REIT Woes Continue as Prologis CEO Schwartz Resigns; Firm to Halt Development, Slash Dividend
- Nov 12, 2008
Jeffrey Schwartz, CEO & chairman of Denver-based global industrial real estate giant Prologis, will resign from his position after nearly four years at the helm. Schwartz (pictured) will be replaced as CEO by current Prologis president & COO Walter Rakowich, while board trustee Stephen Feinberg will assume the role of chairman. In addition to the shakeup in the C-suite, Prologis will reduce a planned dividend payment and halt new development for the foreseeable future, as well as cut its workforce. The world’s largest industrial warehouse developer, Prologis has been stung badly by the credit crunch, and shares of the REIT have been battered. After the announcement of Schwartz’s departure this morning, company stock plummeted to just over $4.30– its lowest price since March of 1994. The price bounced back up to $4.55 by 1:30 p.m. Eastern time. But even before this morning’s shakeup, Prologis had not escaped the troubles that have plagued the REIT sector at large as of late. Company stock had fallen 78 percent in just the last month as the credit crunch dried up loans and refinancing availability, crippling the firm’s balance sheet. Formerly seen as a safe haven and outperforming the broader stock market, the REIT sector suffered greatly in the wake of October’s financial and economic turmoil. “October changed the REIT economy,” noted Ron Kuykendall, a spokesperson for the National Association of Real Estate Investment Trusts (NAREIT), who spoke with CPN recently. Overall, REITs have plummeted in value over the past several weeks. As reported by CPN, the FTSE NAREIT Equity REIT Index had dropped more than 32 percent as of late October. And industrial REITs were the hardest hit of all, down more than 62 percent for the year, according to the index. Even the largest players have been affected. Major shopping center REIT General Growth Properties has lost 99 percent of its share value this year, and is currently exploring bankruptcy protection. Just this morning, Standard & Poor’s announced that General Growth would be removed from the S&P 500 index after the close of trading today. Both General Growth and Prologis were among the largest equity REITs at the end of the second quarter. Now neither is among the top 15. Prologis had planned to pay a dividend of $2.28 a share for 2009. That payments has been reduced to a target of $1.00 a share in an effort to “permit the company to retain additional capital, which will be used to repay debt and strengthen the balance sheet,” according to a Prologis statement. In further efforts to retain capital, the REIT will suspend new development until “conditions improve and liquidity returns.” Schwartz. 49, had served as CEO of Prologis since January of 2005, and assumed the chairman role in May 2007.