Why everyone is talking about Prologis

Supply chain issues are causing supply chain “wows” for some publicly traded companies, including specialist warehouse real estate investment trusts (REITs) throughout the global distribution nervous system .

This includes the largest of industrial REITs: Prologis (NYSE: PLD), indicating that demand is at an all time high for warehouse space. The company said in an October report that strong retail sales took the vacancy rate among U.S. warehouses to a new low of 3.9%, as net absorption – the newly occupied space less. newly vacant space – hit a record 115 million square feet in the third quarter of this year, more than double the level of last year.

Individual and institutional investors have responded to this kind of talk by pumping money into stocks, projects and acquisitions. This is reflected in the performance of the 13 REITs that Nareit – the national REITs trade group and data tracker – places in the industry niche. As of September 30, the group had posted a cumulative total return of 21.96%, even after a volatile September. Prologis, meanwhile, had recorded a return of 53.80% until November 29 of this year, and there is reason to believe that this race is not over.

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The San Francisco-based company has a portfolio of 4,675 buildings covering 994 million square feet and occupied by 5,500 customers. Prologis operates in 19 countries across the Americas and in Europe and Asia, but generates 81% of its net operating income (NOI) and manages 70% of its total assets in the United States.

This year alone, Prologis invested nearly $ 4.3 billion in early stage development, including 166 projects in 62 markets in 15 countries. This adds to a 20-year development history that includes $ 36.5 billion in investments that the company says has allowed it to create more square meters of such space than any other US logistics REIT. reunited.

Despite all these expenses, profitability was not an issue. Same-store NOI growth has averaged 4.1% over the past five years compared to 3.1% for other national logistics REITs. For the third quarter, net earnings per share soared to $ 0.97 from $ 0.40 a year earlier, and funds from basic operations (FFOs), a key measure of REIT performance, rose well to $ 1.04 per share from $ 0.90 in the third quarter of last year.

Meanwhile, Prologis stock closed at $ 153.28 on November 29, just 1.03% off its 52-week high of $ 154.87 from November 24 and 64.68% higher than the low of $ 93.08 hit Jan.12. Its market capitalization of $ 113.3 billion is among the largest of any REIT.

The stock was returning 1.68% at this level, compared to 1.29% for the S&P 500. This is based on an annual dividend of $ 2.52, a payout that has been steadily increased over the past 12 years, passing. from $ 0.28 in 2009 to $ 0.63 in each of the last three quarters after rising nickel in the first quarter of 2021.

Prologis and the logistics market inspire investor confidence

The Prologis report referenced above indicates that at least 800 million square feet of additional logistics real estate will be needed to overcome the warehouse shortage and build resilience in the global chain. Most importantly, according to the company, the market is not even fully reflecting this demand yet, as many companies are now focusing more on building inventory rather than adding space.

Company President and CEO Hamid Moghadam said in the third quarter earnings announcement that record vacancy rates are driving unprecedented increases in rents and market valuations, and that space in its markets is effectively exhausted.

Real estate equity investors who acquire what Prologis offers may take the opportunity to capitalize on this robust future growth by investing in that particular REIT, or one of the others that specialize in their own style of logistics.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.