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Prologis forms $1bn US JV with Norges

The San Francisco-based industrial real estate developer and the world’s largest sovereign wealth fund have agreed to establish a new venture that will be seeded with assets from two of Prologis’ former funds.

Prologis has formed a $1 billion joint venture with Norges Bank Investment Management (NBIM) to invest in industrial properties in the US. Prologis will own a 55 percent stake in the new partnership, Prologis US Logistics Venture, while Norges Bank, which manages the Norwegian Government Pension Fund Global, the world’s largest sovereign wealth fund at NOK5.06 trillion (€601.52 billion; $822.57 billion), will hold the other 45 percent.

Under the joint venture agreement, Norges Bank will purchase the interest in a 12.8 million-square-foot stabilized portfolio of industrial and logistics properties in the US from Prologis for $480 million. The deal pegs the total value of the assets at approximately $1 billion. The portfolio encompasses 66 assets located in nine US markets, including southern California, Pennsylvania, the San Francisco Bay Area, New Jersey, Las Vegas, Chicago, Seattle, Atlanta and Miami.

The initial portfolio, which is free of debt, encompasses a portion of the assets from Prologis’ former North American Industrial Fund III and Prologis Institutional Alliance Fund II. In August, Prologis announced that it had acquired 18 properties totaling 8.1 million square feet in North American Industrial Fund III from its former partner, Lehman Brothers Holdings. A month earlier, the firm said it had acquired its partners’ 72 percent interest in Prologis Institutional Alliance Fund II, bringing the entire 4.9-million-square-foot portfolio onto its balance sheet.

The transaction, which will not involve any financing, is anticipated to close this month. Prologis and Norges Bank also anticipate making additional investments in the US on behalf of the Prologis US Logistics Venture over time.

The new partnership marks the second joint venture between Prologis and Norges Bank, which previously formed a €2.4 billion joint venture in Europe in December 2012. That partnership involved Norges Bank striking its first industrial real estate deal with the purchase of a 50 percent stake in a 195-property, 49-million-square-foot portfolio of logistics properties in 11 European countries from Prologis for €1.2 billion.

The new US venture, meanwhile, represents the second real estate partnership in the US for Norges Bank, and its fourth US property transaction, all of which occurred in 2013. In mid-December, the pension plan established a new multibillion-dollar joint venture with MetLife Real Estate Investors to buy Class A office properties in top-tier US markets.

That transaction followed an agreement in September for Norges Bank to purchase a 45 percent stake in the Times Square Tower from Boston Properties for $684 million. The sovereign wealth fund first entered the US real estate market in February 2013, when it bought a 49.9 stake in a portfolio of five Class A offices valued at $1.2 billion from New York-based financial services firm TIAA-CREF. 

The Norwegian Government Pension Fund Global is mandated to gradually increase its property investments to as much as 5 percent of the total fund’s value. As part of that goal, it intends to invest up to one-third of its real estate target allocation in the US. At the end of the third quarter, Norway had NOK42.39 billion, or 0.9 percent of its total assets, invested in property, of which NOK8.9 billion was held in the US.