ProLogis Forms New North American Property Fund to Acquire $1.8 Billion Industrial Portfolio From Dermody Properties/CalSTERS JV

Transaction Includes 24.7 Million Square Feet of Distribution Properties and Land that Supports an Additional $440 Million of New Development

DENVER, July 12 /PRNewswire-FirstCall/ -- ProLogis (NYSE: PLD), the world's largest owner, manager and developer of distribution facilities, announced today that it has formed a new North American property fund to acquire a portfolio of industrial assets from DP Industrial, a joint venture between Dermody Properties (DP), one of the nation's largest private industrial property developers, and CalSTERS, the California State Teachers Retirement System. The total consideration is approximately $1.85 billion, including transaction costs.

The acquisition includes 114 properties comprising 24.7 million square feet of distribution space in Reno and Las Vegas, Nevada; Eastern Pennsylvania; Chicago, Illinois and Tejon Ranch in Southern California, including 1.2 million square feet of construction in progress. Also included are 518 acres of developable land that can accommodate up to 9.3 million square feet of future development. DP will continue to operate as a private industrial property developer and will maintain its national headquarters in Reno, Nevada.

The industrial properties will be purchased by the newly formed $1.8 billion ProLogis North American Properties Fund III. Affiliates of Lehman Brothers acted as advisor to the fund and provided debt and equity financing to the venture. ProLogis will retain a 20 percent equity interest in the fund as well as full ownership of the land acquired in the transaction.

"This transaction affords a number of strategic benefits for our company," said Jeffrey H. Schwartz, ProLogis chairman and chief executive officer. "It significantly expands our platform in five key U.S. logistics markets through the addition of complementary, high-quality warehouse assets and elevates us to the market-leading position in Reno, Las Vegas and Eastern Pennsylvania. It also enhances our land bank and strengthens relationships with our base of target customers. We're extremely pleased to have completed this acquisition and look forward to integrating the DP properties into our investment management business."

Of the acquired operating properties, approximately 49 percent is located in Reno, Nevada. "Reno is growing in stature as a regional distribution hub that can serve consumer markets throughout California, Nevada and the Pacific Northwest," Schwartz added. "We believe our expanded position there will deliver a sustained competitive advantage for ProLogis as we serve customers with large-scale distribution needs across the western U.S."

Walter C. Rakowich, ProLogis president and chief operating officer, noted that the acquired buildings are similar to ProLogis' facilities in terms of construction, building size and office finish, with an average age of eight years. More than 50 percent of the total square footage is occupied by existing ProLogis customers, and 40 percent is leased to large enterprises on the company's list of targeted global customers. "At 90.5 percent leased on average, we believe the portfolio, which was well-managed by DP, offers us an even greater opportunity to increase occupancy and stabilized yields over the near term."

Of the included land, approximately 64 percent is located in greater Chicago and Eastern Pennsylvania, both major distribution markets. More than 200 acres is located adjacent to a key intermodal facility outside Chicago operated by the Union Pacific railway company. "Across the board, the DP land bank is extremely well-located for future industrial development," Rakowich said.

"We expect the acquisition of these assets to be additive to 2008 earnings," Schwartz said. "The DP properties also create value over the long term due to their location in markets that we believe will outpace the average national rent growth. Additionally, our ability to integrate this portfolio into our investment management business will enhance returns through active portfolio management and fee income."

About ProLogis

ProLogis is the world's largest owner, manager and developer of distribution facilities, with operations in 103 markets across North America, Europe and Asia. The company has $28.6 billion of assets owned, managed and under development, comprising 436.9 million square feet (40.6 million square meters) in 2,525 properties as of March 31, 2007. ProLogis' customers include manufacturers, retailers, transportation companies, third-party logistics providers and other enterprises with large-scale distribution needs. Headquartered in Denver, Colorado, ProLogis employs more than 1,300 people worldwide.

This announcement does not constitute an offer to sell or the solicitation of an offer to buy any securities of ProLogis North American Properties Fund III and such securities may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements of the Securities Act of 1933.

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 global, 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.