Amid an uncertain economic backdrop, business growth
indicators remain strong
SAN
FRANCISCO, Oct. 19, 2022 /PRNewswire/
-- Prologis, Inc. (NYSE: PLD), the global leader in logistics
real estate, today reported results for the third quarter of
2022.
Net earnings per diluted share was $1.36 for the quarter compared with $0.97 for the third quarter of 2021. Core funds
from operations (Core FFO)* per diluted share was $1.73 for the quarter compared with $1.04 for the same period in 2021. The third
quarter of 2022 included $0.57 of net
promote income, while the same period in 2021 included $0.01.
"Our record results for the quarter point to the continued
strength of our business; however, given the impact
of aggressive Fed tightening and the rapid change in market
sentiment, we will run our company assuming an economic slowdown,"
said Hamid R. Moghadam, co-founder
and CEO, Prologis. "We have built our portfolio to outperform and
our balance sheet to be resilient throughout cycles - we view this
as a time of opportunity. We will remain patient to capitalize on
growth opportunities as they emerge."
OPERATING PERFORMANCE
Owned &
Managed
|
3Q22
|
Notes
|
Average
Occupancy
|
97.7 %
|
|
Leases
Commenced
|
51.0MSF
|
45.2MSF operating
portfolio and 5.8MSF
development portfolio
|
Retention
|
76.4 %
|
|
|
|
Prologis
Share
|
3Q22
|
Notes
|
Net Effective Rent
Change
|
59.7 %
|
All-time high; Led by U.S. at
67.0%
|
Cash Rent
Change
|
38.5 %
|
|
Cash Same Store
NOI*
|
9.3 %
|
All-time high; Led by Europe at
10.6%
|
DUKE PORTFOLIO EXPANDS MARKETS, CUSTOMERS AND
OPPORTUNITIES
The acquisition of Duke Realty Corporation,
which closed on October 3, 2022,
provides Prologis with additional growth from high-quality
properties and more than 500 new customers. Having completed the
integration and accomplished day-one cost synergies, the company
will now focus on building accretion through incremental property
cash flows and Essentials income. The acquisition is not included
in Prologis' third quarter results but is factored into updated
2022 guidance.
DEPLOYMENT ACTIVITY
Prologis Share
|
3Q22
|
Acquisitions
|
$714M
|
Weighted avg stabilized cap
rate (excluding other real estate)
|
4.2 %
|
Development
Stabilizations
|
$1,039M
|
Estimated weighted avg
yield
|
6.1 %
|
Estimated weighted avg
margin
|
40.9 %
|
Estimated value
creation
|
$425M
|
% Build-to-suit
|
60.4 %
|
Development
Starts
|
$1,139M
|
Estimated weighted avg
yield
|
6.3 %
|
Estimated weighted avg
margin
|
33.6 %
|
Estimated value
creation
|
$383M
|
% Build-to-suit
|
52.8 %
|
Total
Dispositions and
Contributions
|
$129M
|
Weighted avg
stabilized cap rate (excluding land and other real
estate)
|
3.7 %
|
BALANCE SHEET & LIQUIDITY
"We have significant
liquidity, low leverage and investment capacity to support our
operations and to allow for opportunistic investments," said
Timothy D. Arndt, chief financial
officer. "Additionally, our embedded lease mark-to-market continued
to expand to 62%, and we have substantially insulated our earnings
and equity from foreign currency movements over the next several
years."
During the third quarter, Prologis and its co-investment
ventures issued $3.1 billion of debt
at a weighted average interest rate of 3.6%, and a weighted average
term of 7.5 years. This activity includes $1.2 billion in green bonds. Year-to-date,
Prologis and its co-investment ventures issued $10.8 billion of debt at a weighted average
interest rate of 2.6% and a weighted average term of 7.0 years.
"The capital markets remain open for us, as demonstrated by our
most recent green bond raise in late September," Arndt added. "This
is a testament to the hard work and discipline we have exhibited in
building an industry-leading balance sheet."
The company has maintained its leading liquidity position with
approximately $5.3 billion in cash
and availability on its credit facilities. As of September 30, 2022, debt as a percentage of total
market capitalization was 20.7%, and the company's weighted average
interest rate on its share of total debt was 1.9% with a weighted
average term of 9.6 years. In addition, the company has no
significant debt maturities until 2026.
FOREIGN CURRENCY STRATEGY
Prologis hedges its exposure
to foreign currency fluctuations by borrowing in the currencies in
which it invests and using derivative financial instruments. As of
September 30, 2022, 95% of Prologis'
equity was in USD and Core FFO* forecasted in foreign currencies
for 2023, 2024 and 2025 were 99%, 98% and 95%, respectively, hedged
through derivative contracts.
2022 GUIDANCE
"While confident as ever about the
resiliency of our business, we are exercising caution in the near
term," said Arndt. "Accordingly, we are taking a more conservative
approach in how we choose to allocate our capital, and are
therefore lowering our guidance for development starts,
dispositions and contributions while we closely monitor the
market."
2022
GUIDANCE
|
|
|
|
Earnings (per
diluted share)
|
Previous
|
Revised
|
Change at
M.P.
|
Net Earnings
|
$5.15 to
$5.25
|
$4.25 to
$4.30
|
(17.8) %
|
Core FFO*
|
$5.14 to
$5.18
|
$5.12 to
$5.14**
|
(0.6) %
|
Core FFO, excluding net
promote income*
|
$4.54 to
$4.58
|
$4.60 to
$4.62
|
1.1 %
|
|
|
|
|
Operations
|
|
|
|
Average
occupancy
|
97.25% to
97.75%
|
97.25% to
97.75%
|
- bps
|
Cash Same Store NOI* -
PLD share
|
8.25% to
8.75%
|
8.50% to
8.75%
|
12.5 bps
|
|
|
|
|
Strategic Capital
(in millions)
|
Previous
|
Revised
|
Change at
M.P.
|
Strategic Capital
revenue,
excluding promote
revenue
|
$550 to
$560
|
$535 to
$545
|
(2.7) %
|
Net promote
income
|
$460
|
$420
|
(8.7) %
|
|
|
|
|
G&A (in
millions)
|
|
|
|
General &
administrative expenses
|
$315 to
$320
|
$325 to
$330
|
3.1 %
|
|
|
|
Capital Deployment –
Prologis Share (in millions)
|
|
|
Development
stabilizations
|
$2,300 to
$2,600
|
$2,700 to
$3,000
|
16.3 %
|
Development
starts
|
$4,500 to
$5,000
|
$4,200 to
$4,600
|
(7.4) %
|
Acquisitions
|
$1,200 to
$1,700
|
$1,900 to
$2,100
|
37.9 %
|
Contributions
|
$1,600 to
$1,900
|
$800 to
$900
|
(51.4) %
|
Dispositions
|
$1,900 to
$2,200
|
$1,300 to
$1,400
|
(34.1) %
|
Net
sources/(uses)
|
$(2,200) to
$(2,600)
|
$(4,000) to
$(4,400)
|
$(1,800)
|
Realized development
gains
|
$750 to
$850
|
$400 to
$500
|
$(350)
|
*
|
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.
|
**
|
The decrease in Core
FFO 2022 guidance was mostly attributed to lower promote
guidance.
|
The earnings guidance described above gives effect to the
acquisition of Duke Realty Corporation that closed on October 3, 2022, as well as potential gains
recognized from real estate transactions but excludes any future or
potential foreign currency or derivative gains or losses as our
guidance assumes constant foreign currency rates. 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 2022 relates predominantly to
these items. Please refer to our quarterly Supplemental
Information, which is available on our Investor Relations website
at https://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.
OCTOBER 19, 2022, CALL
DETAILS
The call will take place on Wednesday, October 19, 2022, at 9:00 a.m. PT/12:00 p.m.
ET. To access a live broadcast of the call, please dial +1
(877) 897-2615 (toll-free from the United
States and Canada) or +1
(201) 689-8514 (from all other countries). A live webcast can be
accessed from the Investor Relations section of
www.prologis.com.
A telephonic replay will be available October 19 – November
2 at +1 (877) 660-6853 (from the
United States and Canada)
or +1 (201) 612-7415 (from all other countries) using access code
13733185. The webcast replay will be posted in the Investor
Relations section of www.prologis.com under "Events &
Presentations."
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, 2022,
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 1.0 billion square feet (97 million
square meters) in 19 countries. Prologis leases modern logistics
facilities to a diverse base of approximately 5,800 customers
principally 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,"
and "estimates," including 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, contribution and 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 and political
climates; (ii) changes in global 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 changes in income tax laws and 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; (viii) risks of doing business
internationally, including currency risks; (ix) environmental
uncertainties, including risks of natural disasters; (x) risks
related to the current coronavirus pandemic; and (xi) 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 except as may be required by law.
dollars in millions,
except per share/unit data
|
Three Months ended
September 30,
|
|
Nine Months ended
September 30,
|
|
|
|
|
|
2022
|
2021
|
|
2022
|
2021
|
|
Rental and other
revenues
|
$
1,156
|
$
1,042
|
|
$
3,337
|
$
3,091
|
|
Strategic capital
revenues
|
595
|
141
|
|
885
|
391
|
|
|
Total
revenues
|
1,751
|
1,183
|
|
4,222
|
3,482
|
|
Net earnings
attributable to common stockholders
|
1,014
|
722
|
|
2,773
|
1,686
|
|
Core FFO attributable
to common stockholders/unitholders*
|
1,328
|
795
|
|
3,010
|
2,312
|
|
AFFO attributable to
common stockholders/unitholders*
|
1,260
|
751
|
|
2,987
|
2,367
|
|
Adjusted EBITDA
attributable to common stockholders/unitholders*
|
1,610
|
1,096
|
|
3,956
|
3,280
|
|
Estimated value
creation from development stabilizations - Prologis
Share
|
425
|
173
|
|
1,203
|
610
|
|
Common stock dividends
and common limited partnership unit distributions
|
605
|
482
|
|
1,814
|
1,447
|
|
|
|
|
|
|
|
|
|
|
|
Per common share -
diluted:
|
|
|
|
|
|
|
|
Net earnings
attributable to common stockholders
|
$
1.36
|
$
0.97
|
|
$
3.72
|
$
2.27
|
|
|
Core FFO attributable
to common stockholders/unitholders*
|
1.73
|
1.04
|
|
3.93
|
3.02
|
|
|
Business line
reporting:
|
|
|
|
|
|
|
|
|
Real estate
operations*
|
1.05
|
0.94
|
|
3.05
|
2.76
|
|
|
|
Strategic
capital*
|
0.68
|
0.10
|
|
0.88
|
0.26
|
|
|
|
Core FFO
attributable to common stockholders/unitholders*
|
1.73
|
1.04
|
|
3.93
|
3.02
|
|
|
|
Realized development
gains, net of taxes*
|
0.10
|
0.18
|
|
0.49
|
0.62
|
|
Dividends and
distributions per common share/unit
|
0.79
|
0.63
|
|
2.37
|
1.89
|
|
|
* This is a non-GAAP
financial measure. Please see our Notes and Definitions for further
explanation.
|
in thousands
|
|
September 30,
2022
|
|
June 30,
2022
|
|
December 31,
2021
|
|
Assets:
|
|
|
|
|
|
|
|
Investments in real
estate properties:
|
|
|
|
|
|
|
|
|
Operating
properties
|
$
46,625,674
|
|
$
45,708,272
|
|
$
44,453,760
|
|
|
|
Development
portfolio
|
3,441,800
|
|
3,465,438
|
|
2,729,340
|
|
|
|
Land
|
2,677,988
|
|
2,855,734
|
|
2,519,590
|
|
|
|
Other real estate
investments
|
3,209,408
|
|
3,241,586
|
|
3,302,500
|
|
|
|
|
|
|
55,954,870
|
|
55,271,030
|
|
53,005,190
|
|
|
|
Less accumulated
depreciation
|
8,558,576
|
|
8,251,995
|
|
7,668,187
|
|
|
|
|
|
Net investments in real
estate properties
|
47,396,294
|
|
47,019,035
|
|
45,337,003
|
|
|
Investments in and
advances to unconsolidated entities
|
8,659,129
|
|
8,443,644
|
|
8,610,958
|
|
|
Assets held for sale or
contribution
|
614,356
|
|
403,617
|
|
669,688
|
|
|
|
|
|
Net investments in real
estate
|
56,669,779
|
|
55,866,296
|
|
54,617,649
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
636,282
|
|
437,515
|
|
556,117
|
|
|
Other assets
|
3,639,468
|
|
3,460,006
|
|
3,312,454
|
|
Total
assets
|
$
60,945,529
|
|
$
59,763,817
|
|
$
58,486,220
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Equity:
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
Debt
|
$
18,139,299
|
|
$
18,040,832
|
|
$
17,715,054
|
|
|
|
Accounts payable,
accrued expenses and other liabilities
|
3,199,909
|
|
2,849,047
|
|
3,028,956
|
|
|
|
|
|
Total
liabilities
|
21,339,208
|
|
20,889,879
|
|
20,744,010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
Stockholders'
equity
|
35,293,100
|
|
34,575,767
|
|
33,426,873
|
|
|
|
Noncontrolling
interests
|
3,323,541
|
|
3,333,421
|
|
3,397,538
|
|
|
|
Noncontrolling
interests - limited partnership unitholders
|
989,680
|
|
964,750
|
|
917,799
|
|
|
|
|
|
Total equity
|
39,606,321
|
|
38,873,938
|
|
37,742,210
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
and equity
|
$
60,945,529
|
|
$
59,763,817
|
|
$
58,486,220
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
|
|
|
September
30,
|
|
September
30,
|
|
in thousands, except
per share amounts
|
2022
|
2021
|
|
2022
|
2021
|
|
Revenues:
|
|
|
|
|
|
|
|
Rental
|
$
1,151,846
|
$
1,037,281
|
|
$
3,322,159
|
$
3,073,700
|
|
|
Strategic
capital
|
594,752
|
141,448
|
|
884,916
|
390,796
|
|
|
Development management
and other
|
4,294
|
4,320
|
|
15,025
|
17,711
|
|
|
|
Total
revenues
|
1,750,892
|
1,183,049
|
|
4,222,100
|
3,482,207
|
|
Expenses:
|
|
|
|
|
|
|
|
Rental
|
284,707
|
256,607
|
|
830,846
|
779,624
|
|
|
Strategic
capital
|
130,555
|
52,389
|
|
239,418
|
146,938
|
|
|
General and
administrative
|
87,903
|
66,970
|
|
245,663
|
219,344
|
|
|
Depreciation and
amortization
|
401,450
|
390,806
|
|
1,200,410
|
1,181,117
|
|
|
Other
|
7,004
|
4,413
|
|
28,214
|
15,051
|
|
|
|
Total
expenses
|
911,619
|
771,185
|
|
2,544,551
|
2,342,074
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
before gains on real estate transactions, net
|
839,273
|
411,864
|
|
1,677,549
|
1,140,133
|
|
|
Gains on dispositions
of development properties and land, net
|
74,678
|
139,406
|
|
390,686
|
500,410
|
|
|
Gains on other
dispositions of investments in real estate, net
(excluding development properties and land)
|
1,019
|
214,390
|
|
585,854
|
358,180
|
|
Operating
income
|
914,970
|
765,660
|
|
2,654,089
|
1,998,723
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
Earnings from
unconsolidated co-investment ventures, net
|
78,452
|
84,020
|
|
220,001
|
200,027
|
|
|
Earnings from other
unconsolidated ventures, net
|
6,473
|
7,798
|
|
21,480
|
31,259
|
|
|
Interest
expense
|
(63,884)
|
(63,638)
|
|
(188,241)
|
(203,331)
|
|
|
Foreign currency and
derivative gains and interest and other income, net
|
171,832
|
63,326
|
|
364,623
|
142,859
|
|
|
Losses on early
extinguishment of debt, net
|
-
|
-
|
|
(18,895)
|
(187,453)
|
|
|
|
Total other income
(expense)
|
192,873
|
91,506
|
|
398,968
|
(16,639)
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before
income taxes
|
1,107,843
|
857,166
|
|
3,053,057
|
1,982,084
|
|
|
Current income tax
expense
|
(32,512)
|
(63,244)
|
|
(94,011)
|
(124,298)
|
|
|
Deferred income tax
benefit (expense)
|
(6,157)
|
3,809
|
|
(23,714)
|
(10,049)
|
|
Consolidated net
earnings
|
1,069,174
|
797,731
|
|
2,935,332
|
1,847,737
|
|
Net earnings
attributable to noncontrolling interests
|
(24,979)
|
(54,406)
|
|
(79,257)
|
(109,768)
|
|
Net earnings
attributable to noncontrolling interests - limited partnership
units
|
(28,731)
|
(19,787)
|
|
(78,433)
|
(46,908)
|
|
Net earnings
attributable to controlling interests
|
1,015,464
|
723,538
|
|
2,777,642
|
1,691,061
|
|
Preferred stock
dividends
|
(1,531)
|
(1,531)
|
|
(4,600)
|
(4,614)
|
|
Net earnings
attributable to common stockholders
|
$
1,013,933
|
$
722,007
|
|
$
2,773,042
|
$
1,686,447
|
|
Weighted average common
shares outstanding - Diluted
|
766,372
|
764,945
|
|
766,019
|
764,644
|
|
Net earnings per
share attributable to common stockholders - Diluted
|
$
1.36
|
$
0.97
|
|
$
3.72
|
$
2.27
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
|
|
|
September
30,
|
|
September
30,
|
|
in thousands
|
2022
|
2021
|
|
2022
|
2021
|
|
Net earnings
attributable to common stockholders
|
$
1,013,933
|
$
722,007
|
|
$
2,773,042
|
$
1,686,447
|
|
Add (deduct) NAREIT
defined adjustments:
|
|
|
|
|
|
|
|
Real estate related
depreciation and amortization
|
388,953
|
379,646
|
|
1,163,265
|
1,149,199
|
|
|
Gains on other
dispositions of investments in real estate, net of taxes (excluding
development properties and land)
|
(1,019)
|
(187,754)
|
|
(591,496)
|
(331,544)
|
|
|
Reconciling items
related to noncontrolling interests
|
(1,113)
|
19,408
|
|
3,813
|
260
|
|
|
Our share of
reconciling items related to unconsolidated co-investment
ventures
|
79,633
|
51,702
|
|
224,920
|
200,483
|
|
|
Our share of
reconciling items related to other unconsolidated
ventures
|
5,314
|
7,429
|
|
16,332
|
22,053
|
|
NAREIT defined FFO
attributable to common stockholders/unitholders*
|
$
1,485,701
|
$
992,438
|
|
$
3,589,876
|
$
2,726,898
|
|
Add (deduct) our
defined adjustments:
|
|
|
|
|
|
|
|
Unrealized foreign
currency and derivative gains, net
|
(76,140)
|
(66,739)
|
|
(231,481)
|
(150,057)
|
|
|
Deferred income tax
expense (benefit)
|
6,157
|
(3,809)
|
|
23,714
|
10,049
|
|
|
Current income tax
expense on dispositions related to acquired tax
liabilities
|
72
|
-
|
|
72
|
2,992
|
|
|
Reconciling items
related to noncontrolling interests
|
-
|
1,336
|
|
-
|
915
|
|
|
Our share of
reconciling items related to unconsolidated co-investment
ventures
|
(15,599)
|
(256)
|
|
(14,044)
|
(2,276)
|
|
FFO, as modified by
Prologis attributable to common
stockholders/unitholders*
|
$
1,400,191
|
$
922,970
|
|
$
3,368,137
|
$
2,588,521
|
|
Adjustments to arrive
at Core FFO attributable to common
stockholders/unitholders*:
|
|
|
|
|
|
|
|
Gains on dispositions
of development properties and land, net
|
(74,678)
|
(139,406)
|
|
(390,686)
|
(500,410)
|
|
|
Current income tax
expense on dispositions
|
963
|
4,584
|
|
7,047
|
29,148
|
|
|
Losses on early
extinguishment of debt, net
|
-
|
-
|
|
18,895
|
187,453
|
|
|
Reconciling items
related to noncontrolling interests
|
-
|
6,630
|
|
4,484
|
6,606
|
|
|
Our share of
reconciling items related to unconsolidated co-investment
ventures
|
1,226
|
360
|
|
1,226
|
2,947
|
|
|
Our share of
reconciling items related to other unconsolidated
ventures
|
655
|
(230)
|
|
655
|
(2,284)
|
|
Core FFO
attributable to common stockholders/unitholders*
|
$
1,328,357
|
$
794,908
|
|
$
3,009,758
|
$
2,311,981
|
|
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
|
74,678
|
139,406
|
|
390,686
|
500,410
|
|
|
Current income tax
expense on dispositions
|
(963)
|
(4,584)
|
|
(7,047)
|
(29,148)
|
|
|
Straight-lined rents
and amortization of lease intangibles
|
(36,688)
|
(37,473)
|
|
(111,928)
|
(113,279)
|
|
|
Property
improvements
|
(61,747)
|
(57,745)
|
|
(117,563)
|
(98,874)
|
|
|
Turnover
costs
|
(86,697)
|
(85,816)
|
|
(262,177)
|
(233,853)
|
|
|
Amortization of debt
premium, financing costs and management contracts, net
|
3,264
|
2,923
|
|
8,853
|
8,001
|
|
|
Stock compensation
amortization expense
|
61,670
|
25,895
|
|
140,022
|
84,416
|
|
|
Reconciling items
related to noncontrolling interests
|
11,587
|
5,137
|
|
33,602
|
20,296
|
|
|
Our share of
reconciling items related to unconsolidated ventures
|
(33,668)
|
(31,970)
|
|
(97,448)
|
(82,701)
|
|
AFFO attributable to
common stockholders/unitholders*
|
$
1,259,793
|
$
750,681
|
|
$
2,986,758
|
$
2,367,249
|
|
|
|
* This is a non-GAAP
financial measure. Please see our Notes and Definitions for further
explanation.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
|
|
|
September
30
|
|
September
30
|
|
in thousands
|
2022
|
2021
|
|
2022
|
2021
|
|
Net earnings
attributable to common stockholders
|
$
1,013,933
|
$
722,007
|
|
$
2,773,042
|
$
1,686,447
|
|
|
|
Gains on other
dispositions of investments in real estate, net (excluding
development properties and land)
|
(1,019)
|
(214,390)
|
|
(585,854)
|
(358,180)
|
|
|
|
Depreciation and
amortization expense
|
401,450
|
390,806
|
|
1,200,410
|
1,181,117
|
|
|
|
Interest
expense
|
63,884
|
63,638
|
|
188,241
|
203,331
|
|
|
|
Current and deferred
income tax expense, net
|
38,669
|
59,435
|
|
117,725
|
134,347
|
|
|
|
Net earnings
attributable to noncontrolling interests - limited partnership
units
|
28,731
|
19,787
|
|
78,433
|
46,908
|
|
|
|
Pro forma
adjustments
|
6,756
|
(1,473)
|
|
8,542
|
(5,105)
|
|
|
|
Preferred stock
dividends
|
1,531
|
1,531
|
|
4,600
|
4,614
|
|
|
|
Unrealized foreign
currency and derivative gains, net
|
(76,140)
|
(66,739)
|
|
(231,481)
|
(150,057)
|
|
|
|
Stock compensation
amortization expense
|
61,670
|
25,895
|
|
140,022
|
84,416
|
|
|
|
Losses on early
extinguishment of debt, net
|
-
|
-
|
|
18,895
|
187,453
|
|
|
|
Reconciling items
related to noncontrolling interests
|
(30,536)
|
1,828
|
|
(76,745)
|
(44,851)
|
|
|
|
Our share of
reconciling items related to unconsolidated ventures
|
101,228
|
93,980
|
|
320,476
|
309,416
|
|
Adjusted EBITDA
attributable to common stockholders/unitholders*
|
$
1,610,157
|
$
1,096,305
|
|
$
3,956,306
|
$
3,279,856
|
|
|
|
|
|
|
|
* This is a non-GAAP
financial measure. Please see our Notes and Definitions 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 by 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,
amortization of 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 fees and
transactional fees that we earn from our consolidated and
unconsolidated co-investment ventures less costs directly
associated with our strategic capital group and Net Promote Income.
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 companies
as they may use different methodologies in computing such
measures.
Calculation of Per Share Amounts
|
|
Three Months
Ended
|
|
|
Nine Months
Ended
|
|
|
|
Sept.
30,
|
|
|
Sept.
30,
|
|
in thousands, except
per share amount
|
|
|
2022
|
|
|
2021
|
|
|
|
2022
|
|
|
2021
|
|
Net
earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to common stockholders
|
|
$
|
1,013,933
|
|
$
|
722,007
|
|
|
$
|
2,773,042
|
|
$
|
1,686,447
|
|
Noncontrolling interest
attributable to exchangeable limited
partnership
units
|
|
|
28,792
|
|
|
19,890
|
|
|
|
78,648
|
|
|
47,131
|
|
Adjusted net
earnings attributable to common stockholders -
Diluted
|
|
$
|
1,042,725
|
|
$
|
741,897
|
|
|
$
|
2,851,690
|
|
$
|
1,733,578
|
|
Weighted average common
shares outstanding - Basic
|
|
|
740,719
|
|
|
739,439
|
|
|
|
740,585
|
|
|
739,217
|
|
Incremental weighted
average effect on exchange of
limited
partnership units
|
|
|
21,230
|
|
|
20,421
|
|
|
|
21,246
|
|
|
20,860
|
|
Incremental weighted
average effect of equity awards
|
|
|
4,423
|
|
|
5,085
|
|
|
|
4,188
|
|
|
4,567
|
|
Weighted average
common shares outstanding - Diluted
|
|
|
766,372
|
|
|
764,945
|
|
|
|
766,019
|
|
|
764,644
|
|
Net earnings per
share - Basic
|
|
$
|
1.37
|
|
$
|
0.98
|
|
|
$
|
3.74
|
|
$
|
2.28
|
|
Net earnings per
share - Diluted
|
|
$
|
1.36
|
|
$
|
0.97
|
|
|
$
|
3.72
|
|
$
|
2.27
|
|
Core
FFO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core FFO attributable
to common stockholders/unitholders
|
|
$
|
1,328,357
|
|
$
|
794,908
|
|
|
$
|
3,009,758
|
|
$
|
2,311,981
|
|
Noncontrolling interest
attributable to exchangeable limited
partnership
units
|
|
|
153
|
|
|
147
|
|
|
|
317
|
|
|
409
|
|
Core FFO
attributable to common stockholders/unitholders -
Diluted
|
|
$
|
1,328,510
|
|
$
|
795,055
|
|
|
$
|
3,010,075
|
|
$
|
2,312,390
|
|
Weighted average common
shares outstanding - Basic
|
|
|
740,719
|
|
|
739,439
|
|
|
|
740,585
|
|
|
739,217
|
|
Incremental weighted
average effect on exchange of
limited
partnership units
|
|
|
21,230
|
|
|
20,421
|
|
|
|
21,246
|
|
|
20,860
|
|
Incremental weighted
average effect of equity awards
|
|
|
4,423
|
|
|
5,085
|
|
|
|
4,188
|
|
|
4,567
|
|
Weighted average
common shares outstanding - Diluted
|
|
|
766,372
|
|
|
764,945
|
|
|
|
766,019
|
|
|
764,644
|
|
Core FFO per share -
Diluted
|
|
$
|
1.73
|
|
$
|
1.04
|
|
|
$
|
3.93
|
|
$
|
3.02
|
|
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 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 the properties in the Development Portfolio as Stabilized NOI
divided by TEI. The yields on a Prologis Share basis were as
follows:
|
Pre-Stabilized
Developments
|
|
2022 Expected
Completion
|
|
2023 and
Thereafter
Expected Completion
|
|
Total
Development
Portfolio
|
|
U.S.
|
|
6.8 %
|
|
|
6.1 %
|
|
|
6.1 %
|
|
|
6.2 %
|
|
Other
Americas
|
|
7.7 %
|
|
|
7.6 %
|
|
|
7.3 %
|
|
|
7.4 %
|
|
Europe
|
|
6.8 %
|
|
|
5.6 %
|
|
|
5.3 %
|
|
|
5.5 %
|
|
Asia
|
|
5.8 %
|
|
|
5.7 %
|
|
|
5.7 %
|
|
|
5.7 %
|
|
Total
|
|
6.3 %
|
|
|
6.2 %
|
|
|
6.0 %
|
|
|
6.1 %
|
|
Fee Related Earnings ("FRE") is a non-GAAP financial
measure and component of NAV. It is used to assess the performance
of our strategic capital business and enables management and
investors to estimate the corresponding fair value. FRE is
calculated as the third party share of asset management fees and
transactional fees from our consolidated and unconsolidated
co-investment ventures, net of direct and allocated related
expenses. As non-GAAP financial measures, FRE has certain
limitations as an analytical tool and may vary among real estate
and asset management companies. As a result, we provide a
reconciliation of Strategic Capital Revenues (from our Consolidated
Financial Statements prepared in accordance with U.S. GAAP) to our
FRE measure, as follows:
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
in
thousands
|
Sept. 30,
2022
|
|
Strategic capital
revenues
|
$
|
594,752
|
|
$
|
884,916
|
|
Less: Strategic capital
revenue from property management fees and other unconsolidated
ventures
|
|
(26,990)
|
|
|
(81,478)
|
|
Less: Prologis share of
asset management fees and transactional fees from our
unconsolidated
co-investment ventures
|
|
(21,309)
|
|
|
(67,123)
|
|
Add: Third party share
of asset management fees and transactional fees from our
consolidated
co-investment ventures
|
|
15,099
|
|
|
46,355
|
|
Effect of foreign
currency exchange
|
|
(3,536)
|
|
|
(7,672)
|
|
Third party share
of fee related and promote revenue
|
$
|
558,016
|
|
$
|
774,998
|
|
Less: Promote
revenue
|
|
(456,038)
|
|
|
(475,084)
|
|
Fee related
revenue
|
$
|
101,978
|
|
$
|
299,914
|
|
Less: Strategic capital
expenses for asset management fees and transactional
fees
|
|
(24,132)
|
|
|
(68,605)
|
|
Fee Related
Earnings
|
$
|
77,846
|
|
$
|
231,309
|
|
Fee Related Earnings Annualized utilizes the components
of the current quarter FRE to calculate an estimated annual FRE
amount. FRE annualized is calculated as the current quarter third
party share of asset management fees from consolidated and
unconsolidated co-investment ventures multiplied by four plus the
third party share of transactional fees from consolidated and
unconsolidated co-investment ventures for the trailing twelve
months. This total is reduced by trailing twelve months of
strategic capital expenses for asset management and transactional
fees.
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 sales net of
any related tax, 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)
|
foreign currency
exchange gains and losses resulting from (a) debt transactions
between us and our foreign entities, (b) third-party
debt that is used to hedge our investment in foreign entities, (c)
derivative financial instruments related to any such debt
transactions,
and (d) mark-to-market adjustments associated with other 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 recognize 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, net of
current tax expense, 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
amortization 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 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 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
(a)
|
$
|
4.25
|
|
$
|
4.30
|
|
Our share
of:
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
2.42
|
|
|
2.44
|
|
Net gains on real
estate transactions, net of taxes
|
|
(1.30)
|
|
|
(1.35)
|
|
Unrealized foreign
currency losses (gains), loss on early extinguishment of debt and
other, net
|
|
(0.25)
|
|
|
(0.25)
|
|
Core
FFO
|
$
|
5.12
|
|
$
|
5.14
|
|
(a)
|
Earnings guidance
includes potential future gains recognized from real estate
transactions, but excludes future foreign
currency and derivative gains or losses as these items are
difficult to predict.
|
Market Capitalization equals Market Equity, less
liquidation preference of the preferred shares/units, plus our
share of total debt.
Market Equity equals outstanding shares of common stock
and units multiplied by the closing stock price plus the
liquidation preference of the preferred shares/units.
Net Promote Income is promote revenue earned from third
party investors during the period, net of related cash and stock
compensation expenses, and taxes and foreign currency derivative
gains and losses, if applicable.
Owned and Managed represents the consolidated properties
and properties owned by our unconsolidated co-investment ventures,
which we manage.
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 period 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.
Retention is the square footage of all leases
commenced during the period that are rented by existing tenants
divided by the square footage of all expiring and in-place leases
during the reporting period. The square footage of tenants that
default or buy-out prior to expiration of their lease and
short-term leases of less than one year, are not included in the
calculation.
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 and investors to analyze our ongoing
business operations. We determine our same store metrics on
property NOI, which is calculated as rental revenue less rental
expense for the applicable properties in the same store population
for both consolidated and unconsolidated properties based on our
ownership interest, as further defined below.
We define our same store population for the three months ended
September 30, 2022 as the properties
in our Owned and Managed Operating Portfolio, including the
property NOI for both consolidated properties and properties owned
by the unconsolidated co-investment ventures at January 1, 2021 and owned throughout the same
three-month period in both 2021 and 2022. We believe the drivers of
property NOI for the consolidated portfolio are generally the same
for the properties owned by the ventures in which we invest and
therefore we evaluate the same store metrics of the Owned and
Managed portfolio based on Prologis' ownership in the properties
("Prologis Share"). The same store population excludes properties
held for sale to third parties, along with development properties
that were not stabilized at the beginning of the period
(January 1, 2021) and properties
acquired or disposed of to third parties during the period. 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.
As non-GAAP financial measures, the same store metrics have
certain limitations as an analytical tool and may vary among real
estate companies. As a result, we provide a reconciliation of
Rental Revenues less Rental Expenses ("Property NOI") (from our
Consolidated Financial Statements prepared in accordance with U.S.
GAAP) to our Same Store Property NOI measures, as follows:
|
Three Months
Ended
|
|
|
|
Sept.
30,
|
|
dollars in
thousands
|
2022
|
|
2021
|
|
Change
(%)
|
|
Reconciliation of
Consolidated Property NOI to Same Store Property NOI
measures:
|
|
|
|
|
|
|
|
|
|
Rental
revenues
|
$
|
1,151,846
|
|
$
|
1,037,281
|
|
|
|
|
Rental
expenses
|
|
(284,707)
|
|
|
(256,607)
|
|
|
|
|
Consolidated
Property NOI
|
|
867,139
|
|
|
780,674
|
|
|
|
|
Adjustments to
derive same store results:
|
|
|
|
|
|
|
|
|
|
|
Property NOI from
consolidated properties not included in same
store portfolio and other
adjustments (a)
|
|
(143,860)
|
|
|
(106,084)
|
|
|
|
|
|
Property NOI from
unconsolidated co-investment ventures included
in same store portfolio
(a)(b)
|
|
615,212
|
|
|
564,534
|
|
|
|
|
|
Third parties' share of
Property NOI from properties included in
same store portfolio
(a)(b)
|
|
(502,429)
|
|
|
(467,188)
|
|
|
|
|
Prologis Share of
Same Store Property NOI – Net Effective (b)
|
$
|
836,062
|
|
$
|
771,936
|
|
|
8.3
|
%
|
|
Consolidated properties
straight-line rent and fair value lease
adjustments included in the
same store portfolio (c)
|
|
(16,871)
|
|
|
(20,855)
|
|
|
|
|
|
Unconsolidated
co-investment ventures straight-line rent and fair
value lease adjustments
included in the same store portfolio (c)
|
|
(9,370)
|
|
|
(12,650)
|
|
|
|
|
|
Third parties' share of
straight-line rent and fair value lease
adjustments included
in the same store portfolio (b)(c)
|
|
7,765
|
|
|
9,412
|
|
|
|
|
Prologis Share of
Same Store Property NOI – Cash (b)(c)
|
$
|
817,586
|
|
$
|
747,843
|
|
|
9.3
|
%
|
(a)
|
We exclude properties held for sale to third parties,
along with development properties that were not stabilized at the
beginning of the period and 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. Same Store Property NOI is adjusted to include an
allocation of 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 and leasing services are recognized
as part of our consolidated rental expense.
|
(b)
|
We include the Property NOI for the same store
portfolio for both consolidated properties and properties owned by
the co-investment ventures based on our investment in the
underlying properties. In order to calculate our share of Same
Store Property NOI from the co-investment ventures in which we own
less than 100%, we use the co-investment ventures' underlying
Property NOI for the same store portfolio and apply our ownership
percentage at September 30, 2022 to the Property NOI for both
periods, including the properties contributed during the period. We
adjust the total Property NOI from the same store portfolio of the
co-investment ventures by subtracting the third parties' share of
both consolidated and unconsolidated co-investment
ventures.
|
|
During the periods presented, certain wholly owned
properties 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 venture subsequent to the contribution date
based on our ownership interest at the end of the period). As a
result, only line items labeled "Prologis Share of Same Store
Property NOI" are comparable period over
period.
|
(c)
|
We further remove certain noncash items
(straight-line rent and amortization of fair value lease
adjustments) included in the financial statements prepared in
accordance with U.S. GAAP to reflect a Same Store Property NOI –
Cash measure.
|
|
We manage our business and compensate our executives
based on the same store results of our Owned and Managed portfolio
at 100% as we manage our portfolio on an ownership blind basis. We
calculate those results by including 100% of the properties
included in our same store portfolio.
|
Weighted Average Interest Rate is based on the
effective rate, which includes the amortization of related premiums
and discounts and finance costs.
Weighted Average Stabilized Capitalization ("Cap") Rate
is calculated as Stabilized NOI divided by the Acquisition
Price.
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SOURCE Prologis, Inc.