The Chinese businessmen Jeff Schwartz works with like to toast.
It’s one of the cultural lessons Schwartz, chief executive of ProLogis, has learned while guiding the Denver-based company through an aggressive worldwide expansion, with particular emphasis on Asia.
“It’s wearing on my liver,” said Schwartz, who has raised glasses of Moutai, a 53 percent alcohol-content liquor akin to grain alcohol, as many as 14 times during the course of an evening.
“It’s all about developing relationships on a personal level,” he said. “It’s very important in China.”
ProLogis, the world’s largest developer, owner and manager of warehouse distribution space, has expanded its global footprint to 508.8 million square feet of industrial space in 118 markets across North America, Asia and Europe. Since 2003, the company’s stock steadily rose from about $24 a share to more than $71 a share a year ago. Over the past year, the company’s stock has ranged from $50.10 to $73.35 per share.
For Schwartz, China has been an attractive market, given its explosive growth and economic might. Since entering the country in April 2003, ProLogis has completed and manages almost 21 million square feet of property and has projects in 19 cities.
Schwartz, 48, was named chief executive in 2005 but has a long history with ProLogis, serving as president of international operations, chairman of the international investment committee and chief operating officer in Asia. He also served as vice chairman with responsibility for all international operations. Prior to that he founded and was managing partner of the Krauss/Schwartz Co., the largest industrial developer in Florida, which was acquired by ProLogis in 1994.
Schwartz started ProLogis on its path to dominating the distribution business around the globe in 1996 with the company’s first international expansion into Mexico.
“It was really driven by our customers who had business in Mexico,” Schwartz said. “It seemed very exotic and foreign until we started in Europe, which seemed very exotic and foreign until we started in Asia.”
Following the oil
The company last year opened an office in Dubai as part of an effort to capitalize on the opportunities oil-rich countries provide.
“There is massive wealth transfer from non-oil-rich to oil-rich countries, and it’s creating significant growth opportunities,” Schwartz said. “We need to become more energy independent, but that’s not going to change any time soon.”
The company is projecting that up to 85 percent of its growth this year will be outside the United States. Domestically, it plans to do more build-to-suit than speculative projects.
ProLogis’ top global customers include DHL, Matsushita Electric Indust. Co. Ltd, CEVA Logistics, Hitachi Transport, NYK Group, Nippon Express Group and Home Depot Inc. It also serves Panasonic, LG Electronics, Procter & Gamble, Bose, UPS, FedEx and Office Depot.
Historically, much of ProLogis’ growth has been through mergers and acquisitions. Among the most notable was its $5.3 billion merger in 2005 with Catellus, its biggest U.S. competitor, more than doubling its Denver workforce to 350 people.
The deal accelerated ProLogis’ growth plans, forcing it to build an addition to its Denver headquarters to accommodate its expanded staff.
“It’s one of Colorado’s more significant companies,” said Matt Cheroutes, director of communications for the state’s Office of Economic Development. “. . . We’re thrilled they’re growing and continue to grow.”
Seen by many as a star among real estate investment trusts or REITs, ProLogis has a market capitalization of $14 billion, nearly three times that of its nearest competitor, AMB Property, in the industrial REIT sector.
There isn’t another company that competes with ProLogis on a global basis. The bulk of its competition comes instead from local developers in the markets where it works.
“We do come across them in Denver a lot,” said developer Ray Pittman, president of Landmark Properties Group which is exploring doing some projects with ProLogis. “We look at them more as a collaborative partner, not so much as a competitor. We try to get out of their way and cooperate and collaborate with them whenever we can.”
Not everyone on board
While most analysts view ProLogis as a shining star, not all agree its future is bright.
“I’ve had reservations about the company for some while,” said David Harris, an analyst with Lehman Brothers who covers the company. “I thought there were risks attached to the business model and many investors weren’t fully appreciating those. I’m almost alone in expressing that view.”
The risks, Harris said, are that the global economy is more strongly tied to U.S. consumers than people believe and that real-estate prices are under pressure in some countries, putting pressure on the margins that form the bulk of ProLogis’ earnings.
“It’s not the easiest company to fully comprehend,” Harris said. “It’s not a plain-vanilla landlord owning a building and collecting rent.”
Under its business model, ProLogis owns buildings, develops buildings for sale and provides asset management, which is tied to its development business.
“It’s a business model that’s been built in these extraordinarily favorable times and has featured rapid expansion of the development program,” Harris said.
As it grows, ProLogis is gaining a reputation for its environmental practices, something Schwartz says is driven by the company’s global perspective.
The new 93,350-square-foot addition to the company’s headquarters will be be part of an environmental certification program known as LEED, and all its new U.S. projects will comply with standards developed by the U.S. Green Building Council.
Schwartz says ProLogis’ sustainability initiatives pay big dividends because sustainable buildings are increasingly important to customers.
“We’re seeing increased leasing velocity because of the long-term lower operating costs for customers,” Schwartz said.
ProLogis
Headquarters: Denver
Employees: More than 1,535 worldwide, 360 in Denver
Customers: 4,900-plus
Buildings: 2,766
Worldwide holdings
ProLogis operates markets in Asia, Europe and North America
Asia: 28 markets totaling 55.4 million square feet, with $5.7 billion in assets under management
Europe: 45 markets totaling 112.6 million square feet, with $10.4 billion in assets under management
North America: 45 markets totaling 340.8 million square feet, with $20.2 billion in assets under management
Total: 118 markets totaling 508.8 million square feet, with $36.3 billion in assets under management
Margaret Jackson: 303-954-1473 or mjackson@denverpost.com
This article has been corrected in this online archive. Originally, due to incorrect information provided by a source, it incorrectly described ProLogis’ holdings. The company has $20.2 billion in assets under management and 340.8 million square feet in North America, and $5.7 billion in assets under management and 55.4 million square feet in Asia.
