02:47 PM EST, 12/19/2024 (MT Newswires) -- Prologis ( PLD ) has begun realizing value through the development and conversion of dry warehouses into data centers, including the $735 million sale of a 32-megawatt turnkey data center to HMC, UBS Securities said in a note emailed on Thursday.

The firm estimates the development cost at $320 million to $384 million, resulting in a value creation margin range of between 90% to 130% that far exceeds the margin typically seen in traditional warehouse development.

The company plans to develop 3 gigawatts of data center capacity over the next five years and a long-term vision of converting over 100 warehouses into data centers for a total capacity of 10 gigawatts, UBS added.

The firm expects that higher interest rates and fewer development completions are likely to narrow Prologis' ( PLD ) spread between net operating income and funds from operations growth, and occupancy levels may also face pressure.

The brokerage has a buy rating on Prologis' ( PLD ) stock with a price target of $138.

Price: 102.26, Change: -1.65, Percent Change: -1.59