As part of its effort to boost its international business, Prologis Inc. ( PLD ) is setting up a real estate investment trust in Japan through Nippon Prologis REIT Inc. (NPR). The company would be sponsoring NPR exclusively and would keep a minimum of 15% ownership stake in it.
In addition, Prologis, which is a leading owner, operator and developer of industrial real estate in the U.S., would provide 12 of its Class-A properties in Japan to NPR for creating its initial portfolio. Valued at around JPY 173 billion ($2 billion), the assets span 9.6 million square feet. With an average age of 3.4 years, these assets are strategically located in global markets of Tokyo and Osaka.
NPR would function as a long-term investment medium for logistics facilities. Tokyo Stock Exchange has already given a nod to NPR for its listing. Moreover, according to a Reuters report, in its initial public offering, NPR plans to sell shares worth JPY 91 billion ($1.04 billion).
NPR enjoys sole negotiation privileges for eight additional properties that are owned by Prologis. Further, it would get pipeline, operational and personnel aid as par a sponsor support agreement. Also, Prologis' wholly owned subsidiaries would offer property and asset management supports to NPR.
As a matter of fact, the industrial property market in Japan is showing signs of stability that was held back by the devastation and loss caused by the earthquake and tsunami. The deal signifies Prologis' motive to capitalize on the opportunity and meet the improving property values and growing institutional demand for quality properties.
Prologis also signed four new lease agreements spanning about 1.1 million square feet in Japan in November. The deals were penned with existing clients for an undisclosed amount. Also, in December, it inked a definitive deal with Norges Bank Investment Management (NBIM) to create a Euro-denominated JV: Prologis European Logistics Partners Sàrl. We believe such strategic efforts would provide prospect for top-line expansion and hence we remain encouraged.
Prologis is expected to release its fourth-quarter 2012 results on February 6, 2013. The Zacks Consensus Estimate for the company's fourth quarter FFO is currently pegged at 41 cents per share. It currently has a Zacks Rank #2 (Buy). One of its peers, Winthrop Realty Trust ( FUR ), has a Zacks Rank #5 (Strong Sell).