Prologis Inc. (
- a leading industrial real estate investment trust (REIT) -
recently inked a definitive deal with Norges Bank Investment
Management (NBIM) to create a Euro-denominated joint venture
(JV), Prologis European Logistics Partners Sàrl. The $3.1 billion
deal will have an initial term of 15 years, which may be extended
for an additional 15-year period.
NBIM is a unit of Norges Bank - the Central Bank of Norway. It is
in charge of the operational management of the Norwegian
Government Pension Fund Global. Moreover, NBIM manages foreign
exchange reserves of Norges Bank.
Prologis European Logistics Partners Sàrl will be a 50 / 50 JV
with an €1.2 billion ($1.55 billion) investment by each Prologis
and NBIM. As per the deal, Prologis will have the opportunity to
reduce its venture ownership to 20% after the second anniversary
of the closure of the transaction.
Further, as part of the deal, NBIM received a warrant to purchase
6 million common shares of Prologis based on the closing price of
$35.64 per share as on December 19, 2012. The warrant bears a
Upon closure, the JV will acquire a portfolio of Prologis'
wholly-owned distribution facilities in 11 European markets. The
portfolio includes 195 properties spanning approximately 49
million square feet. The JV may increase its portfolio through
strategic acquisitions in target markets to complement the
company's existing asset base.
Management remains upbeat regarding the new JV as it will enable
both the companies to deeply penetrate the industrial real estate
market of Europe. In addition, the JV transaction signifies a
major achievement for Prologis, as it completes the company's
European recapitalization ahead of schedule.
As a matter of fact, Prologis has been active on spreading across
the globe through JV agreements and build-to-suit development
projects. With improving property values and rising institutional
demand for quality properties, the company has witnessed a
growing customer interest in new build-to-suit development
projects worldwide. Additionally, leasing decisions that were
earlier postponed due to volatility in the markets are gradually
coming off the shelf.
In last two months, Prologis has signed many build-to-suit deals
across the globe, including the core U.S. and UK markets. As of
September 30, 2012, Prologis' global development portfolio
totaled 16.3 million square feet, with an estimated total
investment of $1.5 billion.
Prologis acquires, develops, operates and manages industrial real
estate space in North America, Asia and Europe. The industrial
distribution warehouse space of the company is located in some of
the busiest distribution markets across the globe. The properties
of the company are typically located in large, supply-constrained
infill markets close to airports, seaports, and ground
transportation facilities, all of which enable rapid distribution
of customers' products. This has facilitated the company to gain
a significant pricing advantage over its competitors.
For Prologis, which currently has a Zacks #3 Rank (implying a
short-term Hold rating), the deal is a strategic fit. It marks an
efficient recapitalization effort and would likely help the
company to diversify its revenue and serve its growing customer
base. Therefore, this might lead to upward revision of its
estimates and in turn help in obtaining a better Zacks Rank. One
of its peers,
Winthrop Realty Trust (
also carries a Zacks #3 Rank.
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PROLOGIS INC (PLD): Free Stock Analysis
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