- Major Elements of De-leveraging Plan Complete - - Significant
Progress on Development Portfolio Leasing - - $325 Million in
Equity Raised Through 'At the Market' Program - DENVER, Oct. 22
/PRNewswire-FirstCall/ -- ProLogis (NYSE:PLD), a leading global
provider of distribution facilities, today reported funds from
operations as defined by ProLogis (FFO), excluding significant
non-cash items, of $0.21 per diluted share for the third quarter of
2009, compared with $0.59 per diluted share in the third quarter of
2008. Significant non-cash items of $0.07 per diluted share for the
third quarter of 2009 included impairment of real estate properties
and other assets, which were partially offset by gains from early
extinguishment of debt. FFO, including significant non-cash items,
was $0.14 per diluted share for the third quarter of 2009; there
were no significant non-cash items reported in the same period in
2008. Also embedded in the $0.21 per diluted share of FFO,
excluding significant non-cash items, was approximately $0.03 per
diluted share of non-recurring charges associated with write-offs
of certain corporate assets and costs associated with the company's
workforce reduction. The company reported a net loss of $0.03 per
diluted share for the third quarter of 2009, compared with net
earnings of $0.12 per diluted share in the third quarter of 2008.
FFO, excluding significant non-cash items, was $1.06 per diluted
share for the nine months ended September 30, 2009, compared with
$2.95 per diluted share in 2008. FFO, including significant
non-cash items, was $1.16 per diluted share for the same period in
2009; there were no significant non-cash items reported in the nine
months ended September 30, 2008. Net earnings per diluted share for
the nine months ended September 30, 2009 were $1.06 per diluted
share, compared with $1.57 per diluted share in the same period of
2008. Early Signs of Stabilization in Property Market Fundamentals
"During the third quarter, we began to see signs that demonstrate
industrial property market fundamentals are firming up," said
Walter C. Rakowich, chief executive officer. "While there continues
to be pressure on market rental rates, overall market occupancies
seem to be stabilizing, with an increase in customer activity. Some
supply chain reconfiguration plans that were postponed are coming
off the shelf, and there is growing customer interest in new
build-to-suit development in global markets where there is a lack
of appropriate supply. "Throughout ProLogis' portfolio, occupancies
increased for the first time in two years," Rakowich added.
ProLogis' non-development portfolio was 92.7 percent leased at the
end of the third quarter, an increase of 20 basis points over 92.5
percent leased at June 30. In addition, the company's static
development portfolio (in place at December 31, 2008) was 61.7
percent leased at the end of the third quarter, up from 54.1
percent at June 30, 2009 and 41.4 percent at December 31, 2008.
"While one quarter does not signal a trend, we are feeling
cautiously optimistic that market occupancies have stabilized and
are pleased to have already reached the lower end of our goal to be
60 to 70 percent leased in our static development portfolio by year
end. As global economies continue to show signs of improvement, we
believe a corresponding increase in demand, combined with virtually
non-existent new supply, should support stronger market occupancies
in 2010," Rakowich said. ProLogis' same-store net operating income
as adjusted (excluding same-store assets associated with the
company's development portfolio) decreased 4.3 percent, primarily
reflecting year-over-year occupancy declines, offset by reduced
rental expenses in the same-store pool. Continued pressure on
market rents led to negative rent growth of 14.7 percent for the
quarter on turnover of 20.2 million square feet, or 5.2 percent, of
the adjusted same-store pool. Beginning to Reduce Land Position
Through Pre-leased Development and Sales "One of our primary goals
is to reduce risk by decreasing the amount of non-income producing
assets on our balance sheet," said Ted R. Antenucci, chief
investment officer. "Through land sales and pre-leased
developments, we have begun to monetize nearly $120 million of land
year to date. The developments started in the third quarter include
two in Japan for Kirin Logistics and Senko and two in Europe for
LG/Hi-Logistics and a major UK retailer. These projects demonstrate
our new approach to development, whereby we generate returns from
our land bank, and when possible, invest our development capital
alongside that of our partners and customers. Going forward, we
plan to focus more on these types of build-to-suit transactions and
fee development management opportunities, such as the previously
announced project we are doing for The Royal Mail in the UK." Also
during the third quarter, ProLogis completed gross asset sales and
property fund contributions of $241.0 million. "Earlier in the
year, we outlined our expectation for a total of $1.5 - $1.7
billion of contributions and asset sales, excluding the sale of our
China operations and our property fund interests in Japan,"
Antenucci said. "With $1.2 billion of sales and contributions
completed year to date, we are comfortable with meeting this
target." De-leveraging Plan Essentially Complete "The third quarter
also was notable for the completion of the remaining major elements
associated with our de-leveraging plan," said William E. Sullivan,
chief financial officer. "We successfully issued $350 million of
senior notes, amended and extended our global line of credit to
August 2012 and completed a bondholder consent solicitation that
simplifies and improves transparency related to our bond covenants.
We also took advantage of the REIT rally to issue equity through
our at the market equity issuance program at average pricing of
$11.15 per share, generating net proceeds of $325 million on
approximately 29.8 million shares sold. These actions provide us
with further flexibility and the liquidity to withstand pressure
from today's challenging market conditions, while positioning us to
consider opportunities that may emerge as global economies
recover." Through a combination of asset sales and fund
contributions, common equity issuances and repurchases of debt at a
discount, the company has reduced its direct debt by over $3.0
billion since December 31, 2008, while funding nearly $600 million
of costs associated with its development portfolio. "In addition to
addressing ProLogis' direct debt maturities for 2009 and well into
2010, we also made substantial progress with the refinancing and
repayment of property fund debt. Since the start of the year, we
have completed over 1.6 billion of secured financings and loan
extensions on behalf of our funds, of which approximately 1.2
billion was executed upon in the third quarter," said Sullivan.
Commentary on Guidance "We are narrowing our full-year 2009
guidance to $1.39 to $1.43 per share of FFO, excluding significant
non-cash items and non-recurring charges, and $0.96 to $1.00 in
earnings per share. We will continue to monitor market conditions
and their impact on expected results for next year and will provide
the market with detailed guidance for 2010 in January prior to the
release of fourth quarter results," Sullivan added. Copies of
ProLogis' third quarter 2009 supplemental information will be
available from the company's website at http://ir.prologis.com/ in
the "Annual & Supplemental Reports" section before open of
market on Thursday, October 22, 2009. The company will host a
webcast/conference call on Thursday, October 22, 2009, at 10:00
a.m. Eastern Time. The live webcast and the replay will be
available on the company's website at http://ir.prologis.com/.
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/reitcalls. About
ProLogis ProLogis is a leading global provider of distribution
facilities, with more than 475 million square feet of industrial
space owned and managed (44 million square meters) in markets
across North America, Europe and Asia. The company leases its
industrial facilities to more than 4,500 customers, including
manufacturers, retailers, transportation companies, third-party
logistics providers and other enterprises with large-scale
distribution needs. For additional information about the company,
go to http://www.prologis.com/. 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 reports filed with the Securities and Exchange Commission by
ProLogis under the heading "Risk Factors." ProLogis undertakes no
duty to update any forward-looking statements appearing in this
press release. Overview (in thousands, except per share amounts)
Summary of Results Three Months Ended Nine Months Ended September
30, September 30, ------------- ------------- 2009 2008 (1) 2009
2008 (1) ---- ------- ---- ------- Revenues (9) $273,932 $988,890
$973,679 $4,106,441 Net earnings (loss) (a) $(11,788) $32,153
$405,809 $422,006 Net earnings (loss) per share - Diluted (a)
$(0.03) $0.12 $1.06 $1.57 FFO, including significant non-cash items
(a) $65,187 $157,994 $444,646 $793,936 Add (deduct) significant
non-cash items: Impairment of real estate properties and other
assets 46,274 - 130,492 - Net gain related to disposed assets -
China operations - - (3,315) - Gains on early extinguishment of
debt (12,010) - (173,218) - Our share of certain (gains) losses
recognized by the property funds (4,925) - 6,358 - ------ --- -----
--- Total adjustments for significant non-cash items 29,339 -
(39,683) - ------ --- ------- --- FFO, excluding significant
non-cash items (a) $94,526 $157,994 $404,963 $793,936 =======
======== ======== ======== FFO per share - Diluted, including
significant non-cash items (a) $0.14 $0.59 $1.16 $2.95 Add (deduct)
- summarized significant non-cash adjustments - per share 0.07 -
(0.10) - ---- --- ----- --- FFO per share - Diluted, excluding
significant non-cash items (a) $0.21 $0.59 $1.06 $2.95 ===== =====
===== ===== Distributions per common share (b) $0.15 $0.5175 $0.55
$1.5525 ===== ======= ===== ======= ---- (a) These amounts are
attributable to common shares. (b) In April 2009, our Board of
Trustees ("Board") set our quarterly distribution at $0.15 per
common share. The payment of distributions, including the
composition between cash and stock, is subject to authorization by
the Board out of funds legally available for the payment of
distributions, market conditions, our financial condition and Real
Estate Investment Trust ("REIT") distribution requirements and may
be adjusted at the discretion of the Board during the year.
Footnotes follow Financial Statements Consolidated Balance Sheets
(in thousands, except per share data) September 30, December 31,
2009 2008 (1) ---- -------- Assets: Investments in real estate
assets (1): Industrial properties: Core $7,441,065 $7,924,507
Completed development 4,094,702 3,031,449 Properties under
development 354,885 1,181,344 Land held for development 2,694,925
2,482,582 Retail and mixed use properties 388,008 358,992 Land
subject to ground leases and other 416,577 425,001 Other
investments 240,533 321,397 ------- ------- 15,630,695 15,725,272
Less accumulated depreciation 1,606,533 1,583,299 ---------
--------- Net investments in real estate assets 14,024,162
14,141,973 Investments in and advances to unconsolidated investees:
Property funds (2) 1,838,797 1,957,977 Other unconsolidated
investees 366,451 312,016 ------- ------- Total investments in and
advances to unconsolidated investees 2,205,248 2,269,993 Cash and
cash equivalents 41,542 174,636 Accounts and notes receivable
147,921 244,778 Other assets (1) 1,027,410 1,126,993 Discontinued
operations - assets held for sale (2) - 1,310,754 --- ---------
Total assets $17,446,283 $19,269,127 =========== ===========
Liabilities and Equity: Liabilities: Debt (1)(2)(3)(4) $7,706,105
$10,711,368 Accounts payable and accrued expenses 611,408 658,868
Other liabilities 556,957 751,238 Discontinued operations - assets
held for sale (2) - 389,884 --- ------- Total liabilities 8,874,470
12,511,358 --------- ---------- Equity (5): ProLogis shareholders'
equity: Series C preferred shares at stated liquidation preference
of $50 per share 100,000 100,000 Series F preferred shares at
stated liquidation preference of $25 per share 125,000 125,000
Series G preferred shares at stated liquidation preference of $25
per share 125,000 125,000 Common shares at $.01 par value per share
4,732 2,670 Additional paid-in capital (1) 8,524,988 7,070,108
Accumulated other comprehensive income (loss) (6) 125,594 (29,374)
Distributions in excess of net earnings (1) (455,109) (655,513)
-------- -------- Total ProLogis shareholders' equity 8,550,205
6,737,891 Noncontrolling interests (7) 21,608 19,878 ------ ------
Total equity 8,571,813 6,757,769 --------- --------- Total
liabilities and equity $17,446,283 $19,269,127 ===========
=========== Footnotes follow Financial Statements Consolidated
Statements of Operations (in thousands, except per share amounts)
Three Months Ended Nine Months Ended September 30, September 30,
------------- ------------- 2009 2008 (1) 2009 2008 (1) ----
-------- ---- -------- Revenues: Rental income (8) $225,130
$225,501 $674,648 $707,245 Property management and other fees and
incentives (2) 45,792 35,125 111,200 97,195 CDFS disposition
proceeds (9): Developed and repositioned properties (2) - 613,443
180,237 3,013,511 Acquired property portfolios - 107,063 - 270,238
Development management and other income 3,010 7,758 7,594 18,252
----- ----- ----- ------ Total revenues 273,932 988,890 973,679
4,106,441 ------- ------- ------- --------- Expenses: Rental
expenses (10) 69,498 68,551 208,195 219,402 Investment management
expenses (10) 10,186 13,456 31,581 38,417 Cost of CDFS dispositions
(1)(9): Developed and repositioned properties - 543,118 - 2,465,550
Acquired property portfolios - 107,063 - 270,238 General and
administrative (10)(11) 38,632 46,651 128,325 140,363 Reduction in
workforce (11) 415 - 11,745 - Impairment of real estate properties
and other assets (12) 46,274 - 130,492 - Depreciation and
amortization 80,484 74,515 233,872 220,896 Other expenses 8,405
3,495 19,408 10,658 ----- ----- ------ ------ Total expenses
253,894 856,849 763,618 3,365,524 ------- ------- ------- ---------
Operating income 20,038 132,041 210,061 740,917 Other income
(expense): Earnings from unconsolidated property funds, net (13)
11,639 17,918 31,135 35,904 Earnings (loss) from other
unconsolidated investees, net (693) 5,208 2,850 12,429 Interest
expense (1)(14) (89,838) (94,290) (265,819) (284,752) Other income
(expense), net (10,021) 868 (5,846) 13,996 Net gains on
dispositions of real estate properties (9) 13,627 1,152 22,419
5,816 Foreign currency exchange gains (losses), net (15) 13,386
(10,073) 34,898 (32,977) Gains on early extinguishment of debt (3)
12,010 - 173,218 - ------ --- ------- --- Total other income
(expense) (49,890) (79,217) (7,145) (249,584) ------- -------
------ -------- Earnings before income taxes (29,852) 52,824
202,916 491,333 Current income tax expense (benefit) (2) (4,626)
10,938 30,140 47,717 Deferred income tax expense (benefit) (5,088)
10,706 (20,687) 19,403 ------ ------ ------- ------ Total income
taxes (9,714) 21,644 9,453 67,120 ------ ------ ----- ------
Earnings (loss) from continuing operations (20,138) 31,180 193,463
424,213 Discontinued operations (16): Income attributable to
disposed properties 611 6,133 17,810 10,136 Net gain related to
disposed assets - China operations (2) - - 3,315 - Net gains on
dispositions: Non-development properties 14,270 2,492 199,791 8,161
Development properties and land subject to ground leases (2) - 108
11,503 2,232 - --- ------ ----- Total discontinued operations
14,881 8,733 232,419 20,529 ------ ----- ------- ------
Consolidated net earnings (loss) (5,257) 39,913 425,882 444,742 Net
earnings attributable to noncontrolling interests (7) (162) (1,427)
(966) (3,665) ---- ------ ---- ------ Net earnings (loss)
attributable to controlling interests (1) (5,419) 38,486 424,916
441,077 Less preferred share dividends 6,369 6,333 19,107 19,071
----- ----- ------ ------ Net earnings (loss) attributable to
common shares $(11,788) $32,153 $405,809 $422,006 ======== =======
======== ======== Weighted average common shares outstanding -
Basic (5) 452,683 263,139 379,421 261,665 Weighted average common
shares outstanding - Diluted (5) 452,683 266,133 382,623 270,665
Net earnings (loss) per share attributable to common shares -
Basic: Continuing operations $(0.06) $0.09 $0.46 $1.53 Discontinued
operations 0.03 0.03 0.61 0.08 ---- ---- ---- ---- Net earnings
(loss) per share attributable to common shares - Basic $(0.03)
$0.12 $1.07 $1.61 ====== ===== ===== ===== Net earnings (loss) per
share attributable to common shares -Diluted: Continuing operations
$(0.06) $0.09 $0.45 $1.49 Discontinued operations 0.03 0.03 0.61
0.08 ---- ---- ---- ---- Net earnings (loss) per share attributable
to common shares -Diluted $(0.03) $0.12 $1.06 $1.57 ====== =====
===== ===== Footnotes follow Financial Statements Consolidated
Statements of Funds From Operations (FFO) (in thousands, except per
share amounts) Three Months Ended Nine Months Ended September 30,
September 30, ------------- ------------- 2009 2008 (1) 2009 2008
(1) ---- -------- ---- -------- Revenues: Rental income $225,226
$253,580 $711,681 $785,557 Property management and other fees and
incentives (2) 45,792 35,502 111,293 97,572 CDFS disposition
proceeds (9): Developed and repositioned properties (2) - 617,133
180,237 3,032,408 Acquired property portfolios - 190,711 - 353,886
Development management and other income 3,010 7,991 7,594 18,522
----- ----- ----- ------ Total revenues 274,028 1,104,917 1,010,805
4,287,945 ------- --------- --------- --------- Expenses: Rental
expenses (10) 68,874 79,589 218,228 245,632 Investment management
expenses (10) 10,186 13,456 31,581 38,417 Cost of CDFS dispositions
(1)(9): Developed and repositioned properties - 546,700 - 2,483,925
Acquired property portfolios - 190,711 - 353,886 General and
administrative (10) 38,632 50,842 129,630 153,178 Reduction in
workforce (11) 415 - 11,745 - Impairment of real estate properties
and other assets (12) 46,274 - 130,492 - Depreciation of corporate
assets 3,982 4,004 12,069 12,155 Other expenses 8,405 3,689 19,414
11,792 ----- ----- ------ ------ Total expenses 176,768 888,991
553,159 3,298,985 ------- ------- ------- --------- 97,260 215,926
457,646 988,960 Other income (expense): FFO from unconsolidated
property funds (13) 43,901 50,067 115,518 128,454 FFO from other
unconsolidated investees 947 4,824 8,926 5,304 Interest expense (1)
(89,838) (93,839) (265,649) (284,128) Other income (expense), net
(10,021) 1,822 (5,774) 17,082 Net gains on dispositions of real
estate properties (9) 12,515 - 30,072 - Foreign currency exchange
gains (losses), net 318 (3,927) (22,068) (7,732) Gains on early
extinguishment of debt (3) 12,010 - 173,218 - Current income tax
benefit (expense) (2)(17) 4,626 (11,577) (30,341) (39,443) Net gain
related to disposed assets - China operations (2) - - 3,315 -
------- ------- ----- -------- Total other income (expense)
(25,542) (52,630) 7,217 (180,463) ------- ------- ----- --------
FFO 71,718 163,296 464,863 808,497 Less preferred share dividends
6,369 6,333 19,107 19,071 Less net earnings (loss) attributable to
noncontrolling interests (7) 162 (1,031) 1,110 (4,510) --- ------
----- ------ FFO attributable to common shares, including
significant non-cash items $65,187 $157,994 $444,646 $793,936
Adjustments for significant non-cash items 29,339 - (39,683) -
------ --- ------- --- FFO attributable to common shares, excluding
significant non-cash items $94,526 $157,994 $404,963 $793,936
======= ======== ======== ======== Weighted average common shares
outstanding - Basic (5) 452,683 263,139 379,421 261,665 FFO per
share attributable to common shares, including significant non-cash
items: Basic $0.14 $0.60 $1.17 $3.03 ===== ===== ===== =====
Diluted $0.14 $0.59 $1.16 $2.95 ===== ===== ===== ===== FFO per
share attributable to common shares, excluding significant non-cash
items: Basic $0.21 $0.60 $1.07 $3.03 ===== ===== ===== =====
Diluted $0.21 $0.59 $1.06 $2.95 ===== ===== ===== ===== Footnotes
follow Financial Statements Reconciliations of Net Earnings (Loss)
to FFO and EBITDA (in thousands) Reconciliation of net earnings
(loss) to FFO, including significant non- cash items Three Months
Ended Nine Months Ended September 30, September 30, -------------
------------- 2009 2008 (1) 2009 2008 (1) ---- -------- ----
-------- Net earnings (loss) (a) $(11,788) $32,153 $405,809
$422,006 Add (deduct) NAREIT defined adjustments: Real estate
related depreciation and amortization 76,502 70,511 221,803 208,741
Adjustments to gains on dispositions for depreciation (1,001) -
(2,204) (1,710) Gains on dispositions of non-development/ non-CDFS
properties (111) (1,152) (1,646) (5,814) Reconciling items
attributable to discontinued operations (16): Gains on dispositions
of non-development/ non-CDFS properties (14,270) (2,492) (199,791)
(8,161) Real estate related depreciation and amortization 109 7,415
8,614 23,633 --- ----- ----- ------ Total discontinued operations
(14,161) 4,923 (191,177) 15,472 Our share of reconciling items from
unconsolidated investees: Real estate related depreciation and
amortization 37,973 37,596 113,954 103,908 Adjustment to gains/
losses on dispositions for depreciation (1,310) 2 (7,888) (163)
Other amortization items (1,659) (4,433) (7,821) (12,503) ------
------ ------ ------- Total unconsolidated investees 35,004 33,165
98,245 91,242 ------ ------- ------- ------- Total NAREIT defined
adjustments 96,233 107,447 125,021 307,931 ------ ------- -------
------- Subtotal-NAREIT defined FFO 84,445 139,600 530,830 729,937
Add (deduct) our defined adjustments: Foreign currency exchange
losses (gains), net (15) (13,068) 6,417 (56,897) 27,218 Current
income tax expense (17) - - - 9,658 Deferred income tax expense
(benefit) (5,088) 10,742 (20,699) 19,478 Our share of reconciling
items from unconsolidated investees: Foreign currency exchange
losses (gains), net (15) (556) 953 (790) 2,413 Unrealized losses
(gains) on derivative contracts, net (208) 183 (6,167) 4,998
Deferred income tax expense (benefit) (338) 99 (1,631) 234 ---- ---
------ --- Total unconsolidated investees (1,102) 1,235 (8,588)
7,645 ------ ----- ------ ----- Total our defined adjustments
(19,258) 18,394 (86,184) 63,999 ------- ------ ------- ------ FFO,
including significant non-cash items (a) $65,187 $157,994 $444,646
$793,936 ======= ======== ======== ======== Reconciliation of FFO,
including significant non-cash items, to FFO, excluding significant
non-cash items Three Months Ended Nine Months Ended September 30,
September 30, ------------- ------------- 2009 2008 (1) 2009 2008
(1) ---- ------- ---- ------- FFO, including significant non-cash
items (a) $65,187 $157,994 $444,646 $793,936 Add (deduct)
significant non-cash items: Impairment of real estate properties
and other assets (12) 46,274 - 130,492 - Net gain related to
disposed assets - China operations (2) - - (3,315) - Gains on early
extinguishment of debt (3) (12,010) - (173,218) - Our share of
certain (gains) losses recognized by the property funds (4,925) -
6,358 - ------ --- ------- --- Total adjustments for significant
non-cash items 29,339 - (39,683) - ------ --- ------- --- FFO,
excluding significant non-cash items (a) $94,526 $157,994 $404,963
$793,936 ======= ======== ======== ======== Reconciliation of FFO,
excluding significant non-cash items, to EBITDA Three Months Ended
Nine Months Ended September 30, September 30, -------------
------------- 2009 2008 (1) 2009 2008 (1) ---- ------- ---- -------
FFO, excluding significant non-cash items (a) $94,526 $157,994
$404,963 $793,936 Interest expense 89,838 93,839 265,649 284,128
Depreciation of corporate assets 3,982 4,004 12,069 12,155 Current
income tax expense (benefit) included in FFO (4,626) 11,577 30,341
39,443 Adjustments to gains on dispositions for interest
capitalized 4,605 12,195 11,544 44,995 Preferred share dividends
6,369 6,333 19,107 19,071 Share of reconciling items from
unconsolidated investees 44,241 52,554 130,705 140,088 ------
------ ------- ------- Earnings before interest, taxes,
depreciation and amortization (EBITDA) $238,935 $338,496 $874,378
$1,333,816 ======== ======== ======== ========== See Consolidated
Statements of Operations and Consolidated Statements of FFO.
Footnotes follow Financial Statements (a) Attributable to common
shares. Calculation of Per Share Amounts (in thousands, except per
share amounts) Net Earnings (Loss) Per Share Three Months Ended
Nine Months Ended September 30, September 30, -------------
------------- 2009 2008 2009 2008 ---- ---- ---- ---- Net earnings
(loss) - Basic (a) $(11,788) $32,153 $405,809 $422,006
Noncontrolling interest attributable to convertible limited
partnership units (b) - - 966 3,665 --- --- --- ----- Adjusted net
earnings (loss) - Diluted (a) $(11,788) $32,153 $406,775 $425,671
======== ======= ======== ======== Weighted average common shares
outstanding - Basic 452,683 263,139 379,421 261,665 Incremental
weighted average effect of conversion of limited partnership units
(b) - - 1,192 5,088 Incremental weighted average effect of stock
awards (c) - 2,994 2,010 3,912 --- ----- ----- ----- Weighted
average common shares outstanding - Diluted 452,683 266,133 382,623
270,665 ======= ======= ======= ======= Net earnings (loss) per
share - Diluted (a) $(0.03) $0.12 $1.06 $1.57 ====== ===== =====
===== FFO Per Share, including significant non-cash items Three
Months Ended Nine Months Ended September 30, September 30,
------------- ------------- 2009 2008 2009 2008 ---- ---- ---- ----
FFO - Basic, including significant non-cash items (a) $65,187
$157,994 $444,646 $793,936 Noncontrolling interest attributable to
convertible limited partnership units (b) - 1,427 966 3,665 ---
----- --- ----- FFO - Diluted, including significant non-cash items
(a) $65,187 $159,421 $445,612 $797,601 ======= ======== ========
======== Weighted average common shares outstanding - Basic 452,683
263,139 379,421 261,665 Incremental weighted average effect of
conversion of limited partnership units (b) - 5,146 1,192 5,088
Incremental weighted average effect of stock awards (c) 2,388 2,994
2,010 3,912 ----- ----- ----- ----- Weighted average common shares
outstanding - Diluted 455,071 271,279 382,623 270,665 =======
======= ======= ======= FFO per share - Diluted, including
significant non-cash items (a) $0.14 $0.59 $1.16 $2.95 ===== =====
===== ===== FFO Per Share, excluding significant non-cash items
Three Months Ended Nine Months Ended September 30, September 30,
------------- ------------- 2009 2008 2009 2008 ---- ---- ---- ----
FFO - Basic, including significant non-cash items (a) $65,187
$157,994 $444,646 $793,936 Adjustments for significant non- cash
items 29,339 - (39,683) - Noncontrolling interest attributable to
convertible limited partnership units 162 1,427 966 3,665 --- -----
--- ----- FFO - Diluted, excluding significant non-cash items (a)
$94,688 $159,421 $405,929 $797,601 ======= ======== ========
======== Weighted average common shares outstanding - Basic 452,683
263,139 379,421 261,665 Incremental weighted average effect of
conversion of limited partnership units 1,110 5,146 1,192 5,088
Incremental weighted average effect of stock awards (c) 2,388 2,994
2,010 3,912 ----- ----- ----- ----- Weighted average common shares
outstanding - Diluted 456,181 271,279 382,623 270,665 =======
======= ======= ======= FFO per share - Diluted, excluding
significant non-cash items (a) $0.21 $0.59 $1.06 $2.95 ===== =====
===== ===== (a) Attributable to common shares. (b) If the impact of
the conversion of limited partnership units is anti-dilutive, the
income and shares are not included in the diluted per share
calculation. (c) Total weighted average potentially dilutive awards
outstanding were 11,470 and 9,603 for the three months ended
September 30, 2009 and 2008, respectively, and 11,739 and 9,993 for
the nine months ended September 30, 2009 and 2008, respectively. Of
the potentially dilutive instruments, 6,062 and 3,112, were
anti-dilutive for the three months ended September 30, 2009 and
2008, respectively, and 6,875 and 1,769, were anti-dilutive for the
nine months ended September 30, 2009 and 2008. During a loss
period, the impact from convertible partnership units and stock
awards are not included as the impact is anti-dilutive. Notes to
Financial Statements Please also refer to our annual and quarterly
financial statements filed with the Securities and Exchange
Commission on Forms 10-K and 10-Q for further information about us
and our business. Certain 2008 amounts included in our financial
statements have been reclassified to conform to the 2009
presentation. (1) In May 2008, the Financial Accounting Standards
Board ("FASB") issued a new standard that requires separate
accounting for the debt and equity components of convertible debt.
The value assigned to the debt component is the estimated fair
value of a similar bond without the conversion feature at the time
of issuance, which would result in the debt being recorded at a
discount. The resulting debt discount is amortized through the
first redeemable option date as additional non-cash interest
expense. We adopted this standard on January 1, 2009, as required,
on a retroactive basis to the convertible notes we issued in 2007
and 2008. As a result, we restated our 2008 results to reflect the
additional interest expense and the additional capitalized interest
related to our development activities for both properties we
currently own, as well as properties that were contributed during
the applicable periods. This restatement impacted earnings and FFO.
The following tables illustrate the impact of the restatement on
our Consolidated Balance Sheets and Consolidated Statements of
Operations and FFO for these periods (in thousands): As of December
31, 2008 ----------------------- New Standard As Reported
Adjustments As Adjusted ----------- ----------- -----------
Consolidated Balance Sheet: --------------------------- Net
investments in real estate assets $15,706,172 $19,100 $15,725,272
Other assets $1,129,182 $(2,189) $1,126,993 Debt $11,007,636
$(296,268) $10,711,368 Additional paid in capital $6,688,615
$381,493 $7,070,108 Distributions in excess of net earnings
$(587,199) $(68,314) $(655,513) For the three months ended,
September 30, 2008 ----------------------------------------------
New Standard As Reported Adjustments (a) As Adjusted -----------
-------------- ----------- (before 2009 discontinued operations
adjustment) Consolidated Statements of Operations:
-------------------------- Cost of CDFS dispositions $733,022 $807
$733,829 Interest expense, net of capitalization $83,327 $10,512
$93,839 Net earnings attributable to controlling interests $49,805
$(11,319) $38,486 For the nine months ended, September 30, 2008
--------------------------------------------- New Standard As
Reported Adjustments (a) As Adjusted ----------- --------------
----------- (before 2009 discontinued operations adjustment)
Consolidated Statements of Operations: --------------------------
Cost of CDFS dispositions $2,818,114 $1,322 $2,819,436 Interest
expense, net of capitalization $252,587 $31,541 $284,128 Net
earnings attributable to controlling interests $473,940 $(32,863)
$441,077 -------- (a) The adjustments are the same in our
Consolidated Statements of FFO. (2) On February 9, 2009, we sold
our operations in China and our property fund interests in Japan to
affiliates of GIC Real Estate, the real estate investment company
of the Government of Singapore Investment Corporation ("GIC RE"),
for total cash consideration of $1.3 billion ($845 million related
to China and $500 million related to the Japan investments). We
used the proceeds primarily to pay down borrowings on our credit
facilities. All of the assets and liabilities associated with our
China operations were classified as Assets and Liabilities Held for
Sale in our accompanying Consolidated Balance Sheet as of December
31, 2008. In the fourth quarter of 2008, based on the carrying
values of these assets and liabilities, as compared with the
estimated sales proceeds less costs to sell, we recognized an
impairment of $198.2 million. In connection with the sale in the
first quarter of 2009, we recognized a $3.3 million gain on sale.
In addition, the results of our China operations are presented as
discontinued operations in our accompanying Consolidated Statements
of Operations for all periods. All operating information presented
throughout this report excludes China operations. In connection
with the sale of our investments in the Japan property funds, we
recognized a gain of $180.2 million. The gain is reflected as CDFS
Proceeds in our Consolidated Statements of Operations and FFO, as
it represents previously deferred gains on the contribution of
properties to the property funds based on our ownership interest in
the property funds at the time of original contribution of
properties. We also recognized $20.5 million in current income tax
expense related to the Japan portion of the transaction. In April
2009, we sold one property in Japan to GIC RE for $128.1 million,
resulting in a gain on sale of $13.1 million that is reflected as
Discontinued Operations - Net Gains on Dispositions of Development
Properties and Land Subject to Ground Leases and as Net Gains on
Dispositions of Real Estate Properties in our Consolidated
Statements of Operations and FFO, respectively. The building and
related borrowings were classified as held for sale at December 31,
2008. We continued to manage the Japan properties until July 2009.
In connection with the termination of the management agreement, we
earned a termination fee of $16.3 million that is included in
Property Management and Other Fees and Incentives in our
Consolidated Statements of Operations and FFO. (3) During the three
and nine months ended September 30, 2009, in connection with our
announced initiatives to reduce debt, we repurchased several series
of notes outstanding at a discount and extinguished some secured
debt prior to maturity, which resulted in the recognition of gains
and is summarized, as follows (in thousands): For the Three For the
Nine Months Ended Months Ended September 30, September 30, 2009
2009 -------------- -------------- Convertible Senior Notes:
Original principal amount $15,000 $536,257 Cash purchase price
$13,028 $351,105 Senior Notes (a): Original principal amount
$20,000 $363,192 Cash purchase price $19,925 $322,015 Secured Debt:
Original principal amount (b) $227,017 $227,017 Cash extinguishment
price $227,017 $227,017 Total: Original principal amount $262,017
$1,126,466 Cash purchase/ extinguishment price $259,970 $900,137
Gain on early extinguishment of debt (c) $12,010 $173,218 --------
(a) Included in the nine months ended September 30, 2009 is the
repurchase of euro 97.7 million ($136.0 million) original principal
amount of our Euro senior notes for euro 82.6 million ($115.1
million). (b) Amount excludes premium of $11.4 million that was
recorded upon acquisition. (c) Represents the difference between
the recorded debt (net of the discount or premium) and the
consideration we paid to retire the debt. (4) In July 2009, we
exercised our option to extend the maturity of our global line of
credit (the "Global Line") to October 6, 2010. In August 2009, we
amended the Global Line, extending the maturity to August 21, 2012
and reducing the size of our aggregate commitments to $2.25 billion
after October 2010. The Global Line will continue to have a
capacity of $3.6 billion until October 2010. We may draw funds from
a syndicate of banks in US dollars, euros, Japanese yen, British
pound sterling and Canadian dollars and until October 2010, South
Korean won. Lenders who did not participate in the amended and
extended facility will be subject to the existing pricing structure
through October 2010, while the new pricing structure is effective
for continuing lenders. In connection with the amendment of the
Global Line, we repaid the balance outstanding and terminated our
existing multi-currency credit facility, which was scheduled to
mature on October 6, 2009, with borrowings under the Global Line.
In August 2009, we issued $350 million of senior notes with a
stated interest rate of 7.625% and a maturity of August 2014. We
used the proceeds primarily to repay borrowings under our Global
Line and other debt. (5) On April 14, 2009, we completed a public
offering of 174.8 million common shares at a price of $6.60 per
share and received net proceeds of $1.1 billion that were used to
repay borrowings under our credit facilities. During the third
quarter, we issued 29.8 million shares and received gross proceeds
of $331.9 million and paid offering expenses of approximately $6.9
million under our at the market share issuance plan. (6) The net
gains recognized in Accumulated Other Comprehensive Income (Loss)
in the nine months ended September 30, 2009 in our Consolidated
Balance Sheet are principally the result of the strengthening of
the euro, yen and pound sterling against the U.S. dollar, offset
somewhat by the sale of our China operations and investments in the
Japan property funds in February 2009. The strengthening of these
currencies against the U.S. dollar results in greater net assets
upon translation of our international operations into U.S. dollars.
(7) On January 1, 2009, we adopted the provisions of a new
accounting standard that requires noncontrolling interests
(previously referred to as minority interests) to be reported as a
component of equity and changes the accounting for transactions
with noncontrolling interest holders. (8) In our Consolidated
Statements of Operations, rental income includes the following (in
thousands): Three Months Ended Nine Months Ended September 30,
September 30, ------------- ------------- 2009 2008 2009 2008 ----
---- ---- ---- Rental income $168,562 $164,710 $496,270 $517,864
Rental expense recoveries 48,598 51,970 151,753 165,129
Straight-lined rents 7,970 8,821 26,625 24,252 ----- ----- ------
------ $225,130 $225,501 $674,648 $707,245 ======== ========
======== ======== The decrease in rental income is generally due to
the contributions and sale of properties, offset somewhat by
increased leasing in our development properties. (9) In response to
market conditions, during the fourth quarter of 2008 we modified
our business strategy. As a result, as of December 31, 2008, we
have two operating segments - Direct Owned and Investment
Management, and we no longer have a CDFS Business segment. We
presented the results of operations of our CDFS Business segment
separately in 2008. Our direct owned segment represents the direct,
long-term ownership of industrial properties. Our investment
strategy in this segment focuses primarily on the ownership and
leasing of industrial properties in key distribution markets. We
consider these properties to be our Core Portfolio. Also included
in this segment are operating properties we developed with the
intent to contribute the properties to an unconsolidated property
fund that we previously referred to as our "CDFS Pipeline" and,
beginning December 31, 2008, we now refer to as our Completed
Development Portfolio. Our intent is to hold and use the Core and
Development properties, however, we may contribute either Core or
Development properties to the property funds, to the extent there
is fund capacity, or sell them to third parties. When we contribute
or sell Development properties, we recognize FFO to the extent the
proceeds received exceed our original investment (i.e. prior to
depreciation). However, beginning January 1, 2009, we now present
the results as Net Gains on Dispositions, rather than as CDFS
Disposition Proceeds and Cost of CDFS Dispositions. In addition, we
have industrial properties that are currently under development
(also included in our Development Portfolio) and land available for
development that are part of this segment as well. The investment
management segment represents the investment management of
unconsolidated property funds and joint ventures and the properties
they own. See note 16 for information on properties sold to third
parties. (10) Beginning in 2009, we are reporting the direct costs
associated with our investment management segment for all periods
presented as a separate line item "Investment Management Expenses"
in our Consolidated Statements of Operations and FFO. These costs
include the property management expenses associated with the
property-level management of the properties owned by the property
funds (previously included in Rental Expenses) and the investment
management expenses associated with the asset management of the
property funds (previously included in General and Administrative
Expenses). In order to allocate the property management expenses
between the properties owned by us and the properties owned by the
property funds and joint ventures, we use the square feet owned at
the beginning of the period by the respective portfolios. See note
2 related to the Japan properties that we no longer manage. (11) As
we previously announced in the fourth quarter of 2008, in response
to the difficult economic climate, we initiated general and
administrative expense ("G&A") reductions with a near-term
target of a 20 to 25% reduction in G&A prior to capitalization
or allocation. These initiatives include a Reduction in Workforce
("RIF") and reductions to other expenses through various cost
savings measures. Due to the changes in our business strategy in
the fourth quarter of 2008, we have halted the majority of our new
development activities, which, along with lower gross G&A, has
resulted in lower capitalized G&A. Our G&A included in our
Statements of Operations consisted of the following (in thousands):
Three Months Ended Nine Months Ended September 30, September 30,
------------- ------------- 2009 2008 2009 2008 ---- ---- ---- ----
Gross G&A expense $65,060 $94,486 $212,221 $289,464 Capitalized
amounts and amounts reported as rental and investment management
expenses (26,428) (47,835) (83,896) (149,101) ------- -------
------- --------- Net G&A $38,632 $46,651 $128,325 $140,363
======= ======= ======== ======== In the fourth quarter of 2008 and
the nine months ended September 30, 2009, we recognized $23.1
million and $11.7 million, respectively, of expenses related to the
RIF program. (12) During the three and nine months ended September
30, 2009, we recorded impairment charges of our real estate
properties of $39.7 million and $123.9 million, respectively,
related primarily to completed development properties in Europe
that have been or we expect to contribute or sell during the
remainder of 2009. The charges represent the difference between the
estimated proceeds and our cost basis at the time of
contribution/sale and may vary depending on market conditions. In
addition, we recorded impairment charges of other assets of $6.6
million, which related primarily to intangible assets that were
acquired in 2007. (13) The following table represents our share of
income (loss) recognized by the property funds related to
derivative activity and the sale of real estate properties (in
thousands). Three Months Ended Nine Months Ended September 30,
September 30, ------------- ------------- 2009 2008 2009 2008 ----
---- ---- ---- Included in Earnings from Unconsolidated Property
Funds in our Consolidated Statements of Operations: Derivative
loss: $(2,890) $(2,447) $(7,700) $(13,089) Gain (loss) from the
sale of properties and (impairment charges): $(1,496) $1,302
$(5,777) $1,467 Included in FFO from Unconsolidated Property Funds
in our Consolidated Statements of FFO: Derivative loss: $(3,099)
$(2,265) $(13,867) $(8,092) Gain (loss) from the sale of properties
and (impairment charges): $(2,544) $1,304 $(13,403) $1,304 (14) The
following table presents the components of interest expense as
reflected in our Consolidated Statements of Operations (in
thousands): Three Months Ended Nine Months Ended September 30,
September 30, ------------- ------------- 2009 2008 2009 2008 ----
---- ---- ---- Interest expense $91,349 $120,014 $281,585 $360,820
Amortization of discount, net 15,706 18,243 51,049 45,225
Amortization of deferred loan costs 4,941 3,044 11,191 8,765 -----
----- ------ ----- Interest expense before capitalization 111,996
141,301 343,825 414,810 Capitalized amounts (22,158) (47,011)
(78,006) (130,058) ------- ------- ------- --------- Net interest
expense $89,838 $94,290 $265,819 $284,752 ======= ======= ========
======== The decrease in interest expense in 2009 over 2008 is due
to significantly lower debt levels, offset by lower capitalization
due to less development activity. (15) Included in Foreign Currency
Exchange Gains (Losses), Net, for the nine months ended September
30, 2009 and 2008, are net foreign currency exchange gains and
losses, respectively, related to the remeasurement of inter-company
loans between the U.S. and our consolidated subsidiaries in Japan
and Europe due to the fluctuations in the exchange rates of U.S.
dollars to the yen, the euro and pound sterling between December
31st and September 30th of the applicable years. We do not include
the gains and losses related to inter-company loans in our
calculation of FFO. (16) The operations of the properties held for
sale or disposed of to third parties and the aggregate net gains
recognized upon their disposition are presented as discontinued
operations in our Consolidated Statements of Operations for all
periods presented, unless the property was developed under a
pre-sale agreement. As discussed in Note 2 above, all of the assets
and liabilities associated with our China operations were
classified as Assets and Liabilities Held for Sale in our
accompanying Consolidated Balance Sheet as of December 31, 2008, as
well as one property in Japan that we sold to GIC RE in April 2009.
During the first nine months of 2009, other than our China
operations, we disposed of 128 properties to third parties
aggregating 13.7 million square feet, 3 of which were development
properties. This includes a portfolio of 90 properties aggregating
9.6 million square feet that were sold to a single venture in which
we retained a 5% interest and for which we will continue to manage
the properties. During all of 2008, we disposed of 15 properties to
third parties, 6 of which were development properties, as well as
land subject to ground leases. The income attributable to these
properties was as follows (in thousands): Three Months Ended Nine
Months Ended September 30, September 30, -------------
------------- 2009 2008 2009 2008 ---- ---- ---- ---- Rental income
$96 $28,079 $37,033 $78,312 Rental expenses 624 (11,038) (10,033)
(26,230) Depreciation and amortization (109) (7,415) (8,614)
(23,633) Other expenses, net - (3,493) (576) (18,313) --- ------
---- ------- Income attributable to disposed properties $611 $6,133
$17,810 $10,136 ==== ====== ======= ======= For purposes of our
Consolidated Statements of FFO, we do not segregate discontinued
operations. In addition, we include the gains from disposition of
land parcels and Completed Development Properties (2009) and CDFS
properties (2008) in the calculation of FFO, including those
classified as discontinued operations. (17) In connection with
purchase accounting, we record all of the acquired assets and
liabilities at the estimated fair values at the date of
acquisition. For our taxable subsidiaries, we recognize the
deferred tax liabilities that represent the tax effect of the
difference between the tax basis carried over and the fair values
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. DATASOURCE: ProLogis CONTACT:
Investor Relations, Melissa Marsden, +1-303-567-5622, , or Media,
Krista Shepard, +1-303-567-5907, , both of ProLogis; or Financial
Media, Suzanne Dawson of Linden Alschuler & Kaplan, Inc,
+1-212-329-1420, , for ProLogis Web Site: http://www.prologis.com/
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