PR Newswire | Jan 26, 2021 08:03AM EST

01/26 07:00 CST

Prologis Reports Fourth Quarter and Full Year 2020 Earnings Results SAN FRANCISCO, Jan. 26, 2021

SAN FRANCISCO, Jan. 26, 2021 /PRNewswire/ -- Prologis, Inc. (NYSE: PLD), the global leader in logistics real estate, reported results for the fourth quarter of 2020.

Net earnings per diluted share was $0.38 for the quarter and $2.01 for the year compared with $0.61 and $2.46 for the same periods in 2019. The decline in 2020 was due to lower gains on dispositions and higher costs from early extinguishment of debt.

Core funds from operations (Core FFO)* per diluted share was $0.95 for the quarter, compared with $0.84 for the same period in 2019. For the full year 2020, Core FFO per diluted share was $3.80 compared with $3.31 for the same period in 2019. Core FFO for full-year periods 2020 and 2019 included net promote income per diluted share of $0.22 and $0.18, respectively.

"The work we have done to create the best-in-class portfolio and the most efficient cost structure in the industry is delivering exceptional financial results," said Hamid R. Moghadam, chairman and CEO, Prologis. "The pandemic has pushed global supply chains to their limits. Increased e-commerce adoption and the rebuilding of inventories to meet consumer demand are structural forces in the logistics environment that will take years to play out."

Moghadam added, "The Prologis platform provides us with the ability to create value for our customers beyond our real estate from our unmatched purchasing power and significant investments in technology, innovation and data."

OPERATING PERFORMANCE

Owned & Managed 4Q20 Notes

Average Occupancy 95.8% Up 50bps from Q3 2020

Leases Commenced 45.0 36.6 MSF operating portfolio and 8.4 MSF MSF development portfolio

Retention 78.4% Up 560bps from Q3 2020

Prologis Share 4Q20 Notes

Net Effective Rent 28.0% Led by U.S. at 32.1%, a 2020 high watermarkChange

Cash Rent Change 13.4%

Cash Same Store NOI* 3.0% Led by U.S. at 3.5%

DEPLOYMENT ACTIVITY

Prologis Share 4Q20 FY2020

Building Acquisitions $397M $912M

Weighted avg stabilized cap rate 4.1% 4.2%

Development Stabilizations $919M $2,493M

Estimated weighted avg yield 6.0% 6.3%

Estimated weighted avg margin 32.7% 37.8%

Estimated value creation $301M $942M

Development Starts $1,352M$2,112M

Estimated weighted avg margin 22.6% 24.9%

Estimated value creation $289M $507M

% Build-to-suit 28.3% 39.9%

Total Dispositions and Contributions $815M $2,435M

Weighted avg stabilized cap rate (excluding land and 5.0% 5.0% other real estate)

BALANCE SHEET & LIQUIDITYDuring 2020, Prologis and its co-investment ventures issued $10.4 billion of debt at a weighted average interest rate of 1.8 percent and a weighted average term of approximately 12 years. This activity includes $6.3 billion in bond raises, including $2.2 billion in green bonds issued at a weighted average rate of 1.1 percent.

Debt as a percentage of total market capitalization was 20.0 percent and the company's weighted average rate on its share of total debt was 2.0 percent with a weighted average remaining term of 9.7 years. At December 31, the company's unconsolidated co-investment ventures had liquidity of approximately $3.0 billion and a loan-to-value ratio of approximately 19 percent. The combined investment capacity of Prologis and its open-ended vehicles, at levels in line with their current credit ratings, is over $13 billion.

2021 GUIDANCE"Year-over-year growth at the midpoint, excluding promotes, is forecasted to be more than 10 percent. Promote revenue will be negligible in 2021, and we expect to recognize two cents of net promote expense related to the amortization of costs from prior period promotes," said Thomas S. Olinger, chief financial officer, Prologis. "We expect to generate over $1.0 billion in free cash flow after dividends and maintain a low dividend AFFO payout ratio in the mid-60 percent range."

Olinger added, "Since the ProLogis/AMB merger, our earnings CAGR of 9.5 percent has outperformed other logistics REITs1 by more than 350 basis points annually. This is the result of the work we have done over the last 10 years building the premier portfolio that is critical to today's supply chain and centered squarely on our customers."

2021 GUIDANCE^2

Earnings (per diluted share)

Net Earnings $2.36 to $2.52

Core FFO* $3.88 to $3.98

Core FFO, excluding net promote expense*^3 $3.90 to $4.00

Operations

Average occupancy 95.50% to 96.50%

Cash Same Store NOI* - PLD share 3.50% to 4.50%

Strategic Capital (in millions)

Strategic capital revenue, excl promote revenue $435 to $450

Net promote income (expense)^3 ($16)

G&A (in millions)

General & administrative expenses $290 to $300

Prologis OwnedCapital Deployment (in millions) Share and Managed

$1,900 to $2,500Development stabilizations $2,100 to $2,800

$2,300 to $2,700Development starts $2,700 to $3,100

$400 to $1,000Building acquisitions $800 to $2,000

$1,400 to $1,800Building contributions $1,700 to $2,200

$1,000 to $1,400Building and land dispositions $1,400 to $2,000

($300) to ($500)Net proceeds (Uses) ($400) to ($900)

Realized development gains - PLD share $500 to $600

1. Other logistics REITs include DRE, EGP, FR, REXR, STAG, TRNO.

2. At the midpoint, this includes approximately 30 basis points of bad debt expense.

We are further adjusting Core FFO to exclude $0.02 of net promote expense.3. The expense relates to amortization of stock compensation issued to employees related to promote income recognized in prior periods.

This is a non-GAAP financial measure. See the Notes and Definitions in our* supplemental information for further explanation and a reconciliation to the most directly comparable GAAP measure.

The earnings guidance described above includes potential gains recognized from real estate transactions but excludes any future or potential foreign currency or derivative gains or losses as our guidance assumes constant foreign currency rates. In reconciling from net earnings to Core FFO*, Prologis makes certain adjustments, including but not limited to real estate depreciation and amortization expense, gains (losses) recognized from real estate transactions and early extinguishment of debt, impairment charges, deferred taxes and unrealized gains or losses on foreign currency or derivative activity. The difference between the company's Core FFO* and net earnings guidance for 2020 relates predominantly to these items. Please refer to our fourth quarter Supplemental Information, which is available on our Investor Relations website at http://ir.prologis.com and on the SEC's website at www.sec.gov for a definition of Core FFO* and other non-GAAP measures used by Prologis, along with reconciliations of these items to the closest GAAP measure for our results and guidance.

January 26, 2021, CALL DETAILSThe call will take place on Tuesday, January 26, 2021, at 9:00 a.m. PT/12:00 p.m. ET. To access a live broadcast of the call, please dial +1 (833) 968-2252 (toll-free from the United States and Canada) or +1 (778) 560-2807 (from all other countries) and enter conference code 1358007. A live webcast can be accessed from the Investor Relations section of www.prologis.com.

ABOUT PROLOGISPrologis, Inc. is the global leader in logistics real estate with a focus on high-barrier, high-growth markets. As of December 31, 2020, the company owned or had investments in, on a wholly owned basis or through co-investment ventures, properties and development projects expected to total approximately 984 million square feet (91 million square meters) in 19 countries. Prologis leases modern logistics facilities to a diverse base of approximately 5,500 customers principally across two major categories: business-to-business and retail/online fulfillment.

FORWARD-LOOKING STATEMENTSThe statements in this document 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," 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, development activity, contribution and disposition activity, general conditions in the geographic areas where we operate, our debt, capital structure and financial position, our ability to 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) national, international, regional and local economic and political climates; (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; (v) maintenance of real estate investment trust 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 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 the current coronavirus pandemic; and (xi) those additional factors discussed in reports filed with the Securities and Exchange Commission by us under the heading "Risk Factors." We undertake no duty to update any forward-looking statements appearing in this document except as may be required by law.

dollars in millions, except per share/unit data Three Months ended Nine Months ended September 30, September 30,

2020 2019 2020 2019

Rental and other revenues $ 991 $ 728 $3,802 $ 2,839

Strategic capital revenues 121 98 637 492

Total revenues 1,112 826 4,439 3,331

Net earnings attributable to common stockholders 280 385 1,473 1,567

Core FFO attributable to common stockholders/unitholders* 723 551 2,864 2,164

AFFO attributable to common stockholders/unitholders* 618 599 2,875 2,276

Adjusted EBITDA attributable to common stockholders/ 964 854 4,067 3,153unitholders*

Estimated value creation from development stabilizations - 301 236 942 911Prologis Share

Common stock dividends and common limited partnership unit 444 348 1,776 1,390distributions

Per common share - diluted:

Net earnings attributable to common stockholders $0.38 $0.61 $2.01 $2.46

Core FFO attributable to common stockholders/unitholders* 0.95 0.84 3.80 3.31

Business line reporting:

Real estate operations* 0.87 0.75 3.30 2.87

Strategic capital* 0.08 0.09 0.50 0.44

Core FFO attributable to common stockholders/unitholders* 0.95 0.84 3.80 3.31

Realized development gains, net of taxes* 0.09 0.25 0.56 0.69

Dividends and distributions per common share/unit 0.58 0.53 2.32 2.12

* This is a non-GAAP financial measure. Please see our Notes and Definitionsfor further explanation.

in thousands December 31, 2020 September 30, 2020 December 31, 2019

Assets:

Investments in real estate properties:

Operating $ 43,507,619 $ 42,623,889 $ 31,287,833 properties

Development 1,882,611 2,032,238 1,869,267 portfolio

Land 1,606,358 1,754,583 1,101,646

Other real estate 3,387,740 2,695,649 965,668 investments

50,384,328 49,106,359 35,224,414

Less accumulated 6,539,156 6,229,744 5,437,662 depreciation

Net investments in real estate 43,845,172 42,876,615 29,786,752 properties

Investments in and advances to 7,602,014 7,310,960 6,237,371 unconsolidated entities

Assets held for sale or 1,070,724 1,757,187 720,685 contribution

Net investments 52,517,910 51,944,762 36,744,808 in real estate

Lease right-of-use 492,801 455,704 486,330 assets

Cash and cash 598,086 940,193 1,088,855 equivalents

Other assets 2,949,009 2,874,643 2,198,187

Total assets $ 56,065,005 $ 55,759,598 $ 40,031,850

Liabilities andEquity:

Liabilities:

Debt $ 16,849,076 $ 16,518,126 $ 11,905,877

Lease 486,972 448,534 471,634 liabilities

Accounts payable, accrued expenses 2,891,349 2,752,165 2,054,189 and other liabilities

Total 19,740,425 19,270,291 13,960,066 liabilities

Equity:

Stockholders' 31,971,547 32,097,175 22,653,127 equity

Noncontrolling 3,483,526 3,502,996 2,775,394 interests

Noncontrolling interests - limited 869,507 889,136 643,263 partnership unitholders

Total equity 36,324,580 36,489,307 26,071,784

Total liabilities and $ 56,065,005 $ 55,759,598 $ 40,031,850 equity

Three Months Ended Twelve Months Ended

December 31, December 31,

in thousands, except per 2020 2019 2020 2019share amounts

Revenues:

Rental $987,810 $723,857 $3,791,131 $2,831,818

Strategic capital 120,745 98,470 636,987 491,886

Development management 3,042 3,689 10,617 6,917 and other

Total revenues 1,111,597 826,016 4,438,735 3,330,621

Expenses:

Rental 246,846 184,196 952,063 734,266

Strategic capital 44,131 45,993 218,041 184,661

General and 66,144 65,542 274,845 266,718 administrative

Depreciation and 417,066 289,240 1,561,969 1,139,879 amortization

Other 4,437 3,506 30,010 13,149

Total expenses 778,624 588,477 3,036,928 2,338,673

Operating income beforegains on real estate 332,973 237,539 1,401,807 991,948transactions, net

Gains on dispositions of development 81,569 164,260 464,942 467,577 properties and land, net

Gains on other dispositions of investments in real 67,838 157,841 252,195 390,241 estate, net (excluding development properties and land)

Operating income 482,380 559,640 2,118,944 1,849,766

Other income (expense):

Earnings from unconsolidated 79,197 39,626 240,312 181,911 co-investment ventures, net

Earnings from other unconsolidated 1,329 9,028 57,058 18,267 ventures, net

Interest expense (76,856) (60,080) (314,507) (239,953)

Foreign currency and derivative losses and (113,479) (100,645) (166,429) (17,502) interest and other income, net

Losses on early extinguishment of debt, (23,684) (40) (188,290) (16,126) net

Total other expense (133,493) (112,111) (371,856) (73,403)

Earnings before income 348,887 447,529 1,747,088 1,776,363taxes

Current income tax (33,572) (18,835) (129,714) (62,296) expense

Deferred income tax (7,308) (2,452) (744) (12,221) expense

Consolidated net 308,007 426,242 1,616,630 1,701,846earnings

Net earningsattributable to (18,486) (28,204) (93,195) (82,222)noncontrolling interests

Net earningsattributable tononcontrolling interests (7,627) (11,047) (41,621) (46,665)- limited partnershipunits

Net earningsattributable to 281,894 386,991 1,481,814 1,572,959controlling interests

Preferred stock (1,424) (1,511) (6,345) (6,009)dividends

Loss on preferred stock - - (2,347) -repurchase

Net earningsattributable to common $280,470 $385,480 $1,473,122 $1,566,950stockholders

Weighted average commonshares outstanding - 764,761 655,408 754,414 654,903Diluted

Net earnings per shareattributable to common $ 0.38 $ 0.61 $ 2.01 $ 2.46stockholders - Diluted

Three Months Ended Twelve Months Ended

December 31, December 31,

in thousands 2020 2019 2020 2019

Net earnings attributable to common $280,470 $385,480 $1,473,122 $1,566,950stockholders

Add (deduct) NAREIT definedadjustments:

Real estate related depreciation 407,193 279,449 1,523,378 1,102,065 and amortization

Gains on other dispositions of investments in real estate, net (67,838) (157,841) (252,195) (390,241) (excluding development properties and land)

Reconciling items related to (22,114) 16,908 (57,400) (8,190) noncontrolling interests

Our share of reconciling items related to unconsolidated 50,812 61,749 237,558 235,043 co-investment ventures

Our share of reconciling items related to other unconsolidated 12,247 2,714 30,283 11,035 ventures

NAREIT defined FFO attributable to $660,770 $588,459 $2,954,746 $2,516,662common stockholders/unitholders*

Add (deduct) our definedadjustments:

Unrealized foreign currency and 101,790 121,749 160,383 68,971 derivative losses, net

Deferred income tax expense 7,308 2,452 744 12,221

Current income tax expense on dispositions related to acquired 1,530 - 5,589 - tax liabilities

Reconciling items related to (729) 443 (1,449) 413 noncontrolling interests

Our share of reconciling items related to unconsolidated (2,767) (5,355) (232) (7,529) co-investment ventures

FFO, as modified by Prologisattributable to common stockholders $767,902 $707,748 $3,119,781 $2,590,738/unitholders*

Adjustments to arrive at Core FFOattributable to common stockholders/unitholders*:

Gains on dispositions of development properties and land, (81,569) (164,260) (464,942) (467,577) net

Current income tax expense on 11,227 2,159 40,994 15,069 dispositions

Losses on early extinguishment of debt, preferred stock repurchase 23,684 40 198,637 16,126 and other, net

Reconciling items related to 131 36 (2,466) 186 noncontrolling interests

Our share of reconciling items related to unconsolidated (110) 10,614 4,497 14,613 co-investment ventures

Our share of reconciling items related to other unconsolidated 1,477 (5,145) (32,353) (5,138) ventures

Core FFO attributable to common $722,742 $551,192 $2,864,148 $2,164,017stockholders/unitholders*

Adjustments to arrive at AdjustedFFO ("AFFO") attributable to commonstockholders/unitholders*,including our share ofunconsolidated ventures lessnoncontrolling interest:

Gains on dispositions of development properties and land, 81,569 164,260 464,942 467,577 net

Current income tax expense on (11,227) (2,159) (40,994) (15,069) dispositions

Straight-lined rents and (39,274) (23,036) (133,466) (105,097) amortization of lease intangibles

Property improvements (58,136) (53,897) (149,491) (135,346)

Turnover costs (79,323) (50,861) (221,491) (179,274)

Amortization of debt premium, financing costs and management 2,726 4,682 9,434 18,279 contracts, net

Stock compensation amortization 23,471 25,090 109,831 97,557 expense

Reconciling items related to 10,835 11,096 36,258 32,467 noncontrolling interests

Our share of reconciling items (35,408) (27,285) (64,379) (69,269) related to unconsolidated ventures

AFFO attributable to common $617,975 $599,082 $2,874,792 $2,275,842stockholders/unitholders*

* This is a non-GAAP financial measure. Please see our Notes and Definitionsfor further explanation.

Three Months Ended Twelve Months Ended

December 31, December 31,

in thousands 2020 2019 2020 2019

Net earnings attributable to $ 280,470 $385,480 $ 1,473,122 $1,566,950common stockholders

Gains on other dispositions of investments in real estate, net (67,838) (157,841) (252,195) (390,241) (excluding development properties and land)

Depreciation and amortization 417,066 289,240 1,561,969 1,139,879 expenses

Interest expense 76,856 60,080 314,507 239,953

Current and deferred income tax 40,880 21,287 130,458 74,517 expense, net

Net earnings attributable to noncontrolling interests - 7,627 11,047 41,621 46,665 limited partnership unitholders

Pro forma adjustments 1,960 (2,461) 53,753 (272)

Preferred stock dividends 1,424 1,511 6,345 6,009

Unrealized foreign currency and 101,790 121,749 160,383 68,971 derivative losses, net

Stock compensation amortization 23,471 25,090 109,831 97,557 expense

Losses on early extinguishment of debt, preferred stock 23,684 40 198,637 16,126 repurchase and other, net

Adjusted EBITDA, consolidated* $907,390 $755,222 $3,798,431 $2,866,114

Reconciling items related to (30,390) 6,049 (103,650) (55,113) noncontrolling interests

Our share of reconciling items related to unconsolidated 87,369 92,864 372,520 341,896 ventures

Adjusted EBITDA attributable to $964,369 $854,135 $4,067,301 $3,152,897common stockholders/unitholders*

* This is a non-GAAP financial measure. Please see our Notes and Definitionsfor further explanation.

Adjusted EBITDA.We use Adjusted EBITDA attributable to common stockholders/unitholders ("Adjusted EBITDA"), a non-GAAP financial measure, as a measure of our operating performance. The most directly comparable GAAP measure to Adjusted EBITDA is net earnings.

We calculate Adjusted EBITDA beginning with consolidated net earnings attributable to common stockholders and removing the effect of: interest expense, income taxes, depreciation and amortization, impairment charges, gains or losses from the disposition of investments in real estate (excluding development properties and land), gains from the revaluation of equity investments upon acquisition of a controlling interest, gains or losses on early extinguishment of debt and derivative contracts (including cash charges), similar adjustments we make to our FFO measures (see definition below), and other items, such as, amortization of stock based compensation and unrealized gains or losses on foreign currency and derivatives. We also include a pro forma adjustment to reflect a full period of NOI on the operating properties we acquire or stabilize during the quarter and to remove NOI on properties we dispose of during the quarter, assuming all transactions occurred at the beginning of the quarter. The pro forma adjustment also includes economic ownership changes in our ventures to reflect the full quarter at the new ownership percentage.

We believe Adjusted EBITDA provides investors relevant and useful information because it permits investors to view our operating performance, analyze our ability to meet interest payment obligations and make quarterly preferred stock dividends on an unleveraged basis before the effects of income tax, depreciation and amortization expense, gains and losses on the disposition of non-development properties and other items (outlined above), that affect comparability. While all items are not infrequent or unusual in nature, these items may result from market fluctuations that can have inconsistent effects on our results of operations. The economics underlying these items reflect market and financing conditions in the short-term but can obscure our performance and the value of our long-term investment decisions and strategies.

We calculate our Adjusted EBITDA, based on our proportionate ownership share of both our unconsolidated and consolidated ventures. We reflect our share of our Adjusted EBITDA measures for unconsolidated ventures by applying our average ownership percentage for the period to the applicable reconciling 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 Adjusted EBITDA measures to remove the noncontrolling interests share of the applicable reconciling items based on our average ownership percentage for the applicable periods.

While we believe Adjusted EBITDA is an important measure, it should not be used alone because it excludes significant components of net earnings, such as our historical cash expenditures or future cash requirements for working capital, capital expenditures, distribution requirements, contractual commitments or interest and principal payments on our outstanding debt and is therefore limited as an analytical tool.

Our computation of Adjusted EBITDA may not be comparable to EBITDA reported by other companies in both the real estate industry and other industries. We compensate for the limitations of Adjusted EBITDA by providing investors with financial statements prepared according to GAAP, along with this detailed discussion of Adjusted EBITDA and a reconciliation to Adjusted EBITDA from consolidated net earnings attributable to common stockholders.

Business Line Reportingis a non-GAAP financial measure.Core FFO and development gains are generated by our three lines of business: (i) real estate operations; (ii) strategic capital; and (iii) development. The real estate operations line of business represents total Prologis Core FFO, less the amount allocated to the Strategic Capital line of business. The amount of Core FFO allocated to the Strategic Capital line of business represents the third party share of asset management fees, Net Promotes and transactional fees that we earn from our consolidated and unconsolidated co-investment ventures less costs directly associated to our strategic capital group. Realized development gains include our share of gains on dispositions of development properties and land, net of taxes. To calculate the per share amount, the amount generated by each line of business is divided by the weighted average diluted common shares outstanding used in our Core FFO per share calculation. Management believes evaluating our results by line of business is a useful supplemental measure of our operating performance because it helps the investing public compare the operating performance of Prologis' respective businesses to other companies' comparable businesses. Prologis' computation of FFO by line of business may not be comparable to that reported by other real estate investment trusts as they may use different methodologies in computing such measures.

Calculation of Per Share Amounts

Three Months Ended Twelve Months Ended

Dec. 31, Dec. 31,

in thousands, except per share 2020 2019 2020 2019amount

Net earnings

Net earnings attributable to $ 280,470 $ 385,480 $ 1,473,122 $ 1,566,950common stockholders

Noncontrolling interestattributable to exchangeable 7,686 11,148 41,938 46,986limited partnership units

Adjusted net earningsattributable to common $ 288,156 $ 396,628 $ 1,515,060 $ 1,613,936stockholders - Diluted

Weighted average common shares 738,590 631,246 728,323 630,580outstanding - Basic

Incremental weighted averageeffect on exchange of limited 20,629 18,412 20,877 19,154partnership units

Incremental weighted average 5,542 5,750 5,214 5,169effect of equity awards

Weighted average common shares 764,761 655,408 754,414 654,903outstanding - Diluted

Net earnings per share - Basic $ 0.38 $ 0.61 $ 2.02 $ 2.48

Net earnings per share - $ 0.38 $ 0.61 $ 2.01 $ 2.46Diluted

Core FFO

Core FFO attributable tocommon stockholders/ $ 722,742 $ 551,192 $ 2,864,148 $ 2,164,017unitholders

Noncontrolling interestattributable to exchangeable 131 163 598 646limited partnership units

Core FFO attributable tocommon stockholders/ $ 722,873 $ 551,355 $ 2,864,746 $ 2,164,663unitholders - Diluted

Weighted average common shares 738,590 631,246 728,323 630,580outstanding - Basic

Incremental weighted averageeffect on exchange of limited 20,629 18,412 20,877 19,154partnership units

Incremental weighted average 5,542 5,750 5,214 5,169effect of equity awards

Weighted average common shares 764,761 655,408 754,414 654,903outstanding - Diluted

Core FFO per share - Diluted $ 0.95 $ 0.84 $ 3.80 $ 3.31

Estimated Value Creation represents the value that we expect to create through our development and leasing activities. We calculate Estimated Value Creation by estimating the Stabilized NOI that the property will generate and applying a stabilized capitalization rate applicable to that property. Estimated Value Creation is calculated as the amount by which the value exceeds our TEI and does not include any fees or promotes we may earn. Estimated Value Creation for our Value-Added Properties that are sold includes the realized economic gain.

Estimated Weighted Average Marginis 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.

Estimated Weighted Average Stabilized Yieldis calculated on the active properties in the Development Portfolio as Stabilized NOI divided by TEI. The yields on a Prologis Share basis were as follows:

Pre-Stabilized 2021 Expected Completion 2022 and Thereafter Expected Total Development Portfolio Developments Completion

U.S. 6.0 % 6.0 % 6.1 % 6.0 %

Other Americas 9.8 % 6.9 % - % 7.0 %

Europe 5.4 % 5.5 % - % 5.5 %

Asia 5.5 % 5.5 % 5.3 % 5.4 %

Total 5.7 % 5.7 % 5.5 % 5.7 %

FFO, as modified by Prologis attributable to common stockholders/unitholders ("FFO, as modified by Prologis"); Core FFO attributable to common stockholders/unitholders ("Core FFO"); AFFO attributable to common stockholders/unitholders ("AFFO"); (collectively referred to as "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, 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 co-investment 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, Core FFO and AFFO, 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 and consolidated ventures. We reflect our share of our FFO measures for unconsolidated ventures by applying our average ownership percentage for the period to the applicable reconciling 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 reconciling 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 revenues 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

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:

(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 earnings that is excluded from our defined FFO measure;

foreign currency exchange gains and losses resulting from (a) debt transactions between us and our foreign entities, (b) third-party debt(iii) that is used to hedge our investment in foreign entities, (c) derivative financial instruments related to any such debt transactions, and (d) mark-to-market adjustments associated with other derivative 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

In addition to FFO, as modified by Prologis,we also use Core FFO. To arrive at CoreFFO,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

(i) gains or losses from the disposition of land and development properties that were developed with the intent to contribute or sell;

(ii) income tax expense related to the sale of investments in real estate;

impairment charges recognized related to our investments in real estate(iii) generally as a result of our change in intent to contribute or sell these properties;

(iv) gains or losses from the early extinguishment of debt and redemption and repurchase of preferred stock; and

(v) expenses related to natural disasters.

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.

AFFO

To arrive at AFFO, we adjust Core FFO to include realized gains from the disposition of land and development properties and recurring capital expenditures and exclude the following items that we recognize directly in Core FFO:

(i) straight-line rents;

(ii) amortization of above- and below-market lease intangibles;

(iii) amortization of management contracts;

(iv) amortization of debt premiums and discounts and financing costs, net of amounts capitalized, and;

(v) stock compensation amortization expense.

We use AFFO 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, and (v) 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. * 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. 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.

Guidance.The following is a reconciliation of our annual guided Net Earnings per share to our guided Core FFO per share:

Low High

Net Earnings (a) $ 2.36 $ 2.52

Our share of:

Depreciation and amortization 2.38 2.42

Net gains on real estate transactions, net of taxes (0.86) (0.96)

Unrealized foreign currency gains and other, net 0.00 0.00

Core FFO $ 3.88 $ 3.98

Earnings guidance includes potential future gains recognized from real(a) estate transactions, but excludes future foreign currency or derivative gains or losses as these items are difficult to predict.

Prologis Sharerepresents our proportionate economic ownership of each entity included in our total owned and managed portfolio whether consolidated or unconsolidated.

Rent Change (Cash)represents the percentage change in starting rental rates per the lease agreement, on new and renewed leases, commenced during the period compared with the previous ending rental rates in that same space. This measure excludes any short-term leases of less than one-year, holdover payments, free rent periods and introductory (teaser rates) defined as 50% or less of the stabilized rate.

Rent Change (Net Effective)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 the previous net effective rental rates in that same space. This measure excludes any short-term leases of less than one year and holdover payments.

Retention is the square footage of all leases commenced during the period that are rented by existing tenants divided by the square footage of all expiring and in-place leases during the reporting period. The square footage of tenants that default or buy-out prior to expiration of their lease and short-term leases of less than one year, are not included in the calculation.

Same Store.Our same store metrics are non-GAAP financial measures, which are commonly used in the real estate industry and expected from the financial community, 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 December 31, 2020 as the properties in our Owned and Managed operating portfolio, including the property NOI for both consolidated properties and properties owned by the unconsolidated co-investment ventures at January 1, 2019 and owned throughout the same three-month period in both 2019 and 2020. 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 Owned and Managed 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, 2019) 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:

Three Months Ended

Dec. 31,

dollars in thousands 2020 2019 Change (%)

Reconciliation of Consolidated PropertyNOI to Same Store Property NOI measures:

Rental revenues $ 987,810 $ 723,857

Rental expenses (246,846) (184,196)

Consolidated Property NOI $ 740,964 $ 539,661

Adjustments to derive same store results:

Property NOI from consolidated properties not included in same store (252,566) (60,646) portfolio and other adjustments (a)

Property NOI from unconsolidated co-investment ventures included in same 514,622 492,464 store portfolio (a)(b)

Third parties' share of Property NOI from properties included in same store (414,532) (402,988) portfolio (a)(b)

Prologis Share of Same Store Property NOI $ 588,488 $ 568,491 3.5 %- Net Effective (b)

Consolidated properties straight-line rent and fair value lease adjustments (10,739) (8,819) included in the same store portfolio (c)

Unconsolidated co-investment ventures straight-line rent and fair value lease (11,318) (6,989) adjustments included in the same store portfolio (c)

Third parties' share of straight-line rent and fair value lease adjustments 8,809 5,842 included in the same store portfolio (b) (c)

Prologis Share of Same Store Property NOI $ 575,240 $ 558,525 3.0 %- Cash (b)(c)

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(a) 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 services are recognized as part of our consolidated rental expense.

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(b) Property NOI for the same store portfolio and apply our ownership percentage at December 31, 2020 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.

We further remove certain noncash items (straight-line rent and(c) amortization of fair value lease adjustments) 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 Owned and Managed 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.

Weighted Average Interest Rate is based on the effective rate, which includes the amortization of related premiums and discounts and finance costs.

Weighted Average Stabilized Capitalization ("Cap") Rateis calculated as Stabilized NOI divided by the Acquisition Price.

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SOURCE Prologis, Inc.