Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Wow.
Speaker 1: We like to remind everybody that Amazon Home Depot, Fedexups,
Speaker 1: also Giga Cloud Technology are just some of our next
Speaker 1: guest big customers. We're talking about the one hundred and
Speaker 1: twenty five billion dollar market cap company. It is a
Speaker 1: warehouse logistical read it is Prologious, that is massive, and
Speaker 1: it owns, develops and manages logistical warehouses for the biggest
Speaker 1: companies like we just mentioned. And they've got more than
Speaker 1: a one point three billion square feet in twenty countries.
Speaker 1: So what a great person to get a view in
Speaker 1: terms of the macro of what's going on around the world.
Speaker 3: Considering tim our backdrop.
Speaker 4: Shares up about three percent so far this year. We've
Speaker 4: got Dan Letter with us CEO of pro Logis. He
Speaker 4: joins us here in the studio. Dan, good to see
Speaker 4: you again. You just took over as CEO that we've
Speaker 4: spoken just a few months before that. I want to
Speaker 4: start with what Carol mentioned in the macro, because we
Speaker 4: are just squarely focused on an increase in oil prices
Speaker 4: as a result of the war or iron what that
Speaker 4: means for consumers, what it means for business leaders.
Speaker 5: How are you looking at the macro environment.
Speaker 2: Yeah, well, first, thanks for having me. Great to be
Speaker 2: here with you too. I look at the macro environment
Speaker 2: right now, and I think about all the chaos and
Speaker 2: turbulence our customers have been through, going back to COVID
Speaker 2: six years ago, the world was shut down right over
Speaker 2: the course of these six years. Think of all the
Speaker 2: geopolitical events post COVID, the raid hikes, and how that
Speaker 2: impacted our customers. And I actually look at these customers
Speaker 2: and I realize they've built a lot of endurance. They
Speaker 2: actually this turbulence is more of a feature of the
Speaker 2: environment that we're living in today. And I look back
Speaker 2: to a conference where we were talking to investors a
Speaker 2: couple weeks ago, actually right after the weekend of the
Speaker 2: original I ran bombing, and we were telling our customers
Speaker 2: twenty twenty six started really strong. Twenty twenty five was
Speaker 2: our second largest leasing year ever, and we were seeing
Speaker 2: that go into twenty twenty six.
Speaker 3: Does that continue.
Speaker 1: There's a lot that's happened, like it's just I think,
Speaker 1: kind of shocking. And we talk about this so much.
Speaker 1: No one expected some of the things that have come
Speaker 1: at us DAN in twenty twenty six, So since that
Speaker 1: that was just a few weeks ago or a month
Speaker 1: ago or so of that update and that you were
Speaker 1: talking with like is that optimism still there and is
Speaker 1: your outlook on twenty twenty six still the same.
Speaker 2: So what we see at this time is customers don't
Speaker 2: necessarily pull back. I look back to last year at
Speaker 2: this time we had expressed a little caution that led
Speaker 2: into what was Liberation Day, right, and you see customers
Speaker 2: just look around and see what's going on and then
Speaker 2: lean in. They make long term decisions, five, seven, ten
Speaker 2: year decisions when they're working with us, right, and so
Speaker 2: they're really kind of seeing through that noise. And when
Speaker 2: you look at these decisions they're making, it's really only
Speaker 2: three to five percent of the overall cost of the
Speaker 2: supply chain.
Speaker 1: So no people who were maybe going to sign a
Speaker 1: contract that backed out or anything.
Speaker 2: Like that, we hadn't seen that. And it's really just
Speaker 2: a matter of they digest it and then they it
Speaker 2: comes in different forms. Maybe you end up seeing some
Speaker 2: short term leasing or but certainly no pullback.
Speaker 4: What about when it comes specifically to data centers, because
Speaker 4: last time we talked with you about the data center
Speaker 4: activity you're seeing and in that time a lot has happened.
Speaker 4: We've heard from different companies. Microsoft is renting a Texas
Speaker 4: data center that was dropped by Oracle and open Ai.
Speaker 4: Are you seeing any signs of weakness or slow down
Speaker 4: or changing trends when it comes to the data center business?
Speaker 2: So, our data center business was really born from our
Speaker 2: higher and better use business. When you have six thousand buildings,
Speaker 2: fourteen thousand acres of land close to seventy eight percent
Speaker 2: of the world GDP, that is where the next way
Speaker 2: of the economy is. That's where data centers need to be.
Speaker 2: And we have deep relationships with these hyperscalers. We have
Speaker 2: a fortress of a balance sheet, and every megau we
Speaker 2: can deliver over the next three years is in some
Speaker 2: sort of least discussion right now. And we have five
Speaker 2: point seven gigawats of power that we control or are
Speaker 2: in its advanced.
Speaker 5: Meaning full capacity in terms of negotiations.
Speaker 2: Right now, we're at full capacity.
Speaker 4: So nobody else could come to you right now and
Speaker 4: say we're interested in the next few years and you
Speaker 4: have an option for them.
Speaker 2: No, that's not the case. Just the next three years
Speaker 2: of power that we can deliver. These hyperscalers. These major
Speaker 2: data center users are heavily focused on near term power,
Speaker 2: and we're focused on delivering power much longer beyond that,
Speaker 2: and so we're certainly in discussions beyond that next three years,
Speaker 2: and that's where this five point seven gigawatts of power
Speaker 2: will come in.
Speaker 3: So that's the power you've secured, right.
Speaker 2: So we've secured one point eight gigawatts, and then we
Speaker 2: have three point nine gigawatts that we call in the
Speaker 2: advanced stages, which means it's a year or two behind. Okay,
Speaker 2: but again, think of the universe of opportunities we have
Speaker 2: behind that five point seven you have, which is just
Speaker 2: the size of our platform.
Speaker 1: All right, So then I'm going to say, are you
Speaker 1: looking to secure even more power?
Speaker 2: Absolutely, we are working. And remember we're a global company.
Speaker 2: As you said, we're in joy countries and so we're
Speaker 2: working around the tier one, tier two mare it's in
Speaker 2: the United States, we work around the flapp dy markets
Speaker 2: in Europe, and we're starting to see it actually in
Speaker 2: Latin America and Japan as well.
Speaker 1: So has anything changed because of the war or is
Speaker 1: really everybody kind of looking through this because we talk
Speaker 1: about an energy environment, you know, We've talked a lot
Speaker 1: about LNG specifically because Qatar has lost about thirty percent
Speaker 1: of their capacity and that's going to take three to
Speaker 1: five years to build. There's going to be a floor
Speaker 1: where energy prices are higher, and so I'm just curious
Speaker 1: has any of that impacted you guys in terms of
Speaker 1: how you think about outlook build spend.
Speaker 2: Costs well as it relates to logistics real estate. Again,
Speaker 2: it's three to five percent of the overall costs. So
Speaker 2: our customers need to make these decisions long term and
Speaker 2: they want to be close to those population centers. So
Speaker 2: can't necessarily sit back and wait.
Speaker 3: Can I just throw one thing out there?
Speaker 1: This could be a little wacky, but it's it's Elon
Speaker 1: and so that's kind of whacky. But we've talked this
Speaker 1: week right about data centers in space. Is that something
Speaker 1: you are thinking about and how that might impact you guys?
Speaker 1: You obviously are doing this on Mother Earth, and I'm
Speaker 1: just wondering, is that just something that.
Speaker 2: Well, we're going to stick to these twenty countries that
Speaker 2: we're focused on. I think I think there's plenty of
Speaker 2: opportunity for us for the foreseeable future. But maybe ask
Speaker 2: me in ten years.
Speaker 4: Okay, yeah, I mean, but to Carroll's point, why you know,
Speaker 4: with that getting so much discussion right now, why are
Speaker 4: you just focused on terrestrial? I mean, I know it
Speaker 4: would have sound crazy. It sounded crazy a year ago
Speaker 4: to be talking about this, but this is something that
Speaker 4: you know a lot of people think is the future
Speaker 4: of these data centers.
Speaker 2: Well, we do this business one hundred percent on a
Speaker 2: build the suit basis, so we have leases in place
Speaker 2: before we put a shovel in the ground, and we
Speaker 2: have so much opportunity in front of us, we don't
Speaker 2: need to be thinking about another vector to grow this
Speaker 2: data center business.
Speaker 3: Yeah, that's pretty fascinating. What would change your mind?
Speaker 2: Though?
Speaker 3: In terms?
Speaker 1: Would it have to be an economic slode in which
Speaker 1: some have talked about, depending on when this war ends
Speaker 1: or even if we start, if we see inflationary pressures continue,
Speaker 1: and whether there's demand destruction that slows down essentially.
Speaker 3: The global economy, a lot has to fall into place, as.
Speaker 1: You know, Is that what would maybe change your outlook?
Speaker 1: Or again, because everything's locked in place, if the economy
Speaker 1: slows down, what kind of impact might that have on
Speaker 1: you guys? Or it doesn't matter because you've already kind
Speaker 1: of signed things in are moving ahead because it's longer term.
Speaker 2: When I think about our core business, Yeah, if you
Speaker 2: think of the building blocks for our core business is
Speaker 2: seventy percent of the US GDP is consumption. Our buildings
Speaker 2: are close to the major population centers the United States.
Speaker 2: So on top of that, there's the e commerce secular
Speaker 2: demand driver. We've been talking about e commerce for a
Speaker 2: long time. Pre Covid, e commerce penetration as a percentage
Speaker 2: retail sales was in the seventeen ish percent ratio rate.
Speaker 2: Now it's like mid twenties. We see that growing another
Speaker 2: one seventy five to one hundred basis points a year
Speaker 2: through the end of the decade. That alone is additional
Speaker 2: demand on top of that. So there's a big tailwind
Speaker 2: for our growth.
Speaker 1: So but if there was an economic slowdown, that could
Speaker 1: be a problem, well or would that not even impact
Speaker 1: That's what I'm saying.
Speaker 2: One thing I forgot to mention is, yeah, e commerce
Speaker 2: for every dollar retail sales, it needs three x the
Speaker 2: warehouse space because think of all the activities that happen
Speaker 2: in the brick and mortar and the returns happened there.
Speaker 2: There's the stock in the back. And then with e commerce,
Speaker 2: there's been that proliferation of skews and all of us
Speaker 2: we're looking for speed and we're looking for choice, right
Speaker 2: and so that's been a big driver. And you may
Speaker 2: see flat retail sales, but you'll see e commerce penetration.
Speaker 5: That's good.
Speaker 2: That's commerce penetration is great news for logistics real estate.
Speaker 4: On that I'm interested in the droid venture that you
Speaker 4: guys announced last week, one point six billion dollar JV
Speaker 4: with GIC to build a suit warehouse development.
Speaker 5: Why partner with GIC, Why not do this solo?
Speaker 2: Well, we've long been developing on our balance sheet, but
Speaker 2: now look at our development business. We can build forty
Speaker 2: three billion dollars more of logistics space in our land
Speaker 2: bank alone, not buying any more lane. And on top
Speaker 2: of that, we have this data center business.
Speaker 3: We see that one more time. That's tremendous.
Speaker 2: So we have two hundred and thirty billion worth of
Speaker 2: AUM today at the end of last quarter. Yeah, we
Speaker 2: can build another forty three billion of logistics buildings on
Speaker 2: our fourteen thousand acres of land. That's two hundred and
Speaker 2: forty million square fee. We can grow at the company
Speaker 2: eighteen percent without buying another piece of land. Then we
Speaker 2: have this data center business. Think about it from a
Speaker 2: megawatt perspective. If you build a powered shell that's on
Speaker 2: the continuum poweredshell over here, that's about two and a
Speaker 2: half to three million dollars of megawatt. You go out
Speaker 2: this side of the continuum and that's a turnkey that's
Speaker 2: everything soup to nuts built out. That's fifteen million a megawatt.
Speaker 2: So think about how big that data center development could be.
Speaker 2: So we're looking at diversifying our capital stacked there and
Speaker 2: our partners great to have a new partner with GIC here.
Speaker 2: They want a piece of this development business and when
Speaker 2: we're doing that to help build bigger relationships globally.
Speaker 3: Same you're not optimistic, Dan, come back soon.
Speaker 2: Thanks for having me.
Speaker 3: Really appreciate it. Dan let Our CEO of Prologists,