Business Combination

6 Months Ended

Jun. 30, 2016

Business Combinations [Abstract]

Business Combination

NOTE 2. BUSINESS COMBINATION

On May 29, 2015, we acquired the real estate assets and operating platform from KTR Capital Partners and its affiliates (“KTR”). The portfolio consisted of 315 operating properties, aggregating 59.0 million square feet, 3.6 million square feet of properties under development and land parcels that will support an estimated build out of 6.8 million square feet. The properties were acquired by our consolidated co-investment venture Prologis U.S. Logistics Venture, of which we own 55%. The acquisition was funded through cash (which included the contribution of $2.3 billion from our venture partner and the proceeds from the issuance of debt), the assumption of secured mortgage debt and the issuance of 4.5 million common limited partnership units in the Operating Partnership. We incurred $24.7 million of acquisition costs that are included in Other Expenses during the second quarter of 2015.

The allocation of the purchase price required a significant amount of judgment and was based on our valuations, estimates and assumptions of the acquisition date fair value of the tangible and intangible assets acquired and liabilities assumed. The adjustments finalizing the purchase price allocation during the measurement period were not considered to be material to our financial position or results of operations.

The allocation of the purchase price was as follows (in thousands):

Investments in real estate properties	$	5,441,384
Intangible assets, net of intangible liabilities		332,708
Accounts receivable and other assets		8,062
Debt, including premium		(735,172	)
Accounts payable, accrued expenses and other liabilities		(56,313	)
Total estimated purchase price		4,990,669
Our venture partner’s share of purchase price		(2,253,234	)
Common limited partnership units issued in the Operating Partnership		(181,170	)
Prologis share of cash purchase price	$	2,556,265

The following pro forma financial information presents our results as though the KTR acquisition had been completed on January 1, 2014. The pro forma information does not reflect the actual results of operations had the transaction actually been completed on January 1, 2014, and it is not indicative of future operating results. The results for the three and six months ended June 30, 2015, include approximately one month of actual results for the acquisition, which includes the acquisition expenses, and two and five months of pro forma adjustments, respectively. Actual results in 2015 include rental income and rental expenses of the properties acquired of $35.3 million and $7.9 million, respectively, representing the period from acquisition through June 30, 2015.

The following amounts are in thousands, except per share amounts:

	Three Months Ended		Six Months Ended
	June 30, 2015		June 30, 2015
Total revenues	$	576,055	$	1,134,918
Net earnings attributable to common stockholders	$	153,582	$	498,791
Net earnings per share attributable to common stockholders – Basic	$	0.29	$	0.96
Net earnings per share attributable to common stockholders – Diluted	$	0.29	$	0.95

These results include certain adjustments, primarily: (i) decreased revenues from the amortization of the net assets from the acquired leases with net favorable rents relative to estimated market rents; (ii) increased depreciation and amortization expense resulting from the adjustment of real estate assets to estimated fair value and recognition of intangible assets related to in-place leases; and (iii) additional interest expense attributable to the debt issued to finance our cash portion of the acquisition offset by lower interest expense due to the accretion of the fair value adjustment of debt.