ProLogis Inc. (PLD), a publicly traded real investment trust (REIT), has recently sold most of its industrial buildings in North America for $561 million. The company had been marketing most of these assets for sale since late 2008 and expects to realize $200 million in net proceeds from the disposal. ProLogis further expects to sell an additional $96 million worth of properties in North America in the second half of 2009.

In response to the economic realities of constrained credit and rapidly deteriorating industrial real estate fundamentals, ProLogis had earlier stalled all new ventures and early-stage developments. The company is currently concentrating on increasing its liquidity and de-leveraging its balance sheet through sale of assets.

ProLogis is currently selling about 136 properties with an average age of 20 years. Spanning across 14.2 million square feet of space, the properties are located in various markets such as Chicago, Houston, Dallas, Atlanta, Memphis, Northern and Southern California, Seattle, Portland, Phoenix, Washington DC and Northern New Jersey. The blended stabilized cap rate is expected to be 8.89%.

With the recent transaction, ProLogis has generated $840 million from asset sales in 2Q09. The company had earlier received $151 million from contributions of stabilized properties to the ProLogis European Properties Fund II (PEPF II) and $128 million from the sale of a property in Japan. The company sold its Japanese property to GIC Real Estate (GIC), the real estate investment arm of the Government of Singapore Investment Corporation. In 1Q09, GIC had acquired all ProLogis properties in China and a part of its Japanese property fund interests for $1.3 billion.

In addition to proceeds from sale of assets, ProLogis had received $345 million of secured debt financing during 2Q09. With the new capital, the company addressed all its debt maturities in 2009 and reduced its corporate debt by over 25% ($2.7 billion) from September 30, 2008 levels.

ProLogis is the best positioned industrial REIT in the current scenario. Its recent efforts to de-leverage further make us confident of maintaining our Buy rating and a favorable outlook for the company.

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