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Section 1: 8-K (8-K)

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549


 FORM 8-K
 

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 15, 2016
 

PARKWAY, INC.
(Exact Name of Registrant as Specified in its Charter)
 

Maryland
 
001-37819
 
61-1796261
(State or Other Jurisdiction
of Incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
 
 
San Felipe Plaza
 5847 San Felipe Street, Suite 2200,
 
 
Houston, Texas
 
77057
(Address of Principal Executive Offices)
 
(Zip code)
(346) 200-3100
(Registrant’s telephone number, including area code)
N/A
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))






Item 7.01. Regulation FD Disclosure
Parkway, Inc. (the “Company”) intends to distribute copies of certain presentation materials (the “Materials”) to analysts, institutional investors and other persons on November 15, 2016 through November 17, 2016 in connection with the National Association of Real Estate Investment Trust’s (NAREIT) REITWorld Annual Convention for All Things REIT in Phoenix, Arizona. A copy of these Materials is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein solely for purposes of this Item 7.01 disclosure.
The information in this Item 7.01 disclosure, including Exhibit 99.1, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities under that Section. In addition, the information in this Item 7.01 disclosure, including Exhibit 99.1, shall not be incorporated by reference into the filings of the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
Cautionary Note Regarding Forward-Looking Statements
Certain statements contained in this presentation, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward-looking statements within the meaning of the federal securities laws and as such are based upon the Company’s current beliefs as to the outcome and timing of future events. There can be no assurance that actual future developments affecting the Company will be those anticipated by the Company. Examples of forward-looking statements include projected capital resources, projected profitability and portfolio performance, estimates of market rental rates, projected capital improvements, expected sources of financing, expectations as to the timing of closing of acquisitions, dispositions, or other transactions, the expected operating performance of anticipated near-term acquisitions and descriptions relating to these expectations, including without limitation, the anticipated net operating income yield. The Company cautions investors that any forward-looking statements presented in this presentation are based on management’s beliefs and assumptions made by, and information currently available to, management. When used, the words “anticipate,” “assume,” “believe,” “estimate,” “expect,” “forecast,” “guidance,” “intend,” “may,” “might,” “outlook,” “project,” “should” or similar expressions that do not relate solely to historical matters are intended to identify forward-looking statements. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Forward-looking statements involve risks and uncertainties (some of which are beyond the Company’s control) and are subject to change based upon various factors, including but not limited to the following risks and uncertainties: the Company’s lack of operating history as an independent company; conditions associated with the Company’s primary market, including an oversupply of office space, customer financial difficulties and general economic conditions; that certain of the Company’s properties represent a significant portion of the Company’s revenues and costs; that the spin-off from Cousins Properties Incorporated (“Cousins”) will not qualify for tax-free treatment; the Company’s ability to meet mortgage debt obligations on certain of the Company’s properties; the availability of refinancing current debt obligations; potential co-investments with third-parties; changes in any credit rating the Company may obtain; changes in the real estate industry and in performance of the financial markets and interest rates and the Company’s ability to effectively hedge against interest rate changes; the actual or perceived impact of global and economic conditions; declines in commodity prices, which may negatively impact the Houston, Texas market; the concentration of the Company’s customers in the energy sector; the demand for and market acceptance of the Company’s properties for rental purposes; the Company’s ability to enter into new leases or renewal leases on favorable terms; the potential for termination of existing leases pursuant to customer termination rights; the amount, growth and relative inelasticity of the Company’s expenses; risks associated with the ownership and development of real property; termination of property management contracts; the bankruptcy or insolvency of companies for which the Company provides property management services or the sale of these properties; the outcome of claims and litigation involving or affecting the Company; the ability to satisfy conditions necessary to close pending transactions and the ability to successfully integrate the assets and related operations acquired in such transactions after closing; applicable regulatory changes; risks associated with acquisitions, including the integration of the portion of the combined business of Parkway Properties, Inc. (“Legacy Parkway”) and Cousins relating to the ownership of real properties in Houston and Legacy Parkway’s fee-based real estate business; risks associated with the fact that the Company’s historical and predecessors’ financial information may not be a reliable indicator of the





Company’s future results; risks associated with achieving expected synergies or cost savings; risks associated with the potential volatility of the Company’s common stock; and other risks and uncertainties detailed from time to time in the Company’s Securities and Exchange Commission filings.
Should one or more of these risks or uncertainties occur, or should underlying assumptions prove incorrect, the Company’s business, financial condition, liquidity, cash flows and results could differ materially from those expressed in any forward-looking statement. While forward-looking statements reflect the Company’s good faith beliefs, they are not guarantees of future performance. Any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise overtime, and it is not possible for us to predict the occurrence of those matters or the manner in which they may affect us. The Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. Accordingly, investors should use caution in relying on past forward-looking statements, which were based on results and trends at the time they were made, to anticipate future results or trends.
Item 9.01. Financial Statements and Exhibits 

(d) Exhibits
 Exhibit No.
 
Description
99.1
 
Presentation Materials of Parkway, Inc., dated November 2016.






SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
Date: November 15, 2016
 
 
 
PARKWAY, INC.
 
 
 
 
 
 
 
 
BY:
 
/s/ A. Noni Holmes-Kidd
 
 
 
 
 
 
 
 
A. Noni Holmes-Kidd
 
 
 
 
 
 
 
 
Vice President, General Counsel and Secretary






EXHIBIT INDEX
Exhibit No.
  
Description
99.1
  
Presentation Materials of Parkway, Inc., dated November 2016.
 



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Section 2: EX-99.1 (EXHIBIT 99.1)

parkwaynareit111516v8
PARKWAY, INC. OVERVIEW November 2016


 
2 FORWARD-LOOKING STATEMENTS Certain statements contained in this presentation, including those that express a belief, expectation or intention, as well as those that are not statements of historical fact, are forward- looking statements within the meaning of the federal securities laws and as such are based upon Parkway, Inc.’s (“Parkway,” “PKY,” the “Company,” “we,” “our” or “us”) current beliefs as to the outcome and timing of future events. There can be no assurance that actual future developments affecting the Company will be those anticipated by the Company. Examples of forward-looking statements include projected capital resources, projected profitability and portfolio performance, estimates of market rental rates, projected capital improvements, expected sources of financing, expectations as to the timing of closing of acquisitions, dispositions, or other transactions, the expected operating performance of anticipated near-term acquisitions and descriptions relating to these expectations, including without limitation, the anticipated net operating income (“NOI”) yield. We caution investors that any forward- looking statements presented in this presentation are based on management’s beliefs and assumptions made by, and information currently available to, management. When used, the words “anticipate,” “assume,” “believe,” “estimate,” “expect,” “forecast,” “guidance,” “intend,” “may,” “might,” “outlook,” “project,” “should” or similar expressions that do not relate solely to historical matters are intended to identify forward-looking statements. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Forward- looking statements involve risks and uncertainties (some of which are beyond the Company’s control) and are subject to change based upon various factors, including but not limited to the following risks and uncertainties: our lack of operating history as an independent company; conditions associated with our primary market, including an oversupply of office space, customer financial difficulties and general economic conditions; that certain of our properties represent a significant portion of our revenues and costs; that the Spin-Off from Cousins Properties Incorporated (“Cousins” or “CUZ”) will not qualify for tax-free treatment; our ability to meet mortgage debt obligations on certain of our properties; the availability of refinancing current debt obligations; potential co-investments with third-parties; changes in any credit rating we may subsequently obtain; changes in the real estate industry and in performance of the financial markets and interest rates and our ability to effectively hedge against interest rate changes; the actual or perceived impact of global and economic conditions; declines in commodity prices, which may negatively impact the Houston, Texas market; the concentration of our customers in the energy sector; the demand for and market acceptance of our properties for rental purposes; our ability to enter into new leases or renewal leases on favorable terms; the potential for termination of existing leases pursuant to customer termination rights; the amount, growth and relative inelasticity of our expenses; risks associated with the ownership and development of real property; termination of property management contracts; the bankruptcy or insolvency of companies for which we provide property management services or the sale of these properties; the outcome of claims and litigation involving or affecting the Company; the ability to satisfy conditions necessary to close pending transactions and the ability to successfully integrate the assets and related operations acquired in such transactions after closing; applicable regulatory changes; risks associated with acquisitions, including the integration of the portion of the combined business of Parkway Properties, Inc. (“Legacy Parkway”) and Cousins relating to the ownership of real properties in Houston and Legacy Parkway’s fee-based real estate business; risks associated with the fact that our historical and predecessors' financial information may not be a reliable indicator of our future results; risks associated with achieving expected synergies or cost savings; risks associated with the potential volatility of our common stock; and other risks and uncertainties detailed from time to time in our Securities and Exchange Commission filings. Should one or more of these risks or uncertainties occur, or should underlying assumptions prove incorrect, the Company’s business, financial condition, liquidity, cash flows and results could differ materially from those expressed in any forward-looking statement. While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. Any forward-looking statement speaks only as of the date on which it is made. New risks and uncertainties arise overtime, and it is not possible for us to predict the occurrence of those matters or the manner in which they may affect us. We disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes. Accordingly, investors should use caution in relying on past forward-looking statements, which were based on results and trends at the time they were made, to anticipate future results or trends.


 
3 PRESENTATION HIGHLIGHTS  Houston Overall • Near-Term Challenges. Houston office fundamentals continued to decline in the third quarter of 2016 with year-over- year Class-A rents down 2%1 and meaningful additions to sublease availability. • Long-Term Resilience. Despite current headwinds, Houston has historically remained resilient. Current job growth remains positive and while investment sales volume has slowed considerably, asset pricing remains stable. 2  Parkway Submarkets • Premier Submarkets. Parkway submarkets are surrounded by numerous amenities, including high-end retail, restaurants, and entertainment options, and are conveniently located near high-income residential areas.  Parkway Assets • Largest Class-A Landlord. Parkway’s dominant market share in Houston should enhance the Company’s ability to pursue higher rental rates, higher retention and operational efficiencies. • Stable, Trophy Assets. Parkway’s portfolio is 87% leased with a weighted average remaining lease term of approximately 6.6 years. • Embedded Upside. Weighted average net in-place rents were $18.57 per sq. ft.. Market rents for these assets were approximately 18% above average net in-place rents. 3  Parkway Tenancy • Institutional Strength. 84% of annualized base rental revenue is attributable to investment-grade and non-energy customers. 4 • Cash Flow Stability. Even if no renewals or new leases were executed for the next three years, contractual customer revenue is estimated to decline by only 3%. 4 1. Source: 3Q16 Costar Office Report 2. Source: Bureau of Labor Statistics (September 2016) 3. Source: Internal data and estimates as of 9/30/16. 4. Source: Company estimates. Annualized revenue projections as of 1/1/2017. Includes contractual base rent and contractual expense reimbursement projections for in-place leases as of 9/30/16.


 
HOUSTON OFFICE MARKET OVERVIEW November 2016


 
5 HOUSTON MARKET OVERVIEW Did You Know? 1,2,3 #1 Population Growth 2000 - 2015 #1 Job Growth 2000 - 2015 #1 Import / Export Waterborne Tonnage #3 Fortune 500 HQs 5th Largest U.S. Metro Economy Largest Medical Complex in the World 1. Source: HFF Houston Outlook – May 2016. 2. Source: Greater Houston Partnership – “Talking Points Q3/16.” 3. PPR Houston Office Market Report 3Q 2016. 4. Source: CoStar Office Quarterly Market Reports (Houston) Q3 2016.  Diverse economy with strong demographic trends1,2,3 − 5th largest U.S. metro economy with ~6.8M population as of 3Q 2016 − 24 Fortune 500 companies are located in Houston − 6 of the top 10 employers are non-energy − Home to Texas Medical Center: − World’s largest medical complex, which includes a children’s hospital and cancer center − 8th largest business district in the U.S. with 1,345 acres of campuses and 8M of annual patient visits − Net in-migration averaging over 60,000 people per year since 2007 − Median household income of $60,759, which is above national levels  Gateway office market4 − 140M sq. ft. in 470 Class-A office buildings (23% of total inventory located in Parkway’s submarkets) − ~$34 per sq. ft. average gross rents − 83% occupied with 1.5M sq. ft. absorption as of 9/30/16


 
6 7% 8% 8% 9% 10% 10% 11% 14% 15% 15% 18% 18% Philadelphia Chicago D.C. Metro U.S. New York Boston Los Angeles Houston Atlanta Miami Dallas San Francisco STRONG JOB GROWTH WITH A WELL-DIVERSIFIED ECONOMY Source: Bureau of Labor Statistics (September 2016). Top MSA 5-Year Job Growth Houston Job Diversification HOUSTON’S HIGHLY DIVERSIFIED JOB MARKET HAS HELPED DELIVER STRONG GROWTH OVER THE PAST 5 YEARS Trade, Transportation, and Utilities 20% Professional and Business Services 15% Government 13% Education and Health Services 13% Leisure and Hospitality 11% [CATEGORY NAME] [PERCENTAGE] Construction 7% Financial Activities 5% Other Services 4% Mining and Logging 3% Information 1%


 
7 $27.54 $27.94 $28.00 $28.09 $28.06 $27.70 $27.69 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 MARKET UPDATE - LEASING FUNDAMENTALS Source: CoStar Office Quarterly Market Reports (Houston) Q3 2016 Class-A Asking Rents have declined 2% since 3Q of last year and 2.3% since their 2-year peak in 2Q 2015. Houston overall asking rents have declined 1.1% since 3Q of last year. Class-A Asking Rents Houston Overall Asking Rents Both Class-A and Houston overall have seen a decline in net absorption and an increase in vacancy. Houston Overall Vacancy and Net Absorption Class-A Vacancy and Net Absorption Asking Rental Rates Vacancy and Net Absorption 0% 2% 4% 6% 8% 10% 12% 14% 16% (500,000) 0 500,000 1,000,000 1,500,000 2,000,000 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 Absorption Vac % $34.32 $34.54 $34.45 $34.36 $34.35 $33.97 $33.75 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 0% 5% 10% 15% 20% (500,000) 0 500,000 1,000,000 1,500,000 2,000,000 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 Absorption Vac %


 
8 4.5 21.0 47.6 6.3 26.0 27.6 5.8 3.3 0.2 >1970 1970s 1980s 1990s 2000s 2010s 2016 2017 2018 NEW SUPPLY Houston New Office Deliveries (MM Sq. Ft.) RELATIVE TO EXISTING ASSETS, MOSTLY BUILT IN THE 1970S AND 1980S, NEW SUPPLY IS LIMITED AND SUBSTANTIALLY PRE-LEASED EXISTING FUTURE DELIVERIES 3% 15% 33% 4% 18% 19% 4% 2% 0.2% % of Total Inventory Source: CoStar Exisitng and Under Construction 4 & 5 Star Office @ OCT-16 Note: 2016 includes projects delivered or expected to deliver in 2016. Current Leased Percentage 70% 45% 100%


 
9 (150) (100) (50) 0 50 100 150 200 250 300 350 6 12 18 24 30 36 42 48 54 60 N u m b e r o f Jo b s C re a te d Months After Oil Price Peak RESILIENCE TO ENERGY SHOCKS HOUSTON’S DIVERSIFIED JOB MARKET CONSISTENTLY WITHSTOOD PRIOR ENERGY SHOCKS WITH TOTAL EMPLOYMENT SURPASSING PRIOR PEAK LEVELS WITHIN A FOUR-YEAR PERIOD 1997 Asian Financial Crisis 1990 - 1991 Recession 2008 - 2009 Financial Crisis Cumulative Houston Job Growth / (Decline) (000s) 2000 Tech Bubble & 2001 Recession Jun-14 – Current Oil Shock Oil Price Trough Source: FactSet, Bureau of Labor Statistics, REIS as of 9/30/16. Note: Includes time periods in which price of WTI Crude Oil dropped more than 30% over a 12-month period since 1990. 1. Represents the minimum observation over a five-year period following oil’s peak relative to the observed metric at or around the time of oil’s peak. Peak to Trough Change (5 Year Period After Oil Price Peak) 1 Event WTI Crude Oil Prices Total Houston Employment 1990 - 1991 Recession (64%) No Decline from Oil Peak 1997 Asian Financial Crisis (60%) No Decline from Oil Peak 2000 Tech Bubble & 2001 Recession (53%) (0%) 2008 - 2009 Financial Crisis (77%) (4%) Jun-14 - Current Oil Shock (75%) No Decline from Oil Peak


 
10 96 62 25 4 2 Oil & Gas Industry bankruptcy cases filed in the United States since 2015 of these cases (65%) were filed in Texas courts and are in varying stages of the bankruptcy process of these cases (26%) specifically referenced the rejection of some type of lease agreement of those rejections (5%) included leases or subleases for office real estate Only 2 of those bankruptcy filings (2%) have resulted in the rejection of an office lease in Houston to date DESPITE ELEVATED BANKRUPTCY RATES, THE MAJORITY OF HOUSTON ENERGY TENANTS HAVE REMAINED SOLVENT AND DEFAULT RATES FOR OFFICE LEASES ARE NEGLIGIBLE RESILIENCY OF HOUSTON ENERGY TENANTS Source: PKY Research as of Oct. 28, 2016 conducted based on Oil & Gas Industry Bankruptcy List from Haynes Boone Oil Patch Monitor as of October 19, 2016. Note: Includes only companies filing in the United States for which documents were available through October 28, 2016.


 
11 Financial Crisis HOUSTON CLASS-A OFFICE VALUES HAVE INCREASED BY ~6.0% ANNUALLY OVER THE PAST 10 YEARS LONG-TERM ASSET VALUE APPRECIATION Source: CoStar, National Bureau of Economic Research. 1. Class-A is equivalent to CoStar’s “4 & 5 Star” rating. Data as of Oct-16. Represents cumulative percentage change in rolling 4-quarter average sale values. Houston Class-A Office Avg. Sale Price Growth1 Oil Price Shock -20% 0% 20% 40% 60% 80% 100% 120% 140% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016


 
12 [CELLREF] $520 [CELLREF] $501 [CELLREF] $527 [CELLREF] $411 [CELLREF] $385 [CELLREF] $494 [CELLREF] $400 [CELLREF] $485 [CELLREF] $524 [CELLREF] $308 [CELLREF] $283 [CELLREF] $283 [CELLREF] $266 [CELLREF] $296 [CELLREF] $298 [CELLREF] $366 $0 $100 $200 $300 $400 $500 $600 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 PRICING RESILIENCY Source: HFF Research 3Q 2016. High Water Marks by Year - Class-A Office Sales Houston ACROSS CYCLES AND DESPITE MACRO VIOLATILITY, PRICING IN HOUSTON FOR QUALITY ASSETS HAS REMAINED STABLE Life Science Plaza $559


 
13 RECENT CLASS-A OFFICE SALES Source: HFF Research 3Q 2016. Name Submarket Size Built/Renovated Class $/SF Date Sold NOI Cap 9720 Cypresswood Dr FM 1960 94,820 2005 A $174 UC $1,155,000 7.0% Greenspoint Place Greenspoint 2,132,652 1980's A $36 Jul-16 N/A N/A Life Science Plaza Med Ctr/Bellaire 345,473 2009 A $559 Dec-15 $10,435,500 5.4% 16055 Space Center Blvd NASA/Clear Lake 149,144 1985/2014 A $144 Dec-15 N/A N/A Energy Center III Energy Corridor 548,685 2015 A $501 Nov-15 $14,437,500 5.3% BBVA Compass Galleria 326,201 2013 A $527 Oct-15 $8,256,000 4.8% Beltway 8 Corporate Center West Belt 130,000 2015 A $118 Sep-15 N/A N/A Galleria Place I & II Galleria 395,474 1969 & 1976 A $229 Aug-15 $2,172,000 2.4% Academy Headquarters Energy Corridor 207,000 2015 A $280 Aug-15 $3,335,000 5.8% One Sugar Creek Ft. Bend 194,720 1983 A $161 Aug-15 N/A 7.8% Tower Park North Greenspoint 181,633 1982/2010 A $30 Aug-15 N/A N/A One Commerce Green Greenspoint 340,956 1983/1996 A $139 Aug-15 $4,037,500 8.5% Mason Creek Office Center Energy Corridor 135,716 2013 A $284 Jun-15 $2,302,300 6.0% 16676 Northchase Drive Greenspoint 101,111 2003 A $32 Jun-15 N/A N/A 55 Waugh Midtown 243,933 1982/1991 A $224 Jun-15 $3,494,400 6.4% Westway One West Belt 143,961 2007 A $262 Jun-15 N/A N/A Westway Two West Belt 242,374 2009 A $340 Jun-15 N/A N/A 400 North Belt Greenspoint 230,872 1982 A $44 May-15 $1,035,300 10.2% 801 Travis CBD 220,380 1981/2007/2014 A $227 Apr-15 $3,130,000 6.3% 1000 Main CBD 837,161 2003 A $520 Mar-15 $24,823,500 5.7% Westgate II & III Energy Corridor 411,806 2014 A $325 Mar-15 $8,629,600 6.4% 1301 Fannin CBD 784,143 1983 A $255 Feb-15 $12,400,000 6.2% Noble Energy I FM 1960 497,447 1998 A $257 Jan-15 $7,783,600 6.1% TGS Nopec West Belt 97,501 2014 A $258 Jan-15 N/A N/A Men's Wearhouse Westchase 206,362 2006 A $257 Jan-15 N/A N/A Kirkwood Tower Energy Corridor 285,682 1984/2013 A $188 Dec-14 $3,542,384 6.6% Sam Houston Crossing I West Belt 159,175 2007 A $206 Dec-14 $2,706,000 8.3% 1500 Citywest Westchase 192,313 1981/1994 A $203 Dec-14 $2,150,500 5.5% 3000 Post Oak Galleria 441,523 1982 A $385 Nov-14 $9,282,000 5.5% 600 Jefferson CBD 449,087 1972/1998 A $153 Oct-14 $5,500,000 8.0% 2200 West Loop Galleria 201,720 1974/2000/2008 A $233 Oct-14 $3,236,100 6.9% 13401 North Freeway Greenspoint 143,410 1983/2002 A $42 Oct-14 $600,000 10.0%


 
PARKWAY PORTFOLIO OVERVIEW November 2016


 
15 OPERATING METRICS ASSET BREAKDOWN BY SF Assets 5 Buildings 19 Rentable Square Feet 8.7 MM % Leased1 87% Sustainability All properties LEED certified Wtd. Avg. Net In-Place Rents1 $18.57 Mark-to-Market1 +18% 1. As of 9/30/16. CLASS-A PROPERTIES WITH STATE-OF-THE-ART AMENITIES AND UNIQUE FEATURES DESIGNED TO ATTRACT A BROAD RANGE OF HIGH-QUALITY CUSTOMERS KEY STATISTICS Post Oak Central, 15% San Felipe Plaza, 11% Greenway Plaza, 50% Phoenix Tower, 7% CityWest Place, 17% LOCATED IN THRIVING NEIGHBORHOODS WITHIN ATTRACTIVE SUBMARKETS IN HOUSTON


 
16 WELL-POSITIONED PORTFOLIO OF ICONIC PROPERTIES Rentable SF: 1,473,000 Buildings: 4 % Leased: 76% Wt. Avg. Term Remaining: 11.0 Years In-Place Rent / Market Rent / Mark-to-Mkt: $22.86 / $24.58 / +8% CityWestPlace San Felipe Plaza Phoenix Tower Greenway Plaza Post Oak Central Rentable SF: 980,000 Buildings: 1 % Leased: 86% Wt. Avg. Term Remaining: 5.4 Years In-Place Rent / Market Rent / Mark-to-Mkt : $21.54 / $22.50 / +4% Rentable SF: 630,000 Buildings: 1 % Leased: 81% Wt. Avg. Term Remaining: 4.3 Years In-Place Rent / Market Rent / Mark-to-Mkt: $18.24 / $21.00 / +15% Rentable SF: 4,348,000 Buildings: 10 % Leased: 90% Wt. Avg. Term Remaining: 6.6 Years In-Place Rent / Market Rent / Mark-to-Mkt : $16.46 / $20.73 / +26% Rentable SF: 1,280,000 Buildings: 3 % Leased: 93% Wt. Avg. Term Remaining: 3.6 Years In-Place Rent / Market Rent / Mark-to-Mkt: $18.69 / $22.29 / +19% Source: Internal data and estimates as of 9/30/16. Note: Weighted average remaining lease term as of 10/1/16 weighed by total rentable base area. Rents shown represent net rental rates.


 
17 Rank Customer Rentable SF (000s) % of Total SF Credit Rating Rating Date LED Term Remaining 1 961 12.8% A / A3 4Q14 / 1Q16 Dec-26 10.3 2 524 7.0% A+ / Aa3 1Q16 / 1Q16 Dec-19 3.3 3 507 6.7% BBB / Baa3 1Q16 / 1Q16 Aug-32 15.9 4 391 5.2% A / A2 3Q14 / 4Q15 Dec-23 7.3 5 255 3.4% BB+ / B2 4Q15 / 1Q16 Jan-23 6.3 6 216 2.9% CC / Caa2 1Q16 / 2Q16 Jun-26 9.8 7 202 2.7% B / Caa1 2Q14 / 2Q14 May-23 6.7 8 189 2.5% BBB (1) 2Q15 (1) Sep-19 3.0 9 176 2.3% BBB / B1 4Q15 / 1Q16 Sep-23 7.0 10 167 2.2% CC / Caa2 1Q16 / 2Q15 Dec-25 9.3 3,590 47.6% 8.6 STRONG CREDITWORTHY CUSTOMERS Cross Section of Portfolio by Credit Rating2 Investment grade (IG) customers: 49% of annual base rent (ABR) IG or non-energy customers: 84% of ABR Source: Company estimates. Revenue projections include contractual base rent and expense reimbursement projections for in-place leases as of 9/30/16. 1. Represents Fitch rating. Not rated by S&P or Moody’s. 2. IG = Investment Grade Portfolio Top Customers IG - Energy 38% IG - Other Sectors 11% Non-IG - Other Sectors 35% Non-IG - Energy 16%


 
18 8.7 6.3 4.0 4.0 3.1 3.0 2.2 2.1 1.8 1.8 1.7 1.6 1.6 1.6 1.5 1.5 1.5 1.5 1.4 1.4 1.3 1.3 1.3 1.3 1.3 1.2 1.2 1.2 1.2 1.2 DOMINANT POSITION IN MULTIPLE SUBMARKETS POSITIONS PARKWAY FOR OPERATIONAL OUTPERFORMANCE LEADING OWNER OF HOUSTON CLASS A PROPERTIES 1. Source: CoStar 4&5 Star Office October 2016 2. Note: Square feet shown in millions and at 100% ownership. Houston Class-A Office Owners (MM Sq. Ft.)1,2


 
19 CRITICAL MASS OBTAINED IN EACH SUBMARKET Galleria Westchase Greenway 69% Market Share of Class-A Office #1 Class-A Office Owner by Sq. Ft. Class-A Submarket Concentration PARKWAY IS THE LARGEST LANDLORD IN SOME OF HOUSTON’S MOST DESIRABLE SUBMARKETS Source: CoStar Exisitng 4 & 5 Star Office @ OCT-16 15% Market Share of Class-A Office #1 Class-A Office Owner by Sq. Ft. 15% Market Share of Class-A Office #1 Class-A Office Owner by Sq. Ft. Critical Mass in Select Submarkets is expected to lead to: Pricing power in lease and vendor negotiations Ability to attract, hire, and retain superior local market leadership and leasing teams Flexibility to meet changing customer space demands Enhanced ability to identify and capitalize on emerging investment opportunities All of which is expected to result in:  Higher rental rates  Better customer retention  Higher occupancy  Lower operating expenditures  Higher NOI margins


 
20 ASSETS LOCATED IN SUBMARKETS ADJACENT TO HIGH-INCOME RESIDENTIAL AREAS BEST LOCATIONS IN PREMIER HOUSTON SUBMARKETS Source: U.S. Census Bureau (2014), CoStar. CityWestPlace San Felipe Plaza Post Oak Central Phoenix Tower Greenway Plaza


 
21 HISTORICAL SUBMARKET PERFORMANCE CLASS-A OCCUPANCY CLASS-A GROSS ASKING RENTS Source: CoStar Exisitng 4 & 5 Star Office @ OCT-16 1. PKY CoStar submarkets are Galleria/Uptown, San Felipe/Voss, Greenway Plaza and Westchase; 4 & 5 Star only 2. PKY Assets excludes 3 star assets: 3800 Buffalo Speedway, GWP 1, GWP 2, and 4 GWP $14.00 $19.00 $24.00 $29.00 $34.00 $39.00 $44.00 Houston PKY Submarkets PKY Assets 70% 75% 80% 85% 90% 95% 100% Houston PKY Submarkets PKY Assets


 
22 $44.27 37.35 37.22 37.11 35.38 34.50 34.20 33.75 33.24 31.08 30.59 30.14 28.53 28.02 27.63 27.39 27.22 27.16 26.71 26.29 25.80 24.28 23.77 22.43 19.23 19.06 18.79 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 $45.00 $50.00 SUPERIOR OPERATING PERFORMANCE IN EACH SUBMARKET Source: CoStar Office Quarterly Market Reports (Houston) Q3 2016 Class-A Gross Asking Rent ($ / Sq. Ft.) Parkway Submarkets PARKWAY SUBMARKETS ARE AMONGST THE MOST DESIRABLE SUBMARKETS IN HOUSTON


 
23 0 1,000,000 2,000,000 3,000,000 4,000,000 5,000,000 6,000,000 7,000,000 8,000,000 CBD Energy Corridor Galleria Greenspoint Westchase The Woodlands Greenway West Belt Katy Freeway Sugar Land Med Ctr / Bellaire FM 1960 North Loop Class A Direct Class A Sublease HOUSTON VACANCY AND SUBLEASE AVAILABILITY Source: HFF Research 3Q 2016 Note: TNS = Term Not Specified Houston Class-A Office Vacancy and Sublease Space by Submarket CURRENT VACANCY COMBINED WITH SUBLEASE SPACE ON THE MARKET HAS INCREASED OVERALL HOUSTON VACANCY TO APPOXIMATELY 17% 0-3 Ys 36% 3-5 Ys 12% 5-7 Ys 14% 7-10 Ys 15% 10+ Ys 14% TNS 9% Subleases by Term Remaining 23% 33% 27% 74% 30% 16% 21% 26% 19% 12% 8% 11% 32% Total Available as % Of Total Class-A Inventory Parkway Submarkets Total Class-A Available Sublease Sq. Ft. - 9.69 MM


 
PRO FORMA FINANCIALS AND LEASING RESULTS November 2016


 
25 PORTFOLIO HISTORICAL LEASING LEASING VELOCITY HAS SLOWED SIGNIFICANTLY SINCE 2014, HOWEVER FUNDAMENTALS REMAIN STEADY THROUGHOUT THE PORTFOLIO Leasing Volume (RSF in 1,000s) 1,056 1,788 137 158 71 0 500 1,000 1,500 2,000 2014 2015 2016 Q1 2016 Q2 2016 3Q New Renewal Expansion Total $39.17 $31.73 $30.28 $33.00 $36.32 $0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00 $40.00 $45.00 2014 2015 2016 Q1 2016 Q2 2016 3Q New Renewal Expansion Total Annual Gross Rental Rates PSF Tenant Improvements PSF per year of lease term Average Lease Term (Yrs) $4.98 $2.52 $3.87 $5.62 $5.28 $0.00 $2.00 $4.00 $6.00 $8.00 $10.00 2014 2015 2016 Q1 2016 Q2 2016 3Q New Renewal Expansion Total 6.8 4.3 6.8 6.9 8.6 0.0 5.0 10.0 15.0 2014 2015 2016 Q1 2016 Q2 2016 3Q New Renewal Expansion Total 1. Excludes tenant improvements for 46,000 sq. ft. TechSpace lease signed at CityWestPlace given that a portion of the lease is retail space and TI amounts include additional capital for building and lobby upgrades. Including this lease, the average TI in the third quarter of 2016 is $9.38/sf/yr. 1


 
26 1% 6% 6% 12% 7% 5% 5% 46% 0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 2016 2017 2018 2019 2020 2021 2022 2023+ LIMITED NEAR-TERM LEASE EXPIRATIONS Expiring % of Total Rentable Square Feet MINIMAL NEAR-TERM EXPIRATIONS WITH 12% OR LESS EXPIRING EACH YEAR THROUGH 2022 Source: Internal data as of 9/30/16. WEIGHTED AVERAGE REMAINING LEASE TERM OF ~6.6 YEARS


 
27 ASSUMING NO NEW OR RENEWAL LEASES ARE SIGNED THROUGH 2019, TOTAL CONTRACTUAL REVENUE WOULD ONLY DECLINE BY 3% DURING THAT TIME $82 $81 $74 $26 $31 $29 $39 $37 $36 $91 $93 $93 $0 $50 $100 $150 $200 $250 $300 2017 2018 2019 Energy - Investment Grade Energy - Non Investment Grade Other Industries - Investment Grade Other Industries - Non-Investment Grade $238 $241 $231 STABLE NEAR-TERM CASH FLOWS Contractual Customer Revenue Source: Company estimates. Revenue projections include contractual base rent and expense reimbursement projections for in-place leases as of 9/30/16.  Non-Investment Grade Energy Customers represent less than 16% of Parkway’s contractual revenue over the next three years.  Total lease obligated base rental revenue over the life of all contractual leases is $1.14BN beginning January 2017.


 
28 $297 $0 $0 $102 $350 $247 $62 Initial Liquidity 2016 2017 2018 2019 2020 2021+ CONSERVATIVE & FLEXIBLE BALANCE SHEET COMPLEMENTS STAGGERED DEBT MATURITIES TO FACILITATE STRATEGIC EXECUTION STRONG AND FLEXIBLE BALANCE SHEET FINANCIAL STRATEGY Liquidity Upcoming Debt Maturities NET DEBT / EBITDA1 LIQUIDITY AND UPCOMING MATURITIES (MM) $297 (Initial Liquidity) No material debt maturing until December 2018 $100 Undrawn Revolver $197 Cash  Scalable Platform – $297 million of initial liquidity – No material near term debt maturities  Low Leverage Strategy – ~4.1x Net Debt / EBITDA 1 – Stable EBITDA supported by creditworthy customers (nearly 50% of ABR from investment grade customers2) Source: Parkway, Inc. Form 10. SNL Financial as of Q3 2016. 1. Represents average debt as a multiple of EBITDA as of 9/30/16. 2. Includes customers with at least a Baa or BBB credit rating from Moody’s or S&P, respectively. Measured by Annualized Base Rent contribution. Maturity Date Interest Rate 9/30/16 Outstanding Balance San Felipe Plaza 12/01/18 4.78% 106,541 $350 Million Term Loan 10/06/19 3.53% 350,000 CityWestPlace III & IV 03/05/20 5.03% 89,116 Post Oak Central 10/01/20 4.26% 178,471 Phoenix Tower 03/01/23 3.87% 77,067 Wt. Avg. / Total 4.06% 801,195 SUMMARY OF DEBT 4.1 x 4.8 x 5.1 x 5.7 x 7.2 x 7.6 x PKY CUZ HIW CXP FSP TIER


 
29 PRO FORMA FINANCIALS PRO FORMA ANNUALIZED GAAP AND CASH NOI1 THE COMBINED HOUSTON PORTFOLIO ACHIEVED GAAP NOI OF APPROXIMATELY $161 MILLION AND CASH NOI OF APPROXIMATELY $137 MILLION IN 3Q16 1. Parkway defines NOI as income from office properties less property operating expenses. Parkway considers NOI to be a useful performance measure to investors and management because it reflects the revenues and expenses directly associated with owning and operating its properties and the impact to operations from trends in occupancy rates, rental rates and operating costs not otherwise reflected in net income. 2. The 3Q16 combined amounts represent the sum of each of the Parkway Houston and Cousins Houston portfolios and do not represent a pro forma projection which would include adjustments for the change in basis for amortization and the resetting of straight line rent adjustments that occurred at merger closing. 3Q16 2 1Q16 2Q16 Parkway Houston Cousins Houston Combined Net Income (Loss) 5,570 5,970 (403) 7,075 6,672 Management Company Income (1,305) (1,287) (1,161) - (1,161) Management Company Expense 781 1,225 906 - 906 Depreciation and Amortization 22,527 22,839 9,309 15,221 24,530 General and Administrative 4,809 3,060 1,894 1,688 3,582 Interest and Other Income (186) (110) (61) - (61) Interest Expense 8,118 8,159 2,899 1,956 4,855 Transaction Costs - - - 494 494 Income Tax Expense 493 267 353 - 353 GAAP NOI 40,807 40,123 13,736 26,434 40,170 Annualized GAAP NOI 163,228 160,492 160,680 Parkway Houston Straight-Line Rent Adjustments (3,085) (3,085) (1,288) - (1,288) Parkway Houston Above/Below Market Rent Adjustments (636) (636) (1,239) - (1,239) Cousins Houston Non-Cash Rental Revenue Adjustments (2,831) (3,005) - (3,368) (3,368) Cash NOI 34,255 33,397 11,209 23,066 34,275 Annualized Cash NOI 137,020 133,588 137,100


 
STRATEGY AND INVESTMENT HIGHLIGHTS November 2016


 
31 DIFFERENTIATED BUSINESS STRATEGY  Generate superior revenue growth through active and creative leasing strategies  Increase NOI margins through economies of scale  Leverage pricing power in lease and vendor negotiations to reduce costs  Attract, hire and retain superior local market leadership and best-in-class leasing teams  Enhance market intelligence and broaden network of customer relationships  Solidify Parkway’s brand and position as the preferred Houston landlord  Promote flexibility to meet customers across their space and geographic needs Superior Operations Sound Financial Strategy  Strong liquidity with $197mm in cash and an undrawn $100mm revolver at merger closing  Low leverage: ~4.1x Net Debt / EBITDA1  No near-term debt maturities and staggered maturities in future years  Flexible balance sheet that can be adapted to meet the evolving market conditions and competitive needs Disciplined Investment Approach  Initial focus on unlocking internal embedded growth  Unlock value in existing portfolio with targeted asset repositioning and redevelopment projects  Maintain high-quality assets with state-of-the-art amenities  Promote a patient, prudent and disciplined approach to new investments  Realize value through monetization as local market dynamics improve 1. Represents average debt as a multiple of EBITDA per 3Q 2016 filings. Parkway defines EBITDA as net income before interest expense, income taxes and depreciation and amortization.


 
32 COMPREHENSIVE, ROI FOCUSED REPOSITIONING PLANS PARKWAY WILL CONTINUE TO DEPLOY A DISCIPLINED, BOTTOM -LINE FOCUSED APPROACH TO UPGRADING ASSET QUALITY AND DRIVING ENHANCED LEASING PERFORMANCE Note: Rendering of potential dining option at Greenway


 
33 COMPREHENSIVE, ROI FOCUSED REPOSITIONING PLANS Note: Rendering of potential lobby renovations, fitness center and dining option at Greenway


 
34 INVESTMENT HIGHLIGHTS Dominant office landlord in Houston, which has Gateway office market characteristics −Largest landlord in Houston with 8.7 million sq. ft. −5th largest U.S. metro economy, with third largest density of Fortune 500 companies and a broad and diversified job base1 Unique office portfolio within outperforming submarkets −Consists of five Class-A assets located in three targeted submarkets −Amenity rich locations surrounded by high-end retail, restaurants and entertainment options −Conveniently located near high-income executive housing −Minimal near-term lease expirations with weighted average remaining lease term of approximately 6.6 years Focus on unlocking embedded growth and value opportunities −Potential to increase occupancy, realize higher rents and operate portfolio more efficiently −Proactively identify shifting customer needs and attract new, high-quality customers −Assess development and redevelopment opportunities within the portfolio −Take advantage of current and future market dislocation in Houston and capitalize early on emerging investment opportunities −Pursue opportunistic investments and monetize as local markets recover Conservative and flexible balance sheet to position company for internal and external growth opportunities −Low leverage strategy with no near-term debt maturities −Approximately $297 million of current liquidity Experienced leadership team with proven success of identifying attractive investment opportunities −Proven track record of outperformance and focus on driving shareholder value −In-depth market knowledge and extensive existing relationships with industry participants 1. Source: Greater Houston Partnership – “Talking Points Q3/16.”


 
5847 San Felipe St, Suite 2200 Houston, TX 77057


 
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