Prologis (PLD) Realigns Portfolio, Sells Assets Worth $1.1B

Industrial REIT Prologis Inc. PLD recently accomplished the sale of $1.1-billion portfolio, comprising buildings and land in Europe and the United States. The move comes as part of the company’s effort to align its portfolio in tune with its long-term investment strategy. Its share of the proceeds aggregated around $610 million.

These assets which were sold off to a major Asian property company, included $934 million of assets from Prologis' co-investment ventures. Further, the dispositions included $195 million in wholly-owned assets. The company had already included this transaction while providing its guidance for 2018.

Among the assets that were sold off were 46 buildings, aggregating 9.9 million square feet, mainly in Poland, France and Hungary, as well as 40 buildings, totaling 6.6 million square feet, predominantly in Seattle, Dallas and Chicago. In total, the portfolio comprised 16.5 million square feet of buildings, as well as 144 acres of land.

At present, 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, other REITs, such as Duke Realty Corp. DRE, Terreno Realty Corporation TRNO and Liberty Property Trust LPT, have also been significantly gaining from this trend.

Particularly, with improving operating fundamentals in the industrial real estate markets, Prologis is actively capitalizing on growth opportunities. This August, it completed the acquisition of DCT Industrial Trust in an $8.5-billion stock-for-stock deal. The combined portfolio will enable the company to realize significant synergies and strengthen its position in key markets.

Also, in the April-June 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.

On the other hand, the company’s total dispositions and contributions came in at $416 million, with weighted average stabilized cap rate (excluding land and other real estate) of 5.1%. Moreover, Prologis’ realignment program, which kicked off in 2011, and is slated for completion in fourth-quarter 2018, will aggregate $14 billion of building sales on an owned and managed basis. Such efforts are expected to provide the dry powder for its growth strategies.

Prologis currently has a Zacks Rank #2 (Buy). The company’s shares have appreciated 2.1% in three months’ time as against its industry’s decline of 2.6%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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