ProLogis, North America's largest industrial real estate investment trust, will pay $1.03 billion for the industrial operations of English developer Parkridge, as it seeks to extend its presence in the UK and Eastern Europe.
Denver-based ProLogis will buy Parkridge's industrial development business for $581 million, the acquirer said today in a PRNewswire statement. The company also said an unidentified Parkridge joint venture partner agreed to sell its 50% interest in central European industrial developments for $449 million, giving ProLogis full control of that operation.
CEO Jeffrey Schwartz is pursuing a strategy of worldwide expansion to meet rising demand for warehouse space. ProLogis bought Catellus Development Corp. In 2005 for $5.5 billion, almost doubling its holdings. Excluding today's announced acquisitions, ProLogis had more than three times the sales of its nearest US competitor, AMB Property Corp. of San Francisco.
The transaction „enables us to expand our presence in existing and target markets through the acquisition of one of our top competitors in European industrial development,” Schwartz said in the statement. It will allow growth „across a broader range of European markets, without the need to commit a significant amount of management's time.” The acquisition will add about $3 billion of future potential development and is ProLogis' biggest since Catellus, said Melissa Marsden, the company's senior vice president for investor relations.
Birmingham, England-based Parkridge, founded in 1998 by Chairman John Cutts and partners, is a developer of industrial, retail and residential properties throughout Europe, including in the UK, France, Germany, Russia, Hungary, Poland and Luxembourg. Cutts will join ProLogis as the vice chairman for Europe and remain as chairman and chief executive officer of Parkridge Retail, which develops shopping centers and mixed-use projects in the UK and Poland
The deal will add about 35.5 million square feet to the 422 million square feet of real estate that ProLogis owns, manages or has under development worldwide, Marsden said. All but 5.6 million of that is either under construction or potential development, she said, including 20.2 million in the UK and another 9.7 million spread across Poland, Hungary, the Czech Republic, Slovakia and Romania.
The transaction will likely be „modestly dilative” to earnings in the first year, ProLogis said in today's statement. That's mostly because many Parkridge projects are still under construction, Marsden said. ProLogis left unchanged its projected funds from operation for 2007 of $3.80 to $4 a share. The company had funds from operation, a measure of cash flow used by REITs, of $947.9 million, or $3.69 a share, last year.
ProLogis said that, of the $581 million it is paying for Parkridge's operations, $443 million will be paid for Parkridge's industrial business. It will pay 25.4% of that in cash, and the remainder in ProLogis common stock. Its $138 million investment in Parkridge's retail business is to be paid in cash, it said. The cash for the transactions will come from a new $600 million loan and from the company's existing lines of credit, the company said.
The deal gives ProLogis control of an industrial land bank in the UK of 800 acres, capable of supporting 14 to 15 million square feet of new warehousing and distribution centers, which ProLogis valued at $2.25 billion. The eastern European joint venture has potential developments valued at more than $650 million, according to ProLogis. (Bloomberg)