4.	Real Estate

Investments in real estate properties are presented at cost, and consist of the following at December 31 (dollars and square feet in thousands):


	Square Feet /Acres (1)				No. of Buildings (1)				Investment Balance
	2014		2013		2014		2013		2014		2013
Industrial operating properties:
Improved land		- -		- -		- -		- -	$	4,227,637	$	4,074,647
Buildings and improvements		282,282		267,097		1,607		1,610		14,407,815		13,726,417
Development portfolio, including land costs:
Pre-stabilized		7,448		4,491		24		11		547,982		204,022
Properties under development		22,844		18,587		55		46		925,998		816,995
Land		9,017		9,747		- -		- -		1,577,786		1,516,166
Other real estate investments (2)										502,927		486,230

Total investments in real estate properties										22,190,145		20,824,477
Less accumulated depreciation										2,790,781		2,568,998

Net investments in real estate properties									$	19,399,364	$	18,255,479

(1)	Items indicated by ‘- -‘are not applicable.

(2)

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

At December 31, 2014, 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).

Acquisitions

Real estate acquisition activity for the years ended December 31 was as follows (dollars and square feet in thousands):


	2014		2013		2012
Acquisitions of properties from unconsolidated co-investment ventures
Number of industrial operating properties		231		58		215
Square feet		45,663		16,319		46,277
Real estate acquisition value	$	2,770,191	$	1,141,128	$	2,294,892
Gains on revaluation of equity investments upon acquisition of a controlling interest	$	201,319	$	34,787	$	286,335

Acquisitions of properties from third parties
Number of industrial operating properties		8		12		12
Square feet		1,004		3,262		1,622
Real estate acquisition value	$	78,314	$	146,331	$	77,397

The acquisitions of controlling interests in unconsolidated co-investment ventures is discussed in Note 3.

Dispositions

Real estate disposition activity for the years ended December 31 was as follows (dollars and square feet in thousands):


	2014		2013		2012
Continuing Operations
Contributions to unconsolidated co-investment ventures
Number of properties		126		254		25
Square feet		25,247		71,503		4,784
Net proceeds	$	1,825,311	$	6,479,707	$	380,880
Net gains on contributions	$	188,268	$	555,196	$	1,958
Dispositions to third parties
Number of properties		145		-		-
Square feet		19,856		-		-
Net proceeds (1)	$	1,365,318	$	177,273	$	94,587
Net gains on dispositions (1)	$	336,203	$	7,673	$	17,314
Discontinued Operations
Number of properties		-		89		200
Square feet		-		9,196		27,169
Net proceeds from dispositions	$	-	$	608,286	$	1,562,189
Net gains from dispositions, including related impairment charges and taxes (2)	$	-	$	116,550	$	35,098

(1)	Dispositions to third parties include land sales.

(2)	We recorded $1.2 million and $0.2 million of income tax expense in 2013 and 2012, respectively, related to the disposition of properties in discontinued operations.

Detail of significant transactions with related parties (co-investment ventures)

In June 2014, we completed the initial public offering of FIBRA Prologis, a Mexican REIT, on the Mexican Stock Exchange. In connection with the offering, FIBRA Prologis purchased 177 properties aggregating 29.7 million square feet (12.6 million square feet related to wholly-owned properties, 7.6 million square feet from our consolidated co-investment venture Prologis Mexico Fondo Logistico (“AFORES”) and 9.5 million square feet from our unconsolidated co-investment venture Prologis Mexico Industrial Fund). We received 287.3 million equity units of FIBRA Prologis (priced at Ps 27.00 ($2.09)) in exchange for our combined investments, resulting in a 45% ownership interest that we account for under the equity method. Based on this transaction, we recognized a gain on disposition of investments in real estate of $52.5 million; current tax expense of $32.4 million; deferred tax benefit of $55.5 million; and earnings attributable to noncontrolling interest of $61.0 million.

In the first quarter of 2013, we completed the initial public offering of Nippon Prologis REIT, Inc. (“NPR”), a publicly traded company listed on the Tokyo Stock Exchange. NPR acquired a portfolio of 12 properties totaling 9.6 million square feet from us for an aggregate purchase price of ¥173 billion ($1.9 billion). As a result of this transaction, we recognized a gain of $337.9 million, net of a $59.6 million deferral due to our ongoing investment. The gain was recorded in Gains on Dispositions of Investments in Real Estate and Revaluation of Equity Investments upon Acquisition of a Controlling Interest, Net in the Consolidated Statements of Operations.

Also during the first quarter of 2013, we closed Prologis European Logistics Partners Sàrl (“PELP”), a European joint venture with Norges Bank Investment Management (“NBIM”). The venture acquired a portfolio from us for approximately €2.3 billion ($3.0 billion) consisting of 195 properties and 48.7 million square feet in 11 European target global markets. As a result of this transaction, we recognized a gain of $1.8 million, net of a deferred gain due to our ongoing investment. In connection with the closing, a warrant NBIM received at signing to acquire six million shares of our common stock with a strike price of $35.64 became exercisable. We used a Black-Scholes pricing model to value the warrant and this value was included as consideration in the overall result of the transaction. On December 12, 2014, NBIM exercised the warrant to receive six million shares of our common stock for an aggregate strike price of $213.8 million.

Lease Commitments

We have entered into operating ground leases as a lessee on certain land parcels, primarily on-tarmac facilities and office space with remaining lease terms of 1 to 75 years. Future minimum rental payments under non-cancelable operating leases in effect at December 31, 2014, were as follows (in thousands):


2015	$	32,307
2016		30,237
2017		27,490
2018		25,896
2019		25,110
Thereafter		391,634

Total	$	532,674

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 1.9% and 19.5%, respectively, of our net effective rent at December 31, 2014. We determine net effective rent at the beginning of a lease based upon total estimated cash to be received through the term of the lease on an annual basis. At December 31, 2014, 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 were as follows (in thousands):


2015	$	1,193,676
2016		1,025,162
2017		798,922
2018		601,492
2019		427,600
Thereafter		1,326,106

Total	$	5,372,958

These amounts do not reflect future rental revenues from the renewal or replacement of existing leases and exclude reimbursements of operating expenses.