9.	Noncontrolling Interests

Operating Partnership

We report noncontrolling interests related to several entities we consolidate but do not own 100% of the common 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 exchangeable into shares of the REIT’s common stock (or cash), generally at a rate of one share of common stock to one unit. We evaluated the noncontrolling interests with redemption provisions that permit the issuer to settle in either cash or common stock at the option of the issuer to determine whether temporary or permanent equity classification on the balance sheet is appropriate, including the requirement to settle in unregistered shares, and determined that these units meet the requirements to qualify for presentation as permanent equity. We also consolidate several entities in which we do not own 100% and the units of the entity are not exchangeable into our common stock.

If we contribute a property to a consolidated co-investment venture, the property is still reflected in the Consolidated Financial Statements, but due to our ownership of less than 100%, there is an increase in noncontrolling interest related to the contributed properties, which represents the cash we receive from our partners.

During the nine months ended September 30, 2013, net earnings attributable to noncontrolling interests was $3.1 million, of which $4.6 million was a loss from continuing operations and $7.7 million was income from discontinued operations. All other periods were not considered significant.

In June 2013, we acquired our partners’ interest in Prologis Institutional Alliance Fund II, a consolidated co-investment venture. In connection with this transaction, we paid $245.8 million and issued 804,734 limited partnership units worth $31.3 million in one of our limited partnerships based primarily on appraised values of the properties. These units are exchangeable into an equal number of shares of our common stock. The difference between the amount we paid and the noncontrolling interest balance at the time was not significant, but was adjusted through equity with no gain or loss recognized. As a result of this transaction, the assets and liabilities associated with this venture are now wholly owned in our Consolidated Balance Sheets.

In the second quarter of 2013, we earned a promote fee from Prologis Institutional Alliance Fund II of $18.8 million from the fund, which was based on the venture’s cumulative returns to the investors over the life of the venture. Of that amount, $13.5 million represented the third party investors’ portion and is reflected as a component of Noncontrolling Interest in the Consolidated Statements of Operations for the nine months ended September 30, 2013. We also recognized approximately $3.0 million of expense for the nine months ended September 30, 2013, in Investment Management Expenses in the Consolidated Statements of Operations, representing the cash bonus paid out to certain employees pursuant to the terms of the Prologis Promote Plan, previously referred to as the Private Capital Plan.

REIT

The noncontrolling interest of the REIT includes the noncontrolling interests presented in the Operating Partnership, as well as the common limited partnership units in the Operating Partnership that are not owned by the REIT. As of September 30, 2013, the REIT owned an approximate 99.63% common general partnership interest in the Operating Partnership.

The following is a summary of the noncontrolling interest and the consolidated entity’s total investment in real estate and debt at September 30, 2013 and December 31, 2012 (dollars in thousands):


	Our Ownership Percentage						Noncontrolling Interest				Total Investment In Real Estate				Debt
	2013			2012			2013		2012		2013		2012		2013		2012
Partnerships with exchangeable units (1)		various			various		$	74,611	$	44,476	$	589,352	$	826,605	$	—	$	—
Prologis Institutional Alliance Fund II (2)		N/A			28.2	%		—		280,751		—		571,668		—		178,778
Mexico Fondo Logistico (AFORES) (3)		20.0	%		20.0	%		215,056		157,843		455,011		388,960		197,349		214,084
Brazil Fund (4)		50.0	%		50.0	%		68,503		66,494		—		—		—		—
Prologis AMS		38.5	%		38.5	%		63,005		59,631		145,102		160,649		44,861		63,749
Other consolidated entities		various			various			38,722		43,930		379,472		404,825		59,086		62,061

Operating Partnership noncontrolling interests								459,897		653,125		1,568,937		2,352,707		301,296		518,672
Limited partners in the Operating Partnership (5)								50,532		51,194		—		—		—		—

REIT noncontrolling interests							$	510,429	$	704,319	$	1,568,937	$	2,352,707	$	301,296	$	518,672

(1)

At September 30, 2013 and December 31, 2012, there were 1,949,501 and 1,173,571 limited partnership units, respectively, that were exchangeable into an equal number of shares of the REIT’s common stock. At September 30, 2013, this included the 804,734 units of one of our limited partnerships issued as part of the Prologis Institutional Alliance Fund II transaction. In the second quarter of 2013, 1,053 limited partnership units were redeemed for cash and the remaining limited partnership units of one of our limited partnerships were redeemed for 27,751 shares of common stock. All of these 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.

(2)	As disclosed above, we acquired our partners’ interest in June 2013.

(3)	In May 2013, we contributed land and five properties aggregating 0.7 million square feet to this entity for $52.1 million. As this entity is consolidated, we did not record a gain on this transaction.

(4)

We have a 50% ownership interest in and consolidate the Brazil Fund that in turn has investments in several joint ventures that are accounted for on the equity method. The Brazil Fund’s assets are primarily investments in unconsolidated entities of $139.6 million at September 30, 2013. For additional information on our unconsolidated investments, see Note 4.

(5)

At September 30, 2013 and December 31, 2012, there were 1,843,131 and 1,893,266 units respectively, that were associated with the limited partners in the Operating Partnership and were exchangeable into an equal number of shares of the REIT’s common stock. In the third quarter of 2013, 50,135 units were redeemed for cash. All of these outstanding limited partnership units receive quarterly cash distributions equal to the quarterly distributions paid on our common stock pursuant to the terms of the partnership agreement.