Prologis, Inc. (PLD) Earnings Call Transcript & Summary

Good morning, everyone. My name is Anthony Powell, and I cover U.S. REITs here at Barclays. I'm here with Tim Arndt, CFO of Prologis. Good morning, Tim.

Good morning.

Prologis, as you know, is the largest publicly traded REIT focusing on the industrial sector. So there's been a lot of talk this year about normalization in terms of tenant demand, rent growth in all real state sectors including yours. Obviously, industrial has been one of the strongest sectors in real estate in the past several years. You took your rent growth forecast to 7% to 9% this year, which while down is still pretty strong. So maybe talk about what you're seeing in the market? I know you had a release that was [ worrying ] it's in your occupancy and rent growth. So how are things going right now overall?

I think conditions are still very good, frankly. And you're right, I think that [Audio Gap] was relatively subtle. We had come out on the year originally at a 9% number, we widened it out to 7% to 9%. And it was clear that, that was from shifting landscape that we had seen in SoCal. We've got a book out this morning that speaks to just where we are in the quarter. We had ended August with occupancy at about 97%. We're up from that a bit here as we are a week or 2 into September, and I expect to see us build a little bit further as we close out the quarter. We also published -- we've been very active in telling you what rent change on signings are. It's a very current look at the strength of rent change. That was 73% in the first couple of months of this third quarter. It looks optically off from the second quarter. It's 100% due to mix. We just had a little bit heavier of the stronger lease mark-to-market in the second quarter than we see what was just executed in these first 2 months, but overall, our rents are hitting our numbers and maybe slightly ahead. So things are good. I think they look like they will continue to be stronger as we continue to watch this birth of new starts in particular, I'm sure you'll have some questions on that, but the forward look on supply/demand also looks like it will be pretty good going into '24 and even '25.

Got it. So in terms of tenant demand, I mean, there's a perception that this is all e-commerce, but we know is that the case. So where you're seeing kind of the tenant -- what sectors are driving the most demand and all those incremental demand? And where are you seeing softness? And how has your mix shifted over time?

I think the last part of your question is the most interesting, which is it's not much. I would say, over time, we slice our customer use into about 12 categories roughly. One that has decidedly moved a little bit from long-term trend is transportation, that element of it, which I think is logical when you think about the context of e-commerce. That's a piece that is just picking up that's much more active. But the real story, I think, by right of our size, we capture so much of the economy and demand is so broad-based. Any other category, we truthfully see very little meaningful change from current leasing levels to the long term. We're talking about less than a percentage point change in those categories. If I look very near term, if you want some kind of read, I would point to auto. We've had some particular strength and then also pharma and medical device. And those are both kind of secular. I would say, the latter being more from an aging demographic, the former on the auto side, out of some new ecosystem is really being built to do support in EV industry, and there's more around that. But I don't think those are going to be long-term pickups and shift. I think the mix will be pretty balanced, which you see in a big portfolio.

Right. We hear from some of the other industrial resets, subtenants are taking longer to make decisions, particularly kind of for larger spaces. Did you see that? Does your -- you just state numbers aren't super like different than...

You're right. So we measure this actively. We report on it. We call it gestation, but it's really the customer decision-making time and it looks like it's moving around a lot on a chart, but it's really by days or a week or 2, I think it's a little bit different than COVID. There was a real frenetic pace during COVID to take and renew space quickly. And now that demand is more normal, I think it's gotten more consistent with 2019 levels. And understandably so, you've had fear and a lot of discussion of recession for better part of a year or more now. And so customers are being a little more careful in their spending and signing up for longer-term leases. But ultimately, when we look at retention and occupancy, the numbers are very good. They're ultimately getting to the decision and still taking up space.

I want to go back to Southern California, where we said there was a bit of softness relative to the prior year, it was a very strong and into what happened in Southern California and what's happening now? Any impact in that marketing, any most recent update?

I think what happened and we tried to explain this in a few ways. I think SoCal, you just have a market where when we look at the rent growth that was experienced between say, the beginning of 2022 to the middle of '23, you had over 150% rent growth, like 2.5x market rents and the headroom that, that can create in rent levels for all kinds of different constituents there to achieve their debt service on their loan or achieve a profitability they were looking in development, there's headroom to play with brands that at that point. And so that puts some pressure on the market together with abort-labor situation that was definitely protracted went longer than anyone had thought only getting resolved and ratified in the last month or so. And then a lot of deliveries, new construction getting delivered into the market. So that kind of hit at once created some softness in certain pockets. We still see that softness in smaller space sizes in particular. But it's a great market. If I go back to that 73% rent change that we saw on signings, the L.A. slice of that number was well over 100%. So there's still a lot of rent change there, rent growth to harvest, it will be a strong same store for us, and it's on a very big space, we feel great about it going forward.

Yes, that was my next question on the lease merchant market, 60% at the last quarter, how does that translate to NOI growth and in terms of growth for the next few years? And where does it go in a recession? Let's say we hit some kind of, let's say, next year, does that shrink to some much lower level that people be concerned about?

Yes, I'd like to first highlight that lease market at 66% and the rent change for years were hitting is on a much broader diversified set of geographies, not only in the U.S. and global. So it's -- we're impressed with the number of what we've been able to achieve in our market selection. Where does the lease mark-to-market go from here? Is it -- what's market rent growth going to be here? You have to pick a number there. The in-place rent piece of that equation will predict with change about 2% a quarter or something, something on that order as you're going through same-store growth quarter-by-quarter. And you have to say, well, what is market rent growth going to do? And in a recession, which I think was your question, it will decline. I think -- look, I think that the lease mark-to-market is going to decline anyway at some point to the degree that market rent growth is not on the order of say, 8% to 10%, which is what same-store would be at these levels and the ratio will decline. But it -- the good news about lease mark-to-market, and I think this is totally unique in our industry. So much of what has happened to rents in [indiscernible] sector is not yet in our P&L. It's all sitting off here to decide $2.8 billion of rent, NOI, EBITDA, dividend, whatever you want to call it, it's all those things, is going to come through our P&L over time without any further market rent growth from here.

Over how long -- over 4, 5 years and somewhat...

Yes. I mean you've got to pin that number to, when does that last lease roll but the bulk of that would be in 3 to 4 years. Average lease term and logistics is about 5 years.

And you mentioned supply growth earlier and alluded to it. It's a bit higher than prior years in the first half of this year, expected to come down from starts. Where do you see those starts and deliveries trending in your markets in the next, say, 4 quarters?

Well, deliveries will probably still be -- I think they are going to be 400 -- mid-400s this year, maybe a level close to that still into at least kind of on a run rate the next year. Demand will be -- it's going to be strong. It will be the coded piece, for sure, but not a paper out today. I think that's speaking to some of the longer-term trends we see in resiliency that we expect to see in demand. Our first chunk that is just from basic resiliency. So we -- in COVID, our customers got caught -- put it in many ways. We all remember, it's like a distant memory in some ways, but all the supply chain conversations around the things we couldn't get and customers were learning more about their supply teams at the time and how they were running a little to just in time and not as just in case as they would like to. And we put out a case that we would see out of that 5% to 10% increase and resiliency that our customers would have -- they still want to build for their supply chains. Piece of that is in question right now as people being careful with expenditure with that going through. And that's going to be something that really fortifies demand, together with increased product variety that our paper this week is that the product offerings from many of our customers, top retailers, there's 16% higher product offerings from customers of our space, that requires much more space as that variety is being offered to their consumers. And then continued penetration in e-commerce, right? We see the current level of e-commerce sales are taking about 22%, 23% of total retail sales today. We see that climbing to about 30% by the year 2030. And that increased penetration is important because every dollar, one channel to the other, has the 3x more on the warehouse space needs. So all of those things together almost like -- maybe I shouldn't say agnostic broader economy, are things that are going to make demand, I think, comparatively strong in our sector too.

I'll make to that point though, we see you having us all the time on certain retailers having higher inventory or certain retailers pressure on consumer -- we get this question a lot of time and if these retailers are seeing struggles, is there any [indiscernible]. So do you see that at all? Or is that driving...

To me, I think that is illogical but maybe old fashion way to thinking almost in our sector. When you take on the opinion or the perspective that it's the close-in functional fully stock and operating supply chain that better assures your topline sales, and that's the competitive landscape our customers were in, you need to stay invested in quality real estate, have that resiliency built. We've heard many of our customers say and publicly, their worst fear is seeing customers leave their stores empty-handed because they couldn't find a thing they went in to get it. I think that's actually something my personal life that points me much more to [indiscernible] frankly. You just want to know you can get the thing that you want. So if you're in a down economy, you're looking to procure your margins and your topline sales, I think underinvesting in your supply team and with logistics being 3% to 6% of that cost, that's probably not the first place [indiscernible].

To the point, I mean, I think you updated your utilization stats this morning. Have they been a bit stable and you guys seen a big drop in that warehouse?

Correct. Correct at that level, so.

Right. Can we talk about international markets a bit about how you're holding property, and maybe talk about Europe, Japan, Mexico are doing and maybe more on nearshoring and onshore as it was a hot topic I guess in the space?

Yes, broadly, if I go around the globe, we are one of the few global REITs. I think we've really seen a benefit in all corners of our business from that kind of diversification, whether it's asset values or rents or capital sourcing. If I look on the operations side, Europe has been quite strong. Europe had better occupancy than even the U.S. for several quarters running. I think it's about 50 basis points better occupied today. It's been a place where market rent growth has not been at the level that we've seen in the U.S., but still quite strong. We've certainly been working with our teams around the globe to be in better recognition of the pricing power that we have when the markets are this tight, and so we have a lease mark-to-market in Europe that's somewhere in the 30s percent. So rent change there has been quite good, better than history and that I recall. You highlight Mexico. Mexico is even better. Mexico, I think, is our best market for market rent growth from here and the balance of 2023 has benefited greatly from nearshoring. I know everybody who knows that story. And traditionally, we've looked at the closer broader markets for that strength, but we've seen Monterey in particular, with the announcement from Tesla and their Gigafactory as being another beneficiary. We're making investments in that market. I think the market is 1.5% vacant. And broadly, our portfolio prospects goes about 99%. So I think our favorite teams are here this week, is that right or somewhere in the city, but you should take a look at the Mexico even they're performing very well. The other question in here, I'm not sure if you were getting through it as well as just an onshoring, what are we seeing from that perspective? And I think there's more to onshoring than we have suggested there might be for Prologis in the past. We think early on in those discussions, our thesis has typically been that we want to be invested where the consumption is occurring. And that's got us in the Tier 1 cities around the globe. That's what ought to be constant while source of the production might move from China to Southeast Asia to Mexico to onshore. Let's just always be where the goods are ultimately being consumed. But that said, we do find ourselves with both big footprints that are benefiting in Phoenix, we come to mind, Indianapolis, parts of Ohio. So we're seeing a little bit more than we would expect.

So the benefiting is from more manufacturing activity and...

Yes, I'm glad to ask that it's less so the manufacturing facility, but these -- the development of these markets have an ecosystem around vendors that supply to mature population base that might grow up around these places. So there can be a couple of offshoots that increased demand overall.

I know you focused historically a lot on the coastal markets in the U.S., but those are interior markets being Ohio, Columbus. So is that maybe a change in your investment focus or just the slight...

I don't think it meaningfully changes our investment focus.

I guess on that, on investment in acquisitions, you announced a $3 billion portfolio of Blackstone, 4% cap rate initially, 5.75 market rents. That was one of the first real estate deals that had happened that size for a while -- all for market. So do you feel comfortable with the pricing there because you raised debt after that kind of low 5% down rates, a tight spread. So maybe how are you going to be comfortable with that pricing? Is there upside to capital?

Well, we ultimately underwrite to unlevered IRRs, which in this case, we reported, we saw it at 8%. I would say, I think that on conservative assumptions around vacancy and credit loss and a number of things that we are typical in our underwriting. So I would expect outperformance on that IRR is ultimately quite possible. And I would also add that, that IRR would not include all the other things that wind up occurring in our ownership of assets on our platform like property management synergies. It's not in their potential opportunities from here is not in that number. So there's actually a return beyond that, but just to get kind of a clean comp on the pricing. So on that basis, clearly 5% debt is still quite accretive to 8% IRR.

Are there more deals like that out there? Could we see kind of an acceleration in these activity? Or is it still kind of choppy [indiscernible]?

We've seen transaction activity pick up. I think my view is that maybe 6 to 9 months ago, we were talking about transaction activity that was more muted in my opinion, perhaps out of -- buyers seeking a little more confidence in what the operating conditions were going to be. And quarter-by-quarter, we and just even the national brokers, were reporting strong statistics and logistics, strong occupancies, market rent growth exceedingly high, rent change in same-store growth. So I think that confidence in operating fundamentals has been built for buyers. In the last, what, 6 weeks, let's say, you've got a more turbulent cost of capital picture than any of us were hoping for. The 10-year moving 40 basis points since June or so. And it's almost not just its absolute level, that's one thing to contend with, but it's volatility moving as much as it is every 2 or 3 weeks. I think gives people some uncertainty on what the cost cap is. So that, I think, is probably putting a little bit more headwind in the transaction market than we might have expected otherwise. But assuming some stability there, I think we'll see things pick up. We are not -- I'll just add quickly that we don't buy to any kind of budget. We probably say we don't even develop to any kind of real budget number in terms of volume, although with $38 billion of land bank can build out under our control, I think we can pretty reliably count on 4 billion starts number, the average over the coming years may be higher. [indiscernible] come at you a little more randomly. So they got to want to look at a strategic fit and then to get the pricing to work. So we don't count on that kind of deployment, but happy to take things down where we can.

You acquired Duke Realty last year, I guess it's about a year ago. How has that acquisition performed up to expectations to lease spaces up to rents and performance-essential opportunity?

Yes. We've got quite good at integrating these portfolios. And Blackstone is just a recent example of it and that we underwrote it quite quickly by the time we sell it on a portfolio, financed it quickly, had no additions to corporate or no additions to property overhead, just a very recent example of how quick those things would come about. So Duke was the same way, even though it's larger, these things wind up plugging into our portfolio pretty easily. We've described outperformance that we've seen. And I would say expected in terms of a portfolio where we've got higher rents being achieved compared to underwriting unexplained by market rent growth, which we would point to. Well, that's our cluster and that's putting assets into already densely grouping of our properties, our implementation flow are [indiscernible]. We leased properties, frankly, different than to some other operators. Others had leased where they're leasing people who paid on a commission basis. You all know that's not probably the best way to get the last nickel out of the rent. So we expected a number of those sources of outperformance and have seen it come through.

And moving on to development. I think you're at $2.5 billion to $3 billion in terms of your guidance for this year, it implies a decent acceleration in the back half of this year. So is that still achievable you think and how are the construction costs, like the margins, how does that all trend?

Yes, I think it's still achievable. So our forecast -- what's interesting when you're talking about this kind of forecasting, you're often talking about in our world, names deals and placeholders, what might make up this. When you think about $38 billion of product that is available to build out, everything has a name. I mean we know multiples of places we might go for that demand. We have a sense of where the build-to-suit sense is a piece of that is going to come from. And then what is in question, as we look at it from quarter-to-quarter is what piece of spec there to pick up. And I think we see enough stability and strength in a lot of the markets with that component of those [indiscernible] come from that will have the numbers. Construction costs are probably relatively flat. We've described changes in land values. We've seen land values probably about 30% off their peak. And then in the last few quarters, the rest of construction costs, whether labor or other materials relatively flat. We tend to -- I mean our deployment teams, our development teams, of course, are focused on construction costs and locking them in and procuring goods orderly and efficiently. But we tend to look at is what's the margin we can get in there. And that's going to affect both the development yield, but in a way that it ultimately factors into replacement cost and stabilized yields. What we want ultimately is the margin. What's the spread between development IRRs, and that can make us a little agnostic to what yield or absolute costs are or speaking, is this development if you build it and stabilize it under, again, I would say, relatively conservative assumptions, can we get a 15% margin? That would be our typical underwriting threshold at Prologis. You know if you look at our numbers, we've outperformed that significantly some multiples of that number over the last several years, aided by things like cap rate compression and more robust growth. But we see that as very much in the cards for our pipeline.

Got it. Right. And we see some press recently about you're going to move some data center projects in Austin, Skybox and you talked about this maybe accelerating. So talk about what you're doing in data centers and it's something that's important to you, given AI and what's going on there?

Yes. I think it's -- I suppose it's fair to say that AI has made it a little more important, but it was important on its own. I mean just we -- if I go back and you know, Anthony, to our companies founding 40 years ago with a program, as many of you know, really started an investment thesis and logistics for a handful of reasons. One of them was if you look good, curate a portfolio that was pretty close in population centers. That's driven on my consumption comments from earlier, but also in the spirit of will some of those properties being the cheapest on them always be logistic and probably not. There will be some higher and better use on the horizon, and we experienced a lot of that in our 40 years of conversion of logistics properties to office and apartment and retail and biotech in the South Bay is something that holds a lot of promise. So data centers is a natural emerging sector for us to continue to look at. We own some data centers today, not a lot. We don't really expect to be an owner of data centers over the long term, most likely. We -- our specialty is logistics, but we recognize by right of the portfolio we have and it really its adjacency to fiber in either current or probable access to power that there's a lot of conversion opportunity out there for us. I will tell you, many of you know we have an energy business that we've stood up mostly doing, let's call it, solar on our rooftops, complemented with battery and storage. That means we have an energy team, energy experts that we've been able to point at this initiative, too. As we have data center conversions out there that everything is lined up with the power procurement businesses to play. We have a team dedicated to that kind of thing today. So we're having an Investor Day to a little plug on this in the fourth quarter. And one of the segments is around the Prologis portfolio broadly, and we'll be talking a bit more about higher better use in data centers there.

So I'm just going to jump on to the potentials in energy because it's been a big part of the story in the past few years. Maybe update us on how you're doing in terms of why it's produced, its targets, revenues generated from essentials, preclusions, door panels and all that and where that can go?

Yes. So we are going to close out the third quarter, I think, just shy of 500 megawatts is my memory in terms of power production and storage in the portfolio will be north of that 0.5 gigawatt figure by year-end. We have a big team very focused on this now. And you've seen, as we look at some of our earlier goals, ambitions for power production in this portfolio, we've increased significantly. I think our prior 2025 goal was for 400 megawatts and we've passed that significantly by now and upgraded that goal to a gigawatt by 2025. You may know the staff, and I'll repeat it's just that we're the second largest corporate on-site power producer in the U.S. on that number, but currently, only about 4% of the portfolio is generating slower. What is this very logical space, which is a warehouse rooftop. There's a lot of surface area out there that was untapped. And recognizing its potential improvements in the cost of this entire business, the IRA is certainly helpful. There's a very meaningful business there for us to have.

You're talking about IRA, I've got questions about that. How much does the IRA have in terms of solar panel charging? How much incremental is the demand and can that generate you and others in this space?

What it did is it gave more clarity and certainty to -- luckily that you do frankly need in the U.S. in many markets to make solar pencil. So you could do solar without the benefit that IRA at a decent return, I'll say, it wouldn't pass what we acquire. The IRA provides in addition to returns that gets you into kind of low double digit on IRRs. And the IRA lengthened the time of the tax credits, it made it clear what was going to generate a 30% versus 40% versus 50% tax credit depending on where you're procuring materials, what [ time of length ] you're using. And then for REITs that gave you ability to sell tax thesis without that income needing to be distributed to shareholders, which would kind of upend the point of selling tax credit. So that last one is very important. Plus, I'll say, because the volume that we expect, we may be generating a tax credit years would likely exceed what we could utilize in our own TRS and so the visibility on monetization is really important to the expansion of this program.

Great. Let's go to strategic capital, which I think you issued a release a couple of weeks ago saying that you cleared redemptions in the U.S. and Europe. You invested $500 million in online. Can you remind the audience what was going on there in terms of both redemptions and contributions and where you see that going for the rest of the year?

Yes. And to tell that story, I'd like to back up quickly to about a year ago, you and I were talking. A year ago, we were entering this first phase of kind of asset value resets in real estate, we were sitting here at this conference, now expecting property values to potentially decrease in the third quarter. And they didn't much in the U.S. We saw a little bit in Europe at end of the quarter. And it gave rise to some increases in redemption requests from investors, namely in our open-ended funds. And I'd just like to start there because I think this is a good message about our governance and the way we run the funds because at that time, we told our investors more importantly, but also the public side that we would be honoring those redemptions of course, but we felt that the values on that day, September 30 had yet at all reflected what might come over a little bit more passage of time from appraisals in terms of valuation changes. And I'd just like highlighting that we got that right. If I take Europe in the following 2 quarters, we had continued write-downs. I think they aggregated to about 20% cumulatively by the end of the first quarter of '23. And at that point, we said, based on our outlook at underwriting and sufficient evidence from [indiscernible] we said these are good values for us to transact on again maybe at this fund, and we proceeded on redemptions in Europe in the second quarter. We also said at the time that the U.S. seemed to be a quarter behind. It felt like they needed one more quarter of asset value reset. We saw that in the second quarter. It was a 5% decline. I think from memory was the largest of those few quarters. And we similarly said on this last earnings call that, yes, these U.S. values look good. And we proceeded on the USLF redemptions in the third quarter, just this third quarter now July. So that's why we put an announcement out on a few weeks ago. There are -- that is on what's called active redemptions. Redemptions become active, 2 quarters following the date they go in. We'll have some more redemptions to fill out for USLF. I think fundraising in the strategic capital vehicles has occurred. We've been raising new equity in the vehicles, but it's in smaller amounts than we would like. And I think it's a little bit behind -- I'm going to say, a quarter right now from where we would have liked to have seen it. And I think that's very easily understood when I look at my own Bloomberg screen every morning and see, as I mentioned earlier, treasury or other rates bouncing around, I think that confidence in the sector, they want to get further into logistics real estate from here is definitely there from all the investor chatter that I see. But I think when they compound that with what do I think my cost of capital is and some fluidity there, it's slow decision-making event.

In terms of earnings there and the promotes, you've had just over 3 years, you typically aren't a promote under funds and they've been very large in the past few years. Looking forward, kind of given the volatility just in your cost of capital and valuations, will those be harder to come by as we look through the next?

Well, I think we will have promote. The -- it's true that the promote income in '22 and '23 driven by Europe in '22 and the U.S. in '23 was very significant. And ultimately, the quant on the size of the float is going to be driven by 2 things logically. It's going to be what was the level of appreciation in this region or of this portfolio, that's going to drive what is outperforming and then two would just be the nominal size of the fund itself. Is this a big fund for that to be applied to or a small fund? So I think the first of those, it will be hard to come by the level of property appreciation that we saw in the last 3 years in our jurisdictions going forward. I think we could all agree that, that was pretty exceptional, never say never, but I wouldn't -- I don't count on that. I do think continued growth in the AUM of our vehicles. In addition to adding new vehicles, we added a new vehicle in the second quarter in Japan, for example, so there's always this AUM growth, which I think there's a case to go in probably 10% or low double digits per year based on just a normalized level of annual appreciation, new funds, contribution activity from our development portfolio, third-party acquisitions. There's a case for the quantum of AUM to grow anyway, but 2025 specifically has no meaningful scheduled promotes, I would say, right now, there's some very small AUM that's promotable next year. I'm sorry, said that wrong, '24, '25, Europe comes back and I'll say one more thing on this point. We have worked to level out what promotable AUM is, it's not hitting in these big chunks every 3 years. And that would be kind of a big boat to turn. But there will be a time where there's a much more even amount of AUM promotable and every year that should serve to give a little less volatility in this line item.

Maybe a quick one on the question, earlier this year, there's a lot of focus on access to financing and real estate, a lot of questions about the ability for our real estate businesses to rate money. You've been able to do that all over the world this year. Can you talk about how you've done that and what you have left to do this year and what your too, I guess, ideal leverage ratios are?

Yes. I'll start with the last one, which would be, I would call us 4.5x debt to EBITDA and 20% LTE roughly. And I think our rating would have us more comfortably maybe 25% loan-to-value and debt to EBITDA then makes it more 5.5x. I'd be very consistent with our ratings and it would probably be a bit more optimal. We certainly get questions about why don't you lever up a bit, is too little leveraged if you were to really financially engineered on us. I think it probably is. But if you think about that over the course of the last, let's say, 5 years, where EBITDA growth is probably in that period of time range between 6% and 10%, maybe the last few years, closer to 8% to 10%. Valuation growth has been what it has, you can imagine even maintaining leverage with those 2 pieces of the ratios moving as quickly as they are is almost challenging. So building upon it from there, unless you're willing to just deploy capital into assets you don't necessarily want to find strategic, which we're not willing to do. It's really hard to bring it up from there.

Okay. I have about 2 minutes left. So I think we asked this question in every panel to the audience. The question is, do you see your position in PLD increasing understanding what the next year? I think we look at for Europe [indiscernible] we'll give the answer once we have that. And any questions from the audience? If not, maybe one more from me in terms of how you look at your valuation and cap rates. You talked about that meetings over the past year or so, there's a, I guess, a debate about whether we should look at kind of current market cap rates or build in the multi-market and use that or look at -- just work with that. How should we be evaluating your company in time? And where do you think your current stock price lie?

Yes. Well, I won't be surprised. I think we train sizable discount, take the least part $28 billion to throw that in the dividend, what dividend yield do you get at this price. I mean where is it, there's a few obvious things to look at, let's say, the direction that the stock should be and will be going. I'm glad you highlighted, we've seen a lot of difficulty in understanding spot values or NAVs with the disparate out there. In our industry, I don't -- and maybe any -- if I think about it, has never had to deal with what does it mean for the valuation of real estate when the lease mark-to-market 66% over the prior quarter, 68% difference in market and place cap rates is very wide when you're doing that math and the confusion in terms of what are the brokers quoting, what is this real estate roller deal voting, there's a lot of confusion on there, and I think it's a mismatch of NOI and cap rates being applied and at times arriving at nonsensical value per foot. So yes, we've encouraged people. I do it myself all the time. I will tell you when deals come through, investment committee, if someone's quoting a cap rate boil down to -- just tell me what it is for. So I'm clear. The logistics real estate is -- if you look at our supplemental, you can see the replacement costs by our development portfolio, if you put a margin on it, but it's 200, 225, something on that order if folks are out there capping and arriving at values that are wildly off when we tried to [indiscernible] or as much as we can.

Well, Tim, thanks a lot for your time today. Appreciate it.