Yahoo Finance Prologis (PLD) & DCT Industrial Merger Nears Conclusion
Industrial REIT Prologis, Inc.’s PLD deal with DCT Industrial Trust Inc. DCT to acquire the latter in an $8.4-billion stock-for-stock deal, including debt assumption, is nearing conclusion, with stockholders of DCT Industrial approving the merger agreement.
Now the transaction remains subject to some closing norms and is expected to close on or around Aug 22. Upon completion of the deal, DCT Industrial stockholders will be given 1.02 shares of Prologis in exchange of each DCT share.
According to the previously-published press release from Prologis, with this acquisition, the company will add 71-million-square-foot of operating portfolio that overlaps the company’s existing assets. This will enable the company to strengthen its foothold in major high-growth markets of Southern California, the San Francisco Bay Area, New York/New Jersey, Seattle and South Florida.
Further, this deal will help the company acquire 7.1 million square feet of development, redevelopment and value-added projects, 195 acres of land in pre-development, with build-out potential of more than 2.9 million square feet, and 215 acres of land under contract or option, with a build-out potential of more than 3.3 million square feet.
Considering DCT’s high-quality realigned portfolio, along with an efficient platform and strong customer base, this buyout is expected to solidify Prologis’ market position and improve its growth curve. Moreover, the combined portfolio will enable the company to realize significant economies of scale. In fact, management expects $80 million in day-one synergies, and $40 million of future annual revenue synergies and incremental development value creation.
Notably, industrial REITs are gaining traction as high consumer spending, strengthening e-commerce market, and a healthy manufacturing environment amid recovering economy and job market are spurring demand for this real estate category and giving significant impetus to industrial REITs like Prologis, Liberty Property Trust LPT and Duke Realty Corp. DRE to flourish.
Per a study by the commercial real estate services firm — CBRE Group — availability rate for the U.S. industrial real estate market in Q2 shrunk 10 basis points (bps) to 7.2%, denoting the lowest level since Q4 2000. Additionally, with demand surpassing new supply, net asking rents inched up 1.7% in Q2 to $7.11 per square feet — marking the highest level since 1989.
Amid these, Prologis is well poised to excel as it has the capacity to offer modern distribution facilities in key position. However, any protectionist trade policies will have an adverse impact on economic growth, as well as this asset category’s business over the long term. Also, a whole lot of new buildings are slated to be completed and made available in the market in the near future, leading to lesser scope for rent and occupancy growth.
Prologis currently has a Zacks Rank #3 (Hold). The company’s shares have appreciated 8% in a month’s time compared with its industry’s growth of 3.7%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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