Prologis Announces Third Quarter 2014 Earnings Results [Real Estate]
Core Funds From Operations Increased 18 Percent Year-over-Year -
Rent Change on Rollovers Increased 9.7 Percent -
Prologis, Inc. reported results for third quarter 2014. Core funds from operations (Core FFO) per fully diluted share was $0.48 for the third quarter compared with $0.41 for the same period in 2013, a year-over-year increase of 18 percent.
"I am very pleased with our quarterly performance," said Hamid R. Moghadam, chairman and CEO, Prologis. "Our results were led by operations, with global occupancy ending at 95 percent and rent change reaching the highest level in many years. We are raising the midpoint for our full-year 2014 Core FFO guidance due to our performance to date and expectations for continued growth."
OPERATING RESULTS STRENGTHEN ACROSS THE GLOBE
Prologis ended the quarter with 95.0 percent occupancy in its operating portfolio, an increase of 110 basis points over the same period in 2013 and 40 basis points over the prior quarter. The quarterly increase was driven by a 110 basis point increase in spaces under 100,000 square feet and a 90 basis point increase in the company's European portfolio.
In the third quarter, the company leased 40.8 million square feet (3.8 million square meters) in its combined operating and development portfolios. Tenant retention was 83.9 percent.
GAAP rental rates on signed leases during the quarter increased 9.7 percent from prior rents, led by the U.S. at 15.5 percent and followed by Asia at 10.2 percent and Europe at 0.2 percent.
During the third quarter, same store NOI increased 3.7 percent on a GAAP basis and 4.0 percent on an adjusted cash basis.
CAPITAL DEPLOYMENT ACTIVITY CAPTURES DEMAND FOR CLASS-A PRODUCT
New investments totaled $1.9 billion ($1.3 billion Prologis' share) in the third quarter, as the company continued to deploy capital at attractive yields.
Development Starts & Stabilizations
During the quarter, Prologis started $697.5 million ($615.6 million Prologis' share) of new developments, with an estimated weighted average yield upon stabilization of 7.1 percent and an estimated development margin of 19.1 percent.
The company stabilized $222.7 million ($219.4 million Prologis' share) in development projects, principally in the U.S. and Mexico, with an estimated development margin of 25.7 percent, generating $56.9 million (Prologis' share) of estimated value creation.
"Margins remain above average and we are poised to create value for years to come," said Mike Curless, chief investment officer, Prologis. "Our land bank is well-positioned for the next generation of development activity. Approximately 90 percent is located in major metropolitan areas, where we see accelerating demand."
At quarter end, the book value of the company's land bank totaled $1.8 billion with an estimated build-out potential of $10.8 billion.
Prologis acquired $883.8 million ($367.4 million Prologis' share) of buildings, principally in Europe through its co-investment ventures. The stabilized capitalization rate on Prologis' share of building acquisitions was 6.1 percent.
The company invested $357.5 million in its North American Industrial Fund, increasing Prologis' ownership interest to 63.3 percent.
Contributions & Dispositions
Prologis completed $442.6 million ($376.2 million Prologis' share) of contributions to Nippon Prologis REIT and third-party dispositions of non-strategic assets of $398.0 million ($390.3 million Prologis' share). Prologis' share of contributions and building dispositions had a stabilized capitalization rate of 6.0 percent.
STRONG FINANCIAL POSITION
Prologis completed $478 million of capital markets activity and increased its U.S. dollar net equity exposure to 89 percent.
As previously announced and subsequent to quarter end, the company completed a €600 million bond offering at an annual coupon rate of 1.375 percent with a 2020 maturity. Prologis has limited debt maturities until 2017.
"We continue to seek opportunities to secure long-term capital at today's cost to enhance the composition of our debt portfolio and liquidity," said Tom Olinger, chief financial officer, Prologis. "We are very pleased with our progress toward significantly minimizing the impact of foreign currency movements on our earnings and net asset value."
Net earnings per fully diluted share was $0.23 for the third quarter compared with a net loss per share of $0.02 for the same period in 2013.
GUIDANCE MIDPOINT INCREASED FOR 2014
Prologis increased the midpoint of its full-year 2014 Core FFO guidance, narrowing the range to $1.85 to $1.86 per diluted share from $1.82 to $1.86 per diluted share. The company expects to recognize net earnings, for GAAP purposes, of $0.49 to $0.50 per share.
The Core FFO and earnings guidance reflected above excludes any potential future gains (losses) recognized from real estate transactions. In reconciling from net earnings to Core FFO, Prologis makes certain adjustments, including but not limited to real estate depreciation and amortization expense, gains (losses) recognized from real estate transactions and early extinguishment of debt or redemption of preferred stock, impairment charges, deferred taxes and unrealized gains or losses on foreign currency or derivative activity.
The difference between the company's Core FFO and net earnings guidance for 2014 predominantly relates to real estate depreciation and recognized gains or losses on real estate transactions and early extinguishment of debt.
WEBCAST & CONFERENCE CALL INFORMATION
Prologis will host a live webcast/conference call to discuss quarterly results, current market conditions and future outlook today, Oct. 23, at 12 p.m. U.S. Eastern Time. Interested parties are encouraged to access the webcast by clicking the microphone icon located near the top of the opening page of the Prologis Investor Relations website (http://ir.prologis.com). Interested parties also can participate via conference call by dialing +1 877-256-7020 (toll-free from the U.S. and Canada) or +1 973-409-9692 (from all other countries) and entering conference code 48765485.
A telephonic replay will be available Oct. 23-Nov. 23 at +1 855-859-2056 (from the U.S. and Canada) or +1 404-537-3406 (from all other countries); please use conference code 48765485. The webcast replay will be posted when available in the "Events & Presentations" section of Investor Relations on the Prologis website.
Posted at 22:18