Prologis to acquire Liberty in $12.6B warehouse deal

Dive Brief:

Prologis announced Sunday it will acquire Liberty Property Trust in an all-stock transaction valued at $12.6 billion. The warehouse giant expects the deal to close in the first quarter of 2020.
The acquisition will add 107 million square feet of logistics space to Prologis' portfolio, along with 5.1 million square feet of "logistics development in progress."
Prologis CEO Hamid R. Moghadam described Liberty's warehouse assets as "highly complementary to our U.S. portfolio." In particular, the acquisition will provide Prologis with additional assets in markets such as Lehigh Valley in Pennsylvania, Chicago, Houston, New Jersey and Southern California.

Dive Insight:

The M&A strategy many big players in industrial real estate have embraced reflects two major trends in warehousing and logistics. For one, demand for warehousing space is high among shippers, making such assets a hot commodity and appealing buy for real estate players. However, land availability is low, especially in desirable markets, leading providers to acquire their rivals and their assets rather than acquire land and build new warehouses.

Last month, Blackstone announced its intention to buy U.S. logistics assets from Colony Capital for $5.9 billion. And in June, Blackstone said it would buy $18.7 billion in logistics assets from GLP. The firm was also reportedly in talks to purchase 11 warehouses from TA Realty located near JFK airport.

Prologis too has been hot on the acquisition trail. The warehouse giant agreed to acquire Industrial Property Trust in July for $3.99 billion. Last year, it acquired DCT Industrial Trust for $8.5 billion. The acquisition of Liberty, if it goes through, will be the largest of Prologis' recent acquisitions in terms of value and size of assets.

Aside from additional warehouse assets in the U.S., the Liberty acquisition provides Prologis with industrial real estate space in many target markets for warehousing. According to a presentation published alongside a Prologis investor call, Liberty holds 18.4 million square feet of warehousing space in Lehigh Valley. The region has emerged as a logistics hub given its proximity to major metropolitan areas in the Northeast and its availability of land.

Liberty also has 12.2 million square feet of logistics assets in Chicago and 5.8 million square feet in Southern California, areas with high demand due to their proximity to major transport hubs in rail and seaports, respectively.

While advantageous for Prologis, the deal won't necessarily help loosen demand in what CBRE's Richard Barkham described as a "red-hot industrial market in the U.S." Availability of warehouse space declined for 35 quarters in a row before ticking up slightly in the second quarter of this year.