Prologis agrees to acquire KTR portfolio for US$5.9 billion

[BOSTON] Prologis, the world's largest owner of industrial real estate, agreed to acquire KTR Capital Partners for US$5.9 billion to expand its presence in key US markets.

The purchase will be made by Prologis US Logistics Venture, a joint venture with Norges Bank Investment Management, the San Francisco-based company said on Sunday in a statement. The transaction includes the assumption of about US$700 million in debt and the issuance of as much as US$230 million of common limited partnership units in Prologis LP to KTR.

Prologis, with a market value of about US$22 billion, said the acquisition will expand its position in Southern California, New Jersey, Chicago, South Florida, Seattle and Dallas. Warehouse properties have become attractive as global trade increases, luring investors including Brookfield Property Partners LP and TPG Capital in recent years.

"It is rare to have the opportunity to acquire a portfolio of such high asset quality, customer profile and market composition that is so consistent with our own," Hamid Moghadam, chairman and chief executive officer of Prologis, said in the statement.

Prologis expects the transaction to add to its forecasted annual core funds from operations by about US$0.14 per share, on a stabilised basis. The company said in a separate statement on Sunday that the first quarter's core funds from operations rose 14 per cent from a year earlier to 49 cents a share.

KTR owns about 70 million square feet of real estate in 25 markets, concentrated in California, New Jersey, Chicago, South Florida and Texas, according to its website. The company is led by Jeffrey Kelter, the former CEO of Keystone Property Trust. Keystone was acquired by a group including Prologis in 2004 for about US$1.7 billion.

Norges Bank Investment Management, Norway's sovereign- wealth fund, made its first industrial property purchase in 2012 with the acquisition of a 50 percent stake in a European property portfolio from Prologis. The sovereign wealth fund became among the top foreign buyers of real estate in the US last year, buying stakes in properties including three towers from Boston Properties Inc.

US industrial real estate prices climbed 17 per cent in the 12 months through February and are within 2 per cent of their 2007 peak, according to Moody's Investors Service. Mr Moghadam said on the company's October earnings conference call that the transaction market is "very competitive" with "significant capital" chasing top-quality buildings.

Representatives for Prologis and KTR didn't immediately return calls seeking comment outside of regular business hours.

BLOOMBERG