JACKSON, Miss., Dec. 4 /PRNewswire-FirstCall/ -- Parkway Properties,
Inc. (NYSE: PKY) announced today updated earnings guidance for 2007 and
reaffirmed the previous earnings guidance for 2006.
(Logo: http://www.newscom.com/cgi-bin/prnh/20030513/PARKLOGO )
On October 30, 2006, the Company issued funds from operations ("FFO")
guidance for 2007 of $4.00 to $4.20 per diluted share. The Company is
updating its 2007 FFO guidance to $3.80 to $4.00 per share. This updated
guidance includes additional assumptions regarding the sale or joint
venture of certain assets in 2007 and the reinvestment of proceeds from
this capital activity as detailed in the attached exhibits. The sales and
joint ventures projected during 2007 will result in estimated debt
prepayment penalties and expenses of approximately $2.8 million, or $0.18
per diluted share. These one- time charges are the primary drivers of the
decline in earnings guidance.
The Company's GEAR UP Strategic Plan calls for the disposition of
approximately 5 million square feet of existing assets, mainly through
contribution to joint ventures, with an estimated current value of
approximately $807 million during 2007 and 2008. The Company anticipates
reinvesting the net proceeds of these dispositions into acquisitions in
core Parkway markets. Due to the uncertainty of the timing of dispositions
and the subsequent reinvestment of proceeds, the Company anticipates that
these capital events may have a temporary dilutive impact on FFO in 2007.
The projected joint venture of One and Two Illinois Center in Chicago,
Illinois, which was not included in the original guidance, is likewise not
included in the updated earnings guidance at this time. Over the past five
months, the Company marketed the two properties as a single joint venture
and identified a number of interested investors. The Company signed letters
of intent with two unrelated parties, but was unable to reach final
agreement on all terms of a contribution of the properties to a joint
venture with either party. The Company will continue to pursue selective
opportunities to joint venture the properties.
Steven G. Rogers, President and Chief Executive Officer of Parkway
Properties, Inc. stated, "Our updated earnings guidance captures the
significant asset recycling of our secondary market portfolios. These
actions show a modest short-term dilution to FFO per share in 2007, but
support our GEAR UP Plan strategy of asset recycling and our transformation
to an operator-owner. On a fully reinvested basis, we believe that these
actions will have a positive impact on FFO, FAD and net asset value over
the long term. Since our last earnings release, we have been unable to
finalize our contribution of One and Two Illinois Center in Chicago to a
joint venture on terms that are acceptable to Parkway. Our present plans
are to keep these assets, improve the leasing and operations, and allow the
Chicago market some time to gain strength in investors' minds. We have
strong confidence in the asset values of One and Two Illinois Center and
their ability to produce a growing income stream in the improving Chicago
and East Loop markets."
The Company is forecasting FFO per diluted share of $3.80 to $4.00 and
EPS of $4.45 to $4.55 for 2007. The reconciliation of forecasted EPS to
forecasted FFO per diluted share is as follows:
Guidance for 2007 Range
Fully diluted EPS $4.45 - $4.55
Plus: Real estate depreciation and amortization $4.09 - $4.17
Plus: Depreciation on unconsolidated joint ventures $0.05 - $0.11
Less: Gain on sale of real estate and joint venture ($4.45 - $4.49)
interests
Less: Diluted share adjustment for convertible ($0.01 - $0.01)
preferred
Less: Minority interest depreciation and amortization ($0.33 - $0.33)
Fully diluted FFO per share $3.80 - $4.00
Earnings guidance is based on the core operating assumptions and 2007
capital activity assumptions described below. The core operating
assumptions were originally stated in the October 30, 2006 press release
and include assumptions regarding the Company's capital activity for the
remainder of 2006 and new investments for the discretionary fund in 2007.
These core assumptions have been updated to take account of the additional
capital activity anticipated in 2007.
The new assumptions relating to 2007 capital activity are described
below and are not based on contracts that currently exist. These
assumptions reflect the Company's expectations based on its knowledge of
current market conditions and its experience. There can be no certainty
that this capital activity can be completed on the terms that have been
used in these assumptions. The Company expects to update this guidance and
the assumptions used in this guidance on a quarterly basis, to be included
in its announcement of quarterly operating results.
Core Operating Assumptions
* An average occupancy for the first, second, third and fourth quarters
of 2007 of 91%, 92%, 93% and 94%, respectively.
* An average same store net operating income growth for the first half of
2007 of 4%; and an average same store net operating income growth for
the second half of 2007 of 8%; for an annual increase in same store net
operating income of 6% on a GAAP basis. On a cash basis, annual same
store net operating income is expected to increase 9%. The list of same
store assets has been updated to reflect the projected sale or joint
venture of assets in 2007.
* Straight line rent adjustment is expected to be approximately $1.8
million for 2007 compared to $4.9 million for 2006, reflecting the
reduction in rent concessions in 2007 as compared to 2006.
* Interest rate on non-hedged floating rate debt of 6.70% and 6.50% for
first and second half of year respectively, for an average interest rate
of 6.60%.
* Sale of six wholly-owned properties by the end of 2006 for a total sales
price of approximately $48 million and an estimated gain for financial
reporting purposes on these sales of approximately $9 million.
* New investments for the discretionary fund projected late in the fourth
quarter of 2006 totaling $120 million and in 2007 totaling $150 million,
all at an average acquisition capitalization rate of 7% on the assets
and 9% to Parkway when including various recurring fees.
* No lease termination fee income is assumed for 2007 as compared to
$588,000 recorded in 2006.
2007 Capital Activity Assumptions
* One fee simple sale of an asset in Columbia, South Carolina valued at
$10.2 million is projected to take place on April 1, 2007.
* Contributions of assets to joint ventures, where the Company will retain
a 25% ownership interest, are projected to be made as shown below:
* Assets in Virginia totalling 883,000 square feet with an estimated
value of $105 million contributed to a joint venture on April 1, 2007;
* Assets in Knoxville, Tennessee totalling 549,000 square feet with an
estimated value of $60 million on July 1, 2007;
* Two assets in Columbia, South Carolina totalling 759,000 square feet
with an estimated value of $103 million on October 1, 2007.
* Debt prepayment penalties and expense of $2.8 million, or $0.18 per
share in FFO, are projected on the dispositions in 2007.
* The Company's debt to total market capitalization is expected to range
from 46% to 49% throughout 2007 as these capital events take place, with
a projected ending debt to market capitalization of 48%, calculated
using the November 30, 2006 closing stock price of $51.88 per share.
* Proceeds from dispositions are used to pay down short-term debt with an
interest rate of 6.5% at the time of the sale.
* Fee simple acquisitions of $100 million are projected as shown below:
* $40 million on August 1, 2007 at a 7% cap rate;
* $40 million on November 1, 2007 at a 7% cap rate;
* $20 million on December 1, 2007 at a 7% cap rate.
On January 1, 2006, the Company initiated a new operating plan that
will be referred to as the "GEAR UP" Plan. At the heart of the GEAR UP Plan
are Great People transforming Parkway through Equity Opportunities and
Asset Recycling from an owner-operator to an operator-owner. Our
long-standing commitment to Retain our Customers and provide an
Uncompromising Focus on Operations remains steadfast. We believe that by
accomplishing these goals we can deliver excellent Performance to our
shareholders. Performance for the GEAR UP Plan will be measured as the sum
of adjusted funds available for distribution, as defined by the Company,
cumulative over the three years of the plan. The goal for cumulative
adjusted funds available for distribution is $7.18 per diluted share.
Parkway Properties, Inc., a member of the S&P Small Cap 600 Index, is a
self-administered real estate investment trust specializing in the
operation, 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
68 office properties located in 11 states with an aggregate of
approximately 13 million square feet of leasable space as of December 4,
2006. 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.
Parkway Properties, Inc.'s press releases and additional information
about the Company are available on the World Wide Web at
http://www.pky.com.
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 and development of real
property; the failure to acquire or sell properties as and when
anticipated; 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.
Exhibit 1
Disposition Assumptions
Atrium at Virginia
Stoneridge Portfolio
Disposition:
Assumed date of sale or JV 04/01/07 04/01/07
Properties included Atrium at Stoneridge (1)
Total square feet of assets 108,000 883,000
Format of sale Fee Simple Joint Venture
Ownership interest retained 0% 25%
Projected cash NOI (annualized
for 100% ownership) $631,000 $7,625,000
Broker opinion of value (100%) $10,185,000 $104,994,000
Derived cap rate 6.20% 7.26%
Mortgage balance to be prepaid
at closing (100%) $- $-
Mortgage placed on new
joint venture (100%) $- $78,746,000
Estimated cash proceeds to
Parkway (PKY %) $10,045,000 $96,911,000
Short-Term Reinvestment of Proceeds:
Pay down bank lines of credit $10,045,000 $96,911,000
Short-term borrowing rate 6.57% 6.57%
FFO Impact:
FFO impact on operations $25,000 $(318,000)
Debt prepayment penalty and expense - -
Total 2007 FFO impact $25,000 $(318,000)
FFO impact on operations per diluted share $- $(0.02)
Debt prepayment penalty and expense
per diluted share - -
Total 2007 FFO impact per diluted share $- $(0.02)
FFO impact stabilized (full 12 months) $90,000 $(557,000)
FFO impact per diluted share
stabilized (full 12 months) $0.01 $(0.04)
Net Income and EPS Impact:
Net income impact (excluding gains) $243,000 $1,872,000
Gain on sale of real estate and
joint venture interests 2,566,000 15,487,000
Total 2007 net income impact $2,809,000 $17,359,000
Diluted EPS impact (excluding gains) $0.02 $0.12
Gain on sale of real estate and
joint venture interests per diluted share 0.17 1.03
Total 2007 diluted EPS impact $0.19 $1.15
Net income impact stabilized (full 12 months) $381,000 $2,361,000
Diluted EPS impact stabilized (full 12 months) $0.02 $0.16
(1) Properties included in Virginia Portfolio are six Richmond
properties: Glen Forest, Moorefield I, Moorefield II, Moorefield III,
Boulders Center and Winchester and three Norfolk properties: Lynwood
Plaza, Town Point Center and Greenbrier Tower I & II.
Exhibit 1
Disposition Assumptions (Cont'd)
Total
Knoxville Columbia Year Ended
Portfolio Portfolio 12/31/07
Disposition:
Assumed date of sale or JV 07/01/07 10/01/07
Properties included Cedar Ridge Capitol Center
First Tower at 1301
Tennessee Gervais
Plaza
Total square feet
of assets 549,000 759,000 2,299,000
Format of sale Joint Venture Joint Venture
Ownership interest
retained 25% 25%
Projected cash NOI
(annualized for
100% ownership) $4,539,000 $6,459,000 $19,254,000
Broker opinion of
value (100%) $60,011,000 $102,950,000 $278,140,000
Derived cap rate 7.56% 6.27% 6.92%
Mortgage balance to be
prepaid at closing (100%) $7,413,000 $18,580,000 $25,993,000
Mortgage placed on new
joint venture (100%) $45,008,000 $77,213,000 $200,967,000
Estimated cash proceeds
to Parkway (PKY %) $47,663,000 $74,963,000 $229,582,000
Short-Term Reinvestment
of Proceeds:
Pay down bank lines
of credit $47,663,000 $74,963,000 $229,582,000
Short-term borrowing rate 6.50% 6.50%
FFO Impact:
FFO impact on operations $(159,000) $51,000 $(401,000)
Debt prepayment penalty
and expense (588,000) (2,210,000) (2,798,000)
Total 2007 FFO impact $(747,000) $(2,159,000) $(3,199,000)
FFO impact on operations
per diluted share $(0.01) $- $(0.03)
Debt prepayment penalty
and expense per diluted share (0.04) (0.14) (0.18)
Total 2007 FFO impact
per diluted share $(0.05) $(0.14) $(0.21)
FFO impact stabilized
(full 12 months) $(248,000) $630,000 $(85,000)
FFO impact per diluted
share stabilized
(full 12 months) $(0.02) $0.04 $(0.01)
Net Income and EPS Impact:
Net income impact
(excluding gains) $(130,000) $(1,693,000) $292,000
Gain on sale of real estate
and joint venture interests 15,723,000 34,309,000 68,085,000
Total 2007 net income
impact $15,593,000 $32,616,000 $68,377,000
Diluted EPS impact
(excluding gains) $(0.01) $(0.11) $0.02
Gain on sale of real
estate and joint venture
interests per diluted share 1.05 2.28 4.53
Total 2007 diluted
EPS impact $1.04 $2.17 $4.55
Net income impact
stabilized (full 12 months) $984,000 $2,501,000 $6,227,000
Diluted EPS impact
stabilized (full 12 months) $0.06 $0.17 $0.41
Exhibit 2
Acquisition Assumptions
Total
Year Ended
Acquisition Acquisition Acquisition 12/31/07
#1 #2 #3
Acquisition:
Assumed date of
acquisition 08/01/07 11/01/07 12/01/07
Purchase price $40,000,000 $40,000,000 $20,000,000 $100,000,000
Format of
acquisition Fee Simple Fee Simple Fee Simple
Anticipated cap rate 7.00% 7.00% 7.00% 7.00%
Projected cash NOI
(annualized) $2,800,000 $2,800,000 $1,400,000 $7,000,000
Source of funds:
Bank lines of credit $40,000,000 $40,000,000 $20,000,000 $100,000,000
Short-term borrowing
rate 6.50% 6.50% 6.50%
FFO Impact:
FFO impact in 2007 $84,000 $33,000 $8,000 $125,000
FFO impact per
diluted share in
2007 $0.01 $0.00 $0.00 $0.01
FFO impact stabilized
(full 12 months) $200,000 $200,000 $100,000 $500,000
FFO impact per
diluted share
stabilized (full 12
months) $0.01 $0.01 $0.01 $0.03
EPS Impact:
Net income impact in
2007 $(293,000) $(117,000) $(30,000) $(440,000)
Diluted EPS impact in
2007 $(0.02) $(0.01) $(0.00) $(0.03)
Net income impact
stabilized (full 12
months) $(700,000) $(700,000) $(350,000) $(1,750,000)
Diluted EPS impact
stabilized (full 12
months) $(0.05) $(0.05) $(0.02) $(0.12)
CONTACT: STEVEN G. ROGERS
PRESIDENT & CHIEF EXECUTIVE OFFICER
WILLIAM R. FLATT
CHIEF FINANCIAL OFFICER
(601) 948-4091
SOURCE Parkway Properties, Inc.
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Related links:
http://www.pky.com/
Photo Notes:
NewsCom: http://www.newscom.com/cgi-bin/prnh/20030513/PARKLOGO
AP Archive: http://photoarchive.ap.org
PRN Photo Desk, photodesk@prnewswire.com
http://www.prnewswire.com/comp/103115.html/
CONTACT:
Steven G. Rogers, President & Chief Executive
Officer, or William R. Flatt, Chief Financial Officer, both of
Parkway Properties, Inc., +1-601-948-4091
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