Zacks Industry Outlook Highlights: Plum Creek Timber, Simon Property Group and Prologis

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Nov 09, 2012, 09:30 ET

CHICAGO, Nov. 9, 2012 /PRNewswire/ -- Today, Zacks Equity Research discusses the U.S. REITs, including Plum Creek Timber Co. Inc. (NYSE:PCL), Simon Property Group Inc. (NYSE:SPG) and Prologis Inc. (NYSE:PLD).

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A synopsis of today's Industry Outlook is presented below. The full article can be read at

Link: http://www.zacks.com/stock/news/86559/real-estate-investment-trust-outlook-nov-2012

We are bullish on Plum Creek Timber Co. Inc. (NYSE:PCL) that owns one of the largest and most geographically diversified private timberlands in the U.S. The company produces lumber, plywood and medium density fiberboard in its wood products manufacturing facilities. Plum Creek's diversified timber and land base provides excellent operational flexibility to respond to changing market conditions amid a challenging macroeconomic environment.

In addition, the upsurge in demographic trends driving housing markets and demand for real estate properties across the nation provides a strong economic backdrop for the company to demonstrate solid financial performance in the future. Housing starts are expected to be up 25% in 2012, and increase from 750,000 starts in the current year to 900,000 in 2013.

Plum Creek benefits from large economies of scale and capitalizes on the increasing value of timber over time to offset several negative effects of cyclical commodity pricing. Furthermore, Plum Creek makes prudent investments in the growth of its timberland assets and harvests trees at the most 'economically mature' point in the life cycle of a tree. The company also acquires attractive timberlands and uses advanced practices to improve productivity of its forests, which augments its timber inventory.

We also remain bullish on Simon Property Group Inc. (NYSE:SPG) the largest publicly traded retail REIT in North America, with assets in almost all retail distribution channels. The company's international presence gives it a more sustainable long-term growth story than its domestically focused peers. The geographic and product diversity of the company also insulate it from market volatility to a great extent and provide a steady source of income.

The company has one of the strongest comparable sales per square foot in the industry. Comparable sales in the combined portfolio were $562 per square foot during third quarter 2012, compared to $514 in the prior-year quarter. In addition, Simon Property generally enters into long-term leases with companies, which insulate it from short-term market swings that have weighed on other players in the industry. With a favorable supply/demand relationship, rising earnings estimates, robust growth projections, and a healthy dividend yield, Simon Property offers an enticing upside potential going forward.

Another stock worth mentioning is Prologis Inc. (NYSE:PLD) that acquires, develops, operates and manages industrial real estate space in North America, Asia and Europe. Prologis had merged with the erstwhile namesake company in an all-stock deal to become a behemoth of sorts in the industrial real estate sector. The combined entity had brought two of the most complementary customer franchises on the same platform and created a $44 billion worth of asset pool at their disposal at the time of merger. The merger had led to potential cost savings through operational synergies and had created a stronger platform for value creation and sustainable growth in the long term.

In addition, Prologis provides industrial distribution warehouse space in some of the busiest distribution markets across the globe. The properties of the company are typically located in large, supply-constrained infill markets at close proximity to airports, seaports and ground transportation facilities, which enable rapid distribution of customers' products. This has enabled the company to gain a significant pricing advantage over its competitors.

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