Why Logistics Giant Prologis Inc. Q2 Results Should Matter To All Investors

In a nutshell, this massive industrial REIT has its fingers on the pulse of global trade and can give investors unique insights into economic growth by both region and by country. Prologis, Inc.

is an S&P 500 company with an industrial portfolio totaling 670 million square feet, spread across 21 countries around the globe.

Source: Prologis 2Q15 Earnings Supplemental Notably, ecommerce giant Amazon.com

is the largest customer, with global supply chain and third-party logistics experts: DHL, CEVA Logistics, FedEx

, Nippon Express and UPS, all among PLD's top 15 customers.

Large buildings over 500,000 SF in the Prologis portfolio have remained at ~98 percent occupancy during the past four years, driven by ecommerce, retail distribution and supply chain optimization. Prologis - Portfolio Overview Prologis has an equity market cap of $19.8 billion, with $56 billion of global AUM broken out: Americas 62.7 percent, Europe 25.3 percent and Asia 12 percent, including assets managed for multiple JV investors.

Source: Prologis 2Q15 Earnings Supplemental This includes a global land bank which can support another $10 billion of development, which according to Chairman and CEO Hamid Moghadam on the earnings call is "…about four years of activity at our current pace." Prologis - Market Insights Americas: "New supply in the US continues to be absorbed at a rapid pace driving vacancy down to 15-year lows. Our forecast calls for declining vacancy rates in the US through the end of 2016 with supply and demand reaching equilibrium in 2017." • http://www.benzinga.com/news/earnings/15/04/5424370/5-slides-explain-phenomenal-prologis-jv-bet-on-u-s-industrial-real-estat On May 29, Prologis closed its previously announced $5.9 billion stock and cash acquisition of KTR Capital, which boosted its U.S. industrial portfolio by ~60 million SF. These assets were acquired on behalf of PLD's U.S. Logistics Venture with Norges, and the Prologis share was $3.2 billion. Europe: "In Europe improved customer sentiment is leading to growth in occupancies and rents especially in the UK and Northern Europe. Markets in Central and Eastern Europe are also on the mend, albeit at a slower rate. Even Southern Europe which has lagged the other regions is showing modest improvement." According to Moghadam, the big European real estate story is cap rate compression, "…rates on the continent have tightened by about 150 basis points since 2013 and we expect them to drop another 50 to 75 basis points over the next 12 months. Asia: "Rents in Japan are growing at a healthy pace and vacancies are low. Competition, however, is heating up, putting pressure on land prices and development margins. In China procuring land in the top-tier markets remains a challenge but high quality product continues to lease in line with pro forma." "Our investment strategy with its focus on global markets has enabled us to achieve rent increases of 22% with our share of same-store NOI exceeding 7% in the second quarter," according to Moghadam. Prologis Q2 2015 Highlights On July 21, Prologis announced strong results for the quarter ended June 30, and increased earnings guidance for FY2015. FFO Growth: Core FFO (funds from operations) per diluted share was $0.52 for Q2 vs $0.48 for the same period in 2014, an increase of 8 percent. Guidance: "Prologis increased the midpoint of its full-year 2015 Core FFO guidance and narrowed the range to $2.18 to $2.22 per diluted share from $2.16 to $2.22 per diluted share, representing expected year-over-year growth of 17 percent." Occupancy: during Q2 increased by 80 bps Y/Y to 95.4 percent. Notably, the leasing of buildings 100,000 SF and less accelerated, resulting in occupancy increasing from 89 to 95 percent. Pricing Power: "GAAP rent change on rollover was 16.6% and the highest quarterly level we recorded to date," according to the release. Dividend: Prologis announced an 11 percent annual dividend increase to $1.60 per share. Notably, Prologis has now raised its dividend three times over the past 18 months, for a cumulative increase totaling 43 percent.