US shed giant ProLogis has agreed to sell its China business and its 20% stake in its Japanese funds, to GIC Real Estate, the property investment arm of the Government of Singapore Investment Corporation for $1.3bn (£880m).
Shares in US logistics company rose by 15% to $10.5 a share on the news.
ProLogis said it would use the net proceeds of the sale, which is expected to complete next month, to reduce its debts.
Walter Rakowich, CEO of ProLogis said: ‘In one substantial step, this transaction helps ProLogis de-lever its balance sheet, relieve near-term re-financing pressure and enhance liquidity.’
‘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.’
He said: ‘As an important partner in several of ProLogis' property funds, including those in Japan and China, GIC Real Estate is very familiar with our business in these markets and is a natural buyer for these high-quality assets.’
The deal sees GIC take on 20.7m sq ft of completed properties and properties under development in China, 45.5% of which is leased; ProLogis’s interests in five joint ventures in China; a 30% stake in a retail scheme in China; 713 acres (291 ha) of land in China.
In Japan, ProLogis is selling its 20% stake in its Japanese funds that own 27.1m sq ft of properties. GIC already owns the remaining 80%. It is also selling GIC an additonal 637,000 sq ft shed in Japan. It will retain 8.7m sq ft of properties and 64 acres (26ha) of land in the country.
The sales will mean ProLogis will make a net loss of between 4% and 6% on its investments in the two countries.
Staff within ProLogis’s China business will join GIC to manage the portfolio while appointments will be made by ProLogis and GIC for staff to manage the Japanese investments.
Rakowich said: ‘We view Asia as an important region of the world for industrial real estate and will continue to build our business there over time. In the current environmenthowever, we are intently focused on liquidity and risk mitigation, and the most important steps we can take are those that preserve and build value for our shareholders going forward.’