Prologis (NYSE:PLD) is the world's largest industrial REIT, with 512.2 M sq ft of rentable property--more than double the square footage of its nearest competitor, ING. The company owns and manages interests in more than 2,669 distribution facilities, service offices, and other properties, spanning about 483 M sq ft in 105 markets including North America (72% of PLD's total property square footage as of September 2007), Europe (19%), and Asia/Pacific (8%).
Unlike many REITs who distribute 90% of their taxable income as dividends and thus need to raise additional capital for real estate development from equity markets, Prologis has a number of property funds that generate capital the company then uses for new development. These property funds are real estate mutual funds which Prologis has set up with institutional investors; Prologis contributes real estate properties it has developed to the funds and acts a managing partner as well as minority owner. This practice brings Prologis revenue from the development of real estate, rental revenues through the mutual funds, and property fund management fees--none of which are subject to the REIT 90% redistribution rule. Since Prologis can usually count on its property funds to purchase its properties, the property fund system also reduces the companies' exposure to general market conditions, where a temporarily weak market or lack of buyers would cause a new development to sell for less. However, Prologis has not gone untouched in the 2007-8 weakening of the US credit and real estate markets. PLD has 10 B USD in debt (debt/equity ratio 1.42); however, the company is actually relatively well-situated for its traditionally high-debt REIT industry; close competitors AMB Property (AMB) and First Industrial Realty Trust (FR) all have higher debt-to-equity ratios.
Real State
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