Prologis, Inc. · NYSE:PLD
Prologis — Q1 2009 Earnings Presentation
55 slides from Prologis's earnings presentation, Apr 30, 2009
Slide 1: 1Q09 Update
1Q09 Update Walt Rakowich, Chief Executive Officer Bill Sullivan, Chief Financial Officer April 30, 2009
Slide 2: Forward Looking Statement
Forward Looking Statement The statements above that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on c
Slide 3: Key Takeaways
Key Takeaways y We are making great progress on our financial goals y Operating property performance down but within expectations y Our development pipeline is leasing up and represents a powerful tool for future earnings growth 2
Slide 4: A Great Global Business
A Great Global Business ProLogis associates around the globe serve 4,500+ customers in 18 countries ASIA NORTH AMERICA EUROPE 11 msf 349 msf 128 msf 2 countries 3 countries 13 countries 3 3
Slide 5: With High Quality, State-of-the-Art Facilities
With High Quality, State-of-the-Art Facilities Cincinnati, OH ProLogis Parc Centrair ProLogis Park Yongin II Fontana, CA Lyon, France Norrkoping, Sweden ProLogis Park Osaka II West Midland, UK Houston, TX ProLogis Park Deokpyung 4
Slide 6: Overview
Overview y Focus and progress y Operating fundamentals y Financial review y Summary / Recap 5
Slide 7: Focus and Progress
Focus and Progress The Roadmap to Recovery as outlined on November 13 y Preserve capital y Simplify and communicate y De-risk the operations y De-lever the balance sheet 6
Slide 8: Preserving Capital
Preserving Capital Actions taken in November 2008 to preserve capital y Eliminated virtually all development starts and new land acquisitions y Shut down approximately $580M of developments in progress y Reduced annual dividend y $290M annual cash savings y Initiated right sizing of G&A y Achieved $
Slide 9: Simplifying and Communicating
Simplifying and Communicating y Eliminated CDFS segment y Simplified financial reporting y Increased communications with shareholders, rating agencies and bankers y Stepped up employee communications programs 8
Slide 10: De-risking the Operations
De-risking the Operations y Reduced development portfolio by $3.2B (40%+) since 9/30/08 y Reduced “at-risk” (unleased) portion of development portfolio by approximately $1.8B y Renegotiated equity agreements with fund partners y Terminated land purchase agreements where possible y Closed operations
Slide 11: De-leveraging the Balance Sheet
De-leveraging the Balance Sheet From 10/1/08 through 3/31/09 y Completed fund contributions of $1.4B ($1.1B net of co-investment) y Completed sale of China and fund interests in Japan for $1.3B y Put $1B of US assets on the market for sale y Repurchased $358M of bonds/converts at 32.5% discount to p
Slide 12: De-leveraging from 10/1/08 to 3/31/09
De-leveraging from 10/1/08 to 3/31/09 Deleveraging since 9/30/08 (Millions) Sources Fund contributions, net of co-investment $1,129 Reduction in debt through bond / convertible debt buybacks 116 Asia and asset sales 1,429 Change in FX 64 ABP14 Discount adjustment 296 $3,034 Uses Funding of under dev
Slide 13: Activity Since 3/31/09
Activity Since 3/31/09 y Raised $1.1B in follow-on equity offering y Repurchased bonds and converts at discount, de-levered by $112M y Rate locked on $344M of new secured on-balance sheet financing y Closed on contributions/sales of $170M y Sold ProLogis Park Misato II ($128M) y Contributed addition
Slide 14: Overview
Overview y Focus and progress y Operating fundamentals y Financing activities y Summary / Recap 13
Slide 15: Operating Fundamentals
Operating Fundamentals y Operating portfolio y Development portfolio y Overall industrial market conditions y Risks and opportunities 14
Slide 16: Operating Portfolio Leasing Performance
Operating Portfolio Leasing Performance 4Q08 1Q09* Direct Core, Non-development Portfolio % Leased 92.2% 90.5% Investment Management Portfolio % Leased 96.0% 94.5% Total* % Leased 94.7% 93.0% *1Q09 reflects sale of Japan Funds, which resulted in a 30 bps reduction in total % leased 15
Slide 17: Operating Portfolio Performance Metrics
Operating Portfolio Performance Metrics 1Q08* 2Q08* 3Q08* 4Q08 1Q09** Direct Core Portfolio Average Tenant Retention 55.6% 87.9% 77.6% 88.0% 74.4% Turnover Costs per sf $0.91 $1.09 $1.41 $0.79 $0.84 Leasing Activity (msf) 18.1 23.1 18.4 17.2 13.7 Investment Management Portfolio Average Tenant Retent
Slide 18: Same Store Performance Analysis
Same Store Performance Analysis Operating and Operating Development Portfolio Portfolio Same Store Net Operating Income (1.85%) 0.78% Average leasing (1.84%) 0.16% Rent Growth (4.19%) (4.17%) 17
Slide 19: Operations Review
Operations Review y Operating portfolio y Development portfolio y Overall industrial market conditions y Risks and opportunities 18
Slide 20: Development Portfolio
Development Portfolio Total pipeline and leasing Billions % Leased $10 50% $8 45% $6 40% $4 35% $2 $7.4 $7.6 $8.4 $5.1 $8.2 $4.8 $0 30% 12/31/07 3/31/08 6/30/08 9/30/08 12/31/2008 3/31/2009 Pipeline TEI Leasing Percentage Development portfolio at 12/31/08 of $5.1B was 46.4% leased as of 3/31/08 Up 5
Slide 21: Targeted Development Leasing
Targeted Development Leasing MSF Total development pipeline at 12/31/08 60.4 Overall target leasing based on 93% occupancy 56.2 Leased at 3/31/09 (before contributions) 28.1 Target SF remaining to be leased 28.1 20
Slide 22: Task at Hand
Task at Hand Historical Leasing in Development Pipeline Average Inventory leasing of 4.5 msf per quarter MSF 7 6.6 6 5 4.8 4.2 4.0 4 3.2 3 2 1 0 1Q08 2Q08 3Q08 4Q08 1Q09 28 msf targeted to be leased in development portfolio 21
Slide 23: Operations Review
Operations Review y Operating portfolio y Development portfolio y Overall industrial market conditions y Risks and opportunities 22
Slide 24: Industrial Market Conditions
Industrial Market Conditions Current Conditions y Operating fundamentals mirroring economic conditions – continuing to weaken y Occupancies are declining y Absorption is negative y Some shadow/sub-lease space creeping into the markets y Uncertainty leading to lengthy negotiations y Customers continu
Slide 25: Declining Absorption in Top US Markets
Declining Absorption in Top 30 US Markets Net Industrial Absorption MSF 2006 – 1Q09 200 158 150 131.5 100 50 23.9 15.8 13.1 2.8 -7.8 -18.8 0 -50 2006 2007 2008 1Q08 2Q08 3Q08 4Q08 1Q09 24
Slide 26: 25 Years of Positive Absorption
25 Years of Positive Absorption Net Industrial Absorption 1983 - 2008 MSF 200 150 100 50 0 83 85 87 89 91 93 95 97 99 01 03 05 07 19 19 19 19 19 19 19 19 19 20 20 20 20 25
Slide 27: Declining Occupancies in Top US Industrial Markets
Declining Occupancies in Top 30 US Industrial Markets Historic Occupancy 95% Quarterly 2000-1Q 2009 93% 90% 88% 85% 1999-Q4 2000-Q4 2001-Q4 2002-Q4 2003-Q4 2004-Q4 2005-Q4 2006-Q4 2007-Q4 2008-Q4 26
Slide 28: National Occupancies Have Stayed Above 89% Over 25 Years
National Occupancies Have Stayed Above 89% Over 25 Years Top 30 Market Average Occupancy 1983 thru 1Q 2009* 95% 90% 85% 09 83 85 87 89 91 93 95 97 99 01 03 05 07 1Q 19 19 19 19 19 19 19 19 19 20 20 20 20 *All numbers as of 12/31 except 1Q09 27
Slide 29: Overall Supply Exceeds Absorption
Overall Supply Exceeds Absorption Deliveries and Absorption of MSF Warehouses 2006 – 1Q09 200 158 145 147 133 140 150 100 50 24.8 24 0 -18.8 -50 -100 06 07 08 09 20 20 20 1Q Deliveries Absorption 28
Slide 30: Supply Equals a 25 Year Low
Supply Equals a 25 Year Low Deliveries of Warehouse Deliveries as a % 1983 – 2009P of Existing Stock MSF 6% 180 160 5% 140 120 4% 100 3% 80 60 2% 40 1% 20 0 0% 83 9 85 9 87 9 89 9 91 9 93 9 95 9 97 9 99 0 01 0 03 0 05 0 07 09P 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 19
Slide 31: Development Starts Are Even Lower
Development Starts Are Even Lower MSF New Starts – Top 30 Markets 160 146 128 128 120 102 98 90 81 75 80 64 40 2 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 1Q09 BTS Inventory 30
Slide 32: Demand Drivers
Demand Drivers US / Canada / UK 1. GDP growth 2. Growing product obsolescence Western Europe / Japan 1. Shift from ownership to leasing of facilities 2. Very high product obsolescence / supply chain reconfiguration 3. Economic growth Central Europe / Mexico 1. New companies expanding into market 2.
Slide 33: Operations Review
Operations Review y Operating portfolio y Development portfolio y Overall industrial market conditions y Risks and opportunities 32
Slide 34: Risks and Opportunities
Risks and Opportunities y Near-term Risks y Overall market conditions may deteriorate further or faster than expected y Lease up in development slower than budgeted y Near-term Opportunities y Income from $2.6B of currently un-leased development y New fund formations y Long-term Opportunities y Sust
Slide 35: Overview
Overview y Focus and progress y Operating fundamentals y Financial review y Summary / Recap 34
Slide 36: Financial Review
Financial Review y Review of 1Q09 results / FY 2009 guidance y Financing activities / debt maturities review y Contributions / dispositions 35
Slide 37: 1Q Financial Results
1Q Financial Results 3/31/09 3/31/08 (1) FFO per share, including significant non-cash items $0.90 $1.34 Our share of losses on derivative activity recognized by the funds 0.04 -- Net gains related to disposed assets – China operations (0.01) -- Gain on early extinguishment of debt (0.07) -- FFO per
Slide 38: Updated 2009 Guidance
Updated 2009 Guidance Millions, unless per share data Low High FFO, excluding significant non-cash items $495 $550 Wtd. Avg. shares o/s 268 268 FFO/share, excluding significant non-cash items $1.85 $2.05 Impact of April Equity Issuance Reduction in Interest Expense 26 40 Revised 2009 FFO, excluding
Slide 39: Pro Forma Run-rate FFO
Pro Forma Run-rate FFO Millions, unless per share data Low High Revised 2009 FFO/share, excl significant non-cash items $1.31 $1.48 Revised weighted average shares outstanding 398 398 Revised 2009 FFO, excluding significant non-cash items $521 $590 Net gain from sale of Japan funds 160 160 Annual pr
Slide 40: Financial Review
Financial Review y Review of 1Q09 results y Financing activities / debt maturities review y Contributions / Dispositions 39
Slide 41: Financing Activities Since 3/31/09
Financing Activities Since 3/31/09 y Equity follow-on offering completed y $1.1B net proceeds y Funds to be used to de-lever y Bond tenders / repurchases completed y €42.65M ($58.3M) retired on 2011 Eurobonds for €32M ($43.7M), ($14.6M de-levering) y $225.0M of convertible bonds retired for $128.4M
Slide 42: Impact of New Equity – Sources and Uses
Impact of New Equity – Sources and Uses $ in Million 1Q09 2Q-4Q Sources China and Japan sales – closed $1,345 $ -- Fund contributions / asset sales, net of PLD co-investment 97 1,350 FX and other 219 -- Proceeds from new Secured Debt – rate locked 344 Proceeds from Equity Offering 1,107 Total Source
Slide 43: Balance Sheet Debt Maturities at 3/31/09
Balance Sheet Debt Maturities at 3/31/09 Billions $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $0.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Thereafter Unsecured Senior Notes Convertible Bonds Secured Debt GLOC Other 42
Slide 44: Balance Sheet Debt Maturities - 2009
Balance Sheet Debt Maturities - 2009 Millions Outstanding at 12/31 3/31 Maturity Type Activity in Progress $250 $250 Aug - 09 Floating Rate To be repaid through secured debt financings: Note - $100M 5-year interest-only, in documentation, rate $25 $25 Nov – 09 Meridian locked at 6.5% Notes - $122M 1
Slide 45: Balance Sheet Debt Maturities - 2010
Balance Sheet Debt Maturities - 2010 Millions Outstanding at 12/31 3/31 Maturity Type Refinancing Game Plan $190 $190 Nov–10 Fixed rate debt To be refinanced through 2009 excess secured debt issue proceeds, incremental secured financings or balance sheet liquidity $60 $60 Various Other unsecured not
Slide 46: Fund Debt Maturities at 3/31/09
Fund Debt Maturities at 3/31/09 Billions $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $0.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Thereafter PEPR PEPF II California NA I NA VI-X NA XI NAIF NAIF II NAIF III Mexico Korea 45
Slide 47: Fund Debt Maturities - 2009
Fund Debt Maturities - 2009 Millions Outstanding at 12/31 3/31 4/30 Fund Maturity Activity in Progress $491 $459 $0 PEPR July Repaid €336M ($491M) CMBS and crystallized a €40M economic gain on FX derivative $176 $0 $0 CA Aug - Closed on $120M 10-year refinance at 7.5% coupon, extended $56M for 1 yea
Slide 48: Fund Debt Maturities - 2010
Fund Debt Maturities - 2010 Millions Outstanding at (1) 12/31 3/31 Fund Maturity Type Refinancing Game Plan $221 $206 PEPR March Hypo RE Term sheet executed for 3-yr extension with partial pay down. Indicative fixed rate coupon of 5.1% $801 $749 May CMBS III & IV To be repaid from cash flow, asset s
Slide 49: Financial Review
Financial Review y Review of 1Q09 results y Financing activities / debt maturities review y Contributions / dispositions 48
Slide 50: 2009 Asset Sales/Contributions
2009 Asset Sales/Contributions $1.5B to $1.7B of gross asset contributions / sales expected in 2009 y $900M - $950M of assets to be contributed / sold to third-party funds y $725M of contributions to PEPF II targeted for 2009 y $131M of contributions closed in March 2009 y $538M of development pipel
Slide 51: Investment Management Equity Capacity
Investment Management Equity Capacity Remaining Unfunded 3rd Targeted 2009 Active Funds with Additional Contributions Party Equity Contributions Expected in 2009 at 4/30 at 4/30/09 Europe $1,010 $552 Mexico 247 75 Total $1,257 $627 50
Slide 52: Pro forma Leverage
Pro forma Leverage Pro 12/31/08 3/31/09 Equity April Debt Forma Leverage Leverage Offering Buy Back Leverage Analysis Analysis Effect Effect Analysis Total Debt* $10,909 $9,435 ($1,100) ($112) $8,223 Total Un-depreciated Book Assets $20,835 $18,989 $18,989 Total Debt as a % of Book Assets 52.4% 49.7
Slide 53: Overview
Overview y Focus and progress y Operating fundamentals y Financing activities y Summary / Recap 52
Slide 54: Key Takeaways
Key Takeaways y We are making great progress on our financial goals y Operating property performance down but within expectations y Our development pipeline is leasing up and represents a powerful tool for future earnings growth y We have a great global business with terrific assets, high-quality cu
Slide 55: Cincinnati, OH ProLogis Parc Centrair Fontana, CA
Cincinnati, OH ProLogis Parc Centrair ProLogis Park Yongin II Fontana, CA Lyon, France Norrkoping, Sweden ProLogis Park Osaka II West Midland, UK Houston, TX ProLogis Park Deokpyung 54