Prologis, Inc.

Welcome to the Prologis Q4 earnings conference call. My name is Kim, and I will be your operator for today's call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. If you would like to ask a question during that time, please press star 1 on your telephone keypad. If you would like to withdraw your question, press the pound key. Also note that this conference is being recorded. I'd now like to turn the call over to Tracy Ward. Tracy, you may begin.

Thanks, Kim, and good morning, everyone. Welcome to our fourth quarter 2018 conference call. The supplemental document is available on our website at Prologis.com under Investor Relations. I'd like to state that this conference call will contain forward-looking statements under federal securities laws. These statements are based on current expectations, estimates, and projections about the markets, and the industry in which Prologis operates, as well as management, beliefs, and assumptions. Forward-looking statements are not guarantees of performance, and actual operating results may be affected by a variety of factors. For a list of those factors, please refer to the forward-looking statement notice in our 10-K or SEC filing. Additionally, our fourth quarter results press release and supplemental do contain financial measures such as FFO, and EBITDA that are non-GAAP measures. And in accordance with Reg G, we've provided a reconciliation to those measures. This morning, we'll hear from Hamid Mohamedam, our chairman and CEO, who will comment on the company's outlook. Then Tom Olinger, our CFO, who will cover results and guidance. Gary Anderson, Chris Caton, Mike Curliss, Ed Neckroach, Gene Riley, and Colleen McEwen are also here with us today. And with that, I'll turn the call over to Hamid.

Good morning, everyone, and thank you for joining us. We had a great fourth quarter capping out our strongest year ever, and Tom will go over the details of all that later. What I want to do right off the bat is to address the issues that are probably top of mind for most of you, namely what we're seeing in the up-to-the-minute data, what we're hearing from our customers, and the steps we're taking to manage through this period of increased uncertainty. First, let me start with what we know. The proprietary forward-looking operating metrics which we monitor regularly, such as showings, average deal gestation periods, and lease conversion rates, are holding steady. We signed 17 million square feet of leases in December and in the first 20 days of January, usually the slowest part of the year. Based on specific data which we can elaborate on in Q&A, customer interest is robust. We expect activity to remain strong, with our most dynamic customers building out new and improved logistic networks. While we haven't seen any softness, even in the slower growing segments, we wouldn't be surprised if some users hit the pause button until they saw further clarity on the direction of the economy. Now, for what we think this means. Our crystal ball is not any clearer than anybody else's, and we're navigating in uncharted waters. since the factors causing market volatility are 100% self-inflicted and don't lend themselves to fundamental analysis. If the government shuts down and the trade disputes with China are resolved soon, the market can very quickly bounce back on its prior strong trajectory. After all, confidence is the cheapest and strongest form of stimulus. Now, what are we doing about all this? With the completion of our $14 billion non-strategic disposition program, our portfolio is now focused on the highest quality properties in the best markets. Our balance sheet is one of the strongest among REITs, and our funds have ample investment capacity. In short, we've already done the hard work of preparing for all parts of the market cycle. Also, property fundamentals remain as strong as I've ever seen, with vacancy at a historic low, utilization at a historic high, limited new supply, absence of shadow space, and e-commerce providing a secular tailwind to the logistics sector. We've taken several additional steps to account for the increased risk of the capital market volatility. First, we've raised the bar for all new speculative development starts. Second, we're monitoring our proprietary forward-looking indicators on a daily basis and are actively engaged in customer dialogue to assess any changes in market sentiment. And third, In the last two weeks, we've tempered our 2019 business plan assumptions and guidance to account for higher potential risks in the environment. Again, I want to emphasize, we are not seeing any signs of weakness in the market, but to ignore the turbulence of the past month would be irresponsible. We're not telegraphing an inflection point in the economy. We're just trying to be prudent in running our business. Looking back, this environment reminds me a lot of the dot-com era. In the two years following the market peak in March of 2000, NASDAQ lost two-thirds of its value. The S&P 500 was off 20%, while REITs appreciated by nearly 60%. We're not naive enough to think that we can predict the market, but there are uncanny parallels between the environment today and then. Sure, today's generation of tech leaders are real companies making real money, but there are plenty of unicorns that are highly dependent on on the abundance of cheap capital, risk capital, for their survival. History doesn't repeat itself, but it does often rhyme with the past. My bet is that well-managed REITs will shine once again because of their defensive characteristics and attractive risk-adjusted deals. With that, I'll turn it over to Tom.