SAN FRANCISCO, Jan. 24, 2017 /PRNewswire/ -- Prologis, Inc.
(NYSE: PLD), the global leader in logistics real estate, today
reported results for the fourth quarter and full year 2016.
Net earnings per diluted share was $0.82 for the quarter and $2.27 for the year compared with $0.23 and $1.64 for
the same period in 2015. The year-over-year increase is due
primarily to improved operating conditions and higher net promote
income. Core funds from operations per diluted share* was
$0.63 for the quarter and
$2.57 for the year compared with
$0.64 and $2.23 for the same period in 2015. The 15 percent
annual year-over-year increase reflects improved operating
conditions and higher net promote income.
"The fourth quarter represented the culmination of Vision 2016
and our results are a testament to the strength of our global
portfolio, setting a new high-water mark for performance," said
Hamid R. Moghadam, chairman and CEO,
Prologis. "The team delivered record occupancy with double-digit
rent growth, above-average value creation and outsized promotes
from our strategic capital ventures."
Moghadam added, "I believe we are now at the cusp of yet another
important market transition to a phase for which Prologis is
ideally positioned. We entered 2017 with significant embedded
earnings potential from the combination of rolling in-place leases
to market and building out our land bank in the world's premier
consumption markets."
FOCUS ON QUALITY LOCATIONS DRIVES POWERFUL OPERATING
PERFORMANCE
Owned &
Managed
|
4Q16
|
4Q15
|
Notes
|
Period End
Occupancy
|
97.1%
|
96.9%
|
Ended 2016 with
record global occupancy
|
Leases
Signed
|
39MSF
|
40MSF
|
More than 180MSF
leased in 2016
|
Customer
Retention
|
79.8%
|
85.9%
|
|
|
Prologis
Share
|
4Q16
|
4Q15
|
Notes
|
Net Effective Rent
Change
|
16.0%
|
12.4%
|
Led by the U.S. at
23.2%
|
Cash Rent
Change
|
7.0%
|
2.9%
|
|
Net Effective Same
Store NOI*
|
3.2%
|
6.6%
|
5.6% for full-year
2016, led by the U.S. at 6.9%
|
Cash Same Store
NOI*
|
4.4%
|
4.5%
|
|
DEVELOPMENT BUSINESS CONTINUES TO ACHIEVE STRONG
MARGINS
Prologis Share
(Millions of $)
|
4Q16
|
2016
|
Building
Acquisitions
|
$127
|
$247
|
Weighted avg
stabilized cap rate
|
5.2%
|
5.7%
|
Development
Stabilizations
|
$674
|
$2,155
|
Estimated weighted avg
yield
|
6.5%
|
6.8%
|
Estimated weighted avg
margin
|
23.9%
|
26.5%
|
Estimated value
creation
|
$161
|
$571
|
Development
Starts
|
$717
|
$1,809
|
Estimated weighted avg
margin
|
23.3%
|
20.2%
|
Estimated value
creation
|
$167
|
$365
|
%
Build-to-suit
|
34.3%
|
41.7%
|
Total Dispositions
(Buildings and Land) and Contributions
|
$934
|
$2,626
|
Weighted avg
stabilized cap rate (excluding land and other real
estate)
|
5.4%
|
5.8%
|
"We continue to allocate capital to profitable development
projects on our strategic land bank," said Michael Curless, chief investment officer,
Prologis. "Record low vacancies in most of our markets combined
with the need for faster delivery times are resulting in strong
demand for development product from our customers, who require
well-located logistics space to fulfill their needs."
UPGRADE TO A-/A3 RATING UNDERSCORES FORTRESS BALANCE
SHEET
During the fourth quarter, Moody's and S&P
upgraded Prologis' credit rating to A3 and A-, respectively.
"These upgrades are an important achievement for our company,"
said Thomas S. Olinger, chief
financial officer, Prologis. "They are an acknowledgement of the
strength of our balance sheet and our prudent financial management.
The upgrades also reflect the quality of our global portfolio, our
industry-leading operating performance and our growth
potential."
Olinger added, "We ended the year with the strongest balance
sheet in the company's history and we have liquidity of more than
$4 billion."
2017 GUIDANCE
Earnings (per
diluted share)
|
Net
Earnings
|
$1.55 to
$1.70
|
Core FFO*
|
$2.60 to
$2.70
|
Operations
|
Year-end
occupancy
|
95.5% to
96.5%
|
Net Effective Same
Store NOI – Prologis share*
|
4.0% to
5.0%
|
Other Assumptions
(in millions)
|
Strategic capital
revenues
|
$205 to
$215
|
Net promote
income
|
$35 to $45
|
General &
administrative expenses
|
$210 to
$220
|
Realized development
gains
|
$250 to
$300
|
Capital Deployment
(in millions)
|
Prologis
Share
|
Owned and
Managed
|
Development
stabilizations
|
$1,600 to
$2,000
|
$1,900 to
$2,300
|
Development
starts
|
$1,600 to
$1,900
|
$2,000 to
$2,400
|
Building
acquisitions
|
$100 to
$300
|
$200 to
$500
|
Building and land
dispositions
|
$850 to
$1,100
|
$1,300 to
$1,700
|
Building
contributions
|
$850 to
$1,100
|
$1,000 to
$1,300
|
The earnings guidance described above includes potential future
gains (losses) recognized from real estate transactions but
excludes any future foreign currency or derivative gains or losses.
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 2017 relates predominantly to these items.
Please refer to our fourth quarter Supplemental Information, which
is available on our Investor Relations website at
www.ir.prologis.com and on the SEC's website at www.sec.gov for a
definition of Core FFO* and other non-GAAP measures used by
Prologis, along with reconciliations of these items to the closest
GAAP measure for our results and guidance.
WEBCAST & CONFERENCE CALL INFORMATION
Prologis will host a live webcast and conference call to discuss
quarterly results, current market conditions and future outlook.
Here are the event details:
- Tuesday, January 24, 2017, at
12 p.m. U.S. Eastern Time.
- Live webcast at http://ir.prologis.com by clicking
Investors>Investor Events and Presentations.
- Dial in: +1 877-447-8218 or +1 973-409-9692 and enter Passcode
33699077.
A telephonic replay will be available January 24-January 31 at +1 (855) 859-2056 (from
the United States and Canada) or +1 (404) 537-3406 (from all other
countries) using conference code 33699077. 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 December 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 676 million
square feet (63 million square meters) in 20 countries. Prologis
leases modern distribution facilities to a diverse base of
approximately 5,200 customers across two major categories:
business-to-business and retail/online fulfillment.
FORWARD-LOOKING STATEMENTS
The statements in
this document that are not historical facts are forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. These forward-looking statements are based on
current expectations, estimates and projections about the industry
and markets in which we operate as well as management's beliefs and
assumptions. Such statements involve uncertainties that could
significantly impact our financial results. Words such as
"expects," "anticipates," "intends," "plans," "believes," "seeks,"
"estimates" and variations of such words and similar expressions
are intended to identify such forward-looking statements, which
generally are not historical in nature. All statements that
address operating performance, events or developments that we
expect or anticipate will occur in the future — including
statements relating to rent and occupancy growth, development
activity and changes in sales or contribution volume of properties,
disposition activity, general conditions in the geographic areas
where we operate, our debt, capital structure and financial
position, our ability to form new co-investment ventures and the
availability of capital in existing or new co-investment ventures —
are forward-looking statements. These statements are not guarantees
of future performance and involve certain risks, uncertainties and
assumptions that are difficult to predict. Although we believe the
expectations reflected in any forward-looking statements are based
on reasonable assumptions, we can give no assurance that our
expectations will be attained and therefore, actual outcomes and
results may differ materially from what is expressed or forecasted
in such forward-looking statements. Some of the factors that may
affect outcomes and results include, but are not limited to: (i)
national, international, regional and local economic climates, (ii)
changes in financial markets, interest rates and foreign currency
exchange rates, (iii) increased or unanticipated competition for
our properties, (iv) risks associated with acquisitions,
dispositions and development of properties, (v) maintenance of real
estate investment trust status, tax structuring and income tax
rates (vi) availability of financing and capital, the levels of
debt that we maintain and our credit ratings, (vii) risks related
to our investments in our co-investment ventures, including our
ability to establish new co-investment ventures and funds, (viii)
risks of doing business internationally, including currency risks,
(ix) environmental uncertainties, including risks of natural
disasters, and (x) those additional factors discussed in reports
filed with the Securities and Exchange Commission by us under the
heading "Risk Factors." We undertake no duty to update any
forward-looking statements appearing in this document.
*This is a non-GAAP financial measure. See the Notes and
Definitions in our supplemental information for further explanation
and a reconciliation to the most directly comparable GAAP
measure.
dollars in
millions, except per share/unit data
|
Three Months
ended
December 31,
|
|
Twelve Months
ended
December 31,
|
|
2016
|
2015
|
|
2016
|
2015
|
|
Revenues
|
$ 620
|
$ 643
|
|
$ 2,533
|
$ 2,197
|
|
Net earnings
attributable to common stockholders
|
441
|
118
|
|
1,203
|
863
|
|
Core FFO*
|
345
|
346
|
|
1,400
|
1,181
|
|
AFFO*
|
431
|
301
|
|
1,405
|
1,160
|
|
Adjusted
EBITDA*
|
641
|
515
|
|
2,223
|
1,936
|
|
Estimated value
creation from development starts - Prologis share
|
167
|
115
|
|
365
|
380
|
|
Common stock
dividends and common limited partnership unit
distributions
|
231
|
219
|
|
923
|
807
|
|
|
|
|
|
|
|
|
|
|
Per common share -
diluted:
|
|
|
|
|
|
|
|
Net earnings
attributable to common stockholders
|
$0.82
|
$0.23
|
|
$
2.27
|
$
1.64
|
|
|
Core FFO*
|
0.63
|
0.64
|
|
2.57
|
2.23
|
|
|
Business line
reporting:
|
|
|
|
|
|
|
|
|
Real estate
operations*
|
0.57
|
0.55
|
|
2.22
|
2.02
|
|
|
|
Strategic
capital*
|
0.06
|
0.09
|
|
0.35
|
0.21
|
|
|
|
Core
FFO*
|
0.63
|
0.64
|
|
2.57
|
2.23
|
|
|
|
Realized development
gains, net of taxes
|
0.30
|
0.10
|
|
0.57
|
0.49
|
|
Dividends and
distributions per common share/unit
|
0.42
|
0.40
|
|
1.68
|
1.52
|
|
|
|
|
|
* This is a
non-GAAP financial measure, please see below for further
explanation.
|
in
thousands
|
|
December 31,
2016
|
|
September 30,
2016
|
|
December 31,
2015
|
Assets:
|
|
|
|
|
|
|
|
Investments in real
estate properties:
|
|
|
|
|
|
|
|
|
Operating
properties
|
|
$
23,943,457
|
|
$
23,876,290
|
|
$
23,735,745
|
|
|
Development
portfolio
|
|
1,432,082
|
|
1,809,002
|
|
1,872,903
|
|
|
Land
|
|
1,218,904
|
|
1,352,600
|
|
1,359,794
|
|
|
Other real estate
investments
|
|
524,887
|
|
532,812
|
|
552,926
|
|
|
|
|
|
|
27,119,330
|
|
27,570,704
|
|
27,521,368
|
|
|
Less accumulated
depreciation
|
|
3,758,372
|
|
3,638,688
|
|
3,274,284
|
|
|
|
|
Net investments in
real estate properties
|
|
23,360,958
|
|
23,932,016
|
|
24,247,084
|
|
Investments in and
advances to unconsolidated entities
|
|
4,230,429
|
|
4,580,584
|
|
4,755,620
|
|
Assets held for
sale
|
|
322,139
|
|
450,349
|
|
378,423
|
|
Notes receivable
backed by real estate
|
|
32,100
|
|
33,800
|
|
235,050
|
|
|
|
|
Net investments in
real estate
|
|
27,945,626
|
|
28,996,749
|
|
29,616,177
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
807,316
|
|
375,120
|
|
264,080
|
|
Other
assets
|
|
1,496,990
|
|
1,516,340
|
|
1,514,510
|
|
|
|
|
Total
assets
|
|
$
30,249,932
|
|
$
30,888,209
|
|
$
31,394,767
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Equity:
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Debt
|
|
$
10,608,294
|
|
$
11,256,997
|
|
$
11,626,831
|
|
|
Accounts payable,
accrued expenses and other liabilities
|
|
1,183,498
|
|
1,347,942
|
|
1,347,100
|
|
|
|
|
Total
liabilities
|
|
11,791,792
|
|
12,604,939
|
|
12,973,931
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
|
14,991,081
|
|
14,799,167
|
|
14,667,935
|
|
|
Noncontrolling
interests
|
|
3,072,469
|
|
3,092,988
|
|
3,320,227
|
|
|
Noncontrolling
interests - limited partnership unitholders
|
|
394,590
|
|
391,115
|
|
432,674
|
|
|
|
|
Total
equity
|
|
18,458,140
|
|
18,283,270
|
|
18,420,836
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
and equity
|
|
$
30,249,932
|
|
$
30,888,209
|
|
$
31,394,767
|
in thousands, except
per share amounts
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
|
|
|
December
31,
|
|
December
31,
|
|
|
|
|
2016
|
2015
|
|
2016
|
2015
|
Revenues:
|
|
|
|
|
|
|
Rental
|
$ 559,885
|
$ 560,186
|
|
$
2,220,409
|
$
1,973,187
|
|
Strategic
capital
|
52,987
|
77,115
|
|
294,552
|
210,362
|
|
Development
management and other
|
7,243
|
5,900
|
|
18,174
|
13,525
|
|
|
Total
revenues
|
620,115
|
643,201
|
|
2,533,135
|
2,197,074
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
Rental
|
141,050
|
150,983
|
|
568,870
|
544,182
|
|
Strategic
capital
|
30,723
|
31,761
|
|
128,506
|
108,422
|
|
General and
administrative
|
56,433
|
59,769
|
|
222,067
|
217,227
|
|
Depreciation and
amortization
|
225,736
|
272,906
|
|
930,985
|
880,373
|
|
Other
|
1,965
|
22,231
|
|
14,329
|
66,698
|
|
|
Total
expenses
|
455,907
|
537,650
|
|
1,864,757
|
1,816,902
|
|
|
|
|
|
|
|
|
|
Operating
income
|
164,208
|
105,551
|
|
668,378
|
380,172
|
|
|
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
|
|
Earnings from
unconsolidated co-investment ventures, net
|
59,204
|
51,669
|
|
191,877
|
155,373
|
|
Earnings from other
unconsolidated ventures, net
|
1,481
|
1,210
|
|
14,430
|
3,889
|
|
Interest
expense
|
(70,569)
|
(82,665)
|
|
(303,146)
|
(301,363)
|
|
Gains on dispositions
of development properties and land, net
|
174,368
|
47,978
|
|
334,369
|
258,088
|
|
Gains on dispositions
of real estate, net (excluding development properties and
land)
|
121,067
|
55,621
|
|
423,029
|
500,799
|
|
Foreign currency and
derivative gains and interest and other income, net
|
34,909
|
19,191
|
|
15,683
|
37,950
|
|
Gains (losses) on
early extinguishment of debt, net
|
-
|
(69,778)
|
|
2,484
|
(86,303)
|
|
|
Total other
income
|
320,460
|
23,226
|
|
678,726
|
568,433
|
|
|
|
|
|
|
|
|
|
Earnings before
income taxes
|
484,668
|
128,777
|
|
1,347,104
|
948,605
|
|
Current income tax
expense
|
(21,754)
|
(5,319)
|
|
(60,089)
|
(28,147)
|
|
Deferred income tax
benefit
|
3,788
|
3,299
|
|
5,525
|
5,057
|
Consolidated net
earnings
|
466,702
|
126,757
|
|
1,292,540
|
925,515
|
Net earnings
attributable to noncontrolling interests
|
(12,442)
|
(1,392)
|
|
(48,307)
|
(44,950)
|
Net earnings
attributable to noncontrolling interests - limited partnership
units
|
(12,063)
|
(5,370)
|
|
(34,301)
|
(11,126)
|
Net earnings
attributable to controlling interests
|
442,197
|
119,995
|
|
1,209,932
|
869,439
|
Preferred stock
dividends
|
(1,658)
|
(1,632)
|
|
(6,714)
|
(6,651)
|
Net earnings
attributable to common stockholders
|
$
440,539
|
$
118,363
|
|
$
1,203,218
|
$
862,788
|
Weighted average
common shares outstanding - Diluted
|
550,885
|
542,435
|
|
546,666
|
533,944
|
Net earnings per
share attributable to common stockholders - Diluted
|
$
0.82
|
$
0.23
|
|
$
2.27
|
$
1.64
|
in
thousands
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
|
|
|
December
31,
|
|
December
31,
|
|
|
|
|
2016
|
2015
|
|
2016
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to common stockholders
|
$ 440,539
|
$ 118,363
|
|
$
1,203,218
|
$
862,788
|
Add (deduct) NAREIT
defined adjustments:
|
|
|
|
|
|
|
Real estate related
depreciation and amortization
|
217,955
|
267,087
|
|
899,821
|
854,471
|
|
Gains on dispositions
of real estate, net (excluding development properties and
land)
|
(121,067)
|
(55,621)
|
|
(423,029)
|
(500,799)
|
|
Reconciling items
related to noncontrolling interests
|
(17,514)
|
(44,733)
|
|
(104,832)
|
(78,106)
|
|
Our share of
reconciling items related to unconsolidated co-investment
ventures
|
43,135
|
34,732
|
|
159,956
|
179,031
|
|
Our share of
reconciling items related to other unconsolidated
ventures
|
1,718
|
1,637
|
|
2,154
|
6,585
|
Subtotal-NAREIT
defined FFO*
|
$
564,766
|
$
321,465
|
|
$
1,737,288
|
$
1,323,970
|
|
|
|
|
|
|
|
|
|
Add (deduct) our
defined adjustments:
|
|
|
|
|
|
|
Unrealized foreign
currency and derivative losses (gains), net
|
(29,369)
|
(7,830)
|
|
(7,505)
|
1,026
|
|
Deferred income tax
benefit
|
(3,788)
|
(3,299)
|
|
(5,525)
|
(5,057)
|
|
Current income tax
expense related to acquired tax liabilities
|
-
|
-
|
|
-
|
3,497
|
|
Reconciling items
related to noncontrolling interests
|
643
|
(163)
|
|
682
|
(1,330)
|
|
Our share of
reconciling items related to unconsolidated co-investment
ventures
|
(24,010)
|
(1,793)
|
|
(22,840)
|
(13,564)
|
FFO, as modified
by Prologis*
|
$
508,242
|
$
308,380
|
|
$
1,702,100
|
$
1,308,542
|
|
|
|
|
|
|
|
|
|
|
Gains on dispositions
of development properties and land, net
|
(174,368)
|
(47,978)
|
|
(334,369)
|
(258,088)
|
|
Current income tax
expense (benefit) on dispositions
|
9,332
|
(5,130)
|
|
24,152
|
(200)
|
|
Acquisition
expenses
|
2,075
|
17,485
|
|
4,607
|
47,034
|
|
Losses (gains) on
early extinguishment of debt, net
|
-
|
69,778
|
|
(2,484)
|
86,303
|
|
Reconciling items
related to noncontrolling interests
|
1
|
1,286
|
|
4,299
|
(11,121)
|
|
Our share of
reconciling items related to unconsolidated co-investment
ventures
|
929
|
1,937
|
|
5,612
|
8,820
|
|
Our share of
reconciling items related to other unconsolidated
ventures
|
(1,424)
|
-
|
|
(3,419)
|
-
|
Core
FFO*
|
$
344,787
|
$
345,758
|
|
$
1,400,498
|
$
1,181,290
|
|
|
|
|
|
|
|
|
|
Adjustments to arrive
at Adjusted FFO ("AFFO"), including our share of unconsolidated
co-investment ventures less noncontrolling
interests:
|
|
|
|
|
|
|
Gains on dispositions
of development properties and land, net
|
174,368
|
47,978
|
|
334,369
|
258,088
|
|
Current income tax
(expense) benefit on dispositions
|
(9,332)
|
5,130
|
|
(24,152)
|
200
|
|
Straight-lined rents
and amortization of lease intangibles
|
(18,944)
|
(22,082)
|
|
(104,886)
|
(59,619)
|
|
Property
improvements
|
(28,451)
|
(29,743)
|
|
(78,745)
|
(75,283)
|
|
Turnover
costs
|
(40,891)
|
(45,902)
|
|
(165,992)
|
(154,524)
|
|
Amortization of debt
premiums, financing costs and management contracts, net
|
(1,172)
|
(7,666)
|
|
(11,420)
|
(25,830)
|
|
Stock compensation
expense
|
16,683
|
13,541
|
|
60,341
|
53,665
|
|
Reconciling items
related to noncontrolling interests
|
13,108
|
13,862
|
|
56,917
|
44,971
|
|
Our share of
reconciling items related to unconsolidated co-investment
ventures
|
(19,591)
|
(19,913)
|
|
(61,923)
|
(63,257)
|
AFFO*
|
|
|
$
430,565
|
$
300,963
|
|
$
1,405,007
|
$
1,159,701
|
|
* This is a
non-GAAP financial measure, please see below for further
explanation.
|
in
thousands
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
|
December
31,
|
|
December
31,
|
|
|
2016
|
2015
|
|
2016
|
2015
|
|
|
|
|
|
|
|
Net earnings
attributable to common stockholders
|
$
440,539
|
$ 118,363
|
|
$
1,203,218
|
$
862,788
|
|
Gains on dispositions
of real estate, net (excluding development properties and
land)
|
(121,067)
|
(55,621)
|
|
(423,029)
|
(500,799)
|
|
Depreciation and
amortization
|
225,736
|
272,906
|
|
930,985
|
880,373
|
|
Interest
expense
|
70,569
|
82,665
|
|
303,146
|
301,363
|
|
Losses (gains) on
early extinguishment of debt, net
|
-
|
69,778
|
|
(2,484)
|
86,303
|
|
Current and deferred
income tax expense, net
|
17,966
|
2,020
|
|
54,564
|
23,090
|
|
Net earnings
attributable to noncontrolling interests - limited partnership
unitholders
|
12,063
|
5,370
|
|
34,301
|
11,126
|
|
Pro forma
adjustments
|
(1,382)
|
(9,354)
|
|
(10,248)
|
19,397
|
|
Preferred stock
dividends
|
1,658
|
1,632
|
|
6,714
|
6,651
|
|
Unrealized foreign
currency and derivative losses (gains), net
|
(29,369)
|
(7,830)
|
|
(7,505)
|
1,026
|
|
Stock compensation
expense
|
16,683
|
13,541
|
|
60,341
|
53,665
|
|
Acquisition
expenses
|
2,075
|
17,485
|
|
4,607
|
47,034
|
Adjusted EBITDA,
consolidated*
|
$
635,471
|
$
510,955
|
|
$
2,154,610
|
$
1,792,017
|
|
|
|
|
|
|
|
|
|
|
Reconciling items
related to noncontrolling interests
|
(34,140)
|
(53,600)
|
|
(152,082)
|
(117,817)
|
|
Our share of
reconciling items related to unconsolidated co-investment
ventures
|
39,590
|
57,350
|
|
219,975
|
262,151
|
Adjusted
EBITDA*
|
$
640,921
|
$
514,705
|
|
$
2,222,503
|
$
1,936,351
|
|
* This is a
non-GAAP financial measure, please see below for further
explanation.
|
Adjusted EBITDA. We use Adjusted EBITDA, a non-Generally
Accepted Accounting Principles ("GAAP") financial measure, as a
measure of our operating performance. We calculate Adjusted EBITDA
beginning with consolidated net earnings 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 items, such as stock based compensation and unrealized gains
or losses on foreign currency. 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), that affect comparability. 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 quarters,
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 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 to
Adjusted EBITDA from consolidated net earnings, a GAAP
measurement.
Business Line Reporting is a non-GAAP financial
measure. Core FFO and development gains are generated by our
three lines of business: (i) real estate operations; (ii) strategic
capital; and (iii) development. 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
|
|
Twelve Months
Ended
|
|
|
Dec.
31,
|
|
Dec.
31,
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Net
earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
$
|
440,539
|
|
$
|
118,363
|
|
$
|
1,203,218
|
|
$
|
862,788
|
|
Noncontrolling
interest attributable to exchangeable limited partnership units
|
|
12,600
|
|
|
5,745
|
|
|
37,079
|
|
|
13,120
|
|
Gains, net of
expenses, associated with exchangeable debt assumed exchanged
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,614)
|
|
Adjusted net
earnings - Diluted
|
$
|
453,139
|
|
$
|
124,108
|
|
$
|
1,240,297
|
|
$
|
874,294
|
|
Weighted average
common shares outstanding - Basic
|
|
528,012
|
|
|
523,770
|
|
|
526,103
|
|
|
521,241
|
|
Incremental weighted
average effect on exchange of limited partnership units
|
|
15,869
|
|
|
16,393
|
|
|
16,833
|
|
|
8,569
|
|
Incremental weighted
average effect of equity awards
|
|
7,004
|
|
|
2,272
|
|
|
3,730
|
|
|
1,961
|
|
Incremental weighted
average effect on exchangeable debt assumed exchanged (a)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,173
|
|
Weighted average
common shares outstanding - Diluted
|
|
550,885
|
|
|
542,435
|
|
|
546,666
|
|
|
533,944
|
|
Net earnings per
share - Basic
|
$
|
0.83
|
|
$
|
0.23
|
|
$
|
2.29
|
|
$
|
1.66
|
|
Net earnings per
share - Diluted
|
$
|
0.82
|
|
$
|
0.23
|
|
$
|
2.27
|
|
$
|
1.64
|
|
Core
FFO
|
|
|
|
|
|
|
|
|
|
|
|
|
Core FFO
|
$
|
344,787
|
|
$
|
345,758
|
|
$
|
1,400,498
|
|
$
|
1,181,290
|
|
Noncontrolling
interest attributable to exchangeable limited partnership units
|
|
991
|
|
|
53
|
|
|
4,273
|
|
|
213
|
|
Interest expense on
exchangeable debt assumed exchanged
|
|
-
|
|
|
-
|
|
|
-
|
|
|
3,506
|
|
Core FFO -
Diluted
|
$
|
345,778
|
|
$
|
345,811
|
|
$
|
1,404,771
|
|
$
|
1,185,009
|
|
Weighted average
common shares outstanding - Basic
|
|
528,012
|
|
|
523,770
|
|
|
526,103
|
|
|
521,241
|
|
Incremental weighted
average effect on exchange of limited partnership units
|
|
15,869
|
|
|
14,897
|
|
|
16,833
|
|
|
6,897
|
|
Incremental weighted
average effect of equity awards
|
|
7,004
|
|
|
2,272
|
|
|
3,730
|
|
|
1,961
|
|
Incremental weighted
average effect on exchangeable debt assumed exchanged (a)
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,173
|
|
Weighted average
common shares outstanding - Diluted
|
|
550,885
|
|
|
540,939
|
|
|
546,666
|
|
|
532,272
|
|
Core FFO per share
- Diluted
|
$
|
0.63
|
|
$
|
0.64
|
|
$
|
2.57
|
|
$
|
2.23
|
|
|
|
(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 modified by Prologis attributable to common
stockholders/unitholders ("FFO, as modified by Prologis"); Core FFO
attributable to common stockholders/unitholders ("Core FFO"); AFFO;
(collectively referred to as "FFO"). FFO is a non-GAAP
financial measure that is commonly used in the real estate
industry. The most directly comparable GAAP measure to FFO is net
earnings.
The National Association of Real Estate Investment Trusts
("NAREIT") defines FFO as earnings computed under GAAP to exclude
historical cost depreciation and gains and losses from the sales,
along with impairment charges, of previously depreciated
properties. We also exclude the gains on revaluation of equity
investments upon acquisition of a controlling interest and the gain
recognized from a partial sale of our investment. We exclude
similar adjustments from our unconsolidated entities and the third
parties' share of our consolidated ventures.
Our FFO Measures
Our FFO measures begin with NAREIT's definition and we make
certain adjustments to reflect our business and the way that
management plans and executes our business strategy. While
not infrequent or unusual, the additional items we adjust for in
calculating FFO, as modified by Prologis, Core FFO
and AFFO, as defined below, are subject to significant
fluctuations from period to period. Although these items may have a
material impact on our operations and are reflected in our
financial statements, the removal of the effects of these items
allows us to better understand the core operating performance of
our properties over the long term. These items have both
positive and negative short-term effects on our results of
operations in inconsistent and unpredictable directions that are
not relevant to our long-term outlook.
We calculate our FFO measures, as defined below, based on our
proportionate ownership share of both our unconsolidated and
consolidated ventures. We reflect our share of our FFO
measures for unconsolidated ventures by applying our average
ownership percentage for the period to the applicable reconciling
items on an entity by entity basis. We reflect our share for
consolidated ventures in which we do not own 100% of the equity by
adjusting our FFO measures to remove the noncontrolling interests
share of the applicable reconciling items based on our average
ownership percentage for the applicable periods.
These FFO measures are used by management as supplemental
financial measures of operating performance and we believe that it
is important that stockholders, potential investors and financial
analysts understand the measures management uses. We do not use our
FFO measures as, nor should they be considered to be, alternatives
to net earnings computed under GAAP, as indicators of our operating
performance, as alternatives to cash from operating activities
computed under GAAP or as indicators of our ability to fund our
cash needs.
We analyze our operating performance primarily by the rental
revenues of our real estate and the revenues from our strategic
capital business, net of operating, administrative and financing
expenses. This income stream is not directly impacted by
fluctuations in the market value of our investments in real estate
or debt securities.
FFO, as modified by Prologis
To arrive at FFO, as modified by Prologis, we adjust the
NAREIT defined FFO measure to exclude the impact of foreign
currency related items and deferred tax, specifically:
(i)
|
deferred income tax
benefits and deferred income tax expenses recognized by our
subsidiaries;
|
(ii)
|
current income tax
expense related to acquired tax liabilities that were recorded as
deferred tax liabilities in an acquisition, to the extent the
expense is offset with a deferred income tax benefit in earnings
that is excluded from our defined FFO measure;
|
(iii)
|
unhedged foreign
currency exchange gains and losses resulting from debt transactions
between us and our foreign consolidated 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 and unconsolidated
entities; and
|
(v)
|
mark-to-market
adjustments associated with derivative financial
instruments.
|
We use FFO, as modified by Prologis, so that management,
analysts and investors are able to evaluate our performance against
other REITs that do not have similar operations or operations in
jurisdictions outside the U.S.
Core FFO
In addition to FFO, as modified by Prologis, we also use
Core FFO. To arrive at Core FFO, we adjust
FFO, as modified by Prologis, to exclude the following
recurring and nonrecurring items that we recognized directly in
FFO, as modified by Prologis:
(i)
|
gains or losses from
contribution or sale of land or development properties that were
developed with the intent to contribute or sell;
|
(ii)
|
income tax expense
related to the sale of investments in real estate and third-party
acquisition costs related to the acquisition of real
estate;
|
(iii)
|
impairment charges
recognized related to our investments in real estate generally as a
result of our change in intent to contribute or sell these
properties;
|
(iv)
|
gains or losses from
the early extinguishment of debt and redemption and repurchase of
preferred stock; and
|
(v)
|
expenses related to
natural disasters.
|
We use Core FFO, including by segment and region, to: (i) assess
our operating performance as compared to similar real estate
companies and the industry in general, (ii) evaluate our
performance and the performance of our properties in comparison
with expected results and results of previous periods, relative to
resource allocation decisions; (iii) evaluate the performance of
our management; (iv) budget and forecast future results to assist
in the allocation of resources; (v) provide guidance to the
financial markets to understand our expected operating performance;
and (v) evaluate how a specific potential investment will impact
our future results.
AFFO
To arrive at AFFO, we adjust Core FFO to include realized gains
from the disposition of land and development properties and
recurring capital expenditures and exclude the following items that
we recognize directly in Core FFO:
(i)
|
straight-line
rents;
|
(ii)
|
amortization of
above- and below-market lease intangibles;
|
(iii)
|
amortization of
management contracts;
|
(iv)
|
amortization of debt
premiums and discounts and financing costs, net of amounts
capitalized, and;
|
(v)
|
stock compensation
expense.
|
We use AFFO to (i) assess our operating performance as compared
to similar real estate companies and the industry in general, (ii)
evaluate our performance and the performance of our properties in
comparison with expected results and results of previous periods,
relative to resource allocation decisions, (iii) evaluate the
performance of our management, (iv) budget and forecast future
results to assist in the allocation of resources, and (v) evaluate
how a specific potential investment will impact our future
results.
Limitations on the use of our FFO measures
While we believe our modified FFO measures are important
supplemental measures, neither NAREIT's nor our measures of FFO
should be used alone because they exclude significant economic
components of net earnings computed under GAAP and are, therefore,
limited as an analytical tool. Accordingly, these are only a few of
the many measures we use when analyzing our business. Some of
these limitations are:
- The current income tax expenses and acquisition costs that are
excluded from our modified FFO measures represent the taxes and
transaction costs that are payable.
- Depreciation and amortization of real estate assets are
economic costs that are excluded from FFO. FFO is limited, as it
does not reflect the cash requirements that may be necessary for
future replacements of the real estate assets. Furthermore, the
amortization of capital expenditures and leasing costs necessary to
maintain the operating performance of industrial properties are not
reflected in FFO.
- Gains or losses from non-development 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 modified FFO measures result from the creation of a
deferred income tax asset or liability that may have to be settled
at some future point. Our modified FFO measures do not currently
reflect any income or expense that may result from such
settlement.
- The foreign currency exchange gains and losses that are
excluded from our modified FFO measures are generally recognized
based on movements in foreign currency exchange rates through a
specific point in time. The ultimate settlement of our foreign
currency-denominated net assets is indefinite as to timing and
amount. Our FFO measures are limited in that they do not reflect
the current period changes in these net assets that result from
periodic foreign currency exchange rate movements.
- The gains and losses on extinguishment of debt that we exclude
from our Core FFO, may provide a benefit or cost to us as we may be
settling our debt at less or more than our future obligation.
- The natural disaster expenses that we exclude from Core FFO are
costs that we have incurred.
We compensate for these limitations by using our FFO measures
only in conjunction with net earnings computed under GAAP when
making our decisions. This information should be read with our
complete consolidated financial statements prepared under GAAP. To
assist investors in compensating for these limitations, we
reconcile our FFO measures to our net earnings computed under
GAAP.
Guidance. The following is a reconciliation of our guided
Net Earnings per share to our guided Core FFO per share:
|
Low
|
|
High
|
Net
Earnings
|
$
|
1.55
|
|
$
|
1.70
|
Our share
of:
|
|
|
|
|
|
Depreciation and
amortization
|
|
1.65
|
|
|
1.70
|
Net gains of real
estate transactions, net of taxes
|
|
(0.60)
|
|
|
(0.70)
|
Core FFO
|
$
|
2.60
|
|
$
|
2.70
|
Prologis Share represents our proportionate economic
ownership of each entity included in our total owned and managed
portfolio whether consolidated or unconsolidated.
Rent Change (Cash) represents the change in starting
rental rates per the lease agreement on new and renewed leases
signed during the periods as compared with the previous ending
rental rates in that same space. This measure excludes any free
rent periods and teaser rates defined as 50% or less of the
stabilized rate.
Rent Change (Net Effective) represents the change in net
effective rental rates (average rate over the lease term) on new
and renewed leases signed during the period as compared with the
previous effective rental rates in that same space.
Same Store. We evaluate the operating performance of the
operating properties we own and manage using a "same store"
analysis because the population of properties in this analysis is
consistent from period to period, thereby eliminating the effects
of changes in the composition of the portfolio on performance
measures. We include properties from our owned and managed
portfolio in our same store analysis. We have defined the same
store portfolio, for the three months ended December 31, 2016, as those properties that were
in operation at January 1, 2015, and
have been in operation throughout the same three-month periods in
both 2016 and 2015 (including development properties that have been
completed and available for lease). We have removed all properties
that were disposed of to a third party or were classified as held
for sale to a third party from the population for both periods. We
believe the factors that affect rental revenues, rental expenses
and NOI in the same store portfolio are generally the same as for
the total operating portfolio. To derive an appropriate measure of
period-to-period operating performance, we remove the effects of
foreign currency exchange rate movements by using the recent period
end exchange rate to translate from local currency into the U.S.
dollar, for both periods.
Same store is a commonly used measure in the real estate
industry. Our same store measures are non-GAAP financial measures
that are calculated beginning with rental revenues, rental
recoveries and rental expenses from the financial statements
prepared in accordance with GAAP. It is also common in the real
estate industry and expected from the analyst and investor
community that these numbers be further adjusted to remove certain
non-cash items included in the financial statements prepared in
accordance with GAAP to reflect a cash same store number. In order
to clearly label these metrics, we call one Same Store NOI and one
Same Store NOI - Cash. As our same store measures are non-GAAP
financial measures they have certain limitations as 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 with explanations of how
these metrics are calculated.
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,
|
|
|
2016
|
|
2015
|
|
Change (%)
|
|
Rental
Revenue:
|
|
|
|
|
|
|
|
|
|
Rental
Revenue
|
$
|
435,722
|
|
$
|
435,626
|
|
|
|
|
Rental
Recoveries
|
|
124,163
|
|
|
124,560
|
|
|
|
|
Per the Consolidated
Statements of Operations
|
|
559,885
|
|
|
560,186
|
|
|
|
|
Properties not
included and other adjustments (a)
|
|
(168,972)
|
|
|
(177,920)
|
|
|
|
|
Unconsolidated
Co-Investment Ventures
|
|
436,500
|
|
|
423,065
|
|
|
|
|
Same Store -
Rental Revenue
|
$
|
827,413
|
|
$
|
805,331
|
|
|
2.7
|
%
|
|
|
|
|
|
|
|
|
|
|
Rental
Expense:
|
|
|
|
|
|
|
|
|
|
Per the Consolidated
Statements of Operations
|
$
|
141,050
|
|
$
|
150,983
|
|
|
|
|
Properties not
included and other adjustments (b)
|
|
(32,106)
|
|
|
(44,394)
|
|
|
|
|
Unconsolidated
Co-Investment Ventures
|
|
99,212
|
|
|
96,511
|
|
|
|
|
Same Store -
Rental Expense
|
$
|
208,156
|
|
$
|
203,100
|
|
|
2.5
|
%
|
|
|
|
|
|
|
|
|
|
|
NOI:
|
|
|
|
|
|
|
|
|
|
Consolidated
NOI
|
$
|
418,835
|
|
$
|
409,203
|
|
|
|
|
Properties not
included and other adjustments
|
|
(136,866)
|
|
|
(133,526)
|
|
|
|
|
Unconsolidated
Co-Investment Ventures
|
|
337,288
|
|
|
326,554
|
|
|
|
|
Same Store -
NOI
|
$
|
619,257
|
|
$
|
602,231
|
|
|
2.8
|
%
|
Same Store -
NOI - Prologis Share (c)
|
$
|
355,837
|
|
$
|
344,739
|
|
|
3.2
|
%
|
|
|
|
|
|
|
|
|
|
|
NOI- Cash:
|
|
|
|
|
|
|
|
|
|
Same store-
NOI
|
$
|
619,257
|
|
$
|
602,231
|
|
|
|
|
Straight-line rent
adjustments (d)
|
$
|
(8,783)
|
|
$
|
(14,539)
|
|
|
|
|
Fair value lease
adjustments (d)
|
|
(1,203)
|
|
|
(477)
|
|
|
|
|
Same Store - NOI-
Cash
|
$
|
609,271
|
|
$
|
587,215
|
|
|
3.8
|
%
|
Same Store - NOI-
Prologis Share (c)
|
$
|
349,502
|
|
$
|
334,697
|
|
|
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)
|
Prologis share of
Same Store is calculated using the underlying building information
from the Same Store NOI and NOI - Cash calculations and applying
our ownership percentage as of December 31, 2016 to the NOI of each
building for both periods.
|
(d)
|
In order to derive
Same Store- NOI - Cash, we adjust Same Store- NOI to exclude
non-cash items included in our rental income in our financial
statements, including straight line rent adjustments and
adjustments related to purchase accounting to reflect leases at
fair value at the time of acquisition.
|
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 Properties that are sold includes the realized economic
gain.
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/prologis-reports-fourth-quarter-and-full-year-2016-earnings-results-300395369.html
SOURCE Prologis, Inc.