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Notes From the ProLogis Earnings Call

October 26, 2008

ProLogis (PLD: 40.61 +1.02%) released its earnings numbers and its FFO numbers were down significantly, prompting a selloff in its stock as well as San Francisco-based AMB’s (AMB: N/A N/A). Digging into their earnings call were a few notable excerpts.

On development:

Beginning in September, we have done nothing but build to suit starts, and those are serving customer relationships that we’ve had for an extended period of time.

We’ve also both put in – increased our expected investment yield or decreased our expected value upon completion to be conservative and those required that our teams, not only have things 100% pre-lease, but also increased our required margins substantially above where there were previously – to ask what they were previously – quite frankly at a minimum on those.

On capitalization rates in the US:

If you look at the US, we think that cap rates have moved 50 to 75 basis points already for Class A product building…

On capitalization rates in the UK:

…things that were in the 5.5% and 5.25% range are now pushing closer to 7% to the cap rate, so there’s been significant value diminution there in the UK.

On fees ProLogis incurs if it successfully negotiates a loan extension with a lender:

…we have to pay a one time fee which I think is 75 basis points for the extension.

On interest rates:

…we rate locked on that about two weeks ago. It’s a 6.3% coupon, 10-year interest only maturity in 58% loan-to-value. (referring to one of their credit facilities)

…you swap that to fix and you’re below six.

Visit seekingalpha for the balance of the transcript.

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