Prologis Inc.’s (PLD - Free Report) 21-building campus in Menlo Park, CA, has been acquired by Facebook (FB - Free Report) for $400 million as part of the latter's expansion plans, per Bloomberg. The warehouses will be demolished, where office and residential spaces will be built to accommodate Facebook's employees.
This industrial real estate investment trust (REIT) purchased the property in Menlo Park, 10 years ago, for $110 million. Per the chief executive officer of Prologis, Hamid Moghadam, Facebook had to double its previous offer, made in 2015, to acquire the space.
The deal reflects how warehouses are benefiting from solid demand for space in urban areas. Another advantage being enjoyed by the industrial REITs is better pricing power due to declining warehouse supply.
Amid e-commerce boom, growth in industries and companies opting for consolidation of operations for improving supply chain efficiencies and shifting closer to large population centers, demand for logistics infrastructure and efficient distribution networks has been increasing. This is helping the industrial real estate market to grow and given Prologis’ solid capacity, the company remains well poised to capitalize on this trend.
Particularly, with a large customer base, e-commerce boom and heightened urbanization, companies are shifting their strategies toward same-day delivery and other services, which are propelling demand for modern distribution facilities.
Further, healthy manufacturing environment, recovering economy and job-market gains are likely to drive demand from other sectors beside e-commerce. Thus, Prologis is well poised to benefit from its capacity to offer modern distribution facilities at strategic in-fill locations.
This Zacks Rank #2 (Buy) stock has outperformed its industry in the past three months. The stock has gained 6.4%, while the industry recorded growth of 3.3% during this time frame.
Other Stocks Worth a Look
A few other top-ranked stocks from the same space are Arbor Realty Trust (ABR - Free Report) and Chatham Lodging Trust (CLDT - Free Report) . Both stocks carry a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Arbor Realty Trust’s Zacks Consensus Estimate for 2018 FFO per share rose 14.4% to $1.03 in a month’s time. Its shares have returned 26.6% over the past 12 months.
Chatham Lodging’s FFO per share estimates for the current year inched up 1% to $1.93 in a month’s time. Its shares have gained 14.4% over the past 12 months.
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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