ProLogis sells off China assets
Denver-based warehouse and distribution center developer ProLogis has sold its way out of China to help balance its books.
The company, the world’s largest DC and warehouse developer, made the sale in late December as a way to de-leverage its balance sheet in an industry rocked by the global downturn in consumer demand.
ProLogis sold 1.9 million square feet of completed and under development properties, as well as its interest in five joint ventures and a property fund in China, to CIG Real Estate, the real estate investment arm of the Singapore government, China Daily reported last month. The deal, which also included the sale of 20 percent of ProLogis’ properties in Japan, was worth $1.3 billion.
It marks a staggering reversal of course for the ambitious developer. ProLogis entered China in 2003 and it quickly became a huge source of growth for the company — after Japan, it was the ProLogis’ largest Asian market, and was on pace to surpass Japan in the near future. As recently as late October, ProLogis had signed a contract with Mitsubishi to lease a warehouse in Shanghai, adding to its portfolio.
The company told American Shipper in 2007 that it planned to invest $500 million per year in the growing Chinese logistics property market, but the economic downturn hit the company hard.
In mid-November, ProLogis announced longtime Chief Executive Officer Jeffrey Schwartz was stepping down as the company’s share price dove 35 percent. Walter Rakovich, the new CEO, former president and chief operating officer, said the company intended to “right-size” itself given the current economic environment. Rakovich indicated the company would do so by holding off on new developments and land acquisitions, not through shedding of assets.
However, things changed.
“In one substantial step, this transaction helps ProLogis de-lever its balance sheet, relieve near-term refinancing pressure and enhance liquidity,” Rakovich said 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 (in November) to strengthen the company’s balance sheet in order to meet the challenges of the current environment.”
Analysts suggested that ProLogis was taking a 4 percent to 6 percent loss on the sale, but that the company received far fairer value on its assets in China than it would have if it tried to sell properties in the United States. The buyer, GIC, is a partner in several of ProLogis’ property funds and has taken over management of its China properties. ' Eric Johnson
