NOTE 5. 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 partners and investors and provide asset and property management services to these entities, which we refer to as co-investment ventures. These entities may be consolidated or unconsolidated, depending on the structure, our partner’s participation and other rights and our level of control of the entity. This note details our investments in unconsolidated co-investment ventures, which are accounted for using the equity method of accounting. See Note 12 for more detail regarding our consolidated investments.

We also have other ventures, generally with one partner and that we do not manage, which we account for using the equity method. We refer to our investments in all entities accounted for using the equity method, both unconsolidated co-investment ventures and other ventures, collectively, as unconsolidated entities.

The following table summarizes our investments in and advances to our unconsolidated entities at December 31 (in thousands):

	2016		2015
Unconsolidated co-investment ventures	$	4,057,524	$	4,585,427
Other ventures		172,905		170,193
Totals	$	4,230,429	$	4,755,620

Unconsolidated Co-Investment Ventures

The following table summarizes our investments in the individual co-investment ventures at December 31 (dollars in thousands):

	Ownership Percentage						Investment in and Advances to
Co-Investment Venture	2016			2015			2016		2015
Prologis Targeted U.S. Logistics Fund, L.P. (“USLF”) (1)		14.9	%		22.5	%	$	434,818	$	689,408
FIBRA Prologis (2) (3)		45.9	%		45.9	%		547,744		569,800
Prologis Brazil Logistics Partners Fund I, L.P. (“Brazil Fund”) and related joint ventures (4)	various			various				297,300		216,668
Europe Logistics Venture 1, FCP-FIS (“ELV”) (5) (6)		15.0	%		15.0	%		48,289		53,960
Prologis European Logistics Partners Sàrl (“PELP”) (5)		50.0	%		50.0	%		1,623,707		1,762,291
Prologis European Properties Fund II, FCP-FIS (“PEPF II”)		31.2	%		31.3	%		344,200		410,984
Prologis Targeted Europe Logistics Fund, FCP-FIS (“PTELF”) (1) (6)		23.5	%		41.6	%		310,118		480,401
Nippon Prologis REIT, Inc. (“NPR”) (7) (8)		15.1	%		15.1	%		348,570		300,822
Prologis China Logistics Venture I, LP and II, LP (Prologis China Logistics Venture) (5)		15.0	%		15.0	%		102,778		101,093
Totals							$	4,057,524	$	4,585,427

(1)

During 2016, we redeemed a portion of our investment in PTELF and USLF for €275.0 million ($311.1 million) and $300.0 million, respectively, and recorded a gain of $136.3 million, which is included in Gains on the Dispositions of Investments in Real Estate and Revaluation of Equity Investments Upon Acquisition of a Controlling Interest, Net. The amounts received for the redemptions were included in Return of Investment from Unconsolidated Entities in the Consolidated Statements of Cash Flows.

(2)	At December 31, 2016, we owned 291.1 million units of FIBRA Prologis that had a closing price of Ps 29.69 ($1.44) per unit on the Mexican Stock Exchange.

(3)	We have granted FIBRA Prologis a right of first refusal with respect to stabilized properties that we plan to sell in Mexico.

(4)

We have a 50% ownership interest in and consolidate an entity that in turn owns 50% of several entities that we account for on the equity method. Also, we have additional investments in other unconsolidated entities in Brazil that we account for on the equity method with various ownership interests ranging from 5% to 50%.

(5)	We have one partner in each of these co-investment ventures.

(6)	In January 2017, we sold our investment in ELV to our fund partner and ELV contributed its properties to PTELF in exchange for equity interests.

(7)

At December 31, 2016, we owned 0.3 million units of NPR that had a closing price of ¥238,900 ($2,041) per share on the Tokyo Stock Exchange. At December 31, 2016 and 2015, we had receivables from NPR of $96.9 million and $85.2 million, respectively, related to customer security deposits that originated through a leasing company owned by us that pertain to properties owned by NPR. We have a corresponding payable to NPR’s customers in Other Liabilities.

(8)	For any properties we develop and plan to sell in Japan, we have committed to offer those properties to NPR.

The amounts recognized in Strategic Capital Revenues and Earnings from Unconsolidated Entities, Net depend on the size and operations of the co-investment ventures, the timing of revenues earned through promotes during the life of a venture or upon liquidation, as well as fluctuations in foreign currency exchange rates. We recognized Strategic Capital Expenses for direct costs associated with the asset management of these ventures and allocated property-level management costs for the properties owned by the ventures. Our ownership interest in these ventures also impacts the earnings we recognize.

The following table summarizes the amounts we recognized in the Consolidated Statements of Income related to the unconsolidated co-investment ventures for the years ended December 31 (in thousands):

	2016		2015		2014
Strategic capital revenues and other revenues:
U.S.	$	37,911	$	36,964	$	81,351
Other Americas		22,777		22,516		13,003
Europe		184,956		112,675		86,487
Asia		46,521		35,453		37,509
Total strategic capital revenues		292,165		207,608		218,350
Development management and other revenues		11,006		7,467		5,424
Total strategic capital revenues and other revenues	$	303,171	$	215,075	$	223,774

Earnings from unconsolidated co-investment ventures, net:
U.S.	$	10,441	$	7,124	$	16,420
Other Americas		27,155		28,842		(7,824	)
Europe		137,652		106,656		108,430
Asia		16,629		12,780		14,022
Total earnings from unconsolidated co-investment ventures, net	$	191,877	$	155,402	$	131,048

The following table summarizes the promotes earned and recognized in Strategic Capital Revenues for the years ended December 31 (in thousands):

	2016		2015		2014
Strategic capital – promote revenues
Total promote (1)	$	99,766	$	56,637	$	42,132
Less: Prologis’ share		11,222		27,175		10,852
Net promote recognized (third-party share) in strategic capital revenues	$	88,544	$	29,462	$	31,280

(1)	We earned promotes from PTELF and PEPF II in 2016, PELP and ELV in 2015 and USLF in 2014, each based on the venture’s cumulative returns to the investors over the last three years.

Approximately 40% of promote revenues are paid as a combination of cash and stock awards pursuant to the terms of the Prologis Promote Plan and expensed through Strategic Capital Expenses. See Note 13 for more information on this plan.

The following tables summarize the operating information and financial position of our unconsolidated co-investment ventures (not our proportionate share), at December 31 and for the years ended December 31 as presented at our adjusted basis derived from the ventures’ GAAP information:

(dollars and square feet in millions)	2016			2015			2014
U.S.:
Number of ventures		1			1			1
Number of properties owned		369			391			392
Square feet		50			50			50
Total assets	$	4,238		$	4,408		$	4,403
Third-party debt	$	1,414		$	1,433		$	1,594
Total liabilities	$	1,540		$	1,550		$	1,697
Our investment balance (1)	$	435		$	690		$	712
Our weighted average ownership (2)		14.9	%		22.5	%		24.3	%
Other Americas:
Number of ventures		2			2			2
Number of properties owned		213			205			198
Square feet		42			39			37
Total assets	$	2,793		$	2,482		$	2,653
Third-party debt	$	739		$	657		$	679
Total liabilities	$	814		$	708		$	717
Our investment balance (1)	$	845		$	786		$	825
Our weighted average ownership (2)		43.9	%		43.8	%		42.9	%
Europe:
Number of ventures		4			4			4
Number of properties owned		700			688			636
Square feet		163			159			148
Total assets	$	10,853		$	11,343		$	11,440
Third-party debt	$	2,446		$	2,640		$	2,621
Total liabilities	$	3,283		$	3,584		$	3,501
Our investment balance (1)	$	2,327		$	2,707		$	2,773
Our weighted average ownership (2)		35.1	%		38.9	%		38.8	%
Asia:
Number of ventures		2			2			2
Number of properties owned		85			66			52
Square feet		36			29			26
Total assets	$	5,173		$	4,320		$	4,120
Third-party debt	$	1,947		$	1,520		$	1,637
Total liabilities	$	2,239		$	1,751		$	1,734
Our investment balance (1)	$	451		$	402		$	356
Our weighted average ownership (2)		15.1	%		15.0	%		15.0	%
Totals:
Number of ventures		9			9			9
Number of properties owned		1,367			1,350			1,278
Square feet		291			277			261
Total assets	$	23,057		$	22,553		$	22,616
Third-party debt	$	6,546		$	6,250		$	6,531
Total liabilities	$	7,876		$	7,593		$	7,649
Our investment balance (1)	$	4,058		$	4,585		$	4,666
Our weighted average ownership (2)		27.9	%		31.6	%		32.0	%

(in millions)	2016		2015		2014 (3)
Revenues:
U.S.	$	395	$	382	$	541
Other Americas		242		228		170
Europe		964		947		1,001
Asia:		342		275		280
Total revenues	$	1,943	$	1,832	$	1,992

Net earnings:
U.S.	$	57	$	35	$	55
Other Americas		71		78		(1	)
Europe		333		261		268
Asia		101		77		86
Total net earnings	$	562	$	451	$	408

(1)

The difference between our ownership interest of a venture’s equity and our investment balance at December 31, 2016, 2015 and 2014, results principally from three types of transactions: (i) deferring a portion of the gains we recognize from a contribution of a property to a venture ($469.9 million, $430.7 million and $322.9 million, respectively); (ii) recording additional costs associated with our investment in the venture ($124.1 million, $122.1 million and $117.5 million respectively); and (iii) advances to a venture ($166.1 million, $189.7 million and $125.7 million, respectively).

(2)	Represents our weighted average ownership interest in all co-investment ventures based on each entity’s contribution of total assets, before depreciation, net of other liabilities.

(3)

We had significant activity with our U.S. and Other Americas unconsolidated co-investment ventures in 2014 as explained in Notes 3 and 4. We began consolidating NAIF in 2014. We formed and invested in FIBRA Prologis in 2014 and in connection with this transaction, we concluded our unconsolidated co-investment venture in Mexico.

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 acquisition price of additional investments that the venture could make may be more than the equity commitment. Depending on market conditions, the investment objectives of the ventures, our liquidity needs and other factors, we may make additional contributions of properties or additional cash investments in these ventures through the remaining commitment period.

The following table summarizes the remaining equity commitments at December 31, 2016 (in millions):

	Equity Commitments						Expiration Date for Remaining Commitments
	Prologis		Venture Partners		Total
Prologis Targeted U.S. Logistics Fund	$	-	$	180	$	180	2017
Prologis Targeted Europe Logistics Fund (1)		-		243		243	2017
Prologis China Logistics Venture		294		1,665		1,959	2017
Total	$	294	$	2,088	$	2,382

(1)	Equity commitments are denominated in euro and reported in U.S. dollars based on an exchange rate of $1.05 U.S. dollars to the euro.