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 September 30, 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 October 25, 2023, was approximately 923,971,000.

EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the period ended September 30, 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 September 30, 2023, the Parent owned a 97.58% common general partnership interest in the OP and substantially all of the preferred units in the OP. The remaining 2.42% 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 – September 30, 2023 and December 31, 2022		1
		Consolidated Statements of Income – Three and Nine Months Ended September 30, 2023 and 2022		2
		Consolidated Statements of Comprehensive Income – Three and Nine Months Ended September 30, 2023 and 2022		3
		Consolidated Statements of Equity – Three and Nine Months Ended September 30, 2023 and 2022		4
		Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2023 and 2022		5
	Prologis, L.P.:
		Consolidated Balance Sheets – September 30, 2023 and December 31, 2022		6
		Consolidated Statements of Income – Three and Nine Months Ended September 30, 2023 and 2022		7
		Consolidated Statements of Comprehensive Income – Three and Nine Months Ended September 30, 2023 and 2022		8
		Consolidated Statements of Capital – Three and Nine Months Ended September 30, 2023 and 2022		9
		Consolidated Statements of Cash Flows – Nine Months Ended September 30, 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		21
		Note 11. Business Segments		24
		Note 12. Supplemental Cash Flow Information		26
		Reports of Independent Registered Public Accounting Firm		27
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		29
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		49
	Item 4.	Controls and Procedures		50
PART II.	Other Information
	Item 1.	Legal Proceedings		51
	Item 1A.	Risk Factors		51
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		51
	Item 3.	Defaults Upon Senior Securities		51
	Item 4.	Mine Safety Disclosures		51
	Item 5.	Other Information		51
	Item 6.	Exhibits		51

Index

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

PROLOGIS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except per share data)



	September 30, 2023			December 31, 2022
ASSETS
Investments in real estate properties	$	87,021,585		$	81,623,396
Less accumulated depreciation		10,439,374			9,036,085
Net investments in real estate properties		76,582,211			72,587,311
Investments in and advances to unconsolidated entities		9,091,824			9,698,898
Assets held for sale or contribution		797,758			531,257
Net investments in real estate		86,471,793			82,817,466

Cash and cash equivalents		740,841			278,483
Other assets		4,736,775			4,801,499
Total assets	$	91,949,409		$	87,897,448

LIABILITIES AND EQUITY
Liabilities:
Debt	$	27,578,197		$	23,875,961
Accounts payable and accrued expenses		1,721,108			1,711,885
Other liabilities		4,389,242			4,446,509
Total liabilities		33,688,547			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 September 30, 2023 and December 31, 2022		63,948			63,948
Common stock; $0.01 par value; 923,974 shares and 923,142 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively		9,240			9,231
Additional paid-in capital		54,197,865			54,065,407
Accumulated other comprehensive loss		(185,783	)		(443,609	)
Distributions in excess of net earnings		(449,439	)		(457,695	)
Total Prologis, Inc. stockholders’ equity		53,635,831			53,237,282
Noncontrolling interests		4,625,031			4,625,811
Total equity		58,260,862			57,863,093
Total liabilities and equity	$	91,949,409		$	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						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
Revenues:
Rental	$	1,777,359		$	1,151,846		$	5,062,583		$	3,322,159
Strategic capital		136,848			594,752			1,070,584			884,916
Development management and other		457			4,294			1,055			15,025
Total revenues		1,914,664			1,750,892			6,134,222			4,222,100
Expenses:
Rental		416,076			284,707			1,216,568			830,846
Strategic capital		84,069			130,555			306,684			239,418
General and administrative		96,673			87,903			292,097			245,663
Depreciation and amortization		642,010			401,450			1,846,545			1,200,410
Other		12,342			7,004			31,686			28,214
Total expenses		1,251,170			911,619			3,693,580			2,544,551

Operating income before gains on real estate transactions, net		663,494			839,273			2,440,642			1,677,549
Gains on dispositions of development properties and land, net		89,030			74,678			273,907			390,686
Gains on other dispositions of investments in real estate, net		129,584			1,019			158,392			585,854
Operating income		882,108			914,970			2,872,941			2,654,089

Other income (expense):
Earnings from unconsolidated entities, net		71,365			84,925			217,786			241,481
Interest expense		(181,053	)		(63,884	)		(466,882	)		(188,241	)
Foreign currency and derivative gains and other income, net		67,964			171,832			102,682			364,623
Gains (losses) on early extinguishment of debt, net		-			-			3,275			(18,895	)
Total other income (expense)		(41,724	)		192,873			(143,139	)		398,968
Earnings before income taxes		840,384			1,107,843			2,729,802			3,053,057
Income tax expense		(41,243	)		(38,669	)		(152,541	)		(117,725	)
Consolidated net earnings		799,141			1,069,174			2,577,261			2,935,332
Less net earnings attributable to noncontrolling interests		51,514			53,710			148,983			157,690
Net earnings attributable to controlling interests		747,627			1,015,464			2,428,278			2,777,642
Less preferred stock dividends		1,453			1,531			4,381			4,600
Net earnings attributable to common stockholders	$	746,174		$	1,013,933		$	2,423,897		$	2,773,042

Weighted average common shares outstanding – Basic		924,395			740,719			924,228			740,585
Weighted average common shares outstanding – Diluted		951,908			766,372			951,643			766,019

Net earnings per share attributable to common stockholders – Basic	$	0.81		$	1.37		$	2.62		$	3.74

Net earnings per share attributable to common stockholders – Diluted	$	0.80		$	1.36		$	2.61		$	3.72

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						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
Consolidated net earnings	$	799,141		$	1,069,174		$	2,577,261		$	2,935,332
Other comprehensive income:
Foreign currency translation gains, net		146,281			239,062			284,229			761,102
Unrealized gains (losses) on derivative contracts, net		3,702			24,902			(19,998	)		67,230
Comprehensive income		949,124			1,333,138			2,841,492			3,763,664
Net earnings attributable to noncontrolling interests		(51,514	)		(53,710	)		(148,983	)		(157,690	)
Other comprehensive income attributable to noncontrolling interests		(3,396	)		(6,829	)		(6,405	)		(21,705	)
Comprehensive income attributable to common stockholders	$	894,214		$	1,272,599		$	2,686,104		$	3,584,269

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 September 30, 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		Income (Loss)			Earnings			Interests			Equity
Balance at July 1, 2023	$	63,948		923,861	$	9,239	$	54,115,592	$	(332,370	)	$	(390,779	)	$	4,612,194		$	58,077,824
Consolidated net earnings		-		-		-		-		-			747,627			51,514			799,141
Effect of equity compensation plans		-		6		-		35,021		-			-			68,350			103,371
Capital contributions		-		-		-		-		-			-			62			62
Redemption of noncontrolling interests		-		107		1		6,206		-			-			(9,497	)		(3,290	)
Foreign currency translation gains, net		-		-		-		-		142,969			-			3,312			146,281
Unrealized gains on derivative contracts, net		-		-		-		-		3,618			-			84			3,702
Reallocation of equity		-		-		-		41,046		-			-			(41,046	)		-
Dividends ($0.87 per common share) and other distributions		-		-		-		-		-			(806,287	)		(59,942	)		(866,229	)
Balance at September 30, 2023	$	63,948		923,974	$	9,240	$	54,197,865	$	(185,783	)	$	(449,439	)	$	4,625,031		$	58,260,862


			Common Stock						Accumulated			Distributions
			Number				Additional		Other			in Excess of			Non-
	Preferred		of		Par		Paid-in		Comprehensive			Net			controlling			Total
	Stock		Shares		Value		Capital		Income (Loss)			Earnings			Interests			Equity
Balance at July 1, 2022	$	63,948		740,360	$	7,404	$	35,573,940	$	(328,761	)	$	(740,764	)	$	4,298,171		$	38,873,938
Consolidated net earnings		-		-		-		-		-			1,015,464			53,710			1,069,174
Effect of equity compensation plans		-		23		-		15,496		-			-			26,754			42,250
Capital contributions		-		-		-		-		-			-			838			838
Redemption of noncontrolling interests		-		28		-		1,357		-			-			(3,874	)		(2,517	)
Foreign currency translation gains, net		-		-		-		-		232,919			-			6,143			239,062
Unrealized gains on derivative contracts, net		-		-		-		-		24,216			-			686			24,902
Reallocation of equity		-		-		-		15,526		-			-			(15,526	)		-
Dividends ($0.79 per common share) and other distributions		-		-		-		-		-			(587,645	)		(53,681	)		(641,326	)
Balance at September 30, 2022	$	63,948		740,411	$	7,404	$	35,606,319	$	(71,626	)	$	(312,945	)	$	4,313,221		$	39,606,321

Nine Months Ended September 30, 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			Income (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		-		-		-		-			-			2,428,278			148,983			2,577,261
Effect of equity compensation plans		-		330		4		70,176			-			-			152,176			222,356
Capital contributions		-		-		-		-			-			-			1,760			1,760
Redemption of noncontrolling interests		-		502		5		29,004			-			-			(98,768	)		(69,759	)
Foreign currency translation gains, net		-		-		-		-			277,341			-			6,888			284,229
Unrealized losses on derivative contracts, net		-		-		-		-			(19,515	)		-			(483	)		(19,998	)
Reallocation of equity		-		-		-		33,281			-			-			(33,281	)		-
Dividends ($2.61 per common share) and other distributions		-		-		-		(3	)		-			(2,420,022	)		(178,055	)		(2,598,080	)
Balance at September 30, 2023	$	63,948		923,974	$	9,240	$	54,197,865		$	(185,783	)	$	(449,439	)	$	4,625,031		$	58,260,862


			Common Stock							Accumulated			Distributions
			Number				Additional			Other			in Excess of			Non-
	Preferred		of		Par		Paid-in			Comprehensive			Net			controlling			Total
	Stock		Shares		Value		Capital			Income (Loss)			Earnings			Interests			Equity
Balance at January 1, 2022	$	63,948		739,827	$	7,398	$	35,561,608		$	(878,253	)	$	(1,327,828	)	$	4,315,337		$	37,742,210
Consolidated net earnings		-		-		-		-			-			2,777,642			157,690			2,935,332
Effect of equity compensation plans		-		349		4		36,613			-			-			87,153			123,770
Capital contributions		-		-		-		-			-			-			11,921			11,921
Redemption of noncontrolling interests		-		235		2		10,929			-			-			(63,436	)		(52,505	)
Foreign currency translation gains, net		-		-		-		-			741,234			-			19,868			761,102
Unrealized gains on derivative contracts, net		-		-		-		-			65,393			-			1,837			67,230
Reallocation of equity		-		-		-		(2,821	)		-			-			2,821			-
Dividends ($2.37 per common share) and other distributions		-		-		-		(10	)		-			(1,762,759	)		(219,970	)		(1,982,739	)
Balance at September 30, 2022	$	63,948		740,411	$	7,404	$	35,606,319		$	(71,626	)	$	(312,945	)	$	4,313,221		$	39,606,321

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

Index

PROLOGIS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	Nine Months Ended
	September 30,
	2023			2022
Operating activities:
Consolidated net earnings	$	2,577,261		$	2,935,332
Adjustments to reconcile net earnings to net cash provided by operating activities:
Straight-lined rents and amortization of above and below market leases		(466,686	)		(107,565	)
Equity-based compensation awards		210,022			140,022
Depreciation and amortization		1,846,545			1,200,410
Earnings from unconsolidated entities, net		(217,786	)		(241,481	)
Operating distributions from unconsolidated entities		536,104			316,299
Increase in operating receivables from unconsolidated entities		(98,227	)		(480,588	)
Amortization of debt discounts and debt issuance costs, net		55,526			6,875
Gains on dispositions of development properties and land, net		(273,907	)		(390,686	)
Gains on other dispositions of investments in real estate, net		(158,392	)		(585,854	)
Unrealized foreign currency and derivative gains, net		(22,006	)		(239,645	)
Losses (gains) on early extinguishment of debt, net		(3,275	)		18,895
Deferred income tax expense		9,836			23,714
Decrease in other assets		66,281			143,333
Increase in accounts payable and accrued expenses and other liabilities		237,340			109,752
Net cash provided by operating activities		4,298,636			2,848,813
Investing activities:
Real estate development		(2,507,664	)		(2,231,821	)
Real estate acquisitions		(3,648,920	)		(2,232,354	)
Duke Transaction, net of cash acquired		(28,111	)		-
Tenant improvements and lease commissions on previously leased space		(271,011	)		(262,177	)
Property improvements		(156,520	)		(117,563	)
Proceeds from dispositions and contributions of real estate		1,310,442			1,721,993
Investments in and advances to unconsolidated entities		(246,135	)		(192,335	)
Return of investment from unconsolidated entities		304,901			58,528
Proceeds from the settlement of net investment hedges		31,045			45,033
Payments on the settlement of net investment hedges		(161	)		(771	)
Net cash used in investing activities		(5,212,134	)		(3,211,467	)
Financing activities:
Dividends paid on common and preferred stock		(2,420,022	)		(1,762,759	)
Noncontrolling interests contributions		1,760			11,921
Noncontrolling interests distributions		(178,055	)		(219,970	)
Settlement of noncontrolling interests		(69,759	)		(52,505	)
Tax paid with shares withheld		(19,814	)		(25,427	)
Debt and equity issuance costs paid		(58,320	)		(31,912	)
Net proceeds from (payments on) credit facilities		(1,328,136	)		60,357
Repurchase of and payments on debt		(270,344	)		(886,746	)
Proceeds from the issuance of debt		5,746,977			3,394,353
Net cash provided by financing activities		1,404,287			487,312

Effect of foreign currency exchange rate changes on cash		(28,431	)		(44,493	)
Net increase in cash and cash equivalents		462,358			80,165
Cash and cash equivalents, beginning of period		278,483			556,117
Cash and cash equivalents, end of period	$	740,841		$	636,282

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.

Index

PROLOGIS, L.P.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)



	September 30, 2023		December 31, 2022
ASSETS
Investments in real estate properties	$	87,021,585	$	81,623,396
Less accumulated depreciation		10,439,374		9,036,085
Net investments in real estate properties		76,582,211		72,587,311
Investments in and advances to unconsolidated entities		9,091,824		9,698,898
Assets held for sale or contribution		797,758		531,257
Net investments in real estate		86,471,793		82,817,466

Cash and cash equivalents		740,841		278,483
Other assets		4,736,775		4,801,499
Total assets	$	91,949,409	$	87,897,448

LIABILITIES AND CAPITAL
Liabilities:
Debt	$	27,578,197	$	23,875,961
Accounts payable and accrued expenses		1,721,108		1,711,885
Other liabilities		4,389,242		4,446,509
Total liabilities		33,688,547		30,034,355

Capital:
Partners’ capital:
General partner – preferred		63,948		63,948
General partner – common		53,571,883		53,173,334
Limited partners – common		854,388		843,263
Limited partners – Class A common		472,347		464,781
Total partners’ capital		54,962,566		54,545,326
Noncontrolling interests		3,298,296		3,317,767
Total capital		58,260,862		57,863,093
Total liabilities and capital	$	91,949,409	$	87,897,448

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

Index

PROLOGIS, L.P.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per unit amounts)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
Revenues:
Rental	$	1,777,359		$	1,151,846		$	5,062,583		$	3,322,159
Strategic capital		136,848			594,752			1,070,584			884,916
Development management and other		457			4,294			1,055			15,025
Total revenues		1,914,664			1,750,892			6,134,222			4,222,100
Expenses:
Rental		416,076			284,707			1,216,568			830,846
Strategic capital		84,069			130,555			306,684			239,418
General and administrative		96,673			87,903			292,097			245,663
Depreciation and amortization		642,010			401,450			1,846,545			1,200,410
Other		12,342			7,004			31,686			28,214
Total expenses		1,251,170			911,619			3,693,580			2,544,551

Operating income before gains on real estate transactions, net		663,494			839,273			2,440,642			1,677,549
Gains on dispositions of development properties and land, net		89,030			74,678			273,907			390,686
Gains on other dispositions of investments in real estate, net		129,584			1,019			158,392			585,854
Operating income		882,108			914,970			2,872,941			2,654,089

Other income (expense):
Earnings from unconsolidated entities, net		71,365			84,925			217,786			241,481
Interest expense		(181,053	)		(63,884	)		(466,882	)		(188,241	)
Foreign currency and derivative gains and other income, net		67,964			171,832			102,682			364,623
Gains (losses) on early extinguishment of debt, net		-			-			3,275			(18,895	)
Total other income (expense)		(41,724	)		192,873			(143,139	)		398,968
Earnings before income taxes		840,384			1,107,843			2,729,802			3,053,057
Income tax expense		(41,243	)		(38,669	)		(152,541	)		(117,725	)
Consolidated net earnings		799,141			1,069,174			2,577,261			2,935,332
Less net earnings attributable to noncontrolling interests		32,613			24,979			87,833			79,257
Net earnings attributable to controlling interests		766,528			1,044,195			2,489,428			2,856,075
Less preferred unit distributions		1,453			1,531			4,381			4,600
Net earnings attributable to common unitholders	$	765,075		$	1,042,664		$	2,485,047		$	2,851,475

Weighted average common units outstanding – Basic		939,602			753,616			939,448			753,515
Weighted average common units outstanding – Diluted		951,908			766,372			951,643			766,019

Net earnings per unit attributable to common unitholders – Basic	$	0.81		$	1.37		$	2.62		$	3.74

Net earnings per unit attributable to common unitholders – Diluted	$	0.80		$	1.36		$	2.61		$	3.72

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

Index

PROLOGIS, L.P.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2023			2022			2023			2022
Consolidated net earnings	$	799,141		$	1,069,174		$	2,577,261		$	2,935,332
Other comprehensive income:
Foreign currency translation gains, net		146,281			239,062			284,229			761,102
Unrealized gains (losses) on derivative contracts, net		3,702			24,902			(19,998	)		67,230
Comprehensive income		949,124			1,333,138			2,841,492			3,763,664
Net earnings attributable to noncontrolling interests		(32,613	)		(24,979	)		(87,833	)		(79,257	)
Other comprehensive loss (income) attributable to noncontrolling interests		260			470			(20	)		955
Comprehensive income attributable to common unitholders	$	916,771		$	1,308,629		$	2,753,639		$	3,685,362

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

Index

PROLOGIS, L.P.

CONSOLIDATED STATEMENTS OF CAPITAL

(Unaudited)

(In thousands)

Three Months Ended September 30, 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 July 1, 2023		1,279	$	63,948		923,861	$	53,401,682			14,538		$	840,369			8,595	$	469,424		$	3,302,401		$	58,077,824
Consolidated net earnings		-		-		-		747,627			-			12,344			-		6,557			32,613			799,141
Effect of equity compensation plans		-		-		6		35,021			331			68,350			-		-			-			103,371
Capital contributions		-		-		-		-			-			-			-		-			62			62
Redemption of limited partners units		-		-		107		6,207			(134	)		(9,497	)		-		-			-			(3,290	)
Foreign currency translation gains (losses), net		-		-		-		142,969			-			2,307			-		1,265			(260	)		146,281
Unrealized gains on derivative contracts, net		-		-		-		3,618			-			53			-		31			-			3,702
Reallocation of capital		-		-		-		41,046			-			(41,675	)		-		629			-			-
Distributions ($0.87 per common unit) and other		-		-		-		(806,287	)		-			(17,863	)		-		(5,559	)		(36,520	)		(866,229	)
Balance at September 30, 2023		1,279	$	63,948		923,974	$	53,571,883			14,735		$	854,388			8,595	$	472,347		$	3,298,296		$	58,260,862


	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 July 1, 2022		1,279	$	63,948		740,360	$	34,511,819			12,662		$	590,224			8,595	$	374,526		$	3,333,421		$	38,873,938
Consolidated net earnings		-		-		-		1,015,464			-			17,736			-		10,995			24,979			1,069,174
Effect of equity compensation plans		-		-		23		15,496			131			26,754			-		-			-			42,250
Capital contributions		-		-		-		-			-			-			-		-			838			838
Redemption of limited partners units		-		-		28		1,357			(45	)		(3,874	)		-		-			-			(2,517	)
Foreign currency translation gains (losses), net		-		-		-		232,919			-			4,069			-		2,544			(470	)		239,062
Unrealized gains on derivative contracts, net		-		-		-		24,216			-			422			-		264			-			24,902
Reallocation of capital		-		-		-		15,526			-			(15,878	)		-		352			-			-
Distributions ($0.79 per common unit) and other		-		-		-		(587,645	)		-			(12,896	)		-		(5,558	)		(35,227	)		(641,326	)
Balance at September 30, 2022		1,279	$	63,948		740,411	$	35,229,152			12,748		$	606,557			8,595	$	383,123		$	3,323,541		$	39,606,321

Nine Months Ended September 30, 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		1,279	$	63,948		923,142	$	53,173,334			14,640		$	843,263			8,595	$	464,781		$	3,317,767		$	57,863,093
Consolidated net earnings		-		-		-		2,428,278			-			39,919			-		21,231			87,833			2,577,261
Effect of equity compensation plans		-		-		330		70,180			1,174			152,176			-		-			-			222,356
Capital contributions		-		-		-		-			-			-			-		-			1,760			1,760
Redemption of limited partners units		-		-		502		29,009			(1,079	)		(98,768	)		-		-			-			(69,759	)
Foreign currency translation gains, net		-		-		-		277,341			-			4,422			-		2,446			20			284,229
Unrealized losses on derivative contracts, net		-		-		-		(19,515	)		-			(311	)		-		(172	)		-			(19,998	)
Reallocation of capital		-		-		-		33,281			-			(34,018	)		-		737			-			-
Distributions ($2.61 per common unit) and other		-		-		-		(2,420,025	)		-			(52,295	)		-		(16,676	)		(109,084	)		(2,598,080	)
Balance at September 30, 2023		1,279	$	63,948		923,974	$	53,571,883			14,735		$	854,388			8,595	$	472,347		$	3,298,296		$	58,260,862


	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		1,279	$	63,948		739,827	$	33,362,925			12,354		$	557,097			8,595	$	360,702		$	3,397,538		$	37,742,210
Consolidated net earnings		-		-		-		2,777,642			-			48,415			-		30,018			79,257			2,935,332
Effect of equity compensation plans		-		-		349		36,617			969			87,153			-		-			-			123,770
Capital contributions		-		-		-		-			-			-			-		-			11,921			11,921
Redemption of limited partners units		-		-		235		10,931			(575	)		(63,436	)		-		-			-			(52,505	)
Foreign currency translation gains (losses), net		-		-		-		741,234			-			12,763			-		8,060			(955	)		761,102
Unrealized gains on derivative contracts, net		-		-		-		65,393			-			1,126			-		711			-			67,230
Reallocation of capital		-		-		-		(2,821	)		-			2,514			-		307			-			-
Distributions ($2.37 per common unit) and other		-		-		-		(1,762,769	)		-			(39,075	)		-		(16,675	)		(164,220	)		(1,982,739	)
Balance at September 30, 2022		1,279	$	63,948		740,411	$	35,229,152			12,748		$	606,557			8,595	$	383,123		$	3,323,541		$	39,606,321

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

Index

PROLOGIS, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	Nine Months Ended
	September 30,
	2023			2022
Operating activities:
Consolidated net earnings	$	2,577,261		$	2,935,332
Adjustments to reconcile net earnings to net cash provided by operating activities:
Straight-lined rents and amortization of above and below market leases		(466,686	)		(107,565	)
Equity-based compensation awards		210,022			140,022
Depreciation and amortization		1,846,545			1,200,410
Earnings from unconsolidated entities, net		(217,786	)		(241,481	)
Operating distributions from unconsolidated entities		536,104			316,299
Increase in operating receivables from unconsolidated entities		(98,227	)		(480,588	)
Amortization of debt discounts and debt issuance costs, net		55,526			6,875
Gains on dispositions of development properties and land, net		(273,907	)		(390,686	)
Gains on other dispositions of investments in real estate, net		(158,392	)		(585,854	)
Unrealized foreign currency and derivative gains, net		(22,006	)		(239,645	)
Losses (gains) on early extinguishment of debt, net		(3,275	)		18,895
Deferred income tax expense		9,836			23,714
Decrease in other assets		66,281			143,333
Increase in accounts payable and accrued expenses and other liabilities		237,340			109,752
Net cash provided by operating activities		4,298,636			2,848,813
Investing activities:
Real estate development		(2,507,664	)		(2,231,821	)
Real estate acquisitions		(3,648,920	)		(2,232,354	)
Duke Transaction, net of cash acquired		(28,111	)		-
Tenant improvements and lease commissions on previously leased space		(271,011	)		(262,177	)
Property improvements		(156,520	)		(117,563	)
Proceeds from dispositions and contributions of real estate		1,310,442			1,721,993
Investments in and advances to unconsolidated entities		(246,135	)		(192,335	)
Return of investment from unconsolidated entities		304,901			58,528
Proceeds from the settlement of net investment hedges		31,045			45,033
Payments on the settlement of net investment hedges		(161	)		(771	)
Net cash used in investing activities		(5,212,134	)		(3,211,467	)
Financing activities:
Distributions paid on common and preferred units		(2,488,993	)		(1,818,509	)
Noncontrolling interests contributions		1,760			11,921
Noncontrolling interests distributions		(109,084	)		(164,220	)
Redemption of common limited partnership units		(69,759	)		(52,505	)
Tax paid with shares of the Parent withheld		(19,814	)		(25,427	)
Debt and equity issuance costs paid		(58,320	)		(31,912	)
Net proceeds from (payments on) credit facilities		(1,328,136	)		60,357
Repurchase of and payments on debt		(270,344	)		(886,746	)
Proceeds from the issuance of debt		5,746,977			3,394,353
Net cash provided by financing activities		1,404,287			487,312

Effect of foreign currency exchange rate changes on cash		(28,431	)		(44,493	)
Net increase in cash and cash equivalents		462,358			80,165
Cash and cash equivalents, beginning of period		278,483			556,117
Cash and cash equivalents, end of period	$	740,841		$	636,282

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.

Index

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 two operating business segments: Real Estate (Rental Operations and Development) and Strategic Capital. Our Real Estate Segment represents the ownership, leasing and development of logistics properties. Our Strategic Capital Segment represents the management of properties owned by our unconsolidated co-investment ventures and other ventures. See Note 11 for further discussion of our business segments. Unless otherwise indicated, the Notes to the Consolidated Financial Statements apply to both the Parent and the OP. The terms “the Company,” “Prologis,” “we,” “our” or “us” means the Parent and OP collectively.

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 September 30, 2023, the Parent owned a 97.58% common general partnership interest in the OP and substantially all of the preferred units in the OP. The remaining 2.42% common limited partnership interests, which include Class A common limited partnership units (“Class A Units”) in the OP, are owned by unaffiliated investors and certain current and former directors and officers of the Parent. Each partner’s percentage interest in the OP is determined based on the number of OP units held, including the number of OP units into which Class A Units are convertible, compared to total OP units outstanding at each period end and is used as the basis for the allocation of net income or loss to each partner. At the end of each reporting period, a capital adjustment is made in the OP to reflect the appropriate ownership interest for each of the common unitholders. These adjustments are reflected in the line items Reallocation of Equity in the Consolidated Statements of Equity of the Parent and Reallocation of Capital in the Consolidated Statements of Capital of the OP.

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 October 3, 2022, we acquired Duke Realty Corporation and Duke Realty Limited Partnership (collectively “Duke” or the “Duke Transaction”). Through the Duke Transaction, we acquired a portfolio primarily comprised of logistics real estate assets, including 494 industrial operating properties, aggregating 144.4 million square feet, which are highly complementary to our U.S. portfolio in terms of product quality, location and growth potential in our key markets. There was approximately 15 million square feet of non-strategic industrial operating properties acquired in the Duke Transaction for which our intent is not to operate these properties long term. These assets are classified as other real estate investments within Investments in Real Estate Properties in the Consolidated Balance Sheets. The portfolio also included properties under development, land for future development and investments in other ventures.

Index

The Duke Transaction was completed for $23.2 billion through the issuance of equity based on the value of the Prologis common stock and units issued of $18.8 billion, the assumption of debt of $4.2 billion and transaction costs. In connection with the transaction, each issued and outstanding share or unit held by a Duke shareholder or unitholder was converted automatically into 0.475 shares of Prologis common stock or common units of Prologis, L.P., respectively, including shares and units under Duke’s equity incentive plan that became fully vested at closing.

The aggregate equity consideration is calculated below (in millions, except price per share):


Number of Prologis shares and units issued upon conversion of Duke's shares and units at October 3, 2022		184.80
Multiplied by price of Prologis' common stock on September 30, 2022	$	101.60
Fair value of Prologis shares and units issued	$	18,776

We accounted for the Duke Transaction as an asset acquisition and as a result, the transaction costs of $239.8 million were capitalized to the basis of the acquired properties. Transaction costs included the direct costs incurred to acquire the real estate assets.

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. The total purchase price, including transaction costs, was allocated as follows (in millions):


Net investments in real estate	$	24,915
Cash and other assets		441
Debt		(4,162	)
Intangible liabilities, net of intangible assets (1)		(1,457	)
Accounts payable, accrued expenses and other liabilities		(719	)
Noncontrolling interests		(2	)
Total purchase price, including transaction costs	$	19,016

(1)

Intangible assets of $836.6 million and intangible liabilities of $2.3 billion were included within Other Assets and Other Liabilities, respectively, in the Consolidated Balance Sheets. The acquired lease intangibles from the Duke Transaction will be amortized over the terms of the respective leases with a weighted average remaining lease term of 64 months at October 3, 2022.

NOTE 3. REAL ESTATE

Investments in real estate properties consisted of the following (dollars and square feet in thousands):


	Square Feet				Number of Buildings
	Sep 30,		Dec 31,		Sep 30,		Dec 31,		Sep 30,		Dec 31,
	2023		2022		2023		2022		2023		2022
Operating properties:
Buildings and improvements		620,413		597,362		2,933		2,825	$	51,476,222	$	48,650,334
Improved land										22,390,537		20,388,461
Development portfolio, including land costs:
Prestabilized		12,738		4,874		40		15		1,718,732		597,553
Properties under development		25,042		44,011		70		121		2,701,514		3,614,601
Land (1)										3,730,346		3,338,121
Other real estate investments (2)										5,004,234		5,034,326
Total investments in real estate properties										87,021,585		81,623,396
Less accumulated depreciation										10,439,374		9,036,085
Net investments in real estate properties									$	76,582,211	$	72,587,311

(1)

At September 30, 2023 and December 31, 2022, our land was comprised of 8,094 and 7,188 acres, respectively.

(2)

Included in other real estate investments were: (i) land parcels we own and lease to third parties; (ii) non-strategic real estate assets, primarily acquired from the Duke Transaction, that we do not intend to operate long term; (iii) non-industrial real estate assets that we intend to redevelop into industrial properties; and (iv) costs associated with potential acquisitions and future development projects, including purchase options on land.

Index

Acquisitions

The following table summarizes our real estate acquisition activity (dollars and square feet in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023 (1)		2022
Number of operating properties		-		9		76		22
Square feet		-		1,952		14,941		3,746
Acres of land		890		590		1,128		1,796
Acquisition cost of net investments in real estate, excluding other real estate investments	$	116,112	$	314,736	$	3,626,672	$	1,562,962

Acquisition cost of other real estate investments	$	37,343	$	33,627	$	77,624	$	636,841

(1)

On June 29, 2023, we acquired a real estate portfolio comprised of 70 operating properties in the U.S., aggregating 13.8 million square feet, for cash consideration of $3.1 billion.

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 September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Dispositions of development properties and land, net (1)
Number of properties		2		7		7		18
Square feet		1,530		1,203		3,652		4,966
Net proceeds	$	272,250	$	168,601	$	738,207	$	846,350
Gains on dispositions of development properties and land, net	$	89,030	$	74,678	$	273,907	$	390,686

Other dispositions of investments in real estate, net (2)
Number of properties		19		-		24		102
Square feet		2,415		-		2,775		8,676
Net proceeds	$	263,567	$	-	$	635,140	$	1,264,280
Gains on other dispositions of investments in real estate, net	$	129,584	$	1,019	$	158,392	$	585,854

(1)

The gains we recognize in Gains on Dispositions of Development Properties and Land, Net in the Consolidated Statements of Income are principally driven by the contribution of newly developed properties to our unconsolidated co-investment ventures and occasionally sales to a third party.

(2)

During the nine months ended September 30, 2023, we sold our ownership interest in an unconsolidated office joint venture.

Leases

We recognized lease right-of-use assets of $677.0 million and $735.4 million within Other Assets and lease liabilities of $587.0 million and $638.8 million within Other Liabilities, for land and office space leases in which we are the lessee, in the Consolidated Balance Sheets at September 30, 2023 and December 31, 2022, respectively.

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.

Index

The following table summarizes our investments in and advances to unconsolidated entities (in thousands):


	September 30,		December 31,
	2023		2022
Unconsolidated co-investment ventures	$	7,953,412	$	8,073,927
Other ventures (1)		1,138,412		1,624,971
Total	$	9,091,824	$	9,698,898

(1)

Included in other ventures is our $193.2 million and $162.6 million investment in early and growth-stage companies that are focused on emerging technologies in the logistics sector at September 30, 2023 and December 31, 2022, respectively.

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 September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Recurring fees	$	113,947	$	115,902	$	340,842	$	344,945
Transactional fees		15,757		19,805		44,359		54,553
Promote revenue (1)		3,993		456,038		673,665		475,552
Total strategic capital revenues from unconsolidated co-investment ventures (2)	$	133,697	$	591,745	$	1,058,866	$	875,050

(1)

Includes promote revenue earned from unconsolidated co-investment ventures in the U.S. and Mexico in June 2023 and in Europe in September 2022.

(2)

These amounts exclude strategic capital revenues from other ventures.

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 (2)						Total
At:	Sep 30, 2023			Dec 31, 2022			Sep 30, 2023			Dec 31, 2022			Sep 30, 2023			Dec 31, 2022			Sep 30, 2023			Dec 31, 2022			Sep 30, 2023			Dec 31, 2022
Key property information:
Ventures		1			1			2			2			2			2			4			3			9			8
Operating properties		741			739			266			260			995			989			226			217			2,228			2,205
Square feet		124			123			61			60			220			219			94			89			499			491

Financial position:
Total assets ($)		11,747			12,617			4,056			3,744			22,222			22,502			9,807			9,964			47,832			48,827
Third-party debt ($)		4,039			3,468			916			919			5,462			5,315			3,913			3,811			14,330			13,513
Total liabilities ($)		4,738			4,143			1,025			1,011			7,428			7,292			4,330			4,279			17,521			16,725

Our investment balance ($) (3)		2,294			2,398			1,142			1,070			3,736			3,786			781			820			7,953			8,074
Our weighted average ownership (4)		27.3	%		26.2	%		38.7	%		41.0	%		31.3	%		31.0	%		15.2	%		15.2	%		27.7	%		27.4	%

	U.S.						Other Americas (1)						Europe						Asia						Total
Operating Information:	Sep 30, 2023			Sep 30, 2022			Sep 30, 2023			Sep 30, 2022			Sep 30, 2023			Sep 30, 2022			Sep 30, 2023			Sep 30, 2022			Sep 30, 2023			Sep 30, 2022
For the three months ended:
Total revenues ($)		330			297			109			97			429			342			164			152			1,032			888
Net earnings ($)		86			73			52			35			66			113			28			34			232			255

Our earnings from unconsolidated co-investment ventures, net ($)		24			20			18			12			23			41			5			5			70			78

For the nine months ended:
Total revenues ($)		983			874			314			282			1,255			1,052			491			478			3,043			2,686
Net earnings ($)		262			213			142			99			226			344			56			100			686			756

Our earnings from unconsolidated co-investment ventures, net ($)		71			58			49			34			74			111			10			16			204			219

(1)

Prologis Brazil Logistics Venture (“PBLV”) and our other Brazilian joint ventures are combined as one venture for the purpose of this table.

(2)

In April 2023, we formed Prologis Japan Core Logistics Fund ("PJLF") with two investors through the initial contribution of assets for which we received cash and equity ownership. We made additional contributions to PJLF in the third quarter of 2023. We account for our investment in PJLF under the equity method of accounting. At September 30, 2023, our ownership interest was 16.3%.

Index

(3)

Prologis’ investment balance is presented at our adjusted basis. The difference between our ownership interest of a venture’s equity and our investment balance at September 30, 2023 and December 31, 2022, results principally from four types of transactions: (i) deferred gains from the contribution of property to a venture prior to January 1, 2018; (ii) recording additional costs associated with our investment in the venture; (iii) receivables, principally for fees and promotes ($255.3 million and $193.7 million, respectively); and (iv) customer security deposits retained subsequent to property contributions to Nippon Prologis REIT, Inc.

(4)

Represents our weighted average ownership interest in all unconsolidated co-investment ventures based on each entity’s contribution of total assets before depreciation, net of other liabilities.

Equity Commitments Related to Certain Unconsolidated Co-Investment Ventures

At September 30, 2023, our outstanding equity commitments were $893.6 million, principally for Prologis China Logistics Venture, Prologis European Logistics Fund and USLF. The equity commitments expire from 2023 to 2033 if they have not been previously called. Typically, equity commitments are used for future development and acquisitions in the unconsolidated co-investment ventures.

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 September 30, 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 in the Consolidated Balance Sheets 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):


	September 30,		December 31,
	2023		2022
Number of operating properties		20		21
Square feet		6,883		4,061
Total assets held for sale or contribution	$	797,758	$	531,257
Total liabilities associated with assets held for sale or contribution – included in Other Liabilities	$	38,386	$	4,536

NOTE 6. DEBT

All debt is incurred by the OP or its consolidated subsidiaries. The following table summarizes our debt (dollars in thousands):


	September 30, 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	4.6%		3.6	$	212,748	4.2%	2.8	$	1,538,461
Senior notes	2.9%		10.4		24,741,952	2.3%	10.3		19,786,253
Term loans and unsecured other	2.8%		3.9		2,253,857	2.3%	4.9		2,106,592
Secured mortgage	3.8%		3.8		369,640	3.0%	4.3		444,655
Total	2.9%		9.8	$	27,578,197	2.5%	9.2	$	23,875,961

(1)

The weighted average interest rates represent the effective interest rates (including amortization of debt issuance costs and noncash premiums or discounts) at the end of the period for the debt outstanding and include the impact of designated interest rate swaps, which effectively fix the interest rate on certain variable rate debt.

(2)

The weighted average years represents the remaining maturity in years on the debt outstanding at period end.

Index

(3)

We borrow in the functional currencies of the countries where we invest. Included in the outstanding balances were borrowings denominated in the following currencies:


	September 30, 2023								December 31, 2022
	Weighted Average Interest Rate			Amount Outstanding		% of Total			Weighted Average Interest Rate			Amount Outstanding		% of Total
British pound sterling		2.2	%	$	1,274,242		4.6	%		2.1	%	$	1,228,483		5.1	%
Canadian dollar		5.0	%		819,390		3.0	%		4.5	%		814,491		3.4	%
Chinese renminbi		3.7	%		238,553		0.9	%		-			-		-
Euro		2.0	%		9,736,225		35.3	%		1.3	%		7,991,301		33.5	%
Japanese yen		1.0	%		2,925,039		10.6	%		1.0	%		3,308,009		13.9	%
U.S. dollar		3.9	%		12,584,748		45.6	%		3.6	%		10,533,677		44.1	%
Total		2.9	%	$	27,578,197		100.0	%		2.5	%	$	23,875,961		100.0	%

Credit Facilities

The following table summarizes information about our available liquidity at September 30, 2023 (in millions):



Aggregate lender commitments
Credit facilities	$	6,370
Less:
Borrowings outstanding		213
Outstanding letters of credit		37
Current availability		6,120
Cash and cash equivalents		741
Total liquidity	$	6,861

We have a global senior credit facility (the “2022 Global Facility”) with a borrowing capacity of $3.0 billion (subject to currency fluctuations). On April 5, 2023, we amended and restated our other global senior credit facility (the “2021 Global Facility”) as the 2023 Global Facility and upsized its borrowing capacity to $3.0 billion (subject to currency fluctuations). 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. The 2022 Global Facility is scheduled to initially mature in June 2026 and the 2023 Global Facility in June 2027; however, we can extend the maturity date for each facility by six months on two occasions, subject to the payment of extension fees. We also have the ability to increase each credit facility to $4.0 billion, subject to currency fluctuations and obtaining additional lender commitments.

We also have a Japanese yen revolver (the "Yen Credit Facility"). On August 25, 2023, we amended and restated the Yen Credit Facility, upsizing its borrowing capacity by ¥3.5 billion for total commitments of ¥58.5 billion ($392.0 million at September 30, 2023). We have the ability to increase the borrowing capacity of the Yen Credit Facility to ¥75.0 billion ($502.6 million at September 30, 2023), subject to obtaining additional lender commitments. The Yen Credit Facility is initially scheduled to mature in August 2027; however, we may extend the maturity date for one year, subject to the payment of extension fees.

We refer to the 2022 Global Facility, the 2023 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.

Senior Notes

The following table summarizes the issuances of senior notes during the nine months ended September 30, 2023 (principal in thousands):


	Aggregate Principal				Issuance Date Weighted Average
Issuance Date	Borrowing Currency		USD (1)		Interest Rate	Years	Maturity Dates
January	€	1,250,000	$	1,354,125	4.1%	13.8	January 2030 – 2043
March	$	1,200,000	$	1,200,000	4.9%	17.7	June 2033 – 2053
May	€	750,000	$	808,425	4.6%	10.0	May 2033
June	$	2,000,000	$	2,000,000	5.1%	13.2	June 2028 – 2053
Total			$	5,362,550	4.7%	13.9

(1)

The exchange rate used to calculate into U.S. dollars was the spot rate at the settlement date.

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Term Loans

In the third quarter of 2023, we entered into Chinese renminbi term loans totaling ¥1.7 billion ($239.4 million) with an issuance date weighted average interest rate of 3.5% maturing between September 2024 to 2026.

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 September 30, 2023 (in thousands):


	Unsecured
	Credit		Senior			Term Loans			Secured
Maturity	Facilities		Notes			and Other			Mortgage			Total
2023 (1)	$	-	$	-		$	-		$	1,684		$	1,684
2024 (1)(2)		-		317,820			100,281			96,121			514,222
2025 (3)		-		33,504			724,404			167,520			925,428
2026 (4)		31,782		1,294,868			708,905			3,980			2,039,535
2027 (5)		180,966		1,707,417			47,916			4,156			1,940,455
Thereafter		-		21,979,912			676,428			89,135			22,745,475
Subtotal		212,748		25,333,521			2,257,934			362,596			28,166,799
Unamortized premiums (discounts), net		-		(477,240	)		710			8,136			(468,394	)
Unamortized debt issuance costs, net		-		(114,329	)		(4,787	)		(1,092	)		(120,208	)
Total	$	212,748	$	24,741,952		$	2,253,857		$	369,640		$	27,578,197

(1)

We expect to repay the amounts maturing in the next twelve months with cash generated from operations, proceeds from dispositions of real estate properties, or as necessary, with additional borrowings.

(2)

Included in the 2024 maturities was a Chinese term loan ($100.3 million at September 30, 2023) that can be extended until 2026, subject to the prevailing interest rate at the time of extension.

(3)

Included in the 2025 maturities was a Canadian term loan ($223.4 million at September 30, 2023) that can be extended until 2027.

(4)

Included in the 2026 maturities was the 2022 Global Facility ($31.8 million at September 30, 2023) that can be extended until 2027.

(5)

Included in the 2027 maturities was the 2023 Global Facility ($181.0 million at September 30, 2023) that can be extended until 2028.

Financial Debt Covenants

Our senior notes, term loans and Credit Facilities outstanding at September 30, 2023 were subject to certain financial covenants under their related documents. At September 30, 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 100% indirectly owned by the OP and all unsecured debt issued or to be issued by each entity is or will be fully and unconditionally guaranteed by the OP. There are no restrictions or limits on the OP’s ability to obtain funds from its subsidiaries by dividend or loan. In reliance on Rule 13-01 of Regulation S-X, the separate financial statements of Prologis Euro Finance LLC, Prologis Yen Finance LLC and Prologis Sterling Finance LLC are not provided.

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

Index

stock, generally at a rate of one share of common stock to one limited partnership unit. We also consolidate certain entities in which we do not own 100% of the equity but the equity of these entities is not exchangeable into our common stock.

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
	Sep 30, 2023			Dec 31, 2022			Sep 30, 2023		Dec 31, 2022		Sep 30, 2023		Dec 31, 2022		Sep 30, 2023		Dec 31, 2022
Prologis U.S. Logistics Venture		55.0	%		55.0	%	$	3,152,160	$	3,182,858	$	7,161,018	$	7,225,438	$	165,959	$	158,453
Other consolidated entities (1)		-		various				146,136		134,909		1,060,117		1,737,311		142,533		259,524
Prologis, L.P.								3,298,296		3,317,767		8,221,135		8,962,749		308,492		417,977
Limited partners in Prologis, L.P. (2)(3)								1,326,735		1,308,044		-		-		-		-
Prologis, Inc.							$	4,625,031	$	4,625,811	$	8,221,135	$	8,962,749	$	308,492	$	417,977

(1)

Includes two partnerships that have issued limited partnership units to third parties, as discussed above, along with various other consolidated entities. The limited partnership units outstanding at September 30, 2023 and December 31, 2022 were exchangeable into cash or, at our option, 0.3 million shares of the Parent’s common stock.

(2)

We had 8.6 million Class A Units that were convertible into 8.1 million and 8.0 million limited partnership units of the OP at September 30, 2023 and December 31, 2022, respectively.

(3)

There were limited partnership units in the OP, excluding the Class A Units, that were exchangeable into cash or, at our option, 9.2 million and 10.0 million shares of the Parent’s common stock, at September 30, 2023 and December 31, 2022, respectively. Also included are the vested OP Long-Term Incentive Plan Units (“LTIP Units”) associated with our long-term compensation plans of 5.5 million and 4.6 million shares of the Parent’s common stock at September 30, 2023 and December 31, 2022, respectively. See further discussion of LTIP Units in Note 8.

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 three-year performance periods beginning every January 1. The fair value of the awards is measured at the grant date and amortized over the period from the grant date to the date at which the awards vest, which ranges from three to ten years. The performance hurdle (“Outperformance Hurdle”) at the end of the initial three-year performance period requires our three-year compound annualized total stockholder return (“TSR”) to exceed a threshold set at the three-year compound annualized TSR for the Morgan Stanley Capital International (“MSCI”) US REIT Index for the same period plus 100 basis points. If the Outperformance Hurdle is met, a compensation pool will be formed equal to 3% of the excess value created, subject to a maximum as defined by each performance period. POP awards cannot be paid at a time when we meet the outperformance hurdle yet our absolute TSR is negative. If after seven years our absolute TSR has not been positive, the awards will be forfeited.

We granted participation points for the 2023 – 2025 performance period in January 2023, with a fair value of $28.3 million using a Monte Carlo valuation model that assumed a risk-free interest rate of 4.2% and an expected volatility of 35.0% for Prologis and 31.0% for the MSCI US REIT Index. The 2023 – 2025 performance period has an absolute maximum cap of $100.0 million. If an award is earned at the end of the initial three-year performance period, then 20% of the POP award is paid at the end of the initial performance period and the remaining 80% is subject to additional seven-year cliff vesting. The 20% that is paid at the end of the initial three-year performance period is subject to an additional three-year holding requirement. Awards are in the form of common stock, restricted stock units, POP LTIP Units and LTIP Units.

The Outperformance Hurdle was met for the 2020 – 2022 performance period, which resulted in awards of $100.0 million being earned at December 31, 2022 and awarded in January 2023. Additionally, awards of $22.4 million were earned at December 31, 2022 and awarded in January 2023 for prior performance periods related to the compensation pool in excess of the initial award based on the terms of the POP awards granted prior to 2018. The tables below include POP awards that were earned but are unvested, while any vested awards are reflected within the Consolidated Statements of Equity and Capital. The initial grant date fair value derived using a Monte Carlo valuation model was used in determining the grant date fair value per unit in the tables below.

Index

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 nine months ended September 30, 2023 (units in thousands):


				Weighted Average
	Unvested RSUs			Grant Date Fair Value
Balance at January 1, 2023		1,533		$	100.59
Granted		1,136			104.78
Vested and distributed		(429	)		117.29
Forfeited		(40	)		113.01
Balance at September 30, 2023		2,200		$	99.27

LTIP Units

The following table summarizes the activity for LTIP Units for the nine months ended September 30, 2023 (units in thousands):


	Unvested			Weighted Average
	LTIP Units			Grant Date Fair Value
Balance at January 1, 2023		4,214		$	73.31
Granted		2,567			100.16
Vested LTIP Units		(1,019	)		108.99
Forfeited		(2	)		142.72
Balance at September 30, 2023		5,760		$	78.94

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				Nine Months Ended
	September 30,				September 30,
Prologis, Inc.	2023		2022		2023		2022
Net earnings attributable to common stockholders – Basic	$	746,174	$	1,013,933	$	2,423,897	$	2,773,042
Net earnings attributable to exchangeable limited partnership units (1)		19,054		28,792		61,497		78,648
Adjusted net earnings attributable to common stockholders – Diluted	$	765,228	$	1,042,725	$	2,485,394	$	2,851,690

Weighted average common shares outstanding – Basic		924,395		740,719		924,228		740,585
Incremental weighted average effect on exchange of limited partnership units (1)		23,627		21,230		23,615		21,246
Incremental weighted average effect of equity awards		3,886		4,423		3,800		4,188
Weighted average common shares outstanding – Diluted (2)		951,908		766,372		951,643		766,019

Net earnings per share attributable to common stockholders:
Basic	$	0.81	$	1.37	$	2.62	$	3.74
Diluted	$	0.80	$	1.36	$	2.61	$	3.72

Index


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
Prologis, L.P.	2023			2022			2023			2022
Net earnings attributable to common unitholders	$	765,075		$	1,042,664		$	2,485,047		$	2,851,475
Net earnings attributable to Class A Units		(6,557	)		(10,995	)		(21,231	)		(30,018	)
Net earnings attributable to common unitholders – Basic		758,518			1,031,669			2,463,816			2,821,457
Net earnings attributable to Class A Units		6,557			10,995			21,231			30,018
Net earnings attributable to exchangeable other limited partnership units		153			61			347			215
Adjusted net earnings attributable to common unitholders – Diluted	$	765,228		$	1,042,725		$	2,485,394		$	2,851,690

Weighted average common partnership units outstanding – Basic		939,602			753,616			939,448			753,515
Incremental weighted average effect on exchange of Class A Units		8,121			8,034			8,096			8,017
Incremental weighted average effect on exchange of other limited partnership units		299			299			299			299
Incremental weighted average effect of equity awards of Prologis, Inc.		3,886			4,423			3,800			4,188
Weighted average common units outstanding – Diluted (2)		951,908			766,372			951,643			766,019

Net earnings per unit attributable to common unitholders:
Basic	$	0.81		$	1.37		$	2.62		$	3.74
Diluted	$	0.80		$	1.36		$	2.61		$	3.72

(1)

Earnings allocated to the exchangeable OP units not held by the Parent have been included in the numerator and exchangeable common units have been included in the denominator for the purpose of computing diluted earnings per share for all periods as the per share and unit amount is the same.

(2)

Our total weighted average potentially dilutive shares and units outstanding consisted of the following:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Class A Units		8,121		8,034		8,096		8,017
Other limited partnership units		299		299		299		299
Equity awards		7,252		6,557		7,347		6,309
Prologis, L.P.		15,672		14,890		15,742		14,625
Common limited partnership units		15,207		12,897		15,220		12,930
Prologis, Inc.		30,879		27,787		30,962		27,555

Index

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 and 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 in the Consolidated Balance Sheets (in thousands):


	September 30, 2023				December 31, 2022
	Asset		Liability		Asset		Liability
Undesignated derivatives
Foreign currency contracts
Forwards
Brazilian real	$	-	$	569	$	35	$	494
British pound sterling		19,973		638		29,187		648
Canadian dollar		9,210		-		12,074		2
Chinese renminbi		2,318		2		657		364
Euro		34,156		1,877		51,317		2,801
Japanese yen		57,758		-		34,022		2,344
Mexican peso		-		444		-		-
Swedish krona		6,659		1		6,292		-
Options
Mexican peso		1,629		1,738		-		-

Designated derivatives
Foreign currency contracts
Net investment hedges
British pound sterling		10,254		-		23,534		-
Canadian dollar		12,915		-		24,552		-

Interest rate swaps
Cash flow hedges
Euro		3,790		-		44,982		-
U.S. dollar		-		-		584		29
Total fair value of derivatives	$	158,662	$	5,269	$	227,236	$	6,682

Undesignated Derivative Financial Instruments

Foreign Currency Contracts

The following table summarizes the activity of our undesignated foreign currency contracts for the nine months ended September 30 (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			Other			Total
Notional amounts at January 1 ($)		283			601			349			331			81		1,645			175			749			383			250			105			1,662
New contracts ($)		6			110			124			116			34		390			124			603			251			175			81			1,234
Matured, expired or settled contracts ($)		(73	)		(218	)		(73	)		(66	)		68		(362	)		(49	)		(753	)		(274	)		(78	)		(105	)		(1,259	)
Notional amounts at September 30 ($)		216			493			400			381			183		1,673			250			599			360			347			81			1,637

Weighted average forward rate at September 30		1.29			1.17			1.28			113.85								1.28			1.20			1.32			108.59
Active contracts at September 30		77			69			92			96								96			89			89			99

Index

The following table summarizes the undesignated derivative financial instruments exercised and outstanding recognized in realized and unrealized gains, 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 September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Exercised contracts		42		55		163		124
Realized gains on the matured, expired or settled contracts	$	11	$	94	$	42	$	124
Unrealized gains on the change in fair value of outstanding contracts	$	29	$	48	$	9	$	151

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”) in the Consolidated Balance Sheets and reflected within the Other Comprehensive Income table below.

Foreign Currency Contracts

The following table summarizes the activity of our foreign currency contracts designated as net investment hedges for the nine months ended September 30 (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 ($)		534			-			440			974			-			535			432			967
New contracts ($)		350			100			218			668			44			599			317			960
Matured, expired or settled contracts ($)		(363	)		(100	)		(228	)		(691	)		(44	)		(535	)		(300	)		(879	)
Notional amounts at September 30 ($)		521			-			430			951			-			599			449			1,048

Weighted average forward rate at September 30		1.32			-			1.25						-			1.29			1.31
Active contracts at September 30		6			-			4						-			7			4

Interest Rate Swaps

The following table summarizes the activity of our interest rate swaps designated as cash flow hedges for the nine months ended September 30 (in millions):


	2023						2022
	EUR		USD		Total		EUR		USD		Total
Notional amounts at January 1 ($)		447		150		597		165		-		165
New contracts ($)		691		1,750