NOTE 4. REAL ESTATE

Investments in real estate properties consisted of the following at December 31 (dollars and square feet in thousands):

	Square Feet				Number of Buildings
	2017		2016		2017		2016		2017		2016
Operating properties:
Buildings and improvements		294,811		331,210		1,525		1,776	$	16,849,349	$	17,905,914
Improved land										5,735,978		6,037,543
Development portfolio, including land costs:
Prestabilized		7,345		8,256		22		29		546,173		798,233
Properties under development		22,216		19,539		63		60		1,047,316		633,849
Land (1)										1,154,383		1,218,904
Other real estate investments (2)										505,445		524,887
Total investments in real estate properties										25,838,644		27,119,330
Less accumulated depreciation										4,059,348		3,758,372
Net investments in real estate properties									$	21,779,296	$	23,360,958

(1)	Included in our investments in real estate at December 31, 2017 and 2016, were 5,191 and 5,892 acres of land, respectively.

(2)

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

At December 31, 2017, we owned real estate assets in the U.S. and other Americas (Brazil, Canada and Mexico), Europe (Belgium, the Czech Republic, France, Germany, Hungary, Italy, the Netherlands, Poland, Slovakia, Spain, Sweden and the United Kingdom (“U.K.”)) and Asia (China, Japan and Singapore).

Acquisitions

The following table summarizes our real estate acquisition activity for the years ended December 31 (dollars and square feet in thousands):

	2017		2016		2015
Number of operating properties		16		9		52
Square feet		6,859		1,823		7,375
Acquisition value of net investments in real estate properties (1) (2)	$	1,139,410	$	411,706	$	1,042,562

(1)	Value includes the acquisition of 1,392, 776 and 690 acres of land in 2017, 2016 and 2015, respectively.

(2)

In August 2017, we acquired our partner’s interest in certain joint ventures in Brazil for an aggregate price of R$1.2 billion ($381.7 million). As a result of this transaction, we began consolidating the real estate properties that included twelve operating properties, two prestabilized properties and 531.4 acres of undeveloped land. We accounted for the transaction as a step-acquisition under the business combination rules and recognized a gain. The results of operations for these real estate properties were not significant in 2017. While the preliminary purchase price allocation is substantially complete, the valuation of the real estate properties is still being finalized.

The table above does not include the properties acquired in the KTR transaction in 2015, as this transaction is explained in Note 3.

Dispositions

The following table summarizes our real estate disposition activity for the years ended December 31 (dollars and square feet in thousands):

	2017		2016		2015
Contributions to unconsolidated co-investment ventures (1)
Number of properties		222		35		31
Square feet		48,171		11,624		8,355
Net proceeds (2)	$	3,201,986	$	1,231,878	$	835,385
Gains on contributions, net (2)	$	847,034	$	267,441	$	148,987
Dispositions to third parties
Number of properties		110		172		136
Square feet		17,147		20,360		23,024
Net proceeds (2) (3)	$	1,281,501	$	1,760,048	$	2,352,645
Gains on dispositions, net (2) (3)	$	274,711	$	353,668	$	609,900

Total gains on contributions and dispositions, net	$	1,121,745	$	621,109	$	758,887
Gains on revaluation of equity investments upon acquisition of a controlling interest		61,220		-		-
Gains on redemptions of investments in co-investment ventures (4)		-		136,289		-
Total gains on dispositions of investments in real estate and revaluation of equity investments upon acquisition of a controlling interest, net	$	1,182,965	$	757,398	$	758,887

(1)

In July 2017, we contributed 190 operating properties totaling 37.1 million square feet owned by Prologis North American Industrial Fund (“NAIF”) to Prologis Targeted U.S. Logistics Fund (“USLF”), our unconsolidated co-investment venture. In exchange for the contribution, we received additional units and USLF assumed $956.0 million of secured debt.

(2)	Includes the contribution and disposition of land parcels.

(3)	Includes the sale of our investment in Europe Logistics Venture 1 (“ELV”) in January 2017. See Note 5 for more information on this transaction.

(4)	In 2016, we redeemed a portion of our investment in two co-investment ventures.

Operating Lease Agreements

We lease our operating properties and certain land parcels to customers under agreements that are generally classified as operating leases. Our weighted average lease term remaining, based on square feet for all leases in effect at December 31, 2017, was 48 months.

The following table summarizes our minimum lease payments on leases with lease periods greater than one year for space in our operating properties, pre-stabilized development properties and leases of land subject to ground leases at December 31, 2017 (in thousands):

2018	$	1,602,708
2019		1,440,452
2020		1,255,182
2021		1,015,212
2022		770,119
Thereafter		2,312,372
Total	$	8,396,045

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

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 65 years. The following table summarizes our future minimum rental payments under non-cancelable operating leases in effect at December 31, 2017 (in thousands):

2018	$	34,413
2019		31,819
2020		30,420
2021		25,964
2022		24,399
Thereafter		311,372
Total	$	458,387