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Prologis to Acquire Liberty Property Trust in $12.6 Billion Transaction

By Colin McEvoy on November 4, 2019

Liberty Property Trust, the largest industrial property owner in the Lehigh Valley, has approved an agreement to be acquired by Prologis Inc., a global leader in commercial real estate, in a transaction valued at approximately $12.6 billion.

Prologis and Liberty Property Trust have announced that the two companies have entered into a definitive merger agreement, highlighting the importance of the Lehigh Valley as a key national market in commercial and industrial real estate investment.

“The Prologis acquisition of Liberty is very significant for the Lehigh Valley,” said Don Cunningham, President & CEO of Lehigh Valley Economic Development Corporation (LVEDC). “Liberty has long been the largest owner of industrial real estate in the region and Prologis has had a large presence here as well. The combined companies will become an even more significant entity in our market. The purchase shows the strategic importance of the Lehigh Valley in the industrial and manufacturing sectors.”

Prologis Chairman & CEO Hamid R. Moghadam said the company considers Lehigh Valley one of its target markets, and this transaction will deepen Prologis’ presence there as well as other markets like Chicago, Houston, Central Pennsylvania, and Southern California.

“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,” Moghadam said. “The strategic fit between the portfolios allows us to capture immediate cost and long-term revenue synergies.”

Once the transaction goes into effect, the combined companies will own 59 industrial/flex buildings in Lehigh Valley, encompassing 25.6 million square feet, which will account for about 21% of the total space in the market, according to George Lewis, LVEDC Director of Research & Analysis.

Liberty Property Trust, which has had a presence in the Lehigh Valley for 33 years, owns 37 buildings in the region, totaling 17.5 million square feet, or 14% of the region’s industrial market share, Lewis said.

Prologis currently owns 22 buildings in Lehigh Valley encompassing 8.1 million square feet, or 6.5% of the regional market spare, according to Lewis, whose analysis was based on data from CoStar, the world leader in commercial real estate information.

“Liberty and Prologis represent two of the finest teams of real estate professionals and two of the finest portfolios of industrial real estate ever assembled,” said Bill Hankowsky, Liberty Property Trust Chairman & CEO.

“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,” Hankowsky said. “It is a testament to Liberty’s outstanding teams of professionals, both present and past.”

The acquisition includes 107 million square foot logistics operating portfolio, with an 87% overlap with key markets, according to Prologis.

It also includes 5.1 million square feet of logistics development in progress, 4.9 million square feet of office operating and development portfolio, and 1,684 acres of land for future logistics development with build-out potential of 19.7 million square feet.

“Liberty’s high-quality logistics real estate will strengthen our portfolio as well as our customer roster,” said Prologis Chief Investment Officer Eugene F. Reilly. “We are also excited about the caliber of talent at Liberty and expect a number of their employees to join us to help manage the portfolio and execute on capital deployment.”

The board of directors of Prologis and the board of trustees of Liberty have each unanimously approved the transaction.

This transaction is expected to create immediate cost synergies of approximately $120 million from corporate general and administrative cost savings, operating leverage, lower interest expense and lease adjustments, according to Prologis Chief Financial Officer Thomas S. Olinger.

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