PLD 3Q21 Results/Investor Day: Prologis (PLD) kicks off REIT earnings season this Friday, 10/15. We are looking for a modest beat-and-raise and are modeling FY21 Core FFO of $4.12/share vs. Consensus of $4.07 which is inclusive of $0.02/share of volatile promote income. We think its likely that PLD takes up its ranges (currently $4.04-$4.08 and $4.02-$4.06, respectively) and ultimately converges towards our number by they time it reports 4Q21 results early next year. Pre-COVID PLD typically introduced forward year guidance along with 4Q results, however this year the company is holding a virtual analyst/investor day on 10/18 to review its unique Strategic Capital program as well as the development platform, so it is possible that (1) the FY22 outlook comes early and/or (2) there is an updated view provided for company-wide compounded NOI and earnings growth. We are modeling +8% Core FFO earnings growth in FY22 inclusive of promotes. As a reminder, we are underweight Industrial/Warehouse along with Quad 2 in 4Q, with the exception of idiosyncratic IRM which remains on our Best Idea Long list. We included PLD's GIP backtest data in Figures 1, 2 & 3 below for context, and interestingly from a macro perspective the history for Quad 3 to 2 transition is not great for PLD and Industrial/Warehouse broadly.
Figure 1: PLD Quad GIP Backtest
Figure 2: PLD Qtrly Expected Value by Quad
Figure 3: PLD Total Observations by Quad Regime
Single-Family Rental (SFR) News: Yesterday a release from U.S. SFR owner/operator Quinn residences may have flown under the radar, but contained some interesting tidbits for the SFR space and the broad investment case for the sector. Just more evidence of the flood of institutional capital entering the subsector. Quinn raised about ~$750 million of equity to develop build-to-rent single-family communities in the Southeastern United States which is obviously a critical geography for REITs AMH & INVH. Assuming 40-50% leverage this could ultimately translate into ~$1.5 billion of total investment capacity. Quinn currently owns ~1,000 homes and is under contract to acquire ~1,500 additional homes that are currently being built for delivery to its communities by year end. A couple of interesting quotes: "...add much-needed supply of new reasonably-priced rental homes in the high population growth markets of the Southeastern United States," and "The single-family rental sector sits at the intersection of two of our high-conviction themes - increasing housing demand and a lack of reasonably-priced housing alternatives..."
Trepp September CMBS Special Servicing Report: The special servicing rate fell for the twelfth consecutive month to 7.48% from 7.79% with all main property sectors flat-to-down. Lodging and retail remains broadly distressed. The percentage of loans on the watchlist for special servicing rose for the ninth consecutive month, up +32bp to 29.3%.
Recent Notes:
10.10.21 - SUNDAY NIGHT REIT READ | 10.10.21 | (POSITION MONITOR UPDATE)
10.8.21 - BLACK BOOK ROUND-UP | AMERCO (UHAL)
10.7.21 - BEST IDEA ROUND-UP | AMERICOLD REALTY TRUST (COLD)
10.5.21 - REITS DAILY BRIEF | 10.5.21 (ESS, FR, STAG, PLYM, DRE)
9.30.21 - REITS DAILY BRIEF | POSITION MONITOR UPDATE | 9.30.21 | (SLG, VNO, PGRE)
9.29.21 - REITs DAILY BRIEF | 9/29/21 | (APARTMENT RENT TRACKER)
Please e-mail with any questions.
Rob Simone, CFA
Managing Director
Twitter: @HedgeyeREITs
