Analyst Note| Kevin Brown |
No-moat ProLogis reported strong second-quarter results and raised its 2021 guidance for the second straight quarter, leading us to raise our fair value estimate to $107 from $92. Same-store occupancy increased 60 basis points sequentially to 96.0%, in line with our estimates. Meanwhile, same-store net operating income grew 5.8% year over year, well above what the company had produced over the prior several quarters. The second-quarter result was also the third straight quarter of accelerating same-store NOI growth, which led management to increase its 2021 NOI guidance by 75 basis points to a new range of 5.25% to 5.75%. We similarly revised our short-term fundamental outlook upward for ProLogis as we believe it will continue to benefit from the current leasing environment that is driving rates higher for the next few years. The strong internal growth led to ProLogis reporting core funds from operations of $1.01 in the second quarter, slightly ahead of our estimate, and led to management raising its 2021 core FFO guidance by 7 cents at the midpoint to a new range of $4.04 to $4.08.