Cousins, Parkway Bank on Sun Belt

By Paul Rosta

Cousins Properties’ 1.4 million-square-foot Post Oak Central complex in Houston would become part of a new REIT as part of a merger agreement with Parkway Properties.

Moving to expand their Sun Belt footprint and consolidate their holdings in hard-hit Houston, Cousins Properties Inc. and Parkway Properties Inc. struck a deal to merge while spinning off their Houston assets into a separate REIT, the companies announced on Friday.

Cousins would gain Parkway’s assets outside of Houston and continue to be led by Larry Gellerstedt, the company’s president & CEO. Expected to close during the fourth quarter, the proposed stock-for-stock deal and REIT spinoff would create a portfolio comprising 41 properties and totaling 15.8 million feet. Cousins shareholders will own 52 percent of the company and of the Houston spinoff; Parkway investors would own the remaining 48 percent, the companies said.

Larry Gellerstedt, Cousins president & CEO

“We firmly believe our shareholders will benefit by having an expanded portfolio of office towers in key urban submarkets, greater tenant and geographic diversity and enhanced access to the capital markets,” Gellerstedt explained in the statement announcing the deal.

Atlanta would continue to anchor Cousins’ portfolio, accounting for 49 percent of its assets, up slightly from 44 today. After Atlanta, the second largest share of Cousins’ portfolio would be Charlotte, N.C. (16 percent), Austin, Texas (12 percent) and Tampa, Fla. (11 percent).

Cousins Properties would gain Tempe Gateway in Tempe, Ariz., as part of its proposed merger with Parkway Properties.

By acquiring most of Parkway’s assets, Cousins would gain a presence in three major Florida markets—Orlando, Tampa and Miami—for the first time, and would also establish a footprint in Phoenix. The two REITs have several markets in common, including Atlanta, Austin, Texas, Charlotte, N.C., and Houston. Parkway’s portfolio also includes assets in Houston, Austin, Texas, Jacksonville, Fla., Atlanta, Charlotte, N.C., and Philadelphia.

Cousins Properties would gain Tempe Gateway in Tempe, Ariz., as part of its proposed merger with Parkway Properties.

A centerpiece of the deal is the plan for both companies to combine their holdings in Houston’s office market, which has been hit hard by the slumping energy sector. The Houston assets would be moved into a 19-building, 8.7 million-square-foot public REIT with the working name HoustonCo. Led by Jim Heistand, Parkway’s CEO, the new entity would benefit from the quality of the properties and economies of scale, the executives said in a presentation on Friday morning.

HoustonCo would consist of three properties contributed by Parkway and two owned by Cousins. Largest among them is Greenway Plaza, a 10-building, 4.4 million-square-foot complex owned by Cousins about five miles southwest of downtown Houston. Parkway’s largest Houston property is CityWestPlace, which consists of four buildings developed between 1993 and 2001 and totaling 1.5 million square feet.