Stockholders' Equity of Prologis, Inc.

12 Months Ended

Dec. 31, 2014

Equity [Abstract]

Stockholders' Equity of Prologis, Inc.

10. Stockholders’ Equity of Prologis, Inc.

Shares Authorized

At December 31, 2014, 1.1 billion shares were authorized to be issued by the Parent, of which 1.0 billion shares represent common stock. The Board may, without stockholder approval, classify or reclassify any unissued shares of our stock from time to time by setting or changing the preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions, qualifications and terms or conditions of redemption of such shares.

Common Stock

As discussed in Note 4, NBIM exercised a warrant and paid $213.8 million in exchange for six million shares of common stock.

In the fourth quarter of 2014, we issued 3.3 million shares of common stock under our at-the-market program, which generated $140.1 million in net proceeds. We had an equity distribution agreement that allowed us to sell up to $750 million aggregate gross sales proceeds of shares of common stock in this program, through two designated agents, who earn a fee of up to 2% of the gross proceeds, as agreed to on a transaction-by-transaction basis. On February 5, 2015, we entered into a new equity distribution agreement that replaced and superseded the previous agreement. The new agreement allows us to sell up to $750 million aggregate gross sales proceeds of shares of common stock in this program, through six designated agents, who earn a fee of up to 2% of the gross proceeds, as agreed to on a transaction-by-transaction basis.

On April 30, 2013, we completed a public offering of 35.65 million shares of common stock at a price of $41.60 per share, generating approximately $1.4 billion in net proceeds.

Under the 2012 Long-Term Incentive Plan (the “LTIP”), certain of our employees and outside directors are able to participate in equity-based compensation plans. Under this plan, we received gross proceeds for the issuance of common stock of $25.8 million, $22.4 million and $31.0 million, for the years ended December 31, 2014, 2013 and 2012, respectfully. See Note 13 for additional information on this plan.

Preferred Stock

At December 31, 2014 and 2013, we had one series of preferred stock outstanding, the series Q preferred stock, with a liquidation preference of $50 per share, a par value of $0.01 and a dividend rate of 8.54%, which will be redeemable at our option on or after November 13, 2026. Holders have, subject to certain conditions, limited voting rights and all holders are entitled to receive cumulative preferential dividends based upon liquidation preference. The dividends are payable quarterly in arrears on the last day of each quarter-end. Dividends are payable when, and if, they have been declared by the Board, out of funds legally available for the payment of dividends.

During the second quarter of 2014, we repurchased approximately 435 thousand shares of Series Q preferred stock and recognized a loss on preferred stock redemption of $6.5 million, which primarily represented the difference between the repurchase price and the carrying value of the preferred stock net of original issuance costs. In the second quarter of 2013, we redeemed all of the outstanding series L, M, O, P, R and S preferred stock and recognized a loss of $9.1 million in the first quarter of 2013, when we notified the holders of our intent to redeem these series of preferred stock.

Ownership Restrictions

For us to qualify as a REIT, five or fewer individuals may not own more than 50% of the value of our outstanding stock at any time during the last half of our taxable year. Therefore, our charter restricts beneficial ownership (or ownership generally attributed to a person under the REIT tax rules, by a person, or persons acting as a group, of issued and outstanding common and preferred stock that would cause that person to own or be deemed to own more than 9.8% (by value or number of shares, whichever is more restrictive) of our issued and outstanding capital stock. Further, subject to certain exceptions, no person shall at any time directly or indirectly acquire ownership of more than 25% of any of the preferred stock. These provisions assist us in protecting and preserving our REIT status and protect the interests of stockholders in takeover transactions by preventing the acquisition of a substantial block of outstanding shares of stock.

Shares of stock owned by a person or group of persons in excess of these limits are subject to redemption by us. The provision does not apply where a majority of the Board, in its sole and absolute discretion, waives such limit after determining that our status as a REIT for federal income tax purposes will not be jeopardized or the disqualification of our REIT status is advantageous to our stockholders.

Dividends

In order to comply with the REIT requirements of the Internal Revenue Code, we are generally required to make common and preferred stock dividends (other than capital gain distributions) to our stockholders in amounts that together at least equal (i) the sum of (a) 90% of our “REIT taxable income” computed without regard to the dividends paid deduction and net capital gains and (b) 90% of the net income (after tax), if any, from foreclosure property, minus (ii) certain excess non-cash income. Our common stock distribution policy is to distribute a percentage of our cash flow that ensures that we will meet the distribution requirements of the Internal Revenue Code and that allows us to also retain cash to meet other needs, such as capital improvements and other investment activities.

Our tax return for the year ended December 31, 2014 has not been filed. The taxability information presented for our dividends paid in 2014 is based upon management’s estimate. Our tax returns for open tax years have not been examined by the Internal Revenue Service, other than those discussed in Note 15. Consequently, the taxability of dividends is subject to change.

In 2014, 2013 and 2012, we paid all of our dividends in cash. The following summarizes the taxability of our common and preferred stock dividends for the years ended December 31:

	2014 (1)(2)		2013		2012
Common Stock:
Ordinary income	$	0.29	$	-	$	0.38
Qualified dividend		0.41		-		0.20
Capital gains		0.62		1.12		0.54
Total distribution	$	1.32	$	1.12	$	1.12
Preferred Stock - Series L (3):
Ordinary income	$	- -	$	-	$	0.55
Qualified dividend		- -		-		0.28
Capital gains		- -		0.41		0.80
Total dividend	$	- -	$	0.41	$	1.63
Preferred Stock - Series M, R and S (3):
Ordinary income	$	- -	$	-	$	0.57
Qualified dividend		- -		-		0.30
Capital gains		- -		0.42		0.82
Total dividend	$	- -	$	0.42	$	1.69
Preferred Stock - Series O (3):
Ordinary income	$	- -	$	-	$	0.59
Qualified dividend		- -		-		0.31
Capital gains		- -		0.44		0.85
Total dividend	$	- -	$	0.44	$	1.75
Preferred Stock - Series P (3):
Ordinary income	$	- -	$	-	$	0.58
Qualified dividend		- -		-		0.30
Capital gains		- -		0.43		0.83
Total dividend	$	- -	$	0.43	$	1.71
Preferred Stock - Series Q:
Ordinary income	$	0.71	$	-	$	1.44
Qualified dividend		1.01		-		0.75
Capital gains		2.55		4.27		2.08
Total dividend	$	4.27	$	4.27	$	4.27

(1) Items indicated by ‘- - ‘ are not applicable.

(2) Taxability for 2014 is estimated.

(3) As discussed above, in April 2013, we redeemed all of the outstanding series L, M, O, P, R and S preferred stock.

Common stock dividends are characterized for federal income tax purposes as ordinary income, qualified dividend, capital gains, non-taxable return of capital or a combination of the four. Common stock dividends that exceed our current and accumulated earnings and profits (calculated for tax purposes) constitute a return of capital rather than a dividend and generally reduce the stockholder’s basis in the common stock. To the extent that a dividend exceeds both current and accumulated earnings and profits and the stockholder’s basis in the common stock, it will generally be treated as a gain from the sale or exchange of that stockholder’s common stock. At the beginning of each year, we notify our stockholders of the taxability of the common stock dividends paid during the preceding year.

Pursuant to the terms of our preferred stock, we are restricted from declaring or paying any dividend with respect to our common stock unless and until all cumulative dividends with respect to the preferred stock have been paid and sufficient funds have been set aside for dividends that have been declared for the relevant dividend period with respect to the preferred stock.