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Prologis (PLD) & Ivanhoe Cambridge Form $880M JV in Brazil

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In an effort to bank on the rising demand for modern logistics space in Brazil, industrial REIT Prologis Inc. (PLD - Free Report) and real estate investor Ivanhoé Cambridge have recently collaborated and formed an $880-million joint venture (JV) with 20/80 stake.

Prologis Brazil Logistics Venture will carry out developing and operating of logistics real estate in Brazil, particularly in São Paulo and Rio de Janeiro. Notably, the venture at closing purchased an initial portfolio of assets of around 6.9 million square feet of operating properties, as well as 371 acres of land from Prologis. It has done so with an assurance to build out the existing land bank.

The focus on São Paulo and Rio de Janeiro market is a strategic fit, as a significant portion of the country’s GDP is located in São Paulo and Rio de Janeiro, and demand for modern logistics space is increasing in this region. Furthermore, economic reforms and measures to improve consumption levels are likely to open up prospects for new business. This will likely trigger demand for industrial real estates in Brazil.

No doubt, Prologis has already earned its reputation for being the leading provider of logistics real estate around the globe. The company enjoys ownership or had investments in properties and development projects estimated to total around 771 million square feet in 19 countries as of Sep 30, 2018.

Moreover, the industrial real estate asset category has grabbed solid attention not only in the Brazilian market, but across several regions in the United States. This emerges from the fact that high-consumer spending, thriving e-commerce market, robust consumer confidence, as well as healthy manufacturing environment amid recovering economy and job market are spurring demand for this real estate category. In addition to Prologis, other REITs, including Duke Realty , Terreno Realty Corporation (TRNO - Free Report) and Liberty Property Trust , are anticipated to benefit from the same factors.

Amid these, Prologis is well poised to capitalize on growth opportunities, aided by its capacity to offer modern distribution facilities at strategic in-fill locations. The company possesses decent balance-sheet strength and being a market leader, it has the ability to raise capital at favorable rates. Nevertheless, there is rising supply of industrial real estate space and this will partly dampen the robust growth momentum in rents. Also, rate hike adds to its woes.

Prologis is slated to report fourth-quarter and full-year 2018 earnings on Jan 22, before the opening bell. The Zacks Consensus Estimate for the fourth-quarter funds from operations (FFO) per share is 79 cents and for the full year is $3.01.

Prologis currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The company’s shares have appreciated 15.7% in a month’s time compared with its industry’s growth of 10%.



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