October 28, 2019

Prologis (PLD) announced yesterday that it will acquire Liberty Property Trust (LPT) in an all-stock transaction valued at $12.6 billion—an approximate 20% premium over the current value of LPT’s shares.

PLD will acquire a 104 million-sq.-ft. operating portfolio in 18 U.S. markets, 4.6 million sq. ft. worth of projects in development, land that can support another 19 million sq. ft. of development and a 4 million-sq.-ft. portfolio in the U.K. PLD plans to sell approximately $2.8 billion of non-core industrial assets, including assets in markets with no current PLD presence, and LPT’s $700 million office portfolio.

After the deal closes and PLD spins off the non-core assets, it will be left with 73 million sq. ft. in 18 U.S. markets. The transaction will extend PLD’s status as the world’s largest industrial owner with 532 million sq. ft. in the U.S. and a total of 828 million sq. ft. worldwide.

Based on the most recent LPT NOI disclosures, this deal is priced at between a 4.5% and 4.7% cap rate and $108 per sq. ft. This is consistent with recent portfolio pricing.

This deal is a continuation of two major trends in the industrial & logistics sector:

  • Demand for I&L assets by institutional investors is accelerating. The size and number of portfolio deals has increased this year, highlighted by Blackstone’s $18.7 billion acquisition of GLP this year. This is PLD’s second major portfolio transaction in the past year, following its $8.4 billion acquisition of DCT.
  • I&L market fundamentals remain exceedingly strong. Near record-low vacancy rates, along with all-time-high rents, have attracted both domestic and foreign investors to the sector. These investors have embraced the generational shift in supply chain that currently is underway—an evolution largely driven by the advent and growth of e-commerce.

Blackstone has been extremely active in the I&L sector and has quickly become the second-largest owner of I&L assets in just the past two years. For more information on Blackstone’s ambitions and support for the broader strength in the I&L market, this recent Wall Street Journal article is worth reading.

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