ProLogis, a global provider of distribution facilities, is selling its entire operation in China and 20% interests in its Japan funds for $1.3 billion, plus liabilities assumed as part of the transaction. The global REIT is reducing its debt and is expecting a net loss of 4% to 6% of the book value of the sold assets. ProLogis will see a reduction in its development pipeline by roughly $1.0 billion, which will include $255 million in completion costs for developments within its China JV. GIC is the REIT arm of the government of Singapore Investment Corp.
"In one substantial step, this transaction helps ProLogis de-lever its balance sheet, relieve near-term re-financing pressure and enhance liquidity," says Walter C. Rakowich, CEO of Prologis, in a statement. Continuing, Rakowich points out that the sale is a step toward ProLogis' larger goal of strengthening the company's balance sheets in the rough economic climate.
According to ProLogis, the China assets include: 20.7 million square feet of completed properties and properties under development with a total expected investment of $861 million, which includes a remaining funding requirement of $223 million for properties under development; ProLogis' interest in five China JV's and a single property fund; a 30% interest in SZITIC CP, a retail JV with a book value of $53 million; and 713 acres with a carrying value of $213 million. In Japan, ProLogis will sell 4.5 million square feet of facilities completed and fully-leased totaling $687 million of investment; 4.2 million square feet of facilities under development with a total expected investment of $681 million; and 64 acres of land worth $173 million.
Rakowich adds in the release, "We view Asia as an important region of the world for industrial real estate and will continue to build our business there over time. 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.
Upon the announcement that it was selling its Asian investment, ProLogis' shares popped-up 19% shortly after the open. The REIT's shares, as of this article, are off roughly 85% this year. Industrial REIT's have been struggling in this hostile environment and ProLogis, particularly, began a heavier slide after its former-CEO Jeffery Schwartz resigned in November. Following Schwartz's resignation, the industrial provider set an initiative to halt all new development. ProLogis did not respond to GlobeSt.com inquiries by deadline.
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