Prologis Inc. (PLD - Analyst Report), through its operating subsidiary Prologis, L.P., priced a public offering of two series of senior unsecured notes worth $1.25 billion of the aggregate principal amount. The move is in line with the company’s strategy to enhance its financial position. The sale of the notes is anticipated to close on Aug 15, subject to customary closing conditions.
In particular, the operating subsidiary of this industrial real estate investment trust (REIT) intends to utilize the net proceeds from the offering to pay off debts under the global credit line. It also plans to use the proceeds to finance cash purchases of certain senior notes that started on Aug 8, 2013.
In the $1.25 billion of aggregate principal amount of notes, the two series of notes are of $400 million and $850 million. The 2.75% notes worth $400 million (due Feb 15, 2019) are priced at 99.965% of the principal amount. On the other hand, the 4.25% notes worth $850 million (due Aug 15, 2023) are priced at 99.742% of the principal amount. As a matter of fact, the notes will be fully and unconditionally guaranteed by Prologis.
Off late, Prologis has been active in enhancing its balance sheet position. Last month, the company recast and increased its global line of credit. The credit line was upsized by $350 million to $2.0 billion and the move helped extend the initial term to 2017 as well as lower its interest rate by 40 basis points.
In July, Prologis delivered a positive earnings surprise of about 7.9% for the second quarter of 2013. The company reported core funds from operations (FFO) per share of 41 cents, beating the Zacks Consensus Estimate of 38 cents. However, it fell short of the prior-year quarter figure by 2 cents.
Results primarily reflected a decent reduction in expenses, partly offset by a fall in revenues. Yet, the company’s strategic measures and capital market moves have helped enhance flexibility, lower interest expenses and extend maturities.
Prologis currently carries a Zacks Rank #3 (Hold). Some better performing REITs include CubeSmart (CUBE - Snapshot Report), Highwoods Properties, Inc. (HIW - Analyst Report) and Extra Space Storage Inc. (EXR - Snapshot Report). All these stocks carry a Zacks Rank #2 (Buy).
Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.