WEST CONSHOHOCKEN, PA-Keystone Property Trust entered into a definitive merger agreement to be acquired by a partnership among Denver-based ProLogis, which is the world’s largest industrial REIT, and affiliates of Boston-based Eaton Vance Management for $23.80 a share in cash. This represents a 17% premium over the closing price of Keystone shares on April 30. The deal includes $850 million in equity and is valued at $1.6 billion, including debt and expenses.

ProLogis and the Eaton Vance affiliates have formed five separate entities to buy Keystone’s 22.9 million sf of bulk industrial properties, which are valued at $1.4 billion. The Eaton Vance affiliates will own 80% and ProLogis will own 20% of each of the entities. ProLogis will receive management and performance incentive fees from the newly formed entities, which is consistent with the practice at existing ProLogis property funds. In addition, ProLogis will purchase directly the remaining 10.9 million sf of assets own by Keystone or by Keystone JVs, for $290 million.

Locally based Keystone’s current portfolio consists of 147 properties, including ones under development, aggregating more than 34 million sf in the Eastern US. The purchase significantly enhances ProLogis’s positions in New Jersey, eastern Pennsylvania, Indianapolis and the Miami airport market, “four of the most important logistics markets in the US,” says K. Dane Booksher, chairman and CEO of ProLogis.

In addition, several of Keystone’s major customers are current ProLogis customers. They include Exel Logistics, the Home Depot, Procter & Gamble, APL Logistics and Sears Logistics Services. The Keystone acquisition brings the total number of assets under management in ProLogis Property Funds to $7.6 billion.

Jeffrey M. Kelter, Keystone’s president and CEO, could not be reached. Keystone was formed as a REIT in 1997. Its asset base has increased six-fold and it has delivered a compound annual shareholder return of 16.5% since then. The ProLogis/Eaton Vance transaction is expected to reach completion during the third quarter of this year. Keystone and ProLogis trade as KTR and PLD, respectively, on the NYSE.

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