Moody's Lifts Outlook on Prologis (PLD) to Positive; Ratings Affirmed

Moody's Investors Service, affirmed the Baa1 senior unsecured rating and Baa2 preferred stock ratings of Prologis, L.P. and Prologis, Inc. (NYSE: PLD), respectively. The rating outlook was revised to positive from stable.

The positive outlook reflects Prologis' strong operating performance in the last five quarters with positive same-store NOI growth and solid rent growth across the portfolio. Record-high occupancy rates have also lifted net operating income, showing little signs of slowing moving into the second half of 2016. In addition, Moody's notes that Prologis completed large capital transactions which helped de-lever its balance sheet post the KTR portfolio acquisition. This, coupled with development projects that are expected to stabilize in the next 12-24 months should result in important enhancements to its key credit metrics.

The following ratings were affirmed, with a positive outlook:

Prologis, L.P. -- Senior unsecured at Baa1; senior unsecured MTN at Baa1, senior unsecured MTN shelf at (P)Baa1; senior unsecured shelf at (P)Baa1; subordinate debt shelf at (P)Baa2

Prologis, Inc.-- Preferred stock at Baa2

RATINGS RATIONALE

The rating action also acknowledges that during 2015, Prologis recycled approximately $3.3 billion of assets, stabilized $1.8 billion of developments, while raising approximately $3.1 billion of capital and integrating and funding the $5.9 billion KTR portfolio acquisition. In addition, the REIT's liquidity position is very strong, with $265 million cash on hand and access to an undrawn $2.6 billion credit facilities as of December 31, 2015. At 4Q15, fixed charge coverage and net debt to EBITDA were at 3.7x and 7.3x respectively, with net debt expected to significantly improve by YE2016 and fixed charge remaining on a positive trajectory. Currently, the REITs effective leverage and secured debt levels are strong for its current rating category.

According to Moody's, Prologis' Baa1 rating continues to reflect its position as the largest publicly traded global industrial REIT, with approximately $59.4 billion of assets owned, managed and under development as of December 31, 2015. Prologis has approximately $22.2 billion of directly owned assets and $37.2 billion of assets under management on behalf of third party funds. It is the world's largest owner, manager and developer of industrial facilities, with operations across the Americas, Europe and Asia. Prologis' Baa1 senior unsecured rating reflects the REIT's large pool of high quality unencumbered assets, which should continue to improve in size, quality and geographic diversity as the REIT executes on its on-balance sheet development program. Prologis benefits from strong tenant relationships underpinning a growing global franchise and the diversification gains derived from its established fund management platform and international strategy. The REIT possesses a global leadership position in the warehouse distribution business, coupled with a strong management team and demonstrated access to committed equity capital at some of its funds and access to all capital markets.

Moody's would expect to raise Prologis' ratings should the REIT sustain its strong operating performance while continuing to improve its credit metrics so that net debt to EBITDA is closer to 5.5x and fixed charge is sustained above 3.5x. A ratings upgrade would also require that the REIT pursues balanced growth strategy that would limit its JV/Fund revenues over total revenues and development over total gross assets to no more than its current levels (approximately 12% and 9% respectively as of December 31, 2015).

A downgrade in Prologis ratings' would be precipitated by deterioration in its current credit profile, specifically net debt/EBITDA greater than 7.0x on a consistent basis, a decline in fixed charge coverage to below 3.0x; coupled with significant increase in development exposure over 15% of gross assets and JV/Fund revenues as a percent of total revenues rising above mid-teens.

Moody's last rating action with respect to Prologis was on July 17, 2014 when the rating agency upgraded Prologis, L.P.'s senior unsecured rating to Baa1, from Baa2 and Prologis, Inc.'s preferred stock rating to Baa2, from Baa3 with a stable outlook.

The principal methodology used in these ratings was Global Rating Methodology for REITs and Other Commercial Property Firms published in July 2010. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology.

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