Parkway Properties Reports Earnings Slightly Below Estimates

Parkway Properties

reported 3Q results that were slightly below Citi's estimate and consensus. 2010 core guidance increased to $2.47-$2.57 from $2.40-$2.60. Leasing volume remains strong as PKY continues to make progress resolving its significant near-term expirations. 2011 lease roll was reduced to 12% from 16% last Qtr. However, economics remain soft. Citi maintains a Hold rating and model portfolio underweight. Valuation that is at the low end of peer range is offset by a low dividend, past mgmt missteps, high leverage and what remains elevated 2011-12 lease roll of (16%/12%) in weak markets. PKY is transferring former Rubicon assets at cost to its Texas Teachers JV, representing the fund's first “acquisition.” Rubicon was a 20% JV for PKY. Its partner filed Ch. 11. PKY wrote down its investment to zero. Purchased $51m of mortgage debt last summer for $33m. PKY is now “selling” the assets to the fund for $33mm, allowing it to recycle $22.5m of cash and earn asset mgmt fees. Citi has a $21 PT on Parkway Properties PKY closed Monday at $15.26