CPPIB to buy Parkway for $1.2bn

The Canadian pension is taking the Houston-based REIT private after doing a portfolio-level deal with the company earlier this year.

The Canada Pension Plan Investment Board is purchasing a Houston-based office real estate investment trust in a $1.2 billion deal, the Toronto-based pension system said Friday.

CPPIB is buying Parkway, which owns 19 properties in Houston, in a deal expected to close in the fourth quarter. Parkway’s entire 8.7 million square foot portfolio was 88 percent leased as of March 31, according to Friday’s statement.

Earlier this year, CPPIB teamed up with two private equity real estate firms, TH Real Estate and Silverpeak, to purchase minority stakes in a Parkway-owned Houston office portfolio, PERE previously reported. The February deal saw CPPIB acquire a 24.5 percent interest in the Greenway Portfolio for $141 million, which comprises 4.9 million square feet across 11 office buildings.

“Parkway fits well with CPPIB's long-term real estate strategy to hold stable, high-quality assets in large US markets,” said Hilary Spann, CPPIB’s head of US real estate investments. “Through this investment, CPPIB gains additional scale in Houston.”

Alternative investment manager TPG purchased a 43 percent stake in Parkway in 2012 for $200 million, according to a statement at the time. The Fort Worth, Texas-based company is selling its interest, which now comprises about 10 percent of the REIT’s stock, as part of the CPPIB take-private deal. A spokeswoman for TPG declined to comment.

HFF Securities acted as the advisor on the deal.

CPPIB has also invested in Houston through its October 2015 purchase of a 10.6 percent stake in an industrial portfolio owned by Global Logistic Properties. The portfolio includes seven Houston-area industrial properties.

“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,” James Heistand, Parkway’s chief executive, said in Friday’s statement.

CPPIB’s real estate portfolio, which comprised 12.6 percent of its overall C$316.7 billion ($234.5 billion; €208.6 billion) in assets, returned 8.3 percent in the fiscal year ending March 31, compared with 12.3 percent in the 2016 fiscal year, PERE previously reported.