HOUSTON — Canada Pension Plan Investment Board (CPPIB) has completed its $1.2 billion acquisition of Parkway Inc., a major owner of office properties in Houston. The transaction, which closed last week, gives CPPIB control of a large, diversified portfolio of office buildings across the city.
The Parkway portfolio encompasses approximately 8.7 million square feet of office space in Houston. Key assets include the 1.3 million-square-foot Post Oak Central, the 627,000-square-foot Phoenix Tower, the 980,000-square-foot San Felipe Plaza, the 1.5 million-square-foot CityWest Place in the Westchase area, and the 4.4 million-square-foot Greenway Plaza complex.
Parkway Inc. was a Houston-focused company, with all of its holdings located within the metropolitan area. The company was formed following a merger between Cousins Properties and Parkway, which consolidated a substantial amount of local office real estate under a single, locally concentrated platform.
The roots of that consolidation date to the sharp oil price decline that began in mid-2014. Oil fell from about $107 per barrel in June 2014 to under $30 per barrel by early 2016, triggering layoffs and cost-cutting across Houston’s energy sector. As energy firms reduced staff and downsized office footprints, vacancy rates in the city’s office market rose sharply. Publicly traded firms with large Houston exposures faced investor pressure and critical analyst commentary. In response, Cousins and Parkway combined their Houston assets, placing them into the newly formed Parkway Inc.
Since then, oil markets have stabilized and Houston’s office market has shown signs of gradual recovery. Although vacancy rates remain elevated and leasing activity is still rebuilding, market fundamentals have improved from the trough.
CPPIB had previously acquired an interest in Greenway Plaza, the centerpiece of Parkway’s holdings. With this latest $1.2 billion purchase, the pension fund now owns the remainder of Parkway’s portfolio and becomes one of the largest single owners of office space in Houston.
Headquartered in Toronto, CPPIB operates globally with offices in Hong Kong, London, Luxembourg, Mumbai, New York, São Paulo and Sydney. It is governed and managed independently from the Canada Pension Plan and operates at arm’s length from government.