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Prologis (PLD) Boosts Flexibility With $1.8B Debt Refinancing

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Industrial REIT Prologis Inc. (PLD - Free Report) has closed a ¥55.1-billion senior unsecured note transaction. Along with other capital market transactions, this helped in refinancing $1.8-billion debt assumed relating to the DCT Industrial Trust buyout. The efforts added to the company’s financial flexibility.

Moreover, apart from the ¥55.1 billion of senior unsecured notes due in 2025, 2028, 2030 and 2038 with an average annual coupon of 0.998% (approximately $500 million USD), the company went for other issuances, including €700 million of senior unsecured notes due in 2029 with an average annual coupon of 1.875% (around $825 million USD), as well as $700 million of senior unsecured notes due in 2028 and 2048, with an average annual coupon of 4.089%. With a weighted average term of more than 13 years, the company has achieved a blended interest rate of around 2.4% for the financings.

These measures, in total, helped in refinancing of around $2 billion, and with the proceeds, the company not only retired $1.8 billion of DCT's debt, but also funded some closing costs in connection to its buyout as well for paying down of other short-term borrowings. This will help the company realize an estimated $38 million in annual interest savings.

Overall, the company, being a market leader, has the ability to raise capital at favorable rates. Such efforts helped beef up its USD net equity exposure, besides extending the debt pile’s duration to 6.3 years from 5.0 years. Also, its weighted average interest rate was lowered to 2.8% from approximately 2.9%, which is encouraging.

Therefore, given its balance-sheet strength and prudent financial management, the company remains well poised to capitalize on growth opportunities. In fact, currently, the industrial real estate category has grabbed attention as high consumer spending, e-commerce boom and a healthy manufacturing environment amid recovering economy and job market are spurring demand for the real estate category. Apart from Prologis, this is stoking growth of other REITs like Duke Realty Corp. (DRE - Free Report) , Terreno Realty Corporation (TRNO - Free Report) and Liberty Property Trust (LPT - Free Report) as well.

Notably, Prologis completed the acquisition of DCT Industrial Trust in an $8.5-billion stock-for-stock deal this August. The combined portfolio will enable the company to realize significant synergies and strengthen its position in key markets. Also, in the June-end quarter, Prologis’ share of building acquisitions amounted to $101 million, with a weighted average stabilized cap rate of 4.9%. Development stabilization aggregated $592 million, while development starts totaled $744 million, with 25.4% being build-to-suit.

Prologis currently has a Zacks Rank #3 (Hold). The company’s shares have appreciated 3% in three months’ time as against its industry’s decline of 0.9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.



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