Business Combinations

12 Months Ended

Dec. 31, 2015

Business Combinations [Abstract]

Business Combinations

Note 3. Business Combinations

Acquisition of KTR Capital Partners and Its Affiliates

On May 29, 2015, we acquired the high quality real estate assets and operating platform with high profile customers and comparable market composition to ours from KTR Capital Partners and its affiliates (“KTR”). The portfolio consisted of 315 operating properties, aggregating 59 million square feet, 3.6 million square feet of properties under development and land parcels that will support an estimated build out of 6.8 million square feet. The properties were acquired by our consolidated co-investment venture Prologis U.S. Logistics Venture (“USLV”), of which we own 55%. The acquisition was funded through cash (which included the contribution of $2.3 billion from our venture partner and the proceeds of newly issued debt by us, as detailed in Note 9), the assumption of secured mortgage debt and the issuance of 4.5 million common limited partnership units in the Operating Partnership. We incurred $24.7 million of acquisition costs during the second quarter of 2015, which are included in Other Expense.

The allocation of the purchase price required a significant amount of judgment and was based on our valuations, estimates and assumptions of the acquisition date fair value of the tangible and intangible assets acquired and liabilities assumed. While the preliminary allocation of the purchase price is substantially complete, the valuation of the real estate properties is still being finalized. We do not expect future revisions, if any, to have a significant impact on our financial position or results of operations.

The allocation of the purchase price was as follows (in thousands):

Investments in real estate properties	$	5,440,923
Intangible assets, net of intangible liabilities		332,708
Accounts receivable and other assets		7,632
Debt, including premium		(735,172	)
Accounts payable, accrued expenses and other liabilities		(55,422	)
Total estimated purchase price		4,990,669
Our venture partner’s share of purchase price		(2,253,234	)
Common limited partnership units issued in the Operating Partnership		(181,170	)
Prologis share of cash purchase price	$	2,556,265

The following unaudited pro forma financial information presents our results as though the KTR acquisition had been completed on January 1, 2014. The pro forma information does not reflect the actual results of operations had the transaction actually been completed on January 1, 2014, and it is not indicative of future operating results. The results for the year ended December 31, 2015, include approximately seven months of actual results for the acquisition, the acquisition expenses, and five months of pro forma adjustments. Our results of operations in 2015 include rental revenue and rental expenses of the properties acquired of $235.7 million and $56.9 million, respectively, representing the period from acquisition through December 31, 2015.

The following amounts are in thousands, except per share amounts:

	2015		2014
Total revenues	$	2,358,643	$	2,064,724
Net earnings attributable to common stockholders	$	866,753	$	537,861
Net earnings per share attributable to common stockholders – Basic	$	1.66	$	1.08
Net earnings per share attributable to common stockholders – Diluted	$	1.65	$	1.07

These results include certain adjustments, primarily: (i) decreased revenues from the amortization of the net assets from the acquired leases with net favorable rents relative to estimated market rents; (ii) 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 (iii) additional interest expense attributable to the debt issued to finance our cash portion of the acquisition offset by lower interest expense due to the accretion of the fair value adjustment of debt assumed.

Acquisition of a Controlling Interest in Prologis North American Industrial Fund

During 2014, we increased our ownership in Prologis North American Industrial Fund (“NAIF”) from 23.1% to 66.1% by acquiring the equity units from all but one partner for an aggregate of $679.0 million. This included the acquisition of $46.8 million of equity units on October 20, 2014, that resulted in our gaining control over NAIF, based on the rights of the limited partners, and therefore we began consolidating NAIF at that date. We recognized a gain of $201.3 million in Gains on Dispositions of Investments in Real Estate and Revaluation of Equity Investments upon Acquisition of a Controlling Interest, Net.

The total purchase price was $1.1 billion, which included our investment in NAIF at the time of consolidation. The adjustments finalizing the purchase price allocation during the 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 thousands):

Investments in real estate properties	$	2,658,252
Intangible assets, net of intangible liabilities		138,185
Cash		87,780
Accounts receivable and other assets		5,664
Debt, including premium		(1,195,213	)
Accounts payable, accrued expenses and other liabilities		(57,655	)
Noncontrolling interests		(554,493	)
Total purchase price	$	1,082,520

Our results of operations for 2014 included rental revenue and rental expenses of the properties acquired in the NAIF acquisition of $49.2 million and $13.3 million, respectively, offset by the impact of noncontrolling interests.

2013 Acquisitions of Controlling Interests in Unconsolidated Co-Investment Ventures

During 2013, we acquired real estate from three unconsolidated co-investment ventures through the conclusion of the venture or the acquisition of our partner’s interest. In connection with these transactions, we remeasured our equity investment to fair value and recognized gains of $34.8 million in Gains on Dispositions of Investments in Real Estate and Revaluation of Equity Investments upon Acquisition of a Controlling Interest, Net. The fair value was primarily based on external valuations.

· On October 2, 2013, we acquired our partner’s 78.4% interest in the unconsolidated co-investment venture Prologis SGP Mexico and concluded the venture. The allocation of net assets acquired was $409.5 million in real estate properties, $4.0 million of net other assets and $158.4 million in debt. All properties acquired in the transaction were contributed in June 2014 to an unconsolidated co-investment venture in Mexico, as discussed in Note 4.

· On August 6, 2013, we concluded the unconsolidated co-investment venture Prologis North American Industrial Fund III. The venture sold 73 properties to a third party and we subsequently acquired the remaining properties through the purchase of our partner’s 80% ownership interest in the venture. The allocation of net assets acquired was $519.2 million in real estate properties and $22.0 million of net other assets. These properties were contributed in January 2014 to a consolidated venture in which we own 55% of the equity as discussed in Note 12.

· In the second quarter of 2013, we concluded an unconsolidated co-investment venture in Japan.

The results of operations for these properties were not significant in 2013.