ProLogis (PLD) is a real estate investment trust (REIT) with a global growth twist: While many REITs focus on apartment buildings and commercial properties, PLD works a niche in global trade expansion. As the world grows more interconnected by trade, so should the value of its investment holdings.
ProLogis is an owner, operator and developer of industrial real estate, focused on markets tied to global trade across the Americas, Europe and Asia. As of Dec. 31, 2011, it owned, or had investments in, on a consolidated basis or through unconsolidated investees, properties and development, projects totaling approximately 600 million square feet in 22 countries.
These properties are leased to approximately 4,500 customers, including third-party logistics providers, manufacturers, retailers, transportation companies and other enterprises.
Of the approximately 600 million square feet, approximately 559 million square feet were operating industrial distribution buildings with a gross book value of $42.8 billion that were 92.2 percent occupied, ProLogis said in a recent filing.
The largest customer and 25 largest customers accounted for 2.4 percent and 17.9 percent, respectively, of the annualized base rent of the combined portfolio, ProLogis reported.
“We believe that gross domestic product (GDP) growth and growth in global trade are important drivers of demand for our product. Trade and GDP are correlated as higher levels of investment, production and consumption within a globalized economy are consistent with increased levels of imports and exports,” PLD management said.
“As the world produces and consumes more, we believe that the volume of global trade will continue to increase at a rate in excess of growth in global GDP. Significant supply chain reconfiguration, obsolescence and customers’ preference to lease, rather than own, facilities also drive demand for quality distribution space.”
ProLogis has a market cap of $14.62 billion in a sector, real estate investment trusts, where the average company size is $8.4 billion.
Analysts are generally positive on PLD, with buy or outperform calls from Friedman, Billings, Ramsey & Co., Cantor Fitzgerald, JP Morgan, and Morgan Stanley.
“Prologis had earlier merged with the erstwhile namesake company in an all-stock deal to become a behemoth of sorts in the industrial real estate sector. The merger had led to potential cost savings through operational synergies and had created a stronger platform for value creation and sustainable growth in the long term,” Zacks Investment Research analysts wrote in early May, reiterating a hold rating on the company.
“However, the continued troubles in the residential sector are weighing on commercial property operations and have significantly affected the long-term growth of the company.”
ProLogis next reports on July 26.
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