ProLogis to Sell $505M Portfolio

Taking yet another step in its restructuring strategy, ProLogis has arranged to sell a portfolio of retail, mixed-use and ground lease assets located in the U.S.

December 22, 2010
By Barbra Murray, Contributing Editor

Courtesy Flickr Creative Commons user kla4067

Taking yet another step in its portfolio-restructuring strategy, ProLogis has arranged to sell a portfolio of retail, mixed-use and ground lease assets located in the U.S. The distribution facilities provider entered into a definitive agreement that will allow TPG Capital to acquire the assets for an aggregate $505 million.

The group of properties consists of four shopping centers, two office properties, 11 mixed-use projects with accompanying land and development agreements, two residential development joint ventures and Los Angeles Union Station. As of the close of the third quarter, ProLogis’ retail and mixed-use holdings spanned nearly 1.2 million square feet with an average lease rate of 90.5 percent. The disposition also includes certain ground leases and additional right-of-way leases. ProLogis came into possession of the portfolio in 2005 when it acquired Catellus Development Corporation for $5.5 billion. As per terms of the new deal, TPG will also take ownership of the Catellus name.

ProLogis CEO Walter Rakowich said that while the Catellus assets are high-quality and have good prospects, they are not in line with the company’s strategy of concentrating on core industrial properties in major logistics corridors.

And timing is everything. “Historically, there were tax consequences in selling these assets before 2014 given the 10-year tax prohibition of selling assets that were once held in a C corporation,” Rakowich said during the company’s third quarter earnings conference call in late October. “However, the recent Jobs Bill recently passed changed that provision for 2010 and 2011, and we now have a window to sell these assets sooner without C corp tax consequences.”

ProLogis recently made another big step in its effort to retool its portfolio through the disposition of non-strategic and non-core assets. The company’s North American industrial portfolio fell into that category. In November, ProLogis completed the sale of the 23 million square-foot group of 180 industrial properties to affiliates of Blackstone Real Estate Advisors for approximately $1 billion. The transaction also included ProLogis’ 25 percent stake in the Hilton New Orleans Riverside Hotel and its 20 percent ownership interest in ProLogis North American Properties Fund VI-VIII.