Prologis Inc. (PLD), a leading industrial real estate investment trust (REIT), has recently disclosed that it had completed approximately $605 million worth of asset sale during first quarter 2012 in Europe, generating about $485 million of proceeds for itself. Besides providing additional liquidity, the asset sale enabled the company to restructure its portfolio in tune with its corporate strategy.
Prologis sold 15 properties spanning approximately 2.3 million square feet of space in five submarkets in Germany. The properties were sold for $150 million, out of which the company’s share was $110 million.
Prologis also sold 11 properties totaling 1.8 million square feet in three submarkets in Poland for $130 million, generating $90 million in proceeds for itself. In addition, the company sold 3.5 million square feet in the U.K. for $325 million, out of which its own share was $285 million.
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 fourth quarter 2011 results exceeded the Zacks Consensus Estimates, macroeconomic issues had resulted in a slower pace of recovery as the industry was affected by 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 is expected to offset Prologis’ ability to push through rental rate increases, thereby affecting its long-term profitability.
We currently have a ‘Neutral’ recommendation and a Zacks #3 Rank for Prologis, which translates into a short-term ‘Hold’ rating. We also have a ‘Neutral’ recommendation and a Zacks #3 Rank for Winthrop Realty Trust (FUR), one of the peers of Prologis.
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