Stripnomics

Dow Jones reports:

ProLogis Down On News That DHL Express Plans US Departure

ProLogis (PLD) shares fell after one of the real-estate investment trust’s largest clients, DHL Express, confirmed Monday it plans to exit the U.S. domestic business. Analysts said the slide in ProLogis was a market overreaction to news that would have only a limited impact on its business.

Shares of ProLogis, which specializes in distribution facilities, fell $2.21, or 22%, to close at $7.75 Monday, and dropped another 3% to $7.50 in after-hours trading.

ProLogissaid Monday that the impact of DHL’s decision will be minimal. It noted that, of the 13 million square feet ProLogisleases to DHL worldwide, only about 235,000 feet could be affected by DHL’s decision. ProLogis also said the square footage is only a small percentage of the 340 million square feet it owns and manages in the U.S.

Oppenheimer & Co. analyst Mark Biffert said he believes the market is overreacting to the DHL news, and the stock will recover once investors look more carefully at the numbers.

Like other REITs, ProLogis shares have been battered during the economic crisis; the stock is down 88% year-to-date.

I disagree. PLD was down because: THE 10Q WAS UNLEASED! I have been salivating for this day! Even though Singletary and the 49ers lost a heartbreaker tonight, my dorky love for examining PLD’s Cash Flow Statement kept my fire burning. I don’t know what time it was filed today but I figure someone got a hold of it before the market closed.

Anyhow, I’m not changing my position in the morning. I will still be SHORT. To me, the Cash Flow Statement looks as bad as I suspected it would.

Per note 9 to the 10Q, Total Debt increased by about $300M from $10,789,200,000 as of June 30 to $11,097,901,000 as of September 30.  After reverse engineering the specific numbers for the last quarter only (they don’t just give em to you!) I found that Proceeds from Credit Facilities increased by about $480M from $52,607,000 in June to $537,694,000 in September. The good news for common shareholders was that the company only raised about $2M from common stock sales.

All in all this was not much of a surprise. However, sometimes it’s more telling to look for what is not in the documents.  Per the Investing activities section of the Cash Flow Statement, Real Estate Investments sucked up about $1.3 Billion as it changed from ($3,000,419,000) in June to ($4,306,323,000) in September.

What exactly accounted for these “Real Estate Investments”? I don’t know. I don’t see the specifics anywhere in the statement. It could be expenditures for construction activities. If you know, tell me. Anyhow, I know this number does not change much every quarter. It seems to be almost recurring in nature but I can’t say for sure what comprises it. After comparing the Cash investing and Financing Notes (page 44 - Sept) with the previous quarter’s (page 40 - June) it looks like there was only 1 property acquisition this quarter for about $69M (reverse engineered). The rest seems to be a constant vortex of cash for an “investment” unknown to me.

Something else I noticed on the Cash Flow Statement was the large jump in Foreign Exchange Losses. PLD lost about $20M on exchange rates. That is much more than the mere $3M that the company made in gains on the CDFS and Non-CDFS assets that it sold this quarter per Note 6 to the Consolidated Financial Statements. This could be the result of a lower dollar or a particularly weak foreign currency - but the dollar is strong now. I suspect the latter… probably resulting from borrowing in a weak foreign currency since the amount is so high, but I cannot prove this.

I’m getting pretty tired. I’ll try to get to more analysis tomorrow.

This entry was posted on Tuesday, November 11th, 2008 at 1:39 am and is filed under Accounting, Economics, Law, ProLogis (PLD), Real Estate. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.