Welcome to the Prologis conference call relating to the proposed merger of Prologis and Liberty Property Trust. My name is Jack, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. To ask a question during the session, you will need to press star one on your telephone keypad. Thank you. Note that this conference is being recorded. I'd now like to turn the call over to Tracy Ward. Tracy, you may begin.
Thanks, Jack. Good morning, everyone. If you've not yet downloaded the press release or acquisition presentation related to this call, they are available on Prologis' website at prologis.com under Investor Relations and Liberty's website at Liberty Property Trust under Investors. This morning, you'll hear from Hamid Moghadam, our Chairman and CEO, Gene Reilly , our Chief Investment Officer, and Tom Olinger , our Chief Financial Officer. Also joining us for the call from Prologis is Ed Nekritz and Chris Caton. Before we begin our prepared remarks, I'd like to state that this conference call will contain forward-looking statements under federal securities laws. These statements are based on current expectations, and estimates, and projections about the market and the industry in which the companies operate, as well as beliefs and assumptions of management of both companies. Some of these factors are referred to in Prologis' and Liberty's 10-Ks and other SEC filings.
Additional factors that could cause actual results to differ include, but are not limited to, the potential benefit of the proposed merger, the expected timing and likelihood of completion of the transaction, including the ability to obtain the requisite approval of Liberty shareholders, and the risk that conditions to the closing of the transaction may not be satisfied. Forward-looking statements are not guarantees of performance, and actual operating results may differ. This call will contain financial measures such as FFO and adjusted EBITDA that are non-GAAP measures. We do not use these measures as, nor should they be considered to be alternatives to net earnings computed under GAAP as indicators of our operating performance as alternatives to cash from operating activities computed under GAAP or as indicated of our ability to fund our cash needs. With that, I'll turn the call over to Hamid. Will you please begin?
Thank you, Tracy. Good morning, everyone. We're here to discuss the transaction that we announced last evening. Liberty is a company we've admired for quite some time. They have high-quality assets in many of our target markets. We have a great deal of respect for Bill Hankowsky and his team. They've done an excellent job of focusing the business on high-quality industrial markets, a strategic direction that we looked at complete. Significant synergies exist that will be accretive in the short term to earnings and are neutral on NAV. There's also significant customer overlap between the two businesses. Gene Reilly will shortly talk about the operational and real estate aspects of this transaction, and he'll turn it over to Tim to discuss the financial aspects. We look forward to addressing your questions at the end of those two presentations. Thank you.
Thanks, Hamid. Good morning, everybody. I'm going to cover the transaction overview very quickly, as you all have the details, then describe the attributes and integration of the Liberty assets we will hold and the plans for disposition. This stock-for-stock transaction implies a price of $12.6 billion. There will be no changes to the management or board of Prologis, yet we hope to retain a number of Liberty's team for property management, leasing, development, and other open positions today at Prologis. The deal is highly accretive. Tim will cover those details in a minute. Liberty is comprised primarily of a logistics real estate business, including 107 million sq ft stabilized portfolio, primarily in the U.S., over 5 million sq ft of development and progress in a very well-positioned 1,600-acre land bank.
Liberty also owns mixed-use assets in the U.S. and the U.K. We have a disposition plan for these assets and certain selected logistics assets. Before I address that, I want to discuss the attributes of the assets we intend to hold. Held assets total 73 million sq ft, which has 100% overlap with our portfolio. Notable additions are to the Lehigh Valley, Houston, Chicago, New Jersey, and the Southern California markets. The physical characteristics of the assets are exceptional. The average age is about seven years younger than the Prologis portfolio. We will complete, stabilize, and hold virtually all of the 5 million sq ft of construction in progress. This is about $465 million in value. We will hold about 1,000 acres of the land bank with a build-out of approximately 12 million sq ft.
About half of this is in the Lehigh Valley and about 20% in South Florida. There is also land in Southern California that is under contract and will likely close prior to the closing of this transaction that is also significant for us. This portfolio expands our connections with 180 existing customers and introduces 325 new relationships. There will be no material change to our top 25 customer list. After closing this and the previously announced IPT transaction, Prologis will have nine markets in the U.S. with more than 20 million sq ft and over $2 billion of assets. Our platform has reached a scale that creates synergies beyond individual asset operations, meaning that our teams have a depth of market knowledge and insight, operational flexibility, and local relationships that create unique customer service and collaboration opportunities, which we believe will ultimately drive revenue synergies that should grow over time.
The most important aspect of this portfolio, perhaps, is its submarket fit with Prologis. 90% of the whole portfolio is within five miles of a Prologis asset. We've been trying to grow our presence in the Lehigh Valley for years. The fact is that Liberty has led this market from its inception. The combined portfolio going forward in the Lehigh Valley totals 26 million sq ft, with additional land to build 4 million sq ft in the future. These properties are extremely well-located in the submarket, and mostly in master plan parks that Liberty has built over the years. While central P.A. has generally experienced oversupply recently, Liberty's assets are located primarily in the core of Lehigh Valley, which today has a vacancy rate of under 4% and is much more constrained in terms of future supply. Turning to Houston, which is the other big asset concentration.
We love this market's long-term prospects. It's a top 10 logistics market globally, and it has the highest pace of population growth of all of them. The combined Houston portfolio includes 193 buildings and 31 million sq ft of the best product in the market. I should note that there will be a short-term dampening of same-store NOI with the acquisition of this portfolio, given the market mix. Tim will speak about this in detail. Over the long term, we believe these assets are the assets that we want to own in these markets for the future and for the long term. As separate portfolios, Prologis, Liberty, and IPT have a total of 324 million sq ft in clusters, which essentially means that they are the assets that are in close proximity to one another. Together, they will have a total of 387 million sq ft in clusters.
This is an increase of 64 million sq ft, which drags $250 million of annual NOI with it. We believe asset clusters can achieve a 2% premium or $6 million in annual increased NOI in aggregate in this case. Turning to execution. In the past eight years, we've integrated over $61 billion of assets in very large portfolio transactions, including the AMB Prologis merger, the KTR and DCT acquisitions, and several medium-sized deals. In each case, we outperformed our synergy forecasts. In each case, our teams on the ground and in corporate functions emerged stronger than ever. We have identified approximately $3.5 billion of non-strategic assets for disposition, $700 million of office, of which over $300 million is currently under contract or being marketed. Of the 26% of sales in the logistics sector, 10% of this is in exit markets.
There are four markets in the U.S. that we will exit entirely. One market, Tampa, this will be the fourth time we've actually exited that market. 16% is normal culling of the portfolio in our target market. As a reminder, in the past eight years, we've sold $15 billion of assets, over 250 million sq ft, 1,600 properties in 108 markets. I'm very confident in our team's ability to sell these assets over the next couple of years. The tremendous adjacencies of the portfolio have benefits for revenue synergies going forward, but they also have benefits to the management and integration of the portfolio. Our people on the ground know the Liberty team very well. They know these assets extremely well, and frankly, they cannot wait to get after the effort to integrate these assets, as well as IPT's assets.
We look forward to discussing the future, as I mentioned earlier, with Liberty employees. I'm very confident in our ability to manage the integration, and once again, emerge better than ever. With that, I'll turn the call over to Tim to walk us through the financial details and expected value creation.
Thanks, Gene. I'll start by reviewing the implied cap rate of the transaction. For the total portfolio, we view the cap rate at 4.7% and the hold portfolio at 4.25%. We would view this hold cap rate as identical to ours on a mix-adjusted basis. The synergies associated with the transaction are significant at $120 million. First, given our scale and operating leverage, we expect cash savings of approximately $60 million from G&A, property management, and leasing. These savings will be realized on day one. Another way to think about these cash savings is that the $60 million represents over 80 basis points of additional yield on the hold assets. We continue to scale as post-transaction, our G&A as a percentage of AUM will drop by 15% to 38 basis points. Second, there's approximately $60 million of mark-to-market adjustment.
This consists of $35 million of interest expense savings, given our cost to capital advantage. We are still evaluating our plan for handling Liberty's debt on day one, but we expect to realize virtually all the interest expense synergies in cash at, or shortly after closing through refinancing activity. The remainder of the mark-to-market is $25 million related to fair value lease adjustments and straight-line rent reset. The transaction's expected to close in the first quarter of 2020. From an accretion standpoint, we expect the acquisition to increase core FFO per share in the first full year by $0.10 to $0.12. Upon stabilization of the acquired development assets, completion of the planned non-strategic asset sales, and redeployment of the proceeds, annual core FFO accretion is expected to grow to a total of $0.14 to $0.16 per share from this transaction.
Turning to the balance sheet, given the all-stock structure, there will be no significant funding requirements on day one. This transaction reinforces the strength of our balance sheet while also creating significant incremental capital from the sale of non-strategic assets, adding to our substantial investment capacity. We expect to retain our current credit ratings as we will maintain our low leverage and strong coverage metrics. In closing, we feel great about this transaction, and are confident we'll realize the synergies that we laid out. With that, thank you for your interest, and I'll turn it over to Jack for your questions.
Certainly. As a reminder, if you'd like to ask a question, please press star one. You will be limited to one question. For follow-ups, you may queue, time allowing. Craig Mailman with KeyBanc Capital Markets, your line is open.
Hey, guys. I think Gene touched on the Liberty acquisition could weigh on kind of same store here out of the gate when you guys put it in the portfolio. Could you talk a little about how you weighed that dilution from kind of a core growth quality perspective versus the long term?
Yeah, I guess there are a couple of ways to look at that. One, in terms of how we valued this business. As Tom mentioned, you look through this, it's about a four and a quarter. That, on a market-adjusted basis, is right on top of where we are today. We think these assets are valued the right way. In terms of the short-term growth, there are different profiles between markets, and I think that's reflected. From a long-term perspective, there is a slight dilution. I'll probably ask Tom to speak to that.
Yeah, it's a minimal impact long term. The same store pool. Liberty will make up roughly 12% of post-transaction NOI. The impact is minimal. It's circa 10 basis points.
Yeah, let me also suggest another way of looking at this, which I find interesting. That is, if you look at the $60 million of cash savings, which are realized day one on synergies, on roughly $360 million of their NOI, that's about 83 basis points. The cap rates are interesting, but we are also, remember, in effect, selling real estate at the same cap rate as we're buying. The absolute numbers are interesting, but the relative numbers are what's important. On top of that, we have 83 basis points of accretion from these synergy savings, which is very significant and represents four or five years of same-store NOI growth. Certainly, we're going to be able to clean up the portfolio in a much shorter period of time than that.
By definition, the remainder of the portfolio is going to be identical to our growth rates, particularly when you dilute it across what will be about a 900-million-square-foot portfolio.
Jeremy Metz with BMO, your line is open.
Hey, good morning. I guess, Hamid, I was wondering if you could talk a little bit about the process here. I know we'll get the details in the proxy. Hopefully you could share a little color, who approached who, when first contact was made. Tim, on the balance sheet, leverage goes up a tick here with the deal. You've spoken in the past about taking leverage up some over time. Just how comfortable are you ratcheting it up even a little further from here as you take on more deals?
Jeremy, you know I can't talk about the details of that. I think I will give you a general answer that hopefully will apply to every one of these calls that we have and has in the past, which is, you can be assured that we look at every single transaction in this space that is out there, whether it's on the market or not on the market and interesting to us. We're constantly in dialogue with people, exploring ways of growing our business, and we'll continue to do so. Tim, you want to take the second part?
Yep. On the debt capacity leverage standpoint, you're right, we have substantial room for incremental leverage. We have significant liquidity. This transaction alone, with the non-strategic asset sales, will generate more significant capital. I don't see our leverage moving materially from where it is, just given our normal cash free cash flow. I wouldn't expect it to do much from here.
Yeah. It actually sort of extends the levering up process anyway, because it frees up roughly $3.5 billion of cash from the sales. Whatever runway we had to be reaching, whatever target leverage we had, it just got extended by $3.5 billion, which is a couple of years of deployment.
Ki Bin Kim with SunTrust, your line is open.
Thanks. Good morning out there. Congrats on the deal. If I look at the reported stats from Liberty's results, their cap lease and spreads were up 16%, same store NOI flat. I compare it to your results, cap lease and spreads of 37% up, same store NOI 4%. I put this deal in perspective to the IPT portfolio that you purchased at about a 4.6% cap rate, DCT at a 4.4% cap rate. Those assets had, I would say, much more of a coastal high-growth presence versus Liberty. It just feels like this deal is a little bit different type of flavor. You said the whole portfolio was at 4%, 4.25%.
I was wondering if you could just implicitly in that thinking, in this deal, maybe you can provide a little more color, and are you implicitly thinking that Liberty's assets will eventually produce the same type of growth that we've been used to from PLD?
It's interesting, again, as I said before, to talk about the cap rate for the transaction, but remember, this is a merger, so we're in effect trading our stock for their stock. In the case of DCT, don't hold me to these numbers, but I think they're pretty close. I think the two numbers were 4.6, 4.7, and at that time we discussed a lot about whether 4.6 or 4.7 was the appropriate cap rate. I reminded everyone that we're selling at 4.6 and we're buying at 4.6. Here, once you get beyond the higher-yielding assets that we will be selling, the non-strategic assets, what remains is going to be a 4.25 cap rate on the portfolio, which is again, very similar to what we are selling our currency at.
Again, relative valuation is what matters, and then there is 83 basis points of immediate synergies that drop to the bottom line. One really simplistic way of looking at it is that we are paying for this transaction with roughly 4.25% cap rate assets, and we're buying synergy-adjusted assets for roughly five and change percentage. That's not counting any of the revenue synergies that we discussed, nor is it counting, by the way, any of the additional development value creation that we can generate on that land bank and additional incremental development capacity. We feel really good about this. It's neutral on our balance sheet. This is the advantage of scale, but scale alone is not sufficient. Quality scale is what matters.
You can generate scale by going out there and buying all kinds of properties, unfortunately, in our sector, it seems that people just focus on the cap rate as opposed to the growth rate. Frankly, we like that because that allows other people to do things that are not quite as much of an interest to us, but it also allows us to acquire portfolios that are very attractive to us because of their long-term growth profile. For sure, the Liberty portfolio today is in markets that have a lower same-store NOI growth rate than Prologis, for sure. It's also in markets that have significantly higher cap rates on the non-strategic assets. The extra yield from those non-strategic assets will make up for the lower growth in the short term.
In the long term, once we've sold those non-strategic assets, we're pretty much back on the same growth curve, mix-adjusted, going forward. It actually works out really well in the short term and in the really long term. If you want to really be precise about what is the impact on the long-term same-store NOI growth, for sure, this portfolio has higher concentration in Pennsylvania and Houston than our existing portfolio. Look at the numbers. On the numbers, our share of Pennsylvania goes from under 2% to 3.5%. Our share of Houston goes from 2% to 3%. There are two points of additional exposure, if you will, to those two markets. I don't think 2% additional exposure to somewhat slower-growing markets is going to mean anything on a portfolio of our size.
If you want to put a number to it could dilute our long-term growth rate by, call it, 10 basis points, 12 basis points, something like that. We think it's a pretty attractive way of growing our portfolio.
Steve Sakwa with Evercore ISI, your line is open.
Thanks. I realize given that this is a merger using stock, the funds couldn't really come into play. How do you sort of envision the U.S. funds maybe participating in this transaction once everything's closed?
Yeah, Steve, I don't expect them to do that. On the IPT transaction, the funds were the sole recipient of those assets. Obviously, we're a pretty significant investor in the fund, so indirectly, we're getting our share of that. All the assets will go into two of our vehicles in the U.S. Here, all the assets go into the balance sheet, not because of any allocation reasons, but because of the currency that we use to buy each transaction. That's the way we also expect to do things going forward, and have done so in the past.
Derek Johnston with Deutsche Bank, your line is open.
Hi, good morning. Thank you. Was just wondering, I think I recall that Houston was one of the markets that was possibly challenged somewhat by a lower rent roll. I was just wondering why the outsized exposure there is exciting, and also, equally, what's so exciting about the Lehigh Valley? Thank you.
Let me address Houston, and just to compound your question, and remind you, our call out for the weak markets included Houston. They also included Central Pennsylvania, and there's some assets here in Central Pennsylvania. Let me anticipate another question and address both of those together. In terms of being on our list of four or five markets, that is a relative list, but all these markets have significantly stronger market characteristics than other points in the cycle. Compared to a national market, which is 4.5%, 5% vacant in the relevant sub-market, they are more oversupplied. We expect that to have a dampening effect on rental growth rates in the next year or two.
That's why we talked about the dampening effect on same-store NOI growth in the short term, and that's when the non-strategic assets and their higher yields sort of contribute to the growth of the company. In the long term, all these markets go through cycles, and we expect those two markets will normalize. They're not going to be overbuilt forever. By that time, we think the growth characteristics are going to be indistinguishable from other markets like them. They're not going to be as dynamic as a Los Angeles or a Bay Area or a Seattle because there are fewer supply constraints, but they're going to be pretty interesting growth rates. Every day, the entitlements are getting more difficult, even in Pennsylvania and Houston. Every day, construction costs are going up. Every day, our replacement cost rents are going up.
Not as much as the close coastal markets, but they're going up. We do expect those markets to be back on track within a year or two. Gene, do you want to add to that?
Yeah. You mentioned what's the point of view on Pennsylvania. One thing I'd note that some of the disposition assets that we described earlier actually are in Pennsylvania. Virtually nothing in the Lehigh Valley, but in Central Pennsylvania, we will sell about three and a half million square feet of the Liberty portfolio, which by the way, is about 26 million feet in Pennsylvania in general. There are some assets, and they're all pretty much in Central P.A., which is a little more challenged. Remember, you have a 3.8 vacancy rate in the Lehigh Valley. Not so bad. This is irreplaceable product that you're not going to build much more space in the Lehigh Valley going forward. You go west, yeah, there are going to be supply concerns. We feel great about it. As I said, we've been looking for growth there forever.
Manny Korchman with Citi, your line is open.
Hey, it's Michael Bilerman here with Manny. Hamid, I was wondering if you can talk about two things. One is, as we think about when you buy portfolios or companies, sort of the overlap. I think back to the DCT deal last year, I think you had 94% overlap, a lot of it was hold. In this case, only 70% of the company is on hold. Obviously, part of that's the office assets, but a much lower percentage. Just talk sort of generally about how much are you willing to take on in terms of asset sales, because 70% is pretty low relative to what you've done in the past. The second part is, if I think back to the DCT deal, Phil had come on and talked about the process from the DCT perspective. He also joined your board.
Liberty Management is absent from this call. Can you just talk a little bit about those dynamics as well?
Sure. Let me take the board dynamics first. Look, we would have been delighted to have Bill Hankowsky on our board. He's a caliber of an individual and professional that could be very accretive to our governance, et cetera. Our board is just getting too big. We are still too big from the AMB Prologis merger days. We grew it by one because right around that time, we had two retirements. We can't keep going in terms of adding people to our board. It's just going to get unwieldy. This is not in any way a reflection on Bill or his qualifications to be on our board. He's certainly qualified. No problem with that. With respect to percentages of properties, let me just go back and remind you, on the KTR transaction, we sold about 15% of the portfolio. DCT was the most aligned portfolio.
In that case, I think it was 5%, 6% of the overall thing. This one is 71%, so 29% disposition. I got to tell you, the number of portfolios that have significant overlap with our strategy is getting smaller and smaller every day. By definition, every single one that's done later is going to be less synergistic with our portfolio. There is no absolute lower bound on how far we would go, but I would think it would get pretty uninteresting to us if a portfolio is less than 50% strategic with our business. By the way, Tracy reminds me, I didn't mention IPT. IPT is 80% hold, 20% sell. I don't know, use 50% for just discussion purposes for now. Also remember that the company today, before this transaction, is almost $110 billion of assets. After this, it will be called $125 billion in transactions.
A large portfolio out there would be a $10 billion portfolio, right? There aren't too many of those left. Even at 50%, that's $5 billion of dispositions on what would then be $135 billion portfolio. It's a 3% sale of the total asset base. We can handle that in our sleep, I think, pretty much. We've been selling during the AMB Prologis time after the merger, about $500 million of properties per quarter. We can work through these portfolios in adequate time. We're not in a hurry to sell anything. These are good assets, and whether we sell them today or a year from now, or two years from now, I think we'll sell them when we can maximize value. We're very comfortable taking on things that are at least 50% consistent with our portfolio.
Caitlin Burrows with Goldman Sachs, your line is open.
Hi. Good morning. I guess maybe just in terms of the large-scale acquisitions, it does seem like with DCT last year and now IPT and Liberty, that you guys have been increasing the portfolio-type acquisitions, but you did just talk about how it is hard to find those. I guess going forward, do you expect portfolio acquisitions to continue being a driver of earnings growth? Do you think that becomes more limited just because there's less out there?
Good question. Let me just make a categorical point. We have never, ever in our history provided guidance that includes external growth or inorganic growth. The most important source of growth, and people forget this at good parts of the cycle, is internal growth. Anybody can convert a multiple advantage by buying portfolios if they can capture synergies. That's not what's important. Generating reliable same-store growth over time through real estate operations and then customer activities and all the other initiatives that we have going on, squeezing more juice out of that orange is really what this is all about, and we're excited about that. We're not serial acquirers. We don't guide to it, et cetera. By the way, there are a lot of transactions that we pursue that we're not the successful buyer on. We've done some of those this year, pretty significant ones.
I think we're pretty disciplined about the way we approach things, and I think our track record so far of being able to deliver on our promises on now three or four acquisitions of scale that we've done, has been pretty good, and we expect it to continue to be that way with this transaction. Was there another aspect to your question? I don't think so. Okay, great. Thank you.
Eric Frankel with Green Street, your line is open.
Thank you. Congrats, everyone, on the deal for putting in probably a lot of work over the last few months. I'm not sure if you actually did. Could you provide an actual timeframe of all the asset sales you want to execute, one? Second, the land bank that you quoted in the press release and the presentation, I think with 20 million total square feet, including JVs, you want to get that down to 12 million. Does that include any options? I'm certainly aware that Liberty, that's kind of part of their repertoire in the Lehigh Valley to put a lot of land under options. What are the plans for JVs going forward? Thank you.
Okay. Let me handle the JV question. We obviously haven't had the opportunity to talk to the JV partners yet. There are a number of different kinds of JVs. There are obviously JVs in Comcast. There are JVs with financial players. Some of those financial players are the existing partners of ours. In the due course of things, we'll get around to talking to the JV partners, and depending on their preferences and all that, we'll craft something that works for everybody. With respect to the timeframe on dispositions, I will tell you, the very last asset will not be sold sooner than two years, and I would be very surprised if the very last asset was still around in five years. If you want a range, I got to put a pretty wide range on it.
It's not something that's keeping us up at night to do it. Execution quality is more important than any particular timeframe. Gene, do you want to?
Yeah. Eric, with respect to the land, the numbers do not include any options. The only material change that you might see in the future is this piece of land that's under contract in Southern California.
This is a piece of land in Southern Ontario that is adjacent to land we already own, and it is highly strategic for us. Frankly, one-off, it's a great piece of land. That hasn't closed yet. When there's more news on that, we'll let you know.
It's actually right in the middle of two parcels we own.
Yeah.
It's not just adjacent, but it's basically the only missing piece.
The only hole.
of the assemblage.
Alexander Goldfarb with Sandler O'Neill, your line is open.
Oh, hey, good morning. Thank you. It doesn't sound like anyone from Liberty is on the call. I guess I'll ask just for you guys specifically. A lot of filings were out this morning. Maybe I missed it, is there any collar or floor that's part of the consideration such that, depending on there's a minimum price that Liberty expects or sort of if your stock drops below a certain point, the ratio changes?
No, we don't have any ratchets or any collars on the pricing. It's a free-floating exchange ratio.
Jonathan Petersen with Jefferies, your line is open.
Great, thanks. Tim, I was hoping you could help me with the math, and I'll preface this by saying I might be thinking about it the wrong way, but you have the total day one synergies at $120 million, and the pro forma share count should be about 164 million. That gets me to about $0.16 versus the $0.10-$0.12 you guys outlined there. Just maybe help me with that math a little bit. And then on the interest expense, I know with DCT, you financed a decent amount of it with foreign-denominated debt. I wonder if you might do the same here with Liberty?
Yep. John, thanks. The 10-12 going from the $0.16, it's really around deployment timing, and selling assets and the drag on redeploying those assets. That's the main difference. Regarding end development lease up of their portfolio, those would be the two components. The second thing on your second question on interest expense, the accretion here reflects any debt refinancing on a U.S. dollar basis. We have not underwritten any non-dollar offerings, the debt offerings. I think we certainly will have some capacity to do that, and we'll consider that, as we finalize our plans. Again, that would be upside to the numbers that you're seeing here.
Yeah, philosophically, we don't go around minimizing interest rates around the world. We actually manage currency. Our strategy of borrowing in foreign currency is only there to the extent that we have foreign assets that we need to hedge. The idea of borrowing in one currency and owning assets in a different currency that's mismatched is not a good recipe for success. The timing of some of the financings after DCT may have made it look like those two things were related, but they weren't.
Nicholas Yulico with Scotiabank, your line is open.
Oh, thanks. I guess I just wanted to go back to the cap rate commentary. I think you said you looked at the deal, and it was a four and a quarter cap rate on all the assets you plan to keep at Liberty. I guess I'm just wondering how you kind of got comfortable with that cap rate as if you're building up across their markets, kind of bottom-up cap rates for their portfolio. You guys have been active with M&A in the last year. Blackstone has as well. It kind of feels like we're seeing a new paradigm with pricing where cap rates are going lower, and I guess I'm just wondering how much that affected your decision-making here as well about the trajectory of where cap rates have gone in industrial in the last year.
We're not smart enough to know where cap rates are going. In fact, I've been on many calls, been asked as to, do I think cap rate compression is going to continue? I've said no in the last three years, and I've been dead wrong. You don't want to listen to anything I have to say about direction cap rates. All I know is what the implied cap rate is for Prologis on any given day. Because I can look it up on the stock code, and I can tell what we can buy with that currency. We're swapping currencies here again. On a mixed-adjusted basis, the currencies are priced exactly the same way, including the premium that we're paying for Liberty.
On top of that, as I've said, I think a couple of times, we are generating immediate synergies that you can think of as another 83 basis points in cap rates without counting any of the revenue synergies. I think if you can buy a quality portfolio, and after synergies come out 83 basis points ahead day one, and you're swapping currencies on the same valuation basis, that is a great transaction on a real estate basis alone. Once you look at all the things we're doing on our platform to these real estate assets in terms of additional products and services that we can sell to our customers and the additional juice that we can get out of that orange, then it becomes an even more attractive transaction.
We don't spend a lot of time actually looking at the absolute cap rate because we're not smart enough to know where those things are going.
John Guiney with T. Rowe, your line is open.
Great. Thank you. Nice job, guys. Two curiosity questions. In the case of DCT, your stock was about $64, now it is about $88. Is it harder to convince a seller to take your stock at 64 versus 88? Why should FAS 141 accounting be considered a synergy?
It's not. We have not at all looked at the FAS, or whatever it is, as synergies. We're talking about cash synergies so far. The $120, by the way, includes it. If you noticed, I didn't talk about the $120. I talked about the $60 cash in this entire conversation, which is really the only one that I'm counting. All the discussion so far has been $60 million of cash synergies day one, plus revenue synergies that we're very sure about, that we'll get in the future, plus the G&A. By the way, the $60 million is coming just off of G&A. It's pretty straightforward. With respect to convincing sellers, look, yeah, our stock was, I think $63, $64 at the time of DCT. DCT was also a 4.6, 4.7 cap rate. Again, we are swapping currency.
If the target believes that in a certain cap rate for their own security, by definition, they should believe in the same cap rate in our implied valuation as well. They're really getting the same type of currencies, just they're getting a pretty good portfolio and the net winner are the shareholders of both companies that benefit from the synergies and the additional growth. I think everybody wins on these kinds of transactions. By the way, maybe real estate people get all excited about these things, because there's not been a great history of a lot of REIT M&A. I think if you are disciplined and the portfolios are consistent and the markets are consistent, one plus one can become three.
If you're just going around growing your business by buying everything in sight, I think, and not trying to get synergies, that's a different business and not one that we want to engage in.
Dave Rogers with Baird, your line is open.
Good morning. Maybe Gene and Tim can fill in any gaps. You talked about 325 new tenants added to the portfolio. Can you kind of discuss maybe some of the exposures that you'll see in the hold portfolio, how that might change some of those? Maybe Tim can add a little bit more on tenant credit and average size tenant in the hold portfolio, how that impacts the PLD portfolio, all pro forma.
The only thing that really stands out, Amazon is, I think, 7% of the NOI of Liberty, so they're a big component. Blended in with the rest of our customer roster, as I said, there's really no material change. There's some Sears exposure, but we've kind of cranked through that. Again, I think, if you're looking at the actual impact of Prologis, it's immaterial really across the board.
Blaine Heck with Wells Fargo, your line is open.
Thanks. Good morning. Sorry if I missed this, but Tim, what's the actual magnitude of the drag on same-store NOI you guys are expecting in the near term? Can you give us any sense of what you're expecting on a cap rate basis on the non-strategic asset sales?
I'll let Gene handle the second one. Listen, I don't think the drag Well, number one, you're not going to see the same store until 2022. Let's talk real economics, right? This deal closes in Q1 of 2020. It's a 2022 same-store discussion. Let's talk about the NOI, in 2020 when this deal closes and beyond. I don't want to get into guidance for 2020 yet. You'll get same-store guidance here next week at our investor forum. Again, I think it's going to be minimal. Remember, they're 12% post of our portfolio, NOI basis. While there will be a short-term drag, I certainly expect that our revenue synergies will help tampen that drag down.
Long-term, we just don't think this is a big impact, and I think short-term, you're not going to see much of an impact in reality, just given the magnitude and the revenue synergies I think we're going to deliver that aren't in those numbers.
Right. The non-strategic asset sales, probably that's in the low 6s in terms of the exit cap rates. I'd be a little bit careful with that. There's a huge range of product and markets. You have markets like Richmond, Tampa, some unconstrained Carolinas. That's the number, but it's a pretty big range.
Manny Korchmann with Citi, your line is open.
Hey, it's Mike Bilerman again. Just in terms of timing, I guess, had you had an offer on the table prior to Liberty issuing equity on September 5th and low $50s net in the high $40s after transaction costs? Or did this come about post that equity deal?
Hey, you got to watch Star Wars VIII or whatever it is. You can't go from episodes I to VIII all at once. We can't talk about that, you know that. We'll be talking about all those things in great detail, I'm sure, when the proxy comes out.
Steve Sakwa with Evercore ISI, your line is open.
Yeah. I just wanted to circle back on sort of the revenue synergies, and as you think about maybe the rent differential between kind of where your leases and rents are versus Liberty's, and then where your leases were versus, say, DCT's in the same markets. How do you sort of think about that uplift? I know in the DCT deal, you felt like there was a lot of uplift when those assets came onto your platform. Do you sort of feel the same way or even stronger about the Liberty assets?
Yeah. Interesting question and a really good one we've spent a lot of time on. The in-place to market spread on the Prologis portfolio is about 15.5%. You know that. On the LPT portfolio with its current mix, it's about 11%, a little bit less lift. If you adjust that in-place to market by the market mix, given their lower exposure to coastal and greater exposure to the markets we talked about, they're identical, very similar characteristics. There's nothing really unusual going on with the portfolio, which gives us a great deal of comfort. We haven't, again, talked about any of these additional products and services that we can generate on this portfolio. We have not talked about any of the revenue management opportunities that we can generate out of this.
Give us a few months to get our arms around this, and I think you'll be pleasantly surprised with our progress.
Michael Mueller with JP Morgan, your line is open.
Thanks. Hi. I know it's not a big number in the grand scheme of things, have the Comcast cost overrun issues been resolved? If not, how are you thinking about that risk?
Yeah, I think we've got our arms around that. There isn't resolution, but we got our arms around it. It's not a problem.
Yeah. Obviously, there's only so much we can talk about that dispute.
Sure.
Michael's question was the last one. I want to thank you for spending your time with us this morning. The good news is that we have an investor conference coming up next Tuesday, so I want to put a plug in for that, November 5th in New York. The best news is that instead of getting one guidance early, you're going to get guidance on two companies early. I really encourage you to attend. Thank you.
This concludes the Prologis conference call. We thank you for your participation. You may now disconnect.