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4/21/15
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Prologis Inc, the big, international industrial owner/developer, has inked a definitive agreement to acquire the real estate assets and operating platform of KTR Capital Partners (KTR) and its affiliates for a total purchase price of $5.9 bil. The properties comprise KTR’s three co-investment funds and will be acquired by Prologis U.S. Logistics Venture (USLV), a 55-45 consolidated joint venture with Norges Bank Investment Management (NBIM), manager of the Norwegian Government Pension Fund Global.
“I have known KTR’s leadership for 15 years and have always considered them to be astute investors and one of our toughest competitors in the U.S.,” said Hamid Moghadam, chairman and CEO, Prologis, “This transaction will deliver accretive returns to our shareholders and will enhance our important and successful partnership with NBIM, which will now exceed $11 bil on two continents.”
The 60 msf operating portfolio comprises 322 properties and aligns with Prologis’ investment strategy with approximately 95 percent overlap with its existing U.S. portfolio. Specifically, the transaction enhances the company’s position in Southern California, New Jersey, Chicago, South Florida, Seattle and Dallas. The acquisition also includes 3.6 msf of development-in-progress and a well-located land bank with a build-out potential of 6.8 msf.
The total consideration for the transaction is $5.9 bil, including the assumption of approximately $700 mil of secured mortgage debt and the issuance of up to $230 mil (less assumed liabilities) of common limited partnership units in Prologis, L.P. to KTR.
The transaction is expected to be accretive to forecasted annual core funds from operations (Core FFO) by approximately $0.14 per share, on a stabilized basis. This represents 7 percent growth from the midpoint of Prologis’ 2015 guidance. These estimates are made on a leverage-neutral basis over the long term and include the effects from anticipated funding and capitalization costs.
Contemporaneously, Prologis has obtained a commitment from Morgan Stanley Senior Funding Inc to provide a $1.0 bil bridge facility for the transaction, which provides ample capacity while maintaining significant liquidity on its credit facilities.
Additionally, the transaction is expected to lower general and administrative expenses as a percentage of assets under management by approximately 12 percent and increase its U.S. dollar equity exposure to 93 percent.
“We remain committed to maintaining our strong balance sheet, which will continue to provide us with the flexibility to capture market opportunities across the business cycle,” said Tom Olinger, chief financial officer, Prologis. “This highly accretive transaction advances our strategy of using our scale to grow with minimal incremental overhead and demonstrates the unique appeal and the strength of our currency through our OP unit structure.”
The transaction is anticipated to close in the next 30-60 days and is subject to customary closing conditions.
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