Debt

9 Months Ended

Sep. 30, 2011

Debt [Abstract]

Debt

8. Debt

All debt is held directly or indirectly by the Operating Partnership. The REIT itself does not have any indebtedness, but guarantees the unsecured debt of the operating partnership. Generally, unsecured debt, including the credit facilities, senior notes, exchangeable senior notes, and unsecured term loans, is issued by the Operating Partnership or other wholly owned subsidiaries and guaranteed by the REIT. We generally do not guarantee the debt issued by consolidated subsidiaries in which we own less than 100%.

Our debt consisted of the following (dollars in thousands):

	September 30, 2011					December 31, 2010
	Weighted Average Interest Rate (1)			Amount Outstanding (1)		Weighted Average Interest Rate			Amount Outstanding
Credit Facilities		2.14	%	$	1,354,323		3.53	%	$	520,141
Senior notes		6.29	%		4,778,782		6.63	%		3,195,724
Exchangeable senior notes (2)		4.86	%		1,351,267		4.90	%		1,521,568
Secured mortgage debt (3)		4.59	%		2,035,660		5.67	%		1,249,729
Secured mortgage debt of consolidated investees (4)		4.57	%		1,371,885		—			—
Other debt of consolidated investees (5)		4.92	%		859,254		—			—
Other debt (6)		2.44	%		396,106		6.48	%		18,867
Totals		5.00	%	$	12,147,277		5.79	%	$	6,506,029

(1) Included in the balances at September 30, 2011 was debt assumed in connection with the Merger and acquisition of PEPR (see Note 2 for more details). The weighted average interest rate represents the interest rate including amortization of related premiums/discounts. Includes $4.3 billion of principal borrowings denominated in euro ($2.4 billion), Japanese yen ($1.4 billion), British pound sterling ($0.4 billion) and Singapore dollar ($0.1 billion).

(2) The interest rates include the impact of amortization of the non-cash discount related to these notes. The weighted average coupon interest rate was 2.6% as of September 30, 2011 and December 31, 2010. During the third quarter of 2011, we repurchased $135 million of outstanding notes (amount including discount was $132.5 million) for $135.2 million, resulting in a $2.7 million non-cash loss.

(3) The debt is secured by 292 real estate properties with an aggregate undepreciated cost of $4.6 billion at September 30, 2011.

(4) This debt was assumed in connection with the Merger and acquisition of PEPR. The debt is secured by 196 real estate properties with an aggregate undepreciated cost of $2.9 billion at September 30, 2011.

(5) This debt was assumed in connection with the Merger and acquisition of PEPR and includes $54.8 million on a $70 million credit facility obtained by a consolidated investee, €458.9 million ($613.1 million at September 30, 2011) of Eurobonds payable to third parties and €142.3 million ($191.4 million at September 30, 2011) of unsecured credit facilities associated with PEPR. During the third quarter of 2011, we repurchased €64.1 million ($86.1 million) of PEPR public bonds, resulting in a $2.4 million gain.

(6) The debt includes $18.9 million of assessment bonds and $377.2 million of corporate term loans.

During the nine months ended September 30, 2010, we repurchased certain senior and exchangeable senior notes outstanding with maturities in 2012 and 2013. We utilized proceeds from borrowings under the credit facilities to repurchase the senior notes. In addition, in 2010 we repaid certain secured mortgage debt in connection with the sale of two properties in Japan. The activity is summarized as follows (in thousands):

	Three Months Ended September 30,			Nine Months Ended September 30,
	2010			2010
Original principal amount	$	226,120			$	1,433,378
Cash purchase / repayment price	$	220,685			$	1,411,148
Loss on early extinguishment of debt (1)	$	(1,791	)		$	(48,449	)

(1) Represents the difference between the recorded debt (including unamortized related debt issuance costs, premiums and discounts) and the consideration we paid to retire the debt, which may include prepayment penalties and costs.

Credit Facilities

On June 3, 2011, we entered into a global senior credit facility (“Global Facility”), pursuant to which, the Operating Partnership and certain subsidiaries may obtain loans and/or procure the issuance of letters of credit in various currencies on a revolving basis in an aggregate amount not to exceed approximately $1.75 billion (subject to currency fluctuations). Funds may be drawn in U.S. dollar, euro, Japanese yen, British pound sterling and Canadian dollar. We may increase the Global Facility to $2.75 billion, subject to obtaining additional lender commitments.

The Global Facility is scheduled to mature on June 3, 2015, but the Operating Partnership may, at its option and subject to the satisfaction of certain conditions and payment of an extension fee, extend the maturity date of the Global Facility to June 3, 2016. Pricing under the Global Facility, including the spread over LIBOR, facility fees and letter of credit fees, varies based upon the public debt ratings of the Operating Partnership. The Global Facility contains customary representations, covenants and defaults (including a cross-acceleration to other recourse indebtedness of more than $50 million).

In addition, on June 3, 2011, we entered into a ¥36.5 billion (approximately $474.9 million at September 30, 2011) yen revolver (the “Revolver”). The Revolver matures on March 1, 2014, but we may, at our option and subject to the satisfaction of customary conditions and payment of an extension fee, extend the maturity date to February 27, 2015. We may increase availability under the Revolver to an amount not exceeding ¥56.5 billion (approximately $735.1 million at September 30, 2011) subject to obtaining additional lender commitments. Pricing under the Revolver is consistent with the Global Facility pricing. The Revolver contains certain customary representations, covenants and defaults that are substantially the same as the corresponding provisions of the Global Facility.

We refer to the Global Facility and the Revolver, collectively, as our “Credit Facilities”.

Commitments and availability under our Credit Facilities as of September 30, 2011 were as follows (dollars in millions):

Aggregate - commitments	$	2,208.3
Less:
Borrowings outstanding		1,352.2
Outstanding letters of credit		87.6
Current availability	$	768.5

Senior Notes

In June 2011, we completed an exchange offer for $4.6 billion of ProLogis senior notes and convertible senior notes with approximately $4.4 billion, or 95%, of the aggregate principal amount being validly tendered for exchange. The senior unsecured notes were exchanged for notes issued by the Operating Partnership that are guaranteed by the REIT. As a result of the exchange offer, we have no separate remaining financial reporting obligations or financial covenants associated with the ProLogis senior notes. All other terms of the newly issued senior notes and exchangeable notes remain substantially the same.

Exchangeable Senior Notes

In connection with the Merger and the exchange offer discussed above, our convertible senior notes became exchangeable senior notes issued by the Operating Partnership that are exchangeable into common stock of the REIT. As a result, the accounting for the exchangeable senior notes now requires us to separate the fair value of the derivative instrument (exchange feature) from the debt instrument and account for it separately as a derivative. The fair value of the derivative instrument was $62.5 million at the time of the Merger and was reclassified into Accounts Payable and Accrued Expenses from Debt in our Consolidated Balance Sheet. At each reporting period, we adjust the derivative instrument to fair value with the resulting adjustment being recorded in earnings as Foreign Currency Exchange and Derivative Gains (Losses), Net. The fair value of the derivative was $11.2 million at September 30, 2011 and therefore, we have recognized an unrealized gain of $61.0 million and $51.3 million, for the three and nine months ended September 30, 2011, respectively.

Secured Mortgage Debt

TMK bonds are a financing vehicle in Japan for special purpose companies known as TMKs. We issued a ¥13.0 billion ($161.3 million) TMK bond on March 17, 2011 at 1.34% due March 2018 secured by one property with an undepreciated cost of $273.4 million at September 30, 2011. In addition, we assumed ten secured mortgage notes and two additional TMK bonds with the Merger with an outstanding balance of $375.1 million and ¥13.5 billion ($176.0 million) at September 30, 2011, respectively, secured by 76 properties with an undepreciated cost of $934.4 million at September 30, 2011.

Other Debt

As of September 30, 2011, we had two outstanding term loans that we assumed in connection with the Merger, a Japanese Yen term loan with an outstanding balance of ¥12.5 billion ($165.4 million at September 30, 2011) that matures in October 2012 with a weighted average interest rate of 3.4%, and a €157.5 million ($211.8 million at September 30, 2011) senior unsecured term loan with a weighted average interest rate of 3.4% that matures in November 2015.

Long-Term Debt Maturities

Principal payments due on our debt, excluding the Credit Facilities, for the remainder of 2011 and for each of the years in the five-year period ending December 31, 2016 and thereafter are as follows (in thousands):

	Wholly Owned		Consolidated Investees		Total Consolidated
2011 (1)	$	48,891	$	39,884	$	88,775
2012 (1) (2)		1,153,008		381,672		1,534,680
2013 (2) (3)		1,044,335		620,162		1,664,497
2014		669,147		1,073,467		1,742,614
2015		1,132,571		17,830		1,150,401
2016		902,805		41,247		944,052
Thereafter		3,586,283		4,780		3,591,063
Total principal due		8,537,040		2,179,042		10,716,082
Premium, net		24,775		52,097		76,872
Net carrying balance	$	8,561,815	$	2,231,139	$	10,792,954

(1) We expect to repay the amounts maturing in 2011 and 2012 with borrowings under our Credit Facilities or with proceeds from the disposition of wholly owned real estate properties. The maturities in 2012 in our consolidated but not wholly owned subsidiaries include $240.2 million of unsecured credit facilities and $141.5 million of secured borrowings, which we expect to pay either by issuing new debt, with proceeds from asset sales or equity contributions to the funds. In October 2011, we repaid approximately $310 million of debt maturing in 2011 and 2012 with proceeds from the contribution to Prologis Targeted U.S. Logistics Fund.

(2) The maturities in 2012 and 2013 include $458.0 million and $527.8 million, respectively, of aggregate principal amounts of the exchangeable senior notes originally issued in 2007 and 2008, respectively, based on the year in which the holders first have the right to require us to repurchase their notes for cash.

(3) The exchangeable senior notes originally issued in November 2007 are included as 2013 maturities since the holders have the right to require us to repurchase their notes for cash in January 2013. The holders of these notes also have the option to exchange their notes in November 2012, which we may settle in cash or common stock, at our option.

Debt Covenants

Our debt agreements contain various covenants, including maintenance of specified financial ratios. We believe the covenants are customary and we were in compliance with all covenants as of September 30, 2011.