Prologis forms €2.4bn joint venture with Norges Bank

The San Francisco-based logistics giant has partnered with Norway’s sovereign wealth fund to jointly own a portfolio of industrial assets in Europe. The deal allows Prologis to recapitalise the bulk of its European assets, primarily the former ProLogis European Properties fund, and represents Norway’s first investment in the industrial space.

Prologis and Norges Bank Investment Management (NBIM), the manager of Norway’s Government Pension Fund Global, have formed a joint venture to own a €2.4 billion ($3.1 billion) portfolio of stabilised industrial assets in Europe. The venture, known as Prologis European Logistics Partners, is structured as a 50:50 partnership, with each partner contributing €1.2 billion in equity to the venture.

The venture represents the first time the €500 billion Government Pension Fund Global has invested outside the office and retail sectors since it began its real estate programme two years ago. The venture has an initial term of 15 years, which may be extended for additional 15-year periods.

“Our participation in the Prologis European Logistics Partners venture advances our strategy of investing in high-quality properties,” said Karsten Kallevig, chief investment officer for real estate at NBIM, in a statement. “We are very pleased to be teaming up with a partner of Prologis’ caliber as we enter the market for industrial real estate, and we look forward to working together on future endeavors.”

Upon closing, the venture will acquire a portfolio of 195 properties, totaling approximately 49 million square feet, in 11 target market throughout Europe. About 75 percent of the properties will come from the former ProLogis European Properties (PEPR) fund, with the remaining 25 percent comprising other assets in Europe wholly owned by Prologis.

The venture represents a significant milestone for Prologis, as it serves to essentially complete the firm’s European recapitalisation. Indeed, in the wake of privatising PEPR – following a hostile bid by APG and the Goodman Group – in the spring of 2011, Prologis set about assessing its overall European holdings, which comprised roughly €2.5 billion in PEPR assets and €1 billion in properties on its balance sheet, Guy Jaquier, chief executive of private capital, told PERE. The firm decided that some assets were better owned by Prologis’ existing funds and were reallocated accordingly, while other assets no longer fit with its portfolio and were sold to third parties, he explained. The remainder – roughly €1.8 billion in PEPR assets and €600 million in balance sheet assets – went towards the venture with Norges.

Going forward, Prologis and Norges may grow the joint portfolio by acquiring strategic portfolios in target markets and, where appropriate, larger properties that complement the existing asset base. Jaquier noted that there is no target allocation for future acquisitions and that the partners will need to contribute more equity to the venture when such deals present themselves. He stressed, however, that the venture will not be actively looking for one-off purchases.

Prologis, meanwhile, will have the ability to reduce its stake in the partnership from 50 percent to 20 percent following the second anniversary of closing. Jaquier explained that this is consistent with the firm’s long-term ownership target of 20 percent to 30 percent on a pan-European basis and is similar to other funds and partnerships in which it participates.