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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended September 30, 2021

 

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

 

For the transition period from ______________ to ______________

 

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

 

Prologis, Inc.

Prologis, L.P.

(Exact name of registrant as specified in its charter)

 

Maryland (Prologis, Inc.)

Delaware (Prologis, L.P.)

 

94-3281941 (Prologis, Inc.)

94-3285362 (Prologis, L.P.)

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

 

 

Pier 1, Bay 1, San Francisco, California

 

94111

(Address or principal executive offices)

 

(Zip Code)

 

(415) 394-9000

(Registrants’ telephone number, including area code)

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

 

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

 

 

 

Title of Each Class

 

Trading Symbol(s)

 

Name of Each Exchange on Which Registered

Prologis, Inc.

 

Common Stock, $0.01 par value

 

PLD

 

New York Stock Exchange

Prologis, L.P.

 

3.000% Notes due 2026

 

PLD/26

 

New York Stock Exchange

Prologis, L.P.

 

2.250% Notes due 2029

 

PLD/29

 

New York Stock Exchange

 

 

 

 

 

 

 

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

Prologis, Inc.

Yes

No

Prologis, L.P.

Yes

No

 

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

Prologis, Inc.

Yes

No

Prologis, L.P.

Yes

No

 

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

 

Prologis, Inc.:

 

 

 

 

Large accelerated filer   

Accelerated filer   

Non-accelerated filer   

Smaller reporting company   

Emerging growth company    

 

Prologis, L.P.:

 

 

 

 

Large accelerated filer   

Accelerated filer   

Non-accelerated filer   

Smaller reporting company   

Emerging growth company    

 

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

 

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

Prologis, Inc.

Yes

No

Prologis, L.P.

Yes

No

 

The number of shares of Prologis, Inc.’s common stock outstanding at October 22, 2021, was approximately 739,327,000.

 

 

 

 


 

 

EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the period ended September 30, 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 September 30, 2021, the Parent owned 97.26% common general partnership interest in the OP and substantially all of the preferred units in the OP. The remaining 2.74% common limited partnership interests are owned by unaffiliated investors and certain current and former directors and officers of the Parent.

 

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

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

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

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

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

 

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

 

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

                

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

                

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

 

 

 


 

 

PROLOGIS

INDEX

 

 

 

 

 

Page

Number

 

PART I.

 

Financial Information

 

 

 

 

 

Item 1.

Financial Statements

 

1

 

 

 

            Prologis, Inc.:

 

 

 

 

 

 

Consolidated Balance Sheets – September 30, 2021 and December 31, 2020

 

1

 

 

 

 

Consolidated Statements of Income – Three and Nine Months Ended September 30, 2021 and 2020

 

2

 

 

 

 

Consolidated Statements of Comprehensive Income – Three and Nine Months Ended September 30, 2021 and 2020

 

3

 

 

 

 

Consolidated Statements of Equity – Three and Nine Months Ended September 30, 2021 and 2020

 

4

 

 

 

 

Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2021 and 2020

 

5

 

 

 

            Prologis, L.P.:

 

 

 

 

 

 

Consolidated Balance Sheets – September 30, 2021 and December 31, 2020

 

6

 

 

 

 

Consolidated Statements of Income – Three and Nine Months Ended September 30, 2021 and 2020

 

7

 

 

 

 

Consolidated Statements of Comprehensive Income – Three and Nine Months Ended September 30, 2021 and 2020

 

8

 

 

 

 

Consolidated Statements of Capital – Three and Nine Months Ended September 30, 2021 and 2020

 

9

 

 

 

 

Consolidated Statements of Cash Flows – Nine Months Ended September 30, 2021 and 2020

 

10

 

 

 

            Prologis, Inc. and Prologis, L.P.:

 

 

 

 

 

 

Notes to the Consolidated Financial Statements

 

11

 

 

 

 

Note 1. General

 

11

 

 

 

 

Note 2. Liberty Transaction

 

12

 

 

 

 

Note 3. Real Estate

 

12

 

 

 

 

Note 4. Unconsolidated Entities

 

14

 

 

 

 

Note 5. Assets Held for Sale or Contribution

 

15

 

 

 

 

Note 6. Debt

 

16

 

 

 

 

Note 7. Noncontrolling Interests

 

18

 

 

 

 

Note 8. Long-Term Compensation

 

19

 

 

 

 

Note 9. Earnings Per Common Share or Unit

 

20

 

 

 

 

Note 10. Financial Instruments and Fair Value Measurements

 

22

 

 

 

 

Note 11. Business Segments

 

25

 

 

 

 

Note 12. Supplemental Cash Flow Information

 

27

 

 

 

 

Reports of Independent Registered Public Accounting Firm

 

29

 

 

 

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

31

 

 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

 

50

 

 

 

Item 4.

Controls and Procedures

 

52

 

PART II.

 

Other Information

 

 

 

 

 

Item 1.

Legal Proceedings

 

52

 

 

 

Item 1A.

Risk Factors

 

52

 

 

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

52

 

 

 

Item 3.

Defaults Upon Senior Securities

 

52

 

 

 

Item 4.

Mine Safety Disclosures

 

52

 

 

 

Item 5.

Other Information

 

53

 

 

 

Item 6.

Exhibits

 

53

 

 

 

 

 

 


Index

 

 

PART I. FINANCIAL INFORMATION

 

ITEM 1. Financial Statements

 

PROLOGIS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except per share data)

 

 

 

 

 

 

 

 

 

September 30, 2021

 

 

December 31, 2020

 

ASSETS

 

 

 

 

 

 

 

Investments in real estate properties

$

52,458,694

 

 

$

50,384,328

 

Less accumulated depreciation

 

7,404,304

 

 

 

6,539,156

 

Net investments in real estate properties

 

45,054,390

 

 

 

43,845,172

 

Investments in and advances to unconsolidated entities

 

7,652,323

 

 

 

7,602,014

 

Assets held for sale or contribution

 

571,671

 

 

 

1,070,724

 

Net investments in real estate

 

53,278,384

 

 

 

52,517,910

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

585,071

 

 

 

598,086

 

Other assets

 

3,153,215

 

 

 

2,949,009

 

Total assets

$

57,016,670

 

 

$

56,065,005

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

Debt

$

17,135,668

 

 

$

16,849,076

 

Accounts payable and accrued expenses

 

1,441,776

 

 

 

1,143,372

 

Other liabilities

 

1,681,752

 

 

 

1,747,977

 

Total liabilities

 

20,259,196

 

 

 

19,740,425

 

 

 

 

 

 

 

 

 

Equity:

 

 

 

 

 

 

 

Prologis, Inc. stockholders’ equity:

 

 

 

 

 

 

 

Series Q preferred stock at stated liquidation preference of $50 per share; $0.01 par value;

   1,279 shares issued and outstanding and 100,000 preferred shares authorized at

         September 30, 2021 and December 31, 2020

 

63,948

 

 

 

63,948

 

Common stock; $0.01 par value; 739,323 shares and 739,381 shares issued and outstanding at

     September 30, 2021 and December 31, 2020, respectively

 

7,393

 

 

 

7,394

 

Additional paid-in capital

 

35,526,671

 

 

 

35,488,634

 

Accumulated other comprehensive loss

 

(983,906

)

 

 

(1,193,739

)

Distributions in excess of net earnings

 

(2,107,989

)

 

 

(2,394,690

)

Total Prologis, Inc. stockholders’ equity

 

32,506,117

 

 

 

31,971,547

 

Noncontrolling interests

 

4,251,357

 

 

 

4,353,033

 

Total equity

 

36,757,474

 

 

 

36,324,580

 

Total liabilities and equity

$

57,016,670

 

 

$

56,065,005

 

 

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

1

 


Index

 

PROLOGIS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share amounts)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental

 

$

1,037,281

 

 

$

980,148

 

 

$

3,073,700

 

 

$

2,803,321

 

Strategic capital

 

 

141,448

 

 

 

98,993

 

 

 

390,796

 

 

 

516,242

 

Development management and other

 

 

4,320

 

 

 

3,632

 

 

 

17,711

 

 

 

7,575

 

Total revenues

 

 

1,183,049

 

 

 

1,082,773

 

 

 

3,482,207

 

 

 

3,327,138

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental

 

 

256,607

 

 

 

245,490

 

 

 

779,624

 

 

 

705,217

 

Strategic capital

 

 

52,389

 

 

 

45,791

 

 

 

146,938

 

 

 

173,910

 

General and administrative

 

 

66,970

 

 

 

74,348

 

 

 

219,344

 

 

 

208,701

 

Depreciation and amortization

 

 

390,806

 

 

 

400,738

 

 

 

1,181,117

 

 

 

1,144,903

 

Other

 

 

4,413

 

 

 

3,020

 

 

 

15,051

 

 

 

25,573

 

Total expenses

 

 

771,185

 

 

 

769,387

 

 

 

2,342,074

 

 

 

2,258,304

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income before gains on real estate transactions, net

 

 

411,864

 

 

 

313,386

 

 

 

1,140,133

 

 

 

1,068,834

 

Gains on dispositions of development properties and land, net

 

 

139,406

 

 

 

134,207

 

 

 

500,410

 

 

 

383,373

 

Gains on other dispositions of investments in real estate, net

 

 

214,390

 

 

 

108,927

 

 

 

358,180

 

 

 

184,357

 

Operating income

 

 

765,660

 

 

 

556,520

 

 

 

1,998,723

 

 

 

1,636,564

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings from unconsolidated entities, net

 

 

91,818

 

 

 

73,972

 

 

 

231,286

 

 

 

216,844

 

Interest expense

 

 

(63,638

)

 

 

(80,711

)

 

 

(203,331

)

 

 

(237,651

)

Interest and other income (expense), net

 

 

(846

)

 

 

(5,866

)

 

 

4,615

 

 

 

(4,469

)

Foreign currency and derivative gains (losses), net

 

 

64,172

 

 

 

(100,974

)

 

 

138,244

 

 

 

(48,481

)

Losses on early extinguishment of debt, net

 

 

-

 

 

 

(98,266

)

 

 

(187,453

)

 

 

(164,606

)

Total other income (expense)

 

 

91,506

 

 

 

(211,845

)

 

 

(16,639

)

 

 

(238,363

)

Earnings before income taxes

 

 

857,166

 

 

 

344,675

 

 

 

1,982,084

 

 

 

1,398,201

 

Total income tax expense

 

 

(59,435

)

 

 

(12,154

)

 

 

(134,347

)

 

 

(89,578

)

Consolidated net earnings

 

 

797,731

 

 

 

332,521

 

 

 

1,847,737

 

 

 

1,308,623

 

Less net earnings attributable to noncontrolling interests

 

 

74,193

 

 

 

29,827

 

 

 

156,676

 

 

 

108,703

 

Net earnings attributable to controlling interests

 

 

723,538

 

 

 

302,694

 

 

 

1,691,061

 

 

 

1,199,920

 

Less preferred stock dividends

 

 

1,531

 

 

 

1,652

 

 

 

4,614

 

 

 

4,921

 

Loss on preferred stock repurchase

 

 

-

 

 

 

2,347

 

 

 

-

 

 

 

2,347

 

Net earnings attributable to common stockholders

 

$

722,007

 

 

$

298,695

 

 

$

1,686,447

 

 

$

1,192,652

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding – Basic

 

 

739,439

 

 

 

738,194

 

 

 

739,217

 

 

 

724,876

 

Weighted average common shares outstanding – Diluted

 

 

764,945

 

 

 

764,619

 

 

 

764,644

 

 

 

750,971

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings per share attributable to common stockholders – Basic

 

$

0.98

 

 

$

0.40

 

 

$

2.28

 

 

$

1.65

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings per share attributable to common stockholders – Diluted

 

$

0.97

 

 

$

0.40

 

 

$

2.27

 

 

$

1.63

 

 

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

2

 


Index

 

PROLOGIS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Consolidated net earnings

 

$

797,731

 

 

$

332,521

 

 

$

1,847,737

 

 

$

1,308,623

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation gains (losses), net

 

 

48,708

 

 

 

(45,576

)

 

 

201,881

 

 

 

(180,162

)

Unrealized gains (losses) on derivative contracts, net

 

 

3,748

 

 

 

2,379

 

 

 

13,379

 

 

 

(19,696

)

Comprehensive income

 

 

850,187

 

 

 

289,324

 

 

 

2,062,997

 

 

 

1,108,765

 

Net earnings attributable to noncontrolling interests

 

 

(74,193

)

 

 

(29,827

)

 

 

(156,676

)

 

 

(108,703

)

Other comprehensive loss (income) attributable to noncontrolling interests

 

 

(1,242

)

 

 

861

 

 

 

(5,427

)

 

 

5,791

 

Comprehensive income attributable to common stockholders

 

$

774,752

 

 

$

260,358

 

 

$

1,900,894

 

 

$

1,005,853

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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


3

 


Index

 

 

PROLOGIS, INC.

 

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands)

 

Three Months Ended September 30, 2021 and 2020

 

 

 

 

 

 

Common Stock

 

 

 

 

 

 

Accumulated

 

 

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number

 

 

 

 

 

 

Additional

 

 

Other

 

 

in Excess of

 

 

Non-

 

 

 

 

 

 

Preferred

 

 

of

 

 

Par

 

 

Paid-in

 

 

Comprehensive

 

 

Net

 

 

controlling

 

 

Total

 

 

Stock

 

 

Shares

 

 

Value

 

 

Capital

 

 

Income (Loss)

 

 

Earnings

 

 

Interests

 

 

Equity

 

Balance at July 1, 2021

$

63,948

 

 

 

739,020

 

 

$

7,390

 

 

$

35,432,843

 

 

$

(1,035,120

)

 

$

(2,363,348

)

 

$

4,375,091

 

 

$

36,480,804

 

Consolidated net earnings

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

723,538

 

 

 

74,193

 

 

 

797,731

 

Effect of equity compensation plans

 

-

 

 

 

17

 

 

 

-

 

 

 

11,141

 

 

 

-

 

 

 

-

 

 

 

17,017

 

 

 

28,158

 

Capital contributions

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,017

 

 

 

3,017

 

Redemption of noncontrolling interests

 

-

 

 

 

286

 

 

 

3

 

 

 

12,540

 

 

 

-

 

 

 

-

 

 

 

(45,149

)

 

 

(32,606

)

Issuance of units related to acquisitions

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

130,416

 

 

 

130,416

 

Foreign currency translation gains,

     net

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

47,576

 

 

 

-

 

 

 

1,132

 

 

 

48,708

 

Unrealized gains on derivative

     contracts, net

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,638

 

 

 

-

 

 

 

110

 

 

 

3,748

 

Reallocation of equity

 

-

 

 

 

-

 

 

 

-

 

 

 

70,153

 

 

 

-

 

 

 

-

 

 

 

(70,153

)

 

 

-

 

Dividends ($0.63 per common share)

     and other distributions

 

-

 

 

 

-

 

 

 

-

 

 

 

(6

)

 

 

-

 

 

 

(468,179

)

 

 

(234,317

)

 

 

(702,502

)

Balance at September 30, 2021

$

63,948

 

 

 

739,323

 

 

$

7,393

 

 

$

35,526,671

 

 

$

(983,906

)

 

$

(2,107,989

)

 

$

4,251,357

 

 

$

36,757,474

 

 

Balance at July 1, 2020

$

68,948

 

 

 

738,732

 

 

$

7,387

 

 

$

35,424,401

 

 

$

(1,142,129

)

 

$

(2,115,679

)

 

$

4,503,281

 

 

 

36,746,209

 

Consolidated net earnings

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

302,694

 

 

 

29,827

 

 

 

332,521

 

Effect of equity compensation plans

 

-

 

 

 

9

 

 

 

1

 

 

 

14,274

 

 

 

-

 

 

 

-

 

 

 

20,905

 

 

 

35,180

 

Issuance of units related to acquisitions

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

48,533

 

 

 

48,533

 

Repurchase of preferred stock

 

(5,000

)

 

 

-

 

 

 

-

 

 

 

147

 

 

 

-

 

 

 

(2,347

)

 

 

-

 

 

 

(7,200

)

Redemption of noncontrolling interests

 

-

 

 

 

224

 

 

 

2

 

 

 

9,698

 

 

 

-

 

 

 

-

 

 

 

(78,734

)

 

 

(69,034

)

Foreign currency translation losses, net

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(44,637

)

 

 

-

 

 

 

(939

)

 

 

(45,576

)

Unrealized gains on derivative

     contracts, net

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,301

 

 

 

-

 

 

 

78

 

 

 

2,379

 

Reallocation of equity

 

-

 

 

 

-

 

 

 

-

 

 

 

7,707

 

 

 

-

 

 

 

-

 

 

 

(7,707

)

 

 

-

 

Dividends ($0.58 per common share)

     and other distributions

 

-

 

 

 

-

 

 

 

-

 

 

 

(4

)

 

 

-

 

 

 

(430,589

)

 

 

(123,112

)

 

 

(553,705

)

Balance at September 30, 2020

$

63,948

 

 

 

738,965

 

 

$

7,390

 

 

$

35,456,223

 

 

$

(1,184,465

)

 

$

(2,245,921

)

 

$

4,392,132

 

 

$

36,489,307

 

 

Nine Months Ended September 30, 2021 and 2020

 

 

 

 

 

 

Common Stock

 

 

 

 

 

 

Accumulated

 

 

Distributions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number

 

 

 

 

 

 

Additional

 

 

Other

 

 

in Excess of

 

 

Non-

 

 

 

 

 

 

Preferred

 

 

of

 

 

Par

 

 

Paid-in

 

 

Comprehensive

 

 

Net

 

 

controlling

 

 

Total

 

 

Stock

 

 

Shares

 

 

Value

 

 

Capital

 

 

Income (Loss)

 

 

Earnings

 

 

Interests

 

 

Equity

 

Balance at January 1, 2021

$

63,948

 

 

 

739,381

 

 

$

7,394

 

 

$

35,488,634

 

 

$

(1,193,739

)

 

$

(2,394,690

)

 

$

4,353,033

 

 

$

36,324,580

 

Consolidated net earnings

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,691,061

 

 

 

156,676

 

 

 

1,847,737

 

Effect of equity compensation plans

 

-

 

 

 

(403

)

 

 

(5

)

 

 

24,443

 

 

 

-

 

 

 

-

 

 

 

61,580

 

 

 

86,018

 

Capital contributions

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

7,378

 

 

 

7,378

 

Redemption of noncontrolling interests

 

-

 

 

 

345

 

 

 

4

 

 

 

15,135

 

 

 

-

 

 

 

-

 

 

 

(153,312

)

 

 

(138,173

)

Consolidation of other venture

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

25,759

 

 

 

25,759

 

Issuance of units related to acquisitions

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

130,416

 

 

 

130,416

 

Foreign currency translation gains,

     net

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

196,820

 

 

 

-

 

 

 

5,061

 

 

 

201,881

 

Unrealized gains on derivative

     contracts, net

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

13,013

 

 

 

-

 

 

 

366

 

 

 

13,379

 

Reallocation of equity

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,510

)

 

 

-

 

 

 

-

 

 

 

1,510

 

 

 

-

 

Dividends ($1.89 per common share)

     and other distributions

 

-

 

 

 

-

 

 

 

-

 

 

 

(31

)

 

 

-

 

 

 

(1,404,360

)

 

 

(337,110

)

 

 

(1,741,501

)

Balance at September 30, 2021

$

63,948

 

 

 

739,323

 

 

$

7,393

 

 

$

35,526,671

 

 

$

(983,906

)

 

$

(2,107,989

)

 

$

4,251,357

 

 

$

36,757,474

 

 

Balance at January 1, 2020

$

68,948

 

 

 

631,797

 

 

$

6,318

 

 

$

25,719,427

 

 

$

(990,398

)

 

$

(2,151,168

)

 

$

3,418,657

 

 

$

26,071,784

 

Consolidated net earnings

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,199,920

 

 

 

108,703

 

 

 

1,308,623

 

Effect of equity compensation plans

 

-

 

 

 

655

 

 

 

7

 

 

 

21,096

 

 

 

-

 

 

 

-

 

 

 

63,905

 

 

 

85,008

 

Liberty Transaction, net of issuance

     costs

 

 

 

 

 

106,723

 

 

 

1,067

 

 

 

9,801,373

 

 

 

-

 

 

 

-

 

 

 

211,086

 

 

 

10,013,526

 

Issuance of units related to acquisitions

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

48,533

 

 

 

48,533

 

Repurchase of common shares

 

-

 

 

 

(539

)

 

 

(5

)

 

 

(34,824

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(34,829

)

Repurchase of preferred stock

 

(5,000

)

 

 

-

 

 

 

-

 

 

 

147

 

 

 

-

 

 

 

(2,347

)

 

 

-

 

 

 

(7,200

)

Capital contributions

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

916,974

 

 

 

916,974

 

Redemption of noncontrolling interests

 

-

 

 

 

329

 

 

 

3

 

 

 

14,249

 

 

 

-

 

 

 

-

 

 

 

(126,029

)

 

 

(111,777

)

Foreign currency translation losses, net

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(174,903

)

 

 

-

 

 

 

(5,259

)

 

 

(180,162

)

Unrealized losses on derivative

     contracts, net

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(19,164

)

 

 

-

 

 

 

(532

)

 

 

(19,696

)

Reallocation of equity

 

-

 

 

 

-

 

 

 

-

 

 

 

(64,752

)

 

 

-

 

 

 

-

 

 

 

64,752

 

 

 

-

 

Dividends ($1.74 per common share)

     and other distributions

 

-

 

 

 

-

 

 

 

-

 

 

 

(493

)

 

 

-

 

 

 

(1,292,326

)

 

 

(308,658

)

 

 

(1,601,477

)

Balance at September 30, 2020

$

63,948

 

 

 

738,965

 

 

$

7,390

 

 

$

35,456,223

 

 

$

(1,184,465

)

 

$

(2,245,921

)

 

$

4,392,132

 

 

$

36,489,307

 

 

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

4

 


Index

 

PROLOGIS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2021

 

 

2020

 

Operating activities:

 

 

 

 

 

 

 

 

Consolidated net earnings

 

$

1,847,737

 

 

$

1,308,623

 

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Straight-lined rents and amortization of above and below market leases

 

 

(109,043

)

 

 

(88,637

)

Equity-based compensation awards

 

 

84,416

 

 

 

86,360

 

Depreciation and amortization

 

 

1,181,117

 

 

 

1,144,903

 

Earnings from unconsolidated entities, net

 

 

(231,286

)

 

 

(216,844

)

Operating distributions from unconsolidated entities

 

 

311,284

 

 

 

355,395

 

Decrease in operating receivables from unconsolidated entities

 

 

18,036

 

 

 

71,979

 

Amortization of debt discounts and debt issuance costs, net

 

 

6,632

 

 

 

5,568

 

Gains on dispositions of development properties and land, net

 

 

(500,410

)

 

 

(383,373

)

Gains on other dispositions of investments in real estate, net

 

 

(358,180

)

 

 

(184,357

)

Unrealized foreign currency and derivative losses (gains), net

 

 

(150,443

)

 

 

58,645

 

Losses on early extinguishment of debt, net

 

 

187,453

 

 

 

164,606

 

Deferred income tax expense (benefit)

 

 

10,049

 

 

 

(6,564

)

Increase in accounts receivable and other assets

 

 

(223,658

)

 

 

(33,189

)

Increase in accounts payable and accrued expenses and other liabilities

 

 

206,272

 

 

 

50,220

 

Net cash provided by operating activities

 

 

2,279,976

 

 

 

2,333,335

 

Investing activities:

 

 

 

 

 

 

 

 

Real estate development

 

 

(1,770,353

)

 

 

(1,501,089

)

Real estate acquisitions

 

 

(1,196,994

)

 

 

(700,793

)

Liberty Transaction, net of cash acquired

 

 

-

 

 

 

(24,550

)

IPT Transaction, net of cash acquired

 

 

-

 

 

 

(1,665,359

)

Tenant improvements and lease commissions on previously leased space

 

 

(233,853

)

 

 

(142,168

)

Property improvements

 

 

(98,874

)

 

 

(91,355

)

Proceeds from dispositions and contributions of real estate

 

 

2,817,943

 

 

 

1,684,633

 

Investments in and advances to unconsolidated entities

 

 

(454,918

)

 

 

(345,310

)

Return of investment from unconsolidated entities

 

 

56,993

 

 

 

206,741

 

Proceeds from repayment of notes receivable backed by real estate

 

 

-

 

 

 

4,312

 

Proceeds from the settlement of net investment hedges

 

 

-

 

 

 

2,352

 

Payments on the settlement of net investment hedges

 

 

(16,513

)

 

 

(7,236

)

Net cash used in investing activities

 

 

(896,569

)

 

 

(2,579,822

)

Financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock

 

 

743

 

 

 

1,869

 

Repurchase and retirement of common stock

 

 

-

 

 

 

(34,829

)

Repurchase of preferred stock

 

 

-

 

 

 

(7,200

)

Dividends paid on common and preferred stock

 

 

(1,404,360

)

 

 

(1,292,326

)

Noncontrolling interests contributions

 

 

7,378

 

 

 

916,974

 

Noncontrolling interests distributions

 

 

(337,110

)

 

 

(308,658

)

Settlement of noncontrolling interests

 

 

(138,173

)

 

 

(111,777

)

Tax paid with shares withheld

 

 

(18,434

)

 

 

(23,227

)

Debt and equity issuance costs paid

 

 

(22,008

)

 

 

(51,723

)

Net payments on credit facilities

 

 

(70,200

)

 

 

(142,498

)

Repurchase of and payments on debt

 

 

(2,201,383

)

 

 

(6,156,328

)

Proceeds from the issuance of debt

 

 

2,824,754

 

 

 

7,303,761

 

Net cash provided by (used in) financing activities

 

 

(1,358,793

)

 

 

94,038

 

 

 

 

 

 

 

 

 

 

Effect of foreign currency exchange rate changes on cash

 

 

(37,629

)

 

 

3,787

 

Net decrease in cash and cash equivalents

 

 

(13,015

)

 

 

(148,662

)

Cash and cash equivalents, beginning of period

 

 

598,086

 

 

 

1,088,855

 

Cash and cash equivalents, end of period

 

$

585,071

 

 

$

940,193

 

 

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

 


Index

 

 

PROLOGIS, L.P.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)

 

 

 

 

 

 

 

 

 

September 30, 2021

 

 

December 31, 2020

 

ASSETS

 

 

 

 

 

 

 

Investments in real estate properties

$

52,458,694

 

 

$

50,384,328

 

Less accumulated depreciation

 

7,404,304

 

 

 

6,539,156

 

Net investments in real estate properties

 

45,054,390

 

 

 

43,845,172

 

Investments in and advances to unconsolidated entities

 

7,652,323

 

 

 

7,602,014

 

Assets held for sale or contribution

 

571,671

 

 

 

1,070,724

 

Net investments in real estate

 

53,278,384

 

 

 

52,517,910

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

585,071

 

 

 

598,086

 

Other assets

 

3,153,215

 

 

 

2,949,009

 

Total assets

$

57,016,670

 

 

$

56,065,005

 

 

 

 

 

 

 

 

 

LIABILITIES AND CAPITAL

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

Debt

$

17,135,668

 

 

$

16,849,076

 

Accounts payable and accrued expenses

 

1,441,776

 

 

 

1,143,372

 

Other liabilities

 

1,681,752

 

 

 

1,747,977

 

Total liabilities

 

20,259,196

 

 

 

19,740,425

 

 

 

 

 

 

 

 

 

Capital:

 

 

 

 

 

 

 

Partners’ capital:

 

 

 

 

 

 

 

General partner – preferred

 

63,948

 

 

 

63,948

 

General partner – common

 

32,442,169

 

 

 

31,907,599

 

Limited partners – common

 

564,480

 

 

 

523,954

 

Limited partners – Class A common

 

351,090

 

 

 

345,553

 

Total partners’ capital

 

33,421,687

 

 

 

32,841,054

 

Noncontrolling interests

 

3,335,787

 

 

 

3,483,526

 

Total capital

 

36,757,474

 

 

 

36,324,580

 

Total liabilities and capital

$

57,016,670

 

 

$

56,065,005

 

 

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

 

6

 


Index

 

 

PROLOGIS, L.P.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per unit amounts)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental

 

$

1,037,281

 

 

$

980,148

 

 

$

3,073,700

 

 

$

2,803,321

 

Strategic capital

 

 

141,448

 

 

 

98,993

 

 

 

390,796

 

 

 

516,242

 

Development management and other

 

 

4,320

 

 

 

3,632

 

 

 

17,711

 

 

 

7,575

 

Total revenues

 

 

1,183,049

 

 

 

1,082,773

 

 

 

3,482,207

 

 

 

3,327,138

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rental

 

 

256,607

 

 

 

245,490

 

 

 

779,624

 

 

 

705,217

 

Strategic capital

 

 

52,389

 

 

 

45,791

 

 

 

146,938

 

 

 

173,910

 

General and administrative

 

 

66,970

 

 

 

74,348

 

 

 

219,344

 

 

 

208,701

 

Depreciation and amortization

 

 

390,806

 

 

 

400,738

 

 

 

1,181,117

 

 

 

1,144,903

 

Other

 

 

4,413

 

 

 

3,020

 

 

 

15,051

 

 

 

25,573

 

Total expenses

 

 

771,185

 

 

 

769,387

 

 

 

2,342,074

 

 

 

2,258,304

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating income before gains on real estate transactions, net

 

 

411,864

 

 

 

313,386

 

 

 

1,140,133

 

 

 

1,068,834

 

Gains on dispositions of development properties and land, net

 

 

139,406

 

 

 

134,207

 

 

 

500,410

 

 

 

383,373

 

Gains on other dispositions of investments in real estate, net

 

 

214,390

 

 

 

108,927

 

 

 

358,180

 

 

 

184,357

 

Operating income

 

 

765,660

 

 

 

556,520

 

 

 

1,998,723

 

 

 

1,636,564

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings from unconsolidated entities, net

 

 

91,818

 

 

 

73,972

 

 

 

231,286

 

 

 

216,844

 

Interest expense

 

 

(63,638

)

 

 

(80,711

)

 

 

(203,331

)

 

 

(237,651

)

Interest and other income (expense), net

 

 

(846

)

 

 

(5,866

)

 

 

4,615

 

 

 

(4,469

)

Foreign currency and derivative gains (losses), net

 

 

64,172

 

 

 

(100,974

)

 

 

138,244

 

 

 

(48,481

)

Losses on early extinguishment of debt, net

 

 

-

 

 

 

(98,266

)

 

 

(187,453

)

 

 

(164,606

)

Total other income (expense)

 

 

91,506

 

 

 

(211,845

)

 

 

(16,639

)

 

 

(238,363

)

Earnings before income taxes

 

 

857,166

 

 

 

344,675

 

 

 

1,982,084

 

 

 

1,398,201

 

Total income tax expense

 

 

(59,435

)

 

 

(12,154

)

 

 

(134,347

)

 

 

(89,578

)

Consolidated net earnings

 

 

797,731

 

 

 

332,521

 

 

 

1,847,737

 

 

 

1,308,623

 

Less net earnings attributable to noncontrolling interests

 

 

54,406

 

 

 

21,453

 

 

 

109,768

 

 

 

74,709

 

Net earnings attributable to controlling interests

 

 

743,325

 

 

 

311,068

 

 

 

1,737,969

 

 

 

1,233,914

 

Less preferred unit distributions

 

 

1,531

 

 

 

1,652

 

 

 

4,614

 

 

 

4,921

 

Loss on preferred unit repurchase

 

 

-

 

 

 

2,347

 

 

 

-

 

 

 

2,347

 

Net earnings attributable to common unitholders

 

$

741,794

 

 

$

307,069

 

 

$

1,733,355

 

 

$

1,226,646

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common units outstanding – Basic

 

 

751,558

 

 

 

750,971

 

 

 

751,773

 

 

 

737,489

 

Weighted average common units outstanding – Diluted

 

 

764,945

 

 

 

764,619

 

 

 

764,644

 

 

 

750,971

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings per unit attributable to common unitholders – Basic

 

$

0.98

 

 

$

0.40

 

 

$

2.28

 

 

$

1.65

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings per unit attributable to common unitholders – Diluted

 

$

0.97

 

 

$

0.40

 

 

$

2.27

 

 

$

1.63

 

 

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

 

 

7

 


Index

 

 

PROLOGIS, L.P.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Consolidated net earnings

 

$

797,731

 

 

$

332,521

 

 

$

1,847,737

 

 

$

1,308,623

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation gains (losses), net

 

 

48,708

 

 

 

(45,576

)

 

 

201,881

 

 

 

(180,162

)

Unrealized gains (losses) on derivative contracts, net

 

 

3,748

 

 

 

2,379

 

 

 

13,379

 

 

 

(19,696

)

Comprehensive income

 

 

850,187

 

 

 

289,324

 

 

 

2,062,997

 

 

 

1,108,765

 

Net earnings attributable to noncontrolling interests

 

 

(54,406

)

 

 

(21,453

)

 

 

(109,768

)

 

 

(74,709

)

Other comprehensive loss (income) attributable to noncontrolling interests

 

 

336

 

 

 

(217

)

 

 

493

 

 

 

405

 

Comprehensive income attributable to common unitholders

 

$

796,117

 

 

$

267,654

 

 

$

1,953,722

 

 

$

1,034,461

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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


8

 


Index

 

 

PROLOGIS, L.P.

CONSOLIDATED STATEMENTS OF CAPITAL

(Unaudited)

(In thousands)

 

Three Months Ended September 30, 2021 and 2020

 

 

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 July 1, 2021

 

1,279

 

 

$

63,948

 

 

 

739,020

 

 

$

32,041,765

 

 

 

12,231

 

 

$

530,326

 

 

 

8,595

 

 

$

346,967

 

 

$

3,497,798

 

 

$

36,480,804

 

Consolidated net earnings

 

-

 

 

 

-

 

 

 

-

 

 

 

723,538

 

 

 

-

 

 

 

11,971

 

 

 

-

 

 

 

7,816

 

 

 

54,406

 

 

 

797,731

 

Effect of equity compensation plans

 

-

 

 

 

-

 

 

 

17

 

 

 

11,141

 

 

 

125

 

 

 

17,017

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

28,158

 

Capital contributions

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,017

 

 

 

3,017

 

Redemption of limited partners units

 

-

 

 

 

-

 

 

 

286

 

 

 

12,543

 

 

 

(523

)

 

 

(45,149

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(32,606

)

Issuance of units related to acquisitions

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,031

 

 

 

130,416

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

130,416

 

Foreign currency translation gains

     (losses), net

 

-

 

 

 

-

 

 

 

-

 

 

 

47,576

 

 

 

-

 

 

 

954

 

 

 

-

 

 

 

514

 

 

 

(336

)

 

 

48,708

 

Unrealized gains on derivative

     contracts, net

 

-

 

 

 

-

 

 

 

-

 

 

 

3,638

 

 

 

-

 

 

 

71

 

 

 

-

 

 

 

39

 

 

 

-

 

 

 

3,748

 

Reallocation of capital

 

-

 

 

 

-

 

 

 

-

 

 

 

70,153

 

 

 

-

 

 

 

(71,466

)

 

 

-

 

 

 

1,313

 

 

 

-

 

 

 

-

 

Distributions ($0.63 per common unit)

     and other

 

-

 

 

 

-

 

 

 

-

 

 

 

(468,185

)

 

 

-

 

 

 

(9,660

)

 

 

-

 

 

 

(5,559

)

 

 

(219,098

)

 

 

(702,502

)

Balance at September 30, 2021

 

1,279

 

 

$

63,948

 

 

 

739,323

 

 

$

32,442,169

 

 

 

12,864

 

 

$

564,480

 

 

 

8,595

 

 

$

351,090

 

 

$

3,335,787

 

 

$

36,757,474

 

 

Balance at July 1, 2020

 

1,379

 

 

$

68,948

 

 

 

738,732

 

 

$

32,173,980

 

 

 

12,914

 

 

$

563,403

 

 

 

8,608

 

 

$

350,078

 

 

$

3,589,800

 

 

$

36,746,209

 

Consolidated net earnings

 

-

 

 

 

-

 

 

 

-

 

 

 

302,694

 

 

 

-

 

 

 

5,158

 

 

 

-

 

 

 

3,216

 

 

 

21,453

 

 

 

332,521

 

Effect of equity compensation plans

 

-

 

 

 

-

 

 

 

9

 

 

 

14,275

 

 

 

22

 

 

 

20,905

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

35,180

 

Issuance of units related to

     acquisitions

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

461

 

 

 

48,533

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

48,533

 

Repurchase of preferred units

 

(100

)

 

 

(5,000

)

 

 

-

 

 

 

(2,200

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(7,200

)

Redemption of limited partners units

 

-

 

 

 

-

 

 

 

224

 

 

 

9,700

 

 

 

(903

)

 

 

(78,215

)

 

 

(13

)

 

 

(519

)

 

 

-

 

 

 

(69,034

)

Foreign currency translation gains

     (losses), net

 

-

 

 

 

-

 

 

 

-

 

 

 

(44,637

)

 

 

-

 

 

 

(676

)

 

 

-

 

 

 

(480

)

 

 

217

 

 

 

(45,576

)

Unrealized gains on derivative

     contracts, net

 

-

 

 

 

-

 

 

 

-

 

 

 

2,301

 

 

 

-

 

 

 

52

 

 

 

-

 

 

 

26

 

 

 

-

 

 

 

2,379

 

Reallocation of capital

 

-

 

 

 

-

 

 

 

-

 

 

 

7,707

 

 

 

-

 

 

 

(8,454

)

 

 

-

 

 

 

747

 

 

 

-

 

 

 

-

 

Distributions ($0.58 per common unit)

     and other

 

-

 

 

 

-

 

 

 

-

 

 

 

(430,593

)

 

 

-

 

 

 

(9,080

)

 

 

-

 

 

 

(5,558

)

 

 

(108,474

)

 

 

(553,705

)

Balance at September 30, 2020

 

1,279

 

 

$

63,948

 

 

 

738,965

 

 

$

32,033,227

 

 

 

12,494

 

 

$

541,626

 

 

 

8,595

 

 

$

347,510

 

 

$

3,502,996

 

 

$

36,489,307

 

 

Nine Months Ended September 30, 2021 and 2020

 

 

General Partner

 

 

Limited Partners

 

 

Non-

 

 

 

 

 

 

Preferred

 

 

Common

 

 

Common

 

 

Class A Common

 

 

controlling

 

 

Total

 

 

Units

 

 

Amount

 

 

Units

 

 

Amount

 

 

Units

 

 

Amount

 

 

Units

 

 

Amount

 

 

Interests

 

 

Capital

 

Balance at January 1, 2021

 

1,279

 

 

$

63,948

 

 

 

739,381

 

 

$

31,907,599

 

 

 

12,142

 

 

$

523,954

 

 

 

8,595

 

 

$

345,553

 

 

$

3,483,526

 

 

$

36,324,580

 

Consolidated net earnings

 

-

 

 

 

-

 

 

 

-

 

 

 

1,691,061

 

 

 

-

 

 

 

28,645

 

 

 

-

 

 

 

18,263

 

 

 

109,768

 

 

 

1,847,737

 

Effect of equity compensation plans

 

-

 

 

 

-

 

 

 

(403

)

 

 

24,438

 

 

 

1,210

 

 

 

61,580

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

86,018

 

Capital contributions

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

7,378

 

 

 

7,378

 

Redemption of limited partners units

 

-

 

 

 

-

 

 

 

345

 

 

 

15,139

 

 

 

(1,519

)

 

 

(153,312

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(138,173

)

Consolidation of other venture

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

25,759

 

 

 

25,759

 

Issuance of units related to acquisitions

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,031

 

 

 

130,416

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

130,416

 

Foreign currency translation gains

     (losses), net

 

-

 

 

 

-

 

 

 

 

 

 

 

196,820

 

 

 

-

 

 

 

3,424

 

 

 

-

 

 

 

2,130

 

 

 

(493

)

 

 

201,881

 

Unrealized gains on derivative

     contracts, net

 

-

 

 

 

-

 

 

 

-

 

 

 

13,013

 

 

 

-

 

 

 

226

 

 

 

-

 

 

 

140

 

 

 

-

 

 

 

13,379

 

Reallocation of capital

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,510

)

 

 

-

 

 

 

(169

)

 

 

-

 

 

 

1,679

 

 

 

-

 

 

 

-

 

Distributions ($1.89 per common unit)

     and other

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,404,391

)

 

 

-

 

 

 

(30,284

)

 

 

-

 

 

 

(16,675

)

 

 

(290,151

)

 

 

(1,741,501

)

Balance at September 30, 2021

 

1,279

 

 

$

63,948

 

 

 

739,323

 

 

$

32,442,169

 

 

 

12,864

 

 

$

564,480

 

 

 

8,595

 

 

$

351,090

 

 

$

3,335,787

 

 

$

36,757,474

 

 

Balance at January 1, 2020

 

1,379

 

 

$

68,948

 

 

 

631,797

 

 

$

22,584,179

 

 

 

9,933

 

 

$

355,076

 

 

 

8,613

 

 

$

288,187

 

 

$

2,775,394

 

 

$

26,071,784

 

Consolidated net earnings

 

-

 

 

 

-

 

 

 

-

 

 

 

1,199,920

 

 

 

-

 

 

 

20,752

 

 

 

-

 

 

 

13,242

 

 

 

74,709

 

 

 

1,308,623

 

Effect of equity compensation plans

 

-

 

 

 

-

 

 

 

655

 

 

 

21,103

 

 

 

1,279

 

 

 

63,905

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

85,008

 

Liberty Transaction, net of issuance

     costs

 

-

 

 

 

-

 

 

 

106,723

 

 

 

9,802,440

 

 

 

2,288

 

 

 

210,190

 

 

 

-

 

 

 

-

 

 

 

896

 

 

 

10,013,526

 

Issuance of units related to

     acquisitions

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

461

 

 

 

48,533

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

48,533

 

Repurchase of common units

 

-

 

 

 

-

 

 

 

(539

)

 

 

(34,829

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(34,829

)

Repurchase of preferred units

 

(100

)

 

 

(5,000

)

 

 

-

 

 

 

(2,200

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(7,200

)

Capital contributions

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

916,974

 

 

 

916,974

 

Redemption of limited partners units

 

-

 

 

 

-

 

 

 

329

 

 

 

14,252

 

 

 

(1,467

)

 

 

(125,307

)

 

 

(18

)

 

 

(722

)

 

 

-

 

 

 

(111,777

)

Foreign currency translation

     losses, net

 

-

 

 

 

-

 

 

 

-

 

 

 

(174,903

)

 

 

-

 

 

 

(2,957

)

 

 

-

 

 

 

(1,897

)

 

 

(405

)

 

 

(180,162

)

Unrealized losses on derivative

     contracts, net

 

-

 

 

 

-

 

 

 

-

 

 

 

(19,164

)

 

 

-

 

 

 

(324

)

 

 

-

 

 

 

(208

)

 

 

-

 

 

 

(19,696

)

Reallocation of capital

 

-

 

 

 

-

 

 

 

-

 

 

 

(64,752

)

 

 

-

 

 

 

(851

)

 

 

-

 

 

 

65,603

 

 

 

-

 

 

 

-

 

Distributions ($1.74 per common unit)

     and other

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,292,819

)

 

 

-

 

 

 

(27,391

)

 

 

-

 

 

 

(16,695

)

 

 

(264,572

)

 

 

(1,601,477

)

Balance at September 30, 2020

 

1,279

 

 

$

63,948

 

 

 

738,965

 

 

$

32,033,227

 

 

 

12,494

 

 

$

541,626

 

 

 

8,595

 

 

$

347,510

 

 

$

3,502,996

 

 

$

36,489,307

 

 

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

9

 


Index

 

PROLOGIS, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2021

 

 

2020

 

Operating activities:

 

 

 

 

 

 

 

 

Consolidated net earnings

 

$

1,847,737

 

 

$

1,308,623

 

Adjustments to reconcile net earnings to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Straight-lined rents and amortization of above and below market leases

 

 

(109,043

)

 

 

(88,637

)

Equity-based compensation awards

 

 

84,416

 

 

 

86,360

 

Depreciation and amortization

 

 

1,181,117

 

 

 

1,144,903

 

Earnings from unconsolidated entities, net

 

 

(231,286

)

 

 

(216,844

)

Operating distributions from unconsolidated entities

 

 

311,284

 

 

 

355,395

 

Decrease in operating receivables from unconsolidated entities

 

 

18,036

 

 

 

71,979

 

Amortization of debt discounts and debt issuance costs, net

 

 

6,632

 

 

 

5,568

 

Gains on dispositions of development properties and land, net

 

 

(500,410

)

 

 

(383,373

)

Gains on other dispositions of investments in real estate, net

 

 

(358,180

)

 

 

(184,357

)

Unrealized foreign currency and derivative losses (gains), net

 

 

(150,443

)

 

 

58,645

 

Losses on early extinguishment of debt, net

 

 

187,453

 

 

 

164,606

 

Deferred income tax expense (benefit)

 

 

10,049

 

 

 

(6,564

)

Increase in accounts receivable and other assets

 

 

(223,658

)

 

 

(33,189

)

Increase in accounts payable and accrued expenses and other liabilities

 

 

206,272

 

 

 

50,220

 

Net cash provided by operating activities

 

 

2,279,976

 

 

 

2,333,335

 

Investing activities:

 

 

 

 

 

 

 

 

Real estate development

 

 

(1,770,353

)

 

 

(1,501,089

)

Real estate acquisitions

 

 

(1,196,994

)

 

 

(700,793

)

Liberty Transaction, net of cash acquired

 

 

-

 

 

 

(24,550

)

IPT Transaction, net of cash acquired

 

 

-

 

 

 

(1,665,359

)

Tenant improvements and lease commissions on previously leased space

 

 

(233,853

)

 

 

(142,168

)

Property improvements

 

 

(98,874

)

 

 

(91,355

)

Proceeds from dispositions and contributions of real estate

 

 

2,817,943

 

 

 

1,684,633

 

Investments in and advances to unconsolidated entities

 

 

(454,918

)

 

 

(345,310

)

Return of investment from unconsolidated entities

 

 

56,993

 

 

 

206,741

 

Proceeds from repayment of notes receivable backed by real estate

 

 

-

 

 

 

4,312

 

Proceeds from the settlement of net investment hedges

 

 

-

 

 

 

2,352

 

Payments on the settlement of net investment hedges

 

 

(16,513

)

 

 

(7,236

)

Net cash used in investing activities

 

 

(896,569

)

 

 

(2,579,822

)

Financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of common partnership units in exchange for contributions from Prologis, Inc.

 

 

743

 

 

 

1,869

 

Repurchase and retirement of common units

 

 

-

 

 

 

(34,829

)

Repurchase of preferred units

 

 

-

 

 

 

(7,200

)

Distributions paid on common and preferred units

 

 

(1,451,319

)

 

 

(1,336,412

)

Noncontrolling interests contributions

 

 

7,378

 

 

 

916,974

 

Noncontrolling interests distributions

 

 

(290,151

)

 

 

(264,572

)

Redemption of common limited partnership units

 

 

(138,173

)

 

 

(111,777

)

Tax paid with shares of the Parent withheld

 

 

(18,434

)

 

 

(23,227

)

Debt and equity issuance costs paid

 

 

(22,008

)

 

 

(51,723

)

Net payments on credit facilities

 

 

(70,200

)

 

 

(142,498

)

Repurchase of and payments on debt

 

 

(2,201,383

)

 

 

(6,156,328

)

Proceeds from the issuance of debt

 

 

2,824,754

 

 

 

7,303,761

 

Net cash provided by (used in) financing activities

 

 

(1,358,793

)

 

 

94,038

 

 

 

 

 

 

 

 

 

 

Effect of foreign currency exchange rate changes on cash

 

 

(37,629

)

 

 

3,787

 

Net decrease in cash and cash equivalents

 

 

(13,015

)

 

 

(148,662

)

Cash and cash equivalents, beginning of period

 

 

598,086

 

 

 

1,088,855

 

Cash and cash equivalents, end of period

 

$

585,071

 

 

$

940,193

 

 

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

 


Index

 

 

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1. GENERAL

 

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

 

For each share of preferred or common stock the Parent issues, the OP issues a corresponding preferred or common partnership unit, as applicable, to the Parent in exchange for the contribution of the proceeds from the stock issuance. At September 30, 2021, the Parent owned a 97.26% common general partnership interest in the OP and substantially all of the preferred units in the OP. The remaining 2.74% common limited partnership interests, which include Class A common limited partnership units (“Class A Units”) in the OP, are owned by unaffiliated investors and certain current and former directors and officers of the Parent. Each partner’s percentage interest in the OP is determined based on the number of OP units held, including the number of OP units into which Class A Units are convertible, compared to total OP units outstanding at each period end and is used as the basis for the allocation of net income or loss to each partner. At the end of each reporting period, a capital adjustment is made in the OP to reflect the appropriate ownership interest for each of the common unitholders. These adjustments are reflected in the line items Reallocation of Equity in the Consolidated Statements of Equity of the Parent and Reallocation of Capital in the Consolidated Statements of Capital of the OP.

 

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

 

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

 

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

 

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

 

Accounting Pronouncements.

 

Reference Rate Reform. In March 2020, the Financial Accounting Standards Board issued an Accounting Standard Update (“ASU”) that provided practical expedients to address existing guidance on contract modifications and hedge accounting due to the expected market transition from the London Inter-bank Offered Rate (“LIBOR”) and other interbank offered rates (together “IBORs”) to alternative reference rates, such as the Secured Overnight Financing Rate. We refer to this transition as “reference rate reform.”

 

11

 


Index

 

The ASU was effective upon issuance on a prospective basis beginning January 1, 2020 and we elected to adopt the ASU over time as our reference rate reform activities occurred. In reliance on the relief, we have modified debt contracts during the three months ended September 30, 2021. There were no other changes to the contracts other than the base rate from GBP LIBOR and Yen LIBOR to their alternative reference rates and therefore there was no material impact on our Consolidated Financial Statements due to the adoption of the ASU. We anticipate further modifications to other debt and derivative contracts by the end of 2021.

 

NOTE 2. LIBERTY TRANSACTION

 

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

 

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

 

Through the Liberty Transaction, we acquired a portfolio primarily comprised of logistics real estate assets, including 519 industrial operating properties, aggregating 99.6 million square feet, which are highly complementary to our U.S. portfolio in terms of product quality, location and growth potential in our key markets.

 

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

 

Number of Prologis shares and units issued upon conversion of Liberty shares and units at February 4, 2020

 

109.01

 

Multiplied by price of Prologis' common stock on February 3, 2020

$

91.87

 

Fair value of Prologis shares and units issued

$

10,015

 

 

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

 

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

 

Net investments in real estate

$

12,636

 

Intangible assets, net of intangible liabilities

 

491

 

Cash and other assets

 

233

 

Debt

 

(2,845

)

Accounts payable, accrued expenses and other liabilities

 

(383

)

Noncontrolling interests

 

(1

)

Total purchase price, including transaction costs

$

10,131

 

 

NOTE 3. REAL ESTATE

 

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

 

 

Square Feet

 

 

Number of Buildings

 

 

 

 

 

Sep 30,

 

 

Dec 31,

 

 

Sep 30,

 

 

Dec 31,

 

 

Sep 30,

 

Dec 31,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

2021

 

2020

 

Operating properties:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Buildings and improvements

 

444,812

 

 

 

441,336

 

 

 

2,286

 

 

 

2,261

 

 

$

32,064,117

 

$

31,489,943

 

Improved land

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12,145,397

 

 

12,017,676

 

Development portfolio, including

     land costs:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Prestabilized

 

3,761

 

 

 

6,076

 

 

 

12

 

 

 

24

 

 

 

433,391

 

 

553,266

 

Properties under development

 

31,967

 

 

 

22,004

 

 

 

84

 

 

 

61

 

 

 

2,377,098

 

 

1,329,345

 

Land (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,039,754

 

 

1,606,358

 

Other real estate investments (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,398,937

 

 

3,387,740

 

Total investments in real estate

     properties

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

52,458,694

 

 

50,384,328

 

Less accumulated depreciation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,404,304

 

 

6,539,156

 

Net investments in real estate

     properties

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$

45,054,390

 

$

43,845,172

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

12

 


Index

 

 

(1)

At September 30, 2021 and December 31, 2020, our land was comprised of 5,186 and 5,304 acres, respectively.

 

(2)

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

 

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

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2021

 

 

2020

 

 

2021 (1)

 

 

2020 (2)

 

Number of operating properties

 

 

15

 

 

 

2

 

 

 

26

 

 

 

140

 

Square feet

 

 

3,910

 

 

 

194

 

 

 

6,023

 

 

 

20,470

 

Acres of land

 

 

685

 

 

 

156

 

 

 

1,391

 

 

 

611

 

Acquisition cost of net investments in real estate (3)

 

$

757,711

 

 

$

188,717

 

 

$

1,796,383

 

 

$

2,730,377

 

   

(1)

During the nine months ended September 30, 2021, we acquired additional ownership interest in unconsolidated other ventures from our partners and began consolidating the real estate assets.

 

(2)

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

 

(3)

The acquisition cost of net investments in real estate includes other real estate investments of $50.5 million and $224.3 million during the three and nine months ended September 30, 2021, respectively. Acquisitions of other real estate investments were not material during 2020. This category of real estate is not included within the other metrics in this table.  

 

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

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2021 (1)

 

 

2020

 

 

2021 (1)

 

 

2020

 

Dispositions of development properties and land, net (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of properties

 

 

12

 

 

 

12

 

 

 

31

 

 

 

32

 

Square feet

 

 

2,876

 

 

 

3,150

 

 

 

12,337

 

 

 

11,776

 

Net proceeds

 

$

368,131

 

 

$

410,398

 

 

$

1,814,331

 

 

$

1,384,227

 

Gains on dispositions of development properties and land, net

 

$

139,406

 

 

$

134,207

 

 

$

500,410

 

 

$

383,373

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other dispositions of investments in real estate, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of properties

 

 

31

 

 

 

15

 

 

 

74

 

 

 

38

 

Square feet

 

 

5,806

 

 

 

2,558

 

 

 

12,060

 

 

 

6,635

 

Net proceeds

 

$

738,396

 

 

$

409,303

 

 

$

1,334,168

 

 

$

763,615

 

Gains on other dispositions of investments in real estate, net

 

$

214,390

 

 

$

108,927

 

 

$

358,180

 

 

$

184,357

 

13

 


Index

 

 

 

(1)

During the three and nine months ended September 30, 2021, we sold our ownership interest in an unconsolidated other venture.

 

(2)

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 and occasionally sales to a third party.  

 

Leases

 

We recognized lease right-of-use assets of $425.6 million and $492.8 million within Other Assets and lease liabilities of $419.2 million and $487.0 million within Other Liabilities, for land and office space leases in which we are the lessee, on the Consolidated Balance Sheets at September 30, 2021 and December 31, 2020, respectively.

 

NOTE 4. UNCONSOLIDATED ENTITIES

 

Summary of Investments

 

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

 

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

 

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

 

 

 

September 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Unconsolidated co-investment ventures

 

$

6,896,069

 

 

$

6,685,567

 

Other ventures (1)

 

 

756,254

 

 

 

916,447

 

Total

 

$

7,652,323

 

 

$

7,602,014

 

 

(1)

During the nine months ended September 30, 2021, we acquired additional ownership interest in unconsolidated other ventures from our partners and began consolidating the real estate assets. We also sold our ownership interest in an unconsolidated other venture.  

 

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

September 30,

 

 

Nine Months Ended

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Recurring fees

 

$

100,167

 

 

$

80,403

 

 

$

288,049

 

 

$

231,263

 

Transactional fees

 

 

14,399

 

 

 

15,827

 

 

 

53,476

 

 

 

47,879

 

Promote revenue (1)

 

 

1,570

 

 

 

-

 

 

 

13,821

 

 

 

228,421

 

Total strategic capital revenues from unconsolidated

     co-investment ventures (2)

 

$

116,136

 

 

$

96,230

 

 

$

355,346

 

 

$

507,563

 

 

(1)

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

 

(2)

These amounts exclude strategic capital revenues from other ventures.

14

 


Index

 

 

 

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:

Sep 30,

2021

 

 

Dec 31,

2020

 

 

Sep 30,

2021

 

 

Dec 31,

2020

 

 

Sep 30,

2021

 

 

Dec 31,

2020

 

 

Sep 30,

2021

 

 

Dec 31,

2020

 

 

Sep 30,

2021

 

 

Dec 31,

2020

 

Key property information:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ventures

 

1

 

 

 

1

 

 

 

2

 

 

 

2

 

 

 

3

 

 

 

3

 

 

 

3

 

 

 

3

 

 

 

9

 

 

 

9

 

Operating properties

 

716

 

 

 

706

 

 

 

236

 

 

 

229

 

 

 

804

 

 

 

768

 

 

 

184

 

 

 

167

 

 

 

1,940

 

 

 

1,870

 

Square feet

 

119

 

 

 

117

 

 

 

53

 

 

 

51

 

 

 

195

 

 

 

185

 

 

 

74

 

 

 

67

 

 

 

441

 

 

 

420

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial position:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets ($)

 

10,929

 

 

 

10,840

 

 

 

3,155

 

 

 

3,023

 

 

 

17,747

 

 

 

16,918

 

 

 

10,298

 

 

 

10,209

 

 

 

42,129

 

 

 

40,990

 

Third-party debt ($)

 

3,063

 

 

 

3,129

 

 

 

867

 

 

 

854

 

 

 

3,750

 

 

 

4,002

 

 

 

3,992

 

 

 

3,831

 

 

 

11,672

 

 

 

11,816

 

Total liabilities ($)

 

3,677

 

 

 

3,722

 

 

 

932

 

 

 

898

 

 

 

5,499

 

 

 

5,607

 

 

 

4,506

 

 

 

4,389

 

 

 

14,614

 

 

 

14,616

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Our investment balance ($) (2)

 

1,883

 

 

 

1,886

 

 

 

832

 

 

 

811

 

 

 

3,363

 

 

 

3,152

 

 

 

818

 

 

 

837

 

 

 

6,896

 

 

 

6,686

 

Our weighted average ownership (3)

 

25.3

%

 

 

25.6

%

 

 

40.1

%

 

 

40.8

%

 

 

29.7

%

 

 

30.0

%

 

 

15.2

%

 

 

15.2

%

 

 

26.0

%

 

 

26.1

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S.

 

 

Other Americas (1)

 

 

Europe

 

 

Asia

 

 

Total

 

Operating Information:

Sep 30,

2021

 

 

Sep 30,

2020

 

 

Sep 30,

2021

 

 

Sep 30,

2020

 

 

Sep 30,

2021

 

 

Sep 30,

2020

 

 

Sep 30,

2021

 

 

Sep 30,

2020

 

 

Sep 30,

2021

 

 

Sep 30,

2020

 

For the three months ended:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues ($)

 

260

 

 

 

237

 

 

 

81

 

 

 

70

 

 

 

348

 

 

 

303

 

 

 

164

 

 

 

148

 

 

 

853

 

 

 

758

 

Net earnings ($)

 

152

 

 

 

29

 

 

 

28

 

 

 

23

 

 

 

84

 

 

 

80

 

 

 

49

 

 

 

152

 

 

 

313

 

 

 

284

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Our earnings from unconsolidated

     co-investment ventures, net ($)

 

40

 

 

 

9

 

 

 

9

 

 

 

8

 

 

 

27

 

 

 

27

 

 

 

8

 

 

 

23

 

 

 

84

 

 

 

67

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the nine months ended:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenues ($)

 

771

 

 

 

702

 

 

 

234

 

 

 

204

 

 

 

1,029

 

 

 

874

 

 

 

483

 

 

 

429

 

 

 

2,517

 

 

 

2,209

 

Net earnings ($)

 

255

 

 

 

103

 

 

 

86

 

 

 

69

 

 

 

253

 

 

 

230

 

 

 

120

 

 

 

210

 

 

 

714

 

 

 

612

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Our earnings from unconsolidated

     co-investment ventures, net ($)

 

68

 

 

 

28

 

 

 

31

 

 

 

26

 

 

 

81

 

 

 

75

 

 

 

20

 

 

 

32

 

 

 

200

 

 

 

161

 

 

(1)

Prologis Brazil Logistics Venture (“PBLV”) and our other Brazilian joint ventures are combined as one venture for the purpose of this table.

 

(2)

Prologis’ investment balance is presented at our adjusted basis derived from the ventures’ U.S. GAAP information. The difference between our ownership interest of a venture’s equity and our investment balance at September 30, 2021 and December 31, 2020, resulted principally from four types of transactions: (i) deferred gains from the contribution of property to a venture prior to January 1, 2018; (ii) recording additional costs associated with our investment in the venture; (iii) receivables, principally for fees and promotes ($126.9 million and $165.6 million, respectively); and (iv) customer security deposits retained subsequent to property contributions to Nippon Prologis REIT, Inc.

 

(3)

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

 

Equity Commitments Related to Certain Unconsolidated Co-Investment Ventures

 

At September 30, 2021, our outstanding equity commitments were $333.6 million, principally for Prologis China Logistics Venture. The equity commitments expire from 2021 to 2028 if they have not been previously called.

 

NOTE 5. ASSETS HELD FOR SALE OR CONTRIBUTION

 

We had investments in certain real estate properties that met the criteria to be classified as held for sale or contribution at September 30, 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.

 

15

 


Index

 

 

Assets held for sale or contribution consisted of the following (dollars and square feet in thousands):

 

 

 

September 30,

 

 

December 31,

 

 

 

2021

 

 

2020 (1)

 

Number of operating properties

 

 

17

 

 

 

66

 

Square feet

 

 

5,856

 

 

 

12,923

 

Total assets held for sale or contribution

 

$

571,671

 

 

$

1,070,724

 

Total liabilities associated with assets held for sale or contribution – included in Other Liabilities

 

$

6,178

 

 

$

16,214

 

 

(1)

At December 31, 2020, Assets Held for Sale or Contribution included certain properties acquired through the Liberty Transaction and the IPT Transaction that were subsequently sold during 2021.

 

NOTE 6. DEBT

 

All debt is incurred by the OP or its consolidated subsidiaries.

The following table summarizes our debt (dollars in thousands):

 

 

September 30, 2021

 

 

December 31, 2020

 

 

Weighted Average

 

 

Amount

 

 

Weighted Average

 

 

Amount

 

 

Interest Rate (1)

 

 

Term (2)

 

 

Outstanding (3)

 

 

Interest Rate (1)

 

 

Term (2)

 

 

Outstanding (3)

 

Credit facilities

0.8%

 

 

 

2.5

 

 

$

100,000

 

 

0.8%

 

 

 

2.0

 

 

$

171,794

 

Senior notes

1.6%

 

 

 

11.7

 

 

 

14,887,589

 

 

2.0%

 

 

 

11.2

 

 

 

14,275,870

 

Term loans and unsecured

    other

0.8%

 

 

 

5.7

 

 

 

1,405,981

 

 

0.9%

 

 

 

5.6

 

 

 

1,764,311

 

Secured mortgage

3.4%

 

 

 

3.2

 

 

 

742,098

 

 

3.1%

 

 

 

3.0

 

 

 

637,101

 

Total

1.6%

 

 

 

10.8

 

 

$

17,135,668

 

 

1.9%

 

 

 

10.2

 

 

$

16,849,076

 

 

(1)

The weighted average 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:

 

 

 

 

September 30, 2021

 

 

December 31, 2020

 

 

 

 

Weighted Average Interest Rate

 

 

Amount Outstanding

 

 

% of Total

 

 

Weighted Average Interest Rate

 

 

Amount Outstanding

 

 

% of Total

 

 

British pound sterling

 

 

2.2

%

 

$

1,005,266

 

 

 

5.9

%

 

 

2.2

%

 

$

1,019,480

 

 

 

6.1

%

 

Canadian dollar

 

 

2.7

%

 

 

283,751

 

 

 

1.7

%

 

 

2.7

%

 

 

285,708

 

 

 

1.7

%

 

Euro

 

 

1.1

%

 

 

6,877,873

 

 

 

40.0

%

 

 

1.4

%

 

 

6,549,676

 

 

 

38.8

%

 

Japanese yen

 

 

0.8

%

 

 

3,146,736

 

 

 

18.4

%

 

 

0.8

%

 

 

2,877,247

 

 

 

17.1

%

 

U.S. dollar

 

 

2.6

%

 

 

5,822,042

 

 

 

34.0

%

 

 

2.8

%

 

 

6,116,965

 

 

 

36.3

%

 

Total

 

 

1.6

%

 

$

17,135,668

 

 

 

100.0

%

 

 

1.9

%

 

$

16,849,076

 

 

 

100.0

%

 

Credit Facilities

 

We have a global senior credit facility (the “2019 Global Facility”) under which we may draw in British pounds sterling, Canadian dollars, euro, Japanese yen, Mexican pesos and U.S. dollars on a revolving basis up to $3.5 billion (subject to currency fluctuations). In April 2021, we entered into a second global senior credit facility (the “2021 Global Facility”) under which we may draw in Canadian dollars, euro, British pounds sterling, Japanese yen, Mexican pesos and U.S. dollars on a revolving basis up to $1.0 billion (subject to currency fluctuations). The 2019 Global Facility is scheduled to initially mature in January 2023 and the 2021 Global Facility in April 2024; however, we may extend the maturity date for both facilities by six months on two occasions, subject to the payment of extension fees. We have the ability to increase the 2019 Global Facility to $4.5 billion and the 2021 Global Facility to $2.0 billion, subject to currency fluctuations and obtaining additional lender commitments.

 

We also have a Japanese yen revolver (the “Yen Credit Facility”) with total commitments of ¥55.0 billion ($491.1 million at September 30, 2021). We have the ability to increase the borrowing capacity of the Yen Credit Facility to ¥75.0 billion ($669.7 million at September 30, 2021), subject to obtaining additional lender commitments. The Yen Credit Facility is initially scheduled to mature in July 2024; however, we may extend the maturity date for one year, subject to the payment of extension fees.

 

16

 


Index

 

 

We refer to the 2019 Global Facility, the 2021 Global Facility and the Yen Credit Facility, collectively, as our “Credit Facilities.” Pricing for the Credit Facilities, including the spread over the applicable benchmark and the rates applicable to facility fees and letter of credit fees, varies based on the public debt ratings of the OP.

 

Liquidity

 

The following table summarizes information about our available liquidity at September 30, 2021 (in millions):

 

 

 

 

 

Aggregate lender commitments

 

 

 

 

Credit Facilities

 

$

4,990

 

Less:

 

 

 

 

Borrowings outstanding

 

 

100

 

Outstanding letters of credit

 

 

14

 

Current availability

 

$

4,876

 

Cash and cash equivalents

 

 

585

 

Total liquidity

 

$

5,461

 

 

Senior Notes

 

The following table summarizes the issuances and redemptions of senior notes during the nine months ended September 30, 2021 (principal in thousands):

 

 

 

Aggregate Principal

 

 

Issuance Date Weighted Average

 

 

 

Issuance Date

 

Borrowing Currency

 

 

USD (1)

 

 

Interest Rate (2)

 

 

Term (3)

 

 

Maturity Dates

February

 

1,350,000

 

 

$

1,639,305

 

 

0.7%

 

 

 

14.3

 

 

February 2032 – 2041

February

 

$

400,000

 

 

$

400,000

 

 

1.6%

 

 

 

10.1

 

 

March 2031

June

 

¥

65,000,000

 

 

$

587,441

 

 

0.8%

 

 

 

15.4

 

 

June 2028 – 2061

Total

 

 

 

 

 

$

2,626,746

 

 

0.9%

 

 

 

13.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Aggregate Principal

 

 

Redemption Date Weighted Average

 

 

 

Redemption Date

 

Borrowing Currency

 

 

USD (1)

 

 

Interest Rate (2)

 

 

Term (3)

 

 

Maturity Dates

March

 

599,514

 

 

$

715,700

 

 

3.4%

 

 

 

3.0

 

 

February 2024

March

 

$

750,000

 

 

$

750,000

 

 

3.8%

 

 

 

4.7

 

 

November 2025

Total

 

 

 

 

 

$

1,465,700

 

 

3.6%

 

 

 

3.8

 

 

 

 

(1)

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

 

(2)

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

 

(3)

The weighted average term represents the remaining maturity in years on the related debt at the issuance or redemption date.

 

During the nine months ended September 30, 2021, we used the net proceeds from the issuance of the senior notes to fund the senior note redemptions, repay other indebtedness and for general corporate purposes.

 

Early Extinguishment of Debt

 

During the nine months ended September 30, 2021 and 2020, we recognized $187.5 million and $164.6 million of losses on the early extinguishment of debt, respectively. The losses during both periods were driven by the redemption of certain higher interest rate senior notes before their stated maturity. We redeemed $1.5 billion of senior notes with stated maturities of 2024 and 2025, and $2.0 billion of senior notes with stated maturities between 2021 and 2024, during the nine months ended September 30, 2021 and 2020, respectively. The losses in 2020 included the extinguishment of debt assumed in the Liberty Transaction and the IPT Transaction, which represented the excess of the prepayment penalties over the premium recorded upon assumption of the debt.

 

Term Loans

 

In April 2021, the multi-currency term loan (“2017 Term Loan”) was terminated, the outstanding balance paid down and the interest rate swap contracts associated with the outstanding balance of $250.3 million were settled.

17

 


Index

 

 

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 September 30, 2021 (in thousands):

 

 

 

Unsecured

 

 

 

 

 

 

 

 

 

Credit

 

 

Senior

 

 

Term Loans

 

 

Secured

 

 

 

 

 

Maturity

 

Facilities

 

 

Notes

 

 

and Other

 

 

Mortgage

 

 

Total

 

2021 (1)

 

$

-

 

 

$

-

 

 

$

-

 

 

$

94,802

 

 

$

94,802

 

2022 (1)

 

 

-

 

 

 

521,055

 

 

 

9,780

 

 

 

203,095

 

 

 

733,930

 

2023

 

 

-

 

 

 

-

 

 

 

133,850

 

 

 

36,784

 

 

 

170,634

 

2024 (2)

 

 

100,000

 

 

 

-

 

 

 

-

 

 

 

174,433

 

 

 

274,433

 

2025

 

 

-

 

 

 

44,648

 

 

 

-

 

 

 

144,446

 

 

 

189,094

 

Thereafter

 

 

-

 

 

 

14,396,288

 

 

 

1,268,001

 

 

 

78,095

 

 

 

15,742,384

 

Subtotal

 

 

100,000

 

 

 

14,961,991

 

 

 

1,411,631

 

 

 

731,655

 

 

 

17,205,277

 

Premiums (discounts), net

 

 

-

 

 

 

3,495

 

 

 

-

 

 

 

12,319

 

 

 

15,814

 

Debt issuance costs, net

 

 

-

 

 

 

(77,897

)

 

 

(5,650

)

 

 

(1,876

)

 

 

(85,423

)

Total

 

$

100,000

 

 

$

14,887,589

 

 

$

1,405,981

 

 

$

742,098

 

 

$

17,135,668

 

 

(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 additional borrowings.

 

(2)

Included in the 2024 maturities is the 2021 Global Facility that can be extended until 2025.

 

Financial Debt Covenants

 

Our senior notes and term loans outstanding at September 30, 2021 were subject to certain financial covenants under their related indentures. We are also subject to financial covenants under our Credit Facilities and certain secured mortgage debt. At September 30, 2021, we were in compliance with all of our financial debt covenants.

 

Guarantee of Finance Subsidiary Debt

 

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

 

NOTE 7. NONCONTROLLING INTERESTS

 

Prologis, L.P.

 

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

 

Prologis, Inc.

 

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

 

18

 


Index

 

 

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

 

 

Our Ownership Percentage

 

 

Noncontrolling Interests

 

 

Total Assets

 

 

Total Liabilities

 

 

Sep 30,

2021

 

 

Dec 31,

2020

 

 

Sep 30,

2021

 

 

Dec 31,

2020

 

 

Sep 30,

2021

 

 

Dec 31,

2020

 

 

Sep 30,

2021

 

 

Dec 31,

2020

 

Prologis U.S. Logistics Venture

 

55.0

%

 

 

55.0

%

 

$

3,204,673

 

 

$

3,385,110

 

 

$

7,272,631

 

 

$

7,663,800

 

 

$

159,883

 

 

$

145,131

 

Other consolidated entities (1)

various

 

 

various

 

 

 

131,114

 

 

 

98,416

 

 

 

1,395,579

 

 

 

1,066,129

 

 

 

168,807

 

 

 

73,987

 

Prologis, L.P.

 

 

 

 

 

 

 

 

 

3,335,787

 

 

 

3,483,526

 

 

 

8,668,210

 

 

 

8,729,929

 

 

 

328,690

 

 

 

219,118

 

Limited partners in Prologis, L.P. (2)(3)

 

 

 

915,570

 

 

 

869,507

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Prologis, Inc.

 

 

 

 

 

 

 

 

$

4,251,357

 

 

$

4,353,033

 

 

$

8,668,210

 

 

$

8,729,929

 

 

$

328,690

 

 

$

219,118

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Includes our two partnerships that have issued limited partnership units to third parties, as discussed above, along with various other consolidated entities. The limited partnership units outstanding at September 30, 2021 and December 31, 2020 were exchangeable into cash or, at our option, 0.3 million shares of the Parent’s common stock.

 

(2)

We had 8.6 million Class A Units that were convertible into 8.0 million limited partnership units of the OP at September 30, 2021 and December 31, 2020.

 

(3)

There were limited partnership units in the OP, excluding the Class A Units, that were exchangeable into cash or, at our option, 8.9 million and 8.2 million shares of the Parent’s common stock at September 30, 2021 and December 31, 2020, respectively. We issued 1.0 million limited partnership units to our partner as partial consideration for the acquisition of additional ownership interest in an unconsolidated other venture in 2021. Also included are the vested OP Long-Term Incentive Plan Units (“LTIP Units”) associated with our long-term compensation plan of 4.0 million at September 30, 2021 and 3.9 million at December 31, 2020. See further discussion of LTIP Units in Note 8.

 

NOTE 8. LONG-TERM COMPENSATION

 

Equity-Based Compensation Plans and Programs

 

Prologis Outperformance Plan (“POP”)

 

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

 

We granted participation points for the 2021 – 2023 performance period in January 2021, with a fair value of $30.3 million using a Monte Carlo valuation model that assumed a risk-free interest rate of 0.2% and an expected volatility of 32.0% for Prologis and 29.0% for the MSCI US REIT Index. The 2021 – 2023 performance period has an absolute maximum cap of $100 million. If an award is earned at the end of the initial three-year performance period, then 20% of the POP award is paid at the end of the initial performance period and the remaining 80% is subject to additional seven-year cliff vesting. The 20% that is paid at the end of the initial three-year performance period is subject to an additional three-year holding requirement.      

 

The Outperformance Hurdle was met for the 2018 – 2020 performance period, which resulted in awards being earned at December 31, 2020. Additionally, awards were earned at December 31, 2020 for prior performance periods related to the compensation pool in excess of the initial award based on the terms of the POP awards granted prior to 2018. Awards of $100.0 million for the 2018 – 2020 performance period and $35.7 million in the aggregate for the 2016 – 2018 and 2017 – 2019 performance periods were awarded in January 2021 in the form of common stock, restricted stock units, POP LTIP Units and LTIP Units. The tables below include POP awards that were earned but are unvested while any vested awards are reflected within the Consolidated Statements of Equity and Capital. The initial grant date fair value derived using a Monte Carlo valuation model was used in determining the grant date fair value per unit in the tables below.

 

Other Equity-Based Compensation Plans and Programs

 

Our other equity-based compensation plans and programs include (i) the Prologis Promote Plan (“PPP”); (ii) the annual long-term incentive (“LTI”) equity award program (“Annual LTI Award”); and (iii) the annual bonus exchange program. Awards under these plans and programs may be issued in the form of restricted stock units (“RSUs”) or LTIP Units at the participant’s election. RSUs and LTIP

19

 


Index

 

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 nine months ended September 30, 2021 (units in thousands):

 

 

 

 

 

 

 

Weighted Average

 

 

 

Unvested RSUs

 

 

Grant Date Fair Value

 

Balance at January 1, 2021

 

 

986

 

 

$

80.32

 

Granted (1)

 

 

691

 

 

 

78.51

 

Vested and distributed

 

 

(392

)

 

 

76.85

 

Forfeited

 

 

(150

)

 

 

75.88

 

Balance at September 30, 2021

 

 

1,135

 

 

$

81.01

 

 

 

 

 

 

 

 

 

 

(1)

Included in granted were unvested units based on the POP performance criteria being met for the 2018 – 2020 performance period and represented the earned award amounts subject to an additional vesting period. 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 nine months ended September 30, 2021 (units in thousands):

 

 

 

Unvested

 

 

Weighted Average

 

 

 

LTIP Units

 

 

Grant Date Fair Value

 

Balance at January 1, 2021

 

 

3,052

 

 

$

66.50

 

Granted (1)

 

 

1,264

 

 

 

59.10

 

Forfeited

 

 

(51

)

 

 

55.66

 

Vested LTIP Units

 

 

(944

)

 

 

79.80

 

Balance at September 30, 2021

 

 

3,321

 

 

$

60.07

 

 

(1)

Included in granted were unvested units based on the POP performance criteria being met for the 2018 – 2020 performance period and represented the earned award amounts subject to an additional vesting period. Unvested units are included in the award discussion above. These amounts also include awards earned for prior performance periods related to the compensation pool in excess of the initial award.

 

NOTE 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.

 

20

 


Index

 

 

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

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

Prologis, Inc.

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net earnings attributable to common stockholders – Basic

 

$

722,007

 

 

$

298,695

 

 

$

1,686,447

 

 

$

1,192,652

 

Net earnings attributable to exchangeable limited partnership units (1)

 

 

19,890

 

 

 

8,440

 

 

 

47,131

 

 

 

34,252

 

Adjusted net earnings attributable to common stockholders – Diluted

 

$

741,897

 

 

$

307,135

 

 

$

1,733,578

 

 

$

1,226,904

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding – Basic

 

 

739,439

 

 

 

738,194

 

 

 

739,217

 

 

 

724,876

 

Incremental weighted average effect on exchange of limited partnership units (1)

 

 

20,421

 

 

 

21,110

 

 

 

20,860

 

 

 

20,960

 

Incremental weighted average effect of equity awards

 

 

5,085

 

 

 

5,315

 

 

 

4,567

 

 

 

5,135

 

Weighted average common shares outstanding – Diluted (2)

 

 

764,945

 

 

 

764,619

 

 

 

764,644

 

 

 

750,971

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net earnings per share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.98

 

 

$

0.40

 

 

$

2.28

 

 

$

1.65

 

Diluted

 

$

0.97

 

 

$

0.40

 

 

$

2.27

 

 

$

1.63

 

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

Prologis, L.P.

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net earnings attributable to common unitholders

 

$

741,794

 

 

$

307,069

 

 

$

1,733,355

 

 

$

1,226,646

 

Net earnings attributable to Class A Units

 

 

(7,816

)

 

 

(3,216

)