Blackstone's $3.1 billion sale of nearly 14 million square feet of industrial properties to Prologis announced yesterday will provide pricing transparency to a sector "where wide bid-ask spreads have persisted for several quarters," write Green Street analysts Vince Tibone and Jessica Zheng in a research note about the blockbuster deal. They also note that "a comp of this size and prominence could help thaw the industrial private transactions market."
The deal comes as industrial real estate transaction volumes have declined more than 70% year over year in the first quarter, according to Green Street's sales comp database, providing little new data for buyers and sellers seeking to establish current pricing.
As the companies announced, the acquisition price represents an approximately 4% cap rate in the first year and a 5.75% cap rate when adjusting to today's market rents and "appears to be fairly representative of a high-quality, national portfolio," Tibone and Zheng write.
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The deal includes properties in Atlanta (22% of square footage), SoCal (15%), NY/NJ (14%), Phoenix (12%), Dallas (11%), Baltimore/DC (9%), Pennsylvania (5%), Las Vegas (5%), Northern California (2%), and South Florida (2%). "We currently value this market mix at the deal weightings within Prologis' NAV
model at a blended cap rate that is 10 to 20 basis points higher than the transaction cap rate. The cash lease mark to market on the portfolio to be acquired is in the low-50% range versus 60% for Prologis' current portfolio as of the end of the first quarter."
Additionally, "the price per square foot for the transaction is $220, which is comparable to our current per pound valuations for this market mix in Prologis' NAV."
Green Street is currently reviewing industrial cap rates, which "may need to be revised lower as a result of this deal," Tibone and Zheng say.
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Erika Morphy
Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.
