SAN FRANCISCO, Jan. 23, 2018 /PRNewswire/ -- Prologis, Inc.
(NYSE: PLD), the global leader in logistics real estate, today
reported results for the fourth quarter and full year 2017.
Net earnings per diluted share was $0.55 for the quarter and $3.06 for the year compared with $0.82 and $2.27 for
the same periods in 2016. The year-over-year increase is
principally due to higher gains on real estate transactions,
stronger operating results and higher net promote income.
Core funds from operations* per diluted share was $0.67 for the quarter and $2.81 for the year compared with $0.63 and $2.57 for
the same periods in 2016. The year-over-year increase is due
primarily to stronger operating results and higher net promote
income.
"Our results are a testament to our high-quality portfolio,
proven strategy and strong execution by our global team," said
Hamid R. Moghadam, chairman and CEO,
Prologis. "We are starting 2018 with even more embedded rental
upside than we had last year. Looking forward, it's all about using
our scale and expertise to drive organic growth, put our global
land bank to work and deliver further value from our customer
relationships."
OPERATING RESULTS REMAIN EXCELLENT
Owned &
Managed
|
4Q17
|
4Q16
|
Notes
|
Period End
Occupancy
|
97.2%
|
97.1%
|
Record and led by
the U.S. at 98.0%
|
Leases
Signed
|
42MSF
|
39MSF
|
|
|
|
Prologis
Share
|
4Q17
|
4Q16
|
Notes
|
Net Effective Rent
Change
|
19.0%
|
16.0%
|
Led by the U.S. at
29.8%
|
Cash Rent
Change
|
8.8%
|
7.0%
|
|
Net Effective Same
Store NOI*
|
4.1%
|
3.2%
|
Led by the U.S. at
5.4%
|
Cash Same Store
NOI*
|
5.5%
|
4.4%
|
Led by the U.S. at
6.8%
|
STRONG CUSTOMER RELATIONSHIPS DRIVE RECORD BUILD-TO-SUIT
ACTIVITY
Prologis
Share
|
4Q17
|
FY2017
|
Building
Acquisitions
|
$79M
|
$185M
|
Weighted avg stabilized cap
rate
|
5.6%
|
5.6%
|
Development
Stabilizations
|
$525M
|
$2,037M
|
Estimated weighted avg
yield
|
6.9%
|
6.6%
|
Estimated weighted avg
margin
|
29.0%
|
28.6%
|
Estimated value
creation
|
$152M
|
$583M
|
% Build-to-suit
|
46.4%
|
34.9%
|
Development
Starts
|
$692M
|
$2,332M
|
Estimated weighted avg
margin
|
19.5%
|
19.1%
|
Estimated value
creation
|
$135M
|
$446M
|
%
Build-to-suit
|
43.3%
|
47.1%
|
Dispositions and
Contributions
|
$839M
|
$2,528M
|
Weighted avg
stabilized cap rate (excluding land and other real
estate)
|
6.0%
|
5.5%
|
BEST-IN-CLASS BALANCE SHEET PRIMED FOR GROWTH
During
the fourth quarter, Prologis and its co-investment ventures
completed $1.9 billion of
refinancings and redeemed $788
million of near-term bonds. For the full year, on a
look-through basis, the company reduced its leverage by 340 basis
points to 23.7 percent on a market capitalization basis and
improved its debt-to-adjusted EBITDA* by approximately 0.2x to
4.6x.
COMPANY ESTABLISHES 2018 EARNINGS GUIDANCE RANGES
The
company established a guidance range for net earnings per diluted
share of $2.10 to $2.25 and a range for Core FFO* per diluted share
of $2.85 to $2.95.
"Strong operating fundamentals will translate to robust earnings
growth in 2018," said Thomas S.
Olinger, chief financial officer, Prologis. "Fueled by same
store NOI growth, Core FFO, excluding promotes, is expected to
increase 7 percent at the midpoint. This represents very strong
growth, given that we anticipate further delevering of our already
conservative balance sheet."
2018
GUIDANCE
|
|
Earnings (per
diluted
share)
|
Net
Earnings
|
$2.10 to
$2.25
|
Core FFO*
|
$2.85 to
$2.95
|
|
Operations
|
Year-end
occupancy
|
96.0% to
97.0%
|
Net Effective Same
Store NOI – Prologis share*
|
4.0% to
5.0%
|
|
Other Assumptions
(in
millions)
|
Strategic capital
revenue, excl. promote revenue
|
$260 to
$270
|
Net promote
income
|
$30 to $40
|
General &
administrative expenses
|
$227 to
$237
|
Realized development
gains
|
$300 to
$400
|
|
|
|
Capital Deployment
(Prologis Share, in millions)
|
Prologis
Share
|
Owned and
Managed
|
Development
stabilizations
|
$1,800 to
$2,000
|
$2,100 to
$2,300
|
Development
starts
|
$2,000 to
$2,300
|
$2,500 to
$2,900
|
Building
acquisitions
|
$300 to
$500
|
$500 to
$800
|
Building and land
dispositions
|
$950 to
$1,200
|
$1,600 to
$2,000
|
Building
contributions
|
$1,350 to
$1,650
|
$1,800 to
$2,200
|
The earnings guidance described above includes potential future
gains recognized from real estate transactions but excludes any
future foreign currency or derivative gains or losses as these
items are difficult to predict. In reconciling from net earnings to
Core FFO*, Prologis makes certain adjustments, including but not
limited to real estate depreciation and amortization expense, gains
(losses) recognized from real estate transactions and early
extinguishment of debt, impairment charges, deferred taxes and
unrealized gains or losses on foreign currency or derivative
activity. The difference between the company's Core FFO* and net
earnings guidance for 2018 relates predominantly to these items.
Please refer to our fourth quarter Supplemental Information, which
is available on our Investor Relations website at
www.ir.prologis.com and on the SEC's website at www.sec.gov for a
definition of Core FFO* and other non-GAAP measures used by
Prologis, along with reconciliations of these items to the closest
GAAP measure for our results and guidance.
WEBCAST & CONFERENCE CALL INFORMATION
Prologis
will host a live webcast and conference call to discuss quarterly
results, current market conditions and outlook. Here are the event
details:
- Tuesday, January 23, 2018, at
12 p.m. U.S. Eastern Time.
- Live webcast at http://ir.prologis.com by clicking
Investors>Investor Events and Presentations.
- Dial in: +1 888-771-4371 or +1 847-585-4405 and enter Passcode
46214331.
A telephonic replay will be available January 23-30 at +1 888-843-7419 (from
the United States and Canada) or +1 630-652-3042 (from all other
countries) using conference code 46214331. The webcast replay will
be posted when available in the Investor Relations "Events &
Presentations" section.
ABOUT PROLOGIS
Prologis, Inc. is the global leader in
logistics real estate with a focus on high-barrier, high-growth
markets. As of December 31, 2017, the
company owned or had investments in, on a wholly owned basis or
through co-investment ventures, properties and development projects
expected to total approximately 684 million square feet (64 million
square meters) in 19 countries. Prologis leases modern distribution
facilities to a diverse base of approximately 5,000 customers
across two major categories: business-to-business and retail/online
fulfillment.
FORWARD-LOOKING STATEMENTS
The statements in this document that are not historical facts are
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking
statements are based on current expectations, estimates and
projections about the industry and markets in which we operate as
well as management's beliefs and assumptions. Such statements
involve uncertainties that could significantly impact our financial
results. Words such as "expects," "anticipates," "intends,"
"plans," "believes," "seeks," "estimates" and variations of such
words and similar expressions are intended to identify such
forward-looking statements, which generally are not historical in
nature. All statements that address operating performance,
events or developments that we expect or anticipate will occur in
the future — including statements relating to rent and occupancy
growth, development activity and changes in sales or contribution
volume of properties, disposition activity, general conditions in
the geographic areas where we operate, our debt, capital structure
and financial position, our ability to form new co-investment
ventures and the availability of capital in existing or new
co-investment ventures — are forward-looking statements. These
statements are not guarantees of future performance and involve
certain risks, uncertainties and assumptions that are difficult to
predict. Although we believe the expectations reflected in any
forward-looking statements are based on reasonable assumptions, we
can give no assurance that our expectations will be attained and
therefore, actual outcomes and results may differ materially from
what is expressed or forecasted in such forward-looking statements.
Some of the factors that may affect outcomes and results include,
but are not limited to: (i) national, international, regional and
local economic climates, (ii) changes in financial markets,
interest rates and foreign currency exchange rates, (iii) increased
or unanticipated competition for our properties, (iv) risks
associated with acquisitions, dispositions and development of
properties, (v) maintenance of real estate investment trust status,
tax structuring and income tax rates (vi) availability of financing
and capital, the levels of debt that we maintain and our credit
ratings, (vii) risks related to our investments in our
co-investment ventures, including our ability to establish new
co-investment ventures and funds, (viii) risks of doing business
internationally, including currency risks, (ix) environmental
uncertainties, including risks of natural disasters, and (x) those
additional factors discussed in reports filed with the Securities
and Exchange Commission by us under the heading "Risk Factors." We
undertake no duty to update any forward-looking statements
appearing in this document.
*This is a non-GAAP financial measure. See the Notes and
Definitions in our supplemental information for further explanation
and a reconciliation to the most directly comparable GAAP
measure.
dollars in
millions, except per share/unit data
|
Three Months
ended
December 31,
|
|
Twelve Months
ended
December 31,
|
|
2017
|
2016
|
|
2017
|
2016
|
|
Rental and other
revenues
|
$ 552
|
$
564
|
|
$ 2,244
|
$ 2,230
|
|
Strategic capital
revenues
|
68
|
56
|
|
374
|
303
|
|
|
Total
revenues
|
620
|
620
|
|
2,618
|
2,533
|
|
Net earnings
attributable to common stockholders
|
296
|
441
|
|
1,642
|
1,203
|
|
Core FFO*
|
373
|
345
|
|
1,551
|
1,400
|
|
AFFO*
|
385
|
431
|
|
1,597
|
1,405
|
|
Adjusted
EBITDA*
|
584
|
641
|
|
2,398
|
2,223
|
|
Estimated value
creation from development starts - Prologis share
|
135
|
167
|
|
446
|
365
|
|
Common stock
dividends and common limited partnership unit
distributions
|
243
|
231
|
|
973
|
923
|
|
|
|
|
|
|
|
|
|
|
Per common share -
diluted:
|
|
|
|
|
|
|
|
Net earnings
attributable to common stockholders
|
$0.55
|
$0.82
|
|
$
3.06
|
$2.27
|
|
|
Core FFO*
|
0.67
|
0.63
|
|
2.81
|
2.57
|
|
|
Business line
reporting:
|
|
|
|
|
|
|
|
|
Real estate
operations*
|
0.61
|
0.57
|
|
2.40
|
2.22
|
|
|
|
Strategic
capital*
|
0.06
|
0.06
|
|
0.41
|
0.35
|
|
|
|
Core
FFO*
|
0.67
|
0.63
|
|
2.81
|
2.57
|
|
|
|
Realized development
gains, net of taxes
|
0.15
|
0.30
|
|
0.56
|
0.57
|
|
Dividends and
distributions per common share/unit
|
0.44
|
0.42
|
|
1.76
|
1.68
|
|
|
|
|
* This is a
non-GAAP financial measure, please see below for further
explanation.
|
in
thousands
|
|
December 31,
2017
|
|
September 30,
2017
|
|
December 31,
2016
|
Assets:
|
|
|
|
|
|
|
Investments in real
estate properties:
|
|
|
|
|
|
|
|
Operating
properties
|
$
22,585,327
|
|
$
22,656,273
|
|
$
23,943,457
|
|
|
Development
portfolio
|
1,593,489
|
|
1,500,999
|
|
1,432,082
|
|
|
Land
|
1,154,383
|
|
1,313,268
|
|
1,218,904
|
|
|
Other real estate
investments
|
505,445
|
|
506,617
|
|
524,887
|
|
|
|
|
|
25,838,644
|
|
25,977,157
|
|
27,119,330
|
|
|
Less accumulated
depreciation
|
4,059,348
|
|
3,977,667
|
|
3,758,372
|
|
|
|
|
Net investments in
real estate properties
|
21,779,296
|
|
21,999,490
|
|
23,360,958
|
|
Investments in and
advances to unconsolidated entities
|
5,496,450
|
|
5,371,758
|
|
4,230,429
|
|
Assets held for
sale
|
342,060
|
|
321,905
|
|
322,139
|
|
Notes receivable
backed by real estate
|
34,260
|
|
-
|
|
32,100
|
|
|
|
|
Net investments in
real estate
|
27,652,066
|
|
27,693,153
|
|
27,945,626
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
447,046
|
|
568,726
|
|
807,316
|
|
Other
assets
|
1,381,963
|
|
1,392,271
|
|
1,496,990
|
|
|
|
|
Total
assets
|
$
29,481,075
|
|
$
29,654,150
|
|
$
30,249,932
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Equity:
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
Debt
|
$
9,412,631
|
|
$
9,721,065
|
|
$
10,608,294
|
|
|
Accounts payable,
accrued expenses and other liabilities
|
1,362,703
|
|
1,373,829
|
|
1,183,498
|
|
|
|
|
Total
liabilities
|
10,775,334
|
|
11,094,894
|
|
11,791,792
|
|
|
|
|
|
|
|
|
|
|
|
Equity:
|
|
|
|
|
|
|
|
Stockholders'
equity
|
15,631,158
|
|
15,543,751
|
|
14,991,081
|
|
|
Noncontrolling
interests
|
2,660,242
|
|
2,591,544
|
|
3,072,469
|
|
|
Noncontrolling
interests - limited partnership unitholders
|
414,341
|
|
423,961
|
|
394,590
|
|
|
|
|
Total
equity
|
18,705,741
|
|
18,559,256
|
|
18,458,140
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
and equity
|
$
29,481,075
|
|
$
29,654,150
|
|
$
30,249,932
|
in thousands, except
per share amounts
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
|
|
|
December
31,
|
|
December
31,
|
|
|
|
|
2017
|
2016
|
|
2017
|
2016
|
Revenues:
|
|
|
|
|
|
|
Rental
|
$ 550,649
|
$ 559,885
|
|
$
2,225,141
|
$
2,220,409
|
|
Strategic
capital
|
68,148
|
56,443
|
|
373,889
|
303,562
|
|
Development
management and other
|
1,125
|
3,787
|
|
19,104
|
9,164
|
|
Total revenues
|
619,922
|
620,115
|
|
2,618,134
|
2,533,135
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
Rental
|
140,338
|
141,050
|
|
569,523
|
568,870
|
|
Strategic
capital
|
35,360
|
30,723
|
|
155,141
|
128,506
|
|
General and
administrative
|
59,709
|
56,433
|
|
231,059
|
222,067
|
|
Depreciation and
amortization
|
222,501
|
225,736
|
|
879,140
|
930,985
|
|
Other
|
3,597
|
1,965
|
|
12,205
|
14,329
|
|
Total
expenses
|
461,505
|
455,907
|
|
1,847,068
|
1,864,757
|
|
|
|
|
|
|
|
|
|
Operating
income
|
158,417
|
164,208
|
|
771,066
|
668,378
|
|
|
|
|
|
|
|
|
|
Other income
(expense):
|
|
|
|
|
|
|
Earnings from
unconsolidated co-investment ventures, net
|
73,768
|
59,204
|
|
234,168
|
191,877
|
|
Earnings from other
unconsolidated ventures, net
|
2,532
|
1,481
|
|
14,399
|
14,430
|
|
Interest
expense
|
(62,030)
|
(70,569)
|
|
(274,486)
|
(303,146)
|
|
Gains on dispositions
of development properties and land, net
|
91,794
|
174,368
|
|
327,528
|
334,369
|
|
Gains on dispositions
of real estate, net (excluding development properties and
land)
|
131,787
|
121,067
|
|
855,437
|
423,029
|
|
Foreign currency and
derivative (losses) and interest and other income, net
|
(7,331)
|
34,909
|
|
(44,165)
|
15,683
|
|
Gains (losses) on
early extinguishment of debt, net
|
(37,783)
|
-
|
|
(68,379)
|
2,484
|
|
Total
other income
|
192,737
|
320,460
|
|
1,044,502
|
678,726
|
|
|
|
|
|
|
|
|
|
Earnings before
income taxes
|
351,154
|
484,668
|
|
1,815,568
|
1,347,104
|
|
Current income tax
expense
|
(17,089)
|
(21,754)
|
|
(59,614)
|
(60,089)
|
|
Deferred income tax
benefit
|
4,808
|
3,788
|
|
5,005
|
5,525
|
Consolidated net
earnings
|
338,873
|
466,702
|
|
1,760,959
|
1,292,540
|
Net earnings
attributable to noncontrolling interests
|
(30,086)
|
(12,442)
|
|
(63,620)
|
(48,307)
|
Net earnings
attributable to noncontrolling interests - limited partnership
units
|
(7,901)
|
(12,063)
|
|
(45,014)
|
(34,301)
|
Net earnings
attributable to controlling interests
|
300,886
|
442,197
|
|
1,652,325
|
1,209,932
|
Preferred stock
dividends
|
(1,476)
|
(1,658)
|
|
(6,499)
|
(6,714)
|
Loss on preferred
stock repurchase
|
(3,895)
|
-
|
|
(3,895)
|
-
|
Net earnings
attributable to common stockholders
|
$
295,515
|
$
440,539
|
|
$
1,641,931
|
$
1,203,218
|
Weighted average
common shares outstanding - Diluted
|
554,401
|
550,885
|
|
552,300
|
546,666
|
Net earnings per
share attributable to common stockholders - Diluted
|
$
0.55
|
$
0.82
|
|
$
3.06
|
$
2.27
|
in
thousands
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
|
|
|
December
31,
|
|
December
31,
|
|
|
|
|
2017
|
2016
|
|
2017
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to common stockholders
|
$ 295,515
|
$ 440,539
|
|
$
1,641,931
|
$
1,203,218
|
Add (deduct) NAREIT
defined adjustments:
|
|
|
|
|
|
|
Real estate related
depreciation and amortization
|
214,292
|
217,955
|
|
847,516
|
899,821
|
|
Gains on dispositions
of real estate, net (excluding development properties and
land)
|
(131,787)
|
(121,067)
|
|
(855,437)
|
(423,029)
|
|
Reconciling items
related to noncontrolling interests
|
1,661
|
(17,514)
|
|
(38,972)
|
(104,832)
|
|
Our share of
reconciling items related to unconsolidated co-investment
ventures
|
38,076
|
43,135
|
|
140,712
|
159,956
|
|
Our share of
reconciling items related to other unconsolidated
ventures
|
1,728
|
1,718
|
|
6,759
|
2,154
|
Subtotal-NAREIT
defined FFO*
|
$
419,485
|
$
564,766
|
|
$
1,742,509
|
$
1,737,288
|
|
|
|
|
|
|
|
|
|
Add (deduct) our
defined adjustments:
|
|
|
|
|
|
|
Unrealized foreign
currency and derivative losses (gains), net
|
13,563
|
(29,369)
|
|
69,363
|
(7,505)
|
|
Deferred income tax
benefit
|
(4,808)
|
(3,788)
|
|
(5,005)
|
(5,525)
|
|
Current income tax
expense on dispositions related to acquired tax assets
|
2,241
|
-
|
|
2,331
|
-
|
|
Reconciling items
related to noncontrolling interests
|
1
|
643
|
|
(8)
|
682
|
|
Our share of
reconciling items related to unconsolidated co-investment
ventures
|
(12,236)
|
(24,010)
|
|
(14,677)
|
(22,840)
|
FFO, as modified
by Prologis*
|
$
418,246
|
$
508,242
|
|
$
1,794,513
|
$
1,702,100
|
|
|
|
|
|
|
|
|
|
Adjustments to arrive
at Core FFO:
|
|
|
|
|
|
|
Gains on dispositions
of development properties and land, net
|
(91,794)
|
(174,368)
|
|
(327,528)
|
(334,369)
|
|
Current income tax
expense on dispositions
|
6,529
|
9,332
|
|
19,102
|
24,152
|
|
Acquisition
expenses
|
-
|
2,075
|
|
-
|
4,607
|
|
Losses (gains) on
early extinguishment of debt and preferred stock repurchase,
net
|
41,678
|
-
|
|
72,274
|
(2,484)
|
|
Reconciling items
related to noncontrolling interests
|
297
|
1
|
|
(390)
|
4,299
|
|
Our share of
reconciling items related to unconsolidated co-investment
ventures
|
(33)
|
929
|
|
(224)
|
5,612
|
|
Our share of
reconciling items related to other unconsolidated
ventures
|
(1,656)
|
(1,424)
|
|
(6,594)
|
(3,419)
|
Core
FFO*
|
$
373,267
|
$
344,787
|
|
$
1,551,153
|
$
1,400,498
|
|
|
|
|
|
|
|
|
|
Adjustments to arrive
at Adjusted FFO ("AFFO")*, including our share of unconsolidated
ventures less noncontrolling interests:
|
|
|
|
|
|
|
Gains on dispositions
of development properties and land, net
|
91,794
|
174,368
|
|
327,528
|
334,369
|
|
Current income tax
expense on dispositions
|
(6,529)
|
(9,332)
|
|
(19,102)
|
(24,152)
|
|
Straight-lined rents
and amortization of lease intangibles
|
(14,788)
|
(18,944)
|
|
(81,021)
|
(104,886)
|
|
Property
improvements
|
(33,992)
|
(28,451)
|
|
(84,022)
|
(78,745)
|
|
Turnover
costs
|
(37,813)
|
(40,891)
|
|
(153,255)
|
(165,992)
|
|
Amortization of debt
discount (premium), financing costs and management contracts,
net
|
2,853
|
(1,172)
|
|
3,845
|
(11,420)
|
|
Stock compensation
expense
|
18,549
|
16,683
|
|
76,640
|
60,341
|
|
Reconciling items
related to noncontrolling interests
|
9,563
|
13,108
|
|
35,820
|
56,917
|
|
Our share of
reconciling items related to unconsolidated ventures
|
(17,662)
|
(19,591)
|
|
(60,594)
|
(61,923)
|
AFFO*
|
|
|
$
385,242
|
$
430,565
|
|
$
1,596,992
|
$
1,405,007
|
* This is a
non-GAAP financial measure, please see below for further
explanation.
|
in
thousands
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
|
|
|
December
31,
|
|
December
31,
|
|
|
|
|
2017
|
2016
|
|
2017
|
2016
|
|
|
|
|
|
|
|
|
|
Net earnings
attributable to common stockholders
|
$
295,515
|
$ 440,539
|
|
$
1,641,931
|
$
1,203,218
|
|
|
Gains on dispositions
of real estate, net (excluding development properties and
land)
|
(131,787)
|
(121,067)
|
|
(855,437)
|
(423,029)
|
|
|
Depreciation and
amortization expenses
|
222,501
|
225,736
|
|
879,140
|
930,985
|
|
|
Interest
expense
|
62,030
|
70,569
|
|
274,486
|
303,146
|
|
|
Losses (gains) on
early extinguishment of debt, net
|
37,783
|
-
|
|
68,379
|
(2,484)
|
|
|
Current and deferred
income tax expense, net
|
12,281
|
17,966
|
|
54,609
|
54,564
|
|
|
Net earnings
attributable to noncontrolling interests - limited partnership
unitholders
|
7,901
|
12,063
|
|
45,014
|
34,301
|
|
|
Pro forma
adjustments
|
(2,777)
|
(1,382)
|
|
11,828
|
(10,248)
|
|
|
Preferred stock
dividends and repurchase
|
5,371
|
1,658
|
|
10,394
|
6,714
|
|
|
Unrealized foreign
currency and derivative losses (gains), net
|
13,563
|
(29,369)
|
|
69,363
|
(7,505)
|
|
|
Stock compensation
expense
|
18,549
|
16,683
|
|
76,640
|
60,341
|
|
|
Acquisition
expenses
|
-
|
2,075
|
|
-
|
4,607
|
Adjusted EBITDA,
consolidated*
|
$
540,930
|
$
635,471
|
|
$
2,276,347
|
$
2,154,610
|
|
|
|
|
|
|
|
|
|
|
|
Reconciling items
related to noncontrolling interests
|
(6,785)
|
(34,140)
|
|
(90,893)
|
(152,082)
|
|
|
Our share of
reconciling items related to unconsolidated ventures
|
49,658
|
39,590
|
|
212,190
|
219,975
|
Adjusted
EBITDA*
|
$
583,803
|
$
640,921
|
|
$
2,397,644
|
$
2,222,503
|
* This is a
non-GAAP financial measure, please see below for further
explanation.
|
Adjusted EBITDA. We use Adjusted EBITDA, a non-GAAP
financial measure, as a measure of our operating performance. The
most directly comparable GAAP measure to Adjusted EBITDA is net
earnings.
We calculate Adjusted EBITDA beginning with consolidated net
earnings attributable to common stockholders and removing the
effect of: interest expense, income taxes, depreciation and
amortization, impairment charges, third party acquisition expenses
related to the acquisition of real estate, gains or losses from the
disposition of investments in real estate (excluding development
properties and land), gains from the revaluation of equity
investments upon acquisition of a controlling interest, gains or
losses on early extinguishment of debt and derivative contracts
(including cash charges), similar adjustments we make to our FFO
measures (see definition below), and other items, such as, stock
based compensation and unrealized gains or losses on foreign
currency and derivatives. We also include a pro forma adjustment to
reflect a full period of NOI on the operating properties we acquire
or stabilize during the quarter and to remove NOI on properties we
dispose of during the quarter, assuming all transactions occurred
at the beginning of the quarter. The pro forma adjustment also
includes economic ownership changes in our ventures to reflect the
full quarter at the new ownership percentage.
We believe Adjusted EBITDA provides investors relevant and
useful information because it permits investors to view our
operating performance, analyze our ability to meet interest payment
obligations and make quarterly preferred stock dividends on an
unleveraged basis before the effects of income tax, non-cash
depreciation and amortization expense, gains and losses on the
disposition of non-development properties and other items (outlined
above), that affect comparability. While all items are not
infrequent or unusual in nature, these items may result from market
fluctuations that can have inconsistent effects on our
results of operations. The economics underlying these items reflect
market and financing conditions in the short-term but can obscure
our performance and the value of our long-term investment decisions
and strategies.
While we believe Adjusted EBITDA is an important measure, it
should not be used alone because it excludes significant components
of net earnings, such as our historical cash expenditures or future
cash requirements for working capital, capital expenditures,
distribution requirements, contractual commitments or interest and
principal payments on our outstanding debt and is therefore limited
as an analytical tool.
Our computation of Adjusted EBITDA may not be comparable to
EBITDA reported by other companies in both the real estate industry
and other industries. We compensate for the limitations of Adjusted
EBITDA by providing investors with financial statements prepared
according to GAAP, along with this detailed discussion of Adjusted
EBITDA and a reconciliation to Adjusted EBITDA from consolidated
net earnings attributable to common stockholders.
Business Line Reporting is a non-GAAP financial
measure. Core FFO and development gains are generated by our
three lines of business: (i) real estate operations; (ii) strategic
capital; and (iii) development. The real estate operations
line of business represents total Prologis Core FFO, less the
amount allocated to the Strategic Capital line of business.
The amount of Core FFO allocated to the Strategic Capital line of
business represents the third party share of asset management and
transactional fees that we earn from our consolidated and
unconsolidated co-investment ventures less costs directly
associated to our strategic capital group, plus development
management income. Realized development gains include our
share of gains on dispositions of development properties and land,
net of taxes. To calculate the per share amount, the amount
generated by each line of business is divided by the weighted
average diluted common shares outstanding used in our Core FFO per
share calculation. Management believes evaluating our results by
line of business is a useful supplemental measure of our operating
performance because it helps the investing public compare the
operating performance of Prologis' respective businesses to other
companies' comparable businesses. Prologis' computation of FFO by
line of business may not be comparable to that reported by other
real estate investment trusts as they may use different
methodologies in computing such measures.
Calculation of Per
Share Amounts
|
|
|
|
in thousands,
except per share amount
|
Three Months
Ended
|
|
|
Twelve Months
Ended
|
|
|
Dec.
31,
|
|
|
Dec.
31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
2017
|
|
|
2016
|
|
Net
earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
earnings
|
$
|
295,515
|
|
$
|
440,539
|
|
|
$
|
1,641,931
|
|
$
|
1,203,218
|
|
Noncontrolling
interest attributable to exchangeable limited partnership units
|
|
8,153
|
|
|
12,600
|
|
|
|
46,280
|
|
|
37,079
|
|
Adjusted net
earnings - Diluted
|
$
|
303,668
|
|
$
|
453,139
|
|
|
$
|
1,688,211
|
|
$
|
1,240,297
|
|
Weighted average
common shares outstanding - Basic
|
|
531,478
|
|
|
528,012
|
|
|
|
530,400
|
|
|
526,103
|
|
Incremental weighted
average effect on exchange of limited partnership units
|
|
15,336
|
|
|
15,869
|
|
|
|
15,945
|
|
|
16,833
|
|
Incremental weighted
average effect of equity awards
|
|
7,587
|
|
|
7,004
|
|
|
|
5,955
|
|
|
3,730
|
|
Weighted average
common shares outstanding - Diluted
|
|
554,401
|
|
|
550,885
|
|
|
|
552,300
|
|
|
546,666
|
|
Net earnings per
share - Basic
|
$
|
0.56
|
|
$
|
0.83
|
|
|
$
|
3.10
|
|
$
|
2.29
|
|
Net earnings per
share - Diluted
|
$
|
0.55
|
|
$
|
0.82
|
|
|
$
|
3.06
|
|
$
|
2.27
|
|
Core
FFO
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Core FFO
|
$
|
373,267
|
|
$
|
344,787
|
|
|
$
|
1,551,153
|
|
$
|
1,400,498
|
|
Noncontrolling
interest attributable to exchangeable limited partnership units
|
|
415
|
|
|
991
|
|
|
|
2,903
|
|
|
4,273
|
|
Core FFO -
Diluted
|
$
|
373,682
|
|
$
|
345,778
|
|
|
$
|
1,554,056
|
|
$
|
1,404,771
|
|
Weighted average
common shares outstanding - Basic
|
|
531,478
|
|
|
528,012
|
|
|
|
530,400
|
|
|
526,103
|
|
Incremental weighted
average effect on exchange of limited partnership units
|
|
15,336
|
|
|
15,869
|
|
|
|
15,945
|
|
|
16,833
|
|
Incremental weighted
average effect of equity awards
|
|
7,587
|
|
|
7,004
|
|
|
|
5,955
|
|
|
3,730
|
|
Weighted average
common shares outstanding - Diluted
|
|
554,401
|
|
|
550,885
|
|
|
|
552,300
|
|
|
546,666
|
|
Core FFO per share
- Diluted
|
$
|
0.67
|
|
$
|
0.63
|
|
|
$
|
2.81
|
|
$
|
2.57
|
|
Estimated Value Creation represents the value that we
expect to create through our development and leasing activities. We
calculate Value Creation by estimating the Stabilized NOI that the
property will generate and applying a stabilized capitalization
rate applicable to that property. Estimated Value Creation is
calculated as the amount by which the value exceeds our total
expected investment and does not include any fees or promotes we
may earn. Estimated Value Creation for our Value-Added Properties
that are sold includes the realized economic gain.
Estimated Weighted Average Margin is calculated on
development properties as Estimated Value Creation, less estimated
closing costs and taxes, if any, on properties expected to be sold
or contributed, divided by TEI.
Estimated Weighted Average Stabilized Yield is calculated
on development properties as Stabilized NOI divided by TEI.
FFO, as modified by Prologis attributable to common
stockholders/unitholders ("FFO, as modified by Prologis"); Core FFO
attributable to common stockholders/unitholders ("Core FFO"); AFFO;
(collectively referred to as "FFO"). FFO is a non-GAAP
financial measure that is commonly used in the real estate
industry. The most directly comparable GAAP measure to FFO is net
earnings.
The National Association of Real Estate Investment Trusts
("NAREIT") defines FFO as earnings computed under GAAP to exclude
historical cost depreciation and gains and losses from the sales,
along with impairment charges, of previously depreciated
properties. We also exclude the gains on revaluation of equity
investments upon acquisition of a controlling interest and the gain
recognized from a partial sale of our investment, as these are
similar to gains from the sales of previously depreciated
properties. We exclude similar adjustments from our unconsolidated
entities and the third parties' share of our consolidated
co-investment ventures.
Our FFO Measures
Our FFO measures begin with NAREIT's definition and we make
certain adjustments to reflect our business and the way that
management plans and executes our business strategy. While
not infrequent or unusual, the additional items we adjust for in
calculating FFO, as modified by Prologis, Core FFO
and AFFO, as defined below, are subject to significant
fluctuations from period to period. Although these items may have a
material impact on our operations and are reflected in our
financial statements, the removal of the effects of these items
allows us to better understand the core operating performance of
our properties over the long term. These items have both
positive and negative short-term effects on our results of
operations in inconsistent and unpredictable directions that are
not relevant to our long-term outlook.
We calculate our FFO measures, as defined below, based on our
proportionate ownership share of both our unconsolidated and
consolidated ventures. We reflect our share of our FFO
measures for unconsolidated ventures by applying our average
ownership percentage for the period to the applicable reconciling
items on an entity by entity basis. We reflect our share for
consolidated ventures in which we do not own 100% of the equity by
adjusting our FFO measures to remove the noncontrolling interests
share of the applicable reconciling items based on our average
ownership percentage for the applicable periods.
These FFO measures are used by management as supplemental
financial measures of operating performance and we believe that it
is important that stockholders, potential investors and financial
analysts understand the measures management uses. We do not use our
FFO measures as, nor should they be considered to be, alternatives
to net earnings computed under GAAP, as indicators of our operating
performance, as alternatives to cash from operating activities
computed under GAAP or as indicators of our ability to fund our
cash needs.
We analyze our operating performance primarily by the rental
revenues of our real estate and the revenues from our strategic
capital business, net of operating, administrative and financing
expenses. This income stream is not directly impacted by
fluctuations in the market value of our investments in real estate
or debt securities.
FFO, as modified by Prologis
To arrive at FFO, as modified by Prologis, we adjust the
NAREIT defined FFO measure to exclude the impact of foreign
currency related items and deferred tax, specifically:
(i)
|
deferred income tax
benefits and deferred income tax expenses recognized by our
subsidiaries;
|
(ii)
|
current income tax
expense related to acquired tax liabilities that were recorded as
deferred tax liabilities in an acquisition, to the extent the
expense is offset with a deferred income tax benefit in earnings
that is excluded from our defined FFO measure;
|
(iii)
|
unhedged foreign
currency exchange gains and losses resulting from debt transactions
between us and our foreign consolidated subsidiaries and our
foreign unconsolidated entities;
|
(iv)
|
foreign currency
exchange gains and losses from the remeasurement (based on current
foreign currency exchange rates) of certain third party debt of our
foreign consolidated and unconsolidated
entities; and
|
(v)
|
mark-to-market
adjustments associated with derivative financial
instruments.
|
We use FFO, as modified by Prologis, so that management,
analysts and investors are able to evaluate our performance against
other REITs that do not have similar operations or operations in
jurisdictions outside the U.S.
Core FFO
In addition to FFO, as modified by Prologis, we also use
Core FFO. To arrive at Core FFO, we adjust
FFO, as modified by Prologis, to exclude the following
recurring and nonrecurring items that we recognized directly in
FFO, as modified by Prologis:
(i)
|
gains or losses from
the disposition of land and development properties that were
developed with the intent to contribute or sell;
|
(ii)
|
income tax expense
related to the sale of investments in real estate and third-party
acquisition costs related to the acquisition of real
estate;
|
(iii)
|
impairment charges
recognized related to our investments in real estate generally as a
result of our change in intent to contribute or sell these
properties;
|
(iv)
|
gains or losses from
the early extinguishment of debt and redemption and repurchase of
preferred stock; and
|
(v)
|
expenses related to
natural disasters.
|
We use Core FFO, including by segment and region, to: (i) assess
our operating performance as compared to other real estate
companies, (ii) evaluate our performance and the performance of our
properties in comparison with expected results and results of
previous periods; (iii) evaluate the performance of our management;
(iv) budget and forecast future results to assist in the allocation
of resources; (v) provide guidance to the financial markets to
understand our expected operating performance; and (v) evaluate how
a specific potential investment will impact our future results.
AFFO
To arrive at AFFO, we adjust Core FFO to include realized gains
from the disposition of land and development properties and
recurring capital expenditures and exclude the following items that
we recognize directly in Core FFO:
(i)
|
straight-line
rents;
|
(ii)
|
amortization of
above- and below-market lease intangibles;
|
(iii)
|
amortization of
management contracts;
|
(iv)
|
amortization of debt
premiums and discounts and financing costs, net of amounts
capitalized, and;
|
(v)
|
stock compensation
expense.
|
We use AFFO to (i) assess our operating performance as compared
to other real estate companies, (ii) evaluate our performance and
the performance of our properties in comparison with expected
results and results of previous periods, (iii) evaluate the
performance of our management, (iv) budget and forecast future
results to assist in the allocation of resources, and (v) evaluate
how a specific potential investment will impact our future
results.
Limitations on the use of our FFO measures
While we believe our modified FFO measures are important
supplemental measures, neither NAREIT's nor our measures of FFO
should be used alone because they exclude significant economic
components of net earnings computed under GAAP and are, therefore,
limited as an analytical tool. Accordingly, these are only a few of
the many measures we use when analyzing our business. Some of
the limitations are:
- The current income tax expenses and acquisition costs that are
excluded from our modified FFO measures represent the taxes and
transaction costs that are payable.
- Depreciation and amortization of real estate assets are
economic costs that are excluded from FFO. FFO is limited, as it
does not reflect the cash requirements that may be necessary for
future replacements of the real estate assets. Furthermore, the
amortization of capital expenditures and leasing costs necessary to
maintain the operating performance of logistics facilities are not
reflected in FFO.
- Gains or losses from non-development property and dispositions
or impairment charges related to expected dispositions represent
changes in value of the properties. By excluding these gains and
losses, FFO does not capture realized changes in the value of
disposed properties arising from changes in market conditions.
- The deferred income tax benefits and expenses that are excluded
from our modified FFO measures result from the creation of a
deferred income tax asset or liability that may have to be settled
at some future point. Our modified FFO measures do not currently
reflect any income or expense that may result from such
settlement.
- The foreign currency exchange gains and losses that are
excluded from our modified FFO measures are generally recognized
based on movements in foreign currency exchange rates through a
specific point in time. The ultimate settlement of our foreign
currency-denominated net assets is indefinite as to timing and
amount. Our FFO measures are limited in that they do not reflect
the current period changes in these net assets that result from
periodic foreign currency exchange rate movements.
- The gains and losses on extinguishment of debt that we exclude
from our Core FFO, may provide a benefit or cost to us as we may be
settling our debt at less or more than our future obligation.
- The natural disaster expenses that we exclude from Core FFO are
costs that we have incurred.
We compensate for these limitations by using our FFO measures
only in conjunction with net earnings computed under GAAP when
making our decisions. This information should be read with our
complete Consolidated Financial Statements prepared under GAAP. To
assist investors in compensating for these limitations, we
reconcile our modified FFO measures to our net earnings computed
under GAAP.
Guidance. The following is a reconciliation of our annual
guided Net Earnings per share to our guided Core FFO per share:
|
Low
|
|
High
|
|
Net
Earnings
|
$
|
2.10
|
|
$
|
2.25
|
|
Our share
of:
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
1.69
|
|
|
1.74
|
|
Net gains on real
estate transactions, net of taxes
|
|
(0.94)
|
|
|
(1.04)
|
|
Unrealized foreign
currency losses and other, net
|
|
0.00
|
|
|
0.00
|
|
Core FFO
|
$
|
2.85
|
|
$
|
2.95
|
|
Prologis Share represents our proportionate economic
ownership of each entity included in our total owned and managed
portfolio whether consolidated or unconsolidated.
Rent Change (Cash) represents the change in starting
rental rates per the lease agreement, on new and renewed leases,
signed during the periods as compared with the previous ending
rental rates in that same space. This measure excludes any free
rent periods and teaser rates defined as 50% or less of the
stabilized rate.
Rent Change (Net Effective) represents the change in net
effective rental rates (average rate over the lease term), on new
and renewed leases, signed during the period as compared with the
previous effective rental rates in that same space.
Same Store. We evaluate the operating performance of the
operating properties we own and manage using a "same store"
analysis because the population of properties in this analysis is
consistent from period to period, which eliminates the effects of
changes in the composition of the portfolio. We have defined the
same store portfolio, for the three months ended December 31, 2017, as those owned and managed
properties that were in operation at January
1, 2016 and have been in operation throughout the same
three-month periods in both 2016 and 2017 (including development
properties that have been completed and available for lease). We
have removed all properties that were disposed of to a third party
or were classified as held for sale to a third party from the
population for both periods. We believe the factors that affect
rental revenues, rental expenses and NOI in the same store
portfolio are generally the same as for the total operating
portfolio. To derive an appropriate measure of period-to-period
operating performance, we remove the effects of foreign currency
exchange rate movements by using the recent period end exchange
rate to translate from local currency into the U.S. dollar, for
both periods.
Same store is a commonly used measure in the real estate
industry. Our same store measures are non-GAAP financial measures
that are calculated beginning with rental revenues, rental
recoveries and rental expenses from the financial statements
prepared in accordance with GAAP. It is also common in the real
estate industry and expected from the analyst and investor
community that these numbers be further adjusted to remove certain
non-cash items included in the financial statements prepared in
accordance with GAAP to reflect a cash same store number. In
order to clearly label these metrics, we call one Same Store NOI
and one Same Store NOI – Cash. As our same store measures are
non-GAAP financial measures, they have certain limitations as
analytical tools and may vary among real estate companies. As a
result, we provide a reconciliation from our financial statements
prepared in accordance with GAAP to same store property NOI with
explanations of how these metrics are calculated.
The following is a reconciliation of our consolidated rental
revenues, rental recoveries, rental expenses and property NOI, as
included in the Consolidated Statements of Operations, to the
respective amounts in our same store portfolio analysis:
dollars in
thousands
|
Three Months
Ended
|
|
|
Dec.
31,
|
|
|
2017
|
|
2016
|
|
Change
(%)
|
|
Rental
revenues:
|
|
|
|
|
|
|
|
|
|
Rental
revenues
|
$
|
433,568
|
|
$
|
435,722
|
|
|
|
|
Rental
recoveries
|
|
117,081
|
|
|
124,163
|
|
|
|
|
Per the Consolidated
Statements of Operations
|
|
550,649
|
|
|
559,885
|
|
|
|
|
Properties not
included and other adjustments (a)
|
|
(82,049)
|
|
|
(65,536)
|
|
|
|
|
Unconsolidated
co-investment ventures
|
|
525,164
|
|
|
463,858
|
|
|
|
|
Same Store -
rental revenues
|
$
|
993,764
|
|
$
|
958,207
|
|
|
3.7
|
%
|
|
|
|
|
|
|
|
|
|
|
Rental
expenses:
|
|
|
|
|
|
|
|
|
|
Per the Consolidated
Statements of Operations
|
$
|
140,338
|
|
$
|
141,050
|
|
|
|
|
Properties not
included and other adjustments (b)
|
|
(13,986)
|
|
|
(8,314)
|
|
|
|
|
Unconsolidated
co-investment ventures
|
|
123,928
|
|
|
104,962
|
|
|
|
|
Same Store -
rental expenses
|
$
|
250,280
|
|
$
|
237,698
|
|
|
5.3
|
%
|
|
|
|
|
|
|
|
|
|
|
NOI:
|
|
|
|
|
|
|
|
|
|
Consolidated
NOI
|
$
|
410,311
|
|
$
|
418,835
|
|
|
|
|
Properties not
included and other adjustments
|
|
(68,063)
|
|
|
(57,222)
|
|
|
|
|
Unconsolidated
Co-Investment Ventures
|
|
401,236
|
|
|
358,896
|
|
|
|
|
Same Store -
NOI
|
$
|
743,484
|
|
$
|
720,509
|
|
|
3.2
|
%
|
Same Store -
NOI - Prologis Share (c)
|
$
|
426,803
|
|
$
|
409,982
|
|
|
4.1
|
%
|
|
|
|
|
|
|
|
|
|
|
NOI- Cash:
|
|
|
|
|
|
|
|
|
|
Same store-
NOI
|
$
|
743,484
|
|
$
|
720,509
|
|
|
|
|
Straight-line rent
adjustments (d)
|
|
(9,591)
|
|
|
(13,635)
|
|
|
|
|
Fair value lease
adjustments (d)
|
|
532
|
|
|
(1,089)
|
|
|
|
|
Same Store - NOI-
Cash
|
$
|
734,425
|
|
$
|
705,785
|
|
|
4.1
|
%
|
Same Store - NOI-
Prologis Share (c)
|
$
|
423,606
|
|
$
|
401,530
|
|
|
5.5
|
%
|
|
|
(a)
|
To calculate Same
Store rental income, we exclude net termination and renegotiation
fees to allow us to evaluate the growth or decline in each
property's rental income without regard to one-time items that are
not indicative of the property's recurring operating
performance.
|
(b)
|
To calculate Same
Store rental expense, we include an allocation of the property
management expenses for our consolidated properties based on the
property management fee that is provided for in the individual
management agreements under which our wholly owned management
companies provide property management services (generally the fee
is based on a percentage of revenue). On consolidation, the
management fee income and expenses are eliminated and the actual
cost of providing property management services is
recognized.
|
(c)
|
Prologis share of
Same Store is calculated using the underlying building information
from the Same Store NOI and NOI - Cash calculations and applying
our ownership percentage as of December 31, 2017 to the NOI of each
building for both periods.
|
(d)
|
In order to derive
Same Store- NOI - Cash, we adjust Same Store- NOI to exclude
non-cash items included in our rental income in our financial
statements, including straight line rent adjustments and
adjustments related to purchase accounting to reflect leases at
fair value at the time of acquisition.
|
Weighted Average Stabilized Capitalization ("Cap") Rate
is calculated as Stabilized NOI divided by the Acquisition
Cost.
View original content with
multimedia:http://www.prnewswire.com/news-releases/prologis-reports-fourth-quarter-and-full-year-2017-earnings-results-300586445.html
SOURCE Prologis, Inc.