Stockholders' Equity of the REIT

12 Months Ended

Dec. 31, 2012

Stockholders' Equity of the REIT

11. Stockholders’ Equity of the REIT

Shares Authorized

At December 31, 2012, 1.1 billion shares were authorized to be issued by the REIT, of which 1.0 billion shares represent common stock. The Board may, without stockholder approval, classify or reclassify any unissued shares of our stock from time to time by setting or changing the preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions, qualifications and terms or conditions of redemption of such shares.

Common Stock

In 2011, in connection with the Merger, holders of ProLogis common shares received 0.4464 of a newly issued share of AMB common stock, ProLogis became a subsidiary of AMB and AMB changed its name to Prologis, Inc. Because ProLogis was the accounting acquirer (as discussed in Note 3), the historical ProLogis shares outstanding were adjusted by the Merger exchange ratio and restated. As of the Merger date, 169.6 million shares were added to reflect the outstanding shares of common stock of AMB. In addition, in late June 2011 we issued 34.5 million shares of common stock generating net proceeds of $1.1 billion. As of December 31, 2012, we had 461.8 million shares of common stock outstanding.

We have sold or issued shares of common stock under various common stock plans, including stock-based compensation plans as follows:

• The Incentive Plan and Outside Trustees Plan: Certain of our employees and outside directors participate in stock-based compensation plans that provide compensation, generally in the form of common stock. In 2012, the new 2012 Long-Term Incentive Plan was approved, which replaced all prior active incentive plans. See Note 14 for additional information on these plans.

• 1999 Dividend Reinvestment and Share Purchase Plan, as amended (the “1999 Dividend Reinvestment Plan”): Allowed holders of common stock to automatically reinvest distributions and certain holders and persons who are not holders of common stock to purchase a limited number of additional shares of common stock by making optional cash payments, without payment of any brokerage commission or service charge. In 2011, in connection with the Merger, this program was terminated.

• Controlled Offering Program: We had an agreement with two designated agents to sell shares of common stock and earn a fee of up to 2% of the gross proceeds. There have been no shares of common stock issued since March 2010. In 2011, in connection with the Merger, this program was terminated.

• ProLogis Trust Employee Share Purchase Plan (the “Employee Share Plan”): Certain of our employees were able to purchase common stock, through payroll deductions only, at a discounted price of 85% of the market price of the common stock. In 2011, in connection with the Merger, this program was terminated.

Under the common stock plans discussed above, we received gross proceeds of $31.0 million, $0.7 million and $30.8 million for the year ended December 31, 2012, 2011 and 2010, respectively, adjusted by the Merger exchange ratio of 0.4464 and issued shares of common stock for the years ended December 31, as follows (in thousands):

	2012		2011		2010
Incentive Plan and Outside Trustees Plan		2,258		793		617
1999 Dividend Reinvestment Plan		-		-		54
Controlled Offering Program		-		-		978
Employee Share Plan		-		-		76
Total		2,258		793		1,725

Limited partnership units were redeemed for 0.1 million and 0.1 million common shares in 2012 and 2010, respectively. We did not redeem any limited partnership units in 2011. See Note 13 for more details.

Preferred Stock

At December 31, 2012, we had seven series of preferred stock outstanding. Holders of each series of preferred stock have, subject to certain conditions, limited voting rights and all holders are entitled to receive cumulative preferential dividends based upon each series’ respective liquidation preference. The dividends for Series Q, R and S are payable quarterly in arrears on the last day of March, June, September, and December. The dividends for Series L, M, O and P are payable quarterly in arrears on the 15th day of April, July, October and January. Dividends on preferred stock are payable when, and if, they have been declared by the Board, out of funds legally available for the payment of dividends. After the respective redemption dates, each series of preferred stock can be redeemed at our option. The cash redemption price (other than the portion consisting of accrued and unpaid dividends) with respect to Series Q Preferred Stock is payable solely out of the cumulative sales proceeds of our other capital stock, which may include stock of other series of preferred stock. With respect to the payment of dividends, each series of preferred stock ranks on parity with the other series of preferred stock.

We had the following preferred stock issued and outstanding as of December 31 (in thousands):

	2012		2011
Series L	$	49,100	$	49,100
Series M		57,500		57,500
Series O		75,300		75,300
Series P		50,300		50,300
Series Q		100,000		100,000
Series R		125,000		125,000
Series S		125,000		125,000
Total preferred stock	$	582,200	$	582,200

Terms and conditions of our preferred stock outstanding at December 31, 2012 was as follows (dollars and shares in thousands):

Series of Preferred Stock	Shares Outstanding	Liquidation Preference		Par Value		Dividend Rate		Optional Redemption Date
Series L	2,000	$	50,000	$	0.01		6.50 %	(a)
Series M	2,300		57,500	$	0.01		6.75 %	(a)
Series O	3,000		75,000	$	0.01		7.00 %	(a)
Series P	2,000		50,000	$	0.01		6.85 %	(a)
Series Q	2,000		100,000	$	0.01		8.54 %	11/13/26
Series R	5,000		125,000	$	0.01		6.75 %	(a)
Series S	5,000		125,000	$	0.01		6.75 %	(a)
	21,300	$	582,500

(a) These shares are currently redeemable at our option.

Ownership Restrictions

For us to qualify as a real estate investment trust under the Internal Revenue Code, five or fewer individuals may not own more than 50% of the value of our outstanding stock at any time during the last half of our taxable year. Therefore, our charter restricts beneficial ownership (or ownership generally attributed to a person under the real estate investment trust tax rules (i) by a person, or persons acting as a group, of each of our issued and outstanding common, series L preferred stock, series M preferred stock, series O preferred stock and series P preferred stock, or (ii) series Q preferred stock, series R preferred stock or series S preferred stock that, together with all other capital stock owned or deemed owned by that person, would cause that person to own or be deemed to own more than 9.8% (by value or number of shares, whichever is more restrictive) of our issued and outstanding capital stock. Further, subject to certain exceptions, no person shall at any time directly or indirectly acquire ownership of more than 25% of any of the series Q preferred stock, series R preferred stock and series S preferred stock. These provisions assist us in protecting and preserving our real estate investment trust status and protect the interests of stockholders in takeover transactions by preventing the acquisition of a substantial block of outstanding shares of stock.

Shares of stock owned by a person or group of persons in excess of these limits are subject to redemption by us. The provision does not apply where a majority of the Board, in its sole and absolute discretion, waives such limit after determining that the status of us as a real estate investment trust for federal income tax purposes will not be jeopardized or the disqualification of us as a real estate investment trust is advantageous to our shareholders.

Dividends

In 2012, 2011 and 2010, we paid all of our dividends in cash. The following summarizes the taxability of our common and preferred stock dividends for the years ended December 31:

	2012 (1)		2011		2010
Common Stock: (2)
Ordinary income	$	0.38	$	0.07	$	-
Qualified dividend		0.20		0.01		-
Capital gains		0.54		0.84		1.25
Return of capital		-		0.14		-
Total distribution	$	1.12	$	1.06	$	1.25
Preferred Stock - Series L (3):
Ordinary income	$	0.55		0.15
Qualified dividend		0.28		-
Capital gains		0.80		1.07
Total dividend	$	1.63		1.22		N/A
Preferred Stock - Series M (3):
Ordinary income	$	0.57		0.15
Qualified dividend		0.30		-
Capital gains		0.82		1.11
Total dividend	$	1.69		1.26		N/A
Preferred Stock - Series O (3):
Ordinary income	$	0.59		0.16
Qualified dividend		0.31		-
Capital gains		0.85		1.15
Total dividend	$	1.75		1.31		N/A
Preferred Stock - Series P (3):
Ordinary income	$	0.58		0.15
Qualified dividend		0.30		-
Capital gains		0.83		1.13
Total dividend	$	1.71		1.28		N/A
Preferred Stock - Series Q (4):
Ordinary income	$	1.44	$	0.38	$	-
Qualified dividend		0.75		0.04		-
Capital gains		2.08		3.85		4.27
Total dividend	$	4.27	$	4.27	$	4.27
Preferred Stock - Series R (4):
Ordinary income	$	0.57	$	0.15	$	-
Qualified dividend		0.30		0.02		-
Capital gains		0.82		1.52		1.69
Total dividend	$	1.69	$	1.69	$	1.69
Preferred Stock - Series S (4):
Ordinary income	$	0.57	$	0.15	$	-
Qualified dividend		0.30		0.02		-
Capital gains		0.82		1.52		1.69
Total dividend	$	1.69	$	1.69	$	1.69

(1) Taxability for 2012 is estimated.

(2) The historical shares were adjusted by the Merger exchange ratio of 0.4464. As a result, the common stock dividends were also adjusted pre-Merger.

(3) Represents the dividends paid since the Merger.

(4) Upon completion of the Merger, each outstanding Series C, F and G Cumulative Redeemable Preferred Share of beneficial interest in ProLogis was exchanged for a newly issued share of Cumulative Redeemable Preferred Stock, Series Q, R and S, respectively.

In order to comply with the real estate investment trust requirements of the Internal Revenue Code, we are generally required to make common stock distributions (other than capital gain distributions) to our stockholders at least equal to (i) the sum of (a) 90% of our “REIT taxable income” computed without regard to the dividends paid deduction and net capital gains and (b) 90% of the net income (after tax), if any, from foreclosure property, minus (ii) certain excess non-cash income. Our common stock dividend policy is to distribute a percentage of our cash flow to ensure we will meet the distribution requirements of the Internal Revenue Code, while allowing us to retain cash to meet other needs, such as capital improvements and other investment activities.

Common stock dividends are characterized for federal income tax purposes as ordinary income, qualified dividend, capital gains, non-taxable return of capital or a combination of the four. Common stock dividends that exceed our current and accumulated earnings and profits (calculated for tax purposes) constitute a return of capital rather than a dividend and generally reduce the stockholder’s basis in the common stock. To the extent that a dividend exceeds both current and accumulated earnings and profits and the stockholder’s basis in the common stock, it will generally be treated as a gain from the sale or exchange of that stockholder’s common stock. At the beginning of each year, we notify our stockholders of the taxability of the common stock dividends paid during the preceding year.

The payment of common stock dividends is dependent upon our financial condition, operating results and real estate investment trust distribution requirements and may be adjusted at the discretion of the Board during the year. A cash dividend of $0.28 per common share for the first quarter of 2013 was declared on February 27, 2013. The dividend will be paid on March 29, 2013 to holders of common shares on March 12, 2013.

Pursuant to the terms of our preferred stock, we are restricted from declaring or paying any dividend with respect to our common stock unless and until all cumulative dividends with respect to the preferred stock have been paid and sufficient funds have been set aside for dividends that have been declared for the relevant dividend period with respect to the preferred stock.

Our tax return for the year ended December 31, 2012 has not been filed. The taxability information presented for our dividends paid in 2012 is based upon management’s estimate. Our tax returns for open tax years have not been examined by the Internal Revenue Service, other than those discussed in Note 17. Consequently, the taxability of dividends is subject to change.