Tim Arndt
Chief Financial Officer at Prologis
Thanks, Jill. Good morning, everybody, and welcome to our second quarter earnings call. We had a very good quarter with outstanding results across our uniquely diversified business. It was highlighted by record rent change; a ramp-up in development starts, roughly half of which were built to suit; and the acquisition of over $3 billion of real estate at accretive returns deepening our scale in key markets. We also earned record Strategic Capital income and raised $1.2 billion in new equity across the vehicles.
We are watching markets closely, and we've been clear that we expect vacancies to rise over the course of the year from a normalization of demand and elevated development deliveries. We've indeed seen vacancy build and expect it to reach the mid-fours in the U.S by year end, but continue to believe that fundamentals will regain momentum in 2024 with the outlook for new supply declining as development starts continue to fall this year. In short, our outlook is completely unchanged and we feel great about our business.
Turning to our results. Core FFO, excluding promotes, was $1.25 per share and, including promotes, was $1.83 per share, both ahead of our forecast. Our promote income was generated from both USLF and FIBRA Prologis and meaningfully exceeded our guidance. USLF generated promote revenue at Prologis share of over $635 million. In its three-year performance period, assets grew by over $10 billion and the fund delivered an IRR of over 20%, net of all fees and with very low leverage.
In terms of our operating results, average occupancy for the quarter was 97.5%, down 50 basis points from the first quarter and in line with our expectations. Rent change on starts was a record on both a net effective and cash basis, 79% and 48%, respectively. Net effective rent change on signings of more forward-looking view was an impressive 87% with notable rent change from Phoenix at 137%, Northern New Jersey at 150% and Southern California at 181%. Global markets also contributed to strong signings, with Mexico at 34%, the U.K. at 36%, Central Europe at 51%, and Canada at 150%. Bottom line, rent change has been both robust and broad based.
Market rents continued to grow, albeit at a slower pace, increasing a little over 1.5% in the quarter. In-place rents grew by approximately 2.5% over the quarter, the net of which translates to a lease mark-to-market of 66%, down from 68%. We explained last quarter that our lease mark-to-market would generate $2.85 per share of incremental earnings as leases roll over time without any additional market rent growth. Interestingly, that future upside is virtually unchanged at June 30th, even though we crystallize rental increases over the quarter. This is because a lower lease mark-to-market is now being applied to a larger base of in-place NOI.
Ultimately, same-store growth is our most important operating metric, and this quarter remained exceptional at 8.9% on a net effective basis and 10.7% on cash. I'd like to highlight that even with $4 billion of investment during the quarter, the balance sheet remains in impeccable shape with liquidity of approximately $6.4 billion and debt to EBITDA of 4.2 times. We raised approximately $7 billion in debt financing across four currencies at an interest rate of 4.9% and an average term of eight years.
Turning to our markets, the trend to normalization, which we've been speaking to for some time, continues. Proposal activity, gestation and preleasing of vacancy are all within a few percent of their pre-COVID levels, a period which we've highlighted many times was itself historically strong. Our IBI sentiment index ticked up in the quarter to over 58, indicating a continued strong backdrop for demand as described by our customers and further supported by utilization increasing to 85.5%.
Unsurprisingly, customers have been more deliberate in their decision making amidst the uptick in vacancy. We continue to believe that this will be a short-lived reprieve as construction starts have, indeed, declined significantly for our expectations. Starts in the second quarter were down approximately 40% across our U.S. markets and 50% in Europe. We see deliveries in 2024 falling short of demand, reducing vacancy over the course of next year.
Significant attention has been given to Southern California in recent months. While our portfolio is over 97% leased and we are achieving record rent change, vacancy has grown, partially due to port operations that have not yet returned to normal. Additionally, some customers are reevaluating expansion in the Inland Empire, diversifying operations to other Southwest markets. With all this in mind, we've reduced our rent growth forecast for Southern California in 2023. However, given what is still low vacancy together with structural headwinds to new supply and a huge consumption base, we believe strongly in this market.
The global nature of our portfolio means that we'll see markets contribute to growth in different periods, evening out peaks and troughs. We see this playing out in a number of markets across the globe where our rent growth forecast is increasing this quarter, such as Las Vegas, Texas, Europe and Mexico, to name a few. All this together with the more than 5% rent growth to date has us reforecasting the full year to a range of 7% to 9% on a global basis. What matters more than what will transpire in the next six months is what we see over the medium term, which is growth that will be fueled by escalating replacement costs, growing barriers to new supply, and ongoing secular drivers of demand.
Late in the second quarter, we announced and closed on the acquisition of over 14 million square foot portfolio in many of our best U.S. markets. We estimate an 8% unlevered IRR simply at the property level, exclusive of additional return driven by property management synergies, essentials opportunities, including solar, and the upside we expect through revenue management. While this was the largest transaction in the quarter, overall activity increased slightly, bringing additional price discovery to the market.
In Europe, values have been relatively stable, experiencing a 1% decline over the second quarter. Latin America saw an increase in values with writeups in Brazil and Mexico of 2% and 5%, respectively. And writedowns in the U.S. were in line with expectations, approximately 5%, driving the cumulative decline over the last year to 12%. With this move, we view the values as fair and are proceeding on redemptions in USLF for the third quarter.
New redemption requests in the quarter totaled approximately $800 million and was concentrated in USLF and our China venture, where values have held up better. Together with other activity, the net redemption queue stands at approximately $1.6 billion. Outside of the open-ended funds, the company raised an incremental $1.2 billion comprised of $500 million in the FIBRA and NPR, as well as a new $700 million dollar commitment for a complementary vehicle in Japan, TJLF, which is detailed in our supplemental.
Before turning to guidance, I'd like to mention a few updates across our Essentials business. We added 45 solar production and storage in the first half of the year, bringing our platform total to 450 megawatts, nearly 50% of the way to our 1-gigawatt goal for 2025. Additionally, Prologis Mobility, our EV business, has more than 65 fleet charging sites in the pipeline across the U.S. and Europe.
In terms of our outlook for the balance of the year, we are guiding average occupancy to range between 97% and 97.5%. We are increasing our same-store guidance to 8.75% to 9.25% on a net effective basis and 9.5% to 10% on a cash basis. Net effective rent change propelling same store should continue to accelerate in the next two quarters and average approximately 80% over the year. We are maintaining our G&A guidance to range between $380 million and $390 million and are increasing our Strategic Capital revenue guidance, excluding promotes, to range between $520 million and $530 million.
As a result of the outperformance in USLF's promote, we are increasing our forecast for net promote income to $475 million. Year to date, we are in excess of this amount, but amortization expense will continue over the back half of the year. Development starts picked up during the quarter with commencements of 12 projects around the globe. And while we remain very selective on new spec starts, we are maintaining our guidance of $2.5 billion to $3 billion for the year. We had over $550 million in contribution and disposition activity during the quarter concentrated in Japan and Mexico and are maintaining guidance of $2 billion to $3 billion.
Putting it all together, we are increasing guidance for GAAP earnings to range between $3.30 and $3.40 per share. We are increasing core FFO including promotes guidance to a range of $5.56 to $5.60 per share and increasing core FFO excluding promotes to range between $5.06 and $5.10 per share, with the midpoint representing over 10% annual growth marking our fourth consecutive year of double-digit earnings growth.
The quarter highlighted many ways that Prologis has diversified itself across geographies, business lines and capital sources. While rents in some markets decelerate, others with different demand drivers are now accelerating. We're seeing the same balance with property values as demonstrated over the quarter. Further, we generate incremental cash flows and value creation outside of the pure rent business in closely related and synergistic platforms, namely Strategic Capital, Development and, now, Essentials.
Our fundraising efforts also demonstrate the value of having alternatives. Clearly, our wide access to debt capital has been a tremendous advantage, but we also benefit from access to varied equity sources for our ventures. By utilizing open-end vehicles, JVs and public structures, we have the ability to be opportunistic and proactive in changing capital markets.
As we close, I'd like to remind you of two upcoming events at Prologis later in the year, our GROUNDBREAKERS thought leadership forum on September 27th right here in San Francisco and our Investor Forum on December 13th in New York. Additional information for each is available on our website.
With that, I will hand it back to the operator for your questions.
