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DENVER, July 26 -- ProLogis (NYSE: PLD), a leading global provider of distribution services and facilities, reported a 14.6% increase in funds from operations (FFO) per diluted share for the quarter ended June 30, 2000, to $.55 per diluted share, from $.48 per diluted share in 1999. For the six months ended June 30, 2000, FFO per diluted share rose 12.6% to $1.07 per diluted share from $.95 per diluted share in the first half of 1999.
"Continued growth in our Corporate Distribution Facilities business and strong performance from our operating properties contributed to our excellent results for the second quarter," said K. Dane Brooksher, chairman and chief executive officer. "We also made further progress recently toward our key objectives of accelerating future earnings growth and increasing returns on invested capital with the first closing of the ProLogis North American Properties Fund I and our investment in GOwarehouse."
The company reported strong rental growth of 15.8% and a 6.1% increase in same store net operating income on a cash basis for the quarter, while the company's stabilized lease percentage at June 30, 2000 was 95.8%. Mr. Brooksher noted that these results were due to the ProLogis Operating System(TM), which helps expand customer relationships, supports the company's consistently strong internal growth and contributes to the expansion of the company's corporate distribution facility development business.
Exceptional Growth in Corporate Distribution Facilities Business
"Income from our Corporate Distribution Facilities business more than doubled in the second quarter," said Irving F. Lyons, III, president and chief investment officer. "Customer demand for new, well-located distribution space continues to be very strong. Our expansive global development capabilities enable us to capture this demand, while the ProLogis North American Properties Fund I -- together with the ProLogis European Properties Fund we established last year -- ensures we will have a predictable source of capital to fund future development while executing our capital redeployment plan.
Mr. Lyons also noted that the company has completed $408 million in total dispositions in Europe and North America in 2000. At the end of the second quarter, the company's development pipeline was 11.4 million square feet, with a total expected investment of $625 million. At the end of the quarter, the company had a total of $566 million invested in properties under development and land, with $159 million in short-term debt, net of its cash balances.
ProLogis North American Properties Fund I to Enhance Shareholder Returns
Earlier this week, ProLogis announced the first closing of the ProLogis North American Properties Fund I. The State Teachers' Retirement System of Ohio (OSTRS), has agreed to contribute $75 million in equity and is the lead investor in the Fund. The total committed capitalization for the first closing -- including OSTRS commitment, ProLogis' equity contribution and targeted leverage of 50 to 60% -- is approximately $230 million. ProLogis will retain an ownership in the Fund of not less than 20%. The company also stated that it plans to fund its ongoing North American development business through this type of fund structure.
"The Fund allows us to maintain customer relationships and expand our operating platform with less overall capital deployed, thereby increasing returns on invested capital. ProLogis will receive ongoing profits from the transfer of newly developed properties to the Fund and generate returns from the reinvestment of those development profits. In addition, we will generate cash flow from our ownership interest in the Fund and earn fee income from the ongoing management of the properties," Mr. Lyons added.
GOwarehouse Expands Logistics Technology Services Platform
"We continued to strengthen our logistics technology leadership with our strategic investment in GOwarehouse, whose proprietary technology integrates inventory data, allowing customers to turn inventory faster, predict demand better and serve their customers more efficiently. This investment is consistent with our strategy to invest in technology that is complementary to our distribution and logistics businesses and can benefit our customers," Mr. Brooksher said.
Under the agreement, ProLogis will invest $25 million in GOwarehouse convertible preferred stock, representing an interest of approximately 15.6% upon conversion. In addition, GOwarehouse will pay ProLogis $30 million in GOwarehouse stock, representing an additional 18.9% ownership interest for a five-year non-exclusive license of the ProLogis Operating System(TM).
"This agreement demonstrates the value we've created with the ProLogis Operating System and the attractiveness of partnering with ProLogis to reach our base of over 10,000 customers with new value-added services. Many of our customers are seeking ways to make their supply chains more efficient and we believe GOwarehouse's proprietary technology will provide the platform from which we can enhance our logistics services and capture that opportunity," Mr. Brooksher added.
ProLogis is a leading global provider of integrated distribution facilities and services, with 1,664 distribution facilities owned or managed throughout North America and Europe. ProLogis has built the industry's first and only global network of distribution facilities with the primary objective to build shareholder value by becoming the leading provider of distribution services. The company expects to achieve this objective through the ProLogis Operating System(TM), and its commitment to be "The Global Distribution Solution" by providing exceptional corporate distribution services and facilities to meet customer expansion and reconfiguration needs globally. As of June 30, 2000, ProLogis owned, managed or had under development a total of 185.2 million square feet of distribution facilities, in 98 global markets.
In addition to historical information, this press release contains forward-looking statements under the federal securities laws. These statements are based on current expectations, estimates and projections about the industry and markets in which ProLogis operates, management's beliefs and assumptions made by management. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties which are difficult to predict. Actual operating results may be affected by changes in national and local economic conditions, competitive market conditions, changes in financial markets or interest rates that could adversely affect ProLogis' ability to meet its financing needs and obligations, weather, obtaining governmental approvals and meeting development schedules, and therefore, may differ materially from what is expressed or forecasted in this press release.
A copy of ProLogis' second quarter 2000 supplemental information will be available from the company's web site at http://www.prologis.com or by request at 800/820-0181. The company's conference call will be available via a live webcast on the company's website at www.prologis.com. The replay of the call will be available on the company's web site or at www.streetfusion.com or at www.streetevents.com.
ProLogis Trust
Second Quarter 2000
Unaudited Financial Results
Consolidated Statements of Funds from Operations (A)
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Revenues:
Rental income (B) $119,696 $131,251 $240,505 $228,412
Corporate distribution
facilities services
income (C) 33,295 15,396 58,763 30,923
Income from temperature
-controlled distribution
operations (D) 9,273 11,361 16,104 19,751
Income from ProLogis
California LLC (E) 4,531 -- 9,245 --
Income from ProLogis
European Properties
Fund (F) 2,949 -- 6,198 --
Income from ProLogis
European Properties
S.a.r.l. (G) 2,064 -- 4,838 --
Income from ProLogis
Garonor (H) -- 2,483 -- 6,318
Interest and other income 2,491 1,080 4,364 1,879
174,299 161,571 340,017 287,283
Expenses:
Rental expenses, net
of recoveries (I) 7,584 8,976 14,131 16,165
General and administrative 11,281 9,390 22,522 17,811
Depreciation of non-real
estate assets 1,262 439 2,008 751
Interest (J) 42,856 45,351 84,842 76,269
Interest rate hedge expense -- -- -- 945
Other 1,973 806 3,308 3,345
64,956 64,962 126,811 115,286
Funds from operations 109,343 96,609 213,206 171,997
Less preferred share
dividends 14,150 14,493 28,555 27,938
Less minority interest
share in funds from
operations 1,435 1,434 3,089 2,603
Funds from Operations
Attributable to Common
Shares $93,758 $80,682 $181,562 $141,456
Weighted average Common
Shares outstanding - basic 163,148 162,004 162,644 142,974
Weighted average Common
Shares outstanding
- diluted (K) 177,832 177,056 177,698 157,691
Per Share Funds from
Operations Attributable
to Common Shares:
Basic $0.57 $0.50 $1.12 $0.99
Diluted (K) $0.55 $0.48 $1.07 $0.95
ProLogis Trust
Second Quarter 2000
Unaudited Financial Results
Notes to Consolidated Statements of Funds from Operations
NOTES
- See Reconciliation of Net Earnings to Funds from Operations. The
1999 amounts have been restated from amounts previously reported in
1999 to include non-recurring items as a component of funds from
operations. See Reconciliation of Net Earnings to Common Shares to
Funds from Operations for the definition of funds from operations and
Restatement and Reconciliation of 1999 Funds from Operations for
quarterly restatements of funds from operations for 1999.
- Includes $1,769,000 and $3,184,000 of straight-lined rent for the
three months in 2000 and 1999, respectively, and $3,690,000 and
$4,633,000 for the six months in 2000 and 1999, respectively.
- Income has been reduced by $12.9 million and $13.6 million for thethree and six months in 2000, respectively, which represent the portions of the gains related to the facilities that ProLogis and
ProLogis Kingspark sold to distribution real estate entities that do
not qualify for income recognition due to ProLogis' continuing
ownership in these entities.
- Represents funds from operations from ProLogis' investments in
temperature-controlled distribution operations companies that are
accounted for under the equity method.
- Represents ProLogis' share of funds from operations from its
investment in ProLogis California LLC, a limited liability company
whose members are ProLogis and New York State Common Retirement Fund
that was formed on August 23, 1999. This investment is accounted for
under the equity method. The three and six months ended June 30,
2000 include $617,000 and $1,282,000, respectively of management,
leasing and development fees earned by ProLogis.
- Represents ProLogis' share of funds from operations from its
investment in the ProLogis European Properties Fund that was formed
on September 23, 1999. This investment is accounted for under the
equity method. The three and six months ended June 30, 2000 include
$1,162,000 and $2,304,000, respectively, of management fees earned by
ProLogis.
- Represents ProLogis' 49.9% share of funds from operations of the
ProLogis European Properties S.a.r.l., a Luxembourg entity that owns
Garonor Holdings S.A. and Garonor S.A. ("ProLogis Garonor"). The
ProLogis European Properties S.a.r.l. owns 6,097,000 square feet of
distribution facilities in France (including ProLogis Garonor's
4,995,000 square feet), 393,000 square feet of distribution
facilities in Poland and 138,000 square feet of distribution
facilities in the Netherlands. On January 7, 2000, ProLogis
contributed 50.1% of the common stock of the ProLogis European
Properties S.a.r.l. to the ProLogis European Properties Fund.
Pursuant to the terms of the ProLogis European Properties Fund
agreement, ProLogis will contribute the remaining 49.9% of the
common stock in January 2001. This investment is accounted for under
the equity method.
- As of June 30, 1999, Garonor Holdings S. A. and ProLogis Garonor
became wholly-owned subsidiaries of ProLogis. Prior to June 30,
1999, ProLogis reported the results of operations of these entities
under the equity method of accounting. From July 1, 1999 to January
7, 2000, the funds from operations of these entities have been
consolidated with ProLogis' funds from operations. See Note G.
- Amounts are net of rental expense recoveries of $22,575,000 and
$20,993,000 for the three months in 2000 and 1999, respectively, and
$45,737,000 and $37,876,000 for the six months in 2000 and 1999,
respectively.
- Includes $1,033,000 and $1,244,000 of amortization of loan fees for
the three months in 2000 and 1999, respectively, and $2,020,000 and
$2,046,000 for the six months in 2000 and 1999, respectively.
Excludes $4,263,000 and $3,784,000 of interest that has been
capitalized for the three months in 2000 and 1999, respectively and
$8,446,000 and $7,711,000 for the six months in 2000 and 1999,
respectively.
- Funds from operations per Common Share calculated on a "diluted"
basis is as follows (in thousands, except per share amounts):
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Funds from operations
attributable to Common
Shares $93,758 $80,682 $181,562 $141,456
Minority interest share
in funds from operations 1,435 1,434 3,089 2,603
Series B preferred share
dividends 2,800 3,141 5,853 6,329
Adjusted funds from
operations attributable
to Common Shares $97,993 $85,257 $190,504 $150,388
Weighted average Common
Shares outstanding - basic 163,148 162,004 162,644 142,974
Weighted average conversion
of limited partnership units 5,559 5,599 5,573 5,245
Weighted average conversion
of Series B preferred shares 8,543 9,248 8,755 9,336
Incremental common stock
equivalents (a) 582 205 726 136
Adjusted weighted average
Common Shares 177,832 177,056 177,698 157,691
Diluted funds from
operations per Common Share $0.55 $0.48 $1.07 $0.95
- The number of weighted average common stock equivalents outstanding
were 7,722,000 and 6,131,000 for the three months in 2000 and 1999,
respectively and 8,018,000 and 5,617,000 for the six months in 2000 and
1999, respectively.
ProLogis Trust
Second Quarter 2000
Unaudited Financial Results
Consolidated Statements of Income (A)
(in thousands, except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Revenues:
Rental income (B) $119,696 $131,251 $240,505 $228,412
Corporate distribution
facilities services
income (C) 31,797 11,840 55,561 23,744
Income (loss) from
temperature-controlled
distribution
operations (D) (377) (222) 820 (2,238)
Income from ProLogis
California LLC (E) 2,955 -- 6,054 --
Income (loss) from
ProLogis European
Properties Fund (F) (3,012) -- 4,312 --
Income (loss )from
ProLogis European Properties
S.a.r.l. (G) (53) -- 4,875 --
Loss from ProLogis
Garonor (H) -- (6,712) -- (12,422)
Interest and other income 2,491 1,080 4,364 1,879
153,497 137,237 316,491 239,375
Expenses:
Rental expenses, net
of recoveries (I) 7,584 8,976 14,131 16,165
General and
administrative 11,281 9,390 22,522 17,811
Depreciation and
amortization 37,591 39,628 77,065 66,992
Interest rate hedge
expense -- -- -- 945
Interest (J) 42,856 45,351 84,842 76,269
Other 2,140 1,170 3,475 3,709
101,452 104,515 202,035 181,891
Earnings from
operations 52,045 32,722 114,456 57,484
Minority interest share
in earnings 1,435 1,434 3,089 2,603
Earnings before gain
(loss) on disposition of
real estate and foreign
currency exchange losses 50,610 31,288 111,367 54,881
Gain (loss) on disposition
of real estate (4,801) -- 307 715
Foreign currency exchange
losses, net (K) (12,070) (4,029) (18,592) (12,402)
Earnings before cumulative
effect of accounting
change 33,739 27,259 93,082 43,194
Less cumulative effect of
accounting change (L) -- -- -- 1,440
Net earnings 33,739 27,259 93,082 41,754
Less preferred share
dividends 14,150 14,493 28,555 27,938
Net Earnings Attributable
to Common Shares $19,589 $12,766 $64,527 $13,816
Weighted average Common
Shares outstanding
- basic 163,148 162,004 162,644 142,974
Weighted average Common
Shares outstanding
- diluted (M) 163,730 162,209 163,370 143,110
Per Share Net Earnings
Attributable to Common
Shares before Cumulative
Effect of Accounting Change:
Basic and diluted (M) $0.12 $0.08 $0.40 $0.11
Per Share Net Earnings
Attributable to Common Shares:
Basic and diluted (M) $0.12 $0.08 $0.39 $0.10
NOTES
- See Reconciliation of Net Earnings to Funds from Operations.
- Includes $1,769,000 and $3,184,000 of straight-lined rent for the
three months in 2000 and 1999, respectively, and $3,690,000 and
$4,633,000 for the six months in 2000 and 1999, respectively.
- See Note C on Notes to Consolidated Statements of Funds from
Operations.
- Represents income (loss) from ProLogis' investment in temperature-
controlled distribution operations companies that are accounted for
under the equity method.
- Represents ProLogis' share of income from its investment in ProLogis
California LLC. See Note E on Notes to Consolidated Statements of
Funds from Operations.
- Represents ProLogis' share of income from its investment in the
ProLogis European Properties Fund.See Note F on Notes to
Consolidated Statements of Funds from Operations.
- See Note G on Notes to Consolidated Statements of Funds from
Operations.
- See Note H on Notes to Consolidated Statements of Funds from
Operations.
(I) Amounts are net of rental expense recoveries of $22,575,000 and
$20,993,000 for the three months in 2000 and 1999, respectively, and
$45,737,000 and $37,876,000 for the six months in 2000 and 1999,
respectively.
- Includes $1,033,000 and $1,244,000 of amortization of loan fees for
the three months in 2000 and 1999, respectively, and $2,020,000 and
$2,046,000 for the six months in 2000 and 1999, respectively.
Excludes $4,263,000 and $3,784,000 of interest that has been
capitalized for the three months in 2000 and 1999, respectively, and
$8,446,000 and $7,711,000 for the six months in 2000 and 1999,
respectively.
- Includes foreign currency gains and losses resulting from
intercompany debt transactions and from the remeasurement (based on
current foreign currency exchange rates) of intercompany and other
debt of ProLogis' foreign subsidiaries. Also includes foreign
currency gains and losses resulting from mark to market adjustments
related to derivative financial instruments. Such gains and losses
are not included for purposes of calculating funds from operations.
See Reconciliation of Net Earnings to Funds from Operations for the
definition of funds from operations.
- Represents previously capitalized start-up and organizational costs
that were expensed on January 1, 1999 in accordance with the
requirements of Statement of Position 98-5.
- Net earnings per Common Share on a diluted basis for all periods in
2000 and 1999 do not assume the conversion of limited partnership
units or of Series B preferred shares as the effects are
anti-dilutive.
ProLogis Trust
Second Quarter 2000
Unaudited Financial Results
Reconciliation of Net Earnings to Funds from Operations (A)
(in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
2000 1999 2000 1999
Net Earnings Attributable
to Common Shares $19,589 $12,766 $64,527 $13,816
Add (Deduct):
Real estate related
depreciation and
amortization 36,329 39,189 75,057 66,241
(Gain) loss on the
disposition of non-CDFS
business segment assets 4,801 -- (307) (715)
Foreign currency exchange
losses, net (B) 12,070 4,029 18,592 12,402
Cumulative effect of
accounting change (C) -- -- -- 1,440
Deferred income tax expense 167 364 167 364
ProLogis' share of reconciling
items from unconsolidated
entities (D):
Real estate related
depreciation and
amortization 14,296 12,320 28,535 24,869
Foreign currency exchange
(gains) losses (B) 8,666 10,298 (1,971) 20,543
Deferred income tax
expense (benefit) (2,498) 1,721 (3,064) 884
Cumulative effect of
accounting change (C) -- -- -- 1,480
(Gain) loss on disposition
of non-CDFS business
segment assets 338 (5) 26 132
Funds from Operations
Attributable to Common
Shares $93,758 $80,682 $181,562 $141,456
NOTES
- ProLogis considers funds from operations to be a useful measure of
comparative period operating performance. Funds from operations as
used by ProLogis is defined as net income (computed in accordance
with GAAP) excluding: (i) real estate related depreciation and
amortization; (ii) gains or losses from the disposition of non-CDFS
business segment assets; (iii) deferred income tax benefits and
expenses of ProLogis' taxable subsidiaries; (iv) foreign currency
exchange gains and losses resulting from debt transactions between
ProLogis and its foreign consolidated and unconsolidated entities;
(v) foreign currency exchange gains and losses from the
remeasurement (based on current foreign currency exchange rates) of
third party debt of ProLogis' foreign consolidated and
unconsolidated entities; and (vi) mark to market adjustments related
to derivative financial instruments utilized to manage ProLogis'
foreign currency risks. In addition, adjustments for ProLogis'
unconsolidated entities are calculated to reflect their funds from
operations on the same basis. The 1999 amounts have been restated
from amounts previously reported in 1999 to conform with this
definition. See Restatement and Reconciliation of 1999 Funds from
Operations for quarterly restatements of funds from operations for
1999.
- See Note K on Consolidated Statements of Income.
- See Note L on Consolidated Statements of Income.
- ProLogis accounts for its investments in ProLogis Kingspark, its
temperature-controlled distribution operations companies, ProLogis
California LLC, ProLogis Principal LLC, the ProLogis North American
Properties Fund I, the ProLogis European Properties Fund and the
ProLogis European Properties S.a.r.l. using the equity method. For
purposes of calculating funds from operations, ProLogis adjusts the
net earnings of these businesses on the same basis as the definition
discussed in Note A.Prior to June 30, 1999, ProLogis Garonor was
also accounted for under the equity method. From July 1, 1999 to
January 7, 2000, ProLogis Garonor's funds from operations and net
earnings have been consolidated with ProLogis' funds from operations
and net earnings. See Notes G and H on Notes to Consolidated
Statements of Funds from Operations.
ProLogis Trust
Second Quarter 2000
Unaudited Financial Results
Restatement and Reconciliation of 1999 Funds from Operations
(in thousands, except per share amounts)
Effective January 1, 2000, funds from operations (as discussed on
Reconciliation of Net Earnings to Funds from Operations) no longer
excludes non-recurring items.Consequently, 1999 amounts as previously
reported have been restated as follows:
Three Months Ended
Year
Ended
Mar. 31, June 30, Sept. 30, Dec. 31, Dec. 31,
1999 1999 1999 1999 1999
Previously Reported
FFO attributable
to Common Shares
- Diluted $66,067 $86,297 $91,460 $93,877 $337,701
Interest rate hedge
expense, net (936) 270 270 270 (126)
Non-recurring income
and (expenses) -- (1,310) (18) 1,456 128
Restated FFO attributable
to Common Shares
- Diluted $65,131 $85,257 $91,712 $95,603 $337,703
Weighted average Common
Shares outstanding
- Diluted 138,171 177,056 176,329 176,647 167,421
Per Common Share - Diluted:
Previously Reported FFO $0.48 $0.49 $0.52 $0.53 $2.02
Restated FFO $0.47 $0.48 $0.52 $0.54 $2.02
ProLogis Trust
Second Quarter 2000
Financial Results
Consolidated Balance Sheets
(in thousands)
June 30, December 31,
2000 1999
(Unaudited) (Audited)
Assets:
Investments in distribution properties:
Buildings, improvements, improved
land and CIP $4,398,721 $4,811,255
Land held for development 178,223 163,696
Less accumulated depreciation (416,458) (366,703)
Net investments in distribution properties 4,160,486 4,608,248
Investments in unconsolidated entities:
Investment in distribution real estate
entities 839,210 531,307
Investment in temperature-controlled
distribution operating companies 411,527 406,615
Investment in services companies 2,858 2,442
Total investments in unconsolidated
entities 1,253,595 940,364
Cash and cash equivalents 103,346 69,338
Accounts and notes receivable 54,257 46,998
Other assets 179,906 183,092
Total assets $5,751,590 $5,848,040
Liabilities and Shareholders' Equity:
Liabilities:
Lines of credit $262,279 $98,700
Senior unsecured notes 1,699,815 1,729,630
Other unsecured debt -- 30,892
Mortgage notes and other secured debt 548,198 695,586
Construction payable 34,997 23,064
Interest payable 39,135 41,878
Distributions and dividends payable 729 54,939
Accounts payable 24,436 12,124
Accrued expenses and other liabilities 108,264 145,419
Total liabilities 2,717,853 2,832,232
Minority interest 58,896 62,072
Shareholders' equity:
Series A preferred shares 135,000 135,000
Series B convertible preferred shares 159,935 175,518
Series C preferred shares 100,000 100,000
Series D preferred shares 250,000 250,000
Series E preferred shares 50,000 50,000
Common Shares at $.01 par value 1,634 1,618
Additional paid-in capital 2,678,766 2,640,444
Accumulated other comprehensive income (21,115) (9,765)
Distributions in excess of net earnings (379,379) (389,079)
Total shareholders' equity 2,974,841 2,953,736
Total liabilities and shareholders'
equity $5,751,590 $5,848,040
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