GlobeSt.com UPDATE: ProLogis Fills Need in NE US

When the deal is consummated, ProLogis will own 20% of Keystone and Eaton Vance 80%, he says. The deal with Boston-based Eaton Vance is the largest ProLogis' history, Seiple adds. "In 1999, we purchased the Meridian Industrial Trust, which was slightly smaller," he tells GlobeSt.com.

However, the 33 million sf from Keystone that it will add to its 180-million-sf North American portfolio is not as important as giving it a bigger presence in the Northeast US as well as the Miami area, Seiple says.

"Our strategy is to follow our customers and to have a large presence in all of the major logistic hubs," he tells GlobeSt.com. "By year end, we will have 20 million sf in L.A., by year end we will have 20 million sf in Dallas, and in Atlanta we will have 15 million sf by the end of the year. The Northeast, which is the New York area, New Jersey and Pennsylvania, we'll have about 29 million sf, because of Keystone. Two-thirds of Keystone's holdings are in the Northeast."

The deal will also give them a bigger presence in Florida, he notes. "Miami is not a major market like L.A. or Dallas, but we'll be able to serve the five million people in South Florida, as well as the big import/export business down there," Seiple tells GlobeSt.com.

Fitch Rating, while giving the deal overall high marks, notes there is a potential for conflicts. "I don't see any conflicts," Seiple tells GlobeSt.com. "We see it is being additive. We have to have a critical mass of properties and land in key areas. This will give us both."

ProLogis gains a foothold in markets both by internal growth and purchasing other companies, such as Keystone, he notes. "We do both," he says. "But when you can make significant progress in one deal, that is always preferable. Also, in the past we've done $10 million and $30 million deals, and we'll continue to do that as the opportunity rises. But when the opportunity comes available for a deal like Keystone, you want to take it."

ProLogis didn't structure the 80-20 split with Eaton Vance to reduce its risk, Seiple says. "It's not a reduction of risk," he tells GlobeSt.com. "It allows us to enhance our return on capital and stretch our capital further. We could have bought it ourselves, but we wouldn't."