Denver-based industrial REIT ProLogis is forming a real estate fund to acquire the logistics assets from DP Industrial, a joint venture between Reno, Nevada-based developer Dermody Properties and the California State Teachers Retirement System, for $1.85 billion (€1.3 billion).
The properties are being acquired by ProLogis North American Properties Fund III, a $1.8-billion vehicle recently established by ProLogis. The firm has a 20 percent equity stake in the fund, which was advised by Lehman Brothers. The investment bank also provided debt and equity financing for the fund.
With the transaction, ProLogis picks up 114 properties with a total of 24.7 million square feet of industrial space in the Reno, Las Vegas, Eastern Pennsylvania, Chicago and Southern California markets. The deal includes 1.2 million square feet of space currently under construction and 518 acres of undeveloped land—enough for an additional 9.3 million square feet of space, according to the firm.
ProLogis says approximately 49 percent of the acquired properties are in Reno, while around 64 percent of the developable land is located in two markets, Chicago and Eastern Pennsylvania.
“At 90.5 percent leased on average, we believe the portfolio, which was well-managed by DP, offers us an even greater opportunity to increase occupancy and stabilized yields over the near term,” Walter Rakowich, ProLogis’ president and chief operating officer, said in a statement.
The joint venture between Dermody and CalSTRS was launched in 2003 with the acquisition of the interests in a fund sponsored by Lazard Freres Real Estate Investors. At that time, the joint venture consisted of 105 buildings comprising 17 million square feet and 415 acres of land.
CalSTRS invested a reported $560 million in the venture, which was, at the time, its largest real estate investment ever.