Prologis Beats Estimates

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Prologis, Inc (PLD), a real estate investment trust (:REIT),reported third quarter 2012 funds from operations (FFO as defined by Prologis) of $209.9 million or 44 cents per share, compared with $211.4 million or 45 cents in the year-earlier quarter.

Core FFO for the reported quarter was $236.1 million or 49 cents per share compared to $210.1 million or 44 cents in the year-ago quarter. The core FFO for third quarter 2012 exceeded the Zacks Consensus Estimate by 6 cents.
 
Total revenues during the reported quarter were $512.1 million compared to $469.1 million in the year-ago quarter. Total reported revenues were well ahead of the Zacks Consensus Estimate of $490 million.

During the reported quarter, the company leased 39.0 million square feet of space across the globe. Total occupancy in the operating portfolio was 93.1% at quarter-end. Customer retention during the quarter was 87.5% during the reported quarter with renewals totaling 25.6 million square feet. Same-store net operating income (:NOI) increased 2.7% in third quarter 2012, compared to the year-ago quarter. Same-store rental rates on leases signed in the quarter decreased 1.8%.

Development starts for the company during the reported quarter amounted to $386 million spanning 4.4 million square feet. Prologis monetized $91 million worth of land for these development starts, 66% of which were build-to-suit projects.  

The company spent $234 million on acquisitions, including $112 million worth of properties during the quarter, with a stabilized capitalization rate of 7.0% and an investment of $122 million in land infrastructure. At quarter-end, Prologis' global development portfolio totaled 16.3 million square feet, with an estimated total investment of $1.5 billion.

Prologis completed approximately $174 million worth of asset sale transactions and contributions during the quarter at a weighted average stabilized capitalization rate of 7.0%. The 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.

Year-to-date, through September 30 2012, the company received commitments for $330 million in new third-party equity in its private capital business. Prologis completed over $378 million worth of capital market activities in the quarter. At quarter-end, Prologis had cash and cash equivalents of $158.2 million and total debt of $12.6 billion. For full year 2012, Prologis increased its core FFO guidance in the range of $1.72 to $1.74 per share from the earlier range of $1.64 to $1.70.

Prologis currently retains a Zacks #2 Rank, which translates into a short-term Buy rating. We are also maintaining our long-term Neutral recommendation on the stock. One of its competitors PS Business Parks Inc (PSB) currently retains a Zacks #4 Rank, which translates into a short-term Sell rating.

Note:  FFO, 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.

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