Prologis Sets Up Mexican REIT, Shares Gain

Zacks Equity Research
June 12, 2014

As part of its effort to boost its international business, Prologis Inc. (PLD) completed the initial public offering (IPO) and listing of its Mexican real estate investment trust (:REIT) – FIBRA Prologis (BMV: FIBRAPL 14). Following this announcement, shares of Prologis gained 0.12% on Jun 11.

Through the IPO, FIBRA Prologis reaped around 7 billion pesos ($541.4 million) which consists of 258 million Real Estate Trust Certificates (CBFIs). Out of the total, over 158 million CBFIs were raised through international placement and about 100 million through a domestic offering (excluding over-allotment of shares). Notably, this followed Prologis’ announcement of funding FIBRA Prologis single-handedly, last month (read: Prologis Solely Funds FIBRA Prologis in Mexico).

Importantly, FIBRA Prologis owns a class-A portfolio comprising 177 logistics and manufacturing facilities, which spans 29.7 million square feet of space, in Mexico. The portfolio also includes assets from the previous Prologis MX Fund LP, Prologis Mexico Fondo Logistico and Prologis' wholly owned Mexico properties. As of Jun 9, Prologis had around a 48% stake in this Mexican REIT.

This strategic move would help Prologis to capitalize on the growing opportunities in the logistics and manufacturing facilities in Mexico. With an improvement in operating conditions, the Latin American market is a good investment option for Prologis. According to the International Monetary Fund, GDP growth in Mexico is projected to be 3.0% in 2014, up from a mere 1.1% in the previous year.

The Mexican market continues to experience a recovery in demand with a sustained improvement in occupancy rate across six large logistics markets. Hence, we believe this premeditated decision should help this industrial REIT to ride high on the growth trajectory going forward.

Prologis currently carries a Zacks Rank #3 (Hold). Investors interested in the REIT industry may consider stocks like The GEO Group, Inc. (GEO), Terreno Realty Corp. (TRNO) and Chatham Lodging Trust (CLDT). All these stocks sport a Zacks Rank #1 (Strong Buy).

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