Tim Arndt
Chief Financial Officer at Prologis
Thanks, Jill. Good morning, everybody, and thank you for joining our call.
We are clearly in a volatile macro environment, where ongoing inflation, steeply rising interest rates and the war and energy crisis in Europe are pressuring the global economy. And while we're closely monitoring each element, the fundamentals in our business are very strong, and our read of supply and demand in our markets remains out of sync with the headlines. This morning, we reported excellent third quarter results, which generated many new records in the quarter. We will spend less time on these results and more time describing our view of the market and how we're navigating the environment.
Before doing so, I'd like to thank our teams across the entire organization who did an exceptional job keeping focus on the business, especially while working through the Duke acquisition, which closed on October 3. We fully integrated the portfolio, achieved our day 1 synergies and look forward to the next phase, which is to build AFFO accretion through incremental property cash flows and Essentials income. We move forward with a better portfolio, a larger and stronger balance sheet, talented new employees and new customers to whom we can introduce to our Essentials business.
Turning to results. Core FFO was $1.73 per share, including $0.57 of net promote income earned principally from our PELP venture in Europe. Our annual guidance for Promotes was $0.60, with most of the revenue to be earned in the third quarter. The amount came in below expectations due to a nearly 5% write-down of European asset values in the quarter, partially offset by an increase in NAV from debt mark-to-market. In the end, the promote was a record high, while the fund enjoyed a high teens annualized IRR across the 3-year performance period despite the recent markdown.
I'll note a few operating stats from the quarter, all of which were records for the company. Ending occupancy increased 10 basis points over the quarter to 97.8%. Same-store growth was 8.3% on a net effective basis and 9.3% on a cash basis. Both were driven primarily by rent change, which was 60% on a net effective basis. Separately, the Duke portfolio ended the quarter with 99% occupancy and net effective rent change of 54%. While these markets are outstanding, they are also backward looking. So we've kept focus on more contemporaneous data, namely rent change on signings, which was 84% during the quarter, and our lease mark-to-market, which now stands at nearly 62%.
Finally, we had a very active quarter on the balance sheet, raising over $3 billion of debt in a variety of markets and currencies given our broad access, including a $650 million green bond issued in late September. We ended the quarter with debt-to-EBITDA of 4.3 times, excluding gains, providing us significant investment capacity.
Turning to our observations of current conditions. We continue to see scarcity of available space across our markets. Vacancy rates are at historic lows, and our own occupancy sits at a record high. Market rent growth in the third quarter remained robust in response to this scarcity and continued strong demand. Color across the markets remains generally upbeat in terms of customer inquiries, and our proprietary metrics also reveal healthy activity even if they've softened from the peak demand generated during COVID to levels still above long-term averages.
Transaction gestation was stable during the third quarter at 62 days, proposals via available units slowed during the third quarter to levels more in line with the pace of 2019 and indicative of less urgency to renew space far ahead of exploration. Inside our properties are metrics point of activity that is increasing with our IBI index at 63.8%, the 80th percentile and utilization up to 86.6%, the 95th percentile. Our certain customers have publicly announced a pause in capex spending, particularly those with more mature supply chains. But active dialogue with the majority of our customers confirms an overarching need to increase space as supply chain resiliency remains a top concern.
Shifting to supply. We're seeing initial signs of a deceleration in development activity across our markets as construction and capital costs continue to increase. We believe we could see a gap in deliveries emerge in late '23 or early '24. As for today, our true months of supply metrics sits at a healthy 22 months, up from 18 months last quarter. We've previously explained that we expect to see this metric climb into a low 30 months range, still at a level reflecting a strong operating environment.
It's important to acknowledge where supply is being delivered as our submarket location strategies minimize our exposure to new supply. For example, in our coastal US markets where we generate over 50% of our global NOI, vacancies are just 1.7%. Geographically, we have an increased level of focus on Europe given the ongoing war and growing energy crisis. While we're reporting record results, including occupancy at 98.6% in a market with 2.4% vacancy, we are closely monitoring conditions. Customers are exercising caution in response to rising energy costs, which may create headwinds to near-term demand. That said, we also believe that new supply will now decline around 15% in 2023, which should support occupancy.
The US remains strong, where we now generate 87% of our NOI with the addition of Duke. Our teams continue to see solid activity, although acknowledging a reduced number of prospects for space compared to what we saw during the frenzy of COVID. Rent change on signings during the quarter was 93%, demonstrating a continuation of favorable pricing dynamics.
In Latin America, both Mexico and Brazil are performing well, with very high occupancy over 98% and rent change across the region of 24%. And in Asia, construction costs in Japan are rising most acutely from the weakness in the yen, as well as from competition for key materials to complete construction. Market vacancies have increased, but this constraint on new supply, particularly out to '23 and '24, should provide an offset. The combined picture was positive to third quarter market rent growth, exceeding our expectations and driving a 300 basis point increase of our '22 global forecast to 26%, with the US at 28%, significantly up from the 10% and 11%, respectively, in our initial guidance.
It's difficult to fully know the impact of this market rent growth on values given the limited transaction volume in the market. But our view is that the increase in return requirements is more than offsetting rent growth and indeed pressuring values. Based on prior cycles, we can safely assume it will take few quarters for full price discovery to be made as markets stabilize and transaction volumes build.
With all this in mind, we're carefully managing the business and approaching our markets with a sense of caution much as we did at the onset of the pandemic. In leasing, despite the very strong spot environment, we are carefully watching for softening demand and will assume that there will be further macro deterioration. In some markets, this will have us managing more for occupancy than rent growth, but in many others, we believe pricing will remain favorable given very low availability. This is an environment where our revenue management capabilities will be the most useful and allow us to manage such decisions lease-by-lease.
With deployment, we are reducing our starts guidance to a range of $4.2 billion to $4.6 billion, and we expect our fourth quarter starts will be 60% build-to-suit, reflecting a more cautious approach to deployment in the coming months, aiming to be very selective in new projects. And in terms of strategic capital, we previously mentioned that we expect to see an increase in redemption activity. While we did have inflows from numerous investors, redemptions grew by $1.3 billion, which, for context, is just 3% of our open-end third-party AUM.
Our funds have sufficient equity queues to address this activity. In combination with equity called during the quarter, we now sit at net neutral queues. The open-ended funds have ample investment capacity based on overall low leverage, and we are optimistic about the long-term growth of the business. In the near-term, we will be prudent as we evaluate further capital deployment, including a pause on contributions in the short-term.
Turning to guidance, which includes Duke portfolio for the fourth quarter. We are maintaining our guidance for average occupancy, while increasing our net effective same-store guidance to 7.5% to 7.75%, and our cash same-store guidance to 8.5% to 8.75%. We expect to see our lease mark-to-market around 65% at the end of the year. We now expect acquisitions to range between $1.9 billion to $2.1 billion, which increased due to our acquisition activity in Europe during the quarter, and contributions and dispositions to range between $2.1 billion to $2.3 billion.
Finally, we are increasing core FFO, excluding Promotes, to $4.60 to $4.62 per share, which includes approximately $0.05 of accretion related to the acquisition of Duke. We are guiding core FFO with Promotes to be $5.12 to $5.14 per share, which incorporates a lower Promote guidance of $0.52, reflective of the higher share count resulting from the Duke transaction.
I'd like to point out that our earnings have been unimpacted by FX over this extremely volatile year due to our capital strategy and approach to hedging. The same is true for our equity base, which has very minimal exposure outside of the US dollar despite our global footprint. We will continue to protect both proactively and programmatically.
To close, we're proud of how we've positioned the business and are optimistic about the organic growth ahead. We own hard assets with contractual revenues, significant embedded mark-to-market and have meaningful secular drivers that continue to play out. As an organization, we have long had an entrepreneurial and growth mindset. Today, adding new business lines and cash flow streams that are synergistic with our already unique model. We have built the company to thrive across cycles, including uncertain environments like today, where we can seize opportunities and continue to set our business and portfolio apart.
We'll now turn the call over to the operator for your questions.
