Prologis (PLD)

Total return at 5 years: 8.2%/year = 4.7% appreciation + 3.4% dividend. The target price ($167) is ex-dividend; the $25 in dividends collected over 5 years are added separately.

By both methods, the value today (DCF $135 · Multiples $156) exceeds the market price ($132).

Today — fairly valued: at $132 trades ~14.9% below its value discounted to today (~$156); the discount is positive but does not reach the margin of safety we require (≥38%).

At 5 years — En valor: the target price ($167) plus dividends yield between the 4% floor and the 10% average return — a reasonable return, though without the margin of a great investment.

The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$99.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($132) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The implied growth (7.6%/year) is in line with our base case (8.0%/year) → the price is consistent with the projection.

That growth implies ~$7.4 bn of owner earnings in year 5 (vs ~$7.6 bn of our base case). It recalculates if the DCF assumptions are edited.

A REIT is valued on price/Core-FFO (not P/E: the accounting depreciation of the property is not an economic cost). ⚠️ The real cash is AFFO (owner earnings), substantially lower than Core FFO —it subtracts recurring capex and non-cash straight-line rent—, and the dividend consumes almost all of the AFFO. It returns capital via dividend; it may issue equity to fund development. Total return adds the dividend collected along the way. In edit mode, the metric, shares, dividend, and exit multiple can be adjusted.

A REIT is valued on P/Core-FFO (not P/E: property depreciation is not economic). ⚠️ The trap: Core FFO ($6.09/share over the last twelve months, 2026 guidance $6.22-6.30) overstates real cash — AFFO (owner earnings, subtracts recurring capex ~$890M and non-cash straight-line rent ~$691M) is only ~$4.46, and the dividend consumes ~92% of AFFO (vs ~67% of Core FFO). Core FFO/share grows to ~$8.35 by year 5; the multiple compresses toward ~20× (base). On strict AFFO (P/AFFO 15-20×) the value would be lower. Data centers (5.6 GW) + the rejected SEGRO bid are the swing factors.

Today's multiple compresses on its own going forward as the metric per share grows. The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—. Total return adds the dividend collected; the required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $167 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $132, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $167 in 5 years plus $25 of dividends collected (the dividend adds to the return, not to the price) and a required return of 4.5% annually, the maximum to pay today is $156. Against the current market price ($132), the margin of safety is 14.9% (trades below the maximum → there is margin) and the total return at that price would be 8.2% annually.

• Multiple vs the peer group. 22× trailing-twelve-month Core FFO — a premium over industrial REITs, justified by quality/scale but still a premium. On AFFO, 30× (much more expensive).
• Growth vs multiple. The multiple compresses 24x→20x as growth decelerates plus rates weigh. At a fixed price, the 5-year P/Core-FFO drops to 16×.
• Margin of safety. Base +5%/year price (+8% with dividend) is below the average stock return (~10%); the discount to today is small, far from the required margin. The dividend is the bulk of the return.

Each margin over sales, year by year: historical (solid line) → projection (dotted).

• ✕ ROIC exceeds the cost of capital (~10%)
• ✕ High incremental ROIC (compounding)
• ✓ CFROIC backs up the ROIC (151%, cash vs. accruals)
• ✓ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Balance sheet quality (IG rating). A/A2-rated, ~99.8% unencumbered, >96% fixed-rate, $6.7bn liquidity — one of the few 'A'-rated REITs. The sector's lowest cost of capital is a real competitive advantage.
• Value creation (development). 25% development margin (6.7% stabilized yield > market cap rate): creating value by building is the differentiator vs buying stabilized. Scalable via the land bank ($36bn TEI).
• Quality of cash flow (AFFO vs Core FFO). ⚠️ Core FFO ($5.81) overstates the cash flow: real AFFO (subtracting recurring capex plus straight-line rent) is ~$4.16 → 97% payout. Value and judge the dividend on AFFO, not the headline Core FFO.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

The engine of a logistics REIT is warehouse NOI (rent x occupancy) plus development plus fees. PLD grows via: (1) same-store NOI +5.7% cash (rents rising), (2) the embedded mark-to-market (~17%: contracted rents sit below market → they rise upon renewal — though this engine is decelerating, renewals went from +50% to +32%), (3) development (~$2.8bn/year, 25% margin), (4) data centers (a fast-scaling optionality). GAAP net income/EPS is misleading (accounting depreciation on the real estate isn't a real cost) → it's valued on Core FFO / AFFO.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (30-jun-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Real, not nominal. The growth is real: developed sq ft plus rents rising (mark-to-market) plus the development margin. Not monetary growth.
• Growth engine. Same-store NOI +5.7% plus development ($2.8bn/year, 25% margin) plus embedded mark-to-market ~17% plus data centers. But the mark-to-market is running out (renewals decelerating).
• Sustainability. Core FFO/share +6.5% is well-founded in the near term, but decelerating from the ~10% historical rate. The risk: if the mark-to-market runs out and rates weigh, it converges to ~inflation plus development.

• Relevant in 10 years (recurrence). Logistics/distribution is structural (e-commerce, supply chains); infill warehouses will keep being needed. Long leases (70 months) mean predictable cash flow. High recurrence.
• Pricing power. Yes: scarce infill locations → positive rent change every quarter since 2013. But that power is decelerating (renewals +50%→+32%) as the mark-to-market gets captured.
• Moat and its direction. A wide moat (location plus scale plus balance sheet), stable. The 'physical asset' remains intact; the data center optionality widens it. Counterweight: rent growth is decelerating.
• Cyclicality / sensitivity. Highly sensitive to rates (cap rates plus cost of debt) — the #1 risk. Cyclical via warehouse supply/demand (pandemic oversupply still being digested, vacancy ~7.5%).

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• ✓Leverage (LTV)LTV 37% · A / A2 · 5.8x debt/EBITDA
• ✓Credit quality (unencumbered + fixed rate)100% unencumbered · 97% fixed rate · liquidity $6.7 bn
• ✓Portfolio quality (occupancy + same-store NOI)Occupancy 95.6% · same-store NOI +5.7%
• ✓Value creation (development margin)Margin 25% · yield 6.7%
• !Dividend coverage (payout over AFFO)97% of AFFO

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Leverage backed by real estate. LTV ~37% and ~5.8x debt/EBITDA: high but structural for a REIT and backed by the value of the warehouses — judged with REIT thresholds, not corporate solvency ones. More than 96% fixed-rate protects against a rate hike.
• Credit quality (A rating). A / A2, with ~99.8% of the portfolio unencumbered and $6.7bn of liquidity: one of the few REITs with an 'A' rating, which gives the sector's lowest cost of capital — a real competitive advantage.
• Payout on AFFO (the real cash-flow view). The dividend is ~97% of AFFO (owner earnings ~$4.16), much tighter than the ~69% it appears to be on Core FFO ($5.81): leaves little slack if AFFO decelerates. This is the health point to watch.
• Rate sensitivity. A REIT's value moves with cap rates and the cost of debt; it's the balance sheet's #1 exposure, though the mostly fixed-rate structure cushions the short term.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• Skin in the game. No founder control (Moghadam ~0.46%); robust ownership requirements. Alignment by comp design plus safeguards (PSUs capped if TSR negative). Orderly internal succession.
• Capital allocation. Develops at a 25% margin (creates value by building) plus a sustained dividend increase (~10% CAGR/year). No buybacks. The SEGRO bid (dilutive) is the point to watch. The ~97% payout on AFFO leaves little slack.
• Integrity / candor. Transparent disclosure; Moghadam self-capped his comp. Real comp safeguards. No gross-ups or guaranteed employment contracts.

• Not cheap — fully valued: 22× trailing-twelve-month Core FFO, a premium over industrial REITs.
• Looks cheap against its own history: it trades at 22× — the multiple is weighed down by fear over rates plus the overhang of the SEGRO bid.
• GAAP EPS fell −10.8% in 2025 (purely from lower extraordinary gains plus more interest, while NOI grew +8.2%) — a possible overreaction to a noisy GAAP headline (motivated sellers).

This is a case of 'careful: it may not be cheap, only appear so' (§9). The multiple compression (from ~25x to 22×) removed part of the overpricing but didn't create a margin of safety — on an absolute REIT multiple, PLD still sits at a premium. And there is a genuine counterweight (not just noise): the deceleration in the rent mark-to-market (+50%→+32%) and the failed Strategic Capital fundraise are real signals of a slower growth outlook — part of the multiple compression is a legitimate re-rating, not just irrational pessimism.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at +3%/year (+15% total): the margin of safety protects the downside. The bull (+12%/year, +75% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• High or rising rates. Cap rates expand (NAV falls) and new debt gets more expensive; a REIT's multiple compresses when the yield (3.2%) falls below the treasury bond (4.5%).
• Rent mark-to-market running out. Renewals at market rent have already fallen from +50% to +32%; without that engine, same-store NOI converges to inflation and Core FFO decelerates below 6%.
• Warehouse oversupply. Industrial vacancy (~7.5%) from pandemic-era overbuilding is still being digested and pressures occupancy and rents; a slowdown in e-commerce would worsen it.
• SEGRO bid / Strategic Capital. Whether the SEGRO acquisition gets done expensively and dilutively, or Strategic Capital keeps failing to raise capital (the higher-margin segment stagnating), are the two swing factors in capital allocation.
• Tight dividend slack. With the payout at ~97% of AFFO, a stumble in owner earnings leaves little room to sustain the pace of dividend increases (~10% CAGR/year).

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  Fails the quality gate: ROIC 6% does not clear the 10% bar.

• Peter Lynch Growth at a reasonable price (GARP)

  A fast grower growing 8% at a multiple/growth of 2.7 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Not applicable — the Magic Formula excludes financials and regulated businesses (EBIT/EV does not capture the operating leverage).

• Howard Marks Perception vs reality + cycle

  The price discounts 8%, in line with our 8%: perception and reality aligned.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -1%/yr, bull-scenario ceiling +9%/yr over 5y → capital protected, asymmetry in your favor.

• Pat Dorsey Moat strength (Five Rules)

  A wide moat, stable; sources: intangibles, efficient scale, cost advantage, switching costs, network effects → passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  Justifying the price requires discounting 8%, within what we project (8%) — the story squares with the numbers.