Prologis, Inc. ((PLD)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Prologis, Inc. recently held its earnings call, revealing a strong quarter marked by record leasing activity, significant advancements in its data center business, and robust financial performance. Despite some challenges, such as elevated bad debt expenses and market rent declines, the overall outlook remains positive with improving demand and strategic growth initiatives underway.
Record Leasing Activity
Prologis achieved a record quarter for leasing, with signings of nearly 62 million square feet. This milestone indicates strong demand and improved customer sentiment, reflecting the company’s ability to capitalize on market opportunities effectively.
Data Center Expansion
The company moved another 1.5 gigawatts of additional capacity to advanced stages, with 5.2 gigawatts of power either secured or in advanced stages. This represents a significant investment opportunity of $15 billion, showcasing Prologis’s commitment to expanding its data center business.
Core FFO Exceeds Forecast
Prologis reported Core FFO at $1.49 per share, including net promote expense, and $1.50 per share, excluding net promotes, both ahead of the forecast. This financial performance underscores the company’s strong operational execution.
Strong Rent Change
During the quarter, rent change was 49% on a net effective basis and 29% on cash. This highlights the durability of lease mark to market, demonstrating Prologis’s ability to maintain strong rental growth.
Energy Business Growth
Prologis’s energy business delivered 28 megawatts of solar generation and storage in the quarter, with 825 megawatts of current capacity. The company is on track to achieve a one-gigawatt goal by year-end, emphasizing its focus on sustainable energy solutions.
Successful Financing Activities
The company closed on $2.3 billion in financing activities, including a successful €1 billion raise at 3.5%. This has allowed Prologis to maintain an in-place cost of debt at 3.2% with more than eight years of average remaining life, ensuring financial stability.
Anticipated Decline in Development Starts
Prologis experienced a lighter quarter of development starts but expects a strong fourth quarter. This strategic pacing allows the company to align its development activities with market conditions.
Elevated Bad Debt Expense
Bad debt expense was elevated, expected to be in the forties in terms of basis points on revenue. However, it remains below past crisis levels, indicating manageable financial risk.
Market Rent Declines
Market rent declines have been slowing, with just over a 1% decline this quarter. This suggests that some markets are still experiencing softness, but the overall trend is stabilizing.
Forward-Looking Guidance
During the earnings call, CFO Tim Arndt outlined several key metrics reflecting the company’s strong performance and future guidance. Prologis’s guidance indicates an average occupancy midpoint of 95%, with same-store NOI growth projected between 4.25% to 4.75% on a net effective basis and 4.5% to 5.25% on a cash basis. The company also increased its development starts guidance to a range of $2.75 billion to $3.25 billion and expects GAAP earnings per share to range between $3.40 and $3.50.
In conclusion, Prologis, Inc.’s earnings call highlighted a robust quarter with significant achievements in leasing activity, data center expansion, and financial performance. Despite some challenges, the company’s strategic initiatives and positive outlook suggest continued growth and resilience in the market.