SAN FRANCISCO, Feb. 8, 2012 /PRNewswire/ -- Prologis, Inc. (NYSE: PLD), the leading global owner, operator and developer of industrial real estate, today reported results for the fourth quarter 2011.

Core funds from operations (Core FFO) per fully diluted share was $0.44 for the fourth quarter 2011 compared to $0.41 for the same period in 2010. Funds from operations (FFO) as defined by Prologis per fully diluted share was $0.29 for the fourth quarter 2011 compared to $(4.81) for the same period in 2010. The differential between Core FFO and FFO in the fourth quarter 2011 primarily relates to impairment charges and merger costs. Net income (loss) per share was $(0.10) for the fourth quarter 2011 compared to a net loss of $(4.86) for the same period in 2010. All results for 2010 represent solely legacy ProLogis and therefore are not directly comparable to the 2011 reported results.  

Full-year 2011 results include combined company results since the merger on June 3, 2011, and legacy ProLogis prior to the merger. Core FFO per fully diluted share was $1.58 for the full year 2011 compared to $1.27 for the same period in 2010.  FFO as defined by Prologis per fully diluted share was $1.10 for the full year 2011 compared with $(4.44) for the same period in 2010.  Net loss per share was ($0.51) for the full year 2011 compared to a net loss of $(5.90) for the same period in 2010.

"We had an excellent quarter with financial and operating results that were ahead of plan. The team came together seamlessly and we made excellent progress on our strategic priorities," said Hamid R. Moghadam, chairman and co-chief executive officer, Prologis. "Noteworthy accomplishments include increasing our occupancy to 92.2 percent, a 120 basis point improvement over the third quarter and reducing our share of outstanding debt by more than $900 million. In addition, the heavy lifting associated with the merger integration is effectively complete and we have increased our synergy target to an annual savings of $115 million."

Operating Portfolio Metrics

Same-store net operating income (NOI) increased over the prior year by 0.4 percent in the fourth quarter, compared to a decrease of 0.7 percent in the third quarter of 2011. Rental rates on leases signed in the fourth quarter same-store pool decreased 4.5 percent, compared to rental rates on leases signed in the third quarter 2011, which decreased by 8.6 percent.

During the fourth quarter, the company leased a total of 37.6 million square feet (3.5 million square meters) in its combined operating and development portfolios. The company also achieved an 80.1 percent tenant retention rate for the quarter, signing 22.5 million square feet (2.1 million square meters) of renewals.

"Our strong performance for the quarter was driven principally by higher than expected occupancy in the operating portfolio and higher Private Capital revenues. Additionally, our financial performance benefitted by year-end adjustments including a one-time adjustment to G&A expenses," said Walter C. Rakowich, co-chief executive officer, Prologis. "Our teams around the world delivered outstanding results in the fourth quarter, especially in Europe, where occupancy increased 160 basis points over the third quarter."

Contributions & Dispositions

The company closed 37 contribution and disposition transactions during the fourth quarter 2011 with a stabilized capitalization rate of 7.1 percent.  The transactions totaled more than $1.25 billion, of which more than $1.0 billion was Prologis' share of the proceeds, comprising:

  • $907 million in building contributions and sales to five of its co-investment vehicles on three continents, of which $750 million was the company's share; and
  • $366 million of third-party dispositions, of which $316 million was the company's share.
 

At year end, the company had more than $500 million of operating portfolio assets in five separate transactions under contract and scheduled to close in the first quarter of 2012, subject to customary closing conditions. The combination of the total $1.65 billion in transactions closed in the second half of 2011 and the $500 million in transactions under contract at year end represents an 8 percent increase to the top end of the company's second half 2011 guidance range for contributions and dispositions of $1.8 billion to $2.0 billion.

Acquisitions & Development Starts

Capital deployed or committed during the fourth quarter 2011 totaled approximately $345 million, of which $210 million was Prologis' share, including:

  • Acquisitions of $178 million including 11 industrial properties totaling to 1.6 million square feet (150,000 square meters) with a stabilized capitalization rate of 7.0 percent and 10 acres of land. Of  the total acquisitions, $106 million was Prologis' share; and
  • Development starts of $166 million totaling 2.2 million square feet (206,500 square meters) in 9 projects, which monetized $41 million of land. Prologis' share of the total expected investment is $105 million.
 

At quarter end, Prologis' global development portfolio totaled 13.1 million square feet (1.2 million square meters), with an estimated total investment of $1.4 billion. Prologis' share of the estimated total investment was $1.2 billion with an estimated value creation at stabilization of $238 million.

Private Capital Activity

In 2011, Prologis raised or received new, third-party equity commitments of approximately $1.8 billion.

Consistent with the company's priority to streamline its private capital business, it has implemented a plan to rationalize its co-investment ventures into a smaller number of differentiated investment vehicles.

  • As previously announced the company sold its 20 percent interest in its Prologis Korea Fund and liquidated the first phase of its Prologis North America Properties Fund I during the second half of 2011.
  • Subsequent to year end, the company purchased its partner's 63 percent interest in Prologis North America Fund II and brought the portfolio entirely onto its balance sheet.
 

Financing Activity

During the fourth quarter, Prologis completed approximately $1.4 billion of capital markets activities, including debt repurchases, refinancings, and new financings.

As a result and in combination with the significant disposition and contribution activity, the company:

  • Reduced its share of total debt by $907 million;
  • Lowered its share of 2012 debt maturities by $399 million; and
  • Improved its key debt metrics in line with its previously stated strategic priorities.
 

"We exceeded our balance sheet management and delevering objectives for 2011 and remain committed to building one of the top balance sheets in the industry," said William Sullivan, chief financial officer, Prologis. "Carrying this momentum into 2012, a key area of focus is on further improving our financial position and mitigating our exposure to foreign currency."

Guidance for 2012

Prologis established a full-year 2012 Core FFO guidance range of $1.60 to $1.70 per diluted share. The company also expects to recognize a net loss for GAAP purposes, on a relative basis, of $(0.40) to $(0.50) per share.  The difference between the company's Core FFO and net earnings guidance for 2012 predominately relates to real estate depreciation and merger related expenses.

The Core FFO and earnings guidance reflected above excludes any potential gains (losses) recognized from property dispositions, due to the variability of timing, composition of properties and estimate of proceeds.  In reconciling from net earnings to Core FFO, Prologis makes certain adjustments including but not limited to real estate depreciation and amortization expense, impairment charges, deferred taxes, unrealized gains or losses on foreign currency or derivative activity, as well as transaction and merger costs.

The principal drivers supporting Prologis' 2012 guidance include the following:

  • Year end occupancy in its operating portfolio between 92.5 and 93.5 percent (consistent with historical seasonal trends, the company expects occupancy to decrease in the first quarter and trend higher through the remainder of the year);
  • Same-store NOI growth flat to 1.0 percent, excluding the impact of foreign exchange movements;
  • Development starts of $1.1 to $1.4 billion, of which approximately 70 percent is expected to be the company's share;
  • Acquisitions of buildings of $400 to $600 million, of which approximately 40 percent is expected to be the company's share;
  • Building and land dispositions and contributions of $4.5 to $5.5 billion, of which approximately 70 percent is expected to be the company's share. A substantial portion of the disposition and contribution guidance relates to the formation of the Prologis Targeted Japan Logistics Fund and subsequent contribution of assets from its balance sheet; and
  • An average euro exchange rate of $1.30 and an average yen exchange rate of 80 yen per U.S. dollar.
 

Webcast and Conference Call Information

The company will host a webcast /conference call to discuss quarterly results, current market conditions and future outlook today, February 8, 2012, at 12:00 p.m. Eastern Time. Interested parties are encouraged to access the live webcast by clicking the microphone icon located near the top of the opening page at: http://ir.prologis.com. Interested parties also can participate via conference call by dialing (877) 256-7020 from the U.S. and Canada or (+1 973-409-9692) internationally with reservation code 40596350.

A telephonic replay will be available from February 8, 2012, through March 8, 2012, at 855-859-2056 (from the U.S. and Canada) or +1 404-537-3406 (from all other countries), with the reservation code 40596350. The webcast and podcast replay will be posted when available in the "Financial Information" section of the Prologis Investor Relations website.

About Prologis

Prologis, Inc. is the leading owner, operator and developer of industrial real estate, focused on global and regional markets across the Americas, Europe and Asia. As of December 31, 2011, Prologis owned or had investments in, on a consolidated basis or through unconsolidated joint ventures, properties and development projects expected to total approximately 600 million square feet (55.7 million square meters) in 22 countries. The company leases modern distribution facilities to more than 4,500 customers, including manufacturers, retailers, transportation companies, third-party logistics providers and other enterprises.

The statements in this release 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 Prologis operates, management's beliefs and assumptions made by management.  Such statements involve uncertainties that could significantly impact Prologis' financial results. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," 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 developed properties, disposition activity, general conditions in the geographic areas where we operate, synergies to be realized from our recent merger transaction, our debt and financial position, our ability to form new property funds and the availability of capital in existing or new property funds — 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 ("REIT") status and tax structuring, (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 and funds, 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 Prologis under the heading "Risk Factors." Prologis undertakes no duty to update any forward-looking statements appearing in this release.

     

Company Profile


 
 
 

Three Months Ended

December 31,

 

Twelve Months Ended

December 31,

 

(dollars in thousands)

2011 (A)

 

2010 (A)

 

2011 (A)

 

2010 (A)

 
                     
 

Revenues

$     484,132

 

$        236,223

 

$       1,533,291

 

$     884,587

 
 

Net loss attributable to common shares

(45,459)

 

(1,166,589)

 

(188,110)

 

(1,295,920)

 
 

FFO, as defined by Prologis

134,147

 

(1,154,157)

 

411,688

 

(974,197)

 
 

Core FFO

203,945

 

99,380

 

593,917

 

281,386

 
 

AFFO

145,593

 

75,857

 

423,821

 

206,669

 
 

Core EBITDA

397,629

 

247,801

 

1,548,470

 

870,847

 
                     
 

Per common share - diluted:

               
   

Net earnings (loss) attributable to common shares

$          (0.10)

 

$            (4.86)

 

$               (0.51)

 

$          (5.90)

 
   

FFO, as defined by Prologis

0.29

 

(4.81)

 

1.10

 

(4.44)

 
   

Core FFO

0.44

 

0.41

 

1.58

 

1.27

 
                     
                     
                   

 

(A) AMB and Prologis completed the merger (the "Merger") on June 3, 2011.  The financial results presented throughout this supplemental include Prologis for the full period and AMB results from the date of the Merger going forward.  Results for the twelve months ended December 31, 2011 include approximately seven months of the impact from both the Merger and PEPR acquisition.  See Notes and Definitions for more information.

 
 

 
                 

Consolidated Balance Sheets


 
 
           

December 31,

 

September 30,

 

December 31,

 

(in thousands)

2011

 

2011

 

2010 (A)

 

Assets:

                 
 

Investments in real estate assets:

                   
   

Operating portfolio

 

$

21,552,548

 

$

22,474,206

 

$

10,714,799

 
   

Development portfolio

   

860,531

   

676,019

   

365,362

 
   

Land

   

1,984,233

   

1,972,277

   

1,533,611

 
   

Other real estate investments

   

390,225

   

469,852

   

265,869

 
             

24,787,537

   

25,592,354

   

12,879,641

 
   

Less accumulated depreciation

   

2,157,907

   

1,908,152

   

1,595,678

 
       

Net investments in properties

   

22,629,630

   

23,684,202

   

11,283,963

 
 

Investments in and advances to unconsolidated investees

   

2,857,755

   

2,900,646

   

2,024,661

 
 

Notes receivable backed by real estate

   

322,834

   

354,254

   

302,144

 
 

Assets held for sale

   

444,850

   

89,519

   

574,791

 
       

Net investments in real estate

   

26,255,069

   

27,028,621

   

14,185,559

 
                             
 

Cash and cash equivalents

   

176,072

   

216,749

   

37,634

 
 

Restricted cash

   

71,992

   

77,798

   

27,081

 
 

Accounts receivable

   

147,999

   

216,423

   

58,979

 
 

Other assets

   

1,072,780

   

1,046,713

   

593,414

 
       

Total assets

 

$

27,723,912

 

$

28,586,304

 

$

14,902,667

 
                             

Liabilities and Equity:

                   
 

Liabilities:

                   
   

Debt

 

$

11,382,408

 

$

12,147,277

 

$

6,506,029

 
   

Accounts payable, accrued expenses, and other liabilities

   

1,886,030

   

1,837,061

   

876,283

 
       

Total liabilities

   

13,268,438

   

13,984,338

   

7,382,312

 
                             
 

Equity:

                   
   

Stockholders' equity:

                   
     

Preferred stock

   

582,200

   

582,200

   

350,000

 
     

Common stock

   

4,594

   

4,592

   

2,545

 
     

Additional paid-in capital

   

16,349,328

   

16,365,581

   

9,671,560

 
     

Accumulated other comprehensive loss

   

(182,321)

   

(102,546)

   

(3,160)

 
     

Distributions in excess of net earnings

   

(3,092,162)

   

(2,916,997)

   

(2,515,722)

 
       

Total stockholders' equity

   

13,661,639

   

13,932,830

   

7,505,223

 
   

Noncontrolling interests

   

735,222

   

609,259

   

15,132

 
   

Noncontrolling interests - limited partnership unitholders

   

58,613

   

59,877

   

-

 
       

Total equity

   

14,455,474

   

14,601,966

   

7,520,355

 
       

Total liabilities and equity

 

$

27,723,912

 

$

28,586,304

 

$

14,902,667

 
                           

 

(A) Represents legacy Prologis Only

 
 

 
 

Consolidated Statement of Operations


 
 
 

Three Months Ended

 

Twelve Months Ended

 

(in thousands, except per share amounts)

December 31,

 

December 31,

 
     

2011

2010 (A)

 

2011 (A)

2010 (A)

 

Revenues:

                   
 

Rental income

$

442,581

$

192,551

 

$

1,376,836

$

744,540

 
 

Private capital revenue

 

40,230

 

34,645

   

137,619

 

122,526

 
 

Development management and other income

 

1,321

 

9,027

   

18,836

 

17,521

 
   

Total revenues

 

484,132

 

236,223

   

1,533,291

 

884,587

 
                         

Expenses:

                   
 

Rental expenses

 

118,300

 

53,130

   

384,652

 

215,208

 
 

Private capital expenses

 

15,734

 

10,580

   

54,962

 

40,659

 
 

General and administrative expenses

 

50,797

 

50,095

   

195,161

 

165,981

 
 

Merger, acquisition and other integration expenses

 

18,772

 

-

   

140,495

 

-

 
 

Impairment of real estate properties

 

21,237

 

733,316

   

21,237

 

736,612

 
 

Depreciation, amortization and other expenses

 

202,168

 

83,194

   

609,354

 

327,623

 
   

Total expenses

 

427,008

 

930,315

   

1,405,861

 

1,486,083

 
                         

Operating income (loss)

 

57,124

 

(694,092)

   

127,430

 

(601,496)

 
                         

Other income (expense):

                   
 

Earnings from unconsolidated property funds, net

 

904

 

(2,757)

   

49,326

 

10,548

 
 

Earnings from other unconsolidated investees, net

 

3,016

 

5,933

   

10,609

 

13,130

 
 

Interest income

 

5,780

 

2,008

   

19,843

 

5,022

 
 

Interest expense

 

(129,341)

 

(112,034)

   

(468,738)

 

(461,166)

 
 

Impairment of other assets

 

(22,609)

 

(412,745)

   

(126,432)

 

(412,745)

 
 

Gains (losses) on acquisitions and dispositions of investments in real estate, net

 

(2,966)

 

(30,200)

   

111,684

 

28,488

 
 

Foreign currency and derivative gains (losses) and other income (expenses), net

 

(3,584)

 

(5,701)

   

33,337

 

(256)

 
 

Gain (loss) on early extinguishment of debt, net

 

556

 

(153,037)

   

258

 

(201,486)

 
   

Total other income (expense)

 

(148,244)

 

(708,533)

   

(370,113)

 

(1,018,465)

 
                         

Loss before income taxes

 

(91,120)

 

(1,402,625)

   

(242,683)

 

(1,619,961)

 
 

Income tax expense (benefit) - current and deferred

 

(8,184)

 

(5,907)

   

1,776

 

(30,499)

 

Loss from continuing operations

 

(82,936)

 

(1,396,718)

   

(244,459)

 

(1,589,462)

 

Discontinued operations:

                   
 

Income attributable to disposed properties and assets held for sale

 

5,852

 

18,434

   

27,907

 

84,435

 
 

Net gains on dispositions, net of related impairment charges and taxes

 

37,069

 

217,421

   

58,614

 

234,574

 
   

Total discontinued operations

 

42,921

 

235,855

   

86,521

 

319,009

 

Consolidated net loss

 

(40,015)

 

(1,160,863)

   

(157,938)

 

(1,270,453)

 

Net earnings attributable to noncontrolling interests

 

4,832

 

591

   

4,524

 

(43)

 

Net loss attributable to controlling interests

 

(35,183)

 

(1,160,272)

   

(153,414)

 

(1,270,496)

 

Less preferred stock dividends

 

10,276

 

6,317

   

34,696

 

25,424

 

Net loss attributable to common shares

$

(45,459)

$

(1,166,589)

 

$

(188,110)

$

(1,295,920)

 

Weighted average common shares outstanding - Diluted (B)

 

458,383

 

239,912

   

370,534

 

219,515

 

Net loss per share attributable to common shares - Diluted

$

(0.10)

$

(4.86)

 

$

(0.51)

$

(5.90)

 
                       

 

(A) The financial results include Prologis for the full period and AMB and PEPR results from approximately June 1,2011.

 
 

(B) See calculation of Per Share Amounts in Notes and Definitions

 
   
 

 
 

Consolidated Statements of Funds from Operations (FFO)


 
 
 

Three Months Ended

 

Twelve Months Ended

 

(in thousands, except per share amounts)

December 31,

 

December 31,

 
       

2011

2010 (A)

 

2011 (A)

2010 (A)

 

Revenues:

                   
 

Rental income

$

456,462

$

227,750

 

$

1,436,419

$

925,169

 
 

Private capital revenue

 

40,230

 

34,645

   

137,619

 

122,526

 
 

Development management and other income

 

1,321

 

9,027

   

18,836

 

17,521

 
     

Total revenues

 

498,013

 

271,422

   

1,592,874

 

1,065,216

 
                           

Expenses:

                   
 

Rental expenses

 

120,265

 

61,169

   

397,216

 

263,776

 
 

Private capital expenses

 

15,734

 

10,580

   

54,962

 

40,659

 
 

General and administrative expenses

 

50,797

 

50,095

   

195,161

 

165,981

 
 

Merger, acquisition and other integration expenses

 

18,772

 

-

   

140,495

 

-

 
 

Depreciation and amortization of non-real estate assets and other expenses

 

14,663

 

6,696

   

43,026

 

32,441

 
     

Total operating expenses

 

220,231

 

128,540

   

830,860

 

502,857

 
                           

Operating FFO

 

277,782

 

142,882

   

762,014

 

562,359

 
                           

Other income (expense):

                   
 

FFO from unconsolidated property funds

 

42,328

 

23,910

   

189,591

 

139,927

 
 

FFO from other unconsolidated investees

 

5,164

 

7,987

   

17,052

 

20,121

 
 

Interest income

 

5,780

 

2,008

   

19,843

 

5,022

 
 

Interest expense

 

(129,480)

 

(112,034)

   

(469,289)

 

(461,166)

 
 

Impairment of real estate properties and other assets

 

(38,546)

 

(1,107,725)

   

(145,028)

 

(1,110,072)

 
 

Gains (losses) on acquisitions and dispositions of investments in real estate, net

 

(2,538)

 

48,785

   

117,800

 

110,786

 
 

Foreign currency exchange gains (losses) and other income (expenses), net

 

2,418

 

8,395

   

(5,697)

 

11,231

 
 

Gain (loss) on early extinguishment of debt, net

 

556

 

(153,037)

   

258

 

(201,486)

 
 

Current income tax expense

 

(15,674)

 

(9,602)

   

(24,795)

 

(25,452)

 
     

Total other income (expense)

 

(129,992)

 

(1,291,313)

   

(300,265)

 

(1,511,089)

 
                           

Less preferred share dividends

 

10,276

 

6,317

   

34,696

 

25,424

 

Less FFO attributable to noncontrolling interests

 

3,367

 

(591)

   

15,365

 

43

 

FFO, as defined by Prologis

 

134,147

 

(1,154,157)

   

411,688

 

(974,197)

 
                           
 

Impairment charges

 

38,546

 

1,107,725

   

145,028

 

1,110,072

 
 

Japan disaster expenses

 

-

 

-

   

5,210

 

-

 
 

Merger, acquisition and other integration expenses

 

18,772

 

-

   

140,495

 

-

 
 

Our share of losses (gains) on acquisitions and dispositions of investments in real estate, net

 

7,621

 

(48,785)

   

(115,577)

 

(110,786)

 
 

Loss (gain) on early extinguishment of debt, net

 

(556)

 

153,037

   

(258)

 

201,486

 
 

Income tax expense on dispositions

 

5,415

 

7,932

   

7,331

 

10,783

 
 

Adjustments made in 2010, not applicable to 2011

 

-

 

33,628

   

-

 

44,028

 
     

Total of adjustments

 

69,798

 

1,253,537

   

182,229

 

1,255,583

 
                           

Core FFO

$

203,945

$

99,380

 

$

593,917

$

281,386

 

Weighted average common shares outstanding - Diluted (B)

 

474,881

 

253,776

   

385,960

 

221,356

 

Core FFO per share - Diluted

$

0.44

$

0.41

 

$

1.58

$

1.27

 
                         

 

(A)  The financial results include Prologis for the full period and AMB and PEPR results from approximately June 1, 2011.

 

(B)  See calculation of per share amounts in the Notes and Definitions

 
 

 
 

Reconciliations of Net Earnings (Loss) to FFO


 
 
 

Three Months Ended

 

Twelve Months Ended

 

(in thousands)

December 31,

 

December 31,

 
     

2011

2010 (A)

 

2011 (A)

2010 (A)

 

Reconciliation of net loss to FFO

                   
                         

Net loss attributable to common shares

$

(45,459)

$

(1,166,589)

 

$

(188,110)

$

(1,295,920)

 
 

Add (deduct) NAREIT defined adjustments:

                   
   

Real estate related depreciation and amortization

 

187,505

 

76,498

   

566,328

 

295,182

 
   

Impairment on certain real estate properties

 

5,300

 

126,038

   

5,300

 

126,987

 
   

Net gains on non-FFO dispositions

 

(32,016)

 

(221,140)

   

(39,812)

 

(196,080)

 
   

Reconciling items related to noncontrolling interests

 

(8,199)

 

-

   

(19,889)

 

-

 
   

Our share of reconciling items from unconsolidated investees

 

43,879

 

35,891

   

147,608

 

141,721

 

Subtotal-NAREIT defined FFO

 

151,010

 

(1,149,302)

   

471,425

 

(928,110)

 
                         
 

Add (deduct) our defined adjustments:

                   
   

Unrealized foreign currency and derivative losses (gains), net

 

6,002

 

14,096

   

(39,034)

 

11,487

 
   

Deferred income tax expense (benefit)

 

(22,558)

 

(11,781)

   

(19,803)

 

(52,223)

 
   

Our share of reconciling items from unconsolidated investees

 

(307)

 

(7,170)

   

(900)

 

(5,351)

 

FFO, as defined by Prologis

 

134,147

 

(1,154,157)

   

411,688

 

(974,197)

 
                         
 

Adjustments to arrive at Core FFO

 

69,798

 

1,253,537

   

182,229

 

1,255,583

 

Core FFO

$

203,945

$

99,380

 

$

593,917

$

281,386

 
                         

Adjustments to arrive at Adjusted FFO ("AFFO"), including our share of unconsolidated investees:

                   
 

Straight-lined rents and amortization of lease intangibles

 

(9,178)

 

(12,089)

   

(44,507)

 

(47,455)

 
 

Property improvements

 

(21,472)

 

(12,289)

   

(64,903)

 

(37,921)

 
 

Tenant improvements

 

(19,558)

 

(13,811)

   

(60,790)

 

(45,066)

 
 

Leasing commissions

 

(15,739)

 

(8,589)

   

(47,789)

 

(30,826)

 
 

Amortization of management contracts

 

1,925

 

550

   

6,749

 

2,200

 
 

Amortization of debt discounts/(premiums) and financing costs, net of capitalization

 

(4,185)

 

14,993

   

9,662

 

59,266

 
 

Stock compensation expense

 

9,856

 

7,712

   

31,483

 

25,085

 

AFFO

 

$

145,593

$

75,857

 

$

423,822

$

206,668

 
                         

Common stock dividends

$

130,573

$

69,296

 

$

388,333

$

285,217

 
                       

 

(A) The financial results include Prologis for the full period and AMB and PEPR results from approximately June 1,2011.

 
 

 
     

EBITDA Reconciliation


 
 
 

Three Months Ended

 

Twelve Months Ended

 
                 

December 31,

 

December 31,

 
                 

2011

2010

 

2011

2010

 

Reconciliation of Consolidated Net Loss to Core EBITDA

                   
                                     

Consolidated net loss

$

(40,015)

$

(1,160,863)

 

$

(157,938)

$

(1,270,453)

 
   

Net gains on acquisitions and dispositions of investments in real estate, net

 

(35,403)

 

(195,153)

   

(173,514)

 

(273,845)

 
   

Depreciation and amortization

 

192,379

 

81,164

   

585,323

 

311,268

 
   

Interest expense

 

129,341

 

112,034

   

468,738

 

461,166

 
   

Impairment charges

 

43,846

 

1,146,061

   

147,669

 

1,149,357

 
   

Merger, acquisition and other integration expenses

 

18,772

 

-

   

140,495

 

-

 
   

Loss (gain) on early extinguishment of debt

 

(556)

 

153,037

   

(258)

 

201,486

 
   

Current and deferred income tax expense (benefit)

 

(6,884)

 

2,025

   

4,992

 

(19,716)

 
   

Pro forma adjustment (A)

 

-

       

263,994

 

-

 
   

Income on properties sold during the period included in discontinued operations

 

(5,852)

 

(18,434)

   

(27,907)

 

(84,435)

 
   

Other non-cash charges (gains)

 

15,858

 

21,808

   

(7,551)

 

36,572

 
   

Other adjustments made to arrive at Core FFO

 

-

 

14,784

   

5,210

 

19,213

 
 

Core EBITDA, prior to our share of unconsolidated investees

 

311,486

 

156,463

   

1,249,253

 

530,613

 
                                     
   

Our share of reconciling items from unconsolidated investees:

                   
     

Net losses (gains) on disposition of real estate, net

 

5,083

 

-

   

5,083

 

-

 
     

Depreciation and amortization

 

43,879

 

35,891

   

147,608

 

141,721

 
     

Interest expense

 

37,231

 

42,563

   

142,282

 

171,332

 
     

Current and deferred income tax expense (benefit)

 

257

 

1,210

   

4,918

 

7,717

 
     

Other non-cash charges (gains)

 

(307)

 

(7,170)

   

(900)

 

(5,351)

 
     

Realized losses (gains) on derivative activity

 

-

 

18,844

   

226

 

24,815

 

Core EBITDA

$

397,629

$

247,801

 

$

1,548,470

$

870,847

 
                                   

 

(A) Adjustments for the effects of the Merger and PEPR acquisition to reflect NOI for the full period

 
 

 

Notes and Definitions

Please refer to our annual and quarterly financial statements filed with the Securities and Exchange Commission on Forms 10-K and 10-Q and other public reports for further information about us and our business. Certain amounts from previous periods presented in the Supplemental Information have been reclassified to conform to the 2011 presentation.

Our real estate operations segment represents the direct, long-term ownership of industrial properties. Our investment strategy in this segment focuses primarily on the ownership and leasing of industrial properties in global and regional markets. Our intent is to hold and use these properties; however, depending on market and other conditions, we may contribute or sell these properties to property funds/co-investment ventures or sell to third parties.  When we contribute or sell properties we have developed, we recognize FFO to the extent the proceeds received exceed our original investment (i.e. prior to depreciation) and present the results as Net Gains on Dispositions. In addition, we have industrial properties that are currently under development and land available for development that are part of this segment as well.  We may develop the land or sell to third parties, depending on market conditions, customer demand and other factors. The private capital segment represents primarily the management of unconsolidated property funds and joint ventures and the properties they own.

On June 3, 2011, AMB Property Corporation ("AMB") and ProLogis combined through a merger of equals (the "Merger").  As a result of the Merger, each outstanding ProLogis common share was converted into 0.4464 shares of AMB common stock.  At the time of the Merger, AMB changed its name to Prologis, Inc.  After consideration of all applicable factors pursuant to the business combination accounting rules, the Merger resulted in a reverse acquisition in which AMB was considered the "legal acquirer" and ProLogis was considered the "accounting acquirer". As such, the historical results of ProLogis are included for the full period and AMB results are included from the date of the Merger going forward.

During the second quarter of 2011, we increased our ownership of ProLogis European Properties ("PEPR"), through open market purchases and a mandatory tender offer. On May 25, 2011, we settled on our mandatory tender offer. Pursuant to the tender offer and open-market purchases made during the tender period, we acquired an additional 96.5 million ordinary units and 2.7 million convertible preferred units of PEPR for an aggregate purchase price of approximately euro 615.5 million. We funded the aggregate purchases through borrowings under our existing credit facilities and a new euro 500 million bridge facility, which was subsequently repaid with proceeds received from our June equity offering.

After completion of the tender offer, we began consolidating PEPR and recognized a gain of euro 59.6 million ($85.9 million). Following the tender offer, and including open market purchases and our participation in new equity offerings through December 31, 2011, we owned approximately 93.7% of the voting ordinary units of PEPR and 94.9% of the convertible preferred units as of December 31, 2011.

We have preliminarily allocated the aggregate purchase price related to the Merger of $5.9 billion and PEPR of euro 1.1 billion ($1.6 billion) as set forth below. The allocations are based on our preliminary valuations, estimates and assumptions and are subject to change.  

             

(amounts in thousands)

Merger

 

PEPR

 

Total

 

Investments in real estate properties

$ 8,172,814

 

$ 4,453,069

 

$ 12,625,883

 

Investments in and advances to unconsolidated investees

1,620,336

 

-

 

1,620,336

 

Cash, accounts receivable and other assets

687,857

 

251,826

 

939,683

 

Debt

(3,646,719)

 

(2,240,764)

 

(5,887,483)

 

Accounts payable, accrued expenses and other liabilities

(430,562)

 

(703,541)

 

(1,134,103)

 

Noncontrolling interests

(547,277)

 

(133,651)

 

(680,928)

 

Total purchase price

$ 5,856,449

 

$ 1,626,939

 

$ 7,483,388

 
           

 

Assets Held For Sale and Discontinued Operations. As of December 31, 2011, we had four land parcels and 35 operating properties that met the criteria to be presented as held for sale.  The amounts included in Assets Held for Sale include real estate investment balances and the related assets and liabilities for each property.

During 2011, we disposed of 92 properties (most of which were non-development properties)aggregating 10.2 million square feet to third parties. During all of 2010, we disposed of land subject to ground leases and 205 properties aggregating 25.4 million square feet to third parties, two of which were development properties.

The operations of the properties held for sale and properties that were disposed of to third parties during a period, including the aggregate net gains or losses recognized upon their disposition, are presented as discontinued operations in our Consolidated Statements of Operations for all periods presented. The income attributable to these properties was as follows (in thousands):

   

Three Months Ended

 

Twelve Months Ended

 
   

December 31,

 

December 31,

 
   

2011

2010

 

2011

2010

 

Rental income

 

$ 13,881

 

$ 35,199

   

$ 59,583

 

$ 180,629

 

Rental expenses

 

(1,965)

 

(8,039)

   

(12,564)

 

(48,568)

 

Depreciation and amortization

 

(5,925)

 

(8,726)

   

(18,561)

 

(47,626)

 

Interest expense

 

(139)

 

-

   

(551)

 

-

 
                       

Income attributable to disposed properties and assets held for sale

 

$ 5,852

 

$ 18,434

   

$ 27,907

 

$ 84,435

 
                     

 

For purposes of our Consolidated Statements of FFO, we do not segregate discontinued operations.  In addition, we include the gains and losses from disposition impairment charges of land parcels and development properties in the calculation of FFO, including those classified as discontinued operations.

Calculation of Per Share Amounts are as follows (in thousands, except per share amounts):

             
 

Three Months Ended

 

Twelve Months Ended

 
 

December 31,

 

December 31,

 
 

2011

2010

 

2011

2010

 

Net earnings (loss)

           

Net earnings (loss)

$ (45,459)

$ (1,166,589)

 

$ (188,110)

$ (1,295,920)

 

Noncontrolling interest attributable to convertible limited partnership units

-

-

 

-

-

 

Adjusted net earnings (loss) - Diluted

$ (45,459)

$ (1,166,589)

 

$ (188,110)

$ (1,295,920)

 
             

Weighted average common shares outstanding - Basic (a)

458,383

239,912

 

370,534

219,515

 

Incremental weighted average effect of conversion of limited partnership units

-

-

 

-

-

 

Incremental weighted average effect of stock awards

-

-

 

-

-

 

Weighted average common shares outstanding - Diluted (a)

458,383

239,912

 

370,534

219,515

 
             

Net earnings (loss) per share - Basic

$ (0.10)

$ (4.86)

 

$ (0.51)

$ (5.90)

 
             

Net earnings (loss) per share - Diluted

$ (0.10)

$ (4.86)

 

$ (0.51)

$ (5.90)

 
             

FFO, as defined by Prologis

           

FFO, as defined by Prologis

$ 134,147

$ (1,154,157)

 

$ 411,688

$ (974,197)

 

Noncontrolling interest attributable to convertible limited partnership units

108

-

 

289

-

 

FFO - Diluted, as defined by Prologis

$ 134,255

$ (1,154,157)

 

$ 411,977

$ (974,197)

 
             

Weighted average common shares outstanding - Basic (a)

458,383

239,912

 

370,534

219,515

 

Incremental weighted average effect of conversion of limited partnership units

3,361

-

 

2,095

-

 

Incremental weighted average effect of stock awards

1,258

-

 

1,452

-

 

Weighted average common shares outstanding - Diluted (a)

463,002

239,912

 

374,081

219,515

 
             

FFO per share - Diluted, as defined by Prologis

$ 0.29

$ (4.81)

 

$ 1.10

$ (4.44)

 
             

Core FFO

           

Core FFO

$ 203,945

$ 99,380

 

$ 593,917

$ 281,386

 

Noncontrolling interest attributable to convertible limited partnership units

108

(588)

 

289

(64)

 

Interest expense on convertible debt assumed converted

4,165

4,218

 

16,824

-

 

Core FFO - Diluted

$ 208,218

$ 103,010

 

$ 611,030

$ 281,322

 
             

Weighted average common shares outstanding - Basic (a)

458,383

239,912

 

370,534

219,515

 

Incremental weighted average effect of conversion of limited partnership units

3,361

339

 

2,095

346

 

Incremental weighted average effect of stock awards

1,258

1,646

 

1,452

1,495

 

Incremental weighted average effect of conversion of certain convertible debt

11,879

11,879

 

11,879

-

 

Weighted average common shares outstanding - Diluted (a)

474,881

253,776

 

385,960

221,356

 
             

Core FFO per share - Diluted

$ 0.44

$ 0.41

 

$ 1.58

$ 1.27

 
           

 

(a) The historical Prologis shares outstanding have been adjusted by the Merger exchange ratio of 0.4464. Amounts in 2011

    include the assumed issuance of 254.8 million shares as of the Merger date.

 
 

 

General and Administrative Expenses ("G&A") consisted of the following (in thousands):

 

Three Months Ended

   

Twelve Months Ended

 
 

December 31,

   

December 31,

 
   

2011

 

2010

   

2011

 

2010

 

Gross G&A expense

$

89,259

$

76,404

 

$

332,632

$

266,932

 

Reported as rental expense

 

(7,484)

 

(4,888)

   

(24,741)

 

(19,709)

 

Reported as private capital expenses

 

(15,734)

 

(10,580)

   

(54,962)

 

(40,659)

 

Capitalized amounts

 

(15,244)

 

(10,841)

   

(57,768)

 

(40,583)

 

Net G&A

$

50,797

$

50,095

 

$

195,161

$

165,981

 
                   

 

Interest Expense consisted of the following (in thousands):

   

Three Months Ended

 

Twelve Months Ended

 
   

December 31,

 

December 31,

 
     

2011

   

2010

   

2011

   

2010

 

Gross interest expense

 

$

144,797

 

$

102,764

 

$

500,685

 

$

435,289

 

Amortization of discount (premium), net

   

(5,682)

   

8,724

   

228

   

47,136

 

Amortization of deferred loan costs

   

4,316

   

12,375

   

20,476

   

32,402

 

Interest expense before capitalization

   

143,431

   

123,863

   

521,389

   

514,827

 

Capitalized amounts

   

(14,090)

   

(11,829)

   

(52,651)

   

(53,661)

 

Net interest expense

 

$

129,341

 

$

112,034

 

$

468,738

 

$

461,166

 
                           
                         

 

Merger, Acquisition and Other Integration Expenses. In connection with the Merger, we have incurred and expect to incur additional significant transaction, integration, and transitional costs. These costs include investment banker advisory fees; legal, tax, accounting and valuation fees; termination and severance costs (both cash and stock based compensation awards) for terminated and transitional employees; system conversion; and other integration costs. Certain of these costs were obligations of AMB and were expensed prior to the closing of the Merger by AMB. The remainder of the costs will be expensed by us as incurred, which in some cases will be through the end of 2012. At the time of the Merger, we cancelled our existing credit facilities and wrote-off the remaining unamortized deferred loan costs associated with such facilities, which is included in Merger, Acquisition and Other Integration Expenses. In addition, we have included costs associated with the acquisition of a controlling interest in PEPR and reduction in workforce charges associated with dispositions made in 2011. The following is a breakdown of the costs incurred

(in thousands):

   

Three Months Ended

 

Twelve Months Ended

 
   

December 31

 

December 31

 
   

2011

 

2011

 

Professional Fees

$

4,069

 

$

46,467

 

Termination, severance and transitional employee costs

 

13,001

   

58,445

 

Office closure, travel and other costs

 

1,702

   

24,714

 

Write-off of deferred loan costs

 

-

   

10,869

 

Total

$

18,772

 

$

140,495

 
             

 

Rental Income includes the following (in thousands):

 

Three Months Ended

   

Twelve Months Ended

 
 

December 31,

   

December 31,

 
   

2011

   

2010

   

2011

   

2010

 

Rental income

$

347,848

 

$

143,531

 

$

1,062,098

 

$

547,259

 

Amortization of lease intangibles

 

(9,030)

   

(189)

   

(22,736)

   

(495)

 

Rental expense recoveries

 

88,643

   

40,006

   

283,081

   

160,962

 

Straight-lined rents

 

15,120

   

9,203

   

54,393

   

36,814

 
 

$

442,581

 

$

192,551

 

$

1,376,836

 

$

744,540

 
                       

 

SOURCE Prologis, Inc.

Media contact & resources

Jennifer Nelson

VP, Head of Global Corporate Communications
+1 (415) 733 9409
[email protected]
San Francisco, California USA

Corporate Profile

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