PROLOGIS - FORM 8-K - EX-99.1

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8-K - FORM 8-K - PROLOGIS	d79410e8vk.htm

Exhibit 99.1

EARNINGS RELEASE AND SUPPLEMENTAL INFORMATION - Unaudited
Fourth Quarter 2010


OVERVIEW:		Section I
Earnings Release		1.1
Overview		1.4

FINANCIAL STATEMENTS:		Section II
Consolidated Balance Sheets		2.1
Consolidated Statements of Operations		2.2
Consolidated Statements of Funds From Operations (FFO)		2.3
Reconciliations of Net Loss to FFO		2.4
Other Financial Metrics		2.5
Calculation of Per Share Amounts		2.6

DIRECT OWNED:		Section III
Operating Properties		3.1
Land		3.2
Under Development Portfolio and Development Starts		3.3
Investing Activity		3.4

INVESTMENT MANAGEMENT:		Section IV
ProLogis’ Investments in Unconsolidated Investees		4.1
Operating Portfolio of Property Funds		4.2
Summarized Financial Information of Property Funds		4.3
Investing and Financing Activity		4.5

OPERATING STATISTICS:		Section V
Direct Owned Leasing and Capital Expenditures		5.1
Investment Management Leasing and Capital Expenditures		5.2
Same Store Analysis and Top Customers		5.3
Major Logistics Corridors Buildings		5.4

DEBT:		Section VI
ProLogis Debt Summary		6.1
ProLogis Debt and Equity		6.2
Property Fund Debt Summary		6.3
ProLogis Debt Covenant Ratios		6.4

NET ASSET VALUE:		Section VII
Components of Net Asset Value for ProLogis and related notes		7.1

NOTES AND DEFINITIONS:
Notes to Supplemental Information		Appendix A
Definitions		Appendix B

Executive Office Address • 4545 Airport Way • Denver, CO 80239 • +1 (303) 567-5000



Fourth Quarter 2010

PROLOGIS REPORTS FOURTH QUARTER/YEAR-END 2010 RESULTS

– Full-Year Core FFO Exceeds Previous Guidance –
– Strong Leasing Activity at Year End –
– Total Industrial Portfolio 91 Percent Leased –
– Company Provides 2011 Guidance –

Denver, Colo. — February 3, 2011 — ProLogis (NYSE: PLD), the leading global provider of distribution facilities, today reported funds from operations as defined by ProLogis (FFO), excluding items that affect comparability, of $0.76 per diluted share in 2010, $0.57 of which was from core operations, which excludes gains on disposition of real estate, net of taxes. For 2009, the company reported FFO, excluding items that affect comparability, of $1.41 per diluted share, which included $0.85 from core operations. FFO, including significant non-cash items, was negative $2.24 for 2010, compared with $0.34 for 2009.

For the fourth quarter of 2010, FFO, excluding items that affect comparability, was $0.25 per diluted share, $0.18 of which was from core operations. For the fourth quarter of 2009, FFO, excluding items that affect comparability, was $0.23 per share, which included $0.16 from core operations.

The company reported a net loss of $2.64 per diluted share for the full year ended December 31, 2010, compared with a net loss of $0.01 per diluted share for the same period in 2009. For the fourth quarter of 2010, the company reported a net loss per diluted share of $2.17, compared with a net loss of $0.86 in the same period of 2009. The negative FFO, including significant non-cash items, and net loss for both the quarter and year were due principally to a write down of goodwill, as well as impairment charges and loss on early extinguishment of debt, which were in line with the expected amounts communicated in December 2010.

Industrial Fundamentals Continue to Improve

“During the fourth quarter, leasing velocity in our portfolio increased more than 25 percent over the third quarter, and the overall U.S. market experienced its third straight quarter of positive gross absorption — 17 million square feet. We continued to see good demand for build-to-suits and started $155 million of new development that was 95 percent preleased — demonstrating that many markets no longer have the high-quality space available that customers require,” said Walter C. Rakowich, chief executive officer. For the full year, the company started 19 buildings, totaling over $656 million of expected investment, with 17 of those buildings build-to-suit or substantially pre-leased.

“This combination of demand for new space and good leasing activity gives us confidence that the industrial recovery is taking hold. While we believe the market has turned the corner, we also appreciate that challenges remain. We expect same store rental growth to continue to be negative in 2011 as the majority of the leases turning over will be rolling off of the high point of the cycle in 2006 and 2007. However, we remain optimistic that the recovery we began to see in the latter half of 2010 could intensify, if consumers remain confident and inventory rebuilding continues,” added Rakowich.

The company’s total industrial operating portfolio (including completed development and the investment management portfolio) was 91.0 percent leased at the end of the quarter, up more than 100 basis points from 89.9 percent at September 30, 2010. Total leasing activity in the fourth quarter was 34.5 million square feet, bringing the full year number to over 119 million square feet, close to the 2008 peak of 121 million square feet. Leasing in the company’s static completed development portfolio ended the year at 79.7 percent, up 560 basis points from September 30, 2010. Because this pool of properties is substantially leased, beginning in the fourth quarter, the completed development portfolio has been consolidated into the direct owned portfolio, as it is ProLogis’ intent to own the vast majority of these assets long term. Customer retention in both the direct owned and investment management portfolios during the quarter was more than 87 percent. In the company’s total same-store portfolio, rental rates on turnovers declined 10.5 percent, compared with an 8.5 percent decline in the third quarter of 2010. Same-store occupancy increased for the third straight quarter, up 2.1 percent, while same store net operating income was down slightly, a negative 0.45 percent.

Completed $1.5 Billion in Dispositions and Contributions

In 2010, the company generated more than $1.75 billion in net proceeds through a combination of $1.25 billion of asset sales to third parties and $500 million of contributions to property funds and joint ventures. The third-party asset sales were consistent

Section I — Overview
Page 1.1



Fourth Quarter 2010

with the company’s stated goal to sell assets in non-strategic markets and redeploy the proceeds into new development in major global markets, thereby further diversifying and improving the quality of its direct owned portfolio. The majority of the assets sold to third parties were older and smaller than the characteristics of the company’s remaining direct owned portfolio. Additionally, in December, the company announced its intent to sell certain retail, mixed-use and ground lease assets to affiliates of TPG in the first quarter of 2011. Proceeds will be used to pay down the company’s line of credit and to fund new development.

“As market conditions have improved, we have continued to experience strong institutional demand for quality properties, allowing us to exceed our initial expectation of $1.3 to $1.5 billion of gross disposition proceeds,” said Michael S. Curless, managing director of global investments. “We believe we will have further opportunities to prune our portfolio as we focus on strengthening our position in major global logistics corridors, although we do not anticipate portfolio sales in 2011 of the same magnitude as those completed in 2010.”

“During 2010, we took great strides toward the goal of enhancing our direct owned portfolio by retaining new development on our balance sheet and disposing of non-strategic and non-core assets. These actions, coupled with the strengthening of our balance sheet, will allow us to focus our efforts on our core strengths — managing and developing industrial assets in the major logistics corridors around the world,” Rakowich concluded.

Strategic Financial Initiatives Achieved

“As we ended the year, we were pleased with the improved financial and operating positions we achieved in 2010,” stated William E. Sullivan, chief financial officer. “Through debt offerings early in the year, as well as asset sales and our equity raise later in the year, we were able to successfully tender for, or buy back in the open market, $3.0 billion of original principal amount of debt, to end the year with direct debt of $6.5 billion — down from $8.0 billion at the end of 2009. We have less than $200 million in direct debt maturities in 2011, and we intend to extend our global line of credit into 2014. Our improved financial position, coupled with the strength we saw in operating fundamentals as the year drew to a close, allowed us to exceed the top end of our expected core FFO guidance range.”

For the fourth quarter, total charges of $1.42 billion added back to arrive at core FFO included $368 million of non-cash goodwill impairments, as a result of the company’s year-end review. The remaining $1.06 billion is consistent with the range of $995 million to $1.06 billion that the company pre-announced in December 2010. The $1.06 billion includes $157 million of cash charges and $893 million of non-cash charges.

Guidance for 2011

ProLogis established full-year 2011 core FFO guidance of $0.62 to $0.66 per diluted share, and $0.64 to $0.70 per diluted share including gains on dispositions. Net loss for 2011 is expected to be $0.15 to $0.20 per diluted share, primarily due to depreciation and amortization.

For 2011, the primary drivers supporting this guidance include:

•		A 150 — 200 basis point increase in total operating portfolio leasing, compared with year-end 2010 (p 1.5);

•		Same-store net operating income growth of 1 — 3 percent;

•		Development starts of $800 million — $1 billion;

•		Land monetization of $400 — $450 million, with approximately $200 million related to third-party sales, and $200 — $250 million monetized through development activity;

•		Building dispositions and contributions of $650 — $750 million, including the planned sale of Catellus retail and mixed-use assets for $505 million, third-party sales and fund/JV contributions;

•		Share of FFO from property funds and other unconsolidated investees of $170 — $180 million;

•		Management fees from property funds of $110 — $120 million; and

•		A 4 percent reduction in gross G&A expense. Amounts reported as rental and Investment Management expenses are expected to be in line with 2010 levels, while capitalized G&A is expected to increase by 15 percent due to greater development activity (Notes 9, Section II, Appendix A).

Section I — Overview
Page 1.2



Fourth Quarter 2010

Webcast and Conference Call Information

The company will host a webcast/conference call to discuss quarterly results, current market conditions and future outlook on Thursday, February 3, 2011, at 9:00 a.m. Eastern Time. Interested parties are encouraged to access the live webcast by clicking the microphone icon located near the top of the opening page at http://ir.prologis.com. Interested parties also can participate via conference call by dialing (866) 305-2304 domestically or (660) 422-4873 internationally.

Replay Information

A replay of the conference call will be posted when available. The replay will be available until midnight Eastern Time on Thursday, February 17, 2011, and can be accessed by dialing (800) 642-1687 domestically or (706) 645-9291 internationally and entering passcode 39854407. A transcript of the call and the webcast replay, including a podcast format, will be posted when available in the “Financial Information” section of the ProLogis Investor Relations website.

About ProLogis

ProLogis is the leading global provider of distribution facilities, with more than 435 million square feet of industrial space owned and managed (40 million square meters) in markets across North America, Europe and Asia. The company leases its industrial facilities to more than 3,800 customers, including manufacturers, retailers, transportation companies, third-party logistics providers and other enterprises with large-scale distribution needs. For additional information about the company, go to www.prologis.com.

Follow ProLogis on Twitter: http://twitter.com/ProLogis

The statements above that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are based on current expectations, estimates and projections about the industry and markets in which ProLogis operates, management’s beliefs and assumptions made by management, they involve uncertainties that could significantly impact ProLogis’ financial results. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words and similar expressions are intended to identify such forward-looking statements, which generally are not historical in nature. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future — including statements relating to rent and occupancy growth, development activity and changes in sales or contribution volume of developed properties, general conditions in the geographic areas where we operate and the availability of capital in existing or new property funds — are forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be attained and therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. Some of the factors that may affect outcomes and results include, but are not limited to: (i) national, international, regional and local economic climates, (ii) changes in financial markets, interest rates and foreign currency exchange rates, (iii) increased or unanticipated competition for our properties, (iv) risks associated with acquisitions, (v) maintenance of real estate investment trust (“REIT”) status, (vi) availability of financing and capital, (vii) changes in demand for developed properties, and (viii) those additional factors discussed in reports filed with the Securities and Exchange Commission by ProLogis under the heading “Risk Factors.” ProLogis undertakes no duty to update any forward-looking statements appearing in this press release.


Investor Relations	Media	Financial Media
Melissa Marsden	Krista Shepard	Suzanne Dawson
303-567-5622	303-567-5907	Linden Alschuler & Kaplan, Inc
mmarsden@prologis.com	kshepard@prologis.com	212-329-1420
		sdawson@lakpr.com

Section I — Overview
Page 1.3



Fourth Quarter 2010

Overview

(in thousands, except per share amounts)

Summary of Results

	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2010			2009			2010			2009

Revenues (page 2.2)	$	242,717		$	219,185		$	909,155		$	1,054,635


Net loss attributable to common shares (page 2.2)	$	(1,166,589	)	$	(408,459	)	$	(1,295,920	)	$	(2,650	)

FFO, including significant non-cash items (page 2.3)	$	(1,280,195	)	$	(305,761	)	$	(1,101,184	)	$	138,885
Adjustments (page 2.4)		1,263,221			368,586			1,286,995			328,903

FFO, excluding significant non-cash items (page 2.4)		(16,974	)		62,825			185,811			467,788
Adjustments (page 2.4)		157,207			46,707			195,578			102,620

FFO, excluding items that affect comparability including gains net of taxes (page 2.4)		140,233			109,532			381,389			570,408
Gains net of taxes (page 2.4)		(40,853	)		(35,515	)		(100,003	)		(225,358	)

Core FFO (page 2.4)	$	99,380		$	74,017		$	281,386		$	345,050


Per share - Diluted:
Net loss attributable to common shares	$	(2.17	)	$	(0.86	)	$	(2.64	)	$	(0.01	)
FFO, including significant non-cash items	$	(2.38	)	$	(0.65	)	$	(2.24	)	$	0.34
FFO, excluding significant non-cash items	$	(0.03	)	$	0.13		$	0.37		$	1.15
FFO, excluding items that affect comparability, including gains net of taxes	$	0.25		$	0.23		$	0.76		$	1.41
Core FFO	$	0.18		$	0.16		$	0.57		$	0.85

Assets Owned and Under Management

	December 31,		September 30,		June 30,		March 31,		December 31,
	2010		2010		2010		2010		2009
Direct owned - investment balance:
Industrial properties (4):
Core (page 3.1)	$	10,714,799	$	11,631,894	$	11,550,086	$	11,503,087	$	11,547,934
Properties under development (page 3.3)		365,362		276,397		199,434		194,226		191,127
Land (page 3.2)(3)(a)		1,533,611		2,385,076		2,286,385		2,392,147		2,573,506
Retail and mixed use properties (a)		-		272,885		271,961		271,735		271,607
Other real estate investments (a)		265,869		566,571		612,569		600,025		594,995

Total - direct owned		12,879,641		15,132,823		14,920,435		14,961,220		15,179,169


Investment management - investment balance (b):
Industrial properties:
Property funds (page 4.2)		17,540,217		18,811,641		17,958,090		18,660,979		19,468,889
Other unconsolidated investees		987,716		951,208		623,858		618,671		444,985

Total - investment management		18,527,933		19,762,849		18,581,948		19,279,650		19,913,874

Total assets owned and under management	$	31,407,574	$	34,895,672	$	33,502,383	$	34,240,870	$	35,093,043


(a)		As of December 31, 2010, we have reclassified certain retail and mixed-use operating properties, land and land subject to ground leases to Assets Held for Sale. The remaining office building and land subject to ground leases at December 31, 2010 are included in Other Real Estate Investments for all periods presented. See note 2 to Section II in Appendix A.

(b)		Amounts represent the entity’s investment balance in the property, not our proportionate share, and only include entities in which we have an investment.

See numbered note references in Appendix A, and Appendix B for definitions that are used throughout this report.

Section I - Overview
Page 1.4



Fourth Quarter 2010

Overview - continued

(in thousands, except percentages)

Summary of Portfolio


										December 31, 2010			September 30, 2010
Square feet owned and under management:
Direct Owned:
Industrial properties:
Core (page 3.1)											168,547			192,142
Properties under development (page 3.3)											4,858			4,347
Retail and mixed use properties (a)											-			1,150
Investment management - industrial properties:
Property funds (page 4.2)											252,129			269,108
Other unconsolidated investees											12,883			12,975


Total square feet owned and under management											438,417			479,722


				As of December 31, 2010
				Core			Under Development			Investment Mgmt.			Total
Square feet by continent:
North America					138,428			986			156,520			295,934
Europe					22,882			1,619			104,819			129,320
Asia					7,237			2,253			3,673			13,163


Total square feet owned and under management					168,547			4,858			265,012			438,417


Leasing Information

	December 31, 2010			September 30, 2010			June 30, 2010			March 31, 2010			December 31, 2009
Leased %

Direct owned operating portfolio (page 3.1)		87.57	%		85.99	%		84.84	%		83.74	%		82.70	%


Investment management- industrial properties:
Property funds (page 4.2)		93.37	%		92.72	%		93.08	%		93.04	%		93.54	%
Other unconsolidated investees		88.95	%		89.53	%		90.62	%		91.58	%		94.47	%


Investment management portfolio		93.16	%		92.57	%		92.98	%		92.98	%		93.57	%


Total Operating Portfolio - Industrial		90.98	%		89.90	%		89.66	%		89.21	%		89.19	%


Under Development Portfolio (page 3.3)		67.61	%		65.64	%		65.49	%		60.72	%		100.00	%


Leasing activity:
Direct owned - leases signed - quarterly activity (page 5.1)		19,018			11,357			14,222			12,661			15,361
Property funds - leases signed - quarterly activity (page 5.2)		15,497			15,665			14,062			16,957			15,888


Total leasing activity		34,515			27,022			28,284			29,618			31,249


(a)		As of December 31, 2010, we have reclassified certain retail and mixed-use operating properties, land and land subject to ground leases to Assets Held for Sale. The remaining assets are included in Other Real Estate Investments. See note 2 to Section II in Appendix A.

Section I - Overview
Page 1.5



Fourth Quarter 2010

Consolidated Balance Sheets

(in thousands, except per share data)


	December 31,			September 30,			December 31,
	2010			2010			2009

Assets:
Investments in real estate assets:
Industrial properties:
Core (1)	$	10,714,799		$	11,631,894		$	11,547,934
Properties under development		365,362			276,397			191,127
Land (2)(3)		1,533,611			2,385,076			2,573,506
Retail and mixed use properties (2)		-			272,885			271,607
Other real estate investments (2)		265,869			566,571			594,995

		12,879,641			15,132,823			15,179,169
Less accumulated depreciation		1,595,678			1,883,405			1,671,100

Net investments in properties		11,283,963			13,249,418			13,508,069
Investments in and advances to unconsolidated investees (1)(2)(3)		2,024,661			2,238,835			2,106,723
Notes receivable backed by real estate (1)		302,144			123,839			55,544
Assets held for sale (2)(3)(4)		574,791			-			-

Net investments in real estate		14,185,559			15,612,092			15,670,336

Cash and cash equivalents		37,634			17,799			34,362
Restricted cash		27,081			30,263			23,893
Accounts receivable		58,979			72,352			42,117
Other assets (3)		593,414			1,037,413			1,026,187

Total assets	$	14,902,667		$	16,769,919		$	16,796,895


Liabilities and Equity:
Liabilities:
Debt (5)	$	6,506,029		$	8,170,032		$	7,977,778
Accounts payable and accrued expenses		388,536			397,281			367,399
Other liabilities		467,998			519,524			444,432
Liabilities related to assets held for sale (2)(4)		19,749			-			-

Total liabilities		7,382,312			9,086,837			8,789,609


Equity:
ProLogis shareholders’ equity:
Preferred shares		350,000			350,000			350,000
Common shares (6)		5,701			4,770			4,742
Additional paid-in capital (6)		9,668,404			8,573,066			8,524,867
Accumulated other comprehensive income (loss)		(3,160	)		17,392			42,298
Distributions in excess of net earnings		(2,515,722	)		(1,279,837	)		(934,583	)

Total ProLogis shareholders’ equity		7,505,223			7,665,391			7,987,324
Noncontrolling interests		15,132			17,691			19,962

Total equity		7,520,355			7,683,082			8,007,286

Total liabilities and equity	$	14,902,667		$	16,769,919		$	16,796,895

See Appendix A for note references

Section II - Financial Statements
Page 2.1



Fourth Quarter 2010

Consolidated Statements of Operations

(in thousands, except per share amounts)


	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2010			2009			2010			2009

Revenues:
Rental income (7)	$	199,595		$	186,229		$	771,308		$	722,648
Property management and other fees and incentives (8)		34,095			31,563			120,326			142,763
CDFS disposition proceeds (8)		-			-			-			180,237
Development management and other income		9,027			1,393			17,521			8,987

Total revenues		242,717			219,185			909,155			1,054,635


Expenses:
Rental expenses		55,076			55,136			223,924			223,692
Investment management expenses		10,580			11,835			40,659			43,416
General and administrative (9)		50,095			52,161			165,981			180,486
Reduction in workforce (9)		-			-			-			11,745
Impairment of real estate properties (2)(3)		733,316			207,668			736,612			331,592
Depreciation and amortization		83,214			73,712			319,602			274,522
Other expenses		2,030			4,617			16,355			24,025

Total expenses		934,311			405,129			1,503,133			1,089,478

Operating loss		(691,594	)		(185,944	)		(593,978	)		(34,843	)
Other income (expense):
Earnings (loss) from unconsolidated investees, net		3,176			(5,926	)		23,678			28,059
Interest income		2,008			370			5,022			2,702
Interest expense (10)		(112,034	)		(107,486	)		(461,166	)		(373,305	)
Impairment of goodwill and other assets (2)(3)		(412,745	)		(157,076	)		(412,745	)		(163,644	)
Other income (expense), net		8,006			(33,873	)		10,825			(42,051	)
Net gains (losses) on dispositions of investments in real estate (1)(11)		(30,200	)		12,843			28,488			35,262
Foreign currency exchange gains (losses), net (12)		(13,707	)		728			(11,081	)		35,626
Gain (loss) on early extinguishment of debt, net (5)		(153,037	)		(960	)		(201,486	)		172,258

Total other income (expense)		(708,533	)		(291,380	)		(1,018,465	)		(305,093	)

Loss before income taxes		(1,400,127	)		(477,324	)		(1,612,443	)		(339,936	)
Current income tax expense (benefit) (8)		5,874			(878	)		21,724			29,262
Deferred income tax benefit		(11,781	)		(2,600	)		(52,223	)		(23,287	)

Total income taxes		(5,907	)		(3,478	)		(30,499	)		5,975

Loss from continuing operations		(1,394,220	)		(473,846	)		(1,581,944	)		(345,911	)
Discontinued operations (4):
Income attributable to disposed properties and assets held for sale		15,936			21,723			76,917			105,061
Net gain related to disposed assets - China operations (8)		-			-			-			3,315
Net gains on dispositions/impairment of properties:
Non-development properties, net of taxes (1)(2)(3)		203,836			21,024			213,565			220,815
Development properties and land subject to ground leases		13,585			29,146			21,009			40,649

Total discontinued operations		233,357			71,893			311,491			369,840

Consolidated net earnings (loss)		(1,160,863	)		(401,953	)		(1,270,453	)		23,929
Net loss (earnings) attributable to noncontrolling interests		591			(190	)		(43	)		(1,156	)

Net earnings (loss) attributable to controlling interests		(1,160,272	)		(402,143	)		(1,270,496	)		22,773
Less preferred share dividends		6,317			6,316			25,424			25,423

Net loss attributable to common shares	$	(1,166,589	)	$	(408,459	)	$	(1,295,920	)	$	(2,650	)

Weighted average common shares outstanding - Basic (6)		537,438			473,561			491,744			403,149
Weighted average common shares outstanding - Diluted		537,438			473,561			491,744			403,149
Net earnings (loss) per share attributable to common shares - Basic:
Continuing operations	$	(2.60	)	$	(1.01	)	$	(3.27	)	$	(0.93	)
Discontinued operations		0.43			0.15			0.63			0.92

Net loss per share attributable to common shares - Basic	$	(2.17	)	$	(0.86	)	$	(2.64	)	$	(0.01	)

Net earnings (loss) per share attributable to common shares - Diluted (page 2.6):
Continuing operations	$	(2.60	)	$	(1.01	)	$	(3.27	)	$	(0.93	)
Discontinued operations		0.43			0.15			0.63			0.92

Net loss per share attributable to common shares - Diluted	$	(2.17	)	$	(0.86	)	$	(2.64	)	$	(0.01	)

See Appendix A for note references

Section II - Financial Statements
Page 2.2



Fourth Quarter 2010

Consolidated Statements of Funds From Operations (FFO)

(in thousands, except per share amounts)


	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2010			2009			2010			2009

Revenues:
Rental income	$	227,750		$	229,906		$	925,169		$	941,587
Property management and other fees and incentives (8)		34,095			31,563			120,326			142,856
CDFS disposition proceeds (8)		-			-			-			180,237
Development management and other income		9,027			1,393			17,521			8,987

Total revenues		270,872			262,862			1,063,016			1,273,667


Expenses:
Rental expense		61,169			66,162			263,776			284,390
Investment management expenses		10,580			11,835			40,659			43,416
General and administrative (9)		50,095			52,161			165,981			181,791
Reduction in workforce (9)		-			-			-			11,745
Impairment of real estate properties (2)(3)		821,018			207,668			824,314			331,592
Depreciation of corporate assets		4,116			3,828			13,886			15,897
Other expenses		2,030			4,617			16,355			24,031

Total expenses		949,008			346,271			1,324,971			892,862

Operating FFO		(678,136	)		(83,409	)		(261,955	)		380,805

Other income (expense):
FFO from unconsolidated investees		31,897			43,631			160,048			168,075
Interest income		2,008			370			5,022			2,702
Interest expense		(112,034	)		(107,486	)		(461,166	)		(373,135	)
Impairment of goodwill and other assets (2)(3)		(412,745	)		(157,076	)		(412,745	)		(163,644	)
Other income (expense), net		8,006			(33,873	)		10,825			(41,979	)
Net gains on dispositions of investments in real estate (11)		48,785			35,515			110,786			65,587
Foreign currency exchange gains (losses), net		389			(503	)		406			(22,571	)
Gain (loss) on early extinguishment of debt, net (5)		(153,037	)		(960	)		(201,486	)		172,258
Current income tax benefit (expense) (8):
Income tax expense on dispositions (1)(2)		(7,932	)		-			(10,783	)		(20,466	)
Income tax benefit (expense) - other		(1,670	)		4,536			(14,669	)		(5,339	)
Net gain related to disposed assets - China operations (8)		-			-			-			3,315

Total other income (expense)		(596,333	)		(215,846	)		(813,762	)		(215,197	)

FFO		(1,274,469	)		(299,255	)		(1,075,717	)		165,608

Less preferred share dividends		6,317			6,316			25,424			25,423
Less net earnings (loss) attributable to noncontrolling interests		(591	)		190			43			1,300


FFO attributable to common shares, including significant non-cash items		(1,280,195	)		(305,761	)		(1,101,184	)		138,885

Adjustments (page 2.4)		1,263,221			368,586			1,286,995			328,903


FFO attributable to common shares, excluding significant non-cash items	$	(16,974	)	$	62,825		$	185,811		$	467,788

See Appendix A for note references

Section II - Financial Statements
Page 2.3


Fourth Quarter 2010

Reconciliations of Net Loss to FFO

(in thousands)

Reconciliations to FFO


	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2010			2009			2010			2009
Net loss attributable to common shares	$	(1,166,589	)	$	(408,459	)	$	(1,295,920	)	$	(2,650	)
Add (deduct) NAREIT defined adjustments:
Real estate related depreciation and amortization		79,098			69,884			305,716			258,625
Adjustments to gains on dispositions for depreciation		-			(3,183	)		(4,208	)		(5,387	)
Adjustments to (gains on) dispositions of non-development properties		839			(3,291	)		936			(4,937	)
Net gain on disposition of assets in Blackstone transaction (1)		(205,613	)		-			(205,613	)		-
Reconciling items attributable to discontinued operations: (4)
Gains on dispositions of non-development properties		(25,092	)		(21,024	)		(34,821	)		(220,815	)
Real estate related depreciation and amortization		6,126			10,928			37,092			52,604
Our share of reconciling items from unconsolidated investees:
Real estate related depreciation and amortization		39,587			40,361			155,730			154,315
Adjustment to gains/losses on dispositions for depreciation		-			(1,681	)		-			(9,569	)
Other amortization items		(3,696	)		(3,954	)		(14,009	)		(11,775	)

Subtotal-NAREIT defined FFO		(1,275,340	)		(320,419	)		(1,055,097	)		210,411
Add (deduct) our defined adjustments:
Foreign currency exchange losses (gains), net (12)		14,096			(1,231	)		11,487			(58,128	)
Current income tax expense		-			3,658			-			3,658
Deferred income tax benefit		(11,781	)		(2,600	)		(52,223	)		(23,299	)
Our share of reconciling items from unconsolidated investees:
Foreign currency exchange gains, net (12)		(2,633	)		(947	)		(339	)		(1,737	)
Unrealized gains on derivative contracts, net		(8,842	)		(1,394	)		(8,967	)		(7,561	)
Deferred income tax expense		4,305			17,172			3,955			15,541

FFO, including significant non-cash items		(1,280,195	)		(305,761	)		(1,101,184	)		138,885

Adjustments:
Impairment of real estate properties (3)		821,018			207,668			824,314			331,592
Impairment of goodwill and other assets (3)		412,745			157,076			412,745			163,644
Net gain related to disposed assets - China operations (8)		-			-			-			(3,315	)
Losses (gains) on early extinguishment of debt (5)		14,674			960			30,723			(172,258	)
Write-off deferred financing fees associated with Global Line (10)		6,826			-			7,680			-
Our share of certain net losses recognized by the property funds (page 4.3)		7,958			2,882			11,533			9,240

FFO, excluding significant non-cash items		(16,974	)		62,825			185,811			467,788

Adjustments:
Our share of derivative losses recognized by the property funds (page 4.3)		18,844			-			24,815			-
Cash losses on early extinguishment of debt		138,363			-			170,763			-
Adjustments made in 2009, not applicable in 2010		-			46,707			-			102,620

FFO, excluding items that affect comparability including gains net of taxes		140,233			109,532			381,389			570,408

Adjustments:
CDFS proceeds		-			-			-			(180,237	)
Net gains on dispositions of real estate properties		(48,785	)		(35,515	)		(110,786	)		(65,587	)
Income tax expense related to dispositions		7,932			-			10,783			20,466

Core FFO	$	99,380		$	74,017		$	281,386		$	345,050


Per diluted share:
FFO, including significant non-cash items	$	(2.38	)	$	(0.65	)	$	(2.24	)	$	0.34
FFO, excluding significant non-cash items	$	(0.03	)	$	0.13		$	0.37		$	1.15
FFO, excluding items that affect comparability, including gains net of taxes	$	0.25		$	0.23		$	0.76		$	1.41
Core FFO	$	0.18		$	0.16		$	0.57		$	0.85


See Consolidated Statements of Operations on page 2.2 and Consolidated Statements of FFO on page 2.3

See Appendix A for note references

Section II - Financial Statements
Page 2.4


Fourth Quarter 2010

Other Financial Metrics

(in thousands)

Reconciliation of Consolidated Net Earnings (Loss) to Core EBITDA, as adjusted


	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2010			2009			2010			2009
Consolidated net earnings (loss)	$	(1,160,863	)	$	(401,953	)	$	(1,270,453	)	$	23,929
Gains from dispositions of investments in real estate, net		(187,221	)		(63,013	)		(263,062	)		(296,726	)
Depreciation and amortization		83,214			73,712			319,602			274,522
Interest expense		112,034			107,486			461,166			373,305
Impairment charges		1,146,061			364,744			1,149,357			495,236
Loss (gain) on early extinguishment of debt		153,037			960			201,486			(172,258	)
Current and deferred income tax expense (benefit)		(5,907	)		(3,478	)		(30,499	)		5,975
Adjustments made in 2009, not applicable in 2010		-			46,707			-			102,620
Income on properties sold during the quarter included in discontinued operations		(7,022	)		-			(7,022	)		-
Other non-cash charges		21,976			(1,231	)		36,625			(40,886	)

Core EBITDA, as adjusted, prior to our share of unconsolidated investees		155,309			123,934			597,200			765,717

Our share of reconciling items from unconsolidated investees:
Depreciation and amortization		35,891			34,726			141,721			132,971
Other non-cash charges		788			17,713			6,182			15,483
Realized losses on derivative activity		18,844			-			24,815			-

Core EBITDA, as adjusted	$	210,832		$	176,373		$	769,918		$	914,171


ProLogis Debt to Core EBITDA:
Core EBITDA, as adjusted - annualized	$	843,328		$	705,492
ProLogis Debt as of December 31	$	6,506,029		$	7,977,778

ProLogis Debt to Core EBITDA ratio		7.71	x		11.31	x

Debt to Core EBITDA, including our share of unconsolidated investees:
Core EBITDA, as adjusted - annualized	$	843,328		$	705,492
Our share of interest and income taxes from unconsolidated investees		175,092			165,136

Core EBITDA, as adjusted	$	1,018,420		$	870,628


ProLogis Debt as of December 31	$	6,506,029		$	7,977,778
Our share of debt of unconsolidated investees as of December 31		2,330,947			2,591,241

Debt	$	8,836,976		$	10,569,019


Debt to Core EBITDA ratio		8.68	x		12.14	x

Section II - Financial Statements
Page 2.5


Fourth Quarter 2010

Calculation of Per Share Amounts

(in thousands, except per share amounts)

Net Loss Per Share


	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2010 (a)			2009 (a)			2010 (a)			2009 (a)
Net loss (b)	$	(1,166,589	)	$	(408,459	)	$	(1,295,920	)	$	(2,650	)
Noncontrolling interest attributable to convertible limited partnership units (c)		-			-			-			-

Adjusted net loss - Diluted (b)	$	(1,166,589	)	$	(408,459	)	$	(1,295,920	)	$	(2,650	)


Weighted average common shares outstanding - Basic		537,438			473,561			491,744			403,149
Incremental weighted average effect of conversion of limited partnership units (c)		-			-			-			-
Incremental weighted average effect of stock awards		-			-			-			-

Weighted average common shares outstanding - Diluted		537,438			473,561			491,744			403,149


Net loss per share - Diluted (b)	$	(2.17	)	$	(0.86	)	$	(2.64	)	$	(0.01	)

FFO Per Share, Including Significant Non-Cash Items


	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2010 (a)			2009 (a)			2010 (a)			2009
FFO, including significant non-cash items	$	(1,280,195	)	$	(305,761	)	$	(1,101,184	)	$	138,885
Noncontrolling interest attributable to convertible limited partnership units (c)		-			-			-			-

FFO - Diluted, including significant non-cash items (b)	$	(1,280,195	)	$	(305,761	)	$	(1,101,184	)	$	138,885


Weighted average common shares outstanding - Basic		537,438			473,561			491,744			403,149
Incremental weighted average effect of conversion of limited partnership units (c)		-			-			-			-
Incremental weighted average effect of stock awards		-			-			-			2,474

Weighted average common shares outstanding - Diluted		537,438			473,561			491,744			405,623


FFO per share - Diluted, including significant non-cash items (b)	$	(2.38	)	$	(0.65	)	$	(2.24	)	$	0.34

Core FFO Per Share


	Three Months Ended					Twelve Months Ended
	December 31,					December 31,
	2010			2009		2010			2009
Core FFO	$	99,380		$	74,017	$	281,386		$	345,050
Noncontrolling interest attributable to convertible limited partnership units (c)		(588	)		-		(64	)		-
Interest expense for convertible debt to common shares (c)		4,218			-		-			-

Core FFO - Diluted (b)	$	103,010		$	74,017	$	281,322		$	345,050


Weighted average common shares outstanding - Basic		537,438			473,561		491,744			403,149
Incremental weighted average effect of conversion of limited partnership units (c)		760			-		774			-
Incremental weighted average effect of conversion of certain convertible debt (c)		26,611			-		-			-
Incremental weighted average effect of stock awards		3,688			3,159		3,350			2,474

Weighted average common shares outstanding - Diluted		568,497			476,720		495,868			405,623


Core FFO per share - Diluted (b)	$	0.18		$	0.16	$	0.57		$	0.85


(a)		In periods with a net loss, the inclusion of any incremental shares is anti-dilutive, and therefore, both basic and diluted shares are the same.

(b)		Attributable to common shares.

(c)		If the impact of the conversion of limited partnership units or convertible debt is anti-dilutive, the income impact and shares are not included in the diluted per share calculation.

Section II - Financial Statements
Page 2.6


Fourth Quarter 2010

Direct Owned - Operating Properties

(in thousands, except for number of buildings and leased/occupied percentage)

Direct Owned Industrial Operating Properties Portfolio (including completed development)


	December 31, 2010												September 30, 2010
	# of		Square		Investment		Leased			Occupied			# of		Square		Investment		Leased
	Bldgs		Feet		Balance		Percent			Percent			Bldgs		Feet		Balance		Percent
North America:
Canada		2		526	$	48,702		100.00	%		100.00	%		2		526	$	46,220		100.00	%
Mexico		30		5,560		290,098		77.14	%		76.56	%		30		5,560		286,913		74.07	%
United States		856		132,342		7,332,094		91.17	%		90.81	%		1,049		155,771		8,228,994		89.99	%

Total North America		888		138,428		7,670,894		90.64	%		90.27	%		1,081		161,857		8,562,127		89.48	%

Europe:
Central Europe		40		10,244		636,271		65.28	%		51.92	%		40		10,241		646,994		59.27	%
Northern Europe		15		3,306		224,592		95.65	%		89.51	%		13		2,998		212,064		82.32	%
Southern Europe		20		6,169		406,760		62.35	%		59.94	%		20		6,161		414,446		58.39	%
United Kingdom		13		3,163		323,133		77.33	%		77.33	%		14		3,223		340,456		77.75	%

Total Europe		88		22,882		1,590,756		70.54	%		63.03	%		87		22,623		1,613,960		64.72	%

Asia:
Japan		9		7,237		1,453,149		82.63	%		73.92	%		9		7,237		1,413,886		74.75	%
Korea (a)		-		-		-		-			-			4		425		41,921		80.33	%


Total Asia		9		7,237		1,453,149		82.63	%		73.92	%		13		7,662		1,455,807		75.06	%


Total direct owned industrial operating properties (b)(c)		985		168,547	$	10,714,799		87.57	%		85.87	%		1,181		192,142	$	11,631,894		85.99	%


(a)		Assets are reflected as Assets Held for Sale in our Consolidated Balance Sheet at December 31, 2010.

(b)		The leased percentage of the core properties, excluding completed development properties, was 91.17% and 90.43% at December 31, 2010 and September 30, 2010, respectively. If we also exclude the Blackstone properties, the leased percentage of the core properties was 89.35% at September 30, 2010 (see note 1 to Section II in Appendix A for detail related to the Blackstone transaction).

(c)		The leased percentage of the completed development properties was 78.71% and 73.14% at December 31, 2010 and September 30, 2010, respectively. Also see note 1 to Section III in Appendix A for information regarding our Static Completed Development Portfolio.

Section III - Direct Owned
Page 3.1


Fourth Quarter 2010

Direct Owned - Land

(in thousands, except for percentage and acreage)

Land Rollforward


As of September 31, 2010	$	2,385,076
Changes in land held during fourth quarter of 2010:
Acquisitions		35
Dispositions and development starts		(41,252	)
Infrastructure costs and reclasses		3,979
Impairment charges (a)		(667,968	)
Effect of changes in foreign exchange rates and other		(17,702	)
Reclass to “Assets Held for Sale” (b)		(128,557	)

As of December 31, 2010 (a)	$	1,533,611

Investment by Major Logistics Corridors


	Acres		Investment		Percentage
U.S.
New Jersey / Eastern Pennsylvania		565	$	133,588
Chicago		682		61,169
Los Angeles Basin / Inland Empire		360		60,888
Miami / South Florida		74		35,463
Dallas		485		23,111
Washington DC / Baltimore		138		20,351
San Francisco Bay Area / Central Valley		180		17,013
Atlanta		350		12,909
Houston		71		6,845

U.S. major logistic corridors (percentage of total land)		2,905		371,337		24	%

International
London / Midlands - UK		1,128		263,844
Tokyo - Japan		21		80,190
Toronto - Canada		169		75,501
Wroclaw / Silesia - Southern Poland		378		57,919
Warsaw / Poznan - Central Poland		446		52,345
Osaka - Japan		8		46,407
Mexico City - Mexico		122		39,237
Amsterdam / Rotterdam / Antwerp - Benelux		68		29,292
Cologne / Frankfurt - Western Germany		98		27,817
Paris / Le Havre - Central France		86		25,983
Munich / Stuttgart - Southern Germany		95		25,046
Madrid / Barcelona - Spain		55		8,408
Hamburg / Bremen - Northern Germany		14		3,683
Lyon / Marseille - Southern France		16		3,439


International major logistic corridors (percentage of total land)		2,704		739,111		48	%

Major logistics corridors (percentage of total land)		5,609		1,110,448		72	%


Other U.S. markets		1,435		85,459
Other international markets		1,946		337,704


Total Land (a)		8,990	$	1,533,611		100	%


(a)		During the fourth quarter of 2010, we recognized impairment charges based on our change of intent. As of December 31, 2010, we have targeted $1.0 billion of land for disposition. See note 3 to Section II in Appendix A for further discussion.

(b)		See note 4 to Section II in Appendix A.

Section III - Direct Owned
Page 3.2


Fourth Quarter 2010

Direct Owned - Under Development Portfolio and Development Starts

(dollars and square feet in thousands)

Under Development Portfolio


							Remaining		Total
	Number of		Square		Investment		Costs to		Expected		Leased
As of December 31, 2010	Properties		Feet		Balance (a)		Incur (b)		Investment		Percentage
Development - build-to-suit:
North America - United States		2		472	$	7,798	$	10,434	$	18,232		100.00	%

Europe:
Northern Europe		3		880		39,334		19,662		58,996		100.00	%
Southern Europe		2		584		29,095		10,338		39,433		100.00	%
United Kingdom		1		155		10,423		10,391		20,814		100.00	%

Total Europe		6		1,619		78,852		40,391		119,243		100.00	%

Asia - Japan		3		702		57,204		65,675		122,879		100.00	%

Total build-to-suit		11		2,793		143,854		116,500		260,354		100.00	%


Development - inventory:
North America - United States		2		514		28,489		26,623		55,112		31.90	%

Asia - Japan		1		1,551		194,193		70,425		264,618		21.12	%

Total inventory		3		2,065		222,682		97,048		319,730		23.80	%


Total properties under development		14		4,858	$	366,536	$	213,548	$	580,084		67.61	%


	ProLogis Parc Kawajima – Tokyo (under development December 2010)		South Bay Distribution Center – California (under development December 2010)		ProLogis Parc Chanteloup – France (under development December 2010)

Development Starts


	Three Months Ended
	December 31,			September 30,			June 30,			March 31,			Full Year
	2010			2010			2010			2010			2010
North America:
Square Feet		715			270			-			-			985
Total expected investment ($)		43,226			30,123			-			-			73,349
Cost per square foot ($)		60.46			111.57			-			-			74.47
Leased percentage at start		88.87	%		0	%		-			-
Europe (c):
Square Feet		244			328			2,171			365			3,108
Total expected investment ($)		27,565			22,592			161,366			17,745			229,268
Cost per square foot ($)		112.97			68.88			74.33			48.62			73.77
Leased percentage at start		100.00	%		100.00	%		100.00	%		100.00	%
Asia:
Square Feet		524			-			170			1,551			2,245
Total expected investment ($)		84,015			-			34,976			234,433			353,424
Cost per square foot ($)		160.33			-			205.74			151.15			157.43
Leased percentage at start		100.00	%		-			100.00	%		0	%

Total (c):
Square Feet		1,483			598			2,341			1,916			6,338
Total expected investment ($)		154,806			52,715			196,342			252,178			656,041
Cost per square foot ($)		104.39			88.15			83.87			131.62			103.51
Leased percentage at start		94.63	%		54.85	%		100.00	%		19.05	%


(a)		The investment balance includes land and construction costs, as well as leasing commissions associated with these developments that are classified as Other Assets in our Consolidated Balance Sheet.

(b)		These costs may include construction costs, capitalized interest and administrative costs, tenant improvements and leasing commissions and are translated into dollars at current rates, if applicable.

(c)		Amounts include a development start in the second quarter of 2010 with 0.8 million square feet and a total expected investment of $83.4 million that was 100% leased at the start of development. In June 2010, we sold the underlying land to ProLogis European Properties Fund II, and we are constructing the property on behalf of the property fund for a development fee.

Section III - Direct Owned
Page 3.3


Fourth Quarter 2010

Direct Owned - Investing Activity

(in thousands, except acres)

Inflows


	Three Months Ended
	December 31,		September 30,		June 30,		March 31,		Full Year
	2010		2010		2010		2010		2010

Net proceeds from property dispositions:
Contributions to property funds and joint ventures (a):
Completed development properties
Square feet		-		2,042		554		773		3,369
Net sales proceeds ($) (b)		27,361		285,011		38,852		111,208		462,432
Land
Acres		-		-		41		-		41
Net sales proceeds ($)		-		-		34,645		-		34,645

Total contributions to property funds and joint ventures:
Square feet		-		2,042		554		773		3,369
Net sales proceeds ($)		27,361		285,011		73,497		111,208		497,077

Dispositions to third parties:
Completed development properties
Square feet		-		556		-		-		556
Net sales proceeds ($)		-		48,913		-		-		48,913
Non-development properties and other investments (c)
Square feet		23,990		145		303		370		24,808
Net sales proceeds ($)		1,077,830		2,660		3,753		13,688		1,097,931
Land
Acres		249		30		2		150		431
Net sales proceeds ($)		46,376		9,861		95		46,820		103,152

Total dispositions to third parties:
Square feet		23,990		701		303		370		25,364
Net sales proceeds ($)		1,124,206		61,434		3,848		60,508		1,249,996

Total property dispositions:
Square feet		23,990		2,743		857		1,143		28,733
Net sales proceeds ($)		1,151,567		346,445		77,345		171,716		1,747,073


Outflows
	Three Months Ended
	December 31,		September 30,			June 30,			March 31,		Full Year
	2010		2010			2010			2010		2010
Property acquisitions:
Operating properties:
Square feet		-		1,387			1,029			-		2,416
Total purchase price ($)		-		67,735			60,875			-		128,610
Percentage Leased as of 12/31/10		-		72.04	%		80.98	%		-		75.84	%
Land:
Acres		1		10			23			-		34
Total purchase price ($)		35		3,979			1,030			-		5,044
Investments in property funds:
Capital contributions ($) (d)		69,777		94,486			23,363			7,494		195,120
Acquisitions of investment interest ($) (e)		-		-			-			109,237		109,237


(a)		Includes contributions to entities in which we have an investment that is accounted for by the equity method.

(b)		Amount in the fourth quarter of 2010 represents additional proceeds we received from contributions we made to PEPF II in 2009. See note 11 to Section II in Appendix A.

(c)		Amounts in the fourth quarter of 2010 include the sale of a portfolio of industrial properties and several equity method investments. See note 1 to Section II in Appendix A.

(d)		Amounts include cash contributions we made to the property funds and investment interests we received in exchange for properties contributed. See footnotes on Page 4.1 for more detail of activity that occurred during the fourth quarter of 2010.

(e)		In the first quarter of 2010, we purchased 15.8 million common equity units of ProLogis European Properties (“PEPR”).

Section III - Direct Owned
Page 3.4


Fourth Quarter 2010

Investment Management - ProLogis’ Investments in Unconsolidated Investees

(in thousands, except for percentages)

Investments in Unconsolidated Investees


	December 31, 2010					September 30, 2010
	Investment		Ownership			Investment		Ownership
	Balance		Percentage			Balance		Percentage
Property funds:
ProLogis California	$	91,088		50.0	%	$	90,996		50.0	%
ProLogis North American Properties Fund I (a)		40,572		41.3	%		17,000		41.3	%
ProLogis North American Properties Funds VI-VIII (b)		-		-			76,821		20.0	%
ProLogis North American Properties Fund XI		30,274		20.0	%		30,052		20.0	%
ProLogis North American Industrial Fund		234,172		23.1	%		237,545		23.1	%
ProLogis North American Industrial Fund II (c)		354,407		37.0	%		308,961		37.0	%
ProLogis North American Industrial Fund III		132,282		20.0	%		135,351		20.0	%
ProLogis Mexico Industrial Fund		53,574		20.0	%		52,413		20.0	%
ProLogis European Properties (“PEPR”)		496,946		33.1	%		493,056		33.1	%
ProLogis European Properties Fund II (“PEPF II”)		439,985		29.7	%		478,853		29.7	%
ProLogis Korea Fund		16,716		20.0	%		21,561		20.0	%

Total property funds	$	1,890,016		31.2	%	$	1,942,609		30.9	%

Other unconsolidated investees, by continent:
North America (d)(e)	$	17,508				$	179,598
Europe		49,857					51,657
Asia		67,280					64,971

		134,645					296,226

Total investments in and advances to unconsolidated investees	$	2,024,661				$	2,238,835


(a)		During the fourth quarter of 2010, the property fund repaid maturing debt with a capital contribution from us ($23.6 million) and our fund partner ($33.4 million).

(b)		On December 17, 2010, we sold our 20% interest in these property funds. We will continue to provide property management services for the industrial properties that were previously owned by these property funds. See note 1 to Section II in Appendix A for more detail.

(c)		During the fourth quarter of 2010, the property fund settled two interest rate swap contracts. We made a cash contribution of $46.2 million to the property fund for the settlement of these contracts, which increased our preferred investment in the property fund to $131.2 million.

(d)		On December 21, 2010 we entered into a definitive agreement to sell a portfolio of assets, which includes our investments in certain joint ventures that were reclassified to Assets Held for Sale at December 31, 2010. See notes 2 and 4 to Section II in Appendix A for more detail.

(e)		In connection with the Blackstone transaction (see note 1 to Section II in Appendix for more detail), we sold our investment of $100.0 million in one joint venture in North America.

Section IV - Investment Management
Page 4.1


Fourth Quarter 2010

Investment Management - Operating Portfolio of Property Funds

(in thousands, except for percentages)

Operating Industrial Portfolio - Property Funds


	December 31, 2010												September 30, 2010
	# of		Square		Current		Leased			Occupied			# of		Square		Current		Leased
	Bldgs		Feet		Investment (a)		Percent			Percent			Bldgs		Feet		Investment (a)		Percent

North America:
ProLogis California		80		14,178	$	705,396		96.52	%		96.52	%		80		14,178	$	704,669		96.91	%
ProLogis North American Properties Fund I		35		9,033		377,468		94.25	%		94.25	%		35		9,033		377,173		95.44	%
ProLogis North American Properties Fund VI-VIII (b)		-		-		-		-			-			74		17,653		1,101,707		89.90	%
ProLogis North American Properties Fund XI		12		3,616		184,512		85.25	%		85.25	%		12		3,616		183,453		96.13	%
ProLogis North American Industrial Fund		258		49,909		2,988,944		94.59	%		94.36	%		258		49,909		2,978,156		94.09	%
ProLogis North American Industrial Fund II		148		36,018		2,169,772		93.07	%		92.92	%		148		36,018		2,177,249		92.41	%
ProLogis North American Industrial Fund III		120		24,693		1,760,459		86.00	%		84.73	%		120		24,693		1,757,473		85.03	%
ProLogis Mexico Industrial Fund		72		9,144		582,112		90.46	%		89.84	%		72		9,144		579,396		91.13	%

Total North America		725		146,591		8,768,663		92.45	%		92.08	%		799		164,244		9,859,276		92.11	%

Europe Funds		437		103,804		8,642,635		94.57	%		93.62	%		435		103,130		8,799,070		93.56	%

Asia — ProLogis Korea Fund		12		1,734		128,919		100.00	%		100.00	%		12		1,734		153,295		100.00	%


Total investment management operating portfolio		1,174		252,129	$	17,540,217		93.37	%		92.77	%		1,246		269,108	$	18,811,641		92.72	%



Signed 763,228 sf lease with Skecher USA, Inc. at Mission Distribution Center in the Inland Empire — ProLogis California LLC	Signed 448,512 sf, lease with S&S Activewear at Remington Lake Business Park, Chicago — ProLogis North American Industrial Fund	Signed 360,860 sf with NYK Logistics Italy S.p.A. at Romentino Distribution Center, Italy — ProLogis European Properties


(a)		The current investment represents the property fund’s investment balance in the real estate; not our proportionate share.

(b)		During the fourth quarter 2010, we sold our investment in these property funds. See note 1 to Section II in Appendix A.

Section IV - Investment Management
Page 4.2


Fourth Quarter 2010

Investment Management - Summarized Financial Information of Property Funds

(dollars in thousands)

FFO and Net Earnings (Loss) of the Property Funds, Combined


	For the Three Months Ended December 31, 2010
	North American			European			Asian
	Funds (1)			Funds (2)			Fund (3)			Total

Rental income	$	180,300		$	195,694		$	2,930		$	378,924
Rental expenses		(39,572	)		(45,744	)		(134	)		(85,450	)

Net operating income from properties		140,728			149,950			2,796			293,474
Other income (expense), net, including G&A		(5,701	)		12,814			(235	)		6,878
Realized loss on derivative contracts (4)		(43,095	)		(9,771	)		-			(52,866	)
Impairment of real estate properties (5)		(7,980	)		-			(24,790	)		(32,770	)
Interest expense		(79,539	)		(58,880	)		(769	)		(139,188	)
Current income tax benefit (expense)		462			(4,377	)		(72	)		(3,987	)

FFO of the property funds		4,875			89,736			(23,070	)		71,541
Real estate related depreciation and amortization		(73,206	)		(57,914	)		(780	)		(131,900	)
Unrealized gains on derivative contracts (4)		23,899			9,933			-			33,832
Deferred tax benefit (expense)		9,694			(29,876	)		-			(20,182	)
Other expense, net, including foreign currency		-			(1,299	)		-			(1,299	)

Net earnings (loss) of the property funds	$	(34,738	)	$	10,580		$	(23,850	)	$	(48,008	)


ProLogis’ Share of FFO and Net Earnings (Loss) of the Property Funds, Combined
	For the Three Months Ended December 31, 2010
	North American			European			Asian
	Funds (1)			Funds (2)			Fund (3)			Total

ProLogis’ share of the property fund’s FFO (6)	$	(1,177	)	$	26,182		$	(4,615	)	$	20,390
Interest and preferred dividend income (7)		2,035			1,488			-			3,523
Fees paid to ProLogis (8)(9)		14,373			22,485			195			37,053

FFO recognized by ProLogis, including significant non-cash items		15,231			50,155			(4,420	)		60,966
ProLogis’ share of certain losses recognized by the property funds:
Impairment of real estate properties		3,000			-			4,958			7,958

FFO recognized by ProLogis, excluding significant non-cash items	$	18,231		$	50,155		$	538		$	68,924


ProLogis’ share of the property fund’s net earnings (loss) (6)	$	(7,052	)	$	5,543		$	(4,770	)	$	(6,279	)
Interest and preferred dividend income (7)		2,035			1,488			-			3,523
Fees paid to ProLogis (8)(9)		14,373			22,485			195			37,053

Net earnings (loss) recognized by ProLogis	$	9,356		$	29,516		$	(4,575	)	$	34,297

See our Consolidated Statements of Operations on Page 2.2, Consolidated Statements of FFO on Page 2.3 and the Reconciliations of Net Loss to FFO on Page 2.4.

Note references are to Appendix A.

Section IV - Investment Management
Page 4.3


Fourth Quarter 2010

Investment Management - Summarized Financial Information of Property Funds

(dollars in thousands)

FFO and Net Earnings (Loss) of the Property Funds, Combined


	For the Year Ended December 31, 2010
	North American			European			Asian
	Funds (1)			Funds (2)			Fund (3)			Total

Rental income	$	780,893		$	723,299		$	11,377		$	1,515,569
Rental expenses		(189,307	)		(166,137	)		(727	)		(356,171	)

Net operating income from properties		591,586			557,162			10,650			1,159,398
Other expense, net, including G&A		(23,901	)		(7,267	)		(925	)		(32,093	)
Realized loss on derivative contracts (4)		(59,276	)		(9,771	)		-			(69,047	)
Impairment of real estate properties (5)		(20,348	)		-			(24,790	)		(45,138	)
Loss on early extinguishment of debt		-			(2,059	)		-			(2,059	)
Interest expense and other		(337,538	)		(218,499	)		(2,992	)		(559,029	)
Current income tax expense		(1,350	)		(21,596	)		(73	)		(23,019	)

FFO of the property funds		149,173			297,970			(18,130	)		429,013
Real estate related depreciation and amortization		(296,704	)		(219,071	)		(3,042	)		(518,817	)
Unrealized gains on derivative contracts (4)		24,235			865			-			25,100
Deferred tax benefit (expense)		14,987			(32,093	)		-			(17,106	)
Other income, net, including foreign currency		-			588			10			598

Net earnings (loss) of the property funds	$	(108,309	)	$	48,259		$	(21,162	)	$	(81,212	)

ProLogis’ Share of FFO and Net Earnings (Loss) of the Property Funds, Combined


	For the Year Ended December 31, 2010
	North American			European		Asian
	Funds (1)			Funds (2)		Fund (3)			Total

ProLogis’ share of the property fund’s FFO (6)	$	41,949		$	91,009	$	(3,628	)	$	129,330
Interest and preferred dividend income (7)		4,789			5,810		-			10,599
Fees paid to ProLogis (8)(9)		58,959			62,247		758			121,964

FFO recognized by ProLogis, including significant non-cash items		105,697			159,066		(2,870	)		261,893
Impairment of real estate properties		6,000			-		4,958			10,958
Loss on early extinguishment of debt		-			575		-			575

FFO recognized by ProLogis, excluding significant non-cash items	$	111,697		$	159,641	$	2,088		$	273,426


ProLogis’ share of the property fund’s net earnings (loss) (6)	$	(18,031	)	$	22,214	$	(4,233	)	$	(50	)
Interest and preferred dividend income (7)		4,789			5,810		-			10,599
Fees paid to ProLogis (8)(9)		58,959			62,247		758			121,964

Net earnings (loss) recognized by ProLogis	$	45,717		$	90,271	$	(3,475	)	$	132,513

Condensed Balance Sheet of the Property Funds, Combined


	As of December 31, 2010
	North American			European			Asian
	Funds (1)			Funds (2)			Fund (3)			Total

Operating industrial properties, before depreciation	$	8,768,663		$	8,642,635		$	128,919		$	17,540,217
Accumulated depreciation		(999,318	)		(947,624	)		(8,286	)		(1,955,228	)
Properties under development and land		-			87,763			-			87,763
Other assets		312,847			393,991			6,646			713,484

Total assets	$	8,082,192		$	8,176,765		$	127,279		$	16,386,236


Third party debt	$	4,196,245		$	3,476,820		$	49,179		$	7,722,244
Other liabilities		333,586			654,857			3,670			992,113

Total liabilities	$	4,529,831		$	4,131,677		$	52,849		$	8,714,357

See our Consolidated Statements of Operations on Page 2.2, Consolidated Statements of FFO on Page 2.3 and the Reconciliations of Net Loss to FFO on Page 2.4.

Note references are to Appendix A.

Section IV - Investment Management
Page 4.4


Fourth Quarter 2010

Investment Management - Investing and Financing Activity

(in thousands, except percentages)

Investing Activities — for the property funds combined


	Three Months Ended
	December 31,		September 30,		June 30,		March 31,		Full Year
	2010		2010		2010		2010		2010

Inflows:
Property dispositions:
Square feet		-		-		49		-		49
Net sales proceeds ($)		-		-		377		-		377

Outflows:
Acquisitions:
Land and operating properties acquired from ProLogis:
Square feet		-		1,240		554		253		2,047
Purchase price of assets acquired (a) ($)		-		78,788		73,497		22,800		175,085
Operating properties acquired from third parties:
Square feet		767		-		207		-		974
Purchase price of assets acquired ($)		51,655		-		15,592		-		67,247

Financing Activities - for each property fund, if applicable (b)


	Three Months Ended						Twelve Months Ended
	December 31, 2010						December 31, 2010
	Principal			Wtd. Avg. Int. Rate			Principal			Wtd. Avg. Int. Rate

Debt issued:
ProLogis North American Properties Fund I	$	180,000			3.75	%	$	180,000			3.75	%
ProLogis European Properties		-						559,937			5.06	%
ProLogis European Properties Fund II		-						647,488			4.77	%
ProLogis North American Industrial Fund II		-						152,000			7.23	%

Total issued	$	180,000					$	1,539,425

Debt repaid:
ProLogis North American Properties Fund I	$	(234,490	)		7.59	%	$	(234,490	)		7.59	%
ProLogis European Properties Fund II		(123,232	)		5.59	%		(123,232	)		5.59	%
ProLogis European Properties		-						(571,440	)		3.28	%
ProLogis North American Properties Fund XI		-						(42,317	)		4.15	%
ProLogis North American Industrial Fund II		-						(136,783	)		4.66	%
ProLogis North American Industrial Fund II		-						(20,677	)	variable
ProLogis Mexico Fund		-						(55,000	)		6.00	%
Total amortization payments during period		(10,541	)					(36,343	)

Total repaid	$	(368,263	)				$	(1,220,282	)

Line of credit activity, net - advances (payments):
ProLogis European Properties	$	9,757			3.28	%	$	(87,011	)		2.45	%
ProLogis European Properties Fund II		-						(601,026	)		2.28	%

Line of credit activity, net	$	9,757					$	(688,037	)


Grand total net change in debt	$	(178,506	)				$	(368,894	)


Debt extended:
ProLogis European Properties Fund II to 2016	$	238,483			6.33	%	$	238,483			6.33	%
ProLogis Mexico Fund to 2017		-						214,149			6.63	%

Total debt extended	$	238,483					$	452,632


(a)		The purchase price reported is based on proceeds ProLogis received for these contributions.

(b)		Excludes changes due to foreign currency exchange rates, if applicable. See page 6.3 for debt information as of December 31, 2010.

Section IV - Investment Management
Page 4.5


Fourth Quarter 2010

Operating Statistics - Direct Owned Leasing and Capital Expenditures

(in thousands, except percentages and per square foot)

Lease Expirations


			Annual Base Rent of				Percentage of
	Square		Expiring Leases				Total Annual
	Footage		Total		Per sq ft		Base Rents
Month to month customers		4,024	$	9,200	$	2.29		1.42	%
2011		19,098		80,011		4.19		12.26	%
2012		26,041		109,125		4.19		16.72	%
2013		19,923		94,544		4.75		14.49	%
2014		21,925		96,479		4.40		14.79	%
2015		17,635		78,063		4.43		11.96	%
2016		9,939		43,908		4.42		6.73	%
2017		4,152		20,085		4.84		3.08	%
2018		3,580		17,992		5.03		2.76	%
2019		4,829		24,424		5.06		3.74	%
Thereafter		13,584		78,650		5.79		12.05	%

Totals		144,730	$	652,481	$	4.51		100.00	%

Leasing Activity (a)


	Three Months Ended
	December 31,			September 30,			June 30,			March 31,			Full Year
	2010			2010			2010			2010			2010

Square feet of leases signed during the period:

Development properties - new leases over one year		4,205			2,166			4,569			3,778			14,718
Development properties - new leases less than one year		369			477			406			234			1,486
Development properties - renewals		976			532			378			256			2,142
Core properties - new leases		4,511			2,934			3,293			2,801			13,539
Core properties - renewals		8,957			5,248			5,576			5,592			25,373


Total square feet of leases signed		19,018			11,357			14,222			12,661			57,258

# of leases		279			251			322			302			1,154

Weighted average customer retention		87.7	%		70.5	%		78.1	%		71.7	%		77.8	%

Percentage of development properties leased to repeat customers		74.3	%		67.3	%		76.4	%		42.5	%		66.3	%

Turnover costs:
Square feet		15,407			9,097			9,535			9,045			43,084
Cost per sq ft ($)		0.97			1.30			1.13			1.28			1.14
Capital Expenditures

	Three Months Ended
	December 31,			September 30,			June 30,			March 31,			Full Year
	2010			2010			2010			2010			2010

Capital expenditures ($)		7,277			9,452			6,485			5,351			28,565
Tenant improvements ($)		13,516			11,104			9,559			5,233			39,412
Leasing commissions ($)		4,862			4,977			4,161			3,828			17,828

Total		25,655			25,533			20,205			14,412			85,805


(a)		Represents leasing activity for industrial properties.

Section V - Operating Statistics
Page 5.1



Fourth Quarter 2010

Operating Statistics - Investment Management Leasing and Capital Expenditures

(in thousands, except percentages and per square foot)

Lease Expirations


			Annual Base Rent of				Percentage of
	Square		Expiring Leases				Total Annual
	Footage		Total		Per sq ft		Base Rents
Month to month customers		3,100	$	11,732	$	3.78		0.99	%
2011		25,975		123,948		4.77		10.37	%
2012		38,355		187,389		4.89		15.68	%
2013		34,264		163,064		4.76		13.64	%
2014		22,451		108,911		4.85		9.11	%
2015		28,888		141,889		4.91		11.87	%
2016		20,314		104,495		5.14		8.74	%
2017		14,310		81,895		5.72		6.85	%
2018		15,190		83,195		5.48		6.96	%
2019		8,385		49,706		5.93		4.16	%
Thereafter		22,662		138,989		6.13		11.63	%

Totals		233,894	$	1,195,213	$	5.11		100.00	%

Leasing Activity


	Three Months Ended
	December 31,			September 30,			June 30,			March 31,			Full Year
	2010			2010			2010			2010			2010

Square feet of leases signed during the period:
Square feet		15,497			15,665			14,062			16,957			62,181
# of leases		173			160			188			196			717

Weighted average customer retention		87.1	%		79.1	%		81.8	%		76.3	%		80.6	%

Turnover costs:
Square feet		15,151			15,358			13,981			16,946			61,436
Cost per sq ft ($)		1.07			0.91			1.12			0.81			0.97
Capital Expenditures (a)
	Three Months Ended
	December 31,			September 30,			June 30,			March 31,			Full Year
	2010			2010			2010			2010			2010

Capital expenditures ($)		12,985			7,874			4,224			3,987			29,070
Tenant improvements ($)		9,255			8,913			6,060			6,085			30,313
Leasing commissions ($)		9,299			7,968			6,842			5,977			30,086

		31,539			24,755			17,126			16,049			89,469


(a)		Amounts represent the entity’s expenditures, not our proportionate share.

Section V - Operating Statistics
Page 5.2



Fourth Quarter 2010

Operating Statistics - Same Store Analysis and Top Customers

(square feet in thousands)

Same Store Analysis - for the three months ended

See definitions in Appendix B.


	December 31, 2010				September 30, 2010				June 30, 2010				March 31, 2010
	Total		Adjusted		Total		Adjusted		Total		Adjusted		Total		Adjusted
	Portfolio		Portfolio (a)		Portfolio		Portfolio (a)		Portfolio		Portfolio (a)		Portfolio		Portfolio (a)
Sq Ft of Same Store Population		413,716		367,438		455,722		405,253		447,084		401,506		439,871		399,845

Percentage Change in [increase/(decrease)]:
Rental Income		(0.45%)		(4.72%)		(0.13%)		(4.20%)		(0.83%)		(3.50%)		(0.19%)		(3.15%)

Rental Expenses		(0.47%)		(2.90%)		(1.29%)		(3.45%)		6.81%		6.61%		8.61%		7.15%

Net Operating Income		(0.45%)		(5.30%)		0.27%		(4.45%)		(3.36%)		(6.63%)		(3.13%)		(6.39%)

Average Leasing		2.14%		(0.40%)		2.07%		(0.73%)		1.76%		(1.23%)		0.73%		(1.89%)

Sq Ft of Leasing Activity (b)		27,454		26,293		23,866		23,052		22,316		21,554		25,556		25,085

Percentage Change in Rental Rate Growth (b)		(10.50%)		(11.21%)		(8.51%)		(8.51%)		(15.74%)		(16.12%)		(12.25%)		(12.34%)

Top Customers - Direct Owned


		Percentage of
		Annualized Base		Number of
Rank	Customer Name	Rent		Leases

1	Home Depot, Inc		2.70%		5
2	APL (Neptune Orient Lines)		1.98%		13
3	Euromarket Designs		1.11%		3
4	Hitachi, Ltd.		0.91%		2
5	Kellogg Company		0.90%		6
6	LG, Inc.		0.89%		4
7	Ford Motor Company		0.84%		4
8	PepsiCo		0.79%		5
9	Kirin Logistics		0.78%		1
10	Kimberly-Clark Corporation		0.77%		2
11-25	various		9.29%		50

	Total		20.96%		95

Top Customers - Investment Management


		Percentage of
		Annualized Base		Number of
Rank	Customer Name	Rent		Leases

1	DHL		3.92%		49
2	CEVA Logistics		2.48%		26
3	Unilever		1.91%		8
4	SNCF Geodis		1.75%		13
5	Kuehne & Nagel		1.71%		17
6	Wincanton Logistics		1.51%		23
7	Amazon.Com, Inc.		1.15%		6
8	Home Depot, Inc		1.13%		7
9	NYK Group		1.06%		11
10	Kraft Foods, Inc.		1.00%		6
11-25	various		10.19%		82

	Total		27.81%		248


(a)		This portfolio includes all same store properties as defined in Appendix B and included in the “Total Portfolio”, adjusted to exclude 159, 172, 156 and 136 completed development properties as of October 1, July 1, April 1 and January 1, 2009, respectively.

(b)		Rental rate growth represents the increase (decrease) in rental rates on new leases signed during the period, as compared with the previous rental rates in that same space, within the same store population, as defined.

See Definitions in Appendix B.

Section V - Operating Statistics
Page 5.3



Fourth Quarter 2010

Operating Statistics - Major Logistics Corridors - Buildings (a)

(in thousands, except for percentage)

Investment in Major Logistics Corridors - Buildings


						Prorata Share of
	Direct Owned					Investment					Total
	Investment		Percentage			Management		Percentage			PLD Investment		Percentage
U.S.
Los Angeles Basin / Inland Empire	$	1,920,530				$	561,624				$	2,482,154	26	%
Chicago		984,899					82,862					1,067,761	11	%
San Francisco Bay Area / Central Valley		895,581					51,912					947,493	10	%
New Jersey / Eastern Pennsylvania		530,003					275,718					805,721	8	%
Dallas		527,344					103,710					631,054	7	%
Atlanta		293,055					92,003					385,058	4	%
Washington DC / Baltimore		184,578					51,341					235,919	3	%
Houston		166,937					59,367					226,304	2	%
Miami / South Florida		161,317					32,657					193,974	2	%

U.S. investment (percentage of total U.S.)	$	5,664,244		77	%	$	1,311,194		59	%	$	6,975,438	73	%

International
London / Midlands - UK	$	321,750				$	587,390				$	909,140	14	%
Tokyo - Japan		790,319					-					790,319	12	%
Paris / Le Havre - Central France		88,154					347,623					435,777	7	%
Osaka - Japan		377,326					-					377,326	6	%
Warsaw / Poznan - Central Poland		120,601					203,835					324,436	5	%
Wroclaw / Silesia - Southern Poland		146,355					161,356					307,711	5	%
Lyon / Marseille - Southern France		92,017					163,455					255,472	4	%
Amsterdam / Rotterdam / Antwerp - Benelux		13,883					191,290					205,173	3	%
Madrid / Barcelona - Spain		71,994					118,632					190,626	3	%
Cologne / Frankfurt - Western Germany		27,177					128,758					155,935	3	%
Mexico City - Mexico		131,525					24,000					155,525	3	%
Munich / Stuttgart - Southern Germany		78,983					71,781					150,764	2	%
Toronto - Canada		48,702					40,370					89,072	1	%
Hamburg / Bremen - Northern Germany		9,090					61,485					70,575	1	%

International investment (percentage of total international)	$	2,317,876		69	%	$	2,099,975		70	%	$	4,417,851	69	%

Major logistics corridors (percentage of grand total)	$	7,982,120		75	%	$	3,411,169		65	%	$	11,393,289	72	%

Total Industrial Portfolio

						Prorata Share of
	Direct Owned					Investment					Total
	Investment					Management					PLD Investment
Major U.S. corridors	$	5,664,244		53	%	$	1,311,194		25	%	$	6,975,438	44	%
Major international corridors		2,317,876		22	%		2,099,975		40	%		4,417,851	28	%

Subtotal		7,982,120		75	%		3,411,169		65	%		11,393,289	72	%
Other U.S.		1,667,850		15	%		920,428		18	%		2,588,278	16	%
Other international		1,064,829		10	%		906,205		17	%		1,971,034	12	%

Grand total industrial portfolio	$	10,714,799		100	%	$	5,237,802		100	%	$	15,952,601	100	%

Section V - Operating Statistics
Page 5.4



Fourth Quarter 2010

Debt - ProLogis Debt Summary

(dollars in thousands)

Principal Outstanding


	Interest			Due	Outstanding			Outstanding
	Rate(a)			Date	as of 12/31/2010			as of 9/30/10
Euro notes (€101.3 million)		4.375	%	Apr-11	$	133,260		$	136,522
Senior notes		5.500	%	Apr-12		58,935			58,935
Senior notes		5.500	%	Mar-13		61,443			61,443
Senior notes		7.625	%	Aug-14		350,000			350,000
Senior notes		7.810	%	Feb-15		59,356			80,000
Senior notes		9.340	%	Mar-15		6,299			27,000
Senior notes		5.625	%	Nov-15		155,320			387,930
Senior notes		5.750	%	Apr-16		197,758			378,531
Senior notes		8.650	%	May-16		41,003			45,000
Senior notes		5.625	%	Nov-16		182,104			550,000
Senior notes		6.250	%	Mar-17		300,000			300,000
Senior notes		7.625	%	Jul-17		100,000			100,000
Senior notes		6.625	%	May-18		600,000			600,000
Senior notes		7.375	%	Oct-19		396,641			600,000
Senior notes		6.875	%	Mar-20		561,049			800,000
Debt tranche matured/paid during current quarter						-			190,278
Less: discount						(7,444	)		(11,294	)

Total senior notes		6.625	%			3,195,724			4,654,345

Convertible senior notes (2.25% coupon) (b)		5.390	%	Apr-12		592,980			780,980
Convertible senior notes (1.875% coupon) (b)		5.600	%	Jan-13		141,635			236,635
Convertible senior notes (2.625% coupon) (b)		5.860	%	May-13		386,250			406,250
Convertible senior notes (c)		3.250	%	Mar-15		460,000			460,000
Less: discount						(59,297	)		(84,590	)

Total convertible senior notes		4.901	%			1,521,568			1,799,275

Variable rate secured mortgage debt (¥10 billion)		2.740	%	Dec-12		118,682			116,911
Fixed rate secured mortgage debt		6.500	%	Jul-14		101,750			101,750
Variable rate secured mortgage debt (¥14.0 billion)		1.845	%	Dec-14		167,704			168,087
Fixed rate secured mortgage debt (¥3.4 billion)		3.278	%	Apr-15		41,815			40,821
Fixed rate secured mortgage debt		5.470	%	Aug-15		124,096			124,688
Fixed rate secured mortgage debt		7.250	%	Apr-16		174,199			175,124
Fixed rate secured mortgage debt		7.550	%	Jul-19		245,500			245,500
Fixed rate secured mortgage debt		7.580	%	Apr-24		187,649			188,531
Fixed rate secured mortgage debt		5.321	%	various		60,277			64,516
Variable rate secured mortgage debt - TMK		2.014	%	various		11,069			3,602
Add: premium, net						16,988			17,765

Total secured mortgage debt		5.673	%			1,249,729			1,247,295

Assessment bonds		6.477	%	various		18,867			23,805

Global line credit facility		3.532	%	Aug-12		520,141			445,312


Weighted average interest rate / total debt outstanding		5.788	%		$	6,506,029		$	8,170,032

Principal Maturities (excluding global line) - as of December 31, 2010


Summarized by year (in millions)

2011	$	176
2012		799
2013		656
2014		655
2015		799
2016		563
2017		405
2018		606
2019		648
2020		568
Thereafter		161
Global Line (due 2012)		520
Discount		(67	)
Premium		17

Total	$	6,506


(a)		Interest rate is based on the stated rate and weighted based on borrowings outstanding as of December 31, 2010, except as noted.

(b)		The interest rates shown represent the effective interest rate (including non-cash amortization). These convertible notes mature in 2037 and 2038. However, the holders of the notes have the right to require us to repurchase their notes for cash on specific dates approximately every five years beginning in 2012 and 2013, and at any time prior to their maturity upon a change in control or, with respect to some of the notes, a termination of trading (each as defined in the notes). We have reflected the maturities in 2012 and 2013 in the schedule of debt maturities based on the cash put date. The holders of the 1.875% notes we issued in November 2007 have the option to convert their notes beginning in November 2012.

(c)		These notes are convertible at any time by holders at an initial conversion rate of 57.8503 shares per $1,000 principal amount of notes, equivalent to an initial conversion price of approximately $17.29 per share, subject to adjustment upon the occurrence of certain events. The holders of the notes have the right to require us to repurchase their notes for cash at any time on, or prior to, the maturity date upon a change in control or a termination of trading (each as defined in the notes).

Section VI - Debt
Page 6.1



Fourth Quarter 2010

Debt - ProLogis Debt and Equity

(dollars and shares in thousands)

Global Line of Credit - as of December 31, 2010


Information related to our Global Line (dollars in millions):
Aggregate lender - commitments (a)	$	1,601.5
Less:
Borrowings outstanding		520.1
Outstanding letters of credit		88.2

Current availability	$	993.2

Financing Activity (b)


	Three Months Ended						Twelve Months Ended
	December 31, 2010						December 31, 2010
	Principal			Interest Rate (c)			Principal			Interest Rate (c)
Debt issued:
Senior notes:
Due 2017	$	-					$	300,000			6.250	%
Due 2020		-						800,000			6.875	%
Convertible senior notes:
Due 2015		-						460,000			3.250	%
Secured mortgage debt:
Due 2011		7,165			1.951	%		7,165			1.951	%
Due 2013		-						90,006			2.132	%
Due 2014		-						166,745			1.776	%
Due 2015		-						36,727			3.278	%

Total debt issued	$	7,165					$	1,860,643


Debt repaid / repurchased:
Senior notes:
Due 2010	$	(190,278	)		5.250	%	$	(190,278	)		5.250	%
Due 2012		-						(221,853	)		5.500	%
Due 2013		-						(200,623	)		5.500	%
Due 2015		(273,955	)		6.070	%		(286,025	)		6.052	%
Due 2016		(552,666	)		5.688	%		(574,135	)		5.690	%
Due 2019		(203,359	)		7.375	%		(203,359	)		7.375	%
Due 2020		(238,951	)		6.875	%		(238,951	)		6.875	%
Convertible senior notes:
Due 2012		(188,000	)		5.390	%		(510,679	)		5.390	%
Due 2013		(115,000	)		5.645	%		(634,963	)		5.628	%
Secured mortgage debt:
Due 2011		(4,159	)		7.230	%		(4,159	)		7.230	%
Due 2012		-						(50,050	)		4.277	%
Due 2013		(3,093	)		2.190	%		(102,569	)		2.341	%
Assessment bonds:
Due 2011		(624	)		7.008	%		(624	)		7.008	%
Total amortization payments during period		(4,922	)					(44,548	)

Total debt repaid / repurchased	$	(1,775,007	)				$	(3,262,816	)

Global Line activity, net - advances (payments)	$	74,829					$	(216,450	)

Grand total, net activity	$	(1,693,013	)				$	(1,618,623	)

Market Capitalization


	Shares or Equivalents		Market Price - as of		Market Value
	Outstanding		December 31, 2010		Equivalents
8.54% Series C Cumulative Redeemable Preferred Shares		2,000	$	54.50	$	109,000
6.75% Series F Cumulative Redeemable Preferred Shares		5,000	$	23.00		115,000
6.75% Series G Cumulative Redeemable Preferred Shares		5,000	$	22.94		114,700

		12,000				338,700

Common Shares		570,076	$	14.44		8,231,897
Convertible limited partnership units		760	$	14.44		10,974

		570,836				8,242,871


Total equity						8,581,571
Total debt						6,506,029


Total market capitalization					$	15,087,600


(a)		In December 2010, we reduced aggregate lender commitments under our Global Line to approximately $1.6 billion, subject to currency fluctuations. See Appendix B for details.

(b)		Excludes changes due to foreign exchange rates, if applicable.

(c)		Interest rate is weighted if multiple tranches due in the same year are combined.

Section VI - Debt
Page 6.2



Fourth Quarter 2010

Debt - Property Fund Debt Summary

(dollars in thousands)

Principal Maturities of Third Party Debt for each Property Fund - as of December 31, 2010


	Wtd. Avg.
	Int. Rate			2011		2012		2013		2014			2015

ProLogis California		7.24	%	$	-	$	-	$	-	$	137,500		$	-
ProLogis North American Properties Fund I		3.75	%		2,760		177,240		-		-			-
ProLogis North American Properties Fund XI		6.92	%		626		670		413		-			-
ProLogis North American Industrial Fund		5.76	%		-		52,000		80,000		-			108,665
ProLogis North American Industrial Fund II		6.21	%		10,000		164,000		74,000		526,393			-
ProLogis North American Industrial Fund III		5.73	%		120,484		85,696		385,571		146,462			-
ProLogis Mexico Industrial Fund		6.63	%		-		-		-		-			-
ProLogis European Properties		5.58	%		-		334,456		526,455		1,205,208			-
ProLogis European Properties Fund II		4.92	%		-		146,088		276,321		464,723			247,137
ProLogis Korea Fund		6.11	%		16,334		32,845		-		-			-

Total				$	150,204	$	992,995	$	1,342,760	$	2,480,286		$	355,802


													Grand
		2016			2017		2018		2019	Discount			Total

ProLogis California	$	52,500		$	-	$	-	$	120,000	$	-		$	310,000
ProLogis North American Properties Fund I		-			-		-		-		-			180,000
ProLogis North American Properties Fund XI		-			-		-		-		38			1,747
ProLogis North American Industrial Fund		444,000			394,000		165,500		-		-			1,244,165
ProLogis North American Industrial Fund II (a)		136,500			221,000		104,700		-		(6,656	)		1,229,937
ProLogis North American Industrial Fund III		-			-		280,000		-		(1,966	)		1,016,247
ProLogis Mexico Industrial Fund		-			214,149		-		-		-			214,149
ProLogis European Properties		-			-		-		-		-			2,066,119
ProLogis European Properties Fund II		229,886			-		-		46,546		-			1,410,701
ProLogis Korea Fund		-			-		-		-		-			49,179

Total	$	862,886		$	829,149	$	550,200	$	166,546	$	(8,584	)	$	7,722,244

Principal maturities of third party debt for the property funds combined - as of December 31, 2010

Line of credit information for each property fund, as applicable - as of December 31, 2010


			Total		Debt		Remaining
	Maturity		Commitment		Balance		Capacity
ProLogis European Properties (b)		8/9/2013	$	65,775	$	13,155	$	52,620
ProLogis European Properties Fund II (c)		7/30/2013		98,663		-		98,663


			$	164,438	$	13,155	$	151,283


(a)		On January 31, 2010, the property fund extended $189.0 million of debt, originally scheduled to mature in 2017, to 2020 and added $71.8 million of properties as collateral. The interest rate will be 5.00% through 2017, and increase to 5.25% through the end of the loan.

(b)		The ProLogis European Properties credit facility has a limit of €50 million, with the ability to increase to €150 million. This line of credit is denominated in euro and pound sterling. Amount is shown in U.S. dollars using the exchange rate as of December 31, 2010.

(c)		The ProLogis European Properties Fund II credit facility has a limit of €75 million and the ability to increase to €150 million. This line of credit is denominated in euro and pound sterling. Amount is shown in U.S. dollars using the exchange rate as of December 31, 2010.

Section VI - Debt
Page 6.3



Fourth Quarter 2010

Debt - ProLogis Debt Covenant Ratios

Global Line of Credit


			Actual
	Required		Compliance
Financial Covenant	Compliance		at 12/31/2010

Minimum Net Worth	> $7.6 billion		$8.6 billion
Fixed Charge Coverage Ratio		> 1.50		1.77
Unencumbered Debt Service Coverage Ratio		> 1.50		1.94
Maximum Consolidated Leverage to Total Asset Value		< 60%		48%
Restricted Investment Test Limiting Non-Industrial Investments		< 25%		16%
Maximum Secured Debt to Total Asset Value		< 30%		11%
Certain Property NOI to Certain Specified Debt		> 14%		60%

Senior Notes


	Eighth and Ninth
	Supplemental Indenture
			Actual
	Required		Compliance
Financial Covenant	Compliance		at 12/31/2010
Outstanding Indebtedness to Adjusted Total Assets		< 60%		39%
Fixed Charge Coverage Ratio		> 1.5		2.5
Unencumbered Assets Ratio to Unsecured Debt		> 1.5		2.5
Maximum Secured Debt to Adjusted Total Assets		< 40%		7%

See Definitions in Appendix B.

Section VI - Debt
Page 6.4



Fourth Quarter 2010

Components of Net Asset Value for ProLogis (1)

(in thousands, except for percentages and per square foot)

Direct Owned


			Investment				Inv. Bal.					Annualized
	Sq. Ft.		Balance				per Sq. Ft.		NOI (2)			NOI (2)		Leased Percent
Operating properties:
Core > 75% leased		105,557	$	5,953,804			$	56	$	92,425		$	369,700		98.8	%
Core < 75% leased		14,228		691,727				49		6,014			24,056		34.5	%
Land subject to ground leases and other				66,460						1,700			6,800

Total core and other		119,785	$	6,711,991			$	55	$	100,139		$	400,556		91.2	%


												Pro Forma
			Investment		Total		TEI		Pro Forma			Annualized
	Sq. Ft.		Balance		Expected Inv.		per Sq. Ft.		NOI (2)			NOI		Leased Percent

Development properties:
Completed development > 75% leased
North America		17,119	$	1,002,884	$	1,006,060	$	59	$	15,385		$	61,540		98.2	%
Europe		13,410		956,133		985,300		73		17,753			71,012		96.7	%
Asia		6,022		1,193,804		1,201,075		199		20,361			81,444		95.7	%
Completed development < 75% leased
North America		3,192		161,123		161,123		50		2,142			8,568		23.9	%
Europe		7,804		520,649		559,385		72		10,224			40,896		23.8	%
Asia		1,215		258,672		263,260		217		3,161			12,644		17.9	%

Total completed development		48,762	$	4,093,265	$	4,176,203	$	86	$	69,026		$	276,104		78.7	%

Properties under development
Build-to-suit:
North America		472	$	7,798	$	18,232	$	39	$	407		$	1,628
Europe		1,619		78,852		119,243		74		2,084			8,336
Asia		702		57,204		122,879		175		2,032			8,128

Total build-to-suit		2,793		143,854		260,354		93		4,523			18,092

Inventory
North America		514		28,489		55,112		107		944			3,776
Asia		1,551		194,193		264,618		171		4,493			17,972

Total inventory		2,065		222,682		319,730		155		5,437			21,748

Total properties under development		4,858	$	366,536	$	580,084	$	119	$	9,960	₍₃₎	$	39,840


			Investment						Actual Fourth
			Balance						Quarter 2010			Full Year

Land			$	1,533,611


Development management and other income									$	9,027		$	17,521

See Page 7.3 for note references

Section VII - Net Asset Value
Page 7.1


Fourth Quarter 2010

Components of Net Asset Value for ProLogis - Continued (1)

(in thousands, except for percentages and per unit)

Investment Management



									ProLogis share			ProLogis share
			Investment				ProLogis share		Annualized			Debt, Net of
			Balance		Sq. Ft.		NOI (4)		NOI			Other Net Assets

ProLogis interest in Funds:
North America			$	936,369		146,591	$	59,810	$	239,240		$	(2,000,184	)
Asia			$	16,716		1,734	$	559	$	2,236		$	(9,251	)

			Investment		# of		Value per					Calculated
	Sq. Ft.		Balance		Units		Unit (6)		USD / EUR			Value

ProLogis ownership in Europe Funds (5):
PEPR
Common Equity						63,063	€	5.58		1.34		$	471,535
Preferred Equity						7,016	€	6.35		1.34			59,699

Total investment in PEPR		52,980	$	496,946								$	531,234


PEPF II		50,824	$	439,985		86,684	€	5.51		1.34		$	640,023


									Actual Fourth
									Quarter 2010			Annualized

Investment management fees									$	34,095		$	136,380
Investment management expenses										(10,580	)		(42,320	)

										23,515			94,060

Other Balance Sheet Items


	As of
	December 31, 2010
Other assets:
Cash and cash equivalents	$	37,634
Restricted cash		27,081
Deposits, prepaid assets and other tangible assets (7)		614,997
Accounts receivable		58,979
Notes receivable backed by real estate		302,144
Investments in and advances to other unconsolidated investees		132,159
Assets held for sale, net of liabilities		555,042

Total other assets	$	1,728,036


Liabilities and preferred equity:
Debt (8)	$	6,506,029
Discount on debt, net		49,753

Total debt		6,555,782

Other liabilities, payables, and accrued expenses		856,534
Preferred shares		350,000

Total liabilities and preferred shares	$	7,762,316


Total common shares and convertible limited partnership units outstanding (8)		570,836

See Page 7.3 for note references

Section VII - Net Asset Value
Page 7.2


Fourth Quarter 2010

Notes to Net Asset Value

(1)

The components of Net Asset Value do not consider the potential changes in rental and fee income streams or the franchise value associated with our global operating platform.

(2)

A reconciliation of our rental income and rental expenses, computed under Generally Accepted Accounting Principles (“GAAP”), to pro forma net operating income (NOI) for purposes of the Net Asset Value calculation is as follows:


(in thousands)	Core			Completed			Total
	and Other			Development			ProLogis

Calculation of pro forma NOI:
Rental income	$	136,924		$	62,671		$	199,595
Rental expenses		(36,388	)		(18,688	)		(55,076	)
Net termination fees and adjustments (a)		(397	)		(18	)		(415	)

Adjusted NOI		100,139			43,965			144,104
Less: NOI on contributed properties (b)		-			-			-

NOI for properties owned at December 31, 2010		100,139			43,965			144,104
Add: proforma adjustment (c)		-			25,061			25,061

Pro forma NOI - GAAP		100,139			69,026			169,165
Straight-lined rents and amortization of lease intangibles (d)		(2,818	)		(7,209	)		(10,027	)

Pro forma NOI - CASH	$	97,321		$	61,817		$	159,138


(a)		Net termination fees generally represent the gross fee negotiated at the time a customer is allowed to terminate its lease agreement offset by that customer’s rent leveling asset or liability, if any, that has been previously recognized under GAAP. Removing the net termination fees from rental income allows for the calculation of pro forma NOI to include only rental income that is indicative of the property’s recurring operating performance.

(b)		The actual NOI for properties that were contributed and not part of discontinued operations during the three-month period is removed.

(c)		This incremental adjustment is necessary to reflect a full period of NOI for core properties acquired during the quarter and for our completed development properties using an estimated stabilized yield.

(d)		Straight-lined rents and amortization of above and below market leases are removed from rental income computed under GAAP to allow for the calculation of a cash yield.

(3)		Pro forma NOI for our properties under development is based on current total expected investment and an estimated stabilized yield.

(4)		A reconciliation of rental income and rental expenses, computed under GAAP, to pro forma NOI for purposes of the Net Asset Value calculation for the property funds, excluding PEPR and PEPF II, for the three months ended December 31, 2010 is included below.


	ProLogis			N.A.			N.A.			N.A.			N.A.			N.A.			Mexico
(in thousands, except percentages)	California			Properties			Properties			Industrial			Industrial			Industrial			Industrial			Korea
	LLC			Fund I			Fund XI			Fund			Fund II			Fund III			Fund			Fund

ProLogis’ ownership interest as of 12/31/2010		50.0	%		41.3	%		20.0	%		23.1	%		37.0	%(a)		20.0	%		20.0	%		20.0	%
Calculation of pro forma NOI:
Rental income	$	21,382		$	9,613		$	3,636		$	60,250		$	37,621		$	26,011		$	11,699		$	2,930
Rental expenses		(4,150	)		(2,069	)		(1,005	)		(13,869	)		(7,297	)		(5,677	)		(2,227	)		(134	)
Net termination fees and adjustments (b)		7			-			-			20			(141	)		62			(517	)		-
Certain fees paid to ProLogis (c)		159			95			52			645			414			310			110			-

Adjusted NOI		17,398			7,639			2,683			47,046			30,597			20,706			9,065			2,796
Less: actual NOI on certain properties (d)		-			-			-			-			-			-			-			-
Add: stabilized NOI on certain properties (e)		-			-			-			-			-			-			-			-

Pro forma NOI - GAAP		17,398			7,639			2,683			47,046			30,597			20,706			9,065			2,796
Straight-lined rents and amort. of lease intangibles (f)		(9	)		153			(54	)		(1,294	)		110			(71	)		-			(110	)

Pro forma NOI - CASH	$	17,389		$	7,792		$	2,629		$	45,752		$	30,707		$	20,635		$	9,065		$	2,686

Pro forma NOI - GAAP (ProLogis share)	$	8,699		$	3,155		$	537		$	10,868		$	30,597		$	4,141		$	1,813		$	559


(a)		Our aggregate ownership interest in the North American funds has been adjusted to reflect 100% of the NOI of North American Industrial Fund II (“NAIF II”), versus our GAAP ownership interest of 37.0%, to account for our preferred interest in NAIF II.

(b)		Net termination fees generally represent the gross fee negotiated at the time a customer is allowed to terminate its lease agreement offset by that customer’s rent leveling asset or liability, if any, that has been previously recognized under GAAP. Removing the net termination fees from rental income allows for the calculation of pro forma NOI to include only rental income that is indicative of the property’s recurring operating performance.

(c)		These miscellaneous fees are added back as an offset to rental expense because they represent costs that are specific to the ownership structures of the individual property fund and are not necessarily indicative of expenses that would be incurred under other structures.

(d)		The NOI for properties that were acquired or disposed of during the three-month period is removed.

(e)		NOI is adjusted to reflect a full period of operations for properties that were acquired during the three-month period.

(f)		Straight-lined rents and amortization of above and below market leases are removed from rental income computed under GAAP to allow for the calculation of a cash yield.

(5)		PEPR and PEPF II are subject to valuations under International Financial Reporting Standards (IFRS).

(6)		Value per unit for common equity of PEPR is based on PEPR’s restated IFRS net asset value as of September 30, 2010 and preferred equity is based on the closing price of PEPR preferred units on the Euronext Amsterdam stock exchange as of December 31, 2010. PEPR’s closing price of common units on the Euronext Amsterdam stock exchange was €4.81 on December 31, 2010. Value per unit for common equity is based on PEPF II’s estimated IFRS net asset value as of December 31, 2010.

Section VII - Net Asset Value
Page 7.3


Forth Quarter 2010

Notes to Net Asset Value

(7)		These items are reflected in our Consolidated Balance Sheets as components of Other Assets and Investments in Real Estate Assets — Other Real Estate Investments. This includes $112.3 million of rent leveling assets.

(8)		Debt includes $460 million of debt that is convertible by the holders at any time at an initial conversion rate of 57.8503 common shares per $1,000 note outstanding. The potential convertible shares are not included in our total common shares and convertible limited partnership units outstanding at December 31, 2010.

Section VII - Net Asset Value
Page 7.4



Fourth Quarter 2010

Appendix A - Notes to Supplemental Information

Please refer to our annual and quarterly financial statements filed with the Securities and Exchange Commission on Forms 10-K and 10-Q for further information about us and our business. Certain amounts from previous periods presented in the Supplemental Information have been reclassified to conform to the 2010 presentation. Please also read the Definitions included in Appendix B.

Our direct owned segment represents the direct, long-term ownership of industrial properties. Our investment strategy in this segment focuses primarily on the ownership and leasing of industrial properties in key distribution markets. We consider these properties to be our Core Portfolio. Our intent is to hold and use the Core properties; however, depending on market and other conditions, we may contribute these properties to property funds or sell to third parties. When we contribute or sell properties we have developed, we recognize FFO to the extent the proceeds received exceed our original investment (i.e. prior to depreciation) and present the results as Net Gains on Dispositions. In addition, we have industrial properties that are currently under development and land available for development that are part of this segment as well. As noted below in note 4, we have identified the land we expect to develop and land targeted for disposition. We may develop the land or sell to third parties, depending on market conditions, customer demand and other factors. The investment management segment represents primarily the investment management of unconsolidated property funds and joint ventures and the properties they own.

Notes to Section II - Financial Statements

(1)		During the fourth quarter of 2010, we sold a portfolio of industrial properties and several equity method investments to Blackstone Real Estate Advisors (“Blackstone”) for approximately $1.02 billion resulting in a net gain for US GAAP earnings purposes based on the assets sold of $203.1 million ($66.1 million loss in continuing operations and $269.2 million gain in discontinued operations). The net gain includes current tax expense of $2.5 million ($1.6 million in continuing operations and $0.9 million in discontinued operations). The industrial portfolio included 182 properties with 23 million square feet and the equity method investments included our 20% ownership interest in three property funds (ProLogis North American Properties Fund VI-VIII) and an investment in an unconsolidated joint venture that owns a hotel property. Net proceeds were used to repay debt (as discussed below). We retained a preferred equity interest in Blackstone of approximately $188 million, which is reflected as Notes Receivable Backed by Real Estate in our accompanying Consolidated Balance Sheet at December 31, 2010. Also included in Notes Receivable Backed by Real Estate are receivables from certain unconsolidated investees that were funded under a separate note agreement and not considered our share of a partner loan. We will earn a preferred return at an annual rate of 7 percent for the first three years, 8 percent for the fourth year and 10 percent thereafter until redeemed. Partial or full redemption can occur at any time at Blackstone’s discretion or after the five-year anniversary at our discretion. We are continuing to provide property management services for these properties and the management fees are included as Property Management and Other Fees and Incentives in our Consolidated Statements of Operations and FFO for the three and twelve months ended December 31, 2010.

(2)		On December 21, 2010, we announced we entered into a definitive agreement with affiliates of TPG Capital (TPG) to sell a portfolio of U.S. retail, mixed-use and other non-core assets for approximately $505 million.

		The properties, owned directly or through equity interests, to be sold in the transaction include: four shopping centers, two office buildings, 11 mixed-use projects with related land and development agreements, two residential development joint ventures, Los Angeles Union Station and certain ground leases. The transaction is expected to be substantially completed in the first quarter of 2011, subject to customary closing conditions.

		We have classified all of the assets and liabilities associated with this transaction as Assets and Liabilities Held for Sale in our accompanying Consolidated Balance Sheet as of December 31, 2010. Based on the carrying values of these assets and liabilities, as compared with the estimated sales proceeds less costs to sell, we recognized an impairment charge of $168.8 million ($91.4 million in continuing operations of which $47.1 million relates to land and is recorded in Impairment of Real Estate Properties, and $44.3 million relates to the joint ventures and other assets and is recorded in Impairment of Goodwill and Other Assets; and $77.4 million is recorded in discontinued operations as it is associated with the operating properties). See note 4 for a summary of items classified as Assets Held for Sale and Discontinued Operations. We still own an office property and some land subject to ground leases and we have reclassified these amounts to Other Real Estate Investments in our Consolidated Balance Sheets for all periods presented.

(3)		During 2010 and 2009, we recorded impairment charges of certain of our real estate properties and other assets as outlined below (in thousands):


	Three Months Ended				Twelve Months Ended
	December 31,				December 31,
	2010		2009		2010		2009

Included in “Impairment of Real Estate Properties”:
Land	$	732,321	$	135,835	$	734,668	$	136,996
Operating properties		400		49,579		1,349		172,342
Operating properties and land subject to ground leases (included in discontinued operations)		87,702		-		87,702		-
Other real estate		595		22,254		595		22,254

Total impairment of real estate properties	$	821,018	$	207,668	$	824,314	$	331,592

Included in “Impairment of Goodwill and Other Assets”:
Goodwill	$	368,451	$	-	$	368,451	$	-
Unconsolidated investees and other assets		44,294		157,076		44,294		163,644

Total impairment of goodwill and other assets	$	412,745	$	157,076	$	412,745	$	163,644


Total impairment charges	$	1,233,763	$	364,744	$	1,237,059	$	495,236

The impairment charges that we recognized in 2010 and 2009 were primarily due to our change of intent to no longer hold these assets for long-term investment. During the fourth quarter of 2010, we made a strategic decision to more aggressively pursue land sales. As a result this decision, we undertook a complete evaluation of all land positions and divided them between two categories: “land held for development” and “land targeted for disposition”. As a result

Appendix A
Page - 1 -



Fourth Quarter 2010

Appendix A - Notes to Supplemental Information

Notes to Section II - Financial Statements (continued)

		of our change in intent, we adjusted the carrying value of the land targeted for disposition to fair value, if the carrying value exceeded fair value, based on valuations and other relevant market data. In addition for certain assets held for sale, which include operating properties, investments in unconsolidated investees and other assets, we adjusted the carrying value of these assets to the estimated sales price less costs to sell. As a result of these changes and in connection with our annual review of goodwill, we recognized an impairment charge of $368.5 million related to the goodwill allocated to our direct owned segments in the North America reporting unit and Europe reporting unit.

(4)		As discussed in note 2 above, all of the assets and liabilities associated with the TPG transaction are held for sale as of December 31, 2010 and, therefore, the impairment charge of $77.4 million relating to the operating properties is included in discontinued operations. In addition, we have nine land parcels and six operating properties that met the criteria as Held for Sale. A summary of the amounts included in Assets Held for Sale as of December 31, 2010 is as follows:


	December 31, 2010
Assets held for sale:
Investments in real estate	$	487,397
Investments in and advances to unconsolidated investees		62,061
Accounts receivable		7,204
Notes receivable		6,573
Other assets		11,556

Total assets	$	574,791

Liabilities related to assets held for sale:
Assessment bonds payable	$	3,884
Accounts payable and accrued expenses		877
Other liabilities		14,988

Total liabilities	$	19,749

		During the year ended December 31, 2010, we disposed of 205 properties aggregating 25.4 million square feet to third parties, 2 of these properties were development properties. During all of 2009, other than our China operations, we disposed of land subject to ground leases and 140 properties aggregating 14.8 million square feet to third parties, 3 of which were development properties.

		The operations of the properties held for sale and properties that are disposed of to third parties during a period, including impairment charges discussed above and the aggregate net gains recognized upon their disposition, are presented as discontinued operations in our Consolidated Statements of Operations for all periods presented. The income attributable to these properties was as follows:


	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2010			2009			2010			2009

Rental income	$	28,155		$	43,677		$	153,861		$	218,939
Rental expenses		(6,093	)		(11,026	)		(39,852	)		(60,698	)
Depreciation and amortization		(6,126	)		(10,928	)		(37,092	)		(52,604	)
Other expenses, net		-			-			-			(576	)


Income attributable to disposed properties and assets held for sale	$	15,936		$	21,723		$	76,917		$	105,061

		For purposes of our Consolidated Statements of FFO, we do not segregate discontinued operations. In addition, we include the gains from disposition of land parcels and development properties in the calculation of FFO, including those classified as discontinued operations.

(5)		During the periods noted below, in connection with our announced initiatives to stagger and extend our debt maturities and reduce debt, we repurchased portions of several series of senior and convertible senior notes outstanding with maturities ranging from 2012 to 2020, including a tender offer completed in the fourth quarter of 2010, primarily with proceeds from the issuance of equity (see note 6). In addition, in the first and third quarters of 2010, we repaid certain secured mortgage debt in connection with the sale of two properties in Japan. The repurchase activity is summarized as follows (in thousands):

Appendix A
Page - 2 -



Fourth Quarter 2010

Appendix A - Notes to Supplemental Information

Notes to Section II - Financial Statements (continued)


	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2010			2009			2010			2009

Convertible Senior Notes (a):
Original principal amount	$	303,000		$	117,736		$	1,145,642		$	653,993
Cash purchase price	$	300,983		$	102,920		$	1,092,586		$	454,023

Senior Notes:
Original principal amount	$	1,268,931		$	224,506		$	1,724,946		$	587,698
Cash purchase price	$	1,392,345		$	226,754		$	1,874,829		$	545,618

Secured Mortgage Debt:
Original principal amount	$	-		$	-		$	134,721		$	227,017
Cash repayment price	$	-		$	-		$	137,061		$	227,017

Total:
Original principal amount	$	1,571,931		$	342,242		$	3,005,309		$	1,468,708
Cash purchase / repayment price	$	1,693,328		$	329,674		$	3,104,476		$	1,226,658
Gain (loss) on early extinguishment of debt, net (b)	$	(153,037	)	$	(960	)	$	(201,486	)	$	172,258


(a)		Although the cash purchase price is less than the principal amount outstanding, the repurchase of these notes resulted in a non-cash loss in 2010 due to the non-cash discount. Therefore, we adjusted for this non-cash loss to arrive at FFO, excluding significant non-cash items.

(b)		Represents the difference between the recorded debt (including unamortized related debt issuance costs, premiums and discounts) and the consideration we paid to retire the debt. Of the loss referred to above, the non-cash loss of $14.7 million and $30.7 million for the three and twelve months ended December 31, 2010, respectively, are adjusted back to arrive at FFO, excluding significant non-cash items.

(6)		On November 1, 2010, we closed on a public offering of 92 million common shares at a price of $12.30 per share and received net proceeds, after underwriters discount, of $1.1 billion. We used the proceeds to repay borrowings under our Global Line, repurchase portions of our senior notes and for general corporate purposes.

(7)		In our Consolidated Statements of Operations, rental income includes the following (in thousands):


	Three Months Ended				Twelve Months Ended
	December 31,				December 31,
	2010		2009		2010		2009

Rental income	$	148,125	$	137,935	$	566,603	$	531,816
Rental expense recoveries		41,443		37,786		166,695		156,802
Straight-lined rents		10,027		10,508		38,010		34,030


	$	199,595	$	186,229	$	771,308	$	722,648

(8)		On February 9, 2009, we sold our operations in China and our property fund interests in Japan, for total cash consideration of $1.3 billion ($845 million related to China and $500 million related to the Japan investments).

		In connection with the sale of our investments in the Japan property funds, we recognized a gain of $180.2 million. The gain is reflected as CDFS Disposition Proceeds in our Consolidated Statements of Operations and FFO, as it represents previously deferred gains on the contribution of development properties to the property funds based on our ownership interest in the property funds at the time of original contribution. We also recognized $20.5 million in current income tax expense related to the Japan portion of the transaction. We continued to manage the Japan properties until July 2009 at which time we earned a termination fee of $16.3 million that is included in Property Management and Other Fees and Incentives in our Consolidated Statements of Operations and FFO.

(9)		During 2009, in response to the difficult economic climate, we initiated general and administrative expense (“G&A”) reductions. These initiatives included a Reduction in Workforce (“RIF”) program and reductions to other expenses through various cost savings measures. Lower gross G&A and less development activity has resulted in lower capitalized G&A. Our G&A included in our Statements of Operations consisted of the following (in thousands):


	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2010			2009			2010			2009

Gross G&A expense	$	76,404		$	80,187		$	266,932		$	292,408
Reported as rental expense		(4,888	)		(4,786	)		(19,709	)		(19,446	)
Reported as investment management expenses		(10,580	)		(11,835	)		(40,659	)		(43,416	)
Capitalized amounts		(10,841	)		(11,405	)		(40,583	)		(49,060	)


Net G&A	$	50,095		$	52,161		$	165,981		$	180,486

Appendix A
Page - 3 -


Fourth Quarter 2010

Appendix A - Notes to Supplemental Information

Notes to Section II - Financial Statements (continued)

(10)

The following table presents the components of interest expense as reflected in our Consolidated Statements of Operations (in thousands):


	Three Months Ended						Twelve Months Ended
	December 31,						December 31,
	2010			2009			2010			2009

Gross interest expense	$	102,764		$	101,314		$	435,289		$	382,899
Amortization of discount, net		8,724			16,494			47,136			67,542
Amortization of deferred loan costs (a)		12,375			5,877			32,402			17,069

Interest expense before capitalization		123,863			123,685			514,827			467,510
Capitalized amounts		(11,829	)		(16,199	)		(53,661	)		(94,205	)


Net interest expense	$	112,034		$	107,486		$	461,166		$	373,305

(a)

In 2010, we amended the Global Line and reduced the size of the aggregate commitments. As a result, we recognized $6.8 million and $7.7 million in interest expense related to the write-off of the associated deferred financing fees, in the three and twelve months ended December 31, 2010, respectively.

		Gross interest expense increased in 2010 from 2009 due primarily to increased borrowing rates. The decrease in capitalized amounts in 2010 from 2009 is due to less development activity.

(11)		Included in Net Gains (Losses) on Dispositions of Investments in Real Estate for the three months ended December 31, 2010 is a loss of $64.6 million related to the sale of certain unconsolidated joint ventures in the Blackstone transaction (see Note 1), partially offset by gains of $27.4 million related to additional proceeds from contributions we made to PEPF II in 2009 based on valuations received as of December 31, 2010 and our contribution agreement with the property fund.

(12)		Included in Foreign Currency Exchange Gains (Losses), Net, for the year ended December 31, 2010 and 2009, are net foreign currency exchange gains or losses from the remeasurement of inter-company loans between the U.S. and our consolidated subsidiaries in Japan and Europe due to the fluctuations in the exchange rates of U.S. dollars to the yen, the euro and pound sterling between January 1^st and December 31^st of the applicable years. We do not include the gains and losses related to inter-company loans in our calculation of FFO.

Notes to Section III - Direct Owned

(1)

Below is a roll forward of our completed development portfolio as it existed at June 30, 2010. The roll forward does not reflect any contributions or sales of buildings, subsequent to June 30, 2010. See page 3.1 for additional information on our current portfolio as of December 31, 2010.

# of

Square

Leased

Bldgs

Feet

Square Feet

Percent

Roll forward of static completed development portfolio:

As of June 30, 2010 - completed development portfolio

163

51,153

36,792

71.92

Changes during the third quarter:

Net leasing activity

1,121

2.17

Changes to square footage

As of September 30, 2010 - static June 30 completed development portfolio

163

51,171

37,913

74.09

Changes during the fourth quarter:

Net leasing activity

2,883

5.61

Changes to square footage

As of December 31, 2010 - static June 30 completed development portfolio

163

51,184

40,796

79.70

Notes to Section IV - Investment Management

(1)		As of December 31, 2010, the North American funds include seven property funds. During the fourth quarter of 2010, we sold our investments in ProLogis North American Properties Fund VI-VIII. As of January 1, 2010, due to indications that we may not recover our investment in ProLogis North American Properties Fund IX and X, we have excluded these funds from the Supplemental Package. We contributed one property to ProLogis North American Industrial Fund during the first quarter of 2010.

(2)		The European funds include PEPR and PEPF II. PEPF II purchased two properties from third parties during the fourth quarter of 2010. We contributed five completed development properties in the third quarter of 2010 and one completed development property and 41 acres of land to PEPF II during the second quarter of 2010.

(3)		Represents the ProLogis Korea Fund.

Appendix A
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Fourth Quarter 2010

Appendix A - Notes to Supplemental Information

Notes to Section II - Financial Statements (continued)

(4)		In 2010, certain property funds in North America and Europe had interest rate swap contracts that were designated as cash flow hedges to mitigate the volatility in interest rates that no longer met the requirements for hedge accounting. The changes in the fair value of these contracts were recorded through earnings. When these interest rate swap contracts were settled, the realized gain or loss was recorded in realized loss on derivative contracts and included in our calculation of FFO. During 2010, PEPF II and ProLogis North American Industrial Fund II (“NAIF II) settled their outstanding contracts. Our share of realized losses related to these contracts for the three and twelve months ended December 31, 2010 were $11.7 million and $17.7 million, respectively. In addition, during the fourth quarter of 2010, NAIF II settled an outstanding interest rate swap contract prior to the maturity date. This resulted in a reversal of the accumulated other comprehensive income into realized loss on derivative contracts and is included in our calculation of FFO. Our share of realized losses related to this contract was $7.1 million for the three and twelve months ended December 31, 2010.

(5)		During the three and twelve months ended December 31, 2010, certain funds recorded impairment charges on industrial properties they expected to sell based on their change in intent.

(6)		Included in our share of the property fund’s net earnings are items that are necessary to adjust for differences between our investment and the property fund’s basis in certain items, primarily arising due to deferred gains and fees that were not recognized when earned by us due to our ownership interest in the property fund. In our Consolidated Statements of FFO, deferred gains and fees are only recognized when the underlying property is sold to a third party by the property fund and are reflected as Net Gains on Dispositions of Real Estate Properties.

(7)		Represents interest income earned from notes receivables we have from the property funds, along with dividend income earned from our investment in PEPR’s preferred units.

(8)		In addition to the property and asset management fees earned by us and expensed by the property funds, we earn other fees for leasing, construction, development, financing and other activities performed on behalf of the property funds. Certain of these fees are capitalized by the property funds (primarily leasing, construction, development and financing fees). We defer an amount of these types of fees we earn in an amount proportionate to our ownership interest in the property fund. The deferred fees are recognized in income in future periods by reducing depreciation or interest expense (related to the capitalized fees) when we recognize our share of the earnings or losses of the property fund under the equity method - see note (6).

		In addition, in 2010, we are developing a building for PEPF II for which we earn fees. We record these fees in Development Management and Other Income in our Consolidated Statements of Operations and FFO.

(9)		Includes only those fees earned from the property funds included here in which we have ownership interests that are accounted for by the equity method. In addition, we earn fees from the management of properties owned by certain joint ventures and third parties.

Appendix A
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Fourth Quarter 2010

Appendix B - Definitions

Core - Completed Development Portfolio – Includes industrial operating properties we developed.

Core EBITDA, as adjusted – We use core adjusted earnings before interest, income taxes, depreciation and amortization, impairment charges, gains or losses from the disposition of investments in real estate, gains or losses on early extinguishment of debt and derivative contracts (including cash charges), and other non-cash charges (such as stock based compensation amortization, unrealized gains or losses on foreign currency and derivative activity), including our share of these items (other than interest and current income taxes) from unconsolidated investees or (“core EBITDA, as adjusted”), to measure both our operating performance and liquidity.

		We consider Core EBITDA, as adjusted to provide investors relevant and useful information because it permits investors to view income from operations on an unleveraged basis before the effects of income tax, non-cash depreciation and amortization expense and other items (including stock-based compensation amortization and certain unrealized gains and losses), gains or losses from the disposition of investments in real estate, and other significant non-cash items. By excluding interest expense, adjusted EBITDA allows investors to measure the our operating performance independent of our capital structure and indebtedness and, therefore, allows for a more meaningful comparison of our operating performance to that of other companies, both in the real estate industry and in other industries. The impairment charges were principally a result of the our changed intent with respect to the holding period of certain of our real estate properties and decreases in fair value due to increases in capitalization rates and deterioration in market conditions that adversely impacted values. Gains and losses on the early extinguishment of debt and derivatives contracts generally included the costs of repurchasing debt securities. Although difficult to predict, these items may be recurring given the uncertainty of the current economic climate and its adverse effects on the real estate and financial markets. While not infrequent or unusual in nature, these items result from market fluctuations that can have inconsistent effects on each company’s results of operations. The economics underlying these items reflect market and financing conditions in the short-term but can obscure our performance and the value of our long-term investment decisions and strategies.

		As a liquidity measure, the companies believe that Core EBITDA, as adjusted helps investors to analyze our ability to meet interest payment obligations and to make quarterly preferred share dividends and unit distributions. We believe that investors should consider Core EBITDA, as adjusted, in conjunction with net income (the primary measure of our performance) and the other required Generally Accepted Accounting Principles (“GAAP”) measures of our performance and liquidity, to improve their understanding of our operating results and liquidity, and to make more meaningful comparisons of our performance against other companies. By using Core EBITDA, as adjusted, an investor is assessing the earnings generated by our operations, but not taking into account the eliminated expenses or gains incurred in connection with such operations. As a result, adjusted EBITDA has limitations as an analytical tool and should be used in conjunction with our required GAAP presentations. Core EBITDA, as adjusted does not reflect our historical cash expenditures or future cash requirements for working capital, capital expenditures distribution requirements or contractual commitments. Core EBITDA, as adjusted also does not reflect the cash required to make interest and principal payments on our outstanding debt.

		While Core EBITDA, as adjusted is a relevant and widely used measure of operating performance and liquidity, it does not represent net income or cash flow from operations as defined by GAAP and it should not be considered as an alternative to those indicators in evaluating operating performance or liquidity. Further, our computation of Core EBITDA, as adjusted may not be comparable to EBITDA reported by other companies. We compensate for the limitations of Core EBITDA, as adjusted by providing investors with financial statements prepared according to U.S. GAAP, along with this detailed discussion of Core EBITDA, as adjusted and a reconciliation of Core EBITDA, as adjusted to consolidated net earnings (loss), a U.S. GAAP measurement.

Core Portfolio – Includes all industrial operating properties that we own directly, excluding the completed development portfolio.

Debt Covenants –

		Credit Facility – On June 30, 2010, we amended our facility (the “Global Line”) to reduce the size of the aggregate commitments to $2.25 billion (subject to currency fluctuations), by eliminating the Korean won and Canadian dollar tranches and reducing the Euro and Yen tranches. In addition to reducing the commitments, among other amended items, we eliminated the borrowing base covenant and replaced it with a debt yield covenant that requires us to maintain a ratio of net operating income from certain unencumbered properties to certain specified debt, as of the last day of each fiscal quarter. In December 2010, we further reduced the size of our aggregate commitments to $1.6 billion by reducing the U.S., Euro and Yen tranches.

		We may draw funds from a syndicate of banks in U.S. dollars, euros, Japanese yen, British pound sterling and Canadian dollars under the U.S. tranche. Based on our public debt ratings and a pricing grid, interest on the borrowings under the Global Line accrues at a variable rate based upon the interbank offered rate in each respective jurisdiction in which the borrowings are outstanding (3.53% per annum at December 31, 2010 based on a weighted average using local currency rates). The facility matures on August 12, 2012.

		The covenants are calculated based on the definitions as defined within the Global Line agreement and may be different than similar terms in our Consolidated Financial Statements as provided in our Forms 10-K and 10-Q or with the covenants under the Indenture for our Senior Notes below. As of December 31, 2010, we were in compliance with all of our covenants under this agreement.

		Senior Notes – We have approximately $4.6 billion of senior notes outstanding as of December 31, 2010, that have been issued under the 1995 indenture (“Original Indenture”) or supplemental indentures. We refer to the Original Indenture, as amended by supplemental indentures, collectively as the “Indenture”. All senior notes, other than the convertible senior notes, issued under the Indenture are subject to one consistent set of financial covenants, defined terms and thresholds for certain events of default.

		The covenants are calculated based on the definitions as defined within the Indenture and may be different than similar terms in our Consolidated Financial Statements as provided in our Forms 10-K and 10-Q or with the covenants under our Global Line above. As of December 31, 2010, we were in compliance with all applicable covenants.

FFO, FFO including significant non-cash items, FFO excluding significant non-cash items (collectively referred to as “FFO”) – FFO is a non-GAAP measure that is commonly used in the real estate industry. The most directly comparable GAAP measure to FFO is net earnings. Although National Association of Real Estate Investment Trusts (“NAREIT”) has published a definition of FFO, modifications to the NAREIT calculation of FFO are common among REITs, as companies seek to provide financial measures that meaningfully reflect their business.

Appendix B
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Fourth Quarter 2010

Appendix B - Definitions

		FFO is not meant to represent a comprehensive system of financial reporting and does not present, nor do we intend it to present, a complete picture of our financial condition and operating performance. We believe net earnings computed under GAAP remains the primary measure of performance and that FFO is only meaningful when it is used in conjunction with net earnings computed under GAAP. Further, we believe our consolidated financial statements, prepared in accordance with GAAP, provide the most meaningful picture of our financial condition and our operating performance.

		NAREIT’s FFO measure adjusts net earnings computed under GAAP to exclude historical cost depreciation and gains and losses from the sales of previously depreciated properties. We agree that these two NAREIT adjustments are useful to investors for the following reasons:

	(i)		historical cost accounting for real estate assets in accordance with GAAP assumes, through depreciation charges, that the value of real estate assets diminishes predictably over time. NAREIT stated in its White Paper on FFO “since real estate asset values have historically risen or fallen with market conditions, many industry investors have considered presentations of operating results for real estate companies that use historical cost accounting to be insufficient by themselves.” Consequently, NAREIT’s definition of FFO reflects the fact that real estate, as an asset class, generally appreciates over time and depreciation charges required by GAAP do not reflect the underlying economic realities.

	(ii)		REITs were created as a legal form of organization in order to encourage public ownership of real estate as an asset class through investment in firms that were in the business of long-term ownership and management of real estate. The exclusion, in NAREIT’s definition of FFO, of gains and losses from the sales of previously depreciated operating real estate assets allows investors and analysts to readily identify the operating results of the long-term assets that form the core of a REIT’s activity and assists in comparing those operating results between periods. We include the gains and losses from dispositions of land, development properties and properties acquired in our CDFS business segment, as well as our proportionate share of the gains and losses from dispositions recognized by the property funds, in our definition of FFO.

		Our FFO Measures

		At the same time that NAREIT created and defined its FFO measure for the REIT industry, it also recognized that “management of each of its member companies has the responsibility and authority to publish financial information that it regards as useful to the financial community.” We believe shareholders, potential investors and financial analysts who review our operating results are best served by a defined FFO measure that includes other adjustments to net earnings computed under GAAP in addition to those included in the NAREIT defined measure of FFO. Our FFO measures are used by management in analyzing our business and the performance of our properties and we believe that it is important that shareholders, potential investors and financial analysts understand the measures management uses.

		We use our FFO measures as supplemental financial measures of operating performance. We do not use our FFO measures as, nor should they be considered to be, alternatives to net earnings computed under GAAP, as indicators of our operating performance, as alternatives to cash from operating activities computed under GAAP or as indicators of our ability to fund our cash needs.

		FFO, including significant non-cash items

		To arrive at FFO, including significant non-cash items, we adjust the NAREIT defined FFO measure to exclude:

	(i)		deferred income tax benefits and deferred income tax expenses recognized by our subsidiaries;

	(ii)		current income tax expense related to acquired tax liabilities that were recorded as deferred tax liabilities in an acquisition, to the extent the expense is offset with a deferred income tax benefit in GAAP earnings that is excluded from our defined FFO measure;

	(iii)		certain foreign currency exchange gains and losses resulting from certain debt transactions between us and our foreign consolidated subsidiaries and our foreign unconsolidated investees;

	(iv)		foreign currency exchange gains and losses from the remeasurement (based on current foreign currency exchange rates) of certain third party debt of our foreign consolidated subsidiaries and our foreign unconsolidated investees; and

	(v)		mark-to-market adjustments associated with derivative financial instruments utilized to manage foreign currency and interest rate risks.

		We calculate FFO, including significant non-cash items for our unconsolidated investees on the same basis as we calculate our FFO, including significant non-cash items.

		We use this FFO measure, including by segment and region, to: (i) evaluate our performance and the performance of our properties in comparison to expected results and results of previous periods, relative to resource allocation decisions; (ii) evaluate the performance of our management; (iii) budget and forecast future results to assist in the allocation of resources; (iv) assess our performance as compared to similar real estate companies and the industry in general; and (v) evaluate how a specific potential investment will impact our future results. Because we make decisions with regard to our performance with a long-term outlook, we believe it is appropriate to remove the effects of short-term items that we do not expect to affect the underlying long-term performance of the properties. The long-term performance of our properties is principally driven by rental income. While not infrequent or unusual, these additional items we exclude in calculating FFO, including significant non-cash items, are subject to significant fluctuations from period to period that cause both positive and negative short-term effects on our results of operations, in inconsistent and unpredictable directions that are not relevant to our long-term outlook.

		We believe investors are best served if the information that is made available to them allows them to align their analysis and evaluation of our operating results along the same lines that our management uses in planning and executing our business strategy.

		FFO, excluding significant non-cash items

		When we began to experience the effects of the global economic crises in the fourth quarter of 2008, we decided that FFO, including significant non-cash items, did not provide all of the information we needed to evaluate our business in this environment. As a result, we developed FFO, excluding significant non-cash items to provide additional information that allows us to better evaluate our operating performance in this unprecedented economic time.

		To arrive at FFO, excluding significant non-cash items, we adjust FFO, including significant non-cash items, to exclude the following items that we recognized directly or our share recognized by our unconsolidated investees:

Appendix B
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Fourth Quarter 2010

Appendix B - Definitions

Non-recurring items

	(i)		impairment charges related to the sale of our China operations;

	(ii)		impairment charges of goodwill; and

	(iii)		our share of the losses recognized by PEPR on the sale of its investment in PEPF II.

Recurring items

	(i)		impairment charges of completed development properties that we contributed or expect to contribute to a property fund;

	(ii)		impairment charges of land or other real estate properties that we sold or expect to sell;

	(iii)		impairment charges of other non-real estate assets, including equity investments;

	(iv)		our share of impairment charges of real estate that is sold or expected to be sold by an unconsolidated investee; and

	(v)		gains or losses from the early extinguishment of debt.

		We believe that these items, both recurring and non-recurring, are driven by factors relating to the fundamental disruption in the global financial and real estate markets, rather than factors specific to the company or the performance of our properties or investments.

		The impairment charges of real estate properties that we have recognized were primarily based on valuations of real estate, which had declined due to market conditions, that we no longer expected to hold for long-term investment. In order to generate liquidity, we decided to sell our China operations in the fourth quarter of 2008 at a loss and, therefore, we recognized an impairment charge. Also, to generate liquidity, we have contributed or intend to contribute certain completed properties to property funds and sold or intend to sell certain land parcels or properties to third parties. To the extent these properties are expected to be sold at a loss, we record an impairment charge when the loss is known. The impairment charges related to goodwill and other assets that we have recognized were similarly caused by the decline in the real estate markets.

		Certain of our unconsolidated investees have recognized and may continue to recognize similar impairment charges of real estate that they expect to sell, which impacts our equity in earnings of such investees.

		In connection with our announced initiatives to reduce debt and extend debt maturities, we have purchased portions of our debt securities. As a result, we recognized net gains or losses on the early extinguishment of certain debt. Certain of our unconsolidated investees have recognized or may recognize similar gains or losses, which impacts our equity in earnings of such investees.

		During this turbulent time, we have recognized certain of these recurring charges and gains over several quarters since the fourth quarter of 2008 and we believe it is reasonably likely that we may recognize similar charges and gains in the near future. As we continue to focus on generating liquidity, we believe it is likely that we may recognize additional impairment charges of assets that we or our unconsolidated investees will sell in the near future. We believe that as the economy stabilizes, our liquidity needs change and the remaining capital available to the existing unconsolidated property funds to acquire our completed development properties expires (existing capital commitments expired in August of 2010), the potential for impairment charges on real estate properties will diminish to an immaterial amount. As we continue to monetize our land bank through development or dispositions, we may dispose of this land at a gain or loss. We may also dispose of other non-strategic assets at a gain or loss. However, we do not expect that we will adjust our FFO measure for these gains or losses after 2010.

		We analyze our operating performance primarily by the rental income of our real estate, net of operating, administrative and financing expenses, which is not directly impacted by short-term fluctuations in the market value of our real estate or debt securities. As a result, although these significant non-cash items have had a material impact on our operations and are reflected in our financial statements, the removal of the effects of these items allows us to better understand the core operating performance of our properties over the long-term.

		As described above, we began using FFO, excluding significant non-cash items, including by segment and region, to: (i) evaluate our performance and the performance of our properties in comparison to expected results and results of previous periods, relative to resource allocation decisions; (ii) evaluate the performance of our management; (iii) budget and forecast future results to assist in the allocation of resources; (iv) assess our performance as compared to similar real estate companies and the industry in general; and (v) evaluate how a specific potential investment will impact our future results. Because we make decisions with regard to our performance with a long-term outlook, we believe it is appropriate to remove the effects of short-term items that we do not expect to affect the underlying long-term performance of the properties we own. As noted above, we believe the long-term performance of our properties is principally driven by rental income. We believe investors are best served if the information that is made available to them allows them to align their analysis and evaluation of our operating results along the same lines that our management uses in planning and executing our business strategy.

		As the impact of these recurring items dissipates, we expect that the usefulness of FFO, excluding significant non-cash items will similarly dissipate and we will go back to using only FFO, including significant non-cash items.

		Limitations on Use of our FFO Measures

		While we believe our defined FFO measures are important supplemental measures, neither NAREIT’s nor our measures of FFO should be used alone because they exclude significant economic components of net earnings computed under GAAP and are, therefore, limited as an analytical tool. Accordingly they are two of many measures we use when analyzing our business. Some of these limitations are:

	•		The current income tax expenses that are excluded from our defined FFO measures represent the taxes that are payable.

	•		Depreciation and amortization of real estate assets are economic costs that are excluded from FFO. FFO is limited, as it does not reflect the cash requirements that may be necessary for future replacements of the real estate assets. Further, the amortization of capital expenditures and leasing costs necessary to maintain the operating performance of industrial properties are not reflected in FFO.

	•		Gains or losses from property dispositions represent changes in the value of the disposed properties. By excluding these gains and losses, FFO does not capture realized changes in the value of disposed properties arising from changes in market conditions.

Appendix B
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Fourth Quarter 2010

Appendix B - Definitions

	•		The deferred income tax benefits and expenses that are excluded from our defined FFO measures result from the creation of a deferred income tax asset or liability that may have to be settled at some future point. Our defined FFO measures do not currently reflect any income or expense that may result from such settlement.

	•		The foreign currency exchange gains and losses that are excluded from our defined FFO measures are generally recognized based on movements in foreign currency exchange rates through a specific point in time. The ultimate settlement of our foreign currency-denominated net assets is indefinite as to timing and amount. Our FFO measures are limited in that they do not reflect the current period changes in these net assets that result from periodic foreign currency exchange rate movements.

	•		The non-cash impairment charges that we exclude from our FFO, excluding significant non-cash items, have been or may be realized as a loss in the future upon the ultimate disposition of the related real estate properties or other assets through the form of lower cash proceeds.

	•		The gains on extinguishment of debt that we exclude from our FFO, excluding significant non-cash items, provides a benefit to us as we are settling our debt at less than our future obligation.

We compensate for these limitations by using our FFO measures only in conjunction with net earnings computed under GAAP when making our decisions. To assist investors in compensating for these limitations, we reconcile our defined FFO measures to our net earnings computed under GAAP. This information should be read with our complete financial statements prepared under GAAP and the rest of the disclosures we file with the SEC to fully understand our FFO measures and the limitations on its use.

Net Asset Value – We consider Net Asset Value to be a useful tool to estimate the fair value of common shareholder equity. The assessment of the fair value of a particular segment of our business is subjective in that it involves estimates and can be performed using various methods. Therefore, in this Supplemental Report, we have presented the financial results and investments related to our business segments that we believe are important in calculating our Net Asset Value but have not presented any specific methodology nor provided any guidance on the assumptions or estimates that should be used in the calculation.

Operating Segments:

		*Direct Owned Segment* – represents the direct long-term ownership of industrial properties, including development of properties.

		*Investment Management Segment* – represents the investment management of unconsolidated property funds and joint ventures and the properties they own.

Same Store – We evaluate the operating performance of the operating properties we own and manage using a “same store” analysis because the population of properties in this analysis is consistent from period to period, thereby eliminating the effects of changes in the composition of the portfolio on performance measures. We include properties owned by us, and properties owned by the industrial property funds and joint ventures that are managed by us (referred to as “unconsolidated investees”), in our same store analysis. We have defined the same store portfolio, for the quarter ended December 31, 2010, as those operating properties that were in operation at October 1, 2009 and have been in operation throughout the full periods in both 2010 and 2009. We have removed all properties that were disposed of to a third party from the population for both periods. We believe the factors that impact rental income, rental expenses and net operating income in the same store portfolio are generally the same as for the total portfolio. In order to derive an appropriate measure of period-to-period operating performance, we remove the effects of foreign currency exchange rate movements by using the current exchange rate to translate from local currency into U.S. dollars, for both periods, to derive the same store results.

		Same store rental income – includes the amount of rental expenses that are recovered from customers under the terms of their respective lease agreements. In computing the percentage change in rental income for the same store analysis, rental income is adjusted to remove the net termination fees recognized for each period. Net termination fees generally represent the gross fee negotiated at the time a customer is allowed to terminate its lease agreement offset by the customer’s rent leveling asset that was previously recognized. Removing the net termination fees for the same store calculation allows us to evaluate the growth or decline in each property’s rental income without regard to items that are not indicative of the property’s recurring operating performance. Customer terminations are negotiated under specific circumstances and are not subject to specific provisions or rights allowed under the lease agreements.

		Same store rental expense – represent gross property operating expenses. In computing the percentage change in rental expenses for the same store analysis, rental expenses include property management expenses for our direct owned properties based on the property management fee that has been computed as provided in the individual agreements under which our wholly owned management company provides property management services to each property (generally the fee is based on a percentage of revenues).

		Same store average leasing – represents the change in the average leased percentage for all periods presented.

		Same store rental rate growth – represents the change in effective rental rates, on new leases signed during the period, as compared with the previous effective rental rates in that same space.

Turnover costs – Represents the square feet and associated costs expected to be incurred i) to prepare a space for a new tenant, except for space that is being leased for the first time (i.e., in a new development property); ii) for a lease renewal with the same tenant; and iii) for space in properties acquired, if the space was vacant at the date of acquisition. The amount provided represents the total turnover costs expected to be incurred on the leases signed during the period and does not represent actual turnover expenditures for the period.

Appendix B
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PROLOGIS - FORM 8-K - EX-99.1 - February 3, 2011

Attached files