Prologis First-Quarter FFO Rises to $262 Million on Merger

May 1 (Bloomberg) -- Prologis Inc., the world’s largest warehouse owner, reported first-quarter funds from operations of $262 million as revenue increased after the company’s merger with AMB Property Corp.

FFO, which gauges a property owner’s ability to generate cash, was 56 cents a share in the third quarter of results since the merger, San Francisco-based Prologis said today in a statement. The year-earlier figure, which reflects the legacy company, was $62.1 million, or 24 cents a share.

Prologis and AMB combined in June in the biggest merger of U.S. real estate investment trusts. The company is disposing of properties in smaller markets and areas less important to global trade while increasing its fund management business. In the first quarter, Prologis had about $762 million in proceeds on $994 million of building and land sales and fund contributions.

“Asset sales are critical to Prologis’ strategic objectives of culling the portfolio, restructuring broken joint-venture funds and de-leveraging,” John Stewart and Eric Frankel, analysts at Green Street Advisors Inc. in Newport Beach, California, wrote on April 23. “The recent uptick in large portfolio transactions bodes well, but Prologis’ aggressive disposition program entails significant execution risk and will represent a drag on near-term earnings growth.”

Core FFO

First-quarter FFO included gains on real estate transactions and other items. Excluding those items, so-called core FFO was $184.8 million, or 40 cents a share, up from $74.4 million, or 29 cents, a year earlier. The average of 16 estimates in a Bloomberg survey was for FFO of 40 cents a share.

Prologis affirmed its forecast for full-year core FFO of $1.60 to $1.70 a share.

Occupancy in the first quarter rose to 92.3 percent from 92.2 percent in the previous three months. The company leased 30.9 million square feet (2.9 million square meters) in its operating and development portfolios.

The results were released before the start of regular U.S. trading. Prologis has fallen 1.8 percent in the past 12 months, compared with a 6 percent gain in the Bloomberg REIT Index.

(Prologis will hold a conference call at 12 p.m. New York time. See PLD US <Equity> EVT <GO>.)

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