Part 1 of 2
According to a recently released research report from BTIG, Prologis Inc. is expected to have strong growth through 2017 and 2018. “We raised our 2017 FFO/sh estimate by $0.10 to $2.75 on higher SSNOI growth (up 90 bps to 4.9% on a GAAP basis) and higher income from promotes. We raised our 2018 estimate $0.10 to $2.86 on the FY impact of higher 2017 internal growth,” the report says.
Prologis has spent the past five years focusing its portfolio in higher-growth US markets, which BTIG expects will provide above average rent growth through 2017 and 2018. Additionally, the firm says that positive economic trends in Europe (16.7% of NOI) should provide an upward bias to earnings growth.
BTIG expects the REIT to focus on its fund business. “Prologis has streamlined its strategic capital business to provide longer life funds and create scalable infrastructure. The company took further steps in 2017 with the buyout of NAIF for $710 million, and the announced deal to consolidate Prologis CCP for $362M. Through 2H17, we expect Prologis to rebalance a number of its funds.”
The report also says that industrial rent growth remains well above its historic average of 1.0% per year. Prologis contends that, since 2012, annual rent growth in its markets has outperformed by 85 bps. “We expect this trend to continue and support above average internal growth for Prologis,” BTIG says.
An although Amazon’s deal for Whole Foods raised questions about the potential use of grocery stores as distribution points for customer orders, as The REIT Wire reported, BTIG expects that last mile distribution challenge will remain an important topic for Prologis through the balance of the year.
Check back in the next day or so for more from Prologis’ Q2 numbers.