Part 2 of 2
Prologis Inc. recently reported its results for Q2, where Hamid Moghadam, chairman and CEO of the San Francisco-based REIT said that results “were excellent” and reflect record rent increases and higher earnings from its strategic capital business. “Market conditions continue to be healthy,” he said.
On the margin, he explains that the company is “now even more positive as we see increased activity from our customers and a greater willingness to compete and pay for quality locations. Market rent growth surprised us to the upside, and the mark-to-market of our portfolio increased to 13% globally, which positions us for strong operating performance for the next several years.”
Results show that net earnings per diluted share was $0.50 compared with $0.52 for the same period in 2016. Core funds from operations* per diluted share was $0.84 compared with $0.60 for the same period in 2016. The impact from net promote income for the quarter was $0.18 per share.
During the quarter, Prologis entered into an agreement to acquire its partner’s interest in its Brazil platform for approximately R$1.2 billion (US$362) million. The transaction is expected to close this year, at which point Prologis will own 100% of the Brazil platform.
Subsequent to quarter-end, Prologis contributed $2.8 billion of the assets formerly owned by the North American Industrial Fund to its Prologis Targeted U.S. Logistics Fund at a 5.4% stabilized capitalization rate. The NAIF portfolio, primarily developed by Prologis, is highly complementary to USLF. Prologis received cash proceeds of $720 million and additional units, which increased its interest in USLF to 27 percent. USLF raised over $950 million from 14 new and existing investors to facilitate this transaction. With this activity, the company now has 9 co-investment ventures.
During the second quarter, the company and its co-investment ventures completed $2.9 billion of financings, principally denominated in sterling and yen. In aggregate, this activity reduced Prologis’ weighted average cost of debt by 10 basis points to 3 percent and extended maturities by 6 months to 5.3 years. The company ended the quarter with 95 percent USD net equity exposure and liquidity of $3.7 billion.
According to analyst James Sullivan of BTIG, the company’s numbers show strong growth, and the firm maintains its “buy” rating. “NOI from consolidated operations, as well as unconsolidated funds and joint ventures, was in-line with our projections,” the firm says.
Sullivan adds that “We expect Prologis to complete additional rebalancings and further streamline its fund structure through the rest of the year.”