Back to top

Analyst Blog

Prologis Inc. (PLD - Analyst Report), an industrial real estate investment trust (REIT), has recently penned two new agreements to lease an aggregate of approximately 1.1 million square feet, in Sao Paulo, Brazil. The deals were sealed with AGV Logistica, a premier third-party logistics provider, and Dafiti, one of the largest online fashion retailers in the region, for an undisclosed amount.

In concurrence with the transaction, AGV Logistica would occupy 654,710 square feet in Prologis CCP Cajamar II Park, located in the Cajamar submarket of Sao Paulo. Prologis is likely to start construction of this distribution center in November 2012 and expects to wrap it up by August next year.

On the other hand, Dafiti would occupy 412,729 square feet in Prologis CCP Jundiai Industrial Park, located in the Jundiai submarket of Sao Paulo. The facility has easy access to Avenida Hermengildo Tonolli and is located in between the municipalities of Campinas and Sao Paulo. When fully built out, the distribution center is expected to total approximately 1.6 million square feet of industrial space.

With the twin deal, both the facilities have been fully pre-leased prior to construction. The projects are joint ventures of Prologis with Cyrela Commercial Properties (CCP) – one of the leading commercial real estate companies in Brazil.

Both development properties are expected to meet the highest functionality, flexibility, and accessibility standards by incorporating the technical know-how of CCP and expertise of Prologis, the world leader in the acquisition and development of Class A industrial projects.

With continued improvement in property values and growing institutional demands for quality properties, Prologis has taken up efficient leasing decisions that were earlier postponed due to market volatility. The industrial property market in Brazil, mainly in Sao Paulo, is also growing on the back of increasing demand.

According to a report by Cushman & Wakefield, the demand for industrial space in Sao Paulo continued to grow in 2011, with overall vacancy rate (stand-alone and industrial parks) falling from 8.7% to 5.8%.

Prologis acquires, develops, operates and manages industrial real estate space in North America, Asia and Europe. As of June 30, 2012, the company owned properties and development projects spanning approximately 569 million square feet across 21 countries.

We currently have a Neutral recommendation and a Zacks #2 Rank for Prologis, which translates into a short-term Buy rating. However, we have an Underperform recommendation and a Zacks #5 Rank (short-term Strong Sell rating) for Winthrop Realty Trust (FUR - Snapshot Report), one of the peers of Prologis.

Please login to Zacks.com or register to post a comment.