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 strategic 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):


	June 30,		December 31,
	2013		2012
Unconsolidated co-investment ventures	$	3,708,196	$	2,013,080
Other joint ventures		176,570		182,702

Totals	$	3,884,766	$	2,195,782

Unconsolidated Co-Investment Ventures

As of June 30, 2013, we had investments in and managed 12 unconsolidated co-investment ventures that own portfolios of operating industrial properties and may also develop properties. Investment Management Income 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). At the time, we had a 15% ownership interest that we accounted 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 deferral 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 expense 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 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.

In connection with the wind down of Prologis Japan Fund I, in June 2013 we purchased 14 properties from the venture and the venture sold the remaining eight properties aggregating 4.3 million square feet to NPR, based on appraised values. In addition, we contributed one pre-stabilized building to NPR for $232.6 million. As a result of the combined transactions, we recorded a net gain of $56.9 million in Gains on Acquisitions and Dispositions of Investments in Real Estate, Net in the Consolidated Statements of Operations. In connection with the contribution of the development building to NPR, we recognized $8.3 million of current tax expense.

NPR completed a secondary offering in June 2013 to fund the purchase of these properties. In connection with this offering, we invested ¥14.2 billion ($151.1 million) that temporarily increased our ownership interest to 17%. In July 2013, the underwriters exercised the overallotment option and our ownership interest decreased to 15%.

On August 6, 2013, Prologis North American Fund III sold $427.5 million of properties to a third party and we acquired the remaining properties for $529.0 million. All debt was paid in full at closing.

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


	Three Months Ended June 30,						Six Months Ended June 30,
	2013			2012			2013		2012
Earnings from unconsolidated co-investment ventures:
Americas (1)	$	(874	)	$	(6,749	)	$	13,394	$	(4,466	)
Europe (2)		8,761			7,172			16,303		15,169
Asia (3)		(16	)		730			2,469		2,208

Total earnings from unconsolidated co-investment ventures, net	$	7,871		$	1,153		$	32,166	$	12,911

Investment management and other income:
Americas	$	14,818		$	16,081		$	30,895	$	33,604
Europe (2)		13,854			9,325			24,467		18,462
Asia (3)		14,239			5,088			20,981		9,842

Total investment management income		42,911			30,494			76,343		61,908
Development management and other income		333			2			1,380		78

Total	$	43,244		$	30,496		$	77,723	$	61,986

1)	During the first quarter of 2013, we recognized a gain of $8.7 million representing our share of the gain from the sale of two properties in February 2013 in the Prologis Brazil Logistics Partners Fund (“Brazil Fund”).

2)	In the first quarter of 2013, we launched PELP, which we started accounting for under the equity method. Our proportionate share of its net earnings is included in 2013 from the date it commenced operations (see above for additional information).

In the first quarter of 2013, we launched NPR, which we started accounting for under the equity method. Our proportionate share of its net earnings is included in 2013 from the date it commenced operations. In addition, in connection with the wind down of Prologis Japan Fund I in June 2013, the venture sold eight properties to NPR and we acquired the remaining 14 properties (see above for additional information).

Investment Management Income 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 $0.7 million and $0.9 million during the three and six months ended June 30, 2013, respectively and $0.5 million and $1.5 million during the three and six months ended June 30, 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
	June 30,			December 31,			June 30,		December 31,
Unconsolidated co-investment ventures by region	2013			2012			2013		2012
Americas		21.6	%		23.2	%	$	1,106,713	$	1,111,831
Europe (1)		39.6	%		29.7	%		2,173,996		722,748
Asia (1)(2)		17.2	%		19.2	%		427,487		178,501

Totals		28.4	%		25.1	%	$	3,708,196	$	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.

(2)	As discussed above, we substantially completed the wind down of Prologis Japan Fund I in June 2013. The investments in and advances to amount for Asia, as of June 30, 2013, includes a receivable from Prologis Japan Fund I of $93.1 million for the estimated remaining net proceeds.

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 June 30, 2013 (1):
Revenues	$	183.1		$	206.9		$	53.8		$	443.8
Net earnings	$	3.5		$	14.2		$	8.2		$	25.9
For the six months ended June 30, 2013 (1):
Revenues	$	365.2		$	355.3		$	99.1		$	819.6
Net earnings (2)	$	33.8		$	44.8		$	12.4		$	91.0
As of June 30, 2013(1):
Total assets	$	9,074.3		$	9,937.4		$	4,122.0		$	23,133.7
Amounts due to us (3)	$	26.9		$	79.2		$	153.8		$	259.9
Third party debt (4)	$	3,950.2		$	2,639.5		$	1,404.5		$	7,994.2
Total liabilities	$	4,160.2		$	3,647.4		$	1,582.8		$	9,390.4
Noncontrolling interest	$	1.5		$	9.4		$	—		$	10.9
Venture partners’ equity	$	4,912.6		$	6,280.6		$	2,539.2		$	13,732.4
Our weighted average ownership (5)		21.6	%		39.6	%		17.2	%		28.4	%
Our investment balance (6)	$	1,106.7		$	2,174.0		$	427.5		$	3,708.2
Deferred gains, net of amortization (7)	$	145.3		$	181.6		$	69.8		$	396.7


2012	Americas			Europe			Asia			Total
For the three months ended June 30, 2012:
Revenues	$	185.8		$	120.9		$	35.0		$	341.7
Net earnings (loss)	$	(28.0	)	$	24.3		$	(0.9	)	$	(4.6	)
For the six months ended June 30, 2012 (1):
Revenues	$	396.2		$	245.9		$	69.8		$	711.9
Net earnings (loss)	$	(38.1	)	$	48.0		$	4.7		$	14.6
As of December 31, 2012:
Total assets	$	9,070.4		$	6,605.2		$	1,937.0		$	17,612.6
Amounts due to 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 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 three and six months ended June 30, 2013. In June 2013, Prologis Japan Fund I substantially completed the wind down process. 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 June 30, 2013, we had one note receivable from Prologis SGP Mexico of $19.8 million; a receivable from PELP for the remaining sale proceeds of $67.7 million until final closing audits are completed; and a receivable from Prologis Japan Fund I for the estimated remaining net sale proceeds of $93.1 million that will be repaid by the end of the year. 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 June 30, 2013, we did not guarantee any third party debt of our co-investment ventures. As of December 31, 2012, we guaranteed $30.4 million of the third party debt of certain co-investment 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. Our venture partners fulfill their equity commitment with cash. We may fulfill our equity commitment through contributions of properties or cash. The venture may obtain financing for the properties and therefore the equity commitment may be less than the acquisition price of the real estate. 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 June 30, 2013 (in millions):


	Equity commitments		Expiration date for remaining commitments
Prologis Targeted U.S. Logistics Fund (1)
Prologis	$	100.0	Open-Ended
Venture Partners	$	31.5

Prologis SGP Mexico (2)
Prologis	$	24.6	(2)
Venture Partner	$	98.1

Prologis European Properties Fund II (3) (4)
Prologis	$	111.2	March 2015
Venture Partner	$	27.5

Europe Logistics Venture 1 (3)
Prologis	$	53.7	February 2014
Venture Partner	$	304.3

Prologis European Logistics Partners (3) (5)
Prologis	$	277.5	January 2014
Venture Partner	$	277.5

Prologis Targeted Europe Logistics Fund (3) (6)
Prologis	$	143.9	(6)
Venture Partner	$	2.6

Prologis China Logistics Venture 1 (7)
Prologis	$	65.9	March 2015
Venture Partner	$	373.4

Total
Prologis	$	776.8
Venture Partners	$	1,114.9

(1)

During the six months ended June 30, 2013, equity commitments of $11.5 million were obtained from third party investors and $10.0 million of third party equity commitments were called. In June 2013, we committed to contribute an additional $100.0 million to the venture. In July 2013, additional equity commitments of $30.0 million were obtained from third party investors and the venture called all outstanding commitments from us and the third parties, which increased our ownership.

(2)	These equity commitments will be called only to pay outstanding debt of the venture. The relevant debt is due in the third quarter of 2013, with an option to extend until the third quarter of 2014.

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

(4)

During the six months ended June 30, 2013, equity commitments of €30.0 million ($39.2 million) were obtained from a new third party investor and we committed to contribute €125.0 million ($163.5 million). 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 ($11.8 million) was called from third parties. In July 2013, an additional €95.0 million ($124.3 million) of equity commitments were obtained from third party investors. Also in July, the venture called capital of €160.0 million ($209.3 million) to fund a contribution from us and increase net equity of which €92.3 million ($120.7 million) was from third parties and €67.7 million ($88.6 million) was our share thereby increasing our ownership.

(5)

This venture was formed in March 2013, with an equity commitment of €2.4 billion ($3.1 billion), which included €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. In June 2013, the venture obtained additional equity commitments of €138 million ($180.5 million) of which €69.0 million ($90.3 million) was our share. These commitments were called in July 2013 to fund the acquisition of properties from a third party.

(6)

Equity commitments of €160.0 million ($209.5 million) and €2.0 million ($2.6 million) were obtained from us and a third party, respectively, during the second quarter of 2013. Subsequently, we contributed €50.0 million ($65.6 million) reducing our total equity commitment as of June 30, 2013. In July 2013, the venture called the remaining commitments from us and the third party to repay debt, which increased our ownership.

(7)	Equity commitments of $10.0 million of which $1.5 million was our share were called during the second quarter of 2013 to fund development.

Other Joint Ventures

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


	June 30,		December 31,
	2013		2012
Americas	$	102,142	$	106,655
Europe		47,303		48,503
Asia		27,125		27,544

Total investments in and advances to other joint ventures	$	176,570	$	182,702