ProLogis to Divest Chinese Ops and Stake in Japan Property Funds for $1.3 Billion

Source: ProLogis

ProLogis has signed 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, ProLogis 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 in a statement. "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.

Comments

[Pelham Higgins]

Does anyone have a list of the properties they are retaining in Japan? Also, does anyone know the NOI yields for these transactions?

[buying off the plan]

Does anyone have a list of the properties they are retaining in Japan?