Item 1. Business

Prologis, Inc. is a self-administered and self-managed REIT and is the sole general partner of Prologis, L.P. through which it holds substantially all of its assets. We operate Prologis, Inc. and Prologis, L.P. as one enterprise and, therefore, our discussion and analysis refers to Prologis, Inc. and its consolidated subsidiaries, including Prologis, L.P. We invest in real estate through wholly owned subsidiaries and other entities through which we co-invest with partners and investors. We have a significant ownership interest in the co-investment ventures, which may be consolidated or unconsolidated based on our level of control of the entity.

Prologis, Inc. began operating as a fully integrated real estate company in 1997 and elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (“Internal Revenue Code” or “IRC”). We believe the current organization and method of operation enable Prologis, Inc. to maintain its status as a REIT. Prologis, L.P. was also formed in 1997.

We operate and manage our business on an owned and managed (“O&M”) basis and therefore evaluate the operating performance of the properties for our O&M portfolio, which includes our consolidated properties and properties owned by our unconsolidated co-investment ventures. We make operating decisions based on our total O&M portfolio, as we manage the properties without regard to their ownership. We also evaluate our results based on our proportionate economic ownership of each property included in the O&M portfolio (“our share”) to reflect our share of the financial results of the O&M portfolio.

Included in our discussion below are references to funds from operations (“FFO”) and net operating income (“NOI”), neither of which are U.S. generally accepted accounting principles (“GAAP”). See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations for a reconciliation of Net Earnings Attributable to Common Stockholders/Unitholders in the Consolidated Statements of Income to our FFO measures and a reconciliation of NOI to Operating Income, the most directly comparable GAAP measures.

Our corporate headquarters is located at Pier 1, Bay 1, San Francisco, California 94111, and our other principal office locations are in Amsterdam, Denver, Mexico City, Shanghai, Singapore and Tokyo.

Our Internet address is www.prologis.com. All reports required to be filed with the Securities and Exchange Commission (“SEC”) are available and can be accessed free of charge through the Investor Relations section of our website. The common stock of Prologis, Inc. is listed on the New York Stock Exchange (“NYSE”) under the ticker “PLD” and is a component of the Standard & Poor’s (“S&P”) 500.

THE COMPANY

We are the global leader in logistics real estate with a focus on high-barrier, high growth markets. We own, manage and develop well-located, high-quality logistics facilities in 19 countries across four continents. Our portfolio focuses on the world’s most vibrant centers of commerce and our scale across these locations allows us to respond to our customers’ diverse logistics requirements. Our teams actively manage our portfolio to provide comprehensive real estate services, including leasing, property management, development, acquisitions and dispositions. Our property dispositions allow us to recycle capital and contribute to self-funding our development and acquisition activities.

With the broadening of e-commerce adoption driving requirements for increased warehouse space to store inventory, surging customer demand has continued to outpace supply. We believe this demand surge is driven by three primary factors: (i) overall consumption growth; (ii) customer supply chains still re-positioning to address the significant shift to e-commerce, as well as preparing for higher growth and service expectations; and (iii) our customers’ desire for more supply chain resiliency. With inventory-to-sales ratios below pre-pandemic levels, our customers not only need to restock for this shortfall, but build an additional safety stock. We believe these forces have placed a premium on speed-to-market and flexibility, driving demand for years to come.

The scale of our 1.0 billion square foot portfolio allows us to help our customers in a multitude of unique ways. We continue to focus on differentiated ways to meet our customers’ needs through our Prologis Essentials business. This program includes product and service solutions for our customers’ operations, workforce, energy, transportation and data and analytic needs. Our integrated suite of solutions allows our customers to benefit from our global scale, strategic partnerships with vendors and local expertise to obtain services and products more efficiently. We use our proprietary data and analytics to provide our customers actionable insights on everything from inventory, shipping, security, communications management and dock visibility.

Prologis Essentials has a strong sustainability component to its suite of services, which supports our customers’ progress toward their sustainability goals. This includes new development and redevelopment of buildings to specifications that align with leading sustainable building standards and implementation of energy solutions such as solar power and LED lighting. As we explore additional ways to deliver revenue-generating sustainability solutions, we created a new senior leadership role in 2021 – chief sustainability and energy officer. We also are anticipating the introduction of electric vehicle (“EV”) fleets in logistics and are making long-term investments in our portfolio and talent to be well prepared for the future of EV trucking and logistics.

At December 31, 2021, we owned or had investments in, on a wholly-owned basis or through ventures, properties and development projects (based on gross book value and total expected investment at completion, respectively) in the following geographies:

Throughout this discussion, we reflect amounts in the United States (“U.S.”) dollar, our reporting currency. Included in these amounts are consolidated and unconsolidated investments denominated in foreign currencies, principally the British pound sterling, Canadian dollar, euro and Japanese yen that are impacted by fluctuations in exchange rates when translated to U.S. dollars. We mitigate our exposure to foreign currency fluctuations by investing outside the U.S. through co-investment ventures, borrowing in the functional currency of our subsidiaries and utilizing derivative financial instruments.

OPERATING SEGMENTS

Our business comprises two operating segments: Real Estate Operations and Strategic Capital.

Below is information summarizing consolidated activity within our segments over the last three years (in millions):

(1)	NOI from Real Estate Operations is calculated directly from our Consolidated Financial Statements as Rental Revenues and Development Management and Other Revenues less Rental Expenses and Other Expenses. NOI from Strategic Capital is calculated directly from our Consolidated Financial Statements as Strategic Capital Revenues less Strategic Capital Expenses.

(2)

A developed property moves into the operating portfolio when it meets our definition of stabilization, which is the earlier of when a property that was developed has been completed for one year, is contributed to a co-investment venture following completion or is 90% occupied. Amounts represent our total expected investment (“TEI”), which includes the estimated cost of development or expansion, land, construction and leasing costs.

Real Estate Operations

Rental. Rental operations comprise the largest component of our operating segments and generally contribute 85% to 90% of our consolidated revenues, earnings and FFO. We collect rent from our customers through operating leases, including reimbursements for the majority of our property operating costs. For leases that commenced during 2021 within the consolidated operating portfolio, the weighted average lease term was 62 months. We expect to generate internal growth by increasing rents, maintaining high occupancy rates and controlling expenses. The primary driver of our revenue growth will be rolling in-place leases to current market rents as leases expire. We believe our active portfolio management, combined with the skills of our property, leasing, maintenance, capital, energy, sustainability and risk management teams allow us to maximize NOI across our portfolio. Substantially all of our consolidated rental revenue, NOI and cash flows are generated in the U.S.

Development. Given the scarcity of modern logistics facilities in our target markets, our development business provides the opportunity to build to our customers’ current and future requirements and deepen our market presence. We believe we have a competitive advantage due to (i) the strategic locations of our global land bank and redevelopment sites; (ii) the development expertise of our local teams; (iii) the depth of our customer relationships and (iv) our ability to integrate sustainable design features and practices, as detailed in our Environmental Stewardship, Social Responsibility and Governance section below, that result in cost-savings and operational efficiencies for our customers. Successful development and redevelopment efforts provide significant earnings growth as projects are leased, generate income and increase the net asset value of our Real Estate Operations segment. Generally, we develop properties in the U.S. for long-term hold and outside the U.S. for contribution to our unconsolidated co-investment ventures.

Strategic Capital

Our strategic capital segment allows us to partner with many of the world’s largest institutional investors. We capitalize our business through private equity, principally perpetual open-ended or long-term ventures, and two publicly traded vehicles: Nippon Prologis REIT, Inc. in Japan and FIBRA Prologis in Mexico. We align our interests with our partners by holding significant ownership interests in all of our eight unconsolidated co-investment ventures (ranging from 15% to 50%). This structure allows us to reduce our exposure to foreign currency movements for investments outside the U.S.

This segment produces durable, long-term cash flows and generally contributes 10% to 15% of our recurring consolidated revenues, earnings and FFO. We generate strategic capital revenues from our unconsolidated co-investment ventures, principally through asset management and property management services. Asset management fees are primarily driven by the real estate valuation of the respective ventures. We earn additional revenues by providing leasing, acquisition, construction management, development and disposition services. In certain ventures, we also have the ability to earn revenues through incentive fees (“promotes” or “promote revenues”) periodically during the life of a venture or upon liquidation based primarily on the appreciation of the portfolio. We plan to profitably grow this business by increasing our assets under management in existing or new ventures. Most of the strategic capital revenues are generated outside the U.S.

FUTURE GROWTH

We believe the quality and scale of our global portfolio, our ability to build out the global land bank, our strategic capital business, the expertise of our team, the depth of our customer relationships and the strength of our balance sheet are differentiators that allow us to drive growth in revenues, NOI, earnings, FFO and cash flows.

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Rent Growth. We expect rents in our markets to continue to increase due to the demand for the location and quality of our properties. In addition, due to strong market rent growth over the last several years, our in-place leases have considerable upside potential to drive future incremental organic NOI growth. We estimate that our net effective lease mark-to-market is approximately 36%, which represents the growth rate from in-place rents to market rents based on our weighted average ownership of the O&M portfolio at December 31, 2021. Therefore, even if market rent growth is flat in the future, we expect our lease renewals to translate into significant increases in future rental income, on a consolidated basis or through the earnings we recognize from our unconsolidated co-investment ventures based on our ownership. We have experienced positive rent change on rollover (comparing the net effective rent (“NER”) of the new lease to the prior lease for the same space) in every quarter since 2013.

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Value Creation from Development. A successful development and redevelopment program requires maintaining control of well-located land and redevelopment sites and sourcing a future pipeline through acquisition opportunities, including our innovative approach with Covered Land Plays, which are income generating assets acquired with the intention to redevelop for higher and better use as industrial properties. The global nature of our development program is a wide landscape of opportunities to pursue based on our judgement of market conditions, opportunities and risks. We believe that the carrying value of our global land bank is meaningfully below its current fair value. Due to the strategic nature of our global land bank, development expertise of our teams and strength of our customer relationships, we expect to create value as we build new properties.

We are able to maintain strong margins despite rising construction costs, as we experienced in 2021, due to our procurement activities that mitigate a portion of the inflationary increases, as well as rising market rents. We measure the estimated value creation of a development project as the margin above our TEI. Based on our current estimates, our consolidated land, including options and Covered Land Plays, has the potential to support the development of $22.2 billion ($26.4 billion on an O&M basis) of TEI of new logistics space. As properties stabilize, we expect to realize the value creation principally through contributions to unconsolidated co-investment ventures and increases in the NOI of the consolidated portfolio. Our current investment in the development portfolio was $2.7 billion and we expect our development activities to increase in 2022.

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Strategic Capital Advantages. We continue to successfully raise capital to propel the long-term growth of the co-investment ventures while maintaining our substantial investments in these vehicles. At December 31, 2021, the gross book value of the operating portfolio held by our eight unconsolidated co-investment ventures was $45.3 billion across 456 million square feet. During 2021, the valuations of the real estate portfolios owned by the unconsolidated co-investment ventures increased significantly, resulting in higher asset management fees. We expect that continued market rent growth will result in an increase in the asset valuations of the unconsolidated co-investment ventures, which will drive significant returns to the investors and increase the potential for earning promote revenues over the next couple of years. Our Strategic Capital business generates durable fee streams, with asset management fees marked to fair values each quarter, all while requiring minimal capital other than our investment in the venture.

(1)	General and Administrative (“G&A”) Expenses is a line item in the Consolidated Financial Statements. Adjusted G&A expenses is calculated from our Consolidated Financial Statements as G&A Expenses and Strategic Capital Expenses, less expenses under the Prologis Promote Plan (“PPP”) and property-level management expenses for the properties owned by the ventures.

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Balance Sheet Strength. We continue to seek and execute on opportunities to refinance debt at historically low rates. Our financing activities over the last three years resulted in extending our consolidated weighted average remaining maturity from 6 to 10 years and lowering our weighted average effective interest rate from 2.7% to 1.6% at January 1, 2019 and December 31, 2021, respectively. At December 31, 2021, we had total available liquidity of $5.0 billion and continue to maintain low leverage as a percentage of our real estate investments and our market capitalization. As a result of our low leverage, available liquidity and investment capacity in the co-investment ventures, we have significant capacity to capitalize on value-added investment opportunities that will translate into future earnings growth.

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Economies of Scale from Growth. We have scalable systems and infrastructure in place to grow both our consolidated and O&M portfolios with limited incremental G&A expense. We believe we can continue to grow NOI and strategic capital revenues organically and through accretive development and acquisition activity while further reducing G&A as a percentage of our investments in real estate. We use adjusted G&A expenses as a percentage of the O&M portfolio (based on gross book value) to measure and evaluate our overhead costs. As shown in the graph above, the acquisitions of Liberty Property Trust and Liberty Property Limited Partnership (collectively “Liberty” or the “Liberty Transaction”) and Industrial Property Trust Inc. (“IPT” or the “IPT Transaction”) in 2020 are key examples of this effort, where we increased our investments in real estate in the O&M portfolio by over 20% and had minimal increases to G&A expenses, resulting in lower G&A expenses as a percentage of investments in real estate.

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Staying “Ahead of What’s Next™”. We are focused on creating value beyond real estate by enhancing our customers’ experience, leveraging our scale to deliver the best value through our procurement activities and constantly innovating through data analytics and digitization efforts. Our Prologis Essentials business supports our customers’ through service and product offerings, including innovative solutions to operations, transport, technology, energy, and labor challenges that can make our customers’ decision process easier and their enterprise more efficient. Additionally, we invest in sustainable logistics building design features and practices, such as the addition of solar panels, LED lighting and EV charging, that also allows us to assist our customers with their sustainability performance.

Competition

Real estate ownership is highly fragmented, and we face competition from many owners and operators. Competitively priced logistics space could impact our occupancy rates and have an adverse effect on how much rent we can charge, which in turn could affect our operating results. We face competition regarding our capital deployment activities, including regional, national and global operators or developers. We also face competition from investment managers for institutional capital within our strategic capital business.

Despite the competition, our global reach and local market knowledge over the years has given us distinct competitive advantages, including the following:

•	a portfolio of properties strategically located in markets characterized by large population densities, growing consumption and high barriers to entry, typically near large labor pools and extensive transportation infrastructure, including our Last Touch® facilities;

•	the ability to leverage the organizational scale and structure of our 1.0 billion square foot O&M portfolio to provide a single point of contact for our multi-market customers to address their needs through our in-house global customer led solutions team;

•	long-term relationships with customers served by our customer experience team that allows us to proactively and promptly respond to their needs across our global platform;

•	the access our customers have to Prologis Essentials integrated suite of solutions;

•	a strategically located, global land bank and redevelopment sites that have the potential to support the development of $26.4 billion of TEI of new logistics space on an O&M basis;

•	local teams with the expertise, experience and relationships to lease our properties and deploy capital advantageously;

•	development of logistics facilities with sustainable design features that meet customer needs for high-quality buildings while enabling them to make progress on their own sustainability objectives;

•	relationships and successful track record with current and prospective investors in our strategic capital business that is comprised of 95% perpetual long-term ventures and two publicly traded vehicles;

•	a market intelligence team that allows us to track business conditions in real time, proactively pursue market opportunities and disruptions alike, and develop revenue-generating capabilities to strengthen our operational excellence;

•	an investment in technology and talent to support our sustainability objectives, including expanding our efforts around renewable energy;

•	Prologis Ventures, our corporate venture capital group, and Prologis Labs, our initiative for testing new technologies alongside our customers, together track the leading edge of innovation within real estate and the supply chain, creating important capabilities that connect Prologis with the C-suites of our customers; and

•	a strong balance sheet and credit ratings, coupled with significant liquidity, borrowing capacity and long-term fixed debt with low rates.

Customers

At December 31, 2021, in our Real Estate Operations segment representing our consolidated properties, we had more than 3,500 customers occupying 448 million square feet of logistics operating properties. Our broad customer base represents a spectrum of international, national, regional and local logistics users who operate in various industries, providing diverse goods to consumers throughout the globe.

The location of our global portfolio gives us the unique ability to provide our customers with the right real estate solutions for their supply chains that, in turn, allows them to meet end-consumer delivery expectations. We have invested in properties located within infill and urban areas in our largest global markets with same day access (defined as Last Touch®) and next day access (defined as city distribution), to the consumer population. We have also invested in facilities located at key transportation hubs on the edge of these major infill and urban areas and gateway distribution facilities that incorporate access to major sea and intermodal ports.

Below are the primary categories of goods in our buildings for our consolidated real estate properties at December 31, 2021.

(1)	NER is calculated using the estimated total cash to be received over the term of the lease divided by the lease term to determine the average amount of cash rent payments received per year. Amounts derived in a currency other than the U.S. dollar have been translated using the average rate from the previous twelve months.

The following table details our top 25 customers for our consolidated and O&M real estate properties at December 31, 2021 (square feet in millions):

	Consolidated - Real Estate Operations									Owned and Managed
Top Customers	% of NER				Total Occupied Square Feet				Top Customers	% of NER				Total Occupied Square Feet
1. Amazon		7.0				24			1. Amazon		4.8				33
2. FedEx		2.1				7			2. Geodis		1.4				15
3. Home Depot		1.9				9			3. FedEx		1.3				9
4. Geodis		1.1				5			4. DHL		1.2				11
5. Wal-Mart		1.0				4			5. Home Depot		1.2				11
6. U.S. Government		0.8				2			6. GXO		1.2				11
7. UPS		0.8				4			7. DSV Panalpina		0.8				7
8. GXO		0.7				4			8. CEVA Logistics		0.7				7
9. DSV Panalpina		0.7				2			9. UPS		0.7				6
10. DHL		0.6				3			10. Kuehne + Nagel		0.7				6
Top 10 Customers		16.7				64			Top 10 Customers		14.0				116
11. Pepsi		0.6				3			11. Wal-Mart		0.6				6
12. Office Depot		0.5				3			12. U.S. Government		0.6				3
13. Staples		0.5				3			13. ZOZO		0.5				3
14. Berkshire Hathaway		0.5				2			14. Hitachi		0.5				4
15. VF Corporation		0.4				1			15. DB Schenker		0.5				5
16. Kellogg		0.4				2			16. J Sainsburys		0.5				3
17. Ryder System		0.4				2			17. Cainiao (Alibaba)		0.5				5
18. Mondelez International		0.4				2			18. BMW		0.4				4
19. National Distribution Centers		0.3				1			19. Maersk		0.4				3
20. Westrock Company		0.3				1			20. Ingram Micro		0.3				4
21. Kuehne + Nagel		0.3				1			21. Sumitomo		0.3				3
22. Sysco Guest Supply		0.3				2			22. Pepsi		0.3				3
23. Lindt & Sprüngli		0.3				2			23. Staples		0.3				4
24. Ingram Micro		0.3				1			24. Panasonic		0.3				2
25. Iron Mountain		0.3				1			25. Mercado Libre		0.3				3
Top 25 Customers		22.5				91			Top 25 Customers		20.3				171

In our Strategic Capital segment, we view our partners and investors as our customers. At December 31, 2021, we had 149 investors in our private equity ventures, several of which invest in multiple ventures.

Employees

Our employees are the most important part of our business. When attracting, developing and retaining talent, we seek individuals who hold varied experiences and viewpoints to create an inclusive and diverse culture and workplace that allows each employee to do their best work and drive our collective success. We focus on leadership development at every level of the organization. We align employees’ goals with our overall strategic direction to create a clear link between individual efforts and the long-term success of the company. We then provide feedback on their performance towards those goals to ensure their growth. Providing our employees’ learning and development through training, educational opportunities and mentorship is critical to our ability to continue to innovate. We have strong employee engagement throughout all areas of the company, which we regularly measure through employee engagement surveys.

Throughout the COVID-19 pandemic, we have protected our employee’s health and well-being by providing the technology and communication equipment necessary to allow the majority of our employees to work remotely. For those employees who cannot effectively do their jobs remotely, we have put protocols in place to ensure a safe working environment. Moving forward, we will provide workplace flexibility with accountability to our employees as determined by role. We continue to attract and retain the top talent in the industry through a robust benefit package, career growth opportunities, talent recognition and individual development planning. Our talented team allows Prologis to deliver on our commitment to our customers and investors.

The following table summarizes our total number of employees at December 31, 2021:

Geographies
U.S. (1)			1,166
Other Americas			146
Europe			494
Asia			247
Total			2,053

(1)	This includes employees who were based in the U.S. but also support other geographies.

We allocate the personnel costs related to providing property management and leasing functions to our Real Estate Operations and Strategic Capital segments based on the square footage of the respective portfolios. The personnel costs to perform only Strategic Capital functions are allocated directly to that segment.

Prologis employees are not organized under collective bargaining agreements, other than in Brazil, France and Spain, and there is a works council in France.

CODE OF ETHICS AND BUSINESS CONDUCT

We maintain a Code of Ethics and Business Conduct applicable to our board of directors (the “Board”) and all of our officers and employees, including the principal executive officer, the principal financial officer and the principal accounting officer, and other people performing similar functions. A copy of our Code of Ethics and Business Conduct is available on our website, www.prologis.com. In addition to being accessible through our website, copies of our Code of Ethics and Business Conduct can be obtained, free of charge, upon written request to Investor Relations, Pier 1, Bay 1, San Francisco, California 94111. Any amendments to or waivers of our Code of Ethics and Business Conduct that apply to the principal executive officer, the principal financial officer, the principal accounting officer, or other people performing similar functions, and that relate to any matter enumerated in Item 406(b) of Regulation S-K, will be disclosed on our website.

ENVIRONMENTAL STEWARDSHIP, SOCIAL RESPONSIBILITY AND GOVERNANCE (“ESG”)

Our long-standing dedication to ESG creates value for our company by strengthening our relationships with our customers, investors, employees and the communities in which we do business. The principles of ESG are an important aspect of our business strategy, delivering a strategic business advantage while positively impacting the environment. We develop modern and efficient buildings with state-of-the-art technology to stay ahead of our customers’ needs while advancing structural, transportation, and energy requirements. We invest in sustainable design features and practices. This includes the addition of solar panels, cool roofs, LED lighting, electric vehicle charging stations, waste diversion, recycling and xeriscaping. These services and solutions deliver cost-savings and operational efficiencies for our customers, reduce energy and water consumption and decrease greenhouse gas emissions within our customers’ operations across our portfolio and our own corporate operations.

We believe our Prologis Essentials LED and SolarSmart solutions accelerate energy savings and help reduce the environmental footprint of our customers. We regularly and proactively reach out to customers to discuss how Prologis can work with them to enhance the sustainability of their operations. We have a comprehensive approach to carbon management that includes science-based targets to address our global carbon footprint resulting from our development activities. We have committed to achieving 100% carbon-neutral construction globally by 2025 and will partner with our customers to decarbonize their operations through our CarbonZero program. We have also committed to achieving green building certifications for 100% of our new development and redevelopment and are exploring innovative and sustainable building designs and technologies such as EV charging stations. We are regularly recognized for our commitment to and leadership in sustainable building practices and are positioning ourselves as the developer of choice for customers seeking a partner that can help them meet their own sustainability goals.

We are committed to social responsibility and strengthening relationships important to our business through customer partnerships, investor outreach, community involvement, labor solutions, and inclusion and diversity initiatives. We also focus on our employees and our customers’ employees through health and wellness programs and building design. Through our Community Workforce Initiative, for example, we are helping build a talent pipeline for our customers with an emphasis on revitalizing career pathways and creating economic opportunities in the communities where we operate. We set an ambitious goal to train 25,000 individuals by 2025 by partnering with leading public sector organizations and leveraging digital learning technologies to develop innovative training solutions. In 2021, we partnered with the Association for Supply Chain Management to create a new industry certificate for our digital curriculum to develop the next generation of talent for the logistics industry.

We strive to promote a culture of uncompromising integrity, including through our governance practices and corporate oversight. Our Board independence and diversity, open communication with our stockholders and a risk management framework that supports our investment and process decisions all serve to mitigate risk and preserve value for our company. The strength of our balance sheet and credit ratings, ability to stay ahead of customer needs, dedication to proactive risk mitigation and engagement with our employees through ethics and anti-corruption training, along with stockholder outreach ensures the financial, operational and reputational resilience of our organization for the long-term. Our approach is reinforced by our Code of Ethics and Business Conduct, as described above.

ENVIRONMENTAL MATTERS

We are exposed to various environmental risks that may result in unanticipated losses and affect our operating results and financial condition. Either the previous owners or we have conducted environmental reviews on a majority of the properties we have acquired, including land. While some of these assessments have led to further investigation and sampling, none of the environmental assessments have revealed an environmental liability that we believe would have a material adverse effect beyond amounts recorded at December 31, 2021. See further discussion in Item 1A. Risk Factors and Note 16 to the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data.

GOVERNMENTAL MATTERS

We are exposed to various regulatory requirements, taxes, tariffs, trade wars and laws within the countries in which we operate and unexpected changes in these items may result in unanticipated losses, adverse tax consequences and affect our operating results and financial condition. In addition, we may be impacted by the ability of our non-U.S. subsidiaries to distribute or otherwise transfer cash among our subsidiaries due to currency exchange control regulations and transfer pricing regulations. The impact of regional or country-specific economic instability, including government shutdowns or other internal trade alliances or agreements could also have a material adverse effect on our business, financial condition or results of operations. See further discussion in Item 1A. Risk Factors.

INSURANCE COVERAGE

We carry insurance coverage on our properties. We determine the type of coverage and the policy specifications and limits based on what we deem to be the risks associated with our ownership of properties and our business operations in specific markets. Such coverage typically includes property damage and rental loss insurance resulting from such perils as fire, windstorm, flood, earthquake and terrorism; commercial general liability insurance; and environmental insurance. Insurance is maintained through a combination of commercial insurance, self-insurance and a wholly-owned captive insurance entity. Additionally, in 2021 we sponsored catastrophe bonds that provide further insurance coverage for potential losses resulting from earthquake risks in the U.S. The costs to insure our properties are primarily covered through expense reimbursements from our customers. We believe our insurance coverage contains policy specifications and insured limits that are customary for similar properties, business activities and markets and we believe our properties are adequately insured. See further discussion in Item 1A. Risk Factors.