ProLogis (PLD), one of the leading global providers of distribution facilities, has recently obtained $157 million (13 billion yen) secured financing to repay its debt. The financing was obtained through a “tokutei mokuteki kaisha” (TMK) bond – a tax-favored, special-purpose vehicle created in Japan for acquiring and holding Japanese assets.
Secured by real estate assets, the TMK issues corporate bonds or equity (in the form of preferred shares), which can be bought by both Japanese and non-Japanese investors. The TMK vehicle could then acquire the collateralized asset and outsource its operation to an asset manager, distributing any profit realized in the form of bond interest on the TMK bonds or dividends on the preferred shares.
Subject to the fulfillment of certain conditions, such distributions are tax deductible for the TMK vehicle, resulting in a low Japanese tax rate. Consequently, TMKs are increasingly gaining popularity as the most preferred investment vehicle to acquire and obtain debt financing in real estate in Japan.
ProLogis utilized the proceeds from the secured financing to pay down its global lines of credit. The TMK bond has a maturity period of seven years and is collateralized by ProLogis Parc Zama I, a five-storeyed distribution facility spanning 1.2 million square feet of space in the city of Zama – a central logistics hub in Japan’s KanagawaPrefecture.
ProLogis Parc Zama I is strategically located in close proximity to downtown Tokyo and the Tomei Expressway – a high-speed motorway that connects Tokyo, Nagoya and Osaka. The facility also features several sustainable features such as a photovoltaic system, a seismic isolation system and rainwater recycling system.
ProLogis owns and manages distribution facilities spanning 435 million square feet (including properties under development) of space across the globe.The company leases its industrial facilities to over 3,800 customers, which include manufacturers, retailers, transportation companies, third-party logistics providers and other enterprises with large-scale distribution needs.
We maintain our ‘Neutral’ recommendation on ProLogis, which currently has a Zacks #3 Rank that translates into a short-term ‘Hold’ rating and indicates that the stock is expected to perform in line with the overall U.S. equity market for the next 1–3 months. We also have a ‘Neutral’ rating and a Zacks #3 Rank for First Industrial Realty Trust Inc. (FR), a competitor of ProLogis.
FIRST INDL RLTY (FR): Free Stock Analysis Report
PROLOGIS (PLD): Free Stock Analysis Report
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