Notes Payable

12 Months Ended

Dec. 31, 2011

Notes Payable [Abstract]

Notes Payable

Note F - Notes Payable

Notes Payable to Banks

At December 31, 2011, the Company had a total of $132.3 million outstanding under the following credit facilities (in thousands):

		Interest			Outstanding
Credit Facilities	Lender	Rate	Maturity		Balance
$10.0 Million Unsecured Working Capital Revolving Credit Facility (1)	PNC Bank	3.6%	01/31/14	$	5,322
$190.0 Million Unsecured Revolving Credit Facility (1)	Wells Fargo	3.6%	01/31/14		127,000
		3.6%		$	132,322

(1)   The interest rate on the credit facilities is based on LIBOR plus 275 to 350 basis points, depending upon overall Company leverage as defined in the loan agreements for the Company's credit facility, with the current rate set at 325 basis points.  Additionally, the Company pays fees on the unused portion of the credit facilities ranging between 40 and 50 basis points based upon usage of the aggregate commitment, with the current rate set at 40 basis points.

On January 31, 2011, the Company closed a new $190.0 million senior unsecured revolving credit facility and a new $10.0 million unsecured working capital revolving credit facility.  The credit facilities have an initial term of three years and replaced the existing unsecured revolving credit facility, term loan and working capital facility that were scheduled to mature on April 27, 2011.  The Company had a $100.0 million interest rate swap associated with the credit facilities that expired March 31, 2011, and locked LIBOR at 3.635%.  Wells Fargo Securities and JP Morgan Securities LLC acted as Joint Lead Arrangers and Joint Book Runners on the unsecured revolving credit facility.  In addition, Wells Fargo Bank, N.A. acted as Administration Agent and JPMorgan Chase Bank, N.A. acted as Syndication Agent.  Other participating lenders include PNC Bank, N.A., Bank of America, N.A., US Bank, N.A., Trustmark National Bank, and BancorpSouth Bank.  The working capital revolving credit facility was provided solely by PNC Bank, N.A.  On September 20, 2011, the Company entered into an amendment to the revolving credit facility, which reduced the Tangible Net Worth requirement and adjusted the definition of FFO under the revolving credit facility.

The Company has entered into interest rate swap agreements.  The Company designated the swaps as cash flow hedges of the variable interest rates on the Company's borrowings under the Wells Fargo unsecured revolving credit facility, a portion of the debt secured by the Pinnacle at Jackson Place and the debt secured by 245 Riverside, Corporate Center Four, Cypress Center, Bank of America Center, Two Ravinia, and Hayden Ferry I.  These swaps, excluding the swap secured by the Pinnacle at Jackson Place, are considered to be fully effective and changes in the fair value of the swaps are recognized in accumulated other comprehensive loss.

The Company's interest rate hedge contracts at December 31, 2011 and 2010 are summarized as follows (in thousands):

								Fair Value
								Liability
Type of	Balance Sheet		Notional	Maturity		Fixed		December 31
Hedge	Location		Amount	Date	Reference Rate	Rate		2011		2010
Swap	Accounts payable and other liabilities	$	100,000	03/31/11	1-month LIBOR	4.8%	$	-		$                        (836)
Swap	Accounts payable and other liabilities	$	23,500	12/01/14	1-month LIBOR	5.8%		-		(2,167)
Swap	Accounts payable and other liabilities	$	12,088	11/18/15	1-month LIBOR	4.1%		(581)		-
Swap	Accounts payable and other liabilities	$	33,875	11/18/17	1-month LIBOR	4.7%		(2,862)		-
Swap	Accounts payable and other liabilities	$	22,000	01/25/18	1-month LIBOR	4.5%		(1,548)		-
Swap	Accounts payable and other liabilities	$	9,250	09/30/18	1-month LIBOR	5.3%		(1,083)		-
Swap	Accounts payable and other liabilities	$	22,500	10/08/18	1-month LIBOR	5.4%		(2,826)		-
Swap	Accounts payable and other liabilities	$	22,100	11/18/18	1-month LIBOR	5.0%		(2,234)		-
							$	(11,134)	$	(3,003)

On March 31, 2011, Fund II entered into an interest rate swap with the lender of the loan secured by 245 Riverside in Jacksonville, Florida, for a $9.3 million notional amount that fixes the interest rate at 5.3% through September 30, 2018.  The Company designated the swap as a cash flow hedge of the variable interest payments associated with the mortgage loan.

On April 8, 2011, Fund II entered into an interest rate swap with the lender of the loan secured by Corporate Center Four in Tampa, Florida, for a $22.5 million notional amount that fixes the interest rate at 5.4% through October 8, 2018.  The Company designated the swap as a cash flow hedge of the variable interest payments associated with the mortgage loan.

On May 18, 2011, Fund II entered into three interest rate swaps with lenders of the loans secured by the following properties:

-   Cypress Center in Tampa, Florida, for a $12.1 million notional amount that fixes the interest rate at 4.1% through November 18, 2015.

-   Bank of America Center in Orlando, Florida, for a $33.9 million notional amount that fixes the interest rate at 4.7% through November 18, 2017.

-   Two Ravinia in Atlanta, Georgia, for a $22.1 million notional amount that fixes the interest rate at 5.0% through November 18, 2018.

On July 25, 2011, Fund II entered into an interest rate swap with the lender of the loan secured by Hayden Ferry Lakeside I in the Tempe submarket of Phoenix, Arizona, for a $22.0 million notional amount that fixes the interest rate at 4.5% through January 25, 2018.  The Company designated the swap as a cash flow hedge of the variable interest payments associated with the mortgage loan.

At December 31, 2011, in conjunction with the sale of the Pinnacle at Jackson Place, a 189,000 square foot office property in Jackson, Mississippi, which is included in the Non-Core Asset portfolio that is under contract for sale and expected to close in the first quarter of 2012, the Company recorded non-cash interest expense of $2.3 million related to the termination of the cash flow hedging relationship and unwinding of the $23.5 million swap secured by this property.

On February 10, 2012, Fund II entered into an interest rate swap with the lender of the loan secured by Hayden Ferry Lakeside II in the Tempe submarket of Phoenix, Arizona, for a $50.0 million notional amount that fixes the interest rate at 5.0% through January 25, 2018.  The Company designated the swap as a cash flow hedge of the variable interest payments associated with the mortgage loan.

The Company designated these swaps as cash flow hedges of the variable interest payments associated with the mortgage loans.

Mortgage Notes Payable

A summary of mortgage notes payable at December 31, 2011 and 2010 is as follows (in thousands):

						Note Balance
	Variable Rate	Fixed	Monthly		Maturity	December 31
Office Property	12/31/11	Rate	Payment		Date	2011		2010
Wholly-Owned
Forum I	-	5.25%	$	-	06/01/11	$	-	$	10,194
Wells Fargo (1)	-	4.39%	-		06/01/11	-		8,616
233 N. Michigan	-	4.94%	-		07/11/11	-		86,711
Bank of America Plaza	-	7.10%	146		05/10/12	16,373		16,939
Teachers Insurance and
Annuity Association (5 properties)	-	6.21%	565		01/01/16	75,724		77,735
John Hancock Facility (2 properties)	-	7.58%	130		06/01/16	18,055		18,243
111 East Wacker, LLC (2)	-	6.29%	918		07/11/16	147,873		148,500
Capital City Plaza	-	7.25%	253		03/05/17	34,073		34,617
Morgan Keegan Tower	-	7.62%	163		10/01/19	11,539		12,578
Citrus Center	-	6.31%	153		06/01/20	22,438		22,820
Stein Mart	-	6.50%	81		08/01/20	11,733		11,935
Pinnacle at Jackson Place - Subordinate NMTC Loan (2) (3)	-	3.00%	15		12/27/47	6,000		6,000
Pinnacle at Jackson Place - Sr NMTC Loan (2) (3) (4)	-	5.80%	114		12/27/47	23,501		23,501
Total Wholly-Owned				2,538			367,309		478,389
Consolidated Joint Ventures
Parkway Properties Office Fund, LP:
Renaissance Center (2)	-	5.47%		97	06/01/12		15,704	16,000
Maitland 100	-	4.92%	-		10/07/12	-		8,798
555 Winderley Place	-	4.92%	-		10/07/12	-		8,320
1401 Enclave	-	5.76%	-		07/10/15	-		28,000
100 Ashford Center/Peachtree Ridge (2)	-	5.61%	179		01/08/16	29,824		30,264
Gateway Center	-	5.92%	-		02/10/16	-		33,000
Desert Ridge Corporate Center	-	5.77%	-		02/10/16	-		49,200
US Cellular Plaza	-	5.53%	-		03/10/16	-		58,564
BellSouth Building/Centurion Centre	-	5.90%	-		06/10/16	-		14,400
Chatham Centre	-	5.56%	-		01/10/17	-		17,100
Overlook II (2)	-	5.61%	147		03/01/17	31,500		31,500
Parkway Properties Office Fund II, LP:
Cypress Center I-III (4)	-	4.06%	42		05/18/16	12,088		-
3344 Peachtree	-	5.25%	485		10/01/17	86,064		-
Bank of America Center (4)	-	4.74%	138		05/18/18	33,875		-
Hayden Ferry Lakeside I (4)	-	4.50%	85		07/25/18	22,000		-
245 Riverside (4)	-	5.25%	42		03/31/19	9,250		-
Corporate Center at International Plaza (4)	-	5.37%	104		04/08/19	22,500		-
Two Ravinia (4)	-	4.99%	95		05/20/19	22,100		-
Two Liberty Place	-	5.20%	391		06/10/19	90,200		-
Carmel Crossing	-	5.46%	46		03/10/20	10,000		-
Total Consolidated Joint Ventures			$	1,851		$	385,105	$	295,146
Total Secured Debt			$	4,389		$	752,414	$	773,535

(1)   A third-party purchased this mortgage and accepted a deed in lieu of foreclosure on the property during the fourth quarter of 2011.                                         

  (2)   For balance sheet purposes, the Company has reclassified these mortgages totaling $254.4 million to Liabilities Related to Assets Held for Sale at December 31, 2011.                                                    

  (3)   The New Markets Tax Credit loans have a stated maturity of December 27, 2047, but contain an early repayment option whereby the lender may call the loans in December 2014.  In the event the lender exercises this option, the outstanding principal balance of the loans will be reduced by $3.0 million.  Additionally, the Company has entered into an interest rate swap agreement with US Bank for a $23.5 million notional amount that fixes the 30-day LIBOR interest rate at 4.05%, which equates to a total current interest rate of 5.8%, for the period January 1, 2009, through December 1, 2014.  The swap agreement serves as a hedge of the variable interest payments on the borrowings under the Pinnacle at Jackson Place Senior New Market Tax Credits mortgage loan.  During the year ended December 31, 2011, in connection with the sale of the Pinnacle at Jackson Place, which is included in the Non-Core Asset portfolio, the Company recorded non-cash interest expense of $2.3 million related to the unwinding of the interest rate swap.  The weighted average interest rate for the total New Markets Tax Credits loans is 5.2%.

(4)   The mortgage loans secured by these properties have variable interest rates that have been fixed by interest rate swap agreements.                                  

At December 31, 2011 and 2010, the net book value of the office properties collateralizing the mortgage loans was $1.0 billion and $1.1 billion, respectively, which includes assets held for sale.

The aggregate annual maturities of mortgage notes payable at December 31, 2011 are as follows (in thousands):

	Total				Debt		Debt
	Mortgage		Held for		Balloon		Principal
	Maturities		Sale		Payments		Amortization
2012	$	40,145	$	17,773	$	16,176	$	6,196
2013		8,736		2,234		-		6,502
2014		10,036		2,377		-		7,659
2015		12,137		2,529		-		9,608
2016		271,249		168,487		94,798		7,964
2017		146,516		31,500		107,907		7,109
Thereafter		263,595		29,502		224,609		9,484
	$	752,414	$	254,402	$	443,490	$	54,522

On January 21, 2011, in connection with its purchase of 3344 Peachtree in Atlanta, Georgia, Fund II assumed the $89.6 million existing non-recourse first mortgage loan, which matures on October 1, 2017, and carries a fixed interest rate of 4.8%.  In accordance with GAAP, the mortgage loan was recorded at $87.2 million to reflect the fair value of the instrument based on a market interest rate of 5.25% on the date of purchase.

On February 18, 2011, Fund II obtained a $10.0 million non-recourse mortgage loan secured by Carmel Crossing, a 326,000 square foot office complex in Charlotte, North Carolina.  The mortgage loan has a fixed rate of 5.5% and is interest only through maturity at March 10, 2020.

On March 31, 2011, Fund II obtained a $9.3 million non-recourse mortgage loan secured by 245 Riverside, a 135,000 square foot office property in Jacksonville, Florida.  The mortgage has a stated rate of LIBOR plus 200 basis points, an initial 36 month interest only period and a maturity of March 31, 2019.  In connection with this mortgage, Fund II entered into an interest rate swap that fixes the interest rate at 5.3% through September 30, 2018.

On April 8, 2011, Fund II obtained a $22.5 million non-recourse mortgage loan secured by Corporate Center Four, a 250,000 square foot office property in Tampa, Florida.  The mortgage has a stated rate of LIBOR plus 200 basis points, an initial 36 month interest only period and a maturity of April 8, 2019.  In connection with this mortgage, Fund II entered into an interest rate swap that fixes the interest rate at 5.4% through October 8, 2018.

On May 11, 2011, in connection with the sale of 233 North Michigan, Parkway repaid the $84.6 million non-recourse mortgage loan that was scheduled to mature in July 2011.  The Company recognized a gain on extinguishment of debt of $302,000 during the second quarter of 2011, which is recorded in income from discontinued operations.

On May 18, 2011, Fund II obtained the following mortgage loans in connection with the purchase of four office properties:

-   A $12.1 million non-recourse mortgage loan secured by Cypress Center, a 286,000 square foot office complex in the Westshore submarket of Tampa, Florida.  The mortgage loan has a stated rate of LIBOR plus 200 basis points with a maturity of May 18, 2016.  Upon obtaining the mortgage, Fund II entered into an interest rate swap that fixes the interest rate at 4.1% through November 18, 2015.

-   A $33.9 million non-recourse mortgage loan secured by Bank of America Center, a 421,000 square foot office property in the central business district of Orlando, Florida.  The mortgage loan has a stated rate of LIBOR plus 200 basis points with a maturity of May 18, 2018.  Upon obtaining the mortgage, Fund II entered into an interest rate swap that fixes the interest rate at 4.7% through November 18, 2017.

-   A $22.1 million non-recourse mortgage loan secured by Two Ravinia Drive, a 438,000 square foot office property located in the Central Perimeter submarket of Atlanta, Georgia.  The mortgage loan has a stated rate of LIBOR plus 200 basis points with a maturity of May 20, 2019.  Upon obtaining the mortgage, Fund II entered into an interest rate swap that fixes the interest rate at 5.0% through November 18, 2018.

-   A $90.2 million non-recourse mortgage loan secured by Two Liberty Place, a 941,000 square foot office property located in the central business district of Philadelphia, Pennsylvania.  The mortgage loan has a fixed rate of 5.2% and a maturity date of June 10, 2019.

On June 1, 2011, the Company repaid a $9.9 million non-recourse mortgage loan secured by Forum I, a 163,000 square foot office property in Memphis, Tennessee.  The mortgage loan had a fixed interest rate of 5.3%.  The Company repaid the mortgage loan using available proceeds under the senior unsecured revolving credit facility.

Upon its maturity on June 1, 2011, the Company elected not to repay an $8.5 million non-recourse mortgage loan secured by the Wells Fargo Building, a 136,000 square foot office building in Houston.  This mortgage loan had a fixed interest rate of 4.4%.  A third-party buyer purchased the mortgage and accepted a deed in lieu of foreclosure on the property on December 9, 2011.  The Company recognized a total non-cash impairment loss of $11.6 million in discontinued operations during the year ended December 31, 2011, and recorded a gain on the forgiveness of debt in discontinued operations of $8.6 million.

On July 25, 2011, Fund II obtained a $22.0 million non-recourse mortgage loan secured by Hayden Ferry I, a 203,000 square foot office property located in the Tempe submarket of Phoenix, Arizona.  The mortgage loan has a stated rate of LIBOR plus 200 basis points, an initial 36 month interest only period, and a maturity date of July 25, 2018.  In connection with this mortgage, Fund II entered into an interest rate swap that fixes the interest rate at 4.5% through January 25, 2018.  During the first quarter of 2012, the mortgage loan secured by Hayden Ferry I was amended such that it is now cross-collateralized, cross-defaulted and coterminous with the mortgage loan secured by Hayden Ferry II.

In connection with the sale of the nine Fund I assets, the buyer assumed a total of $215.3 million in non-recourse mortgage loans, of which $63.2 million was Parkway's share, with a weighted average interest rate of 5.6%.  On March 1, 2012, in connection with the sale of Renaissance Center, the buyer assumed the $15.6 million non-recourse mortgage loan, of which $3.9 million was Parkway's share.  The remaining three assets in the Fund I portfolio have a total of $61.3 million in non-recourse mortgage loans, of which $15.3 million is Parkway's share, which will be assumed by the buyer upon closing during the first half of 2012.

On January 9, 2012, the Company completed the previously announced sale of 111 East Wacker, a 1.0 million square foot office property located in the central business district of Chicago for a gross sales price of $150.6 million.  The buyer assumed the existing $147.9 million non-recourse mortgage loan secured by the property.

On January 11, 2012, Fund II obtained a $23.5 million non-recourse mortgage loan secured by The Pointe, a 252,000 square foot Class A office property in the Westshore submarket of Tampa, Florida. This new mortgage loan matures in February 2019, has a fixed interest rate of 4.0%, and is interest only for the first 42 months of the term.

On February 10, 2012, Fund II obtained a $50.0 million non-recourse mortgage loan secured by Hayden Ferry II, a 300,000 square foot office property located in the Tempe submarket of Phoenix, Arizona.  The mortgage loan has an initial stated rate of LIBOR plus 350 basis points, which is scheduled to decline in stated increments over the first four years of the term, with the decline in the fourth year of the term subject to achieving a defined debt yield hurdle, at which time the rate will remain fixed through maturity.  In connection with this mortgage, Fund II entered into an interest rate swap that fixes the interest rate at 5% through January 25, 2018.  The mortgage loan is cross-collateralized, cross-defaulted, and coterminous with the mortgage loan secured by Hayden Ferry I.