UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-K

(Mark One)

þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 20132016

or

¨

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from             to            

Commission File Number:001-13545 (Prologis, Inc.) 001-14245 (Prologis, L.P.)

 

 

Prologis, Inc.

Prologis, L.P.

(Exact name of registrant as specified in its charter)

 

Maryland (Prologis, Inc.)

Delaware (Prologis, L.P.)

94-3281941 (Prologis, Inc.)

94-3285362 (Prologis, L.P.)

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

Pier 1, Bay 1, San Francisco, California

94111

(Address or principal executive offices)

(Zip Code)

(415) 394-9000

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

 

Title of Each Class

Name of Each Exchange on Which Registered

Prologis, Inc.

Common Stock, $.01$0.01 par value

New York Stock Exchange

Prologis, L.P.

4.000% Notes due 2018

New York Stock Exchange

Prologis, L.P.

3.000%

1.375% Notes due 20222020

New York Stock Exchange

Prologis, L.P.

1.375% Notes due 2021

New York Stock Exchange

Prologis, L.P.

3.000% Notes due 2022

New York Stock Exchange

Prologis, L.P.

3.375% Notes due 2024

New York Stock Exchange

Prologis, L.P.

3.000% Notes due 2026

New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

Prologis, Inc. -NONE

Prologis, L.P. -NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Prologis, Inc.:  Yes þ  No ¨

Prologis, L.P.:  Yesþ  No¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Prologis, Inc.:  Yes¨ Noþ

Prologis, L.P.:  Yes¨ Noþ

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Prologis, Inc.:  Yesþ  No¨  Prologis, L.P.:  Yesþ  No¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website; if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter periods that the registrant was required to submit and post such files). Prologis, Inc.:  Yesþ  No¨   Prologis, L.P.:  Yesþ  No¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to thisForm 10-K.¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (check one):

 

Prologis, Inc.:

þ   Large accelerated filer

¨   Accelerated filer

¨   Non-accelerated filer (do not check if a smaller reporting company)

¨   Smaller reporting company

 

Prologis, L.P.:

¨   Large accelerated filer

¨   Accelerated filer

þ   Non-accelerated filer (do not check if a smaller reporting company)

¨   Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).

Prologis, Inc.:  Yes¨  Noþ

Prologis, L.P.:  Yes¨  Noþ

Based on the closing price of Prologis, Inc.’s common stock on June 30, 2013,2016, the aggregate market value of the voting common equity held by non-affiliatesnonaffiliates of Prologis, Inc. was $18,639,338,377.$25,583,323,441.

The number of shares of Prologis, Inc.’s common stock outstanding as ofat February 21, 201410, 2017, was approximately 499,613,700.529,345,000.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Part III of this report are incorporated by reference to the registrant’s definitive proxy statement for the 20142017 annual meeting of its stockholders or will be provided in an amendment filed on Form 10-K/A.

 

 

 


EXPLANATORY NOTE

This report combines the annual reports on Form 10-K for the year ended December 31, 20132016, of Prologis, Inc. and Prologis, L.P. Unless stated otherwise or the context otherwise requires, references to “Prologis, Inc.” or the “Parent” mean Prologis, Inc. and its consolidated subsidiaries; and references to “Prologis, L.P.” or the “Operating Partnership” mean Prologis, L.P., and its consolidated subsidiaries. The terms “the Company”, “Prologis”,Company,” “Prologis,” “we,” “our” or “us” means Prologis, Inc.the Parent and the Operating Partnership collectively.

Prologis, Inc.

The Parent is a real estate investment trust (a “REIT”) and the general partner of the Operating Partnership. As ofAt December 31, 2013, Prologis, Inc.2016, the Parent owned an approximate 99.65%97.42% common general partnership interest in the Operating Partnership and 100% of the preferred units in the Operating Partnership. The remaining approximate 0.35%2.58% common limited partnership interests are owned by non-affiliatednonaffiliated investors and certain current and former directors and officers of Prologis, Inc.the Parent. As the sole general partner of the Operating Partnership, Prologis, Inc.the Parent has full, exclusive and complete responsibility and discretion in the day-to-day management and control of the Operating Partnership.

We operate Prologis, Inc.the Parent and the Operating Partnership as one enterprise. The management of Prologis, Inc.the Parent consists of the same members as the management of the Operating Partnership. These members are officers of Prologis, Inc.the Parent and employees of the Operating Partnership or one of its direct or indirect subsidiaries. As general partner with control of the Operating Partnership, Prologis, Inc.the Parent consolidates the Operating Partnership for financial reporting purposes, and Prologis, Inc. does not havepurposes. Because the only significant assets other thanasset of the Parent is its investment in the Operating Partnership. Therefore,Partnership, the assets and liabilities of Prologis, Inc.the Parent and the Operating Partnership are the same on their respective financial statements.

We believe combining the annual reports on Form 10-K of Prologis, Inc.the Parent and the Operating Partnership into this single report results in the following benefits:

 

enhances investors’ understanding of Prologis, Inc.the Parent and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;

 

eliminates duplicative disclosure and provides a more streamlined and readable presentation sinceas a substantial portion of the Company’s disclosure applies to both Prologis, Inc.the Parent and the Operating Partnership; and

 

creates time and cost efficiencies through the preparation of one combined report instead of two separate reports.

We believe it

It is important to understand the few differences between Prologis, Inc.the Parent and the Operating Partnership in the context of how we operate as an interrelated consolidated company. Prologis, Inc.’s only material asset is its ownership of partnership interests in the Operating Partnership. As a result, Prologis, Inc.Company. The Parent does not conduct business itself, other than acting as the sole general partner of the Operating Partnership and issuing public equity from time to time. Prologis, Inc.The Parent itself does not issueincur any indebtedness, but it guarantees the unsecured debt of the Operating Partnership. The Operating Partnership holds substantially all the assets of the business, directly or indirectly, and holds the ownership interests in the Company’s investment in certain entities. The Operating Partnership conducts the operations of the business and is structured as a partnership with no publicly traded equity. Except for net proceeds from equity issuances by Prologis, Inc.,the Parent, which are contributed to the Operating Partnership in exchange for partnership units, the Operating Partnership generates the capital required by the business through the Operating Partnership’s operations, its incurrence of indebtedness and the issuance of partnership units to third parties.

Noncontrolling

The presentation of noncontrolling interests, stockholders’ equity and partners’ capital are the main areas of difference between the consolidated financial statements of Prologis, Inc.the Parent and those of the Operating Partnership. The noncontrollingcommon limited partnership interests held by the limited partners in the Operating Partnership are presented as limited partners’ capital within partners’ capital in the Operating Partnership’s consolidated financial statements includeand as noncontrolling interest within equity in the Parent’s consolidated financial statements. The common and preferred partnership interests in consolidated entities not ownedheld by the Operating Partnership. The noncontrolling interests in Prologis, Inc.’s financial statements include the same noncontrolling interests at the Operating Partnership level, as well as the common limited partnership interestsParent in the Operating Partnership which are accounted forpresented as general partner’s capital within partners’ capital byin the Operating Partnership.Partnership’s consolidated financial statements and as preferred stock, common stock, additional paid-in capital, accumulated other comprehensive loss and distributions in excess of net earnings within stockholders’ equity in the Parent’s consolidated financial statements. The differences in the presentations between stockholders’ equity and partners’ capital result from the differences in the equity and capital issuances at the Parent and Operating Partnership levels.

In order to

To highlight the differences between Prologis, Inc.the Parent and the Operating Partnership, there are separate sections in this report, as applicable, that separatelyindividually discuss Prologis, Inc.the Parent and the Operating Partnership, including separate financial statements and separate Exhibit 31 and 32 certifications. In the sections that combine disclosure of Prologis, Inc.the Parent and the Operating Partnership, this report refers to actions or holdings as being actions or holdings of Prologis.


TABLE OF CONTENTS

  Item 

Description

 Page 
 PART I 

1.

 

Business

  4  
 

The Company

  4  
 

Investment Strategy

  5  
 

Business Strategy and Operating Segments

  5  
 

Code of Ethics and Business Conduct

  6  
 

Environmental Matters

  6  
 

Insurance Coverage

  6  

1A.

 

Risk Factors

  7  

1B.

 

Unresolved Staff Comments

  14  

2.

 

Properties

  14  
 

Geographic Distribution

  14  
 

Lease Expirations

  17  
 

Unconsolidated Co-Investment Ventures

  18  

3.

 

Legal Proceedings

  18  

4.

 

Mine Safety Disclosures

  18  
 PART II 

5.

 

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

  19  
 

Market Information and Holders

  19  
 

Dividends

  20  
 

Securities Authorized for Issuance Under Equity Compensation Plans

  20  
 

Other Stockholder Matters

  20  

6.

 

Selected Financial Data

  21  

7.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

  21  
 

Management’s Overview

  22  
 

Results of Operations

  25  
 

Portfolio Information

  31  
 

Environmental Matters

  33  
 

Liquidity and Capital Resources

  33  
 

Off-Balance Sheet Arrangements

  36  
 

Contractual Obligations

  37  
 

Critical Accounting Policies

  37  
 

New Accounting Pronouncements

  39  
 

Funds from Operations

  39  

7A.

 

Quantitative and Qualitative Disclosure About Market Risk

  42  

8.

 

Financial Statements and Supplementary Data

  43  

9.

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

  44  

9A.

 

Controls and Procedures

  44  

9B.

 

Other Information

  45  
 PART III 

10.

 

Directors, Executive Officers and Corporate Governance

  45  

11.

 

Executive Compensation

  45  

12.

 

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

  45  

13.

 

Certain Relationships and Related Transactions, and Director Independence

  45  

14.

 

Principal Accounting Fees and Services

  45  
 PART IV 

15.

 

Exhibits, Financial Statement Schedules

  45  

Item

 

Description

 

Page

 

 

PART I

 

 

1.

 

Business

 

3

 

 

The Company

 

3

 

 

Business Strategy and Operating Segments

 

5

 

 

Code of Ethics and Business Conduct

 

7

 

 

Environmental Matters

 

8

 

 

Insurance Coverage

 

8

1A.

 

Risk Factors

 

8

1B.

 

Unresolved Staff Comments

 

15

2.

 

Properties

 

15

 

 

Geographic Distribution

 

15

 

 

Lease Expirations

 

18

 

 

Co-Investment Ventures

 

19

3.

 

Legal Proceedings

 

19

4.

 

Mine Safety Disclosures

 

19

 

 

PART II

 

 

5.

 

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

20

 

 

Market Information and Holders

 

20

 

 

Preferred Stock Dividends

 

21

 

 

Sale of Unregistered Securities

 

21

 

 

Securities Authorized for Issuance Under Equity Compensation Plans

 

21

 

 

Other Stockholder Matters

 

21

6.

 

Selected Financial Data

 

22

7.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

22

 

 

Management’s Overview

 

22

 

 

Results of Operations

 

23

 

 

Environmental Matters

 

32

 

 

Liquidity and Capital Resources

 

33

 

 

Off-Balance Sheet Arrangements

 

37

 

 

Contractual Obligations

 

38

 

 

Critical Accounting Policies

 

38

 

 

New Accounting Pronouncements

 

40

 

 

Funds from Operations Attributable to Common Stockholders/Unitholders ("FFO")

 

40

7A.

 

Quantitative and Qualitative Disclosures About Market Risk

 

42

8.

 

Financial Statements and Supplementary Data

 

43

9.

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

43

9A.

 

Controls and Procedures

 

43

9B.

 

Other Information

 

44

 

 

PART III

 

 

10.

 

Directors, Executive Officers and Corporate Governance

 

44

11.

 

Executive Compensation

 

44

12.

 

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

44

13.

 

Certain Relationships and Related Transactions, and Director Independence

 

45

14.

 

Principal Accounting Fees and Services

 

45

 

 

PART IV

 

 

15.

 

Exhibits, Financial Statements and Schedules

 

45

16.

 

Form 10-K Summary

 

45

2


The statements in this report that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on current expectations, estimates and projections about the industry and markets in which we operate as well as management’s beliefs and assumptions made by management.assumptions. Such statements involve uncertainties that could significantly impact our financial results. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,”and “estimates” including variations of such words and similar expressions are intended to identify such forward-looking statements, which generally are not historical in nature. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future — including statements relating to rent and occupancy growth, development activity, and changes in sales or contribution volume of properties,and disposition activity, general conditions in the geographic areas where we operate, our debt, capital structure and financial position, our ability to form new co-investment ventures and the availability of capital in existing or new co-investment ventures — are forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be attained, and therefore actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. Some of the factors that may affect outcomes and results include, but are not limited to: (i) national, international, regional and local economic and political climates, (ii) changes in global financial markets, interest rates and foreign currency exchange rates, (iii) increased or unanticipated competition for our properties, (iv) risks associated with acquisitions, dispositions and development of properties, (v) maintenance of REIT status, and tax structuring and changes in income tax rates, (vi) availability of financing and capital, the levels of debt that we maintain and our credit ratings, (vii) risks related to our investments in our co-investment ventures, including our ability to establish new co-investment ventures, (viii) risks of doing business internationally, including currency risks, (ix) environmental uncertainties, including risks of natural disasters, and (x) those additional factors discussed under Item 1A. Risk Factors in this report. We undertake no duty to update any forward-looking statements appearing in this report except as may be required by law.

PART I

ITEM 1. Business

The Company

We are the leading global owner, operator and developer of industrial real estate, focused on global and regional markets across the Americas, Europe and Asia. As of December 31, 2013, on an owned and managed basis, we had properties and development projects totaling 569 million square feet (52.9 million square meters) in 21 countries. These properties are leased to more than 4,500 customers, including third-party logistics providers, transportation companies, retailers, manufacturers, and other enterprises.

Of the 569 million square feet (representing an investment of $45.5 billion) in our owned and managed portfolio as of December 31, 2013:

 

529 million square feet were in our operating portfolio with a gross book value of $41.5 billion that were 95.1 % occupied;

30 million square feet were in our development portfolio with a total expected investment of $2.4 billion that were 45.3% leased;

land available for future development was $1.6 billion;

10 million square feet consisted of properties in which we have an ownership interest but do not manage, including other non-industrial properties we own; and

the largest customer and 25 largest customers accounted for 1.8% and 17.2 %, respectively, of our annualized base rent.

Prologis, Inc. commenced operationsis a self-administered REIT and is the sole general partner of Prologis, L.P. We operate Prologis, Inc. and Prologis, L.P. as one enterprise and, therefore, our discussion and analysis refers to Prologis, Inc. and its consolidated subsidiaries, including Prologis, L.P., collectively.

Prologis, Inc. began operating as a fully integrated real estate company in 1997 and elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (“Internal Revenue Code”), and believes. We believe the current organization and method of operation will enable Prologis, Inc. to maintain its status as a REIT. The Operating PartnershipPrologis, L.P. also was also formed in 1997.

We have investments in entities through a variety of ventures. We co-invest in entities that own multiple properties with partners and investors and provide asset and property management services to these entities. We refer to these entities as co-investment ventures. Our ownership interest in these entities generally ranges from 15-50%. These entities may be consolidated or unconsolidated, depending on the structure, our partner’s participating and other rights and our level of control of the entity. The co-investment ventures may have one or more investors.

Our globalcorporate headquarters are located at Pier 1, Bay 1, San Francisco, California 94111, and our global operational headquartersother principal offices are located at 4545 Airport Way, Denver, Colorado 80239. Our other principal office locations are in Amsterdam, the Grand Duchy ofDenver, Luxembourg, Mexico City, Shanghai, Singapore and Tokyo.

Our Internet website address iswww.prologis.com. All reports required to be filed with the Securities and Exchange Commission (the “SEC”(“SEC”) are available or mayand can be accessed free of charge through the Investor Relations section of our Internet website, as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC.www.prologis.com. The common stock of Prologis, Inc. is listed on the New York Stock Exchange (“NYSE”) under the ticker “PLD” and is a component of the Standard & Poor’s (“S&P&P”) 500.

On June 3, 2011, AMB Property Corporation (“AMB”) completed a merger with ProLogis, a Maryland REIT (“ProLogis”) in which ProLogis shareholders received 0.4464 of a share of common stock of AMB for each outstanding common share of beneficial interest in ProLogis (the “Merger”). In the Merger, AMB was the legal acquirer and ProLogis was the accounting acquirer. Following the Merger, AMB changed its name to Prologis, Inc.

Investment StrategyTHE COMPANY

We are the global leader in logistics real estate with a focus on high-barrier, high-growth markets. We own, manage and develop high-quality logistics facilities in the world’s most active centers of commerce. An investment in Prologis taps into key drivers of economic growth, including consumption, supply chain modernization, e-commerce and urbanization.

Customers turn to us because they know an efficient supply chain will make their businesses run better, and that a strategic relationship with Prologis will create a competitive advantage. We lease modern logistics facilities to a diverse base of approximately 5,200 customers. These facilities assist the efficient distribution of goods for the world’s best businesses and brands.

We invest in Class-A logistics facilities in the world’s primary population centers with high barriers to entry and supported by extensive transportation infrastructure (major airports, seaports, rail systems and highway systems). We believe that growthour portfolio is the highest-quality logistics property portfolio in gross domestic product (“GDP”)the industry because it is focused in those key markets. Our local teams actively manage the portfolio, which encompasses leasing and property management, new capital deployment activities and an opportunistic disposition program. The majority of our consolidated properties are in global tradethe United States (or “U.S.”); while outside the U.S., our properties are generally held in co-investment ventures, which reduces our exposure to movements in foreign currency. Therefore, we are principally an owner-operator in the U.S. and a manager-developer outside the U.S.

Macroeconomics and demographics are important drivers of our business; these drivers include population growth, consumption and rising affluence. In the developed markets of U.S., Europe and Japan, key factors are the reconfiguration of supply chains (strongly influenced by e-commerce trends), and the operational efficiencies that can be realized from our modern logistics facilities. In emerging markets, such as Brazil, China and Mexico, new affluence and the rise of the consumer classes have prompted demand for our industrial real estate. Trade and GDPas supply chains are correlated as higher levels of investment, production and consumption within a globalized economy are consistent with increased levels of imports and exports. As the world produces and consumes more, we believe that the volume of global trade will continue to increase at a rate in excess of growth in global GDP. Significant supply chain reconfiguration, obsolescence and customers’ preference to lease, rather than own, industrialconstructed. Taken together, logistics real estate also drive demand for high quality distribution space.

Our investment strategy focuses on providing distribution and logistics space to customers whose businesses are tied to global trade and depend on the efficient movement of goods through the global supply chain. We have a deep global presence with assets under management of $45.5 billion (based on expected investment) spanning 21 countries on four continents. Our properties are primarily located in two main categories, global markets and regional markets. Global markets comprise approximately 30 of the largest markets tied to global trade. These markets feature large population centers with high per-capita consumption rates and are located near major airports, seaports and ground transportation systems. Regional markets benefit from large population centers but typically are noteconomic growth, as tied towell as from the globalmodernization of supply chain, but rather serve local consumption and are often less supply constrained. chains around the world.

3


We intend to primarily hold only the highest quality class-A product in global and regional markets. As of December 31, 2013, global and regional markets represented approximately 84% and 14%, respectively ofmanage our overallbusiness on an owned and managed platform (basedbasis, including properties wholly owned by us or owned by one of our co-investment ventures, which allows us to make decisions based on the property operations versus our share of netownership. We believe the operating income of the properties). We also own a small number of assets in other markets, which account for approximately 2%fundamentals of our owned and managed platform.portfolio are consistent with those of our consolidated portfolio, and therefore we generally look at operating metrics on an owned and managed basis.

At December 31, 2016, we owned or had investments in, on a wholly owned basis or through co-investment ventures, properties and development projects expected to total $52.1 billion in gross total investment across 676 million square feet (63 million square meters) in 20 countries spanning four continents. Our investment was $30.8 billion, which consisted of our wholly-owned properties and our pro rata (or ownership) share of the properties owned by our co-investment ventures.

Throughout this document, we reflect amounts in U.S. dollars, our reporting currency. Included in these amounts are consolidated and unconsolidated investments denominated in foreign currencies, primarily the British pound sterling, euro and Japanese yen that are impacted by fluctuations in exchange rates when translated into U.S. dollars. We generally planmitigate our exposure to exit from these other marketsforeign currency fluctuations by investing outside the U.S. through co-investment ventures, borrowing in an orderly fashionlocal currency and utilizing derivative instruments.

Details of the 676 million square feet at December 31, 2016, in our owned and managed portfolio were as follows (dollars and square feet in millions):

 

 

U.S.

 

 

Other Americas

 

 

Europe

 

 

Asia

 

 

Total

 

Operating portfolio (number of buildings)

 

 

2,058

 

 

 

240

 

 

736

 

 

102

 

 

 

3,136

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating portfolio (square feet)

 

 

358

 

 

 

51

 

 

 

172

 

 

 

41

 

 

 

622

 

Development portfolio (square feet)

 

 

12

 

 

 

4

 

 

 

9

 

 

 

19

 

 

 

44

 

Other real estate properties (square feet)

 

 

7

 

 

 

-

 

 

 

2

 

 

 

1

 

 

 

10

 

Total square feet

 

 

377

 

 

 

55

 

 

 

183

 

 

 

61

 

 

 

676

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating portfolio (gross book value)

 

$

27,148

 

 

$

3,100

 

 

$

12,010

 

 

$

5,021

 

 

$

47,279

 

Development portfolio (TEI) (1)

 

 

924

 

 

 

304

 

 

 

669

 

 

 

1,488

 

 

 

3,385

 

Land portfolio (gross book value)

 

 

474

 

 

 

356

 

 

 

431

 

 

 

164

 

 

 

1,425

 

Total

 

$

28,546

 

 

$

3,760

 

 

$

13,110

 

 

$

6,673

 

 

$

52,089

 

4


(1)

Total expected investment (“TEI”) represents total estimated cost of development or expansion, including land, development and leasing costs without any depreciation. TEI is based on current projections and is subject to change. Non-U.S. dollar investments were translated to U.S. dollars using the exchange rate at period end.

Our operating portfolio includes stabilized logistics facilities in our owned and managed portfolio. A developed property moves into the next few years, although we may continue to opportunistically invest in other markets. We have local market knowledge, construction expertise andoperating portfolio when it meets stabilization. The property is considered stabilized when a commitment to sustainable design across our diverse portfolio. We are supported by a broad and diverse customer base, comprising relationships with multinational corporations that result in repeatable business.development project has been completed for one year or is at least 90% occupied, whichever occurs first.

Business Strategy and Operating SegmentsBUSINESS STRATEGY AND OPERATING SEGMENTS

Our business strategy includescomprises two operating segments: Real Estate Operations and Investment Management.Strategic Capital.

REAL ESTATE –

RENTAL OPERATIONS

Generate revenues and net operating income (“NOI”) by maintaining high occupancy rates and increasing rents

REAL ESTATE –

DEVELOPMENT

Generate value from development

STRATEGIC CAPITAL

Access third-party capital to grow our business and earn recurring fees and promotes

We have a high-quality logistics portfolio that serves premier companies across the globe. For the year ended December 31, 2016, we:

generated over 90% of our consolidated revenues and NOI from our buildings in the U.S.

increased consolidated revenues and NOI over 12% from 2015

ended the year with consolidated occupancy of 97.0%

Development contributes to significant earnings growth as projects lease up and generate revenues and NOI. For the year ended December 31, 2016, we:

stabilized a total estimated investment in our owned and managed portfolio of $2.5 billion of development projects with an estimated weighted average margin of 25.5%

created $640 million of value (of which $571 million is our share)

Durable fee stream with more than 90% from perpetual or long-life co-investment ventures with some of the world’s largest institutional partners. For the year ended December 31, 2016, we:

generated approximately 90% of our consolidated Strategic Capital revenues from outside the U.S.

increased consolidated Strategic Capital revenues over 40% from 2015

Real Estate Operations Segment

Rental Operations -This representsOperations. Rental operations comprise the primary sourcelargest component of our revenue,operating segments and contributed approximately 90% of our consolidated revenues, earnings and funds from operations (“FFO”)in 2016 (see Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for more information on funds from operations, a non-GAAP measure). We collect rent from our customers underthrough operating leases, including reimbursements for the vast majority of our property operating costs. We expect to generate long-term internal growth in rental income by maintaining a high occupancy rate at our properties, byrates, increasing rents and controlling expenses and through contractual rent increases on existing space and through rent increases on renewals on rollover space, thus capitalizing on the economies of scale inherent in owning, operating and growing a large global portfolio. Our rental income is diversified due to both our global presence and our broad customer base.expenses. We believe thatour active portfolio management, coupled with the skills of our property, management and leasing, teams, regular maintenance, and capital, expenditure programs, energy management and sustainability programs and risk management programs create cost efficiencies, allowingteams, will allow us to leveragemaximize rental revenues across our global platformportfolio. In 2016, over 90% of our consolidated revenues and provide flexible solutions forNOI in this segment were generated in the U.S.NOI from this segment is calculated directly from our customers.financial statements as rental revenues, rental recoveries and development management and other revenues less rental expenses and other expenses.

Development.Capital Deployment -Capital deployment includes development, re-development and acquisition activities that support We utilize (i) our rental operations and are therefore included with that line of business for segment reporting. We acquire, develop and re-develop industrial properties primarily in global and regional markets to meet our customers’ needs. Within this line of business, we capitalize on: (i) the land that we currently own in global and regional markets;bank, (ii) the development expertise of our local personnel;teams, (iii) our global customer relationships;relationships and (iv) our in-depth local knowledge in connection with our development activities. Successful development and redevelopment efforts increase both the demand for high-quality distribution facilities in key markets. We seek to increase our rental incomerevenues and the net asset value of our Real Estate Operations segment. We measure the Company throughvalue we created based on the leasingincrease in estimated fair value of newly developed space,a stabilized development property, as well as throughcompared to the acquisition of new properties. Depending on several factors,costs incurred. Generally, we may develop properties in the U.S. for long-term hold and outside the U.S. for contribution into one ofto our co-investment ventures, or occasionallyventures. Occasionally, we develop for sale to third parties. During 2013, we recognized gains in continuing operations of $563 million from the disposition of properties – primarily properties we developed. We develop directly as well as with our partners in certain co-investment ventures.

Investment Management Segment -We invest with partners and investors through our co-investment ventures,

Strategic Capital

Real estate is a capital-intensive business that requires growth capital. Our strategic capital business gives us access to third-party capital, both private and public.public, which allows us to diversify our sources of capital and therefore have a broader range of options to fund our growth. We tailor industrial portfoliosco-invest with some of the world’s largest institutional partners to investors’ specific needsgrow our business and deploy capital with a focus on larger, long duration ventures and open ended funds with leading global institutions.provide incremental revenues. We also access alternative sources of public equity such as thethrough two publicly traded vehicles: Nippon Prologis REIT, Inc. (“NPR”) which began tradingin Japan and FIBRA Prologis in Mexico. We tailor logistics portfolios to meet our partners’ specific needs, with a focus on the Tokyo Stock Exchange in early 2013. These privatelong-term ventures and public vehicles source strategic capital for distinct geographies across our global platform.open-ended funds. We typically hold ansignificant ownership interestinterests in these ventures, between 15-50%. aligning our interests with those of our partners.

5


We generate investment managementstrategic capital revenues from our unconsolidated co-investment ventures by providingprincipally through asset management and property management services. We mayservices, and we earn additional revenues through additional services provided such asby providing leasing, acquisition, construction, development, disposition, legalfinancing and taxdisposition services. Depending on the structure of the venture and the returns provided to our partners, we may also earn revenues through incentive returns or promotesfees (“promotes”) periodically during the life of a venture or upon liquidation. We believe our co-investments with investors will continue to serveIn 2016, we earned promote revenues in Europe of $89 million. Approximately 40% of promote revenues are paid as a sourcecombination of capital for new investmentscash and providestock awards pursuant to the terms of the Prologis Promote Plan and expensed through Strategic Capital Expenses. This segment contributed approximately 10% of our consolidated revenues, for our stockholders, as well as mitigate risk associated with our foreign currency exposure.earnings and funds from operations in 2016. We mayplan to grow this business withthrough increasing the formation of new ventures and through the growth in existing ventures with new third-party capital and additional investments by us. At December 31, 2013, we had 13 co-investment ventures with assets under management (consolidated and unconsolidated) andin our existing ventures. In 2016, approximately 90% of these ventures (basedthe consolidated revenues and NOI in this segment were generated outside the U.S. NOI in this segment is calculated as Strategic Capital Revenues less Strategic Capital Expenses directly from each line item in the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data and does not include property related NOI.

Competition

Competitively priced logistics space could impact our occupancy rates and have an adverse effect on the gross book value of the buildings in these ventures) are long-life or perpetual vehicles.

Competition

The existence of competitively priced distribution space available in any market could have a material impact on our ability tohow much rent space and on the rents that we can charge, which impactsin turn could affect both of our operating segments. To the extent we wishWe may face competition with regard to acquire land for future development

of properties in our Real Estate Operations segment or dispose of land, we may compete withcapital deployment activities, including local, regional and national operators or developers. We also face competition from investment managers for institutional capital within our Investment Management segment.strategic capital business.

We believe we have competitive advantages due to (i) our our:

properties being focused in the world’s primary population centers with high barriers to entry and supported by extensive transportation infrastructure;

ability to respond quickly to customers’ needs for high-quality distribution space in key global and regional distribution markets; (ii) our logistics facilities;

established relationships with key customers served by our local personnel; (iii) our teams;

ability to leverage our organizational scale and structure to provide a single point of contact for our globalfocus customers through our global customer solutions team; (iv) our

property management and leasing expertise; (v) our

relationships and proven track record with current and prospective investors in our investment managementstrategic capital business; (vi) our global

experience in the developmentdeveloping and management of industrial properties; (vii) the strategic locations of ourmanaging logistics facilities;

well-positioned land that we expect to develop;bank; and (viii) our personnel who are experienced

team members with experience in the land entitlement process.and development processes.

Customers

We have a

Our broad customer base that is diverse in terms of industry concentration and represents a broad spectrum of international, national, regional and local distribution spacelogistics users. At December 31, 2013,2016, in our Real Estate Operations segment representing our consolidated properties, we had more than 3,5003,200 customers occupying 253.5334 million square feet of distributionlogistics space. On an owned and managed basis, we had more than 4,5005,200 customers occupying 503.8625 million square feet of distributionlogistics space. Our largest customer and 25 largest customers accounted for 1.6% and 22.6%, respectively, of our annualized base rent at December 31, 2013, for our Real Estate Operations segment and 1.8% and 17.2%, respectively, for our owned and managed portfolio (which includes our Real Estate Operations segment and our unconsolidated co-investment ventures).

We develop long-term relationships with our customers and understand their business and needs, serving as their strategic partner for real estate on a global basis. Keeping in close contact with customers and focusing on exceptional customer service sets us apart from other real estate providers as much more than a landlord. We believe that what we offer in terms of scope, scale and quality of assets of our owned and managed portfolio is unique. Our in-depth knowledge of our markets helps us stay ahead of trends and create forward-thinking solutions for their distribution networks. This depth of customer knowledge results in greater retention and expanded service, which garners additional business from the same customer across multiple geographies. In our Real Estate Operations segment, over half our annual base rent is derived from customers who lease from us in more than one location and, in some cases, more than one country, which is consistent with our owned and managed portfolio.

In our Investment ManagementStrategic Capital segment, we also considerview our partners and investors to beas our customers. As ofAt December 31, 2013,2016, in our private ventures, we partnered with 104approximately 100 investors, several of which invest in multiple ventures.

6


The following table details our top 25 customers at December 31, 2016 (square feet in millions):

 

Consolidated – Real Estate Operations

 

 

 

Owned and Managed

 

Top Customers

% of NER (1)

 

 

Total Occupied Square Feet

 

 

Top Customers

% of NER (1)

 

 

Total Occupied Square Feet

 

1.   Amazon.com

 

5.0

 

 

 

13

 

 

1.   Amazon.com

 

3.1

 

 

 

15

 

2.   Home Depot

 

1.8

 

 

 

5

 

 

2.   DHL

 

1.6

 

 

 

10

 

3.   FedEx

 

1.3

 

 

 

3

 

 

3.   Geodis

 

1.2

 

 

 

9

 

4.   XPO Logistics

 

1.0

 

 

 

4

 

 

4.   XPO Logistics

 

1.2

 

 

 

9

 

5.   Wal-Mart

 

0.9

 

 

 

3

 

 

5.   Kuehne + Nagel

 

1.1

 

 

 

7

 

6.   BMW

 

0.9

 

 

 

3

 

 

6.   FedEx

 

1.0

 

 

 

4

 

7.   U.S. Government

 

0.9

 

 

 

1

 

 

7.   Home Depot

 

0.9

 

 

 

6

 

8.   Ingram Micro

 

0.8

 

 

 

2

 

 

8.   CEVA Logistics

 

0.9

 

 

 

6

 

9.   PepsiCo

 

0.7

 

 

 

3

 

 

9.   Wal-Mart

 

0.8

 

 

 

5

 

10. DSV Air and Sea

 

0.6

 

 

 

2

 

 

10. DSV Air and Sea

 

0.8

 

 

 

5

 

Top 10 Customers

 

13.9

 

 

 

39

 

 

Top 10 Customers

 

12.6

 

 

 

76

 

11. UPS

 

0.6

 

 

 

2

 

 

11. Nippon Express

 

0.7

 

 

 

3

 

12. Kuehne + Nagel

 

0.6

 

 

 

2

 

 

12. BMW

 

0.6

 

 

 

4

 

13. APL Logistics

 

0.6

 

 

 

2

 

 

13. UPS

 

0.6

 

 

 

3

 

14. Best Buy

 

0.6

 

 

 

2

 

 

14. Hitachi

 

0.5

 

 

 

2

 

15. DHL

 

0.5

 

 

 

2

 

 

15. DB Schenker

 

0.5

 

 

 

4

 

16. Cal Cartage Company

 

0.5

 

 

 

1

 

 

16. U.S. Government

 

0.5

 

 

 

1

 

17. Sears

 

0.5

 

 

 

2

 

 

17. Tesco

 

0.5

 

 

 

3

 

18. Kimberly-Clark

 

0.5

 

 

 

2

 

 

18. Ingram Micro

 

0.5

 

 

 

3

 

19. Geodis

 

0.5

 

 

 

2

 

 

19. Panalpina

 

0.4

 

 

 

2

 

20. NFI Industries

 

0.4

 

 

 

2

 

 

20. PepsiCo

 

0.4

 

 

 

3

 

21. Office Depot

 

0.4

 

 

 

1

 

 

21. Samsung Electronics

 

0.3

 

 

 

2

 

22. Kellogg's

 

0.4

 

 

 

2

 

 

22. Best Buy

 

0.3

 

 

 

2

 

23. Mohawk Industries

 

0.4

 

 

 

1

 

 

23. APL Logistics

 

0.3

 

 

 

2

 

24. C&S Wholesale Grocers

 

0.4

 

 

 

1

 

 

24. Under Armour

 

0.3

 

 

 

2

 

25. Anixter

 

0.4

 

 

 

1

 

 

25. La Poste

 

0.3

 

 

 

2

 

Top 25 Customers

 

21.2

 

 

 

64

 

 

Top 25 Customers

 

19.3

 

 

 

114

 

(1)

Net effective rent (“NER”) is calculated using the estimated total cash to be received over the term of the lease (including base rent and expense reimbursements) divided by the lease term to determine the amount of rent and expense reimbursements received per year. Amounts derived in a currency other than the U.S. dollar have been translated using the average rate from the previous twelve months.

Employees

The following table summarizes our employee base at December 31, 2016:

Regions

Number of Employees

U.S. (1)

830

Other Americas

105

Europe

370

Asia

225

Total

1,530

(1)

This includes employees who are employed in the U.S. but also support other regions.

We employ 1,468 persons across the globe. Ourallocate our employees work in 4 countries in the Americas (873 persons), 15 countries in Europe (387 persons) and 3 countries in Asia (208 persons). Of the total, we have assigned 918 employeeswho perform property management functions to our Real Estate Operations segment and 98 employeesStrategic Capital segment based on the size of the respective portfolios. Employees who perform only Strategic Capital functions are allocated directly to our Investment Managementthat segment. We have 452 employees who work in corporate and support positions who are not assigned to a segment.

We believe ourwe have good relationships with our employees are good. Ouremployees. Prologis employees are not organized under collective bargaining agreements, although some of our employees in Europe are represented by statutory Works Councils and as such, benefit from applicable labor agreements.

Code of Ethics and Business ConductCODE OF ETHICS AND BUSINESS CONDUCT

We maintain a Code of Ethics and Business Conduct applicable to our Boardboard of Directors (“Board”directors (the “Board”) and all of our officers and employees, including the principal executive officer, the principal financial officer and the principal accounting officer, or personsand other people performing similar functions. A copy of our Code of Ethics and Business Conduct is available on our website, www.prologis.com.www.prologis.com. In addition to being accessible through our website, copies of our Code of Ethics and Business Conduct can be obtained, free of charge, upon written request to Investor Relations, Pier 1, Bay 1, San Francisco, California 94111. Any amendments to or waivers of our Code of Ethics and Business Conduct that apply to the principal executive officer, the principal financial officer, or the principal accounting officer, or personsother people performing similar functions, and that relate to any matter enumerated in Item 406(b) of Regulation S-K, will be disclosed on our website.

7


Environmental MattersENVIRONMENTAL MATTERS

We are exposed to various environmental risks that may result in unanticipated losses and affect our operating results and financial condition. Either the previous owners or we have subjectedconducted environmental reviews on a majority of the properties we have acquired, including land, to environmental reviews.land. While some of these assessments have led to further investigation and sampling, none of the environmental assessments has revealed an environmental liability that we believe would have a material adverse effect on our business, financial condition or results of operations. See further discussion in Item 1A. Risk Factors and Note 2017 to the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data.

Insurance CoverageINSURANCE COVERAGE

We carry insurance coverage on our properties. We determine the type of coverage and the policy specifications and limits based on what we deem to be the risks associated with our ownership of properties and our business operations in specific markets. Such coverage typically includes property damage and rental loss insurance resulting from such perils as fire, windstorm, flood, earthquake and terrorism; commercial general liability insurance; and environmental insurance. Insurance is maintained through a combination of commercial insurance, self

insuranceself-insurance and through a wholly-owned captive insurance entity. The costs to insure our properties are primarily covered through reimbursements from our customers. We believe that our insurance coverage contains policy specifications and insured limits that are customary for similar properties, business activities and markets and we believe our properties are adequately insured. See further discussion in Item 1A. Risk Factors.

ITEM 1A. Risk Factors

Our operations and structure involve various risks that could adversely affect our business and financial condition, including but not limited to, our financial position, results of operations, distributable cash flow, ability to make distributions and payments to security holders and the market value of our securities. These risks relate to our consolidated company as well as our investments in unconsolidated entities and include among others:others, (i) general risks; (ii) risks related to our business; (iii) risks related to financing and capital and (iv) income tax risks.

General

General Risks

As a global company, we are subject to social, political and economic risks of doing business in many countries.

We conduct a significant portion of our business and employ a substantial number of people outside of the United States.U.S. During 2013,2016, we generated approximately $527$453 million or 30.1%17.9% of our revenuerevenues from operations outside the United States.U.S. Circumstances and developments related to international and U.S. operations that could negatively affect our business, financial condition, results of operations or cash flowus include, but are not limited to, the following factors:

 

difficulties and costs of staffing and managing international operations in certain regions;

regions, including differing employment practices and labor issues;

 

local businesses and cultural factors that differ from our usual standards and practices;

 

volatility in currencies;

currencies and currency restrictions, which may prevent the transfer of capital and profits to the United States;U.S.;

 

challenges in establishing effective controls and procedures to regulate operations in different regions and to monitor compliance with applicable regulations, such as the Foreign Corrupt Practices Act, the United Kingdom (“U.K.”) Bribery Act and other similar laws;  

unexpected changes in regulatory requirements, tax, tariffs and other laws;laws within the U.S. or other countries in which we operate;

 

potentially adverse tax consequences;

 

the responsibility of complying with multiple and potentially conflicting laws, e.g., with respect to corrupt practices, employment and licensing;

 

the impact of regional or country-specific business cycles and economic instability;instability, including instability in, or further withdrawals from, the European Union or other international trade alliances or agreements;

 

political instability, uncertainty over property rights, civil unrest, drug trafficking, political activism or the continuation or escalation of terrorist or gang activities (particularly with respect to our operations in Mexico);activities;

 

foreign ownership restrictions in operations with the respective countries; and

 

access to capital may be more restricted, or unavailable on favorable terms or at all in certain locations.

Our global growth also subjects us to certain risks, including risks associated with funding increasing headcount, integrating new offices, and establishing effective controls and procedures to regulate the operations of new offices and to monitor compliance with regulations such as the Foreign Corrupt Practices Act, the United Kingdom Bribery Act and similar laws.

Although we have committed substantial resources to expand our global platform, if we are unable to successfully manage the risks associated with our global business or to adequately manage operational fluctuations, our business, financial condition and results of operations could be harmed.

In addition, our international operations and, specifically,we may be impacted by the ability of our non-United Statesnon-U.S. subsidiaries to dividend or otherwise transfer cash among our subsidiaries, including transfers of cash to pay interest and principal on our debt, may be affected bydue to currency exchange control regulations, transfer pricing regulations and potentially adverse tax consequences, among other things.factors.

8


Disruptions in the global capital and credit markets may adversely affect our operating results and financial condition.

To the extent there is turmoil in the global financial markets, this turmoil has the potential to adversely affect (i) the value of our properties; (ii) the availability or the terms of financing that we have or may anticipate utilizing; (iii) our ability to make principal and interest payments on, or refinance any outstanding debt when due; and (iv) the ability of our customers to enter into new leasing transactions or satisfy rental payments under existing leases. Disruptions in the capital and credit markets may also adversely affect our ability to make distributions and payments to our security holders and the market price of our securities.

Our business and operations could suffer in the event of system failures or cyber security attacks.

Despite system redundancy, the implementation of security measures and the existence of a disaster recovery plan for our internal and hosted information technology systems, our systems are vulnerable to damages from any number of sources, including energy blackouts, natural disasters, terrorism, war, telecommunication failures and cyber security attacks, such as computer viruses or unauthorized access. Any system failure or accident that causes interruptions in our operations could result in a material disruption to our business. We may also incur additional costs to remedy damages caused by such disruptions. Any compromise of our security could result in a violation of applicable privacy and other laws, unauthorized access to information of ours and others, significant legal and financial exposure, damage to our reputation, loss or misuse of the information and a loss of confidence in our security measures, which could harm our business.

Risks associated with our dependence on key personnel.

We depend on the deep industry knowledge and the efforts of our executive officers and other key employees. From time to time, our personnel and their roles may change. While we believe that we are able to retain our key talent and find suitable employees to meet our personnel needs, the loss of key personnel, any change in their roles or the limitation of their availability could adversely affect our business. If we are unable to continue to attract and retain our executive officers, or if compensation costs required to attract and retain key employees become more expensive, our performance and competitive position could be materially adversely affected.

Our business could be adversely impacted if we have deficiencies in our disclosure controls and procedures or internal control over financial reporting.

The design and effectiveness of our disclosure controls and procedures and internal control over financial reporting may not prevent all errors, misstatements or misrepresentations. While management continually reviews the effectiveness of our disclosure controls and procedures and internal control over financial reporting, there can be no guarantee that our internal control over financial reporting will be effective in accomplishing all control objectives all of the time. Deficiencies, including any material weakness, in our internal control over financial reporting that may occur in the future could result in misstatements or restatements of our financial statements or a decline in the price of our securities.

The depreciation in the value of the foreign currency in countries where we have a significant investment may adversely affect our results of operations and financial position.

We have pursued, and intend to continue to pursue growth opportunities in international markets where the U.S. dollar is not the functional currency. At December 31, 2013,2016, approximately $7.3$6.6 billion or 29.5 %22.0% of our total consolidated assets are invested in a currency other than the U.S. dollar, primarily the British pound sterling, Canadian dollar, euro and Japanese yen. As a result, we are subject to foreign currency risk due to potential fluctuations in exchange rates between foreign currencies and the U.S. dollar. A significant change in the value of the foreign currency of one or more countries where we have a significant investment may have a material adverse effect on our business and, in particular, our U.S. dollar reported financial position debt covenant ratios,and results of operations and cash flow.debt covenant ratios. Although we attempt to mitigate adverse effects by borrowing under debt agreements denominated in foreign currencies and using derivative contracts, there can be no assurance that those attempts to mitigate foreign currency risk will be successful.

Our hedging of foreign currency and interest rate risk may not effectively limit our exposure to other risks.

Hedging arrangements involve risks, such as the risk of fluctuation in the relative value of the foreign currency or interest rates and the risk that counterparties may fail to honor their obligations under these arrangements and the risk of fluctuation in the relative value of the foreign currency.arrangements. The funds required to settle such arrangements could be significant depending on the stability and movement of the hedged foreign currency.currency or the size of the underlying financing and the applicable interest rates at the time of the breakage. The failure to hedge effectively against foreign exchange changes or interest rate changes may materially adversely affect our results of operations and financial position.

Disruptions in the Global Capital and Credit Markets may adversely affect our operating resultsbusiness.

Compliance or failure to comply with regulatory requirements could result in substantial costs.

We are required to comply with many regulations in different countries, including (but not limited to) the Foreign Corrupt Practices Act, the U.K Bribery Act and financial condition.

Tosimilar laws and regulations. Our properties are also subject to various federal, state and local regulatory requirements, such as the extent there is turmoilAmericans with Disabilities Act and state and local fire and life-safety requirements. Noncompliance could result in the financial markets, it has the potential to materially affect the valueimposition of our properties and investments in our unconsolidated entities, the availabilitygovernmental fines or the termsaward of financingdamages to private litigants. While we believe that we and our unconsolidated entities haveare currently in material compliance with these regulatory requirements, the requirements may change or new requirements may anticipate utilizing, our ability andbe imposed that of our unconsolidated entitiescould require significant unanticipated expenditures by us. If we are required to make principal and interest payments on, or refinance any outstanding debt when due andunanticipated expenditures to comply with these regulations, we may impact the ability of our customers to enter into new leasing transactions or satisfy rental payments under existing leases.be adversely affected.

Any additional, continued or recurring disruptions in the capital and credit markets may adversely affect our financial condition, results of operations, cash flow and ability to make distributions and payments to our security holders and the market price of our securities.

9


Risks Related to our Business

Real estate investments are not as liquid as certain other types of assets, which may reduce economic returns to investors.

Real estate investments are not as liquid as certain other types of investments and this lack of liquidity may limit our ability to react promptly to changes in economic or other conditions. In addition, significantSignificant expenditures associated with real estate investments, such as secured mortgage payments, real estate taxes and maintenance costs, are generally not reduced when circumstances cause a reduction in income from the investments. Like other companies qualifying as REITsAs a REIT, under the Internal Revenue Code, we are only able to hold property for sale in the ordinary course of business through taxable REIT subsidiaries in order to not incur punitive taxation on any tax gain from the sale of such property. While weWe may dispose of certain properties that have been held for investment in order to generate liquidity, ifliquidity. If we do not satisfy certain safe harbors or we believe there is too much risk of incurring the punitive tax on any tax gain from the sale, we may not pursue such sales.

In

We may decide to sell properties to certain of our unconsolidated co-investment ventures or third parties to generate proceeds to fund our capital deployment activities. Our ability to sell properties on advantageous terms is affected by: (i) competition from other owners of properties that are trying to dispose of their properties; (ii) market conditions, including the event thatcapitalization rates applicable to our properties; and (iii) other factors beyond our control. If our competitors sell assets similar to assets we intend to divest in the same markets or at valuations below our valuations for comparable assets, we may be unable to divest our assets at favorable pricing or at all. The unconsolidated co-investment ventures or third parties who might acquire our properties may need to have access to debt and equity capital, in the private and public markets, in order to acquire properties from us. Should they have limited or no access to capital on favorable terms, then dispositions could be delayed.

If we do not have sufficient cash available to us through our operations, sales or contributions of properties or available credit facilities to continue operating our business as usual, we may need to find alternative ways to increase our liquidity. Such alternatives may include, without limitation, divesting ourselves of properties, whether or not they otherwise meet our strategic objectives to keep in the long term, at less than optimal terms, incurring debt, entering into leases with ournew customers at lower rental rates or less than optimal terms or entering into lease renewals with our existing customers without an increase in rental rates at turnover.rates. There can be no assurance, however, that such alternative ways to increase our liquidity will be available to us. Additionally, taking such measures to increase our liquidity may adversely affect our financial condition, results of operations,business, and in particular, our distributable cash flow and debt covenants.

Our investments are concentrated in the logistics sector and our abilitybusiness would be adversely affected by an economic downturn in that sector.

Our investments in real estate assets are concentrated in the logistics sector. This concentration may expose us to make distributions and paymentsthe risk of economic downturns in this sector to a greater extent than if our security holders and the market price of our securities.business activities were more diversified.

General economic conditions and other events or occurrences that affect areas in which our properties are geographically concentrated, may impact financial results.

We are exposed to general economic conditions, local, regional, national and international economic conditions and other events and occurrences that affect the markets in which we own properties. Our operating performance is further impacted by the economic conditions of the specific markets in which we have concentrations of properties.

As of

At December 31, 2013,2016, approximately 32.6%33.0% of our consolidated operating properties or $5.8$8.0 billion (based on consolidated gross book value, or investment before depreciation) are located in California, which represented 24.4%26.3% of the aggregate square footage of our operating properties and 29.1%33.7% of our annualized base rent.NOI. Our revenuerevenues from, and the value of, our properties located in California may be affected by local real estate conditions (such as an oversupply of or reduced demand for industriallogistics properties) and the local economic climate. Business layoffs, downsizing, industry slowdowns, changing demographics and other factors may adversely impact California’s economic climate. Because of the number of properties, we have located in California, a downturn in California’s economy or real estate conditions could adversely affect our financial condition, results of operations, cash flow and ability to make distributions and payments to our security holders and the market price of our securities.business.  

In addition to California, we also have significant holdings (defined as more than 3%3.0% of total consolidated investment before depreciation) in operating properties in certain global and regional markets located in Central &and Eastern Pennsylvania, Chicago, Dallas/Fort Worth, Japan, Mexico, New Jersey/New York City, Seattle and South Florida. Our operating performance could be adversely affected if conditions become less favorable in any of the markets in which we have a concentration of properties. Conditions such as an oversupply of distributionlogistics space or a reduction in demand for distributionlogistics space, among other factors, may impact operating conditions. Any material oversupply of distributionlogistics space or material reduction in demand for distributionlogistics space could adversely affect our results of operations, distributable cash flow and the value of our securities.overall business.  

In addition, our owned and managed portfolio, including the unconsolidated entitiesco-investment ventures in which we invest, havehas concentrations of properties in the same markets mentioned above, as well as in markets in France, Germany, the Netherlands, PolandJapan and the United Kingdom,U.K., and are subject to the economic conditions in those markets.

A number of our propertiesinvestments, both wholly-owned and owned through co-investment ventures, are located in areas that are known to be subject to earthquake activity. United StatesU.S. properties located in active seismic areas include properties in the San Francisco Bay Area, Los Angeles, and Seattle. International properties located in active seismic

areas include Japan and Mexico. We generally carry earthquake insurance on our properties located in areas historically subject to seismic activity, subject to coverage limitations and deductibles, if we believe it is commercially reasonable. We evaluate our earthquake insurance coverage annually in light of current industry practice through an analysis prepared by outside consultants and in some specific instances have elected to self insureself-insure our earthquake exposure based on this analysis. We have elected not to carry earthquake insurance for our assets in Japan based on this analysis.

Further,10


Furthermore, a number of our properties are located in areas that are known to be subject to hurricane and/or flood risk. We carry hurricane and flood hazard insurance on all of our properties located in areas historically subject to such activity, subject to coverage limitations and deductibles, if we believe it is commercially reasonable. We evaluate our insurance coverage annually in light of current industry practice through an analysis prepared by outside consultants.

Our insurance coverage does not include all potential losses.

We and our unconsolidated entities currently carry insurance coverage including property damage and rental loss insurance resulting from certain perils such as fire and additional perils as covered under an extended coverage policy, namely windstorm, flood, earthquake and terrorism; commercial general liability insurance; and environmental insurance, as appropriate for the markets where each of our properties and business operations are located. The insurance coverage contains policy specifications and insured limits customarily carried for similar properties, business activities and markets. We believe our properties and the properties of our unconsolidated entities are adequately insured. However, there are certain losses, including losses from floods, earthquakes, acts of war, acts of terrorism or riots, that are not generally insured against or that are not generally fully insured against because it is not deemed economically feasible or prudent to do so. If an uninsured loss or a loss in excess of insured limits occurs with respect to one or more of our properties, we could experience a significant loss of capital invested and future revenues in these properties and could potentially remain obligated under any recourse debt associated with the property.

Furthermore, we cannot be sure that the insurance companies will be able to continue to offer products with sufficient coverage at commercially reasonable rates. If we experience a loss that is uninsured or that exceeds insured limits with respect to one or more of our properties or if the insurance companies fail to meet their coverage commitments to us in the event of an insured loss, then we could lose the capital invested in the damaged properties, as well as the anticipated future revenue from those properties and, if there is recourse debt, then we would remain obligated for any mortgage debt or other financial obligations related to the properties. Any such losses or higher insurance costs could adversely affect our financial condition, results of operations, cash flow and ability to make distributions and payments to our security holders and the market price of our securities.

Investments in real estate properties are subject to risks that could adversely affect our business.

Investments in real estate properties are subject to varying degrees of risk. While we seek to minimize these risks through geographic diversification of our portfolio, market research and our propertyasset management capabilities, these risks cannot be eliminated. Some of the factorsFactors that may affect real estate values and cash flows include:

 

local conditions, such as an oversupply of distribution space or a reduction in demand for distribution space in an area;demand;

 

technological changes, such as reconfiguration of supply chains, autonomous vehicles, robotics, 3D printing or other technologies;

the attractiveness of our properties to potential customers;

customers and competition from other available properties;

 

increasing costs of rehabilitating, repositioning,maintaining, insuring, renovating and making improvements to our properties;

 

our ability to provide adequate maintenancerehabilitate and reposition our properties due to changes in the business and logistics needs of and insurance on, our properties;customers;

 

our ability to control rents and variable operating costs; and

 

governmental regulations including zoning, usage and tax laws and changes in these laws; and

the associated potential liability under, and changes in, environmental, zoning, usage, tax, tariffs and other laws.

Our investments are concentrated in the industrial distribution sector and our business would be adversely affected by an economic downturn in that sector.

Our investments in real estate assets are primarily concentrated in the industrial distribution sector. This concentration may expose us to the risk of economic downturns in this sector to a greater extent than if our business activities were more diversified.

Our operating results and distributable cash flow will depend on the continued generation of lease revenues from customers and weWe may be unable to lease vacant space or renew leases or re-lease space on favorable terms as leases expire.

Our operating results and distributable cash flow would be adversely affected if a significant number of our customers were unable to meet their lease obligations. We are also subject to the risk that, upon the expiration of leases for space located in our properties, leases may not be renewed by existing customers, the space may not be re-leased to new customers or the terms of renewal or re-leasing (including the cost of

required renovations or concessions to customers) may be less favorable to us than current lease terms. Our competitors may offer space at rental rates below current market rates or below the rental rates we currently charge our customers, we may lose potential customers, and we may be pressured to reduce our rental rates below those we currently charge in order to retain customers when our customers’ leases expire. In the event of default by a significant number of customers, we may experience delays and incur substantial costs in enforcing our rights as landlord, and we may be unable to re-lease spaces. A customer may experience a downturn in its business, which may cause the loss of the customer or may weaken its financial condition, resulting in the customer’s failure to make rental payments when due or requiring a restructuring that might reduce cash flow from the lease. In addition, a customer may seek the protection of bankruptcy, insolvency or similar laws, which could result in the rejection and termination of such customer’s lease and thereby cause a reduction in our available cash flow.

We may acquire properties, which involves risks that could adversely affect our operating resultsbusiness and the value of our securities.financial condition.  

We mayhave acquired properties and will continue to acquire industrialproperties, both through the direct acquisition of real estate and through the acquisition of entities that own the real estate and through additional investments in co-investment ventures that acquire properties. The acquisition of properties involves risks, including the risk that the acquired property will not perform as anticipated and that any actual costs for rehabilitation, repositioning, renovation and improvements identified in the pre-acquisition due diligence process will exceed estimates. When we acquire properties, we may face risks associated with a lack of market knowledge or understanding of the local economy, forging new business relationships in the area and unfamiliarity with local government and permitting procedures. Additionally, there is, and it is expected there will continue to be, significant competition for properties that meet our investment criteria as well as risks associated with obtaining financing for acquisition activities. The acquired properties or entities may be subject to liabilities, which may be without any recourse, or with only limited recourse, with respect to unknown liabilities. As a result, if a liability were asserted against us based on ownership of any of these entities or properties, then we may have to pay substantial sums to settle it.

Our real estate development strategies may not be successful.

Our real estate development strategy is focused on monetizing land in the future through sales to third parties, development of industrial propertieslogistics facilities to hold for long-term investment, or contribution or sale to an unconsolidated entity,a co-investment venture or third party, depending on market conditions, our liquidity needs and other factors. We may expandincrease our investment in ourthe development, renovation and redevelopment business and we willexpect to complete the build-out and leasing of our current development platform.portfolio. We may also develop, renovate and redevelop properties within existing or newly formed development co-investment ventures. The real estate development, renovation and redevelopment business involves significant risks that could adversely affect our financial condition, results of operations, cash flow and ability to make distributions and payments to our security holders and the market price of our securities, which includeincludes the following significant risks:

 

we may not be able to obtain financing for development projects on favorable terms or at all;

 

we may explore development opportunities that may be abandoned and the related investment impaired;

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we may not be able to obtain, or may experience delays in obtaining, all necessary zoning, land-use, building, occupancy and other governmental permits and authorizations;

 

we may have construction costs, total investment amounts and our share of remaining funding that exceed our estimates and projects may not be completed, delivered or stabilized as planned due to defects or other issues;

we may not be able to attract third-party investment in new development co-investment ventures or sufficient customer demand for our product;

we may have properties that perform below anticipated levels, producing cash flow below budgeted amounts;

we may seek to sell certain land parcels and not be able to find a third party to acquire such land or the sales price will not allow us to recover our investment, resulting in impairment charges;

development opportunities that we explore may be abandoned and the related investment impaired;

 

the properties may perform below anticipated levels, producing cash flow below budgeted amounts;

we may not be able to lease properties we develop on favorable terms or at all;

construction costs, total investment amounts and our share of remaining funding may exceed our estimates and projects may not be completed, delivered or stabilized as planned;

 

we may not be able to attract third party investment in new development co-investment ventures or sufficient customer demand for our product;

we may not be able to capture the anticipated enhanced value created by our redevelopment projectsvalue-added properties on expected timetables or at all;

 

we may experience delays (temporary or permanent) if there is public or government opposition to our activities; and

 

we may have substantial renovation, new development and redevelopment activities, regardless of their ultimate success, typicallythat require a significant amount of management’s time and attention, diverting their attention from our day-to-day operations.

We are subject to risks and liabilities in connection with forming co-investment ventures, investing in new or existing co-investment ventures, attracting third-party investment and investing in and managing properties through co-investment ventures.

At December 31, 2016, we had investments in real estate containing approximately 403 million square feet held through co-investment ventures, both public and private. Our organizational documents do not limit the amount of available funds that we may invest in these ventures, and we may and currently intend to develop and acquire properties through co-investment ventures and investments in other entities when warranted by the circumstances. However, there can be no assurance that we will be able to form new co-investment ventures, or attract third-party investment or that additional investments in new or existing ventures to develop or acquire properties will be successful. Further, there can be no assurance that we are able to realize value from such investments.

Our co-investment ventures involve certain additional risks that we do not otherwise face, including:

our partners may share certain approval rights over major decisions made on behalf of the ventures;

if our partners fail to fund their share of any required capital contributions, then we may choose to contribute such capital;

our partners might have economic or other business interests or goals that are inconsistent with our business interests or goals that would affect our ability to operate the property;

the venture or other governing agreements often restrict the transfer of an interest in the co-investment venture or may otherwise restrict our ability to sell the interest when we desire or on advantageous terms;

our relationships with our partners are generally contractual in nature and may be terminated or dissolved under the terms of the agreements, and in such event, we may not continue to manage or invest in the assets underlying such relationships resulting in reduced fee revenues or causing a need to purchase such interest to continue ownership; and

disputes between us and our partners may result in litigation or arbitration that would increase our expenses and prevent our officers and directors from focusing their time and effort on our business and result in subjecting the properties owned by the applicable co-investment venture to additional risk.

We generally seek to maintain sufficient influence over our co-investment ventures to permit us to achieve our business objectives; however, we may not be able to continue to do so indefinitely. We have formed publicly traded investment vehicles, such as NPR and FIBRA Prologis, for which we serve as sponsor or manager. We have contributed, and may continue to contribute, assets into such vehicles. There is a risk that our managerial relationship may be terminated. 

We are exposed to various environmental risks, thatincluding the potential impacts of future climate change, which may result in unanticipated losses that could affect our operating results,business and financial condition and cash flow.condition.

Under various federal, state and local laws, ordinances and regulations, a current or previous owner, developer or operator of real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances. The costs of removal or remediation of such substances could be substantial. Such laws often impose liability without regard to whether the owner or operator

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knew of, or was responsible for, the release or presence of such hazardous substances. In addition, third parties may sue the owner or operator of a site for damages based on personal injury, property damage or other costs, including investigation and clean-up costs, resulting from the environmental contamination.

Environmental laws in some countries, including the United States,U.S., also require that owners or operators of buildings containing asbestos properly manage and maintain the asbestos, adequately inform or train those who may come into contact with asbestos and undertake special precautions, including removal or other abatement, in the event that asbestos is disturbed during building renovation or demolition. These laws may impose fines and penalties on building owners or operators who fail to comply with these requirements and may allow third parties to seek recovery from owners or operators for personal injury associated with exposure to asbestos. Some of our properties are known to contain asbestos-containing building materials.

In addition, some of our properties are leased or have been leased, in part, to owners and operators of businesses that use, store or otherwise handle petroleum products or other hazardous or toxic substances, creating a potential for the release of such hazardous or toxic substances. Further,Furthermore, certain of our properties are on, adjacent to or near other properties that have contained or currently contain petroleum products or other hazardous or toxic substances, or upon which others have engaged, are engaged or may engage in activities that may release such hazardous or toxic substances. From time to time, we may acquire properties, or interests in properties, with known adverse environmental conditions wherefor which we believe that the environmental liabilities associated with these conditions are quantifiable and that the acquisition will yield a superior risk-adjusted return. In connection with certain divested properties, we have agreed to remain responsible for, and to bear the cost of, remediating or monitoring certain environmental conditions on the properties.

We are also exposed to potential physical risks from possible future changes in climate. Our logistics facilities may be exposed to rare catastrophic weather events, such as severe storms or floods. If the frequency of extreme weather events increases due to climate change, our exposure to these events could increase. We do not currently consider ourselves to be exposed to regulatory risks related to climate change, as our operations generally do not emit a significant amount of greenhouse gases. However, we may be adversely impacted as a real estate developer in the future by potential impacts to the supply chain or stricter energy efficiency standards for buildings. We cannot give any assurance that other such conditions do not exist or may not arise in the future. The presence of such substances on our real estate properties could adversely affect our ability to lease, develop or sell such properties or to borrow using such properties as collateral, and this may have an adverse effect on our business and financial condition, and in particular, our distributable cash flow.

If we decide to contribute or sell properties to an unconsolidated entity or third parties to generate proceeds, we may

Our insurance coverage does not be successful.include all potential losses.

We may contribute or selland our unconsolidated co-investment ventures carry insurance coverage including property damage and rental loss insurance resulting from certain perils such as fire and additional perils as covered under an extended coverage policy, namely windstorm, flood, earthquake and terrorism; commercial general liability insurance; and environmental insurance, as appropriate for the markets where each of our properties to certainand business operations are located. The insurance coverage contains policy specifications and insured limits customarily carried for similar properties, business activities and markets. We believe our properties and the properties of our unconsolidated entitiesco-investment ventures are adequately insured. Certain losses, however, including losses from floods, earthquakes, acts of war, acts of terrorism or third parties onriots, generally are not insured against or generally are not fully insured against because it is not deemed economically feasible or prudent to do so. If an uninsured loss or a case-by-case basis. Our abilityloss in excess of insured limits occurs with respect to sell properties on advantageous terms is affected by competition from other ownersone or more of properties that are trying to dispose of their properties; market conditions, including the capitalization rates applicable to our properties; and other factors beyond our control. If our competitors sell assets similar to assets we intend to divest in the same markets and/or at valuations below our valuations for comparable assets, we may be unable to divest our assets at favorable pricing or on favorable terms or at all. The unconsolidated entity or third parties who might acquire our properties, may need to have access towe could experience a significant loss of capital invested and future revenues in these properties and could potentially remain obligated under any recourse debt and equity capital, inassociated with the private and public markets, in order to acquire properties from us. Should they have limited or no access to capital on favorable terms, then dispositions couldproperty.

Furthermore, we cannot be delayed. If we are unable to generate proceeds through property sales we may have to delay our deleveraging plans, which may result in adverse effects on our liquidity, distributable cash flow, debt covenants, andsure that the market price of our securities.

We are subject to risks and liabilities in connection with forming co-investment ventures, investing in new or existing co-investment ventures, attracting third party investment and investing in and managing properties through co-investment ventures.

As of December 31, 2013, we had an investment in real estate containing approximately 270 million square feet held through unconsolidated entities. Our organizational documents do not limit the amount of available funds that we may invest in unconsolidated entities, and we may and currently intend to develop and acquire properties through co-investment ventures and investments in other entities when warranted by the circumstances. However, there can be no assurance that weinsurance companies will be able to form new co-investment ventures, attract third party investment or make additional investments in new or existing co-investment ventures, successfully develop or acquire properties through unconsolidated entities, or realize value from such unconsolidated entities. Our inability to do so may have an adverse effect on our growth, our earnings and the market price of our securities.

Our partners in our unconsolidated investments may share certain approval rights over major decisions and some partners may manage the properties in the unconsolidated entities. Our unconsolidated investments involve certain risks, including:

if our partners fail to fund their share of any required capital contributions, then we may choose to contribute such capital;

our partners might have economic or other business interests or goals that are inconsistent with our business interests or goals that would affect our ability to operate the property;

the venture or other governing agreements often restrict the transfer of an interest in the co-investment venture or may otherwise restrict our ability to sell the interest when we desire or on advantageous terms;

our relationships with our partners are generally contractual in nature and may be terminated or dissolved under the terms of the agreements, and in such event, we may not continue to manageoffer products with sufficient coverage at commercially reasonable rates. If we experience a loss that is uninsured or invest in the assets underlying such relationships resulting in reduced fee revenue or causing a needthat exceeds insured limits with respect to purchase such interest to continue ownership; and

disputes between us and our partners may result in litigation or arbitration that would increase our expenses and prevent our officers and directors from focusing their time and effort on our business and result in subjecting the properties owned by the applicable co-investment venture to additional risk.

We generally seek to maintain sufficient influence over our unconsolidated entities to permit us to achieve our business objectives; however, we may not be able to do so. We have formed publicly traded investment vehicles, like our publicly traded REIT in Japan, for which we serve as sponsor and/or manager. We have contributed, and may continue to contribute, assets into such vehicles. As with any of our publicly traded entities or funds, there is a risk that our managerial relationship may be terminated.

The occurrence of one or more of our properties or if the events described aboveinsurance companies fail to meet their coverage commitments to us in the event of an insured loss, then we could lose the capital invested in the damaged properties, as well as the anticipated future revenues from those properties and, if there is recourse debt, then we would remain obligated for any mortgage debt or other financial obligations related to the properties. Any such losses or higher insurance costs could adversely affect our financial condition, results of operations, cash flow and ability to make distributions and payments to our security holders and the market price of our securities.business.  

Contingent or unknown liabilities could adversely affect our financial condition.

We have acquired and may in the future acquire properties subject to liabilities and without any recourse, or with only limited recourse, with respect to unknown liabilities. As a result, if a liability were asserted against us based upon ownership of any of these entities or properties, then we might have to pay substantial sums to settle it, which could adversely affect our cash flow.

Risks Related to Financing and Capital

We face risks associated with the use of debt to fund our business activities, including refinancing and interest rate risks, and our operating results and financial condition couldmay be adversely affected if we are unable to make required payments on our debt or are unable to refinance our debt.debt or our cash flow may be insufficient to make required debt payments.

We are subject to risks normally associated with debt financing, including the risk that our cash flow will be insufficient to meet required payments of principal and interest. There can be no assurance that we will be able to refinance any maturing indebtedness, that such refinancing would be on terms as favorable as the terms of the maturing indebtedness, or that we will be able to otherwise obtain funds by selling assets or raising equity to make required payments on maturing indebtedness. If we are unable to refinance our indebtedness at maturity or meet our payment obligations, the amount of our distributable cash flowbusiness and our financial condition wouldwill be adversely affectednegatively impacted and, if the maturing debt is secured, the lender may foreclose on the property securing such indebtedness. Our global senior credit facility, Japanese yen-based credit agreementfacilities and certain other debt bears interest at variable rates. Increases in interest rates would increase our interest expense under these agreements. From time to time, we may enter into interest rate swap or cap agreements. Such hedging arrangements involve risks, such as the risk that counterparties may fail to honor their obligations under these arrangements. The funds required to settle any swap breakage arrangements, if any, could be significant depending on the size of underlying financing and the applicable interest rates at the time of breakage. The failure to hedge effectively against interest rate changes may materially adversely affect our results of operations and financial position. In addition, our unconsolidated entities may be unable to refinance indebtedness or meet payment obligations, which may impact our distributable cash flow and our financial condition and/or we may be required to recognize impairment charges of our investments.

Covenants in our credit agreements could limit our flexibility and breaches of these covenants could adversely affect our financial condition.

The terms of our various credit agreements, including our global senior credit facility and Japanese yen-based credit agreement,facilities, the indentures under which our senior notes are issued and other note agreements, require us to comply with a number of customary financial covenants, such as maintaining debt service

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coverage, leverage ratios, fixed charge ratios and other operating covenants including maintaining insurance coverage. These covenants may limit our flexibility into run our operations,business, and breaches of these covenants could result in defaults under the instruments governing the applicable indebtedness. If we default under the covenant provisions and are unable to cure the default, refinance the indebtedness or meet payment obligations, our business and financial condition generally and, in particular, the amount of our distributable cash flow and our financial condition could be adversely affected.

Adverse changes in our credit ratings could negatively affect our financing activity.

The credit ratings of our senior unsecured notes and preferred stock are based on our operating performance, liquidity and leverage ratios, overall financial position and other factors employed by the credit rating agencies in their rating analyses of us. Our credit ratings can affect the amount of capital we can access, as well as the terms and pricing of any debt we may incur. There can be no assurance that we will be able to maintain our current credit ratings, and in the event our credit ratings are downgraded, we would likely incur higher borrowing costs and may encounter difficulty in obtaining additional financing. Also, a downgrade in our credit ratings may trigger additional payments or other negative consequences under our current and future credit facilities and other debt instruments. Adverse changes in our credit ratings could negatively impact our business and, in particular, our refinancing and other capital market activities, our ability to manage debt maturities, our future growth our financial condition, the market price of our securities, and our development and acquisition activity.

At December 31, 2016, our credit ratings were A3 from Moody’s and A- from S&P, both with stable outlook. A securities rating is not a recommendation to buy, sell or hold securities and is subject to revision or withdrawal at any time by the rating organization.

We are dependentdepend on external sources of capital.capital.

In order to

To qualify as a REIT, we are required each year to distribute to our stockholders at least 90% of our REIT taxable income (determined without regard to the dividends-paid deduction and by excluding any net capital gain) to our stockholders and we may be subject to tax to the extent our taxable income is not fully distributed. While historicallyHistorically, we have satisfied these distribution requirements by making cash distributions to our stockholders, but we may choose to satisfy these requirements by making distributions of cash or other property, including, in limited circumstances, our own stock. For distributions with respect to taxable years endingthat ended on or before December 31, 2013,2016, and in some cases declared as late as December 31, 2014, the2016, a REIT can satisfy up to 90% of the distribution requirements discussed above through the distribution of shares of our stock if certain conditions are met. Assuming we continue to satisfy these distribution requirements with cash, we may not be able to fund all future capital needs, including acquisition and development activities, from cash retained from operations and may have to rely on third-party sources of capital. Further, in orderFurthermore, to maintain our REIT status and not have to pay federal income and excise taxes, we may need to borrow funds on a short-term basis to meet the REIT distribution requirements even if the then-prevailing market conditions are not favorable for these borrowings. These short-term borrowing needs could result from differences in timing between the actual receipt of cash and inclusion of income for federal income tax purposes, or the effect of non-deductiblenondeductible capital expenditures, the creation of reserves or required debt or

amortization payments. Our ability to access debt and equity capital on favorable terms or at all is dependent upondepends on a number of factors, including general market conditions, the market’s perception of our growth potential, our current and potential future earnings and cash distributions and the market price of our securities.

Our stockholders may experience dilution if we issue additional common stock.stock or units in the Operating Partnership.

Any additional future issuance of common stock or operating partnership units will reduce the percentage of our common stock and units owned by investors. In most circumstances, stockholders and unitholders will not be entitled to vote on whether or not we issue additional common stock.stock or units. In addition, depending on the terms and pricing of anany additional offering of our common stock or units and the value of the properties, our stockholders and unitholders may experience dilution in both book value and fair value of their common stock.stock or units.

Federal

Income Tax Risks

Our

The failure of Prologis, Inc. to qualify as a REIT would have serious adverse consequences.

We

Prologis, Inc. elected to be taxed as a REIT under Sections 856 through 860 of the Internal Revenue Code commencing with the taxable year ended December 31, 1997. We believe we have operated so asPrologis, Inc. to qualify as a REIT under the Internal Revenue Code and believe that ourthe current organization and method of operation comply with the rules and regulations promulgated under the Internal Revenue Code to enable usPrologis, Inc. to continue to qualify as a REIT. However, it is possible that we are organized or have operated in a manner that would not allow usPrologis, Inc. to qualify as a REIT, or that our future operations could cause usPrologis, Inc. to fail to qualify. Qualification as a REIT requires us to satisfy numerous requirements (some on an annualannually and others on a quarterly basis) established under highly technical and complex sections of the Internal Revenue Code for which there are only limited judicial and administrative interpretations, and involves the determination of various factual matters and circumstances not entirely within our control. For example, in order to qualify as a REIT, Prologis, Inc. must derive at least 95% of its gross income in any year from qualifying sources. In addition, wePrologis, Inc. must pay dividends to ourits stockholders aggregating annually at least 90% of ourits taxable income (determined without regard to the dividends paid deduction and by excluding capital gains) and must satisfy specified asset tests on a quarterly basis. The provisions of the Internal Revenue Code and applicable Treasury regulations regarding qualification as a REIT are more complicated in our casefor Prologis, Inc. because we hold assets through the Operating Partnership.

If we failPrologis, Inc. fails to qualify as a REIT in any taxable year, we will be required to pay federal income tax (including any applicable alternative minimum tax) on taxable income at regular corporate rates. Unless we are entitled to relief under certain statutory provisions, wePrologis, Inc. would be disqualified from treatment as a REIT for the four taxable years following the year in which weit lost the qualification. If wePrologis, Inc. lost ourits REIT status, our net earnings would be significantly reduced for each of the years involved.

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Furthermore, we own a direct or indirect interest in certain subsidiary REITs whichthat elected to be taxed as REITs under Sections 856 through 860 of the Internal Revenue Code. Provided that each subsidiary REIT qualifies as a REIT, our interest in such subsidiary REIT will be treated as a qualifying real estate asset for purposes of the REIT asset tests, and any dividend income or gains derived by us from such subsidiary REIT will generally be treated as income that qualifies for purposes of the REIT gross income tests. To qualify as a REIT, the subsidiary REIT must independently satisfy all of the REIT qualification requirements. If such subsidiary REIT were to fail to qualify as a REIT, and certain relief provisions did not apply, it would be treated as a regular taxable corporation and its income would be subject to United StatesU.S. federal income tax. In addition, a failure of the subsidiary REIT to qualify as a REIT would have an adverse effect on ourthe ability of Prologis, Inc. to comply with the REIT income and asset tests, and thus ourits ability to qualify as a REIT.

Certain property transfers may generate prohibited transaction income, resulting in a penalty tax on gain attributable to the transaction.

From time to time, we may transfer or otherwise dispose of some of our properties, including by contributing properties to our co-investment ventures. Under the Internal Revenue Code, any gain resulting from transfers of properties we hold as inventory or primarily for sale to customers in the ordinary course of business is treated as income from a prohibited transaction subject to a 100% penalty tax. We do not believe that our transfers or disposals of property or our contributions of properties into our co-investment ventures are prohibited transactions. However, whether property is held for investment purposes is a question of fact that depends on all the facts and circumstances surrounding the particular transaction. The Internal Revenue Service may contend that certain transfers or dispositions of properties by us or contributions of properties into our co-investment ventures are prohibited transactions. While we believe that the Internal Revenue Service would not prevail in any such dispute, if the Internal Revenue CodeService were to argue successfully that a transfer, disposition or contribution of property constituted a prohibited transaction, we would be required to pay a 100% penalty tax on any gain allocable to us from the prohibited transaction. In addition, income from a prohibited transaction might adversely affect our ability to satisfy the income tests for qualification as a REIT.

Legislative or regulatory action could adversely affect us.

In recent years, numerous legislative, judicial and administrative changes have been made to the federalU.S. and foreign income tax tawslaws applicable to investments in real estate, REITs, similar entities and similar entities.investments. Additional changes to tax laws are likely to continue to occur in the future, both in and outside of the U.S. and may impact our taxation or that of our stockholders.

Other Risks

Risks Associated with our Dependence on Key Personnel.

We depend on the efforts of our executive officers and other key employees. From time to time, our personnel and their roles may change. In connection with the completion of the Merger, there were changes to our personnel and their roles. While we believe that we have retained

our key talent and have found suitable employees to meet our personnel needs, the loss of key personnel, any change in their roles, or the limitation of their availability could adversely affect our financial condition, results of operations, cash flow and ability to make distributions and payments to security holders and the market price of our securities. If we are unable to continue to attract and retain our executive officers, or if compensation costs required to attract and retain key employees become more expensive, our performance and competitive position could be materially adversely affected.

Compliance or failure to comply with the Americans with Disabilities Act and other similar regulations could result in substantial costs.

Under the Americans with Disabilities Act, places of public accommodation must meet certain federal requirements related to access and use by disabled persons. Noncompliance could result in the imposition of fines by the federal government or the award of damages to private litigants. If we are required to make unanticipated expenditures to comply with the Americans with Disabilities Act, including removing access barriers, then our cash flow and the amounts available to make distributions and payments to our security holders may be adversely affected. Our properties are also subject to various federal, state and local regulatory requirements, such as state and local fire and life-safety requirements. We could incur fines or private damage awards if we fail to comply with these requirements. While we believe that our properties are currently in material compliance with these regulatory requirements, the requirements may change or new requirements may be imposed that could require significant unanticipated expenditures by us that will affect our cash flow and results of operations.

Our business could be adversely impacted if we have deficiencies in our disclosure controls and procedures or internal control over financial reporting.

The design and effectiveness of our disclosure controls and procedures and internal control over financial reporting may not prevent all errors, misstatements or misrepresentations. While management will continue to review the effectiveness of our disclosure controls and procedures and internal control over financial reporting, there can be no guarantee that our internal control over financial reporting will be effective in accomplishing all control objectives all of the time. Deficiencies, including any material weakness, in our internal control over financial reporting that may occur in the future could result in misstatements of our results of operations, restatements of our financial statements, a decline in the price of our securities, or otherwise materially adversely affect our business, reputation, results of operations, financial condition or liquidity.

We are exposed to the potential impacts of future climate change and climate change related risks.

We consider that we are exposed to potential physical risks from possible future changes in climate. Our distribution facilities may be exposed to rare catastrophic weather events, such as severe storms and/or floods. If the frequency of extreme weather events increases due to climate change, our exposure to these events could increase.

We do not currently consider ourselves to be exposed to regulatory risks related to climate change, as our operations do not emit a significant amount of greenhouse gases. However, we may be adversely impacted as a real estate developer in the future by potential impacts to the supply chain and/or stricter energy efficiency standards for buildings.

ITEM 1B. Unresolved Staff Comments

None.

 

ITEM2. Properties

ITEM 2. Properties

GEOGRAPHIC DISTRIBUTION

We are investedinvest in real estate properties that are predominately industrial properties. In Japan, our industrial properties are generally multi-level centers, which is common in Japan due to the high cost and limited availability of land.logistics facilities. Our properties are typically used for distribution, storage, packaging, assembly and light manufacturing of consumer and industrial products. The vast majority of our operating properties are used by our customers for bulk distribution.

Geographic Distribution

Our investment strategy focuses on providing distribution and logistics space to customers whose businesses are tied to global trade and depend on the efficient movement of goods through the global supply chain. Our properties are primarily located in two main market types, global markets and regional markets.

We manage our business on an “ownership blind” basis without regard to whether a particular property is wholly owned by us or owned by oneThe following tables provide details of our co-investment ventures.consolidated operating properties, investment in land and development portfolio. We believe this allows us to make business decisions based on the property operations and not based on our ownership. As such, we have also included the operating property information below for our Real Estate Operations segment and our owned and managed portfolio. The owned and managed portfolio includes the properties we consolidate and the properties owned by our unconsolidated co-investment ventures reflected at 100% of Prologis’the amount included in the ventures’ financial statements as calculated on a GAAP basis, not our proportionate share.

Included in the operating property information below for our Real Estate Operations segmentconsolidated operating properties are 70646 buildings that are owned primarily by entitiestwo co-investment ventures that we consolidate but of which we own less than 100%. of the equity. No individual property or group of properties operating as a single business unit amounted to 10% or more of our consolidated total assets at December 31, 2013,2016, or generated income equal to 10% or more of our consolidated gross revenues for the year ended December 31, 2013.

2016.

15


Dollars and square feet in the following tables are in thousands.millions and items notated by ‘0‘ indicate an amount that rounds to less than one million:  

 

    Consolidated - Real Estate Operations  Segment    Owned and Managed 
Operating properties 

Rentable

Square
Footage

  Gross Book
Value
  Encumbrances (1)  

Rentable

Square
Footage

  Gross Book
Value
 

Americas:

     

Global Markets:

     

United States:

     

Atlanta

  11,641   $473,711   $40,256    15,122   $682,544  

Baltimore/Washington

  3,993    295,896    37,953    7,596    618,639  

Central & Eastern Pennsylvania

  12,261    742,091    68,760    14,842    894,956  

Central Valley California

  7,592    449,315    44,735    9,985    587,562  

Chicago

  26,190    1,496,703    196,157    36,566    2,187,163  

Dallas/Fort Worth

  17,528    753,568    109,625    23,915    1,135,489  

Houston

  6,146    288,460    47,633    10,907    644,994  

New Jersey/New York City

  13,798    1,051,973    116,625    20,678    1,824,860  

San Francisco Bay Area

  15,301    1,583,637    59,083    19,208    1,973,099  

Seattle

  3,386    319,743    44,430    10,758    994,090  

South Florida

  6,612    691,439    55,085    10,677    1,046,435  

Southern California

  42,343    3,766,502    401,537    57,284    5,149,176  

On Tarmac

  2,417    274,856    6,150    2,712    325,469  

Canada

  4,690    438,984       6,383    604,006  

Mexico

  21,460    1,254,170    344,626    30,964    1,858,728  

Brazil

           4,043    370,412  

Regional Markets - United States:

     

Austin

  1,006    60,056       2,213    140,969  

Charlotte

  1,836    71,626    14,307    2,275    97,661  

Cincinnati

  3,387    119,402    40,400    6,663    273,432  

Columbus

  6,791    250,142    34,279    9,344    360,972  

Denver

  3,895    227,374    29,646    5,136    292,220  

Indianapolis

  2,614    91,797    29,297    5,095    199,794  

Las Vegas

  2,882    152,275       3,585    205,693  

Louisville

  3,435    143,684    12,608    3,435    143,684  

Memphis

  4,577    156,959    23,691    5,297    183,679  

Nashville

  4,562    159,939    41,603    5,961    211,885  

Orlando

  2,959    184,449       4,178    277,403  

Phoenix

  2,036    104,417       2,528    129,233  

Portland

  826    51,465    8,940    2,052    150,855  

San Antonio

  3,759    163,349    22,502    5,606    260,810  

Other Markets - United States

  8,756    395,416    28,893    11,848    628,865  
 

 

 

 

Subtotal Americas

  248,679    16,213,398    1,858,821    356,856    24,454,777  
 

 

 

 

Europe:

     

Global Markets:

     

Belgium

  440    36,592       2,016    173,266  

France

  899    71,553       30,026    2,536,025  

Germany

  1,257    87,947       20,020    1,857,506  

Netherlands

           11,089    1,064,607  

Poland

  1,645    85,002       21,234    1,471,898  

Spain

  449    45,679       7,125    584,138  

United Kingdom

  834    83,350       20,077    2,590,057  

Regional Markets:

     

Czech Republic

  278    25,699       6,828    520,979  

Hungary

  201    12,163       5,348    386,789  

Italy

  1,277    86,843       8,378    540,323  

Slovakia

  548    32,412       4,620    332,142  

Sweden

  524    38,407       3,807    401,558  

Other Markets

  1,274    66,757       1,274    66,757  
 

 

 

 

Subtotal Europe

  9,626    672,404       141,842    12,526,045  
 

 

 

 

Asia

     

Global Markets:

     

China

  2,194    74,107       6,566    340,327  

Japan

  4,365    647,415    14,294    22,873    4,078,374  

Singapore

  942    145,032       942    145,032  
 

 

 

 

Subtotal Asia

  7,501    866,554    14,294    30,381    4,563,733  
 

 

 

 

Total operating portfolio

  265,806   $17,752,356   $1,873,115    529,079   $41,544,555  

Value added properties (2)

  1,291    48,708       2,311    87,274  
 

 

 

 

Total operating properties

  267,097   $17,801,064   $1,873,115    531,390   $41,631,829  

 

 

Consolidated Operating Properties

 

 

Owned and Managed

 

Operating properties

 

Rentable Square Footage

 

 

Gross Book Value

 

 

Encumbrances (1)

 

 

Rentable Square Footage

 

 

Gross Book Value

 

Global Markets – U.S.:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Atlanta

 

 

16

 

 

$

712

 

 

$

128

 

 

 

17

 

 

$

812

 

Baltimore/Washington D.C.

 

 

6

 

 

 

518

 

 

 

68

 

 

 

8

 

 

 

704

 

Central Valley California

 

 

11

 

 

 

609

 

 

 

61

 

 

 

11

 

 

 

638

 

Central and Eastern Pennsylvania

 

 

18

 

 

 

1,103

 

 

 

56

 

 

 

18

 

 

 

1,104

 

Chicago

 

 

34

 

 

 

2,137

 

 

 

129

 

 

 

41

 

 

 

2,616

 

Dallas/Fort Worth

 

 

22

 

 

 

1,166

 

 

 

196

 

 

 

25

 

 

 

1,446

 

Houston

 

 

9

 

 

 

519

 

 

 

68

 

 

 

13

 

 

 

832

 

New Jersey/New York City

 

 

28

 

 

 

2,778

 

 

 

357

 

 

 

33

 

 

 

3,372

 

San Francisco Bay Area

 

 

16

 

 

 

1,630

 

 

 

10

 

 

 

19

 

 

 

1,972

 

Seattle

 

 

8

 

 

 

818

 

 

 

59

 

 

 

15

 

 

 

1,515

 

South Florida

 

 

11

 

 

 

1,136

 

 

 

128

 

 

 

15

 

 

 

1,501

 

Southern California

 

 

61

 

 

 

5,727

 

 

 

461

 

 

 

72

 

 

 

6,922

 

Regional Markets – U.S. (15 markets) (2)

 

 

68

 

 

 

3,546

 

 

 

584

 

 

 

70

 

 

 

3,608

 

Other Markets – U.S (5 markets)

 

 

1

 

 

 

59

 

 

 

-

 

 

 

1

 

 

 

106

 

Subtotal U.S.

 

 

309

 

 

 

22,458

 

 

 

2,305

 

 

 

358

 

 

 

27,148

 

Global Markets – Other Americas:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Brazil

 

 

-

 

 

 

-

 

 

 

-

 

 

 

8

 

 

 

505

 

Canada

 

 

8

 

 

 

635

 

 

 

145

 

 

 

8

 

 

 

635

 

Mexico:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Guadalajara

 

0

 

 

 

4

 

 

 

-

 

 

 

6

 

 

 

321

 

Mexico City

 

 

-

 

 

 

-

 

 

 

-

 

 

 

12

 

 

 

819

 

Monterrey

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4

 

 

 

236

 

Regional Markets – Other Americas (3 markets)

 

0

 

 

 

14

 

 

 

-

 

 

 

13

 

 

 

584

 

Subtotal Other Americas

 

 

8

 

 

 

653

 

 

 

145

 

 

 

51

 

 

 

3,100

 

Global Markets – Europe:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Belgium

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3

 

 

 

188

 

Czech Republic

 

 

1

 

 

 

35

 

 

 

-

 

 

 

11

 

 

 

663

 

France

 

 

2

 

 

 

78

 

 

 

-

 

 

 

33

 

 

 

2,141

 

Germany

 

 

2

 

 

 

120

 

 

 

-

 

 

 

23

 

 

 

1,648

 

Italy

 

 

1

 

 

 

68

 

 

 

-

 

 

 

10

 

 

 

528

 

Netherlands

 

0

 

 

 

20

 

 

 

-

 

 

 

18

 

 

 

1,281

 

Poland

 

 

1

 

 

 

51

 

 

 

-

 

 

 

25

 

 

 

1,338

 

Spain

 

 

1

 

 

 

35

 

 

 

-

 

 

 

8

 

 

 

537

 

U.K.

 

 

1

 

 

 

121

 

 

 

-

 

 

 

23

 

 

 

2,718

 

Regional Markets – Europe (3 markets)

 

 

1

 

 

47

 

 

 

-

 

 

 

17

 

 

 

960

 

Other Markets – Europe (1 market)

 

0

 

 

 

9

 

 

 

-

 

 

1

 

 

 

8

 

Subtotal Europe

 

 

10

 

 

 

584

 

 

 

-

 

 

 

172

 

 

 

12,010

 

Global Markets – Asia:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

China

 

 

2

 

 

 

69

 

 

 

-

 

 

 

14

 

 

 

627

 

Japan

 

 

2

 

 

 

165

 

 

 

-

 

 

 

26

 

 

 

4,265

 

Singapore

 

 

1

 

 

 

128

 

 

 

-

 

 

 

1

 

 

 

129

 

Subtotal Asia

 

 

5

 

 

 

362

 

 

 

-

 

 

 

41

 

 

 

5,021

 

Total operating portfolio (3)

 

 

332

 

 

 

24,057

 

 

 

2,450

 

 

 

622

 

 

 

47,279

 

Value-added properties

 

 

2

 

 

 

117

 

 

 

-

 

 

 

3

 

 

 

192

 

Total operating properties

 

 

334

 

 

$

24,174

 

 

$

2,450

 

 

 

625

 

 

$

47,471

 

16


  

 

Investment in Land

  

 

Development
Portfolio

 

Consolidated land and development portfolio in the

Real Estate Operations segment

 Acres   

Estimated Build
Out Potential

(sq. ft.) (3)

  Current
Investment
  Rentable
Square
Footage
  Total
Expected
Investment (4)
 

Americas:

      

Global Markets:

      

United States:

      

Atlanta

  613     8,655   $26,584      $  

Baltimore/Washington

  97     1,147    10,245    395    42,742  

Central & Eastern Pennsylvania

  416     5,412    50,192        

Central Valley California

  1,144     20,560    42,304        

Chicago

  511     9,497    33,209        

Dallas/Ft. Worth

  428     7,583    30,329    2,023    83,665  

Houston

  81     1,191    9,201    282    17,184  

New Jersey/New York City

  183     2,841    76,281    2,645    275,544  

Seattle

            241    17,067  

South Florida

  341     5,794    151,377    312    27,585  

Southern California

  699     13,939    129,949    2,363    159,094  

Canada

  179     3,435    54,928    910    101,608  

Mexico

  789     14,530    152,090    1,944    121,970  

Regional Markets:

      

United States:

      

Central Florida

  129     1,901    27,027        

Charlotte

  20     308    1,389        

Cincinnati

  15     216    2,035    1,791    76,127  

Columbus

  142     2,364    4,705    767    29,992  

Denver

  49     836    6,281    402    23,556  

Indianapolis

  39     655    1,973    715    23,855  

Las Vegas

  75     1,281    7,818        

Memphis

  165     2,839    6,901        

Phoenix

  36     698    3,451    486    22,269  

Portland

  23     389    2,843        

Other Markets - United States

  565     8,790    37,358        
 

 

 

 

Subtotal Americas

  6,739     114,861    868,470    15,276    1,022,258  
 

 

 

 

Europe:

      

Global Markets:

      

Belgium

  27     526    10,744        

France

  448     7,992    79,745    1,322    71,058  

Germany

  112     2,239    25,752        

Netherlands

  56     1,538    53,355        

Poland

  696     12,958    89,516    376    24,350  

Spain

  100     2,021    17,031        

United Kingdom

  665     9,275    184,687    1,865    235,650  

Regional Markets:

      

Czech Republic

  191     3,201    38,501    238    15,304  

Hungary

  338     5,686    40,388        

Italy

  107     2,451    34,048        

Slovakia

  90     1,947    16,633    151    9,798  

Sweden

            164    20,159  

Other markets

  119     2,600    22,236        
 

 

 

 

Subtotal Europe

  2,949     52,434    612,636    4,116    376,319  
 

 

 

 

Asia:

      

Global Markets:

      

China

  18     172    8,793    131    5,707  

Japan

  41     2,173    26,267    3,538    459,131  

Singapore

            17    2,056  
 

 

 

 

Subtotal Asia

  59     2,345    35,060    3,686    466,894  
 

 

 

 

Total land and development portfolio

  9,747     169,640   $1,516,166    23,078   $1,865,471  

The following is a summary of our investment in consolidated real estate properties at December 31, 2013 (in thousands):

 

 

Consolidated – Investment in Land

 

 

Consolidated – Development Portfolio

 

Region

 

Acres

 

 

Estimated Build Out Potential

(square feet) (4)

 

 

Current Investment

 

 

Rentable Square Footage

 

 

TEI (5)

 

Global Markets – U.S.:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Atlanta

 

 

135

 

 

 

2

 

 

$

4

 

 

 

1

 

 

$

49

 

Baltimore/Washington D.C.

 

 

81

 

 

0

 

 

 

21

 

 

 

-

 

 

 

-

 

Central Valley California

 

 

1,090

 

 

 

22

 

 

 

93

 

 

 

1

 

 

 

98

 

Central and Eastern Pennsylvania

 

 

137

 

 

 

2

 

 

 

24

 

 

 

-

 

 

 

-

 

Chicago

 

 

219

 

 

 

4

 

 

 

19

 

 

0

 

 

 

20

 

Dallas/Fort Worth

 

 

178

 

 

 

3

 

 

 

23

 

 

 

1

 

 

 

40

 

Houston

 

 

185

 

 

 

3

 

 

 

15

 

 

0

 

 

 

17

 

New Jersey/New York City

 

 

119

 

 

 

1

 

 

 

38

 

 

 

1

 

 

 

116

 

San Francisco Bay Area

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1

 

 

 

63

 

Seattle

 

 

43

 

 

 

1

 

 

 

30

 

 

 

1

 

 

 

67

 

South Florida

 

 

215

 

 

 

4

 

 

 

117

 

 

0

 

 

 

57

 

Southern California

 

 

144

 

 

 

3

 

 

 

30

 

 

 

2

 

 

 

166

 

Regional Markets – U.S. (15 markets)

 

 

497

 

 

 

8

 

 

 

61

 

 

 

4

 

 

 

231

 

Other Markets – U.S (4 markets)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Subtotal U.S.

 

 

3,043

 

 

 

53

 

 

 

475

 

 

 

12

 

 

 

924

 

Global Markets – Other Americas:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Canada

 

 

161

 

 

 

3

 

 

 

41

 

 

 

1

 

 

 

56

 

Mexico:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Guadalajara

 

 

15

 

 

0

 

 

 

4

 

 

0

 

 

 

28

 

Mexico City

 

 

246

 

 

 

5

 

 

 

127

 

 

 

1

 

 

 

69

 

Monterrey

 

 

110

 

 

 

2

 

 

 

22

 

 

 

1

 

 

 

31

 

Regional Markets – Other Americas (3 markets)

 

 

352

 

 

 

6

 

 

 

31

 

 

 

-

 

 

 

-

 

Subtotal Other Americas

 

 

884

 

 

 

16

 

 

 

225

 

 

 

3

 

 

 

184

 

Global Markets – Europe:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Belgium

 

 

45

 

 

 

1

 

 

 

13

 

 

 

-

 

 

 

-

 

Czech Republic

 

 

162

 

 

 

3

 

 

 

27

 

 

0

 

 

 

29

 

France

 

 

319

 

 

 

6

 

 

 

54

 

 

 

1

 

 

 

70

 

Germany

 

 

50

 

 

 

1

 

 

 

13

 

 

 

1

 

 

 

43

 

Italy

 

 

108

 

 

 

2

 

 

 

27

 

 

0

 

 

 

12

 

Netherlands

 

 

46

 

 

 

1

 

 

 

28

 

 

 

1

 

 

 

64

 

Poland

 

 

443

 

 

 

8

 

 

 

42

 

 

 

1

 

 

 

53

 

Spain

 

 

73

 

 

 

2

 

 

 

27

 

 

 

1

 

 

 

33

 

U.K.

 

 

291

 

 

 

4

 

 

 

132

 

 

 

1

 

 

 

177

 

Regional Markets – Europe (3 markets)

 

 

356

 

 

 

6

 

 

 

35

 

 

 

2

 

 

 

100

 

Other Markets – Europe (1 market)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Subtotal Europe

 

 

1,893

 

 

 

34

 

 

 

398

 

 

 

8

 

 

 

581

 

Global Markets – Asia:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

China

 

 

18

 

 

0

 

 

 

5

 

 

 

-

 

 

 

-

 

Japan

 

 

54

 

 

 

4

 

 

 

116

 

 

 

5

 

 

 

754

 

Subtotal Asia

 

 

72

 

 

 

4

 

 

 

121

 

 

 

5

 

 

 

754

 

Total land and development portfolio

 

 

5,892

 

 

 

107

 

 

$

1,219

 

 

 

28

 

 

$

2,443

 

 

    Investment Before
Depreciation
 

Industrial operating properties

  $17,801,064  

Development portfolio, including cost of land

   1,021,017  

Land

   1,516,166  

Other real estate investments (5)

   486,230  
  

 

 

 

Total consolidated real estate properties

  $20,824,477  

(1)

Certain of our consolidated properties are pledged as security under our secured mortgage debt and assessment bonds at December 31, 2013.2016. For purposes of this table, the total principal balance of a debt issuance that is secured by a pool of properties is allocated among the properties in the pool based on each property’s investment balance. In addition to the amounts reflected here, we also have $26.0$173 million of encumbrances related to other real estate properties not included in the Real Estate Operations segment.Operations. See Schedule III Real Estate and Accumulated Depreciation to the Consolidated Financial Statements in Item 88. Financial Statements and Supplementary Data for additional identification of the properties pledged.

 

(2)

Value added

No regional market within the U.S. represented more than 2% of the total gross book value of the consolidated operating properties. The regional markets within the U.S. by order of highest to lowest gross book value were:  Las Vegas, Denver, Louisville, Orlando, Columbus, Reno, Nashville, Cincinnati, San Antonio, Portland, Indianapolis, Austin, Phoenix, Charlotte and Memphis.

(3)

Included in our consolidated operating properties representare properties that we consider to be held for contribution and are presented as Assets Held for Sale or Contribution in the Consolidated Balance Sheets. We include these properties in our operating portfolio as they are expected to be repurposedcontributed to a better useour co-investment ventures and remain in our owned and managed operating portfolio. At December 31, 2016, we had properties that were expected to be contributed to our co-investment ventures totaling $231 million aggregating 2.4 million square feet. See Note 6 to the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data for further information on our Assets Held for Sale or acquired properties with opportunities to improve operating challenges and create higher value.Contribution.

 

(3)

(4)

Represents the estimated finished square feet available for rentlease upon completion of an industriala building on existing parcels of land included in this table.land.

 

17


(4)

(5)

Represents the total expected investmentTEI when the property under development is completed and leased. This includes the cost of land and development and leasing costs. As noted in the table below, our current investment is $1.4 billion, leaving approximately $1.0 billion of costs remaining. At December 31, 2013, 83%2016, approximately 58% of TEI for the properties under development in the development portfolio were expected to be completed by December 31, 2017, and approximately 37% of TEI for the properties in the development portfolio were already completed but not yet stabilized. The remainder of our properties under development are expected to be complete by December 31, 2014, and 13% of the properties under development are completed but not yet stabilized (defined as a property that has been completed for less than one year and is less than 90% occupied).before July 2018.

 

The following table summarizes our investment in consolidated real estate properties at December 31, 2016 (in millions):

 

 

Investment Before Depreciation

 

Operating properties, excluding assets held for sale or contribution

 

$

23,943

 

Development portfolio, including cost of land

 

 

1,432

 

Land

 

 

1,219

 

Other real estate investments (1)

 

 

525

 

Total consolidated real estate properties

 

$

27,119

 

(5)

(1)

Included in other real estate investments are: (i) certain non-industrialnon-logistics real estate; (ii) our corporate office buildings; (iii) land parcels that are ground leased to third parties; (iii) our corporate office buildings; (iv) certain infrastructure costs related to projects we are developing on behalf of others; (v) costs related to future development projects, including purchase options on land;land and (vi) earnest money deposits associated with potential acquisitions; and (vii) restricted funds that are held in escrow pending the completion of tax-deferred exchange transactions involving operating properties.acquisitions.

Lease ExpirationsLEASE EXPIRATIONS

We generally lease our properties on a long termlong-term basis (with a weighted average lease term remaining of sevenfour years). The following table summarizes the lease expirations of our consolidated operating portfolio for leases in place as ofat December 31, 2013, without giving effect to the exercise of renewal options or termination rights, if any2016 (dollars and square feet in thousands).millions):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year  

Number

of Leases

   Occupied Square
Feet
   Annualized Base
Rent
   % of Annualized
Base Rent
 

Month-to-month

   234     7,213    $23,871     1.8%  

2014

   904     36,110     180,084     13.9%  

2015

   877     48,321     235,977     18.2%  

2016

   746     45,931     226,200     17.4%  

 

 

 

 

 

 

 

 

 

NER

 

 

Number of Leases

 

 

Occupied Square Feet

 

 

Dollars

 

 

Percent of Total

 

 

Dollars Per Square Foot

 

2017

   507     36,245     184,766     14.2%  

 

 

750

 

 

 

38

 

 

$

182

 

 

 

11.3

%

 

$

4.76

 

2018

   394     26,539     152,013     11.7%  

 

 

827

 

 

 

49

 

 

 

246

 

 

 

15.3

%

 

 

5.01

 

2019

   217     22,944     115,797     8.9%  

 

 

747

 

 

 

52

 

 

 

242

 

 

 

15.0

%

 

 

4.70

 

2020

   81     7,876     46,865     3.6%  

 

 

568

 

 

 

34

 

 

 

176

 

 

 

10.9

%

 

 

5.24

 

2021

   50     6,164     28,558     2.2%  

 

 

592

 

 

 

45

 

 

 

232

 

 

 

14.4

%

 

 

5.19

 

2022

   34     3,074     20,045     1.5%  

 

 

281

 

 

 

32

 

 

 

160

 

 

 

9.9

%

 

 

5.05

 

2023

   46     5,631     38,640     3.0%  

 

 

138

 

 

 

16

 

 

 

85

 

 

 

5.3

%

 

 

5.35

 

2024 and thereafter

   46     7,132     47,203     3.6%  

2024

 

 

77

 

 

 

10

 

 

 

57

 

 

 

3.5

%

 

 

5.67

 

2025

 

 

59

 

 

 

12

 

 

 

66

 

 

 

4.1

%

 

 

5.68

 

2026

 

 

30

 

 

 

7

 

 

 

45

 

 

 

2.8

%

 

 

6.35

 

Thereafter

 

 

75

 

 

 

20

 

 

 

121

 

 

 

7.5

%

 

 

6.20

 

  

 

   

 

   

 

   

 

 

 

 

4,144

 

 

 

315

 

 

$

1,612

 

 

 

100.0

%

 

$

5.15

 

Month to month

 

 

135

 

 

 

7

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

   4,136     253,180    $1,300,019     100%  

 

 

4,279

 

 

 

322

 

 

 

 

 

 

 

 

 

 

 

 

 

18


Unconsolidated Co-Investment VenturesCO-INVESTMENT VENTURES

Included in our owned and managed portfolio at December 31, 2013, are consolidated and unconsolidated co-investment ventures that hold investments in 1,323 real estate properties, that we hold through our equity investments in unconsolidated co-investment ventures, primarily industrial propertieslogistics facilities that we also manage. Below is a summary of ourOur unconsolidated co-investment ventures which representsare accounted for under the equity method. The amounts included for the unconsolidated ventures are reflected at 100% of the venture,amount included in the ventures’ financial statements as calculated on a GAAP basis, not our proportionate share, as ofshare. The following table summarizes our consolidated and unconsolidated co-investment ventures at December 31, 20132016 (in thousands).millions):

 

   

 

Operating Portfolio

   Development
Portfolio -

Total Expected
Investment
   Investment
in Land
 
Unconsolidated Co-Investment Venture  Square
Feet
   Gross Book
Value
     

Americas:

        

Prologis Targeted U.S. Logistics Fund

   48,490    $4,418,783    $3,024    $  

Prologis North American Industrial Fund

   46,500     2,859,230            

Prologis Mexico Industrial Fund

   9,503     604,558            

Prologis Brazil Logistics Partners Fund (“Brazil Fund”) and related joint ventures

   4,044     370,412     202,316     45,238  
  

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal Americas

   108,537     8,252,983     205,340     45,238  
  

 

 

   

 

 

   

 

 

   

 

 

 

Europe:

        

Prologis Targeted Europe Logistics Fund

   13,652     1,764,442     27,963       

Prologis European Properties Fund II

   62,364     5,691,874     9,823       

Europe Logistics Venture 1

   5,070     448,045            

Prologis European Logistics Partners

   51,790     3,976,242     19,251       
  

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal Europe

   132,876     11,880,603     57,037       
  

 

 

   

 

 

   

 

 

   

 

 

 

Asia:

        

Nippon Prologis REIT

   18,508     3,430,960            

Prologis China Logistics Venture 1

   4,372     266,219     241,676     23,847  
  

 

 

   

 

 

   

 

 

   

 

 

 

Subtotal Asia

   22,880     3,697,179     241,676     23,847  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total

   264,293    $23,830,765    $504,053    $69,085  

 

Operating Properties

 

 

 

 

 

 

 

 

 

 

 

Square Feet

 

 

Gross

Book Value

 

 

Investment

in Land

 

 

Development Portfolio – TEI

 

Consolidated Co-Investment Ventures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prologis North American Industrial Fund (“NAIF”)

 

 

40

 

 

$

2,438

 

 

$

-

 

 

$

-

 

Prologis U.S. Logistics Venture (“USLV”)

 

 

72

 

 

 

6,058

 

 

 

36

 

 

 

96

 

Totals

 

 

112

 

 

$

8,496

 

 

$

36

 

 

$

96

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unconsolidated Co-Investment Ventures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prologis Targeted U.S. Logistics Fund (“USLF”)

 

 

50

 

 

$

4,704

 

 

$

-

 

 

$

-

 

Subtotal U.S.

 

 

50

 

 

 

4,704

 

 

 

-

 

 

 

-

 

Other Americas:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FIBRA Prologis

 

 

34

 

 

 

1,942

 

 

 

2

 

 

 

-

 

Prologis Brazil Logistics Partners Fund I

     (“Brazil Fund”) and related joint ventures

 

 

8

 

 

 

505

 

 

 

128

 

 

 

120

 

Subtotal Other Americas

 

 

42

 

 

 

2,447

 

 

 

130

 

 

 

120

 

Europe:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Europe Logistics Venture 1 (“ELV”) (1)

 

 

6

 

 

 

378

 

 

 

-

 

 

 

-

 

Prologis European Logistics Partners Sàrl (“PELP”)

 

 

59

 

 

 

3,769

 

 

 

28

 

 

 

26

 

Prologis European Properties Fund II (“PEPF II”)

 

 

72

 

 

 

4,881

 

 

 

5

 

 

 

19

 

Prologis Targeted Europe Logistics Fund (“PTELF”) (1)

 

 

26

 

 

 

2,458

 

 

 

2

 

 

 

-

 

Subtotal Europe

 

 

163

 

 

 

11,486

 

 

 

35

 

 

 

45

 

Asia:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nippon Prologis REIT (“NPR”)

 

 

25

 

 

 

4,101

 

 

 

-

 

 

 

-

 

Prologis China Logistics Venture

 

 

11

 

 

 

559

 

 

 

42

 

 

 

734

 

Subtotal Asia

 

 

36

 

 

 

4,660

 

 

 

42

 

 

 

734

 

Totals

 

 

291

 

 

$

23,297

 

 

$

207

 

 

$

899

 

(1)

In January 2017, we sold our investment in ELV to our fund partner and ELV contributed its properties to PTELF in exchange for equity interests.

For more information regarding our unconsolidated and consolidated co-investment ventures, see NoteNotes 5 and 12 to the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data.

ITEM 3. Legal Proceedings

From time to time, we and our unconsolidated entitiesco-investment ventures are parties to a variety of legal proceedings arising in the ordinary course of business. We believe that, with respect to any such matters thatto which we are currently a party, to, the ultimate disposition of any such matter will not result in a material adverse effect on our business, financial position or results of operations.

 

ITEM4. Mine Safety Disclosures

ITEM 4. Mine Safety Disclosures

Not Applicable

Applicable.

19


PART II

ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information and HoldersMARKET INFORMATION AND HOLDERS

Our common stock is listed on the NYSE under the symbol “PLD.” The following table sets forth the high and low sale price of theour common stock, of Prologis, Inc., as reported in the NYSE Composite Tape, and the declared dividends per common share, for the periods indicated.

 

 

High

 

 

Low

 

 

Dividends

 

  High   Low   Dividends 

2012

      

2016

 

 

 

 

 

 

 

 

 

 

 

 

First Quarter

  $36.03    $28.16    $0.28  

 

$

44.26

 

 

$

35.25

 

 

$

0.42

 

Second Quarter

   36.62     30.03     0.28  

 

$

50.74

 

 

$

43.45

 

 

$

0.42

 

Third Quarter

   37.58     31.03     0.28  

 

$

54.87

 

 

$

48.46

 

 

$

0.42

 

Fourth Quarter

   36.80     32.31     0.28  

 

$

53.51

 

 

$

45.93

 

 

$

0.42

 

2013

      

2015

 

 

 

 

 

 

 

 

 

 

 

 

First Quarter

  $41.02    $37.04    $0.28  

 

$

47.56

 

 

$

41.15

 

 

$

0.36

 

Second Quarter

   45.52     35.09     0.28  

 

$

44.48

 

 

$

37.03

 

 

$

0.36

 

Third Quarter

   40.58     34.60     0.28  

 

$

42.49

 

 

$

36.26

 

 

$

0.40

 

Fourth Quarter

   40.99     35.71     0.28  

 

$

43.69

 

 

$

38.66

 

 

$

0.40

 

Our future common stock dividends, if and as declared, may vary and will be determined by the Board upon the circumstances prevailing at the time, including our financial condition, operating results, estimated taxable income and REIT distribution requirements. These dividends, if and as declared, may be adjusted at the discretion of the Board during the year.

On February 21, 2014,10, 2017, we had approximately 499,613,700529,345,000 shares of common stock outstanding, which were held of record by approximately 5,7874,690 stockholders.

Stock Performance Graph

The following line graph compares the change in Prologis, Inc. cumulative total stockholder’s return on shares of its common stock from December 31, 2008,2011, to the cumulative total return of the Standard and Poor’sS&P 500 Stock Index and the FTSEFinancial Times and Stock Exchange NAREIT Equity REITs Index from December 31, 20082011, to December 31, 2013.2016. The graph assumes an initial investment of $100 in theour common stock of Prologis, Inc. (AMB pre-Merger) and each of the indices on December 31, 2008,2011, and, as required by the SEC, the reinvestment of all dividends. The return shown on the graph is not necessarily indicative of future performance.

 

*$100 invested on 12/31/08 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.20


Copyright© 2014 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved.

This graph and the accompanying text are not “soliciting material,” are not deemed filed with the SEC and are not to be incorporated by reference in any filing by the company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

DividendsPREFERRED STOCK DIVIDENDS

In order to comply with the REIT requirements

At December 31, 2016, and 2015, we had 1.6 million shares of the Internal Revenue Code, we are generally required to make common andSeries Q preferred stock dividends (other than capital gain distributions) to our stockholders in amounts that together at least equal (i) the sumwith a liquidation preference of (a) 90% of our “REIT taxable income” computed without regard to the dividends paid deduction and net capital gains and (b) 90% of the net income (after tax), if any, from foreclosure property, minus (ii) certain excess non-cash income. Our common stock distribution policy is to distribute a percentage of our cash flow that ensures that we will meet the distribution requirements of the Internal Revenue Code and that allows us to also retain cash to meet other needs, such as capital improvements and other investment activities.

In 2013, we paid a quarterly cash dividend of $0.28$50 per common share. Our future common stock dividends may vary and will be determined by our Board upon the circumstances prevailing at the time, including our financial condition, operating results, estimated taxable income and REIT distribution requirements, and may be adjusted at the discretion of the Board during the year.

On April 19, 2013, we redeemed all of the outstanding series L, M, O, P, R, and S preferred stock. On December 31, 2013, we had one remaining series of preferred stock outstanding, the “series Q preferred stock”.

Holders of preferred stock outstanding have limited voting rights, subject to certain conditions, and are entitled to receive cumulative preferential dividends based upon each series’ respective liquidation preference. Dividends are payable quarterly in arrears on the last day of March, June, September and December. Dividends are payable when, and if, they have been declared by the Board, out of funds legally available for payment of dividends. After the respective redemption dates, preferred stock can be redeemed at our option. The following table sets forth the Company’s dividends paid or payable per share were $4.27 for the years ended December 31, 20132016, and 2012:2015.

  

   Years Ended December 31, 
    2013   2012 

Series L preferred stock

  $0.41    $1.63  

Series M preferred stock

  $0.42    $1.69  

Series O preferred stock

  $0.44    $1.75  

Series P preferred stock

  $0.43    $1.71  

Series Q preferred stock

  $4.27    $4.27  

Series R preferred stock

  $0.42    $1.69  

Series S preferred stock

  $0.42    $1.69  

Pursuant to the terms of our preferred stock, we are restricted from declaring or paying any dividend with respect to our common stock unless and until all cumulative dividends with respect to the preferred stock have been paid and sufficient funds have been set aside for dividends that have been declared for the relevant dividend period with respect to the preferred stock.

For more information regarding dividends, see Note 10 to the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data.

SALES OF UNREGISTERED SECURITIES

During 2016, we issued an aggregate of 1.9 million shares of common stock of Prologis, Inc. in connection with the redemption of common units of Prologis, L.P. During 2015, we issued common units and Class A Units of Prologis, L.P. See Note 11 to the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data for more information. The issuance of the shares of common stock, common units and Class A Units was undertaken in reliance upon the exemption from registration requirements of the Securities Authorized for Issuance Under Equity Compensation PlansAct of 1933, as amended, afforded by Section 4(a)(2) thereof.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

For information regarding securities authorized for issuance under our equity compensation plans, see Notes 10 and 13 to the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data.

Other Stockholder MattersOTHER STOCKHOLDER MATTERS

Common Stock Plans

See our 2014 Proxy Statement or our subsequent amendment of this Form 10-K for further

Further information relative to our equity compensation plans.

plans will be provided in our 2017 Proxy Statement or in an amendment filed on Form 10-K/A.

21


ITEM 6. Selected Financial Data

The following table sets forthsummarizes selected financial data related to our historical financial condition and results of operations for 2013 and the four preceding years for both Prologis, Inc. and the Operating Partnership. As previously discussed, since ProLogis was the accounting acquirer in the Merger, the historical results of ProLogis are included for the entire period presented and the combined company’s results are included subsequent to the Merger. Certain amounts for the years prior to 2013 presented in the table below have been reclassified to conform to the 2013 financial statement presentation and to reflect discontinued operations. The amounts in the tables below are inPrologis, L.P. (in millions, except for per share/share and unit amounts.amounts):

 

 Years Ended December 31, 

Years Ended December 31,

 

 2013 2012 2011 (1) 2010 2009 

2016

 

 

2015

 

 

2014

 

 

2013

 

 

2012

 

Operating Data:

     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 $1,750   $1,961   $1,422   $827   $974  

$

2,533

 

 

$

2,197

 

 

$

1,761

 

 

$

1,750

 

 

$

1,961

 

Earnings (loss) from continuing operations (2)

 $230   $(106)   $(275)   $(1,605)   $(372)  

Net earnings (loss) per share attributable to common stock / unitholders - Basic (2):

     

Gains on dispositions of investments in real estate and revaluation

of equity investments upon acquisition of a controlling interest, net (1)

$

757

 

 

$

759

 

 

$

726

 

 

$

715

 

 

$

72

 

Consolidated net earnings (loss)

$

1,293

 

 

$

926

 

 

$

739

 

 

$

230

 

 

$

(106

)

Net earnings (loss) per share attributable to common stockholders

and unitholders – Basic:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations (3)(2)

 $0.40   $(0.35)   $(0.83)   $(7.42)   $(2.21)  

$

2.29

 

 

$

1.66

 

 

$

1.25

 

 

$

0.40

 

 

$

(0.35

)

Discontinued operations (3)

 $0.25   $0.17   $0.32   $1.52   $2.20  

Net earnings (loss) per share attributable to common stock / unitholders - Basic

 $0.65   $(0.18)   $(0.51)   $(5.90)   $(0.01)  

Net earnings (loss) per share attributable to common stock / unitholders - Diluted (2):

     

Discontinued operations (2) (3)

 

-

 

 

 

-

 

 

 

-

 

 

 

0.25

 

 

 

0.17

 

Net earnings (loss) per share attributable to common stockholders

and unitholders – Basic

$

2.29

 

 

$

1.66

 

 

$

1.25

 

 

$

0.65

 

 

$

(0.18

)

Net earnings (loss) per share attributable to common stockholders

and unitholders – Diluted:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 $0.39   $(0.34)   $(0.82)   $(7.42)   $(2.21)  

$

2.27

 

 

$

1.64

 

 

$

1.24

 

 

$

0.39

 

 

$

(0.34

)

Discontinued operations(3)

 $0.25   $0.16   $0.31   $1.52    2.20  

 

-

 

 

 

-

 

 

 

-

 

 

 

0.25

 

 

 

0.16

 

Net earnings (loss) per share attributable to common stock / unitholders - Diluted

 $0.64   $(0.18)   $(0.51)   $(5.90)   $(0.01)  

Common share / unit distributions per share / unit (2)

 $1.12   $1.12   $1.06   $1.25   $1.57  

Net earnings (loss) per share attributable to common stockholders

and unitholders – Diluted

$

2.27

 

 

$

1.64

 

 

$

1.24

 

 

$

0.64

 

 

$

(0.18

)

Dividends per common share and distributions per common unit

$

1.68

 

 

$

1.52

 

 

$

1.32

 

 

$

1.12

 

 

$

1.12

 

Balance Sheet Data:

     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 $24,572   $27,310   $27,724   $14,903   $16,797  

$

30,250

 

 

$

31,395

 

 

$

25,775

 

 

$

24,534

 

 

$

27,268

 

Total debt

 $9,011   $11,791   $11,382   $6,506   $7,978  

$

10,608

 

 

$

11,627

 

 

$

9,337

 

 

$

8,973

 

 

$

11,749

 

FFO (4):

     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of net earnings (loss) to FFO:

     

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings (loss) attributable to common shares

 $315   $(81)   $(188)   $(1,296)   $(3)  

Net earnings (loss) attributable to common stockholders

$

1,203

 

 

$

863

 

 

$

622

 

 

$

315

 

 

$

(81

)

Total NAREIT defined adjustments

  504    633    660    368    260  

 

534

 

 

 

461

 

 

 

299

 

 

 

504

 

 

 

633

 

Total our defined adjustments

  36        (60)    (46)    (71)  

 

(35

)

 

 

(15

)

 

 

(33

)

 

 

36

 

 

 

-

 

 

 

 

 

FFO, as defined by Prologis

 $855   $552   $412   $(974)   $186  

FFO, as modified by Prologis (4)

$

1,702

 

 

$

1,309

 

 

$

888

 

 

$

855

 

 

$

552

 

Total core defined adjustments

  (42)    262    182    1,255    159  

 

(302

)

 

 

(128

)

 

 

65

 

 

 

(42

)

 

 

262

 

 

 

 

 

Core FFO (4)

 $813   $814   $594   $281   $345  

$

1,400

 

 

$

1,181

 

 

$

953

 

 

$

813

 

 

$

814

 

 

(1)

In 2011, we completed the Merger and an acquisition of one of our unconsolidated entities, Prologis European Properties – “PEPR Acquisition” (see Note 3 to the Consolidated Financial Statements in Item 8 for additional information). Activity in 20112012, this included seven months of results associated with the Merger and PEPR Acquisition.

(2)We recognized significant gains on acquisitions and dispositions of investments in real estate of $0.7 billion in 2013. In 2010, we recognized impairment charges of $1.2 billion in real estate and goodwill. The historical shares and units of ProLogis were adjusted by the Merger exchange ratio of 0.4464 for the periods prior to the Merger. As a result, the per share/unit calculations were also adjusted.$269 million.

 

(3)

(2)

Net earnings (loss) per share attributable to common unitholders for the Operating PartnershipPrologis, L.P. was $(0.34) and $0.16 for continuing operations and discontinued operations, respectively, in 2012 and was $(0.82) and $0.31 for continuing operations and discontinued operations, respectively, in 2011.2012. For all other periods,years, the amounts for the Operating Partnership agreedPrologis, L.P. were the same as Prologis, Inc.

(3)

In 2014, the accounting standard changed for classifying and reporting discontinued operations and as such, none of our dispositions in 2016, 2015 or 2014 met the qualifications to Prologis.be reported as discontinued operations.

 

(4)

FFO; FFO, as modified by Prologis and Core FFO are non-GAAP measures used in the real estate industry.measures. See definitions and a complete reconciliation of FFO and Core FFO to net earnings in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.Operations for our definition of our FFO measures and a complete reconciliation to net earnings.

ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with ourthe Consolidated Financial Statements included in Item 88. Financial Statements and Supplementary Data of this report and the matters described under Item 1A. Risk Factors.

Management’s OverviewMANAGEMENT’S OVERVIEW

We believe the scalequality and qualityscale of our global operating platform,portfolio, the skillsexpertise of our team and the strength of our balance sheet will providegive us with unique competitive advantages going forward. We have a straightforwardadvantages. Our plan for growth thatto grow revenues, earnings, NOI, cash flows and funds from operations is based on the following three key elements:following:

 

CapitalizeRent Growth. We expect market rents to continue to grow over the next few years, albeit at a more modest pace, which we believe will be driven by demand for the location and quality of our properties. Because of the strong market rent growth in the last several years, even if market rents remain flat, our in-place leases have considerable room to rise back to market levels. We estimate that on rental recovery.During 2013an aggregate basis our leases are more than 10% below market, which when the lease is renewed, translates

22


into increased future earnings, NOI and cash flow, both on a consolidated basis and through the amounts we recognize from our unconsolidated co-investment ventures based on our ownership. This is reflected in the positive rent change on rollovers (when comparing the net effective rent of the new lease to the prior lease for the same space) on our owned and managed operating portfolio we had quarterly rent increases on rollovers of 2%, 4%, 6% and 6%, following 17 quarters of decreases. Market rents are growing across the majority of our markets and we believe they have substantial room to further increase as they remain significantly below replacement-cost-justified rents. We believe demand for logistics facilities is strong across the globe and will support increases in net effective rents as many of our in place leases were originated during low rent periods, following the global financial crisis. As we are able to recover the majority of our rental expenses from customers, the increase in rent translates into increased net operating income, earnings and cash flows.

Create value from development; by utilizing our land bank, development expertise and customer relationships. We believe one of the keys to a successful development program is having strategic land control and, in this regard, we are well-positioned. Based on our current estimates, our land bank has the potential to support the development of nearly 200 million additional square feet. During 2013, we stabilized development projects with a total expected investment of $1.4 billion. We estimate that after our development and leasing activities, these buildings will have a value that is approximately 30% more than book value (using estimated yield and capitalization rates from our underwriting models). Based on our view of improving market conditions, we believe that our land bank is carried on the books below the current fair value and expect to realize this value going forward through development and sales.

Use our scale to grow earnings.We believe we have the infrastructureexperienced every quarter beginning in place2013 and the acquisition pipeline to allow us to increase our investments in real estate either directly through acquisitions of properties or by investing in our co-investment ventures with minimal increases to gross general and administrative expenses beyond property level expenses. We completed an equity offering in April 2013 in order to capitalize on these opportunities and we made investments in real estate, as well as in our co-investment ventures as detailed below.

We believe these three strategies will enable us to generate growth in revenue, earnings, net operating income, Core FFO and dividends for our shareholders in the coming years.

Since the Merger, we were focused on the following priorities (“The Ten Quarter Plan”), which we completed June 30, 2013:

Align our Portfolio with our Investment Strategy. We categorized our portfolio into three main market categories – global, regional and other markets. At the time of the Merger, 79% of the total owned and managed portfolio was in global markets and our goal was to have 90% of the portfolio in global markets. We substantially met this objective primarily through sales of assets in non-strategic locations, with a portion of the proceeds recycled into new developments. As of December 31, 2013, global markets represented 85% of the owned and managed platform, based on gross book value.

Strengthen our Financial Position.Our intent was to further strengthen our financial position by lowering our financial risk, reducing our currency exposure and building one of the strongest balance sheets in the REIT industry. By the end of 2013, we reduced our debt, improved our debt metrics, increased our financial flexibility and ensured continued access to capital markets. Although our debt may increase temporarily due to acquisitions and other growth initiatives (as it did during the last half of 2013), we expect debt as a percentage of assets to continue to decrease over time.

We have reduced our exposure to foreign currency exchange fluctuations by borrowing in local currencies where appropriate, utilizing derivative contracts to hedge our foreign denominated equity, as well as through holding assets outside the United States primarily in our co-investment ventures. As of December 31, 2013, we increased our share of net equity denominated in U.S. dollars to 77% from 45% at the time of the Merger. We expect our percentage of U.S. dollar denominated net equity to increase further in 2014.

Streamline our Investment Management Business. Several of our legacy co-investment ventures contained fee structures that did not adequately compensate us for the services we provide and as a result we terminated or restructured a number of these co-investment ventures. We substantially repositioned this business to focus on large, long duration ventures, open end ventures and geographically focused public entities and expect to continue with these activities in 2014. Since the Merger, we have raised a significant amount in third-party equity and we expect to grow our investment management business going forward. Growth will come from the deployment of the capital commitments we have already raised, as well as new incremental capital in both our private and public formats. We have reduced the number of our co-investment ventures from 22 at the time of the Merger to 13 at December 31, 2013, with approximately 90% in long-life or perpetual vehicles.for several more years.

Improve the Utilization of Our Low Yielding Assets. We expected to increase the value of our low yielding assets by stabilizing our operating portfolio to 95% leased, completing the build-out and lease-up of our development projects, as well as monetizing our land through development or sale to third parties. We increased occupancy in our owned and managed portfolio 440 basis points from the Merger to 95.1% at December 31, 2013. From the Merger through December 31, 2013, we monetized approximately $890 million of our land bank through development starts and an additional $330 million through third-party sales.

Build the most effective and efficient organization in the REIT industry and become the employer of choice among top professionals interested in real estate as a career. We realized more than $115 million of cost synergies on an annualized basis, compared to the

combined expenses of AMB and ProLogis on a pre-Merger basis. These synergies included gross general and administrative savings, as well as reduced global line of credit facility fees and lower amortization of non real estate assets. In addition, we implemented a new enterprise wide system that includes a property management/billing system (implemented in April 2012), a human resources system (implemented in July 2012), a general ledger and accounting system and a data warehouse (both implemented in January 2013).

Summary of 2013

We formed two new ventures and announced the formation of two additional ventures:

 

Value Creation from Development. We believe a successful development and redevelopment program involves maintaining control of well-positioned land. On the basis of our current estimates, our owned and managed land bank has the potential to support the development of $8.4 billion of TEI of logistics space. We believe the carrying value of our land bank is below its current fair value, and we expect to realize this value going forward primarily through development. During 2016, in our owned and managed portfolio, we stabilized development projects with a TEI of $2.5 billion. Post stabilization, we estimate the value of these buildings to be 25.5% above their book value or the cost to develop (defined as estimated margin and calculated using estimated yield and capitalization rates from our underwriting models). In early 2013, we launched the initial public offering for NPR. NPRaddition, these properties will servegenerate an increase in NOI as the long-term investment vehicle for our stabilized properties in Japan. On February 14, 2013, NPR was listed on the Tokyo Stock Exchangethey are leased up and commenced trading. At that time, NPR acquired a portfolio of 12 properties from us for an aggregate purchase price of ¥173 billion ($1.9 billion). During 2013, NPR completed two follow on equity offerings and used the proceeds to buy properties from us at appraised value.become occupied.

 

On March 19, 2013,Economies of Scale from Growth in Assets Under Management. Over the last several years, we closed onhave invested in a euro denominated co-investment venture, Prologis European Logistics Partners Sàrlvariety of technologies that have allowed us to achieve efficiencies and increase our investments in real estate with minimal increases to general and administrative (“PELP”). PELP is structured as a 50/50 joint venture with Norges Bank Investment Management (“NBIM”G&A”) expenses. We have increased our owned and has an initial term of 15 years, which may be extended for an additional 15-year period. At closing, the venture acquired a portfolio of 195 properties from us for an aggregate purchase price of €2.3 billion ($3.0 billion). PELP acquired additional properties from us during 2013.

In November, we extended the relationship with our partner in China and formed Prologis China Logistics Venture 2. The venture is expected to build, acquire and manage properties in China. The venture has potential investment capacity of over $1 billion, including $588 million of committed equity of which $88 million is our share.

We announced the formation of Prologis U.S. Logistics Venture (“USLV”) with NBIM in December. We closed on the venture in January 2014 with a contribution of 66 operating properties aggregating 12.8managed real estate assets by 85 million square feet for an aggregate purchase price $1.0 billion. These properties were acquired by us(or approximately 16%) over the last two years primarily through acquisitions and integrated the assets with only minimal increases in Juneoverhead related to property management and August through the acquisitionleasing functions. We will continue to leverage these technologies in order to further streamline our operations and reduce our costs as a percentage of our partners’ interests in two previous co-investment ventures (Prologis Institutional Alliance Fund II (“Fund II”) and Prologis North American Industrial Fund III (“NAIF III”), which are described below). We own 55% of the equity and the venture will be consolidated for accounting purposes dueassets under management, along with advanced data analysis to the structure and voting rights of the venture.enhance decision making.

 

We concluded four ventures (one in Japan, two in the United States and one in Mexico):Summary of 2016

 

In connection with the wind down of Prologis Japan Fund I in June 2013, we purchased 14 properties from the venture and the venture sold the remaining six properties to NPR.

In June 2013, we acquired our partners’ interest in Fund II, a consolidated co-investment venture. Based on the venture’s cumulative returns to the investors, we earned a promote payment of approximately $18.8 million from the venture. The third party investors’ portion of the promote payment was $13.5 million, which is reflected as a component of noncontrolling interest in the Consolidated Statements of Operations in Item 8. The assets and liabilities associated with this venture were wholly owned at December 31, 2013, and were subsequently contributed to USLV in January 2014.

On August 6, 2013, NAIF III sold 73 properties to a third party for $427.5 million and we acquired our partners 80% interest in the venture, which included 18 properties. All debt of the venture was paid in full at closing. As a result of these combined transactions, we recorded a net gain of $39.5 million. The assets and liabilities associated with this venture were wholly owned at December 31, 2013, and were subsequently contributed to USLV in January 2014.

On October 2, 2013, we acquired our partner’s 78.4% interest in Prologis SGP Mexico (“SGP Mexico”) and began consolidating its operating properties with an estimated total fair value of $409.5 million.

During the year ended December 31, 2016, operating fundamentals remained strong for our owned and includingmanaged portfolio and we ended the initial formationyear with occupancy of 97.1%. See below for details of the two new ventures discussed above, we contributed a total of 235operating and development properties to fiveactivity of our unconsolidated co-investment venturesOwned and generated net proceeds and net gains of $6.2 billion and $416.0 million, respectively. In addition,Managed Portfolio. During 2016, we contributed a total of 19 properties acquired from third partiescompleted the following activities as further described in the footnotes to three of our co-investment ventures and generated net proceeds and net gains of $337.4 million and $139.2 million, respectively.the Consolidated Financial Statements:

 

We generated net proceeds of $785.6$3.0 billion from the contribution and disposition of real estate assets. We recorded net gains of $354 million from the dispositions of land and 89 operating buildings to third parties, primarily in the U.S., and recognized a net gain of $125.4 million.$267 million from property contributions, principally in Europe and Japan.

 

In addition to the transactions discussed above, we invested a total of $505.7We earned promotes from PEP II, PTELF and USLV aggregating $96 million, of new commitments (with cashwhich $89 million was recorded in StrategicCapital Revenues, and $7 million was recorded in Net Earnings Attributable to Noncontrolling Interests.

We generated proceeds of $611 million and recorded gains of $136 million through contributions)the redemption of our investments in ourcertain unconsolidated co-investment ventures, which includes increasing our investment in three ventures:ventures.  

 

We amended our global senior credit facility (the “Global Facility”) and increased the total borrowing capacity to $3.0 billion and extended the maturity until April 2020. This facility, along with our Japanese yen revolver, increased our ownership interest in Prologis European Properties Fund II to 32.5%.

We increased our ownership interest in Prologis Targeted Europe Logistics Fund to 43.1%.

We increased our ownership interest in Prologis Targeted U.S. Logistics Fund to 25.9%.

In April, we issued 35.65 million shares of common stock in a public offering at a price of $41.60 per share, generating approximately $1.4 billion in net proceeds (“Equity Offering”).

In April, we redeemed $482.5 million of our preferred stock.

We had a significant amount of capital markets activity in 2013. As a result and in combination with our significant contribution and disposition activity, along with the Equity Offering, we decreased our total debt to $9.0borrowing capacity, which was $3.3 billion at December 31, 2013, from $11.82016.

We entered into an ¥120.0 billion ($1.0 billion at December 31, 2012. We extended2016) unsecured yen senior term loan agreement (the “Yen Term Loan”) and repaid our maturitiesexisting yen term loans. See Liquidity and lowered our borrowing costs by issuing several seriesCapital Resources section below for details of new debt and repurchasing existing higher coupon debt. Details of debt activity are as follows:this transaction.

 

We issued senior notes during 2013 as follows (dollarsIn January 2017, we sold our investment in thousands):

    Principal
Amount
   Effective
Interest Rate
  Maturity Date 

Senior Note Issuance Date:

     

August 15, 2013

  $850,000     4.25  August 15, 2023  

August 15, 2013

  $400,000     2.75  February 15, 2019  

November 1, 2013

  $500,000     3.35  February 1, 2021  

December 3, 2013

  700,000     3.00  January 18, 2022  

We used the proceeds of the newly issued debtELV to buy back debt of $1.5 billion through tender offers or private transactions, which resultedour fund partner and ELV contributed its properties to PTELF in a loss on early extinguishment of $180.7 million.

We repaid $1.6 billion of outstanding secured mortgage debt (with an average borrowing cost of 2.4%) with the proceeds from the contribution of properties, primarily to PELP and NPR, and we transferred $548.0 million of outstanding mortgage debt in connection with contributions. In addition, we used proceeds generated from property dispositions and the Equity Offering to repay $564.5 million in senior notes and $483.6 million in exchangeable senior notes. As a result of our repayment of debt, we recorded a loss on early extinguishment of $96.3 million.

All of this activity decreased our borrowing costs to 4.2% at December 31, 2013, from 4.4% at December 31, 2012, and increased the remaining maturity from 43 months to 58 monthsexchange for the same period. Also, the issuance of the euro denominated debt and derivative contracts increased the percentage of our total equity denominated in U.S. dollar to 77%.

We commenced construction of 68 development projects on an owned and managed basis, aggregating 23 million square feet with a total expected investment of $1.8 billion (our share was $1.5 billion), including 27 projects (42% of our share of the total expected investment) that were 100% leased prior to the start of development. These projects had an estimated weighted average yield at stabilization of 7.6% and an estimated development margin of 19.1%. We used $445.3 million of land we already owned for these projects. We expect these developments to be completed by June 2015 or earlier.

We leased a total of 151.9 million square feet in our owned and managed portfolio and incurred average turnover costs (tenant improvements and leasing costs) of $1.42 per square foot. At December 31, 2013, our owned and managed operating portfolio was 95.1% occupied and 95.1% leased as compared to 94.0% occupied and 94.5% leased at December 31, 2012.

Our rent change on roll over was positive in each quarter in 2013 for our owned and managed portfolio, ranging from 2% to 6%. Rent change in our portfolio is continuing its upward trend and we expect to continue to see increases in our rents on rollover. During 2013, we retained 82.6% of customers whose leases were expiring.

Operational Outlook

The recovery of the logistics real estate market further strengthened and broadened globally during 2013. Operating fundamentals continued to improve and we believe this trend will continue as the leading indicators of industrial real estate are strong. Global trade is expected to grow 4.9% in 2014 and 5.4% in 2015 (a). Based on our own internal surveys, space utilization in our facilities continues to trend higher, which means our customers are short on capacity to handle their current needs and their future growth.

Market conditions in the U.S. are very favorable and an ongoing supply and demand imbalance exists (b). The industrial market absorbed 233 million square feet in 2013, the highest level since 2005 (b). By contrast, development completions amounted to only 67 million square feet resulting in a demand imbalance of 166 million square feet, the highest on record (b). These conditions have driven U.S. market vacancy to a new record low of 7.2% (b). As customer demand remains active and supply pipelines are below historical norm, we expect vacancy to continue to decline and rental rates to continue to increase in 2014.

Operating conditions in our Latin American markets are positive and have outperformed uneven macroeconomic growth in 2013. In Mexico, demand has continued to recover and the market occupancy rate across the six largest logistics markets (Mexico City, Monterrey,

Guadalajara, Juarez, Reynosa and Tijuana) was 91.6% at the end of 2013, up 100 basis points from the prior year, based on internally generated data. In Brazil, despite a slowing economy, we believe it is an underserved logistics market and there is strong demand for modern logistics facilities as companies serve the growing consumer market.

In Europe, we believe we have seen the end of recessionary conditions in most countries. Customer sentiment continues to improve and broaden, which is translating into meaningful demand. Evidence for this includes pan-European market occupancy of 91.3%, higher than the level achieved in 2007 (c). The occupancy rate rose 1.0% in 2013 and we expect further gains in 2014. Economic momentum turned positive in 2013 and brighter macroeconomic prospects appear to be generating demand for logistics facilities, in our view. Our research indicates new starts for speculative development are near historic low levels. We expect net effective rents to continue to increase and the recovery to broaden to more of our markets. We believe high occupancy and rent growth, combined with declining capitalization rates will lead to a strong recovery in European industrial real estate values.

Expansionary market conditions are evident in our Asian markets. The availability of Class-A distribution space remains highly constrained and net effective rents are rising. In Japan, vacancy rates remain below 3% (a), and there is upward pressure on rents, especially in Tokyo and Osaka, as these markets have absorbed new deliveries. Increasing development costs, driven by higher land and construction pricing, are expected to keep new supply in balance. Demand in China is accelerating and we see new requirements from retailers and e-commerce customers. Low vacancy conditions continue to lead to outsized rental rate growth, in our view. Land availability has been constrained but appears to be improving. Barriers to supply continue to drive rents ahead of inflation, and we believe that we are well positioned with our development platform to meet this accelerating demand.

We believe elevated occupancy rates across our markets, coupled with the still-gradual pickup in new construction starts, are leading to notable increases in replacement-cost rents and effective rents. We expect to use our strategic land positions to support increased development activity in this environment. Our development business comprises speculative development, build-to-suit development, value-added conversions and redevelopment. We will develop directly and within our co-investment ventures, depending on location, market conditions, submarkets or building sites and availability of capital.interests.

 

RESULTS OF OPERATIONS

(a)according to the International Monetary Fund.

 

(b)according to CB Richard Ellis-Econometric Advisors (“CBRE”).

(c)according to CBRE, Jones Lang LaSalle and DTZ.

ResultsWe evaluate our business operations based on the NOI of Operations

our two business reporting segments, Real Estate Operations Segment

The rental income and rental expense we recognizeStrategic Capital. NOI by segment is a non-GAAP financial measure that is calculated using revenues and expenses directly impactedfrom our financial statements. We consider NOI by our consolidated operating portfolio. As mentioned earlier, we have had significant real estate activity during the last several years that has impacted the sizesegment to be an appropriate supplemental measure of our portfolio. In addition, the operating fundamentals in our markets have been improving, which has impactedperformance because it helps both the occupancy and rental rates we have experienced, as well as fueling development activity. Also included in this segment is revenue from land we own and lease to customers under ground leases and development management and other income, offsetinvestors to understand the core operations of our business.

Below is a reconciliation of our NOI by acquisition, disposition and land holding costs. The results of properties soldsegment to third parties have been reclassified to Discontinued Operations for all periods presented. Net operating income fromOperating Income per the Real Estate Operations segmentConsolidated Financial Statements for the years ended December 31 was as follows (dollars(in millions). Each segment’s NOI is reconciled to a line item in thousands):the Consolidated Financial Statements in the respective segment discussion below.

23


 

 

2016

 

 

2015

 

 

2014

 

Real Estate Operations segment – NOI

 

$

1,655

 

 

$

1,376

 

 

$

1,087

 

Strategic Capital segment – NOI

 

 

166

 

 

 

102

 

 

 

104

 

General and administrative expenses

 

 

(222

)

 

 

(217

)

 

 

(229

)

Depreciation and amortization expenses

 

 

(931

)

 

 

(881

)

 

 

(642

)

Operating income

 

$

668

 

 

$

380

 

 

$

320

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See Note 18 to the Consolidated Financial Statements for more information on our segments and a reconciliation of each reportable business segment’s NOI to Operating Income and Earnings Before Income Taxes.

 

    2013   2012   2011 

Rental and other income

  $1,239,496    $1,469,419    $1,026,825  

Rental recoveries

   331,518     364,320     257,327  

Rental and other expenses

   (478,920)     (517,795)     (372,719)  
  

 

 

 

Net operating income - Real Estate Operations segment

  $1,092,094    $1,315,944    $911,433  
  

 

 

 

Operating margin

   69.5%     71.8%     71.0%  

Average occupancy

   93.6%     92.6%     89.9%  

Detail of our consolidated operating properties as of December 31, was as follows (square feet in thousands):

    2013   2012   2011 

Number of properties

   1,610     1,853     1,797  

Square Feet

   267,097     316,347     291,051  

Occupied %

   94.9%     93.7%     91.4%  

Below are the key drivers that have influenced the net operating income (“NOI”) of this segment:

We contributed a significant amount of properties into our unconsolidated co-investment ventures during 2013. We generally used the proceeds from these contributions to repay debt and to fund future growth. As a result of the contributions of properties we made in 2013, our NOI decreased $299.4 million in 2013 from 2012. The net change in NOI from 2011 to 2012 related to contributions of properties during these periods was not significant. Since we have an ongoing ownership interest in these

ventures, the results remain in Continuing Operations in the Consolidated Statements of Operations in Item 8. In addition to the decrease in NOI in this segment during 2013, we recognized a decrease inInterest Expense and an increase inInvestment Management Income andEarnings from Unconsolidated Entitiesdue to our continuing ownership in and management of these properties.

We completed the Merger and PEPR Acquisition during 2011 and as a result, NOI increased $216.1 million in 2012 from 2011 ($293.6 million in rental income and $77.5 million in rental expense).

Occupancy of the operating properties has continued to increase. In our Real Estate Operations

This operating segment we leased a total of 87.6 million square feet and incurred average turnover costs of $1.71 per square foot. This compares to 2012, when we leased 92.4 million square feet with turnover costs of $1.41 per square feet. The increase in turnover costs is due to the longer term and higher value on the leases signed, resulting in higher leasing commissions.

We calculate the change in effectiveprincipally includes rental rates on leases signed during the quarter as compared to the previous rent on that same space. Rental rate change on rollover (in our total owned and managed operating portfolio) was negative for all periods in 2012 and 2011. Rental change on rollover was positive in all four quarters of 2013 and has continued to increase. Generally we believe that market rents are continuing to increase and the majority of leases that are rolling were put in place at the low end of the cycle. In addition, many of our leases have rent increases throughout the lease term that are based on the consumer price index and are therefore not included in rent leveling and increase therevenues, rental revenue we recognize.

We rationalized and acquired properties or a controlling interest in several of our unconsolidated co-investment ventures:

2013 — aggregated total portfolio of $1.1 billion and 16.3 million square feet; and

2012 — aggregated total portfolio of $2.3 billion and 46.3 million square feet.

We have also increased the size of our portfolio through acquisition activity and development activity. After the development properties are stabilized, we may contribute them to co-investment ventures or we may continue to hold and operate within our consolidated portfolio depending on various factors, including geography and market conditions. We expect to continue to increase our consolidated portfolio through both acquisition and development activity in the future.

Under the terms of our lease agreements, we are able to recover the majority of our rental expenses from customers. Rental expense recoveries included in both rental income and rental expenses were 73.4%, 74.2% and 73.8% of total rental expenses for the years ended December 31, 2013, 2012 and 2011, respectively.

Investment Management Segment

The net operating incomerecognized from the Investment Management segment, representing fees and incentives earned for services performed reduced by Investment Management expenses (direct costs of managing these entities and the properties they own), for the years ended December 31 was as follows (dollars in thousands):

    2013   2012   2011 

Net operating income — Investment Management Segment:

      

Americas:

      

Asset management and other fees

  $52,030    $55,448    $60,240  

Leasing commissions, acquisition and other transaction fees

   14,078     13,974     16,632  

Incentive returns

   6,366          

Investment management expenses

   (53,689)     (37,785)     (34,228)  
  

 

 

 

Subtotal Americas

   18,785     31,637     42,644  

Europe:

      

Asset management and other fees

   53,190     32,951     34,934  

Leasing commissions, acquisition and other transaction fees

   10,604     4,096     11,153  

Investment management expenses

   (22,531)     (15,348)     (15,379)  
  

 

 

 

Subtotal Europe

   41,263     21,699     30,708  

Asia:

      

Asset management and other fees

   29,861     19,026     14,585  

Leasing commissions, acquisition and other transaction fees

   13,343     1,284     75  

Investment management expenses

   (13,059)     (10,687)     (5,355)  
  

 

 

 

Subtotal Asia

   30,145     9,623     9,305  
  

 

 

 

Net operating income — Investment Management segment

  $90,193    $62,959    $82,657  
  

 

 

 

Operating Margin

   50.3%     49.7%     60.1%  

We had the following unconsolidated co-investment ventures under management as of December 31 (square feet and gross book value in thousands):

    2013   2012   2011 

Americas:

      

Number of ventures

   4     6     10  

Square feet

   108,537     127,455     190,541  

Gross book value

  $8,252,983    $9,190,638    $12,966,744  

Europe:

      

Number of ventures

   4     3     3  

Square feet

   132,876     70,294     67,088  

Gross book value

  $11,880,603    $6,670,689    $6,261,114  

Asia:

      

Number of ventures

   2     2     2  

Square feet

   22,880     11,004     10,123  

Gross book value

  $3,697,179    $1,764,608    $2,039,881  

Total:

      

Number of ventures

   10     11     15  

Square feet

   264,293     208,753     267,752  

Gross book value

  $  23,830,765    $  17,625,935    $  21,267,739  

Investment management income fluctuates due to the number and size of co-investment ventures that are under management. As noted earlier, we have formed some new ventures and we have acquired the controlling interest in several co-investment ventures, which results in us owning the properties and reporting them in our consolidated results. In addition, the Merger resulted in the addition of several ventures during 2011.

The direct costs associated with our Investment Management segment totaled $89.3 million, $63.8 million, and $55.0 million for the years ended December 31, 2013, 2012 and 2011, respectively, and are included in the line item Investment Management Expenses in the Consolidated Statements of Operations in Item 8. These expenses include the direct expenses associated with the asset management of the unconsolidated co-investment ventures provided by our employees who are assigned to our Investment Management segment. In addition, in order to achieve efficiencies and economies of scale, all of our property management functions are provided by a team of professionals who are assigned to our Real Estate Operations segment. These individuals perform the property-level management of the properties in our owned and managed portfolio including properties we consolidate and the properties we manage that are owned by the unconsolidated entities.properties. We allocate the costs of our property management functionfunctions to the propertiesReal Estate Operations segment through Rental Expenses and the Strategic Capital segment through Strategic Capital Expenses based on the size of the relative portfolios as compared to our total owned and managed portfolio. The operating fundamentals in the markets in which we consolidate (reportedoperate continue to improve, which has positively affected both the rental rates and occupancy and also has fueled development activity.

Below are the components of Real Estate Operations revenues, expenses and NOI for the years ended December 31 (in millions), derived directly from line items inRental Expenses) the Consolidated Financial Statements.

 

 

2016

 

 

2015

 

 

2014

 

Rental revenues

 

$

1,735

 

 

$

1,536

 

 

$

1,179

 

Rental recoveries

 

 

486

 

 

 

437

 

 

 

349

 

Development management and other revenues

 

 

17

 

 

 

14

 

 

 

13

 

Rental expenses

 

 

(569

)

 

 

(544

)

 

 

(430

)

Other expenses

 

 

(14

)

 

 

(67

)

 

 

(24

)

Real Estate Operations – NOI

 

$

1,655

 

 

$

1,376

 

 

$

1,087

 

Real Estate Operations revenues, expenses and NOI are impacted by capital deployment activities, occupancy and changes in rental rates. The following items highlight the key changes in NOI for the years ended December 31 (in millions):

 

 

Change in

 

 

 

2016 from 2015

 

 

2015 from 2014

 

Acquisitions (1)

 

$

194

 

 

$

279

 

Rent rate and occupancy growth (2)

 

 

89

 

 

 

76

 

Development activity (3)

 

 

39

 

 

 

17

 

Contributions and dispositions

 

 

(91

)

 

 

(98

)

Other (4)

 

 

48

 

 

 

15

 

Total change in Real Estate Operations – NOI

 

$

279

 

 

$

289

 

(1)

The impact from acquisitions in 2016 from 2015 was primarily due to the acquisition of the real estate assets and operating platform of KTR Capital Partners and its affiliates (“KTR”) in May 2015, which generated an additional $152 million of net revenues, including a decrease of $25 million acquisition costs in 2016.

The impact from acquisitions in 2015 from 2014 included the KTR transaction in 2015 and the consolidation of NAIF in 2014. KTR included an additional $176 million of net revenues, which was slightly offset by $25 million in acquisition costs.

In the fourth quarter of 2014, we consolidated our co-investment venture NAIF, which increased NOI $153 million in 2015 from 2014.

Approximately 45% and 34% of KTR and NAIF activity, respectively, is offset in Net Earnings Attributable to Noncontrolling Interests attributable to our venture partner’s share. See Note 3 in the Consolidated Financial Statements for further detail on the KTR transaction and NAIF consolidation.

(2)

Rent rate growth is a combination of the turnover of existing leases and increases in rental rates from contractual rent increases on existing leases. If a lease has a contractual rent increase that is not known at the time the lease is signed, such as the consumer price index or a similar metric, the rent increase is not included in rent leveling and therefore, would impact the rental revenues we recognize. We have experienced an increase in rental rates on turnover of existing leases every quarter beginning in 2013 that has resulted in higher average rental rates in our portfolio and increased rental revenues and NOI as those leases commenced.

(3)

We have had a steady increase in properties that have been completed and leased from 2014 to 2016.

24


(4)

Other items increased NOI in 2016, compared to 2015, such as additional property tax expense recoveries, a reduction of noncash adjustments for the amortization of above or below market leases and decreases in non-recoverable expenses.

Below are key operating metrics of our consolidated operating portfolio for the years ended December 31:

 

Strategic Capital

This operating segment includes revenues from asset management and other fees as well as promotes earned for services performed for our unconsolidated co-investment ventures. Revenues associated with the Strategic Capital segment fluctuate because of the size of co-investment ventures under management, the transactional activity in the ventures and the timing of promotes. These revenues are reduced generally by the direct costs associated with the asset management and property-level management for the properties owned by these ventures. We allocate the unconsolidated entities (included inInvestment Management Expenses), by using the square feet owned by the respective portfolios. The increase inInvestment Management Expenses in 2013 was duecosts of our property management functions to the addition of PELP Strategic Capital segment through Strategic Capital Expenses and NPR and additional expense related to the incentive returns we recognized in 2013, offset somewhat byReal Estate Operations segment through Rental Expenses based on the conclusion of several ventures. The increase inInvestment Management Expenses in 2012 was due to the increased investment management platform and infrastructure that was part of the Merger, offset partially with a decline due to the consolidation of PEPR in June 2011 and the acquisition of three of our co-investment ventures in 2012; Prologis North American Industrial Fund II, Prologis California and Prologis North American Fund 1 (collectively the “2012 Co-Investment Venture Acquisitions”).

We expect the net operating income of this segment to increase in 2014 due to NPR and PELP and the increased size of the existingrelative portfolios as compared to our total owned and managed portfolio.

Below are the components of Strategic Capital revenues, expenses and NOI for the years ended December 31, derived directly from the line items in the Consolidated Financial Statements (in millions):  

 

 

2016

 

 

2015

 

 

2014

 

Strategic capital revenues

 

$

295

 

 

$

210

 

 

$

220

 

Strategic capital expenses

 

 

(129

)

 

 

(108

)

 

 

(116

)

Strategic Capital – NOI

 

$

166

 

 

$

102

 

 

$

104

 

Below is additional detail of our Strategic Capital revenues, expenses and NOI for the years ended December 31 (in millions):

 

 

2016

 

 

2015

 

 

2014

 

U.S. (1):

 

 

 

 

 

 

 

 

 

 

 

 

Asset management and other fees

 

$

33

 

 

$

31

 

 

$

41

 

Leasing commissions, acquisition and other transaction fees

 

 

6

 

 

 

8

 

 

 

12

 

Promotes (2)

 

 

-

 

 

 

-

 

 

 

31

 

Strategic capital expenses (3)

 

 

(41

)

 

 

(41

)

 

 

(46

)

Subtotal U.S.

 

 

(2

)

 

 

(2

)

 

 

38

 

Other Americas (4):

 

 

 

 

 

 

 

 

 

 

 

 

Asset management and other fees

 

 

21

 

 

 

20

 

 

 

11

 

Leasing commissions, acquisition and other transaction fees

 

 

2

 

 

 

2

 

 

 

-

 

Strategic capital expenses

 

 

(10

)

 

 

(9

)

 

 

(9

)

Subtotal Other Americas

 

 

13

 

 

 

13

 

 

 

2

 

Europe:

 

 

 

 

 

 

 

 

 

 

 

 

Asset management and other fees

 

 

84

 

 

 

71

 

 

 

71

 

Leasing commissions, acquisition and other transaction fees

 

 

13

 

 

 

12

 

 

 

16

 

Promotes (2)

 

 

89

 

 

 

30

 

 

 

-

 

Strategic capital expenses

 

 

(43

)

 

 

(27

)

 

 

(30

)

Subtotal Europe

 

 

143

 

 

 

86

 

 

 

57

 

Asia:

 

 

 

 

 

 

 

 

 

 

 

 

Asset management and other fees

 

 

38

 

 

 

32

 

 

 

32

 

Leasing commissions, acquisition and other transaction fees

 

 

9

 

 

 

4

 

 

 

6

 

Strategic capital expenses

 

 

(35

)

 

 

(31

)

 

 

(31

)

Subtotal Asia

 

 

12

 

 

 

5

 

 

 

7

 

Strategic Capital – NOI

 

$

166

 

 

$

102

 

 

$

104

 

25


(1)

In 2014, we acquired a controlling interest in our co-investment venture NAIF. See Notes 3 and 4 to the Consolidated Financial Statements for additional information on this venture.

(2)

The promotes represent the third parties’ share based on the venture’s cumulative returns to the investors over the last three years. Approximately 40% of promote revenues are paid as a combination of cash and stock awards pursuant to the terms of the Prologis Promote Plan and expensed through Strategic Capital Expenses.

(3)

This includes compensation and personnel costs for employees who are located in the U.S. but also support other regions.

(4)

In 2014, we formed the co-investment venture FIBRA Prologis. See Note 4 to the Consolidated Financial Statements for additional information on this venture.

The following real estate investments were held through our unconsolidated co-investment ventures through acquisitions from usat December 31 (dollars and third parties, as well as increased incentive returns.square feet in millions):

 

 

2016

 

 

2015

 

 

2014

 

U.S.:

 

 

 

 

 

 

 

 

 

 

 

 

Number of ventures

 

 

1

 

 

 

1

 

 

 

1

 

Number of properties owned

 

 

369

 

 

 

391

 

 

 

392

 

Square feet

 

 

50

 

 

 

50

 

 

 

50

 

Total assets

 

$

4,238

 

 

$

4,408

 

 

$

4,403

 

Other Americas:

 

 

 

 

 

 

 

 

 

 

 

 

Number of ventures

 

 

2

 

 

 

2

 

 

 

2

 

Number of properties owned

 

 

213

 

 

 

205

 

 

 

198

 

Square feet

 

 

42

 

 

 

39

 

 

 

37

 

Total assets

 

$

2,793

 

 

$

2,482

 

 

$

2,653

 

Europe:

 

 

 

 

 

 

 

 

 

 

 

 

Number of ventures

 

 

4

 

 

 

4

 

 

 

4

 

Number of properties owned

 

 

700

 

 

 

688

 

 

 

636

 

Square feet

 

 

163

 

 

 

159

 

 

 

148

 

Total assets

 

$

10,853

 

 

$

11,343

 

 

$

11,440

 

Asia:

 

 

 

 

 

 

 

 

 

 

 

 

Number of ventures

 

 

2

 

 

 

2

 

 

 

2

 

Number of properties owned

 

 

85

 

 

 

66

 

 

 

52

 

Square feet

 

 

36

 

 

 

29

 

 

 

26

 

Total assets

 

$

5,173

 

 

$

4,320

 

 

$

4,120

 

Total:

 

 

 

 

 

 

 

 

 

 

 

 

Number of ventures

 

 

9

 

 

 

9

 

 

 

9

 

Number of properties owned

 

 

1,367

 

 

 

1,350

 

 

 

1,278

 

Square feet

 

 

291

 

 

 

277

 

 

 

261

 

Total assets

 

$

23,057

 

 

$

22,553

 

 

$

22,616

 

See Note 5 to the Consolidated Financial Statements in Item 8 for additional information on our unconsolidated entities.co-investment ventures.

Other Components of Income

General and Administrative (“G&A”)&A Expenses

G&A expenses increased $5 million for the yearsyear ended December 31, consisted of2016, compared to the following (in thousands):

    2013   2012   2011 

Gross overhead

  $434,933    $394,845    $332,632  

Less: rental expenses

   (32,918)     (35,954)     (24,741)  

Less: investment management expenses

   (89,278)     (63,820)     (54,962)  

Capitalized amounts

   (83,530)     (67,003)     (57,768)  
  

 

 

 

G&A expenses

  $  229,207    $  228,068    $  195,161  

The increasesame time period in 2015, primarily due to increased compensation, including equity-based compensation awards. G&A expenses decreased $12 million for the year ended December 31, 2015, compared to the same time period in 2014, primarily due to fluctuations in foreign currency exchange rates between the U.S. dollar and the various components from 2012 to 2013 was principally due to increased infrastructure to accommodate our growing business. In 2013, the gross book value for our ownedBritish pound sterling, euro and managed portfolio increased $1.4 billion to $45.5 billion at December 31, 2013. As discussed above, we allocate a portion of our G&A expenses that relate to property management functions to our Real Estate Operations segment and our Investment Management segment.Japanese yen.

The increase in G&A expenses and the various components from 2011 to 2012 was due principally to the larger infrastructure associated with the combined company following the Merger and the PEPR Acquisition.

We capitalize certain costs directly related to our development and leasing activities. Capitalized G&A expenses included salaries and related costs, as well as other general and administrativeG&A costs. The following table summarizes capitalized G&A costsamounts for the years ended December 31 were as follows (in thousands)millions):

 

 

2016

 

 

2015

 

 

2014

 

  2013   2012   2011 

Development activities

  $  64,113    $  42,417    $  34,301  

Building and land development activities

 

$

61

 

 

$

63

 

 

$

56

 

Leasing activities

   18,301     23,183     21,390  

 

 

24

 

 

 

21

 

 

 

18

 

Costs related to internally developed software

   1,116     1,403     2,077  
  

 

 

 

Operating building improvements and other

 

 

16

 

 

 

16

 

 

 

13

 

Total capitalized G&A expenses

  $  83,530    $  67,003    $  57,768  

 

$

101

 

 

$

100

 

 

$

87

 

Capitalized salaries and related costs as a percent of total salaries and related costs

 

 

26.0

%

 

 

27.6

%

 

 

23.9

%

For the years ended December 31, 2013, 2012 and 2011, the capitalized salaries and related costs represented 23.7%, 20.3%, and 20.0%, respectively, of our total salaries and related costs. Salaries and related costs are comprised primarily of wages, other compensation and employee-related expenses.26


Our development activity has increased over the last three years and therefore our capitalized costs have increased. We began consolidated development projects with a total expected investment of $1.4 billion, $1.3 billion (nearly half of which was started in the fourth quarter) and $0.8 billion during 2013, 2012, and 2011 respectively.

Depreciation and Amortization

Depreciation and Amortization Expenses

The following table highlights the key changes in depreciation and amortization was $648.7 million, $724.3 million and $542.4 millionexpenses for the years ended December 31 2013, 2012(in millions):

 

 

Change in

 

 

 

2016 from 2015

 

 

2015 from 2014

 

Acquisition of properties (1)

 

$

65

 

 

$

269

 

Development properties placed into service

 

 

22

 

 

 

12

 

Disposition and contribution of properties

 

 

(45

)

 

 

(56

)

Other

 

 

9

 

 

 

13

 

Total change in depreciation and amortization expenses

 

$

51

 

 

$

238

 

(1)

The increase in 2015 from 2014 included the KTR transaction and the consolidation of NAIF.

Our Owned and 2011, respectively. The decrease from 2012Managed Properties

We manage our business on an owned and managed basis, which includes properties wholly owned by us or owned by one of our co-investment ventures. We review our operating fundamentals on an owned and managed basis. We believe reviewing these fundamentals this way allows management to 2013 is primarily dueunderstand the entire impact to less depreciationthe financial statements, as a result of contributions of properties, offset slightly by additional depreciationit will affect both the Real Estate Operations and amortization from completed and leased development properties and increased leasing activity. The increase from 2011 to 2012 is due to additional depreciation and amortization expenses associated with the assets (including intangible assets) acquired in the Merger and PEPR Acquisition during the second quarter of 2011 and the 2012 Co-Investment Venture Acquisitions,Strategic Capital segments, as well as completed and leased development properties and additional leasing and capital improvements in our operating properties.

Merger, Acquisition and Other Integration Expenses

We incurred significant transaction, integration and transitional costs related to the Merger and PEPR Acquisition during 2011 and 2012. See Note 14 to the Consolidated Financial Statements in Item 8 for more detail on these expenses.

Impairment of Real Estate Properties

During 2012 and 2011, we recognized impairment charges of real estate properties in continuing operations of $252.9 million and $21.2 million, respectively, due to our change of intent to no longer hold these assets for long-term investment. In 2012, these impairment charges related to our planned contribution of properties to PELP ($135.3 million), land parcels that we expected to sell to third parties ($88.9 million) and operating buildings we expected to contribute or sell ($28.7 million). See Notes 2 and 15 to the Consolidated Financial Statements in Item 8 for more detail on the process we took to value these assets and the related impairment charges recognized.

Earnings from Unconsolidated Entities, Net

We recognized net earnings from unconsolidated entities of $97.2 million, $31.7 million and $59.9 million for the years ended December 31, 2013, 2012 and 2011, respectively. The earnings we recognize are impacted by: (i) variances in revenuesfrom our unconsolidated co-investment ventures based on our ownership share. We do not control the unconsolidated co-investment ventures for purposes of GAAP and expensesthe presentation of the entity; (ii) the size and occupancy rate of the portfolio of properties owned by the entity; (iii) our ownership interest in the entity; and (iv) fluctuations in foreign currency exchange rates usedventures’ operating information does not represent a legal claim to translate our share of net earnings to U.S. dollars, if applicable. We manage the majority of the properties in which we have an ownership interest as part of our total owned and managed portfolio. We have had significant changes in the co-investment ventures in which we have an ownership interest that has impacted the earnings we recognized. See discussion of our co-investment ventures above in the Investment Management segment discussion and in Note 5 to the Consolidated Financial Statements in Item 8 for further breakdown of our share of net earnings recognized.

Interest Expense

Interest expense from continuing operations included the following components (in thousands) for the years ended December 31:such items.

 

          2013               2012               2011       

Gross interest expense

  $471,923    $578,518    $498,518  

Amortization of discount (premium), net

   (39,015)     (36,687)     228  

Amortization of deferred loan costs

   14,374     16,781     20,476  
  

 

 

   

 

 

   

 

 

 

Interest expense before capitalization

   447,282     558,612     519,222  

Capitalized amounts

   (67,955)     (53,397)     (52,651)  
  

 

 

   

 

 

   

 

 

 

Net interest expense

  $379,327    $505,215    $466,571  

Gross interest expense decreased in 2013 compared to 2012 due to lower debt levels. In 2013, we decreased our debt by $2.8 billion to $9.0 billion at December 31, 2013.

Gross interest expense increased in 2012 compared to 2011 due to higher debt levels as a result of the Merger, the PEPR Acquisition and the 2012 Co-Investment Venture Acquisitions, offset slightly by lower effective borrowing costs.

Our weighted average effective interest rate was 4.7%, 4.6% and 5.6% for the years ended December 31, 2013, 2012 and 2011, respectively. During 2012 and 2013, we issued new debt with lower borrowing costs and used the proceeds to pay down or buy back our higher cost debt resulting in a weighted average effective interest rate of 4.2% as of December 31, 2013.

Our future interest expense, both gross interest and the portion capitalized, will vary depending on, among other things, our effective borrowing rate and the level of our development activities.

See Note 9 to the Consolidated Financial Statements in Item 8 and Liquidity and Capital Resources for further discussion of our debt and borrowing costs.

Gains on Acquisitions and Dispositions of Investments in Real Estate, Net

In 2013, we recognized net gains on acquisitions and dispositions of investments in real estate in continuing operations of $597.7 million, primarily related to contributions of operating properties to our unconsolidated entities. We received proceeds of $6.7 billion from the contribution of 254 properties aggregating 71.5 million square feet.

In 2012, we recognized net gains on acquisitions and dispositions of investments in real estate in continuing operations of $305.6 million, which included $294.2 million of gains related to three 2012 co-investment ventures we acquired. The contributions of operating properties to our unconsolidated entities in 2012 resulted in cash proceeds of $381.9 million and net gains of $11.4 million.

During 2011, we recognized net gains on acquisitions and dispositions of investments in real estate in continuing operations of $111.7 million. This included gains recognized in the second quarter related to the PEPR Acquisition ($85.9 million) and the acquisition of our partner’s interest in one of our other unconsolidated ventures in Japan ($13.5 million). The contributions of operating properties to our unconsolidated entities in 2011 resulted in cash proceeds of $590.8 million and net gains of $12.3 million.

If we realize a gain on contribution of a property to an unconsolidated entity, we recognize the portion attributable to the third party ownership in the entity. If we realize a loss on contribution, we recognize the full amount as soon as it is known. Due to our continuing involvement through our ownership in the unconsolidated entity, these dispositions are not included in discontinued operations.

Foreign Currency and Derivative Gains (Losses), Net

We and certain of our foreign consolidated subsidiaries may have intercompany or third party debt that is not denominated in the entity’s functional currency. When the debt is remeasured against the functional currency of the entity, a gain or loss may result. To mitigate our foreign currency exchange exposure, we borrow in the functional currency of the borrowing entity when appropriate. Certain of our third party and intercompany debt is remeasured with the resulting adjustment recognized as a cumulative translation adjustment inForeign Currency Translation Loss, Net in the Consolidated Statements of Comprehensive Income (Loss). This treatment is applicable to third party debt that is designated as a hedge of our net investment and intercompany debt that is deemed to be long-term in nature.

If the intercompany debt is deemed short-term in nature, when the debt is remeasured, we recognize a gain or loss in earnings. We recognized net foreign currency exchange gains of $9.2 million and $7.4 million in 2013 and 2012, respectively, and losses of $5.9 million in 2011, related to the settlement and remeasurement of debt. Predominantly the gains or losses recognized in earnings relate to the remeasurement of intercompany loans between the United States parent and certain consolidated subsidiaries in Japan and Europe and result from fluctuations in the exchange rates of U.S. dollar to the euro, Japanese yen and British pound sterling. In addition, we recognized net foreign currency exchange losses of $0.6 million and $5.6 million, and gains of $2.1 million from the settlement of transactions with third parties in 2013, 2012 and 2011, respectively.

We recognized unrealized losses of $42.2 million (which included an adjustment to the amortization of a discount associated with a derivative instrument in the fourth quarter of 2013) and $22.3 million in 2013 and 2012, respectively, and an unrealized gain of $45.0 million in 2011 on the derivative instrument (exchange feature) related to our exchangeable senior notes, which became exchangeable at the time of the Merger.

Gains (Losses) on Early Extinguishment of Debt, Net

During the years ended December 31, 2013, 2012 and 2011, we purchased portions of several series of senior notes, senior exchangeable notes and extinguished some secured mortgage debt prior to maturity, which resulted in the recognition of losses of $277.0 million and $14.1 million in 2013 and 2012, respectively, and gains of $0.3 million in 2011. The gains or losses represent the difference between the recorded debt (net of premiums and discounts and including related debt issuance costs) and the consideration we paid to retire the debt, including fees. Included in this amount in 2012 are losses that were included inOther Comprehensive Income (Loss) in the Consolidated Statements of Comprehensive Income (Loss) in Item 8 related to hedge transactions and were deemed unrecoverable in the fourth quarter of 2012. These hedges were associated with debt that was repaid before maturity with the proceeds from the contributions to PELP in early 2013. See Note 9 to the Consolidated Financial Statements in Item 8 for more information regarding our debt repurchases.

Impairment of Other Assets

We recorded impairment charges in 2011 of $126.4 million on certain of our investments in and advances to unconsolidated entities, notes receivable and other assets, as we believed the decline in fair value to be other than temporary or we did not believe these amounts to be recoverable based on the present value of the estimated future cash flows associated with these assets, including estimated sales proceeds.

See Notes 2 and 15 to the Consolidated Financial Statements in Item 8 for further information on our process with regard to analyzing the recoverability of other assets.

Income Tax Benefit (Expense)

During the years ended December 31, 2013, 2012 and 2011, our current income tax expense was $126.2 million, $17.9 million and $21.6 million. We recognize current income tax expense for income taxes incurred by our taxable REIT subsidiaries and in certain foreign jurisdictions, as well as certain state taxes. We also include in current income tax expense the interest associated with our liability for uncertain tax positions. Our current income tax expense fluctuates from period to period based primarily on the timing of our taxable income and changes in tax and interest rates. The majority of the current income tax expense in 2013 relates to asset sales and contributions of certain properties that were held in foreign entities or taxable REIT subsidiaries.

In 2013, 2012 and 2011, we recognized a net deferred tax benefit of $19.4 million, $14.3 million and $19.8 million, respectively. Deferred income tax expense is generally a function of the period’s temporary differences and the utilization of net operating losses generated in prior years that had been previously recognized as deferred income tax assets in taxable subsidiaries operating in the United States or in foreign jurisdictions.

Our income taxes are discussed in more detail in Note 16 to the Consolidated Financial Statements in Item 8.

Discontinued Operations

Earnings from discontinued operations were $123.5 million, $75.9 million and $117.0 million for 2013, 2012 and 2011, respectively. Discontinued operations represent the results of operations of properties that have been sold to third parties or that are held for sale for all periods presented, along with the related gain or loss on sale. The results of operations that have been classified as discontinued operations are reported separately in the Consolidated Financial Statements in Item 8.

See Notes 4 and 8 to the Consolidated Financial Statements in Item 8 for further details on what is reported as discontinued operations.

Other Comprehensive Income (Loss) – Foreign Currency Translation Losses, Net

For our consolidated subsidiaries whose functional currency is not the U.S. dollar, we translate their financial statements into U.S. dollars at the time we consolidate those subsidiaries’ financial statements. Generally, assets and liabilities are translated at the exchange rate in effect as of the balance sheet date. The resulting translation adjustments, due to the fluctuations in exchange rates from the beginning of the period to the end of the period, are included inForeign Currency Translation Losses, Net in the Consolidated Statements of Comprehensive Income (Loss) in Item 8.

During 2013, we recorded unrealized losses of $234.7 million related to foreign currency translations of our foreign subsidiaries into U.S. dollars upon consolidation. This included approximately $190 million of foreign currency translation losses on the properties contributed to PELP and NPR due to the weakening of the euro and Japanese yen, respectively, to the U.S. dollar from December 31, 2012, through the date of the contributions. In addition we recorded net unrealized losses in 2013 due to the weakening of the Japanese yen to the U.S. dollar. During 2012, we recorded unrealized net losses of $79.0 million as the Japanese yen weakened relative to the U.S. dollar by 10.1% from December 31, 2011 to December 31, 2012, offset slightly by the euro and British pound sterling slightly strengthening against the U.S. dollar during the same period. During 2011, we recorded unrealized net losses of $192.6 million as the euro and British pound sterling remained relatively flat from December 31, 2010 to December 31, 2011, but both weakened relative to the U.S. dollar from the Merger and PEPR Acquisition date to December 31, 2011. These losses were offset slightly by the strengthening of the Japanese yen relative to the U.S. dollar during 2011.

Portfolio Information

Our total owned and managed portfolio includes operating industrial properties and does not include properties under development or properties held for sale to third parties and was as follows as ofat December 31 (square feet in thousands)millions):

 

  2013   2012   2011 

2016

 

 

2015

 

 

2014

 

  Number of
Properties
   

Square

Feet

   Number of
Properties
   

Square

Feet

   Number of
Properties
   

Square

Feet

 

Number of Properties

 

 

Square

Feet

 

 

Percentage Occupied

 

 

Number of Properties

 

 

Square

Feet

 

 

Percentage Occupied

 

 

Number of Properties

 

 

Square

Feet

 

 

Percentage Occupied

 

Consolidated

   1,610     267,097     1,853     316,347     1,797     291,051  

 

1,777

 

 

 

332

 

 

 

97.0

%

 

 

1,872

 

 

 

334

 

 

 

97.1

%

 

 

1,605

 

 

 

282

 

 

 

96.4

%

Unconsolidated

   1,323     264,293     1,163     208,753     1,403     267,752  

 

1,359

 

 

 

290

 

 

 

97.2

%

 

 

1,331

 

 

 

273

 

 

 

96.7

%

 

 

1,248

 

 

 

255

 

 

 

95.9

%

  

 

 

 

Totals

   2,933     531,390     3,016     525,100     3,200     558,803  

 

3,136

 

 

 

622

 

 

 

97.1

%

 

 

3,203

 

 

 

607

 

 

 

96.9

%

 

 

2,853

 

 

 

537

 

 

 

96.1

%

Operating Activity

Below is information summarizing the leasing activity of our owned and managed operating portfolio for the years ended December 31:

  

(1)

We retained at least 80% of our customers, based on the total square feet of leases signed, for each year during the three-year period ended December 31, 2016.

(2)

Turnover costs represent the obligations incurred in connection with the signing of a lease, including leasing commissions and tenant improvements.

27


Capital Expenditures

We capitalize costs incurred in developing, renovating, rehabilitating and improving our properties as part of the investment basis. The following table summarizes our capital expenditures on previously leased buildings within our owned and managed portfolio for the years ended December 31 (in millions):  

 

 

2016

 

 

2015

 

 

2014

 

Property improvements

 

$

165

 

 

$

143

 

 

$

140

 

Tenant improvements

 

 

120

 

 

 

127

 

 

 

117

 

Leasing commissions

 

 

117

 

 

 

108

 

 

 

89

 

Total turnover costs

 

 

237

 

 

 

235

 

 

 

206

 

Total capital expenditures

 

$

402

 

 

$

378

 

 

$

346

 

Our proportionate share of capital expenditures based on ownership (1)

 

$

261

 

 

$

257

 

 

$

245

 

(1)

We calculated our proportionate share of capital expenditures by applying our ownership percentage of each co-investment venture on an entity-by-entity basis to the capital expenditures each period.

Development Start Activity

The following table summarizes development starts for the years ended December 31 (dollars and square feet in millions):

 

 

2016 (1)

 

 

2015

 

 

2014

 

Number of new development projects during the period

 

 

102

 

 

 

96

 

 

 

76

 

Square feet

 

 

30

 

 

 

28

 

 

 

26

 

TEI

 

$

2,181

 

 

$

2,247

 

 

$

2,034

 

Our proportionate share of TEI (2)

 

$

1,809

 

 

$

1,815

 

 

$

1,792

 

Percentage of build-to-suits based on TEI

 

 

35.6

%

 

 

43.6

%

 

 

32.6

%

(1)

We expect all of our properties under development at December 31, 2016, to be completed before July 2018.

(2)

We calculate our proportionate share of TEI by applying our ownership percentage of each co-investment venture on an entity-by-entity basis to the TEI of each period.

Development Stabilization Activity

The following table summarizes development stabilization activity for the years ended December 31 (dollars and square feet in millions):

 

 

2016

 

 

2015

 

 

2014

 

Number of development projects stabilized during the period

 

 

98

 

 

 

81

 

 

 

47

 

Square feet

 

 

32

 

 

 

26

 

 

 

17

 

TEI

 

$

2,510

 

 

$

1,848

 

 

$

1,105

 

Our proportionate share of TEI (1)

 

$

2,155

 

 

$

1,640

 

 

$

955

 

Weighted average expected yield on TEI (2)

 

 

6.9

%

 

 

7.4

%

 

 

7.7

%

Estimated value at completion

 

$

3,150

 

 

$

2,434

 

 

$

1,360

 

Our proportionate share of estimated value at completion (1)

 

$

2,726

 

 

$

2,173

 

 

$

1,191

 

Estimated weighted average margin

 

 

25.5

%

 

 

31.8

%

 

 

23.0

%

(1)

We calculate our proportionate share of TEI and estimated value by applying our ownership percentage of each co-investment venture on an entity-by-entity basis to the TEI of each period.

(2)

We calculate the weighted average expected yield on TEI as estimated NOI assuming stabilized occupancy divided by TEI.

For information on our development portfolio at December 31, 2016, see Item 2. Properties.

Same Store Analysis

We evaluate the operating performance of the operating properties we own and manage using a “same store” analysis because the population of properties in this analysis is consistent from period to period, thereby eliminating the effects of changes in the composition of the portfolio on performance measures. We include properties from our consolidatedowned and managed portfolio and properties owned by the co-investment ventures (accounted for on the equity method) that are managed by us (referred to as “unconsolidated entities”) in our same store analysis. We have defined the same store portfolio, for the three months ended December 31, 2013,2016, as those properties that were in operation at January 1, 2012,2015, and have been in operation throughout the same three-month periods in both 20132016 and 2012.2015 (including development properties that have been completed and available for lease). We have removed all properties that were disposed of to a third party or were classified as held for sale to a third party from the population for both periods. We believe the factors that impactaffect rental income,revenues, rental expenses and net operating incomeNOI in the same store portfolio are generally the same as for the total operating portfolio. In order toTo derive an appropriate

28


measure of period-to-period operating performance, we remove the effects of foreign currency exchange rate movements by using the currentrecent period end exchange rate to translate from local currency into the U.S. dollars,dollar, for both periods. The

Same store is a commonly used measure in the real estate industry. Our same store portfolio, formeasures are non-GAAP financial measures that are calculated beginning with rental revenues, rental recoveries and rental expenses from the three months ended December 31, 2013, included 489.8 millionfinancial statements prepared in accordance with GAAP. As our same store measures are non-GAAP financial measures, they have certain limitations as analytical tools and may vary among real estate companies. As a result, we provide a reconciliation from our financial statements prepared in accordance with GAAP to same store property NOI with explanations of aggregated square feet.how these metrics are calculated.

The following is a reconciliation of our consolidated rental income,revenues, rental recoveries, rental expenses and net operating income (calculated as rental income and recoveries less rental expenses)property NOI for the full year, as included in the Consolidated Statements of Operations in Item 8,Income and within Note 20 to the Consolidated Financial Statements, to the respective amounts in our same store portfolio analysis for the three months ended December 31 (dollars in thousands).millions):

 

  Three Months Ended     
  March 31,   June 30,   September 30,   December 31,   Full Year 
 

 

 

 

2013

         

Rental income and rental recoveries

 $444,144    $  363,956    $372,185    $379,208    $  1,559,493  

Rental expenses

  130,354     109,837     106,811     104,936     451,938  
 

 

 

 

Net operating income

 $313,790    $  254,119    $265,374    $274,272    $1,107,555  
 

 

 

 

2012

         

Rental income and rental recoveries

 $433,984    $459,290    $460,213    $470,294    $1,823,781  

Rental expenses

  115,674     123,248     124,401     127,916     491,239  
 

 

 

 

Net operating income

 $318,310    $336,042    $335,812    $342,378    $1,332,542  

   For the Three Months Ended December 31, 
        2013           2012           Percentage    
Change
 

Rental Income (1)(2)

      

Consolidated:

      

Rental income per the Consolidated Statements of Operations

  $301,627    $378,184    

Rental recoveries per the Consolidated Statements of Operations

   77,581     92,110    

Adjustments to derive same store results:

      

Rental income and recoveries of properties not in the same store portfolio — properties developed and acquired during the period and land subject to ground leases

   (29,856)     (22,691)    

Effect of changes in foreign currency exchange rates and other

   (1,275)     (4,215)    

Unconsolidated entities:

      

Rental income

   409,482     308,012    
  

 

 

   

Same store portfolio – rental income (2)(3)

  $757,559    $751,400     0.8%  

Rental Expenses (1)(4)

      

Consolidated:

      

Rental expenses per the Consolidated Statements of Operations

  $104,936    $127,916    

Adjustments to derive same store results:

      

Rental expenses of properties not in the same store portfolio — properties developed and acquired during the period and land subject to ground leases

   (8,866)     (6,521)    

Effect of changes in foreign currency exchange rates and other

   4,777     516    

Unconsolidated entities:

      

Rental expenses

   95,997     83,644    
  

 

 

   

Adjusted same store portfolio – rental expenses (3)(4)

  $196,844    $205,555     (4.2)%  

Net Operating Income (1)

      

Consolidated:

      

Net operating income per the Consolidated Statements of Operations

  $274,272    $342,378    

Adjustments to derive same store results:

      

Net operating income of properties not in the same store portfolio — properties developed and acquired during the period and land subject to ground leases

   (20,990)     (16,170)    

Effect of changes in foreign currency exchange rates and other

   (6,052)     (4,731)    

Unconsolidated entities:

      

Net operating income

   313,485     224,368    
  

 

 

   

Adjusted same store portfolio – net operating income (3)

  $560,715    $545,845     2.7%  

 

 

Three Months Ended

 

 

 

 

 

 

 

March 31,

 

 

June 30,

 

 

September 30,

 

 

December 31,

 

 

Full Year

 

2016

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental revenues

 

$

437

 

 

$

426

 

 

$

436

 

 

$

436

 

 

$

1,735

 

Rental recoveries

 

 

117

 

 

 

120

 

 

 

125

 

 

 

124

 

 

 

486

 

Rental expenses

 

 

(147

)

 

 

(141

)

 

 

(140

)

 

 

(141

)

 

 

(569

)

Property NOI

 

$

407

 

 

$

405

 

 

$

421

 

 

$

419

 

 

$

1,652

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental revenues

 

$

325

 

 

$

358

 

 

$

418

 

 

$

435

 

 

$

1,536

 

Rental recoveries

 

 

94

 

 

 

104

 

 

 

115

 

 

 

124

 

 

 

437

 

Rental expenses

 

 

(127

)

 

 

(126

)

 

 

(140

)

 

 

(151

)

 

 

(544

)

Property NOI

 

$

292

 

 

$

336

 

 

$

393

 

 

$

408

 

 

$

1,429

 

 

 

 

Three Months Ended December 31,

 

 

 

2016

 

 

2015

 

 

Percentage Change

 

Rental Revenues (1) (2)

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated:

 

 

 

 

 

 

 

 

 

 

 

 

Rental revenues (per the quarterly information table above)

 

$

436

 

 

$

435

 

 

 

 

 

Rental recoveries (per the quarterly information table above)

 

 

124

 

 

 

124

 

 

 

 

 

Consolidated adjustments to derive same store results:

 

 

 

 

 

 

 

 

 

 

 

 

Rental revenues and recoveries of properties not in the same store portfolio –

     properties developed, acquired and sold to third parties during the period

          and land subject to ground leases

 

 

(168

)

 

 

(177

)

 

 

 

 

Effect of changes in foreign currency exchange rates and other

 

 

(1

)

 

 

-

 

 

 

 

 

Unconsolidated co-investment ventures – rental revenues

 

 

436

 

 

 

423

 

 

 

 

 

Same store portfolio – rental revenues (2)

 

$

827

 

 

$

805

 

 

 

2.7

%

Rental Expenses (1) (3)

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated:

 

 

 

 

 

 

 

 

 

 

 

 

Rental expenses (per the quarterly information table above)

 

$

141

 

 

$

151

 

 

 

 

 

Consolidated adjustments to derive same store results:

 

 

 

 

 

 

 

 

 

 

 

 

Rental expenses of properties not in the same store portfolio – properties

     developed, acquired and sold to third parties during the period and

          land subject to ground leases

 

 

(46

)

 

 

(52

)

 

 

 

 

Effect of changes in foreign currency exchange rates and other

 

 

14

 

 

 

7

 

 

 

 

 

Unconsolidated co-investment ventures – rental expenses

 

 

99

 

 

 

97

 

 

 

 

 

Same store portfolio – rental expenses (3)

 

$

208

 

 

$

203

 

 

 

2.5

%

NOI (1)

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated:

 

 

 

 

 

 

 

 

 

 

 

 

Property NOI (per the quarterly information table above)

 

$

419

 

 

$

408

 

 

 

 

 

Consolidated adjustments to derive same store results:

 

 

 

 

 

 

 

 

 

 

 

 

Property NOI of properties not in the same store portfolio – properties

     developed, acquired and sold to third parties during the period and

         land subject to ground leases

 

 

(122

)

 

 

(125

)

 

 

 

 

Effect of changes in foreign currency exchange rates and other

 

 

(15

)

 

 

(7

)

 

 

 

 

Unconsolidated co-investment ventures – property NOI

 

 

337

 

 

 

326

 

 

 

 

 

Same store portfolio – NOI

 

$

619

 

 

$

602

 

 

 

2.8

%

(1)

As discussed above,

We include 100% of the Same Store NOI from the properties in our same store portfolio includes industrial properties from our consolidated portfolio and owned by the unconsolidated entities (accounted for on the equity method) that are managed by us.portfolio. During the periods presented, certain properties owned by us were contributed to a co-investment venture and are included in the same store portfolio on an aggregate basis.portfolio. Neither our consolidated results nor those of the unconsolidated entities,co-investment ventures, when viewed individually, would be comparable on a same store

29


basis due tobecause of the changes in composition of the respective portfolios from period to period (for example,(e.g. the results of a contributed property are included in our consolidated results through the contribution date and in the results of the unconsolidated entities subsequent to the contribution date).

 

(2)

We exclude the net termination and renegotiation fees from our same store rental incomerevenues to allow us to evaluate the growth or decline in each property’s rental incomerevenues without regard to items that are not indicative of the property’s recurring operating performance. Net termination and renegotiation fees represent the gross fee negotiated to allow a customer to terminate or renegotiate their lease, offset by the write-off of the asset recorded due to the adjustment to straight-line rents over the lease term. The adjustments to remove these items are included in “effect of changes in foreign currency exchange rates and other” in the tables above.this table.

 

(3)

These amounts include activity of both our consolidated industrial properties and those owned by our unconsolidated entities (accounted for on the equity method) and managed by us.

(4)

Rental expenses in the same store portfolio include the direct operating expenses of the property such as property taxes, insurance utilities, etc.and utilities. In addition, we include an allocation of the property management expenses for our direct-owned properties based on the property management fee that isservices provided for in the individual management agreements under which our wholly owned management companies provide property management services to each property (generally, the fee is based on a percentage of revenues). On

consolidation, the management fee income earned by the management companies and the management fee expense recognized by the propertiesthese amounts are eliminated and the actual costs of providing property management services are recognized as part of our consolidated rental expenses. These expenses fluctuate based on the level of properties included in the same store portfolio and any adjustment is included as “effect of changes in foreign currency exchange rates and other” in the abovethis table.

Other Components of Income (Expense)

Earnings from Unconsolidated Entities, Net

We recognized net earnings from unconsolidated entities that are accounted for using the equity method of $206 million, $159 million and $134 million for the years ended December 31, 2016, 2015 and 2014, respectively. The earnings we recognize can be impacted by: (i) variances in revenues and expenses of each venture; (ii) the size and occupancy rate of the portfolio of properties owned by each venture; (iii) gains or losses from the dispositions of properties; (iv) our ownership interest in each venture; and (v) fluctuations in foreign currency exchange rates used to translate our share of net earnings to U.S. dollars.

See the discussion of our co-investment ventures above in the Strategic Capital segment discussion and in Note 5 to the Consolidated Financial Statements for a further breakdown of our share of net earnings recognized.

Interest Expense

The following table details our net interest expense for the year ended December 31 (dollars in millions):

 

 

2016

 

 

2015

 

 

2014

 

Gross interest expense

 

$

383

 

 

$

394

 

 

$

378

 

Amortization of premium, net and debt issuance costs

 

 

(15

)

 

 

(32

)

 

 

(8

)

Capitalized amounts

 

 

(65

)

 

 

(61

)

 

 

(61

)

Net interest expense

 

$

303

 

 

$

301

 

 

$

309

 

Weighted average effective interest rate

 

 

3.3

%

 

 

3.3

%

 

 

4.2

%

Gross interest expense decreased in 2016, compared with 2015, principally from lower outstanding debt balances and borrowing costs during the periods. Our debt decreased by $1.0 billion from December 31, 2015, to December 31, 2016, primarily from the repayment of the senior term loan related to the KTR transaction with proceeds from contributions and dispositions. Gross interest expense increased in 2015, compared with 2014, due to higher debt driven by the KTR transaction, offset somewhat by a decrease in interest rates and fluctuations in foreign currency exchange rates. See Note 9 to the Consolidated Financial Statements for a further breakdown of gross interest expense, amortization and capitalized amounts included in net interest expense. See also the Liquidity and Capital Resources section for further discussion of our debt and borrowing costs.

Gains on Dispositions of Investments in Real Estate and Revaluation of Equity Investments upon Acquisition of a Controlling Interest, Net

Over the last three years, we have contributed properties, generally that we had developed, to our co-investment ventures in Europe, Japan and Mexico, as included in the table below. We recognize a gain to the extent of the third party ownership in the venture acquiring the property. In 2014, our contribution activity included the properties that we contributed to FIBRA Prologis upon its formation.

In addition, we have sold properties to third parties, generally from our operating portfolio in the U.S. These dispositions have supported our strategic objective of owning a portfolio of high-quality properties in the most active centers of commerce.

We utilize the proceeds from both contributions and dispositions to fund our capital investments.

30


The following table details our gains on dispositions of investments in real estate and revaluation of equity investments upon acquisition of a controlling interest, net for the year ended December 31 (in millions):

 

 

2016

 

 

2015

 

 

2014

 

Contributions to unconsolidated co-investment ventures

 

 

 

 

 

 

 

 

 

 

 

 

Number of properties

 

 

35

 

 

 

31

 

 

 

126

 

Net gains on contributions

 

$

267

 

 

$

149

 

 

$

188

 

Dispositions to third parties

 

 

 

 

 

 

 

 

 

 

 

 

Number of properties

 

 

172

 

 

 

136

 

 

 

145

 

Net gains on dispositions

 

$

354

 

 

$

610

 

 

$

337

 

Total net gains on contributions and dispositions

 

$

621

 

 

$

759

 

 

$

525

 

Gains on redemptions of investments in co-investment ventures

 

 

136

 

 

 

-

 

 

 

-

 

Gains on revaluation of equity investments upon acquisition of a controlling interest, net (1)

 

 

-

 

 

 

-

 

 

 

201

 

Total gains on dispositions of investments in real estate and revaluation of equity

     investments upon acquisition of a controlling interest, net

 

$

757

 

 

$

759

 

 

$

726

 

(1)

In 2014, we acquired the equity units from all but one partner in our co-investment venture NAIF, resulting in the acquisition of a controlling interest. This resulted in us gaining control over NAIF and recording a gain on the revaluation of our equity investment. See Note 3 to the Consolidated Financial Statements for further information on this transaction.

See Notes 4 and 5 to the Consolidated Financial Statements for further information on the gains we recognized.

Foreign Currency and Derivative Gains (Losses), Net

The following table details our foreign currency and derivative gains (losses), net included in earnings for the year ended December 31 (in millions):

 

 

2016

 

 

2015

 

 

2014

 

Realized foreign currency and derivative gains (losses):

 

 

 

 

 

 

 

 

 

 

 

 

Gains on the settlement of unhedged derivative transactions

 

$

3

 

 

$

15

 

 

$

1

 

Losses on the settlement of transactions with third parties

 

 

(3

)

 

 

(4

)

 

 

2

 

Total realized foreign currency and derivative gains

 

 

-

 

 

 

11

 

 

 

3

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized foreign currency and derivative gains (losses), net:

 

 

 

 

 

 

 

 

 

 

 

 

Gains on the change in fair value of unhedged derivative transactions

 

 

10

 

 

 

16

 

 

 

15

 

Losses on remeasurement of certain assets and liabilities (1)

 

 

(2

)

 

 

(20

)

 

 

(8

)

Gains (losses) on embedded derivative, including amortization (settled March 2015)

 

 

-

 

 

 

5

 

 

 

(28

)

Total unrealized foreign currency and derivative gains (losses), net

 

 

8

 

 

 

1

 

 

 

(21

)

Total foreign currency and derivative gains (losses), net

 

$

8

 

 

$

12

 

 

$

(18

)

(1)

These gains or losses were primarily related to the remeasurement of assets and liabilities that are denominated in currencies other than the functional currency of the entity, such as short-term intercompany loans between the U.S. parent and certain consolidated subsidiaries, debt and tax receivables and payables.

See Note 2 to the Consolidated Financial Statements for more information about our foreign currency and derivative policies and Note 16 to the Consolidated Financial Statements for more information about our derivative transactions.

Gains (Losses) on Early Extinguishment of Debt, Net

We repurchased portions of several series of senior notes, senior exchangeable notes and secured mortgage debt that resulted in the recognition of a gain of $2 million in 2016 and losses of $86 million and $165 million in 2015 and 2014, respectively. As a result of these transactions, we reduced our effective interest rate and lengthened the maturities of our debt. See Note 9 to the Consolidated Financial Statements for more information regarding our debt repurchases.

Income Tax Expense (Benefit)

We recognize current income tax expense for income taxes incurred by our taxable REIT subsidiaries, state and local income taxes and taxes incurred in the foreign jurisdictions in which we operate. Our current income tax expense fluctuates from period to period based primarily on the timing of our taxable income. Deferred income tax expense (benefit) is generally a function of the period’s temporary differences and the utilization of net operating losses generated in prior years that had been previously recognized as deferred income tax assets in taxable subsidiaries operating in the U.S. or in foreign jurisdictions.

31


Environmental MattersThe following table summarizes our income tax expense (benefit) for the year ended December 31 (in millions):

 

 

2016

 

 

2015

 

 

2014

 

Current income tax expense:

 

 

 

 

 

 

 

 

 

 

 

 

Income tax expense

 

$

36

 

 

$

24

 

 

$

16

 

Income tax expense on dispositions

 

 

24

 

 

 

-

 

 

 

15

 

Income tax expense on dispositions related to acquired tax liabilities

 

 

-

 

 

 

4

 

 

 

30

 

Total current income tax expense

��

 

60

 

 

 

28

 

 

 

61

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred income tax expense (benefit):

 

 

 

 

 

 

 

 

 

 

 

 

Income tax benefit

 

 

(5

)

 

 

(1

)

 

 

(57

)

Income tax benefit on dispositions related to acquired tax liabilities

 

 

-

 

 

 

(4

)

 

 

(30

)

Total deferred income tax benefit

 

 

(5

)

 

 

(5

)

 

 

(87

)

Total income tax expense (benefit)

 

$

55

 

 

$

23

 

 

$

(26

)

Our income taxes are discussed in more detail in Note 14 to the Consolidated Financial Statements.

Net Earnings Attributable to Noncontrolling Interests

This amount represents the third-party investors’ share of the earnings generated in consolidated entities in which we do not own 100% of the equity, reduced by the third party share of fees or promotes payable to us and earned during the period.

The following table summarizes net earnings attributable to noncontrolling interests for the year ended December 31 (in millions):

 

 

2016

 

 

2015

 

 

2014

 

Prologis North American Industrial Fund

 

$

23

 

 

$

4

 

 

$

3

 

Prologis U.S. Logistics Venture (1)

 

 

18

 

 

 

38

 

 

 

7

 

Other consolidated entities (2)

 

 

8

 

 

 

3

 

 

 

91

 

Prologis, L.P. net earnings attributable to noncontrolling interests

 

 

49

 

 

 

45

 

 

 

101

 

Limited partners in Prologis, L.P.

 

 

34

 

 

 

11

 

 

 

2

 

Prologis, Inc. net earnings attributable to noncontrolling interests

 

$

83

 

 

$

56

 

 

$

103

 

(1)

USLV completed the KTR transaction in May 2015; approximately seven months of operating activity were included in 2015, offset by third-party share of acquisition costs and an acquisition fee payable to us.

(2)

In 2014, we recognized net earnings attributable to noncontrolling interests in Prologis Mexico Fondo Logistico of $65 million because of the FIBRA Prologis transaction, primarily related to the third-party investors’ share of the gain on disposition and the net deferred income tax benefit.

See Note 12 to the Consolidated Financial Statements for further information on our consolidated co-investment ventures.

Other Comprehensive Loss

During 2016, 2015 and 2014, we recorded net losses in our Statement of Comprehensive Income related to foreign currency translations of our foreign subsidiaries into U.S. dollars upon consolidation. These losses were principally due to the weakening of the Brazilian real, British pound sterling, euro and Japanese yen to the U.S. dollar.

During 2016, 2015 and 2014, we also recorded unrealized losses in our Statement of Comprehensive Income, related to the change in fair value of our cash flow hedges and our share of derivatives in our unconsolidated co-investment ventures.

See Note 2 to the Consolidated Financial Statements for more information about our foreign currency and derivative policies and Note 16 to the Consolidated Financial Statements for more information about our derivative transactions and other comprehensive losses.

Other Matters

On June 23, 2016, the U.K. passed a referendum to leave the European Union. Our key business driver remains intact, and we have not seen, nor do we anticipate, a material operational or financial impact. Our customers in the U.K. principally serve domestic consumers and we do not expect the decision to leave the European Union will materially change the consumption habits that drive our business. At December 31, 2016, our owned and managed U.K. operating portfolio was 99.5% leased and had a weighted average lease term of nine years with only 4.6% of the leases expiring in 2017. The U.K. portfolio contributes approximately 4% of our share of annual NOI through consolidated entities and co-investment ventures.

ENVIRONMENTAL MATTERS

A majority of the properties we acquired by us were subjected to environmental reviews either by us or the previous owners. While some of these assessments have led to further investigation and sampling, none of the environmental assessments have revealed an

32


environmental liability that we believe would have a material adverse effect on our business, financial condition or results of operations.

We record a liability See Note 17 in the Consolidated Financial Statements for the estimated costs of environmental remediation to be incurred in connection with certain operating properties we acquire, as well as certain land parcels we acquire in connection with the planned development of the land. The liability is established to cover the environmental remediation costs, including cleanup costs, consulting fees for studies and investigations, monitoring costs and legal costs relating to cleanup, litigation defense, and the pursuit of responsible third parties. We purchase various environmental insurance policies to mitigate our exposure tofurther information about environmental liabilities. We are not aware of any environmental liability that we believe would have a material adverse effect on our business, financial condition or results of operations.

Liquidity and Capital ResourcesLIQUIDITY AND CAPITAL RESOURCES

Overview

We consider our ability to generate cash from operating activities, distributions from our co-investment ventures, dispositions of properties and from available financing sources to be adequate to meet our anticipated future development, acquisition, operating, debt service, dividend and distribution requirements.

Near-Term Principal Cash Sources and Uses

In addition to dividends to the common and preferred stockholders of Prologis and distributions to the holders of limited partnership units of the Operating Partnership and our partners in the consolidated co-investment ventures, we expect our primary cash needs will consist of the following:

 

repaymentcompletion of debt including payments onthe development and leasing of the properties in our credit facilitiesconsolidated development portfolio (at December 31, 2016, 89 properties in our development portfolio were 59.8% leased with a current investment of $1.4 billion and scheduled principal payments in 2014a TEI of $330 million, which does not include a $536 million senior term loan that was extended in January 2014 until 2015;$2.4 billion when completed and leased, leaving $1.0 billion remaining to be spent);

 

completion of the development and leasing of the properties in our consolidated development portfolio (a);

development of new properties for long-term investment, including the acquisition of land in certain markets;

 

capital expenditures and leasing costs on properties in our operating portfolio;

 

repayment of debt and scheduled principal payments of $622 million in 2017;

additional investments in current unconsolidated entities or new investments in future unconsolidated entities;co-investment ventures;

 

depending on market and other conditions, acquisition of operating properties and/or portfolios of operating properties in global or regional markets(depending on market and other conditions) for direct, long-term investment in our consolidated portfolio (this might include acquisitions from our co-investment ventures); and

 

dependingrepurchase of our outstanding debt or equity securities (depending on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors, we may repurchase our outstanding debt or equity securitiesfactors) through cash purchases, in open marketopen-market purchases, privately negotiated transactions, tender offers or otherwise.

 

(a)As of December 31, 2013, we had 57 properties in our development portfolio that were 54.3% leased with a current investment of $1.1 billion and a total expected investment of $1.9 billion when completed and leased, leaving $0.8 billion remaining to be spent.

We expect to fund our cash needs principally from the following sources all subject(subject to market conditions:conditions):

 

available unrestricted cash balances ($491.1807 million at December 31, 2013)2016);

 

property operations;

 

fees and incentives earned for services performed on behalf of the co-investment ventures, and including promotes;

distributions received from the co-investment ventures;

 

proceeds from the disposition of properties, land parcels or other investments to third parties;

 

proceeds from the contributions of properties to current or future co-investment ventures, including the contribution of 66 operating properties we made to USLV in January 2014;ventures;

 

proceeds from the sale of a portion of our investments in co-investment ventures;

borrowing capacity under our current credit facility arrangements discussed below ($1.7 billion available as of December 31, 2013),in the following section, other facilities or borrowing arrangements;arrangements ($3.2 billion available at December 31, 2016); and

 

proceeds from the issuance of debt.

We may also generate proceeds from the issuance of equity securities, including throughsubject to market conditions.

33


Debt

The following table summarizes information about our debt at December 31 (dollars in millions):

 

 

2016

 

 

2015

 

Debt outstanding

 

$

10,608

 

 

$

11,627

 

Weighted average interest rate

 

 

3.2

%

 

 

3.2

%

Weighted average maturity in months

 

60

 

 

67

 

In the first quarter of 2016, we repaid the $400 million remaining balance on the senior term loan that was used to fund the KTR transaction with proceeds generated from the contributions of development properties to our co-investment ventures and proceeds generated from the disposition of certain nonstrategic properties to third parties.

In March 2016, we entered into an at-the-market offering program (we haveunsecured term loan agreement under which we could draw in Japanese yen in an equity distribution agreementaggregate amount not to exceed ¥11.2 billion that allows uswas scheduled to sellmature in March 2017. In the first quarter of 2016, we borrowed ¥11.2 billion ($100 million) on this term loan.

In April 2016, we amended the Global Facility and increased our aggregate borrowing capacity to $3.0 billion

In August 2016, we entered into the Yen Term Loan under which we can draw in Japanese yen in an aggregate amount not to exceed ¥120.0 billion ($1.0 billion at December 31, 2016) bearing interest at yen LIBOR plus 0.65%, of which ¥50.0 billion ($427 million at December 31, 2016) matures in August 2022 and ¥70.0 billion ($598 million at December 31, 2016) matures in August 2023. We may increase the borrowings up to $750 million aggregate gross sales proceeds of shares of common stock through two designated agents, who earn a fee of up to 2% of the gross proceeds, as agreed to on a transaction-by-transaction basis). We have not issued any shares of common stock under this program; and

proceeds from the issuance of debt securities, including secured mortgage debt.

Debt

As of¥200.0 billion ($1.7 billion at December 31, 2013,2016), subject to obtaining additional lender commitments. In the third quarter of 2016, we had $9.0 billion of debt with a weighted average interest rate of 4.2% and a weighted average maturity of 58 months. During 2013, we decreased our debt $2.8 billion, reduced our borrowing costs and lengthenedborrowed on the maturities (was $11.8 billion, 4.4% and 43 months, respectively, as of December 31, 2012) principally with the proceeds from the contribution and the sale of properties and the Equity Offering. We also issued $2.7 billion of senior notes during 2013Yen Term Loan and used the proceeds to repay $1.7 billion of senior notesthe previously outstanding Japanese yen term loans entered into in 2014, 2015 and balances on our credit facilities.

As of2016. The Yen Term Loan was fully drawn at December 31, 2013,2016.

At December 31, 2016, we had credit facilities with an aggregate borrowing capacity of $2.5$3.3 billion, of which $1.7$3.2 billion was available remaining capacity.for borrowing.

As of

At December 31, 2013,2016, our credit ratings were A3 from Moody’s and A- from S&P, both with stable outlook. A securities rating is not a recommendation to buy, sell or hold securities and is subject to revision or withdrawal at any time by the rating organization.

At December 31, 2016, we were in compliance with all of our debt covenants. These covenants include customary financial covenants for total debt, ratios, encumbered debt ratios and fixed charge coverage ratios.

See Note 9 to the Consolidated Financial Statements in Item 8 for further informationdiscussion on our debt.

Equity Commitments Related to Certain Co-Investment Ventures

Certain co-investment ventures have equity commitments from us and our venture partners. Our venture partners fulfill their equity commitment with cash. We may fulfill our equity commitment through contributions of properties or cash. The venture may obtain financingSee the Cash Flow Summary below for the properties and therefore the equity commitment may be less than the acquisition price of the real estate. Depending on market conditions, themore information about our investment objectives of the ventures,activity in our liquidity needs and other factors, we may make contributions of properties to these ventures through the remaining commitment period and we may make additional cash investments in theseco-investment ventures.

The following table is a summary of remaining equity commitments as of December 31, 2013 (in millions):

    Equity commitments   

Expiration date

for remaining
commitments

   Prologis   Venture
Partners
   Total    

Prologis Targeted U.S. Logistics Fund

  $-   $294.8    $294.8    Various

Prologis Targeted Europe Logistics Fund

   136.0     183.4     319.4    June 2015

Prologis European Properties Fund II

   12.0     154.9     166.9    September 2015

Europe Logistics Venture 1

   25.7     145.8     171.5    December 2014

Prologis European Logistics Partners

   255.7     255.7     511.4    February 2016

Prologis China Logistics Venture 1

   61.7     349.6     411.3    March 2015

Prologis China Logistics Venture 2

   88.2     500.0     588.2    November 2017
  

 

 

   

Total Unconsolidated

  $579.3    $1,884.2    $2,463.5    

Brazil Fund (1)

  $56.9    $56.9    $113.8    December 2017
  

 

 

   

Total Consolidated

  $56.9    $56.9    $113.8    
  

 

 

   

Grand Total

  $636.2    $1,941.1    $2,577.3     

(1)Equity commitments are denominated in Brazilian real and called and reported in U.S. dollars. During 2013, to fund development the venture called capital of $99.6 million, of which $49.8 million was from third parties and $49.8 million was our share.

For more information on equity commitments for our unconsolidated co-investment ventures, see Note 5 to the Consolidated Financial Statements in Item 8.Statements.

Cash Provided by Operating ActivitiesFlow Summary

Net

The following table summarizes our cash provided by operating activities was $485.0 million, $463.5 million and $207.1 millionflow activity for the years ended December 31 2013, 2012(in millions):

 

 

2016

 

 

2015

 

 

2014

 

Net cash provided by operating activities

 

$

1,417

 

 

$

1,116

 

 

$

894

 

Net cash provided by (used in) investing activities

 

$

1,252

 

 

$

(4,789

)

 

$

(665

)

Net cash provided by (used in) financing activities

 

$

(2,125

)

 

$

3,596

 

 

$

(351

)

Cash Provided by Operating Activities

Cash provided by operating activities, exclusive of changes in receivables and 2011,payables, is impacted by the following significant activity:

Real estate operations. We receive the majority of our operating cash through net revenues of our Real Estate Operations segment. See our Results of Operations section above for further explanation of our Real Estate Operations segment. The revenues from this segment include noncash adjustments for straight-lined rent and amortization of above and below market leases of $94 million, $60 million and $14 million for 2016, 2015 and 2014, respectively. In 2013, 2012

Strategic capital.We also generate operating cash through our Strategic Capital segment by providing management services to our unconsolidated co-investment ventures, including promotes. See our Strategic Capital Results of Operations section above for the key drivers of our strategic capital revenues and 2011,expenses. Included in the cash provided by operating activities for 2016 is $30 million of cash received from promotes, which represented the third-party share and was less thanaccrued as strategic capital revenues for the cash dividends paid on common and preferred stock by $88.9year ended December 31, 2015.

34


G&A expenses. We incurred $222 million, $104.3$217 million and $207.0$229 million of G&A costs in 2016, 2015 and 2014, respectively.

Distributions from unconsolidated entities.In 2016, we adopted an accounting standard update that clarifies the classification methodology within the statement of cash flows for distributions received from equity method investments. We used a portionelected the nature of thedistributions approach, in which cash proceedsflows generated from the dispositionoperations of real estate properties ($5.4 billion in 2013, $2.0 billion in 2012an unconsolidated entity are classified as a return on investment (cash inflow from operating activities) and $1.6 billion in 2011) to fund dividends on common and preferred stock not covered by cash flows that are generated from operating activities.property sales, debt refinancing or redemption of ownership interests are classified as a return of investment (cash inflow from investing activities).

Following our adoption of this standard, we recognized $287 million, $285 million and $295 million of distributions from our unconsolidated entities in Net Cash InvestingProvided by Operating Activities in 2016, 2015 and Cash Financing Activities

2014, respectively. Included in 2016 are distributions of $27 million that represented our share of promotes earned in 2015. For the years ended December 31, 2013, 20122015 and 2011, investing activities provided net cash of $2.3 billion and $529.62014, we reclassified $141 million and used net cash$177 million of $233.1 million, respectively. The following aredistributions from our unconsolidated entities into Net Cash Provided by Operating Activities that were previously reported as Net Cash Provided by (Used in) Investing Activities. See Note 2 to the significant activitiesConsolidated Financial Statements for all periods presented:more detail on this adoption.  

 

Equity-based compensation awards.We generated cash from contributionsrecord equity-based compensation expenses in Rental Expenses in the Real Estate Operations segment, Strategic Capital Expenses in the Strategic Capital segment and dispositionsG&A expenses. The total amounts expensed were $60 million, $54 million and $57 million in 2016, 2015 and 2014, respectively.

Cash paid for interest and income taxes.We paid combined amounts for interest and income taxes of properties$352 million, $370 million and land parcels of $5.4 billion$364 million in 2013, $2.0 billion in 20122016, 2015 and 2014, respectively. See Note 9 and Note 14 to the Consolidated Financial Statements for further information on this activity.

Cash Provided by (Used in) Investing Activities

Real estate development. We invested $1.6 billion, in 2011. The increase in 2013 is primarily due to the initial contribution of real estate properties in the first quarter of 2013 to our new co-investment ventures, PELP and NPR, that generated cash proceeds of $1.3 billion and $1.9$1.1 billion

respectively. In 2013, we disposed of land and 89 operating properties to third parties and contributed 254 operating properties to unconsolidated co-investment ventures. In 2012, we disposed of land and 200 operating properties to third parties and contributed 25 operating properties to unconsolidated co-investment ventures. In 2011, we disposed of land and 94 operating properties to third parties that included the majority of our non-industrial assets and contributed 57 operating properties to unconsolidated co-investment ventures.

In 2013, 2012 during 2016, 2015 and 2011, we invested $845.2 million, $793.3 million and $811.0 million,2014, respectively, in real estate development and leasing costs for first generation leases. We have 4660 properties under development and 1129 properties that arewere completed but not stabilized as ofat December 31, 2013,2016, and we expect to continue to develop new properties as the opportunities arise.

 

Real estate acquisitions. In 2016, we acquired total real estate of $459 million, which included 776 acres of land and nine operating properties. In 2015, we acquired total real estate of $890 million, which included 690 acres of land and 52 operating properties, excluding the KTR transaction. In 2014, we acquired 1,040 acres of land and eight operating properties for a combined total of $612 million.

KTR transaction, net of cash received. In 2015, we acquired the real estate assets of KTR for a net cash purchase price of $4.8 billion through our consolidated co-investment venture USLV. See Note 3 to the Consolidated Financial Statements for more detail on the transaction.

Capital expenditures.We invested $228.0$268 million, $214.2$238 million and $144.1$213 million in our operating properties during 2013, 20122016, 2015 and 2011,2014, respectively, which included recurring capital expenditures, tenant improvements and leasing commissions on existing operating properties that were previously leased.

 

In 2013, we paid netProceeds from contributions and dispositions. We generated cash from contributions and dispositions of $678.6 millionreal estate properties of $2.8 billion, $2.8 billion and $2.3 billion in 2016, 2015 and 2014, respectively. See Note 4 to acquirethe Consolidated Financial Statements for more detail about our partners’ interest in NAIF IIIcontributions and SGP Mexico. In connection with the acquisition of NAIF II in 2012, we repaid the loan from NAIF II to our partner for a total of $336.1 million. The loan repayment was reduced by the cash acquired in the consolidation of NAIF II. Also in 2012, we paid $47.8 million in connection with the acquisition of two of our unconsolidated co-investment ventures.dispositions.

35


Investments in unconsolidated entities. We invest cash in our unconsolidated co-investment ventures and other ventures, which represented our proportionate share. The ventures use the funds for the acquisition of operating properties, development and repayment of debt. The following table summarizes our investments in our unconsolidated co-investment ventures for the years ended December 31 (in millions):

 

In 2013, we acquired 536 acres of land and 26 operating properties for a combined total of $514.6 million, which includes properties acquired in connection with the wind-down of Prologis Japan Fund I. In 2012, we acquired 1,537 acres of land and 12 operating properties for a combined total of $254.4 million. In 2011, we acquired 78 acres of land and 8 operating properties for a combined total of $214.8 million.

 

 

 

2016

 

 

2015

 

 

2014

 

 

Other Americas

 

 

 

 

 

 

 

 

 

 

 

 

 

Prologis Brazil Logistics Partners Fund I and related joint ventures

 

$

34

 

 

$

57

 

 

$

71

 

 

Europe

 

 

 

 

 

 

 

 

 

 

 

 

 

Prologis European Logistics Partners Sàrl

 

 

125

 

 

 

222

 

 

 

478

 

 

Prologis European Properties Fund II

 

 

6

 

 

 

17

 

 

 

53

 

 

Prologis Targeted Europe Logistics Fund

 

 

-

 

 

 

91

 

 

 

73

 

 

Asia

 

 

 

 

 

 

 

 

 

 

 

 

 

Nippon Prologis REIT

 

 

53

 

 

 

-

 

 

 

57

 

 

Prologis China Logistics Venture

 

 

10

 

 

 

56

 

 

 

14

 

 

Remaining unconsolidated co-investment ventures

 

 

-

 

 

 

3

 

 

 

4

 

 

Total co-investment ventures

 

 

228

 

 

 

446

 

 

 

750

 

 

Other unconsolidated joint ventures

 

 

38

 

 

 

28

 

 

 

6

 

 

Total

 

$

266

 

 

$

474

 

 

$

756

 

 

In 2013, 2012 and 2011, we invested cash of $1.2 billion, $165.0 million and $37.8 million, respectively, in our unconsolidated entities, net of repayment of advances by the entities. Our investment in 2013 principally relates to our investment in NPR of $411.5 million, Prologis Targeted Europe Logistics Fund of $210.2 million, Prologis European Properties Fund II of $167.2 million, PELP of $162.3 million, the Brazil Fund and related joint ventures of $111.5 million and Prologis Targeted U.S. Logistics Fund of $104.8 million. See Note 5 to the Consolidated Financial Statements for more detail on these investments.our unconsolidated co-investment ventures.

Purchase of a controlling interest. We paid net cash of $590 million to acquire a controlling interest in NAIF in 2014.

 

Return of investment. As discussed above, we adopted an accounting standard update in 2016 that clarifies the classification methodology within the statement of cash flows for distributions received from equity method investments. As a result, distributions generated from activities outside the operations of our unconsolidated entities, such as property sales, debt refinancing or redemptions of ownership interests, are reflected in Net Cash Provided by (Used in) Investing Activities. We received distributions from unconsolidated entitiesco-investment ventures and other ventures as a return of investment of $411.9$777 million, $291.7$29 million and $170.2$84 million during 2013, 20122016, 2015 and 2011,2014, respectively. We received $106.3Included in this amount for 2016 is $611 million in connection with the wind down of Prologis Japan Fund I in 2013. During 2012, we received $95.0 million, which represented a return of capital, from one of our other joint ventures that held a note receivable that was repaid during the quarter.

In 2012, we received a full redemption of a $55.0 million note receivable that was issued in 2011 through the sale of non-industrial assets.

In connection witha portion of our investments, and the Merger in 2011, we acquired $234.0 million in cash.

In 2011, we used $1.0 billion of cash to purchase units in PEPR. The acquisitionremaining amount was funded with borrowings on a new €500 million bridge facility (“PEPR Bridge Facility”), put in place for the acquisition, and borrowings underfrom property dispositions within our other credit facilities that were subsequently paid from our equity offering in 2011 (see below for more detail).

unconsolidated co-investment entities. For the years ended December 31, 2013, 20122015 and 2011, financing activities used net cash2014, we reclassified $141 million and $177 million, respectively, of $2.4 billion and $1.1 billion and provided net cash of $163.3 million, respectively. The following are the significant activities for all periods presented:distributions from our unconsolidated entities that were previously reported as Net Cash Provided by (Used in) Investing Activities into Net Cash Provided by Operating Activities.

 

Proceeds from repayment of notes receivable backed by real estate.In April 2013,2016, we received $203 million for the payment in full of notes receivable received in connection with dispositions of real estate to third parties in 2015. In 2014, we received $188 million for the payment in full of the notes receivable that originated in 2010 through the sale of a portfolio of properties. See Note 7 to the Consolidated Financial Statements for further information about notes receivable.

Settlement of net investment hedges. We received net proceeds of $1.4 billion$80 million, $128 million and $13 million from the issuancesettlement of 35.65 million shares of common stock. In June 2011, we completed an equity offeringnet investment hedges during 2016, 2015 and issued 34.5 million shares of common stock and received net proceeds of approximately $1.1 billion.2014, respectively. See Note 16 to the Consolidated Financial Statements for further information on our derivative activity.

 

Cash Provided by (Used in) Financing Activities

We generated proceedsProceeds from the issuance of common stock under our incentive stock plans, principallystock.

o

We generated net proceeds from the issuance of common stock under our incentive plans, primarily from the exercise of stock options, of $40 million, $18 million and $26 million in 2016, 2015 and 2014, respectively.

o

We generated net proceeds of $72 million and $140 million from the issuance of 2 million shares and 3 million shares of common stock under our at-the-market program during 2015 and 2014, respectively.

o

Norges Bank Investment Management exercised a warrant (that we issued in connection with the formation of PELP) for $214 million in exchange for 6 million shares of Prologis common stock in 2014.

Dividends paid on common and preferred stock. We paid dividends of $22.4$893 million, $805 million and $31.0 million in 2013 and 2012, respectively. We had minimal activity in 2011.

In 2013, we paid $482.5 million to redeem all of the outstanding series L, M, O, P, R and S of preferred stock.

We paid distributions of $552.2 million, $520.3 million and $387.1$672 million to our common and preferred stockholders during 2013, 20122016, 2015 and 2011,2014, respectively. We paid dividends on our preferred stock of $21.7 million, $47.6 million, and $27.0 million during 2013, 2012 and 2011, respectively.

 

In 2013, we purchased our partners’ interestRepurchase of preferred stock and units. We paid $28 million to repurchase shares of series Q preferred stock in Fund II for $245.8 million. In 2012, we purchased an additional interest in PEPR for $117.3 million, Fund II for $14.1 million, and our partner’s interest in certain properties in the Brazil Fund and related joint ventures of $4.4 million. Additionally in 2013 and 2012, limited partners in the Operating Partnership redeemed units for cash of $4.9 million and $5.8 million, respectively.2014.

 

In 2013, 2012 and 2011, partnersNoncontrolling interests contributions. Our partner in consolidated co-investment venturesUSLV made contributions in 2015 of $145.5 million, $70.8 million and $123.9 million, respectively,$2.4 billion, primarily for the purchaseKTR transaction, and $446 million in 2014 related to the formation of real estate properties by Mexico Fondo Logistico and developmentthe venture.

36


Noncontrolling interests distributions. Our consolidated ventures distributed $344 million, $216 million and $315 million to various noncontrolling interests in 2016, 2015 and 2014, respectively, primarily due to dispositions of real estate. Included in these amounts were $37 million, $16 million and $2 million in 2016, 2015 and 2014, respectively, of distributions to common limited partnership unitholders of the Operating Partnership.

Tax paid for shares withheld. In 2016, we adopted an accounting standard update that clarifies the classification methodology within the Brazil Fund and related joint ventures.

In 2013, 2012, and 2011,statement of cash flows for taxes paid to a tax authority by us when we distributed $116.0 million, $44.1withhold shares to cover employee withholding tax payments for certain stock compensation plans. As a result of the adoption, we reclassified payments of $12 million and $17.4$13 million from NetCash Provided by Operating Activitiesto various noncontrolling interests,Net Cash Provided by (Used in) Financing Activities for the years ended December 31, 2015 and 2014, respectively. The distribution in 2013 includes cash distributions of $40.6 million to our partners in Prologis AMS due to the disposition of a portfolio of properties.

 

In 2013,Net borrowings on credit facilities. We generated net proceeds of $33 million from our credit facilities in 2016. We made net payments of $8 million and $717 million in 2015 and 2014 respectively, on our credit facilities.

Repurchase and payments of debt. During 2016, we incurred $3.6made payments of $1.6 billion on our outstanding term loans, $233 million on regularly scheduled debt principal payments and payments at maturity and repurchased and extinguished secured mortgage debt of $461 million. During 2015, we made payments of $1.0 billion on our outstanding term loans, $128 million on regularly scheduled debt principallyprincipal payments and payments at maturity and repurchased and extinguished secured mortgage debt of $2.0 billion. During 2014, we made payments of $2.2 billion on our previous term loan, $102 million on regularly scheduled debt principal payments and payments at maturity and repurchased and extinguished senior notes and secured mortgage debt of $1.9 billion.

Proceeds from issuance of debt.In 2016, we issued $973 million of term loan. In 2012, we incurred $1.4 billionloans and $397 million of debt, principally secured mortgage debt and used the net proceeds for general corporate purposes. In 2015, we issued $1.5 billion of senior term loan. In 2011, we incurred $577.9notes, $565 million inof secured mortgage debt and borrowed $721.0$3.1 billion of term loans and used the net proceeds to fund our share of the purchase price for the KTR transaction, repurchased and redeemed senior notes and for general corporate purposes. In 2014, we issued €1.8 billion ($2.4 billion) of senior notes, $2.3 billion of term loans and $71 million on the PEPR Bridge Facility.of secured debt. See Note 9 to the Consolidated Financial Statements for more detail on the senior note issuances in 2013.debt.

 

During 2013, we extinguished senior notes and secured mortgage debt for $4.0 billion, of which $1.6 billion is the repayment of outstanding secured mortgage debt primarily with the proceeds received from contributions of properties to PELP and NPR and $2.4 billion is the repayment of senior notes. During 2012 and 2011, we extinguished certain senior notes, exchangeable senior notes, secured mortgage debt, senior term loans and other debt for $1.7 billion and $894.2 million, respectively.OFF-BALANCE SHEET ARRANGEMENTS

 

We made payments of $2.0 billion, $196.7 million and $975.5 million on regularly scheduled debt principal and maturity payments during 2013, 2012 and 2011, respectively. In 2013, we repaid $355.3 million of outstanding senior notes, $483.6 million of exchangeable senior notes and $135.9 million of secured mortgage debt. Also in 2013, we made payments of $899.0 million on the senior term loan. In 2011, we used $711.8 million in proceeds from our equity offering to repay the amounts borrowed under the PEPR Bridge Facility. Additionally, 2011 activity included the repayment of €101.3 million ($146.8 million) of the euro notes that matured in April 2011.

We made net payments of $93.1 million and $37.6 million in 2013 and 2011, respectively, on our credit facilities and received net proceeds of $9.1 million in 2012 from our credit facilities.

Off-Balance Sheet Arrangements

Unconsolidated Co-Investment VenturesVenture Debt

We had investments in and advances to certainour unconsolidated co-investment ventures, at December 31, 2013,2016, of $4.3$4.1 billion. These unconsolidated ventures had total third partythird-party debt of $7.7$6.5 billion (in the aggregate, not our proportionate share) at December 31, 2013.2016. This debt is primarily secured, or collateralized by properties within the venture and is non-recourse to Prologis or the other investors in the co-investment ventures, matures and maturesbears interest as follows (dollars in millions):

 

   2014  2015  2016  2017  2018  Thereafter  

Discount/

Premium

  Total (1)  Prologis
Ownership
% at
12/31/13
 

Prologis Targeted U.S. Logistics Fund

 $20.0   $185.1   $166.5   $164.2   $298.8   $824.2   $14.0   $1,672.8    25.9

Prologis North American Industrial Fund

      108.7    444.1    205.0    165.5    188.9        1,112.2    23.1

Prologis Mexico Industrial Fund

              214.1                214.1    20.0

Prologis Targeted Europe Logistics Fund

  31.8    241.8    4.6    4.7    97.5    115.0    2.9    498.3    43.1

Prologis European Properties Fund II (2)

  430.8    343.1    216.7    67.5    415.1    518.2    (3.5  1,987.9    32.5

Prologis European Logistics Partners (3)

  288.0        220.4                3.6    512.0    50.0

Nippon Prologis REIT

  46.2        222.0    22.1    286.0    958.9        1,535.2    15.1

Prologis China Logistics Venture 1

          180.0                    180.0    15.0
 

 

 

  

Total co-investment ventures

 $816.8   $878.7   $1,454.3   $677.6   $1,262.9   $2,605.2   $17.0   $7,712.5      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

Gross

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

There-

 

 

Disc/

 

 

 

 

 

 

Average

 

 

Book

 

 

Ownership

 

 

2017

 

 

2018

 

 

2019

 

 

after

 

 

Prem

 

 

Total

 

 

Interest Rate

 

 

Value

 

 

%

 

Prologis Targeted U.S. Logistics Fund

$

19

 

 

$

449

 

 

$

14

 

 

$

930

 

 

$

2

 

 

$

1,414

 

 

 

4.4%

 

 

$

4,704

 

 

 

14.9%

 

FIBRA Prologis

 

217

 

 

 

73

 

 

 

84

 

 

 

363

 

 

 

2

 

 

 

739

 

 

 

5.0%

 

 

 

1,942

 

 

 

45.9%

 

Prologis European Properties Fund II

 

50

 

 

 

317

 

 

 

166

 

 

 

1,253

 

 

 

(11

)

 

 

1,775

 

 

 

3.1%

 

 

 

4,881

 

 

 

31.2%

 

Prologis Targeted Europe Logistics Fund

 

5

 

 

 

77

 

 

 

233

 

 

 

361

 

 

 

(5

)

 

 

671

 

 

 

2.2%

 

 

 

2,458

 

 

 

23.5%

 

Nippon Prologis REIT

 

77

 

 

 

254

 

 

 

231

 

 

 

1,063

 

 

 

(9

)

 

 

1,616

 

 

 

0.9%

 

 

 

4,101

 

 

 

15.1%

 

Prologis China Logistics Venture

 

-

 

 

 

111

 

 

 

180

 

 

 

46

 

 

 

(6

)

 

 

331

 

 

 

4.5%

 

 

 

559

 

 

 

15.0%

 

Totals

$

368

 

 

$

1,281

 

 

$

908

 

 

$

4,016

 

 

$

(27

)

 

$

6,546

 

 

 

 

 

 

$

18,645

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

At December 31, 2016, we did not guarantee any third-party debt of the co-investment ventures. In our role as the manager or sponsor, we work with the co-investment ventures to refinance their maturing debt. There can be no assurance that the co-investment ventures will be able to refinance any maturing indebtedness on terms as favorable as the maturing debt, or at all. If the ventures are unable to refinance the maturing indebtedness with newly issued debt, they may be able to obtain funds by voluntary capital contributions from us and our partners or by selling assets. Certain of our ventures also have credit facilities, or unencumbered properties, both of which may be used to obtain funds.

 

(1)As of December 31, 2013, we did not guarantee any third party debt of the co-investment ventures. In our role as the manager, we work with the co-investment ventures to refinance their maturing debt. There can be no assurance that the co-investment ventures will be able to refinance any maturing indebtedness on terms as favorable as the maturing debt, or at all. If the ventures are unable to refinance the maturing indebtedness with newly issued debt, they may be able to obtain funds by voluntary capital contributions from us and our partners or by selling assets. Certain of the ventures also have credit facilities, or unencumbered properties, both of which may be used to obtain funds. Generally, the co-investment ventures issue long-term debt and utilize the proceeds to repay borrowings under the credit facilities.

37


CONTRACTUAL OBLIGATIONS

 

(2)We expect that the co-investment venture will refinance or repay 2014 maturities through available cash and the issuance of new debt.

(3)We expect that the co-investment venture will repay 2014 maturities through available cash or equity contributions from partners.

Contractual Obligations

Long-Term Contractual Obligations

We had

The following table summarizes our long-term contractual obligations at December 31, 2013 as follows2016 (in millions):

 

   Payments Due By Period 
    Less than 1
year
   1 to 3 years   3 to 5 years   More than
5 years
   Total 

Debt obligations, other than credit facilities and exchangeable debt (1)

  $866    $1,543    $1,521    $3,855    $7,785  

Interest on debt obligations, other than credit facilities and exchangeable debt

   346     617     421     435     1,819  

Exchangeable debt

        460               460  

Interest on exchangeable debt

   15     3               18  

Amounts due on credit facilities

             725          725  

Interest on credit facilities

   9     18     13          40  

Unfunded commitments on the development portfolio (2)

   614     188               802  

Operating lease payments

   36     60     44     227     367  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $1,886    $2,889    $2,724    $4,517    $12,016  

 

Payments Due by Period

 

 

Less than 1 Year

 

 

1 to 3 Years

 

 

3 to 5 Years

 

 

More than 5 Years

 

 

Total

 

Debt obligations, other than credit facilities

$

622

 

 

$

1,812

 

 

$

2,641

 

 

$

5,523

 

 

$

10,598

 

Interest on debt obligations, other than credit facilities

 

340

 

 

 

562

 

 

 

403

 

 

 

373

 

 

 

1,678

 

Unfunded commitments on the development portfolio (1)

 

854

 

 

 

99

 

 

 

-

 

 

 

-

 

 

 

953

 

Operating lease payments

 

31

 

 

 

62

 

 

 

52

 

 

 

333

 

 

 

478

 

Totals

$

1,847

 

 

$

2,535

 

 

$

3,096

 

 

$

6,229

 

 

$

13,707

 

 

(1)

Included in amounts due in less than one year is a $536 million term loan that was extended to 2015 in January 2014.

(2)We had properties in our consolidated development portfolio (completed and under development) at December 31, 2013,2016, with a total expected investmentTEI of $1.9$2.4 billion. The unfunded commitments presented include not only those costs that we are obligated to fund under construction contracts, but all costs necessary to place the property into service, including the estimated costs of tenant improvements, marketing and leasing costs that we willexpect to incur as the property is leased.

Other Commitments

On a continuing basis, we are engaged in various stages of negotiations for the acquisition and/or disposition of individual properties or portfolios of properties.

Distribution and Dividend Requirements

Our dividend policy on our common stock is to distribute a percentage of our cash flow to ensure that we will meet the dividend requirements of the Internal Revenue Code, relative to maintaining our REIT status, while still allowing us to retain cash to meet other needs such as capital improvements and other investment activities.

In 2013 and 2012,2016, we paid quarterly cash dividends of $0.42 per common share. In 2015, we paid a quarterly cash dividend of $0.28$0.36 for the first two quarters and $0.40 per common share.share for the last two quarters. Our future common stock dividends, if and as declared, may vary and will be determined by ourthe Board upon the circumstances prevailing at the time, including our financial condition, operating results and REIT distribution requirements, and may be adjusted at the discretion of the Board during the year.

In the fourth quarter of 2015, we issued a new class of common limited partnership units in the Operating Partnership that are entitled to a quarterly distribution equal to $0.64665 per unit so long as the common units receive a quarterly distribution of at least $0.40 per unit. See Note 11 in the Consolidated Financial Statements for more information on this new partnership unit class. We paid a distribution of $0.64665 in December 2016 and in December 2015 related to this new partnership unit class. We make distributions to the common limited partnership units outstanding at the same per unit amount as our common stock dividend.

At December 31, 2013,2016, we had 1.6 million shares of one series of preferred stock outstanding the series Q.“Series Q preferred stock,” with a liquidation preference of $50 per share. The annual dividend rate is 8.54% per share and dividends are payable quarterly in arrears.

Pursuant to the terms of our preferred stock, we are restricted from declaring or paying any dividend with respect to our common stock unless and until all cumulative dividends with respect to the preferred stock have been paid and sufficient funds have been set aside for dividends that have been declared for the relevant dividend period with respect to the preferred stock.

Other Commitments

On a continuing basis, we are engaged in various stages of negotiations for the acquisition or disposition of individual properties or portfolios of properties.

Critical Accounting PoliciesCRITICAL ACCOUNTING POLICIES

A critical accounting policy is one that is both important to the portrayal of an entity’s financial condition and results of operations and requires judgment on the part of management. Generally, the judgment requires management to make estimates and assumptions about the effect of matters that are inherently uncertain. Estimates are prepared using management’s best judgment, after considering past and current economic conditions and expectations for the future. Changes in estimates could affect our financial position and specific items in our results of operations that are used by stockholders, potential investors, industry analysts and lenders in their evaluation of our performance. Of the accounting policies discussed in Note 2 to the Consolidated Financial Statements, in Item 8, those presented below have been identified by us as critical accounting policies.

Impairment

Consolidation

We consolidate all entities that are wholly owned and those in which we own less than 100% of Long-Lived Assetsthe equity but control, as well as any variable interest entities in which we are the primary beneficiary. We evaluate our ability to control an entity including whether the entity is a variable interest entity and whether we are the primary beneficiary. We consider the substantive terms of the arrangement to identify which enterprise has the power to direct the activities of the entity that most significantly impacts the entity’s economic performance and the obligation to absorb losses of the entity or the right to receive benefits from the entity. Investments in entities that we do not control but over which we have the ability to exercise significant influence over operating and financial policies are accounted

We38


for using the equity method. Our ability to correctly assess our influence or control over an entity affects the carrying values of our respective long-lived assets whenever events or changes in circumstances indicate that the carrying amountspresentation of these assets may not be fully recoverable.investments in the Consolidated Financial Statements.  

Recoverability

Business Combinations

Upon acquisition of real estate assets is measured by comparison of the carrying amount of the asset to the estimated future undiscounted cash flows. In order to review our real estate assets for recoverability, we consider current market conditions, as well as our intent with respect to

holding or disposing of the asset. Our intent with regard to the underlying assets might change as market conditions change. Fair value is determined through various valuation techniques; including discounted cash flow models, applyingthat constitutes a capitalization rate to estimated net operating income of a property, quoted market values and third party appraisals, where considered necessary. The use of projected future cash flows is based on assumptions that are consistent with our estimates of future expectations and the strategic plan we use to manage our underlying business. If our analysis indicates that the carrying value of a real estate property that we expect to hold is not recoverable on an undiscounted cash flow basis, we recognize an impairment charge for the amount bybusiness, which the carrying value exceeds the current estimated fair value of the real estate property. At the time our intent changes to dispose of one of our real estate properties, we compare the carrying value of the property to the estimated proceeds from disposition. If there is an impairment, we record an impairment for any excess including costs to sell.

Assumptions and estimates used in the recoverability analyses for future cash flows, discount rates and capitalization rates are complex and subjective. Changes in economic and operating conditions or our intent with regard to our investment that occurs subsequent to our impairment analyses could impact these assumptions and result in future impairment of our long-lived assets.

Other than Temporary Impairment of Investments in Unconsolidated Entities

When circumstances indicate there may have been a reduction in the value of an equity investment, we evaluate whether the loss in value is other than temporary. If we determine there is a loss in value that is other than temporary, we recognize an impairment charge to reflect the investment at fair value. The use of projected future cash flows and other estimates of fair value, the determination of when a loss is other than temporary, and the calculation of the amount of the loss, is complex and subjective. Use of other estimates and assumptions may result in different conclusions. Changes in economic and operating conditions, as well as changes in our intent with regard to our investment, that occur subsequent to our review could impact these assumptions and result in future impairment charges of our equity investments.

Revenue Recognition – Gains on Disposition of Real Estate

We recognize gains from the contributions and sales of real estate assets, generally at the time the title is transferred, consideration is received and we no longer have substantial continuing involvement with the real estate sold. In many of our transactions, an entity in which we have an ownership interest will acquire a real estate asset from us. We make judgments based on the specific terms of each transaction as to the amount of the total profit from the transaction that we recognize given our continuing ownership interest and our level of future involvement with the entity that acquires the assets. We also make judgments regarding recognition in earnings of certain fees and incentives earned for services provided to these entities based on when they are earned, fixed and determinable.

Business Combinations

We acquire individual properties, as well as portfolios of properties, or businesses. We may also acquireincludes acquiring a controlling interest in an entity previously accounted for underusing the equity method of accounting. When we acquire a business or individual operating properties, with the intention to hold the investment for the long-term,accounting, we allocate the purchase price to the various components of the acquisition based uponon the fair value of each component. The components typically include buildings, land, building, debt, intangible assets related to above and below marketthe acquired leases, value of costs to obtain tenants,debt, deferred tax liabilities and other assumed assets and liabilities in the case of an acquisition of a business.liabilities. In an acquisition of multiple properties, we must also allocate the purchase price among the properties. The allocation of the purchase price is based on our assessment of estimated fair value and often times is based uponon the expected future cash flows of the property and various characteristics of the markets where the property is located. The fair value may also include an enterprise value premium that we estimate a third party would be willing to pay for a portfolio of properties. In the case of an acquisition of a controlling interest in an entity previously accounted for under the equity method of accounting, this allocation may result in a gain or a loss. The initial allocation of the purchase price is based on management’s preliminary assessment, which may differ when final information becomes available. Subsequent adjustments made to the initial purchase price allocation are made within the allocation period, which typically does not to exceed one year. The use of different assumptions in the allocation of the purchase price of the acquired properties and liabilities assumed could affect the timing of recognition of the related revenues and expenses.

Consolidation

Revenue Recognition – Gains (Losses) on Dispositions of Investments in Real Estate and Strategic Capital Revenues

We consolidate all entities that are wholly ownedrecognize gains from the contributions and thosesales of real estate assets, generally at the time the title is transferred, consideration is received and we no longer have substantial continuing involvement with the real estate sold. In many of our transactions, an entity in which we own less than 100% but control,have an equity investment will acquire a real estate asset from us. We make judgments based on the specific terms of each transaction as well as any variable interest entities in which we areto the primary beneficiary. We evaluate our ability to control an entity and whether the entity is a variable interest entity and we are the primary beneficiary through considerationamount of the substantive termstotal profit from the transaction that we recognize given our continuing ownership interest and our level of the arrangement to identify which enterprise has the power to direct the activities offuture involvement with the entity that most significantly impactsacquires the entity’s economic performanceassets. In addition, we make judgments regarding recognition in earnings of certain fees and incentives earned for services provided to these entities based on when they are earned, fixed and determinable.

Derivative Financial Instruments

Derivative financial instruments can be designated as fair value hedges, cash flow hedges or hedges of net investments in foreign operations. We do not use derivatives for trading or speculative purposes. Accounting for derivatives as hedges requires that at inception, and over the obligation to absorb lossesterm of the entity orinstruments, the righthedged item and derivative qualify for hedge accounting. The rules and interpretations for derivatives are complex. Failure to receive benefits from the entity. Investmentsapply this guidance correctly may result in entitiesall changes in which we do not control but over which we have the ability to exercise significant influence over operating and financial policies are presented under the equity method. Investments in entities that we do not control and over which we do not exercise significant influence are carried at the lower of cost or fair value, as appropriate. Our ability to correctly assess our influence and/or control over an entity affects the presentation of these investments in our consolidated financial statements.

Capitalization of Costs and Depreciation

We capitalize costs incurred in developing, renovating, rehabilitating, and improving real estate assets as part of the investment basis. Costs incurred in making repairs and maintaining real estate assets are expensed as incurred. During the land development and construction periods, we capitalize interest costs, insurance, real estate taxes and certain general and administrative costs of the personnel performing development, renovations, and rehabilitation if such costs are incremental and identifiable to a specific activity to get the asset ready for its intended use.

Capitalized costs are included in the investment basis of real estate assets. We also capitalize costs incurred to successfully originate a lease that result directly from, and are essential to, the acquisition of that lease. Leasing costs that meet the requirements for capitalization are presented as a component of other assets.

We estimate the depreciable portion of our real estate assets and related useful lives in order to record depreciation expense. Our ability to estimate the depreciable portions of our real estate assets and useful lives is critical to the determination of the appropriate amount of depreciation expense recorded and the carrying value of the hedged derivative being recognized in earnings. We assess both at inception, and at least quarterly thereafter, whether the derivatives used in hedging transactions are effective at offsetting changes in either the fair values or cash flows of the related underlying assets.exposures. Any ineffective portion of a derivative financial instrument's change in fair value is immediately recognized in earnings. Derivatives not designated as hedges are used to manage our exposure to foreign currency fluctuations and variable interest rates but do not meet the strict hedge accounting requirements. The rules and interpretations for derivatives are complex. Failure to apply this guidance correctly may result in all changes in fair value of the hedged derivative being recognized in earnings. See Notes 2 and 16 to the assets to be depreciatedConsolidated Financial Statements for additional information about our derivative financial instrument policy and the estimated depreciable lives of these assets would have an impact on the depreciation expense recognized.our derivative financial instruments.

Income Taxes

As part of the process of preparing our consolidated financial statements, significant

Significant management judgment is required to estimate our income tax liability for each taxable entity, the liability associated with open tax years that are under review, our REIT taxable income and our compliance with REIT requirements. Our estimates are based on interpretation of tax laws. We estimate our actual current income tax due and assess temporary differences resulting from differing treatment of items for book and tax purposes resulting in the recognition of deferred income tax assets and liabilities. These estimates may have an impact on the income tax expense recognized. Adjustments may be required by a change in assessment of our deferred income tax assets and liabilities,liabilities; changes in assessments of the recognition of income tax benefits for certain non-routine transactions,nonroutine transactions; changes due to audit adjustments by federal, international and state tax authorities,authorities; our inability to qualify as a REIT,REIT; the potential for built-in-gain recognition,built-in gain recognition; changes in the assessment of properties to be contributed to taxable REIT subsidiaries and changes in tax laws. Adjustments required in any given period are included within income tax expense. We recognize the tax benefit from an uncertain tax position only if it is “more-likely-than-not”more likely than not that the tax position will be sustained on examination by taxing authorities.

Derivative Financial Instruments

All derivatives are recognized at fair value inRecoverability of Real Estate Assets

We assess the Consolidated Balance Sheets within the line itemsOther Assetscarrying values of our respective long-lived assets whenever events orAccounts Payable and Accrued Expenses, as applicable. We do not net our derivative position by counterparty for purposes of balance sheet presentation and disclosure. The accounting for gains and losses that result from changes in circumstances indicate that the fair valuescarrying amounts of derivative instruments depends on whetherthese assets may not be fully recoverable.

Recoverability of real estate assets is measured by comparison of the derivatives are designatedcarrying amount of the asset to the estimated future undiscounted cash flows. To review our real estate assets for recoverability, we consider current market conditions, as and qualifywell as hedging instruments. Derivatives can be designatedour intent with respect to holding or disposing of the asset. Our intent with regard to the underlying assets might change as fairmarket conditions change. Fair value hedges,is determined through various valuation techniques, including discounted cash flow hedges or hedges of net investments in foreign operations.

For derivatives that will be accounted for as hedging instruments in accordance with the accounting standards, we formally designate and document, at inception, the financial instrument asmodels, applying a hedgecapitalization rate to estimated NOI of a specific underlying exposure, the risk management objectiveproperty, quoted market values and third-party appraisals, where considered necessary. The use of projected future cash flows is based on assumptions that are consistent with our estimates of future expectations and the strategy for undertaking the hedge transaction. In addition,

39


strategic plan we formally assess both at inception and at least quarterly thereafter, whether the derivatives used in hedging transactions are effective at offsetting changes in either the fair values or cash flows of the related underlying exposures. Any ineffective portion of a derivative financial instrument’s change in fair value is immediately recognized in earnings. Derivatives not designated as hedges are not speculative and may be useduse to manage our exposureunderlying business. If our analysis indicates that the carrying value of a property that we expect to foreign currency fluctuations and variable interest rates but dohold is not meetrecoverable on an undiscounted cash flow basis, we recognize an impairment charge for the strict hedge accounting requirements.

Changes inamount by which the carrying value exceeds the current estimated fair value of derivatives that are designatedthe property. Assumptions and qualify as cash flow hedges and hedges of net investments in foreign operations are recorded inAccumulated Other Comprehensive Lossestimates used in the Consolidated Balance Sheets. Duerecoverability analyses for future cash flows, including market rents, discount rates and capitalization rates are complex and subjective. Changes in economic and operating conditions or our intent with regard to our investment that occurs subsequent to our impairment analyses could impact these assumptions and result in future impairment.

Capitalization of Costs

During the land development and construction periods (including renovating and rehabilitating), we capitalize interest, insurance, real estate taxes and certain general and administrative costs of the personnel performing development, renovations and rehabilitation if such costs are incremental and identifiable to a specific activity to get the asset ready for its intended use. The ability to specifically identify internal personnel costs associated with development and the determination of when a development project is substantially complete and capitalization must cease, requires a high degree of effectiveness between the hedging instrumentsjudgment and the underlying exposures hedged, fluctuationsfailure to accurately assess these costs and timing could result in the valuemisstatement of the derivative instruments will generally be offset by changesasset values and expenses. Capitalized costs are included in the fair values or cash flowsinvestment basis of the underlying exposures being hedged. The changes in fair values of derivatives that were not designated and/or did not qualify as hedging instruments are immediately recognized in earnings. For cash flow hedges, we reclassify changes in the fair value of derivatives into the applicable line item in the Consolidated Statements of Operations in which the hedged items are recorded in the same period that the underlying hedged items affect earnings.real estate assets.

New Accounting PronouncementsNEW ACCOUNTING PRONOUNCEMENTS

See Note 2 to the Consolidated Financial Statements in Item 8.Statements.

Funds from OperationsFUNDS FROM OPERATIONS ATTRIBUTABLE TO COMMON STOCKHOLDERS/UNITHOLDERS (“FFO”)

FFO is a non-GAAP financial measure that is commonly used in the real estate industry. The most directly comparable GAAP measure to FFO is net earnings. Although the

The National Association of Real Estate Investment Trusts (“NAREIT”) has published a definition ofdefines FFO modifications to the NAREIT calculation of FFO are common among REITs, as companies seek to provide financial measures that meaningfully reflect their business.

FFO is not meant to represent a comprehensive system of financial reporting and does not present, nor do we intend it to present, a complete picture of our financial condition and operating performance. We believe net earnings computed under GAAP remains the primary measure of performance and that FFO is only meaningful when it is used in conjunction with net earnings computed under GAAP. Further, we believe our consolidated financial statements, prepared in accordance with GAAP, provide the most meaningful picture of our financial condition and our operating performance.

NAREIT’s FFO measure adjusts net earnings computed under GAAP to exclude historical cost depreciation and gains and losses from the sales, along with impairment charges, of previously depreciated properties. We agree that thesealso consider the gains on revaluation of equity investments upon acquisition of a controlling interest and the gain recognized from a partial sale of our investment to be similar as a gain from the sale of previously depreciated properties under the NAREIT definition of FFO. We exclude similar adjustments are useful to investors forfrom our unconsolidated entities and the following reasons:third parties’ share of our consolidated ventures.

 

(i)historical cost accounting for real estate assets in accordance with GAAP assumes, through depreciation charges, that the value of real estate assets diminishes predictably over time. NAREIT stated in its White Paper on FFO “since real estate asset values have historically risen or fallen with market conditions, many industry investors have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves.” Consequently, NAREIT’s definition of FFO reflects the fact that real estate, as an asset class, generally appreciates over time and depreciation charges required by GAAP do not reflect the underlying economic realities.

(ii)REITs were created as a legal form of organization in order to encourage public ownership of real estate as an asset class through investment in firms that were in the business of long-term ownership and management of real estate. The exclusion, in NAREIT’s definition of FFO, of gains and losses from the sales, along with impairment charges, of previously depreciated operating real estate assets allows investors and analysts to readily identify the operating results of the long-term assets that form the core of a REIT’s activity and assists in comparing those operating results between periods. We include the gains and losses (including impairment charges) from dispositions of land and development properties, as well as our proportionate share of the gains and losses (including impairment charges) from dispositions of development properties recognized by our unconsolidated entities, in our definition of FFO.

Our FFO Measures

At the same time that NAREIT created and defined its FFO measure for the REIT industry, it also recognized that “management of each of its member companies has the responsibility and authority to publish financial information that it regards as useful to the financial community.” We believe stockholders, potential investors and financial analysts who review our operating results are best served by a defined FFO measure that includes other adjustments to net earnings computed under GAAP in addition to those included in the NAREIT defined measure of FFO.

Our FFO measures are used by management in analyzingbegin with NAREIT’s definition and we make certain adjustments to reflect our business and the performance ofway that management plans and executes our properties and we believe that it is important that stockholders, potential investors and financial analysts understand the measures management uses.

We use these FFO measures, including by segment and region, to: (i) evaluate our performance and the performance of our properties in comparison to expected results and results of previous periods, relative to resource allocation decisions; (ii) evaluate the performance of our management; (iii) budget and forecast future results to assist in the allocation of resources; (iv) assess our performance as compared to similar real estate companies and the industry in general; and (v) evaluate how a specific potential investment will impact our future results. Because we make decisions with regard to our performance with a long-term outlook, we believe it is appropriate to remove the effects of short-term items that we do not expect to affect the underlying long-term performance of the properties. The long-term performance of our properties is principally driven by rental income.business strategy. While not infrequent or unusual, thesethe additional items we excludeadjust for in calculatingFFO, as definedmodified by Prologisand Core FFO, both as defined below, are subject to significant fluctuations from period to period that causeperiod. Although these items may have a material impact on our operations and are reflected in our financial statements, the removal of the effects of these items allows us to better understand the core operating performance of our properties over the long term. These items have both positive and negative short-term effects on our results of operations in inconsistent and unpredictable directions that are not relevant to our long-term outlook.

We usecalculate our FFO measures based on our proportionate ownership share of both our unconsolidated and consolidated ventures. We reflect our share of our FFO measures for unconsolidated ventures by applying our average ownership percentage for the period to the applicable reconciling items on an entity by entity basis. We reflect our share for consolidated ventures in which we do not own 100% of the equity by adjusting our FFO measures to remove the noncontrolling interests share of the applicable reconciling items based on our average ownership percentage for the applicable periods.

These FFO measures are used by management as supplemental financial measures of operating performance.performance and we believe that it is important that stockholders, potential investors and financial analysts understand the measures management uses. We do not use our FFO measures as, nor should they be considered to be, alternatives to net earnings computed under GAAP, as indicators of our operating performance, as alternatives to cash from operating activities computed under GAAP or as indicators of our ability to fund our cash needs.

FFO, as defined by Prologis

To arrive atFFO, as defined by Prologis, we adjust the NAREIT defined FFO measure to exclude:

(i)deferred income tax benefits and deferred income tax expenses recognized by our subsidiaries;

(ii)current income tax expense related to acquired tax liabilities that were recorded as deferred tax liabilities in an acquisition, to the extent the expense is offset with a deferred income tax benefit in GAAP earnings that is excluded from our defined FFO measure;

(iii)foreign currency exchange gains and losses resulting from debt transactions between us and our foreign consolidated subsidiaries and our foreign unconsolidated entities;

(iv)foreign currency exchange gains and losses from the remeasurement (based on current foreign currency exchange rates) of certain third party debt of our foreign consolidated subsidiaries and our foreign unconsolidated entities; and

(v)mark-to-market adjustments and related amortization of debt discounts associated with derivative financial instruments.

We calculateFFO, as defined by Prologisfor our unconsolidated entities on the same basis as we calculate ourFFO, as defined by Prologis.

We believe investors are best served if the information that is made available to them allows them to align their analysis and evaluation of our operating results along the same lines that our management uses in planning and executing our business strategy.

Core FFO

In addition toFFO, as defined by Prologis,we also use Core FFO. To arrive atCore FFO,we adjustFFO, as defined by Prologis, to exclude the following recurring and non-recurring items that we recognized directly or our share of these items recognized by our unconsolidated entities to the extent they are included inFFO, as defined by Prologis:

(i)gains or losses from acquisition, contribution or sale of land or development properties;

(ii)income tax expense related to the sale of investments in real estate and third-party acquisition costs related to the acquisition of real estate;

(iii)impairment charges recognized related to our investments in real estate generally as a result of our change in intent to contribute or sell these properties;

(iv)gains or losses from the early extinguishment of debt;

(v)merger, acquisition and other integration expenses; and

(vi)expenses related to natural disasters.

We believe it is appropriate to further adjust ourFFO, as defined by Prologis for certain recurring items as they were driven by transactional activity and factors relating to the financial and real estate markets, rather than factors specific to the on-going operating performance of our properties or investments. The impairment charges we have recognized were primarily based on valuations of real estate, which had declined due to market conditions, that we no longer expected to hold for long-term investment. Over the last few years, we made it a priority to strengthen our financial position by reducing our debt, our investment in certain low yielding assets and our exposure to foreign currency exchange fluctuations. As a result, we changed our intent to sell or contribute certain of our real estate properties and recorded impairment charges when we did not expect to recover the cost of our investment. Also, we have purchased portions of our debt securities when we believed it was advantageous to do so, which was based on market conditions, and in an effort to lower our borrowing costs and extend our debt maturities. As a result, we have recognized net gains or losses on the early extinguishment of certain debt due to the financial market conditions at that time.

We have also adjusted for some non-recurring items. The merger, acquisition and other integration expenses included costs we incurred in 2011 and 2012 associated with the merger with AMB and ProLogis and the PEPR Acquisition and the integration of our systems and processes. In addition, we and our co-investment ventures make acquisitions of real estate and we believe the costs associated with these transactions are transaction based and not part of our core operations.

We analyze our operating performance primarily by the rental incomerevenues of our real estate and the revenue driven byrevenues from our investment managementstrategic capital business, net of operating, administrative and financing expenses. This income stream is not directly impacted by fluctuations in the market value of our investments in real estate or debt securities. As

FFO, as modified by Prologis attributable to common stockholders and unitholders (“FFO, as modified by Prologis”)

To arrive at FFO, as modified by Prologis, we adjust the NAREIT defined FFO measure to exclude:

deferred income tax benefits and deferred income tax expenses recognized by our subsidiaries;

current income tax expense related to acquired tax liabilities that were recorded as deferred tax liabilities in an acquisition, to the extent the expense is offset with a deferred income tax benefit in earnings that is excluded from our defined FFO measure;

40


unhedged foreign currency exchange gains and losses resulting from debt transactions between us and our foreign consolidated subsidiaries and our foreign unconsolidated entities;

foreign currency exchange gains and losses from the remeasurement (based on current foreign currency exchange rates) of certain third party debt of our foreign consolidated subsidiaries and our foreign unconsolidated entities; and

mark-to-market adjustments associated with derivative financial instruments.

We use FFO, as modified by Prologis, so that management, analysts and investors are able to evaluate our performance against other REITs that do not have similar operations or operations in jurisdictions outside the U.S.

Core FFO attributable to common stockholders and unitholders (“Core FFO”)

In addition to FFO, as modified by Prologis, we also use Core FFO. To arrive at Core FFO, we adjust FFO, as modified by Prologis, to exclude the following recurring and nonrecurring items that we recognized directly in FFO, as modified by Prologis:

gains or losses from contribution or sale of land or development properties that were developed with the intent to contribute or sell;

income tax expense related to the sale of investments in real estate and third-party acquisition costs related to the acquisition of real estate;

impairment charges recognized related to our investments in real estate generally as a result although these items have had a material impact on our operations and are reflected in our financial statements, the removal of the effects of these items allows us to better understand the core operating performance of our properties overchange in intent to contribute or sell these properties;

gains or losses from the long-term.early extinguishment of debt and redemption and repurchase of preferred stock; and

expenses related to natural disasters.

We useCore FFO, including by segment and region, to: (i) evaluate our performance and the performance of our properties in comparison to expected results and results of previous periods, relative to resource allocation decisions; (ii) evaluate the performance of our management; (iii) budget and forecast future results to assist in the allocation of resources; (iv) provide guidance to the financial markets to understand our expected operating performance; (v) assess our operating performance as compared to similar real estate companies and the industry in general;general, (ii) evaluate our performance and (vi)the performance of our properties in comparison with expected results and results of previous periods, relative to resource allocation decisions; (iii) evaluate the performance of our management; (iv) budget and forecast future results to assist in the allocation of resources; (v) provide guidance to the financial markets to understand our expected operating performance; and (v) evaluate how a specific potential investment will impact our future results. Because we make decisions with regard to our performance with a long-term outlook, we believe it is appropriate to remove the effects of items that we do not expect to affect the underlying long-term performance of the properties we own. As noted above, we believe the long-term performance of our properties is principally driven by rental income. We believe investors are best served if the information that is made available to them allows them to align their analysis and evaluation of our operating results along the same lines that our management uses in planning and executing our business strategy.

Limitations on Usethe use of our FFO Measuresmeasures

While we believe our definedmodified FFO measures are important supplemental measures, neither NAREIT’s nor our measures of FFO should be used alone because they exclude significant economic components of net earnings computed under GAAP and are, therefore, limited as an analytical tool. Accordingly, these are only a few of the many measures we use when analyzing our business. Some of these limitations are:

 

(i)The current income tax expenses and acquisition costs that are excluded from our defined FFO measures represent the taxes and transaction costs that are payable.

The current income tax expenses and acquisition costs that are excluded from our modified FFO measures represent the taxes and transaction costs that are payable.

 

(ii)Depreciation and amortization of real estate assets are economic costs that are excluded from FFO. FFO is limited, as it does not reflect the cash requirements that may be necessary for future replacements of the real estate assets. Further, the amortization of capital expenditures and leasing costs necessary to maintain the operating performance of industrial properties

Depreciation and amortization of real estate assets are economic costs that are excluded from FFO. FFO is limited, as it does not reflect the cash requirements that may be necessary for future replacements of the real estate assets. Furthermore, the amortization of capital expenditures and leasing costs necessary to maintain the operating performance of logistics facilities are not reflected in FFO.

(iii)Gains or losses from property acquisitions and dispositions or impairment charges related to expected dispositions represent changes in value of the properties. By excluding these gains and losses, FFO does not capture realized changes in the value of acquired or disposed properties arising from changes in market conditions.

 

(iv)The deferred income tax benefits and expenses that are excluded from our defined FFO measures result from the creation of a deferred income tax asset or liability that may have to be settled at some future point. Our defined FFO measures do not currently reflect any income or expense that may result from such settlement.

Gains or losses from non-development property acquisitions and dispositions or impairment charges related to expected dispositions represent changes in value of the properties. By excluding these gains and losses, FFO does not capture realized changes in the value of acquired or disposed properties arising from changes in market conditions.

 

(v)The foreign currency exchange gains and losses that are excluded from our defined FFO measures are generally recognized based on movements in foreign currency exchange rates through a specific point in time. The ultimate settlement of our foreign currency-denominated net assets is indefinite as to timing and amount. Our FFO measures are limited in that they do not reflect the current period changes in these net assets that result from periodic foreign currency exchange rate movements.

The deferred income tax benefits and expenses that are excluded from our modified FFO measures result from the creation of a deferred income tax asset or liability that may have to be settled at some future point. Our modified FFO measures do not currently reflect any income or expense that may result from such settlement.

 

(vi)The gains and losses on extinguishment of debt that we exclude from our Core FFO, may provide a benefit or cost to us as we may be settling our debt at less or more than our future obligation.

The foreign currency exchange gains and losses that are excluded from our modified FFO measures are generally recognized based on movements in foreign currency exchange rates through a specific point in time. The ultimate settlement of our foreign currency-denominated net assets is indefinite as to timing and amount. Our FFO measures are limited in that they do not reflect the current period changes in these net assets that result from periodic foreign currency exchange rate movements.

 

(vii)The merger, acquisition and other integration expenses and the natural disaster expenses that we exclude from Core FFO are costs that we have incurred.

The gains and losses on extinguishment of debt that we exclude from our Core FFO, may provide a benefit or cost to us as we may be settling our debt at less or more than our future obligation.

The natural disaster expenses that we exclude from Core FFO are costs that we have incurred.

41


We compensate for these limitations by using our FFO measures only in conjunction with net earnings computed under GAAP when making our decisions. This information should be read with our complete consolidated financial statementsConsolidated Financial Statements prepared under GAAP. To assist investors in compensating for these limitations, we reconcile our definedmodified FFO measures to our net earnings computed under GAAP for the years ended December 31 as follows (in thousands)millions).

 

   2013  2012  2011 

FFO:

   

Reconciliation of net loss to FFO measures:

   

Net earnings (loss) attributable to common stockholders

 $315,422   $(80,946)   $(188,110)  

Add (deduct) NAREIT defined adjustments:

   

Real estate related depreciation and amortization

  624,573    705,717    523,424  

Impairment charges on certain real estate properties

      34,801    5,300  

Net (gain) loss on non-FFO dispositions and acquisitions

  (271,315)    (207,033)    3,092  

Reconciling items related to noncontrolling interests

  (8,993)    (27,680)    (19,889)  

Our share of reconciling items included in earnings from unconsolidated entities

  159,792    127,323    147,608  
 

 

 

  

 

 

  

 

 

 

Subtotal-NAREIT defined FFO

  819,479    552,182    471,425  

Add (deduct) our defined adjustments:

   

Unrealized foreign currency and derivative losses (gains) and related amortization, net

  32,870    14,892    (39,034)  

Deferred income tax expense (benefit)

  656    (8,804)    (19,803)  

Our share of reconciling items included in earnings from unconsolidated entities

  2,168    (5,835)    (900)  
 

 

 

  

 

 

  

 

 

 

FFO, as defined by Prologis

  855,173    552,435    411,688  

Net gains on acquisitions and dispositions of investments in real estate, net of expenses

  (336,815)    (121,303)    (110,469)  

Losses (gains) on early extinguishment of debt and redemption of preferred stock

  286,122    14,114    (258)  

Our share of reconciling items included in earnings from unconsolidated entities

  8,744    23,097    2,223  

Impairment charges

      264,844    145,028  

Merger, acquisition and other integration expenses

      80,676    140,495  

Natural disaster expenses

          5,210  
 

 

 

  

 

 

  

 

 

 

Core FFO

 $813,224   $813,863   $593,917  

 

 

2016

 

 

2015

 

 

2014

 

FFO

 

 

 

 

 

 

 

 

 

 

 

 

Reconciliation of net earnings to FFO measures:

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings attributable to common stockholders

 

$

1,203

 

 

$

863

 

 

$

622

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Add (deduct) NAREIT defined adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Real estate related depreciation and amortization

 

 

900

 

 

 

855

 

 

 

618

 

Gains on dispositions of investments in real estate properties, net

 

 

(423

)

 

 

(501

)

 

 

(553

)

Reconciling items related to noncontrolling interests

 

 

(105

)

 

 

(78

)

 

 

48

 

Our share of reconciling items included in earnings from unconsolidated entities

 

 

162

 

 

 

185

 

 

 

186

 

NAREIT defined FFO

 

 

1,737

 

 

 

1,324

 

 

 

921

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Add (deduct) our modified adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized foreign currency and derivative losses (gains), net

 

 

(8

)

 

 

1

 

 

 

19

 

Deferred income tax benefit, net

 

 

(5

)

 

 

(5

)

 

 

(87

)

Current income tax expense related to acquired tax liabilities

 

 

-

 

 

 

4

 

 

 

30

 

Reconciling items related to noncontrolling interests

 

 

1

 

 

 

(1

)

 

 

-

 

Our share of reconciling items included in earnings from unconsolidated entities

 

 

(23

)

 

 

(14

)

 

 

5

 

FFO, as modified by Prologis

 

 

1,702

 

 

 

1,309

 

 

 

888

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments to arrive at Core FFO:

 

 

 

 

 

 

 

 

 

 

 

 

Gains on dispositions of development properties and land, net

 

 

(334

)

 

 

(258

)

 

 

(173

)

Current income tax expense on dispositions

 

 

24

 

 

 

-

 

 

 

15

 

Acquisition expenses

 

 

4

 

 

 

47

 

 

 

4

 

Losses (gains) on early extinguishment of debt and repurchase of preferred stock, net

 

 

(2

)

 

 

86

 

 

 

172

 

Reconciling items related to noncontrolling interests

 

 

4

 

 

 

(11

)

 

 

-

 

Our share of reconciling items included in earnings from unconsolidated entities

 

 

2

 

 

 

8

 

 

 

47

 

Core FFO

 

$

1,400

 

 

$

1,181

 

 

$

953

 

ITEM 7A. Quantitative and Qualitative Disclosures aboutAbout Market Risk

We are exposed to the impact of interest rate changes and foreign-exchange relatedforeign exchange-related variability and earnings volatility on our foreign investments. investments and interest rate changes. See our risk factors in Item 1A. Risk Factors, specifically: The depreciation in the value of the foreign currency in countries where we have a significant investment may adversely affect our results of operations and financial position and We have used certainmay be unable to refinance our debt or our cash flow may be insufficient to make required debt payments. See also Notes 2 and 16 in the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data for more information about our foreign operations and derivative financial instruments, primarily foreign currency forward contracts, to reduce our foreign currency market risk, as we deem appropriate. We have also used interest rate swap agreements to reduce our interest rate market risk. We do not use financial instruments for trading or speculative purposes and all financial instruments are entered into in accordance with established policies and procedures.instruments.

We monitor our market risk exposures using a sensitivity analysis. Our sensitivity analysis estimates the exposure to market risk sensitive instruments assuming a hypothetical 10% adverse change in exchange or interest rates at December 31, 2013.2016. The results of the sensitivity analysis are

summarized below.in the following sections. The sensitivity analysis is of limited predictive value. As a result, revenues and expenses, as well as our ultimate realized gains or losses with respect to interest rate and foreign currency exchange rate fluctuations will depend on the exposures that arise during a future period, hedging strategies at the time and the prevailing interest and foreign currency exchange rates. The failure to hedge effectively against exchange and interest rate changes may materially adversely affect our results of operations and financial position.

Foreign Currency Risk

We are exposed to foreign exchange-related variability of investments and earnings from our foreign investments. Foreign currency market risk is the possibility that our financial results or financial position could be better or worse than planned because of changes in foreign currency exchange rates.

Our primary exposure to foreign currency exchange rates relates to the translation of the net income and net investment At December 31, 2016, after consideration of our foreign entities intoderivative and nonderivative financial instruments, we had net equity of approximately $1.6 billion denominated in a currency other than the U.S. dollar principally euro, British pound sterling and Japanese yen, especially to the extent we wish to repatriate funds to the United States. We also have some exposure to movementsrepresenting 7.9% of total net equity. Based on our sensitivity analysis, a 10% reduction in exchange rates relatedwould cause a reduction of $161 million to certain intercompany loansour net equity.

At December 31, 2016, we issue from time to time. To mitigate our foreign currency exchange exposure, we borrow in the functional currency of the borrowing entity, when appropriate. We also may usehad foreign currency forward contracts, or other forms of hedging instruments to manage foreign currency exchange rate risk associated with the projectedwhich were designated and qualify as net operating income or net equity of our foreign consolidated subsidiaries and unconsolidated entities. Hedging arrangements involve risks, such as the risk that counterparties may fail to honor their obligations under these arrangements and the risk of fluctuation in the relative value of the foreign currency. The funds required to settle such arrangements could be significant depending on the stability and movement of foreign currency. The failure to hedge effectively against exchange and interest rate changes may materially adversely affect our results of operations and financial position. We may experience fluctuations in our earnings as a result of changes in foreign currency exchange rates.

In 2013, we entered into seven foreign currency forward contracts that expire in June 2017 and June 2018investment hedges, with an aggregate notional amount of €599.9$146 million ($800.0 million using the forward rate of 1.33) to hedge a portion of our investmentinvestments in Europe at a fixed euro rate in U.S. dollars. We also entered into three foreign currency forward contracts that expire in June 2018 with an aggregate notional amount of ¥24.1 billion ($250.0 million usingCanada and the forward rate of 96.54) to hedge a portionU.K. On the basis of our investment in Japan at a fixed yen rate in U.S. dollars. Based on a sensitivity analysis, a strengthening or weakening of the U.S. dollar against the euro and Japanese yenBritish pound sterling or Canadian dollar by 10% would result in a $105.0$15 million positive or negative change respectively, in our cash flows upon settlementon settlement. In addition, we also have British pound sterling, Canadian dollar, euro and Japanese yen forward and option contracts, which were not designated as hedges, and have an aggregate notional amount of $457 million to mitigate risk associated with the translation of the forward contracts. These derivatives were designatedprojected earnings of our subsidiaries in Canada, Europe and qualify as hedging instruments and thereforeJapan. A

42


weakening of the changes in fair value of these derivatives will be recorded in the foreign currency translation component ofAccumulated Other Comprehensive Loss in the Consolidated Balance Sheets in Item 8.

We issued €700 million ($950.5 million) of debt during December 2013. This debt was issued by the Operating Partnership, which is a U.S. dollar functional entity. To mitigate the risk of fluctuationsagainst these currencies by 10% would result in the exchange rate of the euro, we designated the debt as a non-derivative financial instrument hedge, and as a result, the$46 million negative change in the value of this debt upon translation into U.S. dollars is recorded in the foreign currency translation component ofAccumulated Other Comprehensive Lossin the Consolidated Balance Sheets in Item 8 to offset the foreign currency fluctuations related to our investment in Europe.

We may enter into similar agreements in the future to further hedge our investments in Europe, Japan or other regions outside the United States. As of December 31, 2013, taking into account the net investment hedges, approximately 77% of our net equity was denominated in U.S. dollars.income and cash flows on settlement.

Interest Rate Risk

Our interest rate risk objective is

We also are exposed to limit the impact of future interest rate changes on future earnings and cash flows. To achieve this objective, we primarily borrow on a fixed rate basis for longer-term debt issuances. As ofAt December 31, 2013,2016, we had a total of $1.4$1.8 billion of variable rate debt outstanding, of which $725.5$1.5 billion was outstanding on our term loans, $279 million was outstanding on secured mortgage debt and $35 million was outstanding on our credit facilities, $535.9 million was outstanding under a multi-currency senior term loan and $96.0 million was outstanding secured mortgage debt. As offacilities. At December 31, 2013,2016, we have entered intohad interest rate swap agreements to fix $71.0$276 million (CAD $372 million) of our variable rate secured mortgage debt.

Our primary interest rate risk not subject to interest rate swap agreements is created by the variable rate credit facilities, seniorCanadian term loan and certain secured mortgage debt.loan. During the year ended December 31, 2013,2016, we had weighted average daily outstanding borrowings of $1.4 billion$126 million on our variable rate debt not subject to interest rate swap agreements. Based oncredit facilities. On the resultsbasis of aour sensitivity analysis, assuming a 10% adverse change in interest rates based on our average outstanding variable rate debt balances not subject to interest rate swap agreements during the period the impact was $2.2would result in additional annual interest expense of $2 million, which equates to a change in interest rates of 1611 basis points.

ITEM 8. Financial Statements and Supplementary Data

The Consolidated Balance Sheets as of Prologis, Inc. and Prologis, L.P. at December 31, 20132016, and 2012,2015, the Consolidated Statements of Operations,Income of Prologis, Inc. and Prologis, L.P., the Consolidated Statements of Comprehensive Income (Loss)of Prologis, Inc. and Prologis, L.P., Equity/the Consolidated Statements of Equity of Prologis, Inc., the Consolidated Statements of Capital of Prologis, L.P. and the Consolidated Statements Cash Flows of Prologis, Inc. and Prologis, L.P. for each of the years in the three-year period ended December 31, 2013,2016, Notes to Consolidated Financial Statements and Schedule III — Real Estate and Accumulated Depreciation, together with the reports of KPMG LLP, Independent Registered Public Accounting Firm,independent registered public accounting firm, are included under Item 15 of this report and are incorporated herein by reference. Selected unaudited quarterly financial data isare presented in Note 2320 of the Consolidated Financial Statements.

ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

ITEM 9A. Controls and Procedures

Controls and Procedures (Prologis, Inc.)(The Parent)

Prologis, Inc. carried out an evaluation under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities and Exchange Act) asAct of 1934 (the “Exchange Act”)) at December 31, 2013.2016. Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. Subsequent to December 31, 2013,2016, there were no significant changes in the internal controls or in other factors that could significantly affect these controls, including any corrective actions with regard to significant deficiencies and material weaknesses.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2013,2016, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management’s Annual Report on Internal Control over Financial Reporting

We are responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of the internal control over financial reporting was conducted as ofat December 31, 2013,2016, based on the criteria described in “Internal Control — Integrated Framework” (1992)(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management determined that, as ofat December 31, 2013,2016, the internal control over financial reporting was effective.

Our internal control over financial reporting as ofat December 31, 2013,2016, has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their attestation report which is included herein.

Limitations of the Effectiveness of Controls

Management’s assessment included an evaluation of the design of the internal control over financial reporting and testing of the operational effectiveness of the internal control over financial reporting. The internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent

43


or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Controls and Procedures (The Operating Partnership)

Prologis, L.P. carried out an evaluation under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) at December 31, 2016. Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. Subsequent to December 31, 2016, there were no significant changes in the internal controls or in other factors that could significantly affect these controls, including any corrective actions with regard to significant deficiencies and material weaknesses.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2016, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management’s Annual Report on Internal Control over Financial Reporting

We are responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of the internal control over financial reporting was conducted at December 31, 2016, based on the criteria described in “Internal Control — Integrated Framework” (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management determined that, at December 31, 2016, the internal control over financial reporting was effective.

Limitations of the Effectiveness of Controls

Management’s assessment included an evaluation of the design of the internal control over financial reporting and testing of the operational effectiveness of the internal control over financial reporting. The internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Controls and Procedures (Prologis, L.P.)

Prologis, L.P. carried out an evaluation under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act as of December 31, 2013. Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms. Subsequent to December 31, 2013, there were no significant changes in the internal controls or in other factors that could significantly affect these controls, including any corrective actions with regard to significant deficiencies and material weaknesses.

Changes in Internal Control over Financial Reporting

There has been no change in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) that occurred during the quarter ended December 31, 2013, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Management’s Annual Report on Internal Control over Financial Reporting

We are responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.

Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of the internal control over financial reporting was conducted as of December 31, 2013, based on the criteria described in “Internal Control — Integrated Framework” (1992) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management determined that, as of December 31, 2013, the internal control over financial reporting was effective.

Limitations of the Effectiveness of Controls

Management’s assessment included an evaluation of the design of the internal control over financial reporting and testing of the operational effectiveness of the internal control over financial reporting. The internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

ITEM 9B. Other Information

None.

PART III

ITEM 10. Directors, Executive Officers and Corporate Governance

The information required by this item is incorporated herein by reference to, including relevant sections in our 2017 Proxy Statement, under the captions entitled Board of Directors and OfficersCorporate Governance; Executive Officers; Executive Compensation; Director Compensation; Security Ownership; Equity Compensation Plans and Additional Information or will be provided in an amendment filed on Form 10-K/A.

ITEM 11. Executive Compensation

The information required by this item is incorporated herein by reference to the descriptionsrelevant sections in our 2017 Proxy Statement, under the captions “Electionentitled Board of Directors — Nominees,” Information Relating to Stockholders, Directors, Nominees, and Corporate Governance; Executive Officers — Certain Information with Respect toOfficers; Executive Officers, “Additional Information — Section 16(a) Beneficial Ownership Reporting Compliance,” “Corporate Governance ,”Compensation and “Board of Directors” in our 2014 Proxy StatementDirector Compensation or will be provided in an amendment filed on Form 10-K/A.

ITEM 11. Executive Compensation

The information required by this item is incorporated herein by reference to the descriptions under the captions “Executive Compensation Matters” and “Board of Directors and Committees” in our 2014 Proxy Statement or will be provided in an amendment filed on Form 10-K/A.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this item is incorporated herein by reference to the descriptions under the captions “Information Relating to Stockholders, Directors, Nominees, and Executive Officers — Security Ownership” and “Equity Compensation Plans” in our 2014 Proxy Statement or will be provided in an amendment filed on Form 10-K/A.

ITEM 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this item is incorporated herein by reference to the descriptions under the captions “Information Relating to Stockholders, Directors, Nominees, and Executive Officers — Certain Relationships and Related Transactions” and “Corporate Governance” in our 2014 Proxy Statement or will be provided in an amendment filed on Form 10-K/A.

ITEM 14. Principal Accounting Fees and Services

The information required by this item is incorporated herein by reference to the descriptionrelevant sections in our 2017 Proxy Statement, under the caption “Independent Registered Public Accounting Firm” in our 2014 Proxy Statementcaptions entitled Security Ownership and Equity Compensation Plans or will be provided in an amendment filed on Form 10-K/A.

44


ITEM 13. Certain Relationships and Related Transactions, and Director Independence

The information required by this item is incorporated herein by reference to the relevant sections in our 2017 Proxy Statement, under the caption entitled Board of Directors and Corporate Governance or will be provided in an amendment filed on Form 10-K/A.

ITEM 14. Principal Accounting Fees and Services

The information required by this item is incorporated herein by reference to the relevant sections in our 2017 Proxy Statement, under the caption entitled Audit Matters or will be provided in an amendment filed on Form 10-K/A.

PART IV

ITEM 15. Exhibits, Financial StatementStatements and Schedules

The following documents are filed as a part of this report:

 

(a)Financial Statements and Schedules:

(a) Financial Statements and Schedules:

 

1. FinancialStatements:

1. Financial Statements:

See Index to the Consolidated Financial Statements and Schedule III on page 4746 of this report, which is incorporated herein by reference.

 

2.Financial Statement Schedules:

2. Financial Statement Schedules:

Schedule III — Real Estate and Accumulated Depreciation

All other schedules have been omitted since the required information is presented in the Consolidated Financial Statements and the related Notes or is not applicable.

(b) Exhibits: The Exhibits required by Item 601 of Regulation S-K are listed in the Index to the Exhibits on pages 121116 to 126121 of this report, which is incorporated herein by reference.

(c) Financial Statements: See Index to the Consolidated Financial Statements and Schedule III on page 4746 of this report, which is incorporated by reference.

ITEM 16. Form 10-K Summary

Not Applicable.

45


INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE III

 

Page

Number

Prologis, Inc. and Prologis, L.P.:

Reports of Independent Registered Public Accounting Firm

48

47

Prologis, Inc.:

Consolidated Balance Sheets

51

50

Consolidated Statements of OperationsIncome

52

51

Consolidated Statements of Comprehensive Income (Loss)

53

52

Consolidated Statements of Equity

54

53

Consolidated Statements of Cash Flows

55

54

Prologis, L.P.:

Consolidated Balance Sheets

56

55

Consolidated Statements of OperationsIncome

57

56

Consolidated Statements of Comprehensive Income (Loss)

58

57

Consolidated Statements of Capital

59

58

Consolidated Statements of Cash Flows

60

59

Prologis, Inc. and Prologis, L.P.:

Notes to the Consolidated Financial Statements

61

60

Note 1. Description of Business

60

Note 2. Summary of Significant Accounting Policies

60

Note 3. Business Combination

68

Note 4. Real Estate

69

Note 5. Unconsolidated Entities

71

Note 6. Assets Held for Sale or Contribution

74

Note 7. Notes Receivable Backed by Real Estate

75

Note 8. Other Assets and Other Liabilities

75

Note 9. Debt

76

Note 10. Stockholders' Equity of Prologis, Inc.

80

Note 11. Partners' Capital of Prologis, L.P.

81

Note 12. Noncontrolling Interests

82

Note 13. Long-Term Compensation

83

Note 14. Income Taxes

86

Note 15. Earnings Per Common Share or Unit

87

Note 16. Financial Instruments and Fair Value Measurements

89

Note 17. Commitments and Contingencies

92

Note 18. Business Segments

93

Note 19. Supplemental Cash Flow Information

95

Note 20. Selected Quarterly Financial Data (Unaudited)

96

Reports of Independent Registered Public Accounting Firm

104

98

Schedule III — Real Estate and Accumulated Depreciation

106

100

46


REPORTREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

Prologis, Inc.:

We have audited the accompanying consolidated balance sheets of Prologis, Inc. and subsidiaries (the “Company”) as of December 31, 20132016 and 2012,2015, and the related consolidated statements of operations,income, comprehensive income, (loss), equity, and cash flows for each of the years in the three-year period ended December 31, 2013.2016. These consolidated financial statements are the responsibility of Prologis, Inc.’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Prologis, Inc. and subsidiaries as of December 31, 20132016 and 2012,2015, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2013,2016, in conformity with U.S. generally accepted accounting principles.

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for discontinued

operations as of January 1, 2014, on a prospective basis, due to the adoption of Accounting Standards Update 2014-08.

As discussed in Note 2 to the consolidated financial statements, during 2016 the Company has changed its method for classifying distributions received from equity method investees in the statements of cash flows for all periods presented, on a retrospective basis, due to the early adoption of Accounting Standards Update 2016-15.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Prologis, Inc.’s internal control over financial reporting as of December 31, 2013,2016, based on criteria established inInternal Control — Integrated Framework(1992) (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 26, 201414, 2017 expressed an unqualified opinion on the effectiveness of Prologis, Inc.’s internal control over financial reporting.

/s/ KPMG LLP

Denver, Colorado

February 26, 2014

14, 2017

47


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Partners

Prologis, L.P.:

We have audited the accompanying consolidated balance sheets of Prologis, L.P. and subsidiaries (the “Company”) as of December 31, 20132016 and 2012,2015, and the related consolidated statements of operations,income, comprehensive income, (loss), capital, and cash flows for each of the years in the three-year period ended December 31, 2013.2016. These consolidated financial statements are the responsibility of Prologis, L.P.’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for discontinued operations as of January 1, 2014, on a prospective basis, due to the adoption of Accounting Standards Update 2014-08.

As discussed in Note 2 to the consolidated financial statements, during 2016 the Operating Partnership has changed its method for classifying distributions received from equity method investees in the statements of cash flows for all periods presented, on a retrospective basis, due to the early adoption of Accounting Standards Update 2016-15.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Prologis, L.P. and subsidiaries as of December 31, 20132016 and 2012,2015, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2013,2016, in conformity with U.S. generally accepted accounting principles.

/s/ KPMG LLP

Denver, Colorado

February 26, 2014

14, 2017

48


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

Prologis, Inc.:

We have audited Prologis, Inc.’s internal control over financial reporting as of December 31, 2013,2016, based on criteria established inInternal Control — Integrated Framework (1992) (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Prologis, Inc.’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on Prologis, Inc.’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Prologis, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013,2016, based on criteria established inInternal Control — Integrated Framework(1992) (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Prologis, Inc. and subsidiaries as of December 31, 20132016 and 2012,2015, and the related consolidated statements of operations,income, comprehensive income, (loss), equity, and cash flows for each of the years in the three-year period ended December 31, 2013,2016, and our report dated February 26, 201414, 2017 expressed an unqualified opinion on those consolidated financial statements.

/s/ KPMG LLP

Denver, Colorado

February 26, 2014

14, 2017

49


PROLOGIS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share data)

 

   December 31, 
    2013   2012 

ASSETS

  

Investments in real estate properties

  $20,824,477    $25,809,123  

Less accumulated depreciation

   2,568,998     2,480,660  
  

 

 

   

 

 

 

Net investments in real estate properties

   18,255,479     23,328,463  

Investments in and advances to unconsolidated entities

   4,430,239     2,195,782  

Notes receivable backed by real estate

   188,000     188,000  

Assets held for sale

   4,042     26,027  
  

 

 

   

 

 

 

Net investments in real estate

   22,877,760     25,738,272  

Cash and cash equivalents

   491,129     100,810  

Restricted cash

   14,210     176,926  

Accounts receivable

   128,196     171,084  

Other assets

   1,061,012     1,123,053  
  

 

 

   

 

 

 

Total assets

  $        24,572,307    $        27,310,145  

LIABILITIES AND EQUITY

    

Liabilities:

    

Debt

  $9,011,216    $11,790,794  

Accounts payable and accrued expenses

   641,011     611,770  

Other liabilities

   742,191     1,115,911  

Liabilities related to assets held for sale

   1,436     18,334  
  

 

 

   

 

 

 

Total liabilities

   10,395,854     13,536,809  
  

 

 

   

 

 

 

Equity:

    

Prologis, Inc. stockholders’ equity:

    

Preferred stock

   100,000     582,200  

Common stock; $0.01 par value; 498,799 shares and 461,770 shares issued and outstanding at December 31, 2013 and December 31, 2012, respectively

   4,988     4,618  

Additional paid-in capital

   17,974,509     16,411,855  

Accumulated other comprehensive loss

   (435,675)     (233,563)  

Distributions in excess of net earnings

   (3,932,664)     (3,696,093)  
  

 

 

   

 

 

 

Total Prologis, Inc. stockholders’ equity

   13,711,158     13,069,017  

Noncontrolling interests

   465,295     704,319  
  

 

 

   

 

 

 

Total equity

   14,176,453     13,773,336  
  

 

 

   

 

 

 

Total liabilities and equity

  $24,572,307    $27,310,145  

The accompanying notes are an integral part of these Consolidated Financial Statements.

PROLOGIS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

Years Ended December 31, 2013, 2012, 2011

(In thousands, except per share amounts)

 

Year Ended December 31,

 

 

2016

 

 

2015

 

ASSETS

 

 

 

 

 

 

 

Investments in real estate properties

$

27,119,330

 

 

$

27,521,368

 

Less accumulated depreciation

 

3,758,372

 

 

 

3,274,284

 

Net investments in real estate properties

 

23,360,958

 

 

 

24,247,084

 

Investments in and advances to unconsolidated entities

 

4,230,429

 

 

 

4,755,620

 

Assets held for sale or contribution

 

322,139

 

 

 

378,423

 

Notes receivable backed by real estate

 

32,100

 

 

 

235,050

 

Net investments in real estate

 

27,945,626

 

 

 

29,616,177

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

807,316

 

 

 

264,080

 

Other assets

 

1,496,990

 

 

 

1,514,510

 

Total assets

$

30,249,932

 

 

$

31,394,767

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

Debt

$

10,608,294

 

 

$

11,626,831

 

Accounts payable and accrued expenses

 

556,179

 

 

 

712,725

 

Other liabilities

 

627,319

 

 

 

634,375

 

Total liabilities

 

11,791,792

 

 

 

12,973,931

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

Prologis, Inc. stockholders’ equity:

 

 

 

 

 

 

 

Series Q preferred stock at stated liquidation preference of $50 per share; $0.01 par value; 1,565 shares

     issued and outstanding and 100,000 preferred shares authorized at December 31, 2016, and 2015

 

78,235

 

 

 

78,235

 

Common stock; $0.01 par value; 528,671 shares and 524,512 shares issued and outstanding at

     December 31, 2016, and 2015, respectively

 

5,287

 

 

 

5,245

 

Additional paid-in capital

 

19,455,039

 

 

 

19,302,367

 

Accumulated other comprehensive loss

 

(937,473

)

 

 

(791,429

)

Distributions in excess of net earnings

 

(3,610,007

)

 

 

(3,926,483

)

Total Prologis, Inc. stockholders’ equity

 

14,991,081

 

 

 

14,667,935

 

Noncontrolling interests

 

3,467,059

 

 

 

3,752,901

 

Total equity

 

18,458,140

 

 

 

18,420,836

 

Total liabilities and equity

$

30,249,932

 

 

$

31,394,767

 

 

   2013  2012  2011 

Revenues:

   

Rental income

 $      1,227,975   $1,459,461   $      1,007,989  

Rental recoveries

  331,518    364,320    257,327  

Investment management income

  179,472    126,779    137,619  

Development management and other income

  11,521    9,958    18,836  
 

 

 

  

 

 

  

 

 

 

Total revenues

  1,750,486    1,960,518    1,421,771  
 

 

 

  

 

 

  

 

 

 

Expenses:

   

Rental expenses

  451,938    491,239    348,688  

Investment management expenses

  89,279    63,820    54,962  

General and administrative expenses

  229,207    228,068    195,161  

Depreciation and amortization

  648,668    724,262    542,419  

Other expenses

  26,982    26,556    24,031  

Merger, acquisition and other integration expenses

     80,676    140,495  

Impairment of real estate properties

     252,914    21,237  
 

 

 

  

 

 

  

 

 

 

Total expenses

  1,446,074    1,867,535    1,326,993  
 

 

 

  

 

 

  

 

 

 

Operating income

  304,412    92,983    94,778  

Other income (expense):

   

Earnings from unconsolidated entities, net

  97,220    31,676    59,935  

Interest expense

  (379,327)    (505,215)    (466,571)  

Interest and other income, net

  26,948    22,878    12,008  

Gains on acquisitions and dispositions of investments in real estate, net

  597,656    305,607    111,684  

Foreign currency and derivative gains (losses), net

  (33,633)    (20,497)    41,172  

Gain (loss) on early extinguishment of debt, net

  (277,014)    (14,114)    258  

Impairment of other assets

     (16,135)    (126,432)  
 

 

 

  

 

 

  

 

 

 

Total other income (expense)

  31,850    (195,800)    (367,946)  
 

 

 

  

 

 

  

 

 

 

Earnings (loss) before income taxes

  336,262    (102,817)    (273,168)  

Current income tax expense

  126,180    17,870    21,579  

Deferred income tax benefit

  (19,447)    (14,290)    (19,803)  
 

 

 

  

 

 

  

 

 

 

Total income tax expense

  106,733    3,580    1,776  
 

 

 

  

 

 

  

 

 

 

Earnings (loss) from continuing operations

  229,529    (106,397)    (274,944)  
 

 

 

  

 

 

  

 

 

 

Discontinued operations:

   

Income attributable to disposed properties and assets held for sale

  6,970    40,827    58,392  

Net gains on dispositions, including related impairment charges and taxes

  116,550    35,098    58,614  
 

 

 

  

 

 

  

 

 

 

Total discontinued operations

  123,520    75,925    117,006  
 

 

 

  

 

 

  

 

 

 

Consolidated net earnings (loss)

  353,049    (30,472)    (157,938)  

Net loss (earnings) attributable to noncontrolling interests

  (10,128)    (9,248)    4,524  
 

 

 

  

 

 

  

 

 

 

Net earnings (loss) attributable to controlling interests

  342,921    (39,720)    (153,414)  

Less preferred stock dividend

  18,391    41,226    34,696  

Loss on preferred stock redemption

  9,108        
 

 

 

  

 

 

  

 

 

 

Net earnings (loss) attributable to common stockholders

 $315,422   $(80,946)   $(188,110)  
 

 

 

  

 

 

  

 

 

 

Weighted average common shares outstanding - Basic

  486,076    459,895    370,534  
 

 

 

  

 

 

  

 

 

 

Weighted average common shares outstanding - Diluted

  491,546    461,848    371,730  
 

 

 

  

 

 

  

 

 

 

Net earnings (loss) per share attributable to common stockholders - Basic:

   

Continuing operations

 $0.40   $(0.35)   $(0.83)  

Discontinued operations

  0.25    0.17    0.32  
 

 

 

  

 

 

  

 

 

 

Net earnings (loss) per share attributable to common stockholders - Basic

 $0.65   $(0.18)   $(0.51)  
 

 

 

  

 

 

  

 

 

 

Net earnings (loss) per share attributable to common stockholders - Diluted:

   

Continuing operations

 $0.39   $(0.34)   $(0.82)  

Discontinued operations

  0.25    0.16    0.31  
 

 

 

  

 

 

  

 

 

 

Net earnings (loss) per share attributable to common stockholders - Diluted

 $0.64   $(0.18)   $(0.51)  
 

 

 

  

 

 

  

 

 

 

Dividends per common share

 $1.12   $1.12   $1.06  

The accompanying notes are an integral part of these Consolidated Financial Statements.

PROLOGIS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Years Ended December 31, 2013, 2012 and 2011

(In thousands)

    2013   2012   2011 

Consolidated net earnings (loss)

  $        353,049    $        (30,472)    $        (157,938)  

Other comprehensive income (loss):

      

Foreign currency translation losses, net

   (234,680)     (79,014)     (192,591)  

Unrealized gain (loss) and amortization on derivative contracts, net

   19,590     17,986     (8,166)  
  

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

   137,959     (91,500)     (358,695)  

Net loss (earnings) attributable to noncontrolling interests

   (10,128)     (9,248)     4,524  

Other comprehensive loss attributable to noncontrolling interest

   12,978     9,786     21,596  
  

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributable to common stockholders

  $140,809    $(90,962)    $(332,575)  

The accompanying notes are an integral part of these Consolidated Financial Statements.

PROLOGIS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

Years Ended December 31, 2013, 2012 and 2011

(In thousands)

   Preferred
Stock
  Common Stock  Additional
Paid-in
Capital
  Accumulated
Other
Comprehensive
Income (Loss)
  Distributions
in Excess of
Net Earnings
  Non-
controlling
Interests
  Total Equity 
  Number
of
Shares
  Par
Value
      

Balance as of January 1, 2011

 $350,000    254,482   $2,545   $9,671,560   $(3,160)   $(2,515,722)   $15,132   $7,520,355  

Consolidated net loss

                     (153,414)    (4,524)    (157,938)  

Merger and PEPR Acquisition

  232,200    169,626    1,696    5,552,412            751,068    6,537,376  

Issuances of stock in equity offering, net of issuance costs

      34,500    345    1,111,787                1,112,132  

Effect of common stock plans

      793    8    2,390                2,398  

Capital contributions, net

                          94,020    94,020  

Foreign currency translation losses, net

                  (170,995)        (21,596)    (192,591)  

Unrealized losses and amortization on derivative contracts, net

                  (8,166)            (8,166)  

Distributions and allocations

              11,179        (423,026)    (40,265)    (452,112)  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance as of December 31, 2011

 $582,200    459,401   $4,594   $16,349,328   $(182,321)   $(3,092,162)   $793,835   $14,455,474  

Consolidated net earnings (loss)

                      (39,720)    9,248    (30,472)  

Adjustment to the Merger purchase price allocation

                          10,163    10,163  

Effect of common stock plans

      2,258    23    72,909                72,932  

Noncontrolling interests, issuances

        

(conversions), net

      111    1    2,380            (2,381)      

Capital contributions, net

                          74,447    74,447  

Purchase of noncontrolling interests

              (13,998)            (128,066)    (142,064)  

Foreign currency translation losses, net

                  (69,155)        (9,859)    (79,014)  

Unrealized gains and amortization on derivative contracts, net

                  17,913        73    17,986  

Distributions and allocations

              1,236        (564,211)    (43,141)    (606,116)  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance as of December 31, 2012

 $582,200    461,770   $4,618   $16,411,855   $(233,563)   $(3,696,093)   $704,319   $13,773,336  

Consolidated net earnings

                      342,921    10,128    353,049  

Effect of common stock plans

      1,351    13    93,692                93,705  

Issuance of stock in equity offering, net of issuance costs

      35,650    357    1,437,340                1,437,697  

Redemption of preferred stock

  (482,200)            8,593        (9,108)        (482,715)  

Issuance of warrants

              32,359                32,359  

Capital contributions

                          146,130    146,130  

Settlement of noncontrolling interests

      28        (7,868)            (247,683)    (255,551)  

Foreign currency translation losses, net

                  (221,633)        (13,047)    (234,680)  

Unrealized gains and amortization on derivative contracts, net

                  19,521        69    19,590  

Distributions and allocations

              (1,462)        (570,384)    (134,621)    (706,467)  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance as of December 31, 2013

 $      100,000    498,799   $    4,988   $    17,974,509   $    (435,675)   $    (3,932,664)   $    465,295   $    14,176,453  

The accompanying notes are an integral part of these Consolidated Financial Statements.

PROLOGIS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2013, 2012 and 2011

(In thousands)

   2013  2012  2011 

Operating activities:

   

Consolidated net earnings (loss)

 $    353,049   $    (30,472)   $    (157,938)  

Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:

   

Straight-lined rents

  (46,861)    (62,290)    (59,384)  

Stock-based compensation awards, net

  49,239    32,138    28,920  

Depreciation and amortization

  664,007    767,459    603,884  

Earnings from unconsolidated entities, net

  (97,220)    (31,676)    (59,935)  

Distributions and changes in operating receivables from unconsolidated entities

  75,859    6,581    58,981  

Amortization of debt and lease intangibles

  10,140    21,008    43,556  

Non-cash merger, acquisition and other integration expenses

      17,581    20,290  

Impairment of real estate properties and other assets

      269,049    147,669  

Net gains on dispositions, net of related impairment charges, in discontinued operations

  (118,102)    (43,008)    (61,830)  

Gains on acquisitions and dispositions of investments in real estate, net

  (597,656)    (305,607)    (111,684)  

Losses (gains) on early extinguishment of debt, net

  277,014    14,114    (258)  

Unrealized foreign currency and derivative losses (gains), net

  28,619    14,892    (38,398)  

Deferred income tax benefit

  (20,067)    (21,967)    (19,803)  

Increase in restricted cash, accounts receivable and other assets

  (12,912)    (178,387)    (40,095)  

Decrease in accounts payable and accrued expenses and other liabilities

  (80,120)    (5,923)    (146,911)  
 

 

 

  

 

 

  

 

 

 

Net cash provided by operating activities

  484,989    463,492    207,064  
 

 

 

  

 

 

  

 

 

 

Investing activities:

   

Real estate development activity

  (845,234)    (793,349)    (811,035)  

Real estate acquisitions, net of cash received

  (514,611)    (254,414)    (214,759)  

Tenant improvements and lease commissions on previously leased space

  (145,424)    (133,558)    (88,368)  

Non-development capital expenditures

  (82,610)    (80,612)    (55,702)  

Investments in and advances to unconsolidated entities, net

  (1,221,155)    (165,011)    (37,755)  

Return of investment from unconsolidated entities

  411,853    291,679    170,158  

Proceeds from dispositions and contributions of real estate properties

  5,409,745    1,975,036    1,644,152  

Proceeds from repayment of notes receivable backed by real estate and other notes receivable

      55,000    6,450  

Acquisition of co-investment ventures, net of cash received

  (678,642)    (365,156)      

Investments in notes receivable backed by real estate and advances on other notes receivable

          (55,000)  

Cash acquired in connection with the Merger

          234,045  

Acquisition of PEPR, net of cash received

          (1,025,251)  
 

 

 

  

 

 

  

 

 

 

Net cash provided by (used in) investing activities

  2,333,922    529,615    (233,065)  
 

 

 

  

 

 

  

 

 

 

Financing activities:

   

Proceeds from issuance of common stock, net

  1,505,791    30,981    1,156,493  

Dividends paid on common stock

  (552,170)    (520,253)    (387,133)  

Dividends paid on preferred stock

  (21,684)    (47,581)    (26,965)  

Redemption of preferred stock

  (482,500)          

Noncontrolling interest contributions

  145,522    70,820    123,924  

Noncontrolling interest distributions

  (115,999)    (44,070)    (17,378)  

Purchase of noncontrolling interest

  (250,740)    (142,064)      

Debt and equity issuance costs paid

  (77,017)    (10,963)    (77,241)  

Net proceeds from (payments on) credit facilities

  (93,075)    9,064    (37,558)  

Repurchase and early extinguishment of debt

  (3,985,673)    (1,653,989)    (894,249)  

Proceeds from the issuance of debt

  3,588,683    1,433,254    1,298,891  

Payments on debt

  (2,026,760)    (196,710)    (975,466)  
 

 

 

  

 

 

  

 

 

 

Net cash provided by (used in) financing activities

  (2,365,622)    (1,071,511)    163,318  
 

 

 

  

 

 

  

 

 

 

Effect of foreign currency exchange rate changes on cash

  (62,970)    3,142    1,121  

Net increase (decrease) in cash and cash equivalents

  390,319    (75,262)    138,438  

Cash and cash equivalents, beginning of year

  100,810    176,072    37,634  
 

 

 

  

 

 

  

 

 

 

Cash and cash equivalents, end of year

 $491,129   $100,810   $176,072  

See Note 22 for information on non-cash investing and financing activities and other information.

The accompanying notes are an integral part of these Consolidated Financial Statements.

50


PROLOGIS, L.P.

CONSOLIDATED BALANCE SHEETS

(In thousands)INC.

 

   December 31, 
    2013   2012 

ASSETS

  

Investments in real estate properties

   $      20,824,477    $25,809,123  

Less accumulated depreciation

   2,568,998     2,480,660  
  

 

 

   

 

 

 

Net investments in real estate properties

   18,255,479     23,328,463  

Investments in and advances to unconsolidated entities

   4,430,239     2,195,782  

Notes receivable backed by real estate

   188,000     188,000  

Assets held for sale

   4,042     26,027  
  

 

 

   

 

 

 

Net investments in real estate

   22,877,760     25,738,272  

Cash and cash equivalents

   491,129     100,810  

Restricted cash

   14,210     176,926  

Accounts receivable

   128,196     171,084  

Other assets

   1,061,012     1,123,053  
  

 

 

   

 

 

 

Total assets

   $24,572,307    $27,310,145  

LIABILITIES AND CAPITAL

    

Liabilities:

    

Debt

   $9,011,216    $11,790,794  

Accounts payable and accrued expenses

   641,011     611,770  

Other liabilities

   742,191     1,115,911  

Liabilities related to assets held for sale

   1,436     18,334  
  

 

 

   

 

 

 

Total liabilities

   10,395,854     13,536,809  
  

 

 

   

 

 

 

Capital:

    

Partners’ capital:

    

General partner - preferred

   100,000     582,200  

General partner - common

   13,611,158     12,486,817  

Limited partners

   48,209     51,194  
  

 

 

   

 

 

 

Total partners’ capital

   13,759,367     13,120,211  

Noncontrolling interests

   417,086     653,125  
  

 

 

   

 

 

 

Total capital

   14,176,453     13,773,336  
  

 

 

   

 

 

 

Total liabilities and capital

   $24,572,307    $27,310,145  

The accompanying notes are an integral part of these Consolidated Financial Statements.

PROLOGIS, L.P.

CONSOLIDATED STATEMENTS OF OPERATIONSINCOME

Years Ended December 31, 2013, 2012, 2011

(In thousands, except per unitshare amounts)

 

   2013  2012  2011 

Revenues:

   

Rental income

 $    1,227,975   $    1,459,461   $    1,007,989  

Rental recoveries

  331,518    364,320    257,327  

Investment management income

  179,472    126,779    137,619  

Development management and other income

  11,521    9,958    18,836  
 

 

 

  

 

 

  

 

 

 

Total revenues

  1,750,486    1,960,518    1,421,771  
 

 

 

  

 

 

  

 

 

 

Expenses:

   

Rental expenses

  451,938    491,239    348,688  

Investment management expenses

  89,279    63,820    54,962  

General and administrative expenses

  229,207    228,068    195,161  

Depreciation and amortization

  648,668    724,262    542,419  

Other expenses

  26,982    26,556    24,031  

Merger, acquisition and other integration expenses

      80,676    140,495  

Impairment of real estate properties

      252,914    21,237  
 

 

 

  

 

 

  

 

 

 

Total expenses

  1,446,074    1,867,535    1,326,993  
 

 

 

  

 

 

  

 

 

 

Operating income

  304,412    92,983    94,778  

Other income (expense):

   

Earnings from unconsolidated entities, net

  97,220    31,676    59,935  

Interest expense

  (379,327)    (505,215)    (466,571)  

Interest and other income, net

  26,948    22,878    12,008  

Gains on acquisitions and dispositions of investments in real estate, net

  597,656    305,607    111,684  

Foreign currency and derivative gains (losses), net

  (33,633)    (20,497)    41,172  

Gain (loss) on early extinguishment of debt, net

  (277,014)    (14,114)    258  

Impairment of other assets

      (16,135)    (126,432)  
 

 

 

  

 

 

  

 

 

 

Total other income (expense)

  31,850    (195,800)    (367,946)  
 

 

 

  

 

 

  

 

 

 

Earnings (loss) before income taxes

  336,262    (102,817)    (273,168)  

Current income tax expense

  126,180    17,870    21,579  

Deferred income tax benefit

  (19,447)    (14,290)    (19,803)  
 

 

 

  

 

 

  

 

 

 

Total income tax expense

  106,733    3,580    1,776  
 

 

 

  

 

 

  

 

 

 

Earnings (loss) from continuing operations

  229,529    (106,397)    (274,944)  
 

 

 

  

 

 

  

 

 

 

Discontinued operations:

   

Income attributable to disposed properties and assets held for sale

  6,970    40,827    58,392  

Net gains on dispositions, including related impairment charges and taxes

  116,550    35,098    58,614  
 

 

 

  

 

 

  

 

 

 

Total discontinued operations

  123,520    75,925    117,006  
 

 

 

  

 

 

  

 

 

 

Consolidated net earnings (loss)

  353,049    (30,472)    (157,938)  

Net loss (earnings) attributable to noncontrolling interests

  (8,920)    (9,410)    4,175  
 

 

 

  

 

 

  

 

 

 

Net earnings (loss) attributable to controlling interests

  344,129    (39,882)    (153,763)  

Less preferred unit distribution

  18,391    41,226    34,696  

Loss on preferred unit redemption

  9,108          
 

 

 

  

 

 

  

 

 

 

Net earnings (loss) attributable to common unitholders

 $316,630   $(81,108)   $(188,459)  
 

 

 

  

 

 

  

 

 

 

Weighted average common units outstanding - Basic

  487,936    461,848    371,730  
 

 

 

  

 

 

  

 

 

 

Weighted average common units outstanding - Diluted

  491,546    461,848    371,730  
 

 

 

  

 

 

  

 

 

 

Net earnings (loss) per unit attributable to common unitholders - Basic:

   

Continuing operations

 $0.40   $(0.34)   $(0.82)  

Discontinued operations

  0.25    0.16    0.31  
 

 

 

  

 

 

  

 

 

 

Net earnings (loss) per unit attributable to common unitholders - Basic

 $0.65   $(0.18)   $(0.51)  
 

 

 

  

 

 

  

 

 

 

Net earnings (loss) per unit attributable to common unitholders - Diluted:

   

Continuing operations

 $0.39   $(0.34)   $(0.82)  

Discontinued operations

  0.25    0.16    0.31  
 

 

 

  

 

 

  

 

 

 

Net earnings (loss) per unit attributable to common unitholders - Diluted

 $0.64   $(0.18)   $(0.51)  
 

 

 

  

 

 

  

 

 

 

Distributions per common unit

 $1.12   $1.12   $1.06  

The accompanying notes are an integral part of these Consolidated Financial Statements.

PROLOGIS, L.P.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Years Ended December 31, 2013, 2012 and 2011

(In thousands)

 

 

Year Ended December 31,

 

 

 

2016

 

 

2015

 

 

2014

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Rental

 

$

1,734,844

 

 

$

1,536,117

 

 

$

1,178,609

 

Rental recoveries

 

 

485,565

 

 

 

437,070

 

 

 

348,740

 

Strategic capital

 

 

294,552

 

 

 

210,362

 

 

 

219,871

 

Development management and other

 

 

18,174

 

 

 

13,525

 

 

 

13,567

 

Total revenues

 

 

2,533,135

 

 

 

2,197,074

 

 

 

1,760,787

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Rental

 

 

568,870

 

 

 

544,182

 

 

 

430,289

 

Strategic capital

 

 

128,506

 

 

 

108,422

 

 

 

115,430

 

General and administrative

 

 

222,067

 

 

 

217,227

 

 

 

229,332

 

Depreciation and amortization

 

 

930,985

 

 

 

880,373

 

 

 

642,461

 

Other

 

 

14,329

 

 

 

66,698

 

 

 

23,467

 

Total expenses

 

 

1,864,757

 

 

 

1,816,902

 

 

 

1,440,979

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

668,378

 

 

 

380,172

 

 

 

319,808

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Earnings from unconsolidated entities, net

 

 

206,307

 

 

 

159,262

 

 

 

134,288

 

Interest expense

 

 

(303,146

)

 

 

(301,363

)

 

 

(308,885

)

Interest and other income, net

 

 

8,101

 

 

 

25,484

 

 

 

25,768

 

Gains on dispositions of investments in real estate and revaluation of equity investments

     upon acquisition of a controlling interest, net

 

 

757,398

 

 

 

758,887

 

 

 

725,790

 

Foreign currency and derivative gains (losses), net

 

 

7,582

 

 

 

12,466

 

 

 

(17,841

)

Gains (losses) on early extinguishment of debt, net

 

 

2,484

 

 

 

(86,303

)

 

 

(165,300

)

Total other income

 

 

678,726

 

 

 

568,433

 

 

 

393,820

 

Earnings before income taxes

 

 

1,347,104

 

 

 

948,605

 

 

 

713,628

 

Total income tax expense (benefit)

 

 

54,564

 

 

 

23,090

 

 

 

(25,656

)

Consolidated net earnings

 

 

1,292,540

 

 

 

925,515

 

 

 

739,284

 

Less net earnings attributable to noncontrolling interests

 

 

82,608

 

 

 

56,076

 

 

 

103,101

 

Net earnings attributable to controlling interests

 

 

1,209,932

 

 

 

869,439

 

 

 

636,183

 

Less preferred stock dividends

 

 

6,714

 

 

 

6,651

 

 

 

7,431

 

Loss on preferred stock repurchase

 

 

-

 

 

 

-

 

 

 

6,517

 

Net earnings attributable to common stockholders

 

$

1,203,218

 

 

$

862,788

 

 

$

622,235

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding – Basic

 

 

526,103

 

 

 

521,241

 

 

 

499,583

 

Weighted average common shares outstanding – Diluted

 

 

546,666

 

 

 

533,944

 

 

 

506,391

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings per share attributable to common stockholders – Basic

 

$

2.29

 

 

$

1.66

 

 

$

1.25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings per share attributable to common stockholders – Diluted

 

$

2.27

 

 

$

1.64

 

 

$

1.24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dividends per common share

 

$

1.68

 

 

$

1.52

 

 

$

1.32

 

 

    2013   2012   2011 

Consolidated net earnings (loss)

  $        353,049    $        (30,472)    $        (157,938)  

Other comprehensive income (loss):

      

Foreign currency translation losses, net

   (234,680)     (79,014)     (192,591)  

Unrealized gain (loss) and amortization on derivative contracts, net

   19,590     17,986     (8,166)  
  

 

 

   

 

 

   

 

 

 

Comprehensive income (loss)

   137,959     (91,500)     (358,695)  

Net loss (earnings) attributable to noncontrolling interests

   (8,920)     (9,410)     4,175  

Other comprehensive loss attributable to noncontrolling interests

   12,261     9,573     21,596  
  

 

 

   

 

 

   

 

 

 

Comprehensive income (loss) attributable to common unitholders

  $141,300    $(91,337)    $(332,924)  

The accompanying notes are an integral part of these Consolidated Financial Statements.

PROLOGIS, L.P.

CONSOLIDATED STATEMENTS OF CAPITAL

Years Ended December 31, 2013, 2012 and 2011

(In thousands)

  General Partner  Limited Partners  Non-
controlling
Interests
  Total 
  Preferred  Common  Common   
   Units  Amount  Units  Amount  Units  Amount   

Balance as of January 1, 2011

  12,000       $  350,000    254,482       $  7,155,223           $       $  15,132       $  7,520,355  

Consolidated net loss

             (153,414)        (349)    (4,175)    (157,938)  

Merger and PEPR Acquisition

  9,300    232,200    169,626    5,554,108    2,059    70,141    680,927    6,537,376  

Issuance of units in exchange for contributions of equity offering proceeds

          34,500    1,112,132                1,112,132  

Effect of REIT’s common stock plans

          793    2,398                2,398  

Capital contributions, net

                          94,020    94,020  

Foreign currency translation losses, net

              (170,995)            (21,596)    (192,591)  

Unrealized losses and amortization on derivative contracts, net

              (8,166)                (8,166)  

Distributions and allocations

              (411,847)        (11,179)    (29,086)    (452,112)  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance as of December 31, 2011

  21,300   $582,200    459,401   $13,079,439    2,059   $58,613   $735,222   $14,455,474  

Consolidated net earnings (loss)

              (39,720)        (162)    9,410    (30,472)  

Adjustment to the Merger purchase price allocation

                          10,163    10,163  

Effect of REIT’s common stock plans

          2,258    72,932                72,932  

Noncontrolling interests, issuances (conversions), net

          111    2,381            (2,381)      

Capital contributions, net

                          74,447    74,447  

Purchase of noncontrolling interests

              (13,998)            (122,258)    (136,256)  

Foreign currency translation losses, net

              (69,155)        (286)    (9,573)    (79,014)  

Unrealized gains and amortization on derivative contracts, net

              17,913        73        17,986  

Distributions and allocations

              (562,975)    (166)    (7,044)    (41,905)    (611,924)  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance as of December 31, 2012

  21,300   $582,200    461,770   $12,486,817    1,893   $51,194   $653,125   $13,773,336  

Consolidated net earnings

              342,921        1,208    8,920    353,049  

Effect of REIT’s common stock plans

          1,351    93,705                93,705  

Issuance of units in exchange for contribution of equity offering proceeds

          35,650    1,437,697                1,437,697  

Redemption of preferred units

  (19,300)    (482,200)        (515)                (482,715)  

Issuance of warrants by the REIT

              32,359                32,359  

Capital contributions

                          146,130    146,130  

Settlement of noncontrolling interests

          28    (7,868)            (242,745)    (250,613)  

Foreign currency translation losses, net

              (221,633)        (786)    (12,261)    (234,680)  

Unrealized gains and amortization on derivative contracts, net

              19,521        69        19,590  

Distributions and allocations

              (571,846)    (126)    (3,476)    (136,083)    (711,405)  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Balance as of December 31, 2013

  2,000   $100,000    498,799   $13,611,158    1,767   $48,209   $417,086   $14,176,453  

The accompanying notes are an integral part of these Consolidated Financial Statements.

PROLOGIS, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2013, 2012 and 2011

(In thousands)

   2013  2012  2011 

Operating activities:

   

Consolidated net earnings (loss)

 $353,049   $(30,472)   $(157,938)  

Adjustments to reconcile net earnings (loss) to net cash provided by operating activities:

   

Straight-lined rents

  (46,861)    (62,290)    (59,384)  

REIT stock-based compensation awards, net

  49,239    32,138    28,920  

Depreciation and amortization

  664,007    767,459    603,884  

Earnings from unconsolidated entities, net

  (97,220)    (31,676)    (59,935)  

Distributions and changes in operating receivables from unconsolidated entities

  75,859    6,581    58,981  

Amortization of debt and lease intangibles

  10,140    21,008    43,556  

Non-cash Merger, acquisition and other integration expenses

      17,581    20,290  

Impairment of real estate properties and other assets

      269,049    147,669  

Net gains on dispositions, net of related impairment charges, in discontinued operations

  (118,102)    (43,008)    (61,830)  

Gains on acquisitions and dispositions of investments in real estate, net

  (597,656)    (305,607)    (111,684)  

Losses (gains) on early extinguishment of debt, net

  277,014    14,114    (258)  

Unrealized foreign currency and derivative losses (gains), net

  28,619    14,892    (38,398)  

Deferred income tax benefit

  (20,067)    (21,967)    (19,803)  

Increase in restricted cash, accounts receivable and other assets

  (12,912)    (178,387)    (40,095)  

Decrease in accounts payable and accrued expenses and other liabilities

  (80,120)    (5,923)    (146,911)  
 

 

 

  

 

 

  

 

 

 

Net cash provided by operating activities

  484,989    463,492    207,064  
 

 

 

  

 

 

  

 

 

 

Investing activities:

   

Real estate development activity

  (845,234)    (793,349)    (811,035)  

Real estate acquisitions, net of cash received

  (514,611)    (254,414)    (214,759)  

Tenant improvements and lease commissions on previously leased space

  (145,424)    (133,558)    (88,368)  

Non-development capital expenditures

  (82,610)    (80,612)    (55,702)  

Investments in and advances to unconsolidated entities, net

  (1,221,155)    (165,011)    (37,755)  

Return of investment from unconsolidated entities

  411,853    291,679    170,158  

Proceeds from dispositions and contributions of real estate properties

  5,409,745    1,975,036    1,644,152  

Proceeds from repayment of notes receivable backed by real estate and other notes receivable

      55,000    6,450  

Acquisition of co-investment ventures net of cash received

  (678,642)    (365,156)      

Investments in notes receivable backed by real estate and advances on other notes receivable

          (55,000)  

Cash acquired in connection with the Merger

          234,045  

Acquisition of PEPR, net of cash received

          (1,025,251)  
 

 

 

  

 

 

  

 

 

 

Net cash provided by (used in) investing activities

  2,333,922    529,615    (233,065)  
 

 

 

  

 

 

  

 

 

 

Financing activities:

   

Proceeds from issuance of common partnership units in exchange for contributions from the REIT, net

  1,505,791    30,981    1,156,493  

Distributions paid on common partnership units

  (559,178)    (528,226)    (388,333)  

Distributions paid on preferred units

  (21,684)    (47,581)    (26,965)  

Redemption of preferred stock

  (482,500)          

Noncontrolling interest contributions

  145,522    70,820    123,924  

Noncontrolling interest distributions

  (113,928)    (41,905)    (16,178)  

Purchase of noncontrolling interest

  (245,803)    (136,256)      

Debt and equity issuance costs paid

  (77,017)    (10,963)    (77,241)  

Net proceeds from (payments on) credit facilities

  (93,075)    9,064    (37,558)  

Repurchase and early extinguishment of debt

  (3,985,673)    (1,653,989)    (894,249)  

Proceeds from the issuance of debt

  3,588,683    1,433,254    1,298,891  

Payments on debt

  (2,026,760)    (196,710)    (975,466)  
 

 

 

  

 

 

  

 

 

 

Net cash provided by (used in) financing activities

  (2,365,622)    (1,071,511)    163,318  
 

 

 

  

 

 

  

 

 

 

Effect of foreign currency exchange rate changes on cash

  (62,970)    3,142    1,121  

Net increase (decrease) in cash and cash equivalents

  390,319    (75,262)    138,438  

Cash and cash equivalents, beginning of year

  100,810    176,072    37,634  
 

 

 

  

 

 

  

 

 

 

Cash and cash equivalents, end of year

 $491,129   $100,810   $176,072  

See Note 22 for information on non-cash investing and financing activities and other information.

The accompanying notes are an integral part of these Consolidated Financial Statements.


51


PROLOGIS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

 

 

Year Ended December 31,

 

 

 

2016

 

 

2015

 

 

2014

 

Consolidated net earnings

 

$

1,292,540

 

 

$

925,515

 

 

$

739,284

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation losses, net

 

 

(135,958

)

 

 

(208,901

)

 

 

(171,401

)

Unrealized losses on derivative contracts, net

 

 

(1,349

)

 

 

(17,457

)

 

 

(6,498

)

Comprehensive income

 

 

1,155,233

 

 

 

699,157

 

 

 

561,385

 

Net earnings attributable to noncontrolling interests

 

 

(82,608

)

 

 

(56,076

)

 

 

(103,101

)

Other comprehensive loss (gain) attributable to noncontrolling interests

 

 

(8,737

)

 

 

35,266

 

 

 

13,237

 

Comprehensive income attributable to common stockholders

 

$

1,063,888

 

 

$

678,347

 

 

$

471,521

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

52


PROLOGIS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(In thousands)

 

 

 

 

 

Common Stock

 

 

 

 

 

 

Accumulated

 

 

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number

 

 

 

 

 

 

Additional

 

 

Other

 

 

in Excess of

 

 

Non-

 

 

 

 

 

 

Preferred

 

 

of

 

 

Par

 

 

Paid-in

 

 

Comprehensive

 

 

Net

 

 

controlling

 

 

Total

 

 

Stock

 

 

Shares

 

 

Value

 

 

Capital

 

 

Income (Loss)

 

 

Earnings

 

 

Interests

 

 

Equity

 

Balance at January 1, 2014

$

100,000

 

 

 

498,799

 

 

$

4,988

 

 

$

17,974,509

 

 

$

(435,675

)

 

$

(3,932,664

)

 

$

465,295

 

 

$

14,176,453

 

Consolidated net earnings

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

636,183

 

 

 

103,101

 

 

 

739,284

 

Effect of equity compensation plans

 

-

 

 

 

1,383

 

 

 

14

 

 

 

88,424

 

 

 

-

 

 

 

-

 

 

 

450

 

 

 

88,888

 

Issuance of stock in at-the-market

     program, net of issuance costs

 

-

 

 

 

3,316

 

 

 

33

 

 

 

140,102

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

140,135

 

Repurchase of preferred sock

 

(21,765

)

 

 

-

 

 

 

-

 

 

 

639

 

 

 

-

 

 

 

(6,517

)

 

 

-

 

 

 

(27,643

)

Issuance of stock from exercise of

     warrant

 

-

 

 

 

6,000

 

 

 

60

 

 

 

213,780

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

213,840

 

Formation of Prologis U.S. Logistics

     Venture

 

-

 

 

 

-

 

 

 

-

 

 

 

13,721

 

 

 

-

 

 

 

-

 

 

 

442,251

 

 

 

455,972

 

Consolidation of Prologis North

     American Industrial Fund

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

12,507

 

 

 

-

 

 

 

554,493

 

 

 

567,000

 

Capital contributions

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

14,464

 

 

 

14,464

 

Settlement of noncontrolling

     interests

 

-

 

 

 

-

 

 

 

-

 

 

 

33,803

 

 

 

-

 

 

 

-

 

 

 

(36,243

)

 

 

(2,440

)

Foreign currency translation

     losses, net

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(167,950

)

 

 

-

 

 

 

(13,214

)

 

 

(181,164

)

Unrealized losses and amortization

       on derivative contracts, net

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(9,219

)

 

 

-

 

 

 

(23

)

 

 

(9,242

)

Distributions and allocations

 

-

 

 

 

-

 

 

 

-

 

 

 

2,031

 

 

 

-

 

 

 

(671,495

)

 

 

(322,484

)

 

 

(991,948

)

Balance at December 31, 2014

$

78,235

 

 

 

509,498

 

 

$

5,095

 

 

$

18,467,009

 

 

$

(600,337

)

 

$

(3,974,493

)

 

$

1,208,090

 

 

$

15,183,599

 

Consolidated net earnings

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

869,439

 

 

 

56,076

 

 

 

925,515

 

Effect of equity compensation plans

 

-

 

 

 

1,475

 

 

 

15

 

 

 

57,454

 

 

 

-

 

 

 

-

 

 

 

26,234

 

 

 

83,703

 

Issuance of stock in at-the-market

     program, net of issuance costs

 

-

 

 

 

1,662

 

 

 

16

 

 

 

71,532

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

71,548

 

Issuance of stock upon conversion

    of exchangeable debt

 

-

 

 

 

11,872

 

 

 

119

 

 

 

502,613

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

502,732

 

Issuance of units related to KTR

     transaction

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

181,170

 

 

 

181,170

 

Issuance of units related to other

     acquisitions

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

371,570

 

 

 

371,570

 

Capital contributions

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,355,596

 

 

 

2,355,596

 

Foreign currency translation

     losses, net

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(173,852

)

 

 

-

 

 

 

(35,049

)

 

 

(208,901

)

Unrealized losses and amortization

     on derivative contracts, net

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(17,240

)

 

 

-

 

 

 

(217

)

 

 

(17,457

)

Reallocation of equity

 

-

 

 

 

-

 

 

 

-

 

 

 

202,812

 

 

 

-

 

 

 

(15,894

)

 

 

(186,918

)

 

 

-

 

Distributions and other

 

-

 

 

 

5

 

 

 

-

 

 

 

947

 

 

 

-

 

 

 

(805,535

)

 

 

(223,651

)

 

 

(1,028,239

)

Balance at December 31, 2015

$

78,235

 

 

 

524,512

 

 

$

5,245

 

 

$

19,302,367

 

 

$

(791,429

)

 

$

(3,926,483

)

 

$

3,752,901

 

 

$

18,420,836

 

Consolidated net earnings

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,209,932

 

 

 

82,608

 

 

 

1,292,540

 

Effect of equity compensation plans

 

-

 

 

 

2,282

 

 

 

23

 

 

 

91,191

 

 

 

-

 

 

 

-

 

 

 

26,483

 

 

 

117,697

 

Issuance of units related to

     acquisitions

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,162

 

 

 

3,162

 

Conversion of noncontrolling

     interests

 

-

 

 

 

1,877

 

 

 

19

 

 

 

52,237

 

 

 

-

 

 

 

-

 

 

 

(52,256

)

 

 

-

 

Foreign currency translation gains

     (losses), net

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(144,730

)

 

 

-

 

 

 

8,772

 

 

 

(135,958

)

Unrealized losses on derivative

     contracts, net

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,314

)

 

 

-

 

 

 

(35

)

 

 

(1,349

)

Reallocation of equity

 

-

 

 

 

-

 

 

 

-

 

 

 

8,657

 

 

 

-

 

 

 

-

 

 

 

(8,657

)

 

 

-

 

Distributions and other

 

-

 

 

 

-

 

 

 

-

 

 

 

587

 

 

 

-

 

 

 

(893,456

)

 

 

(345,919

)

 

 

(1,238,788

)

Balance at December 31, 2016

$

78,235

 

 

 

528,671

 

 

$

5,287

 

 

$

19,455,039

 

 

$

(937,473

)

 

$

(3,610,007

)

 

$

3,467,059

 

 

$

18,458,140

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

53


PROLOGIS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

 

Years Ended December 31,

 

 

 

2016

 

 

2015

 

 

2014

 

Operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated net earnings

 

$

1,292,540

 

 

$

925,515

 

 

$

739,284

 

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Straight-lined rents and amortization of above and below market leases

 

 

(93,608

)

 

 

(59,619

)

 

 

(14,392

)

Equity-based compensation awards

 

 

60,341

 

 

 

53,665

 

 

 

57,478

 

Depreciation and amortization

 

 

930,985

 

 

 

880,373

 

 

 

642,461

 

Earnings from unconsolidated entities, net

 

 

(206,307

)

 

 

(159,262

)

 

 

(134,288

)

Distributions from unconsolidated entities

 

 

286,651

 

 

 

284,664

 

 

 

294,890

 

Net changes in operating receivables from unconsolidated entities

 

 

14,823

 

 

 

(38,185

)

 

 

(7,503

)

Amortization of debt premiums, net of deferred financing costs

 

 

(15,137

)

 

 

(31,841

)

 

 

(7,324

)

Gains on dispositions of investments in real estate and revaluation of equity investments

     upon acquisition of a controlling interest, net

 

 

(757,398

)

 

 

(758,887

)

 

 

(725,790

)

Unrealized foreign currency and derivative losses (gains), net

 

 

(8,052

)

 

 

(1,019

)

 

 

22,571

 

Losses (gains) on early extinguishment of debt, net

 

 

(2,484

)

 

 

86,303

 

 

 

165,300

 

Deferred income tax benefit

 

 

(5,525

)

 

 

(5,057

)

 

 

(87,240

)

Increase in accounts receivable and other assets

 

 

(106,337

)

 

 

(64,749

)

 

 

(93

)

Increase (decrease) in accounts payable and accrued expenses and other liabilities

 

 

26,513

 

 

 

4,426

 

 

 

(50,881

)

Net cash provided by operating activities

 

 

1,417,005

 

 

 

1,116,327

 

 

 

894,473

 

Investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Real estate development

 

 

(1,641,560

)

 

 

(1,339,904

)

 

 

(1,064,220

)

Real estate acquisitions

 

 

(458,516

)

 

 

(890,183

)

 

 

(612,330

)

KTR transaction, net of cash received

 

 

-

 

 

 

(4,809,499

)

 

 

-

 

Tenant improvements and lease commissions on previously leased space

 

 

(165,933

)

 

 

(154,564

)

 

 

(133,957

)

Nondevelopment capital expenditures

 

 

(101,677

)

 

 

(83,351

)

 

 

(78,610

)

Proceeds from dispositions and contributions of real estate properties

 

 

2,826,408

 

 

 

2,795,249

 

 

 

2,285,488

 

Investments in and advances to unconsolidated entities

 

 

(265,951

)

 

 

(474,420

)

 

 

(756,416

)

Acquisition of a controlling interest in unconsolidated co-investment ventures, net of

     cash received

 

 

-

 

 

 

-

 

 

 

(590,390

)

Return of investment from unconsolidated entities

 

 

776,550

 

 

 

29,406

 

 

 

84,135

 

Proceeds from repayment of notes receivable backed by real estate

 

 

202,950

 

 

 

9,866

 

 

 

188,000

 

Proceeds from the settlement of net investment hedges

 

 

79,767

 

 

 

129,149

 

 

 

31,409

 

Payments on the settlement of net investment hedges

 

 

-

 

 

 

(981

)

 

 

(18,370

)

Net cash provided by (used in) investing activities

 

 

1,252,038

 

 

 

(4,789,232

)

 

 

(665,261

)

Financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock

 

 

39,470

 

 

 

90,258

 

 

 

378,247

 

Distributions paid on common and preferred stock

 

 

(893,455

)

 

 

(804,697

)

 

 

(672,190

)

Repurchase of preferred stock

 

 

-

 

 

 

-

 

 

 

(27,643

)

Noncontrolling interests contributions

 

 

2,168

 

 

 

2,355,367

 

 

 

468,280

 

Noncontrolling interests distributions

 

 

(343,550

)

 

 

(215,740

)

 

 

(315,426

)

Purchase of noncontrolling interests

 

 

(3,083

)

 

 

(2,560

)

 

 

(2,440

)

Tax paid for shares withheld

 

 

(8,570

)

 

 

(12,298

)

 

 

(12,990

)

Debt and equity issuance costs paid

 

 

(20,123

)

 

 

(32,012

)

 

 

(23,420

)

Net proceeds from (payments on) credit facilities

 

 

33,435

 

 

 

(7,970

)

 

 

(717,369

)

Repurchase and payments of debt

 

 

(2,301,647

)

 

 

(3,156,294

)

 

 

(4,205,806

)

Proceeds from issuance of debt

 

 

1,369,890

 

 

 

5,381,862

 

 

 

4,779,950

 

Net cash provided by (used in) financing activities

 

 

(2,125,465

)

 

 

3,595,916

 

 

 

(350,807

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of foreign currency exchange rate changes on cash

 

 

(342

)

 

 

(9,623

)

 

 

(18,842

)

Net increase (decrease) in cash and cash equivalents

 

 

543,236

 

 

 

(86,612

)

 

 

(140,437

)

Cash and cash equivalents, beginning of year

 

 

264,080

 

 

 

350,692

 

 

 

491,129

 

Cash and cash equivalents, end of year

 

$

807,316

 

 

$

264,080

 

 

$

350,692

 

See Note 19 for information on noncash investing and financing activities and other information.

The accompanying notes are an integral part of these Consolidated Financial Statements.

54


PROLOGIS, L.P.

CONSOLIDATED BALANCE SHEETS

(In thousands)

 

Year Ended December 31,

 

 

2016

 

 

2015

 

ASSETS

 

 

 

 

 

 

 

Investments in real estate properties

$

27,119,330

 

 

$

27,521,368

 

Less accumulated depreciation

 

3,758,372

 

 

 

3,274,284

 

Net investments in real estate properties

 

23,360,958

 

 

 

24,247,084

 

Investments in and advances to unconsolidated entities

 

4,230,429

 

 

 

4,755,620

 

Assets held for sale or contribution

 

322,139

 

 

 

378,423

 

Notes receivable backed by real estate

 

32,100

 

 

 

235,050

 

Net investments in real estate

 

27,945,626

 

 

 

29,616,177

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

807,316

 

 

 

264,080

 

Other assets

 

1,496,990

 

 

 

1,514,510

 

Total assets

$

30,249,932

 

 

$

31,394,767

 

 

 

 

 

 

 

 

 

LIABILITIES AND CAPITAL

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

Debt

$

10,608,294

 

 

$

11,626,831

 

Accounts payable and accrued expenses

 

556,179

 

 

 

712,725

 

Other liabilities

 

627,319

 

 

 

634,375

 

Total liabilities

 

11,791,792

 

 

 

12,973,931

 

 

 

 

 

 

 

 

 

Capital:

 

 

 

 

 

 

 

Partners’ capital:

 

 

 

 

 

 

 

General partner – preferred

 

78,235

 

 

 

78,235

 

General partner – common

 

14,912,846

 

 

 

14,589,700

 

Limited partners – common

 

150,173

 

 

 

186,683

 

Limited partners – Class A common

 

244,417

 

 

 

245,991

 

Total partners’ capital

 

15,385,671

 

 

 

15,100,609

 

Noncontrolling interests

 

3,072,469

 

 

 

3,320,227

 

Total capital

 

18,458,140

 

 

 

18,420,836

 

Total liabilities and capital

$

30,249,932

 

 

$

31,394,767

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

55


PROLOGIS, L.P.

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per unit amounts)

 

 

Year Ended December 31,

 

 

 

2016

 

 

2015

 

 

2014

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Rental

 

$

1,734,844

 

 

$

1,536,117

 

 

$

1,178,609

 

Rental recoveries

 

 

485,565

 

 

 

437,070

 

 

 

348,740

 

Strategic capital

 

 

294,552

 

 

 

210,362

 

 

 

219,871

 

Development management and other

 

 

18,174

 

 

 

13,525

 

 

 

13,567

 

Total revenues

 

 

2,533,135

 

 

 

2,197,074

 

 

 

1,760,787

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Rental

 

 

568,870

 

 

 

544,182

 

 

 

430,289

 

Strategic capital

 

 

128,506

 

 

 

108,422

 

 

 

115,430

 

General and administrative

 

 

222,067

 

 

 

217,227

 

 

 

229,332

 

Depreciation and amortization

 

 

930,985

 

 

 

880,373

 

 

 

642,461

 

Other

 

 

14,329

 

 

 

66,698

 

 

 

23,467

 

Total expenses

 

 

1,864,757

 

 

 

1,816,902

 

 

 

1,440,979

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income

 

 

668,378

 

 

 

380,172

 

 

 

319,808

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

Earnings from unconsolidated entities, net

 

 

206,307

 

 

 

159,262

 

 

 

134,288

 

Interest expense

 

 

(303,146

)

 

 

(301,363

)

 

 

(308,885

)

Interest and other income, net

 

 

8,101

 

 

 

25,484

 

 

 

25,768

 

Gains on dispositions of investments in real estate and revaluation of equity investments

     upon acquisition of a controlling interest, net

 

 

757,398

 

 

 

758,887

 

 

 

725,790

 

Foreign currency and derivative gains (losses), net

 

 

7,582

 

 

 

12,466

 

 

 

(17,841

)

Losses on early extinguishment of debt, net

 

 

2,484

 

 

 

(86,303

)

 

 

(165,300

)

Total other income

 

 

678,726

 

 

 

568,433

 

 

 

393,820

 

Earnings before income taxes

 

 

1,347,104

 

 

 

948,605

 

 

 

713,628

 

Total income tax expense (benefit)

 

 

54,564

 

 

 

23,090

 

 

 

(25,656

)

Consolidated net earnings

 

 

1,292,540

 

 

 

925,515

 

 

 

739,284

 

Less net earnings attributable to noncontrolling interests

 

 

48,307

 

 

 

44,950

 

 

 

100,900

 

Net earnings attributable to controlling interests

 

 

1,244,233

 

 

 

880,565

 

 

 

638,384

 

Less preferred unit distributions

 

 

6,714

 

 

 

6,651

 

 

 

7,431

 

Loss on preferred unit repurchase

 

 

-

 

 

 

-

 

 

 

6,517

 

Net earnings attributable to common unitholders

 

$

1,237,519

 

 

$

873,914

 

 

$

624,436

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common units outstanding – Basic

 

 

532,326

 

 

 

525,912

 

 

 

501,349

 

Weighted average common units outstanding – Diluted

 

 

546,666

 

 

 

533,944

 

 

 

506,391

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings per unit attributable to common unitholders – Basic

 

$

2.29

 

 

$

1.66

 

 

$

1.25

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings per unit attributable to common unitholders – Diluted

 

$

2.27

 

 

$

1.64

 

 

$

1.24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distributions per common unit

 

$

1.68

 

 

$

1.52

 

 

$

1.32

 

The accompanying notes are an integral part of these Consolidated Financial Statements.


56


PROLOGIS, L.P.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

 

 

Year Ended December 31,

 

 

 

2016

 

 

2015

 

 

2014

 

Consolidated net earnings

 

$

1,292,540

 

 

$

925,515

 

 

$

739,284

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation losses, net

 

 

(135,958

)

 

 

(208,901

)

 

 

(171,401

)

Unrealized losses on derivative contracts, net

 

 

(1,349

)

 

 

(17,457

)

 

 

(6,498

)

Comprehensive income

 

 

1,155,233

 

 

 

699,157

 

 

 

561,385

 

Net earnings attributable to noncontrolling interests

 

 

(48,307

)

 

 

(44,950

)

 

 

(100,900

)

Other comprehensive loss (gain) attributable to noncontrolling interests

 

 

(12,601

)

 

 

32,862

 

 

 

12,666

 

Comprehensive income attributable to common unitholders

 

$

1,094,325

 

 

$

687,069

 

 

$

473,151

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

57


PROLOGIS, L.P.

CONSOLIDATED STATEMENTS OF CAPITAL

(In thousands)

 

General Partner

 

 

Limited Partners

 

 

Non-

 

 

 

 

 

 

Preferred

 

 

Common

 

 

Common

 

 

Class A Common

 

 

controlling

 

 

 

 

 

 

Units

 

 

Amount

 

 

Units

 

 

Amount

 

 

Units

 

 

Amount

 

 

Units

 

 

Amount

 

 

Interests

 

 

Total

 

Balance at January 1, 2014

 

2,000

 

 

$

100,000

 

 

 

498,799

 

 

$

13,611,158

 

 

 

1,767

 

 

$

48,209

 

 

 

-

 

 

$

-

 

 

$

417,086

 

 

$

14,176,453

 

Consolidated net earnings

 

-

 

 

 

-

 

 

 

-

 

 

 

636,183

 

 

 

-

 

 

 

2,201

 

 

 

-

 

 

 

-

 

 

 

100,900

 

 

 

739,284

 

Effect of equity compensation

     plans

 

-

 

 

 

-

 

 

 

1,383

 

 

 

88,438

 

 

 

-

 

 

 

450

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

88,888

 

Issuance of units in exchange for

     contribution of at-the-market

          offering proceeds

 

-

 

 

 

-

 

 

 

3,316

 

 

 

140,135

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

140,135

 

Repurchase of preferred units

 

(435

)

 

 

(21,765

)

 

 

-

 

 

 

(5,878

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(27,643

)

Issuance of units in exchange for

     proceeds from exercise of

          warrant

 

-

 

 

 

-

 

 

 

6,000

 

 

 

213,840

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

213,840

 

Formation of Prologis U.S.

     Logistics Venture

 

-

 

 

 

-

 

 

 

-

 

 

 

13,721

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

442,251

 

 

 

455,972

 

Consolidation of Prologis North

     American Industrial Fund

 

-

 

 

 

-

 

 

 

-

 

 

 

12,507

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

554,493

 

 

 

567,000

 

Capital contributions

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

14,464

 

 

 

14,464

 

Settlement of noncontrolling

     interests

 

-

 

 

 

-

 

 

 

-

 

 

 

33,803

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(36,243

)

 

 

(2,440

)

Foreign currency translation

     losses, net

 

-

 

 

 

-

 

 

 

-

 

 

 

(167,950

)

 

 

-

 

 

 

(548

)

 

 

-

 

 

 

-

 

 

 

(12,666

)

 

 

(181,164

)

Unrealized losses and amortization

     on derivative contracts, net

 

-

 

 

 

-

 

 

 

-

 

 

 

(9,219

)

 

 

-

 

 

 

(23

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(9,242

)

Distributions and allocations

 

-

 

 

 

-

 

 

 

-

 

 

 

(669,464

)

 

 

-

 

 

 

(2,100

)

 

 

-

 

 

 

-

 

 

 

(320,384

)

 

 

(991,948

)

Balance at December 31, 2014

 

1,565

 

 

$

78,235

 

 

 

509,498

 

 

$

13,897,274

 

 

 

1,767

 

 

$

48,189

 

 

 

-

 

 

$

-

 

 

$

1,159,901

 

 

$

15,183,599

 

Consolidated net earnings

 

-

 

 

 

-

 

 

 

-

 

 

 

869,439

 

 

 

-

 

 

 

7,733

 

 

 

-

 

 

 

3,393

 

 

 

44,950

 

 

 

925,515

 

Effect of equity compensation

     plans

 

-

 

 

 

-

 

 

 

1,475

 

 

 

57,469

 

 

 

303

 

 

 

26,234

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

83,703

 

Issuance of units in exchange for

     contribution of at-the-market

          offering proceeds

 

-

 

 

 

-

 

 

 

1,662

 

 

 

71,548

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

71,548

 

Issuance of units upon conversion

     of exchangeable debt

 

-

 

 

 

-

 

 

 

11,872

 

 

 

502,732

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

502,732

 

Issuance of units related to KTR

     transaction

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,500

 

 

 

181,170

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

181,170

 

Issuance of units related to other

     acquisitions

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

157

 

 

 

6,534

 

 

 

8,894

 

 

 

365,036

 

 

 

-

 

 

 

371,570

 

Capital contributions

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,355,596

 

 

 

2,355,596

 

Foreign currency translation

     losses, net

 

-

 

 

 

-

 

 

 

-

 

 

 

(173,852

)

 

 

-

 

 

 

(1,520

)

 

 

-

 

 

 

(667

)

 

 

(32,862

)

 

 

(208,901

)

Unrealized losses and amortization

     on derivative contracts, net

 

-

 

 

 

-

 

 

 

-

 

 

 

(17,240

)

 

 

-

 

 

 

(151

)

 

 

-

 

 

 

(66

)

 

 

-

 

 

 

(17,457

)

Reallocation of capital

 

-

 

 

 

-

 

 

 

-

 

 

 

186,918

 

 

 

-

 

 

 

(70,965

)

 

 

-

 

 

 

(115,953

)

 

 

-

 

 

 

-

 

Distributions and other

 

-

 

 

 

-

 

 

 

5

 

 

 

(804,588

)

 

 

(16

)

 

 

(10,541

)

 

 

-

 

 

 

(5,752

)

 

 

(207,358

)

 

 

(1,028,239

)

Balance at December 31, 2015

 

1,565

 

 

$

78,235

 

 

 

524,512

 

 

$

14,589,700

 

 

 

6,711

 

 

$

186,683

 

 

 

8,894

 

 

$

245,991

 

 

$

3,320,227

 

 

$

18,420,836

 

Consolidated net earnings

 

-

 

 

 

-

 

 

 

-

 

 

 

1,209,932

 

 

 

-

 

 

 

14,232

 

 

 

-

 

 

 

20,069

 

 

 

48,307

 

 

 

1,292,540

 

Effect of equity compensation

     plans

 

-

 

 

 

-

 

 

 

2,282

 

 

 

91,214

 

 

 

440

 

 

 

26,483

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

117,697

 

Issuance of units related to

     acquisitions

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

71

 

 

 

3,162

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,162

 

Conversion of limited partners units

 

-

 

 

 

-

 

 

 

1,877

 

 

 

52,256

 

 

 

(1,877

)

 

 

(52,256

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Foreign currency translation gains

     (losses), net

 

-

 

 

 

-

 

 

 

-

 

 

 

(144,730

)

 

 

-

 

 

 

(1,457

)

 

 

-

 

 

 

(2,372

)

 

 

12,601

 

 

 

(135,958

)

Unrealized losses on derivative

     contracts, net

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,314

)

 

 

-

 

 

 

(13

)

 

 

-

 

 

 

(22

)

 

 

-

 

 

 

(1,349

)

Reallocation of capital

 

-

 

 

 

-

 

 

 

-

 

 

 

8,657

 

 

 

-

 

 

 

(12,414

)

 

 

-

 

 

 

3,757

 

 

 

-

 

 

 

-

 

Distributions and other

 

-

 

 

 

-

 

 

 

-

 

 

 

(892,869

)

 

 

(22

)

 

 

(14,247

)

 

 

-

 

 

 

(23,006

)

 

 

(308,666

)

 

 

(1,238,788

)

Balance at December 31, 2016

 

1,565

 

 

$

78,235

 

 

 

528,671

 

 

$

14,912,846

 

 

 

5,323

 

 

$

150,173

 

 

 

8,894

 

 

$

244,417

 

 

$

3,072,469

 

 

$

18,458,140

 

The accompanying notes are an integral part of these Consolidated Financial Statements.

58


PROLOGIS, L.P

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

 

Years Ended December 31,

 

 

 

2016

 

 

2015

 

 

2014

 

Operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated net earnings

 

$

1,292,540

 

 

$

925,515

 

 

$

739,284

 

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Straight-lined rents and amortization of above and below market leases

 

 

(93,608

)

 

 

(59,619

)

 

 

(14,392

)

Equity-based compensation awards

 

 

60,341

 

 

 

53,665

 

 

 

57,478

 

Depreciation and amortization

 

 

930,985

 

 

 

880,373

 

 

 

642,461

 

Earnings from unconsolidated entities, net

 

 

(206,307

)

 

 

(159,262

)

 

 

(134,288

)

Distributions from unconsolidated entities

 

 

286,651

 

 

 

284,664

 

 

 

294,890

 

Net changes in operating receivables from unconsolidated entities

 

 

14,823

 

 

 

(38,185

)

 

 

(7,503

)

Amortization of debt premiums, net of deferred financing costs

 

 

(15,137

)

 

 

(31,841

)

 

 

(7,324

)

Gains on dispositions of investments in real estate and revaluation of equity investments

     upon acquisition of a controlling interest, net

 

 

(757,398

)

 

 

(758,887

)

 

 

(725,790

)

Unrealized foreign currency and derivative losses (gains), net

 

 

(8,052

)

 

 

(1,019

)

 

 

22,571

 

Losses on early extinguishment of debt, net

 

 

(2,484

)

 

 

86,303

 

 

 

165,300

 

Deferred income tax benefit

 

 

(5,525

)

 

 

(5,057

)

 

 

(87,240

)

Increase in accounts receivable and other assets

 

 

(106,337

)

 

 

(64,749

)

 

 

(93

)

Increase (decrease) in accounts payable and accrued expenses and other liabilities

 

 

26,513

 

 

 

4,426

 

 

 

(50,881

)

Net cash provided by operating activities

 

 

1,417,005

 

 

 

1,116,327

 

 

 

894,473

 

Investing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Real estate development

 

 

(1,641,560

)

 

 

(1,339,904

)

 

 

(1,064,220

)

Real estate acquisitions

 

 

(458,516

)

 

 

(890,183

)

 

 

(612,330

)

KTR transaction, net of cash received

 

 

-

 

 

 

(4,809,499

)

 

 

-

 

Tenant improvements and lease commissions on previously leased space

 

 

(165,933

)

 

 

(154,564

)

 

 

(133,957

)

Nondevelopment capital expenditures

 

 

(101,677

)

 

 

(83,351

)

 

 

(78,610

)

Proceeds from dispositions and contributions of real estate properties

 

 

2,826,408

 

 

 

2,795,249

 

 

 

2,285,488

 

Investments in and advances to unconsolidated entities

 

 

(265,951

)

 

 

(474,420

)

 

 

(756,416

)

Acquisition of a controlling interest in unconsolidated co-investment ventures, net of cash received

 

 

-

 

 

 

-

 

 

 

(590,390

)

Return of investment from unconsolidated entities

 

 

776,550

 

 

 

29,406

 

 

 

84,135

 

Proceeds from repayment of notes receivable backed by real estate

 

 

202,950

 

 

 

9,866

 

 

 

188,000

 

Proceeds from the settlement of net investment hedges

 

 

79,767

 

 

 

129,149

 

 

 

31,409

 

Payments on the settlement of net investment hedges

 

 

-

 

 

 

(981

)

 

 

(18,370

)

Net cash provided by (used in) investing activities

 

 

1,252,038

 

 

 

(4,789,232

)

 

 

(665,261

)

Financing activities:

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from issuance of common partnership units in exchange for contributions from

     Prologis, Inc.

 

 

39,470

 

 

 

90,258

 

 

 

378,247

 

Distributions paid on common and preferred units

 

 

(931,559

)

 

 

(820,989

)

 

 

(674,344

)

Repurchase of preferred units

 

 

-

 

 

 

-

 

 

 

(27,643

)

Noncontrolling interests contributions

 

 

2,168

 

 

 

2,355,367

 

 

 

468,280

 

Noncontrolling interests distributions

 

 

(306,297

)

 

 

(199,845

)

 

 

(313,272

)

Purchase of noncontrolling interests

 

 

(2,232

)

 

 

(2,163

)

 

 

(2,440

)

Tax paid for shares of the Parent withheld

 

 

(8,570

)

 

 

(12,298

)

 

 

(12,990

)

Debt and capital issuance costs paid

 

 

(20,123

)

 

 

(32,012

)

 

 

(23,420

)

Net proceeds from (payments on) credit facilities

 

 

33,435

 

 

 

(7,970

)

 

 

(717,369

)

Repurchase and payments of debt

 

 

(2,301,647

)

 

 

(3,156,294

)

 

 

(4,205,806

)

Proceeds from issuance of debt

 

 

1,369,890

 

 

 

5,381,862

 

 

 

4,779,950

 

Net cash provided by (used in) financing activities

 

 

(2,125,465

)

 

 

3,595,916

 

 

 

(350,807

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Effect of foreign currency exchange rate changes on cash

 

 

(342

)

 

 

(9,623

)

 

 

(18,842

)

Net increase (decrease) in cash and cash equivalents

 

 

543,236

 

 

 

(86,612

)

 

 

(140,437

)

Cash and cash equivalents, beginning of year

 

 

264,080

 

 

 

350,692

 

 

 

491,129

 

Cash and cash equivalents, end of year

 

$

807,316

 

 

$

264,080

 

 

$

350,692

 

See Note 19 for information on noncash investing and financing activities and other information.

The accompanying notes are an integral part of these Consolidated Financial Statements.

59


PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1. DESCRIPTION OF THE BUSINESS

1.Description of Business

Prologis, Inc. (the “REIT”(or the “Parent”) commenced operations as a fully integrated real estate company in 1997, elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (“Internal(the “Internal Revenue Code”), and believes the current organization and method of operation will enable the REITit to maintain its status as a real estate investment trust.REIT. The REITParent is the general partner of Prologis, L.P. (the(or the “Operating Partnership”). Through the controlling interest in the Operating Partnership, we are engaged in the ownership, acquisition, development and operationmanagement of industriallogistics properties in globalthe world’s primary population centers and regional markets throughout the Americas, Europe and Asia.in those supported by extensive transportation infrastructure. Our current business strategy includesconsists of two reportableoperating business segments: Real Estate Operations and Investment Management (previously referred to as Private Capital).Strategic Capital. Our Real Estate Operations segment represents the long-term ownership and development of industriallogistics properties. Our Investment ManagementStrategic Capital segment represents the long-term management of co-investment ventures and other unconsolidated entities. See Note 2118 for further discussion of our business segments. Unless otherwise indicated, the notesNotes to the Consolidated Financial Statements apply to both the REITParent and the Operating Partnership. The terms “the Company,” “Prologis,” “we,” “our” or “us” means the REITParent and Operating Partnership collectively.

As

For each share of common stock or preferred stock the Parent issues, the Operating Partnership issues a corresponding common or preferred partnership unit, as applicable, to the Parent in exchange for the contribution of the proceeds from the stock issuance. At December 31, 2013,2016, the REITParent owned an approximate 99.65%97.42% common general partnership interest in the Operating Partnership and 100% of the preferred units.units in the Operating Partnership. The remaining approximate 0.35%2.58% common limited partnership interests, which include 8.9 million Class A common limited partnership units (“Class A Units”) in the Operating Partnership, are owned by non-affiliatedunaffiliated investors and certain current and former directors and officers of the REIT. Parent. Each partner’s percentage interest in the Operating Partnership is determined based on the number of Operating Partnership units held, including the number of Operating Partnership units into which Class A Units are convertible, compared to total Operating Partnership units outstanding at each period end and is used as the basis for the allocation of net income or loss to each partner. At the end of each reporting period, a capital adjustment is made in the Operating Partnership to reflect the appropriate ownership interest for each of the common unitholders. These adjustments are reflected in the line items Reallocation of Equity in the Consolidated Statement of Equity and Reallocation of Capital in the Consolidated Statement of Capital.

As the sole general partner of the Operating Partnership, the REITParent has full, exclusive and complete responsibility and discretion in the day-to-day management and control of the Operating Partnership. WePartnership and we operate the REITParent and the Operating Partnership as one enterprise. The management of the REITParent consists of the same members as the management of the Operating Partnership. These members are officers of the REITParent and employees of the Operating Partnership or one of its direct or indirect subsidiaries. As general partner with control of the Operating Partnership, the REITParent consolidates the Operating Partnership for financial reporting purposes, andPartnership. Because the REIT does not haveParent’s only significant assets other thanasset is its investment in the Operating Partnership. Therefore,Partnership, the assets and liabilities of the REITParent and the Operating Partnership are the same on their respective financial statements.

On June 3, 2011, AMB Property Corporation (“AMB”) and AMB Property, L.P. completed the merger contemplated by the Agreement and Plan of Merger with ProLogis, a Maryland real estate investment trust (“ProLogis”) and its subsidiaries (the “Merger”). Following the Merger, AMB changed its name to Prologis, Inc. AMB was the legal acquirer and ProLogis was the accounting acquirer. As such, in the Consolidated Financial Statements the historical results of ProLogis were included for the pre-Merger period and the combined results were included subsequent to the Merger. See Note 3 for further discussion on the Merger.

Information with respect to the square footage, number of buildings and acres of land is unaudited.

 

2.Summary of Significant Accounting Policies

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Consolidation. The accompanying consolidated financial statementsConsolidated Financial Statements are prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) and are presented in our reporting currency, the U.S. dollar. All material intercompany transactions with consolidated entities have been eliminated.

We consolidate all entities that are wholly owned and those in which we own less than 100% of the equity but control, as well as any variable interest entities in which we are the primary beneficiary. We evaluate our ability to control an entity and whether the entity is a variable interest entity and we are the primary beneficiary through consideration of substantive terms of the arrangement to identify which enterprise has the power to direct the activities of the entity that most significantly impacts the entity’s economic performance and the obligation to absorb losses of the entity or the right to receive benefits from the entity.

For entities that are not defined as variable interest entities (“VIEs”), we first consider whether Prologis iswe are the general partner or the limited partner (or the equivalent in such investments whichthat are not structured as partnerships). We consolidate entities in which we are the general partner and the limited partners in such entities do not have rights whichthat would preclude control. For entities in which we are the general partner but do not control the entity as the other partners hold substantive participating rights and/or kick-out rights, we apply the equity method of accounting is applied since as the general partner we have the ability to influence the venture. For ventures for which we are a limited partner or our investment is in an entity that is not structured similar to a partnership, we consider factors such as ownership interest, voting control, authority to make decisions, and contractual and substantive participating rights of the partners. In instances where the factors indicate that we control the venture, we consolidate the entity.

Reclassifications.Adjustments and Reclassifications. Certain amounts included in the consolidated financial statementsConsolidated Financial Statements for 20122015 and 20112014 have been reclassified to conform to the 20132016 financial statement presentation.

Use of Estimates. The accompanying consolidated financial statements are prepared in accordance with United States generally accepted accounting principles (“GAAP”). GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as ofat the date of the financial statements, and revenuerevenues and expenses during the reporting

60


PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

period. Our actual results could differ from those estimates and assumptions. Although we believe the assumptions and estimates we made are reasonable and appropriate, as discussed in the applicable sections throughout thesethe Consolidated Financial Statements, different assumptions and estimates could materially impact our reported results.

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

Foreign Operations. The U.S. dollar is the functional currency for our consolidated subsidiaries and unconsolidated entities operating in the United StatesU.S. and Mexico and certain of our consolidated subsidiaries that operate as holding companies for foreign investments. The functional currency for our consolidated subsidiaries and unconsolidated entities operating in countries other than the United StatesU.S. and Mexico is the principal currency in which the entity’s assets, liabilities, income and expenses are denominated, which may be different from the local currency of the country of incorporation or the country where the entity conducts its operations.

The functional currencies of our consolidated subsidiaries and unconsolidated entities generally include the Brazilian real, British pound sterling, Canadian dollar, Chinese renminbi, euro, Japanese yen and Singapore dollar. We are parties totake part in business transactions denominated in these and other currencies.local currencies where we operate.

For our consolidated subsidiaries whose functional currency is not the U.S. dollar, we translate their financial statements into the U.S. dollarsdollar at the time we consolidate those subsidiaries’ financial statements. Generally, assets and liabilities are translated at the exchange rate in effect as ofat the balance sheet date. The resulting translation adjustments are included in theAccumulated Other Comprehensive Loss(“AOCI”) in the Consolidated Balance Sheets. Certain balance sheet items, primarily equity and capital-related accounts, are reflected at the historical exchange rate. Income statement accounts are translated using the average exchange rate for the period and income statement accounts that represent significant non-recurringnonrecurring transactions are translated at the rate in effect as ofat the date of the transaction. We translate our share of the net earnings or losses of our unconsolidated entities whose functional currency is not the U.S. dollar at the average exchange rate for the period.

We and certain of our consolidated subsidiaries have intercompany and third partythird-party debt that is not denominated in the entity’s functional currency. When the debt is remeasured against the functional currency of the entity, a gain or loss can result. The resulting adjustment is reflected in results of operations, unless it is intercompany debt that is deemed to be long-term in nature and then the adjustment is reflected as a cumulative translation adjustment inAccumulated Other Comprehensive LossAOCI.

We are subject to foreign currency risk due to potential fluctuations in exchange rates between certain foreign currencies and the U.S. dollar. A significant change in the value of the foreign currency of one or more countries where we have a significant investment would have an effect on our reported results of operations and financial position. Although we attempt to mitigate adverse effects by borrowing under debt agreements denominated in the same functional currency as the investment, and when deemed appropriate through the use of derivative contracts, there can be no assurance that those attempts to mitigate foreign currency risk will be completely successful.

Business Combinations. When we acquire a business, which includes an operating property, we record the acquisition at “full fair value.” Transaction costs related to the acquisition of a business are expensed as incurred. Generally, our acquisitions are of operating properties that meet the definition of a business. The transaction costs related to the acquisition of land, asset acquisitions, and the formation of equity method investments continue to be capitalized, as these are not considered to be business combinations.

When we acquire a business or individual operating properties, with the intention to hold the investment for the long-term,we allocate the purchase price to the various components of the acquisition based uponon the fair value of the acquired assets and liabilities.assumed liabilities, including an allocation to the individual buildings acquired. We generally acquire operating properties that meet the definition of a business and we expense transaction costs as incurred. The initial allocation of the purchase price is based on management’s preliminary assessment, which may differ when final information becomes available. Subsequent adjustments made to the initial purchase price allocation are made within the allocation period, which typically does not to exceed one year. Goodwill represents the excess of the purchase price over the fair value of net tangible and intangible assets acquired in a business combination. A gain may be recognized to the extent the purchase price is less than the fair value of net tangible and intangible assets acquired.

When we obtain control of an unconsolidated entity, we account for the acquisition of the entity in accordance with the guidance for a business combination achieved in stages. We measureremeasure our previously held interest in the unconsolidated entity at its acquisition-date fair value and recognize the resulting gain or loss, if any, in earnings at the acquisition date.

We allocate the purchase price using primarily levelLevel 2 and levelLevel 3 inputs (further defined inFair Value Measurements) below) as follows:

Investments in Real Estate Properties. Industrial We value operating properties are valued as if vacant.vacant. We estimate fair value generally by applying an income approach methodology using a discounted cash flow analysis. Key assumptions in the discounted cash flow analysis include origination costsmarket rents, growth rates and discount and capitalization rates. DiscountWe determine discount and capitalization rates are determined by market and based on recent appraisals, transactions and other market data. The fair value of land is generally based on relevant market data, such as a comparison of the subject site to similar parcels that have recently been sold or are currently being offered on the market for sale.

Investments in Unconsolidated Entities. We estimate the fair value of the entity by using similar valuation methods as those used for consolidated real estate properties and debt. We multiply the estimated net asset value of the entity by our ownership percentage to estimate the fair value of our investment.

Lease IntangiblesPROLOGIS, INC. AND PROLOGIS, L.P.

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Intangible Assets.. We determine the portion of the purchase price related to intangible assets and liabilities as follows:

 

In Place Leases.The fair value of in place leases is calculated based upon our estimate of the costs to obtain tenants, primarily leasing commissions, in each of the applicable markets. The value is recorded in other assets and amortized over the average remaining estimated life of the lease to amortization expense.

Above and Below Market Leases. We recognize an asset or liability for acquired in-place leases with favorable or unfavorable rents based on our estimate of current market rents of the applicable markets. The value is recorded in either Other Assets or Other Liabilities, as appropriate, and is amortized over the term of the respective leases, including any bargain renewal options, to rental revenues.

 

Above and Below Market Leases. An asset or liability is recognized for acquired leases with favorable or unfavorable rents based on our estimate of current market rents in each of the applicable markets. The value is recorded in either other assets or other liabilities, as appropriate, and is amortized over the average remaining estimated life of the lease to rental income.

Foregone Rent. We calculate the value of the revenue and recovery of costs foregone during a reasonable lease-up period, as if the space was vacant, in each of the applicable markets. The values are recorded in Other Assets and amortized over the remaining life of the respective leases to amortization expense.

 

Management Contracts. The recognition of value of existing investment management agreements is calculated by discounting future expected cash flows under

Leasing Commissions. We recognize an asset for leasing commissions upon the acquisition of in-place leases based on our estimate of the cost to lease space in the applicable markets. The value is recorded in Other Assets and amortized over the remaining life of the respective leases to amortization expense.

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Debt. We estimate the agreements. The value is recorded in other assets and amortized over the remaining term of the contract to amortization expense.

Debt. The fair value of debt is estimated based on contractual future cash flows discounted using borrowing spreads and market interest rates that would be available to us for the issuance of debt with similar terms and remaining maturities. In the case of publicly traded debt, we estimate the fair value is estimated based on available market data. Any discount or premium to the principal amount is included in the carrying value and amortized to interest expense over the remaining term of the related debt using the effective interest method to interest expense.method.

Noncontrolling Interest.Interests. We estimate the portion of the fair value of the net assets owned by third parties based on the fair value of the consolidated net assets, principally real estate properties and debt.

Working Capital. TheWe estimate fair value of all other assumedacquired assets and assumed liabilities is based on the best information available.

Fair Value Measurements. The objective of fair value is to determine the price that would be received uponon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (the exit price). We estimate fair value using available market information and valuation methodologies we believe to be appropriate for these purposes. Considerable judgment and a high degree of subjectivity are involved in developing these estimates and, accordingly, they are not necessarily indicative of amounts that we would realize uponon disposition. The fair value hierarchy consists of three broad levels:

 

Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date.

 

Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

 

Level 3 — Unobservable inputs for the asset or liability.

Recurring Fair Value Measurements. Long-Lived Assets.We estimate the fair value of our financial instruments using available market information and valuation methodologies we believe to be appropriate for these purposes as follows:

Debt. We estimate the fair value of our senior notes and exchangeable senior notes for disclosure purposes based on quoted market prices for the same (Level 1) or similar (Level 2) issues when current quoted market prices are available. We estimate the fair value of our credit facilities, term loans, secured mortgage debt and assessment bonds by discounting the future cash flows using rates and borrowing spreads currently available to us (Level 3).

Derivatives. We determine the fair value of our derivative instruments using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, foreign exchange rates, and implied volatilities. We determine the fair values of our interest rate swaps using the market standard methodology of netting the discounted future fixed cash receipts or payments and the discounted expected variable cash payments. We base the variable cash payments on an expectation of future interest rates, or forward curves, derived from observable market interest rate curves. We base the fair values of our net investment hedges on the change in the spot rate at the end of the period as compared with the strike price at inception.

We incorporate credit valuation adjustments to appropriately reflect both our nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we consider the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts and guarantees.

We have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy. Although the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties, we assess the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives.

Nonrecurring Fair Value Measurements. Assets measured at fair value on a nonrecurring basis generally consist of real estate assets and investments in and advances to unconsolidated entities that were subject to impairment charges related to our change of intent to sell the investments and through our recoverability analysis discussed below. We estimate fair value based on expected sales prices in the market (Level 2).

Real Estate Assets. Real estate assets are carried at depreciated cost. CostsWe capitalize costs incurred in developing, renovating, rehabilitating and improving real estate assets are capitalized as part of the investment basis of real estate assets. We expense costs for repairs and maintenance of the real estate assets. Costs of making repairs and maintaining real estate assets are expensed as incurred.

During the land development and construction periods of qualifying projects, we capitalize interest costs, insurance, real estate taxes and general and administrative costs of the personnel performing the development, renovation, and rehabilitation; if such costs are incremental and identifiable to a specific activity to getready the asset ready for its intended use. CapitalizedWe capitalize transaction costs are included inrelated to the investment basis

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acquisition of real estate assets.land for future development. We capitalize costs incurred to successfully originate a lease that resultsresult directly from and are essential to acquire that lease, including internal costs that are incremental and identifiable as leasing activities. Leasing costs that meet the requirements for capitalization are presented as a component of other assets.Other Assets.

The

We charge the depreciable portions of real estate assets are charged to depreciation expense on a straight-line basis over the respective estimated useful lives. Depreciation commences atwhen the asset is ready for its intended use, which we define as the earlier of stabilization (defined as 90%(90% occupied) or one year after completion of construction. We generally use the following useful lives: 5 to 7 years for capital improvements, 10 years for standard tenant improvements, 25 years for depreciable land improvements, on developed buildings, 30 years for operating properties acquired and 40 years for operating properties we develop. Investments that are locatedWe depreciate building improvements on tarmac; which is land owned by federal, state or local airport authorities, andparcels subject to ground leases; are depreciatedleases over the shorter of the investmentestimated building improvement life or the contractual term of the underlying ground lease. Capitalized leasing costs are amortized over the estimated remaining lease term. Our weighted average lease term on leases signed during 2016, based on square feet for all leases, in effect at December 31, 2013, was sevenfive years.

We assess the carrying values of our respective long-livedreal estate assets, whenever events or changes in circumstances indicate that the carrying amounts of these assets may not be fully recoverable. RecoverabilityWe measure the recoverability of the assets is measuredasset by comparison of the carrying amount of the asset to the estimated future undiscounted cash flows. In order to review our assets for recoverability, we consider current market conditions,

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as well as our intent with respect to holding or disposing of the asset. Fair value is determined through various valuation techniques; including discounted cash flow models, quoted market values, and third party appraisals; where considered necessary. If our analysis indicates that the carrying value of the long-lived assetreal estate property is not recoverable on an undiscounted cash flow basis, we recognize an impairment charge for the amount by which the carrying value exceeds the current estimated fair value of the real estate property. For assets we intend to sell, we compare the carrying value of the property to its estimated fair value based on estimated selling price less costs to sell and recognize an impairment for any excess.

We estimate the future undiscounted cash flows and fair value based on our intent as follows:

 

(i)

for real estate properties that we intend to hold long-term; including land held for development, properties currently under development and operating buildings; recoverability is assessed based on the estimated undiscounted future net rental income from operating the property and the terminal value;

(ii)for land parcels we intend to sell, recoverability is assessed based on estimated proceeds from disposition;

(iii)for real estate properties currently under development and operating buildings we intend to sell, recoverability is assessed based on proceeds from disposition that are estimated based on future net rental income of the property and expected market capitalization rates; and

(iv)for costs incurred related to the potential acquisition of land or development of a real estate property, recoverability is assessed based on the probability that the acquisition or development is likely to occur as of the measurement date.

The use of projected future cash flows is based on assumptions that are consistent with our estimates of future expectations and the strategic plan we use to manage our underlying business. However, assumptions and estimates about future cash flows, discount rates and capitalization rates are complex and subjective. Changes in economic and operating conditions and our ultimate investment intent that occur subsequent to our impairment analyses could impact these assumptions and result in future impairment of our real estate properties that we intend to hold long-term; including land held for development, properties currently under development and operating buildings; recoverability is assessed based on the estimated undiscounted future net rental income from operating the property and the terminal value, including anticipated costs to develop;

for real estate properties we intend to sell, including properties currently under development and operating buildings; recoverability is assessed based on proceeds from disposition that are estimated based on future net rental income of the property, expected market capitalization rates and anticipated costs to develop;

for land parcels we intend to sell, recoverability is assessed based on estimated proceeds from disposition; and

for costs incurred related to the potential acquisition of land or the recognitiondevelopment of a gainreal estate property, recoverability is assessed based on the probability that the acquisition or loss at time of disposal.

Goodwill. Goodwill represents the excess of the purchase price over the fair value of net tangible and intangible assets acquired in a business combination. We have $25.3 million of goodwill associated with our Investment Management segment in Europe. We perform an annual review of impairmentdevelopment is likely to occur at the reporting unit level during the fourth quarter and whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable. We have an option to make a qualitative assessment of a reporting unit’s goodwill for impairment to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount prior to performing the two-step goodwill impairment test. If this is the case, the two-step goodwill impairment test is required. If it is more-likely-than-not that the fair value of a reporting unit is greater than its carrying amount, the two-step goodwill impairment test is not required.measurement date.

Assets Held for Sale and Discontinued Operations.or Contribution. We classify a component of our business or property as held for sale or contribution when certain criteria are met, which are in accordance with GAAP. Assets classified as held for sale are expected to be sold to a third party and assets classified as held for contribution are newly developed assets we intend to contribute to an unconsolidated co-investment venture or to a third party within twelve months. At such time, the respective assets and liabilities are presented separately onin the Consolidated Balance Sheets and depreciation is no longer recognized. Assets held for sale or contribution are reported at the lower of their carrying amount or their estimated fair value less the costs to sell the assets. Discontinued operations represent a component of an entity that has either been disposed of or is classified as held for sale and both the operations and cash flows of the component have been or will be eliminated from ongoing operations of the entity as a result of the disposal transaction and the entity will not have any significant continuing involvement in the operations of the component after the disposal transaction. The results of operations of a component of our business or properties that have been classified as discontinued operations are also reported as discontinued operations for all periods presented.

Assets held for sale and properties disposed of are considered discontinued operations if sold to a third party. Properties contributed or sold to entities in which we maintain an ownership interest, act as manager or account for under the equity method are not considered discontinued operations due to our continuing involvement with the properties.

Investments in Unconsolidated Entities. Our We present our investments in certain entities are presented under the equity method. TheWe use the equity method is used when we have the ability to exercise significant influence over operating and financial policies of the venture but do not have control of the entity. Under the equity method, we initially recognize these investments (including advances) are initially recognized in the balance sheet at our cost, including formation costs and arenet of deferred gains from the contribution of properties, if applicable. We subsequently adjustedadjust the accounts to reflect our proportionate share of net earnings or losses recognized and accumulated other comprehensive income or loss, distributions received, deferred gains from the contribution of propertiescontributions made and certain other adjustments, as appropriate. When circumstances indicate there may have been a reduction in the value of an equity investment, we evaluate whether the loss in value is other than temporary. If we conclude it is other than temporary, we recognize an impairment charge to reflect the equity investment at fair value.

Notes Receivable Backed by Real Estate. We hold certain investments in debt securities that are backed by real estate assets. We regularly review the creditworthiness of the entities with which we hold the note agreements and, if necessary, reduce the notes receivable balance by estimating an allowance for amounts that may become uncollectible in the future. The notes are also evaluated individually for impairment. We consider a loan to be impaired when, based on current information and events, it is probable that we will be unable to collect all amounts due according to the contractual terms of the agreement.

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Cash and Cash Equivalents. We consider all cash on hand, demand deposits with financial institutions and short-term highly liquid investments with original maturities of three months or less to be cash equivalents. Our cash and cash equivalents are financial instruments that are exposed to concentrations of credit risk. We invest our cash with high-credit quality institutions. Cash balances may be invested in money market accounts that are not insured. We have not realized any losses in such cash investments or accounts and believe that we are not exposed to any significant credit risk.

Restricted Cash. Restricted cash consists primarily of escrows under secured mortgage agreements for taxes, insurance and certain other reserve requirements relating to the underlying collateral. In certain limited circumstances, the lender retains control over cash received for rental income for a period of three to six months prior to releasing it to us.

Derivative Financial Instruments. We may use derivative financial instruments for the purpose of managing certain foreign currency exchange rate and interest rate risk. We reflectdo not use derivative financial instruments for trading or speculative purposes. All of our derivative financial instruments are customized derivative transactions and are not exchange-traded. Management reviews our hedging program, derivative positions, and overall risk management strategy on a regular basis. We only enter into transactions that we believe will be highly effective at offsetting the underlying risk. Our use of derivatives involves the risk that counterparties may default on a derivative contract. We establish exposure limits for each counterparty to minimize this risk and provide counterparty diversification. Substantially all of our derivative exposures are with counterparties that have long-term credit ratings of single-A or better. We enter into master agreements with counterparties that generally allow for netting of certain exposures; thereby significantly reducing the

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actual loss that would be incurred should a counterparty fail to perform its contractual obligations. To mitigate pre-settlement risk, minimum credit standards become more stringent as the duration of the derivative financial instrument increases. On the basis of these factors, we consider the risk of counterparty default to be minimal.

We recognize all derivatives at fair value within the line items Other Assets or Other Liabilities, as applicable. We do not net our derivative position by counterparty for purposes of balance sheet presentation and recorddisclosure. Derivatives can be designated as fair value hedges, cash flow hedges or hedges of net investments in foreign operations. The accounting for gains and losses that result from changes in the fair values of derivative instruments depends on whether the derivatives are designated as, and qualify as, hedging instruments. For derivatives that will be accounted for as hedging instruments, at inception of the transaction, we formally designate and document the financial instrument as a hedge of a specific underlying exposure, the risk management objective and the strategy for undertaking the hedge transaction. In addition, we formally assess both at inception and at least quarterly thereafter, the effectiveness of our hedging transactions. Changes in the fair value of derivatives that are designated and qualify as cash flow hedges and hedges of net investments in foreign operations are recorded in AOCI. The ineffective portion of a derivative financial instrument's change in fair value, if any, is immediately recognized in earnings. Due to the high degree of effectiveness between the hedging instruments and the underlying exposures hedged, fluctuations in the value of the derivative instruments will generally be offset by changes in the fair values or cash flows of the underlying exposures being hedged. We also use derivatives that are not designated as hedges (and may not meet the hedge accounting requirements) to manage certain risk. The changes in fair values of derivatives that were not designated or did not qualify as hedging instruments are immediately recognized in earnings. For cash flow hedges, we reclassify changes in the fair value of these derivatives eachinto the applicable line item in the Consolidated Statements of Income in which the hedged items are recorded in the same period that the underlying hedged items affect earnings.

Foreign Currency. We primarily manage our foreign currency exposure by borrowing in the currencies in which we invest. In certain circumstances, we may issue debt in a currency that is not the same functional currency of the borrowing entity to offset the translation and economic exposures related to our net investment in international subsidiaries. To mitigate the impact in earnings unless specificof translation from the fluctuations in exchange rates, we may designate the debt as a nonderivative financial instrument hedge. We also hedge accounting criteria are met. To qualify for hedge accounting treatment, generally theour investments in certain international subsidiaries using foreign currency derivative instruments used for risk management purposes must effectively reduce the risk exposure that they are designed to hedge (primarily interest rate swaps and netcontracts (net investment hedges) to offset the translation and ifeconomic exposures related to our investments in these subsidiaries by locking in a derivative instrument is utilized to hedge an anticipated transaction, the anticipated transaction must be probable of occurring. Derivative instruments meeting these hedging criteria are formally designated as hedgesforward exchange rate at the inception of the contract or athedge. To the redesignation process, if applicable.

The unrealized gains and losses resulting fromextent we have an effective hedging relationship, we report all changes in fair value of an effective hedgethe hedged portion of the nonderivative financial instruments and net investment hedges in equity in the foreign currency translation component of AOCI. These amounts offset the translation adjustments on the underlying net assets of our foreign investments, which we also record in AOCI. The foreign currency translation changes of the portion of the nonderivative financial instruments that are not designated as hedges are recorded inAccumulated Other Comprehensive Lossfor the REIT and Partners’ Capitalfor the Operating Partnership. For hedges related to issued debt, these amounts are amortized to earnings over the remaining term of the hedged items. Changes in fair value of a net investment hedge remain in equity until the investment is substantially liquidated. The ineffective portion of a hedge, if any, is immediately recognizeddirectly in earnings towithin the extent that the change in value of the derivative instrument does not perfectly offset the change in value of theline item being hedged. We estimate the fair value of our financial instruments through a variety of methods and assumptions that are based on market conditions and risks existing at each balance sheet date. Primarily, we use quoted market prices or quotes from brokers or dealers for the same or similar instruments. These values represent a general approximation of possible value and may never actually be realized.

Exchangeable Debt. For the convertible notes we issued in 2008 and 2007, we were required to separate the accounting for the debt and equity components as we had the ability to settle the conversion of the debt and conversion spread, at our option, in cash, common stock, or a combination of cash and stock. The liability and equity components of convertible debt were accounted for separately. The value assigned to the debt component was the estimated fair value at the date of issuance of a similar bond without the conversion feature, which resulted in the debt being recorded at a discount. The resulting debt discount was amortized over the estimated remaining life of the debt as additional non-cash interest expense. The carrying amount of the equity component was determined by deducting the fair value of the debt component from the initial proceeds of the convertible debt instrument as a whole. Under the terms of the issuance of the 2010 convertible notes, we were required to settle the conversion by issuance of common shares and therefore this accounting did not apply to these notes.

In connection with the Merger and the debt exchange offer in June 2011, all issuances of our convertible notes became exchangeable notes issued by the Operating Partnership that are exchangeable into common stock of the REIT. As a result, the accounting for the exchangeable senior notes required us to separate the fair value of the derivative instrument (exchange feature) from the debt instrument and account for it separately as a derivative. At each reporting period, we adjust the derivative instrument to fair value with the adjustment being recorded in earnings asForeign Currency Exchange and Derivative Gains (Losses), Net in the Consolidated Statements of Income. We recognize ineffectiveness, if any, in earnings at the time the ineffectiveness occurred.

We may use foreign currency option contracts, including puts, calls and collars to mitigate foreign currency exchange rate risk associated with the translation of our projected earnings of our international subsidiaries, principally in Canada, Europe and Japan. Put option contracts provide us with the option to exchange foreign currency for U.S. dollars at a fixed exchange rate if the foreign currency were to depreciate against the U.S. dollar. Call option contracts create an obligation to exchange foreign currency for U.S. dollars at a fixed exchange rate if the foreign currency were to appreciate against the U.S. dollar. Collar option contracts combine the put and call options into one contract to effectively lock in a range around the rate at which net operating income of our subsidiaries will be translated into U.S. dollars. Foreign currency option contracts are not designated as hedges as they do not meet hedge accounting requirements. Changes in the fair value of non-hedge designated derivatives are recorded directly in earnings within the line item Foreign Currency and Derivative Gains (Losses), Net.

We may also use foreign currency forwards designed as cash flow hedges to mitigate foreign currency exchange rate risk associated with payments in a currency that is not the functional currency of our foreign subsidiaries. To the extent we have an effective hedging relationship, we report all changes in fair value of the hedged portion of the foreign currency forwards cash flow hedges in AOCI. We amortizerecognize ineffectiveness, if any, in earnings at the discounttime the ineffectiveness occurred.

Interest Rate. Our interest rate risk management strategy is to limit the impact of future interest rate changes on earnings and cash flows as well as to stabilize interest expense and manage our exposure to interest rate movements. We primarily accomplish this by issuing fixed rate debt with staggering maturities. We may enter into interest rate swap agreements, which allow us to borrow on a fixed rate basis for longer-term debt issuances. We typically designate our interest rate swap and interest rate cap agreements as cash flow hedges as these derivative instruments may be used to manage the interest rate risk on potential future debt issuances or to fix the interest rate on variable rate debt issuances. The maximum length of time that we hedge our exposure to future cash flows is typically 10 years or less. We have entered into interest rate swap agreements that allow us to receive variable-rate amounts from a counterparty in exchange for us making fixed-rate payments over the remaining termlife of our agreements without the exchange of the exchangeable notes.underlying notional amount.

We report the effective portion of the gain or loss on the derivative as a component of Noncontrolling Interests.AOCI, and reclassify it to Interest Expense in the Consolidated Statements of Income over the corresponding period of the hedged item. To the extent the hedged debt is paid off early, we write off the remaining balance in AOCI and we recognize the amount in Interest Expense in the Consolidated Statements of Income. We recognize losses on a derivative representing hedge ineffectiveness in Interest Expense at the noncontrollingtime the ineffectiveness occurred.

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Costs of Raising Capital. We treat costs incurred in connection with the issuance of common and preferred stock as a reduction to additional paid-in capital. We capitalize costs incurred in connection with the issuance of debt. Costs related to our credit facilities are included in Other Assets and costs related to all our other debt are recorded as a direct reduction of the liability. Costs associated with debt modifications are expensed when incurred.

AOCI. For the Parent, we include AOCI as a separate component of stockholders' equity in the Consolidated Balance Sheets. For the Operating Partnership, AOCI is included in partners’ capital in the Consolidated Balance Sheets. Any reference to AOCI in this document is referring to the component of stockholders’ equity for the Parent and partners’ capital for the Operating Partnership.

Noncontrolling Interests. Noncontrolling interests inrepresent the share of consolidated entities that we consolidate but of which we do not own 100%owned by usingthird parties. We recognize each noncontrolling holder’s respective share of the estimated fair value of the net assets as ofat the date of formation or acquisition. Noncontrolling interest isinterests are subsequently adjusted for the noncontrolling holder’s share of additional contributions, distributions to noncontrolling holders and the noncontrolling holders�� proportionatetheir share of the net earnings or losses of each respective consolidated entity. We allocate net income to noncontrolling interests based on the weighted-average ownership interest during the period. The net income that is not attributable to us is reflected in the line item Net Earnings Attributable to Noncontrolling Interests. We do not recognize a gain or loss on transactions with a consolidated entity in which we do not own 100% of the equity, but we reflect the difference in cash received or paid from the noncontrolling interests carrying amount as paid-in-capital.

Certain limited partnership interests issued by us in connection with the formation of a real estate partnership and as consideration in a business combination are exchangeable into our common stock. Common stock issued upon exchange of a holder’s noncontrolling interest is accounted for at ourthe carrying value of the surrendered noncontrollinglimited partnership interest.

Costs of Raising Capital. Costs incurred in connection with the issuance of both common stock and preferred stock are treated as a reduction to additional paid-in capital. Costs incurred in connection with the issuance or renewal of debt are capitalized in other assets, and amortized to interest expense over the term of the related debt.

Accumulated Other Comprehensive Income (Loss). For the REIT, we includeAccumulated Other Comprehensive Loss as a separate component of stockholders’ equity in the Consolidated Balance Sheets. For the Operating Partnership,Accumulated Other Comprehensive Loss is included in partners’ capital in the Consolidated Balance Sheets. Any reference toAccumulated Other Comprehensive Lossin this document is referring to the component of stockholders’ equity for the REIT and partners’ capital for the Operating Partnership.

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Revenue Recognition.

 

Revenue Recognition.

Rental Income.Revenues. We lease our operating properties to customers under agreements that are classified as operating leases. We recognize the total minimum lease payments provided for under the leases on a straight-line basis over the lease term. Generally, under the terms of our leases, the majority of our rental expenses are recovered from our customers. We reflect amounts recovered from customers as revenuerevenues in the period that the applicable expenses are incurred. AWe make a provision for possible loss is made if the collection of a receivable balance is considered doubtful.

Strategic Capital Revenues.Investment Management Revenue. Investment management revenue includes Strategic capital revenues include revenues we earn from the management services we provide to unconsolidated entities and certain third parties.entities. These fees are recognized as earned anddetermined in accordance with the terms specific to each arrangement and may include property and asset management fees or transactional fees for leasing, acquisition, development, construction, financing, legal and tax services provided. We may also earn promote paymentsincentive returns (called “promotes”) based on third partythird-party investor returns over time, which may be during the duration of the venture or at the time of liquidation. We recognize these fees when they are earned, fixed and determinable. We report these fees in Strategic Capital Revenues. The fees we earn to develop properties within these ventures are reflected in Development Management and Other Revenues on a percentage of completion basis.

We also earned fees from ventures that we consolidate. Upon consolidation these fees were eliminated from our earnings and the third party share of these fees were recognized as a reduction of Net Earnings Attributable to Noncontrolling Interests.

Gains (Losses) on DispositionDispositions of Investments in Real Estate. Gains We recognize gains on the disposition of real estate are recorded when the recognition criteria have been met, generally at the time the risks and rewards and title have transferred and we no longer have substantial continuing involvement with the real estate sold. LossesWe recognize losses from the disposition of real estate are recognized when known.

When we contribute a property to an unconsolidated entity in which we have an ownership interest, we do not recognize a portion of the gain realized. If a loss is realized, it is recognized when known. The amount of gain not recognized, based on our ownership interest in the entity acquiring the property, is deferred by recognizing a reduction to our investment in the applicable unconsolidated entity. We adjust our proportionate share of net earnings or losses recognized in future periods to reflect the entities’ recorded depreciation expense as if it were computed on our lower basis in the contributed properties rather than on the entity’s basis.

When a property that we originally contributed to an unconsolidated entity is disposed of to a third party, we recognize the amount of the gain we had previously deferred, along with our proportionate share of the gain recognized by the unconsolidated entity. During periods whenIf our ownership interest in an unconsolidated entity decreases and the decrease is expected to be permanent, we recognize the amounts relating to previously deferred gains to coincide with our new ownership interest.

Rental Expenses. Rental expenses primarily include the cost of our property management personnel, utilities, repairs and maintenance, property insurance and real estate taxes.

Strategic Capital Expenses.Investment Management Expenses. These costs include the property management Strategic capital expenses associated with the property-level management of the properties owned by our unconsolidated entities andgenerally include the direct expenses associated with the asset management of the unconsolidated entities.co-investment ventures provided by our employees who are assigned to our Strategic Capital segment. In addition, in order to achieve efficiencies and economies of scale, all of our property management functions are provided by property management personnel who are assigned to our Real Estate Operations segment. These individuals perform the property-level management of the properties in our owned and managed portfolio, which include properties we consolidate and those we manage that are owned by the unconsolidated co-investment ventures. We allocate the costs of our property management to the properties we

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PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Stock-Basedconsolidate (included in Rental Expenses) and the properties owned by the unconsolidated co-investment ventures (included in Strategic Capital Expenses) by using the square feet owned by the respective portfolios.

Equity-Based Compensation. We account for stock-basedequity-based compensation by measuring the cost of employee services received in exchange for an award of an equity instrument based on the fair value of the award on the grant date. We recognize the cost of the entire award on a straight-linedstraight-line basis over the period during which an employee is required to provide service in exchange for the award, generally the vesting period.

Income Taxes. The REIT commenced operations as a fully integrated real estate company in 1997, elected to be taxed as a real estate investment trust under the Internal Revenue Code, and believes the current organization and method of operation will enable the REIT to maintain its status as a real estate investment trust. Under the Internal Revenue Code, real estate investment trustsREITs are generally not required to pay federal income taxes if they distribute 100% of their taxable income and meet certain income, asset and stockholder tests. If we fail to qualify as a real estate investment trustREIT in any taxable year, we will be subject to federal income taxes at regular corporate rates (including any alternative minimum tax) and may not be able to qualify as a real estate investment trustREIT for the four subsequent taxable years. Even as a real estate investment trust,REIT, we may be subject to certain state and local taxes on our own income and property, and to federal income and excise taxes on our undistributed taxable income.

We have elected taxable real estate investment trustREIT subsidiary (“TRS”) status for some of our consolidated subsidiaries. This allows us to provide services that would otherwise be considered impermissible for real estate investment trusts.REITs. Many of the foreign countries in which we have operations do not recognize real estate investment trustsREITs or do not accord real estate investment trustREIT status under their respective tax laws to our entities that operate in their jurisdiction. In the United States,U.S., we are taxed in certain states in which we operate. Accordingly, we recognize income tax expense for the federal and state income taxes incurred by our TRSs, taxes incurred in certain states and foreign jurisdictions, and interest and penalties associated with our unrecognized tax benefit liabilities.

We evaluate tax positions taken in the financial statements on a quarterly basisConsolidated Financial Statements under the interpretation for accounting for uncertainty in income taxes. As a result of this evaluation, we may recognize a tax benefit from an uncertain tax position only if it is “more-likely-than-not”more likely than not that the tax position will be sustained on examination by taxing authorities.

Deferred

We recognize deferred income taxes are recognized in certain taxable entities. For federal income tax purposes, certain acquisitions have been treated as tax-free transactions resulting in a carry-over basis in assets and liabilities. For financial reporting purposes and in accordance with purchase accounting, we record all of the acquired assets and assumed liabilities at the estimated fair value at the date of acquisition. For our taxable subsidiaries, including certain international jurisdictions, we recognize the deferred income tax liabilities that represent the tax effect of the difference between the tax basis carried over and the fair value of the tangible and intangible assets at the date of acquisition. Any subsequent increases or decreases to the deferred income tax liability recorded in connection with these acquisitions, related to tax uncertainties acquired, are reflected in earnings.

If taxable income is generated in these subsidiaries, we recognize a benefit in earnings as a result of the reversal of the deferred income tax liability previously recorded at the acquisition date and we record current income tax expense representing the entire current income tax liability. If the reversal of the deferred income tax liability results from a sale or contribution of assets, the classification of the reversal to the Consolidated Statement of Income is based on the taxability of the transaction. We record the reversal to deferred income tax benefit as a taxable transaction if we dispose of the asset. We record the reversal as Gains on Dispositions of Investments in Real Estate and Revaluation of Equity Investments Upon Acquisition of a Controlling Interest, Net as a non-taxable transaction if we dispose of the asset along with the entity that owns the asset.

Deferred income tax expense is generally a function of the period’s temporary differences (items that are treated differently for tax purposes than for financial reporting purposes) and the utilization of tax net operating

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

losses (“NOL”) generated in prior years that had been previously recognized as deferred income tax assets. AWe provide for a valuation allowance for deferred income tax assets is provided if we believe all or some portion of the deferred income tax asset may not be realized. Any increase or decrease in the valuation allowance that results from a change in circumstances that causes a change in the estimated realizability ofability to realize the related deferred income tax asset is included in deferred tax expense.

Environmental Costs. We incur certain environmental remediation costs, including cleanup costs, consulting fees for environmental studies and investigations, monitoring costs, and legal costs relating to cleanup, litigation defense, and the pursuit of responsible third parties. CostsWe expense costs incurred in connection with operating properties and properties previously sold are expensed. Costssold. We capitalize costs related to undeveloped land are capitalized as development costs. Costscosts and include any expected future environmental liabilities at the time of acquisition. We include costs incurred for properties to be disposed are included in the cost of the properties upon disposition. We maintain a liability for the estimated costs of environmental remediation expected to be incurred in connection with undeveloped land, operating properties and properties previously sold that we adjust as appropriate as information becomes available.

New Accounting Pronouncements.

New Accounting Standards Adopted

In March 2013,August 2016, the Financial Accounting Standards Board (“FASB”) issued an accounting standard update that provides guidance for areas in which there is diversity in how certain cash receipts and payments are presented and classified in the statements of cash flows. The update clarifies the classification methodology within the statements of cash flows for eight specific topics. In 2016, we early adopted the standard in its entirety on a retrospective basis, and we determined that the only clarification to significantly impact us was the classification of distributions received from equity method investments. The update allows for the election to classify distributions

66


PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

received from equity method investments based on either a cumulative earnings approach or a nature of distribution approach. We have elected the nature of distribution approach, in which cash flows generated from the operations of an unconsolidated entity are classified as a return on investment (cash inflow from operating activities) and cash flows that are generated from property sales, debt refinancing or sales of our investments are classified as a return of investment (cash inflow from investing activities). We adopted this approach based on the accounting for currency translation adjustment (“CTA”) when a parent sells or transfers part of its ownership interest in a foreign entity. When a company sells a subsidiary or group of assets that constitute a business while maintaining ownershipinformation available to us to determine the nature of the foreign entity in which those assets or subsidiary reside,underlying activity that generated the distributions from unconsolidated entities. As a complete or substantially complete liquidationresult of our adoption of this standard, we reclassified $140.6 million and $177.0 million of distributions from our unconsolidated entities into Net Cash Provided by Operating Activities that was previously reported as Net Cash Provided by (Used in) Investing Activities for the foreign entity is required in order for a parent entity to release CTA to earnings. However, for a company that sells all or part of its ownership interest in a foreign entity, CTA is released upon the loss of a controlling financial interest in a consolidated foreign entity or partial sale of an equity method investment in a foreign entity. For step acquisitions, the CTA associated with the previous equity-method investment is fully released when control is obtainedyears ended December 31, 2015, and consolidation occurs. The guidance is effective for us on January 1, 2014, and we do not expect the guidance to have a material impact on the Consolidated Financial Statements.respectively.

In February 2013,March 2016, the FASB issued an accounting standard update that requires disclosureamends the stock compensation requirements in existing GAAP. The update simplifies certain aspects of accounting for share-based payment transactions, including income tax consequences, statutory tax withholding requirements, forfeitures and classification of taxes paid to a tax authority by us when we withhold shares to cover employee withholding tax payments for certain stock compensation plans in the effectstatements of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income. The new guidance was effective for us on January 1, 2013, for annual and interim periods.cash flows. We adopted the standard in its entirety on a retrospective basis in 2016. As a result of our adoption of this standard, aswe reclassified payments of January 1, 2013,$12.3 million and it did not have a material impact on$13.0 million from Net Cash Provided by Operating Activities to Net Cash Provided by (Used in) Financing Activities for the Consolidated Financial Statements.years ended December 31, 2015, and 2014, respectively.

In December 2011,February 2015, the FASB issued an accounting standard update that requires disclosures about offsettingamends the consolidation requirements in existing GAAP. Under the update, all entities, including limited partnerships and related arrangements to enable financial statement users to evaluatesimilar legal entities, are now within the effect or potential effectscope of netting arrangements on an entity’s financial position, including rights of setoff associated with certain financial instruments and derivative instruments. In January 2013, the FASB clarified that theconsolidation guidance, applies only to derivatives, repurchase agreements and reverse purchase agreements, and securities borrowing and securities lending transactions that are either offset in accordance with specific criteria under GAAP or subject tounless a master netting arrangement or similar agreement.scope exception applies. We adopted this standard as ofon a modified retrospective basis on January 1, 2013,2016, and itthe adoption did not have a material impactsignificant effect on the Consolidated Financial Statements.Statements, however the Operating Partnership and certain of our consolidated co-investment ventures now qualify as VIEs under the new guidance, which required additional disclosures. See Note 12 for additional information about our VIEs.

New Accounting Standards Issued but not yet Adopted

In December 2011,January 2017, the FASB issued an accounting standard update to clarifythat clarifies the scopedefinition of current GAAP.a business. The update clarifiesadds further guidance that assists preparers in evaluating whether a transaction will be accounted for as an acquisition of an asset or a business. We expect most of our acquisitions of operating properties and portfolios of operating properties to qualify as asset acquisitions under the real estate sales guidance appliesstandard which permits the capitalization of acquisition costs to the derecognitionbasis of in-substance real estate as a result of default on the subsidiary’s nonrecourse debt. Thatacquired buildings. This standard is even ifeffective for periods beginning after December 31, 2017, however we plan to adopt this standard in 2017 for the annual and interim reporting entity ceasesperiods beginning after December 31, 2016. We do not expect the adoption to have a controlling financial interest under the consolidation guidance, the reporting entity would continue to include the real estate, debt, and the results of the subsidiary’s operations in its consolidated financial statements until legal title to the real estate is transferred to legally satisfy the debt. We adopted this standard as of January 1, 2013, and it did not have anysignificant impact on the Consolidated Financial Statements.

 

3.Business Combinations

MergerIn May 2014, the FASB issued an accounting standard that requires companies to use a five step model to determine when to recognize revenue from customer contracts in an effort to increase consistency and comparability throughout global capital markets and across industries. We are evaluating each of AMBour revenue streams and ProLogisrelated accounting policy under the standard. Rental revenues and recoveries earned from leasing our operating properties will be evaluated with the adoption of the lease accounting standard (discussed below). Our evaluation under the revenue recognition standard also includes sales to third parties and unconsolidated co-investment ventures as well as recurring fees and promotes earned from our co-investment ventures. For sales to third parties, primarily a result of disposition of real estate in exchange for cash with few contingencies, we do not expect the standard to significantly impact the recognition of or accounting for these sales. Due to our continuing involvement through our equity ownership in our unconsolidated co-investment ventures, we are evaluating the accounting for sales to unconsolidated co-investment ventures under the standard. Additionally, while we do not expect changes in the recognition of recurring fees earned from the co-investment ventures, we are evaluating both the timing and measurement of promotes earned from co-investment ventures under the standard that may result in recognizing such fees when they are probable of being earned. The standard is effective for us on January 1, 2018. In addition to the recognition changes discussed above, expanded quantitative and qualitative disclosures regarding revenue recognition will be required for contracts that are subject to the standard. We expect to adopt the standard on a modified retrospective basis. 

As discussed

In February 2016, the FASB issued an accounting standard that provides the principles for the recognition, measurement, presentation and disclosure of leases.

The accounting for lessors will remain largely unchanged from current GAAP; however, the standard requires that lessors expense, on an as-incurred basis, certain initial direct costs that are not incremental in negotiating a lease. Under existing standards, certain of these costs are capitalizable and therefore this new standard may result in certain of these costs being expensed as incurred after adoption. This standard may also impact the timing, recognition and disclosures related to our rental recoveries from tenants earned from leasing our operating properties.

Under the standard, lessees apply a dual approach, classifying leases as either finance or operating leases. A lessee is required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months, regardless of their lease classification. Based on our real estate leases, we are a lessee on ground leases in certain markets and office space leases. Due to the length of the lease terms of certain ground leases, it is likely they will be classified as finance leases under the standard. At December 31, 2016, we have approximately 90 ground and office space leases that will require us to measure and record a right-of-use asset and a lease liability upon adoption of the standard. Details of our future minimum rental payments under these ground and office space leases are disclosed in Note 1, we completed the Merger on June 3, 2011. After consideration of all applicable factors pursuant to the business combination accounting rules, the Merger resulted in a reverse acquisition in which AMB was the “legal acquirer” because AMB issued its common stock to ProLogis shareholders and ProLogis was the “accounting acquirer” due to various factors, including the fact that ProLogis shareholders held the largest portion of the voting rights in the merged entity and ProLogis appointees represented the majority of the Board of Directors (“Board”). In the Consolidated Financial Statements, the period ended December 31, 2011, included the historical results of ProLogis for the entire period presented, and the results of the merged company for the period subsequent to the Merger.4.

67


PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

 

The standard is effective for us on January 1, 2019. We are assessing the practical expedients available for implementation under the standard. If the practical expedients are elected, we would not be required to reassess (i) whether an expired or existing contract meets the definition of a lease, (ii) the lease classification at the adoption date for expired or existing leases, and (iii) whether costs previously capitalized as initial direct costs would continue to be amortized. The standard will also require new disclosures within the notes accompanying our consolidated financial statements. We will continue to assess the method of adoption and the overall impact the adoption will have on the Consolidated Financial Statements.

 

As ProLogisNOTE 3. BUSINESS COMBINATIONS

KTR Capital Partners and Its Affiliates

On May 29, 2015, we acquired the high quality real estate assets and operating platform with high profile customers and comparable market composition to ours from KTR Capital Partners and its affiliates (“KTR”). The portfolio consisted of 315 operating properties, aggregating 59.0 million square feet, 3.6 million square feet of properties under development and land parcels that will support an estimated build out of 6.8 million square feet. The properties were acquired by our consolidated co-investment venture Prologis U.S. Logistics Venture (“USLV”), of which we own 55%. The transaction was funded through cash (which included the accounting acquirer,contribution of $2.3 billion from our venture partner and the calculationproceeds from the issuance of debt, as detailed in Note 9), the purchase price for accounting purposes is based onassumption of secured mortgage debt and the priceissuance of ProLogis4.5 million common shares and common shares ProLogis would have had to issue to achieve a similar ownership split between AMB stockholders and ProLogis shareholders. We estimated the fair value of the pre-combination portion of AMB’s share-based payment awards based on market data and,limited partnership units in the caseOperating Partnership. We incurred $24.7 million of stock options, we used a Black-Scholes model to estimate the fair value of these awards as of the Merger date. An adjustment was made to equity for the vested portion while the unvested portion will be expensed over the remaining service period. The purchase price allocation reflects aggregate consideration of approximately $5.9 billion, as calculated below (in millions, except price per share):acquisition costs that are included in Other Expenses during 2015.

ProLogis shares and limited partnership units outstanding at June 2, 2011 (60% of total shares of the combined company)

   571.4  

Total shares of the combined company (for accounting purposes)

   952.3  
  

 

 

 

Number of AMB shares to be issued (40% of total shares of the combined company)

   380.9  

Multiplied by price of ProLogis common share on June 2, 2011

  $15.21  
  

 

 

 

Consideration associated with common shares issued

  $5,794.1  

Add consideration associated with share based payment awards.

   62.4  
  

 

 

 

Total consideration of the Operating Partnership

  $        5,856.5  

The allocation of the purchase price requires a significant amount of judgment. The allocation was based on our valuation, estimates and assumptions of the acquisition date fair value of the tangible and intangible assets and liabilities acquired. The purchase price allocation is complete and adjustments recorded during the one year measurement period were not considered to be material to our financial position or results of operations. The allocation of the purchase price was as follows (in millions):

Investments in real estate properties

  $8,197.6  

Investments in and advances to unconsolidated entities

   1,592.3  

Cash, accounts receivable and other assets

   691.3  

Debt

   (3,646.7)  

Accounts payable, accrued expenses and other liabilities

   (420.5)  

Noncontrolling interests

   (557.5)  
  

 

 

 

Total purchase price of the Operating Partnership

  $        5,856.5  

Acquisition of ProLogis European Properties

During the second quarter of 2011, we increased our ownership of ProLogis European Properties (“PEPR”) through open market purchases and a mandatory tender offer. In May 2011, we settled our mandatory tender offer that resulted in the acquisition of an additional 96.5 million ordinary units and 2.7 million convertible preferred units of PEPR. During all of the second quarter of 2011, we made aggregate cash purchases totaling €715.8 million ($1.0 billion). We funded the purchases through borrowings under our global line of credit and a new €500 million bridge facility, which was subsequently repaid with proceeds from an equity offering in June 2011.

Upon completion of the tender offer, we met the requirements to consolidate PEPR. In accordance with the accounting rules for business combinations, we marked our equity investment in PEPR from its carrying value to fair value of approximately €486 million, which resulted in the recognition of a gain of €59.6 million ($85.9 million). We refer to this transaction as the “PEPR Acquisition.” The fair value was based on the trading price for our previously owned units and our acquisition price for the PEPR units purchased during the tender offer period.

We have allocated the aggregate purchase price, representing the share of PEPR we owned at the time of consolidation of €1.1 billion ($1.6 billion). The allocation of the purchase price required a significant amount of judgment and was based on our valuation,valuations, estimates and assumptions of the acquisition date fair value of the tangible and intangible assets acquired and liabilities acquired.assumed. The adjustments finalizing the purchase price allocation is complete and adjustments recorded during the one year measurement period were not considered to be material to our financial position or results of operations.

The allocation of the purchase price was as follows (in millions)thousands):

 

Investments in real estate properties

 

$

5,441,384

 

Intangible assets, net of intangible liabilities

 

 

332,708

 

Accounts receivable and other assets

 

 

8,062

 

Debt, including premium

 

 

(735,172

)

Accounts payable, accrued expenses and other liabilities

 

 

(56,313

)

Total estimated purchase price

 

 

4,990,669

 

Our venture partner’s share of purchase price

 

 

(2,253,234

)

Common limited partnership units issued in the Operating Partnership

 

 

(181,170

)

Prologis share of cash purchase price

 

$

2,556,265

 

 

Investments in real estate properties

  $4,448.2  

Cash, accounts receivable and other assets

   251.4  

Debt

   (2,240.8)  

Accounts payable, accrued expenses and other liabilities

   (698.2)  

Noncontrolling interests

   (133.7)  
  

 

 

 

Total purchase price

  $        1,626.9  

Pro forma Information (unaudited)

The following unaudited pro forma financial information presents our results as though the Merger and the PEPR Acquisition, as well as the equity offering in June 2011 that was used, in part, to repay the loans used to fund the PEPR Acquisition,KTR transaction had been consummated as of

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

completed on January 1, 2010.2014. The pro forma information does not necessarily reflect the actual results of operations had the transactionstransaction actually been consummated at the beginning of the period indicated norcompleted on January 1, 2014, and it is it necessarilynot indicative of future operating results. The pro forma information does not give effect to any cost synergies or other operating efficiencies that have resulted or could result fromresults for the Merger and also does notyear ended December 31, 2015, include any merger and integration expenses. The results included approximately seven months of actual results for both the Mergertransaction, the acquisition expenses, and PEPR Acquisition, andfive months of pro forma adjustments for five months.adjustments. Actual results in 2015 include rental incomerevenues and rental expenses of the properties acquired through the Merger and PEPR Acquisition of $575.2$235.7 million and $154.4$56.9 million, respectively, of which $74.2 million of rental income and $17.7 million of rental expenses are included in discontinued operations. Pro forma information forrepresenting the year endedperiod from acquisition through December 31, 2011 was as follows:2015.

 

The following amounts are in thousands, except per share amounts:

Total revenues

 

 

2015

 

 

2014

 

Total revenues

 

$

2,358,643

 

 

$

2,064,724

 

Net earnings attributable to common stockholders

 

$

866,753

 

 

$

537,861

 

Net earnings per share attributable to common stockholders – Basic

 

$

1.66

 

 

$

1.08

 

Net earnings per share attributable to common stockholders – Diluted

 

$

1.65

 

 

$

1.07

 

$        1,981,579

Net loss attributable to common stockholders

$(70,988)

Net loss per share attributable to common stockholders - basic

$(0.15)

Net loss per share attributable to common stockholders - diluted

$(0.15)

These results include certain adjustments, primarilyprimarily: (i) decreased revenues resulting from the amortization of the net assetassets from the acquired leases with net favorable or unfavorable rents relative to estimated market rents,rents; (ii) increased depreciation and amortization expense resulting from the adjustment of real estate assets to estimated fair value and recognition of intangible assets related to in-place leasesleases; and acquired management contracts and(iii) additional interest expense attributable to the debt issued to finance our cash portion of the acquisition offset by lower interest expense due to the accretion of the fair value adjustment of debt.

2013 Acquisitions

Acquisition of Unconsolidated Co-Investment Ventures

On August 6, 2013, we concluded the unconsolidated co-investment venturea Controlling Interest in Prologis North American Industrial Fund III

During 2014, we increased our ownership in Prologis North American Industrial Fund (“NAIF”) from 23.1% to 66.1% by acquiring the equity units from all but one partner for an aggregate of $679.0 million. This included the acquisition of $46.8 million of equity units on October 20, 2014, that resulted in our gaining control over NAIF, III”). The venture sold 73 properties aggregating 9.5 million square feet to a third party for proceeds of $427.5 million and subsequently paid off allbased on the remaining debt obligationsrights of the venture. Following the sale of these properties,limited partners, and therefore we acquired our partner’s 80% ownership in this venturebegan

68


PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

consolidating NAIF at that date and now own 100% of the remaining assets and liabilities. The assets and liabilities of this venture, as well as the activity since the acquisition date, have been included in the Consolidated Financial Statements. In accordance with the accounting rules for business combinations, we marked our equity investment in NAIF III from its carrying value to the estimated fair value. The fair value was determined and allocated based on our valuation, estimates and assumptions of the acquisition date fair value of the tangible and intangible assets and liabilities. The allocation of net assets acquired was $519.2 million in real estate assets and $22.0 million of net other assets. As a result of these transactions, we have recordedrecognized a gain of $39.5$201.3 million inGains on Acquisitions and Dispositions of Investments in Real Estate and Revaluation of Equity Investments upon Acquisition of a Controlling Interest, Net.

The total purchase price was $1.1 billion, which included our investment in NAIF at the Consolidated Statementstime of Operations. While the current allocation ofconsolidation. The adjustments finalizing the purchase price is substantially complete, the valuation of the real estate properties is being finalized. We do not expect future revisions, if any, to have a significant impact on our financial position or results of operations. The impact of the results in 2013 for the properties acquired from NAIF III was not significant.

On October 2, 2013, we acquired our partner’s 78.4% interest in and concluded the unconsolidated co-investment venture Prologis SGP Mexico (“SGP Mexico”). The assets and liabilities of this venture, as well as the activity since the acquisition date, have been included in the Consolidated Financial Statements. In accordance with the accounting rules for business combinations, we marked our equity investment in SGP Mexico from its carrying value to the estimated fair value. The fair value was determined and allocated based on our valuation, estimates and assumptions of the acquisition date fair value of the tangible and intangible assets and liabilities. The allocation of net assets acquired was $409.5 million in real estate assets and $4.0 million of net other assets and $158.4 million in debt. As a result of these transactions, we have recorded a loss of $1.1 million inGains on Acquisitions and Dispositions of Investments in Real Estate, Net, in the Consolidated Statements of Operations. While the current allocation of the purchase price is substantially complete, the valuation of the real estate properties is being finalized. We do not expect future revisions, if any, to have a significant impact on our financial position or results of operations. The impact of the results in 2013 for the properties acquired from SGP Mexico was not significant.

2012 Acquisitions of Unconsolidated Co-Investment Ventures

On February 3, 2012, we acquired our partner’s 63% interest in and now own 100% of our previously unconsolidated co-investment venture Prologis North American Industrial Fund II (“NAIF II”) and we repaid the loan from NAIF II to our partner for a total of $336.1 million. The assets and liabilities of this venture, as well as the activity since the acquisition date, have been included in the Consolidated Financial Statements. In accordance with the accounting rules for business combinations, we marked our equity investment in NAIF II from its carrying value to the estimated fair value. The fair value was determined and allocated based on our valuation, estimates, and assumptions of the acquisition date fair value of the tangible and intangible assets and liabilities. The allocation of net assets acquired was approximately $1.6 billion in real estate assets, $27.3 million of net other assets and $875.4 million in debt. The purchase price allocation is complete and adjustments recorded during the one year measurement period were not considered to be material to our financial position or results of operations. We did not record a gain or loss with this transaction, as the carrying value of our investment was equal to the estimated fair value.

On February 22, 2012, we dissolved the unconsolidated co-investment venture Prologis California and divided the portfolio equally with our partner. The net value of the assets and liabilities distributed represented the fair value of our ownership interest in the co-investment venture on that date. In accordance with the accounting rules for business combinations, we marked our equity investment in Prologis California from

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

its carrying value to the estimated fair value which resulted in a gain of $273.0 million. The gain is recorded inGains on Acquisitions and Dispositions of Investments in Real Estate, Net in the Consolidated Statements of Operations. The fair value was determined and allocated based on our valuation, estimates, and assumptions of the acquisition date fair value of the tangible and intangible assets and liabilities. The allocation of net assets acquired is approximately $496.3 million in real estate assets, $17.7 million of net other assets and $150.0 million in debt. Thethe purchase price allocation is complete and adjustments recorded during the one year measurement period were not considered to be material to our financial position orwas as follows (in thousands):

Investments in real estate properties

 

$

2,658,252

 

Intangible assets, net of intangible liabilities

 

 

138,185

 

Cash

 

 

87,780

 

Accounts receivable and other assets

 

 

5,664

 

Debt, including premium

 

 

(1,195,213

)

Accounts payable, accrued expenses and other liabilities

 

 

(57,655

)

Noncontrolling interests

 

 

(554,493

)

Total purchase price

 

$

1,082,520

 

Actual results of operations.

On November 30, 2012, Prologis North American Properties Fund 1 (“Fund 1”) distributed real estate properties based on fair value to our partner. We acquired the remaining interest in Fund 1 for total consideration of $33.2 million. In accordance with the accounting rules for business combinations, we marked our equity investment in Fund 1 from its carrying value to the estimated fair value which resulted in a gain of $21.2 million. The gain is recorded inGains on Acquisitions and Dispositions of Investments in Real Estate, Net in the Consolidated Statements of Operations. The fair value was determined and allocated based on our valuation, estimates, and assumptions of the acquisition date fair value, which consisted primarily of real estate and intangible assets of $117.0 million. The purchase price allocation is complete and adjustments recorded during the one year measurement period were not considered to be material to our financial position or results of operations.

We refer to these three transactions collectively as the “2012 Co-Investment Venture Acquisitions.”

Our results for 2012 include2014 included rental incomerevenues and rental expenses of the properties acquired in the 2012 Co-Investment Venture AcquisitionsNAIF acquisition of $170.6$49.2 million and $42.5$13.3 million, respectively, offset by the impact of which $11.5 million of rental income and $2.5 million of rental expenses are included in discontinued operations.noncontrolling interests.

 

4.Real Estate

NOTE 4. REAL ESTATE

Investments in real estate properties are presented at cost, and consistconsisted of the following as ofat December 31 (square(dollars and square feet and dollars in thousands):

 

Square Feet

 

 

Number of Buildings

 

 

 

 

  Square Feet /Acres (1)     No. of Buildings (1)   Investment Balance 

2016

 

 

2015

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

  2013   2012     2013   2012   2013   2012 

Industrial operating properties:

              

Operating properties:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Buildings and improvements

 

331,210

 

 

 

333,830

 

 

 

1,776

 

 

 

1,872

 

 

$

17,905,914

 

 

$

17,861,693

 

Improved land

   - -      - -        - -      - -     $4,074,647    $5,317,123  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6,037,543

 

 

 

5,874,052

 

Buildings and improvements

   267,097     316,347       1,610     1,853     13,726,417     17,291,125  

Development portfolio, including cost of land:

              

Pre-stabilized

   4,491     4,785       11     15     204,022     472,413  

Development portfolio, including land costs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prestabilized

 

8,256

 

 

 

12,598

 

 

 

29

 

 

 

28

 

 

 

798,233

 

 

 

918,099

 

Properties under development

   18,587     13,216       46     30     816,995     479,230  

 

19,539

 

 

 

19,630

 

 

 

60

 

 

 

63

 

 

 

633,849

 

 

 

954,804

 

Land

   9,747     10,915       - -      - -      1,516,166     1,794,364  

Land (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,218,904

 

 

 

1,359,794

 

Other real estate investments (2)

   - -      - -        - -      - -      486,230     454,868  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

524,887

 

 

 

552,926

 

            

 

   

 

 

Total investments in real estate properties

             20,824,477     25,809,123  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

27,119,330

 

 

 

27,521,368

 

Less accumulated depreciation

             2,568,998     2,480,660  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,758,372

 

 

 

3,274,284

 

            

 

   

 

 

Net investments in real estate properties

                $        18,255,479    $        23,328,463  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

23,360,958

 

 

$

24,247,084

 

 

(1)

Items indicated by ‘ - - ‘ are not applicable.

Included in our investments in real estate at December 31, 2016, and 2015 were 5,892 and 7,404 acres of land, respectively.

 

(2)

Included in other real estate investments were:are: (i) certain non-industrialnon-logistics real estate; (ii) our corporate office buildings; (iii) land parcels that are ground leased to third parties; (iii) our corporate office buildings; (iv) certain infrastructure costs related to projects we are developing on behalf of others; (v) costs related to future development projects, including purchase options on land; and (vi) earnest money deposits associated with potential acquisitions; and (vii) restricted funds that are held in escrow pending the completion of tax-deferred exchange transactions involving operating properties.acquisitions.

At December 31, 2013, excluding our assets held for sale,2016, we owned real estate assets in the U.S. and other Americas (Canada Mexico and the United States)Mexico), Europe (Austria, Belgium, the Czech Republic, France, Germany, Hungary, Italy, the Netherlands, Poland, Romania, Slovakia, Spain, Sweden and the United Kingdom)Kingdom (“U.K.”)) and Asia (China, Japan and Singapore).

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)Acquisitions

 

Acquisitions

Real estate acquisition activityThe following table summarizes our acquisitions of properties from third parties for the years ended December 31 2013, 2012 and 2011 was as follows (dollars and square feet in thousands):

 

    2013   2012   2011 

Acquisitions of properties from unconsolidated co-investment ventures

      

Number of properties

   58     215     233  

Square feet

   16,319     46,277     53,603  

Real estate acquisition value

  $        1,141,128    $        2,294,892    $        4,591,017  

Net gains

  $34,787    $286,335    $99,369  

Building acquisitions from third parties

      

Number of properties

   12     12     8  

Square feet

   3,262     1,622     1,498  

Real estate acquisition value

  $146,331    $77,397    $86,851  

 

 

2016

 

 

2015

 

 

2014

 

Number of operating properties

 

 

9

 

 

 

52

 

 

 

8

 

Square feet

 

 

1,823

 

 

 

7,375

 

 

 

1,004

 

Real estate acquisition value (1)

 

$

411,706

 

 

$

1,042,562

 

 

$

548,201

 

(1)

Value includes the acquisition of 776, 690, and 1,040 acres of land in 2016, 2015 and 2014, respectively.

69


PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The table above does not include the properties acquired in the KTR transaction, as this transaction is explained in Note 3.

Dispositions

The acquisitions of properties from unconsolidated co-investment ventures primarily relate to when we have acquired all or a portion of the third parties share of a co-investment venture upon dissolution of the venture.

Dispositions

Realfollowing table summarizes our real estate disposition activity for the years ended December 31 2013, 2012 and 2011 was as follows (dollars and square feet in thousands):

 

    2013   2012   2011 

Continuing Operations

      

Number of properties

   254     25     57  

Square feet

   71,503     4,784     7,784  

Net proceeds from contributions and dispositions

  $        6,656,980    $        475,467    $        731,072  

Net gains from contributions and dispositions

  $562,869    $19,272    $12,315  

Discontinued Operations

      

Number of properties

   89     200     94  

Square feet

   9,196     27,169     10,739  

Net proceeds from dispositions

  $608,286    $1,562,189    $931,443  

Net gains from dispositions, including related impairment charges and taxes

  $116,550    $35,098    $58,614  

 

2016

 

 

2015

 

 

2014

 

Contributions to unconsolidated co-investment ventures

 

 

 

 

 

 

 

 

 

 

 

Number of properties

 

35

 

 

 

31

 

 

 

126

 

Square feet

 

11,624

 

 

 

8,355

 

 

 

25,247

 

Net proceeds (1)

$

1,231,878

 

 

$

835,385

 

 

$

1,825,311

 

Net gains on contributions (1)

$

267,441

 

 

$

148,987

 

 

$

188,268

 

Dispositions to third parties

 

 

 

 

 

 

 

 

 

 

 

Number of properties

 

172

 

 

 

136

 

 

 

145

 

Square feet

 

20,360

 

 

 

23,024

 

 

 

19,856

 

Net proceeds (1)

$

1,760,048

 

 

$

2,352,645

 

 

$

1,365,318

 

Net gains on dispositions (1)

$

353,668

 

 

$

609,900

 

 

$

336,203

 

 

 

 

 

 

 

 

 

 

 

 

 

Total net gains on contributions and dispositions

$

621,109

 

 

$

758,887

 

 

$

524,471

 

Gains on redemptions of investments in co-investment ventures (2)

 

136,289

 

 

 

-

 

 

 

-

 

Gains on revaluation of equity investments upon acquisition of a controlling

     interest, net (3)

 

-

 

 

 

-

 

 

 

201,319

 

Total gains on dispositions of investments in real estate, net

$

757,398

 

 

$

758,887

 

 

$

725,790

 

(1)

Includes the disposition of land parcels.

(2)

See Note 5 for more information on these transactions.

(3)

See Note 3 for more information on this transaction.

In 2014, we launched the initial public offering of FIBRA Prologis, a Mexican REIT. In connection with the offering, FIBRA Prologis purchased 177 properties aggregating 29.7 million square feet (12.6 million square feet related to our wholly owned portfolio, 7.6 million square feet from our consolidated co-investment venture Prologis Mexico Fondo Logistico (“AFORES”) and 9.5 million square feet from our unconsolidated co-investment venture Prologis Mexico Industrial Fund). Also in 2014, AFORES contributed its remaining operating properties and the balance of its secured debt to FIBRA Prologis. The difference between the amount received and the noncontrolling interests balance related to the properties contributed was $34.6 million, and was adjusted through equity with no gain or loss recognized. On the basis of this transaction, we recognized a gain on disposition of investments in real estate of $52.5 million; current tax expense of $32.4 million; deferred tax benefit of $55.5 million; and earnings attributable to noncontrolling interest of $61.0 million.

Operating Lease Agreements

We lease our operating properties and certain land parcels to customers under agreements that are generally classified as operating leases. Our weighted average lease term remaining, based on square feet for all leases in effect at December 31, 2016, was four years.

The following table summarizes our minimum lease payments on leases with lease periods greater than one year for space in our operating properties, pre-stabilized development properties and leases of land subject to ground leases at December 31, 2016 (in thousands):

2017

 

$

1,633,990

 

2018

 

 

1,488,049

 

2019

 

 

1,239,683

 

2020

 

 

1,038,305

 

2021

 

 

809,961

 

Thereafter

 

 

2,391,452

 

Total

 

$

8,601,440

 

These amounts do not reflect future rental revenues from the renewal or replacement of existing leases and exclude reimbursements of operating expenses.

70


PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Lease Commitments 

We have entered into operating ground leases as a lessee on certain land parcels, primarily on-tarmac facilities and office space with remaining lease terms of 1 to 7573 years. Buildings and improvements subject to ground leases are depreciated ratably over the shorter of the term of the related leases or the useful life of the real estate. FutureThe following table summarizes our future minimum rental payments under non-cancelable operating leases in effect as ofat December 31, 2013, were as follows2016 (in thousands):

 

2017

 

$

30,976

 

2018

 

 

32,035

 

2019

 

 

29,520

 

2020

 

 

28,379

 

2021

 

 

24,480

 

Thereafter

 

 

332,835

 

Total

 

$

478,225

 

 

2014

  $36,474  

2015

   34,105  

2016

   25,434  

2017

   22,956  

2018

   20,752  

Thereafter

   227,141  
  

 

 

 

Total

  $        366,862  

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)NOTE 5. UNCONSOLIDATED ENTITIES

 

Operating Lease Agreements

We lease our operating properties and certain land parcels to customers under agreements that are generally classified as operating leases. Our largest customer and 25 largest customers accounted for 1.6% and 22.6%, respectively, of our annualized base rents at December 31, 2013. At December 31, 2013, minimum lease payments on leases with lease periods greater than one year for space in our operating properties and leases of land subject to ground leases were as follows (in thousands):

2014

  $        1,106,254  

2015

   966,365  

2016

   780,354  

2017

   574,171  

2018

   421,255  

Thereafter

   1,139,570  
  

 

 

 

Total

  $4,987,969  

These amounts do not reflect future rental revenues from the renewal or replacement of existing leases and exclude reimbursements of operating expenses. These reimbursements are reflected as rental recoveries and rental expenses in the accompanying Consolidated Statements of Operations.

5.Unconsolidated Entities

Summary of Investments

We have investments in entities through a variety of ventures. We co-invest in entities that own multiple properties with strategic capitalpartners and investors and provide asset and property management services to these entities. Weentities, which we refer to these entities as co-investment ventures. Our ownership interest in these entities generally ranges from 15-50%. These entities may be consolidated or unconsolidated, depending on the structure, our partner’s rightsparticipation and participationother rights and our level of control of the entity. This note details our investments in unconsolidated co-investment ventures, thatwhich are accounted for using the equity method of accounting. See Note 12 for more detail regarding our consolidated investments.

We also have other ventures, generally with one partner and that we do not manage.manage, which we account for using the equity method. We refer to our investments in theall entities accounted for onusing the equity method, both unconsolidated co-investment ventures and other ventures, collectively, as unconsolidated entities.

Our

The following table summarizes our investments in and advances to our unconsolidated entities as ofat December 31 are summarized below (in thousands):

 

  2013   2012 

 

2016

 

 

2015

 

Unconsolidated co-investment ventures

  $4,250,015    $2,013,080  

 

$

4,057,524

 

 

$

4,585,427

 

Other ventures

   180,224     182,702  

 

 

172,905

 

 

 

170,193

 

  

 

   

 

 

Totals

  $        4,430,239    $        2,195,782  

 

$

4,230,429

 

 

$

4,755,620

 

Unconsolidated Co-Investment Ventures

As of December 31, 2013, we had investments in and managed 10 unconsolidated co-investment ventures that own portfolios of operating industrial properties and may also develop properties. We account for our investments in these ventures under the equity method of accounting and, therefore, we record our share of each venture’s net earnings or loss asEarnings from Unconsolidated Entities, Net in the Consolidated Statements of Operations. We earn fees for the management services we provide to these ventures. These fees are recognized as earned and may include property and asset management fees or transactional fees for leasing, acquisition, construction, financing, legal and tax services. We may also earn incentive returns or promotes based on the third party investor returns over time. We report these fees and incentives asInvestment Management Income in the Consolidated Statements of Operations. In addition, we may earn fees for services provided to develop a building within these ventures and those fees are reflected asDevelopment Management and Other Income in the Consolidated Statements of Operations.

In the first quarter of 2013, we launched the initial public offering for Nippon Prologis REIT, Inc. (“NPR”). NPR is a long-term investment vehicle for our stabilized properties in Japan. On February 14, 2013, NPR was listed on the Japan Stock Exchange and commenced trading. At that time, NPR acquired a portfolio of 12 properties totaling 9.6 million square feet from us for an aggregate purchase price of ¥173 billion ($1.9 billion). At the time, we had a 15% ownership interest that we accounted for under the equity method. As a result of this transaction, we recognized a gain of $337.9 million, net of a $59.6 million deferral due to our ongoing investment. The gain was recorded inGains on Acquisitions and Dispositions of Investments in Real Estate, Net in the Consolidated Statements of Operations. We recognized $38.6 million of current tax expense in connection with this contribution.

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

On March 19, 2013, we closed Prologis European Logistics Partners Sàrl (“PELP”), a joint venture with Norges Bank Investment Management (“NBIM”), which is the manager of the Norwegian Government Pension Fund Global. We have a 50% ownership interest that we account for under the equity method. The venture has an initial term of 15 years, which may be extended for an additional 15-year period, and thereafter extended upon negotiation between partners. We will have the ability to reduce our ownership to 20% following the second anniversary of closing. The venture acquired a portfolio from us for approximately €2.3 billion ($3.0 billion) consisting of 195 properties and 48.7 million square feet in 11 target European global markets. As a result of this transaction, we recognized a gain of $1.8 million, net of a deferred gain due to our ongoing investment. The gain was recorded inGains on Acquisitions and Dispositions of Investments in Real Estate, Net in the Consolidated Statements of Operations. In connection with the closing, a warrant NBIM received at signing to acquire six million shares of Prologis common stock with a strike price of $35.64 became exercisable. The warrant can be net share settled. We used the Black-Scholes pricing model to value the warrant and this value was included as consideration in the overall result of the transaction.

During the three years ended December 31, 2013, we also acquired controlling interests in several co-investment ventures and began consolidating the venture or the properties. In addition, during this period we have made contributions of properties to several other co-investment ventures. See Notes 3 and 4 for discussion of these transactions and the impact on our real estate properties. In connection with the Merger, we added several co-investment ventures for which we recognized fees and our proportionate share of earnings (loss) for approximately seven months in 2011.

Summarized information regarding the amounts we recognize in the Consolidated Statements of Operations fromtable summarizes our investments in the unconsolidatedindividual co-investment ventures for the years endedat December 31 was as follows (in(dollars in thousands):

 

    2013   2012   2011 

Earnings (loss) from unconsolidated co-investment ventures:

      

Americas

  $21,724    $(7,843)    $22,709  

Europe

   63,839     31,174     25,709  

Asia

   9,091     2,372     908  
  

 

 

   

 

 

   

 

 

 

Total earnings (loss) from unconsolidated co-investment ventures, net

  $94,654    $25,703    $49,326  
  

 

 

   

 

 

   

 

 

 

Investment management and other income:

      

Americas (1)

  $70,642    $68,142    $67,293  

Europe

   63,794     37,173     45,758  

Asia

   42,749     19,870     14,149  
  

 

 

   

 

 

   

 

 

 

Total investment management income

   177,185     125,185     127,200  

Development management and other income

   4,007     535     5,943  
  

 

 

   

 

 

   

 

 

 

Total investment management and other income

  $        181,192    $        125,720    $        133,143  

 

 

Ownership

Percentage

 

 

Investment in

and Advances to

 

Co-Investment Venture

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Prologis Targeted U.S. Logistics Fund, L.P. (“USLF”) (1)

 

 

14.9

%

 

 

22.5

%

 

$

434,818

 

 

$

689,408

 

FIBRA Prologis (2) (3)

 

 

45.9

%

 

 

45.9

%

 

 

547,744

 

 

 

569,800

 

Prologis Brazil Logistics Partners Fund I, L.P. (“Brazil Fund”)

     and related joint ventures (4)

 

various

 

 

various

 

 

 

297,300

 

 

 

216,668

 

Europe Logistics Venture 1, FCP-FIS (“ELV”) (5) (6)

 

 

15.0

%

 

 

15.0

%

 

 

48,289

 

 

 

53,960

 

Prologis European Logistics Partners Sàrl (“PELP”) (5)

 

 

50.0

%

 

 

50.0

%

 

 

1,623,707

 

 

 

1,762,291

 

Prologis European Properties Fund II, FCP-FIS (“PEPF II”)

 

 

31.2

%

 

 

31.3

%

 

 

344,200

 

 

 

410,984

 

Prologis Targeted Europe Logistics Fund, FCP-FIS (“PTELF”) (1) (6)

 

 

23.5

%

 

 

41.6

%

 

 

310,118

 

 

 

480,401

 

Nippon Prologis REIT, Inc. (“NPR”) (7) (8)

 

 

15.1

%

 

 

15.1

%

 

 

348,570

 

 

 

300,822

 

Prologis China Logistics Venture I, LP and II, LP

     (Prologis China Logistics Venture) (5)

 

 

15.0

%

 

 

15.0

%

 

 

102,778

 

 

 

101,093

 

Totals

 

 

 

 

 

 

 

 

 

$

4,057,524

 

 

$

4,585,427

 

 

1)

(1)

In connection with the conclusion

During 2016, we redeemed a portion of SGP Mexicoour investment in October 2013, we earnedPTELF and USLF for €275.0 million ($311.1 million) and $300.0 million, respectively, and recorded a promote fee from the venturegain of $7.9$136.3 million, which was basedis included in Gains on the venture’s cumulative returns toDispositions of Investments in Real Estate and Revaluation of Equity Investments Upon Acquisition of a Controlling Interest, Net. The amounts received for the investors over the liferedemptions were included in Return of the venture. Of that amount, $6.4 million represented the third party investors’ portion and is reflected inInvestment Management Incomefrom Unconsolidated Entities in the Consolidated Statements of Operation. We also recognized approximately $1.3Cash Flows.

(2)

At December 31, 2016, we owned 291.1 million units of expense inInvestment Management Expenses inFIBRA Prologis that had a closing price of Ps 29.69 ($1.44) per unit on the Consolidated Statements of Operations, representing the associated cash bonus paid out to certain employees pursuant to the terms of the Prologis Promote Plan, previously referred to as the Private Capital Plan.Mexican Stock Exchange.

The amounts of Investment Management Income and Earnings we recognize depends on the number and size of co-investment ventures in which we have an ownership interest and manage. A summary of our outstanding unconsolidated co-investment ventures at December 31 was as follows (square feet and total assets in thousands and represents 100% of the venture):71


    2013   2012   2011 

Number of ventures

   10     11     15  

Square feet

   264,293     208,753     267,752  

Total assets

  $        23,865,250    $        17,612,590    $        20,692,939  

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

 

Information about our investments in the co-investment ventures as of December 31 was as follows (dollars and square feet in thousands):

   Number  of
properties
owned
   Square
feet
   Ownership
Percentage
   Investment in
and Advances to
 
Co-Investment Venture  2013   2013   2013   2012   2013   2012 

Prologis Targeted U.S. Logistics Fund
(Prologis U.S. Logistics Fund, LP) (1)

   385     48,490     25.9 %     23.9 %    $743,454    $645,241  

Prologis North American Industrial Fund (2)

   237     46,500     23.1 %     23.1 %     201,482     209,580  

Prologis North American Industrial Fund III
(Prologis NA 3 LP) (3)

                 20.0 %          20,860  

Prologis Mexico Industrial Fund
(Prologis MX Fund LP) (4)

   74     9,503     20.0 %     20.0 %     49,684     50,681  

Prologis SGP Mexico
(Prologis-SGP Mexico, LLC) (5)

                  21.6 %          33,245  

Prologis Brazil Logistics Partners Fund (“Brazil Fund”) and related joint ventures (“Brazil Ventures”) (6)

   11     4,044     50.0 %     50.0 %     199,392     152,224  

Prologis Targeted Europe Logistics Fund
(Prologis Europe Logistics Fund, FCP-FIS) (7)

   84     13,652     43.1 %     32.4 %     471,896     280,430  

Prologis European Properties Fund II (8)

   250     62,364     32.5 %     29.7 %     582,828     398,291  

Europe Logistics Venture 1
(Europe Logistics JV, FCP-FIS) (9) (10)

   24     5,070     15.0 %     15.0 %     62,654     44,027  

Prologis European Logistics Partners (9) (11)

   209     51,790     50.0 %          1,585,923       

Nippon Prologis REIT (12)

   24     18,508     15.1 %          309,715       

Prologis Japan Fund 1 (Prologis Japan Fund I, LP) (13)

                  20.0 %          144,352  

Prologis China Logistics Venture 1
(Prologis China Logistics Venture I, LP) (9)

   19     4,372     15.0 %     15.0 %     42,987     34,149  
  

 

 

   

 

 

       

 

 

   

 

 

 

Totals

           1,317             264,293              $  4,250,015    $  2,013,080  

(1)

(3)

We have an ownership interestgranted FIBRA Prologis a right of first refusal with respect to stabilized properties that we plan to sell in this co-investment venture along with numerous third party investors. During 2013, this venture disposed of 14 properties for a gain of $35.5 million. In addition, this venture acquired 34 properties from third parties in 2013 aggregating 4.4 million square feet for $274.7 million.Mexico.

 

(2)

(4)

We refer to the combined entities in which we have an ownership interest with nine institutional investors as one unconsolidated co-investment venture named Prologis North American Industrial Fund. Our ownership percentage is based on our levels of ownership interest in these different entities. During 2013, the venture disposed of six properties for a gain of $2.3 million.

(3)In August 2013, we acquired a controlling interest in and began consolidating NAIF III. See Note 3 for information regarding this transaction.

(4)We refer to the combined entities in which we have an ownership interest with several institutional investors as one co-investment venture named Prologis Mexico Industrial Fund.

(5)In October 2013, we purchased our partner’s interest and began consolidating this venture. See Note 3 for information regarding this transaction.

(6)We have a 50% ownership interest in and consolidate an entity that in turn owns 50% of several entities that we account for on the equity method (the “Brazil Fund”).method. Also, we have additional investments in other unconsolidated entities in Brazil that we account for on the equity method with various ownership interests ranging from 5-50%. We refer5% to the Brazil Fund and the other unconsolidated entities collectively as the “Brazil Ventures.” During 2013, the Brazil Ventures contributed three properties to unconsolidated ventures in Brazil aggregating 1.1 million square feet for total proceeds of $122.6 million.50%.

 

(7)

(5)

We have an ownership interest in this co-investment venture along with numerous third party investors. During 2013, we contributed eight properties aggregating 1.6 million square feet in exchange for $144.6 million in proceeds raised from us and third parties and additional ownership interests in the venture. As a result, our ownership percentage in this venture increased in 2013.

(8)We have an ownership interest in this co-investment venture along with numerous third party investors. During 2013, we contributed 21 properties aggregating 4.5 million square feet for total proceeds of $391.6 million. Additionally, this venture acquired 10 properties from third parties in 2013 for $222.4 million aggregating 2.6 million square feet.

(9)We have one partner in each of these co-investment ventures.

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

(10)

(6)

During 2013,

In January 2017, we sold our investment in ELV to our fund partner and ELV contributed 10 properties aggregating 1.9 million square feet for proceeds of $189.9 million.

(11)We established this co-investment venture in 2013, as discussed above. Since the initial contribution, we contributed four properties aggregating 0.5 million square feet for total proceeds of $57.6 million. Additionally, this venture acquired 12 properties from third parties in 2013 for $380.4 million aggregating 2.6 million square feet.

(12)We established this co-investment venture in 2013, as discussed above. Since the initial contribution, we contributed six properties aggregating 4.6 million square feet for total proceeds of $963.9 million. These contributions were funded by NPR with two follow on offerings in 2013. In addition, NPR acquired six properties from Prologis Japan Fund I aggregating 4.3 million square feet.

(13)We concluded this co-investment venture in 2013 through the acquisition of 14 properties by us and the sale of the remaining sixits properties to NPR (as discussed above).PTELF in exchange for equity interests.

The following is summarized financial information of the unconsolidated co-investment ventures and our investment (dollars in millions). The co-investment venture information represents 100% of Prologis’ stepped up basis, not our proportionate share, and may not be comparable to values reflected in the entities’ stand alone financial statements calculated on a different basis.

 

2013 (1)  Americas   Europe   Asia   Total 

Revenues

  $702.4    $801.4    $223.8    $1,727.6  

Net operating income

  $512.9    $621.1    $174.7    $1,308.7  

Net earnings (loss) (2)

  $58.3    $130.6    $47.5    $236.4  

Total assets

  $      8,014.4    $      11,818.8    $      4,032.1    $      23,865.3  

Amounts due to us (3)

  $10.3    $43.7    $110.0    $164.0  

Third party debt (4)

  $2,999.1    $2,998.2    $1,715.2    $7,712.5  

Total liabilities

  $3,177.1    $4,113.6    $1,899.2    $9,189.9  

Our weighted average ownership (5)

   22.7%     39.0%     15.0%     29.2%  

Our investment balance (6)

  $1,194.0    $2,703.3    $352.7    $4,250.0  

Our deferred gains, net of amortization (7)

  $139.6    $196.7    $94.8    $431.1  
2012 (1)  Americas   Europe   Asia   Total 

Revenues

  $759.3    $489.8    $140.5    $1,389.6  

Net operating income

  $560.8    $380.2    $109.4    $1,050.4  

Net earnings (loss) (2)

  $(88.1)    $85.7    $8.2    $5.8  

Total assets

  $9,070.4    $6,605.2    $1,937.0    $17,612.6  

Amounts due to us (3)

  $31.9    $33.3    $7.7    $72.9  

Third party debt (4)

  $3,835.5    $2,384.2    $972.9    $7,192.6  

Total liabilities

  $4,170.4    $2,953.8    $1,062.5    $8,186.7  

Our weighted average ownership (5)

   23.2%     29.7%     19.2%     25.1%  

Our investment balance (6)

  $1,111.8    $722.8    $178.5    $2,013.1  

Our deferred gains, net of amortization (7)

  $147.9    $181.6    $0.1    $329.6  

(1)

(7)

We have had significant activity with our unconsolidated co-investment ventures in 2012 and 2013. We concluded Prologis California and NAIF II in 2012 and NAIF III, Prologis Japan Fund I and SGP Mexico in 2013 and only included the results of these ventures through the transaction dates. In 2013, we launched two new co-investment ventures (PELP and NPR) and the results of these ventures are included from the date these ventures acquired the properties.

(2)In 2013, three ventures in the Americas recorded net gains of $60.6 million from the disposition of 23 properties.

In 2012, five ventures in the Americas recorded net gains of $9.4 million from the disposition of 38 properties. During 2012, NAIF III wrote off accumulated other comprehensive loss due to the settlement of debt before maturity by transferring the secured properties to the lender in lieu of payment for $25.1 million and the settlement of interest rate swap agreements in which the related debt is no longer expected to reach maturity for $21.5 million.

(3)As of

At December 31, 2013,2016, we owned 0.3 million units of NPR that had a closing price of ¥238,900 ($2,041) per share on the Tokyo Stock Exchange. At December 31, 2016 and 2015, we had receivables from Prologis European Logistics Partners for remaining sale proceeds of $35.5 million which has subsequently been received. We also had a receivable from NPR of $88.5$96.9 million and $85.2 million, respectively, related to customer security deposits that are madeoriginated through a leasing company owned by Prologisus that pertain to properties owned by NPR. There isWe have a corresponding payable to NPR’s customercustomers inOther Liabilities.

(8)

For any properties we develop and plan to sell in the Consolidated Balance Sheets.Japan, we have committed to offer those properties to NPR.

The amounts recognized in Strategic Capital Revenues and Earnings from Unconsolidated Entities, Net depend on the size and operations of the co-investment ventures, the timing of revenues earned through promotes during the life of a venture or upon liquidation, as well as fluctuations in foreign currency exchange rates. We recognized Strategic Capital Expenses for direct costs associated with the asset management of these ventures and allocated property-level management costs for the properties owned by the ventures. Our ownership interest in these ventures also impacts the earnings we recognize.

The following table summarizes the amounts we recognized in the Consolidated Statements of Income related to the unconsolidated co-investment ventures for the years ended December 31 (in thousands):

 

 

2016

 

 

2015

 

 

2014

 

Strategic capital revenues and other revenues:

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

37,911

 

 

$

36,964

 

 

$

81,351

 

Other Americas

 

 

22,777

 

 

 

22,516

 

 

 

13,003

 

Europe

 

 

184,956

 

 

 

112,675

 

 

 

86,487

 

Asia

 

 

46,521

 

 

 

35,453

 

 

 

37,509

 

Total strategic capital revenues

 

 

292,165

 

 

 

207,608

 

 

 

218,350

 

Development management and other revenues

 

 

11,006

 

 

 

7,467

 

 

 

5,424

 

Total strategic capital revenues and other revenues

 

$

303,171

 

 

$

215,075

 

 

$

223,774

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings from unconsolidated co-investment ventures, net:

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

10,441

 

 

$

7,124

 

 

$

16,420

 

Other Americas

 

 

27,155

 

 

 

28,842

 

 

 

(7,824

)

Europe

 

 

137,652

 

 

 

106,656

 

 

 

108,430

 

Asia

 

 

16,629

 

 

 

12,780

 

 

 

14,022

 

Total earnings from unconsolidated co-investment ventures, net

 

$

191,877

 

 

$

155,402

 

 

$

131,048

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The following table summarizes the promotes earned and recognized in Strategic Capital Revenues for the years ended December 31 (in thousands):

 

 

2016

 

 

2015

 

 

2014

 

Strategic capital – promote revenues

 

 

 

 

 

 

 

 

 

 

 

 

Total promote (1)

 

$

99,766

 

 

$

56,637

 

 

$

42,132

 

Less: Prologis’ share

 

 

11,222

 

 

 

27,175

 

 

 

10,852

 

Net promote recognized (third-party share) in strategic capital revenues

 

$

88,544

 

 

$

29,462

 

 

$

31,280

 

(1)

We earned promotes from PTELF and PEPF II in 2016, PELP and ELV in 2015 and USLF in 2014, each based on the venture’s cumulative returns to the investors over the last three years.  

Approximately 40% of promote revenues are paid as a combination of cash and stock awards pursuant to the terms of the Prologis Promote Plan and expensed through Strategic Capital Expenses. See Note 13 for more information on this plan.

72


PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following tables summarize the operating information and financial position of our unconsolidated co-investment ventures (not our proportionate share), at December 31 and for the years ended December 31 as presented at our adjusted basis derived from the ventures’ GAAP information:

 

(dollars and square feet in millions)

 

2016

 

 

2015

 

 

2014

 

U.S.:

 

 

 

 

 

 

 

 

 

 

 

 

Number of ventures

 

 

1

 

 

 

1

 

 

 

1

 

Number of properties owned

 

 

369

 

 

 

391

 

 

 

392

 

Square feet

 

 

50

 

 

 

50

 

 

 

50

 

Total assets

 

$

4,238

 

 

$

4,408

 

 

$

4,403

 

Third-party debt

 

$

1,414

 

 

$

1,433

 

 

$

1,594

 

Total liabilities

 

$

1,540

 

 

$

1,550

 

 

$

1,697

 

Our investment balance (1)

 

$

435

 

 

$

690

 

 

$

712

 

Our weighted average ownership (2)

 

 

14.9

%

 

 

22.5

%

 

 

24.3

%

Other Americas:

 

 

 

 

 

 

 

 

 

 

 

 

Number of ventures

 

 

2

 

 

 

2

 

 

 

2

 

Number of properties owned

 

 

213

 

 

 

205

 

 

 

198

 

Square feet

 

 

42

 

 

 

39

 

 

 

37

 

Total assets

 

$

2,793

 

 

$

2,482

 

 

$

2,653

 

Third-party debt

 

$

739

 

 

$

657

 

 

$

679

 

Total liabilities

 

$

814

 

 

$

708

 

 

$

717

 

Our investment balance (1)

 

$

845

 

 

$

786

 

 

$

825

 

Our weighted average ownership (2)

 

 

43.9

%

 

 

43.8

%

 

 

42.9

%

Europe:

 

 

 

 

 

 

 

 

 

 

 

 

Number of ventures

 

 

4

 

 

 

4

 

 

 

4

 

Number of properties owned

 

 

700

 

 

 

688

 

 

 

636

 

Square feet

 

 

163

 

 

 

159

 

 

 

148

 

Total assets

 

$

10,853

 

 

$

11,343

 

 

$

11,440

 

Third-party debt

 

$

2,446

 

 

$

2,640

 

 

$

2,621

 

Total liabilities

 

$

3,283

 

 

$

3,584

 

 

$

3,501

 

Our investment balance (1)

 

$

2,327

 

 

$

2,707

 

 

$

2,773

 

Our weighted average ownership (2)

 

 

35.1

%

 

 

38.9

%

 

 

38.8

%

Asia:

 

 

 

 

 

 

 

 

 

 

 

 

Number of ventures

 

 

2

 

 

 

2

 

 

 

2

 

Number of properties owned

 

 

85

 

 

 

66

 

 

 

52

 

Square feet

 

 

36

 

 

 

29

 

 

 

26

 

Total assets

 

$

5,173

 

 

$

4,320

 

 

$

4,120

 

Third-party debt

 

$

1,947

 

 

$

1,520

 

 

$

1,637

 

Total liabilities

 

$

2,239

 

 

$

1,751

 

 

$

1,734

 

Our investment balance (1)

 

$

451

 

 

$

402

 

 

$

356

 

Our weighted average ownership (2)

 

 

15.1

%

 

 

15.0

%

 

 

15.0

%

Totals:

 

 

 

 

 

 

 

 

 

 

 

 

Number of ventures

 

 

9

 

 

 

9

 

 

 

9

 

Number of properties owned

 

 

1,367

 

 

 

1,350

 

 

 

1,278

 

Square feet

 

 

291

 

 

 

277

 

 

 

261

 

Total assets

 

$

23,057

 

 

$

22,553

 

 

$

22,616

 

Third-party debt

 

$

6,546

 

 

$

6,250

 

 

$

6,531

 

Total liabilities

 

$

7,876

 

 

$

7,593

 

 

$

7,649

 

Our investment balance (1)

 

$

4,058

 

 

$

4,585

 

 

$

4,666

 

Our weighted average ownership (2)

 

 

27.9

%

 

 

31.6

%

 

 

32.0

%

 

73


PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

(in millions)

 

2016

 

 

2015

 

 

2014 (3)

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

395

 

 

$

382

 

 

$

541

 

Other Americas

 

 

242

 

 

 

228

 

 

 

170

 

Europe

 

 

964

 

 

 

947

 

 

 

1,001

 

Asia:

 

 

342

 

 

 

275

 

 

 

280

 

Total revenues

 

$

1,943

 

 

$

1,832

 

 

$

1,992

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings:

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

57

 

 

$

35

 

 

$

55

 

Other Americas

 

 

71

 

 

 

78

 

 

 

(1

)

Europe

 

 

333

 

 

 

261

 

 

 

268

 

Asia

 

 

101

 

 

 

77

 

 

 

86

 

Total net earnings

 

$

562

 

 

$

451

 

 

$

408

 

(1)

As of December 31 2012, we had a note receivable from SGP Mexico of $19.8 million which was settled upon our acquisition of

our partner’s interest on October 2, 2013. The remaining amounts represent current balances from services provided by us to the venture.

(4)As of December 31, 2013, we did not guarantee any third party debt of our co-investment ventures.

(5)Represents our weighted average ownership interest in all co-investment ventures based on each entity’s contribution to total assets, before depreciation, net of other liabilities.

(6)The difference between our ownership interest of thea venture’s equity and our investment balance at December 31, 2016, 2015 and 2014, results principally from three types of transactions: (i) deferring a portion of the gains we recognize from a contribution of one of our propertiesa property to thea venture (see next sub-footnote)($469.9 million, $430.7 million and $322.9 million, respectively); (ii) recording additional costs associated with our investment in the venture;venture ($124.1 million, $122.1 million and $117.5 million respectively); and (iii) advances to the venture.

(7)This amount is recorded as a reduction to our investment and represents the gains that were deferred when we contributed a property to a venture due to($166.1 million, $189.7 million and $125.7 million, respectively).

(2)

Represents our continuingweighted average ownership interest in the property.all co-investment ventures based on each entity’s contribution of total assets, before depreciation, net of other liabilities.

(3)

We had significant activity with our U.S. and Other Americas unconsolidated co-investment ventures in 2014 as explained in Notes 3 and 4. We began consolidating NAIF in 2014. We formed and invested in FIBRA Prologis in 2014 and in connection with this transaction, we concluded our unconsolidated co-investment venture in Mexico.

Equity Commitments Related to Certain Unconsolidated Co-Investment Ventures

Certain co-investment ventures have equity commitments from us and our venture partners. Our venture partners fulfill their equity commitment with cash. We may fulfill our equity commitment through contributions of properties or cash. The venture may obtain financing for the properties and therefore the equity commitment may be less than the acquisition price of additional investments that the real estate.venture could make may be more than the equity commitment. Depending on market conditions, the investment objectives of the ventures, our liquidity needs and other factors, we may make additional contributions of properties toor additional cash investments in these ventures through the remaining commitment period and we may make additional cash investments in these ventures.period.

The following table is a summary ofsummarizes the remaining equity commitments as ofat December 31, 20132016 (in millions):

 

   Equity commitments   Expiration date
for remaining
commitments
    Prologis   Venture
Partners
   Total   

Prologis Targeted U.S. Logistics Fund (1)

  $   $294.8    $294.8    Various

Prologis Targeted Europe Logistics Fund (2) (3)

  $136.0    $183.4    $319.4    June 2015

Prologis European Properties Fund II (2) (4)

  $12.0    $154.9    $166.9    September 2015

Europe Logistics Venture 1 (2) (5)

  $25.7    $145.8    $171.5    December 2014

Prologis European Logistics Partners (6)

  $255.7    $255.7    $511.4    February 2016

Prologis China Logistics Venture 1 (7)

  $61.7    $349.6    $411.3    March 2015

Prologis China Logistics Venture 2 (8)

  $88.2    $500.0    $588.2    November 2017
  

 

 

   

 

 

   

 

 

   

Total

  $        579.3    $        1,884.2    $        2,463.5     

 

 

Equity Commitments

 

 

Expiration Date

for Remaining Commitments

 

 

Prologis

 

 

Venture Partners

 

 

Total

 

 

 

Prologis Targeted U.S. Logistics Fund

 

$

-

 

 

$

180

 

 

$

180

 

 

2017

Prologis Targeted Europe Logistics Fund (1)

 

 

-

 

 

 

243

 

 

 

243

 

 

2017

Prologis China Logistics Venture

 

 

294

 

 

 

1,665

 

 

 

1,959

 

 

2017

Total

 

$

294

 

 

$

2,088

 

 

$

2,382

 

 

 

 

(1)

During 2013, equity commitments of $438.0 million were obtained from third party investors and we committed to contribute $100.0 million. To fund the acquisition of properties during 2013, the venture called capital of $273.3 million, of which $173.3 million was from third parties and $100.0 million was from us. Of the remaining commitments at December 31, 2013, approximately $245 million will expire by June 2014 and the remaining commitments are open-ended.

(2)Equity commitments are denominated in euro and reported above in U.S. dollar.

(3)During 2013, equity commitmentsdollars based on an exchange rate of €234.0 million ($322.7 million) were obtained from third party investors and we committed €258.6 million ($346.8 million). To fund acquisition of properties and pay down debt,$1.05 U.S. dollars to the venture called capital of €261.0 million ($350.1 million) of which €101.0 million ($139.3 million) was from third parties and €160.0 million ($210.9 million) was our share.

(4)During 2013, equity commitments of €325.0 million ($438.4 million) were obtained from third party investors and we committed to contribute €125.0 million ($165.7 million). To meet the capital requirements of the venture, including the repayment of debt and contribution of properties by us, the venture called capital of €329.0 million ($438.4 million) of which €212.7 million ($284.7 million) was from third parties and €116.3 million ($153.7 million) was our share.

(5)During the fourth quarter of 2013, the venture called capital of €149.7 million ($203.4 million) of which €127.2 million ($172.9 million) was from third parties and €22.4 million ($30.5 million) was our share.

(6)

This venture was formed in March 2013 with an equity commitment of €2.4 billion ($3.1 billion), which included €1.2 billion ($1.6 billion) commitment from both our partner and us. We contributed 195 properties to this venture in March using the majority of the equity commitments. Additional equity commitments of €339.8 million ($457.9 million) were obtained, of which €169.9 million ($229.1 million) was our share. Of these commitments €159.8 million ($220.3 million) are denominated in British pound sterling, willeuro.

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

NOTE 6. ASSETS HELD FOR SALE OR CONTRIBUTION

 

be called in euro and are reported above in U.S. dollar. After the initial contribution, the venture called €241.0 million ($319.5 million) of additional capital to fund the acquisition of properties, of which €120.5 million ($159.8 million) was our share. The remaining equity commitments as of December 31, 2013, are to fund the future repayment of debt.

(7)During 2013, equity commitments of $39.1 million, of which $6.9 million was our share, were called.

(8)In the fourth quarter of 2013, we formed Prologis China Logistics Venture 2 and equity commitments of $588.2 million were obtained of which $500.0 million was from third parties and $88.2 million was our share.

To the extent an unconsolidated entity acquires properties from a third party or requires cash to retire debt or has other cash needs, we may be required or agree to contribute our proportionate share of the equity component in cash to the unconsolidated entity.

Other ventures

We have several investments in other unconsolidated ventures that owncertain real estate properties and/or perform development activity. We recognized our proportionate share of the earnings from our investments in these entities of $2.6 million, $6.0 million and $10.6 million for the years ended December 31, 2013, 2012 and 2011, respectively.

6.Notes Receivable Backed by Real Estate

At December 31, 2013 and 2012, we had $188.0 million of notes backed by real estate. The balance for both periods represents an investment in a preferred equity interest made in 2010 through the sale of a portfolio of industrial properties. Based on the terms of this instrument, the preferred equity interest meets the definition of an investment in a debt security from an accounting perspective. We earned a preferred return at an annual rate of 7% for the first three years, 8% for the fourth year and 10% thereafter until redeemed. Partial or full redemption can occur at any time at the buyer’s discretion or after 2015 at our discretion.

7.Other Assets and Other Liabilities

Our other assets consisted of the following, net of amortization and depreciation, if applicable, as of December 31 (in thousands):

    2013   2012 

Rent leveling and above market leases

  $256,018    $349,634  

Leasing commissions

   222,267     218,506  

Prepaid assets

   136,729     104,012  

Value added taxes receivable

   106,074     110,906  

Fixed assets

   85,389     90,177  

Management contracts

   61,082     66,466  

Loan fees

   49,920     49,344  

Other notes receivable

   38,860     34,763  

Deferred income taxes

   19,020     31,733  

Other

   85,653     67,512  
  

 

 

   

 

 

 

Totals

  $        1,061,012    $        1,123,053  

Our other liabilities consisted of the following, net of amortization, if applicable, as of December 31 (in thousands):

    2013   2012 

Tenant security deposits

  $191,070    $174,137  

Income tax liabilities

   184,888     463,102  

Unearned rents

   64,156     115,020  

Value added taxes payable

   57,260     31,399  

Deferred income

   39,565     50,025  

Below market leases

   30,031     53,289  

Environmental

   16,926     30,075  

Other

   158,295     198,864  
  

 

 

   

 

 

 

Totals

  $        742,191    $        1,115,911  

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The decrease in other assets and other liabilities, from December 31, 2012 to December 31, 2013, is principally due to the NPR and PELP contributions. See Note 5 for more details on these transactions.

The expected future amortization of leasing commissions of $222.3 million is summarized in the table below. We also expect our above and below market leases and rent leveling net assets, which total $226.0 million at December 31, 2013, to be amortized into rental income as follows (in thousands):

   Amortization
Expense
   Net Charge to
Rental  Income
 

2014

  $65,867    $34,830  

2015

   52,449     41,036  

2016

   35,544     30,188  

2017

   24,198     25,999  

2018

   14,399     20,330  

Thereafter

   29,810     73,604  
  

 

 

   

 

 

 

Totals

  $        222,267    $        225,987  

8.Assets Held for Sale and Discontinued Operations

We had three land parcels that met the criteria to be classified as held for sale or contribution at December 31, 2013,2016 and five land parcels and one operating building that met the criteria2015. These properties are expected to be classified as held for sale at December 31, 2012.sold to third parties or contributed to unconsolidated co-investment ventures within twelve months. The amounts included in heldAssets Held for sale as of December 31, 2013 and 2012,Sale or Contribution represented real estate investment balances and the related assets and liabilities for each property.

The operations of the properties74


PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Assets held for sale or disposedcontribution consisted of to third partiesthe following (dollars and the aggregatesquare feet in thousands):

 

 

2016

 

 

2015

 

Number of operating properties

 

 

13

 

 

 

17

 

Square feet

 

 

4,167

 

 

 

5,065

 

Total assets held for sale or contribution

 

$

322,139

 

 

$

378,423

 

Total liabilities associated with assets held for sale or contribution – included in Other Liabilities

 

$

4,984

 

 

$

6,874

 

NOTE 7. NOTES RECEIVABLE BACKED BY REAL ESTATE

The following table summarizes information about our notes receivable backed by real estate (dollars in thousands):

 

 

Balance Outstanding

 

 

Interest Rates

 

Maturity Dates

Balance at January 1, 2016

 

$

235,050

 

 

2.0% – 10.0%

 

February 2016 – April 2017

Additions

 

 

-

 

 

 

 

 

Repayments

 

 

(202,950

)

 

 

 

 

Balance at December 31, 2016

 

$

32,100

 

 

5.8% – 10.0%

 

April 2017 – December 2017

NOTE 8. OTHER ASSETS AND OTHER LIABILITIES

The following table summarizes our other assets, net gains or losses recognized upon their disposition are presented asDiscontinued Operations in the Consolidated Statements of Operations for all periods presented. Interest expense is included in discontinued operations onlyamortization and depreciation, if it is directly attributable to these properties.

Discontinued operations are summarized as follows for the years endedapplicable, at December 31 (in thousands):

 

    2013   2012   2011 

Rental income and recoveries

  $34,105    $128,162    $171,103  

Rental expenses

   (10,633)     (40,925)     (48,528)  

Depreciation and amortization

   (15,339)     (43,197)     (61,465)  

Interest expense

   (1,163)     (3,213)     (2,718)  
  

 

 

   

 

 

   

 

 

 

Income attributable to disposed properties and assets held for sale

   6,970     40,827     58,392  

Net gains on dispositions

   117,738     65,927     64,489  

Impairment charges

       (30,596)     (2,659)  

Income tax on dispositions

   (1,188)     (233)     (3,216)  
  

 

 

   

 

 

   

 

 

 

Total discontinued operations

  $        123,520    $        75,925    $        117,006  

 

 

2016

 

 

2015

 

Leasing commissions

 

$

286,821

 

 

$

229,645

 

Rent leveling

 

 

285,824

 

 

 

226,239

 

Acquired lease intangibles

 

 

267,907

 

 

 

433,949

 

Prepaid assets

 

 

120,361

 

 

 

107,000

 

Accounts receivable

 

 

110,918

 

 

 

89,611

 

Fixed assets

 

 

102,830

 

 

 

94,178

 

Value added taxes receivable

 

 

94,713

 

 

 

86,115

 

Derivative assets

 

 

47,114

 

 

 

53,579

 

Management contracts

 

 

41,993

 

 

 

46,293

 

Other notes receivable

 

 

35,824

 

 

 

41,262

 

Deferred income taxes

 

 

14,052

 

 

 

14,650

 

Other

 

 

88,633

 

 

 

91,989

 

Totals

 

$

1,496,990

 

 

$

1,514,510

 

The following table summarizes our other liabilities, net of amortization, if applicable, at December 31 (in thousands):

 

9.Debt

 

 

2016

 

 

2015

 

Tenant security deposits

 

$

206,301

 

 

$

190,160

 

Unearned rents

 

 

90,233

 

 

 

77,730

 

Income tax liabilities

 

 

68,666

 

 

 

81,125

 

Acquired lease intangibles

 

 

31,707

 

 

 

55,976

 

Environmental liabilities

 

 

24,572

 

 

 

21,484

 

Deferred income

 

 

21,629

 

 

 

29,197

 

Value added taxes payable

 

 

15,888

 

 

 

10,272

 

Derivative liabilities

 

 

1,268

 

 

 

13,729

 

Other

 

 

167,055

 

 

 

154,702

 

Totals

 

$

627,319

 

 

$

634,375

 

75


PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table summarizes the expected future amortization of leasing commissions and foregone rent into amortization expense and above and below market leases and rent leveling net assets into rental revenues, all based on the balances at December 31, 2016 (in thousands):

 

 

Amortization Expense

 

 

Net (Increase) Decrease to

Rental Revenues

 

2017

 

$

135,263

 

 

$

(24,939

)

2018

 

 

98,435

 

 

 

25,795

 

2019

 

 

76,315

 

 

 

40,306

 

2020

 

 

59,969

 

 

 

46,465

 

2021

 

 

44,137

 

 

 

41,831

 

Thereafter

 

 

106,325

 

 

 

158,943

 

Totals

 

$

520,444

 

 

$

288,401

 

NOTE 9. DEBT

All debt is held directly or indirectlyincurred by the Operating Partnership. The REIT itselfParent does not have any indebtedness, but guarantees the unsecured debt of the Operating Partnership. We generally do not guarantee the debt issued by non-wholly owned subsidiaries.

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

OurThe following table summarizes our debt consisted of the following as ofat December 31 (dollars in thousands):

 

   2013   2012 
    Weighted
Average Interest
Rate (1)
   Amount
Outstanding (2)
   Weighted
Average Interest
Rate (1)
   Amount
Outstanding
 

Credit Facilities

   1.2%    $725,483     1.5%    $888,966  

Senior notes (3)

   4.5%     5,357,933     5.6%     5,223,136  

Exchangeable senior notes (4)

   3.3%     438,481     4.6%     876,884  

Secured mortgage debt (5)

   5.6%     1,696,597     4.0%     3,625,908  

Secured mortgage debt of consolidated entities (6)

   4.7%     239,992     4.4%     450,923  

Other debt of consolidated entities

           4.8%     67,749  

Term loan

   1.7%     535,908     1.7%     639,636  

Other debt (7)

   6.2%     16,822     6.2%     17,592  
  

 

 

   

 

 

   

 

 

   

 

 

 

Totals

   4.2%    $9,011,216     4.4%    $11,790,794  

 

 

2016

 

 

2015

 

 

 

Weighted Average Interest Rate (1)

 

 

Amount Outstanding (2)

 

 

Weighted Average Interest Rate (1)

 

 

Amount Outstanding

 

Credit facilities

 

 

1.0

%

 

$

35,023

 

 

-

 

 

$

-

 

Senior notes (3)

 

 

3.3

%

 

 

6,417,492

 

 

 

3.3

%

 

 

6,516,392

 

Term loans

 

 

1.4

%

 

 

1,484,523

 

 

 

2.1

%

 

 

2,100,009

 

Unsecured other (4)

 

 

6.1

%

 

 

14,478

 

 

 

6.2

%

 

 

15,448

 

Secured mortgages (5)

 

 

4.9

%

 

 

979,585

 

 

 

5.1

%

 

 

1,172,473

 

Secured mortgages of consolidated entities (6)

 

 

3.0

%

 

 

1,677,193

 

 

 

2.9

%

 

 

1,822,509

 

Totals

 

 

3.2

%

 

$

10,608,294

 

 

 

3.2

%

 

$

11,626,831

 

 

(1)

The interest rates presented represent the effective interest rates (including amortization of debt issuance costs and the non-cashnoncash premiums or discount).discounts) at the end of the period for the debt outstanding.

 

(2)

Included in the outstanding balances are borrowings denominated in non-U.S. dollars:dollars, principally: euro ($1.53.3 billion) and, Japanese yen ($1.3 billion), Canadian dollars ($0.4 billion) and British pound sterling ($0.2 billion).

 

(3)

Notes are due February 2015January 2018 to August 2023 andJune 2026 with effective interest rates rangeranging from 2.8%1.5% to 9.3%.

(4)The weighted average coupon interest rate was 3.3% and 2.8% as of December 31, 2013 and 2012, respectively. The effective interest rate in 2012 included the impact of the related amortization of the non-cash discount related to these notes.

(5)Debt is due May 2014 to April 2025 and interest rates range from 0.5% to 7.6%. The debt is secured by 296 real estate properties with an aggregate undepreciated cost of $4.2 billion at December 31, 2013.2016.

 

(6)

(4)

Debt is due December 2014 to December 2027 and interest rates range from 1.9% to 7.2%.

The debt is secured by 36 real estate properties with an aggregate undepreciated cost of $0.5 billionbalance at December 31, 2013.

(7)Balance2016, represents primarily assessment bonds that are due November 2019 to September 2033 with varyingeffective interest rates ranging from 4.5% to 7.9% that are due February 2014 to September 2033.. The assessment bonds are issued by municipalities and guaranteed by us as a means of financing infrastructure and secured by assessments (similar to property taxes) on various underlying real estate properties with an aggregate undepreciated cost of $838.4$737.4 million at December 31, 2013.2016.

(5)

Debt is due May 2018 to December 2025 with effective interest rates ranging from 0.4% to 7.8% at December 31, 2016. The debt is secured by 145 real estate properties with an aggregate undepreciated cost of $2.4 billion at December 31, 2016.

(6)

Debt is due July 2017 to December 2027 with effective interest rates ranging from 2.4% to 5.3% at December 31, 2016. The debt is secured by 208 real estate properties with an aggregate undepreciated cost of $3.0 billion at December 31, 2016.

Credit Facilities

On July 11, 2013, we terminated our existing

We have a global senior credit facility and entered into a new facility (the “Global Facility”). Under the new facility, funds, under which we may be drawndraw in U.S. dollar,British pounds sterling, Canadian dollars, euro, Japanese yen British pound sterling and Canadian dollarU.S. dollars on a revolving basis upbasis. In 2016, we renewed and amended the Global Facility to $2.0increase our availability from $2.3 billion to $3.0 billion (subject to currency fluctuations). We mayhave the ability to increase the Global Facility to $3.0$3.8 billion, (subjectsubject to currency fluctuations and obtaining additional lender commitments). The Global Facility is scheduled to mature on July 11, 2017; however, we may extend the maturity date by six months twice, subject to satisfaction of certain conditions and payment of extension fees.commitments. Pricing under the Global Facility, including the spread over LIBOR, facility fees and letter of credit fees, varies based uponon the public debt ratings of the Operating Partnership. The Global Facility contains customary representations, covenantsis scheduled to mature in April 2020; however, we may extend the maturity date for six months on two occasions, subject to the satisfaction of certain conditions and defaults (includingpayment of extension fees.

76


PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

We also have a cross-acceleration to other recourse indebtedness of more than $50 million).

On August 14, 2013, we entered into a fourth amended and restated¥45 billion ($384.4 million at December 31, 2016) Japanese yen revolver (the “Revolver”). As a result, we increased our with availability under the Revolver to ¥45.0increase to ¥56.5 billion (approximately $428.8($482.6 million at December 31, 2013). The Revolver matures on May 14, 2018. We may increase availability under the Revolver to an amount not exceeding ¥56.5 billion (approximately $538.4 million at December 31, 2013)2016), subject to obtaining additional lender commitments. Pricing under the Revolver, was consistent withincluding the Global Facility at December 31, 2013.spread over LIBOR, facility fees and letter of credit fees, varies based on the public debt ratings of the Operating Partnership. The Revolver contains certain customary representations, covenants and defaults that are substantially the same as the corresponding provisions of the Global Facility.is scheduled to mature in May 2018.

We refer to the Global Facility and the Revolver, collectively, as our “Credit Facilities.”

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Commitments and availability underThe following table summarizes information about our Credit Facilities were as follows (dollars in millions):

 

  2013   2012   2011 

 

2016

 

 

2015

 

 

2014

 

For the years ended December 31:

      

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average daily interest rate

   1.7 %     1.6 %     2.7 %  

 

 

1.4

%

 

 

1.1

%

 

 

1.1

%

Weighted average daily borrowings

  $789.1    $815.2    $870.9  

 

$

128

 

 

$

261

 

 

$

182

 

Maximum borrowings outstanding at any month-end

  $1,325.4    $1,633.9    $2,368.1  

 

$

307

 

 

$

942

 

 

$

742

 

As of December 31:

      

Aggregate borrowing capacity

  $2,450.9    $2,118.3    $2,184.6  

At December 31:

 

 

 

 

 

 

 

 

 

 

 

 

Aggregate lender – commitments

 

$

3,306

 

 

$

2,662

 

 

$

2,742

 

Less:

 

 

 

 

 

 

 

 

 

 

 

 

Borrowings outstanding

  $725.5    $888.9    $934.9  

 

 

35

 

 

 

-

 

 

 

-

 

Outstanding letters of credit

  $73.2    $68.0    $85.0  

 

 

36

 

 

 

32

 

 

 

35

 

Aggregate remaining capacity available

  $        1,652.2    $        1,161.4    $        1,164.7  

Current availability

 

$

3,235

 

 

$

2,630

 

 

$

2,707

 

In February 2013, we entered into a $500 million bridge loan under which we can borrow in U. S. dollar, euro or yen. We borrowed ¥20 billion ($215.7 million) under the bridge loan to make our initial cash investment in NPR. In connection with the contribution of properties to NPR, we paid the borrowings outstanding on this bridge loan and terminated the facility.

Senior Notes

The senior unsecured notes are issued by the Operating Partnershipunsecured and guaranteed by the REIT. Ourour obligations under the senior notes are effectively subordinated in certain respects to any of our debt that is secured by a lien on real property, to the extent of the value of such real property. The senior notes require interest payments be made quarterly, semi-annually or annually. All of the senior and other notes are redeemable at any time at our option, subject to certain prepayment penalties. Such redemptionrepurchase and other terms are governed by the provisions of indenture agreements, various note purchase agreements and aor trust deed.deeds.

In connection with

During the equity offering in April 2013 (see Note 10 for additional details),years ended December 31 we repaid $202.3 million of outstandingissued the following senior notes (dollars and euros in thousands):

 

 

Principal Amount

 

 

Stated Interest Rate

 

 

Effective Interest Rate

 

 

Maturity Date

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

May 2015 (1)

 

700,000

 

 

$

785,470

 

 

 

1.4%

 

 

 

1.5%

 

 

May 2021

October 2015

 

 

 

 

 

$

750,000

 

 

 

3.8%

 

 

 

4.0%

 

 

November 2025

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2014

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

February 2014 (1)

 

700,000

 

 

$

959,420

 

 

 

3.4%

 

 

 

3.5%

 

 

February 2024

June 2014 (1)

 

500,000

 

 

$

680,550

 

 

 

3.0%

 

 

 

3.1%

 

 

June 2026

October 2014 (1)

 

600,000

 

 

$

756,420

 

 

 

1.4%

 

 

 

1.4%

 

 

October 2020

(1)

This debt is denominated in euro and the exchange rate used to calculate into U.S. dollar was the effective rate at the date of the transaction.

77


PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Term Loans

The following table summarizes our outstanding term loans at maturityDecember 31 (dollars and incurred $32.6 million of debt extinguishment costs, primarily due to the prepayment of $350.0 million of senior notes that were scheduled to matureborrowing currency in 2014.thousands):

In August 2013,

Term Loan

Borrowing Currency

 

Initial Borrowing Date

 

Lender Commitment at 2016

 

 

Amount Outstanding at 2016

 

 

Amount Outstanding at 2015

 

 

Interest Rate

 

Maturity Date

 

 

 

 

 

Borrowing Currency

 

USD

 

 

USD

 

 

USD

 

 

 

 

 

2014 Yen Term Loan (1)

JPY

 

May 2014

 

 

 

 

 

 

 

 

$

-

 

 

$

339,858

 

 

LIBOR plus 1.20%

 

 

Euro Term Loan (2)

USD, EUR, JPY and GBP

 

June 2014

 

500,000

 

$

525,000

 

 

 

193,293

 

 

 

561,879

 

 

LIBOR plus 0.98%

 

June 2017

Senior Term Loan (3)

USD

 

May 2015

 

 

 

 

 

 

 

 

 

-

 

 

 

400,000

 

 

LIBOR plus 1.00%

 

 

2015 Yen Term Loan (1)

JPY

 

June 2015

 

 

 

 

 

 

 

 

 

-

 

 

 

539,906

 

 

LIBOR plus 1.10%

 

 

2015 Canadian Term Loan

CAD

 

December 2015

 

$

371,925

 

$

276,322

 

 

 

276,322

 

 

 

267,872

 

 

CDOR rate plus 1.50%

 

February 2023

Yen Term Loan (1)

JPY

 

August 2016

 

¥

120,000,000

 

$

1,025,057

 

 

 

1,025,057

 

 

 

-

 

 

Yen LIBOR plus 0.65%

 

August 2022 and 2023

Subtotal

 

 

 

 

 

 

 

 

 

 

 

 

1,494,672

 

 

 

2,109,515

 

 

 

 

 

Debt issuance costs, net

 

 

 

 

 

 

 

 

 

 

 

 

(10,149

)

 

 

(9,506

)

 

 

 

 

Totals

 

 

 

 

 

 

 

 

 

 

 

$

1,484,523

 

 

$

2,100,009

 

 

 

 

 

(1)

In March 2016, we entered into an unsecured senior term loan agreement under which we could draw in Japanese yen and borrowed ¥11.2 billion ($99.5 million). In August 2016, we entered into a separate unsecured senior term loan agreement (the “Yen Term Loan”) under which we can draw in Japanese yen, of which ¥50.0 billion ($427.1 million at December 31, 2016) matures in August 2022 and ¥70.0 billion ($597.9 million at December 31, 2016) matures in August 2023. We may increase the borrowings up to ¥200.0 billion ($1.7 billion at December 31, 2016), subject to obtaining additional lender commitments. In the third quarter of 2016, we borrowed on the Yen Term Loan ($1.2 billion) and used the proceeds to repay and cancel the previous outstanding Japanese yen term loans entered into in 2014 and 2015 and 2016. The Yen Term Loan was fully drawn at December 31, 2016.

(2)

We may increase the borrowings up to €1.0 billion ($1.1 billion at December 31, 2016), subject to obtaining additional lender commitments. We may pay down and reborrow on this term loan. We may extend the maturity date twice, by one year each, subject to the satisfaction of certain conditions and payment of an extension fee.

(3)

We entered into the Senior Term Loan in connection with the KTR transaction and initially borrowed $1.0 billion. During 2016, we paid down the remaining balance and cancelled Senior Term Loan.

Secured Mortgage Debt

During 2016, we issued $1.25secured mortgage debt totaling $152.6 million. The debt has a stated interest rate of 3.3% (an effective interest rate of 3.5%) and matures in January 2022.

TMK bonds are a financing vehicle in Japan for special purposes companies known as TMKs. In 2016, we issued ¥25.7 billion ($244.6 million) of new TMK bonds and paid off or transferred substantially all of our outstanding TMK bonds leaving one TMK bond outstanding for ¥20.0 billion ($170.8 million at December 31, 2016). During 2015, we issued new TMK bonds totaling ¥23.0 billion ($191.0 million).

Debt Covenants

We have approximately $6.5 billion of senior notes and $1.5 billion of term loans outstanding at December 31, 2016, under three separate indentures, as follows: (i) $400.0 million at an interest rate of 2.75% maturing in 2019, at 99.97% of par value for an all-in rate of 2.76%;supplemented, and (ii) $850.0 million at an interest rate of 4.25% maturing in 2023, at 99.74% of par value for an all-in rate of 4.28%. In connection with this issuance, we tendered for several series of debt maturing in 2018 through 2020. Pursuantare subject to this tender, we acquired a principal amount of debt aggregatingcertain financial covenants. We are also subject to $611.4 million and recognized a $114.1 million loss from the early extinguishment. We used the remaining proceeds of this issuance to repay borrowings onfinancial covenants under our Credit Facilities.Facilities and certain secured mortgage debt. At December 31, 2016, we were in compliance with all of our debt covenants.

In November 2013, we issued $500.0 million of senior notes with an interest rate of 3.35% and maturing in 2021, at 99.98% of par value for an all-in rate of 3.35%. In connection with this issuance, we tendered for several series of debt maturing in 2018. Pursuant to this tender, we acquired a principal amount of debt aggregating to $299.0 million and recognized a $50.6 million loss from the early extinguishment. We used the remaining proceeds of this issuance to repay borrowings on our Credit Facilities.

In December 2013, we issued €700.0 million ($950.5 million) of senior notes at an interest rate of 3.00% and maturing in 2022, at 99.48% of par value for an all-in rate of 3.08%. In connection with this issuance, we repurchased €407.5 million ($562.0 million) of senior notes maturing in 2014, and recognized a $16.0 million loss from the early extinguishment. We used the remaining proceeds of this issuance to repay borrowings on our Credit Facilities.78


During 2013, we also repurchased senior debt maturing in 2018 through 2020. As a result, we acquired a principal amount of debt aggregating $214.5 million and recognized a $43.2 million loss from early extinguishment.

Exchangeable Senior Notes

We issued three series of exchangeable senior notes in 2007 and 2008 and refer to them collectively as the “2007 and 2008 Exchangeable Notes.” The 2007 and 2008 Exchangeable Notes were senior obligations of Prologis and were exchangeable, under certain circumstances, for cash, our common stock or a combination of cash and our common stock, at our option. In April 2012, we redeemed $448.9 million of the exchangeable notes that were issued in March 2007, which was when the holders had the right to require us to repurchase their notes for cash. In January 2013, we redeemed $141.4 million of the exchangeable notes issued in November 2007. In May 2013, we redeemed $270.1 million of the exchangeable notes issued in May 2008. In June 2013, we redeemed the remainder of the 2007 and 2008 Exchangeable Notes for a total of $72.1 million.

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Long-Term Debt Maturities

 

Principal payments due on our debt, for each year through the period ending December 31, 2026, and thereafter were as follows at December 31, 2016 (in thousands):

 

Unsecured

 

 

 

 

 

 

 

 

 

Credit

 

 

Senior

 

 

Term Loans

 

 

Secured

 

 

 

 

 

Maturity

 

Facilities

 

 

Notes

 

 

and Other

 

 

Mortgage Debt

 

 

Total

 

2017 (1) (2)

 

$

-

 

 

$

-

 

 

$

194,150

 

 

$

428,196

 

 

$

622,346

 

2018

 

 

35,023

 

 

 

175,000

 

 

 

961

 

 

 

570,291

 

 

 

781,275

 

2019

 

 

-

 

 

 

618,294

 

 

 

1,084

 

 

 

446,360

 

 

 

1,065,738

 

2020

 

 

-

 

 

 

831,071

 

 

 

1,190

 

 

 

428,725

 

 

 

1,260,986

 

2021

 

 

-

 

 

 

1,237,871

 

 

 

1,012

 

 

 

141,548

 

 

 

1,380,431

 

2022

 

 

-

 

 

 

737,870

 

 

 

427,886

 

 

 

163,172

 

 

 

1,328,928

 

2023

 

 

-

 

 

 

850,000

 

 

 

874,916

 

 

 

174,624

 

 

 

1,899,540

 

2024

 

 

-

 

 

 

737,870

 

 

 

911

 

 

 

133,308

 

 

 

872,089

 

2025

 

 

-

 

 

 

750,000

 

 

 

976

 

 

 

134,727

 

 

 

885,703

 

2026

 

 

-

 

 

 

527,050

 

 

 

696

 

 

 

1,223

 

 

 

528,969

 

Thereafter

 

 

-

 

 

 

-

 

 

 

5,368

 

 

 

1,161

 

 

 

6,529

 

Subtotal

 

 

35,023

 

 

 

6,465,026

 

 

 

1,509,150

 

 

 

2,623,335

 

 

 

10,632,534

 

Premiums (discounts), net

 

 

-

 

 

 

(19,573

)

 

 

-

 

 

 

43,286

 

 

 

23,713

 

Debt issuance costs, net

 

 

-

 

 

 

(27,961

)

 

 

(10,149

)

 

 

(9,843

)

 

 

(47,953

)

Totals

 

$

35,023

 

 

$

6,417,492

 

 

$

1,499,001

 

 

$

2,656,778

 

 

$

10,608,294

 

(1)

We expect to repay the amounts maturing in 2017 with cash generated from operations, proceeds from dispositions of wholly owned real estate properties, or as necessary, with borrowings on our Credit Facilities.

(2)

Included in 2017 maturities is the Euro Term Loan that can be extended until 2019.

 

Interest expense related toExpense

The following table summarizes the 2007 and 2008 Exchangeable Notescomponents of interest expense for the years ended December 31 included the following components (dollars in(in thousands):

 

    2013   2012   2011 

Coupon rate

  $3,655    $14,312    $24,810  

Amortization of discount

   4,169     18,425     32,393  

Amortization of deferred loan costs

   490     1,280     2,071  
  

 

 

   

 

 

   

 

 

 

Interest expense

  $                8,314    $                34,017    $                59,274  
  

 

 

   

 

 

   

 

 

 

Effective interest rate

   5.9 %     5.7 %     5.7 %  

 

 

2016

 

 

2015

 

 

2014

 

Gross interest expense

 

$

383,098

 

 

$

394,012

 

 

$

377,666

 

Amortization of premium, net

 

 

(30,596

)

 

 

(45,253

)

 

 

(21,440

)

Amortization of debt issuance costs

 

 

15,459

 

 

 

13,412

 

 

 

14,116

 

Interest expense before capitalization

 

$

367,961

 

 

$

362,171

 

 

$

370,342

 

Capitalized amounts

 

 

(64,815

)

 

 

(60,808

)

 

 

(61,457

)

Net interest expense

 

$

303,146

 

 

$

301,363

 

 

$

308,885

 

Total cash paid for interest, net of amounts capitalized

 

$

322,442

 

 

$

345,916

 

 

$

258,441

 

On March 16, 2010,

Early Extinguishment of Debt

In 2014 and 2015, we issued $460.0repurchased or repaid certain debt before the maturity date in an effort to reduce our borrowing costs and extend our debt maturities. As a result, we recognize gains or losses represented by the difference between the recorded debt (including premiums and discounts and related debt issuance costs) and the consideration we paid to retire the debt, including fees.

79


PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table summarizes the activity related to the repurchase of debt and net loss on early extinguishment of debt for the years ending December 31 (in millions):

 

 

2015

 

 

2014

 

Senior notes:

 

 

 

 

 

 

 

 

Original principal amount

 

$

709.7

 

 

$

1,290.4

 

Cash purchase price

 

$

789.0

 

 

$

1,460.3

 

Term loans:

 

 

 

 

 

 

 

 

Original principal amount

 

$

600.0

 

 

$

-

 

Cash repayment price

 

$

600.0

 

 

$

-

 

Secured mortgage debt:

 

 

 

 

 

 

 

 

Original principal amount

 

$

571.5

 

 

$

528.0

 

Cash repayment price

 

$

595.5

 

 

$

531.2

 

Total:

 

 

 

 

 

 

 

 

Original principal amount

 

$

1,881.2

 

 

$

1,818.4

 

Cash purchase / repayment price

 

$

1,984.5

 

 

$

1,991.5

 

Losses on early extinguishment of debt

 

$

86.3

 

 

$

165.3

 

During 2016, we repaid certain debt at the earliest available payment date with no prepayment costs. As a result, we recorded a gain of $2.5 million, which related to premiums associated with the extinguished debt, net of 3.3%remaining debt issuance costs.

Exchangeable Senior Notes

We had exchangeable senior notes maturing in 2015 (“2010 Exchangeable Notes”). The 2010 Exchangeable Notes are exchangeable at any time by holders at an initial conversion rate of 25.8244 shares per $1,000 principal amount of notes, equivalent to an initial conversion price of approximately $38.72 per share, subject to adjustment upon the occurrence of certain events. The holders of the notes have the right to require us to repurchase their notes for cash at any time on or prior to the maturity date upon a change in control or a termination of trading (each as defined in the notes). Based on current conversion rates, 11.9 million shares would be required to settle the principal amount in stock for the 2010 Exchangeable Notes. The conversion of the 2010 Exchangeable Notes into stock, and the corresponding adjustment to interest expense, are included in our computation of diluted earnings per share/unit, unless the impact is anti-dilutive. During 2013, 2012, and 2011, the impact of these notes was anti-dilutive.

The 2010 Exchangeable Notes arethat were issued by the Operating Partnership and arewere exchangeable into common stock of the REIT.Parent. The accounting for the 2010 Exchangeable Notesexchangeable senior notes required us to separate the fair value of the derivative instrument (exchange feature) from the debt instrument and account for it separately as a derivative contract beginning withderivative. During the Merger date. At each reporting period, we adjustperiods, any adjustments to the fair value of the derivative instrument to fair value with the resulting adjustment beingwere recorded in earnings asForeign Currency and Derivative Gains (Losses), Net.Net. The derivative on the debt instrument was amortized over the term of the exchangeable notes. During March 2015, the holders of the exchangeable notes exchanged $459.8 million of their notes for 11.9 million shares of common stock of the Parent and $0.2 million of their notes for cash.

The fair value of the exchange option was $43.0 million immediately before the exchange in March 2015. When the debt was exchanged into common stock, the value of the derivative associated with the 2010 Exchangeable Notesdebt was a liability of $41.0 million and $39.8 million at December 31, 2013 and December 31, 2012, respectively.reclassified to Additional Paid-In Capital. We recognized unrealized gains of $8.3 million during the first quarter of 2015 and unrealized losses of $1.2 million and $22.3 million for the years ended December 31, 2013 and 2012, respectively and an unrealized gain of $45.0$10.3 million for the year ended December 31, 2011.

Secured Mortgage Debt

TMK bonds are a financing vehicle2014 on the change in Japan for special purpose companies known as TMKs. In 2013, we issued ¥10.6 billion ($106.4 million)fair value of new TMK bonds with maturity dates ranging from August 2014 to October 2016 and interest rates ranging from 0.5% to 0.9%. Subsequently, we paid off or transferred substantially all of our outstanding TMKs. At December 31, 2013, we had one TMK bond outstanding for ¥1.5 billion ($14.3 million as of December 31, 2013) with an interest rate of 0.5% and a maturity date of October 2016. The remaining TMK bond is secured by one property with an undepreciated cost of $58.7 million at December 31, 2013.

In connection with a property acquisition and the acquisition of a controlling interest in certain of our co-investment ventures in 2013, we assumed secured mortgage debt of $190.4 million.

Term Loan

We have a senior term loan agreement where we may obtain loans in an aggregate amount not to exceed €487.5 million ($672.3 million at December 31, 2013). The loans can be obtained in U.S. dollar, euro, Japanese yen, and British pound sterling. We may increase the borrowings to approximately €987.5 million ($1.4 billion at December 31, 2013), subject to obtaining additional lender commitments. We fully drew the senior term loan and used the proceeds to pay off two term loans assumed in connectionderivative instrument associated with the Merger and the remainder to pay down borrowings on our Credit Facilities. The loan agreement was scheduled to mature on February 2, 2014, with an option to extend the maturity date three times, in each case up to one year, subject to satisfaction of certain conditions and payment of extension fees. In January 2014, we extended the maturity to February 2015.

Debt Covenants

We have approximately $5.8 billion of senior notes and exchangeable senior notes outstanding as of December 31, 2013. The senior notes were issued under three separate indentures, as supplemented, and are subject to certain financial covenants. The exchangeable senior notes, as well as approximately $128.1 million of notes that were not exchanged for Prologis senior notes at the time of the Merger, are not subject to financial covenants.

We are also subject to financial covenants under our Credit Facilities and certain secured mortgage debt.

As of December 31, 2013, we were in compliance with all of our debt covenants.

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

NOTE 10. STOCKHOLDERS’ EQUITY OF PROLOGIS, INC.

 

Debt Maturities

Principal payments due on our consolidated debt during each of the years in the ten-year period ending December 31, 2023, and thereafter are as follows (in millions):Shares Authorized

 

  Prologis       
  Unsecured  Secured
Mortgage
Debt
  Total  Consolidated
Entities’
Debt
  Total
Consolidated
Debt
 
  Senior  Exchangeable  Credit  Other     
Maturity Debt  Notes  Facilities (1)  Debt (2)     

2014(3)

 $25   $  $ -    $537   $293   $855   $11   $866  

2015

  175    460        1    134    770    9    779  

2016

  641           1    456    1,098    126    1,224  

2017

  438       456    1    226    1,121    4    1,125  

2018

  667       269    1    110    1,047    74    1,121  

2019

  693           1    285    979    2    981  

2020

  379           1    6    386    2    388  

2021

  500              6    506    2    508  

2022

  965              7    972    3    975  

2023

  850              7    857    1    858  

Thereafter

            10    130    140    5    145  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Subtotal

 $5,333   $460   $725   $553   $1,660   $8,731   $239   $8,970  

Unamortized (discounts) premiums, net

  25    (22)          37    40    1    41  
 

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

  

 

 

 

Total

 $5,358   $438   $725   $553   $1,697   $8,771   $240   $9,011  

(1)Included in Credit Facilities is our global senior credit facility which is set to mature in July 2017. We may extend the maturity date by six months, twice, subject to satisfaction of certain conditions and payment of an extension fee.

(2)Included in other debt is a term loan that can be extended until 2017 (three times each at one year). As discussed above, in January 2014, we extended the maturity of this term loan to February 2015.

(3)We expect to repay the amounts maturing in 2014 related to our wholly owned debt with cash generated from operations, proceeds from the disposition of wholly owned real estate properties and with borrowings on our Credit Facilities.

Interest Expense

Interest expense from continuing operations included the following components for the years ended December 31 (in thousands):

    2013   2012   2011 

Gross interest expense

  $471,923    $578,518    $498,518  

Amortization of discount (premium), net

   (39,015)     (36,687)     228  

Amortization of deferred loan costs

   14,374     16,781     20,476  
  

 

 

   

 

 

   

 

 

 

Interest expense before capitalization

   447,282     558,612     519,222  

Capitalized amounts

   (67,955)     (53,397)     (52,651)  
  

 

 

   

 

 

   

 

 

 

Net interest expense

  $379,327    $505,215    $466,571  
  

 

 

   

 

 

   

 

 

 

Total cash paid for interest, net of amounts capitalized

  $        426,528    $        546,627    $        467,400  

10.Stockholders’ Equity of the REIT

Shares Authorized

At December 31, 2013,2016, 1.1 billion shares were authorized to be issued by the REIT,Parent, of which 1.0 billion shares represent common stock. The BoardOur board of directors (the “Board”) may, without stockholder approval, classify or reclassify any unissued shares of our stock from time to time by setting or changing the preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions, qualifications and terms or conditions of redemption of such shares. As of December 31, 2013, we had 498.8

Common Stock

We issued 1.7 million and 3.3 million shares of common stock outstanding.

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Common Stock

On April 30, 2013, we completed a public offering of 35.65under our at-the-market program during 2015 and 2014, respectively, which generated $71.5 million shares of common stock at a price of $41.60 per share, generating approximately $1.4 billionand $140.1 million in net proceeds.

In June 2013, we entered intoproceeds, respectively. We have an equity distribution agreement that allows us to sell up to $750$750.0 million aggregate gross sales proceeds of shares of common stock, in an at-the-market offering program,of which $535.2 million remains available for sale, through twosix designated agents, who earn a fee of up to 2% of the gross proceeds, as agreed to on a transaction-by-transaction basis. We have not issued any shares of common stock under this program.

Under the 2012 Long-Term Incentive Plan and Outside Trustees Plan,(the “LTIP”), certain of our employees and outside directors wereare able to participate in stock-basedequity-based compensation plans that provided compensation, generally in the form of common stock. In 2012, the new Prologis, Inc. 2012 Long-Term Incentive Plan was approved, which replaced all prior active incentive plans. See Note 13 for additional information on these plans. Under these plans, wethis plan. We received gross proceeds and issued sharesfor the issuance of common stock as followsupon the exercise of stock options of $39.5 million, $18.2 million and $25.8 million, for the years ended December 31, (in thousands),2016, 2015 and 2014, respectfully. See Note 13 for additional information on this plan.

 

    2013   2012   2011 

Gross proceeds received

  $        22,410    $        30,980    $        749  

Shares of common stock issued

   1,358     2,258     793  

Limited partnership units were redeemed for $4.9 millionPreferred Stock

At December 31, 2016, and $5.8 million in 2013 and 2012, respectively. We did not redeem any limited partnership units in 2011. See Note 12 for more details.

In 2011, in connection with the Merger, holders of ProLogis common shares received 0.4464 of a newly issued share of AMB common stock, ProLogis became a subsidiary of AMB and AMB changed its name to Prologis, Inc. Because ProLogis was the accounting acquirer (as discussed in Note 3), the historical ProLogis shares outstanding were adjusted by the Merger exchange ratio and restated. As of the Merger date, 169.6 million shares were added to reflect the outstanding shares of common stock of AMB. In addition, in June 2011 we issued 34.5 million shares of common stock generating net proceeds of $1.1 billion.

Preferred Stock

On April 19, 2013, we redeemed all of the outstanding series L, M, O, P, R and S preferred stock. We recognized a loss of $9.1 million in the first quarter of 2013, which primarily represented the difference between redemption value and carrying value net of deferred issuance costs. This amount was recognized in March when we notified the holders of2015 our intent to redeem these series of preferred stock.

We have two million shares of seriesSeries Q preferred stock our only remaining outstanding series of preferred stock, with a liquidation preference of $50 per share, a par value of $0.01, andhad a dividend rate of 8.54%, whichand will be redeemable at our option on or after November 13, 2026. Holders have, subject to certain conditions, limited voting rights and all holders are entitled to receive cumulative preferential dividends based uponon liquidation preference. The dividends are payable quarterly in arrears on the last

80


PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

day of March, June, September, and December.each quarter. Dividends are payable when, and if, they have been declared by the Board, out of funds legally available for the payment of dividends. The cash redemption price (other than the portion consisting of accrued and unpaid dividends) is payable solely out of the cumulative sales proceeds of our other capital stock, which may include stock of other series of preferred stock.

We had the following preferred stock issued and outstanding as of December 31 (in thousands):

 

    2013   2012 

Series L

  $ -     $49,100  

Series M

        57,500  

Series O

        75,300  

Series P

        50,300  

Series Q

   100,000     100,000  

Series R

        125,000  

Series S

        125,000  
  

 

 

   

 

 

 

Total preferred stock

  $        100,000    $        582,200  

Ownership Restrictions

For us to qualify as a real estate investment trust under the Internal Revenue Code,REIT, five or fewer individuals may not own more than 50% of the value of our outstanding stock at any time during the last half of our taxable year. Therefore, our charter restricts beneficial ownership (or

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ownership generally attributed to a person under the real estate investment trust tax rules,REIT rules), by a person, or persons acting as a group, of issued and outstanding common and series Q preferred stock that would cause that person to own or be deemed to own more than 9.8% (by value or number of shares, whichever is more restrictive) of our issued and outstanding capital stock. Further,Furthermore, subject to certain exceptions, no person shall at any time directly or indirectly acquire ownership of more than 25% of any of the series Q preferred stock. These provisions assist us in protecting and preserving our real estate investment trustREIT status and protect the interests of stockholders in takeover transactions by preventing the acquisition of a substantial block of outstanding shares of stock.

Shares of stock owned by a person or group of personspeople in excess of these limits are subject to redemption by us. The provision does not apply where a majority of the Board, in its sole and absolute discretion, waives such limit after determining that theour status of us as a real estate investment trustREIT for federal income tax purposes will not be jeopardized or the disqualification of us as a real estate investment trust is advantageous to our shareholders.jeopardized.

Dividends

In 2013, 2012 and 2011, we paid all of our dividends in cash. The following summarizes the taxability of our common and preferred stock dividends for the years ended December 31:

    2013 (1)   2012   2011 

Common Stock: (2)

      

Ordinary income

  $            -     $            0.38    $            0.07  

Qualified dividend

        0.20     0.01  

Capital gains

   1.12     0.54     0.84  

Return of capital

             0.14  
  

 

 

   

 

 

   

 

 

 

Total distribution

  $1.12    $1.12    $1.06  
  

 

 

   

 

 

   

 

 

 

Preferred Stock - Series L (3):

      

Ordinary income

  $ -      0.55     0.15  

Qualified dividend

        0.28       

Capital gains

   0.41     0.80     1.07  
  

 

 

   

 

 

   

 

 

 

Total dividend

  $0.41     1.63     1.22  
  

 

 

   

 

 

   

 

 

 

Preferred Stock - Series M (3):

      

Ordinary income

  $ -      0.57     0.15  

Qualified dividend

        0.30       

Capital gains

   0.42     0.82     1.11  
  

 

 

   

 

 

   

 

 

 

Total dividend

  $0.42     1.69     1.26  
  

 

 

   

 

 

   

 

 

 

Preferred Stock - Series O (3):

      

Ordinary income

  $ -      0.59     0.16  

Qualified dividend

        0.31       

Capital gains

   0.44     0.85     1.15  
  

 

 

   

 

 

   

 

 

 

Total dividend

  $0.44     1.75     1.31  
  

 

 

   

 

 

   

 

 

 

Preferred Stock - Series P (3):

      

Ordinary income

  $ -      0.58     0.15  

Qualified dividend

        0.30       

Capital gains

   0.43     0.83     1.13  
  

 

 

   

 

 

   

 

 

 

Total dividend

  $0.43     1.71     1.28  
  

 

 

   

 

 

   

 

 

 

Preferred Stock - Series Q (4):

      

Ordinary income

  $ -     $1.44    $0.38  

Qualified dividend

        0.75     0.04  

Capital gains

   4.27     2.08     3.85  
  

 

 

   

 

 

   

 

 

 

Total dividend

  $4.27    $4.27    $4.27  

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

    2013 (1)   2012   2011 

Preferred Stock - Series R (4):

      

Ordinary income

  $            -     $            0.57    $            0.15  

Qualified dividend

        0.30     0.02  

Capital gains

   0.42     0.82     1.52  
  

 

 

   

 

 

   

 

 

 

Total dividend

  $0.42    $1.69    $1.69  
  

 

 

   

 

 

   

 

 

 

Preferred Stock - Series S (4):

      

Ordinary income

  $ -     $0.57    $0.15  

Qualified dividend

        0.30     0.02  

Capital gains

   0.42     0.82     1.52  
  

 

 

   

 

 

   

 

 

 

Total dividend

  $0.42    $1.69    $1.69  

(1)Taxability for 2013 is estimated.

(2)The historical shares were adjusted by the Merger exchange ratio of 0.4464.

(3)Represents the dividends paid since the Merger.

(4)Upon completion of the Merger, each outstanding Series C, F and G Cumulative Redeemable Preferred Share of beneficial interest in ProLogis was exchanged for a newly issued share of Cumulative Redeemable Preferred Stock, Series Q, R and S, respectively.

In order toTo comply with the real estate investment trustREIT requirements of the Internal Revenue Code, we are generally required to make common and preferred stock distributionsdividends (other than capital gain distributions) to our stockholders in amounts that together at least equal to (i) the sum of (a) 90% of our “REIT taxable income” computed without regard to the dividends paid deduction and net capital gains and (b) 90% of the net income (after tax), if any, from foreclosure property, minus (ii) certain excess non-cash income. Our common stock dividenddistribution policy is to distribute a percentage of our cash flow to ensurethat ensures that we will meet the distribution requirements of the Internal Revenue Code while allowingand that allows us to also retain cash to meet other needs, such as capital improvements and other investment activities.

Our tax return for the year ended December 31, 2016, has not been filed. The taxability information presented for our dividends paid in 2016 is based on management’s estimate. Our tax returns for open tax years have not been examined by the Internal Revenue Service, other than those discussed in Note 14. Consequently, the taxability of dividends is subject to change.

In 2016, 2015 and 2014, we paid all of our dividends in cash. The following summarizes the taxability of our common and preferred stock dividends for the years ended December 31:

 

 

2016 (1)

 

 

2015

 

 

2014

 

Common Stock:

 

 

 

 

 

 

 

 

 

 

 

 

Ordinary income

 

$

0.60

 

 

$

0.36

 

 

$

0.29

 

Qualified dividend

 

 

0.15

 

 

 

0.08

 

 

 

0.41

 

Capital gains

 

 

0.93

 

 

 

1.08

 

 

 

0.62

 

Total distribution

 

$

1.68

 

 

$

1.52

 

 

$

1.32

 

Preferred Stock – Series Q:

 

 

 

 

 

 

 

 

 

 

 

 

Ordinary income

 

$

2.02

 

 

$

0.77

 

 

$

0.71

 

Qualified dividend

 

 

0.29

 

 

 

0.62

 

 

 

1.01

 

Capital gains

 

 

1.96

 

 

 

2.88

 

 

 

2.55

 

Total dividend

 

$

4.27

 

 

$

4.27

 

 

$

4.27

 

(1)

Taxability for 2016 is estimated.

Common stock dividends are characterized for federal income tax purposes as ordinary income, qualified dividend, capital gains, non-taxable return of capital or a combination of the four. Common stock dividends that exceed our current and accumulated earnings and profits (calculated for tax purposes) constitute a return of capital rather than a dividend and generally reduce the stockholder’s basis in the common stock. To the extent that a dividend exceeds both current and accumulated earnings and profits and the stockholder’s basis in the common stock, it will generally be treated as a gain from the sale or exchange of that stockholder’s common stock. At the beginning of each year, we notify our stockholders of the taxability of the common stock dividends paid during the preceding year.

The payment of common stock dividends is dependent upon our financial condition, operating results and real estate investment trust distribution requirements and may be adjusted at the discretion of the Board during the year.

Pursuant to the terms of our preferred stock, we are restricted from declaring or paying any dividend with respect to our common stock unless and until all cumulative dividends with respect to the preferred stock have been paid and sufficient funds have been set aside for dividends that have been declared for the relevant dividend period with respect to the preferred stock.

Our tax return for the year ended December 31, 2013 has not been filed. The taxability information presented for our dividends paid in 2013 is based upon management’s estimate. Our tax returns for open tax years have not been examined by the Internal Revenue Service, other than those discussed in Note 16. Consequently, the taxability of dividends is subject to change.

NOTE 11. PARTNERS’ CAPITAL OF PROLOGIS, L.P.

 

11.Partners’ Capital of the Operating Partnership

For each share of common stock or preferred stock the REIT issues, the Operating Partnership issues a corresponding common or preferred partnership unit, as applicable, to the REIT in exchange for the contribution of the proceeds from the stock issuance. In addition, other third parties own common limited partnership units that make up 0.35% of the common partnership units.

As of December 31, 2013, the Operating Partnership had outstanding 498.8 million common general partnership units, 1.8 million common limited partnership units and 2.0 million preferred general partnership units.

Distributions paid to the common limited partnership units and the taxability of thethose distributions are similar to the REIT’sParent’s common stock disclosed above.

81


PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

 

In May 2015, we issued 4.5 million common limited partnership units in the Operating Partnership in connection with the KTR transaction. See Note 3 for more details on the transaction.

 

12.Noncontrolling Interests

In connection with the acquisition of a portfolio of properties in October 2015, we issued 0.2 million common limited partnership units and 8.9 million Class A Units. The number of units issued was based upon an agreed upon price and had a per unit weighted average fair value at the date of issuance of $41.06. The Class A Units generally have the same rights as the existing common units of the Operating Partnership, except that the Class A Units are entitled to a quarterly distribution equal to $0.64665 per unit so long as the common units receive a quarterly distribution of at least $0.40 per unit (in the event the common units receive a quarterly distribution of less than $0.40 per unit, the Class A Unit distribution would be reduced by a proportionate amount). Class A Units are convertible into common units at an initial conversion rate of one-for-one. The conversion rate will be increased or decreased to the extent that, at the time of conversion, the net present value of the distributions paid with respect to the Class A Units are less or more than the distributions paid on common units from the time of issuance of the Class A Units until the time of conversion. At December 31, 2016, the Class A Units were convertible into 8.7 million common units. The Operating Partnership may redeem the Class A Units at any time after October 7, 2025, for an amount in cash equal to the then-current number of the common units into which the Class A Units are convertible, multiplied by $43.11, subject to the holders’ right to convert the Class A Units into common units.

Distributions paid on the common units and Class A Units, and the taxability of those distributions, are similar to dividends paid on the Parent’s common stock disclosed above.

NOTE 12. NONCONTROLLING INTERESTS

Prologis, L.P.

We report noncontrolling interests related to several entities we consolidate but of which we do not own 100% of the common equity. These entities include two real estate partnerships that have issued limited partnership units to third parties. Depending on the specific partnership agreements, these limited partnership units are exchangeableredeemable for cash or, at our option into shares of ourthe Parent’s common stock, (or cash), generally at a rate of one share of common stock to one unit. We evaluated the noncontrolling interests with redemption provisions that permit the issuer to settle in either cash or common stock at the option of the issuer to determine whether temporary or permanent equity classification on the balance sheet is appropriate, including the requirement to settle in unregistered shares, and determined that these units meet the requirements to qualify for presentation as permanent equity. We also consolidate several entities in which we do not own 100% of the equity and the units of the entitythese entities are not exchangeable into our common stock.

If we contribute a property to a consolidated co-investment venture,

As discussed in Note 1, the property is still reflectedParent has complete responsibility, power and discretion in the Consolidated Financial Statements, but due to our ownership of less than 100%, there is an increase in noncontrolling interest related to the contributed properties, which represents the cash we receive from our partners.

In June 2013, we acquired our partners’ interest in Prologis Institutional Alliance Fund II (“Fund II”), a consolidated co-investment venture. In connection with this transaction, we paid $245.8 million and issued 804,734 limited partnership units worth $31.3 million in one of our limited partnerships based primarily on appraised valuesday-to-day management of the properties. These units are exchangeable into an equal number of shares of our common stock.Operating Partnership. The difference betweenParent, through its majority interest, has the amount we paidright to receive benefits from and the noncontrolling interest balance at the time was not significant, but was adjusted through equity with no gain or loss recognized. As a result of this transaction, the assets and liabilities associated with this venture are now wholly owned in the Consolidated Balance Sheets.

In the second quarter of 2013, we earned a promote fee from Fund II, of $18.8 million from the fund, which was based on the venture’s cumulative returns to the investors over the lifeincur losses of the venture. OfOperating Partnership. In addition, the Operating Partnership does not have either substantive liquidation rights or substantive kick-out rights without cause or substantive participating rights that amount, $13.5 million representedcould be exercised by a simple majority of noncontrolling interests. The absence of such rights renders the third party investors’ portion and is reflectedOperating Partnership as a component ofNoncontrolling Interest inVIE. Accordingly, the Consolidated Statements of Operations. We also recognized $2.7 million of expense for the year ended December 31, 2013, inInvestment Management Expenses in the Consolidated Statements of Operations, representing the associated cash bonus paid out to certain employees pursuant to the terms of the Prologis Promote Plan, previously referred to as the Private Capital Plan.

In December 2013, we announced the formation of a new co-investment venture, Prologis U.S. Logistics Venture (“USLV”). Prologis’ partner is NBIM, whichParent is the same partner in our new European fund, PELP. On January 9, 2014, we contributed 66 properties toprimary beneficiary of and consolidates the fund. We own 55% of the equity and the venture is consolidated for accounting purposes due to the structure and voting rights of the venture.Operating Partnership.

REIT

Prologis, Inc.

The noncontrolling interestinterests of the REIT includesParent include the noncontrolling interests presented in the Operating Partnership, as well as the common limited partnership units in the Operating Partnership that are not owned by the REIT. As of December 31, 2013, the REIT owned 99.65% of the common partnership units of the Operating Partnership.

During 2013, net earnings attributable to noncontrolling interests was $10.1 million, of which $0.5 million was a loss from continuing operations and $10.6 million was income from discontinued operations. Amounts allocated to discontinued operations for 2012 and 2011 were not considered significant.

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Parent.

 

The following is a summary of thetable summarizes our ownership percentages and noncontrolling interestinterests and the consolidated entity’sentities’ total investment in real estateassets and debttotal liabilities at December 31 (dollars in thousands):

 

   Our Ownership
Percentage
   Noncontrolling Interest   Total Investment In Real
Estate
   Debt 
    2013   2012   2013   2012   2013   2012   2013   2012 

Partnerships with exchangeable units (1)

   various     various    $75,532    $44,476    $783,052    $826,605    $ -     $ -   

Fund II (2)

   N/A     28.2%          280,751          571,668          178,778  

Mexico Fondo Logistico (AFORES) (3)

   20.0%     20.0%     220,292     157,843     457,006     388,960     191,866     214,084  

Brazil Fund (4)

   50.0%     50.0%     65,006     66,494                      

Prologis AMS

   38.5%     38.5%     24,791     59,631     58,575     160,649     17,063     63,749  

Other consolidated entities

   various     various     31,465     43,930     312,358     404,825     31,063     62,061  
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Operating Partnership noncontrolling interests

       417,086     653,125     1,610,991     2,352,707     239,992     518,672  

Limited partners in the Operating Partnership (5)

       48,209     51,194                      
      

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

REIT noncontrolling interests

            $    465,295    $    704,319    $    1,610,991    $    2,352,707    $    239,992    $    518,672  

 

 

Our Ownership Percentage

 

 

Noncontrolling Interests

 

 

Total Assets

 

 

Total Liabilities

 

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

 

2016

 

 

2015

 

Prologis U.S. Logistics Venture

 

 

55.0

%

 

 

55.0

%

 

$

2,424,800

 

 

$

2,677,642

 

 

$

6,201,278

 

 

$

6,788,968

 

 

$

797,593

 

 

$

847,084

 

Prologis North American Industrial

     Fund (1)

 

 

66.1

%

 

 

66.1

%

 

 

486,648

 

 

 

490,444

 

 

 

2,479,072

 

 

 

2,619,241

 

 

 

1,038,708

 

 

 

1,165,617

 

Prologis Brazil Logistics Partners

     Fund I (1) (2)

 

 

50.0

%

 

 

50.0

%

 

 

61,836

 

 

 

49,313

 

 

 

131,581

 

 

 

100,836

 

 

 

720

 

 

 

192

 

Other consolidated entities (3)

 

various

 

 

various

 

 

 

99,185

 

 

 

102,828

 

 

 

866,821

 

 

 

985,188

 

 

 

34,073

 

 

 

42,811

 

Prologis, L.P. noncontrolling

     interests

 

 

 

 

 

 

 

 

 

 

3,072,469

 

 

 

3,320,227

 

 

 

9,678,752

 

 

 

10,494,233

 

 

 

1,871,094

 

 

 

2,055,704

 

Limited partners in Prologis, L.P.

     (4) (5)

 

 

 

 

 

 

 

 

 

 

394,590

 

 

 

432,674

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Prologis, Inc. noncontrolling

     interests

 

 

 

 

 

 

 

 

 

$

3,467,059

 

 

$

3,752,901

 

 

$

9,678,752

 

 

$

10,494,233

 

 

$

1,871,094

 

 

$

2,055,704

 

 

(1)

These ventures are considered VIE’s under the new consolidation guidance discussed in Note 2. Based on our evaluation, the noncontrolling interests in these ventures do not hold substantive participating or kick-out rights and therefore as a group they

82


PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

lack the power to direct the significant activities of these ventures that most significantly impact the venture’s economic performance. We have both the power to direct the significant activities and the obligation to absorb losses and the rights to receive benefits from these ventures. As a result, we are the primary beneficiary of both ventures and consistent with prior reporting periods, we consolidate each venture within our financial statements.

(2)

The assets of the Brazil Fund are primarily investments in unconsolidated entities of $113.1 million and $103.1 million at December 31, 2016 and 2015, respectively. For additional information on our unconsolidated investments, see Note 5.

(3)

This line item includes our two partnerships that have issued limited partnership units to third parties, as discussed above, along with various other consolidated entities. At December 31, 20132016 and 2012, there were 1,948,608 and 1,173,5712015, limited partnership units respectively, that were exchangeable into an equal number ofcash or, at our option, 1.8 million shares of the REIT’sParent’s common stock. At December 31, 2013, this included the 804,734 units of one of our limited partnerships issued as part of the Prologis Institutional Alliance Fund II transaction. In 2013, 1,1972015, 52 thousand limited partnership units were redeemed for cash and 27,751 limited partnership units were redeemed for an equal number of common shares.$3.2 million. All of these outstanding limited partnership units receive quarterly cash distributions equal to the quarterly dividends paid on our common stock pursuant to the terms of the applicable partnership agreements.

 

(2)

(4)

As disclosed above, we acquired our partners’ interest in June 2013.

(3)In May 2013, we contributed land

We had 8.9 million of Class A Units that were convertible into 8.7 million and five properties aggregating 0.78.8 million square feet to this entity for $52.1 million. As this entity is consolidated, we did not record a gain on this transaction.

(4)We have a 50% ownership interest in and consolidatecommon limited partnership units of the Brazil Fund that in turn has investments in several joint ventures that are accounted for on the equity method. The Brazil Fund’s assets are primarily investments in unconsolidated entities of $152.0 millionOperating Partnership at December 31, 2013. For additional information on2016 and 2015, respectively. They were issued in the fourth quarter of 2015. See Note 11 for further discussion of our unconsolidated investments, see Note 5.Class A Units.

 

(5)

At December 31, 20132016 and December 31, 2012,2015, excluding the Class A Units, there were 1,766,691 and 1,893,266common limited partnership units respectively, that were associated with the limited partners in the Operating Partnership andthat were exchangeable into cash or, at our option, 4.6 million and 6.4 million shares of the Parent’s common stock with a fair value of $241.8 million and $275.0 million, respectively, based on the closing stock price of the Parent’s common stock. In 2015, we issued 4.7 million common limited partnership units in the Operating Partnership, principally in connection with the KTR transaction, and in 2016 unitholders exchanged 1.9 million common limited partnership units into an equal number of shares of the REIT’sParent’s common stock. During 2013, 126,575stock with a value of $52.2 million. At December 31, 2016 and 2015, there were 2.2 million and 1.2 million LTIP Units (as defined in Note 13) outstanding, respectively, associated with our long-term compensation plan that are exchangeable into common units were redeemed for cash.of the Operating Partnership and redeemable into the Parent’s common stock after they vest and other applicable conditions are met. All of these outstanding limited partnership units receive quarterly cash distributions equal to the quarterly distributions paid on our common stock pursuant to the terms of the partnership agreement.

 

13.Long-Term Compensation

In MayNOTE 13. LONG-TERM COMPENSATION

The 2012 the stockholdersLTIP provides for grants of awards to officers, directors, employees, and consultants of the REIT approved the Prologis, Inc. 2012 Long-Term Incentive Plan (the “2012 LTIP”), which replaced all prior active long term incentive plans (“Prior Plans”). After approval of the 2012 LTIP, no further awards could be made under the Prior Plans but outstanding awards previously granted under Prior Plans will remain outstanding in accordance with their terms. The number of shares of common stock that may be issued under the 2012 LTIP is equal to 12.0 million shares plus the aggregate number of shares available for issuance under the Prior Plans at the time the 2012 LTIP was approved, resulting in a total of 27.2 million shares that have been reserved for issuance under the 2012 LTIP. As of December 31, 2013, there were 24.5 million shares of common stock available for future issuance of which 8.6 million are subject to outstanding awards.

Officers, directors and other employees, consultants, and independent contractors of the REITParent or its subsidiaries are eligible to become participants in the 2012 LTIP.subsidiaries. Awards made under the 2012 LTIP can be in the form of stock options (non-qualified options and incentive stock options), stock appreciation rights (“SAR”),and full value awards (restricted stock, restricted stock units and performance-based shares)(“RSUs”), Operating Partnership units (“LTIP Units”), special outperformance plan type of LTIP Units and cash incentive awards.awards). An LTIP Unit represents a partnership interest in the Operating Partnership. After vesting and the satisfaction of certain conditions, an LTIP Unit may be exchangeable for a common unit in the Operating Partnership and then redeemable for a share of common stock (or cash at the election of the Operating Partnership). No participant can be granted more than 1.5 million shares of common stock under the 2012 LTIP in any one calendar year. Awards canmay be made under the 2012 LTIP until it is terminated by the Board or until the ten-year anniversary of the effective date of the plan.

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)We have 27.2 million shares reserved for issuance, of which 19.4 million shares of common stock were available for future issuance at December 31, 2016. Each LTIP Unit counts as one share of common stock for purposes of calculating the limit on shares that may be issued.

 

Prologis Outperformance Plan (“POP” formerly “OPP”)

 

In 2011, in connection with the Merger, each outstanding award of ProLogis was converted into 0.4464 of a newly issued award of the REIT. Additionally, the exercise prices of stock options and the grant date fair values of full value awards have been adjustedWe allocate participation points to reflect the conversion of the underlying award. Values of stock options, restricted stock and restricted stock units of AMB were adjustedparticipants under our POP corresponding to their current fair value as a result of the Merger.three-year performance periods beginning January 1. The fair value adjustment related to vested awards was recognized as an adjustment to paid-in capital and the portion of the adjustment related to unvested awards is beingare measured at the beginning of the performance period and amortized to expense over the remaining service periods.

Performance Plans

We grant performance-based incentive awards under twoapplicable performance compensation plans approved by the compensation committee of the Board in 2012. Under the approved performance plans, referred to as the Outperformance Plan and the Prologis Promote Plan, certain officers and employees may earn incentive compensation in the form of cash incentive awards or stock awards. The plans are designed such that awards will be paid only as a result of extraordinary performance by the Company.

Outperformance Plan (“OPP”)

OPPperiod. POP awards are earned to the extent our total shareholderstockholder return (“TSR”) for the performance period exceeds the TSR for the MSCIMorgan Stanley Capital International (“MSCI”) US REIT Index for the same period plus 100 basis points.points (the “Index”). If this outperformance hurdle is met, the compensation pool is equal to 3% of the excess value created, subject to a maximum of the greater of $75 million or 0.5% of the our equity market capitalization at the start of the performance period. Each participant is allocatedeligible to receive a percentage of the total compensation pool. Awards earned, if any, forpool based on the number of participation points allocated to the participant. If the performance periodcriteria are met, the participants’ points will generally be paid in eitherthe form of common stock or cash.POP LTIP Units (as discussed below). If the performance criteria are not met, the participants’ points will be forfeited. Awards earned at the end of the performance period cannot be paid to participants unless our absolute TSR, as defined in the plan, is positive for the performance period. If we outperform the Index, but the absolute TSR is not positive, payment will be delayed until such time as our absolute TSR becomes positive. If after seven years our absolute TSR has not become positive, the awards will be forfeited.

In February 2013, we granted points

The POP was amended in 2016. Starting with the 2016 – 2018 performance period, if the relevant performance thresholds are met, participants can earn POP awards for their share of an aggregate fair value of $23.9 million asperformance pool up to $75 million. If earned, these POP awards will be paid after the end of the dateinitial three-year performance period. If our levels of outperformance warrant an aggregate performance pool greater than $75 million, then participants can earn their share of the grantadditional award amount in excess of $75 million up to the Capitalization Cap (the “Excess Award Amount”) during the course of a three-year period after the end of the initial performance period.

83


PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

One-third of this Excess Award Amount can be earned at the end of each of the three years after the initial performance period, if our performance meets or exceeds the Index in each of such three years. POP continues to include certain positive TSR requirements, which must be met before participants can be paid awards under POP. In addition, participants will not be able to sell or transfer any equity they receive as initial or excess POP awards until three years after the end of the initial performance period. This amendment impacted the 2016 POP awards, but not the previously issued awards.

We use a Monte Carlo valuation model to value the points allocated under the POP. Participants can elect to choose the form of payment of awards earned, if any, in common stock of the Parent or POP LTIP Units. If and as elected by the participant, POP participation points are exchanged for POP LTIP Units. If the performance criteria are not met, the POP LTIP Units will be forfeited. At December 31, 2016, all awards are equity classified.

The following table details the assumptions using a Monte Carlo valuation model that assumed a risk free interest rate of 0.39%, an expected volatility of 46% for Prologis and 30%each grant based on the year it was granted (dollars in thousands):

 

 

2016

 

 

2015

 

 

2014

 

Risk free interest rate

 

 

0.99

%

 

 

0.86

%

 

 

0.67

%

Expected volatility

 

 

20.5

%

 

 

28.0

%

 

 

38.0

%

Aggregate fair value

 

$

26,600

 

 

$

26,500

 

 

$

23,100

 

The performance criteria was met for the index of selected peer companies and an expected service period of 3 years. Such points relate to a three-year2014 – 2016 performance period, that began onwhich resulted in an aggregate performance pool of $62.2 million awarded in January 1, 2013, and will end on December 31, 2015. If the performance criteria are met, the participants’ points will be paid2017 in the form of common stock.either vested RSUs or POP LTIP Units.

The performance criteria were not met for the 2012 – 2014 and 2013 – 2015 performance periods, therefore, no awards were earned and the awards were forfeited for such performance periods. As the 2013 awardPOP has market-based performance criteria, there is equity-classified,no adjustment to the fair valueexpense previously recognized at the completion of the award was measured at the grant-date and amortized over the performance period.

In 2012, we granted points relating to a three-year performance period (that began on January 1, 2012) that, if earned, were payable in cash. These awards were liability-classified and the fair value was re-measured on a quarterly basis and the expense was adjusted. On May 1, 2013, the compensation committeeregardless of the Board approved a modification of the settlement terms for the awards to be paid in shares of common stock. The award was reclassified from liability to equity based on the fair value at the modification date of $36.1 million using the Monte Carlo simulation model that assumed a risk free interest rate of 0.17%, an expected volatility of 27% for Prologis and 18% for the index of selected peer companies and an expected service period of 1.7 years. The new grant-date fair value less the amount of compensation expense recognized to date is amortized over the remaining performance period, through December 31, 2014.outcome.

We recognized $23.0 million and $9.0 million of compensation expense relating to the OPP awards during the years ended December 31, 2013 and 2012, respectively.

Prologis Promote Plan (“PPP”)

Under the PPP, we establishedestablish a compensation pool equal to 40% of the aggregate incentive feespromotes earned by Prologis under agreements with our co-investment ventures. Each participant was allocated a percentagethat represents the third-party portion of the total compensation poolpromotes. The awards may be settled in some combination of cash, RSUs or for each co-investment venture in February 2012.certain participants LTIP Units. The firstRSUs and LTIP Units have a three-year vesting period.

The following table details the equity awards were madegranted under the PPP in August 2013. The total value of these PPP awards, $5.3 million, was settled in cash ($2.7 million) and RSUs (68,855 RSUs with a grant date fair value of $2.6 million and a three-year vesting period).

We evaluatefor the likelihood that we will earn incentive fees from our co-investment ventures on a quarterly basis. We record an accrual when it becomes probable and estimable that we will earn these fees. Atyear ended December 31 2013,(in thousands):

 

 

2016

 

 

2015

 

 

2014

 

RSUs granted

 

 

77

 

 

 

-

 

 

 

57

 

Grant date fair value of RSUs granted

 

$

4,126

 

 

$

-

 

 

$

2,327

 

LTIP Units granted

 

 

197

 

 

 

-

 

 

 

113

 

Grant date fair value of LTIP Units granted

 

$

8,984

 

 

$

-

 

 

$

4,692

 

Restricted Stock Units (“RSUs”)

In addition to the RSUs granted under the PPP, we accrued $1.3 million of compensation expense associated with incentive fees earned from the conclusion of SGP Mexico.

Full Value Awards

We have granted full value awards, generally in the form of restricted stock units (“RSUs”) and performance-based awards (“PSAs”),grant RSUs to certain employees, generally on an annual basis. We also grant deferred stock units (“DSUs”)Each RSU represents the right to our outside directors. Full value awards each representreceive one share of common stock of the Parent and generally vestvests over a continued service period. Full value awardsThe RSUs earn cash dividends or dividend equivalent units (“DEUs”) (at our common stock dividend rate) overduring the vesting period. Theperiod and are, therefore, considered participating securities. We charge the value of the dividends and DEUs is chargeddividend to retained earnings. The fair value of the full value awardsRSU is generally based on the market price of ourthe Parent’s common stock on the date the award is granted and is charged to compensation expense over the vesting or service period. For RSUs and PSAs, the vesting period, which is generally three years.

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

In 2011, we granted a target number of PSAs of 280,525, which were then earned based on specified performance criteria over a one-year performance period. Based on the attainment of specified individual and company performance goals, a total of 326,475 were earned. Earned PSAs were then subjected to a two-year vesting period. No PSAs were granted in 2012 or 2013.

DSUs issued in 2011 were fully vested at grant. DSUs granted since 2011 vest on the earlier of the date of the first annual meeting of stockholders after the grant date or the first anniversary of the grant date and are subject to a two-year deferral period after vest.

The weighted average fair value offollowing table summarizes the full value awards granted during the years ended December 31, 2013, 2012 and 2011 was $40.24, $32.60, and $34.13, respectively.

Summary of Activity of ouractivity for RSUs and PSAs

The activity for the year ended December 31, 2013 with respect to our RSU and PSA awards was as follows:2016 (units in thousands):

 

    Number of
Shares
   Weighted Average
Grant-Date Fair  Value
   Number of
Shares Vested
 

Balance at January 1, 2013

   1,999,348    $32.28     47,680  
      

 

 

 

Granted

   1,288,457     40.24    

Vested

   (939,464)     31.86    

Forfeited

   (81,898)     36.66    
  

 

 

   

 

 

   

 

 

 

Balance at December 31, 2013

   2,266,443    $36.82     79,306  

Restricted Stock

Restricted stock awards are full value awards that were granted under AMB’s Prior Plans prior to the Merger. Restricted stock awards are valued based on the market price of common stock on the grant date. The vesting period for restricted stock is generally three to four years. We recognize the value of the restricted stock earned as compensation expense over the applicable service period, which is generally the vesting period. Restricted stock has voting rights during the vesting period.

The activity for the year ended December 31, 2013, with respect to our unvested restricted stock was as follows:

 

 

Number of RSUs

 

 

Weighted Average Grant-Date Fair Value

 

 

Number of RSUs Vested

 

Balance at January 1, 2016

 

 

1,626

 

 

$

42.21

 

 

 

109

 

Granted

 

 

843

 

 

 

38.53

 

 

 

 

 

Vested and distributed

 

 

(807

)

 

 

41.70

 

 

 

 

 

Forfeited

 

 

(45

)

 

 

41.08

 

 

 

 

 

Balance at December 31, 2016

 

 

1,617

 

 

$

40.58

 

 

 

125

 

 

    Number of
Shares
   Weighted Average
Grant-Date Fair  Value
 

Balance at January 1, 2013

   687,277    $34.03  

Vested

   (391,790)     34.05  

Forfeited

   (18,326)     34.07  
  

 

 

   

 

 

 

Balance at December 31, 2013

   277,161    $34.00  

Stock Options

Stock options outstanding were primarily granted under AMB’s Prior Plans, which were fair valued as of the Merger Date. No stock options have been granted subsequent to the Merger. Each stock option is exercisable into one share of common stock at an exercise price equal to the market price of our common stock on the grant date. Stock options granted to employees had graded vesting over a three or four year period while stock options granted to outside directors generally vested immediately or within one year of the grant. The maximum contractual terms of each stock option is ten years.

The activity for the year ended December 31, 2013, with respect to our stock options was as follows:

   Options Outstanding   Options Exercisable 
    Number of Options   

Weighted Average
Exercise

Price

   Number of
Options
   

Weighted

Average Exercise

Price

   

Weighted

Average Life

(in years)

 

Balance at January 1, 2013

   7,513,217    $37.02        

Exercised

   (869,443)     30.69        

Forfeited/Expired

   (390,277)     67.99        
  

 

 

   

 

 

       

Balance at December 31, 2013

   6,253,497    $35.97     6,120,224    $36.04     4.3  

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The aggregate intrinsic value of exercised options was $9.6 million, $21.3 million, and $2.0 million for the years ended December 31, 2013, 2012 and 2011, respectively.

As discussed in Note 3, we estimated the fair value of the AMB stock options using the Black-Scholes pricing model as of the Merger date. The fair value of the vested awards were included as part of the total Merger consideration. We used the following assumptions:

Expected volatility

25-55%

Weighted average volatility

44.6%

Expected dividends

3.73%

Expected term (in years)

1-6

Risk-free rate

0.19-1.92%

Compensation Expense

During the years ended December 31, 2013, 2012 and 2011, we recognized $58.4 million, $56.9 million and $34.8 million, respectively, of compensation expense associated with the 2012 LTIP plan and performance plans. These amounts include expense reported asGeneral and Administrative Expenses andMerger, Acquisition and Other Integrated Expenses and are net of $18.8 million, $10.6 million and $8.7 million, respectively, that was capitalized due to our development and leasing activities.

Total remaining compensation cost related to unvested full value awards as ofRSUs outstanding at December 31, 2013,2016, was $54.7$31.4 million, prior to adjustments for capitalized amounts due to our development and leasing activities. The remaining expensecompensation cost will be recognized through 2017, which equates to2019, with a weighted average period of 1.4 years.

84


PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Operating Partnership Long-Term Incentive Plan Units (“LTIP Units”)

LTIP Units are valued based on the market price of the Parent’s common stock on the date the award is granted and generally vest ratably over three years. Distributions are paid with respect to the LTIP Units during the vesting period and, therefore, such LTIP Units are considered participating securities. The fair value of the full value awards which vesteddistribution is charged to Net Income Attributable to Noncontrolling Interests in 2013the Operating Partnership.

The following table summarizes the activity for LTIP Units for the year ended December 31, 2016 (units in thousands):

 

 

Number of LTIP Units

 

 

Weighted Average Grant-Date Fair Value

 

 

Number of LTIP Units Vested

 

Balance at January 1, 2016

 

 

1,244

 

 

$

42.21

 

 

 

303

 

Granted

 

 

975

 

 

 

39.01

 

 

 

 

 

Balance at December 31, 2016

 

 

2,219

 

 

$

40.81

 

 

 

743

 

Total remaining compensation cost related to LTIP Units at December 31, 2016, was $53.6 million.$38.6 million, prior to adjustments for capitalized amounts due to our development and leasing activities. The remaining compensation cost will be recognized through 2019, with a weighted average period of 1.4 years.

Other Plans

In 2011,Prologis Outperformance Plan Operating Partnership Long-Term Incentive Plan Units (“POP LTIP Units” formerly “OPP LTIP Units”)

At December 31, 2016, we had two 401(k) Savings Plan0.8 million, 1.4 million and Trusts, one from ProLogis1.3 million POP LTIP Units outstanding for the 2016 – 2018, 2015 – 2017 and one from AMB. Effective January 1, 2012,2014 – 2016 performance periods, respectively. The following table summarizes the AMBactivity for the POP LTIP Units for the year ended December 31, 2016 (units in thousands):

Number of POP LTIP Units

Balance at January 1, 2016

3,464

Granted

953

Forfeited

(927

)

Balance at December 31, 2016

3,490

Stock Options

We have 2.1 million stock options outstanding and exercisable at December 31, 2016, with a weighted average exercise price of $36.14 and a weighted average life of 2.5 years. The aggregate intrinsic value of exercised options was $45.6 million, $13.7 million, and $5.8 million for the years ended December 31, 2016, 2015 and 2014, respectively. No stock options were granted in the three-year period ended December 31, 2016.

Other Plans

The Prologis 401(k) Plan merged into the ProLogis 401(k) Plan, with the Prologis Plan (the “Plan”“401(k) Plan”) continuing on as the surviving plan. The Plan provides for matching employer contributions of 50 cents$0.50 for every dollar contributed by an employee, up to 6% of the employee’s annual compensation (within the statutory compensation limit). In the 401(k) Plan, vesting in the matching employer contributions is based on the employee’s years of service, with 100% vesting at the completion of one year of service. Our contributions under the matching provisions were $2.7 million, $2.5 million and $2.2 million for 2016, 2015 and 2014, respectively.

In 2011, we had two nonqualified

We have a non-qualified savings plans to provide benefits for certain employees, one from ProLogis and one from AMB. Effective January 1, 2012, a new deferred compensation plan for Prologis was established. The purpose of this plan is to allowthat allows highly compensated employees the opportunity to defer the receipt and income taxation of a certain portion of their compensation in excess of the amount permitted under the 401(k) Plans.Plan. There has been no employer matching underin the new plan.

On a combined basis for all plans, our contributions under the matching provisions were $2.1 million, $1.8 million and $1.6 million for 2013, 2012 and 2011, respectively.

14.Merger, Acquisition and Other Integration Expenses

In connection with the Merger and other related activities, we incurred significant transaction, integration, and transitional costs in 2011 and 2012 (primarily in 2011). These costs included investment banker advisory fees; legal, tax, accounting and valuation fees; termination and severance costs (both cash and stock based compensation awards) for terminated and transitional employees; non-capitalized system conversion costs and other integration costs.

In 2012, we incurred $80.7 million of costs related principally to severance in connection with the Merger; system implementation costs, as portions of the project move into the phase when the costs are expensed (i.e., training and data conversion); additional costs due to the liquidation of PEPR and severance and related costs due to organizational changes in Europe to centralize finance activities and gain efficiencies. In 2011, we incurred $140.5 million of costs related principally to transaction and transitional costs directly related to the Merger, including severance, and transactional costs associated with the PEPR Acquisition. At the time of the Merger, we terminated our existing credit facilities and wrote-off the remaining unamortized deferred loan costs associated with such facilities, which is included in these costs.

15.Impairment Charges

Impairment of Real Estate Properties

During the yearsthree-year period ended December 31, 2012 and 2011, we recognized impairment charges related to certain of our real estate properties totaling $283.5 million and $23.9 million, respectively. We recorded no impairment charges during 2013.2016.

85


PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOTE 14. INCOME TAXES

 

Components of Earnings Before Income Taxes

 

Land

InThe following table summarizes the fourth quartercomponents of 2012, we reviewed our land bank based on our current intent to hold long-term (through the development of an industrial property) or to sell. This review resulted in a change in our intent from long-term hold to sell for some land parcels and the identification of other land parcels that had previously been impaired that are located primarily in Central and Eastern Europe for which the market had continued to lag in the global economic recovery. We had not experienced the same improvement in land values in these regional and other European markets that we had in a majority of our global markets. The fair value of the land parcels was based on internal valuations, which were corroborated primarily from brokers’ opinion of value and comparable land sales, if available. If the carrying value of the land parcel exceeded fair value, we adjusted the carrying value of the land. Accordingly, we recognized impairment charges of $77.5 million based on our evaluation of our investment in land as of December 31, 2012. Additionally during 2012, we recorded impairment charges of $11.4 million on land parcels that we expected to sell as the carrying value exceeded the fair value at that time. The fair value of the land was based on purchase and sale agreements.

Operating Properties

In the fourth quarter of 2012, we announced the signing of a definitive agreement for the formation of a new fund in Europe, PELP. Based on this agreement, we assessed the recoverability of the portfolio of assets we expected to contribute to PELP by comparing the total expected proceeds to the carrying value of the portfolio of assets as of December 31, 2012. As a result of this analysis, we recorded impairment charges of $135.3 million in continuing operations.

During 2012, we also recorded impairment charges for properties we expected to sell to third parties or contribute to co-investment ventures of $30.6 million in discontinued operations and $28.7 million in continuing operations, respectively. The impairment charges were calculated based on the carrying values of those assets compared to the fair value, which was primarily based upon letters of intent, purchase and sale agreements and third party appraisals.

During 2011, we recorded impairment charges for properties we expected to sell to third parties or contribute to co-investment ventures of $2.7 million in discontinued operations and $21.2 million in continuing operations, respectively.

Impairment of Other Assets

In the second quarter of 2011, we recorded impairment charges of $103.8 million primarily related to two of our investments in unconsolidated entities. This included our investment in NAIF III, which we concluded during the third quarter 2013, as discussed in Note 3. Based on the duration of time that the value of our investment had been less than carrying value and the lack of recovery as compared to our other real estate investments, we no longer believed the decline to be temporary. Also included was our investment in a co-investment venture in South Korea that we sold to our venture partner in July 2011. We had previously recognized an impairment associated with this investment due to the decline in value that we believed to be other than temporary.

We had a receivable from an entity that developed retail and mixed use properties in Europe that was secured by land parcels. In late 2011, the entity went into administration. In exchange for the note receivable, we received three land parcels and debt. Based on the fair value of the land less the assumption of debt received in the exchange, we impaired the remaining receivable balance of $20.5 million. In the first quarter of 2012, we recorded an additional impairment charge of $16.1 million.

16.Income Taxes

Components of Loss before Income Taxes

Components of earnings (loss) before income taxes for the years ended December 31 were as follows (in thousands):

 

    2013   2012   2011 

Domestic

  $        (404,910)    $(65,566)    $(303,695)  

International

   741,172     (37,251)     30,527  
  

 

 

   

 

 

   

 

 

 

Earnings (loss) before income taxes

  $336,262    $        (102,817)    $        (273,168)  

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

 

2016

 

 

2015

 

 

2014

 

Domestic

 

$

719,018

 

 

$

511,025

 

 

$

390,874

 

International

 

 

628,086

 

 

 

437,580

 

 

 

322,754

 

Earnings before income taxes

 

$

1,347,104

 

 

$

948,605

 

 

$

713,628

 

 

Summary of Current and Deferred Income Taxes

Components

The following table summarizes the components of the provision for income taxes for the years ended December 31 were as follows (in thousands):

 

  2013   2012   2011 

 

2016

 

 

2015

 

 

2014

 

Current income tax expense (benefit):

      

 

 

 

 

 

 

 

 

 

 

 

 

United States Federal

  $20,009    $(27,897)    $(9,392)  

U.S. federal

 

$

7,153

 

 

$

(11,633

)

 

$

(6,585

)

International

   99,478     46,294     30,010  

 

 

38,493

 

 

 

27,494

 

 

 

52,155

 

State and local

   8,501     7,383     4,177  

 

 

14,443

 

 

 

12,286

 

 

 

16,014

 

  

 

   

 

   

 

 

Total current tax expense

   127,988     25,780     24,795  

 

 

60,089

 

 

 

28,147

 

 

 

61,584

 

  

 

   

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred income tax expense (benefit):

      

 

 

 

 

 

 

 

 

 

 

 

 

United States Federal

   (1,133)     152     (1,333)  

U.S. federal

 

 

(3,306

)

 

 

(810

)

 

 

(27,374

)

International

   (18,934)     (22,119)     (18,470)  

 

 

(2,219

)

 

 

(4,247

)

 

 

(59,866

)

  

 

   

 

   

 

 

Total deferred tax benefit

   (20,067)     (21,967)     (19,803)  

 

 

(5,525

)

 

 

(5,057

)

 

 

(87,240

)

  

 

   

 

   

 

 

Total income tax expense, included in continuing and discontinued operations

  $107,921    $3,813    $4,992  

Total income tax expense (benefit)

 

$

54,564

 

 

$

23,090

 

 

$

(25,656

)

Current Income Taxes

Current income tax expense recognized during 2016 is generallyprincipally due to tax triggered upon the contribution of assets to our Mexico and Japan co-investment ventures and third party sales from our U.S.TRS. Contributions to our co-investment ventures were not significant during 2015, as such there was a function of the level oflimited impact on current income recognized by our taxable REIT subsidiaries (“TRS”), state income taxes, taxes incurred in foreign jurisdictions and interest and penalties associated with our uncertain tax positions. The increase in currentexpense. Current income tax expense during 20132014 is primarilyprincipally due to taxes triggered upon the contribution of the initial portfolio of properties of certain wholly-owned and AFORES entities to our unconsolidated co-investment ventures that were held in certain foreign jurisdictions and United States TRSs.FIBRA Prologis. Current income tax expense resulting fromduring 2015 and 2014 was netted against a current benefit recognized during each year as a result of the contribution of properties was partially offset by the utilization of net operating losses and section 163(j) interest limitation generated in prior years that had been previously recognized as deferred income tax assets in certain ofby our TRSs operating in the United States.U.S. TRS.

For the years ended December 31, 2013, 20122016, 2015 and 2011,2014, we recognized a net expense of $0.3 million and $3.0 million and a net benefit of $1.1 million for uncertain tax positions, of $1.8 million, $28.5 million and $9.0 million, respectively. The benefit that was recognized in all years relates to the reversal of certain expenses due to the expiration of the statute of limitations and settlements with the taxing authorities.

During the years ended December 31, 2013, 20122016, 2015 and 2011,2014, cash paid for income taxes, net of refunds, was $99.5$29.3 million, $38.4$24.1 million and $41.2$105.4 million, respectively.

Deferred Income Taxes

Deferred income tax is generally a function of the period’s temporary differences (principally basis differences between tax and financial reporting for real estate assets and equity investments) and generation of tax net operating losses that may be realized in future periods depending on sufficient taxable income.

For federal income tax purposes, certain acquisitions have been treated as tax-free transactions resulting in a carry-over basis in assets and liabilities. For financial reporting purposes and in accordance with purchase accounting, we record all of the acquired assets and liabilities at the estimated fair values at the date of acquisition. For our taxable subsidiaries, including international jurisdictions, we recognize theThe deferred income tax liabilities that represent the tax effectbenefits recognized in 2016, 2015 and 2014 were primarily due to a reduction in book basis of the difference betweenreal estate as compared to the tax basis carried over and the fair value of the tangible and intangible assets at the date of acquisition. If taxable income is generated in these subsidiaries, we recognize a deferred income tax benefit in earnings as a result of the reversal of deferred tax liabilities from the contribution and dispositions of properties. The deferred income tax liability previouslyliabilities were originally recorded at the acquisition date andtime of acquisition. The majority of the deferred tax benefit we record current income tax expense representing the entire current income tax liability. Any increases or decreasesrecognized in 2014 was due to the reversal of deferred income tax liability recordedliabilities in connection with these acquisitions, relatedthe initial contribution of properties to tax uncertaintiesFIBRA Prologis and due to the expiration of the holding period on properties previously acquired are reflected in earnings.with existing built-in-gains.

86


PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

DeferredThe following table summarizes the deferred income tax assets and liabilities as ofat December 31 were as follows (in thousands):

 

    2013   2012 

Gross deferred income tax assets:

    

Net operating loss carryforwards (1)

  $391,764    $611,027  

Basis difference - real estate properties

   133,767     172,336  

Basis difference - equity investments

   9,238     13,163  

Basis difference - intangibles

   8,113     17,408  

Alternative minimum tax credit carryforward

   1,387     1,387  

Foreign tax credit carryforward

   1,963     1,963  

Section 163(j) interest limitation

   33,224     53,542  

Capital loss carryforward

   32,054     30,395  

Other - temporary differences

   16,774     16,746  
  

 

 

   

 

 

 

Total gross deferred income tax assets

   628,284     917,967  

Valuation allowance

   (583,675)     (859,305)  
  

 

 

   

 

 

 

Gross deferred income tax assets, net of valuation allowance

   44,609     58,662  
  

 

 

   

 

 

 

Gross deferred income tax liabilities:

    

Basis difference - real estate properties

   167,074     436,961  

Built-in-gains - real estate properties

   5,409     6,402  

Basis difference - equity investments

   877     958  

Built-in-gains - equity investments

   21,707     22,053  

Basis difference- intangibles

   8,823     10,591  

Other - temporary differences

   5,269     5,123  
  

 

 

   

 

 

 

Total gross deferred income tax liabilities

   209,159     482,088  
  

 

 

   

 

 

 

Net deferred income tax liabilities

  $164,550    $423,426  

 

 

2016

 

 

2015

 

Gross deferred income tax assets:

 

 

 

 

 

 

 

 

Net operating loss carryforwards (1)

 

$

350,909

 

 

$

321,144

 

Basis difference – real estate properties

 

 

56,827

 

 

 

89,856

 

Basis difference – equity investments and intangibles

 

 

4,666

 

 

 

15,593

 

Section 163(j) interest limitation

 

 

40,766

 

 

 

32,684

 

Capital loss carryforward

 

 

25,145

 

 

 

25,282

 

Other – temporary differences

 

 

5,578

 

 

 

8,993

 

Total gross deferred income tax assets

 

 

483,891

 

 

 

493,552

 

Valuation allowance

 

 

(456,699

)

 

 

(467,440

)

Gross deferred income tax assets, net of valuation allowance

 

 

27,192

 

 

 

26,112

 

Gross deferred income tax liabilities:

 

 

 

 

 

 

 

 

Basis difference – real estate properties

 

 

70,914

 

 

 

82,160

 

Basis difference – equity investments and intangibles

 

 

6,864

 

 

 

6,170

 

Other – temporary differences

 

 

1,028

 

 

 

993

 

Total gross deferred income tax liabilities

 

 

78,806

 

 

 

89,323

 

Net deferred income tax liabilities

 

$

51,614

 

 

$

63,211

 

 

(1)

At December 31, 2013,2016, we had net operating loss (“NOL”)NOL carryforwards as follows (in millions)thousands):

 

    U.S.   Europe   Mexico   Japan   Other 

Gross NOL carryforward

  $69.5    $692.5    $442.3    $118.2    $61.6  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Tax-effected NOL carryforward

   26.1     195.6     132.7     22.7     14.7  

Valuation allowance

   (26.1)     (175.0)     (127.5)     (22.7)     (14.5)  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net deferred tax asset-NOL carryforward

  $ -     $20.6    $5.2    $ -     $0.2  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Expiration periods

   2027-2032     2014-indefinite     2014-2023     2014-2022     2014-indefinite  

 

 

U.S.

 

 

Europe

 

 

Mexico

 

 

Japan

 

 

Other

 

 

Gross NOL carryforward

$

97,565

 

 

$

640,431

 

 

$

371,284

 

 

$

115,154

 

 

$

48,318

 

 

Tax-effected NOL carryforward

 

36,597

 

 

 

162,067

 

 

 

117,633

 

 

 

23,001

 

 

 

11,611

 

 

Valuation allowance

 

(36,597

)

 

 

(146,684

)

 

 

(117,633

)

 

 

(23,001

)

 

 

(11,611

)

 

Net deferred tax asset – NOL

     carryforward

$

-

 

 

$

15,383

 

 

$

-

 

 

$

-

 

 

$

-

 

 

Expiration periods

2023 – 2036

 

 

2017 – indefinite

 

 

2017 – 2027

 

 

2017 – 2025

 

 

2017 – indefinite

 

The decrease in net deferred tax liabilities is due to the transfer of deferred tax balances on real estate properties that were contributed to our unconsolidated co-investment ventures, principally the initial contribution of 195 properties to PELP in the first quarter of 2013.

In addition, we utilized net operating losses and section 163(j) interest limitation of $28.8 million which was generated in prior years in certain TRSs operating in the United States to offset current income tax expense resulting from the contribution of properties to our unconsolidated co-investment ventures. There was a full valuation allowance recorded against these deferred tax assets as of December 31, 2012, as the transaction was not deemed probable under the accounting rules at that time.

We record a valuation allowance against deferred tax assets in certain jurisdictions when we cannot sustain a conclusion that it is more likely than not that we can realize the deferred tax assets and NOL carryforwards during the periods in which these temporary differences become deductible. The deferred tax asset valuation allowance at December 31, 2016, is adequate to reduce the total deferred tax asset to an amount that we estimate will “more-likely-than-not”more likely than not be realized.

Liability for Uncertain Tax Positions

During the years ended December 31, 2013, 20122016, 2015 and 2011,2014, we believe that we have complied with the real estate investment trustREIT requirements of the Internal Revenue Code. The statute of limitations for our tax returns is generally three years. As such, our tax returns that

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

remain subject to examination would be primarily from 20102013 and thereafter. Our major tax jurisdictions outside the United States are Brazil, Canada, China, France, Germany, Japan, Luxembourg, Mexico, Netherlands, Poland, Singapore, Spain, and the United Kingdom.

The liability for uncertain tax positions was $3.0 million, $3.3 million and $0.3 million for the years ended December 31, 2016, 2015 and 2014, respectively, and principally consisted of estimated federal and state income tax liabilities and included accrued interest and penalties of $0.9 million and $0.8 million at December 31, 2013 and 2012, respectively. A reconciliation of the liability for uncertain tax positions was as follows (in thousands):penalties.

 

    2013   2012 

Balance at January 1,

  $7,943    $36,464  

Additions for tax positions taken during the current year

          

Additions for tax positions taken during a prior year

   405     407  

Reductions for tax positions taken during a prior year

        (124)  

Settlements with taxing authorities

   (7,030)       

Reductions due to lapse of applicable statute of limitations

                (28,804)  
  

 

 

   

 

 

 

Balance at December 31,

  $        1,318    $7,943  

NOTE 15. EARNINGS PER COMMON SHARE OR UNIT

 

17.Earnings / Loss Per Common Share / Unit

We determine basic earnings per share/share or unit based on the weighted average number of shares of common stock/stock or units outstanding during the period. We compute diluted earnings per share/share or unit based on the weighted average number of shares or units outstanding combined with the incremental weighted average effect from all outstanding potentially dilutive instruments.

87


PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

The following table sets forth the computation of our basic and diluted earnings per share/share and unit for the years ended December 31 (in thousands, except per share/share and unit amounts):

REIT  2013   2012   2011 

Net earnings (loss) attributable to common stockholders

  $315,422    $(80,946)    $(188,110)  

Noncontrolling interest attributable to exchangeable limited partnership units

   1,305     (162)     (349)  
  

 

 

   

 

 

   

 

 

 

Adjusted net earnings (loss) attributable to common stockholders

  $        316,727    $        (81,108)    $        (188,459)  
  

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding - Basic (1)

   486,076     459,895     370,534  
  

 

 

   

 

 

   

 

 

 

Incremental weighted average effect of exchange of limited partnership units (2)

   2,060     1,953     1,196  

Incremental weighted average effect of stock awards and warrants

   3,410            
  

 

 

   

 

 

   

 

 

 

Weighted average common shares outstanding - Diluted (3)

   491,546     461,848     371,730  
  

 

 

   

 

 

   

 

 

 

Net earnings (loss) per share attributable to common stockholders -

      

Basic

  $0.65    $(0.18)    $(0.51)  

Diluted

  $0.64    $(0.18)    $(0.51)  
Operating Partnership               

Net earnings (loss) attributable to common unitholders

  $316,630    $(81,108)    $(188,459)  

Noncontrolling interest attributable to exchangeable limited partnership units

   97            
  

 

 

   

 

 

   

 

 

 

Adjusted net earnings (loss) attributable to common unitholders

  $316,727    $(81,108)    $(188,459)  
  

 

 

   

 

 

   

 

 

 

Weighted average common partnership units outstanding - Basic (1)

   487,936     461,848     371,730  

Incremental weighted average effect on exchange of limited partnership units

   200            

Incremental weighted average effect of stock awards and warrants of the REIT

   3,410            
  

 

 

   

 

 

   

 

 

 

Weighted average common partnership units outstanding - Diluted (3)

   491,546     461,848     371,730  
  

 

 

   

 

 

   

 

 

 

Net earnings (loss) per unit attributable to common unitholders -

      

Basic

  $0.65    $(0.18)    $(0.51)  

Diluted

  $0.64    $(0.18)    $(0.51)  

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) is as follows:

 

Prologis, Inc.

 

2016

 

 

2015

 

 

2014

 

Net earnings attributable to common stockholders – Basic

 

$

1,203,218

 

 

$

862,788

 

 

$

622,235

 

Net earnings attributable to exchangeable limited partnership units (1)

 

 

37,079

 

 

 

13,120

 

 

 

3,636

 

Gains, net of expenses, associated with exchangeable debt assumed exchanged (2)

 

 

-

 

 

 

(1,614

)

 

 

-

 

Adjusted net earnings attributable to common stockholders – Diluted

 

$

1,240,297

 

 

$

874,294

 

 

$

625,871

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding – Basic

 

 

526,103

 

 

 

521,241

 

 

 

499,583

 

Incremental weighted average effect on exchange of limited partnership units (1)

 

 

16,833

 

 

 

8,569

 

 

 

3,501

 

Incremental weighted average effect of equity awards and warrant

 

 

3,730

 

 

 

1,961

 

 

 

3,307

 

Incremental weighted average effect on exchangeable debt assumed exchanged (2)

 

 

-

 

 

 

2,173

 

 

 

-

 

Weighted average common shares outstanding – Diluted (3)

 

 

546,666

 

 

 

533,944

 

 

 

506,391

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings per share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

2.29

 

 

$

1.66

 

 

$

1.25

 

Diluted

 

$

2.27

 

 

$

1.64

 

 

$

1.24

 

 

Prologis, L.P.

 

2016

 

 

2015

 

 

2014

 

Net earnings attributable to common unitholders

 

$

1,237,519

 

 

$

873,914

 

 

$

624,436

 

Net earnings attributable to Class A convertible common unitholders

 

 

(20,069

)

 

 

(3,393

)

 

 

-

 

Net earnings attributable to common unitholders – Basic

 

$

1,217,450

 

 

$

870,521

 

 

$

624,436

 

Net earnings attributable to Class A convertible common unitholders

 

 

20,069

 

 

 

3,393

 

 

 

-

 

Net earnings attributable to exchangeable limited partnership units

 

 

2,778

 

 

 

1,994

 

 

 

1,435

 

Gain, net of expenses, associated with exchangeable debt assumed exchanged (2)

 

 

-

 

 

 

(1,614

)

 

 

-

 

Adjusted net earnings attributable to common unitholders – Diluted

 

$

1,240,297

 

 

$

874,294

 

 

$

625,871

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common partnership units outstanding – Basic

 

 

532,326

 

 

 

525,912

 

 

 

501,349

 

Incremental weighted average effect on exchange of Class A convertible units

 

 

8,775

 

 

 

2,050

 

 

 

-

 

Incremental weighted average effect on exchange of limited partnership units

 

 

1,835

 

 

 

1,848

 

 

 

1,735

 

Incremental weighted average effect of equity awards and warrant of Prologis, Inc.

 

 

3,730

 

 

 

1,961

 

 

 

3,307

 

Incremental weighted average effect on exchangeable debt assumed exchanged (2)

 

 

-

 

 

 

2,173

 

 

 

-

 

Weighted average common partnership units outstanding – Diluted (3)

 

 

546,666

 

 

 

533,944

 

 

 

506,391

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings per unit attributable to common unitholders:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

2.29

 

 

$

1.66

 

 

$

1.25

 

Diluted

 

$

2.27

 

 

$

1.64

 

 

$

1.24

 

 

(1)

The increase in shares/units between the periods is due to the Merger and equity offering 2011 and an equity offering in April 2013.

(2)Income (loss)

Earnings allocated to the exchangeable Operating Partnership units not held by the REIT hasParent have been included in the numerator and exchangeable Operating Partnership units have been included in the denominator for the purpose of computing diluted earnings per share for all periods sinceas the per share/share and unit amount is the same.

(2)

In March 2015, the exchangeable debt was settled primarily through the issuance of common stock. The incremental weighted average exchangeable Operating Partnership units (in thousands) were 1,860, 1,953 and 1,196 foradjustment in 2015 assumes the years ended December 31, 2013, 2012 and 2011, respectively.exchange occurred on January 1, 2015.

 

(3)

Total weighted average

Our total potentially dilutive stock awardsshares and warrants outstanding (in thousands) were 13,998, 9,805, and 7,648 for the years ended December 31, 2013, 2012 and 2011, respectively. Total weighted average potentially dilutive shares/units from exchangeable debt outstanding (in thousands) were 11,879 for all periods presented. Total weighted average potentially dilutive limited partnership units outstanding (in thousands) were 1,558, 1,284, and 899 forconsisted of the years ended December 31, 2013, 2012 and 2011, respectively.following:

 

18.Related Party Transactions

 

 

2016

 

 

2015

 

 

2014

 

 

Total weighted average potentially dilutive limited partnership units

 

10,610

 

 

 

3,898

 

 

 

1,932

 

 

Total potentially dilutive stock awards

 

8,444

 

 

 

7,299

 

 

 

14,366

 

 

Total weighted average potentially dilutive shares and units from exchangeable debt

 

-

 

 

 

2,173

 

 

 

11,879

 

 

Total Prologis, L.P.

 

19,054

 

 

 

13,370

 

 

 

28,177

 

 

Limited partners in Prologis, L.P.

 

6,223

 

 

 

4,671

 

 

 

1,766

 

 

Total Prologis, Inc.

 

25,277

 

 

 

18,041

 

 

 

29,943

 

In 2013 and 2012, Irving F. Lyons, III, member of the Board, Trustee of ProLogis prior to the Merger and former Chief Investment Officer, converted limited partnership units in the limited partnerships, in which we own a majority interest and consolidate, into 27,751 shares and 45,600 shares of our common stock, respectively. As of December 31, 2013, Mr. Lyons had no outstanding partnership units. See Note 12 for more information regarding these limited partnerships in the Americas.

Also see Note 5 for a discussion of transactions between us and the unconsolidated entities in which we invest.88


PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

19.Financial Instruments and Fair Value Measurements

NOTE 16. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Derivative Financial Instruments

In the normal course of business, our operations are exposed to global market risks, including the effect of changes in foreign currency exchange rates and interest rates. To manage these risks, we may enter into various derivative contracts. Foreigncontracts, such as foreign currency contracts including forwards and options, may be used to manage foreign currency exposure. We may useexposure, and interest rate swaps to manage the effect of interest rate fluctuations. We do not use derivative financial instruments for trading or speculative purposes. The majorityAll of our derivative financial instruments are customized derivative transactions and are not exchange-traded. Management reviews our hedging program, derivative positions and overall risk management strategy on a regular basis. We only enter into only those transactions that we believe will be highly effective at offsetting the underlying risk.

Our use of derivatives does involve

See Note 2 for additional information about our derivative financial instrument policy.

The following table presents the risk that counterparties may default on a derivative contract. We establish exposure limits for each counterparty to minimize this riskfair value and provide counterparty diversification. Substantially allclassification of our derivative exposures are with counterparties that have long-term credit ratings of single-A or better. We enter into master agreements with counterparties that generally allow for netting of certain exposures; thereby significantly reducing the actual loss that would be incurred should a counterparty fail to perform its contractual obligations. To mitigate pre-settlement risk, minimum credit standards become more stringent as the duration of the derivative financial instrument increases. To minimize the concentration of credit risk, we enter into derivative transactions with a portfolio of financial institutions. Based on these factors, we consider the risk of counterparty default to be minimal.

All derivatives are recognized at fair value in the Consolidated Balance Sheets within the line itemsOther Assets orAccounts Payable and Accrued Expenses, as applicable. We do not net our derivative position by counterparty for purposes of balance sheet presentation and disclosure. Derivatives can be designated as fair value hedges, cash flow hedges or hedges of net investments in foreign operations. The accounting for gains and losses that result from changes in the fair values of derivative instruments depends on whether the derivatives are designated as, and qualify as, hedging instruments.

For derivatives that will be accounted for as hedging instruments in accordance with the accounting standards, at inception of the transaction, we formally designate and document the financial instrument as a hedge of a specific underlying exposure, the risk management objective and the strategy for undertaking the hedge transaction. In addition, we formally assess both at inception and at least quarterly thereafter, whether the derivatives used in hedging transactions are effective at offsetting changes in either the fair values or cash flows of the related underlying exposures. The ineffective portion of a derivative financial instrument’s change in fair value, if any, is immediately recognized in earnings. Derivatives not designated as hedges are not speculative and are used to manage our exposure to foreign currency fluctuations but do not meet the strict hedge accounting requirements.

Changes in the fair value of derivatives that are designated and qualify as cash flow hedges and hedges of net investments in foreign operations are recorded inAccumulated Other Comprehensive Loss in the Consolidated Balance Sheets. Due to the high degree of effectiveness between the hedging instruments and the underlying exposures hedged, fluctuations in the value of the derivative instruments will generally be offset by changes in the fair values or cash flows of the underlying exposures being hedged. The changes in fair values of derivatives that were not designated and/or did not qualify as hedging instruments are immediately recognized in earnings. For cash flow hedges, we reclassify changes in the fair value of derivatives into the applicable line item in the Consolidated Statements of Operations in which the hedged items are recorded in the same period that the underlying hedged items affect earnings.

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Our co-investment ventures may also enter into derivative contracts. As we act as the manager of these ventures, our ventures use the same risk mitigation and exposure limits related to counterparties. In addition, these ventures primarily follow the same hedging strategy as Prologis. For our consolidated co-investment ventures, the accounting treatment is as described in this footnote. For our unconsolidated co-investment ventures, we record our proportionate share of any earnings impact inEarnings from Unconsolidated Entities, Netin the Consolidated Statements of Operations. In addition, for derivatives in our unconsolidated ventures that have been designated and qualify as hedging instruments, we record our proportionate share of the effective gain or loss as a component ofAccumulated Other Comprehensive Loss in the Consolidated Balance Sheets. In both circumstances, we record the offsetting amount asInvestments in and Advances to Unconsolidated Entities in the Consolidated Balance Sheets.

Foreign currency hedges

We hedge the net assets of certain international subsidiaries (net investment hedges) using foreign currency derivative contracts to offset the translation and economic exposures related to our investments in these subsidiaries by locking in a forward exchange rate at the inception of the hedge. We measure the effectiveness of our net investment hedges by using the changes in forward exchange rates because this method reflects our risk management strategies, the economics of those strategies in the financial statements and better manages interest rate differentials between different countries. Under this method, all changes in fair value of the forward currency derivative contracts designated as net investment hedges are reported in equity in the foreign currency translation component ofAccumulated Other Comprehensive Loss and offsets translation adjustments on the underlying net assets of foreign entities and affiliates, which are also recorded in Accumulated Other Comprehensive Loss. Ineffectiveness, if any, is recognized in earnings.

In 2013, we entered into seven foreign currency contracts that expire in June 2017 and June 2018 with an aggregate notional amount of €599.9 million ($800.0 million using the weighted average forward rate of 1.33) to hedge a portion of our investment in Europe at a fixed euro rate in U.S. dollars. We also entered into three foreign currency contracts that expire in June 2018 with an aggregate notional amount of ¥24.1 billion ($250.0 million using the weighted average forward rate of 96.54) to hedge a portion of our investment in Japan at a fixed yen rate in U.S. dollars. Pursuant to these contracts, we will sell either euro or yen and buy U.S. dollars at the forward rate upon maturity. In addition, we will receive quarterly payments in U.S. dollars at a predetermined rate with no corresponding payments by us. These derivatives were designated and qualify as hedging instruments and, therefore, the changes in fair value of these derivatives were recorded in the foreign currency translation component ofAccumulated Other Comprehensive Lossin the Consolidated Balance Sheets.

As discussed in Note 9, we issued €700 million ($950.5 million) of debt during December 2013. This debt was issued by the Operating Partnership, which is a U.S. dollar functional entity. To mitigate the risk of fluctuations in the exchange rate of the euro, we designated the debt as a non-derivative financial instrument hedge, and as a result, the change in the value of this debt upon translation into dollars is recorded in the foreign currency translation component ofAccumulated Other Comprehensive Lossin the Consolidated Balance Sheets to offset the foreign currency fluctuations related to our investment in Europe.

In 2012, we entered into foreign currency contracts that expired in April and May 2013. These contracts were designated and qualified as hedging instruments. During 2013, we settled these contracts with a combined notional amount of $1.3 billion. As a result of these settlements, we realized a gain of $4.3 million, inOther Comprehensive Income (Loss)in the Consolidated Statements of Comprehensive Income during 2013.

We had $20.2 million recorded inOther Assetsat December 31 2013, and $30.3 million and $17.5 million recorded inAccounts Payable and Accrued Expenses at December 31, 2013 and December 31, 2012, respectively, in the Consolidated Balance Sheets relating to the fair value of our net investment hedges. Amounts included inAccumulated Other Comprehensive Loss in the Consolidated Balance Sheets at December 31, 2013 and December 31, 2012, were gains of $0.4 million and losses of $17.5 million, respectively. None of our net investment hedges were ineffective during the year ended December 31, 2013; therefore, there was no impact on earnings. For the years ended December 31, 2013 and 2012, we recorded gains of $15.2 million and losses of $17.5 million respectively, inOther Comprehensive Income (Loss) in the Consolidated Statements of Comprehensive Income due to the change in fair value of our net investment hedges. We had no outstanding net investment hedges in 2011.(in thousands):

Interest rate hedges

 

 

2016

 

 

2015

 

 

 

Asset

 

 

Liability

 

 

Asset

 

 

Liability

 

Net investment hedges

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Canadian dollar denominated

 

$

1,245

 

 

$

-

 

 

$

-

 

 

$

-

 

Pound sterling denominated

 

 

7,439

 

 

 

-

 

 

 

33,471

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forwards and options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Euro denominated (1)

 

 

10,933

 

 

 

-

 

 

 

11,711

 

 

 

84

 

Pound sterling denominated (1)

 

 

16,985

 

 

 

-

 

 

 

4,241

 

 

 

745

 

Yen denominated (1)

 

 

9,246

 

 

 

1,071

 

 

 

832

 

 

 

717

 

Other (1)

 

 

831

 

 

 

197

 

 

 

3,324

 

 

 

88

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest rate hedges

 

 

435

 

 

 

-

 

 

 

-

 

 

 

12,095

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total fair value of derivatives

 

$

47,114

 

 

$

1,268

 

 

$

53,579

 

 

$

13,729

 

(1)

As discussed in Note 2, these foreign currency contracts are not designated as hedges, with the exception of cash flow hedges denominated in pesos, which matured in 2016.

Our interest rate risk management strategy is to limit the impact of future interest rate changes on earnings and cash flows as well as to stabilize interest expense and manage our exposure to interest rate movements. To achieve this objective, we may enter into interest rate swap agreements, which allow us to borrow on a fixed rate basis for longer-term debt issuances, or interest rate cap agreements, which allow us to minimize the impact of increases in interest rates. We typically designate our interest rate swap and interest rate cap agreements as cash flow hedges as these derivative instruments may be used to manage the interest rate risk on potential future debt issuances or to fix the interest rate on variable rate debt issuances. The maximum length of time that we hedge our exposure to future cash flows is typically less than 10 years. We use cash flow hedges to minimize the variability in cash flows of assets, liabilities or forecasted transactions caused by fluctuations in interest rates.

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)Foreign Currency

 

We have entered into interest rate swap agreements that allow us to receive variable-rate amounts from a counterpartyThe following tables summarize the activity in exchange for us making fixed-rate payments over the life of our agreements without the exchange of the underlying notional amount. We had one interest rate swap contract, which was denominated in U.S dollar, outstanding at December 31, 2013. We had $5.6 million and $28.0 million accrued inAccounts Payable and Accrued Expenses in the Consolidated Balance Sheets relating to unsettled derivativeforeign currency contracts at December 31, 2013 and 2012, respectively.

The effective portion of the gain or loss on the derivative is reported as a component ofAccumulated Other Comprehensive Loss in the Consolidated Balance Sheets, and reclassified toInterest Expense in the Consolidated Statements of Operations over the corresponding period of the hedged item. The amounts reclassified to interest expense for the years ended December 31 2013(in millions, except for weighted average forward rates and 2011 were not considered significant. The amount reclassified to interest expense for the year ended December 31, 2012, was $14.7 million. For the next twelve months from December 31, 2013, the additional expense that will be reclassified into interest expense is not considered significant. Amounts included inAccumulated Other Comprehensive Loss in the Consolidated Balance Sheets at December 31, 2013 and 2012 were lossesnumber of $14.4active contracts):

2016

Foreign Currency Contracts

 

 

Net Investment Hedges

 

 

Forwards and Options

 

Local Currency

CAD

 

 

GBP

 

 

JPY

 

 

EUR

 

 

GBP

 

 

JPY

 

 

Other

 

Notional amounts at January 1

$

-

 

 

£

238

 

 

¥

-

 

 

275

 

 

£

97

 

 

¥

12,840

 

 

 

 

 

New contracts

 

133

 

 

 

90

 

 

 

11,189

 

 

 

369

 

 

 

-

 

 

 

15,460

 

 

 

 

 

Matured, expired or settled contracts

 

-

 

 

 

(297

)

 

 

(11,189

)

 

 

(470

)

 

 

(49

)

 

 

(12,800

)

 

 

 

 

Notional amounts at December 31

$

133

 

 

£

31

 

 

¥

-

 

 

174

 

 

£

48

 

 

¥

15,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign Currency Contracts

 

U.S. Dollar

Net Investment Hedges

 

 

Forwards and Options (1)

 

Notional amounts at January 1

$

-

 

 

$

386

 

 

$

-

 

 

$

310

 

 

$

148

 

 

$

109

 

 

$

50

 

New contracts

 

100

 

 

 

131

 

 

 

99

 

 

 

413

 

 

 

-

 

 

 

146

 

 

 

15

 

Matured, expired or settled contracts

 

-

 

 

 

(471

)

 

 

(99

)

 

 

(526

)

 

 

(70

)

 

 

(111

)

 

 

(27

)

Notional amounts at December 31

$

100

 

 

$

46

 

 

$

-

 

 

$

197

 

 

$

78

 

 

$

144

 

 

$

38

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average forward

     rate at December 31

 

1.33

 

 

 

1.51

 

 

 

-

 

 

 

1.13

 

 

 

1.54

 

 

 

107.68

 

 

 

 

 

Active contracts at December 31

 

2

 

 

 

2

 

 

 

-

 

 

 

24

 

 

 

8

 

 

 

30

 

 

 

16

 

89


PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2015

 

Foreign Currency Contracts

 

 

 

Net Investment Hedges

 

 

Forwards and Options

 

Local Currency

 

CAD

 

 

EUR

 

 

GBP

 

 

JPY

 

 

EUR

 

 

GBP

 

 

JPY

 

 

Other

 

Notional amounts at January 1

 

$

-

 

 

300

 

 

£

238

 

 

¥

24,136

 

 

284

 

 

£

-

 

 

¥

-

 

 

 

 

 

New contracts

 

 

394

 

 

 

-

 

 

 

118

 

 

 

43,373

 

 

 

333

 

 

 

199

 

 

 

18,740

 

 

 

 

 

Matured, expired or settled contracts

 

 

(394

)

 

 

(300

)

 

 

(118

)

 

 

(67,509

)

 

 

(342

)

 

 

(102

)

 

 

(5,900

)

 

 

 

 

Notional amounts at December 31

 

$

-

 

 

-

 

 

£

238

 

 

¥

-

 

 

275

 

 

£

97

 

 

¥

12,840

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign Currency Contracts

 

U.S. Dollar

 

Net Investment Hedges

 

 

Forwards and Options (1)

 

Notional amounts at January 1

 

$

-

 

 

$

400

 

 

$

400

 

 

$

250

 

 

$

354

 

 

$

-

 

 

$

-

 

 

$

-

 

New contracts

 

 

298

 

 

 

-

 

 

 

186

 

 

 

353

 

 

 

375

 

 

 

300

 

 

 

159

 

 

 

71

 

Matured, expired or settled contracts

 

 

(298

)

 

 

(400

)

 

 

(200

)

 

 

(603

)

 

 

(419

)

 

 

(152

)

 

 

(50

)

 

 

(21

)

Notional amounts at December 31

 

$

-

 

 

$

-

 

 

$

386

 

 

$

-

 

 

$

310

 

 

$

148

 

 

$

109

 

 

$

50

 

2014

 

Foreign Currency Contracts

 

 

 

Net Investment Hedges

 

 

Forwards and Options

 

Local Currency

 

EUR

 

 

GBP

 

 

JPY

 

 

EUR

 

Notional amounts at January 1

 

600

 

 

£

-

 

 

¥

24,136

 

 

-

 

New contracts

 

 

1,746

 

 

 

238

 

 

 

79,010

 

 

 

365

 

Matured, expired or settled contracts

 

 

(2,046

)

 

 

-

 

 

 

(79,010

)

 

 

(81

)

Notional amounts at December 31

 

300

 

 

£

238

 

 

¥

24,136

 

 

284

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign Currency Contracts

 

U.S. Dollar

 

Net Investment Hedges

 

 

Forwards and Options (1)

 

Notional amounts at January 1

 

$

800

 

 

$

-

 

 

$

250

 

 

$

-

 

New contracts

 

 

2,354

 

 

 

400

 

 

 

769

 

 

 

464

 

Matured, expired or settled contracts

 

 

(2,754

)

 

 

-

 

 

 

(769

)

 

 

(110

)

Notional amounts at December 31

 

$

400

 

 

$

400

 

 

$

250

 

 

$

354

 

(1)

During 2016, 2015 and 2014, we exercised 49, 32 and 3 option contracts and realized gains of $3.0 million, $14.6 million and $1.1 million, respectively, in Foreign Currency and Derivative Gains (Losses), Net.

We recognized unrealized gains of $19.1 million, $22.1 million and $33.8$7.7 million respectively. Toin Foreign Currency and Derivative Gains (Losses), Net from the extent the hedged debt is paid off early, the amountschange inAccumulated Other Comprehensive Loss are recognized asGains (Losses) on Early Extinguishment value of Debt, Net In the Consolidated Statements of Operations.

Losses on a derivative representing hedge ineffectiveness are recognized inInterest Expense at the time the ineffectiveness occurred. Losses due to hedge ineffectiveness were not considered material during the year ended December 31, 2013. We recorded losses of $2.4 million and $1.8 million duringour outstanding foreign currency option contracts for the years ended December 31, 20122016, 2015 and 2011,2014, respectively. Also in 2012, we recorded a loss of $11.0 million inGain (Loss)

We had no ineffectiveness on Early Extinguishment of Debt, Net related to interest rate swaps that were considered ineffective with a notional amount of $703.8 million. These derivatives were associated with debt that was paid offour foreign currency derivative contracts during 2016, 2015 or transferred in the first quarter of 2013, in connection with the contribution to our new European co-investment venture, PELP (see Note 6 for more details of this venture). When it was probable the related forecasted transaction would not occur, the hedge was deemed ineffective and the balance inAccumulated Other Comprehensive Loss was written off.2014.

Interest Rate

The following table summarizes the activity in our derivative instrumentsinterest rate swaps for the years ended December 31 as follows (in millions):

 

   2013   2012   2011 
    Foreign
Currency
Forwards
   Interest
Rate
Swaps (1)
   Foreign
Currency
Forwards
   Interest
Rate
Swaps (1)
   Interest
Rate Caps
   Interest
Rate
Swaps (1)
 

Notional amounts at January 1,

  $1,303.8    $        1,314.8    $   $1,496.5    $   $268.1  

New contracts

   1,050.0         1,303.8     445.4          

Acquired contracts (2)

               71.0                 25.7     1,337.3  

Matured or expired contracts

   (1,303.8)     (1,243.8)         (698.1)     (25.7)     (108.9)  
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Notional amounts at December 31,

  $        1,050.0    $71.0    $        1,303.8    $        1,314.8    $   $        1,496.5  

 

 

2016 (1)

 

 

2015

 

 

2014

 

Notional amounts at January 1

 

$

1,196

 

 

$

398

 

 

$

71

 

New contracts

 

 

-

 

 

 

1,158

 

 

 

398

 

Matured, expired or settled contracts

 

 

(925

)

 

 

(360

)

 

 

(71

)

Notional amounts at December 31

 

$

271

 

 

$

1,196

 

 

$

398

 

 

(1)

During 2013, we settled 13 contracts with a notional value of $333.5 million, and contributed 13 contracts with a notional value of $383.9 million related to the transfer of assets to the newly formed PELP co-investment venture.

We also settled five contracts in Japan with a notional value of $526.4 million in connection with the contributions of properties to NPR. In 2012, we entered into fourhad three interest rate swap contracts with combined notional amounts of $445.4 million, with various expiration dates between 2017 and 2019. In addition, we acquired one interest rate swap contract with a notional amount of $71.0 million in connection with the acquisition of our interest in NAIF II. In connection with the Merger and PEPR Acquisition in 2011, we acquired various interest rate swap contracts with combined notional amounts of $1.3 billion, with various expiration dates between October 2012 and January 2014.swaps hedges outstanding at December 31, 2016.

 

(2)To the extent these contracts previously qualified for hedge accounting, they were redesignated at the time of the acquisition to qualify for hedge accounting post Merger and acquisition.

In connection withJanuary 2016, the contributions to NPR, we reclassifiedBank of Japan introduced negative interest rates. As a lossresult, our two Japanese yen denominated interest rate hedges related to the 2015 yen term loan no longer qualified for hedge accounting due to a zero percent floor mismatch in the hedging relationship. These interest rate swaps of $7.8 million duringhedges were designated as cash flow hedges at December 31, 2015, and the first quarter of 2013 fromAccumulated change in fair value was recorded in Other Comprehensive LossIncome. We began recording the change in fair value of these interest rate hedges to the Consolidated Balance SheetsStatements of Income when the hedges no longer qualified for hedge accounting.

In August 2016, we entered into the Yen Term Loan and repaid our 2014, 2015 and 2016 yen term loans. At that time, we settled the outstanding contracts related toGains (Losses) the previously outstanding term loans for $26.3 million. The fair value of the contracts that qualified for hedge accounting at the date of repayment was recorded to AOCI and will be amortized to Interest Expense over the life of the original term loans. We had $13.7 million remaining in AOCI at December 31, 2016. The change in fair value on Early Extinguishmentthe unhedged portion of Debt, Netthe

90


PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

contracts was recorded in the Consolidated Statements of Operations.Income. During the year ended December 31, 2016, we recorded a loss of $9.9 million, respectively, in Foreign Currency and Derivative Gains (Losses), Net. See Note 9 for further discussion of the Yen Term Loan.

During 2015, we entered into two contracts with a notional amount of $526.3 million (¥65.0 billion) to effectively fix the interest rate on the 2015 yen term loan (see above for discussion on the settlement of these contracts) and three contracts with a notional amount of CAD $371.9 million ($271.2 million) to effectively fix the interest rate on the Canadian term loan. In the third quarter of 2015, we entered into two contracts with a notional amount of $360.0 million to effectively fix the interest rate at the three month LIBOR rate of 2.3% on expected future debt issuances. These contracts were settled in the fourth quarter of 2015 when we entered into $750.0 million of senior notes. We recorded a loss of $11.0 million associated with these derivatives that will be amortized to Interest Expense, in accordance with our policy.

During 2014, we entered into two contracts with a notional amount of $398.3 million (¥40.9 billion) to effectively fix the interest rate on the 2014 yen term loan. See above for discussion on the settlement of these contracts.

See Note 9 for more information on our term loans.

Other Comprehensive Income

The change in Other Comprehensive Income in the Consolidated Statements of Comprehensive Income during the periods presented is due to the translation on consolidation of the financial statements into U.S. dollars of our consolidated subsidiaries whose functional currency is not the U.S. dollar for which we recorded losses of $304.0 million, $594.0 million and $614.8 million for the years ended December 31, 2016, 2015 and 2014, respectively. It also includes the change in fair value for the effective portion of our derivative and nonderivative instruments that have been designated as hedges.

The following table presents the gains and (losses) associated with the change in fair value for the effective portion of our derivative and nonderivative hedging instruments included in Other Comprehensive Income for the years ended December 31 (in thousands):

 

 

2016

 

 

2015

 

 

2014

 

Derivative net investment hedges (1)

 

$

55,460

 

 

$

63,934

 

 

$

122,164

 

Interest rate and cash flow hedges (2)

 

 

(551

)

 

 

(21,714

)

 

 

(804

)

Our share of derivatives from unconsolidated co-investment ventures

 

 

(798

)

 

 

4,257

 

 

 

(5,694

)

Total derivative instruments

 

 

54,111

 

 

 

46,477

 

 

 

115,666

 

Nonderivative net investment hedges (3)

 

 

112,591

 

 

 

321,148

 

 

 

321,196

 

Total derivative and nonderivative hedging instruments

 

$

166,702

 

 

$

367,625

 

 

$

436,862

 

(1)

We received $79.8 million, $128.2 million and $13.0 million for the years ended December 31, 2016, 2015 and 2014, respectively, on the settlement of net investment hedges.

(2)

The amount reclassified to interest expense was $5.5 million for 2016 and for 2015 and 2014 the amounts were not considered significant. For the next 12 months from December 31, 2016, we estimate an additional expense of $5.4 million will be reclassified to Interest Expense.

(3)

At December 31, 2016, 2015 and 2014, we had €3.2 billion ($3.4 billion), €3.2 billion ($3.5 billion) and €2.5 million ($3.0 billion) of debt, net of accrued interest, respectively, designated as nonderivative financial instrument hedges of our net investment in international subsidiaries. We had €97.6 million ($118.5 million) of debt that was not designated as a nonderivative financial instrument hedge at December 31, 2014. We recognized unrealized gains of $10.0 million and $7.7 million in Foreign Currency and Derivative Gains (Losses), Net on the unhedged portion of our debt for the years ended December 31, 2015 and 2014, respectively. There were no unrealized gains or losses recognized for the year ended December 31, 2016.

Fair Value Measurements

We have estimated the fair value of our financial instruments using available market information and valuation methodologies we believe to be appropriate for these purposes. Considerable judgment and a high degree of subjectivity are involved in developing these estimates and, accordingly, they are not necessarily indicative of amounts that we would realize uponon disposition. See Note 2 for more information on our fair value measurements policy.

Fair Value Measurements on a Recurring and Non-Recurring Basis

At December 31, 20132016 and December 31, 2012,2015, other than the derivatives discussed above and in Note 9,previously, we dodid not have any significant financial assets or financial liabilities that arewere measured at fair value on a recurring basis in the Consolidated Financial Statements. We have

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy. The credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by ourselves and our counterparties. We have determined that the significance of the impact of the credit valuation adjustments made to our derivative contracts were not significant to the overall valuation. As a result, allAll of our derivatives held as ofat December 31, 20132016 and December 31, 2012,2015, were classified as Level 2 of the fair value hierarchy.

Assets

91


PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Fair Value Measurements on Nonrecurring Basis

No assets met the criteria to be measured at fair value on a non-recurringnonrecurring basis in the Consolidated Financial Statements consist of real estate assets and investments in and advances to unconsolidated entities that were subject to impairment charges as discussed in Note 15. The table below aggregates the fair value of these assets at December 31, 2013 and 2012, respectively, by the levels in the fair value hierarchy (in thousands):2016 or 2015.

 

  2013  2012 
   Level 1  Level 2  Level 3  Total  Level 1  Level 2  Level 3  Total 

Real estate assets

 $          -   $          -   $          -   $          -   $          -   $          -   $      3,677,365   $      3,677,365  

Fair Value of Financial Instruments

At December 31, 20132016 and 2012, our2015, the carrying amounts of certain financial instruments, including cash and cash equivalents, restricted cash, accounts and notes receivable, accounts payable and accrued expenses were representative of their fair values due tobecause of the short-term nature of these instruments.

At December 31, 2013 and 2012, the fair value of our derivative instruments were determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each derivative. This analysis reflects the contractual terms of the derivatives, including the period to maturity, and uses observable market-based inputs, including interest rate curves, foreign exchange rates, and implied volatilities. The fair values of our interest rate swaps are determined using the market standard methodology of netting the discounted future fixed cash receipts or payments and the discounted expected variable cash payments. The variable cash payments are based on an expectation of future interest rates, or forward curves, derived from observable market interest rate curves. The fair values of our net investment hedges are based upon the change in the spot rate at the end of the period as compared to the strike price at inception.

We incorporate credit valuation adjustments to appropriately reflect both our nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. In adjusting the fair value of our derivative contracts for the effect of nonperformance risk, we have considered the impact of netting and any applicable credit enhancements, such as collateral postings, thresholds, mutual puts, and guarantees.

We have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy. Although the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties, we assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives.

At December 31, 2013 and 2012, the fair value of our senior notes and exchangeable senior notes has been estimated based upon quoted market prices for the same (Level 1) or similar (Level 2) issues when current quoted market prices are available, the fair value of our Credit Facilities has been estimated by discounting the future cash flows using rates and borrowing spreads currently available to us (Level 3), and the fair value of our secured mortgage debt and assessment bonds that do not have current quoted market prices available has been estimated by discounting the future cash flows using rates currently available to us for debt with similar terms and maturities (Level 3). The differences in the fair value of our debt from the carrying value in the table below are the result of differences in interest rates and/or borrowing spreads that were available to us at December 31, 20132016 and 2012,2015, as compared with those in effect when the debt was issued or acquired.assumed, including reduced borrowing spreads due to our improved credit ratings. The senior notes and many of the issues of secured mortgage debt contain pre-payment penalties or yield maintenance provisions that could make the cost of refinancing the debt at lower rates exceed the benefit that would be derived from doing so.

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

The following table reflects the carrying amounts and estimated fair values of our debt as ofat December 31 (in thousands):

 

   2013   2012 
    Carrying Value   Fair Value   Carrying Value   Fair Value 

Debt:

        

Credit Facilities

  $725,483    $725,679    $888,966    $893,577  

Senior notes

   5,357,933     5,698,864     5,223,136     5,867,124  

Exchangeable senior notes

   438,481     514,381     876,884     1,007,236  

Secured mortgage debt

   1,696,597     1,840,829     3,625,908     3,765,556  

Secured mortgage debt of consolidated entities

   239,992     246,324     450,923     455,880  

Other debt of consolidated entities

           67,749     68,751  

Term loan and other debt

   552,730     560,714     657,228     660,951  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total debt

  $        9,011,216    $        9,586,791    $        11,790,794    $        12,719,075  

 

 

2016

 

 

2015

 

 

 

Carrying Value

 

 

Fair Value

 

 

Carrying Value

 

 

Fair Value

 

Credit Facilities

 

$

35,023

 

 

$

35,061

 

 

$

-

 

 

$

-

 

Senior notes

 

 

6,417,492

 

 

 

6,935,485

 

 

 

6,516,392

 

 

 

6,801,118

 

Term loans and unsecured other

 

 

1,499,001

 

 

 

1,510,661

 

 

 

2,115,457

 

 

 

2,128,270

 

Secured mortgages

 

 

979,585

 

 

 

1,055,020

 

 

 

1,172,473

 

 

 

1,262,778

 

Secured mortgages of consolidated entities

 

 

1,677,193

 

 

 

1,683,489

 

 

 

1,822,509

 

 

 

1,825,361

 

Total debt

 

$

10,608,294

 

 

$

11,219,716

 

 

$

11,626,831

 

 

$

12,017,527

 

 

20.Commitments and Contingencies

NOTE 17. COMMITMENTS AND CONTINGENCIES

Environmental Matters

A majority of the properties we acquire, including land, are subjected to environmental reviews either by us or the previous owners. In addition, we may incur environmental remediation costs associated with certain land parcels we acquire in connection with the development of the land. We have acquired certain properties in urban and industrial areas that may have been leased to or previously owned by commercial and industrial companies that discharged hazardous materials. We establish a liability at the time of acquisition to cover such costs and adjust the liabilities as appropriate when additional information becomes available. We record our environmental liabilities in Other Liabilities. We purchase various environmental insurance policies to mitigate our exposure to environmental liabilities. We are not aware of any environmental liabilityliabilities that we believe would have a material adverse effect on our business, financial condition or results of operations.

Indemnification Agreements

We have indemnification agreements related to certain co-investment ventures operating outside of the United States for the contribution of certain properties.

We may enter into agreements whereby we indemnify thecertain co-investment ventures, or our venture partners, outside of the U.S. for taxes that may be assessed with respect to certain properties we contributecontributed to these ventures. Our contributions to these ventures are generally structured as contributions of shares of companies that own the real estate assets. Accordingly, the capital gains associated with the step up in the value of the underlying real estate assets, for tax purposes, are deferred and transferred at contribution. We have generally indemnified these ventures to the extent that the ventures: (i) incur capital gains or withholding tax as a result of a direct sale of the real estate asset, as opposed to a transaction in which the shares of the company owning the real estate asset are transferred or sold or (ii) are required to grant a discount to the buyer of shares under a share transfer transaction as a result of the ventures transferring the embedded capital gain tax liability to the buyer of the shares in the transaction. The agreements limit the amount that is subject to our indemnification with respect to each property to 100% of the actual tax liabilities related to the capital gains that are deferred and transferred by us to the ventures at the time of the initial contribution less any deferred tax assets transferred with the property.

The ultimate outcome under these agreements is uncertain as it is dependentdepends on the method and timing of dissolution of the related venture or disposition of any properties by the venture. In previous years, we had two agreements terminate without any amounts being due or payable by us. We consider the probability, timing and amounts in estimating our potential liability under the agreements. Liabilitiesrecord liabilities related to the indemnification agreements are recorded inOther Liabilitiesin the Consolidated Balance Sheets.. We continue to monitor these agreements and the likelihood of the sale of assets that would result in recognition and will adjust the potential liability in the future as facts and circumstances dictate.

Off-Balance Sheet Liabilities

We have issued performance and surety bonds and standby letters of credit in connection with certain development projects. Performance and surety bonds are commonly required by public agencies from real estate developers. Performance and surety bonds

92


PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

are renewable and expire

upon on the completion of the improvements and infrastructure. As ofAt December 31, 20132016, and 2012,2015 we had approximately $25.5$123.5 million and $27.8$131.1 million, respectively, outstanding under such arrangements.

At December 31, 2013, we guaranteed $9.4 million of debt of certain of our unconsolidated entities.

We may be required under capital commitments or we may choose to make additional capital contributions to certain of our unconsolidated entities, representing our proportionate ownership interest, should additional capital contributions be necessary to fund development or acquisition costs, repayment of debt or operation shortfalls. See Note 5 for further discussion related to equity commitments to our unconsolidated entities.

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)Litigation

 

Litigation

In the normal course of business, fromFrom time to time, we and our unconsolidated entities are partiesparty to a variety of legal proceedings arising in the ordinary course of business. We believe that, with respect to any such matters that we are currently a party to, the ultimate disposition of any such matter will not result in ahave material adverse effect on our business, financial position or results of operations.

 

21.Business Segments

NOTE 18. BUSINESS SEGMENTS

Our current business strategy includes two operating segments: Real Estate Operations and Investment Management.Strategic Capital. We generate revenues, earnings, net operating income and cash flows through our segments, as follows:

 

Real Estate Operations – This represents the direct long-term ownership of industrial operating properties and is the primary source of our core revenue and earnings. We collect rent from our customers under

Real Estate Operations.This operating segment represents the ownership and development of operating properties and is the largest component of our revenues and earnings. We collect rent from our customers through operating leases, including reimbursements for the vast majority of our operating costs. Each operating property is considered to be an individual operating segment having similar economic characteristics that are combined within the reportable segment based upon geographic location. Our Real Estate Operations segment also includes development and re-development activities. We develop and re-develop industrial properties primarily in global and regional markets to meet our customers’ needs. We provide additional value creation by utilizing: (i) the land that we currently own in global and regional markets; (ii) the development expertise of our local personnel; (iii) our global customer relationships; and (iv) the demand for high quality distribution facilities in key markets. Land held for development, properties currently under development and land we own and lease to customers under ground leases are also included in this segment.

We own real estate in the Americas (Canada, Mexico and the United States), Europe (Austria, Belgium, the Czech Republic, France, Germany, Hungary, Italy, Poland, Romania, Slovakia, Spain, Sweden and the United Kingdom) and Asia (China, Japan and Singapore).

Investment Management – This represents the long-term management of unconsolidated co-investment ventures. We have a direct and long-standing relationships with a significant number of institutional investors. We tailor industrial portfolios to investors’ specific needs and deploy capital in both close-ended and open-ended venture structures while providing complete portfolio management and financial reporting services. We recognize fees and incentives earned for services performed on behalf of the unconsolidated entities and certain third parties.

We report the costs associated with our Investment Management segment for all periods presented in the line item Investment Management Expenses in the Consolidated Statements of Operations. These costs include the direct expenses associated with the asset management of the co-investment ventures provided by individuals who are assigned to our Investment Management segment. In addition, in order to achieve efficiencies and economies of scale, all of our property management functionsoperating costs. Each operating property is considered to be an individual operating segment with similar economic characteristics; these properties are provided by a team of professionals who are assigned to ourcombined within the reportable segment based on geographic location. Our Real Estate Operations segment. These individuals performsegment also includes development activities that lead to rental operations, including land held for development and properties currently under development. Within this line of business, we capitalize on the property-levelfollowing: (i) the land that we currently own; (ii) the development expertise of our local teams; (iii) our customer relationships; and (iv) our in-depth knowledge in connection with our development activities. Land we own and lease to customers under ground leases is also included in this segment.

Strategic Capital. This operating segment represents the management of unconsolidated co-investment ventures. We generate strategic capital revenues from our unconsolidated co-investment ventures through asset management and property management services and we earn additional revenues by providing leasing, acquisition, construction, development, financing and disposition services. Depending on the properties in our owned and managed portfolio, including properties we consolidatestructure of the venture and the propertiesreturns provided to our partners, we manage that are owned byalso earn revenues through promotes during the life of a venture or upon liquidation. Each unconsolidated entities. We allocate the costs of our property management function to the properties we consolidate (reported inRental Expenses in the Consolidated Statements of Operations) and the properties owned by the unconsolidated entities (included inInvestment Management Expenses in the Consolidated Statements of Operations), by using the square feet owned by the respective portfolios. We are further reimbursed by the co-investment ventures for certain expenses associated with managing these co-investment ventures.

Each entityventure we manage is considered to be an individual operating segment havingwith similar economic characteristics thatcharacteristics; these ventures are combined within the reportable segment based uponon geographic location. Our operations in the Investment Management segment are in the Americas (Brazil, Canada, Mexico and the United States), Europe (Belgium, the Czech Republic, France, Germany, Hungary, Italy, the Netherlands, Poland, Slovakia, Spain, Sweden and the United Kingdom) and Asia (China and Japan).

We present the operations and net gains associated with properties sold to third parties or classified as held for sale as discontinued operations, which results in the restatement of prior year operating results to exclude the items presented as discontinued operations.

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

Reconciliations are presented below for: (i) each reportable business segment’s revenuerevenues from external customers toTotal Revenues in the Consolidated Statements of Operations;; (ii) each reportable business segment’s net operating income from external customers toEarnings (Loss) beforeOperating Income and Earnings Before Income Taxes in the Consolidated Statements of Operations;; and (iii) each reportable business segment’s assets toTotal Assetsin the Consolidated Balance Sheets.. Our chief operating decision makers rely primarily on net operating income and similar measures to make decisions about allocating resources and assessing segment performance. The applicable components ofTotal Revenues,, Operating Income, Earnings (Loss) beforeBefore Income Taxes andTotal Assets are allocated to each reportable business segment’s revenues, net operating income and assets. Items that are not directly assignable to a segment, such as certain corporate income and expenses, are not allocated but reflected as reconciling items. The following reconciliations are presented in thousands:

93

   Years Ended December 31, 
    2013   2012   2011 

Revenues (1):

      

Real estate operations:

      

Americas

  $    1,288,925    $1,176,920    $821,090  

Europe

   174,397     435,244     307,416  

Asia

   107,692     221,575     155,646  
  

 

 

   

 

 

   

 

 

 

Total Real Estate Operations segment

   1,571,014     1,833,739     1,284,152  
  

 

 

   

 

 

   

 

 

 

Investment management:

      

Americas

   72,474     69,422     76,872  

Europe

   63,794     37,047     46,087  

Asia

   43,204     20,310     14,660  
  

 

 

   

 

 

   

 

 

 

Total Investment Management segment

   179,472     126,779     137,619  
  

 

 

   

 

 

   

 

 

 

Total revenues

  $1,750,486    $1,960,518    $1,421,771  

Net operating income:

      

Real estate operations:

      

Americas

  $899,053    $818,393    $569,843  

Europe

   116,178     325,571     222,605  

Asia

   76,863     171,980     118,985  
  

 

 

   

 

 

   

 

 

 

Total Real Estate Operations segment

   1,092,094     1,315,944     911,433  
  

 

 

   

 

 

   

 

 

 

Investment management:

      

Americas

   18,785     31,637     42,644  

Europe

   41,263     21,699     30,708  

Asia

   30,145     9,623     9,305  
  

 

 

   

 

 

   

 

 

 

Total Investment Management segment

   90,193     62,959     82,657  
  

 

 

   

 

 

   

 

 

 

Total segment net operating income

   1,182,287     1,378,903     994,090  

Reconciling items:

      

General and administrative expenses

   (229,207)     (228,068)     (195,161)  

Depreciation and amortization

   (648,668)     (724,262)     (542,419)  

Merger, acquisition and other integration expenses

       (80,676)     (140,495)  

Impairment of real estate properties

       (252,914)     (21,237)  

Earnings from unconsolidated entities, net

   97,220     31,676     59,935  

Interest expense

   (379,327)     (505,215)     (466,571)  

Interest and other income, net

   26,948     22,878     12,008  

Gains on acquisitions and dispositions of investments in real estate, net

   597,656     305,607     111,684  

Foreign currency and derivative gains (losses), net

   (33,633)     (20,497)     41,172  

Gain (loss) on early extinguishment of debt, net

   (277,014)     (14,114)     258  

Impairment of other assets

       (16,135)     (126,432)  
  

 

 

   

 

 

   

 

 

 

Total reconciling items

   (846,025)         (1,481,720)         (1,267,258)  
  

 

 

   

 

 

   

 

 

 

Earnings (loss) before income taxes

  $336,262    $(102,817)    $(273,168)  

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

 

 

 

Years Ended December 31,

 

 

 

 

2016

 

 

 

2015

 

 

 

2014

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Real estate operations:

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

2,040,308

 

 

$

1,801,858

 

 

$

1,306,194

 

Other Americas

 

 

58,541

 

 

 

57,535

 

 

 

97,370

 

Europe

 

 

76,759

 

 

 

69,527

 

 

 

74,413

 

Asia

 

 

62,975

 

 

 

57,792

 

 

 

62,939

 

Total Real Estate Operations segment

 

 

2,238,583

 

 

 

1,986,712

 

 

 

1,540,916

 

Strategic capital:

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

39,360

 

 

 

39,396

 

 

 

84,178

 

Other Americas

 

 

22,777

 

 

 

22,288

 

 

 

10,990

 

Europe

 

 

185,495

 

 

 

112,793

 

 

 

86,549

 

Asia

 

 

46,920

 

 

 

35,885

 

 

 

38,154

 

Total Strategic Capital segment

 

 

294,552

 

 

 

210,362

 

 

 

219,871

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues

 

$

2,533,135

 

 

$

2,197,074

 

 

$

1,760,787

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment net operating income:

 

 

 

 

 

 

 

 

 

 

 

 

Real estate operations:

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

$

1,520,571

 

 

$

1,256,188

 

 

$

932,151

 

Other Americas

 

 

38,136

 

 

 

38,280

 

 

 

69,120

 

Europe

 

 

55,563

 

 

 

39,672

 

 

 

40,627

 

Asia

 

 

41,114

 

 

 

41,692

 

 

 

45,262

 

Total Real Estate Operations segment

 

 

1,655,384

 

 

 

1,375,832

 

 

 

1,087,160

 

Strategic capital:

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

(1,622

)

 

 

(1,925

)

 

 

38,101

 

Other Americas

 

 

12,755

 

 

 

13,277

 

 

 

1,911

 

Europe

 

 

142,975

 

 

 

86,264

 

 

 

56,869

 

Asia

 

 

11,938

 

 

 

4,324

 

 

 

7,560

 

Total Strategic Capital segment

 

 

166,046

 

 

 

101,940

 

 

 

104,441

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total segment net operating income

 

 

1,821,430

 

 

 

1,477,772

 

 

 

1,191,601

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reconciling items:

 

 

 

 

 

 

 

 

 

 

 

 

General and administrative expenses

 

 

222,067

 

 

 

217,227

 

 

 

229,332

 

Depreciation and amortization expenses

 

 

930,985

 

 

 

880,373

 

 

 

642,461

 

Operating income

 

 

668,378

 

 

 

380,172

 

 

 

319,808

 

Earnings from unconsolidated entities, net

 

 

206,307

 

 

 

159,262

 

 

 

134,288

 

Interest expense

 

 

(303,146

)

 

 

(301,363

)

 

 

(308,885

)

Interest and other income, net

 

 

8,101

 

 

 

25,484

 

 

 

25,768

 

Gains on dispositions of investments in real estate and revaluation of equity

     investments upon acquisition of a controlling interest, net

 

 

757,398

 

 

 

758,887

 

 

 

725,790

 

Foreign currency and derivative gains (losses), net

 

 

7,582

 

 

 

12,466

 

 

 

(17,841

)

Gains (losses) on early extinguishment of debt, net

 

 

2,484

 

 

 

(86,303

)

 

 

(165,300

)

Earnings before income taxes

 

$

1,347,104

 

 

$

948,605

 

 

$

713,628

 

 

    December 31, 
    2013   2012 

Assets (2):

    

Real estate operations:

    

Americas

  $    16,293,109    $    15,236,921  

Europe

   1,634,867     5,738,245  

Asia

   1,176,774     3,476,999  
  

 

 

   

 

 

 

Total Real Estate Operations segment

   19,104,750     24,452,165  
  

 

 

   

 

 

 

Investment management (3):

    

Americas

   22,154     24,373  

Europe

   60,327     61,266  

Asia

   3,634     6,108  
  

 

 

   

 

 

 

Total Investment Management segment

   86,115     91,747  
  

 

 

   

 

 

 

Total segment assets

   19,190,865     24,543,912  
  

 

 

   

 

 

 

Reconciling items:

    

Investments in and advances to other unconsolidated entities

   4,430,239     2,195,782  

Notes receivable backed by real estate

   188,000     188,000  

Assets held for sale

   4,042     26,027  

Cash and cash equivalents

   491,129     100,810  

Other assets

   268,032     255,614  
  

 

 

   

 

 

 

Total reconciling items

   5,381,442     2,766,233  
  

 

 

   

 

 

 

Total assets

  $24,572,307    $27,310,145  

 


94


PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

 

December 31,

 

 

 

 

2016

 

 

 

2015

 

Assets:

 

 

 

 

 

 

 

 

Real estate operations:

 

 

 

 

 

 

 

 

U.S.

 

$

21,286,422

 

 

$

22,030,457

 

Other Americas

 

 

978,476

 

 

 

919,381

 

Europe

 

 

1,346,589

 

 

 

1,291,991

 

Asia

 

 

936,462

 

 

 

1,157,401

 

Total Real Estate Operations segment

 

 

24,547,949

 

 

 

25,399,230

 

Strategic capital (1):

 

 

 

 

 

 

 

 

U.S.

 

 

18,090

 

 

 

19,363

 

Europe

 

 

47,635

 

 

 

49,960

 

Asia

 

 

1,301

 

 

 

2,005

 

Total Strategic Capital segment

 

 

67,026

 

 

 

71,328

 

Total segment assets

 

 

24,614,975

 

 

 

25,470,558

 

 

 

 

 

 

 

 

 

 

Reconciling items:

 

 

 

 

 

 

 

 

Investments in and advances to unconsolidated entities

 

 

4,230,429

 

 

 

4,755,620

 

Assets held for sale or contribution

 

 

322,139

 

 

 

378,423

 

Notes receivable backed by real estate

 

 

32,100

 

 

 

235,050

 

Cash and cash equivalents

 

 

807,316

 

 

 

264,080

 

Other assets

 

 

242,973

 

 

 

291,036

 

Total reconciling items

 

 

5,634,957

 

 

 

5,924,209

 

Total assets

 

$

30,249,932

 

 

$

31,394,767

 

(1)

Includes revenues attributable to the United States for the years ended December 31, 2013, 2012 and 2011 of $1.1 billion, $1.1 billion and $0.8 billion, respectively.

(2)Includes long-lived assets attributable to the United States as of December 31, 2013 and 2012 of $15.9 billion and $14.9 billion, respectively.

(3)Represents management contracts and goodwill recorded in connection with business combinations and goodwill associated with the Investment ManagementStrategic Capital segment. Goodwill was $25.3 million at December 31, 2016 and 2015.

 

22.Supplemental Cash Flow Information

Non-cashNOTE 19. SUPPLEMENTAL CASH FLOW INFORMATION

Our significant noncash investing and financing activities for the years ended December 31, 2013, 20122016, 2015 and 2011 are as follows:2014 included the following:

 

As partial consideration for properties we contributed to PELP during the first quarter of 2013, we received ownership interests of $1.3 billion, representing a 50% ownership interest,We capitalized $25.8 million, $22.7 million and PELP assumed $353.2$21.6 million of secured debt.equity-based compensation expense resulting from our development and leasing activities during 2016, 2015 and 2014, respectively.

 

In 2016, we issued 1.9 million shares of the Parent’s common stock upon redemption of an equal number of common limited partnership units in the Operating Partnership as disclosed in Note 12.

We received $31.2 million, $17.7$135.3 million and $5.0$65.3 million of ownership interests in certain unconsolidated entities as a portion of our proceeds from the contribution of properties to these entities during 2013, 20122016 and 2011,2015, respectively.

 

During 2015, we assumed $290.7 million of secured mortgage debt in connection with the acquisition of real estate properties. Also, as partial consideration for the disposition of some properties acquired during 2015, the buyer assumed debt of $170.1 million.

In 2015, common limited partnership units were issued as partial consideration for the acquisition of properties as disclosed in Note 12.

See Notes 3, 9 and 12 for information related to the KTR transaction in May 2015.

We received $235.1 million of notes receivable backed by real estate in exchange for the disposition of real estate in 2015. See Note 7 for more information on our notes receivable backed by real estate.

Holders of our exchangeable senior notes exchanged the majority of their notes into common stock of the Parent in March 2015 as disclosed in Note 9.

As partial consideration for contributionsproperties we contributed to FIBRA Prologis and dispositions in 2013, the buyersconclusion of an unconsolidated co-investment venture during 2014, we received equity valued at $609.7 million and FIBRA Prologis assumed debt$345.1 million of $194.9 million.secured debt. See Note 4 for additional information about this transaction.

 

See Note 3 for information related to the Merger and PEPR Acquisitionacquisitions of controlling interests in 2011 and acquisitions ofour unconsolidated co-investment ventures in 2012 and 2013.2014.

In April 2011, we assumed $61.7 million of debt upon the acquisition of the remaining interest in a venture that owned one property in Japan.

95


PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

 

 

NOTE 20. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)  

 

23.Selected Quarterly Financial Data (Unaudited)

Selected quarterly 2013 and 2012 data has been adjusted from previously disclosed amounts due to the disposal of properties in 2013 whose results of operations were reclassified toDiscontinued Operations in the Consolidated Statements of Operations. The following table details our selected quarterly financial data was as follows (in thousands, except per share and unit data):

 

  Three Months Ended, 
REIT March 31,  June 30,  September 30,  December 31, 

2013:

    

Total revenues

 $        479,971   $        410,693   $423,058   $436,764  

Operating income

 $97,039   $58,514   $77,380   $71,479  

Earnings (loss) from continuing operations

 $289,306   $(20,591)   $(48,671)   $9,485  

Net earnings (loss) attributable to common stockholders

 $265,416   $(1,517)   $(7,534)   $59,057  

Net earnings (loss) attributable to common stockholders - Basic (1)

 $0.58   $  $(0.02)   $0.12  

Net earnings (loss) attributable to common stockholders - Diluted (1)(2)

 $0.57   $  $(0.02)   $0.12  

2012:

    

Total revenues

 $469,456   $492,012   $492,942   $506,108  

Operating income (loss)

 $81,522   $97,482   $76,522   $(162,543)  

Earnings (loss) from continuing operations

 $186,217   $(15,192)   $(7,816)   $(269,606)  

Net earnings (loss) attributable to common stockholders

 $202,412   $(8,119)   $(46,526)   $(228,713)  

Net earnings (loss) attributable to common stockholders - Basic (1)

 $0.44   $(0.02)   $(0.10)   $(0.50)  

Net earnings (loss) attributable to common stockholders - Diluted (1)(2)

 $0.44   $(0.02)   $(0.10)   $(0.50)  

Operating Partnership

                

2013:

    

Total revenues

 $479,971   $410,693   $423,058   $436,764  

Operating income

 $97,039   $58,514   $77,380   $71,479  

Earnings (loss) from continuing operations

 $289,306   $(20,591)   $(48,671)   $9,485  

Net earnings (loss) attributable to common unitholders

 $266,548   $(1,592)   $(7,582)   $59,256  

Net earnings (loss) attributable to common unitholders - Basic (1)

 $0.58   $  $(0.02)   $0.12  

Net earnings (loss) attributable to common unitholders - Diluted (1)(2)

 $0.57   $  $(0.02)   $0.12  

2012:

    

Total revenues

 $469,456   $492,012   $492,942   $506,108  

Operating income (loss)

 $81,522   $97,482   $76,522   $(162,543)  

Earnings (loss) from continuing operations

 $186,217   $(15,192)   $(7,816)   $(269,606)  

Net earnings (loss) attributable to common unitholders

 $203,353   $(8,173)   $(46,678)   $(229,610)  

Net earnings (loss) attributable to common unitholders - Basic (1)

 $0.44   $(0.02)   $(0.10)   $(0.50)  

Net earnings (loss) attributable to common unitholders - Diluted (1)(2)

 $0.44   $(0.02)   $(0.10)   $(0.50)  

 

 

Three Months Ended,

 

Prologis, Inc.

 

March 31,

 

 

June 30,

 

 

September 30,

 

 

December 31,

 

2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental revenues

 

$

437,104

 

 

$

426,150

 

 

$

435,868

 

 

$

435,722

 

Rental recoveries

 

$

117,012

 

 

$

119,981

 

 

$

124,409

 

 

$

124,163

 

Total revenues

 

$

606,300

 

 

$

602,155

 

 

$

704,565

 

 

$

620,115

 

Rental expenses

 

$

(146,581

)

 

$

(140,725

)

 

$

(140,514

)

 

$

(141,050

)

Operating income

 

$

129,198

 

 

$

142,348

 

 

$

232,624

 

 

$

164,208

 

Consolidated net earnings

 

$

222,805

 

 

$

295,791

 

 

$

307,242

 

 

$

466,702

 

Net earnings attributable to common stockholders

 

$

208,041

 

 

$

275,383

 

 

$

279,255

 

 

$

440,539

 

Net earnings per share attributable to common stockholders –

     Basic (1)

 

$

0.40

 

 

$

0.52

 

 

$

0.53

 

 

$

0.83

 

Net earnings per share attributable to common stockholders –

     Diluted (1) (2)

 

$

0.39

 

 

$

0.52

 

 

$

0.52

 

 

$

0.82

 

2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental revenues

 

$

324,547

 

 

$

357,828

 

 

$

418,116

 

 

$

435,626

 

Rental recoveries

 

$

94,255

 

 

$

103,616

 

 

$

114,639

 

 

$

124,560

 

Total revenues

 

$

462,847

 

 

$

510,404

 

 

$

580,622

 

 

$

643,201

 

Rental expenses

 

$

(127,095

)

 

$

(125,820

)

 

$

(140,284

)

 

$

(150,983

)

Operating income

 

$

83,881

 

 

$

87,348

 

 

$

103,392

 

 

$

105,551

 

Consolidated net earnings

 

$

351,312

 

 

$

140,260

 

 

$

307,186

 

 

$

126,757

 

Net earnings attributable to common stockholders

 

$

345,206

 

 

$

140,240

 

 

$

258,979

 

 

$

118,363

 

Net earnings per share attributable to common stockholders –

     Basic (1)

 

$

0.67

 

 

$

0.27

 

 

$

0.49

 

 

$

0.23

 

Net earnings per share attributable to common stockholders –

     Diluted (1) (2)

 

$

0.65

 

 

$

0.27

 

 

$

0.49

 

 

$

0.23

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prologis, L.P.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental revenues

 

$

437,104

 

 

$

426,150

 

 

$

435,868

 

 

$

435,722

 

Rental recoveries

 

$

117,012

 

 

$

119,981

 

 

$

124,409

 

 

$

124,163

 

Total revenues

 

$

606,300

 

 

$

602,155

 

 

$

704,565

 

 

$

620,115

 

Rental expenses

 

$

(146,581

)

 

$

(140,725

)

 

$

(140,514

)

 

$

(141,050

)

Operating income

 

$

129,198

 

 

$

142,348

 

 

$

232,624

 

 

$

164,208

 

Consolidated net earnings

 

$

222,805

 

 

$

295,791

 

 

$

307,242

 

 

$

466,702

 

Net earnings attributable to common unitholders

 

$

214,275

 

 

$

283,699

 

 

$

286,943

 

 

$

452,602

 

Net earnings per unit attributable to common unitholders –

     Basic (1)

 

$

0.40

 

 

$

0.52

 

 

$

0.53

 

 

$

0.83

 

Net earnings per unit attributable to common unitholders –

     Diluted (1) (2)

 

$

0.39

 

 

$

0.52

 

 

$

0.52

 

 

$

0.82

 

2015:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental revenues

 

$

324,547

 

 

$

357,828

 

 

$

418,116

 

 

$

435,626

 

Rental recoveries

 

$

94,255

 

 

$

103,616

 

 

$

114,639

 

 

$

124,560

 

Total revenues

 

$

462,847

 

 

$

510,404

 

 

$

580,622

 

 

$

643,201

 

Rental expenses

 

$

(127,095

)

 

$

(125,820

)

 

$

(140,284

)

 

$

(150,983

)

Operating income

 

$

83,881

 

 

$

87,348

 

 

$

103,392

 

 

$

105,551

 

Consolidated net earnings

 

$

351,312

 

 

$

140,260

 

 

$

307,186

 

 

$

126,757

 

Net earnings attributable to common unitholders

 

$

346,488

 

 

$

141,538

 

 

$

262,155

 

 

$

123,733

 

Net earnings per unit attributable to common unitholders –

     Basic (1)

 

$

0.67

 

 

$

0.27

 

 

$

0.49

 

 

$

0.23

 

Net earnings per unit attributable to common unitholders –

     Diluted (1) (2)

 

$

0.65

 

 

$

0.27

 

 

$

0.49

 

 

$

0.23

 

 

(1)

Quarterly earnings per common share or unit amounts may not total to the annual amounts due to rounding and the changes in the number of weighted common shares or units outstanding and included in the calculation of basic and diluted shares.shares or units.

 

96


PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(2)

Income (loss) allocated to the exchangeable Operating Partnership units not held by the REITParent has been included in the numerator and exchangeable Operating Partnership units have been included in the denominator for the purpose of computing diluted earnings per share for all periods since the per share/share and unit is the same.

 

24.Subsequent Event

In February 2014, we issued €700 million of senior notes at an interest rate of 3.38% maturing in 2024, at 98.9% of par value for an all-in rate of 3.52%. We intend to use the net proceeds for general corporate purposes, including repaying or repurchasing indebtedness. In the short term, we intend to use the net proceeds to repay our Credit Facilities.

97


REPORT OF INDEPENDENT REGISTEREDREGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

Prologis, Inc.:

Under date of February 26, 2014,14, 2017, we reported on the consolidated balance sheets of Prologis, Inc. and subsidiaries as of December 31, 20132016 and 20122015 and the related consolidated statements of operations,income, comprehensive income, (loss), equity, and cash flows for each of the years in the three-year period ended December 31, 2013.2016. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related financial statement schedule, Schedule III — Real Estate and Accumulated Depreciation (Schedule III). Schedule III is the responsibility of Prologis, Inc.’s management. Our responsibility is to express an opinion on Schedule III based on our audits.

In our opinion, Schedule III — Real Estate and Accumulated Depreciation, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ KPMG LLP

Denver, Colorado

February 26, 2014

14, 2017

98


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Partners

Prologis, L.P.:

Under date of February 26, 2014,14, 2017, we reported on the consolidated balance sheets of Prologis, L.P. and subsidiaries as of December 31, 20132016 and 20122015 and the related consolidated statements of operations,income, comprehensive income, (loss), capital, and cash flows for each of the years in the three-year period ended December 31, 2013.2016. In connection with our audits of the aforementioned consolidated financial statements, we also audited the related financial statement schedule, Schedule III — Real Estate and Accumulated Depreciation (Schedule III). Schedule III is the responsibility of Prologis, L.P.’s management. Our responsibility is to express an opinion on Schedule III based on our audits.

In our opinion, Schedule III — Real Estate and Accumulated Depreciation, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

/s/ KPMG LLP

Denver, Colorado

February 26, 2014

14, 2017

99


PROLOGIS, INC. AND PROLOGIS, L.P.

SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 20132016

(In thousands of U.S. dollars, as applicable)

 

 No. of
Bldgs.
  

Encum-
brances

 Initial Cost to
Prologis
 Costs
Capitalized
Subsequent

To
Acquisition
  Gross Amounts At Which Carried
as of December 31, 2013
 Accumulated
Depreciation
(c)
  

Date of

Construction/

Acquisition

 

 

 

 

 

Initial Cost to

Prologis

 

 

Costs

Capitalized

 

 

Gross Amounts at Which Carried

at December 31, 2016

 

 

 

 

 

 

 

Description Land Building &
Improvements
 Land Building &
Improvements
 Total
(a,b)
 

 

No. of Bldgs.

 

Encum-

brances

 

Land

 

 

Building &

Improvements

 

 

Subsequent

to

Acquisition

 

 

Land

 

 

Building &

Improvements

 

 

Total

(a,b)

 

 

Accumulated

Depreciation

(c)

 

 

Date of

Construction/

Acquisition

Industrial Operating Properties (d)

          

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Americas Markets:

          

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North American Markets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States:

          

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Atlanta, Georgia

          

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Atlanta Airport Distribution Center

 

4

 

(d)

 

 

4,759

 

 

 

13,591

 

 

 

998

 

 

 

4,759

 

 

 

14,589

 

 

 

19,348

 

 

 

(1,487

)

 

2014, 2015

Atlanta NE at Sugarloaf

 

1

 

(d)

 

 

620

 

 

 

2,499

 

 

 

73

 

 

 

620

 

 

 

2,572

 

 

 

3,192

 

 

 

(214

)

 

2014

Atlanta NE Distribution Center

  8   (d)  5,582    3,047    28,916    6,276    31,269    37,545    (16,861)   1996, 1997

 

8

 

(d)

 

 

5,582

 

 

 

3,047

 

 

 

32,175

 

 

 

6,276

 

 

 

34,528

 

 

 

40,804

 

 

 

(20,201

)

 

1996, 1997

Atlanta South Business Park

  9     5,353    28,895    1,805    5,353    30,700    36,053    (2,821)   2011

 

9

 

 

 

 

5,353

 

 

 

28,895

 

 

 

4,341

 

 

 

5,353

 

 

 

33,236

 

 

 

38,589

 

 

 

(6,832

)

 

2011

Atlanta West Distribution Center

  7   (d)  7,208    26,306    10,960    7,208    37,266    44,474    (13,205)   1994, 2006, 2012

 

6

 

(d)

 

 

13,420

 

 

 

43,556

 

 

 

8,732

 

 

 

13,420

 

 

 

52,288

 

 

 

65,708

 

 

 

(9,893

)

 

1994, 2006, 2012, 2015

Berkeley Lake Distribution Center

  1   (d)  2,046    8,712    734    2,046    9,446    11,492    (1,761)   2006

 

1

 

(d)

 

 

2,046

 

 

 

8,712

 

 

 

1,204

 

 

 

2,046

 

 

 

9,916

 

 

 

11,962

 

 

 

(2,659

)

 

2006

Breckenridge Distribution Center

 

1

 

(d)

 

 

1,645

 

 

 

6,627

 

 

 

277

 

 

 

1,645

 

 

 

6,904

 

 

 

8,549

 

 

 

(555

)

 

2014

Buford Distribution Center

  1     1,487    —     5,526    1,487    5,526    7,013    (1,006)   2007

 

2

 

 

 

 

2,659

 

 

 

8,847

 

 

 

6,101

 

 

 

2,659

 

 

 

14,948

 

 

 

17,607

 

 

 

(2,190

)

 

2007, 2015

Cobb Place Dist Ctr

  2   (d)  2,970    12,702    176    2,970    12,878    15,848    (915)   2012

Dekalb Ind Ctr

  1     1,401    6,154    90    1,401    6,244    7,645    (524)   2012

Carter-Pacific Business Center

 

3

 

(d)

 

 

1,484

 

 

 

5,965

 

 

 

440

 

 

 

1,484

 

 

 

6,405

 

 

 

7,889

 

 

 

(712

)

 

2014

Cobb Place Distribution Center

 

2

 

 

 

 

2,970

 

 

 

12,702

 

 

 

1,721

 

 

 

2,970

 

 

 

14,423

 

 

 

17,393

 

 

 

(2,439

)

 

2012

Douglas Hill Distribution Center

  4     11,599    46,826    3,653    11,677    50,401    62,078    (13,597)   2005

 

4

 

 

 

 

11,599

 

 

 

46,826

 

 

 

4,820

 

 

 

11,677

 

 

 

51,568

 

 

 

63,245

 

 

 

(19,347

)

 

2005

Hartsfield East DC

  1     697    6,466    354    697    6,820    7,517    (504)   2011

Hartsfield East Distribution Center

 

1

 

 

 

 

697

 

 

 

6,466

 

 

 

654

 

 

 

697

 

 

 

7,120

 

 

 

7,817

 

 

 

(1,131

)

 

2011

Horizon Distribution Center

  1     2,846    11,385    1,508    2,846    12,893    15,739    (2,285)   2006

 

2

 

(d)

 

 

7,364

 

 

 

36,015

 

 

 

1,659

 

 

 

7,364

 

 

 

37,674

 

 

 

45,038

 

 

 

(4,744

)

 

2006, 2015

LaGrange Distribution Center

  1     174    986    858    174    1,844    2,018    (1,297)   1994

Macon Dist Ctr

  1     604    2,691    1    604    2,692    3,296    (278)   2012

Midland Distribution Center

  1     1,919    7,679    1,471    1,919    9,150    11,069    (2,363)   2006

 

1

 

 

 

 

1,919

 

 

 

7,679

 

 

 

1,547

 

 

 

1,919

 

 

 

9,226

 

 

 

11,145

 

 

 

(3,304

)

 

2006

Northeast Industrial Center

  5   (d)  3,603    16,920    3,627    3,603    20,547    24,150    (6,248)   1996, 2012

 

2

 

 

 

 

2,821

 

 

 

12,176

 

 

 

1,707

 

 

 

2,821

 

 

 

13,883

 

 

 

16,704

 

 

 

(2,899

)

 

2012

Northmont Industrial Center

  1     566    3,209    1,398    566    4,607    5,173    (3,077)   1994

 

1

 

 

 

 

566

 

 

 

3,209

 

 

 

1,741

 

 

 

566

 

 

 

4,950

 

 

 

5,516

 

 

 

(3,614

)

 

1994

Olympic Industrial Center

 

2

 

 

 

 

2,156

 

 

 

8,941

 

 

 

545

 

 

 

2,156

 

 

 

9,486

 

 

 

11,642

 

 

 

(1,088

)

 

2014

Park I-75 South

  1     8,369    —     35,671    8,369    35,671    44,040    (403)   2013

 

2

 

(d)

 

 

11,393

 

 

 

18,808

 

 

 

35,508

 

 

 

11,406

 

 

 

54,303

 

 

 

65,709

 

 

 

(5,061

)

 

2013, 2015

Park I-85

 

4

 

 

 

 

6,391

 

 

 

11,585

 

 

 

26,264

 

 

 

6,465

 

 

 

37,775

 

 

 

44,240

 

 

 

(1,485

)

 

2015

Peachtree Corners Business Center

  5     1,519    7,253    3,536    1,519    10,789    12,308    (5,470)   1994, 2006

 

5

 

(d)

 

 

5,750

 

 

 

20,670

 

 

 

3,960

 

 

 

5,750

 

 

 

24,630

 

 

 

30,380

 

 

 

(6,394

)

 

1994, 2015

Piedmont Ct. Distribution Center

  2     885    5,013    3,689    885    8,702    9,587    (5,372)   1997

 

2

 

 

 

 

885

 

 

 

5,013

 

 

 

4,269

 

 

 

885

 

 

 

9,282

 

 

 

10,167

 

 

 

(6,465

)

 

1997

Riverside Distribution Center (ATL)

  3     2,533    13,336    3,756    2,556    17,069    19,625    (9,019)   1999

 

4

 

(d)

 

 

3,306

 

 

 

16,600

 

 

 

4,462

 

 

 

3,329

 

 

 

21,039

 

 

 

24,368

 

 

 

(11,251

)

 

1999, 2014

South Royal Atlanta Distribution Center

  2     1,191    5,719    1,408    1,191    7,127    8,318    (1,529)   2002, 2012

Royal 85 Industrial Center

 

3

 

 

 

 

3,306

 

 

 

16,859

 

 

 

776

 

 

 

3,306

 

 

 

17,635

 

 

 

20,941

 

 

 

(1,081

)

 

2015

Savannah Logistics Center

 

2

 

(d)

 

 

5,114

 

 

 

46,844

 

 

 

343

 

 

 

5,114

 

 

 

47,187

 

 

 

52,301

 

 

 

(2,665

)

 

2015

Southfield-KRDC Industrial SG

  8     5,033    28,725    1,572    5,033    30,297    35,330    (3,250)   2011

 

1

 

 

 

 

1,551

 

 

 

8,621

 

 

 

524

 

 

 

1,551

 

 

 

9,145

 

 

 

10,696

 

 

 

(2,705

)

 

2011

Southside Distribution Center

  1     1,186    2,859    595    1,186    3,454    4,640    (402)   2011

 

1

 

 

 

 

1,186

 

 

 

2,859

 

 

 

590

 

 

 

1,186

 

 

 

3,449

 

 

 

4,635

 

 

 

(952

)

 

2011

Suwanee Creek Dist Ctr

  2     1,045    4,201    81    1,045    4,282    5,327    (300)   2010, 2013

Suwanee Creek Distribution Center

 

2

 

 

 

 

1,045

 

 

 

4,201

 

 

 

492

 

 

 

1,045

 

 

 

4,693

 

 

 

5,738

 

 

 

(791

)

 

2010, 2013

Tradeport Distribution Center

  3   (d)  1,464    4,563    7,780    1,479    12,328    13,807    (7,533)   1994, 1996

 

3

 

(d)

 

 

1,464

 

 

 

4,563

 

 

 

9,663

 

 

 

1,479

 

 

 

14,211

 

 

 

15,690

 

 

 

(8,957

)

 

1994, 1996

Weaver Distribution Center

  2     935    5,182    2,199    935    7,381    8,316    (4,973)   1995

 

2

 

 

 

 

935

 

 

 

5,182

 

 

 

2,439

 

 

 

935

 

 

 

7,621

 

 

 

8,556

 

 

 

(5,742

)

 

1995

Westfork Industrial Center

  2   (d)  579    3,910    426    579    4,336    4,915    (2,563)   1995

 

3

 

(d)

 

 

6,216

 

 

 

19,382

 

 

 

823

 

 

 

6,216

 

 

 

20,205

 

 

 

26,421

 

 

 

(1,306

)

 

2015

Westgate Ind Ctr

  5     2,869    12,730    789    2,869    13,519    16,388    (1,140)   2012
 

 

   

 

 

  

Atlanta, Georgia

  80     75,663    275,469    122,579    76,473    397,238    473,711    (108,696)   

 

84

 

 

 

 

116,202

 

 

 

436,940

 

 

 

158,848

 

 

 

117,099

 

 

 

594,891

 

 

 

711,990

 

 

 

(138,164

)

 

 

 

 

   

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Austin, Texas

          

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corridor Park Corporate Center

 

4

 

(d)

 

 

4,579

 

 

 

18,358

 

 

 

622

 

 

 

4,579

 

 

 

18,980

 

 

 

23,559

 

 

 

(1,535

)

 

2014

MET 4-12 LTD

  1     4,300    20,456    226    4,300    20,682    24,982    (1,991)   2011

 

1

 

 

 

 

4,300

 

 

 

20,456

 

 

 

294

 

 

 

4,300

 

 

 

20,750

 

 

 

25,050

 

 

 

(4,125

)

 

2011

MET PHASE 1 95 LTD

  4     5,593    17,211    874    5,593    18,085    23,678    (1,748)   2011

 

4

 

 

 

 

5,593

 

 

 

17,211

 

 

 

1,519

 

 

 

5,593

 

 

 

18,730

 

 

 

24,323

 

 

 

(3,961

)

 

2011

Montopolis Distribution Center

  1     580    3,384    2,544    580    5,928    6,508    (3,949)   1994

 

1

 

 

 

 

580

 

 

 

3,384

 

 

 

2,628

 

 

 

580

 

 

 

6,012

 

 

 

6,592

 

 

 

(4,882

)

 

1994

Riverside Distribution Center (AUS)

 

1

 

 

 

 

1,849

 

 

 

7,195

 

 

 

93

 

 

 

1,849

 

 

 

7,288

 

 

 

9,137

 

 

 

(435

)

 

2015

Southpark Corporate Center

 

3

 

 

 

 

1,470

 

 

 

5,834

 

 

 

227

 

 

 

1,470

 

 

 

6,061

 

 

 

7,531

 

 

 

(484

)

 

2014

Walnut Creek Corporate Center

  3     461    4,089    338    515    4,373    4,888    (2,930)   1994

 

17

 

(d)

 

 

11,152

 

 

 

46,510

 

 

 

1,643

 

 

 

11,206

 

 

 

48,099

 

 

 

59,305

 

 

 

(7,089

)

 

1994, 2014

 

 

   

 

 

  

Austin, Texas

  9     10,934    45,140    3,982    10,988    49,068    60,056    (10,618)   

 

31

 

 

 

 

29,523

 

 

 

118,948

 

 

 

7,026

 

 

 

29,577

 

 

 

125,920

 

 

 

155,497

 

 

 

(22,511

)

 

 

 

 

   

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Baltimore/Washington

          

Baltimore/Washington DC

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1901 Park 100 Drive

  1   (d)  2,409    7,227    936    2,409    8,163    10,572    (2,280)   2006

 

1

 

(d)

 

 

2,409

 

 

 

7,227

 

 

 

1,178

 

 

 

2,409

 

 

 

8,405

 

 

 

10,814

 

 

 

(3,306

)

 

2006

Airport Commons Distribution Center

  2   (d)  2,320    —     10,170    2,360    10,130    12,490    (4,263)   1997

 

2

 

(d)

 

 

2,320

 

 

 

-

 

 

 

10,671

 

 

 

2,360

 

 

 

10,631

 

 

 

12,991

 

 

 

(5,474

)

 

1997

Ardmore Distribution Center

  3     1,431    8,110    3,185    1,431    11,295    12,726    (6,837)   1994

Ardmore Industrial Center

  2     984    5,581    1,699    985    7,279    8,264    (4,822)   1994

Beltway Distribution

  1     9,211    33,922    346    9,211    34,268    43,479    (3,221)   2011

 

1

 

 

 

 

9,211

 

 

 

33,922

 

 

 

909

 

 

 

9,211

 

 

 

34,831

 

 

 

44,042

 

 

 

(7,016

)

 

2011

BWI Cargo Center E

 

1

 

 

 

 

-

 

 

 

10,725

 

 

 

115

 

 

 

-

 

 

 

10,840

 

 

 

10,840

 

 

 

(7,174

)

 

2011

Corcorde Industrial Center

  4   (d)  1,538    8,717    3,831    1,538    12,548    14,086    (8,339)   1995

 

4

 

(d)

 

 

1,538

 

 

 

8,717

 

 

 

5,104

 

 

 

1,538

 

 

 

13,821

 

 

 

15,359

 

 

 

(9,946

)

 

1995

Corridor Industrial

  1     1,921    7,224    5    1,921    7,229    9,150    (703)   2011

Crysen Industrial

  1     2,285    6,267    354    2,285    6,621    8,906    (706)   2011

Gateway Bus Ctr

  2     4,414    —     11,681    2,356    13,739    16,095    (96)   2012

Corridor Industrial Center

 

1

 

 

 

 

1,921

 

 

 

7,224

 

 

 

365

 

 

 

1,921

 

 

 

7,589

 

 

 

9,510

 

 

 

(1,515

)

 

2011

Crysen Industrial Center

 

1

 

 

 

 

2,285

 

 

 

6,267

 

 

 

656

 

 

 

2,285

 

 

 

6,923

 

 

 

9,208

 

 

 

(1,599

)

 

2011

Gateway Business Center

 

8

 

 

 

 

22,025

 

 

 

25,117

 

 

 

21,843

 

 

 

22,261

 

 

 

46,724

 

 

 

68,985

 

 

 

(4,062

)

 

2012, 2014

Gateway Distribution Center

  3     2,523    5,715    4,760    3,163    9,835    12,998    (2,201)   1998, 2012

 

3

 

 

 

 

2,523

 

 

 

5,715

 

 

 

5,217

 

 

 

3,163

 

 

 

10,292

 

 

 

13,455

 

 

 

(3,229

)

 

1998, 2012

Granite Hill Dist. Center

  2     2,959    9,344    74    2,959    9,418    12,377    (1,115)   2011

Greenwood Industrial

  3     6,828    24,253    490    6,828    24,743    31,571    (2,429)   2011

Granite Hill Distribution Center

 

2

 

 

 

 

2,959

 

 

 

9,344

 

 

 

74

 

 

 

2,959

 

 

 

9,418

 

 

 

12,377

 

 

 

(2,413

)

 

2011

Greenwood Industrial Center

 

3

 

 

 

 

6,828

 

 

 

24,253

 

 

 

2,912

 

 

 

6,828

 

 

 

27,165

 

 

 

33,993

 

 

 

(5,534

)

 

2011

Hampton Central Distribution Center

 

3

 

(d)

 

 

8,928

 

 

 

26,787

 

 

 

1,090

 

 

 

8,928

 

 

 

27,877

 

 

 

36,805

 

 

 

(2,214

)

 

2014

IAD Cargo Center 5

 

1

 

 

 

 

-

 

 

 

43,060

 

 

 

96

 

 

 

-

 

 

 

43,156

 

 

 

43,156

 

 

 

(39,338

)

 

2011

Meadowridge Distribution Center

  1   (d)  1,757    —     6,436    1,902    6,291    8,193    (2,791)   1998

 

3

 

(d)

 

 

7,827

 

 

 

18,076

 

 

 

8,397

 

 

 

7,972

 

 

 

26,328

 

 

 

34,300

 

 

 

(4,959

)

 

1998, 2014

Meadowridge Industrial

  3     4,845    20,576    2,520    4,845    23,096    27,941    (1,817)   2011

Meadowridge Industrial Center

 

3

 

 

 

 

4,845

 

 

 

20,576

 

 

 

4,564

 

 

 

4,845

 

 

 

25,140

 

 

 

29,985

 

 

 

(4,891

)

 

2011

Patuxent Range Road

  2     2,281    9,638    1,226    2,281    10,864    13,145    (993)   2011

 

2

 

 

 

 

2,281

 

 

 

9,638

 

 

 

1,630

 

 

 

2,281

 

 

 

11,268

 

 

 

13,549

 

 

 

(2,490

)

 

2011

Preston Court

  1     2,326    10,146    195    2,326    10,341    12,667    (975)   2011

 

1

 

 

 

 

2,326

 

 

 

10,146

 

 

 

331

 

 

 

2,326

 

 

 

10,477

 

 

 

12,803

 

 

 

(2,181

)

 

2011

ProLogis Park - Dulles

  3   (d)  8,053    19,495    553    8,053    20,048    28,101    (1,314)   2012

 

7

 

(d)

 

 

16,703

 

 

 

35,291

 

 

 

854

 

 

 

16,703

 

 

 

36,145

 

 

 

52,848

 

 

 

(4,850

)

 

2012, 2014

Troy Hill Dist Ctr

  2   (d)  2,495    10,615    25    2,495    10,640    13,135    (744)   2012

Troy Hill Distribution Center

 

3

 

 

 

 

9,179

 

 

 

30,415

 

 

 

741

 

 

 

9,179

 

 

 

31,156

 

 

 

40,335

 

 

 

(3,570

)

 

2012, 2014

White Marsh Distribution Center

 

1

 

 

 

 

4,714

 

 

 

6,955

 

 

 

625

 

 

 

4,714

 

 

 

7,580

 

 

 

12,294

 

 

 

(256

)

 

2015

Baltimore/Washington DC

 

51

 

 

 

 

110,822

 

 

 

339,455

 

 

 

67,372

 

 

 

111,883

 

 

 

405,766

 

 

 

517,649

 

 

 

(116,017

)

 

 

 

 

   

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Baltimore/Washington

  37     60,580    186,830    48,486    59,348    236,548    295,896    (45,646)   
 

 

   

 

 

  

Boston, Massachusetts

          

Boston Industrial

  6     19,134    40,176    (1,965  19,138    38,207    57,345    (5,238)   2011

Cabot Business Park

  9     15,977    41,088    (4,367  15,977    36,721    52,698    (5,079)   2011

Cabot Business Park SGP

  3     6,380    19,563    (395  6,380    19,168    25,548    (2,706)   2011
 

 

   

 

 

  

Boston, Massachusetts

  18     41,491    100,827    (6,727  41,495    94,096    135,591    (13,023)   
 

 

   

 

 

  

Central & Eastern, Pennsylvania

          

Carlisle Dist Ctr

  6   (d)  54,852    233,619    4,494    54,852    238,113    292,965    (6,337)   2012, 2013

Chambersburg Dist Ctr

  1     4,188    17,796    77    4,188    17,873    22,061    (250)   2013

Harrisburg Distribution Center

  5     21,950    96,007    901    21,950    96,908    118,858    (5,540)   2004, 2013

100


PROLOGIS, INC. AND PROLOGIS, L.P.

SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 20132016

(In thousands of U.S. dollars, as applicable)

 

 

No. of
Bldgs.

  

Encum-
brances

 Initial Cost to
Prologis
 

Costs
Capitalized
Subsequent

To
Acquisition

  Gross Amounts At Which Carried
as of December 31, 2013
 

Accumulated
Depreciation
(c)

  

Date of

Construction/

Acquisition

 

 

 

 

 

 

 

Initial Cost to

Prologis

 

 

Costs

Capitalized

 

 

Gross Amounts at Which Carried

at December 31, 2016

 

 

 

 

 

 

 

Description Land Building &
Improvements
 Land Building &
Improvements
 Total
(a,b)
 

 

No. of Bldgs.

 

 

Encum-

brances

 

Land

 

 

Building &

Improvements

 

 

Subsequent

to

Acquisition

 

 

Land

 

 

Building &

Improvements

 

 

Total

(a,b)

 

 

Accumulated

Depreciation

(c)

 

 

Date of

Construction/

Acquisition

Central & Eastern, Pennsylvania

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Carlisle Distribution Center

 

9

 

 

 

 

 

92,681

 

 

 

328,514

 

 

 

45,559

 

 

 

92,707

 

 

 

374,047

 

 

 

466,754

 

 

 

(38,465

)

 

2012, 2013, 2015

Chambersburg Distribution Center

 

1

 

 

 

 

 

4,188

 

 

 

17,796

 

 

 

138

 

 

 

4,188

 

 

 

17,934

 

 

 

22,122

 

 

 

(2,277

)

 

2013

Harrisburg Distribution Center

 

 

6

 

 

 

 

 

30,801

 

 

 

122,169

 

 

 

5,554

 

 

 

30,801

 

 

 

127,723

 

 

 

158,524

 

 

 

(18,167

)

 

2004, 2013, 2015

Harrisburg Industrial Center

  1     782    6,190    964    782    7,154    7,936    (2,258)   2002

 

1

 

 

 

 

 

782

 

 

 

6,190

 

 

 

1,837

 

 

 

782

 

 

 

8,027

 

 

 

8,809

 

 

 

(3,776

)

 

2002

I-78 Dist. Center

  1     13,030    30,007    202    13,030    30,209    43,239    (2,627)   2011

I-81 Distribution

  1     1,822    21,583    247    1,822    21,830    23,652    (1,848)   2011

I-78 Distribution Center

 

1

 

 

 

 

 

13,030

 

 

 

30,007

 

 

 

444

 

 

 

13,030

 

 

 

30,451

 

 

 

43,481

 

 

 

(5,670

)

 

2011

I-81 Distribution Center

 

1

 

 

 

 

 

1,822

 

 

 

21,583

 

 

 

377

 

 

 

1,822

 

 

 

21,960

 

 

 

23,782

 

 

 

(3,998

)

 

2011

Kraft Distribution Center

 

1

 

 

(d)

 

 

7,450

 

 

 

22,457

 

 

 

20

 

 

 

7,450

 

 

 

22,477

 

 

 

29,927

 

 

 

(1,879

)

 

2014

Lehigh Valley Distribution Center

  6     22,380    74,787    22,709    22,380    97,496    119,876    (4,391)   2004, 2010, 2013

 

9

 

 

(d)

 

 

32,520

 

 

 

88,519

 

 

 

50,908

 

 

 

32,782

 

 

 

139,165

 

 

 

171,947

 

 

 

(17,211

)

 

2004, 2010, 2013, 2014, 2015

Northport Industrial Center

 

1

 

 

(d)

 

 

12,282

 

 

 

37,910

 

 

 

-

 

 

 

12,282

 

 

 

37,910

 

 

 

50,192

 

 

 

(3,199

)

 

2014

Park 33 Distribution Center

  1   (d)  13,411        41,110    15,698    38,823    54,521    (4,443)   2007

 

2

 

 

 

 

 

28,947

 

 

 

47,081

 

 

 

41,468

 

 

 

31,231

 

 

 

86,265

 

 

 

117,496

 

 

 

(12,094

)

 

2007,2014

Pottsville Dist Ctr

  1     4,486    19,527    306    4,486    19,833    24,319    (1,439)   2012

PHL Cargo Center C2

 

1

 

 

 

 

 

-

 

 

 

11,966

 

 

 

87

 

 

 

-

 

 

 

12,053

 

 

 

12,053

 

 

 

(6,738

)

 

2011

Quakertown Distribution Center

  1     6,966        27,698    6,966    27,698    34,664    (5,258)   2006

 

1

 

 

 

 

 

6,966

 

 

 

-

 

 

 

28,369

 

 

 

6,966

 

 

 

28,369

 

 

 

35,335

 

 

 

(7,035

)

 

2006

 

 

   

 

 

  

Central & Eastern, Pennsylvania

  24     143,867    499,516    98,708    146,154    595,937    742,091    (34,391)   

 

34

 

 

 

 

 

231,469

 

 

 

734,192

 

 

 

174,761

 

 

 

234,041

 

 

 

906,381

 

 

 

1,140,422

 

 

 

(120,509

)

 

 

 

 

   

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Central Valley, CA

          

Central Valley, California

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Arch Road Logistics Center

  2   (d)  9,492    38,060    2,273    9,492    40,333    49,825    (4,172)   2010

 

2

 

 

(d)

 

 

9,492

 

 

 

38,060

 

 

 

2,314

 

 

 

9,492

 

 

 

40,374

 

 

 

49,866

 

 

 

(8,729

)

 

2010

Central Valley Distribution Center

 

2

 

 

(d)

 

 

4,329

 

 

 

25,033

 

 

 

885

 

 

 

4,329

 

 

 

25,918

 

 

 

30,247

 

 

 

(2,205

)

 

2014

Central Valley Industrial Center

  4   (d)  11,418    48,726    8,430    11,868    56,706    68,574    (23,305)   1999, 2002, 2005

 

4

 

 

(d)

 

 

13,064

 

 

 

58,080

 

 

 

9,062

 

 

 

13,473

 

 

 

66,733

 

 

 

80,206

 

 

 

(26,734

)

 

1999, 2002, 2005, 2014

Chabot Commerce Ctr

  2     5,222    13,697    5,474    5,222    19,171    24,393    (2,289)   2011

Chabot Commerce Center

 

2

 

 

 

 

 

5,222

 

 

 

13,697

 

 

 

7,731

 

 

 

5,222

 

 

 

21,428

 

 

 

26,650

 

 

 

(6,173

)

 

2011

Duck Creek Distribution Center

 

1

 

 

(d)

 

 

6,690

 

 

 

37,858

 

 

 

-

 

 

 

6,690

 

 

 

37,858

 

 

 

44,548

 

 

 

(3,048

)

 

2014

Manteca Distribution Center

  1     9,280    27,840    527    9,480    28,167    37,647    (7,772)   2005

 

1

 

 

 

 

 

9,280

 

 

 

27,840

 

 

 

669

 

 

 

9,480

 

 

 

28,309

 

 

 

37,789

 

 

 

(10,673

)

 

2005

Patterson Pass Business Center

  3   (d)  9,278    23,508    5,680    9,291    29,175    38,466    (2,727)   2007, 2012

 

4

 

 

 

 

 

14,225

 

 

 

19,547

 

 

 

96,523

 

 

 

17,267

 

 

 

113,028

 

 

 

130,295

 

 

 

(7,398

)

 

2007, 2012, 2015, 2016

Tracy II Distribution Center

  5     23,848    32,080    174,482    29,189    201,221    230,410    (14,530)   2007, 2009, 2012, 2013

 

5

 

 

 

 

 

23,905

 

 

 

32,080

 

 

 

152,941

 

 

 

29,246

 

 

 

179,680

 

 

 

208,926

 

 

 

(31,106

)

 

2007, 2009, 2012, 2013

 

 

   

 

 

  

Central Valley, CA

  17     68,538    183,911    196,866    74,542    374,773    449,315    (54,795)   

Central Valley, California

 

21

 

 

 

 

 

86,207

 

 

 

252,195

 

 

 

270,125

 

 

 

95,199

 

 

 

513,328

 

 

 

608,527

 

 

 

(96,066

)

 

 

 

 

   

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charlotte, North Carolina

          

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Charlotte Distribution Center

  9   (d)  4,578        28,376    6,096    26,858    32,954    (14,818)   1995, 1996, 1997, 1998

 

11

 

 

(d)

 

 

6,596

 

 

 

8,206

 

 

 

30,225

 

 

 

8,114

 

 

 

36,913

 

 

 

45,027

 

 

 

(18,116

)

 

1995, 1996, 1997, 1998, 2014

Northpark Distribution Center

  2   (d)  1,183    6,707    2,671    1,184    9,377    10,561    (6,015)   1994, 1998

 

2

 

 

(d)

 

 

1,183

 

 

 

6,707

 

 

 

3,287

 

 

 

1,184

 

 

 

9,993

 

 

 

11,177

 

 

 

(6,977

)

 

1994, 1998

West Pointe Business Center

  2     5,440    12,953    9,718    5,440    22,671    28,111    (3,134)   2006, 2012

 

6

 

 

(d)

 

 

12,832

 

 

 

39,809

 

 

 

20,969

 

 

 

13,134

 

 

 

60,476

 

 

 

73,610

 

 

 

(8,672

)

 

2006, 2012, 2014, 2015

 

 

   

 

 

  

Charlotte, North Carolina

  13     11,201    19,660    40,765    12,720    58,906    71,626    (23,967)   

 

19

 

 

 

 

 

20,611

 

 

 

54,722

 

 

 

54,481

 

 

 

22,432

 

 

 

107,382

 

 

 

129,814

 

 

 

(33,765

)

 

 

 

 

   

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chicago, Illinois

          

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Addison Business Center

  1     1,293    2,907    489    1,293    3,396    4,689    (322)   2011

 

1

 

 

 

 

 

1,293

 

 

 

2,907

 

 

 

536

 

 

 

1,293

 

 

 

3,443

 

 

 

4,736

 

 

 

(835

)

 

2011

Addison Distribution Center

  1     640    3,661    1,232    640    4,893    5,533    (2,833)   1997

 

2

 

 

 

 

 

2,594

 

 

 

11,779

 

 

 

2,295

 

 

 

2,594

 

 

 

14,074

 

 

 

16,668

 

 

 

(4,012

)

 

1997, 2015

Alsip Distribution Center

  2     2,093    11,859    11,105    2,549    22,508    25,057    (14,363)   1997, 1999

 

1

 

 

 

 

 

4,895

 

 

 

9,710

 

 

 

250

 

 

 

4,895

 

 

 

9,960

 

 

 

14,855

 

 

 

(691

)

 

2015

Alsip Industrial

  1     1,422    2,336    17    1,422    2,353    3,775    (483)   2011

Arlington Heights Distribution Center

  1     831    3,326    2,244    831    5,570    6,401    (1,223)   2006

 

2

 

 

 

 

 

5,263

 

 

 

10,361

 

 

 

3,568

 

 

 

5,264

 

 

 

13,928

 

 

 

19,192

 

 

 

(2,754

)

 

2006, 2015

Aurora Distribution Center

 

6

 

 

 

 

 

9,921

 

 

 

53,571

 

 

 

1,645

 

 

 

9,921

 

 

 

55,216

 

 

 

65,137

 

 

 

(4,509

)

 

2015

Bedford Park Distribution Center

 

2

 

 

(d)

 

 

3,014

 

 

 

9,271

 

 

 

359

 

 

 

3,014

 

 

 

9,630

 

 

 

12,644

 

 

 

(697

)

 

2015

Bensenville Distribution Center

  1     926    3,842    6,209    940    10,037    10,977    (6,887)   1997

 

1

 

 

 

 

 

926

 

 

 

3,842

 

 

 

6,429

 

 

 

940

 

 

 

10,257

 

 

 

11,197

 

 

 

(7,769

)

 

1997

Bensenville Ind Park

  13     37,681    92,909    3,157    37,681    96,066    133,747    (10,463)   2011

Bensenville Industrial Park

 

14

 

 

(d)

 

 

43,455

 

 

 

111,007

 

 

 

9,495

 

 

 

43,455

 

 

 

120,502

 

 

 

163,957

 

 

 

(24,998

)

 

2011, 2015

Bloomingdale 100 Business Center

 

4

 

 

(d)

 

 

6,563

 

 

 

26,145

 

 

 

1,784

 

 

 

6,563

 

 

 

27,929

 

 

 

34,492

 

 

 

(2,262

)

 

2014

Bolingbrook Distribution Center

  5   (d)  15,110    68,440    4,501    15,110    72,941    88,051    (24,888)   1999, 2006

 

13

 

 

(d)

 

 

40,219

 

 

 

154,530

 

 

 

28,173

 

 

 

40,219

 

 

 

182,703

 

 

 

222,922

 

 

 

(29,862

)

 

1999, 2006, 2014, 2015

Bridgeview Industrial

  1     1,380    3,404    310    1,380    3,714    5,094    (430)   2011

Bridgeview Distribution Center

 

4

 

 

 

 

 

1,662

 

 

 

6,882

 

 

 

170

 

 

 

1,662

 

 

 

7,052

 

 

 

8,714

 

 

 

(895

)

 

2014

Chicago Industrial Portfolio

  1     1,330    2,876    384    1,330    3,260    4,590    (372)   2011

 

1

 

 

 

 

 

1,330

 

 

 

2,876

 

 

 

428

 

 

 

1,330

 

 

 

3,304

 

 

 

4,634

 

 

 

(940

)

 

2011

Chicago Ridge Freight Terminal

  1     1,789    6,187    268    1,789    6,455    8,244    (547)   2011

Cicero Distribution Center

 

1

 

 

 

 

 

3,789

 

 

 

5,819

 

 

 

849

 

 

 

3,789

 

 

 

6,668

 

 

 

10,457

 

 

 

(762

)

 

2015

Des Plaines Distribution Center

  3     2,158    12,232    6,616    2,159    18,847    21,006    (11,958)   1995, 1996

 

4

 

 

 

 

 

8,022

 

 

 

17,145

 

 

 

4,129

 

 

 

8,023

 

 

 

21,273

 

 

 

29,296

 

 

 

(8,745

)

 

1995, 1996, 2015

Elgin Distribution Center

 

1

 

 

 

 

 

2,480

 

 

 

6,422

 

 

 

854

 

 

 

2,480

 

 

 

7,276

 

 

 

9,756

 

 

 

(404

)

 

2015

Elk Grove Distribution Center

  22   (d)  30,882    80,898    48,660    30,882    129,558    160,440    (48,229)   1995, 1996, 1997, 1999,

2006, 2009

 

14

 

 

(d)

 

 

37,200

 

 

 

81,638

 

 

 

41,879

 

 

 

37,200

 

 

 

123,517

 

 

 

160,717

 

 

 

(48,437

)

 

1995, 1996, 1997, 1999, 2006, 2009, 2015

Elk Grove Du Page

  21   (d)  14,830    64,408    6,936    14,830    71,344    86,174    (3,880)   2012

 

21

 

 

 

 

 

14,830

 

 

 

64,408

 

 

 

13,911

 

 

 

14,830

 

 

 

78,319

 

 

 

93,149

 

 

 

(17,943

)

 

2012

Elk Grove Village SG

  9     9,580    18,750    1,354    9,580    20,104    29,684    (2,588)   2011

 

5

 

 

 

 

 

5,856

 

 

 

11,049

 

 

 

1,484

 

 

 

5,856

 

 

 

12,533

 

 

 

18,389

 

 

 

(3,484

)

 

2011

Elmhurst Distribution Center

  1     713    4,043    1,204    713    5,247    5,960    (3,170)   1997

 

1

 

 

 

 

 

1,862

 

 

 

3,263

 

 

 

472

 

 

 

1,862

 

 

 

3,735

 

 

 

5,597

 

 

 

(197

)

 

2015

Executive Drive

  1     1,371    6,430    249    1,371    6,679    8,050    (627)   2011

Franklin Park Distribution Center

 

3

 

 

 

 

 

22,998

 

 

 

49,906

 

 

 

805

 

 

 

22,998

 

 

 

50,711

 

 

 

73,709

 

 

 

(2,516

)

 

2015

Glendale Heights Distribution Center

  3   (d)  3,903    22,119    4,105    3,903    26,224    30,127    (13,374)   1999

 

5

 

 

 

 

 

8,381

 

 

 

39,047

 

 

 

5,895

 

 

 

8,381

 

 

 

44,942

 

 

 

53,323

 

 

 

(17,374

)

 

1999, 2015

Glenview Distribution Center

  2     1,156    6,550    2,093    1,156    8,643    9,799    (4,938)   1996, 1999

Golf Distribution

  1     5,372    16,619    85    5,372    16,704    22,076    (2,078)   2011

Hintz Building

  1     354    1,970    72    354    2,042    2,396    (205)   2011

I-294 Dist Ctr

  1     3,877    16,589    2    3,877    16,591    20,468    (1,172)   2012

Grand Rapids Distribution Center

 

1

 

 

(d)

 

 

839

 

 

 

1,516

 

 

 

16

 

 

 

839

 

 

 

1,532

 

 

 

2,371

 

 

 

(77

)

 

2015

Gurnee Distribution Center

 

2

 

 

 

 

 

2,353

 

 

 

5,579

 

 

 

298

 

 

 

2,353

 

 

 

5,877

 

 

 

8,230

 

 

 

(385

)

 

2015

I-55 Distribution Center

  2   (d)  5,383    25,504    35,327    11,786    54,428    66,214    (11,587)   2007

 

2

 

 

(d)

 

 

5,383

 

 

 

25,504

 

 

 

36,018

 

 

 

11,786

 

 

 

55,119

 

 

 

66,905

 

 

 

(19,352

)

 

2007

Itasca Distribution Center

  1     300    1,941    899    300    2,840    3,140    (1,785)   1996

 

1

 

 

(d)

 

 

1,222

 

 

 

5,178

 

 

 

1,077

 

 

 

1,222

 

 

 

6,255

 

 

 

7,477

 

 

 

(806

)

 

2014

Itasca Industrial Portfolio

  4     5,942    13,574    262    5,942    13,836    19,778    (1,532)   2011

 

1

 

 

 

 

 

1,044

 

 

 

1,920

 

 

 

229

 

 

 

1,044

 

 

 

2,149

 

 

 

3,193

 

 

 

(545

)

 

2011

Kehoe Industrial

  1     1,394    3,247    389    1,394    3,636    5,030    (317)   2011

Melrose Park Distribution Ctr.

  1     2,657    9,292    215    2,657    9,507    12,164    (1,126)   2011

Kehoe Industrial Center

 

2

 

 

 

 

 

2,975

 

 

 

7,876

 

 

 

545

 

 

 

2,975

 

 

 

8,421

 

 

 

11,396

 

 

 

(1,013

)

 

2011, 2015

Kennicott Park Distribution Center

 

1

 

 

 

 

 

811

 

 

 

2,996

 

 

 

24

 

 

 

811

 

 

 

3,020

 

 

 

3,831

 

 

 

(221

)

 

2015

Kenosha Distribution Center

 

2

 

 

 

 

 

14,484

 

 

 

117,728

 

 

 

521

 

 

 

14,484

 

 

 

118,249

 

 

 

132,733

 

 

 

(5,085

)

 

2015

McCook Distribution Center

 

1

 

 

 

 

 

1,968

 

 

 

6,784

 

 

 

281

 

 

 

1,968

 

 

 

7,065

 

 

 

9,033

 

 

 

(333

)

 

2015

Melrose Park Distribution Center

 

2

 

 

 

 

 

9,544

 

 

 

27,851

 

 

 

488

 

 

 

9,544

 

 

 

28,339

 

 

 

37,883

 

 

 

(1,390

)

 

2015

Minooka Distribution Center

  2   (d)  12,240    41,745    17,741    13,223    58,503    71,726    (14,515)   2005, 2008

 

3

 

 

 

 

 

18,420

 

 

 

67,250

 

 

 

18,437

 

 

 

19,404

 

 

 

84,703

 

 

 

104,107

 

 

 

(23,238

)

 

2005, 2008, 2014

Mitchell Distribution Center

  1     1,236    7,004    3,744    1,236    10,748    11,984    (6,500)   1996

 

1

 

 

 

 

 

1,236

 

 

 

7,004

 

 

 

4,355

 

 

 

1,236

 

 

 

11,359

 

 

 

12,595

 

 

 

(7,913

)

 

1996

Mount Pleasant Distribution Center

 

1

 

 

 

 

 

2,876

 

 

 

8,171

 

 

 

574

 

 

 

2,876

 

 

 

8,745

 

 

 

11,621

 

 

 

(399

)

 

2015

NDP - Chicago

  1     461    1,362    11    461    1,373    1,834    (131)   2011

 

1

 

 

 

 

 

461

 

 

 

1,362

 

 

 

78

 

 

 

461

 

 

 

1,440

 

 

 

1,901

 

 

 

(294

)

 

2011

Nicholas Logistics Center

  1     2,354    10,799    44    2,354    10,843    13,197    (1,255)   2011

Northbrook Distribution Center

  1     2,056    8,227    405    2,056    8,632    10,688    (2,022)   2007

 

1

 

 

 

 

 

2,056

 

 

 

8,227

 

 

 

4,015

 

 

 

2,056

 

 

 

12,242

 

 

 

14,298

 

 

 

(3,532

)

 

2007

Northlake Distribution Center

  1     372    2,105    775    372    2,880    3,252    (1,908)   1996

 

1

 

 

 

 

 

5,015

 

 

 

13,569

 

 

 

125

 

 

 

5,015

 

 

 

13,694

 

 

 

18,709

 

 

 

(760

)

 

2015

OHare Industrial Portfolio

  8     4,989    12,542    118    4,989    12,660    17,649    (1,583)   2011

Pleasant Prairie Distribution Center

  1   (d)  1,314    7,450    2,540    1,315    9,989    11,304    (5,501)   1999

Poplar Gateway Truck Terminal

  1     2,321    4,699    507    2,321    5,206    7,527    (510)   2011

Port OHare

  2     4,819    5,547    61    4,819    5,608    10,427    (695)   2011

Remington Lakes Dist

  1     2,382    11,657    569    2,382    12,226    14,608    (980)   2011

Rochelle Distribution Center

  1     4,457    20,100    11,131    5,254    30,434    35,688    (3,857)   2008

Romeoville Distribution Center

  5   (d)  23,325    94,197    7,494    23,325    101,691    125,016    (27,673)   1999, 2005

S.C. Johnson & Son

  1     2,267    15,911    1,552    3,152    16,578    19,730    (2,603)   2008

Sivert Distribution

  1     1,497    1,470        1,497    1,470    2,967    (170)   2011

Touhy Cargo Terminal

  1     2,697    8,909        2,697    8,909    11,606    (699)   2011

Waukegan Distribution Center

  2   (d)  4,368    17,632    976    4,368    18,608    22,976    (4,517)   2007

West Chicago Distribution Center

  1     3,125    12,499    2,579    3,125    15,078    18,203    (3,849)   2005

Windsor Court

  1     635    3,493    182    635    3,675    4,310    (389)   2011

101


PROLOGIS, INC. AND PROLOGIS, L.P.

SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 20132016

(In thousands of U.S. dollars, as applicable)

 

  

No. of
Bldgs.

  

Encum-
brances

 Initial Cost to
Prologis
  

Costs
Capitalized
Subsequent

To
Acquisition

  Gross Amounts At Which Carried
as of December 31, 2013
  

Accumulated
Depreciation
(c)

  

Date of

Construction/

Acquisition

Description   Land  Building &
Improvements
   Land  Building &
Improvements
  Total
(a,b)
   

Wood Dale Industrial SG

  5     4,343    10,174    418    4,343    10,592    14,935    (1,083)   2011

Woodale Distribution Center

  1     263    1,490    541    263    2,031    2,294    (1,242)   1997

Woodridge Distribution Center

  14   (d)  46,575    197,289    19,571    49,942    213,493    263,435    (57,593)   2005, 2007

Yohan Industrial

  3     4,219    12,306    883    4,219    13,189    17,408    (1,217)   2011
 

 

 

   

 

 

  

Chicago, Illinois

  158     286,682    1,014,520    210,226    299,589    1,211,839    1,511,428    (311,869)   
 

 

 

   

 

 

  

Cincinnati, Ohio

          

Airpark Distribution Center

  2   (d)  2,958    9,894    13,228    3,938    22,142    26,080    (6,803)   1996, 2012

Capital Distribution Center II

  5     1,953    11,067    7,201    1,953    18,268    20,221    (11,519)   1994

Empire Distribution Center

  3     529    2,995    2,882    529    5,877    6,406    (3,954)   1995

Fairfield Business Center

  1     348    1,971    754    381    2,692    3,073    (1,004)   2004

Park I-275

  2   (d)  7,109    26,097    2,858    7,109    28,955    36,064    (2,867)   2008, 2012

Sharonville Distribution Center

  2   (d)  1,202        14,661    2,424    13,439    15,863    (5,853)   1997

West Chester Comm Park I

  2   (d)  1,939    8,224    1,532    1,939    9,756    11,695    (598)   2012
 

 

 

   

 

 

  

Cincinnati, Ohio

  17     16,038    60,248    43,116    18,273    101,129    119,402    (32,598)   
 

 

 

   

 

 

  

Columbus, Ohio

          

Alum Creek Dist Ctr

  1     917    4,584    260    917    4,844    5,761    (415)   2012

Brookham Distribution Center

  2     5,964    23,858    4,392    5,965    28,249    34,214    (8,939)   2005

Canal Pointe Distribution Center

  1     1,237    7,013    1,578    1,280    8,548    9,828    (4,191)   1999

Capital Park South Distribution Center

  7   (d)  8,484    30,385    27,588    8,876    57,581    66,457    (16,155)   1996, 2012

Charter Street Distribution Center

  1     1,245    7,055    889    1,245    7,944    9,189    (3,809)   1999

Corporate Park West

  1     361    2,265    1,368    361    3,633    3,994    (2,300)   1996

Etna Distribution Center

  1     1,669        19,964    1,669    19,964    21,633    (4,244)   2007

Fisher Distribution Center

  1     1,197    6,785    5,524    1,197    12,309    13,506    (6,825)   1995

Foreign Trade Center I

  3     3,619    21,279    6,038    3,975    26,961    30,936    (13,698)   1999

International Street Comm Ctr

  2   (d)  1,503    6,356    262    1,503    6,618    8,121    (465)   2012

Lockbourne Dist Ctr

  1     540    3,030    351    540    3,381    3,921    (346)   2012

South Park Distribution Center

  2   (d)  3,343    15,182    3,274    3,343    18,456    21,799    (6,916)   1999, 2005

Westbelt Business Center

  3     1,777    7,168    1,863    1,777    9,031    10,808    (2,211)   2006

Westpointe Distribution Center

  2   (d)  1,446    7,601    928    1,446    8,529    9,975    (2,952)   2007
 

 

 

   

 

 

  

Columbus, Ohio

  28     33,302    142,561    74,279    34,094    216,048    250,142    (73,466)   
 

 

 

   

 

 

  

Dallas/Fort Worth, Texas

          

Addison Technology Center

  1     858    3,996    11    858    4,007    4,865    (391)   2011

Arlington Corp Ctr

  1     3,212    13,971    47    3,212    14,018    17,230    (608)   2012

Centerport Distribution Center

  1     1,250    7,082    1,175    1,250    8,257    9,507    (4,178)   1999

Dallas Corporate Center

  11   (d)  6,449    5,441    33,879    6,645    39,124    45,769    (17,121)   1996, 1997, 1998, 1999, 2012

Dallas Industrial

  12     7,180    26,514    1,814    7,180    28,328    35,508    (2,961)   2011

Flower Mound Distribution Center

  1   (d)  5,157    20,991    2,446    5,157    23,437    28,594    (5,279)   2007

Freeport Corp Ctr

  2   (d)  8,947    38,219    506    8,947    38,725    47,672    (2,728)   2012

Freeport Distribution Center

  4     1,393    5,549    5,591    1,440    11,093    12,533    (6,036)   1996, 1997, 1998

Great Southwest Distribution Center

  32   (d)  41,069    178,346    29,727    41,069    208,073    249,142    (67,485)   1995, 1996, 1997, 1999,

2000, 2001, 2002, 2005, 2012

Greater Dallas Industrial Port

  3     3,525    16,375    405    3,525    16,780    20,305    (1,757)   2011

Lancaster Distribution Center

  3   (d)  7,610    14,362    37,778    7,265    52,485    59,750    (6,035)   2007, 2008, 2013

Lincoln Industrial Center

  1     738    1,600    101    738    1,701    2,439    (245)   2011

Lonestar Portfolio

  3     4,736    13,035    1,112    4,736    14,147    18,883    (1,656)   2011

Mesquite Dist Ctr

  1     3,692    15,473    20    3,692    15,493    19,185    (1,056)   2012

Mesquite Dist III

  1     2,800        8,864    2,800    8,864    11,664    (154)   2013

Northgate Distribution Center

  8   (d)  10,411    51,454    6,473    10,898    57,440    68,338    (16,041)   1999, 2005, 2008, 2012

Pinnacle Park Distribution Center

  1     1,657    6,940    128    1,657    7,068    8,725    (474)   2012

Richardson Tech Center SGP

  2     1,462    4,557    240    1,462    4,797    6,259    (510)   2011

Royal Distribution Center

  1     811    4,598    1,124    811    5,722    6,533    (2,471)   2001

Stemmons Distribution Center

  1     272    1,544    848    272    2,392    2,664    (1,562)   1995

Stemmons Industrial Center

  8     1,653    10,526    5,896    1,653    16,422    18,075    (10,414)   1994, 1995, 1996, 1999

Trinity Mills Distribution Center

  4   (d)  3,181 ��  18,090    4,556    3,181    22,646    25,827    (11,719)   1996, 1999, 2001

Valwood Business Center

  3     2,842    11,715    1,110    2,842    12,825    15,667    (3,928)   2001, 2006

Valwood Distribution Center

  1     850    4,890    894    850    5,784    6,634    (2,779)   1999

Valwood Industrial

  2     1,802    9,658    340    1,802    9,998    11,800    (1,144)   2011
 

 

 

   

 

 

  

Dallas/Fort Worth, Texas

  108     123,557    484,926    145,085    123,942    629,626    753,568    (168,732)   
 

 

 

   

 

 

  

Denver, Colorado

          

Denver Business Center

  4   (d)  3,497    14,938    481    3,497    15,419    18,916    (918)   2012

Pagosa Distribution Center

  1   (d)  398    2,322    1,458    398    3,780    4,178    (2,660)   1993

Stapleton Business Center

  12   (d)  34,634    139,257    8,344    34,635    147,600    182,235    (41,672)   2005

Upland Distribution Center

  3     385    4,421    4,861    398    9,269    9,667    (4,934)   1994, 1995

Upland Distribution Center II

  3     1,295    5,159    5,924    1,328    11,050    12,378    (7,713)   1993
 

 

 

   

 

 

  

Denver, Colorado

  23     40,209    166,097    21,068    40,256    187,118    227,374    (57,897)   
 

 

 

   

 

 

  

El Paso, Texas

          

Billy the Kid Distribution Center

  1     273    1,547    1,660    273    3,207    3,480    (2,262)   1994

 

 

 

 

 

 

Initial Cost to

Prologis

 

 

Costs

Capitalized

 

 

Gross Amounts at Which Carried

at December 31, 2016

 

 

 

 

 

 

 

Description

 

No. of Bldgs.

 

Encum-

brances

 

Land

 

 

Building &

Improvements

 

 

Subsequent

to

Acquisition

 

 

Land

 

 

Building &

Improvements

 

 

Total

(a,b)

 

 

Accumulated

Depreciation

(c)

 

 

Date of

Construction/

Acquisition

OHare Industrial Portfolio

 

5

 

 

 

 

3,455

 

 

 

8,724

 

 

 

216

 

 

 

3,455

 

 

 

8,940

 

 

 

12,395

 

 

 

(2,387

)

 

2011

Palatine Distribution Center

 

1

 

 

 

 

497

 

 

 

2,723

 

 

 

299

 

 

 

497

 

 

 

3,022

 

 

 

3,519

 

 

 

(200

)

 

2015

Pleasant Prairie Distribution Center

 

2

 

 

 

 

3,293

 

 

 

16,321

 

 

 

3,597

 

 

 

3,293

 

 

 

19,918

 

 

 

23,211

 

 

 

(7,053

)

 

1999, 2015

Remington Lakes Distribution Center

 

1

 

 

 

 

2,382

 

 

 

11,657

 

 

 

901

 

 

 

2,382

 

 

 

12,558

 

 

 

14,940

 

 

 

(2,210

)

 

2011

Romeoville Distribution Center

 

7

 

(d)

 

 

30,559

 

 

 

116,956

 

 

 

11,527

 

 

 

30,559

 

 

 

128,483

 

 

 

159,042

 

 

 

(38,273

)

 

2005, 2015

S.C. Johnson & Son

 

1

 

 

 

 

2,267

 

 

 

15,911

 

 

 

1,842

 

 

 

3,152

 

 

 

16,868

 

 

 

20,020

 

 

 

(4,287

)

 

2008

Shiller Park Distribution Center

 

17

 

 

 

 

17,339

 

 

 

33,001

 

 

 

3,350

 

 

 

17,339

 

 

 

36,351

 

 

 

53,690

 

 

 

(2,363

)

 

2015

Touhy Cargo Terminal

 

1

 

 

 

 

2,697

 

 

 

8,909

 

 

 

-

 

 

 

2,697

 

 

 

8,909

 

 

 

11,606

 

 

 

(1,503

)

 

2011

Tower Distribution Center

 

1

 

 

 

 

2,050

 

 

 

1,279

 

 

 

5

 

 

 

2,050

 

 

 

1,284

 

 

 

3,334

 

 

 

(62

)

 

2015

Waukegan Distribution Center

 

1

 

 

 

 

2,451

 

 

 

9,438

 

 

 

506

 

 

 

2,451

 

 

 

9,944

 

 

 

12,395

 

 

 

(3,260

)

 

2007

West Chicago Distribution Center

 

2

 

 

 

 

3,125

 

 

 

12,764

 

 

 

4,971

 

 

 

3,125

 

 

 

17,735

 

 

 

20,860

 

 

 

(6,425

)

 

2005, 2015

Willowbrook Distribution Center

 

1

 

(d)

 

 

855

 

 

 

3,134

 

 

 

23

 

 

 

855

 

 

 

3,157

 

 

 

4,012

 

 

 

(337

)

 

2015

Windsor Court

 

1

 

 

 

 

635

 

 

 

3,493

 

 

 

536

 

 

 

635

 

 

 

4,029

 

 

 

4,664

 

 

 

(880

)

 

2011

Woodale Distribution Center

 

1

 

 

 

 

263

 

 

 

1,490

 

 

 

599

 

 

 

263

 

 

 

2,089

 

 

 

2,352

 

 

 

(1,454

)

 

1997

Woodridge Distribution Center

 

15

 

(d)

 

 

49,943

 

 

 

215,504

 

 

 

27,177

 

 

 

53,310

 

 

 

239,314

 

 

 

292,624

 

 

 

(83,241

)

 

2005, 2007, 2015

Yohan Industrial Center

 

3

 

 

 

 

4,219

 

 

 

12,306

 

 

 

1,685

 

 

 

4,219

 

 

 

13,991

 

 

 

18,210

 

 

 

(2,937

)

 

2011

Chicago, Illinois

 

189

 

 

 

 

423,270

 

 

 

1,463,703

 

 

 

249,725

 

 

 

434,925

 

 

 

1,701,773

 

 

 

2,136,698

 

 

 

(402,301

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cincinnati, Ohio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Airpark Distribution Center

 

4

 

(d)

 

 

5,851

 

 

 

21,846

 

 

 

15,049

 

 

 

6,831

 

 

 

35,915

 

 

 

42,746

 

 

 

(10,495

)

 

1996, 2012, 2014

DAY Cargo Center

 

5

 

 

 

 

-

 

 

 

4,749

 

 

 

671

 

 

 

-

 

 

 

5,420

 

 

 

5,420

 

 

 

(2,388

)

 

2011

Fairfield Commerce Center

 

1

 

(d)

 

 

2,526

 

 

 

10,110

 

 

 

105

 

 

 

2,526

 

 

 

10,215

 

 

 

12,741

 

 

 

(870

)

 

2014

Gateway International Distribution Center

 

1

 

 

 

 

2,676

 

 

 

-

 

 

 

18,534

 

 

 

2,695

 

 

 

18,515

 

 

 

21,210

 

 

 

(445

)

 

2015

Monroe Park

 

1

 

(d)

 

 

7,222

 

 

 

29,606

 

 

 

506

 

 

 

7,222

 

 

 

30,112

 

 

 

37,334

 

 

 

(2,547

)

 

2014

Mosteller Distribution Center

 

1

 

(d)

 

 

921

 

 

 

3,888

 

 

 

165

 

 

 

921

 

 

 

4,053

 

 

 

4,974

 

 

 

(379

)

 

2014

Park I-275

 

4

 

(d)

 

 

15,939

 

 

 

61,886

 

 

 

3,815

 

 

 

15,939

 

 

 

65,701

 

 

 

81,640

 

 

 

(9,244

)

 

2008, 2012, 2014

Sharonville Distribution Center

 

2

 

(d)

 

 

1,202

 

 

 

-

 

 

 

15,838

 

 

 

2,424

 

 

 

14,616

 

 

 

17,040

 

 

 

(7,486

)

 

1997

West Chester Commerce Park I

 

3

 

 

 

 

3,366

 

 

 

13,877

 

 

 

3,203

 

 

 

3,366

 

 

 

17,080

 

 

 

20,446

 

 

 

(2,581

)

 

2012, 2014

Cincinnati, Ohio

 

22

 

 

 

 

39,703

 

 

 

145,962

 

 

 

57,886

 

 

 

41,924

 

 

 

201,627

 

 

 

243,551

 

 

 

(36,435

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Columbus, Ohio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alum Creek Distribution Center

 

3

 

(d)

 

 

3,945

 

 

 

33,239

 

 

 

321

 

 

 

3,945

 

 

 

33,560

 

 

 

37,505

 

 

 

(1,871

)

 

2015

Brookham Distribution Center

 

2

 

 

 

 

5,964

 

 

 

23,858

 

 

 

5,130

 

 

 

5,965

 

 

 

28,987

 

 

 

34,952

 

 

 

(12,576

)

 

2005

Capital Park South Distribution Center

 

8

 

(d)

 

 

10,077

 

 

 

39,631

 

 

 

32,697

 

 

 

10,470

 

 

 

71,935

 

 

 

82,405

 

 

 

(24,153

)

 

1996, 2012, 2014

Columbus West Industrial Center

 

1

 

 

 

 

427

 

 

 

2,407

 

 

 

202

 

 

 

427

 

 

 

2,609

 

 

 

3,036

 

 

 

(298

)

 

2014

Corporate Park West

 

1

 

(d)

 

 

633

 

 

 

3,583

 

 

 

89

 

 

 

633

 

 

 

3,672

 

 

 

4,305

 

 

 

(327

)

 

2014

Crosswinds Distribution Center

 

1

 

 

 

 

3,058

 

 

 

17,758

 

 

 

500

 

 

 

3,058

 

 

 

18,258

 

 

 

21,316

 

 

 

(1,666

)

 

2014

Etna Distribution Center

 

2

 

(d)

 

 

5,840

 

 

 

33,734

 

 

 

1,055

 

 

 

5,840

 

 

 

34,789

 

 

 

40,629

 

 

 

(2,954

)

 

2014

International Street Commerce Center

 

2

 

 

 

 

1,503

 

 

 

6,356

 

 

 

483

 

 

 

1,503

 

 

 

6,839

 

 

 

8,342

 

 

 

(1,312

)

 

2012

South Park Distribution Center

 

2

 

(d)

 

 

3,343

 

 

 

15,182

 

 

 

3,627

 

 

 

3,343

 

 

 

18,809

 

 

 

22,152

 

 

 

(9,453

)

 

1999, 2005

Westpointe Distribution Center

 

2

 

 

 

 

1,446

 

 

 

7,601

 

 

 

1,764

 

 

 

1,446

 

 

 

9,365

 

 

 

10,811

 

 

 

(4,312

)

 

2007

Columbus, Ohio

 

24

 

 

 

 

36,236

 

 

 

183,349

 

 

 

45,868

 

 

 

36,630

 

 

 

228,823

 

 

 

265,453

 

 

 

(58,922

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dallas/Fort Worth, Texas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Arlington Corporate Center

 

4

 

(d)

 

 

9,380

 

 

 

41,744

 

 

 

450

 

 

 

9,380

 

 

 

42,194

 

 

 

51,574

 

 

 

(5,320

)

 

2012, 2014, 2015

Dallas Corporate Center

 

11

 

(d)

 

 

6,449

 

 

 

5,441

 

 

 

35,845

 

 

 

6,645

 

 

 

41,090

 

 

 

47,735

 

 

 

(21,109

)

 

1996, 1997, 1998, 1999, 2012

Dallas Corporate Center North Distribution Center

 

2

 

 

 

 

6,014

 

 

 

-

 

 

 

20,152

 

 

 

5,990

 

 

 

20,176

 

 

 

26,166

 

 

 

(301

)

 

2015

DFW Cargo Center 1

 

1

 

 

 

 

-

 

 

 

35,117

 

 

 

1,284

 

 

 

-

 

 

 

36,401

 

 

 

36,401

 

 

 

(8,082

)

 

2011

DFW Cargo Center 2

 

1

 

 

 

 

-

 

 

 

27,916

 

 

 

221

 

 

 

-

 

 

 

28,137

 

 

 

28,137

 

 

 

(5,964

)

 

2011

DFW Cargo Center East

 

3

 

 

 

 

-

 

 

 

19,730

 

 

 

367

 

 

 

-

 

 

 

20,097

 

 

 

20,097

 

 

 

(7,001

)

 

2011

DFW Logistics Center 6

 

1

 

 

 

 

2,010

 

 

 

8,153

 

 

 

580

 

 

 

2,010

 

 

 

8,733

 

 

 

10,743

 

 

 

(418

)

 

2015

Flower Mound Distribution Center

 

1

 

(d)

 

 

5,157

 

 

 

20,991

 

 

 

2,588

 

 

 

5,157

 

 

 

23,579

 

 

 

28,736

 

 

 

(8,198

)

 

2007

Frankford Trade Center

 

4

 

 

 

 

6,882

 

 

 

27,530

 

 

 

807

 

 

 

6,882

 

 

 

28,337

 

 

 

35,219

 

 

 

(938

)

 

2015

Freeport Corporate Center

 

6

 

(d)

 

 

15,965

 

 

 

63,935

 

 

 

9,665

 

 

 

15,872

 

 

 

73,693

 

 

 

89,565

 

 

 

(9,737

)

 

2012, 2014

Freeport Distribution Center

 

4

 

 

 

 

1,393

 

 

 

5,549

 

 

 

6,289

 

 

 

1,440

 

 

 

11,791

 

 

 

13,231

 

 

 

(7,219

)

 

1996, 1997, 1998

Gold Spike Distribution Center

 

1

 

 

 

 

3,629

 

 

 

-

 

 

 

18,094

 

 

 

3,629

 

 

 

18,094

 

 

 

21,723

 

 

 

(334

)

 

2015

Great Southwest Corporate Center

 

3

 

 

 

 

4,476

 

 

 

18,358

 

 

 

455

 

 

 

4,476

 

 

 

18,813

 

 

 

23,289

 

 

 

(1,625

)

 

2014

Great Southwest Distribution Center

 

22

 

(d)

 

 

44,349

 

 

 

190,068

 

 

 

26,195

 

 

 

44,454

 

 

 

216,158

 

 

 

260,612

 

 

 

(67,964

)

 

1995, 1996, 1997, 1999, 2000, 2005, 2012, 2014, 2015

Greater Dallas Industrial Portfolio

 

3

 

 

 

 

3,525

 

 

 

16,375

 

 

 

1,713

 

 

 

3,525

 

 

 

18,088

 

 

 

21,613

 

 

 

(4,066

)

 

2011

Heritage Business Park

 

9

 

(d)

 

 

20,153

 

 

 

93,145

 

 

 

29,179

 

 

 

20,153

 

 

 

122,324

 

 

 

142,477

 

 

 

(5,187

)

 

2015

Lonestar Portfolio

 

1

 

 

 

 

2,396

 

 

 

7,839

 

 

 

2,774

 

 

 

2,396

 

 

 

10,613

 

 

 

13,009

 

 

 

(2,655

)

 

2011

Mesquite Distribution Center

 

2

 

 

 

 

8,355

 

 

 

34,609

 

 

 

1,247

 

 

 

8,355

 

 

 

35,856

 

 

 

44,211

 

 

 

(4,450

)

 

2012, 2014

Northgate Distribution Center

 

10

 

(d)

 

 

13,001

 

 

 

62,062

 

 

 

9,361

 

 

 

13,488

 

 

 

70,936

 

 

 

84,424

 

 

 

(23,775

)

 

1999, 2005, 2008, 2012, 2014

Park 121 Distribution Center

 

1

 

 

 

 

6,888

 

 

 

-

 

 

 

14,628

 

 

 

7,662

 

 

 

13,854

 

 

 

21,516

 

 

 

(217

)

 

2016

Riverside Drive Distribution Center

 

1

 

(d)

 

 

5,107

 

 

 

14,919

 

 

 

74

 

 

 

5,107

 

 

 

14,993

 

 

 

20,100

 

 

 

(1,020

)

 

2015

ST Micro Distribution Center

 

2

 

 

 

 

2,429

 

 

 

-

 

 

 

17,317

 

 

 

4,026

 

 

 

15,720

 

 

 

19,746

 

 

 

(96

)

 

2016

Stemmons Distribution Center

 

1

 

 

 

 

272

 

 

 

1,544

 

 

 

1,018

 

 

 

272

 

 

 

2,562

 

 

 

2,834

 

 

 

(1,887

)

 

1995

Stemmons Industrial Center

 

8

 

 

 

 

1,653

 

 

 

10,526

 

 

 

6,697

 

 

 

1,653

 

 

 

17,223

 

 

 

18,876

 

 

 

(12,552

)

 

1994, 1995, 1996, 1999

Trinity Mills Distribution Center

 

1

 

(d)

 

 

735

 

 

 

3,774

 

 

 

1,114

 

 

 

735

 

 

 

4,888

 

 

 

5,623

 

 

 

(2,907

)

 

1999

Valwood Business Center

 

5

 

(d)

 

 

4,679

 

 

 

19,195

 

 

 

1,762

 

 

 

4,679

 

 

 

20,957

 

 

 

25,636

 

 

 

(6,034

)

 

2001, 2006, 2014

102


PROLOGIS, INC. AND PROLOGIS, L.P.

SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 20132016

(In thousands of U.S. dollars, as applicable)

 

  

No. of
Bldgs.

  

Encum-
brances

  Initial Cost to
Prologis
  

Costs
Capitalized
Subsequent

To
Acquisition

  Gross Amounts At Which Carried
as of December 31, 2013
  

Accumulated
Depreciation
(c)

  

Date of

Construction/

Acquisition

Description   Land  Building &
Improvements
   Land  Building &
Improvements
  Total
(a,b)
   

Northwestern Corporate Center

  7     6,104    21,838    22,361    7,043    43,260    50,303    (13,021)   1992, 1993, 1994, 1997, 2012

Vista Del Sol Ind Ctr III

  1     2,040    8,840    54    2,040    8,894    10,934    (389)   2012

Vista Del Sol Industrial Center II

  3     3,587    13,793    7,681    3,977    21,084    25,061    (4,711)   1997, 1998, 2012
 

 

 

   

 

 

  

El Paso, Texas

  12     12,004    46,018    31,756    13,333    76,445    89,778    (20,383)   
 

 

 

   

 

 

  

Houston, Texas

          

Blalock Distribution Center

  3    (d  5,032    21,983    3,018    5,031    25,002    30,033    (3,438 2002, 2012

Crosstimbers Distribution Center

  1     359    2,035    1,222    359    3,257    3,616    (2,203 1994

Jersey Village Corp Ctr

  2    (d  9,760    40,857    256    9,760    41,113    50,873    (2,788 2012

Kempwood Business Center

  4     1,746    9,894    3,416    1,746    13,310    15,056    (6,187 2001

Northpark Distribution Center

  4    (d  5,313    16,568    9,140    5,313    25,708    31,021    (3,630 2006, 2008, 2012

Perimeter Distribution Center

  2     813    4,604    1,577    813    6,181    6,994    (3,336 1999

Pine Forest Business Center

  9     2,665    14,132    7,510    2,665    21,642    24,307    (13,901 1993, 1995

Pine North Distribution Center

  2     847    4,800    1,157    847    5,957    6,804    (3,132 1999

Pinemont Distribution Center

  2     642    3,636    958    642    4,594    5,236    (2,408 1999

Post Oak Business Center

  11     2,334    11,655    9,185    2,334    20,840    23,174    (13,197 1993, 1994, 1996

Post Oak Distribution Center

  5     1,522    8,758    5,644    1,522    14,402    15,924    (10,153 1993, 1994

South Loop Distribution Center

  2     418    1,943    1,934    418    3,877    4,295    (2,512 1994

Southland Distribution Center

  2     2,505    12,437    2,013    2,505    14,450    16,955    (3,692 2002, 2012

West by Northwest Industrial Center

  5    (d  4,510    19,142    3,386    4,650    22,388    27,038    (4,231 1993, 1994, 2012

White Street Distribution Center

  1     469    2,656    2,147    469    4,803    5,272    (3,059 1995

Wingfoot Dist Ctr

  2     1,976    8,606    3,387    1,976    11,993    13,969    (752 2012, 2013

World Houston Dist Ctr

  1     1,529    6,326    38    1,529    6,364    7,893    (256 2012
 

 

 

   

 

 

  

Houston, Texas

  58     42,440    190,032    55,988    42,579    245,881    288,460    (78,875 
 

 

 

   

 

 

  

Indianapolis, Indiana

          

Eastside Distribution Center

  1     228    1,187    2,021    299    3,137    3,436    (1,630 1995

North by Northeast Corporate Center

  1     1,058        9,028    1,059    9,027    10,086    (4,263 1995

Park 100 Industrial Center

  17    (d  10,410    43,048    19,055    10,410    62,103    72,513    (18,372 1995, 2012

Shadeland Industrial Center

  3     428    2,431    2,903    429    5,333    5,762    (3,553 1995
 

 

 

   

 

 

  

Indianapolis, Indiana

  22     12,124    46,666    33,007    12,197    79,600    91,797    (27,818 
 

 

 

   

 

 

  

Las Vegas, Nevada

          

Black Mountain Distribution Center

  2     1,108        7,765    1,206    7,667    8,873    (3,747 1997

Cameron Business Center

  1     1,634    9,255    1,178    1,634    10,433    12,067    (4,913 1999

Sunrise Ind Park

  8     19,782    89,555    898    19,782    90,453    110,235    (1,729 2011, 2013

West One Business Center

  4     2,468    13,985    4,647    2,468    18,632    21,100    (10,586 1996
 

 

 

   

 

 

  

Las Vegas, Nevada

  15     24,992    112,795    14,488    25,090    127,185    152,275    (20,975 
 

 

 

   

 

 

  

Louisville, Kentucky

          

Cedar Grove Distribution Center

  3     9,611    45,964    3,274    9,610    49,239    58,849    (8,438 2005, 2008, 2012

Commerce Crossings Distribution Center

  1     1,912    7,649    137    1,912    7,786    9,698    (2,179 2005

I-65 Meyer Dist. Center

  2    (d  7,770    15,282    24,432    8,077    39,407    47,484    (6,067 2006, 2012

New Cut Road Dist Ctr

  1     2,711    11,694    484    2,711    12,178    14,889    (869 2012

Riverport Distribution Center

  1     1,515    8,585    2,664    1,515    11,249    12,764    (6,491 1999
 

 

 

   

 

 

  

Louisville, Kentucky

  8     23,519    89,174    30,991    23,825    119,859    143,684    (24,044 
 

 

 

   

 

 

  

Memphis, Tennessee

          

Delp Distribution Center

  3     1,068    10,546    373    1,068    10,919    11,987    (6,767 1995

DeSoto Distribution Center

  1     4,761        27,060    4,761    27,060    31,821    (4,775 2007

Memphis Distribution Center

  4     9,506    42,731    978    9,390    43,825    53,215    (4,454 2002, 2012

Memphis Ind Park

  2     3,252    14,448    137    3,252    14,585    17,837    (1,095 2012

Olive Branch Distribution Center

  1    (d  6,719    31,134    187    6,719    31,321    38,040    (2,497 2012

Willow Lake Distribution Center

  1     613    3,474    (28  613    3,446    4,059    (1,952 1999
 

 

 

   

 

 

  

Memphis, Tennessee

  12     25,919    102,333    28,707    25,803    131,156    156,959    (21,540 
 

 

 

   

 

 

  

Nashville, Tennessee

          

CentrePointe Distribution Center

  2    (d  3,760    15,042        3,760    15,042    18,802       2013

Elam Farms Park

  1     2,097    8,386    353    2,097    8,739    10,836    (153 2013

I-40 Industrial Center

  4     3,075    15,333    3,500    3,075    18,833    21,908    (6,288 1995, 1996, 1999, 2012

Interchange City Distribution Center

  3    (d  2,938    14,314    5,889    3,452    19,689    23,141    (3,806 1998, 2012

Southpark Distribution Center

  4    (d  11,834    47,336        11,834    47,336    59,170       2013

Space Park South Distribution Center

  15     3,499    19,830    13,589    3,499    33,419    36,918    (21,902 1994
 

 

 

   

 

 

  

Nashville, Tennessee

  29     27,203    120,241    23,331    27,717    143,058    170,775    (32,149 
 

 

 

   

 

 

  

New Jersey/New York City

          

Brunswick Distribution Center

  2     870    4,928    2,802    870    7,730    8,600    (4,764 1997

CenterPoint Dist Ctr

  1     2,839    12,490    194    2,839    12,684    15,523    (1,069 2012

Chester Distribution Center

  1     548    5,319    300    548    5,619    6,167    (3,974 2002

Clifton Dist Ctr

  1     8,064    12,096    982    8,064    13,078    21,142    (1,518 2010

Cranbury Bus Park

  5    (d  18,180    53,248    1,498    18,180    54,746    72,926    (2,803 2012

 

 

 

 

 

 

Initial Cost to

Prologis

 

 

Costs

Capitalized

 

 

Gross Amounts at Which Carried

at December 31, 2016

 

 

 

 

 

 

 

Description

 

No. of Bldgs.

 

Encum-

brances

 

Land

 

 

Building &

Improvements

 

 

Subsequent

to

Acquisition

 

 

Land

 

 

Building &

Improvements

 

 

Total

(a,b)

 

 

Accumulated

Depreciation

(c)

 

 

Date of

Construction/

Acquisition

Valwood Distribution Center

 

5

 

(d)

 

 

4,742

 

 

 

20,629

 

 

 

1,860

 

 

 

4,742

 

 

 

22,489

 

 

 

27,231

 

 

 

(5,039

)

 

1999, 2014

Valwood Industrial Center

 

2

 

 

 

 

1,802

 

 

 

9,658

 

 

 

958

 

 

 

1,802

 

 

 

10,616

 

 

 

12,418

 

 

 

(2,564

)

 

2011

Watersridge Distribution Center

 

1

 

(d)

 

 

1,939

 

 

 

11,365

 

 

 

103

 

 

 

1,939

 

 

 

11,468

 

 

 

13,407

 

 

 

(622

)

 

2015

Dallas/Fort Worth, Texas

 

116

 

 

 

 

183,380

 

 

 

770,172

 

 

 

212,797

 

 

 

186,469

 

 

 

979,880

 

 

 

1,166,349

 

 

 

(217,281

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denver, Colorado

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denver Business Center

 

3

 

 

 

 

3,142

 

 

 

13,396

 

 

 

830

 

 

 

3,142

 

 

 

14,226

 

 

 

17,368

 

 

 

(2,507

)

 

2012

Havana Distribution Center

 

1

 

(d)

 

 

1,421

 

 

 

5,657

 

 

 

330

 

 

 

1,421

 

 

 

5,987

 

 

 

7,408

 

 

 

(700

)

 

2014

Pagosa Distribution Center

 

1

 

(d)

 

 

398

 

 

 

2,322

 

 

 

1,993

 

 

 

398

 

 

 

4,315

 

 

 

4,713

 

 

 

(3,249

)

 

1993

Peoria Distribution Center

 

2

 

(d)

 

 

4,129

 

 

 

16,593

 

 

 

160

 

 

 

4,129

 

 

 

16,753

 

 

 

20,882

 

 

 

(1,392

)

 

2014

Stapleton Business Center North

 

2

 

 

 

 

8,930

 

 

 

-

 

 

 

32,664

 

 

 

7,230

 

 

 

34,364

 

 

 

41,594

 

 

 

(1,869

)

 

2014, 2015

Stapleton Business Center

 

12

 

 

 

 

34,634

 

 

 

139,257

 

 

 

12,215

 

 

 

34,635

 

 

 

151,471

 

 

 

186,106

 

 

 

(58,668

)

 

2005

Upland Distribution Center

 

6

 

(d)

 

 

4,064

 

 

 

19,035

 

 

 

6,180

 

 

 

4,077

 

 

 

25,202

 

 

 

29,279

 

 

 

(7,295

)

 

1994, 1995, 2014

Upland Distribution Center II

 

2

 

(d)

 

 

1,396

 

 

 

5,349

 

 

 

2,183

 

 

 

1,409

 

 

 

7,519

 

 

 

8,928

 

 

 

(3,465

)

 

1993, 2014

Denver, Colorado

 

29

 

 

 

 

58,114

 

 

 

201,609

 

 

 

56,555

 

 

 

56,441

 

 

 

259,837

 

 

 

316,278

 

 

 

(79,145

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Houston, Texas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Avondale Distribution Center

 

1

 

 

 

 

2,231

 

 

 

5,044

 

 

 

451

 

 

 

2,231

 

 

 

5,495

 

 

 

7,726

 

 

 

(306

)

 

2015

Blalock Distribution Center

 

3

 

(d)

 

 

5,032

 

 

 

21,983

 

 

 

3,340

 

 

 

5,031

 

 

 

25,324

 

 

 

30,355

 

 

 

(6,747

)

 

2002, 2012

Cole Creek Distribution Center

 

1

 

 

 

 

3,865

 

 

 

22,534

 

 

 

298

 

 

 

3,865

 

 

 

22,832

 

 

 

26,697

 

 

 

(1,111

)

 

2015

IAH Cargo Center 1

 

1

 

 

 

 

-

 

 

 

13,267

 

 

 

546

 

 

 

-

 

 

 

13,813

 

 

 

13,813

 

 

 

(1,813

)

 

2012

Jersey Village Corporate Center

 

4

 

(d)

 

 

17,971

 

 

 

73,062

 

 

 

2,905

 

 

 

17,830

 

 

 

76,108

 

 

 

93,938

 

 

 

(9,957

)

 

2012, 2014

Kempwood Business Center

 

4

 

 

 

 

1,746

 

 

 

9,894

 

 

 

3,819

 

 

 

1,746

 

 

 

13,713

 

 

 

15,459

 

 

 

(7,878

)

 

2001

Northpark Distribution Center

 

12

 

(d)

 

 

15,015

 

 

 

37,139

 

 

 

36,813

 

 

 

15,015

 

 

 

73,952

 

 

 

88,967

 

 

 

(10,763

)

 

2006, 2008, 2012, 2013, 2014

Perimeter Distribution Center

 

2

 

 

 

 

676

 

 

 

4,604

 

 

 

1,131

 

 

 

745

 

 

 

5,666

 

 

 

6,411

 

 

 

(3,443

)

 

1999

Pine Forest Business Center

 

11

 

(d)

 

 

6,042

 

 

 

27,639

 

 

 

9,861

 

 

 

6,042

 

 

 

37,500

 

 

 

43,542

 

 

 

(18,792

)

 

1993, 1995, 2014

Pine North Distribution Center

 

2

 

 

 

 

847

 

 

 

4,800

 

 

 

2,067

 

 

 

847

 

 

 

6,867

 

 

 

7,714

 

 

 

(3,889

)

 

1999

Pinemont Distribution Center

 

2

 

 

 

 

642

 

 

 

3,636

 

 

 

1,153

 

 

 

642

 

 

 

4,789

 

 

 

5,431

 

 

 

(2,976

)

 

1999

Post Oak Business Center

 

11

 

 

 

 

2,334

 

 

 

11,655

 

 

 

10,351

 

 

 

2,334

 

 

 

22,006

 

 

 

24,340

 

 

 

(16,351

)

 

1993, 1994, 1996

Post Oak Distribution Center

 

5

 

 

 

 

1,522

 

 

 

8,758

 

 

 

6,560

 

 

 

1,522

 

 

 

15,318

 

 

 

16,840

 

 

 

(11,915

)

 

1993, 1994

Satsuma Station Distribution Center

 

1

 

(d)

 

 

3,088

 

 

 

22,389

 

 

 

190

 

 

 

3,088

 

 

 

22,579

 

 

 

25,667

 

 

 

(1,018

)

 

2015

South Loop Distribution Center

 

2

 

 

 

 

418

 

 

 

1,943

 

 

 

2,285

 

 

 

418

 

 

 

4,228

 

 

 

4,646

 

 

 

(3,106

)

 

1994

Sugarland Corporate Center

 

2

 

 

 

 

3,506

 

 

 

14,067

 

 

 

123

 

 

 

3,506

 

 

 

14,190

 

 

 

17,696

 

 

 

(1,173

)

 

2014

West by Northwest Industrial Center

 

9

 

(d)

 

 

11,316

 

 

 

46,372

 

 

 

4,386

 

 

 

11,456

 

 

 

50,618

 

 

 

62,074

 

 

 

(9,179

)

 

1993, 1994, 2012, 2014

White Street Distribution Center

 

1

 

 

 

 

469

 

 

 

2,656

 

 

 

2,544

 

 

 

469

 

 

 

5,200

 

 

 

5,669

 

 

 

(3,797

)

 

1995

Wingfoot Distribution Center

 

2

 

 

 

 

1,976

 

 

 

8,606

 

 

 

3,480

 

 

 

1,976

 

 

 

12,086

 

 

 

14,062

 

 

 

(2,229

)

 

2012, 2013

World Houston Distribution Center

 

1

 

 

 

 

1,529

 

 

 

6,326

 

 

 

91

 

 

 

1,529

 

 

 

6,417

 

 

 

7,946

 

 

 

(950

)

 

2012

Houston, Texas

 

77

 

 

 

 

80,225

 

 

 

346,374

 

 

 

92,394

 

 

 

80,292

 

 

 

438,701

 

 

 

518,993

 

 

 

(117,393

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Indianapolis, Indiana

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Airport Business Center

 

2

 

(d)

 

 

1,667

 

 

 

6,445

 

 

 

464

 

 

 

1,667

 

 

 

6,909

 

 

 

8,576

 

 

 

(577

)

 

2014

Airtech Park

 

1

 

(d)

 

 

7,305

 

 

 

29,001

 

 

 

467

 

 

 

7,305

 

 

 

29,468

 

 

 

36,773

 

 

 

(2,464

)

 

2014

Eastside Distribution Center

 

1

 

 

 

 

228

 

 

 

1,187

 

 

 

2,255

 

 

 

299

 

 

 

3,371

 

 

 

3,670

 

 

 

(2,188

)

 

1995

North by Northeast Corporate Center

 

1

 

 

 

 

1,058

 

 

 

-

 

 

 

9,302

 

 

 

1,059

 

 

 

9,301

 

 

 

10,360

 

 

 

(5,718

)

 

1995

North Plainfield Park Distribution Center

 

1

 

(d)

 

 

8,562

 

 

 

34,778

 

 

 

103

 

 

 

8,562

 

 

 

34,881

 

 

 

43,443

 

 

 

(2,925

)

 

2014

Park 100 Industrial Center

 

16

 

(d)

 

 

9,360

 

 

 

38,402

 

 

 

23,790

 

 

 

9,360

 

 

 

62,192

 

 

 

71,552

 

 

 

(27,240

)

 

1995, 2012

Park 267

 

1

 

 

 

 

3,705

 

 

 

15,695

 

 

 

948

 

 

 

3,705

 

 

 

16,643

 

 

 

20,348

 

 

 

(1,293

)

 

2014

Shadeland Industrial Center

 

3

 

 

 

 

428

 

 

 

2,431

 

 

 

3,459

 

 

 

429

 

 

 

5,889

 

 

 

6,318

 

 

 

(4,225

)

 

1995

Indianapolis, Indiana

 

26

 

 

 

 

32,313

 

 

 

127,939

 

 

 

40,788

 

 

 

32,386

 

 

 

168,654

 

 

 

201,040

 

 

 

(46,630

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jacksonville, Florida

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

JAX Cargo Center

 

1

 

 

 

 

-

 

 

 

2,892

 

 

 

176

 

 

 

-

 

 

 

3,068

 

 

 

3,068

 

 

 

(1,423

)

 

2011

Jacksonville, Florida

 

1

 

 

 

 

-

 

 

 

2,892

 

 

 

176

 

 

 

-

 

 

 

3,068

 

 

 

3,068

 

 

 

(1,423

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kansas City, Kansas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MCI Cargo Center 1

 

1

 

 

 

 

-

 

 

 

2,781

 

 

 

278

 

 

 

-

 

 

 

3,059

 

 

 

3,059

 

 

 

(2,026

)

 

2011

MCI Cargo Center 2

 

1

 

 

 

 

-

 

 

 

11,630

 

 

 

-

 

 

 

-

 

 

 

11,630

 

 

 

11,630

 

 

 

(3,975

)

 

2011

Kansas City, Kansas

 

2

 

 

 

 

-

 

 

 

14,411

 

 

 

278

 

 

 

-

 

 

 

14,689

 

 

 

14,689

 

 

 

(6,001

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Las Vegas, Nevada

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Arrowhead Commerce Center

 

15

 

(d)

 

 

30,075

 

 

 

82,214

 

 

 

2,599

 

 

 

30,075

 

 

 

84,813

 

 

 

114,888

 

 

 

(4,433

)

 

2015

Cameron Business Center

 

1

 

 

 

 

1,963

 

 

 

3,626

 

 

 

343

 

 

 

1,963

 

 

 

3,969

 

 

 

5,932

 

 

 

(206

)

 

2015

Las Vegas Corporate Center

 

6

 

 

 

 

23,118

 

 

 

51,157

 

 

 

1,846

 

 

 

13,656

 

 

 

62,465

 

 

 

76,121

 

 

 

(3,813

)

 

2014, 2015

Montessouri Distribution Center

 

1

 

 

 

 

1,039

 

 

 

2,967

 

 

 

15

 

 

 

1,039

 

 

 

2,982

 

 

 

4,021

 

 

 

(184

)

 

2015

North 15 Freeway Distribution Center

 

1

 

 

 

 

2,638

 

 

 

9,887

 

 

 

1,731

 

 

 

2,655

 

 

 

11,601

 

 

 

14,256

 

 

 

(67

)

 

2016

Pama Distribution Center

 

1

 

(d)

 

 

2,223

 

 

 

5,695

 

 

 

78

 

 

 

2,223

 

 

 

5,773

 

 

 

7,996

 

 

 

(292

)

 

2015

Sunrise Industrial Park

 

10

 

 

 

 

21,499

 

 

 

92,503

 

 

 

19,237

 

 

 

21,611

 

 

 

111,628

 

 

 

133,239

 

 

 

(13,142

)

 

2011, 2013, 2014, 2016

Valley View Distribution Center

 

1

 

 

 

 

2,420

 

 

 

258

 

 

 

8

 

 

 

2,420

 

 

 

266

 

 

 

2,686

 

 

 

(168

)

 

2015

Warm Springs Distribution Center

 

6

 

(d)

 

 

8,897

 

 

 

39,055

 

 

 

606

 

 

 

8,897

 

 

 

39,661

 

 

 

48,558

 

 

 

(2,104

)

 

2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

103


PROLOGIS, INC. AND PROLOGIS, L.P.

SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 20132016

(In thousands of U.S. dollars, as applicable)

 

  

No. of
Bldgs.

  

Encum-
brances

  Initial Cost to
Prologis
  

Costs
Capitalized
Subsequent

To
Acquisition

  Gross Amounts At Which Carried
as of December 31, 2013
  

Accumulated
Depreciation
(c)

  

Date of

Construction/

Acquisition

Description   Land  Building &
Improvements
   Land  Building &
Improvements
  Total
(a,b)
   

Dellamor

  7     6,710    35,478    920    6,710    36,398    43,108    (4,185 2011

Docks Corner SG (Phase II)

  1     16,232    19,264    4,527    16,232    23,791    40,023    (3,837 2011

Exit 10 Distribution Center

  7    (d  24,152    130,270    5,054    24,152    135,324    159,476    (37,077 2005, 2010

Exit 8A Distribution Center

  1     7,531    44,103    412    7,531    44,515    52,046    (12,335 2005

Franklin Comm Ctr

  1     9,304    23,768    81    9,304    23,849    33,153    (1,904 2011

Highway 17 55 Madis

  1     2,937    13,477    22    2,937    13,499    16,436    (1,519 2011

Kilmer Distribution Center

  4    (d  2,526    14,313    3,622    2,526    17,935    20,461    (10,885 1996

Liberty Log Ctr

  1     3,273    24,029    60    3,273    24,089    27,362    (1,748 2011

Linden Industrial

  1     1,321    7,523    355    1,321    7,878    9,199    (760 2011

Mahwah Corporate Center

  4     12,695    27,342    81    12,695    27,423    40,118    (2,738 2011

Meadow Lane

  1     1,036    6,388        1,036    6,388    7,424    (704 2011

Meadowland Distribution Center

  4    (d  10,271    57,480    4,113    10,271    61,593    71,864    (17,143 2005

Meadowland Industrial Center

  7    (d  4,190    13,469    17,202    4,190    30,671    34,861    (18,850 1996, 1998

Meadowlands ALFII

  3     3,972    18,895    1,584    3,972    20,479    24,451    (1,863 2011

Meadowlands Cross Dock

  1     1,607    5,049    659    1,607    5,708    7,315    (591 2011

Meadowlands Park

  8     6,898    41,471    1,300    6,898    42,771    49,669    (4,624 2011

Mooncreek Distribution Center

  1     3,319    13,422    15    3,319    13,437    16,756    (1,606 2011

Murray Hill Parkway

  2     2,907    12,040    84    2,907    12,124    15,031    (1,209 2011

Newark Airport I and II

  2     2,757    8,749    84    2,757    8,833    11,590    (831 2011

Orchard Hill

  1     678    3,756        678    3,756    4,434    (444 2011

Pennsauken Distribution Center

  2     192    959    509    203    1,457    1,660    (764 1999

Porete Avenue Warehouse

  1     5,386    21,869    393    5,386    22,262    27,648    (1,878 2011

Port Reading Business Park

  1    (d  3,370        24,669    3,370    24,669    28,039    (6,871 2005

Portview Commerce Center

  3    (d  9,577    21,581    19,080    9,577    40,661    50,238    (2,208 2011, 2012

Rancocas Dist Ctr

  1     4,103    17,291    99    4,103    17,390    21,493    (1,195 2012

Secaucus Dist Ctr

  2    (d  9,603        26,882    9,603    26,882    36,485    (591 2012

Skyland Crossdock

  1         9,831    1,219        11,050    11,050    (1,144 2011

South Jersey Distribution Center

  1     6,912    17,437        6,912    17,437    24,349    (251 2013

Teterboro Meadowlands 15

  1     5,837    23,214        5,837    23,214    29,051    (2,219 2011

Two South Middlesex

  1     4,389    8,410    26    4,389    8,436    12,825    (1,056 2011
 

 

 

   

 

 

  

New Jersey/New York City

  82     204,186    728,959    118,828    204,197    847,776    1,051,973    (157,158 
 

 

 

   

 

 

  

On Tarmac

          

BWI Cargo Center E

  1         10,725    108        10,833    10,833    (3,308 2011

DAY Cargo Center

  5         4,749    531        5,280    5,280    (1,031 2011

DFW Cargo Center 1

  1         35,117    754        35,871    35,871    (3,625 2011

DFW Cargo Center 2

  1         27,916    173        28,089    28,089    (2,762 2011

DFW Cargo Center East

  3         19,730    183        19,913    19,913    (3,202 2011

IAD Cargo Center 5

  1         43,060    64        43,124    43,124    (18,206 2011

IAH Cargo Center 1

  1         13,267    252        13,519    13,519    (461 2012

JAX Cargo Center

  1         2,892    115        3,007    3,007    (643 2011

JFK Cargo Center 75_77

  2         35,916    2,399        38,315    38,315    (12,914 2011

LAX Cargo Center

  3         19,217    62        19,279    19,279    (3,448 2011

MCI Cargo Center 1

  1         2,781    11        2,792    2,792    (935 2011

MCI Cargo Center 2

  1    (d      11,630            11,630    11,630    (1,843 2011

PDX Cargo Center Airtrans

  2         13,697    131        13,828    13,828    (1,958 2011

PHL Cargo Center C2

  1         11,966    26        11,992    11,992    (3,119 2011

RNO Cargo Center 10_11

  2         4,265    60        4,325    4,325    (757 2011

SEA Cargo Center North

  1         10,279    25        10,304    10,304    (4,088 2011

SEA Cargo Center South

  1         2,745    10        2,755    2,755    (2,055 2011
 

 

 

   

 

 

  

On Tarmac

  28         269,952    4,904        274,856    274,856    (64,355 
 

 

 

   

 

 

  

Orlando, Florida

          

Beltway Commerce Center

  3     17,082    25,526    5,428    17,082    30,954    48,036    (3,476 2008

Chancellor Distribution Center

  1     380    2,157    2,264    380    4,421    4,801    (2,704 1994

Chancellor Square

  3     2,087    9,708    1,668    2,087    11,376    13,463    (1,034 2011

Consulate Distribution Center

  3     4,148    23,617    2,021    4,148    25,638    29,786    (12,668 1999

Davenport Dist Ctr

  1     934    3,991    91    934    4,082    5,016    (282 2012

Jacksonville Dist Ctr

  1     1,786    8,041    192    1,786    8,233    10,019    (843 2012

Orlando Central Park

  1     1,398    5,977    39    1,398    6,016    7,414    (495 2012

Presidents Drive

  6     6,845    31,180    1,891    6,845    33,071    39,916    (3,542 2011

Sand Lake Service Center

  6     3,704    19,546    2,748    3,704    22,294    25,998    (2,297 2011
 

 

 

   

 

 

  

Orlando, Florida

  25     38,364    129,743    16,342    38,364    146,085    184,449    (27,341 
 

 

 

   

 

 

  

Phoenix, Arizona

          

24th Street Industrial Center

  2     503    2,852    1,774    561    4,568    5,129    (3,295 1994

Alameda Distribution Center

  2     3,872    14,358    2,375    3,872    16,733    20,605    (4,911 2005

Hohokam 10 Business Center

  1     1,317    7,468    1,307    1,318    8,774    10,092    (4,200 1999

Kyrene Commons Distribution Center

  3     1,093    5,475    2,429    1,093    7,904    8,997    (4,590 1992, 1998, 1999

Papago Distribution Center

  3     4,828    20,017    4,634    4,829    24,650    29,479    (8,426 1994, 2005

Phoenix Distribution Center

  1     1,441    5,578    205    1,441    5,783    7,224    (298 2012

Riverside Dist Ctr (PHX)

  1     1,783    7,130    911    1,783    8,041    9,824    (578 2011

 

 

 

 

 

 

Initial Cost to

Prologis

 

 

Costs

Capitalized

 

 

Gross Amounts at Which Carried

at December 31, 2016

 

 

 

 

 

 

 

Description

 

No. of Bldgs.

 

Encum-

brances

 

Land

 

 

Building &

Improvements

 

 

Subsequent

to

Acquisition

 

 

Land

 

 

Building &

Improvements

 

 

Total

(a,b)

 

 

Accumulated

Depreciation

(c)

 

 

Date of

Construction/

Acquisition

West One Business Center

 

4

 

 

 

 

2,468

 

 

 

13,985

 

 

 

5,614

 

 

 

2,468

 

 

 

19,599

 

 

 

22,067

 

 

 

(13,436

)

 

1996

Las Vegas, Nevada

 

46

 

 

 

 

96,340

 

 

 

301,347

 

 

 

32,077

 

 

 

87,007

 

 

 

342,757

 

 

 

429,764

 

 

 

(37,845

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Louisville, Kentucky

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cedar Grove Distribution Center

 

5

 

 

 

 

20,697

 

 

 

105,257

 

 

 

4,238

 

 

 

20,696

 

 

 

109,496

 

 

 

130,192

 

 

 

(17,257

)

 

2005, 2008, 2012, 2015

Commerce Crossings Distribution Center

 

1

 

 

 

 

1,912

 

 

 

7,649

 

 

 

284

 

 

 

1,912

 

 

 

7,933

 

 

 

9,845

 

 

 

(3,018

)

 

2005

I-65 Meyer Distribution Center

 

3

 

 

 

 

9,557

 

 

 

32,334

 

 

 

25,882

 

 

 

9,864

 

 

 

57,909

 

 

 

67,773

 

 

 

(11,615

)

 

2006, 2012, 2015

New Cut Road Distribution Center

 

1

 

 

 

 

2,711

 

 

 

11,694

 

 

 

803

 

 

 

2,711

 

 

 

12,497

 

 

 

15,208

 

 

 

(2,436

)

 

2012

River Ridge Distribution Center

 

1

 

 

 

 

8,102

 

 

 

69,329

 

 

 

303

 

 

 

8,102

 

 

 

69,632

 

 

 

77,734

 

 

 

(3,044

)

 

2015

Louisville, Kentucky

 

11

 

 

 

 

42,979

 

 

 

226,263

 

 

 

31,510

 

 

 

43,285

 

 

 

257,467

 

 

 

300,752

 

 

 

(37,370

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Memphis, Tennessee

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Delp Distribution Center

 

3

 

 

 

 

1,068

 

 

 

10,546

 

 

 

1,036

 

 

 

1,068

 

 

 

11,582

 

 

 

12,650

 

 

 

(8,384

)

 

1995

DeSoto Distribution Center

 

3

 

(d)

 

 

7,225

 

 

 

4,136

 

 

 

35,967

 

 

 

6,778

 

 

 

40,550

 

 

 

47,328

 

 

 

(9,042

)

 

2007, 2014

Memphis Industrial Park

 

2

 

 

 

 

3,252

 

 

 

14,448

 

 

 

1,693

 

 

 

3,252

 

 

 

16,141

 

 

 

19,393

 

 

 

(3,114

)

 

2012

Olive Branch Distribution Center

 

1

 

 

 

 

6,719

 

 

 

31,134

 

 

 

443

 

 

 

6,719

 

 

 

31,577

 

 

 

38,296

 

 

 

(6,611

)

 

2012

Willow Lake Distribution Center

 

1

 

 

 

 

613

 

 

 

3,474

 

 

 

109

 

 

 

613

 

 

 

3,583

 

 

 

4,196

 

 

 

(2,313

)

 

1999

Memphis, Tennessee

 

10

 

 

 

 

18,877

 

 

 

63,738

 

 

 

39,248

 

 

 

18,430

 

 

 

103,433

 

 

 

121,863

 

 

 

(29,464

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nashville, Tennessee

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CentrePointe Distribution Center

 

4

 

(d)

 

 

7,507

 

 

 

15,042

 

 

 

16,220

 

 

 

9,067

 

 

 

29,702

 

 

 

38,769

 

 

 

(1,801

)

 

2013, 2016

Elam Farms Park

 

1

 

 

 

 

2,097

 

 

 

8,386

 

 

 

1,928

 

 

 

2,097

 

 

 

10,314

 

 

 

12,411

 

 

 

(1,758

)

 

2013

I-40 Industrial Center

 

4

 

 

 

 

3,075

 

 

 

15,333

 

 

 

5,611

 

 

 

3,075

 

 

 

20,944

 

 

 

24,019

 

 

 

(9,101

)

 

1995, 1996, 1999, 2012

Interchange City Distribution Center

 

11

 

(d)

 

 

11,460

 

 

 

49,472

 

 

 

6,184

 

 

 

11,460

 

 

 

55,656

 

 

 

67,116

 

 

 

(8,538

)

 

1999, 2012, 2014

Nashville North Distribution Center

 

4

 

(d)

 

 

6,194

 

 

 

44,587

 

 

 

839

 

 

 

6,194

 

 

 

45,426

 

 

 

51,620

 

 

 

(2,479

)

 

2015

Southpark Distribution Center

 

4

 

(d)

 

 

11,834

 

 

 

47,335

 

 

 

1,583

 

 

 

11,834

 

 

 

48,918

 

 

 

60,752

 

 

 

(5,019

)

 

2013

Nashville, Tennessee

 

28

 

 

 

 

42,167

 

 

 

180,155

 

 

 

32,365

 

 

 

43,727

 

 

 

210,960

 

 

 

254,687

 

 

 

(28,696

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New Jersey/New York

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Brunswick Distribution Center

 

2

 

 

 

 

870

 

 

 

4,928

 

 

 

3,665

 

 

 

870

 

 

 

8,593

 

 

 

9,463

 

 

 

(5,681

)

 

1997

Carteret Distribution Center

 

3

 

 

 

 

39,148

 

 

 

109,124

 

 

 

892

 

 

 

39,148

 

 

 

110,016

 

 

 

149,164

 

 

 

(6,225

)

 

2015

CenterPoint Distribution Center

 

1

 

 

 

 

2,839

 

 

 

12,490

 

 

 

1,851

 

 

 

2,839

 

 

 

14,341

 

 

 

17,180

 

 

 

(3,314

)

 

2012

Clifton Distribution Center

 

1

 

 

 

 

8,064

 

 

 

12,096

 

 

 

2,555

 

 

 

8,064

 

 

 

14,651

 

 

 

22,715

 

 

 

(3,165

)

 

2010

Cranbury Business Park

 

8

 

(d)

 

 

43,056

 

 

 

91,129

 

 

 

4,561

 

 

 

43,056

 

 

 

95,690

 

 

 

138,746

 

 

 

(13,029

)

 

2012, 2014

Dellamor

 

7

 

 

 

 

6,710

 

 

 

35,478

 

 

 

2,669

 

 

 

6,710

 

 

 

38,147

 

 

 

44,857

 

 

 

(9,617

)

 

2011

Docks Corner SG (Phase II)

 

1

 

 

 

 

16,232

 

 

 

19,264

 

 

 

7,270

 

 

 

16,232

 

 

 

26,534

 

 

 

42,766

 

 

 

(9,747

)

 

2011

Edison Distribution Center

 

1

 

 

 

 

30,610

 

 

 

52,190

 

 

 

11,042

 

 

 

30,610

 

 

 

63,232

 

 

 

93,842

 

 

 

(1,789

)

 

2015

Elizabeth Seaport II

 

1

 

 

 

 

37,325

 

 

 

-

 

 

 

38,131

 

 

 

40,896

 

 

 

34,560

 

 

 

75,456

 

 

 

(49

)

 

2016

Exit 10 Distribution Center

 

7

 

(d)

 

 

35,289

 

 

 

147,492

 

 

 

12,715

 

 

 

35,289

 

 

 

160,207

 

 

 

195,496

 

 

 

(53,850

)

 

2005, 2015

Exit 7 Distribution Center

 

2

 

(d)

 

 

35,728

 

 

 

117,157

 

 

 

753

 

 

 

35,728

 

 

 

117,910

 

 

 

153,638

 

 

 

(5,139

)

 

2015

Exit 8A Distribution Center

 

2

 

(d)

 

 

21,164

 

 

 

85,257

 

 

 

4,876

 

 

 

21,164

 

 

 

90,133

 

 

 

111,297

 

 

 

(20,304

)

 

2005, 2014

Franklin Commerce Center

 

1

 

 

 

 

9,304

 

 

 

23,768

 

 

 

502

 

 

 

9,304

 

 

 

24,270

 

 

 

33,574

 

 

 

(4,090

)

 

2011

Gourmet Lane Distribution Center

 

1

 

 

 

 

13,099

 

 

 

23,539

 

 

 

1,167

 

 

 

13,099

 

 

 

24,706

 

 

 

37,805

 

 

 

(856

)

 

2015

Highway 17  55 Madis

 

1

 

 

 

 

2,937

 

 

 

13,477

 

 

 

1,115

 

 

 

2,937

 

 

 

14,592

 

 

 

17,529

 

 

 

(3,582

)

 

2011

Interstate Distribution Center

 

3

 

(d)

 

 

30,188

 

 

 

76,705

 

 

 

902

 

 

 

30,188

 

 

 

77,607

 

 

 

107,795

 

 

 

(3,682

)

 

2015

JFK Cargo Center 75_77

 

2

 

 

 

 

-

 

 

 

35,916

 

 

 

5,489

 

 

 

-

 

 

 

41,405

 

 

 

41,405

 

 

 

(19,902

)

 

2011

Kilmer Distribution Center

 

4

 

(d)

 

 

2,526

 

 

 

14,313

 

 

 

5,007

 

 

 

2,526

 

 

 

19,320

 

 

 

21,846

 

 

 

(12,851

)

 

1996

Liberty Log Center

 

1

 

 

 

 

3,273

 

 

 

24,029

 

 

 

372

 

 

 

3,273

 

 

 

24,401

 

 

 

27,674

 

 

 

(3,771

)

 

2011

Linden Industrial Center

 

1

 

(d)

 

 

17,332

 

 

 

24,264

 

 

 

1,397

 

 

 

17,332

 

 

 

25,661

 

 

 

42,993

 

 

 

(920

)

 

2015

Lister Distribution Center

 

1

 

 

 

 

16,855

 

 

 

21,802

 

 

 

1,422

 

 

 

16,855

 

 

 

23,224

 

 

 

40,079

 

 

 

(768

)

 

2015

Maspeth Distribution Center

 

1

 

(d)

 

 

23,784

 

 

 

10,849

 

 

 

278

 

 

 

23,784

 

 

 

11,127

 

 

 

34,911

 

 

 

(364

)

 

2015

Meadow Lane

 

1

 

 

 

 

1,036

 

 

 

6,388

 

 

 

27

 

 

 

1,036

 

 

 

6,415

 

 

 

7,451

 

 

 

(1,518

)

 

2011

Meadowland Distribution Center

 

6

 

(d)

 

 

26,379

 

 

 

83,224

 

 

 

7,428

 

 

 

26,379

 

 

 

90,652

 

 

 

117,031

 

 

 

(25,559

)

 

2005, 2015

Meadowland Industrial Center

 

7

 

(d)

 

 

4,190

 

 

 

13,469

 

 

 

20,655

 

 

 

4,190

 

 

 

34,124

 

 

 

38,314

 

 

 

(22,140

)

 

1996, 1998

Meadowlands ALFII

 

3

 

 

 

 

3,972

 

 

 

18,895

 

 

 

3,427

 

 

 

3,972

 

 

 

22,322

 

 

 

26,294

 

 

 

(4,846

)

 

2011

Meadowlands Park

 

8

 

 

 

 

6,898

 

 

 

41,471

 

 

 

1,998

 

 

 

6,898

 

 

 

43,469

 

 

 

50,367

 

 

 

(10,405

)

 

2011

Mooncreek Distribution Center

 

1

 

 

 

 

3,319

 

 

 

13,422

 

 

 

15

 

 

 

3,319

 

 

 

13,437

 

 

 

16,756

 

 

 

(3,429

)

 

2011

Murray Hill Parkway

 

2

 

 

 

 

2,907

 

 

 

12,040

 

 

 

525

 

 

 

2,907

 

 

 

12,565

 

 

 

15,472

 

 

 

(2,655

)

 

2011

Newark Airport I  and  II

 

2

 

 

 

 

19,045

 

 

 

21,936

 

 

 

901

 

 

 

19,045

 

 

 

22,837

 

 

 

41,882

 

 

 

(1,882

)

 

2011, 2015

Orchard Hill

 

1

 

 

 

 

678

 

 

 

3,756

 

 

 

20

 

 

 

678

 

 

 

3,776

 

 

 

4,454

 

 

 

(955

)

 

2011

Pennsauken Distribution Center

 

2

 

 

 

 

192

 

 

 

959

 

 

 

655

 

 

 

203

 

 

 

1,603

 

 

 

1,806

 

 

 

(958

)

 

1999

Perth Amboy Corporate Park

 

2

 

(d)

 

 

54,701

 

 

 

66,534

 

 

 

4,365

 

 

 

54,701

 

 

 

70,899

 

 

 

125,600

 

 

 

(2,554

)

 

2015

Port Reading Business Park

 

10

 

(d)

 

 

211,931

 

 

 

256,740

 

 

 

119,387

 

 

 

201,814

 

 

 

386,244

 

 

 

588,058

 

 

 

(27,772

)

 

2005, 2014, 2015

Ports Jersey City Distribution Center

 

1

 

 

 

 

34,133

 

 

 

-

 

 

 

61,057

 

 

 

34,504

 

 

 

60,686

 

 

 

95,190

 

 

 

(4,454

)

 

2014

Portview Commerce Center

 

3

 

(d)

 

 

9,577

 

 

 

21,581

 

 

 

19,134

 

 

 

9,798

 

 

 

40,494

 

 

 

50,292

 

 

 

(5,710

)

 

2011, 2012

Secaucus Distribution Center

 

2

 

(d)

 

 

9,603

 

 

 

-

 

 

 

26,905

 

 

 

9,603

 

 

 

26,905

 

 

 

36,508

 

 

 

(3,142

)

 

2012

Skyland Crossdock

 

1

 

 

 

 

-

 

 

 

9,831

 

 

 

1,308

 

 

 

-

 

 

 

11,139

 

 

 

11,139

 

 

 

(3,018

)

 

2011

South Jersey Distribution Center

 

1

 

 

 

 

6,912

 

 

 

17,437

 

 

 

216

 

 

 

6,912

 

 

 

17,653

 

 

 

24,565

 

 

 

(2,317

)

 

2013

Teterboro Meadowlands 15

 

2

 

 

 

 

18,169

 

 

 

34,604

 

 

 

226

 

 

 

18,169

 

 

 

34,830

 

 

 

52,999

 

 

 

(5,752

)

 

2011, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

104


PROLOGIS, INC. AND PROLOGIS, L.P.

SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 20132016

(In thousands of U.S. dollars, as applicable)

 

  

No. of
Bldgs.

  

Encum-
brances

  Initial Cost to
Prologis
  

Costs
Capitalized
Subsequent

To
Acquisition

  Gross Amounts At Which Carried
as of December 31, 2013
  

Accumulated
Depreciation
(c)

  

Date of

Construction/

Acquisition

Description   Land  Building &
Improvements
   Land  Building &
Improvements
  Total
(a,b)
   

University Dr Distribution Center

  1     683    2,735    234    683    2,969    3,652    (880 2005

Watkins Street Distribution Center

  1     242    1,375    530    243    1,904    2,147    (1,262 1995

Wilson Drive Distribution Center

  1     1,273    5,093    902    1,273    5,995    7,268    (1,677 2005
 

 

 

   

 

 

  

Phoenix, Arizona

  16     17,035    72,081    15,301    17,096    87,321    104,417    (30,117 
 

 

 

   

 

 

  

Portland, Oregon

          

Clackamas Dist Ctr

  1     1,540    6,420    37    1,540    6,457    7,997    (436 2012

PDX Corporate Center North Phase II

  1    (d)(e)   5,051    9,895    1,761    5,051    11,656    16,707    (1,753 2008

Southshore Corporate Center

  1    (d)(e)   3,521    13,915    (279  3,578    13,579    17,157    (3,376 2006

Wilsonville Corporate Center

  3     1,570        8,034    1,588    8,016    9,604    (4,617 1995
 

 

 

   

 

 

  

Portland, Oregon

  6     11,682    30,230    9,553    11,757    39,708    51,465    (10,182 
 

 

 

   

 

 

  

Reno, Nevada

          

Damonte Ranch Dist Ctr

  2    (d  7,056    29,742    514    7,056    30,256    37,312    (2,077 2012

Golden Valley Distribution Center

  1     940    13,686    2,167    2,415    14,378    16,793    (4,051 2005

Meredith Kleppe Business Center

  1     526    753    3,646    526    4,399    4,925    (2,969 1993

Packer Way Distribution Center

  2     506    2,879    1,710    506    4,589    5,095    (3,321 1993

Tahoe-Reno Industrial Center

  1     3,281        23,732    3,281    23,732    27,013    (4,120 2007

Vista Industrial Park

  6    (d  5,923    26,807    9,953    5,923    36,760    42,683    (16,181 1994, 2001
 

 

 

   

 

 

  

Reno, Nevada

  13     18,232    73,867    41,722    19,707    114,114    133,821    (32,719 
 

 

 

   

 

 

  

Salt Lake City, Utah

          

Crossroads Corp Ctr

  1     1,549    6,549    70    1,549    6,619    8,168    (464 2012
 

 

 

   

 

 

  

Salt Lake City, Utah

  1     1,549    6,549    70    1,549    6,619    8,168    (464 
 

 

 

   

 

 

  

San Antonio, Texas

          

Director Drive Dist Ctr

  2     1,271    5,455    141    1,271    5,596    6,867    (465 2012

Eisenhauer Distribution Center

  3    (d  3,693    15,848    351    3,693    16,199    19,892    (1,150 2012

Interchange East Dist Ctr

  1     1,496    6,535    221    1,496    6,756    8,252    (711 2012

Macro Distribution Center

  3     1,705    9,024    3,034    1,705    12,058    13,763    (4,126 2002

Perrin Creek Corporate Center

  2    (d  5,454    22,689    86    5,454    22,775    28,229    (1,530 2012

Rittiman East Industrial Park

  2     4,848    19,223    2,722    4,848    21,945    26,793    (5,240 2006

Rittiman West Industrial Park

  2     1,230    4,950    1,049    1,230    5,999    7,229    (1,640 2006

San Antonio Distribution Center I

  6     1,203    4,648    7,194    1,203    11,842    13,045    (8,365 1993

San Antonio Distribution Center II

  3     885        7,508    885    7,508    8,393    (4,048 1994

San Antonio Distribution Center III

  2     1,408    7,531    187    1,412    7,714    9,126    (2,554 1996, 2012

Tri-County Distribution Center

  2    (d  3,183    12,743    627    3,184    13,369    16,553    (2,845 2007

Valley Industrial Center

  1     363        4,844    363    4,844    5,207    (2,581 1997
 

 

 

   

 

 

  

San Antonio, Texas

  29     26,739    108,646    27,964    26,744    136,605    163,349    (35,255 
 

 

 

   

 

 

  

San Francisco Bay Area, California

          

Acer Distribution Center

  1    (d  3,368    15,139    209    3,368    15,348    18,716    (1,740 2011

Alvarado Business Center

  10    (d  20,739    62,595    5,634    20,739    68,229    88,968    (19,250 2005

Arques Business Pk

  2     4,895    12,848    1,661    4,895    14,509    19,404    (1,345 2011

Bayshore Distribution Center

  1     6,450    15,049    2,447    6,450    17,496    23,946    (1,825 2011

Bayside Corporate Center

  7     4,365        20,532    4,365    20,532    24,897    (12,414 1995, 1996

Bayside Plaza I

  12     5,212    18,008    7,593    5,216    25,597    30,813    (16,486 1993

Bayside Plaza II

  2     634        3,459    634    3,459    4,093    (2,327 1994

Brennan Distribution

  1     1,912    7,553    58    1,912    7,611    9,523    (859 2011

Component Drive Ind Port

  3     2,829    13,532    533    2,829    14,065    16,894    (1,547 2011

Cypress

  1     1,065    5,103    46    1,065    5,149    6,214    (563 2011

Dado Distribution

  1     2,194    11,079    257    2,194    11,336    13,530    (1,333 2011

Doolittle Distribution Center

  1     2,843    18,849    712    2,843    19,561    22,404    (1,830 2011

Dowe Industrial Center

  2    (d  5,884    20,400    727    5,884    21,127    27,011    (2,377 2011

Dublin Ind Portfolio

  1     3,241    15,951    993    3,241    16,944    20,185    (1,570 2011

East Bay Doolittle

  1     4,015    15,988    1,113    4,015    17,101    21,116    (1,956 2011

East Grand Airfreight

  2     3,977    11,730    144    3,977    11,874    15,851    (1,086 2011

Edgewater Industrial Center

  1     6,630    31,153    1,745    6,630    32,898    39,528    (3,612 2011

Eigenbrodt Way Distribution Center

  1     393    2,228    628    393    2,856    3,249    (1,930 1993

Gateway Corporate Center

  10     6,736    24,747    9,783    6,744    34,522    41,266    (22,190 1993

Hayward Commerce Center

  4     1,933    10,955    3,625    1,933    14,580    16,513    (9,568 1993

Hayward Distribution Center

  2     831    5,510    3,117    1,038    8,420    9,458    (6,090 1993

Hayward Ind—Hathaway

  2     6,177    8,271    29    6,177    8,300    14,477    (2,336 2011

Hayward Industrial Center

  13     4,481    25,393    8,499    4,481    33,892    38,373    (22,621 1993

Junction Industrial Park

  4     7,658    39,106    1,098    7,658    40,204    47,862    (3,714 2011

Lakeside BC

  2     7,280    21,116    1,039    7,280    22,155    29,435    (1,706 2011

Laurelwood Drive

  2     3,941    13,161    255    3,941    13,416    17,357    (1,217 2011

Lawrence SSF

  1     2,189    7,498    91    2,189    7,589    9,778    (809 2011

Livermore Distribution Center

  4     8,992    26,976    2,236    8,992    29,212    38,204    (8,638 2005

Manzanita R and D

  1     1,420    3,454    399    1,420    3,853    5,273    (335 2011

Martin-Scott Ind Port

  2     3,546    9,717    303    3,546    10,020    13,566    (1,110 2011

Moffett Distribution

  7     16,889    30,590    386    16,889    30,976    47,865    (3,030 2011

 

 

 

 

 

 

Initial Cost to

Prologis

 

 

Costs

Capitalized

 

 

Gross Amounts at Which Carried

at December 31, 2016

 

 

 

 

 

 

 

Description

 

No. of Bldgs.

 

Encum-

brances

 

Land

 

 

Building &

Improvements

 

 

Subsequent

to

Acquisition

 

 

Land

 

 

Building &

Improvements

 

 

Total

(a,b)

 

 

Accumulated

Depreciation

(c)

 

 

Date of

Construction/

Acquisition

Two South Middlesex

 

1

 

 

 

 

4,389

 

 

 

8,410

 

 

 

1,030

 

 

 

4,389

 

 

 

9,440

 

 

 

13,829

 

 

 

(2,408

)

 

2011

New Jersey/New York

 

108

 

 

 

 

814,364

 

 

 

1,585,964

 

 

 

377,910

 

 

 

808,421

 

 

 

1,969,817

 

 

 

2,778,238

 

 

 

(314,169

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Orlando, Florida

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beltway Commerce Center

 

4

 

 

 

 

18,835

 

 

 

25,526

 

 

 

15,316

 

 

 

18,840

 

 

 

40,837

 

 

 

59,677

 

 

 

(7,093

)

 

2008, 2015

Chancellor Distribution Center

 

1

 

 

 

 

380

 

 

 

2,157

 

 

 

2,615

 

 

 

380

 

 

 

4,772

 

 

 

5,152

 

 

 

(3,391

)

 

1994

Chancellor Square

 

3

 

 

 

 

2,087

 

 

 

9,708

 

 

 

2,320

 

 

 

687

 

 

 

13,428

 

 

 

14,115

 

 

 

(2,928

)

 

2011

Consulate Distribution Center

 

5

 

(d)

 

 

6,105

 

 

 

31,550

 

 

 

3,419

 

 

 

6,105

 

 

 

34,969

 

 

 

41,074

 

 

 

(16,254

)

 

1999, 2014

Crowne Pointe Park

 

1

 

 

 

 

3,888

 

 

 

7,497

 

 

 

1,592

 

 

 

3,888

 

 

 

9,089

 

 

 

12,977

 

 

 

(434

)

 

2015

Davenport Distribution Center

 

1

 

 

 

 

934

 

 

 

3,991

 

 

 

102

 

 

 

934

 

 

 

4,093

 

 

 

5,027

 

 

 

(763

)

 

2012

Lake Mary Logistics Center

 

1

 

 

 

 

1,374

 

 

 

5,101

 

 

 

185

 

 

 

1,374

 

 

 

5,286

 

 

 

6,660

 

 

 

(277

)

 

2015

Orlando Airport Park

 

1

 

 

 

 

5,259

 

 

 

-

 

 

 

17,025

 

 

 

5,724

 

 

 

16,560

 

 

 

22,284

 

 

 

(104

)

 

2016

Orlando Central Park

 

1

 

 

 

 

1,398

 

 

 

5,977

 

 

 

416

 

 

 

1,398

 

 

 

6,393

 

 

 

7,791

 

 

 

(1,378

)

 

2012

Orlando Corporate Center

 

6

 

(d)

 

 

8,061

 

 

 

33,030

 

 

 

1,544

 

 

 

8,061

 

 

 

34,574

 

 

 

42,635

 

 

 

(3,061

)

 

2014

Presidents Drive

 

6

 

 

 

 

6,845

 

 

 

31,180

 

 

 

4,240

 

 

 

6,845

 

 

 

35,420

 

 

 

42,265

 

 

 

(8,892

)

 

2011

Sand Lake Service Center

 

6

 

 

 

 

3,704

 

 

 

19,546

 

 

 

4,035

 

 

 

3,704

 

 

 

23,581

 

 

 

27,285

 

 

 

(5,793

)

 

2011

Orlando, Florida

 

36

 

 

 

 

58,870

 

 

 

175,263

 

 

 

52,809

 

 

 

57,940

 

 

 

229,002

 

 

 

286,942

 

 

 

(50,368

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Phoenix, Arizona

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

24th Street Industrial Center

 

2

 

 

 

 

503

 

 

 

2,852

 

 

 

2,042

 

 

 

561

 

 

 

4,836

 

 

 

5,397

 

 

 

(3,781

)

 

1994

Alameda Distribution Center

 

2

 

 

 

 

3,872

 

 

 

14,358

 

 

 

3,184

 

 

 

3,872

 

 

 

17,542

 

 

 

21,414

 

 

 

(6,945

)

 

2005

Brookridge Distribution Center

 

1

 

(d)

 

 

3,897

 

 

 

15,153

 

 

 

241

 

 

 

3,897

 

 

 

15,394

 

 

 

19,291

 

 

 

(1,357

)

 

2014

Hohokam 10 Business Center

 

1

 

 

 

 

1,317

 

 

 

7,468

 

 

 

1,581

 

 

 

1,318

 

 

 

9,048

 

 

 

10,366

 

 

 

(5,355

)

 

1999

Kyrene Commons Distribution Center

 

3

 

 

 

 

1,093

 

 

 

5,475

 

 

 

2,909

 

 

 

1,093

 

 

 

8,384

 

 

 

9,477

 

 

 

(5,550

)

 

1992, 1998, 1999

Papago Distribution Center

 

3

 

 

 

 

4,828

 

 

 

20,017

 

 

 

5,275

 

 

 

4,829

 

 

 

25,291

 

 

 

30,120

 

 

 

(11,790

)

 

1994, 2005

Phoenix Distribution Center

 

1

 

 

 

 

1,441

 

 

 

5,578

 

 

 

1,026

 

 

 

1,441

 

 

 

6,604

 

 

 

8,045

 

 

 

(978

)

 

2012

Sky Harbor Distribution Center

 

3

 

 

 

 

-

 

 

 

14,023

 

 

 

2,714

 

 

 

-

 

 

 

16,737

 

 

 

16,737

 

 

 

(336

)

 

2016

University Dr Distribution Center

 

1

 

 

 

 

683

 

 

 

2,735

 

 

 

825

 

 

 

683

 

 

 

3,560

 

 

 

4,243

 

 

 

(1,298

)

 

2005

Watkins Street Distribution Center

 

1

 

 

 

 

242

 

 

 

1,375

 

 

 

801

 

 

 

243

 

 

 

2,175

 

 

 

2,418

 

 

 

(1,496

)

 

1995

Wilson Drive Distribution Center

 

1

 

 

 

 

1,273

 

 

 

5,093

 

 

 

992

 

 

 

1,273

 

 

 

6,085

 

 

 

7,358

 

 

 

(2,499

)

 

2005

Phoenix, Arizona

 

19

 

 

 

 

19,149

 

 

 

94,127

 

 

 

21,590

 

 

 

19,210

 

 

 

115,656

 

 

 

134,866

 

 

 

(41,385

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Portland, Oregon

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Clackamas Distribution Center

 

5

 

(d)

 

 

8,828

 

 

 

28,192

 

 

 

590

 

 

 

8,828

 

 

 

28,782

 

 

 

37,610

 

 

 

(2,907

)

 

2012, 2014

PDX Cargo Center Airtrans

 

2

 

 

 

 

-

 

 

 

13,697

 

 

 

246

 

 

 

-

 

 

 

13,943

 

 

 

13,943

 

 

 

(4,284

)

 

2011

PDX Corporate Center East

 

4

 

(d)

 

 

7,126

 

 

 

21,303

 

 

 

352

 

 

 

7,126

 

 

 

21,655

 

 

 

28,781

 

 

 

(1,743

)

 

2014

PDX Corporate Center North Phase II

 

4

 

(d)(e)

 

 

10,293

 

 

 

25,461

 

 

 

2,155

 

 

 

10,293

 

 

 

27,616

 

 

 

37,909

 

 

 

(4,266

)

 

2008, 2014

Portland Northwest Corporate Park

 

10

 

 

 

 

13,666

 

 

 

40,999

 

 

 

1,068

 

 

 

13,666

 

 

 

42,067

 

 

 

55,733

 

 

 

(2,171

)

 

2015

Southshore Corporate Center

 

3

 

(d)

 

 

9,480

 

 

 

24,173

 

 

 

11,154

 

 

 

8,143

 

 

 

36,664

 

 

 

44,807

 

 

 

(6,029

)

 

2006, 2014, 2015

Portland, Oregon

 

28

 

 

 

 

49,393

 

 

 

153,825

 

 

 

15,565

 

 

 

48,056

 

 

 

170,727

 

 

 

218,783

 

 

 

(21,400

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reno, Nevada

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Damonte Ranch Distribution Center

 

3

 

(d)

 

 

8,764

 

 

 

36,766

 

 

 

1,317

 

 

 

8,764

 

 

 

38,083

 

 

 

46,847

 

 

 

(6,238

)

 

2012, 2014

Golden Valley Distribution Center

 

1

 

 

 

 

940

 

 

 

13,686

 

 

 

4,237

 

 

 

2,415

 

 

 

16,448

 

 

 

18,863

 

 

 

(5,720

)

 

2005

Reno Aircenter

 

1

 

 

 

 

544

 

 

 

12,292

 

 

 

1,686

 

 

 

544

 

 

 

13,978

 

 

 

14,522

 

 

 

(571

)

 

2015

RNO Cargo Center 10_11

 

2

 

 

 

 

-

 

 

 

4,265

 

 

 

405

 

 

 

-

 

 

 

4,670

 

 

 

4,670

 

 

 

(1,658

)

 

2011

Sage Point Business Park

 

1

 

 

 

 

1,705

 

 

 

6,821

 

 

 

457

 

 

 

1,705

 

 

 

7,278

 

 

 

8,983

 

 

 

(368

)

 

2015

Stead Distribution Center

 

1

 

(d)

 

 

1,046

 

 

 

19,330

 

 

 

607

 

 

 

1,046

 

 

 

19,937

 

 

 

20,983

 

 

 

(931

)

 

2015

Tahoe-Reno Industrial Center

 

3

 

(d)

 

 

6,705

 

 

 

30,381

 

 

 

59,889

 

 

 

6,704

 

 

 

90,271

 

 

 

96,975

 

 

 

(8,571

)

 

2007, 2015

Vista Industrial Park

 

6

 

(d)

 

 

5,923

 

 

 

26,807

 

 

 

10,940

 

 

 

5,923

 

 

 

37,747

 

 

 

43,670

 

 

 

(20,665

)

 

1994, 2001

Reno, Nevada

 

18

 

 

 

 

25,627

 

 

 

150,348

 

 

 

79,538

 

 

 

27,101

 

 

 

228,412

 

 

 

255,513

 

 

 

(44,722

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

San Antonio, Texas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Coliseum Distribution Center

 

2

 

(d)

 

 

1,607

 

 

 

6,548

 

 

 

94

 

 

 

1,607

 

 

 

6,642

 

 

 

8,249

 

 

 

(565

)

 

2014

Cornerstone Distribution Center

 

1

 

 

 

 

2,173

 

 

 

-

 

 

 

14,823

 

 

 

2,386

 

 

 

14,610

 

 

 

16,996

 

 

 

(191

)

 

2016

Director Drive Distribution Center

 

2

 

 

 

 

1,271

 

 

 

5,455

 

 

 

299

 

 

 

1,271

 

 

 

5,754

 

 

 

7,025

 

 

 

(1,268

)

 

2012

Downtown Distribution Center

 

1

 

 

 

 

579

 

 

 

2,347

 

 

 

-

 

 

 

579

 

 

 

2,347

 

 

 

2,926

 

 

 

(206

)

 

2014

Eisenhauer Distribution Center

 

5

 

(d)

 

 

5,042

 

 

 

21,383

 

 

 

1,592

 

 

 

5,042

 

 

 

22,975

 

 

 

28,017

 

 

 

(3,625

)

 

2012, 2014

Interchange East Distribution Center

 

1

 

 

 

 

1,496

 

 

 

6,535

 

 

 

234

 

 

 

1,496

 

 

 

6,769

 

 

 

8,265

 

 

 

(1,872

)

 

2012

Macro Distribution Center

 

4

 

 

 

 

2,535

 

 

 

12,395

 

 

 

4,887

 

 

 

2,535

 

 

 

17,282

 

 

 

19,817

 

 

 

(6,481

)

 

2002, 2014

Perrin Creek Corporate Center

 

10

 

(d)

 

 

9,770

 

 

 

40,193

 

 

 

1,526

 

 

 

9,770

 

 

 

41,719

 

 

 

51,489

 

 

 

(5,552

)

 

2012, 2014

Rittiman East Industrial Park

 

2

 

 

 

 

4,848

 

 

 

19,223

 

 

 

3,292

 

 

 

4,848

 

 

 

22,515

 

 

 

27,363

 

 

 

(8,173

)

 

2006

San Antonio Distribution Center II

 

3

 

 

 

 

885

 

 

 

-

 

 

 

7,893

 

 

 

885

 

 

 

7,893

 

 

 

8,778

 

 

 

(4,834

)

 

1994

San Antonio Distribution Center III

 

3

 

(d)

 

 

3,154

 

 

 

12,876

 

 

 

211

 

 

 

3,154

 

 

 

13,087

 

 

 

16,241

 

 

 

(1,526

)

 

2012, 2014

Tri-County Distribution Center

 

4

 

(d)

 

 

6,888

 

 

 

27,718

 

 

 

2,269

 

 

 

6,889

 

 

 

29,986

 

 

 

36,875

 

 

 

(5,729

)

 

2007, 2014

San Antonio, Texas

 

38

 

 

 

 

40,248

 

 

 

154,673

 

 

 

37,120

 

 

 

40,462

 

 

 

191,579

 

 

 

232,041

 

 

 

(40,022

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

San Francisco Bay Area, California

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Acer Distribution Center

 

1

 

(d)

 

 

3,368

 

 

 

15,139

 

 

 

277

 

 

 

3,368

 

 

 

15,416

 

 

 

18,784

 

 

 

(3,777

)

 

2011

Alvarado Business Center

 

10

 

 

 

 

20,739

 

 

 

62,595

 

 

 

7,995

 

 

 

20,739

 

 

 

70,590

 

 

 

91,329

 

 

 

(27,825

)

 

2005

105


PROLOGIS, INC. AND PROLOGIS, L.P.

SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 20132016

(In thousands of U.S. dollars, as applicable)

 

  

No. of
Bldgs.

  

Encum-
brances

  Initial Cost to
Prologis
  

Costs
Capitalized
Subsequent

To
Acquisition

  Gross Amounts At Which Carried
as of December 31, 2013
  

Accumulated
Depreciation
(c)

  

Date of

Construction/

Acquisition

Description   Land  Building &
Improvements
   Land  Building &
Improvements
  Total
(a,b)
   

Moffett Park - Bordeaux R and D

  4     6,663    19,552    223    6,663    19,775    26,438    (2,096 2011

Oakland Industrial Center

  3    (d  8,234    24,704    2,539    8,235    27,242    35,477    (7,612 2005

Overlook Distribution Center

  1     1,573    8,915    575    1,573    9,490    11,063    (4,497 1999

Pacific Business Center

  2     6,075    26,260    3,439    6,075    29,699    35,774    (2,685 2011

Pacific Commons Industrial Center

  5    (d)(e)   25,784    77,594    2,160    25,805    79,733    105,538    (22,450 2005

Pacific Industrial Center

  6    (d  21,675    65,083    3,423    21,675    68,506    90,181    (19,362 2005

San Leandro Distribution Center

  3     1,387    7,862    2,779    1,387    10,641    12,028    (7,132 1993

Shoreline Business Center

  8     4,328    16,101    5,454    4,328    21,555    25,883    (13,136 1993

Silicon Valley R and D

  4     6,059    21,762    981    6,059    22,743    28,802    (2,327 2011

South Bay Brokaw

  3     4,014    23,296    690    4,014    23,986    28,000    (2,266 2011

South Bay Junction

  2     3,662    21,120    672    3,662    21,792    25,454    (2,049 2011

South Bay Lundy

  2     6,500    33,642    2,145    6,500    35,787    42,287    (3,330 2011

Spinnaker Business Center

  12     7,043    25,220    11,103    7,043    36,323    43,366    (22,216 1993

Thornton Business Center

  4     2,047    11,706    3,939    2,066    15,626    17,692    (9,626 1993

TriPoint Bus Park

  4     9,057    23,727    3,083    9,057    26,810    35,867    (2,298 2011

Utah Airfreight

  1     10,657    42,842    856    10,657    43,698    54,355    (4,060 2011

Wiegman Road

  1     2,285    12,531    294    2,285    12,825    15,110    (1,019 2011

Willow Park Ind - Ph 1

  7     6,628    18,118    436    6,628    18,554    25,182    (2,319 2011

Willow Park Ind - Ph 2 and 3

  4     15,086    27,044    1,329    15,086    28,373    43,459    (3,233 2011

Willow Park Ind - Ph 4 5 7 8

  8     12,131    65,486    2,535    12,131    68,021    80,152    (6,707 2011

Willow Park Ind - Ph 6

  2     3,696    20,929    2,074    3,696    23,003    26,699    (2,503 2011

Yosemite Drive

  1     2,439    12,068    271    2,439    12,339    14,778    (1,119 2011

Zanker-Charcot Industrial

  5     4,867    28,750    876    4,867    29,626    34,493    (2,714 2011
 

 

 

   

 

 

  

San Francisco Bay Area, California

  196     324,609    1,138,011    131,227    324,869    1,268,978    1,593,847    (304,170 
 

 

 

   

 

 

  

Savannah, Georgia

          

Morgan Bus Ctr

  1     2,161    14,680    532    2,161    15,212    17,373    (1,201 2011
 

 

 

   

 

 

  

Savannah, Georgia

  1     2,161    14,680    532    2,161    15,212    17,373    (1,201 
 

 

 

   

 

 

  

Seattle, Washington

          

East Valley Warehouse

  1    (d)(e)   10,472    57,825    792    10,472    58,617    69,089    (4,807 2011

Harvest Business Park

  3    (e  3,541    18,827    650    3,541    19,477    23,018    (1,744 2011

Kent Centre Corporate Park

  4    (e  5,397    21,599    552    5,397    22,151    27,548    (2,030 2011

Kingsport Industrial Park

  7     16,605    48,942    1,941    16,800    50,688    67,488    (6,109 2011

Northwest Distribution Center

  3    (e  5,114    24,090    1,090    5,114    25,180    30,294    (2,278 2011

ProLogis Park SeaTac

  2    (d  12,230    14,170    3,453    12,457    17,396    29,853    (2,476 2008

Puget Sound Airfreight

  1     1,408    4,201    92    1,408    4,293    5,701    (410 2011

Renton Northwest Corp. Park

  4     5,102    17,946    263    5,102    18,209    23,311    (2,002 2011

Sumner Landing

  1    (e  10,332    32,545    564    10,332    33,109    43,441    (2,399 2011
 

 

 

   

 

 

  

Seattle, Washington

  26     70,201    240,145    9,397    70,623    249,120    319,743    (24,255 
 

 

 

   

 

 

  

South Florida

          

Airport West Distribution Center

  2    (d  1,253    3,825    4,079    1,974    7,183    9,157    (3,413 1995, 1998

Beacon Centre

  18     37,998    196,004    5,299    37,998    201,303    239,301    (17,468 2011

Beacon Industrial Park

  8    (d  20,139    68,093    2,870    20,139    70,963    91,102    (6,006 2011

Beacon Lakes

  1     3,312        9,958    3,312    9,958    13,270    (8 2012

Blue Lagoon Business Park

  2    (d  9,189    29,451    1,193    9,189    30,644    39,833    (2,871 2011

Boca Distribution Center

  1     1,474    5,918    1,060    1,474    6,978    8,452    (1,705 2006

CenterPort Distribution Center

  5    (d  8,802    22,504    2,301    8,922    24,685    33,607    (7,545 1999, 2012

Copans Distribution Center

  2     504    2,857    1,110    504    3,967    4,471    (2,002 1997, 1998

Dade Distribution Center

  1     2,589    14,669    390    2,589    15,059    17,648    (4,325 2005

Dolphin Distribution Center

  1     2,716    7,364    852    2,716    8,216    10,932    (983 2011

International Corp Park

  2     10,596    15,898    1,543    10,596    17,441    28,037    (1,959 2010

Marlin Distribution Center

  1     1,844    6,603    32    1,844    6,635    8,479    (748 2011

Miami Airport Business Center

  6     11,173    45,921    1,979    11,173    47,900    59,073    (4,609 2011

North Andrews Distribution Center

  1     698    3,956    335    698    4,291    4,989    (2,633 1994

Pompano Beach Distribution Center

  3     11,035    15,136    3,418    11,035    18,554    29,589    (2,164 2008

Pompano Center of Commer

  5     5,171    13,930    260    5,171    14,190    19,361    (1,210 2011

Port Lauderdale Distribution Center

  3    (d  7,118    10,034    9,427    8,427    18,152    26,579    (4,321 1997, 2012

ProLogis Park I-595

  2    (d  1,998    11,326    750    1,999    12,075    14,074    (4,479 2003

Sawgrass Distribution Center

  2     10,016        15,024    10,016    15,024    25,040    (1,403 2009

Tarpon Distribution Center

  1     1,847    6,451    147    1,847    6,598    8,445    (823 2011
 

 

 

   

 

 

  

South Florida

  67     149,472    479,940    62,027    151,623    539,816    691,439    (70,675 
 

 

 

   

 

 

  

Southern California

          

Anaheim Industrial Center

  12    (d  31,086    57,836    2,399    31,086    60,235    91,321    (16,857 2005

Anaheim Industrial Property

  1     5,096    10,816    14    5,096    10,830    15,926    (989 2011

Arrow Ind. Park

  2    (d  4,840    8,120    637    4,840    8,757    13,597    (714 2012

Artesia Industrial

  19     68,691    145,492    3,839    68,691    149,331    218,022    (15,097 2011

Bell Ranch Distribution

  4     5,539    23,092    1,577    5,539    24,669    30,208    (2,418 2011

Brea Ind Ctr

  1     2,488    4,062    37    2,488    4,099    6,587    (298 2012

California Commerce Center

  4    (d  16,432    26,531    1,917    16,432    28,448    44,880    (2,049 2012

 

 

 

 

 

 

Initial Cost to

Prologis

 

 

Costs

Capitalized

 

 

Gross Amounts at Which Carried

at December 31, 2016

 

 

 

 

 

 

 

Description

 

No. of Bldgs.

 

Encum-

brances

 

Land

 

 

Building &

Improvements

 

 

Subsequent

to

Acquisition

 

 

Land

 

 

Building &

Improvements

 

 

Total

(a,b)

 

 

Accumulated

Depreciation

(c)

 

 

Date of

Construction/

Acquisition

Bayshore Distribution Center

 

1

 

 

 

 

6,450

 

 

 

15,049

 

 

 

2,696

 

 

 

6,450

 

 

 

17,745

 

 

 

24,195

 

 

 

(4,679

)

 

2011

Bayside Corporate Center

 

7

 

 

 

 

4,365

 

 

 

-

 

 

 

23,031

 

 

 

4,365

 

 

 

23,031

 

 

 

27,396

 

 

 

(14,496

)

 

1995, 1996

Bayside Plaza I

 

12

 

 

 

 

5,212

 

 

 

18,008

 

 

 

9,688

 

 

 

5,216

 

 

 

27,692

 

 

 

32,908

 

 

 

(20,122

)

 

1993

Bayside Plaza II

 

2

 

 

 

 

634

 

 

 

-

 

 

 

3,931

 

 

 

634

 

 

 

3,931

 

 

 

4,565

 

 

 

(2,655

)

 

1994

Boyce Distribution Center

 

2

 

 

 

 

21,719

 

 

 

-

 

 

 

35,182

 

 

 

22,360

 

 

 

34,541

 

 

 

56,901

 

 

 

(447

)

 

2016

Brennan Distribution Center

 

1

 

 

 

 

1,912

 

 

 

7,553

 

 

 

125

 

 

 

1,912

 

 

 

7,678

 

 

 

9,590

 

 

 

(1,842

)

 

2011

Component Drive Industrial Portfolio

 

3

 

 

 

 

2,829

 

 

 

13,532

 

 

 

785

 

 

 

2,829

 

 

 

14,317

 

 

 

17,146

 

 

 

(3,489

)

 

2011

Cypress

 

1

 

 

 

 

1,065

 

 

 

5,103

 

 

 

252

 

 

 

1,065

 

 

 

5,355

 

 

 

6,420

 

 

 

(1,275

)

 

2011

Dado Distribution Center

 

1

 

 

 

 

2,194

 

 

 

11,079

 

 

 

283

 

 

 

2,194

 

 

 

11,362

 

 

 

13,556

 

 

 

(2,900

)

 

2011

Doolittle Distribution Center

 

1

 

 

 

 

2,843

 

 

 

18,849

 

 

 

1,672

 

 

 

2,843

 

 

 

20,521

 

 

 

23,364

 

 

 

(4,272

)

 

2011

Dowe Industrial Center

 

2

 

(d)

 

 

5,884

 

 

 

20,400

 

 

 

912

 

 

 

5,884

 

 

 

21,312

 

 

 

27,196

 

 

 

(5,320

)

 

2011

Dublin Industrial Portfolio

 

1

 

 

 

 

3,241

 

 

 

15,951

 

 

 

1,071

 

 

 

3,241

 

 

 

17,022

 

 

 

20,263

 

 

 

(3,393

)

 

2011

East Bay Doolittle

 

1

 

 

 

 

4,015

 

 

 

15,988

 

 

 

1,794

 

 

 

4,015

 

 

 

17,782

 

 

 

21,797

 

 

 

(4,765

)

 

2011

East Grand Airfreight

 

10

 

 

 

 

43,310

 

 

 

43,350

 

 

 

7,435

 

 

 

43,310

 

 

 

50,785

 

 

 

94,095

 

 

 

(5,017

)

 

2011, 2015, 2016

Edgewater Industrial Center

 

1

 

 

 

 

6,630

 

 

 

31,153

 

 

 

3,340

 

 

 

6,630

 

 

 

34,493

 

 

 

41,123

 

 

 

(8,615

)

 

2011

Eigenbrodt Way Distribution Center

 

1

 

 

 

 

393

 

 

 

2,228

 

 

 

694

 

 

 

393

 

 

 

2,922

 

 

 

3,315

 

 

 

(2,266

)

 

1993

Gateway Corporate Center

 

10

 

 

 

 

6,736

 

 

 

24,747

 

 

 

11,655

 

 

 

6,744

 

 

 

36,394

 

 

 

43,138

 

 

 

(26,840

)

 

1993

Hayward Commerce Center

 

4

 

 

 

 

1,933

 

 

 

10,955

 

 

 

3,961

 

 

 

1,933

 

 

 

14,916

 

 

 

16,849

 

 

 

(11,363

)

 

1993

Hayward Commerce Park

 

2

 

 

 

 

7,131

 

 

 

10,519

 

 

 

763

 

 

 

7,131

 

 

 

11,282

 

 

 

18,413

 

 

 

(1,321

)

 

2014

Hayward Distribution Center

 

2

 

 

 

 

831

 

 

 

5,510

 

 

 

3,554

 

 

 

1,038

 

 

 

8,857

 

 

 

9,895

 

 

 

(7,004

)

 

1993

Hayward Industrial Center

 

20

 

 

 

 

13,535

 

 

 

48,573

 

 

 

13,659

 

 

 

13,535

 

 

 

62,232

 

 

 

75,767

 

 

 

(28,586

)

 

1993, 2015

Junction Industrial Park

 

4

 

 

 

 

7,658

 

 

 

39,106

 

 

 

2,156

 

 

 

7,658

 

 

 

41,262

 

 

 

48,920

 

 

 

(8,288

)

 

2011

Laurelwood Drive

 

3

 

 

 

 

18,709

 

 

 

34,925

 

 

 

1,098

 

 

 

18,709

 

 

 

36,023

 

 

 

54,732

 

 

 

(4,197

)

 

2011, 2015

Lawrence SSF

 

1

 

 

 

 

2,189

 

 

 

7,498

 

 

 

299

 

 

 

2,189

 

 

 

7,797

 

 

 

9,986

 

 

 

(1,813

)

 

2011

Livermore Distribution Center

 

4

 

 

 

 

8,992

 

 

 

26,976

 

 

 

3,841

 

 

 

8,992

 

 

 

30,817

 

 

 

39,809

 

 

 

(12,003

)

 

2005

Martin-Scott Industrial Portfolio

 

2

 

 

 

 

3,546

 

 

 

9,717

 

 

 

498

 

 

 

3,546

 

 

 

10,215

 

 

 

13,761

 

 

 

(2,468

)

 

2011

Oakland Industrial Center

 

3

 

 

 

 

8,234

 

 

 

24,704

 

 

 

2,650

 

 

 

8,235

 

 

 

27,353

 

 

 

35,588

 

 

 

(10,629

)

 

2005

Overlook Distribution Center

 

1

 

 

 

 

1,573

 

 

 

8,915

 

 

 

2,576

 

 

 

1,573

 

 

 

11,491

 

 

 

13,064

 

 

 

(5,981

)

 

1999

Pacific Business Center

 

2

 

 

 

 

6,075

 

 

 

26,260

 

 

 

4,153

 

 

 

6,075

 

 

 

30,413

 

 

 

36,488

 

 

 

(7,034

)

 

2011

Pacific Commons Industrial Center

 

5

 

 

 

 

25,784

 

 

 

77,594

 

 

 

2,350

 

 

 

25,805

 

 

 

79,923

 

 

 

105,728

 

 

 

(30,853

)

 

2005

Pacific Industrial Center

 

6

 

 

 

 

21,675

 

 

 

65,083

 

 

 

5,055

 

 

 

21,675

 

 

 

70,138

 

 

 

91,813

 

 

 

(27,280

)

 

2005

San Francisco Industrial Park

 

4

 

 

 

 

35,017

 

 

 

15,007

 

 

 

81

 

 

 

35,017

 

 

 

15,088

 

 

 

50,105

 

 

 

(2,641

)

 

2015

San Leandro Distribution Center

 

9

 

 

 

 

28,264

 

 

 

44,507

 

 

 

5,680

 

 

 

28,265

 

 

 

50,186

 

 

 

78,451

 

 

 

(11,452

)

 

1993, 2015

Shoreline Business Center

 

8

 

 

 

 

4,328

 

 

 

16,101

 

 

 

7,029

 

 

 

4,328

 

 

 

23,130

 

 

 

27,458

 

 

 

(16,550

)

 

1993

South Bay Brokaw

 

3

 

 

 

 

4,014

 

 

 

23,296

 

 

 

1,819

 

 

 

4,014

 

 

 

25,115

 

 

 

29,129

 

 

 

(5,145

)

 

2011

South Bay Junction

 

2

 

 

 

 

3,662

 

 

 

21,120

 

 

 

1,891

 

 

 

3,662

 

 

 

23,011

 

 

 

26,673

 

 

 

(4,702

)

 

2011

South Bay Lundy

 

2

 

 

 

 

6,500

 

 

 

33,642

 

 

 

2,691

 

 

 

6,500

 

 

 

36,333

 

 

 

42,833

 

 

 

(7,830

)

 

2011

Spinnaker Business Center

 

12

 

 

 

 

7,043

 

 

 

25,220

 

 

 

13,120

 

 

 

7,043

 

 

 

38,340

 

 

 

45,383

 

 

 

(27,323

)

 

1993

Thornton Business Center

 

4

 

 

 

 

2,047

 

 

 

11,706

 

 

 

4,822

 

 

 

2,066

 

 

 

16,509

 

 

 

18,575

 

 

 

(11,978

)

 

1993

TriPoint Business Park

 

4

 

 

 

 

9,057

 

 

 

23,727

 

 

 

4,874

 

 

 

9,057

 

 

 

28,601

 

 

 

37,658

 

 

 

(5,468

)

 

2011

Utah Airfreight

 

1

 

 

 

 

10,657

 

 

 

42,842

 

 

 

2,806

 

 

 

10,657

 

 

 

45,648

 

 

 

56,305

 

 

 

(9,147

)

 

2011

Wiegman Road

 

1

 

 

 

 

2,285

 

 

 

12,531

 

 

 

1,255

 

 

 

2,285

 

 

 

13,786

 

 

 

16,071

 

 

 

(2,320

)

 

2011

Yosemite Drive

 

10

 

 

 

 

31,304

 

 

 

65,674

 

 

 

295

 

 

 

31,304

 

 

 

65,969

 

 

 

97,273

 

 

 

(4,245

)

 

2011, 2015

Zanker-Charcot Industrial Center

 

5

 

 

 

 

4,867

 

 

 

28,750

 

 

 

2,224

 

 

 

4,867

 

 

 

30,974

 

 

 

35,841

 

 

 

(6,192

)

 

2011

San Francisco Bay Area, California

 

192

 

 

 

 

420,449

 

 

 

1,081,182

 

 

 

208,018

 

 

 

421,351

 

 

 

1,288,298

 

 

 

1,709,649

 

 

 

(417,808

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Savannah, Georgia

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Morgan Business Center

 

1

 

 

 

 

2,161

 

 

 

14,680

 

 

 

1,260

 

 

 

2,161

 

 

 

15,940

 

 

 

18,101

 

 

 

(2,794

)

 

2011

Savannah, Georgia

 

1

 

 

 

 

2,161

 

 

 

14,680

 

 

 

1,260

 

 

 

2,161

 

 

 

15,940

 

 

 

18,101

 

 

 

(2,794

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Seattle, Washington

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Auburn Distribution Center

 

1

 

 

 

 

2,608

 

 

 

5,742

 

 

 

33

 

 

 

2,608

 

 

 

5,775

 

 

 

8,383

 

 

 

(233

)

 

2015

East Valley Warehouse

 

1

 

(d)(e)

 

 

10,472

 

 

 

57,825

 

 

 

1,012

 

 

 

10,472

 

 

 

58,837

 

 

 

69,309

 

 

 

(10,563

)

 

2011

Fife Distribution Center

 

1

 

 

 

 

3,245

 

 

 

-

 

 

 

13,811

 

 

 

3,588

 

 

 

13,468

 

 

 

17,056

 

 

 

(1,295

)

 

2013

Harvest Business Park

 

3

 

 

 

 

3,541

 

 

 

18,827

 

 

 

1,002

 

 

 

3,541

 

 

 

19,829

 

 

 

23,370

 

 

 

(3,998

)

 

2011

Interurban Distribution Center

 

1

 

(d)

 

 

7,233

 

 

 

13,958

 

 

 

78

 

 

 

7,233

 

 

 

14,036

 

 

 

21,269

 

 

 

(1,532

)

 

2015

Kent Centre Corporate Park

 

4

 

 

 

 

5,397

 

 

 

21,599

 

 

 

1,170

 

 

 

5,397

 

 

 

22,769

 

 

 

28,166

 

 

 

(4,519

)

 

2011

Kent Corporate Center

 

1

 

 

 

 

12,616

 

 

 

8,368

 

 

 

842

 

 

 

12,616

 

 

 

9,210

 

 

 

21,826

 

 

 

(539

)

 

2015

Kent-Northwest Corporate Park

 

18

 

 

 

 

71,768

 

 

 

139,886

 

 

 

3,069

 

 

 

71,768

 

 

 

142,955

 

 

 

214,723

 

 

 

(9,422

)

 

2015

Kingsport Industrial Park

 

7

 

 

 

 

16,605

 

 

 

48,942

 

 

 

3,139

 

 

 

16,800

 

 

 

51,886

 

 

 

68,686

 

 

 

(13,669

)

 

2011

Northwest Distribution Center

 

3

 

 

 

 

5,114

 

 

 

24,090

 

 

 

1,994

 

 

 

5,114

 

 

 

26,084

 

 

 

31,198

 

 

 

(5,403

)

 

2011

Occidental Distribution Center

 

1

 

 

 

 

1,770

 

 

 

1,960

 

 

 

471

 

 

 

1,770

 

 

 

2,431

 

 

 

4,201

 

 

 

(100

)

 

2015

Portside Distribution Center

 

5

 

 

 

 

111,175

 

 

 

71,376

 

 

 

2,274

 

 

 

112,575

 

 

 

72,250

 

 

 

184,825

 

 

 

(3,896

)

 

2015, 2016

ProLogis Park SeaTac

 

2

 

(d)

 

 

12,230

 

 

 

14,170

 

 

 

3,752

 

 

 

12,457

 

 

 

17,695

 

 

 

30,152

 

 

 

(4,423

)

 

2008

Puget Sound Airfreight

 

1

 

 

 

 

1,408

 

 

 

4,201

 

 

 

450

 

 

 

1,408

 

 

 

4,651

 

 

 

6,059

 

 

 

(943

)

 

2011

Renton Northwest Corporate Park

 

4

 

 

 

 

5,102

 

 

 

17,946

 

 

 

1,304

 

 

 

5,102

 

 

 

19,250

 

 

 

24,352

 

 

 

(4,479

)

 

2011

SEA Cargo Center North

 

1

 

 

 

 

-

 

 

 

10,279

 

 

 

63

 

 

 

-

 

 

 

10,342

 

 

 

10,342

 

 

 

(8,842

)

 

2011

Sumner Landing

 

1

 

(e)

 

 

10,332

 

 

 

32,545

 

 

 

894

 

 

 

10,332

 

 

 

33,439

 

 

 

43,771

 

 

 

(5,359

)

 

2011

Van Doren's Distribution Center

 

1

 

(d)

 

 

3,166

 

 

 

7,339

 

 

 

7

 

 

 

3,166

 

 

 

7,346

 

 

 

10,512

 

 

 

(590

)

 

2014

Seattle, Washington

 

56

 

 

 

 

283,782

 

 

 

499,053

 

 

 

35,365

 

 

 

285,947

 

 

 

532,253

 

 

 

818,200

 

 

 

(79,805

)

 

 

106


PROLOGIS, INC. AND PROLOGIS, L.P.

SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 20132016

(In thousands of U.S. dollars, as applicable)

 

  

No. of
Bldgs.

  

Encum-
brances

  Initial Cost to
Prologis
  

Costs
Capitalized
Subsequent

To
Acquisition

  Gross Amounts At Which Carried
as of December 31, 2013
  

Accumulated
Depreciation
(c)

  

Date of

Construction/

Acquisition

Description   Land  Building &
Improvements
   Land  Building &
Improvements
  Total
(a,b)
   

Carson Dist Ctr

  1     15,491       16,978    15,491    16,978    32,469    (827 2011

Carson Industrial

  12     13,608    32,802    1,062    13,608    33,864    47,472    (3,526 2011

Carson Town Center

  2     11,781    31,572    185    11,781    31,757    43,538    (2,656 2011

Cedarpointe Ind Park

  5    (d  7,824    12,476    652    7,824    13,128    20,952    (945 2012

Chartwell Distribution Center

  1     6,417    16,964    786    6,417    17,750    24,167    (1,644 2011

Chino Ind Ctr

  4     850    1,274    10    850    1,284    2,134    (394 2012

Commerce Ind Ctr

  1    (d  11,345    17,653    88    11,345    17,741    29,086    (1,190 2012

Corona Dist Ctr

  1    (d  4,249    6,657    161    4,249    6,818    11,067    (454 2012

Crossroads Business Park

  7    (d  21,393    82,655    105,706    74,914    134,840    209,754    (30,140 2005, 2010

Del Amo Industrial Center

  1     7,471    17,889    387    7,471    18,276    25,747    (1,968 2011

Dominguez North Industrial Center

  6    (d  20,662    34,382    1,725    20,688    36,081    56,769    (4,769 2007, 2012

Eaves Distribution Center

  3     13,914    31,041    1,180    13,914    32,221    46,135    (3,636 2011

Foothill Bus Ctr

  3    (d  5,254    8,096    112    5,254    8,208    13,462    (539 2012

Ford Distribution Cntr

  7     29,895    81,433    1,461    29,895    82,894    112,789    (9,542 2011

Fordyce Distribution Center

  1     6,110    19,485    378    6,110    19,863    25,973    (2,416 2011

Harris Bus Ctr Alliance II

  9     13,134    66,195    1,395    13,134    67,590    80,724    (6,404 2011

Haven Distribution Center

  4    (d  96,975    73,903    7,396    96,975    81,299    178,274    (10,779 2008

Industry Distribution Center

  8    (d)(e)   54,170    99,434    4,601    54,170    104,035    158,205    (27,972 2005, 2012

Inland Empire Distribution Center

  8    (d)(e)   47,947    102,103    8,113    48,726    109,437    158,163    (21,285 2005, 2012

International Multifoods

  1     4,700    8,036    802    4,700    8,838    13,538    (859 2011

Kaiser Distribution Center

  8    (d)(e)   131,819    242,618    19,213    136,027    257,623    393,650    (70,539 2005, 2008

Los Angeles Industrial Center

  2     3,777    7,015    353    3,777    7,368    11,145    (2,145 2005

Meridian Park

  1     12,931    24,268    139    12,931    24,407    37,338    (4,787 2008

Mid Counties Industrial Center

  18    (d  55,436    96,453    14,785    55,437    111,237    166,674    (30,941 2005, 2006, 2010, 2012

Milliken Dist Ctr

  1    (d  18,906    30,811    179    18,906    30,990    49,896    (2,245 2012

NDP—Los Angeles

  5     14,855    41,115    1,109    14,855    42,224    57,079    (4,716 2011

Normandie Industrial

  1     12,297    14,957    614    12,297    15,571    27,868    (1,926 2011

North County Dist Ctr

  3     49,949    76,943    3,056    49,949    79,999    129,948    (5,567 2011, 2012

Ontario Dist Ctr

  1    (d  18,823    29,524    379    18,823    29,903    48,726    (2,016 2012

Orange Industrial Center

  1     4,156    7,836    334    4,157    8,169    12,326    (2,257 2005

Pacific Bus Ctr

  5    (d  20,810    32,169    1,504    20,810    33,673    54,483    (2,194 2012

ProLogis Park Ontario

  2    (d  25,499    47,366    609    25,499    47,975    73,474    (10,855 2007

Rancho Cucamonga Distribution Center

  4    (d)(e)   46,471    86,305    1,459    46,472    87,763    134,235    (24,262 2005

Redlands Distribution Center

  3    (d  27,060    66,820    28,562    28,328    94,114    122,442    (14,598 2006, 2007, 2012

Rialto Dist Ctr

  2     26,562    110,174    321    26,562    110,495    137,057    (7,379 2012

Riverbluff Distribution Center

  1    (d  42,964        32,918    42,964    32,918    75,882    (4,941 2009

Riverside Dist Ctr (LAX)

  2     2,178    3,440    34    2,178    3,474    5,652    (242 2012

Santa Ana Distribution Center

  2     4,318    8,019    693    4,318    8,712    13,030    (2,443 2005

South Bay Distribution Center

  4    (d  14,478    27,511    3,210    15,280    29,919    45,199    (8,728 2005, 2007

Spinnaker Logistics

  1    (d  13,483    22,081    926    13,483    23,007    36,490    (2,271 2011

Starboard Distribution Ctr

  1     18,763    53,824    64    18,763    53,888    72,651    (4,956 2011

Terra Francesco

  1     11,196        15,305    11,196    15,305    26,501    (63 2012

Torrance Dist Ctr

  1     25,730    40,414    63    25,730    40,477    66,207    (2,753 2012

Van Nuys Airport Industrial

  4     23,455    39,916    2,335    23,455    42,251    65,706    (3,428 2011

Vernon Distribution Center

  15     25,439    47,250    3,538    25,441    50,786    76,227    (14,787 2005

Vernon Industrial

  2     3,626    3,319    216    3,626    3,535    7,161    (1,498 2011

Vista Distribution Center

  1     4,150    6,225    2,562    4,150    8,787    12,937    (912 2012

Vista Rialto Distrib Ctr

  1     5,885    25,991    185    5,885    26,176    32,061    (2,237 2011

Walnut Drive

  1     2,665    7,397    25    2,665    7,422    10,087    (685 2011

Watson Industrial Center AFdII

  1     6,944    11,193        6,944    11,193    18,137    (1,064 2011

Wilmington Avenue Warehouse

  2     11,172    34,723    2,316    11,172    37,039    48,211    (3,195 2011
 

 

 

   

 

 

  

Southern California

  225     1,213,159    2,265,676    300,604    1,273,768    2,505,671    3,779,439    (410,997 
 

 

 

   

 

 

  

St. Louis, Missouri

          

Earth City Industrial Center

  2     657    4,141    1,976    657    6,117    6,774    (3,560 1998

Westport Distribution Center

  1     365    1,247    2,299    365    3,546    3,911    (2,092 1997
 

 

 

   

 

 

  

St. Louis, Missouri

  3     1,022    5,388    4,275    1,022    9,663    10,685    (5,652 
 

 

 

   

 

 

  

Mexico:

          

Accion Centro SGP

  5    (d  9,695    38,837    139    9,709    38,962    48,671    (449 2013

Agave Ind Park SGP

  5    (d  18,776    75,627    (221  18,907    75,275    94,182    (942 2013

Agua Fria Ind. Park

  5    (d  8,073    24,560    8,426    8,073    32,986    41,059    (1,944 2011, 2012

Arbolada Distribution Ctr

  3    (d  4,231    16,923    65    4,231    16,988    21,219    (200 2013

Arrayanes Industrial Park

  2    (d  6,639    26,557    150    6,639    26,707    33,346    (260 2013

Arrayanes IP (REIT)

  1    (d  2,016    3,775    2,852    2,016    6,627    8,643    (337 2011

Bermudez Industrial Center

  2     1,155    4,619    4,168    1,158    8,784    9,942    (2,778 2007

Bosques Industrial Park

  1    (d  1,983    6,256    1,244    1,983    7,500    9,483    (986 2011

Carrizal Ind Park

  3    (d  2,778    42,692    940    2,778    43,632    46,410    (3,428 2011

Cedros-Tepotzotlan Distribution Center

  2    (d  11,990    6,719    17,276    12,799    23,186    35,985    (4,915 2006, 2007

Centro Industrial Center

  3     8,274        14,434    8,274    14,434    22,708    (1,986 2009

Corregidora Distr Ctr

  1    (d  939    3,758    39    939    3,797    4,736    (63 2013

Del Norte Industrial Center II

  3     2,803    11,450    3,513    2,803    14,963    17,766    (1,325 2008, 2012

 

 

 

 

 

 

Initial Cost to

Prologis

 

 

Costs

Capitalized

 

 

Gross Amounts at Which Carried

at December 31, 2016

 

 

 

 

 

 

 

Description

 

No. of Bldgs.

 

Encum-

brances

 

Land

 

 

Building &

Improvements

 

 

Subsequent

to

Acquisition

 

 

Land

 

 

Building &

Improvements

 

 

Total

(a,b)

 

 

Accumulated

Depreciation

(c)

 

 

Date of

Construction/

Acquisition

South Florida

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Airport West Distribution Center

 

2

 

(d)

 

 

1,253

 

 

 

3,825

 

 

 

4,116

 

 

 

1,974

 

 

 

7,220

 

 

 

9,194

 

 

 

(4,260

)

 

1995, 1998

Beacon Centre

 

18

 

 

 

 

37,998

 

 

 

196,004

 

 

 

15,561

 

 

 

37,998

 

 

 

211,565

 

 

 

249,563

 

 

 

(40,076

)

 

2011

Beacon Industrial Park

 

9

 

(d)

 

 

23,511

 

 

 

75,424

 

 

 

4,812

 

 

 

23,511

 

 

 

80,236

 

 

 

103,747

 

 

 

(14,551

)

 

2011, 2015

Beacon Lakes

 

5

 

 

 

 

32,911

 

 

 

24,691

 

 

 

39,333

 

 

 

32,658

 

 

 

64,277

 

 

 

96,935

 

 

 

(3,646

)

 

2012, 2014, 2015

Blue Lagoon Business Park

 

2

 

(d)

 

 

9,189

 

 

 

29,451

 

 

 

2,429

 

 

 

9,189

 

 

 

31,880

 

 

 

41,069

 

 

 

(6,369

)

 

2011

CenterPort Distribution Center

 

5

 

(d)

 

 

8,802

 

 

 

22,504

 

 

 

3,958

 

 

 

8,922

 

 

 

26,342

 

 

 

35,264

 

 

 

(10,623

)

 

1999, 2012

Commercial Logistics Center

 

1

 

 

 

 

7,938

 

 

 

11,083

 

 

 

632

 

 

 

7,938

 

 

 

11,715

 

 

 

19,653

 

 

 

(920

)

 

2015

Congress Distribution Center

 

1

 

(d)

 

 

2,266

 

 

 

5,639

 

 

 

381

 

 

 

2,266

 

 

 

6,020

 

 

 

8,286

 

 

 

(375

)

 

2015

Dolphin Distribution Center

 

1

 

 

 

 

2,716

 

 

 

7,364

 

 

 

858

 

 

 

2,716

 

 

 

8,222

 

 

 

10,938

 

 

 

(2,263

)

 

2011

Gateway Center

 

1

 

(d)

 

 

1,015

 

 

 

1,284

 

 

 

18

 

 

 

1,015

 

 

 

1,302

 

 

 

2,317

 

 

 

(91

)

 

2015

Hollywood Park Distribution Center

 

13

 

 

 

 

16,848

 

 

 

36,191

 

 

 

1,574

 

 

 

16,848

 

 

 

37,765

 

 

 

54,613

 

 

 

(2,597

)

 

2015

International Corporate Park

 

5

 

 

 

 

26,915

 

 

 

54,436

 

 

 

3,849

 

 

 

26,915

 

 

 

58,285

 

 

 

85,200

 

 

 

(6,376

)

 

2010, 2015

Lyons Technology Park

 

1

 

(d)

 

 

1,988

 

 

 

3,651

 

 

 

32

 

 

 

1,988

 

 

 

3,683

 

 

 

5,671

 

 

 

(245

)

 

2015

Magnolia Park Distribution Center

 

1

 

(d)

 

 

1,398

 

 

 

1,613

 

 

 

99

 

 

 

1,398

 

 

 

1,712

 

 

 

3,110

 

 

 

(108

)

 

2015

Marlin Distribution Center

 

1

 

 

 

 

1,844

 

 

 

6,603

 

 

 

449

 

 

 

1,844

 

 

 

7,052

 

 

 

8,896

 

 

 

(1,649

)

 

2011

Miami Airport Business Center

 

6

 

 

 

 

11,173

 

 

 

45,921

 

 

 

2,917

 

 

 

11,173

 

 

 

48,838

 

 

 

60,011

 

 

 

(10,456

)

 

2011

North Andrews Distribution Center

 

2

 

(d)

 

 

11,327

 

 

 

22,330

 

 

 

562

 

 

 

11,327

 

 

 

22,892

 

 

 

34,219

 

 

 

(3,963

)

 

1994, 2015

Pompano Beach Distribution Center

 

3

 

 

 

 

11,035

 

 

 

15,136

 

 

 

3,879

 

 

 

11,035

 

 

 

19,015

 

 

 

30,050

 

 

 

(4,090

)

 

2008

Pompano Center of Commerce

 

5

 

 

 

 

5,171

 

 

 

13,930

 

 

 

580

 

 

 

5,171

 

 

 

14,510

 

 

 

19,681

 

 

 

(2,669

)

 

2011

Port Lauderdale Distribution Center

 

9

 

(d)

 

 

40,927

 

 

 

73,128

 

 

 

11,407

 

 

 

42,235

 

 

 

83,227

 

 

 

125,462

 

 

 

(11,392

)

 

1997, 2012, 2014, 2015

Port Lucie West Distribution Center

 

2

 

(d)

 

 

1,131

 

 

 

1,412

 

 

 

56

 

 

 

1,131

 

 

 

1,468

 

 

 

2,599

 

 

 

(122

)

 

2015

ProLogis Park I-595

 

2

 

(d)

 

 

1,998

 

 

 

11,326

 

 

 

1,098

 

 

 

1,999

 

 

 

12,423

 

 

 

14,422

 

 

 

(5,889

)

 

2003

Prospect Park Distribution Center

 

3

 

 

 

 

4,859

 

 

 

11,041

 

 

 

205

 

 

 

4,859

 

 

 

11,246

 

 

 

16,105

 

 

 

(764

)

 

2015

Sawgrass International Park

 

1

 

 

 

 

5,163

 

 

 

11,476

 

 

 

641

 

 

 

5,163

 

 

 

12,117

 

 

 

17,280

 

 

 

(565

)

 

2015

Seneca Distribution Center

 

3

 

 

 

 

16,357

 

 

 

46,738

 

 

 

327

 

 

 

16,357

 

 

 

47,065

 

 

 

63,422

 

 

 

(2,230

)

 

2015

South Dade Commerce Center

 

1

 

(d)

 

 

1,791

 

 

 

147

 

 

 

22

 

 

 

1,791

 

 

 

169

 

 

 

1,960

 

 

 

(36

)

 

2015

Sunshine Park Distribution Center

 

1

 

 

 

 

2,822

 

 

 

4,857

 

 

 

35

 

 

 

2,822

 

 

 

4,892

 

 

 

7,714

 

 

 

(365

)

 

2015

Tarpon Distribution Center

 

1

 

 

 

 

1,847

 

 

 

6,451

 

 

 

337

 

 

 

1,847

 

 

 

6,788

 

 

 

8,635

 

 

 

(1,804

)

 

2011

South Florida

 

105

 

 

 

 

292,193

 

 

 

743,656

 

 

 

100,167

 

 

 

294,090

 

 

 

841,926

 

 

 

1,136,016

 

 

 

(138,494

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Southern California

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Activity Distribution Center

 

4

 

 

 

 

10,820

 

 

 

27,410

 

 

 

421

 

 

 

10,820

 

 

 

27,831

 

 

 

38,651

 

 

 

(1,510

)

 

2015

Anaheim Industrial Center

 

12

 

 

 

 

31,086

 

 

 

57,836

 

 

 

4,114

 

 

 

31,086

 

 

 

61,950

 

 

 

93,036

 

 

 

(23,552

)

 

2005

Anaheim Industrial Property

 

1

 

 

 

 

5,096

 

 

 

10,816

 

 

 

71

 

 

 

5,096

 

 

 

10,887

 

 

 

15,983

 

 

 

(2,151

)

 

2011

Arrow Industrial Park

 

2

 

 

 

 

4,840

 

 

 

8,120

 

 

 

1,112

 

 

 

4,840

 

 

 

9,232

 

 

 

14,072

 

 

 

(2,029

)

 

2012

Artesia Industrial Center

 

26

 

(d)

 

 

163,764

 

 

 

217,400

 

 

 

41,082

 

 

 

178,700

 

 

 

243,546

 

 

 

422,246

 

 

 

(38,492

)

 

2011, 2015

Bell Ranch Distribution Center

 

4

 

 

 

 

5,539

 

 

 

23,092

 

 

 

1,785

 

 

 

5,539

 

 

 

24,877

 

 

 

30,416

 

 

 

(5,635

)

 

2011

Brea Industrial Center

 

1

 

 

 

 

2,488

 

 

 

4,062

 

 

 

467

 

 

 

2,488

 

 

 

4,529

 

 

 

7,017

 

 

 

(888

)

 

2012

California Commerce Center

 

6

 

(d)

 

 

30,127

 

 

 

52,094

 

 

 

4,781

 

 

 

30,127

 

 

 

56,875

 

 

 

87,002

 

 

 

(7,914

)

 

2012, 2014, 2015

Carson Distribution Center

 

2

 

(d)

 

 

29,974

 

 

 

22,483

 

 

 

17,531

 

 

 

29,975

 

 

 

40,013

 

 

 

69,988

 

 

 

(3,568

)

 

2011, 2015

Carson Industrial Center

 

1

 

 

 

 

844

 

 

 

2,081

 

 

 

968

 

 

 

844

 

 

 

3,049

 

 

 

3,893

 

 

 

(747

)

 

2011

Carson Town Center

 

2

 

 

 

 

11,781

 

 

 

31,572

 

 

 

1,287

 

 

 

11,781

 

 

 

32,859

 

 

 

44,640

 

 

 

(5,899

)

 

2011

CAT - Kaiser Commerce Center

 

1

 

(e)

 

 

4,971

 

 

 

-

 

 

 

8,807

 

 

 

4,972

 

 

 

8,806

 

 

 

13,778

 

 

 

(328

)

 

2015

Cedarpointe Industrial Park

 

9

 

(d)

 

 

56,349

 

 

 

105,792

 

 

 

1,518

 

 

 

56,349

 

 

 

107,310

 

 

 

163,659

 

 

 

(7,316

)

 

2012, 2015

Chartwell Distribution Center

 

3

 

 

 

 

55,803

 

 

 

77,135

 

 

 

4,679

 

 

 

55,803

 

 

 

81,814

 

 

 

137,617

 

 

 

(6,953

)

 

2011, 2015

Chatsworth Distribution Center

 

2

 

 

 

 

11,713

 

 

 

17,569

 

 

 

121

 

 

 

11,713

 

 

 

17,690

 

 

 

29,403

 

 

 

(1,159

)

 

2015

Chino Industrial Center

 

4

 

 

 

 

850

 

 

 

1,274

 

 

 

8,338

 

 

 

9,178

 

 

 

1,284

 

 

 

10,462

 

 

 

(1,161

)

 

2012

Commerce Industrial Center

 

1

 

 

 

 

11,345

 

 

 

17,653

 

 

 

2,415

 

 

 

11,345

 

 

 

20,068

 

 

 

31,413

 

 

 

(3,274

)

 

2012

Crossroads Business Park

 

9

 

(d)

 

 

36,131

 

 

 

98,030

 

 

 

114,144

 

 

 

89,673

 

 

 

158,632

 

 

 

248,305

 

 

 

(44,682

)

 

2005, 2010, 2014

Del Amo Industrial Center

 

1

 

 

 

 

7,471

 

 

 

17,889

 

 

 

386

 

 

 

7,471

 

 

 

18,275

 

 

 

25,746

 

 

 

(4,291

)

 

2011

Dominguez North Industrial Center

 

6

 

(d)

 

 

20,662

 

 

 

34,382

 

 

 

4,723

 

 

 

20,688

 

 

 

39,079

 

 

 

59,767

 

 

 

(9,587

)

 

2007, 2012

Eaves Distribution Center

 

3

 

 

 

 

13,914

 

 

 

31,041

 

 

 

2,748

 

 

 

13,914

 

 

 

33,789

 

 

 

47,703

 

 

 

(8,308

)

 

2011

Foothill Business Center

 

3

 

 

 

 

5,254

 

 

 

8,096

 

 

 

322

 

 

 

5,254

 

 

 

8,418

 

 

 

13,672

 

 

 

(1,437

)

 

2012

Ford Distribution Center

 

11

 

 

 

 

44,128

 

 

 

108,125

 

 

 

3,837

 

 

 

44,128

 

 

 

111,962

 

 

 

156,090

 

 

 

(22,488

)

 

2011, 2015

Fordyce Distribution Center

 

1

 

 

 

 

6,110

 

 

 

19,485

 

 

 

910

 

 

 

6,110

 

 

 

20,395

 

 

 

26,505

 

 

 

(5,266

)

 

2011

Harris Business Center Alliance II

 

9

 

 

 

 

13,134

 

 

 

66,195

 

 

 

3,076

 

 

 

13,134

 

 

 

69,271

 

 

 

82,405

 

 

 

(14,258

)

 

2011

Haven Distribution Center

 

4

 

(d)

 

 

96,975

 

 

 

73,903

 

 

 

8,385

 

 

 

96,975

 

 

 

82,288

 

 

 

179,263

 

 

 

(18,460

)

 

2008

Huntington Beach Distribution Center

 

1

 

 

 

 

14,679

 

 

 

22,019

 

 

 

794

 

 

 

14,679

 

 

 

22,813

 

 

 

37,492

 

 

 

(981

)

 

2015

Industry Distribution Center

 

8

 

(e)

 

 

54,170

 

 

 

99,434

 

 

 

8,623

 

 

 

54,170

 

 

 

108,057

 

 

 

162,227

 

 

 

(40,067

)

 

2005, 2012

Inland Empire Distribution Center

 

6

 

 

 

 

43,320

 

 

 

84,006

 

 

 

8,410

 

 

 

44,100

 

 

 

91,636

 

 

 

135,736

 

 

 

(26,974

)

 

2005, 2012, 2015

Jack Northrup Distribution Center

 

1

 

 

 

 

4,280

 

 

 

9,820

 

 

 

53

 

 

 

4,280

 

 

 

9,873

 

 

 

14,153

 

 

 

(493

)

 

2015

Kaiser Distribution Center

 

8

 

(d)(e)

 

 

131,819

 

 

 

242,618

 

 

 

16,957

 

 

 

136,030

 

 

 

255,364

 

 

 

391,394

 

 

 

(92,994

)

 

2005, 2008

LAX Cargo Center

 

3

 

 

 

 

-

 

 

 

19,217

 

 

 

379

 

 

 

-

 

 

 

19,596

 

 

 

19,596

 

 

 

(7,520

)

 

2011

Los Angeles Industrial Center

 

2

 

 

 

 

3,777

 

 

 

7,015

 

 

 

378

 

 

 

3,777

 

 

 

7,393

 

 

 

11,170

 

 

 

(2,965

)

 

2005

Main St Distribution Center

 

1

 

 

 

 

13,058

 

 

 

20,370

 

 

 

853

 

 

 

13,058

 

 

 

21,223

 

 

 

34,281

 

 

 

(1,132

)

 

2015

Meridian Park

 

2

 

 

 

 

38,270

 

 

 

70,022

 

 

 

1,044

 

 

 

38,270

 

 

 

71,066

 

 

 

109,336

 

 

 

(9,381

)

 

2008, 2015

Mid Counties Industrial Center

 

18

 

(d)

 

 

55,436

 

 

 

96,453

 

 

 

16,685

 

 

 

55,437

 

 

 

113,137

 

 

 

168,574

 

 

 

(43,364

)

 

2005, 2006, 2010, 2012

Mill Street Distribution Center

 

1

 

(d)

 

 

1,825

 

 

 

4,306

 

 

 

(1

)

 

 

1,825

 

 

 

4,305

 

 

 

6,130

 

 

 

(363

)

 

2014

Mill Street Spec Distribution Center

 

1

 

(d)

 

 

15,691

 

 

 

36,550

 

 

 

188

 

 

 

15,691

 

 

 

36,738

 

 

 

52,429

 

 

 

(2,999

)

 

2014

107


PROLOGIS, INC. AND PROLOGIS, L.P.

SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 20132016

(In thousands of U.S. dollars, as applicable)

 

  

No. of
Bldgs.

  

Encum-
brances

  Initial Cost to
Prologis
  

Costs
Capitalized
Subsequent

To
Acquisition

  Gross Amounts At Which Carried
as of December 31, 2013
  

Accumulated
Depreciation
(c)

  

Date of

Construction/

Acquisition

Description   Land  Building &
Improvements
   Land  Building &
Improvements
  Total (a,b)   

El Puente Industrial Center

  2     1,906    5,823    1,923    1,889    7,763    9,652    (1,639 2008

El Salto Distribution Center

  2    (d  4,473    6,159    2,215    4,449    8,398    12,847    (903 2008

Encino Distribution Ctr. SGP

  1    (d  9,052    36,822    803    9,206    37,471    46,677    (380 2013

Frontera Dist. Center

  1     1,619    6,475    (5  1,619    6,470    8,089    (130 2013

Iztapalapa Distribution Center

  1     1,287    7,294    1,660    1,287    8,954    10,241    (338 2012

Libramiento Aeropuerto

  2     1,614    7,028    1,801    1,614    8,829    10,443    (579 2012

Los Altos Ind Park

  4    (d  8,026    26,300    16,755    8,026    43,055    51,081    (2,798 2011, 2012

Los Altos Industrial Park

  4    (d  11,276    45,102    842    11,276    45,944    57,220    (601 2013

Mezquite Dist SGP

  2    (d  5,039    20,157    260    5,039    20,417    25,456    (219 2013

Mezquite III prefund

  1    (d  906    14,419    294    906    14,713    15,619    (1,653 2011

Monterrey Airport

  4    (d  12,826    12,878    21,546    12,781    34,469    47,250    (3,329 2007, 2008, 2013

Monterrey Industrial Park

  8    (d  12,079    32,861    2,718    12,409    35,249    47,658    (2,135 1997, 2011

Nor-T Distribution Center

  4     7,247    32,135    6,430    5,898    39,914    45,812    (9,701 2006

Ojo de Agua Ind Ctr

  1    (d  1,826    11,447    1,223    1,826    12,670    14,496    (882 2011

Pacifico Distr Ctr

  4     2,886    14,736    270    2,886    15,006    17,892    (1,990 2011

Palma 1 Dist. Ctr.

  1     1,972    4,888    262    1,972    5,150    7,122    (689 2011

Parque Opcion

  1     730    2,287    1,362    730    3,649    4,379    (363 2011

Periferico Sur Industrial Park

  2     3,058    13,926    12    3,058    13,938    16,996    (200 2012, 2013

Pharr Bridge Industrial Center

  3    ��6,466    14,501    16,980    6,530    31,417    37,947    (3,614 2008, 2009, 2012

Piracanto Ind Park

  4     11,646    33,660    276    11,646    33,936    45,582    (2,863 2011

ProLogis Park Alamar

  3     20,540    17,081    290    20,536    17,375    37,911    (2,104 2008

Puente Grande Distribution Center

  2    (d  14,975    6,813    14,938    14,889    21,837    36,726    (3,011 2008, 2009

Ramon Rivera Lara Industrial Center

  1     444        4,672    2,269    2,847    5,116    (1,029 2000

Reynosa Ind Ctr

  1     756    3,309    1,047    756    4,356    5,112    (284 2012

Reynosa Ind Ctr III

  4     3,251    14,111    3,668    3,251    17,779    21,030    (1,199 2012

Tijuana Ind Ctr Iilam

  1     1,388    5,918    2,483    1,388    8,401    9,789    (516 2012

Tijuana Infd Ctr

  9     10,228    43,963    11,892    10,228    55,855    66,083    (3,756 2012

Toluca Distribution Center

  1    (d  7,952        16,414    7,952    16,414    24,366    (1,850 2009

Tres Rios

  7    (d  31,284    73,124    17,020    32,650    88,778    121,428    (1,908 2011, 2012, 2013
 

 

 

   

 

 

  

Mexico

  117     276,104    774,990    203,076    279,275    974,895    1,254,170    (70,276 
 

 

 

   

 

 

  

Canada:

          

Airport Rd. Dist Ctr

  1     28,401    79,901    2,516    29,683    81,135    110,818    (6,155 2011

Annagem Dist. Center

  1     3,831    13,104    864    4,004    13,795    17,799    (1,088 2011

Annagem Distrib Centre II

  1     2,157    5,527    755    2,254    6,185    8,439��   (556 2011

Bolton Distribution Center

  1     8,681        27,006    9,073    26,614    35,687    (2,423 2009

Keele Distribution Center

  1     1,349    5,414    328    1,410    5,681    7,091    (602 2011

Millcreek Distribution Ctr

  2     9,397    35,745    758    9,821    36,079    45,900    (2,832 2011

Milton 401 Bus. Park

  1     7,331    24,017    2,417    7,661    26,104    33,765    (2,011 2011

Milton 402 Bus Park

  1     6,821    20,407    360    7,129    20,459    27,588    (1,591 2011

Milton Crossings Bus Pk

  2     21,411    52,116    3,824    22,377    54,974    77,351    (4,220 2011

Mississauga Gateway Center

  1     2,188    7,601    718    2,487    8,020    10,507    (1,313 2008

Pearson Logist. Ctr

  2     13,659    48,963    1,417    14,276    49,763    64,039    (3,759 2011
 

 

 

   

 

 

  

Canada

  14     105,226    292,795    40,963    110,175    328,809    438,984    (26,550 
 

 

 

   

 

 

  

Subtotal Americas Markets:

  1,537     3,540,004    10,518,616    2,203,486    3,641,348    12,620,758    16,262,106    (2,432,849 
 

 

 

   

 

 

  

European Markets:

          

Austria

          

Himberg DC

  1     4,219        6,669    4,232    6,656    10,888    (462 2011
 

 

 

   

 

 

  

Austria

  1     4,219        6,669    4,232    6,656    10,888    (462 
 

 

 

   

 

 

  

Belgium

          

Boom Distribution Ct

  1     15,530    20,989    73    15,530    21,062    36,592    (1,702 2011
 

 

 

   

 

 

  

Belgium

  1     15,530    20,989    73    15,530    21,062    36,592    (1,702 
 

 

 

   

 

 

  

Czech Republic

          

Uzice Distribution Center

  1     3,068        22,631    3,131    22,568    25,699    (3,310 2007
 

 

 

   

 

 

  

Czech Republic

  1     3,068        22,631    3,131    22,568    25,699    (3,310 
 

 

 

   

 

 

  

France

          

Bonneuil Distribution Center

  1             17,947        17,947    17,947    (3,533 2012

Isle d’Abeau Distribution Center

  1     3,607    16,184    3,891    4,921    18,761    23,682    (2,159 2011

LGR Genevill. 1 SAS

  1     2,541    2,757    918    2,541    3,675    6,216    (263 2011

LGR Genevill. 2 SAS

  1     1,954    4,049    21    1,954    4,070    6,024    (283 2011

Port of Rouen

  1         17,584    100        17,684    17,684    (1,676 2011
 

 

 

   

 

 

  

France

  5     8,102    40,574    22,877    9,416    62,137    71,553    (7,914 
 

 

 

   

 

 

  

Germany

          

Hausbruch Ind Ctr 4-B

  1     9,421    6,128    148    9,421    6,276    15,697    (1,289 2011

Hausbruch Ind Ctr 5-650

  1     3,392    523    48    3,392    571    3,963    (80 2011

 

 

 

 

 

 

 

 

Initial Cost to

Prologis

 

 

Costs

Capitalized

 

 

Gross Amounts at Which Carried

at December 31, 2016

 

 

 

 

 

 

 

Description

 

No. of Bldgs.

 

 

Encum-

brances

 

Land

 

 

Building &

Improvements

 

 

Subsequent

to

Acquisition

 

 

Land

 

 

Building &

Improvements

 

 

Total

(a,b)

 

 

Accumulated

Depreciation

(c)

 

 

Date of

Construction/

Acquisition

Milliken Distribution Center

 

1

 

 

 

 

 

18,831

 

 

 

30,811

 

 

 

232

 

 

 

18,831

 

 

 

31,043

 

 

 

49,874

 

 

 

(5,888

)

 

2012

NDP - Los Angeles

 

5

 

 

 

 

 

14,855

 

 

 

41,115

 

 

 

3,529

 

 

 

14,855

 

 

 

44,644

 

 

 

59,499

 

 

 

(10,837

)

 

2011

Normandie Industrial Center

 

1

 

 

 

 

 

12,297

 

 

 

14,957

 

 

 

1,989

 

 

 

12,297

 

 

 

16,946

 

 

 

29,243

 

 

 

(4,317

)

 

2011

North County Distribution Center

 

4

 

 

 

 

 

75,581

 

 

 

101,342

 

 

 

10,236

 

 

 

75,581

 

 

 

111,578

 

 

 

187,159

 

 

 

(17,449

)

 

2011, 2012, 2015

Ontario Distribution Center

 

1

 

 

 

 

 

18,823

 

 

 

29,524

 

 

 

482

 

 

 

18,823

 

 

 

30,006

 

 

 

48,829

 

 

 

(5,341

)

 

2012

Orange Industrial Center

 

2

 

 

 

 

 

19,296

 

 

 

9,514

 

 

 

706

 

 

 

4,157

 

 

 

25,359

 

 

 

29,516

 

 

 

(3,172

)

 

2005, 2016

Pacific Business Center

 

5

 

 

 

 

 

20,810

 

 

 

32,169

 

 

 

3,170

 

 

 

20,810

 

 

 

35,339

 

 

 

56,149

 

 

 

(6,205

)

 

2012

Pomona Distribution Center

 

1

 

 

(d)

 

 

22,361

 

 

 

27,898

 

 

 

205

 

 

 

22,361

 

 

 

28,103

 

 

 

50,464

 

 

 

(2,519

)

 

2015

ProLogis Park Ontario

 

2

 

 

(d)

 

 

25,499

 

 

 

47,366

 

 

 

1,283

 

 

 

25,499

 

 

 

48,649

 

 

 

74,148

 

 

 

(15,843

)

 

2007

Rancho Cucamonga Distribution Center

 

6

 

 

(d)(e)

 

 

58,710

 

 

 

113,273

 

 

 

5,079

 

 

 

58,711

 

 

 

118,351

 

 

 

177,062

 

 

 

(34,842

)

 

2005, 2015

Redlands Commerce Center

 

1

 

 

(d)

 

 

20,583

 

 

 

30,881

 

 

 

13

 

 

 

20,583

 

 

 

30,894

 

 

 

51,477

 

 

 

(2,552

)

 

2014

Redlands Distribution Center

 

12

 

 

(d)

 

 

156,478

 

 

 

120,920

 

 

 

200,028

 

 

 

154,454

 

 

 

322,972

 

 

 

477,426

 

 

 

(32,938

)

 

2006, 2007, 2012, 2013, 2014, 2015

Redondo Beach Distribution Center

 

1

 

 

 

 

 

7,455

 

 

 

11,223

 

 

 

72

 

 

 

7,455

 

 

 

11,295

 

 

 

18,750

 

 

 

(934

)

 

2015

Rialto Distribution Center

 

5

 

 

(d)

 

 

86,270

 

 

 

200,602

 

 

 

33,564

 

 

 

88,648

 

 

 

231,788

 

 

 

320,436

 

 

 

(30,989

)

 

2012, 2014, 2015

Riverbluff Distribution Center

 

1

 

 

(d)

 

 

42,964

 

 

 

-

 

 

 

33,014

 

 

 

42,964

 

 

 

33,014

 

 

 

75,978

 

 

 

(8,401

)

 

2009

Santa Ana Distribution Center

 

3

 

 

 

 

 

27,070

 

 

 

32,168

 

 

 

1,253

 

 

 

27,070

 

 

 

33,421

 

 

 

60,491

 

 

 

(4,699

)

 

2005, 2015

Santa Fe Distribution Center

 

1

 

 

 

 

 

12,163

 

 

 

9,927

 

 

 

84

 

 

 

12,163

 

 

 

10,011

 

 

 

22,174

 

 

 

(664

)

 

2015

Slover Distribution Center

 

4

 

 

(d)

 

 

40,335

 

 

 

45,492

 

 

 

386

 

 

 

40,335

 

 

 

45,878

 

 

 

86,213

 

 

 

(2,319

)

 

2015

South Bay Distribution Center

 

4

 

 

(d)

 

 

14,478

 

 

 

27,511

 

 

 

6,608

 

 

 

15,280

 

 

 

33,317

 

 

 

48,597

 

 

 

(12,633

)

 

2005, 2007

South Bay Transport

 

1

 

 

 

 

 

15,928

 

 

 

23,891

 

 

 

106

 

 

 

15,928

 

 

 

23,997

 

 

 

39,925

 

 

 

(630

)

 

2015

Starboard Distribution Center

 

1

 

 

 

 

 

18,763

 

 

 

53,824

 

 

 

386

 

 

 

18,763

 

 

 

54,210

 

 

 

72,973

 

 

 

(10,725

)

 

2011

Terra Francesco

 

1

 

 

 

 

 

11,196

 

 

 

-

 

 

 

15,673

 

 

 

11,196

 

 

 

15,673

 

 

 

26,869

 

 

 

(582

)

 

2012

Torrance Distribution Center

 

1

 

 

 

 

 

25,730

 

 

 

40,414

 

 

 

1,134

 

 

 

25,730

 

 

 

41,548

 

 

 

67,278

 

 

 

(7,211

)

 

2012

Transpark Inland Empire Distribution Center

 

1

 

 

 

 

 

28,936

 

 

 

42,167

 

 

 

578

 

 

 

28,936

 

 

 

42,745

 

 

 

71,681

 

 

 

(3,339

)

 

2014

Van Nuys Airport Industrial Center

 

4

 

 

 

 

 

23,455

 

 

 

39,916

 

 

 

2,860

 

 

 

23,455

 

 

 

42,776

 

 

 

66,231

 

 

 

(8,225

)

 

2011

Vernon Distribution Center

 

14

 

 

 

 

 

23,998

 

 

 

44,529

 

 

 

4,788

 

 

 

24,000

 

 

 

49,315

 

 

 

73,315

 

 

 

(19,476

)

 

2005

Vernon Industrial Center

 

2

 

 

 

 

 

3,626

 

 

 

3,319

 

 

 

692

 

 

 

4,121

 

 

 

3,516

 

 

 

7,637

 

 

 

(2,993

)

 

2011

Vista Distribution Center

 

1

 

 

 

 

 

4,150

 

 

 

6,225

 

 

 

3,933

 

 

 

4,150

 

 

 

10,158

 

 

 

14,308

 

 

 

(3,274

)

 

2012

Walnut Drive

 

1

 

 

 

 

 

2,665

 

 

 

7,397

 

 

 

218

 

 

 

2,665

 

 

 

7,615

 

 

 

10,280

 

 

 

(1,544

)

 

2011

Watson Industrial Center AFdII

 

1

 

 

 

 

 

6,944

 

 

 

11,193

 

 

 

398

 

 

 

6,944

 

 

 

11,591

 

 

 

18,535

 

 

 

(2,345

)

 

2011

Wilmington Avenue Warehouse

 

2

 

 

 

 

 

11,172

 

 

 

34,723

 

 

 

2,952

 

 

 

11,172

 

 

 

37,675

 

 

 

48,847

 

 

 

(7,616

)

 

2011

Workman Mill Distribution Center

 

1

 

 

 

 

 

32,467

 

 

 

56,672

 

 

 

768

 

 

 

32,470

 

 

 

57,437

 

 

 

89,907

 

 

 

(2,505

)

 

2015

Southern California

 

271

 

 

 

 

 

1,961,383

 

 

 

3,136,328

 

 

 

628,810

 

 

 

2,029,727

 

 

 

3,696,794

 

 

 

5,726,521

 

 

 

(743,593

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Tampa, Florida

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate Center Tampa

 

6

 

 

 

 

 

4,458

 

 

 

19,166

 

 

 

(429

)

 

 

4,458

 

 

 

18,737

 

 

 

23,195

 

 

 

(1,143

)

 

2015

Tampa, Florida

 

6

 

 

 

 

 

4,458

 

 

 

19,166

 

 

 

(429

)

 

 

4,458

 

 

 

18,737

 

 

 

23,195

 

 

 

(1,143

)

 

 

Subtotal United States:

 

 

1,699

 

 

 

 

 

5,620,515

 

 

 

13,772,631

 

 

 

3,182,003

 

 

 

5,710,671

 

 

 

16,864,478

 

 

 

22,575,149

 

 

 

(3,521,641

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Canada:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Toronto

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Airport Road Distribution Center

 

1

 

 

(d)

 

 

22,447

 

 

 

63,150

 

 

 

2,165

 

 

 

23,461

 

 

 

64,301

 

 

 

87,762

 

 

 

(10,661

)

 

2011

Annagem Distribution Center

 

1

 

 

 

 

 

3,028

 

 

 

10,357

 

 

 

763

 

 

 

3,164

 

 

 

10,984

 

 

 

14,148

 

 

 

(1,870

)

 

2011

Annagem Distribution Center II

 

1

 

 

 

 

 

1,705

 

 

 

4,368

 

 

 

1,238

 

 

 

1,782

 

 

 

5,529

 

 

 

7,311

 

 

 

(945

)

 

2011

Bolton Distribution Center

 

1

 

 

(d)

 

 

6,861

 

 

 

-

 

 

 

21,418

 

 

 

7,171

 

 

 

21,108

 

 

 

28,279

 

 

 

(3,943

)

 

2009

Keele Distribution Center

 

1

 

 

 

 

 

1,066

 

 

 

4,279

 

 

 

515

 

 

 

1,115

 

 

 

4,745

 

 

 

5,860

 

 

 

(1,214

)

 

2011

Meadowvale Distribution Center

 

2

 

 

(d)

 

 

31,136

 

 

 

-

 

 

 

47,244

 

 

 

31,718

 

 

 

46,662

 

 

 

78,380

 

 

 

(2,118

)

 

2014

Millcreek Distribution Center

 

2

 

 

 

 

 

7,427

 

 

 

28,251

 

 

 

850

 

 

 

7,762

 

 

 

28,766

 

 

 

36,528

 

 

 

(4,873

)

 

2011

Milton 401 Business Park

 

1

 

 

 

 

 

5,794

 

 

 

18,982

 

 

 

3,080

 

 

 

6,055

 

 

 

21,801

 

 

 

27,856

 

 

 

(4,627

)

 

2011

Milton 402 Business Park

 

3

 

 

(d)

 

 

11,960

 

 

 

32,582

 

 

 

8,882

 

 

 

12,262

 

 

 

41,162

 

 

 

53,424

 

 

 

(4,193

)

 

2011, 2014, 2016

Milton Crossings Business Park

 

2

 

 

 

 

 

16,922

 

 

 

41,190

 

 

 

4,588

 

 

 

17,686

 

 

 

45,014

 

 

 

62,700

 

 

 

(7,437

)

 

2011

Mississauga Gateway Center

 

7

 

 

(d)

 

 

51,330

 

 

 

118,855

 

 

 

532

 

 

 

51,673

 

 

 

119,044

 

 

 

170,717

 

 

 

(9,989

)

 

2008, 2014, 2016

Pearson Logistics Center

 

2

 

 

(d)

 

 

10,796

 

 

 

38,698

 

 

 

1,526

 

 

 

11,283

 

 

 

39,737

 

 

 

51,020

 

 

 

(6,650

)

 

2011

Tapscott Distribution Center

 

1

 

 

 

 

 

4,571

 

 

 

-

 

 

 

6,302

 

 

 

3,368

 

 

 

7,505

 

 

 

10,873

 

 

 

(241

)

 

2015

Toronto

 

25

 

 

 

 

 

175,043

 

 

 

360,712

 

 

 

99,103

 

 

 

178,500

 

 

 

456,358

 

 

 

634,858

 

 

 

(58,761

)

 

 

Subtotal Canada:

 

25

 

 

 

 

 

175,043

 

 

 

360,712

 

 

 

99,103

 

 

 

178,500

 

 

 

456,358

 

 

 

634,858

 

 

 

(58,761

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mexico:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Guadalajara

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Parque Opcion

 

1

 

 

 

 

 

730

 

 

 

2,287

 

 

 

1,362

 

 

 

730

 

 

 

3,649

 

 

 

4,379

 

 

 

(802

)

 

2011

Guadalajara

 

1

 

 

 

 

 

730

 

 

 

2,287

 

 

 

1,362

 

 

 

730

 

 

 

3,649

 

 

 

4,379

 

 

 

(802

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

108


PROLOGIS, INC. AND PROLOGIS, L.P.

SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 20132016

(In thousands of U.S. dollars, as applicable)

 

  

No. of
Bldgs.

  

Encum-
brances

  Initial Cost to
Prologis
  

Costs
Capitalized
Subsequent

To
Acquisition

  Gross Amounts At Which Carried
as of December 31, 2013
  

Accumulated
Depreciation
(c)

  

Date of

Construction/

Acquisition

Description   Land  Building &
Improvements
   Land  Building &
Improvements
  Total
(a,b)
   

Huenxe Dist Ctr

  1     2,342       10,596    1,803    11,135    12,938    (365 2012

Kolleda Distribution Center

  1     292    4,514    (361  292    4,153    4,445    (480 2008

Lauenau Dist Ctr

  1     3,162    7,039    84    3,162    7,123    10,285    (688 2011

Martinszehnten Dist Ctr

  1     5,528    8,099    110    5,528    8,209    13,737    (852 2011

Meerane Distribution Center

  1     779    5,990    (273  779    5,717    6,496    (615 2008

Muggensturm

  2     4,013    16,275    98    4,013    16,373    20,386    (1,594 2011
 

 

 

   

 

 

  

Germany

  9     28,929    48,568    10,450    28,390    59,557    87,947    (5,963 
 

 

 

   

 

 

  

Hungary

          

Budapest-Sziget Dist. Center

  1     2,897    9,959    (693  2,940    9,223    12,163    (1,016 2008
 

 

 

   

 

 

  

Hungary

  1     2,897    9,959    (693  2,940    9,223    12,163    (1,016 
 

 

 

   

 

 

  

Italy

          

Arena Po Dist Ctr

  2     9,400    25,443    118    9,400    25,561    34,961    (3,217 2011

Castel San Giovanni Dist Ctr

  1     3,906    11,928    176    3,906    12,104    16,010    (1,267 2011

Siziano Logis Park

  1     12,478    22,621    773    12,478    23,394    35,872    (1,972 2011
 

 

 

   

 

 

  

Italy

  4     25,784    59,992    1,067    25,784    61,059    86,843    (6,456 
 

 

 

   

 

 

  

Poland

          

Nadarzyn Distribution Center

  1     2,852        8,773    2,852    8,773    11,625    (990 2009

Piotrkow II Distribution Center

  1     1,855        6,321    1,806    6,370    8,176    (850 2009

Sochaczew Distribution Center.

  2     151    13,400    2,190    873    14,868    15,741    (2,288 2008

Teresin Dist Ctr

  2     3,856    20,150    1,164    4,558    20,612    25,170    (2,136 2011

Wroclaw V DC

  2     5,378        18,912    5,378    18,912    24,290    (175 2013
 

 

 

   

 

 

  

Poland

  8     14,092    33,550    37,360    15,467    69,535    85,002    (6,439 
 

 

 

   

 

 

  

Romania

          

Bucharest Distribution Center

  4     7,959    34,792    13,118    9,948    45,921    55,869    (7,208 2007, 2008
 

 

 

   

 

 

  

Romania

  4     7,959    34,792    13,118    9,948    45,921    55,869    (7,208 
 

 

 

   

 

 

  

Slovakia

          

Bratislava Distribution Center

  1     2,718        12,051    2,718    12,051    14,769       2012

Sered Distribution Center

  1     2,754        14,889    2,754    14,889    17,643    (1,611 2009
 

 

 

   

 

 

  

Slovakia

  2     5,472        26,940    5,472    26,940    32,412    (1,611 
 

 

 

   

 

 

  

Spain

          

Barajas MAD Logistics

  4         44,613    1,066        45,679    45,679    (4,603 2011
 

 

 

   

 

 

  

Spain

  4         44,613    1,066        45,679    45,679    (4,603 
 

 

 

   

 

 

  

Sweden

          

Orebro Dist Ctr

  1     11,432    24,994    1,981    11,432    26,975    38,407    (3,774 2011
 

 

 

   

 

 

  

Sweden

  1     11,432    24,994    1,981    11,432    26,975    38,407    (3,774 
 

 

 

   

 

 

  

United Kingdom

          

Midpoint Park

  2     33,297    12,800    18,281    33,331    31,047    64,378    (1,184 2008, 2013

North Kettering Bus Pk

  1     2,673    7,935    8,364    4,684    14,288    18,972    (3,273 2007
 

 

 

   

 

 

  

United Kingdom

  3     35,970    20,735    26,645    38,015    45,335    83,350    (4,457 
 

 

 

   

 

 

  

Subtotal European Markets:

  44     163,454    338,766    170,184    169,757    502,647    672,404    (54,915 
 

 

 

   

 

 

  

Asian Markets:

          

China

          

Dalian Ind. Park DC

  1     2,547    14,596    145    2,511    14,777    17,288    (1,053 2011

Fengxian Logistics C

  3         13,823    368        14,191    14,191    (2,537 2011

Jiaxing Distri Ctr

  3     9,404    11,145    10,892    9,287    22,154    31,441    (967 2011, 2013

Tianjin Bonded LP

  2     1,570    9,519    98    1,546    9,641    11,187    (782 2011
 

 

 

   

 

 

  

China

  9     13,521    49,083    11,503    13,344    60,763    74,107    (5,339 
 

 

 

   

 

 

  

Japan

          

Amagasaki DC 2 (fund)

  1    (d  24,257        34,470    24,257    34,470    58,727    (225 2013

Chiba DC 1

  1     1,294    1,621        1,294    1,621    2,915    (47 2013

Ebina Distribution Center

  1     50,235        30,341    50,235    30,341    80,576    (2,847 2010

Funabashi DC 7

  1     4,217    18,278     4,217    18,278    22,495    (533 2013

Funabashi DC 8

  1     5,055    8,930    212    5,055    9,142    14,197    (293 2013

Funabashi Dist Cntr 2 Nishiura

  1     3,249    3,176        3,249    3,176    6,425    (93 2013

Funabashi Dist Cntr Shiomi

  1     9,513    16,746        9,513    16,746    26,259    (488 2013

Kawanishi Distribution Center

  1     26,304        59,588    26,304    59,588    85,892    (2,067 2013

Kobe Distribution Center

  1     9,896        28,347    9,896    28,347    38,243    (61 2013

Narashino DC 1

  1     3,996    10,399        3,996    10,399    14,395    (303 2013

ProLogis Park Aichi Distribution Center

  1     21,006        80,107    28,146    72,967    101,113    (10,295 2007

ProLogis Park Narita III

  1     19,544    69,290    10,839    20,967    78,706    99,673    (9,011 2008

 

 

 

 

 

 

Initial Cost to

Prologis

 

 

Costs

Capitalized

 

 

Gross Amounts at Which Carried

at December 31, 2016

 

 

 

 

 

 

 

Description

 

No. of Bldgs.

 

Encum-

brances

 

Land

 

 

Building &

Improvements

 

 

Subsequent

to

Acquisition

 

 

Land

 

 

Building &

Improvements

 

 

Total

(a,b)

 

 

Accumulated

Depreciation

(c)

 

 

Date of

Construction/

Acquisition

Reynosa

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

El Puente Industrial Center

 

1

 

 

 

 

989

 

 

 

-

 

 

 

12,916

 

 

 

1,767

 

 

 

12,138

 

 

 

13,905

 

 

 

(314

)

 

2015

Reynosa

 

1

 

 

 

 

989

 

 

 

-

 

 

 

12,916

 

 

 

1,767

 

 

 

12,138

 

 

 

13,905

 

 

 

(314

)

 

 

Subtotal Mexico:

 

2

 

 

 

 

1,719

 

 

 

2,287

 

 

 

14,278

 

 

 

2,497

 

 

 

15,787

 

 

 

18,284

 

 

 

(1,116

)

 

 

Subtotal North American Markets:

 

1726

 

 

 

 

5,797,277

 

 

 

14,135,630

 

 

 

3,295,384

 

 

 

5,891,668

 

 

 

17,336,623

 

 

 

23,228,291

 

 

 

(3,581,518

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

European Markets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Austria

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Himberg Distribution Center

 

1

 

 

 

 

3,225

 

 

 

-

 

 

 

5,473

 

 

 

3,551

 

 

 

5,147

 

 

 

8,698

 

 

 

(786

)

 

2011

Austria

 

1

 

 

 

 

3,225

 

 

 

-

 

 

 

5,473

 

 

 

3,551

 

 

 

5,147

 

 

 

8,698

 

 

 

(786

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Czech Republic

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prague Rudna Distribution Center

 

1

 

 

 

 

2,259

 

 

 

11,770

 

 

 

3,035

 

 

 

2,259

 

 

 

14,805

 

 

 

17,064

 

 

 

(825

)

 

2015

Uzice Distribution Center

 

1

 

 

 

 

2,345

 

 

 

-

 

 

 

15,313

 

 

 

2,345

 

 

 

15,313

 

 

 

17,658

 

 

 

(4,130

)

 

2007

Czech Republic

 

2

 

 

 

 

4,604

 

 

 

11,770

 

 

 

18,348

 

 

 

4,604

 

 

 

30,118

 

 

 

34,722

 

 

 

(4,955

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

France

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bonneuil Distribution Center

 

1

 

 

 

 

-

 

 

 

-

 

 

 

11,840

 

 

 

-

 

 

 

11,840

 

 

 

11,840

 

 

 

(1,293

)

 

2012

Le Havre Distribution Center

 

1

 

 

 

 

620

 

 

 

-

 

 

 

7,439

 

 

 

620

 

 

 

7,439

 

 

 

8,059

 

 

 

(178

)

 

2016

LGR Genevill. 1 SAS

 

1

 

 

 

 

1,942

 

 

 

2,107

 

 

 

718

 

 

 

1,942

 

 

 

2,825

 

 

 

4,767

 

 

 

(442

)

 

2011

LGR Genevill. 2 SAS

 

1

 

 

 

 

1,493

 

 

 

3,095

 

 

 

44

 

 

 

1,493

 

 

 

3,139

 

 

 

4,632

 

 

 

(477

)

 

2011

Moissy II Distribution Center

 

2

 

 

 

 

9,562

 

 

 

3,555

 

 

 

21,878

 

 

 

10,250

 

 

 

24,745

 

 

 

34,995

 

 

 

(2,425

)

 

2014, 2016

Port of Rouen

 

1

 

 

 

 

-

 

 

 

13,440

 

 

 

170

 

 

 

-

 

 

 

13,610

 

 

 

13,610

 

 

 

(2,791

)

 

2011

France

 

7

 

 

 

 

13,617

 

 

 

22,197

 

 

 

42,089

 

 

 

14,305

 

 

 

63,598

 

 

 

77,903

 

 

 

(7,606

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Germany

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hausbruch Industrial Center 4-B

 

1

 

 

 

 

7,201

 

 

 

4,684

 

 

 

222

 

 

 

7,201

 

 

 

4,906

 

 

 

12,107

 

 

 

(2,096

)

 

2011

Hausbruch Industrial Center 5-650

 

1

 

 

 

 

2,592

 

 

 

400

 

 

 

292

 

 

 

2,592

 

 

 

692

 

 

 

3,284

 

 

 

(210

)

 

2011

Kolleda Distribution Center

 

1

 

 

 

 

223

 

 

 

3,450

 

 

 

(276

)

 

 

223

 

 

 

3,174

 

 

 

3,397

 

 

 

(605

)

 

2008

Lauenau Distribution Center

 

1

 

 

 

 

2,417

 

 

 

5,380

 

 

 

304

 

 

 

2,417

 

 

 

5,684

 

 

 

8,101

 

 

 

(1,120

)

 

2011

Meerane Distribution Center

 

1

 

 

 

 

22,214

 

 

 

-

 

 

 

71,263

 

 

 

25,970

 

 

 

67,507

 

 

 

93,477

 

 

 

(983

)

 

2016

Germany

 

5

 

 

 

 

34,647

 

 

 

13,914

 

 

 

71,805

 

 

 

38,403

 

 

 

81,963

 

 

 

120,366

 

 

 

(5,014

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hungary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hegyeshalom Distribution Center

 

1

 

 

 

 

245

 

 

 

-

 

 

 

2,969

 

 

 

-

 

 

 

3,214

 

 

 

3,214

 

 

 

-

 

 

2015

Hungary

 

1

 

 

 

 

245

 

 

 

-

 

 

 

2,969

 

 

 

-

 

 

 

3,214

 

 

 

3,214

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Italy

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Arena Po Distribution Center

 

2

 

 

 

 

7,185

 

 

 

19,447

 

 

 

605

 

 

 

7,185

 

 

 

20,052

 

 

 

27,237

 

 

 

(5,360

)

 

2011

Castel San Giovanni Distribution Center

 

1

 

 

 

 

2,986

 

 

 

9,117

 

 

 

321

 

 

 

2,986

 

 

 

9,438

 

 

 

12,424

 

 

 

(1,885

)

 

2011

Siziano Logistics Park

 

1

 

 

 

 

9,538

 

 

 

17,290

 

 

 

1,198

 

 

 

9,538

 

 

 

18,488

 

 

 

28,026

 

 

 

(3,255

)

 

2011

Italy

 

4

 

 

 

 

19,709

 

 

 

45,854

 

 

 

2,124

 

 

 

19,709

 

 

 

47,978

 

 

 

67,687

 

 

 

(10,500

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Poland

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nadarzyn Distribution Center

 

1

 

 

 

 

2,180

 

 

 

-

 

 

 

6,905

 

 

 

2,180

 

 

 

6,905

 

 

 

9,085

 

 

 

(1,486

)

 

2009

Piotrkow II Distribution Center

 

1

 

 

 

 

1,418

 

 

 

-

 

 

 

4,864

 

 

 

1,396

 

 

 

4,886

 

 

 

6,282

 

 

 

(1,170

)

 

2009

Sochaczew Distribution Center

 

2

 

 

 

 

116

 

 

 

10,242

 

 

 

2,214

 

 

 

750

 

 

 

11,822

 

 

 

12,572

 

 

 

(2,874

)

 

2008

Szczecin Distribution Center

 

2

 

 

 

 

925

 

 

 

-

 

 

 

13,163

 

 

 

928

 

 

 

13,160

 

 

 

14,088

 

 

 

(218

)

 

2014, 2015

Poland

 

6

 

 

 

 

4,639

 

 

 

10,242

 

 

 

27,146

 

 

 

5,254

 

 

 

36,773

 

 

 

42,027

 

 

 

(5,748

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Slovakia

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sered Distribution Center

 

1

 

 

 

 

2,105

 

 

 

-

 

 

 

11,559

 

 

 

2,105

 

 

 

11,559

 

 

 

13,664

 

 

 

(2,233

)

 

2009

Slovakia

 

1

 

 

 

 

2,105

 

 

 

-

 

 

 

11,559

 

 

 

2,105

 

 

 

11,559

 

 

 

13,664

 

 

 

(2,233

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Spain

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Baraja MAD Logistics Center

 

4

 

 

 

 

-

 

 

 

34,100

 

 

 

1,040

 

 

 

-

 

 

 

35,140

 

 

 

35,140

 

 

 

(7,935

)

 

2011

Spain

 

4

 

 

 

 

-

 

 

 

34,100

 

 

 

1,040

 

 

 

-

 

 

 

35,140

 

 

 

35,140

 

 

 

(7,935

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sweden

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Orebro Distribution Center

 

1

 

 

 

 

8,738

 

 

 

19,104

 

 

 

2,230

 

 

 

8,738

 

 

 

21,334

 

 

 

30,072

 

 

 

(6,267

)

 

2011

Sweden

 

1

 

 

 

 

8,738

 

 

 

19,104

 

 

 

2,230

 

 

 

8,738

 

 

 

21,334

 

 

 

30,072

 

 

 

(6,267

)

 

 

109


PROLOGIS, INC. AND PROLOGIS, L.P.

SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 20132016

(In thousands of U.S. dollars, as applicable)

 

  

No. of
Bldgs.

  

Encum-
brances

 Initial Cost to
Prologis
  

Costs
Capitalized
Subsequent

To
Acquisition

  Gross Amounts At Which Carried
as of December 31, 2013
  

Accumulated
Depreciation
(c)

  

Date of

Construction/

Acquisition

 
Description   Land  Building &
Improvements
   Land  Building &
Improvements
  Total (a,b)   

Saitama Distribution Center 1

  2     24,943    28,063-    24,943    28,063    53,006    (819  2013  

Shiohama Distr Ctr 1

  1     19,779    23,720        38,126    5,373    43,499    (3,011  2011  
 

 

 

   

 

 

  

Japan

  15     223,288    180,223    243,904    250,198    397,217    647,415    (30,093 
 

 

 

   

 

 

  

Singapore

          

Airport Logistics Center 3

  1         26,958    126        27,084    27,084    (3,093  2011  

Changi South Distr Ctr 1

  1         43,932    118        44,050    44,050    (4,611  2011  

Changi-North DC1

  1         14,536    63        14,599    14,599    (1,552  2011  

Singapore Airport Logist Ctr 2

  1         39,035    185        39,220    39,220    (4,486  2011  

Tuas Distribution Center

  1         19,827    252        20,079    20,079    (3,329  2011  
 

 

 

   

 

 

  

Singapore

  5         144,288    744        145,032    145,032    (17,071 
 

 

 

   

 

 

  

Subtotal Asian Markets:

  29     236,809    373,594    256,151    263,542    603,012    866,554    (52,503 
 

 

 

   

 

 

  

Total Industrial Operating Properties:

  1,610     3,940,267    11,230,976    2,629,821    4,074,647    13,726,417    17,801,064    (2,540,267 
 

 

 

   

 

 

  

Development Portfolio

          

American Markets:

          

United States:

          

Baltimore/Washington

          

Gateway Bus Ctr

  4     11,569        4,360    11,569    4,360    15,929    
 

 

 

   

 

 

  

Baltimore/Washington

  4     11,569        4,360    11,569    4,360    15,929    
 

 

 

   

 

 

  

Cincinnati, Ohio

          

Union Airpark Distribution Center

  1     4,991        11,017    4,991    11,017    16,008    
 

 

 

   

 

 

  

Cincinnati, Ohio

  1     4,991        11,017    4,991    11,017    16,008    
 

 

 

   

 

 

  

Columbus, Ohio

          

Etna Distribution Center

  1     3,270        22,244    3,270    22,244    25,514     2013  
 

 

 

   

 

 

  

Columbus, Ohio

  1     3,270        22,244    3,270    22,244    25,514    
 

 

 

   

 

 

  

Dallas/Fort Worth, Texas

          

Freeport Corp Ctr

  1     458        1,134    458    1,134    1,592    
 

 

 

   

 

 

  

Lancaster Distribution Center

  2     13,025        53,333    13,025    53,333    66,358     2013  
 

 

 

   

 

 

  

Dallas/Fort Worth, Texas

  3     13,483        54,467    13,483    54,467    67,950    
 

 

 

   

 

 

  

Denver, Colorado

          

Stapleton Bus Ctr North

  1     2,954        764    2,954    764    3,718    
 

 

 

   

 

 

  

Denver, Colorado

  1     2,954        764    2,954    764    3,718    
 

 

 

   

 

 

  

Houston, Texas

          

Northpark Distribution Center

  2     2,532        11,851    2,532    11,851    14,383     2013  
 

 

 

   

 

 

  

Houston, Texas

  2     2,532        11,851    2,532    11,851    14,383    
 

 

 

   

 

 

  

Indianapolis, Indiana

          

Lebanon Commerce Park

  1     2,045        18,625    2,045    18,625    20,670    
 

 

 

   

 

 

  

Indianapolis, Indiana

  1     2,045        18,625    2,045    18,625    20,670    
 

 

 

   

 

 

  

New Jersey/New York

          

Port Reading Business Park

  4     53,784        34,706    53,784    34,706    88,490    

Ports Jersey City Distribution Center

  1     27,472        49,754    27,472    49,754    77,226    
 

 

 

   

 

 

  

New Jersey/New York

  5     81,256        84,460    81,256    84,460    165,716    
 

 

 

   

 

 

  

Phoenix, Arizona

          

Riverside Dist Ctr (PHX)

  1     2,478        13,954    2,478    13,954    16,432     2013  
 

 

 

   

 

 

  

Phoenix, Arizona

  1     2,478        13,954    2,478    13,954    16,432    
 

 

 

   

 

 

  

Seattle, Washington

          

Fife Distribution Center

  1     3,236        11,697    3,236    11,697    14,933     2013  
 

 

 

   

 

 

  

Seattle, Washington

  1     3,236        11,697    3,236    11,697    14,933    
 

 

 

   

 

 

  

South Florida

          

Beacon Lakes

  2     7,316        12,557    7,316    12,557    19,873    
 

 

 

   

 

 

  

South Florida

  2     7,316        12,557    7,316    12,557    19,873    
 

 

 

   

 

 

  

Southern California

          

Crossroads Business Park

  1     8,218        6,170    8,218    6,170    14,388    

Redlands Distribution Center

  3     43,992        31,920    43,992    31,920    75,912     2013  
 

 

 

   

 

 

  

Southern California

  4     52,210        38,090    52,210    38,090    90,300    
 

 

 

   

 

 

  

 

 

 

 

 

 

 

 

Initial Cost to

Prologis

 

 

Costs

Capitalized

 

 

Gross Amounts at Which Carried

at December 31, 2016

 

 

 

 

 

 

 

Description

 

No. of Bldgs.

 

 

Encum-

brances

 

Land

 

 

Building &

Improvements

 

 

Subsequent

to

Acquisition

 

 

Land

 

 

Building &

Improvements

 

 

Total

(a,b)

 

 

Accumulated

Depreciation

(c)

 

 

Date of

Construction/

Acquisition

United Kingdom

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grange Park

 

1

 

 

 

 

 

13,258

 

 

 

-

 

 

 

14,900

 

 

 

14,331

 

 

 

13,827

 

 

 

28,158

 

 

 

(519

)

 

2015

Midpoint Park

 

2

 

 

 

 

 

17,843

 

 

 

9,526

 

 

 

24,621

 

 

 

23,011

 

 

 

28,979

 

 

 

51,990

 

 

 

(2,253

)

 

2008, 2015

United Kingdom

 

3

 

 

 

 

 

31,101

 

 

 

9,526

 

 

 

39,521

 

 

 

37,342

 

 

 

42,806

 

 

 

80,148

 

 

 

(2,772

)

 

 

Subtotal European Markets:

 

35

 

 

 

 

 

122,630

 

 

 

166,707

 

 

 

224,304

 

 

 

134,011

 

 

 

379,630

 

 

 

513,641

 

 

 

(53,816

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asian Markets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

China

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dalian Industrial Park Distribution Center

 

1

 

 

 

 

 

2,239

 

 

 

12,828

 

 

 

30

 

 

 

2,052

 

 

 

13,045

 

 

 

15,097

 

 

 

(2,043

)

 

2011

Fengxian Logistics Center

 

3

 

 

 

 

 

-

 

 

 

12,149

 

 

 

991

 

 

 

-

 

 

 

13,140

 

 

 

13,140

 

 

 

(5,073

)

 

2011

Jiaxing Distribution Center

 

4

 

 

 

 

 

10,104

 

 

 

9,795

 

 

 

15,058

 

 

 

8,555

 

 

 

26,402

 

 

 

34,957

 

 

 

(2,715

)

 

2011, 2013

Tianjin Bonded Logistics Park

 

2

 

 

 

 

 

1,380

 

 

 

8,367

 

 

 

25

 

 

 

1,257

 

 

 

8,515

 

 

 

9,772

 

 

 

(1,515

)

 

2011

ProLogis Park Narita III

 

10

 

 

 

 

 

13,723

 

 

 

43,139

 

 

 

16,104

 

 

 

11,864

 

 

 

61,102

 

 

 

72,966

 

 

 

(11,346

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Singapore

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Airport Logistics Center 3

 

1

 

 

 

 

 

-

 

 

 

23,553

 

 

 

201

 

 

 

-

 

 

 

23,754

 

 

 

23,754

 

 

 

(5,890

)

 

2011

Changi South Distribution Center 1

 

1

 

 

 

 

 

-

 

 

 

38,384

 

 

 

104

 

 

 

-

 

 

 

38,488

 

 

 

38,488

 

 

 

(8,773

)

 

2011

Changi-North Distribution Center 1

 

1

 

 

 

 

 

-

 

 

 

14,276

 

 

 

140

 

 

 

-

 

 

 

14,416

 

 

 

14,416

 

 

 

(3,158

)

 

2011

Singapore Airport Logistics Center 2

 

1

 

 

 

 

 

-

 

 

 

34,105

 

 

 

194

 

 

 

-

 

 

 

34,299

 

 

 

34,299

 

 

 

(8,547

)

 

2011

Tuas Distribution Center

 

1

 

 

 

 

 

-

 

 

 

17,324

 

 

 

278

 

 

 

-

 

 

 

17,602

 

 

 

17,602

 

 

 

(6,431

)

 

2011

Singapore

 

5

 

 

 

 

 

-

 

 

 

127,642

 

 

 

917

 

 

 

-

 

 

 

128,559

 

 

 

128,559

 

 

 

(32,799

)

 

 

Subtotal Asian Markets:

 

15

 

 

 

 

 

13,723

 

 

 

170,781

 

 

 

17,021

 

 

 

11,864

 

 

 

189,661

 

 

 

201,525

 

 

 

(44,145

)

 

 

Total Industrial Operating Properties

 

 

1,776

 

 

 

 

 

5,933,630

 

 

 

14,473,118

 

 

 

3,536,709

 

 

 

6,037,543

 

 

 

17,905,914

 

 

 

23,943,457

 

 

 

(3,679,479

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Development Portfolio

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

North American Markets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Atlanta, Georgia

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Park I-75 South

 

1

 

 

 

 

 

9,868

 

 

 

-

 

 

 

28,881

 

 

 

9,868

 

 

 

28,881

 

 

 

38,749

 

 

 

 

 

 

 

Atlanta, Georgia

 

1

 

 

 

 

 

9,868

 

 

 

-

 

 

 

28,881

 

 

 

9,868

 

 

 

28,881

 

 

 

38,749

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Central Valley, California

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

International Park of Commerce

 

1

 

 

 

 

 

3,048

 

 

 

-

 

 

 

2

 

 

 

3,048

 

 

 

2

 

 

 

3,050

 

 

 

 

 

 

 

Patterson Pass Business Center

 

2

 

 

 

 

 

2,922

 

 

 

-

 

 

 

11,360

 

 

 

2,922

 

 

 

11,360

 

 

 

14,282

 

 

 

 

 

 

 

Central Valley, California

 

3

 

 

 

 

 

5,970

 

 

 

-

 

 

 

11,362

 

 

 

5,970

 

 

 

11,362

 

 

 

17,332

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chicago, Illinois

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Glendale Heights Distribution Center

 

1

 

 

 

 

 

153

 

 

 

-

 

 

 

9,825

 

 

 

153

 

 

 

9,825

 

 

 

9,978

 

 

 

 

 

 

2016

Woodridge Distribution Center

 

1

 

 

 

 

 

1,424

 

 

 

-

 

 

 

3,725

 

 

 

1,424

 

 

 

3,725

 

 

 

5,149

 

 

 

 

 

 

2016

Chicago, Illinois

 

2

 

 

 

 

 

1,577

 

 

 

-

 

 

 

13,550

 

 

 

1,577

 

 

 

13,550

 

 

 

15,127

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dallas/Fort Worth, Texas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Park 121 Distribution Center

 

2

 

 

 

 

 

8,546

 

 

 

-

 

 

 

5,874

 

 

 

8,546

 

 

 

5,874

 

 

 

14,420

 

 

 

 

 

 

 

Dallas/Fort Worth, Texas

 

2

 

 

 

 

 

8,546

 

 

 

-

 

 

 

5,874

 

 

 

8,546

 

 

 

5,874

 

 

 

14,420

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Denver, Colorado

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stapleton Business Center North

 

1

 

 

 

 

 

2,403

 

 

 

-

 

 

 

14,430

 

 

 

2,403

 

 

 

14,430

 

 

 

16,833

 

 

 

 

 

 

2016

Denver, Colorado

 

1

 

 

 

 

 

2,403

 

 

 

-

 

 

 

14,430

 

 

 

2,403

 

 

 

14,430

 

 

 

16,833

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Houston, Texas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Greens Parkway Distribution Center

 

1

 

 

 

 

 

1,246

 

 

 

-

 

 

 

14,477

 

 

 

1,246

 

 

 

14,477

 

 

 

15,723

 

 

 

 

 

 

2016

Houston, Texas

 

1

 

 

 

 

 

1,246

 

 

 

-

 

 

 

14,477

 

 

 

1,246

 

 

 

14,477

 

 

 

15,723

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Las Vegas, Nevada

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ann Rd-N Sloan LN Distribution Center

 

1

 

 

 

 

 

3,609

 

 

 

-

 

 

 

19,749

 

 

 

3,609

 

 

 

19,749

 

 

 

23,358

 

 

 

 

 

 

 

Las Vegas Beltway Distribution Center

 

1

 

 

 

 

 

7,321

 

 

 

-

 

 

 

7,443

 

 

 

7,321

 

 

 

7,443

 

 

 

14,764

 

 

 

 

 

 

2016

Las Vegas Corporate Center

 

2

 

 

 

 

 

3,936

 

 

 

-

 

 

 

1,003

 

 

 

3,936

 

 

 

1,003

 

 

 

4,939

 

 

 

 

 

 

 

North 15 Freeway Distribution Center

 

1

 

 

 

 

 

2,734

 

 

 

-

 

 

 

10,114

 

 

 

2,734

 

 

 

10,114

 

 

 

12,848

 

 

 

 

 

 

2016

Sunrise Industrial Park

 

1

 

 

 

 

 

5,348

 

 

 

-

 

 

 

8,011

 

 

 

5,348

 

 

 

8,011

 

 

 

13,359

 

 

 

 

 

 

 

Las Vegas, Nevada

 

6

 

 

 

 

 

22,948

 

 

 

-

 

 

 

46,320

 

 

 

22,948

 

 

 

46,320

 

 

 

69,268

 

 

 

 

 

 

 

110


PROLOGIS, INC. AND PROLOGIS, L.P.

SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 20132016

(In thousands of U.S. dollars, as applicable)

 

  

No. of
Bldgs.

  

Encum-
brances

 Initial Cost to
Prologis
  

Costs
Capitalized
Subsequent

To
Acquisition

  Gross Amounts At Which Carried
as of December 31, 2013
  

Accumulated
Depreciation
(c)

  

Date of

Construction/

Acquisition

 
Description   Land  Building &
Improvements
   Land  Building &
Improvements
  Total (a,b)   

Mexico:

          

El Puente Industrial Center

  1     1,765        36    1,765    36    1,801    

Los Altos Ind Park

  1     2,586        2,448    2,586    2,448    5,034    

Puente Grande Distribution Center

  1     10,538        6,752    10,538    6,752    17,290    

Toluca Distribution Center

  1     3,235        5,802    3,235    5,802    9,037     2013  

Tres Rios

  3     19,924        20,904    19,924    20,904    40,828     2013  
 

 

 

   

 

 

  

Mexico

  7     38,048        35,942    38,048    35,942    73,990    
 

 

 

   

 

 

  

Canada

          

Meadowvale Dist Ctr

  2     38,353        34,200    38,353    34,200    72,553    
 

 

 

   

 

 

  

Canada

  2     38,353        34,200    38,353    34,200    72,553    
 

 

 

   

 

 

  

Subtotal Americas Markets:

  35     263,741        354,228    263,741    354,228    617,969    
 

 

 

   

 

 

  

European Markets:

          

Czech Republic

          

Prague West

  1     3,526        6,232    3,526    6,232    9,758    
 

 

 

   

 

 

  

Czech Republic

  1     3,526        6,232    3,526    6,232    9,758    
 

 

 

   

 

 

  

France

          

LG Roissy Sorbiers SAS

  1     4            4        4    

Moissy II Distribution Center

  1     6,306        2,687    6,306    2,687    8,993    

Vemars Distribution Center

  1     9,428        6,554    9,428    6,554    15,982    
 

 

 

   

 

 

  

France

  3     15,738        9,241    15,738    9,241    24,979    
 

 

 

   

 

 

  

Poland

          

Wroclaw V DC

  1     4,490        16,592    4,490    16,592    21,082    
 

 

 

   

 

 

  

Poland

  1     4,490        16,592    4,490    16,592    21,082    
 

 

 

   

 

 

  

Slovakia

          

ProLogis Park Nove Mesto

  1     971        155    971    155    1,126    
 

 

 

   

 

 

  

Slovakia

  1     971        155    971    155    1,126    
 

 

 

   

 

 

  

Sweden

          

Gothenburg Distribution Center

  1     3,523        42    3,523    42    3,565    
 

 

 

   

 

 

  

Sweden

  1     3,523        42    3,523    42    3,565    
 

 

 

   

 

 

  

United Kingdom

          

Boscombe Road Distribution Center

  1     15,612        1,450    15,612    1,450    17,062    

Dirft Dist Ctr

  1     44,441        6,650    44,441    6,650    51,091    

Park Ryton Dist Ctr

  3     19,793        13,093    19,793    13,093    32,886    
 

 

 

   

 

 

  

United Kingdom

  5     79,846        21,193    79,846    21,193    101,039    
 

 

 

   

 

 

  

Subtotal European Markets:

  12     108,094        53,455    108,094    53,455    161,549    
 

 

 

   

 

 

  

Asia Markets:

          

China

          

Jiaxing Distri Ctr

  1     2,092        3,385    2,092    3,385    5,477     2013  
 

 

 

   

 

 

  

China

  1     2,092        3,385    2,092    3,385    5,477    
 

 

 

   

 

 

  

Japan

          

Funabashi Dist Cntr 4 Nishiura

  1     11,502        4,881    11,502    4,881    16,383    

Hisayama Dist Ctr

  1     5,766        511    5,766    511    6,277    

Joso Dist Ctr

  1     13,687        275    13,687    275    13,962    

Kawajima Park

  1     17,096        31,421    17,096    31,421    48,517    

Kitamoto Distribution Center

  1     20,018        54,052    20,018    54,052    74,070    

Narita 1

  1     10,538        154    10,538    154    10,692    

Osaka 5

  1     39,997        16,065    39,997    16,065    56,062    

ProLogis Parc Tomiya III

  1     9,704        355    9,704    355    10,059    
 

 

 

   

 

 

  

Japan

  8     128,308        107,714    128,308    107,714    236,022    
 

 

 

   

 

 

  

Singapore

          

Changi-North DC1

  1                             
 

 

 

   

 

 

  

Singapore

  1                             
 

 

 

   

 

 

  

Subtotal Asian Markets:

  10     130,400        111,099    130,400    111,099    241,499    
 

 

 

   

 

 

  

Total Development Portfolio

  57     502,235        518,782    502,235    518,782    1,021,017    
 

 

 

   

 

 

  

GRAND TOTAL

  1,667     4,442,502    11,230,976    3,148,603    4,576,882    14,245,199    18,822,081    (2,540,267 
 

 

 

   

 

 

  

 

 

 

 

 

 

Initial Cost to

Prologis

 

 

Costs

Capitalized

 

 

Gross Amounts at Which Carried

at December 31, 2016

 

 

 

 

 

Description

 

No. of Bldgs.

 

Encum-

brances

 

Land

 

 

Building &

Improvements

 

 

Subsequent

to

Acquisition

 

 

Land

 

 

Building &

Improvements

 

 

Total

(a,b)

 

 

Accumulated

Depreciation

(c)

 

Date of

Construction/

Acquisition

Memphis, Tennessee

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

DeSoto Distribution Center

 

1

 

 

 

 

4,140

 

 

 

-

 

 

 

21,382

 

 

 

4,140

 

 

 

21,382

 

 

 

25,522

 

 

 

 

 

Memphis, Tennessee

 

1

 

 

 

 

4,140

 

 

 

-

 

 

 

21,382

 

 

 

4,140

 

 

 

21,382

 

 

 

25,522

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

New Jersey

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Elizabeth Seaport

 

1

 

 

 

 

15,732

 

 

 

-

 

 

 

3,145

 

 

 

15,732

 

 

 

3,145

 

 

 

18,877

 

 

 

 

 

Tri-Port Distribution Center

 

1

 

 

 

 

34,102

 

 

 

-

 

 

 

-

 

 

 

34,102

 

 

 

-

 

 

 

34,102

 

 

 

 

 

New Jersey

 

2

 

 

 

 

49,834

 

 

 

-

 

 

 

3,145

 

 

 

49,834

 

 

 

3,145

 

 

 

52,979

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Phoenix, Arizona

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Riverside Distribution Center

 

1

 

 

 

 

1,075

 

 

 

-

 

 

 

274

 

 

 

1,075

 

 

 

274

 

 

 

1,349

 

 

 

 

 

Phoenix, Arizona

 

1

 

 

 

 

1,075

 

 

 

-

 

 

 

274

 

 

 

1,075

 

 

 

274

 

 

 

1,349

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

San Antonio, Texas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Southport Distribution Center

 

1

 

 

 

 

1,599

 

 

 

-

 

 

 

20,594

 

 

 

1,599

 

 

 

20,594

 

 

 

22,193

 

 

 

 

 

San Antonio, Texas

 

1

 

 

 

 

1,599

 

 

 

-

 

 

 

20,594

 

 

 

1,599

 

 

 

20,594

 

 

 

22,193

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

San Francisco Bay Area, California

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hayward Industrial Center

 

1

 

 

 

 

11,287

 

 

 

-

 

 

 

14,693

 

 

 

11,287

 

 

 

14,693

 

 

 

25,980

 

 

 

 

2016

Oakland Logistics Park

 

1

 

 

 

 

815

 

 

 

-

 

 

 

4,327

 

 

 

815

 

 

 

4,327

 

 

 

5,142

 

 

 

 

 

San Francisco Bay Area, California

 

2

 

 

 

 

12,102

 

 

 

-

 

 

 

19,020

 

 

 

12,102

 

 

 

19,020

 

 

 

31,122

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Seattle, Washington

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Park Tacoma Distribution Center

 

2

 

 

 

 

2,528

 

 

 

-

 

 

 

681

 

 

 

2,528

 

 

 

681

 

 

 

3,209

 

 

 

 

 

Seattle, Washington

 

2

 

 

 

 

2,528

 

 

 

-

 

 

 

681

 

 

 

2,528

 

 

 

681

 

 

 

3,209

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

South Florida

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beacon Lakes

 

3

 

 

 

 

11,833

 

 

 

-

 

 

 

8,112

 

 

 

11,833

 

 

 

8,112

 

 

 

19,945

 

 

 

 

 

South Florida

 

3

 

 

 

 

11,833

 

 

 

-

 

 

 

8,112

 

 

 

11,833

 

 

 

8,112

 

 

 

19,945

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Southern California

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agua Mansa

 

3

 

 

 

 

15,511

 

 

 

-

 

 

 

1,250

 

 

 

15,511

 

 

 

1,250

 

 

 

16,761

 

 

 

 

 

Meridan Park

 

1

 

 

 

 

17,021

 

 

 

-

 

 

 

6,951

 

 

 

17,021

 

 

 

6,951

 

 

 

23,972

 

 

 

 

 

Redlands Distribution Center

 

2

 

 

 

 

18,136

 

 

 

-

 

 

 

5,474

 

 

 

18,136

 

 

 

5,474

 

 

 

23,610

 

 

 

 

 

Southern California

 

6

 

 

 

 

50,668

 

 

 

-

 

 

 

13,675

 

 

 

50,668

 

 

 

13,675

 

 

 

64,343

 

 

 

 

 

Subtotal United States:

 

34

 

 

 

 

186,337

 

 

 

-

 

 

 

221,777

 

 

 

186,337

 

 

 

221,777

 

 

 

408,114

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Canada

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Milton 402 Business Park

 

2

 

 

 

 

7,792

 

 

 

 

 

 

 

20,390

 

 

 

7,792

 

 

 

20,390

 

 

 

28,182

 

 

 

 

2016

Tapscott Distribution Center

 

2

 

 

 

 

7,875

 

 

 

-

 

 

 

15,631

 

 

 

7,875

 

 

 

15,631

 

 

 

23,506

 

 

 

 

2016

Canada

 

4

 

 

 

 

15,667

 

 

 

-

 

 

 

36,021

 

 

 

15,667

 

 

 

36,021

 

 

 

51,688

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mexico

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Agua Fria Industrial Park

 

1

 

 

 

 

4,912

 

 

 

-

 

 

 

10,941

 

 

 

4,912

 

 

 

10,941

 

 

 

15,853

 

 

 

 

 

Arrayanes Industrial Park

 

1

 

 

 

 

4,738

 

 

 

-

 

 

 

6,744

 

 

 

4,738

 

 

 

6,744

 

 

 

11,482

 

 

 

 

 

Los Altos Industrial Park

 

1

 

 

 

 

3,726

 

 

 

-

 

 

 

5,712

 

 

 

3,726

 

 

 

5,712

 

 

 

9,438

 

 

 

 

2016

San Jose Distribution Center

 

3

 

 

 

 

24,303

 

 

 

-

 

 

 

19,060

 

 

 

24,303

 

 

 

19,060

 

 

 

43,363

 

 

 

 

2016

Toluca Distribution Center

 

1

 

 

 

 

3,174

 

 

 

-

 

 

 

4,485

 

 

 

3,174

 

 

 

4,485

 

 

 

7,659

 

 

 

 

2016

Mexico

 

7

 

 

 

 

40,853

 

 

 

-

 

 

 

46,942

 

 

 

40,853

 

 

 

46,942

 

 

 

87,795

 

 

 

 

 

Subtotal North American Markets:

 

45

 

 

 

 

242,857

 

 

 

-

 

 

 

304,740

 

 

 

242,857

 

 

 

304,740

 

 

 

547,597

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

European Markets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Czech Republic

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prague Airport Distribution Center

 

1

 

 

 

 

1,858

 

 

 

-

 

 

 

1,444

 

 

 

1,858

 

 

 

1,444

 

 

 

3,302

 

 

 

 

 

Prague Rudna Distribution Center

 

1

 

 

 

 

6,540

 

 

 

-

 

 

 

8,971

 

 

 

6,540

 

 

 

8,971

 

 

 

15,511

 

 

 

 

2016

Czech Republic

 

2

 

 

 

 

8,398

 

 

 

-

 

 

 

10,415

 

 

 

8,398

 

 

 

10,415

 

 

 

18,813

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

France

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Isle d'Abeau Distribution Center

 

1

 

 

 

 

7,492

 

 

 

-

 

 

 

7,348

 

 

 

7,492

 

 

 

7,348

 

 

 

14,840

 

 

 

 

2016

Le Havre Distribution Center

 

2

 

 

 

 

868

 

 

 

-

 

 

 

25,104

 

 

 

868

 

 

 

25,104

 

 

 

25,972

 

 

 

 

2016

Moissy II Distribution Center

 

1

 

 

 

 

2,459

 

 

 

-

 

 

 

2,131

 

 

 

2,459

 

 

 

2,131

 

 

 

4,590

 

 

 

 

 

France

 

4

 

 

 

 

10,819

 

 

 

-

 

 

 

34,583

 

 

 

10,819

 

 

 

34,583

 

 

 

45,402

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Germany

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bremen Distribution Center

 

1

 

 

 

 

1,275

 

 

 

-

 

 

 

5,198

 

 

 

1,275

 

 

 

5,198

 

 

 

6,473

 

 

 

 

 

Hamm Distribution Center 1

 

1

 

 

 

 

4,699

 

 

 

-

 

 

 

-

 

 

 

4,699

 

 

 

-

 

 

 

4,699

 

 

 

 

 

Krefeld Park

 

1

 

 

 

 

1,372

 

 

 

-

 

 

 

3,378

 

 

 

1,372

 

 

 

3,378

 

 

 

4,750

 

 

 

 

 

Germany

 

3

 

 

 

 

7,346

 

 

 

-

 

 

 

8,576

 

 

 

7,346

 

 

 

8,576

 

 

 

15,922

 

 

 

 

 

111


PROLOGIS, INC. AND PROLOGIS, L.P.

SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION

DECEMBER 31, 2016

(In thousands of U.S. dollars, as applicable)

 

 

 

 

 

 

 

 

Initial Cost to

Prologis

 

 

Costs

Capitalized

 

 

Gross Amounts at Which Carried

at December 31, 2016

 

 

 

 

 

 

 

Description

 

No. of Bldgs.

 

 

Encum-

brances

 

Land

 

 

Building &

Improvements

 

 

Subsequent

to

Acquisition

 

 

Land

 

 

Building &

Improvements

 

 

Total

(a,b)

 

 

Accumulated

Depreciation

(c)

 

 

Date of

Construction/

Acquisition

Hungary

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Budapest-Sziget Distribution Center

 

3

 

 

 

 

 

4,250

 

 

 

-

 

 

 

9,381

 

 

 

4,250

 

 

 

9,381

 

 

 

13,631

 

 

 

 

 

 

2016

Hungary

 

3

 

 

 

 

 

4,250

 

 

 

-

 

 

 

9,381

 

 

 

4,250

 

 

 

9,381

 

 

 

13,631

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Italy

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Bologna Distribution Center

 

1

 

 

 

 

 

2,291

 

 

 

-

 

 

 

961

 

 

 

2,291

 

 

 

961

 

 

 

3,252

 

 

 

 

 

 

 

Italy

 

1

 

 

 

 

 

2,291

 

 

 

-

 

 

 

961

 

 

 

2,291

 

 

 

961

 

 

 

3,252

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Netherlands

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nieuwegein Distribution Center

 

1

 

 

 

 

 

6,551

 

 

 

-

 

 

 

7,766

 

 

 

6,551

 

 

 

7,766

 

 

 

14,317

 

 

 

 

 

 

 

Venlo Distribution Center

 

1

 

 

 

 

 

13,125

 

 

 

-

 

 

 

13,297

 

 

 

13,125

 

 

 

13,297

 

 

 

26,422

 

 

 

 

 

 

 

Netherlands

 

2

 

 

 

 

 

19,676

 

 

 

-

 

 

 

21,063

 

 

 

19,676

 

 

 

21,063

 

 

 

40,739

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Poland

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chorzow Distribution Center

 

1

 

 

 

 

 

3,684

 

 

 

-

 

 

 

7,096

 

 

 

3,684

 

 

 

7,096

 

 

 

10,780

 

 

 

 

 

 

2016

Piotrkow II Distribution Center

 

1

 

 

 

 

 

2,252

 

 

 

-

 

 

 

9,880

 

 

 

2,252

 

 

 

9,880

 

 

 

12,132

 

 

 

 

 

 

 

Strykow

 

2

 

 

 

 

 

4,646

 

 

 

-

 

 

 

6,789

 

 

 

4,646

 

 

 

6,789

 

 

 

11,435

 

 

 

 

 

 

 

Szczecin Distribution Center

 

1

 

 

 

 

 

329

 

 

 

-

 

 

 

2,666

 

 

 

329

 

 

 

2,666

 

 

 

2,995

 

 

 

 

 

 

 

Poland

 

5

 

 

 

 

 

10,911

 

 

 

-

 

 

 

26,431

 

 

 

10,911

 

 

 

26,431

 

 

 

37,342

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Slovakia

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Galanta Distribution Center

 

1

 

 

 

 

 

5,296

 

 

 

-

 

 

 

2,569

 

 

 

5,296

 

 

 

2,569

 

 

 

7,865

 

 

 

 

 

 

 

ProLogis Park Nove Mesto

 

1

 

 

 

 

 

2,473

 

 

 

-

 

 

 

5,941

 

 

 

2,473

 

 

 

5,941

 

 

 

8,414

 

 

 

 

 

 

 

Slovakia

 

2

 

 

 

 

 

7,769

 

 

 

-

 

 

 

8,510

 

 

 

7,769

 

 

 

8,510

 

 

 

16,279

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Spain

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Massalaves Distribution Center

 

1

 

 

 

 

 

4,809

 

 

 

-

 

 

 

303

 

 

 

4,809

 

 

 

303

 

 

 

5,112

 

 

 

 

 

 

 

San Fernando Distribution Center

 

1

 

 

 

 

 

6,350

 

 

 

-

 

 

 

28

 

 

 

6,350

 

 

 

28

 

 

 

6,378

 

 

 

 

 

 

 

Spain

 

2

 

 

 

 

 

11,159

 

 

 

-

 

 

 

331

 

 

 

11,159

 

 

 

331

 

 

 

11,490

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sweden

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gothenburg Distribution Center

 

2

 

 

 

 

 

13,142

 

 

 

-

 

 

 

14,638

 

 

 

13,142

 

 

 

14,638

 

 

 

27,780

 

 

 

 

 

 

 

Sweden

 

2

 

 

 

 

 

13,142

 

 

 

-

 

 

 

14,638

 

 

 

13,142

 

 

 

14,638

 

 

 

27,780

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United Kingdom

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Birmingham International Gateway Distribution Center

 

4

 

 

 

 

 

13,835

 

 

 

-

 

 

 

9,616

 

 

 

13,835

 

 

 

9,616

 

 

 

23,451

 

 

 

 

 

 

2016

Daventry Phase II Distribution Center

 

1

 

 

 

 

 

5,524

 

 

 

-

 

 

 

602

 

 

 

5,524

 

 

 

602

 

 

 

6,126

 

 

 

 

 

 

 

Dirft Distribution Center

 

1

 

 

 

 

 

3,945

 

 

 

-

 

 

 

123

 

 

 

3,945

 

 

 

123

 

 

 

4,068

 

 

 

 

 

 

 

Marston Gate Distribution Center

 

2

 

 

 

 

 

13,735

 

 

 

-

 

 

 

9,714

 

 

 

13,735

 

 

 

9,714

 

 

 

23,449

 

 

 

 

 

 

 

North Kettering Business Park

 

1

 

 

 

 

 

2,367

 

 

 

-

 

 

 

32

 

 

 

2,367

 

 

 

32

 

 

 

2,399

 

 

 

 

 

 

 

Stockly Park Distribution Center

 

2

 

 

 

 

 

24,153

 

 

 

-

 

 

 

16,910

 

 

 

24,153

 

 

 

16,910

 

 

 

41,063

 

 

 

 

 

 

2016

United Kingdom

 

11

 

 

 

 

 

63,559

 

 

 

-

 

 

 

36,997

 

 

 

63,559

 

 

 

36,997

 

 

 

100,556

 

 

 

 

 

 

 

Subtotal European Markets:

 

37

 

 

 

 

 

159,320

 

 

 

-

 

 

 

171,886

 

 

 

159,320

 

 

 

171,886

 

 

 

331,206

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asian Markets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Japan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chiba New Town Distribution Center

 

1

 

 

 

 

 

31,406

 

 

 

-

 

 

 

124,053

 

 

 

31,406

 

 

 

124,053

 

 

 

155,459

 

 

 

 

 

 

 

Higashi Matsuyama Distribution Center

 

1

 

 

 

 

 

13,402

 

 

 

-

 

 

 

7,841

 

 

 

13,402

 

 

 

7,841

 

 

 

21,243

 

 

 

 

 

 

 

Ibaraki Distribution Center

 

1

 

 

 

 

 

43,515

 

 

 

-

 

 

 

178,641

 

 

 

43,515

 

 

 

178,641

 

 

 

222,156

 

 

 

 

 

 

2016

Koga Distribution Center

 

2

 

 

 

 

 

8,257

 

 

 

-

 

 

 

12,090

 

 

 

8,257

 

 

 

12,090

 

 

 

20,347

 

 

 

 

 

 

 

Narashino IV Distribution Center

 

1

 

 

 

 

 

19,424

 

 

 

-

 

 

 

66,114

 

 

 

19,424

 

 

 

66,114

 

 

 

85,538

 

 

 

 

 

 

2016

Shiohama Distribution Center

 

1

 

 

 

 

 

35,058

 

 

 

-

 

 

 

13,478

 

 

 

35,058

 

 

 

13,478

 

 

 

48,536

 

 

 

 

 

 

 

Japan

 

7

 

 

 

 

 

151,062

 

 

 

-

 

 

 

402,217

 

 

 

151,062

 

 

 

402,217

 

 

 

553,279

 

 

 

 

 

 

 

Subtotal Asian Markets:

 

7

 

 

 

 

 

151,062

 

 

 

-

 

 

 

402,217

 

 

 

151,062

 

 

 

402,217

 

 

 

553,279

 

 

 

 

 

 

 

Total Development Portfolio

 

89

 

 

 

 

 

553,239

 

 

 

-

 

 

 

878,843

 

 

 

553,239

 

 

 

878,843

 

 

 

1,432,082

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GRAND TOTAL

 

 

1,865

 

 

 

 

 

6,486,869

 

 

 

14,473,118

 

 

 

4,415,552

 

 

 

6,590,782

 

 

 

18,784,757

 

 

 

25,375,539

 

 

 

(3,679,479

)

 

 


112


Schedule III – Footnotes

 

(a)

Reconciliation of

The following table reconciles real estate assets per Schedule III to the Consolidated Balance Sheet as ofin Item 8. Financial Statements and Supplementary Data at December 31, 20132016 (in thousands):

 

        

Total per Schedule III

  $18,822,081   

 

$

25,375,539

 

 

Land

   1,516,166   

 

 

1,218,904

 

 

Other real estate investments

   486,230   

 

 

524,887

 

 

  

 

  

 

 

Total per consolidated balance sheet

  $            20,824,477    (f)  

 

$

27,119,330

 

(f)

 

(b)

The aggregate cost for Federalfederal tax purposes at December 31, 20132016, of our real estate assets was approximately $13.3$16.1 billion (unaudited).

 

(c)

Real estate assets (excluding land balances) are depreciated over their estimated useful lives. These useful lives are generally 5 to 7 years for capital improvements, 10 years for standard tenant improvements, 25 years for depreciable land improvements, on developed buildings, 30 years for operating properties acquired industrial properties and 40 years for operating properties we develop.

Reconciliation of

The following table reconciles accumulated depreciation per Schedule III to the Consolidated Balance Sheets as ofSheet in Item 8. Financial Statements and Supplementary Data at December 31, 20132016 (in thousands):

 

     

Total accumulated depreciation per Schedule III

  $            2,540,267  

 

$

3,679,479

 

Accumulated depreciation on other real estate investments

   28,731  

 

 

78,893

 

  

 

 

Total per consolidated balance sheet

  $2,568,998  

 

$

3,758,372

 

 

(d)

Properties with an aggregate undepreciated cost of $4.6$5.2 billion secure $1.9$2.7 billion of mortgage notes. See Note 9 to the Consolidated Financial Statements in Item 88. Financial Statements and Supplementary Data for more information related to our secured mortgage debt.

 

(e)

Assessment bonds of $16.2$14.5 million are secured by assessments (similar to property taxes) on various underlying real estate properties with an aggregate undepreciated cost of $835.0$737.4 million. See Note 9 to the Consolidated Financial Statements in Item 88. Financial Statements and Supplementary Data for more information related to our assessment bonds.

 

(f)

A summary of activity for

The following table summarizes our real estate assets and accumulated depreciation for the years ended December 31 (in thousands):

 

  2013   2012   2011 

 

2016

 

 

2015

 

 

2014

 

Real estate assets:

      

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of year

  $23,559,891    $22,413,079    $11,080,161  

 

$

25,608,648

 

 

$

20,109,432

 

 

$

18,822,081

 

Acquisitions of operating properties, improvements to operating properties, development activity, transfers of land to CIP and net effect of changes in foreign exchange rates and other

   2,050,810     2,881,005     12,150,482  

Acquisitions of operating properties, improvements to operating properties

development activity, transfers of land to CIP and net effect of changes

in foreign exchange rates and other

 

 

1,883,888

 

 

 

7,191,335

 

 

 

3,595,836

 

Basis of operating properties disposed of

   (6,857,994)     (1,630,764)     (906,602)  

 

 

(1,359,186

)

 

 

(1,719,632

)

 

 

(2,713,300

)

Change in the development portfolio balance, including the acquisition of properties

   69,374     91,112     495,169  

 

 

(440,821

)

 

 

398,923

 

 

 

452,963

 

Impairment of real estate properties (1)

        (194,541)     (21,237)  

Assets transferred to held-for-sale

             (384,894)  

 

 

(316,990

)

 

 

(371,410

)

 

 

(48,148

)

Balance at end year

 

$

25,375,539

 

 

$

25,608,648

 

 

$

20,109,432

 

  

 

   

 

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at end of year

  $        18,822,081    $        23,559,891    $        22,413,079  
  

 

   

 

   

 

 

Accumulated Depreciation:

      

Accumulated depreciation:

 

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of year

  $2,460,642    $2,150,713    $1,589,251  

 

$

3,207,855

 

 

$

2,748,835

 

 

$

2,540,267

 

Depreciation expense

   505,691     665,239     574,524  

 

 

668,686

 

 

 

617,258

 

 

 

490,298

 

Balances retired upon disposition of operating properties and net effect of changes in foreign exchange rates and other

   (426,066)     (355,310)     (994)  

 

 

(195,895

)

 

 

(153,621

)

 

 

(277,516

)

Assets transferred to held-for-sale

             (12,068)  

 

 

(1,167

)

 

 

(4,617

)

 

 

(4,214

)

  

 

   

 

   

 

 

Balance at end of year

  $2,540,267    $2,460,642    $2,150,713  

 

$

3,679,479

 

 

$

3,207,855

 

 

$

2,748,835

 

 

(1)The impairment charges we recognized in 2012 and 2011 were primarily due to our change of intent to no longer hold these assets for long-term investment. See Note 15 to the Consolidated Financial Statements in Item 8 for more information related to our impairment charges.

113


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

PROLOGIS, INC.

PROLOGIS, INC.

By:

/s/ HAMID R. MOGHADAM

Hamid R. Moghadam

Hamid R. Moghadam

Chief Executive Officer

Date: February 26, 201414, 2017

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and directors of Prologis, Inc., hereby severally constitute Hamid R. Moghadam, Thomas S. Olinger and Edward S. Nekritz, and each of them singly, our true and lawful attorneys with full power to them, and each of them singly, to sign for us and in our names in the capacities indicated below, the Form 10-K filed herewith and any and all amendments to said Form 10-K, and generally to do all such things in our names and in our capacities as officers and directors to enable Prologis, Inc. to comply with the provisions of the Securities Exchange Act of 1934, and all requirements of the U.S. Securities and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by our said attorneys, or any of them, to said Form 10-K and any and all amendments thereto.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Signature

Title

Date

Signature

Title

Date

/s/ HAMID R. MOGHADAM

Hamid R. Moghadam

Chairman of the Board and Chief Executive Officer

February 26, 201414, 2017

Hamid R. Moghadam

/s/ THOMAS S. OLINGER

Chief Financial Officer

February 14, 2017

Thomas S. Olinger

Chief Financial OfficerFebruary 26, 2014

/s/ LORI A. PALAZZOLO

Lori A. Palazzolo

Managing Director and Chief Accounting Officer

February 26, 201414, 2017

Lori A. Palazzolo

/s/ GEORGE L. FOTIADES

Director

February 14, 2017

George L. Fotiades

DirectorFebruary 26, 2014

/s/ CHRISTINE N. GARVEY

Director

February 14, 2017

Christine N. Garvey

DirectorFebruary 26, 2014

/s/ LYDIA H. KENNARD

Director

February 14, 2017

Lydia H. Kennard

DirectorFebruary 26, 2014

/s/ J. MICHAEL LOSH

Director

February 14, 2017

J. Michael Losh

Director

February 26, 2014

/s/ IRVING F. LYONS III

Director

February 14, 2017

Irving F. Lyons III

Director

February 26, 2014

/s/ DAVID P. O’CONNOR

Director

February 14, 2017

David P. O’Connor

/s/ JEFFREY L. SKELTON

Director

February 14, 2017

Jeffrey L. Skelton

Director

February 26, 2014

/s/  D. MICHAEL STEUERT

D. Michael Steuert

Director

February 26, 2014

/s/ CARL B. WEBB

Director

February 14, 2017

Carl B. Webb

Director

February 26, 2014

/s/ WILLIAM D. ZOLLARS

Director

February 14, 2017

William D. Zollars

Director

February 26, 2014

114


SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

PROLOGIS, L.P.

By:

Prologis, Inc., its general partner

By:

/s/ HAMID R. MOGHADAM

Hamid R. Moghadam

Hamid R. Moghadam

Chief Executive Officer

Date: February 26, 201414, 2017

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and directors of Prologis, L.P., hereby severally constitute Hamid R. Moghadam, Thomas S. Olinger and Edward S. Nekritz, and each of them singly, our true and lawful attorneys with full power to them, and each of them singly, to sign for us and in our names in the capacities indicated below, the Form 10-K filed herewith and any and all amendments to said Form 10-K, and generally to do all such things in our names and in our capacities as officers and directors to enable Prologis, L.P. to comply with the provisions of the Securities Exchange Act of 1934, and all requirements of the U.S. Securities and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by our said attorneys, or any of them, to said Form 10-K and any and all amendments thereto.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Signature

Title

Date

Signature

Title

Date

/s/ HAMID R. MOGHADAM

Hamid R. Moghadam

Chairman of the Board and Chief Executive Officer

February 26, 201414, 2017

Hamid R. Moghadam

/s/ THOMAS S. OLINGER

Chief Financial Officer

February 14, 2017

Thomas S. Olinger

Chief Financial OfficerFebruary 26, 2014

/s/ LORI A. PALAZZOLO

Lori A. Palazzolo

Managing Director and Chief Accounting Officer

February 26, 201414, 2017

Lori A. Palazzolo

/s/ GEORGE L. FOTIADES

Director

February 14, 2017

George L. Fotiades

DirectorFebruary 26, 2014

/s/ CHRISTINE N. GARVEY

Director

February 14, 2017

Christine N. Garvey

DirectorFebruary 26, 2014

/s/ LYDIA H. KENNARD

Director

February 14, 2017

Lydia H. Kennard

DirectorFebruary 26, 2014

/s/ J. MICHAEL LOSH

Director

February 14, 2017

J. Michael Losh

Director

February 26, 2014

/s/ IRVING F. LYONS III

Director

February 14, 2017

Irving F. Lyons III

Director

February 26, 2014

/s/ DAVID P. O’CONNOR

Director

February 14, 2017

David P. O’Connor

/s/ JEFFREY L. SKELTON

Director

February 14, 2017

Jeffrey L. Skelton

Director

February 26, 2014

/s/  D. MICHAEL STEUERT

D. Michael Steuert

Director

February 26, 2014

/s/ CARL B. WEBB

Director

February 14, 2017

Carl B. Webb

Director

February 26, 2014

/s/ WILLIAM D. ZOLLARS

Director

February 14, 2017

William D. Zollars

Director

February 26, 2014

115


Certain of the following documents are filed herewith. Certain other of the following documents that have been previously filed with the Securities and Exchange Commission and, pursuant to Rule 12b-32, are incorporated herein by reference.

 

1.1

Equity Distribution Agreement, dated as of February 5, 2015, among Prologis, Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Citigroup Global Markets Inc., Goldman, Sachs & Co., J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC and Wells Fargo Securities, LLC. (incorporated by reference to Exhibit 1.1 to Prologis’ Current Report on Form 8-K filed February 5, 2015).

3.1

Articles of Incorporation of Prologis (incorporated by reference to Exhibit 3.1 to Prologis’ Registration Statement onForm S-11 (No. 333-35915) filed September 18, 1997).

3.2

Articles Supplementary establishing and fixing the rights and preferences of the 6 1/2% Series L Cumulative Redeemable Preferred Stock of Prologis (incorporated by reference to Exhibit 3.16 to Prologis’ Registration Statement on Form 8-A filed June 20, 2003).
3.3Articles Supplementary establishing and fixing the rights and preferences of the 6 3/4% Series M Cumulative Redeemable Preferred Stock of Prologis (incorporated by reference to Exhibit 3.17 to Prologis’ Registration Statement on Form 8-A filed November 12, 2003).
3.4Articles Supplementary establishing and fixing the rights and preferences of the 7.00% Series O Cumulative Redeemable Preferred Stock of Prologis (incorporated by reference to Exhibit 3.19 to Prologis’ Registration Statement on Form 8-A filed December 12, 2005).
3.5Articles Supplementary establishing and fixing the rights and preferences of the 6.85% Series P Cumulative Redeemable Preferred Stock of Prologis (incorporated by reference to Exhibit 3.18 to Prologis’ Registration Statement on Form 8-A filed August 24, 2006).
3.6

Articles Supplementary establishing and fixing the rights and preferences of the Series Q Cumulative Redeemable Preferred Stock of Prologis (incorporated by reference to Exhibit 3.4 to Prologis’ Registration Statement on Form 8-A filed June 2, 2011).

3.7

3.3

Articles Supplementary establishing and fixing the rights and preferences of the Series R Cumulative Redeemable Preferred Stock of Prologis (incorporated by reference to Exhibit 3.5 to Prologis’ Registration Statement on Form 8-A filed June 2, 2011).
3.8Articles Supplementary establishing and fixing the rights and preferences of the Series S Cumulative Redeemable Preferred Stock of Prologis (incorporated by reference to Exhibit 3.6 to Prologis’ Registration Statement on Form 8-A filed June 2, 2011).
3.9

Articles of Merger of New Pumpkin Inc., a Maryland corporation, with and into Prologis, Inc., a Maryland corporation, changing the name of “AMB Property Corporation” to “Prologis, Inc.”, as filed with the Stated Department of Assessments and Taxation of Maryland on June 2, 2011, and effective June 3, 2011 (incorporated by reference to Exhibit 3.1 to Prologis’ Current Report on Form 8-K filed June 8, 2011).

3.10

3.4

Articles of Amendment (incorporated by reference to Exhibit 3.1 to Prologis’ Current Report on Form 8-K filed May 8, 2012).

3.11

3.5

Seventh Amended and Restated Bylaws of Prologis (incorporated by reference to Exhibit 3.2 to Prologis’ Current Report on Form 8-K filed June 8, 2011).
3.12

Thirteenth Amended and Restated Agreement of Limited Partnership of the Operating Partnership (incorporated by reference to Exhibit 3.6 to Prologis’ Current Report on Form 8-K filed June 8, 2011).

3.13

3.6

First Amendment to Thirteenth Amended and Restated Agreement of Limited Partnership of Prologis, L.P., dated February 27, 2014, (incorporated by reference to Exhibit 3.1 to Prologis’ Current Report on Form 8-K filed on February 27, 2014).

3.7

Second Amendment to the Thirteenth Amended and Restated Agreement of the Limited Partnership of Prologis, L.P., dated October 7, 2015 (incorporated by reference to Exhibit 3.1 to Prologis’ Current Report on Form 8-K filed on October 13, 2015).

3.8

Amended and Restated Certificate of Limited Partnership of the Operating Partnership (incorporated by reference to Exhibit 3.7 to Prologis’ Current Report on Form 8-K filed June 8, 2011).

4.1

3.9

Articles Supplementary dated April 3, 2014, (incorporated by reference to Exhibit 3.1 to Prologis’ Current Report on Form 8-K filed on April 3, 2014).

3.10

Eighth Amended and Restated Bylaws of Prologis, Inc. (incorporated by reference to Exhibit 3.1 to Prologis’ Current Report on Form 8-K filed on September 23, 2016).

4.1

Form of Certificate for Common Stock of Prologis (incorporated by reference to Exhibit 4.1 to Prologis’ Registration Statement on Form S-4/A (No. 333-172741) filed April 12, 2011).

4.2

Form of Certificate for the Series Q Cumulative Redeemable Preferred Stock of Prologis (incorporated by reference to Exhibit 4.2 to Prologis’ Registration Statement on Form S-4/A (No. 333-172741) filed April 28, 2011).

4.3

Indenture, dated as of June 8, 2011, by and among the Operating Partnership, as issuer, Prologis, as guarantor, and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 to Prologis’ Registration Statement on Form S-3 (No. 333-177112) filed September 30, 2011).

4.4

Fourth Supplemental Indenture, dated as of June 8, 2011, in respect of the Operating Partnership’s 3.25% Exchangeable Senior Notes due 2015, by and among the Operating Partnership, as issuer, Prologis, as guarantor, and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.6 to Prologis’ Registration Statement on Form S-3(No. 333-177112) filed September 30, 2011).
4.5

Fifth Supplemental Indenture, dated as of August 15, 2013, among Prologis, Inc., Prologis, L.P. and U.S. Bank National Association (incorporated by reference to Exhibit 4.1 to Prologis’ Current Report on Form 8-K filed August 15, 2013).

4.6

4.5

Form of Sixth Supplemental Indenture among Prologis, Inc., Prologis, L.P., Elavon Financial Services Limited, UK Branch, Elavon Financial Services Limited and U.S. Bank National Association (incorporated by reference to Exhibit 4.24.1 to Prologis’ Current Report on Form 8-K filed
December 2, 2013).

4.7

4.6

Form of Seventh Supplemental Indenture among Prologis, Inc., Prologis, L.P., Elavon Financial Services Limited, UK Branch, Elavon Financial Services Limited and U.S. Bank National Association (incorporated by reference to Exhibit 4.1 to Prologis’ Current Report on Form 8-K filed February 18, 2014).

4.8

4.7

Indenture, dated as of June 30, 1998, by and among the Operating Partnership, Prologis and State Street Bank and Trust Company of California, N.A., as trustee (incorporated by reference to Exhibit 4.1 to Prologis’ Current Report on Form 8-K filed August 10, 2006 and also incorporated by reference to Exhibit 4.1 to the Operating Partnership’s Current Report on Form 8-K filed August 10, 2006).

116


4.8

4.9

First Supplemental Indenture, dated as of June 30, 1998, by and among the Operating Partnership, Prologis and State Street Bank and Trust Company of California, N.A., as trustee (incorporated by reference to Exhibit 4.2 to Prologis’ Registration Statement on Form S-11 (No. 333-49163) filed
April 2, 1998).

4.10

4.9

Second Supplemental Indenture, dated as of June 30, 1998, by and among the Operating Partnership, Prologis and State Street Bank and Trust Company of California, N.A., as trustee (incorporated by reference to Exhibit 4.3 to Prologis’ Registration Statement on Form S-11 (No. 333-49163) filed April 2, 1998).

4.11

4.10

Third Supplemental Indenture, dated as of June 30, 1998, by and among the Operating Partnership, Prologis and State Street Bank and Trust Company of California, N.A., as trustee (incorporated by reference to Exhibit 4.4 to Prologis’ Registration Statement on Form S-11 (No. 333-49163) filed
April 2, 1998).

4.12

4.11

Seventh Supplemental Indenture, dated as of August 10, 2006, by and among the Operating Partnership, Prologis and U.S. Bank National Association, as successor-in-interest to State Street Bank and Trust Company of California, N.A., as trustee (incorporated by reference to Exhibit 4.2 to Prologis’ Current Report on Form 8-K filed August 10, 2006 and also incorporated by reference to Exhibit 4.2 to the Operating Partnership’s Current Report on Form 8-K filed August 10, 2006).

4.13

4.12

Eighth Supplemental Indenture, dated as of November 20, 2009, by and among the Operating Partnership, Prologis and U.S. Bank National Association, as successor-in-interest to State Street Bank and Trust Company of California, N.A., as trustee (incorporated by reference to Exhibit 4.1 to Prologis’ Current Report on Form 8-K filed November 20, 2009).

4.14

4.13

Ninth Supplemental Indenture, dated as of November 20, 2009, by and among the Operating Partnership, Prologis and U.S. Bank National Association, as successor-in-interest to State Street Bank and Trust Company of California, N.A., as trustee (incorporated by reference to Exhibit 4.2 to Prologis’ Current Report on Form 8-K filed November 20, 2009).

4.15

4.14

Tenth Supplemental Indenture, dated as of August 9, 2010, by and among the Operating Partnership, Prologis and U.S. Bank National Association, as successor-in-interest to State Street Bank and Trust Company of California, N.A., as trustee (incorporated by reference to Exhibit 4.1 to Prologis’ Current Report on Form 8-K filed August 9, 2010).

4.16

4.15

Eleventh Supplemental Indenture, dated as of November 12, 2010, by and among the Operating Partnership, Prologis and U.S. Bank National Association, as successor-in-interest to State Street Bank and Trust Company of California, N.A., as trustee (incorporated by reference to Exhibit 4.1 to Prologis’ Current Report on Form 8-K filed November 10, 2010).

4.17

4.16

Specimen of 7.50% Notes due 2018 (incorporated by reference to and included in Exhibit 4.3 to Prologis’ Registration Statement on Form S-11 (No. 333-49163) filed April 2, 1998).
4.186.125% Notes due 2016 and Related Guarantee (incorporated by reference to Exhibit 4.3 to Prologis’ Current Report on Form 8-K filed November 20, 2009).
4.196.625% Notes due 2019 and Related Guarantee (incorporated by reference to Exhibit 4.4 to Prologis’ Current Report on Form 8-K filed November 20, 2009).
4.204.500% Notes due 2017 and Related Guarantee (incorporated by reference to Exhibit 4.2 to Prologis’ Current Report on Form 8-K filed August 9, 2010).
4.21

4.00% Notes due 2018 and Related Guarantee (incorporated by reference to Exhibit 4.2 to Prologis’ Current Report on Form 8-K filed November 10, 2010).

4.22

4.17

Form of Global Note Representing the Operating Partnership’s 7.810% Notes due February 1, 2015 and Related Guarantee (incorporated by reference to Exhibit 4.44 to Prologis’ Registration Statement on Form S-4 (No. 333-173891) filed May 3, 2011).
4.23Form of Global Note Representing the Operating Partnership’s 9.340% Notes due March 1, 2015 and Related Guarantee (incorporated by reference to Exhibit 4.45 to Prologis’ Registration Statement on Form S-4 (No. 333-173891) filed May 3, 2011).
4.24Form of Global Note Representing the Operating Partnership’s 5.625% Notes due November 15, 2015 and Related Guarantee (incorporated by reference to Exhibit 4.46 to Prologis’ Registration Statement on Form S-4 (No. 333-173891) filed May 3, 2011).
4.25Form of Global Note Representing the Operating Partnership’s 5.750% Notes due April 1, 2016 and Related Guarantee (incorporated by reference to Exhibit 4.47 to Prologis’ Registration Statement on Form S-4 (No. 333-173891) filed May 3, 2011).
4.26Form of Global Note Representing the Operating Partnership’s 8.650% Notes due May 15, 2016 and Related Guarantee (incorporated by reference to Exhibit 4.48 to Prologis’ Registration Statement on Form S-4 (No. 333-173891) filed May 3, 2011).
4.27Form of Global Note Representing the Operating Partnership’s 5.625% Notes due November 15, 2016 and Related Guarantee (incorporated by reference to Exhibit 4.49 to Prologis’ Registration Statement on Form S-4 (No. 333-173891) filed May 3, 2011).
4.28Form of Global Note Representing the Operating Partnership’s 6.250% Notes due March 15, 2017 and Related Guarantee (incorporated by reference to Exhibit 4.50 to Prologis’ Registration Statement on Form S-4 (No. 333-173891) filed May 3, 2011).
4.29Form of Global Note Representing the Operating Partnership’s 7.625% Notes due July 1, 2017 and Related Guarantee (incorporated by reference to Exhibit 4.51 to Prologis’ Registration Statement on Form S-4 (No. 333-173891) filed May 3, 2011).

4.30Form of Global Note Representing the Operating Partnership’s 6.625% Notes due May 15, 2018 and Related Guarantee (incorporated by reference to Exhibit 4.52 to Prologis’ Registration Statement on Form S-4 (No. 333-173891) filed May 3, 2011).
4.31Form of Global Note Representing the Operating Partnership’s 7.375% Notes due October 30, 2019 and Related Guarantee (incorporated by reference to Exhibit 4.53 to Prologis’ Registration Statement on Form S-4 (No. 333-173891) filed May 3, 2011).
4.32Form of Global Note Representing the Operating Partnership’s 6.875% Notes due March 15, 2020 and Related Guarantee (incorporated by reference to Exhibit 4.54 to Prologis’ Current Report on Form 8-K filed May 3, 2011).
4.33Form of Global Note Representing the Operating Partnership’s 3.250% Exchangeable Senior Notes due 2015 and Related Guarantee (incorporated by reference to and included in Exhibit 4.6 to Prologis’ Registration Statement on Form S-3(No. 333-177112) filed September 30, 2011).
4.34Form of 2.750% Notes due 2019 (incorporated by reference to Exhibit 4.4 to Prologis’ Current Report on Form 8-K filed August 15, 2013).

4.35

4.18

Form of 4.250% Notes due 2023 (incorporated by reference to Exhibit 4.5 to Prologis’ Current Report on Form 8-K filed August 15, 2013).

4.36

4.19

3.350% Notes due 2021 (incorporated by reference to Exhibit 4.2 to Prologis’ Current Report on Form 8-K filed November 1, 2013).

4.37

4.20

Form of 3.000% Notes due 2022 (incorporated by reference to Exhibit 4.2 to Prologis’ Current Report on Form 8-K filed December 2, 2013).

4.38

4.21

Form of 3.375% Notes due 2024 (incorporated by reference to Exhibit 4.3 to Prologis’ Current Report on Form 8-K filed February 18, 2014).

4.39

4.22

Form of Officer’s Certificate related to the Operating Partnership’s 7.810%3.00% Notes due February 1, 20152026 (incorporated by reference to Exhibit 4.624.2 to Prologis’ Registration StatementCurrent Report on Form S-4 (No. 333-173891)8-K filed on May 3, 2011)28, 2014).

4.40

4.23

Form of Officer’s Certificate related to the Operating Partnership’s 9.340%1.375% Notes due March 1, 2015 (incorporated by reference to Exhibit 4.63 to Prologis’ Registration Statement on Form S-4 (No. 333-173891) filed May 3, 2011).

4.41Form of Officer’s Certificate related to the Operating Partnership’s 5.625% Notes due November 15, 2015 (incorporated by reference to Exhibit 4.64 to Prologis’ Registration Statement on Form S-4 (No. 333-173891) filed May 3, 2011).
4.42Form of Officer’s Certificate related to the Operating Partnership’s 5.750% Notes due April 1, 2016 (incorporated by reference to Exhibit 4.65 to Prologis’ Registration Statement on Form S-4 (No. 333-173891) filed May 3, 2011).
4.43Form of Officer’s Certificate related to the Operating Partnership’s 8.650% Notes due May 15, 2016 (incorporated by reference to Exhibit 4.66 to Prologis’ Registration Statement on Form S-4 (No. 333-173891) filed May 3, 2011).
4.44Form of Officer’s Certificate related to the Operating Partnership’s 5.625% Notes due November 15, 2016 (incorporated by reference to Exhibit 4.67 to Prologis’ Registration Statement on Form S-4 (No. 333-173891) filed May 3, 2011).
4.45Form of Officer’s Certificate related to the Operating Partnership’s 6.250% Notes due March 15, 2017 (incorporated by reference to Exhibit 4.68 to Prologis’ Registration Statement on Form S-4 (No. 333-173891) filed May 3, 2011).
4.46Form of Officer’s Certificate related to the Operating Partnership’s 7.625% Notes due July 1, 2017 (incorporated by reference to Exhibit 4.69 to Prologis’ Registration Statement on Form S-4 (No. 333-173891) filed May 3, 2011).
4.47Form of Officer’s Certificate related to the Operating Partnership’s 6.625% Notes due May 15, 2018 (incorporated by reference to Exhibit 4.70 to Prologis’ Registration Statement on Form S-4 (No. 333-173891) filed May 3, 2011).
4.48Form of Officer’s Certificate related to the Operating Partnership’s 7.375% Notes due October 30, 2019 (incorporated by reference to Exhibit 4.71 to Prologis’ Registration Statement on Form S-4 (No. 333-173891) filed May 3, 2011).
4.49Form of Officer’s Certificate related to the Operating Partnership’s 6.875% Notes due March 15, 2020 (incorporated by reference to Exhibit 4.724.2 to Prologis’ Registration StatementCurrent Report on Form S-4 (No. 333-173891)8-K filed May 3, 2011)on October 6, 2014).

4.50

4.24

Officers’ Certificate related to the 2.750% Notes due 2019 (incorporated by reference to Exhibit 4.2 to Prologis’ Current Report on Form 8-K filed August 15, 2013).

4.51

4.25

Officers’ Certificate related to the 4.250% Notes due 2023 (incorporated by reference to Exhibit 4.3 to Prologis’ Current Report on Form 8-K filed August 15, 2013).

4.52

4.26

Officers’ Certificate related to the 3.350% Notes due 2021 (incorporated by reference to Exhibit 4.1 to Prologis’ Current Report on Form 8-K filed November 1, 2013).

4.53

4.27

Form of Officers’ Certificate related to the 3.375% Notes due 2024 (incorporated by reference to Exhibit 4.2 to Prologis’ Current Report on Form 8-K filed February 18, 2014).

117


4.54

4.28

Warrant

Form of Officer’s Certificate related to Purchase Common Stock, dated December 20, 2012the 3.00% Notes due 2026 (incorporated by reference to Exhibit 4.1 to Prologis’ Current Report on Form 8-K filed December 20, 2012)on May 28, 2014).

4.29

Form of Officer’s Certificate related to 1.375% Notes due 2020 (incorporated by reference to Exhibit 4.1 to Prologis’ Current Report on Form 8-k filed on October 6, 2014).

4.30

Form of Officers’ Certificate related to the 1.375% Notes due 2021 (incorporated by reference to Exhibit 4.1 of Prologis’ Current Report on Form 8-K filed May 12, 2015).

4.31

Form of 1.375% Notes due 2021 (incorporated by reference to Exhibit 4.2 of Prologis’ Current Report on Form 8-K filed May 12, 2015).

4.32

Form of Officers’ Certificate related to the 3.750% Notes due 2025 (incorporated by reference to Exhibit 4.1 to Prologis’ Current Report on Form 8-K filed on October 30, 2015).

4.33

Form of 3.750% Notes due 2025 (incorporated by reference to Exhibit 4.2 of Prologis’ Current Report on Form 8-K filed October 30, 2015).

Other debt instruments are omitted in accordance with Item 601(b)(4)(iii)(A) of Registration S-K. Copies of such instruments will be furnished to the Securities and Exchange Commission upon request.

 

10.1

10.1

Agreement of Limited Partnership of ProLogis Limited Partnership-I, dated as of December 22, 1993 (incorporated by reference to Exhibit 10.4 to the Trust’s Registration Statement (No. 33-73382)) .

10.2

Amended and Restated Agreement of Limited Partnership of ProLogis Fraser, L.P., dated as of August 4, 2004 (incorporated by reference to Exhibit 10.1 to the Trust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004).

10.3

Fifteenth Amended and Restated Agreement of Limited Partnership of Prologis 2, L.P., (f/k/a AMB Property II, L.P.) dated February 19, 2010 (incorporated by reference to Exhibit 10.6 to Prologis’ Annual Report on Form 10-K for the year ended December 31, 2009).

10.4

10.4*

Exchange Agreement, dated as of July 8, 2005, by and between the Operating Partnership and Teachers Insurance and Annuity Association of America (incorporated by reference to Exhibit 10.1 to Prologis’ Current Report on Form 8-K filed July 13, 2005 and also incorporated by reference to Exhibit 10.1 to the Operating Partnership’s Current Report on Form 8-K filed July 13, 2005).
10.5Transfer and Registration Rights Agreement, dated as of December 22, 1993, by and among the Trust and the persons set forth therein (incorporated by reference to Exhibit 10.10 to the Trust’s Registration Statement (No. 33-73382)).
10.6Registration Rights Agreement dated February 9, 2007, between the Trust and each of the parties identified therein (incorporated by reference to Exhibit 99.10 to the Trust’s Annual Report on Form 10-K for the year ended December 31, 2006).
10.7Form of Registration Rights Agreement, by and among Prologis and the persons named therein (incorporated by reference to Exhibit 10.2 to Prologis’ Registration Statement on Form S-11 (No. 333-35915) filed September 18, 1997).
10.8Registration Rights Agreement, dated as of November 10, 2009, by and between Prologis and J.P. Morgan Securities Inc. (incorporated by reference to Exhibit 4.1 to Prologis’ Current Report on Form 8-K filed November 10, 2009).
10.9Registration Rights Agreement, dated November 26, 1997, by and among Prologis and the persons named therein (incorporated by reference to Exhibit 4.1 to Prologis’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2010).
10.10Registration Rights Agreement, dated as of July 8, 2005, by and between the Operating Partnership and Teachers Insurance and Annuity Association of America (incorporated by reference to Exhibit 4.3 to the Operating Partnership’s Current Report on Form 8-K filed July 13, 2005).
10.11Registration Rights Agreement, dated November 14, 2003, by and among Prologis 2, L.P.(formerly known as AMB Property II, L.P.) and the unitholders whose names are set forth on the signature pages thereto (incorporated by reference to Exhibit 4.1 to Prologis’ Current Report on Form 8-K filed November 17, 2003).
10.12Registration Rights Agreement, dated as of May 5, 1999, by and among Prologis, Prologis 2, L.P. and the unitholders whose names are set forth on the signature pages thereto (incorporated by reference to Exhibit 4.33 to Prologis’ Annual Report on Form 10-K for the year ended December 31, 2006).
10.13Registration Rights Agreement, dated as of November 1, 2006, by and among Prologis, Prologis 2, L.P., J.A. Green Development Corp. and JAGI, Inc (incorporated by reference to Exhibit 4.34 to Prologis’ Annual Report on Form 10-K for the year ended December 31, 2006).
10.14†Registration Rights Agreement, dated as of June 30, 2013, by and among Prologis, Inc., Prologis 2, L.P. and Bakar AMB Limited Partnership.
10.15Equity Distribution Agreement, dated June 26, 2013, among Prologis, Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated and Citigroup Global Markets Inc. (incorporated by reference to Exhibit 1.1 to Prologis’ Current Report on Form 8-K filed June 26, 2013).
10.16*

The Third Amended and Restated 1997 Stock Option and Incentive Plan of AMB Property Corporation and AMB Property, L.P. (incorporated by reference to Exhibit 10.22 to Prologis’ Annual Report on Form 10-K for the year ended December 31, 2001 and also incorporated by reference to Exhibit 10.19 to the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2001).

10.17*

10.5*

Amendment No. 1 to the Third Amended and Restated 1997 Stock Option and Incentive Plan of AMB Property Corporation and AMB Property, L.P. (incorporated by reference to Exhibit 10.23 to Prologis’ Annual Report on Form 10-K for the year ended December 31, 2001 and also incorporated by reference to Exhibit 10.20 to the Operating Partnership’s Annual Report on Form 10-K for the year ended December 31, 2001).

10.18*

10.6*

Amendment No. 2 to the Third Amended and Restated 1997 Stock Option and Incentive Plan of AMB Property Corporation and AMB Property, L.P. (incorporated by reference to Exhibit 10.5 to Prologis’ Quarterly Report on Form 10-Q for the quarter ended March 31, 2004 and also incorporated by reference to Exhibit 10.4 to the Operating Partnership’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004).

10.19*

10.7*

Amended and Restated 2002 Nonqualified Deferred Compensation Plan (incorporated by reference to Exhibit 10.2 to Prologis’ Current Report on Form 8-K filed October 4, 2006 and also incorporated by reference to Exhibit 10.2 to the Operating Partnership’s Current Report on Form 8-K filed October 4, 2006).

10.20*

10.8*

The Amended and Restated 2002 Stock Option and Incentive Plan of AMB Property Corporation and AMB Property, L.P. (incorporated by reference to Exhibit 10.1 to Prologis’ Current Report on Form 8-K filed May 15, 2007 and also incorporated by reference to Exhibit 10.1 to the Operating Partnership’s Current Report on Form 8-K filed May 15, 2007).

10.21*

10.9*

Amended and Restated 2005 Non-Qualified Deferred Compensation Plan (incorporated by reference to Exhibit 10.2 to Prologis’ Quarterly Report on Form 10-Q for the quarter ended September 30, 2007 and also incorporated by reference to Exhibit 10.2 to the Operating Partnership’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007).
10.22*Prologis 2011 Notional Account Deferred Compensation Plan (incorporated by reference to Exhibit 10.9 to Prologis’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2011).

10.23*Prologis Nonqualified Deferred Compensation Plan (incorporated by reference to Exhibit 10.1 to Prologis’ Current Report on Form 8-K filed December 13, 2011).
10.24*Prologis Outperformance Plan (incorporated by reference to Exhibit 10.1 to Prologis’ Current Report on Form 8-K filed December 22, 2011).

10.25*

10.10*

Prologis, Inc. 2016 Outperformance Plan (incorporated by reference to Exhibit 10.1 to Prologis’ Current Report on Form 8-K filed on August 17, 2016).

10.11*

Form of Prologis, Inc. 2016 Outperformance Plan LTIP Unit Award Agreement (incorporated by reference to Exhibit 10.2 to Prologis’ Current Report on Form 8-K filed on August 17, 2016).

10.12*

Form of Participation Points and LTIP Unit Award Agreement (incorporated by reference to Exhibit 10.1 to Prologis’ Current Report on Form 8-K filed on February 27, 2014).

10.13*

Second Amended and Restated Prologis Promote Plan (incorporated by reference to Exhibit 10.1 to Prologis’ Current Report on Form 8-K filed on August 16, 2013)1, 2014).

118


10.14*

Form of Prologis, Inc. Second Amended and Restated Prologis Promote Plan LTIP Unit Award Agreement (incorporated

by reference to Exhibit 10.1 to Prologis’ Current Report on Form 8-K filed on August 18, 2014).

10.26*

10.15*

Form of Prologis, Inc. Long-Term Incentive Plan LTIP Unit Award Agreement (General) (incorporated by reference to Exhibit 10.3 to Prologis’ Quarterly Report on Form 10-Q for the quarter ended September 30, 2014).

10.16*

Form of Prologis, Inc. 2012 Long-Term Incentive Plan Restricted Stock Unit Agreement (LTIP Unit election) (incorporated by reference to Exhibit 10.27 to Prologis’ Annual Report on Form 10-K for the year ended December 31, 2015).

10.17*

Form of Prologis, Inc. 2012 Long-Term Incentive Plan Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.5 to Prologis’ Quarterly Report on Form 10-Q for the quarter ended September 30, 2014).

10.18*

Form of Prologis, Inc. 2012 Long-Term Incentive Plan Restricted Stock Unit Agreement (Bonus exchange) (incorporated by reference to Exhibit 10.6 to Prologis’ Quarterly Report on Form 10-Q for the quarter ended September 30, 2014).

10.19*

ProLogis 2006 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.2 to the Trust’s Current Report onForm 8-K filed June 2, 2006).

10.27*

10.20*

First Amendment of the ProLogis 2006 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Trust’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010).

10.28*

10.21*

Second Amendment of the ProLogis 2006 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Trust’s Current Report on Form 8-K filed May 19, 2010).

10.29*

10.22*

Third Amendment of the ProLogis 2006 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Trust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2010).

10.30*

10.23*

Form of Non Qualified Share Option Award Terms; The Trust 2006 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.25 to the Trust’s Annual Report on Form 10-K for the year ended December 31, 2009).

10.31*

10.24*

Form of Restricted Share Award Terms; ProLogis 2006 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.26 to the Trust’s Annual Report on Form 10-K for the year ended December 31, 2009).

10.32*

10.25*

Form of Performance Share Award Terms; ProLogis 2006 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.27 to the Trust’s Annual Report on Form 10-K for the year ended December 31, 2009).

10.33*

10.26*

ProLogis 2000 Share Option Plan for Outside Trustees (as Amended and Restated Effective as of December 31, 2009) (incorporated by reference to exhibit 10.13 to ProLogis’ Form 10-K for the year ended December 31, 2008).

10.34*

10.27*

ProLogis Trust 1997 Long-Term Incentive Plan (as Amended and Restated Effective as of September 26, 2002) (incorporated by reference to exhibit 10.1 to ProLogis’ Form 8-K dated February 19, 2003).

10.35*

10.28*

First Amendment of ProLogis 1997 Long-Term Incentive Plan (incorporated by reference to exhibit 10.2 to ProLogis’Form 8-K filed on May 19, 2010).

10.36*

10.29*

ProLogis Deferred Fee Plan for Trustees (As Amended and Restated Effective as of May 14, 2010) (incorporated by reference to exhibit 10.3 to ProLogis’ Form 8-K filed on May 19, 2010).

10.37*

10.30*

Form of Indemnification Agreement between ProLogis and certain directors and executive officers (incorporated by reference to Exhibit 10.1 to Prologis’ Current Report on Form 8-K filed June 8, 2011).

10.38*

10.31*

Form of Amended and Restated Change in Control and Noncompetition Agreement by and between AMB Property, L.P. and executive officers (incorporated by reference to Exhibit 10.1 to AMB Property Corporation’s Current Report on Form 8-K filed on October 1, 2007 and also incorporated by reference to Exhibit 10.1 of AMB Property, L.P.’s Current Report on Form 8-K filed on October 1, 2007).
10.39*Letter Agreement, dated January 30, 2011, by and between Hamid R. Moghadam and AMB Property III, LLC (incorporated by reference to Exhibit 10.10 to Prologis’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2011).
10.40*Letter Agreement, dated January 30, 2011, by and between Eugene F. Reilly and the Operating Partnership (incorporated by reference to Exhibit 10.12 to Prologis’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2011).
10.41*Letter Agreement, dated January 30, 2011, by and between Thomas S. Olinger and the Operating Partnership (incorporated by reference to Exhibit 10.13 to Prologis’ Quarterly Report on Form 10-Q for the quarter ended June 30, 2011).
10.42*

Form of Restricted Stock Unit Agreement; Prologis, Inc. 2012 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to Prologis’ Quarterly Report on Form 10-Q for the quarter ended September 30, 2012).

10.43*

10.32*

Employment Agreement made and entered into on January 30, 2011 and effective as of January 1, 2012, by and between Walter C. Rakowich and ProLogis (incorporated by reference to Exhibit 10.25 to the Trust’s Annual Report on Form 10-K for the year ended December 31, 2010).
10.44*Letter Agreement, dated January 30, 2011, from the Trust to Edward S. Nekritz (incorporated by reference to Exhibit 10.29 to the Trust’s Annual Report on Form 10-K for the year ended December 31, 2010).
10.45*Form of Executive Protection Agreements entered into between ProLogis and Edward S. Nekritz, effective as of December 31, 2009 (incorporated by reference to exhibit 10.23 to ProLogis’ Form 10-K for the year ended December 31, 2008).
10.46*

Prologis, Inc. 2012 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to Prologis’ Current Report on Form 8-K filed May 8, 2012).

10.47*

10.33*

Form of Director Deferred Stock Unit Award terms (incorporated by reference to Exhibit 10.2 to Prologis’ Current Report on Form 8-K filed May 8, 2012).

10.48*

10.34*

First Amendment to Employment Agreement effective as of December 6, 2012, by and between Walter C. Rakowich and Prologis (incorporated by reference to Exhibit 10.55 to Prologis’ Annual Report on Form 10-K for the year ended December 31, 2012).
10.49*

Form of Change of Control and Noncompetition Agreement by and between Prologis, Inc. and its executive officers (incorporated by reference to Exhibit 10.2 to Prologis’ Current Report on Form 8-K filed August 16, 2013).

10.50

10.35*

Credit

Form of Prologis, Inc. Long-Term Incentive Plan LTIP Unit Award Agreement dated as of November 29, 2010, by and among the Operating Partnership, as borrower, the banks listed on the signature pages thereof, HSBC Bank USA, National Association, as administrative agent, Credit Agricole Corporate and Investment Bank, as syndication agent, and HSBC Securities, Inc. and Credit Agricole Corporate and Investment Bank, as joint lead arrangers and joint bookrunners, and Morgan Stanley Senior Funding, Inc. as documentation agent(General form 2015) (incorporated by reference to Exhibit 10.110.57 to Prologis’ CurrentAnnual Report on Form 8-K filed10-K for the year ended December 1, 2010)31, 2014).

10.51

10.36*

Guaranty

Form of Payment, dated as of November 29, 2010, by Prologis, for the benefit of HSBC Bank USA, National Association, as administrative agent for the banks that are from time to time parties to the CreditInc. Long-Term Incentive Plan LTIP Unit Award Agreement dated as of November 29, 2010(Bonus exchange) (incorporated by reference to Exhibit 10.2 to Prologis’ CurrentQuarterly Report on Form 8-K filed December 1, 2010)10-Q for the quarter ended March 31, 2015).

10.52

10.37*

Qualified Borrower Guaranty, dated as

Form of November 29, 2010, by the Operating Partnership for the benefit of HSBC Bank USA, National Association, as administrative agent for the banks that are from time to time parties to the CreditPrologis, Inc. Long-Term Incentive Plan LTIP Unit Award Agreement dated as of November 29, 2010(General form 2016) (incorporated by reference to Exhibit 10.310.48 to Prologis’ CurrentAnnual Report on Form 8-K filed10-K for the year ended December 1, 2010)31, 2015).

119


10.53

10.38*

First Amendment and Waiver, dated as

Form of June 3, 2011, by and among Operating Partnership, as borrower, Prologis, as guarantor, various banks and HSBC Bank USA, National Association, as administrative agent, to the CreditInc. Outperformance Plan LTIP Unit Exchange Award Agreement dated as of November 29, 2010, (incorporated by reference to Exhibit 10.4

10.58 to Prologis’ CurrentAnnual Report on Form 8-K filed June 9, 2011)10-K for the year ended December 31, 2014).

10.54

10.39*

Form of Prologis, Inc. Long-Term Incentive Plan Equity Exchange Offer LTIP Unit Award Agreement (incorporated by reference to Exhibit 10.59 to Prologis’ Annual Report on Form 10-K for the year ended December 31, 2014).

10.40*

Amended and Restated Prologis, Inc. 2011 Notional Account Deferred Compensation Plan (incorporated by reference to Exhibit 10.60 to Prologis’ Annual Report on Form 10-K for the year ended December 31, 2014).

10.41*

Amended and Restated Prologis, Inc. Nonqualified Deferred Compensation Plan (incorporated by reference to Exhibit 10.61 to Prologis’ Annual Report on Form 10-K for the year ended December 31, 2014).

10.42*

Second Amended and Restated Prologis 2005 Nonqualified Deferred Compensation Plan (incorporated by reference to Exhibit 10.62 to Prologis’ Annual Report on Form 10-K for the year ended December 31, 2014).

10.43

Time-Sharing Agreement, dated January 21, 2015, by and between ProLogis Logistics Services Incorporated and Hamid R. Moghadam (incorporated by reference to Exhibit 10.63 to Prologis’ Annual Report on Form 10-K for the year ended December 31, 2014).

10.44

Amended and Restated Time-Sharing Agreement, dated January 11, 2016, by and between ProLogis Logistics Services Incorporated and Hamid R. Moghadam (incorporated by reference to Exhibit 10.55 to Prologis’ Annual Report on Form 10-K for the year ended December 31, 2015).

10.45

Global Senior Credit Agreement dated as of July 11, 2013, among Prologis, Inc., Prologis, L.P., various affiliates of Prologis, L.P., various lenders and agents, and Bank of America, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.1 to Prologis’ Current Report on Form 8-K filed July 15, 2013).

10.55

10.46

First Amendment to the Global Senior Credit Agreement dated as of June 26, 2014 among Prologis, Inc., Prologis, L.P., various affiliates of Prologis, L.P., various lenders and Bank of America, N.A. as administrative agent (incorporated by reference to Exhibit 10.1 to Prologis’ Current Report Form 8-K filed on June 30, 2014).

10.47

Second Amendment to the Global Senior Credit Agreement dated as of January 22, 2015 among Prologis, L.P., various affiliates of Prologis, L.P., various lenders and Bank of America, N.A. as global administrative agent. (incorporated by reference to Exhibit 10.1 to Prologis’ Current Report Form 8-K filed on March 31, 2015).

10.48

Fourth Amended and Restated Revolving Credit Agreement dated as of August 14, 2013 among Prologis Japan Finance Y.K., as initial borrower, Prologis, Inc. and Prologis, L.P., as guarantors, the banks listed on the signature pages thereof, and Sumitomo Mitsui Banking Corporation, as Administrative Agent (incorporated by reference to Exhibit 10.1 to Prologis’ Current Report on Form 8-K filed August 16, 2013).

10.56

10.49

Guaranty of Payment, dated as of August 14, 2013, among Prologis, Inc. and Prologis, L.P., as guarantors, Sumitomo Mitsui Banking Corporation, as Administrative Agent, for the banks that are from time to time parties to the Fourth Amended and Restated Revolving Credit Agreement, dated as ofat August 14, 2013 (incorporated by reference to Exhibit 10.2 to Prologis’ Current Report on Form 8-K filed August 16, 2013).

10.57

10.50

Senior Term Loan Agreement dated as of February 2, 2012, by andJune 19, 2014 among Prologis, the Operating Partnership,Inc., Prologis, L.P., various affiliates of the Operating Partnership,Prologis, L.P., various lenders and Bank of America, N.A. as administrative agent (incorporated by reference to Exhibit 10.1 to Prologis’ Current Report Form 8-K filed on June 24, 2014).

10.51

Senior Term Loan Agreement dated as of May 28, 2015 among Prologis, L.P., as Borrower, Prologis, Inc., as Guarantor, various lenders and Bank of America N.A., as administrative agentAdministrative Agent (incorporated by reference to Exhibit 10.1 of Prologis’ Current Report on Form 8-K filed June 1, 2015).

10.52

First Amendment, dated January 22, 2015, to the Senior Term Loan Agreement dated as of June 19, 2014, among Prologis, L.P., various affiliates thereof, various lenders and Bank of America, N.A. as Administrative Agent (incorporated by reference to Exhibit 10.63 to Prologis’ Annual Report on Form 10-K for the year ended December 31, 2015).

10.53

Term Loan Agreement dated as of August 18, 2016 among Prologis GK Holdings Y.K., as borrower, Prologis, Inc. and Prologis, L.P., as guarantors, the banks listed on the signature pages thereof, and Sumitomo Mitsui Banking Corporation, as Administrative Agent (incorporated by reference to Exhibit 10.1 to Prologis’ Current Report on Form 8-K filed February 8, 2012)on August 22, 2016).

10.58

10.54

First Amendment

Guaranty of Payment dated as of July 11, 2013,August 18, 2016 among Prologis, Inc. and Prologis, L.P., as guarantors, and Sumitomo Mitsui Banking Corporation, as Administrative Agent, for the banks that are from time to time parties to the Senior Term Loan Agreement dated as of February 2, 2012,August 18, 2016 (incorporated by reference to Exhibit 10.2 to Prologis’ Current Report on Form 8-K filed on August 22, 2016).

10.55

Amended and Restated Global Senior Credit Agreement dated as of April 14, 2016 among Prologis, Inc., Prologis, L.P., various affiliates thereof,of Prologis, L.P., various lenders and agents, and Bank of America, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.1 to Prologis’ Current Report on Form 8-K filed July 16, 2013)on April 18, 2016).

120


10.56

Letter Agreement dated February 3, 2017 by and between Prologis, Inc. and Hamid R. Moghadam (incorporated by

reference to Exhibit 10.1 to Prologis’ Current Report Form 8-K filed on February 3, 2017).

12.1†

Computation of Ratio of Earnings to Fixed Charges of Prologis, Inc. and Prologis, L.P.

12.2†

Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock/Unit Dividends of Prologis, Inc. and Prologis, L.P.

21.1†

Subsidiaries of Prologis, Inc. and Prologis, L.P.

23.1†

Consent of KPMG LLP with respect to Prologis, Inc.

23.2†

Consent of KPMG LLP with respect to Prologis, L.P.

24.1†

Powers

Power of Attorney for Prologis, Inc. (included in signature page of this annual report).

31.1†

24.2†

Power of Attorney for Prologis, L.P. (included in signature page of this annual report).

31.1†

Certification of Chief Executive Officer of Prologis, Inc.

31.2†

Certification of Chief Financial Officer of Prologis, Inc.

31.3†

Certification of Chief Executive Officer for Prologis, L.P.

31.4†

Certification of Chief Financial Officer for Prologis, L.P.

32.1†

Certification of Chief Executive Officer and Chief Financial Officer of Prologis, Inc., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2†

Certification of Chief Executive Officer and Chief Financial Officer for Prologis, L.P., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.1

Supplemental United States Federal Income Tax Considerations (incorporated by reference to Exhibit 99.1 to Prologis’ Current Report on Form 8-K filed June 20, 2016).

101. INS†

XBRL Instance Document

101. SCH†

XBRL Taxonomy Extension Schema

101. CAL†

XBRL Taxonomy Extension Calculation Linkbase

101. DEF†

XBRL Taxonomy Extension Definition Linkbase

101. LAB†

XBRL Taxonomy Extension Label Linkbase

101. PRE†

XBRL Taxonomy Extension Presentation Linkbase

 

*

*

Management Contract or Compensatory Plan or Arrangement

Filed herewith

 

126

121