CORRECTED - UPDATE 2-PEPR may launch 60 mln euro convertible prefs

(Corrects throughout to show company may issue convertible preference shares, not convertible bonds)

* Potential convertible pref share issue before year-end

* Plans to pay down 450 mln euros of CMBS debt by year-end

* Q3 profit 26.1 million euros, up 53 pct due to one-offs

* Shares down 2.1 percent (Adds CEO comments, updates shares)

By Gilbert Kreijger

AMSTERDAM, Oct 22 (Reuters) - Dutch-listed ProLogis European Properties (PEPR.AS), hit by falling property prices, may raise 60 million euros ($90 million) by issuing convertible preference shares, it said on Thursday.

PEPR, about 25 percent owned by U.S.-listed ProLogis (PLD.N), has been cutting debt and selling assets since last December to improve liquidity and cope with debt maturing this year and in 2010. It has stopped paying dividends.

The company, which has 1.7 billion euros of debt outstanding and manages 3 billion worth of European distribution facilities, said in a statement it was preparing for the potential issue of up to 60 million euros of underwritten convertible preference shares to existing shareholders.

The preference shares could later convert into ordinary shares, a PEPR spokeswoman said.

"We sincerely don't intend to be banging up against covenants limits. It is just not a good place to be. We are adding that flexibility to our process right now," PEPR Chief Executive Peter Cassells told Reuters.

PEPR could increase the amount of the convertibles issue to about 200 million euros in later stages but it may also sell more assets or refinance debt, Cassells said.

The company expected to pay down by the end of the year 450 million euros worth of commercial mortgage backed securities (CMBS) due to expire in May next year, financing it by issuing new secured debt, using cash or gains on currency instruments, Cassells said.

PEPR reported on Thursday a 26.1 million euro third-quarter profit, up 53 percent mostly due to one-off items that weighed on profit last year.

Its shares were down 2.1 percent at 4.33 euros by 1020 GMT, underperforming the Amsterdam midcap index .AMX, which was down 1.4 percent. (Editing by Dan Lalor and David Holmes) ($1 = 0.6697 euro)