Jeffrey H. Schwartz
Time in current role: two years
Biggest accomplishment: Consummating $5.3 billion merger with Catellus Development Corp. in 2005
Short-term goal: Building an industrial portfolio in China and the rest of Asia
When the founding CEO of the industrial conglomerate ProLogis, K. Dane Brooksher, decided to retire early in 2005, the best guess is that directors didn't spend more than a few nanoseconds pondering the choice of his successor. Jeffrey H. Schwartz, who had in successive assignments led the company's expansion into Mexico, Europe and Asia, had been groomed for the top job at ProLogis for the previous decade.
The experience abroad has turned out to be critical for Schwartz, who is steering the big Denver-based REIT on an increasingly global course. This year ProLogis (NYSE: PLD) is planning $2.5 billion in new construction, but only $700 million of that is slated for the U.S.
The rest is coming in places like Poitiers, France, where the company is erecting a 344,000 sq. ft. distribution center for the tire maker Michelin, and in the deep-water ports around Shanghai, where ProLogis is banking enough land to eventually develop some 50 million sq. ft. of logistics facilities.
Schwartz's secret formula for overseas success? He hires local people to do the heavy lifting. In Japan, for instance, ProLogis has a staff of 75 comprised entirely of Japanese nationals, with not a single American expatriate looking on.
“In Europe we have 290 people working for us and maybe three are American expats,” Schwartz says. “The nationals understand their own markets and cultures. We've got processes in place that empower these local teams to go out and create leading positions in their markets.”
In 2000, ProLogis had $6.4 billion in assets under management. That total has ballooned to $24.8 billion now, with the company controlling 400 million sq. ft. in 81 large urban markets on three continents. In the aftermath of the giant merger with Catellus Development Corp. two years ago, nobody else in the industrial arena is close to challenging ProLogis's size and clout with multi-national clients.
And Schwartz is intent on widening ProLogis' lead. He figures the U.S. has 12 billion sq. ft. of industrial inventory, with perhaps half already obsolete. That means that ProLogis' 320 million sq. ft. is equal to about 5% of the domestic market — not nearly enough to suit Schwartz. “There's nothing to stop us from getting to 15% or 20% of the U.S. market. We're still a pretty young company,” he says.
The opportunities are even bigger overseas. The European market has nearly as much industrial space as the U.S., but ProLogis owns just 80 million sq. ft. there. “We're the largest player in Europe now, but we're not close to the size we can be there,” Schwartz contends.
A native of Philadelphia, Schwartz grew up in New Jersey and earned an accounting degree at Emory University in Atlanta, then an MBA at Harvard before starting up an industrial development firm, Krauss/Schwartz Co., in Tampa, Fla. It was the biggest industrial owner in the Sunshine State when it was acquired by Security Capital Industrial Trust in 1994. At the time, Security owned just 7 million sq. ft. of space. In 1997, the name was changed to ProLogis and Schwartz embarked on a blitzkrieg of new construction and acquisitions of existing assets.
“Jeff started all our businesses outside the U.S.,” notes Dane Brooksher, ProLogis chairman. “It was very important that anybody running ProLogis have a deep understanding of international markets.”
Whether it's the Inland Empire or the Beijing Airport, land for industrial development is getting harder to find and more expensive when it is available. That reality might cut into ProLogis' growth prospects in the future, but Schwartz is hardly deterred. “If new development gets tougher, then that puts upward pressure on rents in existing properties,” he observes. “As the biggest owner of industrial assets, we like that situation.”