Canada Pension Plan Investment Board and Parkway Inc. recently revealed that they have entered into a definitive agreement under which CPPIB will acquire 100% of Parkway, a Houston-based real estate investment trust, for $1.2 billion, or $23.05 per share. The transaction is not subject to a financing condition and is expected to close in the fourth quarter of 2017, subject to customary closing conditions, including approval by Parkway’s stockholders.
The $23.05 per share consideration, which consists of $19.05 per share plus a $4.00 special dividend to be paid prior to closing, represents a premium of approximately 14.3% when compared to Parkway’s 30-day volume weighted average price ended June 29, 2017 and a premium of approximately 13.1% when compared to the prior closing price. Parkway’s board of directors unanimously approved the agreement. TPG Capital and its affiliates, which collectively own approximately 9.8% of the outstanding common stock of Parkway, have agreed to vote in favor of the transaction.
According to a prepared statement, Parkway will pay its previously announced second quarter dividend on June 30, 2017, but will suspend all future quarterly dividend payments through the expected close of the transaction.
“Parkway fits well with CPPIB’s long-term real estate strategy to hold stable, high-quality assets in large U.S. markets,” says Hilary Spann, Managing Director, Head of U.S. Real Estate Investments, CPPIB. “Through this investment, CPPIB gains additional scale in Houston.”
Parkway owns the largest office portfolio in Houston, totaling approximately 8.7 million square feet across 19 properties. Located in the desirable areas of Westchase, Greenway and Galleria, the high-quality office properties are 87.6% leased as of March 31, 2017, and anchored by a broad mix of strong tenants in financial services, technology and commodities businesses.
“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,” stated James R. Heistand, Parkway’s President and Chief Executive Officer. “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.”
HFF Securities LP acted as financial advisor to Parkway, and Hogan Lovells US LLP served as Parkway’s legal counsel.