Prologis offers $24B for Duke Realty

May 10, 2022

Mr. James B. Connor
Chairman and CEO
Duke Realty Corporation
8711 River Crossing Boulevard
Indianapolis, Indiana 46240

Dear Jim:

We are writing to reiterate our proposal to acquire Duke Realty. We are making this letter public after numerous private conversations have not led to serious dialogue or consideration. We believe this proposed transaction will be enthusiastically received by both your and our shareholders.

As you know, and we have stated at multiple times in the past, we admire and respect what you, your management team and board have accomplished. Our proposal represents a terrific opportunity for Duke Realty and your shareholders, who would receive 0.466 shares of Prologis common stock for each share of Duke Realty common stock. Based on Prologis’ latest closing price¹, this proposal values Duke Realty at $61.68 per share, representing a premium of 29% to Duke Realty’s closing price on May 9, 2022.

On almost every metric (current stock price, VWAPs and consensus price targets) our proposal provides Duke Realty’s shareholders with a premium at the absolute top tier of valuation, as compared to other comparable REIT transactions. The terms we are proposing provide Duke Realty shareholders with the opportunity to participate in the growth and upside potential of the combined company, while also delivering an immediate, substantial, and compelling premium.

Based on the clear strategic and financial benefits outlined below, we are highly confident the addition of your assets to our platform will deliver superior value to the shareholders of both companies over the long term. The benefits include: 

• Highly Strategic & Complimentary Combination

• Incremental Value Created from Prologis’ Platform

• Enhanced External Growth

• Significant Synergies

• Day 1 Accretion to Core FFO (less promotes) to Both Shareholders

One thing that sets Prologis apart from others in our industry is a substantial strategic capital business and our Essentials platform. The Essentials platform includes solutions around operations, energy, workforce, transportation and digital – offerings that we provide to customers inside and outside of the Prologis portfolio. The Essentials platform will continue to fuel superior growth. At this point, we are creating recurring revenue both in our own platform and others, including yours.

In addition, our track record on creating value through acquisitions is incredibly strong. Our acquisitions of DCT Industrial Trust Inc. and Liberty Property Trust materially benefited the shareholders of those companies through our outperformance since acquisition, outperforming their peers by 41% and 22% respectively.²

I have no doubt your shareholders will similarly benefit.

I would note, at the proposed exchange ratio, Duke Realty shareholders will own 19% in the combined company. This would represent on average 26% more ownership in the combined company than would be implied by a straightforward ownership split based on Duke Realty’s earnings contribution in the combined company (whether measured on 2022 or 2023 consensus, FFO or AFFO).

In previous communications, you have contended that the premium is not enough to engage seriously with us. Your shareholders should be aware that the immediate value of our offer has increased by approximately 10% since we began our dialogue more than five months ago: 

• In November 2021, we proposed a fixed exchange ratio of 0.465x representing a 20% premium. In response, you indicated that the proposal did not present a compelling premium to Duke Realty shareholders. You also noted that you believed “a premium in the high 20 or low 30 percent range” was warranted.

• In March 2022, we met to discuss the merits of a potential business combination and we reaffirmed our willingness to afford your shareholders the same fixed exchange ratio of 0.465x, which then implied an approximately 28% premium. Even with an increasingly compelling premium, you were unwilling to engage further.

• On April 29, 2022, we had a lengthy conversation in which I reiterated our willingness to transact at the same previously proposed fixed exchange ratio, which continued to imply a compelling premium in-line with your previously articulated expectation.

• On May 3, 2022, we modestly increased our proposed exchange ratio, as a goodwill gesture, to 0.466x, which represented a 34% premium at the time. Later that same evening, you again declined our offer.

Setting the current market volatility aside, we view this combination as a long-term strategic benefit. As evidence of that, the offer represents a 32% premium to the 30-day volume weighted average prices (VWAP).

While we would prefer to continue working privately with you, as we have with others, to reach agreement for the benefit of your shareholders and ours, this approach is clearly not working as detailed above. This led us to conclude that a public approach may be more constructive for all.

We have engaged Goldman Sachs & Co. LLC and Wachtell, Lipton, Rosen & Katz to assist us in completing this transaction. Our transaction would not be subject to any unusual governmental or third-party approvals, or any other significant contingencies. We believe that this transaction can be completed quickly.

Jim, we are committed to completing the acquisition of Duke Realty. I hope that you, your board and your advisors are prepared to engage with us. Again, we firmly believe this proposal is the best path to driving long-term value for Duke Realty shareholders.

Sincerely,

Hamid R. Moghadam
Co-Founder, Chairman & CEO

¹ $132.37 closing price as of May 9, 2022.
² Based on total shareholder returns weighted by market capitalization per Bloomberg as of May 9, 2022 and as of each respective transaction closing date. Peer set includes DRE, EGP, FR, PSB, REXR, STAG, and TRNO.