Q4 2012 Earnings Call
February 06, 2013 12:00 pm ET
Tracy A. Ward - Senior Vice President of IR & Corporate Communications
Hamid R. Moghadam - Chairman of the Board, Chief Executive Officer and Member of Executive Committee
Thomas S. Olinger - Chief Financial Officer
Eugene F. Reilly - Chief Executive Officer of the Americas
Gary A. Anderson - Chief Executive Officer of Europe and Asia
Michael S. Curless - Chief Investment Officer and Chairman of Investment Committee
John W. Guinee - Stifel, Nicolaus & Co., Inc., Research Division
James C. Feldman - BofA Merrill Lynch, Research Division
David Toti - Cantor Fitzgerald & Co., Research Division
Michael Bilerman - Citigroup Inc, Research Division
Craig Mailman - KeyBanc Capital Markets Inc., Research Division
Brendan Maiorana - Wells Fargo Securities, LLC, Research Division
George D. Auerbach - ISI Group Inc., Research Division
Michael W. Mueller - JP Morgan Chase & Co, Research Division
Thomas C. Truxillo - BofA Merrill Lynch, Research Division
John Stewart - Green Street Advisors, Inc., Research Division
Ross T. Nussbaum - UBS Investment Bank, Research Division
Michael J. Salinsky - RBC Capital Markets, LLC, Research Division
Jeffrey Spector - BofA Merrill Lynch, Research Division
Previous Statements by PLD
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Tracy A. Ward
Thank you, Tracy, and good morning, everyone. Welcome to our fourth quarter 2012 conference call. The supplemental document is available on our website at prologis.com under Investor Relations. This morning we'll hear from Hamid Moghadam, Chairman and CEO, who will comment on the company's strategy and market environment; then from Tom Olinger, CFO, who will cover results and guidance. Additionally, we are joined today by members of our executive team, including Gary Anderson; Mike Curless; Nancy Hemmenway; Guy Jaquier; Ed Nekritz; and Gene Reilly.
Before we begin our prepared remarks, I'd like to quickly state that this conference call will contain forward-looking statements under federal securities laws. These statements are based on current expectations, estimates and projections about the market and the industry in which Prologis operates, as well as management's beliefs and assumptions. Forward-looking statements are not guarantees of performance, and actual results may be affected by a variety of factors. For a list of those factors, please refer to the forward-looking statement notice in our 10-K or SEC filings. I'd like to also state that our fourth quarter results, press release and supplemental do contain financial measures such as FFO, EBITDA that are non-GAAP measures and, in accordance with Reg G, we have provided a reconciliation to those measures. [Operator Instructions]
Hamid, will you please begin?
Hamid R. Moghadam
Thanks, Tracy. Good morning, everyone, and welcome to our fourth quarter call. A significant milestone because it marks our first full year operating as a new company.
As you know, at the outset of the merger, we put together an ambitious plan to drive our path for the first 10 quarters as a new company. The purpose of this plan was to build a strong foundation for growth into the future. Today, we're 6 quarters into that plan, and I'm pleased to say that we've outperformed our own high expectations.
Let me take a few moments to review the highlights of our progress. Of the 4 priorities, perhaps the most central to the plan was our decision to realign our portfolio with our investment strategy. Because in many ways, the other priorities follow from this one. We're ahead of plan in terms of focusing our presence in the global markets. This priority contemplated $2.9 billion of dispositions during the course of the 10 Quarter Plan. Today, we're 80% complete, with $2.3 billion of sales at an average cap rate of 7.1%. The dispositions have occurred predominantly in secondary markets, increasing our overall percentage of assets in global markets from 79% at the merger date to 85% today, well on our way to achieving our target of 90% in the future.
Given the number of transactions over the past 18 months, the market has clearly spoken that there is no shortage of demand for high quality industrial real estate. Importantly, we sold properties at prices in line with values embedded in our internal NAV analysis.
On the deployment front, we started more than $1.5 billion of new development at an average yield of 7.9% and a value creation margin of more than 18%. These starts represent a 50% increase over the last year, with a record 57% of them in build-to-suits. In the process, we were able to monetize about $400 million of our land bank.
We've also exceeded our target for our second priority which was to streamline our Private Capital business. Our 10 Quarter Plan contemplated the rationalization of 4 funds. And to date, we've liquidated or restructured a total of 8 funds. At the same time, we're growing our Private Capital business through the formation of new vehicles and raising capital for our existing funds. We exceeded last year's record and raised $1.9 billion of new equity. A big part of this new business was the 50/50 joint venture with Norges Bank Investment Management that we announced in December. We're excited about this new relationship with such a highly regarded investor and expect to close the transaction in March.
Shifting over to Asia, we selected a J-REIT as the optimal structure for capitalizing our Japan operating platform. We're very pleased with the level of interest and demand for the IPO, which priced earlier in the week at the top of its filing range and will close next week. With these 2 major priorities behind us, we will turn our emphasis to growing our Private Capital platform by raising additional growth capital within existing funds and ventures.