SAN FRANCISCO, July 18, 2017 /PRNewswire/ -- Prologis, Inc.
(NYSE: PLD), the global leader in logistics real estate, today
reported results for the second quarter of 2017.
Net earnings per diluted share was $0.50 compared with $0.52 for the same period in 2016. Core funds
from operations* per diluted share was $0.84 compared with $0.60 for the same period in 2016. The impact
from net promote income for the quarter was $0.18 per share.
"Our second quarter results were excellent and reflect record
rent increases and higher earnings from our strategic capital
business," said Hamid R. Moghadam,
chairman and CEO, Prologis. "Market conditions continue to be
healthy. On the margin, we are now even more positive as we see
increased activity from our customers and a greater willingness to
compete and pay for quality locations. Market rent growth surprised
us to the upside, and the mark-to-market of our portfolio increased
to 13 percent globally, which positions us for strong operating
performance for the next several years."
PORTFOLIO LOCATION DRIVES OUTPERFORMANCE
Owned &
Managed
|
2Q17
|
2Q16
|
Notes
|
Period End
Occupancy
|
96.2%
|
96.1%
|
The U.S. increased
70 bps year-over-year
|
Leases
Signed
|
47MSF
|
49MSF
|
|
|
|
|
|
Prologis
Share
|
2Q17
|
2Q16
|
Notes
|
Net Effective Rent
Change
|
24.0%
|
17.8%
|
Led by the U.S. at
29.0%
|
Cash Rent
Change
|
11.2%
|
7.9%
|
|
Net Effective Same
Store NOI*
|
4.6%
|
6.1%
|
Led by the U.S. at
5.2%
|
Cash Same Store
NOI*
|
7.2%
|
5.3%
|
Led by the U.S. at
8.0%
|
GLOBAL INVESTMENT STRATEGY DELIVERS PROFITABLE DEPLOYMENT
ACTIVITY
Prologis
Share
|
2Q17
|
Building
Acquisitions
|
$37M
|
Weighted avg stabilized cap
rate
|
5.9%
|
Development
Stabilizations
|
$560M
|
Estimated weighted avg
yield
|
6.6%
|
Estimated weighted avg
margin
|
23.1%
|
Estimated value
creation
|
$130M
|
Development
Starts
|
$897M
|
Estimated weighted avg
margin
|
20.8%
|
Estimated value
creation
|
$187M
|
%
Build-to-suit
|
34.6%
|
Total Dispositions
and Contributions
|
$410M
|
Weighted avg
stabilized cap rate (excluding land and other real
estate)
|
6.1%
|
STRATEGIC CAPITAL BUSINESS FURTHER STREAMLINED
As
previously announced, Prologis entered into an agreement to acquire
its partner's interest in its Brazil platform for approximately R$1.2 billion (US$362)
million. The transaction is expected to close this year, at
which point Prologis will own 100 percent of the Brazil platform.
Subsequent to quarter-end, Prologis contributed $2.8 billion of the assets formerly owned by the
North American Industrial Fund (NAIF) to its Prologis Targeted U.S.
Logistics Fund (USLF) at a 5.4 percent stabilized capitalization
rate. The NAIF portfolio, primarily developed by Prologis, is
highly complementary to USLF. Prologis received cash proceeds of
$720 million and additional units,
which increased its interest in USLF to 27 percent. USLF raised
over $950 million from 14 new and
existing investors to facilitate this transaction. With this
activity, the company now has 9 co-investment ventures.
FINANCING ACTIVITY HIGHLIGHTS ADVANTAGED ACCESS TO GLOBAL
CAPITAL
During the second quarter, the company and its
co-investment ventures completed $2.9
billion of financings, principally denominated in sterling
and yen. In aggregate, this activity reduced Prologis' weighted
average cost of debt by 10 basis points to 3 percent and extended
maturities by 6 months to 5.3 years. The company ended the quarter
with 95 percent USD net equity exposure and liquidity of
$3.7 billion.
GUIDANCE RANGES INCREASED AND NARROWED FOR 2017
At
the midpoint, guidance for net earnings per diluted share increased
$1.05 and Core FFO* per diluted share
increased $0.05.
"The promote we earned this quarter was above our forecast,
driven by rising property values in our USLF portfolio from
higher-than-expected rents and slight cap rate compression," said
Thomas S. Olinger, chief financial
officer, Prologis. "The combination of this promote income and
higher operational performance led us to raise the midpoint of our
full-year earnings guidance ranges."
2017 GUIDANCE
Earnings (per
diluted share)
|
Previous
|
Revised
|
Net
Earnings
|
$1.70 to
$1.80
|
$2.76 to
$2.84
|
Core FFO*
|
$2.72 to
$2.78
|
$2.78 to
$2.82
|
|
|
|
Operations
|
Previous
|
Revised
|
Year-end
occupancy
|
96.0% to
97.0%
|
96.5% to
97.0%
|
Net Effective Same
Store NOI* – Prologis share
|
4.50% to
5.25%
|
4.75% to
5.25%
|
|
|
|
Other Assumptions
(in millions)
|
Previous
|
Revised
|
Strategic capital
revenue, excl. promote revenue
|
$210 to
$220
|
$225 to
$235
|
Net promote
income
|
$65 to $75
|
$90
|
General &
administrative expenses
|
$215 to
$225
|
$222 to
$228
|
|
|
|
Realized development
gains
|
$250 to
$300
|
$250 to
$300
|
|
|
|
Capital Deployment
(in millions)
|
Prologis
Share
|
Owned and
Managed
|
Development
stabilizations
|
$1,600 to
$2,000
|
$1,900 to
$2,300
|
Development
starts
|
$1,800 to
$2,100
|
$2,300 to
$2,600
|
Building
acquisitions
|
$100 to
$150
|
$400 to
$600
|
Building and land
dispositions
|
$1,000 to
$1,250
|
$1,800 to
$2,100
|
Building
contributions
|
$950 to
$1,200
|
$1,100 to
$1,400
|
The earnings guidance described above includes potential future
gains (losses) recognized from real estate transactions but
excludes any future foreign currency or derivative gains or losses
as these items are difficult to predict. 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, 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 2017 relates predominantly to
these items. Please refer to our second quarter Supplemental
Information, which is available on our Investor Relations website
at www.ir.prologis.com and on the SEC's website at www.sec.gov for
a definition of Core FFO* and other non-GAAP measures used by
Prologis, along with reconciliations of these items to the closest
GAAP measure for our results and guidance.
WEBCAST & CONFERENCE CALL INFORMATION
Prologis
will host a live webcast and conference call to discuss quarterly
results, current market conditions and future outlook. Here are the
event details:
- Tuesday, July 18, 2017, at
12 p.m. U.S. Eastern Time.
- Live webcast at http://ir.prologis.com by clicking
Investors>Investor Events and Presentations.
- Dial in: +1 800-708-4540 or +1 847-619-6397 and enter Passcode
45189496.
A telephonic replay will be available July 18-25 at +1 888-843-7419 (from the United States and Canada) or +1 630-652-3042 (from all other
countries) using conference code 45189496. The webcast replay will
be posted when available in the Investor Relations "Events &
Presentations" section.
ABOUT PROLOGIS
Prologis, Inc. is the global leader in
logistics real estate with a focus on high-barrier, high-growth
markets. As of June 30, 2017, the
company owned or had investments in, on a wholly owned basis or
through co-investment ventures, properties and development projects
expected to total approximately 684 million square feet (64 million
square meters) in 19 countries. Prologis leases modern distribution
facilities to a diverse base of approximately 5,200 customers
across two major categories: business-to-business and retail/online
fulfillment.
FORWARD-LOOKING STATEMENTS
The statements in this document 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 we operate as
well as management's beliefs and assumptions. Such statements
involve uncertainties that could significantly impact our financial
results. Words such as "expects," "anticipates," "intends,"
"plans," "believes," "seeks," "estimates" and 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 properties, disposition activity, general conditions in
the geographic areas where we operate, our debt, capital structure
and financial position, our ability to form new co-investment
ventures and the availability of capital in existing or new
co-investment ventures — 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 status,
tax structuring and income tax rates (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, 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 us under the heading "Risk Factors." We
undertake no duty to update any forward-looking statements
appearing in this document.
*This is a non-GAAP financial measure. See the Notes and
Definitions in our supplemental information for further explanation
and a reconciliation to the most directly comparable GAAP
measure.
dollars in
millions, except per share/unit data
|
Three Months
ended
June 30,
|
|
Six Months
ended
June 30,
|
|
2017
|
2016
|
|
2017
|
2016
|
|
Revenues
|
$ 766
|
$
602
|
|
$ 1,395
|
$ 1,208
|
|
Net earnings
attributable to common stockholders
|
267
|
275
|
|
470
|
483
|
|
Core FFO*
|
461
|
324
|
|
808
|
654
|
|
AFFO*
|
432
|
260
|
|
751
|
606
|
|
Adjusted
EBITDA*
|
637
|
459
|
|
1,149
|
1,009
|
|
Estimated value
creation from development starts - Prologis share
|
187
|
82
|
|
246
|
121
|
|
Common stock
dividends and common limited partnership unit
distributions
|
243
|
231
|
|
486
|
461
|
|
|
|
|
|
|
|
|
|
|
Per common share -
diluted:
|
|
|
|
|
|
|
|
Net earnings
attributable to common stockholders
|
$0.50
|
$0.52
|
|
$
0.88
|
$0.92
|
|
|
Core FFO*
|
0.84
|
0.60
|
|
1.47
|
1.20
|
|
|
Business line
reporting:
|
|
|
|
|
|
|
|
|
Real estate
operations*
|
0.60
|
0.54
|
|
1.17
|
1.10
|
|
|
|
Strategic
capital*
|
0.24
|
0.06
|
|
0.30
|
0.10
|
|
|
|
Core
FFO*
|
0.84
|
0.60
|
|
1.47
|
1.20
|
|
|
|
Realized development
gains, net of taxes
|
0.07
|
0.02
|
|
0.13
|
0.18
|
|
Dividends and
distributions per common share/unit
|
0.44
|
0.42
|
|
0.88
|
0.84
|
* This is a
non-GAAP financial measure, please see below for further
explanation.
|
|
|
in
thousands
|
|
June 30,
2017
|
|
March 31,
2017
|
|
December 31,
2016
|
Assets:
|
|
|
|
|
|
|
Investments in real
estate properties:
|
|
|
|
|
|
|
|
Operating
properties
|
$
24,412,416
|
|
$
23,950,202
|
|
$
23,943,457
|
|
|
Development
portfolio
|
1,489,293
|
|
1,487,458
|
|
1,432,082
|
|
|
Land
|
1,081,897
|
|
1,162,427
|
|
1,218,904
|
|
|
Other real estate
investments
|
517,678
|
|
531,142
|
|
524,887
|
|
|
|
|
|
27,501,284
|
|
27,131,229
|
|
27,119,330
|
|
|
Less accumulated
depreciation
|
4,026,369
|
|
3,914,817
|
|
3,758,372
|
|
|
|
|
Net investments in
real estate properties
|
23,474,915
|
|
23,216,412
|
|
23,360,958
|
|
Investments in and
advances to unconsolidated entities
|
4,617,724
|
|
4,305,881
|
|
4,230,429
|
|
Assets held for
sale
|
350,987
|
|
439,743
|
|
322,139
|
|
Notes receivable
backed by real estate
|
19,536
|
|
17,006
|
|
32,100
|
|
|
|
|
Net investments in
real estate
|
28,463,162
|
|
27,979,042
|
|
27,945,626
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
271,354
|
|
395,829
|
|
807,316
|
|
Other
assets
|
1,415,879
|
|
1,440,087
|
|
1,496,990
|
|
|
|
|
Total
assets
|
$
30,150,395
|
|
$
29,814,958
|
|
$
30,249,932
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Equity:
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Debt
|
$
11,081,922
|
|
$
10,966,932
|
|
$
10,608,294
|
|
|
Accounts payable,
accrued expenses and other liabilities
|
1,208,235
|
|
1,179,605
|
|
1,183,498
|
|
|
|
|
Total
liabilities
|
12,290,157
|
|
12,146,537
|
|
11,791,792
|
|
|
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
Stockholders'
equity
|
14,847,296
|
|
14,746,867
|
|
14,991,081
|
|
|
Noncontrolling
interests
|
2,607,352
|
|
2,516,015
|
|
3,072,469
|
|
|
Noncontrolling
interests - limited partnership unitholders
|
405,590
|
|
405,539
|
|
394,590
|
|
|
|
|
Total
equity
|
17,860,238
|
|
17,668,421
|
|
18,458,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
and equity
|
$
30,150,395
|
|
$
29,814,958
|
|
$
30,249,932
|
|
|
|
|
|
|
|
|
in thousands, except
per share amounts
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
|
June
30,
|
|
June
30,
|
|
|
|
2017
|
2016
|
|
2017
|
2016
|
Revenues:
|
|
|
|
|
|
|
Rental
|
$ 576,377
|
$ 546,131
|
|
$
1,143,310
|
$
1,100,247
|
|
Strategic
capital
|
180,654
|
53,535
|
|
237,699
|
104,538
|
|
Development
management and other
|
9,152
|
2,489
|
|
14,329
|
3,670
|
|
|
Total
revenues
|
766,183
|
602,155
|
|
1,395,338
|
1,208,455
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
Rental
|
147,794
|
140,725
|
|
300,450
|
287,306
|
|
Strategic
capital
|
51,986
|
27,866
|
|
83,785
|
53,159
|
|
General and
administrative
|
60,077
|
56,934
|
|
113,694
|
107,477
|
|
Depreciation and
amortization
|
228,145
|
230,382
|
|
454,736
|
480,382
|
|
Other
|
2,909
|
3,900
|
|
5,515
|
8,585
|
|
|
Total
expenses
|
490,911
|
459,807
|
|
958,180
|
936,909
|
|
|
|
|
|
|
|
|
Operating
income
|
275,272
|
142,348
|
|
437,158
|
271,546
|
|
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
|
|
Earnings from
unconsolidated co-investment ventures, net
|
61,175
|
40,932
|
|
106,625
|
88,124
|
|
Earnings from other
unconsolidated ventures, net
|
7,421
|
522
|
|
10,576
|
11,641
|
|
Interest
expense
|
(75,354)
|
(76,455)
|
|
(148,266)
|
(157,267)
|
|
Gains on dispositions
of development properties and land, net
|
37,720
|
12,299
|
|
67,520
|
106,284
|
|
Gains on dispositions
of real estate, net (excluding development properties and
land)
|
45,286
|
188,051
|
|
112,811
|
238,383
|
|
Foreign currency and
derivative (losses) and interest and other income, net
|
(18,163)
|
(8,808)
|
|
(22,778)
|
(20,428)
|
|
Gains (losses) on
early extinguishment of debt, net
|
(30,596)
|
2,044
|
|
(30,596)
|
992
|
|
|
Total other
income
|
27,489
|
158,585
|
|
95,892
|
267,729
|
|
|
|
|
|
|
|
|
Earnings before
income taxes
|
302,761
|
300,933
|
|
533,050
|
539,275
|
|
Current income tax
expense
|
(14,952)
|
(9,125)
|
|
(22,113)
|
(25,281)
|
|
Deferred income tax
benefit (expense)
|
171
|
3,983
|
|
(2,268)
|
4,602
|
Consolidated net
earnings
|
287,980
|
295,791
|
|
508,669
|
518,596
|
Net earnings
attributable to noncontrolling interests
|
(11,986)
|
(10,396)
|
|
(22,123)
|
(17,237)
|
Net earnings
attributable to noncontrolling interests - limited partnership
units
|
(7,377)
|
(8,316)
|
|
(13,000)
|
(14,550)
|
Net earnings
attributable to controlling interests
|
268,617
|
277,079
|
|
473,546
|
486,809
|
Preferred stock
dividends
|
(1,674)
|
(1,696)
|
|
(3,348)
|
(3,385)
|
Net earnings
attributable to common stockholders
|
$
266,943
|
$
275,383
|
|
$
470,198
|
$
483,424
|
Weighted average
common shares outstanding - Diluted
|
552,114
|
545,388
|
|
550,512
|
544,293
|
Net earnings per
share attributable to common stockholders - Diluted
|
$
0.50
|
$
0.52
|
|
$
0.88
|
$
0.92
|
|
|
|
|
|
|
|
|
in
thousands
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
|
|
June
30,
|
|
June
30,
|
|
|
|
|
2017
|
2016
|
|
2017
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to common stockholders
|
$ 266,943
|
$ 275,383
|
|
$ 470,198
|
$ 483,424
|
Add (deduct) NAREIT
defined adjustments:
|
|
|
|
|
|
|
Real estate related
depreciation and amortization
|
220,130
|
221,233
|
|
439,201
|
464,825
|
|
Gains on dispositions
of real estate, net (excluding development properties and
land)
|
(45,286)
|
(188,051)
|
|
(112,811)
|
(238,383)
|
|
Reconciling items
related to noncontrolling interests
|
(16,644)
|
(24,015)
|
|
(41,707)
|
(64,290)
|
|
Our share of
reconciling items related to unconsolidated co-investment
ventures
|
23,989
|
40,027
|
|
56,048
|
80,027
|
|
Our share of
reconciling items related to other unconsolidated
ventures
|
1,686
|
1,522
|
|
3,300
|
(984)
|
Subtotal-NAREIT
defined FFO*
|
$
450,818
|
$
326,099
|
|
$
814,229
|
$
724,619
|
|
|
|
|
|
|
|
|
|
Add (deduct) our
defined adjustments:
|
|
|
|
|
|
|
Unrealized foreign
currency and derivative losses, net
|
23,303
|
8,451
|
|
35,506
|
23,779
|
|
Deferred income tax
expense (benefit)
|
(171)
|
(3,983)
|
|
2,268
|
(4,602)
|
|
Current income tax
expense (benefit) on dispositions related to acquired tax
assets
|
603
|
-
|
|
(667)
|
-
|
|
Reconciling items
related to noncontrolling interests
|
107
|
803
|
|
13
|
1,286
|
|
Our share of
reconciling items related to unconsolidated co-investment
ventures
|
(2,892)
|
2,314
|
|
(1,829)
|
340
|
FFO, as modified
by Prologis*
|
$
471,768
|
$
333,684
|
|
$
849,520
|
$
745,422
|
|
|
|
|
|
|
|
|
|
|
Gains on dispositions
of development properties and land, net
|
(37,720)
|
(12,299)
|
|
(67,520)
|
(106,284)
|
|
Current income tax
expense on dispositions
|
1,997
|
1,796
|
|
911
|
10,119
|
|
Acquisition
expenses
|
-
|
967
|
|
-
|
2,228
|
|
Losses (gains) on
early extinguishment of debt, net
|
30,596
|
(2,044)
|
|
30,596
|
(992)
|
|
Reconciling items
related to noncontrolling interests
|
488
|
966
|
|
(679)
|
1,056
|
|
Our share of
reconciling items related to unconsolidated co-investment
ventures
|
(779)
|
855
|
|
195
|
3,319
|
|
Our share of
reconciling items related to other unconsolidated
ventures
|
(4,946)
|
-
|
|
(4,867)
|
(1,310)
|
Core
FFO*
|
$
461,404
|
$
323,925
|
|
$
808,156
|
$
653,558
|
|
|
|
|
|
|
|
|
|
Adjustments to arrive
at Adjusted FFO ("AFFO")*, including our share of
unconsolidated
ventures less noncontrolling interests:
|
|
|
|
|
|
|
Gains on dispositions
of development properties and land, net
|
37,720
|
12,299
|
|
67,520
|
106,284
|
|
Current income tax
benefit (expense) on dispositions
|
(1,997)
|
(1,796)
|
|
(911)
|
(10,119)
|
|
Straight-lined rents
and amortization of lease intangibles
|
(23,422)
|
(22,830)
|
|
(48,919)
|
(54,391)
|
|
Property
improvements
|
(20,270)
|
(20,700)
|
|
(27,665)
|
(27,957)
|
|
Turnover
costs
|
(38,064)
|
(47,150)
|
|
(78,342)
|
(88,719)
|
|
Amortization of debt
premiums, financing costs and management contracts, net
|
(683)
|
(3,287)
|
|
(2,748)
|
(7,762)
|
|
Stock compensation
expense
|
19,224
|
16,747
|
|
37,604
|
29,212
|
|
Reconciling items
related to noncontrolling interests
|
7,194
|
14,587
|
|
20,572
|
32,028
|
|
Our share of
reconciling items related to unconsolidated ventures
|
(9,578)
|
(11,526)
|
|
(23,982)
|
(26,190)
|
AFFO*
|
|
|
$
431,528
|
$
260,269
|
|
$
751,285
|
$
605,944
|
* This is a
non-GAAP financial measure, please see below for further
explanation.
|
|
|
|
|
|
|
|
|
in
thousands
|
Three Months
Ended
|
|
Six Months
Ended
|
|
|
|
|
June
30,
|
|
June
30,
|
|
|
|
|
2017
|
2016
|
|
2017
|
2016
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to common stockholders
|
$
266,943
|
$ 275,383
|
|
$
470,198
|
$
483,424
|
|
Gains on dispositions
of real estate, net (excluding development properties and
land)
|
(45,286)
|
(188,051)
|
|
(112,811)
|
(238,383)
|
|
Depreciation and
amortization
|
228,145
|
230,382
|
|
454,736
|
480,382
|
|
Interest
expense
|
75,354
|
76,455
|
|
148,266
|
157,267
|
|
Losses (gains) on
early extinguishment of debt, net
|
30,596
|
(2,044)
|
|
30,596
|
(992)
|
|
Current and deferred
income tax expense, net
|
14,781
|
5,142
|
|
24,381
|
20,679
|
|
Net earnings
attributable to noncontrolling interests - limited partnership
unitholders
|
7,377
|
8,316
|
|
13,000
|
14,550
|
|
Pro forma
adjustments
|
707
|
(1,069)
|
|
11,086
|
(7,004)
|
|
Preferred stock
dividends
|
1,674
|
1,696
|
|
3,348
|
3,385
|
|
Unrealized foreign
currency and derivative losses, net
|
23,303
|
8,451
|
|
35,506
|
23,779
|
|
Stock compensation
expense
|
19,224
|
16,747
|
|
37,604
|
29,212
|
|
Acquisition
expenses
|
-
|
967
|
|
-
|
2,228
|
Adjusted EBITDA,
consolidated*
|
$
622,818
|
$
432,375
|
|
$
1,115,910
|
$
968,527
|
|
|
|
|
|
|
|
|
|
|
Reconciling items
related to noncontrolling interests
|
(25,192)
|
(35,772)
|
|
(59,688)
|
(87,747)
|
|
Our share of
reconciling items related to unconsolidated co-investment
ventures
|
39,772
|
62,755
|
|
92,842
|
127,802
|
Adjusted
EBITDA*
|
$
637,398
|
$
459,358
|
|
$
1,149,064
|
$
1,008,582
|
* This is a
non-GAAP financial measure, please see below for further
explanation.
|
Adjusted EBITDA. We use Adjusted EBITDA, a non-Generally
Accepted Accounting Principles ("GAAP") financial measure, as a
measure of our operating performance. The most directly comparable
GAAP measure to Adjusted EBITDA is net earnings.
We calculate Adjusted EBITDA beginning with consolidated net
earnings attributable to common stockholders and removing the
effect of: interest expense, income taxes, depreciation and
amortization, impairment charges, third party acquisition expenses
related to the acquisition of real estate, gains or losses from the
disposition of investments in real estate (excluding development
properties and land), gains from the revaluation of equity
investments upon acquisition of a controlling interest, gains or
losses on early extinguishment of debt and derivative contracts
(including cash charges), similar adjustments we make to our FFO
measures (see definition below), and other items, such as, stock
based compensation and unrealized gains or losses on foreign
currency and derivatives. We also include a pro forma adjustment to
reflect a full period of NOI on the operating properties we acquire
or stabilize during the quarter and remove NOI on properties we
dispose of during the quarter, to assume all transactions occurred
at the beginning of the quarter. The pro forma adjustment also
includes economic ownership changes in our ventures to reflect the
full quarter at the new ownership percentage.
We believe Adjusted EBITDA provides investors relevant and
useful information because it permits investors to view our
operating performance, analyze our ability to meet interest payment
obligations and make quarterly preferred stock dividends on an
unleveraged basis before the effects of income tax, non-cash
depreciation and amortization expense, gains and losses on the
disposition of non-development properties and other items (outlined
above), that affect comparability. While all items are not
infrequent or unusual in nature, these items may result from market
fluctuations that can have inconsistent effects on our results of
operations. The economics underlying these items reflect market and
financing conditions in the short-term but can obscure our
performance and the value of our long-term investment decisions and
strategies.
While we believe Adjusted EBITDA is an important measure, it
should not be used alone because it excludes significant components
of net earnings, such as our historical cash expenditures or future
cash requirements for working capital, capital expenditures,
distribution requirements, contractual commitments or interest and
principal payments on our outstanding debt and is therefore limited
as an analytical tool.
Our computation of Adjusted EBITDA may not be comparable to
EBITDA reported by other companies in both the real estate industry
and other industries. We compensate for the limitations of Adjusted
EBITDA by providing investors with financial statements prepared
according to GAAP, along with this detailed discussion of Adjusted
EBITDA and a reconciliation to Adjusted EBITDA from consolidated
net earnings attributable to common stockholders.
Business Line Reporting is a non-GAAP financial
measure. Core FFO and development gains are generated by our
three lines of business: (i) real estate operations; (ii) strategic
capital; and (iii) development. The real estate operations
line of business represents total Prologis Core FFO, less the
amount allocated to the Strategic Capital line of business.
The amount of Core FFO allocated to the Strategic Capital line of
business represents the Asset Management Fees we earn from our
consolidated and unconsolidated Co-Investment Ventures less costs
directly associated to our strategic capital group, plus
development management income. Realized development gains
include our share of gains on dispositions of development
properties and land, net of taxes. To calculate the per share
amount, the amount generated by each line of business is divided by
the weighted average diluted common shares outstanding used in our
Core FFO per share calculation. Management believes evaluating our
results by line of business is a useful supplemental measure of our
operating performance because it helps the investing public compare
the operating performance of Prologis' respective businesses to
other companies' comparable businesses. Prologis' computation of
FFO by line of business may not be comparable to that reported by
other real estate investment trusts as they may use different
methodologies in computing such measures.
Calculation of Per
Share Amounts
|
in thousands,
except per share amount
|
Three Months
Ended
|
|
Six Months
Ended
|
|
Jun.
30,
|
|
Jun.
30,
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
Net
earnings
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
$
|
266,943
|
|
$
|
275,383
|
|
$
|
470,198
|
|
$
|
483,424
|
Noncontrolling
interest attributable to exchangeable limited
partnership
units
|
|
7,798
|
|
|
9,085
|
|
|
13,765
|
|
|
15,694
|
Adjusted net
earnings - Diluted
|
$
|
274,741
|
|
$
|
284,468
|
|
$
|
483,963
|
|
$
|
499,118
|
Weighted average
common shares outstanding - Basic
|
|
530,040
|
|
|
524,842
|
|
|
529,400
|
|
|
524,540
|
Incremental weighted
average effect on exchange of
limited
partnership units
|
|
16,364
|
|
|
17,703
|
|
|
16,409
|
|
|
17,623
|
Incremental weighted
average effect of equity awards
|
|
5,710
|
|
|
2,843
|
|
|
4,703
|
|
|
2,130
|
Weighted average
common shares outstanding - Diluted
|
|
552,114
|
|
|
545,388
|
|
|
550,512
|
|
|
544,293
|
Net earnings per
share - Basic
|
$
|
0.50
|
|
$
|
0.52
|
|
$
|
0.89
|
|
$
|
0.92
|
Net earnings per
share - Diluted
|
$
|
0.50
|
|
$
|
0.52
|
|
$
|
0.88
|
|
$
|
0.92
|
Core
FFO
|
|
|
|
|
|
|
|
|
|
|
|
Core FFO
|
$
|
461,404
|
|
$
|
323,925
|
|
$
|
808,156
|
|
$
|
653,558
|
Noncontrolling
interest attributable to exchangeable limited
partnership
units
|
|
974
|
|
|
47
|
|
|
1,916
|
|
|
93
|
Core FFO -
Diluted
|
$
|
462,378
|
|
$
|
323,972
|
|
$
|
810,072
|
|
$
|
653,651
|
Weighted average
common shares outstanding - Basic
|
|
530,040
|
|
|
524,842
|
|
|
529,400
|
|
|
524,540
|
Incremental weighted
average effect on exchange of
limited
partnership units
|
|
16,364
|
|
|
16,037
|
|
|
16,409
|
|
|
15,957
|
Incremental weighted
average effect of equity awards
|
|
5,710
|
|
|
2,843
|
|
|
4,703
|
|
|
2,130
|
Weighted average
common shares outstanding - Diluted
|
|
552,114
|
|
|
543,722
|
|
|
550,512
|
|
|
542,627
|
Core FFO per share
- Diluted
|
$
|
0.84
|
|
$
|
0.60
|
|
$
|
1.47
|
|
$
|
1.20
|
Estimated Value Creation represents the value that we
expect to create through our development and leasing activities. We
calculate Value Creation by estimating the Stabilized NOI that the
property will generate and applying a stabilized capitalization
rate applicable to that property. Estimated Value Creation is
calculated as the amount by which the value exceeds our total
expected investment and does not include any fees or promotes we
may earn. Estimated Value Creation for our Value-Added Properties
that are sold includes the realized economic gain.
Estimated Weighted Average Margin is calculated on
development properties as Estimated Value Creation, less estimated
closing costs and taxes on properties expected to be sold or
contributed, divided by TEI.
FFO, as modified by Prologis attributable to common
stockholders/unitholders ("FFO, as modified by Prologis"); Core FFO
attributable to common stockholders/unitholders ("Core FFO"); AFFO;
(collectively referred to as "FFO"). FFO is a non-GAAP
financial measure that is commonly used in the real estate
industry. The most directly comparable GAAP measure to FFO is net
earnings.
The National Association of Real Estate Investment Trusts
("NAREIT") defines FFO as earnings computed under GAAP to exclude
historical cost depreciation and gains and losses from the sales,
along with impairment charges, of previously depreciated
properties. We also exclude the gains on revaluation of equity
investments upon acquisition of a controlling interest and the gain
recognized from a partial sale of our investment, as these are
similar to gains from sales of previously depreciated properties.
We exclude similar adjustments from our unconsolidated entities and
the third parties' share of our consolidated ventures.
Our FFO Measures
Our FFO measures begin with NAREIT's definition and we make
certain adjustments to reflect our business and the way that
management plans and executes our business strategy. While
not infrequent or unusual, the additional items we adjust for in
calculating FFO, as modified by Prologis, Core FFO
and AFFO, as defined below, are subject to significant
fluctuations from period to period. Although these items may have a
material impact on our operations and are reflected in our
financial statements, the removal of the effects of these items
allows us to better understand the core operating performance of
our properties over the long term. These items have both
positive and negative short-term effects on our results of
operations in inconsistent and unpredictable directions that are
not relevant to our long-term outlook.
We calculate our FFO measures, as defined below, based on our
proportionate ownership share of both our unconsolidated and
consolidated ventures. We reflect our share of our FFO
measures for unconsolidated ventures by applying our average
ownership percentage for the period to the applicable reconciling
items on an entity by entity basis. We reflect our share for
consolidated ventures in which we do not own 100% of the equity by
adjusting our FFO measures to remove the noncontrolling interests
share of the applicable reconciling items based on our average
ownership percentage for the applicable periods.
These FFO measures are used by management as supplemental
financial measures of operating performance and we believe that it
is important that stockholders, potential investors and financial
analysts understand the measures management uses. We do not use our
FFO measures as, nor should they be considered to be, alternatives
to net earnings computed under GAAP, as indicators of our operating
performance, as alternatives to cash from operating activities
computed under GAAP or as indicators of our ability to fund our
cash needs.
We analyze our operating performance primarily by the rental
revenues of our real estate and the revenues from our strategic
capital business, net of operating, administrative and financing
expenses. This income stream is not directly impacted by
fluctuations in the market value of our investments in real estate
or debt securities.
FFO, as modified by Prologis
To arrive at FFO, as modified by Prologis, we adjust the
NAREIT defined FFO measure to exclude the impact of foreign
currency related items and deferred tax, specifically:
(i)
|
deferred income tax
benefits and deferred income tax expenses recognized by our
subsidiaries;
|
(ii)
|
current income tax
expense related to acquired tax liabilities that were recorded as
deferred tax liabilities in an acquisition, to the extent the
expense is offset with a deferred income tax benefit in earnings
that is excluded from our defined FFO measure;
|
(iii)
|
unhedged foreign
currency exchange gains and losses resulting from debt transactions
between us and our foreign consolidated and unconsolidated
subsidiaries and from foreign debt issued by the US
parent;
|
(iv)
|
foreign currency
exchange gains and losses from the remeasurement (based on current
foreign currency exchange rates) of certain third party debt of our
foreign consolidated and unconsolidated
entities; and
|
(v)
|
mark-to-market
adjustments associated with derivative financial
instruments.
|
We use FFO, as modified by Prologis, so that management,
analysts and investors are able to evaluate our performance against
other REITs that do not have similar operations or operations in
jurisdictions outside the U.S.
Core FFO
In addition to FFO, as modified by Prologis, we also use
Core FFO. To arrive at Core FFO, we adjust
FFO, as modified by Prologis, to exclude the following
recurring and nonrecurring items that we recognized directly in
FFO, as modified by Prologis:
(i)
|
gains or losses from
the disposition of land and development properties that were
developed with the intent to contribute or sell;
|
(ii)
|
income tax expense
related to the sale of investments in real estate and third-party
acquisition costs related to the acquisition of real
estate;
|
(iii)
|
impairment charges
recognized related to our investments in real estate generally as a
result of our change in intent to contribute or sell these
properties;
|
(iv)
|
gains or losses from
the early extinguishment of debt and redemption and repurchase of
preferred stock; and
|
(v)
|
expenses related to
natural disasters.
|
We use Core FFO, including by segment and region, to: (i) assess
our operating performance as compared to other real estate
companies, (ii) evaluate our performance and the performance of our
properties in comparison with expected results and results of
previous periods; (iii) evaluate the performance of our management;
(iv) budget and forecast future results to assist in the allocation
of resources; (v) provide guidance to the financial markets to
understand our expected operating performance; and (v) evaluate how
a specific potential investment will impact our future results.
AFFO
To arrive at AFFO, we adjust Core FFO to include realized gains
from the disposition of land and development properties and
recurring capital expenditures and exclude the following items that
we recognize directly in Core FFO:
(i)
|
straight-line
rents;
|
(ii)
|
amortization of
above- and below-market lease intangibles;
|
(iii)
|
amortization of
management contracts;
|
(iv)
|
amortization of debt
premiums and discounts and financing costs, net of amounts
capitalized, and;
|
(v)
|
stock compensation
expense.
|
We use AFFO to (i) assess our operating performance as compared
to other real estate companies, (ii) evaluate our performance and
the performance of our properties in comparison with expected
results and results of previous periods, (iii) evaluate the
performance of our management, (iv) budget and forecast future
results to assist in the allocation of resources, and (v) evaluate
how a specific potential investment will impact our future
results.
Limitations on the use of our FFO measures
While we believe our modified FFO measures are important
supplemental measures, neither NAREIT's nor our measures of FFO
should be used alone because they exclude significant economic
components of net earnings computed under GAAP and are, therefore,
limited as an analytical tool. Accordingly, these are only a few of
the many measures we use when analyzing our business. Some of
the limitations are:
- The current income tax expenses and acquisition costs that are
excluded from our modified FFO measures represent the taxes and
transaction costs that are payable.
- Depreciation and amortization of real estate assets are
economic costs that are excluded from FFO. FFO is limited, as it
does not reflect the cash requirements that may be necessary for
future replacements of the real estate assets. Furthermore, the
amortization of capital expenditures and leasing costs necessary to
maintain the operating performance of logistics facilities are not
reflected in FFO.
- Gains or losses from non-development property and dispositions
or impairment charges related to expected dispositions represent
changes in value of the properties. By excluding these gains and
losses, FFO does not capture realized changes in the value of
disposed properties arising from changes in market conditions.
- The deferred income tax benefits and expenses that are excluded
from our modified FFO measures result from the creation of a
deferred income tax asset or liability that may have to be settled
at some future point. Our modified FFO measures do not currently
reflect any income or expense that may result from such
settlement.
- The foreign currency exchange gains and losses that are
excluded from our modified FFO measures are generally recognized
based on movements in foreign currency exchange rates through a
specific point in time. The ultimate settlement of our foreign
currency-denominated net assets is indefinite as to timing and
amount. Our FFO measures are limited in that they do not reflect
the current period changes in these net assets that result from
periodic foreign currency exchange rate movements.
- The gains and losses on extinguishment of debt that we exclude
from our Core FFO, may provide a benefit or cost to us as we may be
settling our debt at less or more than our future obligation.
- The natural disaster expenses that we exclude from Core FFO are
costs that we have incurred.
We compensate for these limitations by using our FFO measures
only in conjunction with net earnings computed under GAAP when
making our decisions. This information should be read with our
complete Consolidated Financial Statements prepared under GAAP. To
assist investors in compensating for these limitations, we
reconcile our modified FFO measures to our net earnings computed
under GAAP.
Guidance. The following is a reconciliation of our guided
Net Earnings per share to our guided Core FFO per share:
|
Low
|
|
High
|
|
Net
Earnings
|
$
|
2.76
|
|
$
|
2.84
|
|
Our share
of:
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
1.68
|
|
|
1.70
|
|
Net gains on real
estate transactions, net of taxes (a)
|
|
(1.78)
|
|
|
(1.84)
|
|
Unrealized foreign
currency losses and other, net
|
|
0.12
|
|
|
0.12
|
|
Core FFO
|
$
|
2.78
|
|
$
|
2.82
|
|
(a)
|
This amount
includes $0.87 related to the NAIF sale to USLF
(non-FFO).
|
Prologis Share represents our proportionate economic
ownership of each entity included in our total owned and managed
portfolio whether consolidated or unconsolidated.
Rent Change (Cash) represents the change in starting
rental rates per the lease agreement, on new and renewed leases,
signed during the periods as compared with the previous ending
rental rates in that same space. This measure excludes any free
rent periods and teaser rates defined as 50% or less of the
stabilized rate.
Rent Change (Net Effective) represents the change in net
effective rental rates (average rate over the lease term), on new
and renewed leases, signed during the period as compared with the
previous effective rental rates in that same space.
Same Store. We evaluate the operating performance of the
operating properties we own and manage using a "same store"
analysis because the population of properties in this analysis is
consistent from period to period, which eliminates the effects of
changes in the composition of the portfolio. We have defined the
same store portfolio, for the three months ended June 30, 2017, as those owned and managed
properties that were in operation at January
1, 2016 and have been in operation throughout the same
three-month periods in both 2016 and 2017 (including development
properties that have been completed and available for lease). We
removed all properties that were disposed of to a third party or
were classified as held for sale to a third party from the
population for both periods. We believe the factors that affect
rental revenues, rental expenses and NOI in the same store
portfolio are generally the same as for the total operating
portfolio. To derive an appropriate measure of period-to-period
operating performance, we remove the effects of foreign currency
exchange rate movements by using the recent period end exchange
rate to translate from local currency into the U.S. dollar, for
both periods.
Same store is a commonly used measure in the real estate
industry. Our same store measures are non-GAAP financial measures
that are calculated beginning with rental revenues, rental
recoveries and rental expenses from the financial statements
prepared in accordance with GAAP. It is also common in the real
estate industry and expected from the analyst and investor
community that these numbers be further adjusted to remove certain
non-cash items included in the financial statements prepared in
accordance with GAAP to reflect a cash same store number. In
order to clearly label these metrics, we call one Same Store NOI
and one Same Store NOI – Cash. As our same store measures are
non-GAAP financial measures, they have certain limitations as
analytical tools and may vary among real estate companies. As a
result, we provide a reconciliation from our financial statements
prepared in accordance with GAAP to same store property NOI with
explanations of how these metrics are calculated.
The following is a reconciliation of our consolidated rental
revenues, rental recoveries, rental expenses and property NOI, as
included in the Consolidated Statements of Operations, to the
respective amounts in our same store portfolio analysis:
dollars in
thousands
|
Three Months
Ended
|
|
|
Jun.
30,
|
|
|
2017
|
|
2016
|
|
Change
(%)
|
|
Rental
Revenue:
|
|
|
|
|
|
|
|
|
|
Rental
Revenue
|
$
|
447,960
|
|
$
|
426,150
|
|
|
|
|
Rental
Recoveries
|
|
128,417
|
|
|
119,981
|
|
|
|
|
Per the Consolidated
Statements of Operations
|
|
576,377
|
|
|
546,131
|
|
|
|
|
Properties not
included and other adjustments (a)
|
|
(60,960)
|
|
|
(51,844)
|
|
|
|
|
Unconsolidated
Co-Investment Ventures
|
|
461,802
|
|
|
449,226
|
|
|
|
|
Same Store -
Rental Revenue
|
$
|
977,219
|
|
$
|
943,513
|
|
|
3.6
|
%
|
|
|
|
|
|
|
|
|
|
|
Rental
Expense:
|
|
|
|
|
|
|
|
|
|
Per the Consolidated
Statements of Operations
|
$
|
147,794
|
|
$
|
140,725
|
|
|
|
|
Properties not
included and other adjustments (b)
|
|
(5,038)
|
|
|
(5,307)
|
|
|
|
|
Unconsolidated
Co-Investment Ventures
|
|
99,194
|
|
|
100,747
|
|
|
|
|
Same Store -
Rental Expense
|
$
|
241,950
|
|
$
|
236,165
|
|
|
2.4
|
%
|
|
|
|
|
|
|
|
|
|
|
NOI:
|
|
|
|
|
|
|
|
|
|
Consolidated
NOI
|
$
|
428,583
|
|
$
|
405,406
|
|
|
|
|
Properties not
included and other adjustments
|
|
(55,922)
|
|
|
(46,537)
|
|
|
|
|
Unconsolidated
Co-Investment Ventures
|
|
362,608
|
|
|
348,479
|
|
|
|
|
Same Store -
NOI
|
$
|
735,269
|
|
$
|
707,348
|
|
|
3.9
|
%
|
Same Store -
NOI - Prologis Share (c)
|
$
|
421,628
|
|
$
|
403,113
|
|
|
4.6
|
%
|
|
|
|
|
|
|
|
|
|
|
NOI- Cash:
|
|
|
|
|
|
|
|
|
|
Same store-
NOI
|
$
|
735,269
|
|
$
|
707,348
|
|
|
|
|
Straight-line rent
adjustments (d)
|
|
(10,413)
|
|
|
(23,016)
|
|
|
|
|
Fair value lease
adjustments (d)
|
|
(280)
|
|
|
(343)
|
|
|
|
|
Same Store - NOI-
Cash
|
$
|
724,576
|
|
$
|
683,989
|
|
|
5.9
|
%
|
Same Store - NOI-
Prologis Share (c)
|
$
|
415,136
|
|
$
|
387,357
|
|
|
7.2
|
%
|
|
|
(a)
|
To calculate Same
Store rental income, we exclude net termination and renegotiation
fees to allow us to evaluate the growth or decline in each
property's rental income without regard to one-time items that are
not indicative of the property's recurring operating
performance.
|
(b)
|
To calculate Same
Store rental expense, we include an allocation of the property
management expenses for our consolidated properties based on the
property management fee that is provided for in the individual
management agreements under which our wholly owned management
companies provide property management services (generally the fee
is based on a percentage of revenue). On consolidation, the
management fee income and expenses are eliminated and the actual
cost of providing property management services is
recognized.
|
(c)
|
Prologis share of
Same Store is calculated using the underlying building information
from the Same Store NOI and NOI - Cash calculations and applying
our ownership percentage as of June 30, 2017 to the NOI of each
building for both periods.
|
(d)
|
In order to derive
Same Store- NOI - Cash, we adjust Same Store- NOI to exclude
non-cash items included in our rental income in our financial
statements, including straight line rent adjustments and
adjustments related to purchase accounting to reflect leases at
fair value at the time of acquisition.
|
Weighted Average Stabilized Capitalization ("Cap") Rate
is calculated as Stabilized NOI divided by the Acquisition
Cost.
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SOURCE Prologis, Inc.