Investment in Office Properties

Included in investment in office properties at December 31, 2015 are 35 consolidated office properties located in six states with an aggregate of 14.1 million square feet (unaudited) of leasable space.

The Company's acquisitions are accounted for using the acquisition method in FASB ASC 805, "Business Combinations." The results of each acquired property are included in the Company's results of operations from their respective purchase dates. The impact of 2015 acquired properties on the Company's consolidated statement of operations and comprehensive income (loss) for the year ended December 31, 2015 was a net income of $2.6 million, including $21.0 million of total revenues. The impact of 2014 acquired properties on the Company's consolidated statement of operations and comprehensive income (loss) for the year ended December 31, 2014 was a net loss of $2.1 million, including $28.9 million of total revenues.

2015 Acquisitions

On January 8, 2015, the Company acquired One Buckhead Plaza, an office building located in the Buckhead submarket of Atlanta, Georgia, for a gross purchase price of $157.0 million.

On September 25, 2015, the Company acquired Harborview Plaza, an office building located in the Westshore submarket of Tampa, Florida, for a gross purchase price of $49.0 million.

On October 1, 2015, the Company acquired Two Buckhead Plaza, an office building located in the Buckhead submarket of Atlanta, Georgia, for a gross purchase price of $80.0 million. The Company assumed the first mortgage secured by the property, which had an outstanding balance of approximately $52.0 million with an interest rate of 6.43% as of October 1, 2015 and a maturity date of October 1, 2017.

The aggregate preliminary purchase price assignment related to tangible and intangible assets and liabilities based on Level 2 and Level 3 inputs for One Buckhead Plaza, Harborview Plaza and Two Buckhead Plaza is as follows (in thousands):



	Amount
Land	$	41,524
Buildings	224,716
Tenant improvements	11,982
Lease commissions	8,210
Lease in place value	16,108
Above market leases	2,026
Below market leases	(14,426		)
Mortgage premium for mortgage assumed	(4,140		)

The assignment of the purchase price was based on preliminary estimates and is subject to change within the measurement period as valuations are finalized.

The Company's unaudited pro forma results of operations after giving effect to the purchases of One Buckhead Plaza, Harborview Plaza and Two Buckhead Plaza as if the purchases had occurred on January 1, 2014 is as follows (in thousands, except per share data):



	Year Ended
	December 31,
	2015		2014
	(Unaudited)
Revenues	$	486,680	$	489,312
Net income attributable to common stockholders	$	67,789	$	45,886
Basic net income attributable to common stockholders	$	0.61	$	0.45
Diluted net income attributable to common stockholders	$	0.61	$	0.45

2014 Acquisitions

On January 30, 2014, the Company completed the acquisition of the JTB Center, a complex of three office buildings located in the Deerwood submarket of Jacksonville, Florida, for a gross purchase price of $33.3 million. The JTB Center was unencumbered by secured indebtedness and financed through available cash.

On April 10, 2014, the Company completed the acquisition of Courvoisier Centre, a complex of two office buildings located in the Brickell submarket of Miami, Florida, for a gross purchase price of $145.8 million. The acquisition was financed through available cash and borrowings under the Company's unsecured term loans.

On April 14, 2014, the Company commenced construction of Hayden Ferry Lakeside III, a planned office development in the Tempe submarket of Phoenix, Arizona. The Operating Partnership entered into an amendment to the partnership agreement of Parkway Properties Office Fund II L.P. ("Fund II") to, among other things, authorize the Hayden Ferry Lakeside III development and authorize the general partner of Fund II to transfer an interest in the ownership of Hayden Ferry Lakeside III, a subsidiary of Fund II, to the Operating Partnership for $2.0 million. The Company now owns a 70% indirect controlling interest in Hayden Ferry Lakeside III. Costs related to planning, developing, leasing and constructing the property, including costs of development personnel working directly on projects under development, are capitalized. For the year ended December 31, 2014, development costs incurred totaled approximately $24.0 million. On July 2, 2014, Fund II closed on a construction loan secured by Hayden Ferry Lakeside III. See "Note 7—Capital and Financing Transactions—Mortgage Notes Payable" for additional details.

On April 14, 2014, the Company completed the acquisition of One Orlando Centre, an office building located in the central business district of Orlando, Florida, for a gross purchase price of $55.1 million. The Company made an $8.0 million equity investment that will be held in lender reserve accounts to fund the leasing and repositioning of the asset. As part of the purchase price, the Company paid $1.1 million to acquire its 100% interest in the property and simultaneously with the equity investment, the existing $68.3 million first mortgage note secured by the property was restructured into a new $54.0 million first mortgage and a $15.3 million subordinated note. See "Note 7—Capital and Financing Transactions—Mortgage Notes Payable" for additional details.

On July 3, 2014, the Company completed the acquisition of Millenia Park One, an office building located in the Millenia submarket of Orlando, Florida, for a gross purchase price of $25.5 million. The acquisition was funded using available cash and borrowings from the Company's senior unsecured revolving credit facility.

On July 29, 2014, the Company purchased a first mortgage note in an original principal amount of $50.0 million secured by The Forum at West Paces, an office building located in the Buckhead submarket of Atlanta, Georgia. The total purchase price for the note, which was previously under special servicer oversight, was approximately $47.0 million. The note purchase was funded with borrowings under the Company's senior unsecured revolving credit facility. On August 19, 2014, the Company took ownership of The Forum at West Paces with a deed in lieu of foreclosure.

On November 17, 2014, the Company and The California State Teachers' Retirement System ("CalSTRS") terminated their joint venture in Austin, Texas. As part of the agreement, the Company acquired CalSTRS' 60% interest in San Jacinto Center and One Congress Plaza, resulting in 100% ownership of these two assets, and transferred its 40% interest in Frost Bank Tower, 300 West 6th Street and One American Center to CalSTRS. The fair value of the Company's equity interest at November 17, 2014 was $124.7 million, which was determined using Level 2 inputs based on the fair values negotiated between the Company and CalSTRS. In connection with this transaction, the Company received net proceeds of approximately $43.6 million from CalSTRS and recognized a $52.8 million remeasurement gain, which was calculated as the difference between the fair value of the equity interest and the Company's basis in the investment in joint venture, and which is included in gain on sale of real estate in the Company's 2014 consolidated statement of operations and comprehensive income (loss).

On December 9, 2014, the Company acquired Corporate Center I, Corporate Center II and Corporate Center III, located in the Westshore submarket of Tampa, Florida, for a gross purchase price of $240.1 million. The acquisition of the Corporate Center assets was funded through a combination of proceeds received from the Company’s September 2014 public offering of common stock and borrowings under the Company’s senior unsecured revolving credit facility. In conjunction with the closing of the Corporate Center acquisition, the Company completed the purchase and immediate sale of 19 additional office properties located in six states. The Company sold these 19 office assets, which were not consistent with the Company’s current investment strategy, for a gross sale price of $234.8 million at no gain or loss.

On December 30, 2014, the Company purchased a leasehold interest in approximately seven acres of land available for development for a gross purchase price of $4.7 million. On December 31, 2014, the Company acquired approximately 6.5 acres of land available for development for a gross purchase price of $4.8 million. Both land parcels are located in the Westshore submarket of Tampa, Florida adjacent to the Company's Corporate Center I, II, III and IV assets.

The following table summarizes the aggregate purchase price assignments for JTB Center, Courvoisier Centre⁽¹⁾, One Orlando Centre, Millenia Park One, The Forum at West Paces, Corporate Center I, Corporate Center II, Corporate Center III, Corporate Center land and leasehold improvements, One Congress Plaza and San Jacinto Center (in thousands):



	Amount
Land	$	146,602
Buildings	617,807
Tenant improvements	46,146
Lease commissions	17,575
Lease in place value	47,070
Above market leases	10,272
Above (below) market ground leases, net	16,687
Below market leases	(21,433		)
Mortgage premium for mortgages assumed	(18,251		)

(1) The purchase price of Courvoisier Centre was reduced by $5.3 million of credits from the seller.

The unaudited pro forma effect on the Company's results of operations for the purchase of JTB Center, Courvoisier Centre, One Orlando Centre, Millenia Park One, The Forum at West Paces, Corporate Center I, Corporate Center II, Corporate Center III, One Congress Plaza and San Jacinto Center as if the purchases had occurred on January 1, 2013 is as follows (in thousands, except per share data):



	Year Ended
	December 31,
	2014		2013
	(Unaudited)
Revenues	$	493,708	$	370,980
Net income (loss) attributable to common stockholders	$	39,873	$	(18,471	)
Basic net income (loss) attributable to common stockholders	$	0.39	$	(0.28	)
Diluted net income (loss) attributable to common stockholders	$	0.37	$	(0.28	)

Development Property

The Company has a consolidated joint venture with Fund II for Hayden Ferry Lakeside III, a development property located in Phoenix, Arizona. The Company has a 57.142% direct membership interest in the joint venture with Fund II as a 42.858% investor. In total, the Company is, directly and indirectly, a 70% investor in the joint venture, and TRST is a 30% investor.

During the years ended December 31, 2015 and 2014, Fund II increased its investment in the Hayden Ferry Lakeside III development by $37.3 million and $24.0 million, respectively, of which the Company's share was approximately $26.1 million and $16.8 million, respectively. To date, Fund II has invested $61.3 million in the project and expects the total investment to be approximately $68.8 million. As of December 31, 2015, the Company's total investment and its expected total investment were approximately $42.9 million and $48.2 million, respectively.

2015 Dispositions

On January 15, 2015, the Company sold the Raymond James Tower, an office property located in Memphis, Tennessee, for a gross sale price of $19.3 million, providing $8.9 million in buyer credits, and recognized a loss of approximately $117,000 during the year ended December 31, 2015.

On February 4, 2015, the Company sold the Honeywell Building, an office property located in Houston, Texas, for a gross sale price of $28.0 million, and recognized a gain of approximately $14.3 million during the year ended December 31, 2015.

On April 8, 2015, Fund II sold Two Ravinia Drive, an office property located in Atlanta, Georgia, for a gross sale price of $78.0 million, and recognized a gain of approximately $29.0 million during the year ended December 31, 2015, of which $8.7 million was the Company's share. For a discussion of Fund II's paydown of the mortgage debt secured by Two Ravinia Drive, see "Note 7—Capital and Financing Transactions—Mortgage Notes Payable."

On May 8, 2015, the Company sold 400 North Belt, an office property located in Houston, Texas, for a gross sale price of $10.2 million, and recognized a loss of approximately $1.2 million during the year ended December 31, 2015.

On May 13, 2015, the Company sold Peachtree Dunwoody, an office property located in Atlanta, Georgia, for a gross sale price of $53.9 million, and recognized a gain of approximately $14.5 million during the year ended December 31, 2015.

On June 5, 2015, the Company sold Hillsboro I-IV and V, office properties located in Ft. Lauderdale, Florida, for a gross sale price of $22.0 million, and recognized a gain of approximately $2.4 million during the year ended December 31, 2015.

On June 12, 2015, the Company sold Riverplace South, an office property located in Jacksonville, Florida, for a gross sale price of $9.0 million, and recognized a gain of approximately $466,000 during the year ended December 31, 2015.

On July 7, 2015, the Company sold Westshore Corporate Center and Cypress Center I-III, office properties located in Tampa, Florida, and Cypress Center IV, a parcel of land also located in Tampa, Florida, for a gross sale price of $66.0 million, and recognized a gain of approximately $19.2 million during the year ended December 31, 2015.

On July 16, 2015, Fund II sold 245 Riverside, an office property located in Jacksonville, Florida, for a gross sale price of $25.1 million, and recognized a gain of approximately $7.2 million during the year ended December 31, 2015, of which $2.2 million was the Company's share. For a discussion of Fund II's paydown of the mortgage debt secured by 245 Riverside, see "Note 7—Capital and Financing Transactions—Mortgage Notes Payable."

On July 31, 2015, the Company sold 550 Greens Parkway, an office property located in Houston, Texas, for a gross sale price of $2.3 million, and recognized a gain of approximately $37,000 during the year ended December 31, 2015. During the year ended December 31, 2015, utilizing Level 2 fair value inputs, including its purchase and sale agreement dated July 24, 2015, the Company determined the carrying value of 550 Greens Parkway was not recoverable. As a result, the Company recognized an impairment loss on real estate of $4.4 million for the difference between the carrying value and the estimated fair value during the year ended December 31, 2015.

On September 1, 2015, the Company sold Comerica Bank Building, an office property located in Houston, Texas, for a gross sale price of $31.4 million, and recognized a gain of approximately $13.0 million during the year ended December 31, 2015.

On September 3, 2015, the Company sold Squaw Peak I & II, an office property located in Phoenix, Arizona, for a gross sale price of $51.3 million, and recognized a gain of approximately $13.2 million during the year ended December 31, 2015.

On September 11, 2015, the Company sold One Commerce Green, an office property located in Houston, Texas, for a gross sale price of $47.5 million, providing $23.5 million in buyer credits, and recognized a loss of approximately $5.2 million during the year ended December 31, 2015.

On September 30, 2015, the Company sold City Centre, an office property located in Jackson, Mississippi, for a gross sale price of $6.2 million, and recognized a loss of approximately $108,000 during the year ended December 31, 2015. The Company recognized an impairment loss on real estate of $1.0 million for the difference between the carrying value and the estimated fair value during the year ended December 31, 2015.

On December 23, 2015, the Company sold Millenia Park One, an office property located in Orlando, Florida for a gross sales price of $28.2 million, and recognized a gain of approximately $3.5 million during the year ended December 31, 2015.

2014 Dispositions

On January 14, 2014, the Company sold the Woodbranch Building, an office property located in Houston, Texas, for a gross sale price of $15.0 million. The Company received approximately $13.9 million in net proceeds, which were used to fund subsequent acquisitions. The Company recorded a gain of approximately $10.0 million during the year ended December 31, 2014.

On January 31, 2014, the Company sold Mesa Corporate Center, an office property located in Phoenix, Arizona, for a gross sale price of $13.2 million. The Company received approximately $12.1 million in net proceeds from the sale, which were used to fund subsequent acquisitions. The Company recorded a gain of approximately $489,000 during the year ended December 31, 2014.

On September 4, 2014, the Company sold the Schlumberger Building located in Houston, Texas. The Company received approximately $17.0 million in gross proceeds. The Company received $16.2 million in net proceeds from the sale, which the Company used to fund subsequent acquisitions. The Company recorded a gain of approximately $6.7 million during the year ended December 31, 2014.

On October 6, 2014, Fund II sold Tempe Town Lake, a parcel of land zoned for a hotel development in Tempe, Arizona, for a gross sale price of $2.0 million. Fund II recognized a gain of $739,000, of which $221,700 was the Company’s share during the year ended December 31, 2014.

On December 29, 2014, the Company sold 525 North Tryon, an office property located in Charlotte, North Carolina, for a gross sale price of $60.0 million. The Company recognized a gain on the sale of approximately $16.1 million during the year ended December 31, 2014.

Contractual Obligations and Minimum Rental Receipts

Obligations for tenant improvement allowances and lease commission costs for leases in place and commitments for building improvements at December 31, 2015 are as follows (in thousands):



2016	$	56,708
2017	2,377
2018	10
2019	114
2020	3,007
Thereafter	25
Total	$	62,241

Minimum future operating lease payments for various equipment leased at the office properties is as follows for operating leases in place at December 31, 2015 (in thousands):



2016	$	163
2017	122
2018	72
2019	9
2020	—
Total	$	366

The following is a schedule by year of future minimum rental receipts under noncancelable leases for office buildings owned at December 31, 2015 (in thousands):



2016	$	358,388
2017	361,162
2018	332,595
2019	297,855
2020	267,131
Thereafter	1,119,145
Total	$	2,736,276

The following is a schedule by year of future minimum ground lease payments at December 31, 2015 (in thousands):



2016	$	1,264
2017	1,294
2018	1,294
2019	1,294
2020	1,296
Thereafter	91,378
Total	$	97,820

At December 31, 2015, the Company owned Corporate Center I, Corporate Center II and Corporate Center III in Tampa, Florida, each of which are subject to a ground lease. The leases have remaining terms of approximately 65 years with expiration dates of December 31, 2080. Payments consist of a stated monthly amount that adjusts five percent every tenth anniversary through the expiration date.

At December 31, 2015, the Company owned Corporate Center IV in Tampa, Florida which is subject to a ground lease. The lease has a remaining term of approximately 65 years with an expiration date of December 2080. Payments consist of a stated monthly amount that adjusts annually.

At December 31, 2015, the Company has a leasehold interest in land in Tampa, Florida. The lease has a remaining term of approximately 65 years with an expiration date of December 31, 2080. Payments consist of a stated monthly amount that adjusts five percent every tenth anniversary through the expiration date.

At December 31, 2015, the Company owned NASCAR Plaza in Charlotte, North Carolina, which is subject to a ground lease. The lease has a remaining term of approximately 90 years with an expiration date of December 2105. Payments consist of a stated monthly amount through the expiration date.

At December 31, 2015, the Company owned Lincoln Place in Miami, Florida, which is subject to a ground lease. The lease has a remaining term of approximately 34 years with an expiration date of August 31, 2049. Payments consist of a stated monthly amount through the expiration date.

The Company recognized ground rent expenses for these leases of $1.5 million, $601,000, and $198,000 for the years ended December 31, 2015, 2014 and 2013, respectively.