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Real Estate

12 Months Ended

Dec. 31, 2020

NOTE 4. REAL ESTATE

Investments in real estate properties consisted of the following at December 31 (dollars and square feet in thousands):

	Square Feet				Number of Buildings
	2020 ⁽¹⁾		2019		2020 ⁽¹⁾		2019		2020 ⁽¹⁾		2019
Operating properties:
Buildings and improvements		441,336		354,297		2,261		1,876	$	31,489,943	$	23,067,625
Improved land										12,017,676		8,220,208
Development portfolio, including land costs:
Prestabilized		6,076		9,133		24		28		553,266		784,584
Properties under development		22,004		26,893		61		77		1,329,345		1,084,683
Land ⁽²⁾										1,606,358		1,101,646
Other real estate investments ⁽³⁾										3,387,740		965,668
Total investments in real estate properties										50,384,328		35,224,414
Less accumulated depreciation										6,539,156		5,437,662
Net investments in real estate properties									$	43,845,172	$	29,786,752

(1)	Includes the acquired real estate properties from the Liberty Transaction at December 31, 2020. See Note 3 for more information.

(2)	At December 31, 2020 and 2019, our land was comprised of 5,304 and 4,411 acres, respectively.

(3)

Included in other real estate investments were: (i) non-strategic real estate assets acquired in the Liberty Transaction that we do not intend to operate long-term; (ii) land parcels we own and lease to third parties; (iii) real estate assets that we intend to redevelop into industrial properties; and (iv) costs associated with potential acquisitions and future development projects, including purchase options on land.

At December 31, 2020, we had investments in real estate assets in the U.S. and other Americas (Brazil, Canada and Mexico), Europe (Belgium, the Czech Republic, France, Germany, Hungary, Italy, the Netherlands, Poland, Slovakia, Spain, Sweden and the United Kingdom (“U.K.”)) and Asia (China, Japan and Singapore).

Acquisitions

The following table summarizes our real estate acquisition activity, excluding the Liberty Transaction and the DCT Transaction as discussed in Note 3, for the years ended December 31 (dollars and square feet in thousands):

	2020 ⁽¹⁾		2019		2018
Number of operating properties		150		22		20
Square feet		21,874		1,405		4,757
Acres of land		830		1,269		1,210
Acquisition cost of net investments in real estate ⁽²⁾	$	3,260,465	$	1,074,815	$	1,008,718

(1)

In 2020, our two U.S. co-investment ventures, Prologis Targeted U.S. Logistics Fund, L.P. (“USLF”) and Prologis U.S. Logistics Venture, LLC (“USLV”), acquired the wholly-owned real estate assets of Industrial Property Trust Inc. (“IPT”) for $2.0 billion each in a cash transaction, including transaction costs and the assumption and repayment of debt (the “IPT Transaction”). As USLV is a consolidated co-investment venture, the number of operating properties, square feet and acquisition cost are included in the consolidated acquisition activity. For further discussion on the acquisition by USLF, see Note 5, and by USLV, see Notes 8 and 11.

(2)	Includes the acquisition cost of properties classified in other real estate investments of $206.1 million, $302.9 million and $72.3 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Dispositions

The following table summarizes our dispositions of net investments in real estate for the years ended December 31 (dollars and square feet in thousands):

	2020		2019		2018
Dispositions of development properties and land, net ⁽¹⁾
Number of properties		41		31		44
Square feet		14,482		10,027		15,527
Net proceeds	$	1,693,557	$	1,533,055	$	1,803,240
Gains on contributions and dispositions, net	$	464,942	$	467,577	$	469,817
Total gains on dispositions of development properties and land, net	$	464,942	$	467,577	$	469,817

Other dispositions of investments in real estate, net⁽²⁾
Number of properties		61		66		74
Square feet		10,562		15,816		13,035
Net proceeds	$	1,264,692	$	1,492,212	$	956,676
Gains on contributions and dispositions, net	$	252,195	$	255,219	$	371,179
Gains on partial redemptions of investment in an unconsolidated co-investment venture ⁽³⁾	$	-	$	135,022	$	-
Total gains on other dispositions of investments in real estate, net	$	252,195	$	390,241	$	371,179

(1)	The gains we recognize in Gains on Dispositions of Development Properties and Land, Net are primarily driven by the contribution of newly developed properties to our unconsolidated co-investment ventures.

(2)

In 2019, we formed Prologis Brazil Logistics Venture (“PBLV”), a Brazilian unconsolidated co-investment venture, with one partner. We contributed an initial portfolio of real estate properties to PBLV consisting of 14 operating properties totaling 6.9 million square feet and 371 acres of land. We received cash proceeds and units for our 20% equity interest.

(3)	In 2019, we redeemed a portion of our investment in a European unconsolidated co-investment venture.

Leases

We adopted the new lease standard on January 1, 2019 and applied it to leases that were in place on the effective date for both Prologis as a lessor and lessee. Our results for reporting periods beginning January 1, 2019 are presented under the new lease standard. We elected the package of practical expedients and were not required to reassess the following upon adoption: (i) whether an expired or existing contract met the definition of a lease; (ii) the lease classification at January 1, 2019 for existing leases; and (iii) whether leasing costs previously capitalized as initial direct costs would continue to be amortized.

As a Lessor

We lease our operating properties to customers under agreements that are classified primarily as operating leases. We recognize the total minimum lease payments provided for under the leases on a straight-line basis over the lease term. Our weighted average lease term remaining was 50 months based on square feet for all leases in effect at December 31, 2020.

The following table summarizes the minimum lease payments due from our customers on leases with an original lease term greater than one year for space in our operating properties, prestabilized and under development properties, other real estate investments and assets held for sale or contribution at December 31, 2020 (in thousands):


2021	$	2,864,803
2022		2,586,203
2023		2,192,529
2024		1,790,240
2025		1,435,199
Thereafter		4,863,735
Total	$	15,732,709

These amounts do not reflect future rental revenue from the renewal or replacement of existing leases and exclude reimbursements of operating expenses and rental increases that are not fixed.

As a Lessee

We had approximately 130 land and office space leases in which we were the lessee at December 31, 2020 and 2019, which primarily qualify as operating leases with remaining lease terms of 1 to 89 years. Our lease liabilities were $487.0 million and $471.6 million at December 31, 2020 and 2019, respectively.

The following table summarizes the fixed, future minimum rental payments, excluding variable costs, for which the lease has commenced as of December 31, 2020, with amounts discounted by our incremental borrowing rates to calculate the lease liabilities of our leases (in thousands):


2021	$	46,504
2022		47,270
2023		44,613
2024		43,107
2025		36,877
Thereafter		782,489
Total undiscounted rental payments		1,000,860
Less imputed interest		513,888
Total lease liabilities	$	486,972

The weighted average remaining lease term for these leases was 34 and 33 years at December 31, 2020 and 2019, respectively. We do not include renewal options in the lease term for calculating the lease liability unless we are reasonably certain we will exercise the option or the lessor has the sole ability to exercise the option. The weighted average incremental borrowing rate was 3.4% and 3.7% at December 31, 2020 and 2019, respectively. We assigned a collateralized interest rate to each lease based on the term of the lease and the currency in which the lease was denominated.