Industrial REITs and the Year Ahead


Aug. 25 2017, Updated 12:19 p.m. ET

Future scenario

Industrial REITs (real estate investment trusts) appear to have a bright future backed by a growing economy and industrial growth. Higher industrial production has increased demand for warehousing facilities, while growing employment has boosted the demand for office spaces—particularly in metro areas, which are characterized by high-income growth.

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Prologis raised its fiscal 2017 outlook

Prologis (PLD) has raised its fiscal 2017 outlook for net earnings and core FFO (funds from operations). Its net earnings are expected to be between $2.76 and $2.84 per share, which would be higher than the range of $1.70–$1.80 per share expected previously.

Prologis expects to report adjusted FFO in the range of $2.78–$2.82, which would be higher than the range of $2.72–$2.78 per share expected previously.

DCT Industrial Trust

DCT Industrial Trust (DCT) enhanced its fiscal 2017 earnings guidance to $0.84 and $0.90 per share, which is higher than the range of $0.54–$0.62 expected previously. DCT also raised its fiscal 2017 FFO guidance range to $2.39–$2.45 per diluted share, up from $2.36–$2.44 expected previously.

DCT raised and narrowed its occupancy level guidance by 38 bps (basis points) to a range of 97.0%–97.8%. The faster leasing of vacant spaces prompted the management to increase the occupancy guidance.

Duke Realty

Duke Reality (DRE) increased its earnings guidance to a range of $4.40–$4.66 per share, up from the previously expected range of $4.19–$4.70 per share. DRE also elevated its core FFO outlook to a range of $1.20–$1.33 per share, compared with its previous guidance of $1.16–$1.24 per share. The company also narrowed its guidance for same store net operating income. The higher outlook reflects increased acquisition, developments, and leasing activities expected for fiscal 2017.

Notably, the SPDR Dow Jones REIT ETF (RWR) has exposure to PLD, DRE, DCT, and Simon Property Group (SPG), which together constitute ~16% of the fund. RWR has seen a year-to-date return of 2%.

In the next part, we’ll look into the capital deployment of the above three stocks.


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