Behind the Parkway-CALSTRS Deal
Parkway Properties and The California State Teachers' Retirement System made one of the biggest deals in the Austin CBD this year when they unwound a JV that changed the ownership of five of Austin’s high-profile downtown buildings. It's one reason we’re excited to bring you the Next Big Thing event focusing on Austin’s downtown on Dec. 17 (8am start) at the Hyatt Regency Austin.
Parkway Properties VP and managing director Mike Fransen (here with his family) tells us since acquiring initial interest in the Austin portfolio as part of the merger with Thomas Properties Group in December 2013, Parkway has completed 373k SF of leasing at these five assets (San Jacinto Center, One Congress Plaza, Frost Bank Tower, 300 West 6th Street and One American Center) at some of the highest rental rates in Parkway's portfolio. As part of the deal with CALSTRS, the two parties essentially sold each other its shares in the various assets: Parkway takes over full ownership of San Jacinto Center and One Congress Plaza (totaling 926k SF, which is 81% leased) and CALSTRS will have full ownership of Frost Bank Tower, 300 West 6th Street and One American Center.
Parkway’s strategy is to maximize an asset’s value, simplifying ownership and decision-making and improve the bottom line for both tenants and the asset, Mike tells us. Parkway was able to extract the value created in 2014 and streamline the platform with full control of the two assets. Mike says the company is bullish on Austin and the CBD, in particular, and is always looking for opportunities. Downtown’s appeal is varied from good proximity to the workforce to its appeal to the creative class. Tech groups, for example, like downtown for its live, work, play atmosphere.
Parkway, as a whole, is primarily focused on the Sun Belt region from Florida to Phoenix, Mike (left, with with colleagues Mark Miller and Andy Smith) tells us with an eye on the markets with the most job growth and Austin fits that profile extremely well. The firm identifies a handful of submarkets (like the Austin CBD) that outperform within those markets. The Thomas Properties transaction gave Parkway a big entry into the market, he tells us. “Part of our strength is our operational platform and with that scale, we could make it happen,” Mike says. Growing up in Southern Oregon and spending his summers in Colorado, Mike likes to appease his mountain withdrawals from time to time with his wife and daughters. Save your spot at the Next Big Thing event focusing on Austin’s downtown on Dec. 17 (8am start) at the Hyatt Regency Austin by buying your tickets here.