Prologis’ proposed acquisition of Duke Realty would boost the industrial giant’s portfolio across Southern California by almost 15 percent.
Duke Realty currently owns about 15 million square feet of industrial real estate spread over Los Angeles and Orange County, throughout the Inland Empire and south to San Diego, according to a TRD analysis of the firm’s properties.
San Francisco-based Prologis currently owns 97 million square feet across the region — about 10 percent of its global industrial and logistics portfolio, the company confirmed to TRD.
The firm’s $26 billion deal to buy Indianapolis-based Duke Realty allows Prologis to drastically boost its Southern California portfolio without having to participate in bidding wars or make unsolicited offers at high prices — both of which are currently the norm. In one fell swoop, Prologis would have control of Duke’s more than 50 properties in the region, most of which are already leased to attractive tenants. Duke currently boasts Amazon, Wayfair, US Foods and Clorox, among others, as tenants on some of its new developments.
“It doesn’t surprise me,” Patrick Schlehuber, head of acquisitions for Los Angeles-based Rexford Industrial Realty, said of the planned acquisition involving two larger competitors. “Duke Realty has been very aggressive growing their portfolio and Prologis has found their best way to grow — through big acquisitions.”
In 2018, Prologis purchased DCT Industrial Trust for $8.5 billion, a deal that added 71 million square feet of industrial space to Prologis’ portfolio. Two years later, it bought Liberty Property Trust for about $13 billion. That deal included about 108 million square feet of existing logistics space, as well as 1,750 acres of land for future development and 5 million square feet of developments in progress.
“When Prologis buys a property, it has no effect on its bottom line,” said David Auerbach, a managing director at Armada ETF Advisors, a firm that invests in publicly traded REITs. “The only way to materially grow is by buying other companies.”
In total — if the deal goes through after shareholder approval — Prologis would add about 153 million square feet of industrial real estate across the U.S.
But, it’s unclear how the two firms will consolidate personnel. Prologis is at least planning to add Duke Realty CEO Jim Connor to Prologis’ board of directors, it disclosed in financial filings in connection with the proposed merger last week.
Prologis has more than 2,000 employees worldwide, while Duke counts about 200.
“Prologis will hire a number of Duke Realty personnel,” the company disclosed in an investor presentation. However, “no changes” will be made to Prologis’ own executive management team.