By Ilaina Jonas
NEW YORK May 22 (Reuters) - Blackstone Group LP and Prologis Inc have agreed to buy a portfolio of 17 million square feet of warehouse and distribution centers whose majority owner is Lehman Brothers for about $960 million, two sources familiar with the deal said on Wednesday.
Under the deal, Blackstone's IndCor Properties Inc will operate about 9.5 million square feet of properties in Reno, Nevada. Prologis will buy the remaining properties that are chiefly in Pennsylvania and some in Las Vegas, the sources said.
The sources did not want to be named because they were not authorized to speak on the record about the pending deal.
Through a series of deals dating back to 2010, Blackstone will have a portfolio of about 100 million square feet of warehouse and distribution centers, managed under IndCor. That makes Blackstone one of the top three owners of warehouse and distribution centers, typically referred to as industrial real estate. IndCor's chief executive is Tim Beaudin, the former executive vice president of Catellus Development Corp, which Prologis acquired in 2008.
If Blackstone chooses to take IndCor public, the IPO is not likely to happen this year, one source said.
The deal for the properties, comes after Blackstone announced on Monday it would buy 4 million square feet of warehouse and distribution centers from First Potomac Realty Trust for $241.5 million.
Within the past three years, Blackstone has digested big bites of the industrial real estate sector. Last year, it paid $770 million for 65 U.S. properties owned by Australia's Dexus Property Group. It also took control of about 95 warehouse and distribution centers, a mostly California-portfolio known as CalWest, from Walton Street Capital LLC by buying the debt on the portfolio.
Rent and occupancy in the U.S. industrial real estate sector have been slowly improving over the past few years, with occupancy picking up at a more rapid rate over the past few quarters, Green Street analyst John Stewart said.
"However, the run up in asset values is definitely outstripping the improvement in fundamentals," he said. "It says we are in a low-return world."
Lehman first became involved in the property in 2007 when it agreed to provide about $1.5 billion in the form of a debt and equity loan to Prologis - then known as ProLogis - to acquire the properties known as the Dermody industrial portfolio. But the investment bank got stuck with the majority of the properties during the credit crisis. Lehman got stuck with 80 percent of the portfolio, and Prologis 20 percent.
Representatives from Blackstone declined to comment, and San Francisco-based Prologis was not immediately available to comment. Brokers from Eastdil Secured marketed the portfolio, which attracted "robust" interest, one source said.
This week, Lehman, which emerged from bankruptcy last year, continued its efforts to repay creditors, raising $1.88 billion selling claims it had against its former brokerage.