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 other 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):


	September 30,		December 31,
	2013		2012
Unconsolidated co-investment ventures	$	4,035,790	$	2,013,080
Other joint ventures		174,515		182,702

Totals	$	4,210,305	$	2,195,782

Unconsolidated Co-Investment Ventures

As of September 30, 2013, we had investments in and managed 11 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 of 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 was 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.

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 6 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. To fund these combined transactions, we contributed ¥14.2 billion ($144.0 million), which retained our 15% ownership interest following the exercise of the overallotment option by the underwriter. In connection with the contribution of the development building to NPR, we recognized $8.3 million of current tax expense.

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 from us for approximately €2.3 billion ($3.0 billion) consisting of 195 properties in 11 target European global markets. 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 was 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 August 2013 we concluded NAIF III. See Note 2 for information regarding this transaction.

Subsequent to quarter end, on October 2, 2013, we acquired our partner’s interest in Prologis SGP Mexico (“SGP Mexico”), one of our co-investment ventures, and concluded the venture.

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


	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2013		2012			2013		2012
Earnings (loss) from unconsolidated co-investment ventures:
Americas (1)	$	1,664	$	(3,912	)	$	15,058	$	(8,378	)
Europe (2)		20,005		5,858			36,308		21,027
Asia (3)		4,100		432			6,569		2,640

Total earnings from unconsolidated co-investment ventures, net	$	25,769	$	2,378		$	57,935	$	15,289


Investment management and other income:
Americas	$	17,512	$	16,937		$	48,407	$	50,541
Europe (2)		20,037		9,546			44,504		28,008
Asia (3)		9,840		5,131			30,821		14,973

Total investment management income		47,389		31,614			123,732		93,522
Development management and other income		551		106			1,931		184

Total	$	47,940	$	31,720		$	125,663	$	93,706

During the three and nine months ended September 30, 2013, we recognized gains of $1.2 million and $10.0 million, respectively, representing our share of the gain from the sale of one and three properties, respectively, by the Prologis Brazil Logistics Partners Fund and related joint ventures (“Brazil Fund”).

2)	We launched PELP, which we account 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).

3)	We launched NPR, which we account 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).

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 $0.9 million and $1.9 million during the three and nine months ended September 30, 2013, respectively and $0.1 million and $1.6 million during the three and nine months ended September 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
	September 30,			December 31,			September 30,		December 31,
Unconsolidated co-investment ventures by region	2013			2012			2013		2012
Americas		23.5	%		23.2	%	$	1,211,275	$	1,111,831
Europe (1)		41.3	%		29.7	%		2,492,282		722,748
Asia (1) (2)		15.1	%		19.2	%		332,233		178,501

Totals		30.4	%		25.1	%	$	4,035,790	$	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, respectively.

(2)	As discussed above, we completed the wind down of Prologis Japan Fund I in June 2013.

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 September 30, 2013 (1):
Revenues	$	173.2		$	215.3		$	56.8		$	445.3
Net earnings (2)	$	9.1		$	41.9		$	15.7		$	66.7
For the nine months ended September 30, 2013 (1):
Revenues	$	538.4		$	571.6		$	160.0		$	1,270.0
Net earnings (2)	$	34.9		$	77.8		$	32.9		$	145.6
As of September 30, 2013 (1):
Total assets	$	8,433.4		$	11,471.4		$	3,477.3		$	23,382.1
Amounts due to us (3)	$	38.3		$	44.8		$	94.7		$	177.8
Third party debt (4)	$	3,277.2		$	2,715.7		$	1,441.8		$	7,434.7
Total liabilities	$	3,620.7		$	4,409.7		$	1,532.4		$	9,562.8
Noncontrolling interest	$	1.6		$	10.7		$	—		$	12.3
Venture partners’ equity	$	4,811.1		$	7,051.0		$	1,944.9		$	13,807.0
Our weighted average ownership (5)		23.5	%		41.3	%		15.1	%		30.4	%
Our investment balance (6)	$	1,211.3		$	2,492.3		$	332.2		$	4,035.8
Deferred gains, net of amortization (7)	$	141.1		$	184.3		$	69.5		$	394.9


2012	Americas			Europe			Asia			Total
For the three months ended September 30, 2012:
Revenues	$	184.8		$	115.5		$	36.0		$	336.3
Net earnings (loss)	$	(20.6	)	$	9.6		$	4.2		$	(6.8	)
For the nine months ended September 30, 2012 (1):
Revenues	$	581.0		$	361.4		$	105.8		$	1,048.2
Net earnings (loss)	$	(66.5	)	$	49.0		$	8.9		$	(8.6	)
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 above and in Note 2, we have had significant activity with our unconsolidated co-investment ventures in 2012 and 2013. We concluded Prologis California and NAIF II in 2012 and NAIF III and the Prologis Japan Fund I in 2013 and only included the results of these ventures through the transaction dates. In 2013, we launched two new co-investment ventures (PELP and NPR) and the results of these ventures are included from the date these ventures acquired the properties.

(2)	During the three and nine months ended September 30, 2013, the Brazil Fund sold one and three buildings for a net gain of $2.9 million and $24.0 million, respectively.

(3)

As of September 30, 2013, we had receivables from PELP and Prologis Japan Fund I for the remaining sale proceeds of $34.8 million and $8.1 million, respectively, which we expect will be repaid by the end of the year. As of September 30, 2013 and December 31, 2012, we had a note receivable from SGP Mexico of $19.7 million. As discussed earlier, we acquired our partner’s interest in SGP Mexico on October 2, 2013 at which time the note receivable was settled. The remaining amounts generally represent current balances for services provided by us to the co-investment ventures.

(4)	As of September 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 September 30, 2013 (in millions):


	Equity commitments		Expiration date for remaining commitments
Prologis Targeted U.S. Logistics Fund (1)
Prologis	$	—	(1)
Venture Partners	$	150.0

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

Prologis European Properties Fund II (3) (4)
Prologis	$	23.4	March 2015
Venture Partner	$	302.1

Europe Logistics Venture 1 (3)
Prologis	$	55.5	February 2014
Venture Partner	$	314.5

Prologis European Logistics Partners (3) (5)
Prologis	$	193.3	January 2014
Venture Partner	$	193.3

Prologis China Logistics Venture 1 (6)
Prologis	$	63.2	March 2015
Venture Partner	$	358.0

Total
Prologis	$	360.0
Venture Partners	$	1,416.0

(1)

During the nine months ended September 30, 2013, equity commitments of $191.5 million were obtained from third party investors and we committed to contribute an additional $100.0 million. To fund the acquisition of properties during the third quarter, the venture called capital of $171.5 million, of which $71.5 million was from third parties and $100.0 million was from us, resulting in an increase of our ownership. In October 2013, the venture raised an additional $53.5 million from third party investors and called equity commitments of $101.8 million from third party investors to repay debt and fund the acquisition of properties.

(2)	As discussed above, we acquired our partner’s interest on October 2, 2013, and therefore have no remaining equity commitments after that date.

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

(4)

During the nine months ended September 30, 2013, equity commitments of €325.0 million ($436.4 million) were obtained from new third party investors and we committed to contribute €125.0 million ($165.5 million). To meet the capital requirements of the venture, including the repayment of debt and contribution of properties by us, the venture called capital of €209.0 million ($276.3 million) of which €101.3 million ($134.3 million) was from third parties and €107.7 million ($142.1 million) was our share, 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 €138.0 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 $36.0 million of which $5.4 million was our share were called during 2013 to fund development.

In addition, during the nine months ended September 30, 2013, Prologis Targeted European Logistics Fund had equity commitments of €160.0 million ($209.5 million) and €2.0 million ($2.6 million) which were obtained from us and a third party, respectively. The venture called the commitments from us and the third party to repay debt, which increased our ownership. In October 2013, the venture raised additional equity commitments of €99.0 million ($136.6 million) from third party investors, which have subsequently been called.

Other Joint Ventures

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


	September 30,		December 31,
	2013		2012
Americas	$	97,253	$	106,655
Europe		50,166		48,503
Asia		27,096		27,544

Total investments in and advances to other joint ventures	$	174,515	$	182,702