SAN FRANCISCO, Jan. 27, 2015 /PRNewswire/ -- Prologis, Inc.
(NYSE: PLD), the global leader in industrial real estate, today
reported results for the fourth quarter and full year 2014.
Core funds from operations (Core FFO) per diluted share was
$0.48 for the fourth quarter compared
with $0.43 for the same period in
2013. For the full year 2014, Core FFO per diluted share was
$1.88, an increase of 14 percent over
2013.
OPERATIONS OUTPERFORM EXPECTATIONS
"As we closed out
the year, our global occupancies continued to climb and development
leasing reached its highest level in seven years," said
Hamid R. Moghadam, chairman and CEO,
Prologis. "The outperformance is a direct result of our long-term
strategy of operating in infill markets where global trade and
consumption intersect."
Prologis ended the quarter with 96.1 percent occupancy in its
operating portfolio, an increase of 100 basis points over the same
period in 2013 and 110 basis points over the prior quarter. The
quarterly increase was principally driven by a 160 basis point
increase in spaces under 100,000 square feet and a 140 basis point
increase in the company's European portfolio.
In the fourth quarter, the company leased 41.7 million square
feet (3.9 million square meters) in its combined operating and
development portfolios, which includes 8.9 million square feet (0.8
million square meters) of properties under development. Tenant
retention was 85.5 percent.
Rent change on rollovers was positive for the eighth consecutive
quarter, with GAAP rental rates on signed leases increasing 6.2
percent. In the Americas, GAAP rental rates on signed leases
increased 11.5 percent.
During the fourth quarter, same store NOI for the owned and
managed portfolio increased 4.1 percent on a GAAP basis, resulting
in full year 2014 same store NOI growth of 3.7 percent. On a
Prologis' share basis, same store NOI (GAAP) increased 4.9 percent
during the fourth quarter.
CAPITAL DEPLOYMENT BENEFITS FROM GLOBAL REACH
In 2014,
Prologis invested $4.3 billion
($3.1 billion Prologis' share) as the
company deployed capital at attractive yields of 6.8 percent
(Prologis' share).
"The global nature of our platform allows us to deploy capital
where we see the highest risk-adjusted returns," adds Moghadam. "In
the U.S., where market conditions are very strong and values are
high, we were a net seller of non-strategic holdings. In
Europe, the focus has been on net
deployment where we acquired quality assets in target markets at a
discount to replacement costs."
Value Creation and Development Starts
In 2014,
Prologis generated an estimated $301.6
million ($272.6 million
Prologis' share) of value creation from development stabilizations
and through its value-added conversion program.
Development Stabilizations
In the fourth quarter, the
company generated $55.4 million
($46.1 million Prologis' share) of
estimated value creation from $247.4
million ($201.7 million
Prologis' share) of development stabilizations at an estimated
development margin of 22.4 percent. For the full year 2014, the
company stabilized $1.1 billion
($955.2 million Prologis' share) of
development projects with an estimated development margin of 23.0
percent, generating $254.5 million
($235.8 million Prologis' share) of
estimated value creation.
Development Starts
During the quarter, Prologis
started $725.2 million ($625.8 million Prologis' share) of new
developments with an estimated weighted average yield upon
stabilization of 7.3 percent and an estimated development margin of
21.0 percent. For the full year 2014, the company started
$2.0 billion ($1.8 billion Prologis' share) of new developments
with an estimated weighted average yield upon stabilization of 7.2
percent and an estimated development margin of 20.0 percent.
Build-to-suits represented 49.6 percent of development starts in
the fourth quarter and 32.6 percent for the full year 2014.
At year end, the book value of the company's land bank totaled
$1.8 billion with an estimated
build-out potential of $10.7
billion.
Acquisitions
In the fourth quarter, Prologis
acquired $151.4 million ($48.2 million Prologis' share) of buildings
through its co-investment ventures with a stabilized capitalization
rate on Prologis' share of 6.5 percent. For the full year 2014, the
company acquired $1.5 billion
($659.4 million Prologis' share) of
buildings at a stabilized capitalization rate on Prologis' share of
6.4 percent. More than three-quarters of these buildings were in
Europe, where the company
purchased assets at a discount to replacement costs.
Equity Invested in Co-Investment
Ventures
During the year, the company invested
$679.0 million in the Prologis North
American Industrial Fund, through a series of investments, at a
weighted average stabilized capitalization rate of 6.1 percent. As
a result, the company increased its ownership to 66.1 percent and
consolidated the venture.
Contributions and Dispositions
During the
fourth quarter, Prologis completed $213.2
million ($104.3 million
Prologis' share) of contributions to its co-investment ventures and
third-party building dispositions of non-strategic assets of
$500.3 million ($406.8 million Prologis' share). Prologis'
share of contributions and dispositions had a stabilized
capitalization rate of 5.9 percent.
During the full year, the company completed $1.7 billion ($948.7
million Prologis' share) of contributions at a weighted
average stabilized capitalization rate (Prologis' share) of 5.8
percent, and $1.5 billion
($1.3 billion Prologis' share) of
building dispositions at a weighted average stabilized
capitalization rate (Prologis' share) of 6.4 percent.
FINANCIAL STRENGTH A TOP PRIORITY
Prologis completed
more than $1.7 billion of capital
markets activity in the quarter, including the previously announced
issuance of a €600 million euro bond, as well as $356 million of equity issuance from the exercise
of warrants related to the formation of its Prologis European
Logistics Partners venture and through its At-the-Market equity
program. In the full year, the company completed $7.0 billion of capital markets activity.
"We have effectively converted the currency composition of our
balance sheet to U.S. dollars," said Tom
Olinger, chief financial officer, Prologis. "At year end,
our U.S. dollar net equity exposure was 89 percent—this allows us
to operate globally with our earnings and net asset value insulated
from movements in foreign currencies. We are also taking advantage
of the low interest environment to enhance our debt stack, and
maintaining significant liquidity to keep us nimble as
opportunities arise."
In the strategic capital business, the company maintained a
healthy investment queue and raised $2.5
billion through both private and public capital during the
year.
NET EARNINGS
Net earnings per diluted share was
$0.81 for the fourth quarter compared
with $0.12 for the same period in
2013. For the full year 2014, net earnings per diluted share was
$1.24 compared with $0.64 for the full year 2013.
GUIDANCE ESTABLISHED FOR 2015
Prologis established a
full year 2015 Core FFO guidance range of $2.04 to $2.12 per diluted share, representing 11
percent growth at the midpoint compared with full year 2014. The
company expects to recognize net earnings, for GAAP purposes, of
$0.40 to $0.48 per share. This
assumes (on an owned and managed basis):
- Year-end occupancy between 95.5 and 96.5 percent
- GAAP same store NOI growth between 3.5 and 4.5 percent
- Development stabilizations between $1.7
and $1.9 billion
- Development starts between $2.3 and $2.6
billion
- Building acquisitions between $1.0 and
$1.5 billion
- Contributions to co-investment ventures between $1.3 and $1.8 billion
- Third-party dispositions between $1.5
and $2.0 billion
- Strategic capital revenue between $210
and $220 million
- Net G&A between $238 and $248
million
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 expenses, 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 2015 predominantly relates to real estate
depreciation.
WEBCAST & CONFERENCE CALL INFORMATION
Prologis
will host a live webcast/conference call to discuss quarterly
results, current market conditions and future outlook today,
Jan. 27, 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
48765486.
A telephonic replay will be available Jan. 27-Feb. 27 at +1 855 859 2056 (from the U.S.
and Canada) or +1 404 537 3406
(from all other countries); please use conference code 48765486.
The webcast replay will be posted when available in the "Events
& Presentations" section of Investor Relations on the Prologis
website.
ABOUT PROLOGIS
Prologis, Inc., is the global leader in
industrial real estate. As of December 31,
2014, Prologis owned or had investments in, on a wholly
owned basis or through co-investment ventures, properties and
development projects expected to total approximately 590 million
square feet (55 million square meters) in 21 countries. The company
leases modern distribution facilities to more than 4,700 customers,
including third-party logistics providers, transportation
companies, retailers and manufacturers.
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 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 properties,
disposition activity, general conditions in the geographic areas
where we operate, our debt 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 ("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 document.
|
|
Three months ended
December 31,
|
|
|
Year ended
December 31,
|
(dollars in
thousands, except per share data)
|
|
2014
|
|
2013
|
|
|
2014
|
|
2013
|
|
Revenues
|
|
$
450,865
|
|
$
436,764
|
|
|
$ 1,760,787
|
|
$ 1,750,486
|
|
Net earnings
attributable to common stockholders
|
|
408,609
|
|
59,057
|
|
|
622,235
|
|
315,422
|
|
Core FFO
|
|
246,421
|
|
215,055
|
|
|
953,147
|
|
813,224
|
|
Core AFFO
|
|
189,985
|
|
147,554
|
|
|
753,475
|
|
580,844
|
|
Adjusted
EBITDA
|
|
367,240
|
|
366,664
|
|
|
1,463,383
|
|
1,384,274
|
|
Value creation -
Prologis share
|
|
46,138
|
|
125,184
|
|
|
235,784
|
|
372,378
|
|
Common stock
dividends paid
|
|
168,261
|
|
141,127
|
|
|
668,286
|
|
554,242
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per common share -
diluted:
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to common stockholders
|
|
$
0.81
|
|
$
0.12
|
|
|
$
1.24
|
|
$
0.64
|
|
|
Core FFO
|
|
0.48
|
|
0.43
|
|
|
1.88
|
|
1.65
|
|
Dividends per
share
|
|
0.33
|
|
0.28
|
|
|
1.32
|
|
1.12
|
|
|
|
|
|
|
|
|
|
|
|
|
(in
thousands)
|
December 31,
2014
|
|
September 30,
2014
|
|
December 31,
2013
|
Assets:
|
|
|
|
|
|
|
|
|
|
Investments in real
estate properties:
|
|
|
|
|
|
|
|
|
|
|
Operating
properties
|
|
$
18,635,452
|
|
|
$
16,155,668
|
|
|
$
17,801,064
|
|
|
Development
portfolio
|
|
1,473,980
|
|
|
1,316,470
|
|
|
1,021,017
|
|
|
Land
|
|
1,577,786
|
|
|
1,533,590
|
|
|
1,516,166
|
|
|
Other real estate
investments
|
|
502,927
|
|
|
458,290
|
|
|
486,230
|
|
|
|
|
|
|
22,190,145
|
|
|
19,464,018
|
|
|
20,824,477
|
|
|
Less accumulated
depreciation
|
|
2,790,781
|
|
|
2,695,745
|
|
|
2,568,998
|
|
|
|
|
Net investments in
real estate properties
|
|
19,399,364
|
|
|
16,768,273
|
|
|
18,255,479
|
|
Investments in and
advances to unconsolidated entities
|
|
4,824,724
|
|
|
5,814,056
|
|
|
4,430,239
|
|
Assets held for sale
and notes receivable backed by real estate
|
|
43,934
|
|
|
2,564
|
|
|
192,042
|
|
|
|
|
Net investments in
real estate
|
|
24,268,022
|
|
|
22,584,893
|
|
|
22,877,760
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
350,692
|
|
|
311,879
|
|
|
491,129
|
|
Accounts
receivable
|
|
103,445
|
|
|
132,464
|
|
|
107,955
|
|
Other
assets
|
|
1,096,064
|
|
|
1,042,867
|
|
|
1,095,463
|
|
|
|
|
Total
assets
|
|
$
25,818,223
|
|
|
$
24,072,103
|
|
|
$
24,572,307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Equity:
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
Debt
|
|
$
9,380,199
|
|
|
$
8,822,952
|
|
|
$
9,011,216
|
|
|
Accounts payable,
accrued expenses, and other liabilities
|
|
1,254,425
|
|
|
1,112,402
|
|
|
1,384,638
|
|
|
|
|
Total
liabilities
|
|
10,634,624
|
|
|
9,935,354
|
|
|
10,395,854
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
stock
|
|
78,235
|
|
|
78,235
|
|
|
100,000
|
|
|
|
Common
stock
|
|
5,095
|
|
|
5,000
|
|
|
4,988
|
|
|
|
Additional paid-in
capital
|
|
18,467,009
|
|
|
18,081,751
|
|
|
17,974,509
|
|
|
|
Accumulated other
comprehensive loss
|
|
(600,337)
|
|
|
(510,661)
|
|
|
(435,675)
|
|
|
|
Distributions in
excess of net earnings
|
|
(3,974,493)
|
|
|
(4,214,224)
|
|
|
(3,932,664)
|
|
|
|
|
Total stockholders'
equity
|
|
13,975,509
|
|
|
13,440,101
|
|
|
13,711,158
|
|
|
Noncontrolling
interests
|
|
1,159,901
|
|
|
646,404
|
|
|
417,086
|
|
|
Noncontrolling
interests - limited partnership unitholders
|
|
48,189
|
|
|
50,244
|
|
|
48,209
|
|
|
|
|
Total
equity
|
|
15,183,599
|
|
|
14,136,749
|
|
|
14,176,453
|
|
|
|
|
Total liabilities
and equity
|
|
$
25,818,223
|
|
|
$
24,072,103
|
|
|
$
24,572,307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Twelve Months
Ended
|
(in thousands,
except per share amounts)
|
December
31,
|
|
December
31,
|
|
|
|
|
2014
|
2013
|
|
2014
|
2013
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
Rental
income
|
|
$
402,014
|
|
$
379,208
|
|
|
$
1,527,349
|
|
$
1,559,493
|
|
Strategic capital
income
|
|
44,157
|
|
53,907
|
|
|
219,871
|
|
179,472
|
|
Development
management and other income
|
|
4,694
|
|
3,649
|
|
|
13,567
|
|
11,521
|
|
|
Total
revenues
|
|
450,865
|
|
436,764
|
|
|
1,760,787
|
|
1,750,486
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
Rental
expenses
|
|
108,370
|
|
104,936
|
|
|
430,787
|
|
451,938
|
|
Strategic capital
expenses
|
|
22,054
|
|
22,341
|
|
|
96,496
|
|
89,279
|
|
General and
administrative expenses
|
|
65,987
|
|
63,067
|
|
|
247,768
|
|
229,207
|
|
Depreciation and
amortization
|
|
171,402
|
|
165,453
|
|
|
642,461
|
|
648,668
|
|
Other
expenses
|
|
8,096
|
|
9,488
|
|
|
23,467
|
|
26,982
|
|
|
Total
expenses
|
|
375,909
|
|
365,285
|
|
|
1,440,979
|
|
1,446,074
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
74,956
|
|
71,479
|
|
|
319,808
|
|
304,412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
|
|
|
Earnings from
unconsolidated entities, net
|
|
54,877
|
|
37,666
|
|
|
134,288
|
|
97,220
|
|
Interest
expense
|
|
(74,092)
|
|
(87,832)
|
|
|
(308,885)
|
|
(379,327)
|
|
Gains on dispositions
of investments in real estate and revaluation of equity investments
upon acquisition of a controlling interest, net
|
|
388,095
|
|
151,702
|
|
|
725,790
|
|
597,656
|
|
Foreign currency and
derivative gains (losses), related amortization and interest and
other income (expense), net
|
|
(14,527)
|
|
(28,472)
|
|
|
7,927
|
|
(6,685)
|
|
Losses on early
extinguishment of debt, net
|
|
(1,939)
|
|
(112,859)
|
|
|
(165,300)
|
|
(277,014)
|
|
|
Total other income
(expense)
|
|
352,414
|
|
(39,795)
|
|
|
393,820
|
|
31,850
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before
income taxes
|
|
427,370
|
|
31,684
|
|
|
713,628
|
|
336,262
|
|
Income tax benefit
(expense) - current and deferred
|
|
354
|
|
(22,199)
|
|
|
25,656
|
|
(106,733)
|
Earnings from
continuing operations
|
|
427,724
|
|
9,485
|
|
|
739,284
|
|
229,529
|
Discontinued
operations:
|
|
|
|
|
|
|
|
|
|
|
Income attributable
to disposed properties and assets held for sale
|
|
-
|
|
1,832
|
|
|
-
|
|
6,970
|
|
Net gains on
dispositions, including taxes
|
|
-
|
|
56,952
|
|
|
-
|
|
116,550
|
|
|
Total discontinued
operations
|
|
-
|
|
58,784
|
|
|
-
|
|
123,520
|
Consolidated net
earnings
|
|
427,724
|
|
68,269
|
|
|
739,284
|
|
353,049
|
Net earnings
attributable to noncontrolling interests
|
|
(17,437)
|
|
(7,077)
|
|
|
(103,101)
|
|
(10,128)
|
Net earnings
attributable to controlling interests
|
|
410,287
|
|
61,192
|
|
|
636,183
|
|
342,921
|
Preferred stock
dividends
|
|
(1,678)
|
|
(2,135)
|
|
|
(7,431)
|
|
(18,391)
|
Loss on preferred
stock redemption
|
|
-
|
|
-
|
|
|
(6,517)
|
|
(9,108)
|
Net earnings
attributable to common stockholders
|
|
$
408,609
|
|
$
59,057
|
|
|
$
622,235
|
|
$
315,422
|
Weighted average
common shares outstanding - Diluted
|
|
507,896
|
|
503,760
|
|
|
506,391
|
|
491,546
|
Net earnings per
share attributable to common stockholders - Diluted
|
|
$
0.81
|
|
$
0.12
|
|
|
$
1.24
|
|
$
0.64
|
|
Three Months
Ended
|
|
Twelve Months
Ended
|
(in
thousands)
|
December
31,
|
|
December
31,
|
|
|
|
|
2014
|
2013
|
|
2014
|
2013
|
Reconciliation of
net earnings to FFO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to common stockholders
|
|
$
408,609
|
|
$
59,057
|
|
|
$
622,235
|
|
$
315,422
|
Add (deduct) NAREIT
defined adjustments:
|
|
|
|
|
|
|
|
|
|
|
Real estate related
depreciation and amortization
|
|
164,107
|
|
159,489
|
|
|
617,814
|
|
624,573
|
|
Gains on dispositions
of non-development properties and revaluation of equity investments
upon acquisition of a controlling interest, net
|
|
(341,924)
|
|
(76,751)
|
|
|
(553,298)
|
|
(271,315)
|
|
Reconciling items
related to noncontrolling interests
|
|
(984)
|
|
(1,310)
|
|
|
47,939
|
|
(8,993)
|
|
Our share of
reconciling items included in earnings from unconsolidated
co-investment ventures
|
|
30,719
|
|
42,107
|
|
|
179,302
|
|
153,710
|
|
Our share of
reconciling items included in earnings from other unconsolidated
ventures
|
|
2,702
|
|
1,738
|
|
|
7,238
|
|
6,082
|
Subtotal-NAREIT
defined FFO
|
|
263,229
|
|
184,330
|
|
|
921,230
|
|
819,479
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add (deduct) our
defined adjustments:
|
|
|
|
|
|
|
|
|
|
|
Unrealized foreign
currency and derivative losses (gains) and related amortization,
net
|
|
19,887
|
|
33,457
|
|
|
18,984
|
|
32,870
|
|
Deferred income tax
expense (benefit)
|
|
(2,647)
|
|
1,704
|
|
|
(56,720)
|
|
656
|
|
Our share of
reconciling items included in earnings from unconsolidated
co-investment ventures
|
|
3,728
|
|
(6,892)
|
|
|
4,015
|
|
2,168
|
FFO, as defined by
Prologis
|
|
284,197
|
|
212,599
|
|
|
887,509
|
|
855,173
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to arrive
at Core FFO:
|
|
|
|
|
|
|
|
|
|
|
Gains on dispositions
of development properties and land, net
|
|
(43,906)
|
|
(117,887)
|
|
|
(152,798)
|
|
(336,815)
|
|
Losses on early
extinguishment of debt and redemption of preferred stock,
net
|
|
1,939
|
|
112,859
|
|
|
171,817
|
|
286,122
|
|
Our share of
reconciling items from unconsolidated entities less third party
share of consolidated entities
|
|
4,191
|
|
7,484
|
|
|
46,619
|
|
8,744
|
Core
FFO
|
|
$
246,421
|
|
$
215,055
|
|
|
$
953,147
|
|
$
813,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to arrive
at Core Adjusted FFO ("Core AFFO"), including our share of
unconsolidated entities less third party share of consolidated
entities:
|
|
|
|
|
|
|
|
|
|
|
Straight-lined rents
and amortization of lease intangibles
|
|
(5,681)
|
|
(5,011)
|
|
|
(26,278)
|
|
(22,968)
|
|
Property
improvements
|
|
(35,557)
|
|
(31,445)
|
|
|
(96,729)
|
|
(93,841)
|
|
Tenant
improvements
|
|
(22,961)
|
|
(28,076)
|
|
|
(86,490)
|
|
(102,138)
|
|
Leasing
commissions
|
|
(19,084)
|
|
(18,632)
|
|
|
(62,604)
|
|
(64,094)
|
|
Amortization of
management contracts
|
|
1,101
|
|
1,332
|
|
|
4,943
|
|
5,726
|
|
Amortization of debt
premiums and financing costs, net
|
|
(1,933)
|
|
(4,528)
|
|
|
(3,102)
|
|
(19,387)
|
|
Cash received on net
investment hedges
|
|
13,243
|
|
1,804
|
|
|
13,110
|
|
7,848
|
|
Stock compensation
expense
|
|
14,436
|
|
17,055
|
|
|
57,478
|
|
56,474
|
Core
AFFO
|
|
$
189,985
|
|
$
147,554
|
|
|
$
753,475
|
|
$
580,844
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
dividends
|
|
$
168,261
|
|
$
141,127
|
|
|
$
668,286
|
|
$
554,242
|
Calculation of Per
Share Amounts is as follows (in thousands, except per share
amounts):
|
|
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
December
31,
|
|
December
31,
|
|
2014
|
2013
|
|
2014
|
|
2013
|
Net
earnings
|
|
|
|
|
|
|
Net
earnings
|
$ 408,609
|
$ 59,057
|
|
$ 622,235
|
|
$ 315,422
|
Noncontrolling
interest attributable to exchangeable partnership units
|
1,768
|
144
|
|
3,636
|
|
1,305
|
Adjusted net
earnings - Diluted
|
$ 410,377
|
$ 59,201
|
|
$ 625,871
|
|
$ 316,727
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding - Basic
|
501,178
|
498,104
|
|
499,583
|
|
486,076
|
Incremental weighted
average effect on exchange of limited partnership units
|
3,457
|
1,996
|
|
3,501
|
|
2,060
|
Incremental weighted
average effect of stock awards
|
3,261
|
3,660
|
|
3,307
|
|
3,410
|
Weighted average
common shares outstanding - Diluted
|
507,896
|
503,760
|
|
506,391
|
|
491,546
|
|
|
|
|
|
|
|
Net earnings per
share - Basic
|
$ 0.82
|
$ 0.12
|
|
$ 1.25
|
|
$ 0.65
|
|
|
|
|
|
|
|
Net earnings per
share - Diluted
|
$ 0.81
|
$ 0.12
|
|
$ 1.24
|
|
$ 0.64
|
|
|
|
|
|
|
|
Core
FFO
|
|
|
|
|
|
|
Core FFO
|
$ 246,421
|
$ 215,055
|
|
$ 953,147
|
|
$ 813,224
|
Noncontrolling
interest attributable to exchangeable limited partnership
units
|
60
|
144
|
|
209
|
|
2,828
|
Interest expense on
exchangeable debt assumed exchanged
|
4,246
|
4,235
|
|
16,984
|
|
16,940
|
Core FFO -
Diluted
|
$ 250,727
|
$ 219,434
|
|
$ 970,340
|
|
$ 832,992
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding - Basic
|
501,178
|
498,104
|
|
499,583
|
|
486,076
|
Incremental weighted
average effect on exchange of limited partnership units
|
1,964
|
1,996
|
|
1,964
|
|
3,411
|
Incremental weighted
average effect of stock awards
|
3,261
|
3,660
|
|
3,307
|
|
3,410
|
Incremental weighted
average effect on exchangeable debt assumed exchanged
|
11,879
|
11,879
|
|
11,879
|
|
11,879
|
Weighted average
common shares outstanding - Diluted
|
518,282
|
515,639
|
|
516,733
|
|
504,776
|
|
|
|
|
|
|
|
Core FFO per share
- Diluted
|
$ 0.48
|
$ 0.43
|
|
$ 1.88
|
|
$ 1.65
|
FFO, as defined by Prologis; Core FFO; Core AFFO
(collectively referred to as "FFO"). FFO is a non-GAAP measure
that is commonly used in the real estate industry. The most
directly comparable GAAP measure to FFO is net earnings. Although
the National Association of Real Estate Investment Trusts
("NAREIT") has published a definition of FFO, modifications to the
NAREIT calculation of FFO are common among REITs, as companies seek
to provide financial measures that meaningfully reflect their
business.
FFO is not meant to represent a comprehensive system of
financial reporting and does not present, nor do we intend it to
present, a complete picture of our financial condition and
operating performance. We believe net earnings computed under GAAP
remains the primary measure of performance and that FFO is only
meaningful when it is used in conjunction with net earnings
computed under GAAP. Further, we believe our consolidated financial
statements, prepared in accordance with GAAP, provide the most
meaningful picture of our financial condition and our operating
performance.
NAREIT's FFO measure adjusts net 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 agree that these NAREIT adjustments are useful to
investors for the following reasons:
(i)
|
historical cost
accounting for real estate assets in accordance with GAAP assumes,
through depreciation charges, that the value of real estate assets
diminishes predictably over time. NAREIT stated in its White Paper
on FFO "since real estate asset values have historically risen or
fallen with market conditions, many industry investors have
considered presentations of operating results for real estate
companies that use historical cost accounting to be insufficient by
themselves." Consequently, NAREIT's definition of FFO reflects the
fact that real estate, as an asset class, generally appreciates
over time and depreciation charges required by GAAP do not reflect
the underlying economic realities.
|
(ii)
|
REITs were created as
a legal form of organization in order to encourage public ownership
of real estate as an asset class through investment in firms that
were in the business of long-term ownership and management of real
estate. The exclusion, in NAREIT's definition of FFO, of gains and
losses from the sales, along with impairment charges, of previously
depreciated operating real estate assets allows investors and
analysts to readily identify the operating results of the long-term
assets that form the core of a REIT's activity and assists in
comparing those operating results between periods. We include the
gains and losses (including impairment charges) from dispositions
of land and development properties, as well as our proportionate
share of the gains and losses (including impairment charges) from
dispositions of development properties recognized by our
unconsolidated entities, in our definition of FFO.
|
Our FFO Measures
At the same time that NAREIT created and defined its FFO measure
for the REIT industry, it also recognized that "management of each
of its member companies has the responsibility and authority to
publish financial information that it regards as useful to the
financial community." We believe stockholders, potential investors
and financial analysts who review our operating results are best
served by a defined FFO measure that includes other adjustments to
net earnings computed under GAAP in addition to those included in
the NAREIT defined measure of FFO. Our FFO measures are used
by management in analyzing our business and the performance of our
properties and we believe that it is important that stockholders,
potential investors and financial analysts understand the measures
management uses.
We use these FFO measures, including by segment and region, to:
(i) evaluate our performance and the performance of our properties
in comparison to expected results and results of previous periods,
relative to resource allocation decisions; (ii) evaluate the
performance of our management; (iii) budget and forecast future
results to assist in the allocation of resources; (iv) assess our
performance as compared to similar real estate companies and the
industry in general; and (v) evaluate how a specific potential
investment will impact our future results. Because we make
decisions with regard to our performance with a long-term outlook,
we believe it is appropriate to remove the effects of short-term
items that we do not expect to affect the underlying long-term
performance of the properties. The long-term performance of our
properties is principally driven by rental income. While not
infrequent or unusual, these additional items we exclude in
calculating FFO, as defined by Prologis, are subject to
significant fluctuations from period to period that cause 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 use our FFO measures as supplemental financial measures of
operating performance. 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.
FFO, as defined by Prologis
To arrive at FFO, as defined by Prologis, we adjust the
NAREIT defined FFO measure to exclude:
(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 GAAP
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 subsidiaries and our
foreign unconsolidated entities;
|
(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 subsidiaries and our foreign unconsolidated
entities; and
|
(v)
|
mark-to-market
adjustments and related amortization of debt discounts associated
with derivative financial instruments.
|
We calculate FFO, as defined by Prologis for our
unconsolidated entities on the same basis as we calculate our
FFO, as defined by Prologis.
We believe investors are best served if the information that is
made available to them allows them to align their analysis and
evaluation of our operating results along the same lines that our
management uses in planning and executing our business
strategy.
Core FFO
In addition to FFO, as defined by Prologis, we also use
Core FFO. To arrive at Core FFO, we adjust
FFO, as defined by Prologis, to exclude the following
recurring and non-recurring items that we recognized directly or
our share of these items recognized by our unconsolidated entities
to the extent they are included in FFO, as defined by
Prologis:
(i)
|
gains or losses from
acquisition, contribution or sale of land or development
properties;
|
(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;
|
(v)
|
merger, acquisition
and other integration expenses; and
|
(vi)
|
expenses related to
natural disasters.
|
We believe it is appropriate to further adjust our FFO, as
defined by Prologis for certain recurring items as they were
driven by transactional activity and factors relating to the
financial and real estate markets, rather than factors specific to
the on-going operating performance of our properties or
investments. The impairment charges we have recognized were
primarily based on valuations of real estate, which had declined
due to market conditions, that we no longer expected to hold for
long-term investment. Over the last few years, we made it a
priority to strengthen our financial position by reducing our debt,
our investment in certain low yielding assets and our exposure to
foreign currency exchange fluctuations. As a result, we
changed our intent to sell or contribute certain of our real estate
properties and recorded impairment charges when we did not expect
to recover the costs of our investment. Also, we purchased portions
of our debt securities when we believed it was advantageous to do
so, which was based on market conditions, and in an effort to lower
our borrowing costs and extend our debt maturities. As a result, we
have recognized net gains or losses on the early extinguishment of
certain debt due to the financial market conditions at that time.
In addition, we and our co-investment ventures make acquisitions of
real estate and we believe the costs associated with these
transactions are transaction based and not part of our core
operations.
We analyze our operating performance primarily by the rental
income of our real estate and the revenue driven by 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. Although the adjustments we make to
arrive at Core FFO have had 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.
We use Core FFO, including by segment and region, to: (i)
evaluate our performance and the performance of our properties in
comparison to expected results and results of previous periods,
relative to resource allocation decisions; (ii) evaluate the
performance of our management; (iii) budget and forecast future
results to assist in the allocation of resources; (iv) provide
guidance to the financial markets to understand our expected
operating performance; (v) assess our operating performance as
compared to similar real estate companies and the industry in
general; and (vi) evaluate how a specific potential investment will
impact our future results. Because we make decisions with regard to
our performance with a long-term outlook, we believe it is
appropriate to remove the effects of items that we do not expect to
affect the underlying long-term performance of the properties we
own. As noted above, we believe the long-term performance of our
properties is principally driven by rental income. We believe
investors are best served if the information that is made available
to them allows them to align their analysis and evaluation of our
operating results along the same lines that our management uses in
planning and executing our business strategy.
Core AFFO
To arrive at Core AFFO, we adjust Core FFO to further exclude
our share of; (i) straight-line rents; (ii) amortization of above-
and below-market lease intangibles; (iii) recurring capital
expenditures; (iv) amortization of management contracts; (v)
amortization of debt premiums and discounts and financing costs,
net of amounts capitalized, and; (vi) stock compensation
expense.
We believe Core AFFO provides a meaningful indicator of our
ability to fund cash needs, including cash distributions to our
stockholders.
Limitations on Use of our FFO Measures
While we believe our defined 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
these limitations are:
- The current income tax expenses and acquisition costs that are
excluded from our defined 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. Further, the
amortization of capital expenditures and leasing costs necessary to
maintain the operating performance of industrial properties are not
reflected in FFO.
- Gains or losses from property acquisitions 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
acquired or disposed properties arising from changes in market
conditions.
- The deferred income tax benefits and expenses that are excluded
from our defined 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 defined 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 defined 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 merger, acquisition and other integration expenses and 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 defined FFO measures to our net earnings computed
under GAAP.
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, thereby eliminating the effects
of changes in the composition of the portfolio on performance
measures. We include the properties included in our owned and
managed portfolio that were in operation at January 1, 2013 and throughout the full periods
in both 2013 and 2014. We have removed all properties that were
disposed of to a third party from the population for both periods.
We believe the factors that impact rental income, rental expenses
and NOI in the Same Store portfolio are generally the same as for
the total operating portfolio. In order to derive an appropriate
measure of period-to-period operating performance, we remove the
effects of foreign currency exchange rate movements by using the
current exchange rate to translate from local currency into U.S.
dollars, for both periods.
Our same store measures are non-GAAP measures that are commonly
used in the real estate industry and are calculated beginning with
rental income 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- GAAP
and one Same Store NOI-Adjusted Cash. As these are non-GAAP
measures they have certain limitations as an analytical tool 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 NOI-GAAP and then to Same Store
NOI-Adjusted Cash with explanations of how these metrics are
calculated and adjusted.
The following is a reconciliation of our consolidated rental
income, rental expenses and 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
|
|
December
31,
|
|
2014
|
2013
|
Change
(%)
|
Rental
Income:
|
|
|
|
Per the Consolidated
Statements of Operations
|
$ 402,014
|
$ 379,208
|
|
Properties not
included and other adjustments (a)
|
(45,275)
|
(46,029)
|
|
Unconsolidated
Co-Investment Ventures
|
412,873
|
402,185
|
|
Same Store -
Rental Income
|
$ 769,612
|
$ 735,364
|
4.7%
|
|
|
|
|
Rental
Expense:
|
|
|
|
Per the Consolidated
Statements of Operations
|
$ 108,370
|
$ 104,936
|
|
Properties not
included and other adjustments (b)
|
(3,560)
|
(9,166)
|
|
Unconsolidated
Co-Investment Ventures
|
96,060
|
93,380
|
|
Same Store -
Rental Expense
|
$ 200,870
|
$ 189,150
|
6.2%
|
|
|
|
|
NOI-GAAP:
|
|
|
|
Per the Consolidated
Statements of Operations
|
$ 293,644
|
$ 274,272
|
|
Properties not
included and other adjustments
|
(41,715)
|
(36,863)
|
|
Unconsolidated
Co-Investment Ventures
|
316,813
|
308,805
|
|
Same Store - NOI -
GAAP
|
$ 568,742
|
$ 546,214
|
4.1%
|
|
|
|
|
NOI-Adjusted
Cash:
|
|
|
|
Same store- NOI -
GAAP
|
$ 568,742
|
$ 546,214
|
|
Adjustments
(c)
|
(3,805)
|
(5,025)
|
|
Same Store - NOI-
Adjusted Cash
|
$ 564,937
|
$ 541,189
|
4.4%
|
(a)
|
To calculate Same
Store rental income, we exclude the net termination and
renegotiation fees to allow us to evaluate the growth or decline in
each property's rental income without regard to 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)
|
In order to derive
Same Store- NOI - Adjusted Cash, we adjust Same Store- NOI- GAAP to
exclude non-cash items included in our rental income in our GAAP
financial statements, including straight line rent adjustments and
adjustments related to purchase accounts to reflect leases at fair
value at the time of acquisition.
|
Value Creation represents the value that we will create
through our development and leasing activities. We calculate value
creation by estimating the NOI that the property will generate at
Stabilization and applying an estimated stabilized capitalization
rate applicable to that property. The value creation is calculated
as the amount by which the estimated value exceeds our total
expected investment and does not include any fees or promotes we
may earn. This can also include realized economic gains from
value-added conversion properties.
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/prologis-announces-fourth-quarter-and-full-year-2014-earnings-results-300026051.html
SOURCE Prologis, Inc.