Fort Worth, Texas-based global private equity firm TPG Capital has acquired a 43 percent stake in Parkway Properties, an Orlando-based real estate investment trust, for $200 million. As a result of its investment, TPG will have four of its executives sit on Parkway’s board of directors.
Under the terms of the deal, Parkway has issued 4.3 million shares, or approximately $48.4 million, of common stock and approximately 13.5 million shares, with an initial liquidation value of $151.6 million, of newly-created, non-voting cumulative redeemable convertible preferred stock to TPG. That brings the private equity firm’s ownership stake in Parkway to approximately 43 percent on an as-converted basis.
Jim Heistand, Parkway’s president and chief executive officer, said in a statement: “We are pleased to have completed these important steps in the evolution of Parkway as we continue to position ourselves for long-term growth. With TPG’s financial commitment and strategic partnership, we will continue to take advantage of attractive opportunities as we strive to become one of the leading owners of high-quality office properties in select submarkets throughout the fast-growing Sunbelt region.”
As a result of the investment by TPG, Parkway’s board has accepted the resignations of existing board members Daniel Friedman, Michael Lipsey, Leland Speed and Troy Stovall. TPG has replaced those board members with partners Kelvin Davis and Avi Banyasz, as well as senior advisor Adam Metz. The firm also will appoint a fourth director in the near future.
Banyasz said: “Parkway's high-quality office portfolio, which is concentrated in attractive Sunbelt markets, provides a unique investment opportunity.”
Parkway has used the capital from TPG to help finance its acquisition of the Hearst Tower, a 972,000-square-foot office tower located in the central business district of Charlotte, for $250 million. “Hearst Tower is a great example of the type of investments Parkway's talented management team will seek to identify and secure in the future,” Banyasz added.
This investment from TPG follows the firm’s increased activity in the real estate space. The buyout giant spent the bulk of 2011 building up its real estate team, hiring executives from such real estate giants as Morgan Stanley, Westbrook Partners and General Growth Properties. In January of this year, it was revealed that TPG planned to acquire Flagler, a Coral Gables, Florida-based private REIT, from New York-based private equity firm Fortress Investment Group for $1.2 billion.