Prologis Reported a Good Set of Numbers to End the Year; Maintaining Our $118 FVE

No-moat-rated Prologis closed the Duke Realty acquisition and ended the year with a good set of numbers. The consolidated entity reported funds from operations, or FFO, of $1.24 per share, slightly beating the FactSet consensus estimate of $1.22 per share. The industrial space continues to be strong, but we are seeing increasing signs of growth moderation primarily due to a weaker macroeconomic environment. As we have highlighted earlier, slower adoption of e-commerce and a strong supply pipeline should result in the normalization of vacancies and market rent growth from the currently elevated levels. Having said this, the current mark-to-market of 67% on the current leases of the company ensures robust NOI growth for many years. The net effective re-leasing spread was reported at 50.6% for the fourth quarter, down from 59.7% in the previous quarter. We are maintaining our $118 per share fair value estimate after incorporating the fourth-quarter results.