Zacks_Analysts' Blog : Prologis Surpasses Estimates - Analyst Blog

Prologis Inc. (PLD), a leading real estate investment trust (REIT), reported fourth quarter 2011 funds from operations (FFO) of $0.29 per share compared with a FFO loss of $4.81 in the year-earlier quarter. Funds from operations, a widely used metric to gauge the performance of real estate investment trusts (REITs), is obtained after adding depreciation and other non-cash expenses to net income.

The decrease in year-over-year FFO is primarily due to impairment charges and merger-related costs. Excluding non-recurring items, FFO for the reported quarter was 44 cents per share compared to 41 cents in the year-ago quarter. The fourth quarter 2011 recurring FFO beat the Zacks Consensus Estimate by 5 cents.

Total revenues during the reported quarter were $484.1 million compared to $236.2 million in the year-ago quarter. Total reported revenues were well ahead of the Zacks Consensus Estimate of $433 million.

For full year 2011, the company reported FFO of $1.10 per share compared to FFO loss of $4.44 in the previous year. Recurring FFO for fiscal 2011 was $1.58 per share compared to $1.27 in 2010. The fiscal 2011 recurring FFO per share beat the Zacks Consensus Estimate of $1.39.

Total revenues for fiscal 2011 were $1.5 billion compared to $0.9 billion in 2010. Total reported fiscal 2011 revenues were well ahead of the Zacks Consensus Estimate of $1.4 billion.

During the reported quarter, the company leased 37.6 million square feet of space across the globe. Customer retention during the quarter was 80.1% during the reported quarter. Same-store net operating income (NOI) increased 0.4% in fourth quarter 2011, compared to the year-ago quarter. Same-store rental rates on leases signed in the quarter decreased 4.5% year-over-year.

Development starts for the company during the reported quarter were $166 million spanning 2.2 million square feet of space across 9 projects. The company acquired $178 million worth of properties during the quarter, including 11 industrial buildings totaling 1.6 million square feet of space with a stabilized capitalization rate of 7.0% and 10 acres of land. At year-end 2011, Prologis' global development portfolio totaled 13.1 million square feet, with an estimated total investment of $1.4 billion.

Prologis closed 37 contribution and asset sale transactions during the reported quarter with a stabilized capitalization rate of 7.1%, generating proceeds of over $1.25 billion.

The third-party asset sales were consistent with the company’s stated goal to sell assets in non-strategic markets and redeploy the proceeds to fund new development in major global markets, thereby diversifying and improving the quality of its portfolio. During 2011, Prologis raised or received new, third-party equity commitments of approximately $1.8 billion.

During fourth quarter 2011, Prologis completed about $1.4 billion worth of capital market activities. Consequently, the company was able to reduce its share of total debt by $907 million; lower its share of 2012 debt maturities by $399 million; and improve its key debt metrics in line with its previously stated strategic priorities.

At year-end 2011, Prologis had cash and cash equivalents of $176.1 million compared with $37.6 million in the year-earlier period. Total debt at the end of fiscal 2011 was $11.4 billion compared with $6.5 billion in the year-ago period. For full year 2012, Prologis expects recurring FFO in the range of $1.60 to $1.70 per share.

We currently have a Neutral recommendation and a Zacks #4 Rank for Prologis, which translates into a short-term Sell rating. We also have a Neutral recommendation and a Zacks #3 Rank (short-term Hold) for Winthrop Realty Trust (FUR), one of the peers of Prologis.