Private equity firm TPG Capital Management LP has agreed to take a 43 percent stake in Parkway Properties Inc (PKY.N), which will use the cash infusion to buy the Hearst Tower in Charlotte, North Carolina, from Bank of America Corp (BAC.N).
The bank, in turn, has agreed to rent back space in a 10-year lease.
The Florida-based real estate investment trust said that TPG's $200 million equity stake in the company will enable it to take advantage of opportunities to buy more properties at good prices.
"This investment in Parkway by TPG allows us to take advantage of these prospects," Jim Heistand, Parkway's president and chief executive, said in a statement on Thursday.
Parkway will use the cash infusion to acquire the 972,000 square-foot Hearst Tower for $250 million, or $257 per square foot. The building is 94 percent leased, with no meaningful leases expiring until 2017.
Bank of America has agreed to a lease for 322,000 square feet at the bottom of the building.
Parkway will initially use the TPG cash for the building, but then expects to replace some of that investment with a mortgage.
Under the deal for its stake in Parkway, which Parkway's board already has approved, TPG will get four of the nine company board seats. The investment translates to $11.25 per share, a 12 percent premium to the 30-day trailing average closing price of Parkway's shares.
At the closing of the transaction, which is expected to occur before the end of the second quarter, Parkway will issue 4.3 million shares or $48.4 million in common stock, representing about 19.6 percent of its shares outstanding.
It also will issue 13.5 million shares of non-voting Series E cumulative convertible preferred shares with an initial liquidation value of $151.6 million. Parkway will hold a stockholders meeting within 180 days of the closing for shareholders to vote on the conversion.
Parkway's board said that based on the purchase of the Hearst Tower, its prior acquisitions and TPG's stake, it would raise its annual dividend by 33 percent to 40 cents per share.
The sale of the Hearst Tower is part of Bank of America's plans to streamline its space as part of a cost-cutting program.
The bank has also agreed to sell and lease back a 31-story building at 222 Broadway in Manhattan and 100 Federal Street In Boston.
The Hearst Tower houses a three-story trading floor, which sources familiar with the matter say has lost traders over the years as the bank shifts more investment banking operations to New York.
(Reporting by Ilaina Jonas in New York; Editing by Matthew Lewis and Tim Dobbyn)