Prologis (PLD) Ratings Affirmed by S&P; Remains Segment Leader

Standard & Poor's Ratings Services today affirmed its 'BBB+' corporate credit rating on San Francisco-based Prologis Inc. and Prologis L.P. (NYSE: PLD)(collectively Prologis). The outlook is stable. At the same time, we affirmed our senior unsecured ratings on the company's debt at 'BBB+' and our ratings on the company's preferred stock at 'BBB-'.

"Prologis' global size and scale ($52 billion of assets under management), as well as significant geographic and tenant diversity, are unmatched in the industrial subsector, and it has among the highest-quality real estate portfolios in this sector. Prologis owns or has investments in 585 million square feet of industrial space located in 21 countries and leased to more than 4,700 customers," said credit analyst George Skoufis. "In our view, these competitive strengths mean that Prologis is among the best positioned versus peers to take advantage of the rental growth recovery that we expect will continue over the next couple of years."

The stable outlook reflects our view that industrial fundamentals will continue to improve over the next 12 to 24 months and that Prologis' well-diversified global portfolio will experience stable to improving occupancy and rent growth leading to modest NOI growth. Further, we believe management will pursue development in a prudent manner. Moreover, the company's improving credit measures appear sustainable, as financial management is, in our view, relatively conservative and disciplined.

We view a downgrade as unlikely in the near term because of favorable fundamentals coupled with the company's balance sheet strategies that have reduced leverage and strengthened coverage measures, as well as extended its debt tenor and essentially eliminated refinancing risk over the next two years. However, we would consider a downgrade if business fundamentals deteriorate abruptly, leading to material operating and leasing difficulties, and/or the company pursues more aggressive development and financing strategies, such that key credit measures start to deteriorate toward the weaker end of our "intermediate" range, with total debt to EBITDA sustained at or above 7x and FCC in the low-2x area.

We would consider an upgrade to 'A-' if Prologis exhibits strong relative performance such as stronger operating efficiency/overhead ratios relative to peers, continues to pursue development prudently such that funding is at least leverage neutral and any speculative development is largely limited to healthier global markets, and continued improvement in its financial risk profile with debt to EBITDA improving to below 6x, as well FCC maintained above 3x.

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