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Strong Operating Property Fundamentals, Development Gains and Growth in Property Fund Business Support 20% Increase in FFO per Share; Company Increases Guidance for 2006 FFO and Earnings per Share
ProLogis reported funds from operations as defined by ProLogis (FFO) of $0.90 per diluted share for the second quarter of 2006, a 20% increase over adjusted FFO of $0.75 in the second quarter of 2005. After relocation charges and recognition of cumulative translation losses and impairment charges related to the sale of its temperature-controlled business, FFO for the second quarter of 2005 was $0.67 per share. Net earnings per diluted share were $0.66 for the second quarter of 2006, compared with $0.40 for the same period in 2005.
For the six months ended June 30, 2006, adjusted FFO was $1.80 per diluted share, up 31.4% from $1.37 in the first six months of 2005. After $0.01 of merger integration and relocation expenses in 2006 and $0.15 related to the charges noted above in the first half of 2005, FFO per diluted share was $1.79 for the six months ended June 30, 2006, compared with $1.22 in the prior year. Net earnings per diluted share for the six months ended June 30, 2006, were $1.39, compared with $0.69 in the comparable period of 2005. "Globalization and free trade continue to fuel strong growth in our industry," said Jeffrey H. Schwartz, chief executive officer. "Companies around the world are focused on maximizing the efficiency of their supply chains, and they need modern, well-located distribution facilities to achieve that objective. With our global platform, deep customer relationships and industry-leading development and marketing expertise, ProLogis remains extremely well positioned to capitalize on these long-term trends." In the quarter, ProLogis saw improvement in all three of its operating segments: property operations, development and property funds. "Occupancy levels and leasing activity remained strong, and we are pleased to have achieved positive rent growth of 2.5% on lease turnovers and NOI growth of 3.0% in our same-store pool," Schwartz said. "We believe we are well positioned with our leading market positions and geographically diverse development pipeline to capture additional opportunities for growth provided by the current market environment." ProLogis is increasing full-year guidance for adjusted FFO per share to $3.15 - $3.25 and earnings per share to $2.20 - $2.45. There is also the potential to realize up to an additional $0.50 in earnings per share from the recognition of gains on non-CDFS property dispositions. "The synergies from the Catellus merger combined with brisk leasing in our Corporate Distribution Facilities Services (CDFS) pipeline, continued strong CDFS margins and solid improvement in occupancies and rental rate growth support our optimistic outlook," Schwartz said. Previous guidance was $2.95 - $3.15 in FFO per share and $1.85 - $2.25 in earnings per share. The company added that its FFO per share guidance is prior to first-half adjustments of merger integration and corporate relocation charges of $0.01 per share. Development Business and Property Operations Fundamentals Strengthen Leasing in the company's stabilized properties remained strong at 95.2% for the quarter. ProLogis also reported a year-to-date increase in same-store average occupancy of 3.4%, compared with a year ago. "Across our global markets, net absorption of new development deliveries is resilient, and new supply remains in check. Nowhere is this more evident than in North America, where over 43 million square feet of new space was absorbed in the top 30 logistics markets in the second quarter, consistent with the pace of absorption in 2005. "In Europe, leasing of new deliveries continues to be brisk. Our development and leasing activity in central Europe is accelerating, and we remain well-leased in western Europe, despite mixed economic conditions. Our business in Asia continues to grow, with new development in Japan driven by structural changes in distribution networks and strong demand from our major global customers. In China, increased domestic demand for goods has driven our expansion into the coastal markets of Qingdao, Hangzhou and Ningbo," Schwartz said. New Development Leasing Drives CDFS Gains and Further Expansion of Pipeline Gross proceeds from CDFS dispositions of $864 million for the year to date were up 35.8% over dispositions for the first half of 2005, leading to a 30.6% increase in CDFS disposition income. Leasing in the 30.6 million square feet of developments completed in the last 12 months, including those in CDFS joint ventures, was 70.9% at June 30, 2006, supporting year-to-date starts of $1.4 billion. ProLogis' pipeline of CDFS completed developments, repositioned acquisitions and properties under development now stands at a record $4.55 billion, supporting future disposition activity and growth in CDFS income and fund assets. "Our ability to address customers' distribution space needs through our unparalleled global reach helped drive the quarter's strong development and leasing activity," Walter C. Rakowich, president and chief operating officer, said. "During the quarter, more than half of our seven million square feet of new CDFS leases were with repeat customers, including: adidas in Seoul, South Korea; Amazon in Suzhou, China; Kuehne & Nagel in Tokyo and Los Angeles; and Tesco in the Midlands, UK and in Teresin, Poland. Buoyant markets also supported new inventory starts in Juarez, Mexico, the I-81 corridor in Pennsylvania, Warsaw, southern France, Shanghai and Tokyo. Demand for well-located space in these major logistics markets remains strong, and we're seeing significant customer interest in many of our sites -- well in advance of planned completion," Mr. Rakowich added. Second Quarter 2006 Selected Financial and Operating Information * Achieved adjusted FFO per share growth of 20% over second quarter of
2005. * Realized year-to-date FFO from CDFS transactions of $167.5 million,
including recognition of previously deferred proceeds from the first
quarter contribution of properties from North American Property Funds
II, III and IV to ProLogis North American Industrial Fund, up from
$128.3 million in the same period of 2005. FFO amounts do not include
unrecognized deferred gains of $33.9 million related to new development
contributions for the year to date and $25.7 million for the same
period in 2005. Post-deferral, post-tax CDFS margins were 21.0% for
the transactions completed year to date. * Recycled $500.3 million of capital through CDFS contributions and
dispositions during the quarter and $863.8 million year to date. * Started new developments, including those within CDFS joint ventures,
with total expected investment of $514.0 million during the quarter and
$1.4 billion year to date. Year-to-date starts include $97.0 million
of retail development. * Increased ProLogis' share of FFO from property funds to $79.0 million
for the year to date, including earnings from the fund transaction
noted above, up 71.4% from $46.1 million in the prior year. * Grew first half fee income from property funds to $58.9 million,
including the incentive fee from the fund transaction noted above,
up 78.5% from $33.0 million in 2005. * Achieved development management fees, FFO from CDFS joint ventures and
other unconsolidated investees and interest income on long-term notes
receivable of $65.4 million year to date. * Increased total assets owned and under management to $24.8 billion, up
from $22.3 billion at December 31, 2005. * Improved average year-to-date same-store net operating income by 3.5%
(a 3.8% increase when straight-lined rents and lease amortization are
excluded) while same-store occupancies increased by 3.4% for the same
period.
Copies of ProLogis' second quarter 2006 supplemental information will be available from the company's website at http://ir.prologis.com or by request at 800-820-0181. The supplemental information also is available on the SEC's website at http://www.sec.gov. The related conference call will be available via a live webcast on the company's website at http://ir.prologis.com at 10:00 am Eastern Time on Thursday, July 27, 2006. A replay of the webcast will be available on the company's website until August 10, 2006.
ProLogis is a leading provider of distribution facilities and services with 404.3 million square feet (37.6 million square meters) in 2,401 properties owned, managed and under development in 81 markets in North America, Europe and Asia as of June 30, 2006. We continue to expand the industry's first and largest global network of distribution facilities with the objective of building shareholder value. We expect to achieve this through the ProLogis Operating System(R) and our commitment to provide exceptional facilities and services to meet our customers' expansion and reconfiguration needs. Source: ProLogis
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