The logistics real estate markets constricted even further in the second quarter, according to Prologis Inc. (NYSE: PLD). Before the market opened, the San Francisco-based logistics real estate investment trust reported core funds from operations (FFO) of $1.01 per share, which was 2 cents per share ahead of expectations.
“Demand for logistics space is strong and diverse, and operational circumstances remain the best in our 38-year history,” said chairman and CEO Hamid R. Moghadam. “Vacancies are at all-time lows in our markets, resulting in historic rent growth and valuation rises.”
The company recorded a 30-basis-point gain in occupancy year over year, to 96 percent, up 60 basis points over the first quarter. The portfolio was 97.2 percent leased at the end of the second quarter.
“In keeping with corporate objective to offer significant rent change,” the net effective rent change was 31.5 percent higher, with 70.8 percent retention. Leases started jumped 16.7% to 49 million square feet during the period, according to Prologis.
Prologis’ Key Performance Indicators are included in the table below.
For the rest of the year, Prologis raised its guidance. At the midpoint, the full-year net earnings forecast was lifted 9.1 percent to a new range of $3.08 to $3.14. At the midpoint, core FFO projections increased 1.8 percent to $4.04 to $4.08, ahead of the current consensus estimate of $4.01.
In addition, the corporation raised its capital deployment objectives. At the midpoint of their respective ranges, the amounts to be spent on development stabilizations (+9.5 percent), development starts (+10.3 percent), and building acquisitions (+14.3 percent) totaled $6.3 billion.
“We raised our guidance across the board again and now expect 12.8 percent year-over-year Core FFO growth at the midpoint, excluding promotions, and $1.3 billion in free cash flow after dividends,” said CFO Thomas Olinger. “Our forecast is equally encouraging, backed by a nearly 17 percent in-place-to-market spread, a land portfolio with $18 billion in build-out potential, and an industry-leading bank sheet.”
The company will hold a conference call with analysts at noon on Monday to discuss the findings. Keep an eye on FreightWaves for updates on Prologis’ earnings announcement.
FreightWaves is backed by Prologis Ventures.
Todd Maiden’s FreightWaves articles can be found here.
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