* ProLogis first-qtr core FFO 13 cts/share vs View 15 cts
* AMB first-quarter core FFO 32 cents meets View
* Both companies incurred costs from Japan damage
* ProLogis shares fall 1.5 pct; AMB shares down 1.4 pct
(Adds CEO comment, details, updates stock prices)
By Ilaina Jonas
NEW YORK, April 20 ProLogis (PLD.N) and AMB
AMB.N, which will merge later this quarter, said the rebound
in demand for warehouse and distribution space globally
propelled leasing in the first quarter, although both incurred
costs from damage to their properties in Japan following last
month's earthquake and tsunami.
The sector is recovering from a sharp downturn in the
global economies three years ago. Rents are bottoming and
demand is rising, driven by the need for more modern space to
hold and ship products ranging from diapers to drugs as global
Both companies, which are owners and developers, incurred
costs to cover damage to their buildings in Japan during the
Still, Japan could provide opportunities for them to help
"Frankly, to talk about all the great business
opportunities over there, when there's so many people
suffering, we just don't feel good about that," AMB Chief
Executive Officer Hamid Moghadam said. "But let me just say
that the business prospects over there are actually pretty
strong and leave it at that."
Denver-based ProLogis is set to merge next month with San
Francisco-based AMB to create a global company with a foothold
in nearly all the world's major shipping centers.
Rakowich said concerns over sovereign debt issues, rising
energy costs, global military actions and Japan slowed the
rebound during the first two months of the quarter, normally
the slowest for leasing. But leasing picked up again in the
ProLogis incurred $7 million in damage costs related to the
March 11 earthquake in Japan. AMB's tab was $2.7 million.
ProLogis CEO Walter Rakowich said he believes tenants in
Japan, who include large global manufacturers and shippers,
will want newer, better-engineered buildings. In fact, ProLogis
uses its patented seismic isolation system technology for
buildings in Japan, where he sees demand picking up in the
second half of the year.
But the merger mania and enthusiasm may have outpaced the
results and inflated the companies' share prices, and investors
were disappointed with the tempered results.
ProLogis shares were down 1.5 percent at $15.84 and AMB
shares fell 1.4 percent to $35.61 in afternoon trading.
"Overall it was a relatively solid quarter, especially when
you consider the economic factors influencing not just their
international operations but their flow trade into domestic
buildings," said Len Rittberg, an Adelante Capital Management
The sector's recovery plodded along during the first
quarter as both AMB and ProLogis saw occupancies increase, but
rents, as expected, continued to fall, albeit at a slower rate.
Rental increases follow occupancy improvements, but the pace
depends upon the overall economy and supply of space in the
particular market. Moghadam said he expects the power to raise
rents will return in the second half of 2012, when vacancies
fall another 3 percent to 4 percent.
ProLogis said first-quarter core funds from operations,
which exclude $12.9 million in charges related to past mergers
and earthquake damage in Japan, rose to $74.4 million, or 13
cents per share, from $52.3 million or 11 cents a share a year
earlier. The results trailed Wall Street's forecast of 15 cents
per share, according to Thomson Reuters I/B/E/S.
AMB reported first-quarter core FFO of $56.1 million, or 32
cents per share, up from $44.6 million or 29 cents per share a
year before and in line with the average of analysts'
The sector is attracting more players who want to jump in
at the early stages of the recovery. Blackstone Group LP (BX.N)
has entered the market and continues to expand its U.S.
In Europe, ProLogis this month became tangled in a fight
for its European spinoff ProLogis European Properties
Dutch pension group APG Algemene Pensioen Groep N.V. and
Australian property manager Goodman Group (GMG.AX) offered 6
euros per share ($8.70) to raise its stake and manage the
portfolio, one of the largest in Europe.
That prompted ProLogis to raise its stake in PEPR by 5
percent to 38 percent and triggered a tender offer for the
rest. Rakowich knocked down speculation, saying the company is
not interested in selling its stake in PEPR.
($1 = 0.6899 euro)
(Reporting by Ilaina Jonas; editing by Matthew Lewis and