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Analyst Blog

Prologis Inc. (PLD - Analyst Report) announced that its Euro-denominated joint venture (JV) – Prologis European Logistics Partners Sàrl (‘PELP’) – acquired 11 high-quality distribution facilities in United Kingdom. Notably, this is PELP’s first buyout since its initiation in March this year.

The acquired assets, based in the West London, South East and Midlands markets of the U.K., span about 2.45 million square feet. With this buyout, PELP's portfolio now comprises 206 Class-A logistics properties, covering 51.2 million square feet, in Europe.

Notably, PELP is a $3.1 billion worth 50 / 50 JV between Prologis and Norges Bank Investment Management (‘NBIM’), a unit of Norges Bank – the Central Bank of Norway. It is in charge of the operational management of the Norwegian Government Pension Fund Global and manages foreign exchange reserves of Norges Bank.

According to a report by Colliers International – a subsidiary of FirstService Corporation (FSRV - Snapshot Report) – the industrial and logistics market of Europe is expected to remain stable in 2013, amidst a challenging macroeconomic environment.

Particularly with a larger customer base and supply chain consolidation, the demand for distribution facilities remains high while the pace of new units’ construction is at a historic low level. It is this demand-supply disparity that is set to define the market dynamics in near term in absence of any development on a speculative basis and international buyers – mostly the U.S. firms – are capitalizing on it.

As a matter of fact, with a capacity to offer modern distribution facilities in strategic infill locations, Prologis is set to gain from this. Moreover, leasing decisions that were earlier postponed due to volatility in the markets are gradually coming off the shelf.

Earlier this week, Prologis 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. Thus, we expect Prologis to ride high on growth trajectory going forward.

Prologis currently carries a Zacks Rank #3 (Hold). Some better performing REITs include DCT Industrial Trust Inc. (DCT - Snapshot Report) and Extra Space Storage Inc. (EXR - Snapshot Report), both of which carry a Zacks Rank #2 (Buy).

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