The Wall Street Journal-20080113-Barron-s Insight- ProLogis -- Sure It-s a REIT- But It Deserves Another Look
Return to: The_Wall_Street_Journal-20080113
Barron's Insight: ProLogis -- Sure It's a REIT, But It Deserves Another Look
Shares of real-estate investment trusts fell sharply in 2007 after many years of stellar performance, on concerns about the housing downturn, the subprime mortgage problem, the credit crunch and potential economic weakness.
But some of the REITs that have been hammered have strong fundamentals and are worth a look at their currently depressed prices. One REIT likely to outperform this year is ProLogis (PLD), the country's largest industrial-property trust, whose growing global business and diverse income stream could buffer it against any slowdown in the U.S.
At a recent price of $58 a share, ProLogis, based in Denver, was trading well below its 52-week high of $73, hit in early October. The shares could rally to around $70 in the next 12 months if the global economy remains fairly stable.
"From an operational standpoint, we expect to outperform in '08, given our international platform," says Chief Executive Officer Jeffrey Schwartz, 48. "Hopefully, it'll be reflected in the stock price."
ProLogis offers the most compelling play in REITdom on continued robust global trade and growth in China and other percolating economies. It has the world's largest network of goods-distribution facilities, with 483 million square feet in 2,669 properties owned, managed or under development in 20 countries.
Corporate giants such as Deutsche Post, Home Depot and Wal-Mart Stores have turned to ProLogis's network to slash transportation costs.
To keep up with demand, ProLogis is developing projects world-wide, emphasizing China and other emerging economies, as well as Japan. The company's project pipeline stood at $6.2 billion at the end of the third quarter, 16% above the December 2006 level, and management raised its guidance for development starts for 2007 to $3.8 billion to $4 billion, with 80% outside the U.S.
Founded in 1991, ProLogis has grown at a double-digit clip for the past few years, through a business model unique among REITs. Besides managing properties, the company also oversees investment funds, through which it raises capital to develop properties.
In October, management outlined an aggressive growth strategy that, among other things, calls for more than doubling real-estate assets under management by 2010, to around $60 billion.
---
For more stories, see barrons.com
