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Prologis (PLD)

Participants
Tracy Ward SVP, IR and Corporate Communications
Tom Olinger CFO
Hamid Moghadam Chairman of the Board of Directors and CEO
Gary Anderson CEO of Europe and Asia
Chris Caton SVP and Global Head of Research
Mike Curless Chief Custom Officer
Ed Nekritz Chief Legal Officer
Colleen McKeown Chief Human Resources Officer
Gene Reilly Chief Investment Officer
Craig Mailman KeyBanc Capital Markets
Jeremy Metz BMO
Derek Johnston Deutsche Bank
Vikram Malhotra Morgan Stanley
Jamie Feldman Bank of America Merrill Lynch
Blaine Heck Wells Fargo
Ki Bin Kim SunTrust
Eric Frankel Green Street Advisors
Caitlin Burrows Goldman Sachs
Manny Korchman Citi
Nick Yulico Scotiabank
Michael Carroll RBC Capital Markets
Steve Sakwa Evercore
John Guinee Stifel
Michael Mueller JP Morgan
Call transcript
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Operator

Welcome to the Prologis Q3 Earnings Conference Call. My name is Michelle and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. At that time, please limit yourself to one question.

follow-up, back a the have you please in get queue. If being that this note recorded. conference Also is

I would to Tracy, now like you Tracy over may Ward. to begin. turn the call

Tracy Ward

Prologis Good Welcome morning Thank earnings you, to Michelle. the call. third everyone. quarter

press not website on under Relations. the prologis.com it's available If you downloaded release, have Investor yet our at

Colleen Moghadam, and us for Nekritz, the morning, hear Tom and from Curless, joining This McKeown Chris Olinger, our Mike is also Hamid Gary Reilly. you will Chief Anderson, Caton, Financial Officer Gene call Ed

Before assumptions in the our these well the this of These about expectations, operates in and begin Federal forward-looking prepared factors we current to are remarks, projections industry laws. market state conference referred the statements XX-K which I'd management. that statements filings. of or to Securities contain SEC on Both beliefs Company and and Prologis' like are based as call will as the estimates under

that limited transaction that differ Additional not the the factors results including risk be but transaction of likelihood obtain requisite to their with the the closing their completion the approvals timing to are and stockholders of of the IPT, conditions to the and include materially to expected ability the could of cause actual satisfied. not may

and are operating Forward-looking guarantees results performance statements actual of not may differ.

are a EBITDA Finally, in Reg-G, measures provided this financial call earnings have non-GAAP those to reconciliation measures and that measures contain as FFO, such with we in package. will accordance our

Tom you the I'll please turn And, begin. that, call will over Tom. to With

Tom Olinger

and quarter. uncertainties our today. everyone Customer you surrounding meaningful impact from We outstanding on another our we trade. morning joining no thank call Thanks, Good and see Tracy. sentiment remains positive business had for

demand quarter reflect times. healthy consumer our conversion showing and as ever line Our customers last with rates faster are proprietary response gestation, their to improve positive for chains delivery and in supply operating deal metrics demand,

statistics market feet third mid with more viewpoints share Xs, like historically as than our supply leading as are square divergent assessment increase see balanced U.S. normal. our the quarter each. XX are X.X%. to X%, U.S. raising demand from I'd to to million to strong. XX in global have result, rent fundamentals We at outperformed point rent we've and an a growth our X% in market basis of forecast we Rents seen vacancy low forecast XXXX and

Europe as the very the across is highlighting UK, is overall and are active, risk. In remains healthy. while a demand Midlands solid build-to-suit our we supplier Activity pipeline

the Japan five in to We decade. more and continue with than less Fundamentals X% lowest years. the highest at Tokyo vacancy points a in had on continent to be growth less the forecast Osaka than X%, rent in XXXX are than improving in

over the economics. an nearly of square on hit X our portfolio. rents XX.X%, lease remains see U.S. occupancy quarter high quarterly leased our development From at by XX%, of our that and reflect prioritizing results to you XX sequentially basis long-term points for million strategy feet five-year square million XX We maximize operating end our the all-time standpoint, will occupancy down change feet, including average. Rent an Quarter led XX.X%. was roll above in

increased as X% quarter. quarter, for above XX.X% our the $X.XX nominal more third almost third promote Core which market in rents. the Globally quarter, same-store by quarter is basis point push the in-place $X.XX XX promote in to again rent $XXX our than from now terms. in venture. was in valuations per Europe was points XX-basis of for strategy widened growth average million impacted our The or by income of share which share was in net spread with forecast a NOI Our over X.X% included Co-In consistent reduction FFO our cash to the and occupancy, came

fourth value were For creation The estimated and increase $XXX of were margin of pace of in in over million starts of an XX% two-thirds XX% million. the estimated million about deployment, Stabilizations will an build-to-suits. significantly the $XXX and starts quarter quarter. included margin $XXX with with

to terms. globally attractive capital at continue We very access

debt quarter a euro we $X.X average the at under of more interest of years. average term During issued XX fixed billion weighted X% primarily of in rate and a weighted than

annual total interest our to It's years. X.X% we by out pointing incremental and growing XX rate naturally issuances debt basis average hedge just our international by years to that $XXX our about million two an assets. eight worth under an maturity to weighted have average need non-dollar of These points lengthened weighted for lowered

capacity continue significant sell with liquidity maintain and of billion $XX.X We the fund investment downs. sheet to on balance the potential

billion incremental $X.X our In capacity an today. is addition, ventures existing in of third-party investment there

for which looking of many for provided at be Guidance on XXXX, Xth. Investor know you upcoming November will our I Forum are

positive cover and highlights and not the IPT guidance, share For I'll note impact XXXX the does of the then include I'll guidance acquisition. this basis

end by the our increasing cash XX of are to of NOI basis a bottom X%. same-store expect now and points guidance X.XX% We range

starts and the $X.X $X.X We now billion. for starts to million and midpoint development by billion are $XXX between expect raising range

comprise will of initial total starts our XX% more which above expectations. than Build-to-suits is

per fund is with $XXX $X.XX of an from flow the for be debt. now our income cash which year expected Net full projecting $X.XX are of to increase plan prior net We share, free deployment million guidance. promote we uses and to

our are and narrowing by to and For the $X.XX range full year, between midpoint share. $X.XX XXXX per the we FFO $X.XX core guidance increasing

growth midpoint promotes is share revised core excluding per XX% FFO year. last our And than higher in

CAGR XX%. of while exceptional Over the XX%, XX% past five has been to years, our almost from de-levering a growth clearly with

$X expect evidenced in Private XXXX. U.S. portfolio We close be this excludes we to the to the billion plan split of between IPT, the acquisition third record in which I our our the to January ventures capital mentioned, quarter. continues two robust equally interest by guidance of as fundraising investor in As vehicles.

will we $X.X which fund rata pro with and investment Our billion, cash approximately debt. will be

revenue range the share per capture and $X.XX day deliver IPT X% and We quality or synergies accretion and significant value annual $X.XX on high between to acquisition cost of roughly The stabilized expect basis. one. continue on portfolio core a to from FFO shareholder will this

sum year been rest the up an already continuation feel beyond. about for I the and the great of of a excellent year. was quarter what third outlook To our has

And with I'll that, turn it for Michelle to questions. your

Operator

[Operator comes Instructions] Mailman Your KeyBanc question from Markets. from Craig first Capital

Your line is open.

Craig Mailman

to Could kind larger just have and of And credit just wanted guys. guys here seeing kind improve Maybe talk little guys smaller the and maybe between demand kind ability rents talk through tenants, and there and you of in XXX,XXX quality. of than you what guys about have more Hey, frictional of to vacancy availability on spaces demand hit we kind the portfolio. bigger spaces narrow Or profiles in in or push XXX,XXX you're see bit could where of space occupancy where push then kind ability a the average where occupancy you box? of in under to the to what opportunity? type you under square there your more kind those And maybe in be? foot as of could your talk any your those is your see

Hamid Moghadam

question… some that's Now,

Gene Reilly

maybe take write everybody talking let down? me a Did the about this, spaces. first at stab smaller Well,

you reach we broad-based think that obviously change sectors. across where with segment the be can look growth demand these smaller if think inside those are all numbers I are we rent highest. But spaces frankly push and would is the which and seeing all-time at I So rent can we're rents pretty where highs

in We're as as you In from no are terms of is growth demand. auto demand composition chain net from otherwise, matter still well and broad almost where combination probably the that's continued of the the seeing pretty perspective, again, growth. of the we're seeing But the sector that's broad-based weak, of industry e-commerce an Obviously pretty reconfiguration a supply based. globe.

a start on that's So it.

Tom Olinger

Craig, Tom. this is

your to exceptional. on credit questions, credit quality, of two quality our So one be continues

of Our XX below bad of -- XX for has or this years points six basis points last continues been rent XX% the below rent debt experience quarter. basis

I credit frictional your our and on vacancy. spaces regarding So then great feel just small quality question and about

We our spaces. more do many in have units smaller

Gene out, to in are So is rents. more particularly churn we pushing as pointed naturally going there that be

So -- see vacancy, little is higher rents. much the higher a could you frictional pay-off a higher but

pushing are So the economics clear rents. to keep

Operator

Jeremy question will Metz from BMO. Your from come next

is open. Your line

Jeremy Metz

out Hey, uncertainties. talked good month, created started remarks, hadn't challenges concerns typical having they last economic In slowing over ahead earnings significant Tom that the see to They on customer are disputes FedEx you citing added behavior your about did your more there. in that were that clearly mention risks XXXX. opening hadn't call those they its morning. the in and you Hamid, yet, global trade but that started

your impacts billion maybe thoughts of spec haven't just So under you surprised seen have at call on way it just you has wondering, outlook $X.X Thanks. And desire beyond behavior take it for that yet? cetera? all broader any then terms this really et to how development in starts in all the customer or you cadence on that

Hamid Moghadam

Sure.

think day all one trucks a And I infrastructure day. and FedEx and trade true can they about very very time. wars those cost fixed same statements flows no at and the cares trade obviously both more when wars the that. volatile next planes and its be basis become have

them the cannot have volume or because much troughs. -- they capacity handle for miss either, too can good the the handle erratic for they or be So either peaks peaks can't

We are in the stock business.

going you and is space, more when extra don't uncertainty more tariffs when mix our that inventory carry is closer customers. to you, to at So in the to going get short-term cost, you're to the what actually demand the because for stock are good know because

as and metrics the So think business concerned, right I the different. business I think just their as is for far metrics FedEx are our for are

Operator

Bank. Your from Derek next question from Deutsche come Johnston will

Your line is open.

Derek Johnston

how leasing type interested Amazon Can underwriting? How you ultimately And future and shake facility do where did where the process anticipate? you competitive out Thank parties have? Target process? Seattle for versus was what the you And many signed, this demand you. in multistory did and discuss rents of bidding

Hamid Moghadam

seen than rents would that it. bit before, leased at is building economics and the expectations. bit multistory to our lay say and different it, longer a up sure the lease make took could it and a configurations a the out but higher so reason wanted rents out to look at up, the efficiencies lease little turned of it a they It better up of get to out I nobody longer lot they took ever

quality tenants of performance of with be more asset. the couldn't the or we the financial the pleased So

strategy which With increasingly provide in at lot close customers. solution want attention is to other -- has where and multistory places a is reason it's single in some that respect I multistory some think our no is space their There story. strategy. strategy. The and look to places, ultimate there is to, for this multistory people customers gotten is building to places its implications, of a The

multistory many business we so So building our infill are in growing buildings, position. the we're the not in business of of

Operator

Your come Morgan Vikram from from next will question Malhotra Stanley.

open. is line Your

Vikram Malhotra

Thanks for taking the question.

So you Blackstone GLP portfolio and any their us that looked out? pricing if of rates sort broadly, across more if just acquisition. cap just can shaking sold Wondering give original regions how or of part sense portfolios of any you are at and

Hamid Moghadam

look phone can Vikram, we at are they what in. assume and know you People we're know that number we our business everything. --

we positively we have never a that haven't seen. absolutely, of So thought material transaction

you So at we everything. assume can look

attractive get price think presumably, presumably the a to pretty it. they it really sell two paid to Blackstone, have that for these it. guys was and to obviously good price implications it I portfolio sold they going you're to and to that That paid presumably, good bought Blackstone are to they but months enough ask the get

can't that, I'm would but because assumptions probably more making those not be specific pretty in Blackstone's rooms, I be be fair. decision those -- So than any would

Operator

Merrill comes Lynch. question America next Feldman, from Your Bank Jamie of

is open. line Your

Jamie Feldman

to development XX% your were But do Thank and I supply said want -- the to pre-leased your just we just have get of historically supply you. on you quarter, coming in thoughts I mean you high want the your more. more outlook. start online. starts

pick to expect fourth up the in quarter. You

percentage 'XX? level volume? and about of about supply kind this opportunities, you of you how comfort And development big the think heading risk thinking be what should these -- into gives the can the at you paint your as we So pre-leased picture of

Hamid Moghadam

what's Jamie, about there time. numbers. supply they've People with Hey, is think in construction, Hamid concept given of I is a which mix a here, supply snapshot lot point which confusion annual under is that

through has because have duration construction Chris take they materially those So you different are numbers as lengthened. let me

Chris Caton

Yes, about three concepts. absolutely. talk let's Jamie,

by this year completion. we to is First, are real-time about like this actually pace Completion down on look indicator a more When year. starts X%. be are starts, at flat

gone rise, under that so cycle by that Now the up mentioned, we've duration product in as gone this discussed. for build previously seen around has supply time construction deliver challenges Hamid up all has to to third about projects and we've a

And in now much a of quarters. less out four given are so kind of than following pipeline deliveries that XXX%

deliver be what So you got to quarters. time in look to understand following to the at product the four deliveries will

Hamid Moghadam

had supply, if if basically the the recent construction, level past level the two-thirds same would have So of you under annual you continue. the same supply trends of of property the

So apart. need those be concepts really two kept to

Operator

comes question Blaine Fargo. next from Your from Heck Wells

open. line is Your

Blaine Heck

money that Hamid whether release press interest anything pointed that particular? talk the to on kind there your what a ventures you're sticks the in you that the I the that flip side out that a you side, threat you interest seeing out could is are investor and obviously you cause on Can of to think of guess source great And exceptional you capital groups for to have from? interest Thanks. there strategic capital in that about job decrease raising as guys you're do business. done specific just any seeing then incremental

Hamid Moghadam

The is funds much a investments. institutions, call type are Japan Generally I it but is significantly. Yes. large pension as probably alternative to the up everywhere. sources Asia active pension U.S. to compared gets up are significantly XX-year would down their flat say pretty the numbers, of sort on system these from

everywhere. So it's

I U.S. less margin, little more. the On is bit a would and little a say Asia

and levels generally the tough to If allocated With today's threat are to allocated investment the generally, and seen and property industrial portfolio effect. the to respect to and down old will cycle. every the estate in down, stock rest capital in that real a alternatives same reductions down to down type we've to under estate cause the at have guys because really to under threats it's it's market and market that, the the access. been But same of these if usually It's percentage denominator goes goes go the goes the the flows. real bond that's of allocation

Operator

next question from Ki Bin is Your from Kim SunTrust.

line is open. Your

Ki Bin Kim

impact some e-commerce part? Hamid. forward? interesting different two and just spreads, really What's this potential the on quarter on from questions, would Just growth play that might a obviously PLD potentially on and what how the good a about business roll And going it's lease your view the second, mix warehouse of for be numbers

Hamid Moghadam

let Tom the answer part. I'll Yes. second

the sales, year. it things drive of the space That every penetration e-commerce three are e-commerce the sales. the number up portfolio retail to there future Number e-commerce as a for going drive and I share think become percentage the our penetration think I categories one of it. more devoted up will friendly. for of foreseeable as And to total go that in is economics increasing, share of is, the

And grow generation, prime an as guess you they the the iPhone entering know are could their years. millennials, non-millennials, start years, up the I with shopping

are year old years XX who is olds college So in known I XX from who or basically have olds an iPhone never think the the e-commerce. graduating without now from graduating world XX are iPhone, and year college

as the think will the up. the to think I of go percentage population, population guys enter I part So spending those

environment factors that then maybe top of the combined of share which All XX And there e-commerce and over old thing. for factors, are factor of three well good those e-commerce make takes three of the for the time. on really the demand probably X% is gaining underlying which of slowest a retail is type growth space should e-commerce

it Now the I it it, how factor? automation -- XX expand it? real the reduce strategic is, don't -- does It question does does affect

of sort business. And down. warehouse that that for free get in estate, it real real certain is of time time, in the estate returns and caused need go that part issues but guess we'll area more that over reduces at free get over that I returns And by the returns is certain the for fit would and sure need think are so demand in shipping unclear cases better, the efficient on really answer and I thing. the one instances, space The and all for and will like moment increase, the will

this, and biggest you and customers. biggest, the more to the the them want you strategic need driver of choices all Because choice. the speed position the need inventory, quicker the more secular driver for want this, is of Anyway all long-term near you

So, our all that's for business. really good

Tom Olinger

almost is rent question markets Tom. change. said quarter. that being Bin, your high its the the On all-time and mix in had in every this Ki or region, the for region rent near about so higher the change did coastal its see U.S., all-time high this We quarter West East

almost rent board, we're without very the So seeing exception. across positive change

trend, a at change our rent average right quarter ask about four XX%. You trailing is

think term grow to at But change should that pretty good being This for get a to below in-place means market. XX.X% XX.X% need market when be. where remember, rents we near I that's about the outlook quarter, market, in to talk to Right. rent

XX.X% rented, rents. grow to So you're that's if to to -- you get by XX.X% math just XX% market need under

rent what's So so are rolling, XX.X% in rent think signed being near would of our higher built-in change in-place, naturally obviously change think be ago, the further term. near is about term and about

four on point The And change. is last last basis up I'd thing XXX then out year. of rent now XX%, points the average, at in the change that's quarter roll that we're rent

think to market. that we seen our number can we've move on So meaningfully there up based hang I and around in-place

Operator

Frankel Advisors. from next question Street comes Your Eric Green from

is Your open. line

Eric Frankel

Thank you.

know, rent of given -- see transactions can is market between of Midwest information kind or sales in leasing, prices pursue. some kind can there's obviously dependent building the activity, as might conclusion growth Just One multi-tenant you well. not, -- is second, And that's lot smaller Blackstone getting do leasing to sale get on you. is questions. really true two a location is rent to of on size, you the then versus smaller quick affirm just my based press you guys growth differences the that any demand the you portfolio is Thank portfolio Black rent than property related that front, a more and on you whether in buildings smaller or record meaningful

Hamid Moghadam

talked most me growth in macro Eric, with part. the to first starts location the on let properties. the we spot the to those of By the size you're want more before thing middle before, market and you The do Gene, rent terms tenant that scarcest and micro of answer respect far, that sub-market. it. were than one. is in jump important so stuff all And about Gene important on

Gene Reilly

respect the portfolios, all we as, Yes, at and mentioned, these are things the for consider Eric. With the mean Hamid course, to a them premium what of we I look we a portfolios price parts. sure sum lately of at -- to selling

think stunning So plenty true. very, Having I said is that associated that, one-off pretty and metrics with good there that is very also market it. transactions of

Operator

next question Your Goldman Sachs. from from comes Caitlin Burrows

open. is line Your

Caitlin Burrows

portfolio the actually up. on wondering starts since the I were was XXXX side, last slightly just development quarter, maybe the total but declined development

function a to pulling activity is from what's being grows? Those your able X.X% in then to starts confidence yield sustain and -- forward little forward a And I So just just think come expected going Prologis about in X.X%. previously the have this level of on side. that as of

So driving back could this that up? what's and increase

Tom Olinger

Yes.

couple the for cap well The rates cap over years, seen change of having that's on returns some the will have in years, declining said costs that, over really you generally you frankly well. last second the been mix. and declining XX see point, rates have -- as basically last But but

we terms about what last confident $X.X fourth of we that's but volumes, of are terms beyond a the the In guidance quarter that about big quarter talk when development future. that that year. fourth on implying in we did in highly and future billion, of right top we'll We're give the about what the is think I in of

Hamid Moghadam

the development and our lot and a the see I something to answered would be attitude build-to-suit what's spec results and spec and toward question previous in that high can has development, of which continues of percentage Yes being this you bar a higher. reminds I pretty that high, me say on been the is

Operator

Your next Manny question from Citi. comes Korchman from

line Your is open.

Manny Korchman

about yet thinking commented growth higher retention press occupancy. versus Q your guidance, in just and focusing on than Tom, that year-end trailing the your occupancy release you rent the was in you're actually quarter the

new is And that So is does between aren't not something because connecting levels and mean retention as happening else or thought? the rates leases occupancy? that that that fast rent there as does you

Hamid Moghadam

The So, with etc. retention space. etc, workers have their time huge Tom, people. a And but dealing this every tenants and choice ratio people, move, now is go this they're are because And issue bunch that is they not for to I'll higher have today, your going question. the commuting you're to labor, in patterns, change already they answer of not

So a are stay existing afterthought them. to of rent, almost that for is higher customers in regardless an a which of propensity much have space lot

you effect, course where the we the on to is leasing of that that where in that's the the affect pushing new see at of developments, rents So the report. numbers And capture most. you're retention see doesn't primary effect of likely

Operator

question will next from from Nick come Your Scotiabank. Yulico

line is open. Your

Nick Yulico

question though to just year, I any the that infill quarter. spread? had the some just know the sure past leasing on you this make guys clear the measure leases you -- Thanks. to you it has the on as well switch releasing had want spreads. way that impact higher gave drove the Tom I I in what on a

Tom Olinger

No impact at all.

Operator

Michael Your from RBC next Carroll will question from Markets. Capital come

open. is Your line

Michael Carroll

how pretty doubled and for say being more and up in trailing being were are lease been wanted on Haven't the years way or they're much good follow that just I you four over what your I the, to PLD -- quarters? they what's stands stands just aggressive that's past over guess than the rents Yes. today is a fair reflected to on occupancy. pushing is hasn't spreads two

Hamid Moghadam

and and get need to track but and there stated years objective that I'm We to But zero when you. why somebody It's don't quarters, we literally on couple that because a And took long, lose mindset, years long our this people do had kidding we track of human previous going. beings their we feel rent renewals, been are things for renew really these for leaving been called of them have a not that time. tenants, to tenants we change there they that literally. messy were

is I lot zero, I number it be lower it's that but be. longer than would think it a no So to should or expected have

Operator

question comes from Steve next Your from Sakwa Evercore.

line is Your open.

Steve Sakwa

to talked build is months you Thanks. Hamid, the just about to talked Chris XX construction now I wanted longer, you when more and of months XX clarify, the sort X is about -- to month that pipeline or of getting or time XX a that months. to

Just really more in the less markets didn't anything worried markets or understand U.S., really U.S. you're there just but get bit seeing rent trying to sense the in the And of today? just then to about are out, growth you that trying a any call a that. much

Hamid Moghadam

they where. In U.S. be, way depends what on on Yes. it warehouse I longer of and Chris the they as the on but the they know XX let's story single months. numbers Japan, for duration today, will build a to style multi-story takes the construction By But just building. were you. don't focus are it the And

Chris Caton

the the we What its how XX-XX pipeline, more that's coming the from it, to a together. under Steve see it months. is over nine quarters, will that months than deliveries XX% numbers be can four next construction eight going see year, of to we I think roughly Hey, Yes. call something call

the we about supply we relates this how to to list on off we As talked markets in remains call quarter. our -- like added Chicago comes any the case haven't that's market, today risk list, it and how fact that markets last

So...

Steve Sakwa

a off came Osaka little bit know. I earlier.

So...

Chris Caton

that on covered came then included Pennsylvania, list Midlands is and Houston, Osaka that was And the a script. Spain Atlanta, Tom's market Yes. off. in

Hamid Moghadam

some is today would lot to would list even that out get more I space think though going was being surprised. And I quarter, say risk are one Houston. There at it in of than a on construction I last as under is Houston. point people the the

some Now in not the and best of is it sub-markets.

of the watch. Houston some you outlying to So need sub-markets in

the Fortunately, we are sub-markets. to not exposed

Operator

Your John next question will Guinee from from Stifel. come

open. line is Your

John Guinee

Great.

just think be? dirt? investments investments in real acquisitions I and Mike, -- estate an estate. the room. noticed might where I you Page other And and you're pretty buying Curless in I sizable land acquisition in also also in year-to-date Mike Can XX, was what is the uptick other looking real at walk and the through a

Hamid Moghadam

Probably, but answer new Gene, has job, question that Gene ahead. since Mike should a go

Gene Reilly

Yes, lot and they development Mike markets absorbed dirt. land where John, maybe offer need of can got want coastal is where generally customer we where dirt lot a the color replace we've But to of in bank. the a

is LA there replacing So as days. a piece that, in very going forward, we out but these look very, expensive included in is land

of lot to As we you a done level. back we've this know, work work land down what to manageable considered a

tie expensive. that it's And we to going be through have do going creatively, trying but going we're up more very on a little land will as front the to see it land to forward, remain we up options, we're land pick we're been. we but replace bit, trying As bank to disciplined

Hamid Moghadam

we're say land, for California Area. in Southern good needs good -- Bay in the are would biggest Seattle, Our I

Chicago, for more we New would in I Jersey more California, need say call land. sure. Southern need we would out. need the and more we that land, top Those I three land are

Gene Reilly

ago, And years days. and those and are be customers these to where land XX% build-to-suits we're two, numbers doing they XX% three were we're want markets, of global closer with -- in respect our to to the that

Tom Olinger

think investments, become other about question not John, will land about but place, land covered your land the being those And just soon.

Hamid Moghadam

land tad rate maybe Yes. current local market maybe they're basically Those a are place. points actually yielding, below XX-XX close probably to but cap below, the basis pretty

Operator

from Your next question Morgan. comes Mueller from JP Michael

line Your is open.

Michael Mueller

or wondering, expect bit the the you so? Hi. to be of norm the do was over next a more Yes. year mix build-to-suits of elevated little I

Mike Curless

two-thirds We Mike almost quarter is Curless. robust build-to-suits. at did This a have

If look forward. I blending to look as across you the the numbers would year in high in 'XXs our be that's low in we the 'XXs and expect

of part but business of an unusually us this the high to think quarter I these how directionally days. build-to-suit indicative the was important is

Hamid Moghadam

five would years that You ago, compare have years mean, I know, to XX I'll XX or been number XX%-XX%. ago or

the percentage think I So tightness the is build-to-suit markets of up. forcing the

Operator

Capital come And your Mailman KeyBanc from next from Markets. Craig question will

Your open. line is

Craig Mailman

guys. Hey

wanted on-balance to been here kind acquisitions and guys successful just in of of spectrum some, Just or you there advantageous. but lot what a I'm the and have capital sheet, may well-heeled of interest a of in just seeing clearly out curious have kind talk some kind But you of landscape, kind that on missed kind on versus cost requirements portfolios the others, balance hit you you've funds the here return of acquisition level? little is well. of your just competitors you in-funds. sheet some traded how on be the of at quality for about look your as And of look you're at liquidity

Hamid Moghadam

Let me like. start you'd that in if jump and Gene

good for debt a you're Obviously things leveraged they capital, end in really a cap the buying Also this the and that employ this financing I assets for for a at to class. the of pricing location. always of is and really this lower in looking locking cycle. anxious industrial rates in discriminating the become and think it's quality are if it's quality getting a today environment the of happens And them. you're is asset high if it. and really over differences compressing words, buyer industrial, time. cost into quality, you're to other less And capital assets you compressed, part are lot quality, People lower growth get

limited have a probably or take IRR number but would at know, we way low today, I say dropped in a at be and and the for that. quality high right With our of there priced is quarter that the us. portfolio U.S. would occasionally so, portfolio our cost in very marketplace high-quality a And, only respect for to unleveraged some to even the would I quality for than we we getting stuff capital, up tighter X our very you assets from unfortunately requirements. way say, it look [WACC] look every

wider spreads, I've career. I IRR some X.X% mean X.X% seen are X a my Now pretty in those in or is environment the attractive. XX-year of a

debt to then in so, low And but numbers yes, are attractive. pretty would actually of cost or they relation our sound capital capital absolute

Operator

from Your Malhotra question comes from Vikram next Stanley. Morgan

is line open. Your

Vikram Malhotra

Thanks.

wondering follow trends for and if be meaning on or MSAs more two and NOI to it's And may the you just expense on different of and sort the how the sub-markets. divergence -- within some recently. growth divergence Tom I'm to for any things. growth? on one Chris, you've you're what by wanted positively if that's any leases, One Just obviously see seen from if side impact clear negatively sub-markets impacting mentioned recent wondering starting rent it up of within then

Mike Curless

see in rent was Hey, Yes. divergence discussing earlier Hamid we look to is one A as that, strategy. as between sub-market continue to terms at it relates of that to growth. and of ways couple in-fill non-infill

last year much As like we it and the relates better we've example, to outperformance see you good markets really the some Toronto in starting see growth Czech the in in the before. we some recovery Germany and outperform markets, continue Netherlands telegraphed continuing pop or Republic, late and that's seen mind. there early comes and Europe, East York rents recovery in really year to for to to markets or whether And to of what is New

that's how trending. are the rents So

Tom Olinger

even. are fix it taxes, bears around the all those Great. But essentially, up slightly lease cost estate expense we real collecting tenant that. for Vikram on reimbursements question the clear and And on the the where your are now. more call right expenses, leases set we

it way expense set neutral. we to be that So up

So the it and on we're no question, next calculating lease any having to clear component and have think and back on impact the a It to revenue, reimbursement That rent go rent change? rent did how the impact does not. expense an on calculated on is NOI, rent change and component. just simply that about just the the component not clearly, component, expense

So no impact.

Hamid Moghadam

been spread last and the one top of square or portfolio under foot of said. two an just the we've XXX-million a a what implementing I numbers lease. actually have That's the have years this been lease. net want another to track to collect around. don't we clarify Yes. remarkably X.X do stuff this, And it Tom year actually been for reimbursements, triple We why that that's clear would it's something having on advantage But

Operator

from Citi. And your Manny next Korchman from question come will

open. is line Your

Manny Korchman

Yes.

be in read of had as a But vacated guidance. going guidance. the retention that vacated I guess that isolation you that you've lowered my is follow-up But your Hamid, is just in be a occupancy new going to slower. you already your pace -- mentioned So wouldn't where for that to Is my guys. one so leasing That space your wrong I developments, on it's you of means from previous and or have space that expect, question XX%, lease-up through? I occupancy at to impact back

Hamid Moghadam

year were not it part are We renewal as is I we zero as be. would the we the part the as we to that like discussion pushing I zero, not as had people remember losing number it's said that of -- that in -- but high that

was don't I year occupancy range. from declines push I've to this number guys where You're said also years, and for talking in used XX%, one the been only going this get doing there And about XX% We're down. to XX were this. we

I very exactly we were was as clear we executed And what think strategy on described say would I it. way our it So the was.

Operator

of Jamie America from question Merrill next Lynch. from comes Feldman Bank Your

Your line is open.

Jamie Feldman

so, on push on why your can rents well? are I just I deliver. we've year, as And hoping Thanks. mean spending just on you impacting what leases this and is ability much you seen those or -- in taking are that about to happening what also developments you and explain that's and that's so to if could to then quarter the leases, TIs more thinking explain number more TI was -- going longer what the why

Gene Reilly

in permits Jamie, Gene. the is the And the timeframe I'll combination you and its basically and through construction construction. frame first as a that It's affect some projects you can as by forward. time entitlement take of It's pull there which go one. as secondary well, way

are two on it's wide there pretty where really you depending geographically, course items. those is And of So range of outcomes.

Hamid Moghadam

of patterns you that quick weather We've weird also schedules. methods had construction have most think that noticed I of kind definitely

Tom Olinger

little Jamie, it's second turnover on quarter. question -- costs. on your this higher I the a

to things, quarters, better -- what our and I at trailing look mix two been representation. I go its a timing. we've and it's what four think I But on that's due back think a

the have the coming last, We four-quarter last, over over basis pretty really on three a makes clearly been down trailing years that sense. and

the are concessions board. across given falling Just

other free The to I'd look lease point rent as a declining percent consistently thing is of that at value again. is

our not little timing, of not this think we're trying a mix I to rent overall change impacting it's bit So the buy quarter's -- that's and if question.

Operator

your And from question Steve comes next Evercore. Sakwa from

open. is line Your

Steve Sakwa

something to and Thanks. you big of Hamid, the stand? XXXX? on sort And just on could where you and for of update if was a detail likely data that I lot more the wondering sort initiatives procurement we're provide an get is

Hamid Moghadam

we as very We're management. about On I to to tackling going is to that's four don't initiatives. Gary, expanding results. the that. to would really be more know, well. I have big want the one data other early we markets, by mentioned specific piloting project say that are, we'll the talk the are you yield may about portfolio, and encouraged Chris And in I which say and

Gary Anderson

Yes.

talked things past both items CapEx the in about stood say at terms are initiatives, and of and well we related organizations, procurement in the we going and G&A. On I'd procuring there construction procurement

often equation, dollars of We're that we're a that getting off business. start. tens probably terms revenue. So to millions into say respect the And of to running. the starting of in revenue that with I'd is the to We're side build of good

more becoming we're and is growth. it roughly seeing double-digit So meaningful

Mike Curless

Yes. share today earnings. if you would that would it I say that isolate incremental a of be pennies business

three think is I that more potential $X. two and years, than will to be dimes, it hoping in it's we're

to get So, but that is going to take to. us a while

put a now, we're talking that the nobody we're ramp, But of that pennies about this the than couple [indiscernible]. don't in Put slow it's a in right better dollar, before. put don't done has So doing in actually.

So, we of this a customers and get other lot need to educate people ourselves done. and our to

Hamid Moghadam

the I think were Steve last person. you

interest want come. you the you I and Analyst that's good So to and why Company Day, saved a which for plug date for and your encourage guidance thank to our put Take we for that in up care. is big all coming all in the

Operator

everyone. This you today's Thank conference call. conclude will

You may now disconnect.