# Prologis (PLD) Financial Model Free Excel 3-statement financial model and company analysis for Prologis. - Canonical: https://finamodel.com/companies/prologis - Industry: Real Estate - Downloadable model: Yes - Excel download: https://finamodel.com/company-models/PLD.xlsx ## Model Purpose This model forecasts Funds From Operations (FFO), Adjusted Funds From Operations (AFFO), and Net Asset Value (NAV) to determine the equity valuation and dividend sustainability of Prologis for a REIT equity research analyst. ## Company Overview Prologis is the global leader in logistics real estate, focusing on high-barrier, high-growth markets. The company owns, manages, and develops modern logistics facilities, leasing them to a diverse base of business-to-business and retail/online fulfilment customers. Business segments include: * Real Estate Operations (approximately 85% to 90% of revenues): Generates rental income and tenant recoveries from consolidated properties. * Strategic Capital (approximately 5% to 10% of revenues): Generates asset management fees, transactional fees, and promote revenues from unconsolidated co-investment ventures. * Development: Generates value through the construction and stabilisation of new logistics facilities and data centres. The company operates predominantly in the Americas, which accounts for the vast majority of its net operating income, alongside significant portfolios in Europe and Asia. The business model is asset-heavy but highly scalable, leveraging co-investment ventures to boost returns on equity. Prologis holds a dominant competitive position as the largest industrial REIT globally. Recent major events include a strategic push into data centre development to capitalise on digital infrastructure demand and the formation of a $1.6 billion joint venture with GIC in early 2026. ## Revenue Deep Dive ### Real Estate Operations: Rental Revenues * Segment name: Rental Revenues * Revenue driver formula: Total Owned Square Feet x Occupancy Rate x Average Rent per Square Foot * Historical growth rate: 6% to 10% CAGR over the last 3 years, driven by strong mark-to-market rent increases. * Key growth levers and headwinds: Growth is driven by contractual rent escalators and significant positive rent change on rollover. Headwinds include new market supply and macroeconomic softening reducing tenant demand. * Pricing dynamics: Contractual leases typically include annual escalators. Spot pricing on new leases depends heavily on local market vacancy rates. * Revenue recognition notes: Recognised on a straight-line basis over the lease term, which creates a variance between cash rent and GAAP rent. * Seasonality: Minimal seasonality due to long-term lease structures. ### Real Estate Operations: Recoveries * Segment name: Recoveries * Revenue driver formula: Recoverable Property Expenses x Recovery Ratio * Historical growth rate: Tracks closely with property expense inflation (typically 4% to 7% annually). * Key growth levers and headwinds: Driven by property tax assessments, insurance premiums, and maintenance costs. * Pricing dynamics: Contractually passed through to tenants under triple-net lease structures. * Revenue recognition notes: Recognised in the same period the associated expenses are incurred. * Seasonality: Can fluctuate slightly based on the timing of property tax assessments and winter maintenance in certain geographies. ### Strategic Capital Revenues * Segment name: Strategic Capital Revenues * Revenue driver formula: (Assets Under Management x Base Fee Rate) + Transaction Fees + Promote Fees * Historical growth rate: Highly variable due to the lumpy nature of promote fees. Base fees grow steadily at 5% to 8% alongside AUM. * Key growth levers and headwinds: Growth relies on raising new third-party capital and property valuation increases. Headwinds include higher interest rates dampening commercial real estate valuations. * Pricing dynamics: Base fees are contractual percentages of AUM or committed capital. Promotes are performance-based hurdles. * Revenue recognition notes: Base fees are recognised over time. Promote revenues are recognised only when the performance hurdle is met and the fee is crystallised (often at the end of a multi-year promote period). * Seasonality: Promote fees often crystallise in the fourth quarter, making Q4 earnings significantly higher in certain years. ## Cost Structure ### Variable Costs / Property Expenses * Line-by-line breakdown: Property taxes, property insurance, property management, and maintenance. * Gross margin range: Net Operating Income (NOI) margin typically ranges from 70% to 75%. * Key input costs and commodity exposures: Local municipal tax rates and commercial property insurance premiums. * How COGS scales with revenue: Highly linear. Most expenses are recovered directly from tenants via triple-net leases. ### Operating Expenses * General & Administrative (G&A): Typically runs at $500 million to $520 million annually. It is largely headcount-driven to support the global platform. * Strategic Capital Expenses: Direct costs associated with managing the co-investment ventures. * Depreciation & Amortisation: Extremely high due to the asset-heavy real estate base. Typically represents 25% to 30% of total revenues. Split primarily into building depreciation and amortisation of lease intangibles. * Stock-Based Compensation: Moderate, typically embedded within G&A. * Restructuring / one-time charges: Infrequent, usually tied to major acquisitions like the Duke Realty integration. ### Margin Profile * NOI Margin: 70% to 75%. * EBITDA Margin: 60% to 65% (excluding promote revenues). * Margin trend: Relatively stable, though slightly pressured recently by rising insurance costs and property taxes before recoveries catch up. ## Balance Sheet Structure * Total assets: Approximately $90 billion to $100 billion, dominated by real estate. * Key asset categories: Investments in Real Estate (at cost), Accumulated Depreciation, Investments in and Advances to Unconsolidated Entities. * Goodwill & intangibles as % of total assets: Minimal goodwill. Lease intangibles (in-place leases, above/below market leases) are material following acquisitions. * Working capital profile: * Days Sales Outstanding (DSO): Very low (under 15 days) as rent is typically paid in advance. * Days Inventory Outstanding (DIO): Not applicable. * Days Payable Outstanding (DPO): 30 to 45 days. * Net working capital as % of revenue: Structurally negative. * Is working capital positive or negative? Negative, which is standard for REITs and provides a slight funding advantage. * PP&E: Represents the core portfolio of logistics facilities. Useful life assumptions are typically 30 to 40 years for buildings and 15 years for site improvements. * Right-of-use assets / operating leases: Immaterial relative to the owned real estate portfolio. ## Capital Expenditure & Investment * Capex as % of revenue: Maintenance capex (tenant improvements and leasing commissions) typically runs at 5% to 8% of revenue. * Maintenance capex vs. growth capex: Growth capex (development starts) is massive, projected at $3.0 billion to $4.0 billion for 2026. Maintenance capex is a small fraction of this. * Major capex programmes underway: Significant investment in data centre development, with a 5.2-gigawatt allocation of utility-fed capacity secured. * Capitalised software / development costs: Capitalised interest and internal costs during the construction phase of real estate developments are highly material. * M&A pattern: Transformational acquirer (e.g., Duke Realty, Liberty Property Trust) combined with steady organic development. * Typical acquisition multiple paid: Usually transacts at implied cap rates of 4.0% to 5.5% depending on the interest rate environment. ## Debt & Capital Structure * Total debt: Approximately $25 billion to $30 billion. * Debt/EBITDA ratio: 5.3x as of Q4 2025. * Credit rating: A-rated by major agencies, providing a significant cost of capital advantage. * Key debt instruments: Unsecured senior notes, multi-currency revolving credit facilities, and term loans. * Maturity profile: Weighted average term of 8.2 years as of late 2025. * Interest rate profile: Weighted average interest rate of 3.3%. The vast majority is fixed-rate debt. * Covenants: Standard REIT covenants including maximum leverage ratios and minimum fixed charge coverage ratios. * Share repurchase programme: Not a primary tool for capital return; capital is generally recycled into development. * Dividend policy: Strong dividend payer with a yield of approximately 3.1%. The payout ratio is typically 65% to 75% of AFFO. ## Cash Flow Characteristics * Operating cash flow conversion: Very high. OCF often exceeds Net Income due to massive non-cash depreciation add-backs. * Free cash flow margin: AFFO margin (a REIT proxy for free cash flow) typically runs at 45% to 55% of total revenue. * Major non-cash items: Depreciation, amortisation of lease intangibles, straight-line rent adjustments, and equity in earnings of unconsolidated entities. * Working capital cash flow impact: Minimal impact year-over-year. * Capex intensity: High overall due to development, but maintenance capex intensity is low. * Cash tax rate vs. GAAP effective tax rate: As a REIT, Prologis pays minimal corporate income tax provided it distributes at least 90% of its taxable income. The effective tax rate is typically near zero, except for taxable REIT subsidiaries handling certain strategic capital and development activities. ## Sheet Structure 1. **Assumptions**: Hardcoded inputs for macroeconomic drivers, portfolio growth, occupancy, rent spreads, cap rates, and debt terms. 2. **Portfolio & SSNOI**: Roll-forward of square footage, occupancy rates, average rent per square foot, and calculation of Same Store Net Operating Income. 3. **Strategic Capital**: AUM roll-forward, base fee calculations, and placeholder for lumpy promote revenues. 4. **Income Statement**: Consolidated GAAP income statement mirroring the 10-K, separating Rental Revenues, Recoveries, and Strategic Capital Revenues. 5. **Balance Sheet**: Standard GAAP balance sheet highlighting Investments in Real Estate, Accumulated Depreciation, and Unconsolidated Entities. 6. **Cash Flow & FFO**: GAAP cash flow statement followed by the critical reconciliation of Net Income to NAREIT FFO, Core FFO, and AFFO. 7. **Debt Schedule**: Tranche-by-tranche debt roll-forward, interest expense calculation, and weighted average interest rate tracking. 8. **Valuation**: Net Asset Value (NAV) build-up applying target cap rates to forward NOI, plus a standard Dividend Discount Model (DDM). ## Key Financial Relationships 1. Rental Revenue = Total Square Feet x Occupancy Rate x Average Rent per Square Foot. 2. Recoveries Revenue = Total Property Expenses x Tenant Recovery Ratio. 3. Same Store NOI = (Rental Revenue + Recoveries) - Property Expenses for the same-store pool. 4. Strategic Capital Base Fees = Average Assets Under Management x Effective Fee Rate. 5. Gross Real Estate Value = Prior Period Gross Real Estate + Development Starts + Acquisitions - Dispositions. 6. Depreciation Expense = Gross Real Estate Value x Blended Depreciation Rate. 7. Interest Expense = Average Debt Balance x Weighted Average Interest Rate. 8. NAREIT FFO = Net Income + Real Estate Depreciation & Amortisation - Gains on Disposition of Real Estate. 9. Core FFO = NAREIT FFO - Net Promote Income + Strategic Capital Expenses adjustments. 10. AFFO = Core FFO - Maintenance Capital Expenditures - Straight-Line Rent Adjustments. 11. Net Asset Value (NAV) = (Forward 12M NOI / Target Cap Rate) + Other Assets - Total Debt - Preferred Equity. 12. Dividend Payout Ratio = Total Dividends Paid / AFFO. ## Cross-Sheet Dependencies * The **Assumptions** sheet feeds all operational and financial schedules. * The **Portfolio & SSNOI** sheet drives Rental Revenue and Recoveries on the **Income Statement**. * The **Income Statement** generates Net Income, which is the starting point for the **Cash Flow & FFO** sheet. * The **Cash Flow & FFO** sheet calculates the funding gap or surplus, which feeds the **Debt Schedule** (revolver drawdowns or paydowns). * The **Debt Schedule** calculates Interest Expense, which flows back to the **Income Statement** (creating a circular reference that must be managed with a toggle). * The **Balance Sheet** aggregates ending balances from the **Portfolio & SSNOI** (assets), **Debt Schedule** (liabilities), and **Income Statement** (retained earnings). ## Sign Convention * Revenues, asset balances, and equity balances are entered and displayed as positive numbers. * Expenses, capital expenditures, and liability balances are entered and displayed as positive numbers. * In formulas, subtract expenses from revenues (e.g., Net Income = Revenue - Expenses). * On the Cash Flow statement, cash inflows are positive and cash outflows are negative. ## Things Most Likely to Go Wrong * Failing to separate Core FFO from NAREIT FFO. Prologis strips out Net Promote Income to report Core FFO, which is the metric the market actually trades on. * Mismodelling straight-line rent. GAAP revenue includes straight-line rent, but this must be deducted when calculating AFFO to reflect true cash generation. * Double-counting co-investment venture income. The model must carefully separate consolidated real estate (which sits in NOI) from unconsolidated ventures (which sit in equity in earnings and strategic capital fees). * Underestimating the lumpiness of promote revenues. Promote fees are tied to multi-year performance hurdles and can cause massive spikes in Q4 earnings. * Applying the wrong cap rate to the entire portfolio. Data centres and traditional logistics facilities trade at different cap rates; a blended approach must be justified. * Ignoring foreign exchange impacts. While 96% of equity is in USD, European and Asian operations can cause minor translation noise. * Miscalculating the dividend payout ratio. REITs must distribute 90% of taxable income, but analysts measure the payout ratio against AFFO, not Net Income. * Failing to capitalise interest on development projects. Prologis has a massive $3.0 billion to $4.0 billion development pipeline; interest expense on the income statement will be lower than cash interest paid due to capitalisation. ## Validation Checks * Occupancy rate should remain between 94.0% and 97.0% based on historical averages and management guidance. * Debt-to-Adjusted EBITDA must remain near the 5.0x to 5.5x range to maintain the current credit rating. * Cash Same Store NOI growth should track between 3.5% and 5.5% annually. * The weighted average interest rate should remain in the 3.0% to 4.0% range given the long-term fixed-rate debt profile. * AFFO dividend payout ratio should remain between 65% and 80%. * Balance sheet must balance: Total Assets = Total Liabilities + Equity in every forecasted period. * Core FFO per share should approximate $5.81 for the base year (2025). ## Key Assumptions (Default Values) | Assumption | Default Value | Unit | Rationale | |---|---|---|---| | Average Occupancy Rate | 95.0 | % | Midpoint of management guidance for 2025/2026. | | Cash Same Store NOI Growth | 4.5 | % | Midpoint of management guidance. | | Strategic Capital Base Revenue | 660 | $M | Midpoint of 2026 guidance excluding promotes. | | General & Administrative Expense | 510 | $M | Midpoint of management guidance. | | Development Starts | 3,500 | $M | Midpoint of $3.0B to $4.0B guidance. | | Weighted Average Interest Rate | 3.3 | % | Actual reported rate as of Q4 2025. | | Debt-to-Adjusted EBITDA Target | 5.3 | x | Actual reported leverage as of Q4 2025. | | Core FFO per Share (Base Year) | 5.81 | $ | Actual reported Core FFO for 2025. | | Dividend Yield Target | 3.1 | % | Current market yield. | | Target Cap Rate (Valuation) | 4.8 | % | Estimated weighted average stabilised cap rate. | | Maintenance Capex (% of Revenue) | 6.0 | % | Historical average for tenant improvements and leasing commissions. | | Effective Tax Rate | 2.0 | % | Minimal taxes due to REIT structure. | ## Data Sources & Benchmarks * Filings: SEC EDGAR for Prologis (PLD) 10-K, 10-Q, and 8-K filings. * Investor Relations: Prologis IR website for quarterly supplemental information packages (crucial for SSNOI and FFO reconciliations). * Key Peers: Rexford Industrial Realty (REXR), EastGroup Properties (EGP), First Industrial Realty Trust (FR). * Industry Data: CBRE Industrial Real Estate Market Reports, NAREIT industry data. * Consensus Estimates: Bloomberg or FactSet for forward FFO and NAV estimates. ## Sources * Prologis Q4 2025 Earnings Release and Supplemental Information. * Prologis 2024 and 2025 Annual Reports (Form 10-K). * Intellectia.AI Analyst Summaries for Prologis. * Simply Wall St Prologis Earnings Analysis. --- ## Frequently asked questions ### What is Prologis and what kind of real estate does it own? Prologis is the global leader in logistics real estate, specializing in modern logistics facilities located in high-barrier, high-growth markets. The company leases these properties to a diverse range of business-to-business and retail/online fulfillment customers across the Americas, Europe, and Asia. ### How does Prologis generate its revenue? Prologis primarily generates revenue through its Real Estate Operations, which includes rental income and tenant recoveries from its consolidated properties. A smaller but significant portion comes from Strategic Capital, earning asset management fees, transactional fees, and promote revenues from unconsolidated co-investment ventures. ### What are Prologis's key capital expenditure assumptions in financial models? Financial models for Prologis assume substantial growth capex, projected at $3.0 billion to $4.0 billion for 2026, alongside maintenance capex typically running at 5% to 8% of revenue. The company is also making significant investments in data center development, securing a 5.2-gigawatt allocation of utility-fed capacity. ### What is the assumed revenue growth rate for Prologis in financial models? In financial models, Prologis's revenue growth is typically assumed to be 0.2, reflecting its expansion in the logistics real estate sector. This growth is driven by its dominant competitive position and strategic development initiatives, including new logistics facilities and data centers. ### Why are FFO, AFFO, and NAV important for valuing Prologis? Funds From Operations (FFO), Adjusted Funds From Operations (AFFO), and Net Asset Value (NAV) are crucial for valuing Prologis because they provide a comprehensive view of its equity valuation and dividend sustainability. These metrics are standard for REIT analysis and reflect the company's operational performance and asset base, which is dominated by real estate. ### Can I download an Excel financial model for Prologis? Yes, an Excel financial model for Prologis is available for download. This model forecasts key metrics like FFO, AFFO, and NAV, extending its forecast horizon from FY2026 to FY2030 to determine equity valuation and dividend sustainability. [Interactive forecast calculator](https://finamodel.com/companies/prologis/forecast)