Earlier this week, San Francisco-based real estate investment trust Prologis announced its desire to buy Indianapolis-based Duke Realty Corporation, a sustainable industrial real estate development and the nation’s largest logistics-only Real Estate Investment Trust (REIT).
Prologis is the world’s largest industrial real estate company, with ownership or investments in, wholly owned or through co-investment ventures, properties and development projects expected to total approximately 1.0 billion sq.ft. square meters (93 million square meters) in 19 countries, according to its website. Prologis leases modern logistics facilities to a diverse base of around 5,800 customers, mainly split into two broad categories: business-to-business fulfillment and retail/online, he added. And Duke Realty owns and operates approximately 164.9 million leasable square feet of industrial assets in 19 major logistics markets.
Under the terms of the proposed offer, Duke stakeholders would receive 0.466 shares of Prologis common stock for each share of Duke Realty common stock they own, according to Prologis officials. The company said the proposal is valued at $61.68 per Duke Realty share based on Prologis’ closing price on May 9, representing a 29% premium to Duke Realty’s closing price at the end of May. same date. A Wall Street Journal report said the purchase price would be around $24 billion.
“We are confident that the proposed combination will be a win-win solution for our respective shareholders,” Hamid R. Moghadam, CEO and co-founder of Prologis, said in a statement. “Prologis has a proven track record as a leader and innovator in our We are known for providing exceptional service to our customers and delivering superior value to our shareholders, including shareholders of companies with which we have merged or acquired in the past . We believe that Duke Realty shareholders would similarly benefit from the long-term value created by combining our businesses.
This is not the first overture Prologis has made to Duke regarding a sale. On November 29, 2021, Prologis first sent a letter to Duke Realty on November 29, 2021 regarding a potential trade at an exchange rate of 0.465, representing a 20% premium to Duke Realty’s stock price at the time, he said. He added that over the past five months, Duke Realty has not committed substantially as the premium implied by Prologis’ offer has steadily increased. On May 3, 2022, Prologis said it had “modestly increased the proposed exchange ratio – representing a 34% premium to Duke Realty’s stock price at the time – in a final attempt to engage in to reach an agreement on a mutually beneficial transaction. Duke Realty rejected the Prologis proposal the same evening,” he said.
In a May 10 letter sent to Duke Realty CEO James B. Connor, Prologis’ Moghadam said Prologis is very confident that the integration of Duke “will deliver superior value to shareholders of both companies over the long term.” citing various benefits. , including: a highly strategic and complementary combination; incremental value created from the Prologis platform; reinforced external growth; and significant synergies.
And he told Connor that while Prologis would prefer to continue working privately toward a deal with Duke, in an effort to benefit shareholders of both companies, “the approach is clearly not working”, leading Prologis to “conclude that a public approach can be more constructive for all.
Although Prologis persisted in its efforts to get Duke to accept its offer, Duke made it clear that the offer was insufficient.
“As we have repeatedly indicated to Prologis during our discussions over the past few months, in accordance with its fiduciary obligations, our Board of Directors has carefully evaluated Prologis’ proposals and we remain open to exploring all avenues for maximize shareholder value, and we believe the latest offer, virtually unchanged from its previous proposals, falls short in this regard,” the company said in a statement. “We have delivered superior returns to our shareholders based on our portfolio of best-in-class industrial warehouses, our world-class organization and the execution of our growth-oriented strategic plan. Our business is robust and we have significant momentum, as evidenced by record levels of in-service and stabilized occupancy and the considerable success of leases in our development pipeline.We will continue to drive sustainable value creation and are confident in our ability to generate growth steady double-digit FFO, AFFO and dividends for our shareholders for you to come.Duke Realty will have no further comment on the proposal at this time.
Prologis officials did not respond to MLfor comment at the time of going to press.
Ward Richmond, executive vice president of global commercial real estate firm Colliers International, observed in a LinkedIn post that investing in high-quality industrial real estate in key markets is a smart move.
“Few companies have such a strong portfolio of well-positioned industrial real estate assets (110% leased or something?) as Duke (let alone Prologis!),” he wrote. “If I had this Prologis money, I would do exactly the same thing!”
Richmond added that he also encourages Colliers tenant clients to seriously consider buying rather than renting, adding that those who have done so are “smashing themselves right now” as rents double on rental rates. renewal in certain markets.
“Inflation, global conflict, pandemics, working from home, supply chain disruption all seem to point in one direction: own and control as much industrial real estate as possible (big box, last mile, infill , ports, intermodal, highway terminals, truck parking, and if you want to keep it simple, buy (or try to buy) elusive industrial land and hold onto it while you decide what innovative new facility you need to build to get your business off the ground. at the next level,” Richmond said.
About the Author
Jeff Berman, Group News Editor Jeff Berman is Group News Editor for Logistics management, Modern material handlingand Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine where he covers all aspects of the supply chain, logistics, freight forwarding and material handling industries on a daily basis. Contact Jeff Berman