JV Partner Buying CenterPoint for $3B-Plus

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OAK BROOK, IL-Like their counterparts at most REITs, CenterPoint Properties Trust officials have thought they were undervalued by Wall Street. They found someone willing to pay at least 9% more than the industrial REIT’s current stock price.

CalEast Industrial Investors LLC, a joint venture including California Public Employees’ Retirement System and LaSalle Investment Management, has agreed to pay $3.4 billion for the largest industrial property owner in the Chicago market, which represents a per-share price of $50. CalEast Industrial Investors has been a joint venture partner with CenterPoint Properties Trust on developments, particularly in Southeast Wisconsin.

In addition to 33 million sf of industrial space, CenterPoint Properties Trust has 5.5 million sf of projects under development. Its land bank, both wholly owned acreage as well as with partners, could accommodate another 44 million sf. “Through CalEast’s acquisition of CenterPoint, we gain access to an attractive warehouse portfolio, a high quality land bank, and an outstanding management team that has played a pioneering role in the rapidly emerging intermodal logistics industry,” says LaSalle Investment Management chief executive officer Lynn Thurber.

Although Thurber indicates CenterPoint management is expected to remain in place following the early 2006 closing, chief executive officer Michael M. Mullen and president Paul S. Fisher were to meet with their approximately 100 employees this morning. “You may be interested in knowing that CalEast has told me on numerous occasions that they believe CenterPoint’s most valuable assets ‘drive home’ every night,” Mullen says in a memo to employees.

While 9% more than the company’s current common share price, the $50 per share being paid by CalEast is 13% more than CenterPoint’s average price over the past three months. Last month, CenterPoint’s stock was downgraded to “sell” by Deutsche Securities, its second downgrade in 2005. RBC Capital Markets downgraded CenterPoint stock to “underperform” in May.

“The price achieved reflects the significant value of the operating platform that we have create,” says Mullen, whose company’s board of directors was advised by Wachovia Securities and Kirkland & Ellis. Morgan Stanley and Jones Day provided financial and legal advice, respectively, to Cal East.

“Rapid growth in global trade is driving significant change in the warehouse requirements and logistics strategies of companies around the world,” says CalPERS senior investment officer Mike McCook. “We believe that CenterPoint is very well positioned to capitalize on the continuing modernization of the global supply chain.”

Although the company’s market capitalization is $2.2 billion, CalEast will assume CenterPoint’s debt, including preferred shares.