Prologis reported results for the second quarter of 2019 and revealed that, subsequent to quarter end, it has signed a definitive merger agreement to acquire Industrial Property Trust Inc.
Net earnings per diluted share was $0.60 for the quarter compared with $0.62 for the second quarter of 2018. Core funds from operations (Core FFO)* per diluted share was $0.77 for the quarter compared with $0.71 for the same period in 2018.
“We had a terrific quarter—our results reflect strong execution and the quality of our global portfolio,” said Hamid R. Moghadam, chairman and CEO, Prologis. “We are off to an excellent start to the second half of the year as we’ve just entered into an agreement to acquire IPT. The acquisition of this high-quality portfolio will deliver additional shareholder value immediately upon close.”
Prologis will acquire IPT’s wholly owned real estate assets for approximately $3.99 billion in a cash transaction, including the assumption and repayment of debt. The transaction, currently expected to close in the fourth quarter of 2019/first quarter of 2020, is subject to the approval of IPT stockholders and other customary closing conditions.
“This is a compelling opportunity to acquire a portfolio of excellent asset quality and submarket composition consistent with our U.S. investment strategy and footprint,” said Eugene F. Reilly, chief investment officer, Prologis. “We expect to capture significant cost and revenue synergies, in addition to enhancing customer relationships and insights.”
The 37.5 million square foot operating portfolio comprises 236 properties, 96 percent of which are in existing Prologis markets. Specifically, the transaction expands the company’s position in Southern California, the San Francisco Bay Area, Chicago, Atlanta, Dallas, Seattle and New Jersey.
Following the closing, the company intends to hold the portfolio through either one or both of its U.S. co-investment ventures. The transaction is expected to be accretive to annual Core FFO* by approximately $0.05-0.061 per share, on a stabilized basis. The transaction is not expected to have a meaningful impact on the company’s leverage. Further, Prologis does not expect to add any corporate overhead and, as a result, the transaction is expected to lower general and administrative expenses as a percentage of assets under management by approximately 4 percent.
“We have worked diligently to create a balance sheet that allows us to take advantage of opportunities such as this, and we remain committed to maintaining our financial strength,” said Thomas S. Olinger, chief financial officer, Prologis. “This accretive transaction advances our strategy of using our scale to grow earnings with no incremental overhead.”
“We continue to see healthy market conditions, robust customer demand and rent growth that has exceeded our expectations,” said Olinger. “As a result, we are increasing our Core FFO* guidance and now anticipate year-over-year growth without promotes of 9.5 percent.”