Transactions & Finance

Prologis buys Liberty Property for $12.6bn

The giant logistics real estate investment trust makes a strategic play by acquiring Pennsylvania-headquartered Liberty.

The giant logistics real estate investment trust makes a strategic play by acquiring Pennsylvania-headquartered Liberty.


Ultimately valued at $9.7bn plus debt, the purchase of Liberty Property Trust – the logistics company with real estate across America – is a headline play by one of the largest warehouse owners in the world. It brings Prologis a logistics portfolio covering 107 million square feet, with another 5 million square feet of development logistics in progress.

 

Liberty is a real estate investment trust (REIT) with property in Chicago, Houston, New Jersey and Southern California as well as central Pennsylvania, the company’s headquarters state.

 

Said Prologic CEO Hamid Moghadam in a statement: “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.”

 

Bill Hanowsky, CEO of Liberty, added: “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 isn’t the only major warehouse deal to have taken place in the last few weeks. In late September, Blackstone Group, which has acquired over 1 billion square feet of logistics real estate in the last decade, bought Colony Capital’s warehouse unit Colony Industrial for nearly $6bn, bringing it 60 million square feet of warehouse space across 26 markets nationwide.

 

E-commerce is by far the motivating factor behind this investment pattern. Amazon is single-handedly responsible for much of the growth in warehouse demand: it generated $207 billion from retail operations globally in 2018, and its retail business is most profitable in the US. E-commerce platform Shopify, which by helping entrepreneurs of all sizes gain access to markets made over a billion dollars in revenue last year, is on track to have made $1.5bn in 2019, and has over a million sellers on its platform. Even Walmart, which has struggled somewhat in the e-commerce space after several acquisitions that haven’t work out, still commands a large enough market share by itself to make logistics real estate a highly lucrative game.

 

This investment trend, therefore, is likely to continue until the next economic recession, and perhaps after. That kind of real estate can weather economic vicissitudes if it’s held onto tenaciously enough (and is owned outright), and, thinking long-term – as more and more investors are at least claiming to do – demand will only continue to grow as making purchases becomes ever easier.

 

Financial advisor to Prologis: BofA Securities, Morgan Stanley.

Legal advisor to Prologis: Wachtell, Lipton, Rosen & Katz.

Financial advisor to Liberty Property Trust: Morgan, Lewis & Bockius.

Legal advisor to Liberty Property Trust: Goldman Sachs, Citigroup.

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