Managing Global Treasury Technology A case study on Prologis and In-House Banking (IHB)

Agenda Company Introductions Partnership Review Business Case In-House Bank (IHB) Review Implementation Considerations Project Review Benefits Q&A Carola

About Prologis Prologis is the global leader in industrial logistics real estate across the Americas, Europe and Asia We create value by developing and managing a world-class portfolio of high-quality logistics and distribution facilities, serving customers and investors as an integral part of the global supply chain Key Stats: $66 billion in total assets under management ~ 676 million square feet owned, managed, under development Operating portfolio of 3,322 industrial properties Operations in 20 countries across the Americas, Europe and Asia Over 1,600 colleagues serving 5,200 customers worldwide Publicly traded REIT on the NYSE under the symbol “PLD” Member of the S&P 500 Among the top 100 most sustainable companies in the world Operational HQ located in Denver Europe Division located in Amsterdam Ashley Corporate HQ located in San Francisco

30+ Financial Services Clients About Elire Elire is the industry leader in ERP Treasury workstation installations 150+ Treasury workstation implementations since our founding in 2005 Elire Partners include 20+ years in Finance & Treasury Elire Consultants average 7 to 12 years of experience We provide strategic guidance to assist with best practice core business process improvement and we specialize in helping unlock the potential of software investments Elire has been a SWIFT Ready Consulting Partner since 2007 Key Consulting Practices Treasury Advisory Strategic Services TMS RFP & Implementation Services Bank Services RFP & Selection Bank KPI Scorecard Assessments End User Adoption and Change Enablement Jason 150+ Clients 30+ Fortune 500 Clients 30+ Financial Services Clients

History of Partnership January 2007 - Elire and Prologis’ partnership was born in 2007, kicked off by an 8-week Proof of Concept project for global implementation of a treasury workstation. April 2007 – The Elire/Prologis partnership continued in 2007 when the Elire team was brought back on site to set the foundation of Prologis’ treasury utilization by implementing PeopleSoft Cash Management v8.9. This was a dual implementation with separate instances in Denver and Amsterdam. July 2010 – Prologis re-engaged with Elire to complete a short-term Strategic Roadmap project, specific to its growing Debt Management processes. October 2012 – Building off the foundation of the work completed in 2007, Elire and Prologis once again partnered for the implementation of PeopleSoft Cash Management for Prologis’ Asia region and Deal Management for North America. August 2015 – Elire and Prologis partnered on a Decision Point Analysis project to complete a review of current state business processes, as well as execute a cost-benefit analysis of current state customizations, new PeopleSoft 9.2 features, and outstanding work requests in order to develop a scope and timeline for the 9.2 Upgrade that Prologis leadership felt confident in pursuing February 2016 – Following the success of the Decision Point Analysis Project, the Elire team engaged with Prologis Leadership for the IHB Implementation & Current and Future State Business Process Documentation project, focused on its European region. March 2017 – Elire continues to support Prologis as part of their PeopleSoft 9.2 Financials Upgrade – focusing specifically on their Treasury and Cash Management Modules 2007 2010 2012 2015 Ashley 2016 2017

Asset Owning Company (AOC) Current State Top Holding Current set up One route for funding Asset Owning Company (AOC) or sweeping cash balances Intercompany dividends paid once a year AR and AP at AOC level Limited Pay on Behalf (POBO) Holding Finance Company Carola Holding Asset Owning Company (AOC)

Challenge #1 Complex Legal Structure and number of entities with no automated way to track balances created lack of visibility Since the Intercompany loan is qualified and documented as a long term loan (with a long term interest rate) it was considered a risk to continue with the setup as is. Lack of visibility could have led to inappropriate cash movements Possible consequence could be the loss of long term loan status and therefore loss of tax benefits (deductible interest) Carola Solution Implementing In House Bank provided the needed visibility and prevented the cash sweeps from inadvertently reducing the long term loan balance

Challenge #2 Interest Rate Solution The majority of the current Intercompany loans had an interest rate of 6% As loans renewed over time, the rate would be significantly lower based upon market conditions (3%) This reduced the volume of interest to be paid and therefore the volume of cash to sweep without impacting the IC loan principals Ashley Implementing In-House bank allowed us to see the correct percentages of interest vs dividend activity This is important for tax, legal, regulatory, and compliance Solution

What was the solution? Change to Structure Change to Business Process IHB operates at the same level as existing finance companies New short term funding route in current account next to existing long term loans AR and AP remain at AOC level For Pay on Behalf (POBO), IHB takes over from finance company. Change to Business Process Consolidate actual wire payments Utilize short term liquidity and free up trapped cash Holding Finance Company Asset Owning Company Top Holding In House Bank Ashley

Why In-House Banking? Nominal Pool Structure Physical Pool Structure IHBs are typically in USD, EUR, & GBP currencies; can be multiples Nominal netting of intercompany A/R & A/P is naturally achieved IHB nominal daily position reflects cash needs of pool participants FX trading for funding purposes is performed at IHB Pool level Non-deliverable functional (NDF) currency positions are still tracked Regulatory restrictions in some countries (i.e. Italy, Poland) Significantly reduces number of daily payments and related fees Physical Pool Structure Daily ZBA transfers for excess of participating cash (less reserves) IT Technology should support automated sweep transfers Some physical currency holdings must remain in-country Entities with NDF currencies will not participate in physical cash sweeps to minimize local FX trades to deliver funds to IHB bank accounts Jason

How Does In-House Bank Work? Nominal versus Physical Cash Flows Jason

How Does In-House Bank Work? Example ERP Software Solution (PeopleSoft) PS Manual IU Entries PS Sub-Ledger IU Entries IU Entries Optional Optional IU Entries - Principal IU Entries - Interest PS CM – Bank Transfer (BAX) PS DM – I/CO Term Loans PS IU Transfers (Nominal) PS IU Adjust (Nominal) Jason IU Entries Optional BU Cash Flows (+/-) Calc Daily Acct Balance Calc Daily Int Accural IU Interest PS GL Entries Print Monthly BU Stmt

Why This Works? Net Benefits Intercompany loan balances can be kept unchanged, better managed, interest settled quarterly Cash can be made available for the entire fund at all times Interest on long term loans and dividends can be settled without loss of access to cash Settle intercompany transfers through current accounts Reduced number of external FX trades and intercompany transfers Less firefighting, more control at accounting and cash management Jason

Implementation Considerations Policy Changes Corporate to revise internal agreements to allow sweep and zero-balance account (ZBA) New policy redefines minimum operating cash to allow cash sweep between BUs and IHBs Change Corporate investment policy required to invest in multiple currencies Resource Requirements Regional Treasury Centers (RTC) satellite offices needed to sweep BU bank accounts to zero BUs and IHBs need to work in same time zone Need to define resources, system requirements, etc. Bank Account Locations Implementing sweep globally will require changes to bank account locations Open accounts in strategic country locations with a global bank to resolve time zone issues Ideally Company and BU’s hold accounts in the same bank to minimize wire fees Daylight Credit Arrangements Intra-day credit is recommended for BU’s bank accounts Negotiation with bank eased by opening regional BU accounts with Company’s main bank Jason

Implementation Considerations Sweep/Bank Account Architecture All cash above target balance is swept into the cash pool. Target balance will be defined for each entity IHB position Entities with deliverable functional currencies but time zone issues should implement sweep construct by changing bank account structure Entities with time zone issue or non-deliverable functional (NDF) currency will not sweep cash to IHBs (i.e., South America, Middle East/Africa, Asia) Multi-Lateral Netting Account Architecture ML Netting is best practice within an IHB pooling structure IHB nominal balances achieve a natural daily netting function Can occur at summary level or by individual transactions depending on IHB policy and system technology capabilities BUs typically require review and pre-approval of their netting so a user online interface or reporting process is needed ERP software provides a natural integration for intercompany A/R & A/P Jason

Project Scope Strategic Advisory Implementation As part of the Strategic Advisory Services Analysis the following was delivered Documentation of Current State Business Processes Creation of Future State Business processes Each business process map will include a detailed Attribute and Disconnect Reports Implementation Automation of the In-House Banking process utilizing the PeopleSoft Cash Management module Reporting Daily Balance Position Reporting Local currency for each Intercompany Relationship Calculation and record keeping of interest rates on Debit and Credit balances Cash Positioning and Cash Sweeping Functionality Ashley

Project Considerations Challenges to consider Resources spread across Regions Complexity of the In-House Bank Multiple Business Groups involved (Tax, Legal, Accounting, Cash Mgmt etc.) Changes in Design Testing coverage and complexity with supporting results Solutions Open Communication channels with clear procedures Daily Check Ins Full Team engagement Resources strategically placed Ashley

Net Benefit from Prologis IHB Project Direct access to cash Direct access to cash at all times should reduce the average minimum cash requirement by 50% Reduced volume of IC transfers (settlement through current account) Time and Effort to process transactions (estimated 10,000 payments per year) to be processed in batches Visibility allows for process simplification and automation reducing workload for multiple teams involved (accounting and cash management) Reduction of cross-currency transfers This can be solved partly with a better account structure without IHB. However, not all entity structures prefer foreign currency accounts at all levels nor is it always possible. Carola

Thank You! Ashley Bolton Director Enterprise Solutions abolton@prologis.com Carola De Rosa Director Accounting Project Management cderosa@prologis.com Jason McCabe, CTP Principal Consultant – Treasury Jason.mccabe@elire.com

Thank You!