Back to top

Analyst Blog

Prologis Inc. (PLD - Analyst Report), a leading industrial real estate investment trust (REIT), has recently signed a new lease agreement spanning about one million square feet in the U.K., for an undisclosed amount. The deal was penned with Sainsbury's Supermarkets Ltd, a premier retailer and the third largest supermarket chain in the country.

Prologis would construct a build-to-suit facility for Sainsbury's at the Daventry International Rail Freight Terminal (DIRFT), a rail-road intermodal freight terminal with an associated warehousing estate. The proposed construction is slated to come up within the Prologis DIRFT II development site in Daventry and scheduled to commence in early 2013.

The fully built DIRFT II project is expected to encompass 2.2 million square feet. The facility is strategically located alongside the M1 motorway and the West Coast Mainline railway, offering both road and rail connectivity. In addition, a new intermodal terminal connecting the existing DIRFT railway sidings is due to be installed next to the building. Consequently, the distribution center is expected to provide unmatched communication facilities to the lessee.

Besides its locational advantage, the facility is designed to achieve a “Very Good” accreditation from Building Research Establishment Environmental Assessment Method (BREEAM). BREEAM sets the standard for the best practice in sustainable building design, construction and operations. Furthermore, the project is expected to receive the best possible Energy Performance Certificate (EPC) ranking based on its energy efficiency rating.      

The agreement showcases the inherent high quality of the properties of Prologis and signifies a growing demand for Class A logistics space in the U.K. Earlier in the month, Prologis had signed a new build-to-suit agreement in the U.K. to construct a turnkey distribution center spanning about 300,000 square feet for Network Rail. Additionally, in May and September 2012, Prologis had signed two build-to-suit agreements to construct a new e-commerce distribution hub spanning 473,000 square feet and 810,000 square feet of distribution space respectively, in Osaka, Japan.

With improving property values and growing institutional demand for quality properties, Prologis has witnessed a growing customer interest in new build-to-suit development projects across the globe. Additionally, leasing decisions that were earlier postponed due to volatility in the markets are gradually coming off the shelf.

Prologis acquires, develops, operates and manages industrial real estate space in North America, Asia and Europe. As of June 30, 2012, Prologis had approximately 18 million square feet of logistics and distribution space in the U.K.

We currently have a Neutral recommendation and a Zacks #2 Rank for Prologis, which translates into a short-term Buy rating. We also have a Neutral recommendation and a Zacks #3 Rank (short-term Hold 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.