Debt

6 Months Ended

Jun. 30, 2012

7.

Debt

All debt is held directly or indirectly by the Operating Partnership. The REIT itself does not have any indebtedness, but guarantees the unsecured debt of the Operating Partnership. We generally do not guarantee the debt issued by non-wholly owned subsidiaries.

Our debt consisted of the following (dollars in thousands):


	June 30, 2012					December 31, 2011
	Weighted Average Interest Rate (1)			Amount Outstanding		Weighted Average Interest Rate (1)			Amount Outstanding
Credit Facilities		1.66	%	$	1,138,414		2.17	%	$	936,796
Senior notes (2)		5.74	%		4,684,152		6.30	%		4,772,607
Exchangeable senior notes (3)		4.56	%		877,776		4.82	%		1,315,448
Secured mortgage debt		3.78	%		3,115,437		4.71	%		1,699,363
Secured mortgage debt of consolidated entities		4.49	%		1,366,837		4.54	%		1,495,047
Other debt of consolidated entities		4.45	%		602,938		5.30	%		775,763
Other debt		2.15	%		648,031		2.44	%		387,384

Totals		4.35	%	$	12,433,585		5.12	%	$	11,382,408

(1)	The interest rates presented represent the effective interest rates (including amortization of the non-cash premiums or discount).

(2)	In April 2012, we repaid $58.9 million of senior unsecured notes at maturity.

(3)	The weighted average coupon interest rate was 2.8% as of June 30, 2012 and 2.6% as of December 31, 2011.

Credit Facilities

We have a global senior credit facility (“Global Facility”), where funds may be drawn in U.S. dollar, euro, Japanese yen, British pound sterling and Canadian dollar on a revolving basis. The loans cannot exceed $1.71 billion (subject to currency fluctuations). We may increase the Global Facility to $2.75 billion, subject to currency fluctuations and obtaining additional lender commitments. The Global Facility is scheduled to mature on June 3, 2015, but the Operating Partnership may, at its option and subject to the satisfaction of certain conditions and payment of an extension fee, extend the maturity date to June 3, 2016. Pricing under the Global Facility, including the spread over LIBOR, facility fees and letter of credit fees, varies based upon the public debt ratings of the Operating Partnership. The Global Facility contains customary representations, covenants and defaults (including a cross-acceleration to other recourse indebtedness of more than $50 million).

We also have a ¥36.5 billion (approximately $459 million at June 30, 2012) yen revolver (the “Revolver”). The Revolver matures on March 1, 2014, but we may, at our option and subject to the satisfaction of customary conditions and payment of an extension fee, extend the maturity date to February 27, 2015. We may increase availability under the Revolver to an amount not exceeding ¥56.5 billion (approximately $710 million at June 30, 2012) subject to obtaining additional lender commitments. Pricing under the Revolver is consistent with the Global Facility pricing. The Revolver contains certain customary representations, covenants and defaults that are substantially the same as the corresponding provisions of the Global Facility.

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

Commitments and availability under our Credit Facilities as of June 30, 2012 were as follows (dollars in millions):


Aggregate lender - commitments	$	2,146.6
Less:
Borrowings outstanding		1,138.4
Outstanding letters of credit		67.4

Current availability	$	940.8

Exchangeable Senior Notes

In connection with the Merger and exchange offer, our convertible senior notes became exchangeable senior notes issued by the Operating Partnership that are exchangeable into common stock of the REIT. As a result, the accounting for the exchangeable senior notes now requires us to separate the fair value of the derivative instrument (exchange feature) from the debt instrument and account for it separately as a derivative contract. We have determined that the exchangeable notes issued in 2010 are the only exchangeable notes where the fair value of the derivative is not zero at June 30, 2012, therefore this modification in accounting for the exchangeable notes only affected these notes. At each reporting period, we adjust the derivative instrument to fair value with the resulting adjustment being recorded in earnings as Foreign Currency Exchange and Derivative Gains (Losses), Net. The fair value of the derivative associated with our exchangeable notes was a liability of $29.9 million and $17.5 million at June 30, 2012 and December 31, 2011, respectively. We have recognized an unrealized gain of $14.4 million and an unrealized loss of $12.4 million for the three and six months ended June 30, 2012, respectively.

We redeemed $448.9 million of the exchangeable notes issued in 2007 in April 2012, which was when the holders had the right to require us to repurchase their notes for cash.

Secured Mortgage Debt

TMK bonds are a financing vehicle in Japan for special purpose companies known as TMKs. In 2012, we issued ¥35.6 billion ($447.0 million as of June 30, 2012) of new TMK bonds with maturity dates ranging from March 2017 to May 2019 with interest rates ranging from 0.8% to 1.4%, and secured by eight properties with an undepreciated cost at June 30, 2012 of $799.2 million.

In addition, we amended our existing TMK bonds, increasing amounts outstanding by ¥12.4 billion ($156.5 million as of June 30, 2012). As a result, the range of maturities on these bonds changed from 2012 to 2014 to a range of December 2014 to April 2018, and the interest rates were reduced from a range of 1.8% to 3.95% to a range of 1.0% to 1.8%.

In the first quarter of 2012 in connection with the acquisition of NAIF II (see Note 2 for more details), we have assumed additional mortgage debt of $875.4 million, with maturity dates ranging from September 2012 to December 2018. Subsequent to the acquisition, we have paid down a portion of outstanding debt and reduced the balance to $720.2 million, secured by 90 properties with an undepreciated cost of $1.1 billion at June 30, 2012.

In the first quarter of 2012 in connection with the acquisition of our share of Prologis California (See Note 2 for more details), we assumed additional mortgage debt of $150.0 million payable in 2014 and secured by 24 properties with an undepreciated cost of $318.8 million at June 30, 2012.

Secured Mortgage Debt of Consolidated Entities

On June 20, 2012, one of our consolidated co-investment ventures incurred $23.0 million of secured mortgage debt including $13.0 million at 4.50% due December 2016 and $10.0 million at 4.78% due December 2018. This debt is secured by four real estate properties with an aggregate undepreciated cost of $40.6 million at June 30, 2012.

Other Debt

On February 2, 2012, we entered into a senior term loan agreement where we may obtain loans in an aggregate amount not to exceed €487.5 million ($619.3 million at June 30, 2012). The loans can be obtained in U.S. dollar, euro, Japanese yen, and British pound sterling. We may increase the borrowings to approximately €987.5 million ($1.3 billion at June 30, 2012), subject to obtaining additional lender commitments. The loan agreement is scheduled to mature on February 2, 2014, but we may extend the maturity date three times at our option, in each case up to one year, subject to satisfaction of certain conditions and payment of an extension fee. We used the proceeds of the entire senior term loan to pay off the existing two term loans assumed in connection with the Merger and the remainder to pay down credit facilities.

Long-Term Debt Maturities

Principal payments due on our debt, for the remainder of 2012 and for each of the years in the ten-year period ending December 31, 2021 and thereafter are as follows (in millions):


	Prologis
	Unsecured									Secured				Consolidated		Total
	Senior		Exchangeable			Credit		Other		Mortgage				Entities’		Consolidated
Maturity	Debt		Notes			Facilities		Debt		Debt		Total		Debt		Debt
2012(1)(2)	$	—	$	—		$	—	$	1	$	12	$	13	$	54	$	67
2013(2)		376		482			—		1		114		973		628		1,601
2014		374		—			280		631		666		1,951		1,035		2,986
2015		287		460			858		1		212		1,818		22		1,840
2016		640		—			—		1		316		957		123		1,080
2017		700		—			—		1		570		1,271		3		1,274
2018		900		—			—		1		325		1,226		73		1,299
2019		647		—			—		1		522		1,170		—		1,170
2020		687		—			—		1		9		697		1		698
2021		—		—			—		—		167		167		1		168
Thereafter		—		10			—		10		144		164		1		165

Subtotal		4,611		952			1,138		649		3,057		10,407		1,941		12,348
Unamortized (discounts) premiums, net		74		(74	)		—		—		58		58		28		86

Total	$	4,685	$	878		$	1,138	$	649	$	3,115	$	10,465	$	1,969	$	12,434

(1)

We expect to repay the amounts maturing in 2012 related to our wholly owned debt with cash generated from operations. The maturities in 2012 in our consolidated but not wholly owned subsidiaries principally include $14.1 million of unsecured credit facilities and $28.1 million of secured mortgage debt, which we expect to extend, or pay, through the issuance of new debt, with proceeds from asset sales, available cash, or equity contributions to the funds by us and our venture partner.

(2)	The maturities in 2013 include the aggregate principal amounts of the exchangeable senior notes issued in 2007 and 2008, as this is when the holders first have the right to require us to repurchase their notes for cash.

Debt Covenants

Our debt agreements contain various covenants, including maintenance of specified financial ratios. As of June 30, 2012 we were in compliance with all covenants.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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