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Prologis FFO Climbs After Merger With Rival Warehouse Owner AMB Property

Prologis (PLD) Inc., the world’s largest warehouse owner, raised its forecast for the second half and reported third-quarter funds from operations almost doubled as leasing increased after the merger with AMB Property Corp.

FFO, which gauges a property owner’s ability to generate cash, totaled $207.2 million, or 45 cents a share, for the three months ended Sept. 30, the first full quarter of results as a combined company, San Francisco-based Prologis said today in a statement. Year-earlier FFO, which reflects the legacy company, was $104 million, or 48 cents a share.

Prologis and AMB combined in June in the biggest merger of U.S. real estate investment trusts. The new company is selling properties in smaller markets and areas less important to global trade, while boosting its real estate fund management business.

“There’s still a lot of portfolio pruning they’re working on,” Craig Guttenplan, an analyst at New York-based CreditSights Inc., said in a telephone interview before results were announced. “It’s still kind of a transitional period.”

Third-quarter FFO included merger costs and gains on real estate dispositions. Excluding those items, so-called core FFO was $205.9 million, or 44 cents a share, compared with $69.9 million, or 33 cents, a year earlier.

The company raised its forecast for core FFO for the second half to 83 cents to 85 cents a share as demand for industrial real estate increased. That compares to a July projection of 78 cents to 82 cents.

Leasing Momentum

“On a combined basis, we had the strongest third quarter of leasing since 2008, and we believe that this momentum will carry through the fourth quarter,” Walter Rakowich, co-chief executive officer, said in the statement.

Prologis also increased its forecast for property sales and the amount it will put into its real estate funds and investments in the second half, to $1.8 billion to $2 billion. It previously expected up to $1.5 billion of sales and contributions.

The company expects to save $90 million annually in general and administrative and other expenses from the merger.

Prologis released earnings before the start of regular U.S. trading. Its shares fell 4.1 percent to $27.45 yesterday in New York. They have dropped 13 percent this year, compared with a 0.7 percent decline in the Bloomberg REIT Index.

To contact the reporter on this story: Brian Louis in Chicago at blouis1@bloomberg.net

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net

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