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Another European Deal for Prologis - Analyst Blog

Posted
9/11/2013 10:57:00 AM
By: Zacks.com
Referenced Stocks:CUBE;HIW;PLD;SLG

Prologis Inc. ( PLD ) has penned another deal to expand its European platform. This industrial real estate investment trust (REIT), which recently penned a Build-to-Suit deal with Hi Logistics in U.K., has yet again signed a similar agreement with L'Oreal, the French cosmetics group.

This Build-to-Suit deal with L'Oreal is for a 270,000 square feet space in France. Prologis inked the Build-to-Suit deal to develop a facility in the Prologis Park Vemars that enjoys direct access to the Roissy-Charles de Gaulle Airport. It would be the sixth facility at the park and will house L'Oreal's French consumer products division.

The other recent deal for Prologis is a Build-to-Suit agreement with Hi Logistics, a specialist logistics subsidiary of LG Electronics. In addition, the company would develop two speculative facilities. In total, the three buildings will span over 700,000 square feet.

Particularly, the Build-to-Suit deal with Hi Logistics will span 165,000-square-foot and will be positioned at the key distribution hub, Prologis Park Ryton in the West Midlands. It will be the regional distribution center for the customers of Hi Logistics.

With around 30 million square feet of logistics and distribution space as of Jun 30, 2013, Prologis is the leading provider of industrial real estate in France. Moreover, its 17 million square feet of logistics and distribution space in U.K., which is more than 97% leased as of that date, signifies the company's solid foothold in the European industrial real estate market.

Also, these deals depict Prologis' efforts to expand its European platform by leveraging on its relationship with existing customers. L'Oreal is its existing customer with facilities in Poland and the Czech Republic while Hi Logistics already occupies Prologis' facilities in The Netherlands and Poland.

The demand for well-positioned, Class-A logistics facilities remains high amid a larger customer base and supply chain consolidation. However, the pace of new units' construction is low. It is this demand-supply disequilibrium that is set to define the market dynamics in the near term in Europe.

With a capacity to offer modern distribution facilities in strategic infill locations, Prologis is set to gain from this. In fact, it has the capability to meet explicit logistics requirement and, hence, the company is expected to crack such opportunistic deals.

Prologis currently carries a Zacks Rank #3 (Hold). Other better performing REITs include CubeSmart ( CUBE ), Highwoods Properties Inc. ( HIW ) and SL Green Realty Corp. ( SLG ), all carrying a Zacks Rank #2 (Buy).



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