Amid an uncertain economic backdrop, business growth indicators remain strong

SAN FRANCISCO, Oct. 19, 2022 /PRNewswire/ -- Prologis, Inc. (NYSE:PLD), the global leader in logistics real estate, today reported results for the third quarter of 2022.

Net earnings per diluted share was $1.36 for the quarter compared with $0.97 for the third quarter of 2021. Core funds from operations (Core FFO)* per diluted share was $1.73 for the quarter compared with $1.04 for the same period in 2021. The third quarter of 2022 included $0.57 of net promote income, while the same period in 2021 included $0.01.

"Our record results for the quarter point to the continued strength of our business; however, given the impact of aggressive Fed tightening and the rapid change in market sentiment, we will run our company assuming an economic slowdown," said Hamid R. Moghadam, co-founder and CEO, Prologis. "We have built our portfolio to outperform and our balance sheet to be resilient throughout cycles - we view this as a time of opportunity. We will remain patient to capitalize on growth opportunities as they emerge."

OPERATING PERFORMANCE

Owned & Managed	3Q22	Notes
Average Occupancy	97.7 %
Leases Commenced	51.0MSF	45.2MSF operating portfolio and 5.8MSF development portfolio
Retention	76.4 %


Prologis Share	3Q22	Notes
Net Effective Rent Change	59.7 %	All-time high; Led by U.S. at 67.0%
Cash Rent Change	38.5 %
Cash Same Store NOI*	9.3 %	All-time high; Led by Europe at 10.6%

DUKE PORTFOLIO EXPANDS MARKETS, CUSTOMERS AND OPPORTUNITIES

The acquisition of Duke Realty Corporation, which closed on October 3, 2022, provides Prologis with additional growth from high-quality properties and more than 500 new customers. Having completed the integration and accomplished day-one cost synergies, the company will now focus on building accretion through incremental property cash flows and Essentials income. The acquisition is not included in Prologis' third quarter results but is factored into updated 2022 guidance.

DEPLOYMENT ACTIVITY

Prologis Share	3Q22
Acquisitions	$714M
Weighted avg stabilized cap rate (excluding other real estate)	4.2 %
Development Stabilizations	$1,039M
Estimated weighted avg yield	6.1 %
Estimated weighted avg margin	40.9 %
Estimated value creation	$425M
% Build-to-suit	60.4 %
Development Starts	$1,139M
Estimated weighted avg yield	6.3 %
Estimated weighted avg margin	33.6 %
Estimated value creation	$383M
% Build-to-suit	52.8 %
Total Dispositions and Contributions	$129M
Weighted avg stabilized cap rate (excluding land and other real estate)	3.7 %

BALANCE SHEET & LIQUIDITY

"We have significant liquidity, low leverage and investment capacity to support our operations and to allow for opportunistic investments," said Timothy D. Arndt, chief financial officer. "Additionally, our embedded lease mark-to-market continued to expand to 62%, and we have substantially insulated our earnings and equity from foreign currency movements over the next several years."

During the third quarter, Prologis and its co-investment ventures issued $3.1 billion of debt at a weighted average interest rate of 3.6%, and a weighted average term of 7.5 years. This activity includes $1.2 billion in green bonds. Year-to-date, Prologis and its co-investment ventures issued $10.8 billion of debt at a weighted average interest rate of 2.6% and a weighted average term of 7.0 years.

"The capital markets remain open for us, as demonstrated by our most recent green bond raise in late September," Arndt added. "This is a testament to the hard work and discipline we have exhibited in building an industry-leading balance sheet."

The company has maintained its leading liquidity position with approximately $5.3 billion in cash and availability on its credit facilities. As of September 30, 2022, debt as a percentage of total market capitalization was 20.7%, and the company's weighted average interest rate on its share of total debt was 1.9% with a weighted average term of 9.6 years. In addition, the company has no significant debt maturities until 2026.

FOREIGN CURRENCY STRATEGY

Prologis hedges its exposure to foreign currency fluctuations by borrowing in the currencies in which it invests and using derivative financial instruments. As of September 30, 2022, 95% of Prologis' equity was in USD and Core FFO* forecasted in foreign currencies for 2023, 2024 and 2025 were 99%, 98% and 95%, respectively, hedged through derivative contracts.

2022 GUIDANCE

"While confident as ever about the resiliency of our business, we are exercising caution in the near term," said Arndt. "Accordingly, we are taking a more conservative approach in how we choose to allocate our capital, and are therefore lowering our guidance for development starts, dispositions and contributions while we closely monitor the market."

2022 GUIDANCE
Earnings (per diluted share)	Previous	Revised	Change at M.P.
Net Earnings	$5.15 to $5.25	$4.25 to $4.30	(17.8) %
Core FFO*	$5.14 to $5.18	$5.12 to $5.14**	(0.6) %
Core FFO, excluding net promote income*	$4.54 to $4.58	$4.60 to $4.62	1.1 %

Operations
Average occupancy	97.25% to 97.75%	97.25% to 97.75%	- bps
Cash Same Store NOI* - PLD share	8.25% to 8.75%	8.50% to 8.75%	12.5 bps

Strategic Capital (in millions)	Previous	Revised	Change at M.P.
Strategic Capital revenue, excluding promote revenue	$550 to $560	$535 to $545	(2.7) %
Net promote income	$460	$420	(8.7) %

G&A (in millions)
General & administrative expenses	$315 to $320	$325 to $330	3.1 %

Capital Deployment – Prologis Share (in millions)
Development stabilizations	$2,300 to $2,600	$2,700 to $3,000	16.3 %
Development starts	$4,500 to $5,000	$4,200 to $4,600	(7.4) %
Acquisitions	$1,200 to $1,700	$1,900 to $2,100	37.9 %
Contributions	$1,600 to $1,900	$800 to $900	(51.4) %
Dispositions	$1,900 to $2,200	$1,300 to $1,400	(34.1) %
Net sources/(uses)	$(2,200) to $(2,600)	$(4,000) to $(4,400)	$(1,800)
Realized development gains	$750 to $850	$400 to $500	$(350)

*	This is a non-GAAP financial measure. See the Notes and Definitions in our supplemental information for further explanation and a reconciliation to the most directly comparable GAAP measure.
**	The decrease in Core FFO 2022 guidance was mostly attributed to lower promote guidance.

The earnings guidance described above gives effect to the acquisition of Duke Realty Corporation that closed on October 3, 2022, as well as potential gains recognized from real estate transactions but excludes any future or potential foreign currency or derivative gains or losses as our guidance assumes constant foreign currency rates. In reconciling from net earnings to Core FFO*, Prologis makes certain adjustments, including but not limited to real estate depreciation and amortization expense, gains (losses) recognized from real estate transactions and early extinguishment of debt, impairment charges, deferred taxes and unrealized gains or losses on foreign currency or derivative activity. The difference between the company's Core FFO* and net earnings guidance for 2022 relates predominantly to these items. Please refer to our quarterly Supplemental Information, which is available on our Investor Relations website at https://ir.prologis.com and on the SEC's website at www.sec.gov for a definition of Core FFO* and other non-GAAP measures used by Prologis, along with reconciliations of these items to the closest GAAP measure for our results and guidance.

OCTOBER 19, 2022, CALL DETAILS

The call will take place on Wednesday, October 19, 2022, at 9:00 a.m. PT/12:00 p.m. ET. To access a live broadcast of the call, please dial +1 (877) 897-2615 (toll-free from the United States and Canada) or +1 (201) 689-8514 (from all other countries). A live webcast can be accessed from the Investor Relations section of www.prologis.com.

A telephonic replay will be available October 19 – November 2 at +1 (877) 660-6853 (from the United States and Canada) or +1 (201) 612-7415 (from all other countries) using access code 13733185. The webcast replay will be posted in the Investor Relations section of www.prologis.com under "Events & Presentations."

ABOUT PROLOGIS

Prologis, Inc. is the global leader in logistics real estate with a focus on high-barrier, high-growth markets. As of September 30, 2022, the company owned or had investments in, on a wholly owned basis or through co-investment ventures, properties and development projects expected to total approximately 1.0 billion square feet (97 million square meters) in 19 countries. Prologis leases modern logistics facilities to a diverse base of approximately 5,800 customers principally across two major categories: business-to-business and retail/online fulfillment.

FORWARD-LOOKING STATEMENTS

The statements in this document that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on current expectations, estimates and projections about the industry and markets in which we operate as well as management's beliefs and assumptions. Such statements involve uncertainties that could significantly impact our financial results. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," and "estimates," including variations of such words and similar expressions, are intended to identify such forward-looking statements, which generally are not historical in nature. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future—including statements relating to rent and occupancy growth, development activity, contribution and disposition activity, general conditions in the geographic areas where we operate, our debt, capital structure and financial position, our ability to form new co-investment ventures and the availability of capital in existing or new co-investment ventures—are forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be attained and, therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. Some of the factors that may affect outcomes and results include, but are not limited to: (i) national, international, regional and local economic and political climates; (ii) changes in global financial markets, interest rates and foreign currency exchange rates; (iii) increased or unanticipated competition for our properties; (iv) risks associated with acquisitions, dispositions and development of properties; (v) maintenance of real estate investment trust status, tax structuring and changes in income tax laws and rates; (vi) availability of financing and capital, the levels of debt that we maintain and our credit ratings; (vii) risks related to our investments in our co-investment ventures, including our ability to establish new co-investment ventures; (viii) risks of doing business internationally, including currency risks; (ix) environmental uncertainties, including risks of natural disasters; (x) risks related to the current coronavirus pandemic; and (xi) those additional factors discussed in reports filed with the Securities and Exchange Commission by us under the heading "Risk Factors." We undertake no duty to update any forward-looking statements appearing in this document except as may be required by law.

dollars in millions, except per share/unit data			Three Months ended September 30,		Nine Months ended September 30,
			2022	2021	2022	2021
Rental and other revenues			$ 1,156	$ 1,042	$ 3,337	$ 3,091
Strategic capital revenues			595	141	885	391
	Total revenues		1,751	1,183	4,222	3,482
Net earnings attributable to common stockholders			1,014	722	2,773	1,686
Core FFO attributable to common stockholders/unitholders*			1,328	795	3,010	2,312
AFFO attributable to common stockholders/unitholders*			1,260	751	2,987	2,367
Adjusted EBITDA attributable to common stockholders/unitholders*			1,610	1,096	3,956	3,280
Estimated value creation from development stabilizations - Prologis Share			425	173	1,203	610
Common stock dividends and common limited partnership unit distributions			605	482	1,814	1,447

Per common share - diluted:
	Net earnings attributable to common stockholders		$ 1.36	$ 0.97	$ 3.72	$ 2.27
	Core FFO attributable to common stockholders/unitholders*		1.73	1.04	3.93	3.02
	Business line reporting:
		Real estate operations*	1.05	0.94	3.05	2.76
		Strategic capital*	0.68	0.10	0.88	0.26
		Core FFO attributable to common stockholders/unitholders*	1.73	1.04	3.93	3.02
		Realized development gains, net of taxes*	0.10	0.18	0.49	0.62
Dividends and distributions per common share/unit			0.79	0.63	2.37	1.89

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

in thousands				September 30, 2022	June 30, 2022	December 31, 2021
Assets:
	Investments in real estate properties:
		Operating properties		$ 46,625,674	$ 45,708,272	$ 44,453,760
		Development portfolio		3,441,800	3,465,438	2,729,340
		Land		2,677,988	2,855,734	2,519,590
		Other real estate investments		3,209,408	3,241,586	3,302,500
				55,954,870	55,271,030	53,005,190
		Less accumulated depreciation		8,558,576	8,251,995	7,668,187
			Net investments in real estate properties	47,396,294	47,019,035	45,337,003
	Investments in and advances to unconsolidated entities			8,659,129	8,443,644	8,610,958
	Assets held for sale or contribution			614,356	403,617	669,688
			Net investments in real estate	56,669,779	55,866,296	54,617,649

	Cash and cash equivalents			636,282	437,515	556,117
	Other assets			3,639,468	3,460,006	3,312,454
Total assets				$ 60,945,529	$ 59,763,817	$ 58,486,220

Liabilities and Equity:
	Liabilities:
		Debt		$ 18,139,299	$ 18,040,832	$ 17,715,054
		Accounts payable, accrued expenses and other liabilities		3,199,909	2,849,047	3,028,956
			Total liabilities	21,339,208	20,889,879	20,744,010

	Equity:
		Stockholders' equity		35,293,100	34,575,767	33,426,873
		Noncontrolling interests		3,323,541	3,333,421	3,397,538
		Noncontrolling interests - limited partnership unitholders		989,680	964,750	917,799
			Total equity	39,606,321	38,873,938	37,742,210

Total liabilities and equity				$ 60,945,529	$ 59,763,817	$ 58,486,220

			Three Months Ended		Nine Months Ended
			September 30,		September 30,
in thousands, except per share amounts			2022	2021	2022	2021
Revenues:
	Rental		$ 1,151,846	$ 1,037,281	$ 3,322,159	$ 3,073,700
	Strategic capital		594,752	141,448	884,916	390,796
	Development management and other		4,294	4,320	15,025	17,711
		Total revenues	1,750,892	1,183,049	4,222,100	3,482,207
Expenses:
	Rental		284,707	256,607	830,846	779,624
	Strategic capital		130,555	52,389	239,418	146,938
	General and administrative		87,903	66,970	245,663	219,344
	Depreciation and amortization		401,450	390,806	1,200,410	1,181,117
	Other		7,004	4,413	28,214	15,051
		Total expenses	911,619	771,185	2,544,551	2,342,074

Operating income before gains on real estate transactions, net			839,273	411,864	1,677,549	1,140,133
	Gains on dispositions of development properties and land, net		74,678	139,406	390,686	500,410
	Gains on other dispositions of investments in real estate, net (excluding development properties and land)		1,019	214,390	585,854	358,180
Operating income			914,970	765,660	2,654,089	1,998,723
Other income (expense):
	Earnings from unconsolidated co-investment ventures, net		78,452	84,020	220,001	200,027
	Earnings from other unconsolidated ventures, net		6,473	7,798	21,480	31,259
	Interest expense		(63,884)	(63,638)	(188,241)	(203,331)
	Foreign currency and derivative gains and interest and other income, net		171,832	63,326	364,623	142,859
	Losses on early extinguishment of debt, net		-	-	(18,895)	(187,453)
		Total other income (expense)	192,873	91,506	398,968	(16,639)

Earnings before income taxes			1,107,843	857,166	3,053,057	1,982,084
	Current income tax expense		(32,512)	(63,244)	(94,011)	(124,298)
	Deferred income tax benefit (expense)		(6,157)	3,809	(23,714)	(10,049)
Consolidated net earnings			1,069,174	797,731	2,935,332	1,847,737
Net earnings attributable to noncontrolling interests			(24,979)	(54,406)	(79,257)	(109,768)
Net earnings attributable to noncontrolling interests - limited partnership units			(28,731)	(19,787)	(78,433)	(46,908)
Net earnings attributable to controlling interests			1,015,464	723,538	2,777,642	1,691,061
Preferred stock dividends			(1,531)	(1,531)	(4,600)	(4,614)
Net earnings attributable to common stockholders			$ 1,013,933	$ 722,007	$ 2,773,042	$ 1,686,447
Weighted average common shares outstanding - Diluted			766,372	764,945	766,019	764,644
Net earnings per share attributable to common stockholders - Diluted			$ 1.36	$ 0.97	$ 3.72	$ 2.27

		Three Months Ended		Nine Months Ended
		September 30,		September 30,
in thousands		2022	2021	2022	2021
Net earnings attributable to common stockholders		$ 1,013,933	$ 722,007	$ 2,773,042	$ 1,686,447
Add (deduct) NAREIT defined adjustments:
	Real estate related depreciation and amortization	388,953	379,646	1,163,265	1,149,199
	Gains on other dispositions of investments in real estate, net of taxes (excluding development properties and land)	(1,019)	(187,754)	(591,496)	(331,544)
	Reconciling items related to noncontrolling interests	(1,113)	19,408	3,813	260
	Our share of reconciling items related to unconsolidated co-investment ventures	79,633	51,702	224,920	200,483
	Our share of reconciling items related to other unconsolidated ventures	5,314	7,429	16,332	22,053
NAREIT defined FFO attributable to common stockholders/unitholders*		$ 1,485,701	$ 992,438	$ 3,589,876	$ 2,726,898
Add (deduct) our defined adjustments:
	Unrealized foreign currency and derivative gains, net	(76,140)	(66,739)	(231,481)	(150,057)
	Deferred income tax expense (benefit)	6,157	(3,809)	23,714	10,049
	Current income tax expense on dispositions related to acquired tax liabilities	72	-	72	2,992
	Reconciling items related to noncontrolling interests	-	1,336	-	915
	Our share of reconciling items related to unconsolidated co-investment ventures	(15,599)	(256)	(14,044)	(2,276)
FFO, as modified by Prologis attributable to common stockholders/unitholders*		$ 1,400,191	$ 922,970	$ 3,368,137	$ 2,588,521
Adjustments to arrive at Core FFO attributable to common stockholders/unitholders*:
	Gains on dispositions of development properties and land, net	(74,678)	(139,406)	(390,686)	(500,410)
	Current income tax expense on dispositions	963	4,584	7,047	29,148
	Losses on early extinguishment of debt, net	-	-	18,895	187,453
	Reconciling items related to noncontrolling interests	-	6,630	4,484	6,606
	Our share of reconciling items related to unconsolidated co-investment ventures	1,226	360	1,226	2,947
	Our share of reconciling items related to other unconsolidated ventures	655	(230)	655	(2,284)
Core FFO attributable to common stockholders/unitholders*		$ 1,328,357	$ 794,908	$ 3,009,758	$ 2,311,981
Adjustments to arrive at Adjusted FFO ("AFFO") attributable to common stockholders/unitholders*, including our share of unconsolidated ventures less noncontrolling interest:
	Gains on dispositions of development properties and land, net	74,678	139,406	390,686	500,410
	Current income tax expense on dispositions	(963)	(4,584)	(7,047)	(29,148)
	Straight-lined rents and amortization of lease intangibles	(36,688)	(37,473)	(111,928)	(113,279)
	Property improvements	(61,747)	(57,745)	(117,563)	(98,874)
	Turnover costs	(86,697)	(85,816)	(262,177)	(233,853)
	Amortization of debt premium, financing costs and management contracts, net	3,264	2,923	8,853	8,001
	Stock compensation amortization expense	61,670	25,895	140,022	84,416
	Reconciling items related to noncontrolling interests	11,587	5,137	33,602	20,296
	Our share of reconciling items related to unconsolidated ventures	(33,668)	(31,970)	(97,448)	(82,701)
AFFO attributable to common stockholders/unitholders*		$ 1,259,793	$ 750,681	$ 2,986,758	$ 2,367,249

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


			Three Months Ended		Nine Months Ended
			September 30		September 30
	in thousands		2022	2021	2022	2021
	Net earnings attributable to common stockholders		$ 1,013,933	$ 722,007	$ 2,773,042	$ 1,686,447
		Gains on other dispositions of investments in real estate, net (excluding development properties and land)	(1,019)	(214,390)	(585,854)	(358,180)
		Depreciation and amortization expense	401,450	390,806	1,200,410	1,181,117
		Interest expense	63,884	63,638	188,241	203,331
		Current and deferred income tax expense, net	38,669	59,435	117,725	134,347
		Net earnings attributable to noncontrolling interests - limited partnership units	28,731	19,787	78,433	46,908
		Pro forma adjustments	6,756	(1,473)	8,542	(5,105)
		Preferred stock dividends	1,531	1,531	4,600	4,614
		Unrealized foreign currency and derivative gains, net	(76,140)	(66,739)	(231,481)	(150,057)
		Stock compensation amortization expense	61,670	25,895	140,022	84,416
		Losses on early extinguishment of debt, net	-	-	18,895	187,453
		Reconciling items related to noncontrolling interests	(30,536)	1,828	(76,745)	(44,851)
		Our share of reconciling items related to unconsolidated ventures	101,228	93,980	320,476	309,416
	Adjusted EBITDA attributable to common stockholders/unitholders*		$ 1,610,157	$ 1,096,305	$ 3,956,306	$ 3,279,856

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

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

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

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

We calculate our Adjusted EBITDA, based on our proportionate ownership share of both our unconsolidated and consolidated ventures. We reflect our share of our Adjusted EBITDA measures for unconsolidated ventures by applying our average ownership percentage for the period to the applicable reconciling items on an entity by entity basis. We reflect our share for consolidated ventures in which we do not own 100% of the equity by adjusting our Adjusted EBITDA measures to remove the noncontrolling interests share of the applicable reconciling items based on our average ownership percentage for the applicable periods.

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

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

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

Calculation of Per Share Amounts

	Three Months Ended				Nine Months Ended
	Sept. 30,				Sept. 30,
in thousands, except per share amount		2022		2021		2022		2021
Net earnings
Net earnings attributable to common stockholders	$	1,013,933	$	722,007	$	2,773,042	$	1,686,447
Noncontrolling interest attributable to exchangeable limited partnership units		28,792		19,890		78,648		47,131
Adjusted net earnings attributable to common stockholders - Diluted	$	1,042,725	$	741,897	$	2,851,690	$	1,733,578
Weighted average common shares outstanding - Basic		740,719		739,439		740,585		739,217
Incremental weighted average effect on exchange of limited partnership units		21,230		20,421		21,246		20,860
Incremental weighted average effect of equity awards		4,423		5,085		4,188		4,567
Weighted average common shares outstanding - Diluted		766,372		764,945		766,019		764,644
Net earnings per share - Basic	$	1.37	$	0.98	$	3.74	$	2.28
Net earnings per share - Diluted	$	1.36	$	0.97	$	3.72	$	2.27
Core FFO
Core FFO attributable to common stockholders/unitholders	$	1,328,357	$	794,908	$	3,009,758	$	2,311,981
Noncontrolling interest attributable to exchangeable limited partnership units		153		147		317		409
Core FFO attributable to common stockholders/unitholders - Diluted	$	1,328,510	$	795,055	$	3,010,075	$	2,312,390
Weighted average common shares outstanding - Basic		740,719		739,439		740,585		739,217
Incremental weighted average effect on exchange of limited partnership units		21,230		20,421		21,246		20,860
Incremental weighted average effect of equity awards		4,423		5,085		4,188		4,567
Weighted average common shares outstanding - Diluted		766,372		764,945		766,019		764,644
Core FFO per share - Diluted	$	1.73	$	1.04	$	3.93	$	3.02

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

Estimated 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.

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

	Pre-Stabilized Developments		2022 Expected Completion		2023 and Thereafter Expected Completion		Total Development Portfolio
U.S.		6.8 %		6.1 %		6.1 %		6.2 %
Other Americas		7.7 %		7.6 %		7.3 %		7.4 %
Europe		6.8 %		5.6 %		5.3 %		5.5 %
Asia		5.8 %		5.7 %		5.7 %		5.7 %
Total		6.3 %		6.2 %		6.0 %		6.1 %

Fee Related Earnings ("FRE") is a non-GAAP financial measure and component of NAV. It is used to assess the performance of our strategic capital business and enables management and investors to estimate the corresponding fair value. FRE is calculated as the third party share of asset management fees and transactional fees from our consolidated and unconsolidated co-investment ventures, net of direct and allocated related expenses. As non-GAAP financial measures, FRE has certain limitations as an analytical tool and may vary among real estate and asset management companies. As a result, we provide a reconciliation of Strategic Capital Revenues (from our Consolidated Financial Statements prepared in accordance with U.S. GAAP) to our FRE measure, as follows:

	Three Months Ended		Nine Months Ended
in thousands	Sept. 30, 2022
Strategic capital revenues	$	594,752	$	884,916
Less: Strategic capital revenue from property management fees and other unconsolidated ventures		(26,990)		(81,478)
Less: Prologis share of asset management fees and transactional fees from our unconsolidated co-investment ventures		(21,309)		(67,123)
Add: Third party share of asset management fees and transactional fees from our consolidated co-investment ventures		15,099		46,355
Effect of foreign currency exchange		(3,536)		(7,672)
Third party share of fee related and promote revenue	$	558,016	$	774,998
Less: Promote revenue		(456,038)		(475,084)
Fee related revenue	$	101,978	$	299,914
Less: Strategic capital expenses for asset management fees and transactional fees		(24,132)		(68,605)
Fee Related Earnings	$	77,846	$	231,309

Fee Related Earnings Annualized utilizes the components of the current quarter FRE to calculate an estimated annual FRE amount. FRE annualized is calculated as the current quarter third party share of asset management fees from consolidated and unconsolidated co-investment ventures multiplied by four plus the third party share of transactional fees from consolidated and unconsolidated co-investment ventures for the trailing twelve months. This total is reduced by trailing twelve months of strategic capital expenses for asset management and transactional fees.

FFO, as modified by Prologis attributable to common stockholders/unitholders ("FFO, as modified by Prologis"); Core FFO attributable to common stockholders/unitholders ("Core FFO"); AFFO attributable to common stockholders/unitholders ("AFFO"); (collectively referred to as "FFO"). FFO is a non-GAAP financial measure that is commonly used in the real estate industry. The most directly comparable GAAP measure to FFO is net earnings.

The National Association of Real Estate Investment Trusts ("NAREIT") defines FFO as earnings computed under GAAP to exclude historical cost depreciation and gains and losses from sales net of any related tax, along with impairment charges, of previously depreciated properties. We also exclude the gains on revaluation of equity investments upon acquisition of a controlling interest and the gain recognized from a partial sale of our investment, as these are similar to gains from the sales of previously depreciated properties. We exclude similar adjustments from our unconsolidated entities and the third parties' share of our consolidated co-investment ventures.

Our FFO Measures

Our FFO measures begin with NAREIT's definition and we make certain adjustments to reflect our business and the way that management plans and executes our business strategy. While not infrequent or unusual, the additional items we adjust for in calculating FFO, as modified by Prologis, Core FFO and AFFO, as defined below, are subject to significant fluctuations from period to period. Although these items may have a material impact on our operations and are reflected in our financial statements, the removal of the effects of these items allows us to better understand the core operating performance of our properties over the long term. These items have both positive and negative short-term effects on our results of operations in inconsistent and unpredictable directions that are not relevant to our long-term outlook.

We calculate our FFO measures, as defined below, based on our proportionate ownership share of both our unconsolidated and consolidated ventures. We reflect our share of our FFO measures for unconsolidated ventures by applying our average ownership percentage for the period to the applicable reconciling items on an entity by entity basis. We reflect our share for consolidated ventures in which we do not own 100% of the equity by adjusting our FFO measures to remove the noncontrolling interests share of the applicable reconciling items based on our average ownership percentage for the applicable periods.

These FFO measures are used by management as supplemental financial measures of operating performance and we believe that it is important that stockholders, potential investors and financial analysts understand the measures management uses. We do not use our FFO measures as, nor should they be considered to be, alternatives to net earnings computed under GAAP, as indicators of our operating performance, as alternatives to cash from operating activities computed under GAAP or as indicators of our ability to fund our cash needs.

We analyze our operating performance principally by the rental revenues of our real estate and the revenues from our strategic capital business, net of operating, administrative and financing expenses. This income stream is not directly impacted by fluctuations in the market value of our investments in real estate or debt securities.

FFO, as modified by Prologis

To arrive at FFO, as modified by Prologis, we adjust the NAREIT defined FFO measure to exclude the impact of foreign currency related items and deferred tax, specifically:

(i)	deferred income tax benefits and deferred income tax expenses recognized by our subsidiaries;
(ii)	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;
(iii)	foreign currency exchange gains and losses resulting from (a) debt transactions between us and our foreign entities, (b) third-party debt that is used to hedge our investment in foreign entities, (c) derivative financial instruments related to any such debt transactions, and (d) mark-to-market adjustments associated with other derivative financial instruments.

We use FFO, as modified by Prologis, so that management, analysts and investors are able to evaluate our performance against other REITs that do not have similar operations or operations in jurisdictions outside the U.S.

Core FFO

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

(i)	gains or losses from the disposition of land and development properties that were developed with the intent to contribute or sell;
(ii)	income tax expense related to the sale of investments in real estate;
(iii)	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;
(iv)	gains or losses from the early extinguishment of debt and redemption and repurchase of preferred stock; and
(v)	expenses related to natural disasters.

We use Core FFO, including by segment and region, to: (i) assess our operating performance as compared to other real estate companies; (ii) evaluate our performance and the performance of our properties in comparison with expected results and results of previous periods; (iii) evaluate the performance of our management; (iv) budget and forecast future results to assist in the allocation of resources; (v) provide guidance to the financial markets to understand our expected operating performance; and (vi) evaluate how a specific potential investment will impact our future results.

AFFO

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

(i)	straight-line rents;
(ii)	amortization of above- and below-market lease intangibles;
(iii)	amortization of management contracts;
(iv)	amortization of debt premiums and discounts and financing costs, net of amounts capitalized, and;
(v)	stock compensation amortization expense.

We use AFFO to (i) assess our operating performance as compared to other real estate companies; (ii) evaluate our performance and the performance of our properties in comparison with expected results and results of previous periods; (iii) evaluate the performance of our management; (iv) budget and forecast future results to assist in the allocation of resources; and (v) evaluate how a specific potential investment will impact our future results.

Limitations on the use of our FFO measures

While we believe our modified FFO measures are important supplemental measures, neither NAREIT's nor our measures of FFO should be used alone because they exclude significant economic components of net earnings computed under GAAP and are, therefore, limited as an analytical tool. Accordingly, these are only a few of the many measures we use when analyzing our business. Some of the limitations are:

The current income tax expenses that are excluded from our modified FFO measures represent the taxes that are payable.
Depreciation and amortization of real estate assets are economic costs that are excluded from FFO. FFO is limited, as it does not reflect the cash requirements that may be necessary for future replacements of the real estate assets. Furthermore, the amortization of capital expenditures and leasing costs necessary to maintain the operating performance of logistics facilities are not reflected in FFO.
Gains or losses from property dispositions and impairment charges related to expected dispositions represent changes in value of the properties. By excluding these gains and losses, FFO does not capture realized changes in the value of disposed properties arising from changes in market conditions.
The deferred income tax benefits and expenses that are excluded from our modified FFO measures result from the creation of a deferred income tax asset or liability that may have to be settled at some future point. Our modified FFO measures do not currently reflect any income or expense that may result from such settlement.
The foreign currency exchange gains and losses that are excluded from our modified FFO measures are generally recognized based on movements in foreign currency exchange rates through a specific point in time. The ultimate settlement of our foreign currency-denominated net assets is indefinite as to timing and amount. Our FFO measures are limited in that they do not reflect the current period changes in these net assets that result from periodic foreign currency exchange rate movements.
The gains and losses on extinguishment of debt or preferred stock that we exclude from our Core FFO, may provide a benefit or cost to us as we may be settling our obligation at less or more than our future obligation.
The natural disaster expenses that we exclude from Core FFO are costs that we have incurred.

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

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

	Low		High
Net Earnings (a)	$	4.25	$	4.30
Our share of:
Depreciation and amortization		2.42		2.44
Net gains on real estate transactions, net of taxes		(1.30)		(1.35)
Unrealized foreign currency losses (gains), loss on early extinguishment of debt and other, net		(0.25)		(0.25)
Core FFO	$	5.12	$	5.14

(a)

Earnings guidance includes potential future gains recognized from real estate transactions, but excludes future foreign

currency and derivative gains or losses as these items are difficult to predict.

Market Capitalization equals Market Equity, less liquidation preference of the preferred shares/units, plus our share of total debt.

Market Equity equals outstanding shares of common stock and units multiplied by the closing stock price plus the liquidation preference of the preferred shares/units.

Net Promote Income is promote revenue earned from third party investors during the period, net of related cash and stock compensation expenses, and taxes and foreign currency derivative gains and losses, if applicable.

Owned and Managed represents the consolidated properties and properties owned by our unconsolidated co-investment ventures, which we manage.

Prologis Share represents our proportionate economic ownership of each entity included in our total Owned and Managed portfolio whether consolidated or unconsolidated.

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

Rent Change (Net Effective) represents the percentage change in net effective rental rates (average rate over the lease term), on new and renewed leases, commenced during the period compared with the previous net effective rental rates in that same space. This measure excludes any short-term leases of less than one year and holdover payments.

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

Same Store. Our same store metrics are non-GAAP financial measures, which are commonly used in the real estate industry and expected from the financial community, on both a net effective and cash basis. We evaluate the performance of the operating properties we own and manage using a "same store" analysis because the population of properties in this analysis is consistent from period to period, which allows us and investors to analyze our ongoing business operations. We determine our same store metrics on property NOI, which is calculated as rental revenue less rental expense for the applicable properties in the same store population for both consolidated and unconsolidated properties based on our ownership interest, as further defined below.

We define our same store population for the three months ended September 30, 2022 as the properties in our Owned and Managed Operating Portfolio, including the property NOI for both consolidated properties and properties owned by the unconsolidated co-investment ventures at January 1, 2021 and owned throughout the same three-month period in both 2021 and 2022. We believe the drivers of property NOI for the consolidated portfolio are generally the same for the properties owned by the ventures in which we invest and therefore we evaluate the same store metrics of the Owned and Managed portfolio based on Prologis' ownership in the properties ("Prologis Share"). The same store population excludes properties held for sale to third parties, along with development properties that were not stabilized at the beginning of the period (January 1, 2021) and properties acquired or disposed of to third parties during the period. To derive an appropriate measure of period-to-period operating performance, we remove the effects of foreign currency exchange rate movements by using the reported period-end exchange rate to translate from local currency into the U.S. dollar, for both periods.

As non-GAAP financial measures, the same store metrics have certain limitations as an analytical tool and may vary among real estate companies. As a result, we provide a reconciliation of Rental Revenues less Rental Expenses ("Property NOI") (from our Consolidated Financial Statements prepared in accordance with U.S. GAAP) to our Same Store Property NOI measures, as follows:

		Three Months Ended
		Sept. 30,
dollars in thousands		2022		2021		Change (%)
Reconciliation of Consolidated Property NOI to Same Store Property NOI measures:
Rental revenues		$	1,151,846	$	1,037,281
Rental expenses			(284,707)		(256,607)
Consolidated Property NOI			867,139		780,674
Adjustments to derive same store results:
	Property NOI from consolidated properties not included in same store portfolio and other adjustments (a)		(143,860)		(106,084)
	Property NOI from unconsolidated co-investment ventures included in same store portfolio (a)(b)		615,212		564,534
	Third parties' share of Property NOI from properties included in same store portfolio (a)(b)		(502,429)		(467,188)
Prologis Share of Same Store Property NOI – Net Effective (b)		$	836,062	$	771,936		8.3	%
	Consolidated properties straight-line rent and fair value lease adjustments included in the same store portfolio (c)		(16,871)		(20,855)
	Unconsolidated co-investment ventures straight-line rent and fair value lease adjustments included in the same store portfolio (c)		(9,370)		(12,650)
	Third parties' share of straight-line rent and fair value lease adjustments included in the same store portfolio (b)(c)		7,765		9,412
Prologis Share of Same Store Property NOI – Cash (b)(c)		$	817,586	$	747,843		9.3	%

(a)	We exclude properties held for sale to third parties, along with development properties that were not stabilized at the beginning of the period and properties acquired or disposed of to third parties during the period. We also exclude net termination and renegotiation fees to allow us to evaluate the growth or decline in each property's rental revenues without regard to one-time items that are not indicative of the property's recurring operating performance. Net termination and renegotiation fees represent the gross fee negotiated to allow a customer to terminate or renegotiate their lease, offset by the write-off of the asset recorded due to the adjustment to straight-line rents over the lease term. Same Store Property NOI is adjusted to include an allocation of property management expenses for our consolidated properties based on the property management services provided to each property (generally, based on a percentage of revenues). On consolidation, these amounts are eliminated and the actual costs of providing property management and leasing services are recognized as part of our consolidated rental expense.
(b)	We include the Property NOI for the same store portfolio for both consolidated properties and properties owned by the co-investment ventures based on our investment in the underlying properties. In order to calculate our share of Same Store Property NOI from the co-investment ventures in which we own less than 100%, we use the co-investment ventures' underlying Property NOI for the same store portfolio and apply our ownership percentage at September 30, 2022 to the Property NOI for both periods, including the properties contributed during the period. We adjust the total Property NOI from the same store portfolio of the co-investment ventures by subtracting the third parties' share of both consolidated and unconsolidated co-investment ventures.
	During the periods presented, certain wholly owned properties were contributed to a co-investment venture and are included in the same store portfolio. Neither our consolidated results nor those of the co-investment ventures, when viewed individually, would be comparable on a same store basis because of the changes in composition of the respective portfolios from period to period (e.g. the results of a contributed property are included in our consolidated results through the contribution date and in the results of the venture subsequent to the contribution date based on our ownership interest at the end of the period). As a result, only line items labeled "Prologis Share of Same Store Property NOI" are comparable period over period.
(c)	We further remove certain noncash items (straight-line rent and amortization of fair value lease adjustments) included in the financial statements prepared in accordance with U.S. GAAP to reflect a Same Store Property NOI – Cash measure.
	We manage our business and compensate our executives based on the same store results of our Owned and Managed portfolio at 100% as we manage our portfolio on an ownership blind basis. We calculate those results by including 100% of the properties included in our same store portfolio.

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

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

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SOURCE Prologis, Inc.

Prologis Reports Third Quarter 2022 Earnings Results