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Analyst Blog

San Francisco-based industrial real estate investment trust (REIT) -- Prologis Inc. (PLD - Analyst Report) acquired its partners’ 72% interest in Prologis Institutional Alliance Fund II. The deal helped Prologis benefit from its portfolio that comprises 52 facilities, which are advantageously placed in 7 global infill markets across the nation and primarily concentrated in Southern California, the San Francisco Bay Area and New Jersey.

In particular, the acquisition is a rewarding one as it brings in U.S. portfolio spanning 4.9 million square feet. Prologis has funded the deal with the capital infused from its offering in the second quarter. Earlier, Prologis owned 28% stake in Alliance Fund II that was launched in Jun 2001. Notably, the venture’s term end was nearing.

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.

Also, the recent build-to-suit deal in Poland is a strategic fit as it will enable the company to substantially penetrate the industrial real estate market of Europe. Spanning 376,000 square feet, this distribution center represents the fourth build-to-suit project in less than two years at Prologis Park Wroclaw V.

Yet, for this Zacks Rank #3 (Hold) stock, market vacancy increases may mitigate its ability to push through rental-rate increases. Also, rising interest rates could increase its cost of financing.

Other REIT stocks that are performing well and deserve a look are CubeSmart (CUBE - Snapshot Report), DCT Industrial Trust Inc. (DCT - Snapshot Report) and Extra Space Storage Inc. (EXR - Snapshot Report). All of these carry a Zacks Rank #2 (Buy).

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