Cousins Properties, one of Atlanta’s best known developers and office landlords, will acquire rival Parkway Properties of Orlando in an estimated $2 billion merger of real estate investment trusts.
The deal, announced Friday, will expand Cousins’ reach in its hometown and across the Sun Belt. The all-stock merger will also result in the future spinoff of a separate public company that will own all Cousins and Parkway office properties in the Houston area, a market that has struggled amid the oil downturn.
Houston currently accounts for about 40 percent of Cousins’ portfolio.
Cousins President and CEO Larry Gellerstedt will continue in his role. He said in an interview that the expanded Cousins will become the top landlord of Class A or top-tier office space in Buckhead, uptown Charlotte and downtown Austin, as well as make the firm a major player in Phoenix, Orlando and Tampa.
Cousins will operate 41 properties totaling nearly 16 million square feet nationwide. In Buckhead, Cousins will add trophy towers such as Buckhead Plaza I and II, 3344 Peachtree, Capital City Plaza and the Forum complex.
Atlanta, which has seen office vacancy tighten and rents rise of late to record highs, will make up about half of Cousins portfolio after the sale.
“Atlanta is very healthy right now, so are Austin and Charlotte,” he said.
The merger and spinoff of Houston assets is expected to be completed before the end of the year, Gellerstedt said.
Cousins existing shareholders will own a 52 percent stake in both the new Cousins and the future spinoff, which is called “HoustonCo” for now.
Cousins, founded by noted Atlanta developer Tom Cousins, has shifted strategy in recent years to become a more urban-focused developer and owner. The firm owns notable Atlanta towers such as 191 Peachtree, Midtown’s Promenade and the Terminus towers in Buckhead. The company in its history also developed the CNN Center complex and Bank of America Plaza.
After the Great Recession, Cousins focused on what were then fast-growing markets of Austin and Houston. Its Houston towers performed well, but holding Houston properties became a headwind for the company’s stock as the oil price slump hurt the city’s energy-strong economy.
The spinoff, Gellerstedt said, will allow Cousins and Parkway shareholders to ride Houston’s eventual economic rebound without selling properties at the bottom of the market.
Gellerstedt said Cousins will likely look to sell some assets, particularly in Atlanta, and grow elsewhere to diversify. He said asset sales will allow the company to raise cash to make opportunistic purchases or to be ready to develop in the next cycle.
“We work really, really hard to end up with the best balance sheet in the business because whenever the market does go through a correction, I want to be able to be an aggressive buyer when other people can’t in any of these cities,” he said.
Gellerstedt said the current development cycle is in “the sixth or seventh inning,” but he does not expect a future downturn to be anywhere near as severe as the Great Recession.
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