Industrial real estate investment trust (REIT) – Prologis Inc. (PLD) – recast its JPY revolver to $458 million. The move enables the company to enhance its capacity and lower its borrowing expenses.
With a consortium of 9 banks, the credit facility has been elevated by Prologis to JPY 45 billion ($458 million) from JPY 36.5 billion ($372 million). Moreover, as one of the features, it may be further enhanced to JPY 56.5 billion ($576 million), subject to the approval of the lender.
Based on Prologis’ public debt ratings, the pricing on this credit facility currently stands at LIBOR plus 130 basis points – reflecting a reduction of 40 basis points from that of the prior Yen facility. This credit facility is slated to mature on May 14, 2018.
Our Take
Prologis is significantly capitalizing on promising opportunities across the globe. With a larger customer base, rise in e-Commerce application and supply chain consolidation, there is an increasing demand for Class-A facilities and Prologis stands to benefit as it has the capacity to offer modern distribution facilities in strategic infill locations.
Moreover, the industrial property market in Japan is showing signs of stability that was held back by the devastation and loss caused by the earthquake and tsunami in early 2012. The strategic move signifies Prologis’ motive to capitalize on the opportunity and meet the improving property values and growing institutional demand for quality properties.
Particularly, amid an increase in Internet shopping, the demand for warehouses is growing in Japan and Prologis is leveraging on that. Its Japan REIT also began trading earlier this year.
Therefore, this recast of credit facility is encouraging for Prologis, as in addition to lower interest expenses, the move will provide the company the much required financial flexibility to pursue its growth initiatives in Japan.
Prologis currently carries a Zacks Rank #3 (Hold). Some better performing REITs include Winthrop Realty Trust (FUR), having a Zacks Rank #1 (Strong Buy) as well as CubeSmart (CUBE) and Extra Space Storage Inc. (EXR), that carry a Zacks Rank #2 (Buy).
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