For Immediate Release
Chicago, IL – July 13, 2012 – Today, Zacks Equity Research discusses the U.S. Real Estate Investment Trusts (:REIT), including Taubman Centers Inc. (TCO), PS Business Parks, Inc. (PSB) and Prologis Inc. (PLD).
A synopsis of today’s Industry Outlook is presented below. The full article can be read at
We are bullish on Taubman Centers Inc. (TCO) which owns, develops, acquires and operates regional and super-regional shopping centers throughout the U.S. and Asia. (Retail shopping centers spanning over 400,000 square feet of gross leaseable area [GLA] are generally referred to as regional shopping centers, while those centers having in excess of 800,000 square feet of GLA are generally referred to as super-regional shopping centers.)
Taubman focuses on dominant retail malls that command the highest average sales productivity in the U.S., measured in terms of mall tenants’ average sales per square foot. During the first quarter of 2012, mall tenant sales per square foot improved 13.3% year-over-year, bringing the tally on a 12-month trailing basis to $659.
Furthermore, the shopping centers are located in the most affluent regions of the country, thereby enabling retailers to target high-end upscale customers and maximize their profitability. This, in turn, has enabled Taubman to command relatively premium rents for its portfolio, thereby ensuring a steady top-line growth.
In addition, Taubman has one of the strongest balance sheets in the sector with adequate liquidity. The company has also taken prudent steps to reduce operating expenses by pruning its pre-development spending in the U.S. and Asia, as well as significantly reducing its overall workforce. This, in turn, has improved the bottom line of the company.
We also remain bullish on PS Business Parks, Inc. (PSB), which owns, acquires, develops and operates commercial real estate properties such as low-rise suburban multi-tenant offices, business parks and industrial and flex assets. Located mostly in high-population markets, flex properties are a combination of warehouse and office space and can be easily configured to suit a variety of uses.
The warehouse component of the flex space is primarily used for purposes such as light manufacturing and assembly, storage and warehousing, showroom, laboratory, distribution and research and development activities. The office component of the flex space is complementary to the warehouse component, and enables businesses to accommodate management and production staff in the same facility.
PS Business Parks invests and owns commercial real estate properties in diversified markets that enables it to tap multiple industry concentrations and neutralize the operating risks associated with economic down-cycles. Consequently, the company has a relatively steady revenue stream.
The company also seeks to maximize its cash flow by controlling capital expenditures associated with re-leasing space by acquiring and owning properties that can be easily reconfigured and suit a variety of uses. This, in turn, attracts a wide variety of tenants and provides it with operating flexibility to protect and enhance market positions by capitalizing on improving real estate market fundamentals.
Another stock worth mentioning is Prologis Inc. (PLD), which acquires, develops, operates and manages industrial real estate space in North America, Asia and Europe. Prologis had merged with the erstwhile namesake company in an all-stock deal to become a behemoth of sorts in the industrial real estate sector.
The combined entity had brought two of the most complementary customer franchises on the same platform and created a $44 billion asset pool at their disposal at the time of the merger. The merger had led to potential cost savings through operational synergies and had created a stronger platform for value creation and sustainable growth in the long term.
In addition, Prologis provides industrial distribution warehouse space in some of the busiest distribution markets across the globe. The properties of the company are typically located in large, supply-constrained infill markets at close proximity to airports, seaports and ground transportation facilities, which enable rapid distribution of customers’ products. This has enabled the company to gain a significant pricing advantage over its competitors.
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