Welcome to the Prologis Q4 Earnings Conference Call. My name is Kim, and I'll be your operator for today's call. At this time, all participants are in listen-only mode. Later we will conduct a question-and-answer session [Operator Instructions]. Also note that this conference is being recorded. I'd now like to turn the call over to Tracy Ward. Tracy, you may begin.

Thanks, Kim, and good morning everyone. Welcome to our fourth quarter 2018 conference call. The supplemental document is available on our Web site at prologis.com under Investor Relations. I'd like to state that this conference call will contain forward-looking statements under Federal Securities laws. These statements are based on current expectations, estimates and projections about the market and the industry in which Prologis operates as well as management's beliefs and assumptions. Forward-looking statements are not guarantees of performance and actual operating results may be affected by a variety of factors. For a list of those factors, please refer to the forward-looking statement notice in our 10-K or SEC filings. Additionally, our fourth quarter results press release and supplemental do contain financial measures such as FFO and EBITDA that are non-GAAP measures and in accordance with Reg G, we have provided reconciliation to those measures. This morning, we'll hear from Hamid Moghadam, our Chairman and CEO who will comment on the Company's outlook. Then Tom Olinger, our CFO, who will cover results and guidance; Gary Anderson, Chris Caton, Mike Curless, Ed Nekritz, Gene Reilly, and Colleen McKeown are also here with us today. And with that, I'll turn the call over to Hamid.

Good morning, everyone and thank you for joining us. We had a great fourth quarter capping out our strongest year ever, and Tom will go over the details of all that later. What I want to do right off the bat is to address the issues that are probably top of mind for most of you. Namely, what we're seeing in the up to the minute data, what we're hearing from our customers and the steps we're taking to manage through this period of increased uncertainty. First, let me start with what we know. The proprietary forward-looking operating metrics, which we monitor regularly, such as showing average deal gestation period and lease conversion rates are holding steady. We signed 17 million square feet of leases in December and in the first 20 days of January, usually the slowest part of the year. Based on specific data, which we can elaborate on in Q&A, customer interest is robust. We expect activity to remain strong with our most dynamic customers building out new and improved logistics networks. While we haven't seen any softness even in the slower growing segments, we wouldn't be surprised if some users hit the pause button until they saw further clarity on the direction of the economy. Now for what we think this means. Our crystal ball is not any clearer than anybody else's than we're navigating in uncharted waters, since the factors causing market volatility are a 100% self-inflicted and don't lend themselves to fundamental analysis. If the government shuts down and the trade disputes with China are resolved soon, the market can very quickly bounce back on its prior strong trajectory. After all, confidence is the cheapest and strongest form of stimulus. Now, what are we doing about all this? With the completion of our 14…

Thanks Hamid. I’ll cover highlights for the fourth quarter and introduce 2019 guidance. We had an outstanding year and quarter. Core FFO per share was $3.03 for the year, which included $0.14 of net promote income and $0.80 for the quarter, including $0.05 of promotes. Global occupancy at year-end held steady at 97.5% while the U.S. ticked down 20 basis points as we continue to push rates and term. Our share of net effective rent change on rollovers in the quarter was an all time high at 25.6% with the U.S. at over 33%. We leased 35 million square feet in the quarter with an average term of 83 months also a record high. The spread between our in place leases and market rents was extended modestly to more than 15%, driven primarily by Europe where we now estimate our leases to be approximately 11% below market. Our share of cash same-store NOI growth was 4.5% for the quarter. Given the longer lease trends this quarter we had more nominal pre-rents, which had 50 basis points drag on cash same-store. It's important to note that pre-rents as a percentage of lease value declined sequentially by 20 basis points to 3.7%. 2018 was also a good year for our strategic capital business. Investor demand remains strong for well located logistics real estate. We raised $2.2 billion in new capital and grew our third-party AUM to more than $35 billion. Our strategic capital business continues to deliver a durable revenue stream with over 90% of fees coming from perpetual or very long life vehicles. On the deployment front, we had an active year and created significant value for our shareholders. Development stabilizations were approximately $1.9 billion with an estimated margin of over 35% and value creation of $661 million. The $1.1 billion…

Thank you. [Operator Instructions] Your first question comes from Ki Bin Kim from SunTrust. Your line is open.

If any slowdown should occur where should we expect that first, is there a geographic tilt to that? Or is it the amount of pace that it's looking for or the rents or type of tenants, any color around that?

I think it's likely to be a demand driven problem, because any change in situation is not likely to come from the supply side, there is a lot of visibility on supply for the next 12 months. So it's really the demand side. So you would -- where you would see it is obviously on leasing volumes and rent change on leasing and the like, probably not as in same store because that takes a while and it's very occupancy driven. And we're trying to drive down occupancy, so you see the rent change and leasing volumes and all that. Where we would see it a bit earlier than you are some of those forward looking indicators like traffic through our buildings, like how long it takes to make a deal, like what is the conversion rate of showings to actual leasing activity and all that. So we see those on a daily basis literally. I can tell you what happens at the end of today. And those are the forward indicators that I was referring to.

Your next question comes from Michael Bilerman from Citi. Your line is open.

Hamid, I was wondering if you can spend a little bit of time talking about development starts. And I think one of the comments you talked about is trying to be conservative in managing the land bank and managing starts. As we think about 2018, you've put out a range with the midpoint of $1.8 billion in terms of starts, which is down about 30% from the $2.5 billion you did late this year and certainly lower than the guidance you came into as well into 2018. So how much of that is a demand side versus a yield expectation side that's dropping that you don't want to play in. And maybe you can talk about those, or how much of it's just purely don't have the land bank to support a larger pipeline. Maybe you can help with the context?

First of all, if you look at our development guidance, there is build to suite and there is spec. And on the built and suite front, we have assumed a small fall off rate. But essentially the built to suite activity that we have and we know, we have great visibility on. On the specs we've reduced the starts by maybe 40%-ish, maybe 45%, only because why get off in front of skies. Last year was the biggest development start number that we had in a decade. I remember way back when people kept always looking for higher and higher development guidance and I mentioned three or four years ago maybe five years ago now that our development is going to raise between $2 billion and $3 billion a year. Last year, we exceeded that and this is gross numbers not our share, our share numbers are smaller. But at this point in the cycle, why project a more spec development than you have visibility for? So as you know, we're building mostly in parks and we're building off in that sixth or seventh building in the park. We usually have a couple of patch ready to go. So if we're wrong about market demand and strength of the market, we'll just continue at a higher level of spec development where we totally control that, so there is no point counting on that and getting expectation to that level. It's certainly not because of lack of land bank, because while we pruned our land bank significantly, our land is really good and developable and entitled. And it's certainly not because we're not getting the yields. I mean, you've seen us now for five years project yields in the teens and we end up in the 20s and 30s. So the land bank provides for almost $11 billion of build out if we were to build all of it. So we got capacity for many years of development and feel good about that, and are not going to be afraid to put that capacity to good use in terms of additional starts as we watch the year unfold.

Your next question comes from Jamie Feldman from Bank of America. Your line is open.

I was hoping you could just provide a little bit more color on the changes you did make in the guidance, sounds like in the last couple of weeks you revised lower. Can you talk about where you did make the cuts and then also how conservative is this number? I mean, what would it take to actually -- how much worse things have to get for you to actually miss what you put out?

Well, the second part of that or the last part of that is really hard to answer. Obviously, as the world falls off the cliff, so there's always downside to any scenario. But there's certainly less downside in this scenario than it would have been in our original plan. I would say we tweaked our plan in a couple of general areas and Tom can get into the specifics. But we moderated rental growth this year. We are glide path to stabilize occupancy of 95%, which is the norm in our business. We've got there. We accelerated the glide path down to that. We cranked up our credit loss a little bit and we obviously reduced the development guidance or development expectations for the year going forward. Those are the big parts of it. Tom, do you want to…

So on rent growth, we tempered that by about 200 basis points. So for global, our share rent growth in '19 will be in the mid 3s. Same store NOI, we talked about that's down about 50 basis points driven by lower average occupancies, lower market rent growth and little bit of bad debt if you need mentioned starts. We talked about core FFO down about $0.05%, a combination of about $0.02 from same store and NOI, about $0.02 from lower deployment and a slower pace of deployment and about $0.01 from lower fees just related to lower transaction volume.

Your next question comes from the line of Nick Yulico from Scotiabank. Your line is open.

In terms of the guidance for occupancy declining this year, would you break down the drivers of that impact between on the one hand your strategy of pushing rents more at the expense of occupancy versus whether there is a bigger impact from supply demand imbalance or even some of your conservatism on demand because of a weaker economy?

There is no supply demand imbalance. I mean, even last year in 2018 much to our surprise demand exceeded supply. Now, we've been sitting here telling you for four or five years that one of these days the supply will exceed demand by a little bit here and we're going to say that again this year. We've been wrong in the last four or five years. But even if demand falls short of supply with an effective vacancy rate in the market of the high 4% range, even if 50 million square foot shortfall between supply and demand won't move vacancy rates by more than 10 or 15 basis points. So I don’t think it's those things. It's just that we are trying to maintain pricing power and push rents. Frankly as the market has spoken, our occupancy levels have not budged in fact moved in the wrong direction. It is our stated objective not to be running so full, particularly when you look at the underlying utilization of these buildings. It's not only that vacancy rates are low, it's also utilizations are really high. So every indication we have is that our customers need more space and they're really tied, but we do want to drive pricing. So you might critic us by saying why do reduce your rent growth forecast if you’re pushing for more rent and reducing occupancy levels? And my answer to that would be, we’re trying to be prudent in this environment, things move around quite a bit. And if we turn it to be overly prudent during the year, we always have the opportunity to adjust that in subsequent quarters when we thought to.

Your next question comes from the line of Derek Johnston from Deutsche Bank. Your line is open.

I wanted to get into the mix between development yields and the weaker global growth environment that has you guys prudent. And when I look at the 6.2% fourth quarter development yields certainly a bit lower than full year '18 at the 6.5% level. So is this the new norm for 2019 the lower yield environment and is due to construction costs? Can you share some of this cost impact on new development and how those pressures breakdown, I guess between labor and materials? Thank you.

So I wouldn’t read too much into the lower yields, it's partly mix and its partly obviously we moderated our rental growth, so whatever we had in the mix before its going to be a little bit lower because of that moderated rental growth but it's still very profitable development. And as you can see, we keep guiding to built-to-suit margins in the 12% range, the spec margins in the 15% range. And we every year have come out ahead of that 500 to a 1,000 basis points of margin, maybe some more in prior years. So look, I don’t know what it's going to be, we’re going to find out what it is, but we’re taking our best guess at it. And we feel pretty good about there being profitable, ample profitable development opportunities. Again as I said in response to the previous question on development, it's not like we’re reducing our guidance because we don’t think we can get the margins. If the market holds up anywhere near where it has been, I think we’ll get really good margins.

Your next question comes from the line of Craig Mailman from KeyBanc Capital Markets. Your line is open.

Hamid, you had mentioned in your opening remarks that you raised the bar for new speculative starts. Can you maybe just give a little bit more detail on where you tweaked it from maybe yield expectations? And then just a follow-up, Tom, maybe to Jamie’s question. Could you just -- I think I heard 50 basis points. But could you just clarify where cash same-store was before you guys took a haircut to it?

Tom, go ahead and answer that and then I'll…

So Craig, yes, 50 basis points lower same-store based on our assessment of the market volatility versus our original plan, 50 basis points more.

And I thought I answered the first part of the question but if you want to ask the different way, maybe I can see the nuance in it.

I was just -- I apologize if I didn’t hear you. I just wanted to get a sense of where -- what exactly you're tweaking it for, is it a yield bar that you're raising here on new stars or is it just…

No…

So the underwriting is…

No, it's not. What we said is we sat around the table and we said, okay, let's see what happens to our built to suit loan yields, let's whack that by 15%. So let's say what can happen to our spec volume and let's whack that by 45% and we size those numbers around and that's where we came out. So it was not -- I mean it was not a bottoms up deal by deal build up of the spec starts, it was that way for the built to suits. But by definition the spec starts are not that bottoms up exercise.

Your next question comes from Vikram Malhotra from Morgan Stanley. Your line is open.

I just want to focus on the rent growth comments I know you've just tempered expectations more just to be conservative. But can you give us some color on what you're baking in for coastal maybe versus other markets in the past, you've talked about high-single-digits in coastal and mid in others. And then are there a couple of markets you can call out where you're maybe seeing some turn in fundamental that's driving this any market specifically?

The short answer to the question is that coastal is more like 4, 4 plus and in land is more like 2, 2 plus. But there's a lot of variability even in those numbers and we have a very detailed market-by-market analysis of rent. We forecast rents market-by-market and we update our forecast couple times a year.

Your next question comes from Jeremy Metz from BMO Capital Markets. Your line is open.

Two questions from me, the first I just want to go back to the supply conversation, just given some of the rising costs and just the overall limited amount of quality intra land sites that are out there. I'm wondering if you can comment on how much of new supply being built today is really just not competitive or a threat to your U.S. portfolio just given all the repositioning you've done at this point. And then the second one is one for Tom just on guidance. I just have the DCT portfolio under roof for a few months now. I think originally you're expecting about $0.07 of accretion in 2019 from that. Can you just talk how it's trending and do you still feel like that's the appropriate amount?

Jeremy, I'll go first on that. The accretion in '19 is more like $0.05, because in 2018 we had $0.07 annualized. So we got $0.02 plus of that in 2018. So the real incremental increase in '19 is $0.05. But all our expectations as we said, we hit all of our day one synergies way back in Q3 everything is going I would say overall better than plan.

And with respect to markets, I would say there're some markets that are I've had too much supply in the last couple of months, and I would say Chicago -- starts have really picked up in Chicago, so we're watching that pretty carefully. Atlanta and Houston and Central PA, those would be the markets where we would have a concern about supply. And if you wanted to expand that list internationally, I would say I would add Madrid and Osaka to the list. And on the positive side, we feel better about Dallas than we did a couple of months ago. It seems like we're over the hump over there. So these numbers will move around but you'd probably see them more naturally in the less supply constrained markets.

Your next question comes from Michael Carroll from RBC Capital Markets. Your line is open.

Tom, can you provide some color on what's your bad debt assumptions are for 2019, and are you seeing any specific tenants that you conserve in the portfolio? I know last quarter I think you highlighted there is roughly 30 basis points of revenue that you would say that that’s at risk. Or is it more of just the uncertain macro conditions and that's why you increased those assumptions little bit?

It's really -- it's the later. If you look at where bad debts have been trending over the last several years, they've really been at historic lows around 20 basis points of revenue historically. We see that number more like 50 basis points over long periods of time. We feel really good about our credit quality. I think our exposure to total tenants is quite small, extremely small I would say. But yes, in this from how we approach our budgeting, we have assumed that bad debt expenses rise towards, not all historic norms. So they're coming off the bottom rising towards historic norms. But again, I feel great about our credit quality, I feel great about our exposure. This is just in the spirit of being prudent as Hamid mentioned.

And your next question comes from Tom Catherwood from BTIG. Your line is open.

Just sticking with development here, your guidance for 2019, it looks like stabilizations are going to outpace new starts by roughly $250 million, which make sense considering you did $1.4 billion of starts in the fourth quarter. But if we look at 2017 and 2018 combined, the starts outpace stabilizations by nearly $900 million. So all else being equal, I would assume the amount of stabilizations would be even greater in 2019 than what we're looking at. Are the new developments that you're starting taking longer to construct or stabilize, or the other factors that account for this lag in the stabilization?

I'll go first, this is Tom Olinger, a things. I think when you look at '17 and '18, particularly '18, we had a lot of starts in the back half of the year particularly Q4. And then I throw a little bit of mix in there. But from a stabilization standpoint, we are stabilizing assets generally I would say across the board consistently ahead of underwriting, number one. And number two as I think you're going to see a lot of stabilize NOI come in 2020 is going to be when that really unwinds. And when you think about, particularly overseas where we're building multi-story if that takes longer to go. So that has to be factored that's part of the mix component. But we're leasing up you could see in our development pipeline we're leasing up at good rates or at a good pace, I would say, ahead of where we thought we'd be. Rents are higher than we thought they would be, margins are higher than we underwrote. So I feel really good about all that.

So the only thing I would add is it's just put an underline on something Tom said, which I think is generally misunderstood. 2020 is a huge year for incremental return out of development stabilizations, that volume we've already paid for. And the only lift we've gotten to our income statement is through capitalized interest, which is a very low number. And when those yields convert to sort of the 6 plus yield given the volume, it doesn't take a lot of math to figure out that 2020 is going to be a really, really good year in terms of growth coming from the lease up of the outlook pipeline. But we're not going to guide to 2020, so don't even go there.

Your next question comes from John Peterson from Jefferies. Your line is open.

Great thanks. So just looking through your operating metrics and your supplemental, leasing terms this quarter was about 83 months. It's been pretty consistently around 60 months for the past four quarters or probably longer than that. So, is that -- is it a mix? Is it Prologis pushing for longer lease terms or the customers wanting longer lease terms? And do these contracts look any different I guess in terms of free rent or escalators, anything to read into there?

Yes, John, this is Gene. I'll take that one. There is a bit of mix because the development lease terms are actually a 148 months, during the quarter, but the operating portfolio was 71 things. So that's increasing, but at the quite the pace you see with 83. And I also warn everybody, this is volatile quarter to quarter. We have been pushing term really high, it’s good to see it going in the right direction. You're probably not going to see an 83 next quarter, but sort of that trailing average should be changing up.

Your next question comes from Eric Frankel from Greenfield Street Advisors. Your line is open.

Thank you. Just a quick question on the fund management business, maybe you guys can just give a sense of what the investor outlook is, is like for logistics at this point in terms of how much you can grow your AUM, if you wanted to and whether you have the appetite to do so? And then, if a trade war with China really does escalate and we put tariffs on all their imported goods, do you have a sense of what geographic markets in the U.S. will get impacted the most by that?

So, let me take a stab at the second one. I think, if you think about most of our U.S. markets, the vast majority of demand comes from consumption of the population in those markets. Now, there are couple of markets like LA and New Jersey where you have an incremental flow through coming from imports, so those would slow more than the ones that are just consumption markets because the location of where goods are coming from will change on the margin. But those things take actually a lot longer than most people think, and the currency effect is usually also mitigating some of the tariff. But you would think it would be those markets on the coast by a little bit. Chicago is an inland port, so I would throw that one in there too. So, what was the first part of your question, Eric?

Fund management…

Fund management is very strong. Our cues could be a lot longer, if we weren't concerned about the amount of time that it would take for investors to get their capital invested. There's no sense raising a lot more money, if we can't invest it. So, the sector seems to be defying gravity in terms of investor demand, pretty much everywhere.

Your next Question comes from Dave Rodgers from Baird. Your line is open.

Yes, good morning out there. Tom, I wanted to follow up on the 3.5% market rate growth. Can you give that by Asia, Europe and the U.S. just kind of a broad stroke? And what you’re expecting for ’19? And then maybe Hamid, or Gary way in on where your rent growth has been in Europe, cap rate trends just over the last couple of months with some of the uncertainty and what you might be seeing post the Brexit vote in the China slowdown?

Hey, Mike, at this point we won’t breakout the different components of global. Our shares, it's in the midst 3s as I said and it's down about 200 basis points from our original expectations.

With respect to market rent growth, I mean, Europe has been sort of in the 5% range plus or minus, and we do expect it to be greater than the U.S. in 2019. We have tempered our view slightly with respect to next year, downward in terms of market rent growth, but still sort of in the mid 4s. Another part of that question?

No, I think you get it.

Your next question comes from John Guinee from Stifel. Your line is open.

Great, you guys have making it look easy, aren’t you? Your office brethren right now is suffering from a really difficult cost to capital, you guys don’t seem to have that problem. But when you’re looking at your cost to capital, how are you analyzing your open end fund business versus your common stock price? And what point in time does it make sense to really push the fund business versus common equity or to just not even look at that way?

First of all with respect to common equity, I think we’re truly the only company in this sector that hasn’t raised any equity. You could call issuing equity to buy DCT an equity raise, but we haven’t raised equity and I mean ’18 or more anything like that. So our view is that we have a self funding model, and we’re very committed to that. And as we have shown you, we’re over invested in most of our funds. So, there is -- and there is ample demand for people who want to expand their position into our fund. So, we’ve got some like 10 years of capital from those sources, based on our normal run rate, not M&A, but just a normal run rate. So, our philosophy is pretty simple on raising equity, which is we’re not going to and we don’t have need to anytime soon. So with respect our private capital business, this is really important. And I’m going to say it again John, you and I have known each other for a long time, we don’t look at that as a different business, it is our business, it's -- I mean, our capital has invested in that. So it's not like, we do the lower yield deals in our private capital vehicles and our good deals in our balance sheet. We do all deal in our vehicles that are invested in that locality. So we treat all business as the same. I think cost to capital today the way I think about it, is probably in the mid to high 6s, approaching 7 total cost to capital. And I think in the environment where inflation is generally around 2% and leverage is around 25%, 30%. That’s an appropriate risk adjusted return given the volatility of the asset class, and I don’t see that much of a difference between the public sector and the private sector because generally in our sector they seem to trading in line with one another. I think that private side is probably a little bit more richly valued than the public side, but they're reasonably within 5% of one another. So I know that that difference is much wider in other sectors, but part of that may have to do with the growth expectation of the different sectors. We go around capping everything, but we're not very good at capturing different growth rates. So, I think if you looked at in on in IRR risk basis, they're going to be very similar between different sectors.

Your next question comes from Michael Bilerman from Citi. Your line is open.

Hamid, it definitely sounds there's certainly a built in prudence to how you've gone about forecasting for this year, given a lot of a macro uncertainty. A lot of the data and the stats support robustness. And I think you talked about in your opening comments how your discussions with tenants have indicated, continue to robust demand. So I'm wondering, if you can sort of draw parallels to what your tenants are telling you relative to the conservativeness or the prudent is that you are taking in your forward expectations and maybe a mismatch that could be there?

Okay. You know, at the end of the day, I don't think our customers really know that much more than we do. Everybody is guessing as to what the implications of this last 15 days of weirdness are going to be. So, I think basically what we're hearing from our customers is that, they were going pretty much with very strong business plans through the end of the year. Their companies probably haven't had their earnings call yet, so we'll see what they say on those calls. But as far as the real estate department and procuring capacities concerned, they haven't gotten the memo that the businesses is slowing. They may in a couple of months, but they haven't gotten it yet.

And your next question comes from Jamie Feldman from Bank of America. Your line is open.

I wanted your thoughts on some of the consolidation we're seeing in this 3PL industry. Just kind of how do you say, if we continue to see as how do you think this impacts tenant demand and your business over time?

I think it's good to have more profitable, more consolidated larger customers. It is an extremely fragmented business. We don't think the level of concentration, if it's even continued for a long time. This is really going to change the dynamic, the landlord tenant dynamic because it's still going to be a very fragmented business. But I rather have, it's little, the masses have to little from point A to B. The consolidation doesn't do anything about how much the boxes need to move. It's just that this is more profitable and moving those boxes around and to more, better capitalized, profitable customers, we prefer that. So I think some pricing discipline coming into that business in terms of how they price their services is all good.

And your next question comes from Sumit Sharma from Berenberg Capital. Your line is open.

Thank you for taking a question, a quick question on your utilization. So, your last BI report says, it's around 87%, 86.5%. I'm assuming, it's pretty much the same based on your comments. I was just trying to wonder whether you could comment on the range of that distribution, and if the median has shifted higher lower year-over-year just trying to get a sense of the skewness?

So, that's above my pay grade, and Chris Caton will answer that.

Yes, hey, Sumit, thanks for the question. As you've seen in reports, the historical utilization rate can range between 82% and 87% and we're right bang on it's a peek of that over the last 12 months. So utilization is running at peak levels.

Your next question comes from Eric Frankel from Green Street Advisor. Your line is open.

Thank you. Just a quick follow up. Hamid, I know we've talked about maybe few quarters ago just one the trade wars talk really starts to accelerate. Just kind of how stuck company were in their supply chain. Has there been any talk of anything different in terms of changing their manufacturing origination in terms of how their goods are moving?

Not that I can tell and certainly not that supported by the data because notwithstanding all this talk. I think deficit from China was at record levels last time it was recorded. I don't know if that's because of the lag between the lag and the action and anticipation of people doing more volume prior to any cares taking place I don't know. But we haven't seen any of events of that. I think the macro point I can make is that generally people are shifting more production to Mexico in terms of manufacturing, but we were having the same exact conversation about Mexico year and half ago. So, these things can move around faster than people can react so.

Your next question comes from Blaine Heck from Wells Fargo. Your line is open.

Thanks. Just wanted to get a little commentary on asset pricing here, it seems as though we've seen cap rates holding steady or even continuing to decrease in the infill and coastal markets. But I'm wondering, if you're seeing any markets out there especially in the U.S. where maybe there has been an inflection and you're seeing cap rates increase at all?

I'll have to tell you though on the last couple of transactions that we pursued, upscale, we have been blown away -- we were literally blown away by other interest in those portfolios. And if those deals closed that bows very well for us NAV, so let's leave it at that.

Your next question comes from Jason Green from Evercore. Your line is open.

Good morning. Just wanted to ask quickly on institutional capital demand in Brazil given the recent JV you guys announced and the elections that happened about months ago, 13 months ago at this point?

So this is Gene. You're talking about sort of general institutional demand, we may not be the best people to ask, but it is a business environment that has a lot of optimism right now. The new President is certainly business friendly, and we've certainly seen a lot more demand from customer activity down there. And obviously, we did recently sign a very big JV. But as far as broadly speaking, my guess is that there is a more institutional demand at this point given the political changes.

Being that that was the last question, let me just add one more comment that I found the most interesting. Probably, the most interesting statistics that I've seen about the timing is something called the global economic policy uncertainty at index. That I actually saw in couple of weeks ago, and it's a scale we're spending more time trying to understand that, but it's a tail of the degree of policy uncertainty around the world. And let me give you a couple of points. During the 9/11 attack and the Iraq war breaking out, that index was at 200. At the peak of the global financial crisis, it was at 210; and Brexit, it got to 300. And today given the China war and the government shutdown and all that, it's well north of 300. Now, I have no idea whether there is any academic rigor or anything related to this index, but I just found it fascinating that the world thinks we’re in a much less certain environment. Now uncertain is usually viewed as bad, it can be bad or good because we saw how quickly the Mexico stuff turned around. But the reason that we've taken the position that we have this quarter is exactly because we're living in this kind of world. And as I said before, don't read too much into this, we need to stay tuned, be vigilant, really keep a sharp eye on what customers are saying and doing, and I think we're have a business that's just fine. Thank you for your interest and look forward to talking to all of you soon.

This concludes today's conference call, you may now disconnect.