The industrial real estate investment trust (REIT) -
) - closed the Prologis North American Industrial Fund III. The
move comes as part of its efforts to realign its portfolio, trim
down a non-strategic fund and enhance its platform in existing
Structured as an 80/20 equity partnership with Lehman Brothers
Holdings Inc., this Prologis fund had a portfolio comprising 82
properties across the United States, spread over 17.7 million
square feet. The fund was concluded and its assets were sold in
The first one was a third-party sale and it included 64
properties spanning 9.5 million square feet in Reno, Nevada. The
second deal included a stabilized, Class-A portfolio of 18
properties. Spanning 8.1 million square feet in Central and
Eastern Pennsylvania, Southern New Jersey and Las Vegas, Nevada,
these properties were acquired by Prologis. As of Jul 31, 2013,
this portfolio consisting of 18 properties had occupancy of
Last month, Prologis delivered a positive earnings surprise of
about 7.9% for the second quarter of 2013. The company reported
core FFO (funds from operations) per share of 41 cents, beating
the Zacks Consensus Estimate of 38 cents. Prologis' strategic
measures and capital market moves have helped enhance
flexibility, extend maturities and lower interest expenses.
We believe that the portfolio restructuring moves would further
help it grow its top line. In fact, with a rise in e-Commerce
application and supply chain consolidation, there is an
increasing demand for Class-A facilities and Prologis stands to
benefit as it has the capacity to offer modern distribution
facilities in strategic infill locations.
Yet, with sluggish economic growth, we are not overtly optimistic
on this Zacks Rank #3 (Hold) stock and believe that the
risk/reward profile is currently balanced. Market vacancy
increases may reduce its ability to push through rental-rate
increases. Also, rising interest rates could increase its cost of
Other REITs that are performing well and deserve a look include
Chesapeake Lodging Trust
Winthrop Realty Trust
), both carrying a Zacks Rank #1 (Strong Buy) and
Highwoods Properties Inc.
) that has a Zacks Rank #2 (Buy).
FFO, a widely used metric to gauge the performance of REITs,
is obtained after adding depreciation and amortization and other
non-cash expenses to net income.
CHESAPEAKE LODG (CHSP): Free Stock Analysis
WINTHROP REALTY (FUR): Free Stock Analysis
HIGHWOODS PPTYS (HIW): Free Stock Analysis
PROLOGIS INC (PLD): Free Stock Analysis
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