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Here's Why You Should Hold On to Prologis (PLD) Stock Now
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The industrial asset class has grabbed the limelight for showing resilience amid the coronavirus pandemic with low vacancy rates, high asking rents and robust rent collections. In fact, amid e-commerce boom, growth in industries and companies making efforts to improve supply-chain efficiencies, demand for logistics infrastructure and efficient distribution networks has been shooting up. This is aiding the industrial real estate market to prosper.
Apart from fast adoption of e-commerce, the logistics real estate is anticipated to benefit from an increase in inventory levels post the global health crisis, offering possibilities to industrial landlords, including Prologis Inc. (PLD - Free Report) , Duke Realty Corp. , Terreno Realty Corporation (TRNO - Free Report) and Rexford Industrial Realty, Inc. (REXR - Free Report) , to enjoy a favorable market environment.
Particularly, Prologis is well positioned to bank on the favorable environment backed by its solid operating platform and robust scale. The company, which has emerged as a market leader in this asset category, is witnessing solid demand for its industrial real estates, as reflected by the leasing, rent and occupancy levels of the properties.
Prologis has been witnessing decent operating performance amid the pandemic. The average occupancy level in Prologis’ owned-and-managed portfolio was 95.4% in the first quarter and is consistent with seasonality. Moreover, during the quarter, 43.9 million square feet of leases commenced in the company’s owned and managed portfolio, with 39 million square feet in the operating portfolio and 4.8 million square feet in the development portfolio. Further, Prologis’ share of net effective rent change was 27% during the January-March quarter, driven by the United States at 32%. Cash rent change was 12.5%. Also, rent collections remain strong and the company effectively had no bad debt expense in the quarter.
With healthy operating fundamentals in the industrial real estate markets, Prologis has capitalized on growth opportunities through acquisitions and developments. The company’s share of building acquisitions amounted to $71 million, with a weighted average stabilized cap rate of 5% in the first quarter. Development stabilization aggregated $396 million, while development starts totaled $575 million, with 60.6% being build-to-suit. Its high number of build-to-suit development projects highlights the advantageous location of the company’s land bank.
For 2021, the company anticipates $600-$800 million of building acquisitions at Prologis share compared with the $400-$800 million stated earlier. Development starts are projected to be $2,750-$3,050 million compared with the $2,300-$2,700 million mentioned earlier.
Prologis is focused on bolstering its liquidity. The combined investment capacity of Prologis and its open-ended vehicles, in line with their current credit ratings, is now at $14 billion. Its debt maturity schedule is efficiently managed with minimal maturities until 2026. Moreover, the company’s credit ratings as of Mar 31, 2021, were A3 from Moody’s and A- from Standard & Poor’s, both with stable outlook, allowing it to borrow at an advantageous rate. Given its balance-sheet strength and prudent financial management, Prologis is well poised to bank upon growth opportunities.
With the asset category being attractive in these challenging times, there is a development boom in a number of markets. This high supply is likely to fuel competition and curb pricing power. Specifically, new supply is likely to put pressure on vacancy level which might shoot up to some extent in the upcoming quarters.
Furthermore, recovery in the industrial market has continued for long and also growth of e-commerce sales is likely to stabilize to some extent in the upcoming quarters. Therefore, any robust performance is unlikely in the near term. In fact, with comparatively more modest demand, coupled with new supply, the pace of overall growth in rent will likely moderate in the upcoming period.
Shares of Prologis have outperformed the industry it belongs to in the past three months. This Zacks Rank #3 (Hold) company’s shares have gained 18.5%, while the industry has rallied 12.5% during the same time frame. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Image Source: Zacks Investment Research
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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Image: Bigstock
Here's Why You Should Hold On to Prologis (PLD) Stock Now
The industrial asset class has grabbed the limelight for showing resilience amid the coronavirus pandemic with low vacancy rates, high asking rents and robust rent collections. In fact, amid e-commerce boom, growth in industries and companies making efforts to improve supply-chain efficiencies, demand for logistics infrastructure and efficient distribution networks has been shooting up. This is aiding the industrial real estate market to prosper.
Apart from fast adoption of e-commerce, the logistics real estate is anticipated to benefit from an increase in inventory levels post the global health crisis, offering possibilities to industrial landlords, including Prologis Inc. (PLD - Free Report) , Duke Realty Corp. , Terreno Realty Corporation (TRNO - Free Report) and Rexford Industrial Realty, Inc. (REXR - Free Report) , to enjoy a favorable market environment.
Particularly, Prologis is well positioned to bank on the favorable environment backed by its solid operating platform and robust scale. The company, which has emerged as a market leader in this asset category, is witnessing solid demand for its industrial real estates, as reflected by the leasing, rent and occupancy levels of the properties.
Prologis has been witnessing decent operating performance amid the pandemic. The average occupancy level in Prologis’ owned-and-managed portfolio was 95.4% in the first quarter and is consistent with seasonality. Moreover, during the quarter, 43.9 million square feet of leases commenced in the company’s owned and managed portfolio, with 39 million square feet in the operating portfolio and 4.8 million square feet in the development portfolio. Further, Prologis’ share of net effective rent change was 27% during the January-March quarter, driven by the United States at 32%. Cash rent change was 12.5%. Also, rent collections remain strong and the company effectively had no bad debt expense in the quarter.
With healthy operating fundamentals in the industrial real estate markets, Prologis has capitalized on growth opportunities through acquisitions and developments. The company’s share of building acquisitions amounted to $71 million, with a weighted average stabilized cap rate of 5% in the first quarter. Development stabilization aggregated $396 million, while development starts totaled $575 million, with 60.6% being build-to-suit. Its high number of build-to-suit development projects highlights the advantageous location of the company’s land bank.
For 2021, the company anticipates $600-$800 million of building acquisitions at Prologis share compared with the $400-$800 million stated earlier. Development starts are projected to be $2,750-$3,050 million compared with the $2,300-$2,700 million mentioned earlier.
Prologis is focused on bolstering its liquidity. The combined investment capacity of Prologis and its open-ended vehicles, in line with their current credit ratings, is now at $14 billion. Its debt maturity schedule is efficiently managed with minimal maturities until 2026. Moreover, the company’s credit ratings as of Mar 31, 2021, were A3 from Moody’s and A- from Standard & Poor’s, both with stable outlook, allowing it to borrow at an advantageous rate. Given its balance-sheet strength and prudent financial management, Prologis is well poised to bank upon growth opportunities.
With the asset category being attractive in these challenging times, there is a development boom in a number of markets. This high supply is likely to fuel competition and curb pricing power. Specifically, new supply is likely to put pressure on vacancy level which might shoot up to some extent in the upcoming quarters.
Furthermore, recovery in the industrial market has continued for long and also growth of e-commerce sales is likely to stabilize to some extent in the upcoming quarters. Therefore, any robust performance is unlikely in the near term. In fact, with comparatively more modest demand, coupled with new supply, the pace of overall growth in rent will likely moderate in the upcoming period.
Shares of Prologis have outperformed the industry it belongs to in the past three months. This Zacks Rank #3 (Hold) company’s shares have gained 18.5%, while the industry has rallied 12.5% during the same time frame. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
Zacks' Top Picks to Cash in on Artificial Intelligence
In 2021, this world-changing technology is projected to generate $327.5 billion in revenue. Now Shark Tank star and billionaire investor Mark Cuban says AI will create "the world's first trillionaires." Zacks' urgent special report reveals 3 AI picks investors need to know about today.
See 3 Artificial Intelligence Stocks With Extreme Upside Potential>>