10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2023

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

For the transition period from ______________ to ______________

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

Prologis, Inc.

Prologis, L.P.

(Exact name of registrant as specified in its charter)


Maryland (Prologis, Inc.) Delaware (Prologis, L.P.)		94-3281941 (Prologis, Inc.) 94-3285362 (Prologis, L.P.)
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Pier 1, Bay 1, San Francisco, California		94111
(Address or principal executive offices)		(Zip Code)

(415) 394-9000

(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:


	Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Prologis, Inc.	Common Stock, $0.01 par value	PLD	New York Stock Exchange
Prologis, L.P.	3.000% Notes due 2026	PLD/26	New York Stock Exchange
Prologis, L.P.	2.250% Notes due 2029	PLD/29	New York Stock Exchange

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.	Yes	☒	No	☐
Prologis, L.P.	Yes	☒	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.	Yes		No	☐
Prologis, L.P.	Yes		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.:
Large accelerated filer ☒	Accelerated filer ☐	Non-accelerated filer ☐	Smaller reporting company ☐	Emerging growth company ☐


Prologis, L.P.:
Large accelerated filer ☐	Accelerated filer ☐	Non-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	☒
Prologis, L.P.	Yes	☐	No	☒

The number of shares of Prologis, Inc.’s common stock outstanding at April 26, 2023, was approximately 923,466,000.

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:

•

enhances investors’ understanding of the Parent and the OP by enabling investors to view the business as a whole in the same manner as management views and operates the business;

•

eliminates duplicative disclosure and provides a more streamlined and readable presentation as a substantial portion of the Company’s disclosure applies to both the Parent and the OP; and

•

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

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


			Page Number
PART I.	Financial Information
	Item 1.	Financial Statements		1
	Prologis, Inc.:
		Consolidated Balance Sheets – March 31, 2023 and December 31, 2022		1
		Consolidated Statements of Income – Three Months Ended March 31, 2023 and 2022		2
		Consolidated Statements of Comprehensive Income – Three Months Ended March 31, 2023 and 2022		3
		Consolidated Statements of Equity – Three Months Ended March 31, 2023 and 2022		4
		Consolidated Statements of Cash Flows – Three Months Ended March 31, 2023 and 2022		5
	Prologis, L.P.:
		Consolidated Balance Sheets – March 31, 2023 and December 31, 2022		6
		Consolidated Statements of Income – Three Months Ended March 31, 2023 and 2022		7
		Consolidated Statements of Comprehensive Income – Three Months Ended March 31, 2023 and 2022		8
		Consolidated Statements of Capital – Three Months Ended March 31, 2023 and 2022		9
		Consolidated Statements of Cash Flows – Three Months Ended March 31, 2023 and 2022		10
	Prologis, Inc. and Prologis, L.P.:
		Notes to the Consolidated Financial Statements		11
		Note 1. General		11
		Note 2. Duke Transaction		11
		Note 3. Real Estate		12
		Note 4. Unconsolidated Entities		13
		Note 5. Assets Held for Sale or Contribution		15
		Note 6. Debt		15
		Note 7. Noncontrolling Interests		17
		Note 8. Long-Term Compensation		18
		Note 9. Earnings Per Common Share or Unit		19
		Note 10. Financial Instruments and Fair Value Measurements		20
		Note 11. Business Segments		23
		Note 12. Supplemental Cash Flow Information		25
		Reports of Independent Registered Public Accounting Firm		26
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		28
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		48
	Item 4.	Controls and Procedures		49
PART II.	Other Information
	Item 1.	Legal Proceedings		49
	Item 1A.	Risk Factors		49
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		49
	Item 3.	Defaults Upon Senior Securities		49
	Item 4.	Mine Safety Disclosures		50
	Item 5.	Other Information		50
	Item 6.	Exhibits		50

Index

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

PROLOGIS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except per share data)



	March 31, 2023			December 31, 2022
ASSETS
Investments in real estate properties	$	82,385,546		$	81,623,396
Less accumulated depreciation		9,508,351			9,036,085
Net investments in real estate properties		72,877,195			72,587,311
Investments in and advances to unconsolidated entities		9,680,097			9,698,898
Assets held for sale or contribution		734,106			531,257
Net investments in real estate		83,291,398			82,817,466

Cash and cash equivalents		522,501			278,483
Other assets		4,706,985			4,801,499
Total assets	$	88,520,884		$	87,897,448

LIABILITIES AND EQUITY
Liabilities:
Debt	$	25,153,342		$	23,875,961
Accounts payable and accrued expenses		1,507,748			1,711,885
Other liabilities		4,394,565			4,446,509
Total liabilities		31,055,655			30,034,355

Equity:
Prologis, Inc. stockholders’ equity:
Series Q preferred stock at stated liquidation preference of $50 per share; $0.01 par value; 1,279 shares issued and outstanding and 100,000 preferred shares authorized at March 31, 2023 and December 31, 2022		63,948			63,948
Common stock; $0.01 par value; 923,453 shares and 923,142 shares issued and outstanding at March 31, 2023 and December 31, 2022, respectively		9,235			9,231
Additional paid-in capital		54,058,036			54,065,407
Accumulated other comprehensive loss		(496,424	)		(443,609	)
Distributions in excess of net earnings		(799,577	)		(457,695	)
Total Prologis, Inc. stockholders’ equity		52,835,218			53,237,282
Noncontrolling interests		4,630,011			4,625,811
Total equity		57,465,229			57,863,093
Total liabilities and equity	$	88,520,884		$	87,897,448

The accompanying notes are an integral part of these Consolidated Financial Statements.

Index

PROLOGIS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share amounts)


	Three Months Ended
	March 31,
	2023			2022
Revenues:
Rental	$	1,633,770		$	1,076,861
Strategic capital		134,701			133,925
Development management and other		116			8,342
Total revenues		1,768,587			1,219,128
Expenses:
Rental		412,554			275,674
Strategic capital		71,709			51,811
General and administrative		99,777			74,646
Depreciation and amortization		602,367			396,647
Other		7,184			9,589
Total expenses		1,193,591			808,367

Operating income before gains on real estate transactions, net		574,996			410,761
Gains on dispositions of development properties and land, net		-			210,206
Gains on other dispositions of investments in real estate, net		4,047			584,835
Operating income		579,043			1,205,802

Other income (expense):
Earnings from unconsolidated entities, net		75,779			76,962
Interest expense		(136,011	)		(64,064	)
Foreign currency and derivative gains and other income, net		8,614			48,409
Gains (losses) on early extinguishment of debt, net		3,275			(18,165	)
Total other income (expense)		(48,343	)		43,142
Earnings before income taxes		530,700			1,248,944
Income tax expense		(32,071	)		(29,222	)
Consolidated net earnings		498,629			1,219,722
Less net earnings attributable to noncontrolling interests		34,006			68,937
Net earnings attributable to controlling interests		464,623			1,150,785
Less preferred stock dividends		1,453			1,531
Net earnings attributable to common stockholders	$	463,170		$	1,149,254

Weighted average common shares outstanding – Basic		923,888			740,368
Weighted average common shares outstanding – Diluted		951,624			765,517

Net earnings per share attributable to common stockholders – Basic	$	0.50		$	1.55

Net earnings per share attributable to common stockholders – Diluted	$	0.50		$	1.54

The accompanying notes are an integral part of these Consolidated Financial Statements.

Index

PROLOGIS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)


	Three Months Ended
	March 31,
	2023			2022
Consolidated net earnings	$	498,629		$	1,219,722
Other comprehensive income (loss):
Foreign currency translation gains (losses), net		(28,101	)		189,523
Unrealized gains (losses) on derivative contracts, net		(25,853	)		13,349
Comprehensive income		444,675			1,422,594
Net earnings attributable to noncontrolling interests		(34,006	)		(68,937	)
Other comprehensive loss (income) attributable to noncontrolling interests		1,139			(5,739	)
Comprehensive income attributable to common stockholders	$	411,808		$	1,347,918

The accompanying notes are an integral part of these Consolidated Financial Statements.

Index

PROLOGIS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands)

Three Months Ended March 31, 2023 and 2022


			Common Stock							Accumulated			Distributions
			Number				Additional			Other			in Excess of			Non-
	Preferred		of		Par		Paid-in			Comprehensive			Net			controlling			Total
	Stock		Shares		Value		Capital			Loss			Earnings			Interests			Equity
Balance at January 1, 2023	$	63,948		923,142	$	9,231	$	54,065,407		$	(443,609	)	$	(457,695	)	$	4,625,811		$	57,863,093
Consolidated net earnings		-		-		-		-			-			464,623			34,006			498,629
Effect of equity compensation plans		-		288		4		13,468			-			-			51,416			64,888
Capital contributions		-		-		-		-			-			-			-			-
Redemption of noncontrolling interests		-		23		-		1,304			-			-			(43,573	)		(42,269	)
Foreign currency translation losses, net		-		-		-		-			(27,595	)		-			(506	)		(28,101	)
Unrealized losses on derivative contracts, net		-		-		-		-			(25,220	)		-			(633	)		(25,853	)
Reallocation of equity		-		-		-		(22,143	)		-			-			22,143			-
Dividends ($0.87 per common share) and other distributions		-		-		-		-			-			(806,505	)		(58,653	)		(865,158	)
Balance at March 31, 2023	$	63,948		923,453	$	9,235	$	54,058,036		$	(496,424	)	$	(799,577	)	$	4,630,011		$	57,465,229

Common Stock

Accumulated

Distributions