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Unconsolidated Entities | 9 Months Ended
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Sep. 30, 2014
Equity Method Investments and Joint Ventures [Abstract] |
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 strategic capital investors and provide asset and property management services to these entities. We refer to these entities as co-investment ventures. 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 investments in unconsolidated co-investment ventures, which are accounted for using the equity method of accounting. See Note 8 for more detail regarding our consolidated investments. We also have other ventures, generally with one partner and that we do not manage. At September 30, 2014, our investment in these other ventures totaled $173.5 million. We refer to our investments in the entities accounted for on the equity method, both unconsolidated co-investment ventures and other ventures, collectively, as unconsolidated entities. Unconsolidated Co-Investment Ventures As of September 30, 2014, we had investments in and managed unconsolidated co-investment ventures that own portfolios of operating industrial properties and may also develop properties. We account for our investments in these ventures under the equity method of accounting and, therefore, we record our share of each venture’s net earnings or loss as Earnings from Unconsolidated Entities, Net in the Consolidated Statements of Operations. We earn fees for the services we provide to these ventures. 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 fees based on the venture’s cumulative returns to the investors over time. We report these fees in Strategic Capital Income in the Consolidated Statements of Operations. In addition, we may earn fees for services provided to develop a building within these ventures and those fees are reflected in Development Management and Other Income in the Consolidated Statements of Operations. In June 2014, we earned a promote fee from Prologis Targeted U.S. Logistics Fund of $42.1 million, which was based on the venture’s cumulative returns to the investors over the prior three-year period ended June 30, 2014. Of that amount, $31.3 million represented the third party investors’ portion and is reflected in Strategic Capital Income in the Consolidated Statements of Operations. We also recognized $4.2 million of expense which is reflected in Strategic Capital Expenses in the Consolidated Statements of Operations, representing the associated cash bonus paid pursuant to the terms of the Prologis Promote Plan. During the nine months ended September 30, 2014, we increased our ownership of Prologis North American Industrial Fund (“NAIF”) to 63.3% by acquiring the equity units from several partners for $632.1 million. On October 20, 2014, we acquired an additional partner’s interest further increasing our ownership to 66.1% leaving one remaining limited partner, which resulted in us obtaining control over NAIF and required us to consolidate this entity in the fourth quarter of 2014. In 2014, we also invested our proportionate ownership interest in certain other co-investment ventures for the acquisition of properties and repayment of debt, primarily in Europe. As discussed in Note 3, we started a co-investment venture in Mexico in June 2014. During the first quarter of 2013, we started two co-investment ventures, one in Europe and one in Japan. We account for these ventures under the equity method and recognize strategic capital income from them. The amounts recognized in Strategic Capital Income and Earnings from Unconsolidated Entities, Net in the Consolidated Statements of Operations depend on the size of co-investment ventures that we manage and in which we have an equity interest. Our ownership interest in these ventures also impacts the equity in earnings we recognize. A summary of our unconsolidated co-investment ventures was as follows and represents 100% of the venture (square feet and total assets in thousands):
|  | September 30, 2014 |  |  | December 31, 2013 |  |  | September 30, 2013 |
Americas: |  |  |  |  |  |  |  |  |  |  |  |
Number of properties owned |  |  | 814 |  |  |  | 709 |  |  |  | 737 |
Square feet |  |  | 130,476 |  |  |  | 108,537 |  |  |  | 114,042 |
Total assets |  | $ | 9,395,900 |  |  | $ | 8,014,339 |  |  | $ | 8,433,418 |
Europe: |  |  |  |  |  |  |  |  |  |  |  |
Number of properties owned |  |  | 629 |  |  |  | 571 |  |  |  | 534 |
Square feet |  |  | 145,332 |  |  |  | 132,876 |  |  |  | 124,794 |
Total assets |  | $ | 11,951,749 |  |  | $ | 11,818,786 |  |  | $ | 11,471,358 |
Asia: |  |  |  |  |  |  |  |  |  |  |  |
Number of properties owned |  |  | 51 |  |  |  | 43 |  |  |  | 37 |
Square feet |  |  | 25,943 |  |  |  | 22,880 |  |  |  | 18,733 |
Total assets |  | $ | 4,366,286 |  |  | $ | 4,032,125 |  |  | $ | 3,477,339 |
Total: |  |  |  |  |  |  |  |  |  |  |  |
Number of properties owned |  |  | 1,494 |  |  |  | 1,323 |  |  |  | 1,308 |
Square feet |  |  | 301,751 |  |  |  | 264,293 |  |  |  | 257,569 |
Total assets |  | $ | 25,713,935 |  |  | $ | 23,865,250 |  |  | $ | 23,382,115 |
The following is summarized financial information of the unconsolidated co-investment ventures, the amount we recognized as our share of their earnings and our investment (dollars in millions). The co-investment venture information represents the venture’s information (not our proportionate share) based on our GAAP basis in the entity.
2014 (1) |  | Americas |  |  | Europe |  |  | Asia |  |  | Total |
For the three months ended September 30, 2014: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Revenues |  | $ | 204.2 |  |  | $ | 250.5 |  |  | $ | 71.0 |  |  | $ | 525.7 |
Net operating income |  | $ | 154.4 |  |  | $ | 198.0 |  |  | $ | 55.6 |  |  | $ | 408.0 |
Net earnings |  | $ | 24.4 |  |  | $ | 38.7 |  |  | $ | 22.4 |  |  | $ | 85.5 |
Equity in earnings |  | $ | 8.9 |  |  | $ | 14.6 |  |  | $ | 3.7 |  |  | $ | 27.2 |
For the nine months ended September 30, 2014: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Revenues |  | $ | 551.1 |  |  | $ | 749.5 |  |  | $ | 209.2 |  |  | $ | 1,509.8 |
Net operating income |  | $ | 405.8 |  |  | $ | 590.9 |  |  | $ | 162.9 |  |  | $ | 1,159.6 |
Net earnings (2) |  | $ | 16.9 |  |  | $ | 166.9 |  |  | $ | 60.9 |  |  | $ | 244.7 |
Equity in earnings |  | $ | 0.1 |  |  | $ | 66.8 |  |  | $ | 10.2 |  |  | $ | 77.1 |
As of September 30, 2014: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Amounts due to us (3) |  | $ | 11.9 |  |  | $ | 16.7 |  |  | $ | 103.8 |  |  | $ | 132.4 |
Third party debt (4) |  | $ | 3,309.4 |  |  | $ | 2,797.7 |  |  | $ | 1,758.0 |  |  | $ | 7,865.1 |
Total liabilities |  | $ | 3,513.3 |  |  | $ | 3,822.5 |  |  | $ | 1,955.4 |  |  | $ | 9,291.2 |
Our weighted average ownership |  |  | 40.2 | % |  |  | 38.8 | % |  |  | 15.0 | % |  |  | 35.4 | %
Our investment balance |  | $ | 2,371.3 |  |  | $ | 2,893.6 |  |  | $ | 375.6 |  |  | $ | 5,640.5 |
Deferred gains, net of amortization (5) |  | $ | 120.3 |  |  | $ | 197.1 |  |  | $ | 111.9 |  |  | $ | 429.3 |
2013 (1) |  | Americas |  |  | Europe |  |  | Asia |  |  | Total |
For the three months ended September 30, 2013: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Revenues |  | $ | 173.2 |  |  | $ | 215.3 |  |  | $ | 56.8 |  |  | $ | 445.3 |
Net operating income |  | $ | 126.6 |  |  | $ | 170.1 |  |  | $ | 44.6 |  |  | $ | 341.3 |
Net earnings |  | $ | 9.1 |  |  | $ | 41.9 |  |  | $ | 15.7 |  |  | $ | 66.7 |
Equity in earnings |  | $ | 1.7 |  |  | $ | 20.0 |  |  | $ | 4.1 |  |  | $ | 25.8 |
For the nine months ended September 30, 2013: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Revenues |  | $ | 538.4 |  |  | $ | 571.6 |  |  | $ | 160.0 |  |  | $ | 1,270.0 |
Net operating income |  | $ | 393.9 |  |  | $ | 434.8 |  |  | $ | 121.3 |  |  | $ | 950.0 |
Net earnings (2) |  | $ | 34.9 |  |  | $ | 77.8 |  |  | $ | 32.9 |  |  | $ | 145.6 |
Equity in earnings |  | $ | 15.0 |  |  | $ | 36.3 |  |  | $ | 6.6 |  |  | $ | 57.9 |
As of December 31, 2013: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Amounts due to us (3) |  | $ | 10.3 |  |  | $ | 43.7 |  |  | $ | 110.0 |  |  | $ | 164.0 |
Third party debt (4) |  | $ | 2,999.1 |  |  | $ | 2,998.2 |  |  | $ | 1,715.2 |  |  | $ | 7,712.5 |
Total liabilities |  | $ | 3,177.1 |  |  | $ | 4,113.6 |  |  | $ | 1,899.2 |  |  | $ | 9,189.9 |
Our weighted average ownership |  |  | 22.7 | % |  |  | 39.0 | % |  |  | 15.0 | % |  |  | 29.2 | %
Our investment balance |  | $ | 1,194.0 |  |  | $ | 2,703.3 |  |  | $ | 352.7 |  |  | $ | 4,250.0 |
Deferred gains, net of amortization (5) |  | $ | 139.6 |  |  | $ | 196.7 |  |  | $ | 94.8 |  |  | $ | 431.1 |
(1) | We had significant activity with our unconsolidated co-investment ventures in 2014 and 2013. As described above, we started FIBRA in June 2014. In connection with this transaction, we concluded our unconsolidated co-investment venture in Mexico. During 2013, we concluded three co-investment ventures and we started two new co-investment ventures.
(2) | During the nine months ended September 30, 2014, two ventures in the Americas recorded net gains of $16.9 million ($5.6 million was our share) from the disposition of 14 properties and FIBRA recorded acquisition costs of $37.2 million ($16.7 million was our share). During the nine months ended September 30, 2013, one venture in the Americas recorded net gains of $24.0 million from the disposition of three properties ($10.0 million was our share).
(3) | As of September 30, 2014 and December 31, 2013, we had receivables from Nippon Prologis REIT, Inc. (“NPR”) of $91.7 million and $88.5 million, respectively, related to customer security deposits that are made through a leasing company owned by Prologis that pertain to properties owned by NPR. We have a corresponding payable to NPR’s customers in Other Liabilities in the Consolidated Balance Sheets. As of December 31, 2013, we had receivables from Prologis European Logistics Partners Sàrl (“PELP”) for remaining sale proceeds of $35.5 million that were received in the first quarter of 2014. The remaining amounts generally represent current balances for services provided by us to the co-investment ventures.
(4) | As of September 30, 2014 and December 31, 2013, we did not guarantee any third party debt of our co-investment ventures.
(5) | 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 co-investment ventures have equity commitments from us and our venture partners. Our venture partners fulfill their equity commitment with cash. We may fulfill our equity commitment through contributions of properties or cash. The venture may obtain financing for the properties and therefore the acquisition price of additional investments that the venture could make may be more than the equity commitment. 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 and we may make additional cash investments in these ventures. The following table is a summary of remaining equity commitments as of September 30, 2014 (in millions):
|  | Equity commitments |  |  | Expiration date for remaining commitments
|  | Prologis |  |  | Venture Partners |  |  | Total |  |  |
Prologis Targeted U.S. Logistics Fund |  | $ | — |  |  | $ | 351.5 |  |  | $ | 351.5 |  |  | 2015-2017
Prologis Targeted Europe Logistics Fund (1) |  |  | 121.4 |  |  |  | 160.5 |  |  |  | 281.9 |  |  | June 2015
Prologis European Properties Fund II (1) |  |  | 78.6 |  |  |  | 179.3 |  |  |  | 257.9 |  |  | September 2015
Europe Logistics Venture 1 (1) |  |  | 21.9 |  |  |  | 123.9 |  |  |  | 145.8 |  |  | December 2014
Prologis European Logistics Partners (2) |  |  | 107.8 |  |  |  | 107.8 |  |  |  | 215.6 |  |  | February 2016
Prologis China Logistics Venture (3) |  |  | 226.9 |  |  |  | 1,285.6 |  |  |  | 1,512.5 |  |  | 2015 and 2017
Total |  | $ | 556.6 |  |  | $ | 2,208.6 |  |  | $ | 2,765.2 |  |  |
(1) | Equity commitments are denominated in euro and reported above in U.S. dollars based on an exchange rate of 1.26 U.S. dollars to the euro.
(2) | The equity commitments for this venture are expected to fund the future repayment of debt that is denominated in British pounds sterling. The commitments will be called in euros and are reported above in U.S. dollars using an exchange rate of 1.62 U.S. dollars to the British pounds sterling.
(3) | In July 2014, we secured a $500 million increase in committed third-party equity for this venture.

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- Definition The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.12) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6382943&loc=d3e33918-111571 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -SubTopic 10 -Section 35 -Paragraph 32 -URI http://asc.fasb.org/extlink&oid=35687916&loc=d3e32787-111569 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -SubTopic 10 -Section 35 -Paragraph 35 -URI http://asc.fasb.org/extlink&oid=35687916&loc=d3e32847-111569 + Details
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