pld-10q_20190331.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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter periods that the registrant was required to submit such files).

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

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 18, 2019, was approximately 630,793,000.

This report combines the quarterly reports on Form 10-Q for the period ended March 31, 2019, of Prologis, Inc. and Prologis, L.P. Unless stated otherwise or the context otherwise requires, references to “Prologis, Inc.” or the “Parent” mean Prologis, Inc. and its consolidated subsidiaries; and references to “Prologis, L.P.” or the “Operating Partnership” or the “OP” mean Prologis, L.P., and its consolidated subsidiaries. The terms “the Company,” “Prologis,” “we,” “our” or “us” means the Parent and the OP collectively.

The Parent is a real estate investment trust (a “REIT”) and the general partner of the OP. At March 31, 2019, the Parent owned 96.99% common general partnership interest in the OP and 100% of the preferred units in the OP. The remaining 3.01% common limited partnership interests are owned by unaffiliated investors and certain current and former directors and officers of the Parent.

We operate the Parent and the OP as one enterprise. The management of the Parent consists of the same members as the management of the OP. These members are officers of the Parent and employees of the OP or one of its subsidiaries. As sole general partner, the Parent has control of the OP through complete responsibility and discretion in the day-to-day management and therefore, consolidates the OP for financial reporting purposes. Because the only significant asset of the Parent is its investment in the OP, the assets and liabilities of the Parent and the OP are the same on their respective financial statements.

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

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

The presentation of noncontrolling interests, stockholders’ equity and partners’ capital are the main areas of difference between the consolidated financial statements of the Parent and those of the OP. The differences in the presentations between stockholders’ equity and partners’ capital result from the differences in the equity and capital issuances in the Parent and in the OP.

The preferred stock, common stock, additional paid-in capital, accumulated other comprehensive income (loss) and distributions in excess of net earnings of the Parent are presented as stockholders’ equity in the Parent’s consolidated financial statements. These items represent the common and preferred general partnership interests held by the Parent in the OP and are presented as general partner’s capital within partners’ capital in the OP’s consolidated financial statements. The common limited partnership interests held by the limited partners in the OP are presented as noncontrolling interest within equity in the Parent’s consolidated financial statements and as limited partners’ capital within partners’ capital in the OP’s consolidated financial statements.

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


	March 31, 2019			December 31,
	(Unaudited)			2018
ASSETS
Investments in real estate properties	$	34,395,698		$	34,586,987
Less accumulated depreciation		4,868,611			4,656,680
Net investments in real estate properties		29,527,087			29,930,307
Investments in and advances to unconsolidated entities		5,613,060			5,745,294
Assets held for sale or contribution		899,976			622,288
Net investments in real estate		36,040,123			36,297,889

Lease right-of-use assets		383,704			-
Cash and cash equivalents		251,030			343,856
Other assets		1,717,255			1,775,919
Total assets	$	38,392,112		$	38,417,664

LIABILITIES AND EQUITY
Liabilities:
Debt	$	10,706,139		$	11,089,815
Lease liabilities		392,341			-
Accounts payable and accrued expenses		695,761			760,515
Other liabilities		773,810			766,446
Total liabilities		12,568,051			12,616,776

Equity:
Prologis, Inc. stockholders’ equity:
Series Q preferred stock at stated liquidation preference of $50 per share; $0.01 par value; 1,379 shares issued and outstanding and 100,000 preferred shares authorized at March 31, 2019 and December 31, 2018		68,948			68,948
Common stock; $0.01 par value; 630,743 shares and 629,616 shares issued and outstanding at March 31, 2019 and December 31, 2018, respectively		6,307			6,296
Additional paid-in capital		25,654,449			25,685,987
Accumulated other comprehensive loss		(1,029,206	)		(1,084,671	)
Distributions in excess of net earnings		(2,366,015	)		(2,378,467	)
Total Prologis, Inc. stockholders’ equity		22,334,483			22,298,093
Noncontrolling interests		3,489,578			3,502,795
Total equity		25,824,061			25,800,888
Total liabilities and equity	$	38,392,112		$	38,417,664

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

	Three Months Ended
	March 31,
	2019			2018
Revenues:
Rental	$	696,807		$	555,943
Strategic capital		73,805			132,961
Development management and other		1,440			4,752
Total revenues		772,052			693,656
Expenses:
Rental		188,068			142,941
Strategic capital		38,058			43,860
General and administrative		69,701			62,428
Depreciation and amortization		284,009			204,081
Other		3,834			3,239
Total expenses		583,670			456,549

Operating income before gains on real estate transactions, net		188,382			237,107
Gains on real estate transactions, net		188,208			195,111
Operating income		376,590			432,218

Other income (expense):
Earnings from unconsolidated entities, net		56,666			62,656
Interest expense		(60,507	)		(47,245	)
Interest and other income, net		7,910			1,976
Foreign currency and derivative gains (losses), net		8,734			(41,094	)
Losses on early extinguishment of debt, net		(2,116	)		-
Total other income (expense)		10,687			(23,707	)
Earnings before income taxes		387,277			408,511
Total income tax expense		13,512			16,552
Consolidated net earnings		373,765			391,959
Less net earnings attributable to noncontrolling interests		25,219			24,581
Net earnings attributable to controlling interests		348,546			367,378
Less preferred stock dividends		1,499			1,476
Net earnings attributable to common stockholders	$	347,047		$	365,902

Weighted average common shares outstanding – Basic		629,676			532,185
Weighted average common shares outstanding – Diluted		654,359			554,123

Net earnings per share attributable to common stockholders – Basic	$	0.55		$	0.69

Net earnings per share attributable to common stockholders – Diluted	$	0.55		$	0.68

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

	Three Months Ended
	March 31,
	2019			2018
Consolidated net earnings	$	373,765		$	391,959
Other comprehensive income (loss):
Foreign currency translation gains, net		60,080			4,770
Unrealized losses on derivative contracts, net		(2,633	)		(6,287	)
Comprehensive income		431,212			390,442
Net earnings attributable to noncontrolling interests		(25,219	)		(24,581	)
Other comprehensive income attributable to noncontrolling interests		(1,982	)		(168	)
Comprehensive income attributable to common stockholders	$	404,011		$	365,693

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
	Stock		Shares		Value		Capital			Income (Loss)			Earnings			Interests			Total
Balance at January 1, 2019	$	68,948		629,616	$	6,296	$	25,685,987		$	(1,084,671	)	$	(2,378,467	)	$	3,502,795		$	25,800,888
Consolidated net earnings		-		-		-		-			-			348,546			25,219			373,765
Effect of equity compensation plans		-		764		7		(1,198	)		-			-			23,220			22,029
Capital contributions		-		-		-		-			-			-			6,538			6,538
Redemption of noncontrolling interests		-		363		4		2,980			-			-			(43,207	)		(40,223	)
Contribution to Brazil venture		-		-		-		-			-			-			(12,630	)		(12,630	)
Foreign currency translation gains, net		-		-		-		-			58,019			-			2,061			60,080
Unrealized losses on derivative contracts, net		-		-		-		-			(2,554	)		-			(79	)		(2,633	)
Reallocation of equity		-		-		-		(33,304	)		-			-			33,304			-
Dividends ($0.53 per common share) and other		-		-		-		(16	)		-			(336,094	)		(47,643	)		(383,753	)
Balance at March 31, 2019	$	68,948		630,743	$	6,307	$	25,654,449		$	(1,029,206	)	$	(2,366,015	)	$	3,489,578		$	25,824,061

			Common Stock							Accumulated			Distributions
			Number				Additional			Other			in Excess of			Non-
	Preferred		of		Par		Paid-in			Comprehensive			Net			controlling
	Stock		Shares		Value		Capital			Income (Loss)			Earnings			Interests			Total
Balance at January 1, 2018	$	68,948		532,186	$	5,322	$	19,363,007		$	(901,658	)	$	(2,904,461	)	$	3,074,583		$	18,705,741
Consolidated net earnings		-		-		-		-			-			367,378			24,581			391,959
Effect of equity compensation plans		-		921		9		(5,357	)		-			-			11,405			6,057
Capital contributions		-		-		-		-			-			-			850			850
Redemption of noncontrolling interests		-		-		-		(1,131	)		-			-			(14,645	)		(15,776	)
Foreign currency translation gains, net		-		-		-		-			4,420			-			350			4,770
Unrealized losses on derivative contracts, net		-		-		-		-			(6,105	)		-			(182	)		(6,287	)
Reallocation of equity		-		-		-		(52,505	)		-			-			52,505			-
Dividends ($0.48 per common share) and other		-		-		-		(105	)		-			(257,687	)		(41,402	)		(299,194	)
Balance at March 31, 2018	$	68,948		533,107	$	5,331	$	19,303,909		$	(903,343	)	$	(2,794,770	)	$	3,108,045		$	18,788,120

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

	Three Months Ended
	March 31,
	2019			2018
Operating activities:
Consolidated net earnings	$	373,765		$	391,959
Adjustments to reconcile net earnings to net cash provided by operating activities:
Straight-lined rents and amortization of above and below market leases		(27,912	)		(15,060	)
Equity-based compensation awards		31,758			19,996
Depreciation and amortization		284,009			204,081
Earnings from unconsolidated entities, net		(56,666	)		(62,656	)
Operating distributions from unconsolidated entities		96,401			85,229
Decrease (increase) in operating receivables from unconsolidated entities		49,488			(67,223	)
Amortization of debt discounts, net and debt issuance costs		4,162			3,014
Gains on real estate transactions, net		(188,208	)		(195,111	)
Unrealized foreign currency and derivative losses (gains), net		(7,158	)		34,145
Losses on early extinguishment of debt, net		2,116			-
Deferred income tax expense (benefit)		793			(2,064	)
Increase in accounts receivable, lease right-of-use assets and other assets		(13,470	)		(2,705	)
Decrease in accounts payable and accrued expenses, lease liabilities and other liabilities		(54,164	)		(44,364	)
Net cash provided by operating activities		494,914			349,241
Investing activities:
Real estate development		(368,596	)		(365,837	)
Real estate acquisitions		(274,528	)		(112,621	)
Tenant improvements and lease commissions on previously leased space		(40,338	)		(28,027	)
Property improvements		(13,612	)		(10,456	)
Proceeds from dispositions and contributions of real estate properties		595,496			579,429
Investments in and advances to unconsolidated entities		(75,559	)		(52,131	)
Return of investment from unconsolidated entities		355,539			111,211
Proceeds from repayment of notes receivable backed by real estate		-			34,260
Proceeds from the settlement of net investment hedges		9,761			-
Payments on the settlement of net investment hedges		(28,524	)		(3,966	)
Net cash provided by investing activities		159,639			151,862
Financing activities:
Proceeds from issuance of common stock		2,482			1,233
Dividends paid on common and preferred stock		(336,094	)		(257,687	)
Noncontrolling interests contributions		6,538			850
Noncontrolling interests distributions		(47,643	)		(41,402	)
Settlement of noncontrolling interests		(40,223	)		(15,776	)
Tax paid for shares withheld		(21,094	)		(26,479	)
Debt issuance costs paid		(14,692	)		(1,002	)
Net proceeds from (payments on) credit facilities		(24,565	)		12,138
Repurchase of and payments on debt		(1,418,438	)		(696,011	)
Proceeds from the issuance of debt		1,145,095			528,167
Net cash used in financing activities		(748,634	)		(495,969	)

Effect of foreign currency exchange rate changes on cash		1,255			5,919
Net increase (decrease) in cash and cash equivalents		(92,826	)		11,053
Cash and cash equivalents, beginning of period		343,856			447,046
Cash and cash equivalents, end of period	$	251,030		$	458,099

See Note 12 for information on noncash investing and financing activities and other information.

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


	March 31, 2019		December 31,
	(Unaudited)		2018
ASSETS
Investments in real estate properties	$	34,395,698	$	34,586,987
Less accumulated depreciation		4,868,611		4,656,680
Net investments in real estate properties		29,527,087		29,930,307
Investments in and advances to unconsolidated entities		5,613,060		5,745,294
Assets held for sale or contribution		899,976		622,288
Net investments in real estate		36,040,123		36,297,889

Lease right-of-use assets		383,704		-
Cash and cash equivalents		251,030		343,856
Other assets		1,717,255		1,775,919
Total assets	$	38,392,112	$	38,417,664

LIABILITIES AND CAPITAL
Liabilities:
Debt	$	10,706,139	$	11,089,815
Lease liabilities		392,341		-
Accounts payable and accrued expenses		695,761		760,515
Other liabilities		773,810		766,446
Total liabilities		12,568,051		12,616,776

Capital:
Partners’ capital:
General partner – preferred		68,948		68,948
General partner – common		22,265,535		22,229,145
Limited partners – common		395,726		371,281
Limited partners – Class A common		294,331		295,045
Total partners’ capital		23,024,540		22,964,419
Noncontrolling interests

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 ☐

Prologis, L.P.:
Large accelerated filer ☐		Accelerated filer ☐	Non-accelerated filer ☒	Smaller reporting company ☐	Emerging growth company ☐

			Page Number
PART I.	Financial Information
	Item 1.	Financial Statements		1
	Prologis, Inc.:
		Consolidated Balance Sheets – March 31, 2019 and December 31, 2018		1
		Consolidated Statements of Income – Three Months Ended March 31, 2019 and 2018		2
		Consolidated Statements of Comprehensive Income – Three Months Ended March 31, 2019 and 2018		3
		Consolidated Statements of Equity – Three Months Ended March 31, 2019 and 2018		4
		Consolidated Statements of Cash Flows – Three Months Ended March 31, 2019 and 2018		5
	Prologis, L.P.:
		Consolidated Balance Sheets – March 31, 2019 and December 31, 2018		6
		Consolidated Statements of Income – Three Months Ended March 31, 2019 and 2018		7
		Consolidated Statements of Comprehensive Income – Three Months Ended March 31, 2019 and 2018		8
		Consolidated Statements of Capital – Three Months Ended March 31, 2019 and 2018		9
		Consolidated Statements of Cash Flows – Three Months Ended March 31, 2019 and 2018		10
	Prologis, Inc. and Prologis, L.P.:
		Notes to the Consolidated Financial Statements		11
		Note 1. General		11
		Note 2. DCT Transaction		12
		Note 3. Real Estate		13
		Note 4. Unconsolidated Entities		15
		Note 5. Assets Held for Sale or Contribution		16
		Note 6. Debt		17
		Note 7. Noncontrolling Interests		19
		Note 8. Long-Term Compensation		19
		Note 9. Earnings Per Common Share or Unit		20
		Note 10. Financial Instruments and Fair Value Measurements		22
		Note 11. Business Segments		25
		Note 12. Supplemental Cash Flow Information		27
		Reports of Independent Registered Public Accounting Firm		28
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		30
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		47
	Item 4.	Controls and Procedures		48
PART II.	Other Information
	Item 1.	Legal Proceedings		49
	Item 1A.	Risk Factors		49
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		49
	Item 3.	Defaults Upon Senior Securities		49
	Item 4.	Mine Safety Disclosures		49
	Item 5.	Other Information		49
	Item 6.	Exhibits		49