Canada Pension Plan Investment Board (CPPIB), TH Real Estate and Silverpeak Real Estate Partners have recapitalised a $1.05bn (€988m) office portfolio in Houston, Texas.

US-listed property company Parkway said it sold a 49% stake in the portfolio of 11 buildings for $512m.

CPPIB will take a 24.5% stake in the Greenway Portfolio, while TH Real Estate and Silverpeak will share the remaining 24.5%.

CPPIB said it paid $141m for its stake in the 11-asset portfolio, which includes Greenway Plaza and Phoenix Tower.

Parkway said the joint venture would assume the outstanding $76.2m in debt secured against Phoenix Tower, while Goldman Sachs is to provide a new five-year $465m mortgage secured against the other properties in the portfolio.

As majority-owner, Parkway will continue to operate the portfolio, which spans nearly 5m sqft of space, and will provide property management and leasing services for the joint venture.

The deal follows a period of rising vacancy rates in Houston’s office market, which is strongly tied to the energy sector. According to Newmark Grubb Knight Frank, the vacancy rate stands at 19.6% and could rise as 2.4m sqft of new space comes onto the market.

CPPIB said the Greenway submarket is located near Houston’s Galleria district and affluent residential neighbourhoods with transportation links to the central business district and major healthcare and education hubs.

Hilary Spann, managing director, head of US real estate investments at CPPIB, said: “The Greenway Portfolio provides CPPIB with immediate scale in the Houston office sector, which we expect to benefit from accelerating job creation and continuing population growth.”

James Heistand, president and chief executive of Parkway, said the recapitalisation of the portfolio met several objectives: “First, we have established a great partnership with three well-capitalised and highly regarded institutional investors that share our view of the long-term resiliency of the Houston market and the expectation of an eventual recovery in Houston office fundamentals.

“Second, this transaction helps to mitigate risk in a single office campus that represents 57% of our company’s overall square footage. And finally, with approximately $315.8m of expected net proceeds to Parkway, this joint venture will supply us with additional capital to immediately strengthen our balance sheet while providing us the flexibility to further diversify the portfolio through future acquisitions as the Houston market recovers.”