Parkway, Inc. (NYSE: PKY) said June 30 it has agreed to be sold to the Canada Pension Plan Investment Board (CPPIB) for $1.2 billion.
Parkway’s portfolio consists of the Houston-based assets that were spun off into a new REIT following the 2016 merger between Cousins Properties Inc. (NYSE: CUZ) and Parkway Properties, Inc.
The terms of the deal state that Parkway shareholders will receive $23.05 per share, a premium of approximately 13 percent on the previous day’s closing price. The transaction is expected to close in the fourth quarter of 2017.
James Heistand, president and CEO of Parkway, said CPPIB shares Parkway’s view of the long-term resiliency of the Houston market.
“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,” Heistand said.
Hilary Spann, managing director and head of U.S. real estate investments at CPPIB, said Parkway fits well with CPPIB’s long-term real estate strategy to hold stable, high-quality assets in large U.S. markets. The deal will enable CPPIB to gain additional scale in Houston, she noted.
Meanwhile, Mizuho Securities managing director Richard Anderson said the timing of the sale was sooner than many had expected. Nonetheless, he added, “we think the purchase price should be viewed as a good one,” given the continued challenges facing the Houston office market.
John Guinee, managing director at Stifel Nicolaus, observed that CPPIB “offered a valuation today that Parkway may not have been able to attain for several years, as the Houston market slowly recovered.”
Guinee added that any recovery in the Houston office market is likely to be even more delayed, given the 15.5 percent drop in the price of crude oil since the beginning of the year.