10-QPeriod: Q3 FY2022

Prologis, Inc. Quarterly Report for Q3 Ended Sep 30, 2022

Filed October 28, 2022For Securities:PLDPLDGP

Summary

Prologis, Inc. (PLD) reported strong financial performance for the nine months ended September 30, 2022, with significant growth in revenues and net earnings compared to the prior year. The company's Real Estate Operations segment remains the primary revenue driver, benefiting from high occupancy rates and positive rent growth on lease rollovers. The Strategic Capital segment also showed substantial growth, driven by increased asset management fees and promote revenues, reflecting the expansion of its co-investment ventures. A major development during the quarter was the announcement and subsequent completion (shortly after quarter-end) of the acquisition of Duke Realty Corporation for approximately $23 billion. This strategic acquisition significantly expands Prologis' presence in key U.S. markets and is expected to be highly complementary to its existing portfolio. The company maintains a strong balance sheet with ample liquidity, despite rising interest rates, and is focused on prudently deploying capital while managing economic uncertainties.

Financial Highlights

35 data points
Beta

Revenue

$1.75B

Net Income

$1.01B

57.9% Net Margin

EPS (Diluted)

$1.36

Total Assets

$60.95B

Cash & Equivalents

$636.28M

Free Cash Flow

$1.20B

Financial Statements
Beta
Revenue$1.75B
Operating Income$914.97M
Interest Expense$63.88M
Net Income$1.01B
EPS (Basic)$1.37
EPS (Diluted)$1.36
Shares Outstanding (Basic)740.72M
Shares Outstanding (Diluted)766.37M

Key Highlights

  • 1Total revenues increased significantly to $4.22 billion for the nine months ended September 30, 2022, up from $3.48 billion in the prior year, driven by both Real Estate Operations and Strategic Capital segments.
  • 2Net earnings attributable to common stockholders rose to $2.77 billion for the nine months ended September 30, 2022, from $1.69 billion in the same period last year.
  • 3The company announced and subsequently completed the $23 billion acquisition of Duke Realty Corporation, significantly expanding its U.S. industrial real estate portfolio.
  • 4Occupancy remained strong at 97.8% for the owned and managed (O&M) portfolio as of September 30, 2022, with significant rent change on lease rollovers indicating strong leasing momentum.
  • 5Prologis maintained a strong liquidity position with $5.3 billion in total available liquidity at September 30, 2022, including $4.7 billion under its credit facilities.
  • 6The company issued $2.7 billion in senior notes during the nine months, enhancing its capital structure and funding growth initiatives.
  • 7Despite a challenging macroeconomic environment with rising inflation and interest rates, Prologis reported robust operating performance and positive outlook on future rent growth.

Frequently Asked Questions

The acquisition of Duke Realty Corporation was completed on October 3, 2022, shortly after the end of the reporting period. Therefore, the financial results for the nine months ended September 30, 2022, do not include Duke's financials. However, the acquisition is expected to significantly expand Prologis' U.S. portfolio and is considered highly complementary. The transaction was valued at approximately $23 billion, financed through equity and assumed debt.

Prologis acknowledges the challenging macroeconomic environment characterized by inflation and rising interest rates. The company is maintaining a cautious approach to capital deployment, with a focus on build-to-suit developments and a near-term pause on contributions to open-ended funds. They are leveraging their strong balance sheet, ample liquidity, and experienced team to navigate these uncertainties. The significant rent growth and high lease mark-to-market provide a buffer against economic pressures.

Prologis' revenue growth is driven by two primary segments. The Real Estate Operations segment benefits from strong rental revenue growth due to high occupancy and significant rent increases upon lease rollovers (lease mark-to-market). The Strategic Capital segment generates revenue from asset management, property management, and promote fees earned from its co-investment ventures, which are growing in scale and value.

Prologis evaluates its performance using both GAAP and non-GAAP measures. Key GAAP metrics include Total Revenues, Operating Income, and Net Earnings. Non-GAAP metrics highlighted are Net Operating Income (NOI) by segment, Funds From Operations (FFO) as modified by Prologis, and Core FFO. The company also closely monitors operational metrics like occupancy rates and rent change on lease rollovers.