Group 1 - Prologis (NYSE: PLD) is recognized as one of the largest industrial REITs, characterized by a stable debt profile, a healthy portfolio, and a well-supported dividend payout [1] - The company is experiencing long-term tailwinds driven by a boom in e-commerce, which has significantly increased demand for its services [1]

Company Overview - Prologis (PLD) is a leading REIT in logistics real estate, focusing on the ownership, development, and management of high-quality logistics facilities, which are crucial for the economy [1] Analyst Background - The analyst has over 10 years of experience researching companies across various sectors, including commodities and technology, and has written extensively on value investing [1] Investment Focus - The analyst has a particular interest in metals and mining stocks but is also knowledgeable in other industries such as consumer discretionary/staples, REITs, and utilities [1]

Core Viewpoint - Prologis, Inc. (NYSE: PLD) is rated as a Buy for income investors interested in long-term buy-and-hold real estate investment trusts (REITs) due to its position as the global leader in logistics real estate, which has recently experienced significant business growth [1]. Company Summary - Prologis is recognized as the global leader in logistics real estate, benefiting from a recent boom in business [1]. Investment Perspective - The recommendation is particularly aimed at income investors who are looking for stable, long-term investment opportunities in the REIT sector [1].

Company Announcement - Prologis, Inc. will have its CFO, Tim Arndt, present at the BofA Securities 2025 Global Real Estate Conference in New York on September 10, 2025, at 9:35 a.m. ET [1] - The presentation will be available via live audio webcast, with a replay accessible afterward [1] Company Overview - Prologis is a leader in the logistics industry, creating intelligent infrastructure that supports global commerce by connecting digital and physical worlds [2] - The company focuses on agile supply chains and clean energy solutions, aiming to enhance business efficiency and sustainability [2] - Prologis claims unmatched scale, innovation, and expertise, positioning itself as a unique entity in shaping the future of logistics [2]

Investment Decisions - Malcolm sold Iron Mountain due to concerns that its stock price would decline post-earnings report, similar to the reactions of big banks and big tech companies after their earnings releases [2] - The investor had held Iron Mountain for a year with only a 3% dividend return, and its valuation compared to peers in the XLR was not promising for significant growth [3] - Prolis was also sold because it had been a stagnant stock for the year it was held [7] - The investor used the proceeds from the sales to buy ASML, positioning for future opportunities, anticipating a rate cut that would benefit fintech companies [6] Market Sentiment and Expectations - Expectations for some stocks had become too high [4] - Market sentiment suggests investors are taking profits and anticipating a pullback [5] - Consensus indicates the market is overdue for a pullback [5] Real Estate Market Analysis - Prolis boasts about a 95% vacancy rate, but the industry-wide vacancy rate is increasing [7] ETF Performance - The ETF has repeatedly invested in a particular stock (unnamed) but has not seen positive results [8]

Group 1 - The Conservative Income Portfolio targets value stocks with high margins of safety and reduces volatility using well-priced options [1] - The Enhanced Equity Income Solutions Portfolio aims to generate yields of 7-9% while minimizing volatility [1] - Prologis Inc. (NYSE: PLD) has been highlighted as facing valuation challenges due to the unwinding of the Zero Interest Rate Policy (ZIRP) era [2] Group 2 - Trapping Value is a team of analysts with over 40 years of combined experience in generating options income and focusing on capital preservation [3] - The investing group Conservative Income Portfolio collaborates with Preferred Stock Trader to offer two income-generating portfolios and a bond ladder [3] - The Covered Calls Portfolio is designed for lower volatility income investing with an emphasis on capital preservation [2]

Core Thesis - East Group Properties (EGP) is an industrial REIT with a focus on sub-150K square foot warehouses in the Sunbelt, positioned for approximately 10% annual growth in AFFO per share, yet currently trading at a low AFFO multiple of 21.8X, making it one of the cheapest industrial REITs on a leverage-neutral basis [2][56]. Company Track Record - EGP has demonstrated a consistent track record of net operating income (NOI) growth, even during economic downturns, with only slight declines in NOI during challenging periods [7][3]. - The company's conservative management style, led by CEO Marshall Loeb, has resulted in a strong performance and a low debt-to-capital ratio of 13.97%, which is below the optimal range for REITs [3][42]. Valuation Metrics - EGP's AFFO multiple has decreased from 34.8X to 21.8X, indicating a significant drop in valuation, which has transitioned from premium to undervalued [9][8]. - The consensus net asset value (NAV) for EGP is estimated at $179.49, with the stock currently trading at about 90% of NAV [36][39]. Market Positioning - EGP is well-positioned geographically, with a focus on smaller properties that have lower vacancy rates compared to larger assets, maintaining an occupancy rate of 97.3% [30][26]. - The company operates in strong markets such as Dallas, Houston, Orlando, and Tampa, which account for nearly 40% of its revenues [35][33]. Growth Potential - EGP is expected to grow AFFO per share to $10.52 by 2029, driven by favorable leasing spreads and ongoing development projects [54][49]. - The company has a development pipeline of 4 million square feet with a projected investment of $573 million, indicating strong growth prospects [47][48]. Industry Overview - The industrial sector has seen a surge in development activity post-pandemic, but the pace is slowing, with vacancy rates rising to just over 7% [16][22]. - Despite the increase in vacancy, rental rates remain strong, with average rents exceeding $10 per square foot, and demand is expected to remain healthy as construction activity wanes [22][25].

Core Insights - Prologis plays a critical role in the global economy, with nearly $3.2 trillion worth of goods flowing through its warehouses in 2024, representing 2.9% of the world's GDP [1][2] - The company's operations supported 3.6 million jobs worldwide and contributed $348 billion to the global economy [1][3] - The report highlights Prologis' significant impact on local economies and supply chains, emphasizing its role as an engine of economic activity [4] Economic Impact - The 2024 Future Flow of Goods report, produced in collaboration with Oxford Economics, estimates the throughput of goods, direct employment in warehouses, and total economic impact across direct, indirect, and induced channels [3] - Economic activity in Prologis warehouses generated $77 billion in global tax revenues [7] - California led with $465 billion in throughput, supporting 162,000 direct jobs and generating a $54 billion total GDP impact [8] Regional Highlights - In the United States, goods moving through Prologis warehouses totaled $2 trillion across 22 states [2] - Texas ranked second with $273 billion in goods and over 223,000 total jobs across all impact channels [8] - Mexico and Canada experienced significant employment gains, with Prologis direct warehouse jobs up 8% globally since 2022 [7]

Business Operations - Prologis operates in high-barrier, high-growth logistics real estate markets across 20 countries, with a portfolio totaling approximately 1.3 billion square feet[154]. - Rental operations contribute 90% to 95% of consolidated revenues, earnings, and funds from operations (FFO), with a weighted average lease term of 70 months for leases commenced in the operating portfolio[164]. - The company expects to generate earnings growth by increasing rents and maintaining high occupancy rates, driven by rolling in-place leases to current market rents upon expiration[164]. - Prologis has the potential to support the development of $36.4 billion of total expected investment (TEI) in newly developed buildings, with an estimated value creation captured through gains upon contributing properties to co-investment ventures[172]. - The strategic capital segment generates 5% to 10% of consolidated revenues and earnings, primarily through asset management and property management services from unconsolidated co-investment ventures[167]. - Prologis actively manages its portfolio through acquisitions and development, recycling capital from property dispositions back into investment activities[157]. - The company maintains a diversified lease portfolio with contractual revenues and fixed or inflation-linked escalations, supporting stable cash flows[164]. - Prologis aims to grow its strategic capital business by increasing assets under management in existing and new ventures, enhancing revenue generation[169]. - The company is well-positioned to support customers amid economic uncertainties, driven by long-term trends in e-commerce and supply chain modernization[155]. Financial Performance - The occupancy rate of the operating portfolio was 95.0% as of June 30, 2025, with a net effective rent change of 53.6% on leases that commenced during the first half of 2025[175]. - The company experienced consolidated development starts totaling $867 million in the second quarter of 2025, with 63.4% of these being build-to-suit projects[176]. - The gross book value of the operating portfolio held by the company's nine unconsolidated co-investment ventures was $61.0 billion across 553 million square feet as of June 30, 2025[173]. - The Real Estate Segment's NOI for the six months ended June 30, 2025, was $3,038 million, an increase from $2,758 million in the same period of 2024[182]. - The total available liquidity as of June 30, 2025, was approximately $7 billion, including $6.0 billion in credit facilities and $1.1 billion in unrestricted cash[181]. - The consolidated development portfolio was expected to be completed before September 2027 with a total estimated investment (TEI) of $5.2 billion and was 36.5% leased[192]. - The company issued $1.8 billion of senior notes with a weighted average interest rate of 4.8% and a weighted average maturity of 8 years[181]. - The weighted average remaining maturity of consolidated debt was 9 years with a weighted average interest rate of 3.2% as of June 30, 2025[173]. - The company maintained a long-standing strategy of conservative financial leverage, resulting in low leverage as a percentage of real estate investments and market capitalization[173]. - Strategic Capital Segment NOI for the six months ended June 30, 2025, was $162 million, an increase of 21% from $134 million in 2024[198]. - Total strategic capital revenues increased to $288 million in 2025 from $283 million in 2024, driven by a rise in recurring fees from $232 million to $256 million[198]. - Strategic capital expenses decreased from $149 million in 2024 to $126 million in 2025, reflecting improved cost management[198]. - G&A expenses rose slightly to $222 million in 2025 from $218 million in 2024, with capitalized G&A expenses decreasing from $101 million to $84 million[200][201]. - Gains on real estate transactions decreased significantly to $38 million in 2025 from $128 million in 2024, primarily due to fewer property contributions to co-investment ventures[205]. - Net interest expense increased to $484 million in 2025 from $402 million in 2024, attributed to higher interest rates and the issuance of $1.8 billion in senior notes[220]. - The weighted average effective interest rate during the period was 3.2% in 2025, up from 3.0% in 2024[220]. - The company reported net cash provided by operating activities of $2.402 billion for the six months ended June 30, 2025, an increase from $2.142 billion in 2024[242]. Debt and Liquidity - The company had a total debt of $34.67 billion as of June 30, 2025, with a weighted average interest rate of 3.2%[236]. - The company had available unrestricted cash balances of $1.1 billion at June 30, 2025[237]. - The company plans to repay $460 million in scheduled principal payments in 2025 and $2.1 billion in 2026[237]. - The company’s credit ratings were A and A2 from Standard & Poor's and Moody's, respectively, both with a stable outlook[238]. - Cash paid for interest rose to $513 million in 2025 compared to $408 million in 2024[248]. - Total debt repurchase and payments were $72 million in 2025, a decrease from $916 million in 2024[250]. - Proceeds from the issuance of debt totaled $1.778 billion in 2025, down from $3.017 billion in 2024[250]. - At June 30, 2025, total third-party debt for unconsolidated co-investment ventures was $18.6 billion, with a weighted average interest rate of 3.4%[251]. - The company had $1.6 billion in variable rate debt, with a weighted average effective interest rate of 2.9%[273]. - The scheduled principal payments for fixed rate debt total $33.624 billion, with significant repayments in 2026 ($1.538 billion) and 2027 ($2.042 billion)[272]. - The company uses derivative instruments to mitigate interest rate risk on variable rate debt[272]. Foreign Currency and Derivatives - 7.6% of total consolidated revenue, amounting to $328 million, was denominated in foreign currencies for the six months ended June 30, 2025[271]. - For the six months ended June 30, 2025, the company recognized $154 million in losses and $101 million in gains related to foreign currency and derivative transactions[223]. - Total foreign currency and derivative gains (losses), net for the six months ended June 30, 2025, amounted to $(180) million, compared to $80 million in 2024[223]. - The sensitivity analysis indicates a change of 29 basis points on average outstanding variable rate debt balances due to interest rate fluctuations[273].

Core Insights - FIBRA Prologis reported strong financial results for Q2 2025, with net earnings per CBFI increasing to Ps. 1.8021 (US$0.0915) from Ps. 0.7770 (US$0.0470) in Q2 2024, indicating a significant year-over-year growth [2][3] - The company emphasized its strategic focus on resilient consumption-driven hubs, which has contributed to sustainable growth despite market challenges [3] Financial Performance - Funds from operations (FFO) per CBFI rose to Ps. 1.1634 (US$0.0585) in Q2 2025, compared to Ps. 0.8112 (US$0.0485) in the same quarter of 2024 [2] - As of June 30, 2025, FIBRA Prologis had a leverage ratio of 22.8% and liquidity of approximately Ps. 21.5 billion (US$1.1 billion), which includes Ps. 19.7 billion (US$1.0 billion) of available capacity on its unsecured credit facility [5] Operating Metrics - The period-end occupancy rate was 97.7%, while the average occupancy rate was 98.2%, both showing slight decreases from the previous year [4] - Customer retention improved significantly to 86.0% from 65.8% in Q2 2024, indicating stronger tenant relationships [4] - The net effective rent change was recorded at 68.0%, up from 58.1% in the same period last year, driven by markets such as Monterrey and Mexico City [4][8] Updated Guidance - The updated guidance for FFO per CBFI for 2025 has been revised upwards to a range of US$0.2200 to US$0.2400, reflecting a positive outlook excluding foreign exchange impacts [6]