| Unconsolidated Entities |
| 4. |
|
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 private capital investors and
provide asset and property management services to these entities. We refer to these entities as co-investment ventures. Our ownership interest in these entities generally ranges from 15-50%. These entities may be consolidated or unconsolidated,
depending on the structure, our partner’s rights and participation and our level of control of the entity. This Note details our unconsolidated co-investment ventures. See Note 10 for more detail regarding our consolidated investments.
We also have investments in other joint ventures, generally with one partner and that we do not manage. We refer to our investments in the
entities accounted for on the equity method, both unconsolidated co-investment ventures and other joint ventures, as unconsolidated entities.
Our investments in and advances to our unconsolidated entities are summarized below (in thousands):
| |
|
|
|
|
|
|
|
|
|
|
| |
|
June 30, |
|
|
December 31, |
|
| |
|
2012 |
|
|
2011 |
|
|
Unconsolidated co-investment ventures
|
|
$ |
1,943,843 |
|
|
|
|
$ |
2,471,179 |
|
|
Other joint ventures
|
|
|
276,329 |
|
|
|
|
|
386,576 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$ |
2,220,172 |
|
|
|
|
$ |
2,857,755 |
|
| |
|
|
|
|
|
|
|
|
|
|
Unconsolidated Co-Investment Ventures
As of June 30, 2012, we had investments in and managed 13 unconsolidated co-investment ventures that own portfolios of operating industrial properties and may also develop properties. Private
capital revenue includes revenues we earn for the management services we provide to unconsolidated entities and certain third parties. These fees are recognized as earned and may include property and asset management fees or transactional fees
for leasing, acquisition, construction, financing, legal and tax services. We may also earn promote payments based on the third party investor returns over time. In addition, we may earn fees for services provided to develop a building within the
co-investment venture. These are reflected as Development Management and Other Income in the Consolidated Statements of Operations.
Summarized information regarding our investments in the co-investment ventures is as follows (in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Three Months Ended |
|
|
Six Months Ended |
|
| |
|
June 30, |
|
|
June 30, |
|
| |
|
2012 |
|
|
2011 |
|
|
2012 |
|
|
2011 |
|
|
Earnings (loss) from unconsolidated co-investment ventures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas (1)
|
|
$ |
(6,749 |
) |
|
$ |
2,004 |
|
|
$ |
(4,466 |
) |
|
$ |
4,626 |
|
|
Europe
|
|
|
7,172 |
|
|
|
5,679 |
|
|
|
15,169 |
|
|
|
14,770 |
|
|
Asia
|
|
|
730 |
|
|
|
960 |
|
|
|
2,208 |
|
|
|
1,169 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total earnings from unconsolidated co-investment ventures, net
|
|
$ |
1,153 |
|
|
$ |
8,643 |
|
|
$ |
12,911 |
|
|
$ |
20,565 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private capital revenue and other income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
|
|
$ |
16,081 |
|
|
$ |
14,238 |
|
|
$ |
33,604 |
|
|
$ |
27,444 |
|
|
Europe
|
|
|
9,325 |
|
|
|
13,806 |
|
|
|
18,462 |
|
|
|
27,131 |
|
|
Asia
|
|
|
5,088 |
|
|
|
2,343 |
|
|
|
9,842 |
|
|
|
2,536 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total private capital revenue
|
|
|
30,494 |
|
|
|
30,387 |
|
|
|
61,908 |
|
|
|
57,111 |
|
|
Development management and other income
|
|
|
2 |
|
|
|
4,042 |
|
|
|
78 |
|
|
|
5,943 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$ |
30,496 |
|
|
$ |
34,429 |
|
|
$ |
61,986 |
|
|
$ |
63,054 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
During the three and six months ended June 30, 2012, we recorded a $5.0 million loss representing our share of a loss from the early extinguishment of debt in
Prologis North American Industrial Fund III (“Prologis NAIII”). |
We completed the Merger and PEPR Acquisition in the second quarter of 2011. During the first quarter of 2012, we also acquired one of
our unconsolidated co-investment ventures and dissolved another, both located in the Americas. Therefore 2011 may not be comparable to 2012. See Note 2 for more information on these transactions.
Private capital revenue included fees and incentives we earn for services provided to our unconsolidated co-investment ventures (shown above), as well as
fees earned from other unconsolidated entities and third parties of $0.5 million and $1.5 million during the three and six months ended June 30, 2012, respectively and $2.6 million and $5.7 million during the three and six months ended
June 30, 2011, respectively.
Information about our investments
in the co-investment ventures is as follows (dollars in thousands):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Weighted Average Ownership
Percentage |
|
|
Investment in and Advances to |
|
| |
|
June 30, |
|
|
December 31, |
|
|
June 30, |
|
|
December 31, |
|
|
Unconsolidated co-investment ventures by region
|
|
2012 |
|
|
2011 |
|
|
2012 |
|
|
2011 |
|
|
Americas
|
|
|
24.3 |
% |
|
|
28.2 |
% |
|
$ |
1,119,279 |
|
|
$ |
1,596,295 |
|
|
Europe
|
|
|
30.4 |
% |
|
|
29.9 |
% |
|
|
633,674 |
|
|
|
662,010 |
|
|
Asia
|
|
|
19.3 |
% |
|
|
19.4 |
% |
|
|
190,890 |
|
|
|
212,874 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
|
25.7 |
% |
|
|
27.9 |
% |
|
$ |
1,943,843 |
|
|
$ |
2,471,179 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Summarized financial information of the co-investment ventures (for the entire entity, not our proportionate share) and our investment
in such ventures is presented below (dollars in millions):
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2012
|
|
Americas |
|
|
Europe |
|
|
Asia |
|
|
Total |
|
|
For the three months ended June 30, 2012 (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
185.8 |
|
|
$ |
120.9 |
|
|
$ |
35.0 |
|
|
$ |
341.7 |
|
|
Net earnings (loss) (2)
|
|
$ |
(28.0 |
) |
|
$ |
24.3 |
|
|
$ |
(0.9 |
) |
|
$ |
(4.6 |
) |
|
For the six months ended June 30, 2012: (1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
396.2 |
|
|
$ |
245.9 |
|
|
$ |
69.8 |
|
|
$ |
711.9 |
|
|
Net earnings (loss) (2)
|
|
$ |
(38.1 |
) |
|
$ |
48.0 |
|
|
$ |
4.7 |
|
|
$ |
14.6 |
|
|
As of June 30, 2012:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$ |
9,603.7 |
|
|
$ |
5,967.7 |
|
|
$ |
2,080.1 |
|
|
$ |
17,651.5 |
|
|
Amounts due to (from) us (3)
|
|
$ |
6.8 |
|
|
$ |
8.0 |
|
|
$ |
10.0 |
|
|
$ |
24.8 |
|
|
Third party debt (4)
|
|
$ |
3,954.3 |
|
|
$ |
2,114.0 |
|
|
$ |
1,034.4 |
|
|
$ |
7,102.7 |
|
|
Total liabilities
|
|
$ |
4,268.6 |
|
|
$ |
2,638.2 |
|
|
$ |
1,135.9 |
|
|
$ |
8,042.7 |
|
|
Noncontrolling interest
|
|
$ |
0.1 |
|
|
$ |
5.8 |
|
|
$ |
— |
|
|
$ |
5.9 |
|
|
Venture partners’ equity
|
|
$ |
5,335.0 |
|
|
$ |
3,323.7 |
|
|
$ |
944.2 |
|
|
$ |
9,602.9 |
|
|
Our weighted average ownership (5)
|
|
|
24.3 |
% |
|
|
30.4 |
% |
|
|
19.3 |
% |
|
|
25.7 |
% |
|
Our investment balance (6)
|
|
$ |
1,119.3 |
|
|
$ |
633.7 |
|
|
$ |
190.9 |
|
|
$ |
1,943.9 |
|
|
Deferred gains, net of amortization (7)
|
|
$ |
155.0 |
|
|
$ |
181.4 |
|
|
$ |
— |
|
|
$ |
336.4 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
|
|
2011
|
|
Americas |
|
|
Europe |
|
|
Asia |
|
|
Total |
|
|
For the three months ended June 30, 2011 (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
195.1 |
|
|
$ |
169.4 |
|
|
$ |
15.1 |
|
|
$ |
379.6 |
|
|
Net earnings (loss)
|
|
$ |
(15.4 |
) |
|
$ |
17.3 |
|
|
$ |
3.5 |
|
|
$ |
5.4 |
|
|
For the six months ended June 30, 2011 (1):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$ |
368.4 |
|
|
$ |
359.8 |
|
|
$ |
18.1 |
|
|
$ |
746.3 |
|
|
Net earnings (loss)
|
|
$ |
(29.9 |
) |
|
$ |
37.8 |
|
|
$ |
4.6 |
|
|
$ |
12.5 |
|
|
As of December 31, 2011:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$ |
12,236.0 |
|
|
$ |
6,211.8 |
|
|
$ |
2,245.1 |
|
|
$ |
20,692.9 |
|
|
Amounts due to (from) us (3)
|
|
$ |
59.5 |
|
|
$ |
8.1 |
|
|
$ |
9.3 |
|
|
$ |
76.9 |
|
|
Third party debt (4)
|
|
$ |
5,952.8 |
|
|
$ |
2,275.8 |
|
|
$ |
1,061.4 |
|
|
$ |
9,290.0 |
|
|
Total liabilities
|
|
$ |
6,386.4 |
|
|
$ |
2,758.9 |
|
|
$ |
1,174.0 |
|
|
$ |
10,319.3 |
|
|
Noncontrolling interest
|
|
$ |
1.7 |
|
|
$ |
6.2 |
|
|
$ |
— |
|
|
$ |
7.9 |
|
|
Venture partners’ equity
|
|
$ |
5,847.9 |
|
|
$ |
3,446.7 |
|
|
$ |
1,071.1 |
|
|
$ |
10,365.7 |
|
|
Our weighted average ownership (5)
|
|
|
28.2 |
% |
|
|
29.9 |
% |
|
|
19.4 |
% |
|
|
27.9 |
% |
|
Our investment balance (6)
|
|
$ |
1,596.3 |
|
|
$ |
662.0 |
|
|
$ |
212.9 |
|
|
$ |
2,471.2 |
|
|
Deferred gains, net of amortization (7)
|
|
$ |
227.6 |
|
|
$ |
191.0 |
|
|
$ |
0.1 |
|
|
$ |
418.7 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (1) |
During the first quarter of 2012, we began consolidating two of our North America co-investment ventures whose results are included through the transaction date. During
the three and six months ended June 30, 2011, amounts include approximately two and five months of activity, respectively, for PEPR while accounted for on the equity method and approximately one month of activity from the investments acquired
through the Merger. See Note 2 for more details of these transactions. |
| (2) |
During the second quarter of 2012, Prologis NAIII settled debt before maturity by transferring the secured properties to the lender in lieu of payment and triggered the
write-off of the related derivative balance in other comprehensive income of $25.1 million (Prologis share was $5.0 million). |
| (3) |
At December 31, 2011, we had notes receivable aggregating $41.2 million from Prologis NAIII ($21.4 million) and Prologis SGP Mexico ($19.8 million). In February
2012, Prologis NAIII restructured the loan payable to us and our partner into equity according to our ownership percentages. As of June 30, 2012, we have one note receivable from Prologis SGP Mexico of $19.8 million. The remaining amounts
represent current balances from services provided by us to the co-investment ventures. |
| (4) |
As discussed in Note 2, debt was reduced by $1.4 billion related to the consolidation of two unconsolidated co-investment ventures during the first quarter of 2012. As
of June 30, 2012 and December 31, 2011, we guaranteed $28.0 million of the third party debt of certain unconsolidated ventures. As of December 31, 2011, we had pledged properties included in our Real Estate Operations segment with an
undepreciated cost of approximately $277.0 million, to serve as additional collateral for the secured mortgage loan of NAIF II payable to an affiliate of our venture partner. In connection with the acquisition of our partner’s interest in
February 2012, we repaid this loan, and these assets are no longer pledged. |
| (5) |
Represents our weighted average ownership interest in all co-investment ventures based on each entity’s contribution to total assets, before depreciation, net of
other liabilities. |
| (6) |
The difference between our ownership interest of the venture’s equity and our investment balance results principally from three types of transactions:
(i) deferring a portion of the gains we recognize from a contribution of one of our properties to the venture (see next footnote); (ii) recording additional costs associated with our investment in the venture; and (iii) advances to
the venture. |
| (7) |
This amount is recorded as a reduction to our investment and represents the gains that were deferred when we contributed a property to a venture due to our continuing
ownership in the property. |
Equity Commitments Related to Certain Unconsolidated Co-Investment Ventures
Certain unconsolidated co-investment ventures have equity commitments from us and our venture partners. We may fulfill our equity commitment through
contributions of properties or cash. Our venture partners fulfill their equity commitment with cash. We are committed to offer to contribute certain properties that we develop and stabilize in select markets in Europe and Mexico to certain ventures.
These ventures are committed to acquire such properties, subject to certain exceptions, including that the properties meet certain specified leasing and other criteria, and that the ventures have available capital. We are not obligated to contribute
properties at a loss. Depending on market conditions, the investment objectives of the ventures, our liquidity needs and other factors, we may make contributions of properties to these ventures through the remaining commitment period.
The following table is a summary of remaining equity commitments as of June 30, 2012 (in millions):
| |
|
|
|
|
|
|
| |
|
Equity commitments |
|
|
Expiration date for remaining
commitments |
|
Prologis Targeted U.S. Logistics Fund (1)
|
|
|
|
|
|
|
|
Prologis
|
|
$ |
— |
|
|
Open-Ended (1) |
|
Venture Partners
|
|
$ |
137.5 |
|
|
|
| |
|
|
|
|
|
|
|
Prologis SGP Mexico (2)
|
|
|
|
|
|
|
|
Prologis
|
|
$ |
24.6 |
|
|
(2) |
|
Venture Partner
|
|
$ |
98.1 |
|
|
|
| |
|
|
|
|
|
|
|
Europe Logistics Venture 1 (3)
|
|
|
|
|
|
|
|
Prologis
|
|
$ |
75.6 |
|
|
February 2014 |
|
Venture Partner
|
|
$ |
428.7 |
|
|
|
| |
|
|
|
|
|
|
|
Prologis China Logistics Venture 1
|
|
|
|
|
|
|
|
Prologis
|
|
$ |
71.0 |
|
|
March 2015 |
|
Venture Partner
|
|
$ |
402.1 |
|
|
|
| |
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
Prologis
|
|
$ |
171.2 |
|
|
|
|
Venture Partners
|
|
$ |
1,066.4 |
|
|
|
| |
|
|
|
|
|
|
| (1) |
We secured $265.5 million in commitments from third parties in 2012 in order to fund future acquisitions from us and third parties that meet the venture’s
investment strategy, or to pay down existing debt. During the second quarter of 2012, the venture called capital of $128.0 million from these investors to pay down existing debt. The venture called an additional $55.0 million from these investors in
July primarily to pay down existing debt. |
| (2) |
These equity commitments will be called only if needed to pay outstanding debt of the venture. The relevant debt is due in the third quarter of 2012, with an option to
extend until the third quarter of 2013. |
| (3) |
Equity commitments are denominated in euro and reported above in U.S. dollar. During the first quarter of 2012, this co-investment venture acquired two buildings with
proceeds from commitments previously called. In addition, in the first quarter of 2012, the venture called capital of $14.3 million from our partner to cover the acquisition of one property from us. |
Other Joint Ventures
Our investments in and advances to these entities are as follows (in thousands):
| |
|
|
|
|
|
|
|
|
| |
|
June 30, |
|
|
December 31, |
|
| |
|
2012 |
|
|
2011 |
|
|
Americas (1)
|
|
$ |
196,366 |
|
|
$ |
305,352 |
|
|
Europe
|
|
|
50,237 |
|
|
|
50,474 |
|
|
Asia
|
|
|
29,726 |
|
|
|
30,750 |
|
| |
|
|
|
|
|
|
|
|
|
Total investments in and advances to other joint ventures
|
|
$ |
276,329 |
|
|
$ |
386,576 |
|
| |
|
|
|
|
|
|
|
|
| (1) |
During the second quarter of 2012, we received $95.0 million, which represented a return of capital from one of our joint ventures that held a note receivable that was
repaid in full during the quarter. |
|