10-QPeriod: Q3 FY2019

Prologis, Inc. Quarterly Report for Q3 Ended Sep 30, 2019

Filed October 21, 2019For Securities:PLDPLDGP

Summary

Prologis, Inc. (PLD) reported its financial results for the third quarter and the first nine months of 2019. The company demonstrated strong operational performance with continued revenue growth, driven by its core Real Estate Operations segment and supported by its Strategic Capital segment. Net earnings attributable to common stockholders saw a significant increase, reflecting improved profitability and efficient operations. The company also continued to strategically manage its debt, extending maturities and lowering its average interest rate, while maintaining a healthy liquidity position. Key operational highlights include strong occupancy rates and positive rent change on lease rollovers, indicating robust demand for logistics facilities. Prologis also actively managed its portfolio through acquisitions and dispositions, contributing to its strategic capital objectives and recycling capital effectively. The company's forward-looking strategy focuses on rent growth, value creation from development, and expanding its Strategic Capital business, positioning it for continued success in the global logistics real estate market.

Financial Highlights

35 data points
Beta

Revenue

$942.18M

Net Income

$450.64M

47.8% Net Margin

EPS (Diluted)

$0.71

Total Assets

$39.45B

Cash & Equivalents

$1.02B

Free Cash Flow

$644.14M

Financial Statements
Beta
Revenue$942.18M
Operating Income$471.48M
Interest Expense$60.24M
Net Income$450.64M
EPS (Basic)$0.71
EPS (Diluted)$0.71
Shares Outstanding (Basic)630.93M
Shares Outstanding (Diluted)655.26M

Key Highlights

  • 1Total revenues for the nine months ended September 30, 2019, increased to $2.5 billion from $2.0 billion in the prior year period, driven by strong performance in both Real Estate Operations and Strategic Capital segments.
  • 2Net earnings attributable to common stockholders increased by approximately 12.9% for the nine months ended September 30, 2019, reaching $1.18 billion compared to $1.05 billion in the prior year period.
  • 3The company maintained a high occupancy rate of 96.5% for its consolidated operating portfolio as of September 30, 2019.
  • 4Prologis actively engaged in capital recycling, with net proceeds from contributions and dispositions of real estate totaling $1.7 billion for the nine months ended September 30, 2019.
  • 5The company reported a weighted average interest rate on its total debt of 2.3% at September 30, 2019, down from 2.7% at December 31, 2018, reflecting successful debt management and refinancing efforts.
  • 6Total liquidity stood at $4.9 billion as of September 30, 2019, comprising $1.0 billion in unrestricted cash balances and $3.9 billion in available borrowing capacity under its credit facilities.
  • 7The company entered into a merger agreement to acquire Industrial Property Trust Inc. (IPT) for approximately $4.0 billion, expected to close in January 2020, further expanding its U.S. portfolio.

Frequently Asked Questions

Prologis' strategy for future growth is centered around three key pillars: driving rent growth through active lease management and capitalizing on the spread between in-place rents and market rents, creating value through development and redevelopment of its land bank, and expanding its Strategic Capital business by attracting third-party capital to manage. The company aims to leverage its global scale, market expertise, and strong customer relationships to achieve these objectives.

Prologis adopted the new lease standard (ASC 842) on January 1, 2019. This resulted in the recognition of right-of-use (ROU) assets and lease liabilities on the balance sheet, primarily for ground and office space leases where Prologis is the lessee. For lessors, the standard required expensing certain initial direct costs on an as-incurred basis and allowed for practical expedients in presentation, such as combining rental revenue and rental recoveries. The adoption was applied prospectively, and Prologis did not record an adjustment to retained earnings upon adoption.

Prologis mitigates its exposure to foreign currency exchange rate fluctuations by primarily investing outside the U.S. through co-investment ventures, borrowing in the functional currency of its consolidated subsidiaries, and utilizing derivative financial instruments designated as net investment hedges. As of September 30, 2019, after accounting for these measures, the company had minimal net equity denominated in currencies other than the U.S. dollar.

Prologis demonstrated strong operational fundamentals, with the consolidated operating portfolio maintaining a high occupancy rate of 96.5% as of September 30, 2019. The company also reported positive rent change on lease rollovers, with a net effective rent change of 22.5% for the third quarter of 2019. This indicates robust demand for its logistics facilities and the ability to increase rental income upon lease expiration.