Prologis, Inc. (NYSE:PLD) is the largest industrial REIT, with an approximate $21 billion market capitalization. Despite the high valuation metrics, Prologis was one of best performers in Q1 2015 in comparison with its Industrial REIT peers. It leases 2,845 distribution facilities to over 4,700 customers. Most of its buildings — 74 percent are in North and South America, followed by Europe and Asia. The company bases its strategy on the ever-increasing demand for high-quality distribution facilities throughout the world; land banking in well-positioned locations for development or land sales; and economy of scale.
Prologis either owns outright, or has investments in, properties and development projects expected to amount to around 594 million square feet in 21 countries through two segments. Real Estate Operations segment manages the ownership of industrial properties and Strategic Capital segment manages co-investment ventures and other unconsolidated entities. Prologis’s weighted average ownership is approximately 32 percent.
The company has a broad and diverse tenant basis, including multinational corporations that bring them repeat business across our portfolio. They cater to gobal-trade-linked businesses that seek efficient shipment of goods across the global supply chain. Top customers include Amazon, Home Depot, Wal-Mart and FedEx Corporation. The top tenant, DHL Express, contributed two percent of Prologis’s net effective rent.
The results of the first quarter of 2015 compared to the same period the previous year were strong:
- Total revenues increased by six percent.
- Occupancy in the operating portfolio went by 140 basis points to 95.9 percent occupancy.
- Same-store NOI for owned and managed portfolio increased 3.9 on an adjusted-cash basis (4.2 for Prologis share only).
- Core funds from operations and dividends increased fourteen and nine percent respectively.
- Credit ratings have been stable at Moody’s Baa1 and Standard & Poor’s BBB+. Most of their debt is fixed-rate and unsecured. The debt-to-capitalization ratio is about 30 percent.
From a valuation perspective, the FFO multiple is around 20 and the dividend yield is 3.6. Definitely, Prologis is worth including on the watchlist.
Written by Heli Brecailo
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