Many real estate investment trusts have learned lessons from the 2008 financial crisis and are managing their current balance sheets more prudently, positioning them well to navigate current economic headwinds, according to Prologis CFO Tim Arndt.

Key elements of this strategy include maintaining low leverage, extending debt maturities as long as possible, and focusing on liquidity. Arndt noted that this approach allows the industrial real estate company to both seize opportunities amid the uncertainty caused by the Trump administration's April 2 tariff shock and protect itself effectively.

"We manage the balance sheet across cycles, both to seize opportunities and to be prepared for disruptions like this. In that sense, we are ready," Arndt said in an interview with CFO Dive on Friday.

Tim Arndt
Tim Arndt
Image source: Prologis

What does this financial preparedness look like in practice? First, while some companies have only one credit facility maturing every five years, Arndt said Prologis holds three separate credit facilities, each involving about 30 banks, with maturities that overlap and are staggered. Prologis aims to keep most of these facilities undrawn.

"So, tomorrow I can draw $6 billion and put it to work," Arndt said. "That's tremendous flexibility."

This arrangement brings Prologis into the bank market more frequently, but he said it reduces the need to concentrate bank financing at a single point in time when disruptions could occur.

The company is also a highly rated debt issuer, which Arndt said allows it to borrow at maturities of 15 to 40 years, whereas lower-rated companies typically only have access to 10-year financing. According to the company's first-quarter 2025 filing with the U.S. Securities and Exchange Commission, as of March 31, its credit ratings were A from S&P and A2 from Moody's.

Arndt became CFO in 2022. He discussed the company's debt strategy and outlook at a time when the industrial real estate market is viewed by some as—alongside retail—one of the property sectors most exposed to tariffs and their potential impact on supply chains.

During the company's first-quarter earnings call, Arndt outlined the uncertainty facing tenants while asserting that a "decoupled world" moving away from globalization would require more warehouses and could increase demand for industrial space.

When asked in the interview to elaborate on that view, he said his comments were actually "directional." In a hypothetical world without global trade, each region would need space for the entire supply chain: sourcing raw materials, manufacturing goods, storing finished products, and distributing them.

However, he said Prologis's portfolio is concentrated on the consumption end of the supply chain, and the company sticks to that business model, not betting that significant manufacturing will return to the U.S. and create long-term demand across all parts of the supply chain.

"We don't believe—primarily based on the cost and complexity of rebuilding supply chains in the U.S.—that we will see a massive return of production onshore," Arndt said. He noted that manufacturing has not seen significant growth since the first Trump administration began its higher-tariff approach.

Currently, one metric the company uses to gauge tariff impact is utilization rates within its warehouses. In the U.S., that metric has not deviated from the long-term norm of around 85%. Arndt said it is too early to tell, "but we are watching it closely because it is a good leading indicator. You want your buildings to be highly utilized."