3.	Business Combinations

Merger of AMB and ProLogis

As discussed in Note 1, we completed the Merger on June 3, 2011. After consideration of all applicable factors pursuant to the business combination accounting rules, the Merger resulted in a reverse acquisition in which AMB was the “legal acquirer” because AMB issued its common stock to ProLogis shareholders and ProLogis was the “accounting acquirer” due to various factors, including the fact that ProLogis shareholders held the largest portion of the voting rights in the merged entity and ProLogis appointees represented the majority of the Board of Directors (“Board”). In our Consolidated Financial Statements, the period ended December 31, 2011 includes the historical results of ProLogis for the entire period presented, and the results of the merged company are included subsequent to the Merger.

As ProLogis was the accounting acquirer, the calculation of the purchase price for accounting purposes is based on the price of ProLogis common shares and common shares ProLogis would have had to issue to achieve a similar ownership split between AMB stockholders and ProLogis shareholders. We estimated the fair value of the pre-combination portion of AMB’s share-based payment awards based on market data and, in the case of stock options, we used a Black-Scholes model to estimate the fair value of these awards as of the Merger date. An adjustment was made to equity for the vested portion while the unvested portion will be expensed over the remaining service period. The purchase price allocation reflects aggregate consideration of approximately $5.9 billion, as calculated below (in millions, except price per share):


ProLogis shares and limited partnership units outstanding at June 2, 2011 (60% of total shares of the combined company)		571.4
Total shares of the combined company (for accounting purposes)		952.3

Number of AMB shares to be issued (40% of total shares of the combined company)		380.9
Multiplied by price of ProLogis common share on June 2, 2011	$	15.21

Consideration associated with common shares issued	$	5,794.1
Add consideration associated with share based payment awards.		62.4

Total consideration of the Operating Partnership	$	5,856.5

The allocation of the purchase price requires a significant amount of judgment. The allocation was based on our valuation, estimates and assumptions of the acquisition date fair value of the tangible and intangible assets and liabilities acquired. The purchase price allocation is complete and adjustments recorded during the one year 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 millions):


Investments in real estate properties	$	8,197.6
Investments in and advances to unconsolidated entities		1,592.3
Cash, accounts receivable and other assets		691.3
Debt		(3,646.7	)
Accounts payable, accrued expenses and other liabilities		(420.5	)
Noncontrolling interests		(557.5	)

Total purchase price of the Operating Partnership	$	5,856.5

Acquisition of ProLogis European Properties

During the second quarter of 2011, we increased our ownership of ProLogis European Properties (“PEPR”) through open market purchases and a mandatory tender offer. In May 2011, we settled our mandatory tender offer that resulted in the acquisition of an additional 96.5 million ordinary units and 2.7 million convertible preferred units of PEPR. During all of the second quarter of 2011, we made aggregate cash purchases totaling €715.8 million ($1.0 billion). We funded the purchases through borrowings under our global line of credit and a new €500 million bridge facility, which was subsequently repaid with proceeds from an equity offering in June 2011.

Upon completion of the tender offer, we met the requirements to consolidate PEPR. In accordance with the accounting rules for business combinations, we marked our equity investment in PEPR from its carrying value to fair value of approximately €486 million, which resulted in the recognition of a gain of €59.6 million ($85.9 million). We refer to this transaction as the “PEPR Acquisition”. The fair value was based on the trading price for our previously owned units and our acquisition price for the PEPR units purchased during the tender offer period.

We have allocated the aggregate purchase price, representing the share of PEPR we owned at the time of consolidation of €1.1 billion ($1.6 billion). The allocation of the purchase price required a significant amount of judgment and was based on our valuation, estimates and assumptions of the acquisition date fair value of the tangible and intangible assets and liabilities acquired. The purchase price allocation is complete and adjustments recorded during the one year 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 millions):


Investments in real estate properties	$	4,448.2
Cash, accounts receivable and other assets		251.4
Debt		(2,240.8	)
Accounts payable, accrued expenses and other liabilities		(698.2	)
Noncontrolling interests		(133.7	)

Total purchase price	$	1,626.9

Pro forma Information (unaudited)

The following unaudited pro forma financial information presents our results as though the Merger and the PEPR Acquisition, as well as the equity offering in June 2011 that was used, in part, to repay the loans used to fund the PEPR Acquisition, had been consummated as of January 1, 2010. The pro forma information does not necessarily reflect the actual results of operations had the transactions been consummated at the beginning of the period indicated nor is it necessarily indicative of future operating results. The pro forma information does not give effect to any cost synergies or other operating efficiencies that have resulted or could result from the Merger and also does not include any merger and integration expenses. The results for the year ended December 31, 2011 included approximately seven months of actual results for both the Merger and PEPR Acquisition, and pro forma adjustments for five months. Actual results in 2011 include rental income and rental expenses of the properties acquired through the Merger and PEPR Acquisition of $575.2 million and $154.4 million, respectively, of which $50.5 million of rental income and $11.9 million of rental expenses are included in discontinued operations.


(amounts in thousands, except per share amounts)	2011			2010
Total revenues	$	1,981,579		$	1,898,083
Net loss attributable to common stockholders	$	(70,988	)	$	(1,374,283	)
Net loss per share attributable to common stockholders - basic	$	(0.15	)	$	(3.24	)
Net loss per share attributable to common stockholders - diluted	$	(0.15	)	$	(3.24	)

These results include certain adjustments, primarily decreased revenues resulting from the amortization of the net asset from the acquired leases with favorable or unfavorable rents relative to estimated market rents, 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 acquired management contracts and lower interest expense due to the accretion of the fair value adjustment of debt.

Acquisitions of Unconsolidated Co-Investment Ventures

On February 3, 2012, we acquired our partner’s 63% interest in and now own 100% of our previously unconsolidated co-investment venture Prologis North American Industrial Fund II (“NAIF II”) and we repaid the loan from NAIF II to our partner for a total of $336.1 million. The assets and liabilities of this venture, as well as the activity since the acquisition date, have been included in our Consolidated Financial Statements. In accordance with the accounting rules for business combinations, we marked our equity investment in NAIF II from its carrying value to the estimated fair value. The fair value was determined and allocated based on our valuation, estimates, and assumptions of the acquisition date fair value of the tangible and intangible assets and liabilities. The preliminary allocation of net assets acquired is approximately $1.6 billion in real estate assets, $27.3 million of net other assets and $875.4 million in debt. We have not recorded a gain or loss with this transaction, as the carrying value of our investment was equal to the estimated fair value. While the current allocation of the purchase price is substantially complete, the valuation of the real estate properties is being finalized. We do not expect future revisions, if any, to have a significant impact on our financial position or results of operations.

On February 22, 2012, we dissolved the unconsolidated co-investment venture Prologis California and divided the portfolio equally with our partner. The net value of the assets and liabilities distributed represented the fair value of our ownership interest in the co-investment venture on that date. In accordance with the accounting rules for business combinations, we marked our equity investment in Prologis California from its carrying value to the estimated fair value which resulted in a gain of $273.0 million. The gain is recorded in Gains on Acquisitions and Dispositions of Investments in Real Estate, Net in the Consolidated Statements of Operations. The fair value was determined and allocated based on our valuation, estimates, and assumptions of the acquisition date fair value of the tangible and intangible assets and liabilities. The preliminary allocation of net assets acquired is approximately $496.3 million in real estate assets, $17.7 million of net other assets and $150.0 million in debt. While the current allocation of the purchase price is substantially complete, the valuation of the real estate properties is being finalized. We do not expect future revisions, if any, to have a significant impact on our financial position or results of operations.

On November 30, 2012, Prologis North American Properties Fund 1 (“Fund 1”) distributed real estate properties based on fair value to our partner. We acquired the remaining interest in Fund 1 for total consideration of $33.2 million. In accordance with the accounting rules for business combinations, we marked our equity investment in Fund 1 from its carrying value to the estimated fair value which resulted in a gain of $21.2 million. The gain is recorded in Gains on Acquisitions and Dispositions of Investments in Real Estate, Net in our Consolidated Statements of Operations. The fair value was determined and allocated based on our valuation, estimates, and assumptions of the acquisition date fair value, which consisted primarily of real estate and intangible assets of $117.0 million. While the current allocation of the purchase price is substantially complete, the valuation of the real estate properties is being finalized. We do not expect future revisions, if any, to have a significant impact on our financial position or results of operations.

We refer to these three transactions collectively as “Co-Investment Venture Acquisitions”. Our results for 2012 include rental income and rental expenses of the properties acquired in the Co-Investment Venture Acquisitions of $170.6 million and $42.5 million, respectively, of which $4.9 million of rental income and $0.9 million of rental expenses are included in discontinued operations.