ProLogis (PLD), one of the leading global providers of distribution facilities, reported relatively modest third quarter results that show early signs of stabilization in the industrial property market fundamentals. Fund from Operations (FFO), a widely used metric to gauge the performance of REITs, and obtained after adding depreciation and amortization and other non-cash expenses to net income, was 21 cents during the quarter, compared to 59 cents in the year-earlier period.
 
Overall market occupancies increased for the first time since the start of the recession. ProLogis’ non-development portfolio was 92.7% leased at quarter end vis-à-vis 92.5% in the second quarter. The company’s static development portfolio (in place at Dec 31, 2008) was 61.7% leased at quarter end, compared to 54.1% at the end of the second quarter and 41.4% at year end 2008. With global economies emanating positive signs of revival, ProLogis remains optimistic about its future performance and anticipates strong market occupancies in 2010.
 
Furthermore, ProLogis has witnessed a growing customer interest in new build-to-suit development projects across the globe. In addition, leasing decisions that were earlier postponed due to volatility in the markets are gradually coming off the shelf. In order to decrease the risk associated with cyclical local real estate markets and economies, and increase the stability and predictability of the earnings, ProLogis has drastically reduced its non-income producing assets in the balance sheet.
 
Year-to-date, ProLogis has monetized approximately $120 million of land globally through land sales and pre-leased developments. The company also completed gross asset sales and property contributions of $241 million during the quarter, and remained well on target to achieve $1.5 billion to $1.7 billion of contributions and asset sales in the year with $1.2 billion of the target being already achieved year-to-date.
 
During the quarter, ProLogis issued $350 million of senior notes and extended its global line of credit to Aug 2012. The company also raised net proceeds of $325 million by selling approximately 29.8 million shares for $11.15 each. ProLogis has successfully reduced its direct debt by over $3 billion since year end 2008 through a combination of assets sales, fund contributions, equity issuance, and repurchase of debt at a discount.
 
The company has addressed all of its direct debt maturities for 2009, and has repaid a considerable amount of property fund debt for 2010. Since the beginning of the year, ProLogis has completed more than $1.6 billion of secured financings and loan extensions on behalf of its funds, $1.2 billion of which was executed during the third quarter. For full year 2009, ProLogis has narrowed its FFO guidance to $1.39 to $1.43 per share.
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