UPDATE 2-Prologis 4th-qrtr beats Wall Street but outlook trails

Wed Feb 6, 2013 12:37pm EST

* Fourth-quarter FFO/shr 42 cents vs Wall St 41 cents

* Expects 2013 FFO/shr $1.60-$1.70 vs Wall St $1.73

* CEO says 14 cents outlook difference for early sale, tax rebate

* Shares down 1.6 pct

NEW YORK, Feb 6 (Reuters) - Prologis Inc, one of the world's largest owners of warehouse and distribution centers, reported core funds from operations, a measure of earnings, that surpassed Wall Street's forecast, but was down from last year due in part to lower rental rates.

The company on Wednesday also issued a forecast for 2013 that was below Wall Street's forecasts, contributing to shares falling 1.6 percent. Shares were down 65 cents at $39.63 on the New York Stock Exchange.

Prologis reported diluted core funds from operations of $199.3 million, or 42 cents per share in the fourth quarter, compared with 208.2 million or 44 cents per share in the same period a year ago.

Analysts on average had expected the San Francisco-based company to report FFO of 41 cents per share, according to Thomson Reuters I/B/E/S.

Funds from operations, or FFO, is a real estate investment trust performance measure that mitigates the earnings-reducing effect of depreciation, a non-cash charge.

Prologis' Core FFO excludes certain items, such as losses or gains on foreign currency or derivative activity, merger-related costs and impairments.

For property the company has owned at least a year, rental rates on signed leases were 2.4 percent lower than those they replaced. While the industry is recovering, rental rates remain lower than before the downturn.

Prologis Chairman and Chief Executive Officer Hamid Moghadam said he expects the rental rate difference to turn positive this year.

One reason will be the resurgence of demand from the housing market, whose need to store and ship such things as carpet and appliances has been weak, Moghadam said.

"The industrial business is finally having its day in the sun," Moghadam said.

During the quarter, Prologis leased a record 40.5 million square feet of which about 11.6 million were under new leases, and 3.8 million were leases for new development. The remaining square feet were under lease renewals.

Prologis is working on a plan to reduce its debt load to 30 percent of its asset value. The company recently spun out part of its assets in Japan into a Japanese real estate investment trust. It also sold a 50 percent stake in a portfolio of European warehouses to Norway's sovereign wealth fund.

When that transaction closes, the debt to value will be reduced to 37 percent, Moghadam said. That would be down from 50 percent at the time company merged with AMB Property Corp in June 2011.

For 2013, Prologis sees core FFO in the range of $1.60 to $1.70 per share, while analysts have forecast $1.73 per share, according to Thomson Reuters I/B/E/S.

Moghadam attributed the difference to the sooner-than-expected sale of the European portfolio, which will pare 8 cents off FFO, and 6 cents-a-share for a 2012 tax rebate, which will not re-occur this year.