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ProLogis (NYSE: PLD), the world’s largest owner, manager and developer of distribution facilities, and Arcapita, a global investment company headquartered in Bahrain, announced that they have entered into a 50/50 joint venture agreement to create ProLogis Middle East, which will develop and acquire a US$1 billion portfolio of advanced logistics warehouse space in the Gulf Cooperation Council (GCC) region.
Under the terms of the agreement, Prologis Middle East will acquire, finance, develop and manage warehousing properties in Saudi Arabia, Kuwait, Bahrain, Oman and Qatar and expects to commence construction of its first sites during the second half of 2008. The venture will initially focus on Saudi Arabia, with further developments to follow in the rest of the GCC.
“Saudi Arabia will be the starting point for ProLogis Middle East, due to its strategic location, land availability and large population base,” said Jeff Schwartz, chairman and chief executive officer of ProLogis. “Our experience in Dubai has given us a better understanding of the logistics property dynamics in the GCC region, where we believe local and multinational companies will increasingly demand modern distribution centers to serve the region’s growing needs. This new partnership is well positioned to meet this demand, combining the global development expertise of ProLogis with Arcapita’s strong regional relationships and knowledge. As we have done in other nascent logistics markets, we plan to leverage our first-mover advantage and existing customer relationships to create a logistics warehouse platform and fill a previously underserved market with quality warehouse space.”
“Arcapita’s previous partnerships with ProLogis, a series of real estate property funds in the United States, were successful ventures for Arcapita and our investors, and we are very pleased to be working alongside ProLogis again on this new joint venture,” said Atif Abdulmalik, chief executive officer of Arcapita. “The Middle East currently has a shortfall in the supply of modern, institutional-quality warehouses. Given steadily rising gross domestic product regionally, leading to increased demand amongst consumers, we believe the demand for high-quality distribution facilities will continue to grow rapidly and that ProLogis has the experience and global expertise to satisfy this market. The creation of this pan-GCC platform represents an appealing investment proposition for our investors.”
ProLogis Middle East expects that two-thirds of its development will be build-to-suit projects, with the remainder comprising inventory, sale-leaseback and fee development transactions. Saudi Arabia will ultimately account for up to 70 percent of the total platform size, with the balance in the remaining GCC countries, excluding the United Arab Emirates. “Saudi Arabia’s membership into the World Trade Organization in 2005 helped spur economic growth and consequently, demand for regional distribution space,” said Joseph Ghazal, Senior Vice President and head of ProLogis Middle East. “Our strategy will be to target land positions near major population centers and seaports, and we anticipate demand for our high-quality facilities will be strong.”
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