NOTE 12. NONCONTROLLING INTERESTS

Prologis, L.P.

We report noncontrolling interests related to several entities we consolidate but of which we do not own 100% of the 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 redeemable for cash or, at our option into shares of the Parent’s common stock, generally at a rate of one share of common stock to one unit. We also consolidate several entities in which we do not own 100% of the equity but the equity of these entities are not exchangeable into our common stock.

As discussed in Note 1, the Parent has complete responsibility, power and discretion in the day-to-day management of the OP. The Parent, through its majority interest, has the right to receive benefits from and incur losses of the OP. In addition, the OP does not have either substantive liquidation rights or substantive kick-out rights without cause or substantive participating rights that could be exercised by a simple majority of noncontrolling interests. The absence of such rights renders the OP as a VIE. Accordingly, the Parent is the primary beneficiary and therefore consolidates the OP.

Prologis, Inc.

The noncontrolling interests of the Parent include the noncontrolling interests presented above for the OP, as well as the limited partnership units in the OP that are not owned by the Parent.

The following table summarizes our ownership percentages and noncontrolling interests and the consolidated entities’ total assets and total liabilities at December 31 (dollars in thousands):

	Our Ownership Percentage						Noncontrolling Interests				Total Assets				Total Liabilities
	2017			2016			2017		2016		2017		2016		2017		2016
Prologis U.S. Logistics Venture		55.0	%		55.0	%	$	2,581,629	$	2,424,800	$	6,030,819	$	6,201,278	$	284,162	$	797,593
Prologis North American Industrial Fund (1)	N/A				66.1	%		-		486,648		-		2,479,072		-		1,038,708
Prologis Brazil Logistics Partners Fund I (2)	N/A				50.0	%		-		61,836		-		131,581		-		720
Other consolidated entities (3)	various			various				78,613		99,185		806,138		866,821		30,330		34,073
Prologis, L.P.								2,660,242		3,072,469		6,836,957		9,678,752		314,492		1,871,094
Limited partners in Prologis, L.P. (4) (5)								414,341		394,590		-		-		-		-
Prologis, Inc.							$	3,074,583	$	3,467,059	$	6,836,957	$	9,678,752	$	314,492	$	1,871,094

(1)

In March 2017, we acquired all our partner’s interest for $710.2 million. The difference between the amount we paid and the noncontrolling interest balance was recorded to Additional Paid-in Capital with no gain or loss recognized. In July 2017, we contributed substantially all the assets formerly owned by NAIF to our unconsolidated co-investment venture, USLF.

(2)

In March 2017, we acquired all our partner’s interest for $79.8 million. The difference between the amount we paid and the noncontrolling interest balance was recorded to Additional Paid-in Capital with no gain or loss recognized. At December 31, 2016, the assets of the Prologis Brazil Logistics Partners Fund I were primarily investments in unconsolidated entities of $113.1 million, most of which we gained control of and began consolidating in August 2017. See Note 4 for more information on the acquisition of our partner’s interest in certain joint ventures in Brazil.

(3)

This line item includes our two partnerships that have issued limited partnership units to third parties, as discussed above, along with various other consolidated entities. The limited partnership units outstanding at December 31, 2017 and 2016 were exchangeable into cash or, at our option, 1.0 million and 1.8 million shares of the Parent’s common stock with a fair value of $64.3 million and $96.9 million, respectively, based on the closing stock price of the Parent’s common stock. In 2017, limited partnership units were exchanged for 0.8 million shares of the Parent’s 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.

(4)	We had 8.9 million Class A Units that were convertible into 8.5 million and 8.7 million limited partnership units of the OP at December 31, 2017 and 2016, respectively. See Note 11 for further discussion of our Class A Units.

(5)

At December 31, 2017 and 2016, excluding the Class A Units, there were limited partnership units in the OP that were exchangeable into cash or, at our option, 4.1 million and 4.6 million shares of the Parent’s common stock with a fair value of $266.1 million and $241.8 million, respectively, based on the closing stock price of the Parent’s common stock. In 2017 and 2016 unitholders exchanged 0.7 million and 1.9 million limited partnership units into an equal number of shares of the Parent’s common stock.

At December 31, 2017 and 2016, there were 3.4 million and 2.2 million LTIP Units (as defined in Note 13) outstanding, respectively, associated with our long-term compensation plan that were exchangeable into limited partnership units of the OP and redeemable into the Parent’s common stock after they vest and other applicable conditions have been met. 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.