Cousins (NYSE: CUZ) announced in April it will buy Parkway (NYSE: PKY) in a $2 billion-plus deal that allows Cousins to exit a Houston office market weakened by the downturn in oil prices. The companies’ combined Houston portfolios are being spun off into a separate publicly-traded real estate investment trust.
Atlanta-based Cousins and Orlando, Florida-based Parkway both own substantial assets in Austin. Cousins has been an active developer here for years and most recently completed Research Park Plaza V, which ABJ wrote about earlier this year. Cousins also built Colorado Tower in downtown Austin, which delivered in late 2014.
Parkway has seen major changes over the past couple of years as it divided its significant downtown assets with former partner California State Teachers Retirement Systems. The divorce of those two entities occurred in late 2014 with Parkway maintaining control of 98 San Jacinto and 111 Congress Ave., which it rebranded as One Eleven.
Cousins currently owns one other notable Austin asset: 816 Congress Ave., a 20-story office tower. The company probably is most famous for the development of the iconic Frost Bank Tower, which it completed in 2003, at 401 Congress Ave.
The merger will deepen Cousins’ presence in Atlanta, Austin and Charlotte and give it a strong presence in Phoenix, Orlando and Tampa. The company’s portfolio will expand to 41 properties comprising 15.8 million square feet. Cousins will remain headquartered in Atlanta and continue to be led by President and CEO Larry Gellerstedt and the company’s existing senior management team.
Speaking to analysts July 27, Gellerstedt offered three rationales for the deal.
“First, we are expanding our trophy office portfolio in six of the leading growth markets of the Sun Belt,” he said. “Importantly, 81 percent of our assets will be located the best urban submarkets which have historically outperformed the broader MSA office market in each city. Also interesting to note, not a single asset in the new Cousins portfolio will be surface parked, and the average age of our portfolio will improve by approximately 8 years. By way of these metrics, no other portfolio in the Sun Belt offers this type of scale and quality in the most desirable urban locations.”