Market Spaced Out

Copyright 2009, Traffic World, Inc.

The losses of commercial real estate developers ProLogis and AMB Property could be gains for other U.S. warehouse operators or third party logistics providers.

The nation''s largest distribution facility developers are shopping some of their U.S. properties to potential buyers as they seek to rein in debt, pare down warehousing inventories and reassert control of balance sheets that promise billions of dollars in debt servicing due this year.

Developers are moving away from the aggressive, sometimes speculative growth models of just a couple of years ago, selling off assets in parts of the world where expansion has stopped and empty warehouses are proliferating. Cash-healthy or creditworthy 3PLs and distribution center operators may find some bargains as the big developers peel away properties that could confer a competitive advantage for their owners when the freight economy begins to recover.

"We''re in discussion with third parties on a number of fronts, from potential joint ventures to outright sales," said ProLogis CEO Walter C. Rakowich during a conference call in February.

ProLogis lost $887.1 million in the fourth quarter of 2008, compared to a net gain of $113.3 million for the same period in 2007. The developer, which owns, manages or has under development 349 million square feet in North America (of 475 million square feet worldwide), recently sold its assets in China and Japan for about $1.3 billion and hopes to reduce its debt this year by some $2 billion.

"Our goal is to run a parallel course on several options, only some of which we expect to happen," Rakowich said. "We''ve been marketing various portfolios of assets in the U.S. and have received a significant amount of interest on various subsets of those assets."

Competitor AMB Property, which lost $201.9 million in the fourth quarter after a $93.2 million net profit the year before, is taking similar actions.

"We are currently exploring various options to monetize our development and operating assets, including the possibility of forming joint ventures and asset sales," said AMB''s CFO Tom Olinger.

San Francisco-based AMB, which owns or operates 130.2 square feet of distribution space in North America (out of 160 million square feet worldwide), also reduced staff 22 percent, the company''s first headcount reduction in 25 years.