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ProLogis to sell China interests for $1.3 billion

By Zheng Lifei (China Daily)
Updated: 2008-12-25 08:00

ProLogis, the world's largest industrial property and warehouse developer, will sell all its operations in China for nearly $1.3 billion to raise cash to pay down debt, the company said, reversing its previous aggressive expansion drive in the country.

The Denver, US-based company will sell its China business to GIC Real Estate (GIC RE), the property investment arm of the Government of Singapore Investment Corp, which will assume the liabilities of the assets, it said in a statement.

The China assets to be sold include 1.92 million sq m of completed properties and properties under development as well as its interest in five joint ventures and a property fund, the company said.

They also include a retail joint venture with a book value of $53 million and 289 hectares of land with a carrying value of $213 million.

The company said it would also sell its 20 percent interests in Japan property funds, which have a value of $348 million.

The deal, which is expected to close in January, would reduce ProLogis' development pipeline by $1 billion, including $255 million to complete development of projects in China.

"In one substantial step, this transaction helps ProLogis de-lever its balance sheet, relieve near-term refinancing pressure and enhance liquidity," Walter Rakowich, ProLogis chief executive, said in a statement.

ProLogis, which entered China in 2003, has been pursuing an aggressive expansion strategy in the country, banking on the rapidly growing logistics sector.

The company has expanded into 20 Chinese cities and has more than 40 logistics parks under its management.

Its former CEO Jeffery Schwartz said last year in China that the company planned to invest up to $500 million here annually in the coming years.

"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," said Rakowich.

The selling of China assets, analysts said, will help ProLogis offset its huge losses in the European market, and will be transacted at a fairly good price.

"Only in China could the assets be put up for sale for a reasonable price right now, given the current global economic circumstances," said an industrial property analyst in a global property consultancy.

"I don't think ProLogis has lost its interests in China, they may come back again," he said.

"In the context of the global economic recession, China remains a relatively attractive investment (market for property)," CBRE, a global real estate consultancy, said in a research note yesterday.

ProLogis' team of associates will join affiliates of GIC RE to manage its China business portfolio.

(China Daily 12/25/2008 page13)