Prologis, a huge player in the industrial real estate market, has struck a deal worth $8.4 billion to buy DCT Industrial Trust, a major company in the same sector, in a transaction that includes dozens of Northern California properties.
San Francisco-based Prologis, through its proposed purchase of Denver-based DCT Industrial, would obtain a portfolio of industrial buildings totaling 71 million square feet — the size equivalent of roughly three-dozen regional shopping malls — along with development projects and vacant sites.
According to information in a supplement to DCT’s first-quarter financial results, DCT’s portfolio includes an estimated 29 properties in Northern California. The properties total 5.13 million square feet, including DCT properties in San Leandro, Hayward and Tracy.
“For some time, we have considered DCT’s realigned portfolio to be the most complementary to our own in terms of product quality, market position and growth potential,” Prologis Chief Executive Officer Hamid Moghadam said in a prepared release.
Both companies specialize in what generically is known as logistics real estate, which includes industrial, warehouse and distribution centers.
“This transaction underscores the exceptional quality of DCT’s portfolio, platform and customer relationships,” DCT Industrial CEO Philip Hawkins said in a prepared release.
The deal also highlights the value of industrial properties in hot markets such as the Bay Area.
Cupertino-based Apple, Menlo Park-based Facebook, Mountain View-based Google and other tech giants have gobbled up huge amounts of space in Silicon Valley and elsewhere, through a combination of property purchases and leases. That activity has, in turn, prevented industrial development on some parcels where it might otherwise have occurred, and increased the value of existing industrial properties.
Seattle-based Amazon also is among the digital commerce companies that hunger for more industrial sites to support their online retailing activity.
“While we are later in the economic cycle, we believe that the industrial market has a long runway given growing e-commerce-related demand and the subsequent modernization of companies’ supply chains to accommodate for this,” Matt Kopsky, an analyst with St. Louis-based investment firm Edward Jones, wrote in a research note to clients regarding the Prologis-DCT deal, which is expected to be completed by the end of September.
Among the most high-profile of the Prologis properties in Northern California is a vast fulfillment complex in Tracy that’s leased to Amazon.
“We believe this is a positive strategic acquisition for Prologis,” Kopsky said in the research note. “DCT owns warehouses primarily in high-growth markets, which overlap nicely with Prologis’ portfolio. Additionally, DCT has a robust development pipeline in core markets.”
During 2017, Prologis earned $1.64 billion on revenue of $2.87 billion, while DCT Industrial earned $102.8 million on revenue of $429.7 million.
At the end of March, Prologis owned, or had investments in, 683 million square feet of properties, based on the combined size of the existing buildings and potential square footage of future buildings that could be constructed on vacant properties.
With properties in 19 countries, Prologis serves a base of 5,000 customers.
“This deal diversifies our customer roster through the addition of some 500 new relationships,” Prologis CEO for the Americas Eugene Reilly said in a prepared release.