Investment in Office and Parking Properties

Included in investment in office and parking properties at December 31, 2014 are 49 office and parking properties located in eight states with an aggregate of 16.5 million square feet (unaudited) of leasable space.

The Company's acquisitions are accounted for using the acquisition method. The results of each acquired property are included in the Company's results of operations from their respective purchase dates. 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.

2014 Acquisitions

The gross purchase price, excluding closing costs and other adjustments, of office and parking properties acquired during the year ended December 31, 2014 is as follows:



Market Location	Cost (in thousands)
Atlanta, Georgia	$	47,000
Austin, Texas	311,400
Jacksonville, Florida	33,300
Orlando, Florida	80,611
Miami, Florida	140,495
Tampa, Florida	249,669
	$	862,475

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 8—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 8—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 and parking 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 preliminary purchase price allocation 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:



	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	16,687
Below market leases	(21,433		)
Mortgage premium assumed (2)	(18,251		)

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

(2) Mortgage debt assumed with the purchase of One Orlando Centre, One Congress Plaza and San Jacinto Center.

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	)

2013 Acquisitions

On January 17, 2013, the Company purchased 3348 Peachtree, formerly Tower Place 200, an office tower located in the Buckhead submarket of Atlanta, Georgia, for a gross purchase price of $56.3 million. The purchase of 3348 Peachtree was financed with borrowings under the Company's senior unsecured revolving credit facility.

On March 7, 2013, the Company purchased two office complexes located in the Deerwood submarket of Jacksonville, Florida (the "Deerwood Portfolio") for a gross purchase price of $130.0 million. The purchase of these properties was financed with a mortgage loan secured by the properties in the aggregate amount of $84.5 million and borrowings under the Company's senior unsecured revolving credit facility. The mortgage loan has a maturity date of April 1, 2023 and a fixed interest rate of 3.9%.

On August 19, 2013, the Company purchased approximately six acres of land available for development located in Tampa, Florida for a purchase price of $2.9 million.

On August 28, 2013, the Company purchased approximately one acre of land available for development located in Tempe, Arizona for a purchase price of $1.2 million. This land is adjacent to the Company's Hayden Ferry Lakeside and Tempe Gateway assets.

On December 6, 2013, the Company acquired Lincoln Place, an office building located in the South Beach submarket of Miami, Florida. The consideration for the transaction was the assumption of the existing first mortgage loan on the property and the issuance of 900,000 common units in the Operating Partnership. The loan secured by Lincoln Place has a current outstanding balance of approximately $48.7 million, a fixed interest rate of 5.9% and a maturity date of June 2016.

On December 19, 2013, the Company completed the merger transactions contemplated by the agreement and plan of merger, dated as of September 4, 2013 (the "Merger Agreement"), by and among the Company, the Operating Partnership, PKY Masters, LP, a wholly owned subsidiary of Parkway LP ("Merger Sub"), Thomas Properties Group, Inc. ("TPGI") and Thomas Properties Group, L.P. ("TPG LP"). Pursuant to the Merger Agreement, TPGI merged with and into the Company, with the Company continuing as the surviving corporation (the "Parent Merger"), and Thomas Properties Group, L.P. ("TPG LP") merged with and into Merger Sub, a wholly owned subsidiary of Parkway LP, with TPG LP continuing as the surviving entity and an indirect wholly owned subsidiary of Parkway LP (the "Partnership Merger" and, together with the Parent Merger, the "Mergers"). Immediately following the closing of the Mergers, the joint venture interests the Company acquired in One Commerce Square and Two Commerce Square, two office towers located in Philadelphia, Pennsylvania were redeemed by the joint ventures that own the respective properties, and the Company ceased to own any interest in those properties. The Company received net proceeds of approximately $71.8 million in the redemption transactions, which were funded by Brandywine Operating Partnership, L.P., TPGI’s partner in each of the joint ventures. In addition, on December 19, 2013, immediately following the completion of the Mergers, the Company sold Four Points Centre, consisting of two office buildings and a contiguous parcel of land located in Austin, Texas, to Brandywine Operating Partnership, L.P. for a gross sale price of $47.3 million, of which the Company received net proceeds of approximately $21.7 million.

The Company assumed TPGI’s ownership interest in two wholly owned office properties in Houston, Texas and five office properties in Austin, Texas through an indirect interest in PKY/CalSTRS Austin, LLC (the "Austin Joint Venture"), a joint venture with the California State Teachers' Retirement System ("CalSTRS"). See "Note 4—Investments in Unconsolidated Joint Ventures" and mortgage notes payable discussed in "Note 8—Capital and Financing Transactions."

The following table summarizes the aggregate purchase price allocation for TPGI as of December 19, 2013:



	Amount
Assets:	(in thousands)
Land	$	97,132
Buildings	502,386
Tenant improvements	41,697
Leasing commissions	27,613
Lease in place value	61,562
Management contracts	1,888
Condominium units	19,900
Investment in unconsolidated joint ventures	93,539
Other assets	46,500
Asset held for sale	353,752
Total Assets	$	1,245,969

Liabilities:
Below market leases	$	50,152
Accounts payable and accrued expense	72,153
Mortgage debt assumed, net premium of $15,896	335,991
Liabilities held for sale	260,293
Total Liabilities	718,589

Consideration funded prior to closing	80,000
Noncontrolling interest	34,229
Equity issued	413,151
Total Purchase Price	$	1,245,969

The following table summarizes the aggregate purchase price allocation for 3348 Peachtree, the Deerwood Portfolio, and Lincoln Place:



	Amount
Land	$	31,337
Buildings	178,362
Tenant improvements	18,410
Lease commissions	9,448
Lease in place value	20,131
Above market leases	4,969
Below market leases	(9,267		)
Mortgage premium assumed	(2,728		)
Mortgage debt assumed	(133,817		)

The unaudited pro forma effect on the Company's results of operations for the purchase of Tower Place 200, Deerwood North and South, Lincoln Place, and CityWestPlace and San Felipe Plaza acquired as part of the Mergers, as if the purchases had occurred on January 1, 2012, is as follows (in thousands, except per share data):



	Year Ended
	December 31,
	2013			2012
	(Unaudited)
Revenues	$	394,918		$	363,498
Net loss attributable to common stockholders	$	(16,890	)	$	(60,235	)
Basic net loss attributable to common stockholders	$	(0.52	)	$	(2.38	)
Diluted net loss attributable to common stockholders	$	(0.52	)	$	(2.38	)

Summary of Dispositions

On March 20, 2013, the Company sold Atrium at Stoneridge, an office property located in Columbia, South Carolina, for a gross sales price of $3.1 million and recorded a gain of $542,000. The Company received $3.0 million in net proceeds from the sale, which was used to reduce amounts outstanding under the Company's senior unsecured revolving credit facility.

On July 10, 2013, the Company sold two office properties, Waterstone and Meridian, located in Atlanta, Georgia, for a gross sales price of $10.2 million and recorded an impairment loss of $4.6 million during the second quarter of 2013. The Company received $9.5 million in net proceeds from the sale, which was used to reduce amounts outstanding under the Company's senior unsecured revolving credit facility.

On July 17, 2013, the Company sold Bank of America Plaza, an office property located in Nashville, Tennessee, for a gross sales price of $42.8 million and recorded a gain of approximately $11.5 million during the third quarter of 2013. The Company received $40.8 million in net proceeds from the sale, which was used to reduce amounts outstanding under the Company's revolving credit facilities.

On October 31, 2013, the Company sold Lakewood II, an office property located in Atlanta, Georgia, for a gross sale price of $10.6 million. The Company had a 30% ownership interest in the property, which was owned by Fund II. The Company received approximately $3.1 million in cash, its proportionate share of net proceeds from the sale, which was used to reduce amounts outstanding under the Company's senior unsecured revolving credit facility. During the fourth quarter of 2013, Fund II recognized a gain on the sale of Lakewood II of approximately $5.9 million, of which approximately $1.8 million was the Company’s share.

On November 8, 2013, the Company sold Carmel Crossing, an office property located in Charlotte, North Carolina, for a gross sale price of $37.5 million. The Company had a 30% ownership interest in the property, which was owned by Fund II. The Company received approximately $7.1 million in cash, its proportionate share of net proceeds from the sale, which was used to reduce amounts outstanding under the Company's senior unsecured revolving credit facility. During the fourth quarter 2013, Fund II recognized a gain on the sale of Carmel Crossing of approximately $14.6 million, of which $4.4 million was the Company’s share, and expenses related to the prepayment of the associated mortgage loan of approximately $2.1 million, of which approximately $0.6 million was the Company’s share.

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.

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.

Contractual Obligations and Minimum Rental Receipts

Obligations for tenant improvement allowances and lease inducement costs for leases in place and commitments for building improvements at December 31, 2014 are as follows (in thousands):



2015	$	15,362
2016	69
2017	—
2018	232
2019 and thereafter	—
Total	$	15,663

Minimum future operating lease payments for various equipment leased at the office and parking properties is as follows for operating leases in place at December 31, 2014 (in thousands):



2015	$	158
2016	77
2017	22
2018	—
2019 and thereafter	—
Total	$	257

The following is a schedule by year of future minimum rental receipts under noncancelable leases for office buildings owned at December 31, 2014 (in thousands):



2015	$	294,962
2016	293,192
2017	258,665
2018	230,263
2019	201,456
Thereafter	866,367
Total	$	2,144,905

The following is a schedule by year of future minimum ground lease payments at December 31, 2014 (in thousands):



2015	$	1,370
2016	1,308
2017	1,338
2018	1,339
2019	1,339
Thereafter	93,392
Total	$	100,086

At December 31, 2014, 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 66 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, 2014, the Company owned Corporate Center IV in Tampa, Florida which is subject to a ground lease. The lease has a remaining term of approximately 66 years with an expiration date of December 2080. Payments consist of a stated monthly amount that adjusts annually and a development rental rate that is fixed through August 2015.

At December 31, 2014, the Company has a leasehold interest in land in Tampa, Florida. The lease has a remaining term of approximately 66 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 and a development rental rate that is fixed through September 2015.

At December 31, 2014, the Company owned Westshore Corporate Center in Tampa, Florida which is subject to a ground lease. The lease has a remaining term of approximately 20 years with an expiration date of October 2034. Payments consist of a stated monthly amount that adjusts annually through the expiration date.

At December 31, 2014, the Company owned NASCAR Plaza in Charlotte, North Carolina which is subject to a ground lease. The lease has a remaining term of approximately 91 years with an expiration date of December 2105. Payments consist of a stated monthly amount through the expiration date.

At December 31, 2014, the Company owned Lincoln Place in Miami, Florida which is subject to a ground lease. The lease has a remaining term of approximately 35 years with an expiration date of August 31, 2049. Payments consist of a stated monthly amount through the expiration date.