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Prologis buys out investors in Alliance Fund II

The industrial real estate operator and developer has acquired its investors’ 72 percent interest in the closed-ended property fund.

Prologis has purchased its investors’ 72 percent interest in Prologis Institutional Alliance Fund II, bringing the vehicle’s entire 4.9 million-square-foot portfolio onto the company’s balance sheet. Alliance Fund II was a legacy fund of AMB Property, which merged with ProLogis to form Prologis in 2011. 

In 2001, AMB raised a total of $244 million in equity for Alliance Fund II, contributing 20 percent of the vehicle’s total capital raise. The company subsequently increased its stake in the fund to 28 percent after buying out two investors. The vehicle has now reached the end of its investment term.

Rather than liquidating the portfolio, however, Prologis said it chose to retain the assets on its balance sheet because of the quality of the properties. “The assets are high quality industrial assets in key global markets in which we want to remain invested,” a company spokeswoman said in an email to PERE.  “Through this acquisition, these strategically located properties will remain in our operating portfolio.”

Alliance Fund II’s portfolio comprises 52 industrial facilities located in seven markets across the US. The majority of the properties are in southern California, the San Francisco Bay Area and New Jersey.

“This acquisition, approved by 100 percent of our partners, afforded them an expedient and cost-efficient exit from the fund at market value,” said Hamid Moghadam, chairman and chief executive at Prologis, in a statement. “April’s follow-on offering provided us with the capital necessary to complete this strategic acquisition for our shareholders.” On April 25, the firm raised $1.5 billion through its offering of 31 million shares of common stock at $41.60 per share.

Prologis operates the world’s largest industrial real estate portfolio, with ownership interests in approximately 560 million square feet of space in 21 countries as of March 31. The firm had $46.9 billion of assets under management at the end of the second quarter.