4. Unconsolidated Entities

Summary of Investments

We have investments in entities through a variety of ventures. We co-invest in entities that own multiple properties with private capital investors and provide asset and property management services to these entities. We refer to these entities as co-investment ventures. Our ownership interest in these entities generally ranges from 15-50%. These entities may be consolidated or unconsolidated, depending on the structure, our partner’s rights and participation and our level of control of the entity. This note details our unconsolidated co-investment ventures. See Note 9 for more detail regarding our consolidated investments.

We also have investments in joint ventures, generally with one partner and that we do not manage. We refer to our investments in the entities accounted for on the equity method, both unconsolidated co-investment ventures and other unconsolidated joint ventures, collectively, as unconsolidated entities.

Our investments in and advances to our unconsolidated entities are summarized below (in thousands):


	March 31, 2013		December 31, 2012
Unconsolidated co-investment ventures	$	3,458,229	$	2,013,080
Other joint ventures		176,985		182,702

Totals	$	3,635,214	$	2,195,782

Unconsolidated Co-Investment Ventures

As of March 31, 2013, we had investments in and managed 13 unconsolidated co-investment ventures that own portfolios of operating industrial properties and may also develop properties. Private Capital Revenue includes revenues we earn for the management services we provide to unconsolidated entities and certain third parties. These fees are recognized as earned and may include property and asset management fees or transactional fees for leasing, acquisition, construction, financing, legal and tax services. We may also earn incentive returns or promotes based on the third party investor returns over time. In addition, we may earn fees for services provided to develop a building within the co-investment venture. These are reflected as Development Management and Other Income in the Consolidated Statements of Operations.

In the first quarter of 2013, we launched the initial public offering for Nippon Prologis REIT, Inc. (“NPR”). NPR is a long-term investment vehicle for our stabilized properties in Japan. On February 14, 2013, NPR was listed on the Japan Stock Exchange and commenced trading. At that time, NPR acquired a portfolio of 12 properties from us for an aggregate purchase price of ¥173 billion ($1.9 billion), net cash proceeds of ¥158 billion ($1.7 billion). We have a 15% ownership interest that we account for under the equity method. As a result of this transaction, we recognized a gain of $337.9 million, net of a $59.6 million deferred gain due to our ongoing investment. The gain is recorded in Gains on Acquisitions and Dispositions of Investments in Real Estate, Net in the Consolidated Statements of Operations. We recognized $38.6 million of current tax in connection with this contribution.

On March 19, 2013, we closed Prologis European Logistics Partners Sàrl (“PELP”), a joint venture with Norges Bank Investment Management (“NBIM”), which is the manager of the Norwegian Government Pension Fund Global. We have a 50% ownership interest that we account for under the equity method. The venture has an initial term of 15 years, which may be extended for an additional 15-year period, and thereafter extended upon negotiation between partners. We will have the ability to reduce our ownership to 20% following the second anniversary of closing. The venture acquired a portfolio for approximately €2.3 billion ($3.0 billion) consisting of 195 high-quality properties in 11 target European global markets that were contributed by us. As a result of this transaction, we recognized a gain of $1.8 million, net of a deferred gain due to our ongoing investment. The gain is recorded in Gains on Acquisitions and Dispositions of Investments in Real Estate, Net in the Consolidated Statements of Operations. In connection with the closing, a warrant NBIM received at signing to acquire six million shares of Prologis common stock with a strike price of $35.64 became exercisable. The warrant can be net share settled.

Summarized information regarding our investments in the co-investment ventures is as follows (in thousands):


	Three Months Ended March 31,
	2013		2012
Earnings from unconsolidated co-investment ventures:
Americas (1)	$	14,268	$	2,283
Europe (2)		7,542		7,997
Asia (2)		2,485		1,478

Total earnings from unconsolidated co-investment ventures, net	$	24,295	$	11,758

Private capital revenue and other income:
Americas (1)	$	16,077	$	17,523
Europe (2)		10,613		9,137
Asia (2)		6,742		4,754

Total private capital revenue		33,432		31,414
Development management and other income		1,047		76

Total	$	34,479	$	31,490

1)	During the first quarter of 2013, we recognized a gain of $9.7 million representing our share of the sale of two properties in the Prologis Brazil Logistics Partners Fund (“Brazil Fund”).

In the first quarter of 2013, we launched two new co-investment ventures in Europe and Japan and started accounting for these ventures under the equity method. Our proportionate share of the net earnings of these entities are included in 2013 from the date they commenced operations (see above for additional information on these transactions).

Private Capital Revenue includes fees and incentives we earn for services provided to our unconsolidated co-investment ventures (shown above), as well as fees earned from other unconsolidated entities and third parties of $0.2 million and $1.0 million during the three months ended March 31, 2013 and 2012, respectively.

Information about our investments in the co-investment ventures is as follows (dollars in thousands):


	Weighted Average Ownership Percentage						Investment in and Advances to
Unconsolidated co-investment ventures by region	March 31, 2013			December 31, 2012			March 31, 2013		December 31, 2012
Americas		21.3	%		23.2	%	$	1,124,636	$	1,111,831
Europe (1)		36.8	%		29.7	%		2,041,583		722,748
Asia (1)		17.0	%		19.2	%		292,010		178,501

Totals		27.0	%		25.1	%	$	3,458,229	$	2,013,080

(1)	As discussed above, the primary reason for the increase in our investments in and advances to our unconsolidated entities in Europe and Asia is due to PELP and NPR.

Summarized financial information of the co-investment ventures (for the entire entity, not our proportionate share) and our investment in such ventures is presented below (dollars in millions):


2013	Americas			Europe			Asia			Total
For the three months ended March 31, 2013 (1):
Revenues	$	182.1		$	148.4		$	45.3		$	375.8
Net earnings (2)	$	30.3		$	24.1		$	4.2		$	58.6
As of March 31, 2013(1):
Total assets	$	9,329.0		$	9,698.2		$	3,666.7		$	22,693.9
Amounts due to us (3)	$	37.4		$	84.4		$	38.9		$	160.7
Third party debt (4)	$	3,873.9		$	2,654.6		$	1,699.5		$	8,228.0
Total liabilities	$	4,224.6		$	3,582.7		$	1,841.9		$	9,649.2
Noncontrolling interest	$	1.3		$	7.3		$	—		$	8.6
Venture partners’ equity	$	5,103.1		$	6,108.2		$	1,824.8		$	13,036.1
Our weighted average ownership (5)		21.3	%		36.8	%		17.0	%		27.0	%
Our investment balance (6)	$	1,124.6		$	2,041.6		$	292.0		$	3,458.2
Deferred gains, net of amortization (7)	$	147.0		$	182.5		$	57.9		$	387.4


2012	Americas			Europe			Asia			Total
For the three months ended March 31, 2012 (1):
Revenues	$	210.7		$	125.0		$	34.8		$	370.5
Net earnings (loss)	$	(10.1	)	$	23.7		$	5.6		$	19.2
As of December 31, 2012:
Total assets	$	9,070.4		$	6,605.2		$	1,937.0		$	17,612.6
Amounts due to (from) us (3)	$	31.9		$	33.3		$	7.7		$	72.9
Third party debt (4)	$	3,835.5		$	2,384.2		$	972.9		$	7,192.6
Total liabilities	$	4,170.4		$	2,953.8		$	1,062.5		$	8,186.7
Noncontrolling interest	$	1.4		$	7.5		$	—		$	8.9
Venture partners’ equity	$	4,898.6		$	3,643.9		$	874.5		$	9,417.0
Our weighted average ownership (5)		23.2	%		29.7	%		19.2	%		25.1	%
Our investment balance (6)	$	1,111.8		$	722.8		$	178.5		$	2,013.1
Deferred gains, net of amortization (7)	$	147.9		$	181.6		$	0.1		$	329.6

(1)

As discussed in Note 2, in 2012, we concluded two of our co-investment ventures in the Americas whose results are not included in the first quarter of 2013 (NAIF II and Prologis California). First quarter of 2012 included activities for these ventures only through the transaction date. In addition, in the first quarter of 2013, we launched two new co-investment ventures PELP and NPR, and the results of these ventures are included in the first quarter of 2013. See above for more details on these transactions.

(2)	During the first quarter of 2013, the Brazil Fund sold two buildings for a net gain of $21.1 million.

(3)

As of March 31, 2013, we had one note receivable from Prologis SGP Mexico of $19.8 million and a receivable from PELP for remaining sale proceeds of $64.9 million until final closing audits are completed. As of December 31, 2012, we had one note receivable from Prologis SGP Mexico of $19.7 million. The remaining amounts generally represent current balances from services provided by us to the co-investment ventures.

(4)	As of March 31, 2013 and December 31, 2012, we guaranteed $23.4 million and $30.4 million, respectively, of the third party debt of certain unconsolidated ventures.

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

(6)

The difference between our ownership interest of the venture’s equity and our investment balance results principally from three types of transactions: (i) deferring a portion of the gains we recognize from a contribution of one of our properties to the venture (see next subfootnote); (ii) recording additional costs associated with our investment in the venture; and (iii) advances to the venture.

(7)	This amount is recorded as a reduction to our investment and represents the gains that were deferred when we contributed a property to a venture due to our continuing ownership in the property.

Equity Commitments Related to Certain Unconsolidated Co-Investment Ventures

Certain co-investment ventures have equity commitments from us and our venture partners. We may fulfill our equity commitment through contributions of properties or cash. Our venture partners fulfill their equity commitment with cash. We are committed to offer to contribute certain properties that we develop and stabilize in select markets in Europe to certain co-investment ventures. These ventures are committed to acquire such properties, subject to certain exceptions, including that the properties meet certain specified leasing and other criteria, and that the ventures have available capital. The venture may obtain financing for the properties and therefore the equity commitment may be less than the acquisition price of the real estate. We are not obligated to contribute properties at a loss. Depending on market conditions, the investment objectives of the ventures, our liquidity needs and other factors, we may make contributions of properties to these ventures through the remaining commitment period and we may make additional cash investments in these ventures.

The following table is a summary of remaining equity commitments as of March 31, 2013 (in millions):


	Equity commitments		Expiration date for remaining commitments
Prologis Targeted U.S. Logistics Fund (1)
Prologis	$	—	Open-Ended
Venture Partners	$	35.0
Prologis SGP Mexico (2)
Prologis	$	24.6	(2)
Venture Partner	$	98.1
Prologis European Properties Fund II (3)
Prologis	$	—	March 2015
Venture Partner	$	38.4
Europe Logistics Venture 1 (4)
Prologis	$	52.6	February 2014
Venture Partner	$	298.2
Prologis European Logistics Partners (5)
Prologis	$	183.3	January 2014
Venture Partner	$	183.3
Prologis China Logistics Venture 1
Prologis	$	67.4	March 2015
Venture Partner	$	381.7
Total
Prologis	$	327.9
Venture Partners	$	1,034.7

(1)	Equity commitments of $5.0 million were secured from a new third party investor during the first quarter of 2013.

(2)	These equity commitments will be called only to pay outstanding debt of the venture. The relevant debt was originally due in the third quarter of 2012 but was extended until the third quarter of 2013. There is also an option to extend until the third quarter of 2014.

(3)

Equity commitments of €30.0 million ($38.4 million) were secured from a new third party investor during the first quarter of 2013. To fund the extension of a building and to repay debt, this venture called capital of €49.0 million ($63.7 million) in April 2013. We contributed €40.0 million ($52.0 million), which included our share of the capital called, as well as an additional investment that increased our ownership interest in this venture, while the remaining €9.0 million ($11.7 million) reduced the previously committed equity from third parties.

(4)	Equity commitments are denominated in euro and reported above in U.S. dollar.

(5)

In March 2013, we formed a co-investment venture with an equity commitment of €2.4 billion ($3.1 billion), which includes €1.2 billion ($1.6 billion) commitment from both our partner and us. As discussed above, in March we contributed 195 properties to this venture using the majority of the equity commitments.

Other Joint Ventures

Our investments in and advances to these entities are as follows (in thousands):


	March 31, 2013		December 31, 2012
Americas	$	102,204	$	106,655
Europe		47,069		48,503
Asia		27,712		27,544

Total investments in and advances to other joint ventures	$	176,985	$	182,702