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Prologis' (PLD) Acquisition of IPT for $4B Reaches Pinnacle

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Prologis Inc.’s (PLD - Free Report) acquisition of the wholly-owned real estate assets of Industrial Property Trust Inc. (“IPT") recently reached its finale, when the former shelled out $4 billion in cash, including the assumption and repayment of debt, for the transaction.

Specifically, IPT is a sponsored investment fund of Black Creek Group, a real estate investment manager and development company. Prologis has acquired IPT’s properties through its two U.S. co-investment ventures, split evenly between USLV and USLF.

The acquired portfolio consists of 37.5 million square feet of highly-leased industrial properties and 236 properties across 24 geographic areas, 96% of which overlaps Prologis’ existing footprint.

The transaction will expand Prologis' presence in strategic markets across the United States, including Southern California, Chicago, the San Francisco Bay Area, Atlanta, Seattle, Dallas and New Jersey.

Per management, through this acquisition, the company has added high-quality assets that are positioned in markets providing excellent long-term investment potential. Moreover, it has added 450 customers through this deal, 172 of which are existing relationships with Prologis. Further, the company anticipates leveraging on the benefit of its large scale and operating expertise, in order to deliver better service to customers and maximize shareholder value. 

When the transaction was announced last July, the company expected the merger to be accretive to annual core funds from operations (FFO) per share by about 5 to 6 cents, on a stabilized basis. Moreover, the move is unlikely to have any significant impact on Prologis’ leverage. In fact, the company anticipated no added corporate overheads. Further, it stated that combining the entities would lower general and administrative expenses as a percentage of assets under management by around 4%.

The transaction is a testament of the company actively capitalizing on growth opportunities amid healthy operating fundamentals in the industrial real estate markets.  

In fact, per a report from CBRE Group (CBRE - Free Report) , rent growth is projected at 5% in 2020, and will be driven by newer product and infill industrial space in supply-constrained markets. Also, increasing e-commerce penetration, as well as need for last-mile and same-day delivery options has been driving demand for industrial/warehouse spaces.

This is likely to boost demand for light-industrial warehouses of less than 120,000 square feet. Also, with spaces being significantly limited in the smaller-size section, growth in rent is projected to continue in the current year.

This, in turn, is likely to keep spurring demand for industrial/warehouse spaces, enabling industrial landlords like Liberty Property Trust and Duke Realty Corp. among others, to enjoy a favorable market environment.

As for Prologis, with enhanced scale and top-quality assets in most-sought after markets, the company is well poised to capture benefits of favorable industrial market conditions. 

Over the past three months, shares of this Zacks Rank #3 (Hold) company have rallied 3.6%, as against the industry’s decline of 2.8%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


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