$3.6b purchase makes ProLogis world's biggest industrial REIT.

Industrial property REIT, ProLogis, announced the $3.6 billion acquisition of fellow REIT giant, Catellus, last week in a deal that will allow ProLogis to expand its vast web of warehouses and distribution centers as well as developable land. As part of the deal ProLogis will also take on $1.3 billion in debt owed by Catellus.

The buy makes ProLogis the biggest industrial REIT in the world with over 350 million s/f in over 2,250 facilities owned, managed and under development in the United States, Europe and Asia. ProLogis was attracted to Catellus in large part because of Catellus's high percentage of holdings in Southern California, which is considered one of the hottest industrial markets.

The REIT also has a large cache of well-placed developable land.

Catellus was once a company owned by the Santa Fe railroad charged with handling the railroad's considerable land holdings.

It was converted into a REIT in 2003 after having been cut loose by Santa Fe in 1990 to form its own independent corporation.

Much of its land is located along major transportation corridors throughout the western US--just the place where ProLogis would like to develop.

The Catellus holdings also include valuable industrial property in New Jersey located within two miles of the port.

"The land bank of the combined companies will support 80 million s/f of development in North America alone at a value of $6.9 billion," said ProLogis's chief executive officer Jeffrey Schwartz during a June 6 conference call, the day the acquisition was announced. "You add this to our number one market position across Europe, to our number one market position in Japan, as well as our rapidly growing position in China ... we do believe we are the largest private industrial developer."

On the firm's dominance in the coveted Southern California market, Schwartz said the acquisition will make ProLogis the "unparalleled industry leader with 350 million s/f of distribution space, which is more than three times the size of our closest competitor." Part of ProLogis's bullishness is based on the youthful 7.2-year average age of Catellus's industrial portfolio.

Its newer stock is said to offer better amenities and quality as compared to competing properties, the bulk of which, ProLogis executives claim, are far older.

ProLogis president and chief operating officer Walter Rakowich, claimed that the acquisition will also serve the REIT's efforts to expand its operations and holdings internationally.