Prologis Inc. (PLD) – the erstwhile AMB Property Corp., has recently signed four new lease agreements spanning 723,000 square feet of its development portfolio in Japan. The leased industrial space is spread across three separate facilities in diverse locations of the country, signifying the inherent demand of high-quality distribution facilities that can endure natural calamities like earthquake and tsunami to a great extent.
Prologis leased 328,000 square feet to Nippon Access – a premier third-party logistics provider that specialize in food products, and Nippon Express – the largest third-party logistics provider in Japan. The lessees will occupy the space at Prologis Park Iwanuma 1 in Sendai, making the facility fully leased.
The company also leased 325,900 square feet of space to a leading unnamed third-party logistics provider. The lessee will occupy the space at Prologis Park Kawajima – a 1.55 million square foot distribution facility presently under construction in Tokyo and scheduled for completion at the end of the current month. With the deal, the facility is currently 40% pre-leased.
Prologis leased 69,500 square feet of space in Prologis Park Maishima 3 in Osaka to TL Logicom – a third-party logistics provider. With the lease, the property currently has 92% occupancy. The leased properties represent some of the most modern and soundly constructed buildings available in the region. The facilities include several sustainable features and seismic resistance technology that enables them to withstand the fury of Mother Nature and minimize the extent of loses due to unforeseen catastrophes.
Prologis, a leading industrial real estate investment trust (REIT), acquires, develops, operates and manages industrial real estate space in North America, Asia and Europe. The majority of the company’s portfolio comprises high throughput distribution (HTD), which provides multiple options for quick movement and the distribution of goods to the customer and serves as a critical element in creating efficiencies in the global supply chain.
HTD properties are warehouses or other industrial properties that are located near airports, seaports, and ground transportation facilities, which enable rapid distribution of customers’ products.
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 first quarter 2011 results were in line with the company’s expectations, macroeconomic issues had contributed to a slower pace of recovery as the industry was affected by the 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 dramatically. In addition, market vacancy increases will mitigate Prologis’ ability to push through rental rate increases. This has significantly affected the long-term growth of the company.
We currently have an ‘Underperform’ recommendation and a Zacks #2 Rank for Prologis, which translates into a short-term ‘Buy’ recommendation. However, we have an ‘Outperform’ recommendation and a Zacks #1 Rank (short-term ‘Strong Buy’) for Winthrop Realty Trust (FUR), one of the peers of Prologis.
