Industrial giant Prologis posted record profits and revenue in the second quarter, and the company expects even better prospects in the future.
The San Francisco-based REIT reported second-quarter revenue of $2.45 billion, or nearly double the $1.25 billion from the same quarter a year ago. Net earnings came to almost $1.22 billion ($1.31 per share), compared to $610 million (82 cents) in the second quarter of 2022. Core funds from operations, a standard metric for real estate investment trusts, totaled $1.74 billion, or $1.83 per share.
Prologis is the world’s largest industrial property investor, and owns or has stakes in properties and development projects with approximately 1.2 billion square feet in 19 countries. The average occupancy for the company’s owned and operated portfolio stood at 97.5 percent in the second quarter.
The increase in revenue and net earnings stems largely from acquisitions. Last year, Prologis acquired Indianapolis-based rival Duke Realty in an all-stock deal for $26 billion. The company absorbed 153 million square feet of industrial space in 19 markets when the deal closed in the fourth quarter.
During the second quarter, the company issued $7 billion in new debt, a central element in its strategy of growth by acquisition. The debt carried an average interest rate of 4.9 percent and a maturity horizon of 8.4 years, according to the company.
“Our balance sheet has given us unparalleled access to debt markets around the globe, providing us with the ability to fund our ongoing development platform, as well as make accretive investments in a market where most players are stretched,” Timothy Arndt, CFO at Prologis, said in a statement.
Looking to the future, core funds from operations are expected to be $5.56 to $5.60 a share for the full year, up from prior projections of $5.42 to $5.50 a share. Prologis expects same-property net operating income to rise 9.5 to 10 percent, also up from prior projections. Net earnings for shareholders is forecast to rise 5.5 percent, according to the company.
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The industrial powerhouse posted strong earnings in spite of a cooling national industrial market. The vacancy rate stands at 4.1 percent, which is the first time it has gone above 4 percent in two years, according to a second-quarter report by brokerage Cushman & Wakefield. Net absorption registered at 45 million square feet, down from 71 million in the previous quarter and down from 126 million square feet a year prior.
Prologis continues to acquire large assets from its competitors. Last month it struck a multi-billion dollar deal with the Blackstone Group to buy a portfolio of nearly 14 million square feet of industrial space from Stephen Schwarzman’s firm for $3.1 billion. The portfolio consists of about 70 properties in major markets, including Dallas, South Florida and the New York City metro area.