NOTE 3. 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 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 accounted for using the equity method of accounting. See Note 6 for more detail regarding our consolidated investments.

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

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

	June 30,		December 31,
	2017		2016
Unconsolidated co-investment ventures	$	4,382,825	$	4,057,524
Other ventures		234,899		172,905
Totals	$	4,617,724	$	4,230,429

Unconsolidated Co-Investment Ventures

The amounts recognized in Strategic Capital Revenues and Earnings from Unconsolidated Entities, Net depend on the size and operations of the co-investment ventures, the timing of revenues earned through promotes during the life of a venture or upon liquidation, as well as fluctuations in foreign currency exchange rates. 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. Our ownership interest in these ventures also impacts the earnings we recognize.

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2017		2016		2017		2016
Strategic capital revenues from unconsolidated co-investment ventures, net:
U.S. (1)	$	130,165	$	9,179	$	141,223	$	18,174
Other Americas (1)		9,864		5,693		15,915		11,079
Europe		25,957		25,435		52,127		47,768
Asia		14,064		12,654		26,719		26,255
Total strategic capital revenues from unconsolidated co-investment ventures, net	$	180,050	$	52,961	$	235,984	$	103,276

Earnings from unconsolidated co-investment ventures, net:
U.S.	$	1,963	$	718	$	6,909	$	7,377
Other Americas		8,933		7,509		15,503		12,808
Europe		35,859		29,014		65,764		60,593
Asia		14,410		3,693		18,439		7,348
Total earnings from unconsolidated co-investment ventures, net	$	61,165	$	40,934	$	106,615	$	88,126

(1)

In June 2017, we earned promotes from USLF based on the venture’s cumulative returns to its investors over the last three years and FIBRA Prologis based on the venture’s cumulative returns to its investors over the past year. The third parties’ share of the promotes that were recognized in Strategic Capital Revenues were $123.9 million.

The following tables summarize the operating information and financial position of our unconsolidated co-investment ventures (not our proportionate share), as presented at our adjusted basis derived from the ventures’ U.S. GAAP information:

	June 30,			December 31,			June 30,
(dollars and square feet in millions)	2017			2016			2016
U.S.:
Number of ventures		1			1			1
Number of operating properties owned		384			369			379
Square feet		52			50			49
Total assets	$	4,346		$	4,238		$	4,228
Third-party debt	$	1,400		$	1,414		$	1,425
Total liabilities	$	1,620		$	1,540		$	1,504
Our investment balance (1)	$	545		$	435		$	518
Our weighted average ownership (2)		14.2	%		14.9	%		17.6	%
Other Americas:
Number of ventures		2			2			2
Number of operating properties owned		215			213			209
Square feet		43			42			41
Total assets	$	2,791		$	2,793		$	2,694
Third-party debt	$	728		$	739		$	677
Total liabilities	$	812		$	814		$	772
Our investment balance (1)	$	836		$	845		$	848
Our weighted average ownership (2)		44.0	%		43.9	%		43.6	%
Europe:
Number of ventures (3) (4)		4			4			4
Number of operating properties owned		702			700			690
Square feet		164			163			160
Total assets	$	12,178		$	10,853		$	11,188
Third-party debt	$	2,595		$	2,446		$	2,566
Total liabilities	$	3,536		$	3,283		$	3,521
Our investment balance (1)	$	2,505		$	2,327		$	2,464
Our weighted average ownership (2)		33.0	%		35.1	%		36.2	%
Asia:
Number of ventures		2			2			2
Number of operating properties owned		83			85			77
Square feet		36			36			34
Total assets	$	5,528		$	5,173		$	5,346
Third-party debt	$	2,088		$	1,947		$	1,952
Total liabilities	$	2,376		$	2,239		$	2,250
Our investment balance (1)	$	497		$	451		$	498
Our weighted average ownership (2)		15.1	%		15.1	%		15.0	%
Total:
Number of ventures		9			9			9
Number of operating properties owned		1,384			1,367			1,355
Square feet		295			291			284
Total assets	$	24,843		$	23,057		$	23,456
Third-party debt	$	6,811		$	6,546		$	6,620
Total liabilities	$	8,344		$	7,876		$	8,047
Our investment balance (1)	$	4,383		$	4,058		$	4,328
Our weighted average ownership (2)		26.9	%		27.9	%		28.8	%

	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2017		2016		2017		2016
Revenues:
U.S.	$	105	$	98	$	209	$	196
Other Americas		66		59		130		116
Europe		248		248		492		492
Asia		89		86		177		162
Total revenues	$	508	$	491	$	1,008	$	966

Net earnings:
U.S.	$	15	$	6	$	51	$	36
Other Americas		22		19		39		33
Europe		93		68		166		141
Asia		93		22		117		44
Total net earnings	$	223	$	115	$	373	$	254

(1)

The difference between our ownership interest of a venture’s equity and our investment balance at June 30, 2017, and December 31, 2016, results principally from three types of transactions: (i) deferring a portion of the gains we recognize from a contribution of a property to a venture ($459.4 million and $469.9 million, respectively); (ii) recording additional costs associated with our investment in a venture ($125.0 million and $124.1 million, respectively); and (iii) advances to a venture ($300.5 million and $166.1 million, respectively), which increased primarily from the gross promotes that were earned during the second quarter of 2017 and expected to be paid in the third quarter of 2017.

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

(3)	In January 2017, we sold our investment in ELV to our fund partner for $84.3 million and ELV contributed its properties to PTELF in exchange for equity interests.

(4)

In February 2017, we formed the Prologis United Kingdom Logistics Venture (“UKLV”), an unconsolidated co-investment venture in which we have a 15.0% ownership interest. UKLV will acquire land, develop buildings and operate and hold logistics real estate assets in the United Kingdom (“U.K.”). Upon formation, we, along with our venture partner, committed £380.0 million ($493.2 million at June 30, 2017), of which our share is £57.0 million ($74.0 million at June 30, 2017). During the six months ended June 30, 2017, we contributed 1.4 million square feet of stabilized properties, 0.5 million square feet of properties under development and 144.8 acres of land for £269.5 million ($336.4 million). We expect to continue to contribute properties and land into UKLV.

In July 2017, we contributed 190 operating properties formerly owned by Prologis North American Industrial Fund (“NAIF”), totaling approximately 39 million square feet, for an aggregate purchase price of $2.8 billion, to USLF, our unconsolidated co-investment venture. We received cash proceeds of $720 million and additional units, which increased our ownership interest in USLF to approximately 27% and USLF assumed $956.0 million of secured debt. As a result of this transaction, we expect to record a gain of approximately $480 million, net of a deferral due to our ongoing investment, in the third quarter of 2017.

Equity Commitments Related to Certain Unconsolidated Co-Investment Ventures

The following table summarizes the remaining equity commitments at June 30, 2017 (in millions):

	Equity Commitments						Expiration Date for Remaining Commitments
	Prologis		Venture Partners		Total
Prologis Targeted Europe Logistics Fund (1)	$	-	$	346	$	346	2017 - 2018
Prologis United Kingdom Logistics Venture (2)		35		201		236	2021
Prologis China Logistics Venture		294		1,665		1,959	2017
Totals	$	329	$	2,212	$	2,541

(1)	Equity commitments are denominated in euro and reported in U.S. dollars based on an exchange rate of $1.14 U.S. dollars to the euro.

(2)	As discussed above, this co-investment venture was formed in February 2017. Equity commitments are denominated in British pounds sterling and reported in U.S. dollars based on an exchange rate of $1.30 U.S. dollars to the British pound sterling.