EX-99.1 2 e19554ex99_1.txt PRESS RELEASE Exhibit 99.1 Parkway Properties, Inc. Reports 2004 Third Quarter Results JACKSON, Miss., Nov. 1 /PRNewswire-FirstCall/ -- Parkway Properties, Inc. (NYSE: PKY) today announced results for its third quarter ended September 30, 2004. Consolidated Financial Results - Net income available to common shareholders for the three months ended September 30, 2004 was $2,601,000 ($.23 per diluted share) compared to $10,779,000 ($.96 per diluted share) for the three months ended September 30, 2003. Net income available to common shareholders for the nine months ended September 30, 2004 was $11,117,000 ($.98 per diluted share) compared to $24,402,000 ($2.35 per diluted share) for the nine months ended September 30, 2003. A gain on a note receivable of $774,000 was included in net income available to common stockholders for the nine months ended September 30, 2004. Gains on the sale of joint venture interests and real estate of $5,020,000 and $10,661,000 were included in net income available to common stockholders for the three months and nine months ended September 30, 2003, respectively. Additionally, a $2,619,000 non-cash adjustment for original issue costs related to the redemption of Series A Preferred Stock was recorded during the nine months ended September 30, 2003. The Series A Preferred Stock was originally issued in April of 1998. - Funds from operations ("FFO") applicable to common shareholders totaled $13,776,000 ($1.13 per diluted share) for the three months ended September 30, 2004 compared to $13,014,000 ($1.14 per diluted share) for the three months ended September 30, 2003. FFO totaled $38,994,000 ($3.27 per diluted share) for the nine months ended September 30, 2004 compared to $36,245,000 ($3.30 per diluted share) for the nine months ended September 30, 2003. A gain on a note receivable of $774,000 ($.06 per diluted share) was included in FFO for the nine months ending September 30, 2004. A non-cash adjustment for original issue costs related to the redemption of Series A Preferred Stock of $2,619,000 ($.21 per diluted share) and a gain on the sale of land of $362,000 ($.03 per diluted share) were included in FFO for the nine months ending September 30, 2003. A reconciliation of FFO to net income is included in this press release. - Funds available for distribution ("FAD") totaled $5,509,000 for the three months ended September 30, 2004 compared to $10,707,000 for the three months ended September 30, 2003. FAD totaled $19,310,000 for the nine months ended September 30, 2004 compared to $21,549,000 for the nine months ended September 30, 2003. A reconciliation of FAD to net income is included in this press release. Acquisitions - On August 24, 2004 the Company purchased Squaw Peak Corporate Center, a 287,000 square-foot office project in the Camelback/Squaw Peak submarket of Phoenix, Arizona for $46.9 million plus $2.7 million in closing costs and anticipated capital expenditures and leasing costs during the first two years of ownership. Based upon current occupancy of 92%, the property is expected to produce an initial going-in capitalization rate of 9.7%. Operations and Leasing - Parkway's customer retention rate for the three months ending September 30, 2004 was 79% compared to 71% for the quarter ending June 30, 2004 and 59% for the quarter ending September 30, 2003. Customer retention for the nine months ending September 30, 2004 was 74% compared to 66% for the nine months ending September 30, 2003. - As of October 1, 2004, occupancy of the office portfolio was 90.7% compared to 89.7% as of July 1, 2004 and 91.1% as of October 1, 2003. Not included in the October 1, 2004 occupancy rate are 22 signed leases totaling 158,000 square feet, which commence during the fourth quarter of 2004 and first through third quarters of 2005. After adjusting for the additional leasing, the percentage leased would increase to 92.1%. - During the quarter ending September 30, 2004, leases were renewed or expanded on 474,000 net rentable square feet at an average rental rate decrease of 9% and a cost of $1.73 per square foot per year of the lease term in committed tenant improvements and leasing commissions. New leases were signed during the quarter on 112,000 net rentable square feet at a cost of $3.48 per square foot per year of the lease term in committed tenant improvements and leasing commissions. During the nine months ending September 30, 2004, leases were renewed or expanded on 1,164,000 net rentable square feet at an average cost of $1.66 per square foot per year of the lease term in committed tenant improvements and leasing commissions. New leases were signed during the nine months ended September 30, 2004 on 632,000 net rentable square feet at an average cost of $3.08 per square foot per year of the lease term in committed tenant improvements and leasing commissions. - Same store assets produced a decrease in net operating income ("NOI") of $5,550,000 or 10.1% for the nine months ended September 30, 2004 compared to the same period of the prior year. Without the impact of straight line rents, the decrease in same store results for the nine months ended September 30, 2004 would have been 9.9%. Approximately 78% of the decrease in same store results for the nine months ended September 30, 2004 compared to the same period of 2003 was due to lower occupancy and thus lower revenues. The increase in year-to-date same store expenses were due primarily to higher utility costs and insurance losses. Capital Markets, Financing and Private Equity - The Company's previously announced cash dividend of $.65 per share for the quarter ended September 30, 2004 represents a payout of approximately 57.5% of FFO per diluted share. The third quarter dividend was paid on September 29, 2004 and equates to an annualized dividend of $2.60 per share, a yield of 5.1% on the closing stock price on October 29, 2004 of $50.78. This dividend is the 72nd consecutive quarterly distribution to Parkway's shareholders of common stock. - As of September 30, 2004 the Company's debt-to-total market capitalization ratio was 45.2% compared to 43.2% as of June 30, 2004. - In connection with the purchase of the Squaw Peak Corporate Center in Phoenix, Arizona on August 24, 2004, Parkway assumed a $33.9 million fixed rate, non-recourse mortgage, which matures in December 2010 and bears interest at 8.16%. In accordance with generally accepted accounting principles, the mortgage was recorded at $39.6 million to reflect the fair value of the financial instrument based on the rate of 4.9% on the date of purchase. - In mid-December, the Company expects to close a $66.7 million three- building joint venture with the Rubicon Asset Management of Australia and the Greenwich Group. Parkway will retain management and a 20% ownership interest in its Carmel Crossing property located in Charlotte and its Lakewood and Falls Pointe buildings located in Atlanta. The 550,000 square foot portfolio stands at 93% leased. The $66.7 million sales price represents an 8.4% cap rate and $121 per square foot. Parkway will receive an acquisition fee of approximately $2 million in addition to the sales price. Additionally, at closing the partnership expects to place a 7-year $52 million mortgage. The mortgage terms are a fixed interest rate of 4.85% with a 7-year term, of which 4 years are interest only, with a 30-year amortization thereafter. Parkway will own 20% of the assets, but to accommodate our partner's needs, will hold only 14% of the debt or $7.2 million. Rubicon Asset Management is an Australian fund manager. The Greenwich Group acts as their investment advisor for the US Property Income Fund. Additional information about Rubicon can be found at their website, http://www.rubiconasset.com.au . In conjunction with closing, the Company will retire the $4,600,000 existing Lakewood mortgage prior to maturity at an estimated prepayment premium of $425,000. Proceeds from the venture of over $50 million will be applied toward the Company's line of credit. There are no assurances this venture will close. - Following the close of trading on Friday, October 29th, Parkway was added to the S&P SmallCap 600 Index. Outlook for 2004 The Company is forecasting FFO per diluted share of $4.43 to $4.49 and earnings per diluted share ("EPS") of $1.88 to $1.94 for 2004. The reconciliation of forecasted earnings per diluted share to forecasted FFO per diluted share is as follows: Guidance for 2004 Range Fully diluted EPS $1.88 - $1.94 Plus: Real estate depreciation and amortization $2.67 - $2.67 Plus: Depreciation on unconsolidated joint ventures $0.17 - $0.18 Plus: Diluted share adjustment for convertible preferred $0.15 - $0.14 Less: Minority interest depreciation and amortization ($0.05 - $0.05) Less: Gain on sale of joint venture interests ($0.39 - $0.39) Fully diluted FFO per share $4.43 - $4.49 There were no significant changes from prior guidance but for the projected closing of the Rubicon/Greenwich joint venture, which is projected to add $.12 per share to FFO. Outlook for 2005 The Company is forecasting FFO per diluted share of $4.37 to $4.57 and earnings per diluted share ("EPS") of $1.96 to $2.08 for 2005. The reconciliation of forecasted earnings per diluted share to forecasted FFO per diluted share is as follows: Guidance for 2005 Range Fully diluted EPS $1.96 - $2.08 Plus: Real estate depreciation and amortization $2.56 - $2.63 Plus: Depreciation on unconsolidated joint ventures $0.17 - $0.21 Plus: Diluted share adjustment for convertible preferred $0.12 - $0.11 Less: Minority interest depreciation and amortization ($0.05 - $0.05) Less: Gain on sale of joint venture interests ($0.39 - $0.41) Fully diluted FFO per share $4.37 - $4.57 The following assumptions were used in making this forecast: - An occupancy range of 91.7% to 93.9% with the average occupancy rate during the year of 92.5%; - Annual same store net operating income increase in the range of 2% to 4%; - Average interest rate of 3.7% on non-hedged, floating rate debt; and - Net new investments throughout the year totaling $150 million at an average acquisition cap rate of 8.65%. Acquisitions to be funded partially with sales proceeds with the remainder funded with debt and common equity on a leverage neutral basis. Steven G. Rogers, President and Chief Executive Officer stated, "The strengthening economy is beginning to produce jobs which are finding their way into our buildings. This is evidenced by the three straight quarterly increases in leasing and occupancy percentages. We are pleased to announce another proposed joint venture this quarter. This joint venture is with Rubicon, an Australian fund manager, on three assets in Atlanta and Charlotte. Venturing with Best Partners creates higher rates of return to our shareholders through increased fees." Additional Information January 1, 2003 marked the beginning of Parkway's VALUE square Operating Plan, which will span the three-year period ending December 31, 2005. This plan reflects the employees' commitment to create Value for its shareholders while holding firm to the core Values as espoused in the Parkway Commitment to Excellence. The Company plans to create value by Venturing with best partners, Asset recycling, Leverage neutral growth, Uncompromising focus on operations, and providing an Equity return to its shareholders that is 10% greater than that of its peer group, the NAREIT Office Index. Equity return is defined as growth in FFO per diluted share. Parkway will conduct a conference call to discuss the results of its third quarter operations on Tuesday, November 2, 2004, at 9:00 a.m. ET. The number for the conference call is 800-474-8920. A taped replay of the call can be accessed 24 hours a day through November 12, 2004 by dialing 888-203-1112 and using the pass code of 190962. An audio replay will be archived and indexed in the investor relations section of Parkway's website at http://www.pky.com . A copy of the Company's 2004 third quarter supplemental financial and property information package is available by accessing the Company's website, emailing your request to rjordan@pky.com or calling Rita Jordan at 601-948-4091. Please participate in the visual portion of the conference call by accessing the Company's website and clicking on the "3Q Call" Icon. By clicking on topics in the left margin, you can follow visual representations of the presentation. Additional information on Parkway Properties, Inc., including an archive of corporate press releases and conference calls, is available on the Company's website. The Company's third quarter 2004 Supplemental Operating and Financial Data, which includes a reconciliation of GAAP to Non-GAAP financial measures, will be available on the Company's website prior to the start of the conference call. About Parkway Properties Parkway Properties, Inc. is a self-administered real estate investment trust specializing in the operations, acquisition, ownership, management, and leasing of office properties. The Company is geographically focused on the Southeastern and Southwestern United States and Chicago. Parkway owns or has an interest in 62 office properties located in 11 states with an aggregate of approximately 11,565,000 square feet of leasable space as of November 1, 2004. The Company also offers fee based real estate services through its wholly owned subsidiary, Parkway Realty Services, to its owned properties and to its third party and minority interest properties. Certain statements in this release that are not in the present tense or discuss the Company's expectations (including the use of the words anticipate, forecast or project) are forward-looking statements within the meaning of the federal securities laws and as such are based upon the Company's current belief as to the outcome and timing of future events. There can be no assurance that future developments affecting the Company will be those anticipated by the Company. These forward-looking statements involve risks and uncertainties (some of which are beyond the control of the Company) and are subject to change based upon various factors, including but not limited to the following risks and uncertainties: changes in the real estate industry and in performance of the financial markets; the demand for and market acceptance of the Company's properties for rental purposes; the amount and growth of the Company's expenses; tenant financial difficulties and general economic conditions, including interest rates, as well as economic conditions in those areas where the Company owns properties; the risks associated with the ownership of real property; and other risks and uncertainties detailed from time to time on the Company's SEC filings. Should one or more of these risks or uncertainties occur, or should underlying assumptions prove incorrect, the Company's results could differ materially from those expressed in the forward- looking statements. The Company does not undertake to update forward-looking statements. PARKWAY PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share data) September 30 December 31 2004 2003 (Unaudited) Assets Real estate related investments: Office and parking properties $1,024,942 $844,168 Parking development 1,462 - Accumulated depreciation (139,764) (115,473) 886,640 728,695 Land available for sale 3,528 3,528 Note receivable from Moore Building Associates LP - 5,926 Mortgage loans - 861 Investment in unconsolidated joint ventures 19,950 20,026 910,118 759,036 Interest, rents receivable and other assets 77,541 42,804 Cash and cash equivalents 1,579 468 $989,238 $802,308 Liabilities Notes payable to banks $151,758 $110,075 Mortgage notes payable without recourse 361,972 247,190 Accounts payable and other liabilities 46,892 37,022 560,622 394,287 Minority Interest Minority Interest - unit holders 40 41 Minority Interest - real estate partnerships 3,769 - 3,809 41 Stockholders' Equity 8.34% Series B Cumulative Convertible Preferred stock, $.001 par value, 2,142,857 shares authorized, 1,792,857 and 1,942,857 shares issued and outstanding in 2004 and 2003, respectively 62,750 68,000 8.00% Series D Preferred stock, $.001 par value, 2,400,000 shares authorized, issued and outstanding 57,976 57,976 Preferred membership interests 10,741 - Common stock, $.001 par value, 65,057,143 shares authorized, 11,430,812 and 10,808,131 shares issued and outstanding in 2004 and 2003, respectively 11 11 Common stock held in trust, at cost, 130,000 and 128,000 shares in 2004 and 2003, respectively (4,400) (4,321) Additional paid-in capital 274,145 252,695 Unearned compensation (4,044) (4,634) Accumulated other comprehensive income 109 - Retained earnings 27,519 38,253 424,807 407,980 $989,238 $802,308 PARKWAY PROPERTIES, INC. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) Three Months Ended September 30 2004 2003 (Unaudited) Revenues Income from office and parking properties $42,220 $34,888 Management company income 433 546 Interest on note receivable from Moore Building Associates LP - 207 Incentive management fee from Moore Building Associates LP - 66 Other income and deferred gains 3 64 42,656 35,771 Expenses Office and parking properties: Operating expense 19,519 15,229 Interest expense: Contractual 5,052 4,037 Prepayment expenses (141) - Amortization of loan costs 159 77 Depreciation and amortization 10,722 6,722 Operating expense for other real estate properties (2) 11 Interest expense on bank notes: Contractual 932 615 Amortization of loan costs 114 64 Management company expenses 87 61 General and administrative 1,122 1,040 37,564 27,856 Income before equity in earnings, gain and minority interest 5,092 7,915 Equity in earnings of unconsolidated joint ventures 359 590 Gain on sale of joint venture interests and real estate - 5,020 Minority interest - unit holders (1) (1) Minority interest - real estate partnerships (31) - Net Income 5,419 13,524 Dividends on preferred stock (1,468) (1,200) Dividends on convertible preferred stock (1,350) (1,545) Net income available to common stockholders $2,601 $10,779 Net income per common share: Basic $0.23 $1.04 Diluted $0.23 $0.96 Dividends per common share $0.65 $0.65 Weighted average shares outstanding: Basic 11,330 10,411 Diluted 11,528 12,790 PARKWAY PROPERTIES, INC. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) Nine Months Ended September 30 2004 2003 (Unaudited) Revenues Income from office and parking properties $119,351 $107,107 Management company income 1,270 1,688 Interest on note receivable from Moore Building Associates LP - 613 Incentive management fee from Moore Building Associates LP - 221 Other income and deferred gains 20 551 120,641 110,180 Expenses Office and parking properties: Operating expense 55,662 47,608 Interest expense: Contractual 14,369 12,063 Prepayment expenses 130 - Amortization of loan costs 407 209 Depreciation and amortization 26,641 20,674 Operating expense for other real estate properties 18 31 Interest expense on bank notes: Contractual 2,696 2,138 Amortization of loan costs 329 428 Management company expenses 259 302 General and administrative 3,089 3,184 103,600 86,637 Income before equity in earnings, gain and minority interest 17,041 23,543 Equity in earnings of unconsolidated joint ventures 1,469 1,644 Gain on note receivable, sale of joint venture interests and real estate 774 10,661 Minority interest - unit holders (2) (2) Minority interest - real estate partnerships 92 - Net Income 19,374 35,846 Original issue costs associated with redemption of preferred stock - (2,619) Dividends on preferred stock (4,135) (4,152) Dividends on convertible preferred stock (4,122) (4,673) Net income available to common stockholders $11,117 $24,402 Net income per common share: Basic $1.00 $2.43 Diluted $0.98 $2.35 Dividends per common share $1.95 $1.95 Weighted average shares outstanding: Basic 11,094 10,031 Diluted 11,299 12,390 PARKWAY PROPERTIES, INC. RECONCILIATION OF FUNDS FROM OPERATIONS AND FUNDS AVAILABLE FOR DISTRIBUTION TO NET INCOME FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 (In thousands, except per share data) Three Months Ended Nine Months Ended September 30 September 30 2004 2003 2004 2003 (Unaudited) (Unaudited) Net Income $5,419 $13,524 $19,374 $35,846 Adjustments to Net Income: Preferred Dividends (1,468) (1,200) (4,135) (4,152) Convertible Preferred Dividends (1,350) (1,545) (4,122) (4,673) Original Issue Costs - Redemption of Preferred Stock - - - (2,619) Depreciation and Amortization 10,722 6,722 26,641 20,674 Minority Interest Depreciation and Amortization (164) - (490) - Adjustments for Unconsolidated Joint Ventures 616 536 1,724 1,474 Amortization of Deferred Gains - (4) - (8) Minority Interest - Unit Holders 1 1 2 2 Gain on Sale of Joint Venture Interests and Real Estate - (5,020) - (10,299) Funds From Operations Applicable to Common Shareholders (1) $13,776 $13,014 $38,994 $36,245 Funds Available for Distribution Funds From Operations Applicable to Common Shareholders $13,776 $13,014 $38,994 $36,245 Add (Deduct): Adjustments for Unconsolidated Joint Ventures (309) (194) (1,393) (1,831) Adjustments for Minority Interest in Real Estate Partnerships 40 - 118 - Straight-line Rents (1,049) (589) (1,960) (1,618) Amortization of Above/Below Market Leases (54) - 77 - Amortization of Restricted Shares and Share Equivalents 197 168 590 500 Capital Expenditures: Building Improvements (1,235) (912) (3,098) (3,646) Tenant Improvements - New Leases (3,235) (70) (7,762) (3,141) Tenant Improvements - Renewal Leases (888) (346) (2,192) (3,151) Leasing Costs - New Leases (799) (173) (2,371) (668) Leasing Costs - Renewal Leases (935) (191) (1,693) (1,141) Funds Available for Distribution (1) $5,509 $10,707 $19,310 $21,549 Diluted Per Common Share/Unit Information (**) FFO per share $1.13 $1.14 $3.27 $3.30 Dividends paid $0.65 $0.65 $1.95 $1.95 Dividend payout ratio for FFO 57.49% 57.11% 59.62% 59.05% Weighted average shares/units outstanding 13,378 12,792 13,182 12,392 Other Supplemental Information Upgrades on Acquisitions $2,232 $1,320 $6,192 $4,009 Gain on Note Receivable and Land $- $- $774 $362 **Information for Diluted Computations: Convertible Preferred Dividends $1,350 $1,545 $4,122 $4,673 Basic Common Shares/Units Outstanding 11,332 10,412 11,095 10,033 Convertible Preferred Shares Outstanding 1,848 2,112 1,882 2,133 Dilutive Effect of Stock Options, Warrants and Deferred Share Units 198 268 205 226 (1) Funds from operations ("FFO") applicable to common shareholders and funds available for distribution ("FAD") are included herein because we believe that these measures are helpful to investors and our management as measures of the performance of an equity REIT. These measures, along with cash flow from operating, financing and investing activities, provide investors with an indication of our ability to incur and service debt, to pay dividends, to make capital expenditures and to fund other cash needs. Parkway computes FFO in accordance with standards established by the National Association of Real Estate Investment Trusts ("NAREIT"), which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition. FFO is defined as net income, computed in accordance with generally accepted accounting principles ("GAAP"), excluding gains or losses from the sales of properties, plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. There is not a standard definition established for FAD. Therefore, our measure of FAD may not be comparable to FAD reported by other REITs. We define FAD as FFO, excluding the amortization of restricted shares, amortization of above/below market leases and straight line rent adjustments, and reduced by non-revenue enhancing capital expenditures for building improvements, tenant improvements and leasing costs. Adjustments for unconsolidated partnerships and joint ventures are included in the computation of FAD on the same basis. PARKWAY PROPERTIES, INC. CALCULATION OF EBITDA AND COVERAGE RATIOS FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 (In thousands) Three Months Ended Nine Months Ended September 30 September 30 2004 2003 2004 2003 (Unaudited) (Unaudited) Net Income $5,419 $13,524 $19,374 $35,846 Adjustments to Net Income: Interest Expense 5,984 4,652 17,065 14,201 Amortization of Financing Costs 273 141 736 637 Prepayment Expenses - Early Extinguishment of Debt (141) - 130 - Depreciation and Amortization 10,722 6,722 26,641 20,674 Amortization of Deferred Compensation 197 168 590 500 Gain on Note Receivable, Sale of Joint Venture Interests and Real Estate - (5,020) (774) (10,661) Tax Expenses - 44 - 132 EBITDA Adjustments - Unconsolidated Joint Ventures 1,528 1,458 4,396 4,022 EBITDA Adjustments - Minority Interest in Real Estate Partnerships (354) - (1,329) - EBITDA (1) $23,628 $21,689 $66,829 $65,351 Interest Coverage Ratio: EBITDA $23,628 $21,689 $66,829 $65,351 Interest Expense: Interest Expense $5,984 $4,652 $17,065 $14,201 Capitalized Interest 6 - 6 - Interest Expense - Unconsolidated Joint Ventures 737 762 2,176 2,079 Interest Expense - Minority Interest in Real Estate Partnerships (184) - (821) - Total Interest Expense $6,543 $5,414 $18,426 $16,280 Interest Coverage Ratio 3.61 4.01 3.63 4.01 Fixed Charge Coverage Ratio: EBITDA $23,628 $21,689 $66,829 $65,351 Fixed Charges: Interest Expense $6,543 $5,414 $18,426 $16,280 Preferred Dividends 2,818 2,745 8,257 8,825 Preferred Distributions - Unconsolidated Joint Ventures 137 123 384 376 Principal Payments (Excluding Early Extinguishment of Debt) 3,812 2,626 9,630 8,318 Principal Payments - Unconsolidated Joint Ventures 160 146 471 423 Principal Payments - Minority Interest in Real Estate Partnerships (100) - (330) - Total Fixed Charges $13,370 $11,054 $36,838 $34,222 Fixed Charge Coverage Ratio 1.77 1.96 1.81 1.91 (1) EBITDA, a non-GAAP financial measure, means operating income before mortgage and other interest expense, income taxes, depreciation and amortization. We believe that EBITDA is useful to investors and Parkway's management as an indication of the Company's ability to service debt and pay cash distributions. EBITDA, as calculated by us, is not comparable to EBITDA reported by other REITs that do not define EBITDA exactly as we do. EBITDA does not represent cash generated from operating activities in accordance with generally accepted accounting principles, and should not be considered an alternative to operating income or net income as an indicator of performance or as an alternative to cash flows from operating activities as an indicator of liquidity. PARKWAY PROPERTIES, INC. NET OPERATING INCOME FROM OFFICE AND PARKING PROPERTIES THREE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003 (In thousands, except number of properties data) Number Percentage Net Operating of of Income Occupancy Proper- Portfolio ties (1) 2004 2003 2004 2003 Same store properties (3) 51 76.25% $17,310 $18,869 89.5% 91.1% 2003 acquisitions 3 7.57% 1,718 550 87.4% N/A 2004 acquisitions 3 13.65% 3,099 - 97.1% N/A Other property (2) 1 2.33% 528 - 100.0% N/A Assets sold - 0.20% 46 240 N/A N/A Net Operating Income from Office and Parking Properties 58 100.00% $22,701 $19,659 (1) Percentage of portfolio based on 2004 net operating income. (2) In accordance with FIN 46, Parkway began including Moore Building Associates, LP ("MBALP") in its consolidated financial statements effective January 1, 2004. MBALP owns the Toyota Center , which is an office building located in Memphis, TN. (3) Parkway defines Same Store Properties as those properties that were owned for the entire three-month periods ended September 30, 2004 and 2003. Same Store net operating income ("SSNOI") includes income from real estate operations less property operating expenses (before interest and depreciation and amortization) for Same Store Properties. SSNOI as computed by Parkway may not be comparable to SSNOI reported by other REITs that do not define the measure exactly as we do. SSNOI is a supplemental industry reporting measurement used to evaluate the performance of the Company's investments in real estate assets. The following table is a reconciliation of net income to SSNOI: Three Months Ended Nine Months Ended September 30 September 30 2004 2003 2004 2003 Net income $5,419 $13,524 $19,374 $35,846 Add (Deduct): Interest expense 6,116 4,793 17,931 14,838 Depreciation and amortization 10,722 6,722 26,641 20,674 Operating expense for other real estate properties (2) 11 18 31 Management company expenses 87 61 259 302 General and administrative expenses 1,122 1,040 3,089 3,184 Gain on note receivable, sale of joint venture interests and real estate - (5,020) (774) (10,661) Minority interest - unit holders 1 1 2 2 Minority interest - real estate partnerships 31 - (92) - Management company income (433) (546) (1,270) (1,688) Interest income - (207) - (613) Incentive management fee income - (66) - (221) Equity in earnings of unconsolidated joint ventures (359) (590) (1,469) (1,644) Other income and deferred gains (3) (64) (20) (551) Net operating income from office and parking properties 22,701 19,659 63,689 59,499 Less: Net operating income from non same store properties (5,391) (790) (14,238) (4,498) Same Store net operating income $17,310 $18,869 $49,451 $55,001 FOR FURTHER INFORMATION: Steven G. Rogers President & Chief Executive Officer Marshall A. Loeb Chief Financial Officer (601) 948-4091 SOURCE Parkway Properties, Inc. -0- 11/01/2004 /CONTACT: Steven G. Rogers, President & Chief Executive Officer, or Marshall A. Loeb, Chief Financial Officer of Parkway Properties, Inc., +1-601-948-4091/ /Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/20030513/PARKLOGO AP Archive: http://photoarchive.ap.org PRN Photo Desk, photodesk@prnewswire.com/ /Web site: http://www.pky.com http://www.rubiconasset.com.au / (PKY) CO: Parkway Properties, Inc.; Rubicon ST: Mississippi IN: RLT SU: ERN ERP CCA JVN