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Last week’s GlobeSt.com 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, a Cleveland-based research analyst at RBC Capital Markets, talks to GlobeSt.com about the industrial REIT’s new direction.

“ProLogis’ restructuring was completely necessary. The reality is that everything in the global environment has changed very quickly–not only financials–and you can’t really discount this change.

“If you look back to September, PLD reduced their guidance and increased their dividend for the upcoming year by around 10%. The feeling was: ‘okay, I guess they’re trying to provide some kind of confidence boost for 2009…they’re still expecting to sell assets and they’re still developing.’ Then we got to the Q3 conference call and things weren’t quite as good. We were told that the ’09 guidance we’d been given probably wasn’t entirely correct, but PLD still maintained the increase in the dividend and said that while they were slowing down a bit they weren’t going to pull the plug on a lot of large-scale projects. Fast forward a few weeks and clearly everything was not getting better and had not been getting better. Corporate research and management changes aside, they had very little choice but to pull back further, preserve capital and cut the dividend.

“Interestingly enough, PLD had $1.5 billion total availability at the end of Q3. Even at that time, their plan–as outlined in their conference call–would have essentially eaten into most if not all of it and they would have faced a substantial liquidity challenge in the next year. As it stands today, they’ve slowed down new development, curtailed spending and cut the dividend–all in effort to preserve capital–and it works but it still puts them in a tough position over the next three to six months in terms of net contributions to their fund as well as development expenditures going out the door. It will get tighter over the next couple of quarters before it should start to open up in terms of liquidity in the middle to second-half of next year.”

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