HOUSTON — Parkway Properties (NYSE: PKY), a Houston-based REIT, has agreed to sell 49 percent interest in Greenway Plaza and Phoenix Tower, two Class A office properties in the Greenway submarket of Houston, for $512.1 million.
Ownership of the two properties will now be a joint venture between Parkway, TH Real Estate, Silverpeak Real Estate Partners and Canada Pension Plan Investment Board. Parkway will retain a 51 percent majority interest in the portfolio, with TH Real Estate and Silverpeak sharing a 24.5 percent interest, and Canada Pension Plan Investment Board owning the remaining 24.5 percent.
Greenway Plaza is a 52-acre, master-planned, mixed-use development featuring 11 buildings totaling approximately 4.9 million square feet of office space as its focal point. On-site amenities include a full-service restaurant, an underground food court with 16 restaurants, multiple fitness facilities, three full-service banking centers and conference facilities.
Although Phoenix Tower is technically a separate property, it’s located immediately adjacent to Greenway Plaza. The 34-story building totals 665,332 square feet and was built in 1984. Amenities include an on-site deli and a Jack Nicklaus-designed, nine-hole putting green.
“This transaction helps to mitigate risk in a single office campus that represents 57 percent of our company’s overall square footage,” says James Heistand, president and CEO of Parkway. “With approximately $315.8 million of expected net proceeds to Parkway, this joint venture will supply us with additional capital to immediately strengthen our balance sheet, while providing us the flexibility to further diversify the portfolio through future acquisitions as the Houston market recovers.”
Parkway will serve as general partner and provide property management and leasing services for the joint venture. The new ownership venture will take on the existing mortgage debt against Phoenix Tower, which has an outstanding balance of approximately $76.2 million and matures on March 1, 2023.
Additionally, the joint venture received a commitment letter from Goldman Sachs for a five-year mortgage loan totaling $465 million. At closing, Parkway intends to terminate its existing revolver and term loan credit facility and prepay the $350 million outstanding balance using proceeds from the disposition.
Parkway expects the closing of the joint venture and associated financing to occur in the second quarter of 2017, subject to customary closing conditions.
Parkway was a spin-off of Cousins Properties’ Houston office portfolio, which was completed in October 2016. As of the end of 2016, Parkway’s portfolio consisted of five Class A assets comprising 19 buildings and totaling approximately 8.7 million rentable square feet in the Greenway, Galleria and Westchase submarkets of Houston.
Parkway’s stock price closed at $21.58 per share on Friday, Feb. 17, down from $22.27 one month ago.
— Jeff Shaw