SAN FRANCISCO, Oct. 16, 2018 /PRNewswire/
-- Prologis, Inc. (NYSE: PLD), the global leader in
logistics real estate, today reported results for the third quarter
of 2018.
Net earnings per diluted share was $0.60 compared with $1.63 for the third quarter of 2017. The prior
period included $585 million or
$1.08 per diluted share of higher
gains on dispositions. Core funds from operations* per diluted
share was $0.72 compared with
$0.67 for the same period in
2017.
"Demand for well-located logistics real estate is strong, with
customers prioritizing proximity to consumers to offset supply
chain costs such as labor and transportation," said Hamid R. Moghadam, chairman and CEO, Prologis.
"Market rent growth in Europe
continued to accelerate, and we believe it may surpass that of the
U.S. in 2019."
Moghadam added, "The integration of the DCT Industrial
acquisition on August 22 is complete.
We've hit the expected run rate of $80
million per year of immediate savings and the team is now
focused on realizing the revenue and platform synergies associated
with this transaction."
OPERATING RESULTS STRONG ACROSS THE BOARD
Owned &
Managed
|
3Q18
|
3Q17
|
Notes
|
Period End
Occupancy
|
97.5%
|
96.3%
|
Europe at
98.0%
|
Leases
Commenced
|
37 MSF
|
36 MSF
|
Development
leasing vol. totaled ~5 MSF
|
|
Prologis
Share
|
3Q18
|
3Q17
|
Notes
|
Net Effective Rent
Change
|
22.6%
|
20.5%
|
Led by U.S. at
30.4%
|
Cash Rent
Change
|
11.6%
|
8.1%
|
Led by U.S. at
16.7%
|
Cash Same Store
NOI*
|
5.9%
|
5.4%
|
Led by U.S. at
7.1%
|
PROFITABLE CAPITAL RECYCLING
Prologis
Share
|
3Q18
|
Building
Acquisitions
|
$86M1
|
Weighted avg stabilized cap
rate
|
5.0%
|
Development
Stabilizations
|
$290M
|
Estimated weighted avg
yield
|
6.7%
|
Estimated weighted avg
margin
|
35.9%
|
Estimated value
creation
|
$104M
|
Development
Starts
|
$388M
|
Estimated weighted avg
margin
|
17.3%
|
Estimated value
creation
|
$67M
|
%
Build-to-suit
|
34.8%
|
Total Dispositions
and Contributions
|
$462M
|
Weighted avg
stabilized cap rate (excluding land and other real
estate)
|
4.9%
|
|
1.
Excludes the acquisition of DCT Industrial Trust
|
ACCESS TO GLOBAL CAPITAL MARKETS
As previously announced, Prologis issued approximately
$1.3 billion of yen- and
euro-denominated bonds during the quarter. The company has reduced
its weighted average interest rate to 2.7 percent and extended its
weighted average remaining term to 6.3 years.
The company ended the third quarter with leverage of 22.5
percent on a market capitalization basis, debt-to-adjusted EBITDA*
of 4.4x and $3.5 billion of
liquidity.
GUIDANCE RANGE NARROWED FOR 2018
"Our cash same store NOI results are in line with our
sector-leading guidance," said Thomas S.
Olinger, chief financial officer, Prologis. "At the midpoint
of our 2018 guidance, our annual Core FFO* growth will have
averaged more than 9 percent, excluding promotes, and more than 8
percent with promotes over the last two years. Looking ahead, we
remain well-positioned to deliver superior growth given the rental
upside embedded in our portfolio and our ability to create value
from the build-out of our land bank."
2018 GUIDANCE
(UPDATES TO PRIOR GUIDANCE ONLY)
|
|
Earnings (per
diluted share)
|
Previous
|
Revised
|
Net
Earnings
|
$2.67 to
$2.73
|
$2.68 to
$2.72
|
Core FFO*
|
$3.00 to
$3.04
|
$3.01 to
$3.03
|
|
Other Assumptions
(in
millions)
|
Previous
|
Revised
|
Strategic capital
revenue, excl promote revenue
|
$270 to
$280
|
$280 to
$285
|
Net promote
income
|
$68 to $78
|
$74 to $79
|
General &
administrative expenses
|
$227 to
$237
|
$235 to
$240
|
|
|
|
Prologis Share
Capital Deployment (in millions)
|
Previous
|
Revised
|
Development
stabilizations
|
$1,800 to
2,000
|
$1,900 to
2,100
|
|
|
|
Development
starts
|
$2,300 to
$2,600
|
$2,400 to
$2,600
|
Building
acquisitions
|
$300 to
$500
|
$300 to
$400
|
Building and land
dispositions
|
$1,400 to
$1,700
|
$1,400 to
$1,600
|
Building
contributions
|
$1,500 to
$1,800
|
$1,600 to
$1,800
|
Net Proceeds /
(Uses)
|
$300 to
$400
|
$300 to
$400
|
The earnings guidance described above includes potential future
gains recognized from real estate transactions but excludes any
future foreign currency or derivative gains or losses as these
items are difficult to predict. In reconciling from net earnings to
Core FFO*, Prologis makes certain adjustments, including but not
limited to real estate depreciation and amortization expense, gains
(losses) recognized from real estate transactions and early
extinguishment of debt, impairment charges, deferred taxes and
unrealized gains or losses on foreign currency or derivative
activity. The difference between the company's Core FFO* and net
earnings guidance for 2018 relates predominantly to these items.
Please refer to our third 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, October 16, 2018, 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) 209-4258 (toll-free from the United States and Canada) or +1 (647) 689-5198 (from all other
countries) and enter Passcode 1967798.
A telephonic replay will be available October 16-23 at +1 (800) 585-8367 (from the
United States and Canada) or +1 (416) 621-4642 (from all
other countries) using conference code 1967798. 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 September 30, 2018,
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 771 million square feet (72 million
square meters) in 19 countries. Prologis leases modern distribution
facilities to a diverse base of approximately 5,500 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
September 30,
|
|
Nine Months
ended
September 30,
|
|
2018
|
2017
|
|
2018
|
2017
|
Rental and other
revenues
|
$ 611
|
$
535
|
|
$ 1,717
|
$ 1,692
|
Strategic capital
revenues
|
71
|
68
|
|
280
|
306
|
|
Total
revenues
|
682
|
603
|
|
1,997
|
1,998
|
Net earnings
attributable to common stockholders
|
346
|
876
|
|
1,047
|
1,346
|
Core FFO attributable
to common stockholders/unitholders*
|
427
|
370
|
|
1,262
|
1,178
|
AFFO attributable to
common stockholders/unitholders*
|
462
|
460
|
|
1,424
|
1,212
|
Adjusted EBITDA
attributable to common stockholders*
|
710
|
665
|
|
2,005
|
1,814
|
Estimated value
creation from development stabilizations - Prologis
Share
|
104
|
212
|
|
475
|
431
|
Common stock
dividends and common limited partnership unit
distributions
|
315
|
244
|
|
849
|
730
|
|
|
|
|
|
|
|
|
Per common share -
diluted:
|
|
|
|
|
|
|
Net earnings
attributable to common stockholders
|
$0.60
|
$1.63
|
|
$
1.90
|
$2.51
|
|
Core FFO attributable
to common stockholders/unitholders*
|
0.72
|
0.67
|
|
2.22
|
2.14
|
|
Business line
reporting:
|
|
|
|
|
|
|
|
Real estate
operations*
|
0.67
|
0.62
|
|
1.96
|
1.79
|
|
|
Strategic
capital*
|
0.05
|
0.05
|
|
0.26
|
0.35
|
|
|
Core FFO
attributable to common stockholders/unitholders*
|
0.72
|
0.67
|
|
2.22
|
2.14
|
|
|
Realized development
gains, net of taxes
|
0.17
|
0.28
|
|
0.56
|
0.41
|
Dividends and
distributions per common share/unit
|
0.48
|
0.44
|
|
1.44
|
1.32
|
* This is a
non-GAAP financial measure, please see below for further
explanation.
|
in
thousands
|
September 30,
2018
|
|
June 30,
2018
|
|
December 31,
2017
|
Assets:
|
|
|
|
|
|
|
Investments in real
estate properties:
|
|
|
|
|
|
|
|
Operating
properties
|
$
30,473,036
|
|
$
22,267,134
|
|
$
22,585,327
|
|
|
Development
portfolio
|
2,010,046
|
|
1,655,895
|
|
1,593,489
|
|
|
Land
|
1,264,815
|
|
1,111,185
|
|
1,154,383
|
|
|
Other real estate
investments
|
537,886
|
|
521,129
|
|
505,445
|
|
|
|
34,285,783
|
|
25,555,343
|
|
25,838,644
|
|
|
Less accumulated
depreciation
|
4,451,434
|
|
4,283,877
|
|
4,059,348
|
|
|
|
Net investments in
real estate properties
|
29,834,349
|
|
21,271,466
|
|
21,779,296
|
|
Investments in and
advances to unconsolidated entities
|
5,618,178
|
|
5,414,623
|
|
5,496,450
|
|
Assets held for sale
or contribution
|
761,575
|
|
892,546
|
|
342,060
|
|
Notes receivable
backed by real estate
|
-
|
|
-
|
|
34,260
|
|
|
|
Net investments in
real estate
|
36,214,102
|
|
27,578,635
|
|
27,652,066
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
275,562
|
|
527,830
|
|
447,046
|
|
Other
assets
|
1,778,498
|
|
1,396,417
|
|
1,381,963
|
|
|
|
Total
assets
|
$
38,268,162
|
|
$
29,502,882
|
|
$
29,481,075
|
|
|
|
|
|
|
|
|
|
Liabilities and
Equity:
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Debt
|
$
11,232,129
|
|
$
9,427,124
|
|
$
9,412,631
|
|
|
Accounts payable,
accrued expenses and other liabilities
|
1,598,378
|
|
1,349,255
|
|
1,362,703
|
|
|
|
Total
liabilities
|
12,830,507
|
|
10,776,379
|
|
10,775,334
|
|
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
Stockholders'
equity
|
22,030,599
|
|
15,638,570
|
|
15,631,158
|
|
|
Noncontrolling
interests
|
2,743,408
|
|
2,624,175
|
|
2,660,242
|
|
|
Noncontrolling
interests - limited partnership unitholders
|
663,648
|
|
463,758
|
|
414,341
|
|
|
|
Total
equity
|
25,437,655
|
|
18,726,503
|
|
18,705,741
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
and equity
|
$
38,268,162
|
|
$
29,502,882
|
|
$
29,481,075
|
|
|
|
|
|
|
|
|
in thousands, except
per share amounts
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
|
September
30,
|
|
September
30,
|
|
|
|
2018
|
2017
|
|
2018
|
2017
|
Revenues:
|
|
|
|
|
|
|
Rental
|
$ 608,974
|
$ 531,182
|
|
$
1,709,596
|
$
1,674,492
|
|
Strategic
capital
|
71,142
|
68,042
|
|
279,800
|
305,741
|
|
Development
management and other
|
2,316
|
3,650
|
|
7,968
|
17,979
|
|
|
Total
revenues
|
682,432
|
602,874
|
|
1,997,364
|
1,998,212
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
Rental
|
147,184
|
128,735
|
|
423,454
|
429,185
|
|
Strategic
capital
|
35,390
|
35,996
|
|
114,100
|
119,781
|
|
General and
administrative
|
62,244
|
57,656
|
|
182,287
|
171,350
|
|
Depreciation and
amortization
|
252,702
|
201,903
|
|
660,456
|
656,639
|
|
Other
|
3,391
|
3,093
|
|
11,145
|
8,608
|
|
|
Total
expenses
|
500,911
|
427,383
|
|
1,391,442
|
1,385,563
|
|
|
|
|
|
|
|
|
Operating
income
|
181,521
|
175,491
|
|
605,922
|
612,649
|
|
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
|
|
Earnings from
unconsolidated co-investment ventures, net
|
56,342
|
53,775
|
|
164,983
|
160,400
|
|
Earnings from other
unconsolidated ventures, net
|
292
|
1,291
|
|
16,856
|
11,867
|
|
Interest
expense
|
(64,186)
|
(64,190)
|
|
(166,761)
|
(212,456)
|
|
Gains on dispositions
of development properties and land, net
|
108,049
|
168,214
|
|
329,286
|
235,734
|
|
Gains on dispositions
of real estate, net (excluding development properties and
land)
|
86,009
|
610,839
|
|
154,144
|
723,650
|
|
Foreign currency and
derivative gains (losses) and interest and other income,
net
|
23,404
|
(14,056)
|
|
75,309
|
(36,834)
|
|
Losses on early
extinguishment of debt, net
|
(1,955)
|
-
|
|
(2,657)
|
(30,596)
|
|
|
Total other
income
|
207,955
|
755,873
|
|
571,160
|
851,765
|
|
|
|
|
|
|
|
|
Earnings before
income taxes
|
389,476
|
931,364
|
|
1,177,082
|
1,464,414
|
|
Current income tax
expense
|
(13,841)
|
(20,412)
|
|
(45,691)
|
(42,525)
|
|
Deferred income tax
benefit (expense)
|
(115)
|
2,465
|
|
1,079
|
197
|
Consolidated net
earnings
|
375,520
|
913,417
|
|
1,132,470
|
1,422,086
|
Net earnings
attributable to noncontrolling interests
|
(17,264)
|
(11,411)
|
|
(50,204)
|
(33,534)
|
Net earnings
attributable to noncontrolling interests - limited partnership
units
|
(10,420)
|
(24,113)
|
|
(30,965)
|
(37,113)
|
Net earnings
attributable to controlling interests
|
347,836
|
877,893
|
|
1,051,301
|
1,351,439
|
Preferred stock
dividends
|
(1,491)
|
(1,675)
|
|
(4,443)
|
(5,023)
|
Net earnings
attributable to common stockholders
|
$
346,345
|
$
876,218
|
|
$
1,046,858
|
$
1,346,416
|
Weighted average
common shares outstanding - Diluted
|
597,647
|
554,163
|
|
568,599
|
551,618
|
Net earnings per
share attributable to common stockholders - Diluted
|
$
0.60
|
$
1.63
|
|
$
1.90
|
$
2.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in
thousands
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
|
|
September
30,
|
|
September
30,
|
|
|
|
|
2018
|
2017
|
|
2018
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to common stockholders
|
$ 346,345
|
$ 876,218
|
|
$
1,046,858
|
$
1,346,416
|
Add (deduct) NAREIT
defined adjustments:
|
|
|
|
|
|
|
Real estate related
depreciation and amortization
|
244,475
|
194,023
|
|
634,804
|
633,224
|
|
Gains on dispositions
of real estate, net (excluding development properties and
land)
|
(86,009)
|
(610,839)
|
|
(154,144)
|
(723,650)
|
|
Reconciling items
related to noncontrolling interests
|
(9,705)
|
1,074
|
|
(33,132)
|
(40,633)
|
|
Our share of
reconciling items related to unconsolidated co-investment
ventures
|
50,306
|
46,588
|
|
152,216
|
102,636
|
|
Our share of
reconciling items related to other unconsolidated
ventures
|
2,056
|
1,731
|
|
5,330
|
5,031
|
Subtotal-NAREIT
defined FFO attributable to common
stockholders/unitholders*
|
$
547,468
|
$
508,795
|
|
$
1,651,932
|
$
1,323,024
|
|
|
|
|
|
|
|
|
|
Add (deduct) our
defined adjustments:
|
|
|
|
|
|
|
Unrealized foreign
currency and derivative losses (gains), net
|
(20,750)
|
20,294
|
|
(73,276)
|
55,800
|
|
Deferred income tax
expense (benefit)
|
115
|
(2,465)
|
|
(1,079)
|
(197)
|
|
Current income tax
expense on dispositions related to acquired tax assets
|
-
|
757
|
|
878
|
90
|
|
Reconciling items
related to noncontrolling interests
|
74
|
(22)
|
|
118
|
(9)
|
|
Our share of
reconciling items related to unconsolidated co-investment
ventures
|
1,789
|
(612)
|
|
2,979
|
(2,441)
|
FFO, as modified
by Prologis attributable to common
stockholders/unitholders*
|
$
528,696
|
$
526,747
|
|
$
1,581,552
|
$
1,376,267
|
|
|
|
|
|
|
|
|
|
Adjustments to arrive
at Core FFO attributable to common
stockholders/unitholders*:
|
|
|
|
|
|
|
Gains on dispositions
of development properties and land, net
|
(108,049)
|
(168,214)
|
|
(329,286)
|
(235,734)
|
|
Current income tax
expense on dispositions
|
3,162
|
11,662
|
|
13,581
|
12,573
|
|
Losses on early
extinguishment of debt, net
|
1,955
|
-
|
|
2,657
|
30,596
|
|
Reconciling items
related to noncontrolling interests
|
(153)
|
(8)
|
|
5,267
|
(687)
|
|
Our share of
reconciling items related to unconsolidated co-investment
ventures
|
495
|
(386)
|
|
1,223
|
(191)
|
|
Our share of
reconciling items related to other unconsolidated
ventures
|
1,378
|
(71)
|
|
(13,166)
|
(4,938)
|
Core FFO
attributable to common stockholders/unitholders*
|
$
427,484
|
$
369,730
|
|
$
1,261,828
|
$
1,177,886
|
|
|
|
|
|
|
|
|
|
Adjustments to arrive
at Adjusted FFO ("AFFO") attributable to common
stockholders/unitholders*, including our share of unconsolidated
ventures less noncontrolling interest:
|
|
|
|
|
|
|
Gains on dispositions
of development properties and land, net
|
108,049
|
168,214
|
|
329,286
|
235,734
|
|
Current income tax
expense on dispositions
|
(3,162)
|
(11,662)
|
|
(13,581)
|
(12,573)
|
|
Straight-lined rents
and amortization of lease intangibles
|
(19,003)
|
(17,314)
|
|
(45,372)
|
(66,233)
|
|
Property
improvements
|
(28,888)
|
(22,365)
|
|
(59,862)
|
(50,030)
|
|
Turnover
costs
|
(31,852)
|
(37,100)
|
|
(91,194)
|
(115,442)
|
|
Amortization of debt
discount (premium), financing costs and management contracts,
net
|
2,879
|
3,740
|
|
9,684
|
992
|
|
Stock compensation
expense
|
18,947
|
20,487
|
|
58,029
|
58,091
|
|
Reconciling items
related to noncontrolling interests
|
7,346
|
5,685
|
|
14,478
|
26,257
|
|
Our share of
reconciling items related to unconsolidated ventures
|
(20,236)
|
(18,950)
|
|
(39,236)
|
(42,932)
|
AFFO attributable
to common stockholders/unitholders*
|
$
461,564
|
$
460,465
|
|
$
1,424,060
|
$
1,211,750
|
* This is a
non-GAAP financial measure, please see below for further
explanation.
|
in
thousands
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
|
September
30,
|
|
September
30,
|
|
|
|
2018
|
2017
|
|
2018
|
2017
|
|
|
|
|
|
|
|
|
Net earnings
attributable to common stockholders
|
$
346,345
|
$ 876,218
|
|
$
1,046,858
|
$
1,346,416
|
|
Gains on dispositions
of real estate, net (excluding development properties and
land)
|
(86,009)
|
(610,839)
|
|
(154,144)
|
(723,650)
|
|
Depreciation and
amortization expenses
|
252,702
|
201,903
|
|
660,456
|
656,639
|
|
Interest
expense
|
64,186
|
64,190
|
|
166,761
|
212,456
|
|
Losses on early
extinguishment of debt, net
|
1,955
|
-
|
|
2,657
|
30,596
|
|
Current and deferred
income tax expense, net
|
13,956
|
17,947
|
|
44,612
|
42,328
|
|
Net earnings
attributable to noncontrolling interests - limited partnership
unitholders
|
10,420
|
24,113
|
|
30,965
|
37,113
|
|
Pro forma
adjustments
|
54,517
|
3,519
|
|
58,660
|
14,605
|
|
Preferred stock
dividends
|
1,491
|
1,675
|
|
4,443
|
5,023
|
|
Unrealized foreign
currency and derivative losses (gains), net
|
(20,750)
|
20,294
|
|
(73,276)
|
55,800
|
|
Stock compensation
expense
|
18,947
|
20,487
|
|
58,029
|
58,091
|
Adjusted EBITDA,
consolidated*
|
$
657,760
|
$
619,507
|
|
$
1,846,021
|
$
1,735,417
|
|
|
|
|
|
|
|
|
|
Reconciling items
related to noncontrolling interests
|
(20,781)
|
(24,420)
|
|
(66,209)
|
(84,108)
|
|
Our share of
reconciling items related to unconsolidated ventures
|
72,606
|
69,690
|
|
225,232
|
162,532
|
Adjusted EBITDA
attributable to common stockholders/unitholders*
|
$
709,585
|
$
664,777
|
|
$
2,005,044
|
$
1,813,841
|
* This is a
non-GAAP financial measure, please see below for further
explanation.
|
|
Adjusted EBITDA. We use Adjusted EBITDA attributable to
common stockholders/unitholders ("Adjusted EBITDA"), a non-GAAP
financial measure, as a measure of our operating performance. The
most directly comparable GAAP measure to Adjusted EBITDA is net
earnings.
We calculate Adjusted EBITDA beginning with consolidated net
earnings attributable to common stockholders and removing the
effect of: interest expense, income taxes, depreciation and
amortization, impairment charges, gains or losses from the
disposition of investments in real estate (excluding development
properties and land), gains from the revaluation of equity
investments upon acquisition of a controlling interest, gains or
losses on early extinguishment of debt and derivative contracts
(including cash charges), similar adjustments we make to our FFO
measures (see definition below), and other items, such as, stock
based compensation and unrealized gains or losses on foreign
currency and derivatives. We also include a pro forma adjustment to
reflect a full period of NOI on the operating properties we acquire
or stabilize during the quarter and to remove NOI on properties we
dispose of during the quarter, assuming all transactions occurred
at the beginning of the quarter. The pro forma adjustment also
includes economic ownership changes in our ventures to reflect the
full quarter at the new ownership percentage.
We believe Adjusted EBITDA provides investors relevant and
useful information because it permits investors to view our
operating performance, analyze our ability to meet interest payment
obligations and make quarterly preferred stock dividends on an
unleveraged basis before the effects of income tax, depreciation
and amortization expense, gains and losses on the disposition of
non-development properties and other items (outlined above), that
affect comparability. While all items are not infrequent or unusual
in nature, these items may result from market fluctuations that can
have inconsistent effects on our results of operations. The
economics underlying these items reflect market and financing
conditions in the short-term but can obscure our performance and
the value of our long-term investment decisions and strategies.
We calculate our Adjusted EBITDA, based on our proportionate
ownership share of both our unconsolidated and consolidated
ventures. We reflect our share of our Adjusted EBITDA
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 Adjusted EBITDA measures to remove the noncontrolling
interests share of the applicable reconciling items based on our
average ownership percentage for the applicable periods.
While we believe Adjusted EBITDA is an important measure, it
should not be used alone because it excludes significant components
of net earnings, such as our historical cash expenditures or future
cash requirements for working capital, capital expenditures,
distribution requirements, contractual commitments or interest and
principal payments on our outstanding debt and is therefore limited
as an analytical tool.
Our computation of Adjusted EBITDA may not be comparable to
EBITDA reported by other companies in both the real estate industry
and other industries. We compensate for the limitations of Adjusted
EBITDA by providing investors with financial statements prepared
according to GAAP, along with this detailed discussion of Adjusted
EBITDA and a reconciliation to Adjusted EBITDA from consolidated
net earnings attributable to common stockholders.
Business Line Reporting is a non-GAAP financial
measure. Core FFO and development gains are generated by our
three lines of business: (i) real estate operations; (ii) strategic
capital; and (iii) development. The real estate operations
line of business represents total Prologis Core FFO, less the
amount allocated to the Strategic Capital line of business.
The amount of Core FFO allocated to the Strategic Capital line of
business represents the third party share of asset management, Net
Promotes and transactional fees that we earn from our consolidated
and unconsolidated co-investment ventures less costs directly
associated to our strategic capital group. Realized
development gains include our share of gains on dispositions of
development properties and land, net of taxes. To calculate the per
share amount, the amount generated by each line of business is
divided by the weighted average diluted common shares outstanding
used in our Core FFO per share calculation. Management believes
evaluating our results by line of business is a useful supplemental
measure of our operating performance because it helps the investing
public compare the operating performance of Prologis' respective
businesses to other companies' comparable businesses. Prologis'
computation of FFO by line of business may not be comparable to
that reported by other real estate investment trusts as they may
use different methodologies in computing such measures.
Calculation of Per Share Amounts
in thousands,
except per share amount
|
Three Months
Ended
|
|
|
Nine Months
Ended
|
|
|
Sep.
30,
|
|
|
Sep.
30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
2018
|
|
|
2017
|
|
Net
earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to common stockholders
|
$
|
346,345
|
|
$
|
876,218
|
|
|
$
|
1,046,858
|
|
$
|
1,346,416
|
|
Noncontrolling
interest attributable to exchangeable limited
partnership
units
|
|
10,593
|
|
|
24,362
|
|
|
|
31,502
|
|
|
38,127
|
|
Adjusted net
earnings attributable to common stockholders -
Diluted
|
$
|
356,938
|
|
$
|
900,580
|
|
|
$
|
1,078,360
|
|
$
|
1,384,543
|
|
Weighted average
common shares outstanding - Basic
|
|
574,520
|
|
|
531,288
|
|
|
|
546,612
|
|
|
530,036
|
|
Incremental weighted
average effect on exchange of
limited
partnership units
|
|
18,153
|
|
|
15,641
|
|
|
|
17,097
|
|
|
16,150
|
|
Incremental weighted
average effect of equity awards
|
|
4,974
|
|
|
7,234
|
|
|
|
4,890
|
|
|
5,432
|
|
Weighted average
common shares outstanding - Diluted
|
|
597,647
|
|
|
554,163
|
|
|
|
568,599
|
|
|
551,618
|
|
Net earnings per
share - Basic
|
$
|
0.60
|
|
$
|
1.65
|
|
|
$
|
1.92
|
|
$
|
2.54
|
|
Net earnings per
share - Diluted
|
$
|
0.60
|
|
$
|
1.63
|
|
|
$
|
1.90
|
|
$
|
2.51
|
|
Core
FFO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core FFO attributable
to common stockholders/unitholders
|
$
|
427,484
|
|
$
|
369,730
|
|
|
$
|
1,261,828
|
|
$
|
1,177,886
|
|
Noncontrolling
interest attributable to exchangeable limited
partnership
units
|
|
395
|
|
|
572
|
|
|
|
1,177
|
|
|
2,488
|
|
Core FFO
attributable to common stockholders/unitholders -
Diluted
|
$
|
427,879
|
|
$
|
370,302
|
|
|
$
|
1,263,005
|
|
$
|
1,180,374
|
|
Weighted average
common shares outstanding - Basic
|
|
574,520
|
|
|
531,288
|
|
|
|
546,612
|
|
|
530,036
|
|
Incremental weighted
average effect on exchange of
limited
partnership units
|
|
18,153
|
|
|
15,641
|
|
|
|
17,097
|
|
|
16,150
|
|
Incremental weighted
average effect of equity awards
|
|
4,974
|
|
|
7,234
|
|
|
|
4,890
|
|
|
5,432
|
|
Weighted average
common shares outstanding - Diluted
|
|
597,647
|
|
|
554,163
|
|
|
|
568,599
|
|
|
551,618
|
|
Core FFO per share
- Diluted
|
$
|
0.72
|
|
$
|
0.67
|
|
|
$
|
2.22
|
|
$
|
2.14
|
|
Estimated Value Creation represents the value that we
expect to create through our development and leasing activities. We
calculate Estimated Value Creation by estimating the Stabilized NOI
that the property will generate and applying a stabilized
capitalization rate applicable to that property. Estimated Value
Creation is calculated as the amount by which the value exceeds our
TEI and does not include any fees or promotes we may earn.
Estimated Value Creation for our Value-Added Properties that are
sold includes the realized economic gain.
Estimated Weighted Average Margin is calculated on
development properties as Estimated Value Creation, less estimated
closing costs and taxes, if any, on properties expected to be sold
or contributed, divided by TEI.
Estimated Weighted Average Stabilized Yield is calculated
on development properties as Stabilized NOI divided by TEI.
FFO, as modified by Prologis attributable to common
stockholders/unitholders ("FFO, as modified by Prologis"); Core FFO
attributable to common stockholders/unitholders ("Core FFO"); AFFO
attributable to common stockholders/unitholders ("AFFO");
(collectively referred to as "FFO"). FFO is a non-GAAP
financial measure that is commonly used in the real estate
industry. The most directly comparable GAAP measure to FFO is net
earnings.
The National Association of Real Estate Investment Trusts
("NAREIT") defines FFO as earnings computed under GAAP to exclude
historical cost depreciation and gains and losses from the sales,
along with impairment charges, of previously depreciated
properties. We also exclude the gains on revaluation of equity
investments upon acquisition of a controlling interest and the gain
recognized from a partial sale of our investment, as these are
similar to gains from the sales of previously depreciated
properties. We exclude similar adjustments from our unconsolidated
entities and the third parties' share of our consolidated
co-investment 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 principally 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
the disposition of land and development properties that were
developed with the intent to contribute or sell;
|
(ii)
|
income tax expense
related to the sale of investments in real estate;
|
(iii)
|
impairment charges
recognized related to our investments in real estate generally as a
result of our change in intent to contribute or sell these
properties;
|
(iv)
|
gains or losses from
the early extinguishment of debt and redemption and repurchase of
preferred stock; and
|
(v)
|
expenses related to
natural disasters.
|
We use Core FFO, including by segment and region, to: (i) assess
our operating performance as compared to other real estate
companies; (ii) evaluate our performance and the performance of our
properties in comparison with expected results and results of
previous periods; (iii) evaluate the performance of our management;
(iv) budget and forecast future results to assist in the allocation
of resources; (v) provide guidance to the financial markets to
understand our expected operating performance; and (vi) evaluate
how a specific potential investment will impact our future
results.
AFFO
To arrive at AFFO, we adjust Core FFO to include realized gains
from the disposition of land and development properties and
recurring capital expenditures and exclude the following items that
we recognize directly in Core FFO:
(i)
|
straight-line
rents;
|
(ii)
|
amortization of
above- and below-market lease intangibles;
|
(iii)
|
amortization of
management contracts;
|
(iv)
|
amortization of debt
premiums and discounts and financing costs, net of amounts
capitalized, and;
|
(v)
|
stock compensation
expense.
|
We use AFFO to (i) assess our operating performance as compared
to other real estate companies, (ii) evaluate our performance and
the performance of our properties in comparison with expected
results and results of previous periods, (iii) evaluate the
performance of our management, (iv) budget and forecast future
results to assist in the allocation of resources, and (v) evaluate
how a specific potential investment will impact our future
results.
Limitations on the use of our FFO measures
While we believe our modified FFO measures are important
supplemental measures, neither NAREIT's nor our measures of FFO
should be used alone because they exclude significant economic
components of net earnings computed under GAAP and are, therefore,
limited as an analytical tool. Accordingly, these are only a few of
the many measures we use when analyzing our business. Some of
the limitations are:
- The current income tax expenses that are excluded from our
modified FFO measures represent the taxes and transaction costs
that are payable.
- Depreciation and amortization of real estate assets are
economic costs that are excluded from FFO. FFO is limited, as it
does not reflect the cash requirements that may be necessary for
future replacements of the real estate assets. Furthermore, the
amortization of capital expenditures and leasing costs necessary to
maintain the operating performance of logistics facilities are not
reflected in FFO.
- Gains or losses from non-development property dispositions and
impairment charges related to expected dispositions represent
changes in value of the properties. By excluding these gains and
losses, FFO does not capture realized changes in the value of
disposed properties arising from changes in market conditions.
- The deferred income tax benefits and expenses that are excluded
from our modified FFO measures result from the creation of a
deferred income tax asset or liability that may have to be settled
at some future point. Our modified FFO measures do not currently
reflect any income or expense that may result from such
settlement.
- The foreign currency exchange gains and losses that are
excluded from our modified FFO measures are generally recognized
based on movements in foreign currency exchange rates through a
specific point in time. The ultimate settlement of our foreign
currency-denominated net assets is indefinite as to timing and
amount. Our FFO measures are limited in that they do not reflect
the current period changes in these net assets that result from
periodic foreign currency exchange rate movements.
- The gains and losses on extinguishment of debt or preferred
stock that we exclude from our Core FFO, may provide a benefit or
cost to us as we may be settling our obligation at less or more
than our future obligation.
- The natural disaster expenses that we exclude from Core FFO are
costs that we have incurred.
We compensate for these limitations by using our FFO measures
only in conjunction with net earnings computed under GAAP when
making our decisions. This information should be read with our
complete Consolidated Financial Statements prepared under GAAP. To
assist investors in compensating for these limitations, we
reconcile our modified FFO measures to our net earnings computed
under GAAP.
Guidance. The following is a reconciliation of our annual
guided Net Earnings per share to our guided Core FFO per share:
|
Low
|
|
High
|
|
Net
Earnings
|
$
|
2.68
|
|
$
|
2.72
|
|
Our share
of:
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
1.80
|
|
|
1.82
|
|
Net gains on real
estate transactions, net of taxes
|
|
(1.36)
|
|
|
(1.40)
|
|
Unrealized foreign
currency losses and other, net
|
|
(0.11)
|
|
|
(0.11)
|
|
Core FFO
|
$
|
3.01
|
|
$
|
3.03
|
|
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 percentage change in
starting rental rates per the lease agreement, on new and renewed
leases, commenced during the periods compared with the previous
ending rental rates in that same space. This measure excludes any
short-term leases of less than one-year, holdover payments, free
rent periods and introductory (teaser rates) defined as 50% or less
of the stabilized rate.
Rent Change (Net Effective) represents the percentage
change in net effective rental rates (average rate over the lease
term), on new and renewed leases, commenced during the period
compared with the previous net effective rental rates in that same
space. This measure excludes any short-term leases of less than one
year and holdover payments.
Same Store. Our same store metrics are non-GAAP financial
measures, which are commonly used in the real estate industry and
expected from the financial community, on both a net-effective and
cash basis. We evaluate the performance of the operating properties
we own and manage using a "same store" analysis because the
population of properties in this analysis is consistent from period
to period, which allows us to analyze our ongoing business
operations.
We define our same store population for the three months ended
June 30, 2018 as our owned and
managed properties that were in the Operating Portfolio at
January 1, 2017 and owned throughout
the end of the same three month period in both 2018 and 2017. The
same store population excludes development properties that were not
stabilized at the beginning of the period (January 1, 2017) and properties acquired or
disposed of to third parties during the period. Beginning
January 1, 2018, we modified our
definition of same store to align on consistent methodologies with
members of the industrial REIT group. This did not materially
change our historical amounts reported. To derive an appropriate
measure of period-to-period operating performance, we remove the
effects of foreign currency exchange rate movements by using the
reported period end exchange rate to translate from local currency
into the U.S. dollar, for both periods. We believe the factors that
affect rental revenues, rental recoveries, rental expenses and NOI
in the same store portfolio are generally the same as for our
consolidated portfolio.
As our same store measures are non-GAAP financial measures, they
have certain limitations as analytical tools and may vary among
real estate companies. As a result, we provide a reconciliation of
rental revenues, rental recoveries and rental expenses from our
Consolidated Financial Statements prepared in accordance with GAAP
to same store property NOI with explanations of how these metrics
are calculated. In addition, we further remove certain noncash
items (straight-line rent adjustments and amortization of lease
intangibles) included in the financial statements prepared in
accordance with GAAP to reflect a cash same store number. To
clearly label these metrics, they are categorized as same store
portfolio NOI – net effective and same store portfolio NOI –
cash.
The following is a reconciliation of our consolidated rental
revenues, rental recoveries, rental expenses and property NOI, as
included in the Consolidated Statements of Income, to the
respective amounts in our same store portfolio analysis:
dollars in
thousands
|
Three Months
Ended
|
|
|
|
Sep.
30,
|
|
|
|
2018
|
|
2017
|
|
Change
(%)
|
|
Rental
revenues:
|
|
|
|
|
|
|
|
|
|
|
Rental
revenues
|
$
|
476,865
|
|
$
|
416,427
|
|
|
|
|
|
Rental
recoveries
|
|
132,109
|
|
|
114,755
|
|
|
|
|
Per the Consolidated
Statements of Income (a)
|
|
608,974
|
|
|
531,182
|
|
|
|
|
Adjustments to derive
same store results:
|
|
|
|
|
|
|
|
|
|
|
Properties not
included in same store portfolio and other adjustments (a)(b)
|
|
(122,458)
|
|
|
(66,000)
|
|
|
|
|
|
Unconsolidated
co-investment ventures (a)
|
|
535,634
|
|
|
512,793
|
|
|
|
|
Same Store -
rental revenues - net effective
|
$
|
1,022,150
|
|
$
|
977,975
|
|
|
4.5
|
%
|
Straight-line rent
adjustments
|
|
(8,717)
|
|
|
(17,178)
|
|
|
|
|
Fair value lease
adjustments
|
|
241
|
|
|
(289)
|
|
|
|
|
Same Store -
rental revenues - cash
|
$
|
1,013,674
|
|
$
|
960,508
|
|
|
5.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Rental
expenses:
|
|
|
|
|
|
|
|
|
|
Per the Consolidated
Statements of Income (a)
|
$
|
147,184
|
|
$
|
128,735
|
|
|
|
|
Adjustments to derive
same store results:
|
|
|
|
|
|
|
|
|
|
|
Properties not
included in same store portfolio and other adjustments (a)(c)
|
|
(18,329)
|
|
|
(6,836)
|
|
|
|
|
|
Unconsolidated
co-investment ventures (a)
|
|
118,541
|
|
|
111,786
|
|
|
|
|
Same Store -
rental expenses - net effective and cash
|
$
|
247,396
|
|
$
|
233,685
|
|
|
5.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Same Store - NOI -
Net Effective
|
$
|
774,754
|
|
$
|
744,290
|
|
|
4.1
|
%
|
Same Store - NOI -
Net Effective - Prologis Share (d)
|
$
|
444,241
|
|
$
|
425,101
|
|
|
4.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Same Store - NOI -
Cash
|
$
|
766,278
|
|
$
|
726,823
|
|
|
5.4
|
%
|
Same Store -
NOI - Cash - Prologis Share (d)
|
$
|
440,197
|
|
$
|
415,867
|
|
|
5.9
|
%
|
|
|
(a)
|
We include 100% of
the same store NOI from the properties in our same store portfolio.
During the periods presented, certain properties owned by us were
contributed to a co-investment venture and are included in the same
store portfolio. Neither our consolidated results nor those of the
co-investment ventures, when viewed individually, would be
comparable on a same store basis because of the changes in
composition of the respective portfolios from period to period
(e.g. the results of a contributed property are included in our
consolidated results through the contribution date and in the
results of the unconsolidated entities subsequent to the
contribution date). As a result, only line items labeled "same
store portfolio" are comparable period over period.
|
(b)
|
We exclude
non-industrial real estate properties and properties held for sale,
along with development properties that were not stabilized at the
beginning of the reporting period or properties acquired or
disposed of to third parties during the period. We also exclude net
termination and renegotiation fees to allow us to evaluate the
growth or decline in each property's rental revenues without regard
to one-time items that are not indicative of the property's
recurring operating performance. Net termination and renegotiation
fees represent the gross fee negotiated to allow a customer to
terminate or renegotiate their lease, offset by the write-off of
the asset recorded due to the adjustment to straight-line rents
over the lease term.
|
(c)
|
Rental expenses
include the direct operating expenses of the property such as
property taxes, insurance and utilities. In addition, we include an
allocation of the property management expenses for our consolidated
properties based on the property management services provided to
each property (generally, based on a percentage of revenues). On
consolidation, these amounts are eliminated and the actual costs of
providing property management services are recognized as part of
our consolidated rental expenses.
|
(d)
|
Same Store- NOI-
Prologis Share is calculated using the underlying building
information from the Same Store NOI – Net Effective and NOI - Cash
calculations and applying our ownership percentage as of September
30, 2018 to the NOI of each building for both
periods.
|
Weighted Average Stabilized Capitalization ("Cap") Rate
is calculated as Stabilized NOI divided by the Acquisition
Cost.
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SOURCE Prologis, Inc.