filings.toolsItem 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following should be read in conjunction with the Consolidated Financial Statements and related Notes included in Item 1 of this report and our Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the United States (“U.S.”) Securities and Exchange Commission (“SEC”).
The statements in this report that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on current expectations, estimates and projections about the industry and markets in which we operate as well as management’s beliefs and assumptions. Such statements involve uncertainties that could significantly impact our financial results. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “aims,” and “estimates” including variations of such words and similar expressions are intended to identify such forward-looking statements, which generally are not historical in nature. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future — including statements relating to rent and occupancy growth, acquisition and development activity, contribution and disposition activity, general conditions in the geographic areas where we operate, expectations regarding new lines of business, our debt, capital structure and financial position, our ability to earn revenues from co-investment ventures or form new co-investment ventures and the availability of capital in existing or new co-investment ventures — are forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be attained, and therefore actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. Some of the factors that may affect outcomes and results include, but are not limited to: (i) international, national, regional and local economic and political climates and conditions; (ii) changes in global financial markets, interest rates and foreign currency exchange rates; (iii) increased or unanticipated competition for our properties; (iv) risks associated with acquisitions, dispositions and development of properties, including the integration of the operations of significant real estate portfolios; (v) maintenance of Real Estate Investment Trust (“REIT”) status, tax structuring and changes in income tax laws and rates; (vi) availability of financing and capital, the levels of debt that we maintain and our credit ratings; (vii) risks related to our investments in and management of our co-investment ventures, including our ability to establish new co-investment ventures; (viii) risks of doing business internationally, including currency risks; (ix) environmental uncertainties, including risks of natural disasters; (x) risks related to global pandemics; and (xi) those additional factors discussed under Part I, Item 1A. Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2024. We undertake no duty to update any forward-looking statements appearing in this report except as may be required by law.
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 ("co-investment ventures"). We have a significant ownership interest in the co-investment ventures, which are either consolidated or unconsolidated based on our level of control of the entity.
We operate, manage and measure the operating performance of our properties on an owned and managed (“O&M”) basis. Our O&M portfolio includes our consolidated properties as well as properties owned by our unconsolidated co-investment ventures, which we manage. 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”).
Included in our discussion below are references to funds from operations (“FFO”) and net operating income (“NOI”), neither of which are United States ("U.S.") generally accepted accounting principles (“GAAP”). See below 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 in the Consolidated Statements of Income*,* the most directly comparable GAAP measures.
MANAGEMENT'S OVERVIEW
Prologis is the global leader in logistics real estate, operating across high-barrier, high-growth markets. We operate in 20 countries on four continents, with a portfolio concentrated in key centers of commerce, strategically located near end consumers to support the flow of goods. In addition to owning, managing and developing high-quality logistics facilities around the world, we provide integrated infrastructure solutions that help customers operate with greater efficiency, flexibility and resiliency. Our offerings support the evolving needs of modern supply chains, including the increasing connection between physical and digital infrastructure and the growing demand for more sustainable operations.
Logistics supply chains remain essential to our customers and the global economy. Long-term trends, including the growth of e-commerce and modernization of the supply chain, continue to drive demand toward creating supply chain resiliency through leasing additional space to store and distribute goods. This demand has contributed to meaningful rent growth and low vacancy rates in recent years. We believe this demand is driven by three primary factors: (i) the re-positioning of our customer supply chains to accommodate the shift toward e-commerce and heightened service expectations; (ii) growth in overall consumption and households; and (iii) our
customers’ increased focus on building supply chain efficiency. We believe these factors will sustain demand and low vacancy rates over the long term. In the near term, we anticipate customer decision-making may slow as tariff policy has heightened economic uncertainty since early April. However, as supply chains may shift due to the disruption, we believe we are well-positioned to support our customers as they navigate changes.
Our teams actively manage our portfolio by providing comprehensive real estate services, including leasing, property management, development, acquisitions and dispositions. We invest significant capital into new logistics properties through acquisitions and development activity, including both built-to-suit and speculative development and redevelopment of properties into industrial properties and data centers. Proceeds from property dispositions, generally achieved by contributing newly developed properties to our co-investment ventures and selling of non-strategic properties to third parties, enable us to recycle capital back into our ongoing investment activities.
While the majority of our properties in the U.S. are wholly owned, we hold a significant ownership interest in properties both in the U.S. and internationally through our investment in co-investment ventures. Partnering with many of the world’s largest institutional investors through co-investment ventures allows us to expand our investment capacity, enhance and diversify our real estate returns and mitigate our exposure to foreign currency movements.
Our scale and customer-focused strategy have compelled us to expand the services we provide. Our 1.3 billion square foot portfolio serves as the foundation for a comprehensive platform of solutions that address the challenges our customers face in global fulfillment today. Through Prologis Essentials, we provide solutions to meet our customers’ operations, energy and sustainability needs. Our customer experience teams, proprietary technology and strategic partnerships are foundational to all aspects of our Prologis Essentials offerings. These resources allow us to provide our customers with unique and actionable insights and tools to help them make progress on sustainability goals and drive greater efficiency in their operations. Moreover, the principles of environmental, social and governance are ingrained in our business strategy through our integrated approach to global impact and sustainability, which we believe creates value for our customers, investors, employees and communities.
Our Global Presence
At March 31, 2025, we owned or had investments in, on a wholly owned basis or through co-investment ventures, properties and development projects expected to total approximately 1.3 billion square feet across the following geographies:
Throughout this discussion, we reflect amounts in the 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.
Our business comprises two reportable segments: Real Estate (Rental Operations and Development) and Strategic Capital.
Below is information summarizing consolidated activity within our segments (in millions):
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(1)
NOI from the Real Estate Segment is calculated directly from the Consolidated Financial Statements as Rental Revenues and Development Management and Other Revenues less Rental Expenses and Other Expenses. NOI from the Strategic Capital Segment is calculated directly from the 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") upon stabilization, which includes the estimated cost of development or expansion, including land, construction and leasing costs.
Real Estate Segment
Rental Operations. Rental operations comprise the largest component of our reportable segments and generally contributes 90% to 95% 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. Through our global footprint, we have a diversified lease portfolio and our revenues from in-place leases are contractual with fixed or inflation-linked escalations. The weighted average lease term was 69 months for leases that commenced, within the consolidated operating portfolio, during the trailing twelve months ended March 31, 2025. We expect to generate earnings growth by increasing rents, maintaining high occupancy rates and controlling expenses. The primary driver of our revenue growth will be the rolling of in-place leases to current market rents when leases expire, as discussed further below. We believe our active portfolio management, combined with the skills of our property, leasing, maintenance, 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 from rental operations are generated in the U.S.
Development. Our development business provides the opportunity to profitably build modern logistics facilities that address the evolving requirements of our customers while deepening our presence in our target markets. We believe we have a competitive advantage due to: (i) the strategic locations of our global land bank and redevelopment sites for the development of future industrial properties or data centers; (ii) the development expertise of our local teams; (iii) the depth of our customer relationships; (iv) our ability to integrate sustainable design features that provide operational efficiencies for our customers; and (v) our procurement capabilities that allow us to secure high-demand construction materials at a lower cost. Successful development and redevelopment efforts provide significant earnings growth as projects are leased, generate income and increase the value of our Real Estate Segment. Generally, we develop properties in the U.S. to hold for the long term or to contribute to our unconsolidated co-investment venture, and outside the U.S. to contribute to our unconsolidated co-investment ventures.
Strategic Capital Segment
We partner with many of the world’s largest institutional investors through co-investment ventures. The business is capitalized through private and public equity, and is comprised of 95% open-ended ventures, long-term ventures and two publicly traded vehicles (Nippon Prologis REIT, Inc. in Japan and FIBRA Prologis, which controls and owns 90% of Terrafina, also a publicly traded FIBRA in Mexico). We align our interests with our partners by holding significant ownership interests in the co-investment ventures. Nine of the co-investment ventures are unconsolidated entities, and one is consolidated, with our ownership in the co-investment ventures ranging from 15% to 55%. As the majority of our investments are in unconsolidated co-investment ventures, this structure allows us to reduce our exposure to foreign currency movements for non-U.S. investments. Management of the unconsolidated co-investment ventures comprises our Strategic Capital Segment.
This segment generates durable, long-term cash flows and generally contributes 5% to 10% of our consolidated revenues, earnings and FFO, excluding promotes. We generate strategic capital revenue from our unconsolidated co-investment ventures, principally through asset management and property management services. Revenue earned from asset management fees is primarily driven by the quarterly valuation of the real estate properties owned by the respective ventures. We earn additional revenues by providing
leasing, acquisition, construction management, development and disposition services. The majority of the strategic capital revenues are generated outside the U.S. 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, upon liquidation of a venture or upon stabilization of individual venture assets, based primarily on the total return of the investments over certain financial hurdles. Promote revenues are recognized when earned at the end of the promote period or upon liquidation or stabilization. We plan to grow this business and increase revenues by increasing our assets under management in existing or new ventures.
FUTURE GROWTH
We believe that the quality and scale of our portfolio, our ability to develop our land bank and redevelopment sites, our strategic capital business, 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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(1)
Net effective rent ("NER") is calculated at the beginning of the lease using estimated total cash base rent to be received over the term and annualized and excludes fair value lease amortization from acquisitions. Amounts derived in a currency other than the U.S. dollar have been translated using the average rate from the previous twelve months. Trailing NER change is based on the twelve months immediately prior to the period ended.
Rent change represents the percentage change in net effective rental rates (average rate over the lease term), on new and renewed leases, commenced during the period compared with previous net effective rental rates for the same respective spaces.
Rent Growth*.* We have experienced positive rent growth every quarter since 2013. As a result of several years of increases in market rents, our in-place leases have considerable upside potential to capture these higher rents and to drive future organic NOI growth. We estimate that our share of the lease mark-to-market is approximately 25% (on an NER basis), which represents the amount by which current market rents exceed our in-place rents based on our share of the O&M portfolio at March 31, 2025. This lease mark-to-market has remained meaningfully positive despite recent quarters of lower or even negative market rental growth due to the compounded nature of market rent growth. Therefore, even without further market rent growth, we expect our lease renewals to result in higher rental income over the next several years, given our remaining lease terms.
Value Creation from Development. Our global development program offers a broad set of opportunities and serves as a profitable way to expand our portfolio, build scale, serve customers, and create value for investors. We create these opportunities by sourcing land for ownership, as well as pursuing both option strategies and redevelopment projects, often referred to as Covered Land Plays ("CLPs"). Development occurs primarily in our existing markets and is focused on logistics facilities, though we also pursue higher-use conversions, including data centers.
Based on our current estimates, our consolidated land and other real estate investments, including options and CLPs, have the potential to support the development of $36.3 billion ($41.2 billion on an O&M basis) of TEI of newly developed buildings. We measure the estimated value creation of a development project as the stabilized value above our TEI. As properties are completed and leased, we expect to capture the value creation principally through gains realized through contributions of these properties to unconsolidated co-investment ventures and increases in the NOI of the consolidated portfolio.
Strategic Capital Advantages. The co-investment ventures provide capital from third parties that allows us to grow our O&M portfolio, contribute to self-funding our development activities through the sale or contribution of newly developed assets to these vehicles and produce substantial fees for our management of the assets. We raise capital to support the long-term growth of the co-investment ventures while maintaining our own substantial investments in these vehicles. At March 31, 2025, the gross book value of the operating portfolio held by our nine unconsolidated co-investment ventures was $58.5 billion across 552 million square feet.
Balance Sheet Strength. We have a long-held strategy to build and maintain a strong and flexible balance sheet by using conservative levels of financial leverage. At March 31, 2025, the weighted average remaining maturity of our consolidated debt was 9 years and the weighted average interest rate was 3.1%. At March 31, 2025, we had total available liquidity of $6.5 billion. We 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 ability to capitalize on opportunistic value-added investments as they arise.
Our Scale Drives Efficiency. 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.
Staying “Ahead of What’s Next™”. We are focused on creating value beyond real estate by enhancing our customers’ experience, leveraging our scale in procurement and innovating through data analytics and digitization efforts. This includes investments in early and growth-stage companies that are focused on emerging technologies for the logistics sector through Prologis Ventures, our corporate venture capital group. Our Prologis Essentials platform provides our customers with solutions through services and products that address their operations, energy and sustainability needs, simplify their decision making and support them in achieving their environmental goals.
SUMMARY OF THE THREE MONTHS ENDED MARCH 31, 2025
Our operating results and leasing activity were strong during the three months ended March 31, 2025. Due to increases in market rents over the last several years, our existing lease mark-to-market continued to drive rent change on rollover and same-store growth in our O&M portfolio. This lease mark-to-market has remained meaningfully positive despite recent quarters of lower or even negative market rental growth due to the compounded nature of market rent growth. The occupancy of our operating portfolio was 95.1% at March 31, 2025 and rent change on leases that commenced during the three months ended March 31, 2025 was 53.7% on a net effective basis, both metrics based on our ownership share.
During the first quarter, industrial fundamentals were improving. However, in the near term, we anticipate customer decision-making may slow as tariff policy has heightened economic uncertainty since early April. Through dialogue with our customers, we are staying close as they manage tariff policy volatility and navigate changes that may occur within the supply chain. We will remain disciplined in our capital deployment activities by focusing on build-to-suit development for both logistics and data centers. While we believe we are well-positioned to grow revenues over the long-term given the upside potential in our in-place leases, it is difficult to predict the impact on our business, future financial condition and operating results.
We completed the following significant activities in 2025, as described in the Notes to the Consolidated Financial Statements:
We generated net proceeds of $174 million and realized net gains of $64 million, principally from the contribution of a property we developed to an unconsolidated co-investment venture in Europe and sales to third parties in the U.S.
At March 31, 2025, we had total available liquidity of $6.5 billion, including borrowing capacity on our credit facilities of $5.8 billion and unrestricted cash balances of $0.7 billion.
In February, we issued C$750 million ($520 million) of senior notes maturing in 8 years with a weighted average interest rate of 4.2%, further mitigating foreign currency exposure related to our Canadian investments.
RESULTS OF OPERATIONS – THREE MONTHS ENDED MARCH 31, 2025 AND 2024
We evaluate our business operations based on the NOI of our two reportable segments: Real Estate (Rental Operations and Development) and Strategic Capital. NOI by segment is a non-GAAP performance measure that is calculated using revenues and expenses directly from our financial statements. We consider NOI by segment to be an appropriate supplemental measure of our performance because it helps management and investors understand our operating results.
Below is our NOI by segment per the Consolidated Financial Statements and a reconciliation of NOI by segment to Operating Income per the Consolidated Financial Statements for the three months ended March 31 (in millions):
| 2025 | 2024 | |||||||
| Real estate segment: | ||||||||
| Rental revenues | $ | 1,987 | $ | 1,828 | ||||
| Development management and other revenues | 11 | - | ||||||
| Rental expenses | (488 | ) | (454 | ) | ||||
| Other expenses | (9 | ) | (12 | ) | ||||
| Real Estate Segment – NOI | 1,501 | 1,362 | ||||||
| Strategic capital segment: | ||||||||
| Strategic capital revenues | 141 | 128 | ||||||
| Strategic capital expenses | (61 | ) | (78 | ) | ||||
| Strategic Capital Segment – NOI | 80 | 50 | ||||||
| General and administrative expenses | (115 | ) | (111 | ) | ||||
| Depreciation and amortization expenses | (652 | ) | (638 | ) | ||||
| Operating income before gains on real estate transactions, net | 814 | 663 | ||||||
| Gains on dispositions of development properties and land, net | 27 | 40 | ||||||
| Gains on other dispositions of investments in real estate, net | 37 | 17 | ||||||
| Operating income | $ | 878 | $ | 720 |
See Note 10 to the Consolidated Financial Statements for more information on our segments and a reconciliation of each reportable segment’s NOI to Operating Income and Earnings Before Income Taxes.
Real Estate Segment
This reportable segment principally includes rental revenue and rental expenses recognized from our consolidated properties. This segment also includes the operating results of our renewable energy assets. We allocate the costs of our property management and leasing functions to the Real Estate Segment through Rental Expenses and the Strategic Capital Segment through Strategic Capital Expenses, both in the Consolidated Financial Statements*,* based on the square footage of the relative portfolios. In addition, this segment is impacted by our development, acquisition and disposition activities.
Below are the components of Real Estate Segment NOI for the three months ended March 31, derived directly from line items in the Consolidated Financial Statements (in millions):
| 2025 | 2024 | |||||||
| Rental revenues | $ | 1,987 | $ | 1,828 | ||||
| Development management and other revenues | 11 | - | ||||||
| Rental expenses | (488 | ) | (454 | ) | ||||
| Other expenses | (9 | ) | (12 | ) | ||||
| Real Estate Segment – NOI | $ | 1,501 | $ | 1,362 |
The $139 million change in Real Estate Segment (“RES”) NOI for the three months ended March 31 compared to the same period in 2024, was impacted by the following activities (in millions):
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(1)
Significant rent change due to higher rental rates on the rollover of leases during both periods continues to be a key driver of increasing rental income. See below for key metrics on rent change on rollover and occupancy.
(2)
We calculate changes in NOI from development completions period over period by comparing the change in NOI generated on the pool of developments that completed on or after January 1, 2024 through March 31, 2025.
Below are key operating metrics of our consolidated operating portfolio.
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(1)
Consolidated square feet of leases commenced and weighted average net effective rent change were calculated for leases with initial terms of one year or greater.
(2)
Calculated using the trailing twelve months immediately prior to the period ended.
Development Activity
The following table summarizes consolidated development activity for the three months ended March 31 (dollars and square feet in millions):
| 2025 | 2024 | |||||||
| Starts: | ||||||||
| Number of new development buildings started during the period | 11 | 7 | ||||||
| Square feet | 3 | 2 | ||||||
| TEI | $ | 646 | $ | 271 | ||||
| Percentage of build-to-suits based on TEI | 78.0 | % | 22.2 | % | ||||
| Stabilizations: | ||||||||
| Number of development buildings stabilized during the period | 14 | 16 | ||||||
| Square feet | 4 | 3 | ||||||
| TEI | $ | 945 | $ | 515 | ||||
| Percentage of build-to-suits based on TEI | 65.6 | % | 43.6 | % | ||||
| Weighted average stabilized yield (1) | 6.9 | % | 5.7 | % | ||||
| Estimated value at completion | $ | 1,191 | $ | 565 | ||||
| Estimated weighted average margin (2) | 26.1 | % | 9.8 | % | ||||
| Estimated value creation | $ | 246 | $ | 50 |
(1)
We calculate the weighted average stabilized yield as estimated NOI assuming stabilized occupancy divided by TEI.
(2)
Estimated weighted average margin is calculated on development properties as estimated value creation, less estimated closing costs and taxes, if any, on properties expected to be sold or contributed, divided by TEI. Development margins fluctuate depending on several factors including cost of capital, changes in capitalization rates that are used to estimate value at completion and location and type of development, such as build-to-suit development.
At March 31, 2025, the consolidated development portfolio, including properties under development and pre-stabilized properties, was expected to be completed before July 2027 with a TEI of $4.4 billion and was 32.2% leased. This includes the development of data centers with an aggregate TEI of $0.6 billion, on a consolidated basis. Our investment in the development portfolio was $2.6 billion at March 31, 2025.
Capital Expenditures
We capitalize costs incurred in improving and leasing our operating properties as part of the investment basis or within Other Assets in the Consolidated Balance Sheets. The following graph summarizes recurring capitalized expenditures and leasing costs of our consolidated operating properties during each quarter and excludes development costs and spend subsequent to stabilization that is structural in nature and non-recurring:
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Strategic Capital Segment
This reportable segment includes revenues from asset management and property management services, transactional services for acquisition, disposition and leasing activity and promote revenue earned from the unconsolidated co-investment ventures. Revenues associated with the Strategic Capital Segment fluctuate because of changes in the size of the portfolios through acquisitions and dispositions, the fair value of the properties, timing of promotes, foreign currency exchange rates and other transactional activity. These
revenues are reduced by the direct costs associated with the asset and property-level management expenses for the properties owned by these ventures. We allocate the costs of our property management and leasing functions to the Strategic Capital Segment through Strategic Capital Expenses and to the Real Estate Segment through Rental Expenses both in the Consolidated Financial Statements, based on the square footage of the relative portfolios. For further details regarding the key property information and summarized financial condition and operating results of our unconsolidated co-investment ventures, refer to Note 3 to the Consolidated Financial Statements.
Below are the components of Strategic Capital Segment NOI for the three months ended March 31, derived directly from the line items in the Consolidated Financial Statements (in millions):
| 2025 | 2024 | |||||||
| Strategic capital revenues | $ | 141 | $ | 128 | ||||
| Strategic capital expenses | (61 | ) | (78 | ) | ||||
| Strategic Capital Segment – NOI | $ | 80 | $ | 50 |
Below is additional detail of our Strategic Capital Segment revenues, expenses and NOI for the three months ended March 31 (in millions):
| U.S. (1) | Other Americas | Europe | Asia | Total | ||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | 2025 | 2024 | |||||||||||||||||||||||||||||||||
| Strategic capital revenues ($) (2) | ||||||||||||||||||||||||||||||||||||||||||
| Recurring fees (3) | 43 | 41 | 20 | 14 | 44 | 41 | 17 | 19 | 124 | 115 | ||||||||||||||||||||||||||||||||
| Transactional fees (4) | 5 | 5 | 1 | 2 | 7 | 4 | 4 | 2 | 17 | 13 | ||||||||||||||||||||||||||||||||
| Total strategic capital revenues ($) | 48 | 46 | 21 | 16 | 51 | 45 | 21 | 21 | 141 | 128 | ||||||||||||||||||||||||||||||||
| Strategic capital expenses ($) (2) | (28 | ) | (41 | ) | (3 | ) | (6 | ) | (18 | ) | - | (22 | ) | (12 | ) | (9 | ) | (61 | ) | (78 | ) | |||||||||||||||||||||
| Strategic Capital Segment – NOI ($) | 20 | 5 | 18 | 10 | 33 | 23 | 9 | 12 | 80 | 50 |
(1)
The U.S. expenses include compensation and personnel costs for employees who are based in the U.S. but also support other geographies.
(2)
We generally earn promote revenue directly from third-party investors in the co-investment ventures based on the cumulative returns of the venture over a three-year period or the stabilization of individual development projects owned by the venture. Changes in asset valuations within the co-investment ventures during the promote period is one of the significant inputs to the calculation of promote revenues.
The Prologis Promote Plan ("PPP") awards up to 25% of the third-party portion of the promotes earned by us from the co-investment ventures to our employees. This award is issued as a combination of cash and equity-based awards, pursuant to the terms of the PPP and expensed through Strategic Capital Expenses in the Consolidated Statements of Income, as vested. As a result, expenses recognized in the current period may relate to promote revenues recognized in prior periods.
(3)
Recurring fees include asset management and property management fees.
(4)
Transactional fees include leasing commissions, acquisition, disposition, development and other fees.
G&A Expenses
G&A expenses were $115 million and $111 million for the three months ended March 31, 2025 and 2024, respectively. We capitalize certain internal costs that are incremental and directly related to our development and building improvement activities.
The following table summarizes capitalized G&A for the three months ended March 31 (dollars in millions):
| 2025 | 2024 | |||||||
| Building and land development activities | $ | 31 | $ | 40 | ||||
| Operating building improvements and other | 13 | 16 | ||||||
| Total capitalized G&A expenses | $ | 44 | $ | 56 | ||||
| Capitalized compensation and related costs as a percent of total | 21.0 | % | 25.2 | % |
Depreciation and Amortization Expenses
Depreciation and amortization expenses were $652 million and $638 million for the three months ended March 31, 2025 and 2024, respectively.
The $14 million change in depreciation and amortization expenses for the three months ended March 31, 2025 compared to the same period in 2024, was impacted by the following items (in millions):
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Gains on Real Estate Transactions, Net
Gains on the disposition of development properties and land were $27 million and $40 million for the three months ended March 31, 2025 and 2024, respectively, principally from the contribution of properties we developed to unconsolidated co-investment ventures in Europe in 2025 and 2024, and from sales to third parties in the U.S. in 2025.
Gains on other dispositions of investments in real estate were $37 million and $17 million for the three months ended March 31, 2025 and 2024, respectively, primarily from sales of properties to third parties.
Historically, we have utilized the proceeds from these dispositions primarily to fund our acquisition and development activities. See Note 2 to the Consolidated Financial Statements for further information on these transactions.
Our Owned and Managed (“O&M”) Operating Portfolio
We manage our business and review our operating fundamentals on an O&M basis, which includes our consolidated properties and properties owned by our unconsolidated co-investment ventures. We believe reviewing the results in this way allows management to understand performance more broadly as we manage the properties without regard to their ownership. We do not control the unconsolidated co-investment ventures for purposes of GAAP and the presentation of the ventures’ operating information does not represent a legal claim.
Our O&M operating portfolio does not include our development portfolio, value-added properties, non-industrial properties or properties that we consider non-strategic and do not have the intent to hold long term that are classified as either held for sale or within other real estate investments. Value-added properties are properties we have either acquired at a discount and believe we could provide greater returns post-stabilization or properties we expect to repurpose to higher uses. See below for information on our O&M operating portfolio (square feet in millions):
| March 31, 2025 | December 31, 2024 | ||||||||||||||||||
| Number of Properties | Square Feet | Percentage Occupied | Number of Properties | Square Feet | Percentage Occupied | ||||||||||||||
| Consolidated | 2,999 | 649 | 94.8% | 2,981 | 644 | 95.4% | |||||||||||||
| Unconsolidated | 2,434 | 552 | 95.8% | 2,423 | 548 | 96.6% | |||||||||||||
| Total | 5,433 | 1,201 | 95.2% | 5,404 | 1,192 | 95.9% |
Below are the key leasing metrics of our O&M operating portfolio.
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(1)
Square feet of leases commenced and weighted average net effective rent change were calculated for leases with initial terms of one year or greater. We retained approximately 70% or more of our customers, based on the total square feet of leases commenced during these periods.
(2)
Calculated using the trailing twelve months immediately prior to the period ended.
(3)
Turnover costs include external leasing commissions and tenant improvements and represent the estimated obligations incurred in connection with the lease commencement for leases greater than one year.
Same Store Analysis
Our same store metrics are non-GAAP financial measures, which are commonly used in the real estate industry and expected from the financial community, presented on both a net effective and cash basis. We evaluate the performance of the operating properties we own and manage using a “same store” analysis because the population of properties in this analysis is consistent from period to period, which allows us and investors to analyze our ongoing business operations. We determine our same store metrics on property NOI, which is calculated as rental revenue less rental expense for the applicable properties in the same store population for both consolidated and unconsolidated properties based on our ownership interest, as further defined below.
We define our same store population for the three months ended March 31, 2025 as the properties in our O&M operating portfolio, including the property NOI for both consolidated properties and properties owned by the unconsolidated co-investment ventures, at January 1, 2024 and owned throughout the same three-month period in both 2024 and 2025. We believe the drivers of property NOI for the consolidated portfolio are generally the same for the properties owned by the ventures in which we invest and therefore we evaluate the same store metrics of the O&M portfolio based on Prologis’ ownership in the properties (“Prologis Share”). The same store population excludes properties held for sale to third parties, along with development properties that were not stabilized at the beginning of the period (January 1, 2024) and properties acquired or disposed of to third parties during the period. To derive an appropriate measure of period-to-period operating performance, we remove the effects of foreign currency exchange rate movements by using the reported period-end exchange rate to translate from local currency into the U.S. dollar for both periods.
As non-GAAP financial measures, the same store metrics have certain limitations as an analytical tool and may vary among real estate companies. As a result, we provide a reconciliation of Rental Revenues less Rental Expenses (“Property NOI”) (from our Consolidated Financial Statements prepared in accordance with U.S. GAAP) to our Same Store Property NOI measures, as follows for the three months ended March 31 (dollars in millions):
| Percentage | |||||||||||
| 2025 | 2024 | Change | |||||||||
| Reconciliation of Consolidated Property NOI to Same Store Property NOI measures: | |||||||||||
| Rental revenues | $ | 1,987 | $ | 1,828 | |||||||
| Rental expenses | (488 | ) | (454 | ) | |||||||
| Consolidated Property NOI | 1,499 | 1,374 | |||||||||
| Adjustments to derive same store results: | |||||||||||
| Property NOI from consolidated properties not included in same store portfolio and other adjustments (1) | (185 | ) | (99 | ) | |||||||
| Property NOI from unconsolidated co-investment ventures included in same store portfolio (1)(2) | 864 | 793 | |||||||||
| Third parties' share of Property NOI from properties included in same store portfolio (1)(2) | (685 | ) | (659 | ) | |||||||
| Prologis Share of Same Store Property NOI – Net Effective (2) | $ | 1,493 | $ | 1,409 | 5.9 | % | |||||
| Consolidated properties straight-line rent and fair value lease amortization included in same store portfolio (3) | (137 | ) | (135 | ) | |||||||
| Unconsolidated co-investment ventures straight-line rent and fair value lease amortization included in same store portfolio (3) | (34 | ) | (20 | ) | |||||||
| Third parties' share of straight-line rent and fair value lease amortization included in same store portfolio (2)(3) | 26 | 16 | |||||||||
| Prologis Share of Same Store Property NOI – Cash (2)(3) | $ | 1,348 | $ | 1,270 | 6.2 | % |
(1)
We exclude properties held for sale to third parties, along with development properties that were not stabilized at the beginning of the period and properties acquired or disposed of to third parties during the period. We also exclude net termination and renegotiation fees to allow us to evaluate the growth or decline in each property’s rental revenues without regard to one-time items that are not indicative of the property’s recurring operating performance. Net termination and renegotiation fees represent the gross fee negotiated to allow a customer to terminate or renegotiate their lease, offset by the write-off of the asset recorded due to the adjustment to straight-line rents over the lease term. Same Store Property NOI is adjusted to include an allocation of property management expenses for our consolidated properties based on the property management services provided to each property (generally, based on a percentage of revenues). On consolidation, these amounts are eliminated and the actual costs of providing property management and leasing services are recognized as part of our consolidated rental expense.
(2)
We include the Property NOI for the same store portfolio for both consolidated properties and properties owned by the co-investment ventures based on our investment in the underlying properties. In order to calculate our share of Same Store Property NOI from the co-investment ventures in which we own less than 100%, we use the co-investment ventures’ underlying Property NOI for the same store portfolio and apply our ownership percentage at March 31, 2025 to the Property NOI for both periods, including the properties contributed during the period. We adjust the total Property NOI from the same store portfolio of the co-investment ventures by subtracting the third parties’ share of both consolidated and unconsolidated co-investment ventures.
During the periods presented, certain wholly owned properties were contributed to a co-investment venture and are included in the same store portfolio. Neither our consolidated results nor those of the co-investment ventures, when viewed individually, would be comparable on a same store basis because of the changes in composition of the respective portfolios from period to period (e.g. the results of a contributed property are included in our consolidated results through the contribution date and in the results of the venture subsequent to the contribution date based on our ownership interest at the end of the period). As a result, only line items labeled “Prologis Share of Same Store Property NOI” are comparable period over period.
(3)
We further remove certain noncash items (straight-line rent and fair value lease amortization) included in the financial statements prepared in accordance with U.S. GAAP to reflect a Same Store Property NOI – Cash measure.
We manage our business and compensate our executives based on the same store results of our O&M portfolio at 100% as we manage our portfolio on an ownership blind basis. We calculate those results by including 100% of the properties included in our same store portfolio.
Other Components of Income (Expense)
Earnings from Unconsolidated Entities, Net
We recognized net earnings from unconsolidated entities, which are primarily accounted for using the equity method, of $68 million and $72 million for the three months ended March 31, 2025 and 2024, respectively.
The earnings we recognize can be impacted by: (i) the size, rental rates and occupancy of the portfolio of properties owned by each venture; (ii) interest expense based on the size and terms of the debt; (iii) gains or losses from dispositions of properties, impairments and extinguishments of debt; (iv) our ownership interest in each venture; (v) other variances in revenues and expenses of each venture; and (vi) fluctuations in foreign currency exchange rates used to translate our share of net earnings to U.S. dollars.
See the discussion of our unconsolidated entities above in the Strategic Capital Segment discussion and in Note 3 to the Consolidated Financial Statements for a further breakdown of our share of net earnings recognized.
Interest Expense
The following table details our net interest expense for the three months ended March 31 (dollars in millions):
| 2025 | 2024 | |||||||
| Gross interest expense | $ | 234 | $ | 205 | ||||
| Amortization of debt discount and debt issuance costs, net | 21 | 18 | ||||||
| Capitalized amounts | (23 | ) | (30 | ) | ||||
| Net interest expense | $ | 232 | $ | 193 | ||||
| Weighted average effective interest rate during the period | 3.2 | % | 2.9 | % |
Interest expense increased during the three months ended March 31, 2025, as compared to the same period in 2024, principally due to the issuance of senior notes, primarily in 2024, to finance our acquisition and development activities and higher interest rates. We issued $520 million of senior notes during the three months ended March 31, 2025 and $4.2 billion during the year ended December 31, 2024, with a weighted average interest rate of 4.2% and 4.8%, respectively, at the issuance date.
See Note 5 to the Consolidated Financial Statements and the Liquidity and Capital Resources section below, for further discussion of our debt and borrowing costs.
Foreign Currency, Derivative and Other Gains (Losses) and Other Income (Expense), Net
We recognized foreign currency, derivative and other gains (losses) and other income (expense), net, of $32 million in losses and $64 million in gains for the three months ended March 31, 2025 and 2024, respectively. Included in these amounts was interest income earned on short-term investments.
We are exposed to foreign currency exchange risk related to investments in and earnings from our foreign investments. We primarily hedge our foreign currency risk related to our investments by borrowing in the currencies in which we invest thereby providing a natural hedge. We have issued debt in a currency that is not the same functional currency of the borrowing entity and have designated a portion of the debt as a nonderivative net investment hedge. We recognize the remeasurement and settlement of the translation adjustment on the unhedged portion of the debt and accrued interest in unrealized gains or losses. We may use derivative financial instruments to manage foreign currency exchange rate risk related to our earnings. We recognize the change in fair value of the undesignated derivative contracts in unrealized gains and losses. Upon settlement of these transactions, we recognize realized gains or losses.
The following table details our foreign currency and derivative gains (losses), net for the three months ended March 31 included in earnings (in millions):
| 2025 | 2024 | |||||||
| Realized foreign currency and derivative gains (losses), net: | ||||||||
| Gains (losses) on the settlement of undesignated derivatives | $ | 9 | $ | 18 | ||||
| Total realized foreign currency and derivative gains (losses), net | 9 | 18 | ||||||
| Unrealized foreign currency and derivative gains (losses), net: | ||||||||
| Gains (losses) on the change in fair value of undesignated derivatives and unhedged debt | (62 | ) | 39 | |||||
| Gains (losses) on remeasurement of certain assets and liabilities | 7 | (5 | ) | |||||
| Total unrealized foreign currency and derivative gains (losses), net | (55 | ) | 34 | |||||
| Total foreign currency and derivative gains (losses), net | $ | (46 | ) | $ | 52 |
See Note 9 to the Consolidated Financial Statements for more information about our derivative and nonderivative transactions.
Income Tax Expense
We recognize income tax expense related to our taxable REIT subsidiaries and in the local, state and foreign jurisdictions in which we operate. Our current income tax expense (benefit) fluctuates from period to period based primarily on the timing of our taxable income, including gains on the disposition of properties, fees earned from the co-investment ventures and taxable earnings from unconsolidated co-investment ventures. Deferred income tax expense (benefit) is generally a function of the period’s temporary differences and the utilization of net operating losses generated in prior years that had been previously recognized as deferred income tax assets in taxable subsidiaries.
The following table summarizes our income tax expense (benefit) for the three months ended March 31 (in millions):
| 2025 | 2024 | |||||||
| Current income tax expense (benefit): | ||||||||
| Income tax expense (benefit) | $ | 35 | $ | 27 | ||||
| Income tax expense (benefit) on dispositions | 1 | 5 | ||||||
| Total current income tax expense (benefit) | 36 | 32 | ||||||
| Deferred income tax expense (benefit): | ||||||||
| Income tax expense (benefit) | 7 | 1 | ||||||
| Total deferred income tax expense (benefit) | 7 | 1 | ||||||
| Total income tax expense (benefit) | $ | 43 | $ | 33 |
Net Earnings Attributable to Noncontrolling Interests
Net earnings attributable to noncontrolling interests represents the third-party investors’ share of the earnings generated in consolidated entities in which we do not own 100% of the equity, reduced by the third-party share of fees or promotes we earned during the period. We had net earnings attributable to noncontrolling interests of $47 million and $45 million for the three months ended March 31, 2025 and 2024, respectively. Included in these amounts were $15 million for both the three months ended March 31, 2025 and 2024, of net earnings attributable to the common limited partnership unitholders of Prologis, L.P.
See Note 6 to the Consolidated Financial Statements for further information on our noncontrolling interests.
Other Comprehensive Income (Loss)
The key driver of changes in Accumulated Other Comprehensive Income (Loss) (“AOCI/L”) in the Consolidated Financial Statements during the three months ended March 31, 2025 and 2024, was the currency translation adjustment derived from changes in exchange rates during both periods principally on our net investments in real estate outside the U.S. and the borrowings we issue in the functional currencies of the countries where we invest. These borrowings serve as a natural hedge of our foreign investments. In addition, we use derivative financial instruments, such as foreign currency contracts to manage foreign currency exchange rate risk related to our foreign investments and interest rate contracts to manage interest rate risk, that when designated the change in fair value is included in AOCI/L.
See Note 9 to the Consolidated Financial Statements for more information on changes in other comprehensive income and about our derivative and nonderivative transactions.
LIQUIDITY AND CAPITAL RESOURCES
Overview
We consider our ability to generate cash from operating activities, distributions from our co-investment ventures, contributions and dispositions of properties and available financing sources to be adequate to meet our anticipated future development, acquisition, operating, debt service, dividend and distribution requirements.
Near-Term Principal Cash Sources and Uses
In addition to dividends and distributions, we expect our primary cash needs will consist of the following:
completion of the development and leasing of the properties in our consolidated development portfolio (at March 31, 2025, 81 properties in our development portfolio were 32.2% leased with a current investment of $2.6 billion and a TEI of $4.4 billion when completed and leased, leaving $1.8 billion of estimated additional required investment);
development of new properties that we may hold for long-term investment or subsequently contribute to unconsolidated co-investment ventures or sell to third parties, including the acquisition of land;
the acquisition of other real estate investments that we acquire with the intention of redeveloping into industrial properties and data centers;
capital expenditures and leasing costs on properties in our operating portfolio;
investments in renewable energy, energy storage and mobility infrastructure to serve our customers and achieve our sustainability goals;
repayment of debt and scheduled principal payments of $446 million in the remainder of 2025 and $2.4 billion in 2026;
additional investments in current and future co-investment ventures and other ventures; and
the acquisition of operating properties or portfolios of operating properties (depending on market and other conditions), for direct, long-term investment in our consolidated portfolio (this might include acquisitions from our unconsolidated entities).
We expect to fund our cash needs principally from the following sources (subject to market conditions):
net cash flow from property operations;
fees earned for services performed on behalf of co-investment ventures;
distributions received from co-investment ventures;
proceeds from the contribution of properties to current or future co-investment ventures;
proceeds from the disposition of properties or other investments to third parties;
available unrestricted cash balances ($0.7 billion at March 31, 2025);
borrowing capacity under our current credit facility arrangements that allows us to borrow on a short-term basis, with maturities generally ranging from overnight to three months ($5.8 billion available at March 31, 2025), including our commercial paper program; and
proceeds from the issuance of debt.
In the long term, we may also voluntarily repurchase our outstanding debt or equity securities (depending on prevailing market conditions, our liquidity, contractual restrictions and other factors) through cash purchases, open-market purchases, privately negotiated transactions, tender offers or otherwise. We may also fund our cash needs from the issuance of equity securities, subject to market conditions, and through the sale of a portion of our investments in co-investment ventures.
Debt
The following table summarizes information about our consolidated debt by currency (dollars in millions):
| March 31, 2025 | December 31, 2024 | |||||||||||||||||||
| Weighted Average Interest Rate | Amount Outstanding | % of Total | Weighted Average Interest Rate | Amount Outstanding | % of Total | |||||||||||||||
| British pound sterling | 3.1% | $ | 1,772 | 5.5 | % | 3.1% | $ | 1,715 | 5.6 | % | ||||||||||
| Canadian dollar | 4.6% | 1,628 | 5.0 | % | 4.7% | 1,262 | 4.1 | % | ||||||||||||
| Euro | 2.1% | 10,426 | 32.3 | % | 2.1% | 9,900 | 32.1 | % | ||||||||||||
| Japanese yen | 1.2% | 3,058 | 9.5 | % | 1.1% | 2,911 | 9.4 | % | ||||||||||||
| U.S. dollar | 4.1% | 14,744 | 45.7 | % | 4.1% | 14,458 | 46.8 | % | ||||||||||||
| Other | 3.6% | 634 | 2.0 | % | 3.6% | 633 | 2.0 | % | ||||||||||||
| Total debt (1) | 3.1% | $ | 32,262 | 100.0 | % | 3.1% | $ | 30,879 | 100.0 | % |
(1)
The weighted average remaining maturity for total debt outstanding at both March 31, 2025 and December 31, 2024 was 9 years.
Our credit ratings at March 31, 2025, were A and A2 from Standard & Poor's and Moody's, respectively, each with a stable outlook. These ratings allow us to borrow at an advantageous interest rate. Adverse changes in our credit ratings could negatively impact our business and, in particular, our refinancing and other capital market activities, our ability to manage debt maturities, our future growth and our development and acquisition activity. A securities rating is not a recommendation to buy, sell or hold securities and is subject to revision or withdrawal at any time by the rating organization.
At March 31, 2025, we were in compliance with all of our financial debt covenants. These covenants include a number of customary financial covenants, such as maintaining debt service coverage ratios, leverage ratios and fixed charge coverage ratios.
See Note 5 to the Consolidated Financial Statements for further discussion on our debt.
Equity Commitments Related to Certain Co-Investment Ventures
Certain co-investment ventures have equity commitments from us and our venture partners. Our venture partners fulfill their equity commitment with cash. We may fulfill our equity commitment through contributions of properties or cash.
The following table summarizes the remaining equity commitments at March 31, 2025 (dollars in millions):
| Equity Commitments (1) | ||||||||||||||
| Prologis | Venture Partners | Total | Expiration Date | |||||||||||
| Prologis Targeted U.S. Logistics Fund | $ | - | $ | 39 | $ | 39 | 2028 (2) | |||||||
| Prologis Brazil Logistics Venture | 36 | 143 | 179 | 2026 | ||||||||||
| Prologis European Logistics Fund | - | 329 | 329 | 2028 (2) | ||||||||||
| Prologis Japan Core Logistics Fund | 88 | 451 | 539 | 2033 | ||||||||||
| Prologis China Logistics Venture | 71 | 404 | 475 | 2025 – 2028 | ||||||||||
| Total | $ | 195 | $ | 1,366 | $ | 1,561 |
(1)
The equity commitments for the co-investment ventures that operate in a different functional currency than the U.S. dollar were calculated using the foreign currency exchange rate at March 31, 2025.
(2)
Venture partners generally have the option to cancel their equity commitment starting 18 months after the initial commitment date.
See the Cash Flow Summary below for more information about our investment activity in our co-investment ventures.
Cash Flow Summary
The following table summarizes our cash flow activity for the three months ended March 31 (in millions):
| 2025 | 2024 | ||||||
| Net cash provided by (used in) operating activities | $ | 1,161 | $ | 1,055 | |||
| Net cash provided by (used in) investing activities | $ | (1,551 | ) | $ | (1,084 | ) | |
| Net cash provided by (used in) financing activities | $ | (276 | ) | $ | 2 | ||
| Net increase (decrease) in cash and cash equivalents, including the effect of foreign currency exchange rates on cash | $ | (647 | ) | $ | (30 | ) |
Operating Activities
Cash provided by and used in operating activities, exclusive of changes in receivables and payables, was impacted by the following significant activities during the three months ended March 31, 2025 and 2024:
Real Estate Segment. We receive the majority of our operating cash through the net revenues of our Real Estate Segment, including the recovery of our operating costs. Cash flows generated by the Real Estate Segment are impacted by our acquisition, development and disposition activities, which are drivers of NOI recognized during each period. See the Results of Operations section above for further explanation of our Real Estate Segment. The revenues from this segment include noncash adjustments for straight-lined rents and amortization of above and below market leases of $180 million and $159 million in 2025 and 2024, respectively.
Strategic Capital Segment. We also generate operating cash through our Strategic Capital Segment by providing asset management and property management and other services to our unconsolidated co-investment ventures. See the Results of Operations section above for the key drivers of the net revenues from our Strategic Capital Segment. Included in Strategic Capital Revenues in the Consolidated Statements of Income are the promotes we earn from the third-party investors in our co-investment
ventures, which are recognized in operating activities in the period the cash is received, generally the quarter after the revenue is recognized.
G&A expenses and equity-based compensation awards. We incurred $115 million and $111 million of G&A expenses in 2025 and 2024, respectively. We recognized equity-based, noncash compensation expenses of $53 million and $67 million in 2025 and 2024, respectively, which were recorded to Rental Expenses in the Real Estate Segment, Strategic Capital Expenses in the Strategic Capital Segment and G&A Expenses in the Consolidated Statements of Income.
Operating distributions from unconsolidated entities. We received $139 million and $127 million of distributions as a return on our investment from the cash flows generated from the operations of our unconsolidated entities in 2025 and 2024, respectively.
Cash paid for interest, net of amounts capitalized. We paid interest, net of amounts capitalized, of $269 million and $211 million in 2025 and 2024, respectively.
Cash paid for income taxes, net of refunds. We paid income taxes, net of refunds, of $44 million and $58 million in 2025 and 2024, respectively.
Investing Activities
Cash provided by investing activities is driven by proceeds from the sale of real estate assets that include the contribution of properties we developed to our unconsolidated co-investment ventures as well as the sale of non-strategic operating properties. Cash used in investing activities is principally driven by our capital deployment activities of investing in real estate development, acquisitions and capital expenditures as discussed above. This activity includes land for future development, operating properties, other real estate assets and real estate portfolios. See Note 2 to the Consolidated Financial Statements for further information on these activities. In addition, the following significant transactions also impacted our cash used in and provided by investing activities during the three months ended March 31, 2025 and 2024:
Investments in and advances to our unconsolidated entities. We invested cash in our unconsolidated entities of $27 million and $315 million in 2025 and 2024, respectively, representing our proportionate share. The ventures used the funds for the acquisition of properties, development and repayment of debt. See Note 3 to the Consolidated Financial Statements for more detail on our unconsolidated co-investment ventures.
Return of investment from unconsolidated entities. We received distributions from unconsolidated entities as a return of investment of $28 million and $1 million in 2025 and 2024, respectively, representing our proportionate share. Included in these amounts were distributions from venture activities, including proceeds from property sales, debt refinancing and the redemption of our investment in certain unconsolidated entities.
Proceeds from the settlement of net investment hedges. We received proceeds of $5 million and $10 million for the settlement of net investment hedges in 2025 and 2024, respectively. See Note 9 to the Consolidated Financial Statements for further information on our derivative transactions.
Financing Activities
Cash provided by and used in financing activities is principally driven by proceeds from and payments on credit facilities, commercial paper and other debt, along with dividends paid on common and preferred stock and noncontrolling interest contributions and distributions. Our credit facilities and our commercial paper support our cash needs for development and acquisition activities on a short-term basis. The maturities of the borrowings under the credit facilities and the notes under the commercial paper program generally range from overnight to three months.
Our repurchase of and payments on debt and proceeds from the issuance of debt consisted of the following activity for the three months ended March 31 (in millions):
| 2025 | 2024 | |||||||
| Repurchase of and payments on debt (including extinguishment costs) | ||||||||
| Regularly scheduled debt principal payments and payments at maturity | $ | 71 | $ | 325 | ||||
| Secured mortgage debt | - | 89 | ||||||
| Term loans | - | 500 | ||||||
| Total | $ | 71 | $ | 914 | ||||
| Proceeds from the issuance of debt | ||||||||
| Secured mortgage debt | $ | 1 | $ | 5 | ||||
| Senior notes | 518 | 1,853 | ||||||
| Term loans | 1 | - | ||||||
| Total | $ | 520 | $ | 1,858 |
Unconsolidated Co-Investment Venture Debt
We had investments in and advances to our unconsolidated co-investment ventures of $9.5 billion at March 31, 2025. These ventures had total third-party debt of $18.4 billion at March 31, 2025 with a weighted average remaining maturity of 6 years and weighted average interest rate of 3.4%. The weighted average loan-to-value ratio for all unconsolidated co-investment ventures was 30.1% at March 31, 2025 based on gross book value. Loan-to-value, a non-GAAP measure, was calculated as the percentage of total third-party debt to the gross book value of real estate for each venture and weighted based on the cumulative gross book value of all unconsolidated co-investment ventures.
At March 31, 2025, we did not guarantee any third-party debt of the unconsolidated co-investment ventures.
Dividend and Distribution Requirements
Our dividend policy on our common stock is to distribute a percentage of our cash flow to ensure that we will meet the dividend requirements of the Internal Revenue Code ("IRC"), relative to maintaining our REIT status, while still allowing us to retain cash to fund our capital deployment and other investment activities.
Under the IRC, REITs may be subject to certain federal income and excise taxes on undistributed taxable income.
We paid quarterly cash dividends of $1.01 and $0.96 per common share in the first quarter of 2025 and 2024, respectively. Our future common stock dividends, if and as declared, may vary and will be determined by the Board based upon the circumstances prevailing at the time, including our financial condition, operating results and REIT distribution requirements, and may be adjusted at the discretion of the Board during the year.
We make distributions on the common limited partnership units outstanding at the same per unit amount as our common stock dividend. The Class A common limited partnerships units ("Class A Units") in the OP are entitled to a quarterly distribution equal to $0.64665 per unit so long as the common units receive a quarterly distribution of at least $0.40 per unit. We paid a quarterly cash distribution of $0.64665 per Class A Unit in the first quarter of 2025 and 2024.
At March 31, 2025, our Series Q preferred stock had an annual dividend rate of 8.54% per share and the dividends are payable quarterly in arrears.
Pursuant to the terms of our preferred stock, we are restricted from declaring or paying any dividend with respect to our common stock unless and until all cumulative dividends with respect to the preferred stock have been paid and sufficient funds have been set aside for dividends that have been declared for the relevant dividend period with respect to the preferred stock.
Other Commitments
On an ongoing basis, we are engaged in various stages of negotiations for the acquisition or disposition of individual properties or portfolios of properties.
FUNDS FROM OPERATIONS ATTRIBUTABLE TO COMMON STOCKHOLDERS/UNITHOLDERS (“FFO”)
FFO is a non-GAAP financial measure that is commonly used in the real estate industry. The most directly comparable GAAP measure to FFO is net earnings.
The National Association of Real Estate Investment Trusts (“NAREIT”) defines FFO as earnings computed under GAAP to exclude historical cost depreciation and gains and losses from the sales net of any related tax, along with impairment charges, of previously depreciated properties. We also exclude the gains on revaluation of equity investments upon acquisition of a controlling interest and the gain recognized from a partial sale of our investment, as these are similar to gains from the sales of previously depreciated properties. We exclude similar adjustments from our unconsolidated entities and the third parties’ share of our consolidated ventures.
Our FFO Measures
Our FFO measures begin with NAREIT’s definition and we make certain adjustments to reflect our business and the way that management plans and executes our business strategy. While not infrequent or unusual, the additional items we adjust for in calculating FFO, as modified by Prologis and Core FFO, both as defined below, are subject to significant fluctuations from period to period. Although these items may have a material impact on our operations and are reflected in our financial statements, the removal of the effects of these items allows us to better understand the core operating performance of our properties over the long term. These items have both positive and negative short-term effects on our results of operations in inconsistent and unpredictable directions that are not relevant to our long-term outlook.
We calculate our FFO measures, as defined below, based on our proportionate ownership share of both our unconsolidated entities and consolidated ventures. We reflect our share of our FFO measures for unconsolidated entities by applying our average ownership percentage for the period to the applicable adjusting items on an entity-by-entity basis. We reflect our share for consolidated ventures in which we do not own 100% of the equity by adjusting our FFO measures to remove the noncontrolling interests share of the applicable adjusting items based on our average ownership percentage for the applicable periods.
These FFO measures are used by management as supplemental financial measures of operating performance and we believe that it is important that stockholders, potential investors and financial analysts understand the measures management uses. We do not use our FFO measures as, nor should they be considered to be, alternatives to net earnings computed under GAAP, as indicators of our operating performance, as alternatives to cash from operating activities computed under GAAP or as indicators of our ability to fund our cash needs.
We analyze our operating performance principally by the rental revenue of our real estate and the revenues from our strategic capital business, net of operating, administrative and financing expenses. This income stream is not directly impacted by fluctuations in the market value of our investments in real estate or debt securities.
FFO, as modified by Prologis attributable to common stockholders/unitholders (“FFO, as modified by Prologis”)
To arrive at FFO, as modified by Prologis, we adjust the NAREIT defined FFO measure to exclude the impact of foreign currency related items and deferred tax, specifically:
deferred income tax benefits and deferred income tax expenses recognized by our subsidiaries;
current income tax expense related to acquired tax liabilities that were recorded as deferred tax liabilities in an acquisition, to the extent the expense is offset with a deferred income tax benefit in earnings that is excluded from our defined FFO measure; and
foreign currency exchange gains and losses resulting from: (i) debt transactions between us and our foreign entities; (ii) third-party debt that is used to hedge our investment in foreign entities; (iii) derivative financial instruments related to any such debt transactions; and (iv) mark-to-market adjustments associated with derivative and other financial instruments.
We use FFO, as modified by Prologis, so that management, analysts and investors are able to evaluate our performance against other REITs that do not have similar operations or operations in jurisdictions outside the U.S.
Core FFO attributable to common stockholders/unitholders (“Core FFO”)
In addition to FFO, as modified by Prologis, we also use Core FFO. To arrive at Core FFO, we adjust FFO, as modified by Prologis, to exclude the following recurring and nonrecurring items that we recognize directly in FFO, as modified by Prologis:
gains or losses from the disposition of land and development properties that were developed with the intent to contribute or sell;
income tax expense related to the sale of investments in real estate;
impairment charges recognized related to our investments in real estate generally as a result of our change in intent to contribute or sell these properties; and
gains or losses from the early extinguishment of debt and redemption and repurchase of preferred stock.
We use Core FFO, including by segment and region, to: (i) assess our operating performance as compared to other real estate companies; (ii) evaluate our performance and the performance of our properties in comparison with expected results and results of previous periods; (iii) evaluate the performance of our management; (iv) budget and forecast future results to assist in the allocation of resources; (v) provide guidance to the financial markets to understand our expected operating performance; and (vi) evaluate how a specific potential investment will impact our future results.
Limitations on the use of our FFO measures
While we believe our modified FFO measures are important supplemental measures, neither NAREIT’s nor our measures of FFO should be used alone because they exclude significant economic components of net earnings computed under GAAP and are, therefore, limited as an analytical tool. Accordingly, these are only a few of the many measures we use when analyzing our business. Some of the limitations are:
The current income tax expenses that are excluded from our modified FFO measures represent the taxes that are payable.
Depreciation and amortization of real estate assets are economic costs that are excluded from FFO. FFO is limited, as it does not reflect the cash requirements that may be necessary for future replacements of the real estate assets. Furthermore, the amortization of capital expenditures and leasing costs necessary to maintain the operating performance of logistics facilities are not reflected in FFO.
Gains or losses from property dispositions and impairment charges related to expected dispositions represent changes in value of the properties. By excluding these gains and losses, FFO does not capture realized changes in the value of disposed properties arising from changes in market conditions.
The deferred income tax benefits and expenses that are excluded from our modified FFO measures result from the creation of a deferred income tax asset or liability that may have to be settled at some future point. Our modified FFO measures do not currently reflect any income or expense that may result from such settlement.
The foreign currency exchange gains and losses that are excluded from our modified FFO measures are generally recognized based on movements in foreign currency exchange rates through a specific point in time. The ultimate settlement of our foreign currency-denominated net assets is indefinite as to timing and amount. Our FFO measures are limited in that they do not reflect the current period changes in these net assets that result from periodic foreign currency exchange rate movements.
The gains and losses on extinguishment of debt or preferred stock that we exclude from our Core FFO, may provide a benefit or cost to us as we may be settling our obligation at less or more than our future obligation.
We compensate for these limitations by using our FFO measures only in conjunction with net earnings computed under GAAP when making our decisions. This information should be read with our complete Consolidated Financial Statements prepared under GAAP. To assist investors in compensating for these limitations, we reconcile our modified FFO measures to our net earnings computed under GAAP for the three months ended March 31 as follows (in millions):
| 2025 | 2024 | |||||||
| Reconciliation of net earnings attributable to common stockholders to FFO measures: | ||||||||
| Net earnings attributable to common stockholders | $ | 592 | $ | 584 | ||||
| Add (deduct) NAREIT defined adjustments: | ||||||||
| Real estate related depreciation and amortization | 633 | 622 | ||||||
| Gains on other dispositions of investments in real estate, net of taxes (excluding development properties and land) | (36 | ) | (17 | ) | ||||
| Adjustments related to noncontrolling interests | (18 | ) | (16 | ) | ||||
| Our proportionate share of adjustments related to unconsolidated entities | 150 | 119 | ||||||
| NAREIT defined FFO attributable to common stockholders/unitholders | 1,321 | 1,292 | ||||||
| Add (deduct) our modified adjustments: | ||||||||
| Unrealized foreign currency, derivative and other losses (gains), net | 55 | (35 | ) | |||||
| Deferred income tax expense (benefit) | 7 | 1 | ||||||
| Our proportionate share of adjustments related to unconsolidated entities | 1 | - | ||||||
| FFO, as modified by Prologis attributable to common stockholders/unitholders | 1,384 | 1,258 | ||||||
| Adjustments to arrive at Core FFO: | ||||||||
| Gains on dispositions of development properties and land, net | (27 | ) | (40 | ) | ||||
| Current income tax expense on dispositions | - | 5 | ||||||
| Losses (gains) on early extinguishment of debt, net | - | (1 | ) | |||||
| Our proportionate share of adjustments related to unconsolidated entities | (1 | ) | - | |||||
| Core FFO attributable to common stockholders/unitholders | $ | 1,356 | $ | 1,222 |
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