Prologis Inc. has completed its all-stock acquisition of DCT Industrial Trust Inc. for $8.5 billion, including the assumption of debt. In connection with the transaction, each share of DCT common stock was converted into 1.02 shares of Prologis common stock.
The DCT portfolio is highly complementary to Prologis’ existing portfolio in terms of product quality, location and growth potential. The DCT portfolio includes the following:
- 71-million-square-foot owned and managed operating portfolio
- 5 million square feet of development, redevelopment and value-added projects
- 305 acres of land in pre-development with an estimated build-out potential of over 4.5 million square feet and 131 acres of land under contract, or option, with a build-out potential of over 1.6 million square feet
The acquisition expands Prologis’ presence in the high-growth U.S. markets of Southern California, the San Francisco Bay Area, Seattle and South Florida. As a result of the closely aligned portfolios and business strategies, the combined company expects immediate corporate G&A savings and significant scale economies within its operating portfolio, according to a prepared statement. The company also expects to extract additional value from the platform initiatives currently underway at Prologis.
“We have tremendous respect and admiration for what the DCT team has accomplished in transforming their organization into a premier logistics company,” said Hamid R. Moghadam, chairman and chief executive officer, Prologis. “They have created significant value through thoughtful market realignment, strong operating performance and smart development. Going forward, the combination of the portfolios will enable our shareholders to benefit from significant synergies and increased customer mindshare.”
Prologis will refinance $1.8 billion of DCT’s debt, of which approximately $850 million was paid off at closing with the remainder to be retired in the third quarter of 2018. The company expects the blended interest rate associated with the refinancings to be approximately 2.5%, generating an estimated $38 million in annual interest savings. The cumulative interest savings will more than offset the estimated $58 million of one-time debt extinguishment costs related to the refinancing activity. The total transaction costs are expected to be approximately $80 million, with the majority of the costs incurred by Prologis being capitalized.
The acquisition is expected to be accretive to 2018 core funds from operations* (Core FFO) per diluted share by $0.02, in line with the previously estimated Core FFO* per diluted share accretion of $0.06-$0.08 on an annualized basis. As a result, Prologis has increased its 2018 Core FFO* guidance range to $3.00 to $3.04 per diluted share from $2.98 to $3.02 per diluted share.
The acquisition is expected to be dilutive to net earnings per diluted share primarily due to the impact of non-cash real estate depreciation. As a result, Prologis has decreased its full-year 2018 net earnings guidance range to $2.67 to $2.73 per diluted share from $2.80 to $2.86 per diluted share.
Effective immediately, former DCT president and chief executive officer Philip L. Hawkins has joined the Prologis board of directors.