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Prologis Inc. (PLD - Analyst Report), a leading real estate investment trust (REIT), reported second quarter 2012 funds from operations (FFO) of $172.7 million or 37 cents per share compared with $8.2 million or 3 cents in the year-earlier quarter.

Excluding non-recurring items, FFO for the reported quarter was $201.3 million or 43 cents per share compared to $109.7 million or 35 cents in the year-ago quarter. The recurring FFO for second quarter 2012 marginally exceeded the Zacks Consensus Estimate by a penny.

Total revenues during the reported quarter were $520.7 million compared to $320.9 million in the year-ago quarter. Total reported revenues were well ahead of the Zacks Consensus Estimate of $481 million.

During the reported quarter, the company leased 35.0 million square feet of space across the globe. Total occupancy in the operating portfolio was 92.4% at quarter-end. Customer retention during the quarter was 82.4% during the reported quarter.

Same-store net operating income (NOI) increased 0.4% in second quarter 2012, compared to the year-ago quarter. Same-store rental rates on leases signed in the quarter decreased 3.9% year over year.

Development starts for the company during the reported quarter amounted to $229 million spanning 3.7 million square feet of space across 9 projects. Prologis monetized $52 million worth of land for these development starts, 70% of which were build-to-suit projects.  

The company acquired $85 million worth of properties during the quarter, totaling 1.5 million square feet of space in 13 logistics facilities with a stabilized capitalization rate of 7.2%. At quarter-end, Prologis' global development portfolio totaled 13.5 million square feet, with an estimated total investment of $1.3 billion.

Prologis completed approximately $228 million worth of asset sale transactions and contributions during the quarter at a weighted average stabilized capitalization rate of 7.6%. The third-party asset sales were consistent with the company’s stated goal to sell assets in non-strategic markets and redeploy the proceeds to fund new development in major global markets, thereby diversifying and improving the quality of its portfolio.

During the reported quarter, the company raised new third-party equity commitments of approximately $163 million for the Prologis Targeted U.S. Logistics Fund. Prologis completed over $1.2 billion worth of capital market activities in the quarter.

At quarter-end, Prologis had cash and cash equivalents of $293.6 million and total debt of $12.4 billion. For full year 2012, Prologis increased its recurring FFO guidance in the range of $1.64 to $1.70 per share from the earlier range of $1.60 to $1.70.

We currently have a Neutral recommendation and a Zacks #3 Rank for Prologis, which translates into a short-term Hold rating. However, we have an Outperform recommendation and a Zacks #3 Rank for Winthrop Realty Trust (FUR - Snapshot Report), one of the peers of Prologis.

Note: 1. FFO, a widely used metric to gauge the performance of real estate investment trusts (REITs), is obtained after adding depreciation and other non-cash expenses to net income.

2. The second quarter 2011 comparative results include two months of the namesake and approximately one month of the combined company of ProLogis and AMB Property Corp. and are not directly comparable to the 2012 reported results.

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