Prologis Inc (NYSE: PLD) stock fell over 2.5% on 17th July, 2018 (as of 6:57 PM GMT-4; Source: Google finance) after the company in the second quarter of FY 18 reported the funds from operations of 71 cents, which is as per the analysts’ estimates for the funds from operations of 71 cents. The company had reported the adjusted revenue of $544.7 billion in the second quarter of FY 18, missing the analysts’ estimates for revenue of $560.6 million.
Moreover, during the second quarter, the company and its co-investment ventures completed over $850 million of financings, including the previously announced $400 million 10-year bond at 3.875% and $300 million 30-year bond at 4.375%. The company has ended the second quarter with leverage of 22.9 percent on a market capitalization basis, debt-to-adjusted EBITDA of 4.1x and $4.0 billion of liquidity.
PLD expects full-year funds from operations in the range of $2.98 to $3.02 per share compared with prior guidance of $2.95-$3.01. This denotes an increase of 2 cents per share at the midpoint. The company’s improved outlook for market rental growth combined with the year-to-date performance led the company to increase and narrow the full-year guidance ranges for earnings and same store NOI.
Meanwhile, PLD has completed 16 build-to-suit development projects in the first half of 2018 totaling more than 6.2 million square feet with a total expected investment (TEI) of approximately $475 million on a Prologis share basis. During the same period, the company has initiated 14 build-to-suit development starts representing over 4.7 million square feet with a TEI of approximately $450 million on a Prologis share basis. Consistent with first-half completions, the majority of these starts were signed with multi-site customers and are located in urban markets that are positioned for Last Touch operations.
Additionally, PLD and DCT Industrial Trust Inc. have entered into a definitive merger agreement by which Prologis will acquire DCT for $8.4 billion in a stock-for-stock transaction, including the assumption of debt. The boards of directors of both companies have unanimously approved the transaction. The 71 million square foot operating portfolio deepens Prologis’ presence in high-growth markets including Southern California, the San Francisco Bay Area, New York/New Jersey, Seattle and South Florida. The transaction is anticipated to create substantial synergies, including near-term synergies of approximately $80 million in corporate general and administrative cost savings, operating leverage, interest expense and lease adjustments, which are forecast to increase annual stabilized core funds from operations (Core FFO) per share by $0.06-$0.08. A combination of revenue synergies and incremental development volume has the potential to generate $40 million of additional annual revenue and development profit in the future.