Prologis Inc. (NYSE:PLD - News), a leading industrial real estate investment trust (:REIT), has recently signed four new lease agreements spanning 624,250 square feet of its development portfolio in Asia. The strong leasing activities in the region signify the inherent high quality of the distribution facilities of the company that make them attractive investment proposition to enhance the supply chain efficiencies.
Prologis leased 256,000 square feet of space in Tokyo, Japan, in two separate lease agreements to an unnamed global manufacturer and distributor of medical equipment and pharmaceuticals products, and an unnamed premier food trading company. The lessees would occupy the space at Prologis Park Kawajima – a multi-story speculative development, bringing the lease rate at the facility to 87.7%.
The company also leased 248,250 square feet of space in Prologis Guangzhou Development Zone Logistics Center Phase II building in Guangzhou, China, to a third-party logistics company. The leased property is scheduled to be completed in February 2012, and is expected to serve as the regional distribution center for the lessee.
At the same time, Prologis leased 119,500 square feet of industrial space in Osaka, Japan, to a local third-party logistics company specializing in IT devices. The unnamed lessee will occupy the space at Prologis Park Osaka 4 building that is scheduled to be completed in May 2012.
Prologis acquires, develops, operates and manages industrial real estate space in North America, Asia and Europe. Given its international presence, Prologis has lately faced unfavorable foreign currency movements and other economic fluctuations that have impaired its top-line growth.
Furthermore, although third quarter 2011 results exceeded the Zacks Consensus Estimates, macroeconomic issues had contributed to a slower pace of recovery as the industry was affected by the continued concerns about sovereign debt issues, rising energy costs, global military actions and the devastation and loss caused by the earthquake and tsunami in Japan.
In addition, the unrelenting troubles in the residential sector are weighing on commercial property operations. The credit crunch has also widened the bid-ask spread between buyers and sellers of commercial real estate, which has caused deal volumes to fall compared to pre-recession levels. Moreover, market vacancy increases is expected to mitigate Prologis’ ability to push through rental rate increases, thereby affecting the long-term growth of the company.
We currently have a Neutral recommendation and a Zacks #4 Rank for Prologis, which translates into a short-term Sell rating. We also have a ‘Neutral’ recommendation and a Zacks #3 Rank (short-term Hold) for Winthrop Realty Trust (NYSE:FUR - News), one of the peers of Prologis.
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