Black Creek Group Presents Plans for Industrial Property Trust Sale
October 22, 2019 | James Sprow | Blue Vault
In a stockholder presentation filed on October 22, Black Creek Group updated shareholders on plans to sell Industrial Property Trust’s wholly-owned portfolio of 236 properties located across 24 geographical areas to Prologis for approximately $3.99 billion. With the sale that is expected to close in January 2020, shareholders will receive, in the form of a special distribution, an amount currently estimated to be approximately $12.54 per share (less applicable distribution fees on Class T shares).
Not all of the assets of Industrial Property Trust (“IPT”) will be included in the sale to Prologis. A “Build-to-Core Portfolio” (BTC Portfolio) comprised of minority interests in two joint venture partnerships will be held by IPT which will continue to exist as a Maryland REIT. IPT will continue to pursue its investment strategy with respect to the BTC Portfolio to realize value at the optimal time and in the optimal manner, according to the presentation. Based on the most recent estimated net asset value of the BTC Portfolio of $1.08 per share as of November 30, 2018, and after taking into account the increase in the Special Distribution resulting from the sponsor restructuring transactions, the completion of the asset sale would have been approximately $0.72 per share. Dividends will continue until the day immediately preceding the close of the Asset Sale, accruing daily at the quarterly rate of $0.1425 per share.
Pending stockholder approval of the proposed transactions, IPT shareholders will receive $12.54 per share in the form of a special distribution. Based on the most recent NAV of the BTC Portfolio of $1.08, the value of the BTC Interests after completion of the Asset Sale would have been approximately $0.72 per share (taking into account the increase in the Special Distribution resulting from the sponsor restructuring transactions). The implied value per share to shareholders in IPT totals $13.26.
The IPT portfolio after the Asset Sale to Prologis would consist of 52 acquired or completed buildings, eight buildings under construction estimated to be completed in Q2 2020, 11 buildings in pre-construction phase estimated to be completed in Q2 2021, and one land parcel. The portfolio comprises approximately 18 million square feet across 16 industrial markets. IPT plans to convert to a Maryland REIT to facilitate future liquidation, remain a public reporting company, expect corporate governance to generally remain the same, and have a single class structure of Class A beneficial interests.
U.S. federal tax rules generally require liquidation to be complete within 24 months. The portfolio will be valued at least annually, with the last valuation as of November 30, 2018, at a net value of $0.72 per share. The next valuation is expected to be released no later than the closing of the Prologis asset sale. The REIT does not expect to pay additional distributions in 2020. The REIT’s share redemption program will be reinstated solely for redemptions due to death and will be capped at $1 million.
Shareholder proxies will be mailed in October. A special meeting of shareholders in IPT is anticipated on December 11, 2019. The transaction is anticipated to close in the first quarter of 2020 and net proceeds of the Asset Sale will be distributed within five business days following the closing. IPT will continue to own its interests in the BTC Portfolio.
Industrial Property Trust’s Success
Industrial Property Trust represents the third successful nontraded REIT sponsored by Black Creek Group. DCT Industrial Trust, Inc. had a liquidity event in 2006, with its last NAV of $12.25 and having made gross distributions of $2.23 per share, from its starting NAV of $10.00 per share. Industrial Income Trust had a liquidity event in 2015, with a last NAV of $11.11 per share and having made gross distributions of $3.65 per share, from its starting NAV of $10.00 per share. Industrial Property Trust declared its first estimated NAV per share as of August 13, 2015, at $9.24, followed by an estimated NAV of $9.74, $11.11 and $12.33 as of 12/22/16, 12/14/17 and 12/19/18, respectively. This represented a 33% increase in the NAV per share since the first estimate.
IPT increased its quarterly distribution rate for Class A shares from $0.1125 in 2014 to $0.11875, to $0.1250 in 2015, $013515 in 2016 and $0.1425 in 2017, a 27% distribution rate increase since breaking escrow.
IPT’s first building was acquired in January 2014. The REIT made 164 transactions including 288 buildings with 50.0 million rentable square feet, with 503 customers. Its operating portfolio was 96.1% leased as of June 30, 2019.
Black Creek Group is currently raising capital for Black Creek Industrial REIT IV, to acquire high-quality distribution warehouses.
Black Creek Group History
Black Creek Group has 25 years of operating history, with historical development and acquisitions totaling $19.5 billion. It operates with nine offices and more than 300 employees across North America. It is vertically integrated with expertise in development, acquisitions, value-add projects, asset management and leasing. Its track record in industrial real estate includes $15.4 billion in industrial distribution facilities, across 1,229 properties, comprising 213.9 million square feet.
Source: SEC, Black Creek Group
