v2.4.0.6
Real Estate
 12 Months Ended
Dec. 31, 2011
Real Estate [Abstract]  
Real Estate
5. Real Estate

Investments in real estate properties are presented at cost, and consist of the following (in thousands):

 

 

                 
     December 31,
2011 (1)		     December 31,
2010		  

Industrial operating portfolio (2):

                

Improved land

   $ 4,813,145     $ 2,527,972  

Buildings and improvements

     16,739,403       8,186,827  

Development portfolio, including cost of land (3)

     860,531       365,362  

Land (4)

     1,984,233       1,533,611  

Other real estate investments (5)

     390,225       265,869  
   

 

 

    

 

 

  

Total investments in real estate properties

     24,787,537       12,879,641  

Less accumulated depreciation

     2,157,907       1,595,678  
   

 

 

    

 

 

  

Net investments in properties

   $             22,629,630     $             11,283,963  

 

(1) Included in the balances at December 31, 2011 are the real estate properties acquired in connection with the PEPR Acquisition and the Merger. See Note 3 for further details.

 

(2) At December 31, 2011 and 2010, we had 1,797 and 985 industrial properties consisting of 291.1 million and 168.5 million square feet, respectively. Of the properties owned at December 31, 2011, 628 properties consisting of 76.1 million square feet were acquired in the Merger and 220 properties consisting of 50.2 million square feet were acquired in the PEPR Acquisition.

 

(3) At December 31, 2011, the development portfolio consisted of 26 properties aggregating 7.2 million square feet under development and four properties aggregating 2.3 million square feet of pre-stabilized completed properties. Of these properties, 8 properties consisting of 2.5 million square feet were acquired in the Merger. At December 31, 2010, 14 properties aggregating 4.9 million square feet were under development. Our total expected investment upon completion of the development portfolio, including pre-stabilized properties, at December 31, 2011 was $1.2 billion, including land, development and leasing costs.

 

(4) Land consisted of 10,723 acres at December 31, 2011, of which, 2,234 acres were acquired in the Merger and 8,990 acres at December 31, 2010.

 

(5) Included in other investments are: (i) certain non-industrial real estate; (ii) our corporate office buildings; (iii) land subject to ground leases; (iv) certain infrastructure costs related to projects we are developing on behalf of others; (v) costs incurred related to future development projects, including purchase options on land; and (vi) earnest money deposits associated with potential acquisitions.

At December 31, 2011, excluding our assets held for sale, we owned real estate assets in the Americas (Canada, Mexico and the United States), Europe (Austria, Belgium, the Czech Republic, France, Germany, Hungary, Italy, the Netherlands, Poland, Romania, Slovakia, Spain, Sweden and the United Kingdom) and Asia (China, Japan, and Singapore).

During the year ended December 31, 2011, we recognized Gains on Acquisitions and Dispositions of Investments in Real Estate, Net in continuing operations of $111.7 million. This includes a gain of $85.9 million recognized in the second quarter related to the acquisition of a controlling interest in PEPR (See Note 3), a $13.5 million gain from the acquisition of a controlling interest in a joint venture in Japan and the contribution of properties to unconsolidated co-investment ventures.

The 2011 contribution activity resulted in cash proceeds of $590.8 million related to: (i) 40 properties aggregating 4.2 million square feet contributed to Prologis Targeted U.S Logistics Fund; (ii) four properties aggregating 0.6 million square feet to China Logistics Venture; (iii) nine properties aggregating 2.3 million square feet to Prologis European Properties Fund II; and (iv) four properties aggregating 0.7 million square feet to Europe Logistics Fund.

During the year ended December 31, 2011, we recognized a $5.2 million charge for estimated repairs related primarily to one of our buildings in Japan that was damaged from the earthquake and related tsunami in March 2011. This charge was included in Interest and Other Income (Expense), Net on the Consolidated Statements of Operations.

During 2011, in addition to the Merger and PEPR Acquisition we acquired 8 properties aggregating 1.5 million square feet with a combined purchase price of $86.5 million, which was allocated to real estate and other assets.

During the years ended December 31, 2011, 2010 and 2009, we recorded impairment charges related to real estate properties of $23.9 million, $824.3 million and $331.6 million, respectively. See Note 16 for further discussion on the impairment charges.

Lease Commitments

We have entered into operating ground leases on certain land parcels, primarily on-tarmac facilities and office space with remaining lease terms of 1 to 79 years. Buildings and improvements subject to ground leases are depreciated ratably over the lesser of the term of the related leases or its useful life. Future minimum rental payments under non-cancelable operating leases in effect as of December 31, 2011 were as follows (in thousands):

 

 

         

2012

   $ 24,236  

2013

     20,894  

2014

     19,454  

2015

     18,623  

2016

     10,726  

Thereafter

     146,438  
   

 

 

  

Total

   $             240,371  

 

Future Amortization of Leasing Assets and Liabilities

The expected future amortization of leasing commissions of $220.6 million is summarized in the table below. We also expect our above and below market leases and rent leveling assets, which total $269.6 million at December 31, 2011, to be amortized into rental income as follows (in thousands):

 

 

                 
     Amortization
Expense		     Net Charge (Increase)
to Rental Income		  

2012

   $ 75,855     $ 32,040  

2013

     49,061       48,791  

2014

     36,408       56,047  

2015

     27,840       38,734  

2016

     14,932       25,092  

Thereafter

     16,506       68,852  
   

 

 

    

 

 

  

Totals

   $             220,602     $                    269,556  

Operating Lease Agreements

We lease our operating properties and certain land parcels to customers under agreements that are generally classified as operating leases. Our largest customer and 25 largest customers accounted for 2.4% and 17.9%, respectively, of our annualized base rents at December 31, 2011. At December 31, 2011, minimum lease payments on leases with lease periods greater than one year for space in our operating properties and leases of land subject to ground leases, during each of the years in the five-year period ending December 31, 2016 and thereafter were as follows (in thousands):

 

 

         

2012

   $     1,050,141  

2013

     882,559  

2014

     710,916  

2015

     544,487  

2016

     389,951  

Thereafter

     1,119,845  
   

 

 

  
    $             4,697,899  

These amounts do not reflect future rental revenues from the renewal or replacement of existing leases and exclude reimbursements of operating expenses. In addition to minimum rental payments, our customers pay reimbursements for their pro rata share of specified operating expenses, which amounted to $283.1 million, $161.0 million and $150.3 million for the years ended December 31, 2011, 2010 and 2009, respectively. These reimbursements are reflected as rental income and rental expenses in the accompanying Consolidated Statements of Operations.