ProLogis European Properties (PEPR) is planning to change its legal structure in order to allow it the option of raising new equity at a discount to its net asset value per unit.

The fund wants to convert its legal structure from a fonds commun de placement (‘FCP’) into a société d’investissement à capital fixe (‘SICAF’) which it said would improve its flexibility for the rest of the downturn.

A SICAF is a company which is managed by a general partner – which the fund proposes will be the management company of PEPR.

The PEPR board also proposed that it would continue its role as the supervisory board of the SICAF.

It said that one of the major benefits was that under the current structure it meant it could not raise equity at a price below its net asset value per unit.

Other benefits of the conversion would include increased financial flexibility, improved transparency, enhanced corporate governance and no impact on its tax-efficient structure.

Peter Cassells, chief executive officer of PEPR, said: ‘The proposed conversion into a SICAF is a prudent step to provide the management team and PEPR Board with greater flexibility to manage the future of the business.

‘Whilst we have made significant progress with our deleveraging strategy since the beginning of the year, the weakness in the macro economic environment continues to impact the real estate and credit markets.

‘The proposed conversion will enable us to protect PEPR against the downside risk of further deterioration in property values and provides flexibility to address significant debt maturities of approximately €570 million in 2010.

‘In addition, the conversion helps position the business to exploit attractive market opportunities. As such, PEPR’s management company and board believe the proposed conversion is in the best interests of investors as a whole and recommend that investors vote in favour of approving the conversion.’

The PEPR board members and ProLogis have indicated their intention to vote in favour of the conversion.

It is also proposing changes to the corporate governance structure including the voting powers.

These could mean that ProLogis board members would be excluded from voting on all related party transactions involving ProLogis.

Morgan Stanley is acting as financial advisor on the conversion.

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