Prologis buys $3bn of warehousing from Blackstone


The logistics property company Prologis has concluded a large deal with the investment fund Blackstone. On Monday 26th June the two companies announced that they had reached a “definitive agreement for Prologis to acquire nearly 14 million square feet of industrial properties from opportunistic real estate funds affiliated with Blackstone for $3.1 billion, funded by cash.”

The price is justified by Prologis on the basis that it “represents an approximately 4% cap rate in the first year and a 5.75% cap rate when adjusting to today’s market rents”, which means that the operating income yield from the properties, is at present, 4% but when the existing leases are re-negotiated they should yield 5.75%.
It is unclear from the statement where these properties are located. They seem to be in the US but this is not certain.

The implication from the statement from Blackstone is that the motivation to sell the properties might be described as tactical because of the vehicles in which the properties were held by Blackstone which they call “opportunistic real estate funds affiliated with Blackstone”. Confusingly however, Blackstone asserted that the “transaction demonstrates the exceptional demand for high-quality warehouses. With near record low vacancy, logistics remains a high conviction theme for us”, again suggesting that the sale is driven by shorter-term positioning. Blackstone states that it retains a portfolio of “$100 billion of warehouses in North America and $175 billion in total around the world.”

In contrast Dan Letter, president of Prologis, commented that the purchased properties “fit perfectly into our long-term strategic plan for growth.”

It is hard to be certain what this deal says about the market for warehousing. The conventional perception is that the logistics property market is still propped-up by e-retail demand, however volumes from internet retailing have fallen-back from the highs seen in 2020, 2021 and 2022. Possibly Blackstone is looking to ‘take profits’ in a market which, in contrast with some other sectors of the property sector, is still very healthy, whilst ProLogis may be taking a longer view. Either way, both sides of the deal seem to have confidence in the stability and prospects of the logistics property sector over the long term.

Source: Ti Insights

Author: Thomas Cullen

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