Business Segments

6 Months Ended

Jun. 30, 2012

Business Segments [Abstract]

Business Segments

15. Business Segments

Our current business strategy includes two operating segments: Real Estate Operations and Private Capital. We generate revenues, earnings, net operating income (calculated as rental income less rental expenses) and cash flows through our segments, as follows:

• Real Estate Operations — This represents the direct long-term ownership of industrial operating properties and is the primary source of our core revenue and earnings. We collect rent from our customers under operating leases, including reimbursements for the vast majority of our operating costs. Each operating property is considered to be an individual operating segment having similar economic characteristics that are combined within the reportable segment based upon geographic location. Our real estate operations segment also includes development and re-development activities. We develop and re-develop industrial properties primarily in global and regional markets to meet our customers’ needs. We provide additional value creation by utilizing: (i) the land that we currently own in global and regional markets; (ii) the development expertise of our local personnel; (iii) our global customer relationships; and (iv) the demand for high quality distribution facilities in key markets. Land held for development, properties currently under development and land we own and lease to customers under ground leases are also included in this segment.

We own real estate in the Americas (Canada, Mexico and the United States), Europe (Austria, Belgium, the Czech Republic, France, Germany, Hungary, Italy, the Netherlands, Poland, Romania, Slovakia, Spain, Sweden and the United Kingdom) and Asia (China, Japan and Singapore)

• Private Capital — This represents the long-term management of unconsolidated co-investment ventures and other joint ventures. We have a direct and long-standing relationship with a significant number of institutional investors. We tailor industrial portfolios to investors’ specific needs and deploy capital in both close-ended and open-ended fund structures and joint ventures, while providing complete portfolio management and financial reporting services. We recognize fees and incentives earned for services performed on behalf of the unconsolidated entities and certain third parties.

We report the costs associated with our private capital segment for all periods presented in the line item Private Capital Expenses in our Consolidated Statements of Operations. These costs include the direct expenses associated with the asset management of the property funds provided by individuals who are assigned to our private capital segment. In addition, in order to achieve efficiencies and economies of scale, all of our property management functions are provided by a team of professionals who are assigned to our real estate operations segment. These individuals perform the property-level management of the properties we own and the properties we manage that are owned by the unconsolidated entities. We allocate the costs of our property management function to the properties we consolidate (reported in Rental Expenses) and the properties owned by the unconsolidated entities (included in Private Capital Expenses), by using the square feet owned by the respective portfolios. We are further reimbursed by the co-investments ventures for certain expenses associated with managing these property funds.

Each entity we manage is considered to be an individual operating segment having similar economic characteristics that are combined within the reportable segment based upon geographic location. Our operations in the private capital segment are in the Americas (Brazil, Canada, Mexico and the United States), Europe (Belgium, the Czech Republic, France, Germany, Hungary, Italy, the Netherlands, Poland, Slovakia, Spain, Sweden and the United Kingdom) and Asia (China and Japan).

We present the operations and net gains associated with properties sold to third parties or classified as held for sale as discontinued operations, which results in the restatement of prior year operating results to exclude the items presented as discontinued operations.

Reconciliations are presented below for: (i) each reportable business segment’s revenue from external customers to our Total Revenues; (ii) each reportable business segment’s net operating income from external customers to our Earnings (Loss) before Income Taxes; and (iii) each reportable business segment’s assets to our Total Assets. Our chief operating decision makers rely primarily on net operating income and similar measures to make decisions about allocating resources and assessing segment performance. The applicable components of our Total Revenues, Earnings (Loss) before Income Taxes and Total Assets are allocated to each reportable business segment’s revenues, net operating income and assets. Items that are not directly assignable to a segment, such as certain corporate income and expenses, are reflected as reconciling items. The following reconciliations are presented in thousands:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2012			2011			2012			2011
Revenues:
Real estate operations (1):
Americas	$	317,840		$	191,948		$	610,350		$	340,936
Europe		116,325			62,440			235,803			88,985
Asia		55,590			33,548			109,209			56,974
Total Real Estate Operations segment		489,755			287,936			955,362			486,895
Private capital (2):
Americas		16,470			16,548			34,824			32,697
Europe		9,326			13,977			18,463			27,302
Asia		5,197			2,451			10,063			2,812
Total Private Capital segment		30,993			32,976			63,350			62,811
Total revenues	$	520,748		$	320,912		$	1,018,712		$	549,706
Net operating income:
Real estate operations (3):
Americas	$	219,032		$	135,720		$	424,629		$	237,485
Europe		88,181			43,537			177,938			58,860
Asia		43,284			25,893			84,759			42,882
Total Real Estate Operations segment		350,497			205,150			687,326			339,227
Private capital (2)(4):
Americas		7,798			9,323			15,745			18,714
Europe		5,418			10,038			10,802			19,843
Asia		2,702			2,019			4,847			2,106
Total Private Capital segment		15,918			21,380			31,394			40,663
Total segment net operating income		366,415			226,530			718,720			379,890
Reconciling items:
General and administrative expenses		(51,415	)		(51,840	)		(111,574	)		(91,023	)
Merger, acquisition and other integration expenses		(21,186	)		(103,052	)		(31,914	)		(109,040	)
Impairment of real estate properties		—			—			(3,185	)		—
Depreciation and amortization		(186,770	)		(118,606	)		(374,640	)		(198,183	)
Earnings from unconsolidated entities, net		3,889			11,399			17,884			25,040
Interest expense		(127,946	)		(112,916	)		(261,328	)		(203,443	)
Impairment of other assets		—			(103,823	)		(16,135	)		(103,823	)
Interest and other income, net		5,912			5,277			11,013			2,698
Gains on acquisitions and dispositions of investments in real estate, net (5)		520			102,529			268,291			106,254
Foreign currency and derivative gains (losses), net		12,753			(10,255	)		(14,022	)		(8,881	)
Gain (loss) on early extinguishment of debt, net		(500	)		—			4,919			—
Total reconciling items		(364,743	)		(381,287	)		(510,691	)		(580,401	)
Earnings (loss) before income taxes	$	1,672		$	(154,757	)	$	208,029		$	(200,511	)

	June 30,		December 31,
	2012		2011
Assets:
Real estate operations:
Americas	$	15,274,332	$	13,305,147
Europe		6,400,136		6,823,814
Asia		3,615,947		3,502,033
Total Real Estate Operations segment		25,290,415		23,630,994
Private capital (6):
Americas		25,137		43,394
Europe		60,576		61,946
Asia		7,867		9,368
Total Private Capital segment		93,580		114,708
Total segment assets		25,383,995		23,745,702
Reconciling items:
Investments in and advances to unconsolidated entities		2,220,172		2,857,755
Notes receivable backed by real estate		245,654		322,834
Assets held for sale		50,672		444,850
Cash and cash equivalents		293,631		176,072
Other assets		221,439		176,699
Total reconciling items		3,031,568		3,978,210
Total assets	$	28,415,563	$	27,723,912

(1) Includes rental income of our industrial properties and land subject to ground leases, as well as development management and other income.

(2) Includes revenues earned from managing our unconsolidated entities and certain third parties.

(3) Includes rental income less rental expenses of our industrial properties and land subject to ground leases, as well as development management and other income less related expenses.

(4) Amounts are reduced by the direct costs we incur to manage the unconsolidated entities and certain third parties that are presented as Private Capital Expenses in our Consolidated Statements of Operations.

(5) Included in 2012 is a $273.0 million gain on acquisition of Prologis California in February 2012. See Note 2 for further information on this transaction.

(6) Represents management contracts recorded in connection with business combinations and goodwill associated with the Private Capital segment.