Industrial REIT ProLogis has agreed to buy Keystone Property Trust for $1.6 billion. ProLogis partnered with Eaton Vance Fund Affiliates in the transaction, which is expected to close in the third quarter of 2004.

The Keystone board approved the merger agreement. The partnership will acquire all of the outstanding common shares and common units of industrial REIT Keystone for $23.80 per share in cash. The transaction represents a premium of about 17% over the company’s closing price on Friday.

"We’re pleased to be adding Keyston’s exceptional customers and properties to the platform that ProLogis has today. Specifically, this transaction significantly enhances our positions in New Jersey, eastern Pennsylvania, Indianapolis and the Miami airport market — four of the most important logistics markets in the United States," says K. Dane Brooksher, chairman and CEO of ProLogis.

Keystone, based in West Conshohocken, Pa., owns 143 distribution properties with a total of 34 million sq. ft. in the eastern United States. Denver-based ProLogis is the largest owner of distribution facilities in the U.S., with more than 1,700 facilities owned, managed and under development across North America, Europe and Asia.

Merrill Lynch & Co. and Deutsche Bank Securities Inc. acted as financial advisers to Keystone. Clifford Chance acted as legal counsel to Keystone.