TORONTO and HOUSTON—The Canada Pension Plan Investment Board said Friday it would acquire Houston office REIT Parkway Inc. for $1.2 billion, or $23.05 per share. The announcement comes two days after CPPIB and Encino Energy announced a venture to acquire US oil and gas assets, thereby broadening CPPIB's reach into the energy sector, a key source of office-using employment in Houston.
“Parkway fits well with CPPIB's long-term real estate strategy to hold stable, high-quality assets in large US markets,” says Hilary Spann, managing director and head of US real estate investments at CPPIB. “Through this investment, CPPIB gains additional scale in Houston.”
A spinoff from the 2016 merger of Cousins Properties and Parkway Properties, Parkway Inc. owns what reportedly is the largest office portfolio in Houston, totaling approximately 8.7 million square feet across 19 properties. The portfolio was 87.6% leased as of March 31.
The acquisition marks CPPIB's second recent investment in Parkway. In April, GlobeSt.com reported that Parkway had sold a 49% interest in Greenway Plaza and Phoenix Tower, which comprise the Greenway Portfolio, to CPPIB, TH Real Estate and Silverpeak Real Estate Partners. The deal valued the 11-building Greenway Portfolio at $1.045 billion.
'CPPIB shares our view of the long-term resiliency of the Houston market, and we believe this transaction demonstrates our commitment to enhancing stockholder value,” says James R. Heistand, Parkway's president and CEO, regarding the investment board's acquisition of the company. “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.”
The transaction is not subject to a financing condition. It's expected to close in the fourth quarter, of 2017, subject to approval by Parkway's stockholders. The REIT was advised by HFF Securities LP as financial advisor and by Hogan Lovells US LLP legal counsel.
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Paul Bubny
Paul Bubny is managing editor of Real Estate Forum and GlobeSt.com. He has been reporting on business since 1988 and on commercial real estate since 2007. He is based at ALM Real Estate Media Group's offices in New York City.
