TORONTO AND HOUSTON — Canada Pension Plan Investment Board (CPPIB) and Parkway Inc. (NYSE: PKY) have entered into a definitive agreement under which CPPIB will acquire Parkway, a Houston-based real estate investment trust, for $1.2 billion. The transaction, expected to close in the fourth quarter of this year, equates to $23.05 per share.
Parkway owns the largest office portfolio in Houston, according to CPPIB. Located in the Westchase, Greenway and Galleria submarkets, the 19 properties span approximately 8.7 million square feet and were 87 percent leased as of March. Financial services, technology and commodities tenants anchor the buildings.
TPG Capital and its affiliates, which collectively own approximately 10 percent of the outstanding common stock of Parkway, have agreed to vote in favor of the transaction. Parkway will pay its previously announced second quarter dividend today, but will suspend all future quarterly dividend payments through the expected close of the transaction.
“We believe there are still some near-term headwinds in the office sector for Houston, but the implied asset valuation of this transaction shows CPPIB’s appreciation for the high-quality portfolio we have assembled and the near-term stability it provides during the current downturn in the market,” says James R. Heistand, president and CEO of Parkway.
HFF Securities LP served as financial advisor to Parkway, and Hogan Lovells US LLP served as Parkway’s legal counsel.
Toronto-based CPPIB is an investment management organization that invests in public and private equities, real estate, infrastructure and fixed-income instruments. It is governed and managed independently of the Canada Pension Plan (CPP). As of the end of March, the CPP Fund totaled $316.7 billion CA, or $243.8 billion USD.
Parkway is the result of a merger between Cousins Properties and Parkway Properties and spinoff of their Houston assets announced in May of last year. Parkway’s stock price closed at $20.38 per share on Thursday, June 29, up from $16.33 per share one year ago.
— Kristin Hiller