10-QPeriod: Q3 FY2020

Prologis, Inc. Quarterly Report for Q3 Ended Sep 30, 2020

Filed October 28, 2020For Securities:PLDPLDGP

Summary

Prologis, Inc. (PLD) reported its third-quarter 2020 financial results on October 27, 2020. The company demonstrated resilience and growth amidst the ongoing COVID-19 pandemic, driven by strong fundamentals in the logistics real estate sector. The significant Liberty and IPT transactions completed in early 2020 substantially expanded Prologis's real estate portfolio, adding valuable assets and enhancing its market presence. Financially, Prologis maintained robust operational performance. Rental revenues and Net Operating Income (NOI) showed strong growth compared to the prior year, supported by high occupancy rates and positive rent growth on lease rollovers. The company also benefited from strategic capital activities, including significant promote revenue earned. Despite increased debt levels due to acquisitions, Prologis managed its leverage effectively, with a weighted average interest rate on its debt decreasing and ample liquidity to meet its obligations. The company affirmed its strong outlook, anticipating continued rent growth and value creation through its development pipeline.

Financial Highlights

35 data points
Beta

Revenue

$1.08B

Net Income

$298.69M

27.6% Net Margin

EPS (Diluted)

$0.40

Total Assets

$55.76B

Cash & Equivalents

$940.19M

Free Cash Flow

$977.99M

Financial Statements
Beta
Revenue$1.08B
Operating Income$556.52M
Interest Expense$80.71M
Net Income$298.69M
EPS (Basic)$0.40
EPS (Diluted)$0.40
Shares Outstanding (Basic)738.19M
Shares Outstanding (Diluted)764.62M

Key Highlights

  • 1Total assets increased significantly to $55.76 billion as of September 30, 2020, up from $40.03 billion at December 31, 2019, largely due to the Liberty and IPT transactions.
  • 2Total revenues for the nine months ended September 30, 2020, increased to $3.33 billion from $2.50 billion in the prior year, driven by rental and strategic capital revenues.
  • 3Net earnings attributable to common stockholders were $1.19 billion for the nine months ended September 30, 2020, a slight increase from $1.19 billion in the same period of 2019.
  • 4The company reported strong net cash provided by operating activities of $2.33 billion for the nine months ended September 30, 2020, up from $1.65 billion in the prior year.
  • 5Debt increased to $16.52 billion at September 30, 2020, from $11.91 billion at December 31, 2019, primarily to fund acquisitions.
  • 6Prologis maintained a strong liquidity position with $5.17 billion in total liquidity at September 30, 2020.
  • 7The company's portfolio remains well-leased, with 96.3% occupancy for consolidated properties and 94.8% for unconsolidated properties as of September 30, 2020.

Frequently Asked Questions

The acquisition of Liberty Property Trust and Industrial Property Trust (IPT) significantly expanded Prologis's asset base, with total assets growing from $40.03 billion at the end of 2019 to $55.76 billion by September 30, 2020. This growth was primarily reflected in 'Investments in real estate properties' and associated debt.

Prologis reported that despite the COVID-19 pandemic, its operating fundamentals remained strong. The company expects market rents to increase and noted that its in-place leases are approximately 12% below current market rents, indicating significant upside potential upon lease renewal. Occupancy remained high, with consolidated properties at 96.3% and unconsolidated properties at 94.8% as of September 30, 2020.

Total debt increased to $16.52 billion at September 30, 2020, up from $11.91 billion at December 31, 2019, largely due to debt assumed in the Liberty and IPT transactions. However, Prologis actively managed its debt by refinancing and paying down a significant portion of the assumed debt with lower-interest notes. The company's weighted average effective interest rate on debt decreased to 2.0%, and it maintained compliance with all debt covenants, supported by strong operating cash flows and ample liquidity.

These transactions substantially increased the scale of Prologis's 'Real Estate Operations' segment, contributing to higher rental revenues and Net Operating Income (NOI). The 'Strategic Capital' segment also saw benefits, including increased management fees and the potential for future promote revenue as the larger portfolio is managed. The company noted that the integration of these portfolios was achieved with minimal incremental General and Administrative (G&A) expenses, indicating economies of scale.