Prologis cuts earnings to $4.05-$4.15, raises build budget up to $5.75 billion as the SEGRO bid is live
Prologis beat Q3, raised its construction budget for the second time this year and cut its net-earnings forecast, a table its board just certified as a profit forecast under the U.K. Takeover Code while the bid for SEGRO is live. The split is the financing question: who pays for the bigger build and the acquisition at once.
Richard Tang · 3 min read
Prologis−2.70% — Prologis, down 2.70 percent today raised what it will spend on the AI build-out and cut what it expects to earn, and the table holding both numbers is now certified. Third-quarter core funds from operations (FFO), the earnings measure real estate investment trusts report, came in at $1.60 a share 1. That was three cents above what analysts expected 2. The 2026 development-starts budget rose for the second time this year, to between $5.0 billion and $5.75 billion, and acquisitions guidance rose with it 12.
The net-earnings forecast fell to $4.05 to $4.15 a share, from $4.40 to $4.55 1. Because the bid for SEGRO, the London-listed warehouse landlord, is live, Rule 28 of the U.K. Takeover Code turns that guidance into a profit forecast, certified by the board under a Takeover Panel dispensation SEGRO agreed to 1.
The earnings cut is a selling decision
Net earnings include gains on property sales; core FFO excludes them 1. The dispositions guide fell to between $1.75 billion and $2.5 billion 1, and chief financial officer Tim Arndt told analysts a wider bid-ask spread, the gap between what sellers ask and what buyers will pay, is pushing some deals into next year 3.
The rent roll moved the other way: Prologis signed 60 million square feet of leases, cash rents on rollover rose 23.4 percent, and same-store cash growth guidance was raised to 7 to 7.5 percent 1. The weak line in the certified forecast is the timing of asset sales, not tenant demand.
Net earnings guidance was cut at both ends; Core FFO's floor rose
- Previous guidance
- Current guidance (Rule 28 forecast)
Data
| Previous guidance | Current guidance (Rule 28 forecast) | Change | |
|---|---|---|---|
| Net earnings guidance, low end | $4.40 | $4.05 | -8.0% |
| Net earnings guidance, high end | $4.55 | $4.15 | -8.8% |
| Core FFO guidance, low end | $6.22 | $6.25 | +0.5% |
| Core FFO guidance, high end | $6.30 | $6.29 | -0.2% |
Data centers are nearly half the build
The AI build-out reaches a warehouse landlord through electricity: data centers need power, and power needs land with a grid connection. Deals for data centers and power supply took 10 percent of Prologis' new leasing in the quarter, 17 percent in the United States 4. The power pipeline stands at 5.8 gigawatts, with letters of intent covering about one gigawatt that management expects to start largely in 2027 35. Of the $4.1 billion of construction started this year on its share, $2.0 billion is data centers 5.
Build-to-suits, where a tenant commits before ground breaks, are expected to be 55 to 65 percent of this year's starts 3. Rents high enough to justify new construction now sit 27 percent above market 34, which keeps competitors from adding speculative supply.
Data centers are nearly half of Prologis' 2026 construction starts
- Data centers2.0349.8%
- U.S. industrial1.4936.5%
- Industrial outside the U.S.0.5613.7%
Data
| Slice | Value | Share |
|---|---|---|
| Data centers | 2.03 | 49.8% |
| U.S. industrial | 1.49 | 36.5% |
| Industrial outside the U.S. | 0.56 | 13.7% |
The bid is paid in Prologis paper
SEGRO's holders approved the combination on September 28, and the close is expected in the first half of 2027, subject to court and regulatory approvals 36. The offer is 0.0920 new Prologis share per SEGRO share, valuing SEGRO at about $18.8 billion 26. Up to a quarter of the consideration can be taken in cash 6. The Rule 2.9 notice Prologis filed on October 13, disclosing 950.5 million shares in issue, fixes the count the stock payment will be drawn from 7.
The financing runs alongside. Prologis raised $2.4 billion of common equity during the quarter and closed about $1.3 billion of debt just under 4 percent 3. Liquidity stood at $8.8 billion, with debt at 4.5 times adjusted EBITDA 1.
One forecast now binds two shareholder groups
The reward in this cycle goes to whoever turns land that has power into buildings a tenant can lease, and the raised budget is Prologis paying to do that work 1. SEGRO's holders carry most of the bid, because those who do not elect cash are paid in stock and stay invested in the combined company; Prologis' new shareholders, its bondholders near 4 percent and its tenants, through rising cash rents, carry the rest 136.
The timeline is the uncertified part. A gigawatt of letters of intent is not a signed lease, and if those letters slip, the 2027 start wave slips with them 3. On the numbers its board just certified for both sets of shareholders, Prologis can fund the build and the bid at once 1.
Deepdive
AI-generated from this story and its cited sources. Not investment advice.
