ProLogis Pockets $845M, Continues to Make Strides in Debt-Reduction Effort

Action in Asia is proving to be fruitful for ProLogis. The Denver-based industrial REIT has just walked away with $845 million in cash on a $1.3 billion transaction involving the disposition of its operations in China and property fund interests in Japan to GIC Real Estate, the real estate investment company of the Government of Singapore Investment Corp. The sale is just one of many recent steps ProLogis, which saw its stock go as high as $66.58 and dip down as low as $2.20 within the last 12 months, has taken as part of a plan to bolster its balance sheet. ProLogis entered into the sales agreement with GIC RE last December, about one month after revealing its strategic plan to address the impact of the increasingly challenging market conditions that had taken a toll on the company. The China portion of the deal includes 20.7 million square feet of completed properties and projects under development; ProLogis’ interest in five joint ventures and a single property fund for a total stake consisting of 4.4 million square feet of space; 713 acres of land; and a 30 percent interest in a retail joint venture. In Japan, ProLogis parted with 20-percent interests in funds that own 27.1 million square feet, as well as ProLogis Park Misato II, a 637,000-square-foot facility that had been part of the company’s development pipeline; the sale of the building is scheduled to close within the next 30 days. ProLogis still has a strong presence in Japan with a portfolio of 4.5 million square feet of properties, 4.2 million square feet of projects in the development stage, and 64 acres of land. With the completion of the sales in China and Japan, ProLogis will have garnered approximately $1.5 billion in cash, marking an enormous step toward accomplishing its objective of paying down $2 billion in debt by year’s end. The GIC RE transaction, however, is just one of a bevy of moves ProLogis has recently made to address its financial challenges. Actions taken include the securing of a three-year extension on a $167 million secured loan in ProLogis North American Industrial Fund III; the announcement of plans to repay the company’s $456.8 million CMBS debt in April, three months in advance of the due date; and the closing of a $120 million 10-year secured financing deal for ProLogis California Fund. And there’s more to come, according to the firm. “With our recent fund financing activity, we have addressed over 50 percent of 2009 fund-related maturities,” ProLogis CFO William Sullivan noted in a press release. “Further de-leveraging initiatives, including the planned disposition of assets from our direct-owned portfolio, are underway.” The recent news follows months of steady activity for the firm. Upon ProLogis’ November announcement of a game plan to shore up the company via debt reduction, the decreasing of general and administrative expenses and the de-risking of its pipeline of development projects, Jeffrey Schwartz resigned from his post as chairman & CEO, and former president & COO Walter Rakowich took the CEO reins. And as it digs itself out of the hole it fell into last year, ProLogis continues to score lease after lease from one end of the globe to the other. The deals are numerous and include the pre-leasing of 190,000 square feet near Tokyo at the in-progress 1.2 million-square-foot ProLogis Parc Zama I; the completion of over 1 million square feet in lease agreements in metropolitan Louisville, Ky.; and the leasing of over 415,000 square feet in southern France at the in-progress ProLogis Park Clesud. ProLogis owns and manages approximately 475 million square feet of industrial space in the United States, Europe and Asia. Since ProLogis unveiled its new strategic plan and internal executive changes on Nov. 12 last year, its share prices–which had plummeted in the previous months–have been a bit of a mixed bag. Stock closed at $4.47 the day of the announcement, down from $6.87 the previous day. The price on the last trading day of the month was $13.89 in December, $10.01 in January and $5.79 in February. So far this month, stock has reached a high of $7.57. ProLogis did not respond to a request for comment by deadline.