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Prologis Preleases China Facility

Zacks Equity Research

Industrial real estate investment trust (:REIT) Prologis Inc. (PLD) preleased a China-based facility to the e-commerce division of a leading traditional retailer – RT-MART International Ltd. The asset, which will be placed at Prologis Qingpu Logistics Centerin western Shanghai, is poised to serve as East China’s local e-commerce distribution center.

The preleased building, spanning 318,000 square feet, is conveniently connected to major expressways. Moreover, the facility signifies the second phase at the Prologis Qingpu Logistics Center, which upon completion will span around 597,560 square feet in total. Notably, phase one of the Prologis Qingpu Logistics Center, which is a 281,000 square foot facility, is 100% leased and has been operational since 2011.

The industrial property market in China is maintaining an upward trend. Particularly, amid a larger customer base and rise in e-Commerce application and supply chain consolidation, there is an increasing demand for high-quality logistics facilities by leading e-commerce companies such as Amazon.com, Inc. (AMZN) and Alibaba.com. Prologis stands to benefit as it has the capacity to offer modern distribution facilities in strategic infill locations globally.

Prologis inked a similar deal last month in another vibrant market of Japan. The company penned two new lease deals for 452,000 square feet at Prologis Park Kawajima 2 in a Tokyo submarket. With the signing of these deals, the facility that is yet to be completed is fully preleased.

Hence, with around 38 million square feet of distribution space in Asia as of Jun 30, 2013, Prologis is one of the top providers of industrial real estate in the continent. This depicts the company’s solid foothold in the expanse’s industrial real estate market.

Prologis is scheduled to release its third-quarter 2013 results on Oct 23, 2013, before the opening bell. The Zacks Consensus Estimate for the third-quarter 2013 funds from operations (:FFO) is currently pegged at 41 cents, reflecting a year-over-year decline of 6.64%.

Prologis currently carries a Zacks Rank #3 (Hold). Some better performing REITs include Sotherly Hotels Inc. (SOHO) with a Zacks Rank #1 (Strong Buy) and Cousins Properties Inc. (CUZ) with a Zacks Rank #2 (Buy).

Note: FFO, a widely accepted and reported measure of the performance of REITs is derived by adding depreciation, amortization and other non-cash expenses to net income.

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