Prologis will acquire Liberty Property Trust in an all-stock transaction valued at approximately $12.6 billion, including the assumption of debt, both companies announced Sunday.
The deal deepens Prologis’ presence in a number of target markets, including New Jersey, the nearby Lehigh Valley and Central Pennsylvania, as well as Chicago, Houston and Southern California.
According to a release from both companies, the acquisition on an owned and managed basis comprises:
- A 107 million square foot logistics operating portfolio; 87% overlap with key markets;
- 1 million square feet of logistics development in progress;
- 1,684 acres of land for future logistics development, with build-out potential of 19.7 million square feet;
- A 4.9 million square foot office operating and development portfolio.
Prologis plans to dispose of approximately $3.5 billion of assets on a pro rata share basis. This includes $2.8 billion of nonstrategic logistics properties and $700 million of office properties.
This transaction is anticipated to create immediate cost synergies of approximately $120 million from corporate general and administrative cost savings, operating leverage, lower interest expense and lease adjustments, the release said. In addition, there are future synergies with the potential to generate approximately $60 million in annual savings, including $10 million from revenue synergies and $50 million from incremental development value creation.
Under the terms of the agreement, Liberty shareholders will receive 0.675x of a Prologis share for each Liberty share they own. The transaction, which is currently expected to close in the first quarter of 2020, is subject to the approval of Liberty shareholders and other customary closing conditions.
Executives from both companies praised the deal.
- Prologis Chairman and CEO Hamid R. Moghadam: “Liberty’s logistics assets are highly complementary to our U.S. portfolio, and this acquisition increases our holdings and growth potential in several key markets. The strategic fit between the portfolios allows us to capture immediate cost and long-term revenue synergies.”
- Liberty Chairman and CEO Bill Hankowsky: “Liberty and Prologis represent two of the finest teams of real estate professionals and two of the finest portfolios of industrial real estate ever assembled. The joining of these two platforms at this moment, when industrial logistics has become so pivotal to the new economy, will further the industry’s ability to support the nation’s supply chain and enhance value creation for our combined shareholders. It is a testament to Liberty’s outstanding teams of professionals, both present and past.”
- Prologis Chief Investment Officer Eugene Reilly: “Liberty’s high-quality logistics real estate will strengthen our portfolio as well as our customer roster. We are also excited about the caliber of talent at Liberty and expect a number of their employees to join us to help manage the portfolio and execute on capital deployment.”
- Prologis Chief Financial Officer Thomas Olinger: “The execution of this transaction is further evidence of the strength of Prologis’ balance sheet and will create significant additional capital from the future sale of the noncore assets. The combination of these portfolios will drive incremental Core FFO growth and long-term shareholder value.”
Prologis’ portfolio in central and northern New Jersey include the giant Port Reading warehouse and distribution park, as well as warehouses in Monroe Township, the Meadowlands and even into South Jersey. Liberty’s New Jersey holdings range from South Jersey to Edison and up to the Meadowlands, as well. Its New Jersey office is in Mount Laurel.
