Earnings Release and Supplemental Information
Unaudited
Fourth Quarter 2011
Table of Contents
El Salto Distribution Center – Guadalajara, Mexico
Northampton Pineham Distribution Center 1 – Midlands, UK
Prologis Park Osaka 2 – Osaka, Japan
Fourth Quarter 2011 Report
Overview
Press Release 1
Highlights
Company Profile 4
Financial Statements
Consolidated Balance Sheets 6
Consolidated Statements of Operations 7
Consolidated Statements of Funds from Operations (FFO) 8
Reconciliation of Net Earnings (Loss) to FFO 9
EBITDA Reconciliation 10
Operations Overview
Operating Portfolio 11
Operating Metrics 14
Customer Information 15
Capital Deployment
Building Dispositions and Contributions 16
Building Acquisitions 17
Development Starts 18
Development Portfolio 20
Land Portfolio 21
Private Capital
Detail Fund Information 23
Fund Operating and Balance Sheet Information 24
Capitalization
Debt and Equity Summary 25
Debt Covenants and Other Metrics 26
Assets Under Management 27
Net Asset Value
Components 28
Notes and Definitions 30
Copyright © 2012 Prologis
Prologis, Inc. Announces Fourth Quarter 2011 Earnings Results
- Core FFO Exceeds Previous Guidance -
- Strong Leasing Activity Across Regions- - Strategic Priorities Ahead of Plan - - Company Provides 2012 Guidance -
SAN FRANCISCO, February [8], 2012 – Prologis, Inc. (NYSE: PLD), the leading global owner, operator and developer of industrial real estate, today reported results for the fourth quarter 2011.
Core funds from operations (Core FFO) per fully diluted share was $0.44 for the fourth quarter 2011 and $0.88 for the second half 2011 compared to $0.41 and $0.74 respectively for the same periods in 2010. Funds from operations (FFO) as defined by Prologis per fully diluted share was $0.29 for the fourth quarter 2011 and $0.74 for the second half 2011 compared to $(4.81) and $(4.33) respectively for the same periods in 2010. The differential between Core FFO and FFO in the fourth quarter 2011 primarily relates to impairment charges and merger costs.
Net income/(loss) per share was $(0.10) for the fourth quarter 2011 and $0.02 for the second half 2011 compared to net losses of $(4.86) and $(4.93) respectively for the same periods in 2010.
On June 3, 2011, AMB Property Corporation and ProLogis completed their merger and became Prologis, Inc. Under the structure of the merger, AMB Property Corporation was the legal acquirer and ProLogis was the accounting acquirer. Financial results for the fourth quarter and second half 2011 represent the performance of the combined company, whereas financial results for the fourth quarter and second half 2010 reflect stand-alone legacy ProLogis and therefore are not directly comparable.
Full year 2011 results include combined company results for the second half of the year and stand-alone legacy ProLogis prior to the merger, including prior year. Core FFO per fully diluted share was $1.58 for the full year 2011 compared to $1.27 for the same period in 2010. FFO as defined by Prologis per fully diluted share was $1.10 for the full year 2011 compared with $(4.44) for the same period in 2010. Net loss per share was ($0.51) for the full year 2011 compared to a net loss of $(5.90) for the same period in 2010.
“We achieved financial and operating results that were ahead of plan and we made excellent progress on our strategic priorities in the fourth quarter,” said Hamid R. Moghadam, chairman and co-chief executive officer, Prologis. “As a result, we have improved our financial position by reducing our share of outstanding debt by more than $900 million. On the operating front, we increased our occupancy
to 92.2 percent, a 120 basis point increase over the third quarter. Our accomplishments demonstrate how quickly and seamlessly our dedicated teams around the world have come together.”
Operating Portfolio Metrics
Same-store net operating income (NOI) increased over the prior year by 0.4 percent in the fourth quarter, compared to a decrease of (0.7) percent in the third quarter of 2011. Rental rates on leases signed in the fourth quarter same-store pool decreased (4.5) percent, a solid improvement relative to rental rates on leases signed in the third quarter 2011, which decreased by (8.6) percent.
During the fourth quarter, the company leased a total of 37.6 million square feet
(3.5 million square meters) in its combined operating and development portfolios.
The company also achieved an 81.1 percent tenant retention rate for the quarter, signing 22.5 million square feet (2.1 million square meters) of renewals.
“Our strong operating performance for the quarter was driven principally by higher than expected occupancy in the operating portfolio, increased fees from the Private Capital group and reduced G&A expenses,” said Walter C. Rakowich, co-chief executive officer, Prologis. “Our teams around the world delivered outstanding results in the fourth quarter, especially in Europe, where occupancy increased 160 basis points over the third quarter.”
Contributions & Dispositions
The company closed 38 contribution and disposition transactions during the fourth quarter 2011 with a stabilized capitalization rate of 7.1 percent. The transactions totaled approximately $1.25 billion, of which approximately $1.0 billion was Prologis’ share of the proceeds, comprising:
$907 million in building contributions and sales to five of its co-investment vehicles, of which $750 million was the company’s share; and
$347 million of third-party building and land dispositions, of which $297 million was the company’s share. Dispositions comprised $281 million from
1 Copyright © 2012 Prologis
the company’s wholly-owned portfolio and $66 million from its co- investment ventures.
Acquisitions & Development Starts
Capital deployed or committed during the fourth quarter 2011 totaled approximately $345 million, of which $210 million was Prologis’ share, including:
$178 million in acquisitions of 11 industrial properties, with a stabilized capitalization rate of 7.0 percent, and 10 acres of land. Of the total acquisitions, $106 million was Prologis’ share; and
$166 million in development starts totaling 2.2 million square feet (206,500 square meters) in 9 projects, which monetized $41 million of land. Prologis’ share of the total expected investment is $105 million.
At quarter end, Prologis’ global development portfolio totaled 10.8 million square feet (1.0 million square meters), with an estimated total investment of $1.1 billion, of which $912 million was Prologis’ share.
Private Capital Activity
In 2011, Prologis raised or received new, third-party equity commitments of approximately $1.8 billion.
Consistent with the company’s priorities to streamline its private capital business, it has implemented a plan to rationalize its co-investment ventures into a smaller number of differentiated investment vehicles.
As previously announced, the company sold its 20 percent interest in its Prologis Korea Fund and liquidated the first phase of its Prologis North America Properties Fund I during the second half of 2011.
Subsequent to year end, the company purchased its partner’s 63 percent interest in Prologis North America Fund II and brought the portfolio entirely onto its balance sheet.
Financing Activity
During the fourth quarter, Prologis completed approximately $[2.2] billion of capital markets activities, including debt repayments, repurchases, extensions, refinancings and new financings, of which $[1.5] billion was Prologis’ share.
As a result and in combination with the significant disposition and contribution activity, the company:
Reduced $907 million of the company’s share of debt;
Lowered its share of 2012 debt maturities by $399 million; and
Improved its key debt metrics in line with its previously stated strategic priorities.
“We exceeded our balance sheet management and delevering objectives for 2011 and remain committed to building one of the top balance sheets in the industry,” said William Sullivan, chief financial officer, Prologis. “Carrying this momentum into 2012, our main area of focus is on further improving our financial position and mitigating our exposure to foreign currency.”
Guidance for 2012
Prologis established a full-year 2012 Core FFO guidance range of $1.60 to $1.70 per diluted share. The company also expects to recognize a net loss, on a relative basis, of $(0.35) to $(0.45) per share for 2012. The company’s 2012 guidance assumes an average euro exchange rate of $1.30 and an average yen exchange rate of ¥80 per U.S. dollar.
The Core FFO and earnings guidance reflected above excludes any potential gains (losses) recognized from property dispositions, due to the variability of timing, composition of properties and estimate of proceeds. In reconciling from net earnings to Core FFO, Prologis makes certain adjustments including but not limited to impairment charges, real estate depreciation and amortization expense, deferred taxes, unrealized gains or losses on foreign currency or derivative activity, as well as transaction and merger costs.
The primary drivers supporting the Prologis’ 2012 guidance include the following:
Year end occupancy in its operating portfolio between [92.5] and [93.0] percent (consistent with historical seasonal trends, the company expects occupancy to decrease in the first quarter and trend higher through the remainder of the year);
Same-store NOI growth of [0.0] to [1.0] percent, excluding the impact of foreign exchange movements;
2 Copyright © 2012 Prologis
Development starts of $[1.1] to $[1.4] billion, monetizing $[250] to $[300] million of land;
Acquisitions of buildings of $[400] to $[600] million, of which approximately 40 percent is expected to be the company’s share; and
Building and land dispositions and contributions of $[4.8] to $[5.3] billion, of which approximately 70 percent is expected to be the company’s share. A substantial portion of the disposition and contribution guidance relates to the formation of the Prologis Targeted Japan Logistics Fund and subsequent contribution of assets from its balance sheet.
Webcast and Conference Call Information
The company will host a webcast /conference call to discuss quarterly results, current market conditions and future outlook today, February 8, 2012, at 12:00 p.m. Eastern Time. Interested parties are encouraged to access the live webcast by clicking the microphone icon located near the top of the opening page at: http://ir.prologis.com. Interested parties also can participate via conference call by dialing (877) 256-7020 from the U.S. and Canada or (+1 973-409-9692) internationally with reservation code 40596350.
A telephonic replay will be available from February 8, 2012, through March 8, 2012, at 855-859-2056 (from the U.S. and Canada) or +1 404-537-3406 (from all other countries), with the reservation code 40596350. The webcast and podcast replay will be posted when available in the “Financial Information” section of the Prologis Investor Relations website.
About Prologis
Prologis, Inc. is the leading owner, operator and developer of industrial real estate, focused on global and regional markets across the Americas, Europe and Asia. As of December 31, 2011, Prologis owned or had investments in, on a consolidated basis or through unconsolidated joint ventures, properties and development projects expected to total approximately 600 million square feet (55.7 million square meters) in 22 countries. The company leases modern distribution facilities to more than 4,500 customers, including manufacturers, retailers, transportation companies, third-party logistics providers and other enterprises.
The statements in this release that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on current expectations, estimates and projections about the industry and markets in which Prologis operates, management’s beliefs and assumptions made by management. Such statements involve uncertainties that could significantly impact Prologis’ financial results. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words and similar expressions are intended to identify such forward-looking statements, which generally are not historical in nature. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future — including statements relating to rent and occupancy growth, development activity and changes in sales or contribution volume of developed properties, disposition activity, general conditions in the geographic areas where we operate, synergies to be realized from our recent merger transaction, our debt and financial position, our ability to form new property funds and the availability of capital in existing or new property funds — are forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be attained and therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. Some of the factors that may affect outcomes and results include, but are not limited to: (i) national, international, regional and local economic climates, (ii) changes in financial markets, interest rates and foreign currency exchange rates, (iii) increased or unanticipated competition for our properties, (iv) risks associated with acquisitions, dispositions and development of properties, (v) maintenance of real estate investment trust (“REIT”) status and tax structuring, (vi) availability of financing and capital, the levels of debt that we maintain and our credit ratings, (vii) risks related to our investments in our co-investment ventures and funds, including our ability to establish new co-investment ventures and funds, (viii) risks of doing business internationally, including currency risks, (ix) environmental uncertainties, including risks of natural disasters, and (x) those additional factors discussed in reports filed with the Securities and Exchange Commission by Prologis under the heading “Risk Factors.” Prologis undertakes no duty to update any forward-looking statements appearing in this release.
Prologis Contacts
Tracy A. Ward
SVP, IR & Corporate Communications
Direct: +1 415 733 9565
Email: tward@prologis.com
James Larkin
VP, Corporate Communications
Direct: +1 415 733 9411
Email: jlarkin@prologis.com
3 Copyright © 2012 Prologis
Highlights
Company Profile
Fourth Quarter 2011 Report
Prologis, Inc. is the leading owner, operator and developer of industrial real estate, focused on global and regional markets across the Americas, Europe and Asia. As of December 31, 2011, Prologis owned or had investments in, on a consolidated basis or through unconsolidated joint ventures, properties and development projects totaling approximately 600 million square feet (55.7 million square meters) in 22 countries. The company leases modern distribution facilities to more than 4,500 customers, including manufacturers, retailers, transportation companies, third-party logistics providers and other enterprises.
AMERICAS (4 countries) EUROPE (14 countries) ASIA (4 countries) TOTAL
Number of operating portfolio buildings 2,515 617 68 3,200
Operating Portfolio (msf) 392 143 24 559
Development Portfolio (msf) 4 3 6 13
Other (msf) (A) 23 1 1 25
Total (msf) 419 147 31 597
Development portfolio TEI (millions) $357 $208 $849 $ 1,414
Land (acres) 7,179 3,652 158 10,989
Land gross book value (millions) (B) $1,054 $737 $249 $ 2,040
(A) Generally represents properties managed by Prologis on behalf of other third parties (10 msf), properties in which Prologis has an ownership interest but doesn’t manage (10 msf) and other properties owned by Prologis (5 msf).
(B) Original cost basis for the total land portfolio is $3.1 billion.
4 Copyright © 2012 Prologis
Highlights
Company Profile
Fourth Quarter 2011 Report
Three Months Ended December 31, Twelve Months Ended December 31,
(dollars in thousands) 2011 (A) 2010 (A) 2011 (A) 2010 (A)
Revenues $ 484,132 $ 236,223 $ 1,533,291 $ 884,587
Net loss attributable to common shares (45,459) (1,166,589) (188,110) (1,295,920)
FFO, as defined by Prologis 134,147 (1,154,157) 411,688 (974,197)
Core FFO 203,945 99,380 593,917 281,386
AFFO 145,593 75,857 423,821 206,669
Core EBITDA 397,629 247,801 1,548,470 870,847
Per common share—diluted:
Net earnings (loss) attributable to common shares $ (0.10) $ (4.86) $ (0.51) $ (5.90)
FFO, as defined by Prologis 0.29 (4.81) 1.10 (4.44)
Core FFO 0.44 0.41 1.58 1.27
Funds from Operations (in millions) (A) Period Ending Occupancy % (B)
100% $250
$200
95%
92.2%
90.7% 91.0% $150 90% 89.9% $100
85% $50
$- 80%
Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2011 Q2 2011 Q3 2011 Q4 2011
Core FFO FFO, as defined by Prologis
(A) AMB and Prologis completed the merger (the “Merger”) on June 3, 2011. The financial results presented throughout this supplemental include Prologis for the full period and AMB results from the date of the Merger going forward. Results for the twelve months ended December 31, 2011 include approximately seven months of the impact from both the Merger and PEPR acquisition. See the Notes and Definitions for more information.
(B) Includes legacy AMB and Prologis for all periods.
5 Copyright © 2012 Prologis
Financial Statements
Consolidated Balance Sheets
(in thousands)
Fourth Quarter 2011 Report
December 31, 2011 September 30, 2011 December 31, 2010 (A)
Assets:
Investments in real estate assets:
Operating portfolio $ 21,552,548 $ 22,474,206 $ 10,714,799
Development portfolio 860,531 676,019 365,362
Land 1,984,233 1,972,277 1,533,611
Other real estate investments 390,225 469,852 265,869
24,787,537 25,592,354 12,879,641
Less accumulated depreciation 2,157,907 1,908,152 1,595,678
Net investments in properties 22,629,630 23,684,202 11,283,963
Investments in and advances to unconsolidated investees 2,857,755 2,900,646 2,024,661
Notes receivable backed by real estate 322,834 354,254 302,144
Assets held for sale 444,850 89,519 574,791
Net investments in real estate 26,255,069 27,028,621 14,185,559
Cash and cash equivalents 176,072 216,749 37,634
Restricted cash 71,992 77,798 27,081
Accounts receivable 147,999 216,423 58,979
Other assets 1,072,780 1,046,713 593,414
Total assets $ 27,723,912 $ 28,586,304 $ 14,902,667
Liabilities and Equity:
Liabilities:
Debt $ 11,382,408 $ 12,147,277 $ 6,506,029
Accounts payable, accrued expenses, and other liabilities 1,886,030 1,837,061 876,283
Total liabilities 13,268,438 13,984,338 7,382,312
Equity:
Stockholders’ equity:
Preferred stock 582,200 582,200 350,000
Common stock 4,594 4,592 2,545
Additional paid-in capital 16,349,328 16,365,581 9,671,560
Accumulated other comprehensive loss(182,321)(102,546)(3,160)
Distributions in excess of net earnings(3,092,162)(2,916,997)(2,515,722)
Total stockholders’ equity 13,661,639 13,932,830 7,505,223
Noncontrolling interests 735,222 609,259 15,132
Noncontrolling interests—limited partnership unitholders 58,613 59,877 -
Total equity 14,455,474 14,601,966 7,520,355
Total liabilities and equity $ 27,723,912 $ 28,586,304 $ 14,902,667
(A) Represents legacy ProLogis only.
Copyright © 2012 Prologis
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Financial Statements
Consolidated Statements of Operations
(in thousands, except per share amounts) Fourth Quarter 2011 Report
Three Months Ended December 31, Twelve Months Ended
December 31,
2011 2010 (A) 2011 (A) 2010 (A)
Revenues:
Rental income $ 442,581 $ 192,551 $ 1,376,836 $ 744,540
Private capital revenue 40,230 34,645 137,619 122,526
Development management and other income 1,321 9,027 18,836 17,521
Total revenues 484,132 236,223 1,533,291 884,587
Expenses:
Rental expenses 118,300 53,130 384,652 215,208
Private capital expenses 15,734 10,580 54,962 40,659
General and administrative expenses 50,797 50,095 195,161 165,981
Merger, acquisition and other integration expenses 18,772 — 140,495 -
Impairment of real estate properties 21,237 733,316 21,237 736,612
Depreciation, amortization and other expenses 202,168 83,194 609,354 327,623
Total expenses 427,008 930,315 1,405,861 1,486,083
Operating income (loss) 57,124 (694,092) 127,430 (601,496)
Other income (expense):
Earnings from unconsolidated property funds, net 904 (2,757) 49,326 10,548
Earnings from other unconsolidated investees, net 3,016 5,933 10,609 13,130
Interest income 5,780 2,008 19,843 5,022
Interest expense (129,341) (112,034) (468,738) (461,166)
Impairment of other assets (22,609) (412,745) (126,432) (412,745)
Gains (losses) on acquisitions and dispositions of investments in real estate, net (2,966) (30,200) 111,684 28,488
Foreign currency and derivative gains (losses) and other income (expenses), net (3,584) (5,701) 33,337 (256)
Gain (loss) on early extinguishment of debt, net 556 (153,037) 258 (201,486)
Total other income (expense) (148,244) (708,533) (370,113) (1,018,465)
Loss before income taxes (91,120) (1,402,625) (242,683) (1,619,961)
Income tax expense (benefit)—current and deferred (8,184) (5,907) 1,776 (30,499)
Loss from continuing operations (82,936) (1,396,718) (244,459) (1,589,462)
Discontinued operations:
Income attributable to disposed properties and assets held for sale 5,852 18,434 27,907 84,435
Net gains on dispositions, net of related impairment charges and taxes 37,069 217,421 58,614 234,574
Total discontinued operations 42,921 235,855 86,521 319,009
Consolidated net loss (40,015) (1,160,863) (157,938) (1,270,453)
Net earnings attributable to noncontrolling interests 4,832 591 4,524 (43)
Net loss attributable to controlling interests (35,183) (1,160,272) (153,414) (1,270,496)
Less preferred stock dividends 10,276 6,317 34,696 25,424
Net loss attributable to common shares $ (45,459) $ (1,166,589) $ (188,110) $ (1,295,920)
Weighted average common shares outstanding—Diluted (B) 458,383 239,912 370,534 219,515
Net loss per share attributable to common shares—Diluted $ (0.10) $ (4.86) $ (0.51) $ (5.90)
(A) The financial results include Prologis for the full period and AMB and PEPR results from approximately June 1, 2011.
(B) See Calculation of Per Share Amounts in the Notes and Definitions.
7 Copyright © 2012 Prologis
Financial Statements
Consolidated Statements of Funds from Operations (FFO)
(in thousands, except per share amounts) Fourth Quarter 2011 Report
Three Months Ended December 31, Twelve Months Ended
December 31,
2011 2010 (A) 2011 (A) 2010 (A)
Revenues:
Rental income $ 456,462 $ 227,750 $ 1,436,419 $ 925,169
Private capital revenue 40,230 34,645 137,619 122,526
Development management and other income 1,321 9,027 18,836 17,521
Total revenues 498,013 271,422 1,592,874 1,065,216
Expenses:
Rental expenses 120,265 61,169 397,216 263,776
Private capital expenses 15,734 10,580 54,962 40,659
General and administrative expenses 50,797 50,095 195,161 165,981
Merger, acquisition and other integration expenses 18,772 — 140,495 -
Depreciation and amortization of non-real estate assets and other expenses 14,663 6,696 43,026 32,441
Total operating expenses 220,231 128,540 830,860 502,857
Operating FFO 277,782 142,882 762,014 562,359
Other income (expense):
FFO from unconsolidated property funds 42,328 23,910 189,591 139,927
FFO from other unconsolidated investees 5,164 7,987 17,052 20,121
Interest income 5,780 2,008 19,843 5,022
Interest expense (129,480) (112,034) (469,289) (461,166)
Impairment of real estate properties and other assets (38,546) (1,107,725) (145,028) (1,110,072)
Gains (losses) on acquisitions and dispositions of investments in real estate, net (2,538) 48,785 117,800 110,786
Foreign currency exchange gains (losses) and other income (expenses), net 2,418 8,395 (5,697) 11,231
Gain (loss) on early extinguishment of debt, net 556 (153,037) 258 (201,486)
Current income tax expense (15,674) (9,602) (24,795) (25,452)
Total other income (expense) (129,992) (1,291,313) (300,265) (1,511,089)
Less preferred share dividends 10,276 6,317 34,696 25,424
Less FFO attributable to noncontrolling interests 3,367 (591) 15,365 43
FFO, as defined by Prologis 134,147 (1,154,157) 411,688 (974,197)
Impairment charges 38,546 1,107,725 145,028 1,110,072
Japan disaster expenses — — 5,210 -
Merger, acquisition and other integration expenses 18,772 — 140,495 -
Our share of losses (gains) on acquisitions and dispositions of investments in real estate, net 7,621 (48,785) (115,577) (110,786)
Loss (gain) on early extinguishment of debt, net (556) 153,037 (258) 201,486
Income tax expense on dispositions 5,415 7,932 7,331 10,783
Adjustments made in 2010, not applicable to 2011 — 33,628 — 44,028
Total of adjustments 69,798 1,253,537 182,229 1,255,583
Core FFO $ 203,945 $ 99,380 $ 593,917 $ 281,386
Weighted average common shares outstanding—Diluted (B) 474,881 253,776 385,960 221,356
Core FFO per share—Diluted $ 0.44 $ 0.41 $ 1.58 $ 1.27
(A) The financial results include Prologis for the full period and AMB and PEPR results from approximately June 1, 2011. (B) See Calculation of Per Share Amounts in the Notes and Definitions.
8 Copyright © 2012 Prologis
Financial Statements
Reconciliations of Net Earnings (Loss) to FFO
(in thousands)
Fourth Quarter 2011 Report
Three Months Ended December 31, Twelve Months Ended December 31,
2011 2010 (A) 2011 (A) 2010 (A)
Reconciliation of net loss to FFO
Net loss attributable to common shares $ (45,459) $ (1,166,589) $ (188,110) $ (1,295,920)
Add (deduct) NAREIT defined adjustments:
Real estate related depreciation and amortization 187,505 76,498 566,328 295,182
Impairment on certain real estate properties 5,300 126,038 5,300 126,987
Net gains on non-FFO dispositions (32,016) (221,140) (39,812) (196,080)
Reconciling items related to noncontrolling interests (8,199) — (19,889) -
Our share of reconciling items from unconsolidated investees 43,879 35,891 147,608 141,721
Subtotal-NAREIT defined FFO 151,010 (1,149,302) 471,425 (928,110)
Add (deduct) our defined adjustments:
Unrealized foreign currency and derivative losses (gains), net 6,002 14,096 (39,034) 11,487
Deferred income tax expense (benefit) (22,558) (11,781) (19,803) (52,223)
Our share of reconciling items from unconsolidated investees (307) (7,170) (900) (5,351)
FFO, as defined by Prologis 134,147 (1,154,157) 411,688 (974,197)
Adjustments to arrive at Core FFO 69,798 1,253,537 182,229 1,255,583
Core FFO $ 203,945 $ 99,380 $ 593,917 $ 281,386
Adjustments to arrive at Adjusted FFO (“AFFO”), including our share of unconsolidated investees:
Straight-lined rents and amortization of lease intangibles (9,178) (12,089) (44,507) (47,455)
Property improvements (21,473) (12,289) (64,903) (37,921)
Tenant improvements (19,558) (13,811) (60,791) (45,066)
Leasing commissions (15,739) (8,589) (47,789) (30,826)
Amortization of management contracts 1,925 550 6,749 2,200
Amortization of debt discounts/(premiums) and financing costs, net of capitalization (4,185) 14,993 9,662 59,266
Stock compensation expense 9,856 7,712 31,483 25,085
AFFO $ 145,593 $ 75,857 $ 423,821 $ 206,669
Common stock dividends $ 130,573 $ 69,296 $ 388,333 $ 285,217
(A) The financial results include Prologis for the full period and AMB and PEPR results from approximately June 1, 2011.
9 Copyright © 2012 Prologis
Financial Statements
EDITDA Reconciliation
(in thousands)
Fourth Quarter 2011 Report
Three Months Ended Twelve Months Ended
December 31, December 31,
2011 2010 2011 2010
Reconciliation of consolidated net loss to Core EBITDA
Consolidated net loss $ (40,015) $(1,160,863) $ (157,938) $(1,270,453)
Net gains on acquisitions and dispositions of investments in real estate, net(35,403)(195,153)(173,514)(273,845)
Depreciation and amortization 192,379 81,164 585,323 311,268
Interest expense 129,341 112,034 468,738 461,166
Impairment charges 43,846 1,146,061 147,669 1,149,357
Merger, acquisition and other integration expenses 18,772—140,495 -
Loss (gain) on early extinguishment of debt(556) 153,037(258) 201,486
Current and deferred income tax expense (benefit)(6,884) 2,025 4,992(19,716)
Pro forma adjustment (A)—263,994 -
Income on properties sold during the period included in discontinued operations(5,852)(18,434)(27,907)(84,435)
Other non-cash charges (gains) 15,858 21,808(7,551) 36,572
Other adjustments made to arrive at Core FFO—14,784 5,210 19,213
Core EBITDA, prior to our share of unconsolidated investees 311,486 156,463 1,249,253 530,613
Our share of reconciling items from unconsolidated investees:
Net losses (gains) on disposition of real estate, net 5,083—5,083 -
Depreciation and amortization 43,879 35,891 147,608 141,721
Interest expense 37,231 42,563 142,282 171,332
Current and deferred income tax expense (benefit) 257 1,210 4,918 7,717
Other non-cash charges (gains)(307)(7,170)(900)(5,351)
Realized losses (gains) on derivative activity—18,844 226 24,815
Core EBITDA $ 397,629 $ 247,801 $ 1,548,470 $ 870,847
(A) Adjustments for the effects of the Merger and PEPR acquisition to reflect NOI for the full period.
Copyright © 2012 Prologis
10
Operations Overview
Operating Portfolio – Square Feet, Occupied and Leased
(square feet in thousands)
Fourth Quarter 2011 Report
R eg io n # o f B uild ing s Sq uare F eet Occupied Leased
Total Owned and Prologis Prologis% of Total Total Owned and Prologis Total Owned and Prologis
M anaged Share Share (%) M anaged Share M anaged Share
Gl oba l M a r k e t s
U.S.
At lant a East 129 18,087 12,237 67.7% 3.3% 85.1% 84.4% 85.1% 84.4%
Balt imore/ Washingt on East 67 7,862 5,064 64.4% 1.4% 95.7% 94.8% 95.7% 94.8%
Cent ral Valley Nort hwest 23 8,140 5,987 73.6% 1.6% 88.3% 86.9% 88.3% 86.9%
Cent ral & East ern PA East 32 15,317 6,436 42.0% 1.8% 94.1% 96.6% 94.4% 97.4%
Chicago Cent ral 213 37,209 27,834 74.8% 7.6% 91.3% 92.4% 91.6% 92.7%
Dallas/ Ft . Wort h Cent ral 172 24,999 18,713 74.9% 5.1% 93.5% 93.2% 93.5% 93.2%
Houst on Cent ral 85 9,971 6,239 62.6% 1.7% 98.2% 98.8% 98.2% 98.8%
New Jersey/ New York Cit y East 182 22,793 15,982 70.1% 4.3% 91.2% 90.1% 91.2% 90.1%
San Francisco Bay Area Nort hwest 251 20,920 18,239 87.2% 5.0% 88.0% 88.6% 88.6% 89.3%
Seat t le Nort hwest 63 8,241 4,791 58.1% 1.3% 92.8% 93.1% 92.8% 93.1%
Sout h Florida East 93 10,578 7,474 70.7% 2.0% 92.8% 92.4% 92.8% 92.4%
Sout hern Calif ornia Sout hwest 344 64,265 44,329 69.0% 12.1% 96.2% 96.3% 96.2% 96.3%
On Tarmac Various 32 2,649 2,435 91.9% 0.7% 93.1% 92.5% 93.1% 92.5%
Canada East 19 6,383 5,081 79.6% 1.4% 97.8% 97.2% 97.8% 97.2%
Mexico Lat in America 178 28,997 14,688 50.7% 4.0% 91.3% 91.5% 91.3% 91.5%
Brazil Lat in America 3 934 93 10.0% 0.0% 100.0% 100.0% 100.0% 100.0%
Ame r i c a s t ot a l 1, 8 8 6 2 8 7 , 3 4 5 19 5 , 6 2 2 6 8 . 1% 5 3 . 3 % 9 2 . 7 % 9 2 . 6 % 9 2 . 8 % 9 2 . 8 %
Belgium Nort hern 9 2,016 1,653 82.0% 0.4% 99.6% 99.6% 99.6% 99.6%
France Sout hern 141 34,785 25,965 74.6% 7.1% 94.2% 93.3% 94.3% 93.3%
Germany Nort hern 98 19,742 10,158 51.5% 2.8% 97.8% 95.9% 98.4% 97.0%
Net herlands Nort hern 50 10,228 6,343 62.0% 1.7% 88.0% 89.6% 88.0% 89.6%
Poland CEE 107 22,824 13,899 60.9% 3.8% 84.0% 82.5% 86.6% 85.4%
Spain Sout hern 23 6,470 5,809 89.8% 1.6% 76.1% 78.6% 76.3% 78.7%
Unit ed Kingdom UK 73 16,999 10,101 59.4% 2.7% 96.3% 93.8% 96.3% 93.8%
Eur ope t ot a l 5 0 1 113 , 0 6 4 7 3 , 9 2 8 6 5 . 4 % 2 0 . 1% 9 1. 6 % 9 0 . 4 % 9 2 . 2 % 9 1. 1%
China China 19 4,610 2,179 47.3% 0.6% 97.2% 96.5% 97.2% 96.5%
Japan Japan 44 18,481 12,671 68.6% 3.4% 95.5% 94.7% 95.5% 94.7%
Singapore Singapore 5 942 942 100.0% 0.3% 100.0% 100.0% 100.0% 100.0%
Asi a t ot a l 6 8 2 4 , 0 3 3 15 , 7 9 2 6 5 . 7 % 4 . 3 % 9 6 . 0 % 9 5 . 2 % 9 6 . 0 % 9 5 . 2 %
Tot a l gl oba l ma r k e t s 2 , 4 5 5 4 2 4 , 4 4 2 2 8 5 , 3 4 2 6 7 . 2 % 7 7 . 7 % 9 2 . 6 % 9 2 . 2 % 9 2 . 8 % 9 2 . 5 %
Re gi ona l ma r k e t s ( A)
It aly—Europe Sout hern 27 8,378 7,691 91.8% 2.1% 90.3% 89.4% 90.3% 89.4%
Czech Republic—Europe CEE 28 6,510 4,785 73.5% 1.3% 89.2% 85.7% 91.5% 88.5%
Hungary—Europe CEE 30 5,336 3,815 71.5% 1.0% 86.1% 85.5% 86.4% 85.8%
Sweden—Europe Nort hern 10 3,808 2,738 71.9% 0.7% 100.0% 100.0% 100.0% 100.0%
Columbus—Americas Cent ral 39 10,309 6,721 65.2% 1.8% 96.6% 94.8% 96.6% 94.8%
Denver—Americas Nort hwest 33 5,208 4,008 77.0% 1.1% 95.2% 94.6% 95.2% 94.6%
San Ant onio—Americas Cent ral 61 6,358 4,012 63.1% 1.1% 93.1% 90.7% 94.1% 92.2%
Memphis—Americas Cent ral 27 8,310 5,510 66.3% 1.5% 95.6% 93.3% 95.6% 93.3%
Louisville—Americas Cent ral 14 4,927 3,567 72.4% 1.0% 97.7% 98.0% 97.7% 98.0%
Cincinnat i—Americas Cent ral 30 6,898 3,680 53.3% 1.0% 97.2% 95.9% 97.7% 96.3%
Remaining ot her regional (5 market s) Various 121 20,866 10,503 50.3% 2.9% 87.9% 85.0% 89.3% 85.7%
Re gi ona l ma r k e t s t ot a l 4 2 0 8 6 , 9 0 8 5 7 , 0 3 0 6 5 . 6 % 15 . 5 % 9 2 . 5 % 9 1. 0 % 9 3 . 2 % 9 1. 5 %
Ot he r ma r k e t s ( 18 ma r k e t s) Various 3 2 5 4 7 , 4 5 3 2 4 , 8 3 6 5 2 . 3 % 6 . 8 % 8 8 . 4 % 9 0 . 5 % 8 8 . 6 % 9 0 . 6 %
Tot a l ope r a t i ng por t f ol i o—owne d a nd ma na ge d 3 , 2 0 0 5 5 8 , 8 0 3 3 6 7 , 2 0 8 6 5 . 7 % 10 0 . 0 % 9 2 . 2 % 9 1. 9 % 9 2 . 5 % 9 2 . 2 %
(A) Selected and ordered by ProLogis share of NOI.
Copyright © 2012 Prologis
11
Operations Overview
Operating Portfolio – NOI and Gross Book Value
(dollars in thousands) Fourth Quarter 2011 Report
Region Fourth Quarter N OI Gross Book Value
Total Owned and Managed Prologis Share ($) Prologis Share (%) % of Total Total Owned and Managed Prologis Share ($) Prologis Share % % of Total
Global Markets
U.S.
Atlanta East $10,828 $6,851 63.3% 1.7% $796,839 $510,542 64.1% 1.9%
Baltimore/ Washington East 9,769 5,983 61.2% 1.5% 586,487 338,034 57.6% 1.2%
Central Valley Northwest 6,115 4,394 71.9% 1.1% 435,263 312,546 71.8% 1.1%
Central & Eastern PA East 13,204 5,547 42.0% 1.4% 956,240 367,589 38.4% 1.3%
Chicago Central 27,146 20,163 74.3% 5.0% 2,217,664 1,619,252 73.0% 5.9%
Dallas/ Ft . Worth Central 15,956 11,587 72.6% 2.8% 1,194,590 849,207 71.1% 3.1%
Houston Central 9,099 5,252 57.7% 1.3% 523,977 273,379 52.2% 1.0%
New Jersey/ New York City East 28,565 17,996 63.0% 4.4% 1,996,719 1,304,628 65.3% 4.8%
San Francisco Bay Area Northwest 27,215 24,014 88.2% 5.9% 2,028,409 1,773,822 87.4% 6.5%
Seattle Northwest 10,027 5,337 53.2% 1.3% 787,548 448,474 56.9% 1.6%
South Florida East 13,131 9,579 72.9% 2.3% 1,034,968 756,624 73.1% 2.8%
Southern California Southwest 71,683 49,410 68.9% 12.1% 5,352,638 3,820,235 71.4% 13.9%
On Tarmac Various 7,933 7,139 90.0% 1.8% 316,732 280,133 88.4% 1.0%
Canada East 7,843 5,999 76.5% 1.5% 643,424 512,232 79.6% 1.9%
Mexico LatinAmerica 27,912 13,185 47.2% 3.2% 1,813,742 879,710 48.5% 3.2%
Brazil LatinAmerica 2,296 826 36.0% 0.2% 96,618 9,662 10.0% 0.0%
Americas total 288,722 193,262 66.9% 47.5% 20,781,858 14,056,069 67.6% 51.2%
Belgium Northern 3,028 2,453 81.0% 0.6% 172,453 135,430 78.5% 0.5%
France Southern 48,029 34,909 72.7% 8.6% 2,892,187 2,069,139 71.5% 7.6%
Germany Northern 26,936 14,635 54.3% 3.6% 1,632,085 806,785 49.4% 3.0%
Netherlands Northern 14,755 8,742 59.2% 2.1% 982,866 557,673 56.7% 2.0%
Poland CEE 21,295 12,832 60.3% 3.1% 1,510,586 849,936 56.3% 3.1%
Spain Southern 8,851 8,438 95.3% 2.1% 579,969 527,666 91.0% 1.9%
United Kingdom UK 32,382 18,546 57.3% 4.6% 1,988,425 1,076,791 54.2% 3.9%
Europe total 155,276 100,555 64.8% 24.7% 9,758,571 6,023,420 61.7% 22.0%
China China 2,956 835 28.2% 0.2% 285,626 89,313 31.3% 0.3%
Japan Japan 58,890 39,619 67.3% 9.7% 4,238,336 2,791,197 65.9% 10.2%
Singapore Singapore 2,369 2,369 100.0% 0.6% 140,163 140,163 100.0% 0.5%
Asia total 64,215 42,823 66.7% 10.5% 4,664,125 3,020,673 64.8% 11.0%
Total global markets 508,213 336,640 66.2% 82.7% 35,204,554 23,100,162 65.6 % 84.2%
Regional markets(A)
Italy—Europe Southern 9,828 9,022 91.8% 2.2% 549,070 495,766 90.3% 1.8%
Czech Republic—Europe CEE 8,685 6,006 69.2% 1.5% 525,712 368,808 70.2% 1.3%
Hungary—Europe CEE 7,078 5,148 72.7% 1.3% 376,737 238,879 63.4% 1.0%
Sweden—Europe Northern 6,346 4,479 70.6% 1.1% 333,585 235,268 70.5% 0.9%
Columbus—Americas Central 6,195 3,604 58.2% 0.9% 422,188 269,592 63.9% 1.0%
Denver—Americas Northwest 4,234 3,277 77.4% 0.8% 292,670 229,835 78.5% 0.8%
San Antonio—Americas Central 5,300 3,049 57.5% 0.7% 301,577 172,089 57.1% 0.6%
Memphis—Americas Central 4,514 2,831 62.7% 0.7% 283,858 178,004 62.7% 0.6%
Louisville—Americas Central 3,546 2,506 70.7% 0.6% 205,463 142,213 69.2% 0.5%
Cincinnati—Americas Central 4,796 2,180 45.5% 0.5% 290,874 140,041 48.1% 0.5%
Remaining other regional (5markets) Various 15,557 6,837 43.9% 1.7% 1,075,556 509,946 47.4% 1.9%
Regional markets total 76,079 48,939 64.3% 12.0% 4,657,290 2,980,441 64.0% 10.9%
Other markets (18 markets) Various 40,843 21,456 52.5% 5.3% 2,958,443 1,349,611 45.6% 4.9%
Total operating portfolio $625,135 $407,035 65.1% 100.0% $42,820,287 $27,430,214 64.1% 100.0%
(A) Selected and ordered by ProLogis share of NOI.
12 Copyright © 2012 Prologis
Operations Overview
Operating Portfolio – Summary by Region
(dollars in thousands)
Fourth Quarter 2011 Report
# of Buildings Square Feet Occupied Leased
Total Owned and Managed Prologis Share Prologis Share (%) % of Total Total Owned and Managed Prologis Share Total Owned and Managed Prologis Share
Consolidated
Americas 1,445 201,501 201,501 100.0% 54.9% 92.0% 92.0% 92.1% 92.1%
Europe 323 75,640 75,640 100.0% 20.6% 89.3% 89.3% 90.1% 90.1%
Asia 29 13,910 13,910 100.0% 3.8% 94.9% 94.9% 94.9% 94.9%
Total operating portfolio —consolidated 1,797 291,051 291,051 100.0% 79.3% 91.4% 91.4% 91.7% 91.7%
Unconsolidated
Americas 1,070 190,541 54,189 28.4% 14.7% 92.4% 93.4% 92.6% 93.5%
Europe 294 67,088 20,086 29.9% 5.5% 94.2% 94.1% 94.9% 94.8%
Asia 39 10,123 1,882 18.6% 0.5% 97.4% 97.4% 97.4% 97.4%
Total operating portfolio —unconsolidated 1,403 267,752 76,157 28.4% 20.7% 93.1% 93.7% 93.4% 94.0%
Total
Americas 2,515 392,042 255,690 65.2% 69.6% 92.2% 92.3% 92.4% 92.4%
Europe 617 142,728 95,726 67.1% 26.1% 91.6% 90.3% 92.3% 91.1%
Asia 68 24,033 15,792 65.7% 4.3% 96.0% 95.2% 96.0% 95.2%
Total operating portfolio —owned and managed 3,200 558,803 367,208 65.7% 100.0% 92.2% 91.9% 92.5% 92.2%
Fourth Quarter NOI Gross Book Value
Total Owned and Managed Prologis Share $ Prologis Share (%) % of Total Total Owned and Managed Prologis Share $ Total Owned and Managed Prologis Share (%) % of Total
Consolidated
Americas $181,826 $181,826 100.0% 44.7% $13,283,927 $13,283,927 100.0% 48.4%
Europe 100,636 100,636 100.0% 24.7% 5,644,377 5,644,377 100.0% 20.6%
Asia 37,631 37,631 100.0% 9.2% 2,624,244 2,624,244 100.0% 9.6%
Total operating portfolio—consolidated $ 320,093 $ 320,093 100.0% 78.6% $ 21,552,548 $ 21,552,548 100.0% 78.6%
Unconsolidated
Americas $185,091 $53,682 29.0% 13.2% $12,966,744 $3,600,063 27.8% 13.2%
Europe 93,367 28,068 30.1% 6.9% 6,261,114 1,881,174 30.0% 6.8%
Asia 26,584 5,192 19.5% 1.3% 2,039,881 396,429 19.4% 1.4%
Total operating portfolio—unconsolidated $ 305,042 $ 86,942 28.5% 21.4% $ 21,267,739 $ 5,877,666 27.6% 21.4%
Total
Americas $366,917 $235,508 64.2% 57.9% $26,250,671 $16,883,990 64.3% 61.6%
Europe 194,003 128,704 66.3% 31.6% 11,905,491 7,525,551 63.2% 27.4%
Asia 64,215 42,823 66.7% 10.5% 4,664,125 3,020,673 64.8% 11.0%
Total operating portfolio—owned and managed $ 625,135 $ 407,035 65.1% 100.0% $ 42,820,287 $ 27,430,214 64.1% 100.0%
13 Copyright © 2012 Prologis
Operations Overview
Operating Metrics – Owned and Managed (A)
(square feet and dollars in thousands)
Fourth Quarter 2011 Report
Period Period Ending Occupancy by by Region (A) (A)
100% 95% 90% 85% 80%
92.2% 91.0% 91.1% 90.4%
Q1 2011 Q2 2011 Q3 2011 Q4 2011
Americas
91.6% 90.0% 89.3% 88.3%
Q1 2011 Q2 2011 Q3 2011 Q4 2011
Europe
11.5%
96.0%
95.0%
93.4%
91.1%
Q1 2011 Q2 2011 Q3 2011 Q4 2011
Asia
91.0% 92.2%
90.7%
89.9%
Q1 2011 Q2 2011 Q3 2011 Q4 2011
Total
Leasing Activity
Q1 2011 Q2 2011 Q3 2011 Q4 2011
Square feet of leases signed:
Properties under development 877 1,360 1,810 1,365
Operating properties:
New leases 14,773 11,841 11,545 13,663
Renew als 17,225 21,697 20,095 22,533
Total square feet of leases signed 32,875 34,898 33,450 37,561
Weighted average customer retention 65.8% 76.7% 76.3% 80.1%
Turnover costs (per square foot) (C) $ 1.35 $ 1.37 $ 1.36 $ 1.40
Capital Expenditures Incurred
Q1 2011 Q2 2011 Q3 2011 Q4 2011
Property improvements $ 16,701 $ 24,880 $ 33,611 $ 32,297
$ per square foot $ 0.03 $ 0.04 $ 0.06 $ 0.06
Tenant improvements 19,787 24,741 23,934 29,418
Leasing commissions 19,741 21,682 19,136 23,674
Total turnover costs 39,528 46,423 43,070 53,092
Total capital expenditures $ 56,229 $ 71,303 $ 76,681 $ 85,389
%of% of gross NOI (D) 8.9% 113%11.3% 12.4% 13.7%
Weighted average ow nership percent 65.2% 69.0% 76.5% 66.5%
Prologis share $ 36,645 $ 49,215 $ 58,687 $ 56,770
Same Store Information (B)
Q1 2011 Q2 2011 Q3 2011 Q4 2011
Square feet of population 554,504 552,370 547,380 538,400
Percentage change:
Rental income 2.0% 2.2%(0.1%) 0.9%
Rental expenses 2.3%(0.3%) 1.5% 2.0%
Net operating income 0.7% 3.1%(0.7%) 0.4%
Average occupancy 3.0% 2.5% 1.6% 1.6%
Square feet of leasing activity 28,233 27,721 27,969 32,159
Percentage change in rental rates(8.9%)(6.1%)(8.6%)(4.5%)
(A) Includes legacy AMB for the pre-Merger periods presented. (B) See the Notes and Definitions for further explanations.
(C) Turnover costs per foot represent expected costs based on the leases signed during the quarter, rather than costs incurred as presented in the “Capital Expenditures Incurred” section. (D) Pre-Merger information is based on pro forma NOI of the combined company for the respective period.
Copyright © 2012 Prologis
14
Operations Overview
Customer Information – Owned and Managed
(square feet and dollars in thousands) Fourth Quarter 2011 Report
Top Customers Lease Expirations—Owned and Managed
% of Annual Base Rent Total Square Feet Annual Base Rent Percentage of Total Occupied Square Feet Percentage of Total
Year
1 DHL 2.4% 11,473 Month to month customers $ 31,307 1.1% 10,667 2.1%
2 CEVA Logistics 1.4% 7,508 2012 387,197 13.9% 75,204 14.6%
3 Kuehne & Nagel 1.2% 6,279 2013 450,841 16.2% 84,200 16.3%
4 Home Depot, Inc 1.1% 5,685 2014 422,146 15.1% 78,519 15.2%
5 SNCF Geodis 1.0% 5,072 2015 377,290 13.5% 70,890 13.8%
6 Amazon.Com, Inc. 0.9% 3,948 2016 310,158 11.1% 57,711 11.2%
7 United States Government 0.8% 2,060 Thereafter 810,397 29.1% 138,047 26.8%
8 FedEx Corporation 0.7% 2,402 Total $ 2,789,336 100% 515,238 100%
9 Unilever 0.7% 4,965
10 PepsiCo 0.6% 3,876 Lease Expirations—Prologis Share
Top 10 Customers 10.8% 53,268
Annual Base Percentage Occupied Percentage
Year
11 Nippon Express 0.6% 1,473 Rent of Total Square Feet of Total
12 Tesco PLC 0.6% 2,603 Month to month customers $ 22,125 1.2% 8,050 2.4%
13 DB Schenker 0.5% 2,249 2012 255,093 14.1% 49,358 14.5%
14 Panasonic Logistics Co Ltd 0.5% 1,305 2013 295,861 16.3% 54,250 16.1%
15 Hitachi Ltd 0.5% 1,287 2014 279,560 15.4% 53,558 15.9%
16 Sagaw a Express 0.5% 933 2015 248,888 13.7% 47,203 14.0%
17 APL (Neptune Orient Lines) 0.5% 4,830 2016 207,136 11.5% 38,653 11.5%
18 Panalpina Inc 0.5% 2,309 Thereafter 503,133 27.8% 86,322 25.6%
19 Kraft Foods, Inc. 0.5% 2,969 Total $ 1,811,796 100% 337,394 100%
20 Sears Holdings Corporation 0.4% 3,397
21 UTi Worldwide 0.4% 1,970
22 C & S Wholesale Grocers Inc 0.4% 2,222
23 Caterpillar Logistics Services 0.4% 1,137
24 ND Logistics 0.4% 2,233
25 Raben Group BV 0.4% 2,027
Top 25 Customers 17.9% 86,212
15 Copyright © 2012 Prologis
Capital Deployment
Building Dispositions and Contributions (A)
(square feet and dollars in thousands)
Fourth Quarter 2011 Report
Q4 2011 FY 2011
Square Feet Prologis Share of Square Feet Total Proceeds
Prologis Share of Proceeds ($) Prologis Share of Proceeds (%) (B)
Square Feet Prologis Share of Square Feet Total Proceeds Prologis Share of Proceeds ($) Prologis Share of Proceeds (%)
Third Party Building Dispositions
Americas
Prologis wholly owned 4,013 4,013 $200,228 $200,228 100.0% 8,680 8,680 $378,891 $378,891 100.0%
Prologis Institutional Alliance Fund II (C) 258 62 17,992 4,336 24.1% 548 132 35,692 8,602 24.1%
Prologis Targeted U.S. Logistics Fund 47 13 4,157 1,144 27.5% 1,008 301 76,757 22,924 29.9%
Prologis North American Properties Fund I ————— 2,794 1,146 118,000 48,380 41.0%
Prologis North American Industrial Fund 1,010 233 36,391 8,406 23.1% 1,010 233 36,391 8,406 23.1%
Prologis North American Industrial Fund II 202 75 5,377 1,989 37.0% 602 223 11,175 4,134 37.0%
Prologis North American Industrial Fund III 40 8 1,351 270 20.0% 40 8 1,351 270 20.0%
Total Americas 5,570 4,404 265,496 216,373 81.5% 14,682 10,723 658,257 471,607 71.6%
Europe
Prologis w holly owned 340 340 45,040 45,040 100.0% 340 340 45,040 45,040 100.0%
Asia
Prologis w holly owned ————— 1,865 1,865 95,389 95,389 100.0%
Total third party building dispositions 5,910 4,744 $310,536 $261,413 84.2% 16,887 12,928 $798,686 $612,036 76.6%
Building Contributions and Dispositions to Funds/Co-Invesment Ventures
Americas
Prologis Targeted U.S. Logistics Fund 4,190 4,190 $316,014 $316,014 100.0% 4,190 4,190 $316,014 $316,014 100.0%
Prologis Mexico Fondo Logistico (C) 5,340 4,592 292,850 230,127 78.6% 5,340 4,592 292,850 230,127 78.6%
Brazil Americas Fund and related joint ventures 954 239 106,782 26,695 25.0% 954 239 106,782 26,695 25.0%
Total Americas 10,484 9,021 715,646 572,836 80.0% 10,484 9,021 715,646 572,836 80.0%
Europe
Prologis European Properties Fund II 1,282 1,282 113,627 113,627 100.0% 2,320 2,320 189,127 189,127 100.0%
Prologis Targeted Europe Logistics Fund 670 670 77,769 63,929 82.2% 670 670 77,769 63,929 82.2%
Total Europe 1,952 1,952 191,396 177,556 92.8% 2,990 2,990 266,896 253,056 94.8%
Asia
Prologis China Logistics Venture 1 ————— 5,072 5,072 165,832 140,957 85.0%
Total Contributions and Dispositions to the Funds/
Co-Investment Ventures 12,436 10,973 $907,042 $750,392 82.7% 18,546 17,083 $1,148,374 $966,849 84.2%
Total Building Dispositions and Contributions 18,346 15,717 $1,217,578 $1,011,805 83.1% 35,433 30,011 $1,947,060 $1,578,885 81.1%
Weighted average stabilized cap rate 7.1% 7.3%
(A) Amounts include legacy AMB and Prologis industrial building dispositions, but do not include dispositions of non-industrial buildings, land subject to ground leases or joint venture investments of
$19 million and $522 million in the fourth quarter and year to date, respectively.
(B) Prologis share reflects actual ownership on consolidated funds. For contributions, this amount reflects cash proceeds to Prologis (net of units received for partial consideration).
(C) This is a consolidated fund.
16 Copyright © 2012 Prologis
Capital Deployment
Third Party Building Acquisitions (A)
(square feet and dollars in thousands) Fourth Quarter 2011 Report
Q4 2011 Acquisition
Square Feet Prologis Share of
Prologis Share of Acquisition Prologis Share of Acquisition Square Feet Prologis Share of Acquisition FY 2011 Prologis Share Prologis Share of Acquisition of Acquisition
Square Feet Costs Costs ($) Costs (%) Square Feet Costs Costs ($) Costs (%)
Third Party Building Acquisitions (A) (B)
Americas
Prologis wholly owned 713 713 $ 53,127 $ 53,127 100.0% 1,498 1,498 $ 99,249 $ 99,249 100.0%
Prologis Mexico Fondo Logistico (C) ——— —— 163 33 8,344 1,669 20.0%
Prologis Targeted U.S. Logistics Fund 220 61 27,916 7,682 27.5% 979 288 94,670 27,712 29.3%
Total Americas 933 774 81,043 60,809 75.0% 2,640 1,819 202,263 128,630 63.6%
Europe
Prologis wholly owned ——— ———— — — -
Prologis Targeted Europe Logistics Fund ——— —— 234 87 28,996 10,729 37.0%
Prologis European Properties Fund II 240 71 19,820 5,891 29.7% 507 151 34,412 10,269 29.8%
Europe Logistics Venture I 442 66 45,352 6,803 15.0% 442 66 45,352 6,803 15.0%
Total Europe 682 137 65,172 12,694 19.5% 1,183 304 108,760 27,801 25.6%
Asia ——— ———— — — -
Total Third Party Acquisitions 1,615 911 $ 146,215 $ 73,503 50.3% 3,823 2,123 $ 311,023 $ 156,431 50.3%
Weighted average stabilized cap rate 7.0% 7.4%
(A) Includes legacy AMB for the pre-Merger periods.
(B) Does not include acquisition of units in PEPR, the acquisition of SGP Property Fund or the acquisition of other joint venture interests.
(C) This is a consolidated fund. Prologis share excludes noncontrolling interest.
17 Copyright © 2012 Prologis
Capital Deployment – Fourth Quarter
Development Starts
(in thousands, except percent and per square foot) Fourth Quarter 2011 Report
Total Q4 2011 Prologis Share ($)—Q4 Prologis Share (%)—Q4
Square Feet
Total Expected Investment Cost Per Square Foot Leased % at Start Square Feet Total Expected Investment Cost Per Square Foot Leased % at Start Square Feet Total Expected Investment
Americas
Prologis wholly owned 745 $50,173 $67 0.0% 745 $50,173 $67 0.0% 100.0% 100.0%
Prologis Targeted U.S. Logistics Fund—————— -
Prologis SGP Mexico—————— -
Brazil Fund and related joint ventures 966 82,333 85 0.0% 242 20,583 85 0.0% 25.0% 25.0%
Total Americas 1,711 132,506 77 0.0% 987 70,756 72 0.0% 57.7% 53.4%
Europe
Prologis wholly owned 512 33,805 66 60.7% 512 33,805 66 60.7% 100.0% 100.0%
Prologis European Properties Fund II—————— -
Prologis Targeted Europe Logistics Fund—————— -
Total Europe 512 33,805 66 60.7% 512 33,805 66 60.7% 100.0% 100.0%
Asia
Prologis wholly owned—————— -
Prologis China Logisitics Venture I—————— -
Total Asia—————— -
Total 2,223 $166,311 $75 14.0% 1,499 $104,561 $70 20.7% 67.4% 62.9%
Weighted average estimated stabilized yield (%) 10.6% Pro forma NOI ($) $17,629 Weighted average estimated cap rate at stabilization (%) 8.2% Estimated value creation ($) (A) $48,677 Prologis share of value creation ($) (A) $24,087 Prologis share of value creation (%) (A) 49.5%
(A) Value creation excludes fees or promotes that we may earn. See complete definition in the Notes and Definitions section.
Copyright © 2012 Prologis
18
Capital Deployment – Full Year
Development Starts (A)
(in thousands, except percent and per square foot) Fourth Quarter 2011 Report
Total FY 2011 Prologis Share ($)—FY 2011 Prologis Share (%)—FY 2011
Square Feet Total Expected Investment Cost Per Square Foot Current Leased % Square Feet Total Expected Investment Cost Per Square Foot Current Leased % Current Square Feet Leased %
Americas
Prologis wholly owned 1,775 133,457 75 27.3% 1,775 133,457 75 27.3% 100.0% 100.0%
Prologis Targeted U.S. Logistics Fund 272 29,936 110 0.0% 84 9,280 110 0.0% 30.9% 31.0%
Prologis SGP Mexico 22 719 33 100.0% 5 158 33 100.0% 21.7% 22.0%
Brazil Fund and related joint ventures 1,569 140,373 89 19.6% 392 35,093 89 19.6% 25.0% 25.0%
Total Americas 3,638 304,485 84 22.4% 2,256 177,988 79 25.1% 62.0% 58.5%
Europe
Prologis wholly owned 2,589 217,541 84 69.4% 2,589 217,541 84 69.4% 100.0% 100.0%
Prologis European Properties Fund II 418 27,042 65 100.0% 125 8,113 65 100.0% 29.9% 30.0%
Prologis Targeted Europe Logistics Fund 47 4,201 89 0.0% 17 1,554 89 0.0% 37.2% 37.0%
Total Europe 3,054 248,784 81 72.6% 2,731 227,208 83 70.4% 89.4% 91.3%
Asia
Prologis wholly owned 3,901 457,408 117 20.2% 3,901 457,408 117 20.2% 100.0% 100.0%
Prologis China Logisitics Venture I 168 6,086 36 100.0% 25 913 36 100.0% 14.9% 15.0%
Total Asia 4,069 463,494 114 23.4% 3,926 458,321 117 20.7% 96.5% 98.9%
Total 10,761 1,016,763 94 37.0% 8,913 863,517 97 37.0% 82.8% 84.9%
Weighted average estimated stabilized yield (%) 8.5%
Pro forma NOI ($) $86,425
Weighted average estimated cap rate at stabilization (%) 7.1%
Estimated value creation ($) (B) $200,491
Prologis share of value creation ($) (B) $159,992
Prologis share of value creation (%) (B) 79.8%
Historical Development Starts (TEI)
$1,200,000 $1,016,763
$1,000,000 $758,905 $800,000
$600,000 $400,000 $313,877 $200,000
$-
2009 2010 2011
Americas Europe Asia
Full Year 2011 Development Starts
Regional Break Out Prologis share vs. Third Party Build to Suit vs. Speculative
(A) Amounts include legacy AMB and Prologis.
(B) Value creation excludes fees or promotes that we may earn. See complete definition in the Notes and Definitions section.
Copyright © 2012 Prologis
19
Capital Deployment
Development Portfolio
(in thousands, except percent)
Pre-Stabilized Developments 2012 Expected Completion 2013 Expected Completion Total Under Development Total Development Portfolio
Prologis share of
Sq Ft TEI $ Sq Ft TEI $ Sq Ft TEI $ Sq Ft TEI $ TEI $ TEI $ % of Total Leased %
Consolidated
U.S.
Central — $— 147 $7,752 — $— 147 $7,752 $7,752 $7,752 0.6% 0.0%
East —— 858 97,573 —— 858 97,573 97,573 97,573 7.8% 36.8%
Northwest —————————— 0.0% -
Southwest 271 35,361 415 25,617 —— 415 25,617 60,978 60,978 4.9% 0.0%
U.S. Total 271 35,361 14201,420 130,942 —— 14201,420 130,942 166,303 166,303 13.3% 18 .7%
Latin America 221 12,598 596 37,362 —— 596 37,362 49,960 49,960 4.0% 60.9%
Americas total 492 47,959 2,016 168,304 —— 2,016 168,304 216,263 216,263 17.3% 32.4%
Europe
Northern Europe —— 766 64,963 —— 766 64,963 64,963 64,963 5.2% 58.3%
Southern Europe —— 506 37,301 —— 506 37,301 37,301 37,301 3.0% 43.9%
Central Europe 206 16,129 201 13,261 —— 201 13,261 29,390 29,390 2.4% 50.6%
United Kingdom —— 458 42,720 —— 458 42,720 42,720 42,720 3.4% 100.0%
Europe total 206 16,129 1,931 158,245 —— 1,931 158,245 174,374 174,374 14.0% 62.4%
Asia
Japan 1,557 273,090 2,921 484,798 —— 2,921 484,798 757,888 757,888 60.7% 50.1%
Asia total 1,557 273,090 2,921 484,798 —— 2,921 484,798 757,888 757,888 60.7% 50.1%
Total global markets 2,255 337,178 6,868 811,347 —— 6,868 811,347 1,148,525 1,148,525 92.0% 48.1%
Regional and other markets
Americas —————————— 0.0% -
Europe —— 314 18,369 —— 314 18,369 18,369 18,369 1.5% 100.0%
Total regional and other markets —— 314 18,369 —— 314 18,369 18,369 18,369 1.5% 100.0%
Total consolidated development portfolio 2,255 337,178 7,182 829,716 —— 7,182 829,716 1,166,894 1,166,894 93.5% 49.8%
Unconsolidated
Prologis Targeted U.S. Logistics Fund —— 272 28,726 —— 272 28,726 28,726 7,905 0.6% 0.0%
Prologis SGP Mexico, LLC —— 22 1,026 —— 22 1,026 1,026 222 0.0% 100.0%
Brazil Fund and related joint ventures —— 1,256 110,703 —— 1,256 110,703 110,703 55,351 4.4% 0.0%
Prologis European Properties Fund II —— 134 10,326 —— 134 10,326 10,326 3,069 0.3% 100.0%
Prologis Targeted Europe Logistics Fund —— 47 5,272 —— 47 5,272 5,272 1,661 0.1% 0.0%
Prologis China Logistics Venture I —— 850 33,138 1,078 57,844 1,928 90,982 90,982 13,647 1.1% 44.1%
Total unconsolidated development portfolio —— 2,581 189,191 1,078 57,844 3,659 247,035 247,035 81,855 6.5% 27.5%
Total development portfolio—owned & managed 2,255 $ 337,178 9,763 $ 1,018,907 1,078 $ 57,844 10,841 $ 1,076,751 $ 1,413,929 $ 1,248,749 100 .0% 43.6%
Total development portfolio—Prologis share 2,255 $337,178 8,072 $902,894 162 $8,677 8,233 $911,571 $1,248,749 46.5%
Total development portfolio—Prologis share (%) 100.0% 100.0% 82.7% 88.6% 15.0% 15.0% 75.9% 84.7% 88.3%
Cost to complete ($) $15,853 $377,529 $38,398 $415,927 $431,780
Prologis share of cost to complete ($) $15,853 $325,529 $5,760 $331,289 $347,142
Percent build to suit (based on Prologis share) (%) 4.8% 29.0% 0.0% 28.8%
Pre-leased percent (%) n/a 40.7% 0.0% 36.6%
Weighted average estimated stabilized yield (%) 7.0% 8.2% 9.0% 8.2% 7.9%
Pro forma NOI ($) $111,700
Weighted average estimated cap rate at stabilization (%) 6.6%
Estimated value creation ($) (A) $278,495
Prologis share of value creation ($) (A) $237,510
Prologis share of value creation (%) (A) 85.3%
(A) Value creation excludes fees or promotes that we may earn. See complete definition in the Notes and Definitions section.
Copyright © 2012 Prologis
20
Capital Deployment
Land Portfolio – Owned and Managed
(dollars in thousands)
Fourth Quarter 2011 Report
Land by M arket R egion A cres C urrent B o ok V alue
T ot al Owned & Prolo gis Prologis T ot al Owned & Prolo gis Prologis% of
M anaged Share Share ( %) M anaged Share ( $) Share ( %) T ot al
Glo bal markets
U.S.
Atlanta East 732 732 100.0% $ 28,003 $ 28,003 100.0% 1.4%
Baltimore/Washington East 106 106 100.0% 14,868 14,868 100.0% 0.7%
Central Valley Northwest 188 188 100.0% 17,005 17,005 100.0% 0.8%
Central & Eastern PA East 339 339 100.0% 29,354 29,354 100.0% 1.5%
Chicago Central 638 638 100.0% 60,090 60,090 100.0% 3.0%
Dallas/Ft. Worth Central 470 470 100.0% 23,373 23,373 100.0% 1.2%
Houston Central 65 65 100.0% 7,928 7,928 100.0% 0.4%
New Jersey/New York City East 305 305 100.0% 124,431 124,431 100.0% 6.2%
Seattle Northwest 15 15 100.0% 2,121 2,121 100.0% 0.1%
South Florida East 377 377 100.0% 141,581 141,581 100.0% 7.1%
Southern California Southwest 779 779 100.0% 121,810 121,810 100.0% 6.1%
Canada Canada 230 230 100.0% 92,034 92,034 100.0% 4.6%
M exico M exico 1,021 1,021 100.0% 221,568 221,568 100.0% 11.0%
Brazil Brazil 248 124 50.0% 43,162 21,581 50.0% 1.1%
A mericas to tal 5,513 5,389 97.8% 927,328 905,747 97.7% 45.2%
Belgium Northern 30 30 100.0% 10,298 10,298 100.0% 0.5%
France Southern 396 396 100.0% 68,434 68,434 100.0% 3.4%
Germany Northern 203 203 100.0% 50,475 50,475 100.0% 2.5%
Netherlands Northern 63 63 100.0% 57,384 57,384 100.0% 2.9%
Poland CEE 893 893 100.0% 116,942 116,942 100.0% 5.8%
Spain Southern 100 100 100.0% 19,586 19,586 100.0% 1.0%
United Kingdom UK 981 981 100.0% 243,325 243,325 100.0% 12.1%
Euro pe to tal 2,666 2,666 100.0% 566,444 566,444 100.0% 28.2%
China China 60 45 75.0% 23,979 13,344 55.6% 0.7%
Japan Japan 98 98 100.0% 225,121 225,121 100.0% 11.2%
A sia to tal 158 143 90.5% 249,100 238,465 95.7% 11.9%
T o tal glo bal markets 8,337 8,198 98.3% 1,742,872 1,710,656 98.2% 85.3%
T o p regio nal markets (A )
Hungary CEE 338 338 100.0% 46,716 46,716 100.0% 2.3%
Czech Republic CEE 308 308 100.0% 45,249 45,249 100.0% 2.3%
Italy Southern 114 114 100.0% 33,589 33,589 100.0% 1.7%
Central Florida East 147 147 100.0% 26,336 26,336 100.0% 1.3%
Slovakia CEE 108 108 100.0% 18,591 18,591 100.0% 0.9%
Savannah East 229 229 100.0% 13,082 13,082 100.0% 0.7%
Denver Northwest 66 66 100.0% 8,315 8,315 100.0% 0.4%
Columbus Central 199 199 100.0% 6,692 6,692 100.0% 0.3%
M emphis Central 159 159 100.0% 6,452 6,452 100.0% 0.3%
Cincinnati Central 75 75 100.0% 4,915 4,915 100.0% 0.2%
Indianapolis Central 127 127 100.0% 4,469 4,469 100.0% 0.2%
Louisville Central 13 13 100.0% 425 425 100.0% 0.0%
T o tal regio nal markets 1,883 1,883 100.0% 214,831 214,831 100.0% 10.6%
T o tal o ther markets (11 markets) Various 769 769 100.0% 82,204 82,204 100.0% 4.1%
T o tal land po rtfo lio—o wned and managed 10,989 10,850 98.7% $ 2,039,907 $ 2,007,691 98.4% 100.0%
Original C o st B asis $ 3,116,922
(A) Ordered by our share of current book value.
Copyright © 2012 Prologis
21
Capital Deployment
Land Portfolio – Summary and Roll Forward
(dollars in thousands) Fourth Quarter 2011 Report
Land Portfolio Summary Acres % of Total Investment at December 31, 2011 % of Total
Americas
Prologis wholly owned 6,931 63.1% $ 1,010,644 49.5%
Brazil Fund and related joint ventures 248 2.2% 43,162 2.2%
Total Americas 7,179 65.3% 1,053,806 51.7%
Europe
Prologis wholly owned 3,652 33.2% 737,001 36.1%
Asia
Prologis wholly owned 140 1.3% 236,588 11.6%
Prologis China Logistics Venture 1 18 0.2% 12,512 0.6%
Total Asia 158 1.5% 249,100 12.2%
Total land portfolio—owned and managed 10,989 100.0% $ 2,039,907 100.0%
Land Roll Forward—Owned and Managed Americas Europe Asia Total
As of September 30, 2011 $ 1,059,225 $ 775,722 $ 212,000 $ 2,046,947
Acquisitions — — 32,231 32,231
Dispositions (A) (369) (31,708) — (32,077)
Development starts (32,572) (8,102) — (40,674)
Infrastructure costs 18,488 6,191 8,862 33,541
Reclasses 6,457 5,099 — 11,556
Effect of changes in foreign exchange rates and other 2,577 (10,201) (3,993) (11,617)
As of December 31, 2011 $ 1,053,806 $ 737,001 $ 249,100 $ 2,039,907
(A) Includes 137 acres that were sold for $36 million in proceeds.
22 Copyright © 2012 Prologis
Private Capital
Detail Fund Information
Fourth Quarter 2011 Report
Fund Investment Information
Property Funds/Co-Investment Ventures Type Investment Type Geographic Focus Ownership Date Established Term
Prologis Institutional Alliance Fund II Core Consolidated US 24.1% June 2001 Closed end
Prologis AMS Core Consolidated US 38.6% June 2004 Closed end
Prologis Mexico Fondo Logistico (A) Core/Development Consolidated Mexico 20.0% July 2010 Closed end
Prologis European Properties Core Consolidated Europe 93.7% September 1999 Open end
Prologis California Core Unconsolidated US 50.0% August 1999 Closed end
Prologis North American Properties Fund I Core Unconsolidated US 41.3% June 2000 Closed end
Prologis North American Properties Fund XI Core Unconsolidated US 20.0% February 2003 Closed end
Prologis Targeted U.S. Logistics Fund (A) Core Unconsolidated US 27.5% October 2004 Open end
Prologis North American Industrial Fund (A) Core Unconsolidated US 23.1% March 2006 Open end
Prologis DFS Fund I Development Unconsolidated US 15.0% October 2006 Closed end
Prologis North American Industrial Fund III Core Unconsolidated US 20.0% July 2007 Closed end
Prologis North American Industrial Fund II Core Unconsolidated US 37.0% August 2007 Closed end
Prologis SGP Mexico (A) Core Unconsolidated Mexico 21.6% December 2004 Closed end
Prologis Mexico Industrial Fund Core Unconsolidated Mexico 20.0% August 2007 Closed end
Prologis Brazil Logistics Partners Fund I (A)(B) Development Unconsolidated Brazil 50.0% December 2010 Closed end
Prologis Targeted Europe Logistics Fund (A) Core Unconsolidated Europe 31.5% June 2007 Open end
Prologis European Properties Fund II (A) Core Unconsolidated Europe 29.7% August 2007 Open end
Europe Logistics Venture 1 (A) Core Unconsolidated Europe 15.0% February 2011 Open end
Prologis Japan Fund 1 Core Unconsolidated Japan 20.0% June 2005 Closed end
Prologis China Logistics Venture 1 (A) Core/Development Unconsolidated China 15.0% March 2011 Closed end
Information by Unconsolidated Property Fund/Co-investment Venture (C):
Prologis’ Share
Fourth Gross Book Value of Fourth Annualized Total Other Tangible Prologis Investment In
(in thousands) Square Feet Quarter NOI Operating Buildings Debt Quarter NOI Pro forma NOI Debt Assets (Liabilities) and Advances To
Prologis California 14,179 $16,328 $707,769 $310,000 $8,164 $32,656 155,000 $33 $83,994
Prologis North American Properties Fund I 6,239 5,052 266,069 108,721 2,086 8,344 44,902 125 33,194
Prologis North American Properties Fund XI 3,616 2,581 185,613 1,186 516 2,064 237 535 29,868
Prologis North American Industrial Fund 48,898 43,155 2,950,851 1,244,165 9,969 39,876 286,904 9,845 219,160
Prologis North American Industrial Fund II 34,231 28,571 2,085,703 1,243,262 10,571 42,284 459,758(7,017) 335,397
Prologis North American Industrial Fund III 24,653 17,631 1,762,789 1,014,103 3,526 14,104 202,821 946 26,066
Prologis Targeted U.S. Logistics Fund 41,945 53,086 3,920,592 1,598,417 14,611 58,444 439,885 6,803 665,594
Prologis Mexico Industrial Fund 9,494 7,932 584,599 214,149 1,586 6,344 42,830 1,388 52,243
Prologis SGP Mexico 6,352 8,459 406,140 218,825 1,827 7,308 47,266(8,824) 36,794
Brazil Fund and related joint ventures 934 2,296 96,618—826 3,304—15,425 113,985
Americas 190,541 185,091 12,966,744 5,952,828 53,682 214,728 1,679,603 19,259 1,596,295
Prologis European Properties Fund II 54,770 73,009 4,720,821 1,623,913 21,698 86,794 482,627(35,177) 404,298
Prologis Targeted Europe Logistics Fund 11,878 20,084 1,496,686 651,865 6,329 25,314 205,403(427) 245,859
Europe Logistics Venture I 440 273 43,607—41 164—4,132 11,853
Europe 67,088 93,367 6,261,114 2,275,778 28,068 112,272 688,030(31,472) 662,010
Prologis Japan Fund 1 7,263 24,089 1,808,924 961,435 4,818 19,271 192,287 19,835 180,999
Prologis China Logistics Venture 1 2,860 2,495 230,957 100,000 374 1,497 15,000 4,307 31,875
Asia 10,123 26,584 2,039,881 1,061,435 5,192 20,768 207,287 24,142 212,874
Total 267,752 $305,042 $21,267,739 $9,290,041 $86,942 $347,768 $2,574,920 $11,928 $2,471,179
(A) These funds are or will be actively investing in new properties through acquisition and/or development activities, whereas the remaining funds do not expect to be actively investing in new properties. (B) We have a 50% ownership interest in and consolidate an entity that in turn owns 50% of an entity that is accounted for on the equity method (“Brazil Fund”). The Brazil Fund develops industrial properties in Brazil. During the fourth quarter of 2011, the Brazil Fund sold 90% of three properties to a third party and retained a 10% ownership interest in the properties (“Brazil JVs”). Therefore, we effectively own 25% of the Brazil Fund and 5% of the operating properties in the Brazil JVs, which are included in our Owned and Managed operating pool.
(C) Values represent Prologis’ stepped up basis and may not equal the entities stand alone financial statements.
Copyright © 2012 Prologis
23
Private Capital
Fund Operating and Balance Sheet Information
(dollars in thousands)
Fourth Quarter 2011 Report
Americas Europe Asia Total
FFO and Net Earnings (Loss) of the Unconsolidated Property Funds, Aggregated (A) (B) For the Three Months Ended December 31, 2011
Rental income $ 246,946 $ 117,175 $ 39,212 $ 403,332
Rental expenses(57,886)(35,001)(11,742)(104,629)
Net operating income from properties 189,060 82,174 27,470 298,703
Other income (expense) 628 8,691(1,133) 8,186
Gains (losses) on dispositions of investments in real estate, net(15,756)—-(15,756)
General and administrative expenses(6,297)(3,413)(4,421)(14,131)
Interest expense(95,995)(27,715)(8,861)(132,571)
Current income tax expense(139)(455)(188)(781)
FFO of the property funds 71,502 59,282 12,867 143,651
Real estate related depreciation and amortization(69,339)(36,404)(16,553)(122,296)
Gains (losses) on dispositions of investments in real estate, net(37,431) -(1,529)(38,960)
Deferred tax benefit (expense) and other income (expense), net 14,080(13,417) 3,655 4,317
Net earnings (loss) of the property funds $ (21,188) $ 9,461 $(1,560) $(13,289)
Prologis’ Share of FFO and Net Earnings (Loss) of the Unconsolidated Property Funds, Aggregated (A) For the Three Months Ended December 31, 2011
Prologis’ share of the property funds’ FFO $ 21,074 $ 16,875 $ 3,279 $ 41,228
Interest and preferred dividend income 1,044—57 1,101
Fees earned by Prologis 21,888 10,015 6,805 38,708
FFO recognized by Prologis $ 44,006 $ 26,890 $ 10,141 $ 81,038
Prologis’ share of the property f unds’ net earnings (loss) $ (1,891) $ 2,230 $(536) $(197)
Interest and preferred dividend income 1,044—57 1,101
Fees earned by Prologis 21,888 10,015 6,805 38,708
Net earnings recognized by Prologis $ 21,041 $ 12,245 $ 6,326 $ 39,613
Condensed Balance Sheet of the Unconsolidated Property Funds, Aggregated (A)(B) As of December 31, 2011
Operating industrial properties, before depreciation $ 12,966,744 $ 6,261,114 $ 2,039,881 $ 21,267,739
Accumulated depreciation(1,265,663)(299,204)(36,297)(1,601,164)
Properties under development and land 103,457 6,432 62,405 172,294
Other assets 431,494 243,499 179,077 854,070
Total assets $ 12,236,031 $ 6,211,841 $ 2,245,066 $ 20,692,939
Third party debt $ 5,952,828 2,275,778 1,061,435 $ 9,290,041
Other liabilities 433,614 483,099 112,518 1,029,231
Total liabilities $ 6,386,442 $ 2,758,877 $ 1,173,953 $ 10,319,272
Weighted average ow nership 28.2% 29.9% 19.4% 27.8%
(A) Includes the unconsolidated property funds listed on the previous page. (B) Represents the entire entity, not our proportionate share.
Copyright © 2012 Prologis
24
Capitalization
Debt and Equity Summary
(dollars and shares in millions) Fourth Quarter 2011 Report
Maturity Senior Debt Unsecured Convertible Debt Prologis Credit Facilities Secured Other Debt Mortgage Debt Consolidated Total Total Investees Debt Unconsolidated Consolidated Debt Investees Debt Prologis Total Debt Share of Total Debt Prologis Share ( %)
2012 $76 $458 — $162 $163 $859 $361 $1,220 $871 $2,091 $1,306 62.5%
2013 376 482 — 1 138 997 599 1,596 1,758 3,354 1,932 57.6%
2014 374 — 291 1 285 951 1,016 1,967 1,479 3,446 2,385 69.2%
2015 287 460 644 202 209 1,802 22 1,824 1,159 2,983 2,149 72.0%
2016 638 —— 1 174 813 137 950 1,389 2,339 1,207 51.6%
2017 700 —— 1 12 713 2 715 739 1,454 907 62.4%
2018 900 —— 1 151 1,052 64 1,116 650 1,766 1,225 69.4%
2019 647 —— 1 255 903 1 904 340 1,244 1,028 82.6%
2020 690 —— 1 10 701 1 702 402 1,104 804 72.8%
2021 ———— 172 172 1 173 333 506 264 52.2%
Thereafter ——— 10 143 153 2 155 139 294 193 65.6%
Subtotal 4,688 1,400 935 381 1,712 9,116 2,206 11,322 9,259 20,581 13,400 65.1%
Unamortized net (discounts) premiums 84 (85) 2 6 14 21 39 60 31 91 62 68.1%
Subtotal 4,772 1,315 937 387 1,726 9,137 2,245 11,382 9,290 20,672 $13,462 65.1%
Third party share of debt —————— (495) (495) (6,715) (7,210)
Prologis share of debt $4,772 $1,315 $937 $387 $1,726 $9,137 $1,750 $10,887 $2,575 $13,462
Prologis share of debt by local currency
Dollars $4,641 $1,315 $73 $19 $900 $6,948 $124 $7,072 $1,695 $8,767
Euro —— 537 204 16 757 1,263 2,020 560 2,580
GBP ———— — 363 363 115 533 478
Yen 131 — 327 164 788 1,410 — 1,410 192 1,602
Other ———— 22 22 — 22 13 35
Prologis share of debt $4,772 $1,315 $937 $387 $1,726 $9,137 $1,750 $10,887 $2,575 $13,462
Weighted average interest rate (A) 6.3% 4.8% 2.2% 2.4% 4.7% 5.2% 4.8% 5.1% 4.9% 5.0% 5.1%
Weighted average remaining maturity in years 5.6 1.6 3.0 3.2 5.6 4.6 2.2 4.2 3.9 4.1
Market Equity Preferred Stock Liquidity
Security Shares Price Value Series Dividend Rate Value
Common Stock 458.6 $29 $13,117 Series L 6.5% $49 Aggregate lender commitments $2,184
Partnership Units 3.4 $29 96 Series M 6.8% 58 Less:
Total 462.0 $13,213 Series O 7.0% 75 Borrowings outstanding 935
Series P 6.9% 50 Outstanding letters of credit 85
Series Q 8.5% 100 Current availability $1,164
Series R 6.8% 125
Series S 6.8% 125 Unrestricted cash 176
7.1% $582 Total liquidity $1,340
(A) Interest rate is based on the effective rate (which includes the amortization of related premiums and discounts) and weighted based on borrowings outstanding.
25 Copyright © 2012 Prologis
Capitalization
Debt Covenants and Other Metrics
(dollars in thousands) Fourth Quarter 2011 Report
Covenants as of December 31, 2011 (A)
Covenant Legacy AMB Indenture New Prologis Indenture Actual
Covenant Actual
Outstanding indebtedness to adjusted total assets <60% 37.9% <60% 37.9%
Fixed charge coverage ratio >1.5x 2.48x >1.5x 2.67x
Maximum secured debt to adjusted total assets <40% 10.6% <40% 10.6%
Unencumbered assets ratio to unsecured debt >150% 271.7% >150% 271.7%
Global Line
Covenant Actual
Maximum consolidated leverage to total asset value <60% 40.2%
Fixed charge coverage ratio >1.5x 2.37x
Unencumbered debt service coverage ratio >1.5x 2.93x
Maximum secured debt to total asset value <35% 12.3%
Minimum net worth >$10.0 billion $15.4 billion
Debt Metrics (B) (C)
2011
Fourth Quarter Third Quarter
Debt as % of gross real estate assets 44.1% 45.7%
Secured debt as % of gross real estate assets 17.9% 18.4%
Unencumbered gross real estate assets to unsecured debt 228.7% 221.9%
Fixed charge coverage ratio 2.07x 2.04x
Debt/Core EBITDA 8.73x 8.89x
Encumbrances as of December 31, 2011
Consolidated: Unencumbered Encumbered Total
Operating portfolio $ 14,101,948 $ 7,450,600 $ 21,552,548
Development portfolio 815,406 45,125 860,531
Land 1,949,690 34,543 1,984,233
Other real estate investments 390,225 — 390,225
Notes receivable backed by real estate — 322,834 322,834
Assets held for sale 267,819 177,031 444,850
Total consolidated 17,525,088 8,030,133 25,555,221
Unconsolidated operating portfolio—Prologis’ share 1,317,259 4,560,407 5,877,666
Unconsolidated development portfolio and land—Prologis’ share 54,563 4,972 59,535
Gross real estate assets $ 18,896,910 $ 12,595,512 $ 31,492,422
Secured and Unsecured Debt as of December 31, 2011
Unsecured Secured
Debt Mortgage Debt Total
Prologis debt $ 7,403,995 $ 1,711,882 $ 9,115,877
Consolidated investees debt 748,319 1,457,404 2,205,723
Third party share of consolidated debt (85,598) (402,867) (488,465)
Our share of unconsolidated investees debt 109,624 2,457,188 2,566,812
Total debt 8,176,340 5,223,607 13,399,947
Premium (discount)—consolidated 34,686 25,122 59,808
Third party share of premium (discount) (1,959) (4,246) (6,205)
Our share of premium (discount)—unconsolidated — 8,107 8,107
Total debt, net of premium (discount) $ 8,209,067 $ 5,252,590 $ 13,461,657
(A) These calculations are made in accordance with the respective debt agreements, may be different than other covenants or metrics presented and are not calculated in accordance with the applicable SEC rules.
(B) All metrics include both consolidated and Prologis share of unconsolidated investees. (C) See Notes and Definitions for calculation of amounts.
Copyright © 2012 Prologis
26
Capitalization
Assets Under Management
(in millions)
Fourth Quarter 2011 Report
50,000 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0
$ 27,258
Preferred Shares $582
Debt $13,462
Equity Cap $13,214
Total Enterprise Value
$ 43,280
Committed Equity/Investment $2,195
AUM Private Capital $24,742
Investors’ share of assets in JVs/funds $13,827
Prologis share of assets in JVs/funds $8,720
Direct owned and other assets $18,538
Assets Under Management
Total Enterprise Value $27,258
$ 43,280
Asia 12.0%
Europe 32.4%
Americas 55.6%
Total AUM by Division
Copyright © 2012 Prologis
27
Net Asset Value
Components
(in thousands, except for percentages and per square foot) Fourth Quarter 2011 Report
Real Estate Operations
Square Feet Gross Book Value GBV per Sq . Ft . NOI (Actual) Fourth Quarter NOI (Pro Forma) Fourth Quarter Annualized NOI Occupied Percent
CONSOLIDATED OPERATING PORT FOLIO
Properties generating net operating income
Americas 193,056 $ 12,831,435 $ 66 $ 184,746 $ 184,746 $ 738,984 94.2%
Europe 71,565 5,375,897 75 102,952 102,952 411,808 93.8%
Asia 13,910 2,624,244 189 37,631 37,631 150,524 94.9%
Pro forma adjustment for mid-quarter acquisitions/development completions 678 2,712
Sub-total 278,531 20,831,576 75 325,329 326,007 1,304,028 94.1%
Properties generating net operating loss
Americas 8,445 452,492 54 (2,920) 40.7%
Europe 4,075 268,480 66 (2,316) 11.4%
Sub-total 12,520 720,972 58 (5,236) 31.2%
Total consolidated portfolio 291,051 $ 21,552,548 $ 74 $ 320,093 $ 326,007 $ 1,304,028 91.4%
UNCONSOLIDATED OPERATING PORTFOLIO (Prologis Share)
Prologis interest in unconsolidated operating portfolio
Americas 54,189 $ 3,600,063 $ 66 $ 53,682 $ 53,682 $ 214,728 93.4%
Europe 20,086 1,881,174 94 28,068 28,068 112,272 94.1%
Asia 1,882 396,429 211 5,192 5,192 20,768 97.4%
Pro forma adjustment for mid-quarter acquisitions/development completions 299 1,196
Adjustment for North America Fund II (A) 18,000 72,000
Prologis share of unconsolidated operating portfolio 76,157 $ 5,877,666 $ 77 $ 86,942 $ 105,241 $ 420,964 93.7%
Total operating portfolio 367,208 $ 27,430,214 $ 75 $ 407,035 $ 431,248 $ 1,724,992 91.9%
Development
Square Feet Investment Balance TEI TEI per Sq F t . Annualized Pro Forma NOI Percent Occupied
CONSOLIDATED
Prestabilized
Americas 492 $ 41,200 $ 47,959 $ 97 $ 3,460 33.4%
Europe 206 14,163 16,129 78 1,640 0.0%
Asia 1,557 265,038 273,090 175 18,352 71.2% 6 .4%
Properties under development
Americas 2,016 100,298 168,304 83 12,781
Europe 2,245 123,515 176,614 79 14,965
Asia 2,921 316,317 484,798 166 34,318
Total consolidated 9,437 860,531 1,166,894 124 85,516
UNCONSOLIDATED (Prologis Share)
Development portfolio
Americas 707 26,681 63,478 90 7,925
Europe 55 1,912 4,730 86 401
Asia 289 7,484 13,647 47 1,267
Total unconsolidated 1,051 36,077 81,855 78 9,593
Total development portfolio 10,488 $ 896,608 $ 1,248,749 $ 119 $ 95,109
Development Platform (see development pages)
(A) An adjustment is made to reflect 100% of the NOI for this fund to account for our preferred interest.
28 Copyright © 2012 Prologis
Net Asset Value
Components—Continued
(in thousands) Fourth Quarter 2011 Report
Balance Sheet and Other Items
As of December 31, 2011
CONSOLIDATED
Other assets
Cash and cash equivalents $ 176,072
Restricted cash 71,992
Deposits, prepaid assets and other tangible assets 471,024
Other real estate investments 390,225
Accounts receivable 147,999
Notes receivable backed by real estate 322,834
Prologis receivable from unconsolidated property funds 35,237
Investments in and advances to other unconsolidated investees 386,576
Assets held for sale, net of liabilities 423,858
Total other assets $ 2,425,817
Other liabilities
Accounts payable and other current liabilities 639,490
Deferred income taxes 598,373
Value added tax and other tax liabilities 79,312
Tenant security deposits 158,544
Other liabilities 389,319
Noncontrolling interests 793,835
Total liabilities and noncontrolling interests $ 2,658,873
UNCONSOLIDATED
Prologis share of net assets (liabilities) $ 11,929
Land
Investment Balance
Original land basis $ 3,061,307
Current book value of land $ 1,984,233
Prologis share of book value of land in unconsolidated investees 23,458
Total $ 2,007,691
Private Capital / Development Management
Fourth Quarter Annualized
Private capital
Private capital revenue $ 40,230 $ 160,920
Private capital expenses (15,734) (62,936)
Profit margin $ 24,496 $ 97,984
Development management income $ 1,321
Debt and Preferred Stock
As of December 31, 2011
Consolidated debt—at par $ 11,321,600
Prologis share of unconsolidated debt—at par 2,566,812
13,888,412
Adjustment for North American Industrial Fund II (A) 783,504
Subtotal debt 14,671,916
Preferred stock 582,200
Total debt and preferred stock $ 15,254,116
Outstanding shares of common stock 458,644
(A) An adjustment is made to reflect 100% of the debt for this fund to account for our preferred interest.
29 Copyright © 2012 Prologis
Notes and Definitions
Fourth Quarter 2011 Report
Please refer to our annual and quarterly financial statements filed with the Securities and Exchange Commission on Forms 10-K and 10-Q and other public reports for further information about us and our business. Certain amounts from previous periods presented in the Supplemental Information have been reclassified to conform to the 2011 presentation.
Our real estate operations segment represents the direct, long-term ownership of industrial properties. Our investment strategy in this segment focuses primarily on the ownership and leasing of industrial properties in global and regional markets. Our intent is to hold and use these properties; however, depending on market and other conditions, we may contribute or sell these properties to property funds/co-investment ventures or sell to third parties. When we contribute or sell properties we have developed, we recognize FFO to the extent the proceeds received exceed our original investment (i.e. prior to depreciation) and present the results as Net Gains on Dispositions. In addition, we have industrial properties that are currently under development and land available for development that are part of this segment as well. We may develop the land or sell to third parties, depending on market conditions, customer demand and other factors. The private capital segment represents primarily the management of unconsolidated property funds and joint ventures and the properties they own.
On June 3, 2011, AMB Property Corporation (“AMB”) and ProLogis combined through a merger of equals (the “Merger”). As a result of the Merger, each outstanding ProLogis common share was converted into 0.4464 shares of AMB common stock. At the time of the Merger, AMB changed its name to Prologis, Inc. After consideration of all applicable factors pursuant to the business combination accounting rules, the Merger resulted in a reverse acquisition in which AMB was considered the “legal acquirer” and ProLogis was considered the “accounting acquirer”. As such, the historical results of ProLogis are included for the full period and AMB results are included from the date of the Merger going forward.
During the second quarter of 2011, we increased our ownership of ProLogis European Properties (“PEPR”), through open market purchases and a mandatory tender offer. On May 25, 2011, we settled on our mandatory tender offer. Pursuant to the tender offer and open-market purchases made during the tender period, we acquired an additional 96.5 million ordinary units and 2.7 million convertible preferred units of PEPR for an aggregate purchase price of approximately €615.5 million. We funded the aggregate purchases through borrowings under our existing credit facilities and a new €500 million bridge facility, which was subsequently repaid with proceeds received from our June equity offering.
After completion of the tender offer, we began consolidating PEPR and recognized a gain of €59.6 million ($85.9 million). Following the tender offer, and including open market purchases and our participation in new equity offerings through December 31, 2011, we owned approximately 93.7% of the voting ordinary units of PEPR and 94.9% of the convertible preferred units as of December 31, 2011.
We have preliminarily allocated the aggregate purchase price related to the Merger of $5.9 billion and PEPR of €1.1 billion ($1.6 billion) as set forth below. The allocations are based on our preliminary valuations, estimates and assumptions and are subject to change.
(amounts in thousands) Merger PEPR Total
Investments in real estate properties $ 8,172,814 $ 4,453,069 $ 12,625,883
Investments in and advances to unconsolidated investees 1,620,336—1,620,336
Cash, accounts receivable and other assets 687,857 251,826 939,683
Debt(3,646,719)(2,240,764)(5,887,483)
Accounts payable, accrued expenses and other liabilities(430,562)(703,541)(1,134,103)
Noncontrolling interests(547,277)(133,651)(680,928)
Total purchase price $ 5,856,449 $ 1,626,939 $ 7,483,388
Acquisition cost represents economic cost and not necessarily what is capitalized. It includes the initial purchase price; the effects of marking assumed debt to market; if applicable, all due diligence and closing costs, lease intangibles; and estimated acquisition capital expenditures including leasing costs to achieve stabilization.
Assets Held For Sale and Discontinued Operations. As of December 31, 2011, we had four land parcels and 35 operating properties that met the criteria to be presented as held for sale. The amounts included in Assets Held for Sale include real estate investment balances and the related assets and liabilities for each property.
During 2011, we disposed of 92 properties (most of which were non-development properties) aggregating 10.2 million square feet to third parties. During all of 2010, we disposed of land subject to ground leases and 205 properties aggregating 25.4 million square feet to third parties, two of which were development properties.
The operations of the properties held for sale and properties that were disposed of to third parties during a period, including the aggregate net gains or losses recognized upon their disposition, are presented as discontinued operations in our Consolidated Statements of Operations for all periods presented. The income attributable to these properties was as follows (in thousands):
Three Months Twelve Months
Ended Ended
December 31, December 31,
2011 2010 2011 2010
Rental income $ 13,881 $ 35,199 $ 59,583 $ 180,629
Rental expenses(1,965)(8,039)(12,564)(48,568)
Depreciation and amortization(5,925)(8,726)(18,561)(47,626)
Interest expense(139) -(551) -
Income attributable to disposed properties and assets held for
sale $ 5,852 $ 18,434 $ 27,907 $ 84,435
For purposes of our Consolidated Statements of FFO, we do not segregate discontinued operations. In addition, we include the gains and losses from disposition impairment charges of land parcels and development properties in the calculation of FFO, including those classified as discontinued operations.
Assets Under Management (“AUM”) represents the estimated value of the real estate we own or manage through our consolidated entities and unconsolidated investees. We calculate AUM by adding the noncontrolling interests’s share of the estimated fair value of the real estate investment to our share of total market capitalization.
Copyright © 2012 Prologis
30
Notes and Definitions
Fourth Quarter 2011 Report
Calculation of Per Share Amounts are as follows (in thousands, except per share amounts):
Three Months Ended December 31,
Twelve Months Ended December 31,
2011
2010
2011
2010
Net earnings (loss)
Net earnings (loss)
$ (45,459)
$ (1,166,589)
$ (188,110)
$ (1,295,920)
Noncontrolling interest attributable to convertible limited
partnership units -
Adjusted net earnings (loss)—Diluted
$ (45,459)
$ (1,166,589)
$ (188,110)
$ (1,295,920)
Weighted average common shares outstanding—Basic (a)
458,383
239,912
370,534
219,515
Incremental weighted average effect of conversion of limited
partnership units
-
Incremental weighted average effect of stock awards
-
Weighted average common shares outstanding—Diluted (a)
458,383
239,912
370,534
219,515
Net earnings (loss) per share—Basic
$ (0.10)
$ (4.86)
$ (0.51)
$ (5.90)
Net earnings (loss) per share—Diluted
$ (0.10)
$ (4.86)
$ (0.51)
$ (5.90)
FFO, as defined by Prologis
FFO, as defined by Prologis
$ 134,147
$ (1,154,157)
$ 411,688
$ (974,197)
Noncontrolling interest attributable to convertible limited
partnership units
108
-
289
-
FFO—Diluted, as defined by Prologis
$ 134,255
$ (1,154,157)
$ 411,977
$ (974,197)
Weighted average common shares outstanding—Basic (a)
458,383
239,912
370,534
219,515
Incremental weighted average effect of conversion of limited
partnership units
3,361
-
2,095
-
Incremental weighted average effect of stock awards
1,258
-
1,452
-
Weighted average common shares outstanding—Diluted (a)
463,002
239,912
374,081
219,515
FFO per share—Diluted, as defined by Prologis
$ 0.29
$ (4.81)
$ 1.10
$ (4.44)
Core FFO
Core FFO
$ 203,945
$ 99,380
$ 593,917
$ 281,386
Noncontrolling interest attributable to convertible limited
partnership units
108
(588)
289
(64)
Interest expense on convertible debt assumed converted
4,165
4,218
16,824
-
Core FFO—Diluted
$ 208,218
$ 103,010
$ 611,030
$ 281,322
Weighted average common shares outstanding—Basic (a)
458,383
239,912
370,534
219,515
Incremental weighted average effect of conversion of limited
partnership units
3,361
339
2,095
346
Incremental weighted average effect of stock awards
1,258
1,646
1,452
1,495
Incremental weighted average effect of conversion of certain
convertible debt
11,879
11,879
11,879
-
Weighted average common shares outstanding—Diluted (a)
474,881
253,776
385,960
221,356
Core FFO per share—Diluted
$ 0.44
$ 0.41
$ 1.58
$ 1.27
(a) The historical Prologis shares outstanding have been adjusted by the Merger exchange ratio of 0.4464. Amounts in 2011 include the assumed issuance of 254.8 million shares as of the Merger date.
Core EBITDA. We use Core EBITDA to measure both our operating performance and liquidity. We calculate Core EBITDA beginning with consolidated net earnings/loss and removing the affect of interest, income taxes, depreciation and amortization, impairment charges, gains or losses from the acquisition or disposition of investments in real estate, gains or losses on early extinguishment of debt and derivative contracts (including cash charges), similar adjustments we make to our Core FFO (see definition below), and other non-cash charges or gains (such as stock based compensation amortization and unrealized gains or losses on foreign currency and derivative activity), including our share of these items from unconsolidated investees.
We consider Core EBITDA to provide investors relevant and useful information because it permits investors to view income from operations on an unleveraged basis before the effects of income tax, non-cash depreciation and amortization expense and other items (including stock-based compensation amortization and certain unrealized gains and losses), gains or losses from the acquisition or disposition of investments in real estate, items that affect comparability, and other significant non-cash items. In 2011, we adjusted Core EBITDA to include a pro forma adjustment to reflect a full period of NOI on the operating properties we acquired through the Merger and PEPR acquisition and to exclude Merger, Acquisition and Other Integration Expenses and costs associated with the hurricane and tsunami that occurred in first quarter 2011 in Japan. By excluding interest expense EBITDA allows investors to measure our operating performance independent of our capital structure and indebtedness and, therefore, allows for a more meaningful comparison of our operating performance to that of other companies, both in the real estate industry and in other industries. Gains and losses on the early extinguishment of debt generally included the costs of repurchasing debt securities. Although difficult to predict, these items may be recurring given the uncertainty of the current economic climate and its adverse effects on the real estate and financial markets. While not infrequent or unusual in nature, these items result from market fluctuations that can have inconsistent effects on our results of operations. The economics underlying these items reflect market and financing conditions in the short-term but can obscure our performance and the value of our long-term investment decisions and strategies.
As a liquidity measure, we believe that Core EBITDA helps investors to analyze our ability to meet interest payment obligations and to make quarterly preferred share dividends. We believe that investors should consider Core EBITDA in conjunction with net income (the primary measure of our performance) and the other required Generally Accepted Accounting Principles (“GAAP”) measures of our performance and liquidity, to improve their understanding of our operating results and liquidity, and to make more meaningful comparisons of our performance against other companies. By using Core EBITDA an investor is assessing the earnings generated by our operations, but not taking into account the eliminated expenses or gains incurred in connection with such operations. As a result, Core EBITDA has limitations as an analytical tool and should be used in conjunction with our required GAAP presentations. Core EBITDA does not reflect our historical cash expenditures or future cash requirements for working capital, capital expenditures distribution requirements or contractual commitments. Core EBITDA, also does not reflect the cash required to make interest and principal payments on our outstanding debt.
While EBITDA is a relevant and widely used measure of operating performance and liquidity, it does not represent net income or cash flow from operations as defined by GAAP and it should not be considered as an alternative to those indicators in evaluating operating performance or liquidity. Further, our computation of Core EBITDA may not be comparable to EBITDA reported by other companies. We compensate for the limitations of Core EBITDA by providing investors with financial statements prepared according to GAAP, along with this detailed discussion of Core EBITDA and a reconciliation of Core EBITDA to consolidated net earnings (loss), a GAAP measurement.
31 Copyright © 2012 Prologis
Notes and Definitions
Fourth Quarter 2011 Report
Debt Metrics. See below for the detailed calculations for the three months ended for the respective period (dollars in thousands):
Three Months Ended
Dec. 31 Sept. 30
2011 2011
Debt as a % of gross real estate assets:
Total debt $ 13,888,412 $ 14,662,221
Gross real estate assets $ 31,492,422 $ 32,118,465
Debt as a % of gross real estate assets 44.1% 45.7%
Secured debt as a % of gross real estate assets:
Secured debt $ 5,626,474 $ 5,923,718
Gross real estate assets $ 31,492,422 $ 32,118,465
Secured debt as a % of gross real estate assets 17.9% 18.4%
Unencumbered gross real estate assets to unsecured debt:
Unencumbered gross real estate assets $ 18,896,910 $ 19,391,215
Unsecured debt $ 8,261,938 $ 8,738,503
Unencumbered gross real estate assets to unsecured debt 228.7% 221.9%
Fixed Charge Coverage ratio:
Core EBITDA $ 397,629 $ 412,192
Interest expense $ 129,341 $ 136,064
Amortization and write-off of deferred loan costs(4,316)(3,572)
Amortization of debt premium (discount), net 5,682 7,079
Capitalized interest 14,090 14,753
Preferred stock dividends 10,276 10,409
Our share of fixed charges from unconsolidated entities 37,003 37,187
Total fixed charges $ 192,076 $ 201,920
Fixed charge coverage ratio 2.07x 2.04x
Debt to Core EBITDA:
Total debt, including our share of unconsolidated investees $ 13,888,412 $ 14,662,221
Core EBITDA-annualized $ 1,590,516 $ 1,648,768
Debt to Core EBITDA ratio 8.73x 8.89x
Committed Equity/Investment is our estimate of the gross real estate, which could be acquired through the use of the equity commitments from our property fund or co-investment venture partners, plus our funding obligations and estimated debt capitalization.
FFO; FFO, as defined by Prologis; Core FFO; AFFO (collectively referred to as “FFO”). FFO is a non-GAAP measure that is commonly used in the real estate industry. The most directly comparable GAAP measure to FFO is net earnings. Although the National Association of Real Estate Investment Trusts (“NAREIT”) has published a definition of FFO, modifications to the NAREIT calculation of FFO are common among REITs, as companies seek to provide financial measures that meaningfully reflect their business.
FFO is not meant to represent a comprehensive system of financial reporting and does not present, nor do we intend it to present, a complete picture of our financial condition and operating performance. We believe net earnings computed under GAAP remains the primary measure of
performance and that FFO is only meaningful when it is used in conjunction with net earnings computed under GAAP. Further, we believe our consolidated financial statements, prepared in accordance with GAAP, provide the most meaningful picture of our financial condition and our operating performance.
NAREIT’s FFO measure adjusts net earnings computed under GAAP to exclude historical cost depreciation and gains and losses from the sales and impairment charges of previously depreciated properties. We agree that these two NAREIT adjustments are useful to investors for the following reasons: (i) historical cost accounting for real estate assets in accordance with GAAP assumes, through depreciation charges, that the value of real estate assets diminishes predictably over time.
NAREIT stated in its White Paper on FFO “since real estate asset values have historically risen or fallen with market conditions, many industry investors have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves.” Consequently, NAREIT’s definition of FFO reflects the fact that real estate, as an asset class, generally appreciates over time and depreciation charges required by GAAP do not reflect the underlying economic realities.
(ii) REITs were created as a legal form of organization in order to encourage public ownership of real estate as an asset class through investment in firms that were in the business of long-term ownership and management of real estate. The exclusion, in NAREIT’s definition of FFO, of gains and losses from the sales of previously depreciated operating real estate assets allows investors and analysts to readily identify the operating results of the long-term assets that form the core of a REIT’s activity and assists in comparing those operating results between periods. We include the gains and losses from dispositions of land and development properties, as well as our proportionate share of the gains and losses from dispositions recognized by our unconsolidated investees, in our definition of FFO.
Our FFO Measures
At the same time that NAREIT created and defined its FFO measure for the REIT industry, it also recognized that “management of each of its member companies has the responsibility and authority to publish financial information that it regards as useful to the financial community.” We believe stockholders, potential investors and financial analysts who review our operating results are best served by a defined FFO measure that includes other adjustments to net earnings computed under GAAP in addition to those included in the NAREIT defined measure of FFO. Our FFO measures are used by management in analyzing our business and the performance of our properties and we believe that it is important that stockholders, potential investors and financial analysts understand the measures management uses.
We use these FFO measures, including by segment and region, to: (i) evaluate our performance and the performance of our properties in comparison to expected results and results of previous periods, relative to resource allocation decisions; (ii) evaluate the performance of our management; (iii) budget and forecast future results to assist in the allocation of resources; (iv) assess our performance as compared to similar real estate companies and the industry in general; and (v) evaluate how a specific potential investment will impact our future results. Because we make decisions with regard to our performance with a long-term outlook, we believe it is appropriate to remove the effects of short-term items that we do not expect to affect the underlying long-term performance of the properties. The long-term performance of our properties is principally driven by rental income. While not infrequent or unusual, these additional items we exclude in calculating FFO, as defined by Prologis, are subject to significant fluctuations from period to period that cause both positive and negative short-term effects on our results of operations, in inconsistent and unpredictable directions that are not relevant to our long-term outlook.
We use our FFO measures as supplemental financial measures of operating performance. We do not use our FFO measures as, nor should they be considered to be, alternatives to net earnings computed under GAAP, as indicators of our operating performance, as alternatives to cash from operating activities computed under GAAP or as indicators of our ability to fund our cash needs.
Copyright © 2012 Prologis
32
FFO, as defined by Prologis
To arrive at FFO, as defined by Prologis, we adjust the NAREIT defined FFO measure to exclude: (i) deferred income tax benefits and deferred income tax expenses recognized by our subsidiaries; (ii) current income tax expense related to acquired tax liabilities that were recorded as deferred tax liabilities in an acquisition, to the extent the expense is offset with a deferred income tax benefit in GAAP earnings that is excluded from our defined FFO measure; (iii) foreign currency exchange gains and losses resulting from debt transactions between us and our foreign consolidated subsidiaries and our foreign unconsolidated investees; (iv) foreign currency exchange gains and losses from the remeasurement (based on current foreign currency exchange rates) of certain third party debt of our foreign consolidated subsidiaries and our foreign unconsolidated investees; and (v) mark-to-market adjustments associated with derivative financial instruments.
We calculate FFO, as defined by Prologis for our unconsolidated investees on the same basis as we calculate our FFO, as defined by Prologis.
We believe investors are best served if the information that is made available to them allows them to align their analysis and evaluation of our operating results along the same lines that our management uses in planning and executing our business strategy.
FFO, excluding significant non-cash items
When we began to experience the effects of the global economic crises in the fourth quarter of 2008, we decided that FFO, as defined by Prologis, did not provide all of the information we needed to evaluate our business in this environment. As a result, we developed FFO, excluding significant non-cash items to provide additional information that allowed us to better evaluate our operating performance during that unprecedented economic time. Beginning in 2011, we no longer use FFO, excluding significant non-cash items.
Core FFO
Core FFO includes FFO, as defined by Prologis, adjusted to remove gains (losses) on acquisitions or dispositions of investments in real estate that are included in FFO, as defined by Prologis. If we recognize impairment charges due to the expected disposition of investments in real estate, we exclude those impairment charges. We may also adjust for certain other significant items that affect comparability as noted in the reconciliation. In 2011, we have adjusted to exclude Merger, Acquisitions and Other Integration Expenses; early extinguishment of debt; and losses for the disaster expenses that occurred in March 2011 in Japan.
AFFO
To arrive at AFFO, we adjust Core FFO to further exclude; (i) straight-line rents; (ii) amortization of above- and below-market lease intangibles; (iii) recurring capital expenditures; (iv) amortization of management contracts; (v) amortization of debt premiums and discounts, net of amounts capitalized, and; (vi) stock compensation expense.
We believe AFFO provides a meaningful indicator of our ability to fund cash needs, including cash distributions to our stockholders.
Limitations on Use of our FFO Measures
While we believe our defined FFO measures are important supplemental measures, neither NAREIT’s nor our measures of FFO should be used alone because they exclude significant economic components of net earnings computed under GAAP and are, therefore, limited as an analytical tool. Accordingly, they are two of many measures we use when analyzing our business. Some of these limitations are:
• The current income tax expenses that are excluded from our defined FFO measures represent the taxes that are payable.
• Depreciation and amortization of real estate assets are economic costs that are excluded from FFO. FFO is limited, as it does not reflect the cash requirements that may be necessary for future replacements of the real estate assets. Further, the amortization of capital expenditures and leasing costs necessary to maintain the operating performance of industrial properties are not reflected in FFO.
• Gains or losses from property acquisitions and dispositions or impairment charges related to expected dispositions represent changes in the value of the properties. By excluding these gains and losses, FFO does not capture realized changes in the value of acquired or disposed properties arising from changes in market conditions.
• The deferred income tax benefits and expenses that are excluded from our defined FFO measures result from the creation of a deferred income tax asset or liability that may have to be settled at some future point. Our defined FFO measures do not currently reflect any income or expense that may result from such settlement.
• The foreign currency exchange gains and losses that are excluded from our defined FFO measures are generally recognized based on movements in foreign currency exchange rates through a specific point in time. The ultimate settlement of our foreign currency-denominated net assets is indefinite as to timing and amount. Our FFO measures are limited in that they do not reflect the current period changes in these net assets that result from periodic foreign currency exchange rate movements.
• Certain items that are adjusted out of net income(loss) in our FFO measures, such as merger and integration expenses, recurring capital expenditures and other expenses, reflect cash expenditures or items that may need to be paid in cash again at some point.
We compensate for these limitations by using our FFO measures only in conjunction with net earnings computed under GAAP when making our decisions. To assist investors in compensating for these limitations, we reconcile our defined FFO measures to our net earnings computed under GAAP. This information should be read with our complete financial statements prepared under GAAP.
Fixed Charge Coverage is defined as Core EBITDA divided by total fixed charges. Fixed charges consist of net interest expense adjusted for amortization of finance costs and debt discount (premium), capitalized interest, and preferred stock dividends. Prologis uses fixed charge coverage to measure its liquidity. Prologis believes that the fixed charge coverage is relevant and useful to investors because it allows fixed income investors to measure Prologis’ ability to meet its interest payments on outstanding debt, make distributions to its preferred unitholders and pay dividends to its preferred stockholders. Prologis’ computation of fixed charge coverage is not calculated in accordance with applicable SEC rules and may not be comparable to fixed charge coverage reported by other companies.
General and Administrative Expenses (“G&A”) consisted of the following (in thousands):
Three Months Ended December 31, Twelve Months Ended December 31,
2011 2010 2011 2010
Gross G&A expense $ 89,259 $ 76,404 $ 332,632 $ 266,932
Reported as rental expense (7,484) (4,888) (24,741) (19,709)
Reported as private capital expenses (15,734) (10,580) (54,962) (40,659)
Capitalized amounts (15,244) (10,841) (57,768) (40,583)
Net G&A $ 50,797 $ 50,095 $ 195,161 $ 165,981
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Notes and Definitions
Fourth Quarter 2011 Report
Global Markets comprise the largest, most liquid markets benefiting from demand tied to global trade. These markets are defined by large population centers with high consumption per capita and typically feature major seaports, airports, and other transportation infrastructure tied to global trade. While initial returns might be lower, global markets tend to outperform overall markets in terms of growth and total return.
Interest Expense consisted of the following (in thousands):
Three Months Ended Twelve Months Ended
December 31, December 31,
2011 2010 2011 2010
Gross interest expense $ 144,797 $ 102,764 $ 500,685 $ 435,289
Amortization of discount (premium), net(5,682) 8,724 228 47,136
Amortization of deferred loan costs 4,316 12,375 20,476 32,402
Interest expense before capitalization 143,431 123,863 521,389 514,827
Capitalized amounts(14,090)(11,829)(52,651)(53,661)
Net interest expense $ 129,341 $ 112,034 $ 468,738 $ 461,166
Market Equity is defined as the total number of outstanding shares of our common stock and common limited partnership units multiplied by the closing price per share of our common stock at period end.
Merger, Acquisition and Other Integration Expenses. In connection with the Merger, we have incurred and expect to incur additional significant transaction, integration, and transitional costs. These costs include investment banker advisory fees; legal, tax, accounting and valuation fees; termination and severance costs (both cash and stock based compensation awards) for terminated and transitional employees; system conversion; and other integration costs. Certain of these costs were obligations of AMB and were expensed prior to the closing of the Merger by AMB. The remainder of the costs will be expensed by us as incurred, which in some cases will be through the end of 2012. At the time of the Merger, we cancelled our existing credit facilities and wrote-off the remaining unamortized deferred loan costs associated with such facilities, which is included in Merger, Acquisition and Other Integration Expenses. In addition, we have included costs associated with the acquisition of a controlling interest in PEPR and reduction in workforce charges associated with dispositions made in 2011. The following is a breakdown of the costs incurred (in thousands):
Three Months Ended Twelve Months Ended
December 31 December 31
2011 2011
Professional Fees $ 4,069 $ 46,467
Termination, severance and transitional employee costs 13,001 58,445
Office closure, travel and other costs 1,702 24,714
Write-off of deferred loan costs—10,869
Total $ 18,772 $ 140,495
Net Asset Value (“NAV”). We consider NAV to be a useful supplemental measure of our operating performance because it enables both management and investors to estimate the fair value of our business. The assessment of the fair value of a particular segment of our business is subjective in that it involves estimates and can be calculated using various methods. Therefore, in this supplemental report, we have presented the financial results and investments related to our business segments that we believe are important in calculating our NAV but have not presented any specific methodology nor provided any guidance on the assumptions or estimates that should be used in the calculation.
The components of NAV do not consider the potential changes in rental and fee income streams or the franchise value associated with our global operating platform, private capital platform, or development platform.
Net Gains on Acquisitions and Dispositions of Investments in Real Estate includes the gains we recognized from the consolidation of PEPR and the acquisition of a controlling interest in a joint venture in Japan, both in the second quarter of 2011.
Net Operating Income (“NOI”) represents rental income less rental expenses.
Operating Portfolio includes stabilized operating industrial properties we own or that we manage and are owned by an unconsolidated investee accounted for by the equity method of accounting.
Operating Segments – Real Estate Operations represents the direct long-term ownership of industrial properties, including land and the development of properties.
Operating Segments – Private Capital represents the management of unconsolidated property funds/co-investment ventures and other joint ventures and the properties they own.
Pre-stabilized Development represents properties that are complete but have not yet reached Stabilization.
Pro forma NOI reflects the NOI for a full quarter of operating properties that were acquired, contributed or stabilized during the quarter. Pro forma NOI for the properties in our development portfolio is based on current total expected investment and an estimated stabilized yield.
A reconciliation of our rental income and rental expenses, computed under GAAP, to adjusted net operating income (NOI) for the operating portfolio for purposes of the Net Asset Value calculation is as follows:
(in thousands)
Calculation of pro forma NOI:
Rental income $ 442,581
Rental expenses(118,300)
NOI 324,281
Net termination fees and adjustments (a)(504)
Less: Actual NOI for development portfolio and other(675)
Less: NOI on contributed properties (b)(3,009)
Adjusted NOI for operating portfolio owned at December 31, 2011 320,093
-Straight lined rents and amortization of lease intangibles (c)(6,090)
NOI for operating portfolio owned at December 31, 2011—Cash $ 314,003
(a) Net termination fees generally represent the gross fee negotiated at the time a customer is allowed to terminate its lease agreement offset by that customer’s rent leveling asset or liability, if any, that has been previously recognized under GAAP. Removing the net termination fees from rental income allows for the calculation of pro forma NOI to include only rental income that is indicative of the property’s recurring operating performance.
(b) The actual NOI for properties that were contributed and not part of discontinued operations during the three- month period is removed.
(c) Straight-lined rents and amortization of above and below market leases are removed from rental income computed under GAAP to allow for the calculation of a cash yield.
Regional Markets, similar to global markets, also benefit from large-population centers and demand. They are located at key crossroads in the supply chain and/or near economic centers for leading national or global industries. Our assets reflect the highest quality class-A product in that market and are often less supply- constrained and focus on delivering bulk goods to customers.
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Rental Income includes the following (in thousands):
Three Months Ended December 31, Twelve Months Ended December 31,
2011 2010 2011 2010
Rental income $ 347,848 $ 143,531 $ 1,062,098 $ 547,259
Amortization of lease intangibles (9,030) (189) (22,736) (495)
Rental expense recoveries 88,643 40,006 283,081 160,962
Straight-lined rents 15,120 9,203 54,393 36,814
$ 442,581 $ 192,551 $ 1,376,836 $ 744,540
Same Store. We evaluate the operating performance of the industrial operating properties we own and manage using a “same store” analysis because the population of properties in this analysis is consistent from period to period, thereby eliminating the effects of changes in the composition of the portfolio on performance measures. We include all consolidated properties, and properties owned by property funds and joint ventures that are managed by us and in which we have an equity interest (referred to as “unconsolidated investees”), in our same store analysis. We have defined the same store portfolio, for the quarter ended December 31, 2011, as those operating properties in operation at January 1, 2010 that were in operation throughout the full periods in both 2011 and 2010 either by Prologis or AMB or their unconsolidated investees. We have removed all properties that were disposed of to a third party from the population for both periods. We believe the factors that impact rental income, rental expenses and net operating income in the same store portfolio are generally the same as for the total operating portfolio. In order to derive an appropriate measure of period-to-period operating performance, we remove the effects of foreign currency exchange rate movements by using the current exchange rate to translate from local currency into U.S. dollars, for both periods, to derive the same store results.
Same Store Average Occupancy represents the average occupied percentage for the period.
Same Store Rental Expense represents gross property operating expenses. In computing the percentage change in rental expenses for the same store analysis, rental expenses include property management expenses for our direct owned properties based on the property management fee that has been computed as provided in the individual agreements under which our wholly owned management companies provide property management services to each property (generally, the fee is based on a percentage of revenues).
Same Store Change in Rental Rate represents the change in effective rental rates (average rate over the lease term) on new leases signed during the period as compared with the previous effective rental rates in that same space.
Same Store Rental Income includes the amount of rental expenses that are recovered from customers under the terms of their respective lease agreements. In computing the percentage change in rental income for the same store analysis, rental income (as computed under GAAP) is adjusted to remove the net termination fees recognized for each period. Removing the net termination fees for the same store calculation allows us to evaluate the growth or decline in each property’s rental income without regard to items that are not indicative of the property’s recurring operating performance.
Stabilization is defined when a property that was developed has been completed for one year or is 90% occupied. Upon stabilization, a property is moved into our operating portfolio.
Tenant Retention is the square footage of all leases rented by existing tenants divided by the square footage of all expiring and rented leases during the reporting period, excluding the square footage of tenants that default or buy-out prior to expiration of their lease, short-term tenants and the square footage of month-to-month leases.
Total Estimated Investment (“TEI”) represents total estimated cost of development or expansion, including land, development and leasing costs. TEI is based on current projections and is subject to change. Non-U.S. Dollar investments are translated to U.S. Dollars using the exchange rate at period end or the date of development start for purposes of calculating development starts in any period.
Total Market Capitalization is defined as market equity plus our share of total debt and preferred stock.
Turnover Costs represent the costs incurred in connection with the signing of a lease, including leasing commissions and tenant improvements. Tenant improvements include costs to prepare a space for a new tenant and for a lease renewal with the same tenant. It excludes costs to prepare a space that is being leased for the first time (i.e. in a new development property).
Value Creation represents the value that will be created through our development and leasing activities at stabilization. We calculate value by estimating the NOI that the property will generate at Stabilization and applying an estimated stabilized cap rate applicable to that property. The value creation is calculated as the amount by which the estimated value exceeds our total expected investment and does not include any fees or promotes we may earn.
Weighted Average Estimated Stabilized Yield is calculated as NOI adjusted to reflect stabilized occupancy divided by Acquisition Cost or TEI, as applicable.
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