ProLogis Leases in Memphis - Analyst Blog

ProLogis (PLD), a leading global provider of distribution facilities, has recently signed a new lease agreement spanning about 181,000 square feet in Memphis. The deal was signed with Menlo Worldwide Logistics LLC, a global provider of logistics, transportation management and supply chain services, for an undisclosed sum.

The lessee will occupy the space in Building One at ProLogis Park DeSoto, which is strategically located in close proximity  to major highway networks. With the deal, Menlo Worldwide would currently lease approximately 1.6 million square feet across North America and Europe.

The leased distribution facility was constructed in 2008 and comprises two buildings totaling approximately 980,000 square feet of space. Both the buildings are presently fully leased. The leased property has all the state-of-the-art facilities and includes various sustainable design and energy-efficient construction techniques. Consequently, the asset provides significant growth potential to the lessee.

We maintain our Neutral recommendation on ProLogis, which presently has a Zacks #3 Rank translating into a short-term Hold rating and indicates that the stock is expected to perform in line with the overall U.S. equity market for the next 1–3 months.

Our long-term Neutral recommendation on the stock is based on the belief that ProLogis has considerably reduced operating risks through continued lease-up of its development portfolio. ProLogis also has a geographically diverse portfolio of distribution facilities that integrates international scope and expertise with a strong local presence in its markets, which provides strong upside potential for the company.

However, the continued troubles in the residential sector are weighing on commercial property operations. This has significantly affected the top-line growth of industrial real estate companies like ProLogis and AMB Property Corp. (AMB).

AMB provides industrial distribution warehouse space in some of the busiest distribution markets in the Americas, Europe and Asia that have held up relatively well during the recession. Consequently, AMB is comparatively better equipped than private developers and smaller public companies to weather the macroeconomic challenges.