$12.6B deal for Liberty Property Trust
Shareholders must still approve the transaction
WAYNE >> Liberty Property Trust, the Wayne-based commercial real estate development firm, will be acquired by San Francisco-based Prologis Inc. in an all-stock transaction valued at $12.6 billion, including the assumption of debt.
The deal was announced earlier this week by the two companies, and is expected to close in the first quarter of 2020. Under the terms of the agreement, Liberty shareholders will receive 0.675 of a Prologis share for each Liberty share they own. The transaction has been unanimously approved by the board of directors of Prologis and the board of trustees of Liberty. It is now subject to the approval of Liberty shareholders and other customary closing conditions.
“Liberty is a company we’ve admired for quite some time. They have high quality assets in many of our target markets,” Prologis chairman and CEO Hamid Moghadam, said during a merger conference call Monday, following the announcement.
Liberty Property Trust, started
by Willard G. Rouse III, is known for its development of Great Valley Corporate Center in East Whiteland, Chester County — in the early days of the company when it was Rouse & Associates. Other notable regional projects have included the Navy Yard in South Philadelphia, Comcast Center in Philadelphia and the mixeduse Camden Waterfront in New Jersey. The Great Valley Corporate Center, along with other suburban Philadelphia office properties, have been sold over the past several years.
Liberty Property Trust brings to the deal a portfolio that includes 107 million square feet, 5.1 million square feet of projects in development and 1,684 acres of land for future development that could result in the potential addition of 19.7 million square feet.
Prologis plans to sell approximately $3.5 billion of Liberty’s assets, including $2.8 billion of non-strategic logistics properties and $700 million of office properties. No specific details about assets that may be sold are available at this time.
“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 in a statement. “The strategic fit between the portfolios allows us to capture immediate cost and long-term revenue synergies.”
This transaction is anticipated 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 the companies. Additional synergies have the potential to generate approximately $60 million in annual savings.
The transaction deepens Prologis’ presence in target markets such as Lehigh Valley, Chicago, Houston, Central Pa., New Jersey and Southern California, the companies said in a press release.
“We’ve been trying to grow our presence in the Lehigh Valley for years and the fact is that Liberty has led this market from its inception,” Eugene Reilly, Prologis chief investment officer said during the merger conference call, adding that the Lehigh Valley portfolio totals 26 million square feet with additional land to build 4 million square feet in the future.
“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,” Bill Hankowsky, Liberty chairman and CEO, said in a statement. “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.”
During the merger conference call, Moghadam acknowledged that Hankowsky will not be joining the board of directors of Prologis Inc.
“We would have been delighted to have Bill Hankowsky on our board,” Moghadam said on the call. “He’s the caliber of an individual and professional that could be very accretive to our governance, etc. Our board is just getting too big.”
Hankowsky has been with Liberty since 2001. In 2002 he was named president and in 2003 appointed chief executive officer and elected chairman of the Liberty’s board of trustees.
Asked during the merger conference call “who approached who” about the merger, Reilly did not provide specifics, instead offering a more general answer.
“We look at every single transaction in this space that is out there, whether it is on the market or not on the market and interesting to us. We are constantly in dialogue with people, exploring ways of growing our business and will continue to do so,” he said.
However, in an FAQ provided to Liberty Property employees and filed with the Securities and Exchange Commission (SEC) Oct. 29, employees were told that Prologis approached Liberty Property Trust, and the discussions have been taking place “only over the past few weeks.”
Liberty Property Trust has about 250 employees working at 20 corporate locations, including 100 at the company’s Swedesford Road headquarters in Wayne, Chester County, according to Jeanne Leonard, vice president investor relations/corporate communications for Liberty Property Trust.
In response to the question, “Will I have a job with Prologis,” employees were told “it is too early to tell,” and that more information will be known in the coming weeks, according the FAQ.
However, on the merger conference call, Reilly indicated Prologis hopes “to retain a number of Liberty’s team for property management, leasing, development and other open positions today at Prologis.”
“They have assured us that making staffing decisions is a top priority for them. They are going to start meeting with Liberty employees soon,” the Liberty employee FAQ stated.