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Executives

Sarah Clark – IR

Steve Rogers – President and CEO

Will Flatt – EVP and COO

Richard Hickson – EVP and CFO

Jim Ingram – EVP and Chief Investment Officer

Analysts

Jordan Sadler – KeyBanc Capital Markets

Brendan Maiorana – Wells Fargo

Josh Attie – Citigroup

Rich Anderson – BMO Capital Markets

Erin Aslakson – Stifel Nicolaus

Sri Nagarajan – FBR Capital Markets

Ross Nussbaum – UBS

Mitch Germain – JMP Securities

Dan Donlan – Janney Capital Markets

Parkway Properties Inc. (PKY) Q2 2010 Earnings Call Transcript August 3, 2010 11:00 AM ET

Operator

Good day, and welcome to the Parkway Properties second quarter earnings conference call. Today's call is being recorded.

With us today are the Chief Executive Officer, Mr. Steve Rogers; Chief Financial Officer, Mr. Richard Hickson; Chief Accounting Officer, Ms. Mandy Pope; Chief Operating Officer, Mr. Will Flatt; Chief Investment Officer, Mr. Jim Ingram and Ms. Sarah Clark with Investor Relations.

At this time, I’d like to turn the call over to Ms. Sarah Clark. Please go ahead.

Sarah Clark

Thank you. Good morning, everyone and welcome to Parkway's 2010 second quarter conference call. Before we get started with this morning's presentation, I would like to direct you to our website at pky.com, where you'll find a printable version of today's presentation.

On our website, you will also find copies of the earnings press release from August, 2nd and a supplemental information package for the second quarter; both of which include a reconciliation of non-GAAP measures that will be discussed today to their most directly comparable GAAP financial measures.

Certain statements contained in this presentation that are not in the present tense, or that discuss the company's expectations, are forward-looking statements within the meaning of the Federal Securities laws. Although the company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be received. Please see the forward-looking statement disclaimer in Parkway's press release for factors that could cause material differences between forward-looking statements and actual results.

I would now like to turn the call over to, Steve.

Steve Rogers

Good morning. And thank you for joining us today. We've accomplished a lot at Parkway since our last conference call, so let me get right into the details. Since the end of the first quarter, we have signed 1.1 million square feet of new, renewal and expansion leases. We sold one asset for $15.7 million. We acquired the RubiconPark I note for a net $33 million price. We paid off two mortgages, totaling $27.8 billion that encumbered four assets. And we closed two new mortgage loans for a total of $35 million.

Subsequent retention was almost 70% for the quarter. Our portfolio occupancy is 86% today and we are 87% leased. I am particularly pleased to report that included in these leasing statistics were three major early renewals with a slight net expansion, with Traveler's Indemnity, U.S. Cellular and Nabors for a total of 521,000 square feet.

All three of these leases were previously scheduled to expire in 2011. FFO and FAD were in line with our budget and we’re tracking with our earnings outlook on each of these metrics for the full year.

Backing up to the bigger picture, we've provided an updated chart on Page 2 of our company presentation, showing employment growth trends during current and historical recessions. Job growth has been positive this year, but we still have a long way to go before employment returns to its previous peak or near it. And our job growth so far can hardly be considered a full recovery.

We feel that we've emerged from the recession, but we're still expecting a slow recovery. And until job growth accelerates, office fundamentals will continue to be weak. We have also provided an update chart on PPR on the following page, showing where we are in the office market cycle. This analysis continues to show that office fundamentals including occupancy, rent and NLI growth will remain under pressure through 2011, despite expected positive job growth in 2010.

This chart also indicates that late 2010 through 2011 should be the right time in the cycle to make investments in real estate, as strong growth in value is expected to occur in 2012 through 2014. According to real capital analytics, office property transaction volumes as measured in dollars increased 73% during the second quarter; exhibiting the highest dollar amount per quarter of closed transactions since late 2008.

We made several offers during the second quarter on high quality assets and we made it to the best and final round on most of these investments, only to be outbid in yields we believe were unacceptable to Parkway and Texas Teachers.

We continue to make competitive bids and offers are in the best in final on a couple and are optimistic that we'll be able to make our first purchase in Texas Funds soon. As we announced in our detailed press release on Friday, we purchased the RubiconPark I first mortgage note for $33 million, which is a 35% discount to the outstanding principle balance of approximately $51 million.

These assets that secure the loan are Falls Pointe and Lakewood in Atlanta and Carmel Crossing in Charlotte. We have provided a synopsis of this investment on Page 4 of our web presentation. While investments in our fund with Texas remain our highest priority, the expected returns to Parkway from this investment are similar to the high rates of return we expect to receive through the investments in Fund 2. Jim Ingram and I are meeting with Rubicon and the bondholder principles this week.

Alternatives include bondholder investment, foreclosure or deed-in-lieu of foreclosure, all of which could result in time in Parkway's direct ownership of these assets. We are now one month into the execution stage of our FOCUS plan, which is centered around the ultimate goal of achieving a 12% compounded annual total return through our shareholders over the next three years.

A summary of the goals we have defined for the FOCUS plan can be found on Page 6 of the company presentation and include completing our transition to a majority operator owner by having over 50% of our assets under management in fund like or third party structures acquiring higher quality assets through our $750 million fund with Texas.

Narrowing our market focus by exiting non-strategic markets and other non-core asset sales and strengthening our balance sheet as measured by a goal of net debt to GAV ratio of 50% or less and a net debt to EBITDA ratio of 6.5 times or less. It is our belief that these goals will lead to an increased value for our company and ultimately to a 12% compounded annual return for the shareholders.

Our stock has had a good rally over the past couple of weeks, but even at its current level, it is at deep discount to our internal net asset value estimates and the consensus NAV estimate of our analysts.

On Page 7 of the company presentation, we’ve illustrated the correlation of our stock price, our NAV and our consensus NAV and the current gap that exists among these metrics. We believe that our stock price is still undervalued on the basis of NAV, which we estimate between $20 to $27 per share, based on 8.5 to 9.5 cap rate. With the current portfolio approximately 86% occupied, incremental value will be gained as we continue to lease space and increase occupancy over the next few years.

Again, I would like to reference back to the chart shown on Page 3 of our presentation, which shows positive gains in market occupancy starting in 2011. And Parkway has historically and consistently outperformed our markets in occupancy. Additionally, our $750 million fund with Texas should provide for growth, as we were able to make accretive investments at the right time in the cycle.

With that, I will now turn the call over to Will, for an update on operations.

Will Flatt

Thank you, Steve. The overall leasing market remains challenged, marked by corporations seeking to reduce real estate costs and having many opportunities available to them in the marketplace.

The national office vacancy ended the second quarter at 17.7%, which is slightly down from the previous quarter. The average market vacancy for Parkway's markets was 19.3% for the same period and Parkway ended the quarter at 14.6% right now.

Over the past five years, Parkway's average occupancy was approximately 460 basis points above the average occupancy of the markets in which we operate. Consistent with national trends, construction in our markets has come to a halt.

Parkway's largest markets, Chicago, Houston and Atlanta, total 57% of total revenue. And I'd like to provide you with an update on the current market conditions in each of these.

Chicago had total net absorption of negative 239,000 square feet in the second quarter of 2010, bringing its overall market vacancy up to 20%. The amount of subleased space in Chicago continues to decline. However, part of this is the result of space being returned to owners, as sublease terms expire.

A total of $1.1 million square feet has been added in Chicago so far this year, but there are currently no new office developments under construction at this time. Houston is also seeing increased vacancy rates and declining rents and growth in the overall Houston market is being further delayed due to the oil spill in the Gulf of Mexico and the U.S. government ordered moratorium on new deep water oil and gas drilling.

We view Parkway's exposure related to the oil spill and moratorium as minimal, but it is having an impact on customer’s willingness to make decisions. There is also a total of 2 million square feet, only 1% of stock, currently under construction in Houston with the majority of the new development taking place in the Houston CBD.

Atlanta was one of the few markets that was able to maintain its vacancy levels from the Park order and have positive net absorption of over 286,000 square feet. Atlanta's construction pipeline is now cleared, which should help this trend continue as job growth remains positive.

A positive side in all of these markets is increasing investment activity, indicating that investors feel that the market has bottomed and that growth should return soon. We have provided an update of our near term lease rollover exposure on Page 12 of our company presentation.

This chart shows all leases greater than 50,000 square feet that expire over the next couple of years. As you can see, our only remaining major exposure in 2010 is Stealth's Dunbar [ph], which will vacate 53,000 square feet in August.

Please note that despite this vacancy, we also had several other leases commence on August 1st, including the 29,000 square foot DeVry lease in Phoenix, keeping our portfolio occupancy at 86% as of today.

Since last quarter we have completed renewals for Travelers, Nabors and U.S. Cellular, reducing our 2011 exposure by a total of 521,000 square feet and allowing our percentage of square feet expire in 2011 from 15.7% to 11.8%.

These leases were renewed at an average cost-per-square foot per year of $2.66, with an average term of 4.6 years. Parkway's share of this total CapEx is $2.4 million, with $1.2 million expected to be incurred in 2010.

Our largest remaining near-term exposure is AutoTrader in Atlanta, which will vacate upon expiration in February 2011. We have conducted a number of tours for potential customers interested in this space and have 200,000 square feet of proposals outstanding or prospects for traditional office users. We also have construction plans and a financial model developed for the possibility of converting the property to medical office space as another option.

Our customer retention for the quarter was back to a normalized level of around 70%. We also had an increased amount of new leasing activity during the second quarter. This recent leasing activity moved our portfolio to 87.1% leased, as shown on the leasing status report on Page 27 of our supplemental package.

During the second quarter, we completed 191,000 square feet of new leasing, 32,000 square feet of expansions and 313,000 square feet of renewal leasing. The average rental rate for new leases was $16.70 at a cost of $3.54 per square foot per year and the average rate for renewals and expansions was $18.90 at a cost of $2.43 per square foot per year.

The lower average rate is due primarily to leases signed in Columbia, South Carolina and Phoenix, though average leasing rates were down this quarter as compared to last quarter, the leasing costs per square foot per year to complete these leases, especially for new leases continued to stay at a low level and the average net present value of leases remind relatively unchanged from the prior quarter.

Also, Parkway's in-place average rent remains steady at $23.04 per square foot. Parkway's operating profit margin this quarter, net of non-recurring lease termination fee income was approximately 52%, which is slightly higher than last quarter and in line with our average over the past year. We reaffirm our 2010 outlook for average same-store occupancy of 85% to 87% and as of today expect to end 2010 slightly above 86% occupancy.

I'd now like to turn it to Richard for an update on our financial results.

Richard Hickson

Thanks, Will. For the second quarter of 2010, we reported FFO of $0.66 per share. After adjusting for non-recurring items, recurring FFO for the quarter was $0.64 per share, which is in line with our internal budget. A reconciliation of reported FFO to recurring FFO, as well as Parkway's definition of recurring FFO is shown on Page 17 of our company presentation.

Parkway's share of reported same-store GAAP NOI for the quarter decreased $1.5 million or 5.1% as compared to last year. Excluding non-recurring termination fees, recurring same-store GAAP NOI for the quarter decreased $2 million or 7% as compared to last year and decreased $2.5 million or 9.1% on a cash basis.

This decrease was anticipated in our budget and does not change our guidance range for recurring same-store NOI of negative 2.5% to 5.5% on a GAAP basis and negative 5% to 8% on a cash basis. Parkway's year-to-date change in recurring same-store NOI is negative 4.9% on a GAAP basis and negative 6.4% on a cash basis, both within our stated guidance range for the year.

Our internal projections indicate that we are in line with our stated guidance and we reaffirm our 2010 earnings outlook for a reported FFO range of $2.72 to $2.92 per share and a recurring FFO range of $2.40 to $2.60 per share. For your convenience, we have provided a list of our 2011 guidance assumptions on Page 19 of the company presentation.

Our FAD for the quarter was $2.6 million or $0.12 per share and Parkway's share of recurring capital expenditures in the second quarter totaled $10.4 million. As a reminder, our FAD reflects the actual dollars incurred for recurring capital expenditures, including building improvements and leasing costs and by nature may vary significantly from quarter-to-quarter.

Based on the estimated timing of outstanding capital expenditures related to incremental leasing activity, we are expecting higher capital expenditures in future quarters. Therefore, we also reiterate our guidance of $38 to $43 million for Parkway's share of recurring capital expenditures for 2010.

As of June 30th, the company had $721 million in proportionate debt. This includes a line of credit balance of $124.1 million, since the end of the first quarter, the company paid off two mortgage loans using availability under the line of credit for a total of $27.8 million. The first mortgage loan paid off had a principle balance of $17.2 million was secured by three properties in Houston and Atlanta, and had an interest rate of 5.3%. The other mortgage loan had a principle balance of $10.6 million was secured by the Toyota Center in Memphis and had an interest rate of 7.9%.

Since the end of the first quarter, the company has also placed two new 10-year non-recourse first mortgage loans for a total of $35 million. The proceeds from these mortgage loans were used to pay down the line of credit.

The first new mortgage loan was placed on May 28th for $23 million, is secured by Citrus Center in Orlando and has a fixed interest rate of 6.3%. The second new mortgage loan was placed on July 8th for $12 million, is secured by the Stein Mart building in Jacksonville and has a fixed interest rate of 6.5%.

The company's share of remaining secured debt maturities for 2010 is $38.6 million. Consistent with year-to-date activity, we intend to either refinance these remaining maturities with non-recourse first mortgages or pay them off using availability under our line of credit.

We continue to see competitive quotes from a broad selection of secured debt lenders at attractive interest rates. We are currently seeing quoted interest rates from non-recourse mortgage debt ranging from 6.25% to 6.75% for properties in our existing portfolio at 60% to 65% leverage, and quoted interest rates in the range of 5.5% to 6.5% for future fund acquisitions at 50% leverage depending on the profile of the investment.

Our largest debt maturities in 2011 include our line of credit maturing in April and an $89 million first mortgage loan on 233 North Michigan in Chicago maturing in July. Based on current market conditions, we anticipate a favorable refinancing of the 233 North Michigan loan.

As we have stated in the past, we do plan on reducing the size and related borrowing capacity of our line of credit upon renewal. Our line of credit matures in April 2011 and we intend to begin this renewal process this month.

Based on multiple meetings over many months with our existing syndicate of nine lenders, as well as, a number of lenders that are not currently in the syndicate, we continue to see strong interest in our line of credit. While the company anticipates some of the terms and covenants of the line of credit will tighten upon renewal, we anticipate that the renewed line of credit will adequately support the short and long-term objectives of the company.

Our net debt to EBITDA will remain at 6.1 times for the quarter, which is below our peer group at 6.9 times and slightly better than our stated goal of 6.5 times or less. Our net debt to GAV is estimated at 55.6% compared to our stated goal of 50%.

As Steve mentioned earlier, on July 30th, the company purchased a 100% interest in a mortgage note for a net purchase price of $33 million. This mortgage note had an outstanding principle balance of $51 million at the time of our purchase.

This note is secured by two properties in Atlanta and one property in Charlotte, all of which are owned by the Rubicon joint venture in which the company currently holds a 20% ownership interest. The stated interest rate on the note is 4.9% and the maturity date of the note is January 2012. The company used availability under the line of credit in order to fund this purchase.

We'd also like to briefly address our funding alternatives for the company's future investments through Texas Fund II. As we have stated many times, it is important to note that with the structure of Texas Fund II, Parkway only contributes $15 million of equity per every $100 million of total investment by the Fund.

As outlined on Page 23 of the company presentation, there are several alternatives potentially available to the company to fund its share of equity and investments whether through the Fund or fee simple.

First, the company anticipates continuing to produce positive cash flow after dividend payments, which could be made available to help fund new investments.

Additionally, other sources of capital could include planned asset sales or the issuance of equity securities. We believe that access to these potential funding sources should provide the company with the required flexibility to act on attractive investment opportunities. With that, I'll turn the call back over to Steve.

Steve Rogers

Thanks, Richard. In closing, I would like to encourage our investors to look beyond the noise and to keep an eye on the additional announcements regarding execution of our FOCUS plan in the key areas of leasing, investments and financing.

I stated at the beginning of the call and think it is a message that is important enough to repeat, since at the end of the quarter, we assigned 1.1 million square feet of leases. We sold one asset. We acquired the note for $33 million. We paid off two mortgage loans totaling $27.8 million and we closed two new mortgage loans totaling $35 million. This is significant operational activity. It's what we will remain focused on here at Parkway.

With that, we will be happy to answer any questions you may have at this time.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) And we'll go first to Jordan Sadler with KeyBanc Capital Markets.

Jordan Sadler – KeyBanc Capital Markets

Thanks. I just wanted to follow up on the capital discussion, Richard. You ran through sort of potential sources of capital and earlier you ran through some of the larger refinancings that you have ahead. But maybe if you could just frame it for me a little bit differently in terms of sort of the total refinancings that you have to do through 2011. I know you mentioned the two big ones, but just in aggregate the total that you have through 2011, of Parkway's share of maturities and amortization versus what the expected sources of capital would be for that.

Richard Hickson

Sure. I'd be happy to do that. In terms of the total 2011 maturities, excluding our line of credit, the secured-debt maturities obviously as mentioned earlier consist of 233 North Michigan as well as our Form 1 asset in Memphis for about $10 million in principle and a Wells Fargo asset in Houston for about $8.5 million. So those would be the only additional maturities in 2011 beyond those already mentioned.

Jordan Sadler – KeyBanc Capital Markets

Okay. And the plan is to refinance these altogether and maybe you could give us sort of an NOI yield? A current NOI yield on 233 North Michigan, just so we can get a sense of whether or not there's going to have to be any pay-downs on this stuff or what.

Richard Hickson

Well, with regard to the first part of the question, I think it would be a fair statement to say that consistent with what we've been doing in 2010. And I think that would probably carry over. It's a reasonable assumption to carry that over to 2011 that we would seek to refinance those assets at the appropriate time as they come due with first mortgages, likely. With similar, non-recourse first-mortgage debt as tends to be the case with Parkway's strategy for addressing maturing mortgage debt.

Will Flatt

The biggest one is, of course, 233 and at time of maturity, it has an $85 million balance on it and based on the NOI that we have today and a 60% loan-to-value. It is a very strong assumption that we would take proceeds out of that mortgage refinancing. We have really probably no scenario that we can paint today where we'd have to advance funds on the 233 North Michigan Avenue building, based on its low, very low loan-to-value ratio today.

Jordan Sadler – KeyBanc Capital Markets

And the line of credit, have you sort of given an indication of, sizing-wise, where you'd like to end up?

Richard Hickson

Well, Jordan, obviously we are looking at that. We have been working on structuring the line of credit. We are still early in the process. As I mentioned earlier, we are beginning the renewal process in earnest this month, in August. So what I would point you toward is that we do not anticipate and we have not ever anticipated that our line of credit need would be what it is currently in place.

So we expect the line of credit commitments and capacity to reduce. But again, in all of the meetings that we have had with our existing syndicate of nine separate lenders, as well as quite a few lenders that currently are not in the syndicate, all of those meetings have been positive. There is strong interest in participating in our line of credit. So we view that as a good thing going into the renewal process.

Jordan Sadler – KeyBanc Capital Markets

What's the biggest constraint on the line renewal? Is it asset value based on a new cap rate or what or is it just….

Richard Hickson

It's hard to isolate any one variable. So I would be reluctant to focus in on one. I think the broad opinion is that there will be some terms that will tighten. Frankly, it's very possible that some of the terms of the line of credit will stay the same or even improve. And so there's quite a bit of structuring that will happen through the renewal process and again, I would be reluctant to focus on any one metric in isolation.

Jordan Sadler – KeyBanc Capital Markets

And lastly, to Steve, obviously, you closed on sort of an initial sizable investment post-quarter-end that you just disclosed. One, I'm interested in what the accretion expectation would be on a sort of normalized annualized basis. On that investment, just say 2011 and then, two, just maybe pipeline of additional investments.

Steve Rogers

Okay. I think to answer the first half of the question, I would suggest you turn to page four in the web presentation and what that shows is the annual interest of $2.5 million and the annual principle of $821,000. These would be the two major components of economic benefit that Parkway would receive during dependency of holding the note-receivable. It also should be noted as is shown on the bottom of that page four that were we to own this in a fee-simple format, then you would see a purchase price of $59 per square foot and a cap rate once contractual free rent burns off of greater than 10%. So the exact timing of when we move down the road on that is kind of open at this point.

As I mentioned in the script, Jim and I are meeting with Rubicon principles this week. We're also meeting with the bondholders who are going through the process of the Rubicon bankruptcy. And they believe that they'll emerge as the ultimate owners of Rubicon sometime probably in the next month or so. So while Rubicon is still the partner, we recognize that the Rubicon bondholders may well be the partner and so we're holding additional dialogue with all, just to keep informed and to let these guys know what our intentions are, as well. So I think you can probably glean the mathematics from page four and the company is on it. And we're working very diligently toward making sure that these economics are met.

Jordan Sadler – KeyBanc Capital Markets

Is it safe to just in terms of a range just roughly, but somewhere between 100, 150 basis point spread on your investment of $33 million on the low end versus as much as 400 basis points or so on the high end? Is that sort of it?

Steve Rogers

I think that's a far assumption.

Jordan Sadler – KeyBanc Capital Markets

Okay. And then just – and could Texas potentially be the co-investor here? Would they be interested in something like this in the fund?

Steve Rogers

This investment does not fit within the discretion that we have in the Texas agreement. But in the spirit of good faith and in being a good partner, we presented the investment to Texas. And what they are doing is mulling it over, they would like for us to go ahead and get through the actual purchase of the note, which we did and to hold these conversations with the bondholders and our partners and to make sure there's just not any payor, so to speak.

And then they'll make their decision as to whether they think it would be an appropriate investment. But it's not a discretionary investment, because it's not a fee-simple item. The other item that I stated in the script that you should note is that the bondholders have expressed some interest in coming into this note. I think both of those parties recognized the value created at closing and want to evaluate that and we will have to consider that.

Jordan Sadler – KeyBanc Capital Markets

All right. I leave the floor. Thank you.

Steve Rogers

Yes, sir.

Operator

We'll take our next question from Brendan Maiorana with Wells Fargo.

Brendan Maiorana – Wells Fargo

Thanks. Good morning.

Steve Rogers

Good morning.

Will Flatt

Good morning.

Brendan Maiorana – Wells Fargo

Steve, just a follow-up on the Rubicon deal. Can you guys get that asset in a fee-simple structure? Part of the FOCUS plan was acquiring higher-quality assets through the fund investments. Do you think that the asset quality of Rubicon is in line with where you want to move your portfolio?

Steve Rogers

Let me address that. I think the straightforward answer is that certainly I think Carmel Crossing is a very high-quality asset, well located and would qualify immediately. I think Lakewood has some lease stuff that it needs to go through before it's going to either qualify or not. It's a very high-quality physical asset but it is under-leased substantially and therefore would probably not be a perfect fit with the criteria that we've established for Texas. Falls Pointe is 100% leased to RBS Link on I think a seven-year, may be a 10-year lease, with maybe a seven or eight year out. And it would probably represent an asset that at the correct course in time and assuming we had partner approval and assuming we all wanted to move forward would represent an excellent opportunity to make a disposition and create a significant funds flow to this company right off the bat.

Brendan Maiorana – Wells Fargo

Okay. And what do you think is a fair assumption in terms of CapEx costs or additional costs that would be required to lease up Lakewood?

Steve Rogers

Yes. Lakewood's got – that's where we lost a major customer that was one of the things that happened to this partnership. And I think that was about 80,000 square feet of one of our major customers there. So that 80,000 square feet would principally have to be leased up over time before it would represent a good ready-to-go-to-the-market type investment and our estimate of that would be approximately $3 million.

Brendan Maiorana – Wells Fargo

$3 million?

Steve Rogers

Yes, sir.

Brendan Maiorana – Wells Fargo

Okay.

Steve Rogers

That's commissions, BI, TI; everything.

Brendan Maiorana – Wells Fargo

All in.

Steve Rogers

Total investment in the asset but as you will probably be able to glean once we divide these up, there's going to be an extremely low basis in Lakewood.

Brendan Maiorana – Wells Fargo

Sure.

Steve Rogers

So we’re adding $3 million in there, it's going to be an almost silly low price-per-square foot number.

Brendan Maiorana – Wells Fargo

Right. Okay. That's helpful. Thank you. For Will, for your 2011 expirations, you're now at call it $1.5 million for date of expirations after getting a lot of the activity done over the past month or so. How far along are you in terms of discussions on renewal for a lot of that stuff and it sounds like from some of the detail you provided, there's probably about 300,000 square feet that you think is highly likely to vacate. You've done on average around 600,000 square feet of new leasing per year, if I look over the past seven or eight years of new leasing activity.

So I guess I'm just trying to figure out, as you look at the year-end 2010 versus year-end 2011, do you think that you've got the opportunity to move occupancy higher or do you think that 1.5 million square feet of rollovers – that there's a fair amount of assets that's going to fall out?

Will Flatt

Well, I would start on Page 12 with our key leasing update and clearly the largest of that is Auto Trader, which does come out in the early part of the year. So we are going to have pressure on average occupancy for the year. Our very long-term historical average has been 200,000 square feet a quarter, a little over that in terms of new leasing and expansions.

Clearly, the portfolio is larger today. And if we get job growth, we may be able to do better than that. The question of, do we get job growth, is still, I think, an open one. And so we're really not prepared to make a statement today on where 2011 is going to be but I do think that it will be under pressure for the first half of the year with Auto Trader. And some of it will move out of possibly Motorola in the first quarter.

Brendan Maiorana – Wells Fargo

So I guess maybe to ask a little bit differently. Of the remaining lease expirations that you've got, how should we think about the retention ratio? Given that you've put a fair amount of that to bed already, but you've got still a sizable amount relative to your overall portfolio that's rolling next year.

Will Flatt

I would take the leases that we say – big leases that we've got a status on and then just what we do internally as everything else gets smaller than that and either we know something today or it's still part of in the future, we just apply our historical average of 70% on that and that would be how I'd approach it.

Brendan Maiorana – Wells Fargo

Okay. So you think that 70% is still a pretty reasonable average for the remainder that's there?

Will Flatt

For the remainder. Yes.

Brendan Maiorana – Wells Fargo

Okay. And then just lastly for Richard. Looking at the leverage calculation and I know that you're below your target debt to EBITDA of 6.5 today, based on your trailing 12-month EBITDA. But if I look at the NOI that you're providing on page 22 of the web presentation and I annualize that number and then I back out some G&A costs, it would seem that your current run rate is kind of above your target debt-to-EBITDA. Then we kind of add in the costs for Rubicon and then the potential for investments for Texas. It would seem that there's some additional deleveraging that would need to occur to come and hit your longer-term targets. Is that a fair assessment as how you look at it? And would that mean that kind of not just the equity portion of Texas but maybe the equity plus the debt portion would be more likely to be funded through an equity issuance or through total asset sales?

Richard Hickson

You know, Brendan, I think that's a good question. And I would agree that is a fair observation that currently, if you look on page 22, our calculation of net debt to GAV is 55.6%. And when you layer in Rubicon, we see just pro forma for that impact net debt to GAV is about 56.8%.

But you know, our stated goal is 50% and that is something that we will strive to achieve over time. It's not something that happens overnight. You can't just flip a switch and change the balance sheet overnight. So we're working toward that and along those lines, Page 23 addresses how we plan to do that. And so again, I think that's a fair observation.

Will Flatt

I would also weigh in, because I think the architecture of our balance sheet today, we are meeting the debt-to-EBITDA architecture but we're not meeting the debt-to-GAV architecture and what that's going to require is for the company to take the time that we have to over the life of the FOCUS plan to meet these objectives. And we have stated in the plan and there that we do have asset sales which are a component of our plan.

They've been a component of our plan ever since we announced the GEAR UP Plan years ago and those non-strategic asset sales have been largely unencumbered on purpose over time. And what that gives Parkway the latitude to do is that once one of those assets are sold, it allows the full value of the purchase price to flow through on a liquidity format. It may not help the debt-to-GAV per se that day but it does help all the other debt-type metrics.

So I think it's an evolution, Brendan but I think we're committed to it. We've done this before; we can do it again. We've run the company at around 50% most of the company's history. We got a little overleveraged there prior to the great recession and we used our line of credit a little bit more as permanent capital structure rather than as the temporal nature that I think the beast should be viewed as and going forward, that is our view. I think we're pretty consistent and straightforward on that, communicate with all of our shareholders and analysts over the past year or year and a half.

Brendan Maiorana – Wells Fargo

No. Understood. I mean just a point of clarification, just on one of your comments, Steve and then I'll leave the floor but is the difference between being above the line on your debt-to-GAV – debt-to-EBITDA, I’m sorry, calculation versus debt-to-GAV being below the line because you're taking trailing EBITDA and you're taking kind of spot-quarter NOI in the debt-to-GAV and annualizing that number?

Steve Rogers

Well there's no doubt that the shrinking NOI during the recession has not helped either metric to our favor. So we probably will need a little help here from an economy to be able to achieve both of these metrics without some type of liquidity items. That's why I keep always going back to the first couple pages in my chart. Right now we've been in a three-year period in America in our REIT industry and Parkway's no exception of a same-store NOI decline.

Each of those declines has some denigrating effect on these metrics. So we're going to have to take some time to climb out. You've got to have two things happen, Parkway has to take Parkway-specific actions that are liquidity-oriented and then the economy's got to help a little bit, lest we find ourselves with a crummy NOI in this industry and you've got to have that to help push those GAV numbers. The GAV numbers are NOI-based numbers, where the EBITDA has fee income in it and our fee income is growing, and that helps us along in that particular metric. That's one of the reasons I think it's an appropriate metric for Parkway.

Brendan Maiorana – Wells Fargo

Sure. Okay. Thank you.

Operator

We'll take our next question from Michael Bilerman with Citi.

Josh Attie – Citigroup

Hi. Thanks, It's Josh Attie with Michael. Can you talk a little bit about the lease economics? The duration on the renewals seem to be short and is there a specific reason for that? Was that at your option or at the tenant's option?

Steve Rogers

There's not any specific reason. Clearly in this environment, with ramps being where they are, it is our preference to try to push for shorter duration than longer. It is a two-way negotiation and so customers are out there pushing for longer. In this specific incidence and then in some cases, there are customers who are just not willing to make a long-term decision because they're uncertain about their business. So there's no one particular facet there that I can point to.

Josh Attie – Citigroup

And also, the rents on the new leases were under $17 and that seems well below the portfolio average. Was there anything specific about the space that was leased in the quarter that would explain the lower rent?

Steve Rogers

It was specific to the markets. We did a very large lease in Columbia, South Carolina that was just a lower market rent. It's consistent with the rents that we're getting today in that market but that was just as a proportion of new leasing this quarter was higher. And then we did a 30,000 square foot lease in Phoenix that also market rent, there would've been a roll-down for that building but was in the numbers this quarter. And then I'll point to just CapEx per square foot also being down, even though where face rates were down a little bit, CapEx was down. So our net present values from last quarter to this quarter are actually right in line.

Josh Attie – Citigroup

And how much free rent is being provided on the new leases, the renewals and also on the Rubicon JV, how long until the free rent burns off?

Steve Rogers

Free rent is averaging about a month per square foot per year or term. In some cases, maybe a month and a half but the portfolio average is about a month per square foot per year of term and then on the Rubicon joint-venture…

Richard Hickson

Yes. Travelers had eight months of rent that commenced when? In June, Will? Or was that July?

Will Flatt

It commenced July.

Richard Hickson

July. So we've got eight months of free rent there. And then the facility holdings grew at 20 months, so one-half. I'm sorry. I'm sorry. Yes. Excuse me. Falls Pointe had 20 months of one-half rent abatement that began 1/1/2010. So it'd be the equivalent of 10 months, which would be consistent with what Will said, one month per annum of lease term, if you did it on a full instead of a half basis.

Josh Attie – Citigroup

Okay.

Steve Rogers

And I want to add to that, we are seeing the ability to spread free rent around. So it's not always right upfront and so we're seeing in cases where it may be a month per square foot per term, it's staggered through the lease. Like Travelers actually was six months upfront and then two months later in the lease. And so you're seeing that happen.

Will Flatt

It gives a little better present value to the company.

Josh Attie – Citigroup

And what kind of contractual rent escalations are you getting on the new leases?

Richard Hickson

Well typically for our markets, they range from $0.50 a square foot to 2% – 25 to 3%. We are trying to push that number in the belief that we could be in an inflationary environment but because inflation is not showing itself and economics supply-demand being what they are, we are not necessarily winning those arguments today. So it is generally probably trending toward the 2% more than the 2% to 3%.

Josh Attie – Citigroup

Okay. And on the Rubicon JV, how long is it before the free rent burns off and you get to that 10 and 7 cap rate?

Will Flatt

Well, Travelers and RBS are the two major free rent burn-offs and so we would have about 12 – a total of 12 months to get through – eight months to get through Travelers and we would have another 12 months to get through the RBS lane.

Josh Attie – Citigroup

So about two years in total?

Steve Rogers

No, sir. They run contemporaneously. It'll be 8 and 12 running at the same time.

Josh Attie – Citigroup

Okay.

Steve Rogers

You don't add them. Yeah. They run concurrently.

Josh Attie – Citigroup

And then lastly, can you give us an update on your thoughts on Mitch Collins' personal injury lawsuit and what your ultimate liability could be?

Steve Rogers

You know, we have filed an answer to the lawsuit. Many of you have a copy of that. You've requested it. And I think it sort of speaks to the matters at hand. So we are just letting the lawsuit run its course, right now. We have taken a certain reserve in the first quarter; a total of $545,000 that the company believes is sufficient to cover our exposure on the matter from an economic standpoint and that's where we are.

Josh Attie – Citigroup

Okay. Thank you.

Operator

And we'll take our next question from Rich Anderson with BMO Capital Markets.

Rich Anderson – BMO Capital Markets

Good morning, everyone.

Sarah Clark

Good morning.

Steve Rogers

Good morning.

Rich Anderson – BMO Capital Markets

One of the things that kind of comes across right now for Parkway is there's very little room for error in terms of capital. You're doing a lot of things from a leasing standpoint but you're kind of right at the breaking point from a leverage standpoint and – at least in my opinion. A couple of years ago or so you did your equity issuance, $85 million, that was aimed at fixing a lot of the things that were facing you at the time. It was a BOT deal that investors maybe weren't enamored with. I'm wondering if you're hesitant to go back to the market in a big way like that again because maybe the deal itself kind of got a lukewarm response.

Steve Rogers

Well, I would only say that the $85 million offering we completed on April 22 of last year was met with I thought good investor response rather than lukewarm. We were oversubscribed and we didn't want but $85 million and that's what we took. As to why a BOT offering versus a wall crossing, it appeared to us that the 100% certainty that we received from a BOT offering that was offered to us at that point in time was just simply more certainty and better execution for Parkway.

Rich Anderson – BMO Capital Markets

Yes.

Steve Rogers

While it might not have fallen inside the clear box that everyone else was doing at the time. It just simply was a certain arrangement and met Parkway's needs. So no, I would say there's no fear about going back out to the market at the right time. We registered an ATM program in December of this year for $75 million, that's public knowledge and it has been for a while. Once the price reaches an expectation that we find is acceptable, we would possibly reuse that again. So I'd say that's really where we are on it.

Rich Anderson – BMO Capital Markets

Okay. So there are no immediate plans on doing something larger as opposed to the ATM program ongoing?

Steve Rogers

Right now, our plans are sort of just open. If we see something opportunistic, we'd certainly be willing to grab onto it but that's sort of where we are.

Rich Anderson – BMO Capital Markets

Okay. On the line of credit, of refinancing, how much of the reduction in borrowing capacity do you think is a want-to thing, if that's the right way to put it, for Parkway? And how much of it is kind of have-to, to take a lower number?

Steve Rogers

I think it is always a combination. The company's stated objective is that we just don't need a $311 million line. In other words, even offered that amount of money today, it would be foolish for us to accept it because all that you would really do is just pay an unused fee on the outstanding unused portion, which just is throwing money away.

What's happened over the last couple of years and what we need to make sure that everyone's clear on is that the company's needs for the line have just shrunk. We just don't need as much and we view the $85 million offering that you laid out there, the $100 million in asset sales that we've completed, the $15 million we completed this year, that's over $200 million of liquidity in the last 18 months that has helped our balance sheet and therefore we just don't need as much line of credit. Also, we've had a shift in our view and a lot of that, the reason I'm answering this question is because it's a shift in my view and I want to accept that. I just don't view the line of credit as a permanent part of Parkway's balance sheet.

We intend to use the line of credit going forward as a temporary funding mechanism and over time through planned asset sales and positive cash flow and refinancings of first mortgage. And all the items Richard articulated on Page 20 or 23 or whatever it is, I think that you would find that's really our long-term funding strategy for this company.

Rich Anderson – BMO Capital Markets

Okay. And in terms of the renewal activity that you did post second quarter, I just want to make sure I understand, it's a combination of maybe rents being down, maybe slightly below than what you might've done otherwise if you weren't striking a deal early. CapEx is down, though, which offsets that but you're getting maybe minimal escalations and a little bit more free rent than you would've got. Is that kind of what you gave up in order to put to rest these 2011 maturities? Is there more to it?

Steve Rogers

I don't think there's anything more to it. I would say they are low on the capital front. Market to low on the free rent front and there are market deals today, but I don't think there's anything more to it than that.

Rich Anderson – BMO Capital Markets

So you think they're pretty much at-market. There's nothing like below-market in order to get them done early?

Steve Rogers

Market deals.

Rich Anderson – BMO Capital Markets

Yeah. Okay. And last question, not to be specific on the Mitch Collins situation but do you have any idea how long something like this could linger?

Will Flatt

Well, the only thing I could really point to is the OSHA/SOX withdrawal, which lasted 87 days from the time of filing until his withdrawal. This one is in State Court, the personal injury suit and State Court typically lasts a good bit longer. My experience here working in this market 30 years is that these matters can linger for a while. And Parkway's resolved to go through whatever it takes to complete the matter, because we feel pretty strongly about it and that's sort of where we are.

Rich Anderson – BMO Capital Markets

What does the reserve assume in terms of length of time that you have to deal with this or is that kind of like your …

Will Flatt

No. Reserve doesn't take into account length of time. It simply takes into account our best estimate from an accounting perspective and with legal review of what the exposure to Parkway would be economically and that's $545,000. We have good insurance. Employment practices are paying the legal bills for the defense and the answer and that's what we're doing.

Rich Anderson – BMO Capital Markets

Okay. Sounds good. Thank you.

Will Flatt

Yes, sir.

Operator

We'll take our next question from Erin Aslakson with Stifel Nicolas.

Erin Aslakson – Stifel Nicolaus

Good morning. Thank you for taking my call.

Steve Rogers

Hi, Erin.

Erin Aslakson – Stifel Nicolaus

Can you hear me all right?

Steve Rogers

Yeah.

Erin Aslakson – Stifel Nicolaus

Okay. Great. Thank you, again. John, I apologize, he is actually on the Lexington call right now. But a question we had for you is we are still concerned about the dividend and that we feel strongly about dividend yield being important to the suburban and value-oriented REITs in our universe. We assume that you determined your taxable income for 2010 will be roughly about $0.30 per share. Can you confirm this and provide your thoughts for 2011 taxable income?

Steve Rogers

I'm afraid we won't be able to give you a 2011 taxable income number, Erin, vis-à-vis, we just haven't prepared our budget yet for 2011. So I think what you would expect to see out of Parkway is obviously the maintenance of this dividend level here and for the reasons that we articulated in each of the previous calls because we do want to take dollars and positive funds flow which we are creating now as a result of that reduction and put them forward to new investments. This is growth capital.

Additionally, we are at the bottom of the cycle and the customer improvements to move occupancy take a little more money and we're going to use the dividend to grow occupancy and we are going to use the dividend to make investments in Texas Teachers and the other investments we see on the horizon. So I think we'll leave it alone for 2010; take a fresh look at it at 2011. There's nobody in this room or on this call that wants the dividend to go up more than me personally, I promise you. However, we believe that where we are today is the best place for us and we're going to stay the course.

Erin Aslakson – Stifel Nicolaus

Okay. Fair enough. Thank you.

Operator

And we will take our next question from Sri Nagarajan with FBR Capital Markets.

Sri Nagarajan – FBR Capital Markets

Hi. Thanks and good morning.

Steve Rogers

Good morning, Sri.

Sri Nagarajan – FBR Capital Markets

Good morning. I think the question is focused on obviously deleveraging the balance sheet but what I wanted to ask you was in terms of the acquisitions for the funds being priced out. Where is the competition coming from and is there a crowding for the bids for stabilized assets versus value-add assets?

Steve Rogers

The ones that we recently participated in and were invested in, fine. When you gather a lot of information in best and final, so it's an important place to be even if you don't make a purchase.

We're principally institutional quality buyers who are looking at very high-quality Class-A assets. And some of the bidding just simply got away from us. And so the company could've met the pricing and possibly won the deals. But the private REITs have been a pretty significant player. I cannot name them for you today.

Usually the brokers will give us a little feedback and don't specifically name names until there's a closing and then usually there's an announcement and you find out then. But it's institutional capital chasing high-quality assets. And in Texas Fund 2, we're looking more at Class-A assets. So we're just having to sharpen our pencil a bit and we're out there on the playing field now in the best and final on a couple of them that appear to be reasonably priced. We'll see where we end up.

Sri Nagarajan – FBR Capital Markets

And can you give us an indication of the dollar-per-square foot? Let's say the percentage of peak levels for these asset bids that you guys are engaged in?

Steve Rogers

Yeah. There's definitely been a drop from peak levels. I mean so…

Sri Nagarajan – FBR Capital Markets

Can we say 15 or 20%?

Steve Rogers

Oh! Goodness. In some cases, there's been a 20 to 40% value drop. So things that were bid up at the top – call it maybe '07 pricing – without naming assets, one was purchased at the top at $400, $500 a foot. And we were looking at it at nearly half of that.

So yes, we are definitely seeing a significant drop from the peak. But most of our valuations are centered around unleveraged internal rate of return and not so much on the price-per-square foot or what it priced at from the peak. It's definitely down from the peak, but that alone would only indicate that the peak was too high a pricing.

Will Flatt

I would add, NOIs are down. Cap rates are not. I haven't seen that just in an NOI function, but the cap rates still remain very low today.

Steve Rogers

Yes. I mean we're seeing plenty of 7 to 7.5 cap rates. Not in New York, Washington, San Francisco type markets, Boston but in Houston and middle-America-type markets where we're actively engaged.

Sri Nagarajan – FBR Capital Markets

Can you remind us of some of the unlevered IRR assumptions you may be using for these kinds of bids?

Steve Rogers

Yes. I think the one that's public and that's in our web presentation is that one of the de minimus requirements that we have is to make sure that we deliver in good faith a 10% leveraged internal rate of return to our partner, Texas Teachers. Now of course as a Parkway shareholder, you're only interested really in what Parkway gets out of that. But Parkway's leveraged IRR would be up in the high teens, based on say on a 11-ish levered internal rate of return to Texas.

And it usually takes, in order to deliver that rate of return, depending on the occupancy, somewhere around a 6.5 to 8% cap rate or unleveraged IRR in the 8 to 9% level. And then with 50% leverage at very attractive mortgage rates today, Sri, you can actually take an 8 or 9 and with the very low leverage rates that we are placing there today, deliver the rate of return to Texas. And then with the fees, deliver the high rate of return to PKY.

Sri Nagarajan – FBR Capital Markets

Okay. Lastly, talk about your disposition goals. I mean how is the environment for disposition, specifically say in non-core secondary and tertiary markets today?

Steve Rogers

Getting better. The same set of actions are an equal and opposite reaction on the buy side. But there's an equal reaction on the sell side. In other words, the cap rate dropping, which is no news to anybody on this call today, is also affecting our ability to sell which increases the ability to achieve better prices today. And so we're reevaluating our non-core assets and seeing if maybe there's some better pricing available to us for some A-minus to B-plus type assets. We're seeing 8.5 to 9.5 pricing today, which would be the type assets that we would be disposing of under our non-core asset program.

Sri Nagarajan – FBR Capital Markets

All right. Thanks.

Steve Rogers

Yes, sir.

Operator

We'll go next to Ross Nussbaum with UBS.

Ross Nussbaum – UBS

Hi, Steve. I'm going to be quick because I've got to jump on another call.

Steve Rogers

I understand.

Ross Nussbaum – UBS

But in Texas Teachers, you've got two years left. A little less than two years left to invest your Texas Retirement. I don't want to confuse them.

It would seem to me that the probability of your being able to put $750 million out the door in the next two years is probably somewhere between slim and none. Are they understanding of that? Or is there a discussion underway of extending the investment period?

Steve Rogers

Well, first of all, they are a great partner with whom we have dialogue often. This is like any partnership. The partners are trying to achieve a common objective of investing in high-quality assets for the $750 million. No one is listening to an alarm clock going off here. Disciplined investments and the alarm clock usually don't go well together.

So what I think we've heard from Texas is a very supportive partner who understands that Parkway is being disciplined. They understand our company very well. They're probably on this conference call right now. They read our reports. And they understand that not purchasing an asset has been 100% related to the discipline this company has not to make investments that aren't good for them and us. It has nothing to do with balance sheet considerations in this company. It has everything to do with investment criteria. And they want us to stay the course.

We have a great relationship with them. I can't speak for them, but were we to come up on a normal expiration and possibly need additional time, which I do not anticipate today, then I'm confident that Texas would act like the good partner they have been.

Ross Nussbaum – UBS

And so there's no discussion underway of an extension or a revision of the terms at this point?

Steve Rogers

None whatsoever. No.

Ross Nussbaum – UBS

Okay.

Steve Rogers

We're going to stay the course. We've still got plenty of time. I might respectfully disagree, Ross, with the slim-to-none probability. I would give it a lot higher than slim-to-none.

Ross Nussbaum – UBS

Well, it's just $750 million, given what seems to be out there right now and obviously the investment pace over the last year and understandably in a tough environment is a pretty big number.

Steve Rogers

I agree with that. I think the best way to measure us will be probably with our current activity. Because we have not made an investment in 2.5 years, because we really haven't felt like it was the right time in the cycle. Now we're out there on the playing field getting in the best. I don't think we're in the best and final for 18 months there because we didn't want to be. I mean we sort of stayed close to the game, but not really in it. Heck, we've been in the best and final on 10 deals this year.

So it's just a matter of time before things start happening and then you can probably annualize a number once you see some activity from us which right now has been zero. And I understand that, so we get it and understand why it might be this slim-to-none probability assessment. Our probability of getting there is much, much higher than that, based on what we're currently writing offers on today.

Ross Nussbaum – UBS

So in terms of funding that, then, if I look at the funding requirements in terms of your equity, it would seem logical that either there has to be increased dispositions or some common equity issuance to fund that activity. And as you think about what you've got out there in terms of best and final, should those hit in the second half of the year, how do they get funded?

Steve Rogers

I think I'd go to Page 23 and take a look at all of the funding sources and not isolate just on an equity-orientated funding source or beta liquidity, given that we have a better sales environment. Both of those are components of an overall funding plan that we've outlined with multiple sources to the company on Page 23.

Ross Nussbaum – UBS

And finally, in terms of the ATM program. What are the bankers telling you in terms of the ability to execute on that, given the liquidity in the stock? I mean take today, for example. There've been 47,000 shares traded. Is there an ability to use an ATM program with the liquidity where it is?

Steve Rogers

Absolutely. I've been here a very long time and we have used ATM-like programs in Parkway. Do the dribble program. We've executed on these type programs several times in the company's history.

Heck, I remember 20 years ago when we'd trade by appointment only 1,000 shares a day. But we've come a long way since then. We're averaging value today that's 114,000 shares. And that's ample to get the job done in Parkway.

Ross Nussbaum – UBS

Thank you.

Steve Rogers

Yes, sir.

Operator

We'll take our next question from Mitch Germain with JMP Securities.

Mitch Germain – JMP Securities

Good afternoon, guys.

Steve Rogers

Hey, Mitch.

Mitch Germain – JMP Securities

I guess just a follow-up on Sri's questions, before. What percentage below is your bid relative to the winning bid for the acquisitions you've bid on?

Steve Rogers

Usually to get into the best and final, you probably need to be within about 5% of the magic number. And so Parkway has historically been low. And at the moment, we're at peace with that. If you make enough offers, then some of the bidders aren't present for every single bid, because they might not want to be in a certain city or sized asset or rent profile or rent roll profile.

And therefore, you eventually do get to success there. This isn't a lot different than 1998 when we were bidding on things. You bid on some good things. You bid your number; you don't deviate from your discipline. And if you bid on enough of them, then you land a bunch of them or a few of them. And so we're just sort of on the cusp of that as we speak.

Jim Ingram

Yes, Mitch. This is Jim Ingram. I'll add that on the last two rounds of best and finals where Parkway was chosen, even the brokers were surprised with the final offers that they saw from the buyers. It greatly surpassed what they thought where the assets would trade. So it has been interesting to watch. In some cases, we've been 5% off the top mark. In some cases, even as much as 7 to 8%. So we're still on the playing field. We're seeing a lot of good assets. But as Steve mentioned, I think we're getting closer. So I do believe we'll make some good investments for Texas at the latter part of 2010.

Mitch Germain – JMP Securities

And Steve, what's the size – you might have answered this and I apologize, but what's the size of your pipeline today?

Steve Rogers

We traditional don't give that out, because it always sounds a lot larger and therefore meaningless to people. But it's got a "B" in front of it. And so usually people hear the B word and they think, “Oh, my gosh! Parkway's going to buy up the world.” And that's just – It’s probably a meaningless number, today. Let me just leave it at that. It's big; it's robust; we're active. The actual number probably wouldn't – I don't think would help anyone gain insight into where we are.

Mitch Germain – JMP Securities

And then the final question. Are there any assets right now in your portfolio that are currently being marketed for sale?

Steve Rogers

There are. And we have one non-core asset in Houston, Texas that is being marketed for sale. And we'll sort of be able to report to you hopefully on it in the next quarter.

Mitch Germain – JMP Securities

Okay.

Operator

And we'll take our next question from Dan Donlan with Janney Capital Markets.

Dan Donlan – Janney Capital Markets

Thank you. I'm sorry if I missed it. Did you guys talk about the unsecured term loan and what your plans are there for refinancing that?

Steve Rogers

The line of credit?

Dan Donlan – Janney Capital Markets

Well, I said the term limits. That’s probably the line of credit, I guess.

Steve Rogers

Well, the term loan is a part of the overall unsecured line of credit package that we refer to. So that would be a part of the overall renewal process. So I'd point back to the same commentary we had earlier in the call.

Dan Donlan – Janney Capital Markets

Okay. And then did you give a range as to where you think the line of credit could go?

Steve Rogers

We did not.

Dan Donlan – Janney Capital Markets

Are you willing to?

Steve Rogers

Give us a quarter. We're right in the thick of this thing with the bank line. It's going very well. We're going to be fine. Give us a quarter.

Dan Donlan – Janney Capital Markets

Understood. Thank you.

Steve Rogers

Yes, sir. Well, operator, there don't appear to be any other questions. Are there from your perspective?

Operator

There are no further questions at this time.

Steve Rogers

Well, thank you very much for your time today. And let us get back and focus on getting some more leasing investments and financing activity done. We appreciate your following. Good day, now.

Operator

This does conclude today's conference call. We thank you for your participation.

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Source: Parkway Properties Inc. Q2 2010 Earnings Call Transcript
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