UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
For the transition period from ______________ to ______________
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address or principal executive offices) |
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(Zip Code) |
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(Registrants’ telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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Title of Each Class |
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Trading Symbol(s) |
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Name of Each Exchange on Which Registered |
Prologis, Inc. |
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Prologis, L.P. |
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Prologis, L.P. |
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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 for the past 90 days.
Prologis, Inc. |
☒ |
No |
☐ |
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Prologis, L.P. |
☒ |
No |
☐ |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter periods that the registrant was required to submit such files).
Prologis, Inc. |
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No |
☐ |
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Prologis, L.P. |
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No |
☐ |
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:
Prologis, Inc.: |
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Accelerated filer ☐ |
Non-accelerated filer ☐ |
Smaller reporting company |
Emerging growth company |
Prologis, L.P.: |
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Large accelerated filer ☐ |
Accelerated filer ☐ |
Smaller reporting company |
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
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 |
No |
☒ |
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Prologis, L.P. |
Yes |
No |
☒ |
The number of shares of Prologis, Inc.’s common stock outstanding at April 26, 2023, was approximately
EXPLANATORY NOTE
This report combines the quarterly reports on Form 10-Q for the period ended March 31, 2023, 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” or the “OP” mean Prologis, L.P., and its consolidated subsidiaries. The terms “the Company,” “Prologis,” “we,” “our” or “us” means the Parent and the OP collectively.
The Parent is a real estate investment trust (a “REIT”) and the general partner of the OP. At March 31, 2023, the Parent owned a 97.55% common general partnership interest in the OP and substantially all of the preferred units in the OP. The remaining 2.45% common limited partnership interests are owned by unaffiliated investors and certain current and former directors and officers of the Parent.
We operate the Parent and the OP as one enterprise. The management of the Parent consists of the same members as the management of the OP. These members are officers of the Parent and employees of the OP or one of its subsidiaries. As sole general partner, the Parent has control of the OP through complete responsibility and discretion in the day-to-day management and therefore, consolidates the OP for financial reporting purposes. Because the only significant asset of the Parent is its investment in the OP, the assets and liabilities of the Parent and the OP are the same on their respective financial statements.
We believe combining the quarterly reports on Form 10-Q of the Parent and the OP into this single report results in the following benefits:
It is important to understand the few differences between the Parent and the OP in the context of how we operate the Company. The Parent does not conduct business itself, other than acting as the sole general partner of the OP and issuing public equity from time to time. The OP holds substantially all the assets of the business, directly or indirectly. The OP 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 the Parent, which are contributed to the OP in exchange for partnership units, the OP generates capital required by the business through the OP’s operations, incurrence of indebtedness and issuance of partnership units to third parties.
The presentation of noncontrolling interests, stockholders’ equity and partners’ capital are the main areas of difference between the consolidated financial statements of the Parent and those of the OP. The differences in the presentations between stockholders’ equity and partners’ capital result from the differences in the equity and capital issuances in the Parent and in the OP.
The preferred stock, common stock, additional paid-in capital, accumulated other comprehensive income (loss) and distributions in excess of net earnings of the Parent are presented as stockholders’ equity in the Parent’s consolidated financial statements. These items represent the common and preferred general partnership interests held by the Parent in the OP and are presented as general partner’s capital within partners’ capital in the OP’s consolidated financial statements. The common limited partnership interests held by the limited partners in the OP are presented as noncontrolling interest within equity in the Parent’s consolidated financial statements and as limited partners’ capital within partners’ capital in the OP’s consolidated financial statements.
To highlight the differences between the Parent and the OP, separate sections in this report, as applicable, individually discuss the Parent and the OP, including separate financial statements and separate Exhibit 31 and 32 certifications. In the sections that combine disclosure of the Parent and the OP, this report refers to actions or holdings as being actions or holdings of Prologis.
PROLOGIS
INDEX
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
PROLOGIS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except per share data)
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March 31, 2023 |
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December 31, 2022 |
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ASSETS |
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Investments in real estate properties |
$ |
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$ |
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Less accumulated depreciation |
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Net investments in real estate properties |
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Investments in and advances to unconsolidated entities |
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Assets held for sale or contribution |
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Net investments in real estate |
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Cash and cash equivalents |
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Other assets |
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Total assets |
$ |
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$ |
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LIABILITIES AND EQUITY |
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Liabilities: |
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Debt |
$ |
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$ |
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Accounts payable and accrued expenses |
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Other liabilities |
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Total liabilities |
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Equity: |
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Prologis, Inc. stockholders’ equity: |
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Series Q preferred stock at stated liquidation preference of $ |
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Common stock; $ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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( |
) |
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( |
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Distributions in excess of net earnings |
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( |
) |
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( |
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Total Prologis, Inc. stockholders’ equity |
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Noncontrolling interests |
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Total equity |
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Total liabilities and equity |
$ |
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$ |
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The accompanying notes are an integral part of these Consolidated Financial Statements.
1
PROLOGIS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
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Three Months Ended |
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March 31, |
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2023 |
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2022 |
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Revenues: |
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Rental |
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$ |
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$ |
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Strategic capital |
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Development management and other |
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Total revenues |
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Expenses: |
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Rental |
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Strategic capital |
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General and administrative |
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Depreciation and amortization |
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Other |
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Total expenses |
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Operating income before gains on real estate transactions, net |
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Gains on dispositions of development properties and land, net |
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Gains on other dispositions of investments in real estate, net |
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Operating income |
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Other income (expense): |
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Earnings from unconsolidated entities, net |
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Interest expense |
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( |
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( |
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Foreign currency and derivative gains and other income, net |
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Gains (losses) on early extinguishment of debt, net |
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( |
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Total other income (expense) |
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( |
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Earnings before income taxes |
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Income tax expense |
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( |
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( |
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Consolidated net earnings |
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Less net earnings attributable to noncontrolling interests |
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Net earnings attributable to controlling interests |
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Less preferred stock dividends |
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Net earnings attributable to common stockholders |
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$ |
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$ |
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Weighted average common shares outstanding – Basic |
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Weighted average common shares outstanding – Diluted |
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Net earnings per share attributable to common stockholders – Basic |
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$ |
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$ |
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Net earnings per share attributable to common stockholders – Diluted |
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$ |
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$ |
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The accompanying notes are an integral part of these Consolidated Financial Statements.
2
PROLOGIS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands)
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Three Months Ended |
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March 31, |
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2023 |
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2022 |
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Consolidated net earnings |
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$ |
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$ |
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Other comprehensive income (loss): |
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Foreign currency translation gains (losses), net |
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( |
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Unrealized gains (losses) on derivative contracts, net |
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( |
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Comprehensive income |
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Net earnings attributable to noncontrolling interests |
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( |
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( |
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Other comprehensive loss (income) attributable to noncontrolling interests |
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( |
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Comprehensive income attributable to common stockholders |
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$ |
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$ |
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The accompanying notes are an integral part of these Consolidated Financial Statements.
3
PROLOGIS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(Unaudited)
(In thousands)
Three Months Ended March 31, 2023 and 2022
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Common Stock |
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Accumulated |
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Distributions |
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Number |
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Additional |
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Other |
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in Excess of |
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Non- |
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Preferred |
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of |
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Par |
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Paid-in |
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Comprehensive |
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Net |
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controlling |
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Total |
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Stock |
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Shares |
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Value |
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Capital |
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Loss |
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Earnings |
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Interests |
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Equity |
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Balance at January 1, 2023 |
$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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$ |
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Consolidated net earnings |
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- |
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- |
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- |
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- |
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- |
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Effect of equity compensation plans |
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- |
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- |
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- |
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Capital contributions |
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- |
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- |
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- |
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- |
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- |
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- |
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Redemption of noncontrolling interests |
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- |
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- |
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- |
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- |
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( |
) |
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( |
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Foreign currency translation losses, net |
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- |
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- |
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- |
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- |
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( |
) |
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- |
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( |
) |
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( |
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Unrealized losses on derivative |
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- |
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- |
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- |
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- |
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( |
) |
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- |
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( | ) |
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( |
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Reallocation of equity |
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- |
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- |
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- |
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( |
) |
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- |
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- |
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- |
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Dividends ($ |
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- |
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- |
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- |
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- |
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- |
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( |
) |
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( |
) |
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( |
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Balance at March 31, 2023 |
$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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$ |
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Common Stock |
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Accumulated |
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Distributions |
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Number |
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Additional |
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Other |
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in Excess of |
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Non- |
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Preferred |
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of |
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Par |
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Paid-in |
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Comprehensive |
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Net |
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controlling |
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Total |
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Stock |
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Shares |
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Value |
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Capital |
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Income (Loss) |
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Earnings |
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Interests |
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Equity |
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Balance at January 1, 2022 |
$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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$ |
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Consolidated net earnings |
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- |
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- |
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- |
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- |
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- |
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Effect of equity compensation plans |
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- |
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- |
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- |
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Capital contributions |
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- |
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- |
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- |
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- |
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- |
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- |
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Redemption of noncontrolling interests |
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- |
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- |
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- |
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( |
) |
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( |
) |
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Foreign currency translation gains, net |
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- |
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- |
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- |
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- |
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- |
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Unrealized gains on derivative |
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- |
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- |
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- |
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- |
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- |
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Reallocation of equity |
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- |
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- |
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- |
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( |
) |
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- |
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- |
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- |
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Dividends ($ |
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- |
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- |
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- |
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( |
) |
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- |
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( |
) |
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( |
) |
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( |
) |
Balance at March 31, 2022 |
$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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$ |
|
The accompanying notes are an integral part of these Consolidated Financial Statements.
4
PROLOGIS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
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Three Months Ended |
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March 31, |
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2023 |
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2022 |
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Operating activities: |
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Consolidated net earnings |
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$ |
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$ |
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Adjustments to reconcile net earnings to net cash provided by operating activities: |
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Straight-lined rents and amortization of above and below market leases |
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( |
) |
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( |
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Equity-based compensation awards |
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Depreciation and amortization |
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Earnings from unconsolidated entities, net |
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( |
) |
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( |
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Operating distributions from unconsolidated entities |
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Decrease (increase) in operating receivables from unconsolidated entities |
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( |
) |
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Amortization of debt discounts and debt issuance costs, net |
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Gains on dispositions of development properties and land, net |
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( |
) |
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Gains on other dispositions of investments in real estate, net |
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( |
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( |
) |
Unrealized foreign currency and derivative losses (gains), net |
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( |
) |
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Losses (gains) on early extinguishment of debt, net |
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( |
) |
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Deferred income tax expense |
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Decrease in other assets |
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Decrease in accounts payable and accrued expenses and other liabilities |
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( | ) |
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( |
) |
Net cash provided by operating activities |
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Investing activities: |
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Real estate development |
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( |
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( |
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Real estate acquisitions |
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( |
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( |
) |
Duke Transaction, net of cash acquired |
|
|
( |
) |
|
|
|
|
Tenant improvements and lease commissions on previously leased space |
|
|
( |
) |
|
|
( |
) |
Property improvements |
|
|
( |
) |
|
|
( |
) |
Proceeds from dispositions and contributions of real estate |
|
|
|
|
|
|
||
Investments in and advances to unconsolidated entities |
|
|
( |
) |
|
|
( |
) |
Return of investment from unconsolidated entities |
|
|
|
|
|
|
||
Proceeds from the settlement of net investment hedges |
|
|
|
|
|
|
||
Payments on the settlement of net investment hedges |
|
|
|
|
|
( |
) |
|
Net cash provided by (used in) investing activities |
|
|
( |
) |
|
|
|
|
Financing activities: |
|
|
|
|
|
|
||
Dividends paid on common and preferred stock |
|
|
( |
) |
|
|
( |
) |
Noncontrolling interests contributions |
|
|
|
|
|
|
||
Noncontrolling interests distributions |
|
|
( |
) |
|
|
( |
) |
Settlement of noncontrolling interests |
|
|
( |
) |
|
|
( |
) |
Tax paid with shares withheld |
|
|
( |
) |
|
|
( |
) |
Debt and equity issuance costs paid |
|
|
( |
) |
|
|
( |
) |
Net payments on credit facilities |
|
|
( |
) |
|
|
( |
) |
Repurchase of and payments on debt |
|
|
( |
) |
|
|
( |
) |
Proceeds from the issuance of debt |
|
|
|
|
|
|
||
Net cash provided by financing activities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Effect of foreign currency exchange rate changes on cash |
|
|
|
|
|
( |
) |
|
Net increase in cash and cash equivalents |
|
|
|
|
|
|
||
Cash and cash equivalents, beginning of period |
|
|
|
|
|
|
||
Cash and cash equivalents, end of period |
|
$ |
|
|
$ |
|
See Note 12 for information on noncash investing and financing activities and other information.
The accompanying notes are an integral part of these Consolidated Financial Statements.
5
PROLOGIS, L.P.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
|
|
|
|
|
|
||
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||
ASSETS |
|
|
|
|
|
||
Investments in real estate properties |
$ |
|
|
$ |
|
||
Less accumulated depreciation |
|
|
|
|
|
||
Net investments in real estate properties |
|
|
|
|
|
||
Investments in and advances to unconsolidated entities |
|
|
|
|
|
||
Assets held for sale or contribution |
|
|
|
|
|
||
Net investments in real estate |
|
|
|
|
|
||
|
|
|
|
|
|
||
Cash and cash equivalents |
|
|
|
|
|
||
Other assets |
|
|
|
|
|
||
Total assets |
$ |
|
|
$ |
|
||
|
|
|
|
|
|
||
LIABILITIES AND CAPITAL |
|
|
|
|
|
||
Liabilities: |
|
|
|
|
|
||
Debt |
$ |
|
|
$ |
|
||
Accounts payable and accrued expenses |
|
|
|
|
|
||
Other liabilities |
|
|
|
|
|
||
Total liabilities |
|
|
|
|
|
||
|
|
|
|
|
|
||
Capital: |
|
|
|
|
|
||
Partners’ capital: |
|
|
|
|
|
||
General partner – preferred |
|
|
|
|
|
||
General partner – common |
|
|
|
|
|
||
Limited partners – common |
|
|
|
|
|
||
Limited partners – Class A common |
|
|
|
|
|
||
Total partners’ capital |
|
|
|
|
|
||
Noncontrolling interests |
|
|
|
|
|
||
Total capital |
|
|
|
|
|
||
Total liabilities and capital |
$ |
|
|
$ |
|
The accompanying notes are an integral part of these Consolidated Financial Statements.
6
PROLOGIS, L.P.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per unit amounts)
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Revenues: |
|
|
|
|
|
|
||
Rental |
|
$ |
|
|
$ |
|
||
Strategic capital |
|
|
|
|
|
|
||
Development management and other |
|
|
|
|
|
|
||
Total revenues |
|
|
|
|
|
|
||
Expenses: |
|
|
|
|
|
|
||
Rental |
|
|
|
|
|
|
||
Strategic capital |
|
|
|
|
|
|
||
General and administrative |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total expenses |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Operating income before gains on real estate transactions, net |
|
|
|
|
|
|
||
Gains on dispositions of development properties and land, net |
|
|
|
|
|
|
||
Gains on other dispositions of investments in real estate, net |
|
|
|
|
|
|
||
Operating income |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Other income (expense): |
|
|
|
|
|
|
||
Earnings from unconsolidated entities, net |
|
|
|
|
|
|
||
Interest expense |
|
|
( |
) |
|
|
( |
) |
Foreign currency and derivative gains and other income, net |
|
|
|
|
|
|
||
Gains (losses) on early extinguishment of debt, net |
|
|
|
|
|
( |
) |
|
Total other income (expense) |
|
|
( |
) |
|
|
|
|
Earnings before income taxes |
|
|
|
|
|
|
||
Income tax expense |
|
|
( |
) |
|
|
( |
) |
Consolidated net earnings |
|
|
|
|
|
|
||
Less net earnings attributable to noncontrolling interests |
|
|
|
|
|
|
||
Net earnings attributable to controlling interests |
|
|
|
|
|
|
||
Less preferred unit distributions |
|
|
|
|
|
|
||
Net earnings attributable to common unitholders |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Weighted average common units outstanding – Basic |
|
|
|
|
|
|
||
Weighted average common units outstanding – Diluted |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Net earnings per unit attributable to common unitholders – Basic |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Net earnings per unit attributable to common unitholders – Diluted |
|
$ |
|
|
$ |
|
The accompanying notes are an integral part of these Consolidated Financial Statements.
7
PROLOGIS, L.P.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands)
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Consolidated net earnings |
|
$ |
|
|
$ |
|
||
Other comprehensive income (loss): |
|
|
|
|
|
|
||
Foreign currency translation gains (losses), net |
|
|
( |
) |
|
|
|
|
Unrealized gains (losses) on derivative contracts, net |
|
|
( |
) |
|
|
|
|
Comprehensive income |
|
|
|
|
|
|
||
Net earnings attributable to noncontrolling interests |
|
|
( |
) |
|
|
( |
) |
Other comprehensive income attributable to noncontrolling interests |
|
|
( |
) |
|
|
( |
) |
Comprehensive income attributable to common unitholders |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
The accompanying notes are an integral part of these Consolidated Financial Statements.
8
PROLOGIS, L.P.
CONSOLIDATED STATEMENTS OF CAPITAL
(Unaudited)
(In thousands)
Three Months Ended March 31, 2023 and 2022
|
General Partner |
|
|
Limited Partners |
|
|
Non- |
|
|
|
|
||||||||||||||||||||||||||||
|
Preferred |
|
|
Common |
|
|
Common |
|
|
Class A Common |
|
|
controlling |
|
|
Total |
|
||||||||||||||||||||||
|
Units |
|
|
Amount |
|
|
Units |
|
|
Amount |
|
|
Units |
|
|
Amount |
|
|
Units |
|
|
Amount |
|
|
Interests |
|
|
Capital |
|
||||||||||
Balance at January 1, 2023 |
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||||
Consolidated net earnings |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|||||
Effect of equity compensation plans |
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|||||
Capital contributions |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
||
Redemption of limited partners units |
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
||
Foreign currency translation gains |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
|
|
|
( |
) |
|
Unrealized losses on derivative |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( | ) |
|
|
- |
|
|
|
( | ) |
|
|
- |
|
|
|
( |
) |
Reallocation of capital |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
Distributions ($ |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance at March 31, 2023 |
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General Partner |
|
|
Limited Partners |
|
|
Non- |
|
|
|
|
||||||||||||||||||||||||||||
|
Preferred |
|
|
Common |
|
|
Common |
|
|
Class A Common |
|
|
controlling |
|
|
Total |
|
||||||||||||||||||||||
|
Units |
|
|
Amount |
|
|
Units |
|
|
Amount |
|
|
Units |
|
|
Amount |
|
|
Units |
|
|
Amount |
|
|
Interests |
|
|
Capital |
|
||||||||||
Balance at January 1, 2022 |
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||||
Consolidated net earnings |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|||||
Effect of equity compensation plans |
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|||||
Capital contributions |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
||
Redemption of limited partners units |
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
||
Foreign currency translation gains, net |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|||||
Unrealized gains on derivative |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
|
|
- |
|
|
|
|
||||
Reallocation of capital |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
Distributions ($ |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance at March 31, 2022 |
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these Consolidated Financial Statements.
9
PROLOGIS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Operating activities: |
|
|
|
|
|
|
||
Consolidated net earnings |
|
$ |
|
|
$ |
|
||
Adjustments to reconcile net earnings to net cash provided by operating activities: |
|
|
|
|
|
|
||
Straight-lined rents and amortization of above and below market leases |
|
|
( |
) |
|
|
( |
) |
Equity-based compensation awards |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Earnings from unconsolidated entities, net |
|
|
( |
) |
|
|
( |
) |
Operating distributions from unconsolidated entities |
|
|
|
|
|
|
||
Decrease (increase) in operating receivables from unconsolidated entities |
|
|
|
|
|
( |
) |
|
Amortization of debt discounts and debt issuance costs, net |
|
|
|
|
|
|
||
Gains on dispositions of development properties and land, net |
|
|
|
|
|
( |
) |
|
Gains on other dispositions of investments in real estate, net |
|
|
( |
) |
|
|
( |
) |
Unrealized foreign currency and derivative losses (gains), net |
|
|
|
|
|
( |
) |
|
Losses (gains) on early extinguishment of debt, net |
|
|
( |
) |
|
|
|
|
Deferred income tax expense |
|
|
|
|
|
|
||
Decrease in other assets |
|
|
|
|
|
|
||
Decrease in accounts payable and accrued expenses and other liabilities |
|
|
( | ) |
|
|
( |
) |
Net cash provided by operating activities |
|
|
|
|
|
|
||
Investing activities: |
|
|
|
|
|
|
||
Real estate development |
|
|
( |
) |
|
|
( |
) |
Real estate acquisitions |
|
|
( |
) |
|
|
( |
) |
Duke Transaction, net of cash acquired |
|
|
( |
) |
|
|
|
|
Tenant improvements and lease commissions on previously leased space |
|
|
( |
) |
|
|
( |
) |
Property improvements |
|
|
( |
) |
|
|
( |
) |
Proceeds from dispositions and contributions of real estate |
|
|
|
|
|
|
||
Investments in and advances to unconsolidated entities |
|
|
( |
) |
|
|
( |
) |
Return of investment from unconsolidated entities |
|
|
|
|
|
|
||
Proceeds from the settlement of net investment hedges |
|
|
|
|
|
|
||
Payments on the settlement of net investment hedges |
|
|
|
|
|
( |
) |
|
Net cash provided by (used in) investing activities |
|
|
( |
) |
|
|
|
|
Financing activities: |
|
|
|
|
|
|
||
Distributions paid on common and preferred units |
|
|
( |
) |
|
|
( |
) |
Noncontrolling interests contributions |
|
|
|
|
|
|
||
Noncontrolling interests distributions |
|
|
( |
) |
|
|
( |
) |
Redemption of common limited partnership units |
|
|
( |
) |
|
|
( |
) |
Tax paid with shares of the Parent withheld |
|
|
( |
) |
|
|
( |
) |
Debt and equity issuance costs paid |
|
|
( |
) |
|
|
( |
) |
Net payments on credit facilities |
|
|
( |
) |
|
|
( |
) |
Repurchase of and payments on debt |
|
|
( |
) |
|
|
( |
) |
Proceeds from the issuance of debt |
|
|
|
|
|
|
||
Net cash provided by financing activities |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Effect of foreign currency exchange rate changes on cash |
|
|
|
|
|
( |
) |
|
Net increase in cash and cash equivalents |
|
|
|
|
|
|
||
Cash and cash equivalents, beginning of period |
|
|
|
|
|
|
||
Cash and cash equivalents, end of period |
|
$ |
|
|
$ |
|
See Note 12 for information on noncash investing and financing activities and other information.
The accompanying notes are an integral part of these Consolidated Financial Statements.
10
PROLOGIS, INC. AND PROLOGIS, L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. GENERAL
Business. Prologis, Inc. (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 (the “Internal Revenue Code” or “IRC”), and believes the current organization and method of operation will enable it to maintain its status as a REIT. The Parent is the general partner of Prologis, L.P. (or the “Operating Partnership” or “OP”). Through the OP, we are engaged in the ownership, acquisition, development and management of logistics facilities with a focus on key markets in 19 countries on four continents. We invest in real estate through wholly owned subsidiaries and other entities through which we co-invest with partners and investors. We maintain a significant level of ownership in these co-investment ventures, which may be consolidated or unconsolidated based on our level of control of the entity. Our current business strategy consists of
For each share of preferred or common stock the Parent issues, the OP issues a corresponding preferred or common partnership unit, as applicable, to the Parent in exchange for the contribution of the proceeds from the stock issuance. At March 31, 2023, the Parent owned a
As the sole general partner of the OP, the Parent has complete responsibility and discretion in the day-to-day management and control of the OP and we operate the Parent and the OP as one enterprise. The management of the Parent consists of the same members as the management of the OP. These members are officers of the Parent and employees of the OP or one of its subsidiaries. As general partner with control of the OP, the Parent is the primary beneficiary and therefore consolidates the OP. Because the Parent’s only significant asset is its investment in the OP, the assets and liabilities of the Parent and the OP are the same on their respective financial statements.
Basis of Presentation. The accompanying Consolidated 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. Intercompany transactions with consolidated entities have been eliminated.
The accompanying unaudited interim financial information has been prepared according to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in our annual financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with such rules and regulations. Our management believes that the disclosures presented in these financial statements are adequate to make the information presented not misleading. In our opinion, all adjustments and eliminations, consisting only of normal recurring adjustments, necessary to present fairly the financial position and results of operations for both the Parent and the OP for the reported periods have been included. The results of operations for such interim periods are not necessarily indicative of the results for the full year. The accompanying unaudited interim financial information should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the SEC, and other public information.
NOTE 2. DUKE TRANSACTION
On
The Duke Transaction was completed for $
11
issued and outstanding share or unit held by a Duke shareholder or unitholder was converted automatically into
The aggregate equity consideration is calculated below (in millions, except price per share):
Number of Prologis shares and units issued upon conversion of |
|
|
|
Multiplied by price of Prologis' common stock on September 30, 2022 |
$ |
|
|
Fair value of Prologis shares and units issued |
$ |
|
We accounted for the Duke Transaction as an asset acquisition and as a result, the transaction costs of $
Under acquisition accounting, the total cost or total consideration exchanged is allocated to the real estate properties and related lease intangibles on a relative fair value basis. As the fair value of the properties acquired exceeded the purchase price, we allocated the bargain consideration at a property-level based on the relative fair value of the property in comparison to the total portfolio. All other assets acquired and liabilities assumed, including debt, and real estate assets that we intend to sell in the next twelve months were recorded at fair value.
Net investments in real estate |
$ |
|
|
Cash and other assets |
|
|
|
Debt |
|
( |
) |
Intangible liabilities, net of intangible assets (1) |
|
( |
) |
Accounts payable, accrued expenses and other liabilities |
|
( |
) |
Noncontrolling interests |
|
( |
) |
Total purchase price, including transaction costs |
$ |
|
NOTE 3. REAL ESTATE
Investments in real estate properties consisted of the following (dollars and square feet in thousands):
|
Square Feet |
|
Number of Buildings |
|
|
|
||||||||||||
|
Mar 31, |
|
Dec 31, |
|
Mar 31, |
|
Dec 31, |
|
Mar 31, |
|
Dec 31, |
|
||||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|
||||||
Operating properties: |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Buildings and improvements |
|
|
|
|
|
|
|
|
$ |
|
$ |
|
||||||
Improved land |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Development portfolio, including |
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|
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|
|
|
||||||
Prestabilized |
|
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|
|
||||||
Properties under development |
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|
||||||
Land (1) |
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|
|
|
||||||
Other real estate investments (2) |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total investments in real estate |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Less accumulated depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Net investments in real estate |
|
|
|
|
|
|
|
|
$ |
|
$ |
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
12
Acquisitions
The following table summarizes our real estate acquisition activity (dollars and square feet in thousands):
|
|
Three Months Ended |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Number of operating properties |
|
|
|
|
|
|
||
Square feet |
|
|
|
|
|
|
||
Acres of land |
|
|
|
|
|
|
||
Acquisition cost of net investments in real estate, excluding other real estate investments |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Acquisition cost of other real estate investments |
|
$ |
|
|
$ |
|
Dispositions
The following table summarizes our dispositions of net investments in real estate that include contributions to unconsolidated co-investment ventures and dispositions to third parties (dollars and square feet in thousands):
|
|
Three Months Ended |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Dispositions of development properties and land, net (1) |
|
|
|
|
|
|
||
Number of properties |
|
|
|
|
|
|
||
Square feet |
|
|
|
|
|
|
||
Net proceeds |
|
$ |
|
|
$ |
|
||
Gains on dispositions of development properties and land, net |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Other dispositions of investments in real estate, net |
|
|
|
|
|
|
||
Number of properties |
|
|
|
|
|
|
||
Square feet |
|
|
|
|
|
|
||
Net proceeds |
|
$ |
|
|
$ |
|
||
Gains on other dispositions of investments in real estate, net |
|
$ |
|
|
$ |
|
Leases
We recognized lease right-of-use assets of $
NOTE 4. 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 partners and investors and we provide asset management and property management services to these entities, which we refer to as co-investment ventures. These entities may be consolidated or unconsolidated depending on the structure, our partner’s participation and other rights and our level of control of the entity. This note details our investments in unconsolidated co-investment ventures, which are related parties and accounted for using the equity method of accounting. See Note 7 for more detail regarding our consolidated investments that are not wholly owned.
We also have investments in other ventures, generally with one partner, which we account for using the equity method. We refer to our investments in both unconsolidated co-investment ventures and other ventures, collectively, as unconsolidated entities.
13
The following table summarizes our investments in and advances to unconsolidated entities (in thousands):
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Unconsolidated co-investment ventures |
|
$ |
|
|
$ |
|
||
Other ventures (1) |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
Unconsolidated Co-Investment Ventures
The following table summarizes the Strategic Capital Revenues we recognized in the Consolidated Statements of Income related to our unconsolidated co-investment ventures (in thousands):
|
|
Three Months Ended |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Recurring fees |
|
$ |
|
|
$ |
|
||
Transactional fees |
|
|
|
|
|
|
||
Promote revenue |
|
|
|
|
|
|
||
Total strategic capital revenues from unconsolidated co-investment ventures (1) |
|
$ |
|
|
$ |
|
The following table summarizes the key property information, financial position and operating information of our unconsolidated co-investment ventures on a U.S. GAAP basis (not our proportionate share) and the amounts we recognized in the Consolidated Financial Statements related to these ventures (dollars and square feet in millions):
|
U.S. |
|
|
Other Americas (1) |
|
|
Europe |
|
|
Asia |
|
|
Total |
|
|||||||||||||||||||||||||
At: |
Mar 31, |
|
|
Dec 31, |
|
|
Mar 31, |
|
|
Dec 31, |
|
|
Mar 31, |
|
|
Dec 31, |
|
|
Mar 31, |
|
|
Dec 31, |
|
|
Mar 31, |
|
|
Dec 31, |
|
||||||||||
Key property information: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Ventures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Operating properties |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Square feet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
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|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Financial position: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total assets ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Third-party debt ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total liabilities ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Our investment balance ($) (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Our weighted average ownership (3) |
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
|
|
% |
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
U.S. |
|
|
Other Americas (1) |
|
|
Europe |
|
|
Asia |
|
|
Total |
|
|||||||||||||||||||||||||
Operating Information: |
Mar 31, |
|
|
Mar 31, |
|
|
Mar 31, |
|
|
Mar 31, |
|
|
Mar 31, |
|
|
Mar 31, |
|
|
Mar 31, |
|
|
Mar 31, |
|
|
Mar 31, |
|
|
Mar 31, |
|
||||||||||
For the three months ended: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Total revenues ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Net earnings ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Our earnings from unconsolidated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
14
Equity Commitments Related to Certain Unconsolidated Co-Investment Ventures
At March 31, 2023, our outstanding equity commitments were $
NOTE 5. ASSETS HELD FOR SALE OR CONTRIBUTION
We had investments in certain real estate properties that met the criteria to be classified as held for sale or contribution at March 31, 2023 and December 31, 2022. At the time of classification, these properties were expected to be sold to third parties or were recently stabilized and expected to be contributed to unconsolidated co-investment ventures within twelve months. The amounts included in Assets Held for Sale or Contribution represented real estate investment balances and the related assets and liabilities.
Assets held for sale or contribution consisted of the following (dollars and square feet in thousands):
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Number of operating properties |
|
|
|
|
|
|
||
Square feet |
|
|
|
|
|
|
||
Total assets held for sale or contribution |
|
$ |
|
|
$ |
|
||
Total liabilities associated with assets held for sale or contribution – included in Other Liabilities |
|
$ |
|
|
$ |
|
NOTE 6. DEBT
All debt is incurred by the OP or its consolidated subsidiaries. The following table summarizes our debt (dollars in thousands):
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||||||||||||||
|
|
Weighted Average |
|
|
Amount |
|
|
Weighted Average |
|
|
Amount |
|
||||||||
|
|
Interest Rate (1) |
|
Years (2) |
|
|
Outstanding (3) |
|
|
Interest Rate (1) |
|
Years (2) |
|
|
Outstanding (3) |
|
||||
Credit facilities |
|
|
|
|
|
$ |
|
|
|
|
|
|
$ |
|
||||||
Senior notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Term loans and unsecured |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Secured mortgage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Total |
|
|
|
|
|
$ |
|
|
|
|
|
|
$ |
|
|
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||||||||||||||||||
|
|
|
Weighted Average Interest Rate |
|
|
Amount Outstanding |
|
|
% of Total |
|
|
Weighted Average Interest Rate |
|
|
Amount Outstanding |
|
|
% of Total |
|
||||||
|
British pound sterling |
|
|
% |
|
$ |
|
|
|
% |
|
|
% |
|
$ |
|
|
|
% |
||||||
|
Canadian dollar |
|
|
% |
|
|
|
|
|
% |
|
|
% |
|
|
|
|
|
% |
||||||
|
Euro |
|
|
% |
|
|
|
|
|
% |
|
|
% |
|
|
|
|
|
% |
||||||
|
Japanese yen |
|
|
% |
|
|
|
|
|
% |
|
|
% |
|
|
|
|
|
% |
||||||
|
U.S. dollar |
|
|
% |
|
|
|
|
|
% |
|
|
% |
|
|
|
|
|
% |
||||||
|
Total |
|
|
% |
|
$ |
|
|
|
% |
|
|
% |
|
$ |
|
|
|
% |
Credit Facilities
At March 31, 2023, we had two global senior credit facilities: the 2021 Global Facility and the 2022 Global Facility. We may draw on both facilities in British pounds sterling, Canadian dollars, euro, Japanese yen, Mexican pesos and U.S. dollars on a revolving basis up to $
15
2021 Global Facility to $
On April 5, 2023, we amended and restated the 2021 Global Facility as the 2023 Global Facility and upsized its borrowing capacity to $
We also have a Japanese yen revolver (the “Yen Credit Facility”) with total commitments of ¥
We refer to the 2021 Global Facility, the 2022 Global Facility and the Yen Credit Facility, collectively, as our “Credit Facilities.” Pricing for the Credit Facilities, including the spread over the applicable benchmark and the rates applicable to facility fees and letter of credit fees, varies based on the public debt ratings of the OP.
The following table summarizes information about our available liquidity at March 31, 2023 (in millions):
|
|
|
|
|
Aggregate lender commitments |
|
|
|
|
Credit Facilities |
|
$ |
|
|
Less: |
|
|
|
|
Borrowings outstanding |
|
|
|
|
Outstanding letters of credit |
|
|
|
|
Current availability |
|
|
|
|
Cash and cash equivalents |
|
|
|
|
Total liquidity |
|
$ |
|
Senior Notes
The following table summarizes the issuances of senior notes during the three months ended March 31, 2023 (principal in thousands):
|
|
Aggregate Principal |
|
|
Issuance Date Weighted Average |
|
|
|||||||
Issuance Date |
|
Borrowing Currency |
|
|
USD (1) |
|
|
Interest Rate |
|
Years |
|
Maturity Dates |
||
January |
|
€ |
|
|
$ |
|
|
|
|
– |
||||
March |
|
$ |
|
|
$ |
|
|
|
|
– |
||||
Total |
|
|
|
|
$ |
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-Term Debt Maturities
Scheduled principal payments due on our debt for the remainder of 2023 and for each year through the period ended December 31, 2027, and thereafter were as follows at March 31, 2023 (in thousands):
|
|
Unsecured |
|
|
|
|
|
|
||||||||||||
|
|
Credit |
|
|
Senior |
|
|
Term Loans |
|
|
Secured |
|
|
|
|
|||||
Maturity |
|
Facilities |
|
|
Notes |
|
|
and Other |
|
|
Mortgage |
|
|
Total |
|
|||||
2023 (1) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|||||
2024 (1) (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
2025 (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
2026 (4) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
2027 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Thereafter |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Subtotal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Unamortized premiums (discounts), net |
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|||
Unamortized debt issuance costs, net |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
16
Financial Debt Covenants
Our senior notes, term loans and Credit Facilities outstanding at March 31, 2023 were subject to certain financial covenants under their related documents. At March 31, 2023, we were in compliance with all of our financial debt covenants.
Guarantee of Finance Subsidiary Debt
We have finance subsidiaries as part of our operations in Europe (Prologis Euro Finance LLC), Japan (Prologis Yen Finance LLC) and the U.K. (Prologis Sterling Finance LLC) in order to mitigate our foreign currency risk by borrowing in the currencies in which we invest. These entities are
NOTE 7. 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 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 redeemable for cash or, at our option, shares of the Parent’s common stock, generally at a rate of
Prologis, Inc.
The noncontrolling interests of the Parent include the noncontrolling interests described above for the OP, as well as the limited partnership units in the OP that are not owned by the Parent. The 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.
The following table summarizes these entities (dollars in thousands):
|
Our Ownership Percentage |
|
|
Noncontrolling Interests |
|
|
Total Assets |
|
|
Total Liabilities |
|
||||||||||||||||||||
|
Mar 31, |
|
|
Dec 31, |
|
|
Mar 31, |
|
|
Dec 31, |
|
|
Mar 31, |
|
|
Dec 31, |
|
|
Mar 31, |
|
|
Dec 31, |
|
||||||||
Prologis U.S. Logistics Venture |
|
% |
|
|
% |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
Other consolidated entities (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Prologis, L.P. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Limited partners in Prologis, L.P. (2)(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Prologis, Inc. |
|
|
|
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17
NOTE 8. LONG-TERM COMPENSATION
Equity-Based Compensation Plans and Programs
Prologis Outperformance Plan (“POP”)
We have allocated participation points or a percentage of the compensation pool to participants under our POP corresponding to
We granted participation points for the 2023 – 2025 performance period in January 2023, with a fair value of $
The Outperformance Hurdle was met for the 2020 – 2022 performance period, which resulted in awards of $
Other Equity-Based Compensation Plans and Programs
Our other equity-based compensation plans and programs include (i) the Prologis Promote Plan (“PPP”); (ii) the annual long-term incentive (“LTI”) equity award program (“Annual LTI Award”); and (iii) the annual bonus exchange program. Awards under these plans and programs may be issued in the form of restricted stock units (“RSUs”) or LTIP Units at the participant’s election. RSUs and LTIP Units are valued based on the market price of the Parent’s common stock on the date the award is granted and the grant date value is charged to compensation expense over the service period.
Summary of Award Activity
RSUs
The following table summarizes the activity for RSUs for the three months ended March 31, 2023 (units in thousands):
|
|
|
|
|
Weighted Average |
|
||
|
|
Unvested RSUs |
|
|
Grant Date Fair Value |
|
||
Balance at January 1, 2023 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested and distributed |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Balance at March 31, 2023 |
|
|
|
|
$ |
|
||
|
|
|
|
|
|
|
LTIP Units
The following table summarizes the activity for LTIP Units for the three months ended March 31, 2023 (units in thousands):
|
|
Unvested |
|
|
Weighted Average |
|
||
|
|
LTIP Units |
|
|
Grant Date Fair Value |
|
||
Balance at January 1, 2023 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
|
||
Vested LTIP Units |
|
|
( |
) |
|
|
|
|
Balance at March 31, 2023 |
|
|
|
|
$ |
|
18
NOTE 9. EARNINGS PER COMMON SHARE OR UNIT
We determine basic earnings per share or unit based on the weighted average number of shares of common stock or units outstanding during the period. We compute diluted earnings per 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.
The computation of our basic and diluted earnings per share and unit was as follows (in thousands, except per share and unit amounts):
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
Prologis, Inc. |
|
2023 |
|
|
2022 |
|
||
Net earnings attributable to common stockholders – Basic |
|
|
|
|
$ |
|
||
Net earnings attributable to exchangeable limited partnership units (1) |
|
|
|
|
|
|
||
Adjusted net earnings attributable to common stockholders – Diluted |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Weighted average common shares outstanding – Basic |
|
|
|
|
|
|
||
Incremental weighted average effect on exchange of limited partnership units (1) |
|
|
|
|
|
|
||
Incremental weighted average effect of equity awards |
|
|
|
|
|
|
||
Weighted average common shares outstanding – Diluted (2) |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Net earnings per share attributable to common stockholders: |
|
|
|
|
|
|
||
Basic |
|
$ |
|
|
$ |
|
||
Diluted |
|
$ |
|
|
$ |
|
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
Prologis, L.P. |
|
2023 |
|
|
2022 |
|
||
Net earnings attributable to common unitholders |
|
$ |
|
|
$ |
|
||
Net earnings attributable to Class A Units |
|
|
( |
) |
|
|
( |
) |
Net earnings attributable to common unitholders – Basic |
|
|
|
|
|
|
||
Net earnings attributable to Class A Units |
|
|
|
|
|
|
||
Net earnings attributable to exchangeable other limited partnership units |
|
|
|
|
|
|
||
Adjusted net earnings attributable to common unitholders – Diluted |
|
$ |
|
|
$ |
|
||
|
|
|
|
|
|
|
||
Weighted average common partnership units outstanding – Basic |
|
|
|
|
|
|
||
Incremental weighted average effect on exchange of Class A Units |
|
|
|
|
|
|
||
Incremental weighted average effect on exchange of other limited partnership units |
|
|
|
|
|
|
||
Incremental weighted average effect of equity awards of Prologis, Inc. |
|
|
|
|
|
|
||
Weighted average common units outstanding – Diluted (2) |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Net earnings per unit attributable to common unitholders: |
|
|
|
|
|
|
||
Basic |
|
$ |
|
|
$ |
|
||
Diluted |
|
$ |
|
|
$ |
|
|
|
|
Three Months Ended |
|
|||||
|
|
|
March 31, |
|
|||||
|
|
|
2023 |
|
|
2022 |
|
||
|
Class A Units |
|
|
|
|
|
|
||
|
Other limited partnership units |
|
|
|
|
|
|
||
|
Equity awards |
|
|
|
|
|
|
||
|
Prologis, L.P. |
|
|
|
|
|
|
||
|
Common limited partnership units |
|
|
|
|
|
|
||
|
Prologis, Inc. |
|
|
|
|
|
|
19
NOTE 10. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Derivative Financial Instruments
In the normal course of business, our operations are exposed to market risks, including the effect of changes in foreign currency exchange rates and interest rates. We may enter into derivative financial instruments to offset these underlying market risks. There have been no significant changes in our policy or strategy from what was disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.
The following table presents the fair value of our derivative financial instruments recognized within Other Assets and Other Liabilities on the Consolidated Balance Sheets (in thousands):
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||||||||||
|
|
Asset |
|
|
Liability |
|
|
Asset |
|
|
Liability |
|
||||
Undesignated derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forwards |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Brazilian real |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
British pound sterling |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Canadian dollar |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Chinese renminbi |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Euro |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Japanese yen |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Swedish krona |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Designated derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Foreign currency contracts |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Net investment hedges |
|
|
|
|
|
|
|
|
|
|
|
|
||||
British pound sterling |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Canadian dollar |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Chinese renminbi |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest rate swaps |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash flow hedges |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Euro |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. dollar |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total fair value of derivatives |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Undesignated Derivative Financial Instruments
Foreign Currency Contracts
The following table summarizes the activity of our undesignated foreign currency contracts for the three months ended March 31 (in millions, except for weighted average forward rates and number of active contracts):
|
2023 |
|
|
2022 |
|
|||||||||||||||||||||||||||||||||||||||||||||
|
CAD |
|
|
EUR |
|
|
GBP |
|
|
JPY |
|
|
Other |
|
|
Total |
|
|
CAD |
|
|
EUR |
|
|
GBP |
|
|
JPY |
|
SEK |
|
|
Other |
|
|
Total |
|
|||||||||||||
Notional amounts at January 1 ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
New contracts ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Matured, expired or settled contracts ($) |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
( | ) |
|
|
( |
) |
|
|
( |
) |
Notional amounts at March 31 ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Weighted average forward rate at March 31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Active contracts at March 31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
The following table summarizes the undesignated derivative financial instruments exercised and outstanding recognized in realized and unrealized gains (losses), respectively, in Foreign Currency and Derivative Gains and Other Income, Net in the Consolidated Statements of Income (in millions, except for number of exercised contracts):
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Exercised contracts |
|
|
|
|
|
|
||
Realized gains on the matured, expired or settled contracts |
|
$ |
|
|
$ |
|
||
Unrealized gains (losses) on the change in fair value of outstanding contracts |
|
$ |
( |
) |
|
$ |
|
Designated Derivative Financial Instruments
Changes in the fair value of derivatives that are designated as net investment hedges of our foreign operations and cash flow hedges are recorded in Accumulated Other Comprehensive Income (Loss) (“AOCI/L”) and reflected within the Other Comprehensive Income (Loss) table below.
Foreign Currency Contracts
The following table summarizes the activity of our foreign currency contracts designated as net investment hedges for the three months ended March 31 (in millions, except for weighted average forward rates and number of active contracts):
|
|
2023 |
|
|
2022 |
|
||||||||||||||||||||||||||
|
|
CAD |
|
|
CNH |
|
|
GBP |
|
|
Total |
|
|
BRL |
|
|
CAD |
|
|
GBP |
|
|
Total |
|
||||||||
Notional amounts at January 1 ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
New contracts ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Matured, expired or settled contracts ($) |
|
|
( |
) |
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
||
Notional amounts at March 31 ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average forward rate at |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Active contracts at March 31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Rate Swaps
The following table summarizes the activity of our interest rate swaps designated as cash flow hedges for the three months ended March 31 (in millions):
|
|
2023 |
|
|
2022 |
|
|
||||||||||||||
|
|
EUR |
|
|
USD |
|
|
Total |
|
|
EUR |
|
|
Total |
|
|
|||||
Notional amounts at January 1 ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
New contracts ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Matured, expired or settled contracts ($) (1) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
Notional amounts at March 31 ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Designated Nonderivative Financial Instruments
The following table summarizes our debt and accrued interest, designated as a hedge of our net investment in international subsidiaries at the quarter ended (in millions):
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||
British pound sterling |
|
$ |
|
|
$ |
|
||
Canadian dollar |
|
$ |
|
|
$ |
|
21
The following table summarizes the unrealized gains (losses) in Foreign Currency and Derivative Gains and Other Income, Net on the remeasurement of the unhedged portion of our euro denominated debt and accrued interest (in millions):
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Unrealized gains (losses) on the unhedged portion |
|
$ |
( |
) |
|
$ |
|
Other Comprehensive Income (Loss)
The change in Other Comprehensive Income (Loss) in the Consolidated Statements of Comprehensive Income during the periods presented was due to the translation into U.S. dollars from the consolidation of the financial statements of our consolidated subsidiaries whose functional currency is not the U.S. dollar. The change in fair value of the effective portion of our derivative financial instruments that have been designated as net investment hedges and cash flow hedges and the translation of the hedged portion of our debt, as discussed above, are also included in Other Comprehensive Income (Loss).
The following table presents these changes in Other Comprehensive Income (Loss) (in thousands):
|
|
Three Months Ended |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Derivative net investment hedges (1) |
|
$ |
( |
) |
|
$ |
|
|
Debt designated as nonderivative net investment hedges |
|
|
( |
) |
|
|
|
|
Cumulative translation adjustment |
|
|
|
|
|
|
||
Total foreign currency translation gains (losses), net |
|
$ |
( |
) |
|
$ |
|
|
|
|
|
|
|
|
|
||
Cash flow hedges (1) (2) |
|
$ |
( |
) |
|
$ |
|
|
Our share of derivatives from unconsolidated co-investment ventures |
|
|
( |
) |
|
|
|
|
Total unrealized gains (losses) on derivative contracts, net |
|
$ |
( |
) |
|
$ |
|
|
Total change in other comprehensive income (losses) |
|
$ |
( | ) |
|
$ |
|
Fair Value Measurements
There have been no significant changes in our policy from what was disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.
Fair Value Measurements on a Recurring Basis
At March 31, 2023 and December 31, 2022, other than the derivatives discussed previously, we had no significant financial assets or financial liabilities that were measured at fair value on a recurring basis in the Consolidated Financial Statements. All of our derivatives held at March 31, 2023 and December 31, 2022, were classified as Level 2 of the fair value hierarchy.
Fair Value Measurements on Nonrecurring Basis
Acquired properties and assets we expect to sell or contribute are significant nonfinancial assets that met the criteria to be measured at fair value on a nonrecurring basis. At March 31, 2023 and December 31, 2022, we estimated the fair value of our properties using Level 2 or Level 3 inputs from the fair value hierarchy. See more information on our acquired properties in Note 3 and assets held for sale or contribution in Note 5.
Fair Value of Financial Instruments
At March 31, 2023 and December 31, 2022, the carrying amounts of certain financial instruments, including cash and cash equivalents, accounts and notes receivable, accounts payable and accrued expenses were representative of their fair values.
The differences in the fair value of our debt from the carrying value in the table below were the result of differences in interest rates or borrowing spreads that were available to us at March 31, 2023 and December 31, 2022, as compared with those in effect when the
22
debt was issued or assumed, including reduced borrowing spreads due to our improved credit ratings. The senior notes and many of the issuances of secured mortgage debt contain prepayment 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. We evaluate this on an on-going basis and take the opportunity to refinance our debt at lower rates and longer maturities based on market conditions and other factors. See Note 6 for more information on our debt activity.
The following table reflects the carrying amounts and estimated fair values of our debt (in thousands):
|
|
March 31, 2023 |
|
|
December 31, 2022 |
|
||||||||||
|
|
Carrying Value |
|
|
Fair Value |
|
|
Carrying Value |
|
|
Fair Value |
|
||||
Credit facilities |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Senior notes |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Term loans and unsecured other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Secured mortgage |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
NOTE 11. BUSINESS SEGMENTS
Our current business strategy includes
Reconciliations are presented below for: (i) each reportable business segment’s revenues from external customers to Total Revenues; (ii) each reportable business segment’s net operating income from external customers to Operating Income and Earnings Before Income Taxes; and (iii) each reportable business segment’s assets to Total Assets. 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 of Total Revenues, Operating Income, Earnings Before Income Taxes and Total 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.
23
The following reconciliations are presented in thousands:
|
|
Three Months Ended |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Revenues: |
|
|
|
|
|
|
||
Real estate segment: |
|
|
|
|
|
|
||
U.S. |
|
$ |
|
|
$ |
|
||
Other Americas |
|
|
|
|
|
|
||
Europe |
|
|
|
|
|
|
||
Asia |
|
|
|
|
|
|
||
Total real estate segment |
|
|
|
|
|
|
||
Strategic capital segment: |
|
|
|
|
|
|
||
U.S. |
|
|
|
|
|
|
||
Other Americas |
|
|
|
|
|
|
||
Europe |
|
|
|
|
|
|
||
Asia |
|
|
|
|
|
|
||
Total strategic capital segment |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Total revenues |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Segment net operating income: (1) |
|
|
|
|
|
|
||
Real estate segment: |
|
|
|
|
|
|
||
U.S. (2) |
|
|
|
|
|
|
||
Other Americas |
|
|
|
|
|
|
||
Europe |
|
|
|
|
|
|
||
Asia |
|
|
|
|
|
|
||
Total real estate segment |
|
|
|
|
|
|
||
Strategic capital segment: |
|
|
|
|
|
|
||
U.S. (2) |
|
|
|
|
|
|
||
Other Americas |
|
|
|
|
|
|
||
Europe |
|
|
|
|
|
|
||
Asia |
|
|
|
|
|
|
||
Total strategic capital segment |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Total segment net operating income |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Reconciling items: |
|
|
|
|
|
|
||
General and administrative expenses |
|
|
( |
) |
|
|
( |
) |
Depreciation and amortization expenses |
|
|
( |
) |
|
|
( |
) |
Gains on dispositions of development properties and land, net |
|
|
- |
|
|
|
|
|
Gains on other dispositions of investments in real estate, net |
|
|
|
|
|
|
||
Operating income |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Earnings from unconsolidated entities, net |
|
|
|
|
|
|
||
Interest expense |
|
|
( |
) |
|
|
( |
) |
Foreign currency and derivative gains and other income, net |
|
|
|
|
|
|
||
Gains (losses) on early extinguishment of debt, net |
|
|
|
|
|
( | ) |
|
Earnings before income taxes |
|
$ |
|
|
$ |
|
24
|
|
March 31, |
|
|
December 31, |
|
||
Segment assets: |
|
|
|
|
|
|
||
Real estate segment: |
|
|
|
|
|
|
||
U.S. |
|
$ |
|
|
$ |
|
||
Other Americas |
|
|
|
|
|
|
||
Europe |
|
|
|
|
|
|
||
Asia |
|
|
|
|
|
|
||
Total real estate segment |
|
|
|
|
|
|
||
Strategic capital segment: (3) |
|
|
|
|
|
|
||
U.S. |
|
|
|
|
|
|
||
Europe |
|
|
|
|
|
|
||
Asia |
|
|
|
|
|
|
||
Total strategic capital segment |
|
|
|
|
|
|
||
Total segment assets |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Reconciling items: |
|
|
|
|
|
|
||
Investments in and advances to unconsolidated entities |
|
|
|
|
|
|
||
Assets held for sale or contribution |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
|
|
|
|
|
||
Other assets |
|
|
|
|
|
|
||
Total reconciling items |
|
|
|
|
|
|
||
Total assets |
|
$ |
|
|
$ |
|
NOTE 12. SUPPLEMENTAL CASH FLOW INFORMATION
Our significant noncash investing and financing activities for the three months ended March 31, 2023 and 2022 included the following:
We paid $
We paid $
25
Report of Independent Registered Public Accounting Firm
To the Stockholders and Board of Directors
Prologis, Inc.:
Results of Review of Interim Financial Information
We have reviewed the consolidated balance sheet of Prologis, Inc. and subsidiaries (the Company) as of March 31, 2023, the related consolidated statements of income, comprehensive income, equity, and cash flows for the three-month periods ended March 31, 2023 and 2022, and the related notes (collectively, the consolidated interim financial information). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial information for it to be in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2022, and the related consolidated statements of income, comprehensive income, equity, and cash flows for the year then ended (not presented herein); and in our report dated February 14, 2023, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2022 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
Basis for Review Results
This consolidated interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our reviews in accordance with the standards of the PCAOB. A review of consolidated interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
/s/ KPMG LLP
Denver, Colorado
April 28, 2023
26
Report of Independent Registered Public Accounting Firm
To the Partners of Prologis, L.P. and the Board of Directors of Prologis, Inc.:
Results of Review of Interim Financial Information
We have reviewed the consolidated balance sheet of Prologis, L.P. and subsidiaries (the Operating Partnership) as of March 31, 2023, the related consolidated statements of income, comprehensive income, capital, and cash flows for the three-month periods ended March 31, 2023 and 2022, and the related notes (collectively, the consolidated interim financial information). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial information for it to be in conformity with U.S. generally accepted accounting principles.
We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Operating Partnership as of December 31, 2022, and the related consolidated statements of income, comprehensive income, capital, and cash flows for the year then ended (not presented herein); and in our report dated February 14, 2023, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2022 is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.
Basis for Review Results
This consolidated interim financial information is the responsibility of the Operating Partnership’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Operating Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our reviews in accordance with the standards of the PCAOB. A review of consolidated interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
/s/ KPMG LLP
Denver, Colorado
April 28, 2023
27
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following should be read in conjunction with the Consolidated Financial Statements and related Notes included in Item 1 of this report and our Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the United States (“U.S.”) Securities and Exchange Commission (“SEC”).
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. Such statements involve uncertainties that could significantly impact our financial results. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” 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, acquisition and development activity, contribution and disposition activity, general conditions in the geographic areas where we operate, our debt, capital structure and financial position, our ability to earn revenues from co-investment ventures, 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) international, national, regional and local economic and political climates and conditions; (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, including the integration of the operations of significant real estate portfolios; (v) maintenance of Real Estate Investment Trust (“REIT”) status, tax structuring and changes in income tax laws and 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; (x) risks related to global pandemics; and (xi) those additional factors discussed under Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2022. We undertake no duty to update any forward-looking statements appearing in this report except as may be required by law.
Prologis, Inc. is a self-administered and self-managed REIT and is the sole general partner of Prologis, L.P. through which it holds substantially all of its assets. 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. We invest in real estate through wholly owned subsidiaries and other entities through which we co-invest with partners and investors. We have a significant ownership interest in the co-investment ventures, which are either consolidated or unconsolidated based on our level of control of the entity.
We operate, manage and measure the operating performance of our properties on an owned and managed (“O&M”) basis. Our O&M portfolio includes our consolidated properties as well as properties owned by our unconsolidated co-investment ventures, which we manage. We make operating decisions based on our total O&M portfolio as we manage the properties without regard to their ownership. We also evaluate our results based on our proportionate economic ownership of each entity or property included in the O&M portfolio (“our share”), whether consolidated or unconsolidated, to reflect our share of the financial results of the O&M portfolio.
Included in our discussion below are references to funds from operations (“FFO”) and net operating income (“NOI”), neither of which are United States ("U.S.") generally accepted accounting principles (“GAAP”). See below for a reconciliation of Net Earnings Attributable to Common Stockholders/Unitholders in the Consolidated Statements of Income to our FFO measures and a reconciliation of NOI to Operating Income, the most directly comparable GAAP measures.
MANAGEMENT'S OVERVIEW
Prologis is the global leader in logistics real estate with a focus on high-barrier, high growth markets. We own, manage and develop well-located, high-quality logistics facilities in 19 countries across four continents. Our portfolio focuses on the world’s most vibrant centers of commerce and our scale across these locations allows us to better serve our customers’ diverse logistics requirements. Our teams actively manage our portfolio and provide comprehensive real estate services, including leasing, property management, development, acquisitions and dispositions. We invest significant capital into new logistics properties principally through our development activity and third-party acquisitions. The contribution of newly developed properties to our co-investment ventures and the sale of non-strategic properties to third parties allows us to recycle capital back into our development and acquisition activities.
While the majority of our properties in the U.S. are wholly owned, we hold a significant ownership interest in properties both in the U.S. and internationally through our investment in the co-investment ventures. Partnering with the world’s largest institutional investors through co-investment ventures allows us to enhance and diversify our real estate returns as well as mitigate our exposure to foreign currency movements.
28
Logistics supply chains have increased dramatically in their importance to our customers and the global economy. The long-term trends of e-commerce adoption and supply chain resiliency continue to drive the need for increased warehouse space to store and distribute goods. This demand has translated into meaningful increases in rents and has resulted in low vacancy. We believe this demand is driven by three primary factors: (i) customer supply chains re-positioning to address the significant shift to e-commerce and heightened service expectations; (ii) overall consumption and household growth; and (iii) our customers’ desire for more supply chain resiliency. We believe these forces will keep demand strong for the long term.
The nature of the services we are providing to our customers is expanding. The scale of our 1.2 billion square foot portfolio allows us to provide a platform of solutions to address challenges that companies face in global fulfillment today. Through Prologis Essentials, we focus on innovative ways to meet our customers’ operations, energy and sustainability, mobility and workforce needs. Our customer experience teams, proprietary technology and strategic partnerships are foundational to Prologis Essentials and allow us to provide our customers with unique and actionable insights to drive greater efficiency in their operations.
Our long-standing dedication to Environmental, Social and Governance (“ESG”) practices strengthens our relationships with our customers, investors, employees and the communities in which we do business. The principles of ESG are an important aspect of our business strategy that we believe delivers a strategic business advantage while positively impacting the environment.
Our Global Presence
In October 2022, we completed the acquisition of Duke Realty Corporation and Duke Realty Limited Partnership (collectively “Duke”) through a merger transaction that we refer to as the “Duke Transaction” and is detailed in Note 2 to the Consolidated Financial Statements. The Duke portfolio was primarily comprised of logistics real estate assets, including 494 industrial operating properties, aggregating 144 million square feet. The total acquisition price, including transaction costs, was $23.2 billion and was funded through the issuance of equity and the assumption of debt.
At March 31, 2023, we owned or had investments in, on a wholly-owned basis or through co-investment ventures, properties and development projects expected to total approximately 1.2 billion square feet across the following geographies:
Throughout this discussion, we reflect amounts in U.S. dollars, our reporting currency. Included in these amounts are consolidated and unconsolidated investments denominated in foreign currencies, principally the British pound sterling, Canadian dollar, euro and Japanese yen that are impacted by fluctuations in exchange rates when translated to U.S. dollars. We mitigate our exposure to foreign currency fluctuations by investing outside the U.S. through co-investment ventures, borrowing in the functional currency of our subsidiaries and utilizing derivative financial instruments.
29
Our business comprises two operating segments: Real Estate (Rental Operations and Development) and Strategic Capital.
Below is information summarizing consolidated activity within our segments (in millions):
Real Estate Segment
Rental Operations. Rental operations comprises the largest component of our operating segments and generally contributes 85% to 90% of our consolidated revenues, earnings and FFO. We collect rent from our customers through operating leases, including reimbursements for the majority of our property operating costs. For leases that commenced during the three months ended March 31, 2023, within the consolidated operating portfolio, the weighted average lease term was 58 months. We expect to generate internal growth by increasing rents, maintaining high occupancy rates and controlling expenses. The primary driver of our revenue growth will be the rolling of in-place leases to current market rents when leases expire, as discussed further below. We believe our active portfolio management, combined with the skills of our property, leasing, maintenance, capital, energy, sustainability and risk management teams allow us to maximize NOI across our portfolio. Substantially all of our consolidated rental revenue, NOI and cash flows from rental operations are generated in the U.S.
Development. Given the scarcity of modern logistics facilities in our target markets, our development business provides the opportunity to build to the requirements of our customers while deepening our market presence. We believe we have a competitive advantage due to (i) the strategic locations of our global land bank and redevelopment sites; (ii) the development expertise of our local teams; (iii) the depth of our customer relationships; (iv) our ability to integrate sustainable design features that result in cost-savings and operational efficiencies for our customers; and (v) our procurement capabilities that allow us to secure high-demand construction materials at lower cost. Successful development and redevelopment efforts provide significant earnings growth as projects are leased, generate income and increase the value of our Real Estate Segment. Generally, we develop properties in the U.S. for long- term hold and outside the U.S. for contribution to our unconsolidated co-investment ventures.
Strategic Capital Segment
Our Strategic Capital Segment allows us to partner with many of the world’s largest institutional investors. The business is capitalized principally through private and public equity of which 95% is either in perpetual open-ended or long-term ventures, and two publicly traded vehicles (Nippon Prologis REIT, Inc. in Japan and FIBRA Prologis in Mexico). We align our interests with our partners by holding significant ownership interests in all of our eight unconsolidated co-investment ventures (ranging from 15% to 50%). This structure allows us to reduce our exposure to foreign currency movements for investments outside the U.S.
This segment produces durable, long-term cash flows and generally contributes 10% to 15% of our recurring consolidated revenues, earnings and FFO, all while requiring minimal capital other than our investment in the venture. We generate strategic capital revenues from our unconsolidated co-investment ventures, principally through asset management and property management services. Asset management fees are primarily driven by the quarterly valuation of the real estate properties owned by the respective ventures. We earn additional revenues by providing leasing, acquisition, construction management, development and disposition services. In certain ventures, we also have the ability to earn revenues through incentive fees (“promotes” or “promote revenues”) periodically during the life of a venture, upon liquidation of a venture or upon stabilization of individual venture assets based primarily on the total return of the investments over certain financial hurdles. We plan to grow this business and increase revenues by increasing our assets under management in existing or new ventures. The majority of strategic capital revenues are generated outside the U.S.
30
FUTURE GROWTH
We believe that the quality and scale of our portfolio, our ability to build out our land bank, our strategic capital business, the expertise of our team, the depth of our customer relationships and the strength of our balance sheet are differentiators that allow us to drive growth in revenues, NOI, earnings, FFO and cash flows.
31
SUMMARY OF THE THREE MONTHS ENDED MARCH 31, 2023
Our operating results were strong during the three months ended March 31, 2023. Consistent demand and low vacancy in the global logistics markets drove increases in market rents, which along with our significant lease mark-to-market, translated into positive rent change on rollover and same-store growth in our O&M portfolio. Our O&M operating portfolio occupancy was 98.0% at March 31, 2023 and rent change on leases commenced during the three months ended March 31, 2023 was 68.8%, on a net effective basis, based on our ownership share. We believe our results for the three months ended March 31, 2023 are representative of the health of our business despite a slowing economy. Due to current market conditions, we continue to expect some decline in asset valuations and will remain disciplined as we evaluate capital deployment activities. We anticipate the pace of development starts and contributions into our open ended funds to increase in the second half of the year. We believe we are well-positioned to organically grow revenues given the increase in market rents over the last several years and our high lease mark-to-market. However, we will continue to be cautious as we manage our business in this uncertain macroeconomic environment.
At March 31, 2023, the weighted average remaining maturity of our consolidated debt was 10 years and the weighted average interest rate was 2.6%. We completed the following financing activities during the three months ended March 31, 2023:
|
|
|
Aggregate Principal |
|
|
Issuance Date Weighted Average |
|
|
|||||||
|
Issuance Date |
|
Borrowing Currency |
|
|
USD (1) |
|
|
Interest Rate |
|
Years |
|
Maturity Dates |
||
|
January |
|
€ |
1,250 |
|
|
$ |
1,354 |
|
|
4.1% |
|
13.8 |
|
January 2030 – 2043 |
|
March |
|
$ |
1,200 |
|
|
$ |
1,200 |
|
|
4.9% |
|
17.7 |
|
June 2033 – 2053 |
|
Total |
|
|
|
|
$ |
2,554 |
|
|
4.5% |
|
15.6 |
|
|
RESULTS OF OPERATIONS – THREE MONTHS ENDED MARCH 31, 2023 AND 2022
We evaluate our business operations based on the NOI of our two operating segments: Real Estate (Rental Operations and Development) and Strategic Capital. NOI by segment is a non-GAAP performance measure that is calculated using revenues and expenses directly from our financial statements. We consider NOI by segment to be an appropriate supplemental measure of our performance because it helps management and investors understand our operating results.
32
Below is our NOI by segment per our Consolidated Financial Statements and a reconciliation of NOI by segment to Operating Income per the Consolidated Financial Statements for the three months ended March 31 (in millions).
|
|
2023 |
|
|
2022 |
|
||
Real estate segment: |
|
|
|
|
|
|
||
Rental revenues |
|
$ |
1,634 |
|
|
$ |
1,077 |
|
Development management and other revenues |
|
|
- |
|
|
|
8 |
|
Rental expenses |
|
|
(413 |
) |
|
|
(276 |
) |
Other expenses |
|
|
(7 |
) |
|
|
(9 |
) |
Real Estate Segment – NOI |
|
|
1,214 |
|
|
|
800 |
|
|
|
|
|
|
|
|
||
Strategic capital segment: |
|
|
|
|
|
|
||
Strategic capital revenues |
|
|
135 |
|
|
|
134 |
|
Strategic capital expenses |
|
|
(72 |
) |
|
|
(52 |
) |
Strategic Capital Segment– NOI |
|
|
63 |
|
|
|
82 |
|
|
|
|
|
|
|
|
||
General and administrative expenses |
|
|
(100 |
) |
|
|
(74 |
) |
Depreciation and amortization expenses |
|
|
(602 |
) |
|
|
(397 |
) |
Operating income before gains on real estate transactions, net |
|
|
575 |
|
|
|
411 |
|
Gains on dispositions of development properties and land, net |
|
|
- |
|
|
|
210 |
|
Gains on other dispositions of investments in real estate, net |
|
|
4 |
|
|
|
585 |
|
Operating income |
|
$ |
579 |
|
|
$ |
1,206 |
|
See Note 11 to the Consolidated Financial Statements for more information on our segments and a reconciliation of each business segment’s NOI to Operating Income and Earnings Before Income Taxes.
Real Estate Segment
This operating segment principally includes rental revenue and rental expenses recognized from our consolidated properties. We allocate the costs of our property management and leasing functions to the Real Estate Segment through Rental Expenses and the Strategic Capital Segment through Strategic Capital Expenses based on the square footage of the relative portfolios. In addition, this segment is impacted by our development, acquisition and disposition activities.
Below are the components of Real Estate Segment NOI for the three months ended March 31, derived directly from line items in the Consolidated Financial Statements (in millions):
|
|
2023 |
|
|
2022 |
|
||
Rental revenues |
|
$ |
1,634 |
|
|
$ |
1,077 |
|
Development management and other revenues |
|
|
- |
|
|
|
8 |
|
Rental expenses |
|
|
(413 |
) |
|
|
(276 |
) |
Other expenses |
|
|
(7 |
) |
|
|
(9 |
) |
Real Estate Segment – NOI |
|
$ |
1,214 |
|
|
$ |
800 |
|
|
|
|
|
|
|
|
33
The change in Real Estate Segment (“RES”) NOI for the three months ended March 31, 2023 compared to the same period in 2022 of $414 million was impacted by the following activities (in millions):
Below are key operating metrics of our consolidated operating portfolio, which excludes non-strategic industrial properties.
34
Development Activity
The following table summarizes consolidated development activity for the three months ended March 31 (dollars and square feet in millions):
|
|
2023 |
|
|
2022 |
|
||
Starts: |
|
|
|
|
|
|
||
Number of new development buildings during the period |
|
|
2 |
|
|
|