Prologis closes first closed-end fund in Japan since AMB merger

Prologis has closed its first closed-end logistics real estate fund in Japan since the firm merged with AMB Property Corporation in 2011.

The San Francisco-headquartered logistics manager is understood to have been in discussion with Japanese logistics company Nippon Express for a year before launching a closed-end fund to acquire its assets.

Prologis Japan Core Logistics Fund is the firm’s first closed-end private vehicle for Japanese logistics property, and only its second vehicle in the country to date. Nippon Prologis REIT was the firm’s first fund in Japan.

“They [Nippon Express] are our global customer and we have a long history with them locally as well as globally, so they reached out to us on partnering with them,” said Mike Yamada, president of Prologis Japan. “At the same time, there is investor appetite for industrial assets in Japan and we were able to identify an investor interested in investing in the fund.”

Prologis partnered with a domestic investor, which is understood to be a majority stakeholder in the vehicle, according to a Yamada. Prologis will take up both asset and fund management responsibilities.

The fund is a fully seeded vehicle, with Nippon Express providing assets previously on its balance sheet. These were valued at ¥50 billion ($450 million; €431 million). The transaction, conducted as a sale and leaseback, is part of a wider strategy for Nippon Express of focusing primarily on providing third-party logistics services.

Only one of the four projects in the fund has completed. The other three are under construction, due to be completed later this year.

They are being developed exclusively for the storage of pharmaceutical products, according to Prologis. According to a statement, Nippon Express has signed a long-term lease with Prologis for the four facilities.

The second Japanese vehicle was created, in part, because the assets did not fit the investment criteria of Prologis’ original real estate investment trust, which invests in completed properties. Listed in 2013, the Nippon Prologis REIT invests in high-quality “Class-A logistics facilities” that have specific requirements of size, location and functionality.

The REIT’s assets under management have grown to ¥700.6 billion across 48 properties in the past seven years. With a P/E ratio of 37.61, the REIT closed trading at ¥298,300 per share on Tuesday. Prologis currently owns 15 percent of the REIT. The vehicle also has the exclusive negotiation right to acquire properties developed by Prologis.

Today, Prologis has assets under management of around $8.5 billion in Japan, including assets contributed to REIT.

The firm first entered the Japanese market in 1999 but sold all its Japanese property funds and Chinese operations to GIC, the Singaporean sovereign wealth fund, for $1.3 billion shortly after the global financial crisis to reduce its debt.

In 2011, Prologis merged with AMB Property Corporation to become the world’s largest warehouse owner at that time. This also marked the company’s re-entry into China and Japan.