Prologis held its third-quarter 2024 earnings call on October 16, 2024, at 12:00 p.m. ET. The call included prepared remarks, a Q&A session, and various participants from the company.
The call began with a greeting from the operator, introducing Justin Meng, Senior Vice President and Head of Investor Relations, who reminded attendees that the call would involve forward-looking statements governed by federal securities laws. These statements, based on current market expectations and management assumptions, are not guaranteed, and actual outcomes may vary due to several factors outlined in the company’s SEC filings.
Justin Meng introduced Tim Arndt, CFO, who discussed the company’s performance, market conditions, and guidance. Arndt expressed concern for those affected by recent hurricanes and highlighted the limited damage to Prologis properties.
Despite softened occupancy and rent, Prologis reported strong net effective rent change due to lease mark-to-market. Core FFO excluding net promote expense was $1.45 per share, slightly exceeding forecasts. The company maintained 96.2% occupancy and achieved significant rent increases, capturing over $90 million in NOI by aligning leases with market rates.
Prologis raised $4.6 billion in new debt with a focus on development projects, including a new data center. The company expanded its land bank and invested in strategic acquisitions and energy systems. Prologis Ventures had a successful exit in investment with a 65% IRR, contributing valuable insights.
Arndt noted market softness despite GDP and consumption growth, attributing this to excess supply chain availability. However, he showed optimism for an eventual demand recovery and rent growth. Globally, market rents declined approximately 3%, with Southern California experiencing a notable impact.
Arndt expressed confidence in Prologis’s positioning due to low vacancies, a decrease in new development starts, and favorable long-term growth prospects given the disparity between market and replacement cost rents.
In terms of capital markets, Prologis observed growth in U.S. and European values, increasing transaction volumes, and compressing IRRs. The company adjusted its guidance, indicating slight reductions in development starts, but increased acquisition and disposition forecasts due to improving market conditions.
Overall, the call highlighted Prologis’s strong operational performance, active deployment strategy, and focus on capitalizing on long-term demand for logistics real estate, while navigating current market challenges.
