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Real Estate Investment Trust (REIT) Parkway Properties (NYSE: PKY ) , and real estate investment firm Thomas Properties (UNKNOWN: TPGI.DL ) , have signed a definitive stock-for-stock merger agreement valued at an estimated $1.2 billion, the companies announced today. The boards of directors of both companies have unanimously agreed to the deal.
The shareholders of Thomas Properties will receive 0.3822 shares of newly issued Parkway stock for each share of Thomas stock, valuing Thomas' shares at $6.26 each, based on Sept. 4, 2013's closing price of $16.37, according to the companies. James Thomas, president and CEO of Thomas Properties, will become chairman of Parkway's board of directors following the merger.
Parkway will take ownership of at least seven properties owned by Thomas in the Houston and Austin areas, and possibly three assets in Northern Virginia that are currently being used to secure debt. However, according to Parkway, it intends to sell the Northern Virginia assets "before or shortly after the closing of the transaction."
Thomas Properties' portfolio, prior to closing pending sales reliant on a successful merger, consist of over 9.8 million square feet of rentable space, and currently have an 89% occupancy rate, according to the companies.
Separately, Parkway has agreed to sell Thomas' ownership stake in its two Philadelphia Commerce Square high-rise properties to Brandywine Realty Trust (NYSE: BDN ) for $332 million, after the merger with Thomas is complete. Parkway and Brandywine have also agreed on a deal for Thomas Properties' Four Points Centre and adjacent land in Austin, Texas for $51 million, Parkway said. Closing of the Four Points Centre sale to Brandywine is also contingent upon completing the Thomas/Parkway merger.
The merger is expected to close in Q4 of 2013, and is conditional on shareholder approval, and customer closing conditions.