Canada Pension Plan Investment Board and Parkway, Inc. (NYSE: PKY) announced today that they have entered into a definitive agreement under which CPPIB will acquire 100% of Parkway, a Houston-based real estate investment trust, for US$1.2 billion, or US$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 US$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. 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," said 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, totalling 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 L.P. acted as financial advisor to Parkway, and Hogan Lovells US LLP served as Parkway's legal counsel.
About Canada Pension Plan Investment Board
Canada Pension Plan Investment Board (CPPIB) is a professional investment management organization that invests the funds not needed by the Canada Pension Plan (CPP) to pay current benefits on behalf of 20 million contributors and beneficiaries. In order to build a diversified portfolio of CPP assets, CPPIB invests in public equities, private equities, real estate, infrastructure and fixed income instruments. Headquartered in Toronto, with offices in Hong Kong, London, Luxembourg, Mumbai, New York City, São Paulo and Sydney, CPPIB is governed and managed independently of the Canada Pension Plan and at arm's length from governments. At March 31, 2017, the CPP Fund totalled C$316.7 billion. For more information about CPPIB, please visit www.cppib.com or follow us on LinkedIn or Twitter.
Parkway, Inc. 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 March 31, 2017, our portfolio consists 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.