Last week's Quick Poll asked readers if ProLogis'restructuring was necessary or an overreaction, with a total of 65%affirming the former and 35% voting for the latter. Dave Rodgers, aCleveland-based research analyst at RBC Capital Markets, talks about the industrial REIT's new direction.


"ProLogis' restructuring was completely necessary. The realityis that everything in the global environment has changed veryquickly--not only financials--and you can't really discount thischange.


"If you look back to September, PLD reduced their guidance andincreased their dividend for the upcoming year by around 10%. Thefeeling was: 'okay, I guess they're trying to provide some kind ofconfidence boost for 2009…they're still expecting to sell assetsand they're still developing.' Then we got to the Q3 conferencecall and things weren't quite as good. We were told that the '09guidance we'd been given probably wasn't entirely correct, but PLDstill maintained the increase in the dividend and said that whilethey were slowing down a bit they weren't going to pull the plug ona lot of large-scale projects. Fast forward a few weeks and clearlyeverything was not getting better and had not been getting better.Corporate research and management changes aside, they had verylittle choice but to pull back further, preserve capital and cutthe dividend.


"Interestingly enough, PLD had $1.5 billion total availabilityat the end of Q3. Even at that time, their plan--as outlined intheir conference call--would have essentially eaten into most ifnot all of it and they would have faced a substantial liquiditychallenge in the next year. As it stands today, they've slowed downnew development, curtailed spending and cut the dividend--all ineffort to preserve capital--and it works but it still puts them ina tough position over the next three to six months in terms of netcontributions to their fund as well as development expendituresgoing out the door. It will get tighter over the next couple ofquarters before it should start to open up in terms of liquidity inthe middle to second-half of next year."

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