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Debt

12 Months Ended

Dec. 31, 2020

NOTE 8. DEBT

All debt is incurred by the OP or its consolidated subsidiaries. The following table summarizes our debt at December 31 (dollars in thousands):

	2020					2019
	Weighted Average			Amount		Weighted Average			Amount
	Interest Rate⁽¹⁾	Term ⁽²⁾		Outstanding ⁽³⁾		Interest Rate⁽¹⁾	Term ⁽²⁾		Outstanding ⁽³⁾
Credit facilities	0.8%		2.0	$	171,794	0.4%		1.1	$	184,255
Senior notes ⁽⁴⁾⁽⁵⁾	2.0%		11.2		14,275,870	2.4%		8.2		9,660,570
Term loans and unsecured other ⁽⁴⁾	0.9%		5.6		1,764,311	0.9%		7.5		1,441,882
Secured mortgage ⁽⁴⁾⁽⁶⁾⁽⁷⁾	3.1%		3.0		637,101	3.4%		4.0		619,170
Total	1.9%		10.2	$	16,849,076	2.2%		7.8	$	11,905,877

(1)

The interest rates presented represent the effective interest rates (including amortization of debt issuance costs and the noncash premiums or discounts) at the end of the period for the debt outstanding and include the impact of designated interest rate swaps, which effectively fix the interest rate on certain variable rate debt.

(2)	The weighted average term represents the remaining maturity in years on the debt outstanding at period end.

(3)	We borrow in the functional currencies of the countries where we invest. Included in the outstanding balances at December 31 were borrowings denominated in the following currencies:

	2020								2019
	Weighted Average Interest Rate			Amount Outstanding		% of Total			Weighted Average Interest Rate			Amount Outstanding		% of Total
British pound sterling		2.2	%	$	1,019,480		6.1	%		2.3	%	$	656,549		5.5	%
Canadian dollar		2.7	%		285,708		1.7	%		3.4	%		279,730		2.3	%
Euro		1.4	%		6,549,676		38.8	%		1.9	%		6,128,986		51.5	%
Japanese yen		0.8	%		2,877,247		17.1	%		0.7	%		2,329,381		19.6	%
U.S. dollar		2.8	%		6,116,965		36.3	%		4.4	%		2,511,231		21.1	%
Total		1.9	%	$	16,849,076					2.2	%	$	11,905,877

(4)

Through the Liberty Transaction, we assumed $2.5 billion of senior notes, $246.9 million of secured mortgage debt and a $100.1 million term loan with a weighted average stated interest rate of 3.8%. We subsequently paid down $1.8 billion of the assumed debt with senior notes we issued at lower rates in February 2020. See below for additional activity on debt assumed in the Liberty Transaction and the extinguishment of a significant portion of the debt subsequent to acquisition.

(5)	Senior notes are due from February 2022 to October 2050 with effective interest rates ranging from -0.2% to 4.5% at December 31, 2020.

(6)	Through the IPT Transaction, USLV assumed $341.8 million of secured mortgage debt, all of which was paid down at closing. See below for the early extinguishment of debt in the IPT Transaction.

(7)

Secured mortgage debt is due from January 2021 to November 2027 with effective interest rates ranging from 0.2% to 7.8% at December 31, 2020. The debt was principally secured by 85 operating properties and 1 prestabilized property with an aggregate undepreciated cost of $1.6 billion at December 31, 2020.

Credit Facilities

We have a global senior credit facility (the “Global Facility”) under which we may draw in British pounds sterling, Canadian dollars, euro, Japanese yen, Mexican pesos and U.S. dollars on a revolving basis up to $3.5 billion (subject to currency fluctuations). Pricing under the Global Facility, including the spread over LIBOR, facility fees and letter of credit fees, varies based on the public debt ratings of the OP. The Global Facility is scheduled to mature in January 2023; however, we may extend the maturity date for six months on two occasions, subject to the satisfaction of certain conditions and payment of extension fees. We have the ability to increase the Global Facility to $4.5 billion, subject to currency fluctuations and obtaining additional lender commitments.

We also have a Japanese yen revolver (the “Revolver”) that we upsized in July 2020 with total commitments of ¥55.0 billion ($533.6 million at December 31, 2020). We have the ability to increase the borrowing capacity of the Revolver to ¥75.0 billion ($727.6 million at December 31, 2020), subject to obtaining additional lender commitments. Pricing under the Revolver, including the spread over Yen LIBOR, facility fees and letter of credit fees, varies based on the public debt ratings of the OP. At December 31, 2020, the Revolver is scheduled to mature in July 2024; however, we may extend the maturity date for one year, subject to the satisfaction of certain conditions and payment of extension fees.

We refer to the Global Facility and the Revolver, collectively, as our “Credit Facilities.”

Liquidity

The following table summarizes information about our available liquidity (dollars in millions):

	2020			2019			2018
For the years ended December 31:
Weighted average daily interest rate		1.1	%		1.5	%		3.1	%
Weighted average daily borrowings	$	109		$	85		$	253
Maximum borrowings outstanding at any month-end	$	727		$	257		$	485
At December 31:
Aggregate lender commitments
Credit Facilities	$	4,119		$	3,946		$	3,470
Less:
Borrowings outstanding		172			184			51
Outstanding letters of credit		24			36			31
Current availability	$	3,923		$	3,726		$	3,388
Available term loans		250			500			-
Cash and cash equivalents		598			1,089			344
Total liquidity	$	4,771		$	5,315		$	3,732

Senior Notes

The senior notes are unsecured and our obligations are effectively subordinated in certain respects to any of our debt that is secured by a lien on real property, to the extent of the value of such real property. The senior notes require interest payments be made quarterly, semi-annually or annually. The majority of the senior notes are redeemable at any time at our option, subject to certain prepayment penalties. Such repurchase and other terms are governed by the provisions of indenture agreements, various note purchase agreements or trust deeds.

The following table summarizes the issuances and redemptions of senior notes during 2020 (principal in thousands):

	Aggregate Principal				Issuance Date Weighted Average
Initial Borrowing Date	Borrowing Currency		USD ⁽¹⁾		Interest Rate ⁽²⁾	Term⁽³⁾		Maturity Dates
February ⁽⁴⁾⁽⁵⁾	€	1,350,000	$	1,485,405	0.6%		10.7	February 2022 – 2035
February ⁽⁴⁾	$	2,200,000	$	2,200,000	2.4%		15.0	April 2027 – 2050
February	£	250,000	$	322,490	1.9%		15.8	February 2035
June⁽⁵⁾⁽⁶⁾	¥	41,200,000	$	386,314	1.0%		12.4	June 2027 – 2050
August ⁽⁵⁾⁽⁷⁾	$	1,250,000	$	1,250,000	1.6%		18.2	October 2030 – 2050
September	¥	19,700,000	$	186,835	1.0%		14.1	September 2032 – 2040
December	€	300,000	$	364,980	0.0%		2.0	December 2022

	Aggregate Principal				Redemption Date Weighted Average
Redemption Date	Borrowing Currency		USD ⁽¹⁾		Interest Rate ⁽²⁾	Term⁽³⁾		Maturity Dates
January	€	400,000	$	445,880	0.0%		0.1	January 2020
March⁽⁴⁾	€	700,000	$	783,090	1.4%		1.2	May 2021
June⁽⁶⁾	€	212,598	$	238,067	3.0%		1.6	January 2022
June⁽⁶⁾	€	100,486	$	112,524	3.4%		3.6	February 2024
September ⁽⁷⁾	$	850,000	$	850,000	4.3%		2.9	August 2023
December	€	485,066	$	595,710	3.0%		1.1	January 2022

(1)	The exchange rate used to translate into U.S. dollars was the spot rate at the settlement date.

(2)	The interest rate represents the fixed or variable interest rate at the issuance or redemption date of the related debt.

(3)	The issuance date and redemption date weighted average term represent the remaining maturity in years on the related debt at the issuance or redemption date, respectively.

(4)

We utilized the proceeds from these issuances to redeem $1.8 billion of debt assumed in the Liberty Transaction, primarily senior notes as discussed above, and our €700.0 million ($783.1 million) senior notes due in May 2021. The remainder of the proceeds were used for the repayment of other debt and general corporate purposes.

(5)	Approximately $1.5 billion of the proceeds from the issuance of these notes were to fund sustainable and environmentally beneficial projects and buildings in accordance with our green bond framework.

(6)	We utilized the proceeds from the issuance of the Japanese yen senior notes to redeem €212.6 million ($238.1 million) and €100.5 million ($112.5 million) of the euro senior notes due in January 2022 and February 2024, respectively, through a tender offer.

(7)	We utilized the proceeds from this issuance to redeem $850.0 million of senior notes due in August 2023.

In February 2020, we completed an exchange offer for two series of Liberty’s senior notes for an aggregate amount of $750.0 million, with $689.8 million, or 92%, of the aggregate principal amount being validly tendered for exchange. These senior notes are in the aggregate principal amounts of $400.0 million due in October 2026 with an interest rate of 3.3% and $350.0 million due in February 2029 with an interest rate of 4.4%. The senior notes were exchanged for notes issued by a wholly owned subsidiary and guaranteed by the OP. As a result of the exchange offer, we have no separate remaining financial reporting obligations or financial covenants associated with the senior notes assumed in the Liberty Transaction. All other terms of the exchanged Liberty senior notes remained substantially the same.

Term Loans

The following table summarizes our outstanding term loans at December 31 (dollars and borrowing currency in thousands):

Term Loan	Borrowing Currency	Initial Borrowing Date	Lender Commitment at 2020				Amount Outstanding at 2020			Amount Outstanding at 2019			Interest Rate	Maturity Date
			Borrowing Currency		USD		USD			USD
2017 Term Loan ⁽¹⁾	USD, EUR, JPY and GBP	June 2014	$	500,000	$	500,000	$	250,000		$	-		LIBOR + 0.9%	May 2021
2015 Canadian Term Loan	CAD	December 2015	$	170,506	$	133,837		133,837			131,214		CDOR + 0.9%	February 2023
March 2017 Yen Term Loan	JPY	March 2017	¥	12,000,000	$	116,414		116,414			110,553		0.9% and 1.0%	March 2027 – 2028
October 2017 Yen Term Loan	JPY	October 2017	¥	10,000,000	$	97,012		97,012			92,127		0.9%	October 2032
December 2018 Yen Term Loan	JPY	December 2018	¥	20,000,000	$	194,023		194,023			184,254		1.2% and Yen LIBOR + 0.7%	December 2031 – June 2033
January 2019 Yen Term Loan	JPY	January 2019	¥	15,000,000	$	145,517		145,517			138,191		Yen LIBOR + 0.5% to 0.6%	January 2028 – 2030
March 2019 Yen Term Loan	JPY	March 2019	¥	85,000,000	$	824,599		824,599			783,082		Yen LIBOR + 0.4%	March 2026
Subtotal								1,761,402			1,439,421
Debt issuance costs, net								(7,385	)		(8,484	)
Total term loans							$	1,754,017		$	1,430,937

(1)

During 2020, we extended the maturity of the multi-currency term loan (“2017 Term Loan”) by one year until May 2021. We may extend the maturity for one additional year, subject to the satisfaction of certain conditions and the payment of an extension fee. During 2020 and 2019, we borrowed a net $250 million and paid down a net $496.5 million on the 2017 Term Loan, respectively.

Long-Term Debt Maturities

Scheduled principal payments due on our debt for each year through the period ended December 31, 2025, and thereafter were as follows at December 31, 2020 (in thousands):

	Unsecured
		Credit		Senior			Term Loans			Secured
Maturity		Facilities		Notes			and Other			Mortgage			Total
2021⁽¹⁾⁽²⁾		$	-	$	-		$	260,294		$	115,767		$	376,061
2022			-		552,195			-			75,124			627,319
2023 ⁽³⁾			171,794		-			133,837			34,041			339,672
2024			-		735,664			-			269,271			1,004,935
2025			-		798,506			-			142,284			940,790
Thereafter			-		12,251,211			1,377,565			2,468			13,631,244
Subtotal			171,794		14,337,576			1,771,696			638,955			16,920,021
Premiums (discounts), net			-		10,901			-			260			11,161
Debt issuance costs, net			-		(72,607	)		(7,385	)		(2,114	)		(82,106	)
Total		$	171,794	$	14,275,870		$	1,764,311		$	637,101		$	16,849,076

(1)	We expect to repay the amounts maturing in the next twelve months with cash generated from operations, proceeds from dispositions of real estate properties, or as necessary, with borrowings on our Credit Facilities.

(2)	Included in the 2021 maturities is the 2017 Term Loan that can be extended until 2022.

(3)	Included in the 2023 maturities is the Global Facility that can be extended until 2024.

Interest Expense

The following table summarizes the components of interest expense for the years ended December 31 (in thousands):

	2020			2019			2018
Gross interest expense	$	348,427		$	271,451		$	268,942
Amortization of debt discounts (premiums), net		(6,741	)		3,713			(590	)
Amortization of debt issuance costs, net		14,600			13,293			13,243
Interest expense before capitalization	$	356,286		$	288,457		$	281,595
Capitalized amounts		(41,779	)		(48,504	)		(52,454	)
Net interest expense	$	314,507		$	239,953		$	229,141
Total cash paid for interest, net of amounts capitalized	$	309,390		$	214,375		$	205,485

Early Extinguishment of Debt

Over the last three years, we repurchased or repaid certain debt before the maturity date in an effort to reduce our borrowing costs and extend our debt maturities. As a result, the difference between the recorded debt (including premiums, discounts and related debt issuance costs) and the consideration we paid to retire the debt, including fees, was recognized as gains or losses. Fees associated with the restructuring of debt that meets the modification criteria, along with existing unamortized premium or discount and debt issuance costs, are amortized over the term of the new debt.

We recognized losses of $188.3 million, $16.1 million and $2.6 million upon extinguishment of debt in 2020, 2019 and 2018, respectively. During 2020 we issued $6.2 billion of senior notes, aggregate principal in U.S. dollars, and used the proceeds to redeem certain higher interest rate debt before maturity. This resulted in extending our weighted average remaining maturity to 10 years and lowering our weighted average effective interest rate to approximately 1.9% at December 31, 2020 and the recognition of losses on early extinguishment of debt. The losses in 2020 included the extinguishment of debt assumed in the Liberty Transaction and the IPT Transaction, which represented the excess of the prepayment penalties over the premium recorded upon assumption of the debt.

Financial Debt Covenants

We had $14.3 billion of senior notes and $1.8 billion of term loans outstanding at December 31, 2020 that were subject to certain financial covenants under their related indentures. We are also subject to financial covenants under our Credit Facilities and certain secured mortgage debt. At December 31, 2020, we were in compliance with all of our financial debt covenants.

Guarantee of Finance Subsidiary Debt

We have finance subsidiaries as part of our operations in Europe (Prologis Euro Finance LLC), Japan (Prologis Yen Finance LLC) and the U.K. (Prologis Sterling Finance LLC) in order to mitigate our foreign currency risk by borrowing in the currencies in which we invest. These entities are 100% indirectly owned by the OP and all unsecured debt issued or to be issued by each entity is or will be fully and unconditionally guaranteed by the OP. There are no restrictions or limits on the OP’s ability to obtain funds from its subsidiaries by dividend or loan. In reliance on Rule 3-10 of Regulation S-X, the separate financial statements of Prologis Euro Finance LLC, Prologis Yen Finance LLC and Prologis Sterling Finance LLC are not provided.