ProLogis to Sell China Operations and 20 Percent Interest in Japan Property Funds to GIC Real Estate for $1.3 Billion
December 23 2008 - 8:40AM
PR Newswire (US)
- Transaction Significantly Enhances Liquidity and Strengthens
Balance Sheet - DENVER, Dec. 23 /PRNewswire-FirstCall/ -- ProLogis
(NYSE:PLD), a leading global provider of distribution facilities,
today announced the signing of a binding agreement to sell its
operations in China and property fund interests in Japan, to
affiliates of GIC Real Estate (GIC RE), the real estate investment
company of the Government of Singapore Investment Corporation, for
total cash consideration of $1.3 billion, plus liabilities assumed
as part of the transaction. The net proceeds will be used to reduce
debt. Overall, the company expects to record a modest net loss on
the transaction of approximately 4 to 6 percent of the book value
of the assets sold. ProLogis' development pipeline as of September
30, 2008 will be reduced by $1.0 billion, including $255 million in
costs to complete development of the assets owned directly and
within Prologis' development joint ventures in China. The company
expects to close the transaction in January 2009, subject to
fulfillment of conditions precedent. "In one substantial step, this
transaction helps ProLogis de-lever its balance sheet, relieve
near-term re-financing pressure and enhance liquidity," said Walter
C. Rakowich, chief executive officer of ProLogis. "Selling our
China operations and our investment in the Japan funds was not an
easy decision; however, this represents a major milestone in the
implementation of the plan we outlined last month to strengthen the
company's balance sheet in order to meet the challenges of the
current environment. "GIC RE is a well-established, respected
global real estate investor," continued Rakowich. "As an important
partner in several of ProLogis' property funds, including those in
Japan and China, GIC RE is very familiar with our business in these
markets and is a natural buyer for these high-quality assets. "In
China, ProLogis' team of associates will join affiliates of GIC RE
to manage the portfolio, and in Japan, ProLogis and GIC RE will
identify a group of dedicated associates that will transition over
time to manage the GIC RE assets," Rakowich added. "We have a
strong, long-term relationship with GIC RE and look forward to
continuing our partnership." The transaction includes all of the
company's operations in China as well as its property fund
interests in Japan. In China, the assets to be sold to GIC RE
include (all figures as of September 30, 2008): -- 20.7 million
square feet (msf) of completed properties and properties under
development with a total expected investment of $861 million
(including a remaining funding requirement of $223 million for
properties under development) that were 45.5 percent leased; --
ProLogis' interest in five China joint ventures and one property
fund, of which the company's share aggregates 4.4 msf with a total
investment of $184 million (including a remaining funding
requirement of $32 million for properties under development) that
were 69.0 percent leased; -- A 30 percent interest in SZITIC CP, a
retail joint venture, with a book value of $53 million; and -- 713
acres of land with a carrying value of $213 million. In Japan,
ProLogis will sell its 20 percent interests in the Japan funds that
own 27.1 msf of properties, including fourth quarter 2008
contributions, to GIC RE, which already owns an 80 percent stake.
ProLogis has a current investment of $348 million in these funds.
In addition to the proceeds from this transaction, ProLogis will
receive 12.6 billion yen ($140 million) from the sale of a 637,000
square-foot building in Japan from its development pipeline to GIC
RE. The sale of this facility, which is expected to close in the
first quarter of 2009, will satisfy the remainder of GIC RE's
equity commitment to ProLogis Japan Fund II. ProLogis will retain
the following assets in Japan (all figures as of September 30,
2008, updated for fourth quarter contributions and removing
previous starts that were halted during the quarter): -- 4.5 msf of
facilities completed and currently in lease up with a total
investment of $687 million that were 43.7 percent leased; -- 4.2
msf of facilities under development with a total expected
investment of $681 million (including a remaining funding
requirement of $194 million) that were 2.6 percent leased; and --
64 acres of land with a carrying value of $173 million. In
November, ProLogis announced a series of immediate, definitive
actions and outlined a strategic plan to reduce debt, de-risk the
development pipeline and right-size the company. This transaction,
together with a number of other initiatives announced in recent
weeks, accelerates that plan and provides the Company with
significant liquidity. "We view Asia as an important region of the
world for industrial real estate and will continue to build our
business there over time," added Rakowich. "In the current
environment, however, we are intently focused on liquidity and risk
mitigation, and the most important steps we can take are those that
preserve and build value for our shareholders going forward." About
ProLogis ProLogis is the world's largest owner, manager and
developer of distribution facilities, with operations in 136
markets across North America, Europe and Asia. The company has
$40.8 billion of assets owned, managed and under development,
comprising 548 million square feet (51 million square meters) in
2,898 properties as of September 30, 2008. ProLogis' customers
include manufacturers, retailers, transportation companies,
third-party logistics providers and other enterprises with
large-scale distribution needs. The statements above that are not
historical facts are forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended.
These forward-looking statements are based on current expectations,
estimates and projections about the industry and markets in which
ProLogis operates, management's beliefs and assumptions made by
management, they involve uncertainties that could significantly
impact ProLogis' financial results. Words such as "expects,"
"anticipates," "intends," "plans," "believes," "seeks,"
"estimates," variations of such words and similar expressions are
intended to identify such forward-looking statements, which
generally are not historical in nature. All statements that address
operating performance, events or developments that we expect or
anticipate will occur in the future - including statements relating
to rent and occupancy growth, development activity and changes in
sales or contribution volume of developed properties, general
conditions in the geographic areas where we operate and the
availability of capital in existing or new property funds - are
forward-looking statements. These statements are not guarantees of
future performance and involve certain risks, uncertainties and
assumptions that are difficult to predict. Although we believe the
expectations reflected in any forward-looking statements are based
on reasonable assumptions, we can give no assurance that our
expectations will be attained and therefore, actual outcomes and
results may differ materially from what is expressed or forecasted
in such forward-looking statements. Some of the factors that may
affect outcomes and results include, but are not limited to: (i)
national, international, regional and local economic climates, (ii)
changes in financial markets, interest rates and foreign currency
exchange rates, (iii) increased or unanticipated competition for
our properties, (iv) risks associated with acquisitions, (v)
maintenance of real estate investment trust ("REIT") status, (vi)
availability of financing and capital, (vii) changes in demand for
developed properties, and (viii) those additional factors discussed
in "Item 1A. Risk Factors" of ProLogis' Quarterly Report on Form
10-Q for the quarter ended September 30, 2008 and in "Item 1A
--Risk Factors" in ProLogis' Annual Report on Form 10-K for the
year ended December 31, 2007. ProLogis undertakes no duty to update
any forward-looking statements appearing in this press release.
DATASOURCE: ProLogis CONTACT: Investors, Melissa Marsden,
+1-303-567-5622, , or Media, Krista Shepard, +1-303-567-5907, ,
both of ProLogis; or Financial Media, Suzanne Dawson of Linden
Alschuler & Kaplan, Inc, +1-212-329-1420, , for ProLogis Web
Site: http://www.prologis.com/
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