Prologis to Buy Black Creek's IPT for $4 Billion

(Bloomberg) -- Prologis Inc. agreed to buy warehouse owner Industrial Property Trust for about $4 billion to bulk up its business catering to companies such as Amazon.com Inc. and FedEx Corp.

The cash deal, which includes the assumption and repayment of debt, will probably close late this year or early next, Prologis said Monday, confirming an earlier report by Bloomberg. The portfolio includes 236 properties in areas such as Southern California, the San Francisco Bay Area, Chicago, Atlanta, Dallas, Seattle and New Jersey -- with about 96% in markets Prologis is present. Combining businesses will lower costs relative to assets, it said.

“This is a high quality portfolio that we think is really strategic,” Prologis Chief Executive Officer Hamid Moghadam said in a phone interview.

Warehouses and logistics are increasingly favored parts of the real estate market, in part due to strong growth and occupancy rates. Demand from corporations stems from a necessity to meet customer expectations for faster delivery times. The growth of e-commerce would probably insulate the sector from some of the impact from the Trump administration’s tariffs on goods from China, analysts from Green Street Advisors said in May.

Prologis, with a market value of more than $50 billion, doesn’t intend to raise equity to finance the deal. But it does aim to sell about 20% of IPT’s assets, Moghadam said. Three-quarters of that will happen in markets in which the company is already active, and the rest in places such as Salt Lake City and Memphis, where it isn’t seeking a presence.

IPT, a nontraded real estate investment trust, was put on the block in February by its owner Black Creek Group LLC, Bloomberg reported at the time.

Prologis was among bidders vying to own GLP Pte’s U.S. operations earlier this year, but was beaten out by Blackstone Group LP, which clinched the $18.7 billion deal. Still, the warehouse owner acquired DCT Industrial Trust Inc. last year for more than $8 billion, its second-largest deal after merging in 2011 with AMB Property Corp.

“This is not our first rodeo, this is a very bite-sized deal for us and we feel confident about not only closing this transaction in a timely manner but properly integrating the portfolio and realizing the synergies,” said Moghadam. “We’ve got this down to a science,” he said.

His firm estimates general and administrative expenses relative to assets under management will decrease 4%. It expects the transaction will be accretive to annual funds from operations, a metric used by REITs, by 5 cents to 6 cents a share.

Other portfolios Prologis has eyed in the past year would have resulted in a larger portion of sales, Moghadam said. The REIT would have retained around 70% of GLP U.S.’s portfolio, a number that would have dropped further if it had bought IDI Logistics, he said.

To contact the reporter on this story: Gillian Tan in New York at gtan129@bloomberg.net

To contact the editors responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net, David Scheer, Dan Reichl

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