Liberty Property Trust to be sold to San Francisco-based warehouse real estate giant for $12.6 billion

Liberty Property Trust, which built both Comcast towers and kicked off the reinvention of South Philadelphia’s Navy Yard before pivoting to an exclusive focus on industrial projects, has agreed to be acquired by warehouse giant Prologis Inc. in a deal that values the Wayne-based firm at $12.6 billion.

Liberty and Prologis said in a release Sunday that the boards of both companies have agreed to the all-stock deal that includes the assumption of Liberty debt. The deal would put 107 million square feet of Liberty’s existing nationwide warehouse and distribution inventory under San Francisco-based Prologis’ control, along with 5.1 million square feet of industrial projects under development, the companies said.

“The joining of these two platforms at this moment, when industrial logistics has become so pivotal to the new economy, will further the industry’s ability to support the nation’s supply chain and enhance value creation for our combined shareholders,” Bill Hankowsky, Liberty’s chairman and chief executive officer, said in the release.

A Liberty spokesperson declined further comment about the deal and its implications for the company’s local presence, citing regulatory limitations that apply to publicly traded companies.

Liberty announced a year ago that it was getting out of the business of developing and owning office buildings after a decades-long string of high-profile projects that have come to define Philadelphia’s skyline, including One Liberty Place and Comcast Corp.'s two skyscrapers.

Since then, it has sold off properties including the Penn Medicine office building at 800 Walnut St., which traded at a record-breaking valuation for Center City office space, along with buildings at the Navy Yard.

Its remaining office holdings include stakes in the Comcast Center and Comcast Technology Center along Arch Street in Center City. The Sunday announcement did not specify plans for those holdings but noted that Prologis plans to sell about $700 million of office properties as part of the deal.

Liberty has long signaled its intention to unwind its business as a suburban office landlord, selling off its Great Valley Corporate Center in 2016 and announcing early last year that it was seeking buyers for its remaining suburban office holdings.

Liberty began life in 1972 as Rouse & Associates, established by founder Willard Rouse III as a developer of warehouses and suburban office parks, including the sprawling Great Valley center in Malvern.

By the late 1980s, Rouse had turned his attention to Center City, where he overcame objections to building higher than the top of City Hall to advance plans for One Liberty Place, which became the city's tallest building when completed. It was later sold.

In the early 2000s, after Rouse & Associates had evolved into its current, publicly traded incarnation as Liberty Property Trust, Rouse oversaw the start of what would become the Comcast Center. Liberty would later build the new Comcast Technology Center nearby for the telecommunications firm, following up with the Comcast Technology Center tower that opened this year.

Liberty’s pivot to industrial projects came as its growing nationwide portfolio of warehouses and distribution centers benefited from increased demand as retailers compete to meet consumer demand for speedy deliveries of online orders.

But since revising its focus, Liberty has been the frequent target of activist shareholder Jonathan Litt of Land & Buildings Investment Management, who has urged the company to explore selling itself, citing what he has characterized as a gap between its share price and the value of its real estate.

Prologis, which controls nearly 800 million square feet of warehouse and distribution space in 19 countries, said in the release Sunday that the Liberty acquisition would deepen its presence in the Lehigh Valley, Central Pennsylvania and New Jersey, as well as in Chicago, Houston, and Southern California.

“Liberty’s logistics assets are highly complementary to our U.S. portfolio and this acquisition increases our holdings and growth potential in several key markets,” Prologis chairman and chief executive Hamid R. Moghadam said.

The deal follows Prologis’s announcement in July that it would acquire another competitor, Denver-based Industrial Property Trust, in a $4 billion cash deal that bought it 37.5 million square feet of warehouse space in Southern California, the San Francisco Bay Area, Atlanta, and other markets.

“This is yet another of a long list of multibillion Industrial portfolios to change hands in the last two years,” John Guinee, an analyst with Stifel Nicolaus & Co. in Baltimore, wrote in a research note after Sunday’s announcement.

Under the terms of Prologis’ agreement with Liberty, Liberty shareholders will receive 0.675 Prologis shares for each of their own, the companies said. The transaction is expected to close in the first quarter of 2020.