By Robbie Whelan And Shayndi Raice
Prologis Inc., a big owner of warehouses and distribution
centers, agreed to buy industrial-property owner KTR Capital
Partners for $5.9 billion, in one of the largest real-estate deals
so fat this year.
Prologis said in a statement that it would buy closely held KTR,
which owns about 70 million square feet of real estate,
concentrated largely in California, New Jersey, Chicago, South
Florida and Texas. The statement confirmed an earlier report from
The Wall Street Journal.
The purchase price includes the assumption of about $700 million
of secured mortgage debt and the issuance of as much as $230
million of limited partnership units to KTR, according to the
statement.
Prologis is buying KTR through a joint venture that is 45%-owned
by Norges Bank Investment Management, which manages the Norwegian
Government's pension fund.
Prologis, based in San Francisco, is one of the largest U.S.
real-estate investment trusts, with a market value of more than $22
billion. The company owned 2,853 properties at the end of 2014, the
bulk of them in North America, with more than 600 in Europe and
Asia. It also manages $29 billion in real-estate assets through
joint ventures and a series of funds backed by institutional
investors.
The company solidified its position in the market through a 2011
combination with AMB Property Corp. that was valued at more than $8
billion.
KTR was founded in 2004 by several top executives at Keystone
Property Trust after the REIT was sold to Prologis's predecessor
company and investment firm Eaton Vance Management.
KTR, based in New York, raised three funds, with total invested
capital of about $2.5 billion, between 2006 and 2013. The funds buy
and develop warehouses and business parks with office space and
distribution centers for retailers, food-and-beverage companies and
others. Many of KTR's assets are seen as attractive because they
cater to the fast-growing e-commerce industry. Its warehouses are
often situated near major ports.
In March, Prologis Chief Executive Hamid Moghadam said at an
investor conference that the company was trying to simplify its
fund business and focus on growth through the development of new
properties and joint ventures. Since the AMB deal, Mr. Moghadam
said, the company has reduced the number of funds it manages to 11
from 23 and closed or sold off underperforming investment
vehicles.
About 10 million square feet owned by KTR is under development
or not yet completely built.
Mr. Moghadam said in an interview Sunday that KTR's portfolio is
attractive because it is concentrated in U.S. cities that represent
large, established logistics hubs, and because KTR and Prologis
share several large tenants, including Amazon.com Inc., Home Depot
Inc. and FedEx Corp.
"We generally have a hard time buying large portfolios because
the quality isn't always high enough," Mr. Moghadam said.
"Virtually 95% of KTR's assets fit in with our existing
portfolio."
After several quiet years, deal making in the real-estate sector
has begun to pick up, driven by cheap credit and a wave of cash
from large investors seeking to capitalize on rising prices for
commercial property. Green Street Advisors, a Newport Beach,
Calif., research firm, said in a January report that the volume of
real-estate deals fell by 80% between 2007 and the end of 2014
compared with the previous seven years, and that conditions were
ripe for transactions to pick up.
In December, private-equity giant Blackstone Group LP announced
it would sell its U.S. industrial real-estate business, IndCor
Properties Inc., to Singapore's sovereign-wealth fund for more than
$8 billion. This month, General Electric Co. announced it was
selling more than $20 billion in real-estate holdings to Blackstone
and Wells Fargo & Co. Activist investors have also been
pressuring a number of companies to sell themselves or spin off
their real-estate assets into separate REITs. Companies including
Hudson's Bay Co., Sears Holding Corp. and Pinnacle Entertainment
Inc. have outlined plans for real-estate spinoffs in recent months.
In April, healthcare-property landlord Ventas Inc. announced it
would spin off more than $5 billion in nursing facilities into a
separate company.
Prologis has been negotiating its purchase of KTR for about
three months, according to people familiar with the sales process.
Other bidders who looked at the company as part of the process
include Blackstone, the world's largest real-estate fund manager,
and Canadian investment firm Brookfield Asset Management, according
to the people.
Write to Robbie Whelan at robbie.whelan@wsj.com and Shayndi
Raice at shayndi.raice@wsj.com
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