Tuesday, February 01, 2011

AMB Property Corp Acquires Prologis
AMB Property Corp acquired agreed to acquire ProLogis yesterday.  The deal valued ProLogis near its Friday close of approximately $15.00 per share price.  Based on one estimate of ProLogis' 2011 Fund From Operations, it appears the sales price is at 23 times Prologis' expected 2011 FFO.  This seems like a high multiple given ProLogis debt, but is lower than AMB's 33 AFFO (trailing) multiple.  Some of the executives that formed Dividend Capital, a sponsor of non-traded REITs, have backgrounds at ProLogis.  AMB and ProLogis are the two largest industrial REITs, and combined would be a $14 billion company.  The new company will keep the ProLogis name and symbol (PLD). 

The non-traded REIT sponsors are going to love FFO multiples over twenty and be delirious with a an FFO multiple above thirty.   The impact of the front end costs will be a wiped away with FFO multiples this high.  Better yet, non-traded REITs are now an arbitrage play!  Seriously, the valuations should be kept in the nine to twelve range for Adjusted Fund from Operations for back of the envelope valuation estimates. 

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