pld-10q_20210331.htm

Sol

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 March 31, 2021

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

For the transition period from ______________ to ______________

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

Prologis, Inc.

Prologis, L.P.

(Exact name of registrant as specified in its charter)

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

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

(415) 394-9000

(Registrants’ telephone number, including area code)

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

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

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

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

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

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

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

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

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

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

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

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

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

The number of shares of Prologis, Inc.’s common stock outstanding at April 23, 2021, was approximately 739,773,000.

EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the period ended March 31, 2021, 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, 2021, the Parent owned 97.25% common general partnership interest in the OP and 100% of the preferred units in the OP. The remaining 2.75% 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 – March 31, 2021 and December 31, 2020		1
		Consolidated Statements of Income – Three Months Ended March 31, 2021 and 2020		2
		Consolidated Statements of Comprehensive Income – Three Months Ended March 31, 2021 and 2020		3
		Consolidated Statements of Equity – Three Months Ended March 31, 2021 and 2020		4
		Consolidated Statements of Cash Flows – Three Months Ended March 31, 2021 and 2020		5
	Prologis, L.P.:
		Consolidated Balance Sheets – March 31, 2021 and December 31, 2020		6
		Consolidated Statements of Income – Three Months Ended March 31, 2021 and 2020		7
		Consolidated Statements of Comprehensive Income – Three Months Ended March 31, 2021 and 2020		8
		Consolidated Statements of Capital – Three Months Ended March 31, 2021 and 2020		9
		Consolidated Statements of Cash Flows – Three Months Ended March 31, 2021 and 2020		10
	Prologis, Inc. and Prologis, L.P.:
		Notes to the Consolidated Financial Statements		11
		Note 1. General		11
		Note 2. Liberty Transaction		11
		Note 3. Real Estate		12
		Note 4. Unconsolidated Entities		13
		Note 5. Assets Held for Sale or Contribution		15
		Note 6. Debt		15
		Note 7. Noncontrolling Interests		18
		Note 8. Long-Term Compensation		18
		Note 9. Earnings Per Common Share or Unit		20
		Note 10. Financial Instruments and Fair Value Measurements		21
		Note 11. Business Segments		24
		Note 12. Supplemental Cash Flow Information		26
		Reports of Independent Registered Public Accounting Firm		27
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		29
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		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

Index

PART I. FINANCIAL INFORMATION

ITEM 1. Financial Statements

PROLOGIS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except per share data)


	March 31, 2021			December 31, 2020
ASSETS
Investments in real estate properties	$	50,459,365		$	50,384,328
Less accumulated depreciation		6,823,824			6,539,156
Net investments in real estate properties		43,635,541			43,845,172
Investments in and advances to unconsolidated entities		7,514,840			7,602,014
Assets held for sale or contribution		1,055,751			1,070,724
Net investments in real estate		52,206,132			52,517,910

Cash and cash equivalents		676,074			598,086
Other assets		2,850,603			2,949,009
Total assets	$	55,732,809		$	56,065,005

LIABILITIES AND EQUITY
Liabilities:
Debt	$	16,503,458		$	16,849,076
Accounts payable and accrued expenses		1,138,924			1,143,372
Other liabilities		1,705,224			1,747,977
Total liabilities		19,347,606			19,740,425

Equity:
Prologis, Inc. stockholders’ equity:
Series Q preferred stock at stated liquidation preference of $50 per share; $0.01 par value; 1,279 shares issued and outstanding and 100,000 preferred shares authorized at March 31, 2021 and December 31, 2020		63,948			63,948
Common stock; $0.01 par value; 739,746 shares and 739,381 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively		7,397			7,394
Additional paid-in capital		35,454,066			35,488,634
Accumulated other comprehensive loss		(1,021,551	)		(1,193,739	)
Distributions in excess of net earnings		(2,495,343	)		(2,394,690	)
Total Prologis, Inc. stockholders’ equity		32,008,517			31,971,547
Noncontrolling interests		4,376,686			4,353,033
Total equity		36,385,203			36,324,580
Total liabilities and equity	$	55,732,809		$	56,065,005

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

Index

PROLOGIS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share amounts)

	Three Months Ended
	March 31,
	2021			2020
Revenues:
Rental	$	1,021,656		$	878,807
Strategic capital		119,961			96,591
Development management and other		6,699			2,843
Total revenues		1,148,316			978,241
Expenses:
Rental		277,884			227,618
Strategic capital		49,450			46,574
General and administrative		78,032			69,689
Depreciation and amortization		397,575			345,970
Other		3,444			14,574
Total expenses		806,385			704,425

Operating income before gains on real estate transactions, net		341,931			273,816
Gains on dispositions of development properties and land, net		173,643			162,750
Gains on other dispositions of investments in real estate, net		16,623			31,491
Operating income		532,197			468,057

Other income (expense):
Earnings from unconsolidated entities, net		67,049			88,730
Interest expense		(71,281	)		(75,642	)
Interest and other income, net		4,746			370
Foreign currency and derivative gains, net		80,152			113,329
Losses on early extinguishment of debt, net		(187,453	)		(42,767	)
Total other income (expense)		(106,787	)		84,020
Earnings before income taxes		425,410			552,077
Total income tax expense		25,717			30,913
Consolidated net earnings		399,693			521,164
Less net earnings attributable to noncontrolling interests		32,346			30,111
Net earnings attributable to controlling interests		367,347			491,053
Less preferred stock dividends		1,532			1,635
Net earnings attributable to common stockholders	$	365,815		$	489,418

Weighted average common shares outstanding – Basic		738,998			698,272
Weighted average common shares outstanding – Diluted		764,958			723,983

Net earnings per share attributable to common stockholders – Basic	$	0.50		$	0.70

Net earnings per share attributable to common stockholders – Diluted	$	0.49		$	0.70

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

Index

PROLOGIS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

	Three Months Ended
	March 31,
	2021			2020
Consolidated net earnings	$	399,693		$	521,164
Other comprehensive income (loss):
Foreign currency translation gains (losses), net		171,759			(133,533	)
Unrealized gains (losses) on derivative contracts, net		4,821			(23,448	)
Comprehensive income		576,273			364,183
Net earnings attributable to noncontrolling interests		(32,346	)		(30,111	)
Other comprehensive loss (income) attributable to noncontrolling interests		(4,392	)		5,027
Comprehensive income attributable to common stockholders	$	539,535		$	339,099

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

Index

PROLOGIS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

Three Months Ended March 31, 2021 and 2020

(Unaudited)

(In thousands)

			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, 2021	$	63,948		739,381	$	7,394	$	35,488,634		$	(1,193,739	)	$	(2,394,690	)	$	4,353,033		$	36,324,580
Consolidated net earnings		-		-		-		-			-			367,347			32,346			399,693
Effect of equity compensation plans		-		360		3		4,039			-			-			27,298			31,340
Capital contributions		-		-		-		-			-			-			120			120
Redemption of noncontrolling interests		-		5		-		233			-			-			(31,605	)		(31,372	)
Foreign currency translation gains, net		-		-		-		-			167,499			-			4,260			171,759
Unrealized gains on derivative contracts, net		-		-		-		-			4,689			-			132			4,821
Reallocation of equity		-		-		-		(38,816	)		-			-			38,816			-
Dividends ($0.63 per common share) and other distributions		-		-		-		(24	)		-			(468,000	)		(47,714	)		(515,738	)
Balance at March 31, 2021	$	63,948		739,746	$	7,397	$	35,454,066		$	(1,021,551	)	$	(2,495,343	)	$	4,376,686		$	36,385,203

			Common Stock									Accumulated			Distributions
			Number						Additional			Other			in Excess of			Non-
	Preferred		of			Par			Paid-in			Comprehensive			Net			controlling			Total
	Stock		Shares			Value			Capital			Loss			Earnings			Interests			Equity
Balance at January 1, 2020	$	68,948		631,797		$	6,318		$	25,719,427		$	(990,398	)	$	(2,151,168	)	$	3,418,657		$	26,071,784
Consolidated net earnings		-		-			-			-			-			491,053			30,111			521,164
Effect of equity compensation plans		-		518			5			(3,121	)		-			-			26,439			23,323
Liberty Transaction, net of issuance costs		-		106,723			1,067			9,801,412			-			-			211,567			10,014,046
Repurchases of common shares		-		(539	)		(5	)		(34,824	)		-			-			-			(34,829	)
Capital contributions		-		-			-			-			-			-			916,974			916,974
Redemption of noncontrolling interests		-		64			1			2,783			-			-			(19,595	)		(16,811	)
Foreign currency translation losses, net		-		-			-			-			(129,161	)		-			(4,372	)		(133,533	)
Unrealized losses on derivative contracts, net		-		-			-			-			(22,793	)		-			(655	)		(23,448	)
Reallocation of equity		-		-			-			(69,327	)		-			-			69,327			-
Dividends ($0.58 per common share) and other distributions		-		-			-			(9	)		-			(430,766	)		(132,025	)		(562,800	)
Balance at March 31, 2020	$	68,948		738,563		$	7,386		$	35,416,341		$	(1,142,352	)	$	(2,090,881	)	$	4,516,428		$	36,775,870

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

Index

PROLOGIS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Three Months Ended
	March 31,
	2021			2020
Operating activities:
Consolidated net earnings	$	399,693		$	521,164
Adjustments to reconcile net earnings to net cash provided by operating activities:
Straight-lined rents and amortization of above and below market leases		(36,658	)		(23,738	)
Equity-based compensation awards		34,575			31,808
Depreciation and amortization		397,575			345,970
Earnings from unconsolidated entities, net		(67,049	)		(88,730	)
Operating distributions from unconsolidated entities		115,957			106,732
Decrease in operating receivables from unconsolidated entities		4,284			60,739
Amortization of debt discounts and debt issuance costs, net		2,091			1,175
Gains on dispositions of development properties and land, net		(173,643	)		(162,750	)
Gains on other dispositions of investments in real estate, net		(16,623	)		(31,491	)
Unrealized foreign currency and derivative gains, net		(81,726	)		(109,726	)
Losses on early extinguishment of debt, net		187,453			42,767
Deferred income tax expense		1,162			2,993
Decrease in accounts receivable and other assets		68,398			105,648
Decrease in accounts payable and accrued expenses and other liabilities		(18,795	)		(123,468	)
Net cash provided by operating activities		816,694			679,093
Investing activities:
Real estate development		(422,399	)		(443,044	)
Real estate acquisitions		(226,450	)		(439,059	)
Liberty Transaction, net of cash acquired		-			(22,659	)
IPT Transaction, net of cash acquired		-			(1,664,555	)
Tenant improvements and lease commissions on previously leased space		(71,140	)		(39,396	)
Property improvements		(8,071	)		(13,639	)
Proceeds from dispositions and contributions of real estate properties		727,609			723,887
Investments in and advances to unconsolidated entities		(141,764	)		(251,673	)
Return of investment from unconsolidated entities		37,632			139,900
Proceeds from repayment of notes receivable backed by real estate		-			4,312
Proceeds from the settlement of net investment hedges		-			2,352
Payments on the settlement of net investment hedges		(2,511	)		(5,599	)
Net cash used in investing activities		(107,094	)		(2,009,173	)
Financing activities:
Proceeds from issuance of common stock		709			850
Repurchase and retirement of common stock		-			(34,829	)
Dividends paid on common and preferred stock		(468,000	)		(430,766	)
Noncontrolling interests contributions		120			916,974
Noncontrolling interests distributions		(47,714	)		(132,025	)
Settlement of noncontrolling interests		(31,372	)		(16,811	)
Tax paid with shares withheld		(16,955	)		(22,736	)
Debt and equity issuance costs paid		(11,661	)		(31,118	)
Net payments on credit facilities		(115,274	)		(125,166	)
Repurchase of and payments on debt		(1,931,983	)		(4,065,075	)
Proceeds from the issuance of debt		2,029,817			4,991,113
Net cash provided by (used in) financing activities		(592,313	)		1,050,411

Effect of foreign currency exchange rate changes on cash		(39,299	)		(1,315	)
Net increase (decrease) in cash and cash equivalents		77,988			(280,984	)
Cash and cash equivalents, beginning of period		598,086			1,088,855
Cash and cash equivalents, end of period	$	676,074		$	807,871

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

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

Index

PROLOGIS, L.P.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)


	March 31, 2021		December 31, 2020
ASSETS
Investments in real estate properties	$	50,459,365	$	50,384,328
Less accumulated depreciation		6,823,824		6,539,156
Net investments in real estate properties		43,635,541		43,845,172
Investments in and advances to unconsolidated entities		7,514,840		7,602,014
Assets held for sale or contribution		1,055,751		1,070,724
Net investments in real estate		52,206,132		52,517,910

Cash and cash equivalents		676,074		598,086
Other assets		2,850,603		2,949,009
Total assets	$	55,732,809	$	56,065,005

LIABILITIES AND CAPITAL
Liabilities:
Debt	$	16,503,458	$	16,849,076
Accounts payable and accrued expenses		1,138,924		1,143,372
Other liabilities		1,705,224		1,747,977
Total liabilities		19,347,606		19,740,425

Capital:
Partners’ capital:
General partner – preferred		63,948		63,948
General partner – common		31,944,569		31,907,599
Limited partners – common		555,176		523,954
Limited partners – Class A common		348,048		345,553
Total partners’ capital		32,911,741		32,841,054
Noncontrolling interests		3,473,462		3,483,526
Total capital		36,385,203		36,324,580
Total liabilities and capital	$	55,732,809	$	56,065,005

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

Index

PROLOGIS, L.P.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per unit amounts)

	Three Months Ended
	March 31,
	2021			2020
Revenues:
Rental	$	1,021,656		$	878,807
Strategic capital		119,961			96,591
Development management and other		6,699			2,843
Total revenues		1,148,316			978,241
Expenses:
Rental		277,884			227,618
Strategic capital		49,450			46,574
General and administrative		78,032			69,689
Depreciation and amortization		397,575			345,970
Other		3,444			14,574
Total expenses		806,385			704,425

Operating income before gains on real estate transactions, net		341,931			273,816
Gains on dispositions of development properties and land, net		173,643			162,750
Gains on other dispositions of investments in real estate, net		16,623			31,491
Operating income		532,197			468,057

Other income (expense):
Earnings from unconsolidated entities, net		67,049			88,730
Interest expense		(71,281	)		(75,642	)
Interest and other income, net		4,746			370
Foreign currency and derivative gains, net		80,152			113,329
Losses on early extinguishment of debt, net		(187,453	)		(42,767	)
Total other income (expense)		(106,787	)		84,020
Earnings before income taxes		425,410			552,077
Total income tax expense		25,717			30,913
Consolidated net earnings		399,693			521,164
Less net earnings attributable to noncontrolling interests		22,078			16,141
Net earnings attributable to controlling interests		377,615			505,023
Less preferred unit distributions		1,532			1,635
Net earnings attributable to common unitholders	$	376,083		$	503,388

Weighted average common units outstanding – Basic		751,679			710,141
Weighted average common units outstanding – Diluted		764,958			723,983

Net earnings per unit attributable to common unitholders – Basic	$	0.50		$	0.70

Net earnings per unit attributable to common unitholders – Diluted	$	0.49		$	0.70

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

Index

PROLOGIS, L.P.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

	Three Months Ended
	March 31,
	2021			2020
Consolidated net earnings	$	399,693		$	521,164
Other comprehensive income (loss):
Foreign currency translation gains (losses), net		171,759			(133,533	)
Unrealized gains (losses) on derivative contracts, net		4,821			(23,448	)
Comprehensive income		576,273			364,183
Net earnings attributable to noncontrolling interests		(22,078	)		(16,141	)
Other comprehensive loss attributable to noncontrolling interests		476			663
Comprehensive income attributable to common unitholders	$	554,671		$	348,705

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

Index

PROLOGIS, L.P.

CONSOLIDATED STATEMENTS OF CAPITAL

Three Months Ended March 31, 2021 and 2020

(Unaudited)

(In thousands)

	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, 2021		1,279	$	63,948		739,381	$	31,907,599			12,142		$	523,954			8,595	$	345,553		$	3,483,526		$	36,324,580
Consolidated net earnings		-		-		-		367,347			-			6,277			-		3,991			22,078			399,693
Effect of equity compensation plans		-		-		360		4,042			1,055			27,298			-		-			-			31,340
Capital contributions		-		-		-		-			-			-			-		-			120			120
Redemption of limited partners units		-		-		5		233			(341	)		(31,605	)		-		-			-			(31,372	)
Foreign currency translation gains (losses), net		-		-		-		167,499			-			2,911			-		1,825			(476	)		171,759
Unrealized gains on derivative contracts, net		-		-		-		4,689			-			81			-		51			-			4,821
Reallocation of capital		-		-		-		(38,816	)		-			36,630			-		2,186			-			-
Distributions ($0.63 per common unit) and other		-		-		-		(468,024	)		-			(10,370	)		-		(5,558	)		(31,786	)		(515,738	)
Balance at March 31, 2021		1,279	$	63,948		739,746	$	31,944,569			12,856		$	555,176			8,595	$	348,048		$	3,473,462		$	36,385,203

	General Partner										Limited Partners											Non-
	Preferred				Common						Common						Class A Common					controlling
	Units		Amount		Units			Amount			Units			Amount			Units		Amount			Interests			Total
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		-		-		-			491,053			-			8,319			-		5,651			16,141			521,164
Effect of equity compensation plans		-		-		518			(3,116	)		1,191			26,439			-		-			-			23,323
Liberty Transaction, net of issuance costs		-		-		106,723			9,802,479			2,288			210,190			-		-			1,377			10,014,046
Repurchases of common units		-		-		(539	)		(34,829	)		-			-			-		-			-			(34,829	)
Capital contributions		-		-		-			-			-			-			-		-			916,974			916,974
Redemption of limited partners units		-		-		64			2,784			(254	)		(19,595	)		-		-			-			(16,811	)
Foreign currency translation losses, net		-		-		-			(129,161	)		-			(2,301	)		-		(1,408	)		(663	)		(133,533	)
Unrealized losses on derivative contracts, net		-		-		-			(22,793	)		-			(406	)		-		(249	)		-			(23,448	)
Reallocation of capital		-		-		-			(69,327	)		-			4,977			-		64,350			-			-
Distributions ($0.58 per common unit) and other		-		-		-			(430,775	)		-			(9,218	)		-		(5,570	)		(117,237	)		(562,800	)
Balance at March 31, 2020		1,379	$	68,948		738,563		$	32,190,494			13,158		$	573,481			8,613	$	350,961		$	3,591,986		$	36,775,870

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

Index

PROLOGIS, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

	Three Months Ended
	March 31,
	2021			2020
Operating activities:
Consolidated net earnings	$	399,693		$	521,164
Adjustments to reconcile net earnings to net cash provided by operating activities:
Straight-lined rents and amortization of above and below market leases		(36,658	)		(23,738	)
Equity-based compensation awards		34,575			31,808
Depreciation and amortization		397,575			345,970
Earnings from unconsolidated entities, net		(67,049	)		(88,730	)
Operating distributions from unconsolidated entities		115,957			106,732
Decrease in operating receivables from unconsolidated entities		4,284			60,739
Amortization of debt discounts and debt issuance costs, net		2,091			1,175
Gains on dispositions of development properties and land, net		(173,643	)		(162,750	)
Gains on other dispositions of investments in real estate, net		(16,623	)		(31,491	)
Unrealized foreign currency and derivative gains, net		(81,726	)		(109,726	)
Losses on early extinguishment of debt, net		187,453			42,767
Deferred income tax expense		1,162			2,993
Decrease in accounts receivable and other assets		68,398			105,648
Decrease in accounts payable and accrued expenses and other liabilities		(18,795	)		(123,468	)
Net cash provided by operating activities		816,694			679,093
Investing activities:
Real estate development		(422,399	)		(443,044	)
Real estate acquisitions		(226,450	)		(439,059	)
Liberty Transaction, net of cash acquired		-			(22,659	)
IPT Transaction, net of cash acquired		-			(1,664,555	)
Tenant improvements and lease commissions on previously leased space		(71,140	)		(39,396	)
Property improvements		(8,071	)		(13,639	)
Proceeds from dispositions and contributions of real estate properties		727,609			723,887
Investments in and advances to unconsolidated entities		(141,764	)		(251,673	)
Return of investment from unconsolidated entities		37,632			139,900
Proceeds from repayment of notes receivable backed by real estate		-			4,312
Proceeds from the settlement of net investment hedges		-			2,352
Payments on the settlement of net investment hedges		(2,511	)		(5,599	)
Net cash used in investing activities		(107,094	)		(2,009,173	)
Financing activities:
Proceeds from issuance of common partnership units in exchange for contributions from Prologis, Inc.		709			850
Repurchase and retirement of common units		-			(34,829	)
Distributions paid on common and preferred units		(483,928	)		(445,554	)
Noncontrolling interests contributions		120			916,974
Noncontrolling interests distributions		(31,786	)		(117,237	)
Redemption of common limited partnership units		(31,372	)		(16,811	)
Tax paid with shares of the Parent withheld		(16,955	)		(22,736	)
Debt and equity issuance costs paid		(11,661	)		(31,118	)
Net payments on credit facilities		(115,274	)		(125,166	)
Repurchase of and payments on debt		(1,931,983	)		(4,065,075	)
Proceeds from the issuance of debt		2,029,817			4,991,113
Net cash provided by (used in) financing activities		(592,313	)		1,050,411

Effect of foreign currency exchange rate changes on cash		(39,299	)		(1,315	)
Net increase (decrease) in cash and cash equivalents		77,988			(280,984	)
Cash and cash equivalents, beginning of period		598,086			1,088,855
Cash and cash equivalents, end of period	$	676,074		$	807,871

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

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

Index

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. GENERAL

Business. Prologis, Inc. (or the “Parent”) commenced operations as a fully integrated real estate company in 1997, elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code” or “IRC”), and believes the current organization and method of operation will enable it to maintain its status as a REIT. The Parent is the general partner of Prologis, L.P. (or the “Operating Partnership” or “OP”). Through the OP, we are engaged in the ownership, acquisition, development and management of logistics facilities with a focus on key markets in 19 countries on four continents. We invest in real estate through wholly owned subsidiaries and other entities through which we co-invest with partners and investors. We maintain a significant level of ownership in these co-investment ventures, which may be consolidated or unconsolidated based on our level of control of the entity. Our current business strategy consists of two operating business segments: Real Estate 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 11 for further discussion of our business segments. Unless otherwise indicated, the Notes to the Consolidated Financial Statements apply to both the Parent and the OP. The terms “the Company,” “Prologis,” “we,” “our” or “us” means the Parent and OP collectively.

For each share of preferred or common stock the Parent issues, the OP issues a corresponding preferred or common partnership unit, as applicable, to the Parent in exchange for the contribution of the proceeds from the stock issuance. At March 31, 2021, the Parent owned a 97.25% common general partnership interest in the OP and 100% of the preferred units in the OP. The remaining 2.75% common limited partnership interests, which include Class A common limited partnership units (“Class A Units”) in the OP, are owned by unaffiliated investors and certain current and former directors and officers of the Parent. Each partner’s percentage interest in the OP is determined based on the number of OP units held, including the number of OP units into which Class A Units are convertible, compared to total OP units outstanding at each period end and is used as the basis for the allocation of net income or loss to each partner. At the end of each reporting period, a capital adjustment is made in the OP to reflect the appropriate ownership interest for each of the common unitholders. These adjustments are reflected in the line items Reallocation of Equity in the Consolidated Statements of Equity of the Parent and Reallocation of Capital in the Consolidated Statements of Capital of the OP.

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

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

The accompanying unaudited interim financial information has been prepared according to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in our annual financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with such rules and regulations. Our management believes that the disclosures presented in these financial statements are adequate to make the information presented not misleading. In our opinion, all adjustments and eliminations, consisting only of normal recurring adjustments, necessary to present fairly the financial position and results of operations for both the Parent and the OP for the reported periods have been included. The results of operations for such interim periods are not necessarily indicative of the results for the full year. The accompanying unaudited interim financial information should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the SEC, and other public information.

Reclassifications. Lease right-of-use assets and lease liabilities have been reclassified in the Consolidated Financial Statements for 2020 to Other Assets and Other Liabilities, respectively, in order to conform to the 2021 financial statement presentation.

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, the assumption of debt of $2.8 billion and 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.

Index

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.

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 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 to the Liberty real estate properties and related lease intangibles on a relative fair value basis. All other assets acquired and liabilities assumed, including debt, and real estate assets that we do not intend to operate long-term are recorded at fair value as follows (in millions):

Net investments in real estate	$	12,636
Intangible assets, net of intangible liabilities		491
Cash and other assets		233
Debt		(2,845	)
Accounts payable, accrued expenses and other liabilities		(383	)
Noncontrolling interests		(1	)
Total purchase price, including transaction costs	$	10,131

NOTE 3. REAL ESTATE

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

	Square Feet				Number of Buildings
	Mar 31,		Dec 31,		Mar 31,		Dec 31,		Mar 31,		Dec 31,
	2021		2020		2021		2020		2021		2020
Operating properties:
Buildings and improvements		441,737		441,336		2,265		2,261	$	31,520,177	$	31,489,943
Improved land										12,025,439		12,017,676
Development portfolio, including land costs:
Prestabilized		5,572		6,076		18		24		480,918		553,266
Properties under development		22,990		22,004		62		61		1,550,798		1,329,345
Land ⁽¹⁾										1,699,738		1,606,358
Other real estate investments ⁽²⁾										3,182,295		3,387,740
Total investments in real estate properties										50,459,365		50,384,328
Less accumulated depreciation										6,823,824		6,539,156
Net investments in real estate properties									$	43,635,541	$	43,845,172

(1)	At March 31, 2021 and December 31, 2020, our land was comprised of 5,113 and 5,304 acres, respectively.

(2)

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

Index

Acquisitions

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

	Three Months Ended March 31,
	2021		2020 ⁽¹⁾
Number of operating properties		1		137
Square feet		25		20,256
Acres of land		261		267
Acquisition cost of net investments in real estate	$	229,050	$	2,393,767

(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, LLC (“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.

Dispositions

The following table summarizes our dispositions of net investments in real estate which include contributions to unconsolidated co-investment ventures and dispositions to third parties (dollars and square feet in thousands):

	Three Months Ended March 31,
	2021		2020
Dispositions of development properties and land, net ⁽¹⁾
Number of properties		8		11
Square feet		4,287		4,636
Net proceeds	$	769,813	$	633,563
Gains on dispositions of development properties and land, net	$	173,643	$	162,750

Other dispositions of investments in real estate, net
Number of properties		1		18
Square feet		476		2,305
Net proceeds	$	23,342	$	160,557
Gains on other dispositions of investments in real estate, net	$	16,623	$	31,491

(1)	The gains we recognize in Gains on Dispositions of Development Properties and Land, Net are primarily driven by the contribution of newly developed properties to our unconsolidated co-investment ventures.

Leases

We recognized lease right-of-use assets of $462.8 million and $492.8 million within Other Assets and lease liabilities of $458.7 million and $487.0 million within Other Liabilities, for land and office space leases in which we are the lessee, on the Consolidated Balance Sheets at March 31, 2021 and December 31, 2020, respectively.

NOTE 4. UNCONSOLIDATED ENTITIES

Summary of Investments

We have investments in entities through a variety of ventures. We co-invest in entities that own multiple properties with partners and investors and we provide asset and property management services to these entities, which we refer to as co-investment ventures. These entities may be consolidated or unconsolidated depending on the structure, our partner’s participation and other rights and our level of control of the entity. This note details our investments in unconsolidated co-investment ventures, which are related parties and accounted for using the equity method of accounting. See Note 7 for more detail regarding our consolidated investments that are not wholly owned.

We also have investments in other ventures, generally with one partner, which we account for using the equity method. We refer to our investments in both unconsolidated co-investment ventures and other ventures, collectively, as unconsolidated entities.

Index

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

	March 31,		December 31,
	2021		2020
Unconsolidated co-investment ventures	$	6,594,263	$	6,685,567
Other ventures		920,577		916,447
Total	$	7,514,840	$	7,602,014

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 March 31,
	2021		2020
Recurring fees	$	91,037	$	74,687
Transactional fees		20,878		19,960
Promote revenue		1,615		591
Total strategic capital revenues from unconsolidated co-investment ventures ⁽¹⁾	$	113,530	$	95,238

(1)	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⁽¹⁾						Europe						Asia						Total
As of:	Mar 31, 2021			Dec 31, 2020			Mar 31, 2021			Dec 31, 2020			Mar 31, 2021			Dec 31, 2020			Mar 31, 2021			Dec 31, 2020			Mar 31, 2021			Dec 31, 2020
Key property information:
Ventures		1			1			2			2			3			3			3			3			9			9
Operating properties		710			706			230			229			778			768			179			167			1,897			1,870
Square feet		118			117			51			51			187			185			72			67			428			420

Financial position:
Total assets ($)		10,937			10,840			2,987			3,023			17,106			16,918			10,222			10,209			41,252			40,990
Third-party debt ($)		3,169			3,129			824			854			4,110			4,002			3,920			3,831			12,023			11,816
Total liabilities ($)		3,760			3,722			864			898			5,768			5,607			4,428			4,389			14,820			14,616

Our investment balance ($) ⁽²⁾		1,892			1,886			810			811			3,065			3,152			827			837			6,594			6,686
Our weighted average ownership ⁽³⁾		25.4	%		25.6	%		40.8	%		40.8	%		29.4	%		30.0	%		15.2	%		15.2	%		25.8	%		26.1	%

	U.S.						Other Americas ⁽¹⁾						Europe						Asia						Total
Operating Information:	Mar 31, 2021			Mar 31, 2020			Mar 31, 2021			Mar 31, 2020			Mar 31, 2021			Mar 31, 2020			Mar 31, 2021			Mar 31, 2020			Mar 31, 2021			Mar 31, 2020
For the three months ended:
Total revenues ($)		254			233			75			68			338			290			159			138			826			729
Net earnings ($)		49			34			30			23			87			78			35			26			201			161

Our earnings from unconsolidated co-investment ventures, net ($)		13			9			12			9			28			25			6			4			59			47

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

(2)

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 March 31, 2021 and December 31, 2020, resulted 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 ($143.7 million and $165.6 million, respectively); and (iv) customer security deposits retained subsequent to property contributions to Nippon Prologis REIT, Inc.

(3)	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.

Index

Equity Commitments Related to Certain Unconsolidated Co-Investment Ventures

At March 31, 2021, our outstanding equity commitments were $341.2 million, principally for Prologis China Logistics Venture. The equity commitments expire from 2021 to 2028 if they have not been previously called.

NOTE 5. ASSETS HELD FOR SALE OR CONTRIBUTION

We had investments in certain real estate properties that met the criteria to be classified as held for sale or contribution at March 31, 2021 and December 31, 2020. 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):

	March 31,		December 31,
	2021		2020
Number of operating properties		80		66
Square feet		13,756		12,923
Total assets held for sale or contribution	$	1,055,751	$	1,070,724
Total liabilities associated with assets held for sale or contribution – included in Other Liabilities	$	21,828	$	16,214

NOTE 6. DEBT

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

	March 31, 2021					December 31, 2020
	Weighted Average			Amount		Weighted Average			Amount
	Interest Rate⁽¹⁾	Term ⁽²⁾		Outstanding ⁽³⁾		Interest Rate⁽¹⁾	Term ⁽²⁾		Outstanding ⁽³⁾
Credit facilities	0.4%		3.3	$	53,250	0.8%		2.0	$	171,794
Senior notes	1.7%		12.1		14,433,868	2.0%		11.2		14,275,870
Term loans and unsecured other	0.9%		5.3		1,670,556	0.9%		5.6		1,764,311
Secured mortgage	5.4%		3.7		345,784	3.1%		3.0		637,101
Total	1.7%		11.2	$	16,503,458	1.9%		10.2	$	16,849,076

(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 fix the interest rate on certain variable rate debt.

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

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

	March 31, 2021								December 31, 2020
	Weighted Average Interest Rate			Amount Outstanding		% of Total			Weighted Average Interest Rate			Amount Outstanding		% of Total
British pound sterling		2.2	%	$	1,027,910		6.2	%		2.2	%	$	1,019,480		6.1	%
Canadian dollar		2.7	%		288,045		1.7	%		2.7	%		285,708		1.7	%
Euro		1.1	%		6,963,034		42.2	%		1.4	%		6,549,676		38.8	%
Japanese yen		0.8	%		2,460,056		14.9	%		0.8	%		2,877,247		17.1	%
U.S. dollar		2.6	%		5,764,413		35.0	%		2.8	%		6,116,965		36.3	%
Total		1.7	%	$	16,503,458					1.9	%	$	16,849,076

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

Index

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 total commitments of ¥55.0 billion ($496.4 million at March 31, 2021). We have the ability to increase the borrowing capacity of the Revolver to ¥75.0 billion ($676.9 million at March 31, 2021), 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 March 31, 2021, the Revolver was 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 refer to the Global Facility and the Revolver, collectively, as our “Credit Facilities.”

In April 2021, we entered into a second global senior credit facility under which we may draw in various currencies on a revolving basis in an aggregate amount up to $1.0 billion (subject to currency fluctuations). The second global senior credit facility is scheduled to mature in April 2024, subject to extension options.

Liquidity

The following table summarizes information about our available liquidity at March 31, 2021 (in millions):


Aggregate lender commitments
Credit Facilities	$	4,019
Less:
Borrowings outstanding		53
Outstanding letters of credit		19
Current availability	$	3,947
Available term loans		250
Cash and cash equivalents		676
Total liquidity	$	4,873

Senior Notes

The following table summarizes the issuances and redemptions of senior notes during the three months ended March 31, 2021 (principal in thousands):

	Aggregate Principal				Issuance Date Weighted Average
Initial Borrowing Date	Borrowing Currency		USD ⁽¹⁾		Interest Rate ⁽²⁾	Term⁽³⁾		Maturity Dates
February	€	1,350,000	$	1,639,305	0.7%		14.3	February 2032 – 2041
February	$	400,000	$	400,000	1.6%		10.1	March 2031


	Aggregate Principal				Redemption Date Weighted Average
Redemption Date	Borrowing Currency		USD ⁽¹⁾		Interest Rate ⁽²⁾	Term⁽³⁾		Maturity Dates
March	€	599,514	$	715,700	3.4%		3.0	February 2024
March	$	750,000	$	750,000	3.8%		4.7	November 2025

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

(2)	The interest rate represents the fixed or variable interest rate at the issuance or redemption date of the related debt.

(3)	The issuance date and redemption date weighted average term represent the remaining maturity in years on the related debt at the issuance or redemption date, respectively.

During the three months ended March 31, 2021, we used the net proceeds from the issuance of the senior notes to fund the senior note redemptions and for general corporate purposes.

Index

Early Extinguishment of Debt

During the three months ended March 31, 2021 and 2020, we recognized $187.5 million and $42.8 million of losses on the early extinguishment of debt, respectively. The losses during both periods were driven by the redemption of certain high interest rate senior notes before their stated maturity. We redeemed $1.5 billion of senior notes with stated maturities of 2024 and 2025, and $783.1 million of senior notes with a stated maturity of 2021, during the three months ended March 31, 2021 and 2020, respectively. The losses in 2020 included 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.

Term Loans

We did not borrow or pay down on the multi-currency term loan (“2017 Term Loan”) during the three months ended March 31, 2021. During the three months ended March 31, 2020, we borrowed a net $500.0 million.

Long-Term Debt Maturities

Scheduled principal payments due on our debt for the remainder of 2021 and for each year through the period ended December 31, 2025, and thereafter were as follows at March 31, 2021 (in thousands):

	Unsecured
	Credit		Senior			Term Loans			Secured
Maturity	Facilities		Notes			and Other			Mortgage			Total
2021⁽¹⁾⁽²⁾	$	-	$	-		$	260,135		$	21,355		$	281,490
2022 ⁽¹⁾		-		527,625			-			12,098			539,723
2023		-		-			135,244			34,072			169,316
2024 ⁽³⁾		53,250		-			-			133,488			186,738
2025		-		45,127			-			143,766			188,893
Thereafter		-		13,931,343			1,281,618			2,468			15,215,429
Subtotal		53,250		14,504,095			1,676,997			347,247			16,581,589
Premiums (discounts), net		-		6,070			-			224			6,294
Debt issuance costs, net		-		(76,297	)		(6,441	)		(1,687	)		(84,425	)
Total	$	53,250	$	14,433,868		$	1,670,556		$	345,784		$	16,503,458

(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. In April 2021, the 2017 Term Loan was terminated and the interest rate swap contracts associated with the outstanding balance of $250.3 million were settled.

(3)	Included in the 2024 maturities is the Revolver that can be extended until 2025.

Financial Debt Covenants

We had $14.4 billion of senior notes and $1.7 billion of term loans outstanding at March 31, 2021 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 March 31, 2021, we were in compliance with all of our financial debt covenants.

Guarantee of Finance Subsidiary Debt

We have finance subsidiaries as part of our operations in Europe (Prologis Euro Finance LLC), Japan (Prologis Yen Finance LLC) and the U.K. (Prologis Sterling Finance LLC) in order to mitigate our foreign currency risk by borrowing in the currencies in which we invest. These entities are 100% indirectly owned by the OP and all unsecured debt issued or to be issued by each entity is or will be fully and unconditionally guaranteed by the OP. There are no restrictions or limits on the OP’s ability to obtain funds from its subsidiaries by dividend or loan. In reliance on Rule 13-01 of Regulation S-X, the separate financial statements of Prologis Euro Finance LLC, Prologis Yen Finance LLC and Prologis Sterling Finance LLC are not provided.

Index

NOTE 7. NONCONTROLLING INTERESTS

Prologis, L.P.

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

Prologis, Inc.

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

The following table summarizes these entities (dollars in thousands):

	Our Ownership Percentage						Noncontrolling Interests				Total Assets				Total Liabilities
	Mar 31, 2021			Dec 31, 2020			Mar 31, 2021		Dec 31, 2020		Mar 31, 2021		Dec 31, 2020		Mar 31, 2021		Dec 31, 2020
Prologis U.S. Logistics Venture		55.0	%		55.0	%	$	3,375,502	$	3,385,110	$	7,625,390	$	7,663,800	$	134,457	$	145,131
Other consolidated entities⁽¹⁾	various			various				97,960		98,416		1,055,677		1,066,129		72,204		73,987
Prologis, L.P.								3,473,462		3,483,526		8,681,067		8,729,929		206,661		219,118
Limited partners in Prologis, L.P. ⁽²⁾⁽³⁾								903,224		869,507		-		-		-		-
Prologis, Inc.							$	4,376,686	$	4,353,033	$	8,681,067	$	8,729,929	$	206,661	$	219,118

(1)

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 March 31, 2021 and December 31, 2020 were exchangeable into cash or, at our option, 0.3 million shares of the Parent’s common stock.

(2)	We had 8.6 million Class A Units that were convertible into 8.0 million limited partnership units of the OP at March 31, 2021 and December 31, 2020.

(3)

At March 31, 2021 and December 31, 2020, excluding the Class A Units, there were limited partnership units in the OP that were exchangeable into cash or, at our option, 8.2 million shares of the Parent’s common stock. Also included were the vested OP Long-Term Incentive Plan Units (“LTIP Units”) associated with our long-term compensation plan of 4.7 million at March 31, 2021 and 3.9 million at December 31, 2020. See further discussion of LTIP Units in Note 8.

NOTE 8. LONG-TERM COMPENSATION

Equity-Based Compensation Plans and Programs

Prologis Outperformance Plan (“POP”)

We 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 by each performance period. POP awards cannot be paid at a time when we meet the outperformance hurdle yet our absolute TSR is negative. If after seven years our absolute TSR has not been positive, the awards will be forfeited.

We granted participation points for the 2021 – 2023 performance period in January 2021, with a fair value of $30.3 million using a Monte Carlo valuation model that assumed a risk-free interest rate of 0.2% and an expected volatility of 30.5%. The 2021 – 2023 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 at the end of the initial performance period and the remaining 80% is subject to additional seven-year cliff vesting. The 20% that is paid at the end of the initial three-year performance period is subject to an additional three-year holding requirement.

Index

The Outperformance Hurdle was met for the 2018 – 2020 performance period, which resulted in awards being earned at December 31, 2020. Additionally, awards were earned at December 31, 2020 for prior performance periods related to the compensation pool in excess of the initial award based on the terms of the POP awards granted prior to 2018. Awards of $100.0 million for the 2018 – 2020 performance period and $35.7 million in the aggregate for the 2016 – 2018 and 2017 – 2019 performance periods were awarded in January 2021 in the form of common stock, restricted stock units, POP LTIP Units and LTIP Units. POP award activity is included in Summary of Award Activity below.

Other Equity-Based Compensation Plans and Programs

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

Summary of Award Activity

RSUs

The following table summarizes the activity for RSUs for the three months ended March 31, 2021 (units in thousands):

				Weighted Average
	Unvested RSUs			Grant Date Fair Value
Balance at January 1, 2021		986		$	80.32
Granted ⁽¹⁾		611			73.46
Vested and distributed		(337	)		75.98
Forfeited		(90	)		71.70
Balance at March 31, 2021		1,170		$	78.65

(1)

Included in granted are unvested units based on the POP performance criteria being met for the 2018 – 2020 performance period and represented the earned award amounts. 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.

LTIP Units

The following table summarizes the activity for LTIP Units for the three months ended March 31, 2021 (units in thousands):

	Unvested			Unvested Weighted Average
	LTIP Units			Grant Date Fair Value
Balance at January 1, 2021		3,052		$	66.50
Granted ⁽¹⁾		1,253			58.63
Forfeited		(23	)		31.80
Vested LTIP Units⁽²⁾		(791	)		76.98
Balance at March 31, 2021		3,491		$	61.53

(1)

(2)	Vested LTIP Units include vested POP LTIP Units from prior performance periods.

Index

NOTE 9. EARNINGS PER COMMON SHARE OR UNIT

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

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

	Three Months Ended
	March 31,
Prologis, Inc.	2021		2020
Net earnings attributable to common stockholders – Basic	$	365,815	$	489,418
Net earnings attributable to exchangeable limited partnership units⁽¹⁾		10,320		14,049
Adjusted net earnings attributable to common stockholders – Diluted	$	376,135	$	503,467

Weighted average common shares outstanding – Basic		738,998		698,272
Incremental weighted average effect on exchange of limited partnership units ⁽¹⁾		21,042		20,230
Incremental weighted average effect of equity awards		4,918		5,481
Weighted average common shares outstanding – Diluted⁽²⁾		764,958		723,983

Net earnings per share attributable to common stockholders:
Basic	$	0.50	$	0.70
Diluted	$	0.49	$	0.70

	Three Months Ended
	March 31,
Prologis, L.P.	2021			2020
Net earnings attributable to common unitholders	$	376,083		$	503,388
Net earnings attributable to Class A Units		(3,991	)		(5,651	)
Net earnings attributable to common unitholders – Basic		372,092			497,737
Net earnings attributable to Class A Units		3,991			5,651
Net earnings attributable to exchangeable other limited partnership units		52			79
Adjusted net earnings attributable to common unitholders – Diluted	$	376,135		$	503,467

Weighted average common partnership units outstanding – Basic		751,679			710,141
Incremental weighted average effect on exchange of Class A Units		8,062			8,062
Incremental weighted average effect on exchange of other limited partnership units		299			299
Incremental weighted average effect of equity awards of Prologis, Inc.		4,918			5,481
Weighted average common units outstanding – Diluted ⁽²⁾		764,958			723,983

Net earnings per unit attributable to common unitholders:
Basic	$	0.50		$	0.70
Diluted	$	0.49		$	0.70

(1)

The exchangeable limited partnership units include the units as discussed in Note 7. Earnings allocated to the exchangeable OP units not held by the Parent have been included in the numerator and exchangeable common units have been included in the denominator for the purpose of computing diluted earnings per share for all periods as the per share and unit amount is the same.

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

	Three Months Ended
	March 31,
	2021		2020
Class A Units		8,062		8,062
Other limited partnership units		299		299
Equity awards		7,179		7,709
Prologis, L.P.		15,540		16,070
Common limited partnership units		12,681		11,869
Prologis, Inc.		28,221		27,939

Index

NOTE 10. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Derivative Financial Instruments

In the normal course of business, our operations are exposed to market risks, including the effect of changes in foreign currency exchange rates and interest rates. We may enter into derivative financial instruments to offset these underlying market risks. There have been no significant changes in our policy or strategy from what was disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.

The following table presents the fair value of our derivative financial instruments recognized within Other Assets and Other Liabilities on the Consolidated Balance Sheets (in thousands):

	March 31, 2021				December 31, 2020
	Asset		Liability		Asset		Liability
Undesignated derivatives
Foreign currency contracts
Forwards
Brazilian real	$	826	$	-	$	620	$	66
British pound sterling		71		8,735		174		7,589
Canadian dollar		-		8,016		80		5,827
Chinese renminbi		34		499		-		717
Euro		16,096		287		73		6,247
Japanese yen		16,096		-		720		1,604
Swedish krona		1,214		868		-		2,355

Designated derivatives
Foreign currency contracts
Net investment hedges
British pound sterling		3,251		3,125		-		2,081
Canadian dollar		-		14,799		-		9,847

Interest rate swaps
Cash flow hedges
Euro		-		14		-		9
U.S. dollar		-		28		-		140
Total fair value of derivatives	$	37,588	$	36,371	$	1,667	$	36,482

Undesignated Derivative Financial Instruments

Foreign Currency Contracts

The following table summarizes the activity of our undesignated foreign currency contracts for the three months ended March 31 (in millions, except for weighted average forward rates and number of active contracts):

	2021																					2020
	CAD			EUR			GBP			JPY			SEK			Other			Total			CAD			EUR			GBP			JPY			SEK			Other			Total
Notional amounts at January 1 ($)		163			474			207			252			38			28			1,162			120			581			178			182			31			15			1,107
New contracts ($)		3			83			11			25			5			-			127			-			809			294			60			9			19			1,191
Matured, expired or settled contracts ($)		(11	)		(36	)		(16	)		(20	)		(4	)		(4	)		(91	)		(11	)		(1,003	)		(267	)		(15	)		(3	)		(23	)		(1,322	)
Notional amounts at March 31 ($)		155			521			202			257			39			24			1,198			109			387			205			227			37			11			976

Weighted average forward rate at March 31		1.32			1.23			1.33			102.66			8.59									1.32			1.16			1.77			103.08			9.41
Active contracts at March 31		58			74			53			68			51									35			61			64			53			32

Index

The following table summarizes the undesignated derivative financial instruments exercised and associated realized and unrealized gains (losses) in Foreign Currency and Derivative Gains, Net in the Consolidated Statements of Income (in millions, except for number of exercised contracts):

	Three Months Ended
	March 31,
	2021			2020
Exercised contracts		25			33
Realized gains (losses) on the matured, expired or settled contracts	$	(1	)	$	4
Unrealized gains on the change in fair value of outstanding contracts	$	38		$	47

Designated Derivative Financial Instruments

Foreign Currency Contracts

The following table summarizes the activity of our foreign currency contracts designated as net investment hedges for the three months ended March 31 (in millions, except for weighted average forward rates and number of active contracts):

	2021								2020
	CAD			GBP		Total			CAD		GBP			Total
Notional amounts at January 1 ($)		377			135		512			97		387			484
New contracts ($)		250			300		550			-		324			324
Matured, expired or settled contracts ($)		(63	)		-		(63	)		-		(576	)		(576	)
Notional amounts at March 31 ($)		564			435		999			97		135			232

Weighted average forward rate at March 31		1.29			1.38					1.32		1.35
Active contracts at March 31		7			4					2		1

Interest Rate Swaps

The following table summarizes the activity of our interest rate swaps designated as cash flow hedges for the three months ended March 31 (in millions):

	2021						2020
	EUR ⁽¹⁾		USD ⁽¹⁾		Total		EUR		USD			Total
Notional amounts at January 1 ($)		165		250		415		-		-			-
New contracts ($)		-		-		-		165		750			915
Matured, expired or settled contracts ($)		-		-		-		-		(750	)		(750	)
Notional amounts at March 31 ($)		165		250		415		165		-			165

(1)

During the year ended December 31, 2020, we entered into interest rate swap contracts to effectively fix the interest rate on our euro senior notes issued in February 2020 and the U.S. dollar outstanding balance on our 2017 Term Loan. In April 2021, the 2017 Term Loan was terminated and the interest rate swap contracts associated with the outstanding balance were settled.

Designated Nonderivative Financial Instruments

The following table summarizes our debt and accrued interest, designated as a hedge of our net investment in international subsidiaries as of the quarter ended (in millions):

		March 31, 2021				December 31, 2020
British pound sterling		$	956			$	842

The following table summarizes the unrealized gains in Foreign Currency and Derivative Gains, Net on the remeasurement of the unhedged portion of our debt and accrued interest for the three months ended March 31 (in millions):

	Three Months Ended
	March 31,
	2021		2020
Unrealized gains on the unhedged portion	$	46	$	82

Index

Other Comprehensive Income (Loss)

The change in Other Comprehensive Income (Loss) in the Consolidated Statements of Comprehensive Income during the periods presented was due to the translation into U.S. dollars from the consolidation of the financial statements of our consolidated subsidiaries whose functional currency is not the U.S. dollar. The change in fair value of the effective portion of our derivative financial instruments that have been designated as net investment hedges and cash flow hedges and the translation of the hedged portion of our debt, as discussed above, are also included in Other Comprehensive Income (Loss).

The following table presents these changes in Other Comprehensive Income (Loss) (in thousands):

	Three Months Ended March 31,
	2021			2020
Derivative net investment hedges	$	(5,266	)	$	25,359
Debt designated as nonderivative net investment hedges		(6,402	)		32,750
Cumulative translation adjustment		183,427			(191,642	)
Total foreign currency translation gains (losses), net	$	171,759		$	(133,533	)

Cash flow hedges^{(1) (2)}	$	1,371		$	(15,525	)
Our share of derivatives from unconsolidated co-investment ventures		3,450			(7,923	)
Total unrealized gains (losses) on derivative contracts, net	$	4,821		$	(23,448	)
Total change in other comprehensive income (loss)	$	176,580		$	(156,981	)

(1)

We estimate an additional expense of $4.4 million will be reclassified to Interest Expense over the next 12 months from March 31, 2021, due to the amortization of previously settled derivatives designated as cash flow hedges.

(2)

Included in the three months ended March 31, 2020 was $16.8 million in losses associated with the termination of four U.S. dollar treasury lock contracts with an aggregate notional amount of $750.0 million that fixed the interest rate on the forecasted issuance of U.S. dollar senior notes issued in February 2020.

Fair Value Measurements

There have been no significant changes in our policy from what was disclosed in our Annual Report on Form 10-K for the year ended December 31, 2020.

Fair Value Measurements on a Recurring Basis

At March 31, 2021 and December 31, 2020, other than the derivatives discussed previously, we had no significant financial assets or financial liabilities that were measured at fair value on a recurring basis in the Consolidated Financial Statements. All of our derivatives held at March 31, 2021 and December 31, 2020, were classified as Level 2 of the fair value hierarchy.

Fair Value Measurements on Nonrecurring Basis

Acquired properties and assets we expect to sell or contribute are significant nonfinancial assets that met the criteria to be measured at fair value on a nonrecurring basis. At March 31, 2021 and December 31, 2020, we estimated the fair value of our properties using Level 2 or Level 3 inputs from the fair value hierarchy. See more information on our acquired properties in Notes 2 and 3 and assets held for sale or contribution in Note 5.

Fair Value of Financial Instruments

At March 31, 2021 and December 31, 2020, the carrying amounts of certain financial instruments, including cash and cash equivalents, accounts and notes receivable, accounts payable and accrued expenses were representative of their fair values.

The differences in the fair value of our debt from the carrying value in the table below were the result of differences in interest rates or borrowing spreads that were available to us at March 31, 2021 and December 31, 2020, as compared with those in effect when the debt was issued or assumed, including reduced borrowing spreads due to our improved credit ratings. The fair value of the senior notes decreased during the three months ended March 31, 2021 due to the increase in bond yields in the market as compared to the weighted average interest rates on our senior notes. The senior notes and many of the issuances of secured mortgage debt contain prepayment penalties or yield maintenance provisions that could make the cost of refinancing the debt at lower rates exceed the benefit that would be derived from doing so. We evaluate this on an on-going basis and have taken the opportunity to refinance some of our debt at lower rates and longer maturities as discussed in Note 6.

Index

The following table reflects the carrying amounts and estimated fair values of our debt (in thousands):

	March 31, 2021				December 31, 2020
	Carrying Value		Fair Value		Carrying Value		Fair Value
Credit Facilities	$	53,250	$	53,250	$	171,794	$	171,794
Senior notes		14,433,868		14,598,729		14,275,870		15,452,381
Term loans and unsecured other		1,670,556		1,687,135		1,764,311		1,785,706
Secured mortgage		345,784		374,402		637,101		673,549
Total	$	16,503,458	$	16,713,516	$	16,849,076	$	18,083,430

NOTE 11. BUSINESS SEGMENTS

Our current business strategy includes two operating segments: Real Estate Operations and Strategic Capital. We generate revenues, earnings, net operating income and cash flows through our segments, as follows:

•

Real Estate Operations. This operating segment represents the ownership and development of operating properties and is the largest component of our revenue and earnings. We collect rent from our customers through operating leases, including reimbursements for the majority of our property operating costs. Each operating property is considered to be an individual operating segment with similar economic characteristics; these properties are combined within the reportable business segment based on geographic location. Our Real Estate Operations segment also includes development activities that lead to rental operations, including land held for development and properties currently under development, and other real estate investments. Within this line of business, we utilize the following: (i) our land bank; (ii) the development expertise of our local teams; and (iii) our customer relationships. Land we own and lease to customers under land leases, along with land and buildings we lease, is also included in this segment.

•

Strategic Capital. This operating segment represents the management of unconsolidated co-investment ventures. We generate strategic capital revenues primarily from our unconsolidated co-investment ventures through asset management and property management services and we earn additional revenues by providing leasing, acquisition, construction, development, financing and disposition services. Depending on the structure of the venture and the returns provided to our partners, we also earn revenues through promotes periodically during the life of a venture or upon liquidation. Each unconsolidated co-investment venture we manage is considered to be an individual operating segment with similar economic characteristics; these ventures are combined within the reportable business segment based on geographic location.

Reconciliations are presented below for: (i) each reportable business segment’s revenues from external customers to Total Revenues; (ii) each reportable business segment’s net operating income from external customers to Operating Income and Earnings Before Income Taxes; and (iii) each reportable business segment’s assets to Total Assets. Our chief operating decision makers rely primarily on net operating income and similar measures to make decisions about allocating resources and assessing segment performance. The applicable components of Total Revenues, Operating Income, Earnings Before Income Taxes and Total Assets are allocated to each reportable business segment’s revenues, net operating income and assets. Items that are not directly assignable to a segment, such as certain corporate income and expenses, are not allocated but reflected as reconciling items.

Index

The following reconciliations are presented in thousands:

	Three Months Ended March 31,
		2021			2020
Revenues:
Real estate operations segment:
U.S.	$	975,083		$	829,383
Other Americas		23,893			26,079
Europe		18,856			15,502
Asia		10,523			10,686
Total real estate operations segment		1,028,355			881,650
Strategic capital segment:
U.S.		33,983			34,342
Other Americas		10,663			9,111
Europe		43,429			32,590
Asia		31,886			20,548
Total strategic capital segment		119,961			96,591

Total revenues		1,148,316			978,241

Segment net operating income:
Real estate operations segment:
U.S. ⁽¹⁾		709,303			602,604
Other Americas		17,595			19,456
Europe		13,191			10,155
Asia		6,938			7,243
Total real estate operations segment		747,027			639,458
Strategic capital segment:
U.S. ⁽¹⁾		8,302			13,624
Other Americas		7,906			5,179
Europe		32,171			20,594
Asia		22,132			10,620
Total strategic capital segment		70,511			50,017

Total segment net operating income		817,538			689,475

Reconciling items:
General and administrative expenses		(78,032	)		(69,689	)
Depreciation and amortization expenses		(397,575	)		(345,970	)
Gains on dispositions of development properties and land, net		173,643			162,750
Gains on other dispositions of investments in real estate, net		16,623			31,491
Operating income		532,197			468,057

Earnings from unconsolidated entities, net		67,049			88,730
Interest expense		(71,281	)		(75,642	)
Interest and other income, net		4,746			370
Foreign currency and derivative gains, net		80,152			113,329
Losses on early extinguishment of debt, net		(187,453	)		(42,767	)
Earnings before income taxes	$	425,410		$	552,077

Index

	March 31, 2021		December 31, 2020
Segment assets:
Real estate operations segment:
U.S.	$	42,337,749	$	42,559,023
Other Americas		1,168,322		1,145,699
Europe		1,634,170		1,604,393
Asia		905,369		1,081,876
Total real estate operations segment		46,045,610		46,390,991
Strategic capital segment: ⁽²⁾
U.S.		12,939		13,257
Europe		25,280		25,280
Asia		324		354
Total strategic capital segment		38,543		38,891
Total segment assets		46,084,153		46,429,882

Reconciling items:
Investments in and advances to unconsolidated entities		7,514,840		7,602,014
Assets held for sale or contribution		1,055,751		1,070,724
Cash and cash equivalents		676,074		598,086
Other assets		401,991		364,299
Total reconciling items		9,648,656		9,635,123
Total assets	$	55,732,809	$	56,065,005

(1)	This includes compensation, personnel costs and PPP awards for employees who were located in the U.S. but also support other geographies.

(2)	Represents management contracts and goodwill recorded in connection with business combinations associated with the Strategic Capital segment. Goodwill was $25.3 million at March 31, 2021 and December 31, 2020.

NOTE 12. SUPPLEMENTAL CASH FLOW INFORMATION

Our significant noncash investing and financing activities for the three months ended March 31, 2021 and 2020 included the following:

•

We recognized lease right-of-use assets and lease liabilities related to leases in which we are the lessee within Other Assets and Other Liabilities on the Consolidated Balance Sheets, including any new leases, renewals and modifications of $4.6 million in 2021 and $3.8 million in 2020 for both assets and liabilities.

•	We capitalized $8.5 million and $8.3 million in 2021 and 2020, respectively, of equity-based compensation expense.

•	We received $39.1 million and $57.1 million in 2021 and 2020, respectively, of ownership interests in certain unconsolidated co-investment ventures as a portion of our proceeds from the contribution of properties to these entities, as disclosed in Note 4.

•	We issued less than 0.1 million shares in 2021 and 0.1 million shares in 2020 of the Parent’s common stock upon redemption of an equal number of common limited partnership units in the OP.

•	We completed the Liberty Transaction on February 4, 2020 for $13.0 billion through the issuance of equity and the assumption of debt. See Note 2 for more information on this transaction.

We paid $89.5 million and $110.5 million for interest, net of amounts capitalized, for the three months ended March 31, 2021 and 2020, respectively.

We paid $35.8 million and $21.7 million for income taxes, net of refunds, for the three months ended March 31, 2021 and 2020, respectively.

Index

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors
Prologis, Inc.:

Results of Review of Interim Financial Information

We have reviewed the consolidated balance sheet of Prologis, Inc. and subsidiaries (the Company) as of March 31, 2021 the related consolidated statements of income, comprehensive income, and equity for the three-month periods ended March 31, 2021 and 2020, the related consolidated statements of cash flows for the three-month periods ended March 31, 2021 and 2020, and the related notes (collectively, the consolidated interim financial information). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial information for it to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2020, and the related consolidated statements of income, comprehensive income, equity, and cash flows for the year then ended (not presented herein); and in our report dated February 10, 2021, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2020, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

This consolidated interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with the standards of the PCAOB. A review of consolidated interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ KPMG LLP

Denver, Colorado
April 27, 2021

Index

Report of Independent Registered Public Accounting Firm

To the Partners of Prologis, L.P. and the Board of Directors of Prologis, Inc.:

Results of Review of Interim Financial Information

We have reviewed the consolidated balance sheet of Prologis, L.P. and subsidiaries (the Operating Partnership) as of March 31, 2021, the related consolidated statements of income, comprehensive income, and capital for the three-month periods ended March 31, 2021 and 2020, the related consolidated statements of cash flows for the three-month periods ended March 31, 2021 and 2020, and the related notes (collectively, the consolidated interim financial information). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial information for it to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Operating Partnership as of December 31, 2020, and the related consolidated statements of income, comprehensive income, capital, and cash flows for the year then ended (not presented herein); and in our report dated February 10, 2021, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2020, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

This consolidated interim financial information is the responsibility of the Operating Partnership’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Operating Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

/s/ KPMG LLP

Denver, Colorado
April 27, 2021

Index

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following should be read in conjunction with the Consolidated Financial Statements and related Notes included in Item 1 of this report and our Annual Report on Form 10-K for the year ended December 31, 2020, as filed with the United States (“U.S.”) Securities and Exchange Commission (“SEC”).

The statements in this report that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on current expectations, estimates and projections about the industry and markets in which we operate as well as management’s beliefs and assumptions. Such statements involve uncertainties that could significantly impact our financial results. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” and “estimates” including variations of such words and similar expressions are intended to identify such forward-looking statements, which generally are not historical in nature. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future — including statements relating to rent and occupancy growth, acquisition and development activity, contribution and disposition activity, general conditions in the geographic areas where we operate, our debt, capital structure and financial position, our ability to form new co-investment ventures and the availability of capital in existing or new co-investment ventures — are forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be attained, and therefore actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. Some of the factors that may affect outcomes and results include, but are not limited to: (i) international, national, regional and local economic and political climates and conditions; (ii) changes in global financial markets, interest rates and foreign currency exchange rates; (iii) increased or unanticipated competition for our properties; (iv) risks associated with acquisitions, dispositions and development of properties; (v) maintenance of Real Estate Investment Trust (“REIT”) status, tax structuring and changes in income tax laws and rates; (vi) availability of financing and capital, the levels of debt that we maintain and our credit ratings; (vii) risks related to our investments in our co-investment ventures, including our ability to establish new co-investment ventures; (viii) risks of doing business internationally, including currency risks; (ix) environmental uncertainties, including risks of natural disasters; (x) risks related to the coronavirus (“COVID-19”) pandemic; and (xi) those additional factors discussed under Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2020. We undertake no duty to update any forward-looking statements appearing in this report except as may be required by law.

Prologis, Inc. is a self-administered and self-managed REIT and is the sole general partner of Prologis, L.P. through which it holds substantially all of its assets. We operate Prologis, Inc. and Prologis, L.P. as one enterprise and, therefore, our discussion and analysis refers to Prologis, Inc. and its consolidated subsidiaries, including Prologis, L.P. We invest in real estate through wholly owned subsidiaries and other entities through which we co-invest with partners and investors. We have a significant ownership interest in the co-investment ventures, which may be consolidated or unconsolidated based on our level of control of the entity.

We operate and manage our business on an owned and managed (“O&M”) basis and therefore evaluate the operating performance of the properties for our O&M portfolio, which includes our consolidated properties and properties owned by our unconsolidated co-investment ventures, which we manage. We make operating decisions based on our total O&M portfolio, as we manage the properties similarly regardless of ownership. We also evaluate our results based on our proportionate economic ownership of each property included in the O&M portfolio (“our share”) to reflect our share of the financial results of the O&M portfolio.

Included in our discussion below are references to funds from operations (“FFO”) and net operating income (“NOI”), neither of which are U.S. generally accepted accounting principles (“GAAP”). See below for a reconciliation of Net Earnings Attributable to Common Stockholders/Unitholders in the Consolidated Statements of Income to our FFO measures and a reconciliation of NOI to Operating Income, the most directly comparable GAAP measures.

MANAGEMENT’S OVERVIEW

We are the global leader in logistics real estate with a focus on high-barrier, high-growth markets. We own, manage and develop well-located, high-quality logistics facilities in 19 countries across four continents. Our local teams actively manage our portfolio, which encompasses leasing, property management, capital deployment and opportunistic dispositions. Our disposition activities allow us to recycle capital and largely self-fund our development and acquisition activities. The majority of our properties in the United States (“U.S.”) are wholly owned, while our international properties are primarily held in our co-investment ventures, which has the benefit of mitigating our exposure to foreign currency movements.

Our portfolio is focused on the world’s most vibrant centers of commerce and our scale allows us to respond to our customers’ needs for the highest-quality buildings across these locations. There is an emergence of two new structural demand drivers for our real estate: (i) the need for more inventory as supply chains emphasize resilience over efficiency and (ii) the acceleration of e-commerce adoption.

As service time increasingly moves to the forefront of the global supply chain, it drives demand for logistics real estate close to the end-consumer. We have invested in properties located within infill and urban areas in our largest global markets with same day access (defined as Last Touch®) and next day access (defined as city distribution), to the consumer population. This positioning gives us the

Index

unique ability to provide our customers with the right real estate solutions for their supply chains that, in turn, allows them to meet end-consumer delivery expectations.

As we look to the future of logistics real estate, we are focused on solving our customers’ pain points, innovating in pursuit of creative solutions and operational excellence. We are listening and responding to our customers’ needs for skilled labor through initiatives to create community workforce programs to develop their talent pool, utilize our proprietary data and analytics to ensure efficient distribution solutions and leverage our scale to negotiate better pricing on common products and services that our customers need. Our customers turn to us because they know that a strategic partnership with Prologis is a competitive advantage. We accomplish all of this by employing individuals who continue to grow, embrace change and draw strength from inclusion and diversity.

At March 31, 2021, our total O&M portfolio at 100%, including properties and development projects (based on gross book value and total expected investment (“TEI”)), totaled $97.7 billion across 990 million square feet (92 million square meters) and four continents. Our share of the total O&M portfolio was $61.4 billion. We lease modern logistics facilities to a diverse base of approximately 5,500 customers.

Our business comprises two operating segments: Real Estate Operations and Strategic Capital.

Below is information summarizing consolidated activity within our segments (in millions):

(1)	NOI from Real Estate Operations is calculated directly from our Consolidated Financial Statements as Rental Revenues and Development Management and Other Revenues less Rental Expenses and Other Expenses.

(2)	A developed property moves into the operating portfolio when it meets our definition of stabilization, which is the earlier of one year after completion or 90% occupancy. Amounts represent our TEI, which includes the estimated cost of development or expansion, land, construction and leasing costs.

Real Estate Operations

Rental. Rental operations comprise the largest component of our operating segments and generally contribute 85% to 90% of our consolidated revenues, earnings and FFO. We collect rent from our customers through operating leases, including reimbursements for the majority of our property operating costs. We expect to generate internal growth by increasing rents, maintaining high occupancy rates and controlling expenses. The primary driver of our revenue growth will be rolling in-place leases to current market rents as leases expire. We believe our active portfolio management, combined with the skills of our property, leasing, maintenance, capital, energy, sustainability and risk management teams allow us to maximize NOI across our portfolio. A majority of our consolidated rental revenue, NOI and cash flows are generated in the U.S.

Development. Given the scarcity of modern logistics facilities in our target markets, our development business provides us the opportunity to build what our customers need. We develop properties to meet these needs, deepen our market presence and maintain a modern portfolio. We believe we have a competitive advantage due to (i) the strategic locations of our land bank and redevelopment sites; (ii) the development expertise of our local teams; and (iii) the depth of our customer relationships. Successful development and redevelopment efforts provide significant earnings growth as projects are leased, generate income and increase the net asset value of our Real Estate Operations segment. Based on our current estimates, our consolidated land, including options, has the potential to support the development of $12.0 billion of TEI of new logistics space. In addition to our land portfolio, we have also made investments in other properties that have the potential to be redeveloped to increase value. Generally, we develop properties in the U.S. for long-term hold and outside the U.S. for contribution to our unconsolidated co-investment ventures.

Strategic Capital

Our strategic capital segment allows us to partner with many of the world’s largest institutional investors and capitalize our business through private equity, principally perpetual open-ended or long-term ventures. We also access capital in this segment through two publicly traded vehicles: Nippon Prologis REIT, Inc. in Japan and FIBRA Prologis in Mexico. We align our interests with our partners by holding significant ownership interests in all of our 9 unconsolidated co-investment ventures (ranging from 15% to 50%), which allows us to reduce our exposure to foreign currency movements for investments outside the U.S.

Index

This segment produces stable, long-term cash flows and generally contributes 10% to 15% of our recurring consolidated revenues, earnings and FFO. We generate strategic capital revenues from our unconsolidated co-investment ventures, principally through asset and property management services. We earn additional revenues by providing leasing, acquisition, construction, development, financing, legal and disposition services. In certain ventures, we also have the ability to earn revenues through incentive fees (“promotes” or “promote revenues”) periodically during the life of a venture or upon liquidation. We plan to profitably grow this business by increasing our assets under management in existing or new ventures. Most of the strategic capital revenues are generated outside the U.S. NOI in this segment is calculated directly from our Consolidated Financial Statements as Strategic Capital Revenues less Strategic Capital Expenses and excludes property-related NOI.

FUTURE GROWTH

We believe the quality and scale of our global portfolio, the expertise of our team, the depth of our customer relationships and the strength of our balance sheet give us unique competitive advantages to grow revenues, NOI, earnings, FFO and cash flows.

(1)	Calculated using the trailing twelve months immediately prior to the period ended.

(2)

General and Administrative (“G&A”) Expenses is a line item in the Consolidated Financial Statements. Adjusted G&A expenses is calculated from our Consolidated Financial Statements as G&A Expenses and Strategic Capital Expenses, less expenses under the Prologis Promote Plan (“PPP”) and property-level management expenses for the properties owned by the ventures. Annualized 2021 represents G&A and adjusted G&A expenses for the year ended December 31, 2021 based on the three months ended March 31, 2021.

•

Rent Growth. Due to the demand for the location and quality of our properties, we expect rents in our markets to increase. In addition, due to strong market rent growth over the last several years, our in-place leases have considerable upside potential. We estimated that the rental rates of our leases are 13.6% below current market on the basis of our weighted average ownership at March 31, 2021. Therefore, even if market rent growth is flat, a lease renewal will likely translate into increased future rental income, on a consolidated basis or through the earnings we recognize from our unconsolidated co-investment ventures based on our ownership. We have experienced positive rent change on rollover (comparing the net effective rent (“NER”) of the new lease to the prior lease for the same space) in every quarter since 2013. We expect this trend to continue for several more years due to our current in-place rents being below market. We also expect future growth in market rents to further contribute to increased rental income.

•

Value Creation from Development. A successful development and redevelopment program involves maintaining control of well-located and entitled land and redevelopment sites. We believe that the carrying value of our land bank is below its current fair value. Due to the strategic nature of our land bank, development expertise of our teams and strength of our customer relationships, we expect to create value as we build new properties. We measure the estimated value creation of a development project as the margin above our anticipated cost to develop. As properties stabilize, we expect to realize the value creation principally through contributions to unconsolidated co-investment ventures and increases in NOI.

•

Balance Sheet Strength. We have continued to seek and execute on opportunities to refinance debt at historically low rates, as we did during the first quarter. At March 31, 2021, we had total available liquidity of $4.9 billion and continue to maintain low leverage as a percentage of our real estate investments and our market capitalization. As a result of our low leverage, available liquidity and investment capacity in the co-investment ventures, we have significant capacity to capitalize on value-added investment opportunities that will translate into future earnings growth.

•

Economies of Scale from Growth. We use adjusted G&A expenses as a percentage of the O&M portfolio to measure and evaluate our overhead costs. We have scalable systems and infrastructure in place to grow both our consolidated and O&M portfolios with limited incremental G&A expense. We believe we can continue to grow NOI and strategic capital revenues organically and through accretive development and acquisition activity while further reducing G&A as a percentage of our investments in real estate. As noted in the graph above, the acquisitions of Liberty Property Trust and Liberty Property Limited Partnership (collectively “Liberty” or the “Liberty Transaction”) and Industrial Property Trust Inc. (“IPT” or the “IPT Transaction”) in

Index

the first quarter of 2020 are key examples of this effort, where we increased our investments in real estate in the O&M portfolio by over 20% and had minimal increases to G&A expenses, which resulted in lower G&A expenses as a percentage of investments in real estate.

•

Staying “Ahead of What’s Next™”. We are working on initiatives to create value beyond the real estate by enhancing our customers’ experience, utilizing our scale to streamline our procurement activities and negotiating better pricing on products and services for us and our customers, as well as delivering improvements to our business through innovation, data analytics and digitization efforts. Underlying our future strategy for growth is our ongoing commitment to, and initiatives in, environmental stewardship, social responsibility and governance.

SUMMARY OF 2021

Our financial condition and operating results remain strong in the COVID-19 environment and the positive momentum from the fourth quarter of 2020 has carried into 2021, as evidenced by our operating results, profitable deployment activities and solid outlook. While we do not expect significant impacts to our business, financial condition and operating results, we cannot fully predict negative trends due to the continued uncertainty of COVID-19 across the globe.

Based on the demand we see in our proprietary data, strong rent collections and in dialogue with our customers, we expect operating conditions in our portfolio to continue to strengthen during 2021. E-commerce continues to grow well above its historical average and customers negatively impacted by the current economy represent a minimal percentage of our annual rent. Leasing activity accelerated for the O&M portfolio during the three months ended March 31, 2021, as discussed below.

Overall, our business continuity, communication plans and technology are allowing all functions of our business to continue to work smoothly during this time. Generally, our employees have continued working remotely or in certain locations in our offices under protocols to keep a safe working environment.

During the three months ended March 31, 2021, we generated net proceeds of $793 million and realized net gains of $190 million, primarily from the contribution of properties to our unconsolidated co-investment ventures in Japan and Europe and dispositions to third parties in the U.S.

We completed the following consolidated financing activities that included the issuance of $2.0 billion and redemption of $1.5 billion of senior notes, with aggregate principal amounts in U.S. dollars. This resulted in extending our consolidated weighted average remaining maturity to 11 years and lowering our weighted average effective interest rate to 1.7% (principal in millions):

	Aggregate Principal				Issuance Date Weighted Average
Initial Borrowing Date	Borrowing Currency		USD ⁽¹⁾		Interest Rate ⁽²⁾	Term ⁽³⁾		Maturity Dates
February	€	1,350	$	1,639	0.7%		14.3	February 2032 - 2041
February	$	400	$	400	1.6%		10.1	March 2031

	Aggregate Principal				Redemption Date Weighted Average
Redemption Date	Borrowing Currency		USD ⁽¹⁾		Interest Rate⁽²⁾	Term⁽³⁾		Maturity Date
March	€	600	$	716	3.4%		3.0	February 2024
March	$	750	$	750	3.8%		4.7	November 2025

(1)

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

(2)

The interest rate represents the fixed or variable interest rate at the issuance or redemption date of the related debt.

(3)

The issuance date and redemption date weighted average term represent the remaining maturity in years on the related debt at the issuance or redemption date, respectively.

At March 31, 2021, we had total available liquidity of $4.9 billion, principally due to aggregate availability under our credit facilities of $3.9 billion and unrestricted cash balances of $676 million. In April 2021, we increased our available liquidity by entering into a second global senior credit facility with an available borrowing capacity of $1.0 billion and terminating the $500 million multi-currency term loan.

Throughout this discussion, we reflect amounts in U.S. dollars, our reporting currency. Included in these amounts are consolidated and unconsolidated investments denominated in foreign currencies, principally the British pound sterling, euro and Japanese yen that are impacted by fluctuations in exchange rates when translated to U.S. dollars. We mitigate our exposure to foreign currency fluctuations by investing outside the U.S. through co-investment ventures, borrowing in the functional currency of our subsidiaries and utilizing derivative financial instruments.

Index

RESULTS OF OPERATIONS – THREE MONTHS ENDED MARCH 31, 2021 AND 2020

We evaluate our business operations based on the NOI of our two operating segments: Real Estate Operations and Strategic Capital. NOI by segment is a non-GAAP performance measure that is calculated using revenues and expenses directly from our financial statements. We consider NOI by segment to be an appropriate supplemental measure of our performance because it helps management and investors understand our operating results.

Below is a reconciliation of our NOI by segment to Operating Income per the Consolidated Financial Statements for the three months ended March 31 (in millions). Each segment’s NOI is reconciled to line items in the Consolidated Financial Statements as provided in the related discussion below.

	2021			2020
Real Estate Operations – NOI	$	747		$	639
Strategic Capital – NOI		71			50
General and administrative expenses		(78	)		(69	)
Depreciation and amortization expenses		(398	)		(346	)
Operating income before gains on real estate transactions, net		342			274
Gains on dispositions of development properties and land, net		174			163
Gains on other dispositions of investments in real estate, net		16			31
Operating income	$	532		$	468

See Note 11 to the Consolidated Financial Statements for more information on our segments and a reconciliation of each business segment’s NOI to Operating Income and Earnings Before Income Taxes.

Real Estate Operations

This operating segment principally includes rental revenue and rental expenses recognized from our consolidated properties. We allocate the costs of our property management and leasing functions to the Real Estate Operations segment through Rental Expenses and the Strategic Capital segment through Strategic Capital Expenses based on the square footage of the relative portfolios. In addition, this segment is impacted by our development, acquisition and disposition activities.

Below are the components of Real Estate Operations NOI for the three months ended March 31, derived directly from line items in the Consolidated Financial Statements (in millions):

	2021			2020
Rental revenues	$	1,022		$	879
Development management and other revenues		6			3
Rental expenses		(278	)		(228	)
Other expenses		(3	)		(15	)
Real Estate Operations – NOI	$	747		$	639

The change in Real Estate Operations NOI for the three months ended March 31, 2021 from the same period in 2020, was impacted by the following items (in millions):

(1)	Acquisition activity increased NOI in 2021, compared to 2020, primarily due to the Liberty Transaction on February 4, 2020. We acquired 519 industrial operating properties, aggregating 100 million square feet, and increased our consolidated investments in real estate by approximately $13 billion.

(2)	During both periods, we experienced positive rental rate growth. Rental rate growth is a combination of higher rental rates on rollover of leases (or rent change) and contractual rent increases on existing leases. If a lease has a contractual rent increase

Index

driven by a metric that is not known at the time the lease commences, such as the consumer price index or a similar metric, the rent increase is not included in rent leveling and therefore, impacts the rental revenue we recognize. Significant rent change during both periods continues to be a key driver in increasing rental income. See below for key metrics on rent change on rollover and occupancy for the consolidated operating portfolio.

(3)	We calculate changes in NOI from development completions period over period by comparing the change in NOI generated on the pool of developments that completed on or after January 1, 2020 through March 31, 2021.

Below are key operating metrics of our consolidated operating portfolio, which excludes non-strategic industrial properties.

(1)	Consolidated square feet of leases commenced and weighted average net effective rent change were calculated for leases with initial terms of one year or greater.

(2)	Calculated using the trailing twelve months immediately prior to the period ended.

Development Activity

The following table summarizes consolidated development activity for the three months ended March 31 (dollars and square feet in millions):

	2021			2020
Starts:
Number of new development projects during the period		13			4
Square feet		5			2
TEI ⁽¹⁾	$	556		$	299
Percentage of build-to-suits based on TEI		59.9	%		16.6	%

Stabilizations:
Number of development projects stabilized during the period		13			19
Square feet		4			6
TEI ⁽¹⁾	$	372		$	673
Percentage of build-to-suits based on TEI		15.8	%		24.7	%
Weighted average stabilized yield ⁽²⁾		5.8	%		6.3	%
Estimated value at completion	$	533		$	941
Estimated weighted average margin		43.2	%		39.8	%

(1)	TEI also includes development starts on yards and parking lots that will be included in other real estate investments upon completion.

(2)	We calculate the weighted average stabilized yield as estimated NOI assuming stabilized occupancy divided by TEI.

During the first quarter of 2020, we suspended several recently started speculative development projects for the short term based on the market conditions at that time and government restrictions due to COVID-19. By the fourth quarter of 2020, most suspended projects were restarted and at March 31, 2021, the entire development portfolio consisted of active projects. At March 31, 2021, the consolidated development portfolio, including properties under development and prestabilized properties, was expected to be completed before August 2022 with a TEI of $3.7 billion, leaving $1.7 billion remaining to be spent and was 61.8% leased. We expect our development activities to continue to accelerate in 2021.

Index

Capital Expenditures

We capitalize costs incurred in renovating, improving and leasing our operating properties as part of the investment basis or within other assets. The following graph summarizes capital expenditures, excluding development costs, and property improvements per average square foot of our consolidated operating properties during each quarter:

Strategic Capital

This operating segment includes revenues from asset and property management services performed, transactional services for acquisition, disposition and leasing activity and promote revenue earned from the unconsolidated entities. Revenues associated with the Strategic Capital segment fluctuate because of changes in the size of the portfolios through acquisitions and dispositions, the fair value of the properties and other transactional activity including foreign currency exchange rates and timing of promotes. These revenues are reduced by the direct costs associated with the asset and property-level management expenses for the properties owned by these ventures. We allocate the costs of our property management and leasing functions to the Strategic Capital segment through Strategic Capital Expenses and to the Real Estate Operations segment through Rental Expenses based on the square footage of the relative portfolios. For further details regarding the key property information and summarized financial condition and operating results of our unconsolidated co-investment ventures, refer to Note 4 to the Consolidated Financial Statements.

Below are the components of Strategic Capital revenues, expenses and NOI for the three months ended March 31, derived directly from the line items in the Consolidated Financial Statements (in millions):

	2021			2020
Strategic capital revenues	$	120		$	97
Strategic capital expenses		(49	)		(47	)
Strategic Capital – NOI	$	71		$	50

Below is additional detail of our Strategic Capital revenues, expenses and NOI for the three months ended March 31 (in millions):

	U.S. ⁽¹⁾						Other Americas						Europe						Asia						Total
	2021			2020			2021			2020			2021			2020			2021			2020			2021			2020
Strategic capital revenues ($)
Recurring fees ⁽²⁾		30			25			9			8			36			28			19			15			94			76
Transactional fees⁽³⁾		4			9			2			1			5			4			13			6			24			20
Promote revenue ⁽⁴⁾					-			-			-			2			1			-			-			2			1
Total strategic capital revenues ($)		34			34			11			9			43			33			32			21			120			97
Strategic capital expenses ($)		(25	)		(20	)		(3	)		(4	)		(11	)		(13	)		(10	)		(10	)		(49	)		(47	)
Strategic Capital – NOI ($)		9			14			8			5			32			20			22			11			71			50