Prologis Furthers Expansion Plans - Analyst Blog


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Prologis Inc. ( PLD ) is actively capitalizing on the growing demand for industrial real estate. The company recently penned a preleasing deal for a 258,000 square foot facility in Denver, Colorado, while its Japanese unit planned new investment units issuance for funding acquisitions.

In Detail

Inked with a repeat customer, the preleasing deal enhances Prologis' ties and reflects its concerted efforts towards meeting the growing demand for mid-size spaces across the region. Notably, the company, which has around 320 million square feet of logistics and distribution space as of Sep 30, 2013, is a top provider of industrial real estate in North America.

On the other hand, Nippon Prologis REIT, Inc. (NPR), a Japanese real estate investment trust managed by a wholly owned subsidiary of Prologis - disclosed its plan to issue new investment units for funding its premium properties acquisition.

In particular, NPR, in which Prologis will retain a 15% ownership interest, expects to reap approximately JPY 32 billion ($324 million) from this issuance. This, in addition to the debt of around JPY 22 billion ($223 million), is to be used for acquiring four Class-A properties for approximately JPY 54 billion ($547 million).

The acquisition of these assets, spanning approximately 2.6 million square feet, is conditional to the successful issuance of units and is projected to be complete on Dec 3.

Our Take

Going forward, we believe that amid the backdrop of a larger customer base, rise in e-Commerce application and supply chain consolidation, there will continue to be an increasing demand for Class-A facilities. Prologis stands to benefit as it has the capacity to offer modern distribution facilities in strategic infill locations.

In the last month, this industrial real estate investment trust (REIT) reported core FFO (funds from operations) per share of 41 cents for third-quarter 2013, which was line with the Zacks Consensus Estimate.

While the company experienced a notable decline in expenses (17.2%), the benefit was partly shadowed by a fall in revenues. Yet, the company's strategic measures and capital market moves helped enhance flexibility and extend maturities. Notably, the company's rents on rollover increased 6.1% in the quarter.

Prologis currently carries a Zacks Rank #3 (Hold). Some better performing REITs include CubeSmart ( CUBE ), Extra Space Storage Inc. ( EXR ) and Public Storage ( PSA ). All the 3 stocks carry a Zacks Rank #2 (Buy).

Note: 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.

CUBESMART (CUBE): Free Stock Analysis Report

EXTRA SPACE STG (EXR): Free Stock Analysis Report

PROLOGIS INC (PLD): Free Stock Analysis Report

PUBLIC STORAGE (PSA): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
More Headlines for: CUBE , EXR , PLD , PSA

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