PARKWAY, INC. (NYSE:PKY) Files An 8-K Entry into a Material Definitive Agreement
Item1.01. Entry into a Material Definitive Agreement
Greenway Joint Venture Agreement
On April17, 2017, Parkway, Inc. (the Company), through its
subsidiaries, entered into a joint venture agreement with respect
to the previously announced joint venture for its Greenway Plaza
and Phoenix Tower properties (together, the Greenway Properties).
This agreement the Amended and Restated Limited Partnership
Agreement (the Joint Venture Agreement) of GWP JV Limited
Partnership (the Joint Venture), dated April17, 2017, with an
affiliate of Canada Pension Plan Investment Board (CPPIB) and an
entity controlled by TH Real Estate Global Asset Management and
Silverpeak Real Estate Partners (TIAA/SP) (CPPIB and TIAA/SP are
referred to each as an Investor and together as the Investors)
was entered into on April17, 2017 in connection with the initial
closing of the sale of an interest in the Companys Greenway
Properties to the Investors, as discussed further in Item 2.01
below. The Company, through its subsidiaries, now owns a 51%
indirect interest in the Greenway Properties (with 1% being held
by a subsidiary acting as the general partner of the Joint
Venture and 50% being held by a subsidiary acting as a limited
partner of the Joint Venture), and each of CPPIB and TIAA/SP owns
a 24.5% indirect interest in the Greenway Properties as a limited
partner of the Joint Venture.
The Joint Venture Agreement provides for a subsidiary of Parkway
Operating Partnership LP, the Companys operating partnership (the
Operating Partnership), to serve as general partner and be
responsible for the day-to-day business and affairs of the Joint
Venture, subject to certain major decision approval rights of the
Investors (which include, but are not limited to, liquidation or
merger of the Joint Venture, selling joint venture assets,
amendment of the Joint Venture Agreement, entry into certain
material contracts, including debt documents, making certain
expenditures and other major actions). The Investors also have
the ability to remove the Operating Partnerships subsidiary as
general partner following certain defaults by the Operating
Partnerships subsidiaries under the Joint Venture Agreement,
including, among other things, for failure to fund their portion
of capital calls in the amount of $20million or more in the
aggregate.
The Joint Venture Agreement includes provisions permitting the
general partner to make certain mandatory capital calls,
including for payment of certain approved or budgeted expenses,
together with remedies for the failure of any partner to fund its
portion of a capital call, including the right of non-defaulting
partners to fund the deficiency amount by providing an interest
bearing loan. Any capital call relating to certain liabilities
specifically retained by the Operating Partnership to the
Contribution Agreement (as defined herein) must be funded 50% by
the Operating Partnership. Distributions of available cash under
the Joint Venture Agreement generally will be made quarterly on a
pro rata basis.
The Joint Venture Agreement also provides the partners with a
right of first offer (ROFO). Under this right, each partner may
trigger an interest sale ROFO process at any time to which the
other partners may either acquire the triggering partners
interest in the Joint Venture or permit the triggering partner to
sell its interest to a third party. In addition, the Operating
Partnership, through its subsidiaries, or the Investors, acting
together, may trigger an asset sale ROFO at any time to which the
general partner of the joint venture must pursue a sale of all or
substantially all of the Joint Ventures assets for not less than
a specified amount based on a third-party valuation. An Investor
acting alone may not trigger an asset sale ROFO until the third
anniversary of the date of the Joint Venture Agreement.
The Joint Venture Agreement also includes co-investment rights in
favor of the Investors through the third anniversary of the date
of the agreement. These co-investment rights require the Company
to permit the Investors to co-invest (in some cases, up to 49% in
the aggregate) in certain opportunities that may be pursued by
the Company or its affiliates within the greater Houston
metropolitan area (as defined in the Joint Venture Agreement).
These opportunities include the Company seeking additional
investors above certain thresholds with respect to other greater
Houston metropolitan area assets of the Company or with respect
to the Companys acquisition or financing of other commercial
office properties, office building development sites or parking
garages located in the greater Houston metropolitan area. No
Investor will have any further co-investment rights after it has
invested an aggregate of $500million (which includes its
investment in the Joint Venture).
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In connection with formation of the Joint Venture, the Joint
Venture formed GWP JV Holdings, LLC (the Subsidiary REIT) as a
subsidiary of the Joint Venture to hold the Greenway Properties,
which will elect to be taxed as a real estate investment trust
for federal income taxes purposes commencing with its taxable
year ending December31, 2017. The Joint Venture holds the
Greenway Properties indirectly through its interest in the
Subsidiary REIT. In connection with the execution of the Joint
Venture Agreement, the Operating Partnership (through its
subsidiary that serves as general partner of the Joint Venture)
and the Joint Venture entered into the Amended and Restated
Limited Liability Company Agreement of GWP JV Holdings, LLC dated
April17, 2017. This agreement provides that the Subsidiary REIT
is governed by a board of directors consisting of five directors.
The board of directors is responsible for the day-to-day business
and affairs of the Subsidiary REIT and acts by majority vote,
provided that certain major decisions (including actions that
constitute Joint Venture major decisions, as well as certain
other major actions such as sales of assets, entering into
certain major leases and debt agreements, approval of annual
budgets and establishing certain reserves, among other things)
require the unanimous approval of the board. to the Joint Venture
Agreement, the Company is entitled to name three directors to the
Subsidiary REITs board, and each of the Investors is entitled to
name one director to the Subsidiary REITs board.
The foregoing description of the Joint Venture Agreement does not
purport to be complete, and is qualified in its entirety by
reference to the full text of the Joint Venture Agreement, a copy
of which is attached hereto as Exhibit 10.1 and incorporated
herein by reference.
Omnibus Direction Agreement
On April17, 2017, the Company, through the Operating Partnership
and certain other subsidiaries, entered into an Omnibus Direction
Agreement (the Direction Agreement) with an affiliate of CPPIB
and an entity controlled by TIAA/SP. The Direction Agreement
amends certain terms of the Omnibus Contribution and Partial
Interest Assignment Agreement (the Contribution Agreement), dated
February17, 2017, among the Operating Partnership, certain of the
Companys other subsidiaries, an affiliate of CPPIB and an entity
controlled by TIAA/SP, related to the procedures for contributing
the interests in the Greenway Properties to the Joint Venture.
The Company completed the contribution of the Greenway Properties
on April20, 2017, as described in Item 2.01 below.
The foregoing description of the Direction Agreement does not
purport to be complete, and is qualified in its entirety by
reference to the full text of the Direction Agreement, a copy of
which is attached hereto as Exhibit 2.1 and incorporated herein
by reference.
New Greenway Mortgage Loan
On April17, 2017, in connection with execution of the Joint
Venture Agreement, certain subsidiaries of the Joint Venture
(collectively, the Borrowers) entered into a loan agreement (the
Loan Agreement) with Goldman Sachs Mortgage Company (Lender).
The Loan Agreement provides for a loan in the original principal
amount of $465,000,000 (the Loan) to the Borrowers, which was
fully funded at the initial closing of the Joint Venture on
April17, 2017. The Operating Partnership used the proceeds of the
Loan to (i)repay all amounts outstanding under the Companys
current Credit Agreement, dated as of October6, 2016, by and
among the Operating Partnership, as Borrower, the Company, the
financial institutions party thereto and their assignees, as
lenders, and Bank of America, N.A., as Administrative Agent,
Wells Fargo Bank, National Association, as Syndication Agent, and
JPMorgan Chase Bank, N.A., Citizens Bank, National Association,
and KeyBank National Association, as Co-Documentation Agents (the
Credit Agreement), and (ii)to fund a credit to the Joint Venture
with respect to certain outstanding contractual lease obligations
and in-process capital expenditures.
The Loan has a term of five years, maturing on May6, 2022, and
bears interest at a rate of 3.753% per annum. The Loan is secured
by, among other things, a first priority mortgage lien against
the Borrowers fee simple interest in the Greenway Properties
(other than the Phoenix Tower property).
The Borrowers are permitted to voluntarily prepay the Loan in
whole, but not in part, during a prepayment period beginning
May6, 2020 through the maturity date without any yield
maintenance charge. In addition, the
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Loan Agreement provides for mandatory prepayment in certain
circumstances such as casualty and condemnation without a yield
maintenance charge. At any time after a lockout period beginning
from the date of closing of the Loan to the earlier of two years
following securitization of the Loan or three years after closing
of the Loan, the Borrowers may cause the full release of the
Greenway Properties that secure the Loan from the lien of the
Loan by providing satisfactory defeasance collateral that is
sufficient to meet the payment obligations set forth in the Loan
Agreement. Alternatively, at any time after the lockout period,
in connection with an arms length sale of certain parcels of the
Greenway Properties that secure the Loan, the Borrowers may
release certain portions of the collateral by providing
substitute, defeasance collateral to the Lender in specific
amounts allocated to the parcels to be released, provided other
conditions are satisfied, including that certain debt service
coverage ratios are met after giving effect to such release.
The Loan is non-recourse, subject to customary carveouts, with
the Operating Partnership acting as the nonrecourse guarantor to
a Guaranty, dated as of April17, 2017, by the Operating
Partnership in favor of Lender (the Guaranty). The Lender, the
Borrowers and certain affiliates of the Borrowers, also entered
into customary ancillary loan documents.
The Loan Agreement includes customary representations and
warranties of the Borrowers. The Loan Agreement also includes
customary events of default, the occurrence of which, following
any applicable grace period, would permit the Lender to, among
other things, declare the principal, accrued interest and other
obligations of the Borrowers under the Loan Agreement to be
immediately due and payable and foreclose on the collateral
securing the Loan, including the Greenway Plaza property.
The foregoing description of the Loan Agreement and the Guaranty
does not purport to be complete, and is qualified in its entirety
by reference to the full text of the Loan Agreement and the
Guaranty, copies of which are attached hereto as Exhibits 10.2
and 10.3 and are incorporated herein by reference.
Item1.02. Termination of a Material Definitive
Agreement
On April17, 2017, in connection with entering into the Loan
Agreement described in Item 1.01 above, the Company terminated
and repaid in full, as applicable (i)the Credit Agreement and
(ii)the Guaranty, dated as of October6, 2016, by the Company,
Parkway Properties General Partners, Inc., Parkway Properties LP
and certain subsidiaries of the Operating Partnership in favor of
Bank of America, N.A., as Administrative Agent. The Credit
Agreement provided for a three-year, $100million senior secured
revolving credit facility and a three-year, $350million senior
secured term loan facility, which term loan had been fully
funded. The revolving credit facility and the senior secured term
loan facility were scheduled to mature by their terms on October
6, 2019.
The Company repaid in full all amounts outstanding under the
Credit Agreement with the proceeds from the Loan. No early
termination penalties were incurred as a result of the
termination. The Credit Agreement and Guaranty were filed as
Exhibits 10.29 and 10.30 to the Companys Annual Report on Form
10-K for the year ended December31, 2016.
Item2.01. Completion of Acquisition or Disposition of
Assets
On April20, 2017, the Company completed the previously announced
sale of an aggregate 49% interest in the Greenway Properties to
the Contribution Agreement. As a result, the Company, through the
Joint Venture, now owns a 51% indirect interest in the Greenway
Properties (with 1% being held by a subsidiary acting as the
general partner of the Joint Venture and 50% being held by a
subsidiary acting as a limited partner of the Joint Venture)and
each of CPPIB and TIAA/SP now owns a 24.5% interest. TIAA/SP
acquired its aggregate percentage interest in two tranches over a
three business day period. The Greenway Properties together
constitute an approximately 5.0million square foot campus
consisting of 11 office properties located in the Greenway
submarket of Houston, Texas.
At closing of the transaction, the Operating Partnership
contributed all of its direct and indirect interests in the
Greenway Properties to the Joint Venture and subsequently sold an
aggregate 49% limited partnership interest in the Joint Venture
to the Investors. In exchange for their respective limited
partnership interests in the Joint Venture, each of CPPIB and
TIAA/SP paid to the Operating Partnership an aggregate of
approximately $105.8 million in cash,
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which was the result of the stated purchase price of 24.5% of the
agreed gross asset value of the Greenway Properties of
$1.045billion adjusted to certain adjustments set forth in the
Contribution Agreement, including adjustments for the amount of
the Loan, the assumption of the Phoenix Tower mortgage loan by
the Joint Venture, closing costs, certain lease obligations and
capital expenditures.
In addition to the Joint Venture Agreement, in connection with
the closing, the Company, through one of its subsidiaries,
entered into property management, leasing and services agreements
with subsidiaries of the Joint Venture to which the Company,
through its subsidiary, will act as property manager, leasing
agent and construction manager of the Joint Ventures properties
in exchange for specified property management, leasing and
construction management fees.
Item2.03. Creation of a Direct Financial Obligation or an
Obligation under an Off-Balance Sheet Arrangement of a
Registrant
The information provided in Item1.01 of this Current Report on
Form 8-K related to the Loan Agreement is incorporated herein by
reference.
| Item7.01. | Regulation FD Disclosure |
On April20, 2017, the Company issued a press release announcing
the closing of the sale of the 49% interest in the Greenway
Properties to the Investors. A copy of the press release is
attached hereto as Exhibit 99.1 and is incorporated herein by
reference.
The information in this Item 7.01 disclosure, including Exhibit
99.1, is being furnished and shall not be deemed filed for
purposes of Section18 of the Securities Exchange Act of 1934, as
amended (the Exchange Act), or otherwise subject to the
liabilities under that Section. In addition, the information in
this Item 7.01 disclosure, including Exhibit 99.1, shall not be
incorporated by reference into the filings of the Company under
the Securities Act of 1933, as amended, or the Exchange Act,
except as shall be expressly set forth by specific reference in
such filing.
| Item9.01. | Financial Statements and Exhibits. |
(b) Pro Forma Financial Information.
The unaudited pro forma combined financial statements of the
Company as of and for the year ended December31, 2016 are filed
herewith as Exhibit99.2 and are incorporated by reference herein.
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(d) Exhibits.
|
Exhibit No. |
Description |
|
| 2.1 |
Omnibus Direction Agreement, dated as of April17, 2017, by and among Parkway Operating Partnership LP, each of the entities listed on Exhibit A attached thereto,Permian Investor LP, and CPPIB US RE-A, Inc. |
|
| 10.1 |
Amended and Restated Limited Partnership Agreement of GWP JV Limited Partnership dated as of April17, 2017. |
|
| 10.2 |
Loan Agreement dated as of April17, 2017, between Goldman Sachs Mortgage Company, as Lender, and GWP North Richmond, LLC, GWP Eight Twelve, LLC, GWP West, LLC, GWP Richmond Avenue, LLC, GWP Central Plant, LLC, GWP Nine, LLC, GWP Edloe Parking, LLC, GWP ONE, LLC, GWP TWO, LLC, GWP East, LLC and GWP 3800 Buffalo Speedway, LLC. |
|
| 10.3 |
Guaranty, dated as of April17, 2017, by Parkway Operating Partnership LP in favor of Goldman Sachs Mortgage Company. |
|
| 99.1 | Press Release issued April20, 2017. | |
| 99.2 |
Unaudited pro forma combined financial statements of Parkway, Inc. as of and for the year ended December31, 2016. |
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About PARKWAY, INC. (NYSE:PKY)
Parkway, Inc. is a real estate investment trust (REIT). The Company has a portfolio of approximately five Class A office assets totaling over 8.7 million rentable square feet in the Galleria, Greenway and Westchase submarkets of Houston, Texas. The Company offers fee-based real estate services through its subsidiaries, which in total manages or leases approximately 2.7 million square feet primarily for third-party owners. The Company holds, directly and through its ownership of Parkway Properties General Partners, Inc. (Parkway GP), approximately 98% common partnership interest in the Parkway Operating Partnership LP (the Operating Partnership). The Company, through its Operating Partnership, owns substantially all of its assets and conducts substantially all of its operations. The Company’s assets include Greenway Plaza, Post Oak Central, CityWestPlace, Phoenix Tower and San Felipe Plaza. PARKWAY, INC. (NYSE:PKY) Recent Trading Information
PARKWAY, INC. (NYSE:PKY) closed its last trading session 00.00 at 20.39 with 98,698 shares trading hands.