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

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

3. 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

4. 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

5. History of Partnership
January 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

6. 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)

7. 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

8. 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

9. 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

10. 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

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

12. 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

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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

20. Thank You! Ashley Bolton Director Enterprise Solutions
Carola De Rosa
Director Accounting Project Management
Jason McCabe, CTP
Principal Consultant – Treasury

21. Thank You!