PLD Signs Japan Build-to-Suit Deal

Zacks

Prologis Inc. (PLD), a leading industrial real estate investment trust (:REIT), has recently signed a new build-to-suit agreement spanning about 810,000 square feet in Osaka, Japan, for an undisclosed amount. The deal was penned with Rakuten Inc. – one of the premier global online retailers offering a wide array of services such as e-commerce, e-reading, travel, banking, securities, credit card, e-money, portal and media, and online marketing.

The proposed construction for the building is scheduled to begin in November this year and is expected to be complete within a year. The strategic agreement strengthens the long-term relationships of both the participating companies and offers a win-win deal for both. While Rakuten would benefit from the expertise of Prologis, the latter would gain unrivalled market dominance with strong demands for its state-of-the-art facilities.    

Earlier, in May 2012, Prologis had signed a build-to-suit agreement to construct a new e-commerce distribution hub spanning 473,000 square feet in Osaka, Japan. Prologis will start construction on the proposed hub in November 2012 and expects to wind it up by September 2013.

The distribution hub will come up in Prologis Park Amagasaki 3, which is strategically located in close proximity to the central business district of Osaka with easy access to major expressways and a commuter rail station.

The continued leasing activities in the region show signs of stability in the industrial property market in Japan that was pegged back by the devastation and loss caused by the earthquake and tsunami.

In addition, with improving property values and growing institutional demand for quality properties, Prologis has witnessed a growing customer interest in new build-to-suit development projects across the globe. Additionally, leasing decisions that were earlier postponed due to volatility in the markets are gradually coming off the shelf.

Prologis acquires, develops, operates and manages industrial real estate space in North America, Asia and Europe. As of June 30, 2012, Prologis had approximately 22 million square feet of logistics and distribution space in Japan.

We currently have a Neutral recommendation and a Zacks #3 Rank for Prologis, which translates into a short-term Hold rating. However, we have an Underperform recommendation and a Zacks #5 Rank (short-term Strong Sell rating) for Winthrop Realty Trust (FUR), one of the peers of Prologis.

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