pld-10q_20210930.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended 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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.”

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

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

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.

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.

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.

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.

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.

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

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)

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.

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	)