Ushering in good news for its Brazil business, industrial real
estate investment trust (REIT) -
) - disclosed a deal for pre-leasing a space of 197,000 square feet
to a logistics and supply chain solutions company at Prologis CCP
Cajamar II, Building 300 in Sao Paulo, Brazil.
The pre-lease deal, inked with a repeat customer, reflects the
solid demand for Prologis' properties in Brazil. In fact, the Sao
Paulo metro area offers a good prospect for providers of Class-A
logistics facilities due to rising demand from manufacturing and
retail customers who require space to serve the expanding consumer
Prologis seems to be effectively capitalizing on this growing
demand. When fully build out, Prologis CCP Cajamar II, a joint
venture with Cyrela Commercial Properties, is estimated to span
around 2.9 million square feet. Its location in the Cajamar
submarket of Sao Paulo, adjoining to the Anhanguera Highway, makes
it a preferred choice for companies requiring logistics facilities.
Moreover, in this underserved Brazilian logistics market, Prologis,
with around 11.7 million square feet of developed or
to-be-developed industrial real estate (as of Jun 30, 2014) in the
country, stands big.
Last month, driven by higher rental income and strategic capital
earnings, Prologis reported better-than-expected second-quarter
2014 results. Core FFO (funds from operations) per share came in at
48 cents, 2 cents above the Zacks Consensus Estimate and 7 cents
ahead of the year-ago quarter figure.
Therefore, going forward, with solid fundamentals and capacity to
offer modern logistic facilities in strategic locations, we believe
Prologis will be able to benefit from this supply-demand imbalance.
Furthermore, with growing application of e-commerce, we expect
demand for logistic facilities to rise. This is because in order to
better serve customers and reduce delivery times, firms continue to
seek a consolidated distribution network and settlements in the
vicinity of population centers. Yet, growing competition and
prevailing interest rate issues continue to remain a concern for
Prologis currently carries a Zacks Rank #3 (Hold). Investors
interested in the REIT industry may consider better-ranked stocks
like DCT Industrial Trust Inc. (
), HCP, Inc. (
) and Extra Space Storage Inc. (
). All these stocks have 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.
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