JACKSON, Miss., Nov. 2 /PRNewswire-FirstCall/ --

Highlights -- Achieves FFO of $0.76 per diluted share -- Achieves same-store average occupancy of 88.8% -- Average same-store rent per square foot increases 2.8% to $23.12 -- Increases FFO earnings outlook range for 2009 to $3.17 to $3.27 per diluted share

Parkway Properties, Inc. (NYSE: PKY) today announced results for its third quarter ended September 30, 2009.

(Logo: http://www.newscom.com/cgi-bin/prnh/20030513/PARKLOGO )

Steven G. Rogers, President and Chief Executive Officer stated, "We are pleased to report funds from operations ("FFO") of $0.76 per diluted share for the third quarter, while maintaining average portfolio occupancy and average rent per square foot at the high end of our previous earnings outlook. While the U.S. is beginning its economic recovery, office leasing trends will continue to lag the overall economic recovery. We will continue to play good defensive ball while positioning our balance sheet for future growth."

Consolidated Financial Results

-- FFO available to common shareholders totaled $16.2 million, or $0.76 per diluted share, for the three months ended September 30, 2009, as compared to $14.0 million, or $0.92 per diluted share, for the three months ended September 30, 2008. For the nine months ended September 30, 2009, FFO totaled $48.9 million, or $2.59 per diluted share, compared to $43.9 million, or $2.90 per diluted share for the nine months ended September 30, 2008. For the nine months ended September 30, 2009, the Company recorded an unusual item of $742,000, or $0.04 per diluted share, related to the partial recognition of a gain on involuntary conversion from Hurricane Ike.

Included in FFO per diluted share are the following amounts (in thousands, except average rent per square foot and average occupancy): YTD YTD Description Q3 2009 Q3 2008 2009 2008 ------------------------------------------------------------------------- Unusual Items: Gain on involuntary conversion from Hurricane Ike $- $- $742 $- Hurricane Ike expense $- $(640) $- $(640) Non-cash purchase accounting adjustment $- $- $- $(657) Loss on extinguishment of debt $- $(2,140) $- $(2,153) Other Items of Note: Lease termination fees (1) $349 $2,371 $429 $3,652 Straight-line rent (1) $1,419 $391 $3,762 $1,038 Amortization of above market rent (1) $(49) $(152) $(196) $(537) Bad debt expense (1) $(384) $(361) $(1,652) $(999) Portfolio Information: Average rent per square foot (2)(3) $23.12 $22.27 $22.99 $22.04 Average occupancy (2)(4) 88.7% 91.2% 89.4% 90.9% Same-store average rent per square foot (2)(3) $23.12 $22.49 $22.86 $22.25 Same-store average occupancy (2)(4) 88.8% 90.9% 89.6% 90.7% Total office square feet under ownership (2) 13,362 13,350 13,362 13,350 Total office square feet under management (5) 14,179 15,162 14,179 15,162 (1) These items include 100% of amounts from wholly-owned assets plus the Company's allocable share of these items recognized from the assets held in consolidated joint ventures and unconsolidated joint ventures. (2) These items include total office square feet of wholly-owned assets, consolidated joint ventures and unconsolidated joint ventures. (3) Average rent per square foot is defined as the weighted average annual gross rental rate, including escalations for operating expenses, divided by occupied square feet. (4) Average occupancy is defined as average occupied square feet divided by average total rentable square feet. (5) Total office square feet under management includes wholly-owned assets, consolidated joint ventures, unconsolidated joint ventures and third-party management agreements at the end of the period.

-- Funds available for distribution ("FAD") totaled $7.3 million, or $0.34 per diluted share, for the three months ended September 30, 2009, as compared to $7.5 million, or $0.49 per diluted share, for the three months ended September 30, 2008. FAD for the three months ended September 30, 2009 was affected by the leasing costs related to three large new leases totaling approximately 160,000 square feet in the amount of $2.0 million. FAD totaled $27.6 million, or $1.46 per diluted share, for the nine months ended September 30, 2009, compared to $27.9 million, or $1.84 per diluted share for the nine months ended September 30, 2008.

-- Net loss available to common shareholders for the three months ended September 30, 2009, was $2.8 million, or $0.13 per diluted share, as compared to net income available to common shareholders of $18.5 million, or $1.23 per diluted share, for the three months ended September 30, 2008. Net loss available to common shareholders for the nine months ended September 30, 2009, was $5.0 million, or $0.27 per diluted share as compared to net income available to common shareholders of $11.6 million, or $0.77 per diluted share, for the nine months ended September 30, 2008. Net gains on the sale of real estate and involuntary conversion of $1.2 million were included in net loss available to common shareholders for the nine months ended September 30, 2009. Net gains on the sale of real estate of $22.6 million were included in net income available to common shareholders for the three months and nine months ended September 30, 2008.

Operations and Leasing

-- The Company's average rent per square foot increased 3.8% to $23.12 during the third quarter 2009 as compared to $22.27 for the third quarter 2008 and increased 4.3% to $22.99 during the nine months ended September 30, 2009, as compared to $22.04 for the nine months ended September 30, 2008. On a same-store basis, the Company's average rent per square foot increased 2.8% to $23.12 during the third quarter 2009 as compared to $22.49 during the third quarter 2008, and increased 2.7% to $22.86 during the nine months ended September 30, 2009, as compared to $22.25 during the nine months ended September 30, 2008.

-- The Company's average occupancy for the third quarter 2009 was 88.7% as compared to 91.2% for the third quarter 2008, and was 89.4% for the nine months ended September 30, 2009, as compared to 90.9% for the nine months ended September 30, 2008. On a same-store basis, the Company's average occupancy for the third quarter 2009 was 88.8% as compared to 90.9% for the third quarter 2008. For the nine months ended September 30, 2009, same-store average occupancy was 89.6% as compared to 90.7% for the nine months ended September 30, 2008.

-- At October 1, 2009, the Company's office portfolio occupancy was 88.3% as compared to 88.7% at July 1, 2009, and 90.4% at October 1, 2008. Not included in the October 1, 2009, occupancy rate are 23 signed leases totaling 133,000 square feet, which commence in the fourth quarter of 2009 through the first quarter of 2010. Including these leases, the Company's portfolio was 89.3% leased at October 12, 2009.

-- Parkway's customer retention rate was 58.0% for the quarter ending September 30, 2009, as compared to 68.8% for the quarter ending June 30, 2009, and 66.7% for the quarter ending September 30, 2008. Customer retention for the nine months ended September 30, 2009, and September 30, 2008, was 61.0% and 71.5%, respectively.

-- During the third quarter 2009, 65 leases were renewed or expanded on 464,000 rentable square feet at an average rent per square foot of $21.23, representing a 6.1% increase, and at a cost of $2.45 per square foot of the lease term in annual leasing costs. During the nine months ending September 30, 2009, 191 leases were renewed or expanded on 1.3 million rentable square feet at an average rent per square foot of $20.75, representing a 3.0% decrease, and at a cost of $2.32 per square foot per year of the lease term in annual leasing costs.

-- During the third quarter 2009, 39 new leases were signed on 203,000 rentable square feet at an average rent per square foot of $22.18 and at a cost of $5.06 per square foot of the lease term in annual leasing costs. During the nine months ending September 30, 2009, 87 new leases were signed on 511,000 rentable square feet at an average rent per square foot of $21.26 and at an average cost of $4.66 per square foot per year of the lease term in annual leasing costs.

-- On a same-store basis, the Company's share of net operating income ("NOI") decreased $1.2 million or 4.0% for the third quarter 2009 as compared to the same period of the prior year on a GAAP basis. On a cash basis, the Company's share of same-store NOI decreased $2.1 million or 7.1% for the third quarter 2009 as compared to the same period of the prior year. The Company's share of same-store NOI for the nine months ended September 30, 2009, decreased $1.3 million or 1.6% compared to the same period of 2008 on a GAAP basis and decreased $3.7 million or 4.3% on a cash basis. The decrease in same-store NOI on a cash basis is primarily attributable to a decrease in lease termination fees of $3.2 million and an increase in ad valorem taxes of $880,000, partially offset by an increase in rent income of $1.1 million due to a 2.7% increase in average rent per square foot for the nine months ending September 30, 2009, as compared to the same period of 2008.

Capital Structure

-- On September 30, 2009, the Company owed $100.0 million related to its $311.0 million line of credit and has $35.6 million in cash and cash equivalents. The Company has no outstanding debt maturities remaining in 2009 and $123.8 million in 2010. Included in the 2010 debt maturities is a $60.0 million mortgage related to its Capital City Plaza asset, which is currently 93.1% leased. The mortgage on Capital City Plaza has a one-year extension option at the Company's discretion. Assuming the extension option is exercised, the Company's total maturities for 2010 would be $63.8 million, and its existing line of credit capacity could be utilized to pay such debt maturities.

-- The Company's previously announced cash dividend of $0.325 per share for the quarter ended September 30, 2009, represents a payout of approximately 42.9% of FFO per diluted share for the quarter. The third quarter dividend was paid on September 30, 2009. The dividend was the ninety-second (92nd) consecutive quarterly distribution to Parkway's shareholders of Common Stock, representing an annualized dividend rate of $1.30 per share and a yield of 7.4% based on the closing stock price on October 30, 2009 of $17.65.

-- At September 30, 2009, the Company's debt to EBITDA multiple was 6.6 times as compared to 6.5 times at June 30, 2009, and 7.0 times at September 30, 2008. The decrease in the debt to EBITDA multiple at September 30, 2009 compared to the prior year is primarily due to the reduction in debt as a result of the second quarter 2009 $85.0 million common stock offering.

Revised Outlook for 2009

The Company is increasing its 2009 FFO outlook from $2.80 to $3.15 per diluted share to $3.17 to $3.27 per diluted share. The reconciliation of forecasted earnings per diluted share ("EPS") to forecasted FFO per diluted share is as follows:

Outlook for 2009 Range --------------------------------------------------------- ------------- Fully diluted EPS ($0.43-$0.33) Plus: Real estate depreciation and amortization $4.57-$4.57 Plus: Depreciation on unconsolidated joint ventures $0.04-$0.04 Less: Gain on sale of real estate ($0.02-$0.02) Less: Noncontrolling interest depreciation/amortization ($0.99-$0.99) ------------- FFO per diluted share $3.17-$3.27 =============

The revised earnings outlook for 2009 is based on the Company's actual FFO for the nine months ended September 30, 2009 of $2.59 per diluted share, which includes $0.04 per diluted share related to the partial recognition of a gain on involuntary conversion from Hurricane Ike, and the Company's 2009 fourth quarter FFO forecast, as adjusted for the core operating assumptions described below. The revised earnings outlook does not include the impact of possible future gains or losses on early extinguishment of debt, possible future acquisitions or dispositions, possible future impairment charges or other unusual charges that may occur during the remainder of the year. These assumptions reflect the Company's expectations based on its knowledge of current market conditions and historical experience.

Revised 2009 Core Operating Assumptions:

-- An average annual same-store occupancy range of 89.0% to 89.5%. -- An average annual same-store rental rate per square foot of $22.50 to $23.00. -- Recurring same-store net operating income decrease of (2.5%) to (1.0%) on a GAAP basis. On a recurring cash basis, annual same-store net operating income is expected to decline by (5.0%) to (3.5%). -- Net general and administrative expenses are expected to be in the range of $6.4 million to $6.6 million. -- Total capital expenditures are projected to be in the range of $25.0 million to $30.0 million, as compared to $24.0 million in 2008. -- Assumes annual weighted average diluted shares of 19.4 million for 2009.

About Parkway Properties

Parkway Properties, Inc., a member of the S&P Small Cap 600 Index, is a self-administered real estate investment trust specializing in the operation, leasing, acquisition, and ownership of office properties. The Company is geographically focused on the Southeastern and Southwestern United States and Chicago. Parkway owns or has an interest in 65 office properties located in 11 states with an aggregate of approximately 13.4 million square feet of leasable space at November 2, 2009. Included in the portfolio are 21 properties totaling 3.9 million square feet that are owned jointly with other investors, representing 28.8% of the portfolio. Fee-based real estate services are offered through the Company's wholly-owned subsidiary, Parkway Realty Services, which also manages and/or leases approximately 1.3 million square feet for third-party owners at November 2, 2009.

Additional Information

The Company will conduct a conference call to discuss the results of its third quarter operations on Tuesday, November 3, 2009, at 11:00 a.m. Eastern Time. The number for the conference call is 888-245-0920. A taped replay of the call can be accessed 24 hours a day through November 13, 2009, by dialing 888-203-1112 and using the pass code of 8245324. An audio replay will be archived and indexed in the investor relations section of the Company's website at www.pky.com. A copy of the Company's 2009 third quarter supplemental financial and property information package is available by accessing the Company's website, emailing your request to rjordan@pky.com or calling Rita Jordan at 6019484091. Please participate in the visual portion of the conference call by accessing the Company's website and clicking on the "3Q Call" icon.

Additional information on Parkway Properties, Inc., including an archive of corporate press releases and conference calls, is available on the Company's website. The Company's third quarter 2009 Supplemental Operating and Financial Data, which includes a reconciliation of Non-GAAP financial measures, is available on the Company's website.

Forward Looking Statement

Certain statements in this release that are not in the present or past tense or discuss the Company's expectations (including the use of the words anticipate, believe, forecast, intends or project) are forward-looking statements within the meaning of the federal securities laws and as such are based upon the Company's current belief as to the outcome and timing of future events. There can be no assurance that future developments affecting the Company will be those anticipated by the Company. These forward-looking statements involve risks and uncertainties (some of which are beyond the control of the Company) and are subject to change based upon various factors, including but not limited to the following risks and uncertainties: changes in the real estate industry and in performance of the financial markets; the demand for and market acceptance of the Company's properties for rental purposes; the amount and growth of the Company's expenses; tenant financial difficulties and general economic conditions, including interest rates, as well as economic conditions in those areas where the Company owns properties; the risks associated with the ownership and development of real property; the failure to acquire or sell properties as and when anticipated; and other risks and uncertainties detailed from time to time on the Company's SEC filings. Should one or more of these risks or uncertainties occur, or should underlying assumptions prove incorrect, the Company's results could differ materially from those expressed in the forward-looking statements. The Company does not undertake to update forward-looking statements.

Company's Use of FFO, FAD and EBITDA

FFO, FFO per diluted share, FAD, FAD per diluted share and EBITDA are used by management, investors and industry analysts as supplemental measures of operating performance of equity REITs and should be evaluated along with GAAP net income and income per diluted share (the most directly comparable GAAP measures), as well as cash flow from operating activities, investing activities and financing activities, in evaluating the operating performance of equity REITs. Management believes that FFO, FFO per diluted share, FAD, FAD per diluted share and EBITDA are helpful to investors as supplemental performance measures because these measures exclude the effect of depreciation, amortization and gains or losses from sales of real estate, all of which are based on historical costs which implicitly assumes that the value of real estate diminishes predictably over time. Since real estate values instead have historically risen or fallen with market conditions, these non-GAAP measures can facilitate comparisons of operating performance between periods and among other equity REITs. FFO, FAD and EBITDA do not represent cash generated from operating activities in accordance with GAAP and are not necessarily indicative of cash available to fund cash needs as disclosed in the Company's Consolidated Statements of Cash Flows. FFO, FAD and EBITDA should not be considered as an alternative to net income as an indicator of the Company's operating performance or as an alternative to cash flows as a measure of liquidity.

Parkway Properties, Inc. FOR FURTHER INFORMATION: 188 E. Capitol Street, Suite 1000 Steven G. Rogers Jackson, MS 39201 President & Chief Executive Officer www.pky.com J. Mitchell Collins (601) 948-4091 Chief Financial Officer

PARKWAY PROPERTIES, INC. CONSOLIDATED BALANCE SHEETS (In thousands, except share data) September 30 December 31 2009 2008 ---- ---- (Unaudited) Assets Real estate related investments: Office and parking properties $1,732,454 $1,737,549 Real estate development 609 609 Accumulated depreciation (323,721) (282,919) -------- -------- 1,409,342 1,455,239 Land available for sale 750 750 Mortgage loan 7,965 7,519 Investment in unconsolidated joint ventures 11,332 11,057 ------ ------ 1,429,389 1,474,565 Rents receivable and other assets 112,011 118,512 Intangible assets, net 66,794 79,460 Cash and cash equivalents 35,635 15,318 ------ ------ $1,643,829 $1,687,855 ========== ========== Liabilities Notes payable to banks $100,000 $185,940 Mortgage notes payable 856,232 869,581 Accounts payable and other liabilities 96,874 98,894 ------ ------ 1,053,106 1,154,415 --------- --------- Equity Parkway Properties, Inc. shareholders' equity 8.00% Series D Preferred stock, $.001 par value, 2,400,000 shares authorized, issued and outstanding 57,976 57,976 Common stock, $.001 par value, 67,600,000 shares authorized, 21,621,552 and 15,253,396 Shares issued and outstanding in 2009 and 2008, respectively 22 15 Common stock held in trust, at cost, 71,255 and 85,300 shares in 2009 and 2008, respectively (2,399) (2,895) Additional paid-in capital 514,757 428,367 Accumulated other comprehensive loss (5,821) (7,728) Accumulated deficit (93,553) (69,487) ------- ------- Total Parkway Properties, Inc. shareholders' equity 470,982 406,248 Noncontrolling interest - real estate partnerships 119,741 127,192 ------- ------- Total equity 590,723 533,440 ------- ------- $1,643,829 $1,687,855 ========== ==========

PARKWAY PROPERTIES, INC. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) Three Months Ended September 30 ------------------ 2009 2008 ---- ---- (Unaudited) Revenues Income from office and parking properties $66,474 $69,857 Management company income 340 449 --- --- Total revenues 66,814 70,306 ------ ------ Expenses Property operating expense 31,600 34,295 Depreciation and amortization 23,401 22,755 Management company expenses 577 432 General and administrative 1,783 2,055 ----- ----- Total expenses 57,361 59,537 ------ ------ Operating income 9,453 10,769 Other income and expenses Interest and other income 672 346 Equity in earnings of unconsolidated joint ventures 48 255 Interest expense (13,835) (14,843) ------- ------- Loss from continuing operations (3,662) (3,473) Discontinued operations: Loss from discontinued operations - (2,001) Gain on sale of real estate from discontinued operations - 22,588 --- ------ Total discontinued operations - 20,587 --- ------ Net income (loss) (3,662) 17,114 Net loss attributable to noncontrolling interest - real estate partnerships 2,107 2,584 ----- ----- Net income (loss) for Parkway Properties, Inc. (1,555) 19,698 Dividends on preferred stock (1,200) (1,200) ------ ------ Net income (loss) available to common stockholders $(2,755) $18,498 ======= ======= Net income (loss) per common share attributable to Parkway Properties, Inc.: Basic: Loss from continuing operations attributable to Parkway Properties, Inc. $(0.13) $(0.14) Discontinued operations - 1.37 --- ---- Net income (loss) attributable to Parkway Properties, Inc. $(0.13) $1.23 ====== ===== Diluted: Loss from continuing operations attributable to Parkway Properties, Inc. $(0.13) $(0.14) Discontinued operations - 1.37 --- ---- Net income (loss) attributable to Parkway Properties, Inc. $(0.13) $1.23 ====== ===== Dividends per common share $0.325 $0.65 ====== ===== Weighted average shares outstanding: Basic 21,313 15,031 ====== ====== Diluted 21,313 15,031 ====== ======

PARKWAY PROPERTIES, INC. CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) Nine Months Ended September 30 ------------------ 2009 2008 ---- ---- (Unaudited) Revenues Income from office and parking properties $200,751 $198,144 Management company income 1,486 1,356 ----- ----- Total revenues 202,237 199,500 ------- ------- Expenses Property operating expense 97,058 95,708 Depreciation and amortization 68,701 66,659 Management company expenses 1,710 1,353 General and administrative 4,734 6,443 ----- ----- Total expenses 172,203 170,163 ------- ------- Operating income 30,034 29,337 Other income and expenses Interest and other income 1,283 1,020 Equity in earnings of unconsolidated joint ventures 475 802 Gain on involuntary conversion 742 - Gain on sale of real estate 470 - Interest expense (41,936) (44,954) ------- ------- Loss from continuing operations (8,932) (13,795) Discontinued operations: Loss from discontinued operations - (760) Gain on sale of real estate from discontinued operations - 22,588 --- ------ Total discontinued operations - 21,828 --- ------ Net income (loss) (8,932) 8,033 Net loss attributable to noncontrolling interest - real estate partnerships 7,508 7,134 ----- ----- Net income (loss) for Parkway Properties, Inc. (1,424) 15,167 Dividends on preferred stock (3,600) (3,600) ------ ------ Net income (loss) available to common stockholders $(5,024) $11,567 ======= ======= Net income (loss) per common share attributable to Parkway Properties, Inc.: Basic: Loss from continuing operations attributable to Parkway Properties, Inc. $(0.27) $(0.68) Discontinued operations - 1.45 --- ---- Net income (loss) attributable to Parkway Properties, Inc. $(0.27) $0.77 ====== ===== Diluted: Loss from continuing operations attributable to Parkway Properties, Inc. $(0.27) $(0.68) Discontinued operations - 1.45 --- ---- Net income (loss) attributable to Parkway Properties, Inc. $(0.27) $0.77 ====== ===== Dividends per common share $0.975 $1.95 ====== ===== Weighted average shares outstanding: Basic 18,827 15,019 ====== ====== Diluted 18,827 15,019 ====== ======

PARKWAY PROPERTIES, INC. RECONCILIATION OF FUNDS FROM OPERATIONS AND FUNDS AVAILABLE FOR DISTRIBUTION TO NET INCOME FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (In thousands, except per share data) Three Months Ended Nine Months Ended September 30 September 30 -------------- -------------- 2009 2008 2009 2008 ---- ---- ---- ---- (Unaudited) (Unaudited) Net Income (Loss) $(1,555) $19,698 $(1,424) $15,167 Adjustments to Net Income (Loss): Preferred Dividends (1,200) (1,200) (3,600) (3,600) Depreciation and Amortization 23,401 22,755 68,701 66,659 Depreciation and Amortization - Discontinued Operations - 171 - 1,873 Noncontrolling Interest Depreciation and Amortization (4,625) (5,011) (14,939) (14,119) Adjustments for Unconsolidated Joint Ventures 221 200 630 555 Gain on Sale of Real Estate - (22,588) (470) (22,588) --- ------- ---- ------- Funds From Operations Available to Common Shareholders (1) $16,242 $14,025 $48,898 $43,947 ======= ======= ======= ======= Funds Available for Distribution Funds From Operations Available to Common Shareholders $16,242 $14,025 $48,898 $43,947 Add (Deduct) : Adjustments for Unconsolidated Joint Ventures (70) (116) (588) (297) Adjustments for Noncontrolling Interest in Real Estate Partnerships 1,179 673 3,562 2,053 Straight-line Rents (2,103) (824) (5,334) (2,690) Straight-line Rents - Discontinued Operations - 13 - 61 Amortization of Above/Below Market Leases (8) (49) (98) 198 Amortization of Share-Based Compensation 659 463 1,940 1,381 Capital Expenditures: Building Improvements (1,668) (1,185) (3,546) (3,058) Tenant Improvements - New Leases (3,227) (1,500) (7,077) (4,221) Tenant Improvements - Renewal Leases (845) (2,545) (3,761) (5,585) Leasing Costs - New Leases (1,304) (967) (2,279) (1,765) Leasing Costs - Renewal Leases (1,537) (510) (4,077) (2,075) ------ ---- ------ ------ Funds Available for Distribution (1) $7,318 $7,478 $27,640 $27,949 ====== ====== ======= ======= Diluted Per Common Share/Unit Information (**) FFO per share $0.76 $0.92 $2.59 $2.90 FAD per share $0.34 $0.49 $1.46 $1.84 Dividends paid $0.325 $0.65 $0.975 $1.95 Dividend payout ratio for FFO 42.91% 70.33% 37.67% 67.24% Dividend payout ratio for FAD 95.24% 131.90% 66.65% 105.74% Weighted average shares/units outstanding 21,445 15,174 18,894 15,155 Other Supplemental Information Upgrades on Acquisitions $1,104 $3,043 $5,623 $12,275 Gain on Involuntary Conversion $- $- $742 $- **Information for Diluted Computations: Basic Common Shares/Units Outstanding 21,314 15,032 18,828 15,021 Dilutive Effect of Other Share Equivalents 131 142 66 134 (1) Parkway computes FFO in accordance with standards established by the National Association of Real Estate Investment Trusts ("NAREIT"), which may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition. FFO is defined as net income, computed in accordance with generally accepted accounting principles ("GAAP"), excluding gains or losses from the sales of properties, plus real estate related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. There is not a standard definition established for FAD. Therefore, our measure of FAD may not be comparable to FAD reported by other REITs. We define FAD as FFO, excluding the amortization of restricted shares, amortization of above/below market leases and straight line rent adjustments, and reduced by non-revenue enhancing capital expenditures for building improvements, tenant improvements and leasing costs. Adjustments for unconsolidated partnerships and joint ventures are included in the computation of FAD on the same basis.

PARKWAY PROPERTIES, INC. CALCULATION OF EBITDA AND COVERAGE RATIOS FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (In thousands) Three Months Ended Nine Months Ended September 30 September 30 ------------------ ----------------- 2009 2008 2009 2008 ---- ---- ---- ---- (Unaudited) (Unaudited) Net Income (Loss) $(1,555) $19,698 $(1,424) $15,167 Adjustments to Net Income (Loss): Interest Expense 13,288 14,659 40,164 44,647 Amortization of Financing Costs 547 450 1,772 1,322 Prepayment Expense - Early Extinguishment of Debt - 2,140 - 2,153 Depreciation and Amortization 23,401 22,926 68,701 68,532 Amortization of Share-Based Compensation 659 463 1,940 1,381 Net Gain on Real Estate and Involuntary Conversion - (22,588) (1,212) (22,588) Tax Expense 2 2 2 2 EBITDA Adjustments - Unconsolidated Joint Ventures 349 331 1,014 945 EBITDA Adjustments - Noncontrolling Interest in Real Estate Partnerships (7,769) (8,141) (24,356) (23,067) ------ ------ ------- ------- EBITDA (1) $28,922 $29,940 $86,601 $88,494 ======= ======= ======= ======= Interest Coverage Ratio: EBITDA $28,922 $29,940 $86,601 $88,494 ======= ======= ======= ======= Interest Expense: Interest Expense $13,288 $14,659 $40,164 $44,647 Capitalized Interest - 258 - 601 Interest Expense - Unconsolidated Joint Ventures 126 128 376 382 Interest Expense - Noncontrolling Interest in Real Estate Partnerships (3,075) (3,061) (9,209) (8,750) ------ ------ ------ ------ Total Interest Expense $10,339 $11,984 $31,331 $36,880 ======= ======= ======= ======= Interest Coverage Ratio 2.80 2.50 2.76 2.40 ==== ==== ==== ==== Fixed Charge Coverage Ratio: EBITDA $28,922 $29,940 $86,601 $88,494 ======= ======= ======= ======= Fixed Charges: Interest Expense $10,339 $11,984 $31,331 $36,880 Preferred Dividends 1,200 1,200 3,600 3,600 Principal Payments (Excluding Early Extinguishment of Debt) 3,472 3,231 10,083 10,481 Principal Payments - Unconsolidated Joint Ventures 35 14 108 40 Principal Payments - Noncontrolling Interest in Real Estate Partnerships (279) (78) (695) (250) ---- --- ---- ---- Total Fixed Charges $14,767 $16,351 $44,427 $50,751 ======= ======= ======= ======= Fixed Charge Coverage Ratio 1.96 1.83 1.95 1.74 ==== ==== ==== ==== Modified Fixed Charge Coverage Ratio: EBITDA $28,922 $29,940 $86,601 $88,494 ======= ======= ======= ======= Modified Fixed Charges: Interest Expense $10,339 $11,984 $31,331 $36,880 Preferred Dividends 1,200 1,200 3,600 3,600 ----- ----- ----- ----- Total Modified Fixed Charges $11,539 $13,184 $34,931 $40,480 ======= ======= ======= ======= Modified Fixed Charge Coverage Ratio 2.51 2.27 2.48 2.19 ==== ==== ==== ==== The following table reconciles EBITDA to cash flows provided by operating activities: EBITDA $28,922 $29,940 $86,601 $88,494 Amortization of Above (Below) Market Leases (8) (49) (98) 198 Amortization of Mortgage Loan Discount (154) (131) (447) (380) Operating Distributions from Unconsolidated Joint Ventures 69 194 392 855 Interest Expense (13,288) (14,659) (40,164) (44,647) Prepayment Expense - Early Extinguishment of Debt - (2,140) - (2,153) Tax Expense (2) (2) (2) (2) Change in Deferred Leasing Costs (2,950) (1,833) (7,413) (6,527) Change in Receivables and Other Assets (3,073) (6,335) 2,680 3,559 Change in Accounts Payable and Other Liabilities 11,070 6,729 6,640 1,896 Adjustments for Noncontrolling Interests 5,662 5,557 16,848 15,933 Adjustments for Unconsolidated Joint Ventures (397) (586) (1,489) (1,747) ---- ---- ------ ------ Cash Flows Provided by Operating Activities $25,851 $16,685 $63,548 $55,479 ======= ======= ======= ======= (1) Parkway defines EBITDA, a non-GAAP financial measure, as net income before interest expense, 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. EBITDA does not represent cash generated from operating activities in accordance with generally accepted accounting principles, and should not be considered an alternative to operating income or net income as an indicator of performance or as an alternative to cash flows from operating activities as an indicator of liquidity.

PARKWAY PROPERTIES, INC. NET OPERATING INCOME FROM OFFICE AND PARKING PROPERTIES THREE MONTHS ENDED SEPTEMBER 30, 2009 AND 2008 (In thousands, except number of properties data) Net Operating Average Income Occupancy ------------- ------------ Number of Percentage of Properties Portfolio (1) 2009 2008 2009 2008 ---------- ------------- ----------------- ------------ Same-store properties (2): Wholly-owned 44 68.99% $25,405 $26,545 88.8% 90.8% Parkway Properties Office Fund LP 13 22.74% 8,375 8,285 88.0% 89.2% Other consolidated joint venture 1 1.52% 561 438 87.5% 88.2% Unconsolidated joint ventures 7 5.30% 1,951 2,827 90.9% 97.2% --- ---- ----- ----- ---- ---- Total same-store properties 65 98.55% 36,292 38,095 88.8% 90.9% Office property development 1 1.44% 528 (16) 82.8% N/A Assets sold - 0.01% 5 310 N/A N/A --- ---- --- --- Net operating income from office and parking properties 66 100.00% $36,825 $38,389 --- ------ ------- ------- (1) Percentage of portfolio based on 2009 net operating income. (2) Parkway defines Same-Store Properties as those properties that were owned for the entire three-month periods ended September 30, 2009 and 2008 and excludes properties classified as discontinued operations. Same-Store net operating income ("SSNOI") includes income from real estate operations less property operating expenses (before interest and depreciation and amortization) for Same-Store Properties. SSNOI as computed by Parkway may not be comparable to SSNOI reported by other REITs that do not define the measure exactly as we do. SSNOI is a supplemental industry reporting measurement used to evaluate the performance of the Company's investments in real estate assets. The following table is a reconciliation of net income to SSNOI: Three Months Ended Nine Months Ended September 30 September 30 ------------------ ----------------- 2009 2008 2009 2008 ---- ---- ---- ---- Net income (loss) for Parkway Properties, Inc. $(1,555) $19,698 $(1,424) $15,167 Add (deduct): Interest expense 13,835 14,843 41,936 44,954 Depreciation and amortization 23,401 22,755 68,701 66,659 Management company expenses 577 432 1,710 1,353 General and administrative expenses 1,783 2,055 4,734 6,443 Equity in earnings of unconsolidated joint ventures (48) (255) (475) (802) Gain on involuntary conversion - - (742) - Gain on sale of real estate - - (470) - Net loss attributable to noncontrolling interests - real estate partnerships (2,107) (2,584) (7,508) (7,134) Loss from discontinued operations - 2,001 - 760 Gain on sale of real estate from discontinued operations - (22,588) - (22,588) Management company income (340) (449) (1,486) (1,356) Interest and other income (672) (346) (1,283) (1,020) ---- ---- ------ ------ Net operating income from consolidated office and parking properties 34,874 35,562 103,693 102,436 Net operating income from unconsolidated joint ventures 1,951 2,827 7,223 8,366 Less: Net operating income from non same-store properties (533) (294) (5,316) (2,867) ---- ---- ------ ------ Same-store net operating income $36,292 $38,095 $105,600 $107,935 ------- ------- -------- --------