10-QPeriod: Q3 FY2015

Prologis, Inc. Quarterly Report for Q3 Ended Sep 30, 2015

Filed November 2, 2015For Securities:PLDPLDGP

Summary

Prologis, Inc. (PLD) reported solid financial results for the nine months ended September 30, 2015, demonstrating strong growth in its core real estate operations and strategic capital segments. Total revenues increased to $1.55 billion compared to $1.31 billion in the prior year, driven by substantial growth in rental income and rental recoveries, partly due to the significant acquisition of KTR Capital Partners. The company also reported a substantial increase in net earnings attributable to common stockholders, rising to $744.4 million from $213.6 million in the same period last year. The company continued its strategic growth through acquisitions, most notably the integration of KTR, which significantly expanded its real estate portfolio. Prologis also actively managed its capital structure, issuing new debt and equity, and utilizing its credit facilities. The company maintained a strong focus on operational efficiency, evidenced by high occupancy rates and positive rent changes on lease rollovers, underscoring its resilience and strategic positioning in the industrial real estate market.

Financial Highlights

35 data points
Beta

Net Income

$258.98M

EPS (Diluted)

$0.49

Total Assets

$31.42B

Cash & Equivalents

$310.43M

Free Cash Flow

$400.67M

Financial Statements
Beta
Operating Expenses$477.23M
Operating Income$103.39M
Interest Expense$81.03M
Net Income$258.98M
EPS (Basic)$0.49
EPS (Diluted)$0.49
Shares Outstanding (Basic)523.53M
Shares Outstanding (Diluted)532.07M

Key Highlights

  • 1Total revenues increased to $1.55 billion for the nine months ended September 30, 2015, up from $1.31 billion in the prior year, primarily driven by rental income and rental recoveries.
  • 2Net earnings attributable to common stockholders significantly increased to $744.4 million for the nine months ended September 30, 2015, compared to $213.6 million in the prior year.
  • 3The company completed a major acquisition of KTR Capital Partners, adding 59 million square feet of operating properties and significant development pipeline, funded by cash, debt, and equity.
  • 4Real Estate Operations Net Operating Income (NOI) grew to $983.7 million for the nine months ended September 30, 2015, up from $796.4 million in the prior year, supported by a 120 basis point increase in average occupancy.
  • 5Prologis successfully issued new debt and equity, including €700 million in senior notes and $1.0 billion in an unsecured senior term loan, to fund acquisitions and general corporate purposes.
  • 6Positive rent change on lease rollovers averaged between 9.7% to 14.4% for the nine months ended September 30, 2015, marking the eleventh consecutive quarter of positive rent change.
  • 7The company maintained strong liquidity with $310.4 million in unrestricted cash and $2.4 billion available under its credit facilities as of September 30, 2015.

Frequently Asked Questions

The acquisition of KTR Capital Partners on May 29, 2015, significantly expanded Prologis' real estate portfolio by 59 million square feet of operating properties and added a substantial development pipeline. This acquisition was funded through a combination of cash, assumption of debt, and issuance of common limited partnership units. The results for the nine months ended September 30, 2015, included approximately four months of KTR's operational results, contributing to the increase in total revenues and Real Estate Operations NOI.

Prologis actively managed its capital structure by issuing new debt and equity. Notably, they issued €700.0 million in senior notes and drew down $1.0 billion on a new unsecured senior term loan to fund the KTR acquisition and other corporate needs. The company also saw a significant increase in total debt to $11.9 billion from $9.4 billion year-over-year, primarily due to these financing activities. The weighted average interest rate on debt decreased to 3.0% from 3.6%, indicating successful management of borrowing costs.

Prologis reported positive trends in rental income and occupancy. For the nine months ended September 30, 2015, average occupancy in operating properties increased to 95.2% from 94.0% in the prior year. Furthermore, Prologis experienced positive rent change on lease rollovers ranging from 9.7% to 14.4%, marking the eleventh consecutive quarter of positive rent change, signaling strong market demand and pricing power.

The Strategic Capital segment, which includes income from fees and promotes earned for services to unconsolidated co-investment ventures, saw a decrease in Net Operating Income (NOI) to $71.1 million for the nine months ended September 30, 2015, from $101.3 million in the prior year. This decrease was primarily attributed to a significant promote earned in the prior year from the Prologis Targeted U.S. Logistics Fund and increased expenses in 2014 related to the Prologis Promote Plan. However, the segment continues to contribute to overall revenue and aligns Prologis' interests with its partners through significant ownership stakes in these ventures.