Will this turn out to be another flop for GIC? BTW do take note that it will assume the liabilites as well. There is no indication of how much that is.
http://www.bizjournals.com/denver/stories/2008/12/22/daily8.html
ProLogis to sell off China operations
Tuesday, December 23, 2008, 10:16am MST | Modified: Tuesday, December 23, 2008, 10:41am
Debt-burdened ProLogis Inc. has agreed to sell off its operations in China and one-fifth of its share of property fund interests in Japan for $1.3 billion in cash that will be applied to its debt.
As of the third quarter of 2008, Denver-based ProLogis (NYSE: PLD) had $11.6 billion in debt on its books.
Following Tuesday’s announcement, ProLogis stock rose on morning trading. At 9:58 a.m. MST, shares were up 13.3 percent, to $10.38.
ProLogis, a publicly traded real estate investment trust (REIT), is the world’s largest developer and owner of distribution centers.
The company said Tuesday that affiliates of GIC Real Estate, a real estate investment unit of the Government of Singapore Investment Corp., would acquire the China and Japan interests for $1.3 billion plus liabilities assumed as part of the transaction. The deal is expected to close in January.
In a statement, ProLogis said it expects to record “a net loss on the transaction of approximately 4 to 6 percent of the book value of the assets sold.”
It said its development pipeline as of Sept. 30 would be reduced by $1 billion, “including $255 million in costs to complete development of the assets owned directly and within ProLogis’ development joint ventures in China.”
“In one substantial step, this transaction helps ProLogis de-lever its balance sheet, relieve near-term re-financing pressure and enhance liquidity,” Walter Rakowich, the new CEO of ProLogis, said in Tuesday’s statement.
“Selling our China operations and our investment in the Japan funds was not an easy decision,” he said. “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.”
ProLogis listed these assets as part of the transaction:
• 20.7 million square feet (msf) of completed properties and properties under development with a total expected investment of $861 million (including a remaining funding requirement of $223 million for properties under development) that were 45.5 percent leased.
• ProLogis’ interest in five China joint ventures and one property fund, of which the company’s share aggregates 4.4 million square feet with a total investment of $184 million (including a remaining funding requirement of $32 million for properties under development that were 69.0 percent leased).
• A 30 percent interest in SZITIC CP, a retail joint venture, with a book value of $53 million.
• 713 acres of land with a carrying value of $213 million.
The company said it would retain these properties in Japan:
• 4.5 msf of facilities completed, with 43.7 percent leased. The total investment is $687 million.
• 4.2 msf of facilities under development with a total expected investment of $681 million (including a remaining funding requirement of $194 million) that were 2.6 percent leased.
• 64 acres of land with a carrying value of $173 million.
Rakowich said in November he hoped to reduce at least $2 billion in borrowings in the new year. ProLogis had $353 million in balance-sheet debt alone coming due in 2009.
The ProLogis board replaced former CEO Jeffrey Schwartz with Rakowich in November as part of a major repositioning prompted by the economic downturn.
That strategy also includes halting all new development and cutting overhead by 25 percent.
