Canada Pension Plan Investment Board (CPPIB) has entered into an agreement to acquire the entire portfolio of a Houston-based real estate investment trust. The US $1.2 billion (CAD $1.56 billion) deal for Parkway REIT equates to US $23.05 (CAD $29.97) per share and will add 19 properties encompassing approximately 8.7 million square feet to CPPIB’s real estate holdings.
“Through this investment, CPPIB gains additional scale in Houston. Parkway fits with CPPIB’s long-term real estate strategy to hold stable, high-quality assets in large U.S. markets,” says Hillary Spann, managing director and head of U.S. real estate investments with CPPIB.
This includes Greenway Plaza, an 11-building, mixed-use developed on a 52-acre site boasting nearly 5 million square feet of office space. Other properties are located in Houston’s Westchase district and neighbouring Galleria, both which are popular business, retail and residential areas. As of March 31, the Parkway REIT portfolio was nearly 88 per cent leased.
“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,” observes James Heistand, Parkway’s president and chief executive officer.
The transaction is not subject to financing conditions and is expected to close, subject to stockholders’ approval, in the fourth quarter of 2017.