ProLogis, Inc. (PLD)

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Prologis (PLD)

Q2 2011 Earnings Call

July 28, 2011 10:00 am ET


Guy Jaquier - Chief Executive Officer of Private Capital

Tracy Ward - Vice President, Investor Relations

Walter Rakowich - Co-Chief Executive Officer, Trustee and Chairman of Executive Committee

Gary Anderson - Chief Executive Officer of Europe & Asia

Michael Curless - Managing Director of Global Investments

Thomas Olinger - Chief Integration Officer

Hamid Moghadam - Chairman, Co-Chief Executive Officer and Member of Executive Committee

William Sullivan - Chief Financial Officer


Jeffrey Spector - BofA Merrill Lynch

George Auerbach - ISI Group Inc.

Jamie Feldman - UBS

John Guinee - Stifel, Nicolaus & Co., Inc.

Sloan Bohlen - Goldman Sachs Group Inc.

Ki Kim - Macquarie Research

David Rodgers - RBC Capital Markets, LLC

Steven Benyik - Jefferies & Company, Inc.

Chris Canton

Paul Morgan - Morgan Stanley

Steven Frankel - Green Street Advisors, Inc.

Michael Bilerman - Citigroup Inc

Ross Nussbaum - UBS Investment Bank

Michael Mueller - JP Morgan Chase & Co

Suzanne Kim - Crédit Suisse AG

Srikanth Nagarajan - FBR Capital Markets & Co.



Good morning. My name is Ashley, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Prologis Second Quarter Earnings Conference Call. [Operator Instructions] Thank you. I would now like to turn the call over to Ms. Tracy Ward. Ma'am, you may begin.

Tracy Ward

Thank you, Ashley. Good morning, everyone. Welcome to our second quarter 2011 conference call. Our press release and supplemental are available on our website at under Investor Relations. This morning we'll hear from Hamid Moghadam, Co-CEO and Chairman, to comment on our company's strategy and the market environment. Then from Bill Sullivan, CFO, who will cover results and guidance. Additionally we are joined today by Walt Rakowich, Gary Anderson, Mike Curless, Guy Jaquier, Gene Reilly and Tom Olinger.

Before we begin 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 belief and assumption. Forward-looking statements are not guarantees of performance, and actual operating 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 filing. I’d also like to state that our second quarter results press release and supplemental do contain financial measures, such as FFO and EBITDA, that are non-GAAP measures, and in accordance with Reg G, we have provided a reconciliation to those measures.

As we have done in the past to provide a broader range of investors and analysts with the opportunity to ask questions, we will ask you to please limit your questions to one at a time. Hamid, will you please begin.

Hamid Moghadam

Good morning, everyone, and thank you, for joining us today. We are pleased to be hosting our first earnings call as a combined company. Over the past few months, Walt and I have spent a lot of time visiting our offices around the globe. And I can tell you our team is very enthusiastic and energized about this merger. It's great to see how well and how quickly the 2 organizations have come together.

As we plot our course for the future, we've established a clear strategy for the new company. Our priorities are: First, to strengthen our financial position and to build 1 of the top 3 balance sheets in the industry; second, to align our portfolio with our investment strategy, while serving the needs of our customers; third, to refine our private capital business and to position us for substantial growth; and fourth, to build the most effective and efficient organization in the business and become the employer of choice among top professionals interested in real estate as a career.

I'd like to take a few minutes to expand on each of these things. First, by streamlining the company's overhead structure, reducing our leverage and focusing our portfolio on our target markets, we plan to achieve substantial savings in operational expenses as well as our overall cost of capital. This added financial flexibility will position us to capitalize on market opportunities across the entire business cycle. Also by adopting the best practices from both companies and by incorporating the lessons of the past few years, we've created a sophisticated framework for evaluating and managing risk on an integrated basis across the different aspects of our business. You will hear more from us on this in the coming months, but as an example, we've introduced the private capital model into our development activities in Brazil and China. This strategy lowers our balance sheet exposure to land and development, mitigates our net currency exposure and allows us to develop more of our financial resources to meeting the needs of our customers around the world, while reducing the overall risks of our business.

Second, in order to align our portfolio with our asset allocation strategy, we performed a comprehensive review of our markets, which we have now categorized into 2 main segments. Global markets comprise roughly 30 of the largest, most liquid markets tied to global trade and represent approximately 80% of our overall platform. These markets are defined by large population centers with high per-capita consumption rates. They typically feature major seaports, airports and other transportation infrastructure. While initial returns might be lower, global markets tend to outperform in terms of growth and total return. Examples of global markets would be Los Angeles, Tokyo, London and Sao Paolo.

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