pld-10q_20170331.htm

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website; if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter periods that the registrant was required to submit and post such files).

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

The number of shares of Prologis, Inc.’s common stock outstanding at April 21, 2017, was approximately 530,315,000.

This report combines the quarterly reports on Form 10-Q for the period ended March 31, 2017, of Prologis, Inc. and Prologis, L.P. Unless stated otherwise or the context otherwise requires, references to “Prologis, Inc.” or the “Parent” mean Prologis, Inc. and its consolidated subsidiaries; and references to “Prologis, L.P.” or the “Operating Partnership” mean Prologis, L.P., and its consolidated subsidiaries. The terms “the Company,” “Prologis,” “we,” “our” or “us” means the Parent and the Operating Partnership collectively.

The Parent is a real estate investment trust (“REIT”) and the general partner of the Operating Partnership. At March 31, 2017, the Parent owned an approximate 97.31% common general partnership interest in the Operating Partnership and 100% of the preferred units in the Operating Partnership. The remaining approximate 2.69% common limited partnership interests are owned by nonaffiliated investors and certain current and former directors and officers of the Parent. As the sole general partner of the Operating Partnership, the Parent has complete responsibility and discretion in the day-to-day management and control of the Operating Partnership.

We operate the Parent and the Operating Partnership as one enterprise. The management of the Parent consists of the same members as the management of the Operating Partnership. These members are officers of the Parent and employees of the Operating Partnership or one of its subsidiaries. As general partner with control of the Operating Partnership, the Parent consolidates the Operating Partnership for financial reporting purposes. Because the only significant asset of the Parent is its investment in the Operating Partnership, the assets and liabilities of the Parent and the Operating Partnership are the same on their respective financial statements.

We believe combining the quarterly reports on Form 10-Q of the Parent and the Operating Partnership into this single report results in the following benefits:

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

The presentation of noncontrolling interests, stockholders’ equity and partners’ capital are the main areas of difference between the consolidated financial statements of the Parent and those of the Operating Partnership. The preferred stock, common stock, additional paid-in capital, accumulated other comprehensive loss and distributions in excess of net earnings of the Parent are presented as stockholders’ equity in the Parent’s consolidated financial statements. These items represent the common and preferred general partnership interests held by the Parent in the Operating Partnership and are presented as general partner’s capital within partners’ capital in the Operating Partnership’s consolidated financial statements. The common limited partnership interests held by the limited partners in the Operating Partnership are presented as noncontrolling interest within equity in the Parent’s consolidated financial statements and as limited partners’ capital within partners’ capital in the Operating Partnership’s consolidated financial statements. The differences in the presentations between stockholders’ equity and partners’ capital result from the differences in the equity and capital issuances at the Parent and Operating Partnership levels.

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


	March 31, 2017			December 31,
	(Unaudited)			2016
ASSETS
Investments in real estate properties	$	27,131,229		$	27,119,330
Less accumulated depreciation		3,914,817			3,758,372
Net investments in real estate properties		23,216,412			23,360,958
Investments in and advances to unconsolidated entities		4,305,881			4,230,429
Assets held for sale or contribution		439,743			322,139
Notes receivable backed by real estate		17,006			32,100
Net investments in real estate		27,979,042			27,945,626

Cash and cash equivalents		395,829			807,316
Other assets		1,440,087			1,496,990
Total assets	$	29,814,958		$	30,249,932

LIABILITIES AND EQUITY
Liabilities:
Debt	$	10,966,932		$	10,608,294
Accounts payable and accrued expenses		549,836			556,179
Other liabilities		629,769			627,319
Total liabilities		12,146,537			11,791,792

Equity:
Prologis, Inc. stockholders’ equity:
Series Q preferred stock at stated liquidation preference of $50 per share: $0.01 par value; 1,565 shares issued and outstanding and 100,000 preferred shares authorized at March 31, 2017, and December 31, 2016		78,235			78,235
Common stock: $0.01 par value; 530,213 shares and 528,671 shares issued and outstanding at March 31, 2017, and December 31, 2016, respectively		5,302			5,287
Additional paid-in capital		19,246,762			19,455,039
Accumulated other comprehensive loss		(943,282	)		(937,473	)
Distributions in excess of net earnings		(3,640,150	)		(3,610,007	)
Total Prologis, Inc. stockholders’ equity		14,746,867			14,991,081
Noncontrolling interests		2,921,554			3,467,059
Total equity		17,668,421			18,458,140
Total liabilities and equity	$	29,814,958		$	30,249,932

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

	Three Months Ended
	March 31,
	2017			2016
Revenues:
Rental	$	439,884		$	437,104
Rental recoveries		127,049			117,012
Strategic capital		57,045			51,003
Development management and other		5,177			1,181
Total revenues		629,155			606,300
Expenses:
Rental		152,656			146,581
Strategic capital		31,799			25,293
General and administrative		53,617			50,543
Depreciation and amortization		226,591			250,000
Other		2,606			4,685
Total expenses		467,269			477,102

Operating income		161,886			129,198

Other income (expense):
Earnings from unconsolidated entities, net		48,605			58,311
Interest expense		(72,912	)		(80,812	)
Interest and other income, net		2,785			2,591
Gains on dispositions of investments in real estate, net		97,325			144,317
Foreign currency and derivative losses, net		(7,400	)		(14,211	)
Losses on early extinguishment of debt, net		-			(1,052	)
Total other income		68,403			109,144
Earnings before income taxes		230,289			238,342
Total income tax expense		9,600			15,537
Consolidated net earnings		220,689			222,805
Less net earnings attributable to noncontrolling interests		15,760			13,075
Net earnings attributable to controlling interests		204,929			209,730
Less preferred stock dividends		1,674			1,689
Net earnings attributable to common stockholders	$	203,255		$	208,041

Weighted average common shares outstanding – Basic		528,721			524,205
Weighted average common shares outstanding – Diluted		550,010			543,562

Net earnings per share attributable to common stockholders – Basic	$	0.38		$	0.40

Net earnings per share attributable to common stockholders – Diluted	$	0.38		$	0.39

Dividends per common share	$	0.44		$	0.42

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

	Three Months Ended
	March 31,
	2017			2016
Consolidated net earnings	$	220,689		$	222,805
Other comprehensive income (loss):
Foreign currency translation gains, net		39,667			1,461
Unrealized gains (losses) on derivative contracts, net		2,631			(15,892	)
Comprehensive income		262,987			208,374
Net earnings attributable to noncontrolling interests		(15,760	)		(13,075	)
Other comprehensive income attributable to noncontrolling interests		(48,107	)		(8,040	)
Comprehensive income attributable to common stockholders	$	199,120		$	187,259

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

			Common Stock							Accumulated			Distributions
			Number				Additional			Other			in Excess of			Non-
	Preferred		of		Par		Paid-in			Comprehensive			Net			controlling			Total
	Stock		Shares		Value		Capital			Loss			Earnings			Interests			Equity
Balance at January 1, 2017	$	78,235		528,671	$	5,287	$	19,455,039		$	(937,473	)	$	(3,610,007	)	$	3,467,059		$	18,458,140
Consolidated net earnings		-		-		-		-			-			204,929			15,760			220,689
Effect of equity compensation plans		-		930		9		(1,239	)		-			-			8,286			7,056
Settlement of noncontrolling interests		-		-		-		(201,797	)		-			-			(588,006	)		(789,803	)
Conversion of noncontrolling interests		-		612		6		17,229			-			-			(17,235	)		-
Foreign currency translation gains (losses), net		-		-		-		-			(8,369	)		-			48,036			39,667
Unrealized gains on derivative contracts, net		-		-		-		-			2,560			-			71			2,631
Reallocation of equity		-		-		-		(22,457	)		-			-			22,457			-
Distributions and other		-		-		-		(13	)		-			(235,072	)		(34,874	)		(269,959	)
Balance at March 31, 2017	$	78,235		530,213	$	5,302	$	19,246,762		$	(943,282	)	$	(3,640,150	)	$	2,921,554		$	17,668,421

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

	Three Months Ended
	March 31,
	2017			2016
Operating activities:
Consolidated net earnings	$	220,689		$	222,805
Adjustments to reconcile net earnings to net cash provided by operating activities:
Straight-lined rents and amortization of above and below market leases		(25,497	)		(20,283	)
Equity-based compensation awards		18,380			12,465
Depreciation and amortization		226,591			250,000
Earnings from unconsolidated entities, net		(48,605	)		(58,311	)
Distributions from unconsolidated entities		77,347			80,088
Net changes in operating receivables from unconsolidated entities		3,880			30,599
Amortization of debt premiums, net of debt issuance costs		(2,905	)		(5,391	)
Gains on dispositions of investments in real estate, net		(97,325	)		(144,317	)
Unrealized foreign currency and derivative losses, net		12,078			15,079
Losses on early extinguishment of debt, net		-			1,052
Deferred income tax expense (benefit)		2,439			(619	)
Increase in accounts receivable and other assets		33,470			11,455
Decrease in accounts payable and accrued expenses and other liabilities		(67,748	)		(110,746	)
Net cash provided by operating activities		352,794			283,876
Investing activities:
Real estate development		(320,986	)		(343,955	)
Real estate acquisitions		(132,358	)		(67,346	)
Tenant improvements and lease commissions on previously leased space		(40,278	)		(41,569	)
Nondevelopment capital expenditures		(10,851	)		(10,721	)
Proceeds from dispositions and contributions of real estate properties		542,192			603,387
Investments in and advances to unconsolidated entities		(106,658	)		(117,017	)
Return of investment from unconsolidated entities		108,543			111,141
Proceeds from repayment of notes receivable backed by real estate		15,094			197,500
Proceeds from the settlement of net investment hedges		1,789			869
Net cash provided by investing activities		56,487			332,289
Financing activities:
Proceeds from issuance of common stock		1,899			1,192
Dividends paid on common and preferred stock		(235,072	)		(222,559	)
Noncontrolling interests contributions		-			256
Noncontrolling interests distributions		(35,989	)		(78,888	)
Purchase of noncontrolling interests		(789,803	)		(2,128	)
Tax paid for shares withheld		(19,179	)		(7,268	)
Debt and equity issuance costs paid		(735	)		(315	)
Net proceeds from (payments on) credit facilities		(33,745	)		302,983
Repurchase and payments of debt		(201,800	)		(809,309	)
Proceeds from issuance of debt		485,496			299,497
Net cash used in financing activities		(828,928	)		(516,539	)

Effect of foreign currency exchange rate changes on cash		8,160			6,031
Net increase (decrease) in cash and cash equivalents		(411,487	)		105,657
Cash and cash equivalents, beginning of period		807,316			264,080
Cash and cash equivalents, end of period	$	395,829		$	369,737

See Note 11 for information on noncash investing and financing activities and other information.

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


	March 31, 2017		December 31,
	(Unaudited)		2016
ASSETS
Investments in real estate properties	$	27,131,229	$	27,119,330
Less accumulated depreciation		3,914,817		3,758,372
Net investments in real estate properties		23,216,412		23,360,958
Investments in and advances to unconsolidated entities		4,305,881		4,230,429
Assets held for sale or contribution		439,743		322,139
Notes receivable backed by real estate		17,006		32,100
Net investments in real estate		27,979,042		27,945,626

Cash and cash equivalents		395,829		807,316
Other assets		1,440,087		1,496,990
Total assets	$	29,814,958	$	30,249,932

LIABILITIES AND CAPITAL
Liabilities:
Debt	$	10,966,932	$	10,608,294
Accounts payable and accrued expenses		549,836		556,179
Other liabilities		629,769		627,319
Total liabilities		12,146,537		11,791,792

Capital:
Partners’ capital:
General partner – preferred		78,235		78,235
General partner – common		14,668,632		14,912,846
Limited partners – common		166,902		150,173
Limited partners – Class A common		238,637		244,417
Total partners’ capital		15,152,406		15,385,671
Noncontrolling interests		2,516,015		3,072,469
Total capital		17,668,421		18,458,140
Total liabilities and capital	$	29,814,958	$	30,249,932

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

	Three Months Ended
	March 31,
	2017			2016
Revenues:
Rental	$	439,884		$	437,104
Rental recoveries		127,049			117,012
Strategic capital		57,045			51,003
Development management and other		5,177			1,181
Total revenues		629,155			606,300
Expenses:
Rental		152,656			146,581
Strategic capital		31,799			25,293
General and administrative		53,617			50,543
Depreciation and amortization		226,591			250,000
Other		2,606			4,685
Total expenses		467,269			477,102

Operating income		161,886			129,198

Other income (expense):
Earnings from unconsolidated entities, net		48,605			58,311
Interest expense		(72,912	)		(80,812	)
Interest and other income, net		2,785			2,591
Gains on dispositions of investments in real estate, net		97,325			144,317
Foreign currency and derivative losses, net		(7,400	)		(14,211	)
Losses on early extinguishment of debt, net		-			(1,052	)
Total other income		68,403			109,144
Earnings before income taxes		230,289			238,342
Total income tax expense		9,600			15,537
Consolidated net earnings		220,689			222,805
Less net earnings attributable to noncontrolling interests		10,137			6,841
Net earnings attributable to controlling interests		210,552			215,964
Less preferred unit distributions		1,674			1,689
Net earnings attributable to common unitholders	$	208,878		$	214,275

Weighted average common units outstanding – Basic		534,685			531,070
Weighted average common units outstanding – Diluted		550,010			543,562

Net earnings per unit attributable to common unitholders – Basic	$	0.38		$	0.40

Net earnings per unit attributable to common unitholders – Diluted	$	0.38		$	0.39

Distributions per common unit	$	0.44		$	0.42

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

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

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

Prologis, Inc.:
Large accelerated filer ☒	Accelerated filer ☐	Non-accelerated filer ☐	Smaller reporting company ☐	Emerging growth company ☐
	(Do not check if a smaller reporting company)

Prologis, L.P.:
Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☒	Smaller reporting company ☐	Emerging growth company ☐
	(Do not check if a smaller reporting company)

			Page Number
PART I.	Financial Information
	Item 1.	Financial Statements		1
	Prologis, Inc.:
		Consolidated Balance Sheets – March 31, 2017, and December 31, 2016		1
		Consolidated Statements of Income – Three Months Ended March 31, 2017, and 2016		2
		Consolidated Statements of Comprehensive Income – Three Months Ended March 31, 2017, and 2016		3
		Consolidated Statement of Equity – Three Months Ended March 31, 2017		3
		Consolidated Statements of Cash Flows – Three Months Ended March 31, 2017, and 2016		4
	Prologis, L.P.:
		Consolidated Balance Sheets – March 31, 2017, and December 31, 2016		5
		Consolidated Statements of Income – Three Months Ended March 31, 2017, and 2016		6
		Consolidated Statements of Comprehensive Income – Three Months Ended March 31, 2017, and 2016		7
		Consolidated Statement of Capital – Three Months Ended March 31, 2017		7
		Consolidated Statements of Cash Flows – Three Months Ended March 31, 2017, and 2016		8
	Prologis, Inc. and Prologis, L.P.:
		Notes to the Consolidated Financial Statements		9
		Note 1. General		9
		Note 2. Real Estate		11
		Note 3. Unconsolidated Entities		11
		Note 4. Assets Held for Sale or Contribution		15
		Note 5. Debt		15
		Note 6. Noncontrolling Interests		16
		Note 7. Long-Term Compensation		17
		Note 8. Earnings Per Common Share or Unit		18
		Note 9. Financial Instruments and Fair Value Measurements		19
		Note 10. Business Segments		23
		Note 11. Supplemental Cash Flow Information		25
		Reports of Independent Registered Public Accounting Firm		26
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		28
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		45
	Item 4.	Controls and Procedures		46
PART II.	Other Information
	Item 1.	Legal Proceedings		46
	Item 1A.	Risk Factors		46
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		46
	Item 3.	Defaults Upon Senior Securities		46
	Item 4.	Mine Safety Disclosures		47
	Item 5.	Other Information		47
	Item 6.	Exhibits		47