UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
☑
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
FORM 10-K
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.)
(State or other jurisdiction of
incorporation or organization)
Pier 1, Bay 1 , San Francisco, California
(Address or principal executive offices)
94-3281941 (Prologis, Inc.)
94-3285362 (Prologis, L.P.)
(I.R.S. Employer
Identification No.)
94111
(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:
Prologis, Inc.
Prologis, L.P.
Prologis, L.P.
Title of Each Class
Common Stock, $0.01 par value
3.000% Notes due 2026
2.250% Notes due 2029
Trading Symbol(s)
PLD
PLD/26
PLD/29
Name of Each Exchange on Which Registered
New York Stock Exchange
New York Stock Exchange
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
Prologis, Inc. – NONE
Prologis, L.P. – NONE
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Prologis, Inc.: Yes ☑ No ☐
Prologis, L.P.: Yes ☑ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Prologis, Inc.: Yes ☐ No ☑
Prologis, L.P.: Yes ☐ No ☑
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 requirements 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 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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,”
“accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act (check one):
Prologis, Inc.:
Prologis, L.P.:
☑
☐
☐
☑
Large accelerated filer
Non-accelerated filer
Large accelerated filer
Non-accelerated filer
☐
Accelerated filer
☐
Accelerated filer
☐
☐
☐
☐
Smaller reporting company
Emerging growth company
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act
(15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☑
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.
☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery
period pursuant to §240.10D-1(b). ☐
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 ☑
Based on the closing price of Prologis, Inc.’s common stock on June 30, 2022, the aggregate market value of the voting common equity held by nonaffiliates of Prologis, Inc. was $
The number of shares of Prologis, Inc.’s common stock outstanding at February 13, 2023, was approximately 923,429,000.
86,814,282,420.
Portions of Part III of this report are incorporated by reference to the registrant’s definitive proxy statement for the 2022 annual meeting of its stockholders or will be provided in an amendment filed on Form 10-K/A.
Auditor Name: KPMG LLP
Auditor Location: Denver, CO
Auditor Firm ID: 185
DOCUMENTS INCORPORATED BY REFERENCE
EXPLANATORY NOTE
This report combines the annual reports on Form 10-K for the year ended December 31, 2022, 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 December 31, 2022, the Parent owned a 97.60% common general partnership
interest in the OP and substantially all of the preferred units in the OP. The remaining 2.40% 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 annual reports on Form 10-K of the Parent and the OP into this single report results in the following benefits:
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enhances investors’ understanding of the Parent and the OP by enabling investors to view the business as a whole in the same manner as management views and
operates the business;
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.
Table of Contents
Item
1.
Business
TABLE OF CONTENTS
Description
PART I
Page
The Company
Operating Segments
Future Growth
Code of Ethics and Business Conduct
Environmental, Social and Governance
Environmental Matters
Governmental Matters
Insurance Coverage
Risk Factors
Unresolved Staff Comments
Properties
Geographic Distribution
Lease Expirations
Co-Investment Ventures
Legal Proceedings
Mine Safety Disclosures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information and Holders
Preferred Stock Dividends
PART II
Sales of Unregistered Securities
Purchases of Equity Securities
Securities Authorized for Issuance Under Equity Compensation Plans
Other Stockholder Matters
[Reserved]
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Overview
Results of Operations
Environmental Matters
Liquidity and Capital Resources
Critical Accounting Policies
New Accounting Pronouncements
Funds from Operations Attributable to Common Stockholders/Unitholders
Quantitative and Qualitative Disclosures About Market Risk
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
PART III
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Exhibits, Financial Statements and Schedules
Form 10-K Summary
PART IV
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1B.
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3.
4.
5.
6.
7.
7A.
8.
9.
9A.
9B.
9C.
10.
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12.
13.
14.
15.
16.
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Table of Contents
The statements in this report that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on current expectations, estimates and projections about the
industry and markets in which we operate as well as management’s beliefs and assumptions. Such statements involve uncertainties that could significantly impact our
financial results. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” and “estimates” including variations of such words and similar expressions are
intended to identify such forward-looking statements, which generally are not historical in nature. All statements that address operating performance, events or developments
that we expect or anticipate will occur in the future — including statements relating to rent and occupancy growth, acquisition and development activity, contribution and
disposition activity, general conditions in the geographic areas where we operate, our debt, capital structure and financial position, our ability to earn revenues from co-
investment ventures, form new co-investment ventures and the availability of capital in existing or new co-investment ventures — are forward-looking statements. These
statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Although we believe the
expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be attained, and
therefore actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. Some of the factors that may affect
outcomes and results include, but are not limited to: (i) international, national, regional and local economic and political climates and conditions; (ii) changes in global
financial markets, interest rates and foreign currency exchange rates; (iii) increased or unanticipated competition for our properties; (iv) risks associated with acquisitions,
dispositions and development of properties, including the integration of the operations of significant real estate portfolios; (v) maintenance of Real Estate Investment Trust
(“REIT”) status, tax structuring and changes in income tax laws and rates; (vi) availability of financing and capital, the levels of debt that we maintain and our credit ratings;
(vii) risks related to our investments in our co-investment ventures, including our ability to establish new co-investment ventures; (viii) risks of doing business internationally,
including currency risks; (ix) environmental uncertainties, including risks of natural disasters; (x) risks related to global pandemics; and (xi) those additional factors discussed
under Part I, Item 1A. Risk Factors in this report. We undertake no duty to update any forward-looking statements appearing in this report except as may be required by law.
PART I
ITEM 1. Business
Prologis, Inc. is a self-administered and self-managed REIT and is the sole general partner of Prologis, L.P. through which it holds substantially all of its assets. We operate
Prologis, Inc. and Prologis, L.P. as one enterprise and, therefore, our discussion and analysis refers to Prologis, Inc. and its consolidated subsidiaries, including Prologis,
L.P. We invest in real estate through wholly owned subsidiaries and other entities through which we co-invest with partners and investors. We have a significant ownership
interest in the co-investment ventures, which are either consolidated or unconsolidated based on our level of control of the entity.
Prologis, Inc. began operating as a fully integrated real estate company in 1997 and elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended
(“Internal Revenue Code” or “IRC”). We believe the current organization and method of operation enable Prologis, Inc. to maintain its status as a REIT. Prologis, L.P. was
also formed in 1997.
We operate, manage and measure the operating performance of our properties on an owned and managed (“O&M”) basis. Our O&M portfolio includes our consolidated
properties as well as properties owned by our unconsolidated co-investment ventures. We make operating decisions based on our total O&M portfolio as we manage the
properties without regard to their ownership. We also evaluate our results based on our proportionate economic ownership of each property included in the O&M portfolio
(“our share”) to reflect our share of the financial results of the O&M portfolio.
Included in our discussion below are references to funds from operations (“FFO”) and net operating income (“NOI”), neither of which are United States (“U.S.”) generally
accepted accounting principles (“GAAP”). See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for a reconciliation of Net
Earnings Attributable to Common Stockholders/Unitholders in the Consolidated Statements of Income to our FFO measures and a reconciliation of NOI to Operating Income,
the most directly comparable GAAP measures.
Our corporate headquarters is located at Pier 1, Bay 1, San Francisco, California 94111, and our other principal office locations are in Amsterdam, Denver, Mexico City,
Shanghai, Singapore and Tokyo.
Our Internet address is www.prologis.com. All reports required to be filed with the Securities and Exchange Commission (“SEC”) are available and can be accessed free of
charge through the Investor Relations section of our website. The common stock of Prologis, Inc. is listed on the New York Stock Exchange (“NYSE”) under the ticker “PLD”
and is a component of the Standard & Poor’s (“S&P”) 500.
THE COMPANY
Prologis is the global leader in logistics real estate with a focus on high-barrier, high-growth markets. We own, manage and develop well-located, high-quality logistics
facilities in 19 countries across four continents. Our portfolio focuses on the world’s most vibrant centers of commerce and our scale across these locations allows us to
better serve our customers’ diverse logistics requirements. Our teams actively manage our portfolio and provide comprehensive real estate services, including leasing,
property management, development, acquisitions and dispositions. We invest significant capital into new logistics properties principally through our
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Table of Contents
development activity and third-party acquisitions. The contribution of newly developed properties to our co-investment ventures and the sale of non-strategic properties to
third parties allows us to recycle capital into our development and acquisition activities.
While the majority of our properties in the U.S. are wholly owned, we hold a significant ownership interest in properties internationally and in the U.S. through our
investments in the co-investment ventures. Partnering with the world’s largest institutional investors through co-investment ventures allows us to enhance and diversify our
real estate returns as well as mitigate our exposure to foreign currency movements.
Logistics supply chains have increased dramatically in importance to our customers and the global economy. The long-term trends of e-commerce adoption and supply chain
resiliency continue to drive the need for increased warehouse space to store and distribute goods. This demand has translated into meaningful increases in rents and low
vacancy. We believe this demand is driven by three primary factors: (i) customer supply chains re-positioning to address the significant shift to e-commerce and heightened
service expectations; (ii) overall consumption and household growth; and (iii) our customers’ desire for more supply chain resiliency. We believe these forces will keep
demand strong for the long-term.
The nature of the services we are providing to our customers is expanding. The scale of our 1.2 billion square foot portfolio allows us to provide a platform of solutions to
address challenges that companies face in global fulfillment today. Through Prologis Essentials, we focus on innovative ways to meet our customers’ operations, energy and
sustainability, mobility and workforce needs. Our customer experience teams, proprietary technology and strategic partnerships are foundational to Prologis Essentials and
allow us to provide our customers with unique and actionable insights to drive greater efficiency in their operations.
Our long-standing dedication to Environmental, Social and Governance (“ESG”) practices strengthens our relationships with our customers, investors, employees and the
communities in which we do business. The principles of ESG are an important aspect of our business strategy that we believe delivers a strategic business advantage while
positively impacting the environment.
2022 Significant Acquisition
On October 3, 2022, we acquired Duke Realty Corporation and Duke Realty Limited Partnership (collectively “Duke”) through a merger transaction that we refer to as the
“Duke Transaction” and is detailed in Note 3 to the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data. Our financial condition and
operating results include the Duke properties subsequent to the acquisition date. The Duke portfolio was primarily comprised of logistics real estate assets, including 494
industrial operating properties, aggregating 144 million square feet and was highly complementary to our U.S. portfolio in terms of product quality, location and growth
potential. There was approximately 15 million square feet of non-strategic industrial operating properties that we do not intend to hold long-term and are classified as other
real estate investments. The portfolio also included properties under development, land for future development and investments in other ventures. The acquisition expanded
our presence in target markets such as Chicago, Dallas, Atlanta, South Florida and Southern California. The total acquisition price, including transaction costs, was $23.2
billion and was funded through the issuance of equity based on the value of the Prologis, Inc. common stock issued using the closing price on September 30, 2022 and the
assumption of debt. As a result of the closely aligned portfolios and similar business strategy and our ability to scale, we integrated the Duke portfolio while adding minimal
property management and general and administrative expenses (“G&A”).
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Table of Contents
Overview
At December 31, 2022, we owned or had investments in, on a wholly-owned basis or through co-investment ventures, properties and development projects expected to total
approximately 1.2 billion square feet across the following geographies:
Throughout this discussion, we reflect amounts in the U.S. dollar, our reporting currency. Included in these amounts are consolidated and unconsolidated investments
denominated in foreign currencies, principally the British pound sterling, Canadian dollar, euro and Japanese yen that are impacted by fluctuations in exchange rates when
translated to U.S. dollars. We mitigate our exposure to foreign currency fluctuations by investing outside the U.S. through co-investment ventures, borrowing in the functional
currency of our subsidiaries and utilizing derivative financial instruments.
OPERATING SEGMENTS
Our business comprises two operating segments: Real Estate (Rental Operations and Development) and Strategic Capital.
Below is information summarizing consolidated activity within our segments over the last three years (in millions):
(1)
(2)
NOI from the Real Estate Segment is calculated directly from our Consolidated Financial Statements as Rental Revenues and Development Management and Other
Revenues less Rental Expenses and Other Expenses. NOI from the Strategic Capital Segment is calculated directly from our Consolidated Financial Statements as
Strategic Capital Revenues less Strategic Capital Expenses.
A developed property moves into the operating portfolio when it meets our definition of stabilization, which is the earlier of when a property that was developed has
been completed for one year, is contributed to a co-investment venture following completion or is 90% occupied. Amounts represent our total expected investment
(“TEI”) upon stabilization, which includes the estimated cost of development or expansion, including land, construction and leasing costs.
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Real Estate Segment
Rental Operations. Rental operations comprise the largest component of our operating segments and generally contribute 85% to 90% of our consolidated revenues,
earnings and FFO. We collect rent from our customers through operating leases, including reimbursements for the majority of our property operating costs. For leases that
commenced during 2022 within the consolidated operating portfolio, the weighted average lease term was 69 months. We expect to generate internal growth by increasing
rents, maintaining high occupancy rates and controlling expenses. The primary driver of our revenue growth, outside of the Duke Transaction, will be rolling in-place leases to
current market rents when leases expire, as discussed further below. We believe our active portfolio management, combined with the skills of our property, leasing,
maintenance, capital, energy, sustainability and risk management teams allow us to maximize NOI across our portfolio. Substantially all of our consolidated rental revenue,
NOI and cash flows from rental operations are generated in the U.S.
Development. Given the scarcity of modern logistics facilities in our target markets, our development business provides the opportunity to build to the requirements of our
current and future customers while deepening our market presence. We believe we have a competitive advantage due to (i) the strategic locations of our global land bank
and redevelopment sites; (ii) the development expertise of our local teams; (iii) the depth of our customer relationships; (iv) our ability to integrate sustainable design features
that result in cost-savings and operational efficiencies for our customers; and (v) our procurement capabilities that allow us to secure high-demand construction materials at
lower cost. Successful development and redevelopment efforts provide significant earnings growth as projects are leased, generate income and increase the value of our
Real Estate Segment. Generally, we develop properties in the U.S. for long-term hold and outside the U.S. for contribution to our unconsolidated co-investment ventures.
Strategic Capital Segment
Our Strategic Capital Segment allows us to partner with many of the world’s largest institutional investors. The business is capitalized principally through private and public
equity of which 95% is either in perpetual open-ended or long-term ventures, and two publicly traded vehicles (Nippon Prologis REIT, Inc. in Japan and FIBRA Prologis in
Mexico). We align our interests with our partners by holding significant ownership interests in all of our eight unconsolidated co-investment ventures (ranging from 15% to
50%). This structure allows us to reduce our exposure to foreign currency movements for investments outside the U.S.
This segment produces durable, long-term cash flows and generally contributes 10% to 15% of our recurring consolidated revenues, earnings and FFO, all while requiring
minimal capital other than our investment in the venture. We generate strategic capital revenues from our unconsolidated co-investment ventures, principally through asset
management and property management services. Asset management fees are primarily driven by the quarterly valuation of the real estate properties owned by the
respective ventures. We earn additional revenues by providing leasing, acquisition, construction management, development and disposition services. In certain ventures, we
also have the ability to earn revenues through incentive fees (“promotes” or “promote revenues”) periodically during the life of a venture, upon liquidation of a venture or upon
stabilization of individual venture assets based primarily on the total return of the investments over certain financial hurdles. We plan to grow this business and increase
revenues by increasing our assets under management in existing or new ventures. The majority of strategic capital revenues are generated outside the U.S.
FUTURE GROWTH
We believe that the quality and scale of our portfolio, our ability to build out our land bank, our strategic capital business, the expertise of our team, the depth of our customer
relationships and the strength of our balance sheet are differentiators that allow us to drive growth in revenues, NOI, earnings, FFO and cash flows.
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Rent Growth. We expect rents in our markets to continue to increase due to healthy demand combined with low vacancy. Due to strong market rent growth over
the last several years, our in-place leases have considerable upside potential to drive future organic NOI growth. We estimate that our lease mark-to-market is
approximately 67% (on a net effective basis), which represents the growth rate from in-place rents to current market rents based on our share of the O&M portfolio
at December 31, 2022. Therefore, even if there was no additional market rent growth in the future, we expect our lease renewals to translate into significant
increases in future income. We have experienced positive rent change on rollover (comparing the net effective rent (“NER”) of the new lease to the prior lease for
the same space) in every quarter since 2013.
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•
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Value Creation from Development. A successful development and redevelopment program requires sourcing well-located land and redevelopment sites through
acquisition opportunities, including our innovative approach with Covered Land Plays, which are income producing assets acquired with the intention to redevelop
for higher and better use as industrial properties. Our investment in the development portfolio was $4.2 billion at December 31, 2022. We believe that the carrying
value of our land bank is below its current fair value. Based on our current estimates, our consolidated land, including options and Covered Land Plays, has the
potential to support the development of $34.2 billion ($39.0 billion on an O&M basis) of TEI of new logistics space. The global nature of our development program
provides a wide landscape of opportunities to pursue based on our judgement of market conditions, opportunities and risks.
We expect to create value as we build new properties. We measure the estimated value creation of a development project as the stabilized value above our TEI. As
properties are completed and leased, we expect to realize the value creation principally through gains realized through contributions of these properties to
unconsolidated co-investment ventures and increases in the NOI of the consolidated portfolio.
Strategic Capital Advantages. We raise capital to support the long-term growth of the co-investment ventures while maintaining our own substantial investments in
these vehicles. At December 31, 2022, the gross book value of the operating portfolio held by our eight unconsolidated co-investment ventures was $49.3 billion
across 488 million square feet.
(1)
G&A Expenses is a line item in the Consolidated Financial Statements. Adjusted G&A expenses is calculated from our Consolidated Financial Statements as G&A
Expenses and Strategic Capital Expenses, less expenses under the Prologis Promote Plan (“PPP”) and property-level management expenses for the properties
owned by the ventures.
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Balance Sheet Strength. The Duke Transaction increased the strength and size of our balance sheet while allowing us to maintain our low leverage. At December
31, 2022, the weighted average remaining maturity of our consolidated debt was 9 years and the weighted average interest rate was 2.5%, primarily as a result of
our refinancing activities over the last several years. Through our refinancing activities we have substantially addressed all our debt maturities until 2026 and have
taken advantage of previously low interest rates. At December 31, 2022, we had total available liquidity of $4.1 billion. We continue to maintain low leverage as a
percentage of our real estate investments and our market capitalization. As a result of our low leverage, available liquidity and investment capacity in the co-
investment ventures, we have significant capacity to capitalize on opportunistic value-added investments as they arise.
Economies of Scale from Growth. We have scalable systems and infrastructure in place to grow both our consolidated and O&M portfolios with limited
incremental G&A expense. We use adjusted G&A expenses as a percentage of the O&M portfolio (based on gross book value) to measure and evaluate our
overhead costs. We believe we can continue to grow NOI and strategic capital revenues organically and through accretive development and acquisition activity
while further reducing G&A as a percentage of our investments in real estate. The acquisition of the Duke portfolio in 2022 is a key example of this, where we
increased our O&M portfolio by over 20% in the fourth quarter of 2022 and had minimal increases to G&A expenses, resulting in lower G&A expenses as a
percentage of investments in real estate. While we plan to make future investments in our new lines of business through Prologis Essentials, we expect to maintain
our operational efficiency.
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•
Staying “Ahead of What’s Next™”. We are focused on creating value beyond real estate by enhancing our customers’ experience, leveraging our scale to obtain
procurement savings and innovating through data analytics and digitization efforts. This includes investments in early and growth-stage companies that are focused
on emerging technology. Through Prologis Essentials we support our customers through service and product offerings, including innovative solutions to operations,
energy and sustainability, mobility and workforce that can make our customers’ decision process easier and their enterprise more efficient.
Competition
Real estate ownership is highly fragmented, and we face competition from many owners and operators. Competitively priced logistics space could impact our occupancy
rates and have an adverse effect on how much rent we can charge, which in turn could affect our operating results. We face competition regarding our capital deployment
activities, including regional, national and global operators and developers. We also face competition from investment managers for institutional capital within our strategic
capital business.
Despite the competition, our global reach and local market knowledge over the years has given us distinct competitive advantages, including the following:
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a portfolio of properties strategically located in markets characterized by large population densities, growing consumption and high barriers to entry, typically near
large labor pools and extensive transportation infrastructure, including our Last Touch® facilities;
the ability to leverage the organizational scale and structure of our 1.2 billion square foot O&M portfolio to provide a single point of contact for our multi-market
customers to address their needs through our in-house global Customer Led Solutions Team;
services and solutions offered through Prologis Essentials to assist our customers with their operations, energy and sustainability, mobility and workforce needs;
a strategically located, global land bank and redevelopment sites that have the potential to support the development of $39.0 billion of TEI of new logistics space on
an O&M basis;
local teams with the expertise, experience and relationships to lease our properties and deploy capital advantageously;
development of logistics facilities with sustainable design features that meet customer needs for high-quality buildings while enabling them to make progress on
their own sustainability objectives;
relationships and successful track record with current and prospective investors in our strategic capital business that is comprised of 95% perpetual open-ended or
long-term ventures and two publicly traded vehicles;
a market intelligence team that allows us to track business conditions in real time, proactively pursue market opportunities and disruptions alike, and develop
revenue-generating capabilities to strengthen our operational excellence;
an investment in technology and talent to support our sustainability objectives, including expanding our efforts around renewable energy;
Prologis Ventures, our corporate venture capital group, and Prologis Labs, our initiative for testing new technologies alongside our customers, together track the
leading edge of innovation and technologies within real estate and the supply chain, creating important capabilities that connect Prologis with the C-suites of our
customers; and
a strong balance sheet and credit ratings, coupled with significant liquidity, borrowing capacity and long-term fixed debt with low rates.
Customers
At December 31, 2022, in our Real Estate Segment representing our consolidated properties, we had more than 4,000 customers occupying 601 million square feet of
logistics operating properties (6,600 customers occupying 1.2 billion square feet for our O&M portfolio). Our broad customer base represents a spectrum of international,
national, regional and local logistics users who operate in various industries, providing diverse goods to consumers throughout the globe.
The location of our global portfolio gives us the unique ability to provide our customers with the right real estate solutions for their supply chains that, in turn, allows them to
meet end-consumer delivery expectations. We have invested in properties located within infill and urban areas in our largest global markets with same day access (defined
as Last Touch®) and next day access (defined as city distribution), to the consumer population. We have also invested in facilities located at key transportation hubs on the
edge of these major infill and urban areas and gateway distribution facilities that incorporate access to major sea and intermodal ports.
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Below are the primary categories of goods in our consolidated real estate properties at December 31, 2022.
(1)
NER is calculated using the estimated total cash to be received over the term of the lease divided by the lease term to determine the average amount of cash rent
payments received per year. Amounts derived in a currency other than the U.S. dollar have been translated using the average rate from the previous twelve
months.
Primary categories do not sum to 100% as the difference is attributable to customers that do not clearly fall into a single category.
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The following table details our top 25 customers for our consolidated and O&M real estate properties at December 31, 2022 (square feet in millions):
Consolidated - Real Estate
Segment
Owned and Managed
Top Customers
1. Amazon
2. Home Depot
3. FedEx
4. UPS
5. Geodis
6. Wal-Mart
7. NFI Industries
8. U.S. Government
9. Wayfair
10. Pepsi
Top 10 Customers
11. DHL
12. GXO
13. Sycamore Partners (Staples)
14. DSV Panalpina
15. Ryder System
16. CEVA Logistics
17. Uline
18. Berkshire Hathaway
19. Target
20. Office Depot
21. Kellogg
22. Toyo Tires
23. Kuehne + Nagel
24. Iron Mountain
25. Best Buy
Top 25 Customers
% of
NER
7.0
2.6
1.9
1.0
0.9
0.7
0.6
0.6
0.6
0.5
16.4
0.5
0.5
0.4
0.4
0.4
0.4
0.4
0.4
0.4
0.4
0.4
0.4
0.3
0.3
0.3
22.3
Total Occupied
Square Feet
Top Customers
34 1. Amazon
15 2. Home Depot
8 3. FedEx
6 4. Geodis
6 5. DHL
4 6. CEVA Logistics
3 7. UPS
2 8. GXO
5 9. DSV Panalpina
3 10. Maersk
86
Top 10 Customers
3 11. Kuehne + Nagel
4 12. Wal-Mart
3 13. U.S. Government
2 14. Cainiao (Alibaba)
2 15. DB Schenker
3 16. NFI Industries
1 17. Hitachi
3 18. XPO Logistics
2 19. Nippon Express
3 20. ZOZO
3 21. Mercado Libre
1 22. Pepsi
2 23. Wayfair
2 24. Nippon Kabushika Kaisha (Yusen Logistics)
2 25. Uline
122
Top 25 Customers
% of
NER
5.3
1.7
1.3
1.3
1.1
0.9
0.8
0.7
0.7
0.6
14.4
0.6
0.5
0.5
0.5
0.4
0.4
0.4
0.4
0.4
0.4
0.4
0.3
0.3
0.3
0.3
20.5
Total Occupied
Square Feet
43
17
10
17
12
12
8
9
7
6
141
7
6
4
5
5
3
4
4
3
4
4
3
5
2
2
202
In our Strategic Capital Segment, we view our partners and investors as our customers. At December 31, 2022, we had 162 investors in our private equity ventures, several
of which invest in multiple ventures.
Our People
Our people are the foundation of our business. They implement our strategy and create value for our customers and shareholders. We actively seek to recruit and retain
talented employees with varied experiences and viewpoints. The intent is to create an inclusive and diverse culture where each employee can do their best work and drive
our collective success.
We are committed to our diversity, equity, inclusion and belonging (“DEIB”) hiring practices. We also conduct annual pay equity analyses that cover women and people of
color and aim to address differences in compensation not explained by relevant job factors accordingly.
The following charts display diversity by levels of seniority of our workforce at December 31, 2022:
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(1) Managers include employees with manager, director or vice president titles. Senior leaders include employees with senior vice president or higher titles.
We focus on learning and development at every level of the organization. We align employees’ goals with our overall strategic direction to create a clear link between
individual efforts and the long-term success of the company. We then provide feedback on their performance towards those goals to ensure their growth. Providing our
employees learning and development through training, educational opportunities and mentorship is critical to our ability to continue to innovate. In 2022, more than 2,000
employees completed more than 7,400 hours of company-provided or company-sponsored learning and development training.
We provide opportunities for our employees to share their perspectives and feedback on our company and their work experience. Our most recent employee engagement
pulse survey, completed in November 2022 with a participation rate of 92%, indicated that 87% of Prologis employees are engaged based on their positive response to the
questions that comprise our engagement driver index.
We strive to create a healthy and safe working environment for our employees. We provide workplace flexibility with accountability as determined by role. For example, for
those employees who work on-site, we have protocols in place to help ensure a safe working environment. We continue to attract and retain talent in the industry through a
robust benefit package, career growth opportunities, talent recognition and individual development planning.
The following table summarizes our total number of employees at December 31, 2022:
Geographies
U.S. (1)
Other Americas
Europe
Asia
Total
1,481
162
575
248
2,466
(1)
This includes employees who were based in the U.S. but also support other geographies.
Prologis employees are not organized under collective bargaining agreements, other than in Brazil, France and Spain, and there is a works council in France.
CODE OF ETHICS AND BUSINESS CONDUCT
We maintain a Code of Ethics and Business Conduct applicable to our board of directors (the “Board”) and all of our officers and employees, including the principal executive
officer, the principal financial officer and the principal accounting officer, and other people performing similar functions. A copy of our Code of Ethics and Business Conduct is
available on our website, www.prologis.com. In addition to being accessible through our website, copies of our Code of Ethics and Business Conduct can be obtained, free of
charge, upon written request to Investor Relations, Pier 1, Bay 1, San Francisco, California 94111. Any amendments to or waivers of our Code of Ethics and Business
Conduct that apply to the principal executive officer, the principal financial officer, the principal accounting officer, or other people performing similar functions, and that relate
to any matter enumerated in Item 406(b) of Regulation S-K, will be disclosed on our website.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”)
Environmental
We develop modern and efficient buildings with state-of-the-art technology to stay ahead of our customers’ needs, advance structural, transportation and energy
requirements, and make progress on our own sustainability goals and objectives. This includes new development and redevelopment of buildings to specifications that align
with leading sustainable building standards and the implementation of energy solutions such as onsite solar generation, cool roofs, LED lighting, EV charging stations, waste
diversion, recycling and xeriscaping. We regularly ask customers how Prologis can work with them to enhance the sustainability of their operations. We believe these
services and solutions can deliver cost-savings and operational efficiencies, reduce energy and water consumption and decrease greenhouse gas emissions within our
customers’ operations and across our own portfolio.
We have committed to: (i) installing 100% LED lighting within our logistics facilities across our O&M operating properties by 2025; (ii) installing 1 gigawatt of solar generation
capacity, supported by storage, by 2025, and (iii) obtaining green building certifications for 100% of our eligible new development and redevelopment. We believe our
Prologis Essentials LED and SolarSmart solutions create energy savings, help reduce the environmental footprint of our customers and accelerate our progress in these
areas. At December 31, 2022, we had installed LED lighting across more than 70% of our logistics facilities within our O&M operating properties. During 2022, approximately
100 megawatts of solar generation capacity was installed on the roofs within our O&M portfolio. Both of these metrics exclude the operating properties acquired in the Duke
Transaction and by Prologis European Logistics Fund (“PELF”) in September 2022.
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To fund our sustainable development activities, we have utilized the proceeds from senior notes issuances to finance green projects eligible under our green bond
framework. For development properties in our O&M portfolio that were approved by our Investment Committee after June 2021 and that reached stabilization during 2022, we
certified 15% of our eligible developed and redeveloped buildings with green building certifications and the remaining 85% were scheduled for green building certification.
In 2022, we announced a new commitment to achieve net zero emissions across our entire value chain by 2040, including scope 1, 2 and 3 emissions. Our commitment is
aligned with the Science Based Target initiative’s Net Zero Standard and includes the following interim milestones: (i) 1 gigawatt of solar generation capacity, supported by
storage, by 2025, as discussed above; (ii) carbon neutral construction by 2025; and (iii) net zero operations for scope 1 and 2 emissions by 2030. We believe we can improve
our scope 1 and scope 2 emissions through energy efficiency, electrification and sourcing renewable energy for our offices. Scope 3 emissions comprise a significant portion
of our total emissions. To decrease scope 3 emissions, we believe we can reduce building and tenant energy consumption, and expand our generation and use of renewable
energy. In support of carbon neutral construction, we will pursue sustainable design, new construction practices and innovation in building materials, as well as purchase
high-quality carbon offsets for emissions that cannot yet be eliminated.
Social
We are committed to social responsibility and strengthening relationships important to our business through customer partnerships, investor outreach, community
involvement, labor solutions, and DEIB initiatives. We work in partnership with local leaders and
organizations to create jobs and job training programs; promote health and safety; and enhance recreational and transit infrastructure. We believe these efforts help create a
more stable and predictable business environment for Prologis and our customers and support social wellness and well-being in the communities we serve.
For our customers, where recruitment and retention of logistics talent is a key challenge, we are helping build a talent pipeline through our Community Workforce Initiative
(“CWI”), founded in 2018. The CWI is a talent development program that advances the skills and capabilities of logistics talent, with an emphasis on revitalizing career
pathways and creating economic opportunities in the communities where we operate. In 2018, we set a goal to train 25,000 individuals by 2025 by partnering with leading
public sector organizations and leveraging digital learning technologies to develop innovative training solutions. At December 31, 2022, under the program, we have trained
approximately 21,000 individuals towards this goal.
Beginning in 2019, we committed to spending 75,000 hours supporting our local communities by 2025. To achieve this goal, we enable our employees to spend 40 working
hours a year to volunteer, including at our company-sponsored day of volunteering, where employees around the globe volunteer on projects to help in their local
communities. At December 31, 2022, we have contributed in excess of 38,000 hours towards our goal. In addition, we encourage our employees to support our local
communities outside of working hours with our Dollars for Doers and other matching gifts programs, through which Prologis donates to eligible charities and non-profit
organizations based on employees’ personal volunteer hours or dollar donations.
Governance
We strive to promote a culture of uncompromising integrity, including through our governance practices and corporate oversight. Our Board independence and diversity, open
communication with our stockholders and a risk management framework that supports our investment and process decisions all serve to mitigate risk and preserve value for
our company. Over the past eight years we have onboarded six new directors, increasing the ethnic, gender and geographical diversity of the Board, as well as its breadth of
experience. The charters of our Board Governance and Nomination Committee and Talent and Compensation Committee provide that such committees have specific
oversight over ESG matters and DEIB matters, respectively. The strength of our balance sheet and credit ratings, dedication to proactive risk mitigation and engagement with
our employees through ethics and anti-corruption training protects the financial, operational and reputational resilience of our company. Our global risk management team
works with our Board to do regular enterprise-wide risk assessments to ensure proper oversight over real estate, financial and emerging risks across our global organization.
We are committed to ensuring that 100% of our employees complete ethics training each year and continued to achieve this commitment in 2022. Along with this
commitment, our employees completed more than 1,800 hours of information technology security, compliance and other ethics training. Our approach is reinforced by our
Code of Ethics and Business Conduct, as described above.
ENVIRONMENTAL MATTERS
We are exposed to various environmental risks that may result in unanticipated losses and affect our operating results and financial condition. Either the previous owners or
we have conducted environmental reviews on a majority of the properties we have acquired, including land. While some of these assessments have led to further
investigation and sampling, none of the environmental assessments have revealed an environmental liability that we believe would have a material adverse effect beyond
amounts recorded at December 31, 2022. See further discussion in Item 1A. Risk Factors and Note 16 to the Consolidated Financial Statements in Item 8. Financial
Statements and Supplementary Data.
GOVERNMENTAL MATTERS
We are exposed to various regulatory requirements, taxes, tariffs, trade wars and laws within the countries in which we operate and unexpected changes in these items may
result in unanticipated losses, adverse tax consequences and affect our operating results and
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financial condition. In addition, we may be impacted by the ability of our non-U.S. subsidiaries to distribute or otherwise transfer cash among our subsidiaries due to currency
exchange control regulations and transfer pricing regulations. The impact of regional or country-specific economic instability, including government shutdowns or other
internal trade alliances or agreements could also have a material adverse effect on our business, financial condition or results of operations. See further discussion in Item
1A. Risk Factors.
INSURANCE COVERAGE
We carry insurance coverage on our properties. We determine the type of coverage and the policy specifications and limits based on what we deem to be the risks
associated with our ownership of properties and our business operations in specific markets. Such coverage typically includes property damage and rental loss insurance
resulting from such perils as fire, windstorm, flood, earthquake and terrorism; commercial general liability insurance; and environmental insurance. Insurance is maintained
through a combination of commercial insurance, self-insurance and a wholly-owned captive insurance entity. Additionally, in 2021 we sponsored a catastrophe bond
issuance that provides further insurance coverage through 2024 for potential losses resulting from earthquake risks in the U.S. The costs to insure our properties are
primarily covered through expense reimbursements from our customers. We believe our insurance coverage contains policy specifications and insured limits that are
customary for similar properties, business activities and markets and we believe our properties are adequately insured. See further discussion in Item 1A. Risk Factors.
ITEM 1A. Risk Factors
Our operations and structure involve various risks that could adversely affect our business and financial condition, including but not limited to, our financial position, results of
operations, cash flow, ability to make distributions and payments to security holders and the market value of our securities. These risks relate to Prologis as well as our
investments in consolidated and unconsolidated entities and include among others, (i) risks related to our global operations (ii) risks related to our business; (iii) risks related
to financing and capital; (iv) risks related to income taxes; and (v) general risks.
Risks Related to our Global Operations
As a global company, we are subject to social, political and economic risks of doing business in many countries.
We conduct a significant portion of our business and employ a substantial number of people outside of the U.S. During 2022, we generated approximately $1.0 billion or
17.3% of our consolidated revenues from operations outside the U.S. Circumstances and developments related to international operations that could negatively affect us
include, but are not limited to, the following factors:
•
•
•
•
•
•
•
•
•
•
difficulties and costs of staffing and managing international operations in certain geographies, including differing employment practices and labor issues;
local businesses and cultural factors that differ from our domestic standards and practices;
volatility in currencies and currency restrictions, which may prevent the availability of capital or the transfer of profits to the U.S.;
challenges in establishing effective controls and procedures to regulate operations in different geographies and to monitor compliance with applicable regulations,
such as the Foreign Corrupt Practices Act, the United Kingdom (“U.K.”) Bribery Act and other similar laws;
unexpected changes in regulatory and environmental requirements, taxes, tariffs, trade wars and laws within the countries in which we operate;
the responsibility of complying with multiple and potentially conflicting laws, e.g., with respect to corrupt practices, employment and licensing;
the impact of regional or country-specific business cycles, military conflicts and economic instability, including government shutdowns and withdrawals from the
European Union or other international trade alliances or agreements;
political instability, uncertainty over property rights, civil unrest, drug trafficking, political activism or the continuation or escalation of terrorist or gang activities;
foreign ownership restrictions in operations with the respective countries; and
access to capital may be more restricted, or unavailable on favorable terms or at all in certain locations.
In addition, we may be impacted by the ability of our non-U.S. subsidiaries to dividend or otherwise transfer cash among our subsidiaries due to currency exchange control
regulations, transfer pricing regulations and potentially adverse tax consequences, among other factors.
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Compliance or failure to comply with regulatory requirements could result in substantial costs.
We are required to comply with many regulations in different countries, including (but not limited to) the Foreign Corrupt Practices Act, the U.K. Bribery Act and similar laws
and regulations. Our properties are also subject to various federal, state and local regulatory requirements, such as the Americans with Disabilities Act and state and local
fire, life-safety, energy and greenhouse gas emissions requirements. Noncompliance could result in the imposition of governmental fines or the award of damages to private
litigants. While we believe that we are currently in material compliance with these regulatory requirements, the requirements may change or new requirements may be
imposed that could require significant unanticipated expenditures by us.
Disruptions in the global capital and credit markets may adversely affect our operating results and financial condition.
To the extent there is turmoil in the global financial markets, this turmoil has the potential to adversely affect (i) the value of our properties; (ii) the availability or the terms of
financing that we have or may anticipate utilizing; (iii) our ability to make principal and interest payments on, or refinance any outstanding debt when due; and (iv) the ability
of our customers to enter into new leasing transactions or satisfy rental payments under existing leases. Disruptions in the capital and credit markets may also adversely
affect the market price of our securities and our ability to make distributions and payments to our security holders.
The depreciation in the value of the foreign currency in countries where we have a significant investment may adversely affect our results of operations and
financial position.
We hold significant real estate investments in international markets where the U.S. dollar is not the functional currency. At December 31, 2022, approximately $10.2 billion or
11.6% of our total consolidated assets were invested in a currency other than the U.S. dollar, principally the British pound sterling, Canadian dollar, euro and Japanese yen.
For the year ended December 31, 2022, $762.4 million or 17.2% of our total consolidated segment NOI was denominated in a currency other than the U.S. dollar. See Note
17 to the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data for more information on these amounts. As a result, we are subject to
foreign currency risk due to potential fluctuations in exchange rates between foreign currencies and the U.S. dollar. A significant change in the value of the foreign currency
of one or more countries where we have a significant investment may have a material adverse effect on our business and, specifically, our U.S. dollar reported financial
position and results of operations.
Our hedging of foreign currency and interest rate risk may not effectively limit our exposure to these risks.
We attempt to mitigate our risk by borrowing in the currencies in which we have significant investments thereby providing a natural hedge. We may also enter into derivative
financial instruments that we designate as net investment hedges, as these amounts offset the translation adjustments on the underlying net assets of our foreign
investments. We enter into other foreign currency contracts, such as forwards, to reduce fluctuations in foreign currency cash flow associated with the translation of future
earnings of our international subsidiaries. Although we attempt to mitigate the potential adverse effects of changes in foreign currency rates there can be no assurance that
those attempts will be successful. In addition, we occasionally use interest rate swap contracts to manage interest rate risk and limit the impact of future interest rate
changes on earnings and cash flows. Hedging arrangements involve risks, such as the risk of fluctuation in the relative value of the foreign currency or interest rates and the
risk that counterparties may fail to honor their obligations under these arrangements. The funds required to settle such arrangements could be significant depending on the
stability and movement of the hedged foreign currency or the size of the underlying financing and the applicable interest rates at the time of the breakage. The failure to
hedge effectively against foreign exchange changes or interest rate changes may adversely affect our business.
Risks Related to our Business
General economic conditions and other events or occurrences that affect areas in which our properties are geographically concentrated, may impact financial
results.
We are exposed to the economic conditions and other events and occurrences in the local, regional, national and international geographies in which we own properties. Our
operating performance is further impacted by the economic conditions of the specific markets in which we have concentrations of properties.
At December 31, 2022, 30.3% of our consolidated operating properties or $21.0 billion (based on consolidated gross book value, or investment before depreciation) were
located in California (Central Valley, San Francisco Bay Area and Southern California markets), which represented 23.6% of the aggregate square footage of our operating
properties and 33.0% of our consolidated operating property NOI. Our revenues from, and the value of, our properties located in California may be affected by local real
estate conditions (such as an oversupply of or reduced demand for logistics properties) and the local economic climate. Business layoffs, downsizing, industry slowdowns,
changing demographics and other factors may adversely impact California’s economic climate. Because of the investment we have located in California, a downturn in
California’s economy or real estate conditions, including state income tax and property tax laws, could adversely affect our business.
In addition to California, we also have significant holdings (defined as more than 3% of total consolidated investment before depreciation) in operating properties in certain
markets located in Atlanta, Chicago, Dallas/Fort Worth, Houston, Lehigh Valley, New Jersey/New York City, Seattle and South Florida. Of these markets, no single market
contributed more than 10% of our total
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consolidated investment before depreciation in operating properties, with the exception of New Jersey/New York City. Our operating performance could be adversely affected
if conditions become less favorable in any of the markets in which we have a concentration of properties. Conditions such as an oversupply of logistics space or a reduction
in demand for logistics space, among other factors, may impact operating conditions. Any material oversupply of logistics space or material reduction in demand for logistics
space could adversely affect our overall business.
Our O&M portfolio, which includes our consolidated properties and properties owned by our unconsolidated co-investment ventures, has concentrations of properties in the
same markets mentioned above, as well as in markets in Japan and the U.K., and are subject to the economic conditions in those markets.
Real estate investments are not as liquid as certain other types of assets, which may reduce economic returns to investors.
Real estate investments are not as liquid as certain other types of investments and this lack of liquidity may limit our ability to react promptly to changes in economic or other
conditions. Significant expenditures associated with real estate investments, such as secured mortgage debt payments, real estate taxes and maintenance costs, are
generally not reduced when circumstances cause a reduction in income from the investments. As a REIT, under the IRC, we are only able to hold property for sale in the
ordinary course of business through taxable REIT subsidiaries in order to not incur punitive taxation on any tax gain from the sale of such property. We may dispose of
certain properties that have been held for investment to generate liquidity. If we do not satisfy certain safe harbors or we believe there is too much risk of incurring the
punitive tax on any tax gain from the sale, we may not pursue such sales.
We may decide to sell or contribute properties to certain of our co-investment ventures or sell properties to third parties to generate proceeds to fund our capital deployment
activities. Our ability to sell or contribute properties on advantageous terms is affected by: (i) competition from other owners of properties that are trying to dispose of their
properties; (ii) economic and market conditions, including the capitalization rates applicable to our properties; and (iii) other factors beyond our control. If our competitors sell
assets similar to assets we intend to divest in the same markets or at valuations below our valuations for comparable assets, we may be unable to divest our assets at
favorable pricing or at all. The co-investment ventures or third parties who might acquire our properties may need to have access to debt and equity capital, in the private and
public markets, in order to acquire properties from us. Should they have limited or no access to capital on favorable terms, then dispositions and contributions could be
delayed.
If we do not have sufficient cash available to us through our operations, sales or contributions of properties or available credit facilities to continue operating our business as
usual, we may need to find alternative ways to increase our liquidity. Such alternatives may include, without limitation, divesting properties at less than optimal terms,
incurring debt, entering into leases with new customers at lower rental rates or less than optimal terms or entering into lease renewals with our existing customers without an
increase in rental rates. There can be no assurance, however, that such alternative ways to increase our liquidity will be available to us. Additionally, taking such measures to
increase our liquidity may adversely affect our business, and in particular, our distributable cash flow and debt covenants.
Our investments are concentrated in the logistics sector and our business would be adversely affected by an economic downturn in that sector.
Our investments in real estate assets are concentrated in the logistics sector. This concentration may expose us to the risk of economic downturns in this sector to a greater
extent than if our business activities were more diversified.
Investments in real estate properties are subject to risks that could adversely affect our business.
Investments in real estate properties are subject to varying degrees of risk. While we seek to minimize these risks through geographic diversification of our portfolio, market
research and our asset management capabilities, these risks cannot be eliminated. Factors that may affect real estate values and cash flows include:
•
•
•
•
•
•
•
local conditions, such as oversupply or a reduction in demand;
technological changes, such as reconfiguration of supply chains, autonomous vehicles, robotics, 3D printing or other technologies;
the attractiveness of our properties to potential customers and competition from other available properties;
increasing costs of maintaining, insuring, renovating and making improvements to our properties;
our ability to reposition our properties due to changes in the business and logistics needs of our customers;
our ability to lease the properties at favorable rates and control variable operating costs; and
governmental and environmental regulations and the associated potential liability under, and changes in, environmental, zoning, usage, tax, tariffs and other laws.
These factors may affect our ability to recover our investment in the properties and result in impairment charges.
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Our customers may be unable to meet their lease obligations or we may be unable to lease vacant space or renew leases or re-lease space on favorable terms as
leases expire.
Our operating results and distributable cash flow would be adversely affected if a significant number of our customers were unable to meet their lease obligations. At
December 31, 2022, our top 10 customers accounted for 16.4% of our consolidated NER and 14.4% of our O&M NER. In the event of default by a significant number of
customers, we may experience delays and incur substantial costs in enforcing our rights as landlord, and we may be unable to re-lease spaces. A customer may experience
a downturn in its business, which may cause the loss of the customer or may weaken its financial condition, resulting in the customer’s failure to make rental payments when
due or requiring a restructuring that might reduce cash flow from the lease. In addition, a customer may seek the protection of bankruptcy, insolvency or similar laws, which
could result in the rejection and termination of such customer’s lease and thereby cause a reduction in our available cash flow.
We are also subject to the risk that, upon the expiration of leases they may not be renewed by existing customers, the space may not be re-leased to new customers or the
terms of renewal or re-leasing (including the cost of required renovations or concessions to customers) may be less favorable to us than current lease terms. Our competitors
may offer space at rental rates below current market rates or below the rental rates we currently charge our customers and we may be pressured to reduce our rental rates
below those we currently charge to retain customers when leases expire or we may lose potential customers.
We may acquire properties and companies that involve risks that could adversely affect our business and financial condition.
We have acquired properties and will continue to acquire properties through the direct acquisition of real estate, the acquisition of entities that own real estate or through
additional investments in co-investment ventures that acquire properties. The acquisition of properties involves risks, including the risk that the acquired property will not
perform as anticipated and that any actual costs for rehabilitation, repositioning, renovation and improvements identified in the pre-acquisition due diligence process will
exceed estimates. When we acquire properties, we may face risks associated with entering a new market such as a lack of market knowledge or understanding of the local
economy, forging new business relationships in the area and unfamiliarity with local government and permitting procedures. Additionally, there is, and it is expected there will
continue to be, significant competition for properties that meet our investment criteria as well as risks associated with obtaining financing for acquisition activities. The
acquired properties or entities may be subject to liabilities, including tax liabilities, which may be without any recourse, or with only limited recourse, with respect to unknown
liabilities. As a result, if a liability were asserted against us based on our new ownership of any of these entities or properties, then we may have to pay substantial sums to
settle it.
We may be unable to integrate the operations of newly acquired companies and realize the anticipated synergies and other benefits or do so within the anticipated timeframe.
Potential difficulties we may encounter in the integration process include: (i) the inability to dispose of non-industrial assets or operations that are outside of our area of
expertise; (ii) potential unknown liabilities and unforeseen increased expenses, delays or regulatory conditions associated with these transactions; and (iii) performance
shortfalls as a result of the diversion of management’s attention caused by completing these transactions and integrating the companies’ operations.
Our real estate development and redevelopment strategies may not be successful.
Our real estate development and redevelopment strategy is focused on monetizing land and redevelopment sites in the future through development of logistics facilities to
hold for long-term investment and for contribution or sale to a co-investment venture or third party, depending on market conditions, our liquidity needs and other factors. We
may increase our investment in the development, renovation and redevelopment business and we expect to complete the build-out and leasing of our current development
portfolio. We may also develop, renovate and redevelop properties within existing or newly formed co-investment ventures. The real estate development, renovation and
redevelopment business includes the following significant risks:
•
•
•
•
•
•
•
•
we may not be able to obtain financing for development projects on favorable terms or at all;
we may explore development opportunities that may be abandoned and the related investment impaired;
we may not be able to obtain, or may experience delays in obtaining, all necessary zoning, land-use, building, occupancy and other governmental permits and
authorizations;
we may incur higher construction costs, due primarily to this inflationary environment, or additional costs related to regulation that exceed our estimates and projects
may not be completed, delivered or stabilized as planned due to defects or other issues;
we may not be able to attract third-party investment in new development co-investment ventures or sufficient customer demand for our product;
we may have properties that perform below anticipated levels, producing cash flows below budgeted amounts;
we may seek to sell certain land parcels and not be able to find a third party to acquire such land or the sales price will not allow us to recover our investment,
resulting in impairment charges;
we may not be able to lease properties we develop on favorable terms or at all;
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•
•
•
we may not be able to capture the anticipated enhanced value created by our value-added properties on expected timetables or at all;
we may experience delays (temporary or permanent) if there is public or government opposition to our activities; and
we may have substantial renovation, new development and redevelopment activities, regardless of their ultimate success, that require a significant amount of
management’s time and attention, diverting their attention from our day-to-day operations.
We are subject to risks and liabilities in connection with forming and attracting third-party investment in co-investment ventures, investing in new or existing co-
investment ventures, and managing properties through co-investment ventures.
At December 31, 2022, we had investments in co-investment ventures, both public and private, that owned real estate with a gross book value of approximately $59.6 billion.
Our organizational documents do not limit the amount of available funds that we may invest in these ventures, and we may and currently intend to develop and acquire
properties through co-investment ventures and investments in other entities when warranted by the circumstances. However, there can be no assurance that we will be able
to form new co-investment ventures, or attract third-party investment or that additional investments in new or existing ventures to develop or acquire properties will be
successful. Further, there can be no assurance that we are able to realize value from our existing or future investments. The same factors that impact the valuation of our
consolidated portfolio, as discussed above, also impact the portfolios held by the co-investment ventures and could result in other than temporary impairment of our
investment and a reduction in fee revenues.
Our co-investment ventures involve certain additional risks that we do not otherwise face, including:
•
•
•
•
•
•
•
our partners may share certain approval rights over major decisions made on behalf of the ventures;
our partners may seek to redeem their investment, and may do so simultaneously, causing the venture to seek capital to satisfy these requests on less than optimal
terms;
if our partners fail to fund their share of any required capital contributions, then we may choose to contribute such capital;
our partners might have economic or other business interests or goals that are inconsistent with our business interests or goals that would affect our ability to
operate the venture;
the venture or other governing agreements often restrict the transfer of an interest in the co-investment venture or may otherwise restrict our ability to sell the
interest when we desire or on advantageous terms;
our relationships with our partners are generally contractual in nature and may be terminated or dissolved under the terms of the agreements, and in such event, we
may not continue to invest in or manage the assets underlying such relationships resulting in a decrease in our assets under management and a reduction in fee
revenues. This may also require us to acquire the properties in order to maintain an investment in the portfolio; and
disputes between us and our partners may result in litigation or arbitration that would increase our expenses and prevent our officers and directors from focusing
their time and effort on our business and result in subjecting the properties owned by the applicable co-investment venture to additional risk.
We generally seek to maintain sufficient influence over our co-investment ventures to permit us to achieve our business objectives; however, we may not be able to continue
to do so indefinitely. We have formed publicly traded investment vehicles, such as NPR and FIBRA Prologis, for which we serve as sponsor or manager. These entities bear
their own risks related to trading markets, foreign currency exchange rates and market demand. We have contributed, and may continue to contribute, assets into such
vehicles. There is a risk that our managerial relationship may be terminated.
We have also made investments in early and growth-stage companies that are focused on emerging technology. These companies may not be successful at raising
additional capital or generating cash flows to sustain operations, which could result in the impairment of our investment. In addition, through Prologis Essentials we are
investing in the development of new business lines that are complementary to our core business. These business lines may not be successful and may include risks that are
different than investing in our core real estate business.
We are exposed to various environmental risks, which may result in unanticipated losses that could affect our business and financial condition.
Under various federal, state and local laws, ordinances and regulations, a current or previous owner, developer or operator of real estate may be liable for the costs of
removal or remediation of certain hazardous or toxic substances. The costs of removal or remediation of such substances could be substantial. Such laws often impose
liability without regard to whether the owner or operator knew of, or was responsible for, the release or presence of such hazardous substances. In addition, third parties may
sue the owner or
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operator of a site for damages based on personal injury, property damage or other costs, including investigation and clean-up costs, resulting from the environmental
contamination.
Environmental laws in some countries, including the U.S., also require that owners or operators of buildings containing asbestos properly manage and maintain the asbestos,
adequately inform or train those who may come into contact with asbestos and undertake special precautions, including removal or other abatement, in the event that
asbestos is disturbed during building renovation or demolition. These laws may impose fines and penalties on building owners or operators who fail to comply with these
requirements and may allow third parties to seek recovery from owners or operators for personal injury associated with exposure to asbestos. Some of our properties are
known to contain asbestos-containing building materials.
In addition, some of our properties are leased or have been leased, in part, to owners and operators of businesses that use, store or otherwise handle petroleum products or
other hazardous or toxic substances, creating a potential for the release of such hazardous or toxic substances. Furthermore, certain of our properties are on, adjacent to or
near other properties that have contained or currently contain petroleum products or other hazardous or toxic substances, or upon which others have engaged, are engaged
or may engage in activities that may release such hazardous or toxic substances. From time to time, we may acquire properties, or interests in properties, with known
adverse environmental conditions for which we believe that the environmental liabilities associated with these conditions are quantifiable and that the acquisition will yield a
superior risk-adjusted return. In connection with certain divested properties, we have agreed to remain responsible for, and to bear the cost of, remediating or monitoring
certain environmental conditions on the properties.
Our insurance coverage does not cover all potential losses.
We and our unconsolidated co-investment ventures carry insurance coverage including property damage and rental loss insurance resulting from certain perils such as fire
and additional perils as covered under an extended coverage policy, namely windstorm, flood, earthquake and terrorism; commercial general liability insurance; and
environmental insurance, as appropriate for the markets where each of our properties and business operations are located. The insurance coverage contains policy
specifications and insured limits customarily carried for similar properties, business activities and markets. We believe our properties and the properties of our co-investment
ventures are adequately insured. Certain losses, however, including losses from floods, earthquakes, acts of war, acts of terrorism or riots and pandemics, generally are not
insured against or not fully insured against because it is not deemed economically feasible or prudent to do so. If an uninsured loss or a loss in excess of insured limits
occurs with respect to one or more of our properties, we could experience a significant loss of capital invested and future revenues in these properties and could potentially
remain obligated under any recourse debt associated with the property.
Furthermore, we cannot be sure that the insurance companies will be able to continue to offer products with sufficient coverage at commercially reasonable rates. If we
experience a loss that is uninsured or that exceeds insured limits with respect to one or more of our properties or if the insurance companies fail to meet their coverage
commitments to us in the event of an insured loss, then we could lose the capital invested in the damaged properties, as well as the anticipated future revenues from those
properties and, if there is recourse debt, then we would remain obligated for any mortgage debt or other financial obligations related to the properties. Any such losses or
higher insurance costs could adversely affect our business.
A number of our investments, both wholly-owned and owned through co-investment ventures, are located in areas that are known to be subject to earthquake activity. U.S.
properties located in active seismic areas include properties in our markets in California and Seattle. International properties located in active seismic areas include Japan
and Mexico. We generally carry earthquake insurance on our properties located in areas historically subject to seismic activity, subject to coverage limitations and
deductibles, if we believe it is commercially reasonable. We evaluate our earthquake insurance coverage annually in light of current industry practice through an analysis
prepared by outside consultants and in some specific instances have elected to self-insure our earthquake exposure based on this analysis. We have elected not to carry
earthquake insurance for our assets in Japan based on this analysis. See Item 2. Properties for more information on the markets above exposed to seismic activities.
Furthermore, a number of our properties are located in areas that are known to be subject to hurricane or flood risk. We carry hurricane and flood hazard insurance on all of
our properties located in areas historically subject to such activity, subject to coverage limitations and deductibles, if we believe it is commercially reasonable. We evaluate
our insurance coverage annually in light of current industry practice through an analysis prepared by outside consultants.
Risks Related to Financing and Capital
In order to meet REIT distribution requirements we may need access to external sources of capital.
To qualify as a REIT, we are required each year to distribute at least 90% of our REIT taxable income (determined without regard to the dividends-paid deduction and by
excluding any net capital gain) to our stockholders and we may be subject to tax to the extent our taxable income is not fully distributed. Historically, we have satisfied these
distribution requirements by making cash distributions to our stockholders, however, we may elect to pay a portion of the distribution in shares of our stock. Assuming we
continue to satisfy these distribution requirements with cash, we may not be able to fund all future capital needs, including acquisition and development activities, from cash
retained from operations and may have to rely on third-party sources of capital. Furthermore, to maintain our REIT status and not have to pay federal income and excise
taxes, we may need to borrow funds on a short-term basis to meet the REIT distribution requirements even if the then-prevailing market conditions are not favorable for these
borrowings. These short-term
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borrowing needs could result from differences in timing between the actual receipt of cash and inclusion of income for federal income tax purposes, or the effect of
nondeductible capital expenditures, the creation of reserves or required debt or amortization payments. Our ability to access debt and equity capital on favorable terms or at
all depends on a number of factors, including general market conditions, the market’s perception of our growth potential, our current and potential future earnings and cash
distributions and the market price of our securities.
Covenants in our credit agreements could limit our flexibility and breaches of these covenants could adversely affect our financial condition.
The terms of our various credit agreements, including our credit facilities and term loans, the indentures under which certain of our senior notes are issued and other note
agreements, require us to comply with a number of customary financial covenants, such as maintaining debt service coverage ratios, leverage ratios and fixed charge
coverage ratios. These covenants may limit our flexibility to run our business, and breaches of these covenants could result in defaults under the instruments governing the
applicable indebtedness. If we default under the covenant provisions and are unable to cure the default, refinance the indebtedness or meet payment obligations, our
business and financial condition generally and, in particular, the amount of our distributable cash flow could be adversely affected.
Adverse changes in our credit ratings could negatively affect our financing activity.
At December 31, 2022, our credit ratings were A3 from Moody’s with a stable outlook and A from S&P with a stable outlook. A securities rating is not a recommendation to
buy, sell or hold securities and is subject to revision or withdrawal at any time by the rating organization.
The credit ratings of our senior notes and preferred stock are based on our operating performance, liquidity and leverage ratios, overall financial position and other factors
employed by the credit rating agencies in their rating analyses of us. Our credit ratings can affect the amount of capital we can access, as well as the terms and pricing of any
debt we may incur. There can be no assurance that we will be able to maintain our current credit ratings, and in the event our credit ratings are downgraded, we would likely
incur higher borrowing costs and may encounter difficulty in obtaining additional financing. Also, a downgrade in our credit ratings may trigger additional payments or other
negative consequences under our credit facilities and other debt instruments. Adverse changes in our credit ratings could negatively impact our business and, in particular,
our refinancing and other capital market activities, our ability to manage debt maturities, our future growth and our development and acquisition activity.
We may be unable to refinance our debt or our cash flow may be insufficient to make required debt payments.
We are subject to risks normally associated with debt financing, including the risk that our cash flow will be insufficient to meet required payments of principal and interest.
There can be no assurance that we will be able to refinance any maturing indebtedness, that such refinancing would be on terms as favorable as the terms of the maturing
indebtedness, or that we will be able to otherwise obtain funds by selling assets or raising equity to make required payments on maturing indebtedness. If we are unable to
refinance our indebtedness at maturity or meet our payment obligations, our business and financial condition will be negatively impacted and, if the maturing debt is secured,
the lender may foreclose on the property securing such indebtedness. Our credit facilities and certain other debt bears interest at variable rates. Increases in market interest
rates would increase our interest expense under these agreements.
Our stockholders may experience dilution if we issue additional common stock or units in the OP.
Any additional future issuance of common stock or OP units will reduce the percentage of our common stock and units owned by investors. In most circumstances,
stockholders and unitholders will not be entitled to vote on whether or not we issue additional common stock or units. In addition, depending on the terms and pricing of any
additional offering of our common stock or OP units and the utilization of the proceeds, our stockholders and unitholders may experience dilution in both book value and fair
value of their common stock or units.
Risks Related to Income Tax
The failure of Prologis, Inc. to qualify as a REIT would have serious adverse consequences.
Prologis, Inc. elected to be taxed as a REIT under Sections 856 through 860 of the IRC commencing with the taxable year ended December 31, 1997. We believe Prologis,
Inc. has been organized and operated to qualify as a REIT under the IRC and believe that the current organization and method of operation comply with the rules and
regulations promulgated under the IRC to enable Prologis, Inc. to continue to qualify as a REIT. However, it is possible that we are organized or have operated in a manner
that would not allow Prologis, Inc. to qualify as a REIT, or that our future operations could cause Prologis, Inc. to fail to qualify. Qualification as a REIT requires us to satisfy
numerous requirements (some annually and others on a quarterly basis) established under highly technical and complex sections of the IRC for which there are only limited
judicial and administrative interpretations and involves the determination of various factual matters and circumstances not entirely within our control. For example, to qualify
as a REIT, Prologis, Inc. must derive at least 95% of its gross income in any year from qualifying sources. In addition, Prologis, Inc. must pay dividends to its stockholders
aggregating annually at least 90% of its taxable income (determined without regard to the dividends paid deduction and by excluding capital gains) and must satisfy specified
asset tests on a quarterly basis. Historically, we have satisfied these distribution requirements by making cash distributions to our stockholders, but we may choose to satisfy
these requirements by making distributions of cash or
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other property, including, in limited circumstances, our own stock. The provisions of the IRC and applicable Treasury regulations regarding qualification as a REIT are more
complicated for Prologis, Inc. because we hold substantially all of our assets through the OP.
If Prologis, Inc. fails to qualify as a REIT in any taxable year, we will be required to pay federal income tax (including, for taxable years prior to 2018, any applicable
alternative minimum tax) on taxable income at regular corporate rates. Unless we are entitled to relief under certain statutory provisions, Prologis, Inc. would be disqualified
from treatment as a REIT for the four taxable years following the year in which it lost the qualification and would be subject to corporate tax on built-in gains that exist at the
time of REIT re-election if recognized within the five-year period after re-election, and potentially 10 years for certain states. If Prologis, Inc. lost its REIT status, our net
earnings would be significantly reduced for each of the years involved. In addition, we may need to borrow additional funds or liquidate some investments to pay any
additional tax liability. Accordingly, funds available for investment, operations and distributions would be reduced.
Furthermore, we own a direct or indirect interest in certain subsidiary REITs that elected to be taxed as REITs under Sections 856 through 860 of the IRC. Provided that each
subsidiary REIT qualifies as a REIT, our interest in such subsidiary REIT will be treated as a qualifying real estate asset for purposes of the REIT asset tests, and any
dividend income or gains derived by us from such subsidiary REIT will generally be treated as income that qualifies for purposes of the REIT 95% and 75% gross income
tests. To qualify as a REIT, the subsidiary REIT must independently satisfy all of the REIT qualification requirements. If such subsidiary REIT were to fail to qualify as a REIT,
and certain relief provisions did not apply, it would be treated as a regular taxable corporation and its income would be subject to U.S. federal income tax. In addition, a failure
of the subsidiary REIT to qualify as a REIT would have an adverse effect on the ability of Prologis, Inc. to comply with the REIT income and asset tests, and thus its ability to
qualify as a REIT.
In addition, we may acquire properties through the acquisition of REIT entities that own the real estate. If a gain in such assets is not otherwise recognized by the seller or
target in such acquisitions, and such entities were to fail to satisfy the REIT requirements for any year, they would be disqualified from treatment as a REIT for the four
taxable years following the year in which the REIT qualification was lost and the acquired assets would be subject to corporate tax on built-in gains that exist at the time of
REIT re-election or, if earlier, at the time of Prologis’ acquisition of the assets. A sale of such assets within the 5-year recognition period, and potentially 10 years for certain
states, could result in corporate tax liabilities that could be significant.
Certain property transfers may generate prohibited transaction income, resulting in a penalty tax on gain attributable to the transaction.
From time to time, we may transfer or otherwise dispose of some of our properties, including by contributing properties to our co-investment ventures. Under the IRC, any
gain resulting from transfers of properties we hold as inventory or primarily for sale to customers in the ordinary course of business is treated as income from a prohibited
transaction subject to a 100% penalty tax. We do not believe that our transfers or disposals of property or our contributions of properties into our co-investment ventures are
prohibited transactions. However, whether property is held for investment purposes is a question of fact that depends on all the facts and circumstances surrounding the
particular transaction. The Internal Revenue Service (“IRS”) may contend that certain transfers or dispositions of properties by us or contributions of properties into our co-
investment ventures are prohibited transactions. While we believe that the IRS would not prevail in any such dispute, if the IRS were to argue successfully that a transfer,
disposition or contribution of property constituted a prohibited transaction, we would be required to pay a 100% penalty tax on any gain allocable to us from the prohibited
transaction. In addition, income from a prohibited transaction might adversely affect our ability to satisfy the income tests for qualification as a REIT.
Legislative or regulatory action could adversely affect us.
In recent years, numerous legislative, judicial and administrative changes have been made to the U.S., state, local and foreign income tax laws applicable to investments in
real estate, REITs, similar entities and investments. Additional changes are likely to continue to occur in the future, both in and outside of the U.S. and may impact our
taxation or that of our stockholders. Any increases in tax liability could be substantial and would reduce the amount of cash available for other purposes.
Complying with REIT requirements may limit our flexibility or cause us to forego otherwise attractive opportunities.
Our use of taxable REIT subsidiaries (“TRSs”) enables us to engage in non-REIT qualifying business activities. Under the IRC, no more than 20% of the value of the assets
of a REIT may be represented by securities of one or more TRSs and other non-qualifying assets. This limitation may hinder our ability to make certain attractive
investments, including the purchase of non-qualifying assets, the expansion of non-real estate activities and investments in the businesses to be conducted by our TRSs, and
to that extent limit our opportunities.
General Risks
Our business may be materially and adversely affected by the impact of global pandemics.
We cannot predict the extent to which global pandemics may impact our business and operating results and that of our co-investment ventures, but their impact may include
the following:
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•
•
•
•
•
Existing customers and potential customers of our logistics facilities may be adversely affected by the decrease in economic activity, which in turn could disrupt
their business and their ability to enter into new leasing transactions or satisfy rental payments;
Government, labor or other restrictions may prevent us from completing the development or leasing of properties currently under development or making our
properties ready for our customers to move in;
Our ability to recover our investments in real estate assets may be impacted by current market conditions;
Increases in material costs as a result of labor shortages and supply chain disruptions may make the development of properties more costly than we originally
budgeted; and
Our workforce, including our executives, may become ill or have difficulty working remotely, caring for our properties and/or customers.
Any prolonged economic downturn, escalation of the outbreak or disruption in the financial markets may also impact our ability to access capital markets to issue debt or
equity securities and to complete real estate transactions at attractive pricing or at all.
These items may materially and adversely affect our financial condition, results of operations, cash flows and real estate values.
Our business and operations could suffer in the event of system failures or cyber security attacks.
Despite system redundancy, the implementation of security measures and the existence of a disaster recovery plan for our internal and hosted information technology
systems, our systems are vulnerable to damages from any number of sources, including energy blackouts, natural disasters, terrorism, war, telecommunication failures and
cyber security attacks, such as malware, ransomware, or unauthorized access. Any system failure or accident that causes interruptions in our operations could result in a
material disruption to our business. We may incur additional costs to remedy damages caused by such disruptions. Third-party security events at vendors, sub-processors,
and service providers could also impact our data and operations via unauthorized access to information or disruption of services which may ultimately result in financial
losses. Despite training, detection systems and response procedures, an increase in email attacks (phishing and business email compromise) may create disruption to our
business and financial risk.
Although security incidents have had an insignificant financial impact on our operating results, the growing frequency of attempts may lead to increased costs to protect the
company and respond to any events, including additional personnel, consultants and protection technologies. Any compromise of our security could result in a violation of
applicable privacy and other laws, unauthorized access to information of ours and others, significant legal and financial exposure, damage to our reputation, loss or misuse of
the information and a loss of confidence in our security measures, which could harm our business. Additionally, remediation costs for security events may not be covered by
our insurance.
Risks associated with our dependence on key personnel.
We depend on the deep industry knowledge and the efforts of our executive officers and other key employees. From time to time, our personnel and their roles may change.
While we believe that we are able to retain our key talent and find suitable employees to meet our needs, the loss of key personnel, any change in their roles or the limitation
of their availability could adversely affect our business. If we are unable to continue to attract and retain our executive officers, or if compensation costs required to attract
and retain key employees become more expensive, our performance and competitive position could be materially adversely affected.
Our business could be adversely impacted if we have deficiencies in our disclosure controls and procedures or internal control over financial reporting.
The design and effectiveness of our disclosure controls and procedures and internal control over financial reporting may not prevent all errors, misstatements or
misrepresentations. While management continually reviews the effectiveness of our disclosure controls and procedures and internal control over financial reporting, there can
be no guarantee that our internal control over financial reporting will be effective in accomplishing all control objectives all of the time. Deficiencies, including any material
weakness, in our internal control over financial reporting that may occur in the future could result in misstatements or restatements of our financial statements or a decline in
the price of our securities.
We are exposed to the potential impacts of future climate change and could be required to implement new or stricter regulations, which may result in
unanticipated losses that could affect our business and financial condition.
We are also exposed to potential physical risks from possible future changes in climate. Our logistics facilities and the global supply chain may be exposed to catastrophic
weather events, such as severe storms, fires or floods. If the frequency of extreme weather events increases, our exposure to these events could increase. We may also be
adversely impacted by transition risks, such as potential impacts to the supply chain as a real estate developer or changes in laws and regulations, such as stricter energy
efficiency standards or greenhouse gas regulations for the commercial building sectors. We cannot give any assurance that other such conditions do not exist or may not
arise in the future. The potential impacts of future climate change on our real estate properties could adversely affect our ability to lease, develop or sell such properties or to
borrow using such properties as collateral.
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ITEM 1B. Unresolved Staff Comments
None.
ITEM 2. Properties
GEOGRAPHIC DISTRIBUTION
We predominately invest in logistics facilities. Our properties are typically used for distribution, storage, packaging, assembly and light manufacturing of consumer products.
The vast majority of our operating properties are used by our customers for retail and online fulfillment and business-to-business transactions.
The following tables provide details of our consolidated operating properties, investment in land and development portfolio and our O&M portfolio. The O&M portfolio includes
the properties we consolidate and the properties owned by our unconsolidated co-investment ventures reflected at 100% of the amount included in the ventures’ financial
statements as calculated on a GAAP basis, not our proportionate share.
Included in the operating property information below for our consolidated operating properties are 498 buildings owned primarily by one co-investment venture that we
consolidate but of which we own less than 100% of the equity. No individual property or market amounted to 10% or more of our consolidated total assets at December 31,
2022, or generated revenue equal to 10% or more of our consolidated total revenues for the year ended December 31, 2022, with the exception of the Southern California
market. Dollars and square feet in the following tables are in millions:
Geographies
U.S.:
Atlanta
Baltimore/Washington D.C.
Central PA
Central Valley
Chicago
Dallas/Ft. Worth
Houston
Lehigh Valley
New Jersey/New York City
San Francisco Bay Area
Seattle
South Florida
Southern California
Remaining Markets – U.S. (18 markets) (2)
Subtotal U.S.
Other Americas:
Brazil
Canada
Mexico
Subtotal Other Americas
Europe:
France
Germany
Netherlands
U.K.
Remaining Countries – Europe (8 countries) (2)
Subtotal Europe
Asia:
China
Japan
Singapore
Subtotal Asia
Total operating portfolio (3)
Value-added properties (4)
Total operating properties
Rentable Square
Footage
Consolidated Operating Properties
Gross Book
Value
Encumbrances (1)
41 $
13
18
21
53
43
30
30
42
21
16
22
98
129
577
1
10
*
11
-
1
-
2
2
5
3,289 $
1,700
1,489
1,716
4,843
3,486
3,125
3,884
7,119
3,185
2,653
3,792
15,639
10,659
66,579
53
845
21
919
-
84
-
422
177
683
-
1
1
2
595
6
601 $
-
40
142
182
68,363
1,061
69,424 $
-
-
-
-
-
-
-
-
28
-
-
14
9
69
120
-
138
-
138
-
-
-
-
-
-
-
-
-
-
258
-
258
Items notated by ‘*’ indicate an amount less than one million that rounds to zero.
22
O&M
Rentable Square
Footage
Gross Book
Value
47 $
17
19
22
70
50
36
34
51
26
24
28
118
158
700
17
10
44
71
34
31
29
31
97
222
46
44
1
91
1,084
9
1,093 $
3,764
2,104
1,609
1,856
6,354
4,080
3,648
4,174
8,492
3,855
3,529
4,661
18,009
12,862
78,997
870
845
2,923
4,638
3,157
3,155
2,999
7,107
7,678
24,096
3,088
6,709
142
9,939
117,670
1,631
119,301
Table of Contents
Geographies
U.S.:
Atlanta
Baltimore/Washington D.C.
Central PA
Central Valley
Chicago
Dallas/Ft. Worth
Houston
Lehigh Valley
New Jersey/New York City
San Francisco Bay Area
Seattle
South Florida
Southern California
Remaining Markets – U.S. (18 markets)
Subtotal U.S.
Other Americas:
Brazil
Canada
Mexico
Subtotal Other Americas
Europe:
France
Germany
Netherlands
U.K.
Remaining Countries – Europe (8 countries)
Subtotal Europe
Asia:
Japan
Subtotal Asia
Total land and development portfolio
Consolidated – Investment in Land
Consolidated – Development Portfolio
Estimated Build Out
Potential
(square feet) (5)
Acres
Current
Investment
Rentable Square
Footage Upon
Completion
TEI (6)
546
36
-
803
103
359
335
105
194
-
149
113
494
1,444
4,681
263
292
751
1,306
176
39
15
224
696
1,150
51
51
7,188
6 $
*
-
14
2
5
4
1
3
-
2
2
9
23
71
5
5
14
24
4
1
*
4
14
23
4
4
122 $
46
15
-
262
35
121
114
34
287
-
103
109
464
543
2,133
56
435
150
641
139
28
9
212
125
513
51
51
3,338
1 $
*
*
1
3
3
1
1
*
2
1
1
5
8
27
-
2
5
7
1
1
1
2
3
8
7
7
49 $
117
80
44
111
381
341
123
177
127
314
158
203
1,427
1,025
4,628
-
310
388
698
65
106
82
494
417
1,164
988
988
7,478
Items notated by ‘*’ indicate an amount less than one million that rounds to zero.
(1)
(2)
(3)
Certain of our consolidated properties are pledged as security under secured mortgage debt and assessment bonds. For purposes of this table, the total principal
balance of a debt issuance that is secured by a pool of properties is allocated among the properties in the pool based on each property’s investment balance. In
addition to the amounts reflected here, we also have $184 million of encumbrances related to two properties under development, one prestabilized property, two
other real estate investments and one land parcel included in the consolidated portfolio.
No remaining market within the U.S. or country within Europe represented more than 2% of the total gross book value of the consolidated and O&M operating
properties.
Included in our consolidated operating properties are properties that we consider to be held for contribution and are presented within Assets Held for Sale or
Contribution in the Consolidated Balance Sheets. We include these properties in our operating portfolio as they are expected to be contributed to our co-investment
ventures and remain in our O&M operating portfolio. At December 31, 2022, we had investments in real estate properties that were expected to be contributed to
our unconsolidated co-investment ventures totaling $489 million and aggregating 4 million square feet. See Note 6 to the Consolidated Financial Statements in Item
8. Financial Statements and Supplementary Data for further information on our Assets Held for Sale or Contribution.
(4)
Value-added properties are properties we have either acquired at a discount and believe we could provide greater returns post-stabilization or properties we expect
to repurpose to a higher and better use.
(5)
Represents the estimated finished square feet available for lease upon completion of a building on existing parcels of land.
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(6)
TEI is based on current projections and is subject to change. As noted in the table below, our current investment in the development portfolio was $4.2 billion,
leaving approximately $3.3 billion of additional required investment. At December 31, 2022, based on TEI, approximately 9% of the properties in the development
portfolio were completed but not yet stabilized, 72% of the properties were expected to be completed before December 31, 2023, and the remaining properties were
expected to be completed before November 2024.
The following table summarizes our investment in consolidated real estate properties at December 31, 2022 (in millions):
Operating properties, excluding assets held for sale or contribution
Development portfolio, including cost of land
Land
Other real estate investments (1)
Total consolidated real estate properties
Investment Before Depreciation
$
$
69,039
4,212
3,338
5,034
81,623
(1)
Included in other real estate investments were: (i) non-strategic real estate assets, primarily acquired in the Duke Transaction, that we do not intend to operate long-
term; (ii) land parcels we own and lease to third parties; (iii) non-industrial real estate assets that we generally intend to redevelop into industrial properties; and (iv)
costs associated with potential acquisitions and future development projects, including purchase options on land.
LEASE EXPIRATIONS
We generally lease our properties on a long-term basis (the average term for leases commenced, including new leases and renewals, in 2022 was 69 months). The following
table summarizes the lease expirations of our consolidated operating portfolio for leases in place at December 31, 2022 (dollars and square feet in millions):
2023 (1)
2024
2025
2026
2027
2028
2029
2030
2031
2032
Thereafter
Month to month
Total consolidated
Number of Leases
Occupied Square
Feet
Dollars
% of Total
Dollars Per Square
Foot
NER
916
1,155
993
1,039
952
422
251
141
115
123
116
6,223
128
6,351
$
$
54
78
76
84
85
52
39
27
23
29
35
582
3
585
357
508
514
570
643
420
267
198
162
223
334
4,196
8.5 % $
12.1 %
12.2 %
13.6 %
15.3 %
10.0 %
6.4 %
4.7 %
3.9 %
5.3 %
8.0 %
100.0 % $
6.61
6.51
6.76
6.79
7.56
8.08
6.85
7.33
7.04
7.69
9.54
7.21
(1)
We have signed leases that were due to expire in 2023, totaling 24 million square feet in our consolidated portfolio (3.4% of total NER). These are excluded from
2023 expirations and are reflected at their respective expiration year.
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CO-INVESTMENT VENTURES
Included in our O&M portfolio are consolidated and unconsolidated co-investment ventures that hold investments in real estate properties, primarily logistics facilities, that we
also manage. Our unconsolidated co-investment ventures are accounted for under the equity method. The amounts included for the unconsolidated ventures are reflected at
100% of the amount included in the ventures’ financial statements as calculated on a GAAP basis, not our proportionate share. The following table summarizes our
consolidated and unconsolidated co-investment ventures at December 31, 2022 (in millions):
Operating Properties
Square Feet
Gross
Book Value
Investment
in Land
Development Portfolio
– TEI
Consolidated Co-Investment Venture
U.S.:
Prologis U.S. Logistics Venture (“USLV”)
Total
Unconsolidated Co-Investment Ventures
U.S.:
Prologis Targeted U.S. Logistics Fund (“USLF”)
Other Americas:
FIBRA Prologis
Prologis Brazil Logistics Venture ("PBLV") and other joint
ventures
Subtotal Other Americas
Europe:
Prologis European Logistics Fund (“PELF”)
Prologis European Logistics Partners (“PELP”)
Subtotal Europe
Asia:
Nippon Prologis REIT (“NPR”)
Prologis China Core Logistics Fund (“PCCLF”)
Prologis China Logistics Venture
Subtotal Asia
Total
77 $
77 $
8,037 $
8,037 $
4 $
4 $
123 $
12,557 $
- $
44
16
60
161
58
219
43
31
15
89
491 $
2,916
817
3,733
17,400
6,432
23,832
6,669
2,331
756
9,756
49,878 $
-
51
51
13
34
47
-
-
13
13
111 $
60
60
200
-
106
106
47
64
111
-
-
541
541
958
For more information regarding our unconsolidated and consolidated co-investment ventures, see Notes 5 and 11 to the Consolidated Financial Statements in Item 8.
Financial Statements and Supplementary Data.
ITEM 3. Legal Proceedings
From time to time, we and our co-investment ventures are parties to a variety of legal proceedings arising in the ordinary course of business. We believe that, with respect to
any such matters to which we are currently a party, the ultimate disposition of any such matter will not result in a material adverse effect on our business, financial position or
results of operations.
ITEM 4. Mine Safety Disclosures
Not Applicable.
PART II
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
MARKET INFORMATION AND HOLDERS
Our common stock is listed on the NYSE under the symbol “PLD.”
Stock Performance Graph
The following line graph compares the change in Prologis, Inc. cumulative total stockholder’s return on shares of its common stock from December 31, 2017, to the
cumulative total return of the S&P 500 Stock Index and the Financial Times and Stock Exchange NAREIT
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Equity REITs Index from December 31, 2017, to December 31, 2022. The graph assumes an initial investment of $100 in our common stock and each of the indices on
December 31, 2017, and, as required by the SEC, the reinvestment of all dividends. The return shown on the graph is not necessarily indicative of future performance.
This graph and the accompanying text are not “soliciting material,” are not deemed filed with the SEC and are not to be incorporated by reference in any filing by the
Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective
of any general incorporation language in any such filing.
PREFERRED STOCK DIVIDENDS
At December 31, 2022, we had 1.3 million shares of Series Q preferred stock outstanding with a liquidation preference of $50 per share that will be redeemable at our option
on or after November 13, 2026. Dividends payable per share were $4.27 for the year ended December 31, 2022.
For more information regarding dividends, see Note 9 to the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data.
SALES OF UNREGISTERED SECURITIES
During 2022, we issued 2.1 million common limited partnership units in Prologis, L.P. in the Duke Transaction and 0.3 million shares of common stock of Prologis, Inc. in
connection with the redemption of common units of Prologis, L.P. in reliance on the exemption from registration requirements of the Securities Act of 1933, as amended,
afforded by Section 4(a)(2) thereof.
PURCHASES OF EQUITY SECURITIES
During 2022, we did not purchase any common stock of Prologis, Inc. in connection with our share purchase program.
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS
For information regarding securities authorized for issuance under our equity compensation plans, see Notes 9 and 12 to the Consolidated Financial Statements in Item 8.
Financial Statements and Supplementary Data.
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OTHER STOCKHOLDER MATTERS
Common Stock Plans
Further information relative to our equity compensation plans will be provided in our 2022 Proxy Statement or in an amendment filed on Form 10-K/A.
ITEM 6. [Reserved]
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the Consolidated Financial Statements included in Item 8. Financial Statements and Supplementary Data of this
report and the matters described under Item 1A. Risk Factors.
A discussion regarding our financial condition and results of operations for 2022 compared to 2021 is presented below. Information on 2020 is included in graphs only to
show year over year trends in our results of operations and operating metrics. Our financial condition for 2020, results of operations for 2020 and 2021 compared to 2020 and
details on the acquisitions of Industrial Property Trust Inc. (“IPT” or the “IPT Transaction”) and Liberty Property Trust and Liberty Property Limited Partnership (“Liberty” or the
“Liberty Transaction”) referenced throughout this document can be found under Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations, which is incorporated by reference herein to our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 9,
2022, and is available on the SEC’s website at www.sec.gov and our Investor Relations website at www.ir.prologis.com.
MANAGEMENT’S OVERVIEW
Summary of 2022
In 2022, our operating results were robust and we ended the year in a solid financial position. Strong demand and low vacancy in the global logistics markets drove increases
in market rents throughout the year, which translated into significant rent change on rollover and same-store growth in our O&M portfolio. Our O&M operating portfolio
occupancy was 98.2% at December 31, 2022 and rent change on leases commenced during 2022 was 48.0%, on a net effective basis, based on our ownership share. Our
2022 results are representative of the prospects we see for our business despite challenging headwinds from the capital markets, ongoing inflation, steeply rising interest
rates and the war and energy crisis in Europe that are all pressuring the global economy. Due to current market conditions, we expect some decline in asset valuations in
2023 and therefore will continue to be disciplined as we evaluate capital deployment activities, including a focus on build-to-suit developments and a pause on contributions
into our open-ended funds in the near term. We believe we are well-positioned to organically grow revenues given the increase in market rents over the last several years
and our high lease mark-to-market. However, we will be cautious as we manage our business in this uncertain environment.
We completed the following significant activities in 2022, as described in the Notes to the Consolidated Financial Statements:
•
•
•
•
•
•
On October 3, 2022, we completed the Duke Transaction for $23.2 billion through the issuance of equity and assumption of debt. We assumed $4.2 billion of debt with
a weighted average stated interest rate of 2.3% and 4.9% at fair value. We paid down the balance of $745 million on Duke’s line of credit subsequent to closing the
acquisition. The Duke portfolio was primarily comprised of logistics real estate assets, including 494 industrial operating properties, aggregating 144 million square
feet.
We generated net proceeds of $2.7 billion and realized net gains of $1.2 billion, principally from the contribution of properties to our unconsolidated co-investment
ventures in Europe and Japan and dispositions of non-strategic assets to third parties, primarily in the U.S.
We earned promotes aggregating $505 million ($386 million net of related strategic capital expenses), primarily during the third quarter of 2022 from the third-party
investors in PELF in Europe.
With the overall strengthening of the U.S. dollar against the foreign currencies in which we operate, in 2022 we realized net gains upon settlement of undesignated
derivative instruments that offset the negative impact of the translation of our earnings to U.S. dollars.
In June, we terminated our global senior credit facility (the “2019 Global Facility”) and entered into the 2022 Global Facility with a borrowing capacity of up to $3.0
billion and an extended initial maturity date of June 2026. We also upsized our second global senior credit facility (the “2021 Global Facility”), increasing its borrowing
capacity up to $2.0 billion. This resulted in increasing our total borrowing capacity under both facilities to $5.0 billion and modifying the base rate of the aggregate
lender commitments in U.S. dollars from the U.S. dollar London Inter-bank Offered Rate to the Secured Overnight Financing Rate.
At December 31, 2022, we had total available liquidity of $4.1 billion, with aggregate availability under our credit facilities of $3.9 billion and unrestricted cash balances
of $278 million.
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•
At December 31, 2022, we had total senior notes of $19.8 billion, with a weighted average remaining maturity of 10 years and an effective interest rate of 2.3%. In
addition to the senior notes assumed in the Duke Transaction, we issued $3.3 billion of senior notes in 2022 (principal in millions):
Aggregate Principal
Issuance Date Weighted Average
Issuance Date
January
February (2)
July
September (2)
November
December
Total
Borrowing Currency
£
€
¥
$
C$
¥
60 $
1,550 $
30,965 $
650 $
500 $
24,200 $
$
USD (1)
Interest Rate
Years
81
1,768
227
650
362
178
3,266
2.1%
1.0%
1.4%
4.6%
5.3%
1.8%
2.3%
20.0
8.5
15.5
10.3
8.2
13.4
9.8
Maturity Dates
December 2041
February 2024 – 2034
July 2027 – 2042
January 2033
January 2031
December 2027 – 2037
(1)
(2)
The exchange rate used to calculate into U.S. dollars was the spot rate at the settlement date.
A portion of the net proceeds from the issuance of these notes were used to finance green projects eligible under our green bond framework.
On October 6, 2022, we completed an exchange offer and consent solicitation for nine series of Duke’s senior notes for an aggregate amount of $3.4 billion, with $3.2
billion, or 96%, of the aggregate principal amount being validly tendered for exchange. The validly tendered senior notes were exchanged for notes issued by the OP. As
a result of the consent solicitation, we have no separate remaining financial reporting obligations or financial covenants associated with the senior notes assumed in the
Duke Transaction. All other terms of the assumed Duke senior notes remained substantially the same.
RESULTS OF OPERATIONS
We evaluate our business operations based on the NOI of our two operating segments: Real Estate (Rental Operations and Development) and Strategic Capital. NOI by
segment is a non-GAAP performance measure that is calculated using revenues and expenses directly from our financial statements. We consider NOI by segment to be an
appropriate supplemental measure of our performance because it helps management and investors understand our operating results.
Below is our NOI by segment per our Consolidated Financial Statements and a reconciliation of NOI by segment to Operating Income per the Consolidated Financial
Statements (in millions):
Real estate segment:
Rental revenues
Development management and other revenues
Rental expenses
Other expenses
Real Estate Segment – NOI
Strategic capital segment:
Strategic capital revenues
Strategic capital expenses
Strategic Capital Segment– NOI
General and administrative expenses
Depreciation and amortization expenses
Operating income before gains on real estate transactions, net
Gains on dispositions of development properties and land, net
Gains on other dispositions of investments in real estate, net
Operating income
2022
2021
4,913
21
(1,206 )
(40 )
3,688
1,040
(304 )
736
(331 )
(1,813 )
2,280
598
589
3,467
$
$
4,148
20
(1,041 )
(22 )
3,105
591
(207 )
384
(294 )
(1,578 )
1,617
817
773
3,207
$
$
See Note 17 to the Consolidated Financial Statements for more information on our segments and a reconciliation of each business segment’s NOI to Operating Income and
Earnings Before Income Taxes.
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Real Estate Segment
This operating segment principally includes rental revenue and rental expenses recognized from our consolidated properties. We allocate the costs of our property
management and leasing functions to the Real Estate Segment through Rental Expenses and the Strategic Capital Segment through Strategic Capital Expenses based on
the square footage of the relative portfolios. In addition, this segment is impacted by our development, acquisition and disposition activities.
Below are the components of Real Estate Segment NOI, derived directly from line items in the Consolidated Financial Statements (in millions):
Rental revenues
Development management and other revenues
Rental expenses
Other expenses
Real Estate Segment – NOI
2022
2021
$
$
4,913
21
(1,206 )
(40 )
3,688
$
$
4,148
20
(1,041 )
(22 )
3,105
The change in Real Estate Segment (“RES”) NOI in 2022 compared to 2021 of approximately $583 million was impacted by the following activities (in millions):
(1)
(2)
(3)
Acquisition activity is principally due to the Duke Transaction on October 3, 2022. We primarily recognized intangible liabilities for the lower in-place rents, as
compared to current market rents, under the acquired leases from Duke. These intangible liabilities are amortized to rental revenues over the remaining lease term,
which on average is 64 months.
During both periods, we experienced positive rental rate growth. Rental rate growth is a combination of higher rental rates on rollover of leases (or rent change) and
contractual rent increases on existing leases. If a lease has a contractual rent increase driven by a metric that is not known at the time the lease commences, such
as the consumer price index or a similar metric, the rent increase is not included in rent leveling and therefore impacts the rental revenue we recognize. Significant
rent change during both periods continues to be a key driver in increasing rental income. See below for key metrics on rent change on rollover and occupancy.
We calculate changes in NOI from development completions period over period by comparing the change in NOI generated on the pool of developments that
completed on or after January 1, 2021 through December 31, 2022.
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Below are key operating metrics of our consolidated operating portfolio, which excludes non-strategic industrial properties.
(1)
(2)
In 2022, we completed the Duke Transaction.
Consolidated square feet of leases commenced and weighted average net effective rent change were calculated for leases with initial terms of one year or greater.
Development Activity
The following table summarizes consolidated development activity (dollars and square feet in millions):
Starts:
Number of new development buildings during the period
Square feet
TEI
Percentage of build-to-suits based on TEI
Stabilizations:
Number of development buildings stabilized during the period
Square feet
TEI
Percentage of build-to-suits based on TEI
Weighted average stabilized yield (1)
Estimated value at completion
Estimated weighted average margin (2)
Estimated value creation
2022
2021
91
31
4,679
39.1 %
69
22
2,772
38.9 %
6.2 %
4,294
54.9 %
1,522
$
$
$
$
78
26
3,478
46.2 %
62
19
2,329
42.7 %
6.1 %
3,613
55.1 %
1,284
$
$
$
$
(1)
(2)
We calculate the weighted average stabilized yield as estimated NOI assuming stabilized occupancy divided by TEI.
Estimated weighted average margin is calculated on development properties as estimated value creation, less estimated closing costs and taxes, if any, on
properties expected to be sold or contributed, divided by TEI.
At December 31, 2022, the consolidated development portfolio, including properties under development and pre-stabilized properties, was expected to be completed before
November 2024 with a TEI of $7.5 billion and was 45.2% leased. The development portfolio included 15 buildings that were properties under development by Duke and
acquired at the time of the acquisition. Our investment in the development portfolio was $4.2 billion at December 31, 2022 leaving $3.3 billion remaining to be spent. For
additional information on our development portfolio at December 31, 2022, see Item 2. Properties.
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Table of Contents
Capital Expenditures
We capitalize costs incurred in improving and leasing our operating properties as part of the investment basis or within other assets. The following graph summarizes
capitalized expenditures, excluding development costs, of our consolidated operating properties during each year:
Our capital expenditures continue to increase year over year as we grow the consolidated operating portfolio through development and acquisitions. We plan to continue
allocating capital in 2023 to renovate and modernize our operating portfolio, including the addition of sustainable and efficient building features.
Strategic Capital Segment
This operating segment includes revenues from asset management and property management services performed, transactional services for acquisition, disposition and
leasing activity and promote revenue earned primarily from the unconsolidated co-investment ventures. Revenues associated with the Strategic Capital Segment fluctuate
because of changes in the size of the portfolios through acquisitions and dispositions, the fair value of the properties and other transactional activity including foreign currency
exchange rates and timing of promotes. These revenues are reduced by the direct costs associated with the asset and property-level management expenses for the
properties owned by these ventures. We allocate the costs of our property management and leasing functions to the Strategic Capital Segment through Strategic Capital
Expenses and to the Real Estate Segment through Rental Expenses based on the square footage of the relative portfolios. For further details regarding the key property
information and summarized financial condition and operating results of our unconsolidated co-investment ventures, refer to Note 5 to the Consolidated Financial Statements.
Below are the components of Strategic Capital Segment NOI derived directly from the line items in the Consolidated Financial Statements (in millions):
Strategic capital revenues
Strategic capital expenses
Strategic Capital Segment – NOI
2022
2021
$
$
1,040
(304 )
736
$
$
591
(207 )
384
Below is additional detail of our Strategic Capital Segment revenues, expenses and NOI (in millions):
Strategic capital revenues ($)
Recurring fees (2)
Transactional fees (3)
Promote revenue (4)
Total strategic capital revenues ($)
Strategic capital expenses ($) (4)
Strategic Capital Segment - NOI ($)
U.S. (1)
2022
2021
Other Americas
2021
2022
Europe
Asia
Total
2022
2021
2022
2021
2022
2021
178
22
15
215
(155 )
60
136
14
22
172
(112 )
60
45
6
32
83
(20 )
63
38
8
13
59
(12 )
47
167
20
458
645
(87 )
558
156
30
63
249
(45 )
204
78
19
-
97
(42 )
55
79
32
-
111
(38 )
73
468
67
505
1,040
(304 )
736
409
84
98
591
(207 )
384
(1)
(2)
The U.S. expenses include compensation and personnel costs for employees who are based in the U.S. but also support other geographies.
Recurring fees include asset management and property management fees. The increase in fees is primarily due to higher asset management fees driven by the
increases in the fair value of the properties based on third party valuations. We saw some decline in asset values in the last half of 2022, and we expect to see
additional decline in 2023.
(3)
Transactional fees include leasing commissions and acquisition, disposition, development and other fees.
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(4)
We generally earn promote revenue directly from third-party investors in the co-investment ventures based on the cumulative returns of the venture over a three-
year period or the stabilization of individual development projects owned by the venture. An increase in asset valuations in the co-investment ventures during the
promote period is one of the significant drivers of returns that can translate into earning future promote revenues. Included above is promote revenue earned from
PELF in September 2022. Approximately 40% of the promote earned by us from the co-investment ventures is paid to our employees as a combination of cash and
stock-based awards pursuant to the terms of the PPP and expensed through Strategic Capital Expenses, as vested.
G&A Expenses
G&A expenses were $331 million and $294 million for 2022 and 2021, respectively. G&A expenses increased in 2022 as compared to 2021, principally due to inflationary
increases and higher compensation expenses based on our performance. We expect that 2023 will include additional investments we are making in our Prologis Essentials
business, primarily in the energy teams. We capitalize certain internal costs that are incremental and directly related to our development and building improvement activities.
The following table summarizes capitalized G&A (in millions):
Building and land development activities
Operating building improvements and other
Total capitalized G&A expenses
Capitalized salaries and related costs as a percent of total salaries and related costs
Depreciation and Amortization Expenses
$
$
2022
2021
107
45
152
$
$
22.7 %
95
29
124
21.9 %
Depreciation and amortization expenses were $1.8 billion and $1.6 billion in 2022 and 2021, respectively.
The change in depreciation and amortization expenses in 2022 compared to 2021 of approximately $235 million was impacted by the following activities (in millions):
(1)
Included in acquisitions are the operating properties, other real estate properties and related lease intangibles acquired in the Duke Transaction.
Gains on Real Estate Transactions, Net
Gains on the disposition of development properties and land were $598 million and $817 million for 2022 and 2021, respectively, and primarily included gains from the
contribution of properties we developed to our unconsolidated co-investment ventures in Europe and Japan for 2022 and additionally in the U.S. for 2021. Gains on other
dispositions of investments in real estate were $589 million and $773 million for 2022 and 2021, respectively, which included sales of non-strategic operating properties in the
U.S., including properties acquired in the LPT Transaction and the IPT Transaction. Additionally, 2021 included the sale of our ownership interest in one of our
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unconsolidated ventures and the contribution of operating properties to our unconsolidated co-investment venture in the U.S. We utilized the proceeds from these
transactions primarily to fund our development activities during both periods. See Note 4 to the Consolidated Financial Statements for further information on these
transactions.
Our Owned and Managed (“O&M”) Operating Portfolio
We manage our business and review our operating fundamentals on an O&M basis, which includes our consolidated properties and properties owned by our unconsolidated
co-investment ventures. We believe reviewing the fundamentals this way allows management to understand the entire impact to the financial statements, as it will affect both
the Real Estate Segment and the Strategic Capital Segment, as well as the net earnings we recognize from our unconsolidated co-investment ventures based on our
ownership. We do not control the unconsolidated co-investment ventures for purposes of GAAP and the presentation of the ventures’ operating information does not
represent a legal claim.
Our O&M operating portfolio does not include our development portfolio, value-added properties, non-industrial properties or properties we do not have the intent to hold
long-term that are classified as either held for sale or within other real estate investments. Value-added properties are properties we have either acquired at a discount and
believe we could provide greater returns post-stabilization or properties we expect to repurpose to a higher and better use. See below for information on our O&M operating
portfolio at December 31 (square feet in millions):
Consolidated
Unconsolidated
Total
Number of
Properties
2022
Square
Feet
Percentage
Occupied
Number of
Properties
2021
Square
Feet
Percentage
Occupied
2,812
2,177
4,989
595
488
1,083
98.3 %
98.1 %
98.2 %
2,300
1,987
4,287
446
456
902
98.2 %
97.3 %
97.7 %
Below are the key leasing metrics of our O&M operating portfolio.
(1)
(2)
Square feet of leases commenced and weighted average net effective rent change were calculated for leases with initial terms of one year or greater. We retained
approximately 70% or more of our customers, based on the total square feet of leases commenced, for each year. In 2022, we experienced a significant increase
in net effective rent change due to increasing market rents.
Turnover costs include external leasing commissions and tenant improvements and represent the obligations incurred in connection with the lease commencement
for leases greater than one year. In 2022, spend on turnover costs remained similar to 2021, however, the value of the leases commenced increased due to strong
market rent growth.
Same Store Analysis
Our same store metrics are non-GAAP financial measures, which are commonly used in the real estate industry and expected from the financial community, on both a net
effective and cash basis. We evaluate the performance of the operating properties we own and manage using a “same store” analysis because the population of properties
in this analysis is consistent from period to period, which allows us and investors to analyze our ongoing business operations. We determine our same store metrics on
property NOI, which is calculated as rental revenue less rental expense for the applicable properties in the same store population for both consolidated and unconsolidated
properties based on our ownership interest, as further defined below.
We define our same store population for the three months ended December 31, 2022 as the properties in our O&M operating portfolio, including the property NOI for both
consolidated properties and properties owned by the unconsolidated co-investment ventures at January 1, 2021 and owned throughout the same three-month period in both
2021 and 2022. We believe the drivers of property NOI for the consolidated portfolio are generally the same for the properties owned by the ventures in which we invest and
therefore we evaluate the same store metrics of the O&M portfolio based on Prologis’ ownership in the properties (“Prologis Share”). The same store population excludes
properties held for sale to third parties, along with development properties that were not stabilized at the beginning
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of the period (January 1, 2021) and properties acquired or disposed of to third parties during the period. To derive an appropriate measure of period-to-period operating
performance, we remove the effects of foreign currency exchange rate movements by using the reported period-end exchange rate to translate from local currency into the
U.S. dollar, for both periods.
As non-GAAP financial measures, the same store metrics have certain limitations as analytical tools and may vary among real estate companies. As a result, we provide a
reconciliation of Rental Revenues less Rental Expenses (“Property NOI”) (from our Consolidated Financial Statements prepared in accordance with U.S. GAAP) to our Same
Store Property NOI measures.
We evaluate the results of our same store portfolio on a quarterly basis. The following is a reconciliation of our consolidated rental revenues, rental expenses and property
NOI for each quarter in 2022 and 2021 to the full year, as included in the Consolidated Statements of Income and within Note 19 to the Consolidated Financial Statements
and to the respective amounts in our same store portfolio analysis for the three months ended December 31 (dollars in millions):
2022
Rental revenues
Rental expenses
Property NOI
2021
Rental revenues
Rental expenses
Property NOI
March 31,
June 30,
September 30,
December 31,
Full Year
Three Months Ended
$
$
$
$
1,077
(276 )
801
1,022
(278 )
744
$
$
$
$
1,093
(270 )
823
1,015
(245 )
770
$
$
$
$
1,152
(285 )
867
1,037
(256 )
781
$
$
$
$
1,591
(375 )
1,216
1,074
(262 )
812
$
$
$
$
4,913
(1,206 )
3,707
4,148
(1,041 )
3,107
Reconciliation of Consolidated Property NOI to Same Store Property NOI measures:
Rental revenues
Rental expenses
Consolidated Property NOI
Adjustments to derive same store results:
Property NOI from consolidated properties not included in same store portfolio and
other adjustments (1)
Property NOI from unconsolidated co-investment ventures included in same store
portfolio (1)(2)
Third parties' share of Property NOI from properties included in same store portfolio (1)(2)
Prologis Share of Same Store Property NOI – Net Effective (2)
Consolidated properties straight-line rent and fair value lease adjustments
included in same store portfolio (3)
Unconsolidated co-investment ventures straight-line rent and fair value lease
adjustments included in same store portfolio (3)
Third parties' share of straight-line rent and fair value lease adjustments included
in same store portfolio (2)(3)
Prologis Share of Same Store Property NOI – Cash (2)(3)
Three Months Ended
December 31,
2022
2021
% Change
$
$
$
$
$
1,591
(375 )
1,216 $
1,074
(262 )
812
(471 )
615
(502 )
858
$
(17 )
(9 )
7
839 $
(118 )
578
(475 )
797
(24 )
(15 )
11
769
7.7 %
9.1 %
(1)
We exclude properties held for sale to third parties, along with development properties that were not stabilized at the beginning of the period and properties acquired
or disposed of to third parties during the period. We also exclude net termination and renegotiation fees to allow us to evaluate the growth or decline in each
property’s rental revenues without regard to one-time items that are not indicative of the property’s recurring operating performance. Net termination and
renegotiation fees represent the gross fee negotiated to allow a customer to terminate or renegotiate their lease, offset by the write-off of the asset recorded due to
the adjustment to straight-line rents over the lease term. Same Store Property NOI is adjusted to include an allocation of property management expenses for our
consolidated properties based on the property management services provided to each property (generally, based on a percentage of revenues). On consolidation,
these amounts are eliminated and the actual costs of providing property management and leasing services are recognized as part of our consolidated rental
expense.
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(2)
We include the Property NOI for the same store portfolio for both consolidated properties and properties owned by the co-investment ventures based on our
investment in the underlying properties. In order to calculate our share of Same Store Property NOI from the co-investment ventures in which we own less than
100%, we use the co-investment ventures’ underlying Property NOI for the same store portfolio and apply our ownership percentage at December 31, 2022 to the
Property NOI for both periods, including the properties contributed during the period. We adjust the total Property NOI from the same store portfolio of the co-
investment ventures by subtracting the third parties’ share of both consolidated and unconsolidated co-investment ventures.
During the periods presented, certain wholly owned properties were contributed to a co-investment venture and are included in the same store portfolio. Neither our
consolidated results nor those of the co-investment ventures, when viewed individually, would be comparable on a same store basis because of the changes in
composition of the respective portfolios from period to period (e.g. the results of a contributed property are included in our consolidated results through the contribution
date and in the results of the venture subsequent to the contribution date based on our ownership interest at the end of the period). As a result, only line items labeled
“Prologis Share of Same Store Property NOI” are comparable period over period.
(3)
We further remove certain noncash items (straight-line rent and amortization of fair value lease adjustments) included in the financial statements prepared in
accordance with U.S. GAAP to reflect a Same Store Property NOI – Cash measure.
We manage our business and compensate our executives based on the same store results of our O&M portfolio at 100% as we manage our portfolio on an ownership blind
basis. We calculate those results by including 100% of the properties included in our same store portfolio.
Other Components of Income (Expense)
Earnings from Unconsolidated Entities, Net
We recognized net earnings from unconsolidated entities, which are accounted for using the equity method, of $311 million and $404 million during 2022 and 2021,
respectively. Included in 2021 is our share of the gains recognized upon the sale of certain non-strategic assets acquired in the IPT Transaction and the sale by UKLV of its
operating properties to our unconsolidated co-investment ventures, PELF and PELP.
The earnings we recognize can be impacted by: (i) variances in revenues and expenses of each venture; (ii) the size and occupancy rate of the portfolio of properties owned
by each venture; (iii) gains or losses from the dispositions of properties and extinguishment of debt; (iv) our ownership interest in each venture; and (v) fluctuations in foreign
currency exchange rates used to translate our share of net earnings to U.S. dollars. See the discussion of our unconsolidated entities above in the Strategic Capital Segment
discussion and in Note 5 to the Consolidated Financial Statements for a further breakdown of our share of net earnings recognized.
Interest Expense
The following table details our net interest expense (dollars in millions):
Gross interest expense
Amortization of debt discount and debt issuance costs, net
Capitalized amounts
Net interest expense
Weighted average effective interest rate during the year
$
$
2022
2021
$
345
24
(60 )
$
309
1.8 %
299
9
(42 )
266
1.7 %
Interest expense increased in 2022, as compared to 2021, primarily due to assuming $4.2 billion of debt in the Duke Transaction with a weighted average interest rate at fair
value of 4.9%, which included $2.9 billion of senior notes and a $501 million term loan. Additionally, we issued $3.3 billion of senior notes with a weighted average interest
rate of 2.3%, at the issuance date, in 2022.
See Note 8 to the Consolidated Financial Statements and the Liquidity and Capital Resources section below, for further discussion of our debt and borrowing costs.
Foreign Currency and Derivative Gains (Losses) and Other Income (Expense), Net
We recognized foreign currency and derivative gains (losses) and other income (expense), net, of $242 million and $165 million for the year ended December 31, 2022 and
2021, respectively.
We are exposed to foreign currency exchange risk related to investments in and earnings from our foreign investments. We primarily hedge our foreign currency risk related
to our investments by borrowing in the currencies in which we invest thereby providing a natural hedge. We have issued debt in a currency that is not the same functional
currency of the borrowing entity and have designated a portion of the debt as a nonderivative net investment hedge. We recognize the remeasurement and settlement of the
translation adjustment on the unhedged portion of the debt and accrued interest in unrealized gains or losses. We may use derivative financial instruments to manage foreign
currency exchange rate risk related to our earnings. We recognize the change in fair value of the
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undesignated derivative contracts in unrealized gains and losses. Upon settlement of these transactions, we recognize realized gains or losses.
The following table details our foreign currency and derivative gains (losses), net included in earnings (in millions):
Realized foreign currency and derivative gains (losses), net:
Gains (losses) on the settlement of undesignated derivatives
Gains (losses) on the settlement of transactions with third parties
Total realized foreign currency and derivative gains (losses), net
Unrealized foreign currency and derivative gains, net:
Gains on the change in fair value of undesignated derivatives and unhedged debt
Gains on remeasurement of certain assets and liabilities
Total unrealized foreign currency and derivative gains, net
Total foreign currency and derivative gains, net
2022
2021
$
$
145 $
1
146
83
9
92
238 $
(8 )
(1 )
(9 )
169
4
173
164
See Note 2 to the Consolidated Financial Statements for more information about our foreign currency and derivative financial instrument policies and Note 15 to the
Consolidated Financial Statements for more information about our derivative and nonderivative transactions.
Losses on Early Extinguishment of Debt, Net
We recognized $20 million and $187 million of losses on the early extinguishment of debt in 2022 and 2021, respectively. The losses in 2021 included the redemption of $1.5
billion of senior notes with stated maturities between 2024 and 2025. See Note 8 to the Consolidated Financial Statements and the Liquidity and Capital Resources section,
for more information regarding our debt.
Income Tax Expense
We recognize income tax expense related to our taxable REIT subsidiaries and in the local, state and foreign jurisdictions in which we operate. Our current income tax
expense (benefit) fluctuates from period to period based primarily on the timing of our taxable income, including gains on the disposition of properties and fees earned from
the co-investment ventures. Deferred income tax expense (benefit) is generally a function of the period’s temporary differences and the utilization of net operating losses
generated in prior years that had been previously recognized as deferred income tax assets in taxable subsidiaries.
The following table summarizes our income tax expense (benefit) (in millions):
Current income tax expense (benefit):
Income tax expense
Income tax expense on dispositions
Income tax expense (benefit) on dispositions related to acquired tax liabilities
Total current income tax expense
Deferred income tax expense (benefit):
Income tax expense
Income tax benefit on dispositions related to acquired tax liabilities
Total deferred income tax expense
Total income tax expense
2022
2021
$
$
130
13
(21 )
122
13
-
13
135
$
$
108
62
3
173
4
(3 )
1
174
Our income taxes are discussed in more detail in Note 13 to the Consolidated Financial Statements.
Net Earnings Attributable to Noncontrolling Interests
This amount represents the third-party investors’ share of the earnings generated in consolidated entities in which we do not own 100% of the equity, reduced by the third-
party share of fees or promotes payable to us and earned during the period. We had net earnings attributable to noncontrolling interests of $191 million and $209 million in
2022 and 2021, respectively. Included in these amounts were $92 million and $82 million in 2022 and 2021, respectively, of net earnings attributable to the common limited
partnership unitholders of Prologis, L.P. Included in 2021 was the sale of non-strategic operating properties in our consolidated co-investment venture in the U.S.
See Note 11 to the Consolidated Financial Statements for further information on our noncontrolling interests.
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Other Comprehensive Income (Loss)
The key driver of changes in Accumulated Other Comprehensive Income (Loss) (“AOCI/L”) in 2022 and 2021 was the currency translation adjustment derived from changes
in exchange rates during both periods primarily on our net investments in real estate outside the U.S. and the borrowings we issue in the functional currencies of the
countries where we invest. These borrowings serve as a natural hedge of our foreign investments. In addition, we use derivative financial instruments, such as foreign
currency forward and option contracts to manage foreign currency exchange rate risk related to our foreign investments and interest rate swaps to manage interest rate risk,
that when designated the change in fair value is included in AOCI/L.
See Note 2 to the Consolidated Financial Statements for more information about our foreign currency and derivative financial instrument policies and Note 15 to the
Consolidated Financial Statements for more information about our derivative and nonderivative transactions and other comprehensive income (loss).
ENVIRONMENTAL MATTERS
See Note 16 in the Consolidated Financial Statements for further information about environmental liabilities.
LIQUIDITY AND CAPITAL RESOURCES
Overview
We consider our ability to generate cash from operating activities, distributions from our co-investment ventures, contributions and dispositions of properties and available
financing sources to be adequate to meet our anticipated future development, acquisition, operating, debt service, dividend and distribution requirements.
Given the uncertain macro environment and the impact on real estate valuations, we expect to be cautious as we evaluate capital deployment activities, including a focus on
build-to-suit developments and a pause on contributions in the near term.
Near-Term Principal Cash Sources and Uses
In addition to dividends and distributions, we expect our primary cash needs will consist of the following:
•
•
•
•
•
•
•
completion of the development and leasing of the properties in our consolidated development portfolio (at December 31, 2022, 136 properties in our development
portfolio were 45.2% leased with a current investment of $4.2 billion and a TEI of $7.5 billion when completed and leased, leaving $3.3 billion of estimated additional
required investment);
development of new properties that we may hold for long-term investment or subsequently contribute to unconsolidated co-investment ventures, including the
acquisition of land;
the acquisition of other real estate investments that we acquire with the intention of redeveloping into industrial properties;
capital expenditures and leasing costs on properties in our operating portfolio, including investments in solar panels and other renewable energy improvements;
repayment of debt and scheduled principal payments of $33 million in 2023;
additional investments in current and future unconsolidated co-investment ventures and other ventures; and
the acquisition of operating properties or portfolios of operating properties (depending on market and other conditions) for direct, long-term investment in our
consolidated portfolio (this might include acquisitions from our unconsolidated entities). In October 2022, we completed the Duke Transaction for $23.2 billion
through the issuance of equity and the assumption of debt.
We expect to fund our cash needs principally from the following sources (subject to market conditions):
•
•
•
•
•
net cash flow from property operations;
fees earned for services performed on behalf of co-investment ventures;
distributions received from co-investment ventures;
proceeds from the contribution of properties to current or future co-investment ventures;
proceeds from the disposition of properties or other investments to third parties;
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•
•
•
available unrestricted cash balances ($278 million at December 31, 2022);
borrowing capacity under our current credit facility arrangements ($3.9 billion available at December 31, 2022); and
proceeds from the issuance of debt.
Long-term, we may also voluntarily repurchase our outstanding debt or equity securities (depending on prevailing market conditions, our liquidity, contractual restrictions and
other factors) through cash purchases, open-market purchases, privately negotiated transactions, tender offers or otherwise. We may also fund our cash needs from the
issuance of equity securities, subject to market conditions, and the through sale of a portion of our investments in co-investment ventures.
Debt
The following table summarizes information about our consolidated debt by currency at December 31 (dollars in millions):
British pound sterling
Canadian dollar
Euro
Japanese yen
U.S. dollar
Total debt (1)
Weighted Average
Interest Rate
2022
Amount
Outstanding
% of Total
Weighted Average
Interest Rate
2021
Amount
Outstanding
% of Total
2.1 % $
4.5 %
1.3 %
1.0 %
3.6 %
2.5 % $
1,228
815
7,991
3,308
10,534
23,876
5.1 %
3.4 %
33.5 %
13.9 %
44.1 %
100.0 %
2.1 % $
2.7 %
1.0 %
0.9 %
2.6 %
1.6 % $
1,377
284
7,408
2,879
5,767
17,715
7.8 %
1.6 %
41.8 %
16.2 %
32.6 %
100.0 %
(1)
The weighted average remaining maturity for total debt outstanding at December 31, 2022 and 2021 was 9 and 10 years, respectively.
Our credit ratings at December 31, 2022, were A3 from Moody’s with a stable outlook and A from Standard & Poor’s with a stable outlook. These ratings allow us to borrow at
an advantageous interest rate. Adverse changes in our credit ratings could negatively impact our business and, in particular, our refinancing and other capital market
activities, our ability to manage debt maturities, our future growth and our development and acquisition activity. A securities rating is not a recommendation to buy, sell or hold
securities and is subject to revision or withdrawal at any time by the rating organization.
At December 31, 2022, we were in compliance with all of our financial debt covenants. These covenants include a number of customary financial covenants, such as
maintaining debt service coverage ratios, leverage ratios and fixed charge coverage ratios.
See Note 8 to the Consolidated Financial Statements for further discussion on our debt.
Equity Commitments Related to Certain Co-Investment Ventures
Certain co-investment ventures have equity commitments from us and our venture partners. Our venture partners fulfill their equity commitment with cash. We may fulfill our
equity commitment through contributions of properties or cash.
The following table summarizes the remaining equity commitments at December 31, 2022 (in millions):
Prologis Targeted U.S. Logistics Fund
Prologis European Logistics Fund
Prologis China Logistics Venture
Prologis Brazil Logistics Venture
Total
Prologis
Equity Commitments (1)
Venture Partners
Total
$
$
-
-
252
36
288
$
$
1,027
211
1,318
141
2,697
$
$
Expiration Date
2024 – 2025 (2)
2025 (2)
2023 – 2028
2026
1,027
211
1,570
177
2,985
(1)
The equity commitments for the co-investment ventures that operate in a different functional currency than the U.S. dollar were calculated using the foreign currency
exchange rate at December 31, 2022.
(2)
Venture partners have the option to cancel their equity commitment starting 18 months after the initial commitment date.
See the Cash Flow Summary below for more information about our investment activity in our co-investment ventures.
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Cash Flow Summary
The following table summarizes our cash flow activity (in millions):
Net cash provided by operating activities
Net cash used in investing activities
Net cash (used in) provided by financing activities
Net decrease in cash and cash equivalents, including the effect of foreign
currency exchange rates on cash
Operating Activities
2022
2021
4,126 $
(4,499 ) $
116 $
2,996
(1,990 )
(1,008 )
(278 ) $
(42 )
$
$
$
$
Cash provided by and used in operating activities, exclusive of changes in receivables and payables, was impacted by the following significant activities:
•
•
•
•
•
•
Real Estate Segment. We receive the majority of our operating cash through the net revenues of our Real Estate Segment, including the recovery of our operating
costs. Cash flows generated by the Real Estate Segment are impacted by our acquisition, development and disposition activities, which are drivers of NOI
recognized during each period. See the Results of Operations section above for further explanation of our Real Estate Segment. The revenues from this segment
include noncash adjustments for straight-lined rents and amortization of above and below market leases of $268 million and $148 million for 2022 and 2021,
respectively.
Strategic Capital Segment. We also generate operating cash through our Strategic Capital Segment by providing asset management and property management
and other services to our unconsolidated co-investment ventures. See the Results of Operations section above for the key drivers of the net revenues from our
Strategic Capital Segment. Included in Strategic Capital Revenues is the third-party investors’ share that is owed for promotes, which is recognized in operating
activities in the period the cash is received, generally the quarter after the revenue is recognized.
G&A expenses and equity-based compensation awards. We incurred $331 million and $294 million of G&A expenses in 2022 and 2021, respectively. We
recognized equity-based, noncash compensation expenses of $175 million and $113 million in 2022 and 2021, respectively, which were recorded to Rental
Expenses in the Real Estate Segment, Strategic Capital Expenses in the Strategic Capital Segment and G&A Expenses.
Operating distributions from unconsolidated entities. We received $410 million and $440 million of distributions as a return on our investment from the cash
flows generated from the operations of our unconsolidated entities in 2022 and 2021, respectively.
Cash paid for interest, net of amounts capitalized. We paid interest, net of amounts capitalized, of $234 million and $279 million in 2022 and 2021, respectively.
See Note 8 to the Consolidated Financial Statements for further information on this activity.
Cash paid for income taxes, net of refunds. We paid income taxes, net of refunds, of $130 million and $149 million in 2022 and 2021, respectively. See Note 13
to the Consolidated Financial Statements for further information on this activity.
Investing Activities
Cash provided by investing activities is driven by proceeds from the sale of real estate assets that include the contribution of properties we developed to our unconsolidated
co-investment ventures as well as the sale of operating properties. Contribution and disposition activity in 2022 was significantly lower than in 2021 due to the sale of non-
strategic assets in 2021 and a pause on contributions in the fourth quarter of 2022. Cash used in investing activities is primarily driven by our capital deployment activities of
investing in real estate development, acquisitions and capital expenditures as discussed above. Acquisition activity includes land for future development, operating properties
and other real estate assets. See Note 4 to the Consolidated Financial Statements for further information on these activities. In addition, the following significant transactions
also impacted our cash used in and provided by investing activities:
•
•
Duke Transaction, net of cash acquired. We paid net cash of $92 million to complete the Duke Transaction in 2022, primarily due to transaction costs. The
acquisition was financed through the issuance of equity and the assumption of debt. A portion of this debt was paid down subsequent to the acquisition, see the
Financing Activities section below. See Note 3 to the Consolidated Financial Statements for more information on this transaction.
Investments in and advances to our unconsolidated entities. We invested cash in our unconsolidated entities that represented our proportionate share, of $442
million and $798 million in 2022 and 2021, respectively. The ventures used the funds for the acquisition of properties, development and repayment of debt. See Note
5 to the Consolidated Financial Statements for more detail on our unconsolidated co-investment ventures.
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•
•
Return of investment from unconsolidated entities. We received distributions from unconsolidated entities as a return of investment of $77 million and $58
million in 2022 and 2021, respectively. Included in these amounts were distributions from venture activities including proceeds from property sales, debt refinancing
and the redemption of our investment in certain unconsolidated entities.
Net proceeds from (payments on) the settlement of net investment hedges. We received $56 million and paid $13 million for the settlement of net investment
hedges in 2022 and 2021, respectively. See Note 15 to the Consolidated Financial Statements for further information on our derivative transactions.
Financing Activities
Cash provided by and used in financing activities is principally driven by proceeds from and payments on credit facilities and other debt, along with dividends paid on
common and preferred stock and noncontrolling interest contributions and distributions.
Our repurchase of and payments on debt and proceeds from the issuance of debt consisted of the following activity (in millions):
Repurchase of and payments on debt (including extinguishment costs)
Regularly scheduled debt principal payments and payments at maturity
Secured mortgage debt
Senior notes
Term loans
Total
Proceeds from the issuance of debt
Secured mortgage debt
Senior notes
Term loans
Total
2022 (1)
2021
$
$
$
$
914
328
3
136
1,381
331
3,256
529
4,116
$
$
$
$
10
656
1,644
250
2,560
242
2,902
454
3,598
(1) We completed the Duke Transaction in 2022 and assumed $4.2 billion of debt. We paid down the balance of $745 million on Duke’s line of credit subsequent to
closing the acquisition which is reflected in Net proceeds from (payments on) credit facilities. The assumption of debt was excluded from this table.
Unconsolidated Co-Investment Venture Debt
We had investments in and advances to our unconsolidated co-investment ventures of $8.1 billion at December 31, 2022. The ventures listed below had total third-party debt
of $13.5 billion at December 31, 2022 with a weighted average remaining maturity of 7 years and weighted average interest rate of 2.8%. Certain of our ventures do not have
third-party debt and are therefore excluded. This debt is non-recourse to Prologis and other investors in the co-investment ventures and bears interest as follows at
December 31, 2022 (dollars in millions):
Prologis Targeted U.S. Logistics Fund
FIBRA Prologis
Prologis European Logistics Fund
Nippon Prologis REIT
Prologis China Core Logistics Fund
Prologis China Logistics Venture
Total
Total Debt (1)
3,468
920
5,315
2,395
826
589
13,513
$
$
Weighted Average
Interest Rate
3.5%
4.0%
2.4%
0.7%
5.3%
5.5%
$
$
Gross Book Value of
Real Estate (1)
13,155
2,939
17,581
6,669
2,331
1,168
43,843
Ownership %
26.2%
47.9%
23.8%
15.1%
15.5%
15.0%
(1)
The weighted average loan-to-value ratio for all unconsolidated co-investment ventures was 26.3% at December 31, 2022. Loan-to-value, a non-GAAP measure,
was calculated as the percentage of total third-party debt to the gross book value of real estate for each venture and weighted based on the cumulative gross book
value of all unconsolidated co-investment ventures.
At December 31, 2022, we did not guarantee any third-party debt of the unconsolidated co-investment ventures. In our role as the manager or sponsor, we work with the co-
investment ventures to maintain sufficient liquidity and refinance their maturing debt. There can be no assurance that the co-investment ventures will be able to refinance any
maturing indebtedness on terms as favorable as the maturing debt, or at all. If the ventures are unable to refinance the maturing indebtedness with newly issued debt, they
may be able to obtain funds by voluntary capital contributions from us and our partners or by selling assets. Certain of our ventures also have credit facilities, or
unencumbered properties, both of which may be used to obtain funds.
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Dividend and Distribution Requirements
Our dividend policy on our common stock is to distribute a percentage of our cash flow to ensure that we will meet the dividend requirements of the IRC, relative to
maintaining our REIT status, while still allowing us to retain cash to fund our capital deployment and other investment activities.
Under the IRC, REITs may be subject to certain federal income and excise taxes on undistributed taxable income.
We paid quarterly cash dividends of $0.79 and $0.63 per common share in 2022 and 2021, respectively. Our future common stock dividends, if and as declared, may vary
and will be determined by the Board based upon the circumstances prevailing at the time, including our financial condition, operating results and REIT distribution
requirements, and may be adjusted at the discretion of the Board during the year.
We make distributions on the common limited partnership units outstanding at the same per unit amount as our common stock dividend. The Class A common limited
partnership units (“Class A Units”) in the OP are entitled to a quarterly distribution equal to $0.64665 per unit so long as the common units receive a quarterly distribution of at
least $0.40 per unit. We paid a quarterly cash distribution of $0.64665 per Class A Unit in 2022 and 2021.
At December 31, 2022, our Series Q preferred stock had an annual dividend rate of 8.54% per share and the dividends are payable quarterly in arrears.
Pursuant to the terms of our preferred stock, we are restricted from declaring or paying any dividend with respect to our common stock unless and until all cumulative
dividends with respect to the preferred stock have been paid and sufficient funds have been set aside for dividends that have been declared for the relevant dividend period
with respect to the preferred stock.
Other Commitments
On an ongoing basis, we are engaged in various stages of negotiations for the acquisition or disposition of individual properties or portfolios of properties.
CRITICAL ACCOUNTING POLICIES
A critical accounting policy is one that involves an estimate or assumption that is subjective and requires management judgment about the effect of a matter that is inherently
uncertain and material to an entity’s financial condition and results of operations. Management’s judgment considers historical and current economic conditions and
expectations for the future. Changes in estimates could affect our financial position and specific items in our results of operations that are used by stockholders, potential
investors, industry analysts and lenders in their evaluation of our performance. Of the significant accounting policies discussed in Note 2 to the Consolidated Financial
Statements, those presented below have been identified by us as meeting the criteria to be considered critical accounting policies as they relate to our financial condition as
of December 31, 2022 and 2021 and our operating results for the three-year period ended December 31, 2022. Refer to Note 2 for more information on these critical
accounting policies.
Asset Acquisitions
We generally account for an acquisition of a single property or portfolio of properties as an asset acquisition. We measure the real estate assets acquired through an asset
acquisition based on their cost or total consideration exchanged. The difference between the cost and the estimated fair value (excess or bargain consideration) is allocated
to the real estate properties and related lease intangibles on a relative fair value basis. Assets we do not intend to hold long-term are recorded at fair value. At a property-
level, we allocate the fair value to the components, which include building, land, improvements, and intangible assets or liabilities related to acquired leases. The most
significant portion of the allocation is to building and land and requires the use of market based estimates and assumptions.
The fair value of real estate properties subject to purchase price allocation is based on the expected future cash flows of the property and various characteristics of the
markets where the property is located utilizing an income approach methodology, which may be a discounted cash flow analysis or applying a capitalization rate to the
estimated net operating income of a property. Key assumptions may include market rents and capitalization rates. Estimates of future cash flows are based on a number of
factors including historical operating results, known trends and market and economic conditions. We determine capitalization rates by market based on recent transactions
and other market data and adjust if necessary, based on the property characteristics. The fair value of land is generally based on relevant market data, such as a comparison
of the subject site to similar parcels that have recently been sold or are currently being offered on the market for sale. The use of different assumptions to value the acquired
properties and allocate the most significant portion of the property value between the building and land could affect the depreciation expense we recognize over the
estimated remaining useful life.
Recoverability of Real Estate Assets
We assess the carrying values of our respective long-lived assets whenever events or changes in circumstances indicate that the carrying amounts of these assets may not
be fully recoverable. This assessment is primarily triggered based on the shortening of the
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expected hold period due to our change in intent to sell a property in the near term. We have processes to monitor our intent with regard to our investments and the
estimated disposition value in comparison to the current carrying value. If our assessment of potential triggering events indicates that the carrying value of a property that we
expect to sell in the near term is not recoverable, we recognize an impairment charge for the amount by which the carrying value exceeds the current estimated fair value of
the property. We determine the fair value of the property based on the proceeds from disposition that are estimated based on quoted market values, third-party appraisals or
discounted cash flow models that utilize the future net operating income of the property and expected market capitalization rates. The use of projected future cash flows is
based on assumptions that are consistent with our estimates of future expectations and the strategic plan we use to manage our underlying business. Changes in economic
and operating conditions could impact our intent and the assumptions used in determining the fair value that could result in future impairment.
NEW ACCOUNTING PRONOUNCEMENTS
None.
FUNDS FROM OPERATIONS ATTRIBUTABLE TO COMMON STOCKHOLDERS/UNITHOLDERS (“FFO”)
FFO is a non-GAAP financial measure that is commonly used in the real estate industry. The most directly comparable GAAP measure to FFO is net earnings.
The National Association of Real Estate Investment Trusts (“NAREIT”) defines FFO as earnings computed under GAAP to exclude historical cost depreciation and gains and
losses from the sales net of any related tax, along with impairment charges, of previously depreciated properties. We also exclude the gains on revaluation of equity
investments upon acquisition of a controlling interest and the gain recognized from a partial sale of our investment, as these are similar to gains from the sales of previously
depreciated properties. We exclude similar adjustments from our unconsolidated entities and the third parties’ share of our consolidated co-investment ventures.
Our FFO Measures
Our FFO measures begin with NAREIT’s definition and we make certain adjustments to reflect our business and the way that management plans and executes our business
strategy. While not infrequent or unusual, the additional items we adjust for in calculating FFO, as modified by Prologis and Core FFO, both as defined below, are subject to
significant fluctuations from period to period. Although these items may have a material impact on our operations and are reflected in our financial statements, the removal of
the effects of these items allows us to better understand the core operating performance of our properties over the long term. These items have both positive and negative
short-term effects on our results of operations in inconsistent and unpredictable directions that are not relevant to our long-term outlook.
We calculate our FFO measures, as defined below, based on our proportionate ownership share of both our unconsolidated and consolidated ventures. We reflect our share
of our FFO measures for unconsolidated ventures by applying our average ownership percentage for the period to the applicable reconciling items on an entity by entity
basis. We reflect our share for consolidated ventures in which we do not own 100% of the equity by adjusting our FFO measures to remove the noncontrolling interests share
of the applicable reconciling items based on our average ownership percentage for the applicable periods.
These FFO measures are used by management as supplemental financial measures of operating performance and we believe that it is important that stockholders, potential
investors and financial analysts understand the measures management uses. We do not use our FFO measures as, nor should they be considered to be, alternatives to net
earnings computed under GAAP, as indicators of our operating performance, as alternatives to cash from operating activities computed under GAAP or as indicators of our
ability to fund our cash needs.
We analyze our operating performance principally by the rental revenue of our real estate and the revenues from our strategic capital business, net of operating,
administrative and financing expenses. This income stream is not directly impacted by fluctuations in the market value of our investments in real estate or debt securities.
FFO, as modified by Prologis attributable to common stockholders/unitholders (“FFO, as modified by Prologis”)
To arrive at FFO, as modified by Prologis, we adjust the NAREIT defined FFO measure to exclude the impact of foreign currency related items and deferred tax, specifically:
•
•
•
deferred income tax benefits and deferred income tax expenses recognized by our subsidiaries;
current income tax expense related to acquired tax liabilities that were recorded as deferred tax liabilities in an acquisition, to the extent the expense is offset with a
deferred income tax benefit in earnings that is excluded from our defined FFO measure; and
foreign currency exchange gains and losses resulting from (i) debt transactions between us and our foreign entities, (ii) third-party debt that is used to hedge our
investment in foreign entities, (iii) derivative financial instruments related to any such debt transactions, and (iv) mark-to-market adjustments associated with other
derivative financial instruments.
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We use FFO, as modified by Prologis, so that management, analysts and investors are able to evaluate our performance against other REITs that do not have similar
operations or operations in jurisdictions outside the U.S.
Core FFO attributable to common stockholders/unitholders (“Core FFO”)
In addition to FFO, as modified by Prologis, we also use Core FFO. To arrive at Core FFO, we adjust FFO, as modified by Prologis, to exclude the following recurring and
nonrecurring items that we recognize directly in FFO, as modified by Prologis:
•
•
•
•
•
gains or losses from the disposition of land and development properties that were developed with the intent to contribute or sell;
income tax expense related to the sale of investments in real estate;
impairment charges recognized related to our investments in real estate generally as a result of our change in intent to contribute or sell these properties;
gains or losses from the early extinguishment of debt and redemption and repurchase of preferred stock; and
expenses related to natural disasters.
We use Core FFO, including by segment and region, to: (i) assess our operating performance as compared to other real estate companies; (ii) evaluate our performance and
the performance of our properties in comparison with expected results and results of previous periods; (iii) evaluate the performance of our management; (iv) budget and
forecast future results to assist in the allocation of resources; (v) provide guidance to the financial markets to understand our expected operating performance; and (vi)
evaluate how a specific potential investment will impact our future results.
Limitations on the use of our FFO measures
While we believe our modified FFO measures are important supplemental measures, neither NAREIT’s nor our measures of FFO should be used alone because they
exclude significant economic components of net earnings computed under GAAP and are, therefore, limited as an analytical tool. Accordingly, these are only a few of the
many measures we use when analyzing our business. Some of the limitations are:
•
•
•
•
•
•
•
The current income tax expenses that are excluded from our modified FFO measures represent the taxes that are payable.
Depreciation and amortization of real estate assets are economic costs that are excluded from FFO. FFO is limited, as it does not reflect the cash requirements that
may be necessary for future replacements of the real estate assets. Furthermore, the amortization of capital expenditures and leasing costs necessary to maintain
the operating performance of logistics facilities are not reflected in FFO.
Gains or losses from property dispositions and impairment charges related to expected dispositions represent changes in value of the properties. By excluding these
gains and losses, FFO does not capture realized changes in the value of disposed properties arising from changes in market conditions.
The deferred income tax benefits and expenses that are excluded from our modified FFO measures result from the creation of a deferred income tax asset or
liability that may have to be settled at some future point. Our modified FFO measures do not currently reflect any income or expense that may result from such
settlement.
The foreign currency exchange gains and losses that are excluded from our modified FFO measures are generally recognized based on movements in foreign
currency exchange rates through a specific point in time. The ultimate settlement of our foreign currency-denominated net assets is indefinite as to timing and
amount. Our FFO measures are limited in that they do not reflect the current period changes in these net assets that result from periodic foreign currency exchange
rate movements.
The gains and losses on extinguishment of debt or preferred stock that we exclude from our Core FFO, may provide a benefit or cost to us as we may be settling
our obligation at less or more than our future obligation.
The natural disaster expenses that we exclude from Core FFO are costs that we have incurred.
We compensate for these limitations by using our FFO measures only in conjunction with net earnings computed under GAAP when making our decisions. This information
should be read with our complete Consolidated Financial Statements prepared under GAAP. To assist investors in compensating for these limitations, we reconcile our
modified FFO measures to our net earnings computed under GAAP as follows (in millions):
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Reconciliation of net earnings attributable to common stockholders to FFO measures:
Net earnings attributable to common stockholders
2022
2021
$
3,359 $
2,934
Add (deduct) NAREIT defined adjustments:
Real estate related depreciation and amortization
Gains on other dispositions of investments in real estate, net of taxes
Reconciling items related to noncontrolling interests
Our share of reconciling items included in earnings related to unconsolidated entities
NAREIT defined FFO attributable to common stockholders/unitholders
Add (deduct) our modified adjustments:
Unrealized foreign currency and derivative gains, net
Deferred income tax expense
Current income tax expense (benefit) on dispositions related to acquired tax liabilities
Reconciling items related to noncontrolling interests
Our share of reconciling items included in earnings related to unconsolidated entities
FFO, as modified by Prologis attributable to common stockholders/unitholders
Adjustments to arrive at Core FFO:
Gains on dispositions of development properties and land, net
Current income tax expense on dispositions
Losses on early extinguishment of debt, net
Reconciling items related to noncontrolling interests
Our share of reconciling items included in earnings related to unconsolidated entities
Core FFO attributable to common stockholders/unitholders
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
1,763
(595 )
(13 )
363
4,877
(85 )
13
(21 )
-
(42 )
4,742
(598 )
18
20
5
1
4,188 $
$
1,534
(749 )
5
200
3,924
(173 )
1
3
1
(1 )
3,755
(817 )
38
187
7
2
3,172
We are exposed to the impact of foreign exchange-related variability and earnings volatility on our foreign investments and interest rate changes. See our risk factors in Item
1A. Risk Factors, specifically Risks Related to our Global Operations and Risks Related to Financing and Capital. See also Notes 2 and 15 in the Consolidated Financial
Statements in Item 8. Financial Statements and Supplementary Data for more information about our foreign operations and derivative financial instruments.
We monitor our market risk exposures using a sensitivity analysis. Our sensitivity analysis estimates the exposure to market risk sensitive instruments assuming a
hypothetical 10% adverse change in foreign currency exchange rates or interest rates at December 31, 2022. The results of the sensitivity analysis are summarized in the
following sections. The sensitivity analysis is of limited predictive value. As a result, revenues and expenses, as well as our ultimate realized gains or losses with respect to
foreign currency exchange rate and interest rate fluctuations will depend on the exposures that arise during a future period, hedging strategies at the time and the prevailing
foreign currency exchange rates and interest rates.
Foreign Currency Risk
We are exposed to foreign currency exchange variability related to investments in and earnings from our foreign investments. Foreign currency market risk is the possibility
that our results of operations or financial position could be better or worse than planned because of changes in foreign currency exchange rates. We primarily hedge our
foreign currency risk by borrowing in the currencies in which we invest thereby providing a natural hedge. Additionally, we hedge our foreign currency risk by entering into
derivative financial instruments that we designate as net investment hedges, as these amounts offset the translation adjustments on the underlying net assets of our foreign
investments. At December 31, 2022, after consideration of our ability to borrow in the foreign currencies in which we invest and also derivative and nonderivative financial
instruments as discussed in Note 15 to the Consolidated Financial Statements, we had minimal net equity denominated in a currency other than the U.S. dollar.
For the year ended December 31, 2022, $975 million or 16% of our total consolidated revenue was denominated in foreign currencies. We enter into other foreign currency
contracts, such as forwards, to reduce fluctuations in foreign currency associated with the translation of the future earnings of our international subsidiaries. We have forward
contracts that were not designated as hedges, denominated principally in British pound sterling, Canadian dollar, euro and Japanese yen, and have an aggregate notional
amount of $1.6 billion to mitigate risk associated with the translation of the future earnings of our subsidiaries denominated in these currencies. The gain or loss on
settlement of these contracts is included in our earnings and offsets the lower or higher translation of earnings from our investments denominated in currencies other than
the U.S. dollar. Although the impact to net earnings is mitigated through higher translated U.S. dollar earnings from these currencies, a weakening of the U.S. dollar against
these currencies by 10% could result in a $164 million cash payment on settlement of these contracts.
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Interest Rate Risk
We are also exposed to the impact of interest rate changes on future earnings and cash flows. To mitigate that risk, we generally borrow with fixed rate debt and we may use
derivative instruments to fix the interest rate on our variable rate debt. At December 31, 2022, $21.1 billion of our debt bore interest at fixed rates and therefore the fair value
of these instruments was affected by changes in market interest rates. At December 31, 2022, $3.3 billion of our debt bore interest at variable rates. The following table
summarizes the future repayment of debt and scheduled principal payments at December 31, 2022 (dollars in millions):
Fixed rate debt (1)
Weighted average interest rate (2)
Variable rate debt
Credit facilities
Secured mortgage debt
Senior notes
Term loans
Total variable rate debt
$
$
$
2023
2024
2025
2026
29
$
3.4 %
255
$
1.4 %
176
$
3.1 %
1,313
$
3.3 %
Thereafter
19,343
$
2.3 %
Total
Fair Value
21,116
$
2.3 %
17,324
-
4
-
-
4
$
$
487
-
160
-
647
$
$
-
10
-
721
731
$
$
1,051
64
-
645
1,760
$
$
-
-
-
190
190
$
$
1,538
78
160
1,556
3,332
$
$
1,538
79
160
1,555
3,332
(1)
(2)
At December 31, 2022, we had one interest rate swap agreement to fix €150 million ($156 million) of our floating rate euro senior notes which is included in fixed
rate debt.
The weighted average interest rates represent the effective interest rates (including amortization of debt issuance costs and noncash premiums and discounts) at
December 31, 2022 for the debt outstanding and include the impact of designated interest rate swaps, which effectively fix the interest rate on certain variable rate
debt.
At December 31, 2022, the weighted average effective interest rate on our variable rate debt was 2.5%, which was calculated using an average balance on our credit
facilities throughout the year and our other variable rate debt balances at December 31, 2022. Changes in interest rates can cause interest expense to fluctuate on our
variable rate debt. On the basis of our sensitivity analysis, a 10% increase in interest rates on our average outstanding variable rate debt balances would result in additional
annual interest expense of $6 million for the year ended December 31, 2022, which equates to a change in interest rates of 25 basis points on our average outstanding
variable rate debt balances and 2 basis point on our average total debt portfolio balances.
ITEM 8. Financial Statements and Supplementary Data
The Consolidated Balance Sheets of Prologis, Inc. and Prologis, L.P. at December 31, 2022 and 2021, the Consolidated Statements of Income of Prologis, Inc. and Prologis,
L.P., the Consolidated Statements of Comprehensive Income of Prologis, Inc. and Prologis, L.P., the Consolidated Statements of Equity of Prologis, Inc., the Consolidated
Statements of Capital of Prologis, L.P. and the Consolidated Statements of Cash Flows of Prologis, Inc. and Prologis, L.P. for each of the years in the three-year period
ended December 31, 2022, Notes to Consolidated Financial Statements and Schedule III — Real Estate and Accumulated Depreciation, together with the reports of KPMG
LLP, independent registered public accounting firm, are included under Item 15 of this report and are incorporated herein by reference. Selected unaudited quarterly financial
data are voluntarily presented in Note 19 of the Consolidated Financial Statements.
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
ITEM 9A. Controls and Procedures
Controls and Procedures (Prologis, Inc.)
Prologis, Inc. carried out an evaluation under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of
the effectiveness of the disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities and Exchange Act of 1934 (the “Exchange Act”)) at December
31, 2022. Based on this evaluation, the Chief Executive Officer and the Chief Financial Officer have concluded that the disclosure controls and procedures are effective to
ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the
time periods specified in the SEC rules and forms. Subsequent to December 31, 2022, there were no significant changes in the internal controls or in other factors that could
significantly affect these controls, including any corrective actions with regard to significant deficiencies and material weaknesses.
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Changes in Internal Control over Financial Reporting
There have not been any changes in Prologis, Inc.’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) that
occurred during the quarter ended December 31, 2022, that have materially affected, or are reasonably likely to materially affect, Prologis, Inc.’s internal control over financial
reporting.
Management’s Annual Report on Internal Control over Financial Reporting
We are responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.
Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of the
internal control over financial reporting was conducted at December 31, 2022, based on the criteria described in “Internal Control — Integrated Framework” (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management determined that, at December 31, 2022, the internal
control over financial reporting was effective.
Our internal control over financial reporting at December 31, 2022, has been audited by KPMG LLP, an independent registered public accounting firm, as stated in their
attestation report, which is included herein.
Limitations of the Effectiveness of Controls
Management’s assessment included an evaluation of the design of the internal control over financial reporting and testing of the operational effectiveness of the internal
control over financial reporting. The internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with GAAP. Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Controls and Procedures (Prologis, L.P.)
Prologis, L.P. carried out an evaluation under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of
the effectiveness of the disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) at December 31, 2022. Based on this evaluation, the Chief
Executive Officer and the Chief Financial Officer have concluded that the disclosure controls and procedures are effective to ensure that information required to be disclosed
by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and
forms. Subsequent to December 31, 2022, there were no significant changes in the internal controls or in other factors that could significantly affect these controls, including
any corrective actions with regard to significant deficiencies and material weaknesses.
Changes in Internal Control over Financial Reporting
There have not been any changes in Prologis, L.P.’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) that
occurred during the quarter ended December 31, 2022, that have materially affected, or are reasonably likely to materially affect, Prologis, L.P.’s internal control over
financial reporting.
Management’s Annual Report on Internal Control over Financial Reporting
We are responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.
Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of the
internal control over financial reporting was conducted at December 31, 2022, based on the criteria described in “Internal Control — Integrated Framework” (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment, management determined that, at December 31, 2022, the internal
control over financial reporting was effective.
Limitations of the Effectiveness of Controls
Management’s assessment included an evaluation of the design of the internal control over financial reporting and testing of the operational effectiveness of the internal
control over financial reporting. The internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with GAAP. Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
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become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
ITEM 9B. Other Information
None.
ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not Applicable.
PART III
ITEM 10. Directors, Executive Officers and Corporate Governance
The information required by this item is incorporated herein by reference to, including relevant sections in our 2023 Proxy Statement, under the captions entitled Board of
Directors and Corporate Governance; Executive Officers; Executive Compensation; Director Compensation; Security Ownership; Equity Compensation Plans and Additional
Information or will be provided in an amendment filed on Form 10-K/A.
ITEM 11. Executive Compensation
The information required by this item is incorporated herein by reference to the relevant sections in our 2023 Proxy Statement, under the captions entitled Board of Directors
and Corporate Governance; Executive Officers; Executive Compensation and Director Compensation or will be provided in an amendment filed on Form 10-K/A.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is incorporated herein by reference to the relevant sections in our 2023 Proxy Statement, under the captions entitled Security
Ownership and Equity Compensation Plans or will be provided in an amendment filed on Form 10-K/A.
ITEM 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated herein by reference to the relevant sections in our 2023 Proxy Statement, under the caption entitled Board of Directors
and Corporate Governance or will be provided in an amendment filed on Form 10-K/A.
ITEM 14. Principal Accounting Fees and Services
The information required by this item is incorporated herein by reference to the relevant sections in our 2023 Proxy Statement, under the caption entitled Audit Matters or will
be provided in an amendment filed on Form 10-K/A.
PART IV
ITEM 15. Exhibits, Financial Statements and Schedules
The following documents are filed as a part of this report:
(a) Financial Statements and Schedules:
1. Financial Statements:
See Index to the Consolidated Financial Statements and Schedule III on page 49 of this report, which is incorporated herein by reference.
2. Financial Statement Schedules:
Schedule III — Real Estate and Accumulated Depreciation
All other schedules have been omitted since the required information is presented in the Consolidated Financial Statements and the related notes or is not applicable.
(b) Exhibits: The Exhibits required by Item 601 of Regulation S-K are listed in the Index to the Exhibits on pages 104 to 116 of this report, which is incorporated herein by
reference.
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(c) Financial Statements: See Index to the Consolidated Financial Statements and Schedule III on page 49 of this report, which is incorporated by reference.
ITEM 16. Form 10-K Summary
Not Applicable.
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INDEX TO THE CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE III
Prologis, Inc. and Prologis, L.P.:
Reports of Independent Registered Public Accounting Firm
Prologis, Inc.:
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Equity
Consolidated Statements of Cash Flows
Prologis, L.P.:
Consolidated Balance Sheets
Consolidated Statements of Income
Consolidated Statements of Comprehensive Income
Consolidated Statements of Capital
Consolidated Statements of Cash Flows
Prologis, Inc. and Prologis, L.P.:
Notes to the Consolidated Financial Statements
Note 1. Description of the Business
Note 2. Summary of Significant Accounting Policies
Note 3. Acquisitions
Note 4. Real Estate
Note 5. Unconsolidated Entities
Note 6. Assets Held for Sale or Contribution
Note 7. Other Assets and Other Liabilities
Note 8. Debt
Note 9. Stockholders' Equity of Prologis, Inc.
Note 10. Partners' Capital of Prologis, L.P.
Note 11. Noncontrolling Interests
Note 12. Long-Term Compensation
Note 13. Income Taxes
Note 14. Earnings Per Common Share or Unit
Note 15. Financial Instruments and Fair Value Measurements
Note 16. Commitments and Contingencies
Note 17. Business Segments
Note 18. Supplemental Cash Flow Information
Note 19. Selected Quarterly Financial Data (Unaudited)
Schedule III — Real Estate and Accumulated Depreciation
49
Page
Number
50
55
56
57
58
59
60
61
62
63
64
65
65
65
72
73
75
78
78
79
83
84
85
85
88
90
91
94
95
97
99
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Index to Item 15
To the Stockholders and Board of Directors
Prologis, Inc.:
Opinion on the Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have audited the accompanying consolidated balance sheets of Prologis, Inc. and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements
of income, comprehensive income, equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes and financial statement schedule III
(collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of
December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, in conformity with U.S. generally
accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting
as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway
Commission, and our report dated February 14, 2023 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based
on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of
the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be
communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are
not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Assessment of the Company’s evaluation of the expected holding period for operating properties
As discussed in Notes 2 and 4, the Company had $69,039 million of operating properties as of December 31, 2022. The Company tests the recoverability of operating properties
whenever events or changes in circumstances, including shortening the expected holding period of such assets, indicate that the carrying amount of these assets may not be
recoverable.
We identified the assessment of the Company’s evaluation of the expected holding period for operating properties as a critical audit matter. Subjective auditor judgment was required to
assess the relevant events or changes in circumstances that the Company used to evaluate its expected holding period. A shortening of the expected holding period could indicate a
potential impairment.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls
related to determining the expected holding period of operating properties and any related changes. We evaluated the Company’s expected holding period by inquiring of the Company
regarding changes to the expected holding period, considering certain factors related to the current economic environment, reading minutes of the meetings of the Company’s Board of
Directors, reading external communications with investors and analysts, and analyzing documents prepared by the Company regarding proposed real estate transactions and potential
changes to the expected holding period.
Duke Realty transaction
As discussed in Note 3 to the consolidated financial statements, on October 3, 2022 Prologis, Inc. and Prologis, L.P. acquired Duke Realty Corporation and Duke Realty Limited
Partnership (collectively the “Duke Realty transaction”) for $23.2 billion and the transaction was accounted for as an asset acquisition. In asset acquisitions, the Company measures the
real estate assets acquired based on their cost or total consideration exchanged and any excess or bargain consideration is allocated to the real estate properties and related lease
intangibles on a relative fair value basis. The components of the acquisition include an initial allocation to investments in real estate properties acquired based on fair value and an initial
allocation of that fair value to buildings and land. The Company determines fair value of the real estate properties based on the expected future cash flows of the property and various
characteristics of the markets where the property is located utilizing an income approach methodology, which may be a discounted cash flow analysis or applying a capitalization rate to
the estimated net operating income of a property.
We identified the evaluation of the fair value allocated to investments in real estate properties acquired, including the allocation of the property fair value to land and building, in the Duke
Realty transaction as a critical audit matter. Evaluating the fair value amounts estimated by the Company in the allocation involved complex auditor judgment as a result of measurement
uncertainty. Specifically, testing significant assumptions of market rents and capitalization rates related to investments in real estate and testing the allocation of property fair value to land
and building required specialized skills and knowledge.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls
over the Company’s fair value estimation process for investments in real estate properties, including land and building. This included controls related to the determination of amounts
allocated to land and building and determination of market rents and capitalization rates used to estimate the fair value of investments in real estate properties. For a selection of
investments in real estate properties we involved valuation professionals with specialized skills and knowledge, who assisted in:
50
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Index to Item 15
•
•
•
•
Comparing the Company’s determination of the fair value of investments in real estate properties to sales prices from available property sales
Comparing the Company’s market rent and capitalization rate assumptions used in the determination of the fair value of investments in real estate properties to available
leasing information, industry research publications and inquiries of market participants
Comparing the Company’s determination of the fair value of land to sales prices from available land sales
Comparing the Company’s determination of the fair value of building to developed ranges of estimates based on market data, such as industry guides used for developing
replacement building values.
We have served as the Company’s auditor since 2002.
Denver, Colorado
February 14, 2023
/s/ KPMG LLP
51
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Index to Item 15
To the Partners of Prologis, L.P. and the Board of Directors of Prologis, Inc.:
Opinion on the Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have audited the accompanying consolidated balance sheets of Prologis, L.P. and subsidiaries (the Operating Partnership) as of December 31, 2022 and 2021, the related consolidated
statements of income, comprehensive income, capital, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes and financial statement
schedule III (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the
Operating Partnership as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, in
conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These consolidated financial statements are the responsibility of the Operating Partnership’s management. Our responsibility is to express an opinion on these consolidated financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Operating Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement, whether due to error or fraud. The Operating Partnership is not required to have, nor were we engaged to perform, an
audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of
expressing an opinion on the effectiveness of the Operating Partnership’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be
communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging,
subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are
not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Assessment of the Operating Partnership’s evaluation of the expected holding period for operating properties
As discussed in Notes 2 and 4, the Operating Partnership had $69,039 million of operating properties as of December 31, 2022. The Operating Partnership tests the recoverability of
operating properties whenever events or changes in circumstances, including shortening the expected holding period of such assets, indicate that the carrying amount of these assets
may not be recoverable.
We identified the assessment of the Operating Partnership’s evaluation of the expected holding period for operating properties as a critical audit matter. Subjective auditor judgment was
required to assess the relevant events or changes in circumstances that the Operating Partnership used to evaluate its expected holding period. A shortening of the expected holding
period could indicate a potential impairment.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls
related to determining the expected holding period of operating properties and any related changes. We evaluated the Operating Partnership’s expected holding period by inquiring of
the Operating Partnership regarding changes to the expected holding period, considering certain factors related to the current economic environment, reading minutes of the meetings of
the Board of Directors of Prologis, Inc., reading external communications with investors and analysts, and analyzing documents prepared by the Operating Partnership regarding
proposed real estate transactions and potential changes to the expected holding period.
Duke Realty transaction
As discussed in Note 3 to the consolidated financial statements, on October 3, 2022 Prologis, Inc. and Prologis, L.P. acquired Duke Realty Corporation and Duke Realty Limited
Partnership (collectively the “Duke Realty transaction”) for $23.2 billion and the transaction was accounted for as an asset acquisition. In asset acquisitions, the Company measures the
real estate assets acquired based on their cost or total consideration exchanged and any excess or bargain consideration is allocated to the real estate properties and related lease
intangibles on a relative fair value basis. The components of the acquisition include an initial allocation to investments in real estate properties acquired based on fair value and an initial
allocation of that fair value to buildings and land. The Company determines fair value of the real estate properties based on the expected future cash flows of the property and various
characteristics of the markets where the property is located utilizing an income approach methodology, which may be a discounted cash flow analysis or applying a capitalization
52
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Index to Item 15
rate to the estimated net operating income of a property.
We identified the evaluation of the fair value allocated to investments in real estate properties acquired, including the allocation of the property fair value to land and building, in the Duke
Realty transaction as a critical audit matter. Evaluating the fair value amounts estimated by the Company in the allocation involved complex auditor judgment as a result of measurement
uncertainty. Specifically, testing significant assumptions of market rents and capitalization rates related to investments in real estate and testing the allocation of property fair value to land
and building required specialized skills and knowledge.
The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls
over the Company’s fair value estimation process for investments in real estate properties, including land and building. This included controls related to the determination of amounts
allocated to land and building and determination of market rents and capitalization rates used to estimate the fair value of investments in real estate properties. For a selection of
investments in real estate properties we involved valuation professionals with specialized skills and knowledge, who assisted in:
•
•
•
•
Comparing the Company’s determination of the fair value of investments in real estate properties to sales prices from available property sales
Comparing the Company’s market rent and capitalization rate assumptions used in the determination of the fair value of investments in real estate properties to available
leasing information, industry research publications and inquiries of market participants
Comparing the Company’s determination of the fair value of land to sales prices from available land sales
Comparing the Company’s determination of the fair value of building to developed ranges of estimates based on market data, such as industry guides used for developing
replacement building values
We have served as the Operating Partnership’s auditor since 2002.
Denver, Colorado
February 14, 2023
/s/ KPMG LLP
53
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Index to Item 15
To the Stockholders and Board of Directors
Prologis, Inc.:
Opinion on Internal Control Over Financial Reporting
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We have audited Prologis, Inc. and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control –
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of
December 31, 2022 and 2021, the related consolidated statements of income, comprehensive income, equity, and cash flows for each of the years in the three-year period ended
December 31, 2022, and the related notes and financial statement schedule III (collectively, the consolidated financial statements), and our report dated February 14, 2023 expressed an
unqualified opinion on those consolidated financial statements.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial
reporting, included in the accompanying Management's Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal
control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective
internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.
Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures
that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable
assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding
prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are
subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Denver, Colorado
February 14, 2023
/s/ KPMG LLP
54
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Index to Item 15
ASSETS
Investments in real estate properties
Less accumulated depreciation
Net investments in real estate properties
Investments in and advances to unconsolidated entities
Assets held for sale or contribution
Net investments in real estate
Cash and cash equivalents
Other assets
Total assets
LIABILITIES AND EQUITY
Liabilities:
Debt
Accounts payable and accrued expenses
Other liabilities
Total liabilities
Equity:
Prologis, Inc. stockholders’ equity:
PROLOGIS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
December 31,
2022
2021
$
81,623,396 $
9,036,085
72,587,311
9,698,898
531,257
82,817,466
278,483
4,801,499
87,897,448 $
53,005,190
7,668,187
45,337,003
8,610,958
669,688
54,617,649
556,117
3,312,454
58,486,220
23,875,961 $
1,711,885
4,446,509
30,034,355
17,715,054
1,252,767
1,776,189
20,744,010
63,948
63,948
9,231
54,065,407
(443,609 )
(457,695 )
53,237,282
4,625,811
57,863,093
87,897,448 $
7,398
35,561,608
(878,253 )
(1,327,828 )
33,426,873
4,315,337
37,742,210
58,486,220
$
$
$
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 December 31, 2022 and 2021
Common stock; $0.01 par value; 923,142 and 739,827 shares issued and outstanding at December 31, 2022
and 2021, respectively
Additional paid-in capital
Accumulated other comprehensive loss
Distributions in excess of net earnings
Total Prologis, Inc. stockholders’ equity
Noncontrolling interests
Total equity
Total liabilities and equity
The accompanying notes are an integral part of these Consolidated Financial Statements.
55
PROLOGIS, INC.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
Table of Contents
Index to Item 15
Revenues:
Rental
Strategic capital
Development management and other
Total revenues
Expenses:
Rental
Strategic capital
General and administrative
Depreciation and amortization
Other
Total expenses
Operating income before gains on real estate transactions, net
Gains on dispositions of development properties and land, net
Gains on other dispositions of investments in real estate, net
Operating income
Other income (expense):
Earnings from unconsolidated entities, net
Interest expense
Foreign currency and derivative gains (losses) and other income (expense), net
Losses on early extinguishment of debt, net
Total other income (expense)
Earnings before income taxes
Total income tax expense
Consolidated net earnings
Less net earnings attributable to noncontrolling interests
Net earnings attributable to controlling interests
Less preferred stock dividends
Loss on preferred stock repurchase
Net earnings attributable to common stockholders
Weighted average common shares outstanding – Basic
Weighted average common shares outstanding – Diluted
Net earnings per share attributable to common stockholders – Basic
Net earnings per share attributable to common stockholders – Diluted
2022
Years Ended December 31,
2021
2020
$
4,913,171
1,039,585
20,936
5,973,692
1,205,738
303,356
331,083
1,812,777
40,336
3,693,290
2,280,402
597,745
589,391
3,467,538
310,872
(309,037 )
241,621
(20,184 )
223,272
3,690,810
(135,412 )
3,555,398
190,542
3,364,856
6,060
-
$
4,147,994 $
590,750
20,696
4,759,440
1,041,316
207,171
293,167
1,577,942
22,435
3,142,031
1,617,409
817,017
772,570
3,206,996
404,255
(266,228 )
165,278
(187,453 )
115,852
3,322,848
(174,258 )
3,148,590
208,867
2,939,723
6,152
-
3,791,131
636,987
10,617
4,438,735
952,063
218,041
274,845
1,561,969
30,010
3,036,928
1,401,807
464,942
252,195
2,118,944
297,370
(314,507 )
(166,429 )
(188,290 )
(371,856 )
1,747,088
(130,458 )
1,616,630
134,816
1,481,814
6,345
2,347
$
3,358,796
$
2,933,571
$
1,473,122
785,675
811,608
739,363
764,762
728,323
754,414
$
$
4.28
$
3.97 $
4.25
$
3.94 $
2.02
2.01
The accompanying notes are an integral part of these Consolidated Financial Statements.
56
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Index to Item 15
PROLOGIS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
Consolidated net earnings
Other comprehensive income (loss):
Foreign currency translation gains (losses), net
Unrealized gains (losses) on derivative contracts, net
Comprehensive income
Net earnings attributable to noncontrolling interests
Other comprehensive loss (income) attributable to noncontrolling interests
Comprehensive income attributable to common stockholders
2022
Years Ended December 31,
2021
2020
$
3,555,398
$
3,148,590
$
1,616,630
373,405
71,639
4,000,442
(190,542 )
(10,400 )
3,799,500
$
305,929
17,542
3,472,061
(208,867 )
(7,985 )
3,255,209
$
(194,673 )
(14,117 )
1,407,840
(134,816 )
5,449
1,278,473
$
The accompanying notes are an integral part of these Consolidated Financial Statements.
57
Table of Contents
Index to Item 15
Balance at January 1, 2020
Consolidated net earnings
Effect of equity compensation plans
Liberty Transaction, net of issuance costs
Acquisitions by noncontrolling interests
Repurchase of common stock
Repurchase of preferred stock
Capital contributions
Redemption of noncontrolling interests
Foreign currency translation losses, net
Unrealized losses on derivative contracts, net
Reallocation of equity
Dividends ($2.32 per common share) and
other distributions
Balance at December 31, 2020
Consolidated net earnings
Effect of equity compensation plans
Capital contributions
Redemption of noncontrolling interests
Consolidation of other venture
Acquisitions by noncontrolling interests
Foreign currency translation gains, net
Unrealized gains on derivative contracts, net
Reallocation of equity
Dividends ($2.52 per common share) and
other distributions
Balance at December 31, 2021
Consolidated net earnings
Effect of equity compensation plans
Duke Transaction, net of issuance costs
Capital contributions
Redemption of noncontrolling interests
Foreign currency translation gains, net
Unrealized gains on derivative contracts, net
Reallocation of equity
Dividends ($3.16 per common share) and
other distributions
Balance at December 31, 2022
$
$
$
$
PROLOGIS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands)
68,948
-
-
-
-
-
(5,000 )
-
-
-
-
-
-
63,948
-
-
-
-
-
-
-
-
-
Preferred
Stock
Number
of
Shares
Common Stock
$
$
Par
Value
6,318
-
7
1,067
-
(5 )
-
-
7
-
-
-
631,797
-
690
106,723
-
(539 )
-
-
710
-
-
-
Additional
Paid-in
Capital
Accumulated
Other
Comprehensive
Income (Loss)
Distributions
in Excess of
Net
Earnings
Non-
controlling
Interests
$
25,719,427
-
27,745
9,801,373
-
(34,824 )
147
-
30,727
-
-
(55,413 )
$
(990,398 )
-
-
-
-
-
-
-
-
(189,599 )
(13,742 )
-
$
(2,151,168 )
1,481,814
-
-
-
-
(2,347 )
-
-
-
-
-
3,418,657
134,816
82,233
211,086
48,533
-
-
917,092
(147,712 )
(5,074 )
(375 )
55,413
Total
Equity
$ 26,071,784
1,616,630
109,985
10,013,526
48,533
(34,829 )
(7,200 )
917,092
(116,978 )
(194,673 )
(14,117 )
-
-
739,381
$
-
7,394
$
(548 )
35,488,634
$
-
(1,193,739 )
$
(1,722,989 )
(2,394,690 )
$
(361,636 )
4,353,033
(2,085,173 )
$ 36,324,580
-
(389 )
-
835
-
-
-
-
-
-
(4 )
-
8
-
-
-
-
-
-
7,398
-
4
1,827
-
2
-
-
-
$
-
38,114
-
37,238
-
-
-
-
(2,347 )
(31 )
35,561,608
-
66,647
18,551,852
-
12,445
-
-
(127,134 )
-
-
-
-
-
-
298,413
17,073
-
2,939,723
-
-
-
-
-
-
-
-
208,867
78,062
74,404
(190,482 )
25,759
130,416
7,516
469
2,347
3,148,590
116,172
74,404
(153,236 )
25,759
130,416
305,929
17,542
-
$
-
(878,253 )
$
(1,872,861 )
(1,327,828 )
$
(375,054 )
4,315,337
(2,247,946 )
$ 37,742,210
-
-
-
-
-
364,725
69,919
-
3,364,856
-
-
-
-
-
-
-
190,542
121,074
219,565
13,295
(101,427 )
8,680
1,720
127,134
3,555,398
187,725
18,773,244
13,295
(88,980 )
373,405
71,639
-
-
63,948
-
739,827
$
-
-
-
-
-
-
-
-
393
182,661
-
261
-
-
-
-
63,948
-
923,142
$
-
9,231
$
(11 )
54,065,407
$
-
(443,609 )
$
(2,494,723 )
(457,695 )
$
(270,109 )
4,625,811
(2,764,843 )
$ 57,863,093
The accompanying notes are an integral part of these Consolidated Financial Statements.
58
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Index to Item 15
PROLOGIS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Operating activities:
Consolidated net earnings
Adjustments to reconcile net earnings to net cash provided by operating activities:
Straight-lined rents and amortization of above and below market leases
Equity-based compensation awards
Depreciation and amortization
Earnings from unconsolidated entities, net
Operating distributions from unconsolidated entities
Decrease (increase) in operating receivables from unconsolidated entities
Amortization of debt discounts and debt issuance costs, net
Gains on dispositions of development properties and land, net
Gains on other dispositions of investments in real estate, net
Unrealized foreign currency and derivative losses (gains), net
Losses on early extinguishment of debt, net
Deferred income tax expense
Increase in accounts receivable and other assets
Increase in accounts payable and accrued expenses and other liabilities
Net cash provided by operating activities
Investing activities:
Real estate development
Real estate acquisitions
Duke Transaction, net of cash acquired
Liberty Transaction, net of cash acquired
IPT Transaction, net of cash acquired
Tenant improvements and lease commissions on previously leased space
Property improvements
Proceeds from dispositions and contributions of real estate
Investments in and advances to unconsolidated entities
Return of investment from unconsolidated entities
Proceeds from repayment of notes receivable backed by real estate
Proceeds from the settlement of net investment hedges
Payments on the settlement of net investment hedges
Net cash used in investing activities
Financing activities:
Proceeds from issuance of common stock
Repurchase and retirement of common stock
Repurchase of preferred stock
Dividends paid on common and preferred stock
Noncontrolling interests contributions
Noncontrolling interests distributions
Settlement of noncontrolling interests
Tax paid with shares withheld
Debt and equity issuance costs paid
Net proceeds from (payments on) credit facilities
Repurchase of and payments on debt
Proceeds from the issuance of debt
Net cash provided by (used in) financing activities
Effect of foreign currency exchange rate changes on cash
Net decrease in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Years Ended December 31,
2021
2022
2020
$
3,555,398 $
3,148,590 $
1,616,630
(267,709 )
175,356
1,812,777
(310,872 )
410,483
(63,947 )
23,736
(597,745 )
(589,391 )
(92,201 )
20,184
12,638
(71,307 )
109,030
4,126,430
(3,118,379 )
(2,492,108 )
(92,052 )
-
-
(339,234 )
(211,358 )
2,063,623
(442,366 )
76,994
-
59,281
(3,458 )
(4,499,057 )
-
-
-
(2,494,723 )
13,295
(270,109 )
(88,980 )
(27,688 )
(45,654 )
294,164
(1,381,005 )
4,116,489
(148,239 )
113,028
1,577,942
(404,255 )
440,034
(14,223 )
8,656
(817,017 )
(772,570 )
(173,026 )
187,453
1,322
(328,511 )
176,858
2,996,042
(2,639,872 )
(2,320,448 )
-
-
-
(329,059 )
(169,933 )
4,222,290
(798,103 )
58,275
-
3,305
(16,513 )
(1,990,058 )
743
-
-
(1,872,861 )
74,404
(375,054 )
(153,236 )
(19,855 )
(23,318 )
323,336
(2,560,174 )
3,597,690
(126,328 )
109,831
1,561,969
(297,370 )
450,622
14,670
7,859
(464,942 )
(252,195 )
160,739
188,290
744
(127,619 )
94,105
2,937,005
(1,920,218 )
(1,239,034 )
-
(29,436 )
(1,665,359 )
(221,491 )
(149,491 )
2,281,940
(385,936 )
257,065
4,312
2,352
(9,034 )
(3,074,330 )
2,217
(34,829 )
(7,200 )
(1,722,989 )
917,092
(361,636 )
(116,978 )
(24,887 )
(54,204 )
(10,959 )
(6,782,306 )
7,824,517
115,789
(1,008,325 )
(372,162 )
(20,796 )
(277,634 )
556,117
278,483 $
(39,628 )
(41,969 )
598,086
556,117 $
18,718
(490,769 )
1,088,855
598,086
$
See Note 18 for information on noncash investing and financing activities and other information.
The accompanying notes are an integral part of these Consolidated Financial Statements.
59
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Index to Item 15
ASSETS
Investments in real estate properties
Less accumulated depreciation
Net investments in real estate properties
Investments in and advances to unconsolidated entities
Assets held for sale or contribution
Net investments in real estate
Cash and cash equivalents
Other assets
Total assets
LIABILITIES AND CAPITAL
Liabilities:
Debt
Accounts payable and accrued expenses
Other liabilities
Total liabilities
Capital:
Partners’ capital:
General partner – preferred
General partner – common
Limited partners – common
Limited partners – Class A common
Total partners’ capital
Noncontrolling interests
Total capital
Total liabilities and capital
PROLOGIS, L.P.
CONSOLIDATED BALANCE SHEETS
(In thousands)
December 31,
2022
2021
$
81,623,396 $
9,036,085
72,587,311
9,698,898
531,257
82,817,466
278,483
4,801,499
87,897,448 $
53,005,190
7,668,187
45,337,003
8,610,958
669,688
54,617,649
556,117
3,312,454
58,486,220
23,875,961 $
1,711,885
4,446,509
30,034,355
17,715,054
1,252,767
1,776,189
20,744,010
63,948
53,173,334
843,263
464,781
54,545,326
3,317,767
57,863,093
87,897,448 $
63,948
33,362,925
557,097
360,702
34,344,672
3,397,538
37,742,210
58,486,220
$
$
$
The accompanying notes are an integral part of these Consolidated Financial Statements.
60
PROLOGIS, L.P.
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per unit amounts)
Table of Contents
Index to Item 15
Revenues:
Rental
Strategic capital
Development management and other
Total revenues
Expenses:
Rental
Strategic capital
General and administrative
Depreciation and amortization
Other
Total expenses
Operating income before gains on real estate transactions, net
Gains on dispositions of development properties and land, net
Gains on other dispositions of investments in real estate, net
Operating income
Other income (expense):
Earnings from unconsolidated entities, net
Interest expense
Foreign currency and derivative gains (losses) and other income (expense), net
Losses on early extinguishment of debt, net
Total other income (expense)
Earnings before income taxes
Total income tax expense
Consolidated net earnings
Less net earnings attributable to noncontrolling interests
Net earnings attributable to controlling interests
Less preferred unit distributions
Loss on preferred unit repurchase
Net earnings attributable to common unitholders
Weighted average common units outstanding – Basic
Weighted average common units outstanding – Diluted
Net earnings per unit attributable to common unitholders – Basic
Net earnings per unit attributable to common unitholders – Diluted
2022
Years Ended December 31,
2021
2020
$
4,913,171
1,039,585
20,936
5,973,692
1,205,738
303,356
331,083
1,812,777
40,336
3,693,290
2,280,402
597,745
589,391
3,467,538
310,872
(309,037 )
241,621
(20,184 )
223,272
3,690,810
(135,412 )
3,555,398
98,611
3,456,787
6,060
-
$
4,147,994 $
590,750
20,696
4,759,440
1,041,316
207,171
293,167
1,577,942
22,435
3,142,031
1,617,409
817,017
772,570
3,206,996
404,255
(266,228 )
165,278
(187,453 )
115,852
3,322,848
(174,258 )
3,148,590
127,075
3,021,515
6,152
-
3,791,131
636,987
10,617
4,438,735
952,063
218,041
274,845
1,561,969
30,010
3,036,928
1,401,807
464,942
252,195
2,118,944
297,370
(314,507 )
(166,429 )
(188,290 )
(371,856 )
1,747,088
(130,458 )
1,616,630
93,195
1,523,435
6,345
2,347
$
3,450,727
$
3,015,363
$
1,514,743
799,153
811,608
751,973
764,762
740,860
754,414
$
$
4.28
$
3.97 $
4.25
$
3.94 $
2.02
2.01
The accompanying notes are an integral part of these Consolidated Financial Statements.
61
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Index to Item 15
PROLOGIS, L.P.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands)
Consolidated net earnings
Other comprehensive income (loss):
Foreign currency translation gains (losses), net
Unrealized gains (losses) on derivative contracts, net
Comprehensive income
Net earnings attributable to noncontrolling interests
Other comprehensive loss (income) attributable to noncontrolling interests
Comprehensive income attributable to common unitholders
2022
Years Ended December 31,
2021
2020
$
3,555,398
$
3,148,590
$
1,616,630
373,405
71,639
4,000,442
(98,611 )
292
3,902,123
$
305,929
17,542
3,472,061
(127,075 )
692
3,345,678
$
(194,673 )
(14,117 )
1,407,840
(93,195 )
(92 )
1,314,553
$
The accompanying notes are an integral part of these Consolidated Financial Statements.
62
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Index to Item 15
Balance at January 1, 2020
Consolidated net earnings
Effect of equity compensation plans
Liberty Transaction, net of issuance costs
Issuance of units related to acquisitions
Repurchase of common units
Repurchase of preferred units
Capital contributions
Redemption of limited partnership units
Foreign currency translation gains (losses), net
Unrealized losses on derivative contracts, net
Reallocation of capital
Distributions ($2.32 per common unit) and other
Balance at December 31, 2020
Consolidated net earnings
Effect of equity compensation plans
Capital contributions
Redemption of limited partnership units
Consolidation of other venture
Issuance of units related to acquisitions
Foreign currency translation gains (losses), net
Unrealized gains on derivative contracts, net
Reallocation of capital
Distributions ($2.52 per common unit) and other
Balance at December 31, 2021
Consolidated net earnings
Effect of equity compensation plans
Duke Transaction, net of issuance costs
Capital contributions
Redemption of limited partnership units
Foreign currency translation gains (losses), net
Unrealized gains on derivative contracts, net
Reallocation of capital
Distributions ($3.16 per common unit) and other
Balance at December 31, 2022
PROLOGIS, L.P.
CONSOLIDATED STATEMENTS OF CAPITAL
(In thousands)
General Partner
Limited Partners
Preferred
Common
Common
Class A Common
Amount
$
Amount
$
Amount
$
Units
1,379
-
-
-
-
-
(100 )
-
-
-
-
-
-
1,279
-
-
-
-
-
-
-
-
-
-
1,279
-
-
-
-
-
-
-
-
-
1,279
$
$
$
Units
631,797
-
690
106,723
-
(539 )
-
-
710
-
-
-
-
739,381
-
(389 )
-
835
-
-
-
-
-
-
739,827
Amount
$ 22,584,179
1,481,814
27,752
9,802,440
-
(34,829 )
(2,200 )
-
30,734
(189,599 )
(13,742 )
(55,413 )
(1,723,537 )
$ 31,907,599
2,939,723
38,110
-
37,246
-
-
298,413
17,073
(2,347 )
(1,872,892 )
$ 33,362,925
Units
9,933
-
1,362
2,288
461
-
-
-
(1,902 )
-
-
-
-
12,142
-
1,286
-
(2,105 )
-
1,031
-
-
-
-
12,354
68,948
-
-
-
-
-
(5,000 )
-
-
-
-
-
-
63,948
-
-
-
-
-
-
-
-
-
-
63,948
-
-
-
-
393
182,661
3,364,856
66,651
18,553,679
-
1,064
2,140
-
-
-
-
-
-
63,948
-
261
-
-
-
-
923,142
-
12,447
364,725
69,919
(127,134 )
(2,494,734 )
$ 53,173,334
-
(918 )
-
-
-
-
14,640
$
$
$
355,076
25,359
82,233
210,190
48,533
-
-
-
(146,990 )
(3,113 )
(226 )
(10,868 )
(36,240 )
523,954
50,034
78,062
-
(190,482 )
-
130,416
4,982
285
133
(40,287 )
557,097
57,620
121,074
217,385
-
(101,427 )
5,785
1,109
38,931
(54,311 )
843,263
Units
8,613
-
-
-
-
-
-
-
(18 )
-
-
-
-
8,595
-
-
-
-
-
-
-
-
-
-
8,595
-
-
-
-
-
-
-
-
-
8,595
$
$
$
Non-
controlling
Interests
$
$
$
$
2,775,394
93,195
-
896
-
-
-
917,092
-
92
-
-
(303,143 )
3,483,526
127,075
-
74,404
-
25,759
-
(692 )
-
-
(312,534 )
3,397,538
98,611
-
2,180
13,295
-
(292 )
-
-
(193,565 )
3,317,767
$
$
$
$
Total
26,071,784
1,616,630
109,985
10,013,526
48,533
(34,829 )
(7,200 )
917,092
(116,978 )
(194,673 )
(14,117 )
-
(2,085,173 )
36,324,580
3,148,590
116,172
74,404
(153,236 )
25,759
130,416
305,929
17,542
-
(2,247,946 )
37,742,210
3,555,398
187,725
18,773,244
13,295
(88,980 )
373,405
71,639
-
(2,764,843 )
57,863,093
288,187
16,262
-
-
-
-
-
-
(722 )
(2,053 )
(149 )
66,281
(22,253 )
345,553
31,758
-
-
-
-
-
3,226
184
2,214
(22,233 )
360,702
34,311
-
-
-
-
3,187
611
88,203
(22,233 )
464,781
The accompanying notes are an integral part of these Consolidated Financial Statements.
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Index to Item 15
PROLOGIS, L.P
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Operating activities:
Consolidated net earnings
Adjustments to reconcile net earnings to net cash provided by operating activities:
Straight-lined rents and amortization of above and below market leases
Equity-based compensation awards
Depreciation and amortization
Earnings from unconsolidated entities, net
Operating distributions from unconsolidated entities
Decrease (increase) in operating receivables from unconsolidated entities
Amortization of debt discounts and debt issuance costs, net
Gains on dispositions of development properties and land, net
Gains on other dispositions of investments in real estate, net
Unrealized foreign currency and derivative losses (gains), net
Losses on early extinguishment of debt, net
Deferred income tax expense
Increase in accounts receivable and other assets
Increase in accounts payable and accrued expenses and other liabilities
Net cash provided by operating activities
Investing activities:
Real estate development
Real estate acquisitions
Duke Transaction, net of cash acquired
Liberty Transaction, net of cash acquired
IPT Transaction, net of cash acquired
Tenant improvements and lease commissions on previously leased space
Property improvements
Proceeds from dispositions and contributions of real estate
Investments in and advances to unconsolidated entities
Return of investment from unconsolidated entities
Proceeds from repayment of notes receivable backed by real estate
Proceeds from the settlement of net investment hedges
Payments on the settlement of net investment hedges
Net cash used in investing activities
Financing activities:
Proceeds from issuance of common partnership units in exchange for contributions from
Prologis, Inc.
Repurchase and retirement of common units
Repurchase of preferred units
Distributions paid on common and preferred units
Noncontrolling interests contributions
Noncontrolling interests distributions
Redemption of common limited partnership units
Tax paid with shares of the Parent withheld
Debt and equity issuance costs paid
Net proceeds from (payments on) credit facilities
Repurchase of and payments on debt
Proceeds from the issuance of debt
Net cash provided by (used in) financing activities
Effect of foreign currency exchange rate changes on cash
Net decrease in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Years Ended December 31,
2021
2022
2020
$
3,555,398 $
3,148,590 $
1,616,630
(267,709 )
175,356
1,812,777
(310,872 )
410,483
(63,947 )
23,736
(597,745 )
(589,391 )
(92,201 )
20,184
12,638
(71,307 )
109,030
4,126,430
(3,118,379 )
(2,492,108 )
(92,052 )
-
-
(339,234 )
(211,358 )
2,063,623
(442,366 )
76,994
-
59,281
(3,458 )
(4,499,057 )
-
-
-
(2,571,267 )
13,295
(193,565 )
(88,980 )
(27,688 )
(45,654 )
294,164
(1,381,005 )
4,116,489
115,789
(148,239 )
113,028
1,577,942
(404,255 )
440,034
(14,223 )
8,656
(817,017 )
(772,570 )
(173,026 )
187,453
1,322
(328,511 )
176,858
2,996,042
(2,639,872 )
(2,320,448 )
-
-
-
(329,059 )
(169,933 )
4,222,290
(798,103 )
58,275
-
3,305
(16,513 )
(1,990,058 )
743
-
-
(1,935,381 )
74,404
(312,534 )
(153,236 )
(19,855 )
(23,318 )
323,336
(2,560,174 )
3,597,690
(1,008,325 )
(126,328 )
109,831
1,561,969
(297,370 )
450,622
14,670
7,859
(464,942 )
(252,195 )
160,739
188,290
744
(127,619 )
94,105
2,937,005
(1,920,218 )
(1,239,034 )
-
(29,436 )
(1,665,359 )
(221,491 )
(149,491 )
2,281,940
(385,936 )
257,065
4,312
2,352
(9,034 )
(3,074,330 )
2,217
(34,829 )
(7,200 )
(1,781,482 )
917,092
(303,143 )
(116,978 )
(24,887 )
(54,204 )
(10,959 )
(6,782,306 )
7,824,517
(372,162 )
(20,796 )
(277,634 )
556,117
278,483 $
(39,628 )
(41,969 )
598,086
556,117 $
18,718
(490,769 )
1,088,855
598,086
$
See Note 18 for information on noncash investing and financing activities and other information.
The accompanying notes are an integral part of these Consolidated Financial Statements.
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Index to Item 15
PROLOGIS, INC. AND PROLOGIS, L.P.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. DESCRIPTION OF THE 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
(Rental Operations and Development) and Strategic Capital. Our Real Estate Segment represents the ownership, leasing and development of logistics properties. Our
Strategic Capital Segment represents the management of properties owned by our unconsolidated co-investment ventures and other ventures. See Note 17 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 December 31, 2022, the Parent owned a 97.60% common general partnership interest in the OP
and substantially all of the preferred units in the OP. The remaining 2.40% 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.
Information with respect to the square footage, number of buildings and acres of land is unaudited.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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.
Consolidation. We consolidate all entities that are wholly owned and those in which we own less than 100% of the equity but control the entity, as well as any variable
interest entities (“VIEs”) in which we are the primary beneficiary. We evaluate our ability to control an entity and whether the entity is a VIE and we are the primary beneficiary
through consideration of substantive terms of the arrangement to identify which enterprise has the power to direct the activities of the entity that most significantly impact the
entity’s economic performance and the obligation to absorb losses and the right to receive benefits from the entity.
For entities that are not defined as VIEs, we first consider whether we are the general partner or the limited partner (or the equivalent in such investments that are not
structured as partnerships). We consolidate entities in which we are the general partner and the limited partners in such entities that do not have rights that would preclude
control. For entities in which we are the general partner but do not control the entity as the other partners hold substantive participating or kick-out rights, we apply the equity
method of accounting since, as the general partner, we have the ability to exercise significant influence over the operating and financial policies of the venture. For ventures
for which we are a limited partner, or our investment is in an entity that is not structured similar to a partnership, we consider factors such as ownership interest, voting
control, authority to make decisions and contractual and substantive participating rights of the partners. In instances where the factors indicate that we have a controlling
financial interest in the venture, we consolidate the entity. In instances where we do not have a controlling interest in the venture, we apply the equity method of accounting
when the factors indicate we have the ability to exercise significant influence over the venture.
Use of Estimates. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and
liabilities at the date of the financial statements, and revenues and expenses during the reporting
65
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Index to Item 15
period. Although we believe the assumptions and estimates we made are reasonable and appropriate, as discussed in the applicable sections throughout the Consolidated
Financial Statements, different assumptions and estimates could materially impact our reported results.
Foreign Operations. The U.S. dollar is the functional currency for our consolidated subsidiaries and unconsolidated entities operating in the U.S. and Mexico. The functional
currency for our consolidated subsidiaries and unconsolidated entities operating in other countries is the principal currency in which the entity’s assets, liabilities, income and
expenses are denominated, which may be different from the local currency of the country of incorporation or where the entity conducts its operations. The functional
currencies of entities outside of the U.S. and Mexico generally include the Brazilian real, British pound sterling, Canadian dollar, Chinese renminbi, euro, Japanese yen,
Singapore dollar and Swedish krona. We take part in business transactions denominated in these and other local currencies where we operate.
For our consolidated subsidiaries whose functional currency is not the U.S. dollar, we translate their financial statements into U.S. dollars at the time we consolidate those
subsidiaries’ financial statements. Generally, assets and liabilities are translated at the exchange rate in effect at the balance sheet date. The resulting translation
adjustments are included in Accumulated Other Comprehensive Income (Loss) (“AOCI/L”) in the Consolidated Balance Sheets. Certain balance sheet items, primarily equity
and capital-related accounts, are reflected at the historical exchange rate. Income statement accounts are translated using the average exchange rate for the period; income
statement accounts that represent significant nonrecurring transactions, are translated at the rate in effect at the date of the transaction. We translate our share of the net
income or loss of our unconsolidated entities at the average exchange rate for the period other than significant nonrecurring transactions of the unconsolidated entities which
are translated at the rate in effect at the date of the transaction.
We and certain of our consolidated subsidiaries have intercompany and third-party debt that is not denominated in the entity’s functional currency. When the debt is
remeasured against the functional currency of the entity, a gain or loss can result. The resulting adjustment is reflected in Foreign Currency and Derivative Gains (Losses)
and Other Income (Expense), Net in the Consolidated Statements of Income, unless it is intercompany debt that is deemed to be long-term in nature or third-party debt that
has been designated as a nonderivative net investment hedge and then the adjustment is recorded as a cumulative translation adjustment in AOCI/L.
Acquisitions. We apply a screen test to evaluate if substantially all the fair value of the acquired property is concentrated in a single identifiable asset or group of similar
identifiable assets to determine whether a transaction is accounted for as an asset acquisition or business combination. As the fair value of most of our real estate
acquisitions is concentrated in either a single or a group of similar identifiable assets, our real estate transactions are generally accounted for as asset acquisitions, which
permits the capitalization of transaction costs to the basis of the acquired property. We measure the real estate assets acquired through an asset acquisition based on their
cost or total consideration exchanged. The difference between the cost and the estimated fair value (excess or bargain consideration) is allocated to the real estate properties
and related lease intangibles on a relative fair value basis. All other assets and liabilities assumed, including debt, and real estate assets that we intend to sell in the next
twelve months are recorded at fair value. At a property-level, we allocate the fair value to the components which include building, land, improvements, and intangible assets
or liabilities related to acquired leases. Purchase price allocations for a business combination are recorded at fair value.
When we obtain control of an unconsolidated entity and the acquisition qualifies as a business combination, we account for the acquisition in accordance with the guidance
for a business combination achieved in stages. We remeasure our previously held interest in the unconsolidated entity at its acquisition-date fair value and recognize any
resulting gain or loss in earnings.
We allocate the purchase price using primarily Level 2 and Level 3 inputs (further defined in Fair Value Measurements below) as follows:
Investments in Real Estate Properties. We value operating properties as if vacant. We estimate fair value by applying an income approach methodology using either a
discounted cash flow analysis or applying a capitalization rate to the estimated net operating income, defined as rental revenues less rental expenses, of a property. Key
assumptions include market rents, growth rates, and discount and capitalization rates. Estimates of future cash flows are based on a number of factors including historical
operating results, known trends and market and economic conditions. We determine the discount or capitalization rate by market based on recent transactions and other
market data and adjust if necessary, based on the property characteristics. The fair value of land is generally based on relevant market data, such as a comparison of the
subject site to similar parcels that have recently been sold or are currently being offered on the market for sale. At a property level, we allocate the fair value to land and
building.
Lease Intangibles. We determine the portion of the purchase price related to acquired in-place leases as intangible assets and liabilities as follows:
•
Above and Below Market Leases. We recognize an asset or liability for acquired leases with in-place rents that are higher or lower than our estimate of current market
rents in each of the applicable markets. The above or below market lease intangibles are valued using a discounted cash flow approach through which we recognize
the present value of the difference in cash flows between in-place and market rents. The value is recorded in either Other Assets or Other Liabilities, as appropriate,
and is amortized over the remaining term of the respective leases, including any bargain renewal options, to rental revenues.
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•
•
Foregone Rent. We calculate the value of the revenue and recovery of costs which would be foregone during a reasonable lease-up period, if the space was vacant,
in each of the applicable markets. The values are recorded in Other Assets and amortized over the remaining life of the respective leases to amortization expense.
Leasing Commissions. We recognize an asset for leasing commissions based on our estimate of the cost to lease space in the applicable markets. The value is
recorded in Other Assets and amortized over the remaining life of the respective leases to amortization expense.
Investments in Unconsolidated Entities. We estimate the fair value of the entity by using similar valuation methods as those used for the consolidated real estate properties
and debt. We apply our ownership percentage to the estimated net asset value of the entity to determine the fair value of our investment.
Debt. We estimate the fair value of debt based on contractual future cash flows discounted using borrowing spreads and market interest rates that would be available to us
for the issuance of debt with similar terms and remaining maturities. In the case of publicly traded debt, we estimate the fair value based on available market data. Any
discount or premium to the principal amount is included in the carrying value and amortized to interest expense over the remaining term of the related debt using the effective
interest method.
Noncontrolling Interests. We estimate the portion of the fair value of the net assets owned by third parties based on the fair value of the consolidated net assets, principally
real estate properties and debt.
Working Capital. We estimate the fair value of other acquired assets and assumed liabilities using the best information available.
Fair Value Measurements. The objective of fair value is to determine the price that would be received on the sale of an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date (the exit price). We estimate fair value using available market information and valuation methodologies we
believe to be appropriate for these purposes. Considerable judgment and a high degree of subjectivity are involved in developing these estimates and, accordingly, they are
not necessarily indicative of amounts that we would realize on disposition. The fair value hierarchy consists of three broad levels:
•
•
•
Level 1 — Quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date.
Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 3 — Unobservable inputs for the asset or liability.
Fair Value Measurements on a Recurring Basis. We estimate the fair value of our financial instruments using available market information and valuation methodologies we
believe to be appropriate for these purposes. We determine the fair value of our derivative financial instruments using widely accepted valuation techniques. The technique
utilized depends on the type of derivative financial instrument being valued, principally foreign currency forwards and interest rate swaps, and involves the contractual term of
the derivative, observable market-based inputs and implied volatilities.
We determine the fair values of our interest rate swaps using a market standard methodology of netting the discounted future fixed cash receipts and the discounted
expected variable cash payments through a discounted cash flow analysis. We base the variable cash payments on an expectation of future interest rates, or forward curves,
derived from observable market interest rate curves through the contractual term of the debt. We determine the fair values of our foreign currency forwards by comparing the
contracted forward exchange rate to the current market exchange rate. We build a foreign exchange forward curve to determine the foreign exchange forward rate that
pertains to the specific maturity date. Using this foreign exchange forward rate, spot rates and the interest rate curve of the domestic currency as inputs, we calculate the
mark-to-market value of the forward.
We incorporate credit valuation adjustments to appropriately reflect nonperformance risk for us and the respective counterparty in the fair value measurements. In adjusting
the fair value of our derivative contracts for the effect of nonperformance risk, we consider the impact of netting and any applicable credit enhancements, such as collateral
postings, thresholds, mutual puts and guarantees.
We have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy. Although the credit valuation adjustments
associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties, we assess
the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments
are not significant to the overall valuation of our derivatives.
Fair Value Measurements on a Nonrecurring Basis. Assets measured at fair value on a nonrecurring basis generally consist of real estate assets and investments in
unconsolidated entities that were subject to impairment charges due to our evaluation of recoverability whenever events or changes in circumstances indicate the carrying
amount may not be recoverable. As discussed below, our analysis of recoverability is primarily triggered based on the shortening of the expected hold period due to our
change in intent to sell a property
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in the near term. We estimate the fair value of our investments based on expected sales prices in the market (Level 2) or by applying the income approach methodology
using a discounted cash flow analysis (Level 3).
Fair Value of Financial Instruments. We estimate the fair value of our senior notes for disclosure purposes based on quoted market prices for the same (Level 1) or similar
(Level 2) issues when current quoted market prices are available. We estimate the fair value of our credit facilities, term loans, secured mortgage debt and other debt by
discounting the future cash flows using rates and borrowing spreads currently available to us (Level 3).
Real Estate Assets. Real estate assets are carried at depreciated cost. We capitalize costs incurred in developing, redeveloping and improving real estate assets as part of
the investment basis. We expense costs for repairs and maintenance as incurred.
Depreciation and Amortization. We charge the depreciable portions of real estate assets to depreciation expense on a straight-line basis over the respective estimated useful
lives. Depreciation on development buildings commences when the asset is ready for its intended use, which we define as the earlier of when a property that was developed
has been completed for one year, or is 90% occupied. We generally use the following useful lives: 5 to 7 years for capital improvements, 10 years for standard tenant
improvements, 15 to 25 years for depreciable land improvements, 25 to 40 years for operating properties acquired based on the age of the building and 40 years for operating
properties we develop. We depreciate building improvements on land parcels subject to land leases over the shorter of the estimated life of the building improvement or the
contractual term of the underlying land lease. Capitalized leasing costs are amortized over the estimated remaining lease term. The weighted average lease term for leases
that commenced during 2022, based on square feet, was 69 months.
Capitalization of Costs. During the land development and construction periods of qualifying projects, we capitalize interest costs, insurance, real estate taxes and general and
administrative costs of the personnel performing the development; if such costs are incremental and identifiable to a specific activity to ready the asset for its intended use.
We capitalize transaction costs related to the acquisition of land for future development and operating properties that qualify as asset acquisitions. We capitalize incremental,
third-party costs incurred to successfully originate a lease that result directly from obtaining a lease and would not have been incurred if the lease had not been obtained.
Leasing costs that meet the requirements for capitalization are presented as a component of Other Assets and all other capitalized costs are included in the investment basis
of the real estate assets.
Recoverability of Real Estate Assets. We assess the carrying values of our respective long-lived assets whenever events or changes in circumstances indicate that the
carrying amounts of these assets may not be fully recoverable. This assessment is primarily triggered based on the shortening of the expected hold period due to our change
in intent to sell a property in the near term. We have processes to monitor our intent with regard to our investments and the estimated disposition value in comparison to the
current carrying value. If our assessment of potential triggering events indicates that the carrying value of a property that we expect to sell in the near term is not recoverable,
we recognize an impairment charge for the amount by which the carrying value exceeds the current estimated fair value of the property. We determine the fair value of the
property based on the proceeds from disposition that are estimated based on quoted market values, third-party appraisals or discounted cash flow models that utilize the
future net operating income from the property and expected market capitalization rates. The use of projected future cash flows is based on assumptions that are consistent
with our estimates of future expectations and the strategic plan we use to manage our underlying business. Changes in economic and operating conditions could impact our
intent and the assumptions used in determining the fair value that could result in future impairment.
At least annually or more frequently given the presence of a triggering event, we measure the recoverability of our assets. We compare the carrying amount of the asset to
the fair value based on our intent as follows:
•
•
•
•
for real estate properties that we intend to hold long-term; including land held for development, properties currently under development and operating properties;
recoverability is assessed based on the estimated undiscounted future net operating income from the property and the terminal value, including anticipated costs to
develop;
for real estate properties we intend to sell, including properties currently under development and operating properties; recoverability is assessed based on proceeds
from disposition that are estimated based on the future net operating income from the property, expected market capitalization rates and anticipated costs to develop;
for land parcels we intend to sell, recoverability is assessed based on the estimated proceeds from disposition; and
for costs incurred related to the potential acquisition of land and operating properties and future development projects, recoverability is assessed based on the
probability that the acquisition or development is likely to occur at the measurement date.
Assets Held for Sale or Contribution. We classify a property as held for sale or contribution when certain criteria are met in accordance with GAAP. Assets classified as
held for sale are expected to be sold to a third party and assets classified as held for contribution are generally newly developed assets we intend to contribute to an
unconsolidated co-investment venture within twelve months. When the criteria are met, the respective assets and liabilities are presented separately in the Consolidated
Balance Sheets and depreciation is not recognized. Assets held for sale or contribution are reported at the lower of carrying amount or estimated fair value less costs to sell.
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Investments in Unconsolidated Entities. We present our investments in certain entities under the equity method. We use the equity method when we have the ability to
exercise significant influence over operating and financial policies of the venture but do not have control of the entity. Under the equity method, we initially recognize these
investments (including advances) in the balance sheet at our cost, including formation costs and net of deferred gains from the contribution of properties (recognized prior to
January 1, 2018), if applicable. The transaction costs related to the formation of equity method investments are also capitalized. We subsequently adjust the accounts to
reflect our proportionate share of net earnings or losses recognized and accumulated other comprehensive income or loss, distributions received, contributions made, sales
and redemptions of our investments and certain other adjustments, as appropriate. When circumstances indicate there may have been a reduction in the value of an equity
investment, we evaluate whether the loss in value is other than temporary. If we conclude it is other than temporary, we recognize an impairment charge to reflect the equity
investment at fair value.
With regard to distributions from unconsolidated entities, we have elected the nature of distribution approach as the information is available to us to determine the nature of
the underlying activity that generated the distributions. In accordance with the nature of distribution approach, cash flows generated from the operations of an unconsolidated
entity are classified as a return on investment (cash inflow from operating activities) and cash flows that are generated from property sales, debt refinancing or sales and
redemptions of our investments are classified as a return of investment (cash inflow from investing activities).
Cash and Cash Equivalents. We consider all cash on hand, demand deposits with financial institutions and short-term highly liquid investments with original maturities of
three months or less to be cash equivalents. Our cash and cash equivalents are financial instruments that are exposed to concentrations of credit risk. We invest our cash
with high-credit quality institutions both domestically and internationally. Cash balances may be invested in money market accounts that are not insured. We have not realized
any losses of such cash investments or accounts and believe that we are not exposed to any significant credit risk.
Derivative Financial Instruments. We primarily hedge our foreign currency risk by borrowing in the currencies in which we invest. We may use derivative financial
instruments, such as foreign currency forward and option contracts to manage foreign currency exchange rate risk related to both our foreign investments and the related
earnings. In addition, we occasionally use interest rate swap and forward contracts to manage interest rate risk and limit the impact of future interest rate changes on
earnings and cash flows, primarily with variable-rate debt.
We do not use derivative financial instruments for trading or speculative purposes. Each derivative transaction is customized and not exchange-traded. We recognize all
derivatives at fair value within the line items Other Assets or Other Liabilities. We do not net our derivative position by counterparty for purposes of balance sheet
presentation and disclosure. Management reviews our derivative positions, overall risk management strategy and hedging program, on a regular basis. We only enter into
transactions that we believe will be highly effective at offsetting the underlying risk. Our use of derivatives involves the risk that counterparties may default on a derivative
contract; therefore we: (i) establish exposure limits for each counterparty to minimize this risk and provide counterparty diversification; (ii) contract with counterparties that
have long-term credit ratings of single-A or better; (iii) enter into master agreements that generally allow for netting of certain exposures; thereby significantly reducing the
actual loss that would be incurred should a counterparty fail to perform its contractual obligations; and (iv) set minimum credit standards that become more stringent as the
duration of the derivative financial instrument increases. Based on these factors, we consider the risk of counterparty default to be minimal.
Designated Derivatives. We may choose to designate our derivative financial instruments, generally foreign currency forwards to hedge our net investment in foreign
operations or interest rate swaps to hedge future interest payments on variable debt. At inception of the transaction, we formally designate and document the derivative
financial instrument as a hedge of a specific underlying exposure, the risk management objective and the strategy for undertaking the hedge transaction. We formally assess
both at inception and at least quarterly thereafter, the effectiveness of our hedging transactions. Due to the high degree of effectiveness between the hedging instruments and
the underlying exposures hedged, fluctuations in the value of the derivative financial instruments will generally be offset by changes in the cash flows or fair values of the
underlying exposures being hedged.
Changes in the fair value of derivatives that are designated and qualify as net investment hedges of our foreign operations or cash flow hedges are recorded in AOCI/L. For
net investment hedges, these amounts offset the translation adjustments on the underlying net assets of our foreign investments and are recorded in AOCI/L. This includes
debt issued in a currency that is not the same functional currency of the borrowing entity that we may designate as a nonderivative net investment hedge. We compare the
net equity available from our foreign investments first to the derivative financial instruments designated as net investment hedges followed by any nonderivative net
investment hedges. If the total notional amount of the derivative and nonderivative financial instruments exceeds the net equity available, that excess portion is considered
unhedged and the translation of that excess portion is recognized in Foreign Currency and Derivative Gains (Losses) and Other Income (Expense), Net.
For cash flow hedges, we report the effective portion of the gain or loss as a component of AOCI/L and reclassify it to the applicable line item in the Consolidated Statements
of Income, generally Interest Expense, over the corresponding period of the underlying hedged item. The ineffective portion of the change in fair value of a derivative financial
instrument is recognized in earnings, generally Interest Expense, at the time the ineffectiveness occurred. To the extent the hedged forecasted interest payments on debt
related to our interest rate swaps is paid off, the remaining balance in AOCI/L is recognized in Interest Expense in the Consolidated Statements of Income.
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Undesignated Derivatives. We also use derivatives, such as foreign currency forwards and option contracts, that are not designated as hedges to manage foreign currency
exchange rate risk related to the translation of our results of operations. The changes in fair values of these derivatives that were not designated as hedging instruments are
immediately recognized in earnings within the line item Foreign Currency and Derivative Gains (Losses) and Other Income (Expense), Net. These gains or losses are
generally offset by lower or higher earnings due to the translation at exchange rates that were different than our expectations. In addition, we may choose to not designate
our interest rate swap contracts. If a swap contract is not designated as a hedge, the changes in fair value of these instruments is immediately recognized in earnings within
the line item Interest Expense in the Consolidated Statements of Income.
Noncontrolling Interests. Noncontrolling interests represent the share of consolidated entities owned by third parties. We recognize each noncontrolling holder’s respective
share of the estimated fair value of the net assets at the date of formation or acquisition. Noncontrolling interests are subsequently adjusted for the noncontrolling holder’s
share of additional contributions, distributions and their share of the net earnings or losses of each respective consolidated entity. We allocate net income to noncontrolling
interests based on the weighted average ownership interest during the period. The net income that is not attributable to us is reflected in the line item Net Earnings
Attributable to Noncontrolling Interests. We do not recognize a gain or loss on transactions with a consolidated entity in which we do not own 100% of the equity and
recognize the difference between the carrying amount of the noncontrolling interest and the consideration paid or received as additional paid-in-capital.
Certain limited partnership interests, including OP units, are exchangeable into our common stock. Common stock issued upon exchange of a holder’s noncontrolling interest
is accounted for at the carrying value of the surrendered limited partnership interest and the difference between the carrying value and the fair value of the common stock
issued is recorded to additional paid-in-capital.
Revenue Recognition.
Rental Revenues and Recoveries. We lease our operating properties to customers under agreements that are classified as operating leases. We recognize the total
minimum lease payments provided for under the leases on a straight-line basis over the lease term. Generally, under the terms of our leases, the majority of our rental
expenses are recovered from our customers, including common area maintenance, real estate taxes and insurance. Rental expenses recovered through reimbursements
received from customers are recognized in Rental Revenues in the Consolidated Statements of Income. We generally record amounts reimbursed by our customers (“rental
recoveries”) as revenues in the period that the applicable expenses are incurred. We account for and present rental revenue and rental recoveries as a single component
under Rental Revenues as the timing of recognition is the same, the pattern with which we transfer the right of use of the property and related services to the lessee are both
on a straight-line basis and our leases qualify as operating leases. We perform credit analyses of our customers prior to the execution of our leases and continue these
analyses for each individual lease on an ongoing basis in order to ensure the collectability of rental revenue. We recognize revenue to the extent that amounts are determined
to be collectible.
Strategic Capital Revenues. Strategic capital revenues include revenues we earn from the management services we provide to unconsolidated entities. These fees are
determined in accordance with the terms specific to each arrangement and may include recurring fees such as asset management and property management fees or
transactional fees for leasing, acquisition, development, construction, financing and tax services provided. We recognize these fees as we provide the services or on a cost
basis for development fees.
We may also earn incentive returns (“promotes” or “promote revenues”) directly from third-party investors in the co-investment ventures based on the cumulative returns of
the venture over a three-year period or the stabilization of individual development projects owned by the venture. The returns are determined by both the operating
performance and real estate valuation of the venture, including highly variable inputs such as capitalization rates, market rents, interest rates and foreign currency exchange
rates. As these key inputs are highly volatile and out of our control, and such volatility can materially impact our promotes period over period, we recognize promote
revenues at the end of the performance period. We generally earn promote revenue directly from third-party investors in the co-investment ventures. We include the third-
party investors’ share of promotes in Strategic Capital Revenues.
We also earn fees from ventures that we consolidate. Upon consolidation, these fees are eliminated from our earnings and the third-party investors’ share of these fees are
recognized as a reduction of Net Earnings Attributable to Noncontrolling Interests.
Development Management and Other Revenues. Development management and other revenues principally include development and construction management fees from
third parties and are recognized as we provide the services or on a cost basis.
Gains on Real Estate Transactions, Net.
Throughout the Notes to the Consolidated Financial Statements, Gains on Real Estate Transactions, Net collectively refers to Gains on Dispositions of Development
Properties and Land, Net and Gains on Other Dispositions of Investments in Real Estate, Net.
We recognize gains on the disposition of real estate when control transfers to the buyer, generally when consideration and title are exchanged and the risks and rewards of
ownership transfer. We recognize losses from the disposition of real estate when known.
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Beginning January 1, 2018 with the adoption of the new revenue recognition guidance, we recognize the entire gain attributed to contributions of real estate properties to
unconsolidated entities. We previously recognized a gain on contribution only to the extent of the third-party ownership in the unconsolidated entity acquiring the property and
deferred the portion of the gain related to our ownership through a reduction to our investment in the applicable unconsolidated entity. We adjusted our proportionate share of
net earnings or losses recognized in future periods to reflect the entities’ recorded depreciation expense as if it were computed on our lower basis in the contributed
properties rather than on the entity’s basis. For deferred gains from partial sales recorded prior to the adoption of the revenue recognition standard, we continue to recognize
these gains over the lives of the underlying real estate properties or at the time of disposition to a third party. If our ownership interest in an unconsolidated entity decreases
and the decrease is expected to be permanent, we recognize the amounts relating to previously deferred gains to coincide with our new ownership interest.
Gains on Dispositions of Development Properties and Land, Net. We present gains separately based on the type of real estate sold or contributed. We present gains on sales
to third parties or contributions to our unconsolidated co-investment ventures as Gains on Dispositions of Development Properties and Land, Net when the property was
included in our land portfolio or when we developed the property with the intent to sell or contribute.
Gains on Other Dispositions of Investments in Real Estate, Net. We present all other gains on sales to third parties or contributions to our unconsolidated entities of primarily
operating properties and other real estate transactions as Gains on Other Dispositions of Investments in Real Estate, Net. We also include gains or losses on the
remeasurement of equity investments to fair value upon acquisition of a controlling interest if the transaction is considered the acquisition of a business and gains or losses
upon the partial redemption or sale of our investment in an unconsolidated entity.
Rental Expenses. Rental expenses principally include the cost of our property management and leasing personnel, utilities, repairs and maintenance, property insurance,
real estate taxes and the other costs of managing our properties. We are also a lessee of land under leases which generally meet the criteria to be accounted for as operating
leases.
Strategic Capital Expenses. Strategic capital expenses generally include the direct expenses associated with the asset management of the co-investment ventures
provided by our employees who are assigned to our Strategic Capital Segment and the costs of our Prologis Promote Plan (“PPP”) based on earned promotes. For further
discussion on the PPP, see Note 12. In addition, in order to achieve efficiencies and economies of scale, all of our property management and leasing functions are provided
by property management and leasing personnel who are assigned to our Real Estate Segment. These individuals perform the property-level management and leasing of the
properties in our owned and managed portfolio, which includes properties we consolidate and those we manage that are owned by the unconsolidated co-investment
ventures. We allocate the costs of our property management and leasing teams to the properties we consolidate (included in Rental Expenses) and the properties owned by
the unconsolidated co-investment ventures (included in Strategic Capital Expenses) by using the square feet owned by the respective portfolios.
Equity-Based Compensation. We account for equity-based compensation by measuring the cost of employee services received in exchange for an award of an equity
instrument based on the fair value of the award on the grant date. We recognize the cost of the award on a straight-line basis over the period during which an employee is
required to provide service in exchange for the award, generally the vesting period.
Income Taxes. Under the IRC, to qualify as a REIT, we are required to distribute at least 90% of our taxable income, and meet certain income, asset and stockholder tests.
REITs which meet these certain income, asset and stockholder tests are generally not required to pay federal income taxes if they distribute 100% of their taxable income. If
we fail to qualify as a REIT in any taxable year, we will be subject to federal income taxes at regular corporate rates and may not be able to qualify as a REIT for the four
subsequent taxable years. Even as a REIT, we may be subject to certain foreign, state and local taxes on our own income and property, and to federal income and excise
taxes on our undistributed taxable income.
We have elected taxable REIT subsidiary (“TRS”) status for some of our consolidated subsidiaries. This allows us to provide services that would otherwise be considered
impermissible for REITs. Many of the foreign countries in which we have operations do not recognize REITs or do not accord REIT status under their respective tax laws to
our entities that operate in their jurisdiction. In the U.S., we are taxed in certain states in which we operate. Accordingly, we recognize income tax expense for the federal and
state income taxes incurred by our TRSs, taxes incurred in certain states and foreign jurisdictions, and interest and penalties associated with our unrecognized tax benefit
liabilities.
We evaluate tax positions taken in the Consolidated Financial Statements under the interpretation for accounting for uncertainty in income taxes. As a result of this
evaluation, we may recognize a tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing
authorities.
We recognize deferred income taxes in certain taxable entities. For federal income tax purposes, certain acquisitions have been treated as tax-free transactions resulting in a
carry-over tax basis in assets and liabilities. For financial reporting purposes and in accordance with purchase accounting, we record all of the acquired assets and assumed
liabilities based on their relative fair value at date of acquisition, as discussed above. For our taxable subsidiaries, including certain international jurisdictions, we recognize
the deferred income tax liabilities that represent the tax effect of the difference between the tax basis carried over and the relative fair value of the tangible and intangible
assets at date of acquisition. Any subsequent increases or decreases to the deferred income tax liability recorded in connection with these acquisitions, are reflected in
earnings.
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If taxable income is generated in these subsidiaries, we recognize a benefit in earnings as a result of the reversal of the deferred income tax liability previously recorded at
the acquisition date and we record current income tax expense representing the entire current income tax liability. If the reversal of the deferred income tax liability results
from a sale or contribution of assets, the classification of the reversal to the Consolidated Statements of Income is based on the taxability of the transaction. If the sale or
contribution is of the real estate asset and results in a taxable transaction, the reversal is recorded to deferred income tax benefit. If the sale or contribution is the disposition
of the entity that owns the asset, the reversal is recorded through gains.
Deferred income tax expense is generally a function of the period’s temporary differences (items that are treated differently for tax purposes than for financial reporting
purposes) and the utilization of tax net operating losses (“NOL”) generated in prior years that had been previously recognized as deferred income tax assets. We provide for a
valuation allowance for deferred income tax assets if we believe all or some portion of the deferred income tax asset may not be realized. Any increase or decrease in the
valuation allowance that results from a change in circumstances that causes a change in the estimated ability to realize the related deferred income tax asset is included in
deferred tax expense.
Environmental Costs. We incur certain environmental remediation costs, including cleanup costs, consulting fees for environmental studies and investigations, monitoring
costs, and legal costs relating to cleanup, litigation defense, and the pursuit of responsible third parties. We expense costs incurred in connection with operating properties
and properties previously sold. We capitalize costs related to undeveloped land as development costs and record any expected future environmental liabilities at the time of
acquisition. We maintain a liability for the estimated costs of environmental remediation expected to be incurred in connection with undeveloped land, acquired operating
properties and properties previously sold that we adjust as appropriate as information becomes available.
NOTE 3. ACQUISITIONS
Duke Transaction
On October 3, 2022, we acquired Duke Realty Corporation and Duke Realty Limited Partnership (collectively “Duke” or the “Duke Transaction”). Through the Duke
Transaction, we acquired a portfolio primarily comprised of logistics real estate assets, including 494 industrial operating properties, aggregating 144.4 million square feet,
which are highly complementary to our U.S. portfolio in terms of product quality, location and growth potential in our key markets. There was approximately 15 million square
feet of non-strategic operating industrial properties acquired in the Duke Transaction for which our intent is not to operate these properties long-term. These assets are
classified as Other Real Estate Investments in the Consolidated Balance Sheets. The portfolio also included properties under development, land for future development and
investments in other ventures.
The Duke Transaction was completed for $23.2 billion through the issuance of equity based on the value of the Prologis common stock and units issued of $18.8 billion, the
assumption of debt of $4.2 billion and transaction costs. In connection with the transaction, each issued and outstanding share or unit held by a Duke shareholder or
unitholder was converted automatically into 0.475 shares of Prologis common stock or common units of Prologis, L.P., respectively, including shares and units under Duke’s
equity incentive plan that became fully vested at closing.
The aggregate equity consideration is calculated below (in millions, except price per share):
Number of Prologis shares and units issued upon conversion of
Duke's shares and units at October 3, 2022
Multiplied by price of Prologis' common stock on September 30, 2022
Fair value of Prologis shares and units issued
$
$
184.80
101.60
18,776
We accounted for the Duke Transaction as an asset acquisition and as a result, the transaction costs of $239.8 million were capitalized to the basis of the acquired properties.
Transaction costs included the direct costs incurred to acquire the real estate assets.
Under acquisition accounting, the total cost or total consideration exchanged is allocated to the real estate properties and related lease intangibles on a relative fair value
basis. As the fair value of the properties acquired exceeded the purchase price, we allocated the bargain consideration at a property-level based on the relative fair value of
the property in comparison to the total portfolio. All other assets acquired and liabilities assumed, including debt, and real estate assets that we intend to sell in the next
twelve months were recorded at fair value. The total purchase price, including transaction costs, was allocated as follows (in millions):
Net investments in real estate
Cash and other assets
Debt
Intangible liabilities, net of intangible assets (1)
Accounts payable, accrued expenses and other liabilities
Noncontrolling interests
Total purchase price, including transaction costs
72
$
$
24,908
441
(4,162 )
(1,461 )
(708 )
(2 )
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Index to Item 15
(1)
Intangible assets of $832.5 million and intangible liabilities of $2.3 billion were included within Other Assets and Other Liabilities, respectively, on the
Consolidated Balance Sheets. The acquired lease intangibles from the Duke Transaction will be amortized over the terms of the respective leases with a
weighted average remaining lease term of 64 months.
Liberty Transaction
On February 4, 2020, we acquired Liberty Property Trust and Liberty Property Limited Partnership (collectively “Liberty” or the “Liberty Transaction”). 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.
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.
The aggregate equity consideration is calculated below (in millions, except price per share):
Number of Prologis shares and units issued upon conversion of
Liberty shares and units at February 4, 2020
Multiplied by price of Prologis' common stock on February 3, 2020
Fair value of Prologis shares and units issued
$
$
109.01
91.87
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 the direct costs incurred to acquire the real estate assets.
The total purchase price allocation for Liberty was as follows (in millions):
Net investments in real estate
Intangible assets, net of intangible liabilities
Cash and other assets
Debt
Accounts payable, accrued expenses and other liabilities
Noncontrolling interests
Total purchase price, including transaction costs
NOTE 4. REAL ESTATE
$
$
12,636
491
233
(2,845 )
(383 )
(1 )
10,131
Investments in real estate properties consisted of the following at December 31 (dollars and square feet in thousands):
Operating properties:
Buildings and improvements
Improved land
Development portfolio, including land costs:
Prestabilized
Properties under development
Land (2)
Other real estate investments (3)
Total investments in real estate properties
Less accumulated depreciation
Net investments in real estate properties
Square Feet
Number of Buildings
2022 (1)
2021
2022 (1)
2021
2022 (1)
2021
597,362
444,413
2,825
2,310 $
4,874
44,011
6,325
28,638
15
121
16
83
$
48,650,334 $
20,388,461
32,159,514
12,294,246
597,553
3,614,601
3,338,121
5,034,326
81,623,396
9,036,085
72,587,311 $
710,091
2,019,249
2,519,590
3,302,500
53,005,190
7,668,187
45,337,003
(1)
(2)
(3)
Includes the acquired real estate properties from the Duke Transaction at December 31, 2022. See Note 3 for more information.
At December 31, 2022 and 2021, our land was comprised of 7,188 and 6,227 acres, respectively.
Included in other real estate investments were: (i) non-strategic real estate assets, primarily acquired from the Duke Transaction, that we do not intend to operate
long-term; (ii) land parcels we own and lease to third parties; (iii) non-industrial real estate assets that we generally intend to redevelop into industrial properties; and
(iv) costs associated with potential acquisitions and future development projects, including purchase options on land.
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At December 31, 2022, we had investments in real estate assets in the U.S. and other Americas (Brazil, Canada and Mexico), Europe (Belgium, the Czech Republic, France,
Germany, Hungary, Italy, the Netherlands, Poland, Slovakia, Spain, Sweden and the United Kingdom (“U.K.”)) and Asia (China, Japan and Singapore).
Acquisitions
The following table summarizes our real estate acquisition activity, excluding the Duke Transaction and Liberty Transaction as discussed in Note 3, for the years ended
December 31 (dollars and square feet in thousands):
Number of operating properties
Square feet
Acres of land
Acquisition cost of net investments in real estate, excluding other real estate
investments
2022
2021 (1)
2020 (2)
23
5,169
2,218
31
6,760
2,684
150
21,874
830
$
1,828,256
$
2,517,644
$
3,054,381
Acquisition cost of other real estate investments
$
641,168 $
525,499 $
206,084
(1)
(2)
Included in 2021, is our acquisition of additional ownership interest in certain unconsolidated other ventures that we acquired from our partners and subsequently
resulted in the consolidation of the real estate assets.
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.
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 for the years ended December 31 (dollars and square feet in thousands):
Dispositions of development properties and land, net (1)
Number of properties
Square feet
Net proceeds
Gains on dispositions of development properties and land, net
Other dispositions of investments in real estate, net (2)
Number of properties
Square feet
Net proceeds
Gains on other dispositions of investments in real estate, net
2022
2021
2020
21
41
7,676
1,398,585 $
597,745 $
16,482
2,629,750 $
817,017 $
41
14,482
1,693,557
464,942
103
8,718
1,271,639 $
589,391 $
97
20,806
2,536,622 $
772,570 $
61
10,562
1,264,692
252,195
$
$
$
$
(1)
The gains we recognize in Gains on Dispositions of Development Properties and Land, Net are primarily driven by the contribution of newly developed properties to
our unconsolidated co-investment ventures and occasionally sales to a third party.
(2)
In 2021, we sold our ownership interest in an unconsolidated other venture.
Leases
As a Lessor
We lease our real estate properties to customers under agreements that are classified primarily as operating leases. We recognize the total minimum lease payments
provided for under the leases on a straight-line basis over the lease term. Our weighted average lease term remaining was 55 months based on square feet for all leases in
effect at December 31, 2022.
The following table summarizes the minimum lease payments due from our customers on leases for space in our operating properties, prestabilized and under development
properties, other real estate investments and assets held for sale or contribution at December 31, 2022 (in thousands):
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2023
2024
2025
2026
2027
Thereafter
Total
$
$
4,404,367
4,221,731
3,800,708
3,231,191
2,578,599
9,452,245
27,688,841
These amounts do not reflect future rental revenue from the renewal or replacement of existing leases and exclude reimbursements of operating expenses along with rental
increases that are not fixed.
As a Lessee
We had approximately 135 and 120 land and office space leases in which we were the lessee at December 31, 2022 and 2021, respectively, which primarily qualify as
operating leases with remaining lease terms of 1 to 87 years at December 31, 2022. Our lease liabilities were $638.8 million and $448.4 million at December 31, 2022 and
2021, respectively.
The following table summarizes the fixed, future minimum rental payments, excluding variable costs, for leases that had commenced at December 31, 2022, with amounts
discounted at lease commencement by our incremental borrowing rates to calculate the lease liabilities of our leases (in thousands):
2023
2024
2025
2026
2027
Thereafter
Total undiscounted rental payments
Less imputed interest
Total lease liabilities
$
$
62,061
71,709
56,349
47,443
39,642
1,144,025
1,421,229
782,418
638,811
The weighted average remaining lease term for these leases was 31 and 28 years at December 31, 2022 and 2021, respectively. We do not include renewal options in the
lease term for calculating the lease liability unless we are reasonably certain we will exercise the option or the lessor has the sole ability to exercise the option. The weighted
average discount rate was 3.4% and 3.2% at December 31, 2022 and 2021, respectively. We assigned a collateralized interest rate to each lease based on the term of the
lease and the currency in which the lease was denominated.
NOTE 5. 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
management 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 11 for more detail regarding our consolidated investments that are not
wholly owned.
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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 at December 31 (in thousands):
Unconsolidated co-investment ventures
Other ventures (1)
Total
$
$
2022
2021
8,073,927
1,624,971
9,698,898
$
$
7,825,455
785,503
8,610,958
(1)
In 2022, we completed the Duke Transaction and acquired an equity method investment in several other ventures.
Unconsolidated Co-Investment Ventures
The following table summarizes our investments in the individual co-investment ventures at December 31 (dollars in thousands):
Co-Investment Venture
Prologis Targeted U.S. Logistics Fund, L.P. (“USLF”)
FIBRA Prologis (1)
Prologis European Logistics Partners (“PELP”) (2) (3)
Prologis European Logistics Fund (“PELF”) (3)
Prologis UK Logistics Venture (“UKLV”) (2) (3)
Nippon Prologis REIT, Inc. (“NPR”) (4)
Prologis China Core Logistics Fund, LP (“PCCLF”)
Prologis China Logistics Venture I, LP, II, LP and III, LP
(“Prologis China Logistics Venture”) (2)
Prologis Brazil Logistics Venture (“PBLV”) and other joint ventures (2)
Total
(1)
Ownership
Percentage
2022
2021
26.2 %
47.9 %
50.0 %
23.8 %
-
15.1 %
15.5 %
15.0 %
20.0 %
Investment in
and Advances to
$
2022
2,397,544
888,710
1,949,002
1,837,615
-
614,933
92,863
2021
2,393,232
694,590
2,097,332
1,605,253
9,243
684,029
75,922
27.0 % $
47.3 %
50.0 %
23.8 %
15.0 %
15.1 %
15.3 %
15.0 %
20.0 %
$
111,906
181,354
8,073,927
$
120,283
145,571
7,825,455
At December 31, 2022, we owned 489.1 million units of FIBRA Prologis that had a closing price of Ps 55.83 ($2.88) per unit on the Mexican Stock Exchange. We
have granted FIBRA Prologis a right of first refusal with respect to stabilized properties that we plan to sell in Mexico.
(2)
(3)
(4)
We have one partner in each of these co-investment ventures.
In December 2021, UKLV sold its operating properties to our unconsolidated co-investment ventures, PELF and PELP, and its land to us and recognized the related
gains upon disposition. At December 31, 2021, there was a $9.2 million outstanding receivable balance that was paid in the second quarter of 2022.
At December 31, 2022, we owned 0.4 million units of NPR that had a closing price of ¥308,500 ($2,339) per share on the Tokyo Stock Exchange. For any properties
we develop and plan to sell in Japan, we have committed to offer those properties to NPR if we determine the properties meet NPR’s investment objectives.
At December 31, 2022 and 2021, we had receivables from NPR of $161.4 million and $175.2 million, respectively, related to customer security deposits that originated
through a leasing company owned by us that pertain to properties previously contributed to NPR. We have a corresponding payable to NPR’s customers in Other
Liabilities. These amounts are repaid to us as the leases turn over.
The amounts recognized in Strategic Capital Revenues and Earnings from Unconsolidated Entities, Net depend on the size, real estate valuations, operations and
transactions of the unconsolidated co-investment ventures, the timing of revenues earned through promotes and transactional fees, as well as fluctuations in foreign currency
exchange rates and our ownership interest. We recognized Strategic Capital Expenses for direct costs associated with the asset management of these ventures, allocated
property-level management and leasing costs for the properties owned by the ventures and compensation expenses under the PPP. For additional discussion on the PPP,
see Note 12.
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The following table summarizes the Strategic Capital Revenues we recognized in the Consolidated Statements of Income related to our unconsolidated co-investment
ventures for the years ended December 31 (in thousands):
Recurring fees
Transactional fees
Promote revenue (1)
Total strategic capital revenues from unconsolidated co-investment ventures (2)
2022
2021
2020
$
$
455,385 $
67,048
503,779
1,026,212 $
395,765 $
78,552
77,199
551,516 $
318,423
65,804
239,268
623,495
(1)
(2)
Includes promote revenue earned primarily from PELF in September 2022 and USLF in June 2020.
These amounts exclude strategic capital revenues from other ventures.
The following table summarizes the key property information, financial position and operating information of our unconsolidated co-investment ventures on a U.S. GAAP
basis (not our proportionate share) and the amounts we recognized in the Consolidated Financial Statements related to these ventures at December 31 and for the years
ended December 31 (dollars and square feet in millions):
At:
Key property information:
Ventures
Operating properties
Square feet
Financial position:
Total assets ($)
Third-party debt ($)
Total liabilities ($)
U.S.
Other Americas (1)
Europe
Asia
Total
2022
2021
2022
2021
2022 (2)
2021
2022
2021
2022
2021
1
739
123
1
732
122
12,617
3,468
4,143
11,619
3,069
3,717
2
260
60
3,744
919
1,011
2
254
56
3,349
1,052
1,116
2
989
219
2
818
198
22,502
5,315
7,292
18,373
3,737
5,619
3
217
89
9,964
3,811
4,279
3
203
82
10,746
4,157
4,685
8
2,205
491
48,827
13,513
16,725
Our investment balance ($) (3)
Our weighted average ownership (4)
2,398
2,393
1,070
840
3,786
3,712
820
880
8,074
26.2 %
27.0 %
41.0 %
40.8 %
31.0 %
30.9 %
15.2 %
15.1 %
27.4 %
8
2,007
458
44,087
12,015
15,137
7,825
26.9 %
Operating Information:
For the years ended:
Total revenues ($)
Net earnings ($)
U.S.
Other Americas (1)
Europe
Asia
Total
2022
2021
2020
2022
2021
2020
2022
2021
2020
2022
2021
2020
2022
2021
2020
1,182
292
1,039
312
946
169
383
137
321
120
278
1,424
1,387
1,208
91
493
1,070
390
629
114
653
160
584
3,618
3,400
3,016
255
1,036
1,662
905
Our earnings from unconsolidated
co-investment ventures, net ($)
(1)
PBLV and our other Brazilian joint ventures are combined as one venture for the purpose of this table.
79
82
46
47
43
34
150
214
121
19
27
39
295
366
240
(2)
(3)
In September 2022, PELF acquired a real estate portfolio that primarily included 125 industrial operating properties.
Prologis’ investment balance is presented at our adjusted basis. The difference between our ownership interest of a venture’s equity and our investment balance at
December 31, 2022 and 2021, results principally from four types of transactions: (i) deferred gains from the contribution of property to a venture prior to January 1,
2018 ($546.9 million and $559.7 million, respectively); (ii) recording additional costs associated with our investment in the venture ($90.4 million and $96.6 million,
respectively); (iii) receivables, principally for fees and promotes ($193.7 million and $149.5 million, respectively); and (iv) customer security deposits retained
subsequent to property contributions to NPR, as discussed above.
(4)
Represents our weighted average ownership interest in all unconsolidated co-investment ventures based on each entity’s contribution of total assets before
depreciation, net of other liabilities.
Equity Commitments Related to Certain Unconsolidated Co-Investment Ventures
Certain unconsolidated co-investment ventures have equity commitments from us and our venture partners. Our venture partners fulfill their equity commitment with cash. We
may fulfill our equity commitment through contributions of properties or cash. The commitments are generally used for the acquisition or development of properties but may
be used for the repayment of debt or other general uses. The venture may obtain financing for the acquisition of properties and therefore the acquisition price of additional
investments that the venture could make may be more than the equity commitment. Depending on market conditions, the investment objectives of the ventures, our liquidity
needs and other factors, we may make additional contributions of properties or additional cash investments in these ventures.
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At December 31, 2022, our outstanding equity commitments were $287.6 million, principally for Prologis China Logistics Venture. The equity commitments expire from 2023
to 2028 if they have not been previously called. Typically, equity commitments are used for future development and acquisitions in the unconsolidated co-investment
ventures.
NOTE 6. 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 December 31, 2022 and 2021. 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.
Assets held for sale or contribution consisted of the following at December 31 (dollars and square feet in thousands):
Number of operating properties
Square feet
Total assets held for sale or contribution
Total liabilities associated with assets held for sale or contribution – included in Other Liabilities
NOTE 7. OTHER ASSETS AND OTHER LIABILITIES
2022
2021
21
4,061
531,257 $
4,536 $
14
5,486
669,688
10,631
$
$
The following table summarizes our other assets, net of amortization and depreciation, and other liabilities, net of amortization, if applicable, at December 31 (in thousands):
2022
2021
Acquired lease intangibles (1)
Lease right-of-use assets (2)
Rent leveling
Leasing commissions
Accounts receivable
Prepaid assets
Derivative assets
Value added taxes receivable
Fixed assets
Other notes receivable
Management contracts
Deferred income taxes
Other
Total other assets
Acquired lease intangibles (1)
Lease liabilities (2)
Tenant security deposits
Unearned rents
Environmental liabilities
Deferred income taxes
Indemnification liability
Deferred income
Value added taxes payable
Derivative liabilities
Liabilities associated with assets held for sale or contribution
Other
Total other liabilities
$
$
$
$
1,183,006
735,430
715,679
650,127
377,996
239,483
227,236
143,317
119,897
116,537
11,048
5,732
276,011
4,801,499
2,373,050
638,811
419,409
305,299
209,935
99,757
44,356
24,481
15,160
6,682
4,536
305,033
4,446,509
$
$
$
$
552,517
459,364
578,960
520,778
424,240
153,591
91,047
133,034
118,044
35,970
12,282
8,926
223,701
3,312,454
198,894
448,445
373,432
164,669
86,920
75,007
44,416
21,699
17,556
9,675
10,631
324,845
1,776,189
(1)
Included in acquired lease intangible assets and liabilities were $832.5 million of intangible assets and $2.3 billion of intangible liabilities from the Duke Transaction,
respectively. These assets and liabilities will be amortized over the terms of the respective leases with a weighted average remaining lease term of 64 months. See
Note 3 for more information.
(2)
For the amortization of the future minimum rental payments into rental expense and G&A expense on our land and office leases, respectively, refer to Note 4.
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The following table summarizes the expected future amortization of leasing commissions and forgone rent (included in acquired lease intangibles above) into amortization
expense and above and below market leases (included in acquired lease intangibles above) and rent leveling net assets into rental revenues, all based on the balances at
December 31, 2022 (in thousands):
2023
2024
2025
2026
2027
Thereafter
Total
NOTE 8. DEBT
Amortization Expense
Net Increase to
Rental Revenues
$
$
421,196
323,562
257,560
202,120
152,028
376,559
1,733,025
$
$
479,339
343,066
231,108
157,520
112,213
234,017
1,557,263
All debt is incurred by the OP or its consolidated subsidiaries. The following table summarizes our debt at December 31 (dollars in thousands):
Weighted Average
2022
Years (2)
Amount
Outstanding (3)
Weighted Average
2021
Years (2)
Amount
Outstanding (3)
Credit facilities (4)
Senior notes (4) (5)
Term loans and
unsecured other (4)
Secured mortgage (4) (6)
Total
Interest Rate (1)
4.2%
2.3%
2.3%
3.0%
2.5%
2.8
10.3
4.9
4.3
9.2
$
$
1,538,461
19,786,253
2,106,592
444,655
23,875,961
Interest Rate (1)
0.8%
1.7%
0.5%
5.1%
1.6%
1.6
11.6
4.2
4.7
10.4
$
$
491,393
14,981,690
1,825,195
416,776
17,715,054
(1)
(2)
(3)
(4)
(5)
(6)
The weighted average interest rates presented represent the effective interest rates (including amortization of debt issuance costs and 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.
The weighted average years represents the remaining maturity in years on the debt outstanding at period end.
We borrow in the functional currencies of the countries where we invest. Included in the outstanding balances at December 31 were borrowings denominated in the
following currencies:
British pound sterling
Canadian dollar
Euro
Japanese yen
U.S. dollar
Total
2022
2021
Weighted Average
Interest Rate
Amount
Outstanding
% of
Total
Weighted Average
Interest Rate
Amount
Outstanding
% of
Total
2.1 % $
4.5 %
1.3 %
1.0 %
3.6 %
2.5 % $
1,228,483
814,491
7,991,301
3,308,009
10,533,677
23,875,961
5.1 %
3.4 %
33.5 %
13.9 %
44.1 %
100.0 %
2.1 % $
2.7 %
1.0 %
0.9 %
2.6 %
1.6 % $
1,376,807
283,773
7,408,407
2,878,542
5,767,525
17,715,054
7.8 %
1.6 %
41.8 %
16.2 %
32.6 %
100.0 %
Through the Duke Transaction, we assumed $4.2 billion of debt with a weighted average stated interest rate of 2.3% and 4.9% at fair value consisting of $2.9 billion
of senior notes, a $746.4 million line of credit, a $501.2 million term loan and $34.2 million of secured mortgage debt. We paid down the balance on Duke’s line of
credit subsequent to closing the acquisition.
Senior notes are due from February 2024 to June 2061 with effective interest rates ranging from 0.3% to 5.3% at December 31, 2022.
Secured mortgage debt is due from April 2023 to September 2033 with effective interest rates ranging from 0.4% to 7.0% at December 31, 2022. The debt was
principally secured by 21 operating properties, two properties under development, one prestabilized property, two other real estate investments and one land parcel
with an aggregate undepreciated cost of $1.3 billion at December 31, 2022.
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Credit Facilities
In June 2022, we terminated our global senior credit facility (the “2019 Global Facility”) and entered into the 2022 Global Facility with a borrowing capacity of up to $3.0 billion
(subject to currency fluctuations). We also upsized our second global senior credit facility (the “2021 Global Facility”), increasing its borrowing capacity to $2.0 billion (subject
to currency fluctuations). We may draw on both facilities in British pounds sterling, Canadian dollars, euro, Japanese yen, Mexican pesos and U.S. dollars on a revolving
basis. During the recast of both facilities, we modified the base rate of the aggregate lender commitments in U.S. dollars from the U.S. dollar London Inter-bank Offered Rate
to the Secured Overnight Financing Rate. The 2021 Global Facility is scheduled to initially mature in April 2024 and the 2022 Global Facility in June 2026; however, we can
extend the maturity date for each facility by six months on two occasions, subject to the payment of extension fees. We have the ability to increase the 2021 Global Facility to
$2.5 billion and the 2022 Global Facility to $4.0 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 ($417.1 million at December 31, 2022). We have the ability to
increase the borrowing capacity of the Yen Credit Facility to ¥75.0 billion ($568.7 million at December 31, 2022), 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.
We refer to the 2021 Global Facility, the 2022 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.
The following table summarizes information about our Credit Facility activity and available liquidity (dollars in millions):
Credit Facility activity for the years ended December 31:
Weighted average daily interest rate
Weighted average daily borrowings
Maximum borrowings outstanding at any month-end
Available liquidity at December 31:
Aggregate lender commitments
Credit Facilities
Less:
Borrowings outstanding
Outstanding letters of credit
Current availability
Available term loans
Cash and cash equivalents
Total liquidity
Senior Notes
2022
2021
2020
1.7 %
$
519
$
1,538
1.3 %
$
60
$
491
1.1 %
109
727
5,441
$
4,940
$
1,538
38
3,865
-
278
4,143
$
$
491
7
4,442
-
556
4,998
$
$
4,119
172
24
3,923
250
598
4,771
$
$
$
$
$
The senior notes are unsecured and our obligations are effectively subordinated in certain respects to any of our debt that is secured by a lien on real property, to the extent
of the value of such real property. The senior notes require interest payments be made quarterly, semi-annually or annually. The majority of the senior notes are redeemable
at any time at our option, subject to certain prepayment penalties. Such repurchase and other terms are governed by the provisions of indenture agreements, various note
purchase agreements or trust deeds. The following table summarizes the issuances of senior notes during 2022 (principal in thousands):
Aggregate Principal
Issuance Date Weighted Average
Issuance Date
January
February (2)
July
September (2)
November
December
Total
Borrowing Currency
£
€
¥
$
C$
¥
60,000 $
1,550,000 $
30,964,500 $
650,000 $
500,000 $
24,200,000 $
$
USD (1)
Interest Rate
Years
80,932
1,768,240
226,588
650,000
362,511
177,560
3,265,831
2.1%
1.0%
1.4%
4.6%
5.3%
1.8%
2.3%
20.0
8.5
15.5
10.3
8.2
13.4
9.8
(1)
The exchange rate used to calculate into U.S. dollars was the spot rate at the settlement date.
Maturity Dates
December 2041
February 2024 – 2034
July 2027 – 2042
January 2033
January 2031
December 2027 – 2037
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(2)
A portion of the net proceeds from the issuance of these notes were used to finance green projects eligible under our green bond framework.
On October 6, 2022, we completed an exchange offer and consent solicitation for nine series of Duke’s senior notes for an aggregate amount of $3.4 billion, with $3.2 billion,
or 96%, of the aggregate principal amount being validly tendered for exchange. The validly tendered senior notes were exchanged for notes issued by the OP. As a result of
the consent solicitation, we have no separate remaining financial reporting obligations or financial covenants associated with the senior notes assumed in the Duke
Transaction. All other terms of the assumed Duke senior notes remained substantially the same.
Early Extinguishment of Debt
We repurchased, redeemed or repaid certain debt before the maturity date in an effort to reduce our borrowing costs and extend our debt maturities. As a result, the
difference between the recorded debt (including premiums, discounts and related debt issuance costs) and the consideration we paid to retire the debt, including fees, was
recognized as gains or losses. Fees associated with the restructuring of debt that meets the modification criteria, along with existing unamortized premium or discount and
debt issuance costs, are amortized over the term of the new debt.
We recognized $20.2 million, $187.5 million and $188.3 million of losses on the early extinguishment of debt in 2022, 2021 and 2020, respectively. The losses during 2021
and 2020 were driven by the redemption of certain higher interest rate senior notes before their stated maturity. We redeemed $1.5 billion of senior notes in 2021, with stated
maturities of 2024 and 2025, and $2.6 billion of senior notes in 2020, with stated maturities between 2021 and 2024. The losses in 2020 also included the extinguishment of
debt assumed in the Liberty Transaction and IPT Transaction, which represented the excess of the prepayment penalties over the premium recorded upon assumption of the
debt.
Term Loans
The following table summarizes our outstanding term loans at December 31 (dollars and borrowing currency in thousands):
Term Loan
Borrowing
Currency
Issuance Date Lender Commitment at 2022
Amount
Outstanding
at 2022
Amount
Outstanding
at 2021
Interest Rate
Maturity Date
2015 Canadian (1)
Term Loan
March 2017 Yen
Term Loan
October 2017 Yen
Term Loan
December 2018 Yen
Term Loan
January 2019 Yen
Term Loan
March 2019 Yen
Term Loan
June 2022 Yen
Term Loan
2022 Canadian
Term Loan (1)
2022 U.S. Dollar
Term Loan (2)
December 2022 Yen
Term Loan
Subtotal
Debt issuance costs, net
Total term loans
CAD
JPY
JPY
JPY
JPY
JPY
JPY
CAD
USD
JPY
Borrowing
Currency
USD
USD
USD
December
2015
$
-
$
134,173
CDOR + 0.9%
February 2023
March 2017
¥
12,000,000 $
90,994
90,994
104,243
0.9% and 1.0%
March 2027 – 2028
October 2017 ¥
10,000,000 $
75,828
75,828
86,869
0.9%
October 2032
December
2018
¥
20,000,000 $ 151,656
151,656
173,738
1.2% and TIBOR + 0.7%
January 2019 ¥
15,000,000 $ 113,742
113,742
130,304
TIBOR + 0.5% to 0.6%
December 2031 –
June 2033
January 2028 –
2030
March 2019
¥
85,000,000 $ 644,540
644,540
738,388
TIBOR + 0.4%
March 2026
June 2022
¥
25,000,000 $ 189,570
189,570
August 2022 C$
300,000 $ 221,593
221,593
October 2022 $
500,000 $ 500,000
500,000
-
-
-
1.1% and 1.2%
June 2032 - 2034
CDOR + spread
August 2025
SOFR + 0.1%
March 2025
December
2022
¥
15,000,000 $ 113,742
113,742
2,101,665
(5,007 )
2,096,658
$
-
1,367,715
(5,169 )
1,362,546
$
1.4%
December 2033
(1)
In July 2022, we paid down our existing term loan in Canada of CAD $170.5 million ($133.5 million) and entered into a new term loan in Canada (“2022 Canadian
Term Loan”) for CAD $300.0 million ($221.6 million at December 31, 2022), bearing interest at the Canada Dollar Offered Rate (“CDOR”) plus a spread over the
applicable benchmark. We can extend the maturity date on the 2022 Canadian Term Loan by one year on two occasions, subject to the payment of extension fees.
As the CDOR interest rate will transition to the Canadian Overnight Repo Rate Average prior to June 30, 2024, we anticipate modifying the interest rate on this loan
prior to this transition and do not expect it to have a material impact on our Consolidated Financial Statements.
(2)
This term loan was acquired in the Duke Transaction.
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Other Debt
In December 2021, we entered into a loan for €400.0 million ($453.0 million at December 31, 2021) with an interest rate of -0.5% and a maturity of June 2022. This loan
matured in 2022.
Long-Term Debt Maturities
Scheduled principal payments due on our debt for each year through the period ended December 31, 2027, and thereafter were as follows at December 31, 2022 (in
thousands):
Maturity
2023 (1)
2024 (2)
2025 (3)
2026 (4)
2027
Thereafter
Subtotal
Unamortized premiums
(discounts), net
Unamortized debt issuance
costs, net
Total
$
$
Credit
Facilities
-
486,795
-
1,051,666
-
-
1,538,461
Unsecured
Senior
Notes
$
-
319,980
37,914
1,308,179
1,746,859
16,949,473
20,362,405
Term Loans
and Other
Secured
Mortgage
$
-
-
722,711
644,605
54,348
688,869
2,110,533
$
32,940
95,379
146,793
68,434
4,156
89,135
436,837
Total
32,940
902,154
907,418
3,072,884
1,805,363
17,727,477
24,448,236
-
(490,968 )
1,066
8,766
(481,136 )
-
1,538,461
$
(85,184 )
19,786,253
$
$
(5,007 )
2,106,592
$
(948 )
444,655
$
(91,139 )
23,875,961
(1)
(2)
(3)
(4)
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.
Included in the 2024 maturities is the 2021 Global Facility and Yen Credit Facility that can be extended until 2025.
Included in the 2025 maturities is the 2022 Canadian Term Loan that can be extended until 2027.
Included in the 2026 maturities is the 2022 Global Facility that can be extended until 2027.
Interest Expense
The following table summarizes the components of interest expense for the years ended December 31 (in thousands):
Gross interest expense
Amortization of debt discounts (premiums), net
Amortization of debt issuance costs, net
Interest expense before capitalization
Capitalized amounts
Net interest expense
Total cash paid for interest, net of amounts capitalized
Financial Debt Covenants
2022
2021
2020
$
$
$
$
345,398
6,602
17,134
369,134
(60,097 )
309,037
234,131
$
$
$
$
299,115
(7,478 )
16,134
307,771
(41,543 )
266,228
278,861
$
$
$
$
348,427
(6,741 )
14,600
356,286
(41,779 )
314,507
309,390
Our senior notes, term loans and Credit Facilities outstanding at December 31, 2022 were subject to certain financial covenants under their related documents. At December
31, 2022, 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.
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NOTE 9. STOCKHOLDERS’ EQUITY OF PROLOGIS, INC.
Shares Authorized
At December 31, 2022, 2.1 billion shares were authorized to be issued by the Parent, of which 2.0 billion shares represent common stock and 0.1 billion shares represent
preferred stock. Our board of directors (the “Board”) may, without stockholder approval, classify or reclassify any unissued shares of our stock from time to time by setting or
changing the preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions, qualifications and terms or conditions of redemption of such
shares.
Common Stock
Our at-the-market program allows us to sell up to $1.5 billion in aggregate gross sales proceeds of shares of common stock through twenty designated agents. These agents
earn a fee of up to 2% of the gross sales price per share of common stock as agreed to on a transaction-by-transaction basis. We have not issued any shares of common
stock under this program.
On October 3, 2022, we issued 182.7 million common shares in the Duke Transaction. On February 4, 2020, we issued 106.7 million common shares in the Liberty
Transaction. See Note 3 for more detail on these transactions.
Under the 2020 Long-Term Incentive Plan, certain of our employees and outside directors are able to participate in equity-based compensation plans. See Note 12 for
additional information on equity-based compensation plans.
Share Purchase Program
We have a share purchase program for the repurchase of outstanding shares of our common stock on the open market or in privately negotiated transactions for an
aggregate purchase price of up to $1.0 billion. In 2020, we repurchased and retired 0.5 million shares of common stock for an aggregate price of $34.8 million at a weighted
average price of $64.66 per share on the open market.
Preferred Stock
In 2020, we repurchased approximately 0.1 million shares of Series Q preferred stock and recognized a loss of $2.3 million, which primarily represented the difference
between the repurchase price and the carrying value of the preferred stock, net of original issuance costs.
At December 31, 2022 and 2021 our Series Q preferred stock outstanding had a dividend rate of 8.54% and will be redeemable at our option on or after November 13, 2026.
Holders have, subject to certain conditions, limited voting rights and all holders are entitled to receive cumulative preferential dividends based on liquidation preference. The
dividends are payable quarterly when, and if, they have been declared by the Board, out of funds legally available for the payment of dividends.
Ownership Restrictions
For us to qualify as a REIT, five or fewer individuals may not own more than 50% of the value of our outstanding stock at any time during the last half of our taxable year.
Therefore, our charter restricts beneficial ownership (or ownership generally attributed to a person under the REIT rules), by a person, or persons acting as a group, of issued
and outstanding common and preferred stock that would cause that person to own or be deemed to own more than 9.8% (by value or number of shares, whichever is more
restrictive) of our issued and outstanding common stock. Furthermore, subject to certain exceptions, no person shall at any time directly or indirectly acquire ownership of
more than 25% of any of the preferred stock. These provisions assist us in protecting and preserving our REIT status and protect the interests of stockholders in takeover
transactions by preventing the acquisition of a substantial block of outstanding shares of stock.
Shares of stock owned by a person or group of people in excess of these limits are subject to redemption by us. The provision does not apply where a majority of the Board,
in its sole and absolute discretion, waives such limit after determining that our status as a REIT for federal income tax purposes will not be jeopardized.
Dividends
To comply with the REIT requirements of the IRC, we are generally required to make common and preferred stock dividends (other than capital gain distributions) to our
stockholders in amounts that together at least equal (i) the sum of (a) 90% of our “REIT taxable income” computed without regard to the dividends paid deduction and net
capital gains and (b) 90% of the net income (after tax), if any, from foreclosure property, minus (ii) certain excess noncash income. Our common stock distribution policy is to
distribute a percentage of our cash flow that ensures that we will meet the distribution requirements of the IRC and that allows us to also retain cash to meet other needs,
such as capital improvements and other investment activities.
The taxability of our dividends for the years ended December 31, 2022, 2021 and 2020 are presented below. The taxability of dividends paid in 2022 was based on
management’s estimates as our tax return for the year ended December 31, 2022 has not been filed. As the
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statute of limitations is generally three years, our tax returns for certain years remain subject to examination and consequently the taxability of the dividends is subject to
change.
In 2022, 2021 and 2020, we paid all of our dividends in cash.
The following summarizes the taxability of our common and preferred stock dividends for the years ended December 31:
Common Stock:
Ordinary income
Qualified dividend
Capital gains
Total distribution
Preferred Stock – Series Q:
Ordinary income
Qualified dividend
Capital gains
Total dividend
(1)
Taxability for 2022 is estimated.
2022 (1)
2021
2020
$
$
$
$
3.08
0.02
0.06
3.16
4.16
0.02
0.09
4.27
$
$
$
$
2.45
0.00
0.07
2.52
4.15
0.01
0.11
4.27
$
$
$
$
2.12
0.00
0.20
2.32
3.96
0.02
0.29
4.27
Common stock dividends are characterized for federal income tax purposes as ordinary income, qualified dividend, capital gains, non-taxable return of capital or a
combination of the four. Common stock dividends that exceed our current and accumulated earnings and profits (calculated for tax purposes) constitute a return of capital
rather than a dividend and generally reduce the stockholder’s basis in the common stock. To the extent that a dividend exceeds both current and accumulated earnings and
profits and the stockholder’s basis in the common stock, it will generally be treated as a gain from the sale or exchange of that stockholder’s common stock. At the beginning
of each year, we notify our stockholders of the taxability of the common stock dividends paid during the preceding year.
Pursuant to the terms of our preferred stock, we are restricted from declaring or paying any dividend with respect to our common stock unless and until all cumulative
dividends with respect to the preferred stock have been paid and sufficient funds have been set aside for dividends that have been declared for the relevant dividend period
with respect to the preferred stock.
NOTE 10. PARTNERS’ CAPITAL OF PROLOGIS, L.P.
Distributions paid on the common limited partnership units, and the taxability of those distributions, are similar to dividends paid on the Parent’s common stock disclosed
above.
On October 3, 2022, we issued 2.1 million common limited partnership units in the OP in the Duke Transaction. On February 4, 2020, we issued 2.3 million common limited
partnership units in the OP in the Liberty Transaction. See Note 3 for more detail on these transactions. Additionally, 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 and 0.5 million limited partnership units as
partial consideration for the acquisition of other properties in 2020.
We issued Class A Units in the OP through an acquisition of a portfolio of properties in 2015. The Class A Units generally have the same rights as the existing common
limited partnership units of the OP, except that the Class A Units are entitled to a quarterly distribution equal to $0.64665 per unit so long as the common limited partnership
units receive a quarterly distribution of at least $0.40 per unit (in the event the common limited partnership units receive a quarterly distribution of less than $0.40 per unit, the
Class A Unit distribution would be reduced by a proportionate amount). Class A Units are convertible into common limited partnership units at an initial conversion rate of
one-for-one. The conversion rate will be increased or decreased to the extent that, at the time of conversion, the net present value of the distributions paid with respect to the
Class A Units are less or more than the distributions paid on common limited partnership units from the time of issuance of the Class A Units until the time of conversion. At
December 31, 2022 and 2021, the Class A Units were convertible into 8.0 million common limited partnership units. The OP may redeem the Class A Units at any time after
October 7, 2025, for an amount in cash equal to the then-current number of the common limited partnership units into which the Class A Units are convertible, multiplied by
$43.11, subject to the holders’ right to convert the Class A Units into common limited partnership units. Distributions paid to the Class A Units were $2.58660 annually during
the years ended December 31, 2022, 2021 and 2020.
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NOTE 11. 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.
As discussed in Note 1, the Parent has complete responsibility, power and discretion in the day-to-day management of the OP. The Parent, through its majority interest, has
the right to receive benefits from and incur losses of the OP. In addition, the OP does not have either substantive liquidation rights or substantive kick-out rights without cause
or substantive participating rights that could be exercised by a simple majority of noncontrolling interests. The absence of such rights renders the OP as a VIE. Accordingly,
the Parent is the primary beneficiary and therefore consolidates the OP.
Prologis, Inc.
The noncontrolling interests of the Parent include the noncontrolling interests described above for the OP, as well as the limited partnership units in the OP that are not
owned by the Parent. The outstanding limited partnership units receive quarterly cash distributions equal to the quarterly dividends paid on our common stock pursuant to the
terms of the applicable partnership agreements.
The following table summarizes these entities at December 31 (dollars in thousands):
Our Ownership
Percentage
Noncontrolling Interests
Total Assets
Total Liabilities
Prologis U.S. Logistics Venture
Other consolidated entities (1)
Prologis, L.P.
Limited partners in Prologis, L.P. (2)(3)
Prologis, Inc.
2022
2021
2022
2021
2022
55.0 %
various
various
55.0 % $ 3,182,858
134,909
3,317,767
1,308,044
$ 3,264,337 $ 7,225,438
1,737,311
8,962,749
-
133,201
3,397,538
917,799
$
$
2021
7,397,195
1,453,236
8,850,431
-
2022
158,453
259,524
417,977
-
$
$ 4,625,811 $ 4,315,337 $ 8,962,749 $
8,850,431 $
417,977 $
2021
147,545
162,598
310,143
-
310,143
(1)
(2)
(3)
Includes 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 December 31, 2022 and 2021 were exchangeable into cash or, at our option, 0.3 million shares of the Parent’s common stock.
We had 8.6 million Class A Units at December 31, 2022 and 2021 that were convertible into 8.0 million limited partnership units of the OP at the end of each year.
See Note 10 for further discussion of our Class A Units.
There were limited partnership units in the OP, excluding the Class A Units, that were exchangeable into cash or, at our option, 10.0 million and 8.4 million shares of
the Parent’s common stock, at December 31, 2022 and 2021, respectively. Also included are the vested OP Long-Term Incentive Plan Units (“LTIP Units”)
associated with our long-term compensation plans of 4.6 million and 4.0 million shares of the Parent’s common stock at December 31, 2022 and 2021, respectively.
See further discussion of LTIP Units in Note 12.
NOTE 12. LONG-TERM COMPENSATION
2020 Long-Term Incentive Plan
In 2020, our stockholders approved the 2020 Long-Term Incentive Plan (“2020 LTIP”), which replaced the 2012 Long-Term Incentive Plan (“2012 LTIP”). After approval of the
2020 LTIP, no further awards could be made under the 2012 LTIP and outstanding awards previously granted under the 2012 LTIP will remain outstanding in accordance
with the awards’ terms.
The 2020 LTIP provides for grants of awards to officers, directors, employees and consultants of the Parent or its subsidiaries. Awards can be in the form of: full value
awards, stock appreciation rights and stock options (non-qualified options and incentive stock options). Full value awards generally consist of: (i) common stock; (ii) restricted
stock units (“RSUs”); (iii) OP LTIP units (“LTIP Units”) and (iv) Prologis Outperformance Plan (“POP”) OP LTIP units (“POP LTIP Units”). The equity-based compensation
plans and programs under which awards can be made were not changed under the 2020 LTIP. Awards may be made under the 2020 LTIP until it is terminated by the Board
or until the ten-year anniversary of the effective date of the plan.
The awards have been issued under the following components of our equity-based compensation plans and programs at December 31, 2022: (i) POP; (ii) Prologis Promote
Plan (“PPP”); (iii) annual long-term incentive (“LTI”) equity award program (“Annual LTI Award”);
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and (iv) annual bonus exchange program. Under all of these components, certain employees may elect to receive their equity award payout either in the form of RSUs or
other equity of the Parent or LTIP Units of the OP.
At December 31, 2022, we had 33.3 million shares reserved or available for issuance, including 5.7 million shares of common stock to be issued upon vesting of awards
previously granted and 21.0 million shares of common stock remaining available for future issuance under equity compensation plans. Each LTIP Unit and POP LTIP Unit
counts as one share of common stock for purposes of calculating the limit on shares that may be issued.
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 2022 – 2024 performance period in January 2022, as discussed in the table below. The 2022 – 2024 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.
Each participant is eligible to receive a percentage of the total compensation pool based on the number of participation points allocated to the participant, or in the case of
certain executive officers, a set percentage of the compensation pool. If the performance criteria are met, the participants’ points or compensation pool percentage will be
paid in the form of common stock, restricted stock units, POP LTIP Units or LTIP Units, as elected by the participant. Annually, a participant may exchange their participation
points or compensation pool percentage for POP LTIP Units. If the performance criteria are not met, the participants’ points, compensation pool percentage and POP LTIP
Units will be forfeited.
At December 31, 2022, all awards were equity classified. The initial valuation was calculated using a Monte Carlo valuation model.
The following table details the assumptions used for each grant based on the year it was granted (dollars in thousands):
Risk free interest rate
Prologis expected volatility
MSCI US REIT Index expected volatility
Aggregate fair value
2022
2021
2020
1.0 %
31.0 %
29.0 %
0.2 %
32.0 %
29.0 %
1.7 %
19.0 %
13.0 %
$
30,400
$
30,300
$
28,800
Total remaining compensation cost related to the POP at December 31, 2022, was $62.5 million, prior to adjustments for capitalized amounts due to our development
activities. The remaining compensation cost will be recognized through 2031, with a weighted average period of 2.8 years.
The performance criteria were met for the 2020 – 2022, 2019 – 2021, 2018 – 2020, and 2017 – 2019 performance periods at the end of the initial three-year performance
period, which resulted in awards being earned in January 2023, 2022, 2021 and 2020, respectively, in the form of the awards listed below. See below for details on these
performance periods (dollars, shares and units in thousands, except average price):
Performance pool
Common stock shares
Restricted stock units
POP LTIP Units and LTIP Units
Average price used to determine number of awards
2020 – 2022
2019 – 2021
2018 – 2020
2017 – 2019 (1)
$
$
100,000 $
53
211
623
112.74 $
100,000 $
34
134
426
168.37 $
100,000 $
61
242
701
99.67 $
142,133
443
-
930
103.56
(1)
These performance period amounts include awards earned subsequent to the initial three-year performance period. One-third of the remaining compensation pool
in excess of the $75.0 million aggregate initial award amounts can be earned at the end of each
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Index to Item 15
of the three years following the end of the initial three-year performance period if our performance meets or exceeds the MSCI US REIT Index at the end of each of
such three years.
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 award tables below.
Other Equity-Based Compensation Plans and Programs
Awards may be issued in the form of RSUs or LTIP Units at the participants’ elections under the following equity-based compensation plans and programs. RSUs and LTIP
Units are valued based on the market price of the Parent’s common stock on the date the award is granted and the grant date value is charged to compensation expense
over the service period. The service period is generally four years, except for awards under the annual bonus exchange program. Dividends and distributions are paid with
respect to both RSUs and LTIP Units during the vesting period, and therefore they are considered participating securities. We do not allocate undistributed earnings to
participating securities as our net earnings per share or unit would not be materially different. The value of the dividend is charged to retained earnings for RSUs and the
distribution is charged to Net Earnings Attributable to Noncontrolling Interests in the OP for LTIP Units in the Consolidated Financial Statements of the Parent.
Prologis Promote Plan (“PPP”)
Under the PPP, we establish a compensation pool for certain employees up to 40% of the third-party portion of promotes earned by Prologis from the co-investment
ventures. The awards may be settled in some combination of cash and full value awards, at our election.
Annual LTI Equity Award Program (“Annual LTI Award”)
The Annual LTI Award provides for grants to certain employees subject to our performance against benchmark indices that relate to the most recent year’s performance.
Annual Bonus Exchange Program
Under our bonus exchange program, generally all our employees may elect to receive all or a portion of their annual cash bonus in equity. Equity awards granted through the
bonus exchange are valued at a premium to the cash bonus exchanged and vest over three years, excluding certain executive officers. As certain executive officers do not
receive a bonus exchange premium for participating in the bonus exchange program, the equity they receive upon exchange for their cash bonuses does not have a vesting
period.
Summary of Award Activity
RSUs
Each RSU represents the right to receive one share of common stock of the Parent.
The following table summarizes the activity for RSUs for the year ended December 31, 2022 (units in thousands):
Balance at January 1, 2022
Granted
Vested and distributed
Forfeited
Balance at December 31, 2022
Unvested RSUs
Weighted Average Grant Date
Fair Value
1,237
838
(502 )
(40 )
1,533
$
$
87.87
118.05
96.74
121.42
100.59
The fair value of stock awards granted and vested was $98.9 million and $48.6 million for 2022, respectively, and $74.5 million and $32.6 million for 2021 respectively, based
on the weighted average grant date fair value per unit.
Total remaining compensation cost related to RSUs outstanding, excluding POP, at December 31, 2022, was $90.9 million, prior to adjustments for capitalized amounts due
to our development activities. The remaining compensation cost will be recognized through 2026, with a weighted average period of 1.4 years.
LTIP Units
An LTIP Unit represents a partnership interest in the OP. After vesting and the satisfaction of certain conditions, an LTIP Unit may be exchangeable for a common limited
partnership unit in the OP and then redeemable for a share of common stock or cash at our option.
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The following table summarizes the activity for LTIP Units for the year ended December 31, 2022 (units in thousands):
Balance at January 1, 2022
Granted
Vested LTIP Units
Balance at December 31, 2022
Unvested LTIP Units
3,317
1,831
(934 )
4,214
$
$
Weighted Average Grant Date
Fair Value
61.65
103.13
90.30
73.31
The fair value of unit awards granted and vested, excluding POP awards, was $188.8 million and $84.3 million for 2022, respectively, and $86.6 million and $82.2 million for
2021, respectively, based on the weighted average grant date fair value per unit.
Total remaining compensation cost related to LTIP Units, excluding POP, at December 31, 2022, was $176.5 million, prior to adjustments for capitalized amounts due to our
development activities. The remaining compensation cost will be recognized through 2026, with a weighted average period of 1.4 years.
Other Plans
In 2020, the Prologis 401(k) Plan (the “401(k) Plan”) was amended to provide for a new matching employer contribution of $0.50 for every dollar contributed by an employee,
up to 12% of the employee’s annual compensation (within the statutory compensation limit). The matching employer contribution was previously up to 6% of the employee’s
annual compensation. In the 401(k) Plan, vesting in the matching employer contributions is based on the employee’s years of service, with 100% vesting at the completion of
one year of service. Our contributions under the matching provisions were $8.1 million, $5.8 million and $5.9 million for the years ended December 31, 2022, 2021 and 2020,
respectively.
We have a non-qualified savings plan that allows highly compensated employees the opportunity to defer the receipt and income taxation of a certain portion of their
compensation in excess of the amount permitted under the 401(k) Plan. There has been no employer matching within this plan in the three-year period ended December 31,
2022.
NOTE 13. INCOME TAXES
Components of Earnings Before Income Taxes
The following table summarizes the components of earnings before income taxes for the years ended December 31 (in thousands):
Domestic
International
Earnings before income taxes
Summary of Current and Deferred Income Taxes
2022
2021
$ 2,423,809 $ 2,208,168 $ 1,030,609
716,479
$ 3,690,810 $ 3,322,848 $ 1,747,088
1,114,680
1,267,001
2020
The following table summarizes the components of the provision for income taxes for the years ended December 31 (in thousands):
Current income tax expense (benefit):
U.S. federal
International
State and local
Total current income tax expense
Deferred income tax expense (benefit):
U.S. federal
International
Total deferred income tax expense
Total income tax expense
2022
2021
2020
$
(6,645 ) $
112,489
16,930
122,774
58,906 $
103,488
10,542
172,936
48,440
65,720
15,554
129,714
3,359
9,279
12,638
135,412 $
2,895
(1,573 )
1,322
174,258 $
(2,464 )
3,208
744
130,458
$
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Index to Item 15
Current Income Taxes
We recognize current income tax expense for the federal and state income taxes incurred by our TRSs and taxes incurred in certain states and foreign jurisdictions. Current
income tax expense fluctuates from period to period based primarily on the timing of our taxable income. Taxable income incurred over the last three years was principally
due to the following: (i) the contribution of real estate properties to our unconsolidated co-investment ventures and sales to third parties; (ii) recurring and transactional
strategic capital fees earned; and (iii) taxable earnings from unconsolidated co-investment ventures. For 2021 and 2020, we had higher current tax expense in the U.S.
primarily due to the tax incurred on the sale of assets. Included in 2022 is the reversal of a liability for an uncertain tax position, related to a previous acquisition, due to the
expiration of the statute of limitations.
During the years ended December 31, 2022, 2021 and 2020, cash paid for income taxes, net of refunds, was $130.0 million, $148.7 million and $100.7 million, respectively.
Deferred Income Taxes
The deferred income tax expense recognized in 2022, 2021 and 2020 was primarily due to changes in temporary differences and utilization of NOLs.
The following table summarizes the deferred income tax assets and liabilities at December 31 (in thousands):
Gross deferred income tax assets:
NOL carryforwards
Basis difference – real estate properties
Basis difference – equity investments
Section 163(j) interest limitation
Capital loss carryforward
Other – temporary differences
Total gross deferred income tax assets
Valuation allowance
Gross deferred income tax assets, net of valuation allowance
Gross deferred income tax liabilities:
Basis difference – real estate properties
Basis difference – equity investments
Other – temporary differences
Total gross deferred income tax liabilities
Net deferred income tax liabilities
At December 31, 2022, we had NOL carryforwards as follows (in thousands):
2022
2021
$
229,410
94,610
17,042
2,218
6,903
9,250
359,433
(295,834 )
63,599
116,102
40,333
1,189
157,624
94,025 $
272,713
99,984
8,462
1,599
14,238
10,027
407,023
(337,587 )
69,436
104,292
30,276
949
135,517
66,081
$
$
Gross NOL carryforward
Tax-effected NOL carryforward
Valuation allowance
Net deferred tax asset – NOL carryforward
$
$
68,491
17,415
16,811
604
$
$
564,972
142,330
137,055
5,275
$
$
161,964
51,290
51,290
-
$
$
62,563 $
9,258
9,258
- $
36,810
9,117
9,117
-
Expiration periods
2023 – 2042
2023 – indefinite
2023 – 2033
2023 – 2032
2023 – indefinite
U.S.
Europe
Mexico
Japan
Other
The deferred tax asset valuation allowance at December 31, 2022, was adequate to reduce the total deferred tax asset to an amount that we estimate will more likely than
not be realized.
Liability for Uncertain Tax Positions
During the years ended December 31, 2022, 2021 and 2020, we believe that we had complied with the REIT requirements of the IRC. The statute of limitations for our tax
returns is generally three years. As such, our tax returns that remain subject to examination would be primarily from 2019 and thereafter. Liabilities or any related settlements
for uncertain tax positions for the years ended December 31, 2022, 2021 and 2020 were not material to our Consolidated Financial Statements.
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NOTE 14. EARNINGS PER COMMON SHARE OR UNIT
We determine basic earnings per share or unit based on the weighted average number of shares of common stock or units outstanding during the period. We compute
diluted earnings per share or unit based on the weighted average number of shares or units outstanding combined with the incremental weighted average effect from all
outstanding potentially dilutive instruments.
The computation of our basic and diluted earnings per share and unit for the years ended December 31 was as follows (in thousands, except per share and unit amounts):
Prologis, Inc.
Net earnings attributable to common stockholders – Basic
Net earnings attributable to exchangeable limited partnership units (1)
Adjusted net earnings attributable to common stockholders – Diluted
Weighted average common shares outstanding – Basic
Incremental weighted average effect on exchange of limited partnership units (1)
Incremental weighted average effect of equity awards
Weighted average common shares outstanding – Diluted (2)
Net earnings per share attributable to common stockholders:
Basic
Diluted
Prologis, L.P.
Net earnings attributable to common unitholders
Net earnings attributable to Class A Units
Net earnings attributable to common unitholders – Basic
Net earnings attributable to Class A Units
Net earnings attributable to exchangeable other limited partnership units
Adjusted net earnings attributable to common unitholders – Diluted
Weighted average common partnership units outstanding – Basic
Incremental weighted average effect on exchange of Class A Units
Incremental weighted average effect on exchange of other limited partnership units
Incremental weighted average effect of equity awards of Prologis, Inc.
Weighted average common units outstanding – Diluted (2)
Net earnings per unit attributable to common unitholders:
Basic
Diluted
2022
3,358,796 $
92,236
3,451,032 $
2021
2,933,571 $
82,092
3,015,663 $
2020
1,473,122
41,938
1,515,060
$
$
785,675
21,803
4,130
811,608
739,363
20,913
4,486
764,762
728,323
20,877
5,214
754,414
$
$
$
$
$
4.28
4.25 $
$
3.97
3.94 $
2.02
2.01
2022
3,450,727 $
(34,311 )
3,416,416
34,311
305
3,451,032 $
2021
3,015,363 $
(31,758 )
2,983,605
31,758
300
3,015,663 $
799,153
8,026
299
4,130
811,608
751,973
8,004
299
4,486
764,762
2020
1,514,743
(16,262 )
1,498,481
16,262
317
1,515,060
740,860
8,041
299
5,214
754,414
$
$
4.28
4.25
$
$
3.97
3.94
$
$
2.02
2.01
(1)
(2)
Earnings allocated to the exchangeable OP units not held by the Parent have been included in the numerator and exchangeable common units have been included
in the denominator for the purpose of computing diluted earnings per share for all periods as the per share and unit amount is the same.
Our total weighted average potentially dilutive shares and units outstanding for the years ended December 31 consisted of the following:
Class A Units
Other limited partnership units
Equity awards
Prologis, L.P.
Common limited partnership units
Prologis, Inc.
90
2022
2021
2020
8,026
299
6,298
14,623
13,478
28,101
8,004
299
6,719
15,022
12,610
27,632
8,041
299
7,798
16,138
12,537
28,675
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Index to Item 15
NOTE 15. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS
Derivative Financial Instruments
In the normal course of business, our operations are exposed to market risks, including the effect of changes in foreign currency exchange rates and interest rates. We may
enter into derivative financial instruments to offset these underlying market risks. See Note 2 for our derivative financial instruments policy.
The following table presents the fair value of our derivative financial instruments recognized within Other Assets and Other Liabilities on the Consolidated Balance Sheets at
December 31 (in thousands):
Undesignated derivatives
Foreign currency contracts
Forwards
Brazilian real
British pound sterling
Canadian dollar
Chinese renminbi
Euro
Japanese yen
Swedish krona
Designated derivatives
Foreign currency contracts
Net investment hedges
British pound sterling
Canadian dollar
Interest rate swaps
Cash flow hedges
Euro
U.S. dollar
Total fair value of derivatives
2022
2021
Asset
Liability
Asset
Liability
$
$
35
29,187
12,074
657
51,317
34,022
6,292
23,534
24,552
$
494
648
2
364
2,801
2,344
-
$
664
5,361
2,856
-
40,484
23,341
3,773
-
-
9,158
5,410
44,982
584
227,236
$
-
29
6,682
$
-
-
91,047
$
$
91
-
3,492
1,790
550
136
-
201
2,683
823
-
-
9,675
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Index to Item 15
Undesignated Derivative Financial Instruments
Foreign Currency Contracts
The following table summarizes the activity of our undesignated foreign currency contracts for the years ended December 31 (in millions, except for weighted average
forward rates and number of active contracts):
Notional amounts at
January 1 ($)
New contracts ($)
Matured, expired or
settled contracts ($)
Notional amounts at
December 31 ($)
Weighted average
forward rate
at December 31
Active contracts at
December 31
CAD
EUR
GBP
JPY
Other
Total
CAD
EUR
GBP
JPY
Other
Total
CAD
EUR
GBP
JPY
Other
Total
2022
2021
2020
175
172
749
658
383
264
250
181
105
92
1,662
1,367
163
225
474
437
207
308
252
76
66
91
1,162
1,137
120
88
581
1,314
178
364
(64)
(806)
(298)
(100)
(116)
(1,384)
(213)
(162)
(132)
(78)
(52)
(637)
(45)
(1,421)
(335)
283
601
349
331
81
1,645
175
749
383
250
105
1,662
163
474
207
182
154
(84)
252
46
85
1,107
2,005
(65)
(1,950)
66
1,162
1.29
1.18
1.31
109.79
1.26
1.22
1.20
103.14
1.32
1.23
1.32
102.66
103
97
90
96
72
86
70
74
58
64
53
59
The following table summarizes the undesignated derivative financial instruments exercised and associated realized and unrealized gains (losses) in Foreign Currency and
Derivative Gains (Losses) and Other Income (Expense), Net in the Consolidated Statements of Income for the years ended December 31 (in millions, except for number of
exercised contracts):
Exercised contracts
Realized gains (losses) on the matured, expired or settled contracts
Unrealized gains (losses) on the change in fair value of outstanding contracts
Designated Derivative Financial Instruments
2022
2021
2020
$
$
158
145
39
$
$
161
(8 )
88
$
$
173
(6 )
(13 )
Changes in the fair value of derivatives that are designated as net investment hedges of our foreign operations and cash flow hedges are recorded in AOCI/L and reflected
within the Other Comprehensive Income (Loss) table below.
Foreign Currency Contracts
The following table summarizes the activity of our foreign currency contracts designated as net investment hedges for the years ended December 31 (in millions, except for
weighted average forward rates and number of active contracts):
CAD
2022
GBP
Total
CAD
2021
GBP
Total
CAD
2020
GBP
Total
Notional amounts at January 1 ($)
New contracts ($)
Matured, expired or settled contracts ($)
Notional amounts at December 31 ($)
Weighted average forward rate
at December 31
Active contracts at December 31
Interest Rate Swaps
967
1,404
(1,397 )
974
535
964
(965 )
534
1.29
6
432
440
(432 )
440
1.28
4
377
535
(377 )
535
1.25
6
135
432
(135 )
432
1.37
4
512
967
(512 )
967
97
377
(97 )
377
1.31
6
The following table summarizes the activity of our interest rate swaps designated as cash flow hedges for the years ended December 31 (in millions):
484
836
(808 )
512
387
459
(711 )
135
1.35
1
2020
Notional amounts at January 1 ($)
New contracts ($)
Matured, expired or settled contracts ($)
Notional amounts at December 31 ($)
2022
EUR
165
1,004
(722 )
447
USD
-
400
(250 )
150
CAD
-
184
(184 )
-
JPY
-
104
(104 )
-
92
Total
EUR
2021
USD
Total
EUR
USD
Total
165
1,692
(1,260 )
597
165
-
-
165
250
-
(250 )
-
415
-
(250 )
165
-
165
-
165
-
1,500
(1,250 )
250
-
1,665
(1,250 )
415
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Index to Item 15
Designated Nonderivative Financial Instruments
The following table summarizes our debt and accrued interest, designated as a hedge of our net investment in international subsidiaries at December 31 (in millions):
British pound sterling
Canadian dollar
2022
2021
2020
$
$
370
1,237 $
$
624
-
$
$
842
-
The following table summarizes the unrealized gains (losses) in Foreign Currency and Derivative Gains (Losses) and Other Income (Expense), Net on the remeasurement of
the unhedged portion of our debt and accrued interest, including euro and British pound sterling denominated debt, for the years ended December 31 (in millions):
Unrealized gains (losses) on the unhedged portion
$
44
$
81
$
(139 )
2022
2021
2020
Other Comprehensive Income (Loss)
The change in Other Comprehensive Income (Loss) in the Consolidated Statements of Comprehensive Income during the periods presented was due to the translation into
U.S. dollars from the consolidation of the financial statements of our consolidated subsidiaries whose functional currency is not the U.S. dollar. The change in fair value of the
effective portion of our derivative financial instruments that have been designated as net investment hedges and cash flow hedges and the translation of the hedged portion
of our debt, as discussed above, are also included in Other Comprehensive Income (Loss).
The following table presents these changes in Other Comprehensive Income (Loss) for the years ended December 31 (in thousands):
Derivative net investment hedges
Debt designated as nonderivative net investment hedges
Cumulative translation adjustment
Total foreign currency translation gains (losses), net
Cash flow hedges (1)(2)
Our share of derivatives from unconsolidated co-investment ventures
Total unrealized gains (losses) on derivative contracts, net
Total change in other comprehensive income (loss)
2022
2021
2020
$
$
$
$
$
95,012
133,135
145,258
373,405
45,837
25,802
71,639
445,044
$
$
$
$
$
9,792
$
(832 )
296,969
305,929
9,098
8,444
17,542
323,471
$
$
$
$
(4,301 )
(62,263 )
(128,109 )
(194,673 )
(11,269 )
(2,848 )
(14,117 )
(208,790 )
(1)
(2)
We estimate an additional expense of $13.9 million will be reclassified to Interest Expense over the next 12 months from December 31, 2022, due to the
amortization of previously settled derivatives designated as cash flow hedges.
Included in the year ended December 31, 2020, was $16.8 million in losses associated with the termination of four U.S. dollar treasury lock contracts with an
aggregate notional amount of $750.0 million that fixed the interest rate on the forecasted issuance of U.S. dollar senior notes, which were then issued in February
2020.
Fair Value Measurements
We have estimated the fair value of our financial instruments using available market information and valuation methodologies we believe to be appropriate for these
purposes. Considerable judgment and a high degree of subjectivity are involved in developing these estimates and, accordingly, they are not necessarily indicative of
amounts that we would realize on disposition. See Note 2 for more information on our fair value measurements policy.
Fair Value Measurements on a Recurring Basis
At December 31, 2022 and 2021, other than the derivatives discussed previously, we had no significant financial assets or financial liabilities that were measured at fair value
on a recurring basis in the Consolidated Financial Statements. All of our derivatives held at December 31, 2022 and 2021 were classified as Level 2 of the fair value
hierarchy.
Fair Value Measurements on Nonrecurring Basis
Acquired properties and assets we expect to sell or contribute are significant nonfinancial assets that met the criteria to be measured at fair value on a nonrecurring basis, as
detailed in our accounting policy in Note 2. At December 31, 2022 and 2021, we estimated the fair value of our properties using Level 2 or Level 3 inputs from the fair value
hierarchy. See more information on our acquired properties in Notes 3 and 4 and assets held for sale or contribution in Note 6.
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Index to Item 15
Fair Value of Financial Instruments
At December 31, 2022 and 2021, the carrying amounts of certain financial instruments, including cash and cash equivalents, accounts and notes receivable, accounts
payable and accrued expenses were representative of their fair values.
The differences in the fair value of our debt from the carrying value in the table below were the result of differences in interest rates or borrowing spreads that were available
to us at December 31, 2022 and 2021, as compared with those in effect when the debt was issued or assumed, including reduced borrowing spreads due to our improved
credit ratings. The fair value of the senior notes decreased in 2022 due to the increase in bond yields in the market as compared to the weighted average interest rates on
our senior notes. The senior notes and many of the issuances of secured mortgage debt contain prepayment penalties or yield maintenance provisions that could make the
cost of refinancing the debt at lower rates exceed the benefit that would be derived from doing so. We evaluate this on an on-going basis and have taken the opportunity to
refinance some of our debt at lower rates and longer maturities as discussed in Note 8.
The following table reflects the carrying amounts and estimated fair values of our debt at December 31 (in thousands):
Credit Facilities
Senior notes
Term loans and unsecured other
Secured mortgage
Total
NOTE 16. COMMITMENTS AND CONTINGENCIES
Environmental Matters
2022
2021
Carrying Value
Fair Value
Carrying Value
Fair Value
$
$
1,538,461
19,786,253
2,106,592
444,655
23,875,961
$
$
1,538,461
16,604,241
2,092,264
420,964
20,655,930
$
$
491,393
14,981,690
1,825,195
416,776
17,715,054
$
$
491,429
15,151,781
1,835,569
437,215
17,915,994
A majority of the properties we acquire, including land, are subjected to environmental reviews either by us or the previous owners. In addition, we may incur environmental
remediation costs associated with certain land parcels we acquire in connection with the development of the land. We have acquired certain properties that may have been
leased to or previously owned by companies that discharged hazardous materials. We establish a liability at the time of acquisition to cover such costs and adjust the
liabilities as appropriate when additional information becomes available. We record our environmental liabilities in Other Liabilities. We purchase various environmental
insurance policies to mitigate our exposure to environmental liabilities. We are not aware of any environmental liabilities that would have a material adverse effect on our
business, financial condition or results of operations.
Indemnification Agreements
We have entered into agreements whereby we indemnify certain co-investment ventures, or our venture partners, outside of the U.S. for taxes that may be assessed with
respect to certain properties we contributed to these ventures. Our contributions to these ventures are generally structured as contributions of shares of companies that own
the real estate assets. Accordingly, the capital gains associated with the step up in the value of the underlying real estate assets, for tax purposes, are deferred and
transferred at contribution. We have generally indemnified these ventures to the extent that the ventures incur capital gains or withholding tax as a result of a direct sale. The
agreements limit the amount that is subject to our indemnification with respect to each property to 100% of the actual tax liabilities related to the capital gains that are deferred
and transferred by us to the ventures at the time of the initial contribution less any deferred tax assets transferred with the property.
The outcome under these agreements is uncertain as it depends on the method and timing of dissolution of the related venture or disposition of any properties by the
venture. We record liabilities related to the indemnification agreements in Other Liabilities. We continue to monitor these agreements and the likelihood of the sale of assets
that would result in recognition and will adjust the potential liability in the future as facts and circumstances dictate.
Off-Balance Sheet Liabilities
We have issued performance and surety bonds and standby letters of credit in connection with certain development projects. Performance and surety bonds are commonly
required by public agencies from real estate developers. Performance and surety bonds are renewable and expire on the completion of the improvements and infrastructure.
At December 31, 2022 and 2021, we had $456.0 million and $394.6 million, respectively, outstanding under such arrangements.
We may be required under capital commitments or we may choose to make additional capital contributions to certain of our unconsolidated entities, representing our
proportionate ownership interest, should additional capital contributions be necessary to fund development or acquisition costs, repayment of debt or operational shortfalls.
See Note 5 for further discussion related to equity commitments to our unconsolidated co-investment ventures.
94
Table of Contents
Index to Item 15
Litigation
From time to time, we are party to a variety of legal proceedings arising in the ordinary course of business. We believe that, with respect to any such matters that we are
currently a party to, the ultimate disposition of any such matter will not have material adverse effect on our business, financial position or results of operations.
NOTE 17. BUSINESS SEGMENTS
Our current business strategy includes two operating segments: Real Estate (Rental Operations and Development) and Strategic Capital. We generate revenues, earnings,
net operating income and cash flows through our segments, as follows:
•
•
Real Estate Segment. This operating segment represents the ownership and development of operating properties and is the largest component of our revenue and
earnings. We collect rent from our customers through operating leases, including reimbursements for the majority of our property operating costs. Each operating
property is considered to be an individual operating segment with similar economic characteristics; these properties are combined within the reportable business
segment based on geographic location. The Real Estate Segment also includes development activities that lead to rental operations, including land held for
development and properties currently under development, and other real estate investments. Within this line of business, we utilize the following: (i) our land bank;
(ii) the development and leasing expertise of our local teams; and (iii) our customer relationships.
Strategic Capital Segment. This operating segment represents the management of unconsolidated co-investment ventures. We generate strategic capital
revenues primarily from our unconsolidated co-investment ventures through asset management and property management services and we earn additional
revenues by providing leasing, acquisition, construction, development, financing and disposition services. Depending on the structure of the venture and the returns
provided to our partners, we also earn revenues through promotes periodically during the life of a venture or upon liquidation. Each unconsolidated co-investment
venture we manage is considered to be an individual operating segment with similar economic characteristics; these ventures are combined within the reportable
business segment based on geographic location.
Reconciliations are presented below for: (i) each reportable business segment’s revenues from external customers to Total Revenues; (ii) each reportable business
segment’s net operating income from external customers to Operating Income and Earnings Before Income Taxes; and (iii) each reportable business segment’s assets to
Total Assets. Our chief operating decision makers rely primarily on net operating income and similar measures to make decisions about allocating resources and assessing
segment performance. The applicable components of Total Revenues, Operating Income, Earnings Before Income Taxes and Total Assets are allocated to each reportable
business segment’s revenues, net operating income and assets. Items that are not directly assignable to a segment, such as certain corporate income and expenses, are not
allocated but reflected as reconciling items.
95
Table of Contents
Index to Item 15
The following reconciliations are presented in thousands:
Revenues:
Real estate segment:
U.S.
Other Americas
Europe
Asia
Total real estate segment
Strategic capital segment:
U.S.
Other Americas
Europe
Asia
Total strategic capital segment
Total revenues
Segment net operating income:
Real estate segment:
U.S. (1)
Other Americas
Europe
Asia
Total real estate segment
Strategic capital segment:
U.S. (1)
Other Americas
Europe
Asia
Total strategic capital segment
Total segment net operating income
Reconciling items:
General and administrative expenses
Depreciation and amortization expenses
Gains on dispositions of development properties and land, net
Gains on other dispositions of investments in real estate, net
Operating income
Earnings from unconsolidated entities, net
Interest expense
Foreign currency and derivative gains (losses) and other
income (expense), net
Losses on early extinguishment of debt, net
Earnings before income taxes
96
Years Ended December 31,
2022
2021
2020
$
4,726,072 $
92,751
56,731
58,553
4,934,107
3,967,180 $
98,620
55,533
47,357
4,168,690
3,600,335
87,830
68,801
44,782
3,801,748
215,416
82,462
644,832
96,875
1,039,585
171,761
58,655
249,600
110,734
590,750
354,825
37,696
145,016
99,450
636,987
5,973,692
4,759,440
4,438,735
3,555,627
67,552
24,738
40,116
3,688,033
59,561
63,464
557,676
55,528
736,229
2,966,498
72,424
31,163
34,854
3,104,939
59,991
47,247
203,779
72,562
383,579
2,679,685
64,473
43,531
31,986
2,819,675
237,271
24,923
99,504
57,248
418,946
4,424,262
3,488,518
3,238,621
(331,083 )
(1,812,777 )
597,745
589,391
3,467,538
(293,167 )
(1,577,942 )
817,017
772,570
3,206,996
(274,845 )
(1,561,969 )
464,942
252,195
2,118,944
310,872
404,255
297,370
(309,037 )
(266,228 )
(314,507 )
241,621
(20,184 )
3,690,810 $
165,278
(187,453 )
3,322,848 $
(166,429 )
(188,290 )
1,747,088
$
Table of Contents
Index to Item 15
Segment assets:
Real estate segment:
U.S.
Other Americas
Europe
Asia
Total real estate segment
Strategic capital segment (2):
U.S.
Europe
Asia
Total strategic capital segment
Total segment assets
Reconciling items:
Investments in and advances to unconsolidated entities
Assets held for sale or contribution
Cash and cash equivalents
Other assets
Total reconciling items
Total assets
December 31,
2022
2021
$
$
71,858,560
1,831,956
1,952,160
1,031,135
76,673,811
10,817
25,280
231
36,328
76,710,139
44,136,140
1,148,371
1,837,800
965,854
48,088,165
11,984
25,280
299
37,563
48,125,728
9,698,898
531,257
278,483
678,671
11,187,309
87,897,448
$
8,610,958
669,688
556,117
523,729
10,360,492
58,486,220
$
(1)
(2)
This includes compensation and personnel costs for employees who were located in the U.S. but also support other geographies.
Represents management contracts and goodwill recorded in connection with business combinations associated with the Strategic Capital Segment. Goodwill was
$25.3 million at December 31, 2022 and 2021.
NOTE 18. SUPPLEMENTAL CASH FLOW INFORMATION
Our significant noncash investing and financing activities for the years ended December 31, 2022, 2021 and 2020 included the following:
•
•
•
•
•
•
•
We completed the Duke Transaction on October 3, 2022 for $23.2 billion through the issuance of equity and the assumption of debt. We completed the Liberty
Transaction on February 4, 2020 for $13.0 billion through the issuance of equity and the assumption of debt. See Note 3 for more information on these transactions.
Additionally, in 2020, USLV assumed $341.8 million debt as part of the IPT Transaction. See Note 4 for more information on this transaction.
We recognized lease right-of-use assets and lease liabilities related to leases in which we are the lessee within Other Assets and Other Liabilities on the
Consolidated Balance Sheets, including any new leases, renewals and modifications of $162.5 million in 2022, $71.4 million in 2021 and $47.8 million in 2020 for
both assets and liabilities.
We capitalized $34.9 million, $25.6 million and $22.4 million in 2022, 2021 and 2020, respectively, of equity-based compensation expense.
We received $597.5 million, $886.1 million and $433.7 million of ownership interests in certain unconsolidated co-investment ventures as a portion of our proceeds
from the contribution of properties to these entities during 2022, 2021 and 2020, respectively, as disclosed in Note 5. Included in 2022 was the equity interests we
received in a newly formed other venture from the contribution of real estate properties. Included in 2020 was the equity interests we received in PCCLF for the
contribution of real estate properties from Prologis China Logistics Venture II, LP and Prologis China Logistics Venture I, LP.
We issued 0.3 million, 0.8 million and 0.7 million shares in 2022, 2021 and 2020, respectively, of the Parent’s common stock upon redemption of an equal number of
common limited partnership units in the OP.
We reinvested distributions from unconsolidated co-investment ventures of $64.7 million and $45.6 million and increased our ownership in 2022 and 2020,
respectively.
We issued 1.0 million common limited partnership units for $130.4 million to our partner and assumed debt of $215.3 million in our acquisition of additional
ownership interest in and subsequent consolidation of two unconsolidated other ventures in 2021. We issued 0.5 million common limited partnership units for $48.5
million as partial consideration for the acquisition of properties in 2020. See Note 10 for more information.
97
Table of Contents
Index to Item 15
•
•
We received a distribution of proceeds from UKLV for the sale of real estate properties that we subsequently reinvested in PELF and PELP of $153.0 million in
2021.
As partial consideration for the disposition of a portfolio of properties during 2020, the buyer assumed debt of $169.8 million.
98
Table of Contents
Index to Item 15
NOTE 19. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following table details our selected quarterly financial data (in thousands, except per share and unit data):
Prologis, Inc.
2022:
Rental revenues
Total revenues
Rental expenses
Gains on dispositions of development properties and land, net
Gains on other dispositions of investments in real estate, net
Operating income
Consolidated net earnings
Net earnings attributable to common stockholders
Net earnings per share attributable to common
stockholders – Basic (1)
Net earnings per share attributable to common
stockholders – Diluted (1)(2)
2021:
Rental revenues
Total revenues
Rental expenses
Gains on dispositions of development properties and land, net
Gains on other dispositions of investments in real estate, net
Operating income
Consolidated net earnings
Net earnings attributable to common stockholders
Net earnings per share attributable to common
stockholders – Basic (1)
Net earnings per share attributable to common
stockholders – Diluted (1)(2)
Prologis, L.P.
2022:
Rental revenues
Total revenues
Rental expenses
Gains on dispositions of development properties and land, net
Gains on other dispositions of investments in real estate, net
Operating income
Consolidated net earnings
Net earnings attributable to common unitholders
Net earnings per unit attributable to common unitholders –
Basic (1)
Net earnings per unit attributable to common unitholders –
Diluted (1)
2021:
Rental revenues
Total revenues
Rental expenses
Gains on dispositions of development properties and land, net
Gains on other dispositions of investments in real estate, net
Operating income
Consolidated net earnings
Net earnings attributable to common unitholders
Net earnings per unit attributable to common unitholders –
Basic (1)
Net earnings per unit attributable to common unitholders –
Diluted (1)
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
99
March 31,
June 30,
September 30,
December 31,
Three Months Ended
1,076,861
1,219,128
(275,674 )
210,206
584,835
1,205,802
1,219,722
1,149,254
$
$
$
$
$
$
$
$
1,093,452 $
$
1,252,080
(270,465 ) $
$
105,802
- $
533,317
$
646,436 $
$
609,855
1.55
$
0.82
$
1.54
$
0.82
$
1,021,656
1,148,316
(277,884 )
173,643
16,623
532,197
399,693
365,815
$
$
$
$
$
$
$
$
1,014,763 $
1,150,842
$
(245,133 ) $
187,361 $
127,167 $
$
700,866
$
650,313
$
598,625
1,151,846
1,750,892
(284,707 )
74,678
1,019
914,970
1,069,174
1,013,933
$
$
$
$
$
$
$
$
1.37
$
1.36
$
1,037,281
1,183,049
(256,607 )
139,406
214,390
765,660
797,731
722,007
$
$
$
$
$
$
$
$
0.50
$
0.81
$
0.98
$
0.49
$
0.81
$
0.97
$
1,076,861
1,219,128
(275,674 )
210,206
584,835
1,205,802
1,219,722
1,181,525
$
$
$
$
$
$
$
$
1,093,452
1,252,080
(270,465 )
105,802
533,317
646,436
627,286
$
$
$
$
- $
$
$
$
1.55
$
0.82
$
1.54
$
0.82
$
1,021,656
1,148,316
(277,884 )
173,643
16,623
532,197
399,693
376,083
$
$
$
$
$
$
$
$
$
1,014,763
$
1,150,842
$
(245,133 )
187,361
$
127,167 $
$
700,866
$
650,313
$
615,478
0.50
$
0.81
$
0.49
$
0.81
$
1,151,846
1,750,892
(284,707 )
74,678
1,019
914,970
1,069,174
1,042,664
$
$
$
$
$
$
$
$
1.37
$
1.36
$
1,037,281
1,183,049
(256,607 )
139,406
214,390
765,660
797,731
741,794
$
$
$
$
$
$
$
$
0.98
$
0.97
$
1,591,012
1,751,592
(374,892 )
207,059
3,537
813,449
620,066
585,754
0.64
0.63
1,074,294
1,277,233
(261,692 )
316,607
414,390
1,208,273
1,300,853
1,247,124
1.68
1.67
1,591,012
1,751,592
(374,892 )
207,059
3,537
813,449
620,066
599,252
0.64
0.63
1,074,294
1,277,233
(261,692 )
316,607
414,390
1,208,273
1,300,853
1,282,008
1.68
1.67
Table of Contents
Index to Item 15
(1)
(2)
Quarterly earnings per common share or unit amounts may not total to the annual amounts due to rounding and the changes in the number of weighted average
common shares or units outstanding included in the calculation of basic and diluted shares or units.
Income allocated to the exchangeable OP units not held by the Parent has been included in the numerator and exchangeable OP units have been included in the
denominator for the purpose of computing diluted earnings per share for all periods since the per share and unit is the same.
100
Table of Contents
Index to Item 15
Description
Operating Properties
U.S. Markets
Atlanta
Austin
Baltimore/Washington D.C.
Central PA
Central Valley
Charlotte
Chicago
Cincinnati
Columbus
Dallas/Ft. Worth
Denver
Houston
Indianapolis
Jacksonville
Las Vegas
Lehigh Valley
Louisville
Nashville
New Jersey/New York City
Orlando
Phoenix
Portland
Raleigh Durham
Reno
San Antonio
San Francisco Bay Area
Savannah
Seattle
South Florida
Southern California
Tampa
Subtotal U.S. Markets:
Other Americas Markets
Brazil
Canada
Mexico
Subtotal Other Americas Markets:
Europe Markets
Belgium
Germany
Hungary
Slovakia
Spain
United Kingdom
Subtotal Europe Markets:
Asia Markets
Japan
Singapore
Subtotal Asia Markets:
PROLOGIS, INC. AND PROLOGIS, L.P.
SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2022
(In thousands of U.S. dollars, as applicable)
Initial Cost to
Prologis
No. of
Bldgs.
Encum-
brances
Land
Building &
Improvements
Costs
Capitalized
Subsequent
to
Acquisition
Gross Amounts at Which Carried
at December 31, 2022
Land
Building &
Improvements
Total
(a,b)
Accumulated
Depreciation
(c)
Date of
Construction/
Acquisition
165
10
99
34
39
45
237
60
33
185
38
194
37
1
57
65
12
45
156
98
51
41
37
17
20
233
23
109
174
416
26
2,757
5
34
1
40
3
4
1
2
5
2
17
6
5
11
(d)
(d)
(d)
(e)
(d)
(d)
(d)(e)
(d)
704,450
12,783
481,309
289,391
244,099
112,232
1,093,201
157,634
65,940
645,832
115,979
506,818
91,337
-
175,201
1,205,621
48,140
202,495
2,724,856
284,646
154,063
130,433
107,899
25,389
25,735
1,071,018
204,408
850,208
1,329,156
6,127,705
92,357
19,280,335
-
248,162
730
248,892
16,011
47,837
1,845
2,926
10,862
48,510
127,991
20,380
-
20,380
2,108,059
52,335
980,954
1,043,676
530,993
346,000
3,153,363
830,881
369,748
2,281,203
295,412
2,226,942
600,850
2,892
345,091
2,279,491
188,696
595,616
3,808,098
880,549
394,219
276,956
407,505
142,279
95,828
1,670,174
473,995
1,434,654
2,117,967
8,115,196
244,738
38,294,360
53,276
373,220
2,287
428,783
4,776
7,068
-
-
34,504
3,291
49,639
152,367
137,592
289,959
498,688
10,061
275,881
155,465
941,345
102,031
627,377
137,309
77,539
558,842
178,682
391,161
77,308
273
297,766
398,406
94,624
198,166
783,582
180,716
375,847
221,257
20,028
119,361
47,052
577,839
32,404
377,278
344,476
1,842,050
25,477
9,968,291
17
223,615
3,224
226,856
-
35,479
5,983
12,652
13,340
10,347
77,801
20,618
4,890
25,508
725,711
12,837
494,517
306,976
264,445
124,965
1,119,733
165,844
68,889
668,061
115,515
551,473
92,575
-
159,801
1,282,491
50,392
204,864
2,759,509
299,608
184,342
183,932
111,839
26,762
25,957
1,082,106
204,408
876,132
1,342,860
6,373,646
98,472
19,978,662
-
255,888
736
256,624
16,011
52,812
1,845
3,239
9,969
48,919
132,795
20,380
-
20,380
2,585,486
62,342
1,243,627
1,181,556
1,451,992
435,298
3,754,208
959,980
444,338
2,817,816
474,558
2,573,448
676,920
3,165
658,257
2,601,027
281,068
791,413
4,557,027
1,046,303
739,787
444,714
423,593
260,267
142,658
2,236,925
506,399
1,786,008
2,448,739
9,711,305
264,100
47,564,324
53,293
589,109
5,505
647,907
4,776
37,572
5,983
12,339
48,737
13,229
122,636
172,985
142,482
315,467
3,311,197
75,179
1,738,144
1,488,532
1,716,437
560,263
4,873,941
1,125,824
513,227
3,485,877
590,073
3,124,921
769,495
3,165
818,058
3,883,518
331,460
996,277
7,316,536
1,345,911
924,129
628,646
535,432
287,029
168,615
3,319,031
710,807
2,662,140
3,791,599
16,084,951
362,572
67,542,986
53,293
844,997
6,241
904,531
20,787
90,384
7,828
15,578
58,706
62,148
255,431
193,365
142,482
335,847
(363,505 )
(29,336 )
(215,077 )
(241,811 )
(265,716 )
(84,744 )
(784,152 )
(93,837 )
(104,224 )
(536,780 )
(154,568 )
(358,694 )
(75,423 )
(3,015 )
(129,319 )
(272,175 )
(80,928 )
(79,036 )
(784,219 )
(156,640 )
(121,859 )
(75,642 )
(15,973 )
(94,815 )
(69,678 )
(875,417 )
(5,312 )
(306,484 )
(328,733 )
(1,828,182 )
(10,963 )
(8,546,257 )
(779 )
(160,947 )
(1,865 )
(163,591 )
(204 )
(5,903 )
(106 )
(391 )
(17,990 )
(3,412 )
(28,006 )
(3,024 )
(74,846 )
(77,870 )
1994-2022
1994-2015
1995-2022
2002-2022
1999-2022
1994-2020
1995-2022
1996-2022
1996-2022
1994-2022
1993-2022
1993-2022
1995-2022
2011
1996-2021
2004-2022
2005-2022
1995-2022
1996-2022
1994-2022
1992-2022
2006-2022
2020-2022
1994-2021
1994-2016
1993-2022
2022
2008-2022
1994-2022
2005-2022
2020-2022
2022
2008-2022
2011
2022
2011-2022
2022
2021
2011-2019
2019-2021
2019-2022
2011
Total Operating Properties
2,825
19,677,598
39,062,741
10,298,456
20,388,461
48,650,334
69,038,795
(8,815,724 )
101
Table of Contents
Index to Item 15
Description
Development Portfolio
U.S. Markets
Atlanta
Austin
Baltimore/Washington D.C.
Central PA
Central Valley
Charlotte
Chicago
Cincinnati
Dallas/Ft. Worth
Houston
Indianapolis
Las Vegas
Lehigh Valley
Nashville
New Jersey/New York City
Orlando
Phoenix
Reno
San Francisco Bay Area
Seattle
South Florida
Southern California
Subtotal U.S. Markets:
Other Americas Markets
Canada
Mexico
Subtotal Other Americas Markets:
Europe Markets
Belgium
Czech Republic
France
Germany
Hungary
Italy
Netherlands
Poland
Slovakia
Spain
Sweden
U.K.
Subtotal Europe Markets:
Asia Markets
Japan
Subtotal Asia Markets:
Total Development Portfolio
PROLOGIS, INC. AND PROLOGIS, L.P.
SCHEDULE III – REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2022
(In thousands of U.S. dollars, as applicable)
Initial Cost to
Prologis
No. of
Bldgs.
Encum-
brances
Land
Building &
Improvements
Costs
Capitalized
Subsequent
to
Acquisition
Gross Amounts at Which Carried
at December 31, 2022
Land
Building &
Improvements
Total
(a,b)
Accumulated
Depreciation
(c)
Date of
Construction/
Acquisition
(f)
2
1
1
1
2
1
9
1
11
1
2
3
2
3
2
5
5
3
5
3
6
11
80
5
13
18
1
2
2
3
2
2
3
2
2
2
3
7
31
7
7
136
21,712
6,721
14,784
7,810
10,174
8,841
116,955
2,536
83,061
17,165
8,440
23,262
48,636
10,264
51,603
19,490
23,600
19,126
37,507
62,649
63,291
623,788
1,281,415
65,936
64,308
130,244
9,096
5,338
5,260
20,134
5,708
3,637
13,052
8,312
4,490
17,535
45,796
198,265
336,623
162,644
162,644
1,910,926
-
-
-
-
-
-
967
-
-
-
17,058
-
-
-
-
-
-
-
20,605
14,746
-
70,248
123,624
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
59,023
46,522
22,364
25,226
44,198
14,848
163,188
11,861
97,625
57,237
32,671
60,375
76,923
22,670
8,216
71,228
26,774
64,128
52,718
30,980
59,613
168,087
1,216,475
16,302
137,871
154,173
11,063
11,574
21,730
49,748
18,138
17,549
50,091
21,206
26,313
12,198
22,794
126,289
388,693
21,712
6,721
14,784
7,810
10,174
8,841
116,955
2,536
83,061
17,165
8,440
23,262
48,636
10,264
51,603
19,490
23,600
19,126
37,507
62,649
63,291
623,788
1,281,415
65,936
64,308
130,244
9,096
5,338
5,260
20,134
5,708
3,637
13,052
8,312
4,490
17,535
45,796
198,265
336,623
59,023
46,522
22,364
25,226
44,198
14,848
164,155
11,861
97,625
57,237
49,729
60,375
76,923
22,670
8,216
71,228
26,774
64,128
73,323
45,726
59,613
238,335
1,340,099
16,302
137,871
154,173
11,063
11,574
21,730
49,748
18,138
17,549
50,091
21,206
26,313
12,198
22,794
126,289
388,693
80,735
53,243
37,148
33,036
54,372
23,689
281,110
14,397
180,686
74,402
58,169
83,637
125,559
32,934
59,819
90,718
50,374
83,254
110,830
108,375
122,904
862,123
2,621,514
82,238
202,179
284,417
20,159
16,912
26,990
69,882
23,846
21,186
63,143
29,518
30,803
29,733
68,590
324,554
725,316
418,263
418,263
162,644
162,644
418,263
418,263
580,907
580,907
123,624
2,177,604
1,910,926
2,301,228
4,212,154
2022
2022
2022
2022
2022
2022
2022
2022
2022
2022
2022
2022
2022
GRAND TOTAL
2,961
21,588,524
39,186,365
12,476,060
22,299,387
50,951,562
73,250,949
(8,815,724 )
Schedule III – Footnotes
(a)
The following table reconciles real estate assets per Schedule III to the Consolidated Balance Sheets in Item 8. Financial Statements and Supplementary Data at
December 31, 2022 (in thousands):
Total operating properties and development portfolio per Schedule III
Land
Other real estate investments (i)
Total per Consolidated Balance Sheets
$
$
73,250,949 (g)
3,338,121
5,034,326
81,623,396
102
Table of Contents
Index to Item 15
(i)
Other real estate investments includes non-strategic real estate assets, primarily acquired from the Duke Transaction, that we do not intend to operate long-term
at December 31, 2022.
The aggregate cost for federal tax purposes at December 31, 2022, of our real estate assets was approximately $60 billion (unaudited).
Real estate assets (excluding land balances) are depreciated over their estimated useful lives. These useful lives are generally 5 to 7 years for capital
improvements, 10 years for standard tenant improvements, 15 to 25 years for depreciable land improvements, 25 to 40 years for operating properties acquired
based on the age of the building and 40 years for operating properties we develop.
The following table reconciles accumulated depreciation per Schedule III to the Consolidated Balance Sheets in Item 8. Financial Statements and Supplementary Data
at December 31, 2022 (in thousands):
Total accumulated depreciation per Schedule III
Accumulated depreciation on other real estate investments
Total per Consolidated Balance Sheets
$
$
8,815,724 (g)
220,361
9,036,085
Properties with an aggregate undepreciated cost of $631.3 million secure $249.3 million of mortgage notes. See Note 8 to the Consolidated Financial Statements in
Item 8. Financial Statements and Supplementary Data for more information related to our secured mortgage debt.
Assessment bonds of $8.9 million are secured by assessments (similar to property taxes) on various underlying real estate properties with an aggregate
undepreciated cost of $580.3 million. The assessment bonds are included in term loans and unsecured other debt in Note 8 to the Consolidated Financial
Statements in Item 8. Financial Statements and Supplementary Data.
Date of construction is provided for properties in the development portfolio that were completed but not yet stabilized.
The following table summarizes our real estate assets and accumulated depreciation per Schedule III for the years ended December 31 (in thousands):
(b)
(c)
(d)
(e)
(f)
(g)
Real estate assets:
Balance at beginning of year
Acquisitions of and improvements to operating properties, development
activity and net effect of changes in foreign exchange rates and other
Basis of operating properties disposed of
Change in the development portfolio balance, including the acquisition of
properties
Assets transferred to held for sale and contribution
Balance at end year
Accumulated depreciation:
Balance at beginning of year
Depreciation expense
Balances retired upon disposition of operating properties and net effect of
changes in foreign exchange rates and other
Assets transferred to held for sale and contribution
Balance at end of year
103
2022
2021
2020
$
47,183,100 $
45,390,230 $
33,157,100
25,281,173
(445,558 )
3,351,730
(1,589,527 )
13,985,898
(1,045,128 )
1,482,814
(250,580 )
73,250,949 $
846,729
(816,062 )
47,183,100 $
13,345
(720,985 )
45,390,230
7,451,382 $
1,357,180
6,370,341 $
1,143,758
5,294,212
1,112,075
9,090
(1,928 )
8,815,724 $
(42,483 )
(20,234 )
7,451,382 $
(35,083 )
(863 )
6,370,341
$
$
$
Table of Contents
Index to Item 15
Certain of the following documents are filed herewith. Certain other of the following documents that have been previously filed with the Securities and Exchange Commission
and, pursuant to Rule 12b-32, are incorporated herein by reference.
2.1
2.2
2.3
2.4
2.5
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
3.10
3.11
3.12
4.1†
Amended and Restated Agreement and Plan of Merger, dated as of August 20, 2019, among Industrial Property Trust Inc., Prologis, L.P. and Rockies
Acquisition LLC. (incorporated by reference to Exhibit 2.2 to Prologis’ Current Report From 8-K/A filed on August 23, 2019).
Agreement and Plan of Merger, dated as of July 15, 2019, by and among Prologis, L.P., Rockies Acquisition LLC, and Industrial Property Trust Inc.
(incorporated by reference to Exhibit 2.1 to Prologis’ Current Report From 8-K filed on July 15, 2019).
Agreement and Plan of Merger, dated as of October 27, 2019, by and among the Prologis Parties and the Liberty Parties. (incorporated by reference to
Exhibit 2.1 to Prologis’ Current Report form 8-K filed on October 27, 2019).
Agreement and Plan of Merger, dated as of June 11, 2022, by and among the Prologis Parties and the DRE Parties (incorporated by reference to
Exhibit 2.1 to Prologis’ Current Report on Form 8-K filed June 13, 2022).
Letter Agreement, dated as of September 16, 2022, by and among the Prologis Parties and the DRE Parties (incorporated by reference to Exhibit 2.1 to
Prologis' Current Form 8-K filed on September 16,2022).
Articles of Incorporation of Prologis (incorporated by reference to Exhibit 3.1 to Prologis’ Registration Statement on Form S-11/A (No. 333-35915) filed
November 4, 1997).
Articles Supplementary establishing and fixing the rights and preferences of the Series Q Cumulative Redeemable Preferred Stock of Prologis
(incorporated by reference to Exhibit 3.4 to Prologis’ Registration Statement on Form 8-A filed June 2, 2011).
Articles of Merger of New Pumpkin Inc., a Maryland corporation, with and into Prologis, Inc., a Maryland corporation, changing the name of “AMB
Property Corporation” to “Prologis, Inc.”, as filed with the Stated Department of Assessments and Taxation of Maryland on June 2, 2011, and effective
June 3, 2011 (incorporated by reference to Exhibit 3.1 to Prologis’ Current Report on Form 8-K filed June 8, 2011).
Articles of Amendment (incorporated by reference to Exhibit 3.1 to Prologis’ Current Report on Form 8-K filed May 8, 2012).
Thirteenth Amended and Restated Agreement of Limited Partnership of the Operating Partnership (incorporated by reference to Exhibit 3.6 to Prologis’
Current Report on Form 8-K filed June 8, 2011).
First Amendment to Thirteenth Amended and Restated Agreement of Limited Partnership of Prologis, L.P., dated February 27, 2014, (incorporated by
reference to Exhibit 3.1 to Prologis’ Current Report on Form 8-K filed on February 27, 2014).
Second Amendment to the Thirteenth Amended and Restated Agreement of the Limited Partnership of Prologis, L.P., dated October 7, 2015
(incorporated by reference to Exhibit 3.1 to Prologis’ Current Report on Form 8-K filed on October 13, 2015).
Amended and Restated Certificate of Limited Partnership of the Operating Partnership (incorporated by reference to Exhibit 3.7 to Prologis’ Current
Report on Form 8-K filed June 8, 2011).
Articles Supplementary dated April 3, 2014, (incorporated by reference to Exhibit 3.1 to Prologis’ Current Report on Form 8-K filed on April 3, 2014).
Third Amendment to Thirteenth Amended and Restated Agreement of Limited Partnership of Prologis, L.P. (incorporated by reference to Exhibit 3.1 to
Prologis’ Current Report on Form 8-K filed on February 4, 2020).
Prologis, Inc. Articles of Amendment, dated May 4, 2020 (incorporated by reference to Exhibit 3.1 to Prologis’ Current Report Form 8-K filed on May 4,
2020).
Ninth Amended and Restated Bylaws of Prologis, Inc. (incorporated by reference to Exhibit 3.1 to Prologis’ Current Report on Form 8-K filed on
September 24, 2021).
Description of Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934.
104
Table of Contents
Index to Item 15
4.2
4.3
4.4
4.5
4.6
4.7
4.8
4.9
Form of Certificate for Common Stock of Prologis (incorporated by reference to Exhibit 4.1 to Prologis’ Registration Statement on Form S-4/A (No. 333-
172741) filed April 12, 2011).
Form of Certificate for the Series Q Cumulative Redeemable Preferred Stock of Prologis (incorporated by reference to Exhibit 4.2 to Prologis’
Registration Statement on Form S-4/A (No. 333-172741) filed April 28, 2011).
Indenture, dated as of June 8, 2011, by and among the Operating Partnership, as issuer, Prologis, as guarantor, and U.S. Bank National Association,
as trustee (incorporated by reference to Exhibit 4.2 to Prologis’ Registration Statement on Form S-3 (No. 333-177112) filed September 30, 2011).
Fifth Supplemental Indenture, dated as of August 15, 2013, among Prologis, Inc., Prologis, L.P. and U.S. Bank National Association (incorporated by
reference to Exhibit 4.1 to Prologis’ Current Report on Form 8-K filed August 15, 2013).
Form of Sixth Supplemental Indenture among Prologis, Inc., Prologis, L.P., Elavon Financial Services Limited, UK Branch, Elavon Financial Services
Limited and U.S. Bank National Association (incorporated by reference to Exhibit 4.1 to Prologis’ Current Report on Form 8-K filed December 2, 2013).
Form of Seventh Supplemental Indenture among Prologis, Inc., Prologis, L.P., Elavon Financial Services Limited, UK Branch, Elavon Financial Services
Limited and U.S. Bank National Association (incorporated by reference to Exhibit 4.1 to Prologis’ Current Report on Form 8-K filed February 18, 2014).
Form of Eighth Supplemental Indenture among Prologis, Inc., Prologis, L.P., U.S. Bank National Association and Elavon Financial Services DAC, UK
Branch (incorporated by reference to Exhibit 4.1 to Prologis’ Current Report Form 8-K filed on June 6, 2017).
Indenture dated as of August 1, 2018 among Prologis Euro Finance LLC, Prologis, L.P. and U.S. Bank National Association, as trustee (incorporated
by reference to Exhibit 4.1 to Prologis’ Registration Statement on Form 8-K/A filed on August 1, 2018).
4.10
First Supplemental Indenture dated as of August 1, 2018 among Prologis Euro Finance LLC, Prologis, L.P., U.S. Bank National Association, as trustee,
transfer agent and security registrar and Elavon Financial Services DAC, UK Branch, as paying agent (incorporated by reference to Exhibit 4.2 to
Prologis’ Registration Statement on Form 8-K/A filed on August 1, 2018).
4.11
4.12
4.13
4.14
4.15
4.16
4.17
4.18
4.19
Form of lndenture dated as of September 25, 2018 among Prologis Yen Finance LLC, Prologis, L.P. and U.S. Bank National Association, as trustee
(incorporated by reference to Exhibit 4.9 to Prologis’ Current Report Form 8-K/A filed on September 24, 2018).
Form of First Supplemental Indenture dated as of September 25, 2018 among Prologis Yen Finance LLC, Prologis, L.P., U.S. Bank National
Association, as trustee, transfer agent, paying agent and security registrar (incorporated by reference to Exhibit 4.10 to Prologis’ Current Report Form 8-
K/A filed on September 24, 2018).
Second Supplemental Indenture dated as of March 26, 2019 among Prologis Yen Finance LLC, Prologis, L.P. and U.S. Bank National Association as
trustee, transfer agent, paying agent and security registrar (incorporated by reference to Exhibit 4.1 to Prologis’ Current Report Form 8-K filed on April
23, 2019).
Form of 4.250% Notes due 2023 (incorporated by reference to Exhibit 4.5 to Prologis’ Current Report on Form 8-K filed August 15, 2013).
Form of 3.000% Notes due 2022 (incorporated by reference to Exhibit 4.2 to Prologis’ Current Report on Form 8-K filed December 2, 2013).
Form of 3.00% Notes due 2026 (incorporated by reference to Exhibit 4.2 to Prologis’ Current Report on Form 8-K filed on May 28, 2014).
Form of 2.250% Notes due 2029 (incorporated by reference to Exhibit 4.3 to Prologis’ Current Report Form 8-K filed on June 6, 2017).
Form of 3.875% Notes Due 2028 (incorporated by reference to Exhibit 4.1 to Prologis’ Current Report Form 8-K filed on June 20, 2018).
Form of 4.375% Notes Due 2048 (incorporated by reference to Exhibit 4.2 to Prologis’ Current Report Form 8-K filed on June 20, 2018).
105
Table of Contents
Index to Item 15
4.20
4.21
4.22
4.23
4.24
4.25
4.26
4.27
4.28
4.29
4.30
4.31
4.32
4.33
4.34
4.35
4.36
4.37
4.38
4.39
4.40
Form of 1.875% Notes Due 2029 (incorporated by reference to Exhibit 4.4 to Prologis’ Current Report Form 8-K filed on July 31, 2018).
Form of 0.652% Notes due 2025 (incorporated by reference to Exhibit 4.1 to Prologis’ Current Report Form 8-K/A filed on September 24, 2018).
Form of 0.972% Notes due 2028 (incorporated by reference to Exhibit 4.2 to Prologis’ Current Report Form 8-K/A filed on September 24, 2018).
Form of 1.077% Notes due 2030 (incorporated by reference to Exhibit 4.3 to Prologis’ Current Report Form 8-K/A filed on September 24, 2018).
Form of 1.470% Notes due 2038 (incorporated by reference to Exhibit 4.4 to Prologis’ Current Report Form 8-K/A filed on September 24, 2018).
Form of 1.15% Notes due 2039 (incorporated by reference to Exhibit 4.2 to Prologis’ Current Report Form 10-Q filed on April 23, 2019).
Form of 0.250% Notes due 2027 (incorporated by reference to Exhibit 4.1 to Prologis’ Registration Statement 8-A12B filed on September 10, 2019).
Form of 0.625% Notes due 2031 (incorporated by reference to Exhibit 4.4 to Prologis’ Registration Statement 8-A12B filed on September 10, 2019).
Form of 1.500% Notes due 2049 (incorporated by reference to Exhibit 4.6 to Prologis’ Registration Statement 8-A12B filed on September 10, 2019).
Form of Officer’s Certificate related to the 3.00% Notes due 2026 (incorporated by reference to Exhibit 4.1 to Prologis’ Current Report on Form 8-K filed
on May 28, 2014).
Form of Officers’ Certificate related to 2.250% Notes due 2029 (incorporated by reference to Exhibit 4.2 to Prologis’ Current Report Form 8-K filed on
June 6, 2017).
Form of Officer’s Certificate related to 3.875% Notes Due 2028 (incorporated by reference to Exhibit 4.3 to Prologis’ Current Report Form 8-K/A filed on
June 20, 2018).
Form of Officer’s Certificate related to 4.375% Notes Due 2048 (incorporated by reference to Exhibit 4.4 to Prologis’ Current Report Form 8-K/A filed on
June 20, 2018).
Form of Officers’ Certificate related to 0.652% Notes due 2025 (incorporated by reference to Exhibit 4.5 to Prologis’ Current Report Form 8-K/A filed on
September 24, 2018).
Form of Officers’ Certificate related to 0.972% Notes due 2028 (incorporated by reference to Exhibit 4.6 to Prologis’ Current Report Form 8-K/A filed on
September 24, 2018).
Form of Officers’ Certificate related to 1.077% Notes due 2030 (incorporated by reference to Exhibit 4.7 to Prologis’ Current Report Form 8-K/A filed on
September 24, 2018).
Form of Officers’ Certificate related to 1.470% Notes due 2038 (incorporated by reference to Exhibit 4.8 to Prologis’ Current Report Form 8-K/A filed on
September 24, 2018).
Form of Officer’s Certificate related to 1.875% Notes Due 2029 (incorporated by reference to Exhibit 4.3 to Prologis’ Registration Statement on Form 8-
K/A filed on August 1, 2018).
Form of Officer’s Certificate related to the 1.15% Notes due 2039 (incorporated by reference to Exhibit 4.3 to Prologis’ Current Report Form 10-Q filed in
April 23, 2019).
Form of Officer’s Certificate related to the 0.250% Notes due 2027 (incorporated by reference to Exhibit 4.1 to Prologis’ Registration Statement 8-A12B
filed on September 10, 2019).
Form of Officer’s Certificate related to the 0.625% Notes due 2031 (incorporated by reference to Exhibit 4.3 to Prologis’ Registration Statement 8-A12B
filed on September 10, 2019).
106
Table of Contents
Index to Item 15
4.41
4.42
4.43
4.44
4.45
4.46
4.47
4.48
4.49
4.50
4.51
4.52
4.53
4.54
4.55
4.56
4.57
4.58
4.59
4.60
4.61
Form of Officer’s Certificate related to the 1.500% Notes due 2049 (incorporated by reference to Exhibit 4.5 to Prologis’ Registration Statement 8-A12B
filed on September 10, 2019).
Form of Officers’ Certificate related to the 0.375% Notes due 2028 (incorporated by reference to Exhibit 4.1 to Prologis L.P.’s Registration Statement on
Form 8-A12B filed on February 10, 2020).
Form of 0.375% Notes due 2028 (incorporated by reference to Exhibit 4.2 to Prologis L.P.’s Registration Statement on Form 8-A12B filed on February 10,
2020).
Form of Officers’ Certificate related to the 1.000% Notes due 2035 (incorporated by reference to Exhibit 4.3 to Prologis L.P.’s Registration Statement on
Form 8-A12B filed on February 10, 2020).
Form of 1.000% Notes due 2035 (incorporated by reference to Exhibit 4.4 to Prologis L.P.’s Registration Statement on Form 8-A12B filed on February 10,
2020).
Form of Officers’ Certificate related to the Floating Rates Notes due 2022 (incorporated by reference to Exhibit 4.5 to Prologis L.P.’s Registration
Statement on Form 8-A12B filed on February 10, 2020).
Form of Floating Rate Notes due 2022 (incorporated by reference to Exhibit 4.6 to Prologis L.P.’s Registration Statement on Form 8-A12B filed on
February 10, 2020).
Form of Officers’ Certificate related to the 3.250% Notes due 2026 (incorporated by reference to Exhibit 4.1 to Prologis L.P.’s Current Report on Form 8-K
filed on February 14, 2020).
Form of 3.250% Notes due 2026 (incorporated by reference to Exhibit 4.2 to Prologis L.P.’s Current Report on Form 8-K filed on February 14, 2020).
Form of Officers’ Certificate related to the 4.375% Notes due 2029 (incorporated by reference to Exhibit 4.3 to Prologis L.P.’s Current Report Form 8-K
filed on February 14, 2020).
Form of 4.375% Notes due 2029 (incorporated by reference to Exhibit 4.4 to Prologis L.P.’s Current Report Form 8-K filed on February 14, 2020).
Form of Officers’ Certificate related to the 2.125% Notes due 2027 (incorporated by reference to Exhibit 4.5 to Prologis L.P.’s Current Report Form 8-K
filed on February 14, 2020).
Form of 2.125% Notes due 2027 (incorporated by reference to Exhibit 4.6 to Prologis L.P.’s Current Report Form 8-K filed on February 14, 2020).
Form of Officers’ Certificate related to the 2.250% Notes due 2030 (incorporated by reference to Exhibit 4.7 to Prologis L.P.’s Current Report Form 8-K
filed on February 14, 2020).
Form of 2.250% Notes due 2030 (incorporated by reference to Exhibit 4.8 to Prologis L.P.’s Current Report Form 8-K filed on February 14, 2020).
Form of Officers’ Certificate related to the 3.000% Notes due 2050 (incorporated by reference to Exhibit 4.9 to Prologis L.P.’s Current Report Form 8-K
filed on February 14, 2020).
Form of 3.000% Notes due 2050 (incorporated by reference to Exhibit 4.10 to Prologis L.P.’s Current Report Form 8-K filed on February 14, 2020).
Form of Officers’ Certificate related to the 0.589% Notes due 2027 (incorporated by reference to Exhibit 4.1 to Prologis’ Current Report Form 8-K filed on
June 23, 2020).
Form of 0.589% Notes due 2027 (incorporated by reference to Exhibit 4.2 to Prologis' Current Report Form 8-K filed on June 23, 2020).
Form of Officers’ Certificate related to the 0.850% Notes due 2030 (incorporated by reference to Exhibit 4.3 to Prologis’ Current Report Form 8-K filed on
June 23, 2020).
Form of 0.850% Notes due 2030 (incorporated by reference to Exhibit 4.4 to Prologis' Current Report Form 8-K filed on June 23, 2020).
107
Table of Contents
Index to Item 15
4.62
4.63
4.64
4.65
4.66
4.67
4.68
4.69
4.70
4.71
4.72
4.73
4.74
4.75
4.76
4.77
4.78
4.79
4.80
4.81
4.82
Form of Officers’ Certificate related to the 1.003% Notes due 2032 (incorporated by reference to Exhibit 4.5 to Prologis’ Current Report Form 8-K filed on
June 23, 2020).
Form of 1.003% Notes due 2032 (incorporated by reference to Exhibit 4.6 to Prologis' Current Report Form 8-K filed on June 23, 2020).
Form of Officers’ Certificate related to the 1.222% Notes due 2035 (incorporated by reference to Exhibit 4.7 to Prologis’ Current Report Form 8-K filed on
June 23, 2020).
Form of 1.222% Notes due 2035 (incorporated by reference to Exhibit 4.8 to Prologis' Current Report Form 8-K filed on June 23, 2020).
Form of Officers’ Certificate related to the 1.600% Notes due 2050 (incorporated by reference to Exhibit 4.9 to Prologis’ Current Report Form 8-K filed on
June 23, 2020).
Form of 1.600% Notes due 2050 (incorporated by reference to Exhibit 4.10 to Prologis' Current Report Form 8-K filed on June 23, 2020).
Form of Officers’ Certificate related to the 1.250% Notes due 2030 (incorporated by reference to Exhibit 4.1 to Prologis’ Current Report Form 8-K filed on
August 19, 2020).
Form of 1.250% Notes due 2030 (incorporated by reference to Exhibit 4.2 to Prologis’ Current Report Form 8-K filed on August 19, 2020).
Form of Officers’ Certificate related to the 2.125% Notes due 2050 (incorporated by reference to Exhibit 4.3 to Prologis’ Current Report Form 8-K filed on
August 19, 2020).
Form of 2.125% Notes due 2050 (incorporated by reference to Exhibit 4.4 to Prologis’ Current Report Form 8-K filed on August 19, 2020).
Form of Officers’ Certificate related to the 0.500% Notes due 2032 (incorporated by reference to Exhibit 4.1 to Prologis’ Current Report Form 8-K filed on
February 16, 2021).
Form of 0.500% Notes due 2032 (incorporated by reference to Exhibit 4.2 to Prologis' Current Report Form 8-K filed on February 16, 2021).
Form of Officers’ Certificate related to the 1.000% Notes due 2041 (incorporated by reference to Exhibit 4.3 to Prologis’ Current Report Form 8-K filed on
February 16, 2021).
Form of 1.000% Notes due 2041 (incorporated by reference to Exhibit 4.4 to Prologis' Current Report Form 8-K filed on February 16, 2021).
Form of Officers’ Certificate related to the 1.625% Notes due 2031 (incorporated by reference to Exhibit 4.1 to Prologis’ Current Report Form 8-K filed on
February 19, 2021).
Form of 1.625% Notes due 2031 (incorporated by reference to Exhibit 4.2 to Prologis' Current Report Form 8-K filed on February 19, 2021).
Form of Officers’ Certificate related to the 0.448% Notes due 2028 (incorporated by reference to Exhibit 4.1 to Prologis’ Current Report Form 8-K filed on
June 28, 2021).
Form of 0.448% Notes due 2028 (incorporated by reference to Exhibit 4.2 to Prologis' Current Report Form 8-K filed on June 28, 2021).
Form of Officers’ Certificate related to the 0.564% Notes due 2031 (incorporated by reference to Exhibit 4.3 to Prologis’ Current Report Form 8-K filed on
June 28, 2021).
Form of 0.564% Notes due 2031 (incorporated by reference to Exhibit 4.4 to Prologis' Current Report Form 8-K filed on June 28, 2021).
Form of Officers’ Certificate related to the 0.885% Notes due 2036 (incorporated by reference to Exhibit 4.5 to Prologis’ Current Report Form 8-K filed on
June 28, 2021).
108
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Index to Item 15
4.83
4.84
4.85
4.86
4.87
4.88
4.89
4.90
4.91
4.92
4.93
4.94
4.95
4.96
4.97
4.98
4.99
4.100
4.101
Form of 0.885% Notes due 2036 (incorporated by reference to Exhibit 4.6 to Prologis' Current Report Form 8-K filed on June 28, 2021).
Form of Officers’ Certificate related to the 1.134% Notes due 2041 (incorporated by reference to Exhibit 4.7 to Prologis’ Current Report Form 8-K filed on
June 28, 2021).
Form of 1.134% Notes due 2041 (incorporated by reference to Exhibit 4.8 to Prologis' Current Report Form 8-K filed on June 28, 2021).
Form of Officers’ Certificate related to the 1.550% Notes due 2061 (incorporated by reference to Exhibit 4.9 to Prologis’ Current Report Form 8-K filed on
June 28, 2021).
Form of 1.550% Notes due 2061 (incorporated by reference to Exhibit 4.10 to Prologis' Current Report Form 8-K filed on June 28, 2021).
Form of Officers’ Certificate related to the Floating Rate Notes due 2024 (incorporated by reference to Exhibit 4.1 to Prologis’ Current Report Form 8-K
filed on February 8, 2022).
Form of Floating Rate Notes due 2024 (incorporated by reference to Exhibit 4.2 to Prologis’ Current Report Form 8-K filed on February 8, 2022).
Form of Officers’ Certificate related to the 1.000% Notes due 2029 (incorporated by reference to Exhibit 4.3 to Prologis’ Current Report Form 8-K filed on
February 8, 2022).
Form of 1.000% Notes due 2029 (incorporated by reference to Exhibit 4.4 to Prologis’ Current Report Form 8-K filed on February 8, 2022).
Form of Officers’ Certificate related to the 1.500% Notes due 2034 (incorporated by reference to Exhibit 4.5 to Prologis’ Current Report Form 8-K filed on
February 8, 2022).
Form of 1.500% Notes due 2034 (incorporated by reference to Exhibit 4.6 to Prologis’ Current Report Form 8-K filed on February 8, 2022).
Form of Officers’ Certificate related to the 4.625% Notes due 2033 (incorporated by reference to Exhibit 4.1 to Prologis’ Current Report Form 8-K filed on
September 15, 2022).
Form of 4.625% Notes due 2033 (incorporated by reference to Exhibit 4.2 to Prologis' Current Report Form 8-K filed on September 15, 2022).
Form of 3.250% Senior Notes due 2026 (incorporated by reference to Exhibit 4.2 to Prologis' Current Report Form 8-K filed on October 6, 2022).
Officers’ Certificate related to the 3.250% Senior Notes due 2026 (incorporated by reference to Exhibit 4.2 to Prologis' Current Report Form 8-K filed on
October 6, 2022).
Form of 3.375% Senior Notes due 2027 (incorporated by reference to Exhibit 4.2 to Prologis' Current Report Form 8-K filed on October 6, 2022).
Officers’ Certificate related to the 3.375% Senior Notes due 2027 (incorporated by reference to Exhibit 4.2 to Prologis' Current Report Form 8-K filed on
October 6, 2022).
Form of 7.250% Senior Notes due June 2028 (incorporated by reference to Exhibit 4.2 to Prologis' Current Report Form 8-K filed on October 6, 2022).
Officers’ Certificate related to the 7.250% Senior Notes due June 2028 (incorporated by reference to Exhibit 4.2 to Prologis' Current Report Form 8-K filed
on October 6, 2022).
4.102
Form of 4.000% Senior Notes due September 2028 (incorporated by reference to Exhibit 4.2 to Prologis' Current Report Form 8-K filed on October 6,
2022).
4.103
Officers’ Certificate related to the 4.000% Senior Notes due September 2028 (incorporated by reference to Exhibit 4.2 to Prologis' Current Report Form 8-
K filed on October 6, 2022).
4.104
Form of 2.875% Senior Notes due 2029 (incorporated by reference to Exhibit 4.2 to Prologis' Current Report Form 8-K filed on October 6, 2022).
109
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Index to Item 15
4.105
Officers’ Certificate related to the 2.875% Senior Notes due 2029 (incorporated by reference to Exhibit 4.2 to Prologis' Current Report Form 8-K filed on
October 6, 2022).
4.106
4.107
4.108
4.109
4.110
4.111
4.112
4.113
Form of 1.750% Senior Notes due 2030 (incorporated by reference to Exhibit 4.2 to Prologis' Current Report Form 8-K filed on October 6, 2022).
Officers’ Certificate related to the 1.750% Senior Notes due 2030 (incorporated by reference to Exhibit 4.2 to Prologis' Current Report Form 8-K filed on
October 6, 2022).
Form of 1.750% Senior Notes due 2031 (incorporated by reference to Exhibit 4.2 to Prologis' Current Report Form 8-K filed on October 6, 2022).
Form of Officers’ Certificate related to the 1.750% Senior Notes due 2031 (incorporated by reference to Exhibit 4.2 to Prologis' Current Report Form 8-K
filed on October 6, 2022).
Form of 2.250% Senior Notes due 2032 (incorporated by reference to Exhibit 4.2 to Prologis' Current Report Form 8-K filed on October 6, 2022).
Form of Officers’ Certificate related to the 2.250% Senior Notes due 2032 (incorporated by reference to Exhibit 4.2 to Prologis' Current Report Form 8-K
filed on October 6, 2022).
Form of 3.050% Senior Notes due 2050 (incorporated by reference to Exhibit 4.2 to Prologis' Current Report Form 8-K filed on October 6, 2022).
Form of Officers’ Certificate related to the 3.050% Senior Notes due 2050 (incorporated by reference to Exhibit 4.2 to Prologis' Current Report Form 8-K
filed on October 6, 2022).
4.114
Ninth Supplemental Indenture, dated November 3, 2022, by and among Prologis, L.P., Prologis, Inc. and U.S. Bank Trust Company, National Association
(incorporated by reference to Exhibit 4.2 to Prologis' Current Report Form 8-K filed on November 3, 2022).
4.115
Form of Officers’ Certificate related to the 5.250% Notes due 2031 (incorporated by reference to Exhibit 4.2 to Prologis' Current Report Form 8-K filed on
November 3, 2022).
4.116
4.117
4.118
4.119
4.120
4.121
Form of 5.250% Notes due 2031 (incorporated by reference to Exhibit 4.2 to Prologis' Current Report Form 8-K filed on November 3, 2022).
Form of Officers’ Certificate related to the 1.003% Notes due 2027 (incorporated by reference to Exhibit 4.1 to Prologis’ Current Report filed on December
1, 2022).
Form of 1.003% Notes due 2027 (incorporated by reference to Exhibit 4.2 to Prologis' Current Report Form 8-K filed on December 1, 2022).
Form of Officers’ Certificate related to the 1.323% Notes due 2029 (incorporated by reference to Exhibit 4.3 to Prologis' Current Report Form 8-K filed on
December 1, 2022).
Form of 1.323% Notes due 2029 (incorporated by reference to Exhibit 4.4 to Prologis' Current Report Form 8-K filed on December 1, 2022).
Form of Officers’ Certificate related to the 1.903% Notes due 2037(incorporated by reference to Exhibit 4.5 to Prologis' Current Report Form 8-K filed on
December 1, 2022).
4.122
Form of 1.903% Notes due 2037 (incorporated by reference to Exhibit 4.6 to Prologis' Current Report Form 8-K filed on December 1, 2022).
Other debt instruments are omitted in accordance with Item 601(b)(4)(iii)(A) of Registration S-K. Copies of such instruments will be furnished to the Securities and Exchange
Commission upon request.
10.1
Amended and Restated Agreement of Limited Partnership of ProLogis Fraser, L.P., dated as of August 4, 2004 (incorporated by reference to Exhibit 10.1
to the Trust’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004).
110
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Index to Item 15
10.2
Fifteenth Amended and Restated Agreement of Limited Partnership of Prologis 2, L.P., (f/k/a AMB Property II, L.P.) dated February 19, 2010
(incorporated by reference to Exhibit 10.6 to Prologis’ Annual Report on Form 10-K for the year ended December 31, 2009).
10.3*
Amended and Restated 2002 Nonqualified Deferred Compensation Plan (incorporated by reference to Exhibit 10.2 to Prologis’ Current Report on
Form 8-K filed October 4, 2006 and also incorporated by reference to Exhibit 10.2 to the Operating Partnership’s Current Report on Form 8-K filed
October 4, 2006).
10.4*
The Amended and Restated 2002 Stock Option and Incentive Plan of AMB Property Corporation and AMB Property, L.P. (incorporated by reference to
Exhibit 10.1 to Prologis’ Current Report on Form 8-K filed May 15, 2007 and also incorporated by reference to Exhibit 10.1 to the Operating Partnership’s
Current Report on Form 8-K filed May 15, 2007).
10.5*
10.6*
10.7*
Prologis Outperformance Plan (incorporated by reference to Exhibit 10.1 to Prologis’ Current Report on Form 8-K filed December 22, 2011).
Prologis, Inc. 2016 Outperformance Plan (incorporated by reference to Exhibit 10.1 to Prologis’ Current Report on Form 8-K filed on August 16, 2016).
Form of Prologis, Inc. 2016 Outperformance Plan LTIP Unit Award Agreement (incorporated by reference to Exhibit 10.2 to Prologis’ Current Report on
Form 8-K filed on August 16, 2016).
10.8*
Form of Participation Points and LTIP Unit Award Agreement (incorporated by reference to Exhibit 10.1 to Prologis’ Current Report on Form 8-K filed on
February 27, 2014).
10.9*
Second Amended and Restated Prologis Promote Plan (incorporated by reference to Exhibit 10.1 to Prologis’ Current Report on Form 8-K filed on
August 1, 2014).
10.10*
Form of Prologis, Inc. Second Amended and Restated Prologis Promote Plan LTIP Unit Award Agreement (incorporated by reference to Exhibit 10.1 to
Prologis’ Current Report on Form 8-K filed on August 18, 2014).
10.11*
Form of Prologis, Inc. Long-Term Incentive Plan LTIP Unit Award Agreement (General) (incorporated by reference to Exhibit 10.3 to Prologis’ Quarterly
Report on Form 10-Q for the quarter ended September 30, 2014).
10.12*
Form of Prologis, Inc. 2012 Long-Term Incentive Plan Restricted Stock Unit Agreement (LTIP Unit election) (incorporated by reference to Exhibit 10.27 to
Prologis’ Annual Report on Form 10-K for the year ended December 31, 2015).
10.13*
Form of Prologis, Inc. 2012 Long-Term Incentive Plan Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.5 to Prologis’ Quarterly
Report on Form 10-Q for the quarter ended September 30, 2014).
10.14*
Form of Prologis, Inc. 2012 Long-Term Incentive Plan Restricted Stock Unit Agreement (Bonus exchange) (incorporated by reference to Exhibit 10.6 to
Prologis’ Quarterly Report on Form 10-Q for the quarter ended September 30, 2014).
10.15*
10.16*
ProLogis 2006 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.2 to the Trust’s Current Report on Form 8-K filed June 2, 2006).
First Amendment of the ProLogis 2006 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Trust’s Quarterly Report on Form 10-Q
for the quarter ended March 31, 2010).
10.17*
Second Amendment of the ProLogis 2006 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Trust’s Current Report on Form 8-K
filed May 19, 2010).
10.18*
Third Amendment of the ProLogis 2006 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to the Trust’s Quarterly Report on Form 10-
Q for the quarter ended September 30, 2010).
10.19*
Form of Non-Qualified Share Option Award Terms; The Trust 2006 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.25 to the Trust’s
Annual Report on Form 10-K for the year ended December 31, 2009).
10.20*
Form of Restricted Share Award Terms; ProLogis 2006 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.27 to the Trust’s Annual
Report on Form 10-K for the year ended December 31, 2009).
111
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Index to Item 15
10.21*
Form of Performance Share Award Terms; ProLogis 2006 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.26 to the Trust’s Annual
Report on Form 10-K for the year ended December 31, 2009).
10.22*
ProLogis 2000 Share Option Plan for Outside Trustees (as Amended and Restated Effective as of December 31, 2008) (incorporated by reference to
exhibit 10.13 to ProLogis’ Form 10-K for the year ended December 31, 2008).
10.23*
ProLogis Deferred Fee Plan for Trustees (As Amended and Restated Effective as of May 14, 2010) (incorporated by reference to exhibit 10.3 to
ProLogis’ Form 8-K filed on May 19, 2010).
10.24*
Form of Indemnification Agreement between ProLogis and certain directors and executive officers (incorporated by reference to Exhibit 10.1 to Prologis’
Current Report on Form 8-K filed June 8, 2011).
10.25*
Form of Restricted Stock Unit Agreement; Prologis, Inc. 2012 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to Prologis’ Quarterly
Report on Form 10-Q for the quarter ended September 30, 2012).
10.26*
10.27*
10.28*
Prologis, Inc. 2012 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to Prologis’ Current Report on Form 8-K filed May 8, 2012).
Form of Director Deferred Stock Unit Award terms (incorporated by reference to Exhibit 10.2 to Prologis’ Current Report on Form 8-K filed May 8, 2012).
Form of Change of Control and Noncompetition Agreement by and between Prologis, Inc. and its executive officers (incorporated by reference to Exhibit
10.2 to Prologis’ Current Report on Form 8-K filed August 16, 2013).
10.29*
Form of Prologis, Inc. Long-Term Incentive Plan LTIP Unit Award Agreement (General form 2015) (incorporated by reference to Exhibit 10.57 to Prologis’
Annual Report on Form 10-K for the year ended December 31, 2014).
10.30*
Form of Prologis, Inc. Long-Term Incentive Plan LTIP Unit Award Agreement (Bonus exchange) (incorporated by reference to Exhibit 10.2 to Prologis’
Quarterly Report on Form 10-Q for the quarter ended March 31, 2015).
10.31*
Form of Prologis, Inc. Long-Term Incentive Plan LTIP Unit Award Agreement (General form 2016) (incorporated by reference to Exhibit 10.48 to Prologis’
Annual Report on Form 10-K for the year ended December 31, 2015).
10.32*
Form of Prologis, Inc. Outperformance Plan LTIP Unit Exchange Award Agreement (incorporated by reference to Exhibit 10.58 to Prologis’ Annual
Report on Form 10-K for the year ended December 31, 2014).
10.33*
Form of Prologis, Inc. Long-Term Incentive Plan Equity Exchange Offer LTIP Unit Award Agreement (incorporated by reference to Exhibit 10.59 to
Prologis’ Annual Report on Form 10-K for the year ended December 31, 2014).
10.34*
Amended and Restated Prologis, Inc. 2011 Notional Account Deferred Compensation Plan (incorporated by reference to Exhibit 10.60 to Prologis’
Annual Report on Form 10-K for the year ended December 31, 2014).
10.35*
Amended and Restated Prologis, Inc. Nonqualified Deferred Compensation Plan (incorporated by reference to Exhibit 10.61 to Prologis’ Annual Report
on Form 10-K for the year ended December 31, 2014).
10.36*
Second Amended and Restated Prologis 2005 Nonqualified Deferred Compensation Plan (incorporated by reference to Exhibit 10.62 to Prologis’ Annual
Report on Form 10-K for the year ended December 31, 2014).
10.37*
10.38*
Prologis, Inc. 2018 Outperformance Plan (incorporated by reference to Exhibit 10.1 to Prologis’ Current Report Form 8-K filed on January 18, 2018).
Prologis, Inc. Amended and Restated 2018 Outperformance Plan (incorporated by reference to Exhibit 10.1 to Prologis’ Current Report Form 8-K filed on
March 27, 2018).
10.39*
Form of Prologis, Inc. 2018 Amendment to Outperformance Plan LTIP Unit Award Agreements (incorporated by reference to Exhibit 10.2 to Prologis’
Current Report Form 8-K filed on March 27, 2018).
10.40*
Amended and Restated Director Deferred Stock Unit Award Terms (incorporated by reference to Exhibit 10.1 to Prologis’ Current Report on Form 8-K
filed on May 7, 2018).
10.41
Form of Time-Sharing Agreement for Hamid Moghadam (incorporated by reference to Exhibit 10.1 to Prologis’ Current Report on Form 10-Q filed on
October 22, 2018).
112
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Index to Item 15
10.42*
Prologis, Inc. Second Amended and Restated 2018 Outperformance Plan (incorporated by reference to Exhibit 10.1 to Prologis’ Current Report Form 8-K
filed on August 28, 2018).
10.43*
Form of Outperformance Plan LTIP Unit Award Agreement (incorporated by reference to Exhibit 10.2 to Prologis’ Current Report Form 8-K filed on
August 28, 2018).
10.44*
Form of LTIP Unit Award Agreement (Bonus Exchange) (incorporated by reference to Exhibit 10.3 to Prologis’ Current Report Form 8-K filed on August
28, 2018).
10.45*
Form of LTIP Unit Award Agreement (Omnibus) (incorporated by reference to Exhibit 10.4 to Prologis’ Current Report Form 8-K filed on August 28,
2018).
10.46*
10.47*
10.48*
10.49*
Form of RSU Agreement (Global) (incorporated by reference to Exhibit 10.5 to Prologis’ Current Report Form 8-K filed on August 28, 2018).
Form of RSU Agreement (LTIP Unit Election) (incorporated by reference to Exhibit 10.6 to Prologis’ Current Report Form 8-K filed on August 28, 2018).
Form of NEO Retirement Eligibility Waiver (incorporated by reference to Exhibit 10.7 to Prologis’ Current Report Form 8-K filed on August 28, 2018).
Letter Agreement dated February 3, 2017 by and between Prologis, Inc. and Hamid R. Moghadam (incorporated by reference to Exhibit 10.1 to Prologis’
Current Report Form 8-K filed on February 3, 2017).
10.50
Fifth Amended and Restated Revolving Credit Agreement, dated as of February 16, 2017, among Prologis Marunouchi Finance Investment Limited
Partnership, as initial borrower, Prologis, Inc. and Prologis, L.P., as guarantors, the lenders listed on the signature pages thereof, and Sumitomo Mitsui
Banking Corporation, as Administrative Agent (incorporated by reference to Exhibit 10.1 to Prologis’ Current Report Form 8-K filed on February 21,
2017).
10.51
Guaranty of Payment, date as of February 16, 2017, among Prologis, Inc. and Prologis, L.P., as guarantors, Sumitomo Mitsui Banking Corporation, as
Administrative Agent, for the banks that are from time to time parties to the Fifth Amend and Restated Revolving Credit Agreement, dated as of February
16, 2017 (incorporated by reference to Exhibit 10.2 to Prologis’ Current Report Form 8-K filed on February 22, 2017).
10.52
10.53
10.54
10.55
Amended and Restated Senior Term Loan Agreement dated as of May 4, 2017 among Prologis, Inc., Prologis, L.P., various affiliates of Prologis, L.P.,
various lenders and Bank of America, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.1 to Prologis’ Current Report Form 8-K on
May 8, 2017).
Second Amended and Restated Global Senior Credit Agreement, dated as of January 16, 2019, by and among Prologis, Inc., Prologis, L.P., various
affiliates of Prologis, L.P., various lenders and Bank of America, N.A., as Global Administrative Agent (incorporated by reference to Exhibit 10.1 to
Prologis’ Current Report Form 8-K on January 16, 2019).
Term Loan Agreement dated as of March 4, 2019 among Prologis GK Holdings Y.K., as borrower, Prologis, L.P., as guarantor, the lenders party thereto,
and Sumitomo Mitsui Banking Corporation, as Administrative Agent (incorporated by reference to Exhibit 10.1 to Prologis’ Current Report Form 8-K filed
on March 6, 2019).
Guaranty of Payment dated as of March 4, 2019 between Prologis, L.P., as guarantor, and Sumitomo Mitsui Banking Corporation, as Administrative
Agent, for the lenders that are from time to time parties to the Term Loan Agreement dated as of March 4, 2019 (incorporated by reference to Exhibit
10.2 to Prologis’ Current Report Form 8-K filed on March 6, 2019).
10.56*
Amended and Restated Change in Control and Noncompetition Agreement, dated April 30, 2019, between Prologis, Inc. and Hamid R. Moghadam
(incorporated by reference to Exhibit 10.1 to Prologis’ Current Report From 8-K filed on May 3, 2019).
10.57*
Form of Retirement Eligibility Waiver Amendment for Hamid Moghadam (incorporated by reference to Exhibit 10.1 to Prologis’ Current Report Form 8-K
filed on December 10, 2019).
10.58*
Form of Retirement Eligibility Waiver Amendment for Named Executive Officers (other than Hamid Moghadam) (incorporated by reference to Exhibit
10.2 to Prologis’ Current Report Form 8-K filed on December 10, 2019).
10.59*
Prologis, Inc. 2020 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 to Prologis’ Current Report Form 8-K filed on May 4, 2020).
113
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Index to Item 15
10.60
10.61
Sixth Amended and Restated Revolving Credit Agreement, dated as of July 10, 2020, among Prologis Marunouchi Finance Investment Limited
Partnership, as initial borrower, Prologis, L.P., as guarantor, the lenders listed on the signature pages thereof, and Sumitomo Mitsui Banking
Corporation, as Administrative Agent (incorporated by reference to Exhibit 10.1 to Prologis' Current Report Form 8-K filed on July 14, 2020).
Guaranty of Payment, dated as of July 10, 2020, between Prologis, L.P., as guarantor, and Sumitomo Mitsui Banking Corporation, as Administrative
Agent, for the banks that are from time to time parties to the Sixth Amended and Restated Revolving Credit Agreement (incorporated by reference to
Exhibit 10.2 to Prologis' Current Report Form 8-K filed on July 14, 2020).
10.62*
Form of First Amendment to Amended and Restated Prologis, Inc. 2011 Notional Account Deferred Compensation Plan (incorporated by reference to
Exhibit 10.1 to Prologis’ Current Report Form 8-K filed on September 25, 2020).
10.63*
Form of LTIP Unit Award Agreement (Omnibus 2020) (incorporated by reference to Exhibit 10.2 to Prologis’ Current Report Form 8-K filed on September
25, 2020).
10.64*
Form of LTIP Unit Award Agreement (Bonus Exchange 2020) (incorporated by reference to Exhibit 10.3 to Prologis’ Current Report Form 8-K filed on
September 25, 2020).
10.65*
Form of Outperformance Plan LTIP Unit Award Agreement for Named Executive Officers (2020) (incorporated by reference to Exhibit 10.4 to Prologis’
Current Report Form 8-K filed on September 25, 2020).
10.66*
Form of Outperformance Plan LTIP Unit Award Agreement (General 2020) (incorporated by reference to Exhibit 10.5 to Prologis’ Current Report Form 8-
K filed on September 25, 2020).
10.67*
Form of Deferred Compensation LTIP Unit Award Agreement (2020) (incorporated by reference to Exhibit 10.6 to Prologis’ Current Report Form 8-K filed
on September 25, 2020).
10.68*
10.69*
Form of RSU Agreement (Global 2020) (incorporated by reference to Exhibit 10.7 to Prologis’ Current Report Form 8-K filed on September 25, 2020).
Form of RSU Agreement (Bonus Exchange 2020) (incorporated by reference to Exhibit 10.8 to Prologis’ Current Report Form 8-K filed on September 25,
2020).
10.70*
Form of RSU Agreement (LTIP Unit Election 2020) (incorporated by reference to Exhibit 10.9 to Prologis’ Current Report Form 8-K filed on September
25, 2020).
10.71
Global Senior Credit Agreement dated as of April 15, 2021 among Prologis, L.P., various affiliates of Prologis, L.P., various lenders and agents, and
Bank of America, N.A., as Global Administrative Agent (incorporated by reference to Exhibit 10.1 of Prologis’ Current Report Form 8-K filed on April 16,
2021).
10.72
First Amendment to Sixth Amended and Restated Revolving Credit Agreement, dated as of October 1, 2021, among Prologis Marunouchi Finance
Investment Limited Partnership, as initial borrower, Prologis, L.P., as guarantor, the lenders listed on the signature pages thereof, and Sumitomo Mitsui
Banking Corporation, as Administrative Agent (incorporated by reference to Exhibit 10.1 to Prologis’ Current Report Form 10-Q filed on October 26,
2021).
10.73
10.74
10.75
First Amendment to Term Loan Agreement, dated as of October 1, 2021 among Prologis GK Holdings Y.K, as borrower, Prologis, L.P., as guarantor, the
lenders party thereto, and Sumitomo Mitsui Banking Corporation, as Administrative Agent (incorporated by reference to Exhibit 10.2 to Prologis’ Current
Report Form 10-Q filed on October 26, 2021).
First Amendment, dated as of September 20, 2021, to the Global Senior Credit Agreement dated as of April 15, 2021, among Prologis, L.P., various
affiliates of Prologis, L.P., various lenders and Bank of America, N.A., as Global Administrative Agent (incorporated by reference to Exhibit 10.3 to
Prologis’ Current Report Form 10-Q filed on October 26, 2021).
First Amendment, dated as of September 20, 2021, to the Global Senior Credit Agreement dated as of January 16, 2019, among Prologis, L.P., various
affiliates of Prologis, L.P., various lenders and Bank of America, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.4 to Prologis’
Current Report Form 10-Q filed on October 26, 2021).
10.76*
Third Amended and Restated Prologis Promote Plan (incorporated by reference to Exhibit 10.1 to Prologis’ Current Report on Form 8-K filed on
December 2, 2021).
114
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Index to Item 15
10.77
10.78
Global Senior Credit Agreement dated as of June 30, 2022 among Prologis, L.P., various affiliates of Prologis, L.P., various lenders and agents, and
Bank of America, N.A., as Global Administrative Agent (incorporated by reference to Exhibit 10.1 to Prologis’ Current Report on Form 8-K filed July 6,
2022).
Second Amendment dated as of June 30, 2022 among Prologis, L.P., various affiliates of Prologis, L.P., various lenders and agents, and Bank of
America, N.A., as Global Administrative Agent to the Second Amended and Restated Global Senior Credit Agreement dated as of April 15, 2021
(incorporated by reference to Exhibit 10.2 to Prologis’ Current Report on Form 8-K filed July 6, 2022).
10.79*
Form of LTIP Unit Award Agreement (Omnibus 2022) (incorporated by reference to Exhibit 10.1 to Prologis’ Current Report Form 8-K filed on September
27,2022).
10.80*
Form of Third Amended and Restated Prologis 2005 Nonqualified Deferred Compensation Plan (incorporated by reference to Exhibit 10.1 to Prologis’
Current Report Form 8-K filed on December 12, 2022).
10.81*
Form of Second Amended and Restated Prologis, Inc. 2011 Notional Account Deferred Compensation Plan (incorporated by reference to Exhibit 10.2 to
Prologis’ Current Report Form 8-K filed on December 12, 2022).
10.82*
Form of Second Amended and Restated Prologis, Inc. Nonqualified Deferred Compensation Plan (incorporated by reference to Exhibit 10.3 to Prologis’
Current Report Form 8-K filed on December 12, 2022).
10.83†
10.84†
21.1†
22.1†
23.1†
23.2†
23.3†
23.4†
24.1†
24.2†
31.1†
31.2†
31.3†
31.4†
32.1†
32.2†
99.1†
Prologis Bonus Exchange 2022 LTIP Unit Award Agreement - Advance Grant No Pre-Retirement Election
Prologis Bonus Exchange 2022 LTIP Unit Award Agreement - Advance Grant Pre-Retirement Election
Subsidiaries of Prologis, Inc. and Prologis, L.P.
Subsidiary guarantors and issuers of guaranteed securities.
Consent of KPMG LLP with respect to Prologis, Inc.
Consent of KPMG LLP with respect to Prologis, L.P.
Consent of KPMG LLP with respect to Duke Realty Corporation.
Consent of KPMG LLP with respect to Duke Realty Limited Partnership.
Power of Attorney for Prologis, Inc. (included in signature page of this annual report).
Power of Attorney for Prologis, L.P. (included in signature page of this annual report).
Certification of Chief Executive Officer of Prologis, Inc.
Certification of Chief Financial Officer of Prologis, Inc.
Certification of Chief Executive Officer for Prologis, L.P.
Certification of Chief Financial Officer for Prologis, L.P.
Certification of Chief Executive Officer and Chief Financial Officer of Prologis, Inc., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Certification of Chief Executive Officer and Chief Financial Officer for Prologis, L.P., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
Audited financial statements of Duke Realty Corporation and Duke Realty Limited Partnership and the notes thereto as of December 31, 2021.
101. INS†
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the
Inline XBRL Document.
101. SCH†
Inline XBRL Taxonomy Extension Schema
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101. CAL†
Inline XBRL Taxonomy Extension Calculation Linkbase
101. DEF†
Inline XBRL Taxonomy Extension Definition Linkbase
101. LAB†
Inline XBRL Taxonomy Extension Label Linkbase
101. PRE†
Inline XBRL Taxonomy Extension Presentation Linkbase
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
*
†
Management Contract or Compensatory Plan or Arrangement
Filed herewith
Prologis has omitted certain schedules and exhibits pursuant to Item 601(b)(2) of Regulation S-K and shall furnish supplementally to the SEC copies of any of the
omitted schedules and exhibits upon request by the SEC.
116
Table of Contents
Index to Item 15
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SIGNATURES
PROLOGIS, INC.
By:
/s/ Hamid R. Moghadam
Hamid R. Moghadam
Chief Executive Officer
Date: February 14, 2023
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that we, the undersigned officers and directors of Prologis, Inc., hereby severally constitute Hamid R. Moghadam, Timothy
D. Arndt and Edward S. Nekritz, and each of them singly, our true and lawful attorneys with full power to them, and each of them singly, to sign for us and in our names in the
capacities indicated below, the Form 10-K filed herewith and any and all amendments to said Form 10-K, and generally to do all such things in our names and in our
capacities as officers and directors to enable Prologis, Inc. to comply with the provisions of the Securities Exchange Act of 1934, and all requirements of the U.S. Securities
and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by our said attorneys, or any of them, to said Form 10-K and any and all
amendments thereto.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Signature
Title
Date
/s/ Hamid R. Moghadam
Hamid R. Moghadam
/s/ Timothy D. Arndt
Timothy D. Arndt
/s/ Lori A. Palazzolo
Lori A. Palazzolo
/s/ Cristina G. Bita
Cristina G. Bita
/s/ James B. Connor
James B. Connor
/s/ George L. Fotiades
George L. Fotiades
/s/ Lydia H. Kennard
Lydia H. Kennard
/s/ Irving F. Lyons III
Irving F. Lyons III
/s/ Avid Modjtabai
Avid Modjtabai
/s/ David P. O’Connor
David P. O’Connor
/s/ Olivier Piani
Olivier Piani
/s/ Jeffrey L. Skelton
Jeffrey L. Skelton
/s/ Carl B. Webb
Carl B. Webb
/s/ William D. Zollars
William D. Zollars
Chairman of the Board and Chief Executive Officer
February 14, 2023
Chief Financial Officer
February 14, 2023
Managing Director and Chief Accounting Officer
February 14, 2023
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
117
February 14, 2023
February 14, 2023
February 14, 2023
February 14, 2023
February 14, 2023
February 14, 2023
February 14, 2023
February 14, 2023
February 14, 2023
February 14, 2023
February 14, 2023
Table of Contents
Index to Item 15
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SIGNATURES
PROLOGIS, L.P.
By:
Prologis, Inc., its general partner
By:
/s/ Hamid R. Moghadam
Hamid R. Moghadam
Chief Executive Officer
Date: February 14, 2023
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that we, the undersigned officers and directors of Prologis, L.P., hereby severally constitute Hamid R. Moghadam, Timothy
D. Arndt and Edward S. Nekritz, and each of them singly, our true and lawful attorneys with full power to them, and each of them singly, to sign for us and in our names in the
capacities indicated below, the Form 10-K filed herewith and any and all amendments to said Form 10-K, and generally to do all such things in our names and in our
capacities as officers and directors to enable Prologis, L.P. to comply with the provisions of the Securities Exchange Act of 1934, and all requirements of the U.S. Securities
and Exchange Commission, hereby ratifying and confirming our signatures as they may be signed by our said attorneys, or any of them, to said Form 10-K and any and all
amendments thereto.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Signature
Title
Date
/s/ Hamid R. Moghadam
Hamid R. Moghadam
/s/ Timothy D. Arndt
Timothy D. Arndt
/s/ Lori A. Palazzolo
Lori A. Palazzolo
/s/ Cristina G. Bita
Cristina G. Bita
/s/ James B. Connor
James B. Connor
/s/ George L. Fotiades
George L. Fotiades
/s/ Lydia H. Kennard
Lydia H. Kennard
/s/ Irving F. Lyons III
Irving F. Lyons III
/s/ Avid Modjtabai
Avid Modjtabai
/s/ David P. O’Connor
David P. O’Connor
/s/ Olivier Piani
Olivier Piani
/s/ Jeffrey L. Skelton
Jeffrey L. Skelton
/s/ Carl B. Webb
Carl B. Webb
/s/ William D. Zollars
William D. Zollars
Chairman of the Board and Chief Executive Officer
February 14, 2023
Chief Financial Officer
February 14, 2023
Managing Director and Chief Accounting Officer
February 14, 2023
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
Director
118
February 14, 2023
February 14, 2023
February 14, 2023
February 14, 2023
February 14, 2023
February 14, 2023
February 14, 2023
February 14, 2023
February 14, 2023
February 14, 2023
February 14, 2023
Exhibit 4.1
Prologis, Inc.
Prologis, L.P.
Description of the Registrant’s Securities Registered Pursuant to Section 12 of the Securities Exchange Act of 1934
At December 31, 2022, Prologis, Inc. (the “Parent”) and Prologis, L.P., meaning Prologis, L.P. and its consolidated subsidiaries (the “Operating Partnership” or “OP”), had
three outstanding classes of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended (“Exchange Act”): common stock, 3.000% Notes due
2026 and 2.250% Notes due 2029.
Additionally, the OP holds a 100% indirect ownership in three finance subsidiaries, Prologis Euro Finance LLC, Prologis Yen Finance LLC and Prologis Sterling Finance
LLC, which had eleven outstanding classes of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended: 0.250% Notes due 2027, 0.375%
Notes due 2028, 1.000% Notes due 2029, 1.875% Notes due 2029, 0.625% Notes due 2031, 0.500% Notes due 2032, 1.500% Notes due 2034, 1.000% Notes due 2035,
1.000% Notes due 2041, 1.500% Notes due 2049 and Floating Rate Notes due 2024.
The terms “the Company,” “Prologis,” “we,” “our” or “us” means the Parent and OP collectively.
Description of Capital Stock
The following description of our common stock and Series Q preferred stock (“preferred stock”) is a summary and does not purport to be complete. It is subject to and
qualified in its entirety by reference to our Articles of Incorporation of Prologis and related Articles of Amendment (both “Articles of Incorporation”), our Articles
Supplementary, establishing and fixing the rights and preferences of the Series Q Cumulative Redeemable Preferred Stock of Prologis and related Articles Supplementary
and Articles of Amendment (both “Articles Supplementary”) and Ninth Amended and Restated Bylaws of Prologis, Inc. (“Bylaws”), each of which are incorporated by
reference herein and as an exhibit to our most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”). We encourage you to read
our Articles of Incorporation, Articles Supplementary, Bylaws and the applicable provisions of the Maryland General Corporation Law (“MGCL”) and Delaware General
Corporation Law (“DGCL”) for additional information.
Authorized Capital Stock
General. Our authorized capital stock consists of 2,000,000,000 shares of common stock at a par value of $0.01 per share and 100,000,000 shares of preferred stock at a par
value of $0.01 per share.
Common Stock
Shares Outstanding. The outstanding shares of our common stock are duly authorized, validly issued, fully paid and nonassessable. Our common stock is listed under the
New York Stock Exchange under the symbol “PLD.” The transfer agent and securities registrar for our common stock is Computershare Trust Company, N.A.
Unissued Common Stock. The Articles of Incorporation authorize the board of directors (the “Board”) to reclassify any unissued shares of common stock into other classes or
series of classes of stock and to establish the number of shares in each class or series and to set the preferences, conversion and other rights, voting powers, restrictions,
limitations and restrictions on ownership, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each such class or series.
The issuance of any shares of common stock in future financings, acquisitions or otherwise may result in dilution of voting power and relative equity interest of the holders of
shares of our common stock and will subject our common stock to prior dividend and liquidation rights of the outstanding shares of the series of preferred stock.
Restrictions on Ownership. Prologis generally will prohibit ownership by a single stockholder to no more than 9.8% (by value or number of shares, whichever is more
restrictive) of the issued and outstanding shares of common stock.
Dividend Rights. The Board may declare and pay dividends on our common stock out of funds legally available for that purpose, subject to the rights of holders of preferred
stock, as described below.
Voting Rights. Each outstanding share of common stock will entitle the holder to one vote for all matters submitted to stockholders for a vote at every meeting of the
stockholders, including the election of directors. The holders of such shares will possess the exclusive voting power, subject to any resolution adopted by the Board with
respect to any other class or series of stock establishing the designation, powers, preferences and relative, participating, optional or other special rights and powers of such
series.
Holders may vote in person, authorize another person or persons to act by proxy. A majority of the stock issued and outstanding and entitled to vote at any meeting of
stockholders, shall constitute a quorum. A quorum, once established, shall be sufficient to approve
any matter which may properly come before the meeting. Additionally, under MGCL, we generally cannot dissolve, amend our Articles of Incorporation or Bylaws, merge, sell
all or substantially all of our assets, engage in a share exchange or similar transaction in the ordinary course of business unless approved by the affirmative vote of the
stockholders holding at least two-thirds of the shares entitled to vote on the matter and our Articles of Incorporation do not provide for a lesser percentage in any situation.
Voting for the Election of Directors. Each director is to be elected by the vote of the majority of votes cast with respect to that director’s election; provided, if the number of
persons properly nominated to serve as directors exceeds the number of directors to be elected, then each director will be elected by the vote of a plurality of the shares
present in person or by proxy at the meeting and entitled to vote on the election of directors.
Rights and Preferences. Holders of shares of common stock will not have any conversion, exchange, sinking or retirement fund, redemption or appraisal rights or any
preemptive rights to subscribe for any securities of the Company or cumulative voting rights in the election of directors.
Rights Upon Liquidation. Upon liquidation, the holders of our common stock are entitled to share ratably in assets available for distribution to stockholders after satisfaction of
any liquidation preferences of any outstanding preferred stock.
Preferred Stock
Shares Outstanding. The outstanding shares of our preferred stock are duly authorized, validly issued, fully paid and nonassessable. Under our Articles of Incorporation,
without further stockholder action, the Board is authorized, subject to any limitations prescribed by MGCL and DGCL, to provide for the issuance of the shares of preferred
stock in one or more series, to establish from time to time the number of shares to be included in such series, to fix the designation, powers, preferences and rights of the
shares of each such series and any qualifications, limitations and restrictions thereof.
Restriction on Ownership. No person or persons acting as a group at any time may directly or indirectly acquire ownership of more than 25% of the outstanding preferred
stock or Prologis may redeem such shares from the holder or holders within 10 days of becoming aware of such activity.
Redemption Provisions. Prior to November 13, 2026, preferred stock will not be redeemable by Prologis, however, after this date at the option of Prologis, we may redeem
the shares in whole at a redemption price of $50 per share. If full cumulative dividends on the preferred stock have not been declared and paid or declared and set apart for
payment, they may not be redeemed at the option of Prologis except to enforce the ownership restrictions described above as well as to preserve its tax status.
Dividend Rights. The annual dividend rate is 8.54% per share and dividends are payable in arrears. Pursuant to the terms of our preferred stock, we are restricted from
declaring or paying any dividend with respect to our common stock unless and until all cumulative dividends with respect to the preferred stock have been paid and sufficient
funds have been set aside for dividends that have been declared for the relevant dividend period with respect to the preferred stock.
Voting Rights. The voting rights of preferred stock are limited. If and whenever six quarterly dividends payable on the preferred stock is in arrears, whether or not earned or
declared, the number of directors then constituting the Board will be increased by two and the holders of preferred stock, together with the holders of shares of every other
class, voting as a single class, regardless of class or series will be entitled to elect two additional directors to serve at annual meeting of stockholders or special meeting held
in place thereof. The affirmative vote of at least 66 2/3% of the votes entitled to be case by the holders of the preferred stock is required to approve: (i) any changes to the
Articles of Incorporation or Articles Supplementary that materially and adversely affects the voting powers, rights or preferences of the preferred stock; (ii) any share
exchange, consolidation, or merger that materially and adversely affects the holders of the preferred stock and; (iii) the authorization, reclassification or creation of, or the
increase in the authorized amount of, any security ranking senior to the preferred stock in the distribution of assets on any liquidation, dissolution or winding up of the
Company or in the payment of dividends.
Rights and Preferences. The preferred stock is not entitled to the benefits of any retirement of sinking fund and the holders have no conversion, redemption or preemption
rights.
Rights Upon Liquidation. Preferred stockholders receive a liquidation preference of $50 per share.
Anti-takeover Effects of Certain Provisions of the Articles of Incorporation and Bylaws
General. Our Articles of Incorporation and Bylaws contain certain provisions, including our ability to limit the actual or constructive ownership of shares of capital stock that
may be deemed to have an anti-takeover effect and may delay, deter or prevent a tender offer or take-over attempt that a stockholder might consider in its best interest,
including those attempts that might result in premium over the market price for the shares held by the stockholders.
Business Combinations and Control Share Acquisitions Statues. In the Prologis’ Bylaws we have elected not to be governed by the "business combination" provision of the
MGCL or the "control share acquisition" provisions of the MGCL, which could have the effect of delaying or preventing a change of control of the Company. The Bylaws
provide that the Company cannot at a future date determine to be governed by either such provision without the approval of a majority of the outstanding shares entitled to
vote. In addition, such irrevocable resolution adopted by the Board may only be changed by the approval of a majority of the outstanding shares entitled to vote.
Description of Debt Securities of Prologis, Inc. and Prologis, L.P.
The following description of our debt securities is a summary and does not purport to be complete. It is subject to and qualified in its entirety by reference to the Indenture,
dated as of June 8, 2011 by and among the Operating Partnership, as issuer, Prologis, as guarantor, and U.S. Bank National Association, as trustee (“Base Indenture” and
as supplemented by the First, Second, Third, Fourth, Fifth, Six, Seventh and Eighth Supplemental Indentures thereto, which are referred to herein as the “Indenture”) and
Officers’ Certificates and Forms of Notes incorporated by reference herein and as exhibits to our most recent Annual Report on Form 10-K filed with the SEC.
General
The following listing summarizes our two classes of notes (“Notes”) registered under Section 12 of the Exchange Act and are denominated in euro and British pound sterling
and their related documents comprising their respective terms as filed with the SEC:
3.000% Notes due 2026
On June 2, 2014, we issued debt of €500,000,000 aggregate principal amount bearing an interest rate of 3.000% per annum and
maturing on June 2, 2026. The notes are listed under the New York Stock Exchange under the symbol “PLD/26.”
Related Documents Incorporated by Reference
Form of Officers’ Certificate related to the 3.000% Notes due 2026
Form of 3.000% Notes due 2026
2.250% Notes due 2029
On June 7, 2017, we issued debt of £500,000,000 aggregate principal amount bearing an interest rate of 2.250% per annum and
maturing on June 30, 2029. The notes are listed under the New York Stock Exchange under the symbol “PLD/29.”
Related Documents Incorporated by Reference
Form of Eighth Supplemental Indenture among Prologis, Inc., Prologis, L.P., U.S. Bank National Association and Elavon Financial
Services DAC, UK Branch
Form of Officers’ Certificate related to the 2.250% Notes due 2029
Form of 2.250% Notes due 2029
The Indenture
General. All Notes are unsecured and unsubordinated obligations of Prologis underneath the Indenture, as defined above. The Notes are issuable in registered form in the
form set out in the Indenture with coupons in denominations of $100,000 and any integral multiple of $1,000 in excess thereof for U.S. dollar-denominated notes, €100,000
and any integral multiple of €1,000 in excess thereof for euro-denominated notes and £100,000 and any integral multiple of £1,000 in excess thereof for British pound
sterling-denominated notes. None of the Notes are redeemable or convertible at the option of the holders. The Notes do not provide for any sinking fund or analogous
provision and are not to be issued upon the exercise of debt warrants.
Issuance of Additional Notes. The aggregate principal amount of the Notes which may be authenticated and delivered under the Indenture is unlimited. The Notes may be
issued in one or more series. The additional series would be established pursuant to one or more Board Resolutions or supplemental indentures.
Trustee. The U.S. Bank National Association is the trustee for all securities issued under the Indenture, including the Notes, and is referred to herein as the Trustee.
Paying Agent, Transfer Agent and Security Registrar. The U.S. dollar-denominated notes define the paying agent as any person authorized by Prologis to pay the principal of
or any interest on any securities on behalf of Prologis or if no such person is authorized, the paying agent is Prologis. The U.S. dollar-denominated notes also define the
transfer agent and security registrar as the Trustee. The euro-denominated notes define the European paying agent and transfer agent as Elavon Financial Services Limited,
UK Branch and the European security registrar as Elavon Financial Services Limited. The British pound sterling-denominated notes define U.S. Bank National Association as
the transfer agent and security registrar and Elavon Financial Services DAC, UK Branch as the paying agent.
Voting Rights. To be entitled to vote at any meeting of the holders of the Notes, a person must be a holder of one or more series of Notes or a person appointed by an
instrument in writing as a proxy for a holder or holders of one or more such series. At any meeting each holder will be entitled to one vote for each $1,000 principal amount of
the Notes.
Purposes for Which Meetings May Be Called. A meeting of holders may be called at any time to make, give or take any request, demand, authorization, direction, notice,
consent, waiver or other action. A quorum for a meeting is defined when there is a majority of persons entitled to vote in principal amount of the total Notes. In the absence of
a quorum within thirty minutes of the appointed meeting, the meeting will be dissolved or adjourned for a period of 10 days or less. Any resolution presented to a meeting or
an adjourned meeting for which a quorum is present may be adopted by the affirmative vote of the holders of a majority in principal amount of the Notes and may become
binding for all holders, whether present, not present or represented at the meeting.
The Trustee may make reasonable regulations as it may deem advisable at any meetings in regard to proof of the holding of the Notes, the appointment or proxies, the duties
of inspectors of the votes, other evidence of the right to vote and other such matters concerning conduct, including the appointment of a temporary chairman.
Execution of Supplemental Indentures. The Trustee may enter into a supplemental indenture for the purpose of adding, changing or eliminating any provisions to the Base
Indenture or related supplemental indentures or to modify the rights of the holders and any related guarantees provided. To do so, the Trustee receives the consent of the
holders of not less than a majority in principal amount of all Notes.
Redemption Provisions. The Notes are redeemable in whole at any time at the option of Prologis at a redemption price of equal to the greater of 100% of the principal amount
(“Make-Whole Amount’) or the sum of the present values of the remaining scheduled payments of principal and interest on the Notes to be redeemed discounted to the date
of the redemption on an annual basis at the applicable comparable governmental bond rate plus 20 basis points (“Redemption Price”). If the notes are redeemed on or after a
certain time frame as defined in each note, the price is 100% of the principal amount.
Payment of Additional Amounts Upon Redemption. All repayments of the Notes will be made by or on behalf of the Company without withholding or deduction for any present
or future taxes, duties, assessments or governmental charges of whatever nature, imposed or levied by the United States (“U.S.”) or any taxing authority thereof or therein,
unless such withholding or deduction is required by law. If such withholding or deduction is required by law, Prologis will pay to a holder who is not a U.S. person such
additional amounts (the “Additional Amounts”) on the Notes as are necessary in order that the net payment by the Company or the paying agent of the principal of, and
premium (“Tax Redemption Price”), if any, and interest on, the Notes to such holder, after such withholding or deduction, will not be less than the amount provided in the
Notes to be then due and payable; provided, however, that the foregoing obligation to pay the Additional Amounts will not apply to certain items as defined in the Indenture.
Issuance in Euro and British Pound Sterling. Excluding the U.S. dollar-denominated notes, the principal, interest and related Additional Amounts on the euro-denominated
and British pound sterling-denominated notes (or Make-Whole Amount, Redemption Price or Tax Redemption Price) is payable in euro or British pound sterling, as
applicable in each note’s terms. If the euro or British pound sterling is unavailable due to the imposition of exchange controls or other circumstances beyond the Company’s
control, then all payments in respect of the notes will be made in U.S. dollars until the euro or British pound sterling is again available to Prologis. The amount payable on
any date in euros or British pound sterling will be converted to U.S. dollars on the second business day, which is not weekend day or a day on which banking institutions in
The City of New York or London are authorized or required by law, regulation or executive order to close and on which the Trans-European Automated Real-Time Gross
Settlement Express Transfer system is open. The rate used would be:
(1)
(2)
the Market Exchange Rate for euro, which is the noon buying rate in The City of New York for cable transfers of euros as certified for customs; or the most recently
available Market Exchange Rate on or before payment is due; or
the rate mandated by the Board of Governors of the Federal Reserve system for British pound sterling, which is based on the most recent U.S. dollar/British pound
sterling exchange rate published in The Wall Street Journal. If there is no published exchange rate, the rate is determined at Prologis’ sole discretion for British
pound sterling.
Any payment in respect of the euro-denominated and British pound sterling-denominated notes made in U.S. dollars will not constitute an Event of Default, as defined below,
under the Indenture. Neither the Trustee nor the paying agent is responsible for obtaining exchange rates, effecting conversions or otherwise handling redenomination’s.
Covenants. Under the Indenture, Prologis must maintain specific covenants on a quarterly basis to incur additional debt and continue to perform under the Indenture and not
create an Event of Default, including:
(1)
(2)
(3)
(4)
all outstanding debt of Prologis on a consolidated basis in accordance with U.S. generally accepted accounting principles must be less than 60% of the sum of total
assets as of the quarter covered by the Annual Report on Form 10-K or Quarterly Report on Form 10-Q;
the consolidated income available for debt service, as defined in the Indenture, to the annual debt service charge for four consecutive fiscal quarters as of the most
recently ended period must be greater than 1.5, on a pro forma basis after giving effect to the application of proceeds from the incurrence or refinance of additional
debt had it occurred at the beginning of such period;
the total unencumbered assets may not at any time be equal to or less than 150% of the aggregate outstanding principal amount of the unsecured debt;
total debt secured by any mortgage, lien, charge, pledge, encumbrance or security interest of any kind upon any of the property to total assets cannot be equal to or
greater than 40% of all outstanding debt; and
(5)
debt will be deemed to be incurred by the Company or subsidiary whenever the Company or subsidiary will create, assume, guarantee or otherwise become liable.
Events of Default. As described in the Indenture, there are many reasons for events of default, including but not limited to default in payment of principal and any premium
when a series of Notes is due and payable at maturity, default in the payment of interest or any Additional Amounts payable, default in performance or breach of any
covenant or warranty of the Company in the Indenture, default of
other indebtedness of the Company, the court entering into a final judgment or decree in an aggregate amount, excluding insurance, in excess of $50,000,000 and such
charges remaining for 60 days and the court entering into an order or decree of bankruptcy law.
If an event of default under the Indenture with respect to a series of debt securities occurs and is continuing, then in every such case, unless the principal of the debt
securities of such series shall already have become due and payable, the trustee or the holders of not less than 25% in principal amount of such series of debt securities may
declare the principal and the make-whole amount on the debt securities of such series to be due and payable immediately by written notice to the Operating Partnership that
payment of the debt securities is due, and to the trustee if given by the holders.
Subject to provisions in the Indenture relating to its duties in case of default, the trustee is under no obligation to exercise any of its rights or powers under the Indenture at
the request or direction of any holders of any series of debt securities then outstanding under the Indenture, unless such holders shall have offered to the trustee reasonable
security or indemnity. The holders of not less than a majority in principal amount of the debt securities of a series shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the trustee, or of exercising any trust or power conferred upon the trustee with respect to that series. However, the
trustee may refuse to follow any direction which is in conflict with any law or the Indenture, which may involve the trustee in personal liability or which may be unduly
prejudicial to the holders of the debt securities not joining in the proceeding.
Description of Debt Securities of Prologis Euro Finance LLC, Prologis Yen Finance LLC and Prologis Sterling Finance LLC
In 2018, we formed finance subsidiaries as part of our operations in Europe (Prologis Euro Finance LLC), Japan (Prologis Yen Finance LLC) and the United Kingdom
(Prologis Sterling Finance LLC). These entities are 100% indirectly owned by the OP and all unsecured debt issued or to be issued by each entity is or will be fully and
unconditionally guaranteed by the OP. There are no restrictions or limits on the OP’s ability to obtain funds from its subsidiaries by dividend or loan. In reliance on Rule 3-10
of Regulation S-X, the separate financial statements of Prologis Euro Finance LLC, Prologis Yen Finance LLC and Prologis Sterling Finance LLC are not provided in our
Annual Report on Form 10-K and Quarterly Report on Form 10-Q as the finance subsidiaries are entities bearing no assets, operations, revenues or cash flows other than
those related to the issuance, administration and repayment of the securities being registered and any securities guaranteed by the OP. As the debt securities of Prologis
Euro Finance LLC listed in this exhibit are unconditionally guaranteed and 100% indirectly owned by the OP we consider them other securities of the OP for purposes of this
exhibit. At December 31, 2022, there were no securities issued by either Prologis Yen Finance LLC or Prologis Sterling Finance LLC that have been registered under Section
12 of the Exchange Act.
The following description of our debt securities issued by Prologis Euro Finance LLC is a summary and does not purport to be complete. It is subject to and qualified in its
entirety by reference to the Indenture, dated as of August 1, 2018 by and among Prologis Euro Finance LLC, as issuer, the OP, as guarantor, and U.S. Bank National
Association, as trustee (“Finance Subsidiary Base Indenture” and as supplemented by the First and Second Supplemental Indentures thereto, which are collectively referred
to herein as the “Finance Subsidiary Indenture”) and Officers’ Certificates and Forms of Notes incorporated by reference herein and as exhibits to our most recent Annual
Report on Form 10-K filed with the SEC.
General
The following listing summarizes all notes issued by Prologis Euro Finance LLC (“Finance Subsidiary Notes”) registered under Section 12 of the Exchange Act and are
denominated in euros and related documents comprising their respective terms as filed with the SEC:
Prologis Euro Finance LLC
Floating Rate Notes due 2024 (“2024 Notes”)
On February 8, 2022, we issued debt of €300,000,000 aggregate principal amount bearing an applicable rate + 0.200% per annum
and maturing on February 8, 2024. The notes are listed under the New York Stock Exchange under the symbol “PLD/24”.
Related Documents Incorporated by Reference
Form of Officers’ Certificate related to the Floating Rate Notes due 2024
Form of Floating Notes due 2024
0.250% Notes due 2027 (“2027 Notes”)
On September 10, 2019, we issued debt of €600,000,000 aggregate principal amount bearing an interest rate of Euribor + 0.250%
per annum and maturing on September 10, 2027. The notes are listed under the New York Stock Exchange under the symbol
“PLD/27”.
Related Documents Incorporated by Reference
Form of Officers’ Certificate related to the 0.250% Notes due 2027
Form of 0.250% Notes due 2027
0.375% Notes due 2028 (“2028 Notes”)
On February 6, 2020, we issued debt of €550,000,000 aggregate principal amount bearing an interest rate of 0.375% per annum and
maturing on February 6, 2028. The notes are listed under the New York Stock Exchange under the symbol “PLD/28”.
Related Documents Incorporated by Reference
Form of Officers’ Certificate related to the 0.375% Notes due 2028
Form of 0.375% Notes due 2028
1.000% Notes due 2029 (“2029 Notes”)
On February 8, 2022, we issued debt of €500,000,000 aggregate principal amount bearing an interest rate of 1.000% per annum and
maturing on February 8, 2029. The notes are listed under the New York Stock Exchange under the symbol “PLD/29C”.
Related Documents Incorporated by Reference
Form of Officers’ Certificate related to the 1.000% Notes due 2029.
Form of 1.000% Notes due 2029.
1.875% Notes due 2029 (“2029 Notes”)
On August 1, 2018, we issued debt of €700,000,000 aggregate principal amount bearing an interest rate of 1.875% per annum and
maturing on January 5, 2029. The notes are listed under the New York Stock Exchange under the symbol “PLD/29A”.
Related Documents Incorporated by Reference
First Supplemental Indenture, dated as of August 1, 2018, among Prologis Euro Finance LLC, Prologis, L.P., U.S. Bank National
Association and Elavon financial Services DAC, UK Branch.
Form of Officers’ Certificate related to the 1.875% Notes due 2029
Form of 1.875% Notes due 2029
0.625% Notes due 2031 (“2031 Notes”)
On September 10, 2019, we issued debt of €700,000,000 aggregate principal amount bearing an interest rate of 0.625% per annum
and maturing on September 10, 2031. The notes are listed under the New York Stock Exchange under the symbol “PLD/31”.
Related Documents Incorporated by Reference
Form of Officers’ Certificate related to the 0.625% Notes due 2031
Form of 0.625% Notes due 2031
0.500% Notes due 2032 (“2032 Notes”)
On February 16, 2021 we issued debt of €850,000,000 aggregate principal amount bearing an interest rate of 0.500% per annum
and maturing on February 16, 2032. The notes are listed under the New York Stock Exchange under the symbol “PLD/32”.
Related Documents Incorporated by Reference
Form of Officers’ Certificate related to the 0.500% Notes due 2032
Form of 0.500% Notes due 2032
1.500% Notes due 2034 (“2034 Notes”)
On February 8, 2022, we issued debt of €750,000,000 aggregate principal amount bearing an interest rate of 1.500% per annum and
maturing on February 8, 2023. The notes are listed under the New York Stock Exchange under the symbol “PLD/34”.
Related Documents Incorporated by Reference
Form of Officers’ Certificate related to the 1.500% Notes due 2034.
Form of 1.500% Notes due 2034.
1.000% Notes due 2035 (“2035 Notes”)
On February 6, 2020, we issued debt of €650,000,000 aggregate principal amount bearing an interest rate of 1.000% per annum and
maturing on February 6, 2035. The notes are listed under the New York Stock Exchange under the symbol “PLD/35”.
Related Documents Incorporated by Reference
Form of Officers’ Certificate related to the 1.000% Notes due 2035
Form of 1.000% Notes due 2035
1.000% Notes due 2041 (“2041 Notes”)
On February 16, 2021 we issued debt of €500,000,000 aggregate principal amount bearing an interest rate of 1.000% per annum
and maturing on February 16, 2041. The notes are listed under the New York Stock Exchange under the symbol “PLD/41”.
Related Documents Incorporated by Reference
Form of Officers’ Certificate related to the 1.000% Notes due 2041
Form of 1.000% Notes due 2041
1.500% Notes due 2049 (“2049 Notes”)
On September 10, 2019, we issued debt of €500,000,000 aggregate principal amount bearing an interest rate of 1.500% per annum
and maturing on September 10, 2049. The notes are listed under the New York Stock Exchange under the symbol “PLD/49”.
Related Documents Incorporated by Reference
Form of Officers’ Certificate related to the 1.500% Notes due 2049
Form of 1.500% Notes due 2049
The Finance Subsidiary Indenture
General. All Finance Subsidiary Notes are unsecured and unsubordinated obligations of Prologis Euro Finance LLC. They are fully and unconditionally guaranteed by the OP
pursuant to the Finance Subsidiary Indenture, as defined above. The Finance Subsidiary Notes are issuable in registered form in the form set out in the Finance Subsidiary
Indenture with coupons in denominations of €100,000 and any integral multiple of €1,000 in excess thereof. None of the Finance Subsidiary Notes are redeemable or
convertible at the option of the holders. The Finance Subsidiary Notes do not provide for any sinking fund or analogous provision and are not to be issued upon the exercise
of debt warrants.
Issuance of Additional Notes. The aggregate principal amount of the Finance Subsidiary Notes which may be authenticated and delivered under the Finance Subsidiary
Indenture is unlimited. The Finance Subsidiary Notes may be issued in one or more series. The additional series would be established pursuant to one or more Board
Resolutions or supplemental indentures.
Trustee. The U.S. Bank National Association is the trustee for all securities issued under the Finance Subsidiary Indenture, including the Finance Subsidiary Notes, and is
referred to herein as the Trustee.
Paying Agent, Transfer Agent and Security Registrar. The euro-denominated notes define the paying agent as Elavon Financial Services DAC, UK Branch and the transfer
agent and security registrar as U.S. Bank National Association.
Voting Rights. To be entitled to vote at any meeting of the holders of the Finance Subsidiary Notes, a person must be a holder of one or more series of Finance Subsidiary
Notes or a person appointed by a holder in writing as a proxy for a holder or holders of one or more such series. At any meeting each holder will be entitled to one vote for
each $1,000 principal amount of the Finance Subsidiary Notes.
Purposes for Which Meetings May Be Called. A meeting of holders may be called at any time to make, give or take any request, demand, authorization, direction, notice,
consent, waiver or other action. A quorum for a meeting is defined when there is a majority of persons entitled to vote in principal amount of the total Finance Subsidiary
Notes. In the absence of a quorum within thirty minutes of the appointed meeting, the meeting will be dissolved or adjourned for a period of 10 days or less. Any resolution
presented to a meeting or an adjourned meeting for which a quorum is present may be adopted by the affirmative vote of the holders of a majority in principal amount of the
Finance Subsidiary Notes and may become binding for all holders, whether present, not present or represented at the meeting.
The Trustee may make reasonable regulations as it may deem advisable at any meetings in regard to proof of the holding of the Finance Subsidiary Notes, the appointment
or proxies, the duties of inspectors of the votes, other evidence of the right to vote and other such matters concerning conduct, including the appointment of a temporary
chairman.
Execution of Supplemental Indentures. The Trustee may enter into a supplemental indenture for the purpose of adding, changing or eliminating any provisions to the Finance
Subsidiary Indenture or related supplemental indentures or to modify the rights of the holders and any related guarantees provided. To do so, the Trustee receives the
consent of the holders of not less than a majority in principal amount of all Finance Subsidiary Notes affected by the proposed change.
Redemption Provisions. The euro-denominated notes are redeemable in whole at any time at the option of the OP at a redemption price of equal to the greater of 100% of
the principal amount (“Make-Whole Amount’) or the sum of the present values of the remaining scheduled payments of principal and interest on the euro-denominated notes
to be redeemed discounted to the date of the redemption on an annual basis at the applicable comparable governmental bond rate plus 20 basis points, in the case of the
2027 notes, 15 basis points, in the case of the 2028 notes, 20 or 25 basis points, in the case of either of the 2029 notes, 20 basis points, in the case of the 2031 notes, 25
basis points, in the case of the 2034 notes, 20 basis points, in the case of the 2035 notes, and 30 basis points, in the case of the 2049 notes (“Redemption Price”). If the
euro-denominated notes are redeemed on or after a certain time frame as defined in each note, the price is 100% of the principal amount.
Payment of Additional Amounts Upon Redemption. All repayments of the Finance Subsidiary Notes will be made by or on behalf of the finance subsidiaries without
withholding or deduction for any present or future taxes, duties, assessments or governmental charges of whatever nature, imposed or levied by the U.S. or any taxing
authority thereof or therein, unless such withholding or deduction is
required by law. If such withholding or deduction is required by law, the finance subsidiaries will pay to a holder who is not a U.S. person such additional amounts (the
“Additional Amounts”) on the Finance Subsidiary Notes as are necessary in order that the net payment by the finance subsidiary or the paying agent of the principal of, and
premium (“Tax Redemption Price”), if any, and interest on, the Finance Subsidiary Notes to such holder, after such withholding or deduction, will not be less than the amount
provided in the Finance Subsidiary Notes to be then due and payable; provided, however, that the foregoing obligation to pay Additional Amounts will not apply to certain
items as defined in the Finance Subsidiary Indenture.
Issuance in Euro and Yen. The principal, interest and related Additional Amounts on the Finance Subsidiary Notes (or Make-Whole Amount, Redemption Price or Tax
Redemption Price) is payable in euro. If the euro is unavailable due to the imposition of exchange controls or other circumstances beyond the control of Prologis Euro
Finance LLC, then all payments in respect of the Finance Subsidiary Notes will be made in U.S. Dollars until the euro is again available to Prologis Euro Finance LLC. The
amount payable on any date in euros will be converted to U.S. Dollars on the second business day, which is not weekend day or a day on which banking institutions in the
cities of New York, London are authorized or obligated by law or executive order to close and on which the Trans-European Automated Real-Time Gross Settlement Express
Transfer system is open. The rate used would be:
(1)
(2)
(3)
the rate mandated by the Board of Governors of the Federal Reserve System as of the close of business on the second business day prior to the relevant payment
date; or
the most recent U.S. dollar/euro exchange rate published in The Wall Street Journal on or prior to the second business day prior to the relevant payment date if the
Board of Governors of the Federal Reserve System has not announced a rate of conversion; or
the rate determined at the sole discretion of Prologis Euro Finance LLC on the basis of the most recently available market exchange rate for euro, in the event The
Wall Street Journal has not published such exchange rate.
Any payment in respect of the Finance Subsidiary Notes made in U.S. dollars will not constitute an Event of Default, as defined below, under the Finance Subsidiary
Indenture. Neither the Trustee nor the paying agent is responsible for obtaining exchange rates, effecting conversions or otherwise handling redenomination’s.
Covenants. Under the Finance Subsidiary Indenture, the OP must maintain specific covenants to incur additional debt and continue to perform under the Finance
Subsidiaries Indenture and not create an Event of Default, including:
(1)
(2)
(3)
(4)
all outstanding debt of the OP on a consolidated basis in accordance with U.S. generally accepted accounting principles must be less than 60% of the sum of total
assets as of the quarter covered by the Annual Report on Form 10-K or Quarterly Report on Form 10-Q;
the consolidated income available for debt service, as defined in the Finance Subsidiary Indenture, to the annual debt service charge for four consecutive fiscal
quarters as of the most recently ended period must be greater than 1.5, on a pro forma basis after giving effect to the application of proceeds from the incurrence or
refinance of additional debt had it occurred at the beginning of such period;
the total unencumbered assets may not at any time be equal to or less than 150% of the aggregate outstanding principal amount of the unsecured debt of the OP;
total debt secured by any mortgage, lien, charge, pledge, encumbrance or security interest of any kind upon any of the property to total assets cannot be equal to or
greater than 40% of all outstanding debt of the OP; and
(5)
debt will be deemed to be incurred by the OP or subsidiary whenever the OP or subsidiary will create, assume, guarantee or otherwise become liable.
Events of Default. As described in the Finance Subsidiary Indenture, there are many reasons for events of default, including but not limited to default in payment of principal
and any premium when a series of Finance Subsidiary Notes is due and payable at maturity, default in the payment of interest or any Additional Amounts payable, default in
performance of any covenant of the Company in the Finance Subsidiary Indenture, default of other indebtedness of the Company, the court entering into a final judgment or
decree in an aggregate amount, excluding insurance, in excess of $50,000,000 and such charges remaining for 60 days and the court entering into an order or decree of
bankruptcy law.
If an event of default under the Finance Subsidiary Indenture with respect to a series of debt securities occurs and is continuing, then in every such case, unless the principal
of the debt securities of such series shall already have become due and payable, the trustee or the holders of not less than 25% in principal amount of such series of debt
securities may declare the principal and the make-whole amount on the debt securities of such series to be due and payable immediately by written notice to the Operating
Partnership that payment of the debt securities is due, and to the trustee if given by the holders.
Subject to provisions in the Finance Subsidiary Indenture relating to its duties in case of default, the trustee is under no obligation to exercise any of its rights or powers under
the Finance Subsidiary Indenture at the request or direction of any holders of any series of debt securities then outstanding under the Finance Subsidiary Indenture, unless
such holders shall have offered to the trustee reasonable security or indemnity. The holders of not less than a majority in principal amount of the debt securities of a series
shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the trustee, or of exercising any trust or power conferred
upon the trustee with respect to that series. However, the trustee may refuse to follow any direction which is in
conflict with any law or the Finance Subsidiary Indenture, which may involve the trustee in personal liability or which may be unduly prejudicial to the holders of the debt
securities not joining in the proceeding.
PROLOGIS, INC.
2020 LONG-TERM INCENTIVE PLAN
BONUS EXCHANGE
LTIP UNIT AWARD AGREEMENT
EXHIBIT 10.83
Name of the Grantee: [___________________] (the “Grantee”)
Grant Effective Date: As determined under paragraph E of the Recitals
Date of Agreement:
RECITALS
A.
The Grantee is an employee of Prologis, Inc. (the “Company”) or a “Related Company” as defined in the Prologis, Inc.
2020 Long-Term Incentive Plan (as amended and supplemented from time to time, the “Plan”) and provides services to Prologis, L.P., through
which the Company conducts substantially all of its operations (the “Partnership”). Unless otherwise provided herein, capitalized terms used
in this Bonus Exchange LTIP Unit Award Agreement (the “Agreement”) shall have the meaning specified in the Plan.
B.
Pursuant to the Limited Partnership Agreement of the Partnership (as amended and supplemented from time to time, the
“Partnership Agreement”), the Company, as general partner of the Partnership, hereby conditionally grants to the Grantee a Full Value Award
under the Plan (referred to herein as an “Award”) in the form of, and by causing the Partnership to issue to the Grantee, the number of LTIP
Units (as defined in the Partnership Agreement) determined in accordance with the Grantee’s Bonus Exchange Election [For No Premium/No
Vesting: (in which the Grantee made a no premium/no vesting bonus exchange election)] [For Regular Election: (in which the Grantee made
a premium/vesting bonus exchange election)] and as determined by the Compensation Committee (the “Committee”) of the Board of Directors
of the Company (the “Award LTIP Units”), having the rights, voting powers, restrictions, limitations as to distributions, qualifications and
terms and conditions of redemption and conversion set forth in this Agreement and in the Partnership Agreement. The Company will notify
the Grantee of the number of Award LTIP Units granted by the Committee following the Grant Effective Date (as defined below) by sending
the Grantee a Bonus Exchange LTIP Unit Award Notice (in substantially the form attached hereto as Exhibit B).
C.
This Award represents the Grantee’s equity award received as part of the Company’s Bonus Exchange program earned in
202[_].
D.
Upon the close of business on the Grant Effective Date, the Grantee shall receive an award of that number of LTIP Units
determined as described in paragraph B and approved by the Committee, subject to the restrictions and conditions set forth herein, in the Plan,
and in the Partnership Agreement.
E.
This Award and the grant of Award LTIP Units pursuant to this Agreement are specifically conditioned on the approval
by the Committee of the Award and the number of Award LTIP Units subject to this Agreement. The “Grant Effective Date” shall be the date
on which this Award and the number of Award LTIP Units is approved by the Committee. Notwithstanding the foregoing or any other
provision of this Agreement, this Agreement shall become effective only upon approval of the Award by the Committee and if the Committee
does not approve this Award within the first calendar quarter of the calendar year following the year in which the Date of Agreement (as set
forth above) occurs (the last date of such calendar quarter, the “Last Approval Date”) this Agreement shall immediately terminate upon the
Last Approval Date without action of any person. For the avoidance of doubt, if the Grantee’s Termination Date occurs for any reason prior to
the date on which the Grant Effective Date occurs, this Agreement shall immediately terminate upon the Termination Date without action of
any person.
NOW, THEREFORE, the Company, the Partnership and the Grantee agree as follows:
1.
Effectiveness of Award. As of the Grant Effective Date, the Grantee shall be admitted as a partner of the Partnership with
beneficial ownership of the Award LTIP Units by (i) signing and delivering to the Partnership a copy of this Agreement, (ii) signing, as a
Limited Partner, and delivering to the Partnership a counterpart signature page to the Partnership Agreement (attached hereto as Exhibit A),
and (iii) making a Capital Contribution (as defined in the Partnership Agreement) to the Partnership, in cash, in the amount of $0.01 per Award
LTIP Unit (the “Per Unit Contribution”). Upon satisfaction of the foregoing requirements and execution of this Agreement by the Grantee, the
Partnership and the Company, the books and records of the Partnership maintained by the General Partner shall reflect the issuance to the
Grantee of the Award LTIP Units. Thereupon, the Grantee shall have all the rights of a Limited Partner (as defined in the Partnership
Agreement) of the Partnership with respect to a number of LTIP Units equal to the number of Award LTIP Units, subject, however, to the
restrictions and conditions specified in Section 2 below and elsewhere herein. The LTIP Units are uncertificated securities of the Partnership
and upon the Grantee’s request the General Partner shall confirm the number of LTIP Units issued to the Grantee.
2.
Vesting and Forfeiture of Award LTIP Units.
(a)
[For No Premium/No Vesting: The Award LTIP Units shall be vested as of the Grant Effective Date.] [For
Regular Election: Subject to Section 11 hereof, and subsection 4.3 of the Plan, the Award LTIP Units will vest as to the number of Award
LTIP Units, and on the dates, set forth in the Bonus Exchange LTIP Unit Award Notice (each such date a “Vesting Date”) provided that the
Grantee’s Termination Date has not occurred as of the applicable Vesting Date; provided, however, that if the Grantee’s Termination Date
occurs by reason of death or Disability after the Grant Effective Date, then any unvested Award LTIP Units shall vest immediately on the
Termination Date and the Termination Date shall be the “Vesting Date” for purposes of this Agreement. All Award LTIP Units that are not
vested on or before the Grantee’s Termination Date shall thereupon, and with no further action and at no cost to the Company, be immediately
forfeited by the Grantee and the Grantee shall have no further rights with respect to such Award LTIP Units (including the right to vest in such
Award LTIP Units). For the avoidance of doubt, the Award LTIP Units shall not vest solely as a result of the
2
Grantee’s satisfaction of eligibility conditions for retirement or as the result of the Grantee’s termination of employment or service as a result
of retirement (whether as defined in the Plan or for any other purpose)].
(b)
Notwithstanding anything to the contrary set forth in this Agreement, this Award is subject to the Recoupment
Policy set forth in the Prologis Governance Guidelines as in effect from time to time, any other clawback or recoupment policies that are
adopted by the Company, and the provisions of the Plan relating to recoupment, misconduct and good standing.
Termination Date.
(c)
For purposes of this Award, the Committee shall have the exclusive discretion to determine Grantee’s
3.
Distributions. The Grantee shall be entitled to receive distributions with respect to the Award LTIP Units to the extent
provided for in the Partnership Agreement as follows:
(a)
The Award LTIP Units are hereby designated as regular “LTIP Units.”
(b)
Award LTIP Units is the Grant Effective Date.
The LTIP Unit Distribution Participation Date (as defined in the Partnership Agreement) with respect to the
(c)
All distributions paid with respect to the Award LTIP Units shall be fully vested and non-forfeitable when
paid, whether or not the Award LTIP Units have been earned based on performance or have become vested based on continued employment as
provided in Section 2 hereof.
4.
Rights with Respect to Award LTIP Units. Without duplication with the provisions of Section 4 of the Plan or Section
1.14 of Exhibit K to the Partnership Agreement, if(i) the Company shall at any time be involved in a merger, consolidation, dissolution,
liquidation, reorganization, exchange of shares, sale of all or substantially all of the assets or capital stock of the Company or a transaction
similar thereto, (ii) any stock dividend, stock split, reverse stock split, stock combination, reclassification, recapitalization, or other similar
change in the capital structure of the Company, or any distribution to holders of Stock, other than ordinary cash dividends, shall occur, or (iii)
any other event shall occur which, in each case in the judgment of the Committee, necessitates action by way of adjusting the terms of this
Award, then and in that event, the Committee may take such action, if any, as it determines to be reasonably required to maintain the Grantee’s
rights hereunder so that they are substantially proportionate to the rights existing under this Agreement prior to such event, including, but not
limited to, substitution of other awards under the Plan.
5.
Incorporation of the Plan; Interpretation by Committee. This Agreement is subject in all respects to the terms,
conditions, limitations and definitions contained in the Plan. In the event of any discrepancy or inconsistency between this Agreement and the
Plan, the terms and conditions of the Plan shall control. The Committee may make such rules and regulations and establish such procedures
for the administration of this Agreement as it deems appropriate. Without limiting the generality of the foregoing, the Committee may
interpret the Plan and this Agreement, with such interpretations to be conclusive and binding on all persons and otherwise accorded the
maximum deference permitted by law. In the event of any dispute or disagreement as to interpretation of the Plan or this Agreement or of any
rule, regulation or procedure, or as to
3
any question, right or obligation arising from or related to the Plan or this Agreement, the decision of the Committee shall be final and binding
upon all persons.
6.
Restrictions on Transfer.
(a)
Except as otherwise permitted by the Committee, none of the Award LTIP Units granted hereunder nor any of
the common units of the Partnership into which such Award LTIP Units may be converted (the “Award Common Units”) shall be sold,
assigned, transferred, pledged, hypothecated, given away or in any other manner disposed of, or encumbered, whether voluntarily or by
operation of law (each such action a “Transfer”) and right to Redemption (as defined in the Partnership Agreement) may not be exercised until
such Award LTIP Units have vested pursuant to Section 2 hereof; provided, however, that Award LTIP Units may be Transferred prior to such
date in accordance with Section 6.5 of the Plan, so long as the Transferee agrees in writing with the Company and the Partnership to be bound
by all the terms and conditions of this Agreement and the Partnership Agreement and that subsequent Transfers shall be prohibited except
those in accordance with this Section 6.
(b)
The right to Redemption may be exercised with respect to Award Common Units, and Award Common Units
may be Transferred to the Partnership or the Company in connection with the exercise thereof, in accordance with and to the extent otherwise
permitted by the terms of the Partnership Agreement. Notwithstanding the foregoing, without the consent of the General Partner, the right to
Redemption shall not be exercisable with respect to any Award Common Units until two (2) years after the Grant Effective Date; provided
however, that the foregoing restriction shall not apply (i) if the right of Redemption is exercised in connection with a Change in Control or (ii)
in connection with an LTIP Unit Forced Conversion in connection with a Capital Transaction as described in the Partnership Agreement.
(c)
Additionally, all Transfers of Award LTIP Units or Award Common Units must be in compliance with all
applicable securities laws (including, without limitation, the Securities Act (as defined in the Partnership Agreement)) and the applicable terms
and conditions of the Partnership Agreement. In connection with any Transfer of Award LTIP Units or Award Common Units, the Partnership
may require the Grantee to provide an opinion of counsel, satisfactory to the Partnership, that such Transfer is in compliance with all federal
and state securities laws (including, without limitation, the Securities Act).
(d)
Any attempted Transfer of Award LTIP Units or Award Common Units not in accordance with the terms and
conditions of this Section 6 shall be null and void, and the Partnership shall not reflect on its records any change in record ownership of any
Award LTIP Units or Award Common Units as a result of any such Transfer, shall otherwise refuse to recognize any such Transfer and shall
not in any way give effect to any such Transfer of any Award LTIP Units or Award Common Units.
operation of law or otherwise, other than by will or the laws of descent and distribution.
(e)
This Agreement is personal to the Grantee, is non-assignable and is not transferable in any manner, by
4
7.
Legend. The books and records of the Partnership or other documentation evidencing the Award LTIP Units shall bear an
appropriate legend or notation, as determined by the Partnership in its sole discretion, to the effect that such LTIP Units are subject to
restrictions as set forth herein, in the Plan and in the Partnership Agreement.
8.
Tax Matters; Section 83(b) Election. The Grantee hereby agrees to make an election (an “83(b) Election”) to include in
gross income in the year of transfer the unvested Award LTIP Units hereunder pursuant to and in accordance with the requirements of Section
83(b) of the Code substantially in the form attached hereto as Exhibit B and to supply the necessary information in accordance with the
regulations promulgated thereunder. The Grantee shall provide a copy of the Section 83(b) Election to the Company. In no event shall the
Grantee make an 83(b) Election with respect to the Award prior to the Grant Effective Date.
9.
Withholding and Taxes.
(a)
The Grantee acknowledges that, regardless of any action taken by the Company or the Partnership or, if
different, the Grantee’s employer (the “Employer”), the ultimate liability for all income tax, social insurance, payroll tax, fringe benefits tax,
payment on account or other tax-related items related to the Award and legally applicable to the Grantee (“Tax-Related Items”), is and remains
the Grantee’s responsibility and may exceed the amount, if any, actually withheld by the Company or the Employer.
(b)
The Grantee acknowledges and agrees that the Company and/or the Employer (i) make no representations or
undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of this Award, including, but not limited to, the
grant, vesting or settlement of the Award or the subsequent disposition of any LTIP Units acquired pursuant to this Award; and (ii) do not
commit to and are under no obligation to structure the terms of the Award to reduce or eliminate the Grantee’s liability for Tax-Related Items
or achieve any particular tax result. Further, if the Grantee is subject to Tax-Related Items in more than one jurisdiction, the Grantee
acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-
Related Items in more than one jurisdiction.
(c)
Prior to any relevant taxable or tax withholding event, as applicable, the Grantee agrees to make adequate
arrangements satisfactory to the Company and/or the Employer to satisfy any applicable withholding obligations for Tax-Related Items. If
such arrangements are not made by the Grantee by the date specified by the Company and communicated to the Grantee (and in no event less
than 30 days prior to the Vesting Date or if the Vesting Date is the Grant Effective Date, no later than the Grant Effective Date), the Grantee
authorizes the Company or its agent to satisfy any applicable withholding obligations with regard to all Tax-Related Items by deducting such
amounts from any cash payments to be made to the Grantee hereunder or withholding in LTIP Units to be issued hereunder (or, if applicable,
any Common Units into which the LTIP Units are converted or shares of Stock issued in redemption of such Common Units).
law to be withheld or such other amount determined
(d)
The Company may withhold or account for Tax-Related Items by considering the amount that is required by
5
by the Company or an affiliate that is not prohibited by law but in no event more than the maximum U.S. federal, state, local or foreign taxes,
as applicable (including social insurance tax or contributions obligations, if any). In the event of under-withholding, the Grantee may be
required to pay any additional Tax-Related Items directly to the applicable tax authority or to the Company and/or its designated affiliate. If
the obligation for Tax-Related Items is satisfied by withholding in LTIP Units (or other securities pursuant to paragraph (c)), for tax purposes,
the Grantee is deemed to have been issued the full number of vested Award LTIP Units (or other applicable securities), notwithstanding that a
number of the LTIP Units (or other applicable securities) are held back solely for the purpose of paying the Tax-Related Items.
(e)
Finally, the Grantee agrees to pay to the Company or the Employer, including through withholding from the
Grantee’s wages or other cash compensation paid to the Grantee by the Company and/or the Employer, any amount of Tax-Related Items that
the Company or the Employer may be required to withhold or account for as a result of the Grantee’s participation in the Plan that cannot be
satisfied by the means previously described. The Company may refuse to issue or deliver the LTIP Units issuable upon vesting of the Award
LTIP Units, or the proceeds of the disposition thereof, if the Grantee fails to comply with the Grantee’s obligations in connection with the Tax-
Related Items.
10.
Amendment; Modification. This Agreement may only be modified or amended in a writing signed by the parties
hereto, provided that the Grantee acknowledges that the Plan may be amended or discontinued in accordance with Section 7 of the Plan, and
that this Agreement may be amended or canceled by the Committee, on behalf of the Company and the Partnership, for the purpose of
satisfying changes in law or for any other lawful purpose, so long as no such action shall adversely affect the Grantee’s rights under this
Agreement without the Grantee’s written consent. No promises, assurances, commitments, agreements, undertakings or representations,
whether oral, written, electronic or otherwise, and whether express or implied, with respect to the subject matter hereof, have been made by the
parties which are not set forth expressly in this Agreement. The failure of the Grantee or the Company or the Partnership to insist upon strict
compliance with any provision of this Agreement, or to assert any right the Grantee or the Company or the Partnership, respectively, may have
under this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.
11.
Change in Control.
(a)
In the event that a Change in Control occurs prior to the Vesting Date, prior to the date on which any
applicable Award LTIP Units have otherwise been forfeited, and prior to the Grantee’s Termination Date, and either (i) the Grantee’s
Termination Date occurs on or within twenty-four (24) months following the Change in Control due to termination by the Company or the
successor to the Company or a Related Company which is the Grantee’s employer for reasons other than Cause or (ii) the Plan is terminated by
the Company or its successor upon or following a Change in Control without provision for the continuation of this Award to the extent then
unvested and outstanding, then the Award LTIP Units (or to the extent applicable such other award, security or right to payment into which
such Award LTIP Units converted in connection with the Change in Control, as determined by the parties to such Change in Control) to the
extent they have not otherwise cancelled or forfeited, shall immediately vest
6
and the date of the vesting shall be the “Vesting Date.” Any Award LTIP Units that vest pursuant to this paragraph (a) shall be paid in
accordance with the terms and conditions of this Agreement and the terms and conditions of the Plan.
(b)
For purposes of this Section 11, the Grantee’s Termination Date shall be deemed to have occurred on account
of termination by the Company or its successor (or a Related Company) for reasons other than for Cause if the Grantee terminates employment
after, absent the written consent of the Grantee, (i) a substantial adverse alteration in the nature of the Grantee’s status or responsibilities from
those in effect immediately prior to the Change in Control, or (ii) a material reduction in the Grantee’s annual base salary and target bonus, if
any, as in effect immediately prior to the Change in Control. In any event, if, upon a Change in Control, awards in other shares or securities are
substituted for outstanding Awards pursuant to Section 4 of the Plan (or a successor provision), and immediately following the Change in
Control, the Grantee becomes employed by the entity into which the Company merged, or the purchaser of substantially all of the assets of the
Company, or a successor to such entity or purchaser, the Grantee shall not be treated as having terminated employment for purposes of this
Section 11 until such time as the Grantee ceases to be an employee and/or ceases to provide services to the merged entity or purchaser (or
successor), as applicable.
(c)
Notwithstanding the foregoing, unless otherwise provided in the Plan or by the Company in its discretion, the
Award LTIP Units and the benefits evidenced by this Agreement do not create any entitlement to have the Award LTIP Units or any such
benefits transferred to, or assumed by, another company nor to be exchanged, cashed out or substituted for, in connection with any corporate
transaction affecting the Stock or the equity securities of the Partnership.
12.
Complete Agreement. This Agreement (together with those agreements and documents expressly referred to herein, for
the purposes referred to herein) embody the complete and entire agreement and understanding between the parties with respect to the subject
matter hereof, and supersede any and all prior promises, assurances, commitments, agreements, undertakings or representations, whether oral,
written, electronic or otherwise, and whether express or implied, which may relate to the subject matter hereof in any way.
13.
Investment Representation; Registration. The Grantee hereby makes the covenants, representations and warranties set
forth on Exhibit C attached hereto as of the Date of Agreement and as of the Grant Effective Date. All of such covenants, warranties and
representations shall survive the execution and delivery of this Agreement by the Grantee. The Grantee shall immediately notify the
Partnership upon discovering that any of the representations or warranties set forth on Exhibit C was false when made or have, as a result of
changes in circumstances, become false. The Partnership will have no obligation to register under the Securities Act any of the Award LTIP
Units or any other securities issued pursuant to this Agreement or upon conversion or exchange of the Award LTIP Units into other limited
partnership interests of the Partnership or shares of Stock.
14.
No Obligation to Continue Employment or Other Service Relationship. Neither the Company nor any Related
Company is obligated by or as a result of the Plan, or this Agreement to continue to have the Grantee provide services to it or to continue the
Grantee in
7
employment and neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any Subsidiary to terminate its
service relationship with the Grantee or the employment of the Grantee at any time.
15.
No Limit on Other Compensation Arrangements. Nothing contained in this Agreement shall preclude the Company
from adopting or continuing in effect other or additional compensation plans, agreements or arrangements, and any such plans, agreements and
arrangements may be either generally applicable or applicable only in specific cases or to specific persons.
16.
Status of Award LTIP Units under the Plan. The Award LTIP Units are both issued as equity securities of the
Partnership and granted as a “Full Value Award” under the Plan. The Company will have the right at its option, as set forth in the Partnership
Agreement, to issue shares of Stock in exchange for partnership units into which Award LTIP Units may have been converted pursuant to the
Partnership Agreement, subject to certain limitations set forth in the Partnership Agreement, and such Stock, if issued, will be issued under the
Plan. The Grantee acknowledges that the Grantee will have no right to approve or disapprove such election by the Company.
17.
Severability. If any term or provision of this Agreement is or becomes or is deemed to be invalid, illegal or
unenforceable in any jurisdiction or under any applicable law, rule or regulation, then such provision shall be construed or deemed amended to
conform to applicable law (or if such provision cannot be so construed or deemed amended without materially altering the purpose or intent of
this Agreement and the grant of Award LTIP Units hereunder, such provision shall be stricken as to such jurisdiction and the remainder of this
Agreement and the award hereunder shall remain in full force and effect).
18.
Section 409A. If any compensation provided by this Agreement may result in the application of Section 409A of the
Code, the Company shall, in consultation with the Grantee, modify the Agreement in the least restrictive manner necessary in order to, where
applicable, (i) exclude such compensation from the definition of “deferred compensation” within the meaning of such Section 409A or
(ii) comply with the provisions of Section 409A, other applicable provision(s) of the Code and/or any rules, regulations or other regulatory
guidance issued under such statutory provisions and to make such modifications, in each case, without any diminution in the value of the
benefits granted hereby to the Grantee.
19.
Law Governing. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO ANY PRINCIPLES OF CONFLICTS OF LAW WHICH COULD
CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF MARYLAND.
20.
Headings. Section, paragraph and other headings and captions are provided solely as a convenience to facilitate
reference. Such headings and captions shall not be deemed in any way material or relevant to the construction, meaning or interpretation of this
Agreement or any term or provision hereof.
8
21.
Notices. Notices hereunder shall be mailed or delivered to the Partnership at its principal place of business and shall be
mailed or delivered to the Grantee at the address on file with the Partnership or, in either case, at such other address as one party may
subsequently furnish to the other party in writing.
22.
Counterparts. This Agreement may be executed in two or more separate counterparts, each of which shall be an
original, and all of which together shall constitute one and the same agreement.
23.
Successors and Assigns. The rights and obligations created hereunder shall be binding on the Grantee and his heirs and
legal representatives and on the successors and assigns of the Partnership.
24.
Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity
grants, the Company and its agents may process any and all personal or professional data, including but not limited to Social Security or other
identification number, home address and telephone number, date of birth and other information that is necessary or desirable for the
administration of the Plan and/or this Agreement.
25.
Electronic Delivery and Acceptance. The Company may, in its sole discretion, decide to deliver any documents related
to the LTIP Units by electronic means or request the Grantee’s consent to participate in the Plan by electronic means. In consideration of
receiving this Award and accepting the benefits hereof, the Grantee consents to receive such documents by electronic delivery and, to the
extent determined by the Company, any participation by the Grantee in the Plan shall be through any on-line or electronic system established
and maintained by the Company or another third party designated by the Company. The Grantee’s signature or acceptance of this Agreement
is not required to make this Agreement enforceable except to the extent required by law. In consideration of accepting the benefits of this
Award, the Grantee agrees to all of the terms and conditions of this Agreement.
[Signature Page Follows]
9
IN WITNESS WHEREOF, the undersigned have caused this Award to be executed on the [__] day of [______], 20_____.
Its General Partner
PROLOGIS, INC.
By:
Name:
Title:
PROLOGIS, L.P.
By: PROLOGIS, INC.,
By:
Name:
Title:
Grantee
Name:
Address:
10
EXHIBIT A
FORM OF LIMITED PARTNER SIGNATURE PAGE
The Grantee, desiring to become one of the within named Limited Partners of Prologis, L.P., hereby becomes a party to the
Thirteenth Amended and Restated Agreement of Limited Partnership of Prologis, L.P., as amended through the date hereof (the “Partnership
Agreement”).
The Grantee constitutes and appoints the General Partner, any Liquidator, and authorized officers and attorneys-in-fact of each, and
each of those acting singly, in each case with full power of substitution, as the Grantee’s true and lawful agent and attorney-in-fact, with full
power and authority in the Grantee’s name, place and stead to carry out all acts described in Section 2.4.A(i) and (ii) of the Partnership
Agreement, such power of attorney to be irrevocable and a power coupled with an interest pursuant to Section 2.4.B of the Partnership
Agreement.
The Grantee agrees that this signature page may be attached to any counterpart of the Partnership Agreement.
Signature Line for Grantee:
Name: _________________
Date: __________________
Address of Grantee:
______________________________
EXHIBIT B
PROLOGIS, INC.
2020 LONG-TERM INCENTIVE PLAN
BONUS EXCHANGE LTIP UNIT AWARD NOTICE
Name of the Grantee: [___________________] (the “Grantee”)
No. of LTIP Units Awarded: [______________]
Grant Effective Date:
Date of Agreement:
The Grantee is a party to a Bonus Exchange LTIP Unit Award agreement dated as of the Date of Agreement set forth above (the “Agreement”)
and such Agreement has not been terminated or otherwise rendered without force and effect.
Pursuant to the Limited Partnership Agreement (as amended and supplemented from time to time, the “Partnership Agreement”) of Prologis,
L.P., Prologis, Inc. (“Prologis”) as general partner of Prologis, L.P. (the “Partnership”) and the Compensation Committee of the Board of
Directors of Prologis pursuant to its authority under the Prologis, Inc. 2020 Long-Term Incentive Plan (as amended and supplemented from
time to time, the “Plan”), has granted to the Grantee a Full Value Award under the Plan in the form of, and by causing the Partnership to issue
to the Grantee, the number of LTIP Units (as defined in the Partnership Agreement) set forth above having the rights, voting powers,
restrictions, limitations as to distributions, qualifications and terms and conditions of redemption and conversion set forth in the Agreement and
in the Partnership Agreement.
Subject to terms of the Agreement and the Plan, the Award LTIP Units will vest as to the number of Award LTIP Units, and on the dates, set
forth below:
Incremental Number
of Award LTIP Units Vested
_____________
_____________
_____________
Vesting Date
________, 20[__]
________, 20[__]
________, 20[__]
This Bonus Exchange LTIP Unit Award Notice forms part of the Agreement as of the Grant Effective Date.
As set forth in the Agreement, the Grantee will make an 83(b) Election, substantially in the form included on the following pages, to include in
gross income in the year of transfer the value of the unvested Award LTIP Units hereunder pursuant to and in accordance with the
requirements of Section 83(b) of the Code.
ELECTION TO INCLUDE IN GROSS INCOME IN YEAR OF
TRANSFER OF PROPERTY PURSUANT TO SECTION 83(B)
OF THE INTERNAL REVENUE CODE
The undersigned hereby makes an election pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, and Treasury
Regulations Section 1.83-2 promulgated thereunder to include in gross income as compensation for services the excess (if any) of the fair
market value of the property described below over the amount paid for such property.
1.
The name, address and taxpayer identification number of the undersigned are:
Name:
(the “Taxpayer”)
Address:
Social Security No./Taxpayer Identification No.:
Taxable Year: Calendar Year 20[_____].
2.
3.
4.
5.
6.
7.
Description of property with respect to which the election is being made:
The election is being made with respect to [
“Partnership”).
] LTIP Units in Prologis, L.P. (the
The date on which the LTIP Units were transferred is []. [No earlier than Grant Effective Date]
The taxable year to which this election relates is calendar year 20 [_____].
Nature of restrictions to which the LTIP Units are subject:
(a)
(b)
With limited exceptions, until the LTIP Units vest, the Taxpayer may not transfer in any manner any portion
of the LTIP Units without the consent of the Partnership.
The Taxpayer’s LTIP Units are subject to risk of forfeiture upon termination of the Taxpayer’s service
relationship prior to vesting.
The fair market value at time of transfer (determined without regard to any restrictions other than a nonlapse restriction
as defined in Treasury Regulations Section 1.83-3(h)) of the of the LTIP Units with respect to which this election is
being made was $0.01 per LTIP Unit.
The amount paid by the Taxpayer for the LTIP Units was $0.01 per LTIP Unit.
The amount to include in gross income is $0.
The undersigned taxpayer will file this election with the Internal Revenue Service office with which taxpayer files his or her annual income tax
return not later than 30 days after the date of
transfer of the property. A copy of the election also will be furnished to the person for whom the services were performed. The undersigned is
the person performing the services in connection with which the property was transferred.
Dated: [_______], 20 [__]
Name:
GRANTEE’S COVENANTS, REPRESENTATIONS AND WARRANTIES
EXHIBIT C
The Grantee hereby represents, warrants and covenants as follows:
Commission and has had an opportunity to review the following documents (the “Background Documents”):
(a)
The Grantee has received through access to the Company’s filings with the Security and Exchange
(i)
(ii)
(iii)
(iv)
The latest Annual Report to Stockholders that has been provided to stockholders;
The Company’s Proxy Statement for its most recent Annual Meeting of Stockholders;
The Company’s Report on Form 10-K for the fiscal year most recently ended;
The Company’s Form 10-Q for the most recently ended quarter if one has been filed by the
Company with the Securities and Exchange Commission since the filing of the Form 10-K described in clause (iv) above;
fiscal year most recently ended for which a Form 10-K has been filed by the Company;
(v)
Each of the Company’s Current Report(s) on Form 8-K, if any, filed since the later of the end of the
amended;
(vi)
The Thirteenth Amended and Restated Agreement of Limited Partnership of Prologis, L.P., as then
(vii)
(viii)
The Company’s 2020 Long-Term Incentive Plan; and
The Company’s Articles of Incorporation, as then amended.
The Grantee also acknowledges that in the event the Company may deliver any of the Background Documents and other information
relating to the Company and the Partnership prior to the determination by the Partnership of the suitability of the Grantee as a holder of Award
LTIP Units shall not constitute an offer of Award LTIP Units until such determination of suitability shall be made.
(b)
The Grantee hereby represents and warrants that
(i)
The Grantee either (A) is an “accredited investor” as defined in Rule 501(a) under the Securities Act,
or (B) by reason of the business and financial experience of the Grantee, together with the business and financial experience of those
persons, if any, retained by the Grantee to represent or advise him or her with respect to the grant to him or her of LTIP Units, the
potential conversion of LTIP Units into
common units of the Partnership (“Common Units”) and the potential redemption of such Common Units for shares of Stock
(“Shares”), has such knowledge, sophistication and experience in financial and business matters and in making investment decisions
of this type that the Grantee (I) is capable of evaluating the merits and risks of an investment in the Partnership and potential
investment in the Company and of making an informed investment decision, (II) is capable of protecting his or her own interest or has
engaged representatives or advisors to assist him or her in protecting his or her interests, and (III) is capable of bearing the economic
risk of such investment.
(ii)The Grantee understands that (A) the Grantee is responsible for consulting his or her own tax advisors with
respect to the application of the U.S. federal income tax laws, and the tax laws of any state, local or other taxing jurisdiction to which
the Grantee is or by reason of the award of LTIP Units may become subject, to his or her particular situation; (B) the Grantee has not
received or relied upon business or tax advice from the Company, the Partnership or any of their respective employees, agents,
consultants or advisors, in their capacity as such; (C) the Grantee provides or will provide services to the Partnership on a regular
basis and in such capacity has access to such information, and has such experience of and involvement in the business and operations
of the Partnership, as the Grantee believes to be necessary and appropriate to make an informed decision to accept this Award of
LTIP Units; and (D) an investment in the Partnership and/or the Company involves substantial risks. The Grantee has been given the
opportunity to make a thorough investigation of matters relevant to the LTIP Units and has been furnished with, and has reviewed and
understands, materials relating to the Partnership and the Company and their respective activities (including, but not limited to, the
Background Documents). The Grantee has been afforded the opportunity to obtain any additional information (including any
exhibits to the Background Documents) deemed necessary by the Grantee to verify the accuracy of information conveyed to the
Grantee. The Grantee confirms that all documents, records, and books pertaining to his or her receipt of LTIP Units which were
requested by the Grantee have been made available or delivered to the Grantee. The Grantee has had an opportunity to ask questions
of and receive answers from the Partnership and the Company, or from a person or persons acting on their behalf, concerning the
terms and conditions of the LTIP Units. The Grantee has relied upon, and is making its decision solely upon, the Background
Documents and other written information provided to the Grantee by the Partnership or the Company. The Grantee did not
receive any tax, legal or financial advice from the Partnership or the Company and, to the extent it deemed necessary, has consulted
with its own advisors in connection with its evaluation of the Background Documents and this Agreement and the Grantee’s receipt of
LTIP Units.
(iii)
The LTIP Units to be issued, the Common Units issuable upon conversion of the LTIP Units and
any Shares issued in connection with the redemption of any such Common Units will be acquired for the account of the Grantee for
investment only and not with a current view to, or with any intention of, a distribution or resale thereof, in whole or in part, or the
grant of any participation therein, without prejudice, however, to the Grantee’s right (subject to the terms of the LTIP Units, the Plan
and this Agreement) at all times to sell or otherwise dispose of all or any part of his or her LTIP Units, Common Units or Shares in
compliance with the Securities Act, and applicable
state securities laws, and subject, nevertheless, to the disposition of his or her assets being at all times within his or her control.
(iv)The Grantee acknowledges that (A) neither the LTIP Units to be issued, nor the Common Units issuable upon
conversion of the LTIP Units, have been registered under the Securities Act or state securities laws by reason of a specific exemption
or exemptions from registration under the Securities Act and applicable state securities laws and, if such LTIP Units or Common
Units are represented by certificates, such certificates will bear a legend to such effect, (B) the reliance by the Partnership and the
Company on such exemptions is predicated in part on the accuracy and completeness of the representations and warranties of the
Grantee contained herein, (C) such LTIP Units, or Common Units, therefore, cannot be resold unless registered under the Securities
Act and applicable state securities laws, or unless an exemption from registration is available, (D) there is no public market for such
LTIP Units and Common Units and (E) neither the Partnership nor the Company has any obligation or intention to register such LTIP
Units or the Common Units issuable upon conversion of the LTIP Units under the Securities Act or any state securities laws or to
take any action that would make available any exemption from the registration requirements of such laws, except, that, upon the
redemption of the Common Units for Shares, the Company currently intends to issue such Shares under the Plan and pursuant to a
Registration Statement on Form S-8 under the Securities Act, to the extent that (I) the Grantee is eligible to receive such Shares under
the Plan at the time of such issuance and (II) the Company has filed an effective Form S-8 Registration Statement with the Securities
and Exchange Commission registering the issuance of such Shares. The Grantee hereby acknowledges that because of the
restrictions on transfer or assignment of such LTIP Units acquired hereby and the Common Units issuable upon conversion of the
LTIP Units which are set forth in the Partnership Agreement and this Agreement, the Grantee may have to bear the economic risk of
his or her ownership of the LTIP Units acquired hereby and the Common Units issuable upon conversion of the LTIP Units for an
indefinite period of time.
(v)The Grantee has determined that the LTIP Units are a suitable investment for the Grantee.
(vi)No representations or warranties have been made to the Grantee by the Partnership or the Company, or any
officer, director, shareholder, agent, or affiliate of any of them, and the Grantee has received no information relating to an investment
in the Partnership or the LTIP Units except the information specified in this Paragraph (b).
(c)
So long as the Grantee holds any LTIP Units, the Grantee shall disclose to the Partnership in writing such
information as may be reasonably requested with respect to ownership of LTIP Units as the Partnership may deem reasonably necessary to
ascertain and to establish compliance with provisions of the Code, applicable to the Partnership or to comply with requirements of any other
appropriate taxing authority.
(d)
The Grantee hereby agrees to make an election under Section 83(b) of the Code with respect to the LTIP Units
awarded hereunder, and has delivered with this Agreement a completed, executed copy of the election form attached to this Agreement as
Exhibit B. The
Grantee agrees to file the election (or to permit the Partnership to file such election on the Grantee’s behalf) within thirty (30) days after the
Grant Effective Date of the LTIP Units hereunder with the IRS Service Center at which such Grantee files his or her personal income tax
returns.
(e)
The address set forth on the signature page of this Agreement is the address of the Grantee’s principal
residence, and the Grantee has no present intention of becoming a resident of any country, state or jurisdiction other than the country and state
in which such residence is sited.
The representations of the Grantee as set forth above are true and complete to the best of the information and belief of the Grantee as of the
Date of Agreement and as of the Grant Effective Date. The Grantee shall immediately notify the Partnership upon discovering that any of the
representations or warranties set forth on Exhibit C was false when made or have, as a result of changes in circumstances, become false. In
particular, in the event there are any changes in the foregoing representations between the Date of Agreement and the Grant Effective Date, the
Grantee shall immediately notify the Partnership.
PROLOGIS, INC.
2020 LONG-TERM INCENTIVE PLAN
BONUS EXCHANGE
LTIP UNIT AWARD AGREEMENT
EXHIBIT 10.84
Name of the Grantee: [___________________] (the “Grantee”)
Grant Effective Date: As determined under paragraph E of the Recitals
Date of Agreement:
RECITALS
A.
The Grantee is an employee of Prologis, Inc. (the “Company”) or a “Related Company” as defined in the Prologis, Inc.
2020 Long-Term Incentive Plan (as amended and supplemented from time to time, the “Plan”) and provides services to Prologis, L.P., through
which the Company conducts substantially all of its operations (the “Partnership”). Unless otherwise provided herein, capitalized terms used
in this Bonus Exchange LTIP Unit Award Agreement (the “Agreement”) shall have the meaning specified in the Plan.
B.
Pursuant to the Limited Partnership Agreement of the Partnership (as amended and supplemented from time to time, the
“Partnership Agreement”), the Company, as general partner of the Partnership, hereby conditionally grants to the Grantee a Full Value Award
under the Plan (referred to herein as an “Award”) in the form of, and by causing the Partnership to issue to the Grantee, the number of LTIP
Units (as defined in the Partnership Agreement) determined in accordance with the Grantee’s Bonus Exchange Election (in which the Grantee
made a pre-retirement bonus exchange election) and as determined by the Compensation Committee (the “Committee”) of the Board of
Directors of the Company (the “Award LTIP Units”), having the rights, voting powers, restrictions, limitations as to distributions,
qualifications and terms and conditions of redemption and conversion set forth in this Agreement and in the Partnership Agreement. The
Company will notify the Grantee of the number of Award LTIP Units granted by the Committee following the Grant Effective Date (as
defined below) by sending the Grantee a Bonus Exchange LTIP Unit Award Notice (in substantially the form attached hereto as Exhibit B).
C.
This Award represents the Grantee’s equity award received as part of the Company’s Bonus Exchange program earned in
202[_].
D.
Upon the close of business on the Grant Effective Date, the Grantee shall receive an award of that number of LTIP Units
determined as described in paragraph B and approved by the Committee, subject to the restrictions and conditions set forth herein, in the Plan,
and in the Partnership Agreement.
E.
This Award and the grant of Award LTIP Units pursuant to this Agreement are specifically conditioned on the approval
by the Committee of the Award and the number of Award LTIP Units subject to this Agreement. The “Grant Effective Date” shall be the date
on which this Award and the number of Award LTIP Units is approved by the Committee. Notwithstanding the foregoing or any other
provision of this Agreement, this Agreement shall become effective only upon approval of the Award by the Committee and if the Committee
does not approve this Award within the first calendar quarter of the calendar year following the year in which the Date of Agreement (as set
forth above) occurs (the last date of such calendar quarter, the “Last Approval Date”) this Agreement shall immediately terminate upon the
Last Approval Date without action of any person.. For the avoidance of doubt, if the Grantee’s Termination Date occurs for any reason prior to
the date on which the Grant Effective Date occurs, this Agreement shall immediately terminate upon the Termination Date without action of
any person.
NOW, THEREFORE, the Company, the Partnership and the Grantee agree as follows:
1.
Effectiveness of Award. As of the Grant Effective Date, the Grantee shall be admitted as a partner of the Partnership with
beneficial ownership of the Award LTIP Units by (i) signing and delivering to the Partnership a copy of this Agreement, (ii) signing, as a
Limited Partner, and delivering to the Partnership a counterpart signature page to the Partnership Agreement (attached hereto as Exhibit A),
and (iii) making a Capital Contribution (as defined in the Partnership Agreement) to the Partnership, in cash, in the amount of $0.01 per Award
LTIP Unit (the “Per Unit Contribution”). Upon satisfaction of the foregoing requirements and execution of this Agreement by the Grantee, the
Partnership and the Company, the books and records of the Partnership maintained by the General Partner shall reflect the issuance to the
Grantee of the Award LTIP Units. Thereupon, the Grantee shall have all the rights of a Limited Partner (as defined in the Partnership
Agreement) of the Partnership with respect to a number of LTIP Units equal to the number of Award LTIP Units, subject, however, to the
restrictions and conditions specified in Section 2 below and elsewhere herein. The LTIP Units are uncertificated securities of the Partnership
and upon the Grantee’s request the General Partner shall confirm the number of LTIP Units issued to the Grantee.
2.
Vesting and Forfeiture of Award LTIP Units.
(a)
Subject to Section 11 hereof, and subsection 4.3 of the Plan, the Award LTIP Units will vest as to the number
of Award LTIP Units, and on the dates, set forth in the Bonus Exchange LTIP Unit Award Notice (each such date a “Vesting Date”) provided
that the Grantee’s Termination Date has not occurred as of the applicable Vesting Date; provided, however, that if the Grantee’s Termination
Date occurs by reason of death or Disability, or if the Grantee’s Termination Date occurs (other than termination for Cause) after satisfying the
eligibility requirements for Retirement (as defined below) in any case after the Grant Effective Date, then any unvested Award LTIP Units
shall vest immediately on the Termination Date and the Termination Date shall be the “Vesting Date” for purposes of this Agreement. All
Award LTIP Units that are not vested on or before the Grantee’s Termination Date shall thereupon, and with no further action and at no cost to
the Company, be immediately forfeited by the Grantee and the Grantee shall have no further rights with respect to such Award LTIP Units
(including the right to vest in such Award LTIP Units). For purposes of this Agreement, “Retirement”
2
means the occurrence of the Grantee’s Termination Date after either one of the following conditions are met: (A) the Grantee has attained at
least age 55 and has completed at least fifteen (15) years of service with the Company and the Related Companies (including any predecessors
thereto) or (B) the Grantee has attained at least age 60 and the sum of his or her age and years of service with the Company and the Related
Companies (including any predecessors thereto) equals or exceeds seventy (70).
in a separate written agreement between the Company (or an affiliate of the Company) and the Grantee.
(b)
Notwithstanding the foregoing, the Retirement vesting provisions shall not apply if and to the extent provided
(c)
Notwithstanding anything to the contrary set forth in this Agreement, this Award is subject to the Recoupment
Policy set forth in the Prologis Governance Guidelines as in effect from time to time, any other clawback or recoupment policies that are
adopted by the Company, and the provisions of the Plan relating to recoupment, misconduct and good standing.
Termination Date.
(d)
For purposes of this Award, the Committee shall have the exclusive discretion to determine Grantee’s
3.
Distributions. The Grantee shall be entitled to receive distributions with respect to the Award LTIP Units to the extent
provided for in the Partnership Agreement as follows:
(a)
The Award LTIP Units are hereby designated as regular “LTIP Units.”
(b)
Award LTIP Units is the Grant Effective Date.
The LTIP Unit Distribution Participation Date (as defined in the Partnership Agreement) with respect to the
(c)
All distributions paid with respect to the Award LTIP Units shall be fully vested and non-forfeitable when
paid, whether or not the Award LTIP Units have been earned based on performance or have become vested based on continued employment as
provided in Section 2 hereof.
4.
Rights with Respect to Award LTIP Units. Without duplication with the provisions of Section 4 of the Plan or Section
1.14 of Exhibit K to the Partnership Agreement, if(i) the Company shall at any time be involved in a merger, consolidation, dissolution,
liquidation, reorganization, exchange of shares, sale of all or substantially all of the assets or capital stock of the Company or a transaction
similar thereto, (ii) any stock dividend, stock split, reverse stock split, stock combination, reclassification, recapitalization, or other similar
change in the capital structure of the Company, or any distribution to holders of Stock, other than ordinary cash dividends, shall occur, or (iii)
any other event shall occur which, in each case in the judgment of the Committee, necessitates action by way of adjusting the terms of this
Award, then and in that event, the Committee may take such action, if any, as it determines to be reasonably required to maintain the Grantee’s
rights hereunder so that they are substantially proportionate to the rights existing under this Agreement prior to such event, including, but not
limited to, substitution of other awards under the Plan.
5.
Incorporation of the Plan; Interpretation by Committee. This Agreement is subject in all respects to the terms,
conditions, limitations and definitions contained in the Plan.
3
In the event of any discrepancy or inconsistency between this Agreement and the Plan, the terms and conditions of the Plan shall control. The
Committee may make such rules and regulations and establish such procedures for the administration of this Agreement as it deems
appropriate. Without limiting the generality of the foregoing, the Committee may interpret the Plan and this Agreement, with such
interpretations to be conclusive and binding on all persons and otherwise accorded the maximum deference permitted by law. In the event of
any dispute or disagreement as to interpretation of the Plan or this Agreement or of any rule, regulation or procedure, or as to any question, right
or obligation arising from or related to the Plan or this Agreement, the decision of the Committee shall be final and binding upon all persons.
6.
Restrictions on Transfer.
(a)
Except as otherwise permitted by the Committee, none of the Award LTIP Units granted hereunder nor any of
the common units of the Partnership into which such Award LTIP Units may be converted (the “Award Common Units”) shall be sold,
assigned, transferred, pledged, hypothecated, given away or in any other manner disposed of, or encumbered, whether voluntarily or by
operation of law (each such action a “Transfer”) and right to Redemption (as defined in the Partnership Agreement) may not be exercised until
such Award LTIP Units have vested pursuant to Section 2 hereof; provided, however, that Award LTIP Units may be Transferred prior to such
date in accordance with Section 6.5 of the Plan, so long as the Transferee agrees in writing with the Company and the Partnership to be bound
by all the terms and conditions of this Agreement and the Partnership Agreement and that subsequent Transfers shall be prohibited except
those in accordance with this Section 6.
(b)
The right to Redemption may be exercised with respect to Award Common Units, and Award Common Units
may be Transferred to the Partnership or the Company in connection with the exercise thereof, in accordance with and to the extent otherwise
permitted by the terms of the Partnership Agreement. Notwithstanding the foregoing, without the consent of the General Partner, the right to
Redemption shall not be exercisable with respect to any Award Common Units until two (2) years after the Grant Effective Date; provided
however, that the foregoing restriction shall not apply (i) if the right of Redemption is exercised in connection with a Change in Control or (ii)
in connection with an LTIP Unit Forced Conversion in connection with a Capital Transaction as described in the Partnership Agreement.
(c)
Additionally, all Transfers of Award LTIP Units or Award Common Units must be in compliance with all
applicable securities laws (including, without limitation, the Securities Act (as defined in the Partnership Agreement)) and the applicable terms
and conditions of the Partnership Agreement. In connection with any Transfer of Award LTIP Units or Award Common Units, the Partnership
may require the Grantee to provide an opinion of counsel, satisfactory to the Partnership, that such Transfer is in compliance with all federal
and state securities laws (including, without limitation, the Securities Act).
(d)
Any attempted Transfer of Award LTIP Units or Award Common Units not in accordance with the terms and
conditions of this Section 6 shall be null and void, and the Partnership shall not reflect on its records any change in record ownership of any
Award LTIP Units or Award Common Units as a result of any such Transfer, shall otherwise refuse to
4
recognize any such Transfer and shall not in any way give effect to any such Transfer of any Award LTIP Units or Award Common Units.
operation of law or otherwise, other than by will or the laws of descent and distribution.
(e)
This Agreement is personal to the Grantee, is non-assignable and is not transferable in any manner, by
7.
Legend. The books and records of the Partnership or other documentation evidencing the Award LTIP Units shall bear an
appropriate legend or notation, as determined by the Partnership in its sole discretion, to the effect that such LTIP Units are subject to
restrictions as set forth herein, in the Plan and in the Partnership Agreement.
8.
Tax Matters; Section 83(b) Election. The Grantee hereby agrees to make an election (an “83(b) Election”) to include in
gross income in the year of transfer the unvested Award LTIP Units hereunder pursuant to and in accordance with the requirements of Section
83(b) of the Code substantially in the form attached hereto as Exhibit B and to supply the necessary information in accordance with the
regulations promulgated thereunder. The Grantee shall provide a copy of the Section 83(b) Election to the Company. In no event shall the
Grantee make an 83(b) Election with respect to the Award prior to the Grant Effective Date.
9.
Withholding and Taxes.
(a)
The Grantee acknowledges that, regardless of any action taken by the Company or the Partnership or, if
different, the Grantee’s employer (the “Employer”), the ultimate liability for all income tax, social insurance, payroll tax, fringe benefits tax,
payment on account or other tax-related items related to the Award and legally applicable to the Grantee (“Tax-Related Items”), is and remains
the Grantee’s responsibility and may exceed the amount, if any, actually withheld by the Company or the Employer.
(b)
The Grantee acknowledges and agrees that the Company and/or the Employer (i) make no representations or
undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of this Award, including, but not limited to, the
grant, vesting or settlement of the Award or the subsequent disposition of any LTIP Units acquired pursuant to this Award; and (ii) do not
commit to and are under no obligation to structure the terms of the Award to reduce or eliminate the Grantee’s liability for Tax-Related Items
or achieve any particular tax result. Further, if the Grantee is subject to Tax-Related Items in more than one jurisdiction, the Grantee
acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-
Related Items in more than one jurisdiction.
(c)
Prior to any relevant taxable or tax withholding event, as applicable, the Grantee agrees to make adequate
arrangements satisfactory to the Company and/or the Employer to satisfy any applicable withholding obligations for Tax-Related Items. If
such arrangements are not made by the Grantee by the date specified by the Company and communicated to the Grantee (and in no event less
than 30 days prior to the Vesting Date or if the Vesting Date is the Grant Effective Date, no later than the Grant Effective Date), the Grantee
authorizes the Company or its agent to satisfy any applicable withholding obligations with regard to all Tax-
5
Related Items by deducting such amounts from any cash payments to be made to the Grantee hereunder or withholding in LTIP Units to be
issued hereunder (or, if applicable, any Common Units into which the LTIP Units are converted or shares of Stock issued in redemption of
such Common Units).
(d)
The Company may withhold or account for Tax-Related Items by considering the amount that is required by
law to be withheld or such other amount determined by the Company or an affiliate that is not prohibited by law but in no event more than the
maximum U.S. federal, state, local or foreign taxes, as applicable (including social insurance tax or contributions obligations, if any). In the
event of under-withholding, the Grantee may be required to pay any additional Tax-Related Items directly to the applicable tax authority or to
the Company and/or its designated affiliate. If the obligation for Tax-Related Items is satisfied by withholding in LTIP Units (or other
securities pursuant to paragraph (c)), for tax purposes, the Grantee is deemed to have been issued the full number of vested Award LTIP Units
(or other applicable securities), notwithstanding that a number of the LTIP Units (or other applicable securities) are held back solely for the
purpose of paying the Tax-Related Items.
(e)
Finally, the Grantee agrees to pay to the Company or the Employer, including through withholding from the
Grantee’s wages or other cash compensation paid to the Grantee by the Company and/or the Employer, any amount of Tax-Related Items that
the Company or the Employer may be required to withhold or account for as a result of the Grantee’s participation in the Plan that cannot be
satisfied by the means previously described. The Company may refuse to issue or deliver the LTIP Units issuable upon vesting of the Award
LTIP Units, or the proceeds of the disposition thereof, if the Grantee fails to comply with the Grantee’s obligations in connection with the Tax-
Related Items.
10.
Amendment; Modification. This Agreement may only be modified or amended in a writing signed by the parties
hereto, provided that the Grantee acknowledges that the Plan may be amended or discontinued in accordance with Section 7 of the Plan, and
that this Agreement may be amended or canceled by the Committee, on behalf of the Company and the Partnership, for the purpose of
satisfying changes in law or for any other lawful purpose, so long as no such action shall adversely affect the Grantee’s rights under this
Agreement without the Grantee’s written consent. No promises, assurances, commitments, agreements, undertakings or representations,
whether oral, written, electronic or otherwise, and whether express or implied, with respect to the subject matter hereof, have been made by the
parties which are not set forth expressly in this Agreement. The failure of the Grantee or the Company or the Partnership to insist upon strict
compliance with any provision of this Agreement, or to assert any right the Grantee or the Company or the Partnership, respectively, may have
under this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.
11.
Change in Control.
In the event that a Change in Control occurs prior to the Vesting Date, prior to the date on which any
applicable Award LTIP Units have otherwise been forfeited, and prior to the Grantee’s Termination Date, and either (i) the Grantee’s
Termination Date occurs on or within twenty-four (24) months following the Change in Control due to termination by the
(a)
6
Company or the successor to the Company or a Related Company which is the Grantee’s employer for reasons other than Cause or (ii) the Plan
is terminated by the Company or its successor upon or following a Change in Control without provision for the continuation of this Award to
the extent then unvested and outstanding, then the Award LTIP Units (or to the extent applicable such other award, security or right to
payment into which such Award LTIP Units converted in connection with the Change in Control, as determined by the parties to such Change
in Control) to the extent they have not otherwise cancelled or forfeited, shall immediately vest and the date of the vesting shall be the “Vesting
Date.” Any Award LTIP Units that vest pursuant to this paragraph (a) shall be paid in accordance with the terms and conditions of this
Agreement and the terms and conditions of the Plan.
(b)
For purposes of this Section 11, the Grantee’s Termination Date shall be deemed to have occurred on account
of termination by the Company or its successor (or a Related Company) for reasons other than for Cause if the Grantee terminates employment
after, absent the written consent of the Grantee, (i) a substantial adverse alteration in the nature of the Grantee’s status or responsibilities from
those in effect immediately prior to the Change in Control, or (ii) a material reduction in the Grantee’s annual base salary and target bonus, if
any, as in effect immediately prior to the Change in Control. In any event, if, upon a Change in Control, awards in other shares or securities are
substituted for outstanding Awards pursuant to Section 4 of the Plan (or a successor provision), and immediately following the Change in
Control, the Grantee becomes employed by the entity into which the Company merged, or the purchaser of substantially all of the assets of the
Company, or a successor to such entity or purchaser, the Grantee shall not be treated as having terminated employment for purposes of this
Section 11 until such time as the Grantee ceases to be an employee and/or ceases to provide services to the merged entity or purchaser (or
successor), as applicable.
(c)
Notwithstanding the foregoing, unless otherwise provided in the Plan or by the Company in its discretion, the
Award LTIP Units and the benefits evidenced by this Agreement do not create any entitlement to have the Award LTIP Units or any such
benefits transferred to, or assumed by, another company nor to be exchanged, cashed out or substituted for, in connection with any corporate
transaction affecting the Stock or the equity securities of the Partnership.
12.
Complete Agreement. This Agreement (together with those agreements and documents expressly referred to herein, for
the purposes referred to herein) embody the complete and entire agreement and understanding between the parties with respect to the subject
matter hereof, and supersede any and all prior promises, assurances, commitments, agreements, undertakings or representations, whether oral,
written, electronic or otherwise, and whether express or implied, which may relate to the subject matter hereof in any way.
13.
Investment Representation; Registration. The Grantee hereby makes the covenants, representations and warranties set
forth on Exhibit C attached hereto as of the Date of Agreement and as of the Grant Effective Date. All of such covenants, warranties and
representations shall survive the execution and delivery of this Agreement by the Grantee. The Grantee shall immediately notify the
Partnership upon discovering that any of the representations or warranties set forth on Exhibit C was false when made or have, as a result of
changes in circumstances, become false. The Partnership will have no obligation to register under the
7
Securities Act any of the Award LTIP Units or any other securities issued pursuant to this Agreement or upon conversion or exchange of the
Award LTIP Units into other limited partnership interests of the Partnership or shares of Stock.
14.
No Obligation to Continue Employment or Other Service Relationship. Neither the Company nor any Related
Company is obligated by or as a result of the Plan, or this Agreement to continue to have the Grantee provide services to it or to continue the
Grantee in employment and neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any Subsidiary to
terminate its service relationship with the Grantee or the employment of the Grantee at any time.
15.
No Limit on Other Compensation Arrangements. Nothing contained in this Agreement shall preclude the Company
from adopting or continuing in effect other or additional compensation plans, agreements or arrangements, and any such plans, agreements and
arrangements may be either generally applicable or applicable only in specific cases or to specific persons.
16.
Status of Award LTIP Units under the Plan. The Award LTIP Units are both issued as equity securities of the
Partnership and granted as a “Full Value Award” under the Plan. The Company will have the right at its option, as set forth in the Partnership
Agreement, to issue shares of Stock in exchange for partnership units into which Award LTIP Units may have been converted pursuant to the
Partnership Agreement, subject to certain limitations set forth in the Partnership Agreement, and such Stock, if issued, will be issued under the
Plan. The Grantee acknowledges that the Grantee will have no right to approve or disapprove such election by the Company.
17.
Severability. If any term or provision of this Agreement is or becomes or is deemed to be invalid, illegal or
unenforceable in any jurisdiction or under any applicable law, rule or regulation, then such provision shall be construed or deemed amended to
conform to applicable law (or if such provision cannot be so construed or deemed amended without materially altering the purpose or intent of
this Agreement and the grant of Award LTIP Units hereunder, such provision shall be stricken as to such jurisdiction and the remainder of this
Agreement and the award hereunder shall remain in full force and effect).
18.
Section 409A. If any compensation provided by this Agreement may result in the application of Section 409A of the
Code, the Company shall, in consultation with the Grantee, modify the Agreement in the least restrictive manner necessary in order to, where
applicable, (i) exclude such compensation from the definition of “deferred compensation” within the meaning of such Section 409A or
(ii) comply with the provisions of Section 409A, other applicable provision(s) of the Code and/or any rules, regulations or other regulatory
guidance issued under such statutory provisions and to make such modifications, in each case, without any diminution in the value of the
benefits granted hereby to the Grantee.
Law Governing. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO ANY PRINCIPLES OF CONFLICTS OF LAW WHICH COULD
19.
8
CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF MARYLAND.
20.
Headings. Section, paragraph and other headings and captions are provided solely as a convenience to facilitate
reference. Such headings and captions shall not be deemed in any way material or relevant to the construction, meaning or interpretation of this
Agreement or any term or provision hereof.
21.
Notices. Notices hereunder shall be mailed or delivered to the Partnership at its principal place of business and shall be
mailed or delivered to the Grantee at the address on file with the Partnership or, in either case, at such other address as one party may
subsequently furnish to the other party in writing.
22.
Counterparts. This Agreement may be executed in two or more separate counterparts, each of which shall be an
original, and all of which together shall constitute one and the same agreement.
23.
Successors and Assigns. The rights and obligations created hereunder shall be binding on the Grantee and his heirs and
legal representatives and on the successors and assigns of the Partnership.
24.
Data Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity
grants, the Company and its agents may process any and all personal or professional data, including but not limited to Social Security or other
identification number, home address and telephone number, date of birth and other information that is necessary or desirable for the
administration of the Plan and/or this Agreement.
25.
Electronic Delivery and Acceptance. The Company may, in its sole discretion, decide to deliver any documents related
to the LTIP Units by electronic means or request the Grantee’s consent to participate in the Plan by electronic means. In consideration of
receiving this Award and accepting the benefits hereof, the Grantee consents to receive such documents by electronic delivery and, to the
extent determined by the Company, any participation by the Grantee in the Plan shall be through any on-line or electronic system established
and maintained by the Company or another third party designated by the Company. The Grantee’s signature or acceptance of this Agreement
is not required to make this Agreement enforceable except to the extent required by law. In consideration of accepting the benefits of this
Award, the Grantee agrees to all of the terms and conditions of this Agreement.
[Signature Page Follows]
9
IN WITNESS WHEREOF, the undersigned have caused this Award to be executed on the [__] day of [______], 20_____.
Its General Partner
PROLOGIS, INC.
By:
Name:
Title:
PROLOGIS, L.P.
By: PROLOGIS, INC.,
By:
Name:
Title:
Grantee
Name:
Address:
10
EXHIBIT A
FORM OF LIMITED PARTNER SIGNATURE PAGE
The Grantee, desiring to become one of the within named Limited Partners of Prologis, L.P., hereby becomes a party to the
Thirteenth Amended and Restated Agreement of Limited Partnership of Prologis, L.P., as amended through the date hereof (the “Partnership
Agreement”).
The Grantee constitutes and appoints the General Partner, any Liquidator, and authorized officers and attorneys-in-fact of each, and
each of those acting singly, in each case with full power of substitution, as the Grantee’s true and lawful agent and attorney-in-fact, with full
power and authority in the Grantee’s name, place and stead to carry out all acts described in Section 2.4.A(i) and (ii) of the Partnership
Agreement, such power of attorney to be irrevocable and a power coupled with an interest pursuant to Section 2.4.B of the Partnership
Agreement.
The Grantee agrees that this signature page may be attached to any counterpart of the Partnership Agreement.
Signature Line for Grantee:
Name: _________________
Date: __________________
Address of Grantee:
______________________________
EXHIBIT B
PROLOGIS, INC.
2020 LONG-TERM INCENTIVE PLAN
BONUS EXCHANGE LTIP UNIT AWARD NOTICE
Name of the Grantee: [___________________] (the “Grantee”)
No. of LTIP Units Awarded: [______________]
Grant Effective Date:
Date of Agreement:
The Grantee is a party to a Bonus Exchange LTIP Unit Award agreement dated as of the Date of Agreement set forth above (the “Agreement”)
and such Agreement has not been terminated or otherwise rendered without force and effect.
Pursuant to the Limited Partnership Agreement (as amended and supplemented from time to time, the “Partnership Agreement”) of Prologis,
L.P., Prologis, Inc. (“Prologis”) as general partner of Prologis, L.P. (the “Partnership”) and the Compensation Committee of the Board of
Directors of Prologis pursuant to its authority under the Prologis, Inc. 2020 Long-Term Incentive Plan (as amended and supplemented from
time to time, the “Plan”), has granted to the Grantee a Full Value Award under the Plan in the form of, and by causing the Partnership to issue
to the Grantee, the number of LTIP Units (as defined in the Partnership Agreement) set forth above having the rights, voting powers,
restrictions, limitations as to distributions, qualifications and terms and conditions of redemption and conversion set forth in the Agreement and
in the Partnership Agreement.
Subject to terms of the Agreement and the Plan, the Award LTIP Units will vest as to the number of Award LTIP Units, and on the dates, set
forth below:
Incremental Number
of Award LTIP Units Vested
_____________
_____________
_____________
Vesting Date
________, 20[__]
________, 20[__]
________, 20[__]
This Bonus Exchange LTIP Unit Award Notice forms part of the Agreement as of the Grant Effective Date.
As set forth in the Agreement, the Grantee will make an 83(b) Election, substantially in the form included on the following pages, to include in
gross income in the year of transfer the value of the unvested Award LTIP Units hereunder pursuant to and in accordance with the
requirements of Section 83(b) of the Code.
ELECTION TO INCLUDE IN GROSS INCOME IN YEAR OF
TRANSFER OF PROPERTY PURSUANT TO SECTION 83(B)
OF THE INTERNAL REVENUE CODE
The undersigned hereby makes an election pursuant to Section 83(b) of the Internal Revenue Code of 1986, as amended, and Treasury
Regulations Section 1.83-2 promulgated thereunder to include in gross income as compensation for services the excess (if any) of the fair
market value of the property described below over the amount paid for such property.
1.
The name, address and taxpayer identification number of the undersigned are:
Name:
(the “Taxpayer”)
Address:
Social Security No./Taxpayer Identification No.:
Taxable Year: Calendar Year 20[_____].
2.
3.
4.
5.
6.
7.
Description of property with respect to which the election is being made:
The election is being made with respect to [
“Partnership”).
] LTIP Units in Prologis, L.P. (the
The date on which the LTIP Units were transferred is []. [No earlier than Grant Effective Date]
The taxable year to which this election relates is calendar year 20 [_____].
Nature of restrictions to which the LTIP Units are subject:
(a)
(b)
With limited exceptions, until the LTIP Units vest, the Taxpayer may not transfer in any manner any portion
of the LTIP Units without the consent of the Partnership.
The Taxpayer’s LTIP Units are subject to risk of forfeiture upon termination of the Taxpayer’s service
relationship prior to vesting.
The fair market value at time of transfer (determined without regard to any restrictions other than a nonlapse restriction
as defined in Treasury Regulations Section 1.83-3(h)) of the of the LTIP Units with respect to which this election is
being made was $0.01 per LTIP Unit.
The amount paid by the Taxpayer for the LTIP Units was $0.01 per LTIP Unit.
The amount to include in gross income is $0.
The undersigned taxpayer will file this election with the Internal Revenue Service office with which taxpayer files his or her annual income tax
return not later than 30 days after the date of
transfer of the property. A copy of the election also will be furnished to the person for whom the services were performed. The undersigned is
the person performing the services in connection with which the property was transferred.
Dated: [_______], 20 [__]
Name:
GRANTEE’S COVENANTS, REPRESENTATIONS AND WARRANTIES
EXHIBIT C
The Grantee hereby represents, warrants and covenants as follows:
Commission and has had an opportunity to review the following documents (the “Background Documents”):
(a)
The Grantee has received through access to the Company’s filings with the Security and Exchange
(i)
(ii)
(iii)
(iv)
The latest Annual Report to Stockholders that has been provided to stockholders;
The Company’s Proxy Statement for its most recent Annual Meeting of Stockholders;
The Company’s Report on Form 10-K for the fiscal year most recently ended;
The Company’s Form 10-Q for the most recently ended quarter if one has been filed by the
Company with the Securities and Exchange Commission since the filing of the Form 10-K described in clause (iv) above;
fiscal year most recently ended for which a Form 10-K has been filed by the Company;
(v)
Each of the Company’s Current Report(s) on Form 8-K, if any, filed since the later of the end of the
amended;
(vi)
The Thirteenth Amended and Restated Agreement of Limited Partnership of Prologis, L.P., as then
(vii)
(viii)
The Company’s 2020 Long-Term Incentive Plan; and
The Company’s Articles of Incorporation, as then amended.
The Grantee also acknowledges that in the event the Company may deliver any of the Background Documents and other information
relating to the Company and the Partnership prior to the determination by the Partnership of the suitability of the Grantee as a holder of Award
LTIP Units shall not constitute an offer of Award LTIP Units until such determination of suitability shall be made.
(b)
The Grantee hereby represents and warrants that
(i)
The Grantee either (A) is an “accredited investor” as defined in Rule 501(a) under the Securities Act,
or (B) by reason of the business and financial experience of the Grantee, together with the business and financial experience of those
persons, if any, retained by the Grantee to represent or advise him or her with respect to the grant to him or her of LTIP Units, the
potential conversion of LTIP Units into
common units of the Partnership (“Common Units”) and the potential redemption of such Common Units for shares of Stock
(“Shares”), has such knowledge, sophistication and experience in financial and business matters and in making investment decisions
of this type that the Grantee (I) is capable of evaluating the merits and risks of an investment in the Partnership and potential
investment in the Company and of making an informed investment decision, (II) is capable of protecting his or her own interest or has
engaged representatives or advisors to assist him or her in protecting his or her interests, and (III) is capable of bearing the economic
risk of such investment.
(ii)The Grantee understands that (A) the Grantee is responsible for consulting his or her own tax advisors with
respect to the application of the U.S. federal income tax laws, and the tax laws of any state, local or other taxing jurisdiction to which
the Grantee is or by reason of the award of LTIP Units may become subject, to his or her particular situation; (B) the Grantee has not
received or relied upon business or tax advice from the Company, the Partnership or any of their respective employees, agents,
consultants or advisors, in their capacity as such; (C) the Grantee provides or will provide services to the Partnership on a regular
basis and in such capacity has access to such information, and has such experience of and involvement in the business and operations
of the Partnership, as the Grantee believes to be necessary and appropriate to make an informed decision to accept this Award of
LTIP Units; and (D) an investment in the Partnership and/or the Company involves substantial risks. The Grantee has been given the
opportunity to make a thorough investigation of matters relevant to the LTIP Units and has been furnished with, and has reviewed and
understands, materials relating to the Partnership and the Company and their respective activities (including, but not limited to, the
Background Documents). The Grantee has been afforded the opportunity to obtain any additional information (including any
exhibits to the Background Documents) deemed necessary by the Grantee to verify the accuracy of information conveyed to the
Grantee. The Grantee confirms that all documents, records, and books pertaining to his or her receipt of LTIP Units which were
requested by the Grantee have been made available or delivered to the Grantee. The Grantee has had an opportunity to ask questions
of and receive answers from the Partnership and the Company, or from a person or persons acting on their behalf, concerning the
terms and conditions of the LTIP Units. The Grantee has relied upon, and is making its decision solely upon, the Background
Documents and other written information provided to the Grantee by the Partnership or the Company. The Grantee did not
receive any tax, legal or financial advice from the Partnership or the Company and, to the extent it deemed necessary, has consulted
with its own advisors in connection with its evaluation of the Background Documents and this Agreement and the Grantee’s receipt of
LTIP Units.
(iii)
The LTIP Units to be issued, the Common Units issuable upon conversion of the LTIP Units and
any Shares issued in connection with the redemption of any such Common Units will be acquired for the account of the Grantee for
investment only and not with a current view to, or with any intention of, a distribution or resale thereof, in whole or in part, or the
grant of any participation therein, without prejudice, however, to the Grantee’s right (subject to the terms of the LTIP Units, the Plan
and this Agreement) at all times to sell or otherwise dispose of all or any part of his or her LTIP Units, Common Units or Shares in
compliance with the Securities Act, and applicable
state securities laws, and subject, nevertheless, to the disposition of his or her assets being at all times within his or her control.
(iv)The Grantee acknowledges that (A) neither the LTIP Units to be issued, nor the Common Units issuable upon
conversion of the LTIP Units, have been registered under the Securities Act or state securities laws by reason of a specific exemption
or exemptions from registration under the Securities Act and applicable state securities laws and, if such LTIP Units or Common
Units are represented by certificates, such certificates will bear a legend to such effect, (B) the reliance by the Partnership and the
Company on such exemptions is predicated in part on the accuracy and completeness of the representations and warranties of the
Grantee contained herein, (C) such LTIP Units, or Common Units, therefore, cannot be resold unless registered under the Securities
Act and applicable state securities laws, or unless an exemption from registration is available, (D) there is no public market for such
LTIP Units and Common Units and (E) neither the Partnership nor the Company has any obligation or intention to register such LTIP
Units or the Common Units issuable upon conversion of the LTIP Units under the Securities Act or any state securities laws or to
take any action that would make available any exemption from the registration requirements of such laws, except, that, upon the
redemption of the Common Units for Shares, the Company currently intends to issue such Shares under the Plan and pursuant to a
Registration Statement on Form S-8 under the Securities Act, to the extent that (I) the Grantee is eligible to receive such Shares under
the Plan at the time of such issuance and (II) the Company has filed an effective Form S-8 Registration Statement with the Securities
and Exchange Commission registering the issuance of such Shares. The Grantee hereby acknowledges that because of the
restrictions on transfer or assignment of such LTIP Units acquired hereby and the Common Units issuable upon conversion of the
LTIP Units which are set forth in the Partnership Agreement and this Agreement, the Grantee may have to bear the economic risk of
his or her ownership of the LTIP Units acquired hereby and the Common Units issuable upon conversion of the LTIP Units for an
indefinite period of time.
(v)The Grantee has determined that the LTIP Units are a suitable investment for the Grantee.
(vi)No representations or warranties have been made to the Grantee by the Partnership or the Company, or any
officer, director, shareholder, agent, or affiliate of any of them, and the Grantee has received no information relating to an investment
in the Partnership or the LTIP Units except the information specified in this Paragraph (b).
(c)
So long as the Grantee holds any LTIP Units, the Grantee shall disclose to the Partnership in writing such
information as may be reasonably requested with respect to ownership of LTIP Units as the Partnership may deem reasonably necessary to
ascertain and to establish compliance with provisions of the Code, applicable to the Partnership or to comply with requirements of any other
appropriate taxing authority.
(d)
The Grantee hereby agrees to make an election under Section 83(b) of the Code with respect to the LTIP Units
awarded hereunder, and has delivered with this Agreement a completed, executed copy of the election form attached to this Agreement as
Exhibit B. The
Grantee agrees to file the election (or to permit the Partnership to file such election on the Grantee’s behalf) within thirty (30) days after the
Grant Effective Date of the LTIP Units hereunder with the IRS Service Center at which such Grantee files his or her personal income tax
returns.
(e)
The address set forth on the signature page of this Agreement is the address of the Grantee’s principal
residence, and the Grantee has no present intention of becoming a resident of any country, state or jurisdiction other than the country and state
in which such residence is sited.
The representations of the Grantee as set forth above are true and complete to the best of the information and belief of the Grantee as of the
Date of Agreement and as of the Grant Effective Date. The Grantee shall immediately notify the Partnership upon discovering that any of the
representations or warranties set forth on Exhibit C was false when made or have, as a result of changes in circumstances, become false. In
particular, in the event there are any changes in the foregoing representations between the Date of Agreement and the Grant Effective Date, the
Grantee shall immediately notify the Partnership.
SUBSIDIARIES OF PROLOGIS, INC. AND PROLOGIS L.P.
Prologis, L.P. is a direct subsidiary of Prologis, Inc. Prologis, L.P. and its 379 domestic and 221 foreign subsidiaries are in the real estate operations, development and
strategic capital business. The following is a list of additional subsidiaries of Prologis, L.P. at December 31, 2022:
EXHIBIT 21.1
Name of Entity
Entities that engage in real estate operations, development and strategic capital:
AMB Asia LLC and seventy-two foreign subsidiaries
DCT Industrial TRS Inc. and four subsidiaries
DCT Industrial Value Fund I, Inc. and seventeen subsidiaries
Liberty L.P. and its sixty-two domestic subsidiaries and eighteen foreign subsidiaries are direct subsidiaries of
Liberty Property Trust
Duke Realty Limited Partnership and one hundred seventeen subsidiaries
Duke Realty Construction Inc. and nine subsidiaries
Palmtree Acquisition Corporation and forty-five subsidiaries
PLD-TRS Holding LLC and one subsidiary
PLD GBP Finance LP
PLD International Finance, LP and two domestic and three foreign subsidiaries
PLD International Holding L.P. and one hundred sixty-one foreign subsidiaries
Prologis 2, L.P. and seven subsidiaries
Prologis Brazil Logistics Partners Fund I, L.P. and six foreign subsidiaries
Prologis USLV Operating Partnership, L.P. and one hundred seven subsidiaries
Prologis Logistics Services Incorporated and twenty-nine domestic and thirty-one foreign subsidiaries
Prologis UK Holdings S.A. and seventy-nine foreign subsidiaries
Entities that engage in providing management services:
Liberty Property Trust UK Ltd
Prologis California Inc.
Prologis Management LLC
Prologis de Mexico S.A. de C.V.
Prologis Japan Management LLC and two foreign subsidiaries
Prologis Management Services Sarl and two foreign subsidiaries
Prologis Directorship BV
Prologis Directorship II BV
Prologis Directorship Sarl
Prologis B.V. and eleven foreign subsidiaries
Prologis Management B.V. and one foreign subsidiary
Prologis Norway Management AS
Prologis UK Financial Services Limited
Prologis UK Limited and one foreign subsidiary
PLD Finance Management LLC
PLD Finance Management BV
Other entities:
Solutions Insurance Ltd.
Jurisdiction of
Organization
Delaware
Delaware
Maryland
Pennsylvania
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Delaware
Luxembourg
United Kingdom
Delaware
Delaware
Mexico
Delaware
Luxembourg
Netherlands
Netherlands
Luxembourg
Netherlands
Netherlands
Norway
United Kingdom
United Kingdom
Delaware
Netherlands
Bermuda
Prologis, Inc. has fully and unconditionally guaranteed the following securities identified in the table below:
GUARANTORS AND SUBSIDIARY ISSUERS OF GUARANTEED SECURITIES
Subsidiary Issuer
Prologis, L.P.
Guaranteed Securities
3.000% Notes due 2026
3.875% Notes due 2028
2.250% Notes due 2029
4.375% Notes due 2048
Prologis, L.P. has fully and unconditionally guaranteed the following securities identified in the table below:
Exhibit 22.1
Subsidiary Issuer
Prologis Euro Finance LLC
Prologis Yen Finance LLC
Guaranteed Securities
Floating Rate Notes due 2024
0.250% Notes due 2027
0.375% Notes due 2028
1.000% Notes due 2029
1.875% Notes due 2029
0.625% Notes due 2031
0.500% Notes due 2032
1.500% Notes due 2034
1.000% Notes due 2035
1.000% Notes due 2041
1.500% Notes due 2049
0.652% Notes due 2025
0.589% Notes due 2027
1.003% Notes due 2027
0.448% Notes due 2028
0.972% Notes due 2028
1.323% Notes due 2029
0.850% Notes due 2030
1.077% Notes due 2030
0.564% Notes due 2031
1.003% Notes due 2032
1.222% Notes due 2035
0.885% Notes due 2036
1.903% Notes due 2037
1.470% Notes due 2038
1.134% Notes due 2041
1.600% Notes due 2050
1.550% Notes due 2061
Consent of Independent Registered Public Accounting Firm
EXHIBIT 23.1
The Board of Directors
Prologis, Inc.:
We consent to the incorporation by reference in the registration statements (Nos. 333-267431 and 333-237366 ) on Form S-3, registration statement (No. 333-266200) on
Form S-4, and registration statements (Nos. 333-42015, 333-78779, 333-90042, 333-100214, 333-144489, 333-177378, 333-178955, 333-181529, and 333-238012) on Form
S-8 of our reports dated February 14, 2023, with respect to the consolidated financial statements of Prologis, Inc. and the effectiveness of internal control over financial
reporting.
Denver, Colorado
February 14, 2023
/s/ KPMG LLP
The Partners of Prologis, L.P. and the Board of Directors of Prologis, Inc.
Consent of Independent Registered Public Accounting Firm
We consent to the incorporation by reference in the registration statements (Nos. 333-267431 and 333-237366) on Form S-3, registration statement (No. 333-267174) on
Form S-4 and registration statement (No. 333-100214) on Form S-8 of our report dated February 14, 2023, with respect to the consolidated financial statements of Prologis,
L.P..
EXHIBIT 23.2
Denver, Colorado
February 14, 2023
/s/ KPMG LLP
Consent of Independent Registered Public Accounting Firm
EXHIBIT 23.3
We consent to the incorporation by reference in the registration statements (Nos. 333-267431 and 333-237366) on Form S-3, registration statement (No. 333-
266200) on Form S-4, and registration statements (Nos. 333-42015, 333-78779, 333-90042, 333-100214, 333-144489, 333-177378, 333-178955, 333-181529,
and 333-238012) on Form S-8 of our reports dated February 18, 2022, with respect to the consolidated financial statements and financial statement schedule III
of Duke Realty Corporation and the effectiveness of internal control over financial reporting.
/s/ KPMG LLP
Indianapolis, Indiana
February 14, 2023
Consent of Independent Registered Public Accounting Firm
EXHIBIT 23.4
We consent to the incorporation by reference in the registration statements (Nos. 333-267431 and 333-237366) on Form S-3, registration statement (No. 333-
267174) on Form S-4 and registration statement (No. 333-100214) on Form S-8 of our reports dated February 18, 2022, with respect to the consolidated
financial statements and financial statement schedule III of Duke Realty Limited Partnership and the effectiveness of internal control over financial reporting.
/s/ KPMG LLP
Indianapolis, Indiana
February 14, 2023
EXHIBIT 31.1
I, Hamid R. Moghadam, certify that:
CERTIFICATION
1.
2.
3.
4.
a)
b)
c)
d)
5.
a)
b)
I have reviewed this annual report on Form 10-K of Prologis, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures, (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely
affect the registrant’s ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting.
Dated: February 14, 2023
By:
/s/ Hamid R. Moghadam
Name: Hamid R. Moghadam
Title: Chief Executive Officer
EXHIBIT 31.2
I, Timothy D. Arndt, certify that:
CERTIFICATION
1.
2.
3.
4.
a)
b)
c)
d)
5.
a)
b)
I have reviewed this annual report on Form 10-K of Prologis, Inc.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures, (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely
affect the registrant’s ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting.
Dated: February 14, 2023
By:
/s/ Timothy D. Arndt
Name: Timothy D. Arndt
Title: Chief Financial Officer
EXHIBIT 31.3
I, Hamid R. Moghadam, certify that:
CERTIFICATION
1.
2.
3.
4.
a)
b)
c)
d)
5.
a)
b)
I have reviewed this annual report on Form 10-K of Prologis, L.P.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures, (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely
affect the registrant’s ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting.
Dated: February 14, 2023
By:
/s/ Hamid R. Moghadam
Name: Hamid R. Moghadam
Title: Chief Executive Officer
EXHIBIT 31.4
I, Timothy D. Arndt, certify that:
CERTIFICATION
1.
2.
3.
4.
a)
b)
c)
d)
5.
a)
b)
I have reviewed this annual report on Form 10-K of Prologis, L.P.;
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition,
results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures, (as defined in Exchange Act
Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:
Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s
auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting, which are reasonably likely to adversely
affect the registrant’s ability to record, process, summarize and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting.
Dated: February 14, 2023
By:
/s/ Timothy D. Arndt
Name: Timothy D. Arndt
Title: Chief Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of Prologis, Inc. (the “Company”), hereby certifies, to such officer’s knowledge,
that the Company’s Annual Report on Form 10-K for the annual period ended December 31, 2022 (the “Report”), which accompanies these certifications, fully complies with
the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended and that the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
CERTIFICATION
EXHIBIT 32.1
Dated: February 14, 2023
Dated: February 14, 2023
By:
By:
/s/ Hamid R. Moghadam
Name: Hamid R. Moghadam
Title: Chief Executive Officer
/s/ Timothy D. Arndt
Name: Timothy D. Arndt
Title: Chief Financial Officer
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned officers of Prologis, L.P. (the “Company”), hereby certifies, to such officer’s knowledge,
that the Company’s Annual Report on Form 10-K for the annual period ended December 31, 2022 (the “Report”), which accompanies these certifications, fully complies with
the requirements of Section 13(a) of the Securities Exchange Act of 1934, as amended and that the information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
CERTIFICATION
EXHIBIT 32.2
Dated: February 14, 2023
Dated: February 14, 2023
By:
By:
/s/ Hamid R. Moghadam
Name: Hamid R. Moghadam
Title: Chief Executive Officer
/s/ Timothy D. Arndt
Name: Timothy D. Arndt
Title: Chief Financial Officer
Audited Financial Statements and Schedule of Duke Realty Corporation
(a) The following documents are filed as part of this Exhibit 99.1:
1.
Consolidated Financial Statements
The following Consolidated Financial Statements, together with the Management's Report on Internal Control and the Report of Independent Registered
Public Accounting Firm are listed below:
Exhibit 99.1
Duke Realty Corporation:
Management's Report on Internal Control
Report of Independent Registered Public Accounting Firm
Duke Realty Limited Partnership:
Management's Report on Internal Control
Report of Independent Registered Public Accounting Firm
Duke Realty Corporation:
Consolidated Balance Sheets, December 31, 2021 and 2020
Consolidated Statements of Operations and Comprehensive Income, Years Ended December 31, 2021, 2020 and
2019
Consolidated Statements of Cash Flows, Years Ended December 31, 2021, 2020 and 2019
Consolidated Statements of Changes in Equity, Years Ended December 31, 2021, 2020 and 2019
Duke Realty Limited Partnership:
Consolidated Balance Sheets, December 31, 2021 and 2020
Consolidated Statements of Operations and Comprehensive Income, Years Ended December 31, 2021, 2020 and
2019
Consolidated Statements of Cash Flows, Years Ended December 31, 2021, 2020 and 2019
Consolidated Statements of Changes in Equity, Years Ended December 31, 2021, 2020 and 2019
Duke Realty Corporation and Duke Realty Limited Partnership:
Notes to Consolidated Financial Statements
2.
Consolidated Financial Statement Schedules
Duke Realty Corporation and Duke Realty Limited Partnership:
Schedule III – Real Estate and Accumulated Depreciation
-1-
Management's Report on Internal Control
We, as management of Duke Realty Corporation and its subsidiaries (the "General Partner"), are responsible for establishing and maintaining adequate
internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). Pursuant to the rules and
regulations of the Securities and Exchange Commission, internal control over financial reporting is a process designed by, or under the supervision of,
the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of
directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes
those policies and procedures that:
•
•
•
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of assets of the
company;
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company's
assets that could have a material effect on the financial statements.
Management has evaluated the effectiveness of its internal control over financial reporting as of December 31, 2021 based on the control criteria
established in a report entitled Internal Control – Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on such evaluation, we have concluded that, as of December 31, 2021, our internal control over financial reporting is effective based
on these criteria.
The independent registered public accounting firm of KPMG LLP, as auditors of the General Partner's consolidated financial statements, has also issued
an audit report on the General Partner's internal control over financial reporting.
/s/ James B. Connor
James B. Connor
Chairman and Chief Executive Officer
/s/ Mark A. Denien
Mark A. Denien
Executive Vice President and Chief Financial Officer
-2-
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors
Duke Realty Corporation:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Duke Realty Corporation and subsidiaries (the Company) as of December 31, 2021 and 2020, the related
consolidated statements of operations and comprehensive income, cash flows, and changes in equity for each of the years in the three-year period ended December 31, 2021, and
the related notes and financial statement schedule III - real estate and accumulated depreciation (collectively, the consolidated financial statements). We also have audited the
Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and
2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with U.S. generally accepted
accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based
on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment
of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control. Our responsibility is to express an
opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public
accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about
whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was
maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a
reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material
effect on the financial statements.
-3-
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be
communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements,
taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to
which it relates.
Assessment of certain values assigned to acquired assets and liabilities in certain asset acquisitions
As discussed in Notes 2 and 5 to the consolidated financial statements, the Company acquired approximately $571 million of real estate assets in 2021. For asset
acquisitions, the Company records the purchase price to the tangible and identified intangible assets based on its “as-if vacant” fair value and other valuation techniques.
We identified the assessment of the fair value of land and the below market component of in-place leases in certain asset acquisitions as a critical audit matter. There is a
high degree of subjective auditor judgment in determining the fair value of land and market rents used to determine the below market component of in-place leases.
The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Company’s asset allocation
process, including controls to identify and select publicly available comparable land sales and market rents used to estimate the fair value of land and the below market
component of in-place leases, respectively. We involved valuation professionals with specialized skills and knowledge, who assisted in comparing:
•
•
the Company’s estimated fair value of land to a range of independently developed estimates based on publicly available and comparable land sales: and
the market rents used in the Company’s estimated fair value of the below market component of in-place leases to publicly available market data for similar
properties.
/s/ KPMG LLP
We have served as the Company’s auditor since 1986.
Indianapolis, Indiana
February 18, 2022
-4-
Management's Report on Internal Control
We, as management of Duke Realty Limited Partnership and its subsidiaries (the "Partnership"), are responsible for establishing and maintaining
adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). Pursuant to the
rules and regulations of the Securities and Exchange Commission, internal control over financial reporting is a process designed by, or under the
supervision of the principal executive and principal financial officers, or persons performing similar functions, of Duke Realty Corporation (the "General
Partner"), and effected by the General Partner's board of directors, management and other personnel, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally
accepted in the United States of America and includes those policies and procedures that:
•
•
•
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of assets of the
Partnership;
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with
authorizations of management and directors of the General Partner; and
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Partnership's
assets that could have a material effect on the financial statements.
Management has evaluated the effectiveness of its internal control over financial reporting as of December 31, 2021 based on the control criteria
established in a report entitled Internal Control – Integrated Framework (2013), issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on such evaluation, we have concluded that, as of December 31, 2021, our internal control over financial reporting is effective based
on these criteria.
The independent registered public accounting firm of KPMG LLP, as auditors of the Partnership's consolidated financial statements, has also issued an
audit report on the Partnership's internal control over financial reporting.
/s/ James B. Connor
James B. Connor
Chairman and Chief Executive Officer
of the General Partner
/s/ Mark A. Denien
Mark A. Denien
Executive Vice President and Chief Financial Officer
of the General Partner
-5-
Report of Independent Registered Public Accounting Firm
To the Unitholders of Duke Realty Limited Partnership and the Board of Directors of Duke Realty Corporation:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Duke Realty Limited Partnership and subsidiaries (the Partnership) as of December 31, 2021 and 2020, the
related consolidated statements of operations and comprehensive income, cash flows, and changes in equity for each of the years in the three-year period ended December 31,
2021, and the related notes and financial statement schedule III - real estate and accumulated depreciation (collectively, the consolidated financial statements). We also have
audited the Partnership's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control - Integrated Framework (2013)
issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Partnership as of December 31, 2021
and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with U.S. generally accepted
accounting principles. Also in our opinion, the Partnership maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based
on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Basis for Opinions
The Partnership’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control. Our responsibility is to
express an opinion on the Partnership’s consolidated financial statements and an opinion on the Partnership’s internal control over financial reporting based on our audits. We
are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the
Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about
whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was
maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether
due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of
internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control
based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a
reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those
policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company;
and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material
effect on the financial statements.
-6-
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures
may deteriorate.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be
communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements,
taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to
which it relates.
Assessment of certain values assigned to acquired assets and liabilities in certain asset acquisitions
As discussed in Notes 2 and 5 to the consolidated financial statements, the Partnership acquired approximately $571 million of real estate assets in 2021. For asset
acquisitions, the Partnership records the purchase price to the tangible and identified intangible assets based on its “as-if vacant” fair value and other valuation techniques.
We identified the assessment of the fair value of land and the below market component of in-place leases in certain asset acquisitions as a critical audit matter. There is a
high degree of subjective auditor judgment in determining the fair value of land and market rents used to determine the below market component of in-place leases.
The primary procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Partnership’s asset allocation
process, including controls to identify and select publicly available comparable land sales and market rents used to estimate the fair value of land and the below market
component of in-place leases, respectively. We involved valuation professionals with specialized skills and knowledge, who assisted in comparing:
•
•
the Partnership’s estimated fair value of land to a range of independently developed estimates based on publicly available and comparable land sales: and
the market rents used in the Partnership’s estimated fair value of the below market component of in-place leases to publicly available market data for similar
properties.
/s/ KPMG LLP
We have served as the Partnership’s auditor since 1994.
Indianapolis, Indiana
February 18, 2022
-7-
DUKE REALTY CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
As of December 31,
(in thousands, except per share amounts)
ASSETS
Real estate investments:
Real estate assets
Construction in progress
Investments in and advances to unconsolidated joint ventures
Undeveloped land
Accumulated depreciation
Net real estate investments
Real estate investments and other assets held-for-sale
Cash and cash equivalents
Accounts receivable
Straight-line rent receivable
Receivables on construction contracts, including retentions
Deferred leasing and other costs, net of accumulated amortization of $209,975 and $204,122
Restricted cash held in escrow for like-kind exchange
Other escrow deposits and other assets
LIABILITIES AND EQUITY
Indebtedness:
Secured debt, net of deferred financing costs of $304 and $343
Unsecured debt, net of deferred financing costs of $45,136 and $32,763
Unsecured line of credit
Liabilities related to real estate investments held-for-sale
Construction payables and amounts due subcontractors, including retentions
Accrued real estate taxes
Accrued interest
Other liabilities
Tenant security deposits and prepaid rents
Total liabilities
Shareholders' equity:
Common shares ($0.01 par value); 600,000 shares authorized; 382,513 and 373,258 shares issued and
outstanding, respectively
Additional paid-in capital
Accumulated other comprehensive loss
Distributions in excess of net income
Total shareholders' equity
Noncontrolling interests
Total equity
2021
2020
$9,616,076
744,871
168,336
473,317
11,002,600
(1,684,413)
9,318,187
$8,745,155
695,219
131,898
291,614
9,863,886
(1,659,308)
8,204,578
144,651
67,946
69,752
13,449
172,225
57,258
337,936
—
332,197
$10,445,655
6,309
15,204
153,943
30,583
329,765
47,682
255,384
$9,111,394
$59,418
3,629,864
—
3,689,282
$64,074
3,025,977
295,000
3,385,051
6,278
7,740
107,009
77,464
20,815
339,023
66,823
4,306,694
62,332
76,501
18,363
269,806
57,153
3,876,946
3,825
3,733
6,143,147
(28,011)
(75,210)
6,043,751
95,210
6,138,961
$10,445,655
5,723,326
(31,568)
(532,519)
5,162,972
71,476
5,234,448
$9,111,394
See accompanying Notes to Consolidated Financial Statements.
-8-
DUKE REALTY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income
For the Years Ended December 31,
(in thousands, except per share amounts)
Revenues:
Rental and related revenue
General contractor and service fee revenue
Expenses:
Rental expenses
Real estate taxes
General contractor and other services expenses
Depreciation and amortization
Other operating activities:
Equity in earnings of unconsolidated joint ventures
Gain on sale of properties
Gain on land sales
Other operating expenses
Impairment charges
Non-incremental costs related to successful leases
General and administrative expenses
Operating income
Other income (expenses):
Interest and other income, net
Interest expense
Loss on debt extinguishment
Gain on involuntary conversion
Income from continuing operations before income taxes
Income tax (expense) benefit
Income from continuing operations
Discontinued operations:
Gain on sale of properties
Income from discontinued operations
Net income
Net income attributable to noncontrolling interests
Net income attributable to common shareholders
Basic net income per common share:
Continuing operations attributable to common shareholders
Total
Diluted net income per common share:
Continuing operations attributable to common shareholders
Total
Weighted average number of common shares outstanding
Weighted average number of common shares and potential dilutive securities
Comprehensive income:
Net income
Other comprehensive income (loss):
Unrealized losses on interest rate swap contracts
Amortization of interest rate swap contracts
Total other comprehensive income (loss)
Comprehensive income
2021
2020
2019
$1,025,663
80,260
1,105,923
$929,194
64,004
993,198
$855,833
117,926
973,759
85,782
159,580
68,118
362,148
675,628
32,804
585,685
12,917
(3,607)
—
(13,302)
(69,554)
544,943
975,238
4,451
(84,843)
(17,901)
3,222
880,167
(18,549)
861,618
76,639
149,295
57,976
353,013
636,923
11,944
127,700
10,458
(8,209)
(5,626)
(12,292)
(62,404)
61,571
417,846
1,721
(93,442)
(32,900)
4,312
297,537
5,112
302,649
75,584
129,520
111,566
327,223
643,893
31,406
234,653
7,445
(5,318)
—
(12,402)
(60,889)
194,895
524,761
9,941
(89,756)
(6,320)
2,259
440,885
(8,686)
432,199
—
—
861,618
(8,723)
$852,895
111
111
302,760
(2,845)
$299,915
445
445
432,644
(3,672)
$428,972
$2.25
$2.25
$0.81
$0.81
$1.18
$1.18
$2.25
$2.25
377,673
383,476
$0.80
$0.80
370,057
374,156
$1.18
$1.18
362,234
367,339
$861,618
$302,760
$432,644
—
3,557
3,557
$865,175
—
3,468
3,468
$306,228
(30,893)
533
(30,360)
$402,284
See accompanying Notes to Consolidated Financial Statements.
-9-
DUKE REALTY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Years Ended December 31,
(in thousands)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of buildings and tenant improvements
Amortization of deferred leasing and other costs
Amortization of deferred financing costs
Straight-line rental income and expense, net
Impairment charges
Loss on debt extinguishment
Gain on involuntary conversion
Gain on land and property sales
Third-party construction contracts, net
Other accrued revenues and expenses, net
Equity in earnings (in excess of) less than operating distributions received from
unconsolidated joint ventures
Net cash provided by operating activities
Cash flows from investing activities:
Development of real estate investments
Acquisition of buildings and related intangible assets
Acquisition of land and other real estate assets
Second generation tenant improvements, leasing costs and building improvements
Other deferred leasing costs
Other assets
Proceeds from the repayments of notes receivable from property sales
Proceeds from land and property sales, net
Capital distributions from unconsolidated joint ventures
Capital contributions and advances to unconsolidated joint ventures
Net cash used for investing activities
Cash flows from financing activities:
Proceeds from issuance of common shares, net
Proceeds from unsecured debt
Payments on unsecured debt
Proceeds from secured debt financings
Payments on secured indebtedness including principal amortization
(Repayments) borrowings on line of credit, net
Distributions to common shareholders
Distributions to noncontrolling interests, net
Tax payments on stock-based compensation awards
Change in book cash overdrafts
Cash settlement of interest rate swaps
Other financing activities
Deferred financing costs
Redemption of Limited Partner Units
Net cash provided by financing activities
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of year
Cash, cash equivalents and restricted cash at end of year
Non-cash activities:
Lease liabilities arising from right-of-use assets
Assumption of indebtedness and other liabilities in real estate acquisitions
Non-cash distribution of assets from unconsolidated joint ventures, net
Contribution of properties to unconsolidated joint venture
Conversion of Limited Partner Units to common shares
Issuance of Limited Partner Units for acquisition
2021
2020
2019
$861,618
$302,760
$432,644
304,935
57,213
9,735
(32,081)
—
17,901
(3,222)
(598,602)
(6,269)
48,194
297,158
55,855
9,155
(25,865)
5,626
32,900
(4,312)
(138,269)
(2,511)
29,333
272,422
54,801
6,536
(21,197)
—
6,320
(2,259)
(242,543)
9,254
8,476
(16,996)
642,426
4,606
566,436
(18,556)
505,898
(661,416)
(447,584)
(700,632)
(68,445)
(42,214)
(19,067)
—
1,067,967
61,616
(22,640)
(832,415)
406,576
940,749
(390,900)
—
(4,413)
(295,000)
(394,487)
(4,352)
(5,132)
(12,453)
—
(357)
(14,262)
(39)
225,930
35,941
67,223
$103,164
$19,822
$128,639
$11,124
$74,942
$5,099
$11,603
(573,544)
(383,672)
(248,413)
(45,037)
(41,607)
(4,868)
110,000
336,255
876
(6,211)
(856,221)
187,856
663,123
(546,972)
18,400
(13,457)
295,000
(355,287)
(3,347)
(4,360)
1,941
—
163
(7,483)
—
235,577
(54,208)
121,431
$67,223
$20,883
$39,966
$—
$—
$—
$—
(446,801)
(210,224)
(388,202)
(53,137)
(32,921)
(10,777)
162,550
432,662
26,272
(34,496)
(555,074)
272,761
582,284
(255,812)
—
(45,515)
(30,000)
(318,702)
(2,648)
(6,825)
138
(35,569)
(10,183)
(4,839)
—
145,090
95,914
25,517
$121,431
$40,467
$—
$—
$—
$1,624
$—
-10-
See accompanying Notes to Consolidated Financial Statements.
-11-
Balance at December 31, 2018
Net income
Other comprehensive loss
Issuance of common shares
Contributions from noncontrolling interests
Stock-based compensation plan activity
Conversion of Limited Partner Units
Distributions to common shareholders ($0.88 per share)
Distributions to noncontrolling interests
Balance at December 31, 2019
Net income
Other comprehensive income
Issuance of common shares
Contributions from noncontrolling interests
Stock-based compensation plan activity
Distributions to common shareholders ($0.96 per share)
Distributions to noncontrolling interests
Balance at December 31, 2020
Net income
Other comprehensive income
Issuance of common shares
Stock-based compensation plan activity
Issuance of Limited Partner Units
Conversion of Limited Partner Units
Redemption of Limited Partner Units
Distributions to common shareholders ($1.045 per share)
Distributions to noncontrolling interests
Balance at December 31, 2021
DUKE REALTY CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Equity
(in thousands, except per share data)
Common Shareholders
Accumulated
Other
Comprehensive
Income (Loss)
Additional
Paid-in
Capital
—
—
83
—
7
1
—
—
Common
Stock
$3,589 $5,244,375
—
—
272,678
—
6,787
1,623
—
—
$3,680 $5,525,463
—
—
187,806
—
10,057
—
—
$3,733 $5,723,326
—
—
406,494
8,274
—
5,095
(42)
—
—
$3,825 $6,143,147
—
—
82
6
—
4
—
—
—
—
—
50
—
3
—
—
Distributions
in Excess of
Net Income
$(585,087)
428,972
—
—
—
(1,175)
—
(318,702)
—
$(475,992)
299,915
—
—
—
(1,155)
(355,287)
—
$(532,519)
852,895
—
—
(1,099)
—
—
—
(394,487)
—
$(75,210)
Non-
Controlling
Interests
Total
312
3,468
13,322
187,856
(30,360)
272,761
$55,042 $4,713,243
432,644
3,672
—
—
312
7,703
(1,624)
—
(2,960)
(2,960)
$62,145 $5,080,260
302,760
—
(318,702)
2,845
—
—
200
9,833
—
(3,547)
(3,547)
$71,476 $5,234,448
861,618
18,738
(355,287)
8,723
—
—
12,895
11,564
(5,099)
3
—
(4,352)
(4,352)
$95,210 $6,138,961
(394,487)
406,576
11,564
20,076
3,557
200
(39)
—
$(4,676)
—
(30,360)
—
—
—
—
—
—
$(35,036)
—
3,468
—
—
—
—
—
$(31,568)
—
3,557
—
—
—
—
—
—
—
$(28,011)
See accompanying Notes to Consolidated Financial Statements.
-12-
DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Balance Sheets
As of December 31,
(in thousands)
ASSETS
Real estate investments:
Real estate assets
Construction in progress
Investments in and advances to unconsolidated joint ventures
Undeveloped land
Accumulated depreciation
Net real estate investments
Real estate investments and other assets held-for-sale
Cash and cash equivalents
Accounts receivable
Straight-line rent receivable
Receivables on construction contracts, including retentions
Deferred leasing and other costs, net of accumulated amortization of $209,975 and $204,122
Restricted cash held in escrow for like-kind exchange
Other escrow deposits and other assets
LIABILITIES AND EQUITY
Indebtedness:
Secured debt, net of deferred financing costs of $304 and $343
Unsecured debt, net of deferred financing costs of $45,136 and $32,763
Unsecured line of credit
Liabilities related to real estate investments held-for-sale
Construction payables and amounts due subcontractors, including retentions
Accrued real estate taxes
Accrued interest
Other liabilities
Tenant security deposits and prepaid rents
Total liabilities
Partners’ equity:
Common equity (382,513 and 373,258 General Partner Units issued and outstanding, respectively)
Limited Partners' common equity (3,663 and 3,326 Limited Partner Units issued and outstanding,
respectively)
Accumulated other comprehensive loss
Total partners' equity
Noncontrolling interests
Total equity
2021
2020
$9,616,076
744,871
168,336
473,317
11,002,600
(1,684,413)
9,318,187
$8,745,155
695,219
131,898
291,614
9,863,886
(1,659,308)
8,204,578
144,651
67,946
69,752
13,449
172,225
57,258
337,936
—
332,197
$10,445,655
6,309
15,204
153,943
30,583
329,765
47,682
255,384
$9,111,394
$59,418
3,629,864
—
3,689,282
$64,074
3,025,977
295,000
3,385,051
6,278
7,740
107,009
77,464
20,815
339,023
66,823
4,306,694
62,332
76,501
18,363
269,806
57,153
3,876,946
6,071,762
90,679
5,194,540
66,874
(28,011)
6,134,430
4,531
6,138,961
$10,445,655
(31,568)
5,229,846
4,602
5,234,448
$9,111,394
See accompanying Notes to Consolidated Financial Statements.
-13-
DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Income
For the Years Ended December 31,
(in thousands, except per unit amounts)
Revenues:
Rental and related revenue
General contractor and service fee revenue
Expenses:
Rental expenses
Real estate taxes
General contractor and other services expenses
Depreciation and amortization
Other operating activities:
Equity in earnings of unconsolidated joint ventures
Gain on sale of properties
Gain on land sales
Other operating expenses
Impairment charges
Non-incremental costs related to successful leases
General and administrative expenses
Operating income
Other income (expenses):
Interest and other income, net
Interest expense
Loss on debt extinguishment
Gain on involuntary conversion
Income from continuing operations before income taxes
Income tax (expense) benefit
Income from continuing operations
Discontinued operations:
Gain on sale of properties
Income from discontinued operations
Net income
Net (income) loss attributable to noncontrolling interests
Net income attributable to common unitholders
Basic net income per Common Unit:
Continuing operations attributable to common unitholders
Total
Diluted net income per Common Unit:
Continuing operations attributable to common unitholders
Total
Weighted average number of Common Units outstanding
Weighted average number of Common Units and potential dilutive securities
Comprehensive income:
Net income
Other comprehensive income (loss):
Unrealized losses on interest rate swap contracts
Amortization of interest rate swap contracts
Total other comprehensive income (loss)
Comprehensive income
2021
2020
2019
$1,025,663
80,260
1,105,923
$929,194
64,004
993,198
$855,833
117,926
973,759
85,782
159,580
68,118
362,148
675,628
32,804
585,685
12,917
(3,607)
—
(13,302)
(69,554)
544,943
975,238
4,451
(84,843)
(17,901)
3,222
880,167
(18,549)
861,618
—
—
861,618
(369)
$861,249
$2.25
$2.25
$2.25
$2.25
381,381
383,476
76,639
149,295
57,976
353,013
636,923
11,944
127,700
10,458
(8,209)
(5,626)
(12,292)
(62,404)
61,571
417,846
1,721
(93,442)
(32,900)
4,312
297,537
5,112
302,649
111
111
302,760
(182)
$302,578
$0.81
$0.81
$0.80
$0.80
373,360
374,156
75,584
129,520
111,566
327,223
643,893
31,406
234,653
7,445
(5,318)
—
(12,402)
(60,889)
194,895
524,761
9,941
(89,756)
(6,320)
2,259
440,885
(8,686)
432,199
445
445
432,644
6
$432,650
$1.18
$1.18
$1.18
$1.18
365,352
367,339
$861,618
$302,760
$432,644
—
3,557
3,557
$865,175
—
3,468
3,468
$306,228
(30,893)
533
(30,360)
$402,284
See accompanying Notes to Consolidated Financial Statements.
-14-
DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Years Ended December 31,
(in thousands)
Cash flows from operating activities:
Net income
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of buildings and tenant improvements
Amortization of deferred leasing and other costs
Amortization of deferred financing costs
Straight-line rental income and expense, net
Impairment charges
Loss on debt extinguishment
Gain on involuntary conversion
Gain on land and property sales
Third-party construction contracts, net
Other accrued revenues and expenses, net
Equity in earnings (in excess of) less than operating distributions received from
unconsolidated joint ventures
Net cash provided by operating activities
Cash flows from investing activities:
Development of real estate investments
Acquisition of buildings and related intangible assets
Acquisition of land and other real estate assets
Second generation tenant improvements, leasing costs and building improvements
Other deferred leasing costs
Other assets
Proceeds from the repayments of notes receivable from property sales
Proceeds from land and property sales, net
Capital distributions from unconsolidated joint ventures
Capital contributions and advances to unconsolidated joint ventures
Net cash used for investing activities
Cash flows from financing activities:
Contributions from the General Partner
Proceeds from unsecured debt
Payments on unsecured debt
Proceeds from secured debt financings
Payments on secured indebtedness including principal amortization
(Repayments) borrowings on line of credit, net
Distributions to common unitholders
(Distributions to) contributions from noncontrolling interests, net
Tax payments on stock-based compensation awards
Change in book cash overdrafts
Cash settlement of interest rate swaps
Other financing activities
Deferred financing costs
Redemption of Limited Partner Units
Net cash provided by financing activities
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of year
Cash, cash equivalents and restricted cash at end of year
Non-cash activities:
Lease liabilities arising from right-of-use assets
Assumption of indebtedness and other liabilities in real estate acquisitions
Non-cash distribution of assets from unconsolidated joint ventures, net
Contribution of properties to unconsolidated joint venture
Conversion of Limited Partner Units to common shares of the General Partner
Issuance of Limited Partner Units for acquisition
2021
2020
2019
$861,618
$302,760
$432,644
304,935
57,213
9,735
(32,081)
—
17,901
(3,222)
(598,602)
(6,269)
48,194
297,158
55,855
9,155
(25,865)
5,626
32,900
(4,312)
(138,269)
(2,511)
29,333
272,422
54,801
6,536
(21,197)
—
6,320
(2,259)
(242,543)
9,254
8,476
(16,996)
642,426
4,606
566,436
(18,556)
505,898
(661,416)
(447,584)
(700,632)
(68,445)
(42,214)
(19,067)
—
1,067,967
61,616
(22,640)
(832,415)
406,576
940,749
(390,900)
—
(4,413)
(295,000)
(398,399)
(440)
(5,132)
(12,453)
—
(357)
(14,262)
(39)
225,930
35,941
67,223
$103,164
$19,822
$128,639
$11,124
$74,942
$5,099
$11,603
(573,544)
(383,672)
(248,413)
(45,037)
(41,607)
(4,868)
110,000
336,255
876
(6,211)
(856,221)
187,856
663,123
(546,972)
18,400
(13,457)
295,000
(358,484)
(150)
(4,360)
1,941
—
163
(7,483)
—
235,577
(54,208)
121,431
$67,223
$20,883
$39,966
$—
$—
$—
$—
(446,801)
(210,224)
(388,202)
(53,137)
(32,921)
(10,777)
162,550
432,662
26,272
(34,496)
(555,074)
272,761
582,284
(255,812)
—
(45,515)
(30,000)
(321,469)
119
(6,825)
138
(35,569)
(10,183)
(4,839)
—
145,090
95,914
25,517
$121,431
$40,467
$—
$—
$—
$1,624
$—
-15-
See accompanying Notes to Consolidated Financial Statements.
-16-
DUKE REALTY LIMITED PARTNERSHIP AND SUBSIDIARIES
Consolidated Statements of Changes in Equity
(in thousands, except per unit data)
Common Unitholders
Limited Accumulated
Partners'
General
Partner
Common Common Comprehensive
Other
Total
Partners' Noncontrolling
Income (Loss)
Equity
Interests
Total
Equity
Balance at December 31, 2018
Net income
Other comprehensive loss
Capital contribution from the General Partner
Stock-based compensation plan activity
Contributions from noncontrolling interests
Conversion of Limited Partner Units
Distributions to Partners ($0.88 per Common Unit)
Distributions to noncontrolling interests
Balance at December 31, 2019
Net income
Other comprehensive income
Capital contribution from the General Partner
Stock-based compensation plan activity
Contributions from noncontrolling interests
Distributions to Partners ($0.96 per Common Unit)
Distributions to noncontrolling interests
Balance at December 31, 2020
Net income
Other comprehensive income
Capital contribution from the General Partner
Stock-based compensation plan activity
Issuance of Limited Partner Units
Conversion of Limited Partner Units
Redemption of Limited Partner Units
Distributions to Partners ($1.045 per Common Unit)
Distributions to noncontrolling interests
Balance at December 31, 2021
Equity
$4,662,877
428,972
—
272,761
5,619
—
1,624
(318,702)
—
$5,053,151
299,915
—
187,856
8,905
—
(355,287)
—
$5,194,540
852,895
—
406,576
7,181
—
5,099
(42)
(394,487)
—
$6,071,762
Equity
$50,585
3,678
—
—
7,703
—
(1,624)
(2,767)
—
$57,575
2,663
—
—
9,833
—
(3,197)
—
$66,874
8,354
—
—
12,895
11,564
(5,099)
3
(3,912)
—
$90,679
—
3,468
—
—
—
—
—
—
(30,360)
—
—
—
—
—
—
$(4,676) $4,708,786
432,650
(30,360)
272,761
13,322
—
—
(321,469)
—
$(35,036) $5,075,690
302,578
3,468
187,856
18,738
—
(358,484)
—
$(31,568) $5,229,846
861,249
3,557
406,576
20,076
11,564
—
(39)
(398,399)
—
$(28,011) $6,134,430
—
3,557
—
—
—
—
—
—
—
—
312
13,322
3,468
272,761
187,856
(30,360)
$4,457 $4,713,243
432,644
(6)
—
—
—
312
—
—
(321,469)
(193)
(193)
$4,570 $5,080,260
302,760
182
—
—
—
200
—
(358,484)
(350)
(350)
$4,602 $5,234,448
861,618
369
—
—
—
—
—
—
—
(440)
(440)
$4,531 $6,138,961
(398,399)
406,576
3,557
20,076
11,564
18,738
200
(39)
—
See accompanying Notes to Consolidated Financial Statements.
-17-
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1)
The Company
The General Partner was formed in 1985, and we believe that it qualifies as a REIT under the provisions of the Code. The Partnership was formed on
October 4, 1993, when the General Partner contributed all of its properties and related assets and liabilities, together with the net proceeds from an
offering of additional shares of its common stock, to the Partnership. Simultaneously, the Partnership completed the acquisition of Duke Associates, a
full-service commercial real estate firm operating in the Midwest whose operations began in 1972.
The General Partner is the sole general partner of the Partnership, owning approximately 99.1% of the Common Units at December 31, 2021. The
remaining 0.9% of the Common Units are owned by limited partners. As the sole general partner of the Partnership, the General Partner has full,
exclusive and complete responsibility and discretion in the day-to-day management and control of the Partnership. The General Partner and the
Partnership are operated as one enterprise. The management of the General Partner consists of the same members as the management of the Partnership.
As the sole general partner with control of the Partnership, the General Partner consolidates the Partnership for financial reporting purposes, and the
General Partner does not have any significant assets other than its investment in the Partnership. Therefore, the assets and liabilities of the General
Partner and the Partnership are substantially the same.
Limited partners have the right to redeem their Limited Partner Units, subject to certain restrictions. Pursuant to the Partnership Agreement, the General
Partner is obligated to redeem the Limited Partner Units in shares of its common stock, unless it determines in its reasonable discretion that the issuance
of shares of its common stock could cause it to fail to qualify as a REIT. Each Limited Partner Unit shall be redeemed for one share of the General
Partner's common stock, or, in the event that the issuance of shares could cause the General Partner to fail to qualify as a REIT, cash equal to the fair
market value of one share of the General Partner's common stock at the time of redemption, in each case, subject to certain adjustments described in the
Partnership Agreement. The Limited Partner Units are not required, per the terms of the Partnership Agreement, to be redeemed in registered shares of
the General Partner.
As of December 31, 2021, we owned and operated a portfolio primarily consisting of industrial properties and provided real estate services to third-party
owners, customers and joint ventures.
Substantially all of our Rental Operations (see Note 9) are conducted through the Partnership. We conduct our Service Operations (see Note 9) through
Duke Realty Services, LLC, Duke Realty Services Limited Partnership and Duke Construction Limited Partnership ("DCLP"), which are consolidated
entities that are 100% owned by a combination of the General Partner and the Partnership. DCLP is owned through a taxable REIT subsidiary.
(2)
Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include our accounts and the accounts of our majority-owned or controlled subsidiaries. The equity interests in
these controlled subsidiaries not owned by us are reflected as noncontrolling interests in the consolidated financial statements. All significant
intercompany balances and transactions have been eliminated in the consolidated financial statements. Investments in entities that we do not control, and
variable interest entities ("VIEs") in which we are not the primary beneficiary (to the extent applicable), are not consolidated and are reflected as
investments in unconsolidated joint ventures under the equity method of reporting.
Due to the fact that the Limited Partners do not have kick out rights, or substantive participating rights, the Partnership is a VIE. Because the General
Partner holds majority ownership and exercises control over every aspect
-18-
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
of the Partnership's operations, the General Partner has been determined as the primary beneficiary of the Partnership and, therefore, consolidates the
Partnership.
The assets and liabilities of the General Partner and the Partnership are substantially the same, as the General Partner does not have any significant assets
other than its investment in the Partnership.
Reclassifications
Certain amounts in the accompanying consolidated financial statements have been reclassified to conform to the 2021 consolidated financial statement
presentation.
Real Estate Investments
Rental real property, including land, land improvements, buildings and tenant improvements, are included in real estate investments and are generally
stated at cost. Construction in process and undeveloped land are included in real estate investments and are stated at cost. Real estate investments also
include our equity interests in unconsolidated joint ventures that own and operate rental properties and hold land for development.
Depreciation
Buildings and land improvements are depreciated on the straight-line method over their estimated lives not to exceed 40 and 15 years, respectively, for
properties that we develop, and not to exceed 30 and 10 years, respectively, for acquired properties. Tenant improvement costs are depreciated using the
straight-line method over the shorter of the useful life of the asset or term of the related lease.
Cost Capitalization
Direct and certain indirect costs, including interest, clearly associated with the development, construction or expansion of real estate investments are
capitalized as a cost of the property. Direct costs include all leasing commissions paid to third parties for new leases or lease renewals. We capitalize a
portion of our indirect costs associated with our construction and development efforts. Costs that are incremental to executing a lease are capitalized. In
assessing the amount of direct and indirect costs to be capitalized, allocations are made based on estimates of the actual amount of time spent in each
activity. We do not capitalize any costs attributable to downtime or to unsuccessful projects.
We capitalize interest and direct and indirect project costs during the period when we commence activities necessary to get the property ready for its
intended use, including land entitlement and preconstruction activities, up to the time the property is substantially complete and ready for its intended
use. In addition, we capitalize costs, including real estate taxes, insurance and utilities, that have been allocated to vacant space based on the square
footage of the portion of the building not held available for immediate occupancy during the extended lease-up periods after construction of the building
shell has been completed if costs are being incurred to ready the vacant space for its intended use. If costs and activities incurred to ready the vacant
space cease, then cost capitalization is also discontinued until such activities are resumed. Once necessary work has been completed on a vacant space,
project costs are no longer capitalized.
We cease capitalization of all project costs on extended lease-up periods when significant activities have ceased, which does not exceed the shorter of a
one-year period after the completion of the building shell or when the property attains 90% occupancy.
Impairment
-19-
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We evaluate our real estate assets, with the exception of those that are classified as held-for-sale, for impairment whenever events or changes in
circumstances indicate that their carrying amounts may not be recoverable. If such an evaluation is considered necessary, we compare the carrying
amount of that real estate asset, or asset group, with the expected undiscounted cash flows that are directly associated with, and that are expected to arise
as a direct result of, the use and eventual disposition of that asset, or asset group. Our estimate of the expected future cash flows used in testing for
impairment is based on, among other things, our estimates regarding future market conditions, rental rates, occupancy levels, costs of tenant
improvements, leasing commissions and other tenant concessions, assumptions regarding the residual value of our properties at the end of our
anticipated holding period and the length of our anticipated holding period and is, therefore, subjective by nature. These assumptions could differ
materially from actual results. If our strategy changes or if market conditions otherwise dictate a reduction in the holding period and an earlier sale date,
an impairment loss could be recognized and such loss could be material. To the extent the carrying amount of a real estate asset, or asset group, exceeds
the associated estimate of undiscounted cash flows, an impairment loss is recorded to reduce the carrying value of the asset to its fair value.
The determination of the fair value of real estate assets is also highly subjective, especially in markets where there is a lack of recent comparable
transactions. We primarily utilize the income approach to estimate the fair value of our income producing real estate assets. We utilize marketplace
participant assumptions to estimate the fair value of a real estate asset when an impairment charge is required to be measured. The estimation of future
cash flows, as well as the selection of the discount rate and exit capitalization rate used in applying the income approach, are highly subjective measures
in estimating fair value.
Real estate assets classified as held-for-sale are reported at the lower of their carrying value or their fair value, less estimated costs to sell. Once a
property is designated as held-for-sale, no further depreciation expense is recorded.
Asset Acquisitions
Our acquisitions of properties have been accounted for as asset acquisitions as they have not met the definition of a business. Transaction costs related to
asset acquisitions are capitalized. To the extent that we gain control of real estate properties that are accounted for as asset acquisitions, as opposed to
business combinations, we accumulate the costs of any pre-existing equity interests and consideration paid for additional interest acquired and we do not
remeasure our pre-existing equity interest. Generally contingencies arising from an asset acquisition are only recognized when probable.
We allocate the purchase price of asset acquisitions to tangible and identified intangible assets based on their relative fair values, using all pertinent
information available at the date of acquisition. Capitalized acquisition costs are also included in the total cost basis of acquired properties that are asset
acquisitions. The allocation to tangible assets (buildings, tenant improvements and land) is based upon management's determination of the value of the
property as if it were vacant. This “as-if vacant” value is estimated using an income, or discounted cash flow, approach that relies upon internally
determined assumptions that we believe are consistent with current market conditions for similar properties. The most important assumptions in
determining the allocation of the purchase price to tangible assets are the exit capitalization rate, estimated market rents and the fair value of the
underlying land. The purchase price of real estate assets is also allocated to intangible assets consisting of the above or below market component of in-
place leases and the value of in-place leases.
The value allocable to the above or below market component of an acquired in-place lease is determined based upon the present value (using a discount
rate which reflects the risks associated with the acquired leases) of the difference between (i) the contractual amounts to be received pursuant to the lease
over its remaining term and (ii) management's estimate of the amounts that would be received using fair market rates over the remaining term of the
lease. The amounts allocated to above market leases are included in deferred leasing and other costs in the
-20-
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
balance sheet and below market leases are included in other liabilities in the balance sheet; both are amortized to rental income over the remaining terms
of the respective leases.
Factors considered in determining the value allocable to in-place leases include estimates, during hypothetical expected lease-up periods, of space that is
actually leased at the time of acquisition, of lost rent at market rates, fixed operating costs that will be recovered from tenants and theoretical leasing
commissions required to execute similar leases. These intangible assets are included in deferred leasing and other costs in the balance sheet and are
amortized over the remaining term of the existing lease.
Joint Ventures
We have equity interests in unconsolidated joint ventures that are primarily engaged in the operation and development of industrial real estate properties.
We consolidate joint ventures that are considered to be VIEs where we are the primary beneficiary. We analyze our investments in joint ventures to
determine if the joint venture is considered a VIE and would require consolidation. We (i) evaluate the sufficiency of the total equity investment at risk,
(ii) review the voting rights and decision-making authority of the equity investment holders as a group and whether there are limited partners (or similar
owning entities) that lack substantive participating or kick out rights, guaranteed returns, protection against losses, or capping of residual returns within
the group and (iii) establish whether activities within the venture are on behalf of an investor with disproportionately few voting rights in making this
VIE determination.
To the extent that we own interests in a VIE and we (i) have the power to direct the activities that most significantly impact the economic performance of
the VIE and (ii) have the obligation or rights to absorb losses or receive benefits that could potentially be significant to the VIE, then we would be
determined to be the primary beneficiary and would consolidate the VIE. To the extent that we own interests in a VIE, then at each reporting period, we
re-assess our conclusions as to which, if any, party within the VIE is considered the primary beneficiary. Consolidated joint ventures that are VIE's were
not significant in any period presented in these consolidated financial statements.
To the extent that our joint ventures do not qualify as VIEs, they are consolidated if we control them through majority ownership interests or if we are
the managing entity (general partner or managing member) and our partner does not have substantive participating rights. Control is further
demonstrated by our ability to unilaterally make significant operating decisions, refinance debt and sell the assets of the joint venture without the
consent of the non-managing entity and the inability of the non-managing entity to remove us from our role as the managing entity. Consolidated joint
ventures that are not VIEs are not significant in any period presented in these consolidated financial statements.
We use the equity method of accounting for those joint ventures where we exercise significant influence but do not have control. Under the equity
method of accounting, our investment in each joint venture is included on our balance sheet; however, the assets and liabilities of the joint ventures for
which we use the equity method are not included on our balance sheet.
When we sell or contribute properties to unconsolidated joint ventures and retain a non-controlling ownership interest in such assets, we recognize the
difference between the consideration received and the carrying amount of the asset sold or contributed when its derecognition criteria are met. The
equity method investment we retain in such partial sale transactions is noncash consideration and is measured at fair value. As a result, the accounting
for a partial sale results in the recognition of a full gain or loss.
When circumstances indicate there may have been a reduction in the value of an equity investment, we evaluate whether the loss in value is other than
temporary. If we conclude it is other than temporary, we recognize an impairment charge to reflect the equity investment at fair value.
-21-
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In July 2021, we entered into a 20%-owned unconsolidated joint venture with CBRE Global Investors ("CBREGI") with plans to contribute three
tranches of properties. We contributed two separate tranches of properties to the joint venture during 2021 (see Note 5) while the third tranche was
closed in January 2022 (see Note 14). The joint venture financed the acquisition of these properties with a combination of third party first mortgage loans
and equity contributions from our partner in this joint venture.
There were no unconsolidated joint ventures, in which we have any recognized assets or liabilities or have retained any economic exposure to loss at
December 31, 2021 that met the criteria to be considered VIEs. At December 31, 2021, we guaranteed the repayment of a loan associated with one of our
unconsolidated joint ventures. The maximum guarantee exposure for the loan was approximately $4.8 million.
Cash Equivalents
Investments with an original maturity of three months or less are classified as cash equivalents.
Valuation of Receivables
Our determination of the adequacy of our allowances for tenant receivables includes a binary assessment of whether or not the amounts due under a
tenant’s lease agreement are probable of collection. For such amounts that are deemed probable of collection, revenue continues to be recorded on a
straight-line basis over the lease term. For such amounts that are deemed not probable of collection, revenue is recorded as the lesser of (i) the amount
which would be recognized on a straight-line basis or (ii) cash that has been received from the tenant, with any tenant and deferred rent receivable
balances charged as a direct write-off against rental income in the period of the change in the collectability determination.
Deferred Costs
Deferred Financing Costs
Costs incurred in connection with obtaining financing are deferred and are amortized to interest expense over the term of the related loan. The costs for
issuing debt, other than lines of credit, are presented on the consolidated balance sheets as a direct deduction from the debt's carrying value, while debt
issuance costs related to the Partnership's unsecured line of credit are presented as assets on the consolidated balance sheets, as part of other escrow
deposits and other assets.
Lease Related Costs and Acquired Lease-Related Intangible Assets
Costs that are directly incremental to executing a lease are capitalized.
Acquired lease-related intangible assets consist of above market lease assets and the value allocable to in-place leases. Above market lease assets are
amortized as a reduction to rental income over the remaining terms of the respective leases. In-place lease intangible assets are amortized on a straight-
line basis and included within depreciation and amortization in the consolidated statements of operations and comprehensive income.
Deferred leasing costs and acquired lease-related intangible assets at December 31, 2021 and 2020, excluding amounts classified as held-for-sale, were
as follows (in thousands):
-22-
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred leasing costs
Acquired lease-related intangible assets
Accumulated amortization - deferred leasing costs
Accumulated amortization - acquired lease-related intangible assets
Total
2021
2020
$376,597
171,314
$547,911
$(122,789)
(87,186)
$337,936
$359,646
174,241
$533,887
$(120,756)
(83,366)
$329,765
Amounts recorded related to amortization expense for in-place leases for the years ended December 31, 2021 , 2020 and 2019 totaled $20.4 million,
$19.5 million and $22.0 million, respectively. Charges to rental income related to the amortization of above market lease assets for the years ended
December 31, 2021, 2020 and 2019 totaled $367,000, $639,000 and $703,000, respectively.
The expected future amortization, or charge to rental income, of acquired lease-related intangible assets is summarized in the table below (in thousands):
Year
2022
2023
2024
2025
2026
Thereafter
Noncontrolling Interests
Amortization
Expense
Charge to Rental
Income
$18,168
15,271
11,986
9,789
7,574
20,576
$83,364
$352
353
59
—
—
—
$764
Noncontrolling interests relate to the minority ownership interests in the Partnership and interests in consolidated property partnerships that are not
wholly owned by the General Partner or the Partnership. Noncontrolling interests are subsequently adjusted for additional contributions, distributions to
noncontrolling holders and the noncontrolling holders' proportionate share of the net earnings or losses of each respective entity. We report
noncontrolling interests as a component of total equity.
When a Common Unit of the Partnership is redeemed (Note 1), the change in ownership is treated as an equity transaction by the General Partner and
there is no effect on its earnings or net assets.
Revenue Recognition
Rental and Related Revenue
Rental income from leases to customers is recognized on a straight-line basis. If a lease provides for tenant improvements, we determine whether we or
the tenant is the owner of the tenant improvements. When we are the owner of the tenant improvements, any tenant improvements funded by the tenant
are treated as lease payments which are deferred and amortized as revenue over the lease term. When the tenant is the owner of the tenant improvements,
and we fund such improvements, we record such tenant improvement allowances as lease incentives and amortize as a reduction of revenue over the
lease term.
We record lease termination fees when a tenant has executed a definitive termination agreement with us and the payment of the termination fee is not
subject to any material conditions that must be met or waived before the fee is due to us.
-23-
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
General Contractor and Service Fee Revenue
General contractor and service fee revenues are comprised primarily of construction and development related revenues earned from third parties while
acting in capacity of a developer, as a general contractor or a construction manager. We evaluate the goods and services provided in these construction
arrangements to determine whether we are acting as principal or agent and, accordingly, recognize revenue on a gross or net basis based on that
evaluation. There are other ancillary streams of revenue included in general contractor and service fee revenues (see Note 9), such as management fees
earned from unconsolidated joint ventures in accordance with the terms specific to each arrangement, which are not significant.
Our construction arrangements are typically structured with only one performance obligation, which generally represents an obligation either to construct
a new building or to construct fixtures in an existing building, and these single performance obligations are satisfied over time as construction
progresses. We recognize revenue as we satisfy such performance obligations using the percentage of completion method, which is an input
method. Using this method, profits are recorded based on our estimates of the percentage of completion of individual contracts, commencing when the
work performed under the contracts reaches a point where the final costs can be estimated with reasonable accuracy. The percentage of completion
estimates are based on a comparison of the contract expenditures incurred to the estimated final costs. We believe the percentage of completion method
is a faithful depiction of the transfer of goods and services as changes in job performance and estimated profitability, which result in revisions to costs
and income and are recognized in the period in which the revisions are determined, have not historically been significant. We typically receive regular
progress payments on the majority of our construction arrangements and such arrangements generally have an original duration of less than one year. As
the result of the relatively short duration of our construction arrangements, we apply the optional disclosure exemptions, related to our remaining
performance obligations for our in-process construction projects, for which any future variable consideration is not material. Changes in job
performance, job conditions and estimated profitability may result in revisions to costs and income and are recognized in the period in which the
revisions are determined. To the extent that a fixed-price contract is estimated to result in a loss, the loss is recorded immediately.
Opening and closing balances of construction receivables are presented separately on the Consolidated Balance Sheets. Under billed and over billed
receivables on construction contracts totaled $45.8 million and $1.9 million, respectively, at December 31, 2021 and $16.6 million and $105,000,
respectively, at December 31, 2020. Over billed receivables are included in other liabilities in the Consolidated Balance Sheets. We generally do not
have any contract assets associated with our construction arrangements.
Management fees are based on a percentage of rental receipts of properties managed and are recognized as the rental receipts are collected. Maintenance
fees are based upon established hourly rates and are recognized as the services are performed.
Property Sales
Only disposals representing a strategic shift in operations (for example, a disposal of a major geographic area or a major line of business) should be
presented as discontinued operations in accordance with ASC 205-20, without consideration of significant continuing involvement.
We recognize gains on sales of properties, including partial sales, of non-financial assets (and in-substance non-financial assets) when the recognition
criteria are met. In the typical course of our business, sales of non-financial assets represent only one performance obligation and are recognized when
an enforceable contract is in place, collectability is ensured and control is transferred to the buyer.
Leases
-24-
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As a lessor, our primary business is the development, acquisition, and operation of i ndustrial real estate properties that are held for investment and leased
to tenants. We manage residual risk through investing in properties that we believe will appreciate in value over time. We also evaluate the collectability
of the cash flows of our leases prior to their execution, and on an ongoing basis, to ensure collectability is probable prior to recognizing lease revenues
on an accrual basis.
We only capitalize the incremental costs of signing a lease. Non-incremental costs attributable to successful leases, as presented in the Consolidated
Statements of Operations, represent internal costs allocable to successful leasing activities and exclude estimated costs related to downtime and/or
unsuccessful deals. These costs primarily consist of compensation and other benefits for internal leasing and legal personnel. These costs are not
capitalizable "incremental costs" in the context of the applicable lease accounting rules, but we believe separate presentation on the Consolidated
Statements of Operations provides useful information for purposes of comparability with economically similar success-based costs incurred by other
organizations that outsource their leasing functions, which are generally capitalizable.
We exclude certain lessor costs, such as real estate taxes and insurance, that are paid directly by lessees to third parties, from rental revenue and the
associated rental expense. Lessor costs that are paid by the lessor and reimbursed by the lessee continue to be recorded through rental revenue and the
associated rental expense.
The applicable lease accounting rules allow a practical expedient for lessors to not separate rental recovery revenue related to lease-related services from
the associated rental revenue related to the lease when certain criteria are met. The lease-related services provided to our tenants include property
management, common area maintenance ("CAM") and utilities. We assessed the applicable criteria, concluding that the timing and straight-line pattern
of transfer to the lessees for rental recovery revenue from our lease-related services and revenue from the underlying leases are the same and that lease
classification does not change, and we have consistently applied this practical expedient in all periods presented.
As a lessee, we apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is
effectively a financed purchase of the leased asset. This classification determines whether the lease expense is recognized based on an effective interest
method or on a straight-line basis over the term of the lease. In the capacity of a lessee, we record a right-of-use ("ROU") asset and a lease liability for all
leases with a term of greater than 12 months regardless of classification.
See Note 3 for further disclosure on our leases as a lessor and lessee.
Net Income Per Common Share or Common Unit
Basic net income per common share or Common Unit is computed by dividing net income attributable to common shareholders or common unitholders,
less dividends or distributions on share-based awards expected to vest (referred to as "participating securities" and primarily composed of unvested
restricted stock units), by the weighted average number of common shares or Common Units outstanding for the period.
Diluted net income per common share is computed by dividing the sum of net income attributable to common shareholders and the noncontrolling
interest in earnings allocable to Limited Partner Units (to the extent the Limited Partner Units are dilutive), less dividends or distributions on
participating securities that are anti-dilutive, by the sum of the weighted average number of common shares outstanding and, to the extent they are
dilutive, weighted average number of Limited Partner Units outstanding and any potential dilutive securities for the period. Diluted net income per
Common Unit is computed by dividing the net income attributable to common unitholders, less dividends or distributions on participating securities that
are anti-dilutive, by the sum of the weighted average number of Common Units outstanding and any potential dilutive securities for the period.
-25-
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table reconciles the components of basic and diluted net income per common share or Common Unit (in thousands):
General Partner
Net income attributable to common shareholders
Less: Dividends on participating securities
Basic net income attributable to common shareholders
Add back dividends on dilutive participating securities
Noncontrolling interest in earnings of common unitholders
Diluted net income attributable to common shareholders
Weighted average number of common shares outstanding
Weighted average Limited Partner Units outstanding
Other potential dilutive shares
Weighted average number of common shares and potential dilutive securities
Partnership
Net income attributable to common unitholders
Less: Distributions on participating securities
Basic net income attributable to common unitholders
Add back distributions on dilutive participating securities
Diluted net income attributable to common unitholders
Weighted average number of Common Units outstanding
Other potential dilutive units
Weighted average number of Common Units and potential dilutive securities
2021
2020
2019
$852,895
(1,356)
851,539
1,356
8,354
$861,249
377,673
3,708
2,095
383,476
$861,249
(1,356)
$859,893
1,356
$861,249
381,381
2,095
383,476
$299,915
(1,447)
298,468
—
2,663
$301,131
370,057
3,303
796
374,156
$302,578
(1,447)
$301,131
—
$301,131
373,360
796
374,156
$428,972
(1,487)
427,485
1,487
3,678
$432,650
362,234
3,118
1,987
367,339
$432,650
(1,487)
$431,163
1,487
$432,650
365,352
1,987
367,339
The following table summarizes the data that is excluded from the computation of net income per common share or Common Unit as a result of being
anti-dilutive (in thousands):
General Partner and Partnership
Other potential dilutive shares or units:
Anti-dilutive outstanding potential shares or units under fixed stock option and other
stock-based compensation plans
Anti-dilutive outstanding participating securities
—
—
—
1,621
—
—
2021
2020
2019
Federal Income Taxes
General Partner
The General Partner has elected to be taxed as a REIT under the Code, as amended. To qualify as a REIT, the General Partner must meet a number of
organizational and operational requirements, including a requirement to distribute at least 90% of its REIT taxable income to its shareholders.
Management intends to continue to adhere to these requirements and to maintain the General Partner's REIT status. As a REIT, the General Partner is
entitled to a tax deduction for the dividends it pays to shareholders. Accordingly, the General Partner generally will not be subject to federal income
taxes as long as it currently distributes to shareholders an amount equal to or in excess of its taxable income. The General Partner is, however, generally
subject to federal income taxes on any taxable income that is not currently distributed to its shareholders. If the General Partner fails to qualify as a REIT
in any taxable year, it will be subject to federal income taxes and may not be able to qualify as a REIT for four subsequent taxable years.
REIT qualification reduces, but does not eliminate, the amount of state and local taxes we pay. In addition, our financial statements include the
operations of taxable corporate subsidiaries that are not entitled to a dividends paid deduction and are subject to federal, state and local income taxes. As
a REIT, the General Partner may also be subject to certain federal excise taxes if it engages in certain types of transactions.
-26-
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table reconciles the General Partner's net income to taxable income before the dividends paid deduction, and subject to the 90%
distribution requirement, for the years ended December 31, 2021, 2020 and 2019 (in thousands):
Net income
Book/tax differences
Taxable income before the dividends paid deduction
Less: capital gains
Adjusted taxable income subject to the 90% distribution requirement
2021
$861,618
(467,205)
394,413
(33,652)
$360,761
The General Partner's dividends paid deduction is summarized below (in thousands):
Cash dividends paid
Cash dividends declared and paid in subsequent year that apply to current year
Cash dividends declared and paid in current year that apply to previous year
Dividends paid deduction
Less: Capital gain distributions
Dividends paid deduction attributable to adjusted taxable income subject to the 90%
distribution requirement
2021
$394,487
26,886
(22,960)
398,413
(33,652)
2020
$302,760
63,838
366,598
(62,165)
$304,433
2020
$355,287
22,960
(6,521)
371,726
(62,165)
2019
$432,644
(120,421)
312,223
(62,513)
$249,710
2019
$318,702
6,521
(9,286)
315,937
(62,513)
$364,761
$309,561
$253,424
Our tax return for the year ended December 31, 2021 has not been filed. The taxability information presented for our dividends paid in 2021 is based
upon management’s estimate. Consequently, the taxability of dividends is subject to change. A summary of the designated tax characterization of the
dividends paid by the General Partner for the years ended December 31, 2021, 2020 and 2019 is as follows:
Common Shares
Ordinary income
Capital gains
Partnership
2021
2020
2019
91.5%
8.5%
100.0%
74.6%
25.4%
100.0%
80.7%
19.3%
100.0%
For the Partnership, the allocated share of income and loss other than the operations of its taxable REIT subsidiary is included in the income tax returns
of its partners; accordingly the only federal income taxes included in the accompanying consolidated financial statements of the Partnership are in
connection with its taxable REIT subsidiary.
Income taxes are not material to our operating results or financial position. Our taxable REIT subsidiary has no significant net deferred income tax
positions or unrecognized tax benefit items.
Cash Paid for Income Taxes
We paid federal, state and local income taxes, net of income tax refunds, of $22.2 million and $7.8 million in 2021 and 2019, respectively. We received
income tax refunds, net of federal, state and local income tax payments, of $308,000 in 2020.
Fair Value Measurements
We estimate fair value using available market information and valuation methodologies. Assets and liabilities recorded at fair value on the consolidated
balance sheets are categorized based on the inputs to the valuation techniques as follows:
-27-
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities to which we have access.
Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly.
Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or
liability (other than quoted prices), such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity's own assumptions, as there is little, if
any, related market activity.
In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the
fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value
measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and
considers factors specific to the asset or liability.
Derivative Financial Instruments
We periodically enter into certain interest rate protection agreements to effectively convert or cap floating rate debt to a fixed rate, and to hedge
anticipated future financing transactions, both of which qualify for cash flow hedge accounting treatment. We do not utilize derivative financial
instruments for trading or speculative purposes. The entire effect of any hedging instruments and hedged items are presented in the same income
statement line item.
If a derivative qualifies as a cash flow hedge, the gain or loss on the derivative is recorded in accumulated other comprehensive income or loss and
subsequently reclassified into interest expense in the same period during which the hedged forecasted transaction affects earnings. For all hedging
relationships, we formally document the hedging relationship and its risk-management objective and strategy for undertaking the hedge, the hedging
instrument, the hedged item, the nature of the risk being hedged and how the hedging instrument’s effectiveness in offsetting the hedged risk will be
assessed prospectively and retrospectively.
Use of Estimates
The preparation of the financial statements requires management to make a number of estimates and assumptions that affect the reported amount of
assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the period. Actual results could differ from those estimates.
(3)
Leases
Lease Income
Our leases generally include scheduled rent increases, but do not include variable payments based on indexes. Our rental revenue is primarily based on
fixed, non-cancelable leases. Our variable rental revenue primarily consists of amounts recovered from lessees for property tax, insurance and CAM.
All revenues related to lease and lease-related services are included in, and comprise substantially all of, the caption "Rental and Related Revenue" on
the Consolidated Statements of Operations and Comprehensive Income. The components of Rental and Related Revenue are as follows (in thousands):
-28-
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Rental revenue - fixed payments
Rental revenue - variable payments (1)
Rental and related revenue
Twelve Months Ended December 31,
2021
2020
2019
$764,574
261,089
$1,025,663
$692,753
236,441
$929,194
$645,759
210,074
$855,833
(1) Primarily includes tenant recoveries for real estate taxes, insurance and CAM.
The future minimum rents due to us under non-cancelable operating leases are as follows (in thousands):
Year
2022
2023
2024
2025
2026
Thereafter
Lessee Accounting
December 31, 2021
$784,537
769,715
705,620
630,618
546,431
2,299,185
$5,736,106
As of December 31, 2021, our lease arrangements, where we are the lessee, primarily consisted of office and ground leases. For these lease
arrangements, we recognized ROU assets and the corresponding lease liabilities representing the discounted value of future lease payments required. In
determining these amounts, we elected an available practical expedient that allows us, as a lessee, to not separate lease and non-lease components.
Expenses recognized on these leases for the year ended December 31, 2021 were not material.
Our operating leases primarily include all of our office leases and two ground leases. As of December 31, 2021, a $36.8 million ROU asset associated
with operating leases was included within Other Escrow Deposits and Other Assets and a corresponding lease liability of $41.4 million was included in
Other Liabilities on our Consolidated Balance Sheets. As of December 31, 2020, total ROU assets and liabilities for operating leases were $38.9 million
and $42.9 million, respectively. The following table summarizes the future lease payments (in thousands) to be made under non-cancellable operating
lease arrangements:
Year
2022
2023
2024
2025
2026
Thereafter
Total undiscounted operating lease payments
Less: imputed interest
Present value of operating lease payments
December 31, 2021
$4,617
4,327
3,433
1,759
1,644
81,487
$97,267
55,904
$41,363
The weighted average remaining lease term for our operating lease arrangements, on a combined basis as of December 31, 2021, was 34.3 years. The
weighted average discount rate for our operating lease arrangements as of
-29-
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 was 4.42%. As the d iscount rates implied in our operating lease arrangements were not readily determinable, we utilized our current
credit ratings and credit yields observed from market traded securities with similar credit ratings to form a reasonable basis to establish secured
borrowing rates when determining the present value of future operating lease payments.
Our finance leases include two long term ground leases. As of December 31, 2021, a $37.5 million ROU asset associated with finance leases was
included within Other Escrow Deposits and Other Assets and a corresponding $39.2 million lease liability was included within Other Liabilities on our
Consolidated Balance Sheets. As of December 31, 2020, total finance lease related ROU assets and liabilities were $19.2 million and $19.4 million,
respectively. The future lease payments (in thousands) under our finance leases as of December 31, 2021 for five years and thereafter are as follows:
Year
2022
2023
2024
2025
2026
Thereafter
Total undiscounted finance lease payments
Less: imputed interest
Present value of finance lease payments
December 31, 2021
$1,414
1,714
1,731
1,762
1,787
127,532
$135,940
96,746
$39,194
The ground lease payment obligation for one ground lease is subject to an annual consumer price index increase limited within a minimum 2% and a
maximum 3% increase. The contractual obligations for both leases included above assume the minimum annual increase for the remainder of the lease
term since we cannot predict future adjustments. The weighted average remaining lease term for our finance lease arrangements, on a combined basis as
of December 31, 2021 was 54.2 years. The weighted average discount rate for our finance lease arrangements as of December 31, 2021 was 5.12%. The
lessors' implicit rates in the leases were readily determinable when the leases were commenced.
(4)
Restricted Cash
Restricted cash primarily consists of cash proceeds from dispositions but restricted only for qualifying like-kind exchange transactions and cash held in
escrow related to acquisition and disposition holdbacks. The following table provides a reconciliation of cash, cash equivalents, and restricted cash
reported within the Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Consolidated Statements of Cash Flows (in
thousands):
Cash and cash equivalents
Restricted cash held in escrow for like-kind exchange
Restricted cash included in other escrow deposits and other assets
Total cash, cash equivalents, and restricted cash shown in the Consolidated
Statements of Cash Flows
December 31, 2021
December 31, 2020
$69,752
—
33,412
$6,309
47,682
13,232
$103,164
$67,223
Restricted cash held in escrow for like-kind exchange on the Consolidated Balance Sheets consists of cash received from property dispositions intended
to be used for qualifying like-kind exchange transactions.
-30-
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(5)
Acquisitions and Dispositions
Acquisitions and dispositions for the periods presented were completed in accordance with our strategy to reposition our investment concentration
among the markets in which we operate and to increase our overall investment concentration in Coastal Tier 1 markets. Transaction costs related to asset
acquisitions are capitalized.
Acquisitions
The following table summarizes our real estate acquisition activities for the years ended December 31 (dollars in thousands):
Buildings:
Number of buildings
Cash paid at time of acquisition
Land and other real estate assets:
Acres of land
Cash paid at time of acquisition (1)
2021
2020
2019
8
$447,584
10
$383,672
536
$700,632
250
$248,413
6
$210,224
517
$388,202
(1) Includes the cash acquisition cost of other real estate investments totaling $163.7 million, $13.1 million and $160.4 million for the years ended December 31, 2021, 2020 and 2019,
respectively. See Note 7 for information on other real estate investments.
During 2021, we acquired a container storage lot in Northern New Jersey for a combination of $64.0 million of cash and Limited Partner Units with a
fair value of $11.6 million. This income producing acquisition is included as part of land and other real estate assets above and also included in the table
below.
The following table summarizes amounts recognized for each major class of assets and liabilities (in thousands) for acquisitions of income producing
properties during the years ended December 31:
Real estate assets
Lease related intangible assets
Total acquired assets
Secured debt
Below market lease liabilities
2021
2020
2019
$570,820
11,796
$582,616
—
57,441
$410,481
14,460
$424,941
25,455
14,124
$205,390
11,716
$217,106
—
—
The leases in the acquired properties had a weighted average remaining life at acquisition of approximately 11.0 years, 6.4 years and 6.5 years during
2021, 2020 and 2019, respectively.
Distribution of Joint Venture Properties
As part of a plan of dissolution, we received a non-cash distribution of real estate assets from two 50%-owned unconsolidated joint ventures. These joint
ventures distributed their ownership in two in-service properties and certain parcels of undeveloped land to our partner, who shares control with us over
both joint ventures, while distributing their ownership interest in an in-service property, a property under construction and a parcel of undeveloped land
to us. These distributions were based on values negotiated between us and our partner on an arms-length basis and we determined that these negotiated
values represented the fair value of the assets at their highest and best use, as determined from the perspective of a market participant. Concurrent with
these asset distributions, both we and our partner assumed and repaid all of the joint ventures' unsecured debt, with each party paying off an amount
necessary for the value of the assets distributed, net of debt repayments, to be equal.
-31-
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
As the result of this dissolution transaction , we recognized a gain of $10.6 million (included in equity in earnings in the Consolidated Statements of
Operations), which was related to the properties distributed to our partner. We did not recognize a gain to remeasure our existing ownership interest in
the assets we received in distribution and we recognized such assets at a combined basis of $52.2 million in the Consolidated Balance Sheets (not
included in the 2021 Acquisitions table above). We assumed and immediately repaid unsecured debt of the joint ventures totaling $40.2 million.
Fair Value Measurements
We determine the fair value of the individual components of income producing real estate asset acquisitions primarily through calculating the "as-if
vacant" value of a building, using an income approach, which relies significantly upon internally determined assumptions. We have determined that
these estimates primarily rely on Level 3 inputs, which are unobservable inputs based on our own assumptions. The most significant assumptions used
in calculating the "as-if vacant" value for acquisition activity during 2021 and 2020, respectively, are as follows:
Exit capitalization rate
Annual net rental rate per square foot on acquired buildings
Low
3.50%
$6.62
High
5.00%
$17.16
Annual net rental rate per acre on acquired ground lease
$182,136
$182,136
Low
3.98%
$5.28
$—
High
5.46%
$18.11
$—
2021
2020
The estimate of the portion of the "as-if vacant" value that is allocated to the land underlying the acquired real estate relies on Level 3 inputs and is
primarily determined by reference to recent comparable transactions.
Capitalized acquisition costs were insignificant and the fair value of net assets acquired from unrelated parties during the year ended December 31, 2021
was substantially the same as the cost of acquisition.
Dispositions
Dispositions of buildings (see Note 7 for the number of buildings sold in each year) and undeveloped land generated net cash proceeds of $1.07 billion,
$336.3 million and $432.7 million in 2021, 2020 and 2019, respectively.
On July 22, 2021, we closed on the sale of 14 wholly-owned buildings and 15 acres of undeveloped land, for net cash proceeds of $286.3 million, which
completed our previously announced exit from the St. Louis market. This sale did not represent a strategic shift in operations.
In addition, in July 2021 we entered into a 20%-owned unconsolidated joint venture with plans to contribute three tranches of properties for a total of
nine properties. Pursuant to the terms of the joint venture, on July 27, 2021, we contributed to the joint venture the first tranche of three properties, which
consisted of two buildings and one trailer storage lot in Chicago and Atlanta, for net cash proceeds of $115.7 million. On September 21, 2021, we
contributed the second tranche of three properties, which consisted of two buildings and one trailer storage lot in Baltimore, to the joint venture for net
cash proceeds of $172.9 million. The joint venture financed the acquisition of these properties with a combination of third party first mortgage loans and
equity contributions from our partner. we received $41.1 million for our ownership share of proceeds from such third party first mortgage loans, which
was included in capital distributions from unconsolidated joint ventures in the Consolidated Statements of Cash Flows for the year ended December 31,
2021. We closed on the contribution of the third tranche in January 2022 (see Note 14).
During 2020, we collected the remaining $110.0 million of principal on our outstanding notes receivable, which was related to the sale of our medical
office portfolio during 2017.
-32-
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In September 2019, we completed the sale of 18 non-strategic industrial properties for $217.5 million in proceeds and recorded a gain on sale of $146.3
million. These properties totaled 4.1 million square feet and were located in primarily Midwest markets.
All other dispositions were not individually material.
(6)
Investments in Unconsolidated Joint Ventures
Summarized Financial Information
As of December 31, 2021, we had equity interests in nine unconsolidated joint ventures that primarily own and operate rental properties.
Combined summarized financial information for the unconsolidated joint ventures at December 31, 2021 and 2020, and for the years ended
December 31, 2021, 2020 and 2019, are as follows (in thousands):
Rental revenue
Gains on land and property sales - continuing operations
Net income
2021
$67,142
$64,480
$85,323
2020
$57,952
$2,076
$19,183
2019
$59,905
$24,099
$40,134
Equity in earnings of unconsolidated joint ventures
$32,804
$11,944
$31,406
Land, buildings and tenant improvements, net
Construction in progress
Undeveloped land
Other assets
Indebtedness
Other liabilities
Owners' equity
$625,206
31,745
3,326
106,521
$766,798
$286,430
45,580
332,010
434,788
$766,798
$321,803
23,507
23,653
79,842
$448,805
$155,539
31,946
187,485
261,320
$448,805
Investments in and advances to unconsolidated joint ventures (1)
$168,336
$131,898
(1) Differences between the net investment in our unconsolidated joint ventures and our underlying equity in the net assets of the ventures are primarily a result of basis differences associated
with the sales of properties to joint ventures in which we retained an ownership interest. These adjustments have resulted in an aggregate difference increasing our investments in
unconsolidated joint ventures by $3.8 million and $2.7 million as of December 31, 2021 and 2020, respectively. Differences between historical cost basis and the basis reflected at the joint
venture level (other than loans and impairments) are typically depreciated over the life of the related asset.
-33-
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The scheduled principal payments of long term debt for the unconsolidated joint ventures, at our rat able ownership percentage, for each of the next five
years and thereafter as of December 31, 2021 are as follows (in thousands):
Year
2022
2023
2024
2025
2026
Thereafter
Future Repayments
$121
126
2,525
30,885
47,341
—
$80,998
During 2021, a 20% owned joint venture partially financed acquisitions of properties from us with third party mortgage loans and our proportional share
of such borrowings was $41.5 million with maturity dates in 2026 (see Note 5). In January 2022, this unconsolidated joint venture financed an
additional acquisition of assets from us with $34.0 million, at our proportional share, of third party mortgage loans that mature in 2025 (see Note 14).
(7)
Real Estate Assets, Discontinued Operations and Assets Held-for-Sale
Real Estate Assets
Real estate assets, excluding assets held-for-sale, consisted of the following (in thousands):
December 31,
2021
December 31,
2020
Buildings and tenant improvements
$6,007,848
$5,812,004
Land and improvements
Other real estate investments (1)
Real estate assets
3,435,591
2,883,674
172,637
$9,616,076
49,477
$8,745,155
(1) Includes underutilized in-fill sites, which may have had buildings/structures on site when we acquired them, that are either (i) under lease to a third party and, after the lease ends, are expected to be
redeveloped or will require significant capital expenditures before re-leasing; or (ii) industrial/logistics properties that we intend to re-lease after significant retrofitting and/or environmental remediation is
completed. The leases on these assets are usually short term in nature.
Allocation of Noncontrolling Interests - General Partner
The following table illustrates the General Partner's share of the income attributable to common shareholders from continuing operations and
discontinued operations, reduced by the allocation of income between continuing and discontinued operations to noncontrolling interests, for the years
ended December 31, 2021, 2020 and 2019, respectively (in thousands):
Income from continuing operations attributable to common shareholders
Income from discontinued operations attributable to common shareholders
Net income attributable to common shareholders
Allocation of Noncontrolling Interests - Partnership
2021
$852,895
—
$852,895
2020
$299,805
110
$299,915
2019
$428,531
441
$428,972
Substantially all of the income from discontinued operations for all periods presented in the Partnership's Consolidated Statements of Operations and
Comprehensive Income is attributable to the common unitholders.
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DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Assets Sold or Held-for-Sale
The following table illustrates the number of sold or held-for-sale properties:
Properties sold or classified as held-for-sale
Held-for-Sale at
December 31, 2021
3
Sold in
2021
Sold in
2020
Sold in
2019
30
7
28
Total
68
These held-for-sale properties were wholly-owned and leased by our largest tenant, which was the third tranche of assets to be contributed to a 20%
owned unconsolidated joint venture (see Note 5). The contribution was closed in January 2022 (see Note 14).
At December 31, 2021, three in-service properties were classified as held-for-sale, but did not meet the criteria to be classified within discontinued
operations. The following table illustrates aggregate balance sheet information for properties held-for-sale (in thousands):
Held-for-Sale Properties Included in Continuing Operations
December 31, 2021
December 31, 2020
$67,818
102,867
(36,785)
5,392
5,359
$144,651
$43
6,235
$6,278
$27,954
44,800
(5,976)
936
232
$67,946
$660
7,080
$7,740
Land and improvements
Buildings and tenant improvements
Accumulated depreciation
Deferred leasing and other costs, net
Other assets
Total assets held-for-sale
Accrued expenses
Other liabilities
Total liabilities held-for-sale
(8)
Indebtedness
All debt is issued directly or indirectly by the Partnership. The General Partner does not have any indebtedness, but does guarantee some of the
unsecured debt of the Partnership.
Indebtedness at December 31, 2021 and 2020 consists of the following (in thousands):
Weighted
Average
Interest Rate
2021
Weighted
Average
Interest Rate
2020
4.51%
0.12%
3.00%
—%
4.56%
0.08%
3.35%
1.03%
Maturity Date
2025 to 2035
2025
2024 to 2050
2026
2021
$58,422
1,300
3,675,000
—
$3,734,722
45,440
2020
$62,817
1,600
3,058,740
295,000
$3,418,157
33,106
$3,689,282
$3,385,051
Fixed rate secured debt
Variable rate secured debt
Unsecured debt
Unsecured line of credit
Less: Deferred financing costs
Total indebtedness as reported on
consolidated balance sheets
Secured Debt
At December 31, 2021, our secured debt was collateralized by rental properties with a carrying value of $158.9 million and by a letter of credit in the
amount of $1.3 million.
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DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The fair value of our fixed rate secured debt at December 31, 2021 was $60.0 million. Because our fixed rate secured debt is not actively traded in any
marketplace, we utilized a discounted cash flow methodology to determine its fair value. Accordingly, we calculated fair value by applying an estimate
of the current market rate to discount the debt's remaining contractual cash flows. Our estimate of a current market rate, which is the most significant
input in the discounted cash flow calculation, is intended to replicate debt of similar maturity and loan-to-value relationship. The estimated market rates
for all of our current fixed rate secured debt are between 2.40% and 2.90%, depending on the attributes of the specific loans. The current market rates we
utilized were internally estimated; therefore, we have concluded that our determination of fair value for our fixed rate secured debt was primarily based
upon Level 3 inputs.
In February 2020, a consolidated joint venture obtained an $18.4 million secured loan from a third party financial institution, with a fixed annual interest
rate of 3.41% and a maturity date of March 1, 2035.
In September 2020, we assumed two secured loans in conjunction with a two-building asset acquisition. These assumed loans had a total face value of
$21.5 million and fair value of $25.5 million. These assumed loans had a weighted average remaining term at acquisition of 11.8 years and carried a
weighted average stated interest rate of 4.54%. The difference between the fair value and the face value of loans assumed in connection with the
acquisition is recorded as a premium and amortized to interest expense over the life of the loans assumed. We used an estimated market interest rate of
2.50% in determining the fair values of these loans.
During 2020, we repaid one fixed rate secured loan, totaling $9.0 million, which had a stated interest rate of 5.61%.
Unsecured Debt
At December 31, 2021, all of our unsecured debt bore interest at fixed rates and primarily consisted of unsecured notes that are publicly traded. We
utilized broker estimates in estimating the fair value of our fixed rate unsecured debt. The broker estimates took into account any recent trades within the
same series of our fixed rate unsecured debt, comparisons to recent trades of other series of our fixed rate unsecured debt, trades of fixed rate unsecured
debt from companies with profiles similar to ours, as well as overall economic conditions. We reviewed these broker estimates for reasonableness and
accuracy, considering whether the estimates were based upon market participant assumptions within the principal and most advantageous market and
whether any other observable inputs would be more accurate indicators of fair value than the broker estimates. We concluded that the broker estimates
were representative of fair value. We have determined that our estimation of the fair value of our fixed rate unsecured debt was primarily based upon
Level 3 inputs. The estimated trading values of our fixed rate unsecured debt, depending on the maturity and coupon rates, ranged from 95.00% to
125.00% of face value.
The indentures (and related supplemental indentures) governing our outstanding series of unsecured notes also require us to comply with financial ratios
and other covenants regarding our operations. We were in compliance with all such financial covenants at December 31, 2021.
We took the following actions during 2021 and 2020 as they pertain to our unsecured indebtedness:
•
•
•
In November 2021, the Partnership issued $500.0 million of senior unsecured notes that bear a stated interest rate of 2.25%, have an
effective interest rate of 2.38% and mature on January 15, 2032. Proceeds from this unsecured notes offering will be allocated to finance or
refinance eligible green projects.
In August 2021, we redeemed $250.0 million of 3.63% senior unsecured notes due April 2023. We recognized a loss of $13.9 million in
connection with the redemption of these notes including the prepayment premium and write-off of unamortized deferred financing costs.
In June 2021, we redeemed $83.7 million of 3.88% senior unsecured notes due October 2022. In connection with the early repayment of
these notes, we recognized a loss of $3.9 million, including the prepayment premium and the write-off of unamortized deferred financing
costs.
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DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
•
•
•
In January 2021, the Partnership issued $450.0 million of senior unsecured notes that bear a stated interest rate of 1.75%, ha ve an effective
interest rate of 1.83%, and mature on February 1, 2031. Proceeds from the unsecured notes offering were allocated to finance or refinance
eligible green projects. In addition, in January 2021, the Partnership assumed and immediately repaid $40.2 million of unsecured debt
related to the assets received as part of the dissolution of unconsolidated joint ventures (see Note 5).
In June 2020, we issued $350.0 million of senior unsecured notes, which bear interest at a stated interest rate of 1.75%, have an effective
interest rate of 1.85% and mature on July 1, 2030. Proceeds from the unsecured notes offering were primarily used to repurchase and cancel
$216.3 million of 3.88% senior unsecured notes due 2022 pursuant to a tender offer completed by the Partnership in June 2020. In
connection with the early cancellation of these notes, we recognized a loss of $15.1 million consisting of a repayment premium and the
write-off of unamortized deferred financing costs.
In February 2020, we issued $325.0 million of senior unsecured notes that bear interest at a stated interest rate of 3.05%, have an effective
interest rate of 3.19%, and mature on March 1, 2050. Proceeds from the unsecured notes offering were primarily used to repay the $300.0
million of senior unsecured notes bearing a stated interest rate of 4.38% due 2022. In connection with the early redemption of these notes,
we recognized a loss of $17.8 million consisting of a prepayment premium and the write-off of unamortized deferred financing costs.
Unsecured Line of Credit
Our unsecured line of credit at December 31, 2021 is described as follows (in thousands):
Description
Unsecured Line of Credit – Partnership
Borrowing Capacity Maturity Date
Outstanding Balance at
December 31, 2021
$1,200,000 March 31, 2025
$—
In March 2021, the Partnership amended and restated its existing $1.20 billion unsecured line of credit, which was set to mature in January 2022 with
with options to extend until January 30, 2023. The amended and restated line of credit bears interest at one-month LIBOR plus 0.775% with a reduction
in borrowing costs if certain sustainability linked metrics are achieved each year. In addition, the amended and restated line of credit matures on
March 31, 2025 with options to extend until March 31, 2026. Subject to certain conditions, the terms also include an option to increase the facility by up
to an additional $800.0 million, for a total of up to $2.00 billion. This line of credit provides us with an option to obtain borrowings from financial
institutions that participate in the line at rates that may be lower than the stated interest rate, subject to certain restrictions. The line of credit also allows
automatic transition to an alternative rate of interest in the event that the one-month LIBOR ceases to publish and needs to be replaced. As a result of
amending and restating the unsecured line of credit, we incurred $6.2 million of deferred financing costs through December 31, 2021.
This line of credit contains financial covenants that require us to meet certain financial ratios and defined levels of performance, including those related
to fixed charge coverage, unsecured interest expense coverage and debt-to-asset value (with asset value being defined in the Partnership's unsecured line
of credit agreement). At December 31, 2021, we were in compliance with all financial covenants under this line of credit.
We utilized a discounted cash flow methodology in order to estimate the fair value of outstanding borrowings on our unsecured line of credit. To the
extent that credit spreads have changed since the origination of the line of credit, the net present value of the difference between future contractual
interest payments and future interest payments based on our estimate of a current market rate would represent the difference between the book value and
the fair value. This estimate of a current market rate is based upon the rate, considering current market conditions and our specific credit profile, at which
we estimate we could obtain similar borrowings. As our credit spreads have not
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DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
changed appreciably, we believe that the contractual interest rate and the current market rate on any outstanding borrowings on the line of credit are the
same. The current market rate is internally estimated and therefore is primarily based upon a Level 3 input.
Changes in Fair Value
As all of our fair value debt disclosures relied primarily on Level 3 inputs, the following table summarizes the book value and changes in the fair value
of our debt for the year ended December 31, 2021 (in thousands):
Book
Value at
12/31/2020
$62,817
1,600
Book
Value at
12/31/2021
$58,422
1,300
Fair Value
at
12/31/2020
$65,848
1,600
Issuances and
Assumptions Payments/Payoffs
$(4,113)
(300)
$—
—
Adjustments
to Fair Value
$(1,746)
—
Fair Value
at
12/31/2021
$59,989
1,300
Fixed rate secured debt
Variable rate secured debt
Unsecured debt
3,058,740
3,675,000
3,387,913
Unsecured line of credit
Total
Less: Deferred financing
costs
Total indebtedness as
reported on the
consolidated balance
sheets
295,000
295,000
$3,418,157 $3,734,722 $3,750,361
—
33,106
45,440
$3,385,051 $3,689,282
990,226
—
$990,226
(373,966)
(224,708)
3,779,465
(295,000)
$(673,379)
—
$(226,454)
—
$3,840,754
Scheduled Maturities and Interest Paid
At December 31, 2021, the scheduled amortization and maturities of all indebtedness, excluding fair value adjustment, for the next five years and
thereafter were as follows (in thousands):
Year
2022
2023
2024
2025
2026
Thereafter
Amount
$4,646
4,893
305,155
5,102
378,238
3,033,158
$3,731,192
The amount of interest paid in 2021, 2020 and 2019 was $107.9 million, $104.6 million and $111.8 million, respectively. The amount of interest
capitalized in 2021, 2020 and 2019 was $35.0 million, $24.3 million and $26.5 million, respectively.
(9)
Segment Reporting
Reportable Segments
As of December 31, 2021, we had two reportable operating segments, the first consisting of the ownership and rental of industrial real estate
investments. We continue to increase our investments in quality industrial properties largely based on anticipated geographic trends in supply and
demand for industrial buildings, as well as the real estate needs of our major tenants that operate on a national level. We treat our industrial properties as
a single operating and reportable segment based on our method of internal reporting. Properties not included in this reportable segment, because they
are not industrial properties and do not by themselves meet the quantitative thresholds for separate presentation as a reportable segment, are generally
referred to as non-reportable Rental Operations. Our non-reportable Rental Operations primarily include our remaining office properties and medical
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DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
office property at December 31, 2021. The operations of our industrial properties, as well as our non-reportable Rental Operations, are co llectively
referred to as "Rental Operations."
Our second reportable segment consists of various real estate services such as development, general contracting, construction management, property
management, asset management, maintenance and leasing to third-party property customers, owners and joint ventures, and is collectively referred to as
"Service Operations." The Service Operations segment is identified as one single operating segment because the lowest level of financial results
reviewed by our chief operating decision maker are the results for the Service Operations segment in total. Further, our reportable segments are
managed separately because each segment requires different operating strategies and management expertise.
Revenues by Reportable Segment
The following table shows the revenues for each of the reportable segments, as well as a reconciliation to consolidated revenues, for the years ended
December 31, 2021, 2020 and 2019 (in thousands):
Revenues
Rental Operations:
Industrial
Non-reportable Rental Operations
Service Operations
Total segment revenues
Other revenue
Consolidated revenue
Major Customer
2021
2020
2019
$1,019,342
5,506
80,260
1,105,108
815
$1,105,923
$921,612
5,995
64,004
991,611
1,587
$993,198
$848,806
5,794
117,926
972,526
1,233
$973,759
The table below shows the revenues from a major customer from each of our reportable segments (in thousands):
Revenues
Rental Operations - Industrial
Service Operations
Twelve Months Ended December 31,
2019
2020
2021
$91,495
30,315
$92,986
32,771
$63,805
45,177
We generated more than 10% of our total revenues from this customer for the year ended December 31, 2021. Revenues from Rental Operations related
to leasing properties to this customer. Revenues from Service Operations for this customer pertained primarily to general contractor and fee based
construction management services.
Supplemental Performance Measure
PNOI is the non-GAAP supplemental performance measure that we use to evaluate the performance of, and to allocate resources among, the real estate
investments in the reportable and operating segments that comprise our Rental Operations. PNOI for our Rental Operations segments is comprised of
rental revenues from continuing operations less rental expenses and real estate taxes from continuing operations, along with certain other adjusting items
(collectively referred to as "Rental Operations revenues and expenses excluded from PNOI," as shown in the following table). Additionally, we do not
allocate interest expense, depreciation expense and certain other non-property specific revenues and expenses (collectively referred to as "Non-Segment
Items," as shown in the following table) to our individual operating segments.
-39-
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
We evaluate the performance of our Service Operations reportable segment using net income or loss, as allocated to that segment ("Earnings from
Service Operations").The following table shows a reconciliation of our segment-level measures of profitability to consolidated income from continuing
operations before income taxes, for the years ended December 31, 2021, 2020 and 2019 (in thousands and excluding discontinued operations):
2021
2020
2019
PNOI
Industrial
Non-reportable Rental Operations
PNOI, excluding all sold properties
PNOI from sold properties included in continuing operations
PNOI, continuing operations
$706,956 $611,217 $550,399
3,811
554,210
63,911
618,121
5,020
616,237
49,574
665,811
5,227
712,183
24,834
737,017
Earnings from Service Operations
12,142
6,028
6,360
Rental Operations revenues and expenses excluded from PNOI:
Straight-line rental income and expense, net
Revenues related to lease buyouts
Amortization of lease concessions and above and below market rents
Intercompany rents and other adjusting items
Non-Segment Items:
32,081
323
12,368
(2,704)
25,865
2,863
8,984
(1,473)
21,197
1,611
7,802
1,012
Equity in earnings of unconsolidated joint ventures
Interest expense
Depreciation and amortization expense
Gain on sale of properties
Impairment charges
Interest and other income, net
General and administrative expenses
Gain on land sales
Other operating expenses
Loss on extinguishment of debt
Gain on involuntary conversion
Non-incremental costs related to successful leases
Other non-segment revenues and expenses, net
Income from continuing operations before income taxes
32,804
(84,843)
(362,148)
585,685
—
4,451
(69,554)
12,917
(3,607)
(17,901)
3,222
(13,302)
1,216
31,406
(89,756)
(327,223)
234,653
—
9,941
(60,889)
7,445
(5,318)
(6,320)
2,259
(12,402)
986
$880,167 $297,537 $440,885
11,944
(93,442)
(353,013)
127,700
(5,626)
1,721
(62,404)
10,458
(8,209)
(32,900)
4,312
(12,292)
1,210
The most comparable GAAP measure to PNOI is income from continuing operations before income taxes. PNOI excludes expenses that materially
impact our overall results of operations and, therefore, should not be considered as a substitute for income from continuing operations before income
taxes or any other measures derived in accordance with GAAP. Furthermore, PNOI may not be comparable to other similarly titled measures of other
companies.
Assets by Reportable Segment
The assets for each of the reportable segments at December 31, 2021 and 2020 were as follows (in thousands):
Assets
Rental Operations:
Industrial
Non-reportable Rental Operations
Service Operations
Total segment assets
Non-segment assets
Consolidated assets
December 31,
2021
December 31,
2020
$9,887,635
33,702
182,979
10,104,316
341,339
$10,445,655
$8,709,960
35,292
160,194
8,905,446
205,948
$9,111,394
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DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In addition to revenues and PNOI, we also review our second generation capital expenditures in measuring the performance of our individual Rental
Operations segments. We review these expenditures to determine the costs associated with re-leasing vacant space and maintaining the condition of our
properties. Our second generation capital expenditures are included within "second generation tenant improvements, leasing costs and building
improvements" in our consolidated statements of Cash Flows and are primarily attributable to the industrial segment for the years ended December 31,
2021, 2020 and 2019.
(10)
Employee Benefit Plans
We maintain a 401(k) plan for our eligible employees. We make matching contributions of 50% of the employee salary deferral contributions up to 6%
of eligible compensation and may also make annual discretionary contributions. A discretionary contribution was declared at the end of 2021, 2020 and
2019. The total expense recognized for this plan was $2.6 million, $2.2 million and $2.1 million for the years ended December 31, 2021, 2020 and 2019,
respectively.
Effective January 1, 2022, we have increased the matching contribution of 50% of employee salary deferral contributions to up to 10% of employees'
eligible compensation.
(11)
Shareholders' Equity of the General Partner and Partners' Capital of the Partnership
General Partner
The General Partner has an at the market ("ATM") equity program that allows it to issue and sell its common shares through sales agents from time to
time. Actual sales under the ATM equity program depend on a variety of factors to be determined by the General Partner, including, among others,
market conditions, the trading price of the General Partner’s common stock, determinations by the General Partner of the appropriate sources of funding
and potential uses of funding available.
In February 2021, the General Partner terminated its previous equity distribution agreement for the ATM equity program and entered into a new equity
distribution agreement pursuant to which the General Partner may sell from time to time up to an aggregate offering price of $400.0 million of its
common stock through sales agents or forward sellers. No forward sales were executed in 2021 and substantially all of the capacity of this ATM program
was utilized as of December 31, 2021.
During 2021, the General Partner issued 8.2 million common shares pursuant to its ATM equity programs, generating gross proceeds of $408.3 million
and, after deducting commissions and other costs, net proceeds of $403.6 million. The proceeds from these offerings were contributed to the Partnership
and used to fund development activities.
During 2020, the General Partner issued 4.6 million common shares pursuant to its ATM equity programs, generating gross proceeds of $177.1 million
and, after deducting commissions and other costs, net proceeds of $175.0 million. The proceeds from these offerings were contributed to the Partnership
and used to fund development activities.
During 2019, the General Partner issued 8.0 million common shares pursuant to its ATM equity program, generating gross proceeds of approximately
$266.3 million and, after deducting commissions and other costs, net proceeds of approximately $263.3 million. The proceeds from these offerings were
contributed to the Partnership and used to fund development activities.
Partnership
-41-
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For each common share or preferred share that the General Partner issues, the Partnership issues a corresponding General Partner Unit or Preferred Unit,
as applicable, to the General Partner in exchange for the contribution of the proceeds from the stock issuance. Similarly, when the General Partner
redeems or repurchases common shares or preferred shares, the Partnership redeems the corresponding General Partner Units or Preferred Units held by
the General Partner at the same price.
(12)
Stock Based Compensation
We are authorized to issue up to 9.7 million shares of the General Partner's common stock under our stock-based employee and non-employee
compensation plans. Executive officers may elect to receive Long-Term Incentive Plan Units ("LTIP Units"), which represent an interest in the
Partnership, in lieu of stock based compensation awards denominated in the General Partner's common stock.
Restricted Stock Units ("RSUs")
Under our 2015 Long-Term Incentive Plan, which was approved by the General Partner's shareholders in April 2015, and our 2015 Non-Employee
Directors Compensation Plan (collectively, the "Compensation Plans"), RSUs may be granted to non-employee directors, executive officers and selected
employees. An RSU is economically equivalent to a share of the General Partner's common stock, and RSUs are valued based on the market price of the
General Partner's common stock on the date of the award. Amounts disclosed below include both RSUs and any elected LTIP Units, which have the
same vesting schedule as RSUs.
RSUs granted to employees from 2015 to 2021 vest ratably in most cases over a three-year period and are payable in shares of our common stock with a
new share of such common stock issued upon each RSU's vesting. RSUs granted to existing non-employee directors vest 100% over one year and have
contractual lives of one year.
To the extent that a recipient of an RSU grant is not determined to be retirement eligible, as defined by the Compensation Plans, we recognize expense
on a straight-line basis over the vesting period. Expense is recognized immediately at the date of grant to the extent a recipient is retirement eligible and
expense is accelerated to the extent that a participant will become retirement eligible prior to the end of the contractual life of granted RSUs.
The following table summarizes transactions for our unvested RSUs, excluding dividend equivalents, for 2021:
Restricted Stock Units
December 31, 2020
Granted in 2021
Vested in 2021
Forfeited in 2021
December 31, 2021
Weighted
Average
Grant-Date
Fair Value
$32.98
$42.15
$31.66
$37.47
$38.49
Number of
RSUs
678,803
322,227
(368,428)
(41,760)
590,842
Compensation cost recognized for RSUs totaled $12.5 million, $12.1 million and $11.0 million for the years ended December 31, 2021, 2020 and 2019,
respectively.
As of December 31, 2021, there was $6.3 million of total unrecognized compensation expense related to nonvested RSUs granted under the Plan, which
is expected to be recognized over a weighted average period of 1.7 years.
The total intrinsic value (which is equal to the value of a share of the General Partner's common stock on the date of vesting) of RSUs vested during the
years ended December 31, 2021, 2020 and 2019 was $11.7 million, $15.4 million and $17.7 million, respectively.
-42-
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The weighted average grant-date fair value of RSUs granted during 2020 and 2019 was $37.28 and $29.98, respectively.
The weighted average grant-date fair value of nonvested RSUs as of December 31, 2019 was $27.73.
Performance-Based Awards
A portion of the annual stock-based compensation awards granted to our executive officers annually include performance conditions, measured over a
three-year performance period, based on pre-established goals for growth in a defined adjusted funds from operations (“AFFO”) metric. These
performance-based awards disclosed below include awards denominated in both common shares of the General Partner or LTIP Units. The total number
of instruments issued at the end of each performance period may be earned in a range from 0% to 200% of the target value of the award depending on
our AFFO performance relative to the pre-established goals.
To the extent that a recipient of these performance-based awards is not determined to be retirement eligible, as defined by the Compensation Plans, we
recognize expense on a straight-line basis over the performance period based on the most likely payout percentage at each reporting period for each
grant to the extent that a payout is determined to be probable. Expense is recognized immediately at the date of grant, based on the most likely payout
percentage to the extent that a payout is determined to be probable, when a recipient is retirement eligible, and expense is accelerated to the extent that a
participant will become retirement eligible prior to the end of the performance period of an award.
Details on the unvested amounts of these annual grants by performance period are as follows:
Performance-Based Awards
Unvested awards at December 31, 2020
Above target performance adjustment
Vested in 2021
Granted in 2021
Unvested awards at December 31, 2021
Unvested
Weighted
Average
Grant Date
Fair Value
$33.58
$29.98
$29.98
$42.07
$39.62
Unvested
Awards
Outstanding
207,712
105,416
(210,832)
97,527
199,823
A summary of vested performance-based awards that are denominated in LTIP units is as follows:
Vested Awards at December 31, 2020
Vested in 2021
Completed holding period in 2021
Vested Awards at December 31, 2021
Vested LTIP
Awards
Outstanding
322,569
148,518
(142,324)
328,763
Compensation cost recognized for these performance-based awards totaled $8.5 million, $7.8 million and $6.2 million for the years ended December 31,
2021, 2020 and 2019, respectively.
As of December 31, 2021, there was $760,000 of total unrecognized compensation expense related to nonvested performance-based awards, which is
expected to be recognized over a weighted average period of 1.5 years.
The weighted average grant-date fair value, per instrument, for these performance-based awards granted during 2020 and 2019 was $37.29 and $29.98.
-43-
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The weighted average grant-date fair value of these nonvested performance-based awards as of December 31, 2019 was $27.50.
Commitments and Contingencies
(13)
Legal
We are subject to various legal proceedings and claims that arise in the ordinary course of business. In the opinion of management, the amount of any
ultimate liability with respect to these actions is not expected to materially affect our consolidated financial statements or results of operations.
Environmental
We generally perform environmental site assessments at properties we are considering acquiring. The properties, particularly land parcels, we acquire
may have been subject to adverse environmental conditions as a result of previous owners’ operations, which require remediation prior to development of
land by the applicable environmental laws or regulations.
At the time of acquisition, we establish a liability for the costs associated with environmental remediation when such obligation has been incurred and
can be reasonably estimated. Subsequently we adjust the liability as appropriate when additional information becomes available. We record such
environmental liabilities in other liabilities on the Consolidated Balance Sheets. We purchase various environmental insurance policies to mitigate our
exposure to environmental liabilities. As of December 31, 2021, we are not aware of any environmental liabilities that would have a material adverse
effect on our consolidated financial condition, results of operations or cash flows.
Off-Balance Sheet Liabilities
The Partnership has guaranteed the repayment of $18.5 million of economic development bonds issued by various municipalities in connection with
certain commercial developments. We may be required to make payments under our guarantees to the extent that incremental taxes from specified
developments are not sufficient to pay the bond debt service. Management does not believe that it is probable that we will be required to make any
significant payments in satisfaction of these guarantees.
The Partnership also has guaranteed the repayment of a loan associated with one of our unconsolidated joint ventures. At December 31, 2021, the
maximum guarantee exposure for the loan was approximately $4.8 million.
(14)
Subsequent Events
Declaration of Dividends/Distributions
The General Partner's board of directors declared the following dividends/distributions at its regularly scheduled board meeting held on January 26,
2022:
Class of stock/units
Common
Property Dispositions
Quarterly
Amount per Share
or Unit
$0.28
Record Date
February 16, 2022
Payment Date
February 28, 2022
-44-
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In January 2022, we contributed three buildings to an unconsolidated joint venture. The joint venture financed the acquisition of these properties with a
combination of third party first mortgage loans and equity contributions from our partner and we received approximately $289.7 million of net cash
proceeds, including our share of the proceeds from the joint venture's first mortgage loans.
Debt Extinguishment
On January 14, 2022, we provided notice of redemption to the holders of our $300.0 million of 3.75% unsecured notes, which are scheduled to mature in
December 2024. This redemption occurred on February 13, 2022 and resulted in a loss on debt extinguishment of approximately $22.0 million, which is
comprised of the prepayment premium and the write-off of unamortized deferred financing costs.
-45-
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable)
Initial Cost
Schedule III
Gross Book Value at 12/31/2021
Land/Land Imp Bldgs/TI
Total
(1)
Accum.
Depr. (2)
Year
Constructed/Renovated
Year
Acquired
Cost Capitalized
Subsequent to
Development or
Acquisition
Name
Atlanta, Georgia
Airport Distribution 3781
Asset Type Encumbrances Land Buildings
Industrial
—
4,064
11,383
320
4,064
11,703
15,767
3,683
2002
Aurora, Illinois
Meridian Business 880
4220 Meridian Parkway
Butterfield 2805
Butterfield 4000
Butterfield 2850
Butterfield 4200
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Austell, Georgia
Hartman Business 7545
240 The Bluffs
Industrial
Industrial
—
—
—
—
—
—
963
970
9,185
3,132
11,317
5,777
4,625
3,512
10,795
12,639
18,305
13,108
—
—
2,640
6,138
21,471
15,447
1,467
102
5,847
70
130
68
20
3,086
963
970
9,272
3,132
11,317
5,967
6,092
3,614
16,555
12,709
18,435
12,986
7,055
4,584
25,827
15,841
29,752
18,953
3,376
1,544
11,623
3,870
6,561
3,493
2,640
6,138
21,491
18,533
24,131
24,671
8,725
2,314
2000
2004
2008
2016
2016
2016
2008
2018
Avenel, New Jersey
Paddock 1
Baltimore, Maryland
Chesapeake Commerce
5901
Chesapeake Commerce
5003
Chesapeake Commerce
1500
Chesapeake Commerce
5900
Chesapeake Commerce
6000
Batavia, Ohio
S Afton Industrial Park
3001
Bloomingdale, Georgia
Morgan Business Center
400
Bolingbrook, Illinois
250 East Old Chicago
Road
Crossroads 2
Crossroads 375
Crossroads Parkway 370
Crossroads Parkway 605
Crossroads Parkway 335
Boynton Beach, Florida
Gateway Center 1103
Gateway Center 3602
Gateway Center 3402
Industrial
—
20,861
15,408
91
20,861
15,499
36,360
1,644
2020
Industrial
Industrial
Industrial
Industrial
Industrial
—
3,345
1,355
—
6,488
7,087
—
8,289
10,109
—
5,567
6,100
—
2,418
10,369
3,855
5,767
108
876
362
3,365
5,190
8,555
3,834
6,546
12,796
19,342
6,739
8,333
10,173
18,506
4,326
5,567
6,976
12,543
2,373
2,418
10,731
13,149
835
2008
2008
2016
2017
2020
Industrial
—
5,729
20,717
—
5,729
20,717
26,446
2,881
2019
2019
Industrial
—
18,385
44,455
539
18,385
44,994
63,379
9,004
2017
2017
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
—
—
—
—
—
—
—
—
—
1,229
1,134
1,064
2,409
3,656
2,574
3,701
1,738
2,063
4,038
5,434
4,371
4,236
7,587
8,342
5,300
4,584
3,218
253
1,407
497
912
3,550
1,032
1,712
265
471
-46-
1,229
1,134
1,064
2,409
3,656
2,574
3,702
1,739
2,064
4,291
6,841
4,868
5,148
11,137
9,374
5,520
7,975
5,932
7,557
14,793
11,948
7,011
4,848
3,688
10,713
6,587
5,752
1,723
2,375
1,848
2,383
3,970
3,533
2,920
1,789
1,485
2005
1998
2000
1989
1998
1997
2002
2002
2002
2005
2010
2010
2011
2011
2012
2010
2010
2010
2014
2000
2004
2008
2016
2016
2016
2012
2018
2020
2008
2008
2016
2017
2020
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable)
Initial Cost
Schedule III
Gross Book Value at 12/31/2021
Name
Gateway Center 2055
Gateway Center 2045
Gateway Center 2035
Gateway Center 2025
Gateway Center 1926
Asset Type Encumbrances Land Buildings
2,583
Industrial
1,541
Industrial
1,304
Industrial
2,658
Industrial
9,900
Industrial
1,560
1,073
1,073
1,560
4,143
—
—
—
—
—
Land/Land Imp Bldgs/TI
2,758
1,560
2,376
1,073
2,003
1,073
2,803
1,560
11,357
4,144
175
835
699
145
1,458
Total
(1)
4,318
3,449
3,076
4,363
15,501
Accum.
Depr. (2)
1,036
922
772
1,048
4,653
Year
Constructed/Renovated
2000
2000
2000
2000
2004
Year
Acquired
2010
2010
2010
2010
2010
Cost Capitalized
Subsequent to
Development or
Acquisition
Braselton, Georgia
Braselton Business 920
625 Braselton Pkwy
1350 Braselton Parkway
Industrial
Industrial
Industrial
Brentwood, Tennessee
Brentwood South
Business 7104
Brentwood South
Business 7106
Brentwood South
Business 7108
Industrial
Industrial
Industrial
Brooklyn Park, Minnesota
7300 Northland Drive
Crosstown North 9201
Crosstown North 8400
Crosstown North 9100
Crosstown North 9200
Crosstown North 7601
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
—
—
—
1,365
4,355
8,227
7,713
21,010
8,856
—
1,065
4,410
—
1,065
1,844
—
848
3,233
—
—
—
—
—
—
700
835
2,079
1,079
1,222
2,998
5,289
4,433
4,926
3,743
2,674
7,472
4,921
5,726
2,158
2,084
1,974
1,392
862
1,501
3,044
999
2,690
885
1,529
5,417
8,227
12,470
25,674
11,014
13,999
31,091
19,241
7,001
11,360
8,839
1,065
6,494
7,559
3,469
1,065
3,818
4,883
2,100
848
4,625
5,473
2,650
703
1,121
2,233
1,166
1,256
2,998
6,148
5,648
7,816
4,655
5,330
8,357
6,851
6,769
10,049
5,821
6,586
11,355
3,398
3,168
4,003
2,591
2,262
3,366
2001
2006
2008
1987
1987
1989
1999
1998
1999
2000
2005
2005
Buena Park, California
6280 Artesia Boulevard
Carol Stream, Illinois
Carol Stream 815
Carol Stream 640
Carol Stream 370
250 Kehoe Boulevard
Carol Stream 720
Industrial
—
28,582
5,010
871
28,582
5,881
34,463
1,253
2005
Industrial
Industrial
Industrial
Industrial
Industrial
—
—
—
—
—
3,037
876
1,319
1,715
3,362
11,210
3,200
5,960
7,552
17,759
1,849
495
1,053
136
1,020
3,037
876
1,332
1,715
4,083
13,059
3,695
7,000
7,688
18,058
16,096
4,571
8,332
9,403
22,141
6,008
1,534
2,561
2,843
6,592
2004
1999
2002
2008
1999
Carson, California
20915 S Wilmington Ave
Industrial
—
24,350
7,934
545
24,350
8,479
32,829
346
1996
Carteret, New Jersey
900 Federal Blvd.
Chino, California
13799 Monte Vista
Cincinnati, Ohio
Industrial
—
2,088
24,712
36
2,088
24,748
26,836
4,503
2017
Industrial
—
14,046
8,236
2,252
14,046
10,488
24,534
6,983
2013
-47-
2001
2005
2008
1999
1999
1999
1998
1999
1999
2000
2005
2005
2017
2003
2010
2010
2011
2011
2020
2017
2013
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable)
Initial Cost
Schedule III
Gross Book Value at 12/31/2021
Name
Kenwood Commons 8230 Office
Kenwood Commons 8280 Office
World Park 5389
World Park 5232
World Park 5399
World Park 5265
Asset Type Encumbrances Land Buildings
35
275
5,550
5,074
5,251
11,569
Industrial
Industrial
Industrial
Industrial
638
638
963
1,078
739
2,118
663
637
—
—
—
—
Land/Land Imp Bldgs/TI
2,495
638
2,334
638
7,014
963
5,893
1,077
6,146
740
16,049
2,118
2,460
2,059
1,464
818
896
4,480
Total
(1)
3,133
2,972
7,977
6,970
6,886
18,167
Accum.
Depr. (2)
769
1,241
2,616
2,139
2,605
5,889
Year
Constructed/Renovated
1986
1986
1994
1997
1998
2015
Year
Acquired
1993
1993
2010
2010
2010
2010
Cost Capitalized
Subsequent to
Development or
Acquisition
City of Industry, California
825 Ajax Ave
14508 Nelson Ave
Industrial
Industrial
College Park, Georgia
2929 Roosevelt Highway
Industrial
College Station, Texas
Baylor College Station
MOB
Medical
Office
Columbus, Ohio
RGLP Intermodal North
9224
Industrial
RGLP Intermodal S 9799 Industrial
Coppell, Texas
Freeport X
Point West 400
Point West 240
Point West 120
Corona, California
1283 Sherborn Street
Industrial
Industrial
Industrial
Industrial
—
—
38,930
26,162
27,627
25,210
8,133
950
38,930
26,162
35,760
26,160
74,690
52,322
6,546
1,147
2017
2010
—
9,419
17,205
65
9,419
17,270
26,689
1,696
2020
2017
2020
2020
—
5,551
33,770
5,293
5,551
39,063
44,614
17,731
2013
2013
—
—
1,550
13,065
19,873
44,159
—
—
—
—
2,145
10,181
6,785
3,267
12,784
12,803
11,700
8,695
985
239
3,624
9,041
6,299
147
1,550
13,065
20,858
44,398
22,408
57,463
4,100
6,695
2,145
10,475
7,519
3,267
16,408
21,550
17,265
8,842
18,553
32,025
24,784
12,109
7,325
14,092
10,965
4,058
2016
2018
2004
2008
2008
2015
Industrial
—
7,231
13,575
428
7,231
14,003
21,234
4,690
2005
Cranbury, New Jersey
311 Half Acre Road
315 Half Acre Road
Industrial
Industrial
—
—
6,600
14,100
14,106
29,188
317
6,998
6,600
14,100
14,423
36,186
21,023
50,286
4,886
10,481
2004
2004
Cypress, California
6450 Katella Ave
Industrial
—
85,984
2,517
—
85,984
2,517
88,501
204
2021
Davenport, Florida
Park 27 Distribution 210
Park 27 Distribution 220
Industrial
Industrial
Davie, Florida
Westport Business Park
2555
Westport Business Park
2501
Industrial
Industrial
—
—
1,143
4,374
5,052
5,066
600
5,850
1,198
4,502
5,597
10,788
6,795
15,290
2,698
6,664
—
1,040
—
943
951
629
69
239
-48-
1,040
1,020
2,060
943
868
1,811
366
401
2003
2007
1991
1991
2016
2018
2004
2008
2008
2015
2011
2013
2013
2021
2003
2007
2011
2011
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable)
Initial Cost
Asset Type Encumbrances Land Buildings
Schedule III
Gross Book Value at 12/31/2021
Land/Land Imp Bldgs/TI
Total
(1)
Accum.
Depr. (2)
Year
Constructed/Renovated
Year
Acquired
Cost Capitalized
Subsequent to
Development or
Acquisition
Name
Westport Business Park
2525
Deer Park, Texas
801 Seaco Court
Industrial
—
2,048
5,774
1,472
2,048
7,246
9,294
2,725
1991
Industrial
—
2,331
4,673
627
2,331
5,300
7,631
2,240
2006
Des Moines, Washington
21202 24th Ave South
21402 24th Ave South
Industrial
Industrial
Duluth, Georgia
Sugarloaf 2775
Sugarloaf 3079
Sugarloaf 2855
Sugarloaf 6655
2625 Pinemeadow Court
2660 Pinemeadow Court
2450 Satellite Boulevard
DuPont, Washington
2700 Center Drive
2800 Center Drive
2900 Center Drive
2980 Center Drive
Center Drive trailer lot
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Grounds
Durham, North Carolina
Centerpoint Raleigh 1805 Industrial
Centerpoint Raleigh 1757 Industrial
Eagan, Minnesota
Apollo 920
Apollo 940
Apollo 950
2015 Silver Bell Road
Trapp 1279
Trapp 1245
East Point, Georgia
Camp Creek 2400
Camp Creek 2600
Camp Creek 3201
Camp Creek 3900
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
—
—
18,720
18,970
36,496
31,048
—
—
—
—
—
—
—
—
—
—
—
—
560
776
765
1,651
732
459
473
4,298
4,536
2,618
6,804
3,096
1,670
1,730
34,413
21,025
34,692
15,956
3,252
37,943
48,060
71,066
17,527
—
—
—
3,574
2,607
10,339
8,722
—
—
—
—
—
—
—
—
—
—
866
474
1,432
1,740
671
1,250
296
364
1,937
287
3,234
2,092
5,988
4,180
3,441
5,424
627
824
7,426
2,919
43
1,176
1,185
3,482
1,906
879
889
118
414
520
1,794
34
(63)
1
5,260
125
2,036
784
127
2,997
1,054
1,784
2,267
1,702
2,901
2,191
-49-
18,720
18,970
36,539
32,224
55,259
51,194
4,946
4,140
560
776
765
1,651
732
459
473
5,483
8,018
4,524
7,683
3,985
1,788
2,144
6,043
8,794
5,289
9,334
4,717
2,247
2,617
2,989
4,260
2,301
3,591
1,389
699
886
34,582
21,025
34,692
15,956
3,253
72,876
38,294
49,854
70,879
71,100 105,792
33,420
17,464
3,253
—
16,473
2,420
3,872
861
80
3,574
2,607
15,599
8,847
19,173
11,454
6,791
2,990
895
474
1,432
1,740
691
1,250
300
368
1,937
286
5,241
2,876
6,115
7,177
4,475
7,208
6,136
3,350
7,547
8,917
5,166
8,458
2,890
2,522
10,327
5,111
3,190
2,890
12,264
5,397
3,178
1,624
3,333
4,135
2,494
4,048
1,517
1,416
4,610
2,487
2018
2018
1997
1998
1999
1998
1994
1996
1994
2013
2020
2020
1996
n/a
2000
2007
1997
2000
2000
1999
1996
1998
1988
1990
2004
2005
2011
2012
2018
2018
1999
1999
1999
2001
2010
2010
2010
2013
2020
2020
2020
2020
2011
2011
1997
2000
2000
1999
1998
1998
2001
2001
2004
2005
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable)
Initial Cost
Name
Camp Creek 3909
Camp Creek 3000
Camp Creek 4800
Camp Creek 4100
Camp Creek 3700
Camp Creek 4909
Camp Creek 3707
Camp Creek 4505
Camp Creek 4900
Camp Creek 4850
1000 Logistics Way
Camp Creek 6200
2000 Centre Court
Asset Type Encumbrances Land Buildings
1,309
Industrial
1,020
Industrial
3,906
Industrial
9,115
Industrial
Industrial
3,016
14,321
Industrial
20,538
Industrial
9,697
Industrial
7,758
Industrial
Industrial
7,169
41,030
Industrial
15,301
Industrial
10,297
Industrial
2,403
1,163
2,476
3,130
1,878
7,807
7,282
4,505
3,244
5,428
10,599
5,609
3,938
—
—
—
—
—
—
—
—
—
—
—
—
—
Cost Capitalized
Subsequent to
Development or
Acquisition
Gross Book Value at 12/31/2021
Land/Land Imp Bldgs/TI
18,306
3,583
2,375
1,258
6,022
2,740
9,471
3,327
3,111
1,883
18,103
7,851
20,541
7,282
13,405
4,505
8,536
3,244
7,366
5,428
41,030
10,599
15,301
5,609
10,297
3,938
18,177
1,450
2,380
553
100
3,826
3
3,708
778
197
—
—
—
Total
(1)
21,889
3,633
8,762
12,798
4,994
25,954
27,823
17,910
11,780
12,794
51,629
20,910
14,235
Schedule III
Accum.
Depr. (2)
6,660
1,942
3,944
4,292
1,526
Year
Constructed/Renovated
2014
2007
2008
2013
2014
Year
Acquired
2006
2007
2008
2013
2014
6,534
7,128
2,991
1,359
911
1,709
177
43
2016
2017
2017
2019
2020
2021
2021
2021
East Rutherford, New
Jersey
66-96 East Union Avenue
Easton, Pennsylvania
33 Logistics Park 1610
33 Logistics Park 1611
33 Logistics Park 1620
Industrial
Industrial
Industrial
Elk Grove Village, Illinois
1717 Busse Road
901 Chase Avenue
Industrial
Industrial
—
18,043
3,954
—
18,043
3,954
21,997
186
1969
—
—
—
24,752
17,979
29,786
55,500
20,882
33,023
—
—
3,602
10,405
18,065
8,961
1,982
1,970
1,352
494
39
24,896
17,979
29,791
57,338
22,852
34,370
82,234
40,831
64,161
19,386
8,385
7,449
3,602
10,405
18,559
9,000
22,161
19,405
6,631
1,101
2016
2017
2018
2004
2020
Ellenwood, Georgia
2529 Old Anvil Block
Fairfield, Ohio
Union Centre Industrial
6019
Union Centre Industrial
5855
Fairfield Logistics Ctr
7940
Flower Mound, Texas
Lakeside Ranch 550
Lakeside Ranch 1001
Lakeside Ranch 350
Fontana, California
Industrial
—
4,664
9,265
446
4,664
9,711
14,375
4,133
2014
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
—
5,635
6,576
—
3,009
15,387
—
4,679
8,237
—
—
—
4,619
5,662
3,665
19,299
23,061
10,105
2,534
2,063
2,180
488
2,317
4,312
-50-
5,635
9,110
14,745
6,111
3,009
17,450
20,459
4,745
4,689
10,407
15,096
1,889
4,619
5,662
3,665
19,787
25,378
14,417
24,406
31,040
18,082
6,730
3,724
1,452
2008
2016
2018
2007
2019
2019
2016
2017
2017
2019
2020
2021
2021
2021
2021
2016
2017
2018
2011
2020
2014
2008
2016
2018
2011
2019
2019
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable)
Initial Cost
Name
14970 Jurupa Ave
7953 Cherry Ave
9988 Redwood Ave
11250 Poplar Ave
16171 Santa Ana Ave
Asset Type Encumbrances Land Buildings
Grounds
—
12,521
Industrial
16,326
Industrial
33,586
Industrial
13,331
Industrial
17,306
6,704
7,755
18,138
13,681
—
—
—
—
—
Cost Capitalized
Subsequent to
Development or
Acquisition
Gross Book Value at 12/31/2021
Land/Land Imp Bldgs/TI
—
17,306
13,345
6,704
17,021
7,755
33,586
18,138
13,443
13,681
—
824
695
—
112
Total
(1)
17,306
20,049
24,776
51,724
27,124
1,158
3,305
4,692
8,206
2,377
Schedule III
Accum.
Depr. (2)
Year
Constructed/Renovated
Year
Acquired
Fort Lauderdale, Florida
Interstate 95 2200
Interstate 95 2100
Industrial
Industrial
—
—
9,332
10,948
13,401
18,681
2,123
—
9,332
10,948
15,524
18,681
24,856
29,629
3,319
3,513
Fort Worth, Texas
Riverpark 3300
Franklin, Tennessee
Aspen Grove Business
277
Aspen Grove Business
320
Aspen Grove Business
305
Aspen Grove Business
400
Brentwood South
Business 119
Brentwood South
Business 121
Brentwood South
Business 123
Franklin Park, Illinois
11501 West Irving Park
Road
Fremont, California
48401 Fremont Blvd
Fullerton, California
500 Burning Tree Rd
700 Burning Tree Rd
Garner, North Carolina
Greenfield North 600
Industrial
—
1,673
10,633
856
1,674
11,488
13,162
5,016
2007
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
—
936
2,919
—
1,151
5,824
—
—
—
—
—
970
4,677
492
1,677
569
1,063
445
1,563
489
962
3,954
1,628
1,300
1,218
1,625
614
1,347
936
6,873
7,809
3,852
1,151
7,452
8,603
4,065
970
5,977
6,947
3,245
492
2,895
3,387
1,298
569
2,688
3,257
1,485
445
2,177
2,622
1,124
489
2,309
2,798
1,391
1996
1996
1998
2002
1990
1990
1990
Industrial
—
3,900
2,702
1,835
3,900
4,537
8,437
2,321
2007
—
33,621
19,407
Industrial
Industrial
—
—
7,336
5,001
4,435
4,915
—
42
—
33,621
19,407
53,028
708
2021
7,336
5,001
4,477
4,915
11,813
9,916
1,269
869
1991
1991
Industrial
—
519
2,448
536
520
2,983
3,503
1,224
2006
-51-
n/a
2017
2016
2016
2018
2017
2017
2016
2017
2017
2017
2018
2017
2017
2011
1999
1999
1999
2002
1999
1999
1999
2007
2021
2018
2018
2011
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable)
Initial Cost
Gross Book Value at 12/31/2021
Schedule III
Cost Capitalized
Subsequent to
Development or
Acquisition
Asset Type Encumbrances Land Buildings
2,054
Industrial
5,772
Industrial
5,792
Industrial
6,026
Industrial
5,494
Industrial
222
Grounds
5,623
Industrial
6,867
Industrial
—
Industrial
407
381
367
1,897
2,517
189
1,870
3,462
6,112
—
—
—
—
—
—
—
—
—
Land/Land Imp Bldgs/TI
2,348
408
6,628
383
7,553
370
6,040
1,979
7,924
2,610
232
189
5,622
1,870
10,159
3,462
—
6,112
295
858
1,764
96
2,523
10
(1)
3,292
—
Total
(1)
2,756
7,011
7,923
8,019
10,534
421
7,492
13,621
6,112
Accum.
Depr. (2)
919
2,232
2,746
2,323
2,462
259
514
967
217
Year
Constructed/Renovated
2007
2004
2007
2016
2017
n/a
2020
2020
2021
Year
Acquired
2011
2011
2011
2016
2017
2015
2020
2020
2021
Industrial
—
3,189
11,582
7,640
4,778
17,633
22,411
6,317
2013
2011
Name
Greenfield North 700
Greenfield North 800
Greenfield North 900
Greenfield North 1000
Greenfield North 1001
N. Greenfield Pkwy
Greenfield North 1100
Greenfield North 1201
Greenfield North 1300
Geneva, Illinois
1800 Averill Road
Gibsonton, Florida
Tampa Regional Ind Park
13111
Tampa Regional Ind Park
13040
Industrial
Industrial
—
10,547
8,662
—
13,184
13,475
2,011
2,987
10,547
10,673
21,220
3,515
13,184
16,462
29,646
3,468
2017
2018
Glendale Heights, Illinois
990 North Avenue
Industrial
—
12,144
5,933
3,854
12,324
9,607
21,931
1,850
2018
Grand Prairie, Texas
Industrial
Grand Lakes 4003
Grand Lakes 3953
Industrial
1803 W. Pioneer Parkway Industrial
Industrial
Grand Lakes 4053
Groveport, Ohio
Groveport Commerce
Center 6200
Groveport Commerce
Center 6300
Groveport Commerce
Center 6295
Groveport Commerce
Center 6405
RGLP North 2842
Hebron, Kentucky
Hebron 2305
Hebron 2285
Skyport 2350
Skyport 2250
Skyport 2245
Skyport 2265
Southpark 1990
Hialeah, Florida
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
—
—
—
—
3,206
11,853
3,158
2,468
9,124
11,851
15,389
6,599
—
1,049
5,123
—
—
—
—
—
—
—
—
—
—
—
510
2,395
435
5,435
1,207
5,680
10,322
22,366
3,789
6,790
898
1,190
1,714
1,153
366
10,797
6,730
5,777
8,680
8,305
6,038
7,701
14,038
13,674
97
1,242
2,816
2,321
2,160
992
843
18,591
5,138
1,423
1,714
1,167
846
2
-52-
4,361
11,853
3,158
2,468
22,007
25,525
15,486
7,841
26,368
37,378
18,644
10,309
6,487
16,448
5,203
1,656
1,049
7,939
8,988
4,685
510
4,716
5,226
2,507
435
7,595
8,030
3,983
1,207
5,680
11,314
23,209
12,521
28,889
4,780
6,905
3,789
6,813
1,428
1,393
1,714
1,153
366
29,388
11,845
6,670
10,191
9,472
6,884
7,703
33,177
18,658
8,098
11,584
11,186
8,037
8,069
20,695
8,333
2,415
3,562
3,637
2,783
1,373
2017
2008
2008
2018
1999
2000
2000
2005
2008
2006
2007
1997
1999
2000
2006
2016
2017
2018
2018
2006
2008
2011
2018
1999
2000
2000
2005
2010
2006
2007
2010
2010
2010
2010
2016
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable)
Initial Cost
Asset Type Encumbrances Land Buildings
Schedule III
Gross Book Value at 12/31/2021
Land/Land Imp Bldgs/TI
Total
(1)
Accum.
Depr. (2)
Year
Constructed/Renovated
Year
Acquired
Cost Capitalized
Subsequent to
Development or
Acquisition
Name
Countyline Corporate
Park 3740
Countyline Corporate
Park 3780
Countyline Corporate
Park 3760
Countyline Corporate
Park 3840
Countyline Corporate
Park 3850
Countyline Corporate
Park 3870
Hialeah Gardens, Florida
Miami Ind Logistics Ctr
15002
Miami Ind Logistics Ctr
14802
Miami Ind Logistics Ctr
10701
Hopkins, Minnesota
Cornerstone 401
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
—
18,934
11,560
—
21,445
22,144
—
32,802
52,633
—
15,906
14,953
—
18,270
17,567
—
17,605
17,068
—
10,671
14,071
—
10,800
14,236
—
13,048
17,204
45
166
153
266
179
91
1,828
3,635
2,366
18,934
11,605
30,539
3,331
21,445
22,310
43,755
4,379
32,802
52,786
85,588
8,949
15,906
15,219
31,125
3,202
18,270
17,746
36,016
2,549
17,605
17,159
34,764
2,408
10,671
15,899
26,570
4,130
10,800
17,871
28,671
4,574
13,048
19,570
32,618
5,432
2018
2018
2018
2018
2019
2019
2017
2017
2017
Industrial
—
1,454
7,623
2,462
1,454
10,085
11,539
6,062
1996
Houston, Texas
Point North 8210
Industrial
Point North 8120
Industrial
Point North 8111
Industrial
Point North 8411
Industrial
Westland 8323
Industrial
Industrial
Westland 13788
Gateway Northwest 20710 Industrial
Gateway Northwest 20702 Industrial
Gateway Northwest 20502 Industrial
22008 N Berwick Drive
Industrial
Gateway Northwest 20510 Industrial
Industrial
Point North 8221
—
—
—
—
—
—
—
—
—
—
—
—
3,125
4,210
3,957
5,333
4,183
3,246
7,204
2,981
2,987
2,981
6,787
6,503
2,178
2,108
15,093
6,946
2,574
8,338
8,028
3,122
5,342
4,949
11,501
10,357
2,293
4,616
642
1,271
3,675
989
4,167
1,173
21
905
792
1,441
3,125
4,581
3,957
5,333
4,417
3,246
7,204
2,981
2,987
2,981
6,787
6,503
4,471
6,353
15,735
8,217
6,015
9,327
12,195
4,295
5,363
5,854
12,293
11,798
7,596
10,934
19,692
13,550
10,432
12,573
19,399
7,276
8,350
8,835
19,080
18,301
3,373
3,266
5,631
3,246
4,591
5,314
5,217
1,896
2,206
1,611
3,098
2,117
2008
2013
2014
2015
2008
2011
2014
2014
2016
2002
2018
2019
Huntley, Illinois
14100 Weber Drive
Hutchins, Texas
801 Wintergreen Road
Prime Pointe 1005
Prime Pointe 1015
Indianapolis, Indiana
Park 100 5550
Park 100 Bldg 121 Land
Lease
West 79th St. Parking Lot
LL
North Airport Park 7750
Park 100 5010
Park 100 5134
Industrial
—
7,539
34,069
78
7,539
34,147
41,686
8,068
2015
Industrial
Industrial
Industrial
Industrial
Grounds
Grounds
Industrial
Industrial
Industrial
—
—
—
2,288
5,865
8,356
9,115
19,420
16,319
—
1,171
12,611
—
—
—
—
—
3
—
164
1,620
621
578
—
4,279
1,687
1,904
1,482
59
2,257
678
—
—
810
568
299
-53-
2,288
5,865
8,170
10,597
19,479
18,762
12,885
25,344
26,932
3,926
5,340
3,704
1,424
13,036
14,460
8,704
3
—
3
—
164
1,620
621
578
—
5,089
2,255
2,203
164
6,709
2,876
2,781
—
2,168
1,144
867
2006
2016
2018
1997
n/a
n/a
1997
1984
1984
2018
2018
2018
2018
2019
2019
2017
2017
2017
1997
2008
2013
2014
2015
2008
2011
2014
2014
2016
2015
2018
2019
2015
2006
2016
2018
1995
2003
2006
2010
2010
2010
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable)
Initial Cost
Schedule III
Gross Book Value at 12/31/2021
Cost Capitalized
Subsequent to
Development or
Acquisition
Asset Type Encumbrances Land Buildings
998
Industrial
1,515
Industrial
13,332
Industrial
Industrial
8,569
HQ/Core
Portfolio
384
384
1,037
1,152
—
—
—
—
24,259
17,387
1,211
Land/Land Imp Bldgs/TI
1,323
384
1,863
384
14,330
1,037
10,888
1,152
325
348
998
2,319
Total
(1)
1,707
2,247
15,367
12,040
Accum.
Depr. (2)
604
772
5,667
4,471
Year
Constructed/Renovated
1989
1989
1996
2000
Year
Acquired
2010
2010
2010
2010
70
1,211
24,329
25,540
2,108
2020
Industrial
—
8,584
14,385
4,645
8,584
19,030
27,614
1,351
2020
Industrial
—
3,813
9,767
—
3,813
9,767
13,580
662
2016
Kutztown, Pennsylvania
West Hills 9645
West Hills 9677
Industrial
Industrial
La Mirada, California
16501 Trojan Way
16301 Trojan Way
Industrial
Industrial
—
—
15,340
5,218
47,981
13,029
—
—
23,503
39,645
30,945
22,164
623
68
225
45
15,340
5,218
48,604
13,097
63,944
18,315
16,192
4,482
23,503
39,645
31,170
22,209
54,673
61,854
11,572
3,615
2014
2015
2002
2018
2020
2020
2020
2014
2015
2012
2018
2018
Industrial
—
9,786
22,270
8
9,786
22,278
32,064
4,953
2018
Grounds
—
3,334
—
1,041
4,375
—
4,375
Industrial
—
10,121
20,959
—
10,121
20,959
31,080
—
—
n/a
2010
2021
2021
Industrial
—
1,480
2,935
45
1,487
2,973
4,460
1,268
2004
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
—
—
—
—
—
177
340
816
156
349
8,664
6,230
10,741
3,427
7,604
—
—
2,367
7,731
8,449
12,462
1,554
1,479
2,471
109
767
4,907
1,782
-54-
177
340
815
156
350
10,218
7,709
13,213
3,536
8,370
10,395
8,049
14,028
3,692
8,720
6,116
4,360
5,821
1,379
3,380
2,367
7,852
13,356
14,123
15,723
21,975
4,897
7,216
2000
1999
2005
1996
1998
2006
2013
2004
1997
1999
2005
2010
2010
2006
2013
Name
Park 100 5302
Park 100 5303
Park 100 7225
Park 100 4925
8711 North River Crossing
Blvd
Katy, Texas
3900 Peek Road
Kent, Washington
21214 66th Ave South
Lancaster, Texas
Lancaster 2820
LaPorte, Texas
Bayport Container Lot
Lathrop, California
16825 Murphy Parkway
Lawrenceville, Georgia
175 Alcovy Industrial
Road
Lebanon, Indiana
Lebanon Park 185
Lebanon Park 322
Lebanon Park 500
Lebanon Park 210
Lebanon Park 311
Lebanon, Tennessee
Park 840 West 14840
Park 840 East 1009
Linden, New Jersey
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable)
Initial Cost
Schedule III
Gross Book Value at 12/31/2021
Land/Land Imp Bldgs/TI
Total
(1)
Accum.
Depr. (2)
Year
Constructed/Renovated
Year
Acquired
Cost Capitalized
Subsequent to
Development or
Acquisition
Name
Asset Type Encumbrances Land Buildings
Legacy Commerce Center
801
Legacy Commerce Center
301
Legacy Commerce Center
901
Industrial
Industrial
Industrial
—
22,134
23,645
—
6,933
8,575
—
25,935
19,806
2,198
335
2,311
22,134
25,843
47,977
6,905
6,933
8,910
15,843
2,845
25,937
22,115
48,052
6,802
2014
2015
2016
Lithia Springs, Georgia
2601 Skyview Drive
Lockport, Illinois
Lockport 16328
Lockport 16410
Lockport 16508
Lockbourne, Ohio
Creekside 2120
Creekside 4555
Lodi, New Jersey
65 Industrial Road
Logan Township, New
Jersey
1130 Commerce
Boulevard
Industrial
—
4,282
9,534
58
4,282
9,592
13,874
2,816
2016
Industrial
Industrial
Industrial
Industrial
Industrial
—
—
—
—
—
3,339
2,677
4,520
17,446
16,117
17,472
2,868
1,947
15,406
11,453
460
285
2,616
1,031
294
3,339
2,677
4,520
17,906
16,402
20,088
21,245
19,079
24,608
3,659
3,249
4,362
2,868
1,947
16,437
11,747
19,305
13,694
6,312
4,339
2016
2016
2017
2008
2005
Industrial
—
20,063
899
40
20,063
939
21,002
106
1965
Industrial
—
3,770
18,699
1,158
3,770
19,857
23,627
6,240
2002
Long Beach, California
3700 Cover Street
189 W Victoria St
Industrial
Industrial
—
—
7,280
16,905
6,954
2,373
Industrial
—
39,678
23,978
—
—
—
7,280
16,905
6,954
2,373
14,234
19,278
3,464
—
2012
1979
39,678
23,978
63,656
403
2021
Industrial
Industrial
—
—
15,230
10,705
17,865
10,979
56
1,949
15,230
10,958
17,921
12,675
33,151
23,633
6,338
2,503
1999
2017
Industrial
—
4,851
18,985
416
4,851
19,401
24,252
7,117
1999
Maple Grove, Minnesota
Arbor Lakes 10500
Arbor Lakes 10501
Park 81 10750
Industrial
Industrial
Industrial
McDonough, Georgia
—
—
—
4,803
5,363
3,971
9,891
17,713
9,262
4,090
85
1
4,912
5,363
3,971
13,872
17,798
9,263
18,784
23,161
13,234
1,975
2,727
1,143
2018
2019
2019
-55-
Los Angeles, California
13344 S Main Street
Lynwood, California
2700 East Imperial
Highway
11600 Alameda Street
Manteca, California
600 Spreckels Avenue
2014
2015
2016
2017
2017
2017
2017
2012
2012
2020
2013
2013
2021
2021
2011
2017
2012
2018
2019
2019
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable)
Initial Cost
Schedule III
Gross Book Value at 12/31/2021
Name
Liberty Distribution 120
Liberty Distribution 250
Asset Type Encumbrances Land Buildings
8,117
Industrial
10,910
Industrial
615
2,273
—
—
Land/Land Imp Bldgs/TI
8,850
615
17,713
3,416
733
7,946
Total
(1)
9,465
21,129
Accum.
Depr. (2)
4,925
8,521
Year
Constructed/Renovated
1997
2001
Year
Acquired
1999
2001
Cost Capitalized
Subsequent to
Development or
Acquisition
Mechanicsburg,
Pennsylvania
500 Independence Avenue Industrial
Medley, Florida
Miami 27 Business Park
10300
Miami 27 Business Park
10310
Industrial
Industrial
—
4,494
15,007
883
4,499
15,885
20,384
5,099
2008
2013
—
34,758
16,913
—
15,275
11,412
—
—
34,758
16,913
51,671
15,275
11,412
26,687
298
255
2021
2021
Melrose Park, Illinois
1600 North 25th Avenue
Miami, Florida
9601 NW 112 Avenue
Industrial
—
5,907
17,516
299
5,907
17,815
23,722
7,744
2000
Industrial
—
11,626
14,651
8
11,626
14,659
26,285
5,599
2003
Minooka, Illinois
Midpoint Distribution 801 Industrial
—
6,282
30,802
627
6,282
31,429
37,711
9,838
2008
Modesto, California
1000 Oates Court
Monroe Twp., New Jersey
773 Cranbury South River
Road
Industrial
—
10,115
16,944
428
10,115
17,372
27,487
8,440
2002
Industrial
—
3,001
36,527
199
3,001
36,726
39,727
7,609
2016
Moreno Valley, California
17791 Perris Boulevard
15810 Heacock Street
24975 Nandina Ave
24960 San Michele
Industrial
Industrial
Industrial
Industrial
Morgans Point, Texas
Barbours Cut 1200
Barbours Cut 1000
Morrisville, North
Carolina
Perimeter Park 3000
Perimeter Park 2900
Perimeter Park 2800
Perimeter Park 2700
Woodlake 100
Woodlake 101
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
—
—
—
—
—
—
—
—
—
—
—
—
67,806
9,727
13,322
8,336
74,531
18,882
17,214
13,699
889
868
7,140
7,311
482
235
777
662
633
615
1,982
1,314
4,151
1,081
3,183
3,868
38
2,770
214
—
90
168
1,688
1,644
1,511
2,270
2,080
530
-56-
67,806
9,727
13,322
8,336
74,569 142,375
31,379
21,652
30,750
17,428
22,035
13,699
14,331
3,389
2,172
2,430
889
868
7,230
7,479
8,119
8,347
2,661
2,756
491
241
791
662
1,132
615
3,661
2,952
5,648
3,351
4,764
4,398
4,152
3,193
6,439
4,013
5,896
5,013
2,018
1,662
3,039
1,761
2,824
2,411
2018
2017
2019
2019
2004
2005
1989
1990
1992
2001
1994
1997
2021
2021
2010
2013
2013
2012
2017
2017
2017
2019
2019
2010
2010
1999
1999
1999
2001
1999
1999
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable)
Initial Cost
Schedule III
Gross Book Value at 12/31/2021
Name
Woodlake 200
Woodlake 501
Woodlake 400
Asset Type Encumbrances Land Buildings
3,688
Industrial
5,477
Industrial
1,055
Industrial
357
640
390
—
—
—
Land/Land Imp Bldgs/TI
4,620
357
6,509
640
1,498
390
932
1,032
443
Total
(1)
4,977
7,149
1,888
Accum.
Depr. (2)
2,539
3,283
685
Year
Constructed/Renovated
1999
1999
2004
Year
Acquired
1999
1999
2004
Cost Capitalized
Subsequent to
Development or
Acquisition
Myerstown, Pennsylvania
Central Logistics Park
100
Industrial
Central Logistics Park 60 Industrial
Naperville, Illinois
1835 W. Jefferson
175 Ambassador Drive
1860 West Jefferson
Industrial
Industrial
Industrial
Nashville, Tennessee
Industrial
Airpark East 800
Industrial
Nashville Business 3300
Nashville Business 3438
Industrial
Four-Forty Business 700 Industrial
Four-Forty Business 684 Industrial
Four-Forty Business 782 Industrial
Four-Forty Business 784 Industrial
Four-Forty Business 701 Industrial
Industrial
Grounds
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Newark, New Jersey
429 Delancy Street
740-768 Doremus
Avenue
Northlake, Illinois
Northlake Distribution
635
Northlake Distribution
599
200 Champion Way
Oakland, California
1905 Dennison Street
955 Kennedy Street
Ontario, California
1656 Bon View
2151 S Vintage Ave
Orange, California
210 W Baywood Ave
Orlando, Florida
2502 Lake Orange
—
—
16,936
16,058
29,564
26,546
—
—
—
—
—
—
—
—
—
—
—
2,209
3,822
7,016
7,921
11,252
35,581
1,564
936
3,048
938
1,812
1,522
471
997
2,129
4,773
8,165
6,354
6,561
4,820
2,153
4,763
—
60,393
85,359
— 106,552
—
—
—
—
5,721
9,008
2,823
3,554
5,685
11,528
15,063
9,519
12,118
13,053
20,518
9,764
—
9,551
— 105,589
250
82,630
83
—
1,651
11
1,113
1,985
1,914
2,221
706
2,207
1,796
1,698
107
959
—
1,574
3,400
832
2
—
—
—
16,936
16,058
29,647
26,546
46,583
42,604
2,742
807
2,213
3,822
7,016
9,568
11,263
36,694
11,781
15,085
43,710
4,182
4,540
16,272
1,564
936
3,048
938
1,812
1,522
471
997
4,114
6,687
10,386
7,060
8,768
6,616
3,851
4,870
5,678
7,623
13,434
7,998
10,580
8,138
4,322
5,867
1,814
3,822
4,758
4,036
4,923
3,705
2,404
1,838
60,486
86,225 146,711
8,090
106,552
— 106,552
—
5,721
10,582
16,303
4,991
2,823
3,554
9,085
12,360
11,908
15,914
2,988
4,576
12,118
13,053
20,520
9,764
32,638
22,817
1,131
736
9,551
105,589
250
9,801
82,630 188,219
23
1,828
2020
2021
2005
2006
2000
2002
1997
2005
1997
1998
1997
1999
1996
2019
n/a
2002
2014
1997
1956
1966
1991
1991
Industrial
—
5,066
4,515
1,816
5,066
6,331
11,397
1,049
1989
Industrial
—
2,331
3,235
319
2,331
3,554
5,885
1,698
2003
-57-
2020
2021
2003
2010
2012
2002
1999
2005
1999
1999
1999
1999
2010
2019
2021
2002
2006
2011
2020
2020
2021
2021
2018
2003
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Schedule III
Gross Book Value at 12/31/2021
Land/Land Imp Bldgs/TI
Total
(1)
Accum.
Depr. (2)
Year
Constructed/Renovated
Year
Acquired
Cost Capitalized
Subsequent to
Development or
Acquisition
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable)
Initial Cost
Name
Parksouth Distribution
2500
Parksouth Distribution
2490
Parksouth Distribution
2491
Parksouth Distribution
9600
Parksouth Distribution
9550
Parksouth Distribution
2481
Parksouth Distribution
9592
Crossroads Business Park
301
Crossroads Business Park
601
7133 Municipal Drive
Otsego, Minnesota
Gateway North 6301
Gateway North 6651
Gateway North 6701
Gateway North 6651
Pasadena, Texas
Interport 13001
Bayport 4035
Bayport 4331
Perris, California
3500 Indian Avenue
3300 Indian Avenue
4323 Indian Ave
4375 N Perris Blvd
4501 Patterson Avenue
728 W. Rider Street
Asset Type Encumbrances Land Buildings
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Grounds
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
565
4,360
493
4,170
593
3,150
649
4,111
1,030
4,207
725
2,245
623
1,646
1,653
2,804
2,701
5,817
3,571
6,820
1,543
3,667
3,266
1,521
6,515
16,249
10,996
—
5,715
3,772
7,638
30,961
10,255
30,213
16,210
39,012
20,525
26,830
28,211
69,056
27,759
43,280
30,125
69,527
49,869
62,459
Piscataway, New Jersey
141 Circle Drive North
150 Old New Brunswick
Road
600 Ridge Road
Grounds
Industrial
Industrial
—
5,237
—
—
52,134
— 102,080
45,883
63,847
1,714
654
1,963
1,128
3,521
1,567
99
4,070
2,059
29
6,009
129
237
—
781
188
125
8,884
1,870
470
57
2,621
—
29
—
—
570
6,069
6,639
3,287
498
4,819
5,317
2,764
597
5,109
5,706
2,719
653
5,235
5,888
3,091
1,035
7,723
8,758
3,813
730
3,807
4,537
2,142
623
1,745
2,368
845
1,653
6,874
8,527
2,891
2,701
5,817
5,630
6,849
8,331
12,666
3,244
1,296
2,783
3,748
3,374
1,521
11,284
16,297
11,125
—
14,067
20,045
14,499
1,521
2,828
4,548
3,219
536
5,655
3,772
7,638
31,802
10,443
30,338
37,457
14,215
37,976
10,451
2,264
6,970
18,716
38,989
20,525
26,830
28,211
69,056
52,853
34,137
84,162
45,173
51,120
30,595
96,414
69,584
52,490
80,701
62,459 131,515
12,137
16,181
4,644
6,415
5,042
616
5,266
—
5,266
—
52,134
102,080
45,883
98,017
63,847 165,927
1,090
114
1996
1997
1998
1997
1999
2000
2003
2006
2007
2018
2017
2015
2014
n/a
2007
2008
2008
2015
2017
2019
2020
2020
2021
n/a
2021
2019
1999
1999
1999
1999
1999
2000
2003
2006
2007
2018
2015
2015
2014
2016
2013
2017
2017
2015
2017
2019
2020
2020
2021
2020
2021
2021
Plymouth, Minnesota
Waterford Innovation
Center
Pomona, California
Industrial
—
2,689
9,897
113
2,689
10,010
12,699
2,221
2017
2017
-58-
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable)
Initial Cost
Name
1589 E 9th St.
468 S Humane Way
1941 Mission Blvd
1943 Mission Blvd
Asset Type Encumbrances Land Buildings
14,745
Industrial
13,044
Industrial
8,249
Industrial
10,203
Industrial
7,386
11,959
7,405
8,364
—
—
—
—
Cost Capitalized
Subsequent to
Development or
Acquisition
Gross Book Value at 12/31/2021
Land/Land Imp Bldgs/TI
15,397
7,386
13,044
11,959
8,249
7,405
10,203
8,364
652
—
—
—
Total
(1)
22,783
25,003
15,654
18,567
3,552
125
—
—
Schedule III
Accum.
Depr. (2)
Year
Constructed/Renovated
Year
Acquired
Perth Amboy, New Jersey
ePort 960
ePort 980
ePort 1000
Steel Run Logistics Ctr
Bldg 1
Steel Run Logistics Ctr
Bldg 2
Plainfield, Indiana
Plainfield 1551
Plainfield 1581
Plainfield 2209
Plainfield 1390
Plainfield 2425
Home Depot trailer
parking lot
AllPoints Midwest Bldg.
1
AllPoints Midwest Bldg.
4
AllPoints Midwest Bldg.
10
Pompano Beach, Florida
Atlantic Business 1700
Atlantic Business 1800
Atlantic Business 1855
Atlantic Business 2022
Atlantic Business 1914
Atlantic Business 2003
Atlantic Business 1901
Atlantic Business 2200
Atlantic Business 2100
Atlantic Business 2201
Atlantic Business 2101
Atlantic Business 2103
Copans Business Park
1571
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Grounds
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
—
—
—
14,425
43,778
19,726
23,463
87,019
41,229
—
31,987
23,948
—
73,056
68,473
—
—
—
—
—
—
1,097
1,094
2,016
998
1,917
7,772
7,279
8,717
5,817
10,908
310
—
—
6,692
51,152
—
4,111
9,943
—
2,867
22,335
—
—
—
—
—
—
—
—
—
—
—
—
2,743
2,308
2,395
1,563
1,589
1,716
1,729
1,732
1,723
1,901
1,790
1,400
8,821
8,381
8,162
5,885
5,332
5,918
6,199
6,012
6,130
4,050
6,682
3,628
—
1,482
3,646
2,014
273
1,040
388
4,145
10,831
2,506
2,639
986
1,979
—
2,056
22
—
1,849
564
234
41
31
831
381
843
141
121
122
118
367
-59-
14,425
43,778
19,726
25,477
39,902
87,292 131,070
61,995
42,269
4,674
15,950
7,244
32,318
24,005
56,323
2,277
73,974
71,700 145,674
4,412
1,097
1,094
2,016
998
1,918
18,603
9,785
11,356
6,803
12,886
19,700
10,879
13,372
7,801
14,804
8,380
5,013
5,334
2,887
5,052
310
—
310
—
6,692
53,208
59,900
12,143
4,053
10,023
14,076
6,293
2,867
22,335
25,202
1,017
2,743
2,308
2,395
1,563
1,589
1,716
1,729
1,732
1,723
1,901
1,791
1,401
10,670
8,945
8,396
5,926
5,363
6,749
6,580
6,855
6,271
4,171
6,803
3,745
13,413
11,253
10,791
7,489
6,952
8,465
8,309
8,587
7,994
6,072
8,594
5,146
4,259
3,439
3,107
2,190
1,982
2,876
2,397
2,802
2,306
1,534
2,479
1,412
1,482
4,013
5,495
1,480
2016
2017
2017
2017
2017
2017
2017
2020
2020
2015
2000
2002
2004
2006
2018
2008
2012
2018
2000
2001
2001
2002
2002
2002
2004
2004
2002
2005
2004
2005
1989
2017
2021
2021
2021
2017
2017
2017
2020
2020
2000
2000
2002
2004
2006
2018
2016
2013
2021
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable)
Initial Cost
Asset Type Encumbrances Land Buildings
Schedule III
Gross Book Value at 12/31/2021
Land/Land Imp Bldgs/TI
Total
(1)
Accum.
Depr. (2)
Year
Constructed/Renovated
Year
Acquired
Cost Capitalized
Subsequent to
Development or
Acquisition
Name
Copans Business Park
1521
Park Central 3250
Park Central 3760
Pompano Commerce
Center 2901
Pompano Commerce
Center 3101
Pompano Commerce
Center 2951
Pompano Commerce
Center 3151
Sample 95 Business Park
3101
Sample 95 Business Park
3001
Sample 95 Business Park
3035
Sample 95 Business Park
3135
Copans Business Park
1551
Copans Business Park
1501
Park Central 1700
Park Central 2101
Park Central 3300
Park Central 100
Park Central 1300
Copans 95 1731
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Port Wentworth, Georgia
100 Logistics Way
Industrial
500 Expansion Boulevard Industrial
400 Expansion Boulevard Industrial
605 Expansion Boulevard Industrial
405 Expansion Boulevard Industrial
600 Expansion Boulevard Industrial
602 Expansion Boulevard Industrial
Raleigh, North Carolina
Walnut Creek 540
Walnut Creek 4000
Walnut Creek 3080
Walnut Creek 3070
Walnut Creek 3071
Industrial
Industrial
Industrial
Industrial
Industrial
—
—
—
1,543
1,463
2,685
3,101
1,997
2,491
—
2,177
3,896
—
2,905
4,095
—
2,177
4,465
—
2,897
3,939
—
2,860
6,115
—
2,568
6,135
—
3,218
4,288
—
1,463
4,890
—
1,608
3,146
—
—
—
—
—
—
—
4,019
1,903
—
—
—
—
—
—
—
—
—
—
1,723
3,584
2,336
1,417
1,300
2,113
3,511
1,975
649
1,636
1,615
535
1,248
1,840
419
456
679
913
1,718
3,367
6,361
5,756
2,846
1,992
3,021
5,889
11,043
5,842
13,186
6,852
3,192
9,392
10,981
1,651
2,078
2,766
1,187
2,746
309
10
1,682
789
571
37
121
565
121
411
858
667
365
863
1,135
434
660
2,178
1,749
2,283
144
2,798
5,273
50
33
88
1,054
492
1,534
1,500
618
-60-
1,544
1,463
2,685
3,409
2,007
4,173
4,953
3,470
6,858
1,305
799
1,647
2,178
4,684
6,862
1,758
2,916
4,655
7,571
1,805
2,178
4,501
6,679
1,720
2,908
4,049
6,957
1,369
2,860
6,680
9,540
2,464
2,568
6,256
8,824
2,264
3,218
4,699
7,917
1,759
1,463
5,748
7,211
2,441
1,609
3,812
5,421
1,636
1,723
3,585
2,337
1,417
1,300
2,113
3,518
2,005
649
1,636
1,615
535
1,248
1,859
419
456
679
913
1,718
3,732
7,223
6,890
3,280
2,652
5,199
7,631
13,296
5,986
15,984
12,125
3,242
9,425
11,050
5,455
10,808
9,227
4,697
3,952
7,312
11,149
15,301
6,635
17,620
13,740
3,777
10,673
12,909
2,705
2,570
4,300
2,687
3,364
3,124
3,026
4,979
3,600
5,082
1,339
2,760
2,736
1,309
1,083
2,484
864
5,561
2,202
5,223
2,833
1,088
3,139
3,617
1,287
1,287
2,055
1,198
2,321
1989
1999
1995
2010
2015
2010
2015
1999
1999
1999
1999
1989
1989
1998
1998
1996
1998
1997
2019
2006
2006
2007
2020
2008
2008
2009
2001
2001
2001
2004
2008
2010
2010
2010
2010
2015
2010
2015
2010
2011
2011
2010
2011
2011
2011
2011
2011
2011
2011
2019
2006
2008
2008
2008
2009
2009
2009
2001
2001
2001
2004
2008
Name
Rancho Cucamonga,
California
9189 Utica Ave
10415 8th Street
Rancho Dominguez,
California
18700 Laurel Park Rd
Richmond, California
2041 Factory Street
Romeoville, Illinois
875 W. Crossroads
Parkway
Crossroads 1255
Crossroads 801
Industrial
Industrial
Industrial
1341-1343 Enterprise
Drive
Industrial
50-56 N. Paragon
Industrial
Airport Logistics Center I Industrial
Roseville, Minnesota
2215 Highway 36 West
2420 Long Lake Road
Industrial
Industrial
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable)
Initial Cost
Asset Type Encumbrances Land Buildings
Schedule III
Gross Book Value at 12/31/2021
Land/Land Imp Bldgs/TI
Total
(1)
Accum.
Depr. (2)
Year
Constructed/Renovated
Year
Acquired
Cost Capitalized
Subsequent to
Development or
Acquisition
Industrial
Industrial
—
—
5,794
8,641
12,646
9,790
265
—
5,794
8,641
12,911
9,790
18,705
18,431
3,278
144
2016
2021
2017
2021
Industrial
—
8,080
2,987
456
8,438
3,085
11,523
913
1971
2017
Redlands, California
2300 W. San Bernadino
Ave
9180 Alabama St.
Industrial
Industrial
—
—
20,031
52,999
17,968
52,226
1,911
—
20,031
52,999
19,879
39,910
52,226 105,225
8,710
1,958
2001
2021
Industrial
—
8,132
22,266
—
8,132
22,266
30,398
2,723
2000
—
—
—
—
—
—
—
—
4,113
2,350
2,622
3,076
3,985
9,133
7,274
9,217
6,184
12,150
5,433
17,187
1,132
939
5,931
4,135
1,685
3,090
305
394
1,212
5,843
1,283
1,078
4,113
2,350
2,622
3,076
3,985
11,282
8,959
12,307
6,489
12,544
6,645
20,881
13,072
14,657
9,111
15,620
10,630
32,163
3,665
5,250
4,522
2,930
2,174
2,998
1,132
939
7,214
5,213
8,346
6,152
2,852
1,983
2005
1999
2009
2015
2017
2019
1998
2000
San Leandro, California
1919 Williams Street
Santa Fe Springs,
California
13215 Cambridge Street
Savannah, Georgia
198 Gulfstream
194 Gulfstream
190 Gulfstream
250 Grange Road
248 Grange Road
318 Grange Road
246 Grange Road
Grounds
—
27,739
2,038
493
27,739
2,531
30,270
574
n/a
Industrial
—
3,558
10,167
—
3,558
10,167
13,725
122
2021
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
—
—
—
—
—
—
2,096
475
358
599
771
529
759
972
3,650
2,359
4,134
7,776
3,180
4,131
7,486
956
285
372
51
8
892
744
-61-
476
358
599
771
529
759
972
4,605
2,644
4,506
7,827
3,188
5,023
8,230
5,081
3,002
5,105
8,598
3,717
5,782
9,202
1,706
1,058
1,849
3,130
1,278
1,900
3,123
1997
1998
1999
2002
2002
2001
2006
2013
2021
2019
2005
2010
2010
2015
2017
2019
2011
2011
2019
2021
2006
2006
2006
2006
2006
2006
2006
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable)
Initial Cost
Schedule III
Gross Book Value at 12/31/2021
Name
163 Portside Court
151 Portside Court
175 Portside Court
Asset Type Encumbrances Land Buildings
7,746
Industrial
7,117
Industrial
13,344
Industrial
5,260
840
3,740
—
—
4,206
Land/Land Imp Bldgs/TI
8,006
5,260
8,565
790
14,474
4,229
260
1,398
1,619
Total
(1)
13,266
9,355
18,703
Accum.
Depr. (2)
Year
Constructed/Renovated
Year
Acquired
3,212
3,298
5,831
2004
2003
2005
2006
2006
2006
Cost Capitalized
Subsequent to
Development or
Acquisition
-62-
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable)
Initial Cost
Asset Type Encumbrances Land Buildings
Schedule III
Gross Book Value at 12/31/2021
Land/Land Imp Bldgs/TI
Total
(1)
Accum.
Depr. (2)
Year
Constructed/Renovated
Year
Acquired
Cost Capitalized
Subsequent to
Development or
Acquisition
Name
235 Jimmy Deloach
Parkway
239 Jimmy Deloach
Parkway
246 Jimmy Deloach
Parkway
200 Logistics Way
2509 Dean Forest Road
276 Jimmy Deloach
Parkway
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Sea Brook, Texas
Bayport Logistics 5300
Bayport Logistics 5801
Industrial
Industrial
Shakopee, Minnesota
3880 4th Avenue East
Gateway South 2301
Gateway South 2101
Industrial
Industrial
Industrial
—
—
934
7,201
934
6,424
1,274
2,955
—
863
878
2,080
4,878
9,274
5,987
—
6,772
6,405
—
—
—
—
—
1,578
5,116
11,361
7,663
1,023
2,648
4,273
6,102
11,898
16,252
1,277
732
33
1,337
2,477
327
195
251
36
91
90
893
8,519
9,412
3,529
934
7,156
8,090
2,961
806
883
2,602
4,968
10,606
7,942
5,774
11,489
10,544
1,999
3,513
3,236
6,772
6,732
13,504
1,211
1,577
5,116
11,557
7,914
13,134
13,030
4,304
3,021
1,049
2,647
4,273
6,112
11,990
16,342
7,161
14,637
20,615
2,083
2,881
3,406
2001
2001
2006
2006
2008
2019
2009
2015
2000
2016
2017
Sharonville, Ohio
Mosteller 11400
South Brunswick, New
Jersey
10 Broadway Road
Stafford, Texas
10225 Mula Road
Industrial
—
408
2,705
3,773
408
6,478
6,886
3,190
1997
Industrial
—
15,168
13,916
1,226
15,168
15,142
30,310
4,445
2017
Industrial
—
3,502
2,656
3,845
3,502
6,501
10,003
3,987
2008
Sterling, Virginia
TransDulles Centre 22601 Industrial
TransDulles Centre 22620 Industrial
TransDulles Centre 22626 Industrial
TransDulles Centre 22633 Industrial
TransDulles Centre 22635 Industrial
TransDulles Centre 22645 Industrial
TransDulles Centre 22714 Industrial
TransDulles Centre 22750 Industrial
TransDulles Centre 22815 Industrial
TransDulles Centre 22825 Industrial
TransDulles Centre 22879 Industrial
TransDulles Centre 22880 Industrial
TransDulles Centre 46213 Industrial
—
—
—
—
—
—
—
—
—
—
—
—
—
1,700
773
1,544
702
1,753
1,228
3,973
2,068
7,685
1,758
2,828
2,311
5,912
5,001
1,957
3,874
1,586
4,182
3,411
3,535
4,970
5,713
4,951
8,425
4,922
3,965
602
16
321
34
17
379
1,251
357
414
305
399
10
462
1,700
773
1,544
702
1,753
1,228
3,973
2,068
7,685
1,758
2,828
2,311
5,912
5,603
1,973
4,195
1,620
4,199
3,790
4,786
5,327
6,127
5,256
8,824
4,932
4,427
7,303
2,746
5,739
2,322
5,952
5,018
8,759
7,395
13,812
7,014
11,652
7,243
10,339
3,022
1,063
2,198
861
2,270
1,985
3,045
2,802
3,634
2,761
4,648
2,785
2,105
2004
1999
1999
2004
1999
2005
2007
2003
2000
1997
1989
1998
2015
Sumner, Washington
13501 38th Street East
Industrial
—
16,032
4,954
332
16,032
5,286
21,318
5,277
2005
-63-
2006
2006
2006
2008
2011
2019
2010
2015
2011
2016
2017
1997
2017
2008
2016
2016
2016
2016
2016
2016
2007
2016
2016
2016
2016
2016
2015
2007
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable)
Initial Cost
Name
4800 E Valley Highway
1510 Puyallup Street
Asset Type Encumbrances Land Buildings
21,838
Industrial
13,225
Industrial
12,567
12,040
—
—
Cost Capitalized
Subsequent to
Development or
Acquisition
Schedule III
Gross Book Value at 12/31/2021
Land/Land Imp Bldgs/TI
21,838
12,567
13,225
12,040
—
—
Total
(1)
34,405
25,265
Accum.
Depr. (2)
3,707
175
Year
Constructed/Renovated
2004
2021
Year
Acquired
2019
2021
Suwanee, Georgia
Industrial
Horizon Business 90
Industrial
Horizon Business 225
Industrial
Horizon Business 250
Industrial
Horizon Business 70
Industrial
Horizon Business 2780
Industrial
Horizon Business 25
Horizon Business 2790
Industrial
1000 Northbrook Parkway Industrial
Tampa, Florida
Fairfield Distribution
8640
Fairfield Distribution
4720
Fairfield Distribution
4758
Fairfield Distribution
8600
Fairfield Distribution
4901
Fairfield Distribution
4727
Fairfield Distribution
4701
Fairfield Distribution
4661
Eagle Creek Business
8701
Eagle Creek Business
8651
Eagle Creek Business
8601
Pinebrooke Bus Center
10350
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
Tracy, California
1400 Pescadero Avenue
1124 E Pescadero Ave
Industrial
Grounds
West Chester, Ohio
World Park Union Centre
9287
World Park Union Centre
9271
World Park Union Centre
9266
World Park Union Centre
9451
World Park Union Centre
5443
World Park Union Centre
9107
Industrial
Industrial
Industrial
Industrial
Industrial
Industrial
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
153
388
1,381
813
972
615
780
643
1,143
2,048
5,660
3,397
5,576
2,390
4,952
2,974
221
703
1,172
1,015
2,128
2,007
—
729
153
389
1,381
812
972
614
780
643
1,364
2,750
6,832
4,413
7,704
4,398
4,952
3,703
1,517
3,139
8,213
5,225
8,676
5,012
5,732
4,346
497
1,289
2,848
1,779
2,718
2,008
1,899
1,618
483
2,359
1,080
487
3,435
3,922
1,733
534
5,210
5,744
2,854
338
3,410
3,748
1,792
604
3,265
3,869
1,921
488
3,561
4,049
1,875
555
5,133
5,688
2,299
394
3,594
3,988
1,509
444
2,519
2,963
1,191
1,287
5,032
6,319
2,407
2,354
3,321
5,675
2,975
2,332
3,121
5,453
2,596
2,457
6,604
9,061
517
530
4,624
334
2,658
600
1,185
488
2,425
555
3,348
394
1,350
444
1,640
—
1,286
2,331
—
2,354
1,661
—
2,332
2,229
—
2,457
6,211
590
756
2,084
1,136
1,785
2,244
879
2,702
1,660
892
393
11
—
—
—
—
9,633
24,944
39,644
—
9,633
24,944
39,644
—
49,277
24,944
15,142
768
582
827
7,518
582
8,345
8,927
3,364
557
5,923
956
5,951
—
1,036
6,053
935
4,753
528
440
873
429
557
6,451
7,008
2,804
956
6,391
7,347
2,535
1,036
6,926
7,962
2,685
935
5,182
6,117
2,019
986
5,962
1,578
986
7,540
8,526
3,305
-64-
2002
1990
1997
1998
1997
1999
2006
1986
1998
1998
1999
1999
2000
2001
2001
2004
2006
2007
2007
2020
2008
2021
2006
2004
1999
1999
2005
1999
2010
2010
2010
2010
2010
2010
2010
2010
1999
1999
1999
1999
2000
2001
2001
2004
2006
2007
2007
2020
2017
2013
2021
2006
2004
2010
2010
2010
2010
Teterboro, New Jersey
1 Catherine Street
Industrial
—
14,376
18,788
14,376
18,799
33,175
4,652
2016
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Duke Realty Corporation and Duke Realty Limited Partnership
Real Estate and Accumulated Depreciation
December 31, 2021
(in thousands of U.S. dollars, as applicable)
Initial Cost
Schedule III
Gross Book Value at 12/31/2021
Land/Land Imp Bldgs/TI Total (1)
Accum.
Depr. (2)
Year
Constructed/Renovated
Year
Acquired
Cost Capitalized
Subsequent to
Development or
Acquisition
Name
Asset Type Encumbrances Land
Buildings
World Park Union
Centre 9245
Industrial
—
1,011
5,535
782
1,010
6,318
7,328
2,515
2001
West Palm Beach, Florida
Park of Commerce 5655 Industrial
Park of Commerce 5720 Industrial
Industrial
Airport Center 1701
Industrial
Airport Center 1805
Industrial
Airport Center 1865
Grounds
Park of Commerce #4
Park of Commerce #5
Grounds
Turnpike Crossing 1315 Industrial
Turnpike Crossing 1333 Industrial
Turnpike Crossing 6747 Industrial
Turnpike Crossing 6729 Industrial
Turnpike Crossing 6711 Industrial
Turnpike Crossing 6717 Industrial
—
—
—
—
—
—
—
—
—
—
—
—
—
1,417
1,872
2,112
1,478
1,300
5,882
6,258
7,390
6,255
10,607
8,576
8,328
7,849
1,728
3,633
5,844
4,445
4,168
—
—
5,391
4,560
7,112
7,506
7,210
9,542
310
844
689
251
773
—
—
353
975
2,786
723
38
1,378
1,417
2,032
2,112
1,479
1,300
5,882
6,258
7,390
6,255
10,607
8,576
8,340
7,850
2,038
4,317
6,533
4,695
4,941
—
—
5,744
5,535
9,898
8,229
7,236
10,919
3,455
6,349
8,645
6,174
6,241
5,882
6,258
13,134
11,790
20,505
16,805
15,576
18,769
757
1,636
2,628
1,785
1,843
—
—
2,393
2,439
3,301
1,902
927
947
2010
2010
2002
2002
2002
n/a
n/a
2016
2016
2017
2018
2019
2020
Wilmer, TX
110 Sunridge Blvd
Industrial
—
5,692
18,751
—
5,692
18,751
24,443
407
2021
Wind Gap, Pennsylvania
1380 Jacobsburg Road
Industrial
Wood-Ridge, New Jersey
5 Ethel Boulevard
Industrial
Accum. Depr. on
Improvements of
Undeveloped Land
Eliminations
Properties held-for-sale
—
15,500
25,247
753
15,500
26,000
41,500
4,555
2017
—
18,776
24,752
32
18,776
24,784
43,560
3,009
2019
59,722 3,480,500 5,473,564
660,060
(20)
(16)
561
9
(20)
(67,818) (102,867) (170,685)
(36,785)
3,435,591 6,007,848 9,443,439 1,684,413
(4)
2010
2010
2010
2010
2010
2010
2011
2011
2016
2016
2017
2018
2019
2020
2021
2019
2019
(1) The tax basis (in thousands) of our real estate assets at December 31, 2021 was approximately $8,734,029 (unaudited) for federal income tax purposes.
(2) Depreciation of real estate is computed using the straight-line method not to exceed 40 years for buildings and 15 years for land improvements for properties that we develop, and not to exceed 30
years for buildings and 10 years for land improvements for properties that we acquire. Tenant improvements are depreciated over shorter periods based on lease terms (generally 3 to 10 years).
-65-
DUKE REALTY CORPORATION AND DUKE REALTY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Balance at beginning of year
Acquisitions
Construction costs and tenant improvements
Depreciation expense
Cost of real estate sold or contributed
Write-off of fully depreciated assets
Real Estate Assets
Accumulated Depreciation
2021
2020
2019
2021
2020
2019
$8,768,432
$7,851,278
$7,248,346
$1,665,284
$1,487,593
$1,345,060
595,719
979,367
410,003
796,312
205,390
635,173
(598,445)
(130,949)
(203,502)
(85,659)
(176,603)
(61,028)
304,935
(118,072)
(130,949)
297,158
(33,808)
(85,659)
272,422
(68,861)
(61,028)
Balance at end of year including held-for-sale
$9,614,124
$8,768,432
$7,851,278
$1,721,198
$1,665,284
$1,487,593
Properties held-for-sale
(170,685)
(72,754)
(23,401)
(36,785)
(5,976)
(7,132)
Balance at end of year excluding held-for-sale
$9,443,439
$8,695,678
$7,827,877
$1,684,413
$1,659,308
$1,480,461
Other real estate investments
Real estate assets
172,637
49,477
165,500
$9,616,076
$8,745,155
$7,993,377
See Accompanying Notes to Independent Auditors' Report
-66-