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Prologis (PLD) Announces Encouraging Build-to-Suit Activity


PrologisPLD build-to-suit activity remained solid in the second half of 2017, with the company completing 13 development projects. With a total expected investment (TEI) of approximately $350 million, these projects included more than 4.7 million square feet of space.

Further, this industrial real estate investment trust (REIT) was awarded 21 build-to-suit development projects during the same period, denoting over 6.7 million square feet of space. The TEI of these developments totaled approximately $550 million.

In fact, for full-year 2017, the company completed 33 build-to-suit projects covering more than 12 million square feet of space. During the year, it also started 38 projects which have a TEI of nearly $1.1 billion.

These comprise 47% of the company’s total development TEI for 2017 and indicate an increase of more than 45% as compared to the prior year’s TEI for build-to-suit projects.

Also, the company signed agreements for more than 70% of these starts with multi-site customers, while more than 95% of the customers are located in global markets.

Notably, this high number of build-to-suit development projects highlights the advantageous location of the company’s rich land bank as well as the strong network of multi-site customers which are increasingly focusing on e-commerce. In fact, the company’s ratio of built-to-suit activity to overall development starts has achieved the highest level since 2013.

The industrial real estate market has been experiencing solid growth, thanks to the rising Internet retailing and supply-chain consolidation. This, in turn, is generating greater demand for logistics infrastructure and efficient distribution networks. While there is a rising demand for modern logistics facilities, with vacancy rates tightening, a whole lot of new buildings are slated to be made available in the market the near term, leading to elevated supply, and lesser scope for rent and occupancy growth.

Shares of this Zacks Rank #4 (Sell) company have underperformed the industry over the past three months. While Prologis’ shares have lost 5.6%, the industry has incurred loss of 3.8% during the same time period.

Stocks That Warrant a Look

Alexandria Real Estate Equities’ ARE funds from operations (FFO) per share estimates for 2017 remained unchanged at $6.02 over the past month. Also, its shares have gained 1.3% in the past three months. It carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

One Liberty Properties OLP witnessed an upward earnings estimate revision of 7.1% for 2017 in the last 60 days. Also, its shares have gained 5.9% in the past six months. It also carries a Zacks Rank of 2.

Terreno Realty Corporation’s TRNO 2017 FFO per share estimates remained unchanged at $1.10 over the past month. The stock has been up 1.4% for the past six months. It carries a Zacks Rank of 2.

Note: All EPS numbers presented in this write up represent funds from operations (“FFO”) per share. 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.

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