pld-10q_20200630.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2020

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

For the transition period from ______________ to ______________

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

Prologis, Inc.

Prologis, L.P.

(Exact name of registrant as specified in its charter)

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

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

(415) 394-9000

(Registrants’ telephone number, including area code)

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

Securities registered pursuant to Section 12(b) of the Act:

	Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Prologis, Inc.	Common Stock, $0.01 par value	PLD	New York Stock Exchange
Prologis, L.P.	3.000% Notes due 2022	PLD/22	New York Stock Exchange
Prologis, L.P.	3.375% Notes due 2024	PLD/24	New York Stock Exchange
Prologis, L.P.	3.000% Notes due 2026	PLD/26	New York Stock Exchange
Prologis, L.P.	2.250% Notes due 2029	PLD/29	New York Stock Exchange

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

Prologis, Inc.	Yes	☒	No	☐
Prologis, L.P.	Yes	☒	No	☐

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

Prologis, Inc.	Yes	☒	No	☐
Prologis, L.P.	Yes	☒	No	☐

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

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

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

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

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

Prologis, Inc.	Yes	☐	No	☒
Prologis, L.P.	Yes	☐	No	☒

The number of shares of Prologis, Inc.’s common stock outstanding at July 24, 2020, was approximately 738,768,000.

EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the period ended June 30, 2020, 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 June 30, 2020, the Parent owned 97.24% common general partnership interest in the OP and 100% of the preferred units in the OP. The remaining 2.76% common limited partnership interests are owned by unaffiliated investors and certain current and former directors and officers of the Parent.

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

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

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

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

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

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

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

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

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

PROLOGIS

INDEX

			Page Number
PART I.	Financial Information
	Item 1.	Financial Statements		1
	Prologis, Inc.:
		Consolidated Balance Sheets – June 30, 2020 and December 31, 2019		1
		Consolidated Statements of Income – Three and Six Months Ended June 30, 2020 and 2019		2
		Consolidated Statements of Comprehensive Income – Three and Six Months Ended June 30, 2020 and 2019		3
		Consolidated Statements of Equity – Three and Six Months Ended June 30, 2020 and 2019		4
		Consolidated Statements of Cash Flows – Six Months Ended June 30, 2020 and 2019		5
	Prologis, L.P.:
		Consolidated Balance Sheets – June 30, 2020 and December 31, 2019		6
		Consolidated Statements of Income – Three and Six Months Ended June 30, 2020 and 2019		7
		Consolidated Statements of Comprehensive Income – Three and Six Months Ended June 30, 2020 and 2019		8
		Consolidated Statements of Capital – Three and Six Months Ended June 30, 2020 and 2019		9
		Consolidated Statements of Cash Flows – Six Months Ended June 30, 2020 and 2019		10
	Prologis, Inc. and Prologis, L.P.:
		Notes to the Consolidated Financial Statements		11
		Note 1. General		11
		Note 2. Liberty Transaction		12
		Note 3. Real Estate		13
		Note 4. Unconsolidated Entities		14
		Note 5. Assets Held for Sale or Contribution		16
		Note 6. Debt		16
		Note 7. Stockholder's Equity of Prologis, Inc.		19
		Note 8. Noncontrolling Interests		19
		Note 9. Long-Term Compensation		20
		Note 10. Earnings Per Common Share or Unit		21
		Note 11. Financial Instruments and Fair Value Measurements		23
		Note 12. Business Segments		26
		Note 13. Supplemental Cash Flow Information		28
		Reports of Independent Registered Public Accounting Firm		29
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		31
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		50
	Item 4.	Controls and Procedures		51
PART II.	Other Information
	Item 1.	Legal Proceedings		51
	Item 1A.	Risk Factors		52
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		52
	Item 3.	Defaults Upon Senior Securities		52
	Item 4.	Mine Safety Disclosures		52
	Item 5.	Other Information		52
	Item 6.	Exhibits		52

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

PROLOGIS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except per share data)



	June 30, 2020			December 31, 2019
ASSETS
Investments in real estate properties	$	48,578,812		$	35,224,414
Less accumulated depreciation		5,931,378			5,437,662
Net investments in real estate properties		42,647,434			29,786,752
Investments in and advances to unconsolidated entities		7,201,006			6,237,371
Assets held for sale or contribution		1,948,508			720,685
Net investments in real estate		51,796,948			36,744,808

Lease right-of-use assets		497,802			486,330
Cash and cash equivalents		549,129			1,088,855
Other assets		2,377,978			1,711,857
Total assets	$	55,221,857		$	40,031,850

LIABILITIES AND EQUITY
Liabilities:
Debt	$	15,666,872		$	11,905,877
Lease liabilities		488,550			471,634
Accounts payable and accrued expenses		1,140,569			704,954
Other liabilities		1,179,657			877,601
Total liabilities		18,475,648			13,960,066

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 June 30, 2020 and December 31, 2019		68,948			68,948
Common stock; $0.01 par value; 738,732 shares and 631,797 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively		7,387			6,318
Additional paid-in capital		35,424,401			25,719,427
Accumulated other comprehensive loss		(1,142,129	)		(990,398	)
Distributions in excess of net earnings		(2,115,679	)		(2,151,168	)
Total Prologis, Inc. stockholders’ equity		32,242,928			22,653,127
Noncontrolling interests		4,503,281			3,418,657
Total equity		36,746,209			26,071,784
Total liabilities and equity	$	55,221,857		$	40,031,850

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

PROLOGIS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share amounts)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020			2019			2020			2019
Revenues:
Rental	$	944,366		$	700,689		$	1,823,173		$	1,397,496
Strategic capital		320,658			89,144			417,249			162,949
Development management and other		1,100			539			3,943			1,979
Total revenues		1,266,124			790,372			2,244,365			1,562,424
Expenses:
Rental		232,109			181,138			459,727			369,206
Strategic capital		81,545			37,206			128,119			75,264
General and administrative		64,664			66,276			134,353			135,977
Depreciation and amortization		398,195			284,376			744,165			568,385
Other		7,979			3,515			22,553			7,349
Total expenses		784,492			572,511			1,488,917			1,156,181

Operating income before gains on real estate transactions, net		481,632			217,861			755,448			406,243
Gains on dispositions of development properties and land, net		86,416			196,941			249,166			239,382
Gains on other dispositions of investments in real estate, net		43,939			27,254			75,430			173,021
Operating income		611,987			442,056			1,080,044			818,646

Other income (expense):
Earnings from unconsolidated entities, net		54,142			48,556			142,872			105,222
Interest expense		(81,298	)		(59,122	)		(156,940	)		(119,629	)
Interest and other income, net		1,027			4,312			1,397			12,222
Foreign currency and derivative gains (losses), net		(60,836	)		2,041			52,493			10,775
Losses on early extinguishment of debt, net		(23,573	)		(385	)		(66,340	)		(2,501	)
Total other income (expense)		(110,538	)		(4,598	)		(26,518	)		6,089
Earnings before income taxes		501,449			437,458			1,053,526			824,735
Total income tax expense		46,511			26,632			77,424			40,144
Consolidated net earnings		454,938			410,826			976,102			784,591
Less net earnings attributable to noncontrolling interests		48,765			25,550			78,876			50,769
Net earnings attributable to controlling interests		406,173			385,276			897,226			733,822
Less preferred stock dividends		1,634			1,492			3,269			2,991
Net earnings attributable to common stockholders	$	404,539		$	383,784		$	893,957		$	730,831

Weighted average common shares outstanding – Basic		737,992			630,271			718,278			629,990
Weighted average common shares outstanding – Diluted		765,830			655,447			746,027			654,766

Net earnings per share attributable to common stockholders – Basic	$	0.55		$	0.61		$	1.24		$	1.16

Net earnings per share attributable to common stockholders – Diluted	$	0.54		$	0.60		$	1.23		$	1.15

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

PROLOGIS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020			2019			2020			2019
Consolidated net earnings	$	454,938		$	410,826		$	976,102		$	784,591
Other comprehensive income (loss):
Foreign currency translation gains (losses), net		(1,053	)		(47,662	)		(134,586	)		12,418
Unrealized gains (losses) on derivative contracts, net		1,373			(3,725	)		(22,075	)		(6,358	)
Comprehensive income		455,258			359,439			819,441			790,651
Net earnings attributable to noncontrolling interests		(48,765	)		(25,550	)		(78,876	)		(50,769	)
Other comprehensive loss (income) attributable to noncontrolling interests		(97	)		1,484			4,930			(498	)
Comprehensive income attributable to common stockholders	$	406,396		$	335,373		$	745,495		$	739,384

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

PROLOGIS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands)

Three Months Ended June 30, 2020 and 2019

			Common Stock							Accumulated			Distributions
			Number				Additional			Other			in Excess of			Non-
	Preferred		of		Par		Paid-in			Comprehensive			Net			controlling			Total
	Stock		Shares		Value		Capital			Income (Loss)			Earnings			Interests			Equity
Balance at April 1, 2020	$	68,948		738,563	$	7,386	$	35,416,341		$	(1,142,352	)	$	(2,090,881	)	$	4,516,428		$	36,775,870
Consolidated net earnings		-		-		-		-			-			406,173			48,765			454,938
Effect of equity compensation plans		-		128		1		9,943			-			-			16,561			26,505
Liberty Transaction, net of issuance costs		-		-		-		(39	)		-			-			(481	)		(520	)
Redemption of noncontrolling interests		-		41		-		1,768			-			-			(27,700	)		(25,932	)
Foreign currency translation gains (losses), net		-		-		-		-			(1,105	)		-			52			(1,053	)
Unrealized gains on derivative contracts, net		-		-		-		-			1,328			-			45			1,373
Reallocation of equity		-		-		-		(3,132	)		-			-			3,132			-
Dividends ($0.58 per common share) and other distributions		-		-		-		(480	)		-			(430,971	)		(53,521	)		(484,972	)
Balance at June 30, 2020	$	68,948		738,732	$	7,387	$	35,424,401		$	(1,142,129	)	$	(2,115,679	)	$	4,503,281		$	36,746,209

Balance at April 1, 2019	$	68,948	630,743	$	6,307	$	25,654,449		$	(1,029,206	)	$	(2,366,015	)	$	3,489,578		$	25,824,061
Consolidated net earnings		-	-		-		-			-			385,276			25,550			410,826
Effect of equity compensation plans		-	127		2		11,740			-			-			14,101			25,843
Capital contributions		-	-		-		-			-			-			2,533			2,533
Redemption of noncontrolling interests		-	184		2		6,492			-			-			(62,155	)		(55,661	)
Foreign currency translation losses, net		-	-		-		-			(46,282	)		-			(1,380	)		(47,662	)
Unrealized losses on derivative contracts, net		-	-		-		-			(3,621	)		-			(104	)		(3,725	)
Reallocation of equity		-	-		-		(21,014	)		-			-			21,014			-
Dividends ($0.53 per common share) and other distributions		-	-		-		(1	)		-			(336,269	)		(42,512	)		(378,782	)
Balance at June 30, 2019	$	68,948	631,054	$	6,311	$	25,651,666		$	(1,079,109	)	$	(2,317,008	)	$	3,446,625		$	25,777,433

Six Months Ended June 30, 2020 and 2019

			Common Stock									Accumulated			Distributions
			Number						Additional			Other			in Excess of			Non-
	Preferred		of			Par			Paid-in			Comprehensive			Net			controlling			Total
	Stock		Shares			Value			Capital			Income (Loss)			Earnings			Interests			Equity
Balance at January 1, 2020	$	68,948		631,797		$	6,318		$	25,719,427		$	(990,398	)	$	(2,151,168	)	$	3,418,657		$	26,071,784
Consolidated net earnings		-		-			-			-			-			897,226			78,876			976,102
Effect of equity compensation plans		-		646			6			6,822			-			-			43,000			49,828
Liberty Transaction, net of issuance costs		-		106,723			1,067			9,801,373			-			-			211,086			10,013,526
Repurchases of common shares		-		(539	)		(5	)		(34,824	)		-			-			-			(34,829	)
Capital contributions		-		-			-			-			-			-			916,974			916,974
Redemption of noncontrolling interests		-		105			1			4,551			-			-			(47,295	)		(42,743	)
Foreign currency translation losses, net		-		-			-			-			(130,266	)		-			(4,320	)		(134,586	)
Unrealized losses on derivative contracts, net		-		-			-			-			(21,465	)		-			(610	)		(22,075	)
Reallocation of equity		-		-			-			(72,459	)		-			-			72,459			-
Dividends ($1.16 per common share) and other distributions		-		-			-			(489	)		-			(861,737	)		(185,546	)		(1,047,772	)
Balance at June 30, 2020	$	68,948	$	738,732		$	7,387		$	35,424,401		$	(1,142,129	)	$	(2,115,679	)	$	4,503,281		$	36,746,209

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		-	-		-		-			-			733,822			50,769			784,591
Effect of equity compensation plans		-	891		9		10,542			-			-			37,321			47,872
Capital contributions		-	-		-		-			-			-			9,071			9,071
Redemption of noncontrolling interests		-	547		6		9,472			-			-			(105,362	)		(95,884	)
Contribution to Brazil venture		-	-		-		-			-			-			(12,630	)		(12,630	)
Foreign currency translation gains, net		-	-		-		-			11,737			-			681			12,418
Unrealized losses on derivative contracts, net		-	-		-		-			(6,175	)		-			(183	)		(6,358	)
Reallocation of equity		-	-		-		(54,318	)		-			-			54,318			-
Dividends ($1.06 per common share) and other		-	-		-		(17	)		-			(672,363	)		(90,155	)		(762,535	)
Balance at June 30, 2019	$	68,948	631,054	$	6,311	$	25,651,666		$	(1,079,109	)	$	(2,317,008	)	$	3,446,625		$	25,777,433

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

PROLOGIS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Six Months Ended
	June 30,
	2020			2019
Operating activities:
Consolidated net earnings	$	976,102		$	784,591
Adjustments to reconcile net earnings to net cash provided by operating activities:
Straight-lined rents and amortization of above and below market leases		(52,911	)		(51,925	)
Equity-based compensation awards		59,806			51,944
Depreciation and amortization		744,165			568,385
Earnings from unconsolidated entities, net		(142,872	)		(105,222	)
Operating distributions from unconsolidated entities		182,739			179,913
Decrease (increase) in operating receivables from unconsolidated entities		(176,939	)		27,952
Amortization of debt discounts and debt issuance costs, net		3,465			8,419
Gains on dispositions of development properties and land, net		(249,166	)		(239,382	)
Gains on other dispositions of investments in real estate, net		(75,430	)		(173,021	)
Unrealized foreign currency and derivative gains, net		(42,904	)		(3,836	)
Losses on early extinguishment of debt, net		66,340			2,501
Deferred income tax expense		831			9,235
Decrease (increase) in accounts receivable, lease right-of-use assets and other assets		79,095			(11,740	)
Decrease in accounts payable and accrued expenses, lease liabilities and other liabilities		(16,972	)		(44,293	)
Net cash provided by operating activities		1,355,349			1,003,521
Investing activities:
Real estate development		(977,602	)		(755,588	)
Real estate acquisitions		(560,418	)		(468,796	)
Liberty Transaction, net of cash acquired		(23,463	)		-
IPT Transaction, net of cash acquired		(1,665,524	)		-
Tenant improvements and lease commissions on previously leased space		(84,884	)		(80,969	)
Property improvements		(51,456	)		(42,015	)
Proceeds from dispositions and contributions of real estate properties		1,257,908			1,272,298
Investments in and advances to unconsolidated entities		(286,846	)		(186,179	)
Return of investment from unconsolidated entities		141,489			359,306
Proceeds from repayment of notes receivable backed by real estate		4,312			-
Proceeds from the settlement of net investment hedges		2,352			12,240
Payments on the settlement of net investment hedges		(7,031	)		(28,524	)
Net cash provided by (used in) investing activities		(2,251,163	)		81,773
Financing activities:
Proceeds from issuance of common stock		1,851			4,372
Repurchase and retirement of common stock		(34,829	)		-
Dividends paid on common and preferred stock		(861,737	)		(672,363	)
Noncontrolling interests contributions		916,974			9,071
Noncontrolling interests distributions		(185,546	)		(90,155	)
Settlement of noncontrolling interests		(42,743	)		(95,884	)
Tax paid with shares withheld		(23,133	)		(21,859	)
Debt and equity issuance costs paid		(40,979	)		(14,912	)
Net proceeds from (payments on) credit facilities		(62,481	)		58,974
Repurchase of and payments on debt		(4,690,444	)		(2,108,889	)
Proceeds from the issuance of debt		5,377,430			1,897,745
Net cash provided by (used in) financing activities		354,363			(1,033,900	)

Effect of foreign currency exchange rate changes on cash		1,725			5,940
Net increase (decrease) in cash and cash equivalents		(539,726	)		57,334
Cash and cash equivalents, beginning of period		1,088,855			343,856
Cash and cash equivalents, end of period	$	549,129		$	401,190

See Note 13 for information on noncash investing and financing activities and other information.

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

PROLOGIS, L.P.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)



	June 30, 2020		December 31, 2019
ASSETS
Investments in real estate properties	$	48,578,812	$	35,224,414
Less accumulated depreciation		5,931,378		5,437,662
Net investments in real estate properties		42,647,434		29,786,752
Investments in and advances to unconsolidated entities		7,201,006		6,237,371
Assets held for sale or contribution		1,948,508		720,685
Net investments in real estate		51,796,948		36,744,808

Lease right-of-use assets		497,802		486,330
Cash and cash equivalents		549,129		1,088,855
Other assets		2,377,978		1,711,857
Total assets	$	55,221,857	$	40,031,850

LIABILITIES AND CAPITAL
Liabilities:
Debt	$	15,666,872	$	11,905,877
Lease liabilities		488,550		471,634
Accounts payable and accrued expenses		1,140,569		704,954
Other liabilities		1,179,657		877,601
Total liabilities		18,475,648		13,960,066

Capital:
Partners’ capital:
General partner – preferred		68,948		68,948
General partner – common		32,173,980		22,584,179
Limited partners – common		563,403		355,076
Limited partners – Class A common		350,078		288,187
Total partners’ capital		33,156,409		23,296,390
Noncontrolling interests		3,589,800		2,775,394
Total capital		36,746,209		26,071,784
Total liabilities and capital	$	55,221,857	$	40,031,850

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

PROLOGIS, L.P.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per unit amounts)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020			2019			2020			2019
Revenues:
Rental	$	944,366		$	700,689		$	1,823,173		$	1,397,496
Strategic capital		320,658			89,144			417,249			162,949
Development management and other		1,100			539			3,943			1,979
Total revenues		1,266,124			790,372			2,244,365			1,562,424
Expenses:
Rental		232,109			181,138			459,727			369,206
Strategic capital		81,545			37,206			128,119			75,264
General and administrative		64,664			66,276			134,353			135,977
Depreciation and amortization		398,195			284,376			744,165			568,385
Other		7,979			3,515			22,553			7,349
Total expenses		784,492			572,511			1,488,917			1,156,181

Operating income before gains on real estate transactions, net		481,632			217,861			755,448			406,243
Gains on dispositions of development properties and land, net		86,416			196,941			249,166			239,382
Gains on other dispositions of investments in real estate, net		43,939			27,254			75,430			173,021
Operating income		611,987			442,056			1,080,044			818,646

Other income (expense):
Earnings from unconsolidated entities, net		54,142			48,556			142,872			105,222
Interest expense		(81,298	)		(59,122	)		(156,940	)		(119,629	)
Interest and other income, net		1,027			4,312			1,397			12,222
Foreign currency and derivative gains (losses), net		(60,836	)		2,041			52,493			10,775
Losses on early extinguishment of debt, net		(23,573	)		(385	)		(66,340	)		(2,501	)
Total other income (expense)		(110,538	)		(4,598	)		(26,518	)		6,089
Earnings before income taxes		501,449			437,458			1,053,526			824,735
Total income tax expense		46,511			26,632			77,424			40,144
Consolidated net earnings		454,938			410,826			976,102			784,591
Less net earnings attributable to noncontrolling interests		37,115			13,864			53,256			28,509
Net earnings attributable to controlling interests		417,823			396,962			922,846			756,082
Less preferred unit distributions		1,634			1,492			3,269			2,991
Net earnings attributable to common unitholders	$	416,189		$	395,470		$	919,577		$	753,091

Weighted average common units outstanding – Basic		751,182			641,127			730,807			640,832
Weighted average common units outstanding – Diluted		765,830			655,447			746,027			654,766

Net earnings per unit attributable to common unitholders – Basic	$	0.55		$	0.61		$	1.24		$	1.16

Net earnings per unit attributable to common unitholders – Diluted	$	0.54		$	0.60		$	1.23		$	1.15

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

PROLOGIS, L.P.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2020			2019			2020			2019
Consolidated net earnings	$	454,938		$	410,826		$	976,102		$	784,591
Other comprehensive income (loss):
Foreign currency translation gains (losses), net		(1,053	)		(47,662	)		(134,586	)		12,418
Unrealized gains (losses) on derivative contracts, net		1,373			(3,725	)		(22,075	)		(6,358	)
Comprehensive income		455,258			359,439			819,441			790,651
Net earnings attributable to noncontrolling interests		(37,115	)		(13,864	)		(53,256	)		(28,509	)
Other comprehensive loss (income) attributable to noncontrolling interests		(41	)		(70	)		622			(333	)
Comprehensive income attributable to common unitholders	$	418,102		$	345,505		$	766,807		$	761,809

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

PROLOGIS, L.P.

CONSOLIDATED STATEMENTS OF CAPITAL

(Unaudited)

(In thousands)

Three Months Ended June 30, 2020 and 2019

	General Partner									Limited Partners												Non-
	Preferred				Common					Common						Class A Common						controlling			Total
	Units		Amount		Units		Amount			Units			Amount			Units			Amount			Interests			Capital
Balance at April 1, 2020		1,379	$	68,948		738,563	$	32,190,494			13,158		$	573,481			8,613		$	350,961		$	3,591,986		$	36,775,870
Consolidated net earnings		-		-		-		406,173			-			7,275			-			4,375			37,115			454,938
Effect of equity compensation plans		-		-		128		9,944			66			16,561			-			-			-			26,505
Liberty Transaction, net of issuance costs		-		-		-		(39	)		-			-			-			-			(481	)		(520	)
Redemption of limited partners units		-		-		41		1,768			(310	)		(27,497	)		(5	)		(203	)		-			(25,932	)
Foreign currency translation gains (losses), net		-		-		-		(1,105	)		-			20			-			(9	)		41			(1,053	)
Unrealized gains on derivative contracts, net		-		-		-		1,328			-			30			-			15			-			1,373
Reallocation of capital		-		-		-		(3,132	)		-			2,626			-			506			-			-
Distributions ($0.58 per common unit) and other		-		-		-		(431,451	)		-			(9,093	)		-			(5,567	)		(38,861	)		(484,972	)
Balance at June 30, 2020		1,379	$	68,948		738,732	$	32,173,980			12,914		$	563,403			8,608		$	350,078		$	3,589,800		$	36,746,209

Balance at April 1, 2019	1,379	$	68,948	630,743	$	22,265,535		11,210		$	395,726		8,849	$	294,331		$	2,799,521		$	25,824,061
Consolidated net earnings	-		-	-		385,276		-			6,609		-		5,077			13,864			410,826
Effect of equity compensation plans	-		-	127		11,742		103			14,101		-		-			-			25,843
Capital contributions	-		-	-		-		-			-		-		-			2,533			2,533
Redemption of limited partners units	-		-	184		6,494		(911	)		(62,155	)	-		-			-			(55,661	)
Foreign currency translation gains (losses), net	-		-	-		(46,282	)	-			(838	)	-		(612	)		70			(47,662	)
Unrealized losses on derivative contracts, net	-		-	-		(3,621	)	-			(56	)	-		(48	)		-			(3,725	)
Reallocation of capital	-		-	-		(21,014	)	-			20,558		-		456			-			-
Distributions ($0.53 per common unit) and other	-		-	-		(336,270	)	-			(6,985	)	-		(5,722	)		(29,805	)		(378,782	)
Balance at June 30, 2019	1,379	$	68,948	631,054	$	22,261,860		10,402		$	366,960		8,849	$	293,482		$	2,786,183		$	25,777,433

Six Months Ended June 30, 2020 and 2019

	General Partner										Limited Partners												Non-
	Preferred				Common						Common						Class A Common						controlling			Total
	Units		Amount		Units			Amount			Units			Amount			Units			Amount			Interests			Capital
Balance at January 1, 2020		1,379	$	68,948		631,797		$	22,584,179			9,933		$	355,076			8,613		$	288,187		$	2,775,394			26,071,784
Consolidated net earnings		-		-		-			897,226			-			15,594			-			10,026			53,256			976,102
Effect of equity compensation plans		-		-		646			6,828			1,257			43,000			-			-			-			49,828
Liberty Transaction, net of issuance costs		-		-		106,723			9,802,440			2,288			210,190			-			-			896			10,013,526
Repurchases of common units		-		-		(539	)		(34,829	)		-			-			-			-			-			(34,829	)
Capital contributions		-		-		-			-			-			-			-			-			916,974			916,974
Redemption of limited partners units		-		-		105			4,552			(564	)		(47,092	)		(5	)		(203	)		-			(42,743	)
Foreign currency translation losses, net		-		-		-			(130,266	)		-			(2,281	)		-			(1,417	)		(622	)		(134,586	)
Unrealized losses on derivative contracts, net		-		-		-			(21,465	)		-			(376	)		-			(234	)		-			(22,075	)
Reallocation of capital		-		-		-			(72,459	)		-			7,603			-			64,856			-			-
Distributions ($1.16 per common unit) and other		-		-		-			(862,226	)		-			(18,311	)		-			(11,137	)		(156,098	)		(1,047,772	)
Balance at June 30, 2020		1,379	$	68,948		738,732		$	32,173,980			12,914		$	563,403			8,608		$	350,078		$	3,589,800		$	36,746,209

Balance at January 1, 2019	1,379	$	68,948	629,616	$	22,229,145		10,516		$	371,281		8,849	$	295,045		$	2,836,469		$	25,800,888
Consolidated net earnings	-		-	-		733,822		-			12,577		-		9,683			28,509			784,591
Effect of equity compensation plans	-		-	891		10,551		1,458			37,321		-		-			-			47,872
Capital contributions				-		-		-			-							9,071			9,071
Redemption of noncontrolling interests	-		-	-		(9,835	)	-			-		-		-			(11,258	)		(21,093	)
Redemption of limited partners units	-		-	547		19,313		(1,572	)		(94,104	)	-		-			-			(74,791	)
Contribution to Brazil venture	-		-	-		-		-			-		-		-			(12,630	)		(12,630	)
Foreign currency translation gains, net	-		-	-		11,737		-			193		-		155			333			12,418
Unrealized losses on derivative contracts, net	-		-	-		(6,175	)	-			(101	)	-		(82	)		-			(6,358	)
Reallocation of capital	-		-	-		(54,318	)	-			54,192		-		126			-			-
Distributions ($1.06 per common unit) and other	-		-	-		(672,380	)	-			(14,399	)	-		(11,445	)		(64,311	)		(762,535	)
Balance at June 30, 2019	1,379	$	68,948	631,054	$	22,261,860		10,402		$	366,960		8,849	$	293,482		$	2,786,183		$	25,777,433

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

PROLOGIS, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Six Months Ended
	June 30,
	2020			2019
Operating activities:
Consolidated net earnings	$	976,102		$	784,591
Adjustments to reconcile net earnings to net cash provided by operating activities:
Straight-lined rents and amortization of above and below market leases		(52,911	)		(51,925	)
Equity-based compensation awards		59,806			51,944
Depreciation and amortization		744,165			568,385
Earnings from unconsolidated entities, net		(142,872	)		(105,222	)
Operating distributions from unconsolidated entities		182,739			179,913
Decrease (increase) in operating receivables from unconsolidated entities		(176,939	)		27,952
Amortization of debt discounts and debt issuance costs, net		3,465			8,419
Gains on dispositions of development properties and land, net		(249,166	)		(239,382	)
Gains on other dispositions of investments in real estate, net		(75,430	)		(173,021	)
Unrealized foreign currency and derivative gains, net		(42,904	)		(3,836	)
Losses on early extinguishment of debt, net		66,340			2,501
Deferred income tax expense		831			9,235
Decrease (increase) in accounts receivable, lease right-of-use assets and other assets		79,095			(11,740	)
Decrease in accounts payable and accrued expenses, lease liabilities and other liabilities		(16,972	)		(44,293	)
Net cash provided by operating activities		1,355,349			1,003,521
Investing activities:
Real estate development		(977,602	)		(755,588	)
Real estate acquisitions		(560,418	)		(468,796	)
Liberty Transaction, net of cash acquired		(23,463	)		-
IPT Transaction, net of cash acquired		(1,665,524	)		-
Tenant improvements and lease commissions on previously leased space		(84,884	)		(80,969	)
Property improvements		(51,456	)		(42,015	)
Proceeds from dispositions and contributions of real estate properties		1,257,908			1,272,298
Investments in and advances to unconsolidated entities		(286,846	)		(186,179	)
Return of investment from unconsolidated entities		141,489			359,306
Proceeds from repayment of notes receivable backed by real estate		4,312			-
Proceeds from the settlement of net investment hedges		2,352			12,240
Payments on the settlement of net investment hedges		(7,031	)		(28,524	)
Net cash provided by (used in) investing activities		(2,251,163	)		81,773
Financing activities:
Proceeds from issuance of common partnership units in exchange for contributions from Prologis, Inc.		1,851			4,372
Repurchase and retirement of common units		(34,829	)		-
Distributions paid on common and preferred units		(891,185	)		(698,207	)
Noncontrolling interests contributions		916,974			9,071
Noncontrolling interests distributions		(156,098	)		(64,311	)
Settlement of noncontrolling interests		(203	)		(21,093	)
Redemption of common limited partnership units		(42,540	)		(74,791	)
Tax paid with shares of the Parent withheld		(23,133	)		(21,859	)
Debt and equity issuance costs paid		(40,979	)		(14,912	)
Net proceeds from (payments on) credit facilities		(62,481	)		58,974
Repurchase of and payments on debt		(4,690,444	)		(2,108,889	)
Proceeds from the issuance of debt		5,377,430			1,897,745
Net cash provided by (used in) financing activities		354,363			(1,033,900	)

Effect of foreign currency exchange rate changes on cash		1,725			5,940
Net increase (decrease) in cash and cash equivalents		(539,726	)		57,334
Cash and cash equivalents, beginning of period		1,088,855			343,856
Cash and cash equivalents, end of period	$	549,129		$	401,190

See Note 13 for information on noncash investing and financing activities and other information.

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

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. GENERAL

Business. Prologis, Inc. (or the “Parent”) commenced operations as a fully integrated real estate company in 1997, elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), and believes the current organization and method of operation will enable it to maintain its status as a REIT. The Parent is the general partner of Prologis, L.P. (or the “Operating Partnership” or “OP”). Through the OP, we are engaged in the ownership, acquisition, development and management of logistics facilities with a focus on key markets in 19 countries on four continents. We invest in real estate through wholly owned subsidiaries and other entities through which we co-invest with partners and investors. We maintain a significant level of ownership in these co-investment ventures, which may be consolidated or unconsolidated based on our level of control of the entity. Our current business strategy consists of two operating business segments: Real Estate Operations and Strategic Capital. Our Real Estate Operations segment represents the ownership and development of logistics properties. Our Strategic Capital segment represents the management of unconsolidated co-investment ventures and other ventures. See Note 12 for further discussion of our business segments. Unless otherwise indicated, the Notes to the Consolidated Financial Statements apply to both the Parent and the OP. The terms “the Company,” “Prologis,” “we,” “our” or “us” means the Parent and OP collectively.

For each share of preferred or common stock the Parent issues, the OP issues a corresponding preferred or common partnership unit, as applicable, to the Parent in exchange for the contribution of the proceeds from the stock issuance. At June 30, 2020, the Parent owned a 97.24% common general partnership interest in the OP and 100% of the preferred units in the OP. The remaining 2.76% common limited partnership interests, which include 8.6 million Class A common limited partnership units (“Class A Units”) in the OP, are owned by unaffiliated investors and certain current and former directors and officers of the Parent. Each partner’s percentage interest in the OP is determined based on the number of OP units held, including the number of OP units into which Class A Units are convertible, compared to total OP units outstanding at each period end and is used as the basis for the allocation of net income or loss to each partner. At the end of each reporting period, a capital adjustment is made in the OP to reflect the appropriate ownership interest for each of the common unitholders. These adjustments are reflected in the line items Reallocation of Equity in the Consolidated Statements of Equity of the Parent and Reallocation of Capital in the Consolidated Statements of Capital of the OP.

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

Basis of Presentation. The accompanying Consolidated Financial Statements are prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) and are presented in our reporting currency, the U.S. dollar. All material intercompany transactions with consolidated entities have been eliminated.

The accompanying unaudited interim financial information has been prepared according to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in our annual financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with such rules and regulations. Our management believes that the disclosures presented in these financial statements are adequate to make the information presented not misleading. In our opinion, all adjustments and eliminations, consisting only of normal recurring adjustments, necessary to present fairly the financial position and results of operations for both the Parent and the OP for the reported periods have been included. The results of operations for such interim periods are not necessarily indicative of the results for the full year. The accompanying unaudited interim financial information should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC, and other public information.

Reclassifications. Certain amounts included in the Consolidated Financial Statements for 2019 have been reclassified to conform to the 2020 financial statement presentation

New Accounting Pronouncements.

Accounting for Lease Concessions Related to the Effects of the Coronavirus (“COVID-19”) Pandemic. In April 2020, the Financial Accounting Standards Board (“FASB”) issued a Staff Question-and-Answer (“Q&A”) to clarify whether lease concessions related to the effects of COVID-19 require the application of the lease modification guidance under the new lease standard, which we adopted on January 1, 2019. For rent deferrals granted during the six months ended June 30, 2020, we are allowing customers to defer rental payments until later in 2020, in exchange for a note receivable, and we are continuing to recognize rental revenue during the period. In accordance with the Q&A, we are electing to not apply the lease modification guidance to concessions that result in deferred rent as the total cash flows required by the modified lease agreements are materially the same as the cash flows required under the original lease and there are no substantive changes to the consideration. As of July 21, 2020, we have granted deferral requests of $16.9 million.

Although COVID-19 continues to have a minimal impact on our rent collections, we may see an increase in bad debt during the remainder of the year. If we grant concessions to a customer that modify the terms and significantly change the underlying cash flows of the original lease for the remaining term, we will account for these changes as a lease modification in accordance with U.S. GAAP.

Reference Rate Reform. In March 2020, the FASB issued an Accounting Standard Update (“ASU”) that provided practical expedients to address existing guidance on contract modifications and hedge accounting due to the expected market transition from the London Inter-bank Offered Rate (“LIBOR”) and other interbank offered rates (together “IBORs”) to alternative reference rates, such as the Secured Overnight Financing Rate. In July 2017, the Financial Conduct Authority announced it intended to stop compelling banks to submit rates for the calculation of LIBOR after 2021. We refer to this transition as “reference rate reform.”

The first practical expedient allows companies to elect to not apply certain modification accounting requirements to debt, derivative and lease contracts affected by reference rate reform if certain criteria are met. These criteria include the following: (i) the contract referenced an IBOR rate that is expected to be discontinued; (ii) the modified terms directly replace or have the potential to replace the IBOR rate that is expected to be discontinued; and (iii) any contemporaneous changes to other terms that change or have the potential to change the amount and timing of contractual cash flows must be related to the replacement of the IBOR rate. If the contract meets all three criteria, there is no requirement for remeasurement of the contract at the modification date or reassessment of the previous accounting determination.

The second practical expedient allows companies to change the reference rate and other critical terms related to the reference rate reform in derivative hedge documentation without having to dedesignate the hedging relationship. This allows for companies to continue applying hedge accounting to existing cash flow and net investment hedges.

The ASU was effective upon issuance on a prospective basis beginning January 1, 2020 and may be elected over time as reference rate reform activities occur. We have not modified any contracts to date however, we will evaluate any debt, derivative and lease contracts that are modified in the future to ensure they are eligible for modification relief and apply the practical expedients as needed.

NOTE 2. LIBERTY TRANSACTION

On February 4, 2020, we acquired Liberty Property Trust and Liberty Property Limited Partnership (collectively “Liberty” or the “Liberty Transaction”).

The Liberty Transaction was completed for $13.0 billion through the issuance of equity based on the value of the Prologis common stock and units issued of $10.0 billion and the assumption of debt of $2.8 billion, and includes transaction costs. In connection with the transaction, each issued and outstanding share or unit held by a Liberty stockholder or unitholder was converted automatically into 0.675 shares of Prologis common stock or common units of Prologis, L.P., respectively, including shares and units under Liberty’s equity incentive plan that became fully vested at closing.

Through the Liberty Transaction, we acquired a portfolio primarily comprised of logistics real estate assets, including 519 industrial operating properties, aggregating 99.6 million square feet, which are highly complementary to our U.S. portfolio in terms of product quality, location and growth potential in our key markets. There was approximately 34 million square feet of non-strategic industrial properties acquired in the Liberty Transaction that we do not intend to operate long-term. Depending on the expected hold period, these assets are either classified as Assets Held for Sale or Contribution or Other Real Estate Investments in the Consolidated Balance Sheets. In addition, we acquired an ownership interest in eight ventures that own industrial and office properties.

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

Number of Prologis shares and units issued upon conversion of Liberty shares and units at February 4, 2020		109.01
Multiplied by closing price of Prologis' common stock on February 3, 2020	$	91.87
Fair value of Prologis shares and units issued	$	10,015

We accounted for the Liberty Transaction as an asset acquisition and as a result, the transaction costs of $115.8 million were capitalized to the basis of the acquired properties. Transaction costs included investment banker advisory fees, legal fees and other costs.

Under acquisition accounting, the total purchase price was allocated as follows to the Liberty real estate properties and related lease intangibles on a relative fair value basis and all other assets and liabilities assumed at fair value (in millions):

Net investments in real estate	$	12,606
Intangible assets, net of intangible liabilities ⁽¹⁾		515
Cash and other assets		240
Debt		(2,845	)
Accounts payable, accrued expenses and other liabilities		(384	)
Noncontrolling interests		(1	)
Total purchase price, including transaction costs	$	10,131

(1)

Intangible assets of $663.3 million and intangible liabilities of $148.2 million were included within Other Assets and Other Liabilities, respectively, on the Consolidated Balance Sheets. The acquired lease intangibles from the Liberty Transaction were amortized over the terms of the respective leases with a weighted average remaining lease term of 66 months.

NOTE 3. REAL ESTATE

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

	Square Feet				Number of Buildings
	Jun 30,		Dec 31,		Jun 30,		Dec 31,		Jun 30,		Dec 31,
	2020 ⁽¹⁾		2019		2020 ⁽¹⁾		2019		2020 ⁽¹⁾		2019
Operating properties:
Buildings and improvements		434,868		354,297		2,248		1,876	$	30,581,443	$	23,067,625
Improved land										11,603,537		8,220,208
Development portfolio, including land costs:
Prestabilized		7,494		9,133		24		28		575,712		784,584
Properties under development		23,280		26,893		61		77		1,485,109		1,084,683
Land ⁽²⁾										1,692,512		1,101,646
Other real estate investments ⁽³⁾										2,640,499		965,668
Total investments in real estate properties										48,578,812		35,224,414
Less accumulated depreciation										5,931,378		5,437,662
Net investments in real estate properties									$	42,647,434	$	29,786,752

(1)	Includes the acquired real estate properties from the Liberty Transaction at June 30, 2020. See Note 2 for more information.

(2)	At June 30, 2020 and December 31, 2019, our land is comprised of 6,006 and 4,411 acres, respectively.

(3)

Included in other real estate investments were: (i) non-strategic real estate assets, including industrial and office, acquired in the Liberty Transaction that we do not intend to operate long-term; (ii) non-logistics real estate; (iii) land parcels that are ground leased to third parties; (iv) our corporate headquarters; (v) earnest money deposits associated with potential acquisitions; (vi) costs related to future development projects, including purchase options on land; and (vii) infrastructure costs related to projects we are developing on behalf of others.

Acquisitions

The following table summarizes our real estate acquisition activity, excluding the Liberty Transaction as discussed in Note 2 (dollars and square feet in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020 ⁽¹⁾		2019
Number of operating properties		1		1		138		13
Square feet		20		36		20,276		1,003
Acres of land		188		277		455		465
Acquisition cost of net investments in real estate	$	147,893	$	204,935	$	2,541,660	$	517,187

(1)

On January 8, 2020, our two U.S. co-investment ventures, Prologis Targeted U.S. Logistics Fund, L.P. (“USLF”) and Prologis U.S. Logistics Venture (“USLV”), acquired the wholly-owned real estate assets of Industrial Property Trust Inc. (“IPT”) for $2.0 billion each in a cash transaction, including transaction costs and the assumption and repayment of debt (the “IPT Transaction”). As USLV is a consolidated co-investment venture, the number of operating properties, square feet and acquisition cost are included in the consolidated acquisition activity. For further discussion on the acquisition by USLF, see Note 4, and by USLV, see Notes 6 and 8.

Dispositions

The following table summarizes our dispositions of net investments in real estate (dollars and square feet in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Dispositions of development properties and land, net
Contributions to unconsolidated entities
Number of properties		9		5		18		10
Square feet		3,990		3,723		7,514		4,935
Net proceeds	$	340,266	$	679,064	$	894,609	$	803,386
Gains on contributions, net	$	86,416	$	196,941	$	231,161	$	227,774

Dispositions to third parties
Number of properties		-		-		2		2
Square feet		-		-		1,112		670
Net proceeds	$	-	$	-	$	79,220	$	52,024
Gains on dispositions, net	$	-	$	-	$	18,005	$	11,608
Total gains on dispositions of development properties and land, net	$	86,416	$	196,941	$	249,166	$	239,382

Other dispositions of investments in real estate, net
Contributions to unconsolidated entities⁽¹⁾
Number of properties		-		3		-		17
Square feet		-		450		-		7,387
Net proceeds	$	-	$	65,996	$	-	$	685,839
Gains on contributions, net	$	-	$	27,254	$	-	$	37,999

Dispositions to third parties
Number of properties		5		-		23		-
Square feet		1,772		-		4,077		-
Net proceeds	$	193,755	$	-	$	354,312	$	-
Gains on dispositions, net	$	43,939	$	-	$	75,430	$	-
Gains on partial redemption of investment in an unconsolidated co-investment venture⁽²⁾	$	-	$	-	$	-	$	135,022
Total gains on other dispositions of investments in real estate, net	$	43,939	$	27,254	$	75,430	$	173,021

(1)

In January 2019, we formed Prologis Brazil Logistics Venture (“PBLV”), a Brazilian unconsolidated co-investment venture, with one partner. We contributed an initial portfolio of real estate properties to PBLV consisting of 14 operating properties totaling 6.9 million square feet and 371 acres of land. We received cash proceeds and units for our 20.0% equity interest.

(2)	In February 2019, we redeemed a portion of our investment in a European unconsolidated co-investment venture.

NOTE 4. UNCONSOLIDATED ENTITIES

Summary of Investments

We have investments in entities through a variety of ventures. We co-invest in entities that own multiple properties with partners and investors and we provide asset and property management services to these entities, which we refer to as co-investment ventures. These entities may be consolidated or unconsolidated, depending on the structure, our partner’s participation and other rights and our level of control of the entity. This note details our investments in unconsolidated co-investment ventures, which are related parties and are accounted for using the equity method of accounting. See Note 8 for more detail regarding our consolidated investments that are not wholly owned.

We also have investments in other ventures, generally with one partner and that we do not manage, which we account for using the equity method. We refer to our investments in both unconsolidated co-investment ventures and other ventures, collectively, as unconsolidated entities.

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

	June 30,		December 31,
	2020		2019
Unconsolidated co-investment ventures	$	6,211,203	$	5,873,784
Other ventures ⁽¹⁾		989,803		363,587
Total	$	7,201,006	$	6,237,371

(1)	In February 2020, we completed the Liberty Transaction and acquired an equity method investment in eight ventures.

Unconsolidated Co-Investment Ventures

The following table summarizes the Strategic Capital Revenues we recognized in the Consolidated Statements of Income related to our unconsolidated co-investment ventures (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Recurring fees	$	76,173	$	65,537	$	150,860	$	127,654
Transactional fees		12,092		15,830		32,052		27,178
Promote revenue ⁽¹⁾		227,830		7,283		228,421		7,283
Total strategic capital revenues from unconsolidated co-investment ventures ⁽²⁾	$	316,095	$	88,650	$	411,333	$	162,115

(1)	Includes promote revenue earned from our unconsolidated co-investment venture in the U.S. in June 2020.

(2)	These amounts exclude strategic capital revenues from other ventures.

The following table summarizes the key property information, financial position and operating information of our unconsolidated co-investment ventures (not our proportionate share) and the amounts we recognized in the Consolidated Financial Statements related to these ventures (dollars and square feet in millions):

	U.S.						Other Americas						Europe						Asia						Total
As of:	Jun 30, 2020 ⁽¹⁾			Dec 31, 2019			Jun 30, 2020 ⁽²⁾			Dec 31, 2019			Jun 30, 2020			Dec 31, 2019			Jun 30, 2020			Dec 31, 2019			Jun 30, 2020			Dec 31, 2019
Key property information:
Ventures		1			1			2			2			3			3			3			3			9			9
Operating properties		689			605			225			214			745			731			158			144			1,817			1,694
Square feet		113			99			49			44			178			176			65			59			405			378

Financial position:
Total assets ($)		10,276			8,408			2,938			2,707			14,872			14,677			9,420			8,758			37,506			34,550
Third-party debt ($)		2,923			2,130			841			769			3,443			3,213			3,617			3,296			10,824			9,408
Total liabilities ($)		3,857			2,514			877			801			4,787			4,575			4,080			3,751			13,601			11,641

Our investment balance ($) ⁽³⁾		1,932			1,728			795			658			2,728			2,800			756			688			6,211			5,874
Our weighted average ownership ⁽⁴⁾		24.9	%		27.3	%		41.2	%		39.1	%		29.9	%		30.2	%		15.2	%		15.1	%		25.9	%		27.1	%

	U.S.						Other Americas						Europe						Asia						Total
Operating Information:	Jun 30, 2020 ⁽¹⁾			Jun 30, 2019			Jun 30, 2020 ⁽²⁾			Jun 30, 2019			Jun 30, 2020			Jun 30, 2019			Jun 30, 2020			Jun 30, 2019			Jun 30, 2020			Jun 30, 2019
For the three months ended:
Total revenues ($)		232			180			66			67			281			268			143			124			722			639
Net earnings ($)		40			23			23			21			72			84			32			25			167			153

Our earnings from unconsolidated co-investment ventures, net ($)		10			7			9			8			23			27			5			4			47			46

For the six months ended:
Total revenues ($)		465			359			134			134			571			539			281			244			1,451			1,276
Net earnings ($)		74			52			46			55			150			155			58			62			328			324

Our earnings from unconsolidated co-investment ventures, net ($)		19			16			18			21			48			52			9			10			94			99

(1)	In January 2020, USLF acquired a portfolio of 108 operating properties, aggregating 18.3 million square feet, in the IPT Transaction for cash consideration of $2.0 billion, including transaction costs and the assumption and repayment of debt.

(2)	PBLV and our other Brazilian joint ventures are combined as one venture for the purpose of this table.

(3)

Prologis’ investment balance is presented at our adjusted basis derived from the ventures’ U.S. GAAP information. The difference between our ownership interest of a venture’s equity and our investment balance at June 30, 2020 and December 31, 2019, results principally from four types of transactions: (i) deferred gains from the contribution of property to a venture prior to January 1, 2018; (ii) recording additional costs associated with our investment in the venture; (iii) receivables, principally for fees and promotes ($339.6 million and $152.0 million, respectively); and (iv) customer security deposits retained subsequent to property contributions to Nippon Prologis REIT, Inc.

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

Equity Commitments Related to Certain Unconsolidated Co-Investment Ventures

At June 30, 2020, our remaining equity commitments were $357.4 million, primarily for Prologis China Logistics Venture. Our equity commitments expire from 2021 to 2028.

NOTE 5. ASSETS HELD FOR SALE OR CONTRIBUTION

We have investments in certain real estate properties that met the criteria to be classified as held for sale or contribution at June 30, 2020 and December 31, 2019. At the time of classification, these properties were expected to be sold to third parties or were recently stabilized and expected to be contributed to unconsolidated co-investment ventures within twelve months. The amounts included in Assets Held for Sale or Contribution represented real estate investment balances and the related assets and liabilities for each property.

Assets held for sale or contribution, including certain properties acquired through the Liberty Transaction and the IPT Transaction, consisted of the following (dollars and square feet in thousands):

	June 30,		December 31,
	2020		2019
Number of operating properties		154		28
Square feet		24,300		9,371
Total assets held for sale or contribution	$	1,948,508	$	720,685
Total liabilities associated with assets held for sale or contribution – included in Other Liabilities	$	50,490	$	41,994

NOTE 6. DEBT

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

	June 30, 2020					December 31, 2019
	Weighted Average Interest Rate ⁽¹⁾			Amount Outstanding ⁽²⁾		Weighted Average Interest Rate⁽¹⁾			Amount Outstanding ⁽²⁾
Credit facilities		0.6	%	$	115,108		0.4	%	$	184,255
Senior notes ⁽³⁾		2.3	%		13,205,392		2.4	%		9,660,570
Term loans and unsecured other ⁽³⁾		1.0	%		1,695,026		0.9	%		1,441,882
Secured mortgage⁽³⁾⁽⁴⁾		3.6	%		651,346		3.4	%		619,170
Total		2.2	%	$	15,666,872		2.2	%	$	11,905,877

(1)

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

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

	June 30, 2020					December 31, 2019
	Amount Outstanding		% of Total			Amount Outstanding		% of Total
British pound sterling	$	1,077,460		6.9	%	$	656,549		5.5	%
Canadian dollar		265,791		1.7	%		279,730		2.3	%
Euro		6,080,521		38.8	%		6,128,986		51.5	%
Japanese yen		2,480,815		15.8	%		2,329,381		19.6	%
U.S. dollar		5,762,285		36.8	%		2,511,231		21.1	%
Total	$	15,666,872				$	11,905,877

(3)

Through the Liberty Transaction, we assumed $2.5 billion of senior notes, $246.9 million of secured mortgage debt and a $100.1 million term loan with a weighted average stated interest rate of 3.8%. We subsequently paid down $1.8 billion of the assumed debt with senior notes we issued at lower rates in February 2020. See below for additional activity on debt assumed in the Liberty Transaction and the extinguishment of a significant portion of the debt subsequent to acquisition.

(4)	Through the IPT Transaction, USLV assumed $341.8 million of secured mortgage debt, all of which was paid down at closing. See below for the early extinguishment of debt in the IPT Transaction.

Credit Facilities

We have a global senior credit facility (the “Global Facility”), under which we may draw in British pounds sterling, Canadian dollars, euro, Japanese yen, Mexican pesos and U.S. dollars on a revolving basis up to $3.5 billion (subject to currency fluctuations). Pricing under the Global Facility, including the spread over LIBOR, facility fees and letter of credit fees, varies based on the public debt ratings of the OP. The Global Facility is scheduled to mature in January 2023; however, we may extend the maturity date for six months on two occasions, subject to the satisfaction of certain conditions and payment of extension fees. We have the ability to increase the Global Facility to $4.5 billion, subject to currency fluctuations and obtaining additional lender commitments.

We also have a Japanese yen revolver (the “Revolver”) with availability of ¥50.0 billion ($464.0 million at June 30, 2020). We have the ability to increase the Revolver to ¥65.0 billion ($603.2 million at June 30, 2020), subject to obtaining additional lender commitments. Pricing under the Revolver, including the spread over LIBOR, facility fees and letter of credit fees, varies based on the public debt ratings of the OP. At June 30, 2020, the Revolver was scheduled to mature in February 2021; however, we may extend the maturity date for one year, subject to the satisfaction of certain conditions and payment of extension fees.

In July 2020, we upsized our Revolver to increase its borrowing capacity to ¥55.0 billion. The upsized Revolver is scheduled to mature in July 2024; however, we may extend the maturity date for one year, subject to the satisfaction of certain conditions and payment of extension fees. We have the ability to increase borrowing capacity of the Revolver to ¥75.0 billion, subject to currency fluctuations and obtaining additional lender commitments.

We refer to the Global Facility and the Revolver, collectively, as our “Credit Facilities.”

Senior Notes

The following table summarizes the issuances and redemptions of senior notes during the six months ended June 30, 2020 (principal in thousands):

	Aggregate Principal
Initial Borrowing Date	Borrowing Currency		USD ⁽¹⁾		Weighted Average Stated Interest Rate at the Issuance Date	Maturity Dates
February ⁽²⁾	€	1,350,000	$	1,485,405	0.6%	February 2022 – 2035
February ⁽²⁾	$	2,200,000	$	2,200,000	2.4%	April 2027 – 2050
February	£	250,000	$	322,490	1.9%	February 2035
June ⁽³⁾	¥	41,200,000	$	386,314	1.0%	June 2027 – 2050

	Aggregate Principal
Redemption Date	Borrowing Currency		USD ⁽¹⁾		Stated Interest Rate at the Redemption Date	Maturity Dates
January	€	400,000	$	445,880	0.0%	January 2020
March ⁽²⁾	€	700,000	$	783,090	1.4%	May 2021
June ⁽³⁾	€	212,598	$	238,067	3.0%	January 2022
June ⁽³⁾	€	100,486	$	112,524	3.4%	February 2024

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

(2)

We utilized the proceeds from these issuances to redeem $1.8 billion of debt assumed in the Liberty Transaction, primarily senior notes as discussed above, and our €700.0 million ($783.1 million) senior notes due in May 2021. The remainder of the proceeds were used for the repayment of other debt and general corporate purposes.

(3)	We utilized the proceeds from the issuance of the Japanese yen senior notes to redeem €212.6 million ($238.1 million) and €100.5 million ($112.5 million) of the euro senior notes due in January 2022 and February 2024, respectively, through a tender offer.

In February 2020, we completed an exchange offer for two series of Liberty’s senior notes for an aggregate amount of $750.0 million, with $689.8 million, or 92%, of the aggregate principal amount being validly tendered for exchange. These senior notes are in the aggregate principal amounts of $400.0 million due in October 2026 with an interest rate of 3.3% and $350.0 million due in February 2029 with an interest rate of 4.4%. The senior notes were exchanged for notes issued by a wholly owned subsidiary and guaranteed by the OP. As a result of the exchange offer, we have no separate remaining financial reporting obligations or financial covenants associated with the senior notes assumed in the Liberty Transaction. All other terms of the exchanged Liberty senior notes remained substantially the same.

Term Loans

During the six months ended June 30, 2020, we extended the maturity of the multi-currency term loan (“2017 Term Loan”) by one year until May 2021. We may extend the maturity for one additional year, subject to the satisfaction of certain conditions and the payment of an extension fee. During the six months ended June 30, 2020 and 2019, we borrowed a net $250.0 million and paid down a net $59.0 million on the 2017 Term Loan, respectively.

Liquidity

The following table summarizes information about our available liquidity at June 30, 2020 (in millions):


Aggregate lender commitments
Credit Facilities	$	3,947
Available term loans		250
Less:
Borrowings outstanding		115
Outstanding letters of credit		29
Current availability		4,053
Cash and cash equivalents		549
Total liquidity	$	4,602

Long-Term Debt Maturities

Scheduled principal payments due on our debt for the remainder of 2020 and for each year through the period ended December 31, 2024, and thereafter were as follows at June 30, 2020 (in thousands):

	Unsecured
	Credit		Senior			Term Loans			Secured
Maturity	Facilities		Notes			and Other			Mortgage			Total
2020 ⁽¹⁾	$	-	$	-		$	10,626		$	4,521		$	15,147
2021 ⁽¹⁾⁽²⁾		59,118		-			250,000			43,391			352,509
2022		-		713,763			-			11,857			725,620
2023 ⁽³⁾		55,990		850,000			124,597			33,832			1,064,419
2024		-		671,336			-			263,176			934,512
Thereafter		-		11,010,008			1,317,848			293,951			12,621,807
Subtotal		115,108		13,245,107			1,703,071			650,728			15,714,014
Unamortized net premiums		-		24,831			-			2,790			27,621
Unamortized debt issuance costs		-		(64,546	)		(8,045	)		(2,172	)		(74,763	)
Total	$	115,108	$	13,205,392		$	1,695,026		$	651,346		$	15,666,872

(1)	We expect to repay the amounts maturing in the next twelve months with cash generated from operations, proceeds from dispositions of real estate properties, or as necessary, with borrowings on our Credit Facilities.

(2)	Included in the 2021 maturities is the 2017 Term Loan and the Revolver that can be extended until 2022. In July 2020, we upsized our Revolver and it is now scheduled to mature in July 2024, which may be further extended until 2025.

(3)	Included in the 2023 maturities is the Global Facility that can be extended until 2024.

Early Extinguishment of Debt

During the six months ended June 30, 2020, we recognized $66.3 million of losses upon the redemption of certain euro senior notes in March and June as described above and the extinguishment of debt assumed in the Liberty Transaction and the IPT Transaction, which represented the excess of the prepayment penalties over the premium recorded upon assumption of the debt. During the six months ended June 30, 2019, losses on early extinguishment of debt were not significant.

Financial Debt Covenants

We have $13.2 billion of senior notes and $1.7 billion of term loans outstanding at June 30, 2020 that were subject to certain financial covenants under their related indentures. We are also subject to financial covenants under our Credit Facilities and certain secured mortgage debt. At June 30, 2020, we were in compliance with all of our financial debt covenants.

Guarantee of Finance Subsidiary Debt

We have finance subsidiaries as part of our operations in Europe (Prologis Euro Finance LLC), Japan (Prologis Yen Finance LLC) and the U.K. (Prologis Sterling Finance LLC) in order to mitigate our foreign currency risk by borrowing in the currencies in which we invest. These entities are 100% indirectly owned by the OP and all unsecured debt issued or to be issued by each entity is or will be fully and unconditionally guaranteed by the OP. There are no restrictions or limits on the OP’s ability to obtain funds from its subsidiaries by dividend or loan. In reliance on Rule 3-10 of Regulation S-X, the separate financial statements of Prologis Euro Finance LLC, Prologis Yen Finance LLC and Prologis Sterling Finance LLC are not provided.

NOTE 7. STOCKHOLDER’S EQUITY OF PROLOGIS, INC.

Share Purchase Program

In March 2020, the Board of Directors authorized a new share purchase program for the repurchase of outstanding shares of our common stock on the open market or in privately negotiated transactions for an aggregate purchase price of up to $1.0 billion. In March 2020, we repurchased and retired 0.5 million shares of common stock for an aggregate price of $34.8 million at a weighted average price of $64.66 per share on the open market.

Shares Authorized

In April 2020, our stockholders approved an amendment to our Articles of Incorporation that increased the number of authorized shares from 1.0 billion to 2.0 billion shares of common stock.

Common Stock

In May 2020, we entered into a new at-the-market program that allows us to sell up to $1.5 billion in aggregate gross sales proceeds of shares of common stock through twenty designated agents. These agents earn a fee of up to 2% of the gross sales price per share of common stock as agreed to on a transaction-by-transaction basis. We have not issued any shares of common stock under this new program.

NOTE 8. NONCONTROLLING INTERESTS

Prologis, L.P.

We report noncontrolling interests related to several entities we consolidate but of which we do not own 100% of the equity. These entities include two real estate partnerships that have issued limited partnership units to third parties. Depending on the specific partnership agreements, these limited partnership units are redeemable for cash or, at our option, into shares of the Parent’s common stock, generally at a rate of one share of common stock to one limited partnership unit. We also consolidate certain entities in which we do not own 100% of the equity, but the equity of these entities is not exchangeable into our common stock.

Prologis, Inc.

The noncontrolling interests of the Parent include the noncontrolling interests described above for the OP, as well as the limited partnership units in the OP that are not owned by the Parent. The outstanding limited partnership units receive quarterly cash distributions equal to the quarterly dividends paid on our common stock pursuant to the terms of the applicable partnership agreements.

The following table summarizes our ownership percentages and noncontrolling interests and the consolidated entities’ total assets and liabilities (dollars in thousands):

	Our Ownership Percentage						Noncontrolling Interests				Total Assets				Total Liabilities
	Jun 30, 2020			Dec 31, 2019			Jun 30, 2020		Dec 31, 2019		Jun 30, 2020		Dec 31, 2019		Jun 30, 2020		Dec 31, 2019
Prologis U.S. Logistics Venture ⁽¹⁾		55.0	%		55.0	%	$	3,492,089	$	2,677,846	$	7,890,447	$	6,077,016	$	138,994	$	99,397
Other consolidated entities⁽²⁾	various			various				97,711		97,548		1,029,932		849,620		123,384		85,186
Prologis, L.P.								3,589,800		2,775,394		8,920,379		6,926,636		262,378		184,583
Limited partners in Prologis, L.P. ⁽³⁾⁽⁴⁾								913,481		643,263		-		-		-		-
Prologis, Inc.							$	4,503,281	$	3,418,657	$	8,920,379	$	6,926,636	$	262,378	$	184,583

(1)

As discussed in Note 3, in January 2020, USLV acquired a portfolio of 127 operating properties, aggregating 19.0 million square feet, in the IPT Transaction for $2.0 billion, including transaction costs and the assumption and repayment of debt. Our partner contributed their share of the purchase price to fund the acquisition.

(2)

Includes our two partnerships that have issued limited partnership units to third parties, as discussed above, along with various other consolidated entities. The limited partnership units outstanding at June 30, 2020 and December 31, 2019 were exchangeable into cash or, at our option, 0.3 million shares of the Parent’s common stock.

(3)	We had 8.6 million Class A Units that were convertible into 8.0 million and 8.1 million limited partnership units of the OP at June 30, 2020 and December 31, 2019, respectively.

(4)

At June 30, 2020 and December 31, 2019, excluding the Class A Units, there were limited partnership units in the OP that were exchangeable into cash or, at our option, 8.4 million and 6.2 million shares of the Parent’s common stock, respectively. We issued 2.3 million limited partnership units in the Liberty Transaction. Also included are the vested OP Long-Term Incentive Plan Units associated with our long-term compensation plan. See further discussion of LTIP Units in Note 9.

NOTE 9. LONG-TERM COMPENSATION

Equity-Based Compensation Plans and Programs

2020 Long-Term Incentive Plan

In April 2020, our stockholders approved the 2020 Long-Term Incentive Plan (“2020 LTIP”), which replaced the 2012 Long-Term Incentive Plan (“2012 LTIP”). After approval of the 2020 LTIP, no further awards could be made under the 2012 LTIP and outstanding awards previously granted under the 2012 LTIP will remain outstanding in accordance with the awards’ terms.

The 2020 LTIP provides for grants of awards to officers, directors, employees and consultants of the Parent or its subsidiaries. Awards can be in the form of: full value awards, stock appreciation rights, and stock options (non-qualified options and incentive stock options). Full value awards generally consist of: (i) common stock; (ii) restricted stock units (“RSUs”); (iii) OP LTIP units (“LTIP Units”) and (iv) Prologis Outperformance Plan (“POP”) OP LTIP units (“POP LTIP Units”). The equity-based compensation plans and programs under which awards can be made were not changed under the 2020 LTIP. See the discussion below regarding these programs. Awards may be made under the 2020 LTIP until it is terminated by the Board or until the ten-year anniversary of the effective date of the plan.

Prologis Outperformance Plan (“POP”)

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

We granted participation points for the 2020 – 2022 performance period in January 2020, with a fair value of $28.8 million using a Monte Carlo valuation model that assumed a risk-free interest rate of 1.7% and an expected volatility of 16.0%. The 2020 – 2022 performance period has an absolute maximum cap of $100 million. If an award is earned at the end of the initial three-year performance period, then 20% of the POP award is paid and the remaining 80% is subject to additional seven-year cliff vesting. The 20% that is paid at the end of the three-year performance period is subject to an additional three-year holding requirement.

The Outperformance Hurdle was met for the 2017 – 2019 performance period, which resulted in awards being earned at December 31, 2019. Initial awards of $75.0 million in aggregate were awarded in January 2020 in the form of 0.3 million shares of common stock and 0.5 million POP LTIP Units and LTIP Units. Participants are not able to sell or transfer equity awards received until three years after the end of the initial period. One-third of the remaining compensation pool in excess of the $75 million aggregate initial award amounts can be earned at the end of each of the three years following the end of the initial three-year performance period if our performance meets or exceeds the MSCI US REIT Index at the end of each of such three years. Vesting for the 2017 – 2019 performance period for our Named Executive Officers (“NEOs”) follows the construct of the 2020 – 2022 performance period as described above, such that 20% of any amounts earned were awarded in January 2020 subject to a three-year holding period, and 80% of amounts earned at December 31, 2019 will cliff vest at the end of the seventh year following the initial three-year performance period.

Other Equity-Based Compensation Plans and Programs

Our other equity-based compensation plans and programs include (i) the Prologis Promote Plan (“PPP”); (ii) the annual long-term incentive (“LTI”) equity award program (“Annual LTI Award”); and (iii) the annual bonus exchange program. Awards under these plans and programs may be issued in the form of RSUs of the Parent or LTIP Units of the OP at the eligible participant’s election. RSUs and LTIP Units are valued based on the market price of the Parent’s common stock on the date the award is granted and the grant date value is charged to compensation expense over the service period.

Summary of Award Activity

RSUs

The following table summarizes the activity for RSUs for the six months ended June 30, 2020 (units in thousands):

				Weighted Average
	Unvested RSUs			Grant Date Fair Value
Balance at January 1, 2020		1,165		$	68.44
Granted		383			93.00
Vested and distributed		(500	)		62.53
Forfeited		(35	)		74.97
Balance at June 30, 2020		1,013		$	78.55

LTIP Units

The following table summarizes the activity for LTIP Units for the six months ended June 30, 2020 (units in thousands):

	Vested			Unvested			Unvested Weighted Average
	LTIP Units			LTIP Units			Grant Date Fair Value
Balance at January 1, 2020		3,714			2,678		$	60.06
Granted		-			658			93.23
Vested LTIP Units		954			(954	)		63.46
Vested POP LTIP Units ⁽¹⁾		303			-		N/A
Unvested POP LTIP Units ⁽¹⁾		-			345			19.03
Conversion to common limited partnership units		(424	)		-		N/A
Balance at June 30, 2020		4,547			2,727		$	61.61

(1)

Vested and unvested units were based on the POP performance criteria being met for the 2017 – 2019 performance period and represented the earned award amounts. Vested and unvested units are included in the award discussion above. These amounts also include awards earned for prior performance periods related to the compensation pool in excess of the initial award.

NOTE 10. EARNINGS PER COMMON SHARE OR UNIT

We determine basic earnings per share or unit based on the weighted average number of shares of common stock or units outstanding during the period. We compute diluted earnings per share or unit based on the weighted average number of shares or units outstanding combined with the incremental weighted average effect from all outstanding potentially dilutive instruments.

The computation of our basic and diluted earnings per share and unit was as follows (in thousands, except per share and unit amounts):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
Prologis, Inc.	2020		2019		2020		2019
Net earnings attributable to common stockholders – Basic	$	404,539	$	383,784	$	893,957	$	730,831
Net earnings attributable to exchangeable limited partnership units⁽¹⁾		11,763		11,759		25,812		22,416
Adjusted net earnings attributable to common stockholders – Diluted	$	416,302	$	395,543	$	919,769	$	753,247

Weighted average common shares outstanding – Basic		737,992		630,271		718,278		629,990
Incremental weighted average effect on exchange of limited partnership units ⁽¹⁾		21,539		19,556		20,884		19,637
Incremental weighted average effect of equity awards		6,299		5,620		6,865		5,139
Weighted average common shares outstanding – Diluted⁽²⁾		765,830		655,447		746,027		654,766

Net earnings per share attributable to common stockholders:
Basic	$	0.55	$	0.61	$	1.24	$	1.16
Diluted	$	0.54	$	0.60	$	1.23	$	1.15

	Three Months Ended				Six Months Ended
	June 30,				June 30,
Prologis, L.P.	2020		2019		2020		2019
Net earnings attributable to common unitholders	$	416,189	$	395,470	$	919,577	$	753,091