TPGI Thomas Properties Grp., Inc.

Thomas Properties Group, Inc. (NYSE: TPGI) reported today the results of operations for the quarter ended September 30, 2013.

The results of operations presented in this release include TPGI’s results of operations for three and nine months ended September 30, 2013 and 2012. Consolidated net income for the three months ended September 30, 2013 was $80.3 million or $1.71 per share compared to consolidated net loss of $4.1 million or $0.09 per share for the three months ended September 30, 2012. Consolidated net income for the nine months ended September 30, 2013 was $65.8 million or $1.40 per share compared to consolidated net loss of $12.0 million or $0.30 per share for the nine months ended September 30, 2012. The increase in the consolidated net income during the three and nine months ended September 30, 2013 compared to the same periods ending September 30, 2012, was primarily due to a $118.2 million gain associated with the liquidation of our TPG/CalSTRS, LLC joint venture in which we transferred our interest in City National Plaza to our venture partner, and acquired our venture partner’s 75% interest in San Felipe Plaza and CityWestPlace resulting in our sole ownership of these two projects in Houston, Texas.

TPGI's share of after tax cash flow (“ATCF”) for the three months ended September 30, 2013 was a loss of $1.4 million or $0.03 per share compared to ATCF of $1.3 million or $0.03 per share for the three months ended September 30, 2012. The $0.06 decrease in ATCF per share for the three months ended September 30, 2013 compared to the three months ended September 30, 2012 was primarily due to our decreased share of ATCF from the Austin properties. TPGI's share of ATCF for the nine months ended September 30, 2013 was $0.2 million or $0.00 per share compared to ATCF of $3.4 million or $0.08 per share for the nine months ended September 30, 2012. The decrease in ATCF per share for the nine months ended September 30, 2013 compared to the nine months ended September 30, 2012 was primarily the result of our decreased share of ATCF from the Austin properties and the increased number of shares of our common stock outstanding resulting from the issuance of common stock in 2012. The Company defines ATCF (a non-GAAP financial measure) as net income (loss) excluding the following items: noncontrolling interests, deferred income tax expense (benefit), non-cash charges for depreciation and amortization and asset impairment, amortization of loan costs, non-cash compensation expense, adjustments to recognize rental revenues using the straight-line method, adjustments to rental revenue to reflect the fair market value of rents, impairment loss, gain on liquidation of joint venture, and gain (loss) on sale of real estate. ATCF is further described in note (a) and reconciled to net income (loss) in the financial statements below.

Parkway Properties, Inc. Merger

On September 4, 2013, TPGI entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Parkway Properties, Inc., (“Parkway”). Under the terms of the Merger Agreement, TPGI will merge with and into Parkway, with Parkway surviving the merger, and our Operating Partnership will merge with a wholly owned subsidiary of Parkway. Each outstanding share of common stock of TPGI will be canceled and converted into the right to receive 0.3822 shares (the “Exchange Ratio”) of common stock of Parkway, and each outstanding share of limited voting stock of TPGI will be canceled and converted into the right to receive limited voting stock of Parkway at the Exchange Ratio. Pursuant to the Merger Agreement, each outstanding limited partnership unit of TPGI's Operating Partnership will be converted into the right to receive common limited partnership units of Parkway Properties LP at the Exchange Ratio.

Special Meeting

TPGI will hold a Special Meeting of its Stockholders (the “Special Meeting”) on December 17, 2013. The record date for determination of stockholders entitled to vote at the Special Meeting has been set as the close of business on November 11, 2013. At the Special Meeting, TPGI’s stockholders will vote on the a proposal to approve the merger with Parkway and other proposals as described in the preliminary joint proxy statement/prospectus of TPGI and Parkway filed by Parkway with the Securities and Exchange Commission. Completion of the transaction is subject to the approval of shareholders of both companies and satisfaction of customary closing conditions.

Supplemental Materials

The Company publishes a Supplemental Financial Information package which is available at www.tpgre.com in the Investor Relations tab, Supplemental Financial Information section.

About Thomas Properties Group, Inc.

Thomas Properties Group, Inc., with headquarters in Los Angeles, is a full-service real estate company that owns, acquires, develops and manages primarily office, as well as mixed-use properties on a nationwide basis. The Company’s primary areas of focus are the acquisition and ownership of interests in premier office properties, property development and redevelopment, and property and investment management activities. For more information on Thomas Properties Group, Inc., visit www.tpgre.com.

Additional Information about the Proposed Transaction and Where to Find It

This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the proposed transaction, TPG and Parkway have filed a preliminary joint proxy statement/prospectus with the SEC as part of Parkway’s registration statement on Form S-4. These materials are not yet final and may be amended. INVESTORS ARE URGED TO READ THE PRELIMINARY JOINT PROXY STATEMENT/PROSPECTUS (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS THERETO) AND OTHER RELEVANT DOCUMENTS FILED WITH THE SEC IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.

Investors may obtain free copies of the registration statement, the preliminary joint proxy statement/prospectus, the definitive joint proxy statement/prospectus and other relevant documents filed by TPG and Parkway with the SEC (if and when they become available) through the website maintained by the SEC at www.sec.gov. Copies of the documents filed by TPG with the SEC are available free of charge on TPG’s website at www.tpgre.com, and copies of the documents filed by Parkway with the SEC are also available free of charge on Parkway’s website at www.PKY.com.

TPG, Parkway and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from TPG’s and Parkway’s stockholders in respect of the proposed transaction. Information regarding TPG’s directors and executive officers can be found in TPG’s definitive proxy statement filed with the SEC on April 30, 2013. Information regarding Parkway’s directors and executive officers can be found in Parkway’s definitive proxy statement filed with the SEC on April 4, 2013. Additional information regarding the interests of such potential participants is included in the preliminary joint proxy statement/prospectus and will be included in the definitive joint proxy statement/prospectus and other relevant documents filed with the SEC in connection with the proposed transaction if and when they become available. These documents are available free of charge on the SEC’s website and from TPG or Parkway, as applicable, using the sources indicated above.

Forward Looking Statements

Statements made in this press release that are not historical may contain forward-looking statements. Although TPGI believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, these statements are subject to numerous risks and uncertainties. Factors that could cause actual results to differ materially from TPGI’s expectations include actual and perceived trends in various national and economic conditions that affect global and regional markets for commercial real estate services (including interest rates), the availability of debt and equity investors to finance commercial real estate transactions, our ability to enter into or renew leases at favorable rates, which can be impacted by the financial condition of our tenants, risks associated with the success of our development and property redevelopment projects, general volatility in the securities and credit markets, and the impact of tax laws affecting real estate. For a discussion of some of the factors that may cause our results to differ from management’s expectations, see the information under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Form 10-K for the year ended December 31, 2012 and our subsequent Form 10-Q quarterly reports, each of which is filed with the Securities and Exchange Commission. TPGI disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

THOMAS PROPERTIES GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except share and per share data)

(unaudited)

       

Three months ended

Nine months ended

September 30,

September 30,

2013

   

2012

2013     2012 Revenues: Rental $ 8,165 $ 7,813 $ 23,464 $ 23,343 Tenant reimbursements 5,423 5,344 16,392 15,746 Parking and other 769 786 2,977 2,271

Investment advisory, management, leasing and development services

998 1,005 2,526 2,669

Investment advisory, management, leasing and development services - unconsolidated real estate entities

4,114 3,588 10,396 11,909 Reimbursement of property personnel costs 846 1,273 2,879 4,140 Condominium sales 3,630   2,302   11,423   4,266   Total revenues 23,945   22,111   70,057   64,344   Expenses: Property operating and maintenance 6,421 6,183 19,544 18,198 Real estate and other taxes 2,003 1,742 5,940 5,627 Investment advisory, management, leasing and development services 2,968 2,634 7,176 8,628 Reimbursable property personnel costs 846 1,273 2,879 4,140 Cost of condominium sales 2,985 1,858 9,396 3,251 Interest 3,350 4,205 10,594 12,659 Depreciation and amortization 3,738 4,120 11,850 11,782 General and administrative 7,603 3,893 20,083 13,024 Impairment loss —   —   753   —   Total expenses 29,914   25,908   88,215   77,309   Interest income 66 39 180 52 Equity in net income (loss) of unconsolidated real estate entities (1,846 ) (1,797 ) (8,167 ) (2,613 ) Gain (loss) on sale of real estate (7 ) — (566 ) — Gain on liquidation of joint venture 118,201   —   118,201   —   Income (loss) before income taxes and noncontrolling interests 110,445 (5,555 ) 91,490 (15,526 ) Benefit (provision) for income taxes (7,987 ) 442   (8,027 ) 368   Net income (loss) 102,458 (5,113 ) 83,463 (15,158 ) Noncontrolling interests' share of net (income) loss: Unitholders in the Operating Partnership (22,532 ) 1,226 (18,821 ) 3,817 Partners in consolidated real estate entities 355   (198 ) 1,119   (668 ) (22,177 ) 1,028   (17,702 ) 3,149   TPGI's share of net income (loss) $ 80,281   $ (4,085 ) $ 65,761   $ (12,009 ) Income (loss) per share - basic and diluted $ 1.71 $ (0.09 ) $ 1.40 $ (0.30 ) Weighted average common shares - basic 46,610,859 45,517,207 46,484,165 40,301,224 Weighted average common shares - diluted 46,884,429 45,517,207 46,752,071 40,301,224   Reconciliation of net income (loss) to ATCF (a): Net income (loss) $ 80,281 $ (4,085 ) $ 65,761 $ (12,009 ) Adjustments: Income tax (benefit) provision 7,987 (442 ) 8,027 (368 ) Noncontrolling interests - unitholders in the Operating Partnership 22,532 (1,226 ) 18,821 (3,817 ) Depreciation and amortization 3,738 4,120 11,850 11,782 Amortization of loan costs 143 120 416 440 Non-cash compensation expense 558 324 1,815 1,235 Straight-line rent adjustments (1,078 ) 59 (1,110 ) (296 ) Adjustments to reflect the fair market value of rent 33 12 115 31 Impairment loss — — 753 — (Gain) loss on sale of real estate 8 — 566 — Gain on liquidation of joint venture (118,201 ) — (118,201 ) — Unconsolidated real estate entities at TPGI's share: Depreciation and amortization 5,223 1,103 16,442 2,306 Depreciation and amortization from discontinued operations 1,822 1,914 5,560 5,687 Amortization of loan costs (84 ) 8 (251 ) 34 Amortization of loan costs from discontinued operations 28 54 85 195 Straight-line rent adjustments (531 ) (141 ) (2,012 ) (197 )

Straight-line rent adjustments from discontinued operations

133 30 221 59 Adjustments to reflect the fair market value of rent (819 ) (100 ) (2,548 ) (379 )

Adjustments to reflect the fair market value of rent from discontinued operations

(65 ) (77 ) (188 ) (241 )

(Gain) loss on sale of real estate discontinued operations

(2,192 ) — (2,192 ) — Noncontrolling interests' share: Depreciation and amortization (1,754 ) (201 ) (5,582 ) (201 ) Depreciation and amortization from discontinued operations — (23 ) (86 ) (23 ) Amortization of loan costs 28 — 84 — Straight-line rent adjustments 177 31 671 31 Straight-line rent adjustments from discontinued operations — 3 10 3 Adjustments to reflect the fair market value of rent 273 — 849 —

Adjustments to reflect the fair market value of rent from discontinued operations

—   —   (4 ) —   ATCF before income taxes $ (1,760 ) $ 1,483   $ (128 ) $ 4,272   TPGI's share of ATCF before income taxes (b) $ (1,405 ) $ 1,164 $ (102 ) $ 3,265 TPGI's income tax benefit (expense) - current (23 ) 144   (63 ) 108   TPGI's share of ATCF $ (1,428 ) $ 1,308   $ (165 ) $ 3,373   ATCF per share - basic $ (0.03 ) $ 0.03   $ —   $ 0.08   ATCF per share - diluted $ (0.03 ) $ 0.03   $ —   $ 0.08   Dividends paid per share $ 0.02   $ 0.015   $ 0.06   $ 0.045   Weighted average common shares - basic 46,610,859   45,517,207   46,484,165   40,301,224   Weighted average common shares - diluted 46,884,429   45,902,063   46,752,071   40,668,418         a.     ATCF is a non-GAAP financial measure and may not be directly comparable to similarly-titled measures reported by other companies. We define ATCF as net income (loss) excluding the following items: i) deferred income tax expense (benefit); ii) noncontrolling interests; iii) non-cash charges for depreciation and amortization and asset impairment; iv) amortization of loan costs; v) non-cash compensation expense; vi) the adjustment to recognize rental revenues using the straight-line method; vii) the adjustment to rental revenue to reflect the fair market value of rents; viii) impairment loss; ix) gain on liquidation of joint venture; and x) gain (loss) on sale of real estate. Our management utilizes ATCF data in assessing performance of our business operations in period to period comparisons and for financial planning purposes. ATCF should be considered only as a supplement to net income as a measure of our performance. ATCF should not be used as a measure of our liquidity, nor is it indicative of funds available to fund our cash needs. ATCF also should not be used as a substitute for cash flow from operating activities (computed in accordance with GAAP).   b. Based on an interest in our operating partnership of 79.83% and 79.68% for the three and nine months ended September 30, 2013, respectively, and 78.56% and 76.43% for the three and nine months ended September 30, 2012, respectively.    

THOMAS PROPERTIES GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)

        September 30, December 31, 2013 2012 (unaudited) (audited) ASSETS Investments in real estate: Operating properties, net $ 826,688 $ 267,798 Land improvements—development properties, net 15,431   6,403   Investments in real estate, net 842,119   274,201   Condominium units held for sale 29,388 37,891 Investments in unconsolidated real estate entities 66,308 106,210 Cash and cash equivalents, unrestricted 62,274 76,837 Restricted cash 8,794 11,463 Marketable securities 9,160 — Rents and other receivables, net 1,858 1,825 Receivables from unconsolidated real estate entities 1,373 2,347 Deferred rents 22,013 18,994 Deferred leasing and loan costs, net 60,211 10,716 Other assets, net 25,768 10,222 Assets associated with land held for sale —   60,286   Total assets $ 1,129,266   $ 610,992   LIABILITIES AND EQUITY Liabilities: Mortgage loans $ 595,538 $ 259,995 Unsecured loan 80,000 — Accounts payable and other liabilities, net 79,455 28,346 Losses and distributions in excess of investments in unconsolidated real estate entities 276 10,084 Prepaid rent 7,118 1,784 Deferred revenue 10,950 10,566 Obligations associated with land held for sale —   21,380   Total liabilities 773,337   332,155     Equity: Stockholders’ equity:

Preferred stock, $.01 par value, 25,000,000 shares authorized, none issued or outstanding as of September 30, 2013 and December 31, 2012

— —

Common stock, $.01 par value, 225,000,000 shares authorized, 46,969,703 and 46,126,481 shares issued and outstanding as September 30, 2013 of and December 31, 2012, respectively

470 461

Limited voting stock, $.01 par value, 20,000,000 shares authorized, 11,646,949 and 12,313,331 shares issued and outstanding as of September 30, 2013 and December 31, 2012, respectively

116 123 Additional paid-in capital 261,893 258,780 Retained deficit and dividends (20,798 ) (83,635 ) Total stockholders’ equity 241,681   175,729   Noncontrolling interests: Unitholders in the Operating Partnership 60,096 44,154 Partners in consolidated real estate entities 54,152   58,954   Total noncontrolling interests 114,248   103,108   Total equity 355,929   278,837   Total liabilities and equity $ 1,129,266   $ 610,992    

Thomas Properties Group, Inc.Diana M. Laing, Chief Financial Officer(213) 613-1900www.tpgre.com