Prologis: 1Q in Sync with Estimates

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Prologis Inc. (PLD), a leading real estate investment trust (:REIT), reported first quarter 2012 funds from operations (:FFO) of $184.8 million or 40 cents per share compared with $74.4 million or 29 cents in the year-earlier quarter. Fund from operations, a widely used metric to gauge the performance of real estate investment trusts (REITs), is obtained after adding depreciation and other non-cash expenses to net income.

The reported FFO for first quarter 2012 was in line with the Zacks Consensus Estimate. Excluding non-recurring items, FFO for the reported quarter was $262.1 million or 56 cents per share compared with $62.1 million or 24 cents in the year-ago quarter.

Total revenues during the reported quarter were $500.1 million compared with $229.9 million in the year-ago quarter. Total reported revenues were well ahead of the Zacks Consensus Estimate of $452 million.

During the reported quarter, the company leased 30.9 million square feet of space across the globe. Total occupancy in the operating portfolio was 92.3% at quarter-end. Customer retention during the quarter was 78.3%. Same-store net operating income (:NOI) increased 1.7% in first quarter 2012, compared with the year-ago quarter. Same-store rental rates on leases signed in the quarter decreased 1.1% year over year.

Development starts for the company during the reported quarter were $211 million spanning 1.5 million square feet of space across 3 projects. The company acquired $111 million worth of properties during the quarter, including 10 logistics facilities totaling 1.0 million square feet of space for $71 million with a stabilized capitalization rate of 6.6% and $40 million worth of land and related infrastructure. At quarter-end, Prologis' global development portfolio totaled 12.0 million square feet, with an estimated total investment of $1.4 billion.

Prologis completed approximately $994 million worth of asset sale transactions and contributions during the quarter at a weighted average stabilized capitalization rate of 7.2%. Third-party asset sales were consistent with the company’s stated goal to sell assets in non-strategic markets and redeploy the proceeds to fund new development in major global markets, thereby diversifying and improving the quality of its portfolio. During the reported quarter, the company raised new third-party equity commitments of approximately $128 million for the Prologis Targeted U.S. Logistics Fund.

During first quarter 2012, Prologis completed over $1.3 billion worth of capital market activities. At quarter-end, Prologis had cash and cash equivalents of $343.7 million and total debt of $12.4 billion. For full year 2012, Prologis reaffirmed its FFO guidance in the range of $1.60 to $1.70 per share.

We currently have a Neutral recommendation and a Zacks #2 Rank for Prologis, which translates into a short-term Buy rating. We also have a Neutral recommendation and a Zacks #3 Rank (short-term Hold rating) for Winthrop Realty Trust (FUR), one of the peers of Prologis.

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