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Analyst Blog

San Francisco-based industrial real estate investment trust (REIT), Prologis Inc. (PLD - Free Report) , inked a build-to-suit agreement with Chinese logistics provider, Deppon. The agreement is for 2 facilities aggregating 452,000 square feet in southern China.

The proximity of this distribution center, which will be built at the Prologis Dongguan Shipai Logistics Center, to the Congguan Expressway that is scheduled for completion by year-end, would offer direct access to key cities like Guangzhou and Shenzhen.

Notably, there is an increased demand for such facilities in Dongguan, aided by economic growth, considerable manufacturing base as well as domestic consumption. Prologis stands to benefit as it has the capacity to offer modern distribution facilities in strategic infill locations.

The new facilities would function as regional distribution centers for the East Pearl River Delta area. It would include an extended truck court, which would assist express inbound and outbound operations of Deppon.

As a matter of fact, Deppon has been Prologis’ client in the past and this particular deal will extend Prologis' relationship with Deppon to over 1 million square feet across 5 markets in China.

Prologis is significantly capitalizing on the growing opportunities in 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. Also, the company has been actively spreading itself worldwide through joint ventures.

As of Dec 31, 2012, the company had about 36.6 million square feet of distribution space in Asia alone. Moreover, as of that date, the company owned or had investments in, on a consolidated basis or through unconsolidated joint ventures, properties and development projects projected to total around 554 million square feet in 21 countries. We believe such strategic moves will help augment the company’s top line going forward and provide upside potential to its stock price.

Prologis currently holds a Zacks Rank #3 (Hold). Other REITs that are performing well and are worth a look include Ryman Hospitality Properties Inc. (RHP - Free Report) , Omega Healthcare Investors (OHI - Free Report) , both of which carry a Zacks Rank #1 (Strong Buy) and Cousins Properties Inc. (CUZ - Free Report) that holds a Zacks Rank #2 (Buy).