Andre Schulten : Good morning, everyone. Joining me on the call today is John Chevalier, Senior Vice President, Investor Relations. Execution of our integrated strategy drove solid sales and market share results and another quarter of strong earnings and cash results. The strong results we've delivered in the first three quarters of fiscal 2024 enable us to raise our outlook for core earnings per share and keep us on track to deliver within our fiscal year guidance ranges for organic sales growth, cash productivity, and cash return to shareowners. Specifically on the numbers, organic sales grew 3%. Volume was in line with prior year, showing sequential progress. Pricing contributed 3 points to sales growth as we continue to annualize price increases taken last fiscal year. Mix was neutral to organic sales growth, and growth across categories continues to be broad based with 8 of 10 product categories holding or growing organic sales in this quarter. Grooming organic sales grew double-digits. Home Care and Hair Care up high singles. Oral Care grew mid-single-digits. Fabric Care, Family Care, Feminine Care and Personal Health Care were up low singles. Skin and Personal Care and Baby Care organic sales were lower versus prior year. Growth was also broad based across geographies. North America, Europe and Asia Pacific focused markets and Latin America and Europe Enterprise markets are each growing organic sales. Global aggregate value share was up versus prior year with 29 of our top 50 category country combinations holding or growing share. Focus markets grew organic sales 2% for the quarter, and Enterprise Markets grew 4%. Organic sales in North America grew 3% with 3 points of volume growth. Over the last 4 quarters, volume growth in North America has been plus 2%, plus 3%, plus 4%, and now plus 3%. These results include over a point of impact from retail inventory reductions, primarily in personal healthcare. Consumer demand for P&G brands remains very strong in the U.S., with all outlet consumption value growth of 5%, all outlet value share was up 10 basis points versus prior year. U.S. volume share was up 40 basis points, reflecting continued strong volume growth ahead of the underlying market. The gap between consumer offtake of 5% compared to our U.S. sales growth of 3% reflects the aforementioned trade inventory reductions in the quarter. Europe focus markets were up 7% with 4 points of volume growth. Value share in Europe Focus markets was up 100 basis points over the past 3 months. Latin America organic sales were up 17%. Argentina is a significant contributor to this result given the pricing taken to offset the more than 400% devaluation of the Argentine peso since the start of the year. Mexico and Brazil are annualizing high base periods with organic sales growth in the 20s and 30s, and we expect will normalize back to pre-COVID levels in the mid to high single-digits. As we noted last quarter, there are some specific issues affecting other markets. Those challenges continue to impact results in the quarter. Greater China organic sales were down 10% versus prior year, progress versus the December quarter, but still impacted by weak underlying market conditions and headwinds for SK-II and other Japanese brands in the market. SK-II sales in Greater China were down around 30% for the quarter. We have seen some month to month improvement in overall Greater China sales trends, though we expect it will be another quarter or two until we return to growth. Volume trends in some of the European Enterprise and Asia Pacific, Middle East Africa countries such as Egypt, Saudi Arabia, Turkey, Indonesia and Malaysia have remained soft since the start of the heightened tensions in the Middle East. Also, shipments in Russia continue to decline, double digits given our reduced footprint and curtailed investments with consumers and retailers. Combined, the headwinds from Greater China and Asia, Middle East Africa markets were a 150 basis point impact on total company sales for the quarter. We expect these headwinds to moderate or annualize over the coming periods. Moving to the bottom line, core earnings per share were $1.52 up 11% versus prior year. On a currency neutral basis, core EPS increased 18%. Core gross margin increased 310 basis points and operating margin increased 90 basis points. Strong productivity improvement of 320 basis points enabled continued strong investment in superior products, packaging and consumer communication to drive market growth. Currency neutral core operating margin increased 220 basis points. Adjusted free cash flow productivity was 87%. We returned $3.3 billion of cash to share owners, approximately $2.3 billion in dividends and $1 billion in share repurchase. Over 3 quarters, more than $10 billion returned to shareowners in dividends and repurchases. Last week, we announced a 7% increase in our dividend, again reinforcing our commitment to return cash to share owners. This is the 68th consecutive annual dividend increase and 134th consecutive year P&G has paid a dividend. In summary, again, what continues to be a challenging and volatile operating environment, strong overall results enabling us to increase our earnings projections for the year and to maintain our guidance ranges for organic sales and cash generation, all while sustaining strong investment. It's a priority to build category consumption and to restore business growth in China and in the Middle East. Our teams continue to operate with excellence, executing the integrated strategy that has enabled strong results over the past 5 years, and that is the foundation for balanced growth and value creation. A portfolio of daily use products, many providing cleaning, health and hygiene benefits in categories where performance plays a significant role in brand choice. Ongoing commitment to and investment in irresistible superiority across the 5 vectors of products, package, brand communication, retail execution and value for each price tier where we compete. We are again raising the bar on our superiority standards to reflect the dynamic nature of this strategy. Productivity improvements in all areas of our operations to fund investments in superiority, offset cost and currency challenges, expand margins and deliver strong cash generation. An approach of constructive disruption, a willingness to change, adapt and create new trends and technologies that will shape our industry for the future. Finally, an organization that is empowered, agile and accountable. We continue to improve the execution of the integrated strategy with 4 focus areas: strong progress on Supply Chain 3.0, digital acumen, environmental sustainability and a superior employee value equation. These four focus areas are not new or separate strategies. They simply strengthen our ability to execute the strategy. Our strategic choices on portfolio, superiority, productivity, constructive disruption and organization reinforce and build on each other. When executed well, they grow markets, which in turn grow share, sales and profit. We continue to believe that the best path forward to deliver sustainable top and bottom-line growth is to double down on this integrated strategy, starting with a commitment to deliver irresistibly superior propositions to consumers and retail partners, fueled by productivity. Moving on to guidance. As I mentioned, we expect the environment around us to continue to be volatile and challenging, from input costs to currencies to consumer, retailer and geopolitical dynamics. However, our strong results year to date enable us to raise or maintain key guidance metrics for the year. We're maintaining our guidance range for organic sales growth of 4% to 5% for the fiscal year. We're squarely in the middle of this range fiscal year-to-date. This outlook assumes continued normalization in underlying market growth rates that we've seen over the past few quarters. Markets will be lapping the last waves of cost recovery pricing and volumes slowly begin to recover. We also expect the market level changes we faced through quarter 3 to continue in Q4 though with some directional improvement. On the bottom-line, enabled by 15% core EPS growth year-to-date, we are raising our outlook for fiscal 2024 core earnings per share from a range 8% to 9% to a range of 10% to 11%. This outlook includes continued strong investments in innovation and brand building to grow markets and extend the superiority of P&G offerings to consumers. We now estimate commodities will be a tailwind of around $900 million after tax in fiscal '24 based on current spot prices. This is a modest improvement versus the outlook we provided last quarter, though nearly all of this benefit has been booked in the first three quarters of the year. We now expect foreign exchange to be a headwind of approximately $600 million after tax for the fiscal year. The change versus prior guidance reflects volatility in Argentina exchange rates, including a period of currency appreciation in quarter three and a revised devaluation outlook for quarter four. We also reflect a reduction in Argentina FX exposure due to the divestiture of our Argentina Fabric and Home Care business, which we completed in mid-March, and reduced assumptions for future volume and pricing given the current rate outlook and recent shipment trends. The net impact of these changes is a relatively modest help to the bottom line, which is reflected in our updated EPS outlook. We expect higher net interest expense of approximately $100 million after tax versus prior year. General inflation and higher wage and benefit costs are also earnings headwinds for the year. We expect adjusted free cash flow productivity of 90%, and we expect to pay more than $9 billion in dividends to repurchase $5 billion to $6 billion in common stock, combined a plan to return $14 billion to $15 billion of cash to share owners for the year. This outlook is based on current market growth rate estimates, commodity prices and foreign exchange rates, significant additional currency weakness, commodity cost increases, geopolitical disruption or major production stoppages are not anticipated within these guidance ranges. Finally, we'll be closely watching the more volatile regions we mentioned earlier, including the health of the China market, and we'll be keeping a close watch on competitive dynamics to ensure P&G brands remain a superior value for consumers and for retailers. The entire P&G organization remains focused on excellent execution of our integrated, market constructive strategy, which has delivered strong results in a challenging operating and competitive environment. While we expect volatile consumer and macro dynamics to continue, we are confident the best path forward is to double down on this strategy, remain fully invested to drive irresistible superiority across every part of our portfolio and stay focused on delivering balanced top and bottom line growth and value creation for our shareowners. With that, we'll be happy to take your questions.


Andre Schulten: Good morning everyone. Joining me on the call today are Jon Moeller, Chairman of the Board, President and Chief Executive Officer, and John Chevalier, Senior Vice President, Investor Relations. I will start with an overview of results for fiscal year ’24 and for the fourth quarter. Jon will add perspective on our strategic focus areas and capabilities and will close with guidance for fiscal ’25 and then take your questions. Fiscal ’24 was another very strong year. Execution of our integrated strategies enabled the company to meet or exceed going-in guidance ranges for organic sales growth, core EPS growth, cash productivity and cash return to share owners, all this despite significant market level headwinds that were largely unknown when we gave our initial outlook for the year. Organic sales growth for the fiscal year was 4%, our sixth consecutive year of 4% or better organic growth against a strong 7% comp in the prior year and in more challenging market conditions. Growth was broad-based across business units with eight of 10 product categories growing organic sales. Home care, hair care and grooming were up high single digits, oral care and feminine care up mid singles. Fabric care, family care, and personal healthcare grew low single digits. Skin and personal care and baby care were down low singles. Focus markets grew 4% for the year with North America up 5% and Europe focus markets up 8%. Greater China organic sales were down 9% versus the prior year, driven by soft market conditions and brand-specific headwinds on SK-II. Enterprise markets were up 6%, led by Latin America with 15% organic sales growth. Ecommerce sales increased 9%, now representing 18% of the total company. Our strategy focused on driving market growth continues to drive share growth for P&G. All channel market value sales in the U.S. categories in which we compete grew around 5% in fiscal ’24. P&G consumption grew ahead of our fair share of category growth, driving modest value and volume share growth for the year. We grew global aggregate value share. Thirty of 50 category country combinations held or grew share for the year. Importantly, this share growth is broad-based. Six of 10 product categories grew share globally over the past year. Core earnings per share were $6.59, up 12% for the year. Core gross margin improved 360 basis points and core operating margin increased 170 basis points. Over $2.3 billion of productivity improvements were enabled by a significant increase in investment in superior products, packages and brand communication to drive market growth. On a currency-neutral basis, core EPS was up 16% and core operating margin increased 250 basis points. Adjusted free cash flow productivity was 105%. We increased our dividend by 7% and returned over $14 billion of value to share owners, $9.3 billion in dividends, and $5 billion in share repurchase. Moving onto fourth quarter results, organic sales rounded down to 2%, volume was up 2%, solid sequential progress. Pricing was up 1% and mix was in line with prior year. Growth continues to be broad-based across categories and regions. Nine of 10 product categories grew or held organic sales in the quarter. Home care, hair care, grooming and oral care were each up high single digits, feminine care up low singles, skin and personal care, fabric care, personal health care and family care were each in line with prior year, and baby care was down mid singles. Five of seven regions grew organic sales with focus markets up 2% and enterprise markets up 2% for the quarter. Organic sales in North America grew 4% with four points of volume growth and price mix, in line with prior year. European focus markets organic sales were up 2% against a strong 12% comp in the base period. Volume was up 3%. Price mix was down a point as the region has now fully annualized prior year inflation-driven pricing. Latin America organic sales were up 8%, including high singles growth in Brazil. Of note, Argentina’s overall contribution to organic sales for the region and the company were lower than the last two quarters due to the divestiture of a portion of the business in March and a notable decline in shipment volume for the remaining categories. As was announced earlier this month, we have divested the remaining portions of our operations in Argentina. As a result, Argentina will be largely removed from our organic sales reporting in fiscal year ’25. Select P&G brands will still be available in the market through a distribution and licensing agreement with the new owner of the operations. Greater China organic sales declined 8%. Underlying market conditions have remained weak and the 6/18 key consumption period was down sharply versus prior year, just as we saw in the 11/11 Chinese New Year and Valentine’s Day shopping periods. Also, brand-specific headwinds have continued on SK-II due to its Japanese heritage. We expect general market trends and the dynamics related to SK-II to improve over time, though it will likely be another quarter or two until we return to growth. Volume trends in some Europe enterprise and Asia Pacific, Middle East, Africa countries such as Egypt, Saudi Arabia, Turkey, Indonesia, Malaysia and Russia have remained soft. We expect these headwinds to moderate or annualize over the coming periods. Global aggregate market share was down 30 basis points as we are now annualizing very strong growth in European-focused markets. Twenty-five of our top 50 category country combinations held or grew share for the quarter. On the bottom line, core earnings per share were $1.40, up 2% versus the prior year. On a currency-neutral basis, core EPS increased 6%. Core gross margin increased 140 basis points and core operating margin decreased 100 basis points. Strong productivity improvements of 250 basis points, funding a meaningful increase in marketing investment, currency-neutral core operating margin decreased 60 basis points. Adjusted free cash flow productivity was 148%. We returned nearly $4 billion of cash to share owners this quarter, over $2.4 billion in dividends, and $1.5 billion in share repurchases. In summary, we met or exceeded each of our going-in target ranges for the year: organic sales growth, core EPS growth, free cash productivity and cash returns to share owners, strong performance again this year in a challenging economic and geopolitical environment. With that, I’ll pass it over to Jon.


Andre Schulten: Yes. Hi, Bill. Look, maybe the macro indication of trade down is two-fold. Our value shares in aggregate are holding, as we said, and private label shares, which is the other indicator for a trade down in the market, are growing modestly, both in the US and in Europe. When you look at the US, we see value share for private label increasing 30 basis points over the past three and six months. In Europe, we're looking at about 20 basis points of growth. Some of that is simply driven by supply dynamics. So where in the US, for example, where we see private label growth in our categories would be in bath tissue or in paper towels, where private label in the base period was not supplying well and we kind of picked up that supply over quarter one and quarter two of last fiscal year. Now, as private label is in supply and merchandising is reinstated, we see some growth. Encouragingly, when you then look at our Family Care business, sequential share is holding. So there is no direct link of private label growth and us not being able to continue to hold our share position or even expand our share position. Overall, trade down within our portfolio is the design. That's why we have created different value tiers; that’s why we have created different pack sizes. So some level of consumer shifting is expected. We are very encouraged by many of our consumers actually continuing to look for the upper end of our portfolio. And I mentioned the Fabric Care example. Our biggest growth in the Fabric Care share is in the single unit dose segment in the total market, and we're driving that growth. So we're encouraged there. So we see trends in both directions. Part of the consumers continue to look for the upper end of the portfolio. Some consumers who are more exposed from a cash outlay or value standpoint, find a solution within our more value-focused tiers.

US value share for private label past three and six months

US value share for private label three and six months


Andre Schulten : Mark, I wouldn't expect the U.S. to fundamentally change. If you look back over the past six months, private label shares in the U.S. have been relatively steady. We've seen 20 basis points to 30 basis points of increase in private label share, which is a metric we're watching closely. But if you look at sequential share, absolute shares of private label, it continues to hover around 16%, past three, six and even 12 months. So there hasn't been a significant shift in consumer behavior in terms of trade down. I think the way that our pricing was executed with great support in innovation and great support in terms of marketing spend has helped. Our strategy isn't shifting. I don't see the market shifting significantly. All of that with a caveat that who knows what the next six months are going to bring. But if past behavior over the last six months, nine months is any indication, I think the consumer is relatively steady in the U.S., which gives us great confidence. It's our biggest market. We do well, expanding volume share, as I said, and hopefully have a bit more upside here as Family Care and Fabric Care continue to gain momentum.

U.S. private label shares past six months


absolute shares of private label three, six and even 12 months


Andre Schulten: Good morning, Robert. On the gross margin and sales connection here from mix perspective, the effect that you're seeing here is product mix. So, consumers when they come into our P&G portfolio, tend to trade up into higher-value items. We've seen that actually consistently over the past quarters. So that -- as they trade up into higher unit sales, that's a positive impact from a mix perspective on the top-line. But those higher unit sales items also have higher unit profit, but the gross margin in percentage is slightly lower for some of them. When you think about adult incontinence, for example, when you think about fabric care, single unit dose versus liquid detergent, gross margin percentage lower, unit sales higher, unit profit higher. So, it's a positive effect both from the top-line and the bottom-line standpoint, but the percentage mix is lower. U.S. consumer, I think is holding up well. As we said, any indication that we see on our business is that the consumer is still choosing P&G brands. We are growing volume share in a market that is still down on volume. We are growing absolute volume. So, 90 basis points value share goes, 40 basis points value share goes fairly consistently across periods. We also see private label shares stable at 16%, really no movement here over the past one, three, six, nine months, which is a good indication that we don't see any material trade down. Now we're watching this very closely. And we believe that a lot of that is again driven by our very intentional strategy to drive superiority. We continue to invest in innovation. We'll continue to invest in product packaging innovation. We're increasing, as Jon said, communication frequency and reach where we see a good payout and return. Continue to work with our retail partners to ensure that the presentation of our brands online and in-store is as good as it can be. Last element I would call out is we are stable in terms of supply and on-shelf availability, which is also helping our overall position in the market. So, stable, I think is the characterization, but we're watching carefully.

private label shares one, three, six, nine months

private label shares past one, three, six, nine months


Andre Schulten: Let me start. I’m sure Jon will add. I’ll start by saying we’re very pleased with our market share performance. We are holding global aggregate volume share and value share in the light of very strong pricing contribution to the P&L, which is a great outcome. As Jon mentioned, we see sequential progress in terms of volumes in the market and in our performance, which is the critical outcome as we enter fiscal ’24. When you look at the U.S., we continue to drive value share growth of 20 basis points and volume share growth of 50 basis points in the most recent reading, and when you look at our European share, our focus market shares, they’ve turned positive in the past one and two months in European focused markets. All of those things give us great confidence that the strategy of driving superiority and providing value to consumers via innovation at the time when we price is working. Our vertical portfolio across value tiers and across price points in the markets is working, so we’ll continue to double down in that direction. From a U.S. share perspective, we see some trading into private label. Private label shares in aggregate are actually flat in the U.S. at about 16%, so not really growing sequentially, but if you compare versus previous quarter, as we have mentioned before, there is some volatility especially in family care, some in baby care where we would expect as private label and smaller brands return to the shelf, some of those record shares will decrease, and that’s partially what we’re seeing. But structurally, the business is in a very good place and we think we are well positioned to continue our journey on driving market growth and thereby expanding our share premium, which by the way included in our guidance where we said the market is going to grow 4% and we’re going to grow ahead of the market.


Andre Schulten: Look, the flat price mix contribution to organic sales growth in the U.S. is an outcome of simply annualizing the price increases that we had taken in previous periods. That was anticipated and it's consistent with what we're seeing in terms of the construction of the market growth across the U.S. The volume component is coming up, getting closer to about 2%, and the value component is coming down. Different players have priced at different points. So that's really the differential between market and us. There is no trade down of note that I that we can observe. Private label shares, value shares are actually very stable, 16.4% past 1 month and 16.4% past 12 months. So consumers are not trading down within the U.S. towards private label. And if anything, we continue to see when consumers trade into P&G, which they continue to do because both volume share up strongly in the U.S. and value share up. Once they trade into P&G propositions, they continue to trade up actually within those propositions, be it from liquid detergent to unit dose to power pods. So we continue to observe that. So no worries in terms of trade down. On Baby specifically, look, Baby is annualizing a very strong base period and obviously was heavily exposed to the commodity run up and therefore took pricing and in combination with productivity and strong innovation. The volume decline, I would say, is really differential by region. If you look at China, the business is growing very strongly. It's actually 11% growth in the quarter, share growth of more than a point in China, and that's with birth rates contracting. So the portfolio strength in China is remarkable. When I look at the U.S., the premium tier, so when you look at swaddlers, you look at cruisers and cruisers 360, those tiers we have been innovating in very strongly over the past 12, 15 months, and they are growing. They are growing share, and they are growing sales. Where we have an opportunity in the U.S. is on the mid-tier. On Luvs, for example, we have not been able to push the full innovation pipeline out for different reasons, and that's what the team really is focused on to reestablish superiority on those few businesses where we feel that we let value get a little bit out of sync with what the consumer needs. But the plans are there, so now it's a matter of execution. So I feel very good overall about the baby care business, strong innovation pipeline, and that I think will address the isolated superiority gaps that we might have. On commodities, it's very difficult to say when they would actually flow through. I think it's safe to say that there's at least 60 to 90 days of delay. Many of the commodities will take longer to flow through simply because of contract structures that use certain trigger points or holding periods. So I would say at least 60 to 90 days, for many of them probably longer. The only one that tends to flow through quickly is fuel diesel, obviously, because it's captured in transportation.

Private label shares value shares 1 month

private label shares value shares 16.4% past 1 month


Tim Arndt: Thanks Jill. Good morning, everybody, and thank you for joining our call. The third quarter marked a continuation of themes we have been anticipating for more than a year, namely; growing supply translating to increased market vacancy; continued moderation of demand; and market rent growth that will slow until the low levels of new starts drive reduced availability over-time. We have operated in accordance with these views in both our approach to leasing, as well as timing of new development. 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. The geopolitical backdrop has clearly become more troubling as well amounting to a lack of clarity that will likely weigh on demand. 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. We remain focused on the fact that we own assets critical to the supply chain with long-term secular drivers that remain intact. Further, the outlook for future supply will continue to face structural barriers, ultimately driving occupancy, rents and values. In terms of our results, we had an excellent quarter with core FFO excluding net promote income of $1.33 per share. This result includes approximately $0.03 of one-time items related to interest and termination income, as well as the timing of expenses, which we can address in Q&A. Occupancy ticked up over the quarter to 97.5%, aided by retention of 77%. 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%. Same-store growth on a net effective and cash basis was 9.3% and 9.5%, respectively, driven predominantly by rent change. We saw market rents grow roughly 60 basis points during the quarter, the slower pace embedded in our forecast. In combination with the strong build of in-place rents, our lease mark-to-market recalculates to 62% as of September. We raised approximately $1.4 billion in new financings at an average interest rate of 3.2%, comprised principally of $760 million within our ventures, as well as a recast of our Yen credit facility increasing our aggregate line availability. In combination with our cash position, we ended the quarter with a record $6.9 billion of liquidity. Finally, it’s noteworthy that our debt-to-EBITDA has remained very low and essentially flat all year, hovering in the mid-4 times range, despite our increased financing activity, a demonstration of the tremendous growth in our nominal EBITDA. Turning to our markets, while rising, vacancy remains historically very low in the U.S., Mexico and Europe. Market vacancy increased approximately 70 basis points during the quarter in the U.S., driven by low absorption, as well as recently delivered but unleased completions. Europe experienced similar dynamics with an overall increase in market vacancy of 50 basis points. At the macro level our expectations for the U.S. are for completions to outpace net absorption by a cumulative 150 million square feet to 200 million square feet over the next three quarters. Then, over the subsequent three quarters, we see that trend reversing with demand exceeding supply and recovering the net 75 million to 125 million square feet. That trend may extend further into 2025, as we believe development starts over the next several quarters are likely to remain low. 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. In this regard, our portfolio has been largely resilient to moderating demand. Our teams would describe the depth of our leasing pipeline as consistent with the last few quarters. In coming fresh off of one of our customer advisory board sessions, it’s clear that our customers have plans to continue to expand their footprint, increasing capacity and resiliency. However, what’s also clear is that they are slowing such investments until there is more clarity in the economic environment. In the U.S., rents increased in most of our markets with the strongest located in the Sunbelt, Mid-Atlantic and Northern California regions. Europe and Mexico were also bright spots for growth in the quarter. Rents across our Southern California sub-markets declined approximately 2% as it continues to adjust to higher levels of vacancy. While the markets and outlook are mixed, we remain confident in continued market rent growth in the U.S. and globally over the coming year, albeit at a slow pace while the pipeline continues to get absorbed. From our appraisals, U.S. values declined approximately 3% while European values remain stable, in fact, having a very modest write-up. The difference isn’t too surprising as the Fed’s language around inflation and the economy has had more effect in the U.S. capital markets, driving the 10-year up 100 basis points since our last earnings call, compared to the bund [ph] at just 50 basis points. We believe that this is likely another instance, as we saw one year ago, where U.S. appraisals at the end of the quarter have not had sufficient time to react to the increase in rates and we are thus pausing on appraisal-based activity in USLF for at least one quarter. 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. Our funds experienced their first quarter of net positive inflows with approximately $180 million of new commitments versus new redemption requests of $115 million. Given other activity in the quarter, the net redemptions have been reduced from their height of $1.6 billion to approximately $700 million or roughly 2% of third-party AUMs. In terms of our own deployment, development starts ramped up during the quarter, crossing $1 billion, over half of which is related to a data center opportunity in our central region, a testament to our higher and better use strategy and strategically located land bank. Also notable is the acquisition of $118 million of land, including a strategic parcel in Las Vegas, which will build out an additional 10 million square feet over time and brings our total build-out of land globally to over $40 billion. We are laser focused in identifying and executing on value creation in our core business, our energy business, and their adjacencies. Combined with the debt capacity and liquidity we have worked hard to build and preserve, we see the environment as rich with opportunity. Moving to guidance, we are increasing the average occupancy to a range between 97.25% and 97.5%. As a result, we are increasing our same-store guidance to a range of 9% to 9.25% on a net effective basis and 9.75% to 10% on a cash basis. We are maintaining our strategic capital revenue guidance, excluding promotes to a range of $520 million to $530 million and adjusting G&A guidance to range between $390 million and $395 million. Our development starts guidance is increased to a new range of $3 billion to $3.5 billion at our share, driven primarily from the data center start mentioned earlier. 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. In the end, we are adjusting guidance for GAAP earnings to a range of $3.30 per share to $3.35 per share. 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%. I know that many of you are focusing on 2024, so I’d like to take an opportunity to remind you that the Duke portfolio will be entering the same-store pool in 2024, which will widen the recently observed delta between net effective and cash same-store growth. This is, of course, because Duke rents were mark-to-market at close one year ago, so its contribution to net effective same-store growth and earnings will be minimal, even though the cash rent change will be on par with the rest of the Prologis portfolio. 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. 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. We know that turbulent times can bring opportunity for those who are prepared and that’s been central to our strategy and management as a company. I’d like to also remind you of our upcoming Investor Forum on December 13th in New York, our first in four years. We are looking forward to spending the day with you, sharing more about our business, outlook and opportunities ahead. Additional information is available on our website and in our earnings press release. And with that, I will hand it back to the Operator for your questions.


Tim Arndt: Thanks, Jill. I'd like to start our call by recognizing and thanking our team for the incredible effort given over 2023. While it was a turbulent year in many ways, we ended it by delivering nearly 11% earnings growth and driving our 12-year earnings CAGR since merger to 10.3%. We deployed over $7 billion into new investments, raised nearly $2 billion of strategic capital in a very challenging environment and delivered excellent operating results while serving and growing customer relationships. We're also appreciative of the opportunity we had at our Investor Forum last month to share our vision and outlook for the company over the coming years. The environment is setting up in line or better than our expectations with development starts across the market continuing to decline by two-thirds from peak and an improvement in customer sentiment that appears more constructive than just 90 days ago. That said, we still see challenges in some submarkets as near-term outsized deliveries are met with still recovering demand. But our thesis remains the same as we've been describing for over a year and detailed last month in New York, which is that the supply cliff will converge with normalized demand later this year, delivering an environment conducive to strong market rent growth. We believe that annual market rent growth will average between 4% and 6% over the next three years, with 2024 being modestly positive and ramping thereafter. Turning to our results. We finished the year strong with quarterly core FFO, excluding promotes of $1.29 per share, bringing the full year to the top end of our guidance $5.10 per share. While market occupancy declined by approximately 100 basis points, our portfolio gained 10 basis points to end the year at 97.6%. Net effective rent change over the quarter was 74%, bringing the full year to a record of 77%, with another impressive results out of Southern California at over 150%, a reminder that it remains the strongest market for cash flow growth despite near-term choppiness given the large quantum of its lease mark-to-market. In the end, same-store on a net effective basis was 7.8%, while cash was 8.5%. We started over $2 billion of new developments in the quarter across 46 projects in 27 markets with nearly 50% of the activity in build-to-suit. In Energy and as seen in our new supplemental disclosure, we stand at year end with approximately 515 megawatts of solar and storage in operation with an additional 70 currently under construction. We had a quiet quarter on the financing front, raising approximately $300 million, but our full year of activity closed out at over $12 billion at a weighted average rate of 4.5% and term of 10 years. Our total debt portfolio remains at an overall in-place rate of just 3% with more than nine years of average remaining life. Turning to market conditions. The increase in fourth quarter market vacancy was in line with our expectations and driven by demand that remained moderate as customers exercised caution in their spending, while completions hit an all-time high. Development starts, however, have continued to fall across the U.S. and Europe, extending and deepening the future supply shortfall. On the ground, our teams are seeing revived customer interest with healthy showing activity to start the year. This includes build-to-suit inquiries, which we expect to remain active for Prologis following a strong year in 2023. Our proprietary metrics point to normal levels of activity with proposals and gestation timing in line or a bit better than historical norms. Utilization declined in the quarter to approximately 83% and keeping with this morning's report a decrease in the inventory to sales ratio. We view this positively because utilization also increased from here as stronger than expected retail sales over the fourth quarter and holiday season drove lower inventories, which will need to be replenished. Turning to market rents. Our global view is that rents declined this quarter by 90 basis points, but predominantly impacted by an estimated 7% decline in Southern California. Our full year view is that global market rents grew by 6%, just below our expectations, ultimately driving our lease mark-to-market to end the quarter at 57% after capturing approximately $100 million in realized NOI growth from leases rolling up to market. The outlier on rent growth is clearly Southern California. While our portfolio was only 2.6% vacant at year end, growing availability has made leasing very competitive. Combined with a 110% increase in rents since 2020, the rent retracement is understandable. Historically, there has never been a market where the delta between expiring and market rents has been so large that it provides ample room for property owners to deviate from market in order to attract customers. But looking ahead, the positive news is that we are launching two trends reverse. The first is that the supply pipeline is clearly emptying with little in the way of new starts. And the second is that the escalating issues in both the Suez and Panama canals together with the resolution of the West Coast labor negotiations are moving shipment volumes back to the West. While this bodes well for SoCal and still early, we are watching East Coast port markets more closely. In any event, all of these disruptions are reiterating the underlying need for resiliency and the just in case approach to inventories. Summing this all up globally, we recognize the high volume of near term deliveries that need to be absorbed into our markets over the next few quarters. But we are very pleased with our ability thus far to build occupancy, drive rents, and illustrate more differentiation in our portfolio as market vacancy grows. As for Strategic Capital and Valuations, we saw U.S. values decline approximately 5.5% during the quarter, which was our expectation and the reason we paused our appraisal based activity, which includes calling and redeeming capital as well as asset contributions. We run an industry leading franchise in which we aim to set the standard for governance, including timely, accurate, and independent valuations. Calling out when pronounced lags and valuations emerge has protected investors and demonstrated how we stand apart as a responsible partner. With this quarter's value declines in a more stabilized rate environment, we'll resume activity in USLF including the funding of our $250 million commitment announced in the second half of '23. Turning to guidance and all at our share. In terms of operating metrics, we are guiding average occupancy to range between 96.5% and 97.5% with occupancy likely to step down in the first quarter and rebuild over the course of the year. Cash same-store will range between 8% and 9% and net effective same-store growth will range from 7% to 8%. We are forecasting net G&A to range between $420 million and $440 million and Strategic Capital income to range from $530 million to $550 million. We have a very big year of stabilization activity ahead of us with a range of $3.6 billion to $4 billion, and expected yields of approximately 6.25%. On the new deployment front, we are guiding development starts to range between $3 billion and $3.5 billion with the estimated build to suit mix of 40%. And we plan to take sale portfolios to the market over the year with expected proceeds to range between $800 million and $1.2 billion and additionally forecast $1.75 billion to $2.25 billion in contributions to our Strategic Capital vehicles. In the end, we are forecasting GAAP earnings to range between $3.20 and $3.45 per share. Core FFO excluding promotes will range from $5.50 to $5.64 per share, while core FFO including net promote expense will range between $5.42 and $5.56 per share, each a bit higher than our preliminary guidance at the Investor Forum. While we do not forecast any promote revenue at this time, there are some small opportunities that do exist in FIBRA Prologis and our new PJLF vehicle in Japan. In closing, we know that the market is not yet out of the woods with regards to incoming supply, but the combination of a stronger backdrop continued low level of starts and a calmer capital markets environment has us optimistic that 2024 will be another great year. As you know from our Investor Day, we have many initiatives in flight designed to add value beyond our real estate and because of our real estate. We look forward to continuing to execute on our plan and providing you updates throughout the year. And before we move to Q&A, I'd like to get ahead of questions which have grown a little more frequent in recent quarters surrounding market rent growth. Unintentionally, we set an expectation that we could forecast market rents to a single point of accuracy in increasingly short time periods, and honestly, we're just not that good. We've gotten away from a practice that was originally aimed at being high level and directional. So what we've elected to do in order to help investors without perpetuating the issue is to simply provide high level rent growth expectations on a rolling 12 month forward view. As mentioned earlier, in terms of our three year CAGR of 4% to 6%, we believe we'll see modestly positive rent growth aligned with inflation over the next 12 months and we'll continue to update this rolling view on our future calls. With that, we will now take your questions. Operator?


Tim Arndt: Good morning and thank you for joining our call. We've had a good start to the year in terms of our operating and financial results in the first quarter. We delivered strong rent change, drove occupancy slightly ahead of our forecast, raised nearly $5 billion in capital, including $750 million in strategic capital, and made important headway in our Energy business. That said, as we evaluate the market, persistent inflation and high interest rates have kept more customers focused on controlling costs. The resulting delay in decision making, easily observed through the first quarter's below average net absorption, will translate to lower leasing volume within the year. Accordingly, we've opted to adjust our guidance early, getting ahead of what looks like a period of occupancy below our forecast in the near term and its effect on same store in a number of our higher rent markets. This is punctuated, of course, by a more pronounced period of correction still underway in Southern California. New starts, however, continues to be surprisingly disciplined, adding to the expectation for limited new supply in the back half of '24, but also extending deeper into '25. When considered alongside muted demand, we arrive at a view that the operating environment has only changed modestly in aggregate, and that demand is simply pushing out by a few quarters. The outcome of this may simply mean moving towards a long-term occupancy expectation more swiftly this year, which sets up for a better next year. Turning to our results for the quarter. Core FFO, excluding promotes, was $1.31 per share and including net promote expense was $1.28 per share, essentially in line with our forecast. Occupancy in the portfolio ended the quarter at 97%. For context, the US market declined 310 basis points since its peak in the summer of '22, while our portfolio's occupancy has only declined 80 basis points, resulting in vacancy today for Prologis that is less than half of that in our markets and reflective of our portfolio quality. Net effective rent change was 68% based on commencements and 70% based on new signings. Following this in-place increase and changes in market rents, our net effective lease mark-to-market stands at 50%, representing over $2.2 billion of rent to harvest without any additional market rent growth from here. Rent growth captured just for the single quarter was approximately $110 million on an annualized basis and at our share. Our same-store growth on a cash basis was 5.7% and on a net effective basis was 4.1%. The same-store from rent change alone was strong at approximately 9%, but is impacted by a 130 basis point change in year-over-year vacancy, as well as 150 basis points from fair value lease adjustments with the Duke portfolio's inclusion in our same-store pool. Additionally, there were approximately 175 basis points of items specific to the quarter, including one-time reconciling items from 2023, as well as unfavorable comps from low expenses last year. We started over $270 million of new developments in the quarter, bringing our portfolio to approximately $7.5 billion at our share, with estimated value creation of over $1.7 billion, a number we feel increasingly confident in with value stabilizing. In our Energy business, we've made meaningful progress on this year's deployment, including the signing of 405 megawatts of long-term storage-related contracts with investment-grade utilities. We also delivered the largest EV fleet charging project in the United States, less than 15 miles from both the ports of LA and Long beach. Finally, we raised $4.1 billion of debt across our balance sheet and funds at a weighted average rate of 4.7% and a term of 10 years. Our debt portfolio has an overall in-place rate of just 3.1%, with more than nine years of average remaining life and liquidity at the end of the quarter of over $5.8 billion. Turning to market conditions. Most broad economic data from unemployment to retail sales to the health of the consumer remain very strong. And while our tour proposal and other proprietary metrics are similarly positive, overall leasing activity and net absorption are running below expectations. Net absorption in the US, for example, was very low this quarter at just 27 million square feet. So while the macro landscape and supply chains continue to generate a need for space, we think it's prudent to expect continued headwinds on overall absorption over the next few quarters. The interest rate environment and its associated volatility have weighed on customer decision making, especially as the 10 year has increased 70 basis points from its level just 90 days ago and expectations for Fed rate cuts have moved from potentially six to now possibly zero. In parallel, sublease and space utilization rates highlight that some customers have available capacity, driven in part by the high rate of absorption through the pandemic. This dynamic of available space intersecting with the desire for cost containment is what leads to lower absorption and is playing out at different rates across submarkets and customers. For example, while slow leasing has persisted so far this year for less capitalized customers and 3PLs, we see a handful of large e-commerce and retail customers further along in this process, such as Amazon, who voiced caution two years ago, but is now active in several global markets and has openly discussed plans to commit to significant amounts of new space. The overall leasing slowdown is most felt in only a handful of markets. Southern California and the Inland Empire being the most acute. In fact, rents in most of our US markets are generally flat, several are up, and it is mainly elongated downtime affecting near-term occupancy and NOI. While Southern California leasing has been challenging, it has not slowed the tremendous uplift we realize every single quarter from rent change on rollover, which was 120% for the market in the first quarter, with the Inland Empire at 156%, nearly the highest in our portfolio. In Europe, rents grew overall during the quarter, which we believe will remain the case over the balance of the year. And of course, LATAM continues to impress with very high occupancy and market rent growth that has led the globe in recent quarters. Overall, global market rents declined slightly over 1% in the quarter, driven mostly by Southern California, and would have been slightly positive if excluded. I'd like to spend a moment on Baltimore, where we own over 18 million square feet and has been a dynamic market of ours for decades. Our employees, customers and properties are all safe following the bridge collapse last month and our customers expect to be able to withstand the disruption with little impact to their businesses. Shifting to capital markets. Valuations increased in all of our geographies, except for China, which saw a very small decline. Over the last 1.5 years, global values have decreased despite increases in cash flow due to cap rate expansion. As cap rates have stabilized, cash flow growth now has the ability to translate to value growth. Even though modest, the value uplift in the US and Europe are important as strategic capital investors have been looking for values to not only bottom, but actually turn upwards before committing new capital. With Europe a bit ahead of the US in this regard, it is indeed where we've seen stronger fund-raising interest in recent quarters. We also had a successful equity raise in FIBRA Prologis, raising over $500 million for deployment into both assets to be contributed from our balance sheet, as well as pursuits of third-party acquisitions. Transaction volumes and activity have ticked up in recent weeks and pricing has certainly improved. As always, we are actively looking at acquisition opportunities across all of our markets, but our focus remains on the development of our land bank, which provides an opportunity for over $38 billion of build out with a return on incremental capital of approximately 8.5%. In terms of guidance, in light of our views on demand and leasing pace in the coming quarters, we are reducing our average occupancy guidance to range between 95.75% and 96.75% of the 75 basis point adjustment from the midpoint. It's important to understand that approximately two-thirds of this change stems from our higher rent markets, meaning they create a disproportionate impact on same store in 2024. Same-store growth on a net effective basis will range between 5.5% and 6.5%, a reduction of 150 basis points, which accounts for the average occupancy decline, slightly lower rent change for the year as well as 30 basis points of annualized impact from the one-time items in the first quarter mentioned earlier. Our revised range on a cash basis is now 6.25% to 7.25%. We are maintaining our guidance for strategic capital revenue, excluding promotes, to a range of $530 million to $550 million and reducing our G&A guidance to a range of $415 million to $430 million. We are adjusting development start guidance for the year to a revised range of $2.5 billion to $3 billion at our share, reflecting our discipline in speculative starts and the timing impact this has in the calendar year. As we've always said, we don't consider our guidance to be a target internally and each deal ultimately needs to be rational and accretive on its own. In the end, we are forecasting GAAP earnings to range between $3.15 per share and $3.35 per share. Core FFO, including net promote expense, will range between $5.37 per share and $5.47 per share, while core FFO, excluding promotes, will range from $5.45 per share to $5.55 per share. Our updated guidance calls for core earnings growth of nearly 8% at the midpoint. As we close out, I'd like to underscore the message of the call, which is that while we have only a modest change of view in the intermediate term, our confidence in the long term is intact. And putting timing aside, we are encouraged by the outlook for supply in the back half of this year and '25, have tremendous lease mark-to-market to harvest in the interim, and are pleased to see valuations, fundraising and transaction activity all picking up. With that, I'll turn the call over to the operator for your questions.

new developments started $270 million first quarter


Tim Arndt: Thanks, Justin. Good morning, everybody and thank you for joining our call. I'd like to begin by recognizing the devastating wildfires still affecting Los Angeles. We operate a large portfolio there, but more importantly, we have colleagues, customers, and their communities struggling with the aftermath. It's too early to predict the full ramifications, but we'll continue to support the response and stay connected with local and state leaders as well as service organizations as the region works to recover. We have no doubt that a vibrant and dynamic Los Angeles will emerge from this crisis even stronger. In our business, the bottoming process across our markets continues to progress. Leasing in our portfolio accelerated following the U.S. election, and the pipeline has started the year at healthy levels. During the quarter, we signed more than 60 million square feet of leases, a company record, and saw interest diversify across customer profile, size requirements and markets. Looking ahead, we believe market vacancy is topping out and rents will inflect later this year. Turning to our results. Core FFO, excluding net promote income was $1.42 per share and including net promotes was $1.50 per share. Our full-year results ended at the top end of our guidance range, and in the end represent 8.4% growth over 2023, putting us in the 86th percentile of all REITs. Average occupancy was 95.8% for the quarter, 96.3% for the year. Net effective rent change during the quarter was 66% and on a full-year basis was 69%, activity which added over $340 million in annualized NOI. Our net effective lease mark-to-market finished the year at 30% and represents a further $1.4 billion of incremental NOI. And finally, net effective and cash same-store growth during the quarter were 6.6% and 6.7% respectively. In terms of capital recycling, we had another active quarter. Importantly, we contributed $2 billion of assets to our strategic capital ventures, bringing the full-year total to over $3.3 billion. While capital flows in 2024 remain challenging, we did raise over $1.7 billion across the platform, driving the growth in third-party AUM by over 7%. We disposed of over $900 million of assets in the quarter and acquired approximately $450 million. And stepping back, over the full-year, we disposed of over $2.1 billion and reinvested into a similar $2.3 billion of acquisitions at a positive IRR spread of 170 basis points, demonstrating our ability to self-fund and earn a return regardless of the yield environment. Included in our disposition activity for the quarter was the sale of our Elk Grove data center in Chicago. Elk Grove was a logistics asset that we converted to a powered shell before securing a build-to-suit turnkey transaction with a hyperscaler last Fall. We simultaneously identified a buyer and closed in the fourth quarter at very attractive economics. Because the property was owned by USLF for our structuring, procurement, leasing and monetization efforts, Prologis earned a value creation fee of $112 million, which was not included in our prior guidance due to the uncertainty and the timing of the transaction. Elk Grove is a great showcase of our data center development capabilities, which are more comprehensive than most. Today, we have 1.4 gigawatts of secured power and 1.6 gigawatts in advanced stages of procurement. Over the next 10 years, we see 10 gigawatts of development potential across our portfolio. As a platform, we have the team, customer relationships, development and energy expertise, advanced procurement capabilities and the capital required to create significant value for our shareholders. Turning to market conditions. As mentioned, quantitative measures of the market such as vacancy and changes in market rent met our expectations. More importantly, indicators in our pipeline and dialogue with customers have us encouraged that conditions are set for a recovery in net absorption, leading to a bottoming of global rents. It's worth highlighting that our non-U.S. portfolio fared better in rent growth over 2024, particularly in places like Japan, the U.K., Southern Europe, and Latin America, which all grew over the year. Customer engagement is improving and we saw a notable increase in activity amongst our larger global customers who often lead in the recovery of demand as we've seen in past cycles. The improvement in decision-making is reflected in our proprietary metrics where proposals increased earlier in the year, lingered for a period of time and then began converting more meaningfully after the election. That leasing pattern translated to elevated gestation also seen in our metrics. Our '25 forecast for net absorption calls for approximately 20% improvement over 2024, gradually building over the year. We also know that completions will decline significantly, contributing to a supply forecast that is approximately 35% below '24. As such, we expect a decline in vacancy over the year, which will pave the way for rent growth. Longer term, we continue to see the path for uplift from market rents to replacement cost rents, a dynamic that will build upon our already significant lease mark-to-market. Today, we see replacement costs as 50% higher than in-place rents. The capital markets were active with fourth quarter transaction volumes that put the year in total back to pre-COVID levels. Unlevered IRRs have compressed to the mid-7% range, and valuations as reported in our third-party appraisals had the globe marginally up this quarter. Capital raising in our open-end vehicles was more muted in the fourth quarter as investors paused to take in changes in the yield environment, but we remain confident in our expectation for growing capital raises in 2025 as the pipeline is solid and conversations are active. In terms of guidance, which I'll review at our share, we are forecasting average occupancy to range between 94.5% and 95.5%, which contemplates a dip in occupancy over the next one to two quarters, some of which is seasonal before rebuilding closer to 96% by the end of the year. Net effective same-store growth is forecasted to be in a range of 3.5% to 4.5% and cash in the range of 4% to 5%, each driven by still significant rent change. Our G&A forecast is for $440 million to $460 million and our strategic capital revenue forecast calls for $560 million to $580 million. As for deployment, we are forecasting development starts to range between $2.25 billion and $2.75 billion. We will continue to be selective in our starts and clearly have a lot of capacity to grow this number as conditions, rents and returns warrant. As a reminder, data center starts are excluded from this guidance, given their lumpiness. That said, we do expect new projects to begin in 2025, likely in a range of 200 to 400 megawatts. Acquisitions will range between $750 million and $1.25 billion and our combined contribution and disposition activity will range between $2.5 billion and $3.5 billion. Our development portfolio now stands at $4.7 billion with estimated value creation of $1.1 billion, $450 million to $600 million of which we expect to realize this year. Finally, 2025 will be an important year for our energy business where our forecast is to hit our 1-gigawatt goal for solar generation and storage by year-end. In total, we are establishing our initial GAAP earnings guidance in a range of $3.45 to $3.70 per share. Core FFO, including net promote expense will range between $5.65 and $5.81 per share, while core FFO, excluding net promote expense will range between $5.70 and $5.86 per share. In closing, we navigated a challenging year in terms of an operating environment, clearly unwinding from the overbuilding of the COVID era. Our ability to generate over 8% growth in such an environment is a testament to the resiliency and breadth of our company. We're pleased with the increase in activity and improvement in sentiment that we've seen so far in the last two months. And working through great space amid the favorable supply backdrop will further establish the foundation to build occupancy, grow rents, and increase values, unlocking the full earnings potential in our core business. And finally, we're very excited with what the future holds for our data center and energy initiatives. With that, I'll turn the call over to the operator for your questions. Operator?

development starts $2.25 billion to $2.75 billion


Chris Caton: Hey. It's Chris. Thanks for the question, Vikram. I'll take the first one. So, 250 million square feet of net absorption in 2024 compared to 192 million square feet of net absorption in 2023. And we consult a wide range of leading indicators, some of which are contemporary and some that have a nine months to 12-month lease.


Chris Caton: Hi, Jay. It's Chris Caton. So we project 250 million square feet of net absorption in the calendar year and 285 million square feet of completions. And yeah, that's going to be front-end loaded, particularly on the supply side. And so we think you'll see the vacancy rate rise by another 50 basis points to 75 basis points here in the first half of the year, peaking at 6% maybe 6.1%, and then making a meaningful move through the subsequent rest of the year and into 2025 and 2026 based on the trend in starts that we've profiled for you.


Chris Caton: Hi, Vikram. Thanks for the question. It's Chris. So as it relates to demand, just for those following along, net absorption in the first quarter was $26 million square feet, 27 million square feet. We have it at $43 million square feet in the second. And so, we expect 40 to 50 million square feet in net absorption. I think that's the tone that Tim had in his script and that we have here on the call for you. That'll leave - us with a full year net absorption on 160 million to 170 million square feet. Tim's going to take the rest.


Vikram Malhotra: Good morning. Thanks so much for taking the question. So I guess just two parts. One, Chris could you just update us, sort of, your view on the, I think, $175 million. Of net absorption, sort of what you anticipate for the second half, and then, I guess. You also mentioned sort of the rolling rent growth projection. Could you expand upon that in context of your three year view that you provided at the Investor Day on occupancy and term NOI growth?


Chris Caton: Hi, Vince, it's Chris Caton. Thank you for the question, and your read on the quarter is correct. So, we saw 40 million square feet of net absorption in the quarter, 63 million square feet of completions. So, let's just zoom out and talk about the year and talk about how it's -- the direction it's heading, because we are progressing through this bottoming phase. So, net absorption, this year, will amount to 160 million square feet, and that's against deliveries that are 300 million square feet. So, naturally, market vacancies are rising. They're rising up to 6.8%. And it sounds like you're very familiar with historical data, so you'll know that 6.8% is a low number in the totality of history. But there's something that's happening in the background that's really -- that doesn't always get attention we're talking about, which is the emptying of supply chains. So, deliveries peaked a year ago at 135 million square feet per quarter, and they fall into that number I gave you 63 million here this quarter, so less than half in terms of the decline, and they'll continue to decline into next year. At work here, in the backdrop, also is starts are very low. We have them at 40 million, 42 million square feet in the quarter. So, when you put all this together, what you find is the under-construction pipeline, which is about 215 million square feet today, is at its lowest point since 2017. So, we're going to be going into 2025 with a relatively low level of supply and an opportunity for demand to improve as we progress through this uncertainty in the spare capacity.


Chris Caton: Hi, Blaine, it's Chris Caton. Thanks for the question. I'll give you a concise answer and then I'll provide you some context, because this is a growing category. And so, yes, we are leasing with these customers, and yes, we think they will continue to lease space into next year and beyond. And no, we don't really think it's much related to any sort of pull-forward as you asked. But let's just zoom out and understand kind of the broader context here. So, to understand really all these 3PL companies, it is productive to first start with the Chinese e-commerce platforms. They're enjoying rapid growth this year, last year. We're talking about 25%, 50% annual growth and more depending on the concept. And so, the Chinese 3PLs, obviously, are performing the logistics here and they're growing rapidly. I'd say they represent roughly 20% of net absorption this year. And what it also offers their businesses are diversifying as now they compete for all contracts, not just Chinese e-commerce. And so, many of these customers are positioned for growth. They're signing long-term leases and they're investing in their space. You ask after this concept of a pull-forward, and so it is natural to think about how might tariffs and changes in tariffs affect these customers. And a couple of ways to think about it. First, the growth of this ecosystem. This is one that connects Asian manufacturers with American consumers. And what they're doing is they're bypassing the traditional import distributors, and they're doing this in response to the past tariffs, the margin pressure brought about by those tariffs. So, in summary, of that point, some of the growth this year is simply a shift in business model in response to past tariffs. The second point, which I described earlier, is, look, Asian imports are up 21% versus 2019 on an inflation-adjusted basis, and this is really fueled by that China Plus One manufacturing model, and the growth of Asia ex China -- imports from Asia ex China, which are up 40%, as I said. And then the third, in the details of tariffs is something called de minimis provision. You may be aware, this is a provision that allows goods to come in and avoid tariffs under a certain value. These are likely to be wound down under a wide range of scenarios, but it's worth knowing that these are only 3% goods coming in under the de minimis provision, only 3% of Asian imports. And so, look, as the category matures, this is a growth category for sure, there will be winners and losers. And please know that we employ the same rigorous credit evaluation process here as we do with any and all of our prospective customers.


Tim Arndt: And as it relates to net absorption, we saw net absorption of 39 million square feet in the fourth quarter. That amounted to just shy of 150 million square feet in the year, and we are looking for 185 million, 190 million square feet of net absorption in 2025. And that is expected to build over the course of the year.


net effective and cash same store growth

Tim Arndt: Thanks, Jill. Good morning, everybody, and welcome to our first quarter earnings call. We began the year with results and conditions that remained strong. Market rents have continued to grow, demand has been consistent and we're seeing sharp declines in new construction limiting future supply. While logistics real estate is very healthy, the macroeconomic picture continues to be a concern and we anticipate it could weigh on customer sentiment over the balance of the year translate into some demand that could be delayed into 2024. However, this will overlap with a slowdown of new deliveries, creating a sustained dynamic for high occupancy and continued rent growth into next year. Beginning with our results, our core FFO excluding promotes was $1.23 per share and including promotes was $1.22 per share. Our results benefited from higher NOI in the quarter but offset by approximately $0.02 of higher insurance expense from an unusually active storm season experiencing a year's worth of claims activity in just the first quarter. In terms of our operating results, both ending and average occupancy for the quarter were 98%, holding average occupancy flat for the fourth quarter. Rent change was 69% on a net effective basis and 42% on a cash basis each a record. The unusually wide spread between the two is reflective of lower free rent and higher escalations in our new leasing. Despite the step-up of in-place rents, our lease mark-to-market expanded to 68% during the quarter as market rent growth remained strong and slightly ahead of expectations. With the remaining lease term of roughly four years, this lease mark-to-market represents over $2.85 per share of incremental earnings as our leases roll the market, providing visibility to future income and dividend growth. These results drove record same-store growth 9.9% on a net effective basis and 11.4% on a cash basis. During the quarter, our efforts on the balance sheet were focused on liquidity, raising over $3.6 billion in new financings for Prologis and our ventures at an interest rate of 4.6% and a term of nearly 14 years. This fundraising total does not include $1 billion of additional capacity from a recast of our global line-of-credit, which closed in April, and brings our total borrowing potential under our lines to $6.5 billion. As mentioned, fundamentals in our markets remain strong, but we expect that a more cautious outlook will weigh on the pace of demand. This is not a new perspective as our forecast 90 days ago prepared for a weakening sentiment and how the top-down view for some occupancy loss over the year. We haven't changed that outlook, but we also haven't upgraded it despite the quarter's outperformance. As an update on proprietary metrics, our proposal activity ticked up in absolute terms and is in line with strong market conditions as a percent of available space. Approximately 99% of the units across our 1.2 billion square feet are either leased or in negotiation. Utilization ticked down to 85%, which is normalizing to a level that our customers view as optimal. E-commerce leasing increased during the quarter to 19% of all new leasing. We avoid drawing conclusions from a single quarter of activity on most metrics, but it's notable here, that e-commerce leasing picked up meaningfully back towards its five-year average. As we've said before, we ultimately look at retention, pre-leasing and rent achievement as the best real-time metrics of portfolio health, and on that basis, our results are certainly very strong. We expect that the current 3.5% vacancy rate in our US markets will build to the low 4s toward the end of the year, before turning back to the mid-3s by late 2024, due to the lack of incoming supply and accounting for moderating demand. We anticipate a similar path in our European markets, and of course, even a 5% vacancy rate is historically excellent and supportive of strong rental growth. We expect this pattern to play out in our true months of supply metric, which was a very healthy 30 months in the US and should decline into the 20s next year. We are launching markets that have large development pipelines such as a few in the Sunbelt in the US, but so far that supply also seems manageable. In Europe, most of our focus is on the UK, where development starts have continued even as demand has moderated, which will lift market vacancies and may pressure rents. And Japan is also a market which is expected to see larger increases in vacancy over the year, but similarly, expects a slowdown in new supply due to surges in land and construction costs. Taking all of these movements into account, we are holding our market rent growth forecast for the year at 10% in the US and 9% globally. In capital markets, transactions continue to be few and far between, but the pickup in activity suggests, we will see a busier second quarter. Appraised values in our funds declined 1% in the US and 2% in Europe during the quarter and 8% and 18% respectively from the peak. It's worth noting that our view of public market prices and NAVs that they have adjusted much more than is warranted for these levels of write-down. Redemption requests and our open-ended funds have slowed significantly with the redemption queue nearly unchanged around 5% of net asset value. This is reflective of both a slower pace of new redemptions as well as rescissions of prior requests. Combined with over $150 million of new commitments made our net queue is essentially unchanged from last year. Last quarter, we described our approach to fulfilling redemption requests, which is based on an overarching objective to be consistent and fair to all investors, requiring a few quarters for valuers to catch up. In that regard, as appraisal seem to be nearing fair value, we plan to redeem units in this quarter, given the swift response to value changes in Europe and expect to do the same in USLF next quarter. In turn, we view this as an excellent time to invest more of our capital into the vehicles, which we'll be doing over the coming quarters and some meaningful numbers. Turning to guidance. We are tightening and increasing average occupancy to range between 97.25% and 97.75%, a 25 basis point increase at the midpoint. Our same-store will benefit from this increase driving our net effective guidance to a range of 8.5% to 9.25%, and cash same-store of 9% to 9.75%. We are forecasting our lease mark-to-market to end the year close to 70%. Extracting the 2024 component of this suggests rent change should exceed 85% next year, even without continued market rent growth, which is a clear illustration of how our exceptional rent change will not only endure but continue to grow. We expect G&A to range between $380 million and $390 million and strategic capital revenues excluding promotes to range between $515 million and $530 million. We are maintaining our forecast for net promote income of $380 million, and given the size of USLF and the potential for small changes in value to have a meaningful impact, there is potential for upside here and we believe we have the downside covered. We had few development starts in the quarter, a reflection of our discipline, but our pipeline is deep and we are maintaining our guidance of $2.5 billion to $3 billion for the year. We expect the pace to remain slow in the second quarter, putting the bulk of the activity into the second half. It's noteworthy that following the belief that construction costs may decline in the coming quarters. We now see them as likely to increase mostly in line with inflation. As new fundraising has become visible, we forecast contributions to be concentrated in the second half totaling $2 billion to $3 billion when combined with forecasted dispositions. So in total, we expect GAAP earnings to range between $3.10 per share and $3.25 per share. We are increasing our core FFO including promotes guidance to a range of $5.42 per share to $5.50 per share, and further, we are guiding core FFO excluding promotes to range between $5.02 per share and $5.10 per share, with the midpoint representing 10% growth over 2022. I'd like to close with a few observations that we've made about our standing in the equity markets, which we found interesting and wanted to share. Today, we sit as the 68th largest company in the S&P 500 ahead of names like GE, American Express, Cigna, Citigroup, as well as Ford and GM combined. Also of notice that with our planned $3.3 billion of dividends this year, we ranked 42nd in terms of total cash return to investors. Of these top 42 dividend payers, Prologis has outgrown the group by 500 basis points per year over the last three years. And in fact, since our IPO, we have paid over $15 billion in dividends at a 15% CAGR, ranking 13th on growth in the entire S&P 100. While getting bigger has never been our objective, we thought the context would be eye-opening. So in closing, we feel great about the health of our business, even in the face of a slowing economy, most importantly, nothing we have seen alters the path of its underlying secular drivers for the long-term potential of our platform. In that regard, we're excited to tell you much more about that outlook and our platform later in the year. Last week, we announced our upcoming Investor Day to be held at the New York Stock Exchange this December. We hope to see many of you there in person and tuned into the live webcast, where we will showcase our deep bench of talents and the strong differentiators that define our company. More details on that to come. But with that I'll hand it back to the operator for your questions.


Hamid Moghadam : Yeah. Let me start on the development volume and then pitch it over to Dan for the other commentary. We do not care about development starts. We do not care about acquisition guidance. We will - we make all these decisions one-by-one and only when it makes sense to pull the trigger on these. They're buying large already more or less and we could, on a discretionary basis, start all of them today. But that would not be a wise thing to do and we're not going to do it just to meet some artificial guidance. I think the main driver of earnings in this company, which is what we all care about is rental growth and same-store growth. And all I can tell you is that with mid-60s mark-to-market, you can model whatever scenario you want, including zero rent growth from here on out. And for the next four years, five years, you're going to get same-store NOI increase of 7.5% with no rental growth from this point forward. You put in our normalized forecast for a rental growth our best guess and that same-store growth will be at 8.5%. Both of those numbers are consistent with low-double-digit earnings growth, while maintaining our leverage, which is, which is so low. So, I don't - we don't need development starts to drive anything, and we're not going to get in a position of – or jeopardizing our pricing power by virtue of wanting to meet an artificial development goal. Now having said all that, we will start the ones that we think we can lease efficiently and economically and quickly. And the land is there. The approvals are there. And our ability to put buildings up is there. So, there is no benefit in front end loading that stuff and pushing it ahead of where it needs to be. Dan, do you want to address the site question?

same-store growth normalized forecast for a rental growth


cash same-store 8% to 9% net effective same-store growth 7% to 8%


same-store growth on a cash basis projected 7.25% 2024


same-store growth on a cash basis 5.7% first quarter


Tim Arndt: Thank you, Justin, and thank you all for joining our call. We had solid execution against our second quarter plan, which showed improvement over the first quarter, underpinned by a pickup in overall market activity. In fact, we leased 52 million square feet in our portfolio, a 27% increase over the first quarter and one of our highest quarters in the past few years. This helped in delivering occupancy, which outperformed our forecast and more importantly at rent change well over 70%. This was achieved in an environment where decision making has remained slow as many customers optimize existing footprints before committing to new space. As a result, we expect many property owners to continue to prioritize occupancy in select markets with higher availability, keeping pressure on rents. That said, the bright spot continues to be the depletion of the supply pipeline and successive quarters of very low development starts. We believe we are near peak vacancy and this dearth of new supply is setting the stage for more favorable conditions in 2025. As evidenced by very strong rent change this quarter, our lease mark-to-market is serving to sustain meaningful growth through this transition. In terms of results for the quarter, core FFO, excluding promotes, was $1.36 per share and including net promote expense was $1.34 per share. We earned promote revenue within our FIBRA vehicle in Mexico, marking the seventh year of such achievements since its IPO and speaking to the high quality of our portfolio and team in that market. Global occupancy at our share ended the quarter at 96.5%. Our U.S. portfolio continues to outperform the market by over 320 basis points, a meaningful spread that has widened from our historic norm of roughly 175 basis points. As vacancy normalizes in our markets, we expect this flight to quality to continue. We crystallized $100 million of our lease mark to market during the quarter. As of June, we estimate that the net effective market rents are 42% above in-place rents, representing $2 billion of potential NOI. Over 40% of the decline in our lease mark to market ratio is due to this quarter's mark-to-market capture. Net effective rent change was nearly 74% based on commencement and is 64% based on new signings. This metric can be volatile between quarters due to mix, but we continue to expect full year net effective rent change to be above 70%, illustrating the outsized mark to market opportunity that will remain in the near and intermediate term. Our same-store growth was 7.2% on a cash basis, 5.5% on a net effective basis, each strong despite the impact of over 100 basis points of decline in average occupancy year over year, as well as the effect of fair value lease adjustments on net effective growth from the Duke acquisition. We deployed over $700 million into new development projects and acquisitions during the quarter and also closed on over $1 billion in dispositions and contributions at values exceeding our initial expectations. We continue to grow our solar energy business with the installed capacity of our operating portfolio now at 524 megawatts, with an additional 134 megawatts currently under construction, the total of which will generate approximately $55 million of NOI once stabilized in line with our forecast. Finally, we raised $1.2 billion of debt across our balance sheet and funds at a weighted average rate of 4.4% and a term of 11 years. Outside of this total, we also launched our $1 billion commercial paper program, which has thus far saved an average of 60 basis points on our short-term borrowing costs in the U.S. In terms of our markets, there are several encouraging signs for demand, including port volumes on both the East and West Coast, as well as increased volume of proposal activity we've seen across our portfolio. While overall leasing has increased since the first quarter, the tone of our conversations with customers warrants continued caution in the near term. Even though space utilization sits at near a normal range, approximately 85%, we find that many customers simply lack urgency, still prioritizing cost containment in light of an uncertain economic and political environment, both of which will be clearer soon. In the meantime, development starts remain muted and below pre-COVID levels. Quarterly completions peaked last year at 140 million square feet and are projected to approach 50 million square feet by the fourth quarter of this year. We estimate vacancies in our U.S. and European markets will peak over the next few quarters, likely creating a shift in tone as customers assess the requirements heading into 2025. Until then, rent growth will be anemic in most markets and down modestly in some. Southern California remains its own story, where demand remains sluggish and vacancy continues to drift higher. While we've observed some green shoots over the last 90 days, we expect soft conditions to persist over the next 12 months. Globally, we estimate that effective market rents declined 2% during the quarter, with 75% of the decline attributed to SoCal. Because there is so much conflicting data available to investors, it's worth mentioning that we measure market rent growth by evaluating effective rents achieved, not asking rents before concessions, a difference that can be as wide as 5% to 10%. We'd summarize by highlighting that most of the puts and takes across our global portfolio have provided conditions that are largely stable with reason for intermediate-term optimism due to several quarters of low starts and subdued but positive demand. Turning to capital markets. Value saw modest increases in the second quarter for our U.S. and European funds. There's greater depth amongst buyers of logistics properties and lenders are more active, together reducing yield requirements. In particular, buyer pools for well-located core product are growing now with multiple bidders back in the mix. We saw this very clearly in a large portfolio sale we closed this quarter, which was originally brought to the market last fall. Interest was reasonable at the time, but we felt pricing was off, elected to wait, and achieved 28% higher value in the end. I'd like to provide a brief update on our data center business, where we are having very good momentum across our pipeline. As you know, access to power is the key to unlocking value, and our dedicated energy and sustainability teams are leveraging our expertise in net-zero carbon solutions, solar generation, and battery storage to ensure that we're in the pole position with all of the major utilities. To date, we have secured 1.3 gigawatts of power. Of this, 450 megawatts is currently under construction in $1.2 billion of TEI. 300 megawatts is in active pre-development with an expected $700 million of TEI, leaving 550 megawatts as available and currently undergoing build-to-suit discussions. Beyond all of this, we are also in advanced stages of procurement for an additional 1.5 gigawatts, which is key to delivering on our five-year outlook for $7 billion to $8 billion of total data center investment. Overall, we've made significant progress growing this business and are optimistic about the targets we laid out at our Investor Day. Turning to guidance. We are making few changes as the year is playing out to our expectations. As such, we're maintaining our forecast for average occupancy, same-store, G&A, development starts, and stabilizations. There are only a few small changes otherwise. We are lowering our guidance for strategic capital revenue by $10 million only to account for the impact of FX rates, which are hedged elsewhere under P&L and will not affect overall earnings. Due to the increased activity we're seeing in the capital markets and deals completed year-to-date, we are increasing our acquisitions guidance to a new range of $1 billion to $1.5 billion and similarly increasing our guidance for overall dispositions and contributions to a range of $2.75 billion to $3.65 billion. Ultimately, we are increasing our GAAP earnings to a range of $3.25 to $3.45 per share. Core FFO excluding net promote expense will range between $5.46 and $5.54 per share, while core FFO including promotes will range from $5.39 to $5.47 per share, a slight increase at the midpoint from our prior guidance attributed to the FIBRA promote. Our core earnings guidance calls for nearly 8% growth at the midpoint, which ranks in the 87th percentile of S&P 500 REITs. We've been unique in our ability to generate leading growth over a long period of time, not only through a superior business model and portfolio, but also from our commitment to leveraging all that comes from our scale, including adjacent verticals strategic to our core business. Our focus is simply to continue to deliver on this industry-leading and durable growth. As we close, I'd also like to highlight an upcoming event, our annual GROUNDBREAKERS Thought Leadership Forum on October 2nd in London. The program is taking shape as our best yet, exploring the surprising intersection of logistics and health, energy, and even fashion. Additional information for the forum is available on our website, and we hope to see you there or online. With that, I'll hand the call back to the operator for your questions.