Cousins-Parkway Merger Closes, Though Parkway Lives On

By Scott Baltic, Contributing Editor

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

Atlanta and Orlando—In what must have been quite the flurry of closing activity late last week, Cousins Properties Inc. completed its $2 billion-plus merger with Parkway Properties Inc., though the deal has by no means meant the end of Parkway, which re-emerged almost immediately as a significantly changed entity.

The merger, announced in late April, seems to have closed on schedule after stockholder approvals were obtained on Aug. 23. The completion of the spin-off appears to have taken place the following day.

Per the terms of the merger agreement, Parkway stockholders were to receive, for each share of Parkway common stock or limited voting stock held, 1.63 shares of Cousins common stock or limited voting preferred stock, respectively.

The “New Parkway”, a/k/a Parkway Inc., is a self-managed office REIT focused on assets in Houston. Its portfolio consists of five Class A office assets totaling 19 buildings and roughly 8.7 million rentable square feet in the Greenway, Galleria and Westchase submarkets.

The largest asset is Greenway Plaza, a 10-building, 4.4 million-square-foot, master-planned, mixed-use property formerly owned by Cousins. The development’s amenities include fine dining options, a recently renovated underground food court with more than 16 vendors, multiple fitness facilities, three full-service banking centers and conference facilities.

Parkway’s biggest contribution was CityWestPlace in West Houston, a fully leased four-building, 35-acre campus totaling 1.5 million square feet. Amenities there include three first-class restaurants, conference facilities, an auto repair center, an on-campus dentist, a hair salon and dry cleaning. Newly renovated fitness centers are supplemented by a track, sand volleyball court, basketball court, putting green, horseshoe pit, and bocce ball court.

New Parkway will offer fee-based real estate services through wholly owned subsidiaries, which in total will manage or lease about 2.7 million square feet, primarily for third-party owners. Parkway shares will be traded on the NYSE under the symbol PKY.

The spin-off was handled through a special dividend to all Cousins stockholders, including legacy Parkway stockholders, prior to the market open on last Friday, Oct. 7.

In a statement a few days after the merger was announced, Moody’s said it was placing Parkway, then rated Baa3, on review for downgrade, possibly of more than one notch. The rating agency expressed concern that “Although Parkway will be part of a larger, more diversified office REIT focused on high-growth Sunbelt markets, we expect secured leverage will increase significantly as Cousins relies on a secured funding model.”

Cousins now has stronger holdings in Atlanta, an ample presence in Charlotte and Austin, and, for the first time, assets in Florida (Tampa, Orlando and Miami) and metro Phoenix.