Prologis Park Osaka, Osaka, Japan.
Creating Value Beyond Real Estate
A message from our CEO
Fellow Stakeholders,
Communities around the world are struggling under the social and economic weight of the COVID-19 pandemic, while at the same time expressing pent-up frustrations over centuries-old systemic social and racial injustices. First, please know that our hearts go out to everyone affected, as does our gratitude to those on the frontlines working to address these challenges every single day.
Also know that Prologis is not simply supporting from the sidelines. In fact, the demonstrated resiliency of our global platform has put our company in a position of financial and operational strength, which has allowed us to deploy a variety of resources to help.
Specific to COVID-19, we established a $5 million global relief fund to support nonprofits, hospitals and organizations that are focused on public health and safety, as well as access to food and economic recovery. We also donated 1.2 million square feet of space, equal to $4.9 million of in-kind rent, in Prologis facilities across 13 global markets through our Space for Good program, which we stood up to assist municipalities and relief organizations. Furthermore, we made an initial donation of $250,000 to the Equal Justice Initiative, with a total of $1 million committed to support racial equality causes. We also made a public statement reinforcing our continued commitment to focus on inclusion and diversity, and speak out against racial injustice.
Importantly, we view our response to these challenges as a meaningful extension of our historical leadership and ongoing commitment to environmental stewardship, social responsibility and governance (ESG). To guide us through our next phase of growth, in 2019 we launched the 3Cs: Customer Centricity, Change Through Innovation and Operational Excellence, and Culture & Talent. We believe our ESG initiatives further and embolden the 3Cs, and create value for our stakeholders—value that reaches beyond the walls of our real estate.
Customer Centricity has always been at the core of our business, and on the ESG front this past year we expanded our approach to improve the customer experience even further. For example, we made significant strides to enhance the Community Workforce Initiative (CWI), which we launched in 2018 to address our customers’ pain points around labor. To that end, we developed a cutting-edge, digital logistics training curriculum and formed direct partnerships with global customers to develop solutions to address their specific talent needs, such as virtual reality training tools for supervisors and employee engagement platforms for frontline workers. In addition, through our Prologis Ventures investment into WorkStep, an industrial talent hiring and retention platform, we delivered customers a more efficient and cost-effective way to meet their talent needs. In fact, in one case, a global third-party logistics customer leveraged WorkStep to hire during its peak season while significantly improving their retention.
Hamid R. Moghadam, Chairman and CEO
Change Through Innovation & Operational Excellence is about embracing new challenges and using our global footprint and expertise to offer innovative solutions to our customers. As an example, we leveraged our scale to establish a dedicated manufacturing line of LED light fixtures that we can install through our Prologis Essentials LED program, which resulted in procurement cost savings of $15 million in 2019. Also, as our customers come to us for our expertise in sustainable real estate solutions, we are always looking for ways to help them tap into the environmental and economic benefits of renewable energy. For example, we helped our customer L’Oréal achieve carbon-neutral operations in Muggensturm, Germany, with a facility that featured a 2 megawatt (MW) solar installation and the procurement of certified renewable energy from the local electric grid.
Culture & Talent has always been the driving force behind our success. Our commitment to a philosophy of inclusion and diversity is critical to our future as a company. This ranges from our focus on diversity in hiring practices to ensuring that we establish the right tone from the top. Along those lines, we announced that Ms. Avid Modjtabai, a 27-year Wells Fargo veteran and one of American Banker’s “Most Powerful Women in Banking,” joined the Prologis board of directors in February 2020. We are thrilled to be able to gain from her perspective. Her extensive finance and technology expertise, coupled with her focus on customer experience, is an enormous asset to our company.
Never has it been more important than during these trying times that we maintain our dedication to ESG, which has been recognized globally: on the Corporate Knights Global 100 Most Sustainable Corporations in the World list, we were named the #1 real estate company, #6 in the U.S. and #26 overall; and we were included in the Dow Jones Sustainability World Index, placing us among the top 10% of global companies. We are continuing to shape a model for real estate that delivers tangible solutions and value to all of our stakeholders and extends past our net asset value. In the pages that follow, we hope you will see that this value was further propelled in 2019 by our ESG leadership, not just within the real estate industry, but in the global business community.
Sincerely,
Hamid R. Moghadam
Chairman and CEO, Prologis, Inc.
We are continuing to shape a model for real estate that delivers tangible solutions and value to all of our stakeholders and extends past our net asset value.Hamid R. Moghadam, Chairman and Chief Executive Officer
GLOBAL REACH
Scale augments efficiency.
$118B
in assets under management (AUM)
814 MSF
owned, managed or under development
19
countries
3,840
buildings
Partnership ensures enduring value.
5,000
customers
1,200
multisite customers
global occupancy rate
Business model delivers results.
142.7%
five-year TSR1
12.37%
outperformance over MSCI US REIT Index over past five years1
16.5%
greater dividend CAGR than REIT average2
14.7%
net earnings per share five-year compound annual growth rate
12%
core FFO3 per share compound annual growth rate
1. Total stockholder return (“TSR”) is calculated based on the stock price appreciation and dividends paid to show the total return to a stockholder over a period of time. TSR assumes dividends are reinvested in common stock on the day the dividend is paid.
SUSTAINABILITY AT A GLANCE
Our forward-looking approach to sustainable design, development, operations and culture delivers long-term value for our stakeholders.
Employees
93%
of employees completed Inclusion & Diversity engagement survey versus external benchmark of 70-80%
100%
of employees have access to career training and education
4
business days per employee annually to volunteer with charitable organizations
Customers
80%
of our top 25 customers rent our sustainably certified space
68%
of our top 25 customers align with us in supporting the UN Sustainable Development Goals
8.9%
higher retention rates with our top customers (covering 35% of our total square footage) that engage with us through our outreach programs
Environment1
212 MW
of total solar energy generating capacity
456
sustainable building certifications in 18 countries
46%
of total operating portfolio has cool or reflective roofing
88%
of total operating portfolio has efficient lighting
Communities
12,000
volunteer hours in 2019
$2.3M
charitable contributions from the Prologis Foundation
$1.1M
of in-kind rent donated to 15 nonprofit organizations through the Space for Good Program
ESG Trends Requiring Stakeholder Solutions
Customers
Customers face ongoing challenges in attracting and retaining qualified labor.
120% turnover reported by e-commerce customers in 20191
Our experiential learning lab in Miami, Florida, prepares high school students for jobs in the logistics industry.
Communities
When selecting development partners, urban communities seek long-term contributors to sustainability, transit and labor solutions.
56% of 2019 investment in development was based in urban core2
We collaborated with a UK county council to conduct an electric bus pilot around our Prologis Dartford project as a potential solution countywide.
Investors
Investors increasingly call for more disclosure of ESG data and alignment with climate risk frameworks.
77% of institutional investors use ESG in their investment approach3
Employees
Potential and existing employees want to work for companies that give back.
67% of millennials factor in social responsibility when evaluating employers4
Since 2013, Prologis employees have volunteered nearly 54,000 hours through IMPACT Day, the company’s annual day of global service. Additionally, we make significant financial contributions to our communities on an annual basis and especially during times of need.
2. Based on Total Expected Investment (TEI) of 2019 Development Starts as reported in 2019 10-K.
3. https://www.thinkadvisor.com/2018/10/25/institutional-investors-warm-to-esg-investing-rbc-study/
4. Gallup, May 2019.
Culture of Innovation
Throughout 2019, Prologis embraced the challenge of thinking in new and innovative ways. Our focus on Culture & Talent, as well as Change Through Innovation and Operational Excellence (two parts of our 3Cs), gave rise to several initiatives, including Prologis Talks, which are hosted by our Chairman and CEO Hamid Moghadam and feature key leaders from other industries who share their experiences around embracing change. We are focused on building and nurturing an innovative mindset that unlocks solutions for our customers, while creating a culture of inclusion and diversity of ideas.
Prologis Talks interview with Scott Cook, co-founder of Intuit.
Operations
In 2019, we looked into further streamlining our processes and identifying innovative methods to make our operations even more efficient. Here are some examples:
- Lighting Sensors – Motion and daylight sensors that dim and adjust based on available daylight to create energy savings for our customers are added to each Prologis-branded, directly manufactured LED light fixture.
- Design Optimization Workshops – In the building development planning period, these workshops serve as a cross-functional collaboration to explore ideas and discuss insights to reduce risk and create additional value from our buildings. Prologis holds these workshops for new developments globally—above and beyond the industry standard.
- Prologis Essentials – Launched the Prologis Essentials application, an online marketplace of customer solutions.
Installation of energy-efficient fixtures from our Prologis Essentials LED lighting program.
Forklift simulator technology at Prologis Labs in San Leandro, California.
Technology
The future will be built by those who harness the power of technology and data. To keep us on the cutting edge, we built technological infrastructure, such as:
- Data Lake – Across our portfolio of nearly 4,000 buildings, we have access to vast amounts of data. Our data lake is a repository from which we derive value-adding analytics.
- Prologis Labs – Leveraging our technical expertise and appetite for innovation, our lab in San Leandro, California, conducts experiments in new logistics technologies, such as autonomous forklifts, working with customers to create business solutions.
Customer
Further strengthening our commitment to Customer Centricity, our team established new ways to support our customers, including:
- Customer Sustainability Advisory Council (CSAC) – Our CSAC ties our business initiatives with the ESG targets of key customers.
- Net Promoter Score (NPS) – Prologis initiated a NPS program in 2019 to measure customer satisfaction and loyalty. Ranking among the best brands in the world, our NPS score is about 67% higher than the B2B average, which is a good start, but through our customer-centric efforts we aim to drive this number higher.
- New customer-focused departments include: Customer Led Development, Customer Led Innovation and Customer Led Solutions.
Prologis Customer Advisory Board meeting, Brooklyn, New York, 2019.
About This Report
