ProLogis Reports 10.6% Increase in First Quarter Funds From Operations

Transcription

1 May 3, 2000 ProLogis Reports 10.6% Increase in First Quarter Funds From Operations DENVER, May 3 /PRNewswire/ -- ProLogis (NYSE: PLD), a leading global provider of distribution services and facilities, reported a 10.6% increase in funds from operations (FFO) per diluted share for the quarter ended March 31, 2000, to $.52 per diluted share, from $.47 per diluted share in "First quarter results were excellent, driven by the exceptional performance of our operating properties and significant growth in our Corporate Distribution Facilities business," said K. Dane Brooksher, chairman and chief executive officer. "We also strengthened our operating platform with the addition of new services that will expand our customer service offerings and generate service income with minimal capital investment, thereby increasing returns on invested capital." Mr. Brooksher also noted that ProLogis' expanding customer relationships continue to support internal growth by generating high occupancies and strong rental rate increases, and also generate demand for new facility development. ProLogis' stabilized lease percentage at March 31, 2000 was 96.0%, while rental rate growth for the quarter was 18.0% and same store net operating income increased by 8.13%. New Services Offer State-of-the-Art Technology "During the quarter, we added new services and web-enabled technologies that will allow us to provide complete solutions for our customers' distribution services needs. We significantly enhanced our corporate website with the launch of ProLogis CustomerConnect(SM), the industry's first interactive customer account access system. ProLogis CustomerConnect not only offers customers the ability to track their entire portfolio of properties, it also provides a web-based platform for other technology initiatives we currently have underway. In addition, our temperature-controlled business announced it will use DeliveryNet from Descartes to integrate our North American and European internal information systems and to create a B2B food logistics network, allowing customers to track movement of goods and information throughout the supply chain," Mr. Brooksher said. The company also recently formed ProLogis Equipment Services (PES), a joint venture with Dana Commercial Credit Corporation, to provide material handling equipment leasing and asset management services. "PES will be branded and marketed through our Integrated Solutions Group, which now can offer a complete spectrum of distribution-related services -- from selecting the optimal location to developing the facility and providing material handling equipment. In addition, PES will offer a unique, web-based asset management system that will allow customers to manage and track their material handling equipment across their entire network," Mr. Brooksher said. Corporate Distribution Facilities Business Continues to Expand "Income from our Corporate Distribution Facilities business increased significantly in the first quarter," said Irving F. Lyons, III, president and chief investment officer. "We expect this business to continue to perform well for the remainder of the year due to the continued strong markets in North America and accelerating development of facilities in Europe that will be transferred to the ProLogis European Properties Fund." The company noted that it expanded its presence in Europe during the quarter with the initial development of properties in Milan, Italy and with a new build-to-suit distribution facility in Tongeren, Belgium for Exel plc. "In the first quarter we signed over 2.1 million square feet in new Corporate Distribution Facility leases in eight global markets, including leases with global customers such as Exel Logistics, Bissell Homecare, Inc. and TNT UK," Mr. Lyons added. Our total development pipeline is now at 12.4 million square feet and importantly, over half of this pipeline has been funded primarily from our strategic asset disposition program. We completed over $143 million in dispositions, and continue to redeploy proceeds into higher yielding developments," Mr. Lyons added. ProLogis is a leading global provider of integrated distribution facilities and services, with 1,641 distribution facilities owned, operating and under development throughout North America and Europe. ProLogis has built the industry's first and only global

2 network of distribution facilities with the primary objective to build shareholder value by becoming the leading provider of distribution facilities and services. The company expects to achieve this objective through the ProLogis Operating System(TM), and its commitment to be "The Global Distribution Solution" by providing exceptional corporate distribution services and facilities to meet customer expansion and reconfiguration needs globally. As of March 31, 2000, ProLogis had over million square feet of distribution facilities owned, operating or under development in 98 global markets. In addition to historical information, this press release contains forward-looking statements under the federal securities laws. These statements are based on current expectations, estimates and projections about the industry and markets in which ProLogis operates, management's beliefs and assumptions made by management. Forward-looking statements are not guarantees of future performance and involve certain risks and uncertainties which are difficult to predict. Actual operating results may be affected by changes in national and local economic conditions, competitive market conditions, changes in financial markets or interest rates that could adversely affect ProLogis' ability to meet its financing needs and obligations, weather, obtaining governmental approvals and meeting development schedules, and therefore, may differ materially from what is expressed or forecasted in this press release. A copy of ProLogis' first quarter 2000 supplemental information will be available from the company's web site at or by request at 800/ The company's conference call will be available via a live webcast on the company's website at The replay of the call will be available on the company's web site or at or at ProLogis Trust Selected Financial Data (in thousands, except per share amounts) March 31, % Change Income Items: Revenues $165,718 $125, % Funds from operations attributable to Common Shares (A) (B) $87,804 $60, % Diluted per share funds from operations attributable to Common Shares (B) (C) $0.52 $ % Distributions per Common Share (D) $ $ % March 31, December 31, % Change Assets: Investments in land and distribution facilities before depreciation $4,648,107 $4,974, % Total assets (net of accumulated depreciation) $5,702,003 $5,848, % Market Capitalization: Total Common Shares outstanding 162, , % Common Share price $ $ % Total equity value $3,854,295 (E) $3,824,324 (F) 0.8% Total market

3 capitalization (including all debt) $6,309,354 $6,379, % NOTES (A) See Reconciliation of Net Earnings to Funds from Operations. (B) The 1999 amounts have been restated from amounts previously reported in 1999 to include non-recurring items as a component of funds from operations. See Reconciliation of Net Earnings to Funds from Operations for the definition of funds from operations and Restatement and Reconciliation of 1999 Funds from Operations for quarterly restatements of funds from operations for (C) See Note L on notes to Consolidated Statements of Funds from Operations for the calculation of diluted funds from operations per Common Share. (D) ProLogis paid a distribution of $0.335 per common share on February 23, The annual distribution level for 2000 was set at $1.34 per Common Share by the Board of Trustees in December (E) Includes $120.3 million of Series A Preferred Shares, $172.2 million of Series B Convertible Preferred Shares, $100.0 million of Series C Preferred Shares, $186.3 million of Series D Preferred Shares, $43.3 million of Series E Preferred Shares and $107.5 million of convertible limited partnership units. (F) Includes $108.0 million of series A Preferred Shares, $173.3 million of Series B Convertible Preferred Shares, $100.0 million of Series C Preferred Shares, $182.5 million of Series D Preferred Shares, $37.8 million of Series E Preferred Shares and $107.5 million of convertible limited partnership units. ProLogis Trust Consolidated Statements of Funds from Operations (A) (in thousands, except per share amounts) March 31, Revenues: Rental income (B) $120,809 $97,161 Corporate distribution facilities services income (C) 25,468 15,527

4 Income from temperature-controlled distribution operations (D) 6,831 8,390 Income from ProLogis California (E) 4, Income from ProLogis European Properties Fund (F) 3, Income from ProLogis European Properties S.a.r.l. (G) 2, Income from ProLogis Garonor (H) -- 3,835 Interest and other income 1, , ,712 Expenses: Rental expenses, net of recoveries (I) 6,547 7,189 General and administrative 11,241 8,421 Depreciation of non-real estate assets Interest (J) 41,986 30,918 Interest rate hedge expense Other 1,335 2,539 61,855 50,324 Funds from operations 103,863 75,388 Less preferred share dividends 14,405 13,445 Less minority interest share in funds from operations (K) 1,654 1,169 Funds from Operations Attributable to Common Shares $87,804 $60,774 Weighted average Common Shares outstanding - basic (K) 162, ,660 Weighted average Common Shares outstanding - diluted (L) 176, ,171 Per Share Funds from Operations Attributable to Common Shares: Basic (K) $0.54 $0.49 Diluted (L) $0.52 $0.47 Notes to Consolidated Statements of Funds from Operations (in thousands, except per share amounts) NOTES (A) See Reconciliation of Net Earnings to Funds from Operations. The 1999 amounts have been restated from amounts previously reported in 1999 to include non-recurring items as a component of funds from operations. See Reconciliation of Net Earnings to Funds from Operations for the definition of funds from operations and Restatement and Reconciliation of 1999 Funds from Operations for quarterly restatements of funds from operations for (B) Includes $1,921,000 and $1,449,000 of straight-lined rent for the three months in 2000 and 1999, respectively. (C) Income has been reduced by $647,000 for the three months in 2000, which represents the portion of gains related to the facilities that ProLogis and ProLogis Kingspark sold to the ProLogis European Properties Fund that does not qualify for income recognition due to ProLogis' continuing ownership in the ProLogis European Properties Fund. (D) Represents funds from operations from ProLogis' investments in temperature-controlled distribution operations companies that are accounted for under the equity method. (E) Represents ProLogis' share of funds from operations from its investment in ProLogis California I LLC ("ProLogis California"), a

5 partnership with New York State Common Retirement Fund that was formed on August 23, This investment is accounted for under the equity method. The three months ended March 31, 2000 include $665,000 of management, leasing and development fees earned by ProLogis. (F) Represents ProLogis' share of funds from operations from its investment in the ProLogis European Properties Fund that was formed on September 23, This investment is accounted for under the equity method. The three months ended March 31, 2000 include $1,142,000 of management fees earned by ProLogis. (G) Represents ProLogis' 49.9% share of the funds from operations of the ProLogis European Properties S.a.r.l., a Luxembourg entity that owns ProLogis Garonor (consisting of 4,995,000 square feet of distribution facilities in France), 393,000 square feet of distribution facilities in Poland, 138,000 square feet of distribution facilities in the Netherlands and 1,102,000 square feet of non-garonor distribution facilities in France. On January 7, 2000, ProLogis contributed 50.1% of the common stock of the ProLogis European Properties S.a.r.l. to the ProLogis European Properties Fund. Pursuant to the terms of the ProLogis European Properties Fund agreement, ProLogis will contribute the remaining 49.9% of the common stock in January This investment is accounted for under the equity method. (H) As of June 30, 1999, Garonor Holdings S.A. and Garonor S.A. ("ProLogis Garonor") became wholly-owned subsidiaries of ProLogis. Prior to June 30, 1999, ProLogis reported the results of operations of these entities under the equity method of accounting. From July 1, 1999 to January 7, 2000, the funds from operations of these entities have been consolidated with ProLogis' funds from operations. See Note G. (I) Net of rental expense recoveries of $23,612,000 and $16,883,000 for the three months in 2000 and 1999, respectively. (J) Includes $987,000 and $802,000 of amortization of loan fees for the three months in 2000 and 1999, respectively. Excludes $4,183,000 and $3,927,000 of interest that has been capitalized for the three months in 2000 and 1999, respectively. (K) For purposes of calculating "basic" funds from operations per Common Share, ProLogis uses the methodology prescribed by SFAS No Because ProLogis adjusted its calculation of basic funds from operations per Common Share to assume conversion of all limited partnership units to ProLogis Common Shares in prior periods, the 1999 information has been restated to not assume conversion. This change did not affect previously reported funds from operations per share for the three months in 1999, which is $0.49. (L) Funds from operations per Common Share calculated on a "diluted" basis is as follows: March 31, Funds from operations attributable to Common Shares $87,804 $60,774 Minority interest share in funds from operations 1,654 1,169 Series B preferred share dividends 3,053 3,188 Adjusted funds from operations attributable to Common Shares $92,511 $65,131 Weighted average Common Shares outstanding - basic (K) 162, ,660 Weighted average conversion of limited partnership units 5,587 5,065 Weighted average conversion of Series B preferred shares 8,968 9,425 Incremental options and warrants (a)

6 Adjusted weighted average Common Shares 176, ,171 Diluted funds from operations per Common Share $0.52 $0.47 (a) The number of weighted average common stock equivalents outstanding were 7,770,000 and 5,113,000 for the three months in 2000 and 1999, respectively. ProLogis Trust Consolidated Statements of Income (A) (in thousands, except per share amounts) March 31, Revenues: Rental income (B) $120,809 $97,161 Corporate distribution facilities services income (C) 23,764 11,904 Income (loss) from temperaturecontrolled distribution operations (D) 1,197 (2,016) Income from ProLogis California (E) 3, Income from ProLogis European Properties Fund (F) 7, Income from ProLogis European Properties S.a.r.l. (G) 4, Loss from ProLogis Garonor (H) -- (5,710) Interest and other income 1, , ,138 Expenses: Rental expenses, net of recoveries (I) 6,547 7,189 General and administrative 11,241 8,421 Depreciation and amortization 39,474 27,364 Interest rate hedge expense Interest (J) 41,986 30,918 Other 1,335 2, ,583 77,376 Earnings from operations 62,411 24,762 Minority interest share in earnings 1,654 1,169 Earnings before gain on disposition of real estate and foreign currency exchange losses 60,757 23,593 Gain on disposition of real estate 5, Foreign currency exchange losses (K) (6,522) (8,373) Earnings before cumulative effect of accounting change 59,343 15,935 Less cumulative effect of accounting change -- 1,440 Net earnings 59,343 14,495 Less preferred share dividends 14,405 13,445 Net Earnings Attributable to Common Shares $44,938 $1,050 Weighted average Common Shares outstanding - basic 162, ,660 Weighted average Common Shares outstanding - diluted (L) 162, ,681 Per Share Net Earnings Attributable to Common Shares before Cumulative Effect of Accounting Change: Basic and Diluted (L) $0.28 $0.02

7 Per Share Net Earnings Attributable to Common Shares: Basic and Diluted (L) $0.28 $0.01 NOTES (A) See Reconciliation of Net Earnings to Funds from Operations. (B) Includes $1,921,000 and $1,449,000 of straight-lined rent for the three months in 2000 and 1999, respectively. (C) Income has been reduced by $647,000 for the three months in 2000, which represents the portion of the gains related to the facilities that ProLogis and ProLogis Kingspark sold to the ProLogis European Properties Fund that does not qualify for income recognition due to ProLogis' continuing ownership in the ProLogis European Properties Fund. (D) Represents income (loss) from ProLogis' investment in temperature-controlled distribution operations companies that are accounted for under the equity method. (E) Represents ProLogis' share of income from it's investment in ProLogis California, a partnership with New York State Common Retirement Fund that was formed on August 23, This investment is accounted for under the equity method. The three months ended March 31, 2000 include $665,000 of management, leasing and development fees earned by ProLogis. (F) Represents ProLogis' share of income from its investment in the ProLogis European Properties Fund that was formed on September 23, This investment is accounted for under the equity method. The three months ended March 31, 2000 include $1,142,000 of management fees earned by ProLogis. (G) Represents ProLogis' 49.9% share of the income of the ProLogis European Properties S.a.r.l., a Luxembourg entity that owns ProLogis Garonor (consisting of 4,995,000 square feet of distribution facilities in France), 393,000 square feet of distribution facilities in Poland, 138,000 square feet of distribution facilities in the Netherlands and 1,102,000 square feet of non-garonor distribution facilities in France. On January 7, 2000, ProLogis contributed 50.1% of the common stock of the ProLogis European Properties S.a.r.l. to the ProLogis European Properties Fund. Pursuant to the terms of the ProLogis European Properties Fund agreement, ProLogis will contribute the remaining 49.9% of the common stock in January This investment is accounted for under the equity method. (H) See Note H on Notes to Consolidated Statements of Funds from Operations. (I) Net of rental expense recoveries of $23,162,000 and $16,883,000 for the three months in 2000 and 1999, respectively. (J) Includes $987,000 and $802,000 of amortization of loan fees for the three months in 2000 and 1999, respectively. Excludes $4,183,000 and $3,927,000 of interest that has been capitalized for the three months in 2000 and 1999, respectively. (K) Includes gains (losses) resulting from intercompany debt transactions and from the remeasurement (based on current foreign currency exchange rates) of intercompany and other debt of ProLogis' foreign subsidiaries. Also includes gains (losses) resulting from mark to market adjustments related to derivative financial instruments. Such gains and losses are not included for purposes of calculating funds from operations. See Reconciliation of Net Earnings to Funds from Operations for the definition of funds from operations. (L) Net earnings per Common Share on a diluted basis for the three month periods in 2000 and 1999 do not assume the conversion of Series B preferred shares and the conversion of limited partnership units as the effects are anti-dilutive.

8 ProLogis Trust Reconciliation of Net Earnings to Funds from Operations (A) (in thousands) March 31, Net Earnings Attributable to Common Shares $44,938 $1,050 Add (Deduct): Real estate related depreciation and amortization 38,728 27,052 Gain on disposition of depreciated real estate (5,108) (715) Foreign currency exchange losses (B) 6,522 8,373 Cumulative effect of accounting change (C) -- 1,440 ProLogis' share of reconciling items from unconsolidated entities (D): Real estate related depreciation and amortization 14,239 12,549 Foreign currency exchange (gains) losses (B) (10,637) 10,245 Deferred tax benefit (566) (837) Cumulative effect of accounting change (C) (Gain) loss on disposition of depreciated real estate (312) 1,480 Funds from Operations Attributable to Common Shares $87,804 $60,774 NOTES (A) ProLogis considers funds from operations to be a useful measure of comparative period operating performance. Funds from operations as used by ProLogis is defined as net income (computed in accordance with GAAP) excluding: (i) gains or losses from sales of previously depreciated property; (ii) real estate related depreciation and amortization; (iii) deferred income tax benefits and expenses of ProLogis' taxable subsidiaries; (iv) foreign currency exchange gains and losses resulting from debt transactions between ProLogis and its foreign consolidated and unconsolidated entities; (v) foreign currency exchange gains and losses from the remeasurement (based on current foreign currency exchange rates) of third party debt of ProLogis' foreign consolidated and unconsolidated entities; and (vi) mark to market adjustments related to derivative financial instruments utilized to manage ProLogis' foreign currency risks. In addition, adjustments for ProLogis' unconsolidated entities are calculated to reflect their funds from operations on the same basis. The 1999 amounts have been restated from amounts previously reported in 1999 to confirm with this definition. See Restatement and Reconciliation of 1999 Funds from Operations for quarterly restatements of funds from operations for (B) See Note K on Consolidated Statements of Income (C) Represents previously capitalized start-up and organizational costs that were expensed on January 1, 1999 in accordance with the requirements of Statement of Position (D) ProLogis accounts for its investment in ProLogis Kingspark, the

9 temperature-controlled distribution operations companies, ProLogis California, the ProLogis European Properties Fund and the ProLogis European Properties S.a.r.l. using the equity method. For purposes of calculating funds from operations, ProLogis adjusts the net earnings of these businesses on the same basis as the definition discussed in Note A. Prior to June 30, 1999, ProLogis Garonor was also accounted for under the equity method. From July 1, 1999 to January 7, 2000, ProLogis Garonor's funds from operations and net earnings have been consolidated with ProLogis' funds from operations and net earnings. See Note H on Notes to Consolidated Statements of Funds from Operations. ProLogis Trust Restatement and Reconciliation of 1999 Funds from Operations (in thousands, except per share amounts) Effective January 1, 2000, funds from operations (as discussed on Reconciliation of Net Earnings to Funds from Operations) no longer excludes non-recurring items. Consequently, 1999 amounts as previously reported have been restated as follows: Year Ended March June September December December 31, 30, 30, 31, 31, Previously Reported FFO attributable to Common Shares- Diluted $66,067 $86,297 $91,460 $93,877 $337,701 Interest rate hedge expense, net (936) (126) Non-recurring income and (expenses) -- (1,310) (18) 1, Revised FFO attributable to Common Shares- Diluted $65,131 $85,257 $91,712 $95,603 $337,703 Weighted average Common Shares outstanding- Diluted 138, , , , ,421 Per Common Share - Diluted: Previously Reported FFO $0.48 $0.49 $0.52 $0.53 $2.02 Revised FFO $0.47 $0.48 $0.52 $0.54 $2.02

10 ProLogis Trust Financial Results Consolidated Balance Sheets (in thousands) March 31, December 31, (Unaudited) (Audited) Assets: Investments in industrial distribution facilities: Buildings, improvements, improved land and CIP $4,481,862 $4,811,255 Land held for development 166, ,696 Less accumulated depreciation (388,512) (366,703) Net investments in real estate 4,259,595 4,608,248 Investment in temperature-controlled distribution operating companies 405, ,615 Investment in ProLogis California 126, ,560 Investment in ProLogis European Properties Fund (A) 131,916 24,976 Investment in ProLogis European Properties S.a.r.l. (B) 66, Investment in ProLogis Kingspark (A) 400, ,213 Cash and cash equivalents 99,370 69,338 Accounts and notes receivable 43,292 46,998 Other assets 169, ,092 Total assets $5,702,003 $5,848,040 Liabilities and Shareholders' Equity: Liabilities: Lines of credit $174,426 $98,700 Senior unsecured notes 1,729,722 1,729,630 Other unsecured debt -- 30,892 Mortgage notes and other secured debt 550, ,586 Construction payable 41,074 23,064 Interest payable 46,503 41,878 Distributions and dividends payable ,939 Accounts payable 19,671 12,124 Accrued expenses and other liabilities 92, ,419 Total liabilities 2,655,042 2,832,232 Minority interest 61,968 62,072 Shareholders' equity: Series A preferred shares 135, ,000 Series B convertible preferred shares 174, ,518 Series C preferred shares 100, ,000 Series D preferred shares 250, ,000 Series E preferred shares 50,000 50,000 Common Shares at $.01 par value 1,623 1,618 Additional paid-in capital 2,650,519 2,640,444 Accumulated other comprehensive income (32,339) (9,765) Distributions in excess of net earnings (344,297) (389,079) Total shareholders' equity 2,984,993 2,953,736 Total liabilities and shareholders' equity $5,702,003 $5,848,040 NOTES (A) ProLogis' investments in the ProLogis European Properties Fund and ProLogis Kingspark as of March 31, 2000, have been reduced by $8.4 million ($7.0 million related to the ProLogis European Properties Fund and $1.4 million related to ProLogis Kingspark), which represents the cumulative portion of the gains related to the facilities that ProLogis and ProLogis Kingspark sold to the ProLogis

11 European Properties Fund that does not qualify for income recognition due to ProLogis' continuing ownership in the ProLogis European Properties Fund. (B) Represents ProLogis' 49.9% investment in the common stock of the ProLogis European Properties S.a.r.l., a Luxembourg entity that owns ProLogis Garonor (consisting of 4,995,000 square feet of distribution facilities in France), 393,000 square feet of distribution facilities in Poland, 138,000 of distribution facilities in the Netherlands and 1,102,000 square feet of non-garonor distribution facilities in France. On January 7, 2000, ProLogis contributed 50.1% of the common stock of the ProLogis European Properties S.a.r.l. to the ProLogis European Properties Fund. Pursuant to the terms of the ProLogis European Properties Fund agreement, ProLogis will contribute the remaining 49.9% of the common stock in January This entity is accounted for under the equity method.