Prologis Inc. (PLD) – the erstwhile AMB Property Corp., has recently sold a portfolio of 13 industrial properties across the U.S. as part of its strategy to divest non-core assets. The properties were sold to Clarion Partners, a leading U.S.-based real estate investment manager, for approximately $118 million.
Spanning 2.8 million square feet, the portfolio includes distribution properties that range from 100,000 square feet to 368,000 square feet of industrial space. The properties are located in leading sub-markets of metropolitan areas such as Atlanta, Cincinnati, Columbus, Dallas, Indianapolis, San Antonio, Phoenix and Salt Lake City.
The multi-tenant buildings are currently 91.3% leased, and primarily features functional class-A assets in key logistics markets and population centers across the U.S. Consequently, the assets are expected to provide significant revenue-generating opportunities to Clarion and augment its industrial portfolio.
On the other hand, the asset sale is an integral plan of Prologis to enhance investor returns in its private capital funds. Over the years, the company has been selectively selling properties where it has maximized value or where the properties are no longer a strategic fit.
Prologis, a leading industrial real estate investment trust (REIT), 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 second 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 #3 Rank for Prologis, which translates into a short-term Hold recommendation. We have a Neutral recommendation and a Zacks #3 Rank for Winthrop Realty Trust (FUR), one of the peers of Prologis.
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