Is ProLogis On Its Way Back?

Despite the departure of its CEO, the slashing of a dividend payment, a halt to new development plans and a workforce reduction, it remains largely business as usual as industrial REIT ProLogis works to straighten out its financial situation and rework a massive maturing debt load.Denver-headquartered ProLogis, the world’s largest industrial warehouse developer, remains active in the leasing business and has even been able to get its hands on hundreds of millions in financing as of late, neither of which is any small feat in today’s market.The company was stung badly by the credit crunch last fall. By the time CEO & chairman Jeffrey Schwartz resigned in November, the firm’s stock had plummeted some 78 percent in a month.ProLogis was far from the only struggling REIT. Long seen as a safe haven and outperforming the broader equity markets, the sector plunged in October. And industrial trusts were especially battered, losing more than 62 percent of their collective value, according to the FTSE NAREIT Equity REIT index.While shares of ProLogis remain well off their 2008 high of almost $72, they have bounced back from the low of $2.20 reached in the wake of Schwartz’s departure. On Jan. 20, shares of the company’s common stock opened at $12.37.However, even more heartening than the bounce in share price is the fact that ProLogis is still getting deals done—and large ones at that—under the leadership of new CEO Walter Rakowich.Just weeks after the management shake-up, the company closed on a $105 million refinancing of the Chinese tranche of its global line of credit. The very next day, the firm announced $104 million in financing from an institutional investor. That money will be used to refinance a secured debt facility that was set to mature this month and pay down a bridge loan.ProLogis got another cash infusion—to the tune of $1.3 billion—in late December, when it agreed to sell its China operations and the remaining 20 percent share of its Japanese business to GIC Real Estate, the real estate arm of the Government of Singapore Investment Corp. Rakowich characterized the deal as “a substantial step … to help Prologis de-lever its balance sheet, relieve near-term-refinancing pressure and enhance liquidity.”In another effort to navigate its looming debt maturities, ProLogis took a 20 percent share of a private investment fund operated by its European subsidiary. That deal added some $61 million to the coffers of Luxembourg-based ProLogis European Properties, which has $335 million euros in CMBS debt maturing this summer.And leasing activity has anything but dried up for ProLogis. Indeed, on the very same day that Schwartz’s departure was announced, the firm inked a 775,000-square-foot deal with health and hygiene product maker Kimberly-Clark Group in Chicago. Other major lease agreements that have been signed include 300,000 square feet in Memphis to Daimler Trucks, a 445,000-square-foot California deal with a food and drug retailer and a lease with Safelite AutoGlass for 282,000 square feet in Ontario, Calif.While ProLogis still faces a great deal of maturing debt, a stalled development pipeline and—perhaps most important—a still-teetering global economy, it seems as though the firm has at least taken the first steps toward an eventual recovery.