Attached files
| file | filename |
|---|---|
| 8-K/A - 8-K/A - Prologis, Inc. | d49132d8ka.htm |
| EX-99.1 - EX-99.1 - Prologis, Inc. | d49132dex991.htm |
| EX-23.2 - EX-23.2 - Prologis, Inc. | d49132dex232.htm |
| EX-23.1 - EX-23.1 - Prologis, Inc. | d49132dex231.htm |
EXHIBIT 99.2
PROLOGIS, INC. AND PROLOGIS, L.P.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Unless stated otherwise or the context otherwise requires, references to “Prologis, Inc.” mean Prologis, Inc. and its consolidated subsidiaries; and references to “Prologis, L.P.” or the “Operating Partnership” mean Prologis, L.P., and its consolidated subsidiaries. The terms “the Company,” “Prologis,” “we,” “our” or “us” means Prologis, Inc. and the Operating Partnership collectively. Please refer to the explanatory note provided in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2015, and in our Annual Report on Form 10-K for the year ended December 31, 2014.
On May 29, 2015, we acquired the real estate assets and operating platform of KTR Capital Partners and its affiliates (“KTR”). The portfolio included 315 operating properties aggregating 59 million square feet, 3.6 million square feet of properties under development and land parcels that will support an estimated build out of 6.8 million square feet (the “Portfolio”). The properties were acquired by our consolidated co-investment venture Prologis U.S. Logistics Venture (“USLV”), of which we own 55%. The acquisition was funded through cash, the assumption of secured mortgage debt and the issuance of 4.5 million common limited partnership units in the Operating Partnership. Prologis’ portion of cash paid for the acquisition was $2.6 billion. We incurred $24.7 million of acquisition costs that were included in Other Expense in the Consolidated Statements of Operations for the six months ended June 30, 2015.
This pro forma consolidated financial information should be read in conjunction with the consolidated financial statements included in our Form 10-K for the fiscal year ended December 31, 2014, and our Form 10-Q for the quarter ended June 30, 2015, as filed with the Securities and Exchange Commission. The Form 10-Q for the quarter ended June 30, 2015, reflects the acquisition of KTR; therefore, the pro forma consolidated financial information does not include a consolidated balance sheet as of June 30, 2015.
The purchase allocation adjustments made in connection with the pro forma consolidated statements of operations are based on the information available at this time. Subsequent purchase allocation adjustments may be made based on additional information.
The KTR Portfolio’s historical financial statements include rental revenue and expenses related to various properties that were sold by KTR in 2014 and 2015 and not acquired by us. Pro forma adjustments have been reflected in the statements below to eliminate such rental revenue and expenses related to these properties.
The pro forma consolidated financial information does not purport to represent the Company’s results of operations that would actually have occurred had the acquisition of KTR occurred on January 1, 2014; nor does it purport to project our results of operations as of any future date or for any future period.
PROLOGIS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 2015
(In thousands, except per share amounts)
| Prologis, Inc. Historical (1) |
KTR Portfolio (2) |
Pro Forma Adjustments |
Pro Forma Consolidated |
|||||||||||||
| Revenues: |
||||||||||||||||
| Rental income |
$ | 682,375 | $ | 119,728 | $ | 7,724 | (3) | $ | 809,827 | |||||||
| Rental recoveries |
197,871 | 34,215 | — | 232,086 | ||||||||||||
| Strategic capital income |
89,071 | — | — | 89,071 | ||||||||||||
| Development management and other income |
3,934 | — | — | 3,934 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total revenues |
973,251 | 153,943 | 7,724 | 1,134,918 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Expenses: |
||||||||||||||||
| Rental expenses |
252,533 | 46,773 | (2,714 | )(4) | 296,592 | |||||||||||
| Strategic capital expenses |
40,476 | — | — | 40,476 | ||||||||||||
| General and administrative expenses |
113,315 | — | — | 113,315 | ||||||||||||
| Depreciation and amortization |
359,996 | — | 62,119 | (5) | 422,115 | |||||||||||
| Other expenses |
35,702 | — | (24,666 | )(6) | 11,036 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total expenses |
802,022 | 46,773 | 34,739 | 883,534 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Operating income |
171,229 | 107,170 | (27,015 | ) | 251,384 | |||||||||||
| Other income (expense): |
||||||||||||||||
| Earnings from unconsolidated entities, net |
72,826 | — | — | 72,826 | ||||||||||||
| Interest expense |
(137,663 | ) | (13,301 | ) | (9,729 | )(7) | (160,693 | ) | ||||||||
| Interest and other income, net |
12,896 | — | — | 12,896 | ||||||||||||
| Gains on dispositions of investments in real estate, net |
386,497 | — | — | 386,497 | ||||||||||||
| Foreign currency and derivative gains and related amortization, net |
9,054 | — | — | 9,054 | ||||||||||||
| Losses on early extinguishment of debt, net |
(16,525 | ) | — | — | (16,525 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total other income (expense) |
327,085 | (13,301 | ) | (9,729 | ) | 304,055 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Earnings before income taxes |
498,314 | 93,869 | (36,744 | ) | 555,439 | |||||||||||
| Current income tax expense |
5,545 | — | — | 5,545 | ||||||||||||
| Deferred income tax expense |
1,197 | — | — | 1,197 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total income tax expense |
6,742 | — | — | 6,742 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Consolidated net earnings |
491,572 | 93,869 | (36,744 | ) | 548,697 | |||||||||||
| Net (earnings) attributable to noncontrolling interests |
(2,778 | ) | |
— |
|
(32,219 | )(8) | (34,997 | ) | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net earnings attributable to controlling interests |
488,794 | 93,869 | (68,963 | ) | 513,700 | |||||||||||
| Less preferred stock dividends |
3,348 | — | — | 3,348 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net earnings attributable to common stockholders |
$ | 485,446 | $ | 93,869 | $ | (68,963 | ) | $ | 510,352 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Weighted average common shares outstanding - Basic |
518,791 | — | 518,791 | |||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Weighted average common shares outstanding - Diluted |
529,827 | 3,704 | (9) | 533,531 | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Net earnings per share attributable to common stockholders - Basic |
$ | 0.94 | $ | 0.98 | ||||||||||||
|
|
|
|
|
|||||||||||||
| Net earnings per share attributable to common stockholders - Diluted |
$ | 0.92 | $ | 0.97 | ||||||||||||
|
|
|
|
|
|||||||||||||
The accompanying notes are an integral part of this pro forma condensed consolidated statement of operations.
2
PROLOGIS, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
FOR THE YEAR ENDED DECEMBER 31, 2014
(In thousands, except per share amounts)
| Prologis, Inc. Historical (10) |
KTR Portfolio (11) |
Pro Forma Adjustments |
Pro Forma Consolidated |
|||||||||||||
| Revenues: |
||||||||||||||||
| Rental income |
$ | 1,178,609 | $ | 250,790 | $ | (14,579 | )(12) | $ | 1,414,820 | |||||||
| Rental recoveries |
348,740 | 67,988 | — | 416,728 | ||||||||||||
| Strategic capital income |
219,871 | — | — | 219,871 | ||||||||||||
| Development management and other income |
13,567 | — | — | 13,567 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total revenues |
1,760,787 | 318,778 | (14,579 | ) | 2,064,986 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Expenses: |
||||||||||||||||
| Rental expenses |
430,787 | 98,334 | (15,124 | )(13) | 513,997 | |||||||||||
| Strategic capital expenses |
96,496 | — | — | 96,496 | ||||||||||||
| General and administrative expenses |
247,768 | — | — | 247,768 | ||||||||||||
| Depreciation and amortization |
642,461 | — | 165,650 | (14) | 808,111 | |||||||||||
| Other expenses |
23,467 | — | — | 23,467 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total expenses |
1,440,979 | 98,334 | 150,526 | 1,689,839 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Operating income |
319,808 | 220,444 | (165,105 | ) | 375,147 | |||||||||||
| Other income (expense): |
||||||||||||||||
| Earnings from unconsolidated entities, net |
134,288 | — | — | 134,288 | ||||||||||||
| Interest expense |
(308,885 | ) | (32,145 | ) | (23,128 | )(15) | (364,158 | ) | ||||||||
| Interest and other income, net |
25,768 | — | — | 25,768 | ||||||||||||
| Gains on dispositions of investments in real estate and revaluation of equity investments upon acquisition of a controlling interest, net |
725,790 | — | — | 725,790 | ||||||||||||
| Foreign currency and derivative (losses) and related amortization, net |
(17,841 | ) | — | — | (17,841 | ) | ||||||||||
| Losses on early extinguishment of debt, net |
(165,300 | ) | — | — | (165,300 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total other income (expense) |
393,820 | (32,145 | ) | (23,128 | ) | 338,547 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Earnings (loss) before income taxes |
713,628 | 188,299 | (188,233 | ) | 713,694 | |||||||||||
| Current income tax expense |
(61,584 | ) | — | — | (61,584 | ) | ||||||||||
| Deferred income tax benefit |
87,240 | — | — | 87,240 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total income tax expense |
25,656 | — | — | 25,656 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Consolidated net earnings |
739,284 | 188,299 | (188,233 | ) | 739,350 | |||||||||||
| Net (earnings) attributable to noncontrolling interests |
(103,101 | ) | — | (7,670 | )(16) | (110,771 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net earnings attributable to controlling interests |
636,183 | 188,299 | (195,903 | ) | 628,579 | |||||||||||
| Less preferred stock dividends |
7,431 | — | — | 7,431 | ||||||||||||
| Loss on preferred stock redemption / repurchase |
6,517 | — | — | 6,517 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net earnings attributable to common stockholders |
$ | 622,235 | $ | 188,299 | $ | (195,903 | ) | $ | 614,631 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Weighted average common shares outstanding - Basic |
499,583 | — | 499,583 | |||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Weighted average common shares outstanding - Diluted |
506,391 | 4,500 | (17) | 510,891 | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Net earnings per share attributable to common stockholders - Basic |
$ | 1.25 | $ | 1.23 | ||||||||||||
|
|
|
|
|
|||||||||||||
| Net earnings per share attributable to common stockholders - Diluted |
$ | 1.24 | $ | 1.22 | ||||||||||||
|
|
|
|
|
|||||||||||||
The accompanying notes are an integral part of this pro forma condensed consolidated statement of operations.
3
PROLOGIS, L.P.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 2015
(In thousands, except per unit amounts)
| Prologis, L.P. | KTR | Pro Forma | Pro Forma | |||||||||||||
| Historical (1) | Portfolio (2) | Adjustments | Consolidated | |||||||||||||
| Revenues: |
||||||||||||||||
| Rental income |
$ | 682,375 | $ | 119,728 | $ | 7,724 | (3) | $ | 809,827 | |||||||
| Rental recoveries |
197,871 | 34,215 | — | 232,086 | ||||||||||||
| Strategic capital income |
89,071 | — | — | 89,071 | ||||||||||||
| Development management and other income |
3,934 | — | — | 3,934 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total revenues |
973,251 | 153,943 | 7,724 | 1,134,918 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Expenses: |
||||||||||||||||
| Rental expenses |
252,533 | 46,773 | (2,714 | )(4) | 296,592 | |||||||||||
| Strategic capital expenses |
40,476 | — | — | 40,476 | ||||||||||||
| General and administrative expenses |
113,315 | — | — | 113,315 | ||||||||||||
| Depreciation and amortization |
359,996 | — | 62,119 | (5) | 422,115 | |||||||||||
| Other expenses |
35,702 | — | (24,666 | )(6) | 11,036 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total expenses |
802,022 | 46,773 | 34,739 | 883,534 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Operating income |
171,229 | 107,170 | (27,015 | ) | 251,384 | |||||||||||
| Other income (expense): |
||||||||||||||||
| Earnings from unconsolidated entities, net |
72,826 | — | — | 72,826 | ||||||||||||
| Interest expense |
(137,663 | ) | (13,301 | ) | (9,729 | )(7) | (160,693 | ) | ||||||||
| Interest and other income, net |
12,896 | — | — | 12,896 | ||||||||||||
| Gains on dispositions of investments in real estate, net |
386,497 | — | — | 386,497 | ||||||||||||
| Foreign currency and derivative gains and related amortization, net |
9,054 | — | — | 9,054 | ||||||||||||
| Losses on early extinguishment of debt, net |
(16,525 | ) | — | — | (16,525 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total other income (expense) |
327,085 | (13,301 | ) | (9,729 | ) | 304,055 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Earnings before income taxes |
498,314 | 93,869 | (36,744 | ) | 555,439 | |||||||||||
| Current income tax expense |
5,545 | — | — | 5,545 | ||||||||||||
| Deferred income tax expense |
1,197 | — | — | 1,197 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total income tax expense |
6,742 | — | — | 6,742 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Consolidated net earnings |
491,572 | 93,869 | (36,744 | ) | 548,697 | |||||||||||
| Net (earnings) attributable to noncontrolling interests |
(198 | ) | — | (28,443 | )(8) | (28,641 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net earnings attributable to controlling interests |
491,374 | 93,869 | (65,187 | ) | 520,056 | |||||||||||
| Less preferred unit distributions |
3,348 | — | — | 3,348 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net earnings attributable to common unitholders |
$ | 488,026 | $ | 93,869 | $ | (65,187 | ) | $ | 516,708 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Weighted average common units outstanding - Basic |
521,548 | 3,704 | (9) | 525,252 | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Weighted average common units outstanding - Diluted |
529,827 | 3,704 | (9) | 533,531 | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Net earnings per unit attributable to common unitholders - Basic |
$ | 0.94 | $ | 0.98 | ||||||||||||
|
|
|
|
|
|||||||||||||
| Net earnings per unit attributable to common unitholders - Diluted |
$ | 0.92 | $ | 0.97 | ||||||||||||
|
|
|
|
|
|||||||||||||
The accompanying notes are an integral part of this pro forma condensed consolidated statement of operations.
4
PROLOGIS, L.P.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
FOR THE YEAR ENDED DECEMBER 31, 2014
(In thousands, except per unit amounts)
| Prologis, L.P. Historical (10) |
KTR Portfolio (11) |
Pro Forma Adjustments |
Pro Forma Consolidated |
|||||||||||||
| Revenues: |
||||||||||||||||
| Rental income |
$ | 1,178,609 | $ | 250,790 | $ | (14,579 | )(12) | $ | 1,414,820 | |||||||
| Rental recoveries |
348,740 | 67,988 | — | 416,728 | ||||||||||||
| Strategic capital income |
219,871 | — | — | 219,871 | ||||||||||||
| Development management and other income |
13,567 | — | — | 13,567 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total revenues |
1,760,787 | 318,778 | (14,579 | ) | 2,064,986 | |||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Expenses: |
||||||||||||||||
| Rental expenses |
430,787 | 98,334 | (15,124 | )(13) | 513,997 | |||||||||||
| Strategic capital expenses |
96,496 | — | — | 96,496 | ||||||||||||
| General and administrative expenses |
247,768 | — | — | 247,768 | ||||||||||||
| Depreciation and amortization |
642,461 | — | 165,650 | (14) | 808,111 | |||||||||||
| Other expenses |
23,467 | — | — | 23,467 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total expenses |
1,440,979 | 98,334 | 150,526 | 1,689,839 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Operating income |
319,808 | 220,444 | (165,105 | ) | 375,147 | |||||||||||
| Other income (expense): |
||||||||||||||||
| Earnings from unconsolidated entities, net |
134,288 | — | — | 134,288 | ||||||||||||
| Interest expense |
(308,885 | ) | (32,145 | ) | (23,128 | )(15) | (364,158 | ) | ||||||||
| Interest and other income, net |
25,768 | — | — | 25,768 | ||||||||||||
| Gains on dispositions of investments in real estate and revaluation of equity investments upon acquisition of a controlling interest, net |
725,790 | — | — | 725,790 | ||||||||||||
| Foreign currency and derivative (losses) and related amortization, net |
(17,841 | ) | — | — | (17,841 | ) | ||||||||||
| Losses on early extinguishment of debt, net |
(165,300 | ) | — | — | (165,300 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total other income (expense) |
393,820 | (32,145 | ) | (23,128 | ) | 338,547 | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Earnings (loss) before income taxes |
713,628 | 188,299 | (188,233 | ) | 713,694 | |||||||||||
| Current income tax expense |
(61,584 | ) | — | — | (61,584 | ) | ||||||||||
| Deferred income tax benefit |
87,240 | — | — | 87,240 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total income tax expense |
25,656 | — | — | 25,656 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Consolidated net earnings |
739,284 | 188,299 | (188,233 | ) | 739,350 | |||||||||||
| Net (earnings) attributable to noncontrolling interests |
(100,900 | ) | — | (2,161 | )(16) | (103,061 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net earnings attributable to controlling interests |
638,384 | 188,299 | (190,394 | ) | 636,289 | |||||||||||
| Less preferred unit distributions |
7,431 | — | — | 7,431 | ||||||||||||
| Loss on preferred unit redemption / repurchase |
6,517 | — | — | 6,517 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net earnings attributable to common unitholders |
$ | 624,436 | $ | 188,299 | $ | (190,394 | ) | $ | 622,341 | |||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Weighted average common units outstanding - Basic |
501,349 | 4,500 | (17) | 505,849 | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Weighted average common units outstanding - Diluted |
506,391 | 4,500 | (17) | 510,891 | ||||||||||||
|
|
|
|
|
|
|
|||||||||||
| Net earnings per unit attributable to common unitholders - Basic |
$ | 1.25 | $ | 1.23 | ||||||||||||
|
|
|
|
|
|||||||||||||
| Net earnings per unit attributable to common unitholders - Diluted |
$ | 1.24 | $ | 1.22 | ||||||||||||
|
|
|
|
|
|||||||||||||
The accompanying notes are an integral part of this pro forma condensed consolidated statement of operations.
5
PROLOGIS, INC. AND PROLOGIS, L.P.
ADJUSTMENTS TO THE PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND FOR THE YEAR ENDED DECEMBER 31, 2014
| (1) | Represents the consolidated statement of operations for Prologis, Inc. or Prologis, L.P. for the six months ended June 30, 2015, which was included in our previously filed Quarterly Report on Form 10-Q for the quarter ended June 30, 2015. Included in these results is $27.4 million of net operating income (rental income less rental expenses) from the date of acquisition through June 30, 2015. The difference between the net operating income recognized in our operating results and the historical KTR Portfolio net operating income primarily relates to leasing activity in the Portfolio and development properties that were stabilized during 2014 and 2015. As of June 30, 2015, the KTR Portfolio of operating properties was 90% occupied. |
| (2) | This information represents the combined revenue and certain expenses of KTR for the period from January 1, 2015, through the acquisition date of May 29, 2015. |
| (3) | Rental income is adjusted to recognize: (i) $1.1 million reduction due to properties sold prior to acquisition, (ii) $9.4 million increase of total minimum lease payments provided under the acquired leases on a straight line basis over the remaining lease term and (iii) the amortization of the asset or liability from the acquired leases with favorable or unfavorable rents relative to estimated market rents, including a reduction of $2.4 million from amortization of the asset and an increase of $1.8 million from amortization of the liability. The asset or liability from the acquired leases with favorable or unfavorable market rents relative to estimated market rents is amortized using the remaining lease term associated with these leases, which is approximately five years. |
| (4) | Rental expense is adjusted for (i) $0.4 million reduction due to properties sold, (ii) a $4.0 million reduction for the removal of the Portfolio’s historical property management fees; and (iii) a $1.7 million increase of property management expense which primarily include estimated incremental salaries and benefits for property management personnel. |
| (5) | Depreciation and amortization expense is recorded based on the preliminary purchase price allocation of KTR to recognize real estate depreciation expense of $53.8 million as a result of the acquisition of the properties acquired and to reflect amortization expense of $8.3 million on intangible assets recognized related to the estimated value of in-place leases as of January 1, 2014. We estimated the average useful life of the properties to be 35 years and the remaining lease term associated with the in-place leases to be approximately six years. |
| (6) | Other expenses is adjusted to exclude acquisition costs of $24.7 million incurred by the Company related to the acquisition of the Portfolio, as these costs were directly attributable to the Portfolio acquisition and are not recurring in nature. |
| (7) | The adjustment to interest expense includes: (i) the removal of the Portfolio’s historical interest expense of $13.3 million; and (ii) the additional interest expense attributable to the debt assumed, which was adjusted to fair value, as well as the interest expense on the $1.8 billion of variable rate debt and $0.8 billion of fixed rate debt issued by Prologis to finance our cash portion of the acquisition ($2.6 billion) as detailed in the table below (in thousands): |
| Pro forma | Weighted Average Effective Interest |
Additional Interest | ||||||||||
| Debt |
Borrowings | Rate | Expense | |||||||||
| Secured mortgage debt assumed |
$ | 735,172 | 2.69 | % | $ | 8,220 | ||||||
| Prologis cash portion of acquisition |
2,556,265 | 1.39 | % | 14,810 | ||||||||
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| Pro forma adjustment to interest expense |
$ | 23,030 | ||||||||||
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A 12.5 basis points, or 1/8th of 1.0%, increase (decrease) in the one-month LIBOR would increase (decrease) interest expense by approximately $1.1 million for the six months ended June 30, 2015.
| (8) | An adjustment of $32.2 million was made to Prologis, Inc. and an adjustment of $28.4 million was made to Prologis, L.P. to reflect: (i) the adjustment to the income allocated to noncontrolling interests, (ii) adjustment to reflect our partner’s share of increased asset management fees within USLV; and (iii) the adjustment related to the limited partnership unitholders ownership percentage. |
| (9) | Represents the weighted average effect of Operating Partnership units issued in connection with the acquisition of the Portfolio. |
| (10) | Represents the consolidated statement of operations for Prologis, Inc. or Prologis L.P. for the year ended December 31, 2014, which was included in our previously filed Annual Report on Form 10-K for the fiscal year ended December 31, 2014. |
| (11) | This information represents the combined revenue and certain expenses of the Portfolio for the year ended December 31, 2014, which is included in Exhibit 99.1 to this Report on Form 8-K/A. |
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PROLOGIS, INC. AND PROLOGIS, L.P.
ADJUSTMENTS TO THE PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 2015 AND FOR THE YEAR ENDED DECEMBER 31, 2014
| (12) | Rental income is adjusted to recognize: (i) $35.7 million reduction due to properties sold prior to acquisition, (ii) $22.7 million increase of total minimum lease payments provided under the acquired leases on a straight line basis over the remaining lease term; and (iii) the amortization of the asset or liability from the acquired leases with favorable or unfavorable rents relative to estimated market rents, including a reduction of $6.3 million from amortization of the asset and an increase of $4.7 million from amortization of the liability. The asset or liability from the acquired leases with favorable or unfavorable market rents relative to estimated market rents is amortized using the remaining lease term associated with these leases, which is approximately five years. |
| (13) | Rental expense is adjusted for (i) $9.9 million reduction due to properties sold, (ii) a $9.4 million reduction for the removal of the Portfolio’s historical property management fees; and (iii) a $4.2 million increase of property management expense, which primarily include estimated incremental salaries and benefits for property management personnel. |
| (14) | Depreciation and amortization expense is recorded based on the preliminary purchase price allocation of KTR to recognize real estate depreciation expense of $143.6 million as a result of the acquisition of the properties acquired and to reflect amortization expense of $22.1 million on intangible assets recognized related to the estimated value of in-place leases as of January 1, 2014. We estimated the average useful life of the industrial properties to be 35 years and the remaining lease term associated with the in-place leases to be approximately six years. |
| (15) | The adjustment to interest expense includes: (i) the removal of the Portfolio’s historical interest expense of $32.1 million; and (ii) the additional interest expense attributable to the debt assumed, which was adjusted to fair value, as well as the interest expense on the $1.8 billion of variable rate debt and $0.8 billion of fixed rate debt issued by Prologis to finance our cash portion of the acquisition ($2.6 billion) as detailed in the table below (in thousands): |
| Pro forma | Weighted Average Effective Interest |
Additional Interest | ||||||||||
| Debt |
Borrowings | Rate | Expense | |||||||||
| Secured mortgage debt assumed |
$ | 735,172 | 2.69 | % | $ | 19,727 | ||||||
| Prologis cash portion of acquisition |
2,556,265 | 1.39 | % | 35,545 | ||||||||
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| Pro forma adjustment to interest expense |
$ | 55,272 | ||||||||||
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A 12.5 basis points, or 1/8th of 1.0%, increase (decrease) in the one-month LIBOR would increase (decrease) interest expense by approximately $2.2 million for the year.
| (16) | An adjustment of $7.7 million was made to Prologis Inc. and an adjustment of $2.2 million was made to Prologis, L.P. to reflect: (i) the adjustment to the income allocated to noncontrolling interests, (ii) adjustment to reflect our partner’s share of increased asset management fees within USLV and (iii) the adjustment related to the limited partnership unitholders ownership percentage. |
| (17) | Represents the impact of Operating Partnership units issued in connection with the acquisition of the Portfolio. |
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