NOTE 3. REAL ESTATE

Investments in real estate properties consisted of the following (dollars and square feet in thousands):

	Square Feet				Number of Buildings
	Sep 30,		Dec 31,		Sep 30,		Dec 31,		Sep 30,		Dec 31,
	2018 (1)		2017		2018 (1)		2017		2018 (1)		2017
Operating properties:
Buildings and improvements		354,717		294,811		1,890		1,525	$	22,414,423	$	16,849,349
Improved land										8,058,613		5,735,978
Development portfolio, including land costs:
Prestabilized		6,016		7,345		21		22		488,984		546,173
Properties under development		25,617		22,216		73		63		1,521,062		1,047,316
Land (2)										1,264,815		1,154,383
Other real estate investments (3)										537,886		505,445
Total investments in real estate properties										34,285,783		25,838,644
Less accumulated depreciation										4,451,434		4,059,348
Net investments in real estate properties									$	29,834,349	$	21,779,296

(1)	The portfolio acquired in the DCT Transaction was included in investments in real estate at September 30, 2018. See Note 2 for more information.

(2)	Included in our investments in real estate at September 30, 2018 and December 31, 2017, were 5,228 and 5,191 acres of land, respectively.

(3)

Included in other real estate investments were: (i) non-logistics real estate; (ii) land parcels that are ground leased to third parties; (iii) our corporate headquarters; (iv) costs related to future development projects, including purchase options on land; (v) earnest money deposits associated with potential acquisitions; and (vi) infrastructure costs related to projects we are developing on behalf of others.

Acquisitions

The following table summarizes our real estate acquisition activity, excluding the DCT Transaction (as discussed in Note 2), for the three and nine months ended September 30 (dollars and square feet in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Number of operating properties		5		12		8		14
Square feet		523		6,328		1,406		6,478
Acquisition value of net investments in real estate properties (1) (2)	$	183,484	$	703,686	$	497,783	$	744,581

(1)

In August 2017, we acquired our partner’s interest in certain joint ventures in Brazil for an aggregate price of R1.2 billion ($381.7 million). As a result of this transaction, we began consolidating real estate that included twelve operating properties, two prestabilized properties and 531 acres of undeveloped land. We accounted for the transaction as a step-acquisition under the business combination rules and recognized a gain. The results of operations for these real estate properties were not significant in 2017.

(2)	Value includes the acquisition of 974 and 1,201 acres of land during the nine months ended September 30, 2018 and 2017.

Dispositions

The following table summarizes our real estate disposition activity (dollars and square feet in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Contributions to unconsolidated co-investment ventures (1)
Number of properties		13		201		24		211
Square feet		4,192		41,776		8,434		45,420
Net proceeds (2)	$	385,001	$	2,356,322	$	1,050,740	$	2,869,428
Gains on contributions, net (2) (3)	$	129,222	$	647,647	$	330,475	$	773,715
Dispositions to third parties
Number of properties		6		7		24		45
Square feet		1,827		2,179		7,269		8,217
Net proceeds (2) (4)	$	147,408	$	155,227	$	549,530	$	614,906
Gains on dispositions, net (2) (4)	$	64,836	$	50,259	$	152,955	$	104,522

Total gains on contributions and dispositions, net	$	194,058	$	697,906	$	483,430	$	878,237
Gains on revaluation of equity investments upon acquisition of a controlling interest		-		81,147		-		81,147
Total gains on dispositions of investments in real estate and revaluation of equity investments upon acquisition of a controlling interest, net	$	194,058	$	779,053	$	483,430	$	959,384

(1)

In July 2017, we contributed 190 operating properties totaling 37.1 million square feet owned by Prologis North American Industrial Fund (“NAIF”), to Prologis Targeted U.S. Logistics Fund (“USLF”), our unconsolidated co-investment venture. We received cash proceeds and additional units and USLF assumed $956.0 million of secured mortgage debt.

(2)	Includes the contribution and disposition of land parcels.

(3)

Amounts in 2018 reflect the adoption of the new revenue recognition standard under which we recognized the entire gain attributed to contributions of real estate properties to unconsolidated co-investment ventures. Amounts in 2017 reflect our prior recognition of the gain to the extent of the third-party ownership in the unconsolidated co-investment venture acquiring the property with the deferral of a portion of the gain related to our ownership.

(4)	Includes the sale of our investment in Europe Logistics Venture 1 during the nine months ended September 30, 2017.