Prologis Inc (PLD), Duke Realty Corp (DRE): Avoid These Industrial REITs

Prologis

Prologis Inc (NYSE:PLD) has a surprisingly modest amount of debt, with $11.8 billion (as of December 2012) for a debt/equity ratio of .73 (according to YCharts). That is a low rate of leverage for any REIT (and especially compared to Duke). This allows Prologis Inc (NYSE:PLD) to be more aggressive in acquiring additional real estate; recently, they partnered with the Blackstone Group to purchase a 17 million square foot industrial portfolio. Even with the strong balance sheet and recent acquisitions, I am concerned that Prologis Inc (NYSE:PLD) has been steadily losing money. Of the past 20 quarters, only 8 have seen a positive net income for the company. Other metrics haven’t been stellar either, with EPS clocking in at -$.04 for the trailing twelve months, according to Morningstar. FFO has been flat since Q3 of 2011, with Prologis Inc (NYSE:PLD) earning between $.40 and $.45 per share. Especially given the company’s rising revenues – $1.5 billion in 2011 grew to a little over $2 billion in 2012 – the poor EPS and net income and the flat FFO numbers are concerning.

The bottom line

My general rule is to avoid businesses that are inconsistently turning a profit (both of these companies) or carrying a heavy debt load (Duke Realty Corp (NYSE:DRE)). I don’t trust the dividend sustainability for Prologis Inc (NYSE:PLD), as it just instituted its first dividend since 2008. These are not good vehicles for your investment at this time.

The article Avoid These Industrial REITs originally appeared on Fool.com and is written by Michael Douglass.

Michael Douglass has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Michael is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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