Prologis lifts Q2 profits thanks to strong rental growth

Prologis, the San Francisco-based provider of industrial real estate, has reported that rental rates rose by a record 14.4% in the second quarter of 2015, thanks to strong growth in the US and a more modest increase in Europe.

While rental rates in the US surged 21.9% over the three-month period, Europe turned in an increase of 4.4%. The European figure is significantly lower than for the US, but is more than double the 2% rise reported for Asia.

The strong rental growth helped lift core funds from operations (Core FFO) per diluted share to $0.52 over the three-month period, an increase of 8%. Revenues increased 10% over the period to $510,404.

‘The team delivered ahead of plan and our results reflect strong underlying performance across all three lines of our business,’ said Hamid R. Moghadam, chairman and CEO, Prologis. ‘We see significant earnings potential from harvesting the gap between our in-place and market rents, the profitable build-out of our land bank and the efficient scaling of our global platform.’

In April Prologis announced that its joint venture with Norwegian state fund manager NBIM has agreed to buy the real estate assets and operating platform of US industrial giant KTR Capital Partners and its affiliates for $5.9 bn (€5.5 bn). Prologis has a $3.2 bn share in the venture.

Following the strong Q2 performance, Prologis has upwardly adjusted its full-year 2015 Core FFO guidance to $2.18 to $2.22 per diluted share from $2.16 to $2.22 per diluted share. This translates into expected year-over-year growth of 17%.

Prologis ended the quarter with 95.4% occupancy in its operating portfolio, an increase of 80 basis points over the same period in 2014.