Parkway Properties, Inc. Announces Purchase of Chicago Property

JACKSON, Miss., July 11 /PRNewswire-FirstCall/ -- Parkway Properties, Inc. today announced the closing of the previously announced fee simple purchase of One Illinois Center, a 1,003,000 square-foot office building with an attached four-level structured parking garage located at 111 East Wacker Drive in the East Loop sub-market of Chicago. The property was acquired for $198 million plus closing costs and transfer taxes of approximately $1.6 million, anticipated building improvements of $3.7 million and projected leasing costs of $12.1 million during the first two years of ownership, for a total purchase price of $215.4 million, or $215 per rentable square foot ("RSF"). The purchase price represents an estimated 23% discount to current estimated replacement cost of $280 RSF. The property is expected to produce an initial unleveraged yield or going-in cash capitalization rate of approximately 6.3% in the first twelve months of operations, calculated using first year estimated net operating income of $13.5 million and the total purchase price of $215.4 million.

The purchase was funded by a $148.5 million non-recourse first mortgage at a fixed interest rate of 6.29% with interest only payments for five years and a 10-year maturity. Additional purchase funding was provided by a $33.7 million mezzanine loan with a six-month term at an interest rate of LIBOR plus 130 basis points (current rate set at 6.65%), proceeds from the recent sale of Viad Corporate Center in Phoenix and amounts drawn under existing lines of credit.

The Company has engaged Wachovia Securities to market the property, combined with the Company's Two Illinois Center property located at 233 North Michigan Avenue, as a single joint venture. Parkway expects to retain an ownership interest of approximately 25% and to close the joint venture in late 2006. Proceeds from the formation of the joint venture will be used to reduce amounts outstanding under bank lines of credit.

Additional information about One Illinois Center is available in the Company's April 28, 2006 press release of the signing of an agreement to acquire the property. The Company included this anticipated purchase in earnings guidance given in May 2006.

Steven G. Rogers, President and Chief Executive Officer, stated, "We are pleased to join 111 East Wacker with its adjacent partner building, 233 North Michigan Avenue. These assets total over 2 million square feet in a great location in the improving Chicago CBD. The combined cash NOI for these two properties of approximately $32 million represents a diverse rent roll of long term credit customers, making this investment a very attractive opportunity for Parkway and potential co-investors. I am happy to announce that Jay Buckley, Senior Vice President, recently relocated to Chicago to lead our well-established operating team at 233 North Michigan and our new team at 111 East Wacker."

Parkway Properties, Inc., a member of the S&P Small Cap 600 Index, is a self-administered real estate investment trust specializing in the operation, acquisition, ownership, management, and leasing of office properties. The Company is geographically focused on the Southeastern and Southwestern United States and Chicago. Parkway owns or has an interest in 68 office properties located in 11 states with an aggregate of approximately 12,937,000 square feet of leasable space as of July 11, 2006. The Company also offers fee-based real estate services through its wholly owned subsidiary, Parkway Realty Services, to its owned properties and to its third party and minority interest properties.

NOTICE OF ONE ILLINOIS CENTER BUILDING TOUR

Parkway will conduct a Chicago building tour and information exchange for analysts and investors on September 14, 2006. Please contact Will Flatt at (800) 748-1667 for more information.

Parkway Properties, Inc.'s press releases and additional information about the Company are available at http://www.pky.com/.

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

CONTACT: STEVEN G. ROGERS

PRESIDENT & CHIEF EXECUTIVE OFFICER WILLIAM R. FLATT CHIEF FINANCIAL OFFICER (601) 948-4091