ProLogis Turns to Pension Fund to Purchase Warehouses in L.A.

ProLogis Trust, the largest U.S. warehouse owner, and New York State’s pension fund formed a $556 million joint venture to buy the trust’s own warehouses in Los Angeles.

ProLogis and the New York State Common Retirement Fund, the U.S.’s second-largest public pension fund, will each hold $147.5 million in equity in the warehouses, and the venture will have $262 million in debt.

With their stock prices down, REITs have found it difficult to sell stock to finance their growth, so many are turning to deep-pocketed pension funds to set up joint ventures. ProLogis’ shares have fallen 10% in the past 12 months. The stock rose one-sixteenth to 19 3/8 Thursday.

The relationship “provides us with a strong partner and access to an excellent source of private capital,” said K. Dane Brooksher, chief executive of ProLogis. ProLogis can now take capital previously tied up in the warehouses and invest it elsewhere, while still earning management fees.

The $100 billion pension fund will benefit from a steady stream of rental income from the warehouses, said Carl McCall, New York State’s comptroller and sole fiduciary for the pension fund.

In addition to the 11.5 million square feet of warehouse space, the venture will own four parcels of land that can be developed at a later date.