1Q09 Update
Walt Rakowich, Chief Executive OfficerBill Sullivan, Chief Financial Officer
April 30, 2009
1
Forward Looking Statement
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 statements. 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 acquisitions, (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 in “Item 1A. Risk Factors” of ProLogis’ Annual Report on Form 10-K for the year ended December 31, 2008. ProLogis undertakes no duty to update any forward-looking statements appearing in this presentation.
2
Key Takeaways
We are making great progress on our financial goals
Operating property performance down but within expectations
Our development pipeline is leasing up and represents a powerful tool for future earnings growth
3
A Great Global Business
ASIA11 msf2 countries
NORTH AMERICA349 msf3 countries
EUROPE128 msf13 countries
serve 4,500+ customers in 18 countries
ProLogis associates around the globe
3
4
ProLogis Park Deokpyung
With High Quality, State-of-the-Art Facilities
Fontana, CA
Houston, TX
Cincinnati, OH
Norrkoping, Sweden
Lyon, France
West Midland, UK
ProLogis Parc Centrair
ProLogis Park Osaka II
ProLogis Park Yongin II
5
Overview
Focus and progress
Operating fundamentals
Financial review
Summary / Recap
6
Focus and Progress
The Roadmap to Recovery as outlined on November 13Preserve capital Simplify and communicateDe-risk the operationsDe-lever the balance sheet
7
Preserving Capital
Actions taken in November 2008 to preserve capitalEliminated virtually all development starts and new land acquisitions Shut down approximately $580M of developments in progressReduced annual dividend
$290M annual cash savings
Initiated right sizing of G&A Achieved $100M annual cash savings from gross G&A
8
Simplifying and Communicating
Eliminated CDFS segment
Simplified financial reporting
Increased communications with shareholders, rating agencies and bankers
Stepped up employee communications programs
9
De-risking the Operations
Reduced development portfolio by $3.2B (40%+) since 9/30/08Reduced “at-risk” (unleased) portion of development portfolio by approximately $1.8B Renegotiated equity agreements with fund partnersTerminated land purchase agreements where possibleClosed operations in GCC, India and Brazil Reorganized management team to enhance operational controls Retained global development properties to:
Enhance geographic diversityReduce average age of direct-owned portfolio
10
De-leveraging the Balance Sheet
From 10/1/08 through 3/31/09
Completed fund contributions of $1.4B ($1.1B net of co-investment)
Completed sale of China and fund interests in Japan for $1.3B
Put $1B of US assets on the market for sale
Repurchased $358M of bonds/converts at 32.5% discount to par value
11
De-leveraging from 10/1/08 to 3/31/09
Deleveraging since 9/30/08 (Millions)Sources
Fund contributions, net of co-investmentReduction in debt through bond / convertible debt buybacksAsia and asset salesChange in FXABP14 Discount adjustment
$1,129116
1,42964
296$3,034
UsesFunding of under development propertiesCAPEX / TI / LCsAcquisitions / other
$89244
328$1,264
Debt at 9/30/08Amount of debt reduction Debt at 3/31/09
$11,098 1,770
$9,328
12
Activity Since 3/31/09
Raised $1.1B in follow-on equity offering
Repurchased bonds and converts at discount, de-levered by $112M
Rate locked on $344M of new secured on-balance sheet financing
Closed on contributions/sales of $170MSold ProLogis Park Misato II ($128M)
Contributed additional €32M ($42M) to PEPF II
Closed on $50M of 3rd party sales
13
Overview
Focus and progress
Operating fundamentals
Financing activities
Summary / Recap
14
Operating Fundamentals
Operating portfolio
Development portfolio
Overall industrial market conditions
Risks and opportunities
15
Operating Portfolio Leasing Performance
4Q08 1Q09*
Direct Core, Non-development Portfolio% Leased 92.2% 90.5%
Investment Management Portfolio% Leased 96.0% 94.5%
Total*% Leased 94.7% 93.0%
*1Q09 reflects sale of Japan Funds, which resulted in a 30 bps reduction in total % leased
16
Operating Portfolio Performance Metrics
1Q08* 2Q08* 3Q08* 4Q08 1Q09**Direct Core PortfolioAverage Tenant RetentionTurnover Costs per sfLeasing Activity (msf)
55.6%$0.91
18.1
87.9%$1.09
23.1
77.6%$1.41
18.4
88.0%$0.79
17.2
74.4%$0.84
13.7
Investment Management PortfolioAverage Tenant RetentionTurnover Costs per sfLeasing Activity (msf)
60.4%$1.24
10.8
85.2%$0.61
10.1
80.2%$1.20
12.2
92.8%$1.11
11.6
68.5%$0.77
9.3
*Reported as stabilized leased percentage on Direct Investment
**1Q09 reflects sale of Japan Funds
17
Same Store Performance Analysis
Operating Portfolio
Operating andDevelopment
Portfolio
Same StoreNet Operating IncomeAverage leasingRent Growth
(1.85%)(1.84%)(4.19%)
0.78%0.16%
(4.17%)
18
Operations Review
Operating portfolio
Development portfolio
Overall industrial market conditions
Risks and opportunities
19
Development Portfolio
$7.4 $4.8$5.1$8.2$8.4$7.6
$0
$2
$4
$6
$8
$10
12/31/07 3/31/08 6/30/08 9/30/08 12/31/2008 3/31/200930%
35%
40%
45%
50%
Pipeline TEI Leasing Percentage
BillionsTotal pipeline and leasing
Development portfolio at 12/31/08 of $5.1B was 46.4% leased as of 3/31/08Up 500 bps
% Leased
20
Targeted Development Leasing
MSF
Total development pipeline at 12/31/08 60.4
Overall target leasing based on 93% occupancy 56.2
Leased at 3/31/09 (before contributions) 28.1
Target SF remaining to be leased 28.1
21
Task at Hand
4.0
6.6
4.84.2
3.2
0
1
2
3
4
5
6
7
1Q08 2Q08 3Q08 4Q08 1Q09
MSF
Historical Leasing in Development Pipeline
28 msf targeted to be leased in development portfolio
Average Inventory leasing of 4.5 msf per quarter
22
Operations Review
Operating portfolio
Development portfolio
Overall industrial market conditions
Risks and opportunities
23
Industrial Market Conditions
Current ConditionsOperating fundamentals mirroring economic conditions – continuing to weaken
Occupancies are decliningAbsorption is negative
Some shadow/sub-lease space creeping into the marketsUncertainty leading to lengthy negotiationsCustomers continue to balance relocation costs with downsizingLimited new development activity worldwide
Near to Longer-term ConditionsSignificant obsolescence and ownership shifts will continue to drive demand abroad Demand in the US will improve as GDP growth returns
24
Declining Absorption in Top 30 US Markets
158
131.5
23.9 15.8 13.12.8 -18.8-7.8
-50
0
50
100
150
200
2006 2007 2008 1Q08 2Q08 3Q08 4Q08 1Q09
Net Industrial Absorption 2006 – 1Q09MSF
25
25 Years of Positive Absorption
0
50
100
150
200
1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007Net Industrial Absorption 1983 - 2008
MSF
26
Declining Occupancies in Top 30 US Industrial Markets
85%
88%
90%
93%
95%
1999-Q4 2000-Q4 2001-Q4 2002-Q4 2003-Q4 2004-Q4 2005-Q4 2006-Q4 2007-Q4 2008-Q4
Historic OccupancyQuarterly 2000-1Q 2009
27
National Occupancies Have Stayed Above 89% Over 25 Years
85%
90%
95%
1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007
1Q09
Top 30 Market Average Occupancy 1983 thru 1Q 2009*
*All numbers as of 12/31 except 1Q09
28
Overall Supply Exceeds Absorption
145158 147
133 140
24 24.8
-18.8
-100
-50
0
50
100
150
200
2006 2007 20081Q
09
Deliveries Absorption
Deliveries and Absorption of Warehouses 2006 – 1Q09MSF
29
Supply Equals a 25 Year Low
0%
1%
2%
3%
4%
5%
6%
1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
Deliveries as a % of Existing Stock
0
20
40
60
80
100
120
140
160
180
1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 20072009P
Deliveries of Warehouse 1983 – 2009P
MSF
30
Development Starts Are Even Lower
0
40
80
120
160
2000 2001 2002 2003 2004 2005 2006 2007 2008 1Q09
BTS Inventory
New Starts – Top 30 Markets
128
9098
7564
146
128
102
81
2
MSF
31
Demand Drivers
US / Canada / UK
1. GDP growth
2. Growing product obsolescence
Western Europe / Japan1. Shift from ownership to leasing of facilities2. Very high product obsolescence / supply chain reconfiguration3. Economic growth
Central Europe / Mexico1. New companies expanding into market2. Increased domestic consumption3. Lack of existing product
32
Operations Review
Operating portfolio
Development portfolio
Overall industrial market conditions
Risks and opportunities
33
Risks and Opportunities
Near-term RisksOverall market conditions may deteriorate further or faster than expected
Lease up in development slower than budgeted
Near-term OpportunitiesIncome from $2.6B of currently un-leased development
New fund formations
Long-term OpportunitiesSustainability of key demand drivers will re-emerge
Global platform allows us to capture a more significant share of global demand
Monetization of $2.5B of land
34
Overview
Focus and progress
Operating fundamentals
Financial review
Summary / Recap
35
Financial Review
Review of 1Q09 results / FY 2009 guidance
Financing activities / debt maturities review
Contributions / dispositions
36
1Q Financial Results
3/31/09 3/31/08 (1)
FFO per share, including significant non-cash itemsOur share of losses on derivative activity recognized by the fundsNet gains related to disposed assets – China operationsGain on early extinguishment of debt
$0.900.04
(0.01)(0.07)
$1.34------
FFO per share, excluding significant non-cash items $0.86 $1.34Gross CDFS gainsCDFS-related taxes
Net CDFS gainsRealized FX loss on VAT recaptureRIF related expenses
$0.670.08
($0.59)0.030.02
$1.040.02
($1.02)----
Core FFO per share $0.32 $0.32
1) Reflects ($0.04/sh) retroactive impact of ABP-14
37
Updated 2009 Guidance
Millions, unless per share data Low HighFFO, excluding significant non-cash items $495 $550
Wtd. Avg. shares o/s 268 268
FFO/share, excluding significant non-cash items $1.85 $2.05Impact of April Equity Issuance
Reduction in Interest Expense 26 40Revised 2009 FFO, excluding significant non-cash items $521 $590
Revised weighted average shares outstanding 398 398
Revised 2009 FFO/share, excl significant non-cash items $1.31 $1.48
38
Pro Forma Run-rate FFO
Millions, unless per share data Low High
Revised 2009 FFO/share, excl significant non-cash items $1.31 $1.48Revised weighted average shares outstanding 398 398
Revised 2009 FFO, excluding significant non-cash items $521 $590Net gain from sale of Japan funds 160 160
Annual pro forma run-rate FFO $361 $430Revised weighted average shares outstanding 440 440
Annual pro forma run-rate FFO/share $0.82 $0.98
Potential upside from further lease up of development portfolio and other growth initiatives
39
Financial Review
Review of 1Q09 results
Financing activities / debt maturities review
Contributions / Dispositions
40
Financing Activities Since 3/31/09
Equity follow-on offering completed$1.1B net proceedsFunds to be used to de-lever
Bond tenders / repurchases completed€42.65M ($58.3M) retired on 2011 Eurobonds for €32M ($43.7M), ($14.6M de-levering)$225.0M of convertible bonds retired for $128.4M ($96.6M de-levering)
Three US secured debt packages ($344M in total) in documentation
Term sheet in negotiation on $45M Japan secured TMK bond financing
41
Impact of New Equity – Sources and Uses
$ in Million 1Q09 2Q-4QSources
China and Japan sales – closed Fund contributions / asset sales, net of PLD co-investmentFX and otherProceeds from new Secured Debt – rate locked Proceeds from Equity Offering
$1,34597
219
$ --1,350
--344
1,107Total Sources $1,661 $2,801
(1) Assumes secured debt is refinanced at balance upon maturity.(2) Includes buyback of €42.7M ($58.3M) face of 2011 Eurobonds at a price of ~75% of face value (exchange rate as of 3/31/09). Includes buyback of $225M face of 2012 and 2013
convertible senior notes at a price of 57% of face value. Excludes convertible debt of $1.1B, which is not redeemable for cash until January 2013. (3) After Q1, 2009, unencumbered asset pool reduced by asset sales, gross contributions to funds, and new secured debt assumed to be applied on properties at 50% LTV.
Additional sources of capital not currently accounted for include additional asset sales or contributions beyond 2009, earnings from on-balance sheet property development lease-up, and new secured financing against unencumbered assets
$ in Million 4Q08 1Q09 2009 2010 2011 2012Anticipated Uses (1)
Development pipelineAcquisitions / otherRepayment of Senior Notes and Convertible Notes (2)
($315)--
(49)
($485)(250)(456)
($85)--
(220)
----
($446)
----
($1,703)Total Uses ($364) ($1,191) ($305) ($446) ($1,703)
Line of Credit (Pay Down) / DrawLine of Credit Balance (2) $3,218
($1,297)$1,921
($1,610)$311
$305$616
$446$1,062
$1,438$2,500
Cumulative Funding Excess/(Shortfall) Assuming LOC Fully Drawn $0 $0 $0 ($226)Unencumbered Asset Pool (3)
Funding Gap as a % of Unencumbered Asset Pool$14,260 $11,950
0%$11,950
0%$11,950
0%$11,950
1.9%
42
Balance Sheet Debt Maturities at 3/31/09
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Thereafter
Unsecured Senior Notes Convertible Bonds Secured Debt GLOC Other
Billions
43
Balance Sheet Debt Maturities - 2009
Outstanding at12/31 3/31 Maturity Type Activity in Progress
$250
$25
$64
$250
$25
$36M
Aug - 09
Nov – 09
Various
Floating Rate NoteMeridian Notes
Other unsecured notes, secured debt and scheduled principal payments
To be repaid through secured debt financings:- $100M 5-year interest-only, in documentation, rate locked at 6.5%- $122M 10-year interest-only, in documentation, rate locked at 7.55%- $122M 10-year interest-only, in documentation, rate locked at 7.55%- $45M 3-year TMK bond financing under negotiation
$339 $311
Millions
44
Balance Sheet Debt Maturities - 2010
Outstanding at12/31 3/31 Maturity Type Refinancing Game Plan
$190
$60
$190
$60
Nov–10
Various
Fixed rate debt issueOther unsecured notes, secured debt and scheduled principal payments
To be refinanced through 2009 excess secured debt proceeds, incremental secured financings or balance sheet liquidity
$2,618600
$3,218
$1,324597
$1,921
Global LineMulti-Currency Line
In discussion w/ lead banks on line recast, w/ targeted 2012 maturity and $2.5B capacity
$3,468 $2,171
Millions
45
Fund Debt Maturities at 3/31/09
$0.0
$0.5
$1.0
$1.5
$2.0
$2.5
$3.0
$3.5
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Thereafter
PEPR PEPF II California NA I NA VI-X NA XI NAIF NAIF II NAIF III Mexico Korea
Billions
46
Fund Debt Maturities - 2009
1 Does not include regularly scheduled principal amortization payments of approximately $2M for 2009.
Outstanding at12/31 3/31 4/30 Fund Maturity Activity in Progress
$491 $459 $0 PEPR July Repaid €336M ($491M) CMBS and crystallized a €40M economic gain on FX derivative
$176
$138
$0
$138
$0
$0
CA Aug - Closed on $120M 10-year refinance at 7.5% coupon, extended $56M for 1 year
- Closed on 4/29/09 on $138M 5-year refinance at 7.25% coupon
$411
$46
$411
$46
$411
$46
NAIF II July
Aug
Tentative agreement reached on 5-year extension, to be documented in May
In discussion w/ existing lender on refinance$15 $15 $15 NA XI June To be repaid from cash flow / partner capital
$167 $0 $0 NAIF III Extended facility for 3 years with partial pay down
$1,444 (1) $1,071 (1) $472
Millions
47
Fund Debt Maturities - 2010
1 Does not include regularly scheduled principal amortization payments of approximately $4M for 2010.
Outstanding at (1)
12/31 3/31 Fund Maturity Type Refinancing Game Plan$221
$801
$439$1,240
$206
$749
$692$1,647
PEPR March
May
Dec
Hypo RE
CMBS III & IV
Bank Lines
Term sheet executed for 3-yr extension with partial pay down. Indicative fixed rate coupon of 5.1%To be repaid from cash flow, asset sales, FX hedge and secured financings
In discussions with lead banks on 2-yr extension with partial reductions in commitment
$1,384 $1,162 PEPF II May Warehouse In discussions with banks on 2-yr extension with partial reduction in commitment. Actively pursuing secured financings:- Term sheet executed for 10-yr £49 financing. Indicative fixed rate coupon of 6.0%- Term sheet executed for 5-yr €48 financing. Indicative fixed rate coupon of 6.4%- Term sheet executed for 3-yr €130 financing. Indicative fixed rate coupon of 5.0%
-- $56 CA March Life Co loan Financial packages out to Life Cos$131 $131 NA I Dec Life Co loan Evaluating refinancing strategy
$10$32
$10$32
NA XI FebAug
Life Co loan Evaluating refinancing strategy
$27 -- NAIF July Warehouse l Line paid down to $0 from equity funding$111 $111 NAIF II Various Life Co loans Financial packages out to Life Cos
$3,156 $3,149
Millions
48
Financial Review
Review of 1Q09 results
Financing activities / debt maturities review
Contributions / dispositions
49
2009 Asset Sales/Contributions
$1.5B to $1.7B of gross asset contributions / sales expected in 2009$900M - $950M of assets to be contributed / sold to third-party funds
$725M of contributions to PEPF II targeted for 2009$131M of contributions closed in March 2009$538M of development pipeline was >93% leased at 3/31/09$42M of contributions closed in April 2009
$75M of contributions to Mexico Industrial Fund targeted for 2009$47M of development pipeline is >93% leased
$128M (¥12.6B) sale of ProLogis Park Misato II to GIC RE, closed in April$650M - $700M of asset sales targeted for 2009
$5 million closed in Q180%+ of remainder at 3/31 under contract or LOI $50 million closed in April
50
Investment Management Equity Capacity
Active Funds with Additional Contributions Expected in 2009
Unfunded 3rd
Party Equity at 4/30
Remaining Targeted 2009 Contributions
at 4/30/09
EuropeMexico
$1,010247
$55275
Total $1,257 $627
51
Pro forma Leverage
12/31/08 Leverage Analysis
3/31/09 Leverage Analysis
Equity Offering
Effect
April Debt Buy Back
Effect
Pro Forma
Leverage Analysis
Total Debt* $10,909 $9,435 ($1,100) ($112) $8,223
Total Un-depreciated Book Assets $20,835 $18,989 $18,989
Total Debt as a % of Book Assets 52.4% 49.7% 43.3%
* Total Debt represents interest-bearing debt, and includes $198M and $109M of debt included in discontinued ops at 12/31/08 and 3/31/09, respectively, and 12/31/08 total debt reflects the adjustment for convertible debt.
52
Overview
Focus and progress
Operating fundamentals
Financing activities
Summary / Recap
53
Key Takeaways
We are making great progress on our financial goals
Operating property performance down but within expectations
Our development pipeline is leasing up and represents a powerful tool for future earnings growth
We have a great global business with terrific assets, high-quality customers and some of the most talented people in the industry
54
ProLogis Park Deokpyung
Fontana, CA
Houston, TX
Cincinnati, OH
Norrkoping, Sweden
Lyon, France
West Midland, UK
ProLogis Parc Centrair
ProLogis Park Osaka II
ProLogis Park Yongin II