ProLogis European Properties has agreed the sale of a 20% stake in its private equity PEPF II logistics fund, as it seeks to reduce its debts.
Shares in the company soared by 54% on the news.
The deal sees ProLogis, which externally manages ProLogis European Properties, pay around €43m (£40m) for the stake. When completed, ProLogis will own 37% of PEPF II.
The deal sees ProLogis European Properties reduce its exposure to the fund by two thirds. M3 Capital Partners, which brokered the deal, is to market the final third for sale.
The sale will enable ProLogis European Properties to save €348m (£324m) in future equity commitments.
It comes as part of a wider strategy aimed at reducing its debts.
Other measures taken include suspending dividend payments ‘for the foreseeable future’. This is expected to save ProLogis European Properties between €130m-€150m (£121m-£139m) in 2009.
ProLogis European Properties’ debts include a €335.9m CMBS due in July 2009 and €699.3m (£651m) of secured debt during 2010.
Gordon Keiser, CEO of ProLogis European Properties said: ‘Taking into account the ongoing challenges in the real estate and financial markets we have adopted strategic initiatives, approved by the PEPR Board, to improve our liquidity and address our debt maturities.’
‘The disposal of the stake in PEPF II significantly reduces our future debt needs, a key concern expressed by our unit holders and the board. In addition, the proceeds from the sale, together with the cash preserved from the suspension of the dividend, will enable us to further reduce debt.’
Walter Rakowich, CEO of ProLogis said: ‘In a difficult environment, this agreement benefits the shareholders of both companies.
'ProLogis’s expanded ownership in PEPF II’s properties at an attractive price will yield greater current income to ProLogis.’
ProLogis European Properties has also appointed Geoffrey Bell as its chairman. Bell, an economist and banker, is also president of Geoffrey Bell and Company, a consulting company which advises central banks and governments on their international reserve and asset liability management programmes.