FUR Winthrop Realty Trust New (delisted)

Prologis Inc. (PLD), a leading industrial real estate investment trust (REIT), has recently signed a lease agreement spanning 540,000 square feet of its development portfolio in the Netherlands with Syncreon, a worldwide logistics service provider, for an undisclosed amount. The lessee would occupy the space at Prologis Park Tilburg, which is located in the Industrial Park Vossenberg-West, northwest of Tilburg, and consists of three state-of-the-art distribution facilities totaling about 1.3 million square feet of warehouse space.

The transaction is one of the largest of its kind in the country in the current year. With the lease, Syncreon is expected to better serve the European business of an undisclosed international computer manufacturer. The leased facility is strategically located in the south-central part of the Netherlands near the Belgian border and facilitates multimodal transport at a midpoint between Rotterdam and the German industrial zone, thereby offering a significant growth opportunity for the logistics company.

On the other hand, the lease agreement enables Prologis to expand and cement its strategic ties with leading third-party global logistics service providers like Syncreon, which remains focused on improving supply chain efficiencies through the lease-up of functional and modern distribution space. Consequently, the lease agreement is a win-win deal for both the participating companies. 

Prologis acquires, develops, operates and manages industrial real estate space in North America, Asia and Europe. Given its international presence, Prologis has lately faced unfavorable foreign currency movements and other economic fluctuations that have impaired its top-line growth.

Furthermore, although third quarter 2011 results exceeded the Zacks Consensus Estimates, macroeconomic issues had contributed to a slower pace of recovery as the industry was affected by the continued concerns about sovereign debt issues, rising energy costs, global military actions and the devastation and loss caused by the earthquake and tsunami in Japan.

In addition, the unrelenting troubles in the residential sector are weighing on commercial property operations. The credit crunch has also widened the bid-ask spread between buyers and sellers of commercial real estate, which has caused deal volumes to fall compared to pre-recession levels. Moreover, market vacancy increases is expected to mitigate Prologis’ ability to push through rental rate increases, thereby affecting the long-term growth of the company.

We currently have a ‘Neutral’ recommendation and a Zacks #3 Rank for Prologis, which translates into a short-term ‘Hold’ rating. However, we have an ‘Outperform’ recommendation and a Zacks #3 Rank for Winthrop Realty Trust (FUR), one of the peers of Prologis.

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