ProLogis’s China interests to be sold
Prologis, the Denver, US-based company will sell its China business to GIC Real Estate (GICRE), the property investment arm of the Government of Singapore Investment Corp, for nearly $1.3 billion to raise cash to pay down debt. Prologis is the world’s largest industrial property and warehouse developer and before it always kept expanding its business in China.
The assets planed to be sold include not only 1.92 million sq m of completed properties and properties under development but also its interest in five joint ventures and a property fund but 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. Its 20 percent interests equaling a value of $348 million in Japan property funds are also listed to be sold.
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 Prologis chief executive Walter Rakowich’s opinion, the transaction is a substantial step to help Prologis deliver its balance sheet, relieve near-term refinancing pressure and enhance liquidity.
Although Prologis entered China in 2003, now it has expanded into 20 Chinese cities and has managed more than 40 logistics parks.
Last year, Jeffery Schwartz, Prologis’s former CEO, said in China that, in the coming years, the company planned to invest up to $500 million in China. However, caused by the global economic crisis, the company had to make a decision to sell their China operations to strengthen its balance sheet to meet the current environmental challenges.
This decision, selling China assets, 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. Actually Prologis may come back to China again as it never lose its interests in China.
“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.
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