Fitch Affirms ProLogis' IDR at 'BBB+'; Outlook Stable.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has affirmed the following ratings for ProLogis (NYSE NYSE See: New York Stock Exchange :PLD (Programmable Logic Device) Refers to a variety of logic chips that are programmable at the customer's site, the customer being the vendor of the finished chip, not the end user. ): --Issuer Default Rating (IDR IDR In currencies, this is the abbreviation for the Indonesian Rupiah. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ) at 'BBB+'; --Senior unsecured debt at 'BBB+'; --Revolving and term loan facilities at 'BBB+'; --Preferred Stock at 'BBB'. The Rating Outlook is Stable. ProLogis' rating strengths center on the size and quality of its diverse multinational pool of industrial warehouse properties and its strong development track record. Moreover, PLD's directly owned and managed portfolio has exhibited solid occupancy rates and a strong quality of tenants and tenant diversity. In particular, Fitch believes that the company's international presence continues to add diversity and robustness to the core earnings stream and gives the company an edge in its ability to attract and retain high quality tenants as well as gather and interpret market intelligence. In addition, ProLogis has demonstrated substantial acumen at managing development projects in a variety of the world's most desirable warehouse and industrial real estate locations. Other strengths center on the company's deep management team. ProLogis' interest and fixed charge coverage metrics continue to be adequate for its rating level. However, in recent years the company has shown increasing reliance on gains on sale and equity in the income of unconsolidated subsidiaries. Although PLD's all-in EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become fixed charge coverage ratio (as defined below) was a solid 2.8 times (x) for 3Q06, the company's core NOI NOI Net Operating Income NOI Notice of Intent NOI Nation of Islam NOI Notice of Inquiry NOI Neuro Orthopaedic Institute NOI New Organizing Institute NOI Notice of Interest NOI No Offense Intended NOI National Olympiad in Informatics (which only includes revenues and expenses related to directly owned, stabilized properties) adjusted for recurring capital expenditures covers the company's fixed charges (including interest expense, capitalized interest and preferred dividends), by only 1.3x. Clearly, this scenario would reflect a severely stressed economic environment, as the core NOI fixed charge coverage ratio does not include any contribution from the development pipeline prior to stabilization but includes the costs incurred to fund the pipeline. Fitch is therefore comforted by multiple offsets. In particular, Fitch notes the granularity of the construction portfolio and its relatively short construction and stabilization periods, which provide Fitch with some assurance that PLD could throttle back its development program within a reasonable period of time, especially during periods punctuated by severe economic stress. Moreover, and unlike other industrial REITs with development programs, Fitch is also comforted by PLD's strong global franchise, which provides geographic and tenant diversification, granularity and quality of tenant, and softens the negative impact of regional economic and tenant related stress. Finally, it should be noted that PLD's fund structure provides willing buyers for its completed warehouses. However, the funds are only obligated ob·li·gate tr.v. ob·li·gat·ed, ob·li·gat·ing, ob·li·gates 1. To bind, compel, or constrain by a social, legal, or moral tie. See Synonyms at force. 2. To cause to be grateful or indebted; oblige. to purchase the facilities if they are stabilized and meet specified yield levels. (Fixed Charge Coverage defined as EBITDA, as indicated, less tenant improvements, recurring capital expenditures, and straight line rents divided by the sum of interest expense, preferred dividends and capitalized interest). Fitch views PLD's leverage expansion cautiously, as core leverage (defined as on balance sheet debt divided by undepreciated book capital), currently stands at 52.3% (as of September 30, 2006), up from 50% at YE05. Fitch does note that PLD's leverage will tend to oscillate To swing back and forth between the minimum and maximum values. An oscillation is one cycle, typically one complete wave in an alternating frequency. as warehouses become stabilized and are contributed to the funds. However, the upward trend is somewhat concerning. Additionally, Fitch believes that PLD's risk adjusted leverage has increased, reflecting the company's growing component of undeveloped land, development properties, and equity in unconsolidated joint ventures. One metric that is disadvantaged by these growing asset classes is the company's unencumbered asset coverage ratio Asset Coverage Ratio A test that determines a company's ability to cover debt obligations with its assets after all liabilities have been satisfied. It is calculated as the following: , which currently stands at a relatively low 1.2x (September 30, 2006). Fitch defines this ratio as gross unencumbered stabilized real estate divided by total unsecured debt. It should be noted that the company's development portfolio, which is not included in the numerator numerator the upper part of a fraction. numerator relationship see additive genetic relationship. numerator Epidemiology The upper part of a fraction , is supported by a sizeable level of outstanding borrowings on the company's unsecured credit line, which is included in the denominator. Headquartered in Denver, Colorado, ProLogis owns, manages, and develops, industrial distribution facilities in 81 markets in North America, Europe and Asia. ProLogis owns or manages over 400 million square feet and serves approximately 4,700 customers. The company's own asset base was approximately $14.9 billion at the end of the first quarter, while managed assets were in excess of $25 billion. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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