HOUSTON – In a deal that may represent a turnaround milestone for Houston’s office market, Parkway Inc. has agreed to sell a 49 percent stake in its Greenway office portfolio for $512 million or $210 per SF.
The deal represents one of the largest investments in years in Houston, which has been at the bottom of the menu for institutional-quality office building buying. Only a handful of sales have been completed since a shakeout in the energy industry crushed the Houston office market a few years ago.
What’s being sold by Parkway is a stake in a 5 million-SF, 11-building office campus near Buffalo Speedway and the Southwest Freeway in Houston’s Inner Loop. It includes the 10-building Greenway Plaza development and the adjacent 630,000-SF Phoenix Tower. Greenway is one of the strongest submarkets in Houston right now.
Parkway, a REIT based in Orlando although every single one of its holdings are in Houston, was formed last year as the result of a merger involving Cousins Properties.
Three institutional investors – affiliates of TH Real Estate, Silverpeak Real Estate Partners and Canada Pension Plan Investment Board – are buying the 49 percent stake in Greenway.
Investors have been eyeing the Houston office market recently.
Real estate broker Lucian Bukowski, executive vice president in the Houston office of CBRE says he has been approached by a number of Houston-focused investors recently. “They are trying to figure out if now in the time to buy. They already have the equity raised,” Bukowski says. He says the would-be investors typically ask: “Has it bottomed out? Has the price-per-pound gotten cheap enough I can buy something and wait three to five years for the recovery?”
Parkway CEO Jim Heistand says the Greenway sale gives Parkway a chance to diversify a bit. Parkway owns a total of 8.7 million SF. So Greenway amounts to 57 percent of its total holdings. So selling half of Greenway takes some of Parkway’s chips off the Houston table.
But is something even more monumental happening in the Houston market?
Does the Greenway deal mean that the drought is over and institutions will start buying in Houston again? It’s easy to understand the investment narrative – buy low and sell high. And certainly Houston’s office market is in an ugly, low trough right now. However, institutions, pension funds and the like aren’t known for being big risk-takers. Greenway is a blue-chip purchase for institutional buyers – not so risky compared to some of Houston’s rougher submarkets.
The Greenway deal does not mean herds of institutional buyers are going to suddenly descend on a beat-up submarket like the Energy Corridor looking for deals any time soon.
But the time may be right for the entrepreneurial, risk-taking investors and other forward-looking investors – to come back to Houston. When the Greenway transaction was announced Friday evening, maybe that was the sign that many have been waiting for. Maybe the tide just turned.
By Ralph Bivins, Editor, of Realty News Report, a Texas-based publication.
Feb 22, 2017 Realty News Report Copyright 2017