Sentiment Analysis of the earnings transcript to help figure out if there are any bullish or bearish sentiments that could be gathered from it. We're doing ML and AI based analysis on the earnings call to get some more insights.
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| Europe and Mexico were also bright spots for growth in the quarter |
| At the same time, occupancy has been stronger than anticipated and that’s before the lower development starts hit the market |
| In the meantime, and also playing out to our expectations is that our existing lease mark-to-market will drive durable earnings growth as it did in delivering record rent change this quarter, as well as strong earnings and same-store growth |
| And so what I think this is best understood in the context of today’s retail sales numbers, which shows a resilient consumer that is outperforming expectations and leading to lower utilization levels |
| If there’s more demand coming for manufacturing in the U.S., A, we haven’t really seen it and if we do see it, we will be the beneficiary of it because we are well positioned in those central markets as well |
| While the markets and outlook are mixed, we remain confident in continued market rent growth in the U.S |
| In closing, we are navigating the current environment, assured that whatever the economy brings in the short-term, we are positioned to outperform over the long-term |
| Whatever the precise path, we expect that as vacancy normalizes over the long-term, our portfolio will outperform the market due to both its location and quality, as well as the strength of our relationships and operating platform |
| We expect rent growth to remain positive throughout that time period |
| This stems from not only the premier logistics portfolio and customer franchise with one of the best balance sheets amongst corporates, but also highly visible earnings and portfolio growth ahead of us |
| In terms of our results, we had an excellent quarter with core FFO excluding net promote income of $1.33 per share |
| So we are outperforming the market by more than we did before |
| We get a sense that there’s going to be more opportunities coming our way and it is in a capital-constrained environment and we happen to be in the fortunate position of having a really good balance sheet and able to take advantage of those |
| We have really seen construction costs prove resilient and replacement costs prove resilient |
| Occupancy ticked up over the quarter to 97.5%, aided by retention of 77% |
| But actually on a relative basis, it should be good for our business, because it will mean that people will, first of all, inventory becomes really important and it means that -- it’s yet one more uncertainty like the pandemic, like the earthquake, like all these other disruptions that we have seen that will push the general posture of companies from just in time to just in case |
| Our funds experienced their first quarter of net positive inflows with approximately $180 million of new commitments versus new redemption requests of $115 million |
| So don’t be surprised to see us buy some vacant completed shelves at discounts to replacement costs, because -- it’s -- because of our view on demand and supply, with 65% decline in supply, we think if you get into late 2024, early 2025, we are going to be in a pretty strong market |
| We are increasing our core FFO, including promotes guidance to a range of $5.58 per share to $5.60 per share and are increasing core FFO, excluding promotes to a range between $5.08 per share and $5.10 per share, growth of nearly 10.5% |
| And we have actually captured some of those spreads and already improved our position by buying out those leases or just getting them back and releasing the space in a short period of time |
| In combination with the strong build of in-place rents, our lease mark-to-market recalculates to 62% as of September |
| So the markets are strong, but the data center opportunities, if you can get the power, the demand is there and it’s been boosted by AI and a bunch of other things |
| Market conditions are stable and there are a handful of markets that we have talked about that are softer, but by and large, markets are proving resilient with rent growth in line or ahead of inflation |
| Combined with the debt capacity and liquidity we have worked hard to build and preserve, we see the environment as rich with opportunity |
| Net effective rent change was a record 84% at our share, with notable contributions from Northern New Jersey at 200%, Toronto at 187% and Southern California at 165% |
| Really look forward to seeing all of you at our upcoming Investor Day and I promise it will be really good |
| We are not at the moment interested in being in that business in terms of long-term ownership, it’s more of a development and harvest strategy and that capital that comes out of the margins of those deals will be a substantial contributor to our growth going forward |
| In the U.S., rents increased in most of our markets with the strongest located in the Sunbelt, Mid-Atlantic and Northern California regions |
| are for completions to outpace net absorption by a cumulative 150 million square feet to 200 million square feet over the next three quarters |
| I don’t think there’s going to be distress in the terms of a post-savings and loan crisis or any of the downturns, but I think the opportunity set is going to exceed the available capital and I think we will be taking advantage of that |
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| The geopolitical backdrop has clearly become more troubling as well amounting to a lack of clarity that will likely weigh on demand |
| We are having some technical difficulties here and I can’t really explain it |
| You touched on this a little bit, but guidance implies a decrease in FFO in the fourth quarter |
| That trend may extend further into 2025, as we believe development starts over the next several quarters are likely to remain low |
| I just wanted to clarify, so you are expecting over the next few quarters a significant demand shortfall |
| Rents across our Southern California sub-markets declined approximately 2% as it continues to adjust to higher levels of vacancy |
| We have $500 million of contribution and disposition activity during the quarter and given our commentary on USLF valuations, we are pausing our planned contributions into that vehicle this quarter and reducing our combined contribution and disposition guidance to a range of $1.7 billion to $2.3 billion |
| What’s incremental to our forecast is that continued hawkish posture from central banks and the impact it’s had on rates is delaying decision-making and willingness to take expansion space early |
| Demand is definitely softer |
| Let me know if you are having trouble hearing me, because I am having trouble hearing you |
| They are down 65% and even with moderating demand, we are going to get something like 60% or 70% of that shortfall that we are going to encounter in the next three quarters shortfall of demand, we are going to get it back in the subsequent three quarters |
| That’s down from 2.5% last quarter |
| And some of that relates simply not so much to the softness in demand that you are describing, but the timing of deliveries of the pipeline |
| Further, the outlook for future supply will continue to face structural barriers, ultimately driving occupancy, rents and values |
| Elsewhere, values in Mexico are up 8.5%, while China experienced its first meaningful decline of 6.5%, a write-down that we don’t believe has fully run its course |
| I am honestly more worried about the Fed overdoing it than that conflict escalating |
| And then, secondly, just wanted to hear latest thoughts on why you think some of the weakness that you have cited there in rents in Southern California, what that dynamic is out there that would be different than other markets, meaning that Southern California is not a leading indicator for other parts of your portfolio? Hamid Moghadam Well, Southern California is very geared towards basically inflows, 40% of the inflows into this country came through Southern California and that number dropped dramatically because of the labor issues |
| We are just having a difficulty here |
| As we talk about market development starts now at 65% -- I guess down 65% from the peak, this is playing out exactly as we expected and we have been gearing up all year for a really heavy Q4 start volume |
| I know it’s not as large of an activity as developments, but guidance for this year increased while transaction volumes at an industry level are down significantly |
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