UPDATE: ProLogis 2Q Profit Rises 16% On Property Sales
July 23 2009 - 1:33PM
Dow Jones News
ProLogis' (PLD) funds from operations during the second quarter
dropped sharply amid continued weakness in industrial real
estate.
FFO, a key profitability metric for real-estate investment
trusts, excluding items, slumped to 19 cents a share from $1.02.
Meanwhile, the world's largest warehouse manager and developer said
quarterly earnings rose 16% as it posted gains from property
sales.
Chief Executive Walter C. Rakowich said Thursday the industry is
facing declining rents and the company expects the challenging
leasing environment to persist. While there has been an increase in
leasing concessions, the drop in occupancies seems to be leveling
off, he added.
The company affirmed its FFO estimate, while cutting its
full-year earnings target for a third-time to $1.10 to $1.20 a
share from $1.31 to $1.48. This was based on second-quarter
write-downs and charges.
ProLogis reported a profit of $238.9 million, or 58 cents share,
up from $206.3 million, or 76 cents a share, a year earlier.
Property-sales gains were 46 cents compared to 2 cents a year
earlier.
Revenue tumbled 82% to $263.4 million amid a reclassification of
how the company records revenue. Rental income for ProLogis - which
has facilities in North America, Europe and Asia - fell 3.5% to
$229.8 million.
Analysts polled by Thomson Reuters most recently called for FFO
of 23 cents and revenue of $223 million.
Amid the results, ProLogis' share price rose 8.7% to $8.30 in
concert with a broad market rally.
Dave Rodgers, an analyst at RBC Capital Markets, said the
results were largely in line with expectations, helping to fuel the
stock gain. ProLogis' stock has lost 86% of its value in the past
year, though it has more than tripled from an all-time low of $2.20
in November.
Rodgers said ProLogis' continued progress on its liquidity and
leverage position "is keeping investors happy."
REITs have faced upheaval amid slowing retail sales and a poor
outlook for demand for warehouse and factory space. Debt-laden
ProLogis saw its status as a Wall Street darling slip last year
when risky expansion efforts of the past few years left it exposed
to the global downturn and credit crunch. But ProLogis, like many
other companies, got some relief in recent stock and bond offerings
as investors returned to the market.
ProLogis said it plans to continue actions to improve its
liquidity and further leasing of its development portfolio and land
monetization.
Rakowich said in an interview that the company has executed
about roughly $1 billion in asset sales from the $1.5 billion to
$1.7 billion target range outlined for the year. He said a
significant amount of asset sales going forward will be in Europe
and Mexico.
-By A.D. Pruitt, Dow Jones Newswires; 212-416-2197;
angela.pruitt@dowjones.com
(Tess Stynes contributed to this story)