It's the biggest commercial deal in the New Year. Denver, CO-based ProLogis (NYSE: PLD) is selling a portfolio of U.S. retail and mixed-use assets and the Catellus name for a total purchase price of about $505 million.
Most of the deal with affiliates of San Francisco, CA-based TPG Capital is scheduled to close in the first quarter, the company announced.
The properties, owned directly or through equity interests, to be sold in the transaction include four shopping centers, two office buildings, 11 mixed-use projects with related land and development agreements, two residential development joint ventures, Los Angeles Union Station, certain ground leases and other right-of-way leases.
Net proceeds will be used for the repayment of debt and to fund future development activity.
"These assets were acquired in our 2005 merger with Catellus Development Corporation," says ProLogis CEO Walter C. Rakowich.
"We have built upon Catellus' legacy for the past five years and are pleased to see these assets and people transfer to TPG, which has significant experience in real estate and a commitment to building the business.
"The Catellus assets are high-quality with good long-term prospects, but they are not in keeping with our strategy to concentrate our investment in core industrial properties in the world's major logistics corridors."
"We are excited to partner with the strong Catellus management team in the next chapter of the company's evolution," said Kelvin Davis, TPG senior partner.
"The company is already well positioned through its diverse portfolio of high-quality, well-occupied assets in growing markets.
"As a standalone company, we believe the new Catellus will be in an excellent position to capitalize on the economic recovery and build on its strong footprint."
The majority of ProLogis employees associated with the retail/mixed-use properties will be offered employment with Catellus.
Following the closing of the sale to TPG, it is expected that ProLogis' president and chief investment officer Ted R. Antenucci, who joined ProLogis with the Catellus merger in 2005, will rejoin Catellus after a transition period concluding in mid-2011., according to the ProLogis news release.
Mike Curless, managing director of global investments, is expected to assume Antenucci's investment role upon Antenucci's departure.
ProLogis will retain a preferred equity interest in Catellus of approximately $70 million, which will earn a preferred return at an annual rate of 7 percent for the first three years of the term, 8 percent for the fourth year of the term and 10 percent thereafter until redeemed.
Partial or full redemption can occur at any time at TPG's discretion or after the five-year anniversary at ProLogis' discretion.
Ted R. Antenucci
ProLogis also will provide $30 million first mortgage financing on Los Angeles Union Station, which will bear interest at 7 percent.
TPG Capital is the global buyout group of TPG, a leading private investment firm founded in 1992, with more than $48 billion of assets under management and offices in San Francisco, Beijing, Fort Worth, Hong Kong, London, Luxembourg, Melbourne, Moscow, Mumbai, New York, Paris, Shanghai, Singapore and Tokyo.
TPG Capital (formerly Texas Pacific Group) is one of the largest private equity investment firms globally, focused on leveraged buyout, growth capital and leveraged recapitalization investments in distressed companies and turnaround situations.