ProLogis Reports 36.5 Percent Year-Over-Year Growth in FFO for 2006
- Record CDFS Development Profits, Improving Operating Fundamentals and Higher FFO From Funds and Joint Ventures Drive Growth -
DENVER, Feb. 6 /PRNewswire-FirstCall/ -- ProLogis (NYSE: PLD), the world's largest owner, manager and developer of distribution facilities, today reported adjusted funds from operations as defined by ProLogis (FFO) for the year ended December 31, 2006, of $3.70 per diluted share, up 36.5 percent from $2.71 in 2005. After $0.01 of merger integration expenses, FFO per diluted share was $3.69 for the year ended December 31, 2006, compared with $2.51 in 2005, which included $0.20 related to merger integration and relocation expenses and cumulative translation losses and impairment charges related to the sale of ProLogis' temperature-controlled business. For the year, net earnings per diluted share were $3.32, compared with $1.76 in 2005. The increase was primarily due to improvement in each of the company's business segments, as well as gains on the sale of assets that are recognized under GAAP but are not included in ProLogis' definition of FFO.
For the fourth quarter ended December 31, 2006, FFO was $1.11 per diluted share. This compares with $0.58 in the fourth quarter of 2005, which was before $0.01 of merger integration charges. Net earnings per diluted share were $1.28 for the fourth quarter of 2006, compared with $0.43 for the same period in 2005.
"This past year was one of significant achievement for ProLogis around the world," said Jeffrey H. Schwartz, chief executive officer. "We delivered strong financial performance by leveraging our global platform, crystallizing value in our property fund business, and maintaining a diversified development pipeline with exceptional margins. In addition, we successfully completed a number of acquisitions and other investments that enhanced our ability to meet the future needs of global customers."
Schwartz noted that growth in world trade continues to drive customer demand across Asia, Europe and North America, resulting in positive net absorption of new development deliveries and improved operating property performance. Rental rates on ProLogis lease turnovers increased by 5.6 percent in the fourth quarter. In the company's same-store pool, net operating income increased 3.1 percent and both average occupancy and rent growth were up 2.6 percent for the full year.
"Overall market dynamics in our industry remain sound," said Walter C. Rakowich, president and chief operating officer of ProLogis. "We are beginning to see the rent growth we have long been anticipating, and we believe we are well positioned to capture a leading share of the opportunity created through continued strong growth in global trade."
Fund Transactions Boost Growth
During the year, ProLogis completed two fund-related transactions that resulted in total FFO of approximately $172 million. In the first quarter, ProLogis purchased its partner's 80% interest in North American Property Funds II, III and IV and subsequently contributed those assets to its open-end North American Industrial Fund, generating FFO of approximately $62.8 million. In the fourth quarter, ProLogis recognized an incentive return of $109.2 million related to the IPO of ProLogis European Properties (Euronext: PEPR).
"These transactions exemplify the strength of ProLogis' property fund strategy, which leverages strong institutional demand for industrial facilities and serves as a powerful growth engine for our company," Rakowich added.
Global Development Pipeline Grows, Supported by Solid Market Fundamentals
During the year, ProLogis began construction of more than $2.5 billion of new development and completed more than $2.2 billion, including development activity within its industrial joint ventures. Projects completed in 2006 were 69 percent leased at year end. The company's Corporate Distribution Facilities Services (CDFS) pipeline stood at $5.3 billion at the end of the year, a 63 percent increase over the prior-year level.
"Given our expanded platform and strong customer relationships, we plan to increase 2007 development starts by 20 to 30 percent," said Ted Antenucci, president - global development. "Leasing of newly developed assets is even stronger than a year ago. This customer demand, coupled with good visibility on development margins and a geographically diverse development pipeline, gives us a high level of confidence in our ability to grow CDFS income in 2007 and beyond."
Antenucci noted that the top 30 logistics markets in North America absorbed nearly 149 million square feet of space during 2006, compared with development deliveries of just over 135 million square feet. In Europe and Asia, demand and supply also remain well balanced, supporting additional development activity.
"Our ability to address global customers' distribution space needs in the world's top logistics markets is unique in the industry," Antenucci said. "During 2006, approximately half of our 27.3 million square feet of new CDFS leases were with repeat customers, including: Schenker in Le Havre, France; Whirlpool in Monterrey, Mexico; Nippon Express in Tokyo and Amazon.com in Washington, DC."
Selected Financial and Operating Information
* Achieved adjusted FFO per share growth of 36.5 percent year over year.
* Improved average year-to-date, same-store net operating income by
3.1 percent (a 3.5 percent increase when straight-lined rents and lease
amortization are excluded) while same-store occupancies increased by
2.6 percent for the year. Same-store rent growth for the year was
2.6 percent.
* Redeployed a total of $2.31 billion of capital through contributions
and dispositions during the year. Of that, $1.58 billion was CDFS,
with an additional $726.6 million in non-CDFS contributions and
dispositions. This included $388.3 million of proceeds from
dispositions of non-core assets remaining from the Catellus merger.
* Realized FFO from CDFS transactions of $326.9 million for the year,
including recognition of previously deferred proceeds from the first
quarter contribution of properties from North American Property Funds
II, III and IV to ProLogis North American Industrial Fund, up from
$233.3 million in 2005. FFO amounts do not include unrecognized
deferred gains of $65.5 million related to CDFS development
contributions for 2006 and $52.8 million for 2005. Post-deferral,
post-tax CDFS margins were 24.3% for dispositions completed during the
year.
* Recognized income (non-FFO) from non-CDFS dispositions and
contributions of $185.2 million for the year.
* Started new developments with total expected investment of
$792.4 million during the quarter and $2.54 billion for the year,
including industrial joint venture development. For the year, starts
include $96.6 million of retail development.
* Increased ProLogis' share of FFO from property funds to $127.9 million
for the year, including earnings from the North American property fund
transaction noted above, up 32.8 percent from $96.3 million in the
prior year.
* Grew fee income from property funds for the year to $211.9 million,
including the incentive fees from the PEPR and North American fund
transactions noted above, up from $66.9 million in 2005.
* Achieved combined development management fees, FFO from CDFS joint
ventures and other unconsolidated investees and interest income on
long-term notes receivable of $112.0 million for the year.
* Increased total assets owned and under management to $26.7 billion, up
from $22.1 billion at December 31, 2005, a 20.8 percent increase.
Copies of ProLogis' fourth quarter 2006 supplemental information will be available from the company's website at http://ir.prologis.com or by request at 800-820-0181. The supplemental information also is available on the SEC's website at http://www.sec.gov. The related conference call will be available via a live webcast on the company's website at http://ir.prologis.com at 10:00 am Eastern Time on Tuesday, February 6, 2007. A replay of the webcast will be available on the company's website until February 20, 2007. Additionally, a podcast of the company's conference call will be available on the company's website as well as on the REITCafe website located at http://www.REITcafe.com.
About ProLogis
ProLogis is the world's largest owner, manager and developer of distribution facilities, with operations in 80 markets across North America, Europe and Asia. The company has $26.7 billion of assets owned, managed and under development, comprising 422.0 million square feet (39.2 million square meters) in 2,466 properties as of December 31, 2006. 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 1,250 people worldwide.
The statements above that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking 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, they involve uncertainties that could significantly impact ProLogis' financial results. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," variations of such words and similar expressions are intended to identify such forward-looking statements, which generally are not historical in nature. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future -- including statements relating to rent and occupancy growth, development activity and changes in sales or contribution volume of developed properties, general conditions in the geographic areas where we operate and the availability of capital in existing or new property funds -- are forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be attained and therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statement. Some of the factors that may affect outcomes and results include, but are not limited to: (i) national, international, regional and local economic climates, (ii) changes in financial markets, interest rates and foreign currency exchange rates, (iii) increased or unanticipated competition for our properties, (iv) risks associated with acquisition, (v) maintenance of real estate investment trust ("REIT") status, (vi) availability of financing and capital, (vii) changes in demand for developed properties, and (viii) those additional factors discussed under "Item 1A - Risk Factors" in ProLogis' Annual Report on Form 10-K for the year ended December 31, 2005.
ProLogis
Fourth Quarter 2006
Unaudited Financial Results
Selected Financial Information
(in thousands, except per share amounts and percentages)
Three Months Ended
December 31,
2006 2005(1) % Change
Net earnings attributable to common
shares:
Net earnings attributable to
common shares $331,090 $109,102 203.5%
Net earnings per diluted share
attributable to common shares $1.28 $0.43 197.7%
FFO and FFO, as adjusted (see
definition of FFO)
FFO attributable to common shares $288,885 $142,868 102.2%
Add back:
Merger integration expenses(3) -- 3,864
Relocation expenses(4) -- 402
Cumulative translation losses
and impairment charges
related to temperature-
controlled distribution
assets(5) -- --
FFO attributable to common shares,
as adjusted $288,885 $147,134 96.3%
FFO per diluted share attributable
to common shares $1.11 $0.57 94.7%
Add back:
Merger integration expenses(3) -- 0.01
Relocation expenses (4) -- --
Cumulative translation losses
and impairment charges
related to temperature-
controlled distribution
assets(5) -- --
FFO per diluted share attributable
to common shares, as adjusted $1.11 $0.58 91.4%
EBITDA:
EBITDA $407,786 $245,595 66.0%
Distributions:
Actual distributions per common
share(6) $0.40 $0.37 8.1%
Twelve Months Ended
December 31,
2006(2) 2005(1) % Change
Net earnings attributable to common
shares:
Net earnings attributable to common
shares $848,951 $370,747 129.0%
Net earnings per diluted share
attributable to common shares $3.32 $1.76 88.6%
FFO and FFO, as adjusted (see
definition of FFO)
FFO attributable to common shares $945,148 $530,472 78.2%
Add back:
Merger integration expenses(3) 2,630 12,152
Relocation expenses(4) 93 4,451
Cumulative translation losses
and impairment charges related
to temperature-controlled
distribution assets(5) -- 26,864
FFO attributable to common shares,
as adjusted $947,871 $573,939 65.2%
FFO per diluted share attributable
to common shares $3.69 $2.51 47.0%
Add back:
Merger integration expenses(3) 0.01 0.05
Relocation expenses(4) -- 0.02
Cumulative translation losses
and impairment charges related
to temperature-controlled
distribution assets(5) -- 0.13
FFO per diluted share attributable
to common shares, as adjusted $3.70 $2.71 36.5%
EBITDA:
EBITDA $1,424,836 $889,239 60.2%
Distributions:
Actual distributions per common
share (6) $1.60 $1.48 8.1%
See our definition of FFO and our definition of EBITDA.
Footnotes follow Consolidated Balance Sheets.
ProLogis
Fourth Quarter 2006
Unaudited Financial Results
Consolidated Statements of Earnings
(in thousands)
Three Months Ended Twelve Months Ended
December 31, December 31,
2006 2005(1) 2006(2) 2005(1)
Revenues:
Rental income(8)(9)(10) $245,278 $200,143 $927,719 $600,869
CDFS disposition proceeds
(11)(12)(13)(15) 236,137 184,347 1,286,841 1,140,457
Property management and other
fees and incentives(14)(15) 132,611 16,608 211,929 66,934
Development management and
other income(11) 10,895 13,725 37,420 25,464
Total revenues 624,921 414,823 2,463,909 1,833,724
Expenses:
Rental expenses(8)(10) 64,197 53,729 239,545 161,680
Cost of CDFS dispositions(11) 172,872 154,827 993,926 917,782
General and administrative 46,527 34,433 156,889 107,164
Depreciation and
amortization(10) 81,122 65,186 293,027 191,945
Merger integration expenses(3) -- 3,864 2,630 12,152
Relocation expenses(4) -- 402 93 4,451
Other expenses 4,089 2,321 13,013 8,633
Total expenses 368,807 314,762 1,699,123 1,403,807
Operating income 256,114 100,061 764,786 429,917
Other income (expense):
Earnings from unconsolidated
property funds(15) 14,426 11,086 93,055 46,078
Earnings from CDFS joint
ventures and other
unconsolidated
investees(7)(11) 3,692 5,753 50,703 6,421
Interest expense(10)(16) (77,470) (63,759) (294,403) (177,562)
Interest income on long-term
notes receivable(11) 3,494 5,940 16,730 6,781
Interest and other income, net 7,652 3,226 18,248 10,724
Total other income
(expense) (48,206) (37,754) (115,667) (107,558)
Earnings before minority
interest 207,908 62,307 649,119 322,359
Minority interest (916) (1,314) (3,457) (5,243)
Earnings before certain net
gains 206,992 60,993 645,662 317,116
Gains recognized on
dispositions of certain
non-CDFS business assets(17) 67,761 -- 81,470 --
Foreign currency exchange
gains, net(18) 4,637 7,656 21,086 15,979
Earnings before income taxes 279,390 68,649 748,218 333,095
Income taxes(7)(14)(19):
Current income tax expense 8,337 7,662 84,250 14,847
Deferred income tax (benefit)
expense (36,942) 3,855 (53,722) 12,045
Total income taxes (28,605) 11,517 30,528 26,892
Earnings from continuing
operations 307,995 57,132 717,690 306,203
Discontinued operations(10):
Income attributable to
disposed properties and
assets held for sale 2,421 6,487 19,434 18,050
Losses related to temperature
controlled distribution
assets(5) -- -- -- (25,150)
Gains recognized on
dispositions:
Non-CDFS business assets 23,692 47,604 103,729 86,444
CDFS business assets 3,336 4,233 33,514 10,616
Total discontinued
operations 29,449 58,324 156,677 89,960
Net earnings 337,444 115,456 874,367 396,163
Less preferred share dividends 6,354 6,354 25,416 25,416
Net earnings attributable to
common shares $331,090 $109,102 $848,951 $370,747
Footnotes follow Consolidated Balance Sheets.
ProLogis
Fourth Quarter 2006
Unaudited Financial Results
Consolidated Statements of Earnings
(Continued)
(in thousands, except per share amounts)
Three Months Twelve Months
Ended Ended
December 31, December 31,
2006 2005(1) 2006(2) 2005(1)
Weighted average common shares
outstanding - Basic 249,021 243,601 245,952 203,337
Weighted average common shares
outstanding - Diluted 260,218 254,010 256,852 213,713
Net earnings per share attributable to
common shares - Basic:
Continuing operations $1.21 $0.21 $2.81 $1.38
Discontinued operations 0.12 0.24 0.64 0.44
Net earnings per share
attributable to common
shares - Basic $1.33 $0.45 $3.45 $1.82
Net earnings per share attributable to
common shares - Diluted:
Continuing operations $1.17 $0.20 $2.71 $1.34
Discontinued operations 0.11 0.23 0.61 0.42
Net earnings per share
attributable to common
shares - Diluted $1.28 $0.43 $3.32 $1.76
Calculation of Net Earnings per Share Attributable to Common Shares - Diluted
(in thousands, except per share amounts)
Three Months Ended Twelve Months Ended
December 31, December 31,
2006 2005(1) 2006(2) 2005(1)
Net earnings attributable to
common shares - Basic $331,090 $109,102 $848,951 $370,747
Minority interest(a) 916 1,314 3,457 5,243
Adjusted net earnings attributable
to common shares - Diluted $332,006 $110,416 $852,408 $375,990
Weighted average common shares
outstanding - Basic 249,021 243,601 245,952 203,337
Incremental weighted average
effect of conversion of limited
partnership units 5,139 5,539 5,198 5,540
Incremental weighted average
effect of potentially dilutive
instruments(a) 6,058 4,870 5,702 4,836
Weighted average common shares
outstanding - Diluted 260,218 254,010 256,852 213,713
Net earnings per share
attributable to common
shares - Diluted $1.28 $0.43 $3.32 $1.76
(a) Total weighted average potentially dilutive instruments outstanding
were 10,679 and 10,442 for the three months ended December 31, 2006
and 2005, respectively, and 10,909 and 10,783 for the twelve months
ended December 31, 2006 and 2005, respectively.
Footnotes follow Consolidated Balance Sheets.
ProLogis
Fourth Quarter 2006
Unaudited Financial Results
Consolidated Statements of Funds From Operations (FFO)
(in thousands, except per share amounts)
Three Months Ended Twelve Months Ended
December 31, December 31,
2006 2005(1) 2006(2) 2005(1)
Revenues:
Rental income(8) $249,706 $222,231 $973,062 $649,530
CDFS disposition proceeds
(10)(11)(12)(13)(15) 259,024 241,650 1,532,807 1,240,950
Property management and other
fees and incentives(14)(15) 132,611 16,608 211,929 66,934
Development management and
other income(11) 10,895 13,725 37,420 25,464
Total revenues 652,236 494,214 2,755,218 1,982,878
Expenses:
Rental expenses(8) 66,008 64,133 259,265 179,815
Cost of CDFS
dispositions(10)(11) 192,423 207,897 1,205,912 1,007,659
General and administrative 46,527 34,433 156,889 107,164
Depreciation of corporate
assets 2,310 2,047 9,326 7,153
Merger integration expenses(3) -- 3,864 2,630 12,152
Relocation expenses(4) -- 402 93 4,451
Other expenses 4,089 2,321 13,013 8,633
Total expenses 311,357 315,097 1,647,128 1,327,027
340,879 179,117 1,108,090 655,851
Other income (expense):
FFO from unconsolidated
property funds(15) 29,438 26,710 127,905 96,261
FFO from CDFS joint ventures
and other unconsolidated
investees(7)(11) 6,302 6,432 57,853 8,449
Interest expense (77,470) (64,567) (295,277) (178,639)
Interest income on long-term
notes receivable(11) 3,494 5,940 16,730 6,781
Interest and other income, net 7,652 3,226 18,248 10,724
Foreign currency exchange
(expenses/losses) gains,
net(18) (5,803) 1,340 1,531 1,914
Current income tax
expense(7)(19) (8,337) (7,662) (61,059) (14,847)
Losses related to temperature
controlled distribution
assets(5) -- -- -- (25,363)
Total other income
(expense) (44,724) (28,581) (134,069) (94,720)
FFO 296,155 150,536 974,021 561,131
Less preferred share dividends 6,354 6,354 25,416 25,416
Less minority interest 916 1,314 3,457 5,243
FFO attributable to common
shares $288,885 $142,868 $945,148 $530,472
Weighted average common shares
outstanding - Basic 249,021 243,601 245,952 203,337
Weighted average common shares
outstanding - Diluted 260,218 254,010 256,852 213,713
FFO per share attributable to
common shares:
Basic $1.16 $0.59 $3.84 $2.61
Diluted $1.11 $0.57 $3.69 $2.51
See Consolidated Statements of Earnings, our definition of FFO and the
Reconciliations of Net Earnings to FFO.
Footnotes follow Consolidated Balance Sheets.
ProLogis
Fourth Quarter 2006
Unaudited Financial Results
Consolidated Statements of FFO (Continued)
Calculation of FFO per Share Attributable to Common Shares - Diluted
(in thousands, except per share amounts)
Three Months Ended Twelve Months Ended
December 31, December 31,
2006 2005(1) 2006(2) 2005(1)
FFO attributable to common
shares - Basic $288,885 $142,868 $945,148 $530,472
Minority interest 916 1,314 3,457 5,243
FFO attributable to common
shares - Diluted $289,801 $144,182 $948,605 $535,715
Merger integration expenses(3) -- 3,864 2,630 12,152
Relocation expenses(4) -- 402 93 4,451
Cumulative translation losses and
impairment charges related to
temperature-controlled
distribution assets(5) -- -- -- 26,864
FFO attributable to common shares,
as adjusted - Diluted $289,801 $148,448 $951,328 $579,182
Weighted average common shares
outstanding - Basic 249,021 243,601 245,952 203,337
Incremental weighted average
effect of conversion of limited
partnership units 5,139 5,539 5,198 5,540
Incremental weighted average
effect of potentially dilutive
instruments 6,058 4,870 5,702 4,836
Weighted average common shares
outstanding - Diluted 260,218 254,010 256,852 213,713
FFO per share attributable to
common shares - Diluted $1.11 $0.57 $3.69 $2.51
FFO per share attributable to
common shares, as adjusted -
Diluted $1.11 $0.58 $3.70 $2.71
See Consolidated Statements of Earnings and the Reconciliations of Net
Earnings to FFO.
Footnotes follow Consolidated Balance Sheets.
Definition of FFO
FFO is a non-Generally Accepted Accounting Principles (GAAP) measure that
is commonly used in the real estate industry. The most directly comparable
GAAP measure to FFO is net earnings. Although the National Association of
Real Estate Investment Trusts (NAREIT) has published a definition of FFO,
modifications to the NAREIT calculation of FFO are common among REITs, as
companies seek to provide financial measures that meaningfully reflect
their business. FFO, as we define it, is presented as a supplemental
financial measure. FFO is not used by us as, nor should it be considered
to be, an alternative to net earnings computed under GAAP as an indicator
of our operating performance or as an alternative to cash from operating
activities computed under GAAP as an indicator of our ability to fund our
cash needs.
FFO is not meant to represent a comprehensive system of financial
reporting and does not present, nor do we intend it to present, a complete
picture of our financial condition and operating performance. We believe
that GAAP net earnings remains the primary measure of performance and that
FFO is only meaningful when it is used in conjunction with GAAP net
earnings. Further, we believe that our consolidated financial statements,
prepared in accordance with GAAP, provide the most meaningful picture of
our financial condition and our operating performance.
NAREIT's FFO measure adjusts GAAP net earnings to exclude historical cost
depreciation and gains and losses from the sales of previously depreciated
properties. We agree that these two NAREIT adjustments are useful to
investors for the following reasons:
(a) historical cost accounting for real estate assets in accordance with
GAAP assumes, through depreciation charges, that the value of real
estate assets diminishes predictably over time. NAREIT stated in its
White Paper on FFO "since real estate asset values have historically
risen or fallen with market conditions, many industry investors have
considered presentations of operating results for real estate
companies that use historical cost accounting to be insufficient by
themselves." Consequently, NAREIT's definition of FFO reflects the
fact that real estate, as an asset class, generally appreciates over
time and depreciation charges required by GAAP do not reflect the
underlying economic realities.
(b) REITs were created as a legal form of organization in order to
encourage public ownership of real estate as an asset class through
investment in firms that were in the business of long-term ownership
and management of real estate. The exclusion, in NAREIT's definition
of FFO, of gains and losses from the sales of previously depreciated
operating real estate assets allows investors and analysts to readily
identify the operating results of the long-term assets that form the
core of a REIT's activities and assists in comparing those operating
results between periods. We include the gains and losses from
dispositions of properties acquired or developed in our CDFS business
segment and our proportionate share of the gains and losses from
dispositions recognized by the property funds in our definition of
FFO.
At the same time that NAREIT created and defined its FFO concept for the
REIT industry, it also recognized that "management of each of its member
companies has the responsibility and authority to publish financial
information that it regards as useful to the financial community." We
believe that financial analysts, potential investors and shareholders who
review our operating results are best served by a defined FFO measure that
includes other adjustments to GAAP net earnings in addition to those
included in the NAREIT defined measure of FFO.
Our defined FFO measure excludes the following items from GAAP net
earnings that are not excluded in the NAREIT defined FFO measure:
(i) deferred income tax benefits and deferred income tax expenses
recognized by our subsidiaries;
(ii) current income tax expense related to acquired tax liabilities that
were recorded as deferred tax liabilities in an acquisition, to the
extent the expense is offset with a deferred income tax benefit in
GAAP earnings that is excluded from our defined FFO measure;
(iii) certain foreign currency exchange gains and losses resulting from
certain debt transactions between us and our foreign consolidated
subsidiaries and our foreign unconsolidated investees;
(iv) foreign currency exchange gains and losses from the remeasurement
(based on current foreign currency exchange rates) of certain third
party debt of our foreign consolidated subsidiaries and our foreign
unconsolidated investees; and
(v) mark-to-market adjustments associated with derivative financial
instruments utilized to manage our foreign currency risks.
FFO of our unconsolidated investees is calculated on the same basis.
The items that we exclude from GAAP net earnings, while not infrequent or
unusual, are subject to significant fluctuations from period to period
that cause both positive and negative effects on our results of
operations, in inconsistent and unpredictable directions. Most
importantly, the economics underlying the items that we exclude from GAAP
net earnings are not the primary drivers in management's decision-making
process and capital investment decisions. Period to period fluctuations
in these items can be driven by accounting for short-term factors that are
not relevant to long-term investment decisions, long-term capital
structures or to long-term tax planning and tax structuring decisions.
Accordingly, we believe that investors are best served if the information
that is made available to them allows them to align their analysis and
evaluation of our operating results along the same lines that our
management uses in planning and executing our business strategy.
Real estate is a capital-intensive business. Investors' analyses of the
performance of real estate companies tend to be centered on understanding
the asset value created by real estate investment decisions and
understanding current operating returns that are being generated by those
same investment decisions. The adjustments to GAAP net earnings that are
included in arriving at our FFO measure are helpful to management in
making real estate investment decisions and evaluating our current
operating performance. We believe that these adjustments are also helpful
to industry analysts, potential investors and shareholders in their
understanding and evaluation of our performance on the key measures of net
asset value and current operating returns generated on real estate
investments.
While we believe that our defined FFO measure is an important supplemental
measure, neither NAREIT's nor our measure of FFO should be used alone
because they exclude significant economic components of GAAP net earnings
and are, therefore, limited as an analytical tool. Some of the
limitations are:
--The current income tax expenses that are excluded from our defined FFO
measure represent taxes that are payable.
--Depreciation and amortization of real estate assets are economic costs
that are excluded from FFO. FFO is limited as it does not reflect the
cash requirements that may be necessary for future replacements of the
real estate assets. Further, the amortization of capital expenditures and
leasing costs necessary to maintain the operating performance of
distribution properties are not reflected in FFO.
--Gains or losses from property dispositions represent changes in the
value of the disposed properties. FFO, by excluding these gains and
losses, does not capture realized changes in the value of disposed
properties arising from changes in market conditions.
--The deferred income tax benefits and expenses that are excluded from our
defined FFO measure result from the creation of a deferred income tax
asset or liability that may have to be settled at some future point. Our
defined FFO measure does not currently reflect any income or expense that
may result from such settlement.
--The foreign currency exchange gains and losses that are excluded from
our defined FFO measure are generally recognized based on movements in
foreign currency exchange rates through a specific point in time. The
ultimate settlement of our foreign currency-denominated net assets is
indefinite as to timing and amount. Our defined FFO measure is limited in
that it does not reflect the current period changes in these net assets
that result from periodic foreign currency exchange rate movements.
We compensate for these limitations by using our FFO measure only in
conjunction with GAAP net earnings. To further compensate, we always
reconcile our defined FFO measure to GAAP net earnings in our financial
reports. Additionally, we provide investors with our complete financial
statements prepared under GAAP, our definition of FFO, which includes a
discussion of the limitations of using our non-GAAP measure, and a
reconciliation of our GAAP measure (net earnings) to our non-GAAP measure
(FFO, as we define it) so that investors can appropriately incorporate
this measure and its limitations into their analyses.
ProLogis
Fourth Quarter 2006
Unaudited Financial Results
Reconciliations of Net Earnings to FFO
(in thousands)
Three Months Ended Twelve Months Ended
December 31, December 31,
2006 2005(1) 2006(2) 2005(1)
Reconciliation of net
earnings to FFO:
Net earnings attributable to
common shares $331,090 $109,102 $848,951 $370,747
Add (deduct) NAREIT defined
adjustments:
Real estate related
depreciation and
amortization 78,812 63,139 283,701 184,792
Additional CDFS proceeds
recognized(15) -- -- 466 --
Gains recognized on
dispositions of certain
non-CDFS business assets(17) (67,761) -- (81,470) --
Reconciling items attributable
to discontinued operations(10):
Gains recognized on
dispositions of non-CDFS
business assets (23,692) (47,604) (103,729) (86,444)
Real estate related
depreciation and
amortization 196 4,389 5,315 11,399
Totals discontinued
operations (23,496) (43,215) (98,414) (75,045)
Our share of reconciling items
from unconsolidated
investees(20):
Real estate related
depreciation and
amortization 20,317 17,819 68,151 57,766
Gains on dispositions of
non-CDFS business assets (371) (309) (7,124) (1,114)
Other amortization
items(15)(21) (1,801) (1,073) (16,000) (5,134)
Totals unconsolidated
investees 18,145 16,437 45,027 51,518
Totals NAREIT defined
adjustments 5,700 36,361 149,310 161,265
Subtotals-NAREIT
defined FFO 336,790 145,463 998,261 532,012
Add (deduct) our defined
adjustments:
Foreign currency exchange
gains, net(18) (10,440) (6,316) (19,555) (14,065)
Current income tax expense(19) -- -- 23,191 --
Deferred income tax (benefit)
expense(19) (36,942) 3,855 (53,722) 12,045
Reconciling items attributable
to discontinued operations:
Assets disposed of - deferred
income tax benefit(5) -- -- -- (213)
Our share of reconciling items
from unconsolidated
investees(20):
Foreign currency exchange
expenses/losses
(gains), net(18) (175) 561 (45) 298
Deferred income tax (benefit)
expense (348) (695) (2,982) 395
Totals unconsolidated
investees (523) (134) (3,027) 693
Totals our defined
adjustments (47,905) (2,595) (53,113) (1,540)
FFO attributable to
common shares $288,885 $142,868 $945,148 $530,472
See Consolidated Statements of Earnings, Consolidated Statements of FFO
and the definition of FFO.
Footnotes follow Consolidated Balance Sheets.
ProLogis
Fourth Quarter 2006
Unaudited Financial Results
Reconciliations of Net Earnings to EBITDA
(in thousands)
Three Months Ended Twelve Months Ended
December 31, December 31,
2006 2005(1) 2006(2) 2005(1)
Reconciliation of net earnings
to EBITDA:
Net earnings attributable to
common shares $331,090 $109,102 $848,951 $370,747
Add (deduct):
NAREIT defined adjustments to
compute FFO 5,700 36,361 149,310 161,265
Our defined adjustments to
compute FFO (47,905) (2,595) (53,113) (1,540)
Add:
Interest expense 77,470 63,759 294,403 177,562
Depreciation of corporate
assets, including amounts
reported in relocation
expense 2,310 2,239 9,326 8,187
Current income tax expense
included in FFO(19) 8,337 7,662 61,059 14,847
Adjustments to CDFS gains
on dispositions for
interest capitalized 3,164 4,250 28,591 32,735
Preferred share dividends 6,354 6,354 25,416 25,416
Reconciling items
attributable to
discontinued operations -- 808 874 28,113
Impairment charges 1,947 -- 6,121 180
Share of reconciling items
from unconsolidated
investees(20) 19,319 17,655 53,898 71,727
EBITDA $407,786 $245,595 $1,424,836 $889,239
See Consolidated Statements of Earnings and the Reconciliations of Net
Earnings to FFO.
Footnotes follow Consolidated Balance Sheets.
Definition of EBITDA (Earnings before Interest, Taxes, Depreciation and
Amortization):
We believe that EBITDA is a useful supplemental measure, although it does
not represent net earnings or cash from operating activities that are
computed in accordance with GAAP and is not indicative of cash available
to fund cash needs, which we present in our Consolidated Statements of
Cash Flows and include in our Annual Reports on Form 10-K and Quarterly
Reports on Form 10-Q that are filed with the Securities and Exchange
Commission. Accordingly, the EBITDA measure presented should not be
considered as an alternative to net earnings as an indicator of our
operating performance, or as an alternative to cash flows from operating,
investing, or financing activities as a measure of liquidity. The EBITDA
measure presented may not be comparable to similarly titled measures of
other REITs.
EBITDA generally represents net earnings computed in accordance with GAAP
adjusted to exclude:
(i) interest expense;
(ii) income tax expenses and benefits; and
(iii) depreciation and amortization expenses.
In our computation of EBITDA the following items are also excluded:
(i) preferred dividends and charges related to the redemption of
preferred shares;
(ii) the foreign currency exchange gains and losses that are also
excluded in our definition of FFO;
(iii) impairment charges; and
(iv) gains and losses from the dispositions of non-CDFS business
assets.
In addition, we adjust the gains and losses from the contributions and
sales of developed properties recognized as CDFS income to reflect these
gains and losses as if no interest cost had been capitalized during the
development of the properties (i.e. the gains are larger since
capitalized interest is not included in the basis of the assets
contributed and sold). EBITDA of our unconsolidated investees is
calculated on the same basis.
ProLogis
Fourth Quarter 2006
Unaudited Financial Results
Consolidated Balance Sheets
(in thousands)
December 31, December 31,
2006 2005(1)
Assets:
Investments in real estate assets:
Industrial operating properties $10,423,249 $8,730,906
Retail operating properties 305,188 288,253
Land subject to ground leases
and other 472,412 792,668
Properties under development
(including cost of land) 964,842 884,345
Land held for development 1,397,081 1,045,042
Other investments 391,227 133,916
13,953,999 11,875,130
Less accumulated depreciation 1,280,206 1,118,547
Net investments in real
estate assets 12,673,793 10,756,583
Investments in and advances to
unconsolidated investees:
Property funds(14)(15)(22) 981,840 755,320
CDFS joint ventures and other
unconsolidated investees(7) 317,857 294,423
Total investments in and
advances to unconsolidated
investees 1,299,697 1,049,743
Cash and cash equivalents 475,791 203,800
Accounts and notes receivable 439,791 327,214
Other assets 957,295 788,840
Discontinued operations-assets held
for sale(10) 57,158 --
Total assets $15,903,525 $13,126,180
Liabilities and Shareholders' Equity:
Liabilities:
Lines of credit and short-term
borrowings $2,462,796 $2,240,054
Senior notes 4,445,092 2,759,675
Secured debt and assessment bonds 1,478,998 1,678,151
Accounts payable and accrued expenses 518,651 344,423
Other liabilities 546,129 557,210
Discontinued operations-assets
held for sale(10) 1,012 --
Total liabilities 9,452,678 7,579,513
Minority interest 52,268 58,644
Shareholders' equity:
Series C preferred shares at
stated liquidation preference
of $50.00 per share 100,000 100,000
Series F preferred shares at
stated liquidation preference
of $25.00 per share 125,000 125,000
Series G preferred shares at
stated liquidation preference
of $25.00 per share 125,000 125,000
Common shares at $.01 par value
per share 2,509 2,438
Additional paid-in capital 6,000,119 5,606,017
Accumulated other comprehensive
income 216,922 149,586
Distributions in excess of net
earnings (170,971) (620,018)
Total shareholders' equity 6,398,579 5,488,023
Total liabilities and
shareholders' equity $15,903,525 $13,126,180
Footnotes follow Consolidated Balance Sheets.
ProLogis
Fourth Quarter 2006
Unaudited Financial Results
Notes to Consolidated Financial Statements
(1) Certain 2005 amounts included in this Supplemental Information
package have been reclassified to conform to the 2006 presentation.
(2) On September 15, 2005, we completed a merger with Catellus
Development Corporation ("Catellus Merger"). This transaction was
accounted for using the purchase method of accounting and,
accordingly, the purchase price of $5.3 billion has been allocated to
the net assets acquired based on their estimated fair values at the
date of acquisition.
(3) Represents costs incurred related to the Catellus Merger. These
costs included merger integration and employee transition costs as
well as severance costs for certain of our employees whose
responsibilities became redundant after the Catellus Merger.
(4) We completed the relocation of our information technology and
corporate accounting functions from El Paso, Texas to Denver,
Colorado in the first quarter of 2005. We moved our corporate
headquarters, which is located in Denver, to a recently constructed
building in February 2006. Relocation costs included (i) employee
termination costs; (ii) costs associated with the hiring and training
of new personnel and other costs including travel, moving and
temporary facility costs; and (iii) accelerated depreciation
associated with non-real estate assets whose useful life was
shortened due to the relocations.
(5) In July 2005, we sold our temperature-controlled distribution
operations in France and accordingly, the results of operations for
2005 are included in discontinued operations. Due to the sale and
liquidation of the business, we recognized impairment charges and
cumulative translation losses of $26.9 million in 2005.
(6) The annual distribution rate for 2006 was $1.60 per common share. In
December 2006, the Board of Trustees approved an increase in the
annual distribution to $1.84 per common share. The amount of the
common share distribution is declared quarterly and may be adjusted
at the discretion of the Board of Trustees.
(7) We have varying ownership interests in unconsolidated investees. The
investees primarily engage in activities similar to our corporate
distribution facilities services business ("CDFS business") segment
activities (as discussed in note 11) and own operating properties in
China, Europe and North America. We refer to the joint ventures
engaged in industrial property development as industrial CDFS joint
ventures. In addition, certain of the CDFS joint ventures engage in
land, retail and commercial development and operation and we refer to
these joint ventures as non-industrial CDFS joint ventures. We have
ownership interests in all of the CDFS joint ventures ranging from
30% to 50%. We also have varying ownership interests in other
unconsolidated investees that primarily own and operate industrial,
office and hotel properties.
During the second and third quarters of 2006, we recognized an
aggregate of $35.0 million, representing our proportionate share of
the net earnings of a CDFS joint venture, "LAAFB JV". The LAAFB JV
was formed to redevelop a U.S. Air Force base in Los Angeles,
California in exchange for land parcels and certain rights to receive
tax increment financing ("TIF") proceeds over a period of time. As
our investment in LAAFB JV is held in a taxable subsidiary that was
acquired in the Catellus Merger, we also recognized the associated
current income tax expense of $27.0 million and a deferred tax
benefit of $12.4 million during these same periods. See note 19 for
further explanation of our taxes. The operations of the LAAFB JV are
now substantially complete.
(8) Represents rental income earned and rental expenses incurred while we
own a property directly. Under the terms of the respective lease
agreements, some or all of our rental expenses are recovered from our
customers. Amounts recovered are included as a component of rental
income. Rental expenses also include direct expenses associated with
our management of the property funds' operations. For properties that
have been contributed to property funds, we recognize our share of
the total operations of the property funds under the equity method
and present these amounts below operating income in our Consolidated
Statements of Earnings and FFO.
(9) Rental income includes the following (in thousands):
Three Months Ended Twelve Months Ended
December 31, December 31,
2006 2005(1) 2006(2) 2005(1)
Rental income $184,735 $155,799 $707,808 $473,671
Rental expense
recoveries 49,808 38,229 183,493 115,787
Straight-lined
rents 10,735 6,115 36,418 11,411
$245,278 $200,143 $927,719 $600,869
(10) Properties disposed of to third parties are considered to be
discontinued operations unless such properties were developed under a
pre-sale agreement. During 2006, we disposed of 89 such properties to
third parties, 15 of which were CDFS business assets.
The operations of the properties disposed of to third parties during
2006 and the aggregate net gains recognized upon their dispositions
are presented as discontinued operations in our Consolidated
Statements of Earnings for all periods presented. In addition, the
operations of the 72 properties disposed of during 2005 (eight of
which were CDFS business assets) are presented as discontinued
operations. As of December 31, 2006, we had eight properties that
were classified as held for sale and accordingly, the operations of
these properties are included in discontinued operations and the
respective assets and liabilities are presented separately in our
Consolidated Balance Sheet. Interest expense included in
discontinued operations represents interest directly attributable to
these properties.
The components that are presented as discontinued operations
(excluding the net gains or losses recognized upon disposition) are
as follows (in thousands):
Three Months Twelve Months
Ended Ended
December 31, December 31,
2006 2005(1) 2006(2) 2005(1)
Rental income $4,428 $22,088 $45,343 $48,661
Rental expenses (1,811) (10,404) (19,720) (18,135)
Depreciation and amortization (196) (4,389) (5,315) (11,399)
Interest expense -- (808) (874) (1,077)
$2,421 $6,487 $19,434 $18,050
For purposes of our Consolidated Statements of FFO, we do not
segregate discontinued operations. In addition, in the calculation
of FFO we include the CDFS disposition proceeds and the cost of CDFS
dispositions for all CDFS properties disposed of during the period,
including those classified as discontinued operations.
(11) The CDFS business segment primarily represents the development of
properties, the acquisition of properties with the intent to
rehabilitate and/or reposition the property and other land and
commercial development activities. It is generally our intent to
contribute our CDFS properties to a property fund in which we have an
ownership interest and act as manager or sell the properties to a
third party. Additionally, we (i) earn fees for development
activities provided on behalf of customers or third parties; (ii)
recognize interest income on notes receivable related to previous
asset dispositions; (iii) recognize gains or losses on the
disposition of land parcels when our development plans no longer
include these parcels; and (iv) recognize our proportionate share of
the earnings or losses of CDFS joint ventures. We include the income
generated in the CDFS business segment in our computation of FFO and
EBITDA.
(12) When we contribute properties to an entity in which we have an
ownership interest, we do not recognize a portion of the proceeds in
our computation of the gain resulting from the contribution. The
amount of the proceeds that we defer is based on our continuing
ownership interest in the contributed property that arises due to our
ownership interest in the entity acquiring the property. We defer
this portion of the proceeds by recognizing a reduction to our
investment in the applicable unconsolidated investee. We adjust our
proportionate share of the earnings or losses that we recognize under
the equity method in later periods to reflect the entity's
depreciation expense as if the depreciation expense was computed on
our lower basis in the contributed real estate assets rather than on
the entity's basis in the contributed real estate assets. If a loss
is recognized when a property is contributed, the entire loss is
recognized. See note 13 for the amount of cumulative gross proceeds
that have not been recognized as of December 31, 2006.
When a property that we originally contributed to an unconsolidated
investee is disposed of to a third party, we recognize a gain during
the period that the disposition occurs related to the proceeds we had
previously deferred, in addition to our proportionate share of the
gain or loss recognized by the entity. Further, during periods when
our ownership interest in a property fund decreases, we recognize
gains to the extent that proceeds were previously deferred to
coincide with our new ownership interest in the property fund.
(13) As of December 31, 2006, the cumulative gross proceeds that have not
been recognized in computing the gains from our contributions of
properties to unconsolidated investees (before subsequent
amortization) are presented below (in thousands). See note 12.
Gross Proceeds Not Recognized
CDFS Non-CDFS
Transactions Transactions Totals
ProLogis European Properties $123,609 $9,338 $132,947
ProLogis California LLC 5,394 26,129 31,523
ProLogis North American
Properties Fund I 8,271 862 9,133
ProLogis North American
Properties Fund V 25,359 2,939 28,298
ProLogis North American
Properties Funds VI-X 2,766 -- 2,766
ProLogis North American
Industrial Fund 32,506 16,870 49,376
ProLogis Japan
Properties Fund I 44,878 -- 44,878
ProLogis Japan
Properties Fund II 22,939 -- 22,939
CDFS joint ventures 4,590 -- 4,590
Totals $270,312 $56,138 $326,450
(14) In September 2006, ProLogis European Properties ("PEPR") completed an
initial public offering ("IPO") on an Amsterdam stock exchange in
which the selling unitholders offered 49.8 million ordinary units. As
the manager of the property fund, we received an initial incentive
allocation of 53.5 million Euros paid in additional ordinary units
from the pre-IPO unitholders based on the internal rate of return
that such unitholders earned during their pre-IPO holding period.
The incentive return was adjusted through a cash settlement in
October based on the average closing price of the ordinary units
during the 30-day, post-IPO period. In the fourth quarter of 2006,
we recognized the incentive return of $109.2 million, as income,
which is included in Property Management and Other Fees and
Incentives in our Statements of Earnings and FFO. In addition, we
recognized a deferred tax benefit of $36.8 million due to the
reversal of a tax indemnification liability as we no longer have an
obligation to the pre-IPO unitholders under this tax indemnification
agreement. Subsequent to the IPO, our ownership in PEPR is 24%.
(15) On January 4, 2006, we purchased the 80% ownership interests in each
of ProLogis North American Properties Funds II, III and IV
(collectively "the Funds") held by our fund partner, an affiliate of
Arcapita Bank B.S.C.(c) ("Arcapita"). On March 1, 2006, we
contributed substantially all of the assets and associated
liabilities to the ProLogis North American Industrial Fund, which was
finalized in February 2006. See note 22. In connection with these
transactions, we recognized the following amounts in the respective
line items, during the first quarter of 2006 (in thousands):
Statements of Earnings Statements of FFO
CDFS disposition proceeds(a) $12,492 $12,958
Property management and other
fees and incentives(b) $21,958 $21,958
Earnings from unconsolidated
property funds(c) $37,113 $27,916
(a) Represents the recognition of the proceeds that we had previously
deferred as part of CDFS income upon the initial contributions of the
properties to the Funds. See note 12.
(b) Represents an incentive return we earned due to certain return levels
achieved by Arcapita upon the liquidation of the Funds.
(c) Represents our proportionate share of the gain on termination
recognized by the Funds on a depreciated basis (earnings) and on an
undepreciated basis (FFO).
All of the above amounts are net of an aggregate deferred amount of
$17.9 million, due to our 20% continuing ownership interest in the
property fund that purchased the assets.
(16) The following table presents the components of interest expense (in
thousands). The increase in interest expense before capitalization
is primarily the result of increased debt levels due to the Catellus
Merger and other property acquisitions, as well as our increased
development activities, which also accounts for the increase in
capitalized interest.
Three Months Ended Twelve Months Ended
December 31, December 31,
2006 2005(1) 2006(2) 2005(1)
Gross interest expense $106,061 $87,846 $398,066 $239,832
Net premium recognized (3,040) (3,116) (12,564) (3,980)
Amortization of deferred loan
costs 1,945 1,379 6,198 5,595
Interest expense before
capitalization 104,966 86,109 391,700 241,447
Less: capitalized amounts (27,496) (22,350) (97,297) (63,885)
Net interest expense $77,470 $63,759 $294,403 $177,562
(17) In addition to contributions of CDFS properties, from time to time,
we contribute properties from our property operations segment to the
unconsolidated property funds. During the three and twelve months
ended December 31, 2006, we contributed 27 and 39 properties,
respectively, to unconsolidated property funds in which we have
continuing interests through our equity ownership. The gains related
to the dispositions of properties from our property operations
segment are included in earnings, but are not included in our
calculation of FFO. See our definition of FFO.
(18) Foreign currency exchange gains and losses that are recognized as a
component of net earnings generally result from: (i) remeasurement
and/or settlement of certain debt transactions between us and our
foreign consolidated subsidiaries and foreign unconsolidated
investees (depending on the type of loan, the currency in which the
loan is denominated and the form of our investment); (ii)
remeasurement and/or settlement of certain third party debt of our
foreign consolidated subsidiaries (depending on the currency in which
the loan is denominated); and (iii) mark-to-market adjustments
related to derivative financial instruments utilized to manage
foreign currency risks. We generally exclude these types of foreign
currency exchange gains and losses from our defined FFO measure and
also from our computation of EBITDA.
Foreign currency exchange gains and losses that result from
transactions (including certain intercompany debt and equity
investments) that are settled in a currency other than the reporting
entity's functional currency and from the settlement of derivative
financial instruments utilized to manage foreign currency risks are
included in our defined FFO measure and in our computation of EBITDA.
See our definition of FFO and our definition of EBITDA.
(19) Current income tax is generally a function of the level of income
recognized by our taxable subsidiaries operating primarily in the
CDFS business segment, state income taxes, taxes incurred in foreign
jurisdictions and interest associated with our income tax
liabilities. Deferred income tax is generally a function of the
period's temporary differences (items that are treated differently
for tax purposes than for financial reporting purposes), the
utilization of tax net operating losses generated in prior years that
had been previously recognized as deferred tax assets and deferred
tax liabilities related to indemnification agreements related to
certain contributions to property funds. See note 14.
In connection with the Catellus Merger and in accordance with
purchase accounting, we recorded all of the acquired assets and
liabilities at the estimated fair values at the date of acquisition.
For our taxable subsidiaries, we recognized the deferred tax
liabilities that represent the tax effect of the difference between
the tax basis carried over and the fair values of these assets at the
date of acquisition. As taxable income is generated in these
subsidiaries, we recognize a deferred tax benefit in earnings as a
result of the reversal of the deferred tax liability previously
recorded at the acquisition date and we record current income tax
expense representing the entire current income tax liability. In our
calculation of FFO, we only include the current income tax expense to
the extent the associated income is recognized for financial
reporting purposes.
(20) We report our investments in the property funds, CDFS joint ventures
and other unconsolidated investees under the equity method. For
purposes of calculating FFO and EBITDA, the net earnings of each of
our unconsolidated investees is adjusted to be consistent with our
calculation of these measures. See our definition of FFO and our
definition of EBITDA.
(21) Consists primarily of adjustments to the amounts we recognize under
the equity method that are necessary to recognize the amount of gains
not recognized at the contribution date due to the deferral of
certain proceeds based on our ownership interest in the
unconsolidated investee acquiring the property. See note 12. In
addition, this amount represents the adjustment to the amounts we
recognize under the equity method on dispositions made by the
unconsolidated investees to reflect the gain on sale on an
undepreciated basis for FFO.
(22) In February, 2006, we formed a new property fund with several
institutional investors, the North American Industrial Fund, which
currently owns industrial distribution properties in the United
States and may own properties in Canada. The North American
Industrial Fund, in which we have a 20% ownership interest, is an
open-end fund. See note 15 for further discussion about the initial
contribution of assets to the North American Industrial Fund in the
first quarter of 2006. In addition, in January 2006, we made the
first contribution of assets to ProLogis Japan Properties Fund II,
which was formed in late 2005.
SOURCE ProLogis
Released February 6, 2007