Item 1. Financial Statements

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Item 1. Financial Statements

PROLOGIS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except per share data)

September 30, 2022December 31, 2021
ASSETS
Investments in real estate properties$55,954,870$53,005,190
Less accumulated depreciation8,558,5767,668,187
Net investments in real estate properties47,396,29445,337,003
Investments in and advances to unconsolidated entities8,659,1298,610,958
Assets held for sale or contribution614,356669,688
Net investments in real estate56,669,77954,617,649
Cash and cash equivalents636,282556,117
Other assets3,639,4683,312,454
Total assets$60,945,529$58,486,220
LIABILITIES AND EQUITY
Liabilities:
Debt$18,139,299$17,715,054
Accounts payable and accrued expenses1,318,3781,252,767
Other liabilities1,881,5311,776,189
Total liabilities21,339,20820,744,010
Equity:
Prologis, Inc. stockholders’ equity:
Series Q preferred stock at stated liquidation preference of $50 per share; $0.01 par value; 1,279 shares issued and outstanding and 100,000 preferred shares authorized at September 30, 2022 and December 31, 202163,94863,948
Common stock; $0.01 par value; 740,411 shares and 739,827 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively7,4047,398
Additional paid-in capital35,606,31935,561,608
Accumulated other comprehensive loss(71,626)(878,253)
Distributions in excess of net earnings(312,945)(1,327,828)
Total Prologis, Inc. stockholders’ equity35,293,10033,426,873
Noncontrolling interests4,313,2214,315,337
Total equity39,606,32137,742,210
Total liabilities and equity$60,945,529$58,486,220

The accompanying notes are an integral part of these Consolidated Financial Statements.

Index

PROLOGIS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per share amounts)

Three Months EndedNine Months Ended
September 30,September 30,
2022202120222021
Revenues:
Rental$1,151,846$1,037,281$3,322,159$3,073,700
Strategic capital594,752141,448884,916390,796
Development management and other4,2944,32015,02517,711
Total revenues1,750,8921,183,0494,222,1003,482,207
Expenses:
Rental284,707256,607830,846779,624
Strategic capital130,55552,389239,418146,938
General and administrative87,90366,970245,663219,344
Depreciation and amortization401,450390,8061,200,4101,181,117
Other7,0044,41328,21415,051
Total expenses911,619771,1852,544,5512,342,074
Operating income before gains on real estate transactions, net839,273411,8641,677,5491,140,133
Gains on dispositions of development properties and land, net74,678139,406390,686500,410
Gains on other dispositions of investments in real estate, net1,019214,390585,854358,180
Operating income914,970765,6602,654,0891,998,723
Other income (expense):
Earnings from unconsolidated entities, net84,92591,818241,481231,286
Interest expense(63,884)(63,638)(188,241)(203,331)
Foreign currency and derivative gains and interest and other income, net171,83263,326364,623142,859
Losses on early extinguishment of debt, net--(18,895)(187,453)
Total other income (expense)192,87391,506398,968(16,639)
Earnings before income taxes1,107,843857,1663,053,0571,982,084
Income tax expense(38,669)(59,435)(117,725)(134,347)
Consolidated net earnings1,069,174797,7312,935,3321,847,737
Less net earnings attributable to noncontrolling interests53,71074,193157,690156,676
Net earnings attributable to controlling interests1,015,464723,5382,777,6421,691,061
Less preferred stock dividends1,5311,5314,6004,614
Net earnings attributable to common stockholders$1,013,933$722,007$2,773,042$1,686,447
Weighted average common shares outstanding – Basic740,719739,439740,585739,217
Weighted average common shares outstanding – Diluted766,372764,945766,019764,644
Net earnings per share attributable to common stockholders – Basic$1.37$0.98$3.74$2.28
Net earnings per share attributable to common stockholders – Diluted$1.36$0.97$3.72$2.27

The accompanying notes are an integral part of these Consolidated Financial Statements.

Index

PROLOGIS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

Three Months EndedNine Months Ended
September 30,September 30,
2022202120222021
Consolidated net earnings$1,069,174$797,731$2,935,332$1,847,737
Other comprehensive income:
Foreign currency translation gains, net239,06248,708761,102201,881
Unrealized gains on derivative contracts, net24,9023,74867,23013,379
Comprehensive income1,333,138850,1873,763,6642,062,997
Net earnings attributable to noncontrolling interests(53,710)(74,193)(157,690)(156,676)
Other comprehensive income attributable to noncontrolling interests(6,829)(1,242)(21,705)(5,427)
Comprehensive income attributable to common stockholders$1,272,599$774,752$3,584,269$1,900,894

The accompanying notes are an integral part of these Consolidated Financial Statements.

Index

PROLOGIS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands)

Three Months Ended September 30, 2022 and 2021

Common StockAccumulatedDistributions
NumberAdditionalOtherin Excess ofNon-
PreferredofParPaid-inComprehensiveNetcontrollingTotal
StockSharesValueCapitalIncome (Loss)EarningsInterestsEquity
Balance at July 1, 2022$63,948740,360$7,404$35,573,940$(328,761)$(740,764)$4,298,171$38,873,938
Consolidated net earnings-----1,015,46453,7101,069,174
Effect of equity compensation plans-23-15,496--26,75442,250
Capital contributions------838838
Redemption of noncontrolling interests-28-1,357--(3,874)(2,517)
Foreign currency translation gains, net----232,919-6,143239,062
Unrealized gains on derivative contracts, net----24,216-68624,902
Reallocation of equity---15,526--(15,526)-
Dividends ($0.79 per common share) and other distributions-----(587,645)(53,681)(641,326)
Balance at September 30, 2022$63,948740,411$7,404$35,606,319$(71,626)$(312,945)$4,313,221$39,606,321
Common StockAccumulatedDistributions
NumberAdditionalOtherin Excess ofNon-
PreferredofParPaid-inComprehensiveNetcontrollingTotal
StockSharesValueCapitalIncome (Loss)EarningsInterestsEquity
Balance at July 1, 2021$63,948739,020$7,390$35,432,843$(1,035,120)$(2,363,348)$4,375,091$36,480,804
Consolidated net earnings-----723,53874,193797,731
Effect of equity compensation plans-17-11,141--17,01728,158
Capital contributions------3,0173,017
Redemption of noncontrolling interests-286312,540--(45,149)(32,606)
Issuance of units related to acquisitions------130,416130,416
Foreign currency translation gains, net----47,576-1,13248,708
Unrealized gains on derivative contracts, net----3,638-1103,748
Reallocation of equity---70,153--(70,153)-
Dividends ($0.63 per common share) and other distributions---(6)-(468,179)(234,317)(702,502)
Balance at September 30, 2021$63,948739,323$7,393$35,526,671$(983,906)$(2,107,989)$4,251,357$36,757,474

Nine Months Ended September 30, 2022 and 2021

Common StockAccumulatedDistributions
NumberAdditionalOtherin Excess ofNon-
PreferredofParPaid-inComprehensiveNetcontrollingTotal
StockSharesValueCapitalIncome (Loss)EarningsInterestsEquity
Balance at January 1, 2022$63,948739,827$7,398$35,561,608$(878,253)$(1,327,828)$4,315,337$37,742,210
Consolidated net earnings-----2,777,642157,6902,935,332
Effect of equity compensation plans-349436,613--87,153123,770
Capital contributions------11,92111,921
Redemption of noncontrolling interests-235210,929--(63,436)(52,505)
Foreign currency translation gains, net----741,234-19,868761,102
Unrealized gains on derivative contracts, net----65,393-1,83767,230
Reallocation of equity---(2,821)--2,821-
Dividends ($2.37 per common share) and other distributions---(10)-(1,762,759)(219,970)(1,982,739)
Balance at September 30, 2022$63,948740,411$7,404$35,606,319$(71,626)$(312,945)$4,313,221$39,606,321
Common StockAccumulatedDistributions
NumberAdditionalOtherin Excess ofNon-
PreferredofParPaid-inComprehensiveNetcontrollingTotal
StockSharesValueCapitalIncome (Loss)EarningsInterestsEquity
Balance at January 1, 2021$63,948739,381$7,394$35,488,634$(1,193,739)$(2,394,690)$4,353,033$36,324,580
Consolidated net earnings-----1,691,061156,6761,847,737
Effect of equity compensation plans-(403)(5)24,443--61,58086,018
Capital contributions------7,3787,378
Redemption of noncontrolling interests-345415,135--(153,312)(138,173)
Consolidation of other venture------25,75925,759
Issuance of units related to acquisitions------130,416130,416
Foreign currency translation gains, net----196,820-5,061201,881
Unrealized gains on derivative contracts, net----13,013-36613,379
Reallocation of equity---(1,510)--1,510-
Dividends ($1.89 per common share) and other distributions---(31)-(1,404,360)(337,110)(1,741,501)
Balance at September 30, 2021$63,948739,323$7,393$35,526,671$(983,906)$(2,107,989)$4,251,357$36,757,474

The accompanying notes are an integral part of these Consolidated Financial Statements.

Index

PROLOGIS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

Nine Months Ended
September 30,
20222021
Operating activities:
Consolidated net earnings$2,935,332$1,847,737
Adjustments to reconcile net earnings to net cash provided by operating activities:
Straight-lined rents and amortization of above and below market leases(107,565)(109,043)
Equity-based compensation awards140,02284,416
Depreciation and amortization1,200,4101,181,117
Earnings from unconsolidated entities, net(241,481)(231,286)
Operating distributions from unconsolidated entities316,299311,284
Decrease (increase) in operating receivables from unconsolidated entities(480,588)18,036
Amortization of debt discounts and debt issuance costs, net6,8756,632
Gains on dispositions of development properties and land, net(390,686)(500,410)
Gains on other dispositions of investments in real estate, net(585,854)(358,180)
Unrealized foreign currency and derivative gains, net(239,645)(150,443)
Losses on early extinguishment of debt, net18,895187,453
Deferred income tax expense23,71410,049
Decrease (increase) in accounts receivable and other assets143,333(223,658)
Increase in accounts payable and accrued expenses and other liabilities109,752206,272
Net cash provided by operating activities2,848,8132,279,976
Investing activities:
Real estate development(2,231,821)(1,770,353)
Real estate acquisitions(2,232,354)(1,196,994)
Tenant improvements and lease commissions on previously leased space(262,177)(233,853)
Property improvements(117,563)(98,874)
Proceeds from dispositions and contributions of real estate1,721,9932,817,943
Investments in and advances to unconsolidated entities(192,335)(454,918)
Return of investment from unconsolidated entities58,52856,993
Proceeds from the settlement of net investment hedges45,033-
Payments on the settlement of net investment hedges(771)(16,513)
Net cash used in investing activities(3,211,467)(896,569)
Financing activities:
Proceeds from issuance of common stock-743
Dividends paid on common and preferred stock(1,762,759)(1,404,360)
Noncontrolling interests contributions11,9217,378
Noncontrolling interests distributions(219,970)(337,110)
Settlement of noncontrolling interests(52,505)(138,173)
Tax paid with shares withheld(25,427)(18,434)
Debt and equity issuance costs paid(31,912)(22,008)
Net proceeds from (payments on) credit facilities60,357(70,200)
Repurchase of and payments on debt(886,746)(2,201,383)
Proceeds from the issuance of debt3,394,3532,824,754
Net cash provided by (used in) financing activities487,312(1,358,793)
Effect of foreign currency exchange rate changes on cash(44,493)(37,629)
Net increase (decrease) in cash and cash equivalents80,165(13,015)
Cash and cash equivalents, beginning of period556,117598,086
Cash and cash equivalents, end of period$636,282$585,071

See Note 11 for information on noncash investing and financing activities and other information.

The accompanying notes are an integral part of these Consolidated Financial Statements.

Index

PROLOGIS, L.P.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands)

September 30, 2022December 31, 2021
ASSETS
Investments in real estate properties$55,954,870$53,005,190
Less accumulated depreciation8,558,5767,668,187
Net investments in real estate properties47,396,29445,337,003
Investments in and advances to unconsolidated entities8,659,1298,610,958
Assets held for sale or contribution614,356669,688
Net investments in real estate56,669,77954,617,649
Cash and cash equivalents636,282556,117
Other assets3,639,4683,312,454
Total assets$60,945,529$58,486,220
LIABILITIES AND CAPITAL
Liabilities:
Debt$18,139,299$17,715,054
Accounts payable and accrued expenses1,318,3781,252,767
Other liabilities1,881,5311,776,189
Total liabilities21,339,20820,744,010
Capital:
Partners’ capital:
General partner – preferred63,94863,948
General partner – common35,229,15233,362,925
Limited partners – common606,557557,097
Limited partners – Class A common383,123360,702
Total partners’ capital36,282,78034,344,672
Noncontrolling interests3,323,5413,397,538
Total capital39,606,32137,742,210
Total liabilities and capital$60,945,529$58,486,220

The accompanying notes are an integral part of these Consolidated Financial Statements.

Index

PROLOGIS, L.P.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(In thousands, except per unit amounts)

Three Months EndedNine Months Ended
September 30,September 30,
2022202120222021
Revenues:
Rental$1,151,846$1,037,281$3,322,159$3,073,700
Strategic capital594,752141,448884,916390,796
Development management and other4,2944,32015,02517,711
Total revenues1,750,8921,183,0494,222,1003,482,207
Expenses:
Rental284,707256,607830,846779,624
Strategic capital130,55552,389239,418146,938
General and administrative87,90366,970245,663219,344
Depreciation and amortization401,450390,8061,200,4101,181,117
Other7,0044,41328,21415,051
Total expenses911,619771,1852,544,5512,342,074
Operating income before gains on real estate transactions, net839,273411,8641,677,5491,140,133
Gains on dispositions of development properties and land, net74,678139,406390,686500,410
Gains on other dispositions of investments in real estate, net1,019214,390585,854358,180
Operating income914,970765,6602,654,0891,998,723
Other income (expense):
Earnings from unconsolidated entities, net84,92591,818241,481231,286
Interest expense(63,884)(63,638)(188,241)(203,331)
Foreign currency and derivative gains and interest and other income, net171,83263,326364,623142,859
Losses on early extinguishment of debt, net--(18,895)(187,453)
Total other income (expense)192,87391,506398,968(16,639)
Earnings before income taxes1,107,843857,1663,053,0571,982,084
Income tax expense(38,669)(59,435)(117,725)(134,347)
Consolidated net earnings1,069,174797,7312,935,3321,847,737
Less net earnings attributable to noncontrolling interests24,97954,40679,257109,768
Net earnings attributable to controlling interests1,044,195743,3252,856,0751,737,969
Less preferred unit distributions1,5311,5314,6004,614
Net earnings attributable to common unitholders$1,042,664$741,794$2,851,475$1,733,355
Weighted average common units outstanding – Basic753,616751,558753,515751,773
Weighted average common units outstanding – Diluted766,372764,945766,019764,644
Net earnings per unit attributable to common unitholders – Basic$1.37$0.98$3.74$2.28
Net earnings per unit attributable to common unitholders – Diluted$1.36$0.97$3.72$2.27

The accompanying notes are an integral part of these Consolidated Financial Statements.

Index

PROLOGIS, L.P.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(In thousands)

Three Months EndedNine Months Ended
September 30,September 30,
2022202120222021
Consolidated net earnings$1,069,174$797,731$2,935,332$1,847,737
Other comprehensive income:
Foreign currency translation gains, net239,06248,708761,102201,881
Unrealized gains on derivative contracts, net24,9023,74867,23013,379
Comprehensive income1,333,138850,1873,763,6642,062,997
Net earnings attributable to noncontrolling interests(24,979)(54,406)(79,257)(109,768)
Other comprehensive loss attributable to noncontrolling interests470336955493
Comprehensive income attributable to common unitholders$1,308,629$796,117$3,685,362$1,953,722

The accompanying notes are an integral part of these Consolidated Financial Statements.

Index

PROLOGIS, L.P.

CONSOLIDATED STATEMENTS OF CAPITAL

(Unaudited)

(In thousands)

Three Months Ended September 30, 2022 and 2021

General PartnerLimited PartnersNon-
PreferredCommonCommonClass A CommoncontrollingTotal
UnitsAmountUnitsAmountUnitsAmountUnitsAmountInterestsCapital
Balance at July 1, 20221,279$63,948740,360$34,511,81912,662$590,2248,595$374,526$3,333,421$38,873,938
Consolidated net earnings---1,015,464-17,736-10,99524,9791,069,174
Effect of equity compensation plans--2315,49613126,754---42,250
Capital contributions--------838838
Redemption of limited partners units--281,357(45)(3,874)---(2,517)
Foreign currency translation gains (losses), net---232,919-4,069-2,544(470)239,062
Unrealized gains on derivative contracts, net---24,216-422-264-24,902
Reallocation of capital---15,526-(15,878)-352--
Distributions ($0.79 per common unit) and other---(587,645)-(12,896)-(5,558)(35,227)(641,326)
Balance at September 30, 20221,279$63,948740,411$35,229,15212,748$606,5578,595$383,123$3,323,541$39,606,321
General PartnerLimited PartnersNon-
PreferredCommonCommonClass A CommoncontrollingTotal
UnitsAmountUnitsAmountUnitsAmountUnitsAmountInterestsCapital
Balance at July 1, 20211,279$63,948739,020$32,041,76512,231$530,3268,595$346,967$3,497,798$36,480,804
Consolidated net earnings---723,538-11,971-7,81654,406797,731
Effect of equity compensation plans--1711,14112517,017---28,158
Capital contributions--------3,0173,017
Redemption of limited partners units--28612,543(523)(45,149)---(32,606)
Issuance of units related to acquisitions----1,031130,416---130,416
Foreign currency translation gains (losses), net---47,576-954-514(336)48,708
Unrealized gains on derivative contracts, net---3,638-71-39-3,748
Reallocation of capital---70,153-(71,466)-1,313--
Distributions ($0.63 per common unit) and other---(468,185)-(9,660)-(5,559)(219,098)(702,502)
Balance at September 30, 20211,279$63,948739,323$32,442,16912,864$564,4808,595$351,090$3,335,787$36,757,474

Nine Months Ended September 30, 2022 and 2021

General PartnerLimited PartnersNon-
PreferredCommonCommonClass A CommoncontrollingTotal
UnitsAmountUnitsAmountUnitsAmountUnitsAmountInterestsCapital
Balance at January 1, 20221,279$63,948739,827$33,362,92512,354$557,0978,595$360,702$3,397,538$37,742,210
Consolidated net earnings---2,777,642-48,415-30,01879,2572,935,332
Effect of equity compensation plans--34936,61796987,153---123,770
Capital contributions--------11,92111,921
Redemption of limited partners units--23510,931(575)(63,436)---(52,505)
Foreign currency translation gains (losses), net---741,234-12,763-8,060(955)761,102
Unrealized gains on derivative contracts, net---65,393-1,126-711-67,230
Reallocation of capital---(2,821)-2,514-307--
Distributions ($2.37 per common unit) and other---(1,762,769)-(39,075)-(16,675)(164,220)(1,982,739)
Balance at September 30, 20221,279$63,948740,411$35,229,15212,748$606,5578,595$383,123$3,323,541$39,606,321
General PartnerLimited PartnersNon-
PreferredCommonCommonClass A CommoncontrollingTotal
UnitsAmountUnitsAmountUnitsAmountUnitsAmountInterestsCapital
Balance at January 1, 20211,279$63,948739,381$31,907,59912,142$523,9548,595$345,553$3,483,526$36,324,580
Consolidated net earnings---1,691,061-28,645-18,263109,7681,847,737
Effect of equity compensation plans--(403)24,4381,21061,580---86,018
Capital contributions--------7,3787,378
Redemption of limited partners units--34515,139(1,519)(153,312)---(138,173)
Consolidation of other venture--------25,75925,759
Issuance of units related to acquisitions----1,031130,416---130,416
Foreign currency translation gains (losses), net---196,820-3,424-2,130(493)201,881
Unrealized gains on derivative contracts, net---13,013-226-140-13,379
Reallocation of capital---(1,510)-(169)-1,679--
Distributions ($1.89 per common unit) and other---(1,404,391)-(30,284)-(16,675)(290,151)(1,741,501)
Balance at September 30, 20211,279$63,948739,323$32,442,16912,864$564,4808,595$351,090$3,335,787$36,757,474

The accompanying notes are an integral part of these Consolidated Financial Statements.

Index

PROLOGIS, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

Nine Months Ended
September 30,
20222021
Operating activities:
Consolidated net earnings$2,935,332$1,847,737
Adjustments to reconcile net earnings to net cash provided by operating activities:
Straight-lined rents and amortization of above and below market leases(107,565)(109,043)
Equity-based compensation awards140,02284,416
Depreciation and amortization1,200,4101,181,117
Earnings from unconsolidated entities, net(241,481)(231,286)
Operating distributions from unconsolidated entities316,299311,284
Decrease (increase) in operating receivables from unconsolidated entities(480,588)18,036
Amortization of debt discounts and debt issuance costs, net6,8756,632
Gains on dispositions of development properties and land, net(390,686)(500,410)
Gains on other dispositions of investments in real estate, net(585,854)(358,180)
Unrealized foreign currency and derivative gains, net(239,645)(150,443)
Losses on early extinguishment of debt, net18,895187,453
Deferred income tax expense23,71410,049
Decrease (increase) in accounts receivable and other assets143,333(223,658)
Increase in accounts payable and accrued expenses and other liabilities109,752206,272
Net cash provided by operating activities2,848,8132,279,976
Investing activities:
Real estate development(2,231,821)(1,770,353)
Real estate acquisitions(2,232,354)(1,196,994)
Tenant improvements and lease commissions on previously leased space(262,177)(233,853)
Property improvements(117,563)(98,874)
Proceeds from dispositions and contributions of real estate1,721,9932,817,943
Investments in and advances to unconsolidated entities(192,335)(454,918)
Return of investment from unconsolidated entities58,52856,993
Proceeds from the settlement of net investment hedges45,033-
Payments on the settlement of net investment hedges(771)(16,513)
Net cash used in investing activities(3,211,467)(896,569)
Financing activities:
Proceeds from issuance of common partnership units in exchange for contributions from Prologis, Inc.-743
Distributions paid on common and preferred units(1,818,509)(1,451,319)
Noncontrolling interests contributions11,9217,378
Noncontrolling interests distributions(164,220)(290,151)
Redemption of common limited partnership units(52,505)(138,173)
Tax paid with shares of the Parent withheld(25,427)(18,434)
Debt and equity issuance costs paid(31,912)(22,008)
Net proceeds from (payments on) credit facilities60,357(70,200)
Repurchase of and payments on debt(886,746)(2,201,383)
Proceeds from the issuance of debt3,394,3532,824,754
Net cash provided by (used in) financing activities487,312(1,358,793)
Effect of foreign currency exchange rate changes on cash(44,493)(37,629)
Net increase (decrease) in cash and cash equivalents80,165(13,015)
Cash and cash equivalents, beginning of period556,117598,086
Cash and cash equivalents, end of period$636,282$585,071

See Note 11 for information on noncash investing and financing activities and other information.

The accompanying notes are an integral part of these Consolidated Financial Statements.

Index

PROLOGIS, INC. AND PROLOGIS, L.P.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1. GENERAL

Business. Prologis, Inc. (or the “Parent”) commenced operations as a fully integrated real estate company in 1997, elected to be taxed as a real estate investment trust (“REIT”) under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code” or “IRC”), and believes the current organization and method of operation will enable it to maintain its status as a REIT. The Parent is the general partner of Prologis, L.P. (or the “Operating Partnership” or “OP”). Through the OP, we are engaged in the ownership, acquisition, development and management of logistics facilities with a focus on key markets in 19 countries on four continents. We invest in real estate through wholly owned subsidiaries and other entities through which we co-invest with partners and investors. We maintain a significant level of ownership in these co-investment ventures, which may be consolidated or unconsolidated based on our level of control of the entity. Our current business strategy consists of two operating business segments: Real Estate Operations and Strategic Capital. Our Real Estate Operations segment represents the ownership and development of logistics properties. Our Strategic Capital segment represents the management of unconsolidated co-investment ventures and other ventures. See Note 10 for further discussion of our business segments. Unless otherwise indicated, the Notes to the Consolidated Financial Statements apply to both the Parent and the OP. The terms “the Company,” “Prologis,” “we,” “our” or “us” means the Parent and OP collectively.

For each share of preferred or common stock the Parent issues, the OP issues a corresponding preferred or common partnership unit, as applicable, to the Parent in exchange for the contribution of the proceeds from the stock issuance. At September 30, 2022, the Parent owned a 97.27% common general partnership interest in the OP and substantially all of the preferred units in the OP. The remaining 2.73% common limited partnership interests, which include Class A common limited partnership units (“Class A Units”) in the OP, are owned by unaffiliated investors and certain current and former directors and officers of the Parent. Each partner’s percentage interest in the OP is determined based on the number of OP units held, including the number of OP units into which Class A Units are convertible, compared to total OP units outstanding at each period end and is used as the basis for the allocation of net income or loss to each partner. At the end of each reporting period, a capital adjustment is made in the OP to reflect the appropriate ownership interest for each of the common unitholders. These adjustments are reflected in the line items Reallocation of Equity in the Consolidated Statements of Equity of the Parent and Reallocation of Capital in the Consolidated Statements of Capital of the OP.

As the sole general partner of the OP, the Parent has complete responsibility and discretion in the day-to-day management and control of the OP and we operate the Parent and the OP as one enterprise. The management of the Parent consists of the same members as the management of the OP. These members are officers of the Parent and employees of the OP or one of its subsidiaries. As general partner with control of the OP, the Parent is the primary beneficiary and therefore consolidates the OP. Because the Parent’s only significant asset is its investment in the OP, the assets and liabilities of the Parent and the OP are the same on their respective financial statements.

Basis of Presentation. The accompanying Consolidated Financial Statements are prepared in accordance with United States (“U.S.”) generally accepted accounting principles (“GAAP”) and are presented in our reporting currency, the U.S. dollar. Intercompany transactions with consolidated entities have been eliminated.

The accompanying unaudited interim financial information has been prepared according to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). Certain information and note disclosures normally included in our annual financial statements prepared in accordance with GAAP have been condensed or omitted in accordance with such rules and regulations. Our management believes that the disclosures presented in these financial statements are adequate to make the information presented not misleading. In our opinion, all adjustments and eliminations, consisting only of normal recurring adjustments, necessary to present fairly the financial position and results of operations for both the Parent and the OP for the reported periods have been included. The results of operations for such interim periods are not necessarily indicative of the results for the full year. The accompanying unaudited interim financial information should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the SEC, and other public information.

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NOTE 2. REAL ESTATE

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

Square FeetNumber of Buildings
Sep 30,Dec 31,Sep 30,Dec 31,Sep 30,Dec 31,
202220212022202120222021
Operating properties:
Buildings and improvements461,668444,4132,3652,310$33,800,162$32,159,514
Improved land12,825,51212,294,246
Development portfolio, including land costs:
Prestabilized7,4646,3252116903,862710,091
Properties under development36,75628,638101832,537,9382,019,249
Land (1)2,677,9882,519,590
Other real estate investments (2)3,209,4083,302,500
Total investments in real estate properties55,954,87053,005,190
Less accumulated depreciation8,558,5767,668,187
Net investments in real estate properties$47,396,294$45,337,003
(1)At September 30, 2022 and December 31, 2021, our land was comprised of 6,579 and 6,227 acres, respectively.
(2)Included in other real estate investments were: (i) land parcels we own and lease to third parties; (ii) non-strategic real estate assets acquired that we do not intend to operate long-term; (iii) non-industrial real estate assets that we intend to redevelop into industrial properties; and (iv) costs associated with potential acquisitions and future development projects, including purchase options on land.

Acquisitions

The following table summarizes our real estate acquisition activity (dollars and square feet in thousands):

Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Number of operating properties9152226
Square feet1,9523,9103,7466,023
Acres of land5906851,7961,391
Acquisition cost of net investments in real estate, excluding other real estate investments (1)$314,736$707,209$1,562,962$1,572,074
Acquisition cost of other real estate investments$33,627$50,502$636,841$224,309
(1)Included in the three and nine months ended September 30, 2021, is our acquisition of additional ownership interest in certain unconsolidated other ventures that we acquired from our partners and subsequently resulted in the consolidation of the real estate assets.

On October 3, 2022, we completed the acquisition of Duke Realty Corporation (“Duke Realty”) and Duke Realty Limited Partnership (“Duke Realty OP”) (collectively “Duke” or the “Duke Transaction”). The Duke Transaction was completed for approximately $23 billion through the issuance of equity based on the value of the Prologis common stock issued using the closing price on September 30, 2022 and the assumption of debt. The Duke portfolio was primarily comprised of logistics real estate assets, including approximately 480 industrial operating properties, aggregating 142 million square feet, which were highly complementary to our U.S. portfolio in terms of product quality, location and growth potential. The portfolio also included properties under development, land for future development and investments in other ventures. For further information on the Duke Transaction see Note 12.

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Dispositions

The following table summarizes our dispositions of net investments in real estate that include contributions to unconsolidated co-investment ventures and dispositions to third parties (dollars and square feet in thousands):

Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Dispositions of development properties and land, net (2)
Number of properties7121831
Square feet1,2032,8764,96612,337
Net proceeds$168,601$368,131$846,350$1,814,331
Gains on dispositions of development properties and land, net$74,678$139,406$390,686$500,410
Other dispositions of investments in real estate, net
Number of properties-3110274
Square feet-5,8068,67612,060
Net proceeds (1)$-$738,396$1,264,280$1,334,168
Gains on other dispositions of investments in real estate, net (1)$1,019$214,390$585,854$358,180
(1)Included in the three and nine months ended September 30, 2021, is the sale of our ownership interest in an unconsolidated other venture.
(2)The gains we recognize in Gains on Dispositions of Development Properties and Land, Net are primarily driven by the contribution of newly developed properties to our unconsolidated co-investment ventures and occasionally sales to a third party.

Leases

We recognized lease right-of-use assets of $531.0 million and $459.4 million within Other Assets and lease liabilities of $526.7 million and $448.4 million within Other Liabilities, for land and office space leases in which we are the lessee, on the Consolidated Balance Sheets at September 30, 2022 and December 31, 2021, respectively.

NOTE 3. 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 partners and investors and we provide asset management and property management services to these entities, which we refer to as co-investment ventures. These entities may be consolidated or unconsolidated depending on the structure, our partner’s participation and other rights and our level of control of the entity. This note details our investments in unconsolidated co-investment ventures, which are related parties and accounted for using the equity method of accounting. See Note 6 for more detail regarding our consolidated investments that are not wholly owned.

We also have investments in other ventures, generally with one partner, which we account for using the equity method. We refer to our investments in both unconsolidated co-investment ventures and other ventures, collectively, as unconsolidated entities.

The following table summarizes our investments in and advances to unconsolidated entities (in thousands):

September 30,December 31,
20222021
Unconsolidated co-investment ventures$7,864,132$7,825,455
Other ventures794,997785,503
Total$8,659,129$8,610,958

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Unconsolidated Co-Investment Ventures

The following table summarizes the Strategic Capital Revenues we recognized in the Consolidated Statements of Income related to our unconsolidated co-investment ventures (in thousands):

Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Recurring fees$115,902$100,167$344,945$288,049
Transactional fees19,80514,39954,55353,476
Promote revenue (1)456,0381,570475,55213,821
Total strategic capital revenues from unconsolidated co-investment ventures (2)$591,745$116,136$875,050$355,346
(1)Includes promote revenue earned from Prologis European Logistics Fund (“PELF”) in September 2022.
(2)These amounts exclude strategic capital revenues from other ventures.

The following table summarizes the key property information, financial position and operating information of our unconsolidated co-investment ventures on a U.S. GAAP basis (not our proportionate share) and the amounts we recognized in the Consolidated Financial Statements related to these ventures (dollars and square feet in millions):

U.S.Other Americas (1)EuropeAsiaTotal
At:Sep 30, 2022Dec 31, 2021Sep 30, 2022Dec 31, 2021Sep 30, 2022 (2)Dec 31, 2021Sep 30, 2022Dec 31, 2021Sep 30, 2022Dec 31, 2021
Key property information:
Ventures1122223388
Operating properties7387322612549888182082032,1952,007
Square feet12312258562191988482484458
Financial position:
Total assets ($)12,40711,6193,5213,34921,15418,3738,98010,74646,06244,087
Third-party debt ($)3,4683,0691,1501,0524,7403,7373,5054,15712,86312,015
Total liabilities ($)4,1413,7171,2371,1166,7665,6193,9104,68516,05415,137
Our investment balance ($) (3)2,3852,3938598403,9293,7126918807,8647,825
Our weighted average ownership (4)26.5%27.0%40.4%40.8%30.5%30.9%15.2%15.1%27.2%26.9%
U.S.Other Americas (1)EuropeAsiaTotal
Operating Information:Sep 30, 2022Sep 30, 2021Sep 30, 2022Sep 30, 2021Sep 30, 2022Sep 30, 2021Sep 30, 2022Sep 30, 2021Sep 30, 2022Sep 30, 2021
For the three months ended:
Total revenues ($)2972609781342348152164888853
Net earnings ($)731523528113843449255313
Our earnings from unconsolidated co-investment ventures, net ($)20401294127587884
For the nine months ended:
Total revenues ($)8747712822341,0521,0294784832,6862,517
Net earnings ($)2132559986344253100120756714
Our earnings from unconsolidated co-investment ventures, net ($)58683431111811620219200
(1)Prologis Brazil Logistics Venture (“PBLV”) and our other Brazilian joint ventures are combined as one venture for the purpose of this table.
(2)In September 2022, PELF acquired a real estate portfolio that primarily included 125 industrial operating properties.
(3)Prologis’ investment balance is presented at our adjusted basis. The difference between our ownership interest of a venture’s equity and our investment balance at September 30, 2022 and December 31, 2021, results principally from four types of transactions: (i) deferred gains from the contribution of property to a venture prior to January 1, 2018; (ii) recording additional costs associated with our investment in the venture; (iii) receivables, principally for fees and promotes ($642.6 million and $149.5 million, respectively); and (iv) customer security deposits retained subsequent to property contributions to Nippon Prologis REIT, Inc.

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(4)Represents our weighted average ownership interest in all unconsolidated co-investment ventures based on each entity’s contribution of total assets before depreciation, net of other liabilities.

Equity Commitments Related to Certain Unconsolidated Co-Investment Ventures

At September 30, 2022, our outstanding equity commitments were $295.0 million, principally for Prologis China Logistics Venture. The equity commitments expire from 2023 to 2028 if they have not been previously called. Typically, equity commitments are used for future development and acquisitions in the unconsolidated co-investment ventures.

NOTE 4. ASSETS HELD FOR SALE OR CONTRIBUTION

We had investments in certain real estate properties that met the criteria to be classified as held for sale or contribution at September 30, 2022 and December 31, 2021. At the time of classification, these properties were expected to be sold to third parties or were recently stabilized and expected to be contributed to unconsolidated co-investment ventures within twelve months. The amounts included in Assets Held for Sale or Contribution represented real estate investment balances and the related assets and liabilities.

Assets held for sale or contribution consisted of the following (dollars and square feet in thousands):

September 30,December 31,
20222021
Number of operating properties2014
Square feet3,9585,486
Total assets held for sale or contribution$614,356$669,688
Total liabilities associated with assets held for sale or contribution – included in Other Liabilities$7,178$10,631

NOTE 5. DEBT

All debt is incurred by the OP or its consolidated subsidiaries. The following table summarizes our debt (dollars in thousands):

September 30, 2022December 31, 2021
Weighted AverageAmountWeighted AverageAmount
Interest Rate (1)Term (2)Outstanding (3)Interest Rate (1)Term (2)Outstanding (3)
Credit facilities1.4%2.2$520,4460.8%1.6$491,393
Senior notes1.8%10.815,747,6321.7%11.614,981,690
Term loans and unsecured other1.4%5.51,377,2460.5%4.21,825,195
Secured mortgage2.4%3.4493,9755.1%4.7416,776
Total1.8%10.0$18,139,2991.6%10.4$17,715,054
(1)The weighted average interest rates presented represent the effective interest rates (including amortization of debt issuance costs and noncash premiums or discounts) at the end of the period for the debt outstanding and include the impact of designated interest rate swaps, which effectively fix the interest rate on certain variable rate debt.
(2)The weighted average term represents the remaining maturity in years on the debt outstanding at period end.
(3)We borrow in the functional currencies of the countries where we invest. Included in the outstanding balances were borrowings denominated in the following currencies:
September 30, 2022December 31, 2021
Weighted Average Interest RateAmount Outstanding% of TotalWeighted Average Interest RateAmount Outstanding% of Total
British pound sterling2.2%$1,143,8566.3%2.1%$1,376,8077.8%
Canadian dollar3.9%441,2522.4%2.7%283,7731.6%
Euro1.2%7,618,59242.0%1.0%7,408,40741.8%
Japanese yen0.9%2,857,71815.8%0.9%2,878,54216.2%
U.S. dollar2.7%6,077,88133.5%2.6%5,767,52532.6%
Total1.8%$18,139,299100.0%1.6%$17,715,054100.0%

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Credit Facilities

In June, we terminated our global senior credit facility (the “2019 Global Facility”) and entered into the 2022 Global Facility with a borrowing capacity of up to $3.0 billion (subject to currency fluctuations). We also upsized our second global senior credit facility (the “2021 Global Facility”), increasing its borrowing capacity up to $2.0 billion (subject to currency fluctuations). We may draw on both facilities in British pounds sterling, Canadian dollars, euro, Japanese yen, Mexican pesos and U.S. dollars on a revolving basis. During the recast of both facilities, we modified the base rate of the aggregate lender commitments in U.S. dollars from the U.S. dollar London Inter-bank Offered Rate to the Secured Overnight Financing Rate. The 2021 Global Facility is scheduled to initially mature in April 2024 and the 2022 Global Facility in June 2026; however, we can extend the maturity date for each facility by six months on two occasions, subject to the payment of extension fees. We have the ability to increase the 2021 Global Facility to $2.5 billion and the 2022 Global Facility to $4.0 billion, subject to currency fluctuations and obtaining additional lender commitments.

We also have a Japanese yen revolver (the “Yen Credit Facility”) with total commitments of ¥55.0 billion ($380.2 million at September 30, 2022). We have the ability to increase the borrowing capacity of the Yen Credit Facility to ¥75.0 billion ($518.5 million at September 30, 2022), subject to obtaining additional lender commitments. The Yen Credit Facility is initially scheduled to mature in July 2024; however, we may extend the maturity date for one year, subject to the payment of extension fees.

We refer to the 2021 Global Facility, the 2022 Global Facility and the Yen Credit Facility, collectively, as our “Credit Facilities.” Pricing for the Credit Facilities, including the spread over the applicable benchmark and the rates applicable to facility fees and letter of credit fees, varies based on the public debt ratings of the OP.

Liquidity

The following table summarizes information about our available liquidity at September 30, 2022 (in millions):

Aggregate lender commitments
Credit Facilities$5,248
Less:
Borrowings outstanding520
Outstanding letters of credit25
Current availability$4,703
Cash and cash equivalents636
Total liquidity$5,339

Senior Notes

The following table summarizes the issuances of senior notes during the nine months ended September 30, 2022 (principal in thousands):

Aggregate PrincipalIssuance Date Weighted Average
Issuance DateBorrowing CurrencyUSD (1)Interest Rate (2)Term (3)Maturity Dates
January£60,000$80,9322.1%20.0December 2041
February (4)€1,550,000$1,768,2401.0%8.5February 2024 – 2034
July¥30,964,500$226,5881.4%15.5July 2027 – 2042
September (4)$650,000$650,0004.6%10.3January 2033
Total$2,725,7602.0%9.8
(1)The exchange rate used to calculate into U.S. dollars was the spot rate at the settlement date.
(2)The weighted average interest rate represents the fixed or variable interest rates of the related debt at the issuance date.
(3)The weighted average term represents the remaining maturity in years on the related debt at the issuance date.
(4)A portion of net proceeds from the issuance of these notes were used to finance green projects eligible under our green bond framework.

On October 6, 2022, we completed an exchange offer and consent solicitation for nine series of Duke’s senior notes for an aggregate amount of $3.4 billion, with $3.2 billion, or 96%, of the aggregate principal amount being validly tendered for exchange. The validly tendered senior notes were exchanged for notes issued by the OP. As a result of the consent solicitation, we have no separate remaining financial reporting obligations or financial covenants associated with the senior notes assumed in the Duke Transaction. All other terms of the assumed Duke senior notes remained substantially the same.

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Term Loans

In July 2022, we paid down our existing term loan in Canada of CAD $170.5 million ($133.5 million) and entered into a new term loan in Canada (“2022 Canadian Term Loan”) for CAD $300.0 million ($218.2 million at September 30, 2022), bearing interest at the Canada Dollar Offered Rate (“CDOR”) plus a spread over the applicable benchmark and maturing in August 2025, however, we can extend the maturity date by one year on two occasions, subject to the payment of extension fees. As the CDOR interest rate will transition to the Canadian Overnight Repo Rate Average (“CORRA”) prior to June 30, 2024, we anticipate modifying the interest rate on this loan prior to this transition and do not expect it to have a material impact on our Consolidated Financial Statements.

Long-Term Debt Maturities

Scheduled principal payments due on our debt for the remainder of 2022 and for each year through the period ended December 31, 2026, and thereafter were as follows at September 30, 2022 (in thousands):

Unsecured
CreditSeniorTerm LoansSecured
MaturityFacilitiesNotesand OtherMortgageTotal
2022 (1)$-$292,440$3$1,714$294,157
2023 (1)---177,547177,547
2024 (2)377,162292,440-93,519763,121
2025 (3)-34,565219,421134,100388,086
2026 (4)143,284887,279587,6723,4661,621,701
Thereafter-14,322,660574,64974,62914,971,938
Subtotal520,44615,829,3841,381,745484,97518,216,550
Unamortized premiums (discounts), net-(6,306)-9,7813,475
Unamortized debt issuance costs, net-(75,446)(4,499)(781)(80,726)
Total$520,446$15,747,632$1,377,246$493,975$18,139,299
(1)We expect to repay the amounts maturing in the next twelve months with cash generated from operations, proceeds from dispositions of real estate properties, or as necessary, with additional borrowings.
(2)Included in the 2024 maturities is the 2021 Global Facility and Yen Credit Facility that can be extended until 2025.
(3)Included in the 2025 maturities is the 2022 Canadian Term Loan that can be extended until 2027.
(4)Included in the 2026 maturities is the 2022 Global Facility that can be extended until 2027.

Financial Debt Covenants

Our senior notes, term loans and Credit Facilities outstanding at September 30, 2022 were subject to certain financial covenants under their related documents. At September 30, 2022, we were in compliance with all of our financial debt covenants.

Guarantee of Finance Subsidiary Debt

We have finance subsidiaries as part of our operations in Europe (Prologis Euro Finance LLC), Japan (Prologis Yen Finance LLC) and the U.K. (Prologis Sterling Finance LLC) in order to mitigate our foreign currency risk by borrowing in the currencies in which we invest. These entities are 100% indirectly owned by the OP and all unsecured debt issued or to be issued by each entity is or will be fully and unconditionally guaranteed by the OP. There are no restrictions or limits on the OP’s ability to obtain funds from its subsidiaries by dividend or loan. In reliance on Rule 13-01 of Regulation S-X, the separate financial statements of Prologis Euro Finance LLC, Prologis Yen Finance LLC and Prologis Sterling Finance LLC are not provided.

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NOTE 6. NONCONTROLLING INTERESTS

Prologis, L.P.

We report noncontrolling interests related to several entities we consolidate but of which we do not own 100% of the equity. These entities include two real estate partnerships that have issued limited partnership units to third parties. Depending on the specific partnership agreements, these limited partnership units are redeemable for cash or, at our option, shares of the Parent’s common stock, generally at a rate of one share of common stock to one limited partnership unit. We also consolidate certain entities in which we do not own 100% of the equity but the equity of these entities is not exchangeable into our common stock.

Prologis, Inc.

The noncontrolling interests of the Parent include the noncontrolling interests described above for the OP, as well as the limited partnership units in the OP that are not owned by the Parent. The outstanding limited partnership units receive quarterly cash distributions equal to the quarterly dividends paid on our common stock pursuant to the terms of the applicable partnership agreements.

The following table summarizes these entities (dollars in thousands):

Our Ownership PercentageNoncontrolling InterestsTotal AssetsTotal Liabilities
Sep 30, 2022Dec 31, 2021Sep 30, 2022Dec 31, 2021Sep 30, 2022Dec 31, 2021Sep 30, 2022Dec 31, 2021
Prologis U.S. Logistics Venture55.0%55.0%$3,194,303$3,264,337$7,253,012$7,397,195$161,778$147,545
Other consolidated entities (1)variousvarious129,238133,2011,626,8491,453,236231,979162,598
Prologis, L.P.3,323,5413,397,5388,879,8618,850,431393,757310,143
Limited partners in Prologis, L.P. (2)(3)989,680917,799----
Prologis, Inc.$4,313,221$4,315,337$8,879,861$8,850,431$393,757$310,143
(1)Includes two partnerships that have issued limited partnership units to third parties, as discussed above, along with various other consolidated entities. The limited partnership units outstanding at September 30, 2022 and December 31, 2021 were exchangeable into cash or, at our option, 0.3 million shares of the Parent’s common stock.
(2)We had 8.6 million Class A Units that were convertible into 8.1 million and 8.0 million limited partnership units of the OP at September 30, 2022 and December 31, 2021, respectively.
(3)There were limited partnership units in the OP, excluding the Class A Units, that were exchangeable into cash or, at our option, 8.2 million and 8.4 million shares of the Parent’s common stock, at September 30, 2022 and December 31, 2021, respectively. Also included are the vested OP Long-Term Incentive Plan Units (“LTIP Units”) associated with our long-term compensation plans of 4.5 million and 4.0 million shares of the Parent’s common stock at September 30, 2022 and December 31, 2021, respectively. See further discussion of LTIP Units in Note 7.

NOTE 7. LONG-TERM COMPENSATION

Equity-Based Compensation Plans and Programs

Prologis Outperformance Plan (“POP”)

We have allocated participation points or a percentage of the compensation pool to participants under our POP corresponding to three-year performance periods beginning every January 1. The fair value of the awards is measured at the grant date and amortized over the period from the grant date to the date at which the awards vest, which ranges from three to ten years. The performance hurdle (“Outperformance Hurdle”) at the end of the initial three-year performance period requires our three-year compound annualized total stockholder return (“TSR”) to exceed a threshold set at the three-year compound annualized TSR for the Morgan Stanley Capital International (“MSCI”) US REIT Index for the same period plus 100 basis points. If the Outperformance Hurdle is met, a compensation pool will be formed equal to 3% of the excess value created, subject to a maximum as defined by each performance period. POP awards cannot be paid at a time when we meet the outperformance hurdle yet our absolute TSR is negative. If after seven years our absolute TSR has not been positive, the awards will be forfeited.

We granted participation points for the 2022 – 2024 performance period in January 2022, with a fair value of $30.4 million using a Monte Carlo valuation model that assumed a risk-free interest rate of 1.0% and an expected volatility of 31.0% for Prologis and 29.0% for the MSCI US REIT Index. The 2022 – 2024 performance period has an absolute maximum cap of $100 million. If an award is earned at the end of the initial three-year performance period, then 20% of the POP award is paid at the end of the initial performance period and the remaining 80% is subject to additional seven-year cliff vesting. The 20% that is paid at the end of the initial three-year performance period is subject to an additional three-year holding requirement. Awards are in the form of common stock, restricted stock units, POP LTIP Units and LTIP Units.

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The Outperformance Hurdle was met for the 2019 – 2021 performance period, which resulted in awards of $100.0 million being earned at December 31, 2021 and awarded in January 2022. Additionally, awards of $35.7 million were earned at December 31, 2021 and awarded in January 2022 for prior performance periods related to the compensation pool in excess of the initial award based on the terms of the POP awards granted prior to 2018. The tables below include POP awards that were earned but are unvested, while any vested awards are reflected within the Consolidated Statements of Equity and Capital. The initial grant date fair value derived using a Monte Carlo valuation model was used in determining the grant date fair value per unit in the tables below.

Other Equity-Based Compensation Plans and Programs

Our other equity-based compensation plans and programs include (i) the Prologis Promote Plan (“PPP”); (ii) the annual long-term incentive (“LTI”) equity award program (“Annual LTI Award”); and (iii) the annual bonus exchange program. Awards under these plans and programs may be issued in the form of restricted stock units (“RSUs”) or LTIP Units at the participant’s election. RSUs and LTIP Units are valued based on the market price of the Parent’s common stock on the date the award is granted and the grant date value is charged to compensation expense over the service period.

Summary of Award Activity

RSUs

The following table summarizes the activity for RSUs for the nine months ended September 30, 2022 (units in thousands):

Weighted Average
Unvested RSUsGrant Date Fair Value
Balance at January 1, 20221,237$87.87
Granted538121.73
Vested and distributed(433)92.58
Forfeited(38)120.32
Balance at September 30, 20221,304$99.33

LTIP Units

The following table summarizes the activity for LTIP Units for the nine months ended September 30, 2022 (units in thousands):

UnvestedWeighted Average
LTIP UnitsGrant Date Fair Value
Balance at January 1, 20223,317$61.65
Granted98895.90
Vested LTIP Units(838)88.75
Balance at September 30, 20223,467$64.85

NOTE 8. EARNINGS PER COMMON SHARE OR UNIT

We determine basic earnings per share or unit based on the weighted average number of shares of common stock or units outstanding during the period. We compute diluted earnings per share or unit based on the weighted average number of shares or units outstanding combined with the incremental weighted average effect from all outstanding potentially dilutive instruments.

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The computation of our basic and diluted earnings per share and unit was as follows (in thousands, except per share and unit amounts):

Three Months EndedNine Months Ended
September 30,September 30,
Prologis, Inc.2022202120222021
Net earnings attributable to common stockholders – Basic$1,013,933$722,007$2,773,042$1,686,447
Net earnings attributable to exchangeable limited partnership units (1)28,79219,89078,64847,131
Adjusted net earnings attributable to common stockholders – Diluted$1,042,725$741,897$2,851,690$1,733,578
Weighted average common shares outstanding – Basic740,719739,439740,585739,217
Incremental weighted average effect on exchange of limited partnership units (1)21,23020,42121,24620,860
Incremental weighted average effect of equity awards4,4235,0854,1884,567
Weighted average common shares outstanding – Diluted (2)766,372764,945766,019764,644
Net earnings per share attributable to common stockholders:
Basic$1.37$0.98$3.74$2.28
Diluted$1.36$0.97$3.72$2.27
Three Months EndedNine Months Ended
September 30,September 30,
Prologis, L.P.2022202120222021
Net earnings attributable to common unitholders$1,042,664$741,794$2,851,475$1,733,355
Net earnings attributable to Class A Units(10,995)(7,816)(30,018)(18,263)
Net earnings attributable to common unitholders – Basic1,031,669733,9782,821,4571,715,092
Net earnings attributable to Class A Units10,9957,81630,01818,263
Net earnings attributable to exchangeable other limited partnership units61103215223
Adjusted net earnings attributable to common unitholders – Diluted$1,042,725$741,897$2,851,690$1,733,578
Weighted average common partnership units outstanding – Basic753,616751,558753,515751,773
Incremental weighted average effect on exchange of Class A Units8,0348,0038,0178,005
Incremental weighted average effect on exchange of other limited partnership units299299299299
Incremental weighted average effect of equity awards of Prologis, Inc.4,4235,0854,1884,567
Weighted average common units outstanding – Diluted (2)766,372764,945766,019764,644
Net earnings per unit attributable to common unitholders:
Basic$1.37$0.98$3.74$2.28
Diluted$1.36$0.97$3.72$2.27
(1)Earnings allocated to the exchangeable OP units not held by the Parent have been included in the numerator and exchangeable common units have been included in the denominator for the purpose of computing diluted earnings per share for all periods as the per share and unit amount is the same.
(2)Our total weighted average potentially dilutive shares and units outstanding consisted of the following:
Three Months EndedNine Months Ended
September 30,September 30,
2022202120222021
Class A Units8,0348,0038,0178,005
Other limited partnership units299299299299
Equity awards6,5576,9656,3096,863
Prologis, L.P.14,89015,26714,62515,167
Common limited partnership units12,89712,11912,93012,556
Prologis, Inc.27,78727,38627,55527,723

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NOTE 9. FINANCIAL INSTRUMENTS AND FAIR VALUE MEASUREMENTS

Derivative Financial Instruments

In the normal course of business, our operations are exposed to market risks, including the effect of changes in foreign currency exchange rates and interest rates. We may enter into derivative financial instruments to offset these underlying market risks. There have been no significant changes in our policy or strategy from what was disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.

The following table presents the fair value of our derivative financial instruments recognized within Other Assets and Other Liabilities on the Consolidated Balance Sheets (in thousands):

September 30, 2022December 31, 2021
AssetLiabilityAssetLiability
Undesignated derivatives
Foreign currency contracts
Forwards
Brazilian real$30$341$664$-
British pound sterling59,394-5,3613,492
Canadian dollar16,113-2,8561,790
Chinese renminbi1,190--550
Euro97,207-40,484136
Japanese yen59,983-23,341-
Swedish krona9,534-3,773201
Designated derivatives
Foreign currency contracts
Net investment hedges
British pound sterling65,527-9,1582,683
Canadian dollar37,678-5,410823
Interest rate swaps
Cash flow hedges
Euro40,052---
Total fair value of derivatives$386,708$341$91,047$9,675

Undesignated Derivative Financial Instruments

Foreign Currency Contracts

The following table summarizes the activity of our undesignated foreign currency contracts for the nine months ended September 30 (in millions, except for weighted average forward rates and number of active contracts):

20222021
CADEURGBPJPYOtherTotalCADEURGBPJPYOtherTotal
Notional amounts at January 1 ($)1757493832501051,662163474207252661,162
New contracts ($)124603251175811,2342193621667747871
Matured, expired or settled contracts ($)(49)(753)(274)(78)(105)(1,259)(199)(120)(115)(58)(45)(537)
Notional amounts at September 30 ($)250599360347811,637183716258271681,496
Weighted average forward rate at September 301.281.201.32108.591.261.231.37103.19
Active contracts at September 309689899973876978

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The following table summarizes the undesignated derivative financial instruments exercised and associated realized and unrealized gains (losses) in Foreign Currency and Derivative Gains and Interest and Other Income, Net in the Consolidated Statements of Income (in millions, except for number of exercised contracts):

Three Months EndedNine Months Ended
September 30,September 30,
2022202120222021
Exercised contracts5561124135
Realized gains (losses) on the matured, expired or settled contracts$94$(2)$124$(11)
Unrealized gains on the change in fair value of outstanding contracts$48$35$151$75

Designated Derivative Financial Instruments

Changes in the fair value of derivatives that are designated as net investment hedges of our foreign operations and cash flow hedges are recorded in Accumulated Other Comprehensive Income (Loss) (“AOCI/L”) and reflected within the Other Comprehensive Income (Loss) table below.

Foreign Currency Contracts

The following table summarizes the activity of our foreign currency contracts designated as net investment hedges for the nine months ended September 30 (in millions, except for weighted average forward rates and number of active contracts):

20222021
BRLCADGBPTotalCADGBPTotal
Notional amounts at January 1 ($)-535432967377135512
New contracts ($)44599317960535300835
Matured, expired or settled contracts ($)(44)(535)(300)(879)(299)-(299)
Notional amounts at September 30 ($)-5994491,0486134351,048
Weighted average forward rate at September 30-1.291.311.261.38
Active contracts at September 30-7474

Interest Rate Swaps

The following table summarizes the activity of our interest rate swaps designated as cash flow hedges for the nine months ended September 30 (in millions):

20222021
EURUSDTotalEURUSDTotal
Notional amounts at January 1 ($)165-165165250415
New contracts ($)1,0042501,254---
Matured, expired or settled contracts ($)(722)(250)(972)-(250)(250)
Notional amounts at September 30 ($)447-447165-165

Designated Nonderivative Financial Instruments

The following table summarizes our debt and accrued interest, designated as a hedge of our net investment in international subsidiaries at the quarter ended (in millions):

September 30, 2022December 31, 2021
British pound sterling$1,195$624

The following table summarizes the unrealized gains (losses) in Foreign Currency and Derivative Gains and Interest and Other Income, Net on the remeasurement of the unhedged portion of our debt and accrued interest, including euro and British pound sterling denominated debt (in millions):

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Three Months EndedNine Months Ended
September 30,September 30,
2022202120222021
Unrealized gains on the unhedged portion$36$30$85$73

Other Comprehensive Income (Loss)

The change in Other Comprehensive Income (Loss) in the Consolidated Statements of Comprehensive Income during the periods presented was due to the translation into U.S. dollars from the consolidation of the financial statements of our consolidated subsidiaries whose functional currency is not the U.S. dollar. The change in fair value of the effective portion of our derivative financial instruments that have been designated as net investment hedges and cash flow hedges and the translation of the hedged portion of our debt, as discussed above, are also included in Other Comprehensive Income (Loss).

The following table presents these changes in Other Comprehensive Income (Loss) (in thousands):

Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Derivative net investment hedges$74,341$25,549$134,798$11,090
Debt designated as nonderivative net investment hedges105,72615,118247,195(3,715)
Cumulative translation adjustment58,9958,041379,109194,506
Total foreign currency translation gains, net$239,062$48,708$761,102$201,881
Cash flow hedges (1)$16,818$872$45,764$8,246
Our share of derivatives from unconsolidated co-investment ventures8,0842,87621,4665,133
Total unrealized gains on derivative contracts, net$24,902$3,748$67,230$13,379
Total change in other comprehensive income$263,964$52,456$828,332$215,260
(1)We estimate an additional expense of $1.1 million will be reclassified to Interest Expense over the next 12 months from September 30, 2022, due to the amortization of previously settled derivatives designated as cash flow hedges.

Fair Value Measurements

There have been no significant changes in our policy from what was disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.

Fair Value Measurements on a Recurring Basis

At September 30, 2022 and December 31, 2021, other than the derivatives discussed previously, we had no significant financial assets or financial liabilities that were measured at fair value on a recurring basis in the Consolidated Financial Statements. All of our derivatives held at September 30, 2022 and December 31, 2021, were classified as Level 2 of the fair value hierarchy.

Fair Value Measurements on Nonrecurring Basis

Acquired properties and assets we expect to sell or contribute are significant nonfinancial assets that met the criteria to be measured at fair value on a nonrecurring basis. At September 30, 2022 and December 31, 2021, we estimated the fair value of our properties using Level 2 or Level 3 inputs from the fair value hierarchy. See more information on our acquired properties in Notes 2 and assets held for sale or contribution in Note 4.

Fair Value of Financial Instruments

At September 30, 2022 and December 31, 2021, the carrying amounts of certain financial instruments, including cash and cash equivalents, accounts and notes receivable, accounts payable and accrued expenses were representative of their fair values. The differences in the fair value of our debt from the carrying value in the table below were the result of differences in interest rates or borrowing spreads that were available to us at September 30, 2022 and December 31, 2021, as compared with those in effect when the debt was issued or assumed, including reduced borrowing spreads due to our improved credit ratings. The fair value of the senior notes decreased during the nine months ended September 30, 2022 due to the increase in bond yields in the market as compared to the weighted average interest rates on our senior notes. The senior notes and secured mortgage debt may contain prepayment penalties or yield maintenance provisions that could make the cost of refinancing the debt at lower rates exceed the benefit that would be derived from doing so. We evaluate this on an on-going basis based on market conditions and other factors.

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The following table reflects the carrying amounts and estimated fair values of our debt (in thousands):

September 30, 2022December 31, 2021
Carrying ValueFair ValueCarrying ValueFair Value
Credit Facilities$520,446$520,446$491,393$491,429
Senior notes15,747,63212,650,10114,981,69015,151,781
Term loans and unsecured other1,377,2461,378,9481,825,1951,835,569
Secured mortgage493,975470,808416,776437,215
Total$18,139,299$15,020,303$17,715,054$17,915,994

NOTE 10. BUSINESS SEGMENTS

Our current business strategy includes two operating segments: Real Estate Operations and Strategic Capital. We generate revenues, earnings, net operating income and cash flows through our segments, as follows:

•Real Estate Operations. This operating segment represents the ownership and development of operating properties and is the largest component of our revenue and earnings. We collect rent from our customers through operating leases, including reimbursements for the majority of our property operating costs. Each operating property is considered to be an individual operating segment with similar economic characteristics; these properties are combined within the reportable business segment based on geographic location. Our Real Estate Operations segment also includes development activities that lead to rental operations, including land held for development and properties currently under development, and other real estate investments. Within this line of business, we utilize the following: (i) our land bank; (ii) the development and leasing expertise of our local teams; and (iii) our customer relationships.
•Strategic Capital. This operating segment represents the management of unconsolidated co-investment ventures. We generate strategic capital revenues primarily from our unconsolidated co-investment ventures through asset management and property management services and we earn additional revenues by providing leasing, acquisition, construction, development, financing and disposition services. Depending on the structure of the venture and the returns provided to our partners, we also earn revenues through promotes periodically during the life of a venture or upon liquidation. Each unconsolidated co-investment venture we manage is considered to be an individual operating segment with similar economic characteristics; these ventures are combined within the reportable business segment based on geographic location.

Reconciliations are presented below for: (i) each reportable business segment’s revenues from external customers to Total Revenues; (ii) each reportable business segment’s net operating income from external customers to Operating Income and Earnings Before Income Taxes; and (iii) each reportable business segment’s assets to Total Assets. Our chief operating decision makers rely primarily on net operating income and similar measures to make decisions about allocating resources and assessing segment performance. The applicable components of Total Revenues, Operating Income, Earnings Before Income Taxes and Total Assets are allocated to each reportable business segment’s revenues, net operating income and assets. Items that are not directly assignable to a segment, such as certain corporate income and expenses, are not allocated but reflected as reconciling items.

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The following reconciliations are presented in thousands:

Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
Revenues:
Real estate operations segment:
U.S.$1,102,418$992,583$3,187,756$2,939,364
Other Americas23,77424,79169,13674,179
Europe13,43711,91237,14544,140
Asia16,51112,31543,14733,728
Total real estate operations segment1,156,1401,041,6013,337,1843,091,411
Strategic capital segment:
U.S.53,97360,319155,474130,172
Other Americas13,34410,67957,80940,817
Europe503,76445,325599,076136,589
Asia23,67125,12572,55783,218
Total strategic capital segment594,752141,448884,916390,796
Total revenues1,750,8921,183,0494,222,1003,482,207
Segment net operating income:
Real estate operations segment:
U.S. (1)828,144746,7102,384,0602,190,308
Other Americas17,06818,34150,01055,165
Europe7,7586,08913,59226,754
Asia11,4599,44130,46224,509
Total real estate operations segment864,429780,5812,478,1242,296,736
Strategic capital segment:
U.S. (1)(16,055)31,39733,93055,051
Other Americas7,4107,51843,65732,072
Europe461,70134,088528,323102,537
Asia11,14116,05639,58854,198
Total strategic capital segment464,19789,059645,498243,858
Total segment net operating income1,328,626869,6403,123,6222,540,594
Reconciling items:
General and administrative expenses(87,903)(66,970)(245,663)(219,344)
Depreciation and amortization expenses(401,450)(390,806)(1,200,410)(1,181,117)
Gains on dispositions of development properties and land, net74,678139,406390,686500,410
Gains on other dispositions of investments in real estate, net1,019214,390585,854358,180
Operating income914,970765,6602,654,0891,998,723
Earnings from unconsolidated entities, net84,92591,818241,481231,286
Interest expense(63,884)(63,638)(188,241)(203,331)
Foreign currency and derivative gains and interest and other income, net171,83263,326364,623142,859
Losses on early extinguishment of debt, net--(18,895)(187,453)
Earnings before income taxes$1,107,843$857,166$3,053,057$1,982,084

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September 30, 2022December 31, 2021
Segment assets:
Real estate operations segment:
U.S.$45,767,065$44,136,140
Other Americas1,740,4231,148,371
Europe1,633,0211,837,800
Asia1,045,584965,854
Total real estate operations segment50,186,09348,088,165
Strategic capital segment: (2)
U.S.11,02911,984
Europe25,28025,280
Asia215299
Total strategic capital segment36,52437,563
Total segment assets50,222,61748,125,728
Reconciling items:
Investments in and advances to unconsolidated entities8,659,1298,610,958
Assets held for sale or contribution614,356669,688
Cash and cash equivalents636,282556,117
Other assets813,145523,729
Total reconciling items10,722,91210,360,492
Total assets$60,945,529$58,486,220
(1)This includes compensation and personnel costs for employees who were located in the U.S. but also support other geographies.
(2)Represents management contracts and goodwill recorded in connection with business combinations associated with the Strategic Capital segment. Goodwill was $25.3 million at September 30, 2022 and December 31, 2021.

NOTE 11. SUPPLEMENTAL CASH FLOW INFORMATION

Our significant noncash investing and financing activities for the nine months ended September 30, 2022 and 2021 included the following:

•We recognized lease right-of-use assets and lease liabilities related to leases in which we are the lessee within Other Assets and Other Liabilities on the Consolidated Balance Sheets, including any new leases, renewals and modifications of $150.4 million in 2022 and $32.7 million in 2021 for both assets and liabilities.
•We capitalized $26.5 million and $19.4 million in 2022 and 2021, respectively, of equity-based compensation expense.
•We received $393.2 million and $299.4 million in 2022 and 2021, respectively, of ownership interests in certain unconsolidated co-investment ventures as a portion of our proceeds from the contribution of properties to these entities, as disclosed in Note 3.
•We issued 0.2 million and 0.3 million shares in 2022 and 2021, respectively, of the Parent’s common stock upon redemption of an equal number of common limited partnership units in the OP.
•We issued 1.0 million common limited partnership units for $130.4 million to our partner and assumed debt of $215.3 million in our acquisition of additional ownership interest in and subsequent consolidation of two unconsolidated other ventures in 2021.
•We formed an unconsolidated venture by contributing $10.0 million of land in 2021.

We paid $188.9 million and $224.7 million for interest, net of amounts capitalized, during the nine months ended September 30, 2022 and 2021, respectively.

We paid $85.3 million and $85.0 million for income taxes, net of refunds, during the nine months ended September 30, 2022 and 2021, respectively.

NOTE 12. ACQUISITION OF DUKE

On October 3, 2022, we completed the acquisition of Duke. The purchase price consideration was determined based upon a fixed exchange ratio, with each issued and outstanding share of Duke Realty common stock and common unit of Duke Realty OP converting

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automatically into the right to receive 0.475 of a newly issued share of Prologis, Inc. common stock or common unit of Prologis, L.P., as applicable. We issued approximately 183 million shares of Prologis, Inc. common stock and 2 million common limited partnership units in the OP in the Duke Transaction. After consideration of all applicable factors pursuant to the business combination accounting rules, we concluded the transaction will be treated as an asset acquisition and as a result the transaction costs will be capitalized to the basis of the acquired properties. The total acquisition price was approximately $23 billion through the issuance of equity based on the value of the Prologis, Inc. common stock issued using the closing price on September 30, 2022 and the assumption of debt.

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Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Prologis, Inc.:

Results of Review of Interim Financial Information

We have reviewed the consolidated balance sheet of Prologis, Inc. and subsidiaries (the Company) as of September 30, 2022, the related consolidated statements of income, comprehensive income, and equity for the three-month and nine-month periods ended September 30, 2022 and 2021, the related consolidated statements of cash flows for the nine-month periods ended September 30, 2022 and 2021, and the related notes (collectively, the consolidated interim financial information). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial information for it to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2021, and the related consolidated statements of income, comprehensive income, equity, and cash flows for the year then ended (not presented herein); and in our report dated February 9, 2022, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

This consolidated interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with the standards of the PCAOB. A review of consolidated interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ KPMG LLP

Denver, Colorado October 27, 2022

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Report of Independent Registered Public Accounting Firm

To the Partners of Prologis, L.P. and the Board of Directors of Prologis, Inc.:

Results of Review of Interim Financial Information

We have reviewed the consolidated balance sheet of Prologis, L.P. and subsidiaries (the Operating Partnership) as of September 30, 2022, the related consolidated statements of income, comprehensive income, and capital for the three-month and nine-month periods ended September 30, 2022 and 2021, the related consolidated statements of cash flows for the nine-month periods ended September 30, 2022 and 2021, and the related notes (collectively, the consolidated interim financial information). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial information for it to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Operating Partnership as of December 31, 2021, and the related consolidated statements of income, comprehensive income, capital, and cash flows for the year then ended (not presented herein); and in our report dated February 9, 2022, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 2021, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

This consolidated interim financial information is the responsibility of the Operating Partnership’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Operating Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with the standards of the PCAOB. A review of consolidated interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ KPMG LLP

Denver, Colorado October 27, 2022

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