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Unconsolidated Entities

12 Months Ended

Dec. 31, 2019

Equity Method Investments And Joint Ventures [Abstract]

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 we 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 related parties and accounted for using the equity method of accounting. See Note 11 for more detail regarding our consolidated investments that are not wholly owned.

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

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

	2019		2018
Unconsolidated co-investment ventures	$	5,873,784	$	5,407,838
Other ventures		363,587		337,456
Total	$	6,237,371	$	5,745,294

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	2019			2018			2019		2018
Prologis Targeted U.S. Logistics Fund, L.P. (“USLF”)		27.3	%		27.4	%	$	1,728,043	$	1,456,427
FIBRA Prologis ⁽¹⁾		47.1	%		46.7	%		517,347		536,377
Prologis European Logistics Partners Sàrl (“PELP”) ⁽²⁾		50.0	%		50.0	%		1,595,331		1,517,115
Prologis European Logistics Fund (“PELF”)		24.1	%		27.9	%		1,144,831		1,198,904
Prologis UK Logistics Venture (“UKLV”) ⁽²⁾		15.0	%		15.0	%		59,937		68,002
Nippon Prologis REIT, Inc. (“NPR”) ⁽³⁾		15.1	%		15.1	%		544,333		472,035
Prologis China Core Logistics Fund, LP (“PCCLF”) ⁽⁴⁾		15.6	%		-			59,984		-
Prologis China Logistics Venture I, LP, II, LP and III, LP (“Prologis China Logistics Venture”) ⁽²⁾⁽⁴⁾		15.0	%		15.0	%		83,285		141,071
Prologis Brazil Logistics Venture (“PBLV”) and other joint ventures ⁽²⁾⁽⁵⁾		20.0	%		10.0	%		140,693		17,907
Total							$	5,873,784	$	5,407,838

(1)	At December 31, 2019, we owned 305.8 million units of FIBRA Prologis that had a closing price of Ps 41.07 ($2.18) per unit on the Mexican Stock Exchange. We have granted FIBRA Prologis a right of first refusal with respect to stabilized properties that we plan to sell in Mexico.

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

(3)	At December 31, 2019, we owned 0.4 million units of NPR that had a closing price of ¥276,400 ($2,546) per share on the Tokyo Stock Exchange. For any properties we develop and plan to sell in Japan, we have committed to offer those properties to NPR.

At December 31, 2019 and 2018, we had receivables from NPR of $136.3 million and $122.0 million, respectively, related to customer security deposits that originated through a leasing company owned by us that pertain to properties previously contributed to NPR. We have a corresponding payable to NPR’s customers in Other Liabilities. These amounts are repaid to us as the leases turn over.

(4)

In 2019, we formed PCCLF, an unconsolidated co-investment venture investing in properties in China, with eight partners. At that time, we and our existing partner in Prologis China Logistics Venture I, LP received equity interests in PCCLF for the contribution of the existing portfolio of assets consisting of 79 properties totaling 22 million square feet. The seven new partners contributed cash, which was used to redeem a portion of our existing partner’s investment in PCCLF. We maintained our ownership percentage in these assets subsequent to the contribution and therefore did not recognize a gain.

(5)	In 2019, we formed PBLV and hold an 20.0% equity ownership in the venture. In the table above, we reflect our ownership in PBLV and exclude our 10.0% ownership in the other joint ventures. See Note 4 for more information on PBLV.

The amounts recognized in Strategic Capital Revenues and Earnings from Unconsolidated Entities, Net depend on the size and operations of the unconsolidated co-investment ventures, the timing of revenues earned through promotes and transactional fees, as well as fluctuations in foreign currency exchange rates and our ownership interest. 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.

The following table summarizes the Strategic Capital Revenues we recognized in the Consolidated Statements of Income related to our unconsolidated co-investment ventures (in thousands):

	2019		2018		2017
Recurring fees	$	266,615	$	230,746	$	195,513
Transactional fees		57,334		55,816		48,225
Promote revenue ⁽¹⁾		165,635		116,290		127,519
Total strategic capital revenues from unconsolidated co-investment ventures ⁽²⁾	$	489,584	$	402,852	$	371,257

(1)	Includes promote revenue earned from unconsolidated co-investment ventures principally in Europe in 2019, China and Europe in 2018 and the U.S. in 2017.

(2)	These amounts exclude strategic capital revenues from other ventures.

The following table summarizes the key property information, financial position and operating information of our unconsolidated co-investment ventures (not our proportionate share) and the amounts we recognized in the Consolidated Financial Statements related to our unconsolidated co-investment ventures at December 31 and for the years ended December 31 (dollars and square feet in millions):

	U.S.						Other Americas						Europe						Asia						Total
As of:	2019			2018			2019 ⁽¹⁾			2018			2019			2018			2019 ⁽²⁾			2018			2019			2018
Key property information:
Ventures		1			1			2			2			3			3			3			2			9			8
Operating properties		605			566			214			209			731			669			144			125			1,694			1,569
Square feet		99			91			44			39			176			159			59			51			378			340

Financial position:
Total assets ($)		8,408			7,303			2,707			2,137			14,677			13,028			8,758			7,089			34,550			29,557
Third-party debt ($)		2,130			2,094			769			838			3,213			2,548			3,296			2,668			9,408			8,148
Total liabilities ($)		2,514			2,350			801			862			4,575			3,615			3,751			3,006			11,641			9,833

Our investment balance ($)⁽³⁾		1,728			1,457			658			554			2,800			2,784			688			613			5,874			5,408
Our weighted average ownership⁽⁴⁾		27.3	%		27.4	%		39.1	%		44.4	%		30.2	%		33.2	%		15.1	%		15.1	%		27.1	%		28.3	%

	U.S.						Other Americas						Europe						Asia						Total
Operating Information:	2019		2018		2017		2019 ⁽¹⁾		2018		2017		2019		2018		2017		2019		2018		2017		2019		2018		2017
For the years ended:
Total revenues ($)		738		676		533		266		217		245		1,099		1,101		1,030		514		457		372		2,617		2,451		2,180
Net earnings ($)		128		150		139		91		63		71		311		509		406		49		88		182		579		810		798

Our earnings from unconsolidated co-investment ventures, net ($)		38		45		33		32		26		26		102		193		146		10		15		29		182		279		234

(1)	PBLV and our other Brazilian joint ventures are combined as one venture for the purpose of this table.

(2)	As discussed above, the formation of PCCLF in 2019 increased the number of ventures in Asia.

(3)

Prologis’ investment balance is presented at our adjusted basis derived from the ventures’ U.S. GAAP information. The difference between our ownership interest of a venture’s equity and our investment balance at December 31, 2019 and 2018, results principally from four types of transactions: (i) deferred gains from the contribution of property to a venture prior to January 1, 2018 ($611.5 million and $635.9 million, respectively); (ii) recording additional costs associated with our investment in the venture ($87.2 million and $94.4 million, respectively); (iii) receivables, principally for fees and promotes ($152.0 million and $166.7 million, respectively); and (iv) customer security deposits retained subsequent to property contributions to NPR, as discussed above. For deferred gains from partial sales recorded prior to January 1, 2018, we recognize these gains over the lives of the underlying real estate properties or at the time of disposition to a third party.

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

In January 2020, USLF acquired a portfolio of 108 operating properties aggregating 18.3 million square feet from Industrial Property Trust Inc. (“IPT”) in a cash transaction, including the assumption of debt. Our investment in the acquisition was approximately $500 million.

Equity Commitments Related to Certain Unconsolidated Co-Investment Ventures

Certain unconsolidated 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 equity contributions are generally used for the acquisition or development of properties but may be used for the repayment of debt or other general uses. The venture may obtain financing for the acquisition of 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.

At December 31, 2019, our remaining equity commitments were $379.6 million, primarily for Prologis China Logistics Venture. The equity commitments expire from 2020 to 2026.