Investment in Office Properties

Included in investment in office properties at December 31, 2013 are 50 office properties located in eight states with an aggregate of 17.6 million square feet of leasable space.

The contract purchase price, excluding closing costs and other adjustments, of office properties or additional office property interests acquired during the year ended December 31, 2013 is as follows:




Market Location	Cost (in thousands)
Atlanta, GA	$	56,300
Houston, TX	646,700
Jacksonville, FL	130,000
Miami, FL	65,400
	$	898,400

The Company's acquisitions are accounted for using the acquisition method. The results of each acquired property are included in the Company's results of operations from their respective purchase dates.

Summary of Acquisitions

On January 11, 2012, Fund II purchased The Pointe, a 252,000 square foot Class A office building in the Westshore submarket of Tampa, Florida. The gross purchase price for The Pointe was $46.9 million and the Company's ownership share is 30%. The Company's equity contribution of $7.0 million was funded through availability under the Company's senior unsecured revolving credit facility.

On February 10, 2012, Fund II purchased Hayden Ferry Lakeside II ("Hayden Ferry II"), a 300,000 square foot Class A+ office building located in the Tempe submarket of Phoenix, and directly adjacent to Hayden Ferry Lakeside I ("Hayden Ferry I"), which was purchased by Fund II in the second quarter of 2011. The gross purchase price was $86.0 million and the Company's ownership share is 30%. The Company's equity contribution of $10.8 million was initially funded through availability under the Company's existing senior unsecured revolving credit facility. This investment completed the investment period of Fund II.

On June 6, 2012, the Company purchased Hearst Tower, a 972,000 square foot office tower located in the central business district in Charlotte, North Carolina. The gross purchase price was $250.0 million. The purchase of Hearst Tower was financed with proceeds received from the investment in the Company by TPG VI Pantera Holdings, L.P. ("TPG Pantera"), combined with borrowings on the Company's senior unsecured revolving credit facility. For more information on TPG Pantera's investment see "Note 11 - Stockholder's Equity."

On August 31, 2012, the Company purchased a 2,500 space parking garage, a 21,000 square foot office building and a vacant parcel of developable land (collectively the "Hayden Ferry Lakeside III, IV, and V"), all adjacent to the Company's currently owned Hayden Ferry I and Hayden Ferry II assets in Tempe, Arizona. The gross purchase price was $18.2 million on behalf of Fund II. Fund II increased its investment capacity to pursue the purchase, and Parkway's share in this investment is 30%. The Company's equity contribution of $5.5 million was funded using the Company's revolving credit facility.

On November 15, 2012, the Company completed the purchase of Westshore Corporate Center, a 170,000 square foot office tower located in the Westshore submarket of Tampa, Florida, for a net purchase price of $22.7 million. Westshore Corporate Center was built in 1989 and is a 12-story Class A building. Simultaneous with closing, the Company assumed a $14.5 million non-recourse first mortgage loan, with a fixed interest rate of 5.8% and maturity date of May 1, 2015. In accordance with GAAP, the mortgage loan was recorded at $15.7 million to reflect the value of the instrument based on a market interest rate of 2.5% on the date of purchase.

On December 6, 2012, the Company completed the purchase of 525 North Tryon, a 402,000 square foot office property located in the central business district of Charlotte, North Carolina, for a gross purchase price of $47.4 million. The purchase of 525 North Tryon was financed with proceeds received from the Company's December 2012 common equity offering.

On December 20, 2012, the Company completed the purchase of Phoenix Tower, a 626,000 square foot office tower located in the Greenway Plaza submarket of Houston, Texas, for a gross purchase price of $123.8 million. Phoenix Tower is a LEED® Gold Certified, 26-story, Class A office tower that sits atop an eight-story parking garage. The initial purchase price of Phoenix Tower was financed with proceeds received from the Company's December 2012 common equity offering. On February 20, 2013, the Company obtained an $80.0 million non-recourse first mortgage loan secured by Phoenix Tower. The mortgage loan has a fixed interest rate of 3.9%, an initial 24-month interest only period and a maturity date of March 2023.

On December 21, 2012, the Company completed the purchase of Tempe Gateway, a 251,000 square foot office tower located in the Tempe submarket of Phoenix, Arizona, for a gross purchase price of $66.1 million. The purchase of Tempe Gateway was financed with proceeds received from the Company's December 2012 common equity offering.

On December 31, 2012, the Company completed the purchase of NASCAR Plaza, a 390,000 square foot property located in the central business district of Charlotte, North Carolina for a gross purchase price of $99.9 million. NASCAR Plaza was built in 2009 and is a 20-story, LEED® Silver Certified office tower. The building was 87.5% occupied as of January 1, 2013. The Company assumed the first mortgage loan secured by the property, which has a current outstanding balance of approximately $42.6 million with a current interest rate of 4.7% and a maturity date of March 30, 2016. In accordance with GAAP, the mortgage loan was recorded at $43.0 million to reflect the value of the instrument based on a market interest rate of 3.4% on the date of purchase.

The allocation of purchase price related to tangible and intangible assets and liabilities for each class of asset or liability for The Pointe, Hayden Ferry II, Hearst Tower, Hayden Ferry Lakeside III, IV and V, Westshore Corporate Center, 525 North Tryon, Phoenix Tower, Tempe Gateway and NASCAR Plaza is as follows (in thousands):



	Amount
Land	$	43,600
Buildings	580,616
Tenant improvements	59,698
Lease commissions	21,207
Lease in place value	54,575
Above market leases	14,728
Below market leases	(18,979		)
Other	3,001
Mortgage assumed	(58,694		)

Included in the Company's consolidated financial statements for the year ended December 31, 2012 were revenues and net income attributable to common stockholders from 2012 acquisitions of $32.0 million and $2.4 million, respectively.

On January 17, 2013, the Company purchased Tower Place 200, a 258,000 square foot office tower located in the Buckhead submarket of Atlanta, Georgia, for a gross purchase price of $56.3 million. The purchase of Tower Place 200 was financed with borrowings under the Company's senior unsecured revolving credit facility. The building is unencumbered by debt and the Company does not plan to place secured financing on the property at this time.

On March 7, 2013, the Company purchased two office complexes totaling 1.0 million square feet located in the Deerwood submarket of Jacksonville, Florida (the "Deerwood Portfolio") for a gross purchase price of $130.0 million. The purchase of these properties was financed with a mortgage loan secured by the properties in the aggregate amount of $84.5 million and borrowings under the Company's senior unsecured revolving credit facility. The mortgage loan has a maturity date of April 1, 2023 and a fixed interest rate of 3.9%.

On August 19, 2013, the Company purchased approximately six acres of land available for development located in Tampa, Florida for a purchase price of $2.9 million. The land, which was partially and indirectly owned by certain of the Company's officers, is adjacent to the Company's Cypress Center I, II, and III assets and has surface parking used for customers of Cypress I, II, and III. On August, 22, 2013, the Company issued (i) 11,966 shares of common stock to James R. Heistand, our President and Chief Executive Officer, (ii) 29,916 shares of common stock to ACP-Laurich Partnership, Ltd. ("ACP"), of which Mr. Heistand is the indirect owner, and (iii) 5,983 shares of common stock to Henry F. Pratt III, our Executive Vice President of Asset Management and Third Party Services, as partial consideration for the land purchase.

On August 28, 2013, the Company purchased approximately one acre of land available for development located in Tempe, Arizona for a purchase price of $1.2 million. This land is adjacent to Parkway's Hayden Ferry Lakeside and Tempe Gateway assets.

On December 19, 2013, the Company completed the merger transactions contemplated by the agreement and plan of merger , dated as of September 4, 2013 (the "Merger Agreement"), by and among the Company, Parkway Properties LP ("Parkway LP"), PKY Masters, LP, a wholly owned subsidiary of Parkway LP ("Merger Sub"), Thomas Properties Group, Inc. ("TPGI") and Thomas Properties Group, L.P. ("TPG LP"). Pursuant to the Merger Agreement, TPGI merged with and into the Company, with the Company continuing as the surviving corporation (the "Parent Merger"), and Thomas Properties Group, L.P. ("TPG LP") merged with and into Merger Sub, a wholly owned subsidiary of Parkway LP, with TPG LP continuing as the surviving entity and an indirect wholly owned subsidiary of Parkway LP (the "Partnership Merger" and, together with the Parent Merger, the "Mergers"). Immediately following the closing of the Mergers, the joint venture interests the Company acquired in One Commerce Square and Two Commerce Square, two office towers located in Philadelphia, Pennsylvania totaling approximately 1.9 million rentable square feet, were redeemed by the joint ventures that own the respective properties, and the Company ceased to own any interest in those properties. The Company received net proceeds of approximately $71.8 million in the redemption transactions, which were funded by Brandywine Operating Partnership, L.P., or Brandywine, TPGI’s partner in each of the joint ventures. In addition, on December 19, 2013, immediately following the completion of the Mergers, The Company sold Four Points Centre, consisting of two office buildings containing approximately 194,000 rentable square feet and a contiguous parcel of land located in Austin, Texas, to Brandywine for a gross sale price of $47.3 million, of which the Company received net proceeds of approximately $21.7 million.

On December 6, 2013, Parkway acquired Lincoln Place, a 140,000 square foot office building located in the South Beach submarket of Miami, Florida. The consideration for the transaction was the assumption of the existing first mortgage loan on the property and the issuance of 900,000 common units in Parkway’s operating partnership. The loan secured by Lincoln Place has a current outstanding balance of approximately $49.3 million, a fixed interest rate of 5.9% and a maturity date of June 2016.

The Company assumed TPGI’s ownership interest in two wholly owned office properties in Houston, Texas and five office properties in Austin, Texas through an indirect interest in TPG/CalSTRS Austin, LLC (the "Austin joint venture"), a joint venture with the California State Teachers' Retirement System ("CalSTRS"). See "Note 4 - Investments in Unconsolidated Joint Ventures" and mortgage notes payable discussed in "Note 8 - Capital and Financing Transactions."

The unaudited pro forma effect on the Company's results of operations for the purchase of Tower Place 200, Deerwood North and South, Lincoln Place, CityWestPlace and San Felipe Plaza as if the purchases had occurred on January 1, 2012 is as follows (in thousands, except per share data):



	Year Ended
	December 31,
	2013			2012
	Unaudited
Revenues	$	394,918		$	363,498
Net loss attributable to common stockholders	(16,890		)	(60,235		)
Basic net income attributable to common stockholders	(0.52		)	(2.38		)
Diluted net income attributable to common stockholders	(0.52		)	(2.38		)

The following table summarizes the aggregate purchase price allocation for TPGI as of December 19, 2013:



	Amount
Assets:	(in thousands)
Land	$	97,132
Building	506,817
In place leases	61,562
Tenant Improvements	41,697
Leasing Commissions	14,935
Management Contracts	1,888
Condominium Units	19,900
Investment in unconsolidated joint ventures	93,539
Other Assets	47,257
Asset held for sale	353,752
Total Assets	$	1,238,479

Liabilities:
Below Market Rents	50,152
Accounts Payable and Accrued Expense	66,596
Mortgage note payable, net premium of $15,896	335,604
Liabilities held for sale	260,293
Total Liabilities	712,645

Consideration funded prior to closing	80,000
Noncontrolling Interest	34,229
Equity issued	411,605
Total Purchase Price	$	1,238,479

The allocation of purchase price for TPGI is preliminary at December 31, 2013 due to the timing of the Mergers.

The following table summarizes the aggregate purchase price allocation for Tower Place 200, Deerwood North and South, and Lincoln Place:



	Amount
Land	$	39,155
Buildings	170,549
Tenant improvements	18,422
Lease commissions	9,123
Lease in place value	20,495
Above market leases	4,969
Below market leases	(9,267		)
Mortgage premium assumed	(2,804		)
Mortgage debt assumed	(49,369		)

The allocation of purchase price for Lincoln Place is preliminary at December 31, 2013 due to the timing of the acquisition.

Summary of Dispositions

During the year ended December 31, 2012, the Company completed a significant portion of its previously disclosed dispositions as part of its strategic objective of becoming a leading owner of high-quality office assets in higher growth markets in the Sunbelt region of the United States. The Company entered into an agreement to sell 13 office properties totaling 2.7 million square feet owned by Fund I to its existing partner in the fund for a gross sales price of $344.3 million, of which $97.4 million was the Company's share. As of December 31, 2011, the Company had completed the sale of nine of these 13 assets. As of July 1, 2012, the Company had completed the sale of the remaining four Fund I assets. The Company received approximately $14.2 million in net proceeds from the sales of the Fund I assets, and the proceeds were used to reduce amounts outstanding under its credit facilities. Upon sale, the buyer assumed a total of $292.0 million in mortgage loans, of which $82.4 million was Parkway's share.

Additionally, during the year ended December 31, 2012, the Company completed the sale of 15 properties included in its strategic sale of a portfolio of non-core assets, for a gross sales price of $147.7 million, generating net proceeds of approximately $94.3 million, with the buyer assuming $41.7 million in mortgage loans upon sale, of which $31.9 million was Parkway's share. The 15 assets that were sold included five assets in Richmond, Virginia, four assets in Memphis, Tennessee, and six assets in Jackson, Mississippi.

The Company completed the sale of four additional assets during the year ended December 31, 2012, including the sale of 111 East Wacker, a 1.0 million square foot office property located in Chicago, Illinois, the Wink building, a 32,000 square foot office property in New Orleans, Louisiana, Sugar Grove, a 124,000 square foot office property in Houston, Texas, and Falls Pointe, a 107,000 square foot office property located in Atlanta, Georgia owned by Fund II for an aggregate gross sales price of $168.8 million. The Company received approximately $14.8 million in aggregate net proceeds from these sales, which were used to reduce amounts outstanding under its revolving credit facility and to fund subsequent acquisitions. In connection with the sale of 111 East Wacker, the buyer assumed a $147.9 million mortgage loan upon sale.

On March 20, 2013, the Company sold Atrium at Stoneridge, a 108,000 square foot office property located in Columbia, South Carolina, for a gross sales price of $3.1 million and recorded a gain of $542,000 during the first quarter of 2013. The Company received $3.0 million in net proceeds from the sale, which was used to reduce amounts outstanding under the Company's senior unsecured revolving credit facility.

On July 10, 2013, the Company sold two office properties, Waterstone and Meridian, totaling 190,000 square feet located in Atlanta, Georgia, for a gross sales price of $10.2 million and recorded an impairment loss of $4.6 million during the second quarter of 2013. The Company received $9.5 million in net proceeds from the sale, which was used to reduce amounts outstanding under the Company's senior unsecured revolving credit facility.

On July 17, 2013, the Company sold Bank of America Plaza, a 436,000 square foot office property located in Nashville, Tennessee, for a gross sales price of $42.8 million and recorded a gain of approximately $11.5 million during the third quarter of 2013. The Company received $40.8 million in net proceeds from the sale, which was used to reduce amounts outstanding under the Company's revolving credit facilities.

On October 31, 2013, the Company sold Lakewood II, a 123,000 square foot office property located in Atlanta, Georgia, for a gross sale price of $10.6 million. Parkway had a 30% ownership interest in the property, which was owned by Fund II. Parkway received approximately $3.1 million in cash, its proportionate share of net proceeds from the sale, which was used to reduce amounts outstanding under the Company's revolving credit facility. During the fourth quarter of 2013, Fund II recognized a gain on the sale of Lakewood II of approximately $5.9 million, of which approximately $1.8 million was Parkway’s share.

On November 8, 2013, Parkway sold Carmel Crossing, a 326,000 square foot office property located in Charlotte, North Carolina, for a gross sale price of $37.5 million. Parkway had a 30% ownership interest in the property, which was owned by Fund II. Parkway received approximately $7.1 million in cash, its proportionate share of net proceeds from the sale, which was used to reduce amounts outstanding under the Company's revolving credit facility. During the fourth quarter 2013, Fund II recognized a gain on the sale of Carmel Crossing of approximately $14.6 million, of which $4.4 million was Parkway’s share, and expenses related to the prepayment of the associated mortgage loan of approximately $2.1 million, of which approximately $0.6 million was Parkway’s share.

Contractual Obligations and Minimum Rental Receipts

Obligations for tenant improvement allowances and lease inducement costs for leases in place and commitments for building improvements at December 31, 2013 are as follows (in thousands):



2014	$	7,805
2015	—
2016	69
2017	—
2018	315
Total	$	8,189

Minimum future operating lease payments for various equipment leased at the office properties is as follows for operating leases in place at December 31, 2013 (in thousands):



2014	$	156
2015	66
2016	32
2017	21
2018	10
Total	$	285

The following is a schedule by year of future minimum rental receipts under noncancelable leases for office buildings owned at December 31, 2013 (in thousands):



2014	$	267,265
2015	253,249
2016	230,538
2017	193,744
2018	162,430
Thereafter	682,965
Total	$	1,790,191

The following is a schedule by year of future minimum ground lease payments at December 31, 2013 (in thousands):



2014	$	792
2015	872
2016	793
2017	793
2018	794
Thereafter	30,929
Total	$	34,973

At December 31, 2013, the Company owned Corporate Center Four in Tampa, Florida that is subject to a ground lease. The lease has a remaining term of approximately 67 years with an expiration date of December 2080. Payments consist of a stated monthly amount that adjusts annually and a development rental rate that is fixed through August 2015. The development rent rate is $0.40 per gross floor foot area through August 2015 and is subject to increase every five years thereafter at the lesser of 10% or the CPI percentage increase for all urban consumers.

At December 31, 2013, the Company owned Westshore Corporate Center in Tampa, Florida that is subject to a ground lease. The lease has a remaining term of approximately 21 years with an expiration date of October 2034. Payments consist of a stated monthly amount that adjusts annually through the expiration date.

At December 31, 2013, the Company owned NASCAR Plaza in Charlotte, North Carolina that is subject to a ground lease. The lease has a remaining term of approximately 92 years with an expiration date of December 2105. Payments consist of a stated monthly amount through the expiration date.

At December 31, 2013, the Company owned Lincoln Place in Miami, Florida that is subject to a ground lease. The lease has a remaining term of approximately 39 years with an expiration date of September 30, 2052. Payments consist of a stated monthly amount through the expiration date.