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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NUMBER 1-12846
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PROLOGIS TRUST
(Exact name of registrant as specified in its charter)
MARYLAND 74-2604728
(State or other jurisdiction of (I.R.S. employer
of incorporation or organization) identification no.)
14100 EAST 35TH PLACE
AURORA, COLORADO 80011
(Address of principal executive offices and zip code)
(303) 375-9292
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Shares of Beneficial Interest, par value $0.01 per
share New York Stock Exchange
Series A Cumulative Redeemable Preferred Shares of
Beneficial Interest, par value $0.01 per share New York Stock Exchange
Series B Cumulative Convertible Redeemable Preferred Shares
of Beneficial Interest, par value $0.01 per share New York Stock Exchange
Series D Cumulative Redeemable Preferred Shares of
Beneficial Interest, par value $0.01 per share New York Stock Exchange
Series E Cumulative Redeemable Preferred Shares of
Beneficial Interest, par value $0.01 per share New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
Based on the closing price of the registrant's shares on March 16, 2001,
the aggregate market value of the voting shares held by non-affiliates of the
registrant was $2,455,192,440.
At March 16, 2001, there were outstanding approximately 173,560,729 common
shares of beneficial interest of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement for the 2001 annual
meeting of its shareholders are incorporated by reference in Part III of this
report.
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TABLE OF CONTENTS
ITEM DESCRIPTION PAGE
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PART I
1. Business.................................................... 1
ProLogis Trust............................................ 1
Business Strategy and Operating Segments.................. 2
Financing Strategy........................................ 12
ProLogis Operating System(TM)............................. 13
ProLogis Management....................................... 14
Environmental Matters..................................... 19
Insurance Coverage........................................ 19
2. Properties.................................................. 19
Industrial Distribution Facilities........................ 19
Geographic Distribution................................... 20
Facilities................................................ 22
Consolidated Entities..................................... 26
Unconsolidated Entities................................... 28
3. Legal Proceedings......................................... 31
4. Submission of Matters to a Vote of Security Holders....... 31
PART II
5. Market for the Registrant's Common Equity and Related
Stockholder Matters....................................... 31
Distributions and Dividends............................... 32
Dividend Reinvestment and Share Purchase Plan............. 33
6. Selected Financial Data..................................... 34
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 36
Results of Operations..................................... 37
Environmental Matters..................................... 44
Liquidity and Capital Resources........................... 44
New Tax Legislation....................................... 49
Funds from Operations..................................... 49
Risk Factors.............................................. 50
7A. Quantitative and Qualitative Disclosure About Market Risk... 54
8. Financial Statements and Supplementary Data................. 55
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure Matters.......................... 55
PART III
10. Directors and Executive Officers of the Registrant.......... 56
11. Executive Compensation...................................... 56
12. Security Ownership of Certain Beneficial Owners and
Management................................................ 56
13. Certain Relationships and Related Transactions.............. 56
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form
8-K....................................................... 57
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PART I
ITEM 1. BUSINESS
PROLOGIS TRUST
ProLogis Trust ("ProLogis") is a real estate investment trust ("REIT") that
operates a global network of industrial distribution facilities. ProLogis owns
(directly, through consolidated entities or through investments in other real
estate entities accounted for under the equity method) 171.7 million square feet
of industrial distribution facilities operating or under development in North
America and Europe. Additionally, ProLogis owns, operates under lease agreements
or has under development 369.9 million cubic feet of temperature-controlled
distribution facilities (including 35.5 million cubic feet of dry distribution
space located in temperature-controlled distribution facilities) located in the
United States and Europe. This network of distribution facilities makes ProLogis
the largest publicly held U.S.-based global owner and lessor of industrial
distribution and temperature-controlled distribution facilities. The ProLogis
Operating System(TM), comprised of the Market Services Group, the Global
Services Group, the Global Development Group and the Integrated Solutions Group,
combined with ProLogis' international network of distribution facilities,
enables ProLogis to meet its customers' distribution space needs globally.
ProLogis believes it has distinguished itself from its competition by developing
an organizational structure and service delivery system built around its
customers. ProLogis believes that its service approach, which combines
international scope and expertise and a strong local presence in each of its
target markets, makes it attractive to its targeted customer base that includes
the largest global users of distribution facilities. ProLogis is organized under
Maryland law and has elected to be taxed as a REIT under the Internal Revenue
Code of 1986, as amended (the "Code").
ProLogis' business strategy is designed to: (i) achieve long-term
sustainable growth in cash flow; (ii) minimize the need to issue direct public
debt or public equity capital; and (iii) increase the overall return on equity
for shareholders. ProLogis has organized its business into three operating
segments in order to achieve its objectives. For a discussion of certain
financial information regarding each segment see Note 10 to ProLogis'
Consolidated Financial Statements in Item 8. ProLogis' three operating segments
are:
- Property Operations -- The long-term ownership, management and leasing of
industrial distribution facilities in North America and Europe, primarily
distribution space that is adaptable for both distribution and light
manufacturing or assembly uses. This operating segment generates income
from rents and reimbursement of property operating expenses from
unaffiliated customers and earns management fees from entities in which
ProLogis has an ownership interest. As of December 31, 2000, in this
operating segment ProLogis owned and operated (directly or through its
consolidated and unconsolidated entities) 161.5 million square feet of
operating facilities at an investment of $6.0 billion. Of the total,
126.3 million square feet at an investment of $4.3 billion are owned
directly by ProLogis and its consolidated entities. Facilities in this
operating segment located in North America aggregate 145.4 million square
feet of the total with the remaining 16.1 million square feet located in
Europe.
- Corporate Distribution Facilities Services Business ("CDFS
Business") -- The development of industrial distribution facilities to be
disposed of to unaffiliated customers or entities in which ProLogis has
an ownership interest in North America and Europe or for a development
fee for unaffiliated customers in North America and Europe. Income from
this operating segment is derived from the profit resulting from the
disposition of the facilities developed and from fees paid by customers
for the development of facilities on their behalf. The development
activities in this segment are performed directly by ProLogis, directly
by a consolidated entity in which ProLogis recognizes substantially all
of the economic benefits or through an unconsolidated entity, accounted
for under the equity method, in which ProLogis recognizes substantially
all of the economic benefits. Once an entity in which ProLogis has an
ownership interest acquires the facilities from ProLogis or its
consolidated and unconsolidated entities, the operations of these
facilities and the management fees earned by ProLogis related to these
facilities are reflected in ProLogis' property operations segment. As of
December 31, 2000, ProLogis had (directly or through its consolidated and
unconsolidated entities) 10.2 million square feet of distribution
facilities under development with a total budgeted cost of $491.4
million. Of the total, 8.7 million square feet at
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a total budgeted development cost of $355.2 million were owned directly
by ProLogis and its consolidated entity. Also, as of December 31, 2000,
ProLogis owned or controlled (directly or through its consolidated and
unconsolidated entities) 5,126 acres of land with the capacity for
developing approximately 85.7 million square feet of distribution
facilities. Of the total, 3,279 acres of land with the capacity for
developing approximately 57.4 million square feet million square feet of
distribution facilities were owned directly by ProLogis and its
consolidated entity. Land positions in North America aggregated 2,385
acres with the remaining 2,741 acres located in Europe. Upon completion,
ProLogis expects to dispose of the facilities developed to unaffiliated
customers or to entities in which ProLogis has an ownership interest.
- Temperature-Controlled Distribution Operations -- The operation of
temperature-controlled distribution facilities earning revenues from
unaffiliated customers for various services associated with a
temperature-controlled distribution environment. Such services include:
(i) total supply chain management; (ii) management of customer inventory
and related services, (i.e. case picking, sorting, labeling,
shrink-wrapping and blast freezing); (iii) temperature-controlled product
consolidation and transportation services; and (iv) third-party logistics
services and facility management for leading grocery retailers. In this
operating segment, ProLogis recognizes substantially all of the economic
benefits of two companies that are accounted for under the equity method.
As of December 31, 2000, ProLogis' unconsolidated entities owned or
operated under lease agreements 363.6 million cubic feet of
temperature-controlled distribution space (including 35.5 million cubic
feet of dry distribution space located in temperature-controlled
distribution facilities) and had 6.3 million cubic feet of
temperature-controlled distribution facilities under development. Of the
total cubic feet in operation, 175.9 million cubic feet are located in
the United States and 187.7 million cubic feet are located in Europe. The
facilities under development are located in Anaheim (4.0 million cubic
feet) and Houston (2.3 million cubic feet).
2000 Operating Performance
Total funds from operations increased by $56.5 million from $320.2 million
in 1999 to $376.7 million in 2000. This increase was driven by ProLogis'
successful operating and investment strategies. The contribution to total funds
from operations by ProLogis' operating segments for 2000 and 1999 is as follows
(see Note 10 to ProLogis' Consolidated Financial Statements in Item 8):
- 69.6% and 70.6% of total funds from operations is attributable to the
property operations segment in 2000 and 1999, respectively;
- 27.5% and 20.3% of total funds from operations is attributable to the
CDFS business segment in 2000 and 1999, respectively; and
- 2.9% and 9.1% of total funds from operations is attributable to the
temperature-controlled distribution operations segment in 2000 and 1999,
respectively.
Funds from operations is a performance measure used by REITs and it is
defined and discussed in "Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity of Capital
Resources -- Funds from Operations".
ProLogis' net earnings attributable to Common Shares increased to $157.7
million in 2000 from $124.0 million in 1999. ProLogis generated earnings from
operations of $241.8 million in 2000, an increase of $75.3 million over 1999.
ProLogis' cash flow provided by operating activities for 2000 was $336.8
million, an increase of $65.4 million over 1999. See ProLogis' Consolidated
Financial Statements in Item 8.
BUSINESS STRATEGY AND OPERATING SEGMENTS
Business Strategy
ProLogis was originally formed in 1991 with the objective of building a
distribution and light manufacturing asset base at costs significantly below
replacement cost and a land inventory for the future development of industrial
distribution facilities. Additionally, ProLogis intended to create a national
operating company that
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would differentiate itself from its competition through its ability to meet a
corporate customer's distribution facility requirements on a national, regional
and local basis. In 1997, ProLogis expanded its property operations into Mexico
and Europe to meet the needs of its targeted national and international
customers as they expanded and reconfigured their distribution facility
requirements globally. In December 1998, ProLogis added 54 operating facilities
aggregating 5.2 million square feet in France to its European portfolio. To
enhance its North American property operations and service platform, ProLogis
completed a merger with Meridian Industrial Trust Inc. ("Meridian"), a publicly
held REIT, in 1999 adding 32.2 million square feet of operating facilities and
228 acres of land for future development to ProLogis' holdings. See Note 11 to
ProLogis' Consolidated Financial Statements in Item 8.
Having established its core property operations business, in 1997 and 1998
ProLogis expanded its service platform by acquiring an international
temperature-controlled distribution network. Additionally, the merger with
Meridian added 15.2 million cubic feet of temperature-controlled distribution
facilities to ProLogis' holdings in 1999. Also, to enhance its corporate
distribution facilities services business, ProLogis acquired an industrial
distribution facility development company with extensive holdings in the United
Kingdom in August 1998.
To further its objective of increasing cash flows without raising
additional capital through direct public debt and public equity offerings,
ProLogis formed four ventures in 1999 and 2000. Each of the ventures owns
operating facilities acquired primarily from ProLogis with equity contributed by
third party investors. ProLogis maintains an ownership interest (from 20.0% to
50.0% as of December 31, 2000) in each of the ventures. ProLogis utilizes the
ProLogis Operating System(TM) to provide asset and property management services
to the ventures for a fee. In North America, ProLogis has an ownership interest
in three ventures. These ventures own, on a combined basis, 20.9 million square
feet of operating facilities at a combined investment of $927.0 million as of
December 31, 2000. ProLogis European Properties Fund, formed in 1999, has
enabled ProLogis to take advantage of the growth opportunities in the European
industrial distribution market by allowing ProLogis to access over 1.06 billion
euros (the currency equivalent of approximately $986.3 million as of December
31, 2000 based on currency exchange rates quoted by Reuters) of third party
equity capital that has been committed by a group of institutional investors to
ProLogis European Properties Fund through 2002. ProLogis European Properties
Fund owns 14.4 million square feet of operating facilities at an investment of
$792.3 million as of December 31, 2000. See "Item 2.
Properties -- Unconsolidated Entities -- Property Operations" and Note 4 to
ProLogis' Consolidated Financial Statements in Item 8.
Also in 1999, ProLogis formed the Integrated Solutions Group (see
" -- ProLogis Operating System(TM) -- Integrated Solutions Group") with the
objective of increasing ProLogis' service income thereby growing cash flows in a
less capital intensive manner. In 2000, ProLogis made investments in two
logistics technology companies and began earning license fees for the
non-exclusive use of the ProLogis Operating System(TM) by these companies.
ProLogis believes that its network of distribution facilities along with
the ProLogis Operating System(TM) have positioned it to become the global leader
in the industrial distribution facility industry. ProLogis' three operating
segments are discussed in further detail below.
Property Operations Segment
Investments
In the property operations segment, ProLogis owned and operated (directly
or through its consolidated and unconsolidated entities) 1,461 operating
facilities aggregating 161.5 million square feet as of December 31, 2000.
ProLogis' investment strategy with respect to the property operations segment is
to focus primarily on generic distribution facilities with an average office
finish level of less than 10%. ProLogis' distribution facilities are adaptable
for both distribution and light manufacturing or assembly uses. ProLogis has
invested in selected distribution markets in North America and Europe where it
believes the distribution dynamics are strong and supply and demand factors
allow for high occupancy levels and increasing rental rates. In making its
investment decisions, ProLogis evaluates market conditions that would indicate
favorable distribution growth prospects. Such conditions include: (i) growth in
imports and exports; (ii) long-term cost and quality of labor advantages for
domestic and international manufacturers (such as markets benefiting from the
U.S./Mexico twin plant program);
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(iii) proximity to large regional and local population centers with good access
to transportation networks; and (iv) a high ratio of distribution space per
capita.
Property operations segment investment activities in 2000 included:
- During 2000, ProLogis European Properties Fund acquired operating
facilities aggregating 11.2 million square feet and disposed of a 161,000
square foot operating facility. Of the operating facilities acquired in
2000, 9.6 million square feet were acquired from ProLogis or its
consolidated and unconsolidated entities. These acquisitions include 60
facilities aggregating 6.6 million square feet owned by ProLogis European
Properties S.a.r.l., a wholly owned entity of ProLogis until January 7,
2000 when ProLogis contributed 50.1% of its common stock to ProLogis
European Properties Fund for an equity interest. The remaining 49.9% of
the common stock of ProLogis European Properties S.a.r.l. was contributed
to ProLogis European Properties Fund by ProLogis for an additional equity
interest on January 7, 2001. As of December 31, 2000, ProLogis' ownership
in ProLogis European Properties Fund was 34.4% (increasing to 45.6% as of
January 7, 2001). See "Item 2. Properties -- Unconsolidated Entities --
Property Operations Segment" and Note 4 to ProLogis' Consolidated
Financial Statements in Item 8.
- In North America, ProLogis North American Properties Fund I LLC and
ProLogis Iowa I LLC ("ProLogis Principal") were formed in 2000. These
ventures own 8.0 million and 0.4 million square feet of operating
facilities, respectively, that were all previously owned by ProLogis or
its consolidated entities. ProLogis California I LLC ("ProLogis
California"), which was formed in 1999, grew from 11.5 million square
feet of operating facilities as of December 31, 1999 to 12.4 million
square feet of operating facilities as of December 31, 2000. The increase
in 2000 is the net result of the acquisition of an additional operating
facility from ProLogis, the completion of two developments and the
disposition of three operating facilities.
- ProLogis acquired five operating facilities in 2000, four facilities
aggregating 138,000 square feet located in Dallas and a 125,000 square
foot facility located in Juarez, Mexico for a total investment of $8.7
million. The four facilities in Dallas were acquired to complete a
tax-deferred exchange transaction.
Operations
The property operations segment generated approximately 81% of ProLogis'
total income in 2000 (including amounts recognized under the equity method with
respect to ProLogis' unconsolidated entities). This operating segment generated
approximately 85% and 94% of ProLogis' total income in 1999 and 1998,
respectively, (including amounts recognized under the equity method with respect
to ProLogis' unconsolidated entities). See "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Results of
Operations -- Property Operations" and Notes 4 and 10 to ProLogis' Consolidated
Financial Statements in Item 8.
Operational achievements in this operating segment in 2000 included:
- ProLogis' stabilized operating facilities aggregating 155.0 million
square feet (including facilities owned by ProLogis and its consolidated
and unconsolidated entities) was 96.2% leased (95.4% occupied) as of
December 31, 2000. Also, as of December 31, 2000, ProLogis' total
operating portfolio of 161.5 million square feet (including facilities
owned by ProLogis and its consolidated and unconsolidated entities) was
94.1% leased (92.9% occupied). Stabilized facilities are those in which
capital improvements, repositioning, new management and new marketing
programs (or development and marketing, in the case of newly developed
facilities) have been in effect for a sufficient period of time
(generally 12 months) to achieve stabilized occupancy (typically 93%, but
ranging from 90% to 95%, depending on the submarket and product type).
- During 2000, ProLogis and its consolidated and unconsolidated entities
leased 36.3 million square feet of distribution space in 1,137
transactions. Rental rates on both new and renewed leases of previously
leased space increased 15.5% in 2000 and ProLogis' weighted average
customer retention rate was 65.7% in 2000.
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- ProLogis' "same store" portfolio of operating facilities (facilities
owned by ProLogis and its consolidated and unconsolidated entities that
were in operation throughout both 2000 and 1999) aggregated 105.6 million
square feet. The net operating income (rental revenues less net rental
expenses) of the "same store" portfolio increased by 5.94% in 2000 over
1999.
Market Presence
As of December 31, 2000, the operating facilities in the property
operations segment that are owned by ProLogis (directly or through its
consolidated entities) are located in 42 cities in 24 states and the District of
Columbia in the United States, 4 cities in Mexico and 6 cities in 4 countries in
Europe. No individual market represents more than 10% of ProLogis' total real
estate assets. ProLogis' largest markets (based on cost) are Dallas/Fort Worth
(9.2%), Chicago (7.3%), Atlanta (6.5%), San Francisco (South Bay) (5.4%), San
Francisco (East Bay) (5.2%) and Houston (5.1%).
The 77 operating facilities owned by ProLogis California as of December 31,
2000 are all located in the Los Angeles/Orange County market. The 33 operating
facilities owned by ProLogis North American Properties Fund I as of December 31,
2000 are located in 17 cities in 12 states. The three operating facilities owned
by ProLogis Principal as of December 31, 2000 are all located in the Dallas/Ft.
Worth market. The 104 operating facilities owned by ProLogis European Properties
Fund (including facilities owned by ProLogis European Properties S.a.r.l.) as of
December 31, 2000 are located in 15 cities in 6 countries in Europe (including
55 buildings in Paris, France). See "Item 2. Properties -- Facilities" and "Item
2. Properties -- Unconsolidated Entities -- Property Operations".
ProLogis has sought to achieve significant market presence through the
development and acquisition of distribution facilities and master-planned
distribution parks in its target market cities and selected submarkets of those
cities. The target market cities and submarkets are selected when ProLogis'
market research indicates that the long-term demand for distribution and light
manufacturing space is stable to strong. ProLogis defines market presence not
only in terms of square feet of facilities and acres of development land owned,
but also by the extent ProLogis has developed relationships with customers in
such markets. ProLogis' operating strategy is designed to meet the needs of
today's distribution space users, which means providing functional,
cost-effective facilities with a comprehensive level of service. ProLogis
believes that by being a significant local owner and developer in a given
market, it can generate high relative rental rates and occupancy levels,
primarily because it has the ability to reduce turnover by meeting its
customers' needs to either expand or contract. With its network of distribution
facilities and land positions, ProLogis is able to either relocate customers
within its existing inventory of distribution space or develop new facilities to
meet the customer's needs.
A strong market presence provides ProLogis with increased access to
potential leasing and CDFS business segment transactions. ProLogis' experience
has been that many members of the industrial brokerage community and many
corporate users are motivated to develop relationships with the significant
owners and developers in a particular market to facilitate their respective
distribution needs. Having the opportunity to compete for a large percentage of
the distribution space requirements in each target market is a crucial factor in
achieving ProLogis' operating objectives.
Competition
In general, there are numerous other industrial distribution facilities
located in close proximity to ProLogis' facilities. The amount of rentable
distribution space available in any market could have a material effect on
ProLogis' ability to rent space and on the rents that ProLogis can charge. In
addition, in many of ProLogis' submarkets, institutional investors and owners
and developers of industrial distribution facilities (including other REITs)
compete for the acquisition, development and leasing of distribution space. Many
of these entities have substantial resources and experience. Competition for
acquisition of existing distribution facilities and land, both from
institutional capital sources and from other REITs, has increased over the past
several years.
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Property Management
ProLogis provides active and effective property management to directly
serve its customers at the local level; a strategy that ProLogis believes will
enhance the long-term economic performance of its operating facilities and
increase cash flow. ProLogis' property management group seeks to provide
exceptional customer service and attention to customer needs by developing and
implementing proprietary operating, recruiting and training systems to achieve
consistent levels of performance and professionalism throughout the ProLogis
network. Of the operating facilities owned by ProLogis (directly or by its
consolidated and unconsolidated entities) as of December 31, 2000, ProLogis'
property management group was managing 97.5% of the North American operating
facilities and 100.0% of the European operating facilities.
Customers
One of ProLogis' objectives is to develop a customer base in each market
that is diverse in terms of industry concentration and represents a broad
spectrum of international, national, regional and local distribution space
users. As of December 31, 2000, ProLogis (including its consolidated and
unconsolidated entities) had over 3,500 customers in 150.1 million square feet
of occupied distribution space. ProLogis believes that having a large number of
customers with generic space requirements in each submarket reduces its exposure
to overall occupancy declines. ProLogis' largest customer (based on rental
income) accounted for 1.5% of ProLogis' 2000 rental income (on an annualized
basis) for the year ended December 31, 2000. The annualized base rent for
ProLogis' 25 largest customers (based on rental income) accounted for 13.2% of
ProLogis' 2000 rental income (on an annualized basis) for the year ended
December 31, 2000.
Employees
ProLogis and its consolidated entities directly employ approximately 640
persons in North America and Europe. Of the total, approximately 350 employees
are assigned directly to the property operations segment. ProLogis' other
employees may provide assistance in this operating segment. ProLogis believes
its relationship with its employees to be good. ProLogis' employees are not
represented by a collective bargaining agreement.
Seasonal Nature of the Business
The demand for industrial distribution space is not seasonal.
Future Plans
ProLogis believes that its current level of investment in the property
operations segment in North America enables it to serve its customers at a high
level and increase returns to shareholders. ProLogis' business plan for the
property operations segment in North America calls for the expansion of its
network of operating facilities to: (i) address the specific expansion needs of
its customers; (ii) enhance its market presence in specific submarkets; or (iii)
take advantage of opportunities where ProLogis believes it has the ability to
achieve favorable returns, including the formation of ventures such as ProLogis
North American Properties Fund I that will acquire facilities developed within
the CDFS business segment.
ProLogis' market research and customer feedback continue to reflect strong
demand for distribution space in Europe as cross-border trade continues to
increase and many companies continue to move toward consolidation and
reconfiguration of their distribution networks. Consolidation and the emergence
of dominant regional distribution centers have provided, and ProLogis believes
will continue to provide, opportunities for ProLogis as a single-source
pan-European provider of distribution facilities. Consequently, ProLogis'
business plan for the property operations segment in Europe emphasizes growth in
key distribution markets, primarily from the development of facilities within
ProLogis' CDFS business segment that will be acquired by ProLogis European
Properties Fund and then managed by ProLogis.
ProLogis intends to self-fund its future investment activities in the
property operations segment in 2001 with operating cash flow and the proceeds
from dispositions of facilities to third parties and real estate entities in
which ProLogis maintains an ownership interest. See the discussion of factors
that could affect the future plans
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of ProLogis and its consolidated and unconsolidated entities in the property
operations segment at "Item 7. Management's Discussion and Analysis of Results
of Operations and Financial Condition -- Risk Factors".
CDFS Business Segment
Investments
ProLogis operates its CDFS business segment in North America directly and
through ProLogis Development Services Incorporated ("ProLogis Development
Services"), a consolidated entity in which ProLogis realizes substantially all
of the economic benefits. See "Item 2. Properties -- Consolidated
Entities -- ProLogis Development Services". In Europe (excluding the United
Kingdom), ProLogis directly operates the CDFS business segment. In the United
Kingdom, the CDFS business segment is operated by Kingspark S.A. and its wholly
owned subsidiary, Kingspark Group Holdings Limited ("ProLogis Kingspark")
(collectively "the Kingspark entities"). Kingspark S.A. is an unconsolidated
entity in which ProLogis recognizes substantially all of the economic benefits
under the equity method through its ownership of 100% of Kingspark S.A.'s
preferred stock. On January 2, 2001, ProLogis acquired an ownership interest in
the common stock of Kingspark S.A. This transaction resulted in ProLogis having
control of Kingspark S.A. Accordingly, the accounts of the Kingspark entities
will be consolidated in ProLogis' financial statements along with ProLogis'
other majority-owned and controlled subsidiaries and partnerships as of that
date. See "Item 2. Properties -- Unconsolidated Entities -- CDFS Business" and
Note 4 to ProLogis' Consolidated Financial Statements in Item 8.
Within this operating segment, ProLogis, ProLogis Development Services and
the Kingspark entities develop distribution facilities with the intent to
dispose of the facilities to customers, third parties or entities in which
ProLogis maintains an ownership interest. Also within this operating segment,
ProLogis, ProLogis Development Services and the Kingspark entities develop
facilities for customers or third parties for a development fee. Proceeds from
the disposition of these facilities are redeployed into land acquisitions and
other development opportunities. ProLogis addresses specific needs of customers
with respect to a specialized facility or the need to have a facility in a
market that ProLogis does not consider to have favorable dynamics by developing
the facility on a fee development basis or through a pre-sale agreement within
this operating segment.
As of December 31, 2000, all of ProLogis' development activities were part
of the CDFS business segment. As of December 31, 2000, ProLogis, ProLogis
Development Services and the Kingspark entities had 10.2 million square feet of
facilities under development with a total budgeted development cost of $491.4
million. Of the total, 8.7 million square feet with a total budgeted development
cost of $355.2 million are owned directly by ProLogis and ProLogis Development
Services. Facilities under development in North America aggregated 6.3 million
square feet at a total budgeted cost of $257.5 million and facilities under
development in Europe aggregated 3.9 million square feet at a total budgeted
cost of $233.9 million. These facilities are being developed with the objective
of disposing of the facility to a third party or to an entity in which ProLogis
has an ownership interest. To the extent the facilities are acquired by entities
in which ProLogis has an ownership interest, ProLogis' continuing interest in
the operations of these facilities will be included in its property operations
segment (see "-- Property Operations Segment"). ProLogis Development Services
and the Kingspark entities also earn fees under development management
agreements. During 2000, 2.7 million square feet were developed under such
agreements generating development fees of $11.5 million.
ProLogis, ProLogis Development Services and the Kingspark entities have
land positions (land owned or controlled through option, letter of intent,
development rights agreement or contingent contract) aggregating 5,126 acres
with the capacity for developing approximately 85.7 million square feet of
distribution facilities. Of the total land positions, 3,279 acres, with the
capacity for developing approximately 57.4 million square feet of distribution
facilities, are owned or controlled by ProLogis and ProLogis Development
Services. Land positions in North America total 2,385 acres with the capacity
for developing approximately 42.3 million square feet of distribution facilities
and land positions in Europe total 2,741 acres with the capacity for developing
approximately 43.4 million square feet of distribution facilities.
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CDFS business segment investment activities in 2000 included:
- Development starts aggregated 13.7 million square feet at a total
budgeted cost of $651.6 million. Of the total, 12.6 million square feet
at a total budgeted cost of $509.8 million were started by ProLogis and
ProLogis Development Services. Development starts in North America in
2000 aggregated 8.0 million square feet at a total budgeted cost of
$329.6 million and development starts in Europe aggregated 5.7 million
square feet at a total budgeted cost of $322.0 million.
- Development completions aggregated 15.2 million square feet at a total
budgeted cost of $736.9 million. Of the total, 13.1 million square feet
at a total budgeted cost of $512.0 million were completed by ProLogis and
ProLogis Development Services. Development completions in North America
in 2000 aggregated 9.8 million square feet at a total budgeted cost of
$360.2 million and development completions in Europe aggregated 5.4
million square feet at a total budgeted cost of $376.7 million.
- Land acquisitions in 2000 aggregated 1,158 acres, 846 acres in North
America and 312 acres in Europe. This land can be used for the
development of approximately 24.3 million square feet of distribution
facilities.
Operations
The primary source of income in the CDFS business segment is the profits
from dispositions of facilities developed and development management fees earned
by ProLogis Development Services and the Kingspark entities. In 2000, the CDFS
business generated $121.9 million of ProLogis' total income as compared to 1999
and 1998 when the CDFS business generated $70.5 million and $20.5 million of
ProLogis' total income, respectively. As a percentage of total income, this
operating segment has increased in each of the last three years (to 18.9% in
2000 from 12.4% and 5.6% in 1999 and 1998, respectively). ProLogis' share of the
net earnings of the Kingspark entities recognized under the equity method is
included in this segment's total income ($43.8 million in 2000, $23.9 million in
1999 and $2.9 million for the period from acquisition on August 14, 1998 to
December 31, 1998).
The CDFS business segment generated funds from operations of $126.8 million
in 2000 ($60.4 million in North America and $66.4 million in Europe); $76.5
million in 1999 ($28.9 million in North America and $47.6 million in Europe);
and $22.2 million in 1998 ($17.3 million in North America and $4.9 million in
Europe). See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Results of Operations -- CDFS Business",
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Funds from Operations" and Notes 4 and 10 to ProLogis'
Consolidated Financial Statements in Item 8.
Operational achievements in this operating segment in 2000 included:
- ProLogis, ProLogis Development Services and the Kingspark entities
disposed of 11.8 million square feet of distribution facilities developed
and land parcels generating net proceeds of $672.4 million.
- ProLogis Development Services and the Kingspark entities developed 2.7
million square feet of distribution facilities on behalf of customers
under development management agreements. Fees and other miscellaneous
income in the CDFS business segment aggregated $18.7 million in 2000.
Market Presence
ProLogis' CDFS business spans substantially all of ProLogis' property
operations markets. As of December 31, 2000, ProLogis had facilities under
development in 16 cities in 11 states and the District of Columbia in the United
States, 2 cities in Mexico and 8 cities in 4 countries in Europe. As of December
31, 2000, ProLogis' land positions were located in 30 cities in 19 states and
the District of Columbia in the United States, 4 cities in Mexico and 8 cities
in 7 countries in Europe.
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Competition
There are a number of other national, regional and local developers engaged
in industrial distribution facility development in the same North American
markets that ProLogis conducts business. Competition for land acquisitions, from
both institutional capital sources and other REITs, has increased over the past
several years. The disposition market in North America is competitive and is
driven by the supply of new developments, access to capital and interest rate
levels.
ProLogis believes that there are no other REITs or pan-European real estate
operating companies in direct competition with its operations in Europe.
However, there are a number of local and regional developers in ProLogis' target
markets. As in North America, the disposition market in Europe is competitive
and driven by the supply of new developments, access to capital and interest
rate levels. However, the formation of ProLogis European Properties Fund
provides ProLogis and the Kingspark entities with a source of capital that will
allow them to dispose of the facilities they develop in the CDFS business
segment at independently appraised values.
ProLogis believes that it, ProLogis Development Services and the Kingspark
entities have a significant competitive advantage based upon the strategic
locations of the extensive land positions owned or under control. Also, as the
only distribution facilities and services provider operating on a national and
pan-European basis, ProLogis believes it has differentiated itself from many of
its competitors.
Customers
ProLogis leverages off its existing customer relationships, primarily
within the property operations segment and utilizes the ProLogis Operating
System(TM) in identifying and marketing its CDFS business. See "-- Property
Operations -- Customers" and "-- ProLogis Operating System(TM)".
Employees
ProLogis and its consolidated entities directly employ approximately 640
persons in North America and Europe. Of the total, approximately 90 employees
are assigned directly to the CDFS business segment. ProLogis' other employees
may provide assistance in this operating segment. ProLogis believes its
relationship with its employees to be good. ProLogis' employees are not
represented by a collective bargaining agreement.
The Kingspark entities employ approximately 60 persons and these employees
do not participate in a collective bargaining agreement. The Kingspark entities
believe their relationship with their employees to be good.
Seasonal Nature of the Business
The demand for the industrial distribution facilities that are developed by
ProLogis' CDFS business is not impacted on a seasonal basis. However, the
development process can be impeded by weather, particularly during the winter
months in certain markets, which can potentially delay construction completions.
Future Plans
ProLogis' objective is to utilize the capital generated in the CDFS
business to self-fund future CDFS business activities in North America and
Europe. In addition, proceeds from the disposition of operating facilities in
the property operations segment to third parties can also be re-invested in new
development facilities within the CDFS business segment. ProLogis believes that
the reconfiguration of supply chains, necessitated by the need for customers to
add efficiencies within their distribution networks, in both North America and
Europe could favorably impact demand for the distribution facilities and
distribution-related services provided by ProLogis within its CDFS business
segment. Additionally, a limited supply of new state-of-the-art distribution
space in Europe could also provide opportunities within this operating segment.
See the discussion of factors that could affect the future plans of ProLogis,
ProLogis Development Services and the Kingspark entities in the CDFS business
segment at "Item 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition -- Risk Factors".
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Temperature-Controlled Distribution Operations
Investments
ProLogis recognizes substantially all of the economic benefits of ProLogis
Logistics Services Incorporated ("ProLogis Logistics") through its ownership of
100% of ProLogis Logistics' preferred stock. ProLogis Logistics owns 100% of CS
Integrated LLC ("CSI"), a temperature-controlled distribution company operating
in the United States. As of December 31, 2000, CSI owned or operated under lease
agreements 59 temperature-controlled distribution facilities aggregating 175.9
million cubic feet (including 35.5 million cubic feet of dry distribution space
located in temperature-controlled distribution facilities) and had 6.3 million
cubic feet under development in Anaheim (4.0 million cubic feet) and Houston
(2.3 million cubic feet). Additionally, ProLogis recognizes substantially all of
the economic benefits of Frigoscandia S.A. through its ownership of 100% of
Frigoscandia S.A.'s preferred stock. Frigoscandia S.A. owns, through its wholly
owned subsidiaries, 100% of Frigoscandia AB ("Frigoscandia"), a
temperature-controlled distribution company operating in Europe. As of December
31, 2000, Frigoscandia owned or operated under lease agreements 89
temperature-controlled distribution facilities aggregating 187.7 million cubic
feet in 10 European countries. ProLogis accounts for its investments in ProLogis
Logistics/CSI and Frigoscandia S.A./Frigoscandia under the equity method. See
"Item 2. Properties -- Unconsolidated Entities -- Temperature-Controlled
Distribution Operations" and Note 4 to ProLogis' Consolidated Financial
Statements in Item 8.
In order to provide value-added supply chain management services to its
customers, CSI and Frigoscandia leverage their existing temperature-controlled
distribution facilities network with information technology investments that
increase the velocity and visibility of inventory and information throughout the
entire supply chain. CSI added 8.3 million cubic feet of operating capacity in
2000, including a 4.8 million cubic feet facility that was developed by CSI in
Atlanta. Frigoscandia's operating capacity has remained virtually constant over
the past three years (187.7 million as of December 31, 2000, 192.3 million as of
December 31, 1999 and 192.0 million as of December 31, 1998). This trend
reflects Frigoscandia's emphasis on serving its key customers through
improvements and upgrades to technology systems and its existing facilities
rather than increasing its operating capacity.
During 1999 and 2000, both CSI and Frigoscandia enhanced and improved their
logistics information technology systems. These systems are being coordinated on
a global basis which enables CSI and Frigoscandia to maximize synergies within
and between the North American operations and European operations, while still
maintaining operational independence. CSI's non-asset based retail dedicated
business segment, where CSI provides all warehouse logistics services to
supermarket retailers in distribution facilities not owned by CSI, has enabled
CSI to increase its revenues without significantly increasing its invested
capital. Retail-dedicated revenues are earned through fees charged to the
retailer based on volume with no fixed costs attributable to the
retail-dedicated operations.
Operations
ProLogis recognizes its share of the net earnings of ProLogis Logistics/CSI
and Frigoscandia S.A/ Frigoscandia under the equity method as a component of its
total income. ProLogis' share of the net earnings of ProLogis Logistics/CSI was
$12.0 million in 2000, $10.8 million in 1999 and $7.3 million in 1998. In each
year, 1998 to 2000, Frigoscandia S.A./Frigoscandia generated net losses with
ProLogis' share aggregating $20.3 million in 2000, $4.4 million in 1999 and $7.5
million in 1998.
ProLogis' share of the combined funds from operations of ProLogis
Logistics/CSI and Frigoscandia S.A./ Frigoscandia was $27.0 million in 2000 as
compared to $46.1 million in 1999 and $45.7 million in 1998. See "Item 7.
Management's Discussion and Analysis of Results of Operations and Financial
Condition -- Results of Operations -- Temperature-Controlled Distribution
Operations", "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Funds From Operations" and Notes 4 and 10
to ProLogis' Consolidated Financial Statements in Item 8.
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Market Presence
Market presence in the temperature-controlled distribution industry is
generally defined by the volume available for storage of frozen and chilled
foods in addition to the transportation network in place to serve customers.
ProLogis believes that CSI and Frigoscandia are well positioned to provide
supply-chain management services to major food manufacturers and retailers
across multiple markets. With 59 facilities aggregating 175.9 million cubic feet
in operation (including 35.5 million cubic feet of dry distribution space
operated in temperature-controlled distribution facilities), CSI has the third
largest network in the United States (based on cubic feet in operation). CSI's
largest markets (based on cubic feet in operation) are Phoenix (16.9%), Southern
California (16.2%), Southeastern Pennsylvania (14.5%) and Atlanta (12.2%).
Frigoscandia is the largest temperature-controlled distribution company in
Europe with 89 facilities aggregating 187.7 million cubic feet in operation in
10 countries. Frigoscandia's largest markets (based on cubic feet in operation)
are France (34.1%), the United Kingdom (24.5%) and Germany (13.7%).
Competition
ProLogis believes that the temperature-controlled distribution industry has
significant barriers to entry due to its capital-intensive nature, which limits
competition. In the United States, CSI competes directly with several national
temperature-controlled distribution companies. However, CSI's primary
competition in many markets is from local, and considerably smaller, warehouse
operators. In Europe, Frigoscandia has a distinct advantage over its competitors
as few other European temperature-controlled distribution companies have
operations in more than one country (as compared to the 10 countries in which
Frigoscandia operates). Additionally, Frigoscandia is the largest operator of
temperature-controlled distribution facilities in Europe (based on cubic feet in
operation), with a temperature-controlled storage volume of approximately three
times that of its closest competitor. Like CSI, Frigoscandia's primary
competition in many markets is from local, and considerably smaller, warehouse
operators.
Customers
CSI has approximately 950 customers including some of the nation's leading
supermarket retailers in the United States. Of CSI's total revenues,
approximately 69% were derived from is 25 largest customers and CSI's largest
customer accounted for approximately 36% of its total revenues. Excluding the
fees generated by CSI's retail-dedicated operations where CSI provides warehouse
logistics services in the distribution facilities that are owned by the
customer, the 25 largest customers accounted for approximately 48% of total
revenues with the largest customer accounting for approximately 6% of total
revenues. See "-- Investments".
Frigoscandia has approximately 7,000 customers. Of Frigoscandia's total
revenues, approximately 49% were derived from its 25 largest customers and
Frigoscandia's largest customer accounted for approximately 8% of its total
revenues.
Employees
CSI and Frigoscandia directly employ all employees in the
temperature-controlled distribution operations segment. CSI employs
approximately 3,835 persons in the United States, of whom approximately 58%
participate in collective bargaining agreements. Frigoscandia employs
approximately 2,665 persons in 10 European countries, of whom approximately 80%
participate in collective bargaining agreements. Both CSI and Frigoscandia
believe their relationships with their employees to be good.
Seasonal Nature of the Business
Temperature-controlled distribution operations are seasonal, in that demand
for temperature-controlled distribution facilities is stronger during the third
quarter of the calendar year and is at its lowest level in the first quarter of
the calendar year. The seasonal nature of temperature-controlled distribution
operations coincides with the lower demand for frozen foods, such as ice cream,
during the winter months and the timing of the harvests of various food crops in
the third quarter of the year, which increases the demand for
temperature-controlled storage capacity during that time.
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Future Plans
There will be a continued strong emphasis in 2001 on the global marketing
of the varied service offerings that CSI and Frigoscandia can provide to
customers who can benefit from a single-source global temperature-controlled
logistics provider. CSI and Frigoscandia will continue to leverage off their
investments in information technology in 1999 and 2000 to increase their service
offerings to customers, including integrated supply chain management and
transportation services. Additionally, both companies will focus on operational
issues to increase operating efficiencies in 2001. In particular, Frigoscandia
is addressing occupancy issues and other operational issues including
transportation services. See "Item 7. Management's Discussion and Analysis of
Results of Operations and Financial Condition -- Results of
Operations -- Temperature-Controlled Distribution Operations" for a discussion
of operating performance of this business segment and see the discussion of
factors that could affect the future plans of ProLogis, CSI and Frigoscandia at
"Item 7. Management's Discussion and Analysis of Results of Operations and
Financial Condition -- Risk Factors".
ProLogis views its investments in CSI and Frigoscandia as a
temperature-controlled distribution network delivering worldwide
temperature-controlled logistics solutions to its United States and European
customers. Expansion into new markets or within existing markets in the United
States will be considered only to the extent that such expansion is necessary to
enable CSI to expand its services to the major food manufacturers and retailers
that operate across multiple markets. Expansion within the European operations
will be considered on a limited basis to address specific customer needs. The
funds for such expansions are expected to come principally from internally
generated capital from this operating segment's operations.
FINANCING STRATEGY
In order to build its network of distribution facilities, ProLogis accessed
the public debt and public equity markets through the second quarter of 1999.
Since that time, ProLogis has funded its capital requirements primarily with
internally generated funds from its operations and from the disposition of
facilities to third parties and to entities in which ProLogis maintains an
ownership interest. Additionally, ProLogis has utilized, and will continue to
utilize, the borrowing capacity available through its unsecured lines of credit
to finance investment opportunities pending completion of asset dispositions
and, as needed, longer-term debt or equity financing arrangements.
ProLogis' financing activities in 2000 included:
- ProLogis, ProLogis Development Services and the Kingspark entities
generated $806.0 million of proceeds from the disposition of facilities
and land parcels in 2000. These dispositions were primarily within the
CDFS business segment ($672.3 million of proceeds) but also included
dispositions within the property operations segment ($133.7 million of
proceeds). Of the total proceeds of $806.0 million, $55.7 million was
received in the form of equity interests in the entities acquiring the
facilities.
- ProLogis restructured its U.S. dollar denominated revolving credit
facilities during 2000. ProLogis' previous $550.0 million unsecured line
of credit was reduced to $475.0 million, with the ability to increase the
borrowing capacity to $500.0 million. Additionally, provisions were
included in the new agreement that allows for direct borrowings by
ProLogis Development Services and ProLogis Logistics. Also, ProLogis
increased its borrowing capacity under its U.S. dollar denominated
discretionary line of credit from $25.0 million to $55.0 million (with
the additional $30.0 million of borrowings available only in foreign
currency equivalents).
- The formation of ProLogis North American Properties Fund I provided
ProLogis the opportunity to access over $300.0 million of third party
debt and equity capital, including 10-year secured, non-recourse debt
financing of $232.6 million within the venture.
- From September 1999 to December 31, 2000, ProLogis has accessed 325.6
million euros (the currency equivalent of approximately $302.9 million as
of December 31, 2000 based on currency exchange rates quoted by Reuters)
of third party equity capital provided by a group of institutional
investors to ProLogis European Properties Fund through 2002. As of
December 31, 2000, an additional 734.7 million euros (the currency
equivalent of approximately $683.4 million as of December 31, 2000 based
on currency
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exchange rates quoted by Reuters) has been committed to ProLogis European
Properties Fund by this investor group through 2002. This capital is to
be used to fund acquisitions of operating facilities in Europe from
ProLogis, the Kingspark entities or third parties.
ProLogis' revolving credit facilities (the U.S. dollar denominated
unsecured borrowing arrangements aggregating $530.0 million of capacity and
ProLogis' multi-currency borrowing arrangement that allows for the currency
equivalent of 325.0 million euros of borrowings) provide ProLogis with
significant financial flexibility. As of December 31, 2000, ProLogis'
outstanding combined revolving credit facility borrowings of $439.8 million were
at an average interest rate of 6.79% and ProLogis' total debt as a percentage of
total undepreciated book capitalization (excluding accumulated comprehensive
income adjustments) was 43.5%.
PROLOGIS OPERATING SYSTEM(TM)
The cornerstone of ProLogis' business strategy is the ProLogis Operating
System(TM), comprised of the Market Services Group, the Global Services Group,
the Global Development Group and the Integrated Solutions Group. The ProLogis
Operating System(TM) is a customer service delivery system that has been
designed to provide substantial benefits to existing and prospective ProLogis
customers. The customer focus of the ProLogis Operating System(TM) provides for
a high-quality service level and a single point of contact for distribution
solutions on a global basis and positions ProLogis to build customer
relationships that will generate additional business opportunities.
Market Services Group
The Market Services Group is comprised of approximately 350 property
management and leasing employees including 20 market officers. ProLogis' market
officers have extensive experience in marketing industrial distribution space
and are responsible for understanding the needs of existing and prospective
customers in their respective markets. To meet such needs, market officers
utilize their extensive knowledge of local market conditions, including the cost
and availability of alternative space, and are supported by their team of
property management and leasing professionals. A key role of the market officers
is assisting the Global Services Group in identifying ProLogis' customers with
multiple market requirements. ProLogis believes that the market officers' access
to national and pan-European ProLogis resources improves their ability to serve
customers in the local market.
Market officers do not develop projects or borrow or commit capital. Their
focus is strictly on managing the facilities in their markets, creating and
maintaining relationships with distribution space users and industrial brokers,
marketing ProLogis products and identifying potential acquisition, development
and leasing opportunities in their target markets.
Global Services Group
The Global Services Group, comprised of 18 employees, is dedicated to
providing service to the largest users of distribution space that ProLogis has
identified as targeted customers, with the primary focus on making ProLogis the
preferred provider of distribution space to these companies. The Global Services
Group is headquartered in Denver and Amsterdam and has regional offices in
Atlanta, Chicago and the New York City metropolitan area. ProLogis' multi-market
presence permits it to accommodate the reconfiguration needs of its customers by
relocating an existing customer within a market or between markets in North
America or in Europe. ProLogis' development program, land inventory and existing
facilities allow the Global Services Group to assist existing and prospective
customers whose growing business needs require them to expand their distribution
facilities. The expansion can result in relocating the customer to larger
ProLogis spaces or in developing a facility specifically for the customer.
Global Services Group professionals build long-term relationships with
ProLogis' customers and provide a single point of contact for multi-location
global users of distribution facilities to simplify and streamline the execution
of such customers' distribution space plans. ProLogis' experience to date
suggests that many major corporate customers are limiting the number of services
providers that they work with to meet their distribution
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facility requirements. An ancillary benefit of this extensive contact with
customers is the ability to be on the forefront of international and national
distribution and logistics trends.
Global Development Group
The Global Development Group, comprised of approximately 90 employees,
focuses substantial research and development efforts on creating
industry-leading distribution facilities and master-planned distribution parks.
Members of the Global Development Group have extensive experience in the
development and construction of generic facilities that will appeal to a wide
variety of customers and the development of facilities that will meet a specific
customers needs. ProLogis incorporates the latest technology with respect to
building design and building systems and has developed consistent standards and
procedures that it strictly adheres to in the development of all facilities.
The Global Development Group is comprised principally of architects,
engineers and construction professionals who oversee every aspect of the land
planning and building design processes. These professionals also monitor the
construction process and oversee the performance of third-party general
contractors. The Global Development Group's development specialists and project
managers operate regionally to better serve their markets. The project managers
supervise each project with oversight from ProLogis' management, pursuant to
uniform standards, procedures and specifications that have been carefully
designed to achieve consistent quality.
ProLogis believes the depth and breadth of experience within the Global
Development Group enhances the effectiveness of the Global Services Group and
provides the market officers in the Market Services Group with a distinct
competitive advantage for development opportunities in their respective markets.
Integrated Solutions Group
The Integrated Solutions Group, currently comprised of three employees,
coordinates a menu of value-added distribution-related services to customers,
including network optimization tools, strategic site selection, business
location services (including tax incentive analysis and tax negotiation
consulting) and design consulting services. The Integrated Solutions Group was
formed in August 1999 to allow ProLogis to address all areas of its customers'
distribution needs. ProLogis believes that by offering these additional
services, ProLogis will be able to deepen its customer relationships and
increase cash flows with relatively small additional capital requirements.
PROLOGIS MANAGEMENT
ProLogis' success depends upon its management's ability to provide
strategic and day-to-day management, research, investment analysis, acquisition
and due diligence, development, marketing, asset management, capital markets,
asset disposition, management information systems support and legal and
accounting services. ProLogis believes that the quality of its management should
be assessed in light of the following factors:
- Management Depth -- ProLogis has several senior executives with the
leadership, operational, investment and financial skills and experience
to oversee the entire operation of the company. See " -- Executive
Officers and Trustees" and " -- Senior Officers".
- Strategic Vision -- ProLogis' management has demonstrated a strategic
vision in determining an operating and investment focus that has provided
favorable initial yields and long-term growth prospects. ProLogis'
business strategy has focused on acquiring (at prices below replacement
cost) and developing an international distribution facility network and a
land inventory at attractive prices in selected distribution markets.
Through the ProLogis Operating System(TM), ProLogis believes it is the
first international operating company that has been able to address and
service a corporate customer's distribution space requirements on an
international, national, regional and local basis. Additionally, since
mid-1999, ProLogis has focused on self-funding its investment activities
utilizing cash generated by operations and the proceeds from the
disposition of facilities, primarily to entities in which ProLogis
maintains an ownership interest.
- Research Capability -- ProLogis divides its target market cities into
numerous submarkets for analysis purposes. ProLogis' management has
emphasized a submarket by submarket research-based approach in
determining appropriate investment opportunities.
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- Investment Committee Process -- An internal investment committee provides
ProLogis with discipline and guidance to allow ProLogis to achieve its
investment goals. The members of ProLogis' investment committee have
extensive experience in the real estate industry. The internal investment
committee evaluates all prospective investments pursuant to uniform
underwriting criteria prior to submission of investment recommendations
to the investment committee of ProLogis' Board of Trustees (the "Board").
- Acquisitions Capability/Due Diligence Process/Asset
Dispositions -- ProLogis has experienced senior personnel who perform
disciplined and thorough due diligence in determining whether potential
investments and divestitures meet ProLogis' long-term objectives.
ProLogis has developed extensive uniform systems and procedures for
analysis and due diligence to ensure that it maximizes its investment and
divestiture opportunities.
- Development Capability -- By internally developing projects, ProLogis has
captured additional value that normally escapes through sales premiums
paid to third party developers. ProLogis' development employees have
significant development experience. ProLogis has engaged in substantial
development of distribution facilities since its inception in 1991 (64.0
million square feet at a total investment of $2.4 billion developed).
- Operating Capability -- ProLogis believes that management can
substantially improve operating performance and achieve long-term
sustainable growth in cash flow by actively and effectively managing
assets. ProLogis conceived of and developed the ProLogis Operating
System(TM) to effectively operate ProLogis' business and provide
customers with an exceptional level of coordinated, comprehensive
services, including property management, leasing and development
management services. ProLogis also provides comprehensive asset
management services to entities in which ProLogis has an ownership
interest.
- Capital Markets Capability -- ProLogis has been able to effectively raise
public debt and public equity capital that has allowed it to achieve
strong growth in cash flows from its investments. ProLogis enhances its
ability to raise capital by its ability to effectively communicate
ProLogis' business strategy and performance to investors and the
financial media.
Previously, certain of ProLogis' administrative functions were supplemented
by or provided by Security Capital Group Incorporated ("Security Capital"),
ProLogis' largest shareholder, pursuant to an administrative services agreement.
These functions included payroll and human resources, cash management, accounts
payable, specified information systems support, research and insurance services.
ProLogis began transferring these functions from Security Capital to ProLogis
personnel during 2000. As of December 31, 2000, all functions except the cash
management and certain information systems support functions had been assumed by
ProLogis. These remaining functions are expected to be assumed by ProLogis
personnel during the first quarter of 2001.
Executive Officers and Trustees
K. Dane Brooksher -- 62 -- Mr. Brooksher has served as a Trustee since
October 1993. Mr. Brooksher has been Chairman and Chief Executive Officer of
ProLogis since March 1999 and he was Co-Chairman and Chief Operating Officer of
ProLogis from November 1993 to March 1999 (through September 1997 he was
employed by ProLogis' former management company). Prior thereto, Mr. Brooksher
was Area Managing Partner and Chicago Office Managing Partner of KPMG Peat
Marwick (now KPMG LLP), independent public accountants, where he served on the
Board of Directors and Management Committee and as International Development
Partner for Belgium and the Netherlands. Mr. Brooksher is a Director of Vizional
Technologies, Inc. (an entity in which ProLogis has invested) and Butler
Manufacturing Company and he serves as an Advisory Board Member of the J.L.
Kellogg Graduate School of Management of Northwestern University. Mr.
Brooksher's term as Trustee expires in 2002.
Irving F. Lyons, III -- 51 -- Mr. Lyons has served as a Trustee since March
1996. Mr. Lyons has been President of ProLogis since March 1999 and Chief
Investment Officer of ProLogis since March 1997. Mr. Lyons was Co-Chairman of
ProLogis from March 1997 to March 1999 and from December 1993 to March 1997, he
was a Managing Director with ProLogis (through September 1997 he was employed by
ProLogis' former management company). Prior thereto, Mr. Lyons was the Managing
Partner of King & Lyons, a San Francisco Bay Area
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industrial real estate development and management company, since its inception
in 1979. Mr. Lyons' term as Trustee expires in 2003.
C. Ronald Blankenship -- 51 -- Mr. Blankenship has served as a Trustee
since June 2000. Mr. Blankenship has been Director, Vice Chairman and Chief
Operating Officer of Security Capital since May 1998. Mr. Blankenship was
Managing Director of Security Capital from 1991 until 1998 and he was Chairman
of Archstone Communities Trust, (a REIT focused on apartment communities and a
former affiliate of Security Capital) until June 1997. Mr. Blankenship was a
Trustee of Archstone Communities Trust from March 2000 until February 2001.
Since May 1999, Mr. Blankenship has also been Interim Chairman, Chief Executive
Officer and Director of Homestead Village Incorporated (an affiliate of Security
Capital). He is a Trustee of City Center Retail Trust and Urban Growth Property
Trust (both affiliates of Security Capital). Mr. Blankenship is a Director of
BelmontCorp, Carr America Realty Corporation, InterPark Holdings Inc., Macquarie
Capital Partners LLC, Regency Centers Corporation and Storage USA, Inc. (all
affiliates of Security Capital). Mr. Blankenship's term as Trustee expires in
2001.
Stephen L. Feinberg -- 56 -- Mr. Feinberg has served as a Trustee since
January 1993. Mr. Feinberg has been Chairman of the Board and Chief Executive
Officer of Dorsar Investment Co., Inc., a diversified holding company with
interests in real estate and venture capital since 1970. Mr. Feinberg is also a
Director of Security Capital Preferred Growth Incorporated (an affiliate of
Security Capital), Continental Transmission Corporation, The Harvill Press
Limited, MetaMetrics, Inc., St. John's College, The Santa Fe Institute, and The
Feinberg Foundation, Inc. He was formerly Chairman of the Board of St. John's
College, and a former Director of Farrar, Strauss and Giroux, Inc. (a private
publishing company), Molecular Informatics, Inc., Border Steel Mills, Inc.,
Springer Building Materials Corporation, Circle K Corporation, EnerServ
Products, Inc. and Texas Commerce Bank-First State. Mr. Feinberg's term as
Trustee expires in 2001.
Donald P. Jacobs -- 73 -- Mr. Jacobs has served as a Trustee since February
1996. Mr. Jacobs has been a faculty member of the J.L. Kellogg Graduate School
of Management of Northwestern University since 1957, and Dean since 1975. Mr.
Jacobs is a Director of Hartmarx Corporation, Terex Corporation, CDW Computer
Centers and GP Strategies. Mr. Jacobs was formerly a Director of Commonwealth
Edison and its parent company, Unicom and he was formerly Chairman of the Public
Review Board of Andersen Worldwide. Mr. Jacobs was Chairman of the Advisory
Committee of the Oversight Board of the Resolution Trust Corporation for the
third region from 1990 to 1992, Chairman of the Board of AMTRAK from 1975 to
1979, Co-Staff Director of the Presidential Commission on Financial Structure
and Regulation from 1970 to 1971 and Senior Economist for the Banking and
Currency Committee of the U.S. House of Representatives from 1963 to 1964. Mr.
Jacobs' term as Trustee expires in 2001.
William G. Myers -- 73 -- Mr. Myers has served as a Trustee since January
1995. Mr. Myers is Chief Executive Officer of Ojai Ranch and Investment Company,
Inc., Santa Barbara, California, an agri-business and investment company that
Mr. Myers founded in 1963. Mr. Myers was formerly a Trustee of Archstone
Communities Trust (a former affiliate of Security Capital) and a former Director
of S.E.E. International, Itedek, Inc. and Bank of A. Levy. Mr. Myers serves as a
Director of the Library of Congress, James Madison Council, California
Historical Society Foundation and St. Joseph's Health & Retirement Foundation.
He is also a Director of the Santa Barbara Botanic Gardens, Chalone Wine Group
and The Nature Conservancy and he is Trustee of H.C. and R.C. Merritt Trusts.
Mr. Myers' term as Trustee expires in 2003.
John E. Robson -- 70 -- Mr. Robson has served as a Trustee since April
1994. Mr. Robson has been Senior Advisor of Robertson Stephens and Company, a
San Francisco based investment banking firm, since 1994. Mr. Robson was Deputy
Secretary of the United States Treasury from 1989 to 1992, Dean and Professor of
Management, Emory University School of Business Administration from 1986 to
1989, President and Chief Executive Officer and Executive Vice President and
Chief Operating Officer of G.D. Searle & Co., a pharmaceutical and consumer
products firm over the period 1978-1983. Mr. Robson is currently a Director of
Pharmacia Corporation, Northrop Grumman Corporation, COR Solutions, Inc., SCRAM
Technologies, Inc. He is also on the Business Advisory Board of Gilead Sciences,
Inc. Mr. Robson's term as Trustee expires in 2003.
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Kenneth N. Stensby -- 61 -- Mr. Stensby has served as a Trustee since March
1999. Mr. Stensby was a Director of Meridian from 1996 to March 1999. Mr.
Stensby was President and Chief Executive Officer of United Properties, a
Minneapolis-based diversified real estate company, from 1974 until his
retirement in January 1995. Mr. Stensby is past President of the National
Association of Industrial and Office Parks and was a Director of First Asset
Realty Advisors, a pension advisory subsidiary of First Bank of Minneapolis and
Corner House. Mr. Stensby's term as Trustee expires in 2002.
J. Andre Teixeira -- 48 -- Mr. Teixeira has served as a Trustee since
February 1999. Mr. Teixeira is the President of Coca-Cola for the Russia/Ukraine
region and General Manager of Coca-Cola Russia, Ukraine and Belarus. Mr.
Teixeira also serves as Head of Representation for the Coca-Cola Export
Corporation, Moscow. From 1995 to 1998, Mr. Teixeira was Director of the
Development Center, Europe, Coca-Cola Greater Europe; Director, Brussels
Operations, Coca-Cola Greater Europe and Managing Director, Coca-Cola Services
S.A. Mr. Teixeira was the Africa Group Account Executive, Development, for
Coca-Cola from 1994 to 1995 and Director, Research & Development, Coca-Cola
Greater Europe from 1990 to 1995. Mr. Teixeira's term as Trustee expires in
2001.
Thomas G. Wattles -- 49 -- Mr. Wattles has served as a Trustee since
January 1993. Mr. Wattles was a Director of ProLogis' predecessor since its
formation in June 1991 until January 1993. Mr. Wattles was Non-Executive
Chairman of ProLogis from March 1997 to May 1998 and Co-Chairman and Chief
Investment Officer of ProLogis from November 1993 to March 1997 (through
September 1997 he was employed by ProLogis' former management company). Mr.
Wattles is a Managing Director of Security Capital and has been with Security
Capital in various capacities since March 1991. Mr. Wattles is a Trustee of City
Center Retail Trust, CWS Communities Trust and Urban Growth Property Trust (all
affiliates of Security Capital). He is a Director of Access Self-Storage
Holdings S.A., Akeler Holdings S.A., Bernheim-Comofi S.A., CWE Property Holdings
S.A., Interpark Holdings Inc., London & Henley Holdings S.A., Millers Storage
Holdings S.A., Regency Centers Corporation and Security Capital European Realty,
(all affiliates of Security Capital). Mr. Wattles' term as Trustee expires in
2002.
Senior Officers
Ned K. Anderson -- 54 -- Managing Director of ProLogis since December 1998,
where he is responsible for the Market Services Group in the Pacific Region of
the United States. Mr. Anderson has been with ProLogis in varying capacities
since December 1993 (through September 1997 he was employed by ProLogis' former
management company). Prior to joining ProLogis, Mr. Anderson was a partner at
King & Lyons, a San Francisco Bay Area industrial real estate development and
management company.
Paul C. Congleton -- 46 -- Managing Director of ProLogis since September
1999, where he is responsible for coordinating investment and financing
opportunities utilizing institutional capital. Mr. Congleton has been with
ProLogis in varying capacities since January 1995 (through September 1997 he was
employed by ProLogis' former management company). Prior to joining ProLogis, he
was Managing Principal with Overland Company, an Arizona based property
management, leasing and consulting concern.
Tim M. Harvie -- 40 -- Managing Director and Chief Technology Officer of
ProLogis since December 2000, where he is responsible for ProLogis' information
technology operations. Mr. Harvie was with USFreightways Corporation, a provider
of comprehensive supply chain management services from February 1989 to December
2000, most recently as Chief Information Officer.
Steven K. Meyer -- 52 -- Managing Director of ProLogis since December 1998,
where he is responsible for the Market Services Group in the Central Region of
the United States and in Mexico. Mr. Meyer has been with ProLogis in varying
capacities since September 1994 (through September 1997 he was employed by
ProLogis' former management company). Prior to joining ProLogis, Mr. Meyer was
an Executive Vice President with Trammell Crow Company, a diversified commercial
real estate services company in North America.
Walter C. Rakowich -- 43 -- Managing Director and Chief Financial Officer
of ProLogis since December 1998, where he is responsible for worldwide corporate
finance. Mr. Rakowich has been with ProLogis in varying capacities since July
1994 (through September 1997 he was employed by ProLogis' former management
17
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company). Prior thereto, Mr. Rakowich was a consultant to ProLogis in the area
of due diligence and acquisitions and also a Principal with Trammell Crow
Company.
John R. Rizzo -- 51 -- Managing Director of ProLogis since December 2000,
where he is responsible for the North American operations of the Global
Development Group. Mr. Rizzo has been with ProLogis in varying capacities since
January 1999. Prior to joining ProLogis, Mr. Rizzo was Senior Vice President and
Chief Operating Officer of Perini Management Services Incorporated, an affiliate
of Perini Corporation, a construction management and general contracting firm.
John W. Seiple, Jr. -- 42 -- Managing Director of ProLogis since December
1997 and Chief Operating Officer for North American operations of ProLogis since
December 1998. Mr. Seiple has been with ProLogis since October 1993 in varying
capacities (through September 1997 he was employed by ProLogis' former
management company). Prior to joining ProLogis, Mr. Seiple was a Senior Vice
President with Trammell Crow Company.
Robert J. Watson -- 51 -- Managing Director of ProLogis since January 1993
and Chief Operating Officer for European Operations since December 1998. Mr.
Watson has been with ProLogis in varying capacities since January 1993 (through
September 1997 he was employed by ProLogis' former management company). Prior to
joining ProLogis, Mr. Watson with Trammell Crow Company, most recently as the
Regional Partner for Southwest United States Real Estate.
Robin P. R. von Weiler -- 44 -- Managing Director and Regional Head of
ProLogis since December 1999, where he is responsible for the Market Services
and Global Development Groups in Northern and Central Europe. Mr. von Weiler has
been with ProLogis in varying capacities since October 1997. Prior to joining
ProLogis, Mr. Von Weiler was with DTZ Zadelhoff V.O.F., part of DTZ Debenham Tie
Lung, in Rotterdam, the Netherlands, most recently as Vice Managing Director,
Real Estate Agent and Corporate Advisor. Mr. von Weiler is a registered Real
Estate Agent.
Frank H. Fallon -- 39 -- Senior Vice President of ProLogis since September
1999, where he is responsible for the Market Services Group in the Southeast
Region of the United States. Mr. Fallon has been with ProLogis in varying
capacities since January 1995 (through September 1997 he was employed by
ProLogis' former management company). Prior to joining ProLogis, Mr. Fallon was
with Trammell Crow Company.
Ranald Hahn -- 44 -- Senior Vice President and Regional Head of ProLogis
since December 2000, where he is responsible for the Market Services and Global
Development Groups in Southern Europe. Mr. Hahn has been with ProLogis in
varying capacities since March 1999. Prior to joining ProLogis, Mr. Hahn was the
International Business Development Director of GSE, a French logistics
construction company.
M. Gordon Keiser, Jr. -- 56 -- Senior Vice President since October 1995 and
Treasurer of ProLogis since December 1998, where he is responsible for
relationships with ProLogis' lenders. Mr. Keiser has been with ProLogis in
varying capacities since October 1995 (through September 1997 he was employed by
ProLogis' former management company). Prior to joining ProLogis, Mr. Keiser was
Senior Vice President of JMB Realty Corporation with responsibilities for
corporate finance and capital markets financing. Previously, Mr. Keiser was with
KPMG Peat Marwick (now KPMG LLP).
Luke A. Lands -- 44 -- Senior Vice President and Controller of ProLogis
since August 2000, where he supervises accounting, financial reporting and
forecasting. Mr. Lands has been with ProLogis in varying capacities since
January 1996 (through September 1997 he was employed by ProLogis' former
management company). Prior to joining ProLogis, Mr. Lands was Vice President of
SCG Realty Services (an affiliate of Security Capital) from February 1995 to
January 1996 and he was Vice President and Controller for Lincoln Property
Company, a diversified national real estate operating company. Mr. Lands is a
Certified Public Accountant.
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Debra A. McRight -- 41 -- Senior Vice President of ProLogis since December
1999, where she is responsible for North American property management
operations. Ms. McRight has been with ProLogis in varying capacities since
September 1995 (through September 1997 she was employed by ProLogis' former
management company). Prior to joining ProLogis, Ms. McRight was with Paragon
Group, Inc., a full service real estate company, where she was responsible for
property management operations in St. Louis, Missouri.
David S. Morze -- 40 -- Senior Vice President of ProLogis since March 1999,
where he is responsible for the Market Services Group in the Mid-Atlantic Region
of the United States. Mr. Morze has been with ProLogis in varying capacities
since March 1995 (through September 1997 he was employed by ProLogis' former
management company). Prior to joining ProLogis, Mr. Morze was the Director of
Marketing for Northern California for The SARES REGIS Group.
Edward S. Nekritz -- 35 -- Senior Vice President and General Counsel of
ProLogis since December 1998 and Secretary of ProLogis since March 1999, where
he oversees the provision of all legal services for ProLogis and he is also
responsible for ProLogis' due diligence and risk management functions. Mr.
Nekritz has been with ProLogis in varying capacities since September 1995
(through September 1997 he was employed by ProLogis' former management company).
Prior to joining ProLogis, Mr. Nekritz was an attorney with Mayer, Brown &
Platt.
ENVIRONMENTAL MATTERS
Under various federal, state and local laws, ordinances and regulations, a
current or previous owner, developer or operator of real estate may be liable
for the costs of removal or remediation of certain hazardous or toxic substances
at, on, under or in its property. The costs of removal or remediation of such
substances could be substantial. Such laws often impose liability without regard
to whether the owner or operator knew of, or was responsible for, the release or
presence of such hazardous substances. The presence of such substances may
adversely affect the owner's ability to sell such real estate or to borrow using
such real estate as collateral. ProLogis has not been notified by any
governmental authority of any non-compliance, liability or other claim in
connection with any of the properties owned or being acquired at December 31,
2000, and ProLogis is not aware of any environmental condition with respect to
any of its properties that is likely to be material. ProLogis or the predecessor
owners have subjected each of its properties to an environmental assessment
(which does not involve invasive procedures such as soil sampling or ground
water analysis) by independent consultants. While some of these assessments have
led to further investigation and sampling, none of the environmental assessments
has revealed, nor is ProLogis aware of, any environmental liability (including
asbestos-related liability) that ProLogis believes would have a material adverse
effect on its business, financial condition or results of operations. No
assurance can be given, however, that these assessments and investigations
reveal all potential environmental liabilities, that no prior owner or operator
created any material environmental condition not known to ProLogis or the
independent consultants or that future uses or conditions (including, without
limitation, customer actions or changes in applicable environmental laws and
regulations) will not result in unreimbursed costs relating to environmental
liabilities.
INSURANCE COVERAGE
ProLogis and its consolidated and unconsolidated entities currently carry
comprehensive insurance coverage including property, liability, fire, flood,
earthquake, environmental, extended coverage and rental loss, as appropriate for
the markets where each entities facilities and business operations are located.
The insurance coverage contains policy specifications and insured limits
customarily carried for similar facilities. ProLogis believes its facilities and
the facilities of its consolidated and unconsolidated entities are adequately
insured; however, an uninsured loss could result in loss of capital investment
and anticipated profits.
ITEM 2. PROPERTIES
INDUSTRIAL DISTRIBUTION FACILITIES
ProLogis and its consolidated entities (see -- "Consolidated Entities")
have invested primarily in generic industrial distribution facilities with an
average office finish level of less than 10%. Due to the costs associated
19
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with retrofitting customer spaces, service center product has been acquired only
on a very limited basis, generally as part of portfolio acquisitions in which
the majority of product being acquired was bulk distribution. ProLogis'
industrial distribution facilities is typically used for storage, packaging,
assembly, distribution and light manufacturing of consumer and industrial
products.
- Distribution. -- ProLogis' distribution facilities are adaptable for both
bulk distribution and light manufacturing or assembly uses. Based upon
square footage, ProLogis' operating portfolio was comprised of 88.5% bulk
distribution and 10.4% light manufacturing facilities as of December 31,
2000.
- Service Center and Other -- Under ProLogis' definition, service centers
are multi-customer buildings that have a higher percentage of office
space than distribution facilities and only have grade-level loading as
opposed to truck dock loading. As of December 31, 2000, service center
product constituted approximately 0.9% of the square feet in ProLogis'
operating portfolio and other miscellaneous facilities, primarily office
facilities acquired as part of portfolio acquisitions, constituted 0.2%
of the square feet in ProLogis' operating portfolio.
GEOGRAPHIC DISTRIBUTION
ProLogis and its consolidated entities (see -- "Consolidated Entities")
have direct ownership of 1,285 industrial distribution facilities (operating and
under development) in North America and Europe as of December 31, 2000. In the
United States, ProLogis' facilities are located in 42 cities in 24 states and
the District of Columbia. ProLogis' facilities in Mexico are located in four
cities. In Europe, ProLogis' facilities are located in 11 cities in 5 countries.
The table below demonstrates the geographic distribution of ProLogis' portfolio
(operating facilities and facilities under development). The table excludes land
held for future development, which is less than 5% of ProLogis' total
investment, based on cost as of December 31, 2000 and 1999. The table does not
include facilities that are owned by ProLogis' unconsolidated entities which are
discussed under "--Unconsolidated Entities".
DECEMBER 31,
-------------------------------------------------------------
2000 1999
---------------------------- ----------------------------
PERCENTAGE OF PERCENTAGE OF
NUMBER OF ASSETS BASED NUMBER OF ASSETS BASED
FACILITIES ON COST(1) FACILITIES ON COST(1)
---------- ------------- ---------- -------------
NORTH AMERICAN MARKETS(2)(3):
Atlanta, Georgia....................... 97 6.46% 103 6.20%
Austin, Texas.......................... 37 2.00 33 1.53
Birmingham, Alabama.................... 6 0.75 6 0.69
Charlotte, North Carolina.............. 32 2.57 32 2.28
Chattanooga, Tennessee................. 5 0.33 5 0.30
Chicago, Illinois...................... 64 7.45 64 6.25
Cincinnati, Ohio....................... 47 3.00 46 3.04
Columbus, Ohio......................... 32 4.13 32 4.43
Dallas/Fort Worth, Texas............... 116 8.53 120 8.31
Denver, Colorado....................... 26 1.80 28 1.82
El Paso, Texas......................... 19 1.49 22 1.56
Fort Lauderdale/Miami, Florida......... 17 1.73 16 1.58
Houston, Texas......................... 82 4.67 84 4.29
I-95 Corridor, New Jersey.............. 31 4.89 35 4.27
Indianapolis, Indiana.................. 43 2.79 45 2.85
Juarez, Mexico......................... 7 0.37 6 0.27
Kansas City, Kansas/Missouri........... 29 1.28 29 1.14
Las Vegas, Nevada...................... 18 2.20 18 2.18
Los Angeles/Orange County,
California.......................... 6 1.62 4 0.95
Louisville, Kentucky................... 8 1.01 10 1.19
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DECEMBER 31,
-------------------------------------------------------------
2000 1999
---------------------------- ----------------------------
PERCENTAGE OF PERCENTAGE OF
NUMBER OF ASSETS BASED NUMBER OF ASSETS BASED
FACILITIES ON COST(1) FACILITIES ON COST(1)
---------- ------------- ---------- -------------
Memphis, Tennessee..................... 40 3.25 40 2.80
Monterrey, Mexico...................... 10 0.97 10 0.90
Nashville, Tennessee................... 29 1.63 31 1.72
Oklahoma City, Oklahoma................ 6 0.24 6 0.21
Orlando, Florida....................... 23 1.85 23 1.73
Phoenix, Arizona....................... 31 1.67 32 1.63
Portland, Oregon....................... 26 1.59 26 1.42
Reno, Nevada........................... 20 1.48 19 1.50
Reynosa, Mexico........................ 15 1.01 12 0.77
Rio Grande Valley (Brownsville),
Texas............................... 14 0.54 14 0.49
Salt Lake City, Utah................... 7 0.93 10 1.16
San Antonio, Texas..................... 46 2.16 47 2.08
Seattle, Washington.................... 15 1.33 15 1.21
San Francisco (East Bay), California... 54 4.79 54 4.59
San Francisco (South Bay),
California.......................... 71 4.98 72 4.68
St. Louis, Missouri.................... 15 1.05 15 0.95
Tampa, Florida......................... 58 2.67 62 2.52
Tijuana, Mexico........................ 5 0.60 4 0.42
Tulsa, Oklahoma........................ 9 0.26 9 0.23
Washington D.C./Baltimore, Maryland.... 48 4.13 40 3.05
Other(4)............................... 3 0.12 24 0.91
----- ------ ----- ------
Subtotal North America(2)(3)... 1,267 96.32 1,303 90.10
----- ------ ----- ------
EUROPEAN MARKETS(5)(6)(7)(8):
Amsterdam, Netherlands................. -- -- 1 0.20
Brabandt, Netherlands.................. 1 0.27 -- --
Cologne, Germany....................... 1 0.28 1 0.33
Lille, France.......................... 1 0.06 2 0.15
Lyon, France........................... 1 0.14 3 0.50
Marseille, France...................... 1 0.14 -- --
Milan, Italy........................... 2 0.35 -- --
Neustadt, Germany...................... 1 0.28 -- --
Paris, France.......................... 3 0.66 57 6.36
Rotterdam, Netherlands................. 3 0.47 3 0.52
Soest, Germany......................... 1 0.31 -- --
Warsaw, Poland......................... 3 0.72 9 1.84
----- ------ ----- ------
Subtotal Europe(5)(6)(7)(8)....... 18 3.68 76 9.90
----- ------ ----- ------
Total.......................... 1,285(9) 100.00% 1,379(9) 100.00%
===== ====== ===== ======
- ---------------
(1) Facilities under development are reflected at their total budgeted
development cost, rather than cost incurred to date.
(2) In January 2001, ProLogis acquired three operating facilities in Memphis,
Tennessee aggregating 0.7 million square feet for $16.6 million. These
facilities were acquired to complete a tax-deferred exchange transaction.
(3) In January 2001, ProLogis contributed three facilities to ProLogis North
American Properties Fund I in exchange for an additional equity interest of
$34.1 million. The three facilities, one located in Atlanta and two located
in Dallas/Ft. Worth, aggregated 0.9 million square feet.
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(4) In 2000, includes one facility each in Akron, Ohio, Detroit, Michigan and
Norfolk, Virginia. In 1999, includes one facility each in Akron, Ohio,
Boston, Massachusetts and Norfolk, Virginia and 21 facilities in Detroit,
Michigan, 20 of which were disposed of during 2000.
(5) In January 2001, ProLogis contributed two additional facilities located in
France (Lyon and Paris) to ProLogis European Properties Fund. These
facilities aggregated 0.4 million square feet and generated net proceeds of
$16.1 million.
(6) Does not include facilities owned by the Kingspark entities (13 operating
facilities and 12 facilities under development as of December 31, 2000 and
15 operating facilities and 14 facilities under development as of December
31, 1999). Beginning January 2, 2001, the accounts of the Kingspark entities
will be consolidated in ProLogis' financial statements along with ProLogis'
other majority-owned and controlled subsidiaries and partnerships. See
"-- Unconsolidated Entities -- CDFS Business" and Note 4 to ProLogis'
Consolidated Financial Statements in Item 8.
(7) On January 7, 2000, ProLogis contributed 50.1% of the common stock of
ProLogis European Properties S.a.r.l., one of its wholly owned European
entities, to ProLogis European Properties Fund in exchange for an equity
interest. ProLogis European Properties S.a.r.l. owned 60 facilities (54
facilities in Paris, four facilities in Warsaw, one facility in Lyon and one
facility in Rotterdam) as of December 31, 2000. The remaining 49.9% of the
common stock of ProLogis European Properties S.a.r.l. was contributed to
ProLogis European Properties Fund by ProLogis on January 7, 2001 in exchange
for an additional equity interest.
(8) ProLogis is committed to contribute substantially all of its stabilized
facilities in Europe to ProLogis European Properties Fund, subject to
meeting specified criteria.
(9) Includes 41 facilities under development as of December 31, 2000 and 51
facilities under development as of December 31, 1999.
FACILITIES
The information in the following table is as of December 31, 2000 for the
facilities owned by ProLogis and its consolidated entities in North America and
Europe. No individual facility or group of facilities operated as a single
business unit amounted to 10% or more of ProLogis' consolidated total assets as
of December 31, 2000 or generated gross revenue equal to 10% or more of
ProLogis' consolidated gross revenues for the year ended December 31, 2000. The
table does not include facilities that are owned by ProLogis' unconsolidated
entities which are discussed under "-- Unconsolidated Entities".
PERCENTAGE RENTABLE
NO. OF OCCUPANCY SQUARE INVESTMENT ENCUMBRANCES
BLDGS. (1) FOOTAGE (2) (3)
------ ---------- -------------- -------------- ------------
OPERATING FACILITIES OWNED AS OF
DECEMBER 31, 2000(4):
NORTH AMERICAN MARKETS(5)(6):
Atlanta, Georgia........... 95 88.04% 9,131,533 $ 277,710,625 $ 38,607,740
Austin, Texas.............. 35 94.66 2,156,609 84,052,795 --
Birmingham, Alabama........ 6 100.00 1,135,278 34,416,812 --
Charlotte, North
Carolina................. 32 95.70 3,980,670 118,844,478 41,209,222
Chattanooga, Tennessee..... 5 100.00 1,147,872 15,441,941 --
Chicago, Illinois.......... 61 93.51 7,689,671 309,206,016 45,610,450
Cincinnati, Ohio........... 45 88.44 5,031,002 131,029,528 40,704,183
Columbus, Ohio............. 31 94.96 5,747,391 182,533,445 40,274,070
Dallas/Fort Worth, Texas... 116 86.64 11,805,472 393,707,124 67,742,912
Denver, Colorado........... 26 95.26 3,094,209 83,268,800 --
El Paso, Texas............. 18 89.86 2,231,903 61,309,592 3,127,999
Fort Lauderdale/Miami,
Florida.................. 16 91.04 1,694,808 75,129,319 1,967,842
Houston, Texas............. 82 95.20 7,210,747 215,316,366 47,468,959
I-95 Corridor, New
Jersey................... 30 95.31 4,836,537 212,130,095 28,339,021
Indianapolis, Indiana...... 43 87.07 4,187,721 128,884,247 --
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PERCENTAGE RENTABLE
NO. OF OCCUPANCY SQUARE INVESTMENT ENCUMBRANCES
BLDGS. (1) FOOTAGE (2) (3)
------ ---------- -------------- -------------- ------------
Juarez, Mexico............. 7 84.98 487,152 16,921,649 --
Kansas City,
Kansas/Missouri.......... 29 95.83 1,578,487 59,009,721 13,086,357
Las Vegas, Nevada.......... 18 92.97 2,296,811 101,591,116 18,282,310
Los Angeles/Orange County,
California............... 2 100.00 289,283 13,762,044 --
Louisville, Kentucky....... 7 100.00 1,469,988 35,339,694 6,339,495
Memphis, Tennessee......... 39 90.54 5,415,819 140,240,324 14,485,041
Monterrey, Mexico.......... 10 84.82 1,167,403 44,616,155 --
Nashville, Tennessee....... 29 88.99 3,084,949 75,122,667 --
Oklahoma City, Oklahoma.... 6 98.73 639,942 11,000,738 --
Orlando, Florida........... 23 91.22 2,112,100 85,507,117 12,455,664
Phoenix, Arizona........... 31 96.82 2,289,922 77,084,915 --
Portland, Oregon........... 26 95.42 1,957,401 73,589,606 375,637
Reno, Nevada............... 19 91.57 2,327,917 60,326,214 --
Reynosa, Mexico............ 12 86.32 1,140,853 34,169,766 --
Rio Grande Valley
(Brownsville), Texas..... 14 99.65 916,746 24,829,871 2,683,148
Salt Lake City, Utah....... 7 98.19 1,643,468 43,068,889 --
San Antonio, Texas......... 46 93.39 3,906,603 99,555,608 --
Seattle, Washington........ 15 100.00 1,390,447 61,507,597 4,891,877
San Francisco (East Bay),
California............... 54 89.21 5,768,799 220,953,837 14,933,566
San Francisco (South Bay),
California............... 71 99.87 3,694,781 229,646,338 19,194,697
St. Louis, Missouri........ 15 85.97 1,621,825 48,473,098 9,299,966
Tampa, Florida............. 58 97.56 3,325,581 123,217,800 29,143,272
Tijuana, Mexico............ 4 88.24 615,120 22,447,732 --
Tulsa, Oklahoma............ 9 100.00 523,623 11,894,023 --
Washington D.C./Baltimore,
Maryland................. 40 97.14 3,619,350 145,650,708 36,957,185
Other...................... 3 100.00 160,998 5,529,529 431,360
----- ------ ----------- -------------- ------------
Subtotal North
America(5)(6)......... 1,235 92.45 124,526,791 4,188,037,939 537,611,973
----- ------ ----------- -------------- ------------
EUROPEAN MARKETS(7)(8)(9):
Lille, France(10).......... 1 48.18 16,587 2,824,877 --
Lyon, France............... 1 100.00 225,194 6,390,328 --
Milan, Italy............... 2 -- 444,122 16,197,430 --
Paris, France.............. 1 100.00 126,477 8,724,797 --
Rotterdam, Netherlands..... 2 -- 435,420 15,742,227 --
Warsaw, Poland............. 2 57.26 500,655 22,358,816 --
----- ------ ----------- -------------- ------------
Subtotal
Europe(7)(8)(9)....... 9 36.97 1,748,455 72,238,475 --
----- ------ ----------- -------------- ------------
TOTAL OPERATING
FACILITIES OWNED AS
OF DECEMBER 31,
2000(4)............. 1,244 91.68% 126,275,246 $4,260,276,414 $537,611,973
===== ====== =========== ============== ============
23
26
BUDGETED
RENTABLE DEVELOPMENT
NO. OF SQUARE INVESTMENT COSTS
BLDGS. FOOTAGE (2) (11)
------ ---------- ------------ ------------
FACILITIES UNDER DEVELOPMENT AS OF
DECEMBER 31, 2000(12)(13):
NORTH AMERICAN MARKETS:
Atlanta, Georgia..................... 2 702,000 $ 10,331,338 $ 20,880,728
Austin, Texas........................ 2 209,600 5,339,880 8,401,120
Chicago, Illinois.................... 3 725,072 19,699,727 34,551,156
Cincinnati, Ohio..................... 2 214,080 4,824,015 7,273,887
Columbus, Ohio....................... 1 289,280 6,763,336 8,017,382
El Paso, Texas....................... 1 239,131 5,368,005 7,414,958
Fort Lauderdale/Miami, Florida....... 1 94,500 3,923,087 4,815,121
I-95 Corridor, New Jersey............ 1 299,000 9,499,837 13,473,972
Los Angeles/Orange County,
California......................... 4 1,084,192 43,248,515 60,824,068
Louisville, Kentucky................. 1 350,000 7,811,525 11,232,967
Memphis, Tennessee................... 1 360,000 8,486,140 9,790,347
Reno, Nevada......................... 1 218,500 2,233,218 8,133,784
Reynosa, Mexico...................... 3 360,294 9,154,508 12,631,053
Tijuana, Mexico...................... 1 141,290 3,334,101 5,164,760
Washington D.C./Baltimore,
Maryland........................... 8 1,037,261 16,963,318 44,862,321
-- ---------- ------------ ------------
Subtotal North America............. 32 6,324,200 156,980,550 257,467,624
-- ---------- ------------ ------------
EUROPEAN MARKETS:
Brabant, Netherlands................. 1 307,700 6,911,138 12,405,285
Cologne, Germany..................... 1 206,938 4,798,071 12,831,443
Marseille, France.................... 1 230,576 1,247,178 6,537,121
Neustadt, Germany.................... 1 212,266 903,551 12,986,249
Paris, France........................ 2 675,129 4,709,040 21,932,720
Rotterdam, Netherlands............... 1 157,154 1,056,700 6,135,349
Soest, Germany....................... 1 305,579 2,136,294 14,204,828
Warsaw, Poland....................... 1 291,940 7,277,460 10,678,623
-- ---------- ------------ ------------
Subtotal Europe.................... 9 2,387,282 29,039,432 97,711,618
-- ---------- ------------ ------------
TOTAL FACILITIES UNDER
DEVELOPMENT AS OF DECEMBER 31,
2000(12)(13).................. 41 8,711,482 $186,019,982 $355,179,242
== ========== ============ ============
INVESTMENT ENCUMBRANCES
ACREAGE (2) (3)
------- ------------ ------------
LAND HELD FOR DEVELOPMENT AS OF DECEMBER 31,
2000(14)(15):
NORTH AMERICAN MARKETS:
Atlanta, Georgia................................... 228.3 $ 14,624,463 $ --
Austin, Texas...................................... 7.2 763,323 --
Charlotte, North Carolina.......................... 25.3 2,554,060 --
Chicago, Illinois.................................. 245.0 32,623,248 --
Cincinnati, Ohio................................... 90.2 6,658,637 --
Columbus, Ohio..................................... 56.5 2,242,658 --
Dallas/Fort Worth, Texas........................... 182.6 11,390,734 --
Denver, Colorado................................... 15.6 1,405,890 --
El Paso, Texas..................................... 108.3 6,448,009 --
Houston, Texas..................................... 64.9 5,299,734 --
I-95 Corridor, New Jersey.......................... 10.1 739,801 --
Indianapolis, Indiana.............................. 72.7 5,873,642 --
24
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INVESTMENT ENCUMBRANCES
ACREAGE (2) (3)
------- ------------ ------------
Juarez, Mexico..................................... 21.4 3,812,547 --
Kansas City, Kansas/Missouri....................... 16.6 1,511,000 --
Las Vegas, Nevada.................................. 61.8 6,937,917 312,974
Los Angeles/Orange County, California.............. 27.8 5,892,455 --
Louisville, Kentucky............................... 13.0 600,409 --
Memphis, Tennessee................................. 47.9 3,631,205 --
Monterrey, Mexico.................................. 25.9 3,875,347 --
Orlando, Florida................................... 28.1 2,788,623 --
Portland, Oregon................................... 18.0 2,848,334 --
Reno, Nevada....................................... 30.1 4,196,675 --
Reynosa, Mexico.................................... 82.6 6,456,419 --
Rio Grande Valley (Brownsville), Texas............. 14.8 439,288 --
Salt Lake City, Utah............................... 30.3 2,015,954 --
San Antonio, Texas................................. 58.1 5,289,233 --
San Francisco (East Bay), California............... 77.6 5,953,538 --
Seattle, Washington................................ 10.6 1,919,882 --
Tampa, Florida..................................... 53.2 3,758,156 --
Tijuana, Mexico.................................... 14.1 2,926,257 --
Washington D.C./Baltimore, Maryland................ 22.3 1,960,650 --
------- ------------ --------
Subtotal North America........................... 1,760.9 157,438,088 312,974
------- ------------ --------
EUROPEAN MARKETS:
Barcelona, Spain................................... 70.8 19,971,847 --
Brabant, Netherlands............................... 8.9 1,710,486 --
Cologne, Germany................................... 13.4 613,824 --
La Havre, France................................... 123.6 1,105,112 --
Lyon, France....................................... 17.6 2,014,115 --
Milan, Italy....................................... 16.2 1,223,960 --
Tongeren, Belgium.................................. 3.3 182,189 --
Warsaw, Poland..................................... 32.3 3,145,201 --
------- ------------ --------
Subtotal Europe.................................. 286.1 29,966,734 --
------- ------------ --------
TOTAL LAND HELD FOR DEVELOPMENT AS OF DECEMBER
31, 2000(14)(15)............................ 2,047.0 $187,404,822 $312,974
======= ============ ========
BUDGETED
RENTABLE DEVELOPMENT
NO. OF SQUARE INVESTMENT COST ENCUMBRANCES
BLDGS. ACREAGE FOOTAGE (2) (11) (3)
------ ------- ----------- -------------- ------------ ------------
GRAND TOTALS AS OF DECEMBER 31,
2000:
Operating Facilities............ 1,244 n/a 126,275,246 $4,260,276,414 $ n/a $537,611,973
Facilities Under Development.... 41 n/a 8,711,482 186,019,982 355,179,242 n/a
Land Held for Development....... n/a 2,047.0 n/a 187,404,822 n/a 312,974
----- ------- ----------- -------------- ------------ ------------
Totals................... 1,285 2,047.0 134,986,728 $4,633,701,218(16) $355,179,242 $537,924,947
===== ======= =========== ============== ============ ============
- ---------------
(1) Percentage Occupancy is physical occupancy for the facility as of December
31, 2000. Operating facilities as of December 31, 2000 include recently
completed development facilities in initial lease-up (3.4 million square
feet completed in the fourth quarter of 2000) which impacts the overall
occupancy percentage as of December 31, 2000.
(2) Investment is as of December 31, 2000 and represents ProLogis' historical
cost.
25
28
(3) Certain facilities are pledged as collateral under ProLogis' mortgage
notes, securitized debt and assessment bonds as of December 31, 2000. See
Schedule III -- Real Estate and Accumulated Depreciation to ProLogis'
Consolidated Financial Statements in Item 8 for specific facilities
pledged.
(4) All assets are utilized in the property operations segment. See "Item
1 -- Business -- ProLogis Trust".
(5) In January 2001, ProLogis acquired three operating facilities in Memphis,
Tennessee aggregating 0.7 million square feet for $16.6 million. These
facilities were acquired to complete a tax-deferred exchange transaction.
(6) In January 2001, ProLogis contributed three facilities to ProLogis North
American Properties Fund I in exchange for an additional equity interest of
$34.1 million. The three facilities, one located in Atlanta and two located
in Dallas/Ft. Worth, aggregated 0.9 million square feet.
(7) In January 2001, ProLogis contributed two additional facilities located in
France (Lyon and Paris) to ProLogis European Properties Fund. These
facilities aggregated 0.4 million square feet and generated net proceeds of
$16.1 million.
(8) ProLogis is committed to contribute substantially all of its stabilized
facilities in Europe to ProLogis European Properties Fund, subject to
meeting specified criteria.
(9) Does not include 13 operating facilities with an investment of $139.2
million and 12 facilities under development with a total budgeted cost of
$136.2 million owned by the Kingspark entities in the United Kingdom as of
December 31, 2000. Beginning January 2, 2001, the accounts of the Kingspark
entities will be consolidated in ProLogis' financial statements along with
ProLogis' other majority-owned and controlled subsidiaries and
partnerships. See "-- Unconsolidated Entities -- CDFS Business" and Note 4
to ProLogis' Consolidated Financial Statements in Item 8.
(10) Represents an office building acquired as part of a portfolio acquisition.
(11) Represents the total budgeted development cost at completion for facilities
under development, which includes the cost of land, fees, permits, payments
to contractors, architectural and engineering fees and interest and
property taxes to be capitalized during construction, rather than costs
incurred to date.
(12) All of the facilities under development are expected to be utilized in the
CDFS business segment. See "Item 1 -- Business -- ProLogis Trust".
(13) Includes 0.8 million square feet in the design and permitting stage.
(14) All of the land held for future development is expected to be utilized in
the CDFS business segment for the development of approximately 36.2 million
square feet of distribution facilities. See "Item 1 -- Business -- ProLogis
Trust". Does not include 1,232 acres of land controlled under option,
letter of intent or contingent contract with the capacity of developing
approximately 21.2 million square feet of distribution facilities.
(15) Does not include 332 acres of land owned and 1,515 acres of land under
control by the Kingspark entities in the United Kingdom as of December 31,
2000 which has the combined capacity for the development of approximately
28.3 million square feet of distribution facilities.
(16) See Schedule III -- Real Estate and Accumulated Depreciation to ProLogis'
Consolidated Financial Statements in Item 8 for a reconciliation of this
amount to ProLogis' total investment in real estate.
CONSOLIDATED ENTITIES
Partnerships
As of December 31, 2000, ProLogis held a majority interest in and
controlled five partnerships (collectively, the "Partnerships"), which are
consolidated with the accounts of ProLogis. Generally, pursuant to the
Partnership agreements, ProLogis or one of its wholly owned entities, is the
sole controlling general partner and has full responsibility for the management
and control of the Partnerships. The limited partners have no authority to
transact business for, or, except as noted below, participate in the management
decisions of, the Partnerships. However, any decision to amend certain
provisions of the applicable partnership agreement, to dissolve a Partnership
prior to the term set forth in the applicable partnership agreement or to enter
into certain extraordinary transactions would require the consent of all limited
partners. Pursuant to the partnership agreements, ProLogis, or its wholly owned
entity, as the case may be, may not voluntarily withdraw from the
26
29
applicable Partnership or transfer or assign its interests in the Partnership
without the consent of all of the limited partners thereto. The limited partners
may freely transfer their Partnership units to affiliates, provided that such
transfer does not cause a termination of the Partnership for federal income tax
purposes and does not cause ProLogis to cease to comply with requirements under
the Code for qualification as a REIT. Each of the Partnership agreements grants
to the limited partners the right to exchange their Partnership units for
ProLogis common shares of beneficial interest, par value $0.01 per share,
("Common Shares"), subject to certain conditions. For financial reporting
purposes, the assets, liabilities, results of operations and cash flows of each
of the Partnerships are included in ProLogis' consolidated financial statements,
and the interests of the limited partners are reflected as minority interest.
See Note 6 to ProLogis' Consolidated Financial Statements in Item 8. The
Partnerships, which are part of the property operations segment, are as follows
as of December 31, 2000:
INVESTMENT LIMITED
FORMATION IN REAL ESTATE PROLOGIS' PARTNERSHIP UNITS
ENTITY DATE (IN MILLIONS) OWNERSHIP OUTSTANDING
- ------ --------- -------------- --------- -----------------
ProLogis Limited
Partnership-I(1).............. 1993 $211.0(2) 68.70% 4,520,532(3)
ProLogis Limited
Partnership-II................ 1994 $ 58.3(4) 97.80% 90,213(3)
ProLogis Limited
Partnership-III............... 1994 $ 52.0(5) 86.39% 376,347(3)
ProLogis Limited
Partnership-IV(6)............. 1994 $103.9(7) 98.50% 68,612(3)
Meridian Realty Partners Limited
Partnership................... (8) $ 10.4(9) 88.00% 29,712(10)
- ---------------
(1) These facilities cannot be sold, prior to the occurrence of certain events,
without the consent of the limited partners thereto, other than in
tax-deferred exchange transactions.
(2) Facilities are located in the San Francisco (both South Bay and East Bay)
and Tampa markets.
(3) Convertible into Common Shares on a one for one basis.
(4) Facilities are located in the Charlotte, Dallas/Ft. Worth, Denver, El Paso,
San Francisco (East Bay), St. Louis and Washington, D.C./Baltimore markets.
(5) Facilities are located in the Chicago, Ft. Lauderdale/Miami, Norfolk,
Orlando, San Antonio and Tampa markets.
(6) ProLogis Limited Partnership-IV was formed through a cash contribution from
a wholly owned subsidiary of ProLogis, ProLogis-IV, Inc., and the
contribution of distribution facilities from the limited partner. ProLogis
Limited Partnership-IV and ProLogis-IV, Inc. are legal entities separate
and distinct from ProLogis, its affiliates and each other, and each has
separate assets, liabilities, business functions and operations. The sole
assets of ProLogis-IV, Inc. are its general partner advances to and its
interest in ProLogis Limited Partnership-IV. As of December 31, 2000,
ProLogis Limited Partnership-IV had outstanding borrowings from
ProLogis-IV, Inc., of $0.4 million and ProLogis-IV, Inc. had outstanding
borrowings from ProLogis and its affiliates of $0.4 million.
(7) Facilities are located in the Akron, Cincinnati, Dallas/Ft. Worth, Ft.
Lauderdale/Miami, I-95 New Jersey Corridor, Orlando and Tampa markets.
(8) Acquired in merger with Meridian in March 1999. See Note 11 to ProLogis'
Consolidated Financial Statements in Item 8.
(9) Facility is located in the Los Angeles/Orange County market.
(10) Convertible into Common Shares on a 1.1 for one basis, plus $2.00.
ProLogis Development Services
ProLogis Development Services, which is part of the CDFS business segment,
develops distribution facilities that are often disposed of to customers, third
parties or entities in which ProLogis maintains an ownership interest. ProLogis
Development Services also contracts on a fee basis to develop distribution
facilities for customers or third parties. ProLogis owns 100% of the preferred
stock of ProLogis Development Services and realizes substantially all economic
benefits of its activities. Because ProLogis advances mortgage loans to ProLogis
Development Services to fund its acquisition, development and construction
activities, ProLogis
27
30
Development Services is consolidated with ProLogis. ProLogis Development
Services' real estate assets represented 9.7% of ProLogis' total real estate
assets (at cost) as of December 31, 2000. ProLogis Development Services is not a
qualified REIT subsidiary of ProLogis under the Code. Accordingly, provisions
for federal and state income taxes are recognized, as appropriate.
UNCONSOLIDATED ENTITIES
As of December 31, 2000, ProLogis' investments in and advances to
unconsolidated entities totaled $1.45 billion. These investments were structured
to either allow ProLogis to comply with the requirements of the Code to qualify
as a REIT or to further ProLogis' objective of increasing cash flows without
raising additional capital through direct public debt and public equity
offerings.
ProLogis invested in the nonvoting preferred stock of certain entities that
have ownership interests in companies that produce income that is not REIT
"qualifying" income (i.e., rental income and mortgage interest income) under the
Code. To maintain its qualification as a REIT, ProLogis can collectively invest
in these entities in amounts up to 25% of the fair market value of ProLogis'
total assets, with a maximum per company investment of 5% of the fair market
value of ProLogis' total assets. Of these investments, ProLogis Development
Services, ProLogis Logistics, Frigoscandia S.A. and the Kingspark entities all
own properties. ProLogis accounts for the investments in ProLogis Logistics,
Frigoscandia S.A. and the Kingspark entities under the equity method. These
entities' investments in properties are discussed under "-- CDFS Business" and
"-- Temperature-Controlled Distribution Operations". Because ProLogis advances
mortgage loans to ProLogis Development Services to fund its acquisition,
development and construction activities, ProLogis Development Services is
consolidated with ProLogis. Properties owned by ProLogis Development Services
are included in the tables in "-- Geographic Distribution" and "-- Facilities"
and ProLogis Development Services is discussed in "-- Consolidated
Entities--ProLogis Development Services". See also "Item 7 -- Management's
Discussion and Analysis of Financial Condition and Results of Operations -- New
Tax Legislation".
The entities discussed below under "-- Property Operations" were all formed
to allow ProLogis to generate capital for future development activities while
still maintaining an ownership position in the facilities. All of ProLogis'
unconsolidated entities are discussed in Note 4 to ProLogis' Consolidated
Financial Statements in Item 8.
Property Operations
As of December 31, 2000, ProLogis had a 50.0% ownership interest in
ProLogis California, a 34.4% ownership interest in ProLogis European Properties
Fund, a 20.0% ownership interest in ProLogis North America Properties Fund I and
a 20.0% ownership interest in ProLogis Principal. See "Item 1.
Business -- Business Strategy and Operating Segments -- Property Operations
Segment", "Item 7. Management's Discussion and Analysis of Financial Conditions
and Results of Operations -- Results of Operations -- Property Operations" and
Note 4 to ProLogis' Consolidated Financial Statements in Item 8.
RENTABLE PERCENTAGE
NO. OF SQUARE OCCUPANCY INVESTMENT
BLDGS. FOOTAGE (1) (2)
------ ---------- ---------- --------------
NORTH AMERICA:
ProLogis California(3):
Los Angeles/Orange County,
California.......................... 77 12,394,603 99.02% $581,845,469(4)
--- ---------- ------ --------------
ProLogis North American Properties
Fund I (5):
Atlanta, Georgia....................... 4 970,568 100.00% 35,074,211
Chicago, Illinois...................... 1 249,576 100.00% 14,753,864
Cincinnati, Ohio....................... 2 297,720 100.00% 15,028,916
Columbus, Ohio......................... 2 888,691 94.62% 30,242,818
Dallas/Fort Worth, Texas............... 1 492,500 100.00% 21,463,926
Denver, Colorado....................... 2 198,892 100.00% 9,113,621
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31
RENTABLE PERCENTAGE
NO. OF SQUARE OCCUPANCY INVESTMENT
BLDGS. FOOTAGE (1) (2)
------ ---------- ---------- --------------
El Paso, Texas......................... 1 354,159 100.00% 13,600,194
Houston, Texas......................... 2 238,450 100.00% 10,854,536
Indianapolis, Indiana.................. 2 719,829 86.77% 21,409,477
Louisville, Kentucky................... 3 905,800 86.75% 33,686,361
Nashville, Tennessee................... 1 412,800 100.00% 14,799,607
Northern New Jersey.................... 5 1,100,320 96.18% 58,916,082
Phoenix, Arizona....................... 1 156,410 100.00% 6,764,834
Salt Lake City, Utah................... 3 396,600 100.00% 16,964,603
San Antonio, Texas..................... 1 244,800 100.00% 9,025,547
San Francisco (East Bay), California... 2 404,400 100.00% 16,923,718
--- ---------- ------ --------------
33 8,031,515 96.20% 328,622,315(6)
--- ---------- ------ --------------
ProLogis Principal:
Dallas/Fort Worth, Texas............... 3 440,016 100.00% 16,513,899(7)
--- ---------- ------ --------------
Subtotal North America......... 113 20,866,134 97.95% 926,981,683
--- ---------- ------ --------------
EUROPE:
ProLogis European Properties
Fund(8)(9):
Amsterdam, Netherlands................. 5 804,564 100.00% 55,965,952
Annecy, France......................... 1 47,028 99.59% 2,336,941
Barcelona, Spain....................... 1 125,648 100.00% 5,381,639
Birmingham, United Kingdom............. 5 714,116 100.00% 66,465,450
Gelderland, Netherlands................ 2 499,880 100.00% 16,943,161
Lille, France.......................... 12 376,492 100.00% 12,457,154
London, United Kingdom................. 5 1,534,763 96.55% 157,133,640
Lyon, France........................... 3 1,147,981 100.00% 36,286,109
Marseille, France...................... 1 415,383 99.54% 20,641,441
Metz, France........................... 1 193,042 100.00% 6,685,238
Paris, France.......................... 55 6,329,903 93.09% 295,634,811
Rotterdam, Netherlands................. 6 1,161,906 100.00% 56,135,504
Tongeren, Belgium...................... 1 226,797 100.00% 8,433,913
Venlo, Netherlands..................... 1 232,383 100.00% 11,069,274
Warsaw, Poland......................... 5 574,937 95.42% 40,712,816
--- ---------- ------ --------------
Subtotal Europe................ 104 14,384,823 96.39% 792,283,043(10)
--- ---------- ------ --------------
TOTAL UNCONSOLIDATED
ENTITIES..................... 217 35,250,957 97.32% $1,719,264,726
=== ========== ====== ==============
- ---------------
(1) Percentage Occupancy is physical occupancy for the facility as of December
31, 2000.
(2) Investment represents 100% of the entities' historical cost in the assets
as of December 31, 2000.
(3) ProLogis California also had a 332,000 square foot facility under
development and 10.7 acres of land for future development in Los Angeles.
In January 2001, ProLogis California acquired a 326,000 square foot
facility from a third party for $11.3 million.
(4) ProLogis had a 50.0% ownership interest in ProLogis California as of
December 31, 2000.
(5) In January 2001, ProLogis North American Properties Fund I acquired three
facilities, one located in Atlanta and two located in Dallas/Ft. Worth from
ProLogis aggregating 0.9 million square feet for an additional $34.1
million equity interest. After this contribution, ProLogis' ownership
interest in ProLogis North American Properties Fund I was 41.3%.
(6) ProLogis had a 20.0% ownership interest in ProLogis North American
Properties Fund I as of December 31, 2000.
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32
(7) ProLogis had a 20.0% ownership interest in ProLogis Principal as of
December 31, 2000.
(8) Includes all of the facilities owned by ProLogis European Properties
S.a.r.l., which is owned by ProLogis European Properties Fund (50.1%) and
ProLogis (49.9%). ProLogis European Properties S.a.r.l. owned 60 operating
facilities aggregating 6.6 million square feet in three countries (54 of
the facilities are located in France) as of December 31, 2000. On January
7, 2001, ProLogis contributed its 49.9% of the common stock of ProLogis
European Properties S.a.r.l. to ProLogis European Properties Fund in
exchange for an additional equity interest bringing its ownership interest
in ProLogis European Properties Fund to 45.6%.
(9) In January 2001, ProLogis European Properties Fund acquired four facilities
from ProLogis and the Kingspark entities. The two facilities acquired from
ProLogis aggregated 0.4 million square feet and are located in Lyon and
Paris, France. The two facilities acquired from the Kingspark entities
aggregated 0.7 million square feet and are located in Birmingham, United
Kingdom. The total acquisition price for the four facilities was $87.0
million, of which $8.7 million was received by ProLogis and the Kingspark
entities in the form of an additional equity interest.
(10) ProLogis had a 34.4% ownership interest in ProLogis European Properties
Fund as of December 31, 2000.
CDFS Business
ProLogis recognizes substantially all of the economic benefits of the
Kingspark entities. As of December 31, 2000, the Kingspark entities owned 13
operating facilities aggregating 1.6 million square feet at an investment of
$139.2 million and 12 facilities under development aggregating 1.5 million
square feet with a total budgeted development cost of $136.2 million. In
addition, the Kingspark entities owned 332 acres and controlled 1,515 acres of
land through purchase option, letter of intent, development rights agreement or
contingent contract as of December 31, 2000. This land has the combined capacity
for the future development of approximately 28.3 million square feet of
distribution facilities. The Kingspark entities' facilities and land acreage are
located in 12 cities or counties in the United Kingdom. On January 2, 2001,
ProLogis acquired an ownership interest in the common stock of Kingspark S.A.
This transaction resulted in ProLogis having control of Kingspark S.A.
Accordingly, the accounts of the Kingspark entities will be consolidated in
ProLogis' financial statements along with ProLogis' other majority-owned and
controlled subsidiaries and partnerships as of that date. See "Item 1.
Business -- Business Strategy and Operating Segments -- CDFS Business Segment",
"Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Results of Operations -- CDFS Business" and Note 4 to ProLogis'
Consolidated Financial Statements in Item 8.
Temperature-Controlled Distribution Operations
- ProLogis recognizes substantially all of the economic benefits of
ProLogis Logistics, which owns 100% of CSI. As of December 31, 2000, CSI
owned or operated under lease agreements 59 facilities aggregating 175.9
million cubic feet of temperature-controlled distribution facilities
(including 35.5 million cubic feet of dry distribution space located in
temperature-controlled distribution facilities) in 28 cities in the
United States and had 6.3 million cubic feet under development in Anaheim
(4.0 million cubic feet) and Houston (2.3 million cubic feet).
- ProLogis recognizes substantially all of the economic interest in
Frigoscandia S.A., which owns, through its subsidiaries, 100% of
Frigoscandia. Frigoscandia owned or operated under lease agreements 89
facilities aggregating 187.7 million of cubic feet of
temperature-controlled distribution facilities in 10 countries in Europe
as of December 31, 2000.
See "Item 1. Business -- Business Strategy and Operating
Segments -- Temperature-Controlled Distributions Operations Segment", "Item 7.
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations -- Temperature-Controlled Distribution
Operations".
30
33
ITEM 3. LEGAL PROCEEDINGS
ProLogis from time to time may be a party to a variety of legal proceedings
arising in the ordinary course of its business. Such matters generally are not
expected to have a material adverse effect on ProLogis' business, financial
position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
ProLogis' Common Shares are listed on the NYSE under the symbol "PLD". The
following table sets forth the high and low sale prices of the Common Shares as
reported in the NYSE Composite Tape, and distributions per Common Share, for the
periods indicated.
PER
COMMON SHARE
HIGH LOW DISTRIBUTION
---- --- ------------
1999:
First Quarter......................................... $22 3/16 $18 5/8 $0.3183(1)
Second Quarter........................................ 22 18 3/4 0.3272
Third Quarter......................................... 20 1/2 17 7/8 0.3272
Fourth Quarter........................................ 20 1/16 16 13/16 0.3272
2000:
First Quarter......................................... $19 7/8 $17 9/16 $0.3350(2)
Second Quarter........................................ 22 1/16 18 13/16 0.3350
Third Quarter......................................... 24 11/16 21 1/4 0.3350
Fourth Quarter........................................ 23 3/4 19 7/16 0.3350
2001:
First Quarter (through March 16)...................... $22 15/16 $19 9/10 $0.345(3)
- ---------------
(1) Declared in the fourth quarter of 1998 and paid in the first quarter of
1999.
(2) Declared in the fourth quarter of 1999 and paid in the first quarter of
2000.
(3) Declared in the fourth quarter of 2000 and paid on February 23, 2001.
On March 16, 2001, ProLogis had approximately 173,560,729 Common Shares
outstanding, which were held of record by approximately 10,617 shareholders.
On January 11, 2001, ProLogis announced a Common Share repurchase program
under which it may repurchase up to $100.0 million of its Common Shares. The
Common Shares will be repurchased from time to time in the open market and in
privately negotiated transactions, depending on market prices and other
conditions. On February 12, 2001, ProLogis announced its call for the redemption
of all of the outstanding Series B cumulative convertible redeemable preferred
shares at a price of $25.00 per share, plus $0.442 in accrued and unpaid
dividends, for an aggregate redemption price of $25.442 per preferred share. The
redemption date is March 20, 2001. On or prior to March 13, 2001, the Series B
preferred shares could be converted into Common Shares at a conversion rate of
1.282 Common Shares for each Series B preferred share.
In 2000, 1999 and 1998, ProLogis issued 238,000, 14,000 and 20,000 Common
Shares, respectively, upon exchange of limited partnership units in one or more
of the Partnerships. See "Item 2. Properties -- Facilities -- Consolidated
Entities". The Common Shares were issued in transactions exempt from
registration under Section 4(2) of the Securities Act.
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34
DISTRIBUTIONS AND DIVIDENDS
In order to qualify as a REIT under the Code, ProLogis is required to make
distributions (other than capital gain distributions) to its shareholders in
amounts at least equal to (i) the sum of (a) 95% of its "REIT taxable income"
computed without regard to the dividends paid deduction and its net capital gain
(changed to 90% as a result of the RMA -- see "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations -- New Tax
Legislation") and (b) 95% of the net income (after tax), if any, from
foreclosure property, minus (ii) the sum of certain items of noncash income.
ProLogis' distribution strategy is to distribute what it believes is a
conservative percentage of its cash flow, permitting ProLogis to retain funds
for capital improvements and other investments.
ProLogis announces the following year's projected annual Common Share
distribution level after the annual budget review and approval by the Board in
December of each year. At a meeting in December 2000, the Board announced a
projected increase in the annual distribution level for 2001 from $1.34 to $1.38
per Common Share. The payment of distributions is subject to the discretion of
the Board and is dependent upon the financial condition and operating results of
ProLogis and may be adjusted at the discretion of the Board during the year.
Also at the December meeting, the Board declared a distribution of $0.345 per
Common Share for the first quarter of 2001. This distribution was paid on
February 23, 2001 to holders of Common Shares on February 9, 2001.
For federal income tax purposes, distributions may consist of ordinary
income, capital gains, non-taxable return of capital or a combination thereof.
Distributions that exceed ProLogis' current and accumulated earnings and profits
(calculated for tax purposes) constitute a return of capital rather than a
distribution and reduce the shareholder's basis in the Common Shares. To the
extent that a distribution exceeds both current and accumulated earnings and
profits and the shareholders basis in the Common Shares, it will generally be
treated as gain from the sale or exchange of that shareholder's Common Shares.
ProLogis annually notifies shareholders of the taxability of distributions paid
during the preceding year. The following summarizes the taxability of
distributions on Common Shares (amounts for 2000 are estimated):
YEAR ENDED DECEMBER 31,
-----------------------
2000 1999 1998
----- ----- -----
Per Common Share:
Ordinary income........................................... $1.19 $0.84 $1.12
Capital gains............................................. 0.15 0.35 --
Return of capital......................................... -- 0.11 0.12
----- ----- -----
Total............................................. $1.34 $1.30 $1.24
===== ===== =====
On May 3, 1999, ProLogis paid a distribution to holders of Meridian common
stock as of March 19, 1999. This distribution, which was declared by the
Meridian Board of Directors prior to the closing of the merger with Meridian,
related to the first quarter of 1999 and aggregated $11.1 million. This
liability was assumed by ProLogis in connection with the merger with Meridian.
See Note 11 to ProLogis' Consolidated Financial Statements in Item 8.
Annual dividends per preferred share were as follows:
YEAR ENDED DECEMBER 31,
-----------------------------
2000(1) 1999(2) 1998(3)
------- ------- -------
Series A Cumulative Redeemable Preferred Shares............ $2.35 $2.35 $2.35
Series B Cumulative Convertible Redeemable Preferred
Shares................................................... 1.75 1.75 1.75
Series C Cumulative Redeemable Preferred Shares............ 4.27 4.27 4.27
Series D Cumulative Redeemable Preferred Shares............ 1.98 1.98 1.42(4)
Series E Cumulative Redeemable Preferred Shares............ 2.19 1.64(5) --
- ---------------
(1) For federal income tax purposes, $2.08 of the Series A dividend, $1.55 of
the Series B dividend, $3.78 of the Series C dividend, $1.75 of the Series D
dividend and $1.94 of the Series E dividend are treated as ordinary income.
The remaining portion of each dividend represents capital gains.
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35
(2) For federal income tax purposes $1.65 of the Series A dividend, $1.23 of the
Series B dividend, $3.00 of the Series C dividend, $1.39 of the Series D
dividend and $1.15 of the Series E dividend are treated as ordinary income.
The remaining portion of each dividend represents capital gains.
(3) For federal income tax purposes these dividends are treated as ordinary
income to the holders.
(4) For the period from date of issuance to December 31, 1998.
(5) For the period from date of issuance to December 31, 1999.
On April 30, 1999, ProLogis paid an aggregate dividend of $1.1 million on
the Series E preferred shares ($0.5469 per share), of which $729,200 related to
Meridian's series D preferred stock that was accrued by Meridian and was assumed
by ProLogis in connection with the merger with Meridian. See Note 11 to
ProLogis' Consolidated Financial Statements in Item 8.
Pursuant to the terms of its preferred shares, ProLogis is restricted from
declaring or paying any distribution with respect to the Common Shares unless
all cumulative dividends with respect to the preferred shares have been paid and
sufficient funds have been set aside for dividends for the then-current dividend
period with respect to the preferred shares.
ProLogis' tax return for the year ended December 31, 2000 has not been
filed. The taxability information for 2000 is based upon the best available
data. ProLogis' tax returns for prior years have not been examined by the
Internal Revenue Service. Consequently, the taxability of distributions and
dividends is subject to change.
Under federal income tax rules, ProLogis' earnings and profits are first
allocated to its preferred shares, which increases the portion of the Common
Shares distribution classified as return of capital. The portion of
distributions characterized as return of capital results primarily from the
excess of distributions over earnings and profits primarily because non-cash
charges such as depreciation are not considered in determining distribution
levels. See "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Results of Operations."
DIVIDEND REINVESTMENT AND SHARE PURCHASE PLAN
In March 1995, ProLogis adopted a Dividend Reinvestment and Share Purchase
Plan (the "1995 Plan"), which commenced in April 1995. The 1995 Plan allowed
holders of Common Shares the opportunity to acquire additional Common Shares by
automatically reinvesting distributions. Holders of Common Shares who do not
participate in the 1995 Plan continue to receive distributions as declared. The
1995 Plan also allowed participating holders of Common Shares to purchase a
limited number of additional Common Shares by making optional cash payments,
without payment of any brokerage commission or service charge. Common Shares are
acquired pursuant to the 1995 Plan at a price equal to 98% of the market price
of such Common Shares, without payment of any brokerage commission or service
charge.
The 1995 Plan was amended in June 1999 by the 1999 Dividend Reinvestment
and Share Purchase plan (the "1999 Plan"). The primary change effective with the
1999 Plan allows persons who are not holders of Common Shares to participate in
the share purchase plan.
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36
ITEM 6. SELECTED FINANCIAL DATA
The following tables set forth selected financial data relating to the
historical financial condition and results of operations of ProLogis for the
years indicated (amounts in thousands, except per share data). Such selected
financial data is qualified in its entirety by, and should be read in
conjunction with, "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation" and ProLogis' Consolidated Financial
Statements and notes thereto in Item 8.
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ----------- ---------- ---------- ----------
OPERATING DATA:
Rental income....................... $ 480,088 $ 491,826 $ 345,046 $ 284,533 $ 227,000
Other real estate income............ 78,103 46,678 17,554 12,291 5,342
Income from unconsolidated
entities......................... 78,063 22,519 2,755 3,278 --
Total income........................ 643,521 567,392 368,107 302,494 233,463
Rental expenses, including property
management fees paid to affiliate
in 1997 and 1996................. 27,177 33,501 27,120 27,008 26,674
REIT management fees paid to
affiliate........................ -- -- -- ....... 17,791 21,472
General and administrative.......... 44,954 38,284 22,893 6,770 1,025
Interest............................ 172,191 170,746 77,650 52,704 38,819
Earnings from operations(1)......... 241,807 166,549 107,617 42,392 82,710
Gain (loss) on disposition of real
estate........................... 1,314 38,994 5,565 7,378 (29)
Foreign currency hedge income
(expense)........................ -- -- 2,054 (6,028) --
Foreign currency exchange gains
(losses), net.................... (17,927) (16,818) 2,938 (348) --
Total income taxes.................. 5,130 1,472 2,164 85 --
Cumulative effect of accounting
change(2)........................ -- 1,440 -- -- --
Preferred share dividends........... 56,763 56,835 49,098 35,318 25,895
Net earnings attributable to Common
Shares(1)(2)..................... 157,715 123,999 62,231 4,431 53,460
Common Share cash distributions
paid(3).......................... $ 219,333 $ 208,969 $ 151,050 $ 106,556 $ 85,340
PER SHARE DATA:
Basic and diluted net earnings
attributable to Common
Shares(1)(2)..................... $ 0.96 $ 0.81 $ 0.51 $ 0.04 $ 0.63
Series A preferred share dividends
paid............................. 2.35 2.35 2.35 2.35 2.35
Series B preferred share dividends
paid............................. 1.75 1.75 1.75 1.75 1.50
Series C preferred share dividends
paid............................. 4.27 4.27 4.27 4.27 0.57
Series D preferred share dividends
paid............................. 1.98 1.98 1.42 -- --
Series E preferred share dividends
paid(4).......................... 2.19 1.64 -- -- --
Common Share distributions declared
and paid......................... $ 1.34 $ 1.30 $ 1.24 $ 1.07 $ 1.01
Weighted average Common Shares
outstanding:
Basic............................ 163,651 152,412 121,721 100,729 84,504
Diluted.......................... 164,401 152,739 122,028 100,869 84,511
OTHER DATA:
Reconciliation of net earnings to
funds from operations(1)(5):
Net earnings attributable to Common
Shares........................... $ 157,715 $ 123,999 $ 62,231 $ 4,431 $ 53,460
Add (Deduct):
Real estate related depreciation
and amortization............... 146,859 150,050 99,514 76,275 59,850
34
37
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ----------- ---------- ---------- ----------
(Gain) loss on disposition of
non-CDFS business segment
assets......................... (1,314) (38,994) (5,565) (7,378) 29
Foreign currency exchange (gains)
losses, net.................... 19,569 16,596 (3,227) 348 --
Deferred income tax expense...... 4,230 -- 1,796 -- --
Cumulative effect of accounting
change......................... -- 1,440 -- -- --
ProLogis' share of reconciling
items of unconsolidated
entities:
Real estate related
depreciation and
amortization................ 57,366 49,644 36,489 2,419 --
(Gain) loss on disposition of
non-CDFS business segment
assets...................... (744) 826 179 -- --
Foreign currency exchange
(gains) losses, net......... (2,773) 14,650 14,208 -- --
Deferred income tax expense
(benefit)................... (4,190) 510 (2,929) -- --
Cumulative effect of accounting
change...................... -- 1,480 -- -- --
---------- ----------- ---------- ---------- ----------
Funds from operations attributable
to Common Shares(1)(2)(5)........ $ 376,718 $ 320,201 $ 202,696 $ 76,095 $ 113,339
========== =========== ========== ========== ==========
Weighted average Common Shares
outstanding:
Basic............................ 163,651 152,412 121,721 100,729 84,504
Diluted(6)....................... 178,166 167,421 137,153 106,059 89,700
Net cash provided by operating
activities.......................... $ 336,829 $ 271,391 $ 238,253 $ 192,473 $ 136,201
Net cash used in investing
activities.......................... (393,184) (34,365) (1,264,722) (571,061) (665,878)
Net cash provided by (used in)
financing activities................ $ 44,887 $ (230,828) $1,064,600 $ 398,827 $ 512,212
DECEMBER 31,
---------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ----------- ---------- ---------- ----------
FINANCIAL POSITION:
Real estate owned, at cost.......... $4,502,087 $ 4,811,255 $3,476,704 $2,846,591 $2,399,431
Land held for development........... 187,405 163,696 180,796 159,645 109,316
Investments in and advances to
unconsolidated entities.......... 1,453,148 940,364 733,863 86,139 --
Total assets........................ 5,946,334 5,848,040 4,330,729 3,033,953 2,462,306
Lines of credit and short-term
borrowings(7).................... 439,822 98,700 494,300 -- 38,600
Senior unsecured debt............... 1,699,989 1,729,630 1,083,641 724,052 524,191
Secured debt........................ 537,925 695,586 227,804 133,028 139,952
Total liabilities................... 2,972,333 2,832,232 2,023,066 1,003,912 805,933
Minority interest................... 46,630 62,072 51,295 53,304 56,984
Total shareholders' equity.......... $2,927,371 $ 2,953,736 $2,256,368 $1,976,737 $1,599,389
Number of Common Shares
outstanding...................... 165,287 161,825 123,416 117,364 93,677
- ---------------
(1) Earnings from operations, net earnings attributable to Common Shares and
funds from operations attributable to Common Shares for 1999 and 1998
reflect $0.9 million and $26.1 million, respectively, of mark to market
expense associated with two interest rate hedge agreements that, due to
changing market conditions, no longer qualified for hedge accounting
treatment under generally accepted accounting principles ("GAAP"). See "Item
7. Management's Discussion and Analysis of Financial Condition and Results
of Operations -- Liquidity and Capital Resources -- Derivative Financial
Instruments". Earnings from operations and funds from operations
attributable to Common Shares for 1997 reflect the one-time, non-cash charge
of $75.4 million associated with the costs incurred in acquiring ProLogis'
management companies from Security Capital in September 1997.
(2) For 1999, net earnings attributable to Common Shares includes a one-time
expense of $1.4 million related to unamortized organization and start-up
costs. See "Item 7. Management's Discussion and Analysis of
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38
Financial Condition and Results of Operation -- Other Income and Expense
Items -- Cumulative Effect of Accounting Change".
(3) For 1999, includes $11.1 million paid to Meridian shareholders. See "Item 5.
Market for the Registrant's Common Equity and Related Stockholder
Matters -- Distributions and Dividends".
(4) Does not include dividends paid to Meridian shareholders. See "Item 5.
Market for the Registrant's Common Equity and Related Stockholder
Matters -- Distributions and Dividends".
(5) Amounts presented for the years 1996 through 1999 have been restated from
amounts previously presented to reflect a change in the definition of funds
from operations effective in 2000. Funds from operations is discussed and
defined in "Item 7 -- Management's Discussion and Analysis of Financial
Conditions and Results of Operations -- Funds from Operations". Funds from
operations does not represent net income or cash from operating activities
in accordance with GAAP and is not necessarily indicative of cash available
to fund cash needs, which is presented in the Consolidated Statement of Cash
Flows in ProLogis' Consolidated Financial Statements in Item 8. Cash
distributions paid to shareholders are presented above in the "Operating
Data" section of this table. Funds from operations should not be considered
as an alternative to net income as an indicator of ProLogis' operating
performance or as an alternative to cash flows from operating, investing or
financing activities as a measure of liquidity. Additionally, the funds from
operations measure presented by ProLogis will not necessarily be comparable
to similarly titled measures of other REITs. ProLogis considers funds from
operations to be a useful supplemental measure of comparative period
operating performance and as a supplemental measure to provide management,
financial analysts, potential investors and shareholders with an indication
of ProLogis' ability to fund its capital expenditures and investment
activities and to fund other cash needs.
(6) In calculating the weighted average Common Shares for funds from operations
purposes, weighted average Series B convertible preferred shares and
weighted average limited partnership units are considered common stock
equivalents. The weighted average Series B cumulative convertible redeemable
preferred shares included are 8,417,000, 9,221,000 and 10,055,000 for 2000,
1999 and 1998, respectively. The amount of dividends associated with the
Series B cumulative convertible redeemable preferred shares are $11,358,000,
$12,523,000 and $13,668,000 and for 2000, 1999 and 1998, respectively. The
effect of the Series B cumulative convertible preferred shares in 1997 and
1996 was anti-dilutive. The weighted average limited partnership units
included are 5,348,000, 5,461,000, 5,070,000, 5,190,000 and 5,194,000 for
2000, 1999, 1998, 1997 and 1996, respectively. The minority interest share
of earnings associated with these limited partnership units are $5,586,000,
$4,979,000, $4,681,000, $3,560,000 and $3,326,000 for 2000, 1999, 1998, 1997
and 1996, respectively.
(7) As of March 16, 2001, ProLogis had $208.0 million of borrowings outstanding
(including $125.0 million that was borrowed by ProLogis Logistics and
guaranteed by ProLogis) under its U.S. dollar denominated unsecured
revolving credit facilities resulting in $322.0 million of borrowing
capacity available. As of March 16, 2001, ProLogis had the currency
equivalent of approximately $226.2 million (based on currency exchange rates
quoted by Reuters) outstanding on its multi-currency unsecured revolving
credit facility resulting in the currency equivalent of $66.1 million (based
on currency exchange rates quoted by Reuters) of borrowing capacity
available.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with ProLogis's
Consolidated Financial Statements and the notes thereto included in Item 8 of
this report.
The statements contained in this discussion 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.
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. These statements are not guarantees of
future performance and involve certain risks,
36
39
uncertainties and assumptions that are difficult to predict. Therefore, actual
outcomes and results may differ materially from what is expressed or forecasted
in such forward-looking statements. Factors which may affect outcomes and
results include: (i) changes in general economic conditions in ProLogis' markets
that could adversely affect demand for ProLogis' facilities and the
creditworthiness of ProLogis' customers, (ii) changes in financial markets,
interest rates and foreign currency exchange rates that could adversely affect
ProLogis' cost of capital and its ability to meet its financial needs and
obligations, (iii) increased or unanticipated competition for distribution
facilities in ProLogis' target market cities; and (iv) those factors discussed
under "-- Risk Factors".
RESULTS OF OPERATIONS
ProLogis' net earnings attributable to Common Shares were $157.7 million in
2000, $124.0 million in 1999 and $62.2 million in 1998. Basic and diluted per
share net earnings attributable to Common Shares were $0.96 per share in 2000,
$0.81 per share in 1999 and $0.51 per share in 1998.
In 1998, ProLogis' business activities primarily involved the property
operations segment with 93.7% of ProLogis' total income generated by this
operating segment. Income from ProLogis' CDFS business generated 5.6% of
ProLogis' total income while ProLogis recognized a loss of $186,000 from its
temperature-controlled distribution operations in 1998. Through the first
quarter of 1999, the property operations segment continued to grow as the merger
with Meridian was completed in March 1999 adding 32.2 million square feet of
operating facilities to ProLogis' holdings. See Note 11 to ProLogis'
Consolidated Financial Statements in Item 8. After completing this transaction,
including a public debt offering of $500.0 million in April 1999, ProLogis'
focus on its CDFS business segment increased as this segment provided ProLogis
with a means to increase shareholder value while minimizing the need for
additional direct public debt and public equity capital. The CDFS business
segment income increased by $50.0 million in 1999 over 1998 and provided capital
for ProLogis to utilize for its investing activities. The CDFS business segment
income increase was due to the recognition of income from the Kingspark entities
for an entire year (the Kingspark entities were acquired in August 1998) and to
an increase in the number of facilities developed and disposed of to third
parties and to ProLogis European Properties Fund in 1999. ProLogis' income from
its temperature-controlled distribution operations segment increased by $6.6
million in 1999 over 1998 and ProLogis recognized gains from the disposition of
facilities utilized in the property operations segment of $39.0 million in 1999,
primarily on dispositions to ProLogis California, an increase of $33.4 million
over the gains recognized in 1998. Dispositions in the property operations
segment also provided capital that was used for ProLogis' investment activities.
The CDFS business segment was at the core of ProLogis' business strategy in
2000 -- providing capital for ProLogis to redeploy into its development
activities as well as generating profits that contribute to ProLogis' total
income. ProLogis' income from this segment increased by $51.4 million in 2000
over 1999, primarily the result of the number of dispositions of facilities
developed by ProLogis, ProLogis Development Services and the Kingspark entities
to entities in which ProLogis maintains an ownership interest, as well as to
third parties. ProLogis North American Properties Fund I, formed in June 2000,
acquired $326.6 million of facilities that were previously owned by ProLogis and
ProLogis Development Services. Income from ProLogis' temperature-controlled
distribution operations decreased in 2000 from 1999 by $14.8 million, primarily
due to losses incurred in the European operations. Also in 2000, the property
operations segment's net income increased by $41.6 million over 1999. This
operating segment's net income includes rental income and net rental expenses
from facilities directly owned by ProLogis and also its share of the income of
its unconsolidated entities such as ProLogis California, ProLogis European
Properties Fund and ProLogis North American Properties Fund I that engage in
property operations segment activities. See "-- Property Operations", "-- CDFS
Business" and "-- Temperature-Controlled Distribution Operations".
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Property Operations
ProLogis owned or had ownership interests in the following operating
facilities as of the dates indicated:
DECEMBER 31,
----------------------------------------------------------------------
2000 1999 1998
-------------------- ------------------------ --------------------
SQUARE SQUARE SQUARE
NUMBER FOOTAGE NUMBER FOOTAGE NUMBER FOOTAGE
------ ----------- ---------- ----------- ------ -----------
Direct ownership(1)............ 1,244 126,275,246 1,328 133,688,563 1,099 104,539,940
ProLogis California(2)......... 77 12,394,603 78 11,500,014 -- --
ProLogis North American
Properties Fund I(3)......... 33 8,031,515 -- -- -- --
ProLogis Principal(3).......... 3 440,016 -- -- -- --
ProLogis European Properties
Fund and ProLogis European
Properties S.a.r.l.(4)....... 104 14,384,823 18 3,358,683 -- --
ProLogis Garonor(5)............ -- -- -- -- 54 5,246,740
----- ----------- ---------- ----------- ----- -----------
1,461 161,526,203 1,424 148,547,260 1,153 109,786,680
===== =========== ========== =========== ===== ===========
- ---------------
(1) Includes operating facilities owned by ProLogis and its consolidated
entities. See "Item 2. Properties -- Facilities" and "Item 2.
Properties -- Consolidated Entities". The increase in 1999 over 1998 is
primarily attributable to the 247 additional facilities acquired as a part
of the merger with Meridian (see Note 11 to ProLogis' Consolidated Financial
Statements in Item 8) offset by the operating facilities that were
previously directly owned by ProLogis that were acquired by ProLogis
California and ProLogis European Properties Fund in 1999. The decrease in
2000 from 1999 represents the growth of ProLogis European Properties Fund in
2000, a significant portion of which is a result of acquiring operating
facilities from ProLogis, and the formation of ProLogis North American
Properties Fund I in 2000 whose entire portfolio consists of operating
facilities that were previously directly owned by ProLogis and ProLogis
Development Services.
(2) ProLogis has a 50.0% ownership interest in ProLogis California. ProLogis
California began operations on August 26, 1999.
(3) ProLogis had a 20.0% ownership interest as of December 31, 2000 in both
entities that were both formed on June 30, 2000. All operating facilities
owned by these entities were previously directly owned by ProLogis and
ProLogis Development Services. In January 2001, ProLogis contributed three
additional operating facilities aggregating 0.9 million square feet to
ProLogis North American Properties Fund I for an additional equity interest
of $34.1 million, increasing its ownership interest to 41.3%.
(4) As of December 31, 2000, includes 44 operating facilities aggregating
7,751,072 square feet owned directly by ProLogis European Properties Fund in
which ProLogis had a 34.4% ownership interest and 60 operating facilities
aggregating 6,633,751 square feet owned by ProLogis European Properties
S.a.r.l, which is owned by ProLogis European Properties Fund (50.1%) and
ProLogis (49.9%). ProLogis European Properties Fund began operations on
September 23, 1999. The 50.1% interest in the common stock of ProLogis
European Properties S.a.r.l. was contributed to ProLogis European Properties
Fund by ProLogis on January 7, 2000 for an equity interest. The remaining
49.9% of the common stock of ProLogis European Properties S.a.r.l was
contributed to ProLogis European Properties Fund by ProLogis on January 7,
2001 for an additional equity interest, thereby increasing ProLogis'
ownership interest in ProLogis European Properties Fund to 45.6%. As of
December 31, 1999, all facilities were owned directly by ProLogis European
Properties Fund in which ProLogis had a 19.7% ownership interest.
(5) As of December 31, 1998, ProLogis had an investment in Garonor Holdings S.A.
("Garonor Holdings") which owned Garonor S.A. ("ProLogis Garonor"), a real
estate operating company in France. Under the equity method, ProLogis
recognized substantially all of the economic benefits of ProLogis Garonor
and Garonor Holdings for the period from its acquisition by ProLogis on
December 29, 1998 to June 29, 1999. On June 29, 1999, ProLogis Garonor
became a wholly owned subsidiary of ProLogis. ProLogis Garonor was directly
owned by ProLogis during the period from June 29, 1999 to January 7, 2000
and its results of operations were consolidated in ProLogis' financial
statements along with ProLogis' other wholly owned
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subsidiaries and majority owned and controlled partnerships. ProLogis
Garonor is part of ProLogis European Properties S.a.r.l. See Note 4 to
ProLogis' Consolidated Financial Statements in Item 8.
ProLogis' property operations segment income consists of the: (i) net
operating income from the operating facilities that are owned by ProLogis
directly or through its consolidated entities, and (ii) the income recognized by
ProLogis under the equity method from its investments in unconsolidated entities
engaged in property operations. See Note 10 to ProLogis' Consolidated Financial
Statements in Item 8. The amounts recognized under the equity method are based
on the net earnings of each unconsolidated entity and include: interest income
and interest expense, depreciation and amortization expenses, general and
administrative expenses, income taxes and foreign currency exchange gains and
losses (with respect to ProLogis Garonor, ProLogis European Properties Fund and
ProLogis European Properties S.a.r.l.). ProLogis' net operating income from the
property operations segment was as follows for 2000, 1999 and 1998 (in
thousands) (see Note 10 to ProLogis' Consolidated Financial Statements in Item
8):
YEAR ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
Facilities directly owned by ProLogis and its consolidated
entities:
Rental income............................................. $480,088 $491,826 $345,046
Property operating expenses............................... 27,177 33,501 27,120
-------- -------- --------
Net operating income(1)................................ 452,911 458,325 317,926
-------- -------- --------
Income from the ProLogis California......................... 13,178 3,917 --
Income from ProLogis North American Properties Fund I....... 1,806 -- --
Income from ProLogis Principal.............................. 612 -- --
Income from ProLogis European Properties Fund(2)............ 15,648 820 --
Income from ProLogis European Properties S.a.r.l.(2)........ 8,041 -- --
Income (loss) from ProLogis Garonor(2)...................... -- (12,423) 6
-------- -------- --------
Total property operations segment......................... $492,196 $450,639 $317,932
======== ======== ========
- ---------------
(1) Rental expenses, net of recoveries from tenants, decreased by $6.3 million
in 2000 from 1999 and increased by $6.4 million in 1999 from 1998. The
fluctuations in rental expenses between years is primarily the result of the
changes in the composition of the directly owned facilities in each year in
addition to increased rental expense recoveries (as a percentage of total
rental expenses) in each year. Rental expenses, before recoveries from
tenants, has remained constant at 24.8% of rental income for 2000, 24.7% of
rental income for 1999 and 24.5% of rental income for 1998. However, total
rental expense recoveries were 77.1%, 72.4% and 67.9% of total rental
expenses in 2000, 1999 and 1998, respectively. The increase in rental
expense recoveries as a percentage of total rental expenses reflects
ProLogis' emphasis on on-site property management teams and the
effectiveness of the ProLogis Operating System(TM).
(2) ProLogis' share of the income of ProLogis European Properties Fund and
ProLogis European Properties S.a.r.l. includes net foreign currency gains of
$2.3 million and $2.4 million, respectively, in 2000. ProLogis' share of
ProLogis Garonor's loss in 1999 includes the recognition of a net foreign
currency exchange loss of $13.0 million.
The facilities that ProLogis develops are not always pre-leased at the
start of construction. In addition, ProLogis may acquire facilities that are
underleased at the time of acquisition. While these situations will reduce
ProLogis' overall occupancy rate below its stabilized level in the short-term,
they do provide opportunities to increase revenues. The term "stabilized" means
that capital improvements, repositioning, new management and new marketing
programs (or development and marketing, in the case of newly developed
facilities) have been in effect for a sufficient period of time (generally 12
months) to achieve stabilized occupancy (typically 93%, but ranging from 90% to
95%, depending on the submarket and product type). ProLogis has been successful
in increasing occupancies on acquired and developed facilities during their
initial months of operation, resulting in an occupancy rate of 95.4% and a
leased rate of 96.2% for stabilized facilities owned by ProLogis and its
consolidated and unconsolidated entities as of December 31, 2000. The average
increase in rental rates for both new and renewed leases on previously leased
space (36.3 million square feet) for all facilities including those owned by
ProLogis' consolidated and unconsolidated entities during 2000 was 15.5%. During
2000, the net
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operating income (rental income less net rental expenses) generated by ProLogis'
"same store" portfolio of operating facilities (facilities owned by ProLogis and
its consolidated and unconsolidated entities that were in operation throughout
both 2000 and 1999) increased by 5.94% over 1999. The net operating income
(rental income less net rental expenses) generated by ProLogis' "same store"
portfolio of operating facilities in 1999 (facilities owned by ProLogis and its
consolidated and unconsolidated entities that were in operation throughout both
1999 and 1998) increased by 4.00% over 1998.
There has been minimal impact of the California energy situation and the
attendant increase in utility costs on ProLogis' income from the property
operations segment. ProLogis' customers are responsible for their direct utility
bills and ProLogis' facilities have minimal common utility charges, which are
generally included in amounts recovered from customers under the terms of the
lease agreements. Given the typical use of ProLogis' distribution facilities
(bulk distribution and light manufacturing and assembly uses), ProLogis believes
that its customers' total utility expenses are a small portion of the total
expenses related to the operations within ProLogis' facilities. See "Item 2.
Properties -- Industrial Distribution Facilities".
CDFS Business
Income from ProLogis' CDFS business segment consists primarily of: (i) the
profits from the disposition of land parcels and facilities that were developed
by ProLogis or ProLogis Development Services and disposed of to customers or to
entities in which ProLogis has an ownership interest; (ii) development fees
earned by ProLogis Development Services; and (iii) income recognized under the
equity method from ProLogis' investment in the Kingspark entities. The Kingspark
entities engage in CDFS business activities in the United Kingdom similar to
those activities performed directly by ProLogis and ProLogis Development
Services. ProLogis recognizes 95% of the net earnings of the Kingspark entities
that includes: interest income and interest expense (net of capitalized
amounts), general and administrative expense (net of capitalized amounts),
income taxes and foreign currency exchange gains and losses. See Note 4 to
ProLogis' Consolidated Financial Statements in Item 8.
The CDFS business segment operations have increased in volume in each year;
consequently, ProLogis' income from this segment has increased in each year. The
CDFS business segment income is comprised of the following (in thousands):
YEAR ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- ------- -------
Net gains on disposition of land parcels and
facilities developed by ProLogis(1)................ $ 71,284 $44,741 $15,094
Development fees earned by ProLogis Development
Services........................................... 3,954 1,790 2,103
Other miscellaneous income, net...................... 2,865 148 357
Income from the Kingspark entities(2)................ 43,795 23,855 2,915
-------- ------- -------
$121,898 $70,534 $20,469
======== ======= =======
- ---------------
(1) Represents gains from the disposition of land parcels and facilities
developed as follows:
- 2000: 193 acres; 10.6 million square feet; $491.9 million of proceeds;
- 1999: 203 acres; 5.4 million square feet; $357.5 million of proceeds; and
- 1998: 67 acres; 2.0 million square feet; $82.6 million of proceeds.
(2) The Kingspark entities were acquired on August 14, 1998. The Kingspark
entities' income includes:
- Gains from the disposition of land parcels and facilities developed as
follows:
- 2000: 11 acres; 1.2 million square feet; $180.5 million of proceeds; net
gains of $30.5 million;
- 1999: 97 acres; 1.1 million square feet; $155.4 million of proceeds; net
gains of $23.4 million; and
- 1998: 15 acres; $13.8 million of proceeds; net gains of $2.0 million;
- Development fees and other miscellaneous income of $11.9 million in 2000,
$10.1 million in 1999 and $5.3 million for the period from August 14, 1998
to December 31, 1998;
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- Deferred and current income tax expense of $2.6 million in 2000, $7.7
million in 1999 and $0.2 million for the period from August 14, 1998 to
December 31, 1998; and
- Foreign currency exchange gains of $0.3 million in 2000 and foreign
currency exchange losses of $1.5 million in 1999 and $0.9 million for the
period from August 14, 1998 to December 31, 1998.
The enactment of the REIT Modernization Act ("RMA") on January 1, 2001
eliminates the restrictions on the amount of common stock ownership a REIT can
have in certain taxable subsidiaries. This restriction applied to the Kingspark
entities. On January 2, 2001, ProLogis acquired an ownership interest in the
common stock of Kingspark S.A. This transaction resulted in ProLogis having
control of Kingspark S.A. Accordingly, ProLogis will consolidate the Kingspark
entities in its financial statements beginning in 2001. See "-- New Tax
Legislation" and Note 4 to ProLogis' Consolidated Financial Statements in Item
8.
Temperature-Controlled Distribution Operations
ProLogis recognizes income from the temperature-controlled distribution
operations segment of its business under the equity method. ProLogis' share of
the net income or loss of ProLogis Logistics and Frigoscandia S.A. was as
follows (in thousands) (see Notes 4 and 10 to ProLogis' Consolidated Financial
Statements in Item 8):
YEAR ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- ------- -------
Income from ProLogis Logistics....................... $ 11,950 $10,791 $ 7,349
Loss from Frigoscandia S.A. ......................... (20,298) (4,364) (7,535)
-------- ------- -------
Total temperature-controlled distribution
operations segment....................... $ (8,348) $ 6,427 $ (186)
======== ======= =======
The net income or loss of ProLogis Logistics and Frigoscandia S.A. includes
interest income and interest expense, depreciation and amortization expense,
general and administrative expense, income taxes and foreign currency exchange
gains and losses (with respect to Frigoscandia). ProLogis recognizes 95% of the
net earnings of each entity.
ProLogis Logistics acquired CSI on April 24, 1997 and owned between 60.0%
and 77.1% until June 12, 1998, at which time ProLogis Logistics became CSI's
sole owner. The increase in ProLogis' share of ProLogis Logistics' net earnings
from 1999 to 2000 and from 1998 to 1999 of $1.2 million and $3.4 million,
respectively is primarily attributable to the increase in cubic feet capacity in
operation. See "Item 1. Business -- Business Strategy and Operating
Segments -- Temperature-Controlled Distribution Operations -- Operations".
ProLogis invested in Frigoscandia S.A. on January 16, 1998. Frigoscandia's
operating capacity was virtually constant in 1998, 1999 and 2000. ProLogis'
share of Frigoscandia S.A.'s net losses includes net foreign currency exchange
losses of $0.8 million, $1.3 million and $11.4 million in 2000, 1999 and 1998,
respectively. Excluding these foreign currency exchange losses, ProLogis
recognized $16.4 million less income under the equity method in 2000 than it
recognized in 1999 from its investment in Frigoscandia S.A. The increase in
Frigoscandia S.A.'s net loss in 2000 from the loss recognized in 1999 is
primarily due to: (i) lower occupancy levels, principally the result of the
reduction in inventories of beef and pork products by the German and French
governments; (ii) a weak European vegetable harvest due to high rainfall levels
during the summer months resulting in reduced inventories of frozen vegetables;
and (iii) increases in fuel prices and expenses incurred related to trucker
strikes in August and September. In 1999, Frigoscandia S.A.'s net loss was
primarily the result of lower occupancy levels as compared to 1998. In 1998,
Frigoscandia S.A. recognized a net foreign currency exchange loss of $11.4
million. Excluding the effect of this foreign currency exchange loss, ProLogis
would have recognized income of $3.9 million from its investment in Frigoscandia
S.A. in 1998.
ProLogis believes that the factors that contributed to the decline in
operating performance of Frigoscandia are temporary and can be partially
mitigated in the short-term by reductions in general and administrative costs
and other operating costs. However, there is no assurance that these factors are
temporary or that some or all of these factors will not continue past 2001.
ProLogis and Frigoscandia are currently monitoring the recent outbreak of foot
and mouth disease in Europe. At this time, the effect (positive or negative), if
any, on the demand for
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temperature-controlled distribution services and the related transportation
services offered by Frigoscandia cannot be determined.
Other Income and Expense Items
Interest Income
Interest income was $7.3 million in 2000, an increase of $0.9 million over
the interest income recognized in 1999. Interest income increased by $3.6
million in 1999 over 1998. The increases in interest income are primarily the
result of higher average cash balances.
General and Administrative Expense
General and administrative expense was $45.0 million in 2000, $38.3 million
in 1999 and $22.9 million in 1998. The increase in general and administrative
expense in 2000 over 1999 is attributable to new business initiatives in both
North America and Europe. The increase in general and administrative expense in
1999 over 1998 is primarily related to ProLogis' expanded operational
infrastructure in Europe and also because ProLogis began expensing costs related
to start-up activities and organization costs under a new accounting
pronouncement in 1999 (see "-- Cumulative Effect of Accounting Change").
Depreciation and Amortization
Depreciation and amortization expense was $151.5 million in 2000, $152.4
million in 1999 and $100.6 million in 1998. The fluctuations in this expense
between years is primarily attributable to the number of operating facilities
directly owned by ProLogis and its consolidated entities in each year. See
"-- Property Operations".
Interest Expense
Interest expense was $172.2 million in 2000, $170.7 million in 1999 and
$77.7 million in 1998. The increases in each year are primarily the result of
the increased use of debt to finance investment activities in each year,
particularly in 1999 when ProLogis increased its secured debt balances to $695.6
million as of December 31, 1999 (of which $90.1 million was assumed in the
merger with Meridian; see "-- Merger with Meridian") from $227.8 million as of
December 31, 1998. In addition, ProLogis issued senior unsecured notes in the
amounts of $500.0 million in April 1999, $125.0 million in October 1998 and
$250.0 million in July 1998. In conjunction with the merger with Meridian,
ProLogis also assumed $160.0 million of senior unsecured notes.
Interest expense recognized on borrowings is offset by interest capitalized
with respect to ProLogis' development activities. Capitalized interest increased
by $2.5 million to $18.5 million in 2000 from $16.0 million in 1999 and
decreased by $3.2 million to $16.0 million in 1999 from $19.2 million in 1998.
Capitalized interest levels are reflective of ProLogis' cost of funds and the
level of development activity in each year.
Interest Rate Hedge Expense
See "-- Liquidity and Capital Resources -- Derivative Financial
Instruments" for a discussion of this expense.
Other Expenses
Other expenses were $5.9 million in 2000, $4.9 million in 1999 and $6.2
million in 1998. Included as "Other Expenses" are land holding costs, the
write-off of previously capitalized pursuit costs and costs associated with the
name change to ProLogis in 1998.
Land holding costs were $2.1 million in 2000, $2.0 million in 1999 and $2.2
million in 1998. Pursuit cost write-offs were $3.8 million in 2000, $2.9 million
in 1999 and $2.3 million in 1998. Non-recurring costs associated with the name
change were $1.7 million in 1998.
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Gain on Disposition of Real Estate
Gain on disposition of real estate represents the net gains from the
disposition of operating facilities that were acquired or developed within the
property operations segment. Generally, ProLogis disposes of facilities in the
property operations segment because such facilities are considered to be
non-strategic facilities or to complement the portfolio of developed facilities
that are acquired by entities in which ProLogis maintains an ownership interest.
Non-strategic facilities are assets located in markets or submarkets that are no
longer considered target markets as well as assets that were acquired as part of
previous portfolio acquisitions that are not consistent with ProLogis' core
portfolio based on the asset's size or configuration.
Property operations segment dispositions were as follows:
- 2000: 3.5 million square feet; $133.7 million of proceeds; net gains of
$1.3 million;
- 1999 (excluding ProLogis California): 2.6 million square feet; $99.5
million of proceeds; net gains of $13.4 million; and
- 1998: 1.1 million square feet; $26.7 million of proceeds; net gains of
$5.6 million.
In August 1999, in connection with the formation of ProLogis California,
ProLogis disposed of 78 operating facilities and two facilities under
development to ProLogis California. The net sales proceeds from this disposition
were $538.3 million and ProLogis recognized a gain of $25.6 million on the
transaction, which is net of $25.6 million that was deferred because it did not
qualify for income recognition due to ProLogis' continuing ownership in ProLogis
California. ProLogis received an equity interest in ProLogis California of
$148.2 million and ProLogis California assumed $199.3 million of ProLogis' debt.
The remaining proceeds were received in cash.
Foreign Currency Hedge Income
Foreign currency hedge income of $2.0 million recognized in 1998 resulted
from the final settlement of two foreign currency hedge contracts related to the
acquisition of Frigoscandia in January 1998. The settlement of these contracts,
which did not qualify for hedge accounting treatment, resulted in a total loss
of $4.0 million, including a mark to market loss of $6.0 million recognized by
ProLogis in 1997.
Foreign Currency Exchange Gains (Losses)
ProLogis recognized net foreign currency exchange losses of $17.9 million
and $16.8 million for 2000 and 1999, respectively. A net foreign currency
exchange gain of $2.9 million was recognized in 1998. Foreign currency exchange
gains and losses are primarily the result of the remeasurement and settlement of
intercompany debt and the remeasurement of third party debt of ProLogis' foreign
subsidiaries. Fluctuations in the foreign currency exchange gains and losses
recognized in each period are a product of movements in certain foreign currency
exchange rates, primarily the euro and the pound sterling and the level of
intercompany and third party debt outstanding that is denominated in currencies
other than the U.S. dollar. During 2000 and 1999, the euro and pound sterling
depreciated against the U.S. dollar which is the primary cause of the
remeasurement losses recognized in these years. During 1998, the currencies of
ProLogis' foreign subsidiaries, primarily the French franc and Dutch guilder,
strengthened against the U. S. dollar resulting in the net remeasurement gain
that year. ProLogis began utilizing foreign currency put options to hedge its
foreign currency exchange risk in September 1999. See "-- Liquidity and Capital
Resources -- Derivative Financial Instruments".
Income Taxes
ProLogis is taxed as a REIT for federal income tax purposes and is not
required to pay federal income taxes if minimum distribution and income, asset
and shareholder tests are met. ProLogis Development Services is not a qualified
REIT subsidiary for tax purposes. Also, the foreign countries in which ProLogis
operates do not recognize REITs under their respective tax laws. Accordingly,
ProLogis recognizes income taxes as appropriate and in accordance with GAAP with
respect to the taxable earnings of ProLogis Development Services and its foreign
subsidiaries.
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Total income tax expense recognized in 2000, 1999 and 1998 was $5.1
million, $1.5 million and $2.2 million, respectively, of which the deferred
component was $4.2 million, zero and $1.8 million in 2000, 1999, and 1998,
respectively. ProLogis' deferred tax component of total income taxes is a
function of each year's temporary differences (items that are treated
differently for tax purposes than for book purposes) as well as the need for a
deferred tax valuation allowance to adjust certain deferred tax assets
(primarily deferred tax assets created by tax net operating losses) to their
estimated realizable value. In 1999, the effect of the current year's temporary
differences were entirely offset by adjustments to the valuation allowance
resulting in no net deferred tax expense being recognized.
Cumulative Effect of Accounting Change
Through 1998, ProLogis capitalized costs associated with start-up
activities and organization costs and amortized such costs over an appropriate
period, generally five years. Statement of Position 98-5 "Reporting on the Costs
of Start-Up Activities", which requires that costs associated with
organizational, pre-opening, and start-up activities be expensed as incurred,
was adopted by ProLogis on January 1, 1999. Accordingly, ProLogis expensed $1.4
million of unamortized organization and start-up costs as a cumulative effect of
accounting change in the first quarter of 1999. All such costs incurred since
1999 have been expensed (see "-- General and Administrative").
Merger with Meridian
On March 30, 1999, Meridian, a publicly traded REIT that owned industrial
distribution facilities in the United States, was merged with and into ProLogis.
In accordance with the terms of the Agreement and Plan of Merger dated as of
November 16, 1998, as amended, the approximately 33.8 million outstanding shares
of Meridian common stock were exchanged (on a 1.1 for one basis) into
approximately 37.2 million ProLogis Common Shares. In addition, the holders of
Meridian common stock received $2.00 in cash per outstanding share,
approximately $67.6 million in total. The holders of Meridian's Series D
cumulative redeemable preferred stock received a new series of ProLogis
cumulative redeemable preferred shares, Series E preferred shares, on a one for
one basis. The Series E preferred shares have an 8.75% annual dividend rate
($2.1875 per share) and an aggregate liquidation value of $50.0 million. The
total purchase price of Meridian was approximately $1.54 billion, which included
the assumption of the outstanding debt and liabilities of Meridian as of March
30, 1999 and the issuance of approximately 1.1 million stock options, each to
acquire 1.1 ProLogis Common Shares, plus $2.00 in cash. The total assets
acquired from Meridian aggregated approximately $1.54 billion, including $1.42
billion of real estate assets and an interest in a temperature-controlled
distribution business of $28.7 million. The transaction was structured as a
tax-free merger and was accounted for under the purchase method. See Note 11 to
ProLogis' Consolidated Financial Statements in Item 8.
ENVIRONMENTAL MATTERS
ProLogis has not experienced any environmental condition on its facilities,
which materially adversely affected its results of operations or financial
position nor is ProLogis aware of any environmental liability that ProLogis
believes would have a material adverse effect on its business, financial
condition or results of operations. See "-- Risk Factors -- Potential
Environmental Liability".
LIQUIDITY AND CAPITAL RESOURCES
Overview
ProLogis considers its liquidity and ability to generate cash from
operations as well as its financing capabilities (including proceeds from the
disposition of facilities) to be adequate and expects it to continue to be
adequate to meet its anticipated development, acquisition, operating and debt
service needs as well as its shareholder distribution requirements.
ProLogis' future investing activities are expected to consist of: (i)
acquisitions of existing facilities in key distribution markets in the property
operations segment; (ii) the acquisition of land for future development and the
development of distribution facilities in the CDFS business segment for future
disposition to entities in which
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ProLogis maintains an ownership interest or to third parties; and (iii) certain
temperature-controlled distribution facility expansions and, to a limited
extent, investments in additional temperature-controlled distribution
facilities. Temperature-controlled investments will be made as deemed necessary
to achieve strategic objectives with respect to targeted markets in the United
States or to address specific customer needs in the United States and Europe.
ProLogis' future investing activities are expected to be primarily funded with:
- cash generated by operations;
- the proceeds from the disposition of facilities developed to third
parties;
- the proceeds from the disposition of facilities to entities in which
ProLogis maintains an ownership interest, such as ProLogis European
Properties Fund or other entities that may be formed in the future; and
- utilization of ProLogis' revolving credit facilities.
In the short-term, borrowings on and subsequent repayments of ProLogis'
unsecured revolving credit facilities will provide ProLogis with adequate
liquidity and financial flexibility to efficiently respond to market
opportunities. As of March 16, 2001, on a combined basis, ProLogis had
approximately $388.1 million of short-term borrowing capacity available under
its U.S. dollar denominated and multi-currency unsecured revolving credit
facilities (see "-- Credit Facilities"). ProLogis' U.S. dollar denominated
unsecured line of credit agreement allows ProLogis to increase the available
commitment by $25.0 million to a total of $500.0 million. ProLogis has $608.0
million of shelf-registered securities which can be issued in the form of debt
securities, preferred shares, Common Shares, rights to purchase Common Shares
and preferred share purchase rights on an as-needed basis, subject to ProLogis'
ability to effect an offering on satisfactory terms. ProLogis will continue to
evaluate the public debt markets with the objective of reducing its short-term
borrowings and extending debt maturities on favorable terms.
Within ProLogis European Properties Fund, ProLogis has access to 734.7
million euros (the currency equivalent of approximately $683.4 million as of
December 31, 2000 based on currency exchange rates quoted by Reuters) of third
party equity capital in Europe that has been committed primarily by
institutional investors through 2002 to fund acquisitions of ProLogis' completed
stabilized European developments and acquisitions of other facilities from third
parties. ProLogis European Properties Fund has a multi-currency secured,
revolving credit facility in the currency equivalent of 500.0 million euros that
is utilized in conjunction with the committed equity to provide additional
capital for its acquisitions. As of December 31, 2000, 118.2 million euros and
62.6 million pound sterling (the currency equivalent of approximately $205.5
million based on currency exchange rates quoted by Reuters) was outstanding on
the 500.0 million euro credit facility. ProLogis European Properties Fund
expects to obtain secured, term financing to refinance borrowings outstanding on
the 500.0 million euro credit facility.
Cash Operating Activities
Net cash provided by operating activities was $336.8 million in 2000,
$271.4 million in 1999 and $238.3 million in 1998. These increases are primarily
the result of the increased number of operating facilities in each year. See
"-- Results of Operations -- Property Operations". Cash provided by operating
activities exceeded the cash distributions paid on Common Shares in 2000, 1999
and 1998.
Cash Investing and Cash Financing Activities
For 2000, 1999 and 1998, ProLogis used net cash of $393.2 million, $34.4
million, and $1.26 billion, respectively in its investing activities. Such
activities consisted primarily of investments in real estate (including
recurring capital expenditures and tenant improvements and lease commissions on
previously leased space) of $683.2 million in 2000, $512.3 million in 1999 and
$716.6 million in 1998. In addition, investments in unconsolidated entities were
$188.8 million in 2000, $141.0 million in 1999 and $657.5 million in 1998. Net
cash generated from the dispositions of facilities and land parcels was $496.7
million, $570.0 million and $109.3 million in 2000, 1999 and 1998, respectively.
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ProLogis' financing activities in 2000 consisted primarily of $341.1
million of short-term borrowings and $30.7 million of proceeds from Common Share
transactions. In 1999, ProLogis' primary financing activities involved the
completion of secured and unsecured long-term debt transactions generating net
cash of $966.1 million. Proceeds from these debt transactions were the primary
source of the funds for the net repayment of short-term borrowings of $724.0
million in 1999 (including $328.4 million repayment of short-term borrowings
assumed in the merger with Meridian). See "-- Results of Operations -- Merger
with Meridian and Note 11 to ProLogis' Consolidated Financial Statements in Item
8. ProLogis' financing activities in 1998 included net short-term borrowings of
$494.3 million, proceeds from Common Share and preferred share transactions of
$371.9 million and secured and unsecured long-term debt transactions generating
net cash of $440.5 million.
Common Share cash distributions were $219.3 million, $209.0 million
(including $11.1 million paid to Meridian shareholders) and $151.1 million in
2000, 1999 and 1998, respectively. Dividends paid on preferred shares were $56.8
million in 2000, $56.8 million in 1999 (including $0.7 million paid to Meridian
shareholders in 1999) and $49.1 million in 1998. See "-- Distribution and
Dividend Requirements".
Credit Facilities
ProLogis has an unsecured credit agreement with Bank of America, N.A.
("Bank of America"), Commerzbank AG and Chase Bank of Texas, National
Association, as agents for a bank group that provides for a $475.0 million
unsecured revolving line of credit. The credit agreement allows ProLogis to
increase the available commitment by $25.0 million to a total of $500.0 million.
ProLogis Logistics and ProLogis Development Services may also borrow under the
credit agreement, with such borrowings guaranteed by ProLogis. ProLogis'
borrowings under the agreement generally bear interest at LIBOR plus an
applicable margin (based upon ProLogis' current senior unsecured debt ratings).
ProLogis' borrowings in 2000 were primarily at the 30-day LIBOR rate plus 0.75%
(7.31% as of December 31, 2000). Additionally, the credit agreement provides for
a facility fee of 0.15% per annum. The credit agreement matures on June 6, 2003
and may be extended for an additional year at ProLogis' option. As of December
31, 2000, ProLogis had $184.7 million of borrowings outstanding on the unsecured
line of credit and ProLogis was in compliance with all covenants contained in
the credit agreement. As of December 31, 2000, ProLogis Logistics and ProLogis
Development Services had not borrowed under the credit agreement.
In addition, ProLogis has a $55.0 million unsecured discretionary line of
credit with Bank of America that matures on June 6, 2001. Of the total, ProLogis
can borrow the currency equivalent of $30.0 million in certain foreign
currencies with U.S. dollar borrowings limited to $25.0 million. By agreement
between ProLogis and Bank of America, the rate of interest on and the maturity
date of each advance are determined at the time of each advance. There were
$25.0 million of borrowings outstanding on the discretionary line of credit as
of December 31, 2000.
ProLogis has a credit agreement that provides for a 325.0 million euro
multi-currency, unsecured revolving line of credit (the currency equivalent of
approximately $302.3 million as of December 31, 2000 based on currency exchange
rates quoted by Reuters) through a group of 17 banks, on whose behalf ABN AMRO
Bank, N.V. acts as agent. Borrowings under the line of credit bear interest at
Euribor plus 0.75% or Sterling LIBOR plus 0.75% (borrowings outstanding as of
December 31, 2000 were at a weighted average interest rate of 6.23%). The credit
agreement provides for an unused commitment fee of 0.375% per annum. As of
December 31, 2000, there were 247.4 million euros (the currency equivalent of
approximately $230.1 million based on currency exchange rates quoted by Reuters)
of borrowings outstanding on the line of credit and ProLogis was in compliance
with all covenants contained in the credit agreement.
Derivative Financial Instruments
ProLogis uses derivative financial instruments as hedges to manage
well-defined risk associated with interest and foreign currency rate
fluctuations on existing or anticipated obligations and transactions. ProLogis
does not use derivative financial instruments for trading purposes.
The primary risks associated with derivative instruments are market risk
and credit risk. Market risk is defined as the potential for loss in the value
of the derivative due to adverse changes in market prices (interest
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rates or foreign currency rates). The use of derivative financial instruments
allows ProLogis to manage the risks of increases in interest rates and
fluctuations in foreign currency exchange rates with respect to the effects
these fluctuations would have on ProLogis' income and cash flows.
Credit risk is the risk that one of the parties to a derivative contract
fails to perform or meet their financial obligation under the contract. ProLogis
does not obtain collateral to support financial instruments subject to credit
risk but monitors the credit standing of counterparties. ProLogis does not
anticipate non-performance by any of the counterparties to its derivative
contracts. Should a counterparty fail to perform, however, ProLogis would incur
a financial loss to the extent of the positive fair market value of the
derivative instruments, if any.
As of December 31, 2000, ProLogis had foreign currency put option contracts
outstanding in the notional amount of 47.1 million euros (the currency
equivalent of approximately $43.8 million based on currency exchange rates
quoted by Reuters) related to its operations in Europe. The put option contracts
provide ProLogis with the option to exchange euros for U.S. dollars at a fixed
exchange rate such that if the euro were to depreciate against the U.S. dollar
to predetermined levels (as set by the contract), ProLogis could exercise its
options and mitigate its foreign currency exchange losses. The outstanding
contracts do not qualify for hedge accounting treatment and were marked to
market through income as of December 31, 2000. ProLogis recognized aggregate
income of $627,000 on various put option contracts, including realized income of
$1,481,000 and a mark to market expense of $854,000, in 2000.
ProLogis entered into two interest rate protection agreements with a
combined notional amount of $150.0 million in October 1997 in anticipation of
public debt offerings to be completed in 1998. During 1998, the interest rate
protection agreements no longer qualified for hedge accounting treatment under
GAAP. Accordingly, ProLogis began marking these agreements to market through
income and, for the year ended December 31, 1998, ProLogis recognized a non-cash
expense of $26.1 million related to these agreements. These agreements were
terminated in February 1999 at a total cost of $27.0 million (an additional $0.9
million expense was recognized in 1999). ProLogis used these agreements to set
the interest rate on $200.0 million of privately placed secured debt that was
obtained in 1999.
See "-- Results of Operations -- Other Income and Expense Items -- Foreign
Currency Hedge Income (Expense)" for a discussion of foreign currency hedge
contracts entered into in 1997 and terminated in 1998 related to the acquisition
of Frigoscandia.
Commitments
As of December 31, 2000, ProLogis had letters of intent or contingent
contracts, subject to ProLogis' final due diligence, for the acquisition of 1.7
million square feet of operating facilities at an estimated acquisition cost of
$41.4 million. The foregoing transactions are subject to a number of conditions,
and ProLogis cannot predict with certainty that they will be consummated. In
January 2001, ProLogis acquired three of these operating facilities aggregating
0.7 million square feet at a total acquisition costs of $16.6 million. In
addition, as of December 31, 2000, ProLogis had $355.2 million of budgeted
development costs for developments in process, of which $169.2 million was
unfunded.
On January 11, 2001, ProLogis announced a Common Share repurchase program
under which it may repurchase up to $100.0 million of its Common Shares. The
Common Shares will be repurchased from time to time in the open market and in
privately negotiated transactions, depending on market prices and other
conditions. On February 12, 2001, ProLogis announced its call for redemption of
all outstanding Series B cumulative redeemable convertible preferred shares at a
price of $25.00 per share, plus $0.442 in accrued and unpaid dividends, for an
aggregate redemption price of $25.442 per preferred share. The redemption date
is March 20, 2001. On or prior to March 13, 2001, the Series B preferred shares
can be converted into Common Shares at a conversion rate of 1.282 Common Share
for each Series B preferred share. ProLogis intends to fund the Common Share
repurchase program and the redemption of the Series B cumulative redeemable
convertible preferred shares through borrowings on its unsecured revolving
credit facilities.
ProLogis has entered into a subscription agreement to make additional
capital contributions to ProLogis European Properties Fund (excluding the
remaining 49.9% of the common stock of ProLogis European
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Properties S.a.r.l.) of 93.2 million euros (the currency equivalent of
approximately $86.7 million as of December 31, 2000 based on currency exchange
rates quoted by Reuters) through 2002. Also, ProLogis is committed to invest
$8.0 million in the non-cumulative preferred stock of PhatPipe Inc. by March 31,
2001 ($2.5 million of which was funded on January 4, 2001). See Note 4 to
ProLogis' Consolidated Financial Statements in Item 8.
As of March 1, 2001, ProLogis has guaranteed 100% of the outstanding
borrowings under Frigoscandia's multi-currency revolving credit agreement
(increased from 25% as of December 31, 2000). The agreement allows for the
currency equivalent of 360.0 million Deutsche marks of borrowings and the
currency equivalent of approximately $168.1 million was outstanding as of
December 31, 2000 (based on currency exchange rates quoted by Svenska
Handelsbanken). The loan will be due on March 31, 2001 and bears interest at the
relevant index (LIBOR or Euribor based on the currency borrowed) plus 1.15%.
Frigoscandia is negotiating a new credit agreement that will provide for the
currency equivalent of 185.0 million euros of borrowing capacity with interest
charged at the relevant index plus 0.90%, to mature on December 31, 2001.
ProLogis will guarantee 100% of the borrowings under the new agreement.
The Kingspark entities have a line of credit agreement with a bank in the
United Kingdom that has been guaranteed by ProLogis and provides for borrowings
of up to 15.0 million pounds sterling (the currency equivalent of approximately
$22.4 million as of December 31, 2000 based on currency exchange rates quoted by
Reuters). As of December 31, 2000 no borrowings were outstanding on the line of
credit. However, as of December 31, 2000, the Kingspark entities had the
currency equivalent of approximately $13.8 million of letters of credit
outstanding (based on currency exchange rates quoted by Reuters) that reduce the
amount of available borrowings on the line of credit.
ProLogis European Properties Fund has an agreement with two international
banks for a multi-currency, secured revolving credit facility in the currency
equivalent of 500.0 million euros that matures in October 2002. The facility is
secured by certain assets of ProLogis European Properties Fund. Borrowings can
be denominated in sterling currencies or the euro, and will bear interest at
rates above the relevant index (LIBOR or Euribor). As of December 31, 2000,
118.2 million euros and 62.6 million pound sterling were outstanding on the line
(the currency equivalent of approximately $205.5 million based on currency
exchange rates quoted by Reuters). Of the total borrowings outstanding as of
December 31, 2000, ProLogis has guaranteed the currency equivalent of
approximately $93.0 million (based on currency exchange rates quoted by
Reuters).
ProLogis has guaranteed a 140.0 million French franc (the currency
equivalent of approximately $19.9 million as of December 31, 2000 based on
currency exchange rates quoted by Reuters) unsecured loan outstanding of
ProLogis European Properties S.a.r.l.
Distribution and Dividend Requirements
ProLogis' current distribution policy is to pay quarterly distributions to
shareholders based upon what it considers to be a reasonable percentage of cash
flow and at the level that will allow ProLogis to continue to qualify as a REIT
for tax purposes. Because depreciation is a non-cash expense, cash flow
typically will be greater than earnings from operations and net earnings.
Therefore, annual distributions are expected to be consistently higher than
annual earnings.
Cash distributions paid in 2000, 1999 and 1998 were $1.34 per Common Share,
$1.30 per Common Share and $1.24 per Common Share, respectively. The Board set a
projected annual distribution rate for 2001 of $1.38 per Common Share. ProLogis
paid a distribution for the first quarter of 2001 of $0.345 per Common Share on
February 23, 2001 to holders of Common Shares as of February 9, 2001. The
payment of distributions is subject to the discretion of the Board and is
dependent upon the financial condition and operating results of ProLogis and may
be adjusted at the discretion of the Board during the year.
The annual dividend rates on ProLogis' preferred shares (excluding the
Series B cumulative convertible redeemable preferred shares) are $2.35 per
Series A cumulative redeemable preferred share, $4.27 per Series C cumulative
redeemable preferred share, $1.98 per Series D cumulative redeemable preferred
share and $2.19 per Series E cumulative redeemable preferred share. ProLogis
will pay an accrued dividend of $0.442 per Series B
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cumulative convertible redeemable preferred share when these shares are redeemed
on March 20, 2001. See "-- Commitments".
Pursuant to the terms of its preferred shares, ProLogis is restricted from
declaring or paying any distribution with respect to the Common Shares unless
and until all cumulative dividends with respect to the Preferred Shares have
been paid and sufficient funds have been set aside for dividends for the then
current dividend period with respect to the preferred shares.
Conversion to the Euro
Effective January 1, 1999, eleven of the fifteen member countries of the
European Monetary Union launched the new monetary unit, the euro, as the single
currency for the member countries of the European Monetary Union. During the
period from January 1, 1999 to January 1, 2002, a transition period will be in
effect during which time the euro will be available for non-cash transactions.
However, transactions can continue to be denominated in the old national
currencies. After January 1, 2002, all transactions must be denominated in the
euro. The targeted exchange rates of the old national currencies to the euro
were determined in May 1998. Conversion to the euro has not had, nor is
management aware of any future effects of the conversion to the euro that will
have, a material impact on its business operations or results of operations.
NEW TAX LEGISLATION
Due to the previous limitations in the Code, certain of ProLogis' taxable
subsidiaries (those entities whose operations generated income that was
restricted under the REIT rules) were formed as entities in which ProLogis owned
100% of the preferred stock and a third party owned 100% of the voting common
stock. Accordingly, ProLogis accounted for these types of investments (ProLogis
Logistics, Frigoscandia S.A. and Kingspark S.A.) under the equity method rather
than consolidating the investments in its balance sheet and results of
operations (ProLogis Development Services is consolidated with ProLogis because
ProLogis makes mortgage loans to ProLogis Development Services to fund its
investment activities). The RMA, which was effective on January 1, 2001,
modifies certain provisions of the Code with respect to the taxation of REITs.
Primarily, the RMA allows for the creation of Taxable REIT Subsidiaries ("TRS")
which will allow ProLogis and other REITs to own up to 100% of a TRS (previously
limited to 10% of the voting stock). However, certain state law restrictions
have prevented ProLogis from changing the ownership structures such that
ProLogis owns 100% of these entities. See Note 4 to ProLogis' Consolidated
Financial Statements in Item 8.
FUNDS FROM OPERATIONS
Funds from operations attributable to Common Shares increased $56.5 million
to $376.7 million for 2000 from $320.2 million for 1999. Funds from operation
attributable to Common Shares increased $117.5 million from 1998 to 1999.
Funds from operations does not represent net income or cash from operating
activities in accordance with GAAP and is not necessarily indicative of cash
available to fund cash needs, which is presented in the Consolidated Statement
of Cash Flows in ProLogis' Consolidated Financial Statements in Item 8. Funds
from operations should not be considered as an alternative to net income as an
indicator of ProLogis' operating performance or as an alternative to cash flows
from operating, investing or financing activities as a measure of liquidity.
Additionally, the funds from operations measure presented by ProLogis will not
necessarily be comparable to similarly titled measures of other REITs. ProLogis
considers funds from operations to be a useful supplemental measure of
comparative period operating performance and as a supplemental measure to
provide management, financial analysts, potential investors and shareholders
with an indication of ProLogis' ability to fund its capital expenditures and
investment activities and to fund other cash needs.
Funds from operations is defined by the National Association of Real Estate
Investment Trusts ("NAREIT") generally as net income (computed in accordance
with GAAP), excluding real estate related depreciation and amortization, gains
and losses from sales of properties, except those gains and losses from sales of
properties upon completion or stabilization under pre-sale agreements and after
adjustments for unconsolidated entities to
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reflect their funds from operations on the same basis. ProLogis includes gains
and losses from the disposition of its CDFS business segment assets in funds
from operations.
Funds from operations, as used by ProLogis, is modified from the NAREIT
definition. ProLogis' funds from operations measure does not include: (i)
deferred income tax benefits and deferred income tax expenses of ProLogis'
taxable subsidiaries; (ii) foreign currency exchange gains and losses resulting
from debt transactions between ProLogis and its consolidated and unconsolidated
entities; (iii) 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 (iv)
mark to market adjustments related to derivative financial instruments utilized
to manage ProLogis' foreign currency risks. These adjustments to the NAREIT
definition are made to reflect ProLogis' funds from operations on a comparable
basis with the other REITs that do not engage in the types of transactions that
give rise to these items.
Effective in 2000, NAREIT's definition of funds from operations was changed
to include non-recurring items as a component of funds from operations. The 1999
and 1998 amounts presented below have been restated to reflect this change. The
effect of the restatement is an increase of $2,000 and a decrease of $25.7
million from amounts previously presented to funds from operations attributable
to Common Shares for the years ended December 31, 1999 and 1998, respectively.
Funds from operations is as follows (in thousands):
YEAR ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
Net earnings attributable to Common Shares.............. $157,715 $123,999 $ 62,231
Add (Deduct):
Real estate related depreciation and
amortization..................................... 146,859 150,050 99,514
Gain on disposition of non-CDFS business segment
assets........................................... (1,314) (38,994) (5,565)
Foreign currency exchange (gains) losses, net(1)... 19,569 16,596 (3,227)
Deferred income tax expense........................ 4,230 -- 1,797
Cumulative effect of accounting change(2).......... -- 1,440 --
ProLogis' share of reconciling items of
unconsolidated entities:
Real estate related depreciation and
amortization.................................. 57,366 49,644 36,489
(Gain) loss on disposition of non-CDFS business
segment assets................................ (744) 826 179
Foreign currency exchange (gains) losses, net.... (2,773) 14,650 14,207
Deferred income tax expense (benefit)............ (4,190) 510 (2,929)
Cumulative effect of accounting change(2)........ -- 1,480 --
-------- -------- --------
Funds from operations attributable to Common Shares... $376,718 $320,201 $202,696
======== ======== ========
- ---------------
(1) See "-- Results of Operations -- Other Income and Expense Items -- Foreign
Currency Exchange Gain (Losses), Net".
(2) See "-- Results of Operations -- Other Income and Expense
Items -- Cumulative Effect of Accounting Change".
RISK FACTORS
Risks factors include the occurrence of any of the events described below
that could adversely affect ProLogis' ability to achieve its projected returns
on acquisitions and facilities under development and could hinder ProLogis'
ability to make expected distributions to equity holders.
ProLogis is Exposed to the General Economic Conditions of the Markets in which
it Owns Property
ProLogis' operating performance depends on the economic conditions of
markets in which its facilities are concentrated. ProLogis' operating
performance could be adversely affected if conditions, such as an oversupply
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of distribution space or a reduction in demand for industrial distribution
facilities, in ProLogis' larger markets become less favorable relative to other
geographic areas. Any material oversupply of distribution space or material
reduction of demand for distribution space could adversely effect ProLogis'
operating income and the value of its Common Shares.
ProLogis' Investments Are Subject To Risks Particular To Real Estate
Value of Real Estate Dependent on Numerous Factors
Real property investments are subject to varying degrees of risk. Real
estate values are affected by a number of factors, including:
- changes in the general economic climate;
- local conditions, such as an oversupply of space or a reduction in demand
for real estate in an area;
- the quality and philosophy of management;
- competition from other available space;
- the ability of the owner to provide adequate maintenance and insurance;
- the ability of the owner to control variable operating costs;
- governmental regulations;
- interest rate levels;
- the availability of financing; and
- potential liability under, and changes in, environmental, zoning, and
other laws.
Restrictions on, and Risks of, Unsuccessful Development Activities
ProLogis intends to continue to pursue development activities as
opportunities arise. Such development activities generally require various
government and other approvals. ProLogis may not receive such approvals.
ProLogis will be subject to risks associated with any such development
activities. These risks include:
- the risk that development opportunities explored by ProLogis may be
abandoned;
- the risk that construction costs of a facility may exceed original
estimates, possibly making the project less profitable than originally
estimated;
- limited cash flow during the construction period; and
- the risk that occupancy rates and rents of a completed project will not
be sufficient to make the project profitable.
In case of an unsuccessful development project, ProLogis' loss could exceed
its investment in the project.
Tenant Default
ProLogis' income and distributable cash flow would be adversely affected if
a significant number of ProLogis' tenants are unable to meet their obligations
to ProLogis, or if ProLogis is unable to lease, on economically favorable terms,
a significant amount of space in its industrial distribution facilities. In the
event of default by a significant number of tenants, ProLogis may experience
delays and incur substantial costs in enforcing its rights as landlords.
Real Estate Investments Are Not As Liquid As Other Types Of Assets
Real estate investments are not as liquid as other types of assets and
therefore may tend to limit the ability of ProLogis to react promptly to changes
in economic or other conditions. In addition, significant expenditures
associated with real estate investments, such as mortgage payments, real estate
taxes and maintenance costs, are
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generally not reduced when circumstances cause a reduction in income from the
investments. Like other companies qualifying as REITs under the Code, ProLogis
must comply with the safe harbor rules, relating to the number of facilities
disposed of in a year, their tax bases and the cost of improvements made to the
facilities, or meet other tests which enable a REIT to avoid punitive taxation
on the sale of assets. Thus, ProLogis' ability to sell assets, or contribute
assets to entities in which ProLogis has an ownership interest, at any time to
change its asset base may be restricted.
Share Prices May Be Affected By Market Interest Rates
The annual distribution rate on Common Shares as a percentage of its market
price may influence the trading price of such Common Shares. An increase in
market interest rates may lead investors to demand a higher annual distribution
rate, which could adversely affect the market price of such Common Shares. A
decrease in the market price of the Common Shares could reduce ProLogis' ability
to raise additional equity capital in the public markets.
Uninsured Losses May Adversely Affect ProLogis
Some types of losses, such as from acts of war, may be uninsurable, or the
cost of insuring against such losses may not be economically justifiable. If an
uninsured loss occurs, ProLogis could lose both the invested capital in and
anticipated revenues from the affected facility, but would still be obligated to
repay any recourse mortgage indebtedness on the facility.
Potential Environmental Liability
Under various federal, state and local laws, ordinances and regulations, a
current or previous owner, developer or operator of real estate may be liable
for the costs of removal or remediation of hazardous or toxic substances at, on,
under or in its property. The costs of removal or remediation of such substances
could be substantial. Such laws often impose liability without regard to whether
the owner or operator knew of, or was responsible for, the release or presence
of such hazardous substances. The presence of such substances on ProLogis'
properties may adversely affect its ability to sell such properties or to borrow
using such properties as collateral and may also have an adverse affect on
ProLogis' ability to pay distributions to its shareholders.
Debt Financing, Increases in Interest Rates, Financial Covenants and Absence
of Limitations on Debt May Result in Decreased Distribution to Shareholders
Debt Financing
ProLogis is subject to risks normally associated with debt financing,
including the risk that ProLogis' cash flow will be insufficient to meet
required payments of principal and interest and the risk that ProLogis will not
be able to refinance existing indebtedness or that the terms of such
refinancings will not be as favorable as terms of the existing indebtedness.
There can be no assurance that ProLogis will be able to refinance any
indebtedness or otherwise obtain funds by selling assets or raising equity to
make required payments on maturing indebtedness.
Requirements of Credit Facilities; Foreclosures
The terms of ProLogis' indebtedness require ProLogis to comply with a
number of customary financial and other covenants, such as maintaining debt
service coverage and leverage ratios, maintaining insurance coverage, etc. These
covenants may limit ProLogis' flexibility in its operations, and breaches of
these covenants could result in defaults under the instruments governing the
applicable indebtedness even if ProLogis has satisfied its payment obligations.
If ProLogis is unable to refinance its indebtedness at maturity or meet its
payment obligations, the amount of cash available for distribution may be
adversely affected.
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No Limitations on Debt
ProLogis currently has a policy of incurring debt only, if upon such
incurrence, ProLogis' debt-to-book capitalization ratio, as adjusted, would
equal 50% or less. The Board could alter or eliminate this policy without
shareholder approval and would do so if, for example, it were necessary in order
for ProLogis to continue to qualify as a REIT under the Code. If this policy
were changed, ProLogis could become more highly leveraged, resulting in an
increase in debt service that could adversely affect the cash available for
distribution to shareholders.
Failure to Qualify as a REIT Could Adversely Affect Shareholders
ProLogis has elected to be taxed as a REIT under the Code commencing with
its taxable year ended December 31, 1993. To maintain REIT status, ProLogis must
meet a number of highly technical requirements on a continuing basis. Those
requirements seek to ensure, among other things, that the gross income and
investments of a REIT are largely real estate related, that a REIT distributes
substantially all its ordinary taxable income to shareholders on a current basis
and that the REIT's ownership is not overly concentrated. Due to the complex
nature of these rules, the limited available guidance concerning interpretation
of the rules, the importance of ongoing factual determinations and the
possibility of adverse changes in the law, administrative interpretations of the
law and developments at ProLogis, no assurance can be given that ProLogis will
qualify as a REIT for any particular year.
If ProLogis fails to qualify as a REIT, it will be taxed as a regular
corporation, and distributions to shareholders will not be deductible in
computing ProLogis' taxable income. The resulting corporate income tax
liabilities could materially reduce the funds available for distribution to
ProLogis' shareholders or for reinvestment. In the absence of REIT status,
distributions to shareholders would no longer be required. Moreover, ProLogis
might not be able to elect to be treated as a REIT for the four taxable years
after the year during which ProLogis ceased to qualify as a REIT. In addition,
if ProLogis later requalified as a REIT, it might be required to pay a full
corporate-level tax on any unrealized gain in its assets as of the date of
requalification and to make distributions to shareholders equal to any earnings
accumulated during the period of non-REIT status.
Potential Adverse Effect of REIT Distribution Requirements
To maintain its qualification as a REIT under the Code, ProLogis must
annually distribute to ProLogis' shareholders at least 95% of its ordinary
taxable income, excluding net capital gains (changed to 90% as a result of the
RMA -- see "-- New Tax Legislation"). This requirement limits ProLogis' ability
to accumulate capital. ProLogis may not have sufficient cash or other liquid
assets to meet the distribution requirements. Difficulties in meeting the
distribution requirements might arise due to competing demands for ProLogis'
funds or to timing differences between tax reporting and cash receipts and
disbursements, because income may have to be reported before cash is received,
because expenses may have to be paid before a deduction is allowed or because
deductions may be disallowed or limited. In those situations, ProLogis might be
required to borrow funds or sell facilities on adverse terms in order to meet
the distribution requirements. If ProLogis fails to make a required
distribution, it would cease to be a REIT.
Currency Risk
ProLogis has pursued and intends to continue to pursue growth opportunities
in international markets and often invests in countries where the U.S. dollar is
not the national currency. As a result, ProLogis is subject to foreign currency
risk due to potential fluctuations in exchange rates between foreign currencies
and the U.S. dollar. For example, a significant depreciation in the value of the
foreign currencies of one or more countries where ProLogis has a significant
investment may materially adversely affect ProLogis' performance. ProLogis
attempts to mitigate any such effects through the use of foreign currency put
option contracts, although there can be no assurance that such attempts will be
successful.
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Influence of ProLogis' Principal Shareholder May Impact ProLogis' Management
and Operations
ProLogis and Security Capital are parties to a Third Amended and Restated
Investor Agreement, dated as of September 9, 1997. Pursuant to the investor
agreement, Security Capital has the right, so long as it owns between 10% and
25% of the Common Shares, to nominate one person to the Board. So long as
Security Capital owns 25% or more of the Common Shares, Security Capital will be
entitled to nominate a proportionate number of persons to the Board subject to a
maximum of three nominees if the size of the Board does not increase above the
current size of ten trustees. Under the investor agreement, so long as it owns
at least 25% of the Common Shares, Security Capital also has the right of prior
approval with respect to the following matters:
- the issuance of equity securities or securities convertible into equity
securities, other than issuances in connection with option, dividend
reinvestment and similar plans, for less than the fair market value of
such securities;
- the issuance of any preferred shares which would result in the fixed
charge coverage ratio being less than 1.4 to 1.0;
- adopting any employee benefit plans under which Common Shares may be
issued;
- the compensation of senior officers of ProLogis; and
- the incurrence of additional indebtedness which would result in the
interest expense coverage ratio being less than 2.0 to 1.0.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
ProLogis is exposed to market risk from changes in interest rates and
foreign currency exchange rates. On a limited basis, ProLogis uses certain
derivative financial instruments, including interest rate swap agreements and
foreign currency option and forward contracts to reduce its market risk.
ProLogis does not use financial instruments for trading or speculative purposes
and all financial instruments are entered into in accordance with Board approved
policies.
ProLogis has estimated its market risk exposures using sensitivity
analysis. ProLogis has defined its market risk exposure as the potential loss in
future earnings and cash flow with respect to interest rate exposure and future
earnings with respect to foreign currency exchange exposure of its market risk
sensitive instruments assuming a hypothetical 10% adverse change in year end
interest rates and foreign currency exchange rates. The results of the
sensitivity analysis are summarized below. The sensitivity analysis is of
limited predictive value. As a result, ProLogis' ultimate realized gains or
losses with respect to interest and foreign currency exchange rate fluctuations
will depend on the exposures that arise during a future period, hedging
strategies at the time, and the prevailing interest and foreign currency
exchange rates.
Interest Rate Risk
ProLogis' interest rate risk is related primarily to its variable rate
credit facilities. ProLogis' interest rate risk management objective is to limit
the impact of interest rate changes on earnings and cash flows. To achieve its
objective, ProLogis primarily borrows on a fixed rate basis. Therefore,
ProLogis' primary interest rate risk is created by its variable rate unsecured
lines of credit and its variable rate short-term borrowing arrangements, if any.
Although ProLogis has no interest rate derivatives outstanding as of December
31, 2000, ProLogis has in the past and may in the future, utilize derivative
instruments as hedges in anticipation of future debt transactions to manage its
interest rate exposure.
During the year ended December 31, 2000, ProLogis had weighted average
outstanding borrowings of $251.5 million on its variable rate unsecured lines of
credit. Based on the results of the sensitivity analysis, which assumed a 10%
adverse change in interest rates, the estimated market risk exposure for
interest rate-related financial instruments was approximately $1.6 million on
both future earnings and cash flow as of December 31, 2000. The sensitivity
analysis was based on the weighted average outstanding variable rate borrowings
for 2000 and assumed a flat yield curve.
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Foreign Currency Risk
ProLogis uses foreign currency forward and option contracts to manage
foreign currency exchange rate risk related to projected net operating income
(operating income net of foreign denominated interest expense) from foreign
entities.
In addition, ProLogis incurs foreign currency risk related to its U.S.
dollar denominated loans to its foreign consolidated subsidiaries. The
remeasurement of intercompany loans results in foreign currency exchange gains
or losses that are recognized by ProLogis. However, ProLogis does not incur an
actual cash gain or loss until the loans are repaid. ProLogis' exposure to
foreign currency exchange rates exists with the following currencies versus the
U.S. dollar: euro, British pound sterling, French franc and Swedish krona.
ProLogis' foreign currency exchange sensitivity analysis included foreign
currency put option contracts affected by foreign currency exchange risk, as
well as U.S. dollar denominated loans to foreign consolidated entities. Based on
the results of the sensitivity analysis, which assumed a 10% adverse change in
foreign currency exchange rates, the estimated 2000 year-end market risk
exposure to future earnings was $23.6 million. The sensitivity analysis excluded
the impact of the change in foreign currency exchange rates on the underlying
projected net operating income, which has a high degree of inverse correlation
with the derivative instruments used to hedge it. However, since ProLogis hedges
approximately 75% of its projected net operating income from foreign entities,
approximately 25% of the impact to total net operating income from its foreign
entities of an adverse movement in foreign exchange rates would not be offset by
derivative instruments.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ProLogis Consolidated Balance Sheets as of December 31, 2000 and 1999, its
Consolidated Statements of Earnings, Shareholders' Equity and Cash Flows for
each of the three years in the period ended December 31, 2000, Notes to
Consolidated Financial Statements and Schedule III -- Real Estate and
Accumulated Depreciation, together with the report of Arthur Andersen LLP,
independent public accountants, are included under Item 14 of this report and
are incorporated herein by reference. Selected quarterly financial data is
presented in Note 13 of Notes to Consolidated Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE MATTERS
Not applicable.
55
58
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information regarding ProLogis' executive officers, see "Item 1.
Business -- Executive Officers and Trustees" and "-- Senior Officers." The other
information required by this Item 10 is incorporated herein by reference to the
description under the captions "Election of Trustees" and "Section 16(a)
Beneficial Ownership Reporting Compliance" in ProLogis' definitive proxy
statement for its 2001 annual meeting of shareholders ("2001 Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference to the description under the captions
"Executive Compensation," "Compensation Committee Report on Executive
Compensation," "Trustee Compensation" and "Outside Trustee Plan" in the 2001
Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference to the description under the caption
"Principal Shareholders" in the 2001 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference to the description under the caption
"Certain Relationships and Transactions" in the 2001 Proxy Statement.
56
59
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The following documents are filed as a part of this report:
(a) Financial Statements and Schedules:
1. Financial Statements:
See Index to Consolidated Financial Statements and Schedule III on
page 58 of this report, which is incorporated herein by reference.
2. Financial Statement Schedules:
Schedule III -- Real Estate and Accumulated Depreciation
All other schedules have been omitted since the required information
is presented in the financial statements and the related notes or is
not applicable.
3. Exhibits:
See Index to Exhibits on pages 124 to 128 of this report, which is
incorporated herein by reference.
(b) Reports on Form 8-K: The following reports on Form 8-K were filed
during the last quarter of the period covered by this report:
ITEM FINANCIAL
DATE REPORTED STATEMENTS
- ---- -------- ----------
None
(c) Exhibits: The Exhibits required by Item 601 of Regulation S-K are
listed in the Index to Exhibits on pages 124 to 128 of this report, which
is incorporated herein by reference.
57
60
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE III
PAGE
----
ProLogis Trust:
Report of Independent Public Accountants.................. 59
Consolidated Balance Sheets............................... 60
Consolidated Statements of Earnings....................... 61
Consolidated Statements of Shareholders' Equity........... 62
Consolidated Statements of Cash Flows..................... 63
Notes to Consolidated Financial Statements................ 64
Report of Independent Public Accountants.................. 102
Schedule III -- Real Estate and Accumulated
Depreciation........................................... 103
58
61
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Trustees and Shareholders of
ProLogis Trust
We have audited the accompanying consolidated balance sheets of ProLogis
Trust and subsidiaries as of December 31, 2000 and 1999, and the related
consolidated statements of earnings, shareholders' equity, and cash flows for
each of the three years in the period ended December 31, 2000. These financial
statements are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements based on our audits. We
did not audit the financial statements of Frigoscandia Holding AB accounted for
under the equity method of accounting, in which the Trust has investments in and
advances to amounting to $171.9 million and $196.9 million as of December 31,
2000 and 1999, respectively, and losses from unconsolidated entity of $20.0
million, $2.9 million and $7.6 million in 2000, 1999 and 1998, respectively. We
did not audit the financial statements of CS Integrated LLC accounted for under
the equity method of accounting, in which the Trust has an investment in and
advances to amounting to $225.8 million and $186.9 million as of December 31,
2000 and 1999 and earnings from unconsolidated entity of $8.0 million and $9.2
million in 2000 and 1999. These statements were audited by other auditors whose
reports were furnished to us, and our opinion, insofar as it relates to the
amounts included for these entities is based solely on the reports of the other
auditors.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the reports of the other
auditors provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of the other auditors,
the financial statements referred to above present fairly, in all material
respects, the financial position of ProLogis Trust and subsidiaries as of
December 31, 2000 and 1999, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 2000, in
conformity with accounting principles generally accepted in the United States.
Arthur Andersen LLP
Chicago, Illinois
March 15, 2001
59
62
PROLOGIS TRUST
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
DECEMBER 31,
-----------------------
2000 1999
---------- ----------
Real estate................................................. $4,689,492 $4,974,951
Less accumulated depreciation............................. 476,982 366,703
---------- ----------
4,212,510 4,608,248
Investments in and advances to unconsolidated entities...... 1,453,148 940,364
Cash and cash equivalents................................... 57,870 69,338
Accounts and notes receivable............................... 50,856 46,998
Other assets................................................ 171,950 183,092
---------- ----------
Total assets....................................... $5,946,334 $5,848,040
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Lines of credit........................................... $ 439,822 $ 98,700
Senior unsecured debt..................................... 1,699,989 1,729,630
Other unsecured debt...................................... -- 30,892
Secured debt.............................................. 537,925 695,586
Accounts payable and accrued expenses (including amount
due to affiliate of $221 in 1999)....................... 107,494 117,872
Construction payable...................................... 40,925 23,064
Distributions and dividends payable....................... 57,739 54,939
Other liabilities......................................... 88,439 81,549
---------- ----------
Total liabilities.................................. 2,972,333 2,832,232
---------- ----------
Minority interest........................................... 46,630 62,072
Shareholders' equity:
Series A Preferred Shares; $0.01 par value; 5,400,000
shares issued and outstanding at December 31, 2000 and
1999; stated liquidation preference of $25.00 per
share................................................... 135,000 135,000
Series B Convertible Preferred Shares; $0.01 par value;
6,256,100 shares issued and outstanding at December 31,
2000 and 7,020,703 shares issued and outstanding at
December 31, 1999; stated liquidation preference of
$25.00 per share........................................ 156,403 175,518
Series C Preferred Shares; $0.01 par value; 2,000,000
shares issued and outstanding at December 31, 2000 and
1999; stated liquidation preference of $50.00 per
share................................................... 100,000 100,000
Series D Preferred Shares; $0.01 par value; 10,000,000
shares issued and outstanding at December 31, 2000 and
1999; stated liquidation preference of $25.00 per
share................................................... 250,000 250,000
Series E Preferred Shares; $0.01 par value; 2,000,000
shares issued and outstanding at December 31, 2000 and
1999; and stated liquidation preference of $25.00 per
share................................................... 50,000 50,000
Common shares of beneficial interest; $0.01 par value;
165,287,358 shares issued and outstanding at December
31, 2000 and 161,825,466 shares issued and outstanding
at December 31, 1999.................................... 1,653 1,618
Additional paid-in capital.................................. 2,740,136 2,663,350
Employee share purchase notes............................... (18,556) (22,906)
Accumulated other comprehensive income...................... (33,768) (9,765)
Distributions in excess of net earnings..................... (453,497) (389,079)
---------- ----------
Total shareholders' equity......................... 2,927,371 2,953,736
---------- ----------
Total liabilities and shareholders' equity......... $5,946,334 $5,848,040
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
60
63
PROLOGIS TRUST
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
2000 1999 1998
-------- -------- --------
Income:
Rental income............................................. $480,088 $491,826 $345,046
Other real estate income.................................. 78,103 46,678 17,554
Income from unconsolidated entities....................... 78,063 22,519 2,755
Interest.................................................. 7,267 6,369 2,752
-------- -------- --------
Total income...................................... 643,521 567,392 368,107
-------- -------- --------
Expenses:
Rental expenses, net of recoveries $91,706 in 2000,
$87,907 in 1999 and $57,415 in 1998 and including
amounts paid to affiliate of $1,188 in 2000, $1,314 in
1999 and $984 in 1998.................................. 27,177 33,501 27,120
General and administrative, including amounts paid to
affiliate of $958 in 2000, $1,582 in 1999 and $1,992 in
1998................................................... 44,954 38,284 22,893
Depreciation and amortization............................. 151,483 152,447 100,590
Interest.................................................. 172,191 170,746 77,650
Interest rate hedge expense............................... -- 945 26,050
Other..................................................... 5,909 4,920 6,187
-------- -------- --------
Total expenses.................................... 401,714 400,843 260,490
-------- -------- --------
Earnings from operations.................................... 241,807 166,549 107,617
Minority interest share in earnings......................... 5,586 4,979 4,681
-------- -------- --------
Earnings before gain on disposition of real estate and
foreign currency exchange gains (losses).................. 236,221 161,570 102,936
Gain on disposition of real estate.......................... 1,314 38,994 5,565
Foreign currency hedge income............................... -- -- 2,054
Foreign currency exchange gains (losses), net............... (17,927) (16,818) 2,938
-------- -------- --------
Earnings before income taxes................................ 219,608 183,746 113,493
Income taxes:
Current income tax expense................................ 900 1,472 368
Deferred income tax expense............................... 4,230 -- 1,796
-------- -------- --------
Total income taxes................................ 5,130 1,472 2,164
-------- -------- --------
Earnings before cumulative effect of accounting change...... 214,478 182,274 111,329
Cumulative effect of accounting change...................... -- 1,440 --
-------- -------- --------
Net earnings................................................ 214,478 180,834 111,329
Less preferred share dividends.............................. 56,763 56,835 49,098
-------- -------- --------
Net earnings attributable to Common Shares.................. $157,715 $123,999 $ 62,231
======== ======== ========
Weighted average Common Shares outstanding -- Basic......... 163,651 152,412 121,721
======== ======== ========
Weighted average Common Shares outstanding -- Diluted....... 164,401 152,739 122,028
======== ======== ========
Basic per share net earnings attributable to Common Shares:
Earnings before cumulative effect of accounting change.... $ 0.96 $ 0.82 $ 0.51
Cumulative effect of accounting change.................... -- (0.01) --
-------- -------- --------
Net earnings attributable to Common Shares........ $ 0.96 $ 0.81 $ 0.51
======== ======== ========
Diluted per share net earnings attributable to Common
Shares:
Earnings before cumulative effect of accounting change.... $ 0.96 $ 0.82 $ 0.51
Cumulative effect of accounting change.................... -- (0.01) --
-------- -------- --------
Net earnings attributable to Common Shares........ $ 0.96 $ 0.81 $ 0.51
======== ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
61
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PROLOGIS TRUST
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(IN THOUSANDS)
2000 1999 1998
---------- ---------- ----------
Common Shares -- Number of shares at beginning of year...... 161,825 123,416 117,364
Sale of Common Shares..................................... -- -- 5,494
Issuance of Common Shares under plans and through
warrants................................................ 1,642 344 30
Limited partnership units converted to Common Shares...... 238 14 20
Series B preferred shares converted to Common Shares...... 980 663 593
Retirements of employee share purchase notes.............. -- -- (85)
Common Shares issued in merger with Meridian.............. -- 37,388 --
Common Shares issued in acquisition of unconsolidated
entity.................................................. 602 -- --
---------- ---------- ----------
Common Shares -- Number of shares at end of year............ 165,287 161,825 123,416
========== ========== ==========
Common Shares at beginning of year.......................... $ 1,618.2 $ 1,234.2 $ 1,173.8
Sale of Common Shares..................................... -- -- 54.9
Issuance of Common Shares under plans and through
warrants................................................ 16.4 3.4 0.2
Limited partnership units converted to Common Shares...... 2.4 0.1 0.2
Series B preferred shares converted to Common Shares...... 9.8 6.6 5.9
Retirements of employee share purchase notes.............. -- -- (0.8)
Common Shares issued in merger with Meridian.............. -- 373.9 --
Common Shares issued in acquisition of unconsolidated
entity.................................................. 6.0 -- --
---------- ---------- ----------
Common Shares at end of year................................ $ 1,652.8 $ 1,618.2 $ 1,234.2
========== ========== ==========
Preferred Shares at beginning of year....................... $ 710,518 $ 673,440 $ 435,008
Series B preferred shares converted to Common Shares...... (19,115) (12,922) (11,568)
Sale of Series D preferred shares......................... -- -- 250,000
Issuance of Series E preferred shares in merger with
Meridian................................................ -- 50,000 --
---------- ---------- ----------
Preferred Shares at end of year............................. $ 691,403 $ 710,518 $ 673,440
========== ========== ==========
Additional Paid-in Capital at beginning of year............. $2,663,350 $1,907,232 $1,773,465
Issuance of Common Shares under plans and through
warrants................................................ 30,251 6,327 521
Limited partnership units converted to Common Shares...... 8,167 205 302
Series B preferred shares converted to Common Shares...... 19,105 12,916 11,562
Sale of Common Shares and Series D preferred shares....... -- -- 121,810
Retirements of employee share purchase notes.............. -- -- (2,039)
Sale of options to unconsolidated entities................ 2,153 1,226 1,333
Stock-based compensation.................................. 5,238 2,137 278
Preferred and Common Shares issued in merger with
Meridian................................................ -- 733,307 --
Common Shares issued in acquisition of unconsolidated
entity.................................................. 11,872 -- --
---------- ---------- ----------
Additional Paid-in Capital at end of year................... $2,740,136 $2,663,350 $1,907,232
========== ========== ==========
Employee share purchase notes at beginning of year.......... $ (22,906) $ (25,247) $ (27,186)
Retirements of employee share purchase notes.............. -- -- 1,796
Principal payments on employee share purchase notes....... 4,350 2,341 143
---------- ---------- ----------
Employee share purchase notes at end of year................ $ (18,556) $ (22,906) $ (25,247)
========== ========== ==========
Accumulated other comprehensive income at beginning of
year...................................................... $ (9,765) $ 23 $ (63)
Foreign currency translation adjustments.................. (24,003) (9,788) 86
---------- ---------- ----------
Accumulated other comprehensive income at end of year....... $ (33,768) $ (9,765) $ 23
========== ========== ==========
Distributions in excess of net earnings at beginning of
year...................................................... $ (389,079) $ (300,314) $ (205,661)
Net earnings.............................................. 214,478 180,834 111,329
Preferred share dividends................................. (56,763) (56,835) (49,098)
Common Share distributions paid........................... (165,123) (158,554) (117,601)
Common Share distributions accrued........................ (57,010) (54,210) (39,283)
---------- ---------- ----------
Distributions in excess of net earnings at end of year...... $ (453,497) $ (389,079) $ (300,314)
========== ========== ==========
Total shareholders' equity at end of year................... $2,927,371 $2,953,736 $2,256,368
========== ========== ==========
Comprehensive income for the year:
Net earnings.............................................. $ 214,478 $ 180,834 $ 111,329
Preferred share dividends................................. (56,763) (56,835) (49,098)
Foreign currency translation adjustments.................. (24,003) (9,788) 86
---------- ---------- ----------
Comprehensive income for the year........................... $ 133,712 $ 114,211 $ 62,317
========== ========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
62
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PROLOGIS TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
(IN THOUSANDS)
2000 1999 1998
---------- ----------- -----------
Operating activities:
Net earnings.............................................. $ 214,478 $ 180,834 $ 111,329
Minority interest share in earnings....................... 5,586 4,979 4,681
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization........................... 151,483 152,447 100,590
Gain on disposition of real estate...................... (1,314) (38,994) (5,565)
Straight-lined rents.................................... (6,716) (9,889) (6,756)
Amortization of deferred loan costs..................... 4,597 4,440 2,200
Stock-based compensation................................ 3,811 1,657 278
(Income) loss from unconsolidated entities.............. (64,239) (20,948) 11,108
Foreign currency exchange (gains) losses, net............. 20,956 11,344 (3,227)
Foreign currency hedge income............................. -- -- (2,054)
Interest rate hedge expense............................... -- 945 26,050
Cumulative effect of accounting change.................... -- 1,440 --
Increase in accounts receivable and other assets.......... (31,452) (37,344) (36,824)
Increase in accounts payable, accrued expenses and other
liabilities............................................. 39,639 20,480 36,443
---------- ----------- -----------
Net cash provided by operating activities........... 336,829 271,391 238,253
---------- ----------- -----------
Investing activities:
Real estate investments................................... (639,692) (464,406) (695,764)
Tenant improvements and lease commissions on previously
leased space............................................ (19,623) (19,751) (12,757)
Recurring capital expenditures............................ (23,895) (28,114) (8,038)
Proceeds from dispositions of real estate................. 496,744 569,981 109,336
Investments in and advances to unconsolidated entities.... (188,750) (141,037) (657,499)
Cash balances contributed with ProLogis European
Properties S.a.r.l. .................................... (17,968) -- --
Cash acquired in merger with Meridian..................... -- 48,962 --
---------- ----------- -----------
Net cash used in investing activities............... (393,184) (34,365) (1,264,722)
---------- ----------- -----------
Financing activities:
Proceeds from sale of shares, net of expenses............. -- -- 371,865
Proceeds from exercised warrants and stock options and
from dividend reinvestment and share purchase plans..... 30,734 6,331 521
Repurchase of Common Shares............................... -- -- (244)
Proceeds from secured financing transactions.............. -- 466,075 66,000
Proceeds from issuance of senior unsecured debt........... -- 500,000 374,463
Debt issuance and other transaction costs incurred........ (4,598) (58,248) (5,848)
Distributions paid on Common Shares (includes $11,132 paid
to shareholders of Meridian in 1999).................... (219,333) (208,969) (151,050)
Distributions paid to minority interest holders........... (7,123) (7,251) (6,409)
Dividends paid on preferred shares (includes $729 paid to
shareholders of Meridian in 1999)....................... (56,763) (56,835) (49,098)
Principal payments on senior unsecured debt............... (30,000) (12,500) (15,000)
Principal payments received on and retirements of employee
share purchase notes.................................... 4,350 2,341 143
Net proceeds from (payments on) derivative financial
instruments............................................. 808 (27,715) (3,974)
Payments to Meridian shareholders......................... -- (67,581) --
Proceeds from lines of credit and short-term borrowings... 1,075,473 1,939,845 1,569,225
Payments on lines of credit and short-term borrowings..... (734,351) (2,335,445) (1,074,925)
Payment on line of credit assumed in merger with
Meridian................................................ -- (328,400) --
Regularly scheduled principal payments on secured debt.... (7,100) (6,560) (5,658)
Principal payments on secured debt at maturity and
prepayments............................................. (7,210) (35,916) (5,411)
---------- ----------- -----------
Net cash provided by (used in) financing
activities........................................ 44,887 (230,828) 1,064,600
---------- ----------- -----------
Net increase (decrease) in cash and cash equivalents........ (11,468) 6,198 38,131
Cash and cash equivalents, beginning of year................ 69,338 63,140 25,009
---------- ----------- -----------
Cash and cash equivalents, end of year...................... $ 57,870 $ 69,338 $ 63,140
========== =========== ===========
See Note 12 for information on non-cash investing and financing activities.
The accompanying notes are an integral part of these consolidated financial
statements.
63
66
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000
1. DESCRIPTION OF BUSINESS:
ProLogis Trust ("ProLogis") is a publicly held real estate investment trust
("REIT") that owns and operates a network of industrial distribution facilities
in North America and Europe. The ProLogis Operating System(TM), comprised of the
Market Services Group, the Global Services Group, the Global Development Group
and the Integrated Solutions Group, utilizes ProLogis' international network of
distribution facilities to meet its customers' distribution space needs
globally. ProLogis has organized its business into three operating segments:
property operations, corporate distribution facilities services business ("CDFS
business") and temperature-controlled distribution operations. See Note 10.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Financial Presentation
The accounts of ProLogis, its wholly owned subsidiaries and its majority
owned and controlled partnerships are consolidated in the accompanying financial
statements. All material intercompany transactions have been eliminated. Certain
amounts included in the consolidated financial statements for prior years have
been reclassified to conform to the 2000 financial statement presentation.
The preparation of financial statements in conformity with generally
accepted accounting principles ("GAAP") requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
REIT Organization Status
In January 1993, ProLogis was formed as a Maryland REIT and has elected to
be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the
"Code").
REITs are not generally required to pay federal income taxes if minimum
distribution and income, asset and shareholder tests are met. During 2000, 1999
and 1998, ProLogis was in compliance with the REIT requirements. Thus, no
federal income tax provision has been reflected in the accompanying consolidated
financial statements for ProLogis and its wholly owned subsidiaries which are
qualified REIT subsidiaries. The foreign countries that ProLogis operates in do
not recognize REITs under their respective tax laws. Accordingly, ProLogis has
recognized foreign country income taxes in its results of operations, as
applicable.
Real Estate and Depreciation
Real estate is carried at cost, which is not in excess of estimated fair
market value. Costs directly associated with the successful acquisition,
renovation or development of real estate are capitalized. Direct costs
associated with unsuccessful acquisitions are expensed at the time the pursuit
is abandoned.
Depreciation is computed over the estimated useful lives of depreciable
property on a straight-line basis: 7 years for capital improvements, 10 years
for tenant improvements, 30 years for acquired facilities and 40 years for
facilities developed by ProLogis.
ProLogis' management periodically reviews long-lived assets (primarily real
estate and investments in unconsolidated entities) that it owns and operates for
impairment whenever events or changes in circumstances indicate that the
carrying amount of such assets may not be recoverable. In accordance with the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of," management's review involves comparing current and future
operating performance of the assets, the most significant of which is
undiscounted operating cash
64
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
flows, to the carrying value of the assets. Based on this analysis, a provision
for possible loss is recognized if necessary. In management's opinion,
long-lived assets, primarily real estate assets and investments in
unconsolidated entities, are not carried at amounts in excess of their estimated
realizable values. Long-lived assets (primarily real estate and investments in
unconsolidated entities) to be disposed of, if any, are reported at the lower of
their carrying amount or fair value less cost to sell.
ProLogis acquired certain real estate through the formation of partnerships
(as discussed in Note 6) wherein ProLogis contributed cash and the limited
partners contributed real estate in exchange for partnership units which are
ultimately exchangeable for ProLogis common shares of beneficial interest, $0.01
par value ("Common Shares"). In consolidating the partnerships' assets, real
estate cost includes the estimated fair value attributable to the limited
partners' interests as of the acquisition dates.
ProLogis Development Services Incorporated ("ProLogis Development
Services") develops distribution facilities that are often disposed of to
customers, third parties or entities in which ProLogis maintains an ownership
interest. ProLogis Development Services also contracts on a fee basis to develop
distribution facilities for customers or third parties. ProLogis owns 100% of
the preferred stock of ProLogis Development Services and realizes substantially
all economic benefits of its activities. Because ProLogis advances mortgage
loans to ProLogis Development Services to fund its acquisition, development and
construction activities, ProLogis Development Services is consolidated with
ProLogis. ProLogis Development Services is not a qualified REIT subsidiary of
ProLogis under the Code. Accordingly, provisions for federal and state income
taxes are recognized, as appropriate.
Capitalization Policy
Renovations and improvements to real estate assets are capitalized and
depreciated over their estimated useful lives. Repairs and maintenance costs are
expensed as incurred to the extent they are not acquisition-related renovation
costs identified during ProLogis' pre-acquisition due diligence.
General and administrative costs incurred for development (including land
acquisitions), renovation and leasing activities that are incremental and
identifiable to a specific activity are capitalized. Prior to April 1, 1998,
ProLogis also capitalized direct and incremental management costs incurred in
connection with the acquisition of existing operating facilities. In accordance
with Emerging Issues Task Force Issue 97-11, "Accounting for Internal Costs
Relating to Real Estate Property Acquisitions," which was effective on April 1,
1998, such costs are no longer capitalized.
Costs capitalized to real estate are depreciated over the estimated useful
lives of the real estate. Costs capitalized related to leasing activities are
included with other assets and are amortized over the lease term. ProLogis'
average lease term is between four and five years.
ProLogis capitalizes interest costs incurred during the land development or
construction period of qualifying projects.
Unconsolidated Entities
ProLogis' investments in certain entities are accounted for under the
equity method. Accordingly, these investments are recognized at ProLogis' cost
as adjusted for ProLogis' proportionate share of the earnings or losses of the
companies, distributions received and other basis adjustments, as appropriate.
ProLogis' proportionate share of the earnings or losses of these companies is
recognized in income. See Note 4.
Cash and Cash Equivalents
ProLogis considers all cash on hand, demand deposits with financial
institutions and short-term, highly liquid investments with original maturities
of three months or less to be cash equivalents.
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68
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Costs of Raising Capital
Costs incurred in connection with the issuance of shares are deducted from
shareholders' equity. Costs incurred in connection with the incurrence or
renewal of debt are capitalized, included with other assets, and amortized over
the term of the related loan or the renewal term.
Minority Interest
Minority interest is carried at cost and represents limited partners'
interests in various real estate partnerships controlled by ProLogis. Certain
minority interests are carried at the pro rata share of the estimated fair value
of the real estate contributed as of the acquisition dates, as adjusted for
subsequent earnings, contributions and distributions. Common Shares issued upon
exchange of limited partnership units are accounted for at the cost of the
minority interest surrendered.
Financial Instruments
In the normal course of business, ProLogis uses certain derivative
financial instruments for the purpose of foreign currency exchange rate and
interest rate risk management. To qualify for hedge accounting, the derivative
instruments used for risk management purposes must effectively reduce the risk
exposure that they are designed to hedge. For instruments associated with the
hedge of anticipated transactions, hedge effectiveness criteria also require
that the occurrence of the underlying transactions be probable. Instruments
meeting these hedging criteria are formally designated as hedges at the
inception of the contract. Those risk management instruments not meeting these
criteria are accounted for at fair value with changes in fair value recognized
immediately in net income. See Note 16.
In assessing the fair value of its financial instruments, both derivative
and non-derivative, ProLogis uses a variety of methods and assumptions that are
based on market conditions and risks existing at each balance sheet date.
Primarily, ProLogis uses quoted market prices or quotes from brokers or dealers
for the same or similar instruments. These values represent a general
approximation of possible value and may never actually be realized. See Note 16.
ProLogis adopted SFAS No. 133, "Accounting for Derivative Instruments and
for Hedging Activities," as amended, on January 1, 2001. SFAS No. 133 provides
comprehensive guidelines for the recognition and measurement of derivatives and
hedging activities and, specifically, requires all derivatives to be recorded on
the balance sheet at fair value as an asset or liability, with an offset to
accumulated other comprehensive income or income. As discussed in Note 16,
ProLogis' only derivative financial instruments, the foreign currency put option
contracts, were marked to market through income as of December 31, 2000. These
contracts also do not qualify for hedge accounting treatment under SFAS No. 133,
therefore, ProLogis will continue to mark these contracts to market through
income in 2001. ProLogis' unconsolidated entities also adopted SFAS No. 133 on
January 1, 2001. The effect to ProLogis of their adoption of SFAS No. 133 was
immaterial as these entities utilize derivative financial instruments on a
limited basis.
Foreign Currency Exchange Gains or Losses
ProLogis' consolidated subsidiaries whose functional currency is not the
U.S. dollar translate their financial statements into U.S. dollars. Assets and
liabilities are translated at the exchange rate in effect as of the financial
statement date. Income statement accounts are translated using the average
exchange rate for the period. Income statement accounts that represent
significant, nonrecurring transactions are translated at the rate in effect as
of the date of the transaction. Gains and losses resulting from the translation
are included in accumulated other comprehensive income as a separate component
of shareholders' equity. ProLogis and its foreign subsidiaries have certain
transactions denominated in currencies other than their functional currency. In
these instances, nonmonetary assets and liabilities are reflected at the
historical exchange rate, monetary assets and liabilities are
66
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
remeasured at the exchange rate in effect at the end of the period, and income
statement accounts are remeasured at the average exchange rate for the period.
Gains and losses from remeasurement are included in ProLogis' results of
operations. In addition, gains or losses are recorded in the income statement
when a transaction with a third party, denominated in a currency other than the
functional currency, is settled and the functional currency cash flows realized
are more or less than expected based upon the exchange rate in effect when the
transaction was initiated.
The net foreign currency exchange gains and losses recognized in ProLogis'
results of operations were as follows for the periods indicated (in thousands of
U.S. dollars):
YEAR ENDED DECEMBER 31,
----------------------------
2000 1999 1998
-------- -------- ------
Gains (losses) from the remeasurement of third party
debt and remeasurement and settlement of intercompany
debt, net............................................. $(18,762) $(16,549) $3,227
Mark to market losses on foreign currency put option
contracts(1).......................................... (854) (47) --
Gains (losses) from the settlement of foreign currency
put option contracts, net............................. 1,481 (45) --
Other gains (losses), net............................... 208 (177) (289)
-------- -------- ------
$(17,927) $(16,818) $2,938
======== ======== ======
- ---------------
(1) ProLogis entered into foreign currency put option contracts related to its
operations in Europe for 2000 and 1999. These put option contracts do not
qualify for hedge accounting treatment; therefore, ProLogis marks these
contracts to market as of the end of the applicable accounting period. Upon
settlement, the mark to market adjustments are reversed and the total
realized gain or loss is recognized. See Note 16.
Revenue Recognition
ProLogis leases its operating facilities under operating leases and
recognizes the total lease payments provided for under the leases on a
straight-line basis over the lease term. A provision for possible loss is made
when collection of receivables is considered doubtful.
Gains or losses on the disposition of real estate are recorded when the
recognition criteria set forth under GAAP have been met, generally at the time
title is transferred and ProLogis has no future obligations under the contract.
Rental Expenses
Rental expenses include costs of on-site and property management personnel,
utilities, repairs and maintenance, property insurance and real estate taxes,
net of amounts recovered from tenants under the terms of the respective leases.
Stock-Based Compensation
ProLogis adopted SFAS No. 123, "Accounting for Stock-Based Compensation,"
which allows ProLogis to continue to account for its various stock-based
compensation plans using Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations. Under
APB No. 25, if the exercise price of the stock options issued equals or exceeds
the market price of the underlying stock on the date of grant, no compensation
expense is recognized. Certain pro forma earnings per share disclosures required
by SFAS No. 123 are presented in Note 13.
67
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Cost of Start-Up Activities
Statement of Position ("SOP") 98-5 "Reporting on the Costs of Start-Up
Activities," which requires that costs associated with organization,
pre-opening, and start-up activities be expensed as incurred was adopted by
ProLogis on January 1, 1999. Through December 31, 1998, ProLogis capitalized
costs associated with start-up activities and amortized such costs over an
appropriate period, generally five years. ProLogis expensed all unamortized
organization and start-up costs, approximating $1.4 million, as a cumulative
effect of a change in accounting principle as of January 1, 1999. Subsequent to
that date, such costs incurred have been expensed.
3. REAL ESTATE
Real Estate Investments
Real estate investments consisting of income producing industrial
distribution facilities, facilities under development and land held for future
development, at cost, are summarized as follows (in thousands):
DECEMBER 31,
---------------------------
2000 1999
---------- ----------
Operating facilities:
Improved land.......................................... $ 648,950(1) $ 736,605(1)
Buildings and improvements............................. 3,619,543(1) 3,871,396(1)
---------- ----------
4,268,493 4,608,001
---------- ----------
Facilities under development (including cost of land).... 186,020(2)(3) 186,169(2)
Land held for development................................ 187,405(4) 163,696(4)
Capitalized preacquisition costs......................... 47,574(5) 17,085(5)
---------- ----------
Total real estate.............................. 4,689,492 4,974,951
Less accumulated depreciation............................ 476,982 366,703
---------- ----------
Net real estate................................ $4,212,510 $4,608,248(6)
========== ==========
- ---------------
(1) As of December 31, 2000 and December 31, 1999, ProLogis had 1,244 and 1,328
operating facilities, respectively, consisting of 126,275,000 and
133,689,000 square feet, respectively.
(2) Facilities under development consist of 41 buildings aggregating 8,711,000
square feet as of December 31, 2000 and 51 buildings aggregating 10,721,000
square feet as of December 31, 1999.
(3) In addition to the December 31, 2000 construction payable of $40.9 million,
ProLogis had unfunded commitments on its contracts for facilities under
construction totaling $169.2 million.
(4) Land held for future development consisted of 2,047 acres as of December 31,
2000 and 1,798 acres as of December 31, 1999.
(5) Capitalized preacquisition costs include $32.5 million and $6.3 million of
funds on deposit with title companies as of December 31, 2000 and December
31, 1999, respectively.
(6) On January 7, 2000, ProLogis contributed 50.1% of the common stock of one of
its wholly owned European entities, ProLogis European Properties S.a.r.l. to
ProLogis European Properties Fund for an equity interest. ProLogis European
Properties S.a.r.l. owned real estate with a net book value of $334.9
million as of December 31, 1999. ProLogis contributed the remaining 49.9% of
the common stock to ProLogis European Properties Fund on January 7, 2001 for
an additional equity interest. See Note 4.
ProLogis' operating facilities, facilities under development and land held
for future development are located in North America (the United States and
Mexico) and seven countries in Europe. No individual market represents more than
10% of ProLogis' real estate assets.
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Operating Lease Agreements
ProLogis leases its facilities to customers under agreements, which are
classified as operating leases. The leases generally provide for payment of all
or a portion of utilities, property taxes and insurance by the tenant. As of
December 31, 2000, minimum lease payments on leases with lease periods greater
than one year are as follows (in thousands):
2001..................................................... $ 435,093
2002..................................................... 360,759
2003..................................................... 276,559
2004..................................................... 200,510
2005..................................................... 137,800
2006 and thereafter...................................... 323,467
----------
$1,734,188
==========
ProLogis' largest customer (based on rental income) accounted for 1.5% of
ProLogis' rental income (on an annualized basis) for the year ended December 31,
2000. The annualized base rent for ProLogis' 25 largest customers (based on
rental income) accounted for 13.2% of ProLogis' rental income (on an annualized
basis) for the year ended December 31, 2000.
4. UNCONSOLIDATED ENTITIES:
Investments In and Advances To Unconsolidated Entities
Investments in and advances to unconsolidated entities are as follows (in
thousands):
DECEMBER 31,
---------------------
2000 1999
---------- --------
Insight(1).................................................. $ 2,470 $ 2,442
ProLogis Logistics:
Investment(2)............................................. 7,163 11,549
Notes receivable.......................................... 162,856 135,090
Mortgage notes receivable................................. 24,082 23,706
Accrued interest and other receivables.................... 36,952 22,262
---------- --------
231,053 192,607
---------- --------
Frigoscandia S.A.:
Investment(2)............................................. (50,761) (17,396)
Notes receivable.......................................... 208,945 209,314
Accrued interest and other receivables.................... 33,797 22,090
---------- --------
191,981 214,008
---------- --------
Kingspark S.A.:
Investment(2)............................................. 28,829 23,584
Notes receivable.......................................... 409,440 197,611
Mortgage notes receivable................................. 103,106 140,668
Accrued interest and other receivables.................... 29,207 19,908
---------- --------
570,582 381,771
---------- --------
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31,
---------------------
2000 1999
---------- --------
ProLogis California:
Investment(3)............................................. 131,116 121,325
Other receivables......................................... 1,127 3,235
---------- --------
132,243 124,560
---------- --------
ProLogis European Properties Fund:
Investment(4)............................................. 145,850 32,800
Other receivables (payables).............................. 2,088 (7,824)
---------- --------
147,938 24,976
---------- --------
ProLogis European Properties S.a.r.l.(5).................... 84,767 --
ProLogis North American Properties Fund I:
Investment(6)............................................. 9,778 --
Other receivables......................................... 591 --
---------- --------
10,369 --
---------- --------
ProLogis Principal:
Investment(7)............................................. 71
Note receivable........................................... 13,250 --
Accrued interest and other receivables.................... 87 --
---------- --------
13,408 --
---------- --------
ProLogis Equipment Services (2)(8).......................... 450 --
GoProLogis(9)............................................... 56,315 --
ProLogis PhatPipe (10):
Investment................................................ 11,542 --
Other receivables......................................... 30 --
---------- --------
11,572 --
---------- --------
Total............................................. $1,453,148 $940,364
========== ========
- ---------------
(1) Investment represents ProLogis Development Services' investment in the
common stock of Insight, Inc. ("Insight"), a privately owned logistics
optimization consulting company, as adjusted for ProLogis Development
Services' share of Insight's earnings or loss. ProLogis Development
Services had a 33.3% ownership interest in Insight as of December 31, 2000
and 1999.
(2) Investment represents ProLogis' investment in the preferred stock of the
respective companies including acquisition costs, as adjusted for ProLogis'
share of each company's earnings or loss and cumulative translation
adjustments, as appropriate.
(3) Investment represents ProLogis' equity investment in ProLogis California I
LLC ("ProLogis California"), a limited liability company that began
operations on August 26, 1999, including acquisition costs, as adjusted for
ProLogis' share of the earnings or loss of ProLogis California and for the
portion of the gain from the disposition of ProLogis' properties to
ProLogis California that does not qualify for income recognition due to
ProLogis' continuing ownership in ProLogis California. ProLogis had a 50%
ownership interest in ProLogis California as of December 31, 2000 and 1999.
70
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) Investment represents ProLogis' equity investment in ProLogis European
Properties Fund which began operations on September 23, 1999, including
acquisition costs, as adjusted for ProLogis' share of the earnings or loss
of ProLogis European Properties Fund, the portion of the gain from the
disposition of ProLogis' facilities to ProLogis European Properties Fund
that does not qualify for income recognition due to ProLogis' continuing
ownership in ProLogis European Properties Fund and cumulative translation
account adjustments, as appropriate. ProLogis' ownership interest in
ProLogis European Properties Fund was 34.4% and 19.7% as of December 31,
2000 and 1999, respectively.
(5) Investment represents ProLogis' investment in 49.9% of the common stock of
ProLogis European Properties S.a.r.l., a Luxembourg company, as adjusted
for ProLogis' share of the earnings or loss of ProLogis European Properties
S.a.r.l. Prior to January 7, 2000, ProLogis owned 100% of the common stock
of ProLogis European Properties S.a.r.l. and the accounts of this entity
were consolidated in ProLogis' financial statements along with ProLogis'
other majority owned and controlled subsidiaries and partnerships. On
January 7, 2000, ProLogis contributed 50.1% of the common stock to ProLogis
European Properties Fund in exchange for an equity interest. ProLogis
contributed the remaining 49.9% of the common stock of ProLogis European
Properties S.a.r.l. to ProLogis European Properties Fund on January 7, 2001
in exchange for an additional equity interest. ProLogis' ownership interest
in ProLogis European Properties Fund increased to 45.6% on January 7, 2001
as a result of this transaction.
(6) Investment represents ProLogis' and ProLogis Development Services' equity
investment in ProLogis North American Properties Fund I LLC, a limited
liability company that began operations on June 30, 2000, including
acquisition costs, as adjusted for ProLogis' and ProLogis Development
Services' share of the earnings or loss of ProLogis North American
Properties Fund I and the portion of the gain from the disposition of
ProLogis' and ProLogis Development Services' facilities to ProLogis North
American Properties Fund I that does not qualify for income recognition due
to ProLogis' and ProLogis Development Services' continuing ownership in
ProLogis North American Properties Fund I. On a combined basis, ProLogis
and ProLogis Development Services had a 20.0% ownership interest in
ProLogis North American Properties Fund I as of December 31, 2000.
(7) Investment represents ProLogis' equity investment in ProLogis Iowa I LLC
("ProLogis Principal"), a limited liability company that began operations
on June 30, 2000, including acquisition costs, as adjusted for ProLogis'
share of the earnings or loss of ProLogis Principal and the portion of the
gain from the disposition of ProLogis' facilities to ProLogis Principal
that does not quality for income recognition due to ProLogis' continuing
ownership in ProLogis Principal. ProLogis had a 20.0% ownership interest in
ProLogis Principal as of December 31, 2000.
(8) Investment represents ProLogis Development Services' equity investment in
ProLogis Equipment Services LLC, a limited liability company whose other
member is a subsidiary of Dana Commercial Credit Corporation, as adjusted
for ProLogis Development Services' share of the earnings or loss of
ProLogis Equipment Services. ProLogis Equipment Services began operations
on April 26, 2000 for the purpose of acquiring, leasing and selling
material handling equipment and providing asset management services for
such equipment. ProLogis Development Services had a 50.0% ownership
interest in ProLogis Equipment Services as of December 31, 2000.
(9) Investment represents ProLogis' investment in GoProLogis Incorporated
("GoProLogis") which has invested $25.0 million in the non-cumulative
preferred stock of Vizional Technologies, Inc. (formerly GoWarehouse.com,
Inc.) ("Vizional Technologies"), a provider of integrated global logistics
network technology services. This investment was made on July 21, 2000. In
addition, investment includes $30.4 million of non-cumulative preferred
stock of Vizional Technologies received by GoProLogis under a license
agreement for the non-exclusive use of the ProLogis Operating System(TM)
over a five-year period and $0.9 million of other costs associated with
this investment. ProLogis accounts for its investment in GoProLogis on the
equity method. GoProLogis did not receive any dividends from its preferred
stock investment in Vizional Technologies in 2000. As of December 31, 2000,
ProLogis had deferred $27.7 mil-
71
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
lion of income related to this agreement. ProLogis had a 98% ownership
interest in GoProLogis as of December 31, 2000.
(10) Investment represents ProLogis' investment in ProLogis Broadband (1)
Incorporated ("ProLogis PhatPipe") which has invested $3.5 million in the
non-cumulative preferred stock of PhatPipe, Inc. ("PhatPipe"), a real
estate technology company. This investment was made on September 20, 2000.
ProLogis has committed to fund a total of $8.0 million in ProLogis PhatPipe
by March 31, 2001 pursuant to the terms of a stock purchase agreement. In
addition, investment includes $8.0 million of non-cumulative preferred
stock of PhatPipe received by ProLogis PhatPipe under a license agreement
for the non-exclusive use of the ProLogis Operating System(TM) over a
three-year period and $43,000 of other costs associated with this
investment. ProLogis accounts for its investment in ProLogis PhatPipe on
the equity method. ProLogis PhatPipe did not receive any dividends from its
preferred stock investment in PhatPipe in 2000. As of December 31, 2000,
ProLogis had deferred $7.3 million of income related to this agreement.
ProLogis had a 98% ownership interest in ProLogis PhatPipe as of December
31, 2000.
Income (Loss) from Unconsolidated Entities
ProLogis recognized income (loss) from its investments in unconsolidated
entities as follows (in thousands):
YEAR ENDED DECEMBER 31,
-----------------------------
2000 1999 1998
-------- -------- -------
Insight(1)............................................. $ 27 $ (77) $ 20
ProLogis Logistics(2).................................. 11,950 10,791 7,349
Frigoscandia S.A.(2)................................... (20,298) (4,364) (7,535)
Kingspark S.A. (2)(3).................................. 43,795 23,855 2,915
ProLogis California(4)................................. 13,178 3,917 --
ProLogis North American Properties Fund I(5)........... 1,806 -- --
ProLogis Principal(6).................................. 612 -- --
ProLogis Equipment Services............................ (130) -- --
GoProLogis(7).......................................... 2,693 -- --
ProLogis PhatPipe(7)................................... 741 -- --
ProLogis European Properties Fund(8)................... 15,648 820 --
ProLogis European Properties S.a.r.l................... 8,041 -- --
ProLogis Garonor(9).................................... -- (12,423) 6
-------- -------- -------
$ 78,063 $ 22,519 $ 2,755
======== ======== =======
- ---------------
(1) Prior to July 1, 1998, this investment was accounted for under the cost
method.
(2) Amounts represent 95% of the entity's earnings or loss. Includes interest
income on notes due to ProLogis.
(3) ProLogis acquired Kingspark Holding S.A. ("Kingspark S.A.") and its
consolidated entities on August 14, 1998. ProLogis' share of Kingspark
S.A.'s earnings or loss includes net gains from the disposition of
facilities developed by to ProLogis European Properties Fund of $4.3 million
in 2000 and $4.5 million in 1999. The gains are net of $2.5 million in 2000
and $1.1 million in 1999 that did not qualify for income recognition by
ProLogis due to ProLogis' continuing ownership in ProLogis European
Properties Fund.
(4) ProLogis California began operations on August 26, 1999. Amounts recognized
include management, leasing and development fees of $2.7 million for 2000
and $0.9 million for 1999.
(5) ProLogis North American Properties Fund was formed on June 30, 2000.
Includes management fees of $0.7 million.
(6) ProLogis Principal was formed on June 30, 2000. Includes management fees of
$52,000.
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) Represents license fees earned for the non-exclusive use of the ProLogis
Operating System(TM) under licensing agreements.
(8) ProLogis European Properties Fund began operations on September 23, 1999.
ProLogis recognizes its share of the earnings or loss of ProLogis European
Properties Fund based on its average ownership interest during the period.
Amounts recognized include management fees of $5.3 million in 2000 and $0.3
million in 1999. ProLogis began recognizing its share of the earnings or
loss of ProLogis European Properties S.a.r.l. under the equity method on
January 7, 2000.
(9) On December 29, 1998, ProLogis invested in Garonor Holdings S.A. ("Garonor
Holdings") by acquiring 100% of its preferred stock. Garonor Holdings, a
Luxembourg company, owned Garonor S.A. ("ProLogis Garonor"), a real estate
operating company in France. Security Capital Group Incorporated ("Security
Capital"), ProLogis' largest shareholder, owned 100% of the common stock of
Garonor Holdings. On June 29, 1999, ProLogis acquired the common stock of
Garonor Holdings from Security Capital, resulting in ProLogis owning all of
the outstanding common and preferred stock of Garonor Holdings. Accordingly,
as of that date the accounts of Garonor Holdings were consolidated in
ProLogis' financial statements along with ProLogis' other majority owned and
controlled subsidiaries and partnerships. The results of operations of
Garonor Holdings for the period from December 29, 1998 through June 29, 1999
are reflected by ProLogis under the equity method. ProLogis Garonor was
transferred to ProLogis European Properties S.a.r.l. prior to ProLogis
contributing 50.1% of the common stock of ProLogis European Properties
S.a.r.l. to ProLogis European Properties Fund on January 7, 2000 for an
equity interest. On January 7, 2001, ProLogis contributed the remaining
49.9% of the common stock of ProLogis European Properties S.a.r.l. to
ProLogis European Properties Fund for an additional equity interest.
ProLogis Logistics
ProLogis owns 100% of the preferred stock of ProLogis Logistics Services
Incorporated ("ProLogis Logistics"), representing substantially all of the
economic interests. From April 24, 1997 through June 12, 1998, ProLogis
Logistics owned between 60.0% and 77.1% of CS Integrated LLC ("CSI"), a
temperature- controlled distribution company operating in the United States.
ProLogis Logistics increased its ownership interest in CSI to 100% on June 12,
1998. As of December 31, 2000, CSI owned or operated under lease agreements
temperature-controlled distribution facilities aggregating 182.2 million cubic
feet (including 35.5 million cubic feet of dry distribution space located in
temperature-controlled facilities). Of the total, 6.3 million cubic feet was
under development.
As of December 31, 2000, ProLogis had invested $19.9 million in the
preferred stock of ProLogis Logistics and had the following notes and mortgage
notes receivable outstanding:
- $157.8 million unsecured note from ProLogis Logistics; interest at 8.0%
per annum; due on April 2002;
- $5.0 million net unsecured notes from CSI; interest at 10.4% per annum;
due March 2004; and
- $24.1 million net mortgage notes from CSI; secured by operating
properties of CSI; interest at 9.5% per annum; due March 2004.
The common stock of ProLogis Logistics was owned by an unrelated party
until January 2, 2001, when it was purchased by CSI/Frigo LLC, a limited
liability company whose members are ProLogis and K. Dane Brooksher, ProLogis'
chairman. CSI/Frigo LLC also acquired the common stock of Frigoscandia Holding
S.A. ("Frigoscandia S.A.") on that date. ProLogis owns 89% of the membership
interests and Mr. Brooksher owns 11% of the membership interests of CSI/Frigo
LLC. Mr. Brooksher is the managing member of CSI/Frigo LLC. Additionally,
ProLogis has a note agreement with CSI/Frigo LLC that allows ProLogis to
participate in its earnings such that ProLogis will recognize 95% of the
economic interests of CSI/Frigo LLC. This transaction did
73
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
not result in ProLogis acquiring control of ProLogis Logistics or Frigoscandia
S.A., therefore, ProLogis will continue to account for its investments in these
entities under the equity method.
On January 2, 2001, ProLogis Logistics borrowed $125.0 million under
ProLogis' U.S. dollar denominated unsecured line of credit agreement as a
designated subsidiary borrower under the agreement (see Note 5), the proceeds of
which were used to repay $125.0 million of the outstanding notes and accrued
interest due to ProLogis (including all of the amounts due from CSI). The
remaining amounts due to ProLogis were converted to preferred stock by ProLogis
as of January 2, 2001.
Frigoscandia S.A.
ProLogis owns 100% of the preferred stock of Frigoscandia S. A.,
representing substantially all of the economic interests. On January 16, 1998,
Frigoscandia S.A., a Luxembourg company, acquired Frigoscandia AB, a
temperature-controlled distribution company headquartered in Sweden by acquiring
Frigoscandia Holding AB. Frigoscandia Holding AB owns 100% of Frigoscandia AB.
As of December 31, 2000, Frigoscandia AB, which operates in 10 European
countries, owned or operated under lease agreements 187.7 million cubic feet of
temperature-controlled distribution facilities.
As of December 31, 2000, ProLogis had invested $22.6 million in the
preferred stock of Frigoscandia S.A. and had the following notes receivable
outstanding:
- 776.6 million Swedish krona (the currency equivalent of approximately
$81.5 million as of December 31, 2000) unsecured note from Frigoscandia
Holding AB; interest at 5.0% per annum; due on demand;
- 12.8 million euro (the currency equivalent of approximately $11.9 million
as of December 31, 2000) unsecured note from Frigoscandia Holding AB;
interest at 5.0% per annum; due on demand; and
- $115.5 million unsecured note from Frigoscandia S.A.; interest at 5.0%
per annum; $80.0 million due July 15, 2008 with the remainder due on
demand.
The common stock of Frigoscandia S.A. was owned by a limited liability
company in which unrelated parties owned 5% of the voting interests and Security
Capital owned 100% of the non-voting interests until January 2, 2001, when the
common stock was purchased by CSI/Frigo LLC.
As of December 31, 2000, Frigoscandia had a multi-currency revolving credit
agreement in the currency equivalent of 360.0 million Deutsche marks through a
consortium of 11 European banks. The currency equivalent of approximately $168.1
million was outstanding as of December 31, 2000 and ProLogis had guaranteed 25%
of the amount outstanding (ProLogis' guarantee was increased to 100% on March 1,
2001). The loan will be due on March 31, 2001 and bears interest at the relevant
index (LIBOR or Euribor based on the currency borrowed) plus 1.15%. Frigoscandia
is negotiating a new credit agreement that will provide for the currency
equivalent of 185.0 million euros of borrowing capacity with interest charged at
the relevant index plus 0.90%, to mature on December 31, 2001. ProLogis will
guarantee 100% of the borrowings under the new agreement.
Kingspark S.A.
ProLogis owns 100% of the preferred stock of Kingspark S.A., representing
substantially all of the economic interests. On August 14, 1998, Kingspark S.A.,
a Luxembourg company, acquired an industrial distribution facility development
company operating in the United Kingdom, Kingspark Group Holdings Limited
("ProLogis Kingspark") (collectively "the Kingspark entities"). As of December
31, 2000, the Kingspark entities had 1.6 million square feet of operating
facilities at an investment of $139.2 million and 1.5 million square feet of
facilities under development with a total budgeted cost of $136.2 million.
Additionally, as of December 31, 2000, the Kingspark entities owned 332 acres of
land and controlled 1,515 acres of land through
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
purchase options, letters of intent or contingent contracts. The land owned and
controlled by the Kingspark entities has the capacity for the future development
of approximately 28.3 million square feet of facilities.
As of December 31, 2000, ProLogis had invested $24.0 million in the
preferred stock of Kingspark S.A. and had the following notes and mortgage notes
receivable outstanding:
- 187.3 million pounds sterling (the currency equivalent of approximately
$280.1 million as of December 31, 2000) outstanding on an unsecured loan
facility from ProLogis to the Kingspark entities that provides for
borrowings of up to 200 million pounds sterling (the currency equivalent
of approximately $299.0 million as of December 31, 2000); interest at
8.0% per annum; due on demand;
- $129.3 million unsecured note from Kingspark S.A.; interest at 5.0% per
annum; due on demand;
- 42.0 million pound sterling (the currency equivalent of approximately
$62.9 million, as of December 31, 2000) mortgage note from ProLogis
Kingspark; secured by land parcels; interest at 8.0% per annum; due on
demand; and
- 26.9 million pound sterling (the currency equivalent of approximately
$40.2 million as of December 31, 2000) mortgage note from the Kingspark
entities; secured by land parcels and facilities under development;
interest at 7.0% per annum; due on demand.
The common stock of Kingspark S.A. was owned by a limited liability
company, in which unrelated third parties owned 100% of the voting interests and
Security Capital owned 100% of the non-voting interests. On January 2, 2001,
this common stock was acquired by a limited liability company. ProLogis owns 95%
of the membership interests and Mr. Brooksher owns 5% of the membership
interests of the company acquiring the common stock and Mr. Brooksher is its
managing member. This transaction resulted in ProLogis having control of
Kingspark S.A. Accordingly, the accounts of the Kingspark entities will be
consolidated in ProLogis' financial statements along with ProLogis' other
majority-owned and controlled subsidiaries and partnerships beginning on January
2, 2001.
ProLogis Kingspark has a line of credit agreement with a bank in the United
Kingdom. The line of credit agreement provides for borrowings of up to 15.0
million pounds sterling (the currency equivalent of approximately $22.4 million
as of December 31, 2000) and has been guaranteed by ProLogis. As of December 31,
2000, no borrowings were outstanding on the line of credit. However, as of
December 31, 2000, ProLogis Kingspark had the currency equivalent of
approximately $13.8 million of letters of credit outstanding that reduce the
amount of available borrowings on the line of credit.
ProLogis California I LLC
ProLogis California began operations on August 26, 1999 as a limited
liability company whose members are ProLogis and New York State Common
Retirement Fund ("NYSCRF"). As of December 31, 2000, ProLogis California owned
77 operating facilities aggregating 12.4 million square feet and had one 332,000
square foot facility under development (all of which were acquired from
ProLogis). All of ProLogis California's facilities are in the Los Angeles/Orange
County market. ProLogis had a 50.0% ownership interest in ProLogis California as
of December 31, 2000.
75
78
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ProLogis' total investment in ProLogis California as of December 31, 2000
consisted of (in millions):
Equity interest............................................ $169.1
Distributions ($13.9 million received in 2000)............. (23.6)
ProLogis' share of ProLogis California's earnings,
excluding fees earned.................................... 12.6
------
Subtotal......................................... 158.1
Adjustments to carrying value(1)........................... (28.5)
Other, including acquisition costs......................... 1.5
------
131.1
Other receivables.......................................... 1.1
------
Total............................................ $132.2
======
- ---------------
(1) Reflects the reduction in carrying value for the amount of net gain on the
disposition of properties to ProLogis California that does not qualify for
income recognition due to ProLogis' continuing ownership in ProLogis
California.
ProLogis European Properties Fund
ProLogis European Properties Fund was formed on September 16, 1999 and
began operations on September 23, 1999. As of December 31, 2000, ProLogis
European Properties Fund owned 104 operating facilities aggregating 14.4 million
square feet (including 60 facilities aggregating 6.6 million square feet owned
by ProLogis European Properties S.a.r.l.). All but 10 of the facilities,
aggregating 1.5 million square feet, owned by ProLogis European Properties Fund
were acquired from ProLogis or the Kingspark entities.
ProLogis' total investment in ProLogis European Properties Fund as of
December 31, 2000 consisted of (in millions of U.S. dollars):
Equity interest............................................ $155.4
Distributions (all were received in 2000).................. (4.0)
ProLogis' share of ProLogis European Properties Fund's
earnings, excluding fees earned.......................... 9.1
------
Subtotal......................................... 160.5
Adjustments to carrying value(1)........................... (14.9)
Other, net................................................. 0.3
------
145.9
Other receivables.......................................... 2.0
------
Total............................................ $147.9
======
- ---------------
(1) Reflects the reduction in carrying value for amount of net gain on the
disposition of facilities to ProLogis European Properties Fund that does not
qualify for income recognition due to ProLogis' continuing ownership in
ProLogis European Properties Fund.
On January 7, 2000, ProLogis contributed 50.1% of the common stock of one
of its wholly owned European entities, ProLogis European Properties S.a.r.l., to
ProLogis European Properties Fund in exchange for an equity interest. ProLogis
contributed the remaining 49.9% of the common stock to ProLogis European
Properties Fund on January 7, 2001 in exchange for an additional equity
interest. As of December 31, 2000, ProLogis had a 34.4% ownership interest in
ProLogis European Properties Fund (increased to 45.6% as of January 7, 2001).
76
79
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Third parties (19 institutional investors) have invested 325.6 million
euros (the currency equivalent of approximately $302.9 million as of December
31, 2000) in ProLogis European Properties Fund and have committed to fund an
additional 734.7 million euros (the currency equivalent of approximately $683.4
million as of December 31, 2000) through 2002. ProLogis has also entered into a
subscription agreement to make additional capital contributions (excluding the
remaining 49.9% of the common stock of ProLogis European Properties S.a.r.l.) of
93.2 million euros (the currency equivalent of approximately $86.7 million as of
December 31, 2000).
ProLogis European Properties Fund intends to acquire additional stabilized
operating facilities from ProLogis, the Kingspark entities and unrelated
parties, including facilities to be developed by ProLogis and the Kingspark
entities in the future. Stabilized facilities have been defined for purposes of
ProLogis European Properties Fund as facilities that meet minimum leasing
criteria and minimum net operating income yields, as defined and established by
agreement for each country. ProLogis European Properties Fund has the right to
refuse to acquire facilities that ProLogis and the Kingspark entities have
developed if they do not meet the established criteria. ProLogis has an
agreement to manage ProLogis European Properties Fund for a fee pursuant to a
20-year management agreement.
ProLogis European Properties Fund has a credit agreement with two
international banks for a multi-currency, secured revolving credit facility in
the currency equivalent of 500.0 million euros. The credit agreement matures in
October 2002. Borrowings can be denominated in sterling currencies or the euro,
and will bear interest at rates above the relevant index (LIBOR or Euribor). As
of December 31, 2000, 118.2 million euros and 62.6 million pound sterling were
outstanding on the line (the currency equivalent of approximately $205.5 million
as of December 31, 2000). Of the total borrowings, ProLogis has guaranteed the
currency equivalent of approximately $93.0 million as of December 31, 2000.
ProLogis European Properties S.a.r.l.
As of December 31, 2000, ProLogis owned 49.9% of the common stock of
ProLogis European Properties S.a.r.l. and recognized 49.9% of the earnings of
this entity under the equity method for the period from January 7, 2000 to
December 31, 2000. ProLogis European Properties Fund owned the remaining 50.1%
of the common stock of ProLogis European Properties S.a.r.l. and recognized
50.1% of the earnings of this entity in its income. ProLogis contributed its
49.9% ownership of ProLogis European Properties S.a.r.l. to ProLogis European
Properties Fund on January 7, 2001 in exchange for an additional equity
interest. Of the 6.6 million square feet of operating facilities owned by
ProLogis European Properties S.a.r.l. as of December 31, 2000, 6.1 million
square feet are located in France, 0.4 million square feet are located in Poland
and 0.1 million square feet are located in the Netherlands. Additionally,
ProLogis European Properties S.a.r.l. had the currency equivalent of
approximately $141.3 million of debt outstanding as of December 31, 2000
(including the currency equivalent of approximately $19.9 million that is
guaranteed by ProLogis).
ProLogis North American Properties Fund I
ProLogis North American Properties Fund I LLC began operations on June 30,
2000, as a limited liability company whose members are ProLogis, ProLogis
Development Services and the State Teachers Retirement Board of Ohio. ProLogis
North American Properties Fund I owned 33 operating facilities aggregating 8.0
million square feet as of December 31, 2000. ProLogis and ProLogis Development
Services had a combined 20.0% ownership interest in ProLogis North American
Properties Fund I as of December 31, 2000.
77
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ProLogis' and ProLogis Development Services' total investment in ProLogis
North American Properties Fund I as of December 31, 2000 consisted of (in
millions):
Equity interest............................................. $18.6
Distributions............................................... (0.4)
ProLogis' share of ProLogis North American Properties Fund's
earnings, excluding fees earned........................... 0.3
Adjustments to carrying value(1)............................ (9.1)
Other, net.................................................. .4
-----
9.8
Other receivables........................................... 0.6
-----
Total............................................. $10.4
=====
- ---------------
(1) Reflects the reduction in carrying value for amount of net gain on the
disposition of facilities to ProLogis North American Properties Fund I that
does not qualify for income recognition due to ProLogis' and ProLogis
Development Services' continuing ownership in ProLogis North American
Properties Fund I.
ProLogis North American Properties Fund I acquired three stabilized
operating facilities from ProLogis in January 2001 in exchange for an additional
equity interest, bringing the combined ownership interest to 41.3%. ProLogis has
an agreement to manage ProLogis North American Properties Fund I for a fee for a
10-year period, unless terminated at an earlier date as provided under the terms
of the agreement.
ProLogis Principal
ProLogis Principal began operations on June 30, 2000, as a limited
liability company whose members are ProLogis and Principal Financial Group.
ProLogis Principal owned three operating facilities acquired from ProLogis
aggregating 440,000 square feet as of December 31, 2000. As of December 31,
2000, ProLogis has a $13.2 million note receivable from ProLogis Principal that
earns interest at 8.25% per annum and is due March 31, 2001. ProLogis has an
agreement to manage ProLogis Principal's operating facilities for a fee pursuant
to a four-year agreement. ProLogis had a 20.0% ownership interest in ProLogis
Principal as of December 31, 2000.
ProLogis' total investment in ProLogis Principal as of December 31, 2000
consisted of (in millions):
Equity interest............................................. $ 0.6
Adjustments to carrying value(1)............................ (0.4)
-----
0.2
Note receivable............................................. 13.2
-----
Total............................................. $13.4
=====
- ---------------
(1) Reflects the reduction in carrying value for amount of net gain on the
disposition of facilities to ProLogis Principal that does not qualify for
income recognition due to ProLogis' continuing ownership in ProLogis
Principal.
78
81
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Summarized Financial Information
Summarized financial information for ProLogis' unconsolidated entities as
of and for the year ended December 31, 2000 is presented below (in millions of
U.S. dollars). The information presented is for the entire entity.
PROLOGIS PROLOGIS NORTH
PROLOGIS EUROPEAN AMERICAN
LOGISTICS FRIGOSCANDIA KINGSPARK PROLOGIS PROPERTIES PROPERTIES PROLOGIS
(1) S.A.(1) S.A.(1) CALIFORNIA(2) FUND(3) FUND I(4) PRINCIPAL(5)
--------- ------------ --------- ------------- ---------- -------------- ------------
Total assets.................. $376.6 $508.5 $636.3 $590.5 $906.9 $383.1 $16.3
Total liabilities(6).......... $368.5 $566.1 $598.7 $274.3 $412.0 $290.9 $13.7
Minority interest............. $ -- $ 0.4 $ -- $ -- $ 84.8 $ -- $ --
Equity........................ $ 8.1 $(58.0) $ 37.6 $316.2 $410.1 $ 92.2 $ 2.6
Revenues...................... $331.4 $382.9 $ 46.4(7) $ 63.6 $ 69.6 $ 13.8 $ 1.1
Adjusted EBITDA(8)............ $ 33.5 $ 27.7 $ 43.1 $ 52.0 $ 51.6 $ 10.9 $ 0.7
Net earnings (loss)(9)........ $ (3.6) $(31.3)(10) $ 20.0(11) $ 19.8 $ 28.0(12) $ 1.5 $ --(13)
- ---------------
(1) ProLogis had a 95.0% economic interest in each entity as of December 31,
2000.
(2) ProLogis had a 50.0% ownership interest as of December 31, 2000.
(3) ProLogis had a 34.4% ownership interest as of December 31, 2000. ProLogis
European Properties S.a.r.l. is consolidated with ProLogis European
Properties Fund. Minority interest represents ProLogis' 49.9% investment in
the common stock of ProLogis European Properties S.a.r.l.
(4) ProLogis and ProLogis Development Services had a combined 20.0% ownership
interest as of December 31, 2000. ProLogis North American Properties Fund I
was formed on June 30, 2000.
(5) ProLogis had a 20.0% ownership interest as of December 31, 2000. ProLogis
Principal was formed on June 30, 2000.
(6) Includes amounts due to ProLogis of $223.9 million from ProLogis Logistics,
$242.7 million from Frigoscandia S.A., $541.8 million from Kingspark S.A.,
$1.1 million from ProLogis California, $2.1 million from ProLogis European
Properties Fund, $0.6 million from ProLogis North American Properties Fund
I and $13.3 million from ProLogis Principal: and includes loans from third
parties (including accrued interest) of $91.4 million for ProLogis
Logistics, $185.4 million for Frigoscandia S.A., $262.9 million for
ProLogis California, $359.4 million for ProLogis European Properties Fund
and $233.8 million for ProLogis North American Properties Fund I.
(7) Includes $32.3 million of gains related to the disposition of facilities,
including a gain of $4.7 million from the disposition of facilities to
ProLogis European Properties Fund.
(8) Adjusted EBITDA represents earnings from operations before interest
expense, interest income, current and deferred income taxes, depreciation,
amortization, gains and losses on disposition of non-CDFS business segment
assets (see Note 10); foreign currency exchange gains and losses resulting
from the remeasurement (at current foreign currency exchange rates) of
third party and intercompany debt and mark to market adjustments related to
derivative financial instruments utilized to manage foreign currency risks.
(9) ProLogis' share of the net earnings (loss) of the respective entities and
interest income on notes and mortgage notes due to ProLogis are recognized
in the Consolidated Statements of Earnings as "Income from unconsolidated
entities." The net earnings (loss) of each entity includes interest expense
on amounts due to ProLogis, as applicable.
(10) Includes net foreign currency exchange losses of $0.9 million.
(11) Includes net foreign currency exchange gains of $0.4 million.
(12) Includes net foreign currency exchange gains of $7.1 million.
(13) Net earnings for the year ended December 31, 2000 was $22,000.
79
82
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. BORROWINGS:
Unsecured Lines of Credit
ProLogis has an unsecured credit agreement with Bank of America, N.A.
("Bank of America"), Commerzbank AG and Chase Bank of Texas, National
Association, as agents for a bank group that provides for a $475.0 million
unsecured revolving line of credit. The credit agreement allows ProLogis to
increase the available commitment by $25.0 million to a total of $500.0 million.
ProLogis Logistics and ProLogis Development Services may also borrow under the
credit agreement with such borrowings guaranteed by ProLogis. ProLogis'
borrowings under the agreement generally bear interest at LIBOR plus an
applicable margin (based upon ProLogis' current senior unsecured debt ratings).
ProLogis' borrowings in 2000 were primarily at the 30-day LIBOR rate plus 0.75%
(7.31% as of December 31, 2000). Additionally, the credit agreement provides for
a facility fee of 0.15% per annum. The credit agreement matures on June 6, 2003
and may be extended for an additional year at ProLogis' option. As of December
31, 2000, ProLogis had $184.7 million of borrowings outstanding on the unsecured
line of credit and ProLogis was in compliance with all covenants contained in
the credit agreement. As of December 31, 2000, ProLogis Logistics and ProLogis
Development Services had not borrowed under the credit agreement.
In addition, ProLogis has a $55.0 million unsecured discretionary line of
credit with Bank of America that matures on June 6, 2001. Of the total, ProLogis
can borrow the currency equivalent of $30.0 million in certain foreign
currencies with U.S. dollar borrowings limited to $25.0 million. By agreement
between ProLogis and Bank of America, the rate of interest on and the maturity
date of each advance are determined at the time of each advance. There were
$25.0 million of borrowings outstanding on the discretionary line of credit as
of December 31, 2000.
ProLogis has a credit agreement that provides for a 325.0 million euro
multi-currency, unsecured revolving line of credit (the currency equivalent of
approximately $302.3 million as of December 31, 2000) through a group of 17
banks, on whose behalf ABN AMRO Bank, N.V. acts as agent. Borrowings under the
line of credit bear interest at Euribor plus 0.75% or Sterling LIBOR plus 0.75%
(borrowings outstanding as of December 31, 2000 were at a weighted average
interest rate of 6.23%). The credit agreement provides for an unused commitment
fee of 0.375% per annum. As of December 31, 2000, the currency equivalent of
approximately $230.1 million of borrowings were outstanding on the line of
credit and ProLogis was in compliance with all covenants contained in the credit
agreement.
A summary of ProLogis' unsecured lines of credit borrowings is as follows
(dollar amounts in thousands):
YEAR ENDED DECEMBER 31,
--------------------------------
2000 1999 1998
-------- -------- --------
Weighted average daily interest rate............... 6.33% 6.13% 6.46%
Borrowings outstanding as of December 31........... $439,822 $ 98,700 $344,300
Weighted average daily borrowings.................. $251,528 $232,821 $174,901
Maximum borrowings outstanding at any month end.... $439,822 $440,100 $344,300
Total borrowing capacity on all lines of credit as
of December 31................................... $832,317 $902,340 $375,000
80
83
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Senior Unsecured Notes
ProLogis has issued senior unsecured notes and medium-term unsecured notes
that bear interest at fixed rates, payable semi-annually (the "Notes"). The
Notes outstanding as of December 31, 2000 are summarized as follows (in
thousands of dollars):
PRINCIPAL
ORIGINAL COUPON MATURITY PRINCIPAL PAYMENT
DATE OF ISSUANCE PRINCIPAL RATE DATE BALANCE(1) REQUIREMENT
- ---------------- ---------- ------ -------- ---------- -----------
May 16, 1995................... $ 17,500 7.300% 05/15/01 $ 17,492 (2)
May 17, 1996................... 25,000 7.250% 05/15/02 24,994 (3)
October 9, 1998................ 125,000 7.000% 10/01/03 125,000 (2)
April 26, 1999................. 250,000 6.700% 04/15/04 249,694 (2)
July 20, 1998.................. 250,000 7.050% 07/15/06 249,622 (2)
November 20, 1997.............. 135,000 7.250% 11/20/07 134,116 (2)
April 26, 1999................. 250,000 7.100% 04/15/08 249,940 (2)
May 17, 1996................... 100,000 7.950% 05/15/08 99,889 (4)
March 2, 1995.................. 150,000 8.720% 03/01/09 150,000 (5)
May 16, 1995................... 75,000 7.875% 05/15/09 74,789 (6)
November 20, 1997.............. 25,000 7.300% 11/20/09 24,787 (2)
February 4, 1997............... 100,000 7.810% 02/01/15 100,000 (7)
March 2, 1995.................. 50,000 9.340% 03/01/15 50,000 (8)
May 17, 1996................... 50,000 8.650% 05/15/16 49,875 (9)
July 11, 1997.................. 100,000 7.625% 07/01/17 99,791 (2)
---------- ----------
$1,702,500 $1,699,989
========== ==========
- ---------------
(1) Amounts are net of applicable unamortized original issue discount.
(2) Principal due at maturity.
(3) Annual principal payments of $12.5 million from May 15, 2001 to May 15,
2002.
(4) Annual principal payments of $25.0 million from May 15, 2005 to May 15,
2008.
(5) Annual principal payments of $18.75 million from March 1, 2002 to March 1,
2009.
(6) Annual principal payments of $9.375 million from May 15, 2002 to May 15,
2009.
(7) Annual principal payments ranging from $10.0 million to $20.0 million from
February 1, 2010 to February 1, 2015.
(8) Annual principal payments ranging from $5.0 million to $12.5 million from
March 1, 2010 to March 1, 2015.
(9) Annual principal payments ranging from $5.0 million to $12.5 million from
May 15, 2010 to May 15, 2016.
The Notes rank equally with all other unsecured and unsubordinated
indebtedness of ProLogis from time to time outstanding. The Notes are redeemable
at any time at ProLogis' option. Such redemption and other terms are governed by
the provisions of an indenture agreement or, with respect to the $160.0 million
of Notes issued on November 20, 1997, note purchase agreements. Under the terms
of the indenture agreement and note purchase agreements, ProLogis must meet
certain financial covenants and ProLogis was in compliance with all such
covenants as of December 31, 2000.
81
84
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Secured Debt
Secured debt as of December 31, 2000 consisted of the following (in
thousands):
BALLOON
PERIODIC PAYMENT
INTEREST MATURITY PAYMENT PRINCIPAL DUE AT
DESCRIPTION RATE(1) DATE DATE BALANCE MATURITY
- ----------- -------- -------- -------- --------- --------
Mortgage notes:
Rio Grande Industrial Center #1.... 8.875% 09/01/01 (2) $ 2,683 $ 2,544
Titusville Industrial Center #1.... 10.000 09/01/01 (2) 4,313 4,181
Prudential Insurance(3)............ 8.590 04/01/03 (2) 25,361 23,505
Sullivan 75 Distribution Center
#1.............................. 9.960 04/01/04 (2) 1,767 1,663
Charter American Mortgage(3)....... 8.750 08/01/04 (2) 6,927 5,818
West One Business Center #3........ 9.000 09/01/04 (2) 4,234 3,847
Raines Distribution Center......... 9.500 01/01/05 (2) 4,155 2,173
Prudential Insurance(3)(4)......... 6.850 04/01/05 (5) 52,532 48,850
Consulate Distribution Center
#300(4)......................... 6.970 02/01/06 (2) 3,660 3,585
Plano Distribution Center #7(4).... 7.020 04/15/06 (2) 3,707 3,015
Connecticut General Life
Insurance(3).................... 7.080 03/01/07 (2) 147,166 134,431
Vista Del Sol Industrial Center #1
& 2............................. 9.680 08/01/07 (6) 3,128 --
State Farm Insurance(3)(4)......... 7.100 11/01/08 (2) 15,317 13,065
Placid Street Distribution Center
#1(4)........................... 7.180 12/01/09 (2) 7,633 6,529
Earth City Industrial Center #4.... 8.500 07/01/10 (6) 2,029 --
GMAC Commercial Mortgage(3)........ 7.750 10/01/10 (6) 7,271 --
Executive Park Distribution Center
#3.............................. 8.190 03/01/11 (6) 993 --
Cameron Business Center #1(4)...... 7.230 07/01/11 (2) 6,037 4,526
Platte Valley Industrial Center
#9.............................. 8.100 04/01/17 (6) 3,159 --
Platte Valley Industrial Center
#4.............................. 10.100 11/01/21 (6) 2,008 --
Morgan Guaranty Trust(3)........... 7.584 04/01/24 (7) 200,000 127,187
--------
$504,080
========
Assessment bonds:
City of Fremont.................... 7.000% 03/01/11 (6) $ 8,767 --
Various(8)......................... (8) (8) (6) 1,278 --
--------
$ 10,045
========
Securitized debt:
Tranche A.......................... 7.740% 02/01/04 (2) $ 15,998 $ 13,405
Tranche B.......................... 9.940 02/01/04 (2) 7,802 7,215
--------
$ 23,800
========
Total secured debt......... $537,925
========
- ---------------
(1) The weighted average interest rates for mortgage notes, assessment bonds and
securitized debt were 7.49%, 7.12% and 8.46%, respectively as of December
31, 2000. The total weighted average interest rate for ProLogis' secured
borrowings is 7.53%.
(2) Monthly amortization with a balloon payment due at maturity.
(3) Secured by various distribution facilities.
82
85
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(4) Mortgage note was assumed by ProLogis in connection with the merger with
Meridian. See Note 11. Under purchase accounting, the mortgage note was
recorded at its fair value. Accordingly, a premium or discount was
recognized, as applicable.
(5) Carrying value includes premium. Terms are interest only with stated
principal amount of $48.9 million due at maturity.
(6) Fully amortizing.
(7) Monthly interest only payments through May 2005, monthly principal and
interest payments from June 2005 to April 2024 with a balloon payment due at
maturity.
(8) Includes nine issues of assessment bonds with four municipalities. Interest
rates range from 5.50% per annum to 8.75% per annum. Maturity dates range
from August 2004 to September 2016.
Mortgage notes, assessment bonds and securitized debt are secured by real
estate with an aggregate undepreciated cost of $927.0 million, $236.3 million
and $61.3 million, respectively, as of December 31, 2000.
Other Unsecured Debt
As of December 31, 1999, ProLogis had an unsecured term loan in the amount
of 200.0 million French francs (the currency equivalent of approximately $30.9
million). This debt was held by ProLogis European Properties S.a.r.l. See Note
4.
Long-Term Debt Maturities
Approximate principal payments due on senior unsecured notes and secured
debt (mortgage notes, assessment bonds and securitized debt) during each of the
years in the five-year period ending December 31, 2005 and thereafter are as
follows (in thousands):
2001.................................................... $ 44,665
2002.................................................... 48,898
2003.................................................... 184,856
2004.................................................... 316,221
2005.................................................... 112,063
2006 and thereafter..................................... 1,533,722
----------
Total principal due........................... 2,240,425
Less: Original issue discount........................... (2,511)
----------
Total carrying value.......................... $2,237,914
==========
Interest Expense
For 2000, 1999 and 1998, interest expense was $172.2 million, $170.7
million and $77.7 million, respectively, which is net of capitalized interest of
$18.5 million, $16.0 million and $19.2 million, respectively. Amortization of
deferred loan costs included in interest expense was $4.6 million, $4.4 million
and $2.2 million for 2000, 1999 and 1998, respectively. The total interest paid
in cash on all outstanding debt was $178.4 million, $169.8 million and $83.2
million during 2000, 1999 and 1998, respectively.
6. MINORITY INTEREST:
Minority interest represents the limited partners' interests in real estate
partnerships controlled by ProLogis. With respect to each of the partnerships
either ProLogis or a subsidiary of ProLogis is the sole general partner with all
management powers over the business and affairs of the partnership. The limited
partners of each partnership generally do not have the right to participate in
or exercise management control over the business and
83
86
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
affairs of the partnership. With respect to each partnership the general partner
may not, without the written consent of all of the limited partners, take any
action that would prevent such partnership from conducting its business, possess
the property of the partnership, admit an additional partner or subject a
limited partner to the liability of a general partner.
As of December 31, 2000, ProLogis or a subsidiary of ProLogis is the
controlling general partner in five partnerships. In each of these partnerships,
the limited partners are entitled to exchange partnership units for Common
Shares. Additionally, the limited partners are entitled to receive preferential
cumulative quarterly distributions per unit equal to the quarterly distributions
in respect of Common Shares. The five partnerships as of December 31, 2000 are
as follows:
INVESTMENT IN LIMITED
FORMATION REAL ESTATE PROLOGIS' PARTNERSHIP UNITS
ENTITY DATE (IN MILLIONS) OWNERSHIP OUTSTANDING
- ------ --------- -------------- --------- -----------------
ProLogis Limited Partnership-I(1)... 1993 $211.0 68.70% 4,520,532(2)
ProLogis Limited Partnership-II..... 1994 $ 58.3 97.80% 90,213(2)
ProLogis Limited Partnership-III.... 1994 $ 52.0 86.39% 376,347(2)
ProLogis Limited
Partnership-IV(3)................. 1994 $103.9 98.50% 68,612(2)
Meridian Realty Partners Limited
Partnership....................... (4) $ 10.4 88.00% 29,712(5)
- ---------------
(1) These facilities cannot be sold, prior to the occurrence of certain events,
without the consent of the limited partners thereto, other than in
tax-deferred exchanges.
(2) Convertible into Common Shares on a one for one basis.
(3) ProLogis Limited Partnership-IV was formed through a cash contribution from
a wholly owned subsidiary of ProLogis, ProLogis-IV, Inc. and the
contribution of industrial distribution facilities from the limited partner.
ProLogis Limited Partnership-IV and ProLogis-IV, Inc. are legal entities
separate and distinct from ProLogis, its affiliates and each other, and each
has separate assets, liabilities, business functions and operations. The
sole assets of ProLogis-IV, Inc. are its general partner advances to and its
interest in ProLogis Limited Partnership-IV. As of December 31, 2000,
ProLogis Limited Partnership-IV had outstanding borrowings from ProLogis-IV,
Inc., of $0.4 million and ProLogis-IV, Inc. had outstanding borrowings from
ProLogis and its affiliates of $0.4 million.
(4) Acquired in merger with Meridian. See Note 11.
(5) Convertible into Common Shares on a 1.1 for one basis, plus $2.00.
For financial reporting purposes, the assets, liabilities, results of
operations and cash flows of each of the five partnerships are included in
ProLogis' consolidated financial statements, and the interests of the limited
partners are reflected as minority interest.
7. SHAREHOLDERS' EQUITY:
Shares Authorized
As of December 31, 2000, 275,000,000 shares were authorized. ProLogis'
Board of Trustees (the "Board") may increase the number of authorized shares and
may classify or reclassify any unissued shares of ProLogis stock from time to
time by setting or changing the preferences, conversion or other rights, voting
powers, restrictions, limitations as of distributions, qualifications and terms
or conditions of redemption of such shares.
84
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Preferred Shares
As of December 31, 2000, ProLogis had four series of cumulative redeemable
preferred shares of beneficial interest outstanding (Series A, C, D and E) and
one series of cumulative convertible redeemable preferred shares of beneficial
interest outstanding (Series B). The Series B preferred shares are convertible
at any time, unless previously redeemed, at the option of the holders thereof
into Common Shares at a conversion price of $19.50 per share (equivalent to a
conversion rate of 1.282 Common Shares for each Series B preferred share).
Holders of each series of preferred shares have, subject to certain
conditions, limited voting rights. The holders of the preferred shares are
entitled to receive cumulative preferential dividends based upon each series'
respective liquidation preference. Such dividends are payable quarterly in
arrears on the last day of March, June, September and December for all series of
preferred shares, with the exception of Series E, which are payable quarterly on
the last day of January, April, July and October, when, and if, declared by the
Board, out of funds legally available for payment of dividends. After the
respective redemption dates, each series can be redeemed for a cash redemption
price which (other than the portion consisting of accrued and unpaid dividends)
is payable solely out of the sales proceeds of other capital shares of ProLogis,
which may include shares of other series of preferred shares. With respect to
payment of dividends, each series of preferred shares ranks on parity with
ProLogis' other series of preferred shares.
ProLogis' preferred shares as of December 31, 2000 are summarized as
follows:
DIVIDEND
STATED EQUIVALENT BASED OPTIONAL
NUMBER OF SHARES LIQUIDATION DIVIDEND ON LIQUIDATION REDEMPTION
OUTSTANDING PREFERENCE RATE PREFERENCE DATE(1)
---------------- ----------- -------- ---------------- ----------
Series A Cumulative
Redeemable
Preferred Shares... 5,400,000 $25.00 9.40% $2.35 per share 06/21/00
Series B Cumulative
Convertible
Redeemable
Preferred
Shares(2).......... 6,256,100 $25.00 7.00% $1.75 per share 02/21/01(3)
Series C Cumulative
Redeemable
Preferred Shares... 2,000,000 $50.00 8.54% $4.27 per share 11/13/26
Series D Cumulative
Redeemable
Preferred Shares... 10,000,000 $25.00 7.92% $1.98 per share 04/13/03
Series E Cumulative
Redeemable
Preferred Shares... 2,000,000 $25.00 8.75% $2.19 per share 06/30/03
- ---------------
(1) After this date, the preferred shares can be redeemed at ProLogis' option.
(2) During 2000 and 1999, Series B preferred shares of 764,599 and 516,897,
respectively, were converted into 980,216 and 662,661 Common Shares,
respectively.
(3) ProLogis will redeem these shares on March 20, 2001.
Recent Developments
On January 11, 2001, ProLogis announced a Common Share repurchase program
under which it may repurchase up to $100.0 million of its Common Shares. The
Common Shares will be repurchased from time to time in the open market and in
privately negotiated transactions, depending on market prices and other
85
88
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
conditions. On February 12, 2001 ProLogis announced its call for redemption of
all outstanding Series B cumulative convertible redeemable preferred shares at a
price of $25.00 per share, plus $0.442 in accrued and unpaid dividends, for an
aggregate redemption price of $25.442 per preferred share. The redemption date
is March 20, 2001. On or prior to March 13, 2001, the Series B preferred shares
could be converted into Common Shares at a conversion rate of 1.282 Common
Shares for each Series B preferred share.
Issuance of Common Shares
During 2000, ProLogis generated net proceeds of $30.3 million from the
issuance of 1,479,000 Common Shares under its 1999 Dividend Reinvestment and
Share Purchase Plan and issuance of 163,000 Common Shares under long-term
compensation plans. See Note 13. In addition, ProLogis issued: (i) 602,000
Common Shares in connection with the acquisition agreement for the Kingspark
entities (see Note 4); (ii) 980,000 Common Shares upon conversion of 765,000
cumulative convertible redeemable Series B preferred shares; and (iii) 238,000
Common Shares to the holders of 216,000 convertible limited partnership units.
Shelf Registration
ProLogis has a shelf registration statement on file with the Securities and
Exchange Commission that allows ProLogis to issue securities in the form of debt
securities, preferred shares, Common Shares, rights to purchase Common Shares
and preferred share purchase rights on an as-needed basis. These $608.0 million
of shelf-registered securities are available for issuance, subject to ProLogis'
ability to effect an offering on satisfactory terms.
Ownership Restrictions and Significant Shareholder
For ProLogis to qualify as a REIT under the Code, not more than 50% in
value of its outstanding shares of stock may be owned by five or fewer
individuals at any time during the last half of ProLogis' taxable year.
Therefore, ProLogis' Declaration of Trust restricts beneficial ownership (or
ownership generally attributed to a person under the REIT tax rules) of
ProLogis' outstanding shares by a single person, or persons acting as a group,
to 9.8% of ProLogis' outstanding shares. This provision assists ProLogis in
protecting and preserving its REIT status and protects the interest of
shareholders in takeover transactions by preventing the acquisition of a
substantial block of shares.
Shares owned by a person or group of persons in excess of these limits are
subject to redemption by ProLogis. The provision does not apply where a majority
of the Board, in its sole and absolute discretion, waives such limit after
determining that the status of ProLogis as a REIT for federal income tax
purposes will not be jeopardized or the disqualification of ProLogis as a REIT
is advantageous to the shareholders.
Security Capital is exempt from the ownership restrictions described above.
Security Capital owned 30.2% the outstanding Common Shares as of December 31,
2000. For tax purposes, Security Capital's ownership is attributed to its
shareholders.
Dividend Reinvestment and Share Purchase Plan
In March 1995, ProLogis adopted a Dividend Reinvestment and Share Purchase
Plan (the "1995 Plan"), which commenced in April 1995. The 1995 Plan allowed
holders of Common Shares the opportunity to acquire additional Common Shares by
automatically reinvesting distributions. Holders of Common Shares who do not
participate in the 1995 Plan continue to receive distributions as declared. The
1995 Plan also allowed participating holders of Common Shares to purchase a
limited number of additional Common Shares by making optional cash payments,
without payment of any brokerage commission or service charge. Common Shares are
acquired pursuant to the 1995 Plan at a price equal to 98% of the market price
of such Common Shares, without payment of any brokerage commission or service
charge.
86
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The 1995 Plan was amended in June 1999 by the 1999 Dividend Reinvestment
and Share Purchase Plan (the "1999 Plan"). The primary change effective with the
1999 Plan allows persons who are not holders of Common Shares to participate in
the share purchase plan.
Shareholder Purchase Rights
On December 7, 1993, the Board declared a dividend of one preferred share
purchase right ("Right") for each outstanding Common Share to be distributed to
all holders of record of the Common Shares on December 31, 1993. Each Right
entitles the registered holder to purchase one-hundredth of a Participating
Preferred Share for an exercise price of $40.00 per one-hundredth of a
Participating Preferred Share, subject to adjustment as provided in the Rights
Agreement. The Rights will generally be exercisable only if a person or group
(other than certain affiliates of ProLogis) acquires 20% or more of the Common
Shares or announces a tender offer for 25% or more of the Common Shares. Under
certain circumstances, upon a shareholder acquisition of 20% or more of the
Common Shares (other than certain affiliates of ProLogis), each Right will
entitle the holder to purchase, at the Right's then-current exercise price, a
number of Common Shares having a market value of twice the Right's exercise
price. The acquisition of ProLogis pursuant to certain mergers or other business
transactions will entitle each holder of a Right to purchase, at the Right's
then-current exercise price, a number of the acquiring company's common shares
having a market value at that time equal to twice the Right's exercise price.
The Rights held by certain 20% shareholders will not be exercisable. The Rights
will expire on December 7, 2003, unless the expiration date of the Rights is
extended, and the Rights are subject to redemption at a price of $0.01 per Right
under certain circumstances.
8. DISTRIBUTIONS AND DIVIDENDS:
Common Distributions
ProLogis' annual distribution per Common Share was $1.34 in 2000, $1.30 in
1999 and $1.24 in 1998. For Federal income tax purposes, the following
summarizes the taxability of cash distributions paid on Common Shares in 1999
and 1998 and the estimated taxability for 2000:
YEAR ENDED DECEMBER 31,
------------------------
2000 1999 1998
------ ------ ------
Per Common Share:
Ordinary income........................................... $1.19 $0.84 $1.12
Capital gains............................................. 0.15 0.35 --
Return of capital......................................... -- 0.11 0.12
----- ----- -----
Total............................................. $1.34 $1.30 $1.24
===== ===== =====
The distribution level for 2001 was set at $1.38 per Common Share by the
Board in December 2000. Additionally, on December 15, 2000, ProLogis declared a
distribution of $0.345 per Common Share payable on February 23, 2001 to holders
of Common Shares on February 9, 2001.
87
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Preferred Dividends
The annual dividends per preferred share were as follows:
YEAR ENDED DECEMBER 31,
---------------------------
2000(1) 1999(2) 1998(3)
------- ------- -------
Series A Cumulative Redeemable Preferred Shares............. $2.35 $2.35 $2.35
Series B Cumulative Convertible Redeemable Preferred
Shares.................................................... 1.75 1.75 1.75
Series C Cumulative Redeemable Preferred Shares............. 4.27 4.27 4.27
Series D Cumulative Redeemable Preferred Shares............. 1.98 1.98 1.42(4)
Series E Cumulative Redeemable Preferred Shares............. 2.19 1.64(5) --
- ---------------
(1) For federal income tax purposes $2.08 of the Series A dividend, $1.55 of the
Series B dividend, $3.78 of the Series C dividend, $1.75 of the Series D
dividend and $1.94 of the Series E dividend are treated as ordinary income
to the holders. The remaining portion of each dividend represents capital
gains.
(2) For federal income tax purposes $1.65 of the Series A dividend, $1.23 of the
Series B dividend, $3.00 of the Series C dividend, $1.39 of the Series D
dividend and $1.15 of the Series E dividend are treated as ordinary income
to the holders. The remaining portion of each dividend represents capital
gains.
(3) For federal income tax purposes these dividends are treated as ordinary
income to the holders.
(4) For the period from date of issuance to December 31, 1998.
(5) For the period from date of issuance to December 31, 1999.
Pursuant to the terms of its preferred shares, ProLogis is restricted from
declaring or paying any distribution with respect to the Common Shares unless
all cumulative dividends with respect to the preferred shares have been paid and
sufficient funds have been set aside for dividends that have been declared for
the then-current dividend period with respect to the preferred shares.
ProLogis' tax return for the year ended December 31, 2000 has not been
filed. The taxability information for 2000 is based upon the best available
data. ProLogis' tax returns for prior years have not been examined by the
Internal Revenue Service. Consequently, the taxability of distributions and
dividends is subject to change.
9. EARNINGS PER COMMON SHARE:
A reconciliation of the denominator used to calculate basic earnings per
Common Share to the denominator used to calculate diluted earnings per Common
Share for the years indicated (in thousands, except per share amounts) is as
follows:
YEAR ENDED DECEMBER 31,
-----------------------------
2000 1999 1998
-------- -------- -------
Net earnings attributable to Common Shares............ $157,715 $123,999 $62,231
======== ======== =======
Weighted average Common Shares outstanding --
Basic............................................... 163,651 152,412 121,721
Incremental weighted effect of common stock
equivalents and contingently issuable shares (see
Note 13)............................................ 750 327 307
-------- -------- -------
Adjusted weighted average Common Shares outstanding --
Diluted............................................. 164,401 152,739 122,028
======== ======== =======
Basic and diluted per share net earnings attributable
to Common Shares.................................... $ 0.96 $ 0.81 $ 0.51
======== ======== =======
88
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
For the year ended December 31, 1999, basic and diluted per share net
earnings attributable to Common Shares before the cumulative effect of
accounting change were $0.82. The following convertible securities were not
included in the calculation of diluted net earnings per Common Share as the
effect, on an as-converted basis, was antidilutive (in thousands):
YEAR ENDED DECEMBER 31,
-------------------------
2000 1999 1998
------ ------ -------
Series B cumulative convertible redeemable preferred
shares.................................................... 8,417 9,221 10,055
===== ===== ======
Limited partnership units................................... 5,348 5,461 5,070
===== ===== ======
10. BUSINESS SEGMENTS:
ProLogis has three reportable business segments:
- Property operations represents the long-term ownership and leasing of
industrial distribution facilities in the United States, (portions of
which are owned through ProLogis California, ProLogis North American
Properties Fund I and ProLogis Principal -- See Note 4) Mexico and Europe
(portions of which were owned through Garonor Holding (see Note 4), a
subsidiary that was recognized under the equity method until June 29,
1999 and through ProLogis European Properties Fund in 2000 and 1999 and
ProLogis European Properties S.a.r.l. in 2000 -- See Note 4); each
operating facility is considered to be an individual operating segment
having similar economic characteristics which are combined within the
reportable segment based upon geographic location;
- Corporate distribution facilities services business ("CDFS") represents
the development of industrial distribution facilities by ProLogis,
ProLogis Development Services or the Kingspark entities in the United
States, Mexico and Europe (see Note 4) which are often disposed of to
third parties or entities in which ProLogis has an ownership interest and
the development of industrial distribution facilities by ProLogis,
ProLogis Development Services or the Kingspark entities on a fee basis
for third parties in the United States, Mexico and Europe; the
development activities of ProLogis, ProLogis Development Services and the
Kingspark entities are considered to be individual operating segments
having similar economic characteristics which are combined within the
reportable segment based upon geographic location; and
- Temperature-controlled distribution operations represents the operation
of a temperature-controlled distribution and logistics network through
investments in unconsolidated entities in the United States (ProLogis
Logistics) and Europe (Frigoscandia S.A.); each company's operating
facilities are considered to be individual operating segments having
similar economic characteristics which are combined within the reportable
segment based upon geographic location. See Note 4.
89
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Reconciliations of the three reportable segments': (i) income from external
customers to ProLogis' total income; (ii) net operating income from external
customers to ProLogis' earnings from operations (ProLogis' chief operating
decision makers rely primarily on net operating income to make decisions about
allocating resources and assessing segment performance); and (iii) assets to
ProLogis' total assets are as follows (in thousands):
YEAR ENDED DECEMBER 31,
---------------------------------
2000 1999 1998
--------- --------- ---------
Income:
Property operations:
United States(1).............................. $ 476,098 $ 457,592 $ 333,494
Mexico........................................ 15,504 10,503 3,499
Europe(2)..................................... 27,771 16,045 8,059
--------- --------- ---------
Total property operations segment........ 519,373 484,140 345,052
--------- --------- ---------
CDFS business:
United States(3).............................. 58,812 28,861 17,421
Mexico........................................ 1,517 -- 133
Europe(4)(5).................................. 61,569 41,673 2,915
--------- --------- ---------
Total CDFS business segment.............. 121,898 70,534 20,469
--------- --------- ---------
Temperature-controlled distribution operations:
North America(6).............................. 11,950 10,791 7,349
Europe(7)..................................... (20,298) (4,364) (7,535)
--------- --------- ---------
Total temperature-controlled distribution
operations segment..................... (8,348) 6,427 (186)
--------- --------- ---------
Reconciling items:
Interest income............................... 7,267 6,369 2,752
Income from unconsolidated entities........... 3,331 (78) 20
--------- --------- ---------
Total reconciling items.................. 10,598 6,291 2,772
--------- --------- ---------
Total income............................. $ 643,521 $ 567,392 $ 368,107
========= ========= =========
Net operating income:
Property operations:
United States(1).............................. $ 448,074 $ 424,633 $ 306,920
Mexico........................................ 15,093 10,569 3,302
Europe(2)..................................... 29,029 15,437 7,710
--------- --------- ---------
Total property operations segment........ 492,196 450,639 317,932
--------- --------- ---------
CDFS business:
United States(3).............................. 58,812 28,861 17,421
Mexico........................................ 1,517 -- 133
Europe(4)(5).................................. 61,569 41,673 2,915
--------- --------- ---------
Total CDFS business segment.............. 121,898 70,534 20,469
--------- --------- ---------
Temperature-controlled distribution operations:
North America(6).............................. 11,950 10,791 7,349
Europe(7)..................................... (20,298) (4,364) (7,535)
--------- --------- ---------
Total temperature-controlled distribution
operations segment..................... (8,348) 6,427 (186)
--------- --------- ---------
90
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
YEAR ENDED DECEMBER 31,
---------------------------------
2000 1999 1998
--------- --------- ---------
Reconciling items:
Interest income............................... 7,267 6,369 2,752
Income from unconsolidated entities........... 3,331 (78) 20
General and administrative expense............ (44,954) (38,284) (22,893)
Depreciation and amortization................. (151,483) (152,447) (100,590)
Interest expense.............................. (172,191) (170,746) (77,650)
Interest rate hedge expense................... -- (945) (26,050)
Other expenses................................ (5,909) (4,920) (6,187)
--------- --------- ---------
Total reconciling items.................. (363,939) (361,051) (230,598)
--------- --------- ---------
Earnings from operations................. $ 241,807 $ 166,549 $ 107,617
========= ========= =========
DECEMBER 31,
------------------------------------
2000 1999 1998
---------- ---------- ----------
Property operations:
United States(8)............................... $3,887,601 $4,017,702 $3,073,248
Mexico......................................... 113,538 178,253 74,494
Europe(8)...................................... 308,457 387,362 309,639
---------- ---------- ----------
Total property operations segment...... 4,309,596 4,583,317 3,457,381
---------- ---------- ----------
CDFS business:
United States.................................. 304,697 210,088 148,001
Mexico......................................... 26,288 13,249 16,465
Europe(8)...................................... 637,207 432,455 224,769
---------- ---------- ----------
Total CDFS business segment............ 968,192 655,792 389,235
---------- ---------- ----------
Temperature controlled distribution operations:
North America(8)............................... 231,053 192,607 151,021
Europe(8)...................................... 191,981 214,008 221,566
---------- ---------- ----------
Total temperature controlled
distribution operations segment...... 423,034 406,615 372,587
---------- ---------- ----------
Reconciling items:
Investments in unconsolidated entities......... 70,807 2,442 1,520
Cash........................................... 57,870 69,338 63,140
Accounts and notes receivable.................. 43,040 31,084 1,313
Other assets................................... 73,795 99,452 45,553
---------- ---------- ----------
Total reconciling items................ 245,512 202,316 111,526
---------- ---------- ----------
Total assets........................... $5,946,334 $5,848,040 $4,330,729
========== ========== ==========
- ---------------
(1) In addition to the operations of ProLogis that are reported on a
consolidated basis, includes amounts recognized under the equity method
related to ProLogis' investment in ProLogis California, ProLogis North
American Properties Fund I and ProLogis Principal in 2000 and ProLogis
California in 1999. See Note 4 for summarized financial information of
ProLogis California, ProLogis North American Properties Fund I and ProLogis
Principal.
(2) In addition to the operations of ProLogis that are reported on a
consolidated basis, includes amounts recognized under the equity method
related to ProLogis' investment in ProLogis European Properties Fund
(including net foreign currency exchange gains of $2.3 million) and ProLogis
European Properties S.a.r.l.
91
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(including net foreign currency exchange gains of $2.4 million) in 2000 and
ProLogis European Properties Fund (including net foreign currency gains of
$0.3 million) in 1999. In 1999, also includes ProLogis' investment in
Garonor Holdings (including a $13.0 million net foreign currency exchange
loss). See Note 4 for summarized financial information of ProLogis European
Properties Fund and for a discussion of Garonor Holdings.
(3) In 2000, includes $3.3 million, $24.5 million and $1.6 million of net gains
recognized by ProLogis related to the disposition of facilities to ProLogis
California, ProLogis North American Properties Fund I and ProLogis
Principal, respectively. See Note 4.
(4) Includes amounts recognized under the equity method related to ProLogis'
investment in the Kingspark entities in 2000, 1999 and 1998 (including $0.3
million of net foreign currency exchange gains in 2000 and $1.5 million and
$0.9 million of net foreign currency exchange losses in 1999 and 1998,
respectively). See Note 4 for summarized financial information of the
Kingspark entities.
(5) Includes $13.7 million and $17.3 million of net gains recognized by ProLogis
related to the disposition of facilities to ProLogis European Properties
Fund in 2000 and 1999, respectively. In addition, includes $4.3 million and
$4.5 million of net gains recognized under the equity method related to the
Kingspark entities' disposition of facilities to ProLogis European
Properties Fund in 2000 and 1999, respectively. See Note 4.
(6) Represents amounts recognized under the equity method related to ProLogis'
investment in ProLogis Logistics. See Note 4 for summarized financial
information of ProLogis Logistics.
(7) Represents amounts recognized under the equity method related to ProLogis'
investment in Frigoscandia S.A. (including $0.8 million, $1.3 million and
$11.4 million of net foreign currency exchange losses in 2000, 1999 and
1998, respectively). See Note 4 for summarized financial information of
Frigoscandia S.A.
(8) Amounts include investments in unconsolidated entities accounted for under
the equity method. See also Note 4 for summarized financial information of
the unconsolidated entities as of and for the year ended December 31, 2000.
11. MERGER WITH MERIDIAN
On March 30, 1999, Meridian Industrial Trust, Inc. ("Meridian"), a publicly
traded REIT that owned industrial distribution facilities in the United States,
was merged with and into ProLogis. In accordance with the terms of the Agreement
and Plan of Merger dated as of November 16, 1998, as amended (the "Merger
Agreement"), the approximately 33.8 million outstanding shares of Meridian
common stock were exchanged (on a 1.1 for one basis) into approximately 37.2
million ProLogis Common Shares. In addition, the holders of Meridian common
stock received $2.00 in cash per outstanding share, approximately $67.6 million
in total. The holders of Meridian's Series D cumulative redeemable preferred
stock received a new series of ProLogis cumulative redeemable preferred shares,
Series E preferred shares, on a one for one basis. The Series E preferred shares
have an 8.75% annual dividend rate ($2.1875 per share) and an aggregate
liquidation value of $50.0 million. The total purchase price of Meridian was
approximately $1.54 billion, which included the assumption of the outstanding
debt and liabilities of Meridian as of March 30, 1999 and the issuance of
approximately 1.1 million stock options each to acquire 1.1 ProLogis Common
Shares and $2.00 in cash. The assets acquired from Meridian included
approximately $1.42 billion of real estate assets, an interest in a
temperature-controlled distribution business of $28.7 million and cash and other
assets aggregating $72.3 million. The transaction was structured as a tax-free
merger and was accounted for under the purchase method.
The following summarized pro forma unaudited information represents the
combined historical operating results of ProLogis and Meridian with the
appropriate purchase accounting adjustments, assuming the merger with Meridian
had occurred on January 1, 1998. The pro forma financial information presented
is not necessarily
92
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
indicative of what ProLogis' actual operating results would have been had
ProLogis and Meridian constituted a single entity during such periods (in
thousands, except per share amounts):
YEAR ENDED
DECEMBER 31,
-------------------
1999 1998
-------- --------
Rental income............................................... $525,340 $464,034
Earnings from operations.................................... $170,681 $124,928
Earnings attributable to Common Shares before cumulative
effect of accounting change............................... $136,461 $ 78,847
Net earnings attributable to Common Shares.................. $135,021 $ 78,847
Weighted average Common Shares outstanding:
Basic..................................................... 160,705 155,923
Diluted................................................... 161,044 156,680
Basic per share net earnings attributable to Common Shares
before cumulative effect of accounting change............. $ 0.85 $ 0.51
Cumulative effect of accounting change...................... (0.01) --
-------- --------
Basic per share net earnings attributable to Common
Shares.................................................... $ 0.84 $ 0.51
======== ========
Diluted per share net earnings attributable to Common Shares
before cumulative effect of accounting change............. $ 0.85 $ 0.50
Cumulative effect of accounting change...................... (0.01) --
-------- --------
Diluted per share net earnings attributable to Common
Shares.................................................... $ 0.84 $ 0.50
======== ========
12. SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash investing and financing activities for the years ended December
31, 2000, 1999 and 1998 are as follows:
- In connection with ProLogis' contribution of 50.1% of the common stock of
ProLogis European Properties S.a.r.l. to ProLogis European Properties
Fund discussed in Note 4, ProLogis received an equity interest in
ProLogis European Properties Fund of approximately $78.0 million.
ProLogis European Properties S.a.r.l. had total assets of $403.9 million
and total liabilities of $248.1 million. ProLogis has recognized its
investment in the remaining 49.9% of the common stock under the equity
method since January 7, 2000. On January 7, 2001, ProLogis contributed
the remaining 49.9% of the common stock to ProLogis European Properties
Fund for an additional equity interest. See Note 4.
- ProLogis received $11.4 million, $13.8 million, $18.6 million and $0.6
million of the proceeds from its disposition of facilities to ProLogis
European Properties Fund, ProLogis California, ProLogis North American
Properties Fund I and ProLogis Principal, respectively, in the form of an
equity interest in these entities during 2000. Additionally, ProLogis
received $13.2 million of the proceeds from its disposition of facilities
to ProLogis Principal in the form of a note receivable during 2000.
ProLogis received $148.2 million and $23.4 million of the proceeds from
its disposition of facilities to ProLogis California and ProLogis
European Properties Fund, respectively, in the form of an equity interest
in these entities during 1999.
- ProLogis received $2.1 million of the proceeds from its disposition of
facilities to third parties in the form of notes receivable during 2000.
- In connection with the agreement for the acquisition of the Kingspark
entities discussed in Note 4, ProLogis issued 602,000 Common Shares in
2000 valued at $11.9 million.
93
96
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
- In connection with the merger with Meridian in 1999 discussed in Note 11,
ProLogis issued approximately 37.2 million Common Shares and 2.0 million
Series E preferred shares, assumed approximately 1.1 million stock
options and assumed outstanding debt and liabilities of Meridian for an
aggregate purchase price of approximately $1.54 billion in exchange for
the assets of Meridian (including cash balances acquired of $49.0
million).
- Series B cumulative convertible redeemable preferred shares aggregating
$19,115,000, $12,922,000 and $11,568,000 were converted into Common
Shares in 2000, 1999 and 1998, respectively.
- Net foreign currency translation adjustments of $(24,003,000),
$(9,788,000) and $86,000 were recognized in 2000, 1999 and 1998,
respectively.
- Limited partnership units aggregating $8,169,000 (total minority interest
of $13,905,000 less $5,736,000 representing amounts due to ProLogis by
the holder of the units), $205,000 and $302,000 were converted into
Common Shares in 2000, 1999 and 1998, respectively.
- Mortgage notes in the amount $39.8 million were assumed in connection
with the acquisition of real estate in 1998.
- Employee share purchase notes in the amount of $1,796,000 were retired in
1998. See Note 13.
13. LONG-TERM COMPENSATION
Long-Term Incentive Plan and Share Option Plan for Outside Trustees
ProLogis has a long-term incentive plan (the "Incentive Plan"), which
includes an employee share purchase plan, a stock option plan, a restricted
share unit plan and a performance share plan. No more than 14,600,000 Common
Shares in the aggregate may be awarded under the Incentive Plan and no
individual may be granted awards with respect to more than 500,000 Common Shares
in any one-year period. The Incentive Plan has a 10-year term. Additionally,
ProLogis has 500,000 Common Shares authorized for issuance under its Share
Option Plan for Outside Trustees (the "Outside Trustees Plan"). As of December
31, 2000, 4,382,000 Common Shares remain to be issued under the Incentive Plan
and 406,000 Common Shares remain to be issued under the Outside Trustees Plan.
Employee Share Purchase Plan
Under the employee share purchase plan certain employees of ProLogis
purchased 1,356,834 Common Shares on September 8, 1997 at a price of $21.21875
per share. ProLogis financed 95% of the total purchase price through ten-year,
recourse notes to the participants aggregating $27.3 million. The loans, which
have been recognized as a deduction from shareholders' equity, bear interest at
the lower of ProLogis' annual dividend yield on Common Shares or 6% per annum.
The loans are secured by the Common Shares purchased. For each Common Share
purchased, participants were granted two options to purchase Common Shares at a
price of $21.21875. As of December 31, 2000, there were 930,807 Common Shares
securing the employee share purchase notes. The outstanding notes receivable at
December 31, 2000 of $18,556,000 include $16,314,000 due from officers of
ProLogis.
94
97
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Stock Options
ProLogis has granted stock options under the Incentive Plan and the Outside
Trustees Plan. Stock options outstanding as of December 31, 2000 are as follows:
WEIGHTED
AVERAGE
NUMBER OF EXPIRATION REMAINING
OPTIONS EXERCISE PRICE(1) DATE LIFE
--------- ------------------- ---------- ---------
Outside Trustees Plan(2)....... 84,000 $ 17.50-$ 25.00 2001-2010 6.8 years
Employee stock purchase
plan(3)...................... 1,923,874 $21.21875 2007 6.7 years
Stock option plan(2)(3):
1997 awards.................. 234,701 $21.21875-$23.96875 2007 6.7 years
1998 awards.................. 1,217,610 $ 20.9375-$ 24.625 2008 7.8 years
1999 awards.................. 1,265,689 $ 17.1875-$19.71875 2009 8.7 years
2000 awards.................. 1,251,045 $ 20.0625-$ 24.25 2010 9.7 years
Meridian options(4)............ 359,724 $ 16.375-$ 23.9375 2004 3.2 years
Options sold to unconsolidated
entities(2).................. 1,383,963 $ 18.625-$ 24.5625 2008-2010 8.6 years
---------
Total................ 7,720,606
=========
- ---------------
(1) Exercise price was equal to the average of the high and low market price on
the date of grant.
(2) The holders are awarded dividend equivalent units each year of the plan,
except for holders of 24,000 options issued under the Outside Trustees Plan
prior to 1999.
(3) Graded vesting at various rates over periods from one to 10 years, subject
to certain conditions.
(4) Options are fully exercisable. Options issued to holders of Meridian options
are exercisable into 1.1 Common Shares, plus $2.00. See Note 11.
The weighted average fair value of the stock options issued under the
Incentive Plan to ProLogis' employees, issued under the Outside Trustees Plan
and sold to unconsolidated entities during 2000 was $3.41 per option (excluding
the value of the DEUs to be earned). The activity with respect to ProLogis'
stock option plans for the years ended December 31, 2000, 1999 and 1998 is
presented below.
WEIGHTED
AVERAGE NUMBER OF
NUMBER OF EXERCISE OPTIONS
OPTIONS PRICE EXERCISABLE
--------- -------- -----------
Balance at December 31, 1997......................... 3,103,291 $21.21 1,129,448
Granted/Sold....................................... 2,011,392 21.17 870,787
Exercised.......................................... -- -- --
Forfeited.......................................... (251,473) 21.22 --
--------- ------ ---------
Balance at December 31, 1998......................... 4,863,210 21.19 2,000,235
Granted/Sold....................................... 2,066,133 20.41 458,204
Issued in merger with Meridian (Note 11)........... 1,025,850 20.13 1,025,850
Exercised.......................................... (4,000) 15.50 (4,000)
Forfeited.......................................... (487,985) 21.02 --
--------- ------ ---------
95
98
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
WEIGHTED
AVERAGE NUMBER OF
NUMBER OF EXERCISE OPTIONS
OPTIONS PRICE EXERCISABLE
--------- -------- -----------
Balance at December 31, 1999......................... 7,463,208 20.37 3,480,289
Granted/Sold....................................... 1,702,028 23.94 --
Exercised.......................................... (744,171) 19.80 (744,171)
Forfeited.......................................... (700,459) 20.55 --
--------- ------ ---------
Balance at December 31, 2000......................... 7,720,606 $21.11 2,736,118
========= ====== =========
ProLogis did not recognize compensation expense in 2000, 1999 or 1998
related to stock options granted as the exercise price of all options granted
was equal to the average of the high and low market price on the date of grant.
Had compensation expense for these plans been determined using an option
valuation model as provided in SFAS No. 123, ProLogis net earnings attributable
to Common Shares and net earnings per Common Share would change as follows:
YEAR ENDED DECEMBER 31,
-----------------------------
2000 1999 1998
-------- -------- -------
Net earnings attributable to Common Shares:
As reported......................................... $157,715 $123,999 $62,231
Pro forma........................................... 154,857 121,767 60,805
Basic and diluted net earnings per Common Share:
As reported -- basic and diluted.................... $ 0.96 $ 0.81 $ 0.51
Pro forma -- basic.................................. 0.95 0.80 0.50
Pro forma -- diluted................................ 0.94 0.80 0.50
Since stock options vest over several years and additional grants are
likely to be made in future years, the pro forma compensation cost may not be
representative of that to be expected in future years.
The pro forma amounts above were calculated using the Black-Scholes model
and the following assumptions:
YEAR ENDED DECEMBER 31,
------------------------------------
2000 1999 1998
---------- ---------- ----------
Risk-free interest rate........................... 4.99% 6.58% 4.74%
Forecasted dividend yield......................... 5.65% 6.10% 7.36%
Volatility........................................ 22.28% 23.01% 27.37%
Weighted average option life...................... 6.25 years 6.25 years 6.75 years
96
99
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Restricted Share Units ("RSUs")
RSUs in the form of Common Shares are awarded at a rate of one Common Share
per RSU from time to time to employees of ProLogis. The RSUs are valued on the
award date based upon the market price of the Common Shares on that date.
ProLogis recognizes the value of the RSUs awarded over the applicable vesting
period as compensation expense. As of December 31, 2000, there were 587,500 RSUs
outstanding at a total value of $12.6 million, of which $4.4 million has been
expensed. As of December 31, 2000, 166,250 of the outstanding RSUs are vested.
The remaining RSUs will vest as follows:
2001...................................................... 76,875
2002...................................................... 116,875
2003...................................................... 46,300
2004...................................................... 41,875
2005...................................................... 55,575
2006 and thereafter....................................... 83,750
-------
Total........................................... 421,250
=======
Performance Share Plan
Under the performance share plan certain employees are awarded Common
Shares if performance criteria is met. On December 31, 2000, 174,675 Common
Shares valued at $3.9 million were awarded under the plan, based upon the
criteria established for 2000. The entire award will vest on December 31, 2002.
ProLogis will recognize the related compensation expense over the two-year
vesting period beginning January 1, 2001.
Dividend Equivalent Units ("DEUs")
DEUs in the form of Common Shares are awarded at a rate of one Common Share
per DEU on December 31st of each year that the underlying stock options, RSUs or
performance shares are outstanding. The DEUs vest to the same extent the
underlying award vests. The DEUs are valued on the award date based upon the
market price of the Common Shares on that date and ProLogis recognizes that
value as compensation expense over the underlying vesting period of the related
award. Of the total RSUs outstanding, 167,500 RSUs do not earn DEUs but rather
earn dividends at ProLogis' current Common Share distribution rate. As of
December 31, 2000, there were 492,319 DEUs outstanding, of which 53,501 were
vested. The DEUs outstanding have a total value of $10.5 million, of which $2.8
million has been expensed as of December 31, 2000.
401(k) Savings Plan and Trust
ProLogis has a 401(k) Savings Plan and Trust ("401(k) Plan"), that provides
for matching employer contributions in Common Shares of 50 cents for every
dollar contributed by an employee, up to 6% of the employees' annual
compensation (within the statutory compensation limit). The vesting of
contributed Common Shares is based on the employees' years of service, with 20%
vesting each year of service, over a five-year period. Through December 31,
2000, no Common Shares have been issued under the 401(k) Plan as all matching
contributions have been made with Common Shares purchased in the public market.
A total of 190,000 Common Shares have been authorized for issuance under the
401(k) Plan.
Nonqualified Savings Plan
Effective January 1, 1998, ProLogis established the Nonqualified Savings
Plan to provide benefits for a select group of management. The purpose of this
plan is to allow highly compensated employees the opportunity to defer the
receipt and income taxation of a certain portion of their compensation in excess
of the amount permitted under the 401(k) Plan. ProLogis will match the lesser of
(a) 50% of the sum of deferrals under both the 401(k) Plan and this plan, and
(b) 3% of total compensation up to certain levels. The matching account will
vest in the same manner as the 401(k) Plan.
97
100
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Warrants
During 1998, warrants were exercised into 11,764 Common Shares at an
exercise price of $10.00. There were no outstanding warrants as of December 31,
2000.
14. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):
Selected quarterly financial data (in thousands, except for per share
amounts) for 2000 and 1999 is as follows:
THREE MONTHS ENDED,
---------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, TOTAL
--------- -------- ------------- ------------ --------
2000:
Rental income................. $120,809 $119,696 $121,519 $118,064 $480,088
======== ======== ======== ======== ========
Earnings from operations...... $ 62,526 $ 52,612 $ 67,194 $ 59,475 $241,807
Minority interest share in
earnings................... 1,654 1,435 1,228 1,269 5,586
Gain (loss) on disposition of
real estate................ 5,108 (4,801) 702 305 1,314
Foreign currency exchange
gains (losses), net........ (6,520) (11,929) (1,929) 2,451 (17,927)
Total income taxes............ 117 708 2,000 2,305 5,130
-------- -------- -------- -------- --------
Net earnings.................. 59,343 33,739 62,739 58,657 214,478
Less preferred share
dividends.................. 14,405 14,150 14,120 14,088 56,763
-------- -------- -------- -------- --------
Net earnings attributable to
Common Shares.............. $ 44,938 $ 19,589 $ 48,619 $ 44,569 $157,715
======== ======== ======== ======== ========
Basic net earnings
attributable to Common
Shares................... $ 0.28 $ 0.12 $ 0.30 $ 0.27 $ 0.96
======== ======== ======== ======== ========
Diluted net earnings
attributable to Common
Shares................... $ 0.28 $ 0.12 $ 0.29 $ 0.27 $ 0.96
======== ======== ======== ======== ========
1999:
Rental income................. $ 97,161 $131,251 $135,503 $127,911 $491,826
======== ======== ======== ======== ========
Earnings from operations...... $ 25,046 $ 33,290 $ 58,674 $ 49,539 $166,549
Minority interest share in
earnings................... 1,169 1,434 1,139 1,237 4,979
Gain on disposition of real
estate..................... 715 -- 25,643 12,636 38,994
Foreign currency exchange
gains (losses), net........ (8,283) (4,012) 5,830 (10,353) (16,818)
Total income taxes............ 374 585 534 (21) 1,472
-------- -------- -------- -------- --------
Earnings before cumulative
effect in accounting
change..................... 15,935 27,259 88,474 50,606 182,274
Cumulative effect of
accounting change.......... 1,440 -- -- -- 1,440
-------- -------- -------- -------- --------
Net earnings.................. 14,495 27,259 88,474 50,606 180,834
Less preferred share
dividends.................. 13,445 14,493 14,453 14,444 56,835
-------- -------- -------- -------- --------
Net earnings attributable to
Common Shares.............. $ 1,050 $ 12,766 $ 74,021 $ 36,162 $123,999
======== ======== ======== ======== ========
98
101
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
THREE MONTHS ENDED,
---------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, TOTAL
--------- -------- ------------- ------------ --------
Per Common Share:
Basic net earnings
attributable to Common
Shares before cumulative
effect of accounting
change................... $ 0.02 $ 0.08 $ 0.46 $ 0.22 $ 0.82
Cumulative effect of
accounting change........ (0.01) -- -- -- (0.01)
-------- -------- -------- -------- --------
Basic net earnings
attributable to Common
Shares................... $ 0.01 $ 0.08 $ 0.46 $ 0.22 $ 0.81
======== ======== ======== ======== ========
Diluted earnings
attributable to Common
Shares before cumulative
effect of accounting
change................... $ 0.02 $ 0.08 $ 0.44 $ 0.22 $ 0.82
Cumulative effect of
accounting change........ (0.01) -- -- -- (0.01)
-------- -------- -------- -------- --------
Diluted net earnings
attributable to Common
Shares................... $ 0.01 $ 0.08 $ 0.44 $ 0.22 $ 0.81
======== ======== ======== ======== ========
15. RELATED PARTY TRANSACTIONS:
ProLogis leases space to Security Capital and certain of its affiliates on
market terms that management believes are no less favorable to ProLogis than
those that could be obtained with unaffiliated third parties.
ProLogis' rental income related to these leases were $757,000, $756,000 and
$717,000 for the years ended December 31, 2000, 1999 and 1998, respectively. As
of December 31, 2000, 109,804 square feet were leased to related parties. The
annualized rental revenues for these leases are $763,000.
On September 8, 1997, ProLogis and Security Capital entered into an
administrative services agreement (the "ASA"). Under the ASA, Security Capital
provided ProLogis with certain administrative and other services as determined
by ProLogis (certain services originally provided under the ASA were transferred
to ProLogis employees). ProLogis' fees under the ASA were $2.5 million, $3.5
million and $3.7 million for 2000, 1999 and 1998, respectively. Of these fees,
$0.4 million, $0.6 million and $0.7 million were capitalized in 2000, 1999 and
1998, respectively. ProLogis recognizes the ASA fees related to property
management activities as a component of rental expenses. ProLogis began
transitioning these functions from Security Capital during 2000 and, as of
December 31, 2000, ProLogis had assumed substantially all of the functions
previously provided by Security Capital. The ASA expired on December 31, 2000.
Security Capital is continuing to provide the services net yet assumed by
ProLogis under a month-to-month agreement until the transition is completed.
During 2000, ProLogis paid investment advisory fees of $104,000 to Security
Capital Markets Group Incorporated, a registered broker-dealer subsidiary of
Security Capital, related to additional equity contributed by NYSCRF to ProLogis
California during 2000 (see Note 4). During 1999, ProLogis paid investment
advisory fees to Security Capital Markets Group aggregating $15.6 million. The
fees were incurred in connection with the merger with Meridian ($1.54 billion
purchase price -- see Note 11), the formation of ProLogis California which
generated $148.2 million of outside equity capital to ProLogis (see Note 4) and
the formation of the ProLogis European Properties Fund (the currency equivalent
of over $1 billion as of December 31, 1999 of third party capital invested or
committed -- see Note 4).
99
102
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
16. FINANCIAL INSTRUMENTS:
Fair Value of Financial Instruments
The following estimates of the fair value of financial instruments have
been determined by ProLogis using available market information and valuation
methodologies believed to be appropriate for these purposes. Considerable
judgement and a high degree of subjectivity are involved in developing these
estimates and, accordingly, they are not necessarily indicative of amounts
ProLogis would realize upon disposition.
As of December 31, 2000 and 1999, the carrying amounts of certain financial
instruments employed by ProLogis, including cash and cash equivalents, accounts
receivable, accounts payable and accrued expenses were representative of their
fair values because of the short-term maturity of these instruments. Similarly,
the carrying values of the lines of credit balances approximate fair value as of
those dates since the interest rate fluctuates based on published market rates.
As of December 31, 2000 and 1999, the fair values of the senior unsecured debt
and the secured debt (including mortgage notes, assessment bonds and securitized
debt) have been estimated based upon quoted market prices for the same or
similar issues or by discounting the future cash flows using rates currently
available for debt with similar terms and maturities. The differences in the
fair value of ProLogis' senior unsecured debt and secured debt from the carrying
value in the table below are the result of differences in the interest rates
available to ProLogis as of December 31, 2000 and 1999, from the interest rates
in effect at the dates of issuance. The senior unsecured debt and many of the
secured debt issues contain pre-payment penalties or yield maintenance
provisions which would make the cost of refinancing exceed the benefit of
refinancing at the lower rates.
As of December 31, 2000 and 1999, the fair value of ProLogis' derivative
financial instruments are the amounts at which they could be settled, based on
quoted market prices or estimates obtained from brokers or dealers.
The following table reflects the carrying amount and estimated fair value
of ProLogis' financial instruments (in thousands):
DECEMBER 31,
-------------------------------------------------
2000 1999
----------------------- -----------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
---------- ---------- ---------- ----------
Balance sheet financial instruments:
Senior unsecured debt.............. $1,699,989 $1,703,737 $1,729,630 $1,656,445
Secured debt....................... $ 537,925 $ 543,967 $ 565,776 $ 547,428
Derivative financial instruments:
Foreign currency put option
contracts....................... $ 446 $ 446 $ 628 $ 628
Interest rate swap agreements...... $ -- $ -- $ -- $ 7,998
Derivative Financial Instruments
ProLogis uses derivative financial instruments as hedges to manage
well-defined risk associated with interest and foreign currency rate
fluctuations on existing or anticipated obligations and transactions. ProLogis
does not use derivative financial instruments for trading purposes.
The primary risks associated with derivative instruments are market risk
and credit risk. Market risk is defined as the potential for loss in the value
of the derivative due to adverse changes in market prices (interest rates or
foreign currency rates). The use of derivative financial instruments allows
ProLogis to manage the risks of increases in interest rates and fluctuations in
foreign currency exchange rates with respect to the effects these fluctuations
would have on ProLogis' income and cash flows.
100
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Credit risk is the risk that one of the parties to a derivative contract
fails to perform or meet their financial obligation under the contract. ProLogis
does not obtain collateral to support financial instruments subject to credit
risk but monitors the credit standing of counterparties. ProLogis does not
anticipate non-performance by any of the counterparties to its derivative
contracts. Should a counterparty fail to perform, however, ProLogis would incur
a financial loss to the extent of the positive fair market value of the
derivative instruments, if any.
The following table summarizes the activity in derivative financial
instruments for the years ended December 31, 2000 and 1999 (in millions):
INTEREST FOREIGN
INTEREST RATE RATE SWAP CURRENCY PUT
CONTRACTS AGREEMENTS OPTIONS(1)
------------- ---------- ------------
Notional amounts as of December 31, 1998......... $ 75.0 $ 75.0 $ --
New contracts.................................... -- 169.9(2) 27.1
Matured or expired contracts..................... -- -- (3.9)
Terminated contracts............................. (75.0) (75.0) --
------ -------- ------
Notional amounts as of December 31, 1999......... $ -- $ 169.9 $ 23.2
New contracts.................................... -- -- 55.5
Matured or expired contracts..................... -- -- (34.9)
(169.9)
Contracts transferred............................ -- (2) --
------ -------- ------
Notional amounts as of December 31, 2000......... $ -- $ -- $ 43.8
====== ======== ======
- ---------------
(1) ProLogis entered into foreign currency put option contracts during 2000 and
1999 related to its operations in Europe. The put option contracts provide
ProLogis with the option to exchange euros for U.S. dollars at a fixed
exchange rate such that if the euro were to depreciate against the U.S.
dollar to predetermined levels as set by the contracts, ProLogis could
exercise its options and mitigate its foreign currency exchange losses. The
notional amounts of the put option contracts represent the U.S. dollar
equivalent related to the put option contracts with notional amounts of 47.1
million euros and 23.0 million euros as of December 31, 2000 and 1999,
respectively. The outstanding contracts do not qualify for hedge accounting
treatment and were marked to market through income as of December 31, 2000
and 1999. ProLogis recognized aggregate income of $627,000 in 2000 and
aggregate expense of $92,000 in 1999 on the put option contracts including
mark to market expense of $854,000 in 2000 and $47,000 in 1999. See Note 1.
(2) Represents interest rate swap agreements related to debt of ProLogis
European Properties S.a.r.l. See Note 4.
17. COMMITMENTS AND CONTINGENCIES:
Environmental Matters
All of the facilities acquired by ProLogis have been subjected to
environmental reviews by ProLogis or predecessor owners. While some of these
assessments have led to further investigation and sampling, none of the
environmental assessments has revealed, nor is ProLogis aware of any
environmental liability (including asbestos related liability) that ProLogis
believes would have a material adverse effect on ProLogis' business, financial
condition or results of operations.
101
104
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Trustees and Shareholders of
ProLogis Trust:
We have audited, in accordance with auditing standards generally accepted
in the United States, the financial statements of ProLogis Trust included in
this Form 10-K, and have issued our report thereon dated March 15, 2001. Our
audit was made for the purpose of forming an opinion on those statements taken
as a whole. The supplemental Schedule III -- Real Estate and Accumulated
Depreciation ("Schedule III") is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. The Schedule III has been subjected to the auditing
procedures applied in the audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
Arthur Andersen, LLP
Chicago, Illinois
March 15, 2001
102
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PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 2000
(IN THOUSANDS)
INITIAL COST TO
PROLOGIS
----------------------- COSTS CAPITALIZED
NO. OF ENCUM- BUILDING & SUBSEQUENT
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION
- ----------- ------ ------- -------- ------------ -----------------
OPERATING PROPERTIES
Atlanta, Georgia
Atlanta Airport Distribution
Center..................... 6 $ 3,437 $ -- $ 15,445
Atlanta NE at Sugarloaf...... 1 203 -- 1,993
Atlanta NE Distribution
Center..................... 8 (d) 5,582 3,047 24,151
Atlanta West Distribution
Center..................... 20 6,771 34,785 12,121
Carter-Pacific Business
Center..................... 3 556 3,151 743
Cedars Distribution Center... 2 2,622 14,856 3,800
Cobb Place Distribution
Center..................... 2 1,579 -- 8,682
International Airport
Industrial Center.......... 9 (e) 2,939 14,146 5,164
LaGrange Distribution
Center..................... 1 174 986 139
Northeast Industrial
Center..................... 4 1,109 6,283 1,548
Northmont Industrial
Center..................... 1 566 3,209 226
Oakcliff Industrial Center... 3 608 3,446 446
Olympic Industrial Center.... 2 698 3,956 1,626
Peachtree Commerce Business
Center..................... 4 (e) 707 4,004 1,576
Piedmont Court Distribution
Center..................... 2 885 5,013 4,761
Plaza Industrial Center...... 1 66 372 90
Pleasantdale Industrial
Center..................... 2 541 3,184 449
Riverside Distribution
Center..................... 4 2,827 15,821 1,961
Sullivan 75 Distribution
Center..................... 3 (f) 728 2,786 2,760
Tradeport Distribution
Center..................... 3 1,464 4,563 5,749
Weaver Distribution Center... 2 935 5,182 791
Westfork Industrial Center... 10 2,483 14,115 1,049
Zip Industrial Center........ 2 269 1,527 261
Austin, Texas
Corridor Park Corporate
Center..................... 8 2,109 1,681 19,442
Montopolis Distribution
Center..................... 1 580 3,384 667
Rutland Distribution
Center..................... 2 460 2,617 315
Southpark Corporate Center... 7 1,946 -- 15,037
Walnut Creek Corporate
Center..................... 17 3,626 5,649 26,539
Birmingham, Alabama
Oxmoor Distribution Center... 4 2,398 13,591 875
Perimeter Distribution
Center..................... 2 2,489 14,109 955
GROSS AMOUNTS AT WHICH CARRIED
AS OF DECEMBER 31, 2000
--------------------------------------- ACCUMULATED DATE OF
BUILDING & DEPRECIATION CONSTRUCTION/
DESCRIPTION LAND IMPROVEMENTS TOTAL(a)(b) (c) ACQUISITION
- ----------- ---------- ------------ ----------- ------------ ----------------------
OPERATING PROPERTIES
Atlanta, Georgia
Atlanta Airport Distribution
Center..................... $ 5,188 $ 13,694 $ 18,882 $ (1,513) 1996, 1997, 1998
Atlanta NE at Sugarloaf...... 381 1,815 2,196 -- 2000
Atlanta NE Distribution
Center..................... 6,276 26,504 32,780 (3,775) 1996, 1997
Atlanta West Distribution
Center..................... 6,774 46,903 53,677 (9,102) 1994, 1996
Carter-Pacific Business
Center..................... 556 3,894 4,450 (740) 1995
Cedars Distribution Center... 2,622 18,656 21,278 (869) 1999
Cobb Place Distribution
Center..................... 2,101 8,160 10,261 (338) 1999
International Airport
Industrial Center.......... 2,972 19,277 22,249 (3,900) 1994, 1995
LaGrange Distribution
Center..................... 174 1,125 1,299 (248) 1994
Northeast Industrial
Center..................... 1,050 7,890 8,940 (1,249) 1996
Northmont Industrial
Center..................... 566 3,435 4,001 (733) 1994
Oakcliff Industrial Center... 608 3,892 4,500 (761) 1995
Olympic Industrial Center.... 757 5,523 6,280 (976) 1996
Peachtree Commerce Business
Center..................... 707 5,580 6,287 (1,076) 1994
Piedmont Court Distribution
Center..................... 885 9,774 10,659 (854) 1997
Plaza Industrial Center...... 66 462 528 (96) 1995
Pleasantdale Industrial
Center..................... 541 3,633 4,174 (764) 1995
Riverside Distribution
Center..................... 2,850 17,759 20,609 (843) 1997, 1999
Sullivan 75 Distribution
Center..................... 728 5,546 6,274 (1,200) 1994, 1995
Tradeport Distribution
Center..................... 1,479 10,297 11,776 (1,787) 1994, 1996
Weaver Distribution Center... 935 5,973 6,908 (1,198) 1995
Westfork Industrial Center... 2,483 15,164 17,647 (2,827) 1995
Zip Industrial Center........ 269 1,788 2,057 -- 1996
Austin, Texas
Corridor Park Corporate
Center..................... 2,777 20,455 23,232 (2,436) 1995, 1996, 2000
Montopolis Distribution
Center..................... 580 4,051 4,631 (1,026) 1994
Rutland Distribution
Center..................... 462 2,930 3,392 (684) 1993
Southpark Corporate Center... 1,946 15,037 16,983 (2,766) 1994, 1995, 1996
Walnut Creek Corporate
Center..................... 3,685 32,129 35,814 (4,467) 1995, 1996, 1999
Birmingham, Alabama
Oxmoor Distribution Center... 2,398 14,466 16,864 (3,282) 1994
Perimeter Distribution
Center..................... 2,490 15,063 17,553 (3,374) 1994
103
106
PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
INITIAL COST TO
PROLOGIS
----------------------- COSTS CAPITALIZED
NO. OF ENCUM- BUILDING & SUBSEQUENT
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION
- ----------- ------ ------- -------- ------------ -----------------
Charlotte, North Carolina
Barringer Industrial
Center..................... 3 308 1,746 587
Bond Distribution Center..... 2 905 5,126 904
Carowinds Distribution
Center..................... 1 3,600 20,400 --
Charlotte Commerce Center.... 10 (d) 4,341 24,954 4,014
Charlotte Distribution
Center..................... 11 (d) 5,473 -- 29,134
Charlotte Distribution Center
South...................... 1 309 -- 4,734
Interstate North Business
Park....................... 2 535 3,030 316
Northpark Distribution
Center..................... 2 (d) 1,183 6,707 538
Chattanooga, Tennessee
Stone Fort Distribution
Center..................... 4 2,063 11,688 532
Tiftonia Distribution
Center..................... 1 146 829 184
Chicago, Illinois
Addison Distribution
Center..................... 1 646 3,662 443
Alsip Distribution Center.... 2 (f) 2,093 11,859 6,774
Bedford Park Distribution
Center..................... 2 1,142 6,469 207
Bensenville Distribution
Center..................... 2 1,668 9,448 10,416
Bloomingdale 100 Business
Center..................... 3 940 -- 9,635
Bolingbrook Distribution
Center..................... 2 4,565 25,864 447
Bridgeview Distribution
Center..................... 4 1,302 7,378 964
Des Plaines Distribution
Center..................... 3 2,158 12,232 1,545
Elk Grove Distribution
Center..................... 20 (e)(f) 7,689 43,568 4,998
Elmhurst Distribution
Center..................... 1 713 4,043 144
Glendale Heights Distribution
Center..................... 3 3,903 22,119 481
Glenview Distribution
Center..................... 2 (e)(f) 1,156 6,550 745
Itasca Distribution Center... 3 1,613 9,143 328
Lombard Distribution
Center..................... 1 (f) 1,170 6,630 68
Mitchell Distribution
Center..................... 1 (e) 1,236 7,004 1,104
North Avenue Distribution
Center..................... 2 3,201 -- 8,836
Northlake Distribution
Center..................... 1 372 2,106 69
O'Hare Cargo Distribution
Center..................... 2 3,566 -- 18,780
Pleasant Prairie Distribution
Center..................... 1 1,314 7,450 --
Romeoville Distribution
Center..................... 2 1,104 6,258 3
PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
GROSS AMOUNTS AT WHICH CARRIED
AS OF DECEMBER 31, 2000
--------------------------------------- ACCUMULATED DATE OF
BUILDING & DEPRECIATION CONSTRUCTION/
DESCRIPTION LAND IMPROVEMENTS TOTAL(a)(b) (c) ACQUISITION
- ----------- ---------- ------------ ----------- ------------ ----------------------
Charlotte, North Carolina
Barringer Industrial
Center..................... 308 2,333 2,641 (528) 1994
Bond Distribution Center..... 905 6,030 6,935 (1,356) 1994
Carowinds Distribution
Center..................... 3,600 20,400 24,000 (1,162) 1999
Charlotte Commerce Center.... 4,342 28,967 33,309 (6,316) 1994
Charlotte Distribution
Center..................... 7,784 26,823 34,607 (3,437) 1995, 1996, 1997,
1998, 2000
Charlotte Distribution Center
South...................... 1,062 3,981 5,043 (191) 1999
Interstate North Business
Park....................... 535 3,346 3,881 (457) 1997
Northpark Distribution
Center..................... 1,184 7,244 8,428 (949) 1994, 1998
Chattanooga, Tennessee
Stone Fort Distribution
Center..................... 2,063 12,220 14,283 (2,525) 1994
Tiftonia Distribution
Center..................... 146 1,013 1,159 (193) 1995
Chicago, Illinois
Addison Distribution
Center..................... 640 4,111 4,751 (643) 1997
Alsip Distribution Center.... 2,549 18,177 20,726 (1,915) 1997, 1999
Bedford Park Distribution
Center..................... 1,142 6,676 7,818 (627) 1996, 1999
Bensenville Distribution
Center..................... 1,667 19,865 21,532 (1,826) 1997
Bloomingdale 100 Business
Center..................... 3,959 6,616 10,575 -- 1999, 2000
Bolingbrook Distribution
Center..................... 4,564 26,312 30,876 (1,517) 1999
Bridgeview Distribution
Center..................... 1,303 8,341 9,644 (1,290) 1996
Des Plaines Distribution
Center..................... 2,159 13,776 15,935 (2,167) 1995, 1996
Elk Grove Distribution
Center..................... 7,689 48,566 56,255 (5,591) 1995, 1996, 1997,
1998, 1999
Elmhurst Distribution
Center..................... 713 4,187 4,900 (512) 1997
Glendale Heights Distribution
Center..................... 3,903 22,600 26,503 (1,303) 1999
Glenview Distribution
Center..................... 1,156 7,295 8,451 (587) 1996, 1999
Itasca Distribution Center... 1,613 9,471 11,084 (980) 1996, 1997, 1998
Lombard Distribution
Center..................... 1,170 6,698 7,868 (386) 1999
Mitchell Distribution
Center..................... 1,236 8,108 9,344 (1,320) 1996
North Avenue Distribution
Center..................... 2,047 9,990 12,037 (977) 1997,1998
Northlake Distribution
Center..................... 372 2,175 2,547 (341) 1996
O'Hare Cargo Distribution
Center..................... 5,924 16,422 22,346 (817) 1997
Pleasant Prairie Distribution
Center..................... 1,315 7,449 8,764 (424) 1999
Romeoville Distribution
Center..................... 1,104 6,261 7,365 (356) 1999
104
107
PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
INITIAL COST TO
PROLOGIS
----------------------- COSTS CAPITALIZED
NO. OF ENCUM- BUILDING & SUBSEQUENT
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION
- ----------- ------ ------- -------- ------------ -----------------
South Holland Distribution
Center..................... 2 (f) 1,156 6,550 327
Woodale Distribution
Center..................... 1 263 1,490 99
Cincinnati, Ohio
Airpark Distribution
Center..................... 6 (d) 2,986 -- 23,256
Blue Ash/Interstate
Distribution Center........ 1 144 817 522
Capital Distribution Center
I.......................... 4 (d) 1,750 9,922 1,332
Capital Distribution Center
II......................... 5 (d) 1,953 11,067 2,194
Capital Industrial Center
I.......................... 10 (d) 1,039 5,885 2,168
Constitution Distribution
Center..................... 1 1,465 8,301 1
Empire Distribution Center... 3 (d) 529 2,995 693
Kentucky Drive Business
Center..................... 4 553 3,134 934
Production Distribution
Center..................... 2 (g) 717 2,717 2,690
Sharonville Distribution
Center..................... 3 (d) 1,761 -- 11,340
Springdale Commerce Center... 3 421 2,384 1,067
Union Center Business Park... 3 2,852 -- 21,443
Columbus, Ohio
Canal Pointe Distribution
Center..................... 1 1,237 7,013 1
Capital Park South
Distribution Center........ 6 (d) 2,551 -- 35,718
Charter Street Distribution
Center..................... 1 (f) 1,245 7,055 3
Columbus West Industrial
Center..................... 3 (d) 645 3,655 905
Corporate Park West.......... 2 (d) 679 3,849 305
Crosswinds Distribution
Center..................... 1 (f) 4,181 23,693 5
Fisher Distribution Center... 1 1,197 6,785 1,565
Foreign Trade Center I....... 5 6,527 36,989 3,231
International Street
Commerce................... 2 455 -- 6,663
McCormick Distribution
Center..................... 5 1,664 9,429 2,201
New World Distribution
Center..................... 1 207 1,173 1,116
South Park Distribution
Center..................... 1 1,086 6,151 5
Westbelt Business Center..... 2 (d) 465 2,635 249
Dallas/Fort Worth, Texas
Carter Industrial Center..... 1 334 -- 2,486
Centerport Distribution
Center..................... 2 (f) 1,558 8,830 189
Dallas Corporate Center...... 11 (e) 5,714 -- 34,498
Enterprise Distribution
Center..................... 3 2,719 15,410 --
Freeport Distribution
Center..................... 4 1,393 5,549 4,079
Freeport Corporation
Center..................... 2 2,173 -- 14,210
PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
GROSS AMOUNTS AT WHICH CARRIED
AS OF DECEMBER 31, 2000
--------------------------------------- ACCUMULATED DATE OF
BUILDING & DEPRECIATION CONSTRUCTION/
DESCRIPTION LAND IMPROVEMENTS TOTAL(a)(b) (c) ACQUISITION
- ----------- ---------- ------------ ----------- ------------ ----------------------
South Holland Distribution
Center..................... 1,156 6,877 8,033 (396) 1999
Woodale Distribution
Center..................... 263 1,589 1,852 (200) 1997
Cincinnati, Ohio
Airpark Distribution
Center..................... 6,001 20,241 26,242 (2,353) 1996, 1998, 1999, 2000
Blue Ash/Interstate
Distribution Center........ 144 1,339 1,483 (234) 1995
Capital Distribution Center
I.......................... 1,751 11,253 13,004 (2,288) 1994
Capital Distribution Center
II......................... 1,953 13,261 15,214 (2,783) 1994
Capital Industrial Center
I.......................... 1,105 7,987 9,092 (1,640) 1994, 1995
Constitution Distribution
Center..................... 1,465 8,302 9,767 (473) 1999
Empire Distribution Center... 529 3,688 4,217 (680) 1995
Kentucky Drive Business
Center..................... 553 4,068 4,621 (654) 1997
Production Distribution
Center..................... 824 5,300 6,124 (697) 1994, 1998
Sharonville Distribution
Center..................... 2,424 10,677 13,101 (838) 1997, 1998
Springdale Commerce Center... 421 3,451 3,872 (657) 1996
Union Center Business Park... 3,448 20,847 24,295 (239) 1998, 1999
Columbus, Ohio
Canal Pointe Distribution
Center..................... 1,238 7,013 8,251 (399) 1999
Capital Park South
Distribution Center........ 2,898 35,371 38,269 (3,796) 1996, 1998, 1999, 2000
Charter Street Distribution
Center..................... 1,245 7,058 8,303 (402) 1999
Columbus West Industrial
Center..................... 645 4,560 5,205 (877) 1995
Corporate Park West.......... 679 4,154 4,833 (661) 1996
Crosswinds Distribution
Center..................... 4,181 23,698 27,879 (1,350) 1999
Fisher Distribution Center... 1,197 8,350 9,547 (1,680) 1995
Foreign Trade Center I....... 6,992 39,755 46,747 (2,267) 1999
International Street
Commerce................... 483 6,635 7,118 (310) 1997, 1999
McCormick Distribution
Center..................... 1,664 11,630 13,294 (2,278) 1994
New World Distribution
Center..................... 207 2,289 2,496 (441) 1994
South Park Distribution
Center..................... 1,085 6,157 7,242 (351) 1999
Westbelt Business Center..... 465 2,884 3,349 (259) 1998
Dallas/Fort Worth, Texas
Carter Industrial Center..... 334 2,486 2,820 (395) 1996
Centerport Distribution
Center..................... 1,558 9,019 10,577 (504) 1999
Dallas Corporate Center...... 6,012 34,200 40,212 (3,693) 1996, 1997, 1998, 1999
Enterprise Distribution
Center..................... 2,719 15,410 18,129 (877) 1999
Freeport Distribution
Center..................... 1,440 9,581 11,021 (1,090) 1996, 1997, 1998
Freeport Corporation
Center..................... 3,582 12,801 16,383 -- 2000
105
108
PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
INITIAL COST TO
PROLOGIS
----------------------- COSTS CAPITALIZED
NO. OF ENCUM- BUILDING & SUBSEQUENT
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION
- ----------- ------ ------- -------- ------------ -----------------
Great Southwest Distribution
Center..................... 36 (e)(f) 16,580 81,174 24,350
Great Southwest Industrial
Center I................... 2 (e) 234 1,326 964
Lone Star Distribution
Center..................... 1 512 2,896 131
Northgate Distribution
Center..................... 10 (f) 4,653 26,367 2,115
Northpark Business Center.... 1 197 1,117 263
Plano Distribution Center.... 7 (f) 3,915 22,186 95
Redbird Distribution
Center..................... 2 1,095 6,212 172
Royal Commerce Center........ 4 (e) 1,975 11,190 610
Stemmons Distribution
Center..................... 1 272 1,544 400
Stemmons Industrial Center... 15 2,279 12,913 2,375
Trinity Mills Distribution
Center..................... 7 (e) 4,909 27,815 1,713
Valwood Distribution
Center..................... 7 (f) 4,430 25,101 484
Denver, Colorado
Denver Business Center....... 5 1,160 7,486 6,799
Downing Distribution
Center..................... 1 -- 3,877 66
Havana Distribution Center... 1 401 2,281 310
Moline Distribution Center... 1 327 1,850 191
Moncrieff Distribution
Center..................... 1 314 2,493 429
Pagosa Distribution Center... 1 406 2,322 431
Peoria Distribution Center... 2 1,363 -- 9,712
Upland Distribution Center
I.......................... 8 1,948 5,710 15,088
Upland Distribution Center
II......................... 6 2,456 13,946 1,903
East Bay (San Francisco),
California
Barrington Business Center... 3 1,741 9,863 490
Central Valley Distribution
Center..................... 3 5,180 29,357 --
Central Valley Industrial
Center..................... 3 6,382 36,165 55
East Bay Industrial Center... 1 531 3,009 494
Eigenbrodt Way Distribution
Center..................... 1 (f) 393 2,228 238
Hayward Commerce Center...... 4 1,933 10,955 963
Hayward Commerce Park........ 9 2,764 15,661 2,781
Hayward Distribution
Center..................... 6 2,906 19,165 1,320
Hayward Industrial Center.... 13 (f) 4,481 25,393 2,648
Patterson Pass Business
Center..................... 8 4,616 4,885 14,627
San Leandro Distribution
Center..................... 3 1,387 7,862 480
PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
GROSS AMOUNTS AT WHICH CARRIED
AS OF DECEMBER 31, 2000
--------------------------------------- ACCUMULATED DATE OF
BUILDING & DEPRECIATION CONSTRUCTION/
DESCRIPTION LAND IMPROVEMENTS TOTAL(a)(b) (c) ACQUISITION
- ----------- ---------- ------------ ----------- ------------ ----------------------
Great Southwest Distribution
Center..................... 17,530 104,574 122,104 (8,239) 1994, 1995, 1996,
1997, 1998, 1999, 2000
Great Southwest Industrial
Center I................... 308 2,216 2,524 (371) 1995
Lone Star Distribution
Center..................... 511 3,028 3,539 (485) 1996
Northgate Distribution
Center..................... 4,653 28,482 33,135 (3,219) 1994, 1996, 1999
Northpark Business Center.... 197 1,380 1,577 (260) 1995
Plano Distribution Center.... 3,915 22,281 26,196 (1,274) 1999
Redbird Distribution
Center..................... 1,096 6,383 7,479 (577) 1994, 1999
Royal Commerce Center........ 1,975 11,800 13,775 (1,397) 1997
Stemmons Distribution
Center..................... 272 1,944 2,216 (380) 1995
Stemmons Industrial Center... 2,279 15,288 17,567 (2,364) 1994, 1995, 1996, 1999
Trinity Mills Distribution
Center..................... 4,909 29,528 34,437 (2,893) 1996, 1999
Valwood Distribution
Center..................... 4,430 25,585 30,015 (1,455) 1999
Denver, Colorado
Denver Business Center....... 1,160 14,285 15,445 (3,001) 1992, 1994, 1996
Downing Distribution
Center..................... -- 3,943 3,943 (185) 1999
Havana Distribution Center... 401 2,591 2,992 (672) 1993
Moline Distribution Center... 327 2,041 2,368 (471) 1994
Moncrieff Distribution
Center..................... 314 2,922 3,236 (795) 1992
Pagosa Distribution Center... 406 2,753 3,159 (771) 1993
Peoria Distribution Center... 1,654 9,421 11,075 (566) 1999
Upland Distribution Center
I.......................... 1,967 20,779 22,746 (3,274) 1992, 1994, 1995, 2000
Upland Distribution Center
II......................... 2,489 15,816 18,305 (3,819) 1993, 1994
East Bay (San Francisco),
California
Barrington Business Center... 1,741 10,353 12,094 (592) 1999
Central Valley Distribution
Center..................... 5,181 29,356 34,537 (1,672) 1999
Central Valley Industrial
Center..................... 6,382 36,220 42,602 (2,063) 1999
East Bay Industrial Center... 531 3,503 4,034 (743) 1994
Eigenbrodt Way Distribution
Center..................... 393 2,466 2,859 (561) 1993
Hayward Commerce Center...... 1,933 11,918 13,851 (2,731) 1993
Hayward Commerce Park........ 2,764 18,442 21,206 (4,227) 1994
Hayward Distribution
Center..................... 3,327 20,064 23,391 (4,743) 1993
Hayward Industrial Center.... 4,481 28,041 32,522 (6,465) 1993
Patterson Pass Business
Center..................... 6,255 17,873 24,128 (2,233) 1993, 1997, 1998, 2000
San Leandro Distribution
Center..................... 1,387 8,342 9,729 (1,985) 1993
106
109
PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
INITIAL COST TO
PROLOGIS
----------------------- COSTS CAPITALIZED
NO. OF ENCUM- BUILDING & SUBSEQUENT
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION
- ----------- ------ ------- -------- ------------ -----------------
El Paso, Texas
Billy the Kid Distribution
Center..................... 1 273 1,547 552
Goodyear Distribution
Center..................... 1 511 2,899 77
Northwestern Corporate
Center..................... 7 1,552 -- 19,295
Vista Corporate Center....... 4 1,945 -- 11,062
Vista Del Sol Industrial
Center..................... 5 (f) 1,245 -- 20,352
Fort Lauderdale/Miami, Florida
Airport West Distribution
Center..................... 2 1,253 3,825 3,252
CenterPort Distribution
Center..................... 4 3,091 11,806 7,263
Copans Distribution Center... 2 504 2,857 352
North Andrews Distribution
Center..................... 1 (g) 698 3,956 97
Port Lauderdale Distribution
Center..................... 7 7,384 6,654 22,138
Houston, Texas
Brittmore Distribution
Center..................... 2 1,838 10,417 703
Crosstimbers Distribution
Center..................... 1 359 2,035 514
Hempstead Distribution
Center..................... 3 1,013 5,740 933
I-10 Central Distribution
Center..................... 2 181 1,023 295
I-10 Central Service
Center..................... 1 58 330 119
Jersey Village Corporate
Center..................... 1 1,536 -- 11,938
Perimeter Distribution
Center..................... 2 813 4,604 1,907
Pine Forest Business
Center..................... 18 (e) 4,859 27,557 3,098
Pine North Distribution
Center..................... 2 847 4,800 350
Pine Timbers Distribution
Center..................... 2 2,956 16,750 1,350
Pinemont Distribution
Center..................... 2 642 3,636 275
Post Oak Business Center..... 15 (e) 3,005 15,378 3,723
Post Oak Distribution
Center..................... 7 (e) 2,115 12,017 3,329
South Loop Distribution
Center..................... 5 1,051 5,964 1,843
Southwest Freeway Industrial
Center..................... 1 84 476 171
West by Northwest Industrial
Center..................... 17 4,749 8,382 36,122
White Street Distribution
Center..................... 1 469 2,656 307
I-95 Corridor, New Jersey
Amerisource Distribution
Center..................... 1 1,406 7,930 --
Bellmawr Distribution
Center..................... 1 212 1,197 49
Brunswick Distribution
Center..................... 2 870 4,928 1,542
PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
GROSS AMOUNTS AT WHICH CARRIED
AS OF DECEMBER 31, 2000
--------------------------------------- ACCUMULATED DATE OF
BUILDING & DEPRECIATION CONSTRUCTION/
DESCRIPTION LAND IMPROVEMENTS TOTAL(a)(b) (c) ACQUISITION
- ----------- ---------- ------------ ----------- ------------ ----------------------
El Paso, Texas
Billy the Kid Distribution
Center..................... 273 2,099 2,372 (462) 1994
Goodyear Distribution
Center..................... 511 2,976 3,487 (652) 1994
Northwestern Corporate
Center..................... 2,354 18,493 20,847 (2,657) 1992, 1993, 1994,
1997, 1998, 2000
Vista Corporate Center....... 1,946 11,061 13,007 (1,947) 1994, 1995, 1996
Vista Del Sol Industrial
Center..................... 2,636 18,961 21,597 (2,582) 1995, 1997, 1998
Fort Lauderdale/Miami, Florida
Airport West Distribution
Center..................... 1,974 6,356 8,330 (807) 1995, 1998
CenterPort Distribution
Center..................... 3,308 18,852 22,160 (853) 1999
Copans Distribution Center... 504 3,209 3,713 (444) 1997, 1998
North Andrews Distribution
Center..................... 698 4,053 4,751 (833) 1994
Port Lauderdale Distribution
Center..................... 9,353 26,823 36,176 (2,685) 1995, 1997, 1998, 2000
Houston, Texas
Brittmore Distribution
Center..................... 1,838 11,120 12,958 (712) 1999
Crosstimbers Distribution
Center..................... 359 2,549 2,908 (559) 1994
Hempstead Distribution
Center..................... 1,013 6,673 7,686 (1,501) 1994
I-10 Central Distribution
Center..................... 181 1,318 1,499 (308) 1994
I-10 Central Service
Center..................... 58 449 507 (113) 1994
Jersey Village Corporate
Center..................... 2,063 11,411 13,474 -- 1999
Perimeter Distribution
Center..................... 813 6,511 7,324 (270) 1999
Pine Forest Business
Center..................... 4,859 30,655 35,514 (6,122) 1993, 1994, 1995
Pine North Distribution
Center..................... 847 5,150 5,997 (327) 1999
Pine Timbers Distribution
Center..................... 2,956 18,100 21,056 (1,160) 1999
Pinemont Distribution
Center..................... 642 3,911 4,553 (248) 1999
Post Oak Business Center..... 3,005 19,101 22,106 (4,531) 1993, 1994, 1996
Post Oak Distribution
Center..................... 2,115 15,346 17,461 (3,809) 1993, 1994
South Loop Distribution
Center..................... 1,052 7,806 8,858 (1,763) 1994
Southwest Freeway Industrial
Center..................... 84 647 731 (150) 1994
West by Northwest Industrial
Center..................... 4,738 44,515 49,253 (6,693) 1993, 1994, 1995,
1996, 1997, 1998, 1999
White Street Distribution
Center..................... 469 2,963 3,432 (586) 1995
I-95 Corridor, New Jersey
Amerisource Distribution
Center..................... 1,406 7,930 9,336 (454) 1999
Bellmawr Distribution
Center..................... 211 1,247 1,458 (75) 1999
Brunswick Distribution
Center..................... 870 6,470 7,340 (1,177) 1997
107
110
PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
INITIAL COST TO
PROLOGIS
----------------------- COSTS CAPITALIZED
NO. OF ENCUM- BUILDING & SUBSEQUENT
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION
- ----------- ------ ------- -------- ------------ -----------------
Clearview Distribution
Center..................... 1 2,232 12,648 411
Cranbury Business Park....... 2 4,015 -- 16,357
Kilmer Distribution Center... 4 (d) 2,526 14,313 723
Kraft Distribution Center.... 2 6,582 37,296 33,398
Meadowland Industrial
Center..................... 8 (d) 5,676 32,167 12,369
Mt. Laurel Distribution
Center..................... 3 826 4,679 64
National Distribution
Center..................... 2 513 2,908 1,023
Pennsauken Distribution
Center..................... 4 490 2,778 5
Indianapolis, Indiana
Airport Business Center...... 2 600 3,406 4,211
Eastside Distribution
Center..................... 3 1,447 8,197 345
North by Northeast
Distribution Center........ 1 1,058 -- 6,346
Park 100 Industrial Center... 25 10,751 60,928 6,434
Park Fletcher Distribution
Center..................... 9 2,687 15,224 3,406
Shadeland Industrial
Center..................... 3 428 2,431 986
Juarez, Mexico
Salvacar Industrial Center... 5 2,175 -- 10,121
Ramon Rivera Industrial
Center..................... 1 445 -- 3,142
Los Aztecas Industrial
Center..................... 1 148 837 54
Kansas City, Kansas/Missouri
44th Street Business
Center..................... 1 143 813 406
Congleton Distribution
Center..................... 3 518 2,937 449
Executive Park Distribution
Center..................... 1 (f) 258 1,463 198
Lamar Distribution Center.... 1 323 1,829 737
Macon Bedford Distribution
Center..................... 1 304 1,725 474
Platte Valley Industrial
Center..................... 11 (f) 3,867 20,017 7,946
Riverside Distribution
Center..................... 5 533 3,024 996
Riverside Industrial
Center..................... 5 (f) 1,012 5,736 955
Terrace & Lackman
Distribution Center........ 1 285 1,615 446
Las Vegas, Nevada
Black Mountain Distribution
Center..................... 2 1,108 -- 7,635
Cameron Business Center...... 1 (f) 1,634 9,256 37
Hughes Airport Center........ 1 876 -- 3,255
Las Vegas Corporate Center... 8 (h) 5,210 -- 28,226
Placid Street Distribution
Center..................... 1 (f) 2,620 14,848 2
PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
GROSS AMOUNTS AT WHICH CARRIED
AS OF DECEMBER 31, 2000
--------------------------------------- ACCUMULATED DATE OF
BUILDING & DEPRECIATION CONSTRUCTION/
DESCRIPTION LAND IMPROVEMENTS TOTAL(a)(b) (c) ACQUISITION
- ----------- ---------- ------------ ----------- ------------ ----------------------
Clearview Distribution
Center..................... 2,232 13,059 15,291 (1,854) 1996
Cranbury Business Park....... 5,688 14,684 20,372 (294) 1999, 2000
Kilmer Distribution Center... 2,526 15,036 17,562 (2,247) 1996
Kraft Distribution Center.... 6,582 70,694 77,276 (2,124) 1999
Meadowland Industrial
Center..................... 5,677 44,535 50,212 (7,248) 1996, 1998
Mt. Laurel Distribution
Center..................... 826 4,743 5,569 (272) 1999
National Distribution
Center..................... 513 3,931 4,444 (508) 1998
Pennsauken Distribution
Center..................... 490 2,783 3,273 (159) 1999
Indianapolis, Indiana
Airport Business Center...... 934 7,283 8,217 (341) 1999
Eastside Distribution
Center..................... 1,448 8,541 9,989 (835) 1995, 1999
North by Northeast
Distribution Center........ 1,059 6,345 7,404 (1,341) 1995
Park 100 Industrial Center... 10,646 67,467 78,113 (11,859) 1994, 1995, 1999
Park Fletcher Distribution
Center..................... 2,785 18,532 21,317 (3,151) 1994, 1995, 1996
Shadeland Industrial
Center..................... 429 3,416 3,845 (616) 1995
Juarez, Mexico
Salvacar Industrial Center... 2,996 9,300 12,296 (710) 1998, 1999, 2000
Ramon Rivera Industrial
Center..................... 2,246 1,341 3,587 (18) 2000
Los Aztecas Industrial
Center..................... -- 1,039 1,039 (38) 1999
Kansas City, Kansas/Missouri
44th Street Business
Center..................... 143 1,219 1,362 (200) 1996
Congleton Distribution
Center..................... 518 3,386 3,904 (747) 1994
Executive Park Distribution
Center..................... 258 1,661 1,919 (128) 1998
Lamar Distribution Center.... 323 2,566 2,889 (616) 1994
Macon Bedford Distribution
Center..................... 304 2,199 2,503 (404) 1996
Platte Valley Industrial
Center..................... 4,002 27,828 31,830 (5,126) 1994, 1997
Riverside Distribution
Center..................... 534 4,019 4,553 (918) 1994
Riverside Industrial
Center..................... 1,012 6,691 7,703 (1,386) 1994
Terrace & Lackman
Distribution Center........ 285 2,061 2,346 (481) 1994
Las Vegas, Nevada
Black Mountain Distribution
Center..................... 1,206 7,537 8,743 (719) 1997
Cameron Business Center...... 1,634 9,293 10,927 (530) 1999
Hughes Airport Center........ 910 3,221 4,131 (731) 1994
Las Vegas Corporate Center... 6,390 27,046 33,436 (3,526) 1994, 1995, 1996, 1997
Placid Street Distribution
Center..................... 2,620 14,850 17,470 (846) 1999
108
111
PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
INITIAL COST TO
PROLOGIS
----------------------- COSTS CAPITALIZED
NO. OF ENCUM- BUILDING & SUBSEQUENT
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION
- ----------- ------ ------- -------- ------------ -----------------
South Arville Center......... 1 1,440 8,160 15
West One Business Center..... 4 (f) 2,468 13,985 816
Lille, France
Lille Business Park.......... 1 90 510 2,225
Los Angeles/Orange County,
California
Chatsworth Distribution
Center..................... 1 295 1,668 1,397
Inland Empire Distribution
Center..................... 1 889 5,037 4,475
Louisville, Kentucky
Airpark Commerce Center...... 4 1,583 8,971 5,730
Louisville Distribution
Center..................... 2 680 3,402 4,573
Riverport Distribution
Center..................... 1 (f) 1,515 8,585 301
Lyon, France
L'Isle d'Abeau Distribution
Center..................... 1 1,456 -- 4,934
Memphis, Tennessee
Airport Distribution
Center..................... 20 7,160 40,573 9,302
Delp Distribution Center..... 10 (f) 4,886 27,687 7,580
Fred Jones Distribution
Center..................... 1 125 707 161
Olive Branch Distribution
Center..................... 2 (f) 2,892 16,389 116
Raines Distribution Center... 1 (f) 1,635 9,264 2,721
Southwide Industrial
Center..................... 4 725 4,105 119
Willow Lake Distribution
Center..................... 1 (f) 613 3,474 6
Milan, Italy
Piacenza Distribution
Center..................... 2 478 -- 15,719
Monterrey, Mexico
Monterrey Industrial Park.... 9 5,220 3,785 27,948
Ojo de Agua Industrial
Center..................... 1 983 -- 6,681
Nashville, Tennessee
Bakertown Distribution
Center..................... 2 463 2,626 372
I-40 Industrial Center....... 4 1,711 9,698 613
Interchange City Distribution
Center..................... 7 3,524 12,585 10,446
Nashville/I-24 Distribution
Center..................... 1 266 -- 5,657
Space Park South Distribution
Center..................... 15 3,499 19,830 3,832
PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
GROSS AMOUNTS AT WHICH CARRIED
AS OF DECEMBER 31, 2000
--------------------------------------- ACCUMULATED DATE OF
BUILDING & DEPRECIATION CONSTRUCTION/
DESCRIPTION LAND IMPROVEMENTS TOTAL(a)(b) (c) ACQUISITION
- ----------- ---------- ------------ ----------- ------------ ----------------------
South Arville Center......... 1,440 8,175 9,615 (466) 1999
West One Business Center..... 2,468 14,801 17,269 (2,203) 1996
Lille, France
Lille Business Park.......... 99 2,726 2,825 (20) 1999
Los Angeles/Orange County,
California
Chatsworth Distribution
Center..................... 491 2,869 3,360 (163) 1999
Inland Empire Distribution
Center..................... 1,546 8,855 10,401 (507) 1999
Louisville, Kentucky
Airpark Commerce Center...... 1,583 14,701 16,284 (1,356) 1998
Louisville Distribution
Center..................... 689 7,966 8,655 (979) 1995, 1998
Riverport Distribution
Center..................... 1,515 8,886 10,401 (489) 1999
Lyon, France
L'Isle d'Abeau Distribution
Center..................... 1,138 5,252 6,390 -- 2000
Memphis, Tennessee
Airport Distribution
Center..................... 7,160 49,875 57,035 (8,107) 1995, 1996, 1999
Delp Distribution Center..... 4,886 35,267 40,153 (4,169) 1995, 1997, 1999
Fred Jones Distribution
Center..................... 125 868 993 (181) 1994
Olive Branch Distribution
Center..................... 2,892 16,505 19,397 (951) 1999
Raines Distribution Center... 1,635 11,985 13,620 (1,657) 1998
Southwide Industrial
Center..................... 724 4,225 4,949 (247) 1999
Willow Lake Distribution
Center..................... 613 3,480 4,093 (199) 1999
Milan, Italy
Piacenza Distribution
Center..................... 2,640 13,557 16,197 -- 2000
Monterrey, Mexico
Monterrey Industrial Park.... 9,036 27,917 36,953 (2,111) 1997, 1998, 1999, 2000
Ojo de Agua Industrial
Center..................... 1,881 5,783 7,664 (356) 1998
Nashville, Tennessee
Bakertown Distribution
Center..................... 463 2,998 3,461 (517) 1995
I-40 Industrial Center....... 1,712 10,310 12,022 (1,153) 1995, 1996, 1999
Interchange City Distribution
Center..................... 4,279 22,276 26,555 (3,093) 1994, 1995, 1996,
1997, 1998
Nashville/I-24 Distribution
Center..................... 1,251 4,672 5,923 -- 2000
Space Park South Distribution
Center..................... 3,499 23,662 27,161 (5,026) 1994
109
112
PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
INITIAL COST TO
PROLOGIS
----------------------- COSTS CAPITALIZED
NO. OF ENCUM- BUILDING & SUBSEQUENT
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION
- ----------- ------ ------- -------- ------------ -----------------
Oklahoma City, Oklahoma
Melcat Distribution Center... 1 240 1,363 720
Meridian Business Center..... 2 195 1,109 639
Oklahoma Distribution
Center..................... 3 893 5,082 760
Orlando, Florida
33rd Street Industrial
Center..................... 9 (g) 1,980 11,237 1,533
Chancellor Distribution
Center..................... 1 380 2,156 1,143
Consulate Distribution
Center..................... 5 (f) 5,354 30,335 1,695
La Quinta Distribution
Center..................... 1 354 2,006 650
Orlando Central Park......... 3 1,378 -- 9,113
Orlando Corporate Center..... 2 1,081 -- 7,130
Princeton Oaks Distribution
Center..................... 1 (f) 900 5,100 --
Titusville Industrial
Center..................... 1 (f) 283 1,603 97
Paris, France
Cergy-Pontoise............... 1 1,258 -- 7,466
Phoenix, Arizona
24th Street Industrial
Center..................... 2 503 2,852 551
Alameda Distribution
Center..................... 2 820 4,977 813
Black Canyon Business
Center..................... 3 717 4,062 242
Brookridge Distribution
Center..................... 1 1,628 9,228 --
Hohokam 10 Industrial
Center..................... 6 4,258 7,467 11,183
I-10 West Business Center.... 3 263 1,525 281
Kyrene Commons Distribution
Center..................... 3 2,369 5,475 3
Kyrene Commons South
Distribution Center........ 2 1,096 -- 4,990
Martin Van Buren Distribution
Center..................... 6 572 3,285 754
Papago Distribution Center... 1 420 2,383 175
Pima Distribution Center..... 1 306 1,742 268
Watkins Distribution
Center..................... 1 242 1,375 260
Portland, Oregon
Argyle Distribution Center... 3 946 5,388 582
Columbia Distribution
Center..................... 2 550 3,121 285
Jennifer Distribution
Center..................... 2 1,712 -- 6,658
PDX Corporate Center East.... 6 (h) 3,288 -- 20,708
PDX Corporate Center North... 7 (h) 2,405 -- 10,637
Wilsonville Corporate
Center..................... 6 (h) 2,963 -- 14,346
PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
GROSS AMOUNTS AT WHICH CARRIED
AS OF DECEMBER 31, 2000
--------------------------------------- ACCUMULATED DATE OF
BUILDING & DEPRECIATION CONSTRUCTION/
DESCRIPTION LAND IMPROVEMENTS TOTAL(a)(b) (c) ACQUISITION
- ----------- ---------- ------------ ----------- ------------ ----------------------
Oklahoma City, Oklahoma
Melcat Distribution Center... 240 2,083 2,323 (404) 1994
Meridian Business Center..... 196 1,747 1,943 (380) 1994
Oklahoma Distribution
Center..................... 893 5,842 6,735 (1,486) 1993
Orlando, Florida
33rd Street Industrial
Center..................... 1,980 12,770 14,750 (2,300) 1994, 1995, 1996
Chancellor Distribution
Center..................... 380 3,299 3,679 (596) 1994
Consulate Distribution
Center..................... 5,353 32,031 37,384 (1,835) 1999
La Quinta Distribution
Center..................... 354 2,656 3,010 (495) 1994
Orlando Central Park......... 1,871 8,620 10,491 (808) 1997, 1998
Orlando Corporate Center..... 1,429 6,782 8,211 (353) 1999
Princeton Oaks Distribution
Center..................... 900 5,100 6,000 (290) 1999
Titusville Industrial
Center..................... 283 1,700 1,983 (347) 1994
Paris, France
Cergy-Pontoise............... 1,333 7,391 8,724 -- 2000
Phoenix, Arizona
24th Street Industrial
Center..................... 503 3,403 3,906 (792) 1994
Alameda Distribution
Center..................... 820 5,790 6,610 (1,129) 1992, 1998
Black Canyon Business
Center..................... 717 4,304 5,021 (242) 1999
Brookridge Distribution
Center..................... 1,628 9,228 10,856 (525) 1999
Hohokam 10 Industrial
Center..................... 4,258 18,650 22,908 (2,422) 1996, 1999
I-10 West Business Center.... 263 1,806 2,069 (461) 1993
Kyrene Commons Distribution
Center..................... 1,093 6,754 7,847 (1,104) 1992, 1998, 1999
Kyrene Commons South
Distribution Center........ 1,163 4,923 6,086 (463) 1998
Martin Van Buren Distribution
Center..................... 572 4,039 4,611 (955) 1993, 1994
Papago Distribution Center... 420 2,558 2,978 (577) 1994
Pima Distribution Center..... 306 2,010 2,316 (478) 1993
Watkins Distribution
Center..................... 243 1,634 1,877 (324) 1995
Portland, Oregon
Argyle Distribution Center... 946 5,970 6,916 (1,438) 1993
Columbia Distribution
Center..................... 551 3,405 3,956 (711) 1994
Jennifer Distribution
Center..................... 2,303 6,067 8,370 (633) 1998, 1999
PDX Corporate Center East.... 4,468 19,528 23,996 (1,811) 1997, 1998, 1999
PDX Corporate Center North... 2,542 10,500 13,042 (1,952) 1995, 1996
Wilsonville Corporate
Center..................... 2,964 14,345 17,309 (2,188) 1995, 1996
110
113
PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
INITIAL COST TO
PROLOGIS
----------------------- COSTS CAPITALIZED
NO. OF ENCUM- BUILDING & SUBSEQUENT
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION
- ----------- ------ ------- -------- ------------ -----------------
Reno, Nevada
Golden Valley Distribution
Center..................... 2 560 -- 10,111
Meredith Kleppe Business
Center..................... 5 1,573 8,949 1,304
Pacific Industrial Center.... 4 2,501 -- 10,668
Packer Way Business Center... 3 458 2,604 720
Packer Way Distribution
Center..................... 2 506 2,879 697
Damonte Ranch Dist Ctr....... 2 4,579 -- 8,513
Spice Island Distribution
Center..................... 1 435 2,466 803
Reynosa, Mexico
Colonial Industrial Center... 2 943 1,574 2,436
Del Norte Industrial
Center..................... 2 809 -- 6,153
Del Norte Industrial Center
II......................... 1 675 -- 604
Reynosa Industrial Center
III........................ 1 401 -- 3,612
Reynosa Industrial Center.... 6 2,035 1,038 13,890
Rio Grande Valley, Texas
Rio Grande Distribution
Center..................... 5 (f) 527 2,987 801
Rio Grande Industrial
Center..................... 8 (f) 2,188 12,399 1,994
Valley Industrial Center..... 1 230 -- 3,703
Rotterdam, Netherlands
DistriPark Maasvlakte........ 2 -- -- 15,742
Salt Lake City, Utah
Centennial Distribution
Center..................... 2 1,149 -- 8,211
Clearfield Distribution
Center..................... 2 2,500 14,165 757
Crossroads Corporate
Center..................... 1 642 -- 3,217
Salt Lake International
Distribution Center........ 2 1,367 2,792 8,268
San Antonio, Texas
10711 Distribution Center.... 2 582 3,301 590
Coliseum Distribution
Center..................... 2 1,102 2,380 10,382
Distribution Drive Center.... 1 473 2,680 668
Downtown Distribution
Center..................... 1 241 1,364 250
I-10 Central Distribution
Center..................... 1 223 1,275 214
I-35 Business Center......... 4 663 3,773 910
Landmark One Distribution
Center..................... 1 341 1,933 368
Macro Distribution Center.... 1 225 1,282 259
Perrin Creek Corporate
Center..................... 6 1,547 -- 9,887
PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
GROSS AMOUNTS AT WHICH CARRIED
AS OF DECEMBER 31, 2000
--------------------------------------- ACCUMULATED DATE OF
BUILDING & DEPRECIATION CONSTRUCTION/
DESCRIPTION LAND IMPROVEMENTS TOTAL(a)(b) (c) ACQUISITION
- ----------- ---------- ------------ ----------- ------------ ----------------------
Reno, Nevada
Golden Valley Distribution
Center..................... 2,035 8,636 10,671 (1,118) 1996, 1998
Meredith Kleppe Business
Center..................... 1,573 10,253 11,826 (2,478) 1993
Pacific Industrial Center.... 2,501 10,668 13,169 (1,967) 1994, 1995
Packer Way Business Center... 458 3,324 3,782 (811) 1993
Packer Way Distribution
Center..................... 506 3,576 4,082 (867) 1993
Damonte Ranch Dist Ctr....... 6,228 6,864 13,092 -- 1998, 2000
Spice Island Distribution
Center..................... 435 3,269 3,704 (497) 1996
Reynosa, Mexico
Colonial Industrial Center... 670 4,283 4,953 (70) 1999, 2000
Del Norte Industrial
Center..................... 1,065 5,897 6,962 (533) 1998
Del Norte Industrial Center
II......................... 1,274 5 1,279 -- 2000
Reynosa Industrial Center
III........................ 481 3,532 4,013 (121) 2000
Reynosa Industrial Center.... 2,313 14,650 16,963 (1,301) 1997, 1998, 1999
Rio Grande Valley, Texas
Rio Grande Distribution
Center..................... 527 3,788 4,315 (729) 1995
Rio Grande Industrial
Center..................... 2,188 14,393 16,581 (2,828) 1995
Valley Industrial Center..... 363 3,570 3,933 (352) 1997
Rotterdam, Netherlands
DistriPark Maasvlakte........ -- 15,742 15,742 -- 1999, 2000
Salt Lake City, Utah
Centennial Distribution
Center..................... 1,149 8,211 9,360 (1,433) 1995
Clearfield Distribution
Center..................... 2,481 14,941 17,422 (2,597) 1995
Crossroads Corporate
Center..................... 719 3,140 3,859 -- 2000
Salt Lake International
Distribution Center........ 1,364 11,063 12,427 (1,867) 1994, 1995, 1996
San Antonio, Texas
10711 Distribution Center.... 582 3,891 4,473 (942) 1994
Coliseum Distribution
Center..................... 1,613 12,251 13,864 (2,611) 1994, 1995
Distribution Drive Center.... 473 3,348 3,821 (953) 1992
Downtown Distribution
Center..................... 241 1,614 1,855 (398) 1994
I-10 Central Distribution
Center..................... 240 1,472 1,712 (437) 1992
I-35 Business Center......... 663 4,683 5,346 (1,216) 1993
Landmark One Distribution
Center..................... 341 2,301 2,642 (497) 1994
Macro Distribution Center.... 225 1,541 1,766 (413) 1993
Perrin Creek Corporate
Center..................... 1,634 9,800 11,434 (1,476) 1995, 1996
111
114
PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
INITIAL COST TO
PROLOGIS
----------------------- COSTS CAPITALIZED
NO. OF ENCUM- BUILDING & SUBSEQUENT
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION
- ----------- ------ ------- -------- ------------ -----------------
San Antonio Distribution
Center I................... 13 2,154 12,247 3,803
San Antonio Distribution
Center II.................. 3 945 -- 5,963
San Antonio Distribution
Center III................. 8 2,539 9,684 7,628
Tri-County Distribution
Center..................... 1 672 -- 4,902
Woodlake Distribution
Center..................... 2 248 1,405 452
Seattle, Washington
Andover East Business
Center..................... 2 535 3,033 278
Fife Corporate Center........ 3 4,059 -- 10,223
Kent Corporate Center........ 2 (h) 2,882 1,987 8,595
Park at Woodinville A........ 5 (f) 1,937 10,976 528
Van Doren's Distribution
Center..................... 3 (h) 3,663 -- 12,811
South Bay (San Francisco),
California
Bayside Business Center...... 2 (h) 2,088 -- 4,548
Bayside Corporate Center..... 7 (h) 4,365 -- 15,963
Bayside Plaza I.............. 12 (h) 5,212 18,008 1,403
Bayside Plaza II............. 2 (h) 634 -- 2,892
Gateway Corporate Center..... 11 (f)(h) 7,575 24,746 4,896
Mowry Business Center........ 4 5,933 -- 17,943
Overlook Distribution
Center..................... 1 1,573 8,915 29
Shoreline Business Center.... 8 (h) 4,328 16,101 810
Shoreline Business Center
II......................... 2 (h) 922 -- 4,721
Spinnaker Business Center.... 12 (h) 7,043 25,220 1,700
Thornton Business Center..... 5 (f) 3,988 11,706 6,169
Trimble Distribution
Center..................... 5 2,836 16,067 1,312
St. Louis, Missouri
Earth City Industrial
Center..................... 10 (f) 5,750 19,144 12,475
Hazelwood Distribution
Center..................... 2 (f) 847 4,802 113
Westport Distribution
Center..................... 3 (f) 761 4,310 272
Tampa, Florida
Adamo Distribution Center.... 1 105 595 346
Clearwater Distribution
Center..................... 1 (g) 87 504 --
Commerce Park Distribution
Center..................... 4 811 4,597 813
Eastwood Distribution
Center..................... 1 (g) 122 690 95
Joe's Creek Distribution
Center..................... 2 (g) 161 909 134
Lakeland Distribution
Center..................... 1 938 5,313 602
Orchid Lake Industrial
Center..................... 1 41 235 20
PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
GROSS AMOUNTS AT WHICH CARRIED
AS OF DECEMBER 31, 2000
--------------------------------------- ACCUMULATED DATE OF
BUILDING & DEPRECIATION CONSTRUCTION/
DESCRIPTION LAND IMPROVEMENTS TOTAL(a)(b) (c) ACQUISITION
- ----------- ---------- ------------ ----------- ------------ ----------------------
San Antonio Distribution
Center I................... 2,154 16,050 18,204 (4,449) 1992, 1993, 1994
San Antonio Distribution
Center II.................. 885 6,023 6,908 (1,332) 1994
San Antonio Distribution
Center III................. 2,704 17,147 19,851 (2,389) 1996, 1998, 1999
Tri-County Distribution
Center..................... 741 4,833 5,574 -- 2000
Woodlake Distribution
Center..................... 248 1,857 2,105 (359) 1994
Seattle, Washington
Andover East Business
Center..................... 535 3,311 3,846 (720) 1994
Fife Corporate Center........ 4,209 10,073 14,282 (1,446) 1996
Kent Corporate Center........ 3,216 10,248 13,464 (2,082) 1995
Park at Woodinville A........ 1,937 11,504 13,441 (663) 1999
Van Doren's Distribution
Center..................... 4,108 12,366 16,474 (1,440) 1995, 1997, 1999
South Bay (San Francisco),
California
Bayside Business Center...... 2,088 4,548 6,636 (776) 1996
Bayside Corporate Center..... 4,365 15,963 20,328 (3,604) 1995, 1996
Bayside Plaza I.............. 5,216 19,407 24,623 (4,502) 1993
Bayside Plaza II............. 634 2,892 3,526 (985) 1994
Gateway Corporate Center..... 7,575 29,642 37,217 (7,315) 1993, 1996
Mowry Business Center........ 7,815 16,061 23,876 (1,526) 1997, 1998
Overlook Distribution
Center..................... 1,573 8,944 10,517 (510) 1999
Shoreline Business Center.... 4,328 16,911 21,239 (3,952) 1993
Shoreline Business Center
II......................... 922 4,721 5,643 (1,267) 1995
Spinnaker Business Center.... 7,043 26,920 33,963 (6,366) 1993
Thornton Business Center..... 3,989 17,874 21,863 (3,637) 1993, 1996
Trimble Distribution
Center..................... 2,836 17,379 20,215 (4,025) 1994
St. Louis, Missouri
Earth City Industrial
Center..................... 5,936 31,433 37,369 (3,128) 1997, 1998, 1999
Hazelwood Distribution
Center..................... 847 4,915 5,762 (367) 1997, 1999
Westport Distribution
Center..................... 761 4,582 5,343 (535) 1997
Tampa, Florida
Adamo Distribution Center.... 105 941 1,046 (136) 1995
Clearwater Distribution
Center..................... 81 510 591 (111) 1994
Commerce Park Distribution
Center..................... 811 5,410 6,221 (1,118) 1994
Eastwood Distribution
Center..................... 122 785 907 (171) 1994
Joe's Creek Distribution
Center..................... 160 1,044 1,204 (227) 1994
Lakeland Distribution
Center..................... 938 5,915 6,853 (1,281) 1994
Orchid Lake Industrial
Center..................... 41 255 296 (51) 1994
112
115
PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
INITIAL COST TO
PROLOGIS
----------------------- COSTS CAPITALIZED
NO. OF ENCUM- BUILDING & SUBSEQUENT
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION
- ----------- ------ ------- -------- ------------ -----------------
Plant City Distribution
Center..................... 1 (g) 206 1,169 128
Sabal Park Distribution
Center..................... 7 (d) 2,341 5,610 15,574
Silo Bend Distribution
Center..................... 4 (g) 2,887 16,358 1,178
Silo Bend Industrial
Center..................... 1 (g) 525 2,975 346
St. Petersburg Service
Center..................... 1 35 197 22
Tampa East Distribution
Center..................... 10 (g) 2,700 15,302 1,578
Tampa East Industrial
Center..................... 2 (g) 332 1,880 307
Tampa West Distribution
Center..................... 15 (g) 3,273 18,659 2,867
Tampa West Industrial
Center..................... 4 (g) 437 471 5,587
Tampa West Service Center.... 2 (g) 422 2,569 165
Tijuana, Mexico
Tijuana Industrial Center.... 4 2,389 -- 20,058
Tulsa, Oklahoma
52nd Street Distribution
Center..................... 1 340 1,924 241
70th East Distribution
Center..................... 1 129 733 315
Expressway Distribution
Center..................... 4 573 3,280 808
Henshaw Distribution
Center..................... 3 500 2,829 221
Warsaw, Poland
Blonie Industrial Park....... 1 1,378 -- 8,455
Teresin Distribution
Center..................... 1 1,618 -- 10,907
Washington D.C./Baltimore,
Maryland
Airport Commons Distribution
Center..................... 2 (d) 2,320 -- 9,203
Ardmore Distribution
Center..................... 3 1,431 8,110 847
Ardmore Industrial Center.... 2 984 5,581 792
Concorde Industrial Center... 4 (d) 1,538 8,717 2,090
De Soto Business Park........ 5 1,774 10,055 5,408
Eisenhower Industrial
Center..................... 3 (d) 1,240 7,025 1,481
Fleet Distribution Center.... 8 (d) 3,198 18,121 1,746
Gateway Distribution
Center..................... 3 774 -- 7,389
Hampton Central Distribution
Center..................... 3 3,067 -- 16,640
Meadowridge Distribution
Center..................... 3 (d) 4,752 -- 6,811
Patapsco Distribution
Center..................... 1 270 1,528 1,078
Sunnyside Industrial
Center..................... 3 1,541 8,733 1,407
Other.......................... 3 (g) 823 4,693 14
----- -------- ---------- ----------
Total Operating
Properties........... 1,244 588,915 2,231,458 1,439,903
----- -------- ---------- ----------
PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
GROSS AMOUNTS AT WHICH CARRIED
AS OF DECEMBER 31, 2000
--------------------------------------- ACCUMULATED DATE OF
BUILDING & DEPRECIATION CONSTRUCTION/
DESCRIPTION LAND IMPROVEMENTS TOTAL(A)(B) (C) ACQUISITION
- ----------- ---------- ------------ ----------- ------------ ----------------------
Plant City Distribution
Center..................... 206 1,297 1,503 (263) 1994
Sabal Park Distribution
Center..................... 2,678 20,847 23,525 (1,657) 1998
Silo Bend Distribution
Center..................... 2,887 17,536 20,423 (3,479) 1994
Silo Bend Industrial
Center..................... 525 3,321 3,846 (695) 1994
St. Petersburg Service
Center..................... 35 219 254 (44) 1994
Tampa East Distribution
Center..................... 2,541 17,039 19,580 (3,512) 1994
Tampa East Industrial
Center..................... 332 2,187 2,519 (451) 1994
Tampa West Distribution
Center..................... 3,319 21,480 24,799 (4,396) 1994, 1995
Tampa West Industrial
Center..................... 717 5,778 6,495 (787) 1994, 1996, 1998
Tampa West Service Center.... 423 2,733 3,156 (537) 1994
Tijuana, Mexico
Tijuana Industrial Center.... 7,244 15,203 22,447 (424) 1999, 2000
Tulsa, Oklahoma
52nd Street Distribution
Center..................... 340 2,165 2,505 (483) 1994
70th East Distribution
Center..................... 129 1,048 1,177 (213) 1994
Expressway Distribution
Center..................... 573 4,088 4,661 (1,097) 1993
Henshaw Distribution
Center..................... 499 3,051 3,550 (653) 1994
Warsaw, Poland
Blonie Industrial Park....... 1,040 8,793 9,833 -- 2000
Teresin Distribution
Center..................... 722 11,803 12,525 -- 2000
Washington D.C./Baltimore,
Maryland
Airport Commons Distribution
Center..................... 2,360 9,163 11,523 (1,225) 1997
Ardmore Distribution
Center..................... 1,431 8,957 10,388 (1,807) 1994
Ardmore Industrial Center.... 985 6,372 7,357 (1,306) 1994
Concorde Industrial Center... 1,538 10,807 12,345 (1,849) 1995
De Soto Business Park........ 1,774 15,463 17,237 (2,705) 1996
Eisenhower Industrial
Center..................... 1,240 8,506 9,746 (1,847) 1994
Fleet Distribution Center.... 3,198 19,868 23,066 (3,392) 1996
Gateway Distribution
Center..................... 1,413 6,750 8,163 (442) 1998
Hampton Central Distribution
Center..................... 4,604 15,103 19,707 (1,432) 1996, 1997, 1999
Meadowridge Distribution
Center..................... 5,920 5,643 11,563 (461) 1998, 2000
Patapsco Distribution
Center..................... 270 2,606 2,876 (494) 1995
Sunnyside Industrial
Center..................... 1,541 10,140 11,681 (2,107) 1994
Other.......................... 823 4,707 5,529 (518) 1994, 1999
---------- ---------- ---------- ---------
Total Operating
Properties........... 648,950 3,611,326 4,260,276 (476,982)
---------- ---------- ---------- ---------
113
116
FACILITIES UNDER DEVELOPMENT
Atlanta, Georgia
Breckenridge Distribution Center..... 1,035 -- 3,721 4,756 --
Greenwood Industrial Park............ 1,632 -- 3,943 5,575 --
Austin, Texas
Corridor Park Corporate Center....... 874 -- 4,466 5,340 --
Brabant, Netherlands
Tiburg Distribution Center........... 6,911 -- -- 6,911 --
Chicago, Illinois
O'Hare Cargo Distribution Center..... 2,199 -- 4,807 7,006 --
Bloomingdale 100 Business Center..... 971 -- 1,829 2,800 --
Remington Lakes Business Park........ 2,416 -- 7,477 9,893 --
Cincinnati, Ohio
Union Center Commerce Park........... 1,116 -- 3,708 4,824 --
Cologne, Germany
Cologne Eifeltor Distribution
Center............................. 2,476 -- 2,322 4,798 --
Columbus, Ohio
Capital Park South Distribution
Center............................. 320 -- 6,443 6,763 --
El Paso, Texas
Northwestern Corporate Center........ 225 -- 5,143 5,368 --
Fort Lauderdale/Miami, Florida
CenterPort Distribution Center....... 1,170 -- 2,753 3,923 --
I-95 Corridor, New Jersey
Cranbury Business Park............... 1,598 -- 7,902 9,500 --
Los Angeles / Orange County, California
Torrance Distribution Center......... 25,010 -- 18,239 43,249 --
Louisville, Kentucky
New Cut Road Distribution Center..... 2,155 -- 5,657 7,812 --
Marseille, France
Clesud Grans Miramas................. 1,247 -- -- 1,247 --
Memphis, Tennessee
Memphis Industrial Park.............. 220 -- 8,266 8,486 --
FACILITIES UNDER DEVELOPMENT
Atlanta, Georgia
Breckenridge Distribution Center..... 4,756 -- 2000
Greenwood Industrial Park............ 5,575 -- 2000
Austin, Texas
Corridor Park Corporate Center....... 5,340 -- 2000
Brabant, Netherlands
Tiburg Distribution Center........... 6,911 -- 2000
Chicago, Illinois
O'Hare Cargo Distribution Center..... 7,006 -- 2000
Bloomingdale 100 Business Center..... 2,800 -- 2000
Remington Lakes Business Park........ 9,893 -- 2000
Cincinnati, Ohio
Union Center Commerce Park........... 4,824 -- 2000
Cologne, Germany
Cologne Eifeltor Distribution
Center............................. 4,798 -- 2000
Columbus, Ohio
Capital Park South Distribution
Center............................. 6,763 -- 2000
El Paso, Texas
Northwestern Corporate Center........ 5,368 -- 2000
Fort Lauderdale/Miami, Florida
CenterPort Distribution Center....... 3,923 -- 2000
I-95 Corridor, New Jersey
Cranbury Business Park............... 9,500 -- 2000
Los Angeles / Orange County, California
Torrance Distribution Center......... 43,249 -- 2000
Louisville, Kentucky
New Cut Road Distribution Center..... 7,812 -- 2000
Marseille, France
Clesud Grans Miramas................. 1,247 -- 2000
Memphis, Tennessee
Memphis Industrial Park.............. 8,486 -- 2000
114
117
PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
INITIAL COST TO
PROLOGIS
----------------------- COSTS CAPITALIZED
NO. OF ENCUM- BUILDING & SUBSEQUENT
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION
- ----------- ------ ------- -------- ------------ -----------------
Neustadt, Germany
Neustadt..................... 904 -- --
Paris, France
ProLogis Parc Vatry.......... 4,709 -- --
Reno, Nevada
Damonte Ranch Distribution
Center..................... 1,221 -- 1,012
Reynosa, Mexico
Reynosa Industrial Center
III........................ 1,453 -- 7,702
Rotterdam, Netherlands
Moerdijk Distribution
Center..................... 1,057 -- --
Soest, Germany
Soest........................ 1,895 -- 241
Tijuana, Mexico
Tijuana Industrial Center.... 1,376 -- 1,958
Warsaw, Poland
Teresin Distribution
Center..................... 7,277 -- --
Washington D.C./Baltimore,
Maryland
ProLogis Park -- Dulles...... 2,513 -- 2,871
Troy Hill Distribution
Center..................... 4,564 -- 1,925
Kraft Distribution Center.... 1,580 -- 3,511
-------- ---------- ----------
Total Facilities Under
Development.......... 80,124 -- 105,896
-------- ---------- ----------
LAND HELD FOR DEVELOPMENT
Atlanta, Georgia
Atlanta West Distribution
Center..................... 561 -- 193
Breckenridge Distribution
Center..................... 2,504 -- 1,693
Greenwood Ind Park........... 8,353 -- 114
Riverside Distribution
Center..................... 1,107 -- 99
Austin, Texas
Southpark Corporate Center... 525 -- 64
Walnut Creek Corporate
Center..................... 135 -- 40
Barcelona, Spain
Sant Boi Park................ 16,072 -- 3,900
PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
GROSS AMOUNTS AT WHICH CARRIED
AS OF DECEMBER 31, 2000
--------------------------------------- ACCUMULATED DATE OF
BUILDING & DEPRECIATION CONSTRUCTION/
DESCRIPTION LAND IMPROVEMENTS TOTAL(a)(b) (c) ACQUISITION
- ----------- ---------- ------------ ----------- ------------ ----------------------
Neustadt, Germany
Neustadt..................... 904 -- 904 -- 2000
Paris, France
ProLogis Parc Vatry.......... 4,709 -- 4,709 -- 2000
Reno, Nevada
Damonte Ranch Distribution
Center..................... 2,233 -- 2,233 -- 2000
Reynosa, Mexico
Reynosa Industrial Center
III........................ 9,155 -- 9,155 -- 2000
Rotterdam, Netherlands
Moerdijk Distribution
Center..................... 1,057 -- 1,057 -- 2000
Soest, Germany
Soest........................ 2,136 -- 2,136 -- 2000
Tijuana, Mexico
Tijuana Industrial Center.... 3,334 -- 3,334 -- 2000
Warsaw, Poland
Teresin Distribution
Center..................... 7,277 -- 7,277 -- 2000
Washington D.C./Baltimore,
Maryland
ProLogis Park -- Dulles...... 5,384 -- 5,384 -- 2000
Troy Hill Distribution
Center..................... 6,489 -- 6,489 -- 2000
Kraft Distribution Center.... 5,091 -- 5,091 -- 2000
---------- ---------- ---------- ---------
Total Facilities Under
Development.......... 186,020 -- 186,020 --
---------- ---------- ---------- ---------
LAND HELD FOR DEVELOPMENT
Atlanta, Georgia
Atlanta West Distribution
Center..................... 754 -- 754 -- 1994
Breckenridge Distribution
Center..................... 4,197 -- 4,197 -- 1997, 1998
Greenwood Ind Park........... 8,467 -- 8,467 -- 2000
Riverside Distribution
Center..................... 1,206 -- 1,206 -- 1996
Austin, Texas
Southpark Corporate Center... 589 -- 589 -- 1996
Walnut Creek Corporate
Center..................... 175 -- 175 -- 1994, 1996
Barcelona, Spain
Sant Boi Park................ 19,972 -- 19,972 -- 2000
115
118
PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
INITIAL COST TO
PROLOGIS
----------------------- COSTS CAPITALIZED
NO. OF ENCUM- BUILDING & SUBSEQUENT
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION
- ----------- ------ ------- -------- ------------ -----------------
Brabant, Netherlands
Tilburg Distribution
Center..................... 1,711 -- --
Charlotte, North Carolina
Charlotte Distribution Center
South...................... 352 -- 1,851
Interstate North Business
Park....................... 343 -- 9
Chicago, Illinois
Bloomingdale 100 Business
Center..................... 2,462 -- 1,536
Bolingbrook Distribution
Center..................... 4,621 -- 133
O'Hare Cargo Distribution
Center..................... 6,954 -- 3,792
I-55 Distribution Center..... 11,966 630
Remington Lakes Business
Park....................... 528 -- --
Cincinatti, Ohio
Airport West Distribution
Center..................... 2,213 -- 160
Union Center Commerce Park... 297 -- 3,989
Cologne, Germany
Cologne Eifeltor Distribution
Center..................... 614 -- --
Columbus, Ohio
Capital Park South
Distribution Center........ 2,040 -- 94
International Street Commerce
Center..................... 101 -- 8
Dallas/Fort Worth, Texas
Freeport Corporate Center.... 1,705 -- 1,252
Plano Distribution Center.... 1,166 -- --
Northgate Distribution
Center..................... 806 -- 18
Arlington Corporation
Center..................... 1,241 -- 17
Lewisville Distribution
Center..................... 5,186 -- --
Denver, Colorado
Denver Business Center
Land....................... 326 -- 530
Upland Distribution Center
I.......................... 519 -- 31
East Bay (San Francisco),
California
Patterson Pass Business
Center..................... 887 -- 147
Pescadero Distribution
Center..................... 4,684 -- 235
El Paso, Texas
Northwestern Corporate
Center..................... 1,086 -- 2,125
Vista Corporate Center....... 330 -- 144
PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
GROSS AMOUNTS AT WHICH CARRIED
AS OF DECEMBER 31, 2000
--------------------------------------- ACCUMULATED DATE OF
BUILDING & DEPRECIATION CONSTRUCTION/
DESCRIPTION LAND IMPROVEMENTS TOTAL(a)(b) (c) ACQUISITION
- ----------- ---------- ------------ ----------- ------------ ----------------------
Brabant, Netherlands
Tilburg Distribution
Center..................... 1,711 -- 1,711 -- 1999
Charlotte, North Carolina
Charlotte Distribution Center
South...................... 2,203 -- 2,203 -- 1997
Interstate North Business
Park....................... 352 -- 352 -- 1997
Chicago, Illinois
Bloomingdale 100 Business
Center..................... 3,998 -- 3,998 -- 1997
Bolingbrook Distribution
Center..................... 4,754 -- 4,754 -- 1999
O'Hare Cargo Distribution
Center..................... 10,746 -- 10,746 -- 1996, 1997
I-55 Distribution Center..... 12,596 -- 12,596 -- 2000
Remington Lakes Business
Park....................... 528 -- 528 -- 1997
Cincinatti, Ohio
Airport West Distribution
Center..................... 2,373 -- 2,373 -- 2000
Union Center Commerce Park... 4,286 -- 4,286 -- 1997, 2000
Cologne, Germany
Cologne Eifeltor Distribution
Center..................... 614 -- 614 -- 2000
Columbus, Ohio
Capital Park South
Distribution Center........ 2,134 -- 2,134 -- 1994, 1998, 1999, 2000
International Street Commerce
Center..................... 109 -- 109 -- 1996
Dallas/Fort Worth, Texas
Freeport Corporate Center.... 2,957 -- 2,957 -- 1999
Plano Distribution Center.... 1,166 -- 1,166 -- 1999
Northgate Distribution
Center..................... 824 -- 824 -- 2000
Arlington Corporation
Center..................... 1,258 -- 1,258 -- 2000
Lewisville Distribution
Center..................... 5,186 -- 5,186 -- 2000
Denver, Colorado
Denver Business Center
Land....................... 856 -- 856 -- 1998
Upland Distribution Center
I.......................... 550 -- 550 -- 1997
East Bay (San Francisco),
California
Patterson Pass Business
Center..................... 1,034 -- 1,034 -- 1999
Pescadero Distribution
Center..................... 4,919 -- 4,919 -- 2000
El Paso, Texas
Northwestern Corporate
Center..................... 3,211 -- 3,211 -- 1991
Vista Corporate Center....... 474 -- 474 -- 1993
116
119
PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
INITIAL COST TO
PROLOGIS
----------------------- COSTS CAPITALIZED
NO. OF ENCUM- BUILDING & SUBSEQUENT
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION
- ----------- ------ ------- -------- ------------ -----------------
Vista Del Sol Industrial
Center..................... 324 -- 12
Vista Del Sol Industrial
Center II.................. 1,268 397
Vista Del Sol Industrial
Center III................. 306 -- 456
Houston, Texas
Jersey Village Corporate
Center..................... 3,217 -- 1,050
West by Northwest Industrial
Center..................... 898 -- 135
I-95 Corridor, New Jersey
Cranbury Business Park....... 650 -- 90
Indianapolis, Indiana
Airport Business Center...... 2,214 -- --
Lebanon Commerce Park Land... 827 -- 686
North by Northeast
Distribution Center........ 435 -- 60
Plainfield Park Distribution
Center..................... 1,082 -- 570
Juarez, Mexico
Los Aztecas Industrial
Center..................... 670 -- --
Salvacar Industrial Park..... 2,051 -- 624
Ramon Rivera Industrial
Center..................... 445 -- 22
Kansas City, MO
Executive Park............... 1,267 -- 244
Las Vegas, Nevada
Black Mountain Distribution
Center..................... 1,242 -- 114
Hughes Airport Center........ 263 -- 11
Las Vegas Corporate Center... (h) 3,891 -- 1,417
Le Havre, France
Le Havre..................... 1,105 -- --
Los Angeles/Orange County,
California
Magnolia Business Center..... 4,232 -- 42
Ontario Distribution
Center..................... 1,545 -- 74
Louisville, Kentucky
Riverport Distribution
Center..................... 600 -- --
Lyon, France
Isle d'Abeau Distribution
Center..................... 2,014 -- --
Memphis, Tennessee
Memphis Industrial Park...... 897 -- 790
PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
GROSS AMOUNTS AT WHICH CARRIED
AS OF DECEMBER 31, 2000
--------------------------------------- ACCUMULATED DATE OF
BUILDING & DEPRECIATION CONSTRUCTION/
DESCRIPTION LAND IMPROVEMENTS TOTAL(a)(b) (c) ACQUISITION
- ----------- ---------- ------------ ----------- ------------ ----------------------
Vista Del Sol Industrial
Center..................... 336 -- 336 -- 1994
Vista Del Sol Industrial
Center II.................. 1,665 -- 1,665 -- 1995, 1996
Vista Del Sol Industrial
Center III................. 762 -- 762 -- 1999
Houston, Texas
Jersey Village Corporate
Center..................... 4,267 -- 4,267 -- 1997
West by Northwest Industrial
Center..................... 1,033 -- 1,033 -- 1993
I-95 Corridor, New Jersey
Cranbury Business Park....... 740 -- 740 -- 1997,1998
Indianapolis, Indiana
Airport Business Center...... 2,214 -- 2,214 -- 1999
Lebanon Commerce Park Land... 1,513 -- 1,513 -- 1998
North by Northeast
Distribution Center........ 495 -- 495 -- 1994
Plainfield Park Distribution
Center..................... 1,652 -- 1,652 -- 1996
Juarez, Mexico
Los Aztecas Industrial
Center..................... 670 -- 670 -- 1999
Salvacar Industrial Park..... 2,675 -- 2,675 -- 1997
Ramon Rivera Industrial
Center..................... 467 -- 467 -- 2000
Kansas City, MO
Executive Park............... 1,511 -- 1,511 -- 1998
Las Vegas, Nevada
Black Mountain Distribution
Center..................... 1,356 -- 1,356 -- 1995
Hughes Airport Center........ 274 -- 274 -- 1997
Las Vegas Corporate Center... 5,308 -- 5,308 -- 1995, 1997
Le Havre, France
Le Havre..................... 1,105 -- 1,105 -- 1999
Los Angeles/Orange County,
California
Magnolia Business Center..... 4,274 -- 4,274 -- 1999
Ontario Distribution
Center..................... 1,619 -- 1,619 -- 1999
Louisville, Kentucky
Riverport Distribution
Center..................... 600 -- 600 -- 1999
Lyon, France
Isle d'Abeau Distribution
Center..................... 2,014 -- 2,014 -- 2000
Memphis, Tennessee
Memphis Industrial Park...... 1,687 -- 1,687 -- 1997
117
120
PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
INITIAL COST TO
PROLOGIS
----------------------- COSTS CAPITALIZED
NO. OF ENCUM- BUILDING & SUBSEQUENT
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION
- ----------- ------ ------- -------- ------------ -----------------
Distriplex Distribution
Center..................... 1,919 -- 25
Milan, Italy
Piacenza Distribution
Center..................... 814 -- 410
Monterrey Mexico
Monterrey Industrial Park.... 3,797 -- 78
Orlando, Florida
Orlando Central Park......... 2,152 -- 637
Portland, Oregon
Jennifer Distribution
Center..................... 2,139 -- 709
Reno, Nevada
Damonte Ranch................ 2,454 -- 860
Golden Valley Distribution
Center..................... 444 -- 439
Reynosa, Mexico
Del Norte Industrial Center
II......................... 1,391 -- 571
Reynosa Industrial Center
III........................ 149 -- 15
Pharr Bridge Industrial
Center..................... 3,912 -- 28
Reynosa Industrial Park...... 362 -- 28
Rio Grande Valley, Texas
Rio Grande Industrial
Center..................... 139 -- --
Rio Grande Distribution
Center..................... 300 --
Salt Lake City, Utah
Centennial Distribution
Center..................... 824 -- 99
Clearfield Industrial
Center..................... 125 -- 14
Salt Lake International
Distribution Center........ 878 -- 77
San Antonio, Texas
Coliseum Distribution
Center..................... 611 -- 335
Landmark One Distribution
Center..................... 127 -- 5
Perrin Creek Corporate
Center..................... 2,637 -- 245
San Antonio Distribution
Center III................. 458 -- 71
Tri-County Distribution
Center..................... 773 26
Seattle, Washington
Port of Tacoma............... 1,543 -- 377
PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
GROSS AMOUNTS AT WHICH CARRIED
AS OF DECEMBER 31, 2000
--------------------------------------- ACCUMULATED DATE OF
BUILDING & DEPRECIATION CONSTRUCTION/
DESCRIPTION LAND IMPROVEMENTS TOTAL(a)(b) (c) ACQUISITION
- ----------- ---------- ------------ ----------- ------------ ----------------------
Distriplex Distribution
Center..................... 1,944 -- 1,944 -- 2000
Milan, Italy
Piacenza Distribution
Center..................... 1,224 -- 1,224 -- 1999
Monterrey Mexico
Monterrey Industrial Park.... 3,875 -- 3,875 -- 1998, 2000
Orlando, Florida
Orlando Central Park......... 2,789 -- 2,789 -- 1996
Portland, Oregon
Jennifer Distribution
Center..................... 2,848 -- 2,848 -- 1997
Reno, Nevada
Damonte Ranch................ 3,314 -- 3,314 -- 1998
Golden Valley Distribution
Center..................... 883 -- 883 -- 1995
Reynosa, Mexico
Del Norte Industrial Center
II......................... 1,962 -- 1,962 -- 1999
Reynosa Industrial Center
III........................ 164 -- 164 -- 1998
Pharr Bridge Industrial
Center..................... 3,940 -- 3,940 -- 2000
Reynosa Industrial Park...... 390 -- 390 -- 1997
Rio Grande Valley, Texas
Rio Grande Industrial
Center..................... 139 -- 139 -- 1995
Rio Grande Distribution
Center..................... 300 -- 300 -- 1995
Salt Lake City, Utah
Centennial Distribution
Center..................... 923 -- 923 -- 1996
Clearfield Industrial
Center..................... 139 -- 139 -- 1997
Salt Lake International
Distribution Center........ 955 -- 955 -- 1994, 1995
San Antonio, Texas
Coliseum Distribution
Center..................... 946 -- 946 -- 1994
Landmark One Distribution
Center..................... 132 -- 132 -- 1997
Perrin Creek Corporate
Center..................... 2,882 -- 2,882 -- 1996
San Antonio Distribution
Center III................. 529 -- 529 -- 1996
Tri-County Distribution
Center..................... 799 -- 799 -- 2000
Seattle, Washington
Port of Tacoma............... 1,920 -- 1,920 -- 1998
118
121
PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
INITIAL COST TO
PROLOGIS
----------------------- COSTS CAPITALIZED
NO. OF ENCUM- BUILDING & SUBSEQUENT
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION
- ----------- ------ ------- -------- ------------ -----------------
Tampa, Florida
Sabal Park Distribution
Center..................... 1,075 -- 245
Tampa East Distribution
Center..................... 233 -- --
Tampa East Industrial
Center..................... 1,783 -- 22
Tampa West Distribution
Center..................... 242 -- 158
Tijuana, Mexico
Tijuana Industrial Center.... 1,474 -- 1,452
Tongeren, Belgium
Tongeren Distribution
Center..................... 144 -- 38
Warsaw, Poland
Blonie Industrial Park....... 1,085 -- 588
Teresin Distribution
Center..................... 1,472 --
Washington D.C./Baltimore,
Maryland
ProLogis Park -- Dulles...... 1,165 -- --
Meadowridge Distribution
Center..................... 760 -- 36
-------- ---------- ----------
Total Land Held for
Development.......... 150,219 -- 37,186
-------- ---------- ----------
GRAND TOTAL............ $819,258 $2,231,458 $1,582,985
======== ========== ==========
PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
GROSS AMOUNTS AT WHICH CARRIED
AS OF DECEMBER 31, 2000
--------------------------------------- ACCUMULATED DATE OF
BUILDING & DEPRECIATION CONSTRUCTION/
DESCRIPTION LAND IMPROVEMENTS TOTAL(a)(b) (c) ACQUISITION
- ----------- ---------- ------------ ----------- ------------ ----------------------
Tampa, Florida
Sabal Park Distribution
Center..................... 1,320 -- 1,320 -- 1995, 1997
Tampa East Distribution
Center..................... 233 -- 233 -- 1994
Tampa East Industrial
Center..................... 1,805 -- 1,805 -- 1994
Tampa West Distribution
Center..................... 400 -- 400 -- 1994
Tijuana, Mexico
Tijuana Industrial Center.... 2,926 -- 2,926 -- 1998
Tongeren, Belgium
Tongeren Distribution
Center..................... 182 -- 182 -- 2000
Warsaw, Poland
Blonie Industrial Park....... 1,673 -- 1,673 -- 1998
Teresin Distribution
Center..................... 1,472 -- 1,472 -- 2000
Washington D.C./Baltimore,
Maryland
ProLogis Park -- Dulles...... 1,165 -- 1,165 -- 2000
Meadowridge Distribution
Center..................... 796 -- 796 -- 1996
---------- ---------- ---------- ---------
Total Land Held for
Development.......... 187,405 -- 187,405 --
---------- ---------- ---------- ---------
GRAND TOTAL............ $1,022,375 $3,611,326 $4,633,701 $(476,982)
========== ========== ========== =========
119
122
- ---------------
(a) Reconciliation of total cost to real estate balance sheet caption at
December 31, 2000 (in thousands):
Total per Schedule III...................................... $4,633,701
Minority interest in real estate company.................... 8,217
Capitalized preacquisition costs............................ 47,574
----------
Total real estate................................. $4,689,492(i)
==========
(b) The aggregate cost for federal income tax purposes was approximately
$3,392,893,856.
(c) Buildings are depreciated over their estimated useful lives (7 years for
capital improvements, 10 years for tenant improvements, 30 years for
acquisitions and 40 years for developments).
(d) $340,160,523 of these facilities secure $200,000,000 of mortgage notes.
(e) $211,562,957 of these facilities secure $147,165,811 of mortgage notes.
(f) $375,253,585 of these facilities secure $156,914,474 of mortgage notes.
(g) $61,295,480 of these facilities secure $23,799,748 of securitized debt.
(h) $236,284,865 of these facilities secure $10,044,915 of assessment bonds.
(i) A summary of activity for real estate and accumulated depreciation as of
December 31, 2000 is as follows (in thousands):
Real Estate
Balance at beginning of year.............................. $4,974,951
Additions:
Acquisitions and completions of operating facilities... 324,495
Improvements to operating facilities................... 247,570
Dispositions.............................................. (890,320)
Change in construction in progress balance................ 2,307
Change in capitalized preacquisition costs balance........ 30,489
----------
Balance at end of year.................................... $4,689,492
==========
Accumulated depreciation
Balance at beginning of year.............................. $ 366,703
Depreciation expense...................................... 128,403
Accumulated depreciation associated with dispositions..... (18,124)
----------
Balance at end of year.................................... $ 476,982
==========
120
123
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of ProLogis Trust, a Maryland
real estate investment trust, and the undersigned Trustees and officers of
ProLogis Trust, hereby constitutes and appoints K. Dane Brooksher, Walter C.
Rakowich, Luke A. Lands and Edward S. Nekritz, or his true and lawful attorneys
in fact and agents, for it or him and in its or his name, place and stead, in
any and all capacities, with full power to act alone, to sign any and all
amendments to this report, and to file each such amendment to this report, with
all exhibits, thereto, and any and all documents, in connection therewith, with
the Securities and Exchange Commission, hereby granting unto and
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform any and all acts and things requisite and necessary to be done in an
about the premises, as fully to all intents and purposes as it or he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them may lawfully do or cause to be done
by virtue hereof.
121
124
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PROLOGIS TRUST
By: /s/ K. DANE BROOKSHER
----------------------------------
K. Dane Brooksher
Chairman, Chief Executive Officer
Date: March 23, 2001
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ K. DANE BROOKSHER Chairman, Chief Executive March 23, 2001
- ----------------------------------------------------- Officer and Trustee
K. Dane Brooksher
/s/ IRVING F. LYONS III President, Chief Investment March 23, 2001
- ----------------------------------------------------- Officer and Trustee
Irving F. Lyons III
/s/ WALTER C. RAKOWICH Managing Director and Chief March 23, 2001
- ----------------------------------------------------- Financial Officer (Principal
Walter C. Rakowich Financial Officer)
/s/ LUKE A. LANDS Senior Vice President and March 23, 2001
- ----------------------------------------------------- Controller
Luke A. Lands
/s/ SHARI J. JONES Vice President (Principal March 23, 2001
- ----------------------------------------------------- Accounting Officer)
Shari J. Jones
/s/ C. RONALD BLANKENSHIP Trustee March 23, 2001
- -----------------------------------------------------
C. Ronald Blankenship
/s/ STEPHEN L. FEINBERG Trustee March 23, 2001
- -----------------------------------------------------
Stephen L. Feinberg
/s/ DONALD P. JACOBS Trustee March 23, 2001
- -----------------------------------------------------
Donald P. Jacobs
/s/ WILLIAM G. MYERS Trustee March 23, 2001
- -----------------------------------------------------
William G. Myers
/s/ JOHN E. ROBSON Trustee March 23, 2001
- -----------------------------------------------------
John E. Robson
122
125
SIGNATURE TITLE DATE
--------- ----- ----
/s/ KENNETH N. STENSBY Trustee March 23, 2001
- -----------------------------------------------------
Kenneth N. Stensby
/s/ J. ANDRE TEIXEIRA Trustee March 23, 2001
- -----------------------------------------------------
J. Andre Teixeira
/s/ THOMAS G. WATTLES Trustee March 23, 2001
- -----------------------------------------------------
Thomas G. Wattles
123
126
INDEX TO EXHIBITS
Certain of the following documents are filed herewith. Certain other of the
following documents have been previously filed with the Securities and Exchange
Commission and, pursuant to Rule 12b-32, are incorporated herein by reference.
EXHIBIT
NUMBER DESCRIPTION
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3.1 -- Articles of Amendment and Restatement of Declaration of
Trust of ProLogis (incorporated by reference to exhibit
4.1 to ProLogis' quarterly report on Form 10-Q for the
quarter ended June 30, 1999).
3.2 -- Amended and Restated Bylaws of ProLogis (incorporated by
reference to exhibit 3.2 to ProLogis' quarterly report on
Form 10-Q for the quarter ended June 30, 1999).
4.1 -- Rights Agreement, dated as of December 31, 1993, between
ProLogis and State Street Bank and Trust Company, as
Rights Agent, including form of Rights Certificate
(incorporated by reference to exhibit 4.4 to ProLogis'
registration statement No. 33-78080).
4.2 -- First Amendment to Rights Amendment, dated as of February
15, 1995, between ProLogis, State Street Bank and Trust
Company and The First National Bank of Boston, as
successor Rights Agent (incorporated by reference to
exhibit 3.1 to ProLogis' Form 10-Q for the quarter ended
September 30, 1995).
4.3 -- Second Amendment to Rights agreement, dated as of June
22, 1995, between ProLogis, State Street Bank and Trust
Company and The First National Bank of Boston
(incorporated by reference to Exhibit 3.1 to ProLogis'
Form 10-Q for the quarter ended September 30, 1995).
4.4 -- Form of share certificate for Common Shares of Beneficial
Interest of ProLogis (incorporated by reference to
exhibit 4.4 to ProLogis' registration statement No.
33-73382).
4.5 -- Form of share certificate for Series A Cumulative
Redeemable Preferred Shares of Beneficial Interest of
ProLogis (incorporated by reference to exhibit 4.7 to
ProLogis' Form 8-A registration statement relating to
such shares).
4.6 -- 8.72% Note due March 1, 2009 (incorporated by reference
to exhibit 4.7 to ProLogis' Form 10-K for the year ended
December 31, 1994).
4.7 -- Form of share certificate for Series B Cumulative
Convertible Redeemable Preferred Shares of Beneficial
Interest of ProLogis (incorporated by reference to
exhibit 4.8 to ProLogis' Form 8-A registration statement
relating to such shares).
4.8 -- Form of share certificate for Series C Cumulative
Redeemable Preferred Shares of Beneficial Interest of
ProLogis (incorporated by reference to exhibit 4.8 to
ProLogis' Form 10-K for the year ended December 31,
1996).
4.9 -- 9.34% Note due March 1, 2015 (incorporated by reference
to exhibit 4.8 to ProLogis' Form 10-K for the year ended
December 31, 1994).
4.10 -- 7.875% Note due May 15, 2009 (incorporated by reference
to exhibit 4.4 to ProLogis' Form 8-K dated May 9, 1995).
4.11 -- 7.30% Note due May 15, 2001 (incorporated by reference to
exhibit 4.3 to ProLogis' Form 8-K dated May 9, 1995).
4.12 -- 7.25% Note due May 15, 2000 (incorporated by reference to
exhibit 4.2 to ProLogis' Form 8-K dated May 9, 1995).
4.13 -- 7.125% Note due May 15, 1998 (incorporated by reference
to exhibit 4.1 to ProLogis' Form 8-K dated May 9, 1995).
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127
EXHIBIT
NUMBER DESCRIPTION
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4.14 -- 7.25% Note due May 15, 2002 (incorporated by reference to
exhibit 4.1 to ProLogis' Form 10-Q for the quarter ended
June 30, 1996).
4.15 -- 7.95% Note due May 15, 2008 (incorporated by reference to
exhibit 4.2 to ProLogis' Form 10-Q for the quarter ended
June 30, 1996).
4.16 -- 8.65% Note due May 15, 2016 (incorporated by reference to
exhibit 4.3 to ProLogis' Form 10-Q for the quarter ended
June 30, 1996).
4.17 -- 7.81% Medium-Term Notes, Series A, due February 1, 2015
(incorporated by reference to exhibit 4.17 to ProLogis'
Form 10-K for the year ended December 31, 1996).
4.18 -- Indenture, dated as of March 1, 1995, between ProLogis
and State Street Bank and Trust Company, as Trustee
(incorporated by reference to exhibit 4.9 to ProLogis'
Form 10-K for the year ended December 31, 1994).
4.19 -- Collateral Trust Indenture, dated as of July 22, 1993,
between Krauss/Schwartz Properties, Ltd. and NationsBank
of Virginia, N.A., as Trustee (incorporated by reference
to exhibit 4.10 to ProLogis' Form 10-K for the year ended
December 31, 1994).
4.20 -- First Supplement Collateral Trust Indenture, dated as of
October 28, 1994, among ProLogis Limited Partnership-IV,
Krauss/Schwartz Properties, Ltd., and NationsBank of
Virginia, N.A., as Trustee (incorporated by reference to
exhibit 10.6 to ProLogis' Form 10-Q for the quarter ended
September 30, 1994).
4.21 -- Form of share certificate for Series D Cumulative
Redeemable Preferred Shares of Beneficial Interest of
ProLogis (incorporated by reference to exhibit 4.21 of
ProLogis' Registration Statement No. 69001).
4.22 -- Form of share certificate for Series E Cumulative
Redeemable Preferred Shares of Beneficial Interest of
ProLogis (incorporated by reference to exhibit 4.22 of
ProLogis' Registration Statement No. 69001).
4.23 -- 7.625% Note due July 1, 2017 (incorporated by reference
to exhibit 4 to ProLogis' Form 8-K dated July 11, 1997).
4.24 -- Form of 7.05% Promissory Note due July 15, 2006
(incorporated by reference to exhibit 4.24 to ProLogis'
Form 10-K for the year ended December 31, 1999).
4.25 -- 7.00% Promissory Note due October 1, 2003 (incorporated
by reference to exhibit 4.25 to ProLogis' Form 10-K for
the year ended December 31, 1999).
4.26 -- Form of 6.70% Promissory Note due April 15, 2004
(incorporated by reference to exhibit 4.26 to ProLogis'
Form 10-K for the year ended December 31, 1999).
4.27 -- Form of 7.10% Promissory Note due April 15, 2008
(incorporated by reference to exhibit 4.27 to ProLogis'
Form 10-K for the year ended December 31, 1999).
10.1 -- Agreement of Limited Partnership of ProLogis Limited
Partnership-I, dated as of December 22, 1993, by and
among ProLogis, as general partner, and the limited
partners set forth therein (incorporated by reference to
exhibit 10.4 to ProLogis' Registration Statement No.
33-73382).
10.2 -- Amended and Restated Agreement of Limited Partnership of
ProLogis Limited Partnership-II, dated as of February 15,
1994, among ProLogis as general partner, and the limited
partners set forth therein (incorporated by reference to
exhibit 10.12 to ProLogis' Registration Statement No.
33-78080).
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128
EXHIBIT
NUMBER DESCRIPTION
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10.3 -- Third Amended and Restated Investor Agreement, dated as
of September 9, 1997, between ProLogis and SC Group
Incorporated (incorporated by reference to exhibit 10.3
to Security Capital Group Incorporated's Form 10-Q for
the quarter ended September 30, 1997).
10.4 -- Form of Indemnification Agreement entered into between
ProLogis and its Trustees and executive officers
(incorporated by reference to exhibit 10.16 to ProLogis'
Registration Statement No. 33-73382).
10.5 -- Indemnification Agreement between ProLogis and each of
its independent Trustees (incorporated by reference to
exhibit 10.16 to ProLogis' Form 10-K for the year ended
December 31, 1995).
10.6 -- Declaration of Trust for the benefit of ProLogis'
independent Trustees (incorporated by reference to
exhibit 10.17 to ProLogis' Form 10-K for the year ended
December 31, 1995).
10.7 -- Share Option Plan for Outside Trustees (incorporated by
reference to exhibit 10.18 to ProLogis' Form 10-Q for the
quarter ended June 30, 1994).
10.8 -- 1999 Dividend Reinvestment and Share Purchase Plan
(incorporated by reference to the Prospectus contained in
Registration Statement No. 333-75893).
10.9 -- Amended and Restated Agreement of Limited Partnership of
ProLogis Limited Partnership-III, dated as of October 28,
1994, by and among ProLogis, as general partner, and the
limited partners set forth therein (incorporated by
reference to exhibit 10.3 to ProLogis' Form 10-Q for the
quarter ended September 30, 1994).
10.10 -- Amended and Restated Agreement of Limited Partnership of
ProLogis Limited Partnership-IV, dated as of October 28,
1994, by and among ProLogis IV, Inc., as general partner,
and the limited partners set forth therein (incorporated
by reference to exhibit 10.4 to ProLogis' Form 10-Q for
the quarter ended September 30, 1994).
10.11 -- Option Agreement and Consent, dated October 24, 1994, by
and between ProLogis and Farm Bureau Life Insurance
Company (incorporated by reference to exhibit 10.7 to
ProLogis' Form 10-Q for the quarter ended September 30,
1994).
10.12 -- Form of Secured Promissory Note and Pledge Agreement
relating to Share Purchase Program (incorporated by
reference to exhibit 10.17 to ProLogis' Form 10-K for the
year ended December 31, 1998).
10.13 -- Loan Agreement, dated as of December 23, 1998, between
ProLogis and Connecticut General Life Insurance Company
(incorporated by reference to exhibit 10.19 to ProLogis'
Form 10-K for the year ended December 31, 1998).
10.14 -- Tranche A Promissory Note, dated as of February 22, 1999,
between ProLogis and Teachers Insurance and Annuity
Association of America (incorporated by reference to
exhibit 10.20 to ProLogis' Form 10-K for the year ended
December 31, 1998).
10.15 -- Tranche B Promissory Note, dated as of February 22, 1999,
between ProLogis and Teachers Insurance and Annuity
Association of America (incorporated by reference to
exhibit 10.21 to ProLogis' Form 10-K for the year ended
December 31, 1998).
10.16 -- Stock Purchase Agreement among Meridian, Harris Trust &
Savings Bank, as Trustee for Ameritech Pension Trust, and
OTR, on behalf of and as nominee for the State Teachers
Retirement Board of Ohio, dated as of December 29, 1995
(incorporated by reference to Meridian's Registration
Statement No. 333-00018).
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129
EXHIBIT
NUMBER DESCRIPTION
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10.17 -- Amended and Restated Loan Administration Agreement
between The Prudential Insurance Company of America and
Meridian, IndTennco Limited Partnership, Metro-Sierra
Limited Partnership, and Progress Center/Alabama Limited
Partnership, dated as of February 23, 1996 (incorporated
by reference to exhibit 10.24 to Meridian's Form 10-K for
the year ended December 31, 1996).
10.18 -- Note Purchase Agreement among Meridian and The Travelers
Insurance Company (I/N/TRAL & CO.), United Services
Automobile Association (I/N/O SALKELD & CO.), The
Variable Annuity Life Insurance Company, The United
States Life Insurance Company in the City of New York,
All American Life Insurance Company, The Old Line Life
Insurance Company of America, The Lincoln National Life
Insurance Company, Lincoln Life & Annuity Company of New
York, First Penn-Pacific Life Insurance Company (I/N/O
CUDD & CO), Lincoln National Health & Casualty Insurance
Company, Allied Life Insurance Company "B" (I/N/O GERLACH
& CO), sons of Norway (I/N/O VAR & CO), Aid Association
for Lutherans (I/N/O NIMER & CO), Metropolitan Life
Insurance Company, National Life Insurance Company, Life
Insurance Company of the Southwest, Keyport Life
Insurance Company (I/N/O BOST & CO), Union Central Life
Insurance Company (I/N/O HARE & CO), and Pan-American
Life Insurance Company, dated November 15, 1997
(incorporated by reference to exhibit 10.66 to Meridian's
Form 10-K for the year ended December 31, 1997).
10.19 -- Credit Agreement among ProLogis Trust, NationsBank, N.A.,
Commerzbank Aktien Gesellschaft, New York Branch, Chase
Bank of Texas, National Association and Lenders Named
Herein, dated as of March 29, 1999 (incorporated by
reference to exhibit 10.1 to ProLogis' Form 8-K dated
April 16, 1999).
10.20 -- Credit Agreement among ProLogis Trust, as Borrower and
Guarantor, ProLogis Logistics Services Incorporated, as
Borrower, ProLogis Development Services Incorporated, as
Borrower, Bank of America N.A., as Administrative Agent,
Commerzbank Aktiengellschaft, New York Branch, as
Syndication Agent, Chase Bank of Texas, National
Association, as Documentation Agent, First Union National
Bank and Societe Generale, Southwest Agency, as Managing
Agents and the Lenders Named Herein as Lenders, as of
June 6, 2000 (incorporated by reference to exhibit 10.2
to ProLogis' Form 10-Q for the quarter ended June 30,
2000).
10.21 -- Mortgage Noted dated as of March 29, 1999 between
ProLogis Trust and Pro-Industrial Funding Company, Inc.
(incorporated by reference to exhibit 10.1 to ProLogis'
Form 8-K dated May 17, 1999).
10.22 -- Agreement of Limited Partnership of Meridian Realty
Partners, L.P. (incorporated by reference to exhibit 99.1
to ProLogis' Registration Statement No. 333-86081).
10.23 -- ProLogis Trust 1997 Long-Term Incentive Plan (as Amended
and Restated Effective as of May 18, 2000 (incorporated
by reference to exhibit 10.1 to ProLogis' Form 10-Q for
the quarter ended June 30, 2000).
10.24 -- Multi-Currency Revolving Credit Facility Agreement among
PLD Europe Finance B.V. and PLD U.K. Finance B.V. as
Original Borrowers, ProLogis Trust as guarantor, ABN AMRO
Bank N.V. as Arranger and Societe Generale as
Co-Arranger, ABN AMRO Bank N.S. as Agent and Issuing bank
as Banks as defined herein, dated December 17, 1999
(incorporated by reference to exhibit 10.24 to ProLogis'
Form 10-K for the year ended December 31, 1999).
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130
EXHIBIT
NUMBER DESCRIPTION
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10.25 -- Form of Executive Protection Agreements entered into
between ProLogis and K. Dane Brooksher and Irving F.
Lyons III, dated as of June 24, 1999. (incorporated by
reference to exhibit 10.25 to ProLogis' Form 10-K for the
year ended December 31, 1999).
10.26 -- Form of Executive Protection Agreements entered into
between ProLogis and Walter C. Rakowich, Jeffrey H.
Schwartz, Robert J. Watson and John W. Seiple, dated as
of June 24, 1999 (incorporated by reference to exhibit
10.26 to ProLogis' Form 10-K for the year ended December
31, 1999).
12.1 -- Statement re: Computation of Ratio of Earnings to Fixed
Charges.
12.2 -- Statement re: Computation of Ratio of Earnings to
Combined Fixed Charges and Preferred Share Dividends.
21.1 -- Subsidiaries of ProLogis.
23.1 -- Consent of Arthur Andersen LLP.
23.2 -- Consent of KPMG -- Stockholm, Sweden.
23.3 -- Report of KPMG -- Stockholm, Sweden.
23.4 -- Consent of KPMG -- New York, New York.
23.5 -- Report of KPMG -- New York, New York.
24.1 -- Power of Attorney (included at page 121).
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