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8-K - FORM 8-K - Prologis, Inc. | d84906e8vk.htm |
Exhibit 99.1
INDEX TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
FINANCIAL STATEMENTS
Unaudited Pro Forma Condensed Consolidated Statement of Operations for the six months ended
June 30, 2011 and twelve months ended December 31, 2010
|
F-4 | |
Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements
|
F-6 |
F-1
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Introduction
On June 3, 2011, AMB Property Corporation (AMB) and ProLogis combined through a merger of
equals (the Merger). As a result of the Merger, each outstanding ProLogis common share was
converted into 0.4464 shares of AMB common stock, with cash paid in lieu of fractional shares. At
the time of the Merger, AMB changed its name to Prologis, Inc. After consideration of all
applicable factors pursuant to the business combination accounting rules, the Merger resulted in a
reverse acquisition in which AMB was considered the legal acquirer because AMB issued its common
stock to ProLogis shareholders and ProLogis was considered the accounting acquirer due to various
factors including that ProLogis shareholders hold the largest portion of the voting rights in the
merged entity and ProLogis appointees represent the majority of the board of directors of the
combined entity.
In April 2011, we purchased 11.1 million ordinary units of PEPR, increasing our ownership
interest to approximately 39%, and launched a mandatory tender offer to acquire any or all of the
outstanding ordinary units and convertible preferred units of PEPR that we did not own at that
time. On May 25, 2011, we settled our mandatory tender offer that resulted in the acquisition of
an additional 96.5 million ordinary units and 2.7 million convertible preferred units of PEPR.
During all of the second quarter of 2011, we made aggregate cash purchases of 715.8 million ($1.0
billion), including through the tender offer and open market and negotiated purchases. We funded
the purchases through borrowings under our global line of credit and a new 500 million bridge
facility, which was subsequently repaid with proceeds from our June equity offering.
Upon completion of the tender offer, we met the requirements to consolidate PEPR. In
addition, in accordance with the accounting rules for business combinations, we marked our equity
investment in PEPR from carrying value to fair value of approximately 486 million, which resulted
in the recognition of a gain of 59.6 million ($85.9 million). The fair value was based on the
trading price and our acquisition price for the PEPR units previously outstanding and purchased
during the tender offer period, respectively. As of June 30, 2011, we owned approximately 92.3% of
the voting ordinary units of PEPR and 94.6% of the convertible preferred units.
Pro forma information
The following unaudited pro forma financial information presents our results as though the
Merger and the acquisition of PEPR had been consummated as of January 1, 2010. The pro forma
information does not necessarily reflect the actual results of operations had the transactions been
consummated at the beginning of the period indicated nor is it indicative of future operating
results. The pro forma information only includes income through continuing operations and does not
give effect to any cost synergies or other operating efficiencies that could result from the Merger
as well as does not include any merger and integration expenses. The results of operations for the
six months ended June 30, 2011 include approximately one month of actual results for both the
Merger and the PEPR acquisition and pro forma adjustments for the remaining five months.
Pro forma adjustments, and the assumptions on which they are based, are described in the
accompanying Notes to Unaudited Pro Forma Condensed Consolidated Financial Statements, which are
referred to in this Section as the Notes.
The pro forma information has been prepared in accordance with the rules and regulations of
the Securities and Exchange Commission (SEC). All significant adjustments necessary to reflect
the effects of the Merger and acquisition of PEPR that can be factually supported within the SEC
regulations covering the preparation of pro forma financial statements have been made. The pro
forma information is presented for illustrative purposes only and is not necessarily indicative of
the combined operating results or financial position that would have occurred if such transactions
had been consummated on the dates and in accordance with the assumptions described herein, nor is
it necessarily indicative of future operating results or financial position.
You are urged to read the pro forma information below together with ProLogis and AMBs
publicly available historical consolidated financial statements and accompanying notes, which are
available on the SECs website at www.sec.gov.
Merger Consideration
As ProLogis was the accounting acquirer, the calculation of the purchase price for accounting
purposes is based on the price of ProLogis common shares and the number of ProLogis common shares
that ProLogis would have had to issue to achieve a similar ownership split between AMB and ProLogis
shareholders. The preliminary purchase price allocation reflects estimated aggregate consideration
of approximately $5.9 billion, as calculated below (in millions, except price per share):
ProLogis shares and limited partnership units outstanding at June 2, 2011 (60% of total shares of the combined company) |
571.4 | |||
Total shares of the combined company (for accounting purposes) |
952.3 | |||
Number of AMB shares to be issued (40% of total shares of the combined company) |
380.9 | |||
Multiplied by price of ProLogis common shares on June 2, 2011 |
$ | 15.21 | ||
Estimated consideration associated with common shares issued |
$ | 5,794.1 | ||
Add estimated consideration associated with shared based payment awards |
62.4 | |||
Total estimated consideration |
$ | 5,856.5 | ||
F-2
Transaction Costs
In connection with the Merger, we have incurred and expect to incur additional significant
transaction, integration, and transitional costs. These costs include investment banker advisory
fees; legal, tax, accounting and valuation fees; termination and severance costs (both cash and
stock based compensation awards) for terminated and transitional employees; systems conversion
costs; and other integration costs. These costs are expensed as incurred, which in some cases will
be through the end of 2012. The costs that were obligations of AMB and expensed pre-merger are not
included. At the time of the Merger, we terminated our existing credit facilities and wrote-off
the remaining unamortized deferred loan costs associated with such facilities, which is included as
a merger expense. In addition, we have included costs associated with the acquisition of a
controlling interest in PEPR. The following is a breakdown of the costs incurred during 2011 (in
thousands).
Six Months Ended | ||||
June 30, | ||||
2011 | ||||
Professional fees |
$ | 41,489 | ||
Termination, severance and employee costs |
31,096 | |||
Office closure, travel and other costs |
22,345 | |||
Write-off of deferred loan costs |
10,869 | |||
Total |
$ | 105,799 | ||
The unaudited pro forma condensed consolidated financial statements included herein do not
give effect to any potential cost reductions or other operating efficiencies that we expect to
result from the Merger.
F-3
PROLOGIS
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For six months ended June 30, 2011
(in thousands, except per share data)
For six months ended June 30, 2011
(in thousands, except per share data)
AMB | AMB Pro | PEPR | PEPR Pro | Prologis, | ||||||||||||||||||||
Prologis | Historical | Forma | Historical | Forma | Inc. Pro | |||||||||||||||||||
Historical | (A) (B) | Adjustments | (A) | Adjustments | Forma | |||||||||||||||||||
Revenues: |
||||||||||||||||||||||||
Rental Income |
$ | 500,088 | $ | 263,591 | $ | (7,525) | (C) | 166,261 | $ | (2,497) | (I) | $ | 919,918 | |||||||||||
Property management and other fees and incentives |
61,481 | 13,086 | | | (11,672) | (J) | 62,895 | |||||||||||||||||
Development management and other income |
13,239 | | | 2 | | 13,241 | ||||||||||||||||||
Total revenues |
574,808 | 276,677 | (7,525 | ) | 166,263 | (14,169 | ) | 996,054 | ||||||||||||||||
Expenses: |
||||||||||||||||||||||||
Rental expenses |
144,447 | 83,791 | | (D) | 32,709 | | 260,947 | |||||||||||||||||
General and administrative and private capital expense |
113,171 | 46,337 | | (D) | 21,735 | (11,672) | (K) | 169,571 | ||||||||||||||||
Depreciation and amortization |
205,744 | 87,854 | 23,678 | (E) | 50,481 | 25,649 | (L) | 393,406 | ||||||||||||||||
Other expenses |
10,271 | 2,392 | | | | 12,663 | ||||||||||||||||||
Total expenses |
473,633 | 220,374 | 23,678 | 104,925 | 13,977 | 836,587 | ||||||||||||||||||
Operating income (loss) |
101,175 | 56,303 | (31,203 | ) | 61,338 | (28,146 | ) | 159,467 | ||||||||||||||||
Other income (expense): |
||||||||||||||||||||||||
Earnings (loss) from unconsolidated investees, net |
25,040 | 11,039 | (6,752) | (F) | | 850 | (M) | 30,177 | ||||||||||||||||
Interest income |
| 930 | | 197 | | 1,127 | ||||||||||||||||||
Interest expense |
(203,621 | ) | (58,660 | ) | 15,470 | (G) | (56,001 | ) | 9,963 | (N) | (292,849 | ) | ||||||||||||
Impairment of goodwill and other assets |
(103,823 | ) | | | | | (103,823 | ) | ||||||||||||||||
Other income (expense), net |
2,698 | 2,676 | | (78 | ) | | 5,296 | |||||||||||||||||
Net gains on dispositions of investments in real estate |
106,254 | | | | | 106,254 | ||||||||||||||||||
Foreign currency exchange losses, net |
(8,881 | ) | (2,448 | ) | | (231 | ) | | (11,560 | ) | ||||||||||||||
Total other income (expense) |
(182,333 | ) | (46,463 | ) | 8,718 | (56,113 | ) | 10,813 | (265,378 | ) | ||||||||||||||
Earnings (loss) before income taxes |
(81,158 | ) | 9,840 | (22,485 | ) | 5,225 | (17,333 | ) | (105,911 | ) | ||||||||||||||
Current income tax expense |
11,816 | 7,959 | | 9,017 | | 28,792 | ||||||||||||||||||
Deferred income tax expense (benefit) |
982 | (939 | ) | | 2,104 | | 2,147 | |||||||||||||||||
Total income taxes |
12,798 | 7,020 | | 11,121 | | 30,939 | ||||||||||||||||||
Earnings (loss) from continuing operations |
(93,956 | ) | 2,820 | (22,485 | ) | (5,896 | ) | (17,333 | ) | (136,850 | ) | |||||||||||||
Net earnings attributable to noncontrolling interests |
(285 | ) | (4,149 | ) | | 409 | | (4,025 | ) | |||||||||||||||
Net loss from continuing operations attributable to controlling interests |
(94,241 | ) | (1,329 | ) | (22,485 | ) | (5,487 | ) | (17,333 | ) | (140,875 | ) | ||||||||||||
Less preferred share dividends |
14,011 | 7,904 | | 3,746 | (3,746) | (O) | 21,915 | |||||||||||||||||
Net loss from continuing operations attributable to common shares |
$ | (108,252 | ) | $ | (9,233 | ) | $ | (22,485) | (D) | (9,233 | ) | $ | (13,587 | ) | $ | (162,790 | ) | |||||||
Weighted average common shares outstanding Basic (H) |
281,384 | 169,474 | 458,754 | |||||||||||||||||||||
Weighted average common shares outstanding Diluted(H) |
281,384 | 169,474 | 458,754 | |||||||||||||||||||||
Net loss from continuing operations per share attributable to common shares Basic (H) |
$ | (0.38 | ) | $ | (0.05 | ) | $ | (0.35 | ) | |||||||||||||||
Net loss from continuing operations per share attributable to common shares Diluted (H) |
$ | (0.38 | ) | $ | (0.05 | ) | $ | (0.35 | ) |
F-4
PROLOGIS
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For twelve months ended December 31, 2010
(in thousands, except per share data)
For twelve months ended December 31, 2010
(in thousands, except per share data)
AMB | AMB Pro | PEPR | PEPR Pro | Prologis, | ||||||||||||||||||||
ProLogis | Historical | Forma | Historical | Forma | Inc. Pro | |||||||||||||||||||
Historical | (A) (B) | Adjustments | (A) | Adjustments | Forma | |||||||||||||||||||
Revenues: |
||||||||||||||||||||||||
Rental income |
$ | 771,308 | $ | 602,640 | $ | (10,059) | (P) | $ | 387,901 | $ | 2,706 | (V) | $ | 1,754,496 | ||||||||||
Private capital revenue |
120,326 | 30,860 | | | (28,883) | (W) | 122,303 | |||||||||||||||||
Development management and other income |
17,521 | | | 3,747 | | 21,268 | ||||||||||||||||||
Total revenues |
909,155 | 633,500 | (10,059 | ) | 391,648 | (26,177 | ) | 1,898,067 | ||||||||||||||||
Expenses: |
||||||||||||||||||||||||
Rental expenses |
223,924 | 188,710 | | (Q) | 73,615 | | 486,249 | |||||||||||||||||
General and administrative and private capital expense |
206,640 | 126,464 | | (Q) | 38,569 | (28,883) | (X) | 342,790 | ||||||||||||||||
Impairment of real estate properties |
736,612 | | | | | 736,612 | ||||||||||||||||||
Depreciation and amortization |
319,602 | 196,636 | 71,041 | (R) | 121,660 | 61,052 | (Y) | 769,991 | ||||||||||||||||
Restructuring charges |
| 4,874 | | | | 4,874 | ||||||||||||||||||
Other expenses |
16,355 | 3,197 | | 2 | | 19,554 | ||||||||||||||||||
Total expenses |
1,503,133 | 519,881 | 71,041 | 233,846 | 32,169 | 2,360,070 | ||||||||||||||||||
Operating income (loss) |
(593,978 | ) | 113,619 | (81,100 | ) | 157,802 | (58,346 | ) | (462,003 | ) | ||||||||||||||
Other income (expense): |
||||||||||||||||||||||||
Earnings (loss) from unconsolidated investees, net |
23,678 | 17,372 | (23,353) | (S) | | (19,535) | (Z) | (1,838 | ) | |||||||||||||||
Interest income |
5,022 | 1,390 | | | | 6,412 | ||||||||||||||||||
Interest expense |
(461,166 | ) | (130,338 | ) | 37,128 | (T) | (134,019 | ) | 12,015 (AA) | (676,380 | ) | |||||||||||||
Impairment of goodwill and other assets |
(412,745 | ) | | | | | (412,745 | ) | ||||||||||||||||
Other income (expense), net |
10,825 | (1,891 | ) | | 435 | | 9,369 | |||||||||||||||||
Net gains on dispositions of investments in real estate |
28,488 | 6,739 | | | | 35,227 | ||||||||||||||||||
Foreign currency exchange gains (losses), net |
(11,081 | ) | 4,044 | | (982 | ) | | (8,019 | ) | |||||||||||||||
Loss on early extinguishment of debt, net |
(201,486 | ) | (2,892 | ) | | (1,968 | ) | | (206,346 | ) | ||||||||||||||
Total other income (expense) |
(1,018,465 | ) | (105,576 | ) | 13,775 | (136,534 | ) | (7,520 | ) | (1,254,320 | ) | |||||||||||||
Earnings (loss) before income taxes |
(1,612,443 | ) | 8,043 | (67,325 | ) | 21,268 | (65,866 | ) | (1,716,323 | ) | ||||||||||||||
Current income tax expense (benefit) |
21,724 | (2,928 | ) | | 16,787 | | 35,583 | |||||||||||||||||
Deferred income tax expense (benefit) |
(52,223 | ) | 1,619 | | (34,716 | ) | | (85,320 | ) | |||||||||||||||
Total income taxes |
(30,499 | ) | (1,309 | ) | | (17,929 | ) | | (49,737 | ) | ||||||||||||||
Gain (loss) from continuing operations |
(1,581,944 | ) | 9,352 | (67,325 | ) | 39,197 | (65,866 | ) | (1,666,586 | ) | ||||||||||||||
Net earnings attributable to noncontrolling interests |
(43 | ) | (6,078 | ) | | 2,428 | | (3,693 | ) | |||||||||||||||
Net earnings (loss) from continuing operations attributable to controlling interests |
(1,581,987 | ) | 3,274 | (67,325 | ) | 41,625 | (65,866 | ) | (1,670,279 | ) | ||||||||||||||
Less preferred share dividends |
25,424 | 16,269 | | 8,647 | (8,647) (BB) | 41,693 | ||||||||||||||||||
Net earnings (loss) from continuing operations attributable to common shares |
$ | (1,607,411 | ) | $ | (12,995 | ) | $ | (67,325) | (Q) | $ | 32,978 | $ | (57,219 | ) | $ | (1,711,972 | ) | |||||||
Weighted average common shares outstanding Basic (U) |
491,744 | 161,988 | 458,754 | |||||||||||||||||||||
Weighted average common shares outstanding Diluted(U) |
491,744 | 161,988 | 458,754 | |||||||||||||||||||||
Net loss from continuing operations per share attributable to common shares Basic
(U) |
$ | (3.27 | ) | $ | (0.08 | ) | $ | (3.73 | ) | |||||||||||||||
Net loss from continuing operations per share attributable to common shares Diluted
(U) |
$ | (3.27 | ) | $ | (0.08 | ) | $ | (3.73 | ) |
F-5
Notes to unaudited pro forma condensed consolidated financial statements
(1) | Basis of Preliminary Purchase Price Allocation | |
The allocation of purchase price requires a significant amount of judgment. The following purchase price allocation was based on our preliminary valuation, estimates and assumptions of the acquisition date fair value of the tangible and intangible assets and liabilities acquired and is subject to change. Such final determination of the purchase price allocation may be significantly different than reflected below. The preliminary allocation of the purchase price was as follows (in millions): |
Investments in real estate properties |
$ | 8,103.7 | ||
Investments in and advances to unconsolidated investees |
1,632.2 | |||
Cash, accounts receivable and other assets |
736.5 | |||
Debt |
(3,646.7 | ) | ||
Accounts payable, accrued expenses and other liabilities |
(463.6 | ) | ||
Noncontrolling interests |
(505.6 | ) | ||
Total estimated purchase price of the Merger |
$ | 5,856.5 | ||
We have preliminarily allocated the aggregate purchase price, representing the share of PEPR we owned at the time of consolidation of 1.1 billion or ($1.6 billion) as set forth below. The allocation was based on our preliminary valuation, estimates and assumptions of the acquisition date fair value of the tangible and intangible assets and liabilities acquired and is subject to change. The primary areas of the purchase price allocation that are not yet completed relate to the valuation of the intangible lease assets associated with the real estate portfolio of PEPR of 232 industrial buildings in 11 countries in Europe aggregating approximately 53.0 million square feet. The preliminary allocation of the purchase price was as follows (in millions): |
Investments in real estate properties |
$ | 4,456.3 | ||
Cash, accounts receivable and other assets |
100.7 | |||
Debt |
(2,240.8 | ) | ||
Accounts payable, accrued expenses and other liabilities |
(555.6 | ) | ||
Noncontrolling interest |
(133.7 | ) | ||
Total estimated purchase price of PEPR |
$ | 1,626.9 | ||
(2) | Pro Forma Adjustments The pro forma adjustments to the Statement of Operations assumes that a purchase price allocation done as of January 1, 2010 would have been equivalent to the amounts (in United States dollars) assigned based on the purchase price allocation done as of the date of the Merger and PEPR acquisition. |
(A) | AMBs historical numbers date from January 1, 2010 through June 2, 2011. PEPR historical numbers are from January 1, 2010 through May 25, 2011. | ||
(B) | Reclassifications | ||
Represents the reclassification of certain AMB balances to conform to the ProLogis presentation as described below: |
| AMB includes Interest Income and Foreign Currency Exchange Gains (Losses) in Other Income (Expense). ProLogis presents these balances as separate line items within the same section of the Statement of Operations. AMBs interest income and foreign currency exchange gains have been reclassified to conform to ProLogis presentation. | ||
| AMB includes Current Income Tax Expense and Deferred Income Tax Expense as a component of General and Administrative Expenses. ProLogis presents both current and deferred income tax expense as separate line items following Earnings (Loss) Before Income Taxes. AMBs current and deferred income tax balances have been reclassified to conform to ProLogis presentation. |
Statement of Operations Adjustments |
(C) | Rental income is adjusted to: (i) remove $9.1 million AMBs historical straight-line rent adjustment; (ii) recognize $12.0 million of total minimum lease payments provided under the acquired leases on a straight-line basis over the remaining term of the lease as of January 1, 2010; (iii) remove $1.1 million of AMBs historical amortization of the asset or liability created from previous acquisitions of leases with favorable or unfavorable rents; and (iv) amortization of the asset or liability from the acquired leases with favorable or unfavorable rents relative to estimated market rents, including a reduction of $11.3 million from amortization of the asset and an increase of $1.9 million from amortization of the liability both from January 1, 2010. | ||
(D) | The Merger is expected to create operational and general and administrative cost savings, including property management cost savings, investment management expenses, and costs associated with corporate administration and infrastructure, including duplicative public company costs. However, there can be no assurances that there will be success in achieving these anticipated results. Because these adjustments cannot be factually supported, the pro forma statements do include any estimate of the expected future cost savings. |
F-6
(E) | Depreciation and amortization expense is adjusted to: (i) remove $87.9 million of AMBs historical depreciation and amortization expense; (ii) recognize real estate depreciation expense of $101.1 million as a result of the adjustment of AMB real estate assets to estimated acquisition date fair value; (iii) reflect amortization expense of $5.7 million for intangible assets recognized related to the estimated value of in-place leases as of January 1, 2010; (iv) recognize depreciation expense of $1.2 million on corporate and non-real estate assets based on the estimated acquisition date fair value; and (v) recognize amortization for management contracts acquired of $3.5 million based on the fair value of the acquired contracts. The fair value of the acquired management contracts was calculated by discounting future expected cash flows under these agreements. Our preliminary valuations of the intangible assets were based, in part, on a valuation prepared by an independent valuation firm. | ||
(F) | Earnings (loss) from unconsolidated investees were adjusted to reflect fair value. As a result, AMBs equity in earnings was adjusted for the impact that AMB would have recognized from these investees, such as (i) remove historical depreciation and amortization expense; (ii) recognize depreciation and amortization expense based on the estimated acquisition date fair value; (iii) remove historical interest expense; and (iv) recognize interest expense based on the estimated fair value of the debt as of the estimated acquisition date. | ||
(G) | AMBs debt was fair valued at acquisition date. The adjustment to interest expense includes; (i) removal of AMBs historical interest expense of $58.7 million, including amortization of deferred financing costs; and (ii) recognition of interest expense of $43.2 million based on the estimated fair value of assumed debt as of January 1, 2010, net of adjustment to capitalized interest. | ||
(H) | The calculation of basic and diluted loss from continuing operations attributable to common shares per share were as follows (in thousands): |
Six Month Ended June 30, 2011 | ||||||||||||
Prologis | AMB | Prologis, Inc. | ||||||||||
Historical | Historical | Pro Forma | ||||||||||
Loss from continuing operations attributable to common shares
|
$ | (108,252 | ) | $ | (9,233 | ) | $ | (162,790 | ) | |||
Weighted average common shares outstanding Basic and Diluted
|
281,384 | 169,474 | 458,754 | (*) | ||||||||
Net loss from continuing operations per common share Basic
and Diluted
|
$ | (0.38 | ) | $ | (0.05 | ) | $ | (0.35 | ) |
(*) | The pro forma weighted average shares outstanding assumes the AMB common shares were issued on January 1, 2010 and outstanding the entire period. Since we have a loss from continuing operations, both basic and diluted weighted average shares outstanding were the same. |
(I) | Rental income is adjusted to: (i) remove $5.8 million of PEPRs historical straight-line rent adjustment; and (ii) recognize $3.3 million of total minimum lease payments provided under the acquired leases on a straight-line basis over the remaining term of the lease as of January 1, 2010. | ||
(J) | Property management and other fees and incentives is adjusted to remove management fee income paid from PEPR to Prologis. | ||
(K) | Private capital expense is adjusted to remove management fee expense paid from PEPR to Prologis. | ||
(L) | Depreciation and amortization expense is adjusted to: (i) remove $50.5 million of PEPRs historical depreciation and amortization expense; and (ii) recognize real estate depreciation expense of $76.1 million as a result of the adjustment of PEPR real estate assets to estimated acquisition date fair value. | ||
(M) | Earnings (loss) from unconsolidated investees is adjusted to remove the equity in earnings previously reported in the Prologis financials that were related to PEPR. | ||
(N) | The adjustment to interest expense includes; (i) removal of PEPRs historical interest expense of $56 million; (ii) recognition of interest expense of $50.8 million based on the estimated fair value as if the debt was assumed as of January 1, 2010 and (iii) removal of interest expense related to the debt/equity offering to purchase PEPR of $4.8 million. | ||
(O) | Preferred share dividends were adjusted to remove preferred dividends that were paid from PEPR to Prologis. | ||
(P) | Rental income is adjusted to: (i) remove $15.4 million AMBs historical straight-line rent adjustment; (ii) recognize $28.9 million of total minimum lease payments provided under the acquired leases on a straight-line basis over the remaining term of the lease as of January 1, 2010; (iii) remove $0.9 million of AMBs historical amortization of the asset or liability created from previous acquisitions of leases with favorable or unfavorable rents; and (iv) amortization of the asset or liability from the acquired leases with favorable or unfavorable rents relative to estimated market rents, including a reduction of $27.2 million from amortization of the asset and an increase of $4.6 million from amortization of the liability both from January 1, 2010. | ||
(Q) | The Merger is expected to create operational and general and administrative cost savings, including property management costs savings, investment management expenses, costs associated with corporate administration and infrastructure, including duplicative public company costs. However, there can be no assurances that there will be success in achieving these anticipated results. Because these adjustments cannot be factually supported, the pro forma statements do include any estimate of the expected future cost savings. | ||
(R) | Depreciation and amortization expense is adjusted to: (i) remove $196.6 million of AMBs historical depreciation and amortization expense; (ii) recognize real estate depreciation expense of $242.6 million as a result of the adjustment of AMB real estate assets to estimated acquisition date fair value; (iii) reflect amortization expense of $13.7 million for intangible assets recognized related to the estimated value of in-place leases as of January 1, 2010; (iv) recognize depreciation expense of $2.9 million on corporate and non-real estate assets based on the estimated acquisition date fair value; and (v) recognize amortization on management contracts acquired of $8.4 million based on the fair value of the acquired contracts. The fair value of the acquired management contracts was calculated by discounting future expected cash flows under these agreements. Our preliminary valuations of the intangible assets were based, in part, on a valuation prepared by an independent valuation firm. |
F-7
(S) | Earnings (loss) from unconsolidated investees were adjusted to reflect fair value. As a result, AMBs equity in earnings was adjusted for the impact that AMB would have recognized from these investees, such as (i) remove historical depreciation and amortization expense; (ii) recognize depreciation and amortization expense based on the estimated acquisition date fair value; (iii) remove historical interest expense; and (iv) recognize interest expense based on the estimated fair value of the debt as of the estimated acquisition date. | ||
(T) | AMBs debt was fair valued at acquisition date. The adjustment to interest expense includes; (i) removal of AMBs historical interest expense of $130.3 million, including amortization of deferred financing costs; and (ii) recognition of interest expense of $93.2 million based on the estimated fair value of assumed debt as of January 1, 2010, net of adjustment to capitalized interest. | ||
(U) | The calculation of basic and diluted loss from continuing operations attributable to common shares per share were as follows: |
Twelve Months Ended December 31, 2010 | ||||||||||||
ProLogis | AMB | Prologis, Inc. | ||||||||||
Historical | Historical | Pro Forma | ||||||||||
Loss from continuing operations attributable to common shares
|
$ | (1,607,411 | ) | $ | (12,995 | ) | $ | (1,711,972 | ) | |||
Weighted average common shares outstanding Basic and Diluted
|
491,744 | 161,988 | 458,754 | (*) | ||||||||
Net loss from continuing operations per common share Basic
and Diluted
|
$ | (3.27 | ) | $ | (0.08 | ) | $ | (3.73 | ) |
(*) | The pro forma weighted average shares outstanding assumes the AMB common shares were issued on January 1, 2010. Since we have a loss from continuing operations, both basic and diluted weighted average shares outstanding were the same. |
(V) | Rental income is adjusted to: (i) remove $5.1 million of PEPRs historical straight-line rent adjustment; and (ii) recognize $7.8 million of total minimum lease payments provided under the acquired leases on a straight-line basis over the remaining term of the lease as of January 1, 2010. | ||
(W) | Property management and other fees and incentives is adjusted to remove management fee income paid from PEPR to ProLogis. | ||
(X) | Private capital expense is adjusted to remove management fee expense paid from PEPR to ProLogis. | ||
(Y) | Depreciation and amortization expense is adjusted to: (i) remove $121.7 million of PEPRs historical depreciation and amortization expense; and (ii) recognize real estate depreciation expense of $182.7 million as a result of the adjustment of PEPR real estate assets to estimated acquisition date fair value. | ||
(Z) | Earnings (loss) from unconsolidated investees is adjusted to remove the equity earnings previously reported in the ProLogis financials which were related to PEPR. | ||
(AA) | The adjustment to interest expense includes; (i) removal of PEPRs historical interest expense of $134 million and (ii) recognition of interest expense of $122 million based on the estimated fair value as if the debt was assumed as of January 1, 2010. | ||
(BB) | Preferred share dividends were adjusted to remove preferred dividends that were paid from PEPR to ProLogis. |
F-8