Prologis, Inc. (NYSE:PLD) Q4 2014 Earnings Conference Call - Final Transcript
Jan 27, 2015 • 12:00 pm ET
Thank you, Tracy Warren, Senior Vice President, Investor Relations, you may begin your conference.
Thanks, Keith and good morning, everyone. Welcome to our Fourth Quarter 2014 Conference Call. The supplemental document is available on our website at Prologis.com under Investor Relations. This morning, we'll hear from Hamid Moghadam, our Chairman and CEO, who will comment on the company's strategy and the market environment and then Tom Olinger, our CFO, will cover results and guidance. Also joining us for today's call are Gary Anderson, Mike Curless, Ed Nekritz, Gene Reilly and Diana Scott.
(Forward-Looking Cautionary Statements)
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 have provided a reconciliation to those measures. With that, I'll turn the call over to Hamid and we'll get started.
Thanks, Tracy, and good morning, everyone. We had a terrific quarter to finish off an excellent year. A year into our three-year strategic plan which we presented to you back in September of 2013, we are ahead on both earnings and deployment targets. Our outperformance reflects the strength of our repositioned portfolio, which today is focused on the highest quality assets in the best markets around the globe.
Our earnings in 2014 exceeded the top end of our guidance driven by operations and capital deployment. Let me take a few minutes to discuss the three key elements of our strategic plan. Our first priority has been to capitalize on the rental recovery. The improvement in market fundamentals has been strong, but somewhat uneven across regions. It is underway
in the Americas, Asia and certain parts of Europe at a pace ahead of our initial projections, while Southern and Central and Eastern Europe lag behind. In the US, net absorption in 2014 was right on our forecasts at double the rate of deliveries. Our US occupancy outperformed the market by 320 basis points. Demand was broad based. At year-end, we're more than 98% occupied in many of our markets. This occupancy combined with double-digit rent change on (inaudible) resulted in same-store NOI growth of more than 5% in the US and 3.7% overall. For 2015 we forecast deliveries of 165 million square feet against absorption of 225 million square feet leading to further increases in occupancies.
Moving to Europe, despite the bifurcated recovery at 95%, our occupancy in the region outperformed the market by 210 basis points. As we forecasted cap rate compression has been a headwind on rental growth in Europe. What's surprising is how far and how fast cap rates have dropped on the continent. While absorption and delivery information is harder to come by in Europe, we estimate (inaudible) absorption of 66 million square feet compared to new deliveries of 45 million square feet in 2014. This drove market occupancy up by 150 basis points. Looking forward, market occupancies in Europe will continue to rise as supply remains constrained.
We see space utilization running at