FUR Winthrop Realty Trust New (delisted)

Prologis Inc. (PLD), a leading industrial real estate investment trust (REIT), has recently signed a new lease agreement spanning 270,764 square feet of its development portfolio in Carson, California. With the deal, the facility is presently fully leased to 3PL Global LLC, a third-party logistics provider.

The lessee would occupy the space at Prologis South Bay Distribution Center. The leased property is located in close proximity to the Ports of Los Angeles and Long Beach on one hand, and Los Angeles International Airport on the other. Consequently, the property is expected to serve as the regional distribution center for the lessee.

The leased property is accredited with a LEED (Leadership in Energy and Environmental Design) Silver certificate in recognition of its sustainable building design and energy management solutions. Established by the U.S. Green Building Council, LEED is an internationally recognized third-party green building certification system, which ensures that a building is designed and built for environment-compatibility, providing a healthy work environment and reducing operating costs.

The projects are judged on six parameters: Sustainable Sites, Water Efficiency, Energy & Atmosphere, Materials & Resources, Indoor Environmental Quality, and Innovation in Design. The number of points earned by a project determines the level of LEED Certification it receives, which is currently available in four progressive levels – Certified: 26 - 32 points; Silver: 33 - 38 points; Gold: 39 - 51 points; and Platinum: 52 - 69 points.

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 fourth quarter 2011 results exceeded the Zacks Consensus Estimates, macroeconomic issues had resulted in 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 is expected to offset Prologis’ ability to push through rental rate increases, thereby affecting its long-term profitability.

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

 
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