Industrial real estate investment trust (REIT) -
) - announced a $588 million hike in the equity commitment to its
China partnership - Prologis China Logistics Venture. The move
comes as Prologis gears up to capitalize on the growing
fundamentals of the logistics market in China.
Specifically, this $588 million increase involves $500 million of
contributions from HIP China Logistics Investments Limited and $88
million by Prologis.
We expect this increased equity commitment to serve the growing
business of this China partnership. As a matter of fact, rising
domestic consumption as well as an increase in e-commerce
application is propelling the fundamentals of the logistic market
in China. Alongside, with low vacancy rates amid barriers to
supply, rents are expected to exhibit a rising trend, going
Formed in 2011, Prologis China Logistics Venture offers a good
investment vehicle for Prologis to capitalize on this improving
market fundamental on the Chinese soil. This venture enjoys
committed equity of over $1.75 billion as well as potential
investment capacity together with leverage of $3.5 billion.
In May, Prologis inked a build-to-suit deal for 447,000 square foot
of space in that country with an existing customer, Deppon
Logistics Co, a leading Chinese logistics provider. The new
facility would come up at Prologis Tianjin Ninghe Logistics Center
and will serve as Deppon's regional distribution center for the
greater Beijing area. (Read:
Prologis Expands on Chinese Soil
). We expect such strategic investments to drive the company's
fundamentals in the period ahead.
Prologis is slated to release its second-quarter 2014 earnings on
Jul 22, prior to the market opening. The Zacks Consensus Estimate
for funds from operations (FFO) for the quarter is currently pegged
at 46 cents per share, reflecting an 11.2% rise from the year-ago
Prologis currently carries a Zacks Rank #3 (Hold). Investors
interested in the REIT industry may also consider stocks like
Chatham Lodging Trust
Parkway Properties Inc.
Terreno Realty Corp.
). All these stocks carry a Zacks Rank #1 (Strong 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.
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
PROLOGIS INC (PLD): Free Stock Analysis Report
PARKWAY PPTY (PKY): Free Stock Analysis Report
TERRENO REALTY (TRNO): Free Stock Analysis
CHATHAM LODGING (CLDT): Free Stock Analysis
To read this article on Zacks.com click here.