Back to top

Analyst Blog

Prologis Inc. (PLD - Analyst Report) – a real estate investment trust (REIT) – recently inked 2 build-to-suit deals with BMW of North America LLC – a subsidiary of Bayerische Motoren Werke Aktiengesellschaft – for constructing facilities spanning 609,000 square feet. This deal will likely strengthen Prologis’ relationship with its high-end loyal customers.

BMW of North America markets and sells motor vehicles such as motorcycles, motor and passenger cars, and light trucks. Also, the company offers vehicle accessories as well as apparel and accessories for men, women, and kids online. With these deals, BMW's portfolio with Prologis increased to over 2.2 million square feet, located across 5 markets.

The first facility, spanning 326,500 square feet, will be located at Prologis Redlands Distribution Center 11. The Calif.-based distribution center is positioned in Redlands in the Inland Empire submarket. Also, the facility will provide BMW with an option to expand to an additional 96,000 square feet of space.

The other facility, spanning 282,000 square feet, will be situated at Prologis Park 20/35 in the Dallas market. The property will have expansion option of an additional 370,000 square feet. Upon completion, the park will comprise over 3.1 million square feet of logistics space. Both the facilities will have LEED (Leadership in Energy and Environmental Design) Silver Certification.

We remain impressed with Prologis for its decision to join BMW's thriving business. Moreover, we are positive about BMW's loyalty towards the company. This, in turn, is anticipated to provide steady source of rental revenues for Prologis and boost its global presence going forward.

Additionally, Prologis and BMW entered into an agreement to acquire a distribution facility in Ontario, Calif. The property, spanning 204,000 square foot, is located in Inland Empire West submarket. The acquisition is in accordance with the company’s expectation of generating high customer demand for the property.

Last week Prologis reported its fourth-quarter results with core FFO (funds from operations) per share of 42 cents, which were in line with the Zacks Consensus Estimate. However, it was a couple of cents below the year-ago figure. As of Dec 31, 2012, Prologis owned properties and development projects spanning around 554 million square feet, situated across 21 countries.

Prologis currently holds a Zacks Rank #3 (Hold). REITs that are performing better and are worth a look include Vornado Realty Trust (VNO - Analyst Report), RLJ Lodging Trust (RLJ - Snapshot Report) and Simon Property Group Inc. (SPG - Analyst Report). All these companies carry a Zacks Rank #2 (Buy).

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

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