SAN FRANCISCO, April 19, 2016 /PRNewswire/ -- Prologis,
Inc. (NYSE: PLD), the global leader in logistics real estate, today
reported results for the first quarter of 2016.
HIGHLIGHTS
- Core funds from operations per diluted share was $0.61, up 24 percent year-over-year
- Prologis' share of GAAP same store NOI increased 7.4
percent
- Prologis' share of GAAP rent change on rollovers was +20.1
percent
- Short-term financing associated with the acquisition of the KTR
real estate portfolio was fully repaid, ahead of plan
"We are off to an excellent start this year," said Hamid Moghadam, chairman and CEO, Prologis.
"Operating conditions remain extremely healthy in the majority of
our markets, above our expectations. Consumption and e-commerce are
the key drivers of our growth and both continue to grow faster than
underlying economies would suggest. These factors, combined with
our focused investment strategy, have resulted in strong
operational and financial results in the first quarter."
HIGH-QUALITY
PORTFOLIO DRIVES RECORD OPERATING RESULTS
|
|
Owned &
Managed
|
1Q16
|
1Q15
|
Notes
|
Period End
Occupancy
|
96.1%
|
95.9%
|
|
Leases
Signed
|
46MSF
|
39MSF
|
Record leasing
volume
|
Customer
Retention
|
84.4%
|
86.3%
|
|
|
Prologis
Share
|
1Q16
|
1Q15
|
Notes
|
Rent Change
(GAAP)
|
20.1%
|
11.5%
|
Record led by the
U.S. at 27.3%
|
Rent Change
(Cash)
|
8.6%
|
4.7%
|
|
Same store NOI
(GAAP)
|
7.4%
|
3.7%
|
Record led by the
U.S. at 9.6%
|
Same store NOI
(Cash)
|
6.0%
|
4.2%
|
|
PRUDENT CAPITAL
DEPLOYMENT
|
|
Prologis
Share
|
1Q16
|
Notes
|
Building
Acquisitions
|
$46M
|
|
Weighted avg stabilized cap
rate
|
6.6%
|
|
Development
Stabilizations
|
$468M
|
63% outside the
U.S.
|
Estimated weighted avg
yield
|
6.8%
|
|
Estimated weighted avg
margin
|
26.8%
|
|
Estimated value
creation
|
$126M
|
|
Development
Starts
|
$193M
|
|
Estimated weighted avg
margin
|
20.3%
|
|
Estimated value
creation
|
$39M
|
|
%
Build-to-suit
|
41.5%
|
|
Total Dispositions
(Buildings and Land) and Contributions
|
$617M
|
Excludes $198M of
cash received from the installment sale related to
Facebook
|
Weighted avg
stabilized cap rate
|
5.7%
|
Excludes land and
other real estate
|
CONTINUED STRENGTHENING OF FINANCIAL POSITION
During the first quarter, Prologis completed $1.2 billion of refinancings and fully retired
the $400 million short-term financing
associated with the acquisition of the KTR real estate portfolio.
Subsequent to quarter-end, the company recast its Global Line of
Credit which now matures in 2021; the new facility was increased by
$640 million to $3.0 billion and pricing decreased by 10 basis
points to 90 basis points over LIBOR as of the closing of the
line.
"With the recast of our credit facility last week and our
existing yen facility, we've increased our total line capacity to
$3.4 billion at attractive pricing as
well as enhanced our already significant liquidity position," said
Thomas S. Olinger, chief financial
officer, Prologis. "During the quarter, we received positive
outlook revisions to our Baa1/BBB+ credit ratings from Moody's and
S&P, which support the continued upward trajectory of our
balance sheet."
GAAP NET EARNINGS
Net earnings per diluted
share was $0.39 for the first quarter
compared with $0.65 for the same
period in 2015.
GUIDANCE UPDATED
FOR 2016
|
|
Per diluted
share
|
|
GAAP Net
Earnings
|
$0.87 to
$0.95
|
Core FFO
|
$2.50 to
$2.60
|
AFFO
|
$2.40 to
$2.50
|
|
Operations
|
Year-end
occupancy
|
96.0% to
97.0%
|
GAAP Same store NOI –
Prologis share
|
4.0% to
4.5%
|
|
Other Assumptions
(in millions)
|
Strategic capital
revenue
|
$180 to
$190
|
Net promote
income
|
$90 to
$100
|
General &
administrative expense*
|
$218 to
$228
|
Realized development
gains
|
$150 to
$200
|
|
|
Annualized first
quarter 2016 dividend
|
$1.68
|
*Reduction from
original 2016 guidance due to a reclassification of $17 million to
strategic capital expenses
|
|
Capital Deployment
(in millions)
|
Development
stabilizations (80% Prologis share)
|
$2,000 to
$2,200
|
Development starts
(80% Prologis share)
|
$1,800 to
$2,300
|
Building acquisitions
(40% Prologis share)
|
$400 to
$700
|
Building and land
dispositions (75% Prologis share)
|
$1,700 to
$2,200
|
Building
contributions (75% Prologis share, net of retained
ownership)
|
$900 to
$1,200
|
The Core FFO and earnings guidance described above excludes any
potential future gains (losses) recognized from real estate
transactions. In reconciling from net earnings to Core FFO,
Prologis makes certain adjustments, including but not limited to
real estate depreciation and amortization expense, gains (losses)
recognized from real estate transactions and early extinguishment
of debt, acquisition costs, 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 2016 relates predominantly to these
items.
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, April 19, 2016 at
12 p.m. U.S. Eastern Time.
- Live webcast at http://ir.prologis.com by clicking
Investors>Investor Events and Presentations
- Dial in: +1 877-256-7020 or +1 973-409-9692 and enter Passcode
74787274.
A telephonic replay will be available April 19-26 at +1 (855) 859-2056 (from
the United States and Canada) or +1 (404) 537-3406 (from all other
countries) using conference code 74787274. 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 March 31, 2016, 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 667 million square feet (62 million
square meters) in 20 countries. Prologis lease 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.
dollars in
millions, except per share/unit data
|
Three Months ended
March 31,
|
|
2016
|
2015
|
|
Revenues
|
$ 606
|
$ 463
|
|
Revenues - Prologis
share
|
677
|
579
|
|
Net earnings
attributable to common stockholders
|
208
|
345
|
|
Core FFO
|
330
|
254
|
|
AFFO
|
346
|
211
|
|
Adjusted
EBITDA
|
549
|
367
|
|
Estimated value
creation from development starts - Prologis share
|
39
|
46
|
|
Common stock
dividends and common limited partnership unit
distributions
|
230
|
189
|
|
|
|
|
|
|
|
Per common share -
diluted:
|
|
|
|
|
Net earnings
attributable to common stockholders
|
$0.39
|
$0.65
|
|
|
Core FFO
|
0.61
|
0.49
|
|
|
AFFO
|
0.64
|
0.41
|
|
|
Business line
reporting:
|
|
|
|
|
|
Real estate
operations
|
0.57
|
0.45
|
|
|
|
Strategic
capital
|
0.04
|
0.04
|
|
|
|
Core
FFO
|
0.61
|
0.49
|
|
|
|
Realized development
gains, net of taxes
|
0.16
|
0.01
|
|
Dividends and
distributions per common share/unit
|
0.42
|
0.36
|
in
thousands
|
|
March 31,
2016
|
December 31,
2015
|
Assets:
|
|
|
|
|
Investments in real
estate properties:
|
|
|
|
|
|
Operating
properties
|
|
$ 23,788,600
|
$ 23,735,745
|
|
|
Development
portfolio
|
|
1,923,362
|
1,872,903
|
|
|
Land
|
|
1,341,600
|
1,359,794
|
|
|
Other real estate
investments
|
|
575,118
|
552,926
|
|
|
|
|
|
|
27,628,680
|
27,521,368
|
|
|
Less accumulated
depreciation
|
|
3,424,143
|
3,274,284
|
|
|
|
|
Net investments in
real estate properties
|
|
24,204,537
|
24,247,084
|
|
Investments in and
advances to unconsolidated entities
|
|
4,866,664
|
4,755,620
|
|
Assets held for
sale
|
|
431,332
|
378,423
|
|
Notes receivable
backed by real estate
|
|
37,550
|
235,050
|
|
|
|
|
Net investments in
real estate
|
|
29,540,083
|
29,616,177
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
369,737
|
264,080
|
|
Other
assets
|
|
1,465,928
|
1,514,510
|
|
|
|
|
Total
assets
|
|
$ 31,375,748
|
$ 31,394,767
|
|
|
|
|
|
|
|
|
Liabilities and
Equity:
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
Debt
|
|
$ 11,687,171
|
$ 11,626,831
|
|
|
Accounts payable,
accrued expenses and other liabilities
|
|
1,347,953
|
1,347,100
|
|
|
|
|
Total
liabilities
|
|
13,035,124
|
12,973,931
|
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
Preferred
stock
|
|
78,235
|
78,235
|
|
|
|
Common
stock
|
|
5,251
|
5,245
|
|
|
|
Additional paid-in
capital
|
|
19,311,795
|
19,302,367
|
|
|
|
Accumulated other
comprehensive loss
|
|
(813,900)
|
(791,429)
|
|
|
|
Distributions in
excess of net earnings
|
|
(3,948,720)
|
(3,926,483)
|
|
|
|
|
Total stockholders'
equity
|
|
14,632,661
|
14,667,935
|
|
|
Noncontrolling
interests
|
|
3,264,088
|
3,320,227
|
|
|
Noncontrolling
interests - limited partnership unitholders
|
|
443,875
|
432,674
|
|
|
|
|
Total
equity
|
|
18,340,624
|
18,420,836
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
and equity
|
|
$ 31,375,748
|
$ 31,394,767
|
in thousands, except
per share amounts
|
Three Months
Ended
|
|
|
|
|
March
31,
|
|
|
|
|
2016
|
2015
|
Revenues:
|
|
|
|
Rental
|
$ 554,116
|
$ 418,802
|
|
Strategic
capital
|
49,666
|
42,025
|
|
Development
management and other
|
2,518
|
2,020
|
|
|
Total
revenues
|
606,300
|
462,847
|
|
|
|
|
|
|
Expenses:
|
|
|
|
Rental
|
146,581
|
127,095
|
|
Strategic
capital
|
25,293
|
25,182
|
|
General and
administrative
|
50,543
|
51,306
|
|
Depreciation and
amortization
|
250,000
|
169,808
|
|
Other
|
4,685
|
5,575
|
|
|
Total
expenses
|
477,102
|
378,966
|
|
|
|
|
|
|
Operating
income
|
129,198
|
83,881
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
Earnings from
unconsolidated entities, net
|
58,311
|
31,042
|
|
Interest
expense
|
(80,812)
|
(68,761)
|
|
Gains on dispositions
of development properties and land, net
|
93,985
|
831
|
|
Gains on dispositions
of real estate, net (excluding development properties and
land)
|
50,332
|
276,884
|
|
Foreign currency and
derivative gains (losses) and interest and other income (expense),
net
|
(11,620)
|
45,615
|
|
Losses on early
extinguishment of debt, net
|
(1,052)
|
(16,289)
|
|
|
Total other
income
|
109,144
|
269,322
|
|
|
|
|
|
|
Earnings before
income taxes
|
238,342
|
353,203
|
|
Current income tax
expense
|
(16,156)
|
(839)
|
|
Deferred income tax
benefit (expense)
|
619
|
(1,052)
|
Consolidated net
earnings
|
222,805
|
351,312
|
Net earnings
attributable to noncontrolling interests
|
(13,075)
|
(4,436)
|
Net earnings
attributable to controlling interests
|
209,730
|
346,876
|
Preferred stock
dividends
|
(1,689)
|
(1,670)
|
Net earnings
attributable to common stockholders
|
$ 208,041
|
$ 345,206
|
Weighted average
common shares outstanding - Diluted
|
543,562
|
529,022
|
Net earnings per
share attributable to common stockholders - Diluted
|
$ 0.39
|
$ 0.65
|
in
thousands
|
Three Months
Ended
|
|
|
|
|
March
31,
|
|
|
|
|
2016
|
2015
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to common stockholders
|
$ 208,041
|
$ 345,206
|
Add (deduct) NAREIT
defined adjustments:
|
|
|
|
Real estate related
depreciation and amortization
|
243,592
|
164,251
|
|
Gains on dispositions
of real estate, net (excluding development properties and
land)
|
(50,332)
|
(276,884)
|
|
Reconciling items
related to noncontrolling interests
|
(40,275)
|
(11,512)
|
|
Our share of
reconciling items related to unconsolidated co-investment
ventures
|
40,000
|
47,372
|
|
Our share of
reconciling items related to other unconsolidated
ventures
|
(2,506)
|
1,721
|
Subtotal-NAREIT
defined FFO
|
$ 398,520
|
$ 270,154
|
|
|
|
|
|
|
Add (deduct) our
defined adjustments:
|
|
|
|
Unrealized foreign
currency and derivative losses (gains), net
|
15,328
|
(32,860)
|
|
Deferred income tax
benefit (expense)
|
(619)
|
1,052
|
|
Reconciling items
related to noncontrolling interests
|
483
|
(1,568)
|
|
Our share of
reconciling items related to unconsolidated co-investment
ventures
|
(1,974)
|
1,949
|
FFO, as defined by
Prologis
|
$ 411,738
|
$ 238,727
|
|
|
|
|
|
|
Adjustments to arrive
at Core FFO:
|
|
|
|
Net gain on
dispositions of development properties and land, net of
taxes
|
(85,662)
|
(3,234)
|
|
Acquisition
expenses
|
1,261
|
1,304
|
|
Losses on early
extinguishment of debt, net
|
1,052
|
16,289
|
|
Reconciling items
related to noncontrolling interests
|
90
|
(2,029)
|
|
Our share of
reconciling items related to unconsolidated entities
|
1,154
|
3,322
|
Core
FFO
|
$ 329,633
|
$ 254,379
|
|
|
|
|
|
|
Adjustments to arrive
at Adjusted FFO ("AFFO"), including our share of unconsolidated
co-investment ventures less third party share of consolidated
entities:
|
|
|
|
Net gains on
dispositions of development properties and land, net of
taxes
|
85,662
|
3,234
|
|
Straight-lined rents
and amortization of lease intangibles
|
(31,561)
|
(4,832)
|
|
Property
improvements
|
(7,257)
|
(11,470)
|
|
Tenant
improvements
|
(20,289)
|
(18,334)
|
|
Leasing
commissions
|
(21,280)
|
(12,426)
|
|
Amortization of
management contracts
|
916
|
944
|
|
Amortization of debt
premiums and financing costs, net
|
(5,391)
|
(6,419)
|
|
Stock compensation
expense
|
12,465
|
13,234
|
|
Reconciling items
related to noncontrolling interests
|
17,441
|
7,782
|
|
Our share of
reconciling items related to unconsolidated co-investment
ventures
|
(14,664)
|
(14,768)
|
AFFO
|
|
|
|
$ 345,675
|
$ 211,324
|
|
|
|
|
|
|
Common stock
dividends and common limited partnership unit
distributions
|
$ 230,279
|
$ 188,915
|
Payout ratio -
AFFO
|
67%
|
89%
|
Payout ratio - AFFO,
excluding development gains
|
89%
|
91%
|
in
thousands
|
Three Months
Ended
|
|
|
|
|
March
31,
|
|
|
|
|
2016
|
2015
|
|
|
|
|
|
|
Net earnings
attributable to common stockholders
|
$ 208,041
|
$ 345,206
|
|
|
Gains on dispositions
of real estate, net (excluding development properties and
land)
|
(50,332)
|
(276,884)
|
|
|
Depreciation and
amortization expenses
|
250,000
|
169,808
|
|
|
Interest
expense
|
80,812
|
68,761
|
|
|
Losses on early
extinguishment of debt, net
|
1,052
|
16,289
|
|
|
Current and deferred
income tax expense, net
|
15,537
|
1,891
|
|
|
Reconciling items
related to noncontrolling interest- limited partnership
unitholders
|
6,234
|
1,282
|
|
|
Pro forma
adjustments
|
(5,935)
|
740
|
|
|
Preferred stock
dividends
|
1,689
|
1,670
|
|
|
Unrealized foreign
currency and derivative losses (gains), net
|
15,328
|
(32,860)
|
|
|
Stock compensation
expense
|
12,465
|
13,234
|
|
|
Acquisition
expenses
|
1,261
|
1,304
|
Adjusted EBITDA,
consolidated
|
$ 536,152
|
$ 310,441
|
|
|
|
|
|
|
Our share of
reconciling items from unconsolidated entities less third party
share of consolidated entities:
|
|
|
|
|
Gains on dispositions
of real estate, net (excluding development properties and
land)
|
(11,339)
|
5
|
|
|
Depreciation and
amortization expenses
|
5,216
|
38,181
|
|
|
Interest
expense
|
10,158
|
13,773
|
|
|
Losses on early
extinguishment of debt, net
|
1,544
|
342
|
|
|
Current income tax
expense
|
5,577
|
2,189
|
|
|
Unrealized foreign
currency and derivative losses (gains) and deferred income tax
expense, net
|
1,491
|
381
|
|
|
Acquisition
expenses
|
425
|
1,966
|
Adjusted
EBITDA
|
$ 549,224
|
$ 367,278
|
Adjusted EBITDA. We use Adjusted EBITDA to measure our
operating performance. We calculate Adjusted EBITDA beginning with
consolidated net earnings (loss) attributable to common
stockholders and removing the effect of interest, income taxes,
depreciation and amortization, impairment charges, third party
acquisition expenses related to the acquisition of real estate,
gains or losses from the acquisition or disposition of investments
in real estate (other than from land and development properties),
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 non-cash charges or gains (such as stock based compensation
and unrealized gains or losses on foreign currency and derivative
activity). We make adjustments to reflect our economic ownership in
each entity in which we invest, whether consolidated or
unconsolidated.
We consider Adjusted EBITDA to provide investors relevant and
useful information because it permits investors to view our
operating performance 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), items that affect comparability, and
other significant non-cash items. We also include a pro forma
adjustment in Adjusted EBITDA to reflect a full period of NOI on
the operating properties we acquire and stabilize and to remove NOI
on properties we dispose of during the quarter assuming the
transaction occurred at the beginning of the quarter. By
excluding interest expense, Adjusted EBITDA allows investors to
measure our operating performance independent of our capital
structure and indebtedness and, therefore, allows for a more
meaningful comparison of our operating performance to that of other
companies, both in the real estate industry and in other
industries. Gains and losses on the early extinguishment of debt
generally include the costs of repurchasing debt securities. While
not infrequent or unusual in nature, these items 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.
We believe that Adjusted EBITDA helps investors to analyze our
ability to meet interest payment obligations and to make quarterly
preferred share dividends. We believe that investors should
consider Adjusted EBITDA in conjunction with net earnings and the
other required Generally Accepted Accounting Principles ("GAAP")
measures of our performance to improve their understanding of our
operating results, and to make more meaningful comparisons of our
performance against other companies. By using Adjusted EBITDA, an
investor is assessing the earnings generated by our operations but
not taking into account the eliminated expenses or gains incurred
in connection with such operations. As a result, Adjusted
EBITDA has limitations as an analytical tool and should be used in
conjunction with our GAAP presentations. Adjusted EBITDA does not
reflect 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.
While EBITDA is a relevant and widely used measure of operating
performance, it does not represent net income as defined by GAAP
and it should not be considered as an alternative to those
indicators in evaluating operating performance or liquidity.
Further, our computation of Adjusted EBITDA may not be comparable
to EBITDA reported by other companies. 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 of
Adjusted EBITDA to consolidated net earnings (loss), a GAAP
measurement.
Business Line Reporting. Core FFO and development gains
are generated by our three lines of business: (i) real estate
operations; (ii) strategic capital; and (iii) development.
Real estate operations 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 third party share of the asset management
related fees we earn from our co-investment ventures (both
consolidated and unconsolidated) less costs directly associated to
our strategic capital group, plus development management
income. 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 calculation of per share
amounts. 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
|
|
|
March
31,
|
|
|
|
2016
|
|
|
2015
|
|
Net
earnings
|
|
|
|
|
|
|
Net
earnings
|
$
|
208,041
|
|
$
|
345,206
|
|
Noncontrolling
interest attributable to exchangeable limited partnership units
|
|
6,609
|
|
|
1,650
|
|
Gains, net of
expenses, associated with exchangeable debt assumed exchanged
|
|
-
|
|
|
(1,614)
|
|
Adjusted net
earnings - Diluted
|
$
|
214,650
|
|
$
|
345,242
|
|
Weighted average
common shares outstanding - Basic
|
|
524,205
|
|
|
514,022
|
|
Incremental weighted
average effect on exchange of limited partnership units
|
|
17,543
|
|
|
3,794
|
|
Incremental weighted
average effect of stock awards
|
|
1,814
|
|
|
2,394
|
|
Incremental weighted
average effect on exchangeable debt assumed exchanged (a)
|
|
-
|
|
|
8,812
|
|
Weighted average
common shares outstanding - Diluted
|
|
543,562
|
|
|
529,022
|
|
Net earnings per
share - Basic
|
$
|
0.40
|
|
$
|
0.67
|
|
Net earnings per
share - Diluted
|
$
|
0.39
|
|
$
|
0.65
|
|
Core
FFO
|
|
|
|
|
|
|
Core FFO
|
$
|
329,633
|
|
$
|
254,379
|
|
Noncontrolling
interest attributable to exchangeable
limited partnership
units
|
|
46
|
|
|
881
|
|
Interest expense on
exchangeable debt assumed exchanged
|
|
-
|
|
|
3,506
|
|
Core FFO -
Diluted
|
$
|
329,679
|
|
$
|
258,766
|
|
Weighted average
common shares outstanding - Basic
|
|
524,205
|
|
|
514,022
|
|
Incremental weighted
average effect on exchange of limited partnership units
|
|
15,877
|
|
|
3,794
|
|
Incremental weighted
average effect of stock awards
|
|
1,814
|
|
|
2,394
|
|
Incremental weighted
average effect on exchangeable debt assumed exchanged (a)
|
|
-
|
|
|
8,812
|
|
Weighted average
common shares outstanding - Diluted
|
|
541,896
|
|
|
529,022
|
|
Core FFO per share
- Diluted
|
$
|
0.61
|
|
$
|
0.49
|
|
AFFO
|
$
|
345,675
|
|
$
|
211,324
|
|
Noncontrolling
interest attributable to exchangeable limited partnership units
|
|
1,067
|
|
|
60
|
|
Interest expense on
exchangeable debt assumed exchanged
|
|
-
|
|
|
3,113
|
|
AFFO -
Diluted
|
$
|
346,742
|
|
$
|
214,497
|
|
Weighted average
common shares outstanding - Basic
|
|
524,205
|
|
|
514,022
|
|
Incremental weighted
average effect on exchange of limited partnership units
|
|
17,543
|
|
|
2,103
|
|
Incremental weighted
average effect of stock awards
|
|
1,814
|
|
|
2,394
|
|
Incremental weighted
average effect on exchangeable debt assumed exchanged (a)
|
|
-
|
|
|
8,812
|
|
Weighted average
common shares outstanding - Diluted
|
|
543,562
|
|
|
527,331
|
|
AFFO per share -
Diluted
|
$
|
0.64
|
|
$
|
0.41
|
|
|
|
(a)
|
In March 2015, the
exchangeable debt was settled primarily through the issuance of
common stock. The adjustment in 2015 assumes the exchange occurred
on January 1, 2015.
|
FFO, as defined by Prologis attributable to common
stockholders/unitholders ("FFO, as defined by Prologis"); Core FFO
attributable to common stockholders/unitholders ("Core FFO"); AFFO
(collectively referred to as "FFO"). FFO is a financial measure
that is not determined in accordance with GAAP, but is a 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 that FFO is only meaningful when
it is used in conjunction with net earnings computed under GAAP.
Furthermore, we believe our consolidated financial statements,
prepared in accordance with GAAP, provide the most meaningful
picture of our financial condition.
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. We exclude depreciation from our
unconsolidated entities and the third parties' share of our
consolidated ventures.
|
(ii)
|
REITs were created 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 and
consolidated entities, in our definition of FFO. We exclude the
gain on revaluation of equity investments upon acquisition of a
controlling interest from 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 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 third party ownership
share of the applicable reconciling items based on average
ownership percentage for the applicable periods.
We use these FFO measures, including by segment and region, to:
(i) evaluate our performance and the performance of our properties
in comparison with 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 with 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 revenue. While not
infrequent or unusual, these additional items we exclude in
calculating FFO, as defined by Prologis, defined below, 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 associated with derivative financial
instruments.
|
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 nonrecurring items that we recognized directly in
FFO, as defined by Prologis:
(i)
|
gains or losses from
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 and redemption and repurchase of
preferred stock; and
|
(v)
|
expenses related to
natural disasters.
|
AFFO
To arrive at AFFO, we adjust Core FFO to include realized gains
from the disposition of land and development properties and our
share of recurring capital expenditures and exclude our share of
the impact of; (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 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.
We analyze our operating performance primarily by the rental
revenue 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 these items discussed above 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 and AFFO, 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
revenue. 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.
As discussed above, we believe AFFO is a supplemental measure of
operating performance, although we also believe AFFO provides a
meaningful indicator of our ability to fund our distributions to
our stockholders.
Limitations on the 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 we have or may pay.
- Depreciation and amortization of real estate assets are
economic costs that are excluded from FFO. Certain of our FFO
measures are limited, as not all 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 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 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.
Prologis Share represents our proportionate economic
ownership of each entity included in our total owned and managed
portfolio whether consolidated or unconsolidated.
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 (including development
properties that have been completed and available for lease) at
January 1, 2015 and throughout the
full periods in both 2015 and 2016. 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
|
|
|
March
31,
|
|
|
2016
|
|
2015
|
|
Change
(%)
|
|
Rental
Revenue:
|
|
|
|
|
|
|
|
|
|
Rental
Revenue
|
$
|
437,104
|
|
$
|
324,547
|
|
|
|
|
Rental
Recoveries
|
|
117,012
|
|
|
94,255
|
|
|
|
|
Rental Revenue per
the Consolidated Statements of Operations
|
|
554,116
|
|
|
418,802
|
|
|
|
|
Properties not
included and other adjustments (a)
|
|
(160,038)
|
|
|
(40,293)
|
|
|
|
|
Unconsolidated
Co-Investment Ventures
|
|
441,104
|
|
|
427,657
|
|
|
|
|
Same Store -
Rental Income
|
$
|
835,182
|
|
$
|
806,166
|
|
|
3.6
|
%
|
|
|
|
|
|
|
|
|
|
|
Rental
Expense:
|
|
|
|
|
|
|
|
|
|
Per the Consolidated
Statements of Operations
|
$
|
146,581
|
|
$
|
126,934
|
|
|
|
|
Properties not
included and other adjustments (b)
|
|
(30,270)
|
|
|
(6,418)
|
|
|
|
|
Unconsolidated
Co-Investment Ventures
|
|
101,059
|
|
|
100,625
|
|
|
|
|
Same Store -
Rental Expense
|
$
|
217,370
|
|
$
|
221,141
|
|
|
-1.7
|
%
|
|
|
|
|
|
|
|
|
|
|
NOI-GAAP:
|
|
|
|
|
|
|
|
|
|
Per the Consolidated
Statements of Operations
|
$
|
407,535
|
|
$
|
291,868
|
|
|
|
|
Properties not
included and other adjustments
|
|
(129,768)
|
|
|
(33,875)
|
|
|
|
|
Unconsolidated
Co-Investment Ventures
|
|
340,045
|
|
|
327,032
|
|
|
|
|
Same Store - NOI -
GAAP
|
$
|
617,812
|
|
$
|
585,025
|
|
|
5.6
|
%
|
Same Store - NOI -
GAAP - Prologis Share (c)
|
$
|
363,527
|
|
$
|
338,396
|
|
|
7.4
|
%
|
|
|
|
|
|
|
|
|
|
|
NOI-Adjusted
Cash:
|
|
|
|
|
|
|
|
|
|
Same store- NOI -
GAAP
|
$
|
617,812
|
|
$
|
585,025
|
|
|
|
|
Straight-line rent
adjustments (d)
|
$
|
(16,628)
|
|
$
|
(17,635)
|
|
|
|
|
Fair value lease
adjustments (d)
|
|
(1,075)
|
|
|
4,781
|
|
|
|
|
Same Store - NOI-
Adjusted Cash
|
$
|
600,109
|
|
$
|
572,171
|
|
|
4.9
|
%
|
Same Store - NOI-
Adjusted Cash - Prologis Share (c)
|
$
|
353,027
|
|
$
|
333,036
|
|
|
6.0
|
%
|
|
|
(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)
|
Prologis share of
Same Store is calculated using the underlying building information
from the Same Store NOI GAAP and Adjusted Cash calculations and
applying our ownership percentage as of March 31, 2016 to the NOI
of each building for both periods.
|
|
|
(d)
|
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 accounting 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 stabilized NOI that the property will
generate and applying a stabilized capitalization rate applicable
to that property. The 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. Value Creation for our
value-added conversion properties includes the realized economic
gain.
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visit:http://www.prnewswire.com/news-releases/prologis-reports-first-quarter-2016-earnings-results-300253563.html
SOURCE Prologis, Inc.