ProLogis (PLD), one of the leading global providers of distribution facilities, has recently completed three secured financing transactions totaling €280 million.
 
Out of these, two loans totaling €154 million were secured by a portfolio of 23 properties in Germany owned by ProLogis European Properties Fund II. One of these loans (€110 million) has 55% loan-to-value and July 2012 maturity, while the other (€44 million) loan has 66% loan-to-value and June 2013 maturity.
 
The company also obtained a €126 million secured loan on behalf of ProLogis European Properties Fund, which provided a three-year extension to a secured bank loan initially scheduled to mature in March 2010. The original loan was for €151 million and was secured by 24 Central European properties.
 
ProLogis will utilize these loans to address the property fund financing requirements. In response to the continued economic downturn and rapidly deteriorating industrial real estate fundamentals, ProLogis had earlier stopped all new development starts and early-stage developments.
 
Globally, and more in the US, development starts of new industrial space continue to drop in response to decreasing demand, rising construction costs, and difficulty in obtaining financing. Due to a sell-off in the industrial sector, shares of ProLogis have dropped significantly over the past year.
 
While operations will get worse, occupancies and rents will remain relatively stable. ProLogis is the best positioned industrial REIT in the current scenario, and we maintain our Neutral recommendation for the company.
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