UPDATE 3-Blackstone to pay $1.02 bln for ProLogis property

* Blackstone will get 180 industrial properties

* ProLogis lowers outlook

* ProLogis shares down 0.6 pct
(New throughout; adds ProLogis outlook, analyst quote,
background; updates stock price; adds byline)

By Ilaina Jonas

NEW YORK, Oct 18 (BestGrowthStock) – Blackstone Group (BX.N: ) is
buying 180 facilities from ProLogis (PLD.N: ) for $1.02 billion,
as the private equity firm snaps up real estate and the owner
of warehouse and distribution properties works on its balance
sheet.

Blackstone will also get the 20 percent stake in the North
American Property Funds VI, VII and VIII that ProLogis owned,
the companies said on Monday. Blackstone already owned the
other 80 percent.

The industrial property includes facilities in Atlanta,
Austin, Baltimore, Charlotte, Chicago, Cincinnati, Las Vegas,
Los Angeles, Memphis, Nashville, New Jersey, Orlando, Phoenix,
Portland, Reno, San Antonio, San Francisco, Tampa, Virginia and
the Central Valley in California.

The portfolio also includes ProLogis’ 25 percent interest
in the Hilton New Orleans Riverside, which Denver-based
ProLogis inherited when it bought Catellus in 2005, and
adjacent land. The $100 million for the hotel property means
that Hilton Worldwide Inc, which Blackstone bought in 2007,
will own the property in its entirety.

ProLogis, which was saddled with debt when the credit
crisis hit, has been selling assets to strengthen its balance
sheet.

The sale, which is slated to close next month, is expected
to lower ProLogis’ 2010 core funds from operations (FFO) by
0.15 cents to 2 cents per share.

ProLogis lowered its FFO forecast for its full year because
of the deal and a slower-than-expected recovery in demand for
warehouse and distribution centers.

It now forecasts 2010 core FFO of 53 to 56 cents per share,
below the average analysts’ estimate of 58 cents. ProLogis had
previously forecast a range of 55 to 60 cents.

Including the Blackstone deal, ProLogis has sold roughly
$1.6 billion of real estate this year. That is above its prior
goal of $1.3 billion to $1.5 billion. ProLogis expects to use
the money to repay debt and to fund development activity.

Blackstone has been making its way down the buffet table of
U.S. commercial real estate property from distressed owners and
others who need cash — buying hotels, retail property, and
warehouse and distribution centers.

Blackstone said in July that the value of its real estate
portfolio rose 19 percent during the second quarter.

The private equity firm made another large real estate bet
earlier in October, investing in hotel chain Extended Stay
America, which emerged from bankruptcy. Blackstone, alongside
Paulson & Co and Centerbridge Partners, bought the hotel chain
for $3.925 billion. It also has been investing in malls.

It has agreed to take a 7.6 percent stake in the two
companies that will surface when General Growth Properties Inc
(GGP.N: ) emerges from bankruptcy next month. It also is a joint
venture partner with mall owner Glimcher Realty Trust (GRT.N: ),
in which Blackstone has taken either a 60 percent or 80 percent
stake in the properties.

Green Street Advisors analyst Steven Frankel said
Blackstone might be paying less than he would have expected,
but added that the companies did not provide enough details to
properly gauge the deal.

ProLogis said the deal comes to an 8 percent first-year
yield. Since yields move inversely to price, Frankel said, the
yield may be higher than expected, which means the price might
be lower than expected.

“From that perspective, an 8 percent cap rate probably is a
little bit higher than what I was expecting.”

Rent and occupancy rates probably bottomed this quarter.
However, as capital markets loosened, the prices of industrial
properties are up 15 percent this year — still slower than the
30 percent rise in overall U.S. commercial real estate values,
according to Green Street Advisors Commercial Property Price
Index.

Shares of ProLogis fell 7 cents, or 0.6 percent, to close
at $12.58 on the New York Stock Exchange.
(Additional reporting by Megan Davies; Editing by Gary Hill)

UPDATE 3-Blackstone to pay $1.02 bln for ProLogis property