Prologis(PLD) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Core FFO, excluding promotes, was $1.36 per share, and including net promote expense was$1.34 per share [8] - Global occupancy at the company's share ended the quarter at 96.5%, outperforming the market by over 320 basis points [8][9] - Same-store growth was 7.2% on a cash basis and 5.5% on a net effective basis [10] Business Line Data and Key Metrics Changes - The company leased 52 million square feet in its portfolio, a 27% increase over the first quarter [7] - Net effective rent change was nearly 74% based on commencement and 64% based on new signings [9] - The company deployed over $700 million into new development projects and acquisitions during the quarter [10] Market Data and Key Metrics Changes - The southeastern U.S. and Latin America are highlighted as healthy markets, with demand momentum particularly strong for larger spaces [25] - Effective market rents globally declined 2$1 billion to $1.5 billion, and for dispositions to$2.75 billion to $3.65 billion [17] - The company is optimistic about its data center business, having secured 1.3 gigawatts of power, with significant progress in its five-year outlook for$7 billion to $8 billion of total investment [15][66] Management's Comments on Operating Environment and Future Outlook - Management noted that while decision-making remains slow, there is strong proposal activity and leasing activity [22] - The company anticipates that the Southern California market will stabilize within 12 months, while other markets may recover sooner [74] - Management expressed confidence in the long-term strength of the business despite current uncertainties in the economic environment [74] Other Important Information - The company raised$1.2 billion of debt at a weighted average rate of 4.4% and launched a $1 billion commercial paper program [11] - The installed capacity of the solar energy business is now at 524 megawatts, with an additional 134 megawatts under construction [10] Q&A Session Summary Question: Has the momentum in occupancy and rent spreads continued into the third quarter? - Management confirmed that momentum has been maintained, with strong proposal and leasing activity, particularly in renewals [22] Question: Can you discuss demand differences across size ranges and geographies? - The healthiest demand is seen in the southeastern U.S., Latin America, and Europe, with larger spaces (over 100,000 square feet) showing the best momentum [25] Question: What are the expectations for rent growth in the back half of the year? - Management expects modest declines in effective rents over the next 12 months, particularly influenced by the Southern California market [30] Question: Can you provide more detail on lease proposals and their context? - The increase in lease proposals is primarily for new leasing, with a significant uptick in nominal proposals due to increased vacancy [33] Question: How does the pace of development stabilization compare to guidance? - Development leasing has slowed, but the overall development portfolio is trending towards long-term margins of 24% to 25% [37] Question: What is the outlook for the transaction market? - The transaction market is normalizing, with increased activity and multiple offers for well-located core products [44] Question: How is the company addressing the impact of tariffs on trade and industrial real estate? - Management believes that while tariffs may create inflationary pressures, the overall demand for industrial real estate will remain stable [78]