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What changed in Prologis's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Prologis's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+315 added−311 removedSource: 10-K (2024-02-13) vs 10-K (2023-02-14)

Top changes in Prologis's 2023 10-K

315 paragraphs added · 311 removed · 268 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

75 edited+22 added−16 removed26 unchanged
Biggest changeDespite the competition, our global reach and local market knowledge over the years has given us distinct competitive advantages, including the following: • a portfolio of properties strategically located in markets characterized by large population densities, growing consumption and high barriers to entry, typically near large labor pools and extensive transportation infrastructure, including our Last Touch ® facilities; • the ability to leverage the organizational scale and structure of our 1.2 billion square foot O&M portfolio to provide a single point of contact for our multi-market customers to address their needs through our in-house global Customer Led Solutions Team; • services and solutions offered through Prologis Essentials to assist our customers with their operations, energy and sustainability, mobility and workforce needs; • a strategically located, global land bank and redevelopment sites that have the potential to support the development of $39.0 billion of TEI of new logistics space on an O&M basis; • local teams with the expertise, experience and relationships to lease our properties and deploy capital advantageously; • development of logistics facilities with sustainable design features that meet customer needs for high-quality buildings while enabling them to make progress on their own sustainability objectives; • relationships and successful track record with current and prospective investors in our strategic capital business that is comprised of 95% perpetual open-ended or long-term ventures and two publicly traded vehicles; • a market intelligence team that allows us to track business conditions in real time, proactively pursue market opportunities and disruptions alike, and develop revenue-generating capabilities to strengthen our operational excellence; • an investment in technology and talent to support our sustainability objectives, including expanding our efforts around renewable energy; • Prologis Ventures, our corporate venture capital group, and Prologis Labs, our initiative for testing new technologies alongside our customers, together track the leading edge of innovation and technologies within real estate and the supply chain, creating important capabilities that connect Prologis with the C-suites of our customers; and • a strong balance sheet and credit ratings, coupled with significant liquidity, borrowing capacity and long-term fixed debt with low rates.
Biggest changeDespite the competition, our global reach and local market knowledge over the years have given us distinct competitive advantages, including the following: • a portfolio of properties strategically located in markets characterized by large population densities, growing consumption and high barriers to entry, typically near large labor pools and extensive transportation infrastructure, including our Last Touch ® facilities; • the ability to leverage the organizational scale and structure of our 1.2 billion square foot O&M portfolio to provide a single point of contact for our multi-market customers to address their needs through our in-house global Customer Led Solutions Team; • services and solutions offered through Prologis Essentials to assist our customers with their operations and energy and sustainability needs and at the same time enhancing the value of our real estate; 7 Table of Contents • a strategically located, global land bank and redevelopment sites that have the potential to support the development of $40.0 billion of TEI of new logistics space on an O&M basis, including build-to-suit development and redevelopment as industrial properties or other higher use assets; • local teams with the expertise, experience and relationships to lease our properties and deploy capital advantageously, supported by our in-house government and community affairs and entitlement teams; • development of logistics facilities with sustainable design features that meet customer needs for efficient, high-quality buildings while enabling them to make progress on their own sustainability objectives; • relationships and successful track record with current and prospective investors in our strategic capital business that is comprised of 93% perpetual open-ended or long-term ventures and two publicly traded vehicles; • a market intelligence team that allows us to track business conditions in real time, proactively pursue market opportunities and disruptions alike, and develop revenue-generating capabilities to strengthen our operational excellence; • an investment in technology and talent to support our sustainability objectives, including expanding our efforts around renewable energy; • Prologis Ventures, our corporate venture capital group, tracks the leading edge of innovation and technologies within real estate and the supply chain, creating important capabilities that connect Prologis with the C-suites of our customers; and • a strong balance sheet and credit ratings, coupled with significant liquidity, borrowing capacity and long-term fixed debt with low rates.
We invest in real estate through wholly owned subsidiaries and other entities through which we co-invest with partners and investors. We have a significant ownership interest in the co-investment ventures, which are either consolidated or unconsolidated based on our level of control of the entity.
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.
Management’s Discussion and Analysis of Financial Condition and Results of Operations for a reconciliation of Net Earnings Attributable to Common Stockholders/Unitholders in the Consolidated Statements of Income to our FFO measures and a reconciliation of NOI to Operating Income, the most directly comparable GAAP measures.
Management’s Discussion and Analysis of Financial Condition and Results of Operations for a reconciliation of Net Earnings Attributable to Common Stockholders/Unitholders in the Consolidated Statements of Income to our FFO measures and a reconciliation of NOI to Operating Income in the Consolidated Statements of Income, the most directly comparable GAAP measures.
Below is information summarizing consolidated activity within our segments over the last three years (in millions): (1) NOI from the Real Estate Segment is calculated directly from our Consolidated Financial Statements as Rental Revenues and Development Management and Other Revenues less Rental Expenses and Other Expenses.
Below is information summarizing consolidated activity within our segments over the last three years (in millions): (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.
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. for long-term hold and outside the U.S. for contribution to our unconsolidated co-investment ventures.
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 and outside the U.S. for contribution to our unconsolidated co-investment ventures.
We believe this demand is driven by three primary factors: (i) customer supply chains re-positioning to address the significant shift to e-commerce and heightened service expectations; (ii) overall consumption and household growth; and (iii) our customers’ desire for more supply chain resiliency. We believe these forces will keep demand strong for the long-term.
We believe this demand is driven by three primary factors: (i) customer supply chains re-positioning to address the significant shift to e-commerce and heightened service expectations; (ii) overall consumption and household growth; and (iii) our customers’ desire for more supply chain resiliency. We believe these forces will keep demand strong over the long-term.
They implement our strategy and create value for our customers and shareholders. We actively seek to recruit and retain talented employees with varied experiences and viewpoints. The intent is to create an inclusive and diverse culture where each employee can do their best work and drive our collective success.
They implement our strategy and create value for our customers and shareholders. We seek to recruit and retain talented employees with varied experiences and viewpoints. The intent is to create an inclusive and diverse culture where each employee can do their best work and drive our collective success.
Prologis, L.P. was also formed in 1997. 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.
Prologis, L.P. was also formed in 1997. 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.
Our corporate headquarters is located at Pier 1, Bay 1, San Francisco, California 94111, and our other principal office locations are in Amsterdam, Denver, Mexico City, Shanghai, Singapore and Tokyo. Our Internet address is www.prologis.com.
Our corporate headquarters is located at Pier 1, Bay 1, San Francisco, California 94111, and our other principal office locations are in Amsterdam, Denver, Mexico City, Sao Paulo, Shanghai, Singapore and Tokyo. Our Internet address is www.prologis.com.
NOI from the Strategic Capital Segment is calculated directly from our Consolidated Financial Statements as Strategic Capital Revenues less Strategic Capital Expenses.
NOI from the Strategic Capital Segment is calculated directly from the Consolidated Financial Statements as Strategic Capital Revenues less Strategic Capital Expenses.
Our global risk management team works with our Board to do regular enterprise-wide risk assessments to ensure proper oversight over real estate, financial and emerging risks across our global organization. We are committed to ensuring that 100% of our employees complete ethics training each year and continued to achieve this commitment in 2022.
Our global risk management team works with our Board to complete regular enterprise-wide risk assessments to ensure proper oversight over real estate, financial and emerging risks across our global organization. We are committed to ensuring that 100% of our employees complete ethics training each year and continued to achieve this commitment in 2023.
We believe we have a competitive advantage due to (i) the strategic locations of our global land bank and redevelopment sites; (ii) the development expertise of our local teams; (iii) the depth of our customer relationships; (iv) our ability to integrate sustainable design features that result in cost-savings and operational efficiencies for our customers; and (v) our procurement capabilities that allow us to secure high-demand construction materials at lower cost.
We believe we have a competitive advantage due to (i) the strategic locations of our global land bank and redevelopment sites; (ii) the development expertise of our local teams; (iii) the depth of our customer relationships; (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 lower cost.
Substantially all of our consolidated rental revenue, NOI and cash flows from rental operations are generated in the U.S. Development. Given the scarcity of modern logistics facilities in our target markets, our development business provides the opportunity to build to the requirements of our current and future customers while deepening our market presence.
Substantially all of our consolidated rental revenue, NOI and cash flows from rental operations are generated in the U.S. Development. Given the scarcity of modern logistics facilities in our target markets, our development business provides the opportunity to build to the evolving requirements of our customers while deepening our market presence.
While the majority of our properties in the U.S. are wholly owned, we hold a significant ownership interest in properties internationally and in the U.S. through our investments in the co-investment ventures.
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 the co-investment ventures.
The primary driver of our revenue growth, outside of the Duke Transaction, will be rolling 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, capital, energy, sustainability and risk management teams allow us to maximize NOI across our portfolio.
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.
We make operating decisions based on our total O&M portfolio as we manage the properties without regard to their ownership. We also evaluate our results based on our proportionate economic ownership of each property included in the O&M portfolio (“our share”) to reflect our share of the financial results of the O&M portfolio.
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”).
Amounts represent our total expected investment (“TEI”) upon stabilization, which includes the estimated cost of development or expansion, including land, construction and leasing costs. 5 Table of Contents Real Estate Segment Rental Operations. Rental operations comprise the largest component of our operating segments and generally contribute 85% to 90% of our consolidated revenues, earnings and FFO.
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 operating segments and generally contributes 85% to 90% of our consolidated revenues, earnings and FFO.
FUTURE GROWTH We believe that the quality and scale of our portfolio, our ability to build out our land bank, our strategic capital business, the expertise of our team, the depth of our customer relationships and the strength of our balance sheet are differentiators that allow us to drive growth in revenues, NOI, earnings, FFO and cash flows. • Rent Growth.
FUTURE GROWTH We believe that the quality and scale of our portfolio, our ability to build out 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.
As a result of our low leverage, available liquidity and investment capacity in the co-investment ventures, we have significant capacity to capitalize on opportunistic value-added investments as they arise. • Economies of Scale from Growth. We have scalable systems and infrastructure in place to grow both our consolidated and O&M portfolios with limited incremental G&A expense.
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 collect rent from our customers through operating leases, including reimbursements for the majority of our property operating costs. For leases that commenced during 2022 within the consolidated operating portfolio, the weighted average lease term was 69 months. We expect to generate internal growth by increasing rents, maintaining high occupancy rates and controlling expenses.
We collect rent from our customers through operating leases, including reimbursements for the majority of our property operating costs. For leases that commenced during 2023 within the consolidated operating portfolio, the weighted average lease term was 66 months. We expect to generate earnings growth by increasing rents, maintaining high occupancy rates and controlling expenses.
We provide workplace flexibility with accountability as determined by role. For example, for those employees who work on-site, we have protocols in place to help ensure a safe working environment. We continue to attract and retain talent in the industry through a robust benefit package, career growth opportunities, talent recognition and individual development planning.
We provide workplace flexibility with accountability as determined by role. For those employees who work on-site, we have protocols in place to help ensure a safe working environment. We continue to attract and retain talent in the industry through competitive compensation, a robust benefit package, pathways to career advancement, talent recognition and individual development planning.
Customers At December 31, 2022, in our Real Estate Segment representing our consolidated properties, we had more than 4,000 customers occupying 601 million square feet of logistics operating properties (6,600 customers occupying 1.2 billion square feet for our O&M portfolio).
Customers At December 31, 2023, in our Real Estate Segment representing our consolidated properties, we had more than 4,000 customers occupying 634 million square feet of logistics operating properties (6,700 customers occupying 1.2 billion square feet for our O&M portfolio).
Over the past eight years we have onboarded six new directors, increasing the ethnic, gender and geographical diversity of the Board, as well as its breadth of experience. The charters of our Board Governance and Nomination Committee and Talent and Compensation Committee provide that such committees have specific oversight over ESG matters and DEIB matters, respectively.
Over the past nine years we have onboarded six new directors with a breadth of experience, increasing the ethnic, gender and geographical diversity of the Board. The charters of our Board Governance and Nomination Committee and Talent and Compensation Committee provide that such committees have specific oversight over ESG matters and DEIB matters, respectively.
Our most recent employee engagement pulse survey, completed in November 2022 with a participation rate of 92%, indicated that 87% of Prologis employees are engaged based on their positive response to the questions that comprise our engagement driver index. We strive to create a healthy and safe working environment for our employees.
Our most recent employee engagement survey, completed in September 2023, with a participation rate of 92%, indicated that 88% of Prologis employees are engaged based on their positive response to the questions that comprise our engagement driver index. We strive to cultivate a healthy and safe working environment for our employees.
Strategic Capital Segment Our Strategic Capital Segment allows us to partner with many of the world’s largest institutional investors. The business is capitalized principally through private and public equity of which 95% is either in perpetual open-ended or long-term ventures, and two publicly traded vehicles (Nippon Prologis REIT, Inc. in Japan and FIBRA Prologis in Mexico).
Strategic Capital Segment Through the Strategic Capital Segment we partner with many of the world’s largest institutional investors through unconsolidated co-investment ventures. The business is capitalized principally through private and public equity of which 93% is either in perpetual open-ended or long-term ventures and two publicly traded vehicles (Nippon Prologis REIT, Inc. in Japan and FIBRA Prologis in Mexico).
GOVERNMENTAL MATTERS We are exposed to various regulatory requirements, taxes, tariffs, trade wars and laws within the countries in which we operate and unexpected changes in these items may result in unanticipated losses, adverse tax consequences and affect our operating results and 12 Table of Contents financial condition.
Financial Statements and Supplementary Data. GOVERNME NTAL MATTERS We are exposed to various regulatory requirements, taxes, tariffs, trade wars and laws within the countries in which we operate and unexpected changes in these items may result in unanticipated losses, adverse tax consequences and affect our operating results and financial condition.
In addition, we encourage our employees to support our local communities outside of working hours with our Dollars for Doers and other matching gifts programs, through which Prologis donates to eligible charities and non-profit organizations based on employees’ personal volunteer hours or dollar donations.
At December 31, 2023, we have contributed in excess of 54,500 hours towards our goal. In addition, we encourage our employees to support our local communities outside of working hours with our Dollars for Doers and other matching gifts programs, through which Prologis donates to eligible charities and non-profit organizations based on employees’ personal volunteer hours or dollar donations.
We have committed to: (i) installing 100% LED lighting within our logistics facilities across our O&M operating properties by 2025; (ii) installing 1 gigawatt of solar generation capacity, supported by storage, by 2025, and (iii) obtaining green building certifications for 100% of our eligible new development and redevelopment.
For the 2023 year, we committed to: (i) installing 100% LED lighting within our logistics facilities across our O&M operating properties by 2025; (ii) installing 1 gigawatt of solar generation capacity, supported by storage, by 2025; and (iii) obtaining sustainable building certifications for 100% of our eligible new developments and redevelopments.
Amazon 7.0 34 1. Amazon 5.3 43 2. Home Depot 2.6 15 2. Home Depot 1.7 17 3. FedEx 1.9 8 3. FedEx 1.3 10 4. UPS 1.0 6 4. Geodis 1.3 17 5. Geodis 0.9 6 5. DHL 1.1 12 6. Wal-Mart 0.7 4 6. CEVA Logistics 0.9 12 7. NFI Industries 0.6 3 7. UPS 0.8 8 8.
Amazon 6.4 34 1. Amazon 5.0 43 2. Home Depot 2.2 15 2. Home Depot 1.5 17 3. FedEx 1.9 8 3. FedEx 1.4 11 4. UPS 1.0 6 4. Geodis 1.3 17 5. Geodis 0.9 6 5. DHL 1.2 13 6. Wal-Mart 0.8 6 6. CEVA Logistics 0.9 13 7. DHL 0.8 4 7. Maersk 0.8 7 8.
We estimate that our lease mark-to-market is approximately 67% (on a net effective basis), which represents the growth rate from in-place rents to current market rents based on our share of the O&M portfolio at December 31, 2022.
We estimate that our lease mark-to-market is approximately 57% (on an NER basis), which represents the growth rate from in-place rents to current market rents based on our share of the O&M portfolio at December 31, 2023.
Our teams actively manage our portfolio and provide comprehensive real estate services, including leasing, property management, development, acquisitions and dispositions. We invest significant capital into new logistics properties principally through our 3 Table of Contents development activity and third-party acquisitions.
Our teams actively manage our portfolio by providing comprehensive real estate services, including leasing, property management, development, acquisitions and dispositions. We also invest significant capital into new logistics properties through our development activity and third-party acquisitions.
We expect rents in our markets to continue to increase due to healthy demand combined with low vacancy. Due to strong market rent growth over the last several years, our in-place leases have considerable upside potential to drive future organic NOI growth.
We do not have any significant promote opportunities in 2024. • Rent Growth. We expect rents in our markets to continue to increase due to demand and low vacancy. Due to strong market rent growth over the last several years, our in-place leases have considerable upside potential to drive future organic NOI growth.
At December 31, 2022, the gross book value of the operating portfolio held by our eight unconsolidated co-investment ventures was $49.3 billion across 488 million square feet. (1) G&A Expenses is a line item in the Consolidated Financial Statements.
At December 31, 2023, the gross book value of the operating portfolio held by our nine unconsolidated co-investment ventures was $53.1 billion across 507 million square feet. 6 Table of Contents (1) G&A Expenses is a line item in the Consolidated Financial Statements.
Uline 0.3 2 Top 25 Customers 22.3 122 Top 25 Customers 20.5 202 In our Strategic Capital Segment, we view our partners and investors as our customers. At December 31, 2022, we had 162 investors in our private equity ventures, several of which invest in multiple ventures. Our People Our people are the foundation of our business.
Mercado Libre 0.3 4 Top 25 Customers 22.4 126 Top 25 Customers 20.5 215 In our Strategic Capital Segment, we view our partners and investors as our customers. At December 31, 2023, we had 154 investors in our private equity ventures, several of which invest in multiple ventures. Our People Our people are the foundation of our business.
We plan to grow this business and increase revenues by increasing our assets under management in existing or new ventures. The majority of strategic capital revenues are generated outside the U.S.
Promote revenues are recognized when earned at the end of the promote period for the specific co-investment ventures. We plan to grow this business and increase revenues by increasing our assets under management in existing or new ventures. The majority of the strategic capital revenues are generated outside the U.S.
As properties are completed and leased, we expect to realize 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. We raise capital to support the long-term growth of the co-investment ventures while maintaining our own substantial investments in these vehicles.
As properties are completed and leased, we expect to realize 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.
We have also invested in facilities located at key transportation hubs on the edge of these major infill and urban areas and gateway distribution facilities that incorporate access to major sea and intermodal ports. 8 Table of Contents Below are the primary categories of goods in our consolidated real estate properties at December 31, 2022 .
We have also invested in facilities located at key transportation hubs on the edge of these major infill and urban areas and gateway distribution facilities that incorporate access to major sea and intermodal ports. 8 Table of Contents Below are the primary categories of goods in our consolidated real estate properties at December 31, 2023: (1) Primary categories do not sum to 100% as the difference is attributable to customers that do not clearly fall into a single category.
The following table summarizes our total number of employees at December 31, 2022: Geographies U.S. (1) 1,481 Other Americas 162 Europe 575 Asia 248 Total 2,466 (1) This includes employees who were based in the U.S. but also support other geographies.
The following table summarizes our total number of employees at December 31, 2023: Geographies U.S. (1) 1,538 Other Americas 173 Europe 605 Asia 258 Total 2,574 (1) This includes employees who were based in the U.S. but also support other geographies.
Asset management fees are 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.
We generate strategic capital revenues or fees from our unconsolidated co-investment ventures, principally through asset management and property management services. Asset management fees are 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.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE (“ESG”) Environmental We develop modern and efficient buildings with state-of-the-art technology to stay ahead of our customers’ needs, advance structural, transportation and energy requirements, and make progress on our own sustainability goals and objectives.
We have also set goals and objectives to support the communities in which we do business and employ strong governance practices. Environmental We develop modern and efficient buildings with state-of-the-art technology to stay ahead of our customers’ needs, advance structural, transportation and energy requirements, and make progress on our own sustainability goals and objectives.
The contribution of newly developed properties to our co-investment ventures and the sale of non-strategic properties to third parties allow s us to recycle capital into our development and acquisition activities.
Proceeds from the disposition of properties, generally through the contribution of newly developed properties to our co-investment ventures and the sales of non-strategic properties to third parties, allow us to recycle capital back into our investment activities.
We use adjusted G&A expenses as a percentage of the O&M portfolio (based on gross book value) to measure and evaluate our overhead costs. We believe we can continue to grow NOI and strategic capital revenues organically and through accretive development and acquisition activity while further reducing G&A as a percentage of our investments in real estate.
We 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.
In 2018, we set a goal to train 25,000 individuals by 2025 by partnering with leading public sector organizations and leveraging digital learning technologies to develop innovative training solutions. At December 31, 2022, under the program, we have trained approximately 21,000 individuals towards this goal. Beginning in 2019, we committed to spending 75,000 hours supporting our local communities by 2025.
In 2018, we set a goal to train 25,000 individuals by 2025 by partnering with leading public sector organizations and leveraging digital learning technologies to develop innovative training solutions. At December 31, 2023, under the program, we trained approximately 29,700 individuals towards this goal, resulting in us completing our goal two years early.
The nature of the services we are providing to our customers is expanding. The scale of our 1.2 billion square foot portfolio allows us to provide a platform of solutions to address challenges that companies face in global fulfillment today. Through Prologis Essentials, we focus on innovative ways to meet our customers’ operations, energy and sustainability, mobility and workforce needs.
Our 1.2 billion square foot portfolio has provided the foundation upon which we have built a platform of solutions to address challenges that our customers face in global fulfillment today. Through Prologis Essentials, we focus on innovative ways to meet our customers’ operations and energy and sustainability needs.
To achieve this goal, we enable our employees to spend 40 working hours a year to volunteer, including at our company-sponsored day of volunteering, where employees around the globe volunteer on projects to help in their local communities. At December 31, 2022, we have contributed in excess of 38,000 hours towards our goal.
Beginning in 2019, we committed to spending 75,000 hours supporting our local communities by 2025. To achieve this goal, we enable our employees to spend 40 working hours a year to volunteer, including at our company-sponsored day of service, where employees around the globe volunteer on projects to help in their local communities.
(1) NER is calculated using the estimated total cash to be received over the term of the lease divided by the lease term to determine the average amount of cash rent payments received per year. Amounts derived in a currency other than the U.S. dollar have been translated using the average rate from the previous twelve months.
(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 amortization of fair value lease adjustments 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.
As a result of the closely aligned portfolios and similar business strategy and our ability to scale, we integrated the Duke portfolio while adding minimal property management and general and administrative expenses (“G&A”). 4 Table of Contents Overview At December 31, 2022, we owned or had investments in, on a wholly-owned basis or through co-investment ventures, properties and development projects expected to total approximately 1.2 billion square feet across the following geographies: Throughout this discussion, we reflect amounts in the U.S. dollar, our reporting currency.
Our Global Presence At December 31, 2023, we owned or had investments in, on a wholly-owned basis or through co-investment ventures, properties and development projects expected to total approximately 1.2 billion square feet across the following geographies: 4 Table of Contents Throughout this discussion, we reflect amounts in the U.S. dollar, our reporting currency.
Along with this commitment, our employees completed more than 1,800 hours of information technology security, compliance and other ethics training. Our approach is reinforced by our Code of Ethics and Business Conduct, as described above. ENVIRONMENTAL MATTERS We are exposed to various environmental risks that may result in unanticipated losses and affect our operating results and financial condition.
Along with this commitment, our employees completed more than 1,800 hours of information technology security, compliance and other ethics training in 2023. Our approach is reinforced by our Code of Ethics and Business Conduct, as described above.
For development properties in our O&M portfolio that were approved by our Investment Committee after June 2021 and that reached stabilization during 2022, we certified 15% of our eligible developed and redeveloped buildings with green building certifications and the remaining 85% were scheduled for green building certification.
For development properties in our O&M portfolio that were approved by our Investment Committee after June 2021 and that reached stabilization during 2023, we certified 39% of our eligible developments and redevelopments with sustainable building certifications and 57% were scheduled for sustainable building certification, totaling 96% of eligible development and redevelopment.
U.S. Government 0.6 2 8. GXO 0.7 9 9. Wayfair 0.6 5 9. DSV Panalpina 0.7 7 10. Pepsi 0.5 3 10. Maersk 0.6 6 Top 10 Customers 16.4 86 Top 10 Customers 14.4 141 11. DHL 0.5 3 11. Kuehne + Nagel 0.6 7 12. GXO 0.5 4 12. Wal-Mart 0.5 6 13. Sycamore Partners (Staples) 0.4 3 13.
Wayfair 0.6 6 8. UPS 0.8 9 9. DSV Panalpina 0.6 2 9. GXO 0.8 10 10. NFI Industries 0.6 3 10. DSV Panalpina 0.8 8 Top 10 Customers 15.8 90 Top 10 Customers 14.5 148 11. Pepsi 0.6 3 11. Kuehne + Nagel 0.6 7 12. Maersk 0.5 3 12. Wal-Mart 0.6 7 13. GXO 0.5 4 13.
THE COMPANY Prologis is the global leader in logistics real estate with a focus on high-barrier, high-growth markets. We own, manage and develop well-located, high-quality logistics facilities in 19 countries across four continents. Our portfolio focuses on the world’s most vibrant centers of commerce and our scale across these locations allows us to better serve our customers’ diverse logistics requirements.
THE COMPANY Prologis is the global leader in logistics real estate with a focus on high-barrier, high-growth markets. We own, manage and develop well-located, high-quality logistics facilities in 19 countries across four continents.
We believe these services and solutions can deliver cost-savings and operational efficiencies, reduce energy and water consumption and decrease greenhouse gas emissions within our customers’ operations and across our own portfolio.
We regularly talk with customers on how Prologis can work with them to enhance the sustainability of their operations. We believe these services and solutions can deliver operational efficiencies, reduce energy and water consumption and decrease greenhouse gas emissions within our customers’ operations and across our own portfolio.
Primary categories do not sum to 100% as the difference is attributable to customers that do not clearly fall into a single category. 9 Table of Contents The following table details our top 25 customers for our consolidated and O&M real estate properties at December 31, 2022 (square feet in millions): Consolidated - Real Estate Segment Owned and Managed Top Customers % of NER Total Occupied Square Feet Top Customers % of NER Total Occupied Square Feet 1.
Additionally, primary categories are listed in order of the largest percentage of NER for each category type. 9 Table of Contents The following table details our top 25 customers for our consolidated and O&M real estate properties at December 31, 2023 (square feet in millions): Consolidated - Real Estate Segment Owned and Managed Top Customers % of NER Total Occupied Square Feet Top Customers % of NER Total Occupied Square Feet 1.
This includes new development and redevelopment of buildings to specifications that align with leading sustainable building standards and the implementation of energy solutions such as onsite solar generation , cool roofs, LED lighting, EV charging stations, waste diversion, recycling and xeriscaping. We regularly ask customers how Prologis can work with them to enhance the sustainability of their operations.
This includes new development and redevelopment of buildings that align with leading sustainable building standards and the implementation of solutions and services such as onsite solar generation, energy storage, heat pumps, cool roofs, LED lighting, EV charging stations and other mobility solutions, recycling and xeriscaping.
A successful development and redevelopment program requires sourcing well-located land and redevelopment sites through acquisition opportunities, including our innovative approach with Covered Land Plays, which are income producing assets acquired with the intention to redevelop for higher and better use as industrial properties. Our investment in the development portfolio was $4.2 billion at December 31, 2022.
One of the ways in which we create value is through our focus on sourcing well-located land and redevelopment sites through acquisition opportunities, including our innovative approach with Covered Land Plays ("CLP"), which are income producing assets acquired with the intention to redevelop for higher and better use as industrial properties.
In 2022, more than 2,000 employees completed more than 7,400 hours of company-provided or company-sponsored learning and development training. We provide opportunities for our employees to share their perspectives and feedback on our company and their work experience.
Providing our employees learning and development through training, educational opportunities and mentorship is critical to our ability to continue to innovate. In 2023, more than 1,600 employees completed more than 13,600 hours of company-provided or company-sponsored learning and development training. We provide opportunities for our employees to share their insights and perspectives on our company and their work experience.
Competitively priced logistics space could impact our occupancy rates and have an adverse effect on how much rent we can charge, which in turn could affect our operating results. We face competition regarding our capital deployment activities, including regional, national and global operators and developers. We also face competition from investment managers for institutional capital within our strategic capital business.
Competition Real estate ownership is highly fragmented, and we face competition from many owners and operators. Competitively priced logistics space could impact our occupancy rates and have an adverse effect on how much rent we can charge, which in turn could affect our operating results.
We work in partnership with local leaders and organizations to create jobs and job training programs; promote health and safety; and enhance recreational and transit infrastructure. We believe these efforts help create a more stable and predictable business environment for Prologis and our customers and support social wellness and well-being in the communities we serve.
We believe these efforts help create a more stable and predictable business environment for Prologis and our customers, drive economic development and support social wellness and well-being in the communities we serve.
Partnering with the world’s largest institutional investors through co-investment ventures allows us to enhance and diversify our real estate returns as well as mitigate our exposure to foreign currency movements. Logistics supply chains have increased dramatically in importance to our customers and the global economy.
Partnering with 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.
Either the previous owners or we have conducted environmental reviews on a majority of the properties we have acquired, including land. While some of these assessments have led to further investigation and sampling, none of the environmental assessments have revealed an environmental liability that we believe would have a material adverse effect beyond amounts recorded at December 31, 2022.
While some of these assessments have led to further investigation and sampling, none of the environmental assessments have revealed an environmental liability that we believe would have a material adverse effect beyond amounts recorded at December 31, 2023. See further discussion in Item 1A. Risk Factors and Note 16 to the Consolidated Financial Statements in Item 8.
We believe that the carrying value of our land bank is below its current fair value. Based on our current estimates, our consolidated land, including options and Covered Land Plays, has the potential to support the development of $34.2 billion ($39.0 billion on an O&M basis) of TEI of new logistics space.
Based on our current estimates, our consolidated land, including options and CLP, has the potential to support the development of $35.7 billion ($40.0 billion on an O&M basis) of TEI of new logistics space. We measure the estimated value creation of a development project as the stabilized value above our TEI.
Therefore, even if there was no additional market rent growth in the future, we expect our lease renewals to translate into significant increases in future income.
Therefore, even if there was no additional market rent growth in the future, we expect our lease renewals to translate into significant increases in future rental income. • Value Creation from Development. The global nature of our development program provides a wide landscape of opportunities to pursue based on our judgment of market conditions, opportunities and risks.
Through our refinancing activities we have substantially addressed all our debt maturities until 2026 and have taken advantage of previously low interest rates. At December 31, 2022, we had total available liquidity of $4.1 billion. We continue to maintain low leverage as a percentage of our real estate investments and our market capitalization.
At December 31, 2023, we had total available liquidity of $6.0 billion. We continue to maintain low leverage as a percentage of our real estate investments and our market capitalization.
We align our interests with our partners by holding significant ownership interests in all of our eight unconsolidated co-investment ventures (ranging from 15% to 50%). This structure allows us to reduce our exposure to foreign currency movements for investments outside the U.S.
We align our interests with our partners by holding significant ownership interests in our nine unconsolidated co-investment ventures (ranging from 15% to 50%).
U.S. Government 0.5 4 14. DSV Panalpina 0.4 2 14. Cainiao (Alibaba) 0.5 5 15. Ryder System 0.4 2 15. DB Schenker 0.4 5 16. CEVA Logistics 0.4 3 16. NFI Industries 0.4 3 17. Uline 0.4 1 17. Hitachi 0.4 4 18. Berkshire Hathaway 0.4 3 18. XPO Logistics 0.4 4 19. Target 0.4 2 19.
ZOZO 0.4 5 14. U.S. Government 0.5 2 14. DB Schenker 0.4 6 15. Ryder 0.5 2 15. U.S. Government 0.4 3 16. Berkshire Hathaway 0.5 3 16. Wayfair 0.4 6 17. Lululemon 0.4 2 17. Pepsi 0.4 3 18. Samsung 0.4 3 18. Nippon Express 0.4 4 19. OnTrac 0.4 1 19. Cainiao (Alibaba) 0.4 5 20.
This segment produces durable, long-term cash flows and generally contributes 10% to 15% of our recurring consolidated revenues, earnings and FFO, all while requiring minimal capital other than our investment in the venture. We generate strategic capital revenues from our unconsolidated co-investment ventures, principally through asset management and property management services.
This structure allows us to reduce our exposure to foreign currency movements for investments outside the U.S. 5 Table of Contents This segment produces durable, long-term cash flows and generally contributes 10% to 15% of our consolidated revenues, earnings and FFO, excluding promotes, all while requiring minimal capital other than our investment in the venture.
Both of these metrics exclude the operating properties acquired in the Duke Transaction and by Prologis European Logistics Fund ( “ PELF”) in September 2022. 11 Table of Contents To fund our sustainable development activities, we have utilized the proceeds from senior notes issuances to finance green projects eligible under our green bond framework.
To fund our sustainable development activities, we have utilized the proceeds from certain senior notes issuances to finance green projects eligible under our green bond framework.
We believe our Prologis Essentials LED and SolarSmart solutions create energy savings, help reduce the environmental footprint of our customers and accelerate our progress in these areas. At December 31, 2022, we had installed LED lighting across more than 70% of our logistics facilities within our O&M operating properties.
We believe our Prologis Essentials LED and SolarSmart solutions, which provide our customers with energy solutions and savings through efficient lighting and solar panels on our rooftops, help reduce the environmental footprint of our customers and accelerate our progress in these areas.
The following charts display diversity by levels of seniority of our workforce at December 31, 2022: 10 Table of Contents (1) Managers include employees with manager, director or vice president titles. Senior leaders include employees with senior vice president or higher titles. We focus on learning and development at every level of the organization.
We conduct annual pay equity analyses that cover women and people of color and aim to address differences in compensation not explained by relevant job factors accordingly. 10 Table of Contents The following charts display diversity by levels of seniority of our workforce at December 31, 2023: (1) Managers include employees with manager, director or vice president titles.
Our customer experience teams, proprietary technology and strategic partnerships are foundational to Prologis Essentials and allow us to provide our customers with unique and actionable insights to drive greater efficiency in their operations. Our long-standing dedication to Environmental, Social and Governance (“ESG”) practices strengthens our relationships with our customers, investors, employees and the communities in which we do business.
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.
We align employees’ goals with our overall strategic direction to create a clear link between individual efforts and the long-term success of the company. We then provide feedback on their performance towards those goals to ensure their growth. Providing our employees learning and development through training, educational opportunities and mentorship is critical to our ability to continue to innovate.
Senior leaders include employees with senior vice president or higher titles. We focus on learning and development at every level of the organization. We align employees’ goals with our overall strategic direction to create a clear link between individual efforts and the long-term success of the company.
In support of carbon neutral construction, we will pursue sustainable design, new construction practices and innovation in building materials, as well as purchase high-quality carbon offsets for emissions that cannot yet be eliminated. Social We are committed to social responsibility and strengthening relationships important to our business through customer partnerships, investor outreach, community involvement, labor solutions, and DEIB initiatives.
Social We are committed to social responsibility and strengthening relationships important to our business through customer partnerships, investor outreach, community involvement, supplier engagement, labor solutions, and DEIB initiatives, as discussed above.
We are focused on creating value beyond real estate by enhancing our customers’ experience, leveraging our scale to obtain procurement savings and innovating through data analytics and digitization efforts. This includes investments in early and growth-stage companies that are focused on emerging technology.
We increased our O&M portfolio significantly in the fourth quarter of 2022 as a result of the acquisition and had minimal increases to G&A expenses. • 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.
Through Prologis Essentials we support our customers through service and product offerings, including innovative solutions to operations, energy and sustainability, mobility and workforce that can make our customers’ decision process easier and their enterprise more efficient. Competition Real estate ownership is highly fragmented, and we face competition from many owners and operators.
This includes investments in early and growth-stage companies that are focused on emerging technologies for the logistics sector. Through Prologis Essentials, we support our customers through service and product offerings, including innovative solutions to operations and energy and sustainability needs that can make our customers’ decision process easier while progressing on their environmental goals.
Nippon Express 0.4 3 20. Office Depot 0.4 3 20. ZOZO 0.4 4 21. Kellogg 0.4 3 21. Mercado Libre 0.4 4 22. Toyo Tires 0.4 1 22. Pepsi 0.3 3 23. Kuehne + Nagel 0.3 2 23. Wayfair 0.3 5 24. Iron Mountain 0.3 2 24. Nippon Kabushika Kaisha (Yusen Logistics) 0.3 2 25. Best Buy 0.3 2 25.
Kellogg 0.4 3 20. NFI Industries 0.4 3 21. Tesla 0.4 1 21. Samsung 0.4 5 22. CEVA Logistics 0.4 3 22. Ryder 0.3 3 23. Uline 0.4 2 23. Tesla 0.3 2 24. Kuehne + Nagel 0.4 2 24. Logisteed 0.3 4 25. Target 0.3 2 25.
Removed
The principles of ESG are an important aspect of our business strategy that we believe delivers a strategic business advantage while positively impacting the environment. 2022 Significant Acquisition On October 3, 2022, we acquired Duke Realty Corporation and Duke Realty Limited Partnership (collectively “Duke”) through a merger transaction that we refer to as the “Duke Transaction” and is detailed in Note 3 to the Consolidated Financial Statements in Item 8.
Added
Our portfolio focuses on the world’s most vibrant centers of commerce and our scale across these locations allows us to better serve our customers’ diverse logistics requirements. 3 Table of Contents The importance of logistics supply chains has increased dramatically to our customers and the global economy.
Removed
Financial Statements and Supplementary Data . Our financial condition and operating results include the Duke properties subsequent to the acquisition date. The Duke portfolio was primarily comprised of logistics real estate assets, including 494 industrial operating properties, aggregating 144 million square feet and was highly complementary to our U.S. portfolio in terms of product quality, location and growth potential.
Added
Finally, our long-standing dedication to Environmental, Social and Governance (“ESG”) practices creates value for our customers, investors, employees and the communities in which we do business. The principles of ESG are an important aspect of our business strategy that we believe delivers a strategic business advantage.
Removed
There was approximately 15 million square feet of non-strategic industrial operating properties that we do not intend to hold long-term and are classified as other real estate investments. The portfolio also included properties under development, land for future development and investments in other ventures.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeWe attempt to mitigate our risk by borrowing in the currencies in which we have significant investments thereby providing a natural hedge. We may also enter into derivative financial instruments that we designate as net investment hedges, as these amounts offset the translation adjustments on the underlying net assets of our foreign investments.
Biggest changeWe may also enter into derivative financial instruments that we designate as net investment hedges, as these amounts offset the translation adjustments on the underlying net assets of our foreign investments. We enter into other foreign currency contracts, such as forwards, to reduce fluctuations in foreign currency cash flow associated with the translation of future earnings of our international subsidiaries.
The real estate development, renovation and redevelopment business includes the following significant risks: • we may not be able to obtain financing for development projects on favorable terms or at all; • we may explore development opportunities that may be abandoned and the related investment impaired; • we may not be able to obtain, or may experience delays in obtaining, all necessary zoning, land-use, building, occupancy and other governmental permits and authorizations; • we may incur higher construction costs, due primarily to this inflationary environment, or additional costs related to regulation that exceed our estimates and projects may not be completed, delivered or stabilized as planned due to defects or other issues; • we may not be able to attract third-party investment in new development co-investment ventures or sufficient customer demand for our product; • we may have properties that perform below anticipated levels, producing cash flows below budgeted amounts; • we may seek to sell certain land parcels and not be able to find a third party to acquire such land or the sales price will not allow us to recover our investment, resulting in impairment charges; • we may not be able to lease properties we develop on favorable terms or at all; 16 Table of Contents • we may not be able to capture the anticipated enhanced value created by our value-added properties on expected timetables or at all; • we may experience delays (temporary or permanent) if there is public or government opposition to our activities; and • we may have substantial renovation, new development and redevelopment activities, regardless of their ultimate success, that require a significant amount of management’s time and attention, diverting their attention from our day-to-day operations.
The real estate development, renovation and redevelopment business includes the following significant risks: • we may not be able to obtain financing for development projects on favorable terms or at all; • we may explore development opportunities that may be abandoned and the related investment impaired; • we may not be able to obtain, or may experience delays in obtaining, all necessary zoning, land-use, building, occupancy and other governmental permits and authorizations; • we may incur higher construction costs, due primarily to this inflationary environment, or additional costs related to regulation that exceed our estimates and projects may not be completed, delivered or stabilized as planned due to defects or other issues; • we may not be able to attract third-party investment in new development co-investment ventures or sufficient customer demand for our product; • we may have properties that perform below anticipated levels, producing cash flows below budgeted amounts; • we may seek to sell certain land parcels and not be able to find a third party to acquire such land or the sales price will not allow us to recover our investment, resulting in impairment charges; • we may not be able to lease properties we develop on favorable terms or at all; • we may not be able to capture the anticipated enhanced value created by our value-added properties on expected timetables or at all; 17 Table of Contents • we may experience delays (temporary or permanent) if there is public or government opposition to our activities; and • we may have substantial renovation, new development and redevelopment activities, regardless of their ultimate success, that require a significant amount of management’s time and attention, diverting their attention from our day-to-day operations.
Third-party security events at vendors, sub-processors, and service providers could also impact our data and operations via unauthorized access to information or disruption of services which may ultimately result in financial losses. Despite training, detection systems and response procedures, an increase in email attacks (phishing and business email compromise) may create disruption to our business and financial risk.
Third-party security events at vendors, sub-processors, and service providers could also impact our data and operations via unauthorized access to information or disruption of services which may ultimately result in losses. Despite training, detection systems and response procedures, an increase in email attacks (phishing and business email compromise) may create disruption to our business, financial and reputational risk.
Despite system redundancy, the implementation of security measures and the existence of a disaster recovery plan for our internal and hosted information technology systems, our systems are vulnerable to damages from any number of sources, including energy blackouts, natural disasters, terrorism, war, telecommunication failures and cyber security attacks, such as malware, ransomware, or unauthorized access.
Despite system redundancy, the implementation of security measures and the existence of a disaster recovery plan for our internal and hosted information technology systems, our systems are vulnerable to damages from any number of sources, including energy blackouts, natural disasters, terrorism, war, telecommunication failures and cybersecurity attacks, such as malware, ransomware, or unauthorized access.
Any such losses or higher insurance costs could adversely affect our business. A number of our investments, both wholly-owned and owned through co-investment ventures, are located in areas that are known to be subject to earthquake activity. U.S. properties located in active seismic areas include properties in our markets in California and Seattle.
Any such losses or higher insurance costs could adversely affect our business. A number of our investments, both wholly owned and owned through co-investment ventures, are located in areas that are known to be subject to earthquake activity. U.S. properties located in active seismic areas include properties in our markets in California and Washington.
If we experience a loss that is uninsured or that exceeds insured limits with respect to one or more of our properties or if the insurance companies fail to meet their coverage commitments to us in the event of an insured loss, then we could lose the capital invested in the damaged properties, as well as the anticipated future revenues from those properties and, if there is recourse debt, then we would remain obligated for any mortgage debt or other financial obligations related to the properties.
If we experience a loss that is uninsured or that exceeds insured limits with respect to one or more of our properties or if the insurance companies fail to meet their coverage commitments to us in the event of an insured loss, then we could lose the capital invested in the damaged properties, as well as the anticipated future revenues from those properties and, if there 19 Table of Contents is recourse debt, then we would remain obligated for any mortgage debt or other financial obligations related to the properties.
To the extent there is turmoil in the global financial markets, this turmoil has the potential to adversely affect (i) the value of our properties; (ii) the availability or the terms of financing that we have or may anticipate utilizing; (iii) our ability to make principal and interest payments on, or refinance any outstanding debt when due; and (iv) the ability of our customers to enter into new leasing transactions or satisfy rental payments under existing leases.
To the extent there is turmoil in the global financial markets, this turmoil has the potential to adversely affect (i) the value of our properties; (ii) the availability or the terms of financing that we have or may anticipate utilizing; (iii) our ability to make principal and 14 Table of Contents interest payments on, or refinance any outstanding debt when due; and (iv) the ability of our customers to enter into new leasing transactions or satisfy rental payments under existing leases.
Our logistics facilities and the global supply chain may be exposed to catastrophic weather events, such as severe storms, fires or floods. If the frequency of extreme weather events increases, our exposure to these events could increase.
Our logistics facilities and the global supply chain are and may continue to be exposed to catastrophic weather events, such as severe storms, fires or floods. If the frequency of extreme weather events increases, our exposure to these events could increase.
These risks relate to Prologis as well as our investments in consolidated and unconsolidated entities and include among others, (i) risks related to our global operations (ii) risks related to our business; (iii) risks related to financing and capital; (iv) risks related to income taxes; and (v) general risks.
These risks relate to Prologis as well as our investments in consolidated and unconsolidated entities and include among others, (i) risks related to our global operations (ii) risks related to our business; (iii) risks related to financing and capital; and (iv) risks related to income taxes.
If we default under the covenant provisions and are unable to cure the default, refinance the indebtedness or meet payment obligations, our business and financial condition generally and, in particular, the amount of our distributable cash flow could be adversely affected. Adverse changes in our credit ratings could negatively affect our financing activity.
If we default under the covenant provisions and are unable to cure the default, refinance the indebtedness or meet payment obligations, our business and financial condition generally and, in particular, the amount of our distributable cash flow could be adversely affected. 20 Table of Contents Adverse changes in our credit ratings could negatively affect our financing activity.
Provided that each subsidiary REIT qualifies as a REIT, our interest in such subsidiary REIT will be treated as a qualifying real estate asset for purposes of the REIT asset tests, and any dividend income or gains derived by us from such subsidiary REIT will generally be treated as income that qualifies for purposes of the REIT 95% and 75% gross income tests.
Provided that each subsidiary REIT qualifies as a REIT, our interest in such subsidiary REIT will be treated as a qualifying real estate asset for purposes of the REIT asset tests, and any dividend income or gains derived by us from such subsidiary 21 Table of Contents REIT will generally be treated as income that qualifies for purposes of the REIT 95% and 75% gross income tests.
ITEM 1A. Risk Factors Our operations and structure involve various risks that could adversely affect our business and financial condition, including but not limited to, our financial position, results of operations, cash flow, ability to make distributions and payments to security holders and the market value of our securities.
ITEM 1A. Ri sk Factors Our operations and structure involve various risks that could adversely affect our business and financial condition, including but not limited to, our financial position, results of operations, cash flow, ability to make distributions and payments to security holders and the market value of our securities.
A customer may experience a downturn in its business, which may cause the loss of the customer or may weaken its financial condition, resulting in the customer’s failure to make rental payments when due or requiring a restructuring that might reduce cash flow from the lease.
A customer may experience a downturn in its business, 16 Table of Contents which may cause the loss of the customer or may weaken its financial condition, resulting in the customer’s failure to make rental payments when due or requiring a restructuring that might reduce cash flow from the lease.
These short-term 18 Table of Contents borrowing needs could result from differences in timing between the actual receipt of cash and inclusion of income for federal income tax purposes, or the effect of nondeductible capital expenditures, the creation of reserves or required debt or amortization payments.
These short-term borrowing needs could result from differences in timing between the actual receipt of cash and inclusion of income for federal income tax purposes, or the effect of nondeductible capital expenditures, the creation of reserves or required debt or amortization payments.
We hold significant real estate investments in international markets where the U.S. dollar is not the functional currency. At December 31, 2022, approximately $10.2 billion or 11.6% of our total consolidated assets were invested in a currency other than the U.S. dollar, principally the British pound sterling, Canadian dollar, euro and Japanese yen.
We hold significant real estate investments in international markets where the U.S. dollar is not the functional currency. At December 31, 2023, approximately $10.6 billion or 11.4% of our total consolidated assets were invested in a currency other than the U.S. dollar, principally the British pound sterling, Canadian dollar, euro, and Japanese yen.
We cannot give any assurance that other such conditions do not exist or may not arise in the future. The potential impacts of future climate change on our real estate properties could adversely affect our ability to lease, develop or sell such properties or to borrow using such properties as collateral. 21 Table of Contents
We cannot give any assurance that other such conditions do not exist or may not arise in the future. The impacts of climate change on our real estate properties could adversely affect our ability to lease, develop or sell such properties or to borrow using such properties as collateral.
Historically, we have satisfied these distribution requirements by making cash distributions to our stockholders, but we may choose to satisfy these requirements by making distributions of cash or 19 Table of Contents other property, including, in limited circumstances, our own stock.
Historically, we have satisfied these distribution requirements by making cash distributions to our stockholders, but we may choose to satisfy these requirements by making distributions of cash or other property, including, in limited circumstances, our own stock.
The provisions of the I RC and applicable Treasury regulations regarding qualification as a REIT are more complicated for Prologis, Inc. because we hold substantially all of our assets through the OP.
The provisions of the IRC and applicable Treasury regulations regarding qualification as a REIT are more complicated for Prologis, Inc. because we hold substantially all of our assets through the OP.
These factors may affect our ability to recover our investment in the properties and result in impairment charges. 15 Table of Contents Our customers may be unable to meet their lease obligations or we may be unable to lease vacant space or renew leases or re-lease space on favorable terms as leases expire.
These factors may affect our ability to recover our investment in the properties and result in impairment charges. Our customers may be unable to meet their lease obligations, we may be unable to lease vacant space or renew leases or re-lease space on favorable terms as leases expire.
Any prolonged economic downturn, escalation of the outbreak or disruption in the financial markets may also impact our ability to access capital markets to issue debt or equity securities and to complete real estate transactions at attractive pricing or at all. These items may materially and adversely affect our financial condition, results of operations, cash flows and real estate values.
Any prolonged economic downturn, disruption in the financial markets or public health crises may also impact our ability to access capital markets to issue debt or equity securities and to complete real estate transactions at attractive pricing or at all. These items may materially and adversely affect our financial condition, results of operations, cash flows and real estate values.
Of these markets, no single market contributed more than 10% of our total 14 Table of Contents consolidated investment before depreciation in operating properties , with the exception of New Jersey/New York City . Our operating performance could be adversely affected if conditions become less favorable in any of the markets in which we have a concentration of properties.
Of these markets, no single market contributed more than 10% of our total consolidated investment before depreciation in operating properties, with the exception of New Jersey/New York City at 10.6%. Our operating performance could be adversely affected if conditions become less favorable in any of the markets in which we have a concentration of properties.
We are subject to risks and liabilities in connection with forming and attracting third-party investment in co-investment ventures, investing in new or existing co-investment ventures, and managing properties through co-investment ventures. At December 31, 2022, we had investments in co-investment ventures, both public and private, that owned real estate with a gross book value of approximately $59.6 billion.
We are subject to risks and liabilities in connection with forming and attracting third-party investment in co-investment ventures, investing in new or existing co-investment ventures, and managing properties through co-investment ventures. At December 31, 2023, we had investments in co-investment ventures, both public and private, that owned real estate with a gross book value of approximately $62.9 billion.
We cannot predict the extent to which global pandemics may impact our business and operating results and that of our co-investment ventures, but their impact may include the following: 20 Table of Contents • Existing customers and potential customers of our logistics facilities may be adversely affected by the decrease in economic activity, which in turn could disrupt their business and their ability to enter into new leasing transactions or satisfy rental payments; • Government, labor or other restrictions may prevent us from completing the development or leasing of properties currently under development or making our properties ready for our customers to move in; • Our ability to recover our investments in real estate assets may be impacted by current market conditions; • Increases in material costs as a result of labor shortages and supply chain disruptions may make the development of properties more costly than we originally budgeted; and • Our workforce, including our executives, may become ill or have difficulty working remotely, caring for our properties and/or customers.
We cannot predict the extent to which these social, geopolitical and economic risks may impact our business and operating results and that of our co-investment ventures, but their impact may include the following: • existing customers and potential customers of our logistics facilities may be adversely affected by the decrease in economic activity, changes in regulation or disruptions in the supply chain, which in turn could disrupt their business and their ability to enter into new leasing transactions or satisfy rental payments; • government, labor or other restrictions may prevent us from completing the development or leasing of properties currently under development or making our properties ready for our customers to move in; • our ability to recover our investments in real estate assets may be impacted by current market conditions; • increases in material costs as a result of labor shortages and supply chain disruptions may make the development of properties more costly than we originally budgeted or impact transportation routes of our suppliers or our customers; and • our workforce, including our executives, may become ill or have difficulty working remotely, caring for our properties and/or customers creating inefficiencies, delays or disruptions in our business.
We are exposed to the potential impacts of future climate change and could be required to implement new or stricter regulations, which may result in unanticipated losses that could affect our business and financial condition. We are also exposed to potential physical risks from possible future changes in climate.
We are exposed to the impacts of climate change and could be required to comply with new or stricter regulations, which may result in unanticipated losses that could affect our business and financial condition. We are also exposed to physical risks from changes in climate.
Real estate investments are not as liquid as certain other types of assets, which may reduce economic returns to investors. Real estate investments are not as liquid as certain other types of investments and this lack of liquidity may limit our ability to react promptly to changes in economic or other conditions.
Real estate investments are not as liquid as certain other types of investments and this lack of liquidity may limit our ability to react promptly to changes in economic or other conditions.
Our operating results and distributable cash flow would be adversely affected if a significant number of our customers were unable to meet their lease obligations. At December 31, 2022, our top 10 customers accounted for 16.4% of our consolidated NER and 14.4% of our O&M NER.
Our operating results and distributable cash flow would be adversely affected if a significant number of our customers were unable to meet their lease obligations. At December 31, 2023, our top 10 customers accounted for 15.8% of our consolidated NER and 14.5% of our O&M NER.
At December 31, 2022, 30.3% of our consolidated operating properties or $21.0 billion (based on consolidated gross book value, or investment before depreciation) were located in California (Central Valley, San Francisco Bay Area and Southern California markets), which represented 23.6% of the aggregate square footage of our operating properties and 33.0% of our consolidated operating property NOI.
At December 31, 2023, 30.0% of our consolidated operating properties or $22.7 billion (based on consolidated gross book value, or investment before depreciation) were located in California (Central Valley, San Francisco Bay Area and Southern California markets), which represented 23.2% of the aggregate square footage of our operating properties and 31.7% of our consolidated operating property NOI.
Our business and operations could suffer in the event of system failures or cyber security attacks.
Our business and operations could suffer in the event of system failures or cybersecurity attacks.
Circumstances and developments related to international operations that could negatively affect us include, but are not limited to, the following factors: • difficulties and costs of staffing and managing international operations in certain geographies, including differing employment practices and labor issues; • local businesses and cultural factors that differ from our domestic standards and practices; • volatility in currencies and currency restrictions, which may prevent the availability of capital or the transfer of profits to the U.S.; • challenges in establishing effective controls and procedures to regulate operations in different geographies and to monitor compliance with applicable regulations, such as the Foreign Corrupt Practices Act, the United Kingdom (“U.K.”) Bribery Act and other similar laws; • unexpected changes in regulatory and environmental requirements, taxes, tariffs, trade wars and laws within the countries in which we operate; • the responsibility of complying with multiple and potentially conflicting laws, e.g., with respect to corrupt practices, employment and licensing; • the impact of regional or country-specific business cycles, military conflicts and economic instability, including government shutdowns and withdrawals from the European Union or other international trade alliances or agreements; • political instability, uncertainty over property rights, civil unrest, drug trafficking, political activism or the continuation or escalation of terrorist or gang activities; • foreign ownership restrictions in operations with the respective countries; and • access to capital may be more restricted, or unavailable on favorable terms or at all in certain locations.
Circumstances and developments related to international operations that could negatively affect us include, but are not limited to, the following factors: • difficulties and costs of staffing and managing international operations in certain geographies, including differing employment practices and labor issues; • local businesses and cultural factors that differ from our domestic standards and practices; • volatility in currencies and currency restrictions, which may prevent the availability of capital or the transfer of profits to the U.S.; 13 Table of Contents • challenges in establishing effective controls and procedures to regulate operations in different geographies and to monitor compliance with applicable regulations, such as the Foreign Corrupt Practices Act, the United Kingdom (“U.K.”) Bribery Act and other similar laws; • changes in regulatory and environmental requirements, taxes, tariffs, trade wars and laws within the countries in which we operate; • the responsibility of complying with multiple and potentially conflicting laws, e.g., with respect to corrupt practices, human rights, employment and licensing; • changes in general economic conditions from inflation, elevated interest rates, regional or country-specific business cycles, supply chain disruptions, economic downturns or recessions and economic instability, including government shutdowns and withdrawals from the European Union or other international trade alliances or agreements; • political instability, uncertainty over property rights, territorial disputes, military conflict, war or expansion of hostilities, civil unrest, drug trafficking, political activism or the continuation or escalation of terrorist or gang activities; • public health crises, such as outbreaks of global pandemics or contagious diseases; • foreign ownership restrictions in operations with the respective countries; and • access to capital may be more restricted, or unavailable on favorable terms or at all in certain locations.
For the year ended December 31, 2022, $762.4 million or 17.2% of our total consolidated segment NOI was denominated in a currency other than the U.S. dollar. See Note 17 to the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data for more information on these amounts.
For the year ended December 31, 2023, $303.7 million or 5.1% of our total consolidated segment NOI was denominated in a currency other than the U.S. dollar. See Note 17 to the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data for more information on these amounts.
At December 31, 2022, our credit ratings were A3 from Moody’s with a stable outlook and A from S&P with a stable outlook. 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.
Our credit ratings at December 31, 2023 were A and A3 from Standard & Poor's and Moody’s, respectively, each with a stable outlook. 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.
Deficiencies, including any material weakness, in our internal control over financial reporting that may occur in the future could result in misstatements or restatements of our financial statements or a decline in the price of our securities.
Deficiencies, including any material weakness, in our internal control over financial reporting that may occur in the future could result in misstatements or restatements of our financial statements or a decline in the price of our securities. Risks associated with our dependence on key personnel.
This limitation may hinder our ability to make certain attractive investments, including the purchase of non-qualifying assets, the expansion of non-real estate activities and investments in the businesses to be conducted by our TRSs, and to that extent limit our opportunities. General Risks Our business may be materially and adversely affected by the impact of global pandemics.
This limitation may hinder our ability to make certain attractive investments, including the purchase of non-qualifying assets, the expansion of non-real estate activities and investments in the businesses to be conducted by our TRSs, and to that extent limit our opportunities.
Risks Related to our Global Operations As a global company, we are subject to social, political and economic risks of doing business in many countries. We conduct a significant portion of our business and employ a substantial number of people outside of the U.S.
Risks Related to our Global Operations As a global company, we are subject to social, geopolitical and economic risks of doing business in many countries and our results of operations and financial condition may be materially and adversely affected. We conduct a significant portion of our business and employ a substantial number of people outside of the U.S.
We are required to comply with many regulations in different countries, including (but not limited to) the Foreign Corrupt Practices Act, the U.K. Bribery Act and similar laws and regulations.
Compliance or failure to comply with regulatory requirements could result in substantial costs. We are required to comply with many regulations in different countries, including (but not limited to) the Foreign Corrupt Practices Act, the U.K. Bribery Act and similar laws and regulations.
In addition, we may be impacted by the ability of our non-U.S. subsidiaries to dividend or otherwise transfer cash among our subsidiaries due to currency exchange control regulations, transfer pricing regulations and potentially adverse tax consequences, among other factors. 13 Table of Contents Compliance or failure to comply with regulatory requirements could result in substantial costs.
In addition, we may be impacted by the ability of our non-U.S. subsidiaries to dividend or otherwise transfer cash among our subsidiaries due to currency exchange control regulations, transfer pricing regulations and potentially adverse tax consequences, among other factors.
In connection with certain divested properties, we have agreed to remain responsible for, and to bear the cost of, remediating or monitoring certain environmental conditions on the properties. Our insurance coverage does not cover all potential losses.
In connection with certain divested properties, we have agreed to remain responsible for, and to bear the cost of, remediating or monitoring certain environmental conditions on the properties.
A significant change in the value of the foreign currency of one or more countries where we have a significant investment may have a material adverse effect on our business and, specifically, our U.S. dollar reported financial position and results of operations. Our hedging of foreign currency and interest rate risk may not effectively limit our exposure to these risks.
While we endeavor to manage this risk through our hedging and financing activities, a significant change in the value of the foreign currency of one or more countries where we have a significant investment may have a material adverse effect on our business and, specifically, our U.S. dollar reported financial position and results of operations.
We may acquire properties and companies that involve risks that could adversely affect our business and financial condition. We have acquired properties and will continue to acquire properties through the direct acquisition of real estate, the acquisition of entities that own real estate or through additional investments in co-investment ventures that acquire properties.
We have acquired properties and will continue to acquire properties through the direct acquisition of real estate, the acquisition of entities that own real estate or through additional investments in co-investment ventures that acquire properties.
The design and effectiveness of our disclosure controls and procedures and internal control over financial reporting may not prevent all errors, misstatements or misrepresentations.
Our business could be adversely impacted if we have deficiencies in our disclosure controls and procedures or internal control over financial reporting. The design and effectiveness of our disclosure controls and procedures and internal control over financial reporting may not prevent all errors, misstatements or misrepresentations.
Our O&M portfolio, which includes our consolidated properties and properties owned by our unconsolidated co-investment ventures, has concentrations of properties in the same markets mentioned above, as well as in markets in Japan and the U.K., and are subject to the economic conditions in those markets.
Our O&M portfolio, which includes our consolidated properties and properties owned by our unconsolidated co-investment ventures, has concentrations of properties in the same markets mentioned above, as well as in markets in Japan and the U.K., and are subject to the economic conditions in those markets. 15 Table of Contents Real estate investments are not as liquid as certain other types of assets, which may reduce economic returns to investors.
If we are unable to continue to attract and retain our executive officers, or if compensation costs required to attract and retain key employees become more expensive, our performance and competitive position could be materially adversely affected. Our business could be adversely impacted if we have deficiencies in our disclosure controls and procedures or internal control over financial reporting.
If we are unable to continue to attract and retain our executive officers or other key employees, or if compensation costs required to attract and retain such personnel become more expensive, our performance and competitive position could be materially adversely affected.
Environmental laws in some countries, including the U.S., also require that owners or operators of buildings containing asbestos properly manage and maintain the asbestos, adequately inform or train those who may come into contact with asbestos and undertake special precautions, including removal or other abatement, in the event that asbestos is disturbed during building renovation or demolition.
In addition, third parties may sue the owner or operator of a site for damages based on personal injury, property damage or other costs, including investigation and clean-up costs, resulting from the environmental contamination. 18 Table of Contents Environmental laws in some countries, including the U.S., also require that owners or operators of buildings containing asbestos properly manage and maintain the asbestos, adequately inform or train those who may come into contact with asbestos and undertake special precautions, including removal or other abatement, in the event that asbestos is disturbed during building renovation or demolition.
Additionally, remediation costs for security events may not be covered by our insurance. Risks associated with our dependence on key personnel. We depend on the deep industry knowledge and the efforts of our executive officers and other key employees. From time to time, our personnel and their roles may change.
We depend on the deep industry knowledge and the efforts of our executive officers and other key employees. From time to time, our personnel and their roles may change.
During 2022, we generated approximately $1.0 billion or 17.3% of our consolidated revenues from operations outside the U.S.
During 2023, we generated approximately $632 million or 7.9% of our consolidated revenues from operations outside the U.S.
In addition, we occasionally use interest rate swap contracts to manage interest rate risk and limit the impact of future interest rate changes on earnings and cash flows.
Although we attempt to mitigate the potential adverse effects of changes in foreign currency rates there can be no assurance that those attempts will be successful. In addition, we occasionally use interest rate contracts to manage interest rate risk and limit the impact of future interest rate changes on earnings and cash flows.
Removed
We enter into other foreign currency contracts, such as forwards, to reduce fluctuations in foreign currency cash flow associated with the translation of future earnings of our international subsidiaries. Although we attempt to mitigate the potential adverse effects of changes in foreign currency rates there can be no assurance that those attempts will be successful.
Added
Our hedging of foreign currency and interest rate risk may not effectively limit our exposure to these risks. We attempt to mitigate our risk by borrowing in the currencies in which we have significant investments thereby providing a natural hedge.
Removed
In addition, third parties may sue the owner or 17 Table of Contents operator of a site for damages based on personal injury, property damage or other costs, including investigation and clean-up costs, resulting from the environmental contamination.
Added
Additionally, rising inflation or costs could negatively impact our net operating income on existing leases with contractual guaranteed base rent and fixed charges, inclusive of certain rental expenses. We may acquire properties and companies that involve risks that could adversely affect our business and financial condition.
Added
Additionally, remediation costs for security events may not be covered by our insurance. Our insurance coverage does not cover all potential losses.

Item 2. Properties

Properties — owned and leased real estate

20 edited+2 added−2 removed2 unchanged
Biggest change(18 markets) (2) 129 10,659 69 158 12,862 Subtotal U.S. 577 66,579 120 700 78,997 Other Americas: Brazil 1 53 - 17 870 Canada 10 845 138 10 845 Mexico * 21 - 44 2,923 Subtotal Other Americas 11 919 138 71 4,638 Europe: France - - - 34 3,157 Germany 1 84 - 31 3,155 Netherlands - - - 29 2,999 U.K. 2 422 - 31 7,107 Remaining Countries – Europe (8 countries) (2 ) 2 177 - 97 7,678 Subtotal Europe 5 683 - 222 24,096 Asia: China - - - 46 3,088 Japan 1 40 - 44 6,709 Singapore 1 142 - 1 142 Subtotal Asia 2 182 - 91 9,939 Total operating portfolio ( 3 ) 595 68,363 258 1,084 117,670 Value-added properties ( 4 ) 6 1,061 - 9 1,631 Total operating properties 601 $ 69,424 $ 258 1,093 $ 119,301 Items notated by ‘*’ indicate an amount less than one million that rounds to zero. 22 Table of Contents Consolidated – Investment in Land Consolidated – Development Portfolio Geographies Acres Estimated Build Out Potential (square feet) ( 5 ) Current Investment Rentable Square Footage Upon Completion TEI ( 6 ) U.S.: Atlanta 546 6 $ 46 1 $ 117 Baltimore/Washington D.C. 36 * 15 * 80 Central PA - - - * 44 Central Valley 803 14 262 1 111 Chicago 103 2 35 3 381 Dallas/Ft.
Biggest change(18 markets) (2) 136 11,795 66 166 14,132 Subtotal U.S. 609 73,011 114 734 86,047 Other Americas: Brazil * 57 - 18 994 Canada 10 907 138 10 907 Mexico 1 48 - 48 3,328 Subtotal Other Americas 11 1,012 138 76 5,229 Europe: France 1 58 - 35 3,460 Germany 1 150 - 32 3,395 Netherlands * 15 - 30 3,405 U.K. 2 293 - 32 7,770 Remaining Countries – Europe (8 countries) (2) 4 358 - 101 8,407 Subtotal Europe 8 874 - 230 26,437 Asia: China - - - 49 3,158 Japan 2 164 - 48 7,255 Singapore 1 145 - 1 145 Subtotal Asia 3 309 - 98 10,558 Total operating portfolio (3) 631 75,206 252 1,138 128,271 Value-added properties (4) 3 418 - 4 640 Total operating properties 634 $ 75,624 $ 252 1,142 $ 128,911 Items notated by ‘*’ indicate an amount less than one million that rounds to zero. 24 Table of Contents Consolidated – Investment in Land Consolidated – Development Portfolio Geographies Acres Estimated Build Out Potential (square feet) (5) Current Investment Rentable Square Footage Upon Completion TEI (6) U.S.: Atlanta 510 5 $ 67 1 $ 87 Baltimore/Washington D.C. 96 1 57 * 124 Central PA - - - - - Central Valley 805 14 196 1 63 Chicago 84 1 24 1 184 Dallas/Ft.
ITEM 2. Properties GEOGRAPHIC DISTRIBUTION We predominately invest in logistics facilities. Our properties are typically used for distribution, storage, packaging, assembly and light manufacturing of consumer products. The vast majority of our operating properties are used by our customers for retail and online fulfillment and business-to-business transactions.
ITEM 2. Pr operties GEOGRAPHIC DISTRIBUTION We predominately invest in logistics facilities. Our properties are typically used for distribution, storage, packaging, assembly and light manufacturing of consumer products. The vast majority of our operating properties are used by our customers for retail and online fulfillment and business-to-business transactions.
The following table summarizes our consolidated and unconsolidated co-investment ventures at December 31, 2022 (in millions): Operating Properties Square Feet Gross Book Value Investment in Land Development Portfolio – TEI Consolidated Co-Investment Venture U.S.: Prologis U.S.
The following table summarizes our consolidated and unconsolidated co-investment ventures at December 31, 2023 (in millions): Operating Properties Square Feet Gross Book Value Investment in Land Development Portfolio – TEI Consolidated Co-Investment Venture U.S.: Prologis U.S.
No individual property or market amounted to 10% or more of our consolidated total assets at December 31, 2022, or generated revenue equal to 10% or more of our consolidated total revenues for the year ended December 31, 2022, with the exception of the Southern California market.
No individual property or market amounted to 10% or more of our consolidated total assets at December 31, 2023, or generated revenue equal to 10% or more of our consolidated total revenues for the year ended December 31, 2023, with the exception of the Southern California market.
These are excluded from 2023 expirations and are reflected at their respective expiration year. 24 Table of Contents CO-INVESTMENT VENTURES Included in our O&M portfolio are consolidated and unconsolidated co-investment ventures that hold investments in real estate properties, primarily logistics facilities, that we also manage. Our unconsolidated co-investment ventures are accounted for under the equity method.
These are excluded from 2024 expirations and are reflected at their respective expiration year. 26 Table of Contents CO-INVEST MENT VENTURES Included in our O&M portfolio are consolidated and unconsolidated co-investment ventures that hold investments in real estate properties, primarily logistics facilities, that we also manage. Our unconsolidated co-investment ventures are accounted for under the equity method.
Logistics Venture (“USLV”) 77 $ 8,037 $ 4 $ 60 Total 77 $ 8,037 $ 4 $ 60 Unconsolidated Co-Investment Ventures U.S.: Prologis Targeted U.S.
Logistics Venture (“USLV”) 78 $ 8,167 $ 4 $ - Total 78 $ 8,167 $ 4 $ - Unconsolidated Co-Investment Ventures U.S.: Prologis Targeted U.S.
At December 31, 2022, based on TEI, approximately 9% of the properties in the development portfolio were completed but not yet stabilized, 72% of the properties were expected to be completed before December 31, 2023, and the remaining properties were expected to be completed before November 2024.
At December 31, 2023, based on TEI, approximately 26% of the properties in the development portfolio were completed but not yet stabilized, 48% 25 Table of Contents of the properties were expected to be completed before December 31, 2024, and the remaining properties were expected to be completed before July 2026.
The following table summarizes our investment in consolidated real estate properties at December 31, 2022 (in millions): Investment Before Depreciation Operating properties, excluding assets held for sale or contribution $ 69,039 Development portfolio, including cost of land 4,212 Land 3,338 Other real estate investments (1) 5,034 Total consolidated real estate properties $ 81,623 (1) In cluded in other real estate investments were: (i) non-strategic real estate assets, primarily acquired in the Duke Transaction, that we do not intend to operate long-term; (ii) land parcels we own and lease to third parties; (iii) non-industrial real estate assets that we generally intend to redevelop into industrial properties; and (iv) costs associated with potential acquisitions and future development projects, including purchase options on land.
The following table summarizes our investment in consolidated real estate properties at December 31, 2023 (in millions): Investment Before Depreciation Operating properties, excluding assets held for sale or contribution $ 75,436 Development portfolio, including cost of land 4,367 Land 3,776 Other real estate investments (1) 5,088 Total consolidated real estate properties $ 88,667 (1) Included in other real estate investments were: (i) land parcels we own and lease to third parties; (ii) non-strategic real estate assets, primarily acquired from the Duke Transaction, that we do not intend to operate long term; (iii) non-industrial real estate assets that we intend to redevelop as industrial properties or other higher use assets; and (iv) energy assets.
LEASE EXPIRATIONS We generally lease our properties on a long-term basis (the average term for leases commenced, including new leases and renewals, in 2022 was 69 months).
Energy assets include solar panels, battery storage and mobility solutions. LEASE EXPIRATIONS We generally lease our properties on a long-term basis (the average term for leases commenced, including new leases and renewals, in 2023 was 66 months).
(5) Represents the estimated finished square feet available for lease upon completion of a building on existing parcels of land. 23 Table of Contents (6) TEI is based on current projections and is subject to change. As noted in the table below, our current investment in the development portfolio was $4.2 billion, leaving approximately $3.3 billion of additional required investment.
(6) TEI is based on current projections and is subject to change. As noted in the table below, our current investment in the development portfolio was $4.4 billion, leaving approximately $3.4 billion of additional required investment.
The following tables provide details of our consolidated operating properties, investment in land and development portfolio and our O&M portfolio. The O&M portfolio includes the properties we consolidate and the properties owned by our unconsolidated co-investment ventures reflected at 100% of the amount included in the ventures’ financial statements as calculated on a GAAP basis, not our proportionate share.
The O&M portfolio includes the properties we consolidate and the properties owned by our unconsolidated co-investment ventures reflected at 100% of the amount included in the ventures’ financial statements as calculated on a GAAP basis, not our proportionate share. 23 Table of Contents Included in the operating property information below for our consolidated operating properties are 542 buildings owned primarily by one co-investment venture that we consolidate but of which we own less than 100% of the equity.
Dollars and square feet in the following tables are in millions: Consolidated Operating Properties O&M Geographies Rentable Square Footage Gross Book Value Encumbrances (1) Rentable Square Footage Gross Book Value U.S.: Atlanta 41 $ 3,289 $ - 47 $ 3,764 Baltimore/Washington D.C. 13 1,700 - 17 2,104 Central PA 18 1,489 - 19 1,609 Central Valley 21 1,716 - 22 1,856 Chicago 53 4,843 - 70 6,354 Dallas/Ft.
Dollars and square feet in the following tables are in millions: Consolidated Operating Properties O&M Geographies Rentable Square Footage Gross Book Value Encumbrances (1) Rentable Square Footage Gross Book Value U.S.: Atlanta 46 $ 3,876 $ - 52 $ 4,358 Baltimore/Washington D.C. 14 2,143 - 18 2,549 Central PA 18 1,545 - 20 1,783 Central Valley 21 1,824 - 23 1,969 Chicago 56 5,193 - 72 6,747 Dallas/Ft.
(2) No remaining market within the U.S. or country within Europe represented more than 2% of the total gross book value of the consolidated and O&M operating properties. (3) Included in our consolidated operating properties are properties that we consider to be held for contribution and are presented within Assets Held for Sale or Contribution in the Consolidated Balance Sheets.
(3) Included in our consolidated operating properties are properties that we consider to be held for contribution and are presented within Assets Held for Sale or Contribution in the Consolidated Balance Sheets. We include these properties in our operating portfolio as they are expected to be contributed to our co-investment ventures and remain in our O&M operating portfolio.
See Note 6 to the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data for further information on our Assets Held for Sale or Contribution. (4) 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 a higher and better use.
(4) 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 a higher and better use. (5) Represents the estimated finished square feet available for lease upon completion of a building on existing parcels of land.
In addition to the amounts reflected here, we also have $184 million of encumbrances related to two properties under development, one prestabilized property, two other real estate investments and one land parcel included in the consolidated portfolio.
In addition to the amounts reflected here, we also have $128 million of encumbrances related to two prestabilized properties and one land parcel included in the consolidated portfolio. (2) No remaining market within the U.S. or country within Europe represented more than 2% of the total gross book value of the consolidated and O&M operating properties.
The following table summarizes the lease expirations of our consolidated operating portfolio for leases in place at December 31, 2022 (dollars and square feet in millions): NER Number of Leases Occupied Square Feet Dollars % of Total Dollars Per Square Foot 2023 (1) 916 54 $ 357 8.5 % $ 6.61 2024 1,155 78 508 12.1 % 6.51 2025 993 76 514 12.2 % 6.76 2026 1,039 84 570 13.6 % 6.79 2027 952 85 643 15.3 % 7.56 2028 422 52 420 10.0 % 8.08 2029 251 39 267 6.4 % 6.85 2030 141 27 198 4.7 % 7.33 2031 115 23 162 3.9 % 7.04 2032 123 29 223 5.3 % 7.69 Thereafter 116 35 334 8.0 % 9.54 6,223 582 $ 4,196 100.0 % $ 7.21 Month to month 128 3 Total consolidated 6,351 585 (1) We have signed leases that were due to expire in 2023, totaling 24 million square feet in our consolidated portfolio (3.4% of total NER).
The following table summarizes the lease expirations of our consolidated operating portfolio for leases in place at December 31, 2023 (dollars and square feet in millions): NER Occupied Square Feet Dollars % of Total Dollars Per Square Foot 2024 (1) 62 $ 416 8.5 % $ 6.71 2025 80 551 11.3 % 6.89 2026 92 670 13.7 % 7.28 2027 95 749 15.3 % 7.88 2028 81 734 15.0 % 9.06 2029 58 511 10.4 % 8.81 2030 36 296 6.1 % 8.22 2031 26 197 4.0 % 7.58 2032 31 244 5.0 % 7.87 2033 22 203 4.2 % 9.23 Thereafter 29 319 6.5 % 11.00 612 $ 4,890 100.0 % $ 7.99 Month to month 4 Total consolidated 616 (1) We have signed leases that were due to expire in 2024, totaling 25 million square feet in our consolidated portfolio (3.3% of total NER).
We include these properties in our operating portfolio as they are expected to be contributed to our co-investment ventures and remain in our O&M operating portfolio. At December 31, 2022, we had investments in real estate properties that were expected to be contributed to our unconsolidated co-investment ventures totaling $489 million and aggregating 4 million square feet.
At December 31, 2023, we had investments in real estate properties that were expected to be contributed to our unconsolidated co-investment ventures totaling $308 million and aggregating 3 million square feet. See Note 6 to the Consolidated Financial Statements in Item 8. Financial Statements and Supplementary Data for further information on our Assets Held for Sale or Contribution.
Logistics Fund (“USLF”) 123 $ 12,557 $ - $ 200 Other Americas: FIBRA Prologis 44 2,916 - - Prologis Brazil Logistics Venture ("PBLV") and other joint ventures 16 817 51 106 Subtotal Other Americas 60 3,733 51 106 Europe: Prologis European Logistics Fund (“PELF”) 161 17,400 13 47 Prologis European Logistics Partners (“PELP”) 58 6,432 34 64 Subtotal Europe 219 23,832 47 111 Asia: Nippon Prologis REIT (“NPR”) 43 6,669 - - Prologis China Core Logistics Fund (“PCCLF”) 31 2,331 - - Prologis China Logistics Venture 15 756 13 541 Subtotal Asia 89 9,756 13 541 Total 491 $ 49,878 $ 111 $ 958 For more information regarding our unconsolidated and consolidated co-investment ventures, see Notes 5 and 11 to the Consolidated Financial Statements in Item 8.
Logistics Fund (“USLF”) 126 $ 13,162 $ 14 $ - Other Americas: FIBRA Prologis 47 3,284 2 - Prologis Brazil Logistics Venture ("PBLV") and other joint ventures 18 936 33 109 Subtotal Other Americas 65 4,220 35 109 Europe: Prologis European Logistics Fund (“PELF”) 164 18,786 7 54 Prologis European Logistics Partners (“PELP”) 59 6,868 86 43 Subtotal Europe 223 25,654 93 97 Asia: Nippon Prologis REIT (“NPR”) 43 6,601 - - Prologis Japan Core Logistics Fund ("PJLF") 2 491 - - Prologis China Core Logistics Fund (“PCCLF”) 30 2,246 - - Prologis China Logistics Venture 19 912 13 418 Subtotal Asia 94 10,250 13 418 Total 508 $ 53,286 $ 155 $ 624 For more information regarding our unconsolidated and consolidated co-investment ventures, see Notes 5 and 11 to the Consolidated Financial Statements in Item 8.
Worth 359 5 121 3 341 Houston 335 4 114 1 123 Lehigh Valley 105 1 34 1 177 New Jersey/New York City 194 3 287 * 127 San Francisco Bay Area - - - 2 314 Seattle 149 2 103 1 158 South Florida 113 2 109 1 203 Southern California 494 9 464 5 1,427 Remaining Markets – U.S.
Worth 386 6 130 2 320 Houston 443 6 149 - - Lehigh Valley 105 1 38 1 176 New Jersey/New York City 183 3 337 1 295 San Francisco Bay Area 70 1 111 2 500 Seattle 97 1 54 1 171 South Florida 100 1 96 1 231 Southern California 505 9 577 5 1,106 Remaining Markets – U.S.
(18 markets) 1,444 23 543 8 1,025 Subtotal U.S. 4,681 71 2,133 27 4,628 Other Americas: Brazil 263 5 56 - - Canada 292 5 435 2 310 Mexico 751 14 150 5 388 Subtotal Other Americas 1,306 24 641 7 698 Europe: France 176 4 139 1 65 Germany 39 1 28 1 106 Netherlands 15 * 9 1 82 U.K. 224 4 212 2 494 Remaining Countries – Europe (8 countries) 696 14 125 3 417 Subtotal Europe 1,150 23 513 8 1,164 Asia: Japan 51 4 51 7 988 Subtotal Asia 51 4 51 7 988 Total land and development portfolio 7,188 122 $ 3,338 49 $ 7,478 Items notated by ‘*’ indicate an amount less than one million that rounds to zero.
(18 markets) 2,178 31 653 7 2,026 Subtotal U.S. 5,562 80 2,489 23 5,283 Other Americas: Brazil 419 9 72 - - Canada 239 4 408 2 460 Mexico 748 13 238 3 231 Subtotal Other Americas 1,406 26 718 5 691 Europe: France 168 3 136 - - Germany 38 1 30 1 126 Netherlands 23 1 15 * 62 U.K. 284 5 228 2 495 Remaining Countries – Europe (8 countries) 674 13 124 4 406 Subtotal Europe 1,187 23 533 7 1,089 Asia: Japan 42 3 36 5 712 Subtotal Asia 42 3 36 5 712 Total land and development portfolio 8,197 132 $ 3,776 40 $ 7,775 Items notated by ‘*’ indicate an amount less than one million that rounds to zero.
Removed
Included in the operating property information below for our consolidated operating properties are 498 buildings owned primarily by one co-investment venture that we consolidate but of which we own less than 100% of the equity.
Added
The following tables provide details of our consolidated operating properties, investment in land and development portfolio and our O&M portfolio.
Removed
Worth 43 3,486 - 50 4,080 Houston 30 3,125 - 36 3,648 Lehigh Valley 30 3,884 - 34 4,174 New Jersey/New York City 42 7,119 28 51 8,492 San Francisco Bay Area 21 3,185 - 26 3,855 Seattle 16 2,653 - 24 3,529 South Florida 22 3,792 14 28 4,661 Southern California 98 15,639 9 118 18,009 Remaining Markets – U.S.
Added
Worth 46 3,817 - 53 4,420 Houston 32 3,277 - 38 3,810 Lehigh Valley 31 4,065 - 35 4,431 New Jersey/New York City 45 7,982 5 54 9,408 San Francisco Bay Area 22 3,503 20 27 4,185 Seattle 17 2,748 - 25 3,634 South Florida 22 3,983 14 29 5,008 Southern California 103 17,260 9 122 19,613 Remaining Markets – U.S.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+0 added−0 removed2 unchanged
Biggest changeMarket for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities MARKET INFORMATION AND HOLDERS Our common stock is listed on the NYSE under the symbol “PLD.” Stock Performance Graph The following line graph compares the change in Prologis, Inc. cumulative total stockholder’s return on shares of its common stock from December 31, 2017, to the cumulative total return of the S&P 500 Stock Index and the Financial Times and Stock Exchange NAREIT 25 Table of Contents Equity REITs Index from December 31, 201 7 , to December 31, 2022 .
Biggest changeMarket for Registrant’s Common Equity, Related Sto ckholder Matters and Issuer Purchases of Equity Securities MARKET INFORMATION AND HOLDERS Our common stock is listed on the NYSE under the symbol “PLD.” 27 Table of Contents Stock Performance Graph The following line graph compares the change in Prologis, Inc. cumulative total stockholder’s return on shares of its common stock from December 31, 2018, to the cumulative total return of the S&P 500 Stock Index and the Financial Times and Stock Exchange NAREIT Equity REITs Index from December 31, 2018, to December 31, 2023.
PREFERRED STOCK DIVIDENDS At December 31, 2022, we had 1.3 million shares of Series Q preferred stock outstanding with a liquidation preference of $50 per share that will be redeemable at our option on or after November 13, 2026. Dividends payable per share were $4.27 for the year ended December 31, 2022.
PREFERRED STOCK DIVIDENDS At December 31, 2023, we had 1.3 million shares of Series Q preferred stock outstanding with a liquidation preference of $50 per share that will be redeemable at our option on or after November 13, 2026. Dividends payable per share were $4.27 for the year ended December 31, 2023.
Financial Statements and Supplementary Data. 26 Table of Contents OTHER STOCKHOLDER MATTERS Common Stock Plans Further information relative to our equity compensation plans will be provided in our 2022 Proxy Statement or in an amendment filed on Form 10-K/A.
Financial Statements and Supplementary Data. 28 Table of Contents OTHER STOCKHOLDER MATTERS Common Stock Plans Further information relative to our equity compensation plans will be provided in our 2023 Proxy Statement or in an amendment filed on Form 10-K/A.
PURCHASES OF EQUITY SECURITIES During 2022, we did not purchase any common stock of Prologis, Inc. in connection with our share purchase program. SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS For information regarding securities authorized for issuance under our equity compensation plans, see Notes 9 and 12 to the Consolidated Financial Statements in Item 8.
PURCHAS ES OF EQUITY SECURITIES During 2023, we did not purchase any common stock of Prologis, Inc. in connection with our share purchase program. S ECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS For information regarding securities authorized for issuance under our equity compensation plans, see Notes 9 and 12 to the Consolidated Financial Statements in Item 8.
The graph assumes an initial investment of $100 in our common stock and each of the indices on December 31, 201 7 , and, as required by the SEC, the reinvestment of all dividends. The return shown on the graph is not necessarily ind icative of future performance.
The graph assumes an initial investment of $100 in our common stock and each of the indices on December 31, 2018, and, as required by the SEC, the reinvestment of all dividends. The return shown on the graph is not necessarily indicative of future performance.
SALES OF UNREGISTERED SECURITIES During 2022, we issued 2.1 million common limited partnership units in Prologis, L.P. in the Duke Transaction and 0.3 million shares of common stock of Prologis, Inc. in connection with the redemption of common units of Prologis, L.P. in reliance on the exemption from registration requirements of the Securities Act of 1933, as amended, afforded by Section 4(a)(2) thereof.
SALES OF UNREGISTERED SECURITIES During 2023, we issued 0.8 million shares of common stock of Prologis, Inc. in connection with the redemption of common units of Prologis, L.P. in reliance on the exemption from registration requirements of the Securities Act of 1933, as amended, afforded by Section 4(a)(2) thereof.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

107 edited+19 added−23 removed60 unchanged
Biggest changeIn addition to the senior notes assumed in the Duke Transaction, we issued $3.3 billion of senior notes in 2022 (principal in millions): Aggregate Principal Issuance Date Weighted Average Issuance Date Borrowing Currency USD (1) Interest Rate Years Maturity Dates January £ 60 $ 81 2.1% 20.0 December 2041 February (2) € 1,550 $ 1,768 1.0% 8.5 February 2024 – 2034 July ¥ 30,965 $ 227 1.4% 15.5 July 2027 – 2042 September (2) $ 650 $ 650 4.6% 10.3 January 2033 November C$ 500 $ 362 5.3% 8.2 January 2031 December ¥ 24,200 $ 178 1.8% 13.4 December 2027 – 2037 Total $ 3,266 2.3% 9.8 (1) The exchange rate used to calculate into U.S. dollars was the spot rate at the settlement date.
Biggest changeOur financing activities during the year included the following: • On April 5, 2023, we amended and restated our 2021 global senior credit facility (the "2021 Global Facility") as the 2023 Global Facility, increasing its borrowing capacity to $3.0 billion and extended the initial maturity date to June 2027. • On August 25, 2023, we amended and restated the Japanese yen revolver, increasing its borrowing capacity for total commitments of ¥58.5 billion ($414 million at December 31, 2023) and extended the initial maturity date to August 2027. 29 Table of Contents • In the third quarter of 2023, we entered into Chinese renminbi term loans totaling CN¥1.7 billion ($239 million) with an issuance date weighted average interest rate of 3.5% maturing between September 2024 to 2026. • We issued senior notes of $5.4 billion (principal in millions): Aggregate Principal Issuance Date Weighted Average Issuance Date Borrowing Currency USD (1) Interest Rate Years Maturity Dates January € 1,250 $ 1,354 4.1% 13.8 January 2030 – 2043 March $ 1,200 $ 1,200 4.9% 17.7 June 2033 – 2053 May € 750 $ 809 4.6% 10.0 May 2033 June $ 2,000 $ 2,000 5.1% 13.2 June 2028 – 2053 Total $ 5,363 4.7% 13.9 (1) The exchange rate used to calculate into U.S. dollars was the spot rate at the settlement date.
We determine the fair value of the property based on the proceeds from disposition that are estimated based on quoted market values, third-party appraisals or discounted cash flow models that utilize the future net operating income of the property and expected market capitalization rates.
We determine the fair value of the property based on the estimated proceeds from disposition that are based on quoted market values, third-party appraisals or discounted cash flow models that utilize the future net operating income of the property and expected market capitalization rates.
In 2022, we experienced a significant increase in net effective rent change due to increasing market rents. (2) Turnover costs include external leasing commissions and tenant improvements and represent the obligations incurred in connection with the lease commencement for leases greater than one year.
In 2023 and 2022, we experienced a significant increase in net effective rent change due to increasing market rents. (2) Turnover costs include external leasing commissions and tenant improvements and represent the obligations incurred in connection with the lease commencement for leases greater than one year.
Certain of our ventures also have credit facilities, or unencumbered properties, both of which may be used to obtain funds. 40 Table of Contents 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 IRC, relative to maintaining our REIT status, while still allowing us to retain cash to fund our capital deployment and other investment activities.
Certain of our ventures also have credit facilities, or unencumbered properties, both of which may be used to obtain funds. 42 Table of Contents 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 IRC, relative to maintaining our REIT status, while still allowing us to retain cash to fund our capital deployment and other investment activities.
Certain of our ventures do not have third-party debt and are therefore excluded. This debt is non-recourse to Prologis and other investors in the co-investment ventures and bears interest as follows at December 31, 2022 (dollars in millions): Total Debt (1) Weighted Average Interest Rate Gross Book Value of Real Estate (1) Ownership % Prologis Targeted U.S.
Certain of our ventures do not have third-party debt and are therefore excluded. This debt is non-recourse to Prologis and other investors in the co-investment ventures and bears interest as follows at December 31, 2023 (dollars in millions): Total Debt (1) Weighted Average Interest Rate Gross Book Value of Real Estate (1) Ownership % Prologis Targeted U.S.
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 December 31, 2022, we did not guarantee any third-party debt of the unconsolidated co-investment ventures.
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 December 31, 2023, we did not guarantee any third-party debt of the unconsolidated co-investment ventures.
CRITICAL ACCOUNTING POLICIES A critical accounting policy is one that involves an estimate or assumption that is subjective and requires management judgment about the effect of a matter that is inherently uncertain and material to an entity’s financial condition and results of operations. Management’s judgment considers historical and current economic conditions and expectations for the future.
CRITICAL ACCOUN TING POLICIES A critical accounting policy is one that involves an estimate or assumption that is subjective and requires management judgment about the effect of a matter that is inherently uncertain and material to an entity’s financial condition and results of operations. Management’s judgment considers historical and current economic conditions and expectations for the future.
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; • gains or losses from the early extinguishment of debt and redemption and repurchase of preferred stock; and • expenses related to natural disasters.
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 define our same store population for the three months ended December 31, 2022 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, 2021 and owned throughout the same three-month period in both 2021 and 2022.
We define our same store population for the three months ended December 31, 2023 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, 2022 and owned throughout the same three-month period in both 2022 and 2023.
RESULTS OF OPERATIONS We evaluate our business operations based on the NOI of our two operating 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.
RESULTS OF OP ERATIONS We evaluate our business operations based on the NOI of our two operating 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.
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 December 31, 2022 (in millions): Equity Commitments (1) Prologis Venture Partners Total Expiration Date Prologis Targeted U.S.
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 December 31, 2023 (in millions): Equity Commitments (1) Prologis Venture Partners Total Expiration Date Prologis Targeted U.S.
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.
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.
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 December 31, 2022, we were in compliance with all of our financial debt covenants.
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 December 31, 2023, we were in compliance with all of our financial debt covenants.
The Class A common limited partnership 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 2022 and 2021.
The Class A common limited partnership 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 2023 and 2022.
The earnings we recognize can be impacted by: (i) variances in revenues and expenses of each venture; (ii) the size and occupancy rate of the portfolio of properties owned by each venture; (iii) gains or losses from the dispositions of properties and extinguishment of debt; (iv) our ownership interest in each venture; and (v) fluctuations in foreign currency exchange rates used to translate our share of net earnings to U.S. dollars.
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) gains or losses from the dispositions of properties and extinguishment of debt; (iii) our ownership interest in each venture; (iv) other variances in revenues and expenses of each venture; and (v) fluctuations in foreign currency exchange rates used to translate our share of net earnings to U.S. dollars.
A discussion regarding our financial condition and results of operations for 2022 compared to 2021 is presented below. Information on 2020 is included in graphs only to show year over year trends in our results of operations and operating metrics.
A discussion regarding our financial condition and results of operations for 2023 compared to 2022 is presented below. Information on 2021 is included in graphs only to show year over year trends in our results of operations and operating metrics.
See Note 8 to the Consolidated Financial Statements for further information on this activity. • Cash paid for income taxes, net of refunds. We paid income taxes, net of refunds, of $130 million and $149 million in 2022 and 2021, respectively. See Note 13 to the Consolidated Financial Statements for further information on this activity.
See Note 8 to the Consolidated Financial Statements for further information on this activity. • Cash paid for income taxes, net of refunds. We paid income taxes, net of refunds, of $149 million and $130 million in 2023 and 2022, respectively. See Note 13 to the Consolidated Financial Statements for further information on this activity.
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 operating properties.
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.
The following graph summarizes capitalized expenditures, excluding development costs, of our consolidated operating properties during each year: Our capital expenditures continue to increase year over year as we grow the consolidated operating portfolio through development and acquisitions.
The following graph summarizes recurring capitalized expenditures, excluding development costs and non-recurring costs, of our consolidated operating properties during each year: Our capital expenditures continue to increase year over year as we grow the consolidated operating portfolio through development and acquisitions.
Of the significant accounting policies discussed in Note 2 to the Consolidated Financial Statements, those presented below have been identified by us as meeting the criteria to be considered critical accounting policies as they relate to our financial condition as of December 31, 2022 and 2021 and our operating results for the three-year period ended December 31, 2022.
Of the significant accounting policies discussed in Note 2 to the Consolidated Financial Statements, those presented below have been identified by us as meeting the criteria to be considered critical accounting policies as they relate to our financial condition at December 31, 2023, and 2022 and our operating results for the three-year period ended December 31, 2023.
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. 34 Table of Contents (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.
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.
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 and fees earned from the co-investment ventures.
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.
At December 31, 2022, our Series Q preferred stock had an annual dividend rate of 8.54% per share and the dividends are payable quarterly in arrears.
At December 31, 2023, our Series Q preferred stock had an annual dividend rate of 8.54% per share and the dividends are payable quarterly in arrears.
This assessment is primarily triggered based on the shortening of the 41 Table of Contents expected hold period due to our change in intent to sell a property in the near term. We have processes to monitor our intent with regard to our investments and the estimated disposition value in comparison to the current carrying value.
This assessment is primarily triggered based on the shortening of the expected hold period due to a change in our intent to sell a property in the near term. We have processes to monitor our intent with regard to our investments and the estimated disposition value in comparison to the current carrying value.
Our O&M operating portfolio does not include our development portfolio, value-added properties, non-industrial properties or properties we do not have the intent to hold long-term that are classified as either held for sale or within other real estate investments.
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.
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.
LIQUIDITY AND C APITAL 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.
Management’s Discussion and Analysis of Financial Condition and Results of Operations, which is incorporated by reference herein to our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 9, 2022, and is available on the SEC’s website at www.sec.gov and our Investor Relations website at www.ir.prologis.com.
Management’s Discussion and Analysis of Financial Condition and Results of Operations, which is incorporated by reference herein to our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 14, 2023, and is available on the SEC’s website at www.sec.gov and our Investor Relations website at www.ir.prologis.com.
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”).
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 35 Table of Contents the same store metrics of the O&M portfolio based on Prologis’ ownership in the properties (“Prologis Share”).
The use of projected future cash flows is based on assumptions that are consistent with our estimates of future expectations and the strategic plan we use to manage our underlying business. Changes in economic and operating conditions could impact our intent and the assumptions used in determining the fair value that could result in future impairment. NEW ACCOUNTING PRONOUNCEMENTS None.
The use of projected future cash flows is based on assumptions that are consistent with our estimates of future expectations and the strategic plan we use to manage our underlying business. Changes in economic and operating conditions could impact our intent and the assumptions used in determining the fair value that could result in future impairment.
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.
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 plan to continue allocating capital in 2023 to renovate and modernize our operating portfolio, including the addition of sustainable and efficient building features. Strategic Capital Segment This operating segment includes revenues from asset management and property management services performed, transactional services for acquisition, disposition and leasing activity and promote revenue earned primarily from the unconsolidated co-investment ventures.
We plan to continue allocating capital in 2024 to renovate and improve our operating portfolio, including the addition of sustainable and efficient building features. Strategic Capital Segment This operating segment includes revenues from asset management and property management services performed, transactional services for acquisition, disposition and leasing activity and promote revenue earned from the unconsolidated co-investment ventures.
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 December 31, 2022 to the Property NOI for both periods, including the properties contributed during the period.
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 36 Table of Contents NOI for the same store portfolio and apply our ownership percentage at December 31, 2023 to the Property NOI for both periods, including the properties contributed during the period.
We paid down the balance of $745 million on Duke’s line of credit subsequent to closing the acquisition which is reflected in Net proceeds from (payments on) credit facilities . The assumption of debt was excluded from this table .
We paid down the balance of $745 million on Duke’s line of credit subsequent to closing the acquisition which is reflected in Net Proceeds From (Payments On) Credit Facilities in the Consolidated Statements of Cash Flow. The assumption of debt was excluded from this table .
Under the IRC, REITs may be subject to certain federal income and excise taxes on undistributed taxable income. We paid quarterly cash dividends of $0.79 and $0.63 per common share in 2022 and 2021, respectively.
Under the IRC, REITs may be subject to certain federal income and excise taxes on undistributed taxable income. We paid quarterly cash dividends of $0.87 and $0.79 per common share in 2023 and 2022, respectively.
The change in depreciation and amortization expenses in 2022 compared to 2021 of approximately $235 million was impacted by the following activities (in millions): (1) Included in acquisitions are the operating properties, other real estate properties and related lease intangibles acquired in the Duke Transaction.
The change in depreciation and amortization expenses in 2023 compared to 2022 of approximately $672 million was impacted by the following (in millions): (1) Included in acquisitions are the operating properties, other real estate properties and related lease intangibles acquired in the Duke Transaction.
Other Components of Income (Expense) Earnings from Unconsolidated Entities, Net We recognized net earnings from unconsolidated entities, which are accounted for using the equity method, of $311 million and $404 million during 2022 and 2021, respectively.
Other Components of Income (Expense) Earnings from Unconsolidated Entities, Net We recognized net earnings from unconsolidated entities, which are accounted for using the equity method, of $307 million and $311 million during 2023 and 2022, respectively.
Our credit ratings at December 31, 2022, were A3 from Moody’s with a stable outlook and A from Standard & Poor’s with a stable outlook. These ratings allow us to borrow at an advantageous interest rate.
Our credit ratings at December 31, 2023 were A and A3 from Standard & Poor's and Moody’s, respectively, each with a stable outlook. These ratings allow us to borrow at an advantageous interest rate.
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 $268 million and $148 million for 2022 and 2021, respectively. • Strategic Capital Segment.
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 $613 million and $268 million for 2023 and 2022, respectively.
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 based on the square footage of the relative portfolios.
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.
We received $410 million and $440 million of distributions as a return on our investment from the cash flows generated from the operations of our unconsolidated entities in 2022 and 2021, respectively. • Cash paid for interest, net of amounts capitalized. We paid interest, net of amounts capitalized, of $234 million and $279 million in 2022 and 2021, respectively.
We received $680 million and $410 million of distributions as a return on our investment from the cash flows generated from the operations of our unconsolidated entities in 2023 and 2022, respectively. • Cash paid for interest, net of amounts capitalized. We paid interest, net of amounts capitalized, of $457 million and $234 million in 2023 and 2022, respectively.
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 evaluate the performance of the operating properties we own and manage using a “same store” analysis to ensure that the population of properties in this analysis is consistent from period to period, allowing us and investors to analyze our ongoing business operations.
The same store population excludes properties held for sale to third parties, along with development properties that were not stabilized at the beginning 33 Table of Contents of the period (January 1, 20 2 1 ) and properties acquired or disposed of to third parties during the period.
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, 2022) and properties acquired or disposed of to third parties during the period.
Additionally, we issued $3.3 billion of senior notes with a weighted average interest rate of 2.3%, at the issuance date, in 2022. See Note 8 to the Consolidated Financial Statements and the Liquidity and Capital Resources section below, for further discussion of our debt and borrowing costs.
We issued $5.4 billion of senior notes during 2023 and $3.3 billion during 2022, with a weighted average interest rate of 4.7% and 2.3%, respectively, at the issuance date. See Note 8 to the Consolidated Financial Statements and the Liquidity and Capital Resources section below, for further discussion of our debt and borrowing costs.
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.
We also exclude net termination and renegotiation fees and write-offs of fair value lease assets or liabilities 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.
We had net earnings attributable to noncontrolling interests of $191 million and $209 million in 2022 and 2021, respectively. Included in these amounts were $92 million and $82 million in 2022 and 2021, respectively, of net earnings attributable to the common limited partnership unitholders of Prologis, L.P.
We had net earnings attributable to noncontrolling interests of $194 million and $191 million in 2023 and 2022, respectively. Included in these amounts were $77 million and $92 million in 2023 and 2022, respectively, of net earnings attributable to the common limited partnership unitholders of Prologis, L.P.
We recognized equity-based, noncash compensation expenses of $175 million and $113 million in 2022 and 2021, respectively, which were recorded to Rental Expenses in the Real Estate Segment, Strategic Capital Expenses in the Strategic Capital Segment and G&A Expenses. • Operating distributions from unconsolidated entities.
We recognized equity-based, noncash compensation expenses of $268 million and $175 million in 2023 and 2022, 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.
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 December 31, 2022, 136 properties in our development portfolio were 45.2% leased with a current investment of $4.2 billion and a TEI of $7.5 billion when completed and leased, leaving $3.3 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, including the acquisition of land; • the acquisition of other real estate investments that we acquire with the intention of redeveloping into industrial properties; • capital expenditures and leasing costs on properties in our operating portfolio, including investments in solar panels and other renewable energy improvements; • repayment of debt and scheduled principal payments of $33 million in 2023; • additional investments in current and future unconsolidated 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).
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 December 31, 2023, 130 properties in our development portfolio were 37.9% leased with a current investment of $4.4 billion and a TEI of $7.8 billion when completed and leased, leaving $3.4 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, including the acquisition of land; • the acquisition of other real estate investments that we acquire with the intention of redeveloping into industrial properties; • capital expenditures and leasing costs on properties in our operating portfolio; • investments in energy assets such as solar panels, battery storage and mobility solutions to serve our customers; • repayment of debt and scheduled principal payments of $531 million in 2024; • additional investments in current and future unconsolidated 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).
Below are the components of Strategic Capital Segment NOI derived directly from the line items in the Consolidated Financial Statements (in millions): 2022 2021 Strategic capital revenues $ 1,040 $ 591 Strategic capital expenses (304 ) (207 ) Strategic Capital Segment – NOI $ 736 $ 384 Below is additional detail of our Strategic Capital Segment revenues, expenses and NOI (in millions): U.S.
Below are the components of Strategic Capital Segment NOI derived directly from the line items in the Consolidated Financial Statements (in millions): 2023 2022 Strategic capital revenues $ 1,200 $ 1,040 Strategic capital expenses (385 ) (304 ) Strategic Capital Segment – NOI $ 815 $ 736 Below is additional detail of our Strategic Capital Segment revenues, expenses and NOI (in millions): U.S.
Unconsolidated Co-Investment Venture Debt We had investments in and advances to our unconsolidated co-investment ventures of $8.1 billion at December 31, 2022. The ventures listed below had total third-party debt of $13.5 billion at December 31, 2022 with a weighted average remaining maturity of 7 years and weighted average interest rate of 2.8% .
Unconsolidated Co-Investment Venture Debt We had investments in and advances to our unconsolidated co-investment ventures of $8.4 billion at December 31, 2023. The ventures listed below had total third-party debt of $14.9 billion at December 31, 2023 with a weighted average remaining maturity of 7 years and weighted average interest rate of 3.1%.
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 other derivative financial instruments. 42 Table of Contents 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.
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; 44 Table of Contents • 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.
To assist investors in compensating for these limitations, we reconcile our modified FFO measures to our net earnings computed under GAAP as follows (in millions): 43 Table of Contents 2022 2021 Reconciliation of net earnings attributable to common stockholders to FFO measures: Net earnings attributable to common stockholders $ 3,359 $ 2,934 Add (deduct) NAREIT defined adjustments: Real estate related depreciation and amortization 1,763 1,534 Gains on other dispositions of investments in real estate, net of taxes (595 ) (749 ) Reconciling items related to noncontrolling interests (13 ) 5 Our share of reconciling items included in earnings related to unconsolidated entities 363 200 NAREIT defined FFO attributable to common stockholders/unitholders 4,877 3,924 Add (deduct) our modified adjustments: Unrealized foreign currency and derivative gains, net (85 ) (173 ) Deferred income tax expense 13 1 Current income tax expense (benefit) on dispositions related to acquired tax liabilities (21 ) 3 Reconciling items related to noncontrolling interests - 1 Our share of reconciling items included in earnings related to unconsolidated entities (42 ) (1 ) FFO, as modified by Prologis attributable to common stockholders/unitholders 4,742 3,755 Adjustments to arrive at Core FFO: Gains on dispositions of development properties and land, net (598 ) (817 ) Current income tax expense on dispositions 18 38 Losses on early extinguishment of debt, net 20 187 Reconciling items related to noncontrolling interests 5 7 Our share of reconciling items included in earnings related to unconsolidated entities 1 2 Core FFO attributable to common stockholders/unitholders $ 4,188 $ 3,172
To 45 Table of Contents assist investors in compensating for these limitations, we reconcile our modified FFO measures to our net earnings computed under GAAP as follows (in millions): 2023 2022 Reconciliation of net earnings attributable to common stockholders to FFO measures: Net earnings attributable to common stockholders $ 3,053 $ 3,359 Add (deduct) NAREIT defined adjustments: Real estate related depreciation and amortization 2,434 1,763 Gains on other dispositions of investments in real estate, net of taxes (158 ) (595 ) Reconciling items related to noncontrolling interests (38 ) (13 ) Our share of reconciling items included in earnings related to unconsolidated entities 455 363 NAREIT defined FFO attributable to common stockholders/unitholders 5,746 4,877 Add (deduct) our modified adjustments: Unrealized foreign currency, derivative and other losses (gains), net 18 (85 ) Deferred income tax expense 18 13 Current income tax benefit on dispositions related to acquired tax liabilities (11 ) (21 ) Our share of reconciling items included in earnings related to unconsolidated entities (11 ) (42 ) FFO, as modified by Prologis attributable to common stockholders/unitholders 5,760 4,742 Adjustments to arrive at Core FFO: Gains on dispositions of development properties and land, net (462 ) (598 ) Current income tax expense on dispositions 36 18 Losses (gains) on early extinguishment of debt, net (3 ) 20 Reconciling items related to noncontrolling interests 9 5 Our share of reconciling items included in earnings related to unconsolidated entities (6 ) 1 Core FFO attributable to common stockholders/unitholders $ 5,334 $ 4,188
(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.
(2) We calculate the weighted average stabilized yield as estimated NOI assuming stabilized occupancy divided by TEI. (3) 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.
The following table details our foreign currency and derivative gains (losses), net included in earnings (in millions): 2022 2021 Realized foreign currency and derivative gains (losses), net: Gains (losses) on the settlement of undesignated derivatives $ 145 $ (8 ) Gains (losses) on the settlement of transactions with third parties 1 (1 ) Total realized foreign currency and derivative gains (losses), net 146 (9 ) Unrealized foreign currency and derivative gains, net: Gains on the change in fair value of undesignated derivatives and unhedged debt 83 169 Gains on remeasurement of certain assets and liabilities 9 4 Total unrealized foreign currency and derivative gains, net 92 173 Total foreign currency and derivative gains, net $ 238 $ 164 See Note 2 to the Consolidated Financial Statements for more information about our foreign currency and derivative financial instrument policies and Note 15 to the Consolidated Financial Statements for more information about our derivative and nonderivative transactions.
Upon settlement of these transactions, we recognize realized gains or losses. 37 Table of Contents The following table details our foreign currency and derivative gains, net included in earnings (in millions): 2023 2022 Realized foreign currency and derivative gains, net: Gains on the settlement of undesignated derivatives $ 60 $ 145 Gains on the settlement of transactions with third parties 1 1 Total realized foreign currency and derivative gains, net 61 146 Unrealized foreign currency and derivative gains (losses), net: Gains (losses) on the change in fair value of undesignated derivatives and unhedged debt (81 ) 83 Gains on remeasurement of certain assets and liabilities 10 9 Total unrealized foreign currency and derivative gains (losses), net (71 ) 92 Total foreign currency and derivative gains (losses), net $ (10 ) $ 238 See Note 2 to the Consolidated Financial Statements for more information about our foreign currency and derivative financial instrument policies and Note 15 to the Consolidated Financial Statements for more information about our derivative and nonderivative transactions.
(1) In 2022, we completed the Duke Transaction. (2) 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) 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.
See Note 11 to the Consolidated Financial Statements for further information on our noncontrolling interests. 36 Table of Contents Other Comprehensive Income (Loss) The key driver of changes in Accumulated Other Comprehensive Income (Loss) (“AOCI/L”) in 2022 and 2021 was the currency translation adjustment derived from changes in exchange rates during both periods primarily 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.
Other Comprehensive Income (Loss) The key driver of changes in Accumulated Other Comprehensive Income (Loss) (“AOCI/L”) in the Consolidated Financial Statements in 2023 and 2022 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.
See below for information on our O&M operating portfolio at December 31 (square feet in millions): 2022 2021 Number of Properties Square Feet Percentage Occupied Number of Properties Square Feet Percentage Occupied Consolidated 2,812 595 98.3 % 2,300 446 98.2 % Unconsolidated 2,177 488 98.1 % 1,987 456 97.3 % Total 4,989 1,083 98.2 % 4,287 902 97.7 % Below are the key leasing metrics of our O&M operating portfolio.
See below for information on our O&M operating portfolio at December 31 (square feet in millions): 2023 2022 Number of Properties Square Feet Percentage Occupied Number of Properties Square Feet Percentage Occupied Consolidated 2,957 631 97.6 % 2,812 595 98.3 % Unconsolidated 2,242 507 97.5 % 2,177 488 98.1 % Total 5,199 1,138 97.6 % 4,989 1,083 98.2 % Below are the key leasing metrics of our O&M operating portfolio.
Our repurchase of and payments on debt and proceeds from the issuance of debt consisted of the following activity (in millions): 2022 (1) 2021 Repurchase of and payments on debt (including extinguishment costs) Regularly scheduled debt principal payments and payments at maturity $ 914 $ 10 Secured mortgage debt 328 656 Senior notes 3 1,644 Term loans 136 250 Total $ 1,381 $ 2,560 Proceeds from the issuance of debt Secured mortgage debt $ 331 $ 242 Senior notes 3,256 2,902 Term loans 529 454 Total $ 4,116 $ 3,598 (1) We completed the Duke Transaction in 2022 and assumed $4.2 billion of debt.
Our repurchase of and payments on debt and proceeds from the issuance of debt consisted of the following activity (in millions): 2023 2022 (1) Repurchase of and payments on debt (including extinguishment costs) Regularly scheduled debt principal payments and payments at maturity $ 30 $ 914 Secured mortgage debt 153 328 Senior notes 89 3 Term loans - 136 Total $ 272 $ 1,381 Proceeds from the issuance of debt Secured mortgage debt $ 120 $ 331 Senior notes 5,323 3,256 Term loans 312 529 Total $ 5,755 $ 4,116 (1) We completed the Duke Transaction in 2022 and assumed $4.2 billion of debt.
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; 37 Table of Contents • available unrestricted cash balances ($278 million at December 31, 2022); • borrowing capacity under our current credit facility arrangements ($3.9 billion available at December 31, 2022); and • proceeds from the issuance of debt.
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 ($530 million at December 31, 2023); • borrowing capacity under our current credit facility arrangements that allow us to borrow on a short-term basis, with original maturities ranging from overnight to three months ($5.5 billion available at December 31, 2023); and • proceeds from the issuance of debt.
Gains on Real Estate Transactions, Net Gains on the disposition of development properties and land were $598 million and $817 million for 2022 and 2021, respectively, and primarily included gains from the contribution of properties we developed to our unconsolidated co-investment ventures in Europe and Japan for 2022 and additionally in the U.S. for 2021.
Gains on Real Estate Transactions, Net Gains on the disposition of development properties and land were $462 million and $598 million for 2023 and 2022, respectively, primarily from the contribution of properties we developed to our unconsolidated co-investment ventures in Europe, Japan and Mexico 34 Table of Contents for both years.
The following table summarizes our income tax expense (benefit) (in millions): 2022 2021 Current income tax expense (benefit): Income tax expense $ 130 $ 108 Income tax expense on dispositions 13 62 Income tax expense (benefit) on dispositions related to acquired tax liabilities (21 ) 3 Total current income tax expense 122 173 Deferred income tax expense (benefit): Income tax expense 13 4 Income tax benefit on dispositions related to acquired tax liabilities - (3 ) Total deferred income tax expense 13 1 Total income tax expense $ 135 $ 174 Our income taxes are discussed in more detail in Note 13 to the Consolidated Financial Statements.
The following table summarizes our income tax expense (benefit) (in millions): 2023 2022 Current income tax expense (benefit): Income tax expense $ 165 $ 130 Income tax expense on dispositions 39 13 Income tax benefit on dispositions related to acquired tax liabilities (11 ) (21 ) Total current income tax expense 193 122 Deferred income tax expense (benefit): Income tax expense 18 13 Total deferred income tax expense 18 13 Total income tax expense $ 211 $ 135 Our income taxes are discussed in more detail in Note 13 to the Consolidated Financial Statements.
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.
NEW ACCOUN TING PRONOUNCEMENTS See Note 2 to the Consolidated Financial Statements. FUNDS FROM OP ERATIONS 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 following table summarizes capitalized G&A (in millions): 2022 2021 Building and land development activities $ 107 $ 95 Operating building improvements and other 45 29 Total capitalized G&A expenses $ 152 $ 124 Capitalized salaries and related costs as a percent of total salaries and related costs 22.7 % 21.9 % Depreciation and Amortization Expenses Depreciation and amortization expenses were $1.8 billion and $1.6 billion in 2022 and 2021, respectively.
The following table summarizes capitalized G&A (in millions): 2023 2022 Building and land development activities $ 123 $ 107 Operating building improvements and other 52 45 Total capitalized G&A expenses $ 175 $ 152 Capitalized compensation and related costs as a percent of total 23.8 % 22.7 % Depreciation and Amortization Expenses Depreciation and amortization expenses were $2.5 billion and $1.8 billion in 2023 and 2022, respectively.
(3) Transactional fees include leasing commissions and acquisition, disposition, development and other fees. 31 Table of Contents (4) 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.
(5) 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.
Financing Activities Cash provided by and used in financing activities is principally driven by proceeds from and payments on credit facilities and other debt, along with dividends paid on common and preferred stock and noncontrolling interest contributions and distributions.
See Note 15 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 and other debt, along with dividends paid on common and preferred stock and noncontrolling interest contributions and distributions.
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 based on the square footage of the relative portfolios. In addition, this segment is impacted by our development, acquisition and disposition activities.
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.
See the Cash Flow Summary below for more information about our investment activity in our co-investment ventures. 38 Table of Contents Cash Flow Summary The following table summarizes our cash flow activity (in millions): 2022 2021 Net cash provided by operating activities $ 4,126 $ 2,996 Net cash used in investing activities $ (4,499 ) $ (1,990 ) Net cash (used in) provided by financing activities $ 116 $ (1,008 ) Net decrease in cash and cash equivalents, including the effect of foreign currency exchange rates on cash $ (278 ) $ (42 ) Operating Activities Cash provided by and used in operating activities, exclusive of changes in receivables and payables, was impacted by the following significant activities: • Real Estate Segment.
Cash Flow Summary The following table summarizes our cash flow activity (in millions): 2023 2022 Net cash provided by operating activities $ 5,373 $ 4,126 Net cash used in investing activities $ (6,419 ) $ (4,499 ) Net cash provided by financing activities $ 1,320 $ 116 Net increase (decrease) in cash and cash equivalents, including the effect of foreign currency exchange rates on cash $ 252 $ (278 ) 40 Table of Contents Operating Activities Cash provided by and used in operating activities, exclusive of changes in receivables and payables, was impacted by the following significant activities: • Real Estate Segment.
Below is our NOI by segment per our Consolidated Financial Statements and a reconciliation of NOI by segment to Operating Income per the Consolidated Financial Statements (in millions): 2022 2021 Real estate segment: Rental revenues $ 4,913 $ 4,148 Development management and other revenues 21 20 Rental expenses (1,206 ) (1,041 ) Other expenses (40 ) (22 ) Real Estate Segment – NOI 3,688 3,105 Strategic capital segment: Strategic capital revenues 1,040 591 Strategic capital expenses (304 ) (207 ) Strategic Capital Segment– NOI 736 384 General and administrative expenses (331 ) (294 ) Depreciation and amortization expenses (1,813 ) (1,578 ) Operating income before gains on real estate transactions, net 2,280 1,617 Gains on dispositions of development properties and land, net 598 817 Gains on other dispositions of investments in real estate, net 589 773 Operating income $ 3,467 $ 3,207 See Note 17 to the Consolidated Financial Statements for more information on our segments and a reconciliation of each business segment’s NOI to Operating Income and Earnings Before Income Taxes. 28 Table of Contents Real Estate Segment This operating segment principally includes rental revenue and rental expenses recognized from our consolidated properties.
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 (in millions): 2023 2022 Real estate segment: Rental revenues $ 6,819 $ 4,913 Development management and other revenues 5 21 Rental expenses (1,625 ) (1,206 ) Other expenses (54 ) (40 ) Real Estate Segment – NOI 5,145 3,688 Strategic capital segment: Strategic capital revenues 1,200 1,040 Strategic capital expenses (385 ) (304 ) Strategic Capital Segment – NOI 815 736 General and administrative expenses (390 ) (331 ) Depreciation and amortization expenses (2,485 ) (1,813 ) Operating income before gains on real estate transactions, net 3,085 2,280 Gains on dispositions of development properties and land, net 462 598 Gains on other dispositions of investments in real estate, net 161 589 Operating income $ 3,708 $ 3,467 See Note 17 to the Consolidated Financial Statements for more information on our segments and a reconciliation of each business segment’s NOI to Operating Income and Earnings Before Income Taxes.
The following is a reconciliation of our consolidated rental revenues, rental expenses and property NOI for each quarter in 2022 and 2021 to the full year, as included in the Consolidated Statements of Income and within Note 19 to the Consolidated Financial Statements and to the respective amounts in our same store portfolio analysis for the three months ended December 31 (dollars in millions): Three Months Ended March 31, June 30, September 30, December 31, Full Year 2022 Rental revenues $ 1,077 $ 1,093 $ 1,152 $ 1,591 $ 4,913 Rental expenses (276 ) (270 ) (285 ) (375 ) (1,206 ) Property NOI $ 801 $ 823 $ 867 $ 1,216 $ 3,707 2021 Rental revenues $ 1,022 $ 1,015 $ 1,037 $ 1,074 $ 4,148 Rental expenses (278 ) (245 ) (256 ) (262 ) (1,041 ) Property NOI $ 744 $ 770 $ 781 $ 812 $ 3,107 Three Months Ended December 31, 2022 2021 % Change Reconciliation of Consolidated Property NOI to Same Store Property NOI measures: Rental revenues $ 1,591 $ 1,074 Rental expenses (375 ) (262 ) Consolidated Property NOI $ 1,216 $ 812 Adjustments to derive same store results: Property NOI from consolidated properties not included in same store portfolio and other adjustments (1) (471 ) (118 ) Property NOI from unconsolidated co-investment ventures included in same store portfolio (1)(2) 615 578 Third parties' share of Property NOI from properties included in same store portfolio (1)(2) (502 ) (475 ) Prologis Share of Same Store Property NOI – Net Effective (2) $ 858 $ 797 7.7 % Consolidated properties straight-line rent and fair value lease adjustments included in same store portfolio (3) (17 ) (24 ) Unconsolidated co-investment ventures straight-line rent and fair value lease adjustments included in same store portfolio (3) (9 ) (15 ) Third parties' share of straight-line rent and fair value lease adjustments included in same store portfolio (2)(3) 7 11 Prologis Share of Same Store Property NOI – Cash (2)(3) $ 839 $ 769 9.1 % (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.
The following is a reconciliation of our consolidated rental revenues, rental expenses and property NOI for each quarter in 2023 and 2022 to the full year, as included in the Consolidated Statements of Income and within Note 19 to the Consolidated Financial Statements and to the respective amounts in our same store portfolio analysis for the three months ended December 31 (dollars in millions): Three Months Ended March 31, June 30, September 30, December 31, Full Year 2023 Rental revenues $ 1,634 $ 1,652 $ 1,777 $ 1,756 $ 6,819 Rental expenses (413 ) (388 ) (416 ) (408 ) (1,625 ) Property NOI $ 1,221 $ 1,264 $ 1,361 $ 1,348 $ 5,194 2022 Rental revenues $ 1,077 $ 1,093 $ 1,152 $ 1,591 $ 4,913 Rental expenses (276 ) (270 ) (285 ) (375 ) (1,206 ) Property NOI $ 801 $ 823 $ 867 $ 1,216 $ 3,707 Three Months Ended December 31, 2023 2022 % Change Reconciliation of Consolidated Property NOI to Same Store Property NOI measures: Rental revenues $ 1,756 $ 1,591 Rental expenses (408 ) (375 ) Consolidated Property NOI $ 1,348 $ 1,216 Adjustments to derive same store results: Property NOI from consolidated properties not included in same store portfolio and other adjustments (1) (501 ) (432 ) Property NOI from unconsolidated co-investment ventures included in same store portfolio (1)(2) 714 671 Third parties' share of Property NOI from properties included in same store portfolio (1)(2) (575 ) (540 ) Prologis Share of Same Store Property NOI – Net Effective (2) $ 986 $ 915 7.8 % Consolidated properties straight-line rent and fair value lease adjustments included in same store portfolio (3) (17 ) (20 ) Unconsolidated co-investment ventures straight-line rent and fair value lease adjustments included in same store portfolio (3) (7 ) (12 ) Third parties' share of straight-line rent and fair value lease adjustments included in same store portfolio (2)(3) 6 9 Prologis Share of Same Store Property NOI – Cash (2)(3) $ 968 $ 892 8.5 % (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.
Approximately 40% of the promote earned by us from the co-investment ventures is paid to our employees as a combination of cash and stock-based awards pursuant to the terms of the PPP and expensed through Strategic Capital Expenses, as vested. G&A Expenses G&A expenses were $331 million and $294 million for 2022 and 2021, respectively.
Up to 40% of the third-party portion of the promote earned by us from the co-investment ventures is paid to our employees as a combination of cash and stock-based awards pursuant to the terms of the PPP and expensed through Strategic Capital Expenses in the Consolidated Statements of Income, as vested.
Below are the components of Real Estate Segment NOI, derived directly from line items in the Consolidated Financial Statements (in millions): 2022 2021 Rental revenues $ 4,913 $ 4,148 Development management and other revenues 21 20 Rental expenses (1,206 ) (1,041 ) Other expenses (40 ) (22 ) Real Estate Segment – NOI $ 3,688 $ 3,105 The change in Real Estate Segment (“RES”) NOI in 2022 compared to 2021 of approximately $583 million was impacted by the following activities (in millions): (1) Acquisition activity is principally due to the Duke Transaction on October 3, 2022.
In addition, this segment is impacted by our development, acquisition and disposition activities. 30 Table of Contents Below are the components of Real Estate Segment NOI, derived directly from line items in the Consolidated Financial Statements (in millions): 2023 2022 Rental revenues $ 6,819 $ 4,913 Development management and other revenues 5 21 Rental expenses (1,625 ) (1,206 ) Other expenses (54 ) (40 ) Real Estate Segment – NOI $ 5,145 $ 3,688 The change in Real Estate Segment (“RES”) NOI in 2023 compared to 2022 of approximately $1.5 billion was impacted by the following activities (in millions): (1) Acquisition activity is principally due to the Duke Transaction on October 3, 2022 and a $3.1 billion real estate portfolio acquired in the U.S. on June 29, 2023.
Acquisition activity includes land for future development, operating properties and other real estate assets. See Note 4 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: • Duke Transaction, net of cash acquired .
See Note 4 to the Consolidated Financial Statements for further information on these activities, including the $3.1 billion real estate portfolio we acquired in the U.S. in the second quarter of 2023. In addition, the following significant transactions also impacted our cash used in and provided by investing activities: • Duke Transaction, net of cash acquired .
(3) 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, 2021 through December 31, 2022. 29 Table of Contents Below are key operating metrics of our consolidated operating portfolio, which excludes non-strategic industrial properties.
(3) 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, 2022 through December 31, 2023.
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 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.
In 2022, spend on turnover costs remained similar to 2021, however, the value of the leases commenced increased due to strong market rent growth. 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, on both a net effective and cash basis.
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 believe we are well-positioned to organically grow revenues given the increase in market rents over the last several years and our high lease mark-to-market. However, we will be cautious as we manage our business in this uncertain environment.
We believe we are well positioned to organically grow revenues over the long-term given the cumulative growth in market rents over the last several years and our existing high lease mark-to-market.
(1) Other Americas Europe Asia Total 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 Strategic capital revenues ($) Recurring fees (2) 178 136 45 38 167 156 78 79 468 409 Transactional fees (3) 22 14 6 8 20 30 19 32 67 84 Promote revenue (4) 15 22 32 13 458 63 - - 505 98 Total strategic capital revenues ($) 215 172 83 59 645 249 97 111 1,040 591 Strategic capital expenses ($) (4) (155 ) (112 ) (20 ) (12 ) (87 ) (45 ) (42 ) (38 ) (304 ) (207 ) Strategic Capital Segment - NOI ($) 60 60 63 47 558 204 55 73 736 384 (1) The U.S. expenses include compensation and personnel costs for employees who are based in the U.S. but also support other geographies.
(1) Other Americas Europe Asia (2) Total 2023 2022 2023 2022 2023 2022 2023 2022 2023 2022 Strategic capital revenues ($) Recurring fees (3) 171 178 50 45 163 167 76 78 460 468 Transactional fees (4) 21 22 7 6 18 20 19 19 65 67 Promote revenue (5) 641 15 33 32 1 458 - - 675 505 Total strategic capital revenues ($) 833 215 90 83 182 645 95 97 1,200 1,040 Strategic capital expenses ($) (5) (204 ) (155 ) (27 ) (20 ) (103 ) (87 ) (51 ) (42 ) (385 ) (304 ) Strategic Capital Segment - NOI ($) 629 60 63 63 79 558 44 55 815 736 (1) The U.S. expenses include compensation and personnel costs for employees who are based in the U.S. but also support other geographies.
Properties. 30 Table of Contents Capital Expenditures We capitalize costs incurred in improving and leasing our operating properties as part of the investment basis or within other assets.
For additional information on our development portfolio at December 31, 2023, see Item 2. Properties. 32 Table of Contents 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.
Our financial condition for 2020, results of operations for 2020 and 2021 compared to 2020 and details on the acquisitions of Industrial Property Trust Inc. (“IPT” or the “IPT Transaction”) and Liberty Property Trust and Liberty Property Limited Partnership (“Liberty” or the “Liberty Transaction”) referenced throughout this document can be found under Item 7.
Our financial condition for 2021, results of operations for 2021, and 2022 compared to 2021 and details on the acquisition of Duke Realty Corporation and Duke Realty Limited Partnership (collectively "Duke" or the "Duke Transaction") is referenced throughout this document and can be found under Item 7.
Included in Strategic Capital Revenues is the third-party investors’ share that is owed for promotes, which is 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 $331 million and $294 million of G&A expenses in 2022 and 2021, respectively.
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.
See Note 8 to the Consolidated Financial Statements and the Liquidity and Capital Resources section, for more information regarding our debt. 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.
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.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeThe following table summarizes the future repayment of debt and scheduled principal payments at December 31, 2022 (dollars in millions): 2023 2024 2025 2026 Thereafter Total Fair Value Fixed rate debt (1) $ 29 $ 255 $ 176 $ 1,313 $ 19,343 $ 21,116 $ 17,324 Weighted average interest rate (2) 3.4 % 1.4 % 3.1 % 3.3 % 2.3 % 2.3 % Variable rate debt Credit facilities $ - $ 487 $ - $ 1,051 $ - $ 1,538 $ 1,538 Secured mortgage debt 4 - 10 64 - 78 79 Senior notes - 160 - - - 160 160 Term loans - - 721 645 190 1,556 1,555 Total variable rate debt $ 4 $ 647 $ 731 $ 1,760 $ 190 $ 3,332 $ 3,332 (1) At December 31, 2022, we had one interest rate swap agreement to fix €150 million ($156 million) of our floating rate euro senior notes which is included in fixed rate debt.
Biggest changeThe following table summarizes the future repayment of debt and scheduled principal payments at December 31, 2023 (dollars in millions): 2024 2025 2026 2027 Thereafter Total Fair Value Fixed rate debt (1) $ 365 $ 176 $ 1,463 $ 1,796 $ 23,090 $ 26,890 $ 24,096 Weighted average interest rate (2) 2.0 % 3.2 % 3.3 % 2.0 % 2.9 % 2.8 % Variable rate debt Credit facilities $ - $ - $ 355 $ 624 $ - $ 979 $ 979 Secured mortgage debt - 38 - - - 38 38 Senior notes 166 - - - - 166 166 Term loans - 726 601 - 177 1,504 1,503 Total variable rate debt $ 166 $ 764 $ 956 $ 624 $ 177 $ 2,687 $ 2,686 (1) At December 31, 2023, we had one interest rate swap agreement to fix €150 million ($156 million) of our floating rate euro senior notes which is included in fixed rate debt.
At December 31, 2022, after consideration of our ability to borrow in the foreign currencies in which we invest and also derivative and nonderivative financial instruments as discussed in Note 15 to the Consolidated Financial Statements, we had minimal net equity denominated in a currency other than the U.S. dollar.
At December 31, 2023, after consideration of our ability to borrow in the foreign currencies in which we invest and also derivative and nonderivative financial instruments as discussed in Note 15 to the Consolidated Financial Statements, we had minimal net equity denominated in a currency other than the U.S. dollar.
Our sensitivity analysis estimates the exposure to market risk sensitive instruments assuming a hypothetical 10% adverse change in foreign currency exchange rates or interest rates at December 31, 2022. The results of the sensitivity analysis are summarized in the following sections. The sensitivity analysis is of limited predictive value.
Our sensitivity analysis estimates the exposure to market risk sensitive instruments assuming a hypothetical 10% adverse change in foreign currency exchange rates or interest rates at December 31, 2023. The results of the sensitivity analysis are summarized in the following sections. The sensitivity analysis is of limited predictive value.
(2) The weighted average interest rates represent the effective interest rates (including amortization of debt issuance costs and noncash premiums and discounts) at December 31, 2022 for the debt outstanding and include the impact of designated interest rate swaps, which effectively fix the interest rate on certain variable rate debt .
(2) The weighted average interest rates represent the effective interest rates (including amortization of debt issuance costs and noncash premiums and discounts) at December 31, 2023 for the debt outstanding and include the impact of designated interest rate swaps, which effectively fix the interest rate on certain variable rate debt.
Although the impact to net earnings is mitigated through higher translated U.S. dollar earnings from these currencies, a weakening of the U.S. dollar against these currencies by 10% could result in a $164 million cash payment on settlement of these contracts. 44 Table of Contents Interest Rate Risk We are also exposed to the impact of interest rate changes on future earnings and cash flows.
Although the impact to net earnings is mitigated through higher translated U.S. dollar earnings from these currencies, a weakening of the U.S. dollar against these currencies by 10% could result in a $162 million cash payment on settlement of these contracts. 46 Table of Contents Interest Rate Risk We are also exposed to the impact of interest rate changes on future earnings and cash flows.
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk We are exposed to the impact of foreign exchange-related variability and earnings volatility on our foreign investments and interest rate changes. See our risk factors in Item 1A. Risk Factors, specifically Risks Related to our Global Operations and Risks Related to Financing and Capital.
ITEM 7A. Quantitative a nd Qualitat ive Disclosures About Market Risk We are exposed to the impact of foreign exchange-related variability and earnings volatility on our foreign investments and interest rate changes. See our risk factors in Item 1A. Risk Factors, specifically Risks Related to our Global Operations and Risks Related to Financing and Capital.
To mitigate that risk, we generally borrow with fixed rate debt and we may use derivative instruments to fix the interest rate on our variable rate debt. At December 31, 2022, $21.1 billion of our debt bore interest at fixed rates and therefore the fair value of these instruments was affected by changes in market interest rates.
To mitigate that risk, we generally borrow with fixed rate debt and we may use derivative instruments to fix the interest rate on our variable rate debt. At December 31, 2023, $26.9 billion of our debt bore interest at fixed rates and therefore the fair value of these instruments was affected by changes in market interest rates.
At December 31, 2022, the weighted average effective interest rate on our variable rate debt was 2.5%, which was calculated using an average balance on our credit facilities throughout the year and our other variable rate debt balances at December 31, 2022. Changes in interest rates can cause interest expense to fluctuate on our variable rate debt.
At December 31, 2023, the weighted average effective interest rate on our variable rate debt was 3.6%, which was calculated using an average balance on our credit facilities throughout the year and our other variable rate debt balances at December 31, 2023. Changes in interest rates can cause interest expense to fluctuate on our variable rate debt.
On the basis of our sensitivity analysis, a 10% increase in interest rates on our average outstanding variable rate debt balances would result in additional annual interest expense of $6 million for the year ended December 31, 2022, which equates to a change in interest rates of 25 basis points on our average outstanding variable rate debt balances and 2 basis point on our average total debt portfolio balances.
On the basis of our sensitivity analysis, a 10% increase in interest rates on our average outstanding variable rate debt balances would result in additional annual interest expense of $8 million for the year ended December 31, 2023, which equates to a change in interest rates of 36 basis points on our average outstanding variable rate debt balances and 3 basis points on our average total debt portfolio balances.
The gain or loss on settlement of these contracts is included in our earnings and offsets the lower or higher translation of earnings from our investments denominated in currencies other than the U.S. dollar.
As we do not designate these foreign currency contracts as hedges, the gain or loss on settlement is included in our earnings and offsets the lower or higher translation of earnings from our investments denominated in currencies other than the U.S. dollar.
For the year ended December 31, 2022, $975 million or 16% of our total consolidated revenue was denominated in foreign currencies. We enter into other foreign currency contracts, such as forwards, to reduce fluctuations in foreign currency associated with the translation of the future earnings of our international subsidiaries.
For the year ended December 31, 2023, $546 million or 6.8% of our total consolidated revenue was denominated in foreign currencies. We enter into foreign currency contracts that we do not designate, such as forwards, to reduce the impact from fluctuations in foreign currency associated with the translation of the future earnings of our international subsidiaries.
We primarily hedge our foreign currency risk by borrowing in the currencies in which we invest thereby providing a natural hedge. Additionally, we hedge our foreign currency risk by entering into derivative financial instruments that we designate as net investment hedges, as these amounts offset the translation adjustments on the underlying net assets of our foreign investments.
Additionally, we hedge our foreign currency risk by entering into derivative financial instruments, such as foreign currency contracts, that we designate as net investment hedges, as these amounts offset the translation adjustments on the underlying net assets of our foreign investments.
At December 31, 2022, $3.3 billion of our debt bore interest at variable rates.
At December 31, 2023, $2.7 billion of our debt bore interest at variable rates.
We have forward contracts that were not designated as hedges, denominated principally in British pound sterling, Canadian dollar, euro and Japanese yen, and have an aggregate notional amount of $1.6 billion to mitigate risk associated with the translation of the future earnings of our subsidiaries denominated in these currencies.
At December 31, 2023, we had foreign currency contracts denominated principally in British pound sterling, Canadian dollar, euro and Japanese yen, with an aggregate notional amount of $1.6 billion.
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We primarily hedge our foreign currency risk by borrowing in the currencies in which we invest thereby providing a natural hedge.

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