Sol
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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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:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
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(Address or principal executive offices) |
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(Zip Code) |
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(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:
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Title of Each Class |
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Trading Symbol(s) |
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Name of Each Exchange on Which Registered |
Prologis, Inc. |
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Prologis, L.P. |
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Prologis, L.P. |
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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. |
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☒ |
No |
☐ |
Prologis, L.P. |
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☒ |
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. |
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☒ |
No |
☐ |
Prologis, L.P. |
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☒ |
No |
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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.: |
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Large accelerated filer ☒ |
Accelerated filer ☐ |
Non-accelerated filer ☐ |
Smaller reporting company |
Emerging growth company |
Prologis, L.P.: |
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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 |
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No |
☒ |
Prologis, L.P. |
Yes |
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No |
☒ |
The number of shares of Prologis, Inc.’s common stock outstanding at April 23, 2021, was approximately
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:
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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; |
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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 |
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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
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
PROLOGIS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands, except per share data)
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March 31, 2021 |
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December 31, 2020 |
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ASSETS |
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Investments in real estate properties |
$ |
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$ |
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Less accumulated depreciation |
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Net investments in real estate properties |
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Investments in and advances to unconsolidated entities |
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Assets held for sale or contribution |
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Net investments in real estate |
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Cash and cash equivalents |
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Other assets |
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Total assets |
$ |
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$ |
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LIABILITIES AND EQUITY |
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Liabilities: |
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Debt |
$ |
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$ |
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Accounts payable and accrued expenses |
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Other liabilities |
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Total liabilities |
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Equity: |
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Prologis, Inc. stockholders’ equity: |
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Series Q preferred stock at stated liquidation preference of $ March 31, 2021 and December 31, 2020 |
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Common stock; $ March 31, 2021 and December 31, 2020, respectively |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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( |
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Distributions in excess of net earnings |
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( |
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Total Prologis, Inc. stockholders’ equity |
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Noncontrolling interests |
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Total equity |
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Total liabilities and equity |
$ |
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$ |
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The accompanying notes are an integral part of these Consolidated Financial Statements.
1
PROLOGIS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share amounts)
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Three Months Ended |
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March 31, |
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2021 |
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2020 |
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Revenues: |
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Rental |
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$ |
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$ |
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Strategic capital |
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Development management and other |
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Total revenues |
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Expenses: |
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Rental |
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Strategic capital |
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General and administrative |
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Depreciation and amortization |
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Other |
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Total expenses |
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Operating income before gains on real estate transactions, net |
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Gains on dispositions of development properties and land, net |
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Gains on other dispositions of investments in real estate, net |
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Operating income |
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Other income (expense): |
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Earnings from unconsolidated entities, net |
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Interest expense |
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Interest and other income, net |
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Foreign currency and derivative gains, net |
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Losses on early extinguishment of debt, net |
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Total other income (expense) |
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Earnings before income taxes |
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Total income tax expense |
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Consolidated net earnings |
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Less net earnings attributable to noncontrolling interests |
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Net earnings attributable to controlling interests |
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Less preferred stock dividends |
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Net earnings attributable to common stockholders |
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$ |
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$ |
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Weighted average common shares outstanding – Basic |
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Weighted average common shares outstanding – Diluted |
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Net earnings per share attributable to common stockholders – Basic |
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$ |
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$ |
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Net earnings per share attributable to common stockholders – Diluted |
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$ |
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$ |
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The accompanying notes are an integral part of these Consolidated Financial Statements.
2
PROLOGIS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands)
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Three Months Ended |
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March 31, |
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2021 |
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2020 |
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Consolidated net earnings |
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$ |
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$ |
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Other comprehensive income (loss): |
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Foreign currency translation gains (losses), net |
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( |
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Unrealized gains (losses) on derivative contracts, net |
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( |
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Comprehensive income |
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Net earnings attributable to noncontrolling interests |
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( |
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( |
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Other comprehensive loss (income) attributable to noncontrolling interests |
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( |
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Comprehensive income attributable to common stockholders |
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$ |
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$ |
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The accompanying notes are an integral part of these Consolidated Financial Statements.
3
PROLOGIS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
Three Months Ended March 31, 2021 and 2020
(Unaudited)
(In thousands)
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Common Stock |
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Accumulated |
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Distributions |
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Number |
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Additional |
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Other |
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in Excess of |
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Non- |
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Preferred |
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of |
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Par |
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Paid-in |
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Comprehensive |
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Net |
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controlling |
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Total |
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Stock |
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Shares |
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Value |
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Capital |
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Income (Loss) |
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Earnings |
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Interests |
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Equity |
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Balance at January 1, 2021 |
$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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$ |
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Consolidated net earnings |
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- |
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- |
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- |
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- |
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- |
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Effect of equity compensation plans |
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- |
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- |
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- |
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Capital contributions |
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- |
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- |
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- |
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- |
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- |
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- |
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Redemption of noncontrolling interests |
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- |
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- |
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- |
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- |
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( |
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( |
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Foreign currency translation gains, net |
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- |
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- |
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- |
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- |
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- |
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Unrealized gains on derivative contracts, net |
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- |
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- |
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- |
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- |
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- |
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Reallocation of equity |
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- |
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- |
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- |
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( |
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- |
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- |
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- |
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Dividends ($ and other distributions |
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- |
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- |
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- |
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( |
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- |
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( |
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( |
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( |
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Balance at March 31, 2021 |
$ |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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$ |
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Common Stock |
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Accumulated |
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Distributions |
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Number |
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Additional |
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Other |
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in Excess of |
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Non- |
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Preferred |
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of |
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Par |
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Paid-in |
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Comprehensive |
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Net |
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controlling |
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Total |
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Stock |
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Shares |
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Value |
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Capital |
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Loss |
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Earnings |
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Interests |
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Equity |
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Balance at January 1, 2020 |
$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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$ |
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Consolidated net earnings |
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- |
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- |
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- |
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- |
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- |
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Effect of equity compensation plans |
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- |
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( |
) |
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- |
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- |
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Liberty Transaction, net of issuance costs |
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- |
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- |
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- |
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Repurchases of common shares |
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- |
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( |
) |
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( |
) |
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( |
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- |
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- |
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- |
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( |
) |
Capital contributions |
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- |
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- |
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- |
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- |
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- |
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- |
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Redemption of noncontrolling interests |
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- |
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- |
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- |
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( |
) |
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( |
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Foreign currency translation losses, net |
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- |
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- |
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- |
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- |
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( |
) |
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- |
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( |
) |
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( |
) |
Unrealized losses on derivative contracts, net |
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- |
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- |
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- |
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- |
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( |
) |
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- |
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( |
) |
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( |
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Reallocation of equity |
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- |
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- |
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- |
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( |
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- |
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- |
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- |
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Dividends ($ and other distributions |
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- |
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- |
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- |
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( |
) |
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- |
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( |
) |
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( |
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( |
) |
Balance at March 31, 2020 |
$ |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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$ |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these Consolidated Financial Statements.
4
PROLOGIS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
Operating activities: |
|
|
|
|
|
|
|
|
Consolidated net earnings |
|
$ |
|
|
|
$ |
|
|
Adjustments to reconcile net earnings to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Straight-lined rents and amortization of above and below market leases |
|
|
( |
) |
|
|
( |
) |
Equity-based compensation awards |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
Earnings from unconsolidated entities, net |
|
|
( |
) |
|
|
( |
) |
Operating distributions from unconsolidated entities |
|
|
|
|
|
|
|
|
Decrease in operating receivables from unconsolidated entities |
|
|
|
|
|
|
|
|
Amortization of debt discounts and debt issuance costs, net |
|
|
|
|
|
|
|
|
Gains on dispositions of development properties and land, net |
|
|
( |
) |
|
|
( |
) |
Gains on other dispositions of investments in real estate, net |
|
|
( |
) |
|
|
( |
) |
Unrealized foreign currency and derivative gains, net |
|
|
( |
) |
|
|
( |
) |
Losses on early extinguishment of debt, net |
|
|
|
|
|
|
|
|
Deferred income tax expense |
|
|
|
|
|
|
|
|
Decrease in accounts receivable and other assets |
|
|
|
|
|
|
|
|
Decrease in accounts payable and accrued expenses and other liabilities |
|
|
( |
) |
|
|
( |
) |
Net cash provided by operating activities |
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
Real estate development |
|
|
( |
) |
|
|
( |
) |
Real estate acquisitions |
|
|
( |
) |
|
|
( |
) |
Liberty Transaction, net of cash acquired |
|
|
|
|
|
|
( |
) |
IPT Transaction, net of cash acquired |
|
|
|
|
|
|
( |
) |
Tenant improvements and lease commissions on previously leased space |
|
|
( |
) |
|
|
( |
) |
Property improvements |
|
|
( |
) |
|
|
( |
) |
Proceeds from dispositions and contributions of real estate properties |
|
|
|
|
|
|
|
|
Investments in and advances to unconsolidated entities |
|
|
( |
) |
|
|
( |
) |
Return of investment from unconsolidated entities |
|
|
|
|
|
|
|
|
Proceeds from repayment of notes receivable backed by real estate |
|
|
|
|
|
|
|
|
Proceeds from the settlement of net investment hedges |
|
|
|
|
|
|
|
|
Payments on the settlement of net investment hedges |
|
|
( |
) |
|
|
( |
) |
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Financing activities: |
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock |
|
|
|
|
|
|
|
|
Repurchase and retirement of common stock |
|
|
|
|
|
|
( |
) |
Dividends paid on common and preferred stock |
|
|
( |
) |
|
|
( |
) |
Noncontrolling interests contributions |
|
|
|
|
|
|
|
|
Noncontrolling interests distributions |
|
|
( |
) |
|
|
( |
) |
Settlement of noncontrolling interests |
|
|
( |
) |
|
|
( |
) |
Tax paid with shares withheld |
|
|
( |
) |
|
|
( |
) |
Debt and equity issuance costs paid |
|
|
( |
) |
|
|
( |
) |
Net payments on credit facilities |
|
|
( |
) |
|
|
( |
) |
Repurchase of and payments on debt |
|
|
( |
) |
|
|
( |
) |
Proceeds from the issuance of debt |
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign currency exchange rate changes on cash |
|
|
( |
) |
|
|
( |
) |
Net increase (decrease) in cash and cash equivalents |
|
|
|
|
|
|
( |
) |
Cash and cash equivalents, beginning of period |
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
|
|
|
$ |
|
|
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.
5
PROLOGIS, L.P.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands)
|
|
|
|
|
|
|
|
|
March 31, 2021 |
|
|
December 31, 2020 |
|
||
ASSETS |
|
|
|
|
|
|
|
Investments in real estate properties |
$ |
|
|
|
$ |
|
|
Less accumulated depreciation |
|
|
|
|
|
|
|
Net investments in real estate properties |
|
|
|
|
|
|
|
Investments in and advances to unconsolidated entities |
|
|
|
|
|
|
|
Assets held for sale or contribution |
|
|
|
|
|
|
|
Net investments in real estate |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
|
|
Other assets |
|
|
|
|
|
|
|
Total assets |
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND CAPITAL |
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
Debt |
$ |
|
|
|
$ |
|
|
Accounts payable and accrued expenses |
|
|
|
|
|
|
|
Other liabilities |
|
|
|
|
|
|
|
Total liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital: |
|
|
|
|
|
|
|
Partners’ capital: |
|
|
|
|
|
|
|
General partner – preferred |
|
|
|
|
|
|
|
General partner – common |
|
|
|
|
|
|
|
Limited partners – common |
|
|
|
|
|
|
|
Limited partners – Class A common |
|
|
|
|
|
|
|
Total partners’ capital |
|
|
|
|
|
|
|
Noncontrolling interests |
|
|
|
|
|
|
|
Total capital |
|
|
|
|
|
|
|
Total liabilities and capital |
$ |
|
|
|
$ |
|
|
The accompanying notes are an integral part of these Consolidated Financial Statements.
6
PROLOGIS, L.P.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per unit amounts)
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
Revenues: |
|
|
|
|
|
|
|
|
Rental |
|
$ |
|
|
|
$ |
|
|
Strategic capital |
|
|
|
|
|
|
|
|
Development management and other |
|
|
|
|
|
|
|
|
Total revenues |
|
|
|
|
|
|
|
|
Expenses: |
|
|
|
|
|
|
|
|
Rental |
|
|
|
|
|
|
|
|
Strategic capital |
|
|
|
|
|
|
|
|
General and administrative |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
Other |
|
|
|
|
|
|
|
|
Total expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income before gains on real estate transactions, net |
|
|
|
|
|
|
|
|
Gains on dispositions of development properties and land, net |
|
|
|
|
|
|
|
|
Gains on other dispositions of investments in real estate, net |
|
|
|
|
|
|
|
|
Operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
Earnings from unconsolidated entities, net |
|
|
|
|
|
|
|
|
Interest expense |
|
|
( |
) |
|
|
( |
) |
Interest and other income, net |
|
|
|
|
|
|
|
|
Foreign currency and derivative gains, net |
|
|
|
|
|
|
|
|
Losses on early extinguishment of debt, net |
|
|
( |
) |
|
|
( |
) |
Total other income (expense) |
|
|
( |
) |
|
|
|
|
Earnings before income taxes |
|
|
|
|
|
|
|
|
Total income tax expense |
|
|
|
|
|
|
|
|
Consolidated net earnings |
|
|
|
|
|
|
|
|
Less net earnings attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
Net earnings attributable to controlling interests |
|
|
|
|
|
|
|
|
Less preferred unit distributions |
|
|
|
|
|
|
|
|
Net earnings attributable to common unitholders |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Weighted average common units outstanding – Basic |
|
|
|
|
|
|
|
|
Weighted average common units outstanding – Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per unit attributable to common unitholders – Basic |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Net earnings per unit attributable to common unitholders – Diluted |
|
$ |
|
|
|
$ |
|
|
The accompanying notes are an integral part of these Consolidated Financial Statements.
7
PROLOGIS, L.P.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
(In thousands)
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
Consolidated net earnings |
|
$ |
|
|
|
$ |
|
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
Foreign currency translation gains (losses), net |
|
|
|
|
|
|
( |
) |
Unrealized gains (losses) on derivative contracts, net |
|
|
|
|
|
|
( |
) |
Comprehensive income |
|
|
|
|
|
|
|
|
Net earnings attributable to noncontrolling interests |
|
|
( |
) |
|
|
( |
) |
Other comprehensive loss attributable to noncontrolling interests |
|
|
|
|
|
|
|
|
Comprehensive income attributable to common unitholders |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these Consolidated Financial Statements.
8
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 |
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Consolidated net earnings |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of equity compensation plans |
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Capital contributions |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Redemption of limited partners units |
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
Foreign currency translation gains (losses), net |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
( |
) |
|
|
|
|
Unrealized gains on derivative contracts, net |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
Reallocation of capital |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
Distributions ($ |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance at March 31, 2021 |
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 |
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Consolidated net earnings |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of equity compensation plans |
|
- |
|
|
|
- |
|
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
Liberty Transaction, net of issuance costs |
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Repurchases of common units |
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
Capital contributions |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
Redemption of limited partners units |
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
Foreign currency translation losses, net |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Unrealized losses on derivative contracts, net |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
Reallocation of capital |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
|
|
|
|
- |
|
|
|
- |
|
Distributions ($ and other |
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
- |
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Balance at March 31, 2020 |
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these Consolidated Financial Statements.
9
PROLOGIS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
|
|
2021 |
|
|
2020 |
|
||
Operating activities: |
|
|
|
|
|
|
|
|
Consolidated net earnings |
|
$ |
|
|
|
$ |
|
|
Adjustments to reconcile net earnings to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Straight-lined rents and amortization of above and below market leases |
|
|
( |
) |
|
|
( |
) |
Equity-based compensation awards |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
|
|
|
|
|
|
Earnings from unconsolidated entities, net |
|
|
( |
) |
|
|
( |
) |
Operating distributions from unconsolidated entities |
|
|
|
|
|
|
|
|
Decrease in operating receivables from unconsolidated entities |
|
|
|
|
|
|
|
|
Amortization of debt discounts and debt issuance costs, net |
|
|
|
|
|
|
|
|
Gains on dispositions of development properties and land, net |
|
|
( |
) |
|
|
( |
) |
Gains on other dispositions of investments in real estate, net |
|
|
( |
) |
|
|
( |
) |
Unrealized foreign currency and derivative gains, net |
|
|
( |
) |
|
|
( |
) |
Losses on early extinguishment of debt, net |
|
|
|
|
|
|
|
|
Deferred income tax expense |
|
|
|
|
|
|
|
|
Decrease in accounts receivable and other assets |
|
|
|
|
|
|
|
|
Decrease in accounts payable and accrued expenses and other liabilities |
|
|
( |
) |
|
|
( |
) |
Net cash provided by operating activities |
|
|
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
|
|
|
Real estate development |
|
|
( |
) |
|
|
( |
) |
Real estate acquisitions |
|
|
( |
) |
|
|
( |
) |
Liberty Transaction, net of cash acquired |
|
|
|
|
|
|
( |
) |
IPT Transaction, net of cash acquired |
|
|
|
|
|
|
( |
) |
Tenant improvements and lease commissions on previously leased space |
|
|
( |
) |
|
|
( |
) |
Property improvements |
|
|
( |
) |
|
|
( |
) |
Proceeds from dispositions and contributions of real estate properties |
|
|
|
|
|
|
|
|
Investments in and advances to unconsolidated entities |
|
|
( |
) |
|
|
( |
) |
Return of investment from unconsolidated entities |
|
|
|
|
|
|
|
|
Proceeds from repayment of notes receivable backed by real estate |
|
|
|
|
|
|
|
|
Proceeds from the settlement of net investment hedges |
|
|
|
|
|
|
|
|
Payments on the settlement of net investment hedges |
|
|
( |
) |
|
|
( |
) |
Net cash used in investing activities |
|
|
( |
) |
|
|
( |
) |
Financing activities: |
|
|
|
|
|
|
|
|
Proceeds from issuance of common partnership units in exchange for contributions from Prologis, Inc. |
|
|
|
|
|
|
|
|
Repurchase and retirement of common units |
|
|
|
|
|
|
( |
) |
Distributions paid on common and preferred units |
|
|
( |
) |
|
|
( |
) |
Noncontrolling interests contributions |
|
|
|
|
|
|
|
|
Noncontrolling interests distributions |
|
|
( |
) |
|
|
( |
) |
Redemption of common limited partnership units |
|
|
( |
) |
|
|
( |
) |
Tax paid with shares of the Parent withheld |
|
|
( |
) |
|
|
( |
) |
Debt and equity issuance costs paid |
|
|
( |
) |
|
|
( |
) |
Net payments on credit facilities |
|
|
( |
) |
|
|
( |
) |
Repurchase of and payments on debt |
|
|
( |
) |
|
|
( |
) |
Proceeds from the issuance of debt |
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign currency exchange rate changes on cash |
|
|
( |
) |
|
|
( |
) |
Net increase (decrease) in cash and cash equivalents |
|
|
|
|
|
|
( |
) |
Cash and cash equivalents, beginning of period |
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period |
|
$ |
|
|
|
$ |
|
|
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.
10
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
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
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
The Liberty Transaction was completed for $
11
Through the Liberty Transaction, we acquired a portfolio primarily comprised of logistics real estate assets, including
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 |
|
|
|
Multiplied by price of Prologis' common stock on February 3, 2020 |
$ |
|
|
Fair value of Prologis shares and units issued |
$ |
|
|
We accounted for the Liberty Transaction as an asset acquisition and as a result, the transaction costs of $
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 |
$ |
|
|
Intangible assets, net of intangible liabilities |
|
|
|
Cash and other assets |
|
|
|
Debt |
|
( |
) |
Accounts payable, accrued expenses and other liabilities |
|
( |
) |
Noncontrolling interests |
|
( |
) |
Total purchase price, including transaction costs |
$ |
|
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
Improved land |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Development portfolio, including land costs: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prestabilized |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Properties under development |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Land (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other real estate investments (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments in real estate properties |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less accumulated depreciation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investments in real estate properties |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
At March 31, 2021 and December 31, 2020, our land was comprised of |
(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. |
12
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 |
|
|
|
|
|
|
|
|
Square feet |
|
|
|
|
|
|
|
|
Acres of land |
|
|
|
|
|
|
|
|
Acquisition cost of net investments in real estate |
|
$ |
|
|
|
$ |
|
|
(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 $ |
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 |
|
|
|
|
|
|
|
|
Square feet |
|
|
|
|
|
|
|
|
Net proceeds |
|
$ |
|
|
|
$ |
|
|
Gains on dispositions of development properties and land, net |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Other dispositions of investments in real estate, net |
|
|
|
|
|
|
|
|
Number of properties |
|
|
|
|
|
|
|
|
Square feet |
|
|
|
|
|
|
|
|
Net proceeds |
|
$ |
|
|
|
$ |
|
|
Gains on other dispositions of investments in real estate, net |
|
$ |
|
|
|
$ |
|
|
(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 $
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.
13
The following table summarizes our investments in and advances to unconsolidated entities (in thousands):
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2021 |
|
|
2020 |
|
||
Unconsolidated co-investment ventures |
|
$ |
|
|
|
$ |
|
|
Other ventures |
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
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 |
|
$ |
|
|
|
$ |
|
|
Transactional fees |
|
|
|
|
|
|
|
|
Promote revenue |
|
|
|
|
|
|
|
|
Total strategic capital revenues from unconsolidated co-investment ventures (1) |
|
$ |
|
|
|
$ |
|
|
(1) |
|
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 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating properties |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Square feet |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial position: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third-party debt ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our investment balance ($) (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our weighted average ownership (3) |
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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: |
|
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|
|
|
|
|
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|
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|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues ($) |
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|
|
|
|
|
|
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|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings ($) |
|
|
|
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|
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|
|
|
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|
|
|
|
|
|
|
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our earnings from unconsolidated co-investment ventures, net ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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|
|
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|
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|
|
|
|
|
|
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|
|
|
|
|
|
|
(1) |
|
(2) |
|
(3) |
|
14
Equity Commitments Related to Certain Unconsolidated Co-Investment Ventures
At March 31, 2021, our outstanding equity commitments were $
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 |
|
|
|
|
|
|
|
|
Square feet |
|
|
|
|
|
|
|
|
Total assets held for sale or contribution |
|
$ |
|
|
|
$ |
|
|
Total liabilities associated with assets held for sale or contribution – included in Other Liabilities |
|
$ |
|
|
|
$ |
|
|
NOTE 6. DEBT
All debt is incurred by the OP or its consolidated subsidiaries.
|
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 |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
Senior notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
Term loans and unsecured other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured mortgage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
$ |
|
|
(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 |
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
|
|
% |
|
$ |
|
|
|
|
|
% |
|
Canadian dollar |
|
|
|
% |
|
|
|
|
|
|
|
% |
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Euro |
|
|
|
% |
|
|
|
|
|
|
|
% |
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Japanese yen |
|
|
|
% |
|
|
|
|
|
|
|
% |
|
|
|
% |
|
|
|
|
|
|
|
% |
|
U.S. dollar |
|
|
|
% |
|
|
|
|
|
|
|
% |
|
|
|
% |
|
|
|
|
|
|
|
% |
|
Total |
|
|
|
% |
|
$ |
|
|
|
|
|
|
|
|
|
% |
|
$ |
|
|
|
|
|
|
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 $
15
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
We also have a Japanese yen revolver (the “Revolver”) with total commitments of ¥
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 $
Liquidity
The following table summarizes information about our available liquidity at March 31, 2021 (in millions):
|
|
|
|
|
Aggregate lender commitments |
|
|
|
|
Credit Facilities |
|
$ |
|
|
Less: |
|
|
|
|
Borrowings outstanding |
|
|
|
|
Outstanding letters of credit |
|
|
|
|
Current availability |
|
$ |
|
|
Available term loans |
|
|
|
|
Cash and cash equivalents |
|
|
|
|
Total liquidity |
|
$ |
|
|
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 |
|
€ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
February |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate Principal |
|
|
Redemption Date Weighted Average |
|
|
|
||||||||||
Redemption Date |
|
Borrowing Currency |
|
|
USD (1) |
|
|
Interest Rate (2) |
|
|
Term (3) |
|
|
Maturity Dates |
||||
March |
|
€ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
March |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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.
16
Early Extinguishment of Debt
During the three months ended March 31, 2021 and 2020, we recognized $
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 $
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) |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
2022 (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2024 (3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2025 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thereafter |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Premiums (discounts), net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt issuance costs, net |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
(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 $ |
(3) |
Included in the 2024 maturities is the Revolver that can be extended until 2025. |
Financial Debt Covenants
We had $
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
17
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
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 |
|
|
% |
|
|
|
% |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Other consolidated entities (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
Prologis, L.P. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Limited partners in Prologis, L.P. (2)(3) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Prologis, Inc. |
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
(2) |
|
(3) |
|
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
We granted participation points for the 2021 – 2023 performance period in January 2021, with a fair value of $
18
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 $
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 |
|
|
|
|
|
$ |
|
|
Granted (1) |
|
|
|
|
|
|
|
|
Vested and distributed |
|
|
( |
) |
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Balance at March 31, 2021 |
|
|
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
(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 |
|
|
|
|
|
$ |
|
|
Granted (1) |
|
|
|
|
|
|
|
|
Forfeited |
|
|
( |
) |
|
|
|
|
Vested LTIP Units (2) |
|
|
( |
) |
|
|
|
|
Balance at March 31, 2021 |
|
|
|
|
|
$ |
|
|
(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. |
(2) |
Vested LTIP Units include vested POP LTIP Units from prior performance periods. |
19
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 |
|
$ |
|
|
|
$ |
|
|
Net earnings attributable to exchangeable limited partnership units (1) |
|
|
|
|
|
|
|
|
Adjusted net earnings attributable to common stockholders – Diluted |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding – Basic |
|
|
|
|
|
|
|
|
Incremental weighted average effect on exchange of limited partnership units (1) |
|
|
|
|
|
|
|
|
Incremental weighted average effect of equity awards |
|
|
|
|
|
|
|
|
Weighted average common shares outstanding – Diluted (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per share attributable to common stockholders: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
|
|
|
$ |
|
|
Diluted |
|
$ |
|
|
|
$ |
|
|
|
|
Three Months Ended |
|
|||||
|
|
March 31, |
|
|||||
Prologis, L.P. |
|
2021 |
|
|
2020 |
|
||
Net earnings attributable to common unitholders |
|
$ |
|
|
|
$ |
|
|
Net earnings attributable to Class A Units |
|
|
( |
) |
|
|
( |
) |
Net earnings attributable to common unitholders – Basic |
|
|
|
|
|
|
|
|
Net earnings attributable to Class A Units |
|
|
|
|
|
|
|
|
Net earnings attributable to exchangeable other limited partnership units |
|
|
|
|
|
|
|
|
Adjusted net earnings attributable to common unitholders – Diluted |
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
Weighted average common partnership units outstanding – Basic |
|
|
|
|
|
|
|
|
Incremental weighted average effect on exchange of Class A Units |
|
|
|
|
|
|
|
|
Incremental weighted average effect on exchange of other limited partnership units |
|
|
|
|
|
|
|
|
Incremental weighted average effect of equity awards of Prologis, Inc. |
|
|
|
|
|
|
|
|
Weighted average common units outstanding – Diluted (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per unit attributable to common unitholders: |
|
|
|
|
|
|
|
|
Basic |
|
$ |
|
|
|
$ |
|
|
Diluted |
|
$ |
|
|
|
$ |
|
|
(1) |
|
(2) |
|
|
|
|
Three Months Ended |
|
|||||
|
|
|
March 31, |
|
|||||
|
|
|
2021 |
|
|
2020 |
|
||
|
Class A Units |
|
|
|
|
|
|
|
|
|
Other limited partnership units |
|
|
|
|
|
|
|
|
|
Equity awards |
|
|
|
|
|
|
|
|
|
Prologis, L.P. |
|
|
|
|
|
|
|
|
|
Common limited partnership units |
|
|
|
|
|
|
|
|
|
Prologis, Inc. |
|
|
|
|
|
|
|
|
20
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 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
British pound sterling |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canadian dollar |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chinese renminbi |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Euro |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Japanese yen |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Swedish krona |
|
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Designated derivatives |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency contracts |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
British pound sterling |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canadian dollar |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest rate swaps |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow hedges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Euro |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. dollar |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fair value of derivatives |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New contracts ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matured, expired or settled contracts ($) |
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Notional amounts at March 31 ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average forward rate at March 31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active contracts at March 31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
21
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 |
|
|
|
|
|
|
|
|
Realized gains (losses) on the matured, expired or settled contracts |
|
$ |
( |
) |
|
$ |
|
|
Unrealized gains on the change in fair value of outstanding contracts |
|
$ |
|
|
|
$ |
|
|
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 ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New contracts ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matured, expired or settled contracts ($) |
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
|
|
|
|
( |
) |
|
|
( |
) |
Notional amounts at March 31 ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average forward rate at March 31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Active contracts at March 31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
New contracts ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matured, expired or settled contracts ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Notional amounts at March 31 ($) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(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 |
|
$ |
|
|
|
$ |
|
|
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 |
|
$ |
|
|
|
$ |
|
|
22
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 |
|
$ |
( |
) |
|
$ |
|
|
Debt designated as nonderivative net investment hedges |
|
|
( |
) |
|
|
|
|
Cumulative translation adjustment |
|
|
|
|
|
|
( |
) |
Total foreign currency translation gains (losses), net |
|
$ |
|
|
|
$ |
( |
) |
|
|
|
|
|
|
|
|
|
Cash flow hedges (1) (2) |
|
$ |
|
|
|
$ |
( |
) |
Our share of derivatives from unconsolidated co-investment ventures |
|
|
|
|
|
|
( |
) |
Total unrealized gains (losses) on derivative contracts, net |
|
$ |
|
|
|
$ |
( |
) |
Total change in other comprehensive income (loss) |
|
$ |
|
|
|
$ |
( |
) |
|
(1) |
We estimate an additional expense of $ |
|
(2) |
Included in the three months ended March 31, 2020 was $ |
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.
23
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 |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
Senior notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Term loans and unsecured other |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured mortgage |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
|
$ |
|
|
NOTE 11. BUSINESS SEGMENTS
Our current business strategy includes
• |
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.
24
The following reconciliations are presented in thousands:
|
|
Three Months Ended March 31, |
|
|||||
|
|
|
2021 |
|
|
|
2020 |
|
Revenues: |
|
|
|
|
|
|
|
|
Real estate operations segment: |
|
|
|
|
|
|
|
|
U.S. |
|
$ |
|
|
|
$ |
|
|
Other Americas |
|
|
|
|
|
|
|
|
Europe |
|
|
|
|
|
|
|
|
Asia |
|
|
|
|
|
|
|
|
Total real estate operations segment |
|
|
|
|
|
|
|
|
Strategic capital segment: |
|
|
|
|
|
|
|
|
U.S. |
|
|
|
|
|
|
|
|
Other Americas |
|
|
|
|
|
|
|
|
Europe |
|
|
|
|
|
|
|
|
Asia |
|
|
|
|
|
|
|
|
Total strategic capital segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment net operating income: |
|
|
|
|
|
|
|
|
Real estate operations segment: |
|
|
|
|
|
|
|
|
U.S. (1) |
|
|
|
|
|
|
|
|
Other Americas |
|
|
|
|
|
|
|
|
Europe |
|
|
|
|
|
|
|
|
Asia |
|
|
|
|
|
|
|
|
Total real estate operations segment |
|
|
|
|
|
|
|
|
Strategic capital segment: |
|
|
|
|
|
|
|
|
U.S. (1) |
|
|
|
|
|
|
|
|
Other Americas |
|
|
|
|
|
|
|
|
Europe |
|
|
|
|
|
|
|
|
Asia |
|
|
|
|
|
|
|
|
Total strategic capital segment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total segment net operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciling items: |
|
|
|
|
|
|
|
|
General and administrative expenses |
|
|
( |
) |
|
|
( |
) |
Depreciation and amortization expenses |
|
|
( |
) |
|
|
( |
) |
Gains on dispositions of development properties and land, net |
|
|
|
|
|
|
|
|
Gains on other dispositions of investments in real estate, net |
|
|
|
|
|
|
|
|
Operating income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from unconsolidated entities, net |
|
|
|
|
|
|
|
|
Interest expense |
|
|
( |
) |
|
|
( |
) |
Interest and other income, net |
|
|
|
|
|
|
|
|
Foreign currency and derivative gains, net |
|
|
|
|
|
|
|
|
Losses on early extinguishment of debt, net |
|
|
( |
) |
|
|
( |
) |
Earnings before income taxes |
|
$ |
|
|
|
$ |
|
|
25
|
|
March 31, 2021 |
|
|
December 31, 2020 |
|
||
Segment assets: |
|
|
|
|
|
|
|
|
Real estate operations segment: |
|
|
|
|
|
|
|
|
U.S. |
|
$ |
|
|
|
$ |
|
|
Other Americas |
|
|
|
|
|
|
|
|
Europe |
|
|
|
|
|
|
|
|
Asia |
|
|
|
|
|
|
|
|
Total real estate operations segment |
|
|
|
|
|
|
|
|
Strategic capital segment: (2) |
|
|
|
|
|
|
|
|
U.S. |
|
|
|
|
|
|
|
|
Europe |
|
|
|
|
|
|
|
|
Asia |
|
|
|
|
|
|
|
|
Total strategic capital segment |
|
|
|
|
|
|
|
|
Total segment assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciling items: |
|
|
|
|
|
|
|
|
Investments in and advances to unconsolidated entities |
|
|
|
|
|
|
|
|
Assets held for sale or contribution |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
|
|
|
Other assets |
|
|
|
|
|
|
|
|
Total reconciling items |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
|
|
|
$ |
|
|
(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 $ |
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 $ |
• |
We capitalized $ |
• |
We received $ |
• |
We issued less than |
• |
We completed the Liberty Transaction on February 4, 2020 for $ |
We paid $
We paid $
26
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
27
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.
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
28
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
29
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.
30
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 |
31
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.
32
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 |
33
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.
34
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 |
|
|
|
|
|
|
|
|