Parkway, Inc. (NYSE: PKY) announced today that it has reached an agreement to sell a 49.0% interest in Greenway Plaza and Phoenix Tower for $512.1 million, or an implied $210 per square foot. Parkway's Greenway Portfolio is an approximately 5.0 million square foot campus consisting of 11 office properties located in the Greenway submarket of Houston, Texas.
"The recapitalization of our Greenway Portfolio accomplishes several objectives for Parkway," stated James R. Heistand, President and Chief Executive Officer of Parkway, Inc. ("Parkway"). "First, we have established a great partnership with three well-capitalized and highly regarded institutional investors that share our view of the long-term resiliency of the Houston market and the expectation of an eventual recovery in Houston office fundamentals. Second, this transaction helps to mitigate risk in a single office campus that represents 57% of our Company's overall square footage. And finally, 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 has agreed to form a joint venture with affiliates of TH Real Estate, Silverpeak Real Estate Partners ("Silverpeak") and Canada Pension Plan Investment Board ("CPPIB"), with Parkway retaining a 51% interest, a partnership between TH Real Estate and Silverpeak acquiring a 24.5% interest, and CPPIB acquiring a 24.5% interest in the Greenway Portfolio. Parkway will serve as general partner and also will provide property management and leasing services for the joint venture. The joint venture expects to assume the existing mortgage debt secured by Phoenix Tower, which has an outstanding balance of approximately $76.2 million and matures on March 1, 2023. Additionally, the joint venture received a signed commitment letter from Goldman Sachs for a new 5-year mortgage loan totaling $465.0 million secured by the other properties in the Greenway Portfolio, which is expected to close concurrently with the closing of the joint venture, subject to customary closing conditions and contingent on satisfying the conditions set forth in the commitment. At closing, Parkway intends to terminate its existing revolver and term loan credit facility and prepay the $350.0 million outstanding balance using proceeds from the joint venture.
Net proceeds to Parkway are expected to be approximately $315.8 million, which includes the new debt placement and the assumed payoff of Parkway's $350.0 million existing term loan at closing. Parkway's net proceeds also will be net of credits to the other joint venture partners related to outstanding contractual lease obligations for tenant improvements and rent concessions as well as certain capital expenditures for projects that are in process, all of which totals approximately $38.0 million as of the date of execution of the agreement. Additionally, Parkway expects to record an impairment loss of approximately $25.0 million in the first quarter of 2017 related to the joint venture transaction. Parkway expects the closing of the joint venture and associated financing to occur in the second quarter of 2017, subject to customary closing conditions.
About Parkway
Parkway is an independent, publicly traded, self-managed real estate investment trust that owns and operates high-quality office properties located in attractive submarkets in Houston, Texas. As of December 31, 2016, our 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.
