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**ALEX:** Welcome to Beta Finch, your AI-powered earnings breakdown! Today we're digging into Prologis — ticker PLD — the industrial real estate giant that basically owns the warehouses behind your Amazon packages. Q3 2026 results dropped, and there's a lot to unpack, including a massive European merger clearing a huge hurdle.
**JORDAN:** Big one. But before we get into it...
**ALEX:** Right, gotta say it. This podcast is AI-generated content for educational and entertainment purposes only. Nothing we discuss should be considered investment advice. Always do your own research and consult a qualified financial advisor before making any investment decisions.
**JORDAN:** Perfect. Now let's talk warehouses.
**ALEX:** So, headline numbers first. Prologis posted core FFO — that's funds from operations, basically the REIT version of earnings — of $1.60 per share, or $1.61 excluding some promote expenses. Occupancy ticked up to 95.6%, same-store NOI growth came in at 5.7% on a net effective basis, 5.9% on cash. And get this — rent change on rollover, meaning when an old lease expires and they sign a new one, was 38% net effective.
**JORDAN:** That 38% number is the one that jumps out at me. That's the "mark-to-market" story playing out in real time — Prologis signed a ton of leases years ago at much lower rents, and now as those roll over, they're repricing at a huge premium. They said their portfolio-wide lease mark-to-market sits at 16%, representing about $780 million of embedded NOI just waiting to flow through in future years. That's a built-in growth engine regardless of what the broader market does next.
**ALEX:** And they raised guidance because of it. Same-store NOI growth guidance moved up to 5.5%–6% net effective, 7%–7.5% on cash. They also bumped development starts guidance to $6 billion–$6.75 billion for the year, which actually surprised some analysts on the call given everything they said about rising construction costs.
**JORDAN:** Yeah, that was a good tension point in the Q&A. Dan Letter, the CEO, basically explained it: a lot of that increase is build-to-suit projects — meaning a specific customer has already committed to a building before it's even built. He said build-to-suits could be 55% to 65% of total starts this year, and the build-to-suit pipeline is 20-25% bigger than it was a year ago. So it's not that Prologis is getting more aggressive speculatively — it's that demand, particularly from data center supply chain customers, is pulling specific projects forward.
**ALEX:** Which brings us to the two biggest strategic stories of the quarter. First — SEGRO. Can you break that down?
**JORDAN:** So SEGRO is a major European logistics REIT, and Prologis has been working on combining with them. The huge update this quarter: SEGRO shareholders overwhelmingly approved the deal on September 28th. It's now moving through regulatory clearance, with an expected close in the first half of 2027. Once it closes, combined, they'll have a 368-million-square-foot European portfolio — massive scale advantage for serving customers and building out both logistics and data centers across Europe.
**ALEX:** And they already raised $2.4 billion in common equity to help fund part of that consideration, so a chunk of the capital stack is locked in. CFO Tim Arndt made a point of saying 2027 guidance — which comes out in January — probably won't even include SEGRO specifics yet since the deal likely won't have closed by then.
**JORDAN:** Smart to manage expectations there. The second big story, and honestly the one I think long-term investors should watch closest, is data centers. Prologis's pipeline is now 5.8 gigawatts — 1.7 gigawatts of secured power and 4.1 in advanced stages. They've got letters of intent covering about 1 gigawatt, with much of that expected to start in 2027.
**ALEX:** And it's not just the direct data center business — they flagged that customers
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Oct 16 20268 min