Catellus to Be Bought by ProLogis
Combining the two REITs will result in an entity that will have warehouse and distribution centers valued at $21 billion.
June 07, 2005|Roger Vincent | Times Staff Writer
Catellus Development Corp., one of California's largest private landowners
thanks to a lineage that dates to the earliest days of railroads in the
West, has agreed to be sold for $3.6 billion in cash and stock to
warehouse and distribution giant ProLogis.
Both companies are real
estate investment trusts that develop and operate industrial
properties. Catellus also owns Union Station in Los Angeles and a
portion of the residential and office development at
Mission Bay in San
Francisco.
ProLogis will continue to develop Catellus' properties,
including
Kaiser Commerce Center, a 588-acre former Kaiser steel mill
in
San Bernardino County near truck routes that serve the ports of Los
Angeles and Long Beach. Catellus also is constructing office buildings
at Los Angeles Air Force Base in El Segundo with Kearney Real Estate Co.
Under
terms of the deal, ProLogis would pay $33.81 a share, a 16% premium
over Catellus' closing price Friday, or 0.822 share of ProLogis for each
Catellus share. The total value of the deal is $4.9 billion including
debt, the companies said, and marks the biggest U.S. real estate
acquisition of 2005.
The announcement drove Catellus' shares up $3.75, or 13%, on Monday to $32.99. ProLogis' shares fell $1.26 to $40.11.
The combined company would have more than 350 million square feet of warehouse and distribution centers valued at $21 billion.
"Catellus
has the best industrial portfolio in the United States," said Jeffrey
H. Schwartz, chief executive of ProLogis. The majority of Catellus'
holdings are in California, which Schwartz called the top industrial
real estate market in the country, with six times more buildable land in
the state than ProLogis.
"We wanted a much larger presence in Southern California, and that was a driving reason to do this" acquisition, Schwartz said.
Catellus
is "one of the most aggressive of the developers of new industrial land
at the moment," Jim Ulmer, a senior vice president at Baltimore-based
LaSalle Investment Management, told Bloomberg News. LaSalle owns 3.2
million shares of ProLogis and no Catellus shares.
"It's a good deal for Catellus, and it's a very good deal for ProLogis," he said.
Nelson
Rising, chairman and chief executive of Catellus, said, "We believe
this is an excellent way for our shareholders to realize the value of
the platform we have built and to participate in the future growth of
ProLogis."
Rising, 63, has been Catellus' CEO since 1994 and
previously was a senior partner at Maguire Thomas Partners, where he was
in charge of major Los Angeles projects including the Library Tower and
Playa Vista. Rising, whose 1.4% stake in Catellus is worth about $47
million, would join ProLogis' board of directors, but he would not have a
management post.
Catellus' president of commercial development,
Ted Antenucci, would become president of global development for
ProLogis. Schwartz declined to speculate on possible layoffs of Catellus
employees.
The union of the two companies "is very complementary
in terms of what they bring to the table," said John Long, chairman of
the Richard S. Ziman Center for Real Estate at UCLA and a private real
estate investor through Highridge Partners and Golden Boy Partners.
Catellus,
based in San Francisco, has a huge inventory of land and expertise at
getting government approvals for new construction, while ProLogis is a
respected large-scale developer, Long said.
Aurora, Colo.-based
ProLogis owns and manages 2,043 warehouse and distribution centers
totaling 310.8 million square feet in North America, Europe and Asia.
Its customers include FedEx Corp., Home Depot Inc., General Electric
Co., Sears Holdings Corp., Unilever and Wal-Mart Stores Inc.
Catellus
became a REIT at the start of last year as it shifted its focus to
building and operating industrial parks instead of developing urban
mixed-used projects such as Union Station and Santa Fe Place in San
Diego. It has 40.6 million square feet of property, mainly distribution
centers, across the U.S.
Santa Fe Pacific Corp. spun off Catellus to shareholders in 1990.
But
the company's roots and gigantic land holdings date to the 1850s, when
civil engineer Theodore D. Judah built a 23-mile line called the
Sacramento Valley Railroad. It later became the Central Pacific
Railroad, the first to conquer the Sierra Nevada. In 1869, the line
linked up with the Union Pacific, coming from the East, with the driving
of the famed golden spike at Promontory Point, Utah.
As part of
its mandate for a transcontinental railway, the federal government gave
the railroad builders vast tracts of land as an incentive to complete
the historic rail linkage.
Later, with its name changed again,
this time to Southern Pacific, the railroad heavily promoted its
territory in the West to attract residents and businesses and became one
of the most powerful players on the economic scene in 19th century
California.
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