10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q/A

(Amendment No. 2)

R	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For Quarterly Period Ended September 30, 2011
	or
£	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the Transition Period from                                                        to

Commission File Number 1-11533

Parkway Properties, Inc.

(Exact name of registrant as specified in its charter)

Maryland	74-2123597
(State or other jurisdiction of	(IRS Employer Identification No.)
incorporation or organization)

One Jackson Place Suite 1000

188 East Capitol Street

P.O. Box 24647

Jackson, Mississippi 39225-4647

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code (601) 948-4091

Registrant’s web site www.pky.com

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  R No £

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes R No £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer £	Accelerated filer R	Non-accelerated filer £	Smaller reporting company £
		(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes £ No R

21,996,036 shares of Common Stock, $.001 par value, were outstanding at October 31, 2011.

1

EXPLANATORY NOTE

The sole purpose of this Amendment No. 2 to Parkway Properties, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 (the “Form 10-Q”) is to furnish the interactive data files as required by Rule 405 of Regulation S-T.  Exhibit 101 to this Amendment No. 2 provides the following materials from the Form 10-Q, formatted in XBRL (eXtensible Business Reporting Language): (i) consolidated balance sheets, (ii) consolidated statements of operations, (iii) consolidated statement of changes in equity, (iv) consolidated statements of cash flows, and (v) the notes to the consolidated financial statements, tagged as block text.

Users of this data are advised that pursuant to Rule 406T of Regulation S-T these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for the purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

No other changes have been made to the Form 10-Q other than those described above.  This Amendment No. 2 does not reflect subsequent events occurring after the original filing date of the Form 10-Q or modify or update in any way disclosures made in the Form 10-Q.

SIGNATURES

	PARKWAY PROPERTIES, INC.
Date:  November 9, 2011	By:	/s/ Mandy M. Pope
		Mandy M. Pope
		Executive Vice President and Chief Accounting Officer

2

EXHIBIT INDEX

10.1* Second Amendment to Credit Agreement by and among Parkway Properties LP, a Delaware limited partnership; Parkway Properties, Inc., a Maryland corporation; Wells Fargo Securities, LLC and J.P. Morgan Securities LLC, as Joint Lead Arrangers and Joint Bookrunners; Wells Fargo Bank, N.A., as Administration Agent; JPMorgan Chase Bank, N.A., as Syndication Agent; PNC Bank, N.A., Bank of America, N.A., and U.S. Bank, N.A., as Documentation Agents; and the Lenders dated September 20, 2011 (incorporated by reference to Exhibit 99.1 to the Company’s Form 8-K filed September 23, 2011).

31.1* Certification of Chairman of the Board of Directors pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*       Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.3*       Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1* Certification of Chairman of the Board of Directors pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*       Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.3*       Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101** The following materials from Parkway Properties, Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, formatted in XBRL (eXtensible Business Reporting Language): (i) consolidated balance sheets, (ii) consolidated statements of operations (iii) consolidated statement of changes in equity, (iv) consolidated statements of cash flows, and (v) the notes to consolidated financial statements.

* Previously filed

** Furnished herewith

3

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CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) (USD $)	Sep. 30, 2011	Dec. 31, 2010
Parkway Properties, Inc. stockholders' equity
Series D Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Series D Preferred stock, shares authorized (in shares)	5,421,296	4,374,896
Series D Preferred stock, shares issued (in shares)	5,421,296	4,374,896
Series D Preferred stock, shares outstanding (in shares)	5,421,296	4,374,896
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	64,578,704	65,625,104
Common stock, shares issued (in shares)	22,118,817	21,923,610
Common stock, shares outstanding (in shares)	22,118,817	21,923,610
Common stock held in trust, shares (in shares)	12,070	58,134

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CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $) In Thousands, except Share data	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Revenues
Income from office and parking properties	$ 63,594	$ 45,095	$ 170,244	$ 137,392
Management company income	6,120	585	9,990	1,331
Total revenues	69,714	45,680	180,234	138,723
Expenses and other
Property operating expense	30,639	21,612	79,156	65,478
Depreciation and amortization	26,087	14,825	64,519	46,260
Impairment loss on real estate	107,240	0	107,240	0
Impairment loss on mortgage loan receivable	9,235	0	9,235	0
Change in fair value of contingent consideration	(12,000)	0	(12,000)	0
Management company expenses	4,319	858	8,398	2,243
General and administrative	1,902	1,758	5,380	5,361
Acquisition costs	25	0	16,754	0
Total expenses and other	167,447	39,053	278,682	119,342
Operating income (loss)	(97,733)	6,627	(98,448)	19,381
Other income and expenses
Interest and other income	87	354	849	1,105
Equity in earnings of unconsolidated joint ventures	(14)	62	65	253
Gain on involuntary conversion	0	40	0	40
Gain on sale of real estate	743	0	743	0
Interest expense	(13,473)	(10,164)	(37,280)	(30,576)
Loss before income taxes	(110,390)	(3,081)	(134,071)	(9,797)
Income tax (expense) benefit	174	(59)	(50)	(176)
Loss from continuing operations	(110,216)	(3,140)	(134,121)	(9,973)
Discontinued operations:
Income (loss) from discontinued operations	(22,633)	(1,048)	(26,410)	1,444
Gain on sale of real estate from discontinued operations	2,275	0	6,567	8,518
Total discontinued operations	(20,358)	(1,048)	(19,843)	9,962
Net loss	(130,574)	(4,188)	(153,964)	(11)
Net loss attributable to noncontrolling interest - real estate partnerships	77,546	2,356	84,112	7,581
Net income (loss) for Parkway Properties, Inc.	(53,028)	(1,832)	(69,852)	7,570
Dividends on preferred stock	(2,710)	(1,737)	(7,341)	(4,137)
Net income (loss) attributable to common stockholders	$ (55,738)	$ (3,569)	$ (77,193)	$ 3,433
Basic:
Loss from continuing operations attributable to Parkway Properties, Inc.	$ (1.64)	$ (0.12)	$ (2.67)	$ (0.30)
Discontinued operations (in dollars per share)	$ (0.95)	$ (0.05)	$ (0.92)	$ 0.46
Basic net income (loss) attributable to Parkway Properties, Inc.	$ (2.59)	$ (0.17)	$ (3.59)	$ 0.16
Diluted:
Loss from continuing operations attributable to Parkway Properties, Inc.	$ (1.64)	$ (0.12)	$ (2.67)	$ (0.30)
Discontinued operations	$ (0.95)	$ (0.05)	$ (0.92)	$ 0.46
Diluted net income (loss) attributable to Parkway Properties, Inc.	$ (2.59)	$ (0.17)	$ (3.59)	$ 0.16
Weighted average shares outstanding:
Basic	21,502,000	21,438,000	21,489,000	21,413,000
Diluted	21,502,000	21,438,000	21,489,000	21,413,000

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Document And Entity Information (USD $)	9 Months Ended
	Sep. 30, 2011	Oct. 31, 2011	Jun. 30, 2010
Entity Registrant Name	Parkway Properties Inc
Entity Central Index Key	0000729237
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Public Float			$ 301,800,000
Entity Common Stock, Shares Outstanding		21,996,036
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q3
Document Type	10-Q
Amendment Flag	true
Document Period End Date	Sep. 30, 2011
Amendment Description	Furnish XBRL materials

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Discontinued Operations

9 Months Ended

Sep. 30, 2011

Discontinued Operations [Abstract]

Discontinued Operations

Note E - Discontinued Operations

All current and prior period income from the following office property dispositions and property held for sale is included in discontinued operations for the three months and nine months ended September 30, 2011 and 2010 (in thousands).

Office Property	Location	Square Feet	Date of Sale		Net Sales Price		Net Book Value of Real Estate		Gain on Sale
One Park Ten	Houston, TX	163	04/15/2010	$	14,924	$	6,406	$	8,518
2010 Dispositions		163		$	14,924	$	6,406	$	8,518
233 North Michigan	Chicago, IL	1,070	05/11/2011	$	156,546	$	152,254	$	4,292
Greenbrier I & II	Hampton Roads, VA	172	07/19/2011		16,275		15,070		1,205
Glen Forest	Richmond, VA	81	08/16/2011		8,950		7,880		1,070
Tower at 1301 Gervais	Columbia, SC	298	09/08/2011		18,421		18,421		-
2011 Dispositions		1,621		$	200,192	$	193,625	$	6,567
Property Held For Sale
111 East Wacker	Chicago, IL	1,013	-	$	-	$	-	$	-

On May 11, 2011, the Company sold 233 North Michigan, a 1.1 million square foot office building in Chicago, Illinois, for gross proceeds of $162.2 million and recorded a gain on the sale of $4.3 million.  Accordingly, income from 233 North Michigan has been classified as discontinued operations for all current and prior periods presented.

On July 19, 2011, Parkway sold Greenbrier  Towers I & II for gross proceeds of $16.7 million and recorded a gain on the sale of $1.2 million.  The two office buildings total 172,000 square feet and are located in Hampton Roads, Virginia.  Accordingly, income from Greenbrier Towers I & II has been classified as discontinued operations for all current and prior periods presented.

On August 16, 2011, Parkway sold Glen Forest, a 81,000 square foot office building in Richmond, Virginia, for gross proceeds of $9.3 million and recorded a gain on the sale of $1.1 million.  Accordingly, income from Glen Forest has been classified as discontinued operations for all current and prior periods presented.

On September 8, 2011, Parkway sold Tower at 1301 Gervais, a 298,000 square foot office building in Columbia, South Carolina, for gross proceeds of $19.5 million and recorded an impairment loss of $1.0 million.  Accordingly, income from Tower at 1301 Gervais has been classified as discontinued operations for all current and prior periods presented. A non-cash impairment loss totaling $2.7 million was recognized during the nine months ended September 30, 2011, with respect to this property.

In the third quarter of 2011, Parkway classified 111 East Wacker, a 1.0 million square foot office building in Chicago, Illinois, as held for sale.  Accordingly, income from 111 East Wacker has been classified as discontinued operations for all current and prior periods presented.  In accordance with GAAP, a non-cash  impairment loss of $18.8 million was recognized during the third quarter of 2011, with respect to this property.

The major classes of assets and liabilities classified as held for sale for 111 East Wacker at September 30, 2011 are as follows (in thousands):

	September 30
	2011
Balance Sheet:
Investment property	$	168,613
Accumulated depreciation		(33,650)
Office property held for sale		134,963
Rents receivable and other assets		27,472
Intangible assets, net		4,511
Other assets held for sale		31,983
Total assets held for sale	$	166,946
Mortgage notes payable	$	148,272
Accounts payable and other liabilities		17,068
Total liabilities held for sale	$	165,340

The amount of revenues and expenses for these six office properties reported in discontinued operations for the three months and nine months ended September 30, 2011 and 2010 is as follows (in thousands):

		Three Months Ended September 30				Nine Months Ended September 30
		2011		2010		2011		2010
Income statement:
Revenues
Income from office and parking properties	$	9,042	$	16,472	$	41,218	$	56,217
		9,042		16,472		41,218		56,217
Expenses
Office and parking properties:
Operating expense		3,316		7,715		18,016		24,863
Interest expense		2,389		3,504		8,358		10,792
Depreciation and amortization		6,203		6,301		19,787		19,118
Impairment loss		19,767		-		21,467		-
		31,675		17,520		67,628		54,773
Income (loss) from discontinued operations		(22,633)		(1,048)		(26,410)		1,444
Gain on sale of real estate from discontinued operations		2,275		-		6,567		8,518
Total discontinued operations	$	(20,358)	$	(1,048)	$	(19,843)	$	9,962

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Share-Based and Long-Term Compensation Plans

9 Months Ended

Sep. 30, 2011

Share-Based and Long-Term Compensation Plans [Abstract]

Share-Based and Long-Term Compensation Plans

Note J - Share-Based and Long-Term Compensation Plans

Effective May 1, 2010, the stockholders of the Company approved Parkway's 2010 Omnibus Equity Incentive Plan (the "2010 Equity Plan") that authorized the grant of up to 600,000 equity based awards to employees and directors of the Company. The 2010 Equity Plan replaces the Company's 2003 Equity Incentive Plan and the 2001 Non-Employee Directors Equity Compensation Plan.  At present, it is Parkway's intention to grant restricted shares and/or deferred incentive share units instead of stock options although the 2010 Equity Plan authorizes various forms of incentive awards, including options.  The 2010 Equity Plan has a ten-year term.

Compensation expense, including estimated forfeitures, for service-based awards is recognized over the expected vesting period.  The total compensation expense for the long-term equity incentive awards granted under the FOCUS Plan is based upon the fair value of the shares on the grant date, adjusted for estimated forfeitures.  Time-based restricted shares and deferred incentive share units are valued based on the New York Stock Exchange closing market price of Parkway common shares (NYSE ticker symbol, PKY) as of the date of grant.  The grant date fair value for awards that are subject to market conditions is determined using a simulation pricing model developed to specifically accommodate the unique features of the awards.

Restricted shares and deferred incentive share units are forfeited if an employee leaves the Company before the vesting date except in the case of the employee's death or permanent disability or upon termination following a change of control.  Shares and/or units that are forfeited become available for future grant under the 2010 Equity Plan.

Compensation expense related to restricted shares and deferred incentive share units of $1.4 million and $877,000 was recognized for the nine months ended September 30, 2011 and 2010, respectively.  Total compensation expense related to nonvested awards not yet recognized was $3.7 million at September 30, 2011.  The weighted average period over which the expense is expected to be recognized is approximately 2.3 years.

On January 9, 2011, 25,935 restricted shares vested and were issued to officers of the Company due to the achievement of performance goals established in 2009 by the Board of Directors.

On January 12, 2011, 27,125 restricted shares vested and were issued to officers of the Company.  These shares were granted in January 2007 and vested four years from the grant date.

On January 14, 2011, the Board of Directors approved 55,623 FOCUS Plan long-term equity incentive awards to officers of the Company.  The long-term equity incentive awards are valued at $736,000 which equates to an average price per share of $13.23 and consist of 25,620 time-based awards, 16,883 market condition awards subject to an absolute total return goal, and 13,120 market condition awards subject to a relative total return goal.  These shares are accounted for as equity-classified awards.

On May 12, 2011, the Company's Board of Directors, upon the recommendation of the Compensation Committee, approved the Parkway Properties, Inc. 2011 Employee Inducement Award Plan (the "2011 Inducement Plan").  The 2011 Inducement Plan is substantively similar to the Company's 2010 Omnibus Equity Incentive Plan, approved by the Company's stockholders on May 13, 2010, however the potential awards under the 2011 Inducement Plan are limited to shares of restricted stock and restricted share units to new employees of the Company as a result of the Company's combination with Eola.

 On May 18, 2011, the Board of Directors approved 63,241 FOCUS Plan long-term equity incentive awards to new officers of the Company.  The long-term equity incentive awards are valued at $577,000 which equates to an average price per share of $9.12 and consist of 11,384 time-based awards, 29,091 market condition awards subject to an absolute total return goal, and 22,766 market condition awards subject to a relative total return goal.  The Company also awarded 17,530 deferred incentive share units to approximately 136 other former employees of Eola who became employees of the Company effective May 18, 2011.  These shares are accounted for as equity-classified awards.

Also on May 18, 2011, the Board of Directors approved 68,802 FOCUS Plan long-term equity incentive awards to new officers of the Company effective June 1, 2011.  The long-term equity incentive awards are valued at $628,000 which equates to an average price per share of $9.13 and consist of 12,384 time-based awards, 31,649 market condition awards subject to an absolute total return goal, and 24,769 market condition awards subject to a relative total return goal.  These shares are accounted for as equity-classified awards.

On June 20, 2011, the Board of Directors approved 8,705 FOCUS Plan long-term equity incentive awards to officers of the Company.  The long-term equity incentive awards are valued at $68,000 which equates to an average price per share of $7.81 and consist of 534 time-based awards, 4,584 market condition awards subject to an absolute total return goal, and 3,587 market condition awards subject to a relative total return goal.  These shares are accounted for as equity-classified awards.

On July 1, 2011, 6,345 restricted shares vested and were issued to officers of the Company.  These shares were granted in July 2010 and vested one year from the grant date.

On October 13, 2011, 1,000 restricted shares vested and were issued to officers of the Company.  These shares were granted in 2004 and vested seven years from the grant date.

On October, 14, 2011, 10,152 restricted shares vested and were issued to an executive officer of the Company.  The executive officer resigned from the Company effective October 15, 2011, and forfeited 41,349 shares of restricted stock pursuant to the terms of the 2010 Equity Plan.

The time-based awards granted as part of the FOCUS plan will vest ratably over four years from the date the shares are granted.  The market condition awards granted as part of the FOCUS Plan are contingent on the Company meeting goals for compounded annual total return to stockholders ("TRS") over the three year period beginning July 1, 2010.  The market condition goals are based upon (i) the Company's absolute compounded annual TRS; and (ii) the Company's absolute compounded annual TRS relative to the compounded annual return of the MSCI US REIT ("RMS") Index calculated on a gross basis, as follows:

	Threshold	Target	Maximum
Absolute Return Goal	10%	12%	14%
Relative Return Goal	RMS + 100 bps	RMS + 200 bps	RMS + 300 bps

With respect to the absolute return goal, 15% of the award is earned if the Company achieves threshold performance and a cumulative 60% is earned for target performance.  With respect to the relative return goal, 20% of the award is earned if the Company achieves threshold performance and a cumulative 55% is earned for target performance.  In each case, 100% of the award is earned if the Company achieves maximum performance or better.  To the extent actually earned, the market condition awards will vest 50% on each of July 15, 2013 and 2014.

The FOCUS Plan also includes a long-term cash incentive that was designed to reward significant outperformance over the three year period beginning July 1, 2010.  The performance goals for actual payment under the long-term cash incentive will require the Company to (i) achieve an absolute compounded annual TRS that exceeds 14% AND (ii) achieve an absolute compounded annual TRS that exceeds the compounded annual return of the RMS by at least 500 basis points.  Notwithstanding the above goals, in the event the Company achieves an absolute compounded annual TRS that exceeds 19%, then the Company must achieve an absolute compounded annual TRS that exceeds the compounded annual return of the RMS by at least 600 basis points.

 The aggregate amount of the cash incentive earned would increase with corresponding increases in the absolute compounded annual TRS achieved by the Company.  There will be a cap on the aggregate cash incentive earned in the amount of $7.1 million.  Achievement of the maximum cash incentive would equate to an absolute compounded annual TRS that approximates 23%, provided that the absolute compounded annual TRS exceeds the compounded annual return of the RMS by at least 600 basis points.  The total compensation expense for the long-term cash incentive awards granted under the FOCUS Plan is based upon the fair market value of the award on the grant date and adjusted as necessary each reporting period.  The long-term cash incentive awards are accounted for as a liability-classified award on the Company's consolidated balance sheets.  The grant date  and quarterly fair value estimates for awards that are subject to a market condition are determined using a simulation pricing model developed to specifically accommodate the unique features of the awards.

A summary of the Company's restricted shares and deferred incentive share unit activity for the nine months ended September 30, 2011 is as follows:

		Weighted			Weighted
		Average		Deferred	Average
	Restricted	Grant-Date		Incentive	Grant-Date
	Shares	Fair Value		Share Units	Fair Value
Balance at 12/31/10	479,930	$	12.81	15,640	$	25.71
Issued	196,371	10.23		17,010	16.37
Vested	(59,405)	32.28		(30)	52.36
Forfeited	-	-		(1,875)	25.25
Balance at 09/30/11	616,896	$	10.11	30,745	$	20.54

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Basis of Presentation

9 Months Ended

Sep. 30, 2011

Basis of Presentation [Abstract]

Basis of Presentation

Note A - Basis of Presentation

The consolidated financial statements include the accounts of Parkway Properties, Inc. ("Parkway" or "the Company"), its wholly-owned subsidiaries and joint ventures in which the Company has a controlling interest.  The other partners' equity interests in the consolidated joint ventures are reflected as noncontrolling interests in the consolidated financial statements.  Parkway also consolidates subsidiaries where the entity is a variable interest entity ("VIE") and Parkway is the primary beneficiary and has the power to direct the activities of the VIE and has the obligation to absorb losses or the right to receive the benefits from the VIE that could be potentially significant to the VIE.  At September  30, 2011 and December 31, 2010, Parkway did not have any VIEs that required consolidation.  All significant intercompany transactions and accounts have been eliminated in the accompanying financial statements.

The Company also consolidates certain joint ventures where it exercises significant control over major operating and management decisions, or where the Company is the sole general partner and the limited partners do not possess kick-out rights or other substantive participating rights.  The equity method of accounting is used for those joint ventures that do not meet the criteria for consolidation and where Parkway exercises significant influence but does not control these joint ventures.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and footnotes required by United States generally accepted accounting principles ("GAAP") for complete financial statements.

The accompanying unaudited condensed financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented.  All such adjustments are of a normal recurring nature.  The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Operating results for the nine months ended September 30, 2011 are not necessarily indicative of the results that may be expected for the year ended December 31, 2011.  The financial statements should be read in conjunction with the 2010 annual report and the notes thereto.

The balance sheet at December 31, 2010 has been derived from the audited financial statements as of that date but does not include all of the information and footnotes required by United States GAAP for complete financial statements.

In June 2011, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2011-05, "Comprehensive Income", which modifies reporting requirements for comprehensive income in order to increase the prominence of items reported in other comprehensive income in the financial statements.  ASU 2011-05 requires presentation of either a single continuous statement of comprehensive income or two separate, but consecutive statements in which the first statement presents net income and its components followed by a second statement that presents total other comprehensive income, the components of other comprehensive income, and total comprehensive income.  The requirements of ASU 2011-05 will be effective for interim and annual periods beginning after December 15, 2011.  The Company is currently evaluating the impact of ASU 2011-05 on the Company's consolidated financial statements.

In September 2011, the FASB issued ASU 2011-08, which allows an entity to first assess qualitative factors in determining when a two-step quantitative goodwill impairment test is necessary.  If an entity determines, based on qualitative factors, that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the entity would then be required to calculate the fair value of the reporting unit.  The requirements of ASU 2011-08 will be effective for annual reporting periods beginning after December 15, 2011.  The Company is currently evaluating the impact of ASU 2011-08 on the Company's consolidated financial statements.

The Company has evaluated all subsequent events through the issuance date of the financial statements.

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Management Contracts

9 Months Ended

Sep. 30, 2011

Management Contracts [Abstract]

Management Contracts

Note G - Management Contracts

During the second quarter of 2011, as part of the Company's combination with Eola, Parkway purchased the management contracts associated with Eola's property management business.  At the purchase date, the contracts were valued by an independent appraiser at $52.0 million.  The value of the management contracts is based on the sum of the present value of future cash flows attributable to the management contracts, in addition to the value of tax savings as a result of the amortization of intangible assets.  During the three months and nine months ended September 30, 2011, the Company recorded amortization expense of $867,000 and $1.3 million, respectively, on the management contracts.  Also, in conjunction with the valuation of the management company, the Company recorded $26.2 million of goodwill, a $31.0 million liability related to contingent consideration and a deferred tax liability of $14.8 million.  At September 30, 2011, the allocation of purchase price is still preliminary.

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Litigation

9 Months Ended

Sep. 30, 2011

Litigation [Abstract]

Litigation

Note L - Litigation

As previously disclosed, J. Mitchell Collins, the Company's former Chief Financial Officer, has brought and threatened claims against the Company relating to the termination of his employment with the Company.  There have been no significant changes in the litigation by Mr. Collins since the filing of the Company's Form 10-K for the year ended December 31, 2010, and management continues to believe that the final outcome of the litigation by Mr. Collins will not have a material adverse effect on the Company's financial statements.  In early April 2011, the Company filed an injunction action against Mr. Collins, Parkway Properties, Inc. v. J. Mitchell Collins, Madison County (MS) No. 2011-340-G, seeking a permanent injunction forbidding Mr. Collins to assume an anonymous or false identity to communicate any accusation against the Company.

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Capital and Financing Transactions

9 Months Ended

Sep. 30, 2011

Capital and Financing Transactions [Abstract]

Capital and Financing Transactions

Note H - Capital and Financing Transactions

At September 30, 2011, the Company had a total of $113.9 million outstanding under its credit facilities (collectively, the "Credit Facility") and was in compliance with all loan covenants under each credit facility.  The interest rate on the Company's Credit Facility is based on LIBOR plus 275 to 350 basis points depending on the Company's overall leverage, with the current rate set at LIBOR plus 325 basis points.  Additionally, the Company pays fees on the unused portion of the Company's credit facility ranging between 40 and 50 basis points based upon usage of the aggregate commitment, with the current rate set at 40 basis points.

Mortgage notes payable at September 30, 2011 totaled $979.0 million with an average interest rate of 5.8% and were secured by office properties.

On January 31, 2011, the Company closed a new $190.0 million unsecured revolving credit facility and a new $10.0 million unsecured working capital revolving credit facility.  The new credit facilities have an initial term of three years and replaced the existing unsecured revolving credit facility, term loan and working capital facility that were scheduled to mature on April 27, 2011.  The Company had a $100.0 million interest rate swap associated with the credit facilities that expired March 31, 2011, and locked LIBOR at 3.635%.  Wells Fargo Securities and JP Morgan Securities LLC acted as Joint Lead Arrangers and Joint Book Runners on the unsecured revolving credit facility.  In addition, Wells Fargo Bank, N.A. acted as Administration Agent and JPMorgan Chase Bank, N.A. acted as Syndication Agent.  Other participating lenders include PNC Bank, N.A., Bank of America, N.A., US Bank, N.A., Trustmark National Bank, and BancorpSouth Bank.  The working capital revolving credit facility was provided solely by PNC Bank, N.A.  On September 20, 2011, the Company entered into an amendment to the revolving credit facility, which amendment became effective the date of its execution.  The amendment reduced the Tangible Net Worth requirement and adjusted the definition of FFO under the revolving credit facility.

On January 21, 2011, in connection with its purchase of 3344 Peachtree in Atlanta, Georgia, 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 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.

On February 18, 2011, Fund II obtained a $10.0 million mortgage loan secured by Carmel Crossing, a 326,000 square foot office complex in Charlotte, North Carolina.  The mortgage loan has a fixed rate of 5.5% and is interest only through maturity at March 10, 2020.  Parkway received $2.4 million in net proceeds from the loan, which represents its 30% equity investment in the property.  The proceeds were used to reduce amounts outstanding under the Company's credit facility.

On March 31, 2011, Fund II obtained a $9.3 million mortgage loan secured by 245 Riverside, a 135,000 square foot office property in Jacksonville, Florida.  The mortgage has a stated rate of LIBOR plus 200 basis points, an initial thirty-six month interest only period and a maturity of March 31, 2019.  In connection with this mortgage, Fund II entered into an interest rate swap that fixes the interest rate at 5.3% through September 30, 2018.

On April 8, 2011, Fund II obtained a $22.5 million mortgage loan secured by Corporate Center Four, a 250,000 square foot office property in Tampa, Florida.  The mortgage has a stated rate of LIBOR plus 200 basis points, an initial thirty-six month interest only period and a maturity of April 8, 2019.  In connection with this mortgage, Fund II entered into an interest rate swap that fixes the interest rate at 5.4% through October 8, 2018.

On May 11, 2011, the Company sold 233 North Michigan, a 1.1 million square foot office property located in the central business district of Chicago, for a gross sale price of $162.2 million.  At closing, the Company repaid the $84.6 million non-recourse mortgage loan secured by the property that was scheduled to mature in July 2011.  Parkway received net cash proceeds after the repayment of the mortgage loan of approximately $74 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 during the second quarter of 2011, which is recorded in income from discontinued operations.

On May 18, 2011, Fund II obtained the following mortgage loans in connection with the purchase of four office properties:

-   A $12.1 million non-recourse mortgage loan secured by Cypress Center, a 286,000 square foot office complex in the Westshore submarket of Tampa, Florida.  The mortgage loan has a stated rate of LIBOR plus 200 basis points with a maturity of May 18, 2016.  Upon obtaining the mortgage, Fund II entered into an interest rate swap that fixes the interest rate at 4.1% through November 18, 2015.

-   A $33.9 million non-recourse mortgage loan secured by Bank of America Center, a 421,000 square foot office property in the central business district of Orlando, Florida.  The mortgage loan has a stated rate of LIBOR plus 200 basis points with a maturity of May 18, 2018.  Upon obtaining the mortgage, Fund II entered into an interest rate swap that fixes the interest rate at 4.7% through November 18, 2017.

 -   A $22.1 million non-recourse mortgage loan secured by Two Ravinia Drive, a 438,000 square foot office property located in the Central Perimeter submarket of Atlanta, Georgia.  The mortgage loan has a stated rate of LIBOR plus 200 basis points with a maturity of May 20, 2019.  Upon obtaining the mortgage, Fund II entered into an interest rate swap that fixes the interest rate at 4.99% through November 18, 2018.

-   A $90.2 million non-recourse mortgage loan secured by Two Liberty Place, a 941,000 square foot office property located in the central business district of Philadelphia, Pennsylvania.  The mortgage loan has a fixed rate of 5.2% and a maturity date of June 10, 2019.

On May 18, 2011, the Company issued 1.0 million additional shares of its 8.0% Series D Cumulative Redeemable Preferred Stock to an institutional investor at a price of $25.00 per share, equating to a yield of 8.0%.  The Series D Preferred Stock has a $25.00 liquidation value per share and is redeemable at the option of the Company at any time upon proper notice.  The Company used the net proceeds of approximately $26.2 million to fund the combination with Eola and the Company's share of equity contributions to purchase Fund II office properties.

On June 1, 2011, the Company repaid a $9.9 million non-recourse mortgage loan secured by Forum I, a 163,000 square foot office property in Memphis, Tennessee.  The mortgage loan had a fixed interest rate of 5.3%.  The Company repaid the mortgage loan using available proceeds under the credit facility.

Upon its maturity on June 1, 2011, the Company elected not to repay an $8.5 million non-recourse mortgage loan secured by the Wells Fargo Building, a 136,000 square foot office building in Houston.  This mortgage loan had a fixed interest rate of 4.4%.  The Company is currently in default on this mortgage and the lender has identified a third-party buyer for the mortgage.  The Company expects a loan foreclosure or deed in lieu of loan foreclosure on the property, and has recognized an impairment loss on real estate of $7.0 million during the third quarter of 2011.  Upon foreclosure, the Company expects to record a gain on foreclosure of $3.9 million.

On July 25, 2011, Fund II obtained a $22 million mortgage loan secured by Hayden Ferry I, a 203,000 square foot office property located in the Tempe submarket of Phoenix, Arizona.  The mortgage loan has a stated rate of LIBOR plus 200 basis points, an initial thirty-six month interest only period, and a maturity date of July 25, 2018.  In connection with this mortgage, Fund II entered into an interest rate swap that fixes the interest rate at 4.5% through January 25, 2018.

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Mortgage Loans

9 Months Ended

Sep. 30, 2011

Mortgage Loans [Abstract]

Mortgage Loans

Note F - Mortgage Loans

The Company owns the B participation piece (the "B piece") of a first mortgage secured by an 844,000 square foot office building in Dallas, Texas known as 2100 Ross at an original cost of $6.9 million which was purchased  in November 2007.  The B piece was originated by Wachovia Bank, N.A., a Wells Fargo Company, and has a face value of $10.0 million, a stated coupon rate of 6.065% and a scheduled maturity in May 2012.  At September 30, 2011, the Company recorded a non-cash impairment loss on the mortgage loan in the amount of $9.2 million.  The borrower is currently in default on the first mortgage and based on current information, the Company does not believe it will recover its investment in the loan.  Therefore, Parkway has written off its investment in the mortgage loan.

 In connection with the sale of One Park Ten, the Company seller-financed a $1.5 million note receivable that bears interest at 7.25% per annum on an interest-only basis through maturity in June 2012.  The carrying amount of the mortgage loan was $1.5 million at September 30, 2011.

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Unaudited) (Parenthetical) (USD $)	9 Months Ended
	Sep. 30, 2011
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Unaudited) (Parenthetical) [Abstract]
Common dividends declared per share (in dollars per share)	$ 0.225
Preferred dividends declared per share (in dollars per share)	$ 1.500
Issuance of Series D Preferred Stock (in shares)	1,046,400
Shares issued in lieu of Directors' fees (in shares)	17,636
Shares of restricted stock withheld to satisfy tax withholding obligations on vesting of restricted stock (in shares)	18,819
Shares of deferred incentive share units withheld to satisfy tax withholding obligations on vesting of DISUs (in shares)	11
Distribution of shares of common stock from deferred compensation plan (in shares)	48,125
Contribution of shares of common stock to deferred compensation plan (in shares)	2,061

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Net Income (Loss) Per Common Share

9 Months Ended

Sep. 30, 2011

Net Income (Loss) Per Common Share [Abstract]

Net Income (Loss) Per Common Share

Note B - Net Income (Loss) Per Common Share

Basic earnings per share ("EPS") are computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding for the period. In arriving at net income (loss) attributable to common stockholders, preferred stock dividends are deducted.  Diluted EPS reflects the potential dilution that could occur if share equivalents such as employee stock options, restricted shares and deferred incentive share units were exercised or converted into common stock that then shared in the earnings of Parkway.

The computation of diluted EPS is as follows (in thousands, except per share data):

	Three Months Ended September 30				Nine Months Ended September  30
		2011		2010		2011		2010
Numerator:
Basic and diluted net income (loss)           attributable to common stockholders	$	(55,738)	$	(3,569)	$	(77,193)	$	3,433
Basic weighted average shares		21,502		21,438		21,489		21,413
Dilutive weighted average shares		21,502		21,438		21,489		21,413
Diluted net income (loss) per share attributable to           Parkway Properties, Inc.	$	(2.59)	$	(0.17)	$	(3.59)	$	0.16

The computation of diluted EPS for the three months and nine months ended September 30, 2011 and 2010 did not include the effect of employee stock options, deferred incentive share units and restricted shares because their inclusion would have been anti-dilutive.

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Supplemental Cash Flow Information and Schedule of Non-Cash Investing and Financing Activity

9 Months Ended

Sep. 30, 2011

Supplemental Cash Flow Information and Schedule of Non-Cash Investing and Financing Activity [Abstract]

Supplemental Cash Flow Information and Schedule of Non-Cash Investing and Financing Activity

Note C - Supplemental Cash Flow Information and Schedule of Non-Cash Investing and Financing Activity

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

	Nine Months Ended September 30
	2011		2010
	(in thousands)
Supplemental cash flow information:
Cash paid for interest	$	43,250	$	39,986
Cash paid for income taxes		24		141
Supplemental schedule of non-cash investing and financing activity:
Mortgage note payable transferred to purchaser		-		(8,666)
Mortgage loan issued to purchaser		-		(1,500)
Contingent consideration related to the contribution of the Management Company		19,000		-
Restricted shares and deferred incentive share units issued		2,240		1,898
Mortgage loan assumed in purchase		87,225		-
Shares issued in lieu of Directors' fees		319		285

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Fair Values of Financial Instruments

9 Months Ended

Sep. 30, 2011

Fair Values of Financial Instruments [Abstract]

Fair Values of Financial Instruments

Note K - Fair Values of Financial Instruments

FASB Accounting Standards Codification ("ASC") 820, "Fair Value Measurements and Disclosures" ("ASC 820"), defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 also provides guidance for using fair value to measure financial assets and liabilities.  The Codification requires disclosure of the level within the fair value hierarchy in which the fair value measurements fall, including measurements using quoted prices in active markets for identical assets or liabilities (Level 1), quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active (Level 2), and significant valuation assumptions that are not readily observable in the market (Level 3).

Cash and cash equivalents

The carrying amounts for cash and cash equivalents approximated fair value at September 30, 2011 and December 31, 2010.

Mortgage loan receivable

The Company owns the B participation piece (the "B piece") of a first mortgage secured by an 844,000 square foot office building in Dallas, Texas known as 2100 Ross at an original cost of $6.9 million, which was purchased in November 2007.  The B piece was originated by Wachovia Bank, N.A., a Wells Fargo Company, and has a face value of $10.0 million, a stated coupon rate of 6.065% and a scheduled maturity in May 2012.  At September 30, 2011, the Company recorded a non-cash impairment loss on the mortgage loan in the amount of $9.2 million.  The borrower is currently in default on the first mortgage and based on current information, the Company does not believe it will recover its investment in the loan.  Therefore, Parkway has written off its investment in the mortgage loan.

In connection with the sale of One Park Ten, the Company seller-financed a $1.5 million note receivable, and the carrying amount of the note was $1.5 million at September 30, 2011 and December 31, 2010.  The carrying amount of the mortgage loan approximated fair value at September 30, 2011 and December 31, 2010.

Mortgage notes payable

The fair value of the mortgage notes payable is estimated using discounted cash flow analysis, based on the Company's current incremental borrowing rates for similar types of borrowing arrangements.  The aggregate fair value of the mortgage notes payable at September 30, 2011 was $967.0 million as compared to its carrying amount of $979.0 million. The aggregate fair value of the mortgage notes payable at December 31, 2010 was $734.6 million as compared to its carrying amount of $773.5 million.

Notes payable to banks

The fair value of the Company's notes payable to banks is estimated by discounting expected cash flows at current market rates.  The aggregate fair value of the notes payable to banks at September 30, 2011 was $103.2 million as compared to its carrying amount of $113.9 million.  The aggregate fair value of the notes payable to banks at December 31, 2010 was $109.6 million as compared to its carrying amount of $110.8 million.

Interest rate swap agreements

The fair value of the interest rate swaps is determined by estimating the expected cash flows over the life of the swap using the mid-market rate and price environment as of the last trading day of the reporting period.  This information is considered a Level 2 input as defined by ASC 820.  The aggregate fair value liability of the interest rate swaps at September 30, 2011 and December 31, 2010 was $13.1 million and $3.0 million, respectively.

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Acquisitions & Dispositions

9 Months Ended

Sep. 30, 2011

Acquisitions & Dispositions [Abstract]

Acquisitions & Dispositions

Note D - Acquisitions & Dispositions

On January 21, 2011, the Company and Parkway Properties Office Fund II, LP ("Fund II") acquired 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.  Funds 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 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 February 4, 2011, the Company purchased its partner's 50% interest in the Wink-Parkway Partnership ("Wink JV") for $250,000.  The Wink JV was established for the purpose of owning the Wink Building, a 32,000 square foot office property in New Orleans, Louisiana.  Upon completing the purchase of its partner's interest, Parkway now owns 100% of the Wink Building.

On March 31, 2011, Fund II purchased 245 Riverside located in the central business district of Jacksonville, Florida for $18.5 million.  245 Riverside contains approximately 135,000 square feet of office space.  An additional $1.6 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 $9.3 million non-recourse first mortgage loan secured by the property with an initial thirty-six month interest only period and a maturity date of March 31, 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 5.3% through September 30, 2018.  Parkway's equity contribution of $2.8 million was funded through availability under the Company's credit facility.  Parkway's effective ownership interest in this asset is 30%.

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 mortgage loan 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 completed the closing of its purchase of four additional office properties for $316.5 million.  The four properties include Two Liberty Place in Philadelphia, Two Ravinia Drive in Atlanta, Bank of America Center in Orlando, and Cypress Center I, II and III ("Cypress Center") in Tampa.  The properties contain approximately 2.1 million square feet of office space, and an additional $20.9 million is expected to be spent for closing costs, building improvements, leasing costs and tenant improvements during the first two years of ownership.  An existing institutional investor in Two Liberty Place retained an 11% ownership in the property.  Parkway's pro rata share of Two Liberty Place is 19% and Parkway's partner in Fund II owns the remaining 70% interest.  Fund II acquired 100% of the remaining three assets, with Parkway's ownership at 30%.  In connection with the purchases, Fund II placed separate non-recourse mortgage loans on each property totaling $158.3 million with a weighted average interest rate of 4.99%, initial thirty-six month interest only periods, and maturity dates ranging from May 2016 to June 2019.  Parkway's equity contribution of $37.6 million was funded through availability under the Company's credit facility.

On June 30, 2011, Fund II purchased Hayden Ferry Lakeside I ("Hayden Ferry I") located in the Tempe submarket of Phoenix, Arizona, for $39.4 million.  Hayden Ferry I contains approximately 203,000 square feet of office space.  An additional $4.3 million is expected to be spent for closing costs, building improvements, leasing costs and tenant improvements during the first two years of ownership.  Fund II obtained a $22.0 million non-recourse mortgage loan with a fixed interest rate of 4.5%, an initial thirty-six month interest only period, and a maturity date of July 25, 2018.  Parkway's equity contribution of $5.2 million was funded through availability under the Company's credit facility.  Parkway's effective ownership interest in this asset is 30%.

The allocation of purchase price allocated to intangible assets and liabilities and weighted average amortization period (in years) for each class of asset or liability for 3344 Peachtree, 245 Riverside, Corporate Center Four, Two Liberty Place, Two Ravinia Drive, Bank of America Center, Cypress Center and Hayden Ferry I is as follows (in thousands, except weighted average life):

		Amount	Weighted Average Life
Land	$	66,267	N/A
Buildings		380,147	40
Tenant improvements		45,267	6
Lease commissions		26,913	6
Lease in place value		41,195	6
Above market leases		27,428	7
Below market leases		(4,955)	13
Other		2,388	7
Mortgage assumed		(87,225)	7

On May 18, 2011, the Company closed on the agreement with Eola Capital, LLC ("Eola") in which Eola contributed its Property Management Company (the "Management Company") to Parkway.  Eola's principals contributed the Management Company to Parkway for initial consideration of $32.4 million in cash and Eola's principals have the opportunity to earn (i) up to 1.574 million units of limited partnership interest in Parkway's operating partnership ("OP Units") through an earn-out arrangement and (ii) up to 226,000 additional OP Units through an earn-up arrangement.  To the extent earned, all OP Units are redeemable for shares of Parkway common stock on a one-for-one basis.  Earn-out and earn-up consideration is contingent upon the achievement by the Management Company of targeted annual gross fee revenue and/or share price levels during an initial period for the balance of 2011 after closing and a second period for the full calendar year 2012.  The earn-out and earn-up consideration is accounted for as a liability and therefore, any changes in fair value is measured through profit and loss each reporting date until the contingency is resolved.  Parkway also has protections against fee income loss in the form of a provision requiring specific payments to Parkway in the event of certain terminations of existing management contracts and a non-compete agreement with regard to the existing management contracts of the Management Company.  The Management Company was contributed to a wholly-owned taxable REIT subsidiary and therefore, the Company began incurring income tax expenses upon closing of the agreement.  The Management Company currently manages assets totaling approximately 11.2 million square feet.  Parkway funded the cash consideration for the Management Company contribution with operating cash flow, proceeds from the disposition of office properties, proceeds from an equity issuance and amounts available under the Company's credit facilities.  For details regarding the Management Company's purchase price allocation see "Note G - Management Contracts."

The unaudited pro forma effect on the Company's results of operations for the purchase of 3344 Peachtree, 245 Riverside, Corporate Center Four, Two Liberty Place, Two Ravinia Drive, Bank of America Center, Cypress Center, Hayden Ferry I and the Management Company as if the purchase had occurred on January 1, 2010 is as follows (in thousands, except per share data):

			Three Months Ended					Nine Months Ended
	September 30					September 30
			2011		2010			2011		2010
Revenues		$	69,714	$	70,031		$	211,167	$	211,795
Net income (loss) attributable to common stockholders		$	(55,738)	$	(3,598)		$	(71,857)	$	(590)
Basic net income (loss) attributable to common stockholders		$	(2.59)	$	(0.17)		$	(3.34)	$	(0.03)
Diluted net income (loss) attributable to common stockholders		$	(2.59)	$	(0.17)		$	(3.34)	$	(0.03)

On July 6, 2011, RubiconPark II, LLC, sold Maitland 200, a 204,000 square foot office property located in the Maitland submarket of Orlando, for a gross sale price of $23 million.  The $16.9 million mortgage loan secured by the property was repaid upon closing.  Parkway owned a 20% interest in the property and received a priority distribution after the repayment of secured debt of $2.8 million, which was used to reduce amounts outstanding under the Company's credit facility. The Company recognized a gain on the sale of $743,000 during the third quarter of 2011. Additionally, the Company retained management of the property and therefore, the gain was recorded in continuing operations.

 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 2011.  This impairment loss and all income from current and prior periods has been classified 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 in the third quarter of 2011 and has classified the property as held for sale with all income classified as discontinued operations for all current and prior periods presented.

The Company has reached an agreement in principle to sell its interests in the office portfolio owned by Parkway Properties Office Fund, LP ("Fund I"), for which Parkway is a limited partner and serves as general partner.  The office portfolio is comprised of 2.7 million square feet and Parkway's effective ownership of the portfolio is approximately 28.2%.  The properties are secured by a total of $293.1 million in non-recourse mortgage loans, of which $82.7 million is Parkway's share, with an average interest rate of 5.6%.  In connection with this agreement to sell the Company's interests in the portfolio owned by Fund I, the Company recorded an impairment loss in the third quarter of 2011 totaling $100.2 million, of which $28.0 million is Parkway's share.

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Financial Arrangements

9 Months Ended

Sep. 30, 2011

Financial Arrangements

Financial Arrangements

Note N - Financial Arrangements

Steven G. Rogers, Chief Executive Officer, President and a director of the Company resigned from his positions with the Company effective November 30, 2011.  In connection with the resignation, the Company entered into a Transition Agreement, dated October 7, 2011 (the "Transition Agreement"), with Mr. Rogers.  Under the Transition Agreement, the Company shall pay Mr. Rogers a cash payment equal to $2.9 million (less applicable deductions), which includes Mr. Rogers' accrued but unpaid bonus for 2011.  The Company also agreed to fully accelerate the vesting of all of the equity awards made by the Company to Mr. Rogers, other than his performance-based awards under the Company's FOCUS Plan, and provide Mr. Rogers with continuing healthcare coverage for up to two years after his resignation.  As a condition of receiving the benefits provided by the Transition Agreement, Mr. Rogers will be subject to restrictive covenants with respect to confidentiality and his ability to compete with, or solicit employees of, the Company for a period of 24 months.  Mr. Rogers also agreed to provide the Company with a general release of claims and, if requested, to provide consultation services and otherwise assist and advise the Company for a period of 12 months after his resignation.

On September 15, 2011, William R. Flatt, Executive Vice President and Chief Operating Officer of the Company resigned from his positions with the Company effective October 15, 2011.  In connection with the resignation, the Company entered into a Severance Agreement, dated October 10, 2011 (the "Severance Agreement"), with Mr. Flatt.  Under the Severance Agreement, the Company shall pay Mr. Flatt a cash payment equal to $611,000 (less applicable deductions), which includes a pro rata amount for Mr. Flatt's accrued but unpaid bonus for 2011.  The Company also agreed to accelerate the vesting of a pro rata portion of the time-based equity awards made by the Company to Mr. Flatt.  As a condition of receiving the benefits provided by the Severance Agreement, Mr. Flatt provided the Company with a general release of claims.

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (Unaudited) (USD $) In Thousands	Preferred Stock [Member]	Common Stock [Member]	Common Stock Held in Trust	Additional Paid-in Capital [Member]	Accumulated Other Comprehensive Loss [Member]	Accumulated Deficit [Member]	Noncontrolling Interest - Real Estate Partnerships [Member]	Total
Balance at Dec. 31, 2010	$ 102,787	$ 22	$ (1,896)	$ 516,167	$ (3,003)	$ (127,575)	$ 133,988	$ 620,490
Comprehensive loss
Net loss	0	0	0	0	0	(69,852)	(84,112)	(153,964)
Change in fair value of interest rate swaps	0	0	0	0	(2,701)	0	(7,398)	(10,099)
Total comprehensive loss	0	0	0	0	0	0	0	(164,063)
Common dividends declared - $0.225 per share	0	0	0	0	0	(4,964)	0	(4,964)
Preferred dividends declared - $1.50 per share	0	0	0	0	0	(7,341)	0	(7,341)
Share-based compensation	0	0	0	1,389	0	0	0	1,389
Issuance of 1,046,400 shares of 8.0% Series D Preferred stock	26,155	0	0	0	0	0	0	26,155
17,636 shares issued in lieu of Directors' fees	0	0	0	319	0	0	0	319
Issuance costs for shelf registration	0	0	0	(12)	0	0	0	(12)
18,819 and 11 shares withheld to satisfy tax withholding obligation in connection with the vesting of restricted stock and deferred incentive share units, respectively	0	0	0	(336)	0	0	0	(336)
Distribution of 48,125 shares of common stock from deferred compensation plan	0	0	1,625	0	0	0	0	1,625
Contribution of 2,061 shares of common stock to deferred compensation plan	0	0	(38)	0	0	0	0	(38)
Contribution of capital by noncontrolling interest	0	0	0	0	0	0	251,168	251,168
Distribution of capital to noncontrolling interest	0	0	0	0	0	0	(43,520)	(43,520)
Balance at Sep. 30, 2011	$ 128,942	$ 22	$ (309)	$ 517,527	$ (5,704)	$ (209,732)	$ 250,126	$ 680,872

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Segment Information

9 Months Ended

Sep. 30, 2011

Segment Information [Abstract]

Segment Information

Note O - Segment Information

Parkway's primary business is the ownership and operation of office properties.  The Company accounts for each office property or groups of related office properties as an individual operating segment.  Parkway has aggregated its individual operating segments into a single reporting segment due to the fact that the individual operating segments have similar operating and economic characteristics.

The Company believes that the individual operating segments exhibit similar economic characteristics such as being leased by the square foot, sharing the same primary operating expenses and ancillary revenue opportunities and being cyclical in the economic performance based on current supply and demand conditions.  The individual operating segments are also similar in that revenues are derived from the leasing of office space to customers and each office property is managed and operated consistently in accordance with Parkway's standard operating procedures.  The range and type of customer uses of our properties is similar throughout our portfolio regardless of location or class of building and the needs and priorities of our customers do not vary from building to building. Therefore, Parkway's management responsibilities do not vary from location to location based on the size of the building, geographic location or class.

The management of the Company evaluates the performance of the reportable office segment based on funds from operations attributable to common stockholders ("FFO").  Management believes that FFO is an appropriate measure of performance for equity REITs and computes this measure in accordance with the National Association of Real Estate Investment Trusts' ("NAREIT") definition of FFO (including any guidance that NAREIT releases with respect to the definition).  Funds from operations is defined by NAREIT as net income (computed in accordance with GAAP), reduced by preferred dividends, excluding gains or losses on depreciable real estate and extraordinary items under GAAP, plus depreciation and amortization, and after adjustments to derive the Company's pro rata share of FFO of consolidated and unconsolidated joint ventures.  Further, the Company does not adjust FFO to eliminate the effects of non-recurring charges.  On October 31, 2011, NAREIT issued updated guidance on reporting FFO such that impairment losses on depreciable real estate should be excluded from the computation of FFO for current and prior periods.  The Company believes that FFO is a meaningful supplemental measure of its operating performance because historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time, as reflected through depreciation and amortization expenses. However, since real estate values have historically risen or fallen with market and other conditions, many industry investors and analysts have considered presentation of operating results for real estate companies that use historical cost accounting to be insufficient.  Thus, NAREIT created FFO as a supplemental measure of operating performance for real estate investment trusts that excludes historical cost depreciation and amortization, among other items, from net income, as defined by GAAP.  The Company believes that the use of FFO, combined with the required GAAP presentations, has been beneficial in improving the understanding of operating results of real estate investment trusts among the investing public and making comparisons of operating results among such companies more meaningful. FFO as reported by Parkway may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition.  Funds from operations do not represent cash generated from operating activities in accordance with accounting principles generally accepted in the United States and is not an indication of cash available to fund cash needs.  Funds from operations should not be considered an alternative to net income as an indicator of the Company's operating performance or as an alternative to cash flow as a measure of liquidity.

The following is a reconciliation of FFO and net income (loss) attributable to common stockholders for office properties and total consolidated entities for the three months ended September 30, 2011 and 2010.  Amounts presented as "Unallocated and Other" represent primarily income and expense associated with providing management services, corporate general and administrative expense, interest expense on the Company's credit facility and preferred dividends.

	At or for the three months ended								At or for the three months ended
	September 30, 2011								September 30, 2010
	Office			Unallocated				Office			Unallocated
	Properties			and Other		Consolidated		Properties			and Other		Consolidated
	(in thousands)							(in thousands)
	(Unaudited)
Income from office and parking properties (a)	$	63,594	$	-	$	63,594	$	45,095		$	-	$	45,095
Management company income		-		6,120		6,120		-			585		585
Property operating expenses (b)		(30,639)		-		(30,639)		(21,612)			-		(21,612)
Depreciation and amortization		(26,087)		-		(26,087)		(14,825)			-		(14,825)
Management company expenses		-		(4,319)		(4,319)		-			(858)		(858)
Income tax expense-current		-		(190)		(190)		-			(59)		(59)
Income tax expense-deferred		-		364		364		-			-		-
General and administrative expenses		-		(1,902)		(1,902)		-			(1,758)		(1,758)
Acquisition costs		-		(25)		(25)		-			-		-
Other income		-		87		87		-			354		354
Equity in earnings (loss) of               unconsolidated joint ventures		(14)		-		(14)		62			-		62
Gain on involuntary conversion		-		-		-		40			-		40
Interest expense (c)		(11,878)		(1,595)		(13,473)		(8,673)			(1,491)		(10,164)
Adjustment for noncontrolling interest-real estate partnerships		77,546		-		77,546		2,356			-		2,356
Loss from discontinued operations		(22,633)		-		(22,633)		(1,048)			-		(1,048)
Gain on sale of real estate from discontinued operations		2,275		-		2,275		-			-		-
Gain on sale of real estate		743		-		743		-			-		-
Change in fair value of contingent         consideration		-		12,000		12,000		-			-		-
Impairment loss on real estate		(107,240)		-		(107,240)		-			-		-
Impairment loss on mortgage loan         receivable		-		(9,235)		(9,235)		-			-		-
Dividends on preferred stock		-		(2,710)		(2,710)		-			(1,737)		(1,737)
Net income (loss) attributable to common stockholders		(54,333)		(1,405)		(55,738)		1,395			(4,964)		(3,569)
Depreciation and amortization		26,087		-		26,087		14,825			-		14,825
Depreciation and amortization - discontinued operations		6,203		-		6,203		6,301			-		6,301
Depreciation and amortization noncontrolling interest - real estate partnerships		(11,574)		-		(11,574)		(4,011)			-		(4,011)
Adjustment for depreciation and amortization-unconsolidated joint ventures		38		-		38		85			-		85
Impairment loss on real estate		54,767		-		54,767		-			-		-
Gain on sale of real estate		(3,018)		-		(3,018)		-			-		-
Funds from operations available to common stockholders	$	18,170	$	(1,405)	$	16,765	$	18,595		$	(4,964)	$	13,631
Capital expenditures (d)	$	12,906	$	-	$	12,906	$	12,629		$	-	$	12,629

(a) Included in income from office and parking properties are rental revenues, customer reimbursements, parking income and other income.

(b) Included in property operating expenses are real estate taxes, insurance, contract services, repairs and maintenance and property operating expenses.

(c) Interest expense for office properties represents interest expense on property secured mortgage debt.  It does not include interest expense on the Company's unsecured line of credit, which is included in "Unallocated and Other".

(d) Capital expenditures include building improvements, tenant improvements and deferred leasing costs.

 The following is a reconciliation of FFO and net income (loss) attributable to common stockholders for office properties and total consolidated entities for the nine months ended September 30, 2011 and 2010.  Amounts presented as "Unallocated and Other" represent primarily income and expense associated with providing management services, corporate general and administrative expense, interest expense on the Company's credit facility and preferred dividends.

	At or for the nine months ended								At or for the nine months ended
	September 30, 2011								September 30, 2010
	Office			Unallocated				Office			Unallocated
	Properties			and Other		Consolidated		Properties			and Other		Consolidated
	(in thousands)							(in thousands)
	(Unaudited)
Income from office and parking properties (a)	$	170,244	$	-	$	170,244	$	137,392		$	-	$	137,392
Management company income		-		9,990		9,990		-			1,331		1,331
Property operating expenses (b)		(79,156)		-		(79,156)		(65,478)			-		(65,478)
Depreciation and amortization		(64,519)		-		(64,519)		(46,260)			-		(46,260)
Management company expenses		-		(8,398)		(8,398)		-			(2,243)		(2,243)
Income tax expense-current		-		(414)		(414)		-			(176)		(176)
Income tax expense-deferred		-		364		364		-			-		-
General and administrative expenses		-		(5,380)		(5,380)		-			(5,361)		(5,361)
Acquisition costs		(1,124)		(15,630)		(16,754)		-			-		-
Other income		-		849		849		-			1,105		1,105
Equity in earnings of unconsolidated joint ventures		65		-		65		253			-		253
Gain on involuntary conversion		-		-		-		40			-		40
Interest expense (c)		(31,903)		(5,377)		(37,280)		(26,001)			(4,575)		(30,576)
Adjustment for noncontrolling interest-real estate partnerships		84,112		-		84,112		7,581			-		7,581
Income (loss) from discontinued     operations		(26,410)		-		(26,410)		1,444			-		1,444
Gain on sale of real estate from discontinued operations		6,567		-		6,567		8,518			-		8,518
Gain on sale of real estate		743		-		743		-			-		-
Change in fair value of contingent consideration		-		12,000		12,000		-			-		-
Impairment loss on real estate		(107,240)		-		(107,240)		-			-		-
Impairment loss on mortgage loan           receivable		-		(9,235)		(9,235)		-			-		-
Dividends on preferred stock		-		(7,341)		(7,341)		-			(4,137)		(4,137)
Net income (loss) available to common stockholders		(48,621)		(28,572)		(77,193)		17,489			(14,056)		3,433
Depreciation and amortization		64,519		-		64,519		46,260			-		46,260
Depreciation and amortization - discontinued operations		19,787		-		19,787		19,118			-		19,118
Depreciation and amortization noncontrolling interest - real estate partnerships		(25,351)		-		(25,351)		(12,837)			-		(12,837)
Adjustment for depreciation and amortization-unconsolidated joint ventures		198		-		198		253			-		253
Impairment loss on real estate		56,467		-		56,467		-			-		-
Gain on sale of real estate		(7,310)		-		(7,310)		(8,518)			-		(8,518)
Funds from operations available to common stockholders	$	59,689	$	(28,572)	$	31,117	$	61,765		$	(14,056)	$	47,709
Total assets	$	1,822,926	$	91,256	$	1,914,182	$	1,601,498		$	19,567	$	1,621,065
Office and parking properties	$	1,545,749	$	-	$	1,545,749	$	1,403,101		$	-	$	1,403,101
Capital expenditures (d)	$	40,554	$	-	$	40,554	$	30,950		$	-	$	30,950

(a) Included in income from office and parking properties are rental revenues, customer reimbursements, parking income and other income.

(b) Included in property operating expenses are real estate taxes, insurance, contract services, repairs and maintenance and property operating expenses.

(c) Interest expense for office properties represents interest expense on property secured mortgage debt.  It does not include interest expense on the Company's unsecured line of credit, which is included in "Unallocated and Other".

(d) Capital expenditures include building improvements, tenant improvements and deferred leasing costs.

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) In Thousands	9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010
Operating activities
Net loss	$ (153,964)	$ (11)
Adjustments to reconcile net loss to cash provided by operating activities:
Depreciation and amortization	64,519	46,260
Depreciation and amortization - discontinued operations	19,787	19,118
Amortization of above (below) market leases	1,463	(364)
Amortization of above (below) market leases - discontinued operations	(1,069)	217
Amortization of loan costs	1,573	1,317
Amortization of mortgage loan discount	(400)	(522)
Share-based compensation expense	1,389	877
Deferred income tax benefit	(364)	0
Operating distributions from unconsolidated joint ventures	507	0
Gain on sale of real estate investments	(7,310)	(8,558)
Non-cash impairment loss on real estate	107,240	0
Non-cash impairment loss on real estate - discontinued operations	21,467	0
Non-cash impairment loss on mortgage loan receivable	9,235	0
Equity in earnings of unconsolidated joint ventures	(65)	(253)
Change in fair value of contingent consideration	(12,000)	0
Increase in deferred leasing costs	(11,434)	(7,543)
Change in receivables and other assets	(20,990)	(8,129)
Change in accounts payable and other liabilities	5,443	10,750
Cash provided by operating activities	25,027	53,159
Investing activities
Distributions from unconsolidated joint ventures	3,201	0
Investment in real estate	(488,279)	(32,174)
Investment in other assets	(3,500)	0
Investment in management company	(32,400)	0
Proceeds from sale of real estate	200,193	4,758
Improvements to real estate	(29,120)	(23,407)
Cash used in investing activities	(349,905)	(50,823)
Financing activities
Principal payments on mortgage notes payable	(103,792)	(98,582)
Proceeds from mortgage notes payable	222,013	70,000
Proceeds from bank borrowings	241,822	100,969
Payments on bank borrowings	(238,809)	(100,969)
Debt financing costs	(4,828)	(1,000)
Purchase of Company stock	(336)	(799)
Dividends paid on common stock	(4,884)	(4,836)
Dividends paid on preferred stock	(6,818)	(3,600)
Contributions from noncontrolling interest partners	251,168	0
Distributions to noncontrolling interest partners	(43,520)	0
Proceeds from stock offering	26,143	44,883
Cash provided by financing activities	338,159	6,066
Change in cash and cash equivalents	13,281	8,402
Cash and cash equivalents at beginning of period	19,670	20,697
Cash and cash equivalents at end of period	$ 32,951	$ 29,099

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Noncontrolling Interest Real Estate Partnerships

9 Months Ended

Sep. 30, 2011

Noncontrolling Interest - Real Estate Partnerships [Abstract]

Noncontrolling Interest - Real Estate Partnerships

Note I - Noncontrolling Interest - Real Estate Partnerships

The Company has an interest in two joint ventures that are included in its consolidated financial statements. Information relating to these consolidated joint ventures is detailed below.

		Parkway's	Square Feet
Joint Venture Entity and Property Name	Location	Ownership %	(In thousands)
Parkway Properties Office Fund, LP
Desert Ridge Corporate Center	Phoenix, AZ	26.50%	293
Maitland 100	Orlando, FL	25.00%	128
555 Winderley	Orlando, FL	25.00%	102
Gateway Center	Orlando, FL	25.00%	228
BellSouth Building	Jacksonville, FL	25.00%	92
Centurion Centre	Jacksonville, FL	25.00%	88
100 Ashford Center	Atlanta, GA	25.00%	160
Peachtree Ridge	Atlanta, GA	25.00%	160
Overlook II	Atlanta, GA	25.00%	260
U.S. Cellular Plaza	Chicago, IL	40.00%	610
Chatham Centre	Schaumburg, IL	25.00%	206
Renaissance Center	Memphis, TN	25.00%	190
1401 Enclave Parkway	Houston, TX	25.00%	209
Total Parkway Properties Office Fund, LP		28.20%	2,726
Parkway Properties Office Fund II, LP
Hayden Ferry Lakeside I	Phoenix, AZ	30.00%	203
245 Riverside	Jacksonville, FL	30.00%	135
Bank of America Center	Orlando, FL	30.00%	421
Corporate Center Four at International Plaza	Tampa, FL	30.00%	250
Cypress Center I - III	Tampa, FL	30.00%	286
Falls Pointe	Atlanta, GA	30.00%	107
Lakewood II	Atlanta, GA	30.00%	123
3344 Peachtree	Atlanta, GA	33.03%	485
Two Ravinia	Atlanta, GA	30.00%	438
Carmel Crossing	Charlotte, NC	30.00%	326
Two Liberty Place	Philadelphia, PA	19.00%	941
Total Parkway Properties Office Fund II, LP		27.70%	3,715
Total Consolidated Joint Ventures		27.90%	6,441

Parkway is a limited partner and serves as the general partner of Fund I and provides asset management, property management, leasing and construction management services to the fund, for which it is paid market-based fees.  Cash distributions from the fund are made to each joint venture partner based on their percentage of ownership in the fund.  Because Parkway is the sole general partner and has the authority to make major decisions on behalf of the fund, Parkway is considered to have a controlling interest.  Accordingly, Parkway is required to consolidate the fund in its consolidated financial statements.  Fund I has been fully invested  since February 2008.

The Company has reached an agreement in principle to sell its interests in the office portfolio owned by Fund I, for which Parkway is a limited partner and serves as general partner.  The office portfolio is comprised of 2.7 million square feet and Parkway's effective ownership of the portfolio is approximately 28.2%.  The properties are secured by a total of $293.1 million in non-recourse mortgage loans, of which $82.7 million is Parkway's share, with an average interest rate of 5.6%.  In connection with this agreement to sell the Company's interests in the portfolio owned by Fund I, the Company recorded an impairment loss in the third quarter of 2011 totaling $100.2 million, of which $28.0 million is Parkway's share.

In 2008, Parkway formed Fund II, a $750.0 million discretionary fund with the Teacher Retirement System of Texas ("TRST"), for the purpose of acquiring high-quality multi-tenant office properties.  TRST is a 70% investor, and Parkway is a 30% investor in the fund, which, when fully funded, will be capitalized with approximately $375.0 million of equity capital and $375.0 million of non-recourse, fixed-rate first mortgage debt.  Parkway's share of the equity contribution for the fund will be $112.5 million and will be funded with operating cash flow, proceeds from asset sales, issuance of equity securities and/or advances on the credit facility as needed on a temporary basis.  Fund II targets acquisitions in the core markets of Houston, Austin, San Antonio, Chicago, Atlanta, Phoenix, Charlotte, Memphis, Nashville, Jacksonville, Orlando, Tampa/St. Petersburg, and Ft. Lauderdale, as well as other growth markets to be determined at Parkway's discretion.  As of September 30, 2011, Fund II included investments in eleven office properties totaling $636.1 million which represents 84.8% of the fund's $750.0 million investment capacity.

An existing institutional investor in Two Liberty Place retained an 11% ownership in the property.  Parkway's pro rata share of Two Liberty Place is 19% and Parkway's partner in Fund II owns the remaining 70% interest.

Parkway is a limited partner and serves as the general partner of Fund II and provides asset management, property management, and leasing and construction management services to the fund for which it is paid market-based fees.  Parkway exclusively represents the fund in making acquisitions within the target markets and within certain predefined criteria.  Parkway may continue to make fee-simple acquisitions in markets outside of the target markets, acquire properties within the target markets that do not meet the fund's specific criteria or sell any currently owned properties.  Because Parkway is the sole general partner and has the authority to make major decisions on behalf of the fund, Parkway is considered to have a controlling interest.  Accordingly, Parkway is required to consolidate the fund in its consolidated financial statements.

Noncontrolling interest - real estate partnerships represents the other partners' proportionate share of equity in the partnerships discussed above at September 30, 2011.

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Income Taxes

9 Months Ended

Sep. 30, 2011

Income Taxes

Income Tax Disclosure Text Block

Note M - Income Taxes

The Company qualifies and has elected to be taxed as a REIT under the Internal Revenue Code (the "Code").  The Company will generally not be subject to federal income tax to the extent that it distributes its taxable income to the Company's shareholders, and as long as Parkway satisfies the ongoing REIT requirements including meeting certain asset, income and stock ownership tests.

The Company has elected to treat certain consolidated subsidiaries as taxable REIT subsidiaries, which are tax paying entities for income tax purposes and are taxed separately from the Company.  Taxable REIT subsidiaries may participate in non-real estate related activities and/or perform non-customary services for tenants and are subject to federal and state income tax at regular corporate tax rates.

Parkway's provision for income taxes for the three months ended September 30, 2011 and 2010, included $190,000 and $59,000, respectively, of current federal and state income tax expense resulting from undistributed REIT taxable income.  The Company's provision for income taxes for the nine months ended September 30, 2011 and 2010, included $414,000 and $176,000, respectively, of current federal and state income tax expense resulting from undistributed REIT taxable income.

In connection with the purchase accounting for the Management Company, the Company recorded deferred tax liabilities of $14.8 million representing differences between the tax basis and GAAP basis of the acquired assets and liabilities (primarily related to the Management Company contracts) multiplied by the effective tax rate.  The Company was required to record these deferred tax liabilities as a result of the Management Company operating as a C corporation at the time it was acquired.  The deferred income tax benefit recorded for the three months and nine months ended September 30, 2011 was $364,000.

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CONSOLIDATED BALANCE SHEETS (Unaudited) (USD $) In Thousands	Sep. 30, 2011	Dec. 31, 2010
Real estate related investments:
Office and parking properties	$ 1,685,906	$ 1,755,310
Office property held for sale	134,963	0
Land held for development	609	609
Accumulated depreciation	(275,729)	(366,152)
Net investment in office and parking properties	1,545,749	1,389,767
Land available for sale	750	750
Mortgage loans	1,500	10,336
Total net investment in real estate related investments	1,547,999	1,400,853
Receivables and other assets	133,799	132,530
Intangible assets, net	116,736	50,629
Other assets held for sale	31,983	0
Management contracts, net	50,714	0
Cash and cash equivalents	32,951	19,670
Total Assets	1,914,182	1,603,682
Liabilities
Notes payable to banks	113,852	110,839
Mortgage notes payable	830,709	773,535
Accounts payable and other liabilities	123,409	98,818
Liabilities held for sale	165,340	0
Total Liabilities	1,233,310	983,192
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 2011 and 2010, respectively	128,942	102,787
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)	(1,896)
Additional paid-in capital	517,527	516,167
Accumulated other comprehensive loss	(5,704)	(3,003)
Accumulated deficit	(209,732)	(127,575)
Total Parkway Properties, Inc. stockholders' equity	430,746	486,502
Noncontrolling interest - real estate partnerships	250,126	133,988
Total equity	680,872	620,490
Total liabilities and equity	$ 1,914,182	$ 1,603,682