Malvern, PA-based REIT Liberty Property Trust has entered into a purchase agreement with Cabot Industrial Value Fund III, Inc. and Cabot Industrial Value Fund III Manager, LP, to acquire 100 percent of the outstanding general partnership interests and limited partnership interests of the Cabot Industrial Value Fund III for $1.475 billion.
Upon the completion of the Cabot Acquisition, Liberty Property Trust will acquire a 100 percent ownership interest in 177 industrial assets totaling approximately 23 million square feet at a purchase price of approximately $64 per square foot. The assets are located in 24 markets and have an annualized in-place net rent of approximately $98 million.
The average size of the properties is 130,000 square feet, the average lease size is 49,000 square feet, and the average age of these properties is 19 years.
About 13.4 million square feet, or 58 percent of the assets, are across 14 of the real estate investment trust’s existing 15 industrial markets, including Chicago, South Florida, Houston, New Jersey, Maryland (Baltimore/DC Corridor) and Central Pennsylvania.
Approximately 9.6 million square feet, or approximately 42 percent of Cabot’s square footage, are located across ten new Liberty Property industrial markets. The new markets include Atlanta, Dallas/Fort Worth and Southern California, which combined comprise 21 percent of Cabot’s square feet.
Liberty Property Trust plans to fund the cash portion of the acquisition consideration, in addition to net transaction costs of approximately $7 million and planned capital expenditures of approximately $11 million, through a combination of net proceeds from its public offering and borrowings under a $470 million unsecured term loan, which Liberty Property Trust in the process of obtaining.
On an interim basis, Liberty Property Trust has entered into a commitment letter for a $1.27 billion bridge loan facility. The REIT intends to sell certain operating properties, which it expects will generate approximately $150 million in additional proceeds.
The acquisition will be paid through the assumption of approximately $230 million of outstanding mortgage debt with a weighted average interest rate of 5.85% and a weighted average maturity of seven years and the remainder in cash.
The purchase agreement provides that either Liberty Property Trust or the Cabot sellers may terminate the purchase agreement if the acquisition has not occurred by October 16, 2013, subject to extension in certain circumstances. The purchase agreement also contains certain termination rights.
The acquisition is consistent with Liberty Property Trust’s strategy to shift its portfolio composition to industrial assets. The acquisition expands its industrial portfolio on a square footage basis by approximately 40 percent, from approximately 58 million square feet to approximately 81 million square feet.
As of June 30, 2013, Liberty Property Trust owned and operated 340 industrial and 238 office properties totaling 66.8 million square feet.