APG pushes governance changes at Prologis Europe

The proposed conversion of Prologis European Properties (PEPR) from a fonds commun de placement (FCP) to a société d’investissement à capital fixe (SICAF) will lead to additional financial risks, according to APG. On Tuesday, the Dutch pension giant sent a letter to this effect to PEPR's management, chairman Geoffrey Bell and CEO Peter Cassels.

APG believes PEPR's corporate governance structure needs to be amended first and earlier this month urged PEPR to make the necessary changes. The pension fund believes it should be possible for shareholders to dismiss the fund manager, US-based Prologis, ‘without case at any time’. That is not currently possible. APG holds a 12% stake in PEPR and is the second-largest shareholder after Prologis with 25%.

PEPR has been hit hard by the global financial crisis and has had to sharply devalue its portfolio. Its share price has also plunged in the past year. Nevertheless, APG claims the fund's financial position is not so dire that its fiscal structure needs to be changed into a SICAF. APG claims PEPR is still meeting all its bank covenants and that it has sufficient working capital. The pension fund believes the conversion into a SICAF could result in PEPR losing access to a senior unsecured credit facility worth EUR 293 mln and has slammed the proposal, saying it carried 'immediate financial risks'. PEPR's management must first provide clarity over this issue ahead of the shareholders' meeting scheduled for 30 September, APG said in its letter.

APG stressed that it did not want to dismiss Prologis as the fund manager but was concerned Prologis’ dual role as manager and the largest shareholder would pose a conflict of interest if a third party made a bid for PEPR.