Discontinued Operations

12 Months Ended

Dec. 31, 2011

Discontinued Operations [Abstract]

Discontinued Operations

Note H - Discontinued Operations

All current and prior period income from the following office property dispositions are included in discontinued operations for the years ended December 31, 2011, 2010 and 2009 (in thousands).

Office Property	Location	Square Feet	Date of Sale		Net Sales Price		Net Book Value of Real Estate		Gain on Sale (1)	Impairment Loss
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 (2)	Columbia, SC	298	09/08/2011		18,421		18,421		-		6,147
Wells Fargo	Houston, TX	134	12/09/2011		-		-		-		11,561
Fund I Assets	Various	1,956	12/31/2011		256,823		250,699		11,258		68,513
2011 Dispositions		3,711		$	457,169	$	444,258	$	17,825	$	86,221

Properties Held For Sale (1)
Falls Pointe	Atlanta, GA	107	01/06/2012	$	-	$	-	$	-	$	-
111 East Wacker	Chicago, IL	1,013	01/09/2012		-		-		-		19,050
Fund I Assets	Various	771	1Q2012		-		-		-		36,900
Non-Core Assets (3)	Various	1,932	1Q2012		-		-		-		51,889
		3,823		$	-	$	-	$	-	$	107,839
(1)Gains on 2012 dispositions and assets held for sale will be recorded in the 2012 financial statements upon sale. (2)During 2010 and 2011, the Company recognized non-cash impairment losses on this property of $3.4 million and $2.7 million, respectively. (3)During 2010 and 2011, the Company recognized non-cash impairment losses associated with these properties of $640,000 and $51.2 million, respectively.

During 2011, management began a review of the Company's strategy and in connection with this strategic review evaluated its operating properties in an attempt to determine the most effective way to maximize the value of its holdings over time.  The Company defines non-strategic assets as office and parking properties that management believes (i) are located in markets where the Company cannot achieve adequate critical mass or that do not exhibit attractive long-term growth characteristics, (ii) do not have compelling rent growth or cash flow potential, or (iii) additional capital investment would not produce acceptable returns.  As a result of this review, the Company accelerated the sale of certain non-strategic assets and recorded total impairment losses on real estate from discontinued operations of $189.9 million for year ended December 31, 2011.  Parkway's proportionate share of total impairment losses on real estate from discontinued operations of $113.8 million, for a total of $120.2 million for the year ended December 31, 2011.  The Company may be required to record additional impairment charges in future periods. Changes that could cause these impairment losses include: (1) a decision by the Company to sell the asset rather than hold for long-term investment purposes, or (2) changes in management's estimates of future cash flows from the assets that cause the future undiscounted cash flows to be less than the asset's carrying amount. Given the uncertainties with the economic environment, management cannot predict whether or not the Company will incur impairment losses in the future, and if impairment losses are recorded, management cannot predict the magnitude of such losses.

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, an 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.  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 twelve months ended December 31, 2011, with respect to this property.

On December 9, 2011, Parkway conveyed the deed in lieu of foreclosure on Wells Fargo, a 134,000 square foot office building in Houston, Texas.  Accordingly, income from Wells Fargo has been classified as discontinued operations for all current and prior periods presented.  In association with the deed in lieu of foreclosure, the Company recognized an $8.6 million non-cash gain associated with the forgiveness of the mortgage loan secured by this property.  During the fourth quarter 2011, the Company recognized an impairment loss of $11.6 million.

        On December 31, 2011, the Company sold nine properties totaling approximately 2.0 million square feet in five markets, representing a majority of Fund I assets.  The remaining Fund I assets are classified as held for sale.  Accordingly, income from the Fund I properties has been classified as discontinued operations for all current and prior periods presented.  In connection with the completed and pending sale of the Fund I assets, the Company recorded a total impairment loss of $105.4 million, of which $29.3 million was Parkway's proportionate share.  Additionally the Company recorded a total gain on the sale of $11.3 million, of which $3.2 million was Parkway's proportionate share.  Additionally, on March 1, 2012, the Company completed the sale of its interest in Renaissance Center, a 190,000 square foot office property located in Memphis, Tennessee.  The sale of the remaining three assets in the Fund I portfolio is expected to close during the first half of 2012, subject to obtaining necessary lender consents in connection with the existing mortgage loans and customary closing conditions. 

On January 6, 2012, the Company sold Falls Pointe, a 107,000 square foot office building in Atlanta, Georgia, for gross proceeds of $6.0 million and Parkway's ownership share was 30%.  Since Falls Pointe was classified as held for sale at December 31, 2011, income from this office property has been classified as discontinued operations for all current and prior periods presented.

On January 9, 2012, the Company sold 111 East Wacker, a 1.0 million square foot office building in Chicago, Illinois, for gross proceeds of $150.6 million.  Accordingly, income from 111 East Wacker has been classified as discontinued operations for all current and prior periods presented.  A non-cash impairment loss totaling $19.1 million was recognized during the year ended December 31, 2011.

The Non-Core Portfolio consists of approximately 1.9 million square feet located in Jackson, Memphis, and Richmond.  The buyer has concluded its due diligence and the sale is expected to close during the first quarter of 2012, subject to the buyer's successful assumption of certain existing mortgage loans and customary closing conditions.  Accordingly, income from this portfolio of assets has been classified as discontinued operations for all current and prior periods presented.  During the fourth quarter 2011, the Company recognized a total impairment loss for this portfolio in the amount of $51.2 million in discontinued operations as well as an additional impairment loss in continuing operations of $5.9 million in connection with two assets remaining in Jackson and Memphis.  As of March 1, 2012, the Company had completed the sale of seven properties totaling 580,000 square feet.

The major classes of assets and liabilities classified as held for sale at December 31, 2011 are as follows (in thousands):

	December 31
	2011
Balance Sheet:
Investment property	$	355,623
Accumulated depreciation		(23,709)
Office property held for sale		331,914
Rents receivable and other assets		44,724
Intangible assets, net		6,151
Other assets held for sale		50,875
Total assets held for sale	$	382,789
Mortgage notes payable	$	254,402
Accounts payable and other liabilities		31,197
Total liabilities held for sale	$	285,599

The amount of revenue and expense for these office properties reported in discontinued operations for the years ended December 31, 2011, 2010 and 2009 is as follows (in thousands):

	Year Ended December 31
	2011		2010		2009
Statement of Operations:
Revenues
Income from office and parking properties	$	134,254	$	160,415	$	169,624
Other income	-		-		11
	134,254		160,415		169,635
Expenses
Office and parking properties:
Operating expenses	60,520		69,070		76,969
Management company expense	288		380		309
Interest expense	29,794		34,693		36,534
Gain on extinguishment of debt	(7,635)		-		-
Non-cash expense on interest rate swap	2,338		-		-
Depreciation and amortization	54,148		63,350		64,431
Impairment loss	189,940		4,120		-
	329,393		171,613		178,243
Loss from discontinued operations	(195,139)		(11,198)		(8,608)
Gain on sale of real estate from discontinued operations	17,825		8,518		-
Total discontinued operations per Statement of Operations		(177,314)		(2,680)		(8,608)
Net loss attributable to noncontrolling interest from discontinued operations	79,069		9,940		10,639
Total discontinued operations - Parkway's Share	$	(98,245)	$	7,260	$	2,031