Segment Information

9 Months Ended

Sep. 30, 2011

Segment Information [Abstract]

Segment Information

Note O - Segment Information

Parkway's primary business is the ownership and operation of office properties.  The Company accounts for each office property or groups of related office properties as an individual operating segment.  Parkway has aggregated its individual operating segments into a single reporting segment due to the fact that the individual operating segments have similar operating and economic characteristics.

The Company believes that the individual operating segments exhibit similar economic characteristics such as being leased by the square foot, sharing the same primary operating expenses and ancillary revenue opportunities and being cyclical in the economic performance based on current supply and demand conditions.  The individual operating segments are also similar in that revenues are derived from the leasing of office space to customers and each office property is managed and operated consistently in accordance with Parkway's standard operating procedures.  The range and type of customer uses of our properties is similar throughout our portfolio regardless of location or class of building and the needs and priorities of our customers do not vary from building to building. Therefore, Parkway's management responsibilities do not vary from location to location based on the size of the building, geographic location or class.

The management of the Company evaluates the performance of the reportable office segment based on funds from operations attributable to common stockholders ("FFO").  Management believes that FFO is an appropriate measure of performance for equity REITs and computes this measure in accordance with the National Association of Real Estate Investment Trusts' ("NAREIT") definition of FFO (including any guidance that NAREIT releases with respect to the definition).  Funds from operations is defined by NAREIT as net income (computed in accordance with GAAP), reduced by preferred dividends, excluding gains or losses on depreciable real estate and extraordinary items under GAAP, plus depreciation and amortization, and after adjustments to derive the Company's pro rata share of FFO of consolidated and unconsolidated joint ventures.  Further, the Company does not adjust FFO to eliminate the effects of non-recurring charges.  On October 31, 2011, NAREIT issued updated guidance on reporting FFO such that impairment losses on depreciable real estate should be excluded from the computation of FFO for current and prior periods.  The Company believes that FFO is a meaningful supplemental measure of its operating performance because historical cost accounting for real estate assets in accordance with GAAP implicitly assumes that the value of real estate assets diminishes predictably over time, as reflected through depreciation and amortization expenses. However, since real estate values have historically risen or fallen with market and other conditions, many industry investors and analysts have considered presentation of operating results for real estate companies that use historical cost accounting to be insufficient.  Thus, NAREIT created FFO as a supplemental measure of operating performance for real estate investment trusts that excludes historical cost depreciation and amortization, among other items, from net income, as defined by GAAP.  The Company believes that the use of FFO, combined with the required GAAP presentations, has been beneficial in improving the understanding of operating results of real estate investment trusts among the investing public and making comparisons of operating results among such companies more meaningful. FFO as reported by Parkway may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition.  Funds from operations do not represent cash generated from operating activities in accordance with accounting principles generally accepted in the United States and is not an indication of cash available to fund cash needs.  Funds from operations should not be considered an alternative to net income as an indicator of the Company's operating performance or as an alternative to cash flow as a measure of liquidity.

The following is a reconciliation of FFO and net income (loss) attributable to common stockholders for office properties and total consolidated entities for the three months ended September 30, 2011 and 2010.  Amounts presented as "Unallocated and Other" represent primarily income and expense associated with providing management services, corporate general and administrative expense, interest expense on the Company's credit facility and preferred dividends.

	At or for the three months ended								At or for the three months ended
	September 30, 2011								September 30, 2010
	Office			Unallocated				Office			Unallocated
	Properties			and Other		Consolidated		Properties			and Other		Consolidated
	(in thousands)							(in thousands)
	(Unaudited)
Income from office and parking properties (a)	$	63,594	$	-	$	63,594	$	45,095		$	-	$	45,095
Management company income		-		6,120		6,120		-			585		585
Property operating expenses (b)		(30,639)		-		(30,639)		(21,612)			-		(21,612)
Depreciation and amortization		(26,087)		-		(26,087)		(14,825)			-		(14,825)
Management company expenses		-		(4,319)		(4,319)		-			(858)		(858)
Income tax expense-current		-		(190)		(190)		-			(59)		(59)
Income tax expense-deferred		-		364		364		-			-		-
General and administrative expenses		-		(1,902)		(1,902)		-			(1,758)		(1,758)
Acquisition costs		-		(25)		(25)		-			-		-
Other income		-		87		87		-			354		354
Equity in earnings (loss) of               unconsolidated joint ventures		(14)		-		(14)		62			-		62
Gain on involuntary conversion		-		-		-		40			-		40
Interest expense (c)		(11,878)		(1,595)		(13,473)		(8,673)			(1,491)		(10,164)
Adjustment for noncontrolling interest-real estate partnerships		77,546		-		77,546		2,356			-		2,356
Loss from discontinued operations		(22,633)		-		(22,633)		(1,048)			-		(1,048)
Gain on sale of real estate from discontinued operations		2,275		-		2,275		-			-		-
Gain on sale of real estate		743		-		743		-			-		-
Change in fair value of contingent         consideration		-		12,000		12,000		-			-		-
Impairment loss on real estate		(107,240)		-		(107,240)		-			-		-
Impairment loss on mortgage loan         receivable		-		(9,235)		(9,235)		-			-		-
Dividends on preferred stock		-		(2,710)		(2,710)		-			(1,737)		(1,737)
Net income (loss) attributable to common stockholders		(54,333)		(1,405)		(55,738)		1,395			(4,964)		(3,569)
Depreciation and amortization		26,087		-		26,087		14,825			-		14,825
Depreciation and amortization - discontinued operations		6,203		-		6,203		6,301			-		6,301
Depreciation and amortization noncontrolling interest - real estate partnerships		(11,574)		-		(11,574)		(4,011)			-		(4,011)
Adjustment for depreciation and amortization-unconsolidated joint ventures		38		-		38		85			-		85
Impairment loss on real estate		54,767		-		54,767		-			-		-
Gain on sale of real estate		(3,018)		-		(3,018)		-			-		-
Funds from operations available to common stockholders	$	18,170	$	(1,405)	$	16,765	$	18,595		$	(4,964)	$	13,631
Capital expenditures (d)	$	12,906	$	-	$	12,906	$	12,629		$	-	$	12,629

(a) Included in income from office and parking properties are rental revenues, customer reimbursements, parking income and other income.

(b) Included in property operating expenses are real estate taxes, insurance, contract services, repairs and maintenance and property operating expenses.

(c) Interest expense for office properties represents interest expense on property secured mortgage debt.  It does not include interest expense on the Company's unsecured line of credit, which is included in "Unallocated and Other".

(d) Capital expenditures include building improvements, tenant improvements and deferred leasing costs.

 The following is a reconciliation of FFO and net income (loss) attributable to common stockholders for office properties and total consolidated entities for the nine months ended September 30, 2011 and 2010.  Amounts presented as "Unallocated and Other" represent primarily income and expense associated with providing management services, corporate general and administrative expense, interest expense on the Company's credit facility and preferred dividends.

	At or for the nine months ended								At or for the nine months ended
	September 30, 2011								September 30, 2010
	Office			Unallocated				Office			Unallocated
	Properties			and Other		Consolidated		Properties			and Other		Consolidated
	(in thousands)							(in thousands)
	(Unaudited)
Income from office and parking properties (a)	$	170,244	$	-	$	170,244	$	137,392		$	-	$	137,392
Management company income		-		9,990		9,990		-			1,331		1,331
Property operating expenses (b)		(79,156)		-		(79,156)		(65,478)			-		(65,478)
Depreciation and amortization		(64,519)		-		(64,519)		(46,260)			-		(46,260)
Management company expenses		-		(8,398)		(8,398)		-			(2,243)		(2,243)
Income tax expense-current		-		(414)		(414)		-			(176)		(176)
Income tax expense-deferred		-		364		364		-			-		-
General and administrative expenses		-		(5,380)		(5,380)		-			(5,361)		(5,361)
Acquisition costs		(1,124)		(15,630)		(16,754)		-			-		-
Other income		-		849		849		-			1,105		1,105
Equity in earnings of unconsolidated joint ventures		65		-		65		253			-		253
Gain on involuntary conversion		-		-		-		40			-		40
Interest expense (c)		(31,903)		(5,377)		(37,280)		(26,001)			(4,575)		(30,576)
Adjustment for noncontrolling interest-real estate partnerships		84,112		-		84,112		7,581			-		7,581
Income (loss) from discontinued     operations		(26,410)		-		(26,410)		1,444			-		1,444
Gain on sale of real estate from discontinued operations		6,567		-		6,567		8,518			-		8,518
Gain on sale of real estate		743		-		743		-			-		-
Change in fair value of contingent consideration		-		12,000		12,000		-			-		-
Impairment loss on real estate		(107,240)		-		(107,240)		-			-		-
Impairment loss on mortgage loan           receivable		-		(9,235)		(9,235)		-			-		-
Dividends on preferred stock		-		(7,341)		(7,341)		-			(4,137)		(4,137)
Net income (loss) available to common stockholders		(48,621)		(28,572)		(77,193)		17,489			(14,056)		3,433
Depreciation and amortization		64,519		-		64,519		46,260			-		46,260
Depreciation and amortization - discontinued operations		19,787		-		19,787		19,118			-		19,118
Depreciation and amortization noncontrolling interest - real estate partnerships		(25,351)		-		(25,351)		(12,837)			-		(12,837)
Adjustment for depreciation and amortization-unconsolidated joint ventures		198		-		198		253			-		253
Impairment loss on real estate		56,467		-		56,467		-			-		-
Gain on sale of real estate		(7,310)		-		(7,310)		(8,518)			-		(8,518)
Funds from operations available to common stockholders	$	59,689	$	(28,572)	$	31,117	$	61,765		$	(14,056)	$	47,709
Total assets	$	1,822,926	$	91,256	$	1,914,182	$	1,601,498		$	19,567	$	1,621,065
Office and parking properties	$	1,545,749	$	-	$	1,545,749	$	1,403,101		$	-	$	1,403,101
Capital expenditures (d)	$	40,554	$	-	$	40,554	$	30,950		$	-	$	30,950

(a) Included in income from office and parking properties are rental revenues, customer reimbursements, parking income and other income.

(b) Included in property operating expenses are real estate taxes, insurance, contract services, repairs and maintenance and property operating expenses.

(c) Interest expense for office properties represents interest expense on property secured mortgage debt.  It does not include interest expense on the Company's unsecured line of credit, which is included in "Unallocated and Other".

(d) Capital expenditures include building improvements, tenant improvements and deferred leasing costs.