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Prologis (PLD) Beats Q3 FFO Estimates, Raises 2021 Guidance

Prologis, Inc. PLD has reported third-quarter 2021 core funds from operations (FFO) per share of $1.04, beating the Zacks Consensus Estimate of $1.03. It also compares favorably with the year-ago quarter’s figure of 90 cents.

Results reflect solid increases in market rents and valuations amid unprecedented low vacancies in its markets. Further, the industrial REIT hiked its 2021 outlook.

Prologis generated rental revenues of $1,037.3 million, up from the prior-year quarter’s $980.1 million. The Zacks Consensus Estimate for the same was pegged at $1,034.5 million. Total revenues were $1.18 billion, up from the year-ago quarter’s $1.08 billion.

Per Hamid R. Moghadam, chairman and CEO of the company, "Our third quarter results were underpinned by record increases in market rents and valuations."

Quarter in Detail

The average occupancy level in Prologis’ owned and managed portfolio was 96.6% in the third quarter, expanding 60 basis points (bps) from second-quarter 2021. Moreover, the company’s owned and managed portfolio was 98.0% leased as of Sep 30, 2021.

In the quarter under review, 49.5 million square feet of leases commenced in the company’s owned and managed portfolio, with 42.1 million square feet in the operating portfolio and 7.4 million square feet in the development portfolio. The retention level was 79.3% in the quarter.

Prologis’ share of net effective rent change was 27.9% in the July-September quarter. Cash rent change was 12.9%. Cash same-store net operating income (NOI) grew 6.7% and was driven by the United States business at 6.9% and the International business at 5.9%.

The company’s share of building acquisitions amounted to $373 million, with a weighted average stabilized cap rate of 5.0% in the reported quarter. Development stabilization aggregated $368 million, while development starts totaled $1,449 million, with 60.3% being build to suit. The company’s total dispositions and contributions were $732 million, with a weighted average stabilized cap rate (excluding land and other real estates) of 4.1%.

Liquidity

Prologis exited third-quarter 2021 with cash and cash equivalents of $585.1 million. Its liquidity amounted to $5.5 billion in cash and availability on its credit facilities. Debt, as a percentage of total market capitalization, was 16.7%. The company's weighted average interest rate on its share of total debt was 1.8%, with a weighted average term of 10.4 years. The combined investment capacity of Prologis and its open-ended ventures, in line with their current ratings, is roughly $15 billion.

The company and its co-investment ventures issued $1.3 billion of debt in the third quarter at a weighted average interest rate of 2.1%. This included $169 million in green bond raises.

Outlook

Prologis has revised its 2021 core FFO per share guidance to $4.11-$4.13 from the $4.04-$4.08 mentioned earlier, marking a 1.5% increase at the mid-point. The Zacks Consensus Estimate for the same is currently pegged at $4.07.

The company expects average occupancy of 96.25-96.75%, which has been unrevised. Cash same-store NOI (Prologis share) is projected to be 5.75-6.00%, up from the previously mentioned 5.25-5.75%.

The company anticipates $1.2-$1.4 billion of building acquisitions at Prologis share compared with the $700-$900 million stated earlier. Development starts are expected to be $3.5-$3.8 billion compared with the $3.05-$3.35 billion mentioned earlier.

Prologis currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Prologis, Inc. Price, Consensus and EPS Surprise

 

Prologis, Inc. price-consensus-eps-surprise-chart | Prologis, Inc. Quote

We now look forward to the earnings releases of other REITs, including Crown Castle International Corp. CCI, SL Green Realty Corp. SLG and Alexandria Real Estate Equities, Inc. ARE. While Crown Castle and SL Green are slated to release third-quarter 2021 results on Oct 20, Alexandria Real Estate is scheduled to report its numbers on Oct 25.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.


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