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Prologis Announces Fourth Quarter and Full Year 2012 Earnings Results



    Prologis Announces Fourth Quarter and Full Year 2012 Earnings Results

- Record 40.5 million square feet of leasing in Q4; 145 million in 2012 -

- Occupancy increases to 94.0 percent at year end -

- $1.3 billion in contributions and dispositions in Q4; $2.7 billion in 2012 -

- Ahead of schedule on 10 Quarter Strategic Plan -

PR Newswire

SAN FRANCISCO, Feb. 6, 2013

SAN FRANCISCO, Feb. 6, 2013 /PRNewswire/ -- Prologis, Inc. (NYSE: PLD), the
leading global owner, operator and developer of industrial real estate, today
reported results for the fourth quarter and full year 2012.

Core funds from operations (Core FFO) per fully diluted share was $0.42 for
the fourth quarter 2012 compared to $0.44 for the same period in 2011. Core
FFO per fully diluted share for full year 2012 was $1.74 compared to $1.58 for
full year 2011.

Net loss per fully diluted share was $0.50 for the fourth quarter 2012
compared to a net loss of $0.10 for the same period in 2011. Net loss per
share was $0.18 for the full year 2012 compared to a net loss of $0.51 for the
same period in 2011. The net loss for the quarter and year was principally due
to impairment charges and losses on the early extinguishment of debt which
were partially offset by gains on acquisitions and dispositions of real
estate.

"This marks the first full year as a combined company and Prologis delivered
very strong results," said Hamid Moghadam, chairman and CEO, Prologis. "We are
ahead of schedule on our 10 Quarter Plan and we've built a solid foundation
upon which we will continue to grow the company."

Operating Portfolio Metrics
The company leased a record 40.5 million square feet (3.8 million square
meters) in its combined operating and development portfolios in the fourth
quarter, and 145.3 million square feet (13.5 million square meters) in the
full year 2012. Prologis ended the quarter with 94.0 percent occupancy in its
operating portfolio, up 90 basis points over the prior quarter and 180 basis
points over year end 2011. Tenant retention in the quarter was 87.3 percent,
with tenant renewals totaling 25.1 million square feet (2.3 million square
meters).

"Our team did an exceptional job setting another quarterly record for leasing
around the globe," said Moghadam. "Increasing demand and lack of supply remain
the theme in most markets, and we expect our overall rent change on rollover
to turn positive this year. In the United States, in particular, occupancy in
our small spaces increased 280 basis points year over year, and we expect this
trend will continue given improvements in the housing market."

Same-store net operating income (NOI) increased 0.1 percent in the fourth
quarter and 1.3 percent in the full year 2012. Rental rates on leases signed
in the fourth quarter same-store pool decreased by 2.4 percent from in-place
rents.

Dispositions and Contributions
Prologis completed $1.3 billion in contributions and dispositions in the
fourth quarter, of which more than $1.0 billion was Prologis' share. This
includes approximately:

  o $878 million of third-party building and land dispositions primarily in
    the United States and Europe, of which $700 million was the company's
    share; and
  o $401 million of contributions to Prologis European Properties Fund II,
    Prologis Europe Logistics Venture, Prologis Targeted Europe Logistics
    Fund, and joint ventures in Brazil, of which $325 million was the
    company's share.

In the full year 2012, contributions and dispositions totaled $2.7 billion, of
which more than $2.1 billion was the company's share.

Additionally, the company has approximately $5 billion of operating portfolio
assets in Japan and Europe scheduled for contribution in the first quarter of
2013, in connection with Nippon Prologis REIT (NPR) and Prologis European
Logistics Partners Sàrl (PELP), subject to the listing of NPR and customary
closing conditions. The combination of these transactions, in conjunction with
fourth quarter activity, positions the company ahead of its 10 Quarter Plan.

"We continue to make excellent progress executing on our priority to realign
our portfolio," said Thomas Olinger, chief financial officer, Prologis. "These
dispositions and contributions reflect the diversity of our activities as well
as the market's demand for high quality industrial real estate."

Development Starts and Building Acquisitions
Committed capital during the fourth quarter 2012 totaled approximately $1.2
billion, of which $909 million was Prologis' share, including:

  o Development starts of $727 million, of which $613 million was Prologis'
    share. These starts totaled 7.3 million square feet (675,000 square
    meters), and monetized $190 million of land. The company's estimated share
    of value creation on development starts in the fourth quarter was $71
    million.
  o Acquisitions of $458 million, including $276 million in buildings with a
    stabilized capitalization rate of 7.4 percent and an investment of $182
    million in land and land infrastructure. Of the total acquisitions, $295
    million was Prologis' share.

Capital committed during the year totaled approximately $2.5 billion, of which
$2.0 billion was the company's share. This included development starts of $1.6
billion, of which 57 percent were build-to-suits, and acquisitions of $983
million, including $544 million in buildings with a stabilized capitalization
rate of 7.3 percent and an investment of $439 million in land and land
infrastructure.

At quarter end, Prologis' global development pipeline comprised 22.5 million
square feet (2.1 million square meters), with a total expected investment of
$2.1 billion, of which Prologis' share was $1.9 billion. The company's share
of estimated value creation at stabilization is expected to be $354 million,
with a weighted average stabilized yield of 7.8 percent and a margin of
approximately 19 percent.

Private Capital Activity
In 2012, Prologis raised or received commitments for $1.9 billion in new,
third-party equity. This was primarily due to PELP, and also included Prologis
Targeted U.S. Logistics Fund and Prologis Targeted Europe Logistics Fund.

The company continued streamlining its co-investment ventures into fewer, more
profitable and differentiated investment vehicles, rationalizing six funds in
2012.

In the fourth quarter, Prologis concluded the Prologis North American Fund I.
Two of the fund's assets were sold to third parties with the remaining
portfolio divided up between the partners, of which Prologis' share was $117
million.

Capital Markets
Prologis completed approximately $1.1 billion of capital markets activity in
the fourth quarter and $4.8 billion for the full year 2012. This includes debt
financings, re-financings, and pay-downs.

Subsequent to quarter end, the company paid off $141 million of its 1.875
percent convertible notes and repaid $319 million of secured debt.

Guidance for 2013
Prologis established a full-year 2013 Core FFO guidance range of $1.60 to
$1.70 per diluted share. On a GAAP basis, the company expects to recognize a
range of a net loss of ($0.07) per share to net earnings of $0.03 per share.
From a fourth quarter run rate perspective, this slight decline from 2012 is
primarily due to near-term dilution from disposition and contribution
activities, which are expected to significantly deleverage the company by the
end of the first quarter.

The Core FFO and earnings guidance reflected above excludes any potential
future gains (losses) recognized from real estate transactions. In reconciling
from net earnings to Core FFO, Prologis makes certain adjustments, including
but not limited to real estate depreciation and amortization expense,
impairment charges, deferred taxes, early extinguishment of debt, and
unrealized gains or losses on foreign currency or derivative activity.

The difference between the company's Core FFO and net earnings guidance for
2013 predominantly relates to real estate depreciation and recognized gains on
real estate transactions.

The principal drivers supporting Prologis' 2013 guidance include the
following:

  o Year end occupancy in its operating portfolio between 94 to 95 percent
    (consistent with historical seasonal trends, the company expects occupancy
    to decrease in the first quarter and trend higher through the remainder of
    the year);
  o Same-store NOI growth of 1.5 to 2.5 percent, excluding the impact of
    foreign exchange movements;
  o Development starts of $1.5 to $1.8 billion, of which approximately 75
    percent is expected to be the company's share;
  o Building acquisitions of $400 to $600 million, of which approximately 35
    percent is expected to be the company's share;
  o Building and land dispositions and contributions of $7.5 to $10.0 billion,
    of which approximately 60 percent is expected to be the company's share;
    and
  o A euro exchange rate of $1.35; and a yen exchange rate of JPY 92 per U.S.
    dollar.

Webcast and Conference Call Information
The company will host a webcast /conference call to discuss quarterly results,
current market conditions and future outlook today, Feb. 6, 2013, at 12:00
p.m. U.S. Eastern Time. Interested parties are encouraged to access the live
webcast by clicking the microphone icon located near the top of the opening
page of the Prologis Investor Relations website (http://ir.prologis.com).
Interested parties also can participate via conference call by dialing  +1
877-256-7020 (from the U.S. and Canada toll free) or +1 973-409-9692 (from all
other countries) and enter conference code 86463676

A telephonic replay will be available from Feb. 6 through March 6 at +1
855-859-2056 (from the U.S. and Canada) or +1 404-537-3406 (from all other
countries), with conference code 86463676. The webcast and podcast replay will
be posted when available in the "Financial Information" section of Investor
Relations on the Prologis website.

About Prologis
Prologis, Inc., is the leading owner, operator and developer of industrial
real estate, focused on global and regional markets across the Americas,
Europe and Asia. As of Dec. 31, 2012, Prologis owned or had investments in, on
a consolidated basis or through unconsolidated joint ventures, properties and
development projects expected to total approximately 554 million square feet
(51.5 million square meters) in 21 countries. The company leases modern
distribution facilities to more than 4,500 customers, including manufacturers,
retailers, transportation companies, third-party logistics providers and other
enterprises.

The statements in this release  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 Prologis operates, management's beliefs and assumptions made by
management. Such statements involve uncertainties that could significantly
impact Prologis' financial results. Words such as "expects," "anticipates,"
"intends," "plans," "believes," "seeks," "estimates," 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, development activity and changes in sales or
contribution volume of developed properties, disposition activity, general
conditions in the geographic areas where we operate, synergies to be realized
from our recent merger transaction, our debt and financial position, our
ability to form new property funds and the availability of capital in existing
or new property funds — 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) national, international, regional and local economic climates, (ii)
changes in 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, (v) maintenance of real estate investment trust ("REIT") status
and tax structuring, (vi) availability of financing and capital, the levels of
debt that we maintain and our credit ratings, (vii) risks related to our
investments in our co-investment ventures and funds, including our ability to
establish new co-investment ventures and funds, (viii) risks of doing business
internationally, including currency risks, (ix) environmental uncertainties,
including risks of natural disasters, and (x) those additional factors
discussed in reports filed with the Securities and Exchange Commission by
Prologis under the heading "Risk Factors." Prologis undertakes no duty to
update any forward-looking statements appearing in this release

                             Three months ended           Year ended December
                             December 31,                 31,
(dollars in thousands,       2012            2011         2012       2011 (A)
except per share data)
   Revenues                  $    517,557    $            $          $
                                              456,777     2,005,961  1,451,327
   Net loss available for    (228,713)       (45,459)     (80,946)   (188,110)
   common stockholders
   FFO, as defined by        (88,199)        134,147      552,435    411,688
   Prologis
   Core FFO                  195,816         203,945      813,863    593,917
   AFFO                      110,786         147,934      563,180    431,450
   Adjusted EBITDA           376,940         386,965      1,516,263  1,514,150
   Per common share -
   diluted:
       Net loss available    $               $            $          $        
       for common            (0.50)          (0.10)        (0.18)    (0.51)
       stockholders
       FFO, as defined by    (0.19)          0.29         1.19       1.10
       Prologis
       Core FFO              0.42            0.44         1.74       1.58
(A)AMB and Prologis completed a merger (the "Merger") in June 2011.
The financial results presented throughout this supplemental
include Prologis for the full period and AMB results from the date
of the Merger going forward. 

                                   December 31,   September 30,  December 31,
                                   2012           2012           2011
Assets:
 Investments in real estate
 assets:
  Operating properties             $ 22,608,248   $ 23,304,246   $ 21,552,548
  Development portfolio              951,643        774,821        860,531
  Land                               1,794,364      1,924,626      1,984,233
  Other real estate investments      454,868        457,373        390,225
                                     25,809,123     26,461,066     24,787,537
  Less accumulated depreciation      2,480,660      2,389,214      2,157,907
        Net investments in           23,328,463     24,071,852     22,629,630
        properties
 Investments in and advances to      2,195,782      2,242,075      2,857,755
 unconsolidated entities
 Notes receivable backed by real     188,000        243,979        322,834
 estate
 Assets held for sale                26,027         376,642        444,850
        Net investments in real      25,738,272     26,934,548     26,255,069
        estate
 Cash and cash equivalents           100,810        158,188        176,072
 Restricted cash                     176,926        172,515        71,992
 Accounts receivable                 171,084        181,855        147,999
 Other assets                        1,123,053      1,129,316      1,072,780
        Total assets               $ 27,310,145   $ 28,576,422   $ 27,723,912
Liabilities and Equity:
 Liabilities:
  Debt                             $ 11,790,794   $ 12,578,060   $ 11,382,408
  Accounts payable, accrued          1,746,015      1,823,841      1,886,030
  expenses, and other liabilities
        Total liabilities            13,536,809     14,401,901     13,268,438
 Equity:
  Stockholders' equity:
      Preferred stock                582,200        582,200        582,200
      Common stock                   4,618          4,609          4,594
      Additional paid-in capital     16,411,855     16,395,797     16,349,328
      Accumulated other              (233,563)      (165,100)      (182,321)
      comprehensive loss
      Distributions in excess of     (3,696,093)    (3,335,757)    (3,092,162)
      net earnings
        Total stockholders' equity   13,069,017     13,481,749     13,661,639
  Noncontrolling interests           653,125        639,631        735,222
  Noncontrolling interests -         51,194         53,141         58,613
  limited partnership unitholders
        Total equity                 13,773,336     14,174,521     14,455,474
        Total liabilities and      $ 27,310,145   $ 28,576,422   $ 27,723,912
        equity

                              Three Months Ended       Twelve Months Ended
                              December 31,             December 31,
                              2012        2011         2012        2011 (A)
Revenues:
 Rental income                $ 481,743   $ 415,226    $ 1,869,224 $ 1,294,872
 Private capital revenue        31,715      40,230       126,779     137,619
 Development management and     4,099       1,321        9,958       18,836
 other income
       Total revenues           517,557     456,777      2,005,961   1,451,327
Expenses:
 Rental expenses                131,696     110,169      505,499     358,559
 Private capital expenses       16,134      15,734       63,820      54,962
 General and administrative     60,608      50,797       228,068     195,161
 expenses
 Merger, acquisition and        28,103      18,772       80,676      140,495
 other integration expenses
 Impairment of real estate      243,138     21,237       252,914     21,237
 properties
 Depreciation and               187,770     180,628      739,981     552,849
 amortization
 Other expenses                 9,414       9,789        26,556      24,031
      Total expenses            676,863     407,126      1,897,514   1,347,294
Operating income (loss)         (159,306)   49,651       108,447     104,033
Other income (expense):
 Earnings from unconsolidated   10,414      904          25,703      49,326
 co-investment ventures, net
 Earnings from other
 unconsolidated joint           815         3,016        5,973       10,609
 ventures, net
 Interest income                5,107       5,780        22,299      19,843
 Interest expense               (123,623)   (129,055)    (507,484)   (468,072)
 Impairment of other assets     -           (22,609)     (16,135)    (126,432)
 Gain (loss) on acquisitions
 and dispositions of            24,639      (2,966)      305,607     111,684
 investments in real estate,
 net
 Foreign currency and
 derivative gains (losses)      (2,567)     (3,584)      (19,918)    33,337
 and other income (expenses),
 net
 Gain (loss) on early           (19,033)    556          (14,114)    258
 extinguishment of debt, net
      Total other income        (104,248)   (147,958)    (198,069)   (369,447)
      (expense)
Loss before income taxes        (263,554)   (98,307)     (89,622)    (265,414)
 Income tax expense (benefit)   3,364       (8,184)      3,580       1,776
 - current and deferred
Loss from continuing            (266,918)   (90,123)     (93,202)    (267,190)
operations
Discontinued operations:
 Income attributable to
 disposed properties and        2,958       13,039       27,632      50,638
 assets held for sale
 Net gain on dispositions,
 including related impairment   48,620      37,069       35,098      58,614
 charges and taxes
      Total discontinued        51,578      50,108       62,730      109,252
      operations
Consolidated net loss           (215,340)   (40,015)     (30,472)    (157,938)
Net loss (earnings)
attributable to                 (3,068)     4,832        (9,248)     4,524
noncontrolling interests
Net loss attributable to        (218,408)   (35,183)     (39,720)    (153,414)
controlling interests
Less preferred stock            10,305      10,276       41,226      34,696
dividends
Net loss available for common $ (228,713) $ (45,459)   $ (80,946)  $ (188,110)
stockholders
Weighted average common
shares outstanding - Diluted    460,447     458,383      459,895     370,534
(B)
Net loss per share available
for common stockholders -     $ (0.50)    $ (0.10)     $ (0.18)    $ (0.51)
Diluted

                               Three Months Ended      Twelve Months Ended
                               December 31,            December 31,
                               2012        2011        2012        2011 (A)
Reconciliation of net loss to
FFO
Net loss available for common  $ (228,713) $ (45,459)  $ (80,946)  $ (188,110)
stockholders
    Add (deduct) NAREIT
    defined adjustments:
        Real estate related
        depreciation and         182,134     175,754     721,436     533,854
        amortization
        Impairment charges on
        certain real estate      13,141      5,300       34,801      5,300
        properties
        Net gain on non-FFO
        dispositions and         (65,866)    (20,265)    (222,752)   (7,338)
        acquisitions
        Reconciling items
        related to               (5,592)     (8,199)     (27,680)    (19,889)
        noncontrolling
        interests
        Our share of
        reconciling items
        included in earnings     23,032      43,879      127,323     147,608
        from unconsolidated
        entities
Subtotal-NAREIT defined FFO      (81,864)    151,010     552,182     471,425
    Add (deduct) our defined
    adjustments:
        Unrealized foreign
        currency and             (666)       6,002       14,892      (39,034)
        derivative losses
        (gains), net
        Deferred income tax      (2,162)     (22,558)    (8,804)     (19,803)
        benefit
        Our share of
        reconciling items
        included in earnings     (3,507)     (307)       (5,835)     (900)
        from unconsolidated
        entities
FFO, as defined by Prologis      (88,199)    134,147     552,435     411,688
Adjustments to arrive at Core
FFO, including our share of
unconsolidated entities:
    Impairment charges           229,997     38,546      264,844     145,028
    Japan disaster expenses      -           -           -           5,210
    Merger, acquisition and      28,103      18,772      80,676      140,495
    other integration expenses
    Loss (gain) on
    acquisitions and
    dispositions of              (5,835)     2,538       (121,303)   (117,800)
    investments in real
    estate, net
    Loss (gain) on early
    extinguishment of debt,      19,033      (556)       14,114      (258)
    net
    Income tax expense on        -           5,415       -           7,331
    dispositions
    Our share of reconciling
    items included in earnings   12,717      5,083       23,097      2,223
    from unconsolidated
    entities
        Adjustments to arrive    284,015     69,798      261,428     182,229
        at Core FFO
Core FFO                       $ 195,816   $ 203,945   $ 813,863   $ 593,917
Adjustments to arrive at
Adjusted FFO ("AFFO"),
including our share of
unconsolidated entities:
    Straight-lined rents and
    amortization of lease        (5,543)     (8,678)     (27,753)    (42,287)
    intangibles
    Property improvements        (36,037)    (21,473)    (90,144)    (64,918)
    Tenant improvements          (26,970)    (19,558)    (95,566)    (60,975)
    Leasing commissions          (19,481)    (15,739)    (56,629)    (44,905)
    Amortization of management   1,805       1,925       6,419       6,749
    contracts
    Amortization of debt
    discounts/(premiums) and     (6,877)     (2,344)     (19,688)    12,387
    financing costs, net of
    capitalization
    Stock compensation expense   8,073       9,856       32,678      31,482
AFFO                           $ 110,786   $ 147,934   $ 563,180   $ 431,450
Common stock dividends         $ 131,624   $ 130,573   $ 522,986   $ 388,333

Calculation of Per Share Amounts is as follows  (in thousands, except per
share amounts):

                                Three Months Ended      Twelve Months Ended
                                December 31,            December 31,
                                2012        2011        2012       2011
Net loss
Net loss                        $ (228,713) $ (45,459)  $ (80,946) $ (188,110)
Weighted average common shares
outstanding - Basic and Diluted 460,447     458,383     459,895    370,534
(a)
Net loss per share - Basic and  $ (0.50)    $ (0.10)    $ (0.18)   $ (0.51)
Diluted
FFO, as defined by Prologis
FFO, as defined by Prologis     $ (88,199)  $ 134,147   $ 552,435  $ 411,688
Noncontrolling interest
attributable to exchangeable    -           108         227        289
limited partnership units
FFO - Diluted, as defined by    $ (88,199)  $ 134,255   $ 552,662  $ 411,977
Prologis
Weighted average common shares  460,447     458,383     459,895    370,534
outstanding - Basic (a)
Incremental weighted average
effect of exchange of limited   -           3,361       3,238      2,095
partnership units
Incremental weighted average    -           1,258       2,173      1,452
effect of stock awards
Weighted average common shares  460,447     463,002     465,306    374,081
outstanding - Diluted (a)
FFO per share - Diluted, as     $ (0.19)    $ 0.29      $ 1.19     $ 1.10
defined by Prologis
Core FFO
Core FFO                        $ 195,816   $ 203,945   $ 813,863  $ 593,917
Noncontrolling interest
attributable to exchangeable    (708)       108         227        289
limited partnership units
Interest expense on convertible 4,235       4,165       16,896     16,824
debt assumed converted
Core FFO - Diluted              $ 199,343   $ 208,218   $ 830,986  $ 611,030
Weighted average common shares  460,447     458,383     459,895    370,534
outstanding - Basic
Incremental weighted average
effect of exchange of limited   3,171       3,361       3,238      2,095
partnership units
Incremental weighted average    2,195       1,258       2,173      1,452
effect of stock awards
Incremental weighted average
effect of exchange of certain   11,879      11,879      11,879     11,879
exchangeable debt
Weighted average common shares  477,692     474,881     477,185    385,960
outstanding - Diluted
Core FFO per share - Diluted    $ 0.42      $ 0.44      $ 1.74     $ 1.58

(a)   In periods with a net loss, the inclusion of any incremental shares is
anti-dilutive, and therefore, both basic and diluted shares are the same.

FFO, as defined by Prologis; Core FFO; AFFO (collectively referred to as
"FFO"). FFO is a non-GAAP measure that is commonly used in the real estate
industry. The most directly comparable GAAP measure to FFO is net earnings.
Although the National Association of Real Estate Investment Trusts ("NAREIT")
has published a definition of FFO, modifications to the NAREIT calculation of
FFO are common among REITs, as companies seek to provide financial measures
that meaningfully reflect their business.

FFO is not meant to represent a comprehensive system of financial reporting
and does not present, nor do we intend it to present, a complete picture of
our financial condition and operating performance. We believe net earnings
computed under GAAP remains the primary measure of performance and that FFO is
only meaningful when it is used in conjunction with net earnings computed
under GAAP. Further, we believe our consolidated financial statements,
prepared in accordance with GAAP, provide the most meaningful picture of our
financial condition and our operating performance.

NAREIT's FFO measure adjusts net earnings computed under GAAP to exclude
historical cost depreciation and gains and losses from the sales, along with
impairment charges, of previously depreciated properties. We agree that these
NAREIT adjustments are useful to investors for the following reasons:

      historical cost accounting for real estate assets in accordance with
      GAAP assumes, through depreciation charges, that the value of real
      estate assets diminishes predictably over time. NAREIT stated in its
      White Paper on FFO "since real estate asset values have historically
      risen or fallen with market conditions, many industry investors have
(i)   considered presentations of operating results for real estate companies
      that use historical cost accounting to be insufficient by themselves."
      Consequently, NAREIT's definition of FFO reflects the fact that real
      estate, as an asset class, generally appreciates over time and
      depreciation charges required by GAAP do not reflect the underlying
      economic realities.
      REITs were created as a legal form of organization in order to encourage
      public ownership of real estate as an asset class through investment in
      firms that were in the business of long-term ownership and management of
      real estate. The exclusion, in NAREIT's definition of FFO, of gains and
      losses from the sales, along with impairment charges, of previously
      depreciated operating real estate assets allows investors and analysts
(ii)  to readily identify the operating results of the long-term assets that
      form the core of a REIT's activity and assists in comparing those
      operating results between periods. We include the gains and losses from
      dispositions and impairment charges of land and development properties,
      as well as our proportionate share of the gains and losses from
      dispositions and impairment charges recognized by our unconsolidated
      entities, in our definition of FFO.

Our FFO Measures

At the same time that NAREIT created and defined its FFO measure for the REIT
industry, it also recognized that "management of each of its member companies
has the responsibility and authority to publish financial information that it
regards as useful to the financial community." We believe stockholders,
potential investors and financial analysts who review our operating results
are best served by a defined FFO measure that includes other adjustments to
net earnings computed under GAAP in addition to those included in the NAREIT
defined measure of FFO.  Our FFO measures are used by management in analyzing
our business and the performance of our properties and we believe that it is
important that stockholders, potential investors and financial analysts
understand the measures management uses.

We use these FFO measures, including by segment and region, to: (i) evaluate
our performance and the performance of our properties in comparison to
expected results and results of previous periods, relative to resource
allocation decisions; (ii) evaluate the performance of our management; (iii)
budget and forecast future results to assist in the allocation of resources;
(iv) assess our performance as compared to similar real estate companies and
the industry in general; and (v) evaluate how a specific potential investment
will impact our future results. Because we make decisions with regard to our
performance with a long-term outlook, we believe it is appropriate to remove
the effects of short-term items that we do not expect to affect the underlying
long-term performance of the properties. The long-term performance of our
properties is principally driven by rental income. While not infrequent or
unusual, these additional items we exclude in calculating FFO, as defined by
Prologis, are subject to significant fluctuations from period to period that
cause 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 use our FFO measures as supplemental financial measures of operating
performance. 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.

FFO, as defined by Prologis

To arrive at FFO, as defined by Prologis, we adjust the NAREIT defined FFO
measure to exclude:

(i)   deferred income tax benefits and deferred income tax expenses recognized
      by our subsidiaries;
      current income tax expense related to acquired tax liabilities that were
(ii)  recorded as deferred tax liabilities in an acquisition, to the extent
      the expense is offset with a deferred income tax benefit in GAAP
      earnings that is excluded from our defined FFO measure;
      foreign currency exchange gains and losses resulting from debt
(iii) transactions between us and our foreign consolidated subsidiaries and
      our foreign unconsolidated entities;
      foreign currency exchange gains and losses from the remeasurement (based
(iv)  on current foreign currency exchange rates) of certain third party debt
      of our foreign consolidated subsidiaries and our foreign unconsolidated
      entities; and 
(v)   mark-to-market adjustments associated with derivative financial
      instruments.

We calculate FFO, as defined by Prologis for our unconsolidated entities on
the same basis as we calculate our FFO, as defined by Prologis.

We believe investors are best served if the information that is made available
to them allows them to align their analysis and evaluation of our operating
results along the same lines that our management uses in planning and
executing our business strategy.

Core FFO

In addition to FFO, as defined by Prologis, we also use Core FFO.  To arrive
at Core FFO, we adjust FFO, as defined by Prologis, to exclude the following
recurring and non-recurring items that we recognized directly or our share
recognized by our unconsolidated entities to the extent they are included in
FFO, as defined by Prologis:

(i)   gains or losses from acquisition, contribution or sale of land or
      development properties;
(ii)  income tax expense related to the sale of investments in real estate;
      impairment charges recognized related to our investments in  real estate
(iii) (either directly or through our investments in unconsolidated entities)
      generally as a result of our change in intent to contribute or sell
      these properties;
(iv)  impairment charges of goodwill and other assets;
(v)   gains or losses from the early extinguishment of debt;
(vi)  merger, acquisition and other integration expenses; and
(vii) expenses related to natural disasters.

We believe it is appropriate to further adjust our FFO, as defined by Prologis
for certain recurring items as they were driven by transactional activity and
factors relating to the financial and real estate markets,  rather than
factors specific to the on-going operating performance of our properties or
investments. The impairment charges we recognized were primarily based on
valuations of real estate, which had declined due to market conditions, that
we no longer expected to hold for long-term investment. We currently have and
have had over the past several years a stated priority to strengthen our
financial position. We expect to accomplish this by reducing our debt, our
investment in certain low yielding assets, such as land that we decide not to
develop and our exposure to foreign currency exchange fluctuations. As a
result, we have sold to third parties or contributed to unconsolidated
entities real estate properties that, depending on market conditions, might
result in a gain or loss. The impairment charges related to goodwill and other
assets that we have recognized were similarly caused by the decline in the
real estate markets. Also in connection with our stated priority to reduce
debt and extend debt maturities, we have purchased portions of our debt
securities. As a result, we recognized net gains or losses on the early
extinguishment of certain debt due to the financial market conditions at that
time.

We have also adjusted for some non-recurring items. The merger, acquisition
and other integration expenses include costs we incurred in 2011 and 2012
associated with the Merger and PEPR Acquisition and the integration of our
systems and processes. We have not adjusted for the acquisition costs that we
have incurred as a result of routine acquisitions but only the costs
associated with significant business combinations that we would expect to be
infrequent in nature. Similarly, the expenses related to the natural disaster
in Japan that we recognized in 2011 are a rare occurrence but we may incur
similar expenses again in the future.

We analyze our operating performance primarily by the rental income of our
real estate and the revenue driven by our private 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.  As a result, although these items have had 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.

We use Core FFO, including by segment and region, to: (i) evaluate our
performance and the performance of our properties in comparison to expected
results and results of previous periods, relative to resource allocation
decisions; (ii) evaluate the performance of our management; (iii) budget and
forecast future results to assist in the allocation of resources; (iv) provide
guidance to the financial markets to understand our expected operating
performance; (v) assess our operating performance as compared  to similar real
estate companies and the industry in general; and (vi) evaluate how a specific
potential investment will impact our future results. Because we make decisions
with regard to our performance with a long-term outlook, we believe it is
appropriate to remove the effects of items that we do not expect to affect the
underlying long-term performance of the properties we own. As noted above, we
believe the long-term performance of our properties is principally driven by
rental income. We believe investors are best served if the information that is
made available to them allows them to align their analysis and evaluation of
our operating results along the same lines that our management uses in
planning and executing our business strategy. 

AFFO

To arrive at AFFO, we adjust Core FFO  to further exclude; (i) straight-line
rents; (ii) amortization of above- and below-market lease intangibles; (iii)
recurring capital expenditures; (iv) amortization of management contracts; (v)
amortization of debt premiums and discounts, net of amounts capitalized, and;
(vi) stock compensation expense.

We believe AFFO provides a meaningful indicator of our ability to fund cash
needs, including cash distributions to our stockholders.

Limitations on Use of our FFO Measures

While we believe our defined 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, they are two
of many measures we use when analyzing our business.  Some of these
limitations are:

  o The current income tax expenses that are excluded from our defined FFO
    measures represent the taxes that are payable.
  o 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. Further, the amortization of capital expenditures and
    leasing costs necessary to maintain the operating performance of
    industrial properties are not reflected in FFO.
  o Gains or losses from property acquisitions and dispositions or impairment
    charges related to expected dispositions represent changes in the value of
    the properties. By excluding these gains and losses, FFO does not capture
    realized changes in the value of acquired or disposed properties arising
    from changes in market conditions.
  o The deferred income tax benefits and expenses that are excluded from our
    defined 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
    defined FFO measures do not currently reflect any income or expense that
    may result from such settlement.
  o The foreign currency exchange gains and losses that are excluded from our
    defined 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. 
  o The impairment charges of goodwill and other assets that we exclude from
    Core FFO, have been or may be realized as a loss in the future upon the
    ultimate disposition of the related investments or other assets through
    the form of lower cash proceeds. 
  o The gains and losses on extinguishment of debt that we exclude from our
    Core FFO, may provide a benefit or cost to us as we may be settling our
    debt at less or more than our future obligation.
  o The Merger, acquisition and other integration expenses and the natural
    disaster expenses that we exclude from Core FFO are costs that we have
    incurred.

We compensate for these limitations by using our FFO measures only in
conjunction with net earnings computed under GAAP when making our decisions.
To assist investors in compensating for these limitations, we reconcile our
defined FFO measures to our net earnings computed under GAAP. This information
should be read with our complete financial statements prepared under GAAP.

SOURCE Prologis, Inc.

Website: http://www.prologis.com
Contact: Tracy Ward, +1-415-733-9565, tward@prologis.com, San Francisco, Atle
Erlingsson, Tel: +1-415-733-9495, aerlingsson@prologis.com, San Francisco
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