How Hamid Moghadam made Prologis the world’s largest industrial landlord

The Iranian émigré built a warehouse empire. Where does he go from here?

Sep.September 01, 2022 07:00 AM

Hamid Moghadam (Photo courtesy of Prologis)

UPDATED Sept. 1, 2022, 6:45 p.m.: Fresh off a trip to Stanford, Hamid Moghadam was pulling up to his house in San Francisco’s tony Pacific Heights neighborhood when a car stopped right behind him. 

Out jumped two men, armed with guns. They moved in on Moghadam, grabbed his Patek Philippe watch and fled.

They were attacking me,” Moghadam told the San Francisco Business Times. “It happened so fast that I didn’t have time to get scared.”

He did, however, have time to get mad.

In a letter to San Francisco Mayor London Breed, the city’s Board of Supervisors and Gov. Gavin Newsom, Moghadam detailed his experience. His message was stark: Do something about crime, or lose companies like Prologis, Moghadam’s industrial real estate giant that’s headquartered at Pier 1 the Embarcadero. 

I am deeply concerned that our city may be so far down the path toward decline that we may never recover — or at least not for a long, long time,” he wrote, according to a copy of the letter seen by The Real Deal. 

Moghadam declined to be interviewed for this story, but those who know him well say his move to slam city officials was totally in character.

He’s not afraid to tell you you’re wrong,” said Abbas Milani, head of Stanford University’s Iranian studies program, which was funded by Moghadam. 

Others identified bluntness as a constant thread in his improbable rise from Iranian engineering student to global overlord of logistics real estate, with a $180 billion portfolio that spans more than 1 billion square feet. He started with a three-person advisory firm in the 1980s, running a $70 million fund, and today controls a publicly traded company with a $101 billion market cap that had revenues of $4.8 billion last year and profits of $3.2 billion. 

Through development and aggressive acquisitions of other REITs, the firm has become the dominant real estate provider for e-commerce tenants, earning the moniker “Amazon’s landlord.” The pandemic, which pushed a record number of American shoppers online, proved a supercharger for Prologis’ business. As of Aug. 26, its stock price had more than doubled since March 2020 to $129 a share.

Last year, Moghadam was the highest-paid executive of a publicly traded real estate firm, pulling in $25 million in bonuses and other compensation. He takes a nominal salary of $1 per year but owns at least $500 million worth of Prologis stock, SEC filings show. 

Now, despite rising interest rates and worrying signs that e-commerce players are dialing back on space, he’s working to close the biggest deal of his career: Prologis’ $26 billion acquisition of archrival Duke Realty, a prey it has pursued for two years. The honeymoon period for industrial might be drawing to a close, but Moghadam has been building his firm in preparation for a scrap. 

I don’t ever want us to become house cats,” he said at a 2017 talk at Stanford’s Persian Student Association, in his distinct Iranian lilt. “I want us to always be street cats and be always on the lookout for the next threat.”

Revolutionary road

Moghadam’s career might not have shaped up the way it did if not for one historical figure: Ayatollah Khomeini. 

Moghadam was born to a privileged family in Tehran in 1956, a time when Iran was becoming increasingly Westernized and opening up its private sector. After attending an American high school in Tehran and boarding school in Switzerland, a 16-year-old Moghadam scored a spot at MIT in 1973. He graduated with a bachelor’s in engineering and stayed an extra year to get a master’s. His father’s death hastened his plans to return home and take over the family conglomerate, which had interests in development, construction and offshore drilling. 

Then came the Iranian Revolution. Banks, development firms and energy companies were nationalized, stamping out the private sector, and Western influences on academia and business were rooted out. Moghadam’s mother urged him to stay in the U.S., so he applied to business school — Harvard, Stanford, even a Ph.D. program at MIT. 

I got into all of them,” he said in 2016. He chose Stanford because of the weather (he was deciding where to go when a catastrophic blizzard hit the Northeast in 1978). By the time he graduated with his MBA in 1980, “any prospects of going back to Iran at that time disappeared.” 

Things in the U.S. weren’t looking great, either. The country was in a severe recession, and employers weren’t keen on hiring someone with an Iranian name. He was rejected from 86 jobs (one firm rejected him twice by accident). 

He did a stint at a mining company, then turned to his Stanford connections. One of his teachers, John McMahan, had started a private equity firm and took a chance on a former student. 

Soon, Moghadam decided working for someone else wasn’t for him. He teamed up with a friend, Douglas Abbey, and a prominent real estate lawyer, T. Robert Burke, to form AMB Property Corporation. They took out a $50,000 loan from Crocker National Bank — a story Moghadam likes to tell frequently, though he claims it was never used — bought a $200 coffee table and rented a fifth-floor office at 505 Montgomery Street in San Francisco’s financial district. They targeted a raise of $100 million, but could only pull together $70 million. Even that, Moghadam has said, was a victory. 

The partners opted to bet on strip malls and industrial property –– an unusual move in the ’80s and ’90s, given that warehouses were focused on manufacturing and goods storage for physical retailers. Moghadam saw industrial and neighborhood retail as the steadiest source of real returns, as neither required huge amounts of capital to maintain. 

AMB launched two more funds, eventually raising a $400 million vehicle. By 1997, it had almost $3 billion in assets under management and counted Stanford, the World Bank pension plan and the Ford Foundation as clients. It filed to go public. 

At the time of the IPO, about two-thirds of AMB’s portfolio was industrial, while the rest was strip malls. Wall Street wanted cohesion and focus, not a bag of “mixed messages,” as one insider put it. Moghadam decided to zero in on industrial, selling 25 retail properties to San Diego-based Burnham Pacific Properties in 1999 for $560 million.

We found a fool who overpaid for our retail properties,” said Luis Belmonte, who oversaw asset management at AMB until 2005. “He said he got a generous deal, and we kept our mouths shut.” 

AMB had been partnering with developers such as Seefried Properties and Trammell Crow Company, but after it went public, Moghadam, who had assumed the CEO role, was determined to bring that action in-house. By 2004, the company delivered almost half a million square feet of new industrial space on its own, filings show. In 2007, that number neared 5 million. 

As the firm grew, Moghadam wanted a more elaborate headquarters, and bid to redevelop Pier 1 at the Embarcadero, an old warehouse that the Port Authority was up for ground-leasing to a developer.

No way I was going to bid against AMB, they were too smart and had way more money,” said Simon Snellgrove of Pacific Waterfront Partners, who ended up redeveloping two other piers at the wharf. After he did, he approached Moghadam and asked to buy the building.

Hell no, I’m not going to sell you my building,” Snellgrove recalls Moghadam saying.

For Christmas one year, Snellgrove wanted to put up wreaths across all three piers. He approached Moghadam and asked him to pay for his share. 

No, I’m not Christian — I’ll let you do it, but I won’t pay for it,” he told Snellgrove, who added that the two are still friends. 

Eat or be eaten

AMB’s move to go after Prologis in 2010 stunned industrial insiders.

When he did that merger, everybody said, ‘Oh my God, is he going to get eaten?’” Snellgrove said. “Instead, he ate them.” 

The deal was being touted as a “merger of equals,” but was far from it. AMB had about 158 million square feet of real estate at the time, Prologis nearly three times that. But Moghadam sensed an opening given Prologis’ precarious balance sheet, with losses of over $400 million in the fourth quarter of 2009.

He “came out of the womb ready to be a real estate negotiator,” said Abbey, Moghadam’s former partner at AMB. The only concession he made was the company name — the unified firm would be called Prologis. 

That was hard for me personally,” Moghadam said on a call discussing the merger in 2011.

Starting off as co-CEO with Walt Rakowich, then head of Prologis, Moghadam assumed solo leadership less than two years after the merger closed. His first order of business: overhauling the new entity’s balance sheet. 

In Europe, Prologis had formed a publicly traded vehicle that was heavily leveraged. The fund had relied on CMBS loans to fund investments and “faced constraints” in terms of obtaining third-party financing, according to a 2006 prospectus. 

Moghadam took the entity private in September 2012 by buying out all shareholders and lowered the cost of funds by up to 300 basis points, according to people familiar with the move.

Three months later, Moghadam struck a deal to sell a stake in the new private fund to Norway’s sovereign wealth fund for $1.6 billion — “almost to the dollar break-even” on the cost of taking the European entity private, Moghadam said at the time.

“That was a hairy fucking deal and took a high level of audacity,” said Belmonte, who put some of his own money into the new private fund. Moghadam assumed the risk for only a few months. After that, all Prologis had to do was manage the money.

In 2015, Prologis bought KTR Capital Partners for $5.9 billion, adding more than 60 million square feet to its portfolio. Three years later, the company bought DCT Industrial Trust for $8.5 billion in an all-stock deal, adding more than 78 million square feet in properties and development projects. In 2020, the company bought Industrial Property Trust and its more than 100 million-square-foot portfolio for $13 billion.

He has the biggest balls I’ve ever seen in terms of what he’ll ask for in a negotiation and get away with,” said a friend and former employee at AMB. 

Over the years, Moghadam developed a reputation for being exacting with talent. He often uses his connections at Stanford and MIT, both of which he is a big donor to, when hiring. 

He’d say, ‘I need your best student from Shanghai, we’re opening an office in Shanghai and I want someone to get the job done,’” said Tony Ciochetti, the former head of MIT’s real estate program. One MIT student, Aaron Binkley, had used Prologis data for a thesis. Moghadam hired him as a director of sustainability. 

And he’s shown that at Prologis, there’s no room for sentimentality. Belmonte was asked to retire in 2005. 

I was doing $200 million in deals, but he wanted $1 billion,” Belmonte recalled. “I was 64 years old –– I was not a $1 billion-a-year guy or this international road warrior.” 

Moghadam has said that when it comes to talent, he is “less in the rehabilitation business.”

Sharing a story in 2017 of someone he regretted hiring after three or four years, he said that he “spent two years defending this guy and the next two years, I gave him a lot of responsibility and he almost took our company down.” 

One-click wonders 

For the last few months, Wall Street analysts have voiced concerns over Amazon pulling back on warehouse space, pushing Prologis to disclose how it might affect its business. Amazon accounts for about 7 percent of the net-effective rent in Prologis’ consolidated portfolio, and nearly 5 percent in its owned and managed portfolio, according to a February SEC filing.

Moghadam called the Amazon narrative the “worst-understood point” of Prologis on a recent earnings call, dismissing any notion that a pullback would hurt its balance sheet. 

The two companies are, however, closely intertwined, with Prologis building out facilities specifically for Amazon across the country. In Southern California’s Inland Empire, the company is building a 4.1 million-square-foot development (the equivalent of about 40 Walmart stores) that has already been pre-leased to Amazon, marking the e-commerce firm’s largest-ever domestic lease.

And with the acquisition of Duke Realty, Prologis will have even more Amazon exposure. Amazon is also Duke’s largest tenant, occupying almost 6 percent of its portfolio at the end of the second quarter. 

Amazon, for its part, is indicating that it’s increasingly looking to go it alone. 

The company grew its owned real estate portfolio to 16.7 million square feet across North America in 2021, double what it had in 2020. If it keeps going down this path, and other e-commerce giants follow suit, industrial landlords could find themselves iced out. 

Moghadam doesn’t seem concerned. Dan Letter, Prologis’ head of global capital deployment, said in an August interview with TRD that customers only go that route in the case of a highly specialized facility.

With regard to rising interest rates, CFO Tim Arndt said on a recent earnings call that Prologis was “unimpacted” — the company was actually upping its acquisition budget to $1.7 billion.

We are not beholden to the capital markets to deploy capital,” said Letter, adding that Prologis is swooping in on deals that have been sidelined by debt-dependent buyers.

One way Prologis tries to brace for uncertainty is by amassing what Letter calls a land bank — a portfolio of vacant land and options to buy and build — which he claims gives the company the “luxury of turning development off and on based on demand.”

It seems as if Moghadam’s “profound sense of self-confidence,” as Stanford’s Milani put it, has seeped into the company culture. And if Moghadam has his way, Prologis might look quite different in the future.  

If there’s one guarantee at Prologis, there’s change,” Letter said. “Hamid is always going to push, and we’re always going to evolve.”

Moghadam is considering branching out into the solar business, offering to generate power for electric delivery vans, or providing internet services to tenants, he told the Financial Times last year.

There are few magnetic norths in this world,” Moghadam told his fellow Iranians at Stanford. “I want to build something of enduring excellence.” 

This article was updated to clarify details regarding Prologis’ 2013 deal with the Norwegian sovereign wealth fund, as well as the portion of Prologis’ net-effective rent that Amazon accounts for.


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