##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, DC 20549
 
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
 For Quarterly Period Ended March 31, 2009
 or
 o
    
    Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
 For
the Transition Period from ___ to ___
 Commission File Number 1-11533
 Parkway Properties, Inc.
  Maryland
    
    74-2123597(State or other jurisdiction of
    
    (IRS Employer Identification No.)incorporation or organization)
 One Jackson Place Suite 1000
188 East Capitol Street
P. O. Box 24647
Jackson, Mississippi 39225-4647  (Address of principal executive offices) (Zip Code)
 (601) 948-4091
 www.pky.com
  þ o
 o o
   Large accelerated filer
o
    
    Accelerated filer
þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



PARKWAY PROPERTIES, INC.
 FORM 10-Q
 TABLE OF CONTENTS
FOR THE QUARTER ENDED MARCH 31, 2009
  
 PagePart I. Financial InformationItem 1. Financial StatementsConsolidated Balance Sheets, March 31, 2009 and December 31, 2008
    
    
    3Consolidated Statements of Income for the Three Months Ended
March 31, 2009 and 2008
    
    
    4Consolidated
Statement of Changes in Equity for the Three Months Ended
March 31, 2009
    
    
    5Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2009 and 2008
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results
of Operations
    
    
    20Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    35Item 4. Controls and Procedures
    
    
    36Part II. Other InformationItem 1A. Risk Factors
    
    
    36Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    36Item 6. Exhibits
    
    
    36SignaturesAuthorized Signatures
    
    
    36
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PARKWAY PROPERTIES, INC.
 
 CONSOLIDATED BALANCE SHEETS
  March 31
    
    
    December 312009
    
    
    2008(Unaudited)AssetsReal estate related investments:Office and parking properties
    
    $
    1,727,483
    
    
    $
    1,737,549Office property held for sale
    
    
    6,824
    
    
    
    Real estate development
    
    
    609
    
    
    
    609Accumulated depreciation
    
    
    (295,782
    )
    
    
    (282,919
    )1,439,134
    
    
    
    1,455,239Land available for sale
    
    
    750
    
    
    
    750Mortgage loan
    
    
    7,664
    
    
    
    7,519Investment in unconsolidated joint ventures
    
    
    11,234
    
    
    
    11,0571,458,782
    
    
    
    1,474,565Rents receivable and other assets
    
    
    102,506
    
    
    
    118,512Intangible assets, net
    
    
    74,782
    
    
    
    79,460Cash and cash equivalents
    
    
    15,494
    
    
    
    15,318$
    1,651,564
    
    
    $
    1,687,855LiabilitiesNotes payable to banks
    
    $
    201,000
    
    
    $
    185,940Mortgage notes payable
    
    
    844,585
    
    
    
    869,581Accounts payable and other liabilities
    
    
    81,948
    
    
    
    98,8941,127,533
    
    
    
    1,154,415EquityParkway
Properties, Inc. shareholders equity8.00% Series D Preferred stock, $.001 par value,
2,400,000 shares authorized, issued and outstanding
    
    
    57,976
    
    
    
    57,976Common stock, $.001 par value, 67,600,000 shares authorized,
15,369,802 and 15,253,396 shares issued and outstanding
in 2009 and 2008, respectively
    
    
    15
    
    
    
    15Common stock held in trust, at cost, 75,175 and 85,300
shares in 2009 and 2008, respectively
    
    
    (2,553
    )
    
    
    (2,895
    )Additional paid-in capital
    
    
    428,986
    
    
    
    428,367Accumulated other comprehensive loss
    
    
    (7,356
    )
    
    
    (7,728
    )Accumulated deficit
    
    
    (76,465
    )
    
    
    (69,487
    )Total
Parkway
Properties, Inc. shareholders equity
    
    
    400,603
    
    
    
    406,248Noncontrolling interest  real estate partnerships
    
    
    123,428
    
    
    
    127,192Total equity
    
    
    524,031
    
    
    
    533,440$
    1,651,564
    
    
    $
    1,687,855
  Page 3 of 36




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PARKWAY PROPERTIES, INC.
 
 CONSOLIDATED STATEMENTS OF INCOME
  Three Months EndedMarch 312009
    
    
    2008(Unaudited)RevenuesIncome from office and parking properties
    
    $
    67,370
    
    
    $
    62,232Management company income
    
    
    415
    
    
    
    497Total revenues
    
    
    67,785
    
    
    
    62,729ExpensesProperty operating expenses
    
    
    33,721
    
    
    
    29,860Depreciation and amortization
    
    
    23,556
    
    
    
    21,205Management company expenses
    
    
    501
    
    
    
    489General and administrative expenses
    
    
    1,582
    
    
    
    2,296Total expenses
    
    
    59,360
    
    
    
    53,850Operating income
    
    
    8,425
    
    
    
    8,879Other income and expensesInterest and other income
    
    
    302
    
    
    
    368Equity in earnings of unconsolidated joint ventures
    
    
    200
    
    
    
    258Gain on involuntary conversion
    
    
    463
    
    
    
    Loss on sale of real estate
    
    
    (70
    )
    
    
    Interest expense
    
    
    (14,051
    )
    
    
    (15,138
    )Loss from continuing operations
    
    
    (4,731
    )
    
    
    (5,633
    )Discontinued operations:Income from discontinued operations
    
    
    178
    
    
    
    551Net loss
    
    
    (4,553
    )
    
    
    (5,082
    )Net loss attributable to noncontrolling interest  real estate partnerships
    
    
    3,764
    
    
    
    2,487Net loss for Parkway Properties, Inc.
    
    
    (789
    )
    
    
    (2,595
    )Change in market value of interest rate swaps
    
    
    372
    
    
    
    (1,107
    )Comprehensive loss
    
    $
    (417
    )
    
    $
    (3,702
    )Net loss for Parkway Properties, Inc.
    
    $
    (789
    )
    
    $
    (2,595
    )Dividends on preferred stock
    
    
    (1,200
    )
    
    
    (1,200
    )Net loss available to common stockholders
    
    $
    (1,989
    )
    
    $
    (3,795
    )Net loss
per common share attributable to Parkway Properties, Inc.:Basic:Loss from continuing operations
    
    $
    (0.14
    )
    
    $
    (0.29
    )Discontinued operations
    
    
    0.01
    
    
    
    0.04Net loss
    
    $
    (0.13
    )
    
    $
    (0.25
    )Diluted:Loss from continuing operations
    
    $
    (0.14
    )
    
    $
    (0.29
    )Discontinued operations
    
    
    0.01
    
    
    
    0.04Net loss
    
    $
    (0.13
    )
    
    $
    (0.25
    )Dividends per common share
    
    $
    0.325
    
    
    $
    0.65Weighted average shares outstanding:Basic
    
    
    15,043
    
    
    
    15,003Diluted
    
    
    15,043
    
    
    
    15,003
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PARKWAY PROPERTIES, INC.
 
 CONSOLIDATED STATEMENT OF CHANGES IN  EQUITY
   Parkway Properties, Inc. ShareholdersAccumulated
    
    
    
    
    
    
    Total
    
    
    NoncontrollingCommon
    
    
    Additional
    
    
    Other
    
    
    
    
    
    
    Parkway
    
    
    Interest -Preferred
    
    
    Common
    
    
    Stock Held
    
    
    Paid-In
    
    
    Comprehensive
    
    
    Accumulated
    
    
    Properties, Inc.
    
    
    Real Estate
    
    
    TotalStock
    
    
    Stock
    
    
    in Trust
    
    
    Capital
    
    
    Loss
    
    
    Deficit
    
    
    Shareholders Equity
    
    
    Partnerships
    
    
    EquityBalance at December 31, 2008 as previously reported
    
    $
    57,976
    
    
    $
    15
    
    
    $
    (2,895
    )
    
    $
    428,367
    
    
    $
    (7,728
    )
    
    $
    (69,487
    )
    
    $
    406,248
    
    
    $
    
    
    
    $
    406,248Reclassification upon the adoption of SFAS No. 160
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    127,192
    
    
    
    127,192Balance at December 31, 2008 as presented
    
    
    57,976
    
    
    
    15
    
    
    
    (2,895
    )
    
    
    428,367
    
    
    
    (7,728
    )
    
    
    (69,487
    )
    
    
    406,248
    
    
    
    127,192
    
    
    
    533,440Comprehensive lossNet loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (789
    )
    
    
    (789
    )
    
    
    (3,764
    )
    
    
    (4,553
    )Change in fair value of interest rate swaps
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    372
    
    
    
    
    
    
    
    372
    
    
    
    
    
    
    
    372Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (417
    )
    
    
    (3,764
    )
    
    
    (4,181
    )Common dividends declared  $0.325 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,989
    )
    
    
    (4,989
    )
    
    
    
    
    
    
    (4,989
    )Preferred dividends declared  $0.50 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,200
    )
    
    
    (1,200
    )
    
    
    
    
    
    
    (1,200
    )Share-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    661
    
    
    
    
    
    
    
    
    
    
    
    661
    
    
    
    
    
    
    
    661Purchase of Company stock  3,594 shares withheld
to satisfy tax withholding obligations in
connection with the vesting of restricted stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (42
    )
    
    
    
    
    
    
    
    
    
    
    (42
    )
    
    
    
    
    
    
    (42
    )Distribution of 10,125 shares of common stock,
deferred compensation plan
    
    
    
    
    
    
    
    
    
    
    342
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    342
    
    
    
    
    
    
    
    342Balance at March 31, 2009
    
    $
    57,976
    
    
    $
    15
    
    
    $
    (2,553
    )
    
    $
    428,986
    
    
    $
    (7,356
    )
    
    $
    (76,465
    )
    
    $
    400,603
    
    
    $
    123,428
    
    
    $
    524,031
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PARKWAY PROPERTIES, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
  Three Months EndedMarch 312009
    
    
    2008(Unaudited)Operating activitiesNet loss
    
    $
    (789
    )
    
    $
    (2,595
    )Adjustments to reconcile net loss to cash provided by
operating activities:Depreciation and amortization
    
    
    23,556
    
    
    
    21,205Depreciation and amortization  discontinued operations
    
    
    24
    
    
    
    963Amortization
of above (below)  market leases
    
    
    (219
    )
    
    
    57Amortization of loan costs
    
    
    491
    
    
    
    446Amortization of mortgage loan discount
    
    
    (145
    )
    
    
    (123
    )Share based compensation expense
    
    
    661
    
    
    
    454Operating distributions from unconsolidated joint ventures
    
    
    161
    
    
    
    382Loss allocated to noncontrolling interests
    
    
    (3,764
    )
    
    
    (2,487
    )Net gain on real estate and involuntary conversion
    
    
    (393
    )
    
    
    Equity in earnings of unconsolidated joint ventures
    
    
    (200
    )
    
    
    (258
    )Increase in deferred leasing costs
    
    
    (2,131
    )
    
    
    (3,056
    )Changes in operating assets and liabilities:Change in receivables and other assets
    
    
    13,561
    
    
    
    10,403Change in accounts payable and other liabilities
    
    
    (12,782
    )
    
    
    (12,582
    )Cash provided by operating activities
    
    
    18,031
    
    
    
    12,809Investing activitiesPurchases of real estate related investments
    
    
    
    
    
    
    (231,476
    )Proceeds from sale of real estate
    
    
    7,132
    
    
    
    Proceeds from property insurance settlement
    
    
    1,500
    
    
    
    Real estate development
    
    
    (3,791
    )
    
    
    (5,733
    )Improvements to real estate related investments
    
    
    (6,594
    )
    
    
    (6,610
    )Cash used in investing activities
    
    
    (1,753
    )
    
    
    (243,819
    )Financing activitiesPrincipal payments on mortgage notes payable
    
    
    (24,996
    )
    
    
    (7,248
    )Proceeds from long-term financing
    
    
    
    
    
    
    148,411Proceeds from bank borrowings
    
    
    35,415
    
    
    
    88,744Payments on bank borrowings
    
    
    (20,355
    )
    
    
    (43,430
    )Debt financing costs
    
    
    
    
    
    
    (1,236
    )Stock options exercised
    
    
    
    
    
    
    467Purchase of Company stock
    
    
    (42
    )
    
    
    Dividends paid on common stock
    
    
    (4,924
    )
    
    
    (9,819
    )Dividends paid on preferred stock
    
    
    (1,200
    )
    
    
    (1,200
    )Contributions from noncontrolling interest partners
    
    
    
    
    
    
    60,501Distributions to noncontrolling interest partners
    
    
    
    
    
    
    (586
    )Cash provided by (used in) financing activities
    
    
    (16,102
    )
    
    
    234,604Change in cash and cash equivalents
    
    
    176
    
    
    
    3,594Cash and cash equivalents at beginning of period
    
    
    15,318
    
    
    
    11,312Cash and cash equivalents at end of period
    
    $
    15,494
    
    
    $
    14,906
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Parkway Properties, Inc.
 
 Notes to Condensed Consolidated Financial Statements (Unaudited)
 March 31, 2009
 (1) Basis of Presentation
 Consolidation of Variable Interest Entities
 Investors Accounting for an Investee When the Investor Has a Majority of the Voting
Interest but the Minority Shareholder or Shareholders Have Certain Approval or Veto Rights; Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited
Partnership or Similar Entity When the Limited Partners Have Certain Rights; , Accounting for Investments in Real Estate Ventures;
     Page 7 of 36




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(2) Net Loss Per Common Share
  Page 8 of 36




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Three Months EndedMarch 312009
    
    
    2008Numerator:Basic and diluted net loss
available to common stockholders
    
    $
    (1,989
    )
    
    $
    (3,795
    )Denominator:Basic weighted average shares
    
    
    15,043
    
    
    
    15,003Diluted weighted average shares
    
    
    15,043
    
    
    
    15,003Diluted
loss per share attributable to Parkway Properties, Inc.
    
    $
    (0.13
    )
    
    $
    (0.25
    )
   (3) Supplemental Cash Flow Information and Schedule of Non-Cash Investing and Financing Activity
  Three Months EndedMarch 312009
    
    2008(in thousands)Supplemental cash flow information:Cash paid for interest (net of amount capitalized)
    
    $
    13,745
    
    
    $
    14,719Supplemental schedule of non-cash investing and
financing activity:Restricted
shares and deferred incentive share units issued
    
    
    3,151

    
    
    
    1,191
 (4) Dispositions
  Page 9 of 36




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(5) Office Property Held for Sale
   March 312009Balance
Sheet:Investment property
    
    $
    7,632Accumulated depreciation
    
    
    (808
    )Office property held for sale
    
    
    6,824Rents receivable and other assets
    
    
    418Total assets
    
    $
    7,242Accounts payable and other liabilities
    
    $
    178Stockholders equity
    
    
    7,064Total liabilities and stockholders equity
    
    $
    7,242
 (6) Discontinued Operations
  Square
    
    
    Date of
    
    Net Sales
    
    Net Book Value
   
    GainOffice Property
    
    Location
    
    Feet
    
    
    Sale
    
    Price
    
    of Real Estate
    
    on SaleTown Point Center
    
    Norfolk, Virginia
    
    
    131
    
    
    07/15/08
    
    $
    12,180
    
    
    $
    10,621
    
    
    $
    1,559Wachovia Plaza
    
    St. Petersburg, Florida
    
    
    186
    
    
    08/18/08
    
    
    25,492
    
    
    
    16,154
    
    
    
    9,338Capitol Center
    
    Columbia, South Carolina
    
    
    460
    
    
    09/05/08
    
    
    46,792
    
    
    
    35,101
    
    
    
    11,6912008 Dispositions
    
    
    
    
    777
    
    
    
    
    $
    84,464
    
    
    $
    61,876
    
    
    $
    22,588
   Three Months EndedMarch 312009
    
    
    2008Income Statement:RevenuesIncome from office and parking properties
    
    $
    392
    
    
    $
    3,790392
    
    
    
    3,790ExpensesOffice
and parking properties:Property operating expense
    
    
    190
    
    
    
    1,893Interest expense
    
    
    
    
    
    
    383Depreciation and amortization
    
    
    24
    
    
    
    963214
    
    
    
    3,239Income from discontinued operations
    
    $
    178
    
    
    $
    551
 Page 10 of 36




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(7) Mortgage Loan
  (8) Investment in Unconsolidated Joint Ventures
  Parkways
    
    
    
    
    
    PercentageOwnership
    
    Square
    
    LeasedJoint Venture Entity
    
    Property Name
    
    Location
    
    Interest
    
    Feet
    
    At 04/01/09Wink-Parkway Partnership
    
    Wink Building
    
    New Orleans, LA
    
    
    50.0
    %
    
    
    32
    
    
    
    100.0
    %Parkway Joint Venture, LLC (Jackson JV)
    
    UBS Building/River Oaks
    
    Jackson, MS
    
    
    20.0
    %
    
    
    167
    
    
    
    92.9
    %RubiconPark I, LLC (Rubicon JV)
    
    Lakewood/Falls Pointe
    
    Atlanta, GA
    
    
    20.0
    %
    
    
    552
    
    
    
    98.5
    %Carmel Crossing
    
    Charlotte, NCRubiconPark II, LLC (Maitland JV)
    
    Maitland 200
    
    Orlando, FL
    
    
    20.0
    %
    
    
    205
    
    
    
    98.2
    %956
    
    
    
    97.5
    %
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March 31, 2009Wink
    
    Jackson
    
    Rubicon
    
    Maitland
    
    CombinedBuilding
    
    JV
    
    JV
    
    JV
    
    TotalUnconsolidated Joint Ventures (at 100%):Real Estate, Net
    
    $
    1,162
    
    
    $
    15,801
    
    
    $
    65,585
    
    
    $
    28,622
    
    
    $
    111,170Other Assets
    
    
    470
    
    
    
    1,308
    
    
    
    8,249
    
    
    
    1,187
    
    
    
    11,214Total Assets
    
    $
    1,632
    
    
    $
    17,109
    
    
    $
    73,834
    
    
    $
    29,809
    
    
    $
    122,384Mortgage Debt (a)
    
    $
    39
    
    
    $
    12,600
    
    
    $
    51,865
    
    
    $
    18,035
    
    
    $
    82,539Other Liabilities
    
    
    41
    
    
    
    829
    
    
    
    1,536
    
    
    
    771
    
    
    
    3,177Partners and Shareholders Equity
    
    
    1,552
    
    
    
    3,680
    
    
    
    20,433
    
    
    
    11,003
    
    
    
    36,668Total Liabilities & Partners/Shareholders Equity
    
    $
    1,632
    
    
    $
    17,109
    
    
    $
    73,834
    
    
    $
    29,809
    
    
    $
    122,384Parkways Share of Unconsolidated
Joint VenturesReal Estate, Net
    
    $
    581
    
    
    $
    3,160
    
    
    $
    13,117
    
    
    $
    5,724
    
    
    $
    22,582Mortgage Debt
    
    $
    20
    
    
    $
    2,520
    
    
    $
    7,181
    
    
    $
    
    
    
    $
    9,721Investment in Joint Ventures
    
    $
    776
    
    
    $
    (283
    )
    
    $
    5,618
    
    
    $
    5,123
    
    
    $
    11,234
 December 31, 2008Wink
    
    Jackson
    
    Rubicon
    
    Maitland
    
    CombinedBuilding
    
    JV
    
    JV
    
    JV
    
    TotalUnconsolidated Joint Ventures (at 100%):Real Estate, Net
    
    $
    1,168
    
    
    $
    15,918
    
    
    $
    65,749
    
    
    $
    28,828
    
    
    $
    111,663Other Assets
    
    
    457
    
    
    
    1,006
    
    
    
    8,076
    
    
    
    1,048
    
    
    
    10,587Total Assets
    
    $
    1,625
    
    
    $
    16,924
    
    
    $
    73,825
    
    
    $
    29,876
    
    
    $
    122,250Mortgage Debt (a)
    
    $
    67
    
    
    $
    12,600
    
    
    $
    52,000
    
    
    $
    18,154
    
    
    $
    82,821Other Liabilities
    
    
    39
    
    
    
    700
    
    
    
    1,573
    
    
    
    628
    
    
    
    2,940Partners and Shareholders Equity
    
    
    1,519
    
    
    
    3,624
    
    
    
    20,252
    
    
    
    11,094
    
    
    
    36,489Total Liabilities & Partners/Shareholders Equity
    
    $
    1,625
    
    
    $
    16,924
    
    
    $
    73,825
    
    
    $
    29,876
    
    
    $
    122,250Parkways Share of Unconsolidated
Joint VenturesReal Estate, Net
    
    $
    584
    
    
    $
    3,184
    
    
    $
    13,150
    
    
    $
    5,766
    
    
    $
    22,684Mortgage Debt
    
    $
    34
    
    
    $
    2,520
    
    
    $
    7,200
    
    
    $
    
    
    
    $
    9,754Investment in Joint Ventures
    
    $
    760
    
    
    $
    (310
    )
    
    $
    5,484
    
    
    $
    5,123
    
    
    $
    11,057
 
  Page 12 of 36




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##### Table of Contents



Parkways
    
    Monthly
    
    Loan
    
    LoanType of
    
    Interest
    
    
    
    
    
    Share of
    
    Debt
    
    Balance
    
    BalanceJoint Venture
    
    Debt Service
    
    Rate
    
    Maturity Date
    
    Debt
    
    Service
    
    03/31/09
    
    12/31/08Wink-Parkway Partnership
    
    Amortizing
    
    
    8.625
    %
    
    
    07/01/09
    
    
    
    50.00
    %
    
    $
    5
    
    
    $
    20
    
    
    $
    34Maitland JV
    
    Amortizing
    
    
    4.390
    %
    
    
    06/01/11
    
    
    
    0.00
    %
    
    
    
    
    
    
    
    
    
    
    Rubicon JV
    
    Amortizing
    
    
    4.865
    %
    
    
    01/01/12
    
    
    
    13.85
    %
    
    
    30
    
    
    
    7,181
    
    
    
    7,200Jackson JV
    
    Interest Only
    
    
    5.840
    %
    
    
    07/01/15
    
    
    
    20.00
    %
    
    
    12
    
    
    
    2,520
    
    
    
    2,520$
    47
    
    
    $
    9,721
    
    
    $
    9,754Weighted average interest rate at end of period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5.125
    %
    
    
    5.130
    %
  Wink
    
    
    Maitland
    
    
    Rubicon
    
    
    JacksonPartnership
    
    
    JV
    
    
    JV
    
    
    JV
    
    
    Total2009 (Remaining nine months)
    
    $
    20
    
    
    $
    
    
    
    $
    77
    
    
    $
    12
    
    
    $
    1092010
    
    
    
    
    
    
    
    
    
    
    109
    
    
    
    32
    
    
    
    1412011
    
    
    
    
    
    
    
    
    
    
    114
    
    
    
    35
    
    
    
    1492012
    
    
    
    
    
    
    
    
    
    
    6,881
    
    
    
    37
    
    
    
    6,9182013
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    39
    
    
    
    392014
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41
    
    
    
    41Thereafter
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,324
    
    
    
    2,324$
    20
    
    
    $
    
    
    
    $
    7,181
    
    
    $
    2,520
    
    
    $
    9,721
 Page 13 of 36




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##### Table of Contents



Results of OperationsThree Months Ended March 31, 2009Wink
    
    Jackson
    
    Rubicon
    
    Maitland
    
    CombinedBuilding
    
    JV
    
    JV
    
    JV
    
    TotalUnconsolidated Joint Ventures (100%):Revenues
    
    $
    79
    
    
    $
    766
    
    
    $
    2,481
    
    
    $
    1,144
    
    
    $
    4,470Operating Expenses
    
    
    (38
    )
    
    
    (369
    )
    
    
    (1,066
    )
    
    
    (438
    )
    
    
    (1,911
    )Net Operating Income
    
    
    41
    
    
    
    397
    
    
    
    1,415
    
    
    
    706
    
    
    
    2,559Interest Expense
    
    
    (1
    )
    
    
    (184
    )
    
    
    (632
    )
    
    
    (198
    )
    
    
    (1,015
    )Loan Cost Amortization
    
    
    (1
    )
    
    
    (1
    )
    
    
    (16
    )
    
    
    (3
    )
    
    
    (21
    )Depreciation and Amortization
    
    
    (6
    )
    
    
    (156
    )
    
    
    (586
    )
    
    
    (224
    )
    
    
    (972
    )Net Income
    
    $
    33
    
    
    $
    56
    
    
    $
    181
    
    
    $
    281
    
    
    $
    551Parkways
Share of Unconsolidated Joint Ventures:Net Income
    
    $
    16
    
    
    $
    11
    
    
    $
    76
    
    
    $
    97
    
    
    $
    200Depreciation and Amortization
    
    $
    3
    
    
    $
    31
    
    
    $
    117
    
    
    $
    45
    
    
    $
    196Property Management Fees
    
    $
    
    
    
    $
    43
    
    
    $
    154
    
    
    $
    36
    
    
    $
    233Interest Expense
    
    $
    1
    
    
    $
    37
    
    
    $
    87
    
    
    $
    
    
    
    $
    125Loan Cost Amortization
    
    $
    1
    
    
    $
    
    
    
    $
    2
    
    
    $
    
    
    
    $
    3Other Supplemental Information:Distributions from Unconsolidated Joint Ventures
    
    $
    
    
    
    $
    23
    
    
    $
    14
    
    
    $
    124
    
    
    $
    161
 Results of OperationsThree Months Ended March 31, 2008Wink
    
    Jackson
    
    Rubicon
    
    Maitland
    
    CombinedBuilding
    
    JV
    
    JV
    
    JV
    
    TotalUnconsolidated Joint Ventures (100%):Revenues
    
    $
    95
    
    
    $
    634
    
    
    $
    2,555
    
    
    $
    1,152
    
    
    $
    4,436Operating Expenses
    
    
    (26
    )
    
    
    (340
    )
    
    
    (977
    )
    
    
    (388
    )
    
    
    (1,731
    )Net Operating Income
    
    
    69
    
    
    
    294
    
    
    
    1,578
    
    
    
    764
    
    
    
    2,705Interest Expense
    
    
    
    
    
    
    (184
    )
    
    
    (640
    )
    
    
    (203
    )
    
    
    (1,027
    )Loan Cost Amortization
    
    
    (1
    )
    
    
    (1
    )
    
    
    (16
    )
    
    
    (3
    )
    
    
    (21
    )Depreciation and Amortization
    
    
    (6
    )
    
    
    (143
    )
    
    
    (511
    )
    
    
    (210
    )
    
    
    (870
    )Net Income (Loss)
    
    $
    62
    
    
    $
    (34
    )
    
    $
    411
    
    
    $
    348
    
    
    $
    787Parkways Share of Unconsolidated
Joint Ventures:Net Income (Loss)
    
    $
    31
    
    
    $
    (7
    )
    
    $
    123
    
    
    $
    111
    
    
    $
    258Depreciation and Amortization
    
    $
    3
    
    
    $
    29
    
    
    $
    102
    
    
    $
    42
    
    
    $
    176Property Management Fees
    
    $
    
    
    
    $
    69
    
    
    $
    90
    
    
    $
    55
    
    
    $
    214Interest Expense
    
    $
    
    
    
    $
    37
    
    
    $
    88
    
    
    $
    
    
    
    $
    125Loan Cost Amortization
    
    $
    1
    
    
    $
    
    
    
    $
    2
    
    
    $
    
    
    
    $
    3Other Supplemental Information:Distributions from Unconsolidated Joint Ventures
    
    $
    
    
    
    $
    13
    
    
    $
    79
    
    
    $
    290
    
    
    $
    382
 Page 14 of 36




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##### Table of Contents



(9) Capital and Financing Transactions
     Page 15 of 36




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##### Table of Contents



(10) Noncontrolling Interest  Real Estate Partnerships
  Parkways
    
    Square FeetJoint Venture Entity and Property Name
    
    Location
    
    Ownership %
    
    (In thousands)Parkway Moore, LLC/ Moore Building
Associates, LP
Toyota Center
    
    Memphis, TN
    
    
    75.025
    %
    
    
    175Parkway Properties Office Fund, LPDesert Ridge I, II and Shops
    
    Phoenix, AZ
    
    
    26.500
    %
    
    
    293Maitland 100
    
    Orlando, FL
    
    
    25.000
    %
    
    
    128555 Winderley
    
    Orlando, FL
    
    
    25.000
    %
    
    
    102Gateway Center
    
    Orlando, FL
    
    
    25.000
    %
    
    
    228BellSouth Building
    
    Jacksonville, FL
    
    
    25.000
    %
    
    
    92Centurion Centre
    
    Jacksonville, FL
    
    
    25.000
    %
    
    
    88100 Ashford Center
    
    Atlanta, GA
    
    
    25.000
    %
    
    
    160Peachtree Ridge
    
    Atlanta, GA
    
    
    25.000
    %
    
    
    163Overlook II
    
    Atlanta, GA
    
    
    25.000
    %
    
    
    260Citicorp Plaza
    
    Chicago, IL
    
    
    40.000
    %
    
    
    601Chatham Centre
    
    Schaumburg, IL
    
    
    25.000
    %
    
    
    206Renaissance Center
    
    Memphis, TN
    
    
    25.000
    %
    
    
    1901401 Enclave Parkway
    
    Houston, TX
    
    
    25.000
    %
    
    
    209Total Parkway Properties Office Fund, LP
    
    
    
    
    
    
    
    
    
    
    2,720Total Consolidated Joint Ventures
    
    
    
    
    
    
    
    
    
    
    2,895
    Page 16 of 36




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##### Table of Contents



(11) Share-Based Compensation
       Weighted
    
    
    
    
    
    WeightedAverage
    
    Deferred
    
    AverageRestricted
    
    Grant-Date
    
Incentive
    
    Grant-DateShares
    
    Fair Value
    
    Share Units
    
    Fair ValueBeginning Balance
    
    
    220,641
    
    
    $
    39.49
    
    
    
    22,805
    
    
    
    $
    37.62Granted
    
    
    120,000
    
    
    
    15.76
    
    
    
    
    
    
    
    
    Vested
    
    
    (30,416
    )
    
    
    43.08
    
    
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    
    
    
    
    (1,385
    )
    
    
    
    36.37Balance at 3/31/09
    
    
    310,225
    
    
    $
    29.96
    
    
    
    21,420
    
    
    
    $
    37.70
 Page 17 of 36




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##### Table of Contents



(12) Segment Information
    Page 18 of 36




---



##### Table of Contents



At or for the three months ended March 31, 2009
    
    
    At or for the three months ended March 31, 2008Office
    
    
    Unallocated
    
    
    
    
    
    
    Office
    
    
    UnallocatedProperties
    
    
    and Other
    
    
    Consolidated
    
    
    Properties
    
    
    and Other
    
    
    Consolidated(in thousands)
    
    
    (in thousands)Property operating revenues (a)
    
    $
    67,370
    
    
    $
    
    
    
    $
    67,370
    
    
    $
    62,232
    
    
    $
    
    
    
    $
    62,232Property operating expenses (b)
    
    
    (33,721
    )
    
    
    
    
    
    
    (33,721
    )
    
    
    (29,860
    )
    
    
    
    
    
    
    (29,860
    )Property net operating income from continuing operations
    
    
    33,649
    
    
    
    
    
    
    
    33,649
    
    
    
    32,372
    
    
    
    
    
    
    
    32,372Management company income
    
    
    
    
    
    
    415
    
    
    
    415
    
    
    
    
    
    
    
    497
    
    
    
    497Interest and other income
    
    
    
    
    
    
    302
    
    
    
    302
    
    
    
    
    
    
    
    368
    
    
    
    368Interest expense (c)
    
    
    (12,174
    )
    
    
    (1,877
    )
    
    
    (14,051
    )
    
    
    (11,889
    )
    
    
    (3,249
    )
    
    
    (15,138
    )Management company expenses
    
    
    
    
    
    
    (501
    )
    
    
    (501
    )
    
    
    
    
    
    
    (489
    )
    
    
    (489
    )General and administrative expenses
    
    
    
    
    
    
    (1,582
    )
    
    
    (1,582
    )
    
    
    
    
    
    
    (2,296
    )
    
    
    (2,296
    )Equity in earnings of unconsolidated joint ventures
    
    
    200
    
    
    
    
    
    
    
    200
    
    
    
    258
    
    
    
    
    
    
    
    258Adjustment for depreciation and amortization  unconsolidated joint ventures
    
    
    196
    
    
    
    
    
    
    
    196
    
    
    
    176
    
    
    
    
    
    
    
    176Adjustment for depreciation and amortization  discontinued operations
    
    
    24
    
    
    
    
    
    
    
    24
    
    
    
    963
    
    
    
    
    
    
    
    963Adjustment for noncontrolling interest  real estate partnerships
    
    
    (2,234
    )
    
    
    
    
    
    
    (2,234
    )
    
    
    (1,723
    )
    
    
    
    
    
    
    (1,723
    )Income from discontinued operations
    
    
    178
    
    
    
    
    
    
    
    178
    
    
    
    551
    
    
    
    
    
    
    
    551Dividends on preferred stock
    
    
    
    
    
    
    (1,200
    )
    
    
    (1,200
    )
    
    
    
    
    
    
    (1,200
    )
    
    
    (1,200
    )Gain on involuntary conversion
    
    
    463
    
    
    
    
    
    
    
    463
    
    
    
    
    
    
    
    
    
    
    
    Funds from operations available to common stockholders (d)
    
    
    20,302
    
    
    
    (4,443
    )
    
    
    15,859
    
    
    
    20,708
    
    
    
    (6,369
    )
    
    
    14,339Depreciation and amortization
    
    
    (23,556
    )
    
    
    
    
    
    
    (23,556
    )
    
    
    (21,205
    )
    
    
    
    
    
    
    (21,205
    )Depreciation and amortization  unconsolidated joint ventures
    
    
    (196
    )
    
    
    
    
    
    
    (196
    )
    
    
    (176
    )
    
    
    
    
    
    
    (176
    )Depreciation and amortization  discontinued operations
    
    
    (24
    )
    
    
    
    
    
    
    (24
    )
    
    
    (963
    )
    
    
    
    
    
    
    (963
    )Depreciation and amortization  noncontrolling interest  real estate partnerships
    
    
    5,998
    
    
    
    
    
    
    
    5,998
    
    
    
    4,210
    
    
    
    
    
    
    
    4,210Loss on sale of real estate
    
    
    (70
    )
    
    
    
    
    
    
    (70
    )
    
    
    
    
    
    
    
    
    
    
    Net income (loss) available to common stockholders
    
    $
    2,454
    
    
    $
    (4,443
    )
    
    $
    (1,989
    )
    
    $
    2,574
    
    
    $
    (6,369
    )
    
    $
    (3,795
    )Total assets
    
    $
    1,639,163
    
    
    $
    12,401
    
    
    $
    1,651,564
    
    
    $
    1,742,573
    
    
    $
    16,045
    
    
    $
    1,758,618Office and
parking properties and real estate development
    
    $
    1,439,134
    
    
    $
    
    
    
    $
    1,439,134
    
    
    $
    1,513,963
    
    
    $
    
    
    
    $
    1,513,963Investment in unconsolidated joint ventures
    
    $
    11,234
    
    
    $
    
    
    
    $
    11,234
    
    
    $
    11,112
    
    
    $
    
    
    
    $
    11,112Capital expenditures (e)
    
    $
    8,725
    
    
    $
    
    
    
    $
    8,725
    
    
    $
    9,666
    
    
    $
    
    
    
    $
    9,666
 
 (a)
    
    Included in property operating revenues 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 other 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)
    
    For the three months ended March 31, 2009, FFO includes a
gain on involuntary conversion from Hurricane Ike of $463,000 and
lease termination fee income of $41,000. For
the three months ended March 31, 2008,  FFO includes lease
termination fee income of $1.1 million, offset by  a reduction for
a non-cash purchase accounting adjustment  of $657,000 and a loss
on the extinguishment of debt of $401,000.(e)
    
    Capital expenditures include building improvements, tenant improvements and deferred leasing costs. Page 19 of 36




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##### Table of Contents



(13) Hurricane Ike Impact
  
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Overview
  Occupancy
 Rental Rates.
 Customer Retention
 Page 20 of 36




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##### Table of Contents



Page 21 of 36




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Discretionary Funds
    Financial Condition
 Comments are for the balance sheet dated March 31, 2009 compared to the balance sheet dated
December 31, 2008.
 Office
and Parking Properties.
 Dispositions
& Improvements.
 Page 22 of 36




---



##### Table of Contents



Office
Property Held for Sale
 Rents
Receivable and Other Assets
 Page 23 of 36




---



##### Table of Contents



Intangible Assets, Net.
 Notes
Payable to Banks.
 Mortgage
Notes Payable.
    Page 24 of 36




---



##### Table of Contents



Three Months EndedMarch 312009
    
    
    2008Net Loss
    
    $
    (789
    )
    
    $
    (2,595
    )Adjustments to Net Loss:Interest Expense
    
    
    13,560
    
    
    
    14,674Amortization of Financing Costs
    
    
    491
    
    
    
    446Prepayment Expense  Early Extinguishment of Debt
    
    
    
    
    
    
    401Depreciation and Amortization
    
    
    23,580
    
    
    
    22,168Amortization of Share Based Compensation
    
    
    661
    
    
    
    454Net Gain on Real
Estate and Involuntary Conversion
    
    
    (393
    )
    
    
    Tax Expense
    
    
    16
    
    
    
    EBITDA Adjustments  Unconsolidated Joint Ventures
    
    
    324
    
    
    
    304EBITDA Adjustments  Noncontrolling Interest in Real Estate Partnerships
    
    
    (9,136
    )
    
    
    (6,883
    )EBITDA (1)
    
    $
    28,314
    
    
    $
    28,969Interest Coverage Ratio:EBITDA
    
    $
    28,314
    
    
    $
    28,969Interest Expense:Interest Expense
    
    $
    13,560
    
    
    $
    14,674Capitalized Interest
    
    
    
    
    
    
    156Interest Expense  Unconsolidated Joint Ventures
    
    
    125
    
    
    
    125Interest Expense  Noncontrolling Interest in Real Estate Partnerships
    
    
    (3,069
    )
    
    
    (2,612
    )Total Interest Expense
    
    $
    10,616
    
    
    $
    12,343Interest Coverage Ratio
    
    
    2.67
    
    
    
    2.35Fixed Charge Coverage Ratio:EBITDA
    
    $
    28,314
    
    
    $
    28,969Fixed Charges:Interest Expense
    
    $
    10,616
    
    
    $
    12,343Preferred Dividends
    
    
    1,200
    
    
    
    1,200Principal Payments (Excluding Early Extinguishment of Debt)
    
    
    3,230
    
    
    
    3,792Principal Payments  Unconsolidated Joint Ventures
    
    
    33
    
    
    
    13Principal Payments  Noncontrolling Interest in Real Estate Partnerships
    
    
    (142
    )
    
    
    (86
    )Total Fixed Charges
    
    $
    14,937
    
    
    $
    17,262Fixed Charge Coverage Ratio
    
    
    1.90
    
    
    
    1.68Modified Fixed Charge Coverage Ratio:EBITDA
    
    $
    28,314
    
    
    $
    28,969Modified Fixed Charges:Interest Expense
    
    $
    10,616
    
    
    $
    12,343Preferred Dividends
    
    
    1,200
    
    
    
    1,200Total Modified Fixed Charges
    
    $
    11,816
    
    
    $
    13,543Modified Fixed Charge Coverage Ratio
    
    
    2.40
    
    
    
    2.14
 
 (1)
    
    Parkway defines EBITDA, a non-GAAP financial measure, as net income before interest, income
taxes, depreciation, amortization, losses on early extinguishment of debt and other gains and
losses. EBITDA, as calculated by us, is not comparable to EBITDA reported by other REITs that do
not define EBITDA exactly as we do. Page 25 of 36




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##### Table of Contents



Three Months EndedMarch 312009
    
    
    2008EBITDA
    
    $
    28,314
    
    
    $
    28,969Amortization of Above (Below) Market Leases
    
    
    (219
    )
    
    
    57Amortization of Mortgage Loan Discount
    
    
    (145
    )
    
    
    (123
    )Operating Distributions from Unconsolidated
Joint Ventures
    
    
    161
    
    
    
    382Interest Expense
    
    
    (13,560
    )
    
    
    (14,674
    )Prepayment Expense  Early Extinguishment of
Debt
    
    
    
    
    
    
    (401
    )Tax Expense
    
    
    (16
    )
    
    
    Change in Deferred Leasing Costs
    
    
    (2,131
    )
    
    
    (3,056
    )Change in Receivables and Other Assets
    
    
    13,561
    
    
    
    10,403Change in Accounts Payable and Other
Liabilities
    
    
    (12,782
    )
    
    
    (12,582
    )Adjustments for Noncontrolling Interests
    
    
    5,372
    
    
    
    4,396Adjustments for Unconsolidated Joint Ventures
    
    
    (524
    )
    
    
    (562
    )Cash Flows Provided by Operating Activities
    
    $
    18,031
    
    
    $
    12,809
 Equity.
 Increase(Decrease)Net loss attributable to Parkway Properties, Inc.
    
    $
    (789
    )Net loss attributable to noncontrolling interest
    
    
    (3,764
    )Net loss
    
    
    (4,553
    )Change in market value of interest rate swaps
    
    
    372Comprehensive loss
    
    
    (4,181
    )Common stock dividends declared
    
    
    (4,989
    )Preferred stock dividends declared
    
    
    (1,200
    )Shares withheld to satisfy tax withholding obligation on vesting of restricted stock
    
    
    (42
    )Share based compensation expense
    
    
    661Shares distributed from deferred compensation plan
    
    
    342$
    (9,409
    )
  Page 26 of 36




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##### Table of Contents



Results of Operations
 Comments are for the three months ended March 31, 2009 compared to the three months ended March 31,
2008
  Office
and Parking Properties.
  Three Months Ended March 31Increase
    
    
    %2009
    
    
    2008
    
    
    (Decrease)
    
    
    ChangeRevenue from office and parking properties:Same-store properties
    
    $
    59,016
    
    
    $
    58,115
    
    
    $
    901
    
    
    
    1.6
    %Properties acquired in 2008
    
    
    7,315
    
    
    
    3,763
    
    
    
    3,552
    
    
    
    94.4
    %Office property development
    
    
    843
    
    
    
    
    
    
    
    843
    
    
    
    0.0
    %Properties disposed
    
    
    196
    
    
    
    354
    
    
    
    (158
    )
    
    
    -44.6
    %Total revenue from office and parking properties
    
    $
    67,370
    
    
    $
    62,232
    
    
    $
    5,138
    
    
    
    8.3
    %
   Three Months Ended March 31Increase
    
    
    %2009
    
    
    2008
    
    
    (Decrease)
    
    
    ChangeProperty operating expenses:Same-store properties
    
    $
    29,476
    
    
    $
    27,904
    
    
    $
    1,572
    
    
    
    5.6
    %Properties acquired in 2008
    
    
    3,686
    
    
    
    1,777
    
    
    
    1,909
    
    
    
    107.4
    %Office property development
    
    
    433
    
    
    
    2
    
    
    
    431
    
    
    
    21550.0
    %Properties disposed
    
    
    126
    
    
    
    177
    
    
    
    (51
    )
    
    
    -28.8
    %Total property operating expenses
    
    $
    33,721
    
    
    $
    29,860
    
    
    $
    3,861
    
    
    
    12.9
    %
   Page 27 of 36




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##### Table of Contents



Hurricane Ike Impact
 Share-Based Compensation Expense
    General
and Administrative Expense
 Page 28 of 36




---



##### Table of Contents



Interest
Expense.
 Three Months Ended MarchIncrease
    
    %2009
    
    2008
    
    (Decrease)
    
    ChangeInterest expense:Mortgage interest expense
    
    $
    11,897
    
    
    $
    11,203
    
    
    $
    694
    
    
    
    6.2
    %Bank line interest expense
    
    
    1,663
    
    
    
    3,094
    
    
    
    (1,431
    )
    
    
    -46.3
    %Debt prepayment expense
    
    
    
    
    
    
    401
    
    
    
    (401
    )
    
    
    -100.0
    %Mortgage loan cost amortization
    
    
    277
    
    
    
    285
    
    
    
    (8
    )
    
    
    -2.8
    %Bank loan cost amortization
    
    
    214
    
    
    
    155
    
    
    
    59
    
    
    
    38.1
    %Total interest expense
    
    $
    14,051
    
    
    $
    15,138
    
    
    $
    (1,087
    )
    
    
    -7.2
    %
   Discontinued Operations.
 Three Months Ended March 31%2009
    
    
    2008
    
    
    Decrease
    
    
    ChangeDiscontinued operations:Income  from discontinued
operations
    
    $
    178
    
    

    $
    551

    
    
    $
    (373

    )
    
    
    -67.7
    %Total discontinued operations
    
    $
    178
    
    

    $
    551

    
    
    $
    (373

    )
    
    
    -67.7

    %
  Net BookSquare
    
    Date of
    
    Net Sales
    
    Value of
    
    GainOffice Property
    
    Location
    
    Feet
    
    Sale
    
    Proceeds
    
    Real Estate
    
    on SaleTown Point Center
    
    Norfolk, Virginia
    
    
    131
    
    
    
    07/15/08
    
    
    $
    12,180
    
    
    $
    10,621
    
    
    $
    1,559Wachovia Plaza
    
    St. Petersburg, Florida
    
    
    186
    
    
    
    08/18/08
    
    
    
    25,492
    
    
    
    16,154
    
    
    
    9,338Capitol Center
    
    Columbia, South Carolina
    
    
    460
    
    
    
    09/05/08
    
    
    
    46,792
    
    
    
    35,101
    
    
    
    11,6912008 Dispositions
    
    
    
    
    777
    
    
    
    
    
    
    $
    84,464
    
    
    $
    61,876
    
    
    $
    22,588
  Page 29 of 36




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##### Table of Contents



Recent Accounting Pronouncements
     Liquidity and Capital Resources
 Statement
of Cash Flows.
   Page 30 of 36




---



##### Table of Contents



Liquidity.
   OutstandingLine of Credit
    
    Lender
    
    Interest Rate
    
    
    Maturity
    
    
    Balance$15.0 Million
Unsecured Line of Credit (1)
    
    PNC Bank
    
    
    
    
    
    
    04/27/11
    
    
    $
    $236.0 Million Unsecured Line of
Credit (2)
    
    Wells Fargo
    
    
    2.7%
    
    
    
    04/27/11
    
    
    
    141,000$60.0 Million
Unsecured Term Loan (3)
    
    Wells Fargo
    
    
    4.9%
    
    
    
    04/27/11
    
    
    
    60,0003.4%
    
    
    
    
    
    
    $
    201,000
 
 (1)
    
    The interest rate on the $15.0 million unsecured line of credit with PNC Bank is currently
LIBOR plus 200 basis points.  On December 23, 2008, the Company renewed and extended this line to
April 2011.  The Company pays fees on the unused portion of the line of 25 basis points.(2)
    
    The $236.0 million unsecured line of credit is led by Wells Fargo and syndicated to
eight other banks.  The interest rate on the line of credit is currently LIBOR plus 130
basis points or the Prime interest rate plus 25 basis points.  At March 31, 2009, all
amounts outstanding under the line of credit with interest rates not fixed by an
interest rate swap agreement are borrowed at LIBOR plus 130 basis points.  The
Company pays an annual administration fee of $35,000 and fees on the unused
portion of the revolver ranging between 12.5 and 20 basis points based upon
overall Company leverage, with the rate set at 12.5 basis points at March 31, 2009.(3)
    
    The $60.0 million unsecured term loan is led by Wells Fargo and syndicated to eight other
banks.  The interest rate on the term loan is fixed by an interest
rate swap agreement. Excluding the interest rate swap agreement, the
interest rate on the term loan is LIBOR plus 130 basis points. Page 31  of 36




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##### Table of Contents



Fair Market Value LiabilityType of
    Balance Sheet
    Notional
    
    Maturity
    
    
    
    
    
    Fixed
    

March
31Hedge
    Location
    Amount
    
    Date
    
    Reference Rate
    
    Rate
    
    2009
    
    2008Swap
    Accounts payable and other liabilities
    $
    50,000
    
    
    
    06/30/08
    
    
    1-Month LIBOR
    
    
    4.380
    %
    
    $
    
    
    
    $
    (221
    )Swap
    Accounts payable
 and other liabilities
    $
    30,000
    
    
    
    08/31/08
    
    
    1-Month LIBOR
    
    
    4.924
    %
    
    
    
    
    
    
    (305
    )Swap
    Accounts payable 
and other liabilities
    $
    40,000
    
    
    
    12/31/08
    
    
    1-Month LIBOR
    
    
    4.360
    %
    
    
    
    
    
    
    (647
    )Swap
    Accounts payable 
and other liabilities
    $
    20,000
    
    
    
    12/31/08
    
    
    1-Month LIBOR
    
    
    4.245
    %
    
    
    
    
    
    
    (292
    )Swap
    Accounts payable 
and other liabilities
    $
    100,000
    
    
    
    03/31/11
    
    
    1-Month LIBOR
    
    
    4.935
    %
    
    
    (5,119
    )
    
    
    Swap
    Accounts payable 
and other liabilities
    $
    23,500
    
    
    
    12/01/14
    
    
    1-Month LIBOR
    
    
    5.800
    %
    
    
    (2,237
    )
    
    
    $
    (7,356
    )
    
    $
    (1,465
    )
   Page 32  of 36




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##### Table of Contents



Total
    
    
    
    
    
    RecurringAverage
    
    Mortgage
    
    Balloon
    
    PrincipalInterest Rate
    
    Maturities
    
    Payments
    
    AmortizationSchedule of Mortage Maturities by Years:2009*
    
    
    5.5
    %
    
    $
    9,705
    
    
    $
    
    
    
    $
    9,7052010
    
    
    5.8
    %
    
    
    139,555
    
    
    
    126,411
    
    
    
    13,1442011
    
    
    6.0
    %
    
    
    111,752
    
    
    
    102,694
    
    
    
    9,0582012
    
    
    5.9
    %
    
    
    64,516
    
    
    
    56,738
    
    
    
    7,7782013
    
    
    5.9
    %
    
    
    8,111
    
    
    
    
    
    
    
    8,1112014
    
    
    5.9
    %
    
    
    8,818
    
    
    
    
    
    
    
    8,818Thereafter
    
    
    5.3
    %
    
    
    502,128
    
    
    
    469,095
    
    
    
    33,033Total
    
    
    
    
    
    $
    844,585
    
    
    $
    754,938
    
    
    $
    89,647Fair value at 3/31/09
    
    
    
    
    
    $
    806,392
 
 *
    
    Remaining nine months      Page 33  of 36




---



##### Table of Contents



Contractual Obligations
  Funds From Operations
  Page 34  of 36




---



##### Table of Contents



Three Months EndedMarch 312009
    
    
    2008Net Loss
    
    $
    (789
    )
    
    $
    (2,595
    )Adjustments to Net Loss:Preferred Dividends
    
    
    (1,200
    )
    
    
    (1,200
    )Depreciation and Amortization
    
    
    23,556
    
    
    
    21,205Depreciation and Amortization  Discontinued Operations
    
    
    24
    
    
    
    963Noncontrolling Interest Depreciation and Amortization
    
    
    (5,998
    )
    
    
    (4,210
    )Adjustments for Unconsolidated Joint Ventures
    
    
    196
    
    
    
    176Loss on Sale of Real Estate
    
    
    70
    
    
    
    Funds From Operations Available to Common Shareholders
    
    $
    15,859
    
    
    $
    14,339
 Inflation
  Forward-Looking Statements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
  Page 35  of 36




---



##### Table of Contents



Item 4. Controls and Procedures
   
 PART II. OTHER INFORMATION
 
 Item 1A. Risk Factors
  Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 (c) Total Number
    
    (d) Maximum Numberof Shares Purchased
    
    of Shares that(a) Total Number
    
    (b) Average
    
    as Part of Publicly
    
    May Yet Beof Shares
    
    Price Paid
    
    Announced Plans
    
    Purchased UnderPeriod
    
    Purchased
    
    per Share
    
    or Programs
    
    the Plans or Programs01/01/09 to 01/31/09
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    02/01/09 to 02/28/09
    
    
    3,594
    (1)
    
    $
    11.63
    
    
    
    
    
    
    
    03/01/09 to 03/31/09
    
    
    
    
    
    $
    
    
    
    
    
    
    
    
    Total
    
    
    3,594
    
    
    $
    11.63
    
    
    
    
    
    
    
    
 
 (1)
    
    As permitted under the Companys equity compensation plan, these shares were withheld
by the Company to satisfy tax withholding obligations for employees in connection with the
vesting of stock. Shares withheld for tax withholding obligations do not affect the total
number of shares available for repurchase under any approved common stock repurchase plan.
At March 31, 2009, the Company did not have an authorized stock repurchase plan in place. 
 Item 6. Exhibits
 31.1
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
 
 SIGNATURES
  DATE: May 5, 2009
    PARKWAY PROPERTIES, INC.BY:
    /s/ Mandy  M. PopeMandy M. Pope, CPASenior Vice President, Controller and

Chief Accounting Officer Page 36  of 36