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Prologis Reports In Line, Rev Up - Analyst Blog

Posted
2/6/2013 12:23:00 PM
By: Zacks.com
Referenced Stocks:DRH;HCP;PLD;TRNO

Prologis Inc. 's ( PLD ) core FFO (funds from operations) per share of 42 cents were in line with the Zacks Consensus Estimate and 2 cents below the prior year figure of 44 cents.

However, total revenue during the reported quarter were $517.6 million, up 13.3% from the prior year period and well ahead of the Zacks Consensus Estimate of $476 million.

For full year 2012, the company's FFO came in at $1.74 per share, a cent ahead of the Zacks Consensus Estimate of $1.73 per share and well ahead of the prior year figure of $1.58 per share. For full year 2012, total revenue stood at $2.0 billion, which escalated 38.2% from a year ago and exceeded the Zacks Consensus Estimate of $1.9 billion.

Quarter in Detail

During the reported quarter, Prologis leased a record of 40.5 million square feet of space across the globe. Total occupancy in the operating portfolio was 94.0% at quarter-end, up 180 bps (basis points) from a year ago.

Tenant retention reached 87.3% in the quarter, with tenant renewals aggregating 25.1 million square feet. Same-store net operating income (NOI) moved up 0.1% in the reported quarter. Same-store rental rates on leases signed in the quarter declined by 2.4% from in-place rents.

Notable Activities During 4Q

Development starts during the reported quarter amounted to $727 million spanning 7.3 million square feet. Of this, $613 million was Prologis' share. The company monetized $190 million worth of land for these development starts and its share of value creation on development starts was $71 million in the reported quarter.

Total acquisitions of $458 million in the reported quarter included $276 million in buildings with a stabilized capitalization rate of 7.4% and $182 million for investment in land and land infrastructure. Of these Prologis' share was $295 million.

Prologis' global development pipeline comprised 22.5 million square feet at quarter end, with a total expected investment of $2.1 billion. Of this, Prologis' share was $1.9 billion. Moreover, the company accomplished $1.3 billion in contributions and dispositions in the reported quarter, of which more than $1.0 billion was Prologis' share.

Prologis completed around $1.1 billion of capital markets activity in the reported quarter which included debt financings, re-financings, as well as pay-downs. Following the quarter end, the company paid off $141 million of its 1.875% convertible notes and repaid secured debt worth $319 million.

Liquidity

At quarter-end, Prologis had cash and cash equivalents of $100.8 million and total debt of $11.8 billion, compared with $158.2 million and $12.6 billion, respectively, as of the prior-quarter end.

2013 Outlook

For full year 2013, Prologis has provided core FFO guidance in the range of $1.60 to $1.70 per share, based on same-store NOI growth of 1.5% to 2.5% (excluding the impact of foreign exchange movements) and year end occupancy in its operating portfolio between 94% and 95%.

Our Take

Prologis is significantly capitalizing on the growing opportunities in build-to-suit development projects across the globe. In addition, continued lease-up of development portfolio like the recent New Jersey deal is considerably helping Prologis in reducing its operating risks.

Also, the company has been active on spreading worldwide through joint venture (JV) agreements. However, continued troubles in the residential sector are weighed on its commercial property operations and its increasing international presence might negatively impact the company in times of economic fluctuations and impair its top-line growth.

Prologis currently holds a Zacks Rank #3 (Hold). Other REITs that are performing better and are worth a look include Diamondrock Hospitality Co. ( DRH ) and Terreno Realty Corp. ( TRNO ), both carrying a Zacks Rank #1 (Strong Buy) and HCP Inc. ( HCP ) having a Zacks Rank #2 (Buy).

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.



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