ProLogis Downgraded To Market Perform

Wells Fargo has published a research report on ProLogis

and has downgraded the company to Market Perform. In the report, Wells Fargo writes "We see additional upside potential in PLD shares over time, but we believe there is significant execution risk still embedded in the PLD story. Leverage is still high, but can be reduced over time via land sales and lease-up. We expect earnings during the next several quarters to include a lot of one time charges, and a high level of capitalized costs (i.e. low earnings quality) to contribute to the bottom line in 2011. The implied cap rate is now 7.0% (6.3% layering on cap-ex) these levels are reduced by ~100bps including a full G&A load. We see $2-3/sh of upside, but this will require perfect execution on development lease-up, core portfolio lease-up, and land monetization. Our 2010 'core' FFO estimate is reduced to $0.51/sh from $0.54/sh and our 2011 estimate is reduced to $0.62/sh from $0.65/sh. Our valuation is now $11-13/sh, from $11-12/sh." ProLogis closed yesterday at $13.44.