Prologis has formed four new property funds that will invest in distribution centres in Europe, the US, Mexico and South Korea. The new funds will have a combined capacity of over $14 bn (EUR 10 bn) and will serve as exclusive investment vehicles for properties from Prologis' development pipeline, the company said last week.
Prologis has formed four new property funds that will invest in distribution centres in Europe, the US, Mexico and South Korea. The new funds will have a combined capacity of over $14 bn (EUR 10 bn) and will serve as exclusive investment vehicles for properties from Prologis' development pipeline, the company said last week.
'Together with the capacity in Prologis' existing funds, we now have fund agreements in place to support $33 bn of assets under management in funds - more than double the $14 bn of assets under management at the end of the second quarter,' said Jeffrey H. Schwartz, Prologis chairman and ceo. 'We expect to see a commensurate rise in fund management fee income as these new equity commitments are invested over the next three years', he added. Schwartz noted that the European and Mexican funds were oversubscribed.
Prologis' European fund (European Properties Fund II) will function as an open-ended, infinite-life fund with a total capacity of up to EUR 7.5 bn, including equity of EUR 3 bn and targeted leverage of 50% to 60%. Prologis said it has identified a portfolio for contribution to the fund in the third quarter of 2007 valued at about EUR 600 mln. The portfolio comprises recently developed properties as well as certain facilities obtained through the company's 2007 acquisition of Parkridge Holdings' European industrial business. The assets are mainly located in the UK, Western and Central Europe.
The fund is Prologis' second for Europe. The first, Prologis European Properties (PEPR), was created in 1999 and topped up in 2003. PEPR now owns about 5.8 million m2 of industrial property in 11 countries valued at EUR 4.5 bn. PEPR was listed on Euronext Amsterdam In September 2006. Ralf Wessel, fund manager at PEPR, told PropertyEU that the new fund will target investment opportunities across 13-14 countries in Europe, including the UK, Scandinavia, Western Europe as well as Central Europe with Poland, Hungary, Czech Republic, Romania and Slovakia.
'We will target a highly-diversified well-balanced portfolio, focusing on properties with long leases. We also intend to invest no more than 25% to 30% in the same country,' Wessel said. He added that the fund will not invest in Turkey, Russia or Ukraine, while its presence in Eastern Europe will be limited as the fund is targeting a different risk profile. 'We are continuously monitoring the Eastern European market, and at the moment we have not found the right entry into that market. But we are strengthening our presence mainly in Poland, Czech republic and Hungary as demand from our clients in these countries increase,' he added.
Among the investors in the European fund are PEPR, the CPP Investment Board, an investment organization that invests the assets of the Canada Pension Plan, and an affiliate of GIC Real Estate, the real estate investment arm of the Government of Singapore Investment Corporation. The new fund will comprise 28 institutional investors, including five repeat and a number of new investors. PEPR will have a 30% ownership interest, while Prologis will initially retain a 17% direct interest in the fund, along with the 8% interest it will own indirectly through its investment in PEPR. ProLogis will serve as external manager of the fund.