ProLogis Reports Lower 3rd Quarter Earnings

Third quarter earnings carried a $37.2 million charge for investments in temperature controlled facilities in North America. The charge will be partially offset by a $10 million gain on the sale of the facilities that will be recognized in the fourth quarter. Its funds from operations, the most watched measurement for REITs, was unchanged at 60 cents per share, but one cent less than the consensus estimate from Thomson First Call.

And for the first nine months of the year, the FFO per diluted share increased 1.7% to $1.78, compared with $1.75 per share for the same period in 2001, prior to a non-recurring charge of 4 cents per share taken in the second quarter of 2001 related to an impairment adjustment for technology investments.

Year-to-date net earnings were $137 million, or 76 cents per diluted share, from $137.5 million, or 79 cents per diluted share in the comparable period of 2001.

"Third quarter results reflect the continued softness in North American industrial property markets," says K. Dane Brooksher, chairman and CEO. "Despite the challenging business environment here, we remain positive about our opportunities outside the U.S. and continue to execute our integrated business model to help us offset weak market conditions in North America. During the third quarter, we made further progress on extending our reach in Europe, expanding our customer base in Japan and growing income through our ownership interest in, and management of, ProLogis property funds. We also completed the sale of CSI, our North American temperature-controlled logistics business, completing the $400 million of assets identified for sale early this year."

The company is not yet seeing meaningful improvements in operating property results, he says. "We are encouraged by a modest increase in occupancy levels and believe conditions in many major North American markets have stabilized," he adds. "Customer retention and turnover costs also remained stable for the quarter, and while we experienced slight rent growth on lease turnovers, same store growth is slightly negative for the year but in line with our expectations."

Because of continued soft market conditions in North America and the dilution from the sale of CSI, the company is adjusting its range for full year 2002 guidance to $2.37 to $2.41 per share.

"In addition, we are establishing an initial range for 2003 guidance of $2.37 to $2.50 per share," he said. "Our expectation for flat to modest growth next year reflects our caution regarding the timing of a turnaround in North American market conditions, offset by growth in our property fund business and our international platform.