Quarterly Highlights
Complete reconciliations, in dollars and per share amounts, of (i) net income to funds from operations ("FFO"), as defined by Nareit, as well as to Core FFO, and (ii) earnings before income taxes to same property net operating income, on a cash basis, ("SPNOI - Cash") are included in the financial tables included in this release. The company's financial results for the quarter were as follows:
Three Months Ended June 30, 2022 | Six Months Ended June 30, 2022 | ||||||
Net Income per Diluted Share | $ | 0.27 | $ | 0.91 | |||
FFO per Diluted Share | $ | 0.45 | $ | 0.82 | |||
Core FFO per Diluted Share | $ | 0.48 | $ | 0.92 | |||
Growth in SPNOI - Cash | 5.9 | % | 6.5 | % |
Distributions
The company's board of directors will approve the quarterly cash distribution on its common stock in a future meeting. Pursuant to the terms of the merger agreement, the dividend is expected to have the same record and payment dates as the Prologis second quarter dividend.
2022 Earnings Guidance
In light of the company’s proposed merger with Prologis announced in
FFO and AFFO Reporting Definitions
FFO: FFO is a non-GAAP performance measure computed in accordance with standards established by the
Core FFO: Core FFO is computed as FFO adjusted for certain items that can create significant earnings volatility and do not directly relate to our core business operations. The adjustments include gains or losses on debt transactions, gains or losses from involuntary conversion from weather events or natural disasters, promote income, severance and other charges related to major overhead restructuring activities, costs directly attributable to our proposed merger with Prologis, the expense impact of non-incremental costs attributable to successful leasing activities, mark-to-market adjustments associated with derivative financial instruments and similar adjustments for unconsolidated joint ventures and partially owned consolidated entities. Although our calculation of Core FFO differs from Nareit’s definition of FFO and may not be comparable to that of other REITs and real estate companies, we believe it provides a meaningful supplemental measure of our operating performance.
AFFO: AFFO is defined by the company as the Core FFO (as defined above), less recurring building improvements and total second generation capital expenditures (the leasing of vacant space that had previously been under lease by the company is referred to as second generation lease activity) related to leases commencing during the reporting period, and adjusted for certain non-cash items including straight line rental income and expense, amortization of above and below market lease intangibles and lease concession, non-cash components of interest expense including interest rate hedge amortization, stock compensation expense and after similar adjustments for unconsolidated partnerships and joint ventures.
Same-Property Performance
The company includes same-property net operating income growth as a property-level supplemental measure of performance. The company utilizes same-property net operating income growth as a supplemental measure to evaluate property-level performance, and jointly-controlled properties are included at the company's ownership percentage.
A reconciliation of income before income taxes to same-property net operating income is included in the financial tables to this release. A description of the properties that are excluded from the company’s same-property net operating income measure is included on page 19 of its
About
Second Quarter Earnings Call and Supplemental Information
Due to the company's proposed merger with Prologis, a second quarter 2022 conference call will not be held. A copy of the company's supplemental information will be available by
Cautionary Notice Regarding Forward-Looking Statements
The statements in this communication 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 and
Additional Information
In connection with the proposed transaction, Prologis will file with the
This communication shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended.
Participants in the Solicitation
Prologis and
Contact Information:
Investors:
317.808.6060
Media:
317.808.6195
Consolidated Statement of Operations | |||||||||||||||
(Unaudited and in thousands, except per share amounts) | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||
2022 | 2021 | 2022 | 2021 | ||||||||||||
Revenues: | |||||||||||||||
Rental and related revenue | $ | 280,145 | $ | 253,971 | $ | 555,359 | $ | 512,150 | |||||||
General contractor and service fee revenue | 5,143 | 17,721 | 8,092 | 48,834 | |||||||||||
285,288 | 271,692 | 563,451 | 560,984 | ||||||||||||
Expenses: | |||||||||||||||
Rental expenses | 21,240 | 18,515 | 46,526 | 46,645 | |||||||||||
Real estate taxes | 43,728 | 41,368 | 87,656 | 82,538 | |||||||||||
General contractor and other services expenses | 3,730 | 14,066 | 5,199 | 43,529 | |||||||||||
Depreciation and amortization | 93,944 | 91,729 | 187,945 | 185,302 | |||||||||||
162,642 | 165,678 | 327,326 | 358,014 | ||||||||||||
Other operating activities: | |||||||||||||||
Equity in earnings of unconsolidated joint ventures | 5,565 | 10,590 | 9,380 | 26,858 | |||||||||||
Gain on sale of properties | 24,832 | 95,183 | 235,579 | 116,543 | |||||||||||
Gain on land sales | 2,025 | 9,900 | 3,117 | 11,138 | |||||||||||
Other operating expenses | (531 | ) | (338 | ) | (1,310 | ) | (1,483 | ) | |||||||
Impairment charges | (1,563 | ) | - | (1,563 | ) | - | |||||||||
Non-incremental costs related to successful leases | (3,502 | ) | (4,027 | ) | (9,014 | ) | (6,985 | ) | |||||||
General and administrative expenses | (27,496 | ) | (15,879 | ) | (51,409 | ) | (40,096 | ) | |||||||
(670 | ) | 95,429 | 184,780 | 105,975 | |||||||||||
Operating income | 121,976 | 201,443 | 420,905 | 308,945 | |||||||||||
Other income (expenses): | |||||||||||||||
Interest and other income, net | 939 | 1,673 | 1,764 | 2,136 | |||||||||||
Interest expense | (18,734 | ) | (21,072 | ) | (38,733 | ) | (43,579 | ) | |||||||
Loss on debt extinguishment | - | (3,938 | ) | (21,948 | ) | (4,008 | ) | ||||||||
Gain on involuntary conversion | - | 3,222 | - | 3,222 | |||||||||||
Income before income taxes | 104,181 | 181,328 | 361,988 | 266,716 | |||||||||||
Income tax expense | (493 | ) | (3,672 | ) | (6,823 | ) | (8,856 | ) | |||||||
Net income | 103,688 | 177,656 | 355,165 | 257,860 | |||||||||||
Net income attributable to noncontrolling interests | (1,218 | ) | (1,839 | ) | (3,774 | ) | (2,681 | ) | |||||||
Net income attributable to common shareholders | $ | 102,470 | $ | 175,817 | $ | 351,391 | $ | 255,179 | |||||||
Net income per share attributable to common shareholders-basic | $ | 0.27 | $ | 0.47 | $ | 0.91 | $ | 0.68 | |||||||
Net income per share attributable to common shareholders-diluted | $ | 0.27 | $ | 0.47 | $ | 0.91 | $ | 0.68 | |||||||
Consolidated Balance Sheets | ||||||||||
(Unaudited and in thousands) | ||||||||||
2022 | 2021 | |||||||||
Assets | ||||||||||
Real estate investments: | ||||||||||
Real estate assets | $ | 9,994,446 | $ | 9,616,076 | ||||||
Construction in progress | 997,320 | 744,871 | ||||||||
Investments in and advances to unconsolidated joint ventures | 207,977 | 168,336 | ||||||||
Undeveloped land | 600,292 | 473,317 | ||||||||
11,800,035 | 11,002,600 | |||||||||
Accumulated depreciation | (1,808,388 | ) | (1,684,413 | ) | ||||||
Net real estate investments | 9,991,647 | 9,318,187 | ||||||||
Real estate investments and other assets held-for-sale | - | 144,651 | ||||||||
Cash and cash equivalents | 44,195 | 69,752 | ||||||||
Accounts receivable | 13,208 | 13,449 | ||||||||
Straight-line rents receivable | 194,474 | 172,225 | ||||||||
Receivables on construction contracts, including retentions | 35,651 | 57,258 | ||||||||
Deferred leasing and other costs, net | 341,923 | 337,936 | ||||||||
Other escrow deposits and other assets | 337,184 | 332,197 | ||||||||
Total assets | $ | 10,958,282 | $ | 10,445,655 | ||||||
Liabilities and Equity | ||||||||||
Indebtedness: | ||||||||||
Secured debt, net of deferred financing costs | $ | 57,150 | $ | 59,418 | ||||||
Unsecured debt, net of deferred financing costs | 3,831,530 | 3,629,864 | ||||||||
3,888,680 | 3,689,282 | |||||||||
Liabilities related to real estate investments held-for-sale | ||||||||||
- | 6,278 | |||||||||
Construction payables and amounts due subcontractors, including retentions | 123,428 | 107,009 | ||||||||
Accrued real estate taxes | 87,569 | 77,464 | ||||||||
Accrued interest | 22,925 | 20,815 | ||||||||
Other liabilities | 365,680 | 339,023 | ||||||||
Tenant security deposits and prepaid rents | 62,247 | 66,823 | ||||||||
Total liabilities | 4,550,529 | 4,306,694 | ||||||||
Shareholders' equity: | ||||||||||
Common shares | 3,848 | 3,825 | ||||||||
Additional paid-in capital | 6,262,634 | 6,143,147 | ||||||||
Accumulated other comprehensive loss | (26,233 | ) | (28,011 | ) | ||||||
Retained earnings (distributions in excess of net income) | 60,571 | (75,210 | ) | |||||||
Total shareholders' equity | 6,300,820 | 6,043,751 | ||||||||
Noncontrolling interests | 106,933 | 95,210 | ||||||||
Total equity | 6,407,753 | 6,138,961 | ||||||||
Total liabilities and equity | $ | 10,958,282 | $ | 10,445,655 | ||||||
Summary of EPS, FFO and AFFO | |||||||||||||
Three Months Ended | |||||||||||||
(Unaudited and in thousands, except per share amounts) | |||||||||||||
2022 | 2021 | ||||||||||||
Wtd. | Wtd. | ||||||||||||
Avg. | Per | Avg. | Per | ||||||||||
Amount | Shares | Share | Amount | Shares | Share | ||||||||
Net income attributable to common shareholders | $ | 102,470 | $ | 175,817 | |||||||||
Less dividends on participating securities | (319 | ) | (365 | ) | |||||||||
Net income per common share-basic | 102,151 | 384,519 | $ | 0.27 | 175,452 | 376,020 | $ | 0.47 | |||||
Add back: | |||||||||||||
Noncontrolling interest in earnings of unitholders | 1,128 | 4,022 | 1,738 | 3,770 | |||||||||
Other potentially dilutive securities | - | 658 | 365 | 1,831 | |||||||||
Net income attributable to common shareholders-diluted | $ | 103,279 | 389,199 | $ | 0.27 | 177,555 | 381,621 | $ | 0.47 | ||||
Reconciliation to FFO | |||||||||||||
Net income attributable to common shareholders | $ | 102,470 | 384,519 | $ | 175,817 | 376,020 | |||||||
Adjustments: | |||||||||||||
Depreciation and amortization | 93,944 | 91,729 | |||||||||||
Depreciation, amortization and other - unconsolidated joint ventures | 2,999 | 2,012 | |||||||||||
Gain on sales of properties | (24,832 | ) | (95,183 | ) | |||||||||
Gain on land sales | (2,025 | ) | (9,900 | ) | |||||||||
Impairment charges | 1,563 | - | |||||||||||
Income tax expense not allocable to FFO | 493 | 3,672 | |||||||||||
Gain on sales of real estate assets - unconsolidated joint ventures | (1,497 | ) | (7,360 | ) | |||||||||
Noncontrolling interest share of adjustments | (731 | ) | 149 | ||||||||||
Nareit FFO attributable to common shareholders - basic | 172,384 | 384,519 | $ | 0.45 | 160,936 | 376,020 | $ | 0.43 | |||||
Noncontrolling interest in income of unitholders | 1,128 | 4,022 | 1,738 | 3,770 | |||||||||
Noncontrolling interest share of adjustments | 731 | (149 | ) | ||||||||||
Other potentially dilutive securities | 1,727 | 1,831 | |||||||||||
Nareit FFO attributable to common shareholders - diluted | $ | 174,243 | 390,268 | $ | 0.45 | $ | 162,525 | 381,621 | $ | 0.43 | |||
Gain on involuntary conversion | - | (3,222 | ) | ||||||||||
Loss on debt extinguishment - including share of unconsolidated joint venture | - | 3,938 | |||||||||||
Non-incremental costs related to successful leases | 3,502 | 4,027 | |||||||||||
Unconsolidated joint ventures share of unrealized derivative gain | (224 | ) | - | ||||||||||
Merger related costs | 10,000 | - | |||||||||||
Core FFO attributable to common shareholders - diluted | $ | 187,521 | 390,268 | $ | 0.48 | $ | 167,268 | 381,621 | $ | 0.44 | |||
AFFO | |||||||||||||
Core FFO - diluted | $ | 187,521 | 390,268 | $ | 0.48 | $ | 167,268 | 381,621 | $ | 0.44 | |||
Adjustments: | |||||||||||||
Straight-line rental income and expense | (11,642 | ) | (6,571 | ) | |||||||||
Amortization of above/below market rents and concessions | (3,513 | ) | (2,611 | ) | |||||||||
Stock based compensation expense | 2,309 | 5,625 | |||||||||||
Noncash interest expense | 2,496 | 2,378 | |||||||||||
Second generation concessions | (213 | ) | (1,355 | ) | |||||||||
Second generation tenant improvements | (8,387 | ) | (4,604 | ) | |||||||||
Second generation leasing costs | (8,666 | ) | (8,297 | ) | |||||||||
Building improvements | (3,860 | ) | (1,814 | ) | |||||||||
AFFO - diluted | $ | 156,045 | 390,268 | $ | 150,019 | 381,621 | |||||||
Summary of EPS, FFO and AFFO | |||||||||||||
Six Months Ended | |||||||||||||
(Unaudited and in thousands, except per share amounts) | |||||||||||||
2022 | 2021 | ||||||||||||
Wtd. | Wtd. | ||||||||||||
Avg. | Per | Avg. | Per | ||||||||||
Amount | Shares | Share | Amount | Shares | Share | ||||||||
Net income attributable to common shareholders | $ | 351,391 | $ | 255,179 | |||||||||
Less dividends on participating securities | (645 | ) | (735 | ) | |||||||||
Net income per common share-basic | 350,746 | 383,619 | $ | 0.91 | 254,444 | 374,850 | $ | 0.68 | |||||
Add back: | |||||||||||||
Noncontrolling interest in earnings of unitholders | 3,591 | 3,915 | 2,499 | 3,673 | |||||||||
Other potentially dilutive securities | 645 | 1,731 | 735 | 1,811 | |||||||||
Net income attributable to common shareholders-diluted | $ | 354,982 | 389,265 | $ | 0.91 | $ | 257,678 | 380,334 | $ | 0.68 | |||
Reconciliation to FFO | |||||||||||||
Net income attributable to common shareholders | $ | 351,391 | 383,619 | $ | 255,179 | 374,850 | |||||||
Adjustments: | |||||||||||||
Depreciation and amortization | 187,945 | 185,302 | |||||||||||
Depreciation, amortization and other - unconsolidated joint ventures | 6,297 | 4,269 | |||||||||||
Gain on sales of properties | (235,579 | ) | (116,543 | ) | |||||||||
Gain on land sales | (3,117 | ) | (11,138 | ) | |||||||||
Income tax expense not allocable to FFO | 6,823 | 8,856 | |||||||||||
Impairment charges | 1,563 | - | |||||||||||
Gain on sales of real estate assets - unconsolidated joint ventures | (1,497 | ) | (20,108 | ) | |||||||||
Noncontrolling interest share of adjustments | 379 | (492 | ) | ||||||||||
Nareit FFO attributable to common shareholders - basic | 314,205 | 383,619 | $ | 0.82 | 305,325 | 374,850 | $ | 0.81 | |||||
Noncontrolling interest in income of unitholders | 3,591 | 3,915 | 2,499 | 3,673 | |||||||||
Noncontrolling interest share of adjustments | (379 | ) | 492 | ||||||||||
Other potentially dilutive securities | 1,731 | 1,811 | |||||||||||
Nareit FFO attributable to common shareholders - diluted | $ | 317,417 | 389,265 | $ | 0.82 | $ | 308,316 | 380,334 | $ | 0.81 | |||
Gain on involuntary conversion | - | (3,222 | ) | ||||||||||
Loss on debt extinguishment - including share of unconsolidated joint venture | 22,031 | 4,071 | |||||||||||
Non-incremental costs related to successful leases | 9,014 | 6,985 | |||||||||||
Unconsolidated joint ventures share of unrealized derivative gain | (787 | ) | - | ||||||||||
Merger related costs | 10,000 | - | |||||||||||
Core FFO attributable to common shareholders - diluted | $ | 357,675 | 389,265 | $ | 0.92 | $ | 316,150 | 380,334 | $ | 0.83 | |||
AFFO | |||||||||||||
Core FFO - diluted | $ | 357,675 | 389,265 | $ | 0.92 | $ | 316,150 | 380,334 | $ | 0.83 | |||
Adjustments: | |||||||||||||
Straight-line rental income and expense | (22,113 | ) | (15,204 | ) | |||||||||
Amortization of above/below market rents and concessions | (6,416 | ) | (5,466 | ) | |||||||||
Stock based compensation expense | 20,408 | 20,004 | |||||||||||
Noncash interest expense | 5,059 | 4,747 | |||||||||||
Second generation concessions | (1,114 | ) | (1,636 | ) | |||||||||
Second generation tenant improvements | (11,531 | ) | (8,527 | ) | |||||||||
Second generation leasing costs | (15,675 | ) | (16,769 | ) | |||||||||
Building improvements | (4,438 | ) | (3,118 | ) | |||||||||
AFFO - diluted | $ | 321,855 | 389,265 | $ | 290,181 | 380,334 | |||||||
Reconciliation of Same Property Net Operating Income Growth | |||||||
(Unaudited and in thousands) | |||||||
Three Months Ended | |||||||
Income before income taxes | $ | 104,181 | $ | 181,328 | |||
Share of same property NOI from unconsolidated joint ventures | 6,754 | 6,599 | |||||
Income and expense items not allocated to segments | 112,491 | 16,294 | |||||
Earnings from service operations | (1,413 | ) | (3,655 | ) | |||
Properties not included and other adjustments | (39,993 | ) | (28,704 | ) | |||
Same property NOI - Cash Basis | $ | 182,020 | $ | 171,862 | |||
Percent Change | 5.9 | % | |||||
Six Months Ended | |||||||
Income from continuing operations before income taxes | $ | 361,988 | $ | 266,716 | |||
Share of same property NOI from unconsolidated joint ventures | 13,354 | 13,145 | |||||
Income and expense items not allocated to segments | 61,956 | 121,309 | |||||
Earnings from service operations | (2,893 | ) | (5,305 | ) | |||
Properties not included and other adjustments | (74,789 | ) | (58,332 | ) | |||
Same property NOI - Cash Basis | $ | 359,616 | $ | 337,533 | |||
Percent Change | 6.5 | % | |||||
Source:
2022 GlobeNewswire, Inc., source