ProLogis (PLD: 10.56 -0.22 -2.04%), a leading global provider of distribution facilities, has recently inked three new build-to-suit contracts spanning about 389,000 square feet of space in Europe, representing about $31 million of total expected investment and $8 million of land monetization.
The agreements are part of ProLogis’ long-term plan to start $700 million to $800 million of new developments in 2010 across the globe. The company also expects to monetize approximately $350 million to $400 million of land in 2010.
ProLogis has signed a build-to-suit agreement to construct a 181,000 square feet distribution facility for an unnamed global supplier. The project is expected to be completed by the end of the year. The facility would be built on ProLogis-owned land at an existing ProLogis distribution park in Northern Germany.
In addition, ProLogis has signed a build-to-suit contract to develop a 93,000 square feet distribution facility for an unnamed third-party logistics provider. The project, scheduled to be completed in early 2011, would be built on ProLogis-owned land at ProLogis Park Leipzig in Southeast Germany.
In view of improving property values and institutional demand growing for quality properties, ProLogis has witnessed a growing customer interest in new build-to-suit development projects across the globe. In addition, leasing decisions that were earlier postponed due to volatility in the markets are gradually coming off the shelf.
We currently have a Neutral recommendation on ProLogis with a Zacks #4 Rank, which translates into a short-term Sell rating and indicates that the stock is expected to underperform the overall U.S. equity market for the next 1–3 months. The credit crunch has widened the bid-ask spread between buyers and sellers of commercial real estate, which has caused deal volumes to fall dramatically. In addition, market vacancy increases will mitigate ProLogis’ ability to push through rental rate increases, adversely affecting the top-line growth of the company.
| Analysts' Targets | |
| FBR Capital Markets & Co. | $15 |
| Strong Buy | |
| Wednesday, July 14, 2010 | |
| Longbow | $10 |
| Neutral | |
| Friday, June 04, 2010 | |
| J.P. Morgan Securities | $12 |
| Buy | |
| Friday, April 23, 2010 | |
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