Industrial real-estate investment trust ProLogis said Tuesday that it has agreed to sell its Chinese operations and the remaining stake in its Japanese property funds to a Singapore government-owned real-estate company for $1.3 billion in cash.
The Denver-based company said it expects the transaction for the Chinese properties to close in January, pending certain conditions.
The move comes just more than a month after Jeff Schwartz resigned as the company’s chief executive. Schwartz started the company on its path to dominating the global distribution business in 1996 with its first international expansion into Mexico.The company entered China in April 2003, and Schwartz was particularly bullish on the Chinese market.
News of the sale prompted Deutsche Bank to upgrade ProLogis from hold to buy.
“We think the liquidity will improve further as (ProLogis) sells completed developments into its various funds,” Deutsche Bank analyst Lou Taylor wrote in a report Tuesday. “In doing so, the liquidity discount should decline. This should allow the shares to move toward our $15 target price.”
ProLogis expects to lose about 4 percent to 6 percent of the book value of the assets, which include some properties still under construction, interests in joint ventures and one property fund.
Proceeds from the sale will be used to reduce debt.
The company expects its order backlog to be cut by about $1 billion, including costs to complete proj ects in China.
ProLogis has a current investment of $348 million in the Japanese funds, or a stake of about 20 percent. Singapore-based GIC Real Estate already has an 80 percent stake.
ProLogis will also receive about $140 million from the sale of a building in Japan.
“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,” CEO Walter Rakowich said in a statement.
In November, ProLogis announced a series of steps to cut debt and improve liquidity. This deal accelerates that plan, the company said.
Shares of ProLogis gained more than 10 percent to close at $10.10 Tuesday. The stock has ranged from $2.20 to $66.58 over the past year.
