CRE Mega-Deal: Prologis to Buy Duke Realty for $26Bn
CNBC - Warehouse giant Prologis said Monday that it will acquire its smaller rival Duke Realty in an all-stock deal valued at about $26 billion, including debt, in a vote of confidence for the red-hot industrial real estate sector. The announcement comes after Duke Realty in May rejected a nearly $24 billion buyout offer from Prologis, calling it insufficient. Duke Realty had a market capitalization of about $19.1 billion, as of Friday’s market close. Its shares have dropped 24% so far this year, while Prologis’ stock is down a little more than 30%.
Industrial real estate owners have come under pressure with fears mounting that demand for warehouse space could be cooling as retailers’ e-commerce activity drops off from a Covid pandemic high. Last month, The Wall Street Journal reported that Amazon was looking to sublease at least 10 million square feet of its warehouse space and to potentially end or renegotiate some of its leases. This news spooked investors in the sector that had been on a tear in recent years. Companies from Walmart and Target to Dick’s Sporting Goods have also been investing in ways to use their stores as mini fulfillment centers that are closer to customers’ homes. Prologis, which has a market value of nearly $87 billion, watched its shares fall more than 6% in afternoon trading Monday following the news. Duke Realty shares rose over 2%.
Prologis controls roughly 1 billion square feet of warehouses and distribution centers used by companies including Amazon, Home Depot and FedEx. Duke Realty owns and operates about 160 million square feet of industrial real estate in 19 major U.S. logistics markets. Both companies’ boards of directors have unanimously approved the transaction, a press release said. Under the terms of the agreement, Duke Realty shareholders will receive 0.475 of a Prologis share for each Duke Realty share they own. The transaction is expected to close in the fourth quarter. Prologis said the transaction will allow for it to gain properties in key geographic regions and cities including Southern California, New Jersey, South Florida, Chicago, Dallas and Atlanta.
It said it plans to hold 94% of the Duke Realty assets and exit one market. In recent years, Prologis has bulked up its real estate footprint through acquisitions. It bought Liberty Property Trust in 2020 and DCT Industrial Trust in 2018. It isn’t the only player that has been looking to scoop up more logistics facilities, either. Earlier this year, Industrial Logistics Properties Trust bought Monmouth Real Estate Investment Corp. in a deal valued at about $4 billion.