ProLogis sells China operations and 20% interest in Japan

On December 23rd, ProLogis announced the signing of a binding agreement to sell its operations in China and property fund interests in Japan, to affiliates of GIC Real Estate (GIC RE), the real estate investment company of the Government of Singapore Investment Corporation, for a total cash consideration of $1.3 billion, plus liabilities assumed as part of the transaction. The net proceeds will be used to reduce debt.

Overall the company expects to record a modest net loss on the transaction of approximately 4 to 6 percent of the book value of the assets sold. ProLogis' development pipeline as of September 30, 2008 will be reduced by $1.0 billion, including $255 million in costs to complete development of the assets owned directly and within Prologis' development joint ventures in China. The company expects to close the transaction in January 2009, subject to fulfillment of conditions precedent.

The transaction includes all of the company's operations in China as well as its property fund interests in Japan.

In China, the assets to be sold to GIC RE include (all figures as of September 30, 2008): 20.7 million square feet of completed properties and properties under development with a total expected investment of $861 million 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 that were 69.0 percent leased; A 30 percent interest in SZITIC CP, a retail joint venture, with a book value of $53 million; and 713 acres of land with a carrying value of $213 million.

In Japan, ProLogis will sell its 20 percent interest in the Japan funds that owns 27.1 million square feet, including fourth quarter 2008 contributions, to GIC RE, which already owns an 80 percent stake. ProLogis has a current investment of $348 million in these funds. In addition to the proceeds from this transaction, ProLogis will receive 12.6 billion yen ($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.