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Prologis Ups Borrowing Capacity

Zacks Equity Research

San Francisco-based industrial real estate investment trust (:REIT) - Prologis Inc. (PLD) recast $2.0 billion global line of credit. The move has helped the company lower its borrowing expenses and enhance its capacity.

With a consortium of 20 banks, the credit facility has been elevated by Prologis to $2.0 billion from $1.65 billion. Moreover, as one of the features, it may be further enhanced by $1.0 billion to a total of $3.0 billion, subject to the attainment of additional lender commitments.  

Prologis enjoys the benefit of drawing the funds in US dollars, euros, Canadian dollars, British pound sterling, and Japanese yen. This credit facility is slated to mature on Jul 11, 2017. However, on the fulfilment of certain conditions and the payment of an extension fee, the maturity date can be extended for another year.

Based on Prologis’ public debt ratings, the pricing on this credit facility currently stands at LIBOR plus 130 basis points – reflecting a reduction of 40 basis points from that of the prior global credit facility.

In Conclusion

Prologis is significantly capitalizing on promising opportunities across the globe. With a larger customer base, rise in e-Commerce application and supply chain consolidation, there is an increasing demand for Class-A facilities and Prologis stands to benefit as it has the capacity to offer modern distribution facilities in strategic infill locations.

Recently, Prologis announced that its Euro-denominated joint venture (:JV) – Prologis European Logistics Partners Sàrl (‘PELP’) – acquired 11 high-quality distribution facilities in United Kingdom. Moreover, Prologis acquired its partners’ 72% interest in Prologis Institutional Alliance Fund II, helping the former benefit from its portfolio that comprises 52 facilities in 7 global infill markets across the nation.

Also, the company penned a build-to-suit deal in Poland, which is a strategic fit as it will enable the company to substantially penetrate the industrial real estate market of Europe.

Therefore, this recast of credit facility is encouraging for Prologis, as in addition to lower interest expenses, the move will provide the company the much required financial flexibility to pursue its growth initiatives.

Prologis currently carries a Zacks Rank #3 (Hold). Some better performing REITs include CubeSmart (CUBE), DCT Industrial Trust Inc. (DCT) and Extra Space Storage Inc. (EXR). All of these stocks carry a Zacks Rank #2 (Buy).

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