
Independent Auditors' Report
The Board of Directors
Parkway Properties, Inc.:
We have audited the accompanying statement of revenues and certain expenses of NASCAR Plaza (the Property) for the year ended December 31, 2011. This statement of revenues and certain expenses is the responsibility of the Property's management. Our responsibility is to express an opinion on this financial statement based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of revenues and certain expenses is free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement. We believe that our audit provides a reasonable basis for our opinion.
The accompanying statement of revenues and certain expenses of the Property was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission, as described in Note 2, for inclusion in a Form 8-K/A of Parkway Properties, Inc. and is not intended to be a complete presentation of the Property's revenues and expenses.
In our opinion, the statement of revenues and certain expenses referred to above presents fairly, in all material respects, the revenues and certain expenses described in Note 2 of the Property for the year ended December 31, 2011 in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Houston, Texas
February 6, 2013
NASCAR Plaza
Statements of Revenues
and Certain Expenses
(in thousands)
| | Nine Months Ended September 30, 2012 | | | Year Ended December 31, 2011 | |
| Revenues: | | (unaudited) | | | | |
| Rental property revenue | | $ | 4,474 | | | $ | 5,760 | |
| Other income | | | 44 | | | | 53 | |
| | | 4,518 | | | | 5,813 | |
| | | | | | | | |
| Certain expenses: | | | | | | | | |
| Operating expenses | | | 918 | | | | 1,037 | |
| Real estate taxes | | | 581 | | | | 789 | |
| Personnel | | | 222 | | | | 298 | |
| Utilities | | | 301 | | | | 334 | |
| Interest expense | | | 1,099 | | | | 1,466 | |
| | | 3,121 | | | | 3,924 | |
| Excess of revenues over certain expenses | | $ | 1,397 | | | | 1,889 | |
See accompanying notes to statements of revenues and certain expenses.
NASCAR Plaza
Notes to Statements of Revenues
and Certain Expenses
1. Organization and Significant Accounting Policies
Description of Property
On December 31, 2012, Parkway 550 South Caldwell, LLC (the "Buyer"), an affiliate of Parkway Properties, Inc. (the "Company" or "Parkway"), completed the acquisition of NASCAR Plaza, a 390,000 square foot (unaudited) office tower located in the central business district of Charlotte, North Carolina for $99.9 million. In connection with the acquisition, the Company assumed the existing first mortgage secured by the property with a stated value of $42.6 million, with a fixed interest rate of 4.7% and a maturity date of March 30, 2016.
Management's Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of revenues and certain expenses during the reporting period. Actual results could differ from those estimates.
Rental Revenue
Minimum rents from leases are recognized as revenue ratably over the term of each lease using the straight-line method. Tenant reimbursements are recognized as revenue as the applicable services are rendered or expenses incurred.
The future minimum rents for the Property's non-cancelable operating leases at December 31, 2011 are as follows (in thousands):
Year | | Amount | |
| 2012 | | $ | 4,541 | |
| 2013 | | | 8,395 | |
| 2014 | | | 8,944 | |
| 2015 | | | 8,687 | |
| 2016 | | | 8,694 | |
| Thereafter | | | 54,681 | |
| | $ | 93,942 | |
The above amounts do not include tenant reimbursements for utilities, taxes, insurance and common area maintenance.
During the year ended December 31, 2011, two tenants accounted for approximately 77.9% of the Property's rental property revenue. No other tenant accounted for more than 10% of rental property revenue in 2011.
2. Basis of Accounting
The accompanying statement of revenues and certain expenses is presented on the accrual basis. The statement has been prepared for the purpose of complying with Rule 3-14 of Regulation S-X of the Securities and Exchange Commission for real estate properties acquired. Accordingly, the statement excludes certain expenses not comparable to the future operations of the Property such as depreciation and amortization, management fees, income taxes and payroll and other costs not directly related to the proposed future operations of the Property. Management is not aware of any material factors relating to the Property that would cause the reported financial information not to be necessarily indicative of future operating results.
The accompanying unaudited interim statement of revenues and certain expenses was prepared on the same basis as the statement of revenues and certain expenses for the year ended December 31, 2011. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of the information for this interim period have been made. The excess of revenues over certain expenses for such interim period is not necessarily indicative of the excess of revenue over certain expenses for the full year.
3. Mortgage Note Payable
In connection with the acquisition, the Company assumed the existing first mortgage secured by the property with a stated value of $42.6 million, with a fixed interest rate of 4.7% and a maturity date of March 30, 2016. As the Company assumed the existing mortgage secured by the property, interest expense associated with the existing mortgage is presented within certain expenses at an effective rate of 3.4% as it is comparable to the future operations of the Property.
4. Subsequent Events
The acquisition of the Property was completed on December 31, 2012. Management has evaluated subsequent events related to the Property for recognition of disclosure through February 6, 2013, which is the date the statement of revenues and certain expenses was available to be issued and determined that there are no other items to disclose.
PARKWAY PROPERTIES, INC.
Pro Forma Consolidated Statements of Operations and Comprehensive Income
(Unaudited)
The following pro forma consolidated balance sheet (unaudited) as of September 30, 2012 and pro forma consolidated statements of operations and comprehensive income (unaudited) of the Company for the year ended December 31, 2011 and nine months ended September 30, 2012 give effect to the purchase of NASCAR Plaza 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 NASCAR Plaza as if the purchase had been consummated on September 30, 2012.
The pro forma consolidated statements of operations and comprehensive income set forth the effect of NASCAR Plaza as if the purchase had been consummated on January 1, 2011.
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, 2011.
PARKWAY PROPERTIES, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2012
(Unaudited)
| | Parkway Historical | | | Pro Forma Adjustments (1) | | | Parkway Pro Forma | |
| Assets | | | | | (In thousands) | | | | |
| Real estate related investments: | | | | | | | | | |
| Office and parking properties | | $ | 1,442,759 | | | $ | 87,325 | | | $ | 1,530,084 | |
| Accumulated depreciation | | | (190,154 | ) | | | - | | | | (190,154 | ) |
| | | 1,252,605 | | | | 87,325 | | | | 1,339,930 | |
| | | | | | | | | | | | |
| Land available for sale | | | 250 | | | | - | | | | 250 | |
| | | 1,252,855 | | | | 87,325 | | | | 1,340,180 | |
| | | | | | | | | | | | |
| Rents receivable and other assets | | | 109,874 | | | | 3,491 | | | | 113,365 | |
| Intangible assets, net | | | 114,018 | | | | 13,508 | | | | 127,526 | |
| Assets held for sale | | | 7,031 | | | | - | | | | 7,031 | |
| Management contracts, net | | | 47,010 | | | | - | | | | 47,010 | |
| Cash and cash equivalents$ | | | 53,556 | | | | - | | | | 53,556 | |
| Total assets | | $ | 1,584,344 | | | $ | 104,324 | | | $ | 1,688,668 | |
| | | | | | | | | | | | |
| Liabilities | | | | | | | | | | | | |
| Notes payable to banks | | $ | 125,000 | | | $ | 56,600 | | | $ | 181,600 | |
| Mortgage notes payable | | | 549,429 | | | | 42,977 | | | | 592,406 | |
| Accounts payable and other liabilities | | | 79,868 | | | | 4,747 | | | | 84,615 | |
| Liabilities related to assets held for sale | | | 361 | | | | - | | | | 361 | |
| Total liabilities | | | 754,658 | | | | 104,324 | | | | 858,982 | |
| | | | | | | | | | | | |
| Stockholders' Equity | | | | | | | | | | | | |
| 8.00% Series D Preferred stock, $.001 par value, 5,421,296 shares authorized, issued and outstanding | | | 128,942 | | | | - | | | | 128,942 | |
| Common stock, $.001 par value, 98,578,704 shares authorized, 41,191,461 shares issued and outstanding | | | 41 | | | | - | | | | 41 | |
| Common stock held in trust, at cost, 9,964 shares | | | (186 | ) | | | - | | | | (186 | ) |
| Additional paid-in capital | | | 719,031 | | | | - | | | | 719,031 | |
| Accumulated other comprehensive loss | | | (4,711 | ) | | | - | | | | (4,711 | ) |
| Accumulated deficit | | | (278,923 | ) | | | - | | | | (278,923 | ) |
| Total Parkway Properties, Inc. stockholders' equity | | | 564,194 | | | | - | | | | 564,194 | |
| Noncontrolling interests | | | 265,492 | | | | - | | | | 265,492 | |
| Total equity | | | 829,686 | | | | - | | | | 829,686 | |
| Total liabilities and equity | | $ | 1,584,344 | | | $ | 104,324 | | | $ | 1,688,668 | |
See accompanying notes.
PARKWAY PROPERTIES, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE YEAR ENDED DECEMBER 31, 2011
(Unaudited)
| | Parkway Historical | | | Pro Forma Adjustments (1) | | | Parkway Pro Forma | |
| | (In thousands, except per share data) | |
| Revenues | | | | | | | | | |
| Income from office and parking properties | | $ | 149,000 | | | $ | 5,205 | | | $ | 154,205 | |
| Management company income | | | 16,896 | | | | - | | | | 16,896 | |
| Total revenues | | | 165,896 | | | | 5,205 | | | | 171,101 | |
| | | | | | | | | | | | |
| Expenses and other | | | | | | | | | | | | |
| Property operating expense | | | 61,637 | | | | 2,458 | | | | 64,095 | |
| Depreciation and amortization | | | 57,002 | | | | 4,338 | | | | 61,340 | |
| Impairment loss on real estate | | | 6,420 | | | | - | | | | 6,420 | |
| Impairment loss on mortgage loan receivable | | | 9,235 | | | | - | | | | 9,235 | |
| Change in fair value of contingent consideration | | | (13,000 | ) | | | - | | | | (13,000 | ) |
| Management company expenses | | | 13,337 | | | | - | | | | 13,337 | |
| General and administrative | | | 18,805 | | | | - | | | | 18,805 | |
| Acquisition costs | | | 17,219 | | | | - | | | | 17,219 | |
| Total expenses and other | | | 170,655 | | | | 6,796 | | | | 177,451 | |
| | | | | | | | | | | | |
| Operating loss | | | (4,759 | ) | | | (1,591 | ) | | | (6,350 | ) |
| | | | | | | | | | | | |
| Other income and expenses | | | | | | | | | | | | |
| Interest and other income | | | 938 | | | | - | | | | 938 | |
| Equity in earnings of unconsolidated joint ventures | | | 57 | | | | - | | | | 57 | |
| Gain on sale of real estate | | | 743 | | | | - | | | | 743 | |
| Interest expense | | | (31,612 | ) | | | (3,751 | ) | | | (35,363 | ) |
| | | | | | | | | | | | |
| Loss before income taxes | | | (34,633 | ) | | | (5,342 | ) | | | (39,975 | ) |
| | | | | | | | | | | | |
| Income tax expense | | | (56 | ) | | | - | | | | (56 | ) |
| | | | | | | | | | | | |
| Loss from continuing operations | | | (34,689 | ) | | | (5,342 | ) | | | (40,031 | ) |
| Discontinued operations: | | | | | | | | | | | | |
| Loss from discontinued operations | | | (195,139 | ) | | | - | | | | (195,139 | ) |
| Gain on sale of real estate from discontinued operations | | | 17,825 | | | | - | | | | 17,825 | |
| Total discontinued operations | | | (177,314 | ) | | | - | | | | (177,314 | ) |
| | | | | | | | | | | | |
| Net loss | | | (212,003 | ) | | | (5,342 | ) | | | (217,345 | ) |
| Net loss attributable to noncontrolling interests | | | 85,100 | | | | - | | | | 85,100 | |
| | | | | | | | | | | | |
| Net loss for Parkway Properties, Inc. | | | (126,903 | ) | | | (5,342 | ) | | | (132,245 | ) |
| Change in market value of interest rate swaps | | | (337 | ) | | | (1,709 | ) | | | (2,046 | ) |
| Comprehensive loss | | $ | (127,240 | ) | | $ | (7,051 | ) | | $ | (134,291 | ) |
| | | | | | | | | | | | |
| Net loss for Parkway Properties, Inc. | | $ | (126,903 | ) | | $ | (5,342 | ) | | $ | (132,245 | ) |
| Dividends on preferred stock | | | (10,052 | ) | | | - | | | | (10,052 | ) |
| Net loss attributable to common stockholders | | $ | (136,955 | ) | | $ | (5,342 | ) | | $ | (142,297 | ) |
| | | | | | | | | | | | |
| Net loss per common share attributable to Parkway Properties, Inc.: | | | | | | | | | | | | |
| Basic and Diluted: | | | | | | | | | | | | |
| Loss from continuing operations attributable to Parkway Properties, Inc. | | $ | (1.80 | ) | | | | | | $ | (2.05 | ) |
| Discontinued operations | | | (4.57 | ) | | | | | | | (4.57 | ) |
| Basic and diluted net loss attributable to Parkway Properties, Inc. | | $ | (6.37 | ) | | | | | | $ | (6.62 | ) |
| | | | | | | | | | | | |
| Weighted average shares outstanding: | | | | | | | | | | | | |
| Basic | | | 21,497 | | | | | | | | 21,497 | |
| Diluted | | | 21,497 | | | | | | | | 21,497 | |
| | | | | | | | | | | | |
| Amounts attributable to Parkway Properties, Inc. common stockholders: | | | | | | | | | | | | |
Loss from continuing operations attributable to Parkway Properties, Inc. | | $ | (38,710 | ) | | | | | | $ | (44,052 | ) |
Discontinued operations | | | (98,245 | ) | | | | | | | (98,245 | ) |
| Net loss attributable to common stockholders | | $ | (136,955 | ) | | | | | | $ | (142,297 | ) |
See accompanying notes.
PARKWAY PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2012
(Unaudited)
| | Parkway Historical | | | Pro Forma Adjustments (1) | | | Parkway Pro Forma | |
| | (In thousands, except per share data) | |
| Revenues | | | | | | | | | |
| Income from office and parking properties | | $ | 149,995 | | | $ | 4,062 | | | $ | 154,057 | |
| Management company income | | | 14,996 | | | | - | | | | 14,996 | |
| Total revenues | | | 164,991 | | | | 4,062 | | | | 169,053 | |
| | | | | | | | | | | | |
| Expenses and other | | | | | | | | | | | | |
| Property operating expense | | | 58,803 | | | | 2,022 | | | | 60,825 | |
| Depreciation and amortization | | | 59,046 | | | | 3,254 | | | | 62,300 | |
| Change in fair value of contingent consideration | | | 216 | | | | - | | | | 216 | |
| Management company expenses | | | 12,966 | | | | - | | | | 12,966 | |
| General and administrative | | | 11,266 | | | | - | | | | 11,266 | |
| Acquisition costs | | | 1,491 | | | | - | | | | 1,491 | |
| Total expenses and other | | | 143,788 | | | | 5,276 | | | | 149,064 | |
| | | | | | | | | | | | |
| Operating income | | | 21,203 | | | | (1,214 | ) | | | 19,989 | |
| | | | | | | | | | | | |
| Other income and expenses | | | | | | | | | | | | |
| Interest and other income | | | 205 | | | | - | | | | 205 | |
| Gain on sale of real estate | | | 48 | | | | - | | | | 48 | |
| Recovery of losses on mortgage loan receivable | | | 500 | | | | - | | | | 500 | |
| Interest expense | | | (26,301 | ) | | | (2,159 | ) | | | (28,460 | ) |
| | | | | | | | | | | | |
| Loss before income taxes | | | (4,345 | ) | | | (3,373 | ) | | | (7,718 | ) |
| | | | | | | | | | | | |
| Income tax expense | | | (143 | ) | | | - | | | | (143 | ) |
| | | | | | | | | | | | |
| Loss from continuing operations | | | (4,488 | ) | | | (3,373 | ) | | | (7,861 | ) |
| Discontinued operations: | | | | | | | | | | | | |
| Income from discontinued operations | | | 2,538 | | | | - | | | | 2,538 | |
| Gain on sale of real estate from discontinued operations | | | 9,767 | | | | - | | | | 9,767 | |
| Total discontinued operations | | | 12,305 | | | | - | | | | 12,305 | |
| | | | | | | | | | | | |
| Net Income | | | 7,817 | | | | (3,373 | ) | | | 4,444 | |
| Net loss attributable to noncontrolling interest – real estate partnerships | | | 1,789 | | | | - | | | | 1,789 | |
| Net income attributable to noncontrolling interests – unit holders | | | 1 | | | | - | | | | 1 | |
| | | | | | | | | | | | |
| Net income for Parkway Properties, Inc. | | | 9,607 | | | | (3,373 | ) | | | 6,234 | |
| Change in market value of interest rate swaps | | | (1,371 | ) | | | (200 | ) | | | (1,571 | ) |
| Comprehensive income | | $ | 8,236 | | | $ | (3,573 | ) | | $ | 4,663 | |
| | | | | | | | | | | | |
| Net income for Parkway Properties, Inc. | | $ | 9,607 | | | $ | (3,373 | ) | | $ | 6,264 | |
| Dividends on preferred stock | | | (8,132 | ) | | | - | | | | (8,132 | ) |
| Dividends on convertible preferred stock | | | (1,011 | ) | | | - | | | | (1,011 | ) |
| Net income (loss) attributable to common stockholders | | $ | 464 | | | $ | (3,373 | ) | | $ | (2,909 | ) |
| | | | | | | | | | | | |
| Net income (loss) per common share attributable to Parkway Properties, Inc.: | | | | | | | | | | | | |
| Basic and Diluted: | | | | | | | | | | | | |
| Loss from continuing operations attributable to Parkway Properties, Inc. | | $ | (0.28 | ) | | | | | | $ | (0.41 | ) |
| Discontinued operations | | | 0.30 | | | | | | | | 0.30 | |
| Basic and diluted net income (loss) attributable to Parkway Properties, Inc. | | $ | 0.02 | | | | | | | $ | (0.11 | ) |
| | | | | | | | | | | | |
| Weighted average shares outstanding: | | | | | | | | | | | | |
| Basic | | | 27,199 | | | | | | | | 27,199 | |
| Diluted | | | 27,199 | | | | | | | | 27,199 | |
| | | | | | | | | | | | |
| Amounts attributable to Parkway Properties, Inc. common stockholders: | | | | | | | | | | | | |
Loss from continuing operations attributable to Parkway Properties, Inc. | | $ | (7,622 | ) | | | | | | $ | (10,995 | ) |
Discontinued operations | | | 8,086 | | | | | | | | 8,086 | |
| Net income (loss) attributable to common stockholders | | $ | 464 | | | | | | | $ | (2,909 | ) |
See accompanying notes.
PARKWAY PROPERTIES, INC.
Notes to Pro Forma Consolidated Financial Statements
(Unaudited)
1. On December 31, 2012, Parkway 550 South Caldwell, LLC (the "Buyer"), an affiliate of Parkway Properties, Inc. (the "Company" or "Parkway"), completed the acquisition of NASCAR Plaza, a 390,000 square foot (unaudited) office tower located in the central business district of Charlotte, North Carolina for $99.9 million. In connection with the acquisition, the Company assumed the existing first mortgage secured by the property with a stated value of $42.6 million, a fixed interest rate of 4.7% and a maturity date of March 30, 2016. The Company acquired NASCAR Plaza from 550 South Caldwell Investors, LLC (the "Seller"), a Delaware limited liability company, and funded the acquisition by the assumption of the existing first mortgage and with borrowings under its Amended and Restated Credit Agreement (the "Credit Facility"). The Seller is not affiliated with the Company or its advisors.
The pro forma adjustments to the Consolidated Balance Sheet as of September 30, 2012 set forth the effects of Parkway's purchase of NASCAR Plaza as if the purchase had been consummated on September 30, 2012.
The pro forma effect of the allocation of purchase price to assets acquired and liabilities assumed with the purchase of NASCAR Plaza is as follows (in thousands):
| | Pro Forma Adjustments | |
| Real estate investments: | | | |
| Building | | $ | 76,771 | |
| Site improvements | | | 20 | |
| Tenant improvements | | | 10,534 | |
| Total real estate investments acquired | | | 87,325 | |
| Lease costs | | | 3,329 | |
| Intangible assets: | | | | |
| Above-market leases | | | 7,558 | |
| Lease in place value | | | 5,950 | |
| Total assets acquired | | $ | 104,162 | |
| | | | |
| Liabilities assumed: | | | | |
| Below market leases | | $ | 2,663 | |
| Fair value of interest rate swap | | | 1,787 | |
| Mortgage notes payable | | | 42,977 | |
| Total liabilities assumed | | | 47,427 | |
| | | | |
| Pro forma effect of net assets acquired | | $ | 56,735 | |
The pro forma effect of additional amounts paid by Parkway or received from the seller in connection with the purchase and related financing of these office properties are as follows (in thousands):
| | Pro Forma Adjustments | |
| Rents receivable and other assets: | | | |
| Escrows and other deposits | | $ | 138 | |
| Capitalized loan costs, net | | | 24 | |
| | $ | 162 | |
| Accounts payable and other liabilities: | | | | |
| Prepaid rent | | $ | 258 | |
| Security deposits payable | | | 39 | |
| | $ | 297 | |
See note 2(c) for discussion of notes payable to banks and mortgage notes payable.
2. The pro forma adjustments to the Consolidated Statements of Operations and Comprehensive Income for the year ended December 31, 2011 and nine months ended September 30, 2012 set forth the effect of Parkway's purchase of NASCAR Plaza as if the purchase had been consummated on January 1, 2011.
The pro forma adjustments are detailed below for the year ended December 31, 2011 and nine months ended September 30, 2012.
The effect of the purchase of NASCAR Plaza on income and expenses from real estate properties is as follows:
(a) For the year ended December 31, 2011 (in thousands):
| | Pro Forma Adjustments | |
| Rental property revenue | | $ | 5,760 | |
| Other income | | | 53 | |
| Above market lease value amortization | | | (608 | ) |
| Income from office and parking properties | | | 5,205 | |
| | | | |
| Property operating expenses | | | 2,458 | |
| Depreciation and amortization | | | 4,338 | |
| Total expenses | | | 6,796 | |
| Operating loss | | | (1,591 | ) |
| Interest expense | | | (3,751 | ) |
| Loss from continuing operations | | | (5,342 | ) |
| Net loss attributable to noncontrolling interests | | | - | |
| Loss from continuing operations attributable to common stockholders | | $ | (5,342 | ) |
F-9
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) For the nine months ended September 30, 2012 (in thousands):
| | Pro Forma Adjustments | |
| Rental property revenue | | $ | 4,474 | |
| Other income | | | 44 | |
| Above market lease value amortization | | | (456 | ) |
| Income from office and parking properties | | | 4,062 | |
| | | | |
| Property operating expenses | | | 2,022 | |
| Depreciation and amortization | | | 3,254 | |
| Total expenses | | | 5,276 | |
| Operating loss | | | (1,214 | ) |
| Interest expense | | | (2,159 | ) |
| Loss from continuing operations | | | (3,373 | ) |
| Net loss attributable to noncontrolling interests | | | - | |
| Loss from continuing operations attributable to common stockholders | | $ | (3,373 | ) |
Depreciation is provided by the straight-line method over the estimated useful life of the asset as defined in (a) above.
(c) The pro forma effect of the NASCAR Plaza acquisition on interest expense related to additional borrowings on the Company's notes payable to banks ($56.6 million at September 30, 2012 with an effective interest rate of 4.0% for the year ended December 31, 2011 and 2.5% for the nine months ended September 30, 2012) was $2.3 million for the year ended December 31, 2011 and $1.1 million for the nine months ended September 30, 2012. The pro forma effect on interest expense related to mortgage notes payable ($43.0 million at September 30, 2012 with an effective interest rate of 3.4%) was $1.5 million for the year ended December 31, 2011 and $1.1 million for the nine months ended September 30, 2012.
2. No additional income tax expenses were provided because of the Company's net operating loss carryover and status as a REIT.
