10-QPeriod: Q3 FY2018

Prologis, Inc. Quarterly Report for Q3 Ended Sep 30, 2018

Filed October 22, 2018For Securities:PLDPLDGP

Summary

Prologis, Inc. (PLD) reported its third-quarter 2018 financial results, highlighting continued strength in its logistics real estate portfolio. The company completed a significant $8.5 billion merger with DCT Industrial Trust Inc. during the quarter, expanding its footprint in key U.S. markets and enhancing its portfolio quality and scale. This strategic move is expected to generate minimal additional administrative expenses, reinforcing Prologis' market leadership. Financially, Prologis demonstrated robust operational performance with high occupancy rates and positive rent growth on lease rollovers, signaling strong underlying demand for logistics space. The company also actively managed its debt, extending maturities and lowering its weighted average interest rate following the DCT acquisition. The report indicates Prologis is well-positioned to meet its financial obligations and pursue future growth opportunities through development, acquisitions, and strategic capital deployment.

Financial Highlights

37 data points
Beta

Revenue

$682.43M

Net Income

$346.35M

50.8% Net Margin

EPS (Diluted)

$0.60

Total Assets

$38.27B

Cash & Equivalents

$275.56M

Free Cash Flow

$500.69M

Financial Statements
Beta
Revenue$682.43M
Operating Expenses$500.91M
Operating Income$375.58M
Interest Expense$64.19M
Net Income$346.35M
EPS (Basic)$0.60
EPS (Diluted)$0.60
Shares Outstanding (Basic)574.52M
Shares Outstanding (Diluted)597.65M

Key Highlights

  • 1Completed the $8.5 billion merger with DCT Industrial Trust Inc., adding 408 operating properties and expanding presence in key U.S. markets.
  • 2Achieved high portfolio occupancy of 97.5% (owned and managed basis) as of September 30, 2018.
  • 3Reported a net effective rent increase of 21.7% on lease rollovers for the first nine months of 2018.
  • 4Extended weighted average debt maturity to 76 months and lowered weighted average interest rate to 2.7% as of September 30, 2018.
  • 5Generated $1.6 billion in net proceeds and realized $483 million in net gains from property contributions and dispositions during the nine months ended September 30, 2018.
  • 6Maintained a strong balance sheet with a total debt of $11.2 billion and significant liquidity from credit facilities.
  • 7Operating income for the nine months ended September 30, 2018, was $605.9 million, while net earnings attributable to common stockholders were $1,046.9 million.

Frequently Asked Questions

The merger with DCT Industrial Trust Inc. for $8.5 billion significantly expanded Prologis' portfolio, adding 408 operating properties totaling 68 million square feet, 10 properties under development, and substantial land parcels. This acquisition enhances Prologis' presence in high-growth U.S. markets like Southern California, the San Francisco Bay area, Seattle, and South Florida, while being integrated with minimal additional overhead costs.

Prologis strategically managed its debt post-acquisition by refinancing $1.8 billion of the assumed DCT debt through the issuance of new senior notes. This activity extended the weighted average debt maturity to 76 months and lowered the weighted average interest rate to 2.7% as of September 30, 2018.

Prologis anticipates continued rent growth, estimating that current in-place leases are, on average, more than 15% below current market rents. This suggests significant upside potential upon lease rollovers. For the first nine months of 2018, the company achieved a 21.7% increase in net effective rents on lease rollovers, a trend expected to continue due to strong market demand and below-market current rents.

Prologis operates two key segments: Real Estate Operations, which includes ownership and development of logistics properties, and Strategic Capital, which involves managing unconsolidated co-investment ventures. For the nine months ended September 30, 2018, Real Estate Operations generated $1.3 billion in rental revenue and $1.28 billion in Net Operating Income (NOI), while Strategic Capital generated $280 million in revenue and $166 million in NOI. The company reported total revenues of $1.997 billion and operating income of $605.9 million for the same period.