Prologis(PLD)2025-04-16 18:41Financial Data and Key Metrics Changes - Prologis reported a core FFO of 1.43 per share excluding net promotes, both exceeding forecasts [14] - Occupancy at the end of the quarter was 95.2%, a decrease of 70 basis points from year-end, attributed to strong retention [14] - Net effective rent change during the quarter was 54%, with cash basis at 32%, leading to same-store growth of 5.9% and 6.2% respectively [15] - The net effective lease mark-to-market ended at 25%, representing an additional 650 million in new developments, with 80% being build-to-suit projects [9][16] - The data center business expanded power capacity by 400 megawatts, a 13% increase, totaling 2 gigawatts in advanced stages [9][18] Market Data and Key Metrics Changes - The operating environment showed increased leasing activity in sectors like transport, food and beverage, consumer products, and electronics [20] - Net absorption for the quarter was 21 million square feet, with a global decline of 1.5%, primarily in Southern California [79] Company Strategy and Development Direction - The company aims to invest in markets where goods are consumed rather than produced, emphasizing the need for more warehouse space in a disconnected world [13][92] - Prologis plans to reduce development start guidance to 2 billion due to uncertainty in the market [31] Management's Comments on Operating Environment and Future Outlook - Management expressed concerns about potential recession impacts on consumption and decision-making, while also noting the resilience of Prologis due to its diversified rent roll and strong balance sheet [11][12] - The company anticipates increased inventory levels as businesses stockpile, with e-commerce expected to gain more market share [28] Other Important Information - Prologis raised approximately $400 million in new capital for its flagship open-ended funds, with a similar amount in redemptions, resulting in a near-neutral capital raise [19] - The company received a Moody's upgrade to an A2 rating, making it one of only two public REITs with an A-flat rating from both agencies [19] Q&A Session Summary Question: Insights on customer interactions and demand - Management noted that consumption is expected to decline in a recession, but long-term trends indicate growth [40][41] Question: Clarification on leasing and occupancy - The occupancy drop was attributed to a high number of leases rolling in the first quarter, with retention at 73% [48] Question: Stress test scenarios and market conditions - The stress test indicated potential occupancy declines and rent drops, with bad debt expectations adjusted to 75 basis points [78] Question: Impact of tariffs on customers - Management speculated that customers could absorb a 10% tariff, with Mexico expected to benefit from shifts in sourcing [86] Question: Demand for warehouse space - The company believes that a disconnected world will require more warehouse space due to the need for inventory and supply chain adjustments [91][92]