Prologis Inc. (PLD), a leading industrial real estate investment trust (REIT), has recently signed a lease agreement spanning 309,400 square feet of its development portfolio in Brazil with an unnamed retailer of the country for an undisclosed amount. With the deal, Cajamar Industrial Park – the leased property – is fully pre-leased.
When fully built out, the facility is expected to total approximately 2 million square feet of industrial space. The project is a joint venture with Cyrela Commercial Properties – one of the leading commercial real estate companies in Brazil, focusing on the development and acquisition of high-quality office buildings, shopping malls and distribution centers.
Cajamar Industrial Park is located in the Cajamar submarket of Sao Paulo, with access to the Rodoanel Ring Road and central Sao Paulo. The property is expected to meet the highest functionality, flexibility, and accessibility standards by incorporating the technical know-how of Cyrela Commercial Properties and expertise of Prologis, the world’s leader in the acquisition and development of Class A industrial projects.
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 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.
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’ rating. However, 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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