Prologis Announces Second Quarter 2012 Results - Core FFO of $0.43 per fully diluted share -

- 35 million square feet of leasing in its combined operating and development portfolios -

- Company increases low end of full year guidance -

SAN FRANCISCO, July 26, 2012 /PRNewswire/ -- Prologis, Inc. (NYSE: PLD), the leading global owner, operator and developer of industrial real estate, today reported results for the second quarter of 2012.

Core funds from operations (Core FFO) per fully diluted share was $0.43 for the second quarter 2012 compared to $0.35 for the same period in 2011. Funds from operations (FFO) as defined by Prologis per fully diluted share was $0.37 for the second quarter 2012 compared to $0.03 for the same period in 2011. The difference between Core FFO and FFO in the second quarter 2012 primarily relates to merger integration expenses. Net loss per share was $(0.02) for the second quarter 2012 compared to a net loss of $(0.49) for the same period in 2011. The second quarter 2011 comparative results reflect two months of stand-alone legacy ProLogis and approximately one month of results for the combined company. Therefore, they are not directly comparable to the 2012 reported results.

"We delivered solid results for the second quarter despite forecasts of slower economic growth," said Hamid R. Moghadam, chairman and co-chief executive officer, Prologis. "We continue to make excellent progress on our priorities, increasing occupancy in our operating and development portfolios. We also received unitholder and regulatory approval to liquidate Prologis European Properties. While we will continue to exercise a patient and deliberate approach to achieving our strategic goals by the end of 2013, Prologis is well positioned to remain opportunistic, flexible and laser-focused on taking advantage of growth opportunities around the world."

Operating Portfolio Metrics
During the quarter, the company leased a total of 35.0 million square feet (3.3 million square meters) in its combined operating and development portfolios. Prologis ended the quarter above plan with 92.4 percent occupancy in its operating portfolio, up 10 basis points over the prior quarter. Tenant retention in the quarter was 82.4 percent, with renewals totaling 20.2 million square feet (1.9 million square meters).

Same-store net operating income (NOI) in the second quarter of 2012 increased 0.4 percent over the second quarter 2011 on a GAAP basis, compared to an increase of 1.7 percent in the first quarter of 2012. Rental rates on leases signed in the second quarter same-store pool decreased by 3.9 percent from in-place rents, as compared to a decrease of 1.1 percent in the first quarter 2012.

"Building on the momentum from last quarter, the team delivered another strong quarter of leasing volume across our global portfolio, and we completed the majority of our lease expirations for the balance of the year," said Walter C. Rakowich, co-chief executive officer, Prologis. "While the strongest demand continues to be for large, Class-A facilities, we saw a notable improvement in our facilities that are less than 100,000 square feet, and occupancy in Europe continues to hold. Customers have new requirements for e-commerce facilities and remain focused on improving supply chain efficiencies. Given continued supply constraints, our customers with targeted requirements are increasingly pursuing build-to-suits, which we are able to readily accommodate with our strategic land portfolio."

Dispositions and Contributions
During the quarter, the company completed approximately $228 million in building and land dispositions and contributions, of which $191 million was Prologis' share. The building sales and contributions reflect a weighted average stabilized capitalization rate of 7.6 percent.

Development Starts & Building Acquisitions
Capital deployed or committed during the second quarter 2012 totaled approximately $313 million, of which $277 million was Prologis' share, including:

  • Development starts of $229 million totaling 3.7 million square feet (343,740 square meters) in nine projects, which monetized $52 million of land. Of the total expected investment, 70 percent was in build-to-suit projects. The estimated value creation on development starts in the second quarter is $33 million with a stabilized yield of 7.2 percent and a margin of approximately 14 percent.
  • Building acquisitions of $85 million in 13 logistics facilities totaling approximately 1.5 million square feet (139,350 square meters) with a stabilized capitalization rate of 7.2 percent. Of the total acquisitions, $48 million was Prologis' share.

At quarter end, Prologis' global development portfolio comprised 13.5 million square feet (1.3 million square meters), with a total expected investment of $1.3 billion of which Prologis' share is $1 billion. The estimated value creation at stabilization is expected to be $228 million with a stabilized yield of 7.8 percent and a margin of approximately 18 percent.

Private Capital Activity
During the quarter, Prologis raised $163 million in new third-party equity for the Prologis Targeted U.S. Logistics Fund and the Prologis Targeted Europe Logistics Fund. In addition, ProLogis European Properties' (PEPR) unitholders approved the liquidation of the fund during its annual meeting held on June 27, 2012. Prologis currently owns 99.5 percent of the ordinary units and 98.6 percent of the preferred units of PEPR.

"We had a strong quarter of capital raising for our open-end funds from a diverse mix of new and existing investors," said Guy F. Jaquier, chief executive officer, Prologis Private Capital. "This level of activity is demonstrative of the continued demand for high-quality industrial real estate around the globe. In Japan, we continue to move forward with our development fund and to evaluate the optimal structure for our operating assets. In Europe we are pleased to be winding up PEPR ahead of schedule and recapitalizing PEPR's high-quality assets over the next several quarters."

Capital Markets
Prologis completed $1.2 billion of debt financings, re-financings and pay-downs, with approximately $989 million related to the REIT and $176 million on behalf of our property funds during the quarter.

Significant financing activity during the second quarter included the following:

  • Repayment of $449 million of its 2.25 percent convertible notes and $59 million of senior unsecured notes at maturity in the second quarter, as previously announced;
  • Financings of three TMK bonds of 25.4 billion yen (USD 332 million) with a weighted average term of 6.6 years and weighted average rate of 1.21 percent; and
  • Subsequent to quarter end, Prologis closed two transactions for Prologis European Properties Fund II, a 40 million pounds sterling (USD 63 million) secured facility and a 145 million euro (USD 184 million) senior unsecured term loan.

"We continue to have access to capital markets at attractive rates globally, demonstrating the quality of our assets and strength of our global platform," said Thomas S. Olinger, chief financial officer, Prologis. "Excluding the impact of fund rationalization activity, we have reduced our share of debt by $2.3 billion since the merger."

Guidance for 2012
Prologis increased the low end of its full-year 2012 Core FFO guidance range to $1.64 to $1.70 per diluted share, up from $1.60 to $1.70 per diluted share. The company also expects to recognize net earnings, for GAAP purposes, of $0.22 to $0.28 per share. The difference between the company's Core FFO and net earnings guidance for 2012 predominantly relates to real estate depreciation, recognized gains on real estate transactions and merger-related expenses.

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, impairment charges, deferred taxes, and unrealized gains or losses on foreign currency or derivative activity, as well as transaction and merger costs.

Webcast and Conference Call Information
The company will host a webcast /conference call to discuss quarterly results, current market conditions and future outlook today, July 26, 2012, at 12:00 p.m. U.S. Eastern Time. Interested parties are encouraged to access the live 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 877-256-7020 from the United States and Canada or (+1) 973-409-9692 internationally with reservation code 93137132.

A telephonic replay will be available from July 27, 2012, through August 27, 2012, at 855-859-2056 (from the United States and Canada) or (+1) 404-537-3406 (from all other countries), with the reservation code 93137132. The webcast and podcast replay will be posted when available in the "Financial Information" section of the Prologis Investor Relations website.

About Prologis
Prologis, Inc., is the leading owner, operator and developer of industrial real estate, focused on global and regional markets across the Americas, Europe and Asia. As of June 30, 2012, Prologis owned or had investments in, on a consolidated basis or through unconsolidated joint ventures, properties and development projects expected to total approximately 569 million square feet (52.9 million square meters) in 21 countries. The company leases modern distribution facilities to more than 4,500 customers, including manufacturers, retailers, transportation companies, third-party logistics providers and other enterprises.

The statements in this release that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on current expectations, estimates and projections about the industry and markets in which Prologis operates, management's beliefs and assumptions made by management.  Such statements involve uncertainties that could significantly impact Prologis' financial results. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," variations of such words and similar expressions are intended to identify such forward-looking statements, which generally are not historical in nature.  All statements that address operating performance, events or developments that we expect or anticipate will occur in the future — including statements relating to rent and occupancy growth, development activity and changes in sales or contribution volume of developed properties, disposition activity, general conditions in the geographic areas where we operate, synergies to be realized from our recent merger transaction, our debt and financial position, our ability to form new property funds and the availability of capital in existing or new property funds — are forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be attained and therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. Some of the factors that may affect outcomes and results include, but are not limited to: (i) national, international, regional and local economic climates, (ii) changes in financial markets, interest rates and foreign currency exchange rates, (iii) increased or unanticipated competition for our properties, (iv) risks associated with acquisitions, dispositions and development of properties, (v) maintenance of real estate investment trust ("REIT") status and tax structuring, (vi) availability of financing and capital, the levels of debt that we maintain and our credit ratings, (vii) risks related to our investments in our co-investment ventures and funds, including our ability to establish new co-investment ventures and funds, (viii) risks of doing business internationally, including currency risks, (ix) environmental uncertainties, including risks of natural disasters, and (x) those additional factors discussed in reports filed with the Securities and Exchange Commission by Prologis under the heading "Risk Factors." Prologis undertakes no duty to update any forward-looking statements appearing in this release.

Company Profile



Three months ended June 30,

Six months ended June 30,

(dollars in thousands, except per share data)


2012


2011 (A)


2012


2011 (A)


Revenues


$ 520,748


$ 320,912


$ 1,018,712


$ 549,706


Net earnings (loss) available for common stockholders


(8,120)


(151,471)


194,293


(198,087)


FFO, as defined by Prologis


172,671


8,195


434,743


70,341


Core FFO


201,320


109,662


386,085


184,069


AFFO


148,569


85,369


282,392


136,499


Core EBITDA


395,147


267,311


782,569


478,331













Per common share - diluted:











Net earnings (loss) available for common stockholders


$     (0.02)


$     (0.49)


$         0.42


$     (0.70)



FFO, as defined by Prologis


0.37


0.03


0.93


0.25



Core FFO


0.43


0.35


0.83


0.65


































(A) AMB and Prologis completed a merger (the "Merger") in June 2011. The financial results presented throughout this supplemental include Prologis for the full period and AMB results from the date of the Merger going forward.

 

Balance Sheet







June 30, 2012


March 31, 2012


December 31, 2011

Assets:










Investments in real estate assets:











Operating properties

$

23,442,394


$

23,438,703


$

21,552,548



Development portfolio


656,561



787,029



860,531



Land


1,881,062



1,933,321



1,984,233



Other real estate investments


442,280



419,432



390,225







26,422,297



26,578,485



24,787,537



Less accumulated depreciation


2,256,101



2,256,901



2,157,907





Net investments in properties


24,166,196



24,321,584



22,629,630


Investments in and advances to unconsolidated entities


2,220,172



2,452,939



2,857,755


Notes receivable backed by real estate


245,654



247,241



322,834


Assets held for sale


50,672



102,183



444,850





Net investments in real estate


26,682,694



27,123,947



26,255,069















Cash and cash equivalents


293,631



343,736



176,072


Restricted cash


151,184



91,957



71,992


Accounts receivable


168,008



163,679



147,999


Other assets


1,120,046



1,144,634



1,072,780





Total assets

$

28,415,563


$

28,867,953


$

27,723,912














Liabilities and Equity:










Liabilities:











Debt

$

12,433,585


$

12,380,921


$

11,382,408



Accounts payable, accrued expenses, and other liabilities


1,812,411



1,936,372



1,886,030





Total liabilities


14,245,996



14,317,293



13,268,438















Equity:











Stockholders' equity:












Preferred stock


582,200



582,200



582,200




Common stock


4,606



4,604



4,594




Additional paid-in capital


16,373,438



16,370,254



16,349,328




Accumulated other comprehensive loss


(333,811)



(219,574)



(182,321)




Distributions in excess of net earnings


(3,159,462)



(3,019,829)



(3,092,162)





Total stockholders' equity


13,466,971



13,717,655



13,661,639



Noncontrolling interests


649,389



774,950



735,222



Noncontrolling interests - limited partnership unitholders


53,207



58,055



58,613





Total equity


14,169,567



14,550,660



14,455,474





Total liabilities and equity

$

28,415,563


$

28,867,953


$

27,723,912














 

Consolidated Statement of Operations






Three Months Ended


Six Months Ended





June 30,


June 30,





2012

2011 (A)


2012

2011 (A)

Revenues:











Rental income

$

488,026

$

279,016


$

950,520

$

473,656


Private capital revenue


30,993


32,976



63,350


62,811


Development management and other income


1,729


8,920



4,842


13,239



Total revenues


520,748


320,912



1,018,712


549,706














Expenses:











Rental expenses


132,031


77,199



256,474


137,397


Private capital expenses


15,075


11,596



31,956


22,148


General and administrative expenses


51,415


51,840



111,574


91,023


Merger, acquisition and other integration expenses


21,186


103,052



31,914


109,040


Impairment of real estate properties


-


-



3,185


-


Depreciation and amortization


186,770


118,606



374,640


198,183


Other expenses


7,227


5,587



11,562


10,271



Total expenses


413,704


367,880



821,305


568,062














Operating income (loss)


107,044


(46,968)



197,407


(18,356)














Other income (expense):











Earnings from unconsolidated co-investment ventures, net


1,153


8,643



12,911


20,565


Earnings from other unconsolidated entities, net


2,736


2,756



4,973


4,475


Interest income


5,366


4,677



10,793


9,103


Interest expense


(127,946)


(112,916)



(261,328)


(203,443)


Impairment of other assets


-


(103,823)



(16,135)


(103,823)


Gains on acquisitions and dispositions of investments in real estate, net


520


102,529



268,291


106,254


Foreign currency and derivative gains (losses) and other income (expenses), net


13,299


(9,655)



(13,802)


(15,286)


Gain (loss) on early extinguishment of debt, net


(500)


-



4,919


-



Total other income (expense)


(105,372)


(107,789)



10,622


(182,155)














Earnings (loss) before income taxes


1,672


(154,757)



208,029


(200,511)


Income tax expense - current and deferred


8,075


6,429



20,199


12,798

Earnings (loss) from continuing operations


(6,403)


(161,186)



187,830


(213,309)

Discontinued operations:











Income attributable to disposed properties and assets held for sale


1,197


9,384



8,813


19,383


Net gains on dispositions, net of related impairment charges and taxes


9,874


8,175



21,123


10,135



Total discontinued operations


11,071


17,559



29,936


29,518

Consolidated net earnings (loss)


4,668


(143,627)



217,766


(183,791)

Net earnings attributable to noncontrolling interests


(2,739)


(202)



(2,857)


(285)

Net earnings (loss) attributable to controlling interests


1,929


(143,829)



214,909


(184,076)

Less preferred stock dividends


10,049


7,642



20,616


14,011

Net earnings (loss) available for common stockholders

$

(8,120)

$

(151,471)


$

194,293

$

(198,087)

Weighted average common shares outstanding - Diluted (B)


459,878


307,756



464,696


281,384

Net earnings (loss) per share available for common stockholders - Diluted

$

(0.02)

$

(0.49)


$

0.42

$

(0.70)














(A) The financial results include Prologis for the full period and AMB and PEPR results from approximately June 1, 2011.














(B) See Calculation of Per Share Amounts in the Notes and Definitions.