Wells Fargo Downgrades ProLogis (PLD) to Market Perform

January 30, 2013 6:47 AM EST Send to a Friend
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Price: $41.24 +0.71%

Rating Summary:
    18 Buy, 7 Hold, 2 Sell

Rating Trend: Up Up

Today's Overall Ratings:
    Up: 13 | Down: 18 | New: 41
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Wells Fargo downgraded ProLogis (NYSE: PLD) from Outperform to Market Perform but raises its valuation range from $36-$40 to $38-$41.

The firm comments, "We are lowering our rating on PLD to Market Perform from Outperform owing to our view that the current share price doesn't reflect weakerthan- expected pricing on asset dispositions/fund contributions of late, but does reflect upside potential from NOI growth, a growing development pipeline with strong embedded value creation, and increased management fees. PLD announced solid progress towards de-leveraging goals with its European JV formation and planned J-REIT. In addition, we expect PLD sold more assets in North America in Q4 2012. We applaud PLD for its execution thus far, and we believe the improvement in valuation following these moves was appropriate. Yet, weaker-than-expected pricing on dispositions (we estimate $0.80/sh reduction to NAV, all else equal) could limit NAV/sh growth potential when all the moving parts are settled. Further, we estimate the implied value on PLD's North American portfolio is 5.3%--well below peers. PLD shares are up 20% since early December (industrial REIT peers at +12%, RMZ index +8.0%). PLD trades at an overall implied cap rate of 5.4%; peers at 6.1%. We expect PLD to show better ssNOI growth vs. peers in 2013, and we believe the development pipeline should be additive to NAV/sh, but we don't think this is enough to spur additional outperformance. Valuation range $38-41, from $36-40, no change to estimates."

For an analyst ratings summary and ratings history on ProLogis click here. For more ratings news on ProLogis click here.

Shares of ProLogis closed at $40.74 yesterday.


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