ProLogis Reports Stronger Earnings

AURORA, CO-Locally based ProLogis, the world's largest industrial real estate investment trust, reported Tuesday in a Securities and Exchange Commission 8K filing that its adjusted FFO rose 9.9% in the third quarter to 78 cents per diluted share, compared with 71 cents per share in the third quarter of 2004. Net earnings in the third quarter increased 50% to 63 cents per share from 42 cents per share in the third quarter of 2004, primarily because of gains on the sale of assets.

In the first nine months of the year, PLD's FFO was $2.15 per diluted share, up 15% from $1.87 in the first nine months of 2004. For 2005, FFO per share excludes 19 cents in relocation and merger integration expenses and cumulative translation losses and impairment charges related to the sale of its temperature-controlled business. For 2004, FFO per share excludes 3 cents per share in charges related to redemption of preferred shares and relocation expenses. In the first nine months, net earnings per diluted share increased 23.1%, from $1.08 in the comparable period in 2004 to $1.33, primarily due to the sale of assets.

"Across our global markets, we continue to see improvement in market conditions, with positive net absorption, strong leasing activity and further increases in occupancies," says Jeffrey H. Schwartz, CEO. "ProLogis' solid financial performance was driven by strong development income, improved property operations and increased income and fees from our property funds."

He also notes that ProLogis has completed its mergerwith Catellus Development Corp. in the third quarter, adding more than $4.7 billion of "high-quality real estate assets, while providing excellent land positions and significantly expanding our share of key North American logistics markets."

Year-to-date, ProLogis reports a 20.4% increase in FFO from its corporate distribution facilities services business during the same period in the prior year. "Due to the continued strength of our development business, we have raised and tightened our full-year guidance from $2.60 to $2.68, to $2.67 to $2.70 in adjusted FFO per share," Schwartz says. "Additionally, we have raised earnings per share guidance from $1.60 to $1.80 per share, to $2.65 to $2.85 per share, driven by approximately $1 per share from expected sales of non-CDFS assets in the fourth quarter."

Additionally, ProLogis established a range for 2006 of $2.90 to $3.02 in FFO per share and $1.50 to $1.70 in earnings per share. The company added that its FFO per share guidance does not include merger integration and corporate relocation expenses.

For the third quarter, the company also reported a 1.08% increase in same-store net operating income and a 1.73% increase in same-store average occupancies when compared with the third quarter of 2004. The company says it saw positive rent growth in its same-store pool for the first time in three years with an overall leased percentage in its stabilized portfolio of 93.7%.

"Strong customer demand is driving improvement in occupancies in North America, even as development has accelerated across a number of key markets," Schwartz says. "Overall occupancies during the quarter rose 30 basis points on average across the top 30 North American logistics markets that we track closely. As a result, rents have firmed throughout the markets and are rising in some. In Europe, distribution optimization continues to support strong leasing in our inventory developments enabling us to maintain high occupancies in our stabilized portfolio, even though some countries'economies remain stagnant. In Asia, both development and leasing activity continue to be brisk due to the relative lack of modern distribution infrastructure in that region."

Walter C. Rakowich, president and chief operating officer, says that PLD's development pace moderated it the third quarter, as the company had indicated in the second quarter. "However, at approximately $1.8 billion of development starts year-to-date, including those in CDFS joint ventures, we are confident that we will achieve, or slightly exceed, the upper end of our projected range of $1.9 to $2 billion for the year," Rakowich says.

Rakowich says improving global market conditions and strong customer relationships continue to support strong leasing in the company's record CDFS pipeline of completions, repositioned acquisitions and properties under development, which now exceeds $3.1 billion. Completed developments during the past four quarters of $1.4 billion totaling 23.5 million sf were more than 69% leased at quarter's end, ahead of expectations.