NEW YORK, Dec 23 (Reuters) - ProLogis, one of the world's largest warehouse owners and developers, said on Tuesday it would sell its China operations and interest in its Japan Property funds for $1.3 billion as it tries to raise cash to pay down its debt.
ProLogis, whose shares jumped more than 17 percent, said it expects to record a small net loss equal to about 4 percent to 5 percent of the book value of the assets it planned to sell to GIC Real Estate (GIC RE), the real estate investment company of the government of Singapore Investment Corp. The unit of the sovereign wealth fund also will assume the operation's liabilities, ProLogis said.
Denver-based ProLogis said the deal, which is expected to close in January 2009, would reduce its development pipeline by $1 billion. That includes $255 million to complete development of projects ProLogis owns in whole and within joint ventures 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.
At the end of the third quarter the pipeline stood at $8.2 billion. By the end of October, ProLogis trimmed that down to $7.5 billion by selling some of its buildings to its funds and canceling several development projects.
Just six months ago ProLogis focused its attention on its expansion in Asia, which it had planned to account for an increasing larger share of the its portfolio of properties. But the credit crisis and the downturn in the global economy transformed the company's rapid expansion into a burden under the weight of the debt used to support the activity.
ProLogis typically developed warehouse and distribution centers and then created funds to buy them. ProLogis would retain about a 20 percent stake in the funds and receive fees for managing them.
Last month, the company said it had had $7.43 billion in balance sheet debt coming due in 2009 through 2012. Its funds had $8.38 billion maturing over the same period.
Its troubles led to the resignation of its former CEO Jeffrey Schwartz, who had led the Asia expansion before becoming the company's top executive.
'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,' Rakowich said.
In Japan, ProLogis will sell its 20 percent interests in the Japan funds that own 27.1 million square feet of
properties. GIC RE already owns an 80 percent stake.
ProLogis also will receive $140 million from the sale of a 637,000 square-foot building in Japan from its development pipeline to GIC RE.
The sale of this facility, which is expected to close in the first quarter of 2009, will satisfy the remainder of GIC RE's equity commitment to ProLogis Japan Fund II.
ProLogis shares were up $1.57 at $10.73 in early trading on the New York Stock Exchange.
(Editing by Dave Zimmerman) Keywords: PROLOGIS/ (ilaina.jonas@thomsonreuters.com ; +1 646 223 6193; Reuters Messaging: ilaina.jonas.reuters.com@reuters.net ) COPYRIGHT Copyright Thomson Reuters 2008. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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