Prologis (PLD), Ivanhoe Cambridge To Create $890M JV In Brazil

Industrial REIT Prologis Inc. (NYSE:PLD) and real estate investor Ivanhoé Cambridge have collaborated to capitalize on growing demand for modern logistics space in Brazil. Specifically, Prologis and Ivanhoé Cambridge have announced an agreement to form an $890-million joint venture (JV) with 20/80 stake. The transaction is conditioned upon customary closing norms, including relevant regulatory and third-party nods.

Prologis Brazil Logistics Venture will carry out developing and operating of logistics real estate in Brazil, particularly in São Paulo and Rio de Janeiro. The focus on São Paulo and Rio de Janeiro market is a strategic fit as more than 40% of the country’s GDP is located in São Paulo and Rio de Janeiro, and demand for modern logistics space is increasing in this region.

Moreover, economic reforms and efforts to boost consumption levels are likely to open up prospects for new business. This is expected to trigger demand for industrial real estates in Brazil.

Notably, the venture, at closing, will acquire an initial portfolio of assets of around 6.9 million square feet of operating properties and 371 acres of land from Prologis' balance sheet. It will do so with an assurance to build out the existing land bank.

Admittedly, Prologis has already earned its reputation for being the leading provider of logistics real estate around the globe. The company enjoys ownership or had investments in properties and development projects estimated to total around 771 million square feet in 19 countries as of Sep 30, 2018.

Moreover, the industrial real estate asset category has grabbed solid attention not only in the Brazilian market, but across several regions in the United States. This is because high-consumer spending, e-commerce boom, as well as healthy manufacturing environment amid recovering economy and job market are spurring demand for this real estate category. In addition to Prologis, other REITs, including Duke Realty (NYSE:DRE) , Terreno Realty Corporation (NYSE:TRNO) and Liberty Property Trust (NYSE:LPT) , are expected to benefit from the same factors.

Nevertheless, there is rising supply of industrial real estate space and this will partly dampen the robust growth momentum in rents. Also, rate hike add to the REITs’ woes.

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