Prologis, Inc. - FORM 8-K - EX-99.1

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8-K - FORM 8-K - Prologis, Inc.	d83842e8vk.htm

Exhibit 99.1

Prologis Reports Second Quarter Results

Prologis, Inc. Announces Second Quarter 2011 Earnings Results

- Integration Plan on Track -
- Enhanced Platform Delivers Strong Operating Results -
- Company Confirms Second Half Guidance, With a Bias to Higher End of Range -

SAN FRANCISCO, July [28], 2011 — Prologis, Inc. (NYSE: PLD), the leading global owner, operator and developer of industrial real estate, today reported results for the second quarter of 2011.

On June 3, 2011, AMB Property Corporation and ProLogis completed their merger and became Prologis, Inc. Under the structure of the merger, AMB Property Corporation was the legal acquirer and ProLogis was the accounting acquirer. Therefore financial results for the second quarter reflect two months of stand-alone legacy ProLogis and approximately one month of results of the combined company. These quarterly results also reflect the consolidation, of approximately one month, of ProLogis European Properties (Euronext/Amsterdam: PEPR, hereafter “PEPR”) due to the acquisition of a controlling interest by the company. All prior periods financial comparisons reflect legacy ProLogis results. The operating metric and capital deployment comparisons for 2011 have been generally conformed to legacy ProLogis definitions and represent the combined company.

Core funds from operations (“Core FFO”) per fully diluted share amounted to $0.35 for the second quarter of 2011, compared to $0.28 for legacy ProLogis for the same quarter in 2010. Funds from operations, as defined by Prologis (“FFO”) per fully diluted share was $0.03 for the second quarter of 2011, compared to $0.32 for legacy ProLogis, for the same period in 2010. The differential between Core FFO and FFO in the second quarter of 2011 relates to impairment charges of $0.34 per share and merger costs of $0.33 per share, offset by net gains on acquisitions and dispositions of real estate of $0.34 per share.

Net loss per share for the second quarter of 2011 was $(0.49), compared to a loss of $(0.11) for the same quarter in 2010. The year-over-year change primarily relates to the impairment charges and merger costs, again offset by net gains on acquisitions and dispositions of real estate.

“Our global footprint and access to capital provide us with the ability to seize opportunities around the world as the economic recovery continues,” said Hamid R. Moghadam, chairman and co-chief executive officer. “Operating performance was strong, demonstrated by significant improvements in same-store net operating income, occupancy and rent change on rollover. We believe our company’s positive performance in the second quarter is indicative of a trend that will continue through the rest of 2011 and into 2012.”

Operating Portfolio Metrics

Prologis’ operating portfolio was 90.7 percent occupied at the end of the second quarter, up more than 80 basis points from 89.9 percent occupied at March 31, 2011.Same-store net operating income increased by 3.1 percent for the second quarter, compared to a 0.7 percent increase in the first quarter of this year. Rental rates on leases signed in the same-store pool decreased (6.1) percent for the second quarter, a significant improvement over the (8.9) percent decline in the first quarter.

Leasing Activity

During the second quarter, the company leased a total of 33.5 million square feet (3.1 million square meters) in its operating portfolio and 1.4 million square feet (126,348 square meters) in its development portfolio. Year-to-date, Prologis has leased approximately 68 million square feet (6.3 million square meters) in its operating and development portfolios. The company also achieved a 76.7 percent tenant retention rate for the quarter, signing 22 million square feet (2 million square meters) of renewals.

Capital Markets Activity

During the second quarter, Prologis:

	•		Completed the issuance and sale of 34.5 million shares of its common stock in a public offering at a price of $33.50 per share, generating approximately $1.1 billion in net proceeds. The follow-on offering is part of the company’s strategic priority to further strengthen its balance sheet. Prologis utilized the proceeds from the equity offer to fully repay debt under the bridge facility used to fund the company’s tender offer for PEPR. The remainder of the proceeds was used to reduce debt under the Prologis global senior credit facility and for general corporate purposes.

	•		Completed an exchange offer for $4.6 billion of legacy ProLogis senior unsecured notes and convertible debt, with approximately $4.4 billion, or 95 percent, of the aggregate principal amount of legacy ProLogis notes having been validly tendered for exchange. The legacy ProLogis notes were exchanged for notes issued by Prologis, Inc.’s operating partnership, Prologis, L.P. and guaranteed by Prologis, Inc.

	•		Entered into a new $1.75 billion global senior credit agreement with a syndicate of 20 banks. The pricing on the new facility represents a reduction of 180 basis points from the pricing of the legacy ProLogis global credit facility, which was terminated at the closing of the merger.

•

Amended a JPY 36.5 billion ($456 million) revolving credit agreement with a syndicate of eight banks. The revised pricing on this facility represents a reduction of 70 basis points from the yen revolver pricing in place immediately prior to the amendment of the agreement.

As of June 30, 2011, Prologis’ liquidity exceeded $1.5 billion, consisting of $1.3 billion of availability on its lines of credit and $261 million in unrestricted cash and cash equivalents.

Private Capital Activity

Year-to-date through June 30, 2011, Prologis raised $1.3 billion of new third-party equity in its Private Capital business, with $207 million of that amount raised in the second quarter.

As previously announced, the company completed a mandatory tender offer for PEPR, a Luxembourg closed-ended investment fund. As of June 30, 2011 Prologis owned approximately 92.4 percent of the outstanding units of PEPR.

Also as previously announced, Prologis acquired its partner’s 50 percent interest in its AMB-SGP joint venture during the second quarter.

Capital Deployment Activity

Year-to-date through June 30, 2011, the combined company deployed $796 million, $368 million of which was deployed in the second quarter. Activity in the second quarter included:

•		$317 million of new development starts in seven countries. Nine of the 13 projects are build-to-suit.

•		$50 million in acquisitions comprising 4 properties totaling approximately 910,000 square feet (85,000 square meters).

Also during the quarter, in partnership with Bank of America Merrill Lynch and NRG Energy, Prologis announced an offer of a conditional commitment from the U.S. Department of Energy’s Loan Programs Office to help finance a 733-megawatt distributed rooftop solar power generation project, the largest of its kind in the world. The government loan guarantee supporting $1.4 billion of debt facilitates a total project size of about $2.6 billion, which is being financed primarily by the private sector over the next four years. Prologis will lease its rooftops and will also act as developer, construction manager and program sponsor, in addition to making a modest equity investment.

During the second quarter, the combined company completed $258 million in asset dispositions, primarily consisting of $115 million related to the closing of the remaining Catellus assets and $144 million of industrial land building sales.

Common Stock Dividend Update

Subject to approval from its board of directors, Prologis expects to declare its third-quarter dividend in September, payable in October 2011.

Integration Update

The company has identified more than $90 million of merger cost synergies including gross G&A savings, reduced facility fees on its global line of credit and lower amortization of non real estate assets. Since closing the merger, Prologis has already realized approximately 60 percent of these merger synergies and expects to realize the total amount on a run rate basis by year-end 2012.

“Our overall progress on the integration is on target and in many areas is ahead of plan,” said Walter C. Rakowich co-chief executive officer. “When we put the companies together, we gained an unparalleled platform of distribution facilities throughout the world. We are able to serve customers in ways few other companies can, and we can accomplish this at an overall lower cost of capital. The organization is already beginning to benefit from combining the two businesses and, importantly, our customers are benefiting as well. The merger has primed Prologis for success globally.”

Guidance for the Remainder of 2011

The company expects to achieve its previously provided Core FFO guidance of $0.78 to $0.82 per share for the second half 2011, with an expectation in the higher end of the range. The company also expects to recognize a net loss of $0.15-$0.18 per share for the second half of 2011. In reconciling from net earnings (loss) to Core FFO, Prologis adds back real estate depreciation, amortization expense and merger costs estimated at $0.93 to $1.02 per share. Net income guidance excludes any potential gains (losses) recognized from property dispositions due to the variability of timing, composition of properties and estimate of proceeds.

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, July 28, 2011, at 10:00 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 (877) 256-7020 domestically or (706) 643-7823 internationally with reservation code 83570494.

About Prologis

Prologis, Inc. is the leading owner, operator and developer of industrial real estate, focused on global and regional markets across the Americas, Europe and Asia. As of

June 30 2011, Prologis owned or had investments in, on a consolidated basis or through unconsolidated joint ventures, properties and development projects expected to total approximately 600 million square feet (55.7 million square meters) in 22 countries. The company leases modern distribution facilities to more than 4,500 customers, including manufacturers, retailers, transportation companies, third-party logistics providers and other enterprises.

Some of the information included in this press release contains forward-looking statements which are made pursuant to the safe-harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause our actual results to differ materially from those in the forward-looking statements, and you should not rely on the forward-looking statements as predictions of future events. The events or circumstances reflected in forward-looking statements might not occur. You can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “pro forma,” “estimates” or “anticipates” or the negative of these words and phrases or similar words or phrases. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Forward-looking statements are necessarily dependent on assumptions, data or methods that may be incorrect or imprecise and we may not be able to realize them. We caution you not to place undue reliance on forward-looking statements, which reflect our analysis only and speak only as of the date of this report or the dates indicated in the statements. We assume no obligation to update or supplement forward-looking statements. The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements: changes in general economic conditions in California, the U.S. or globally (including financial market fluctuations), global trade or in the real estate sector (including risks relating to decreasing real estate valuations and impairment charges); risks associated with using debt to fund the company’s business activities, including refinancing and interest rate risks; the company’s failure to obtain, renew, or extend necessary financing or access the debt or equity markets; the company’s failure to maintain its current credit agency ratings or comply with its debt covenants; risks related to the merger transaction with ProLogis, including litigation related to the merger, and the risk that the merger may not achieve its intended results; risks related to the company’s obligations in the event of certain defaults under co-investment venture and other debt; defaults on or non-renewal of leases by customers, lease renewals at lower than expected rent or failure to lease properties at all or on favorable rents and terms; difficulties in identifying properties, portfolios of properties, or interests in real-estate related entities or platforms to acquire and in effecting acquisitions on advantageous terms and the failure of acquisitions to perform as the company expects; unknown liabilities acquired in connection with the acquired properties, portfolios of properties, or interests in real-estate related entities; the company’s failure to successfully integrate acquired properties and operations; risks and uncertainties affecting property development, redevelopment and value-added conversion (including construction delays, cost overruns, the company’s inability to obtain necessary permits and financing, the company’s inability to lease properties at all or at favorable rents and terms, and public opposition to these activities); the company’s failure to set up additional funds, attract additional investment in existing funds or to contribute properties to its co-investment ventures due to such factors as its inability to acquire, develop, or lease properties that meet the investment criteria of such ventures, or the co-investment ventures’ inability to access debt and equity capital to pay for property contributions or their allocation of available capital to cover other capital requirements; risks and uncertainties relating to the disposition of properties to third parties and the company’s ability to effect such transactions on advantageous terms and to timely reinvest proceeds from any such dispositions; risks of doing business internationally and global expansion, including unfamiliarity with the new markets and currency

risks; risks of changing personnel and roles; losses in excess of the company’s insurance coverage; changes in local, state and federal regulatory requirements, including changes in real estate and zoning laws; increases in real property tax rates; risks associated with the company’s tax structuring; increases in interest rates and operating costs or greater than expected capital expenditures; environmental uncertainties and risks related to natural disasters; and our failure to qualify and maintain our status as a real estate investment trust. Our success also depends upon economic trends generally, various market conditions and fluctuations and those other risk factors discussed under the heading “Risk Factors” and elsewhere in our most recent annual report on Form 10-K for the year ended December 31, 2010 and our other public reports.

Prologis Contacts



Tracy A. Ward		Sara M. Klein
SVP, IR & Corporate Communications		Manager, Media and Public Relations
Direct +1 415 733 9565		Direct +1 415 733 9447
Email tward@prologis.com		Email sklein@prologis.com

Prologis, Inc. is the leading owner, operator and developer of industrial real estate, focused on global and regional markets across the Americas, Europe and Asia. As of June 30 2011, Prologis owned or had investments in, on a consolidated basis or through unconsolidated joint ventures, properties and development projects expected to total approximately 600 million square feet (55.7 million square meters) in 22 countries. The company leases modern distribution facilities to more than 4,500 customers, including manufacturers, retailers, transportation companies, third-party logistics providers and other enterprises.


AMERICAS		EUROPE		ASIA		TOTAL (A)
Operating Portfolio (msf)	399	Operating Portfolio (msf)	144	Operating Portfolio (msf)	24	567
Leased percentage %	91.5	Leased percentage %	90.2	Leased percentage %	94.7	91.3
Occupied percentage %	91.0	Occupied percentage %	89.3	Occupied percentage %	93.4	90.7
Development Portfolio (msf)	3.1	Development Portfolio (msf)	3.3	Development Portfolio (msf)	6.2	12.6
Total expected investment (millions)	$ 211.9	Total expected investment (millions)	$ 268.9	Total expected investment (millions)	$ 812.4	$ 1,293.2
Gross book value (millions)	$ 117.5	Gross book value (millions)	$ 139.5	Gross book value (millions)	$ 444.9	$ 701.9
Land Inventory (acres)	7,330	Land Inventory (acres)	3,816	Land Inventory (acres)	93	11,239
Gross book value (millions)	$ 1,053.4	Gross book value (millions)	$ 821.0	Gross book value (millions)	$ 206.6	$ 2,081.0


(A)		Includes both consolidated and unconsolidated assets under management. Does not include approximately 20 million square feet of mixed-use properties, properties in which Prologis has an ownership interest but doesn’t manage, and properties managed by Prologis on behalf of other third parties.


(in thousands, except per share amounts)	Three Months Ended June 30,				Six Months Ended June 30,
	2011 (A)		2010 (A)		2011 (A)		2010 (A)
Revenues	$	335,901	$	219,146	$	574,808	$	436,514
Net loss attributable to common shares	$	(151,471)	$	(23,150)	$	(198,087)	$	(114,279)
FFO, as defined by Prologis	$	8,195	$	67,844	$	70,341	$	74,961
Core FFO	$	109,662	$	60,334	$	184,069	$	112,671
Core EBITDA, as adjusted	$	352,015	$	167,622	$	690,235	$	330,201



Per common share — diluted:
Net loss attributable to common shares	$	(0.49)	$	(0.11)	$	(0.70)	$	(0.54)
FFO, as defined by Prologis	$	0.03	$	0.32	$	0.25	$	0.35
Core FFO	$	0.35	$	0.28	$	0.65	$	0.53


(A)		We completed the merger with AMB (the “Merger”) on June 3, 2011. The financial results presented throughout this supplemental include ProLogis for the full period and AMB results from the date of the Merger going forward. Results for 2011 include approximately one month of the impact from both the Merger and PEPR acquisition. See the Notes and Definitions for more information.
(B)		Includes legacy AMB and ProLogis for all periods.


(in thousands)	June 30, 2011		March 31, 2011 (A)		December 31, 2010 (A)
Assets:
Investments in real estate assets:
Operating portfolio	$	22,629,855	$	10,807,183	$	10,714,799
Development portfolio		632,196		452,813		365,362
Land		2,033,725		1,599,966		1,533,611
Other real estate investments		452,978		281,546		265,869

		25,748,754		13,141,508		12,879,641
Less accumulated depreciation		1,764,289		1,656,781		1,595,678

Net investments in properties		23,984,465		11,484,727		11,283,963
Investments in and advances to unconsolidated investees		3,012,144		2,084,696		2,024,661
Notes receivable backed by real estate		359,228		358,323		302,144
Assets held for sale		171,765		215,714		574,791

Net investments in real estate		27,527,602		14,143,460		14,185,559

Cash and cash equivalents		260,893		24,744		37,634
Restricted cash		68,390		34,088		27,081
Accounts receivable and other assets		1,277,621		733,403		652,393

Total assets	$	29,134,506	$	14,935,695	$	14,902,667


Liabilities and Equity:
Liabilities:
Debt	$	12,119,952	$	6,415,034	$	6,506,029
Accounts payable, accrued expenses, and other liabilities		1,944,309		894,272		876,283

Total liabilities		14,064,261		7,309,306		7,382,312


Equity:
Shareholders’ equity:
Preferred shares		582,200		350,000		350,000
Common shares		4,589		2,550		2,545
Additional paid-in capital		16,375,867		9,669,017		9,671,560
Accumulated other comprehensive income (loss)		225,364		213,465		(3,160)
Distributions in excess of net earnings		(2,842,842)		(2,626,381)		(2,515,722)

Total shareholders’ equity		14,345,178		7,608,651		7,505,223
Noncontrolling interests, including limited partnership units		725,067		17,738		15,132

Total equity		15,070,245		7,626,389		7,520,355

Total liabilities and equity	$	29,134,506	$	14,935,695	$	14,902,667


(A)		Represents legacy Prologis only.


(in thousands, except per share amounts)	Three Months Ended					Six Months Ended
	June 30,					June 30,
	2011 (A)			2010		2011 (A)			2010
Revenues:
Rental income	$	294,670		$	188,205	$	500,088		$	375,835
Private capital revenue		32,311			28,307		61,481			56,969
Development management and other income		8,920			2,634		13,239			3,710

Total revenues		335,901			219,146		574,808			436,514


Expenses:
Rental expenses		81,140			54,089		144,447			110,313
Private capital expenses		11,596			9,931		22,148			20,250
General and administrative		51,840			38,921		91,023			80,927
Merger, acquisition and other integration expenses		103,052			—		109,040			—
Depreciation, amortization and other expenses		128,666			81,887		216,015			161,295

Total expenses		376,294			184,828		582,673			372,785


Operating income (loss)		(40,393)			34,318		(7,865)			63,729

Other income (expense):
Earnings from unconsolidated investees, net		11,399			3,304		25,040			11,277
Interest expense		(113,059)			(118,920)		(203,621)			(228,899)
Impairment of other assets		(103,823)			—		(103,823)			—
Net gains on acquisitions and dispositions of investments in real estate		102,529			10,959		106,254			22,766
Foreign currency and derivative gains (losses) and other income (expenses), net		(4,978)			(8,576)		(6,183)			(5,060)
Gain (loss) on early extinguishment of debt, net		—			975		—			(46,658)

Total other income (expense)		(107,932)			(112,258)		(182,333)			(246,574)


Loss before income taxes		(148,325)			(77,940)		(190,198)			(182,845)
Income tax expense (benefit) — current and deferred		6,429			(40,249)		12,798			(32,047)

Loss from continuing operations		(154,754)			(37,691)		(202,996)			(150,798)
Discontinued operations:
Income attributable to disposed properties and assets held for sale		2,952			20,122		9,070			40,574
Net gains on dispositions, net of related impairment charges and taxes		8,175			979		10,135			9,127

Total discontinued operations		11,127			21,101		19,205			49,701

Consolidated net loss		(143,627)			(16,590)		(183,791)			(101,097)
Net earnings attributable to noncontrolling interests		(202)			(191)		(285)			(444)

Net loss attributable to controlling interests		(143,829)			(16,781)		(184,076)			(101,541)
Less preferred share dividends		7,642			6,369		14,011			12,738

Net loss attributable to common shares	$	(151,471	)	$	(23,150)	$	(198,087	)	$	(114,279	)

Net loss per share attributable to common shares — diluted	$	(0.49)		$	(0.11)	$	(0.70)		$	(0.54)


(A)		Includes approximately one month of the impact from the Merger and PEPR acquisition.


(in thousands)	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011 (A)		2010		2011 (A)		2010
Revenues:
Rental income	$	297,629	$	230,249	$	513,001	$	461,167
Private capital revenue		32,311		28,307		61,481		56,969
Development management and other income		8,920		2,634		13,239		3,710

Total revenues		338,860		261,190		587,721		521,846


Expenses:
Rental expenses		81,128		65,395		147,815		133,281
Private capital expenses		11,596		9,931		22,148		20,250
General and administrative		51,840		38,921		91,023		80,927
Merger, acquisition and other integration expenses		103,052		—		109,040		—
Impairment of real estate properties		2,659		367		2,659		367
Depreciation of corporate assets and other expenses		8,714		7,755		17,007		15,417

Total expenses		258,989		122,369		389,692		250,242


Operating FFO		79,871		138,821		198,029		271,604

Other income (expense):
FFO from unconsolidated investees		49,704		44,508		98,399		82,176
Interest expense		(113,059)		(118,920)		(203,621)		(228,899)
Impairment of other assets		(103,823)		—		(103,823)		—
Net gains on acquisitions and dispositions of investments in real estate		106,752		10,756		109,320		21,102
Foreign currency exchange gains (losses) and other expenses, net		5,309		(1,138)		2,469		(831)
Gain (loss) on early extinguishment of debt, net		—		975		—		(46,658)
Current income tax expense		(6,311)		(598)		(13,732)		(10,351)

Total other income (expense)		(61,428)		(64,417)		(110,988)		(183,461)


Less preferred share dividends		7,642		6,369		14,011		12,738
Less FFO attributable to noncontrolling interests		2,606		191		2,689		444

FFO, as defined by Prologis		8,195		67,844		70,341		74,961

Impairment charges		106,482		367		106,482		367
Japan disaster expenses		(1,315)		—		5,610		—
Merger and other integration expenses		103,052		—		109,040		—
Net gains on acquisitions and dispositions of investments in real estate		(106,752)		(10,756)		(109,320)		(21,102)
Income tax expense on dispositions		—		—		1,916		851
Adjustments made in 2010, not applicable to 2011		—		2,879		—		57,594

Total of adjustments		101,467		(7,510)		113,728		37,710



Core FFO	$	109,662	$	60,334	$	184,069	$	112,671

Core FFO per share diluted	$	0.35	$	0.28	$	0.65	$	0.53


(A)		Includes approximately one month of the impact from the Merger and PEPR acquisition.


(in thousands)	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011 (A)		2010		2011 (A)		2010
Reconciliation of Net Loss to FFO

Net loss attributable to common shares	$	(151,471)	$	(23,150)	$	(198,087)	$	(114,279)
Add (deduct) NAREIT defined adjustments:
Real estate related depreciation and amortization		119,952		73,765		199,008		145,511
Adjustments related to dispositions		(6,592)		9,434		(11,169)		10,999
Reconciling items related to noncontrolling interests		(2,404)		—		(2,404)		—
Our share of reconciling items from unconsolidated investees		36,660		35,676		72,337		69,843

Subtotal-NAREIT defined FFO		(3,855)		95,725		59,685		112,074

Add (deduct) our defined adjustments:
Unrealized foreign currency and derivative losses, net		10,287		7,438		8,652		4,229
Deferred income tax expense (benefit)		118		(40,847)		982		(42,398)
Our share of reconciling items from unconsolidated investees		1,645		5,528		1,022		1,056

FFO, as defined by Prologis	$	8,195	$	67,844	$	70,341	$	74,961

Adjustments to Core FFO		101,467		(7,510)		113,728		(37,710)

Core FFO	$	109,662	$	60,334	$	184,069	$	112,671


(A)		Adjustment for acquisitions made during the quarter, including the Merger and PEPR acquisition to reflect NOI for the full period.

Reconciliation of Consolidated Net Loss to Core EBITDA, as adjusted


(dollars in thousands)	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011		2010
Consolidated net loss	$	(143,627)		$	(16,590)		$	(183,791)	$	(101,097)
Net gains on acquisitions and dispositions of investments in real estate		(113,363)			(11,938)			(120,964)		(32,744)
Depreciation and amortization		123,079			76,871			205,744		152,012
Interest expense		113,059			118,920			203,621		228,899
Impairment charges		106,482			367			106,482		367
Merger and other integration expenses		103,052			—			109,040		—
Current and deferred income tax expense (benefit)		6,429			(40,249)			14,714		(31,196)
Pro forma adjustment (A)		104,573			—			263,994		—
Income on properties sold during the quarter included in discontinued operations		(2,952)			(20,122)			(9,070)		(40,574)
Other non-cash charges		18,293			13,803			21,270		16,482
Other adjustments made to derive Core FFO		(1,315)			2,879			5,610		57,594

Core EBITDA, as adjusted, prior to our share of unconsolidated investees		313,710			123,991			616,650		249,743
Our share of reconciling items from unconsolidated investees:
Depreciation and amortization		36,660			35,676			72,337		69,843
Other non-cash charges		1,645			8,528			1,022		4,631
Realized losses (gains) on derivative activity		—			(523)			226		5,984

Core EBITDA, as adjusted	$	352,015		$	167,622		$	690,235	$	330,201


Prologis debt to core EBITDA:
Consolidated core EBITDA, as adjusted — annualized	$	1,408,060		$	670,488
Prologis consolidated debt as of June 30	$	12,035,862		$	8,271,884
Prologis consolidated debt to core EBITDA ratio		8.55	x		12.34	x
Debt to core EBITDA, including our share of unconsolidated investees:
Core EBITDA, as adjusted — annualized	$	1,408,060		$	670,488
Our share of interest and current income taxes from unconsolidated investees		123,668			178,392

Core EBITDA, as adjusted-annualized	$	1,531,728		$	848,880


Prologis consolidated debt as of June 30	$	12,035,862		$	8,271,884
Our share of debt of unconsolidated investees as of June 30		2,677,319			2,549,423

Total debt, including our share of unconsolidated investees	$	14,713,181		$	10,821,307

Debt to core EBITDA ratio (including our share of unconsolidated investees)		9.61	x		12.75	x

(A) Adjustment for acquisitions made during the quarter, including the Merger and PEPR acquisition to reflect NOI for the full period.

(square feet and gross book value in thousands)


	# of
Markets	bldgs		Square Feet		Leased %			Occupied %			Gross Book Value		% of Total
Global Markets
Central		472		72,584		91.7	%		91.1	%	$	3,848,864		8.8	%
East		531		76,550		91.2	%		90.7	%		5,330,444		12.2	%
Northwest		329		36,122		91.6	%		90.7	%		3,011,456		6.9	%
Southwest		343		64,569		96.1	%		96.0	%		5,267,348		12.1	%
On Tarmac		32		2,649		93.6	%		93.6	%		360,152		0.8	%

U.S. total		1,707		252,474		92.7	%		92.2	%		17,818,264		40.8	%
Canada		18		6,235		91.3	%		91.3	%		708,625		1.6	%
Latin America		88		17,746		92.0	%		91.3	%		1,108,593		2.5	%

Americas total		1,813		276,455		92.6	%		92.1	%		19,635,482		45.0	%
Europe:
Northern Europe		150		31,303		90.7	%		90.5	%		2,981,499		3.9	%
Southern Europe		162		40,764		89.1	%		89.1	%		3,463,519		6.8	%
Central and Eastern Europe		107		22,811		84.9	%		83.0	%		1,685,614		7.9	%
United Kingdom		85		20,166		93.4	%		93.4	%		2,457,831		5.6	%

Europe total		504		115,044		89.5	%		89.0	%		10,588,463		24.2	%
Asia:
Japan		37		15,049		94.5	%		93.9	%		3,745,520		8.6	%
China		18		4,361		95.3	%		95.3	%		223,462		0.5	%
Singapore		5		942		100.0	%		100.0	%		125,995		0.3	%

Asia total		60		20,352		94.9	%		94.5	%		4,094,977		9.4	%


Total global markets		2,377		411,851		91.8	%		91.3	%		34,318,922		78.6	%

Regional and other markets
Americas		767		122,647		89.1	%		88.5	%		6,454,698		14.8	%
Europe		113		28,682		93.2	%		90.5	%		2,312,087		5.3	%
Asia		7		3,436		93.5	%		87.1	%		586,679		1.3	%

Total regional and other markets		887		154,765		90.0	%		88.8	%		9,353,464		21.4	%



Total operating portfolio — combined		3,264		566,616		91.3	%		90.7	%	$	43,672,386		100.0	%

Consolidated
Americas		1,526		207,779		90.1	%		89.6	%	$	13,507,440		30.9	%
Europe		343		80,622		87.4	%		86.2	%		6,625,303		15.2	%
Asia		29		13,914		93.4	%		91.2	%		2,497,112		5.7	%

Total operating portfolio — consolidated		1,898		302,315		89.5	%		88.7	%		22,629,855		51.8	%

Unconsolidated
Americas		1,054		191,323		93.1	%		92.5	%		12,582,740		28.8	%
Europe		274		63,104		93.8	%		93.3	%		6,275,247		14.4	%
Asia		38		9,874		96.5	%		96.5	%		2,184,544		5.0	%

Total operating portfolio — unconsolidated		1,366		264,301		93.4	%		92.9	%		21,042,531		48.2	%



Total operating portfolio — combined		3,264		566,616		91.3	%		90.7	%	$	43,672,386		100.0	%

(dollars and square feet in thousands)

Period Ending Occupancy by Region (A)


Leasing Activity	(A)		(A)		(B)		(B)
	Q2 2011		Q1 2011		Q4 2010		Q3 2010

Square feet of leases signed:
Properties under development		1,360		877		1,100		327
Operating properties:
New leases		11,841		14,773		12,285		9,992
Renewals		21,697		17,225		21,130		16,703

Total square feet of leases signed		34,898		32,875		34,515		27,022
Weighted average customer retention		76.7%		65.8%		87.4%		76.0%
Turnover costs (per square foot)	$	1.37	$	1.35	$	1.02	$	1.06


Capital Expenditures	(A)		(A)		(B)		(B)
	Q2 2011		Q1 2011		Q4 2010		Q3 2010

Capital expenditures	$	24,880	$	16,701	$	20,262	$	17,326
$ per square feet	$	0.04	$	0.03	$	0.05	$	0.04
Tenant improvements		24,741		19,787		22,771		20,017
Leasing commissions		21,682		19,741		14,161		12,945

Total	$	71,303	$	56,229	$	57,194	$	50,288
% of gross NOI (D)		11.3%		8.9%		12.6%		12.2%
Weighted average ownership percent		69.0%		65.2%		60.7%		65.5%
Prologis share		49,215	$	36,645	$	34,689	$	32,959


Same Store Information (c)
	Q2 2011 ()		Q1 2011 ()


Square feet of population		552,370		554,504
Percentage change:
Rental income		2.2%		2.0%
Rental expenses		(0.3%)		2.3%
Net operating income		3.1%		0.7%
Average occupancy		2.5%		3.0%

Square feet of leasing activity		27,721		28,233
Percentage change in rental rates		(6.1%)		(8.9%)


(A)		Includes legacy AMB and ProLogis for the periods presented.

(B)		Includes only legacy ProLogis.

(C)		Portfolio includes legacy AMB and ProLogis for both periods. See the Notes and Definitions for further explanations.

(D)		Based on proforma NOI


(square feet and dollars in thousands)
Top Customers

	% of Annual		Total Square
	Base Rent		Feet

Deutsche Post AG (DHL)		2.4%		11,773
CEVA Logistics		1.5%		7,651
Kuehne & Nagel		1.2%		6,423
Home Depot, Inc		1.1%		5,685
SNCF Geodis		0.9%		5,021
FedEx Corporate Services Inc		0.8%		2,720
United States Government		0.8%		1,473
Unilever		0.7%		5,208
Wincanton Logistics		0.7%		2,915
PepsiCo		0.7%		3,994

Top 10 customers		10.8%		52,863
11 - 25		7.2%		34,836

Top 25 customers		18.0%		87,699



Lease Expirations

	Annual Base		Percentage of		Occupied		Percentage of
Year	Rent		Total		Square Feet		Total

Month to month customers	$	39,532		1.4%		9,910		1.9%
Remainder of 2011		166,136		5.8%		30,805		6.0%
2012		461,462		16.0%		86,458		16.8%
2013		452,389		15.7%		80,270		15.6%
2014		390,205		13.5%		70,502		13.7%
2015		359,903		12.5%		64,663		12.6%
2016		279,234		9.7%		51,583		10.0%
Thereafter		738,683		25.4%		119,513		23.4%

Total	$	2,887,544		100%		513,704		100%


(in thousands)
Building Acquisitions (A)									Building Dispositions (A)
	Q2 2011				YTD 2011				Q2 2011				YTD 2011
	Square				Square				Square				Square
	Feet		Acq. Cost		Feet		Acq. Cost		Feet		Sale Price		Feet		Sale Price
Americas
Consolidated		163	$	8,344		163	$	8,344		284		20,685		3,338	$	132,411
Unconsolidated		42		12,230		321	$	29,530		229	$	31,800		629	$	37,598

Europe
Consolidated		—		—		—		—		89	$	8,956		362	$	25,989
Unconsolidated		89	$	8,956		392	$	31,191		—		—		—		—

Asia
Consolidated		616	$	20,450		616	$	20,450		179	$	42,951		179	$	42,951
Unconsolidated		—		—		—		—		—		—		—		—


Total		910	$	49,980		1,492	$	89,515		781	$	104,392		4,508	$	238,949


All Regions
Consolidated		779	$	28,794		779	$	28,794		552	$	72,592		3,879	$	201,351
Unconsolidated		131		21,186		713		60,721		229		31,800		629		37,598

Total		910	$	49,980		1,492	$	89,515		781	$	104,392		4,508	$	238,949


Other Capital Deployment Activity (A)
	Q2 2011 (B)		YTD 2011 (B)
Investments
Acquisition of units in PEPR	$	1,030,844	$	1,030,844
Acquisition of SGP Property Fund	$	51,627	$	51,627
Invested in unconsolidated investees	$	8,200	$	32,364

Dispositions
Disposition of Catellus assets	$	115,065	$	472,319
Dispositions of land	$	30,187	$	39,286
Sale of Los Nogales Trust shares	$	8,330	$	8,330


(A)		Includes legacy AMB and ProLogis for all periods.

(B)		Does not include merger with AMB, which was all stock.


(dollars and square feet in thousands)
															Prologis Share
	# of				Investment		Cost to		Total Expected				Targeted		Investment		Total Expected
	Properties		Square Feet		Balance		Complete		Investment		Leased %		Year 1 Yield		Balance		Investment
Consolidated:
Completed — pre-stabilized:
Americas		4		1,335	$	61,370	$	1,610	$	62,980		0.0%			$	61,370	$	62,980
Europe		1		115		11,078		276		11,354		100.0%				11,078		11,354

Total completed pre-stabilized		5		1,450		72,448		1,886		74,334		7.9%				72,448		74,334

Under construction:
Americas		6		1,073		29,515		58,283		87,798		56.0%				29,515		87,798
Europe		10		2,859		124,947		116,346		241,293		78.9%				124,947		241,293
Asia		7		4,665		406,740		326,146		732,886		29.9%				406,740		732,886

Total under construction		23		8,597		561,202		500,775		1,061,977		49.4%				561,202		1,061,977


Total consolidated development portfolio		28		10,047	$	633,650	$	502,661	$	1,136,311		43.4%		7.3%	$	633,650	$	1,136,311


Unconsolidated:
Completed — pre-stabilized:
Americas		1		85	$	6,662	$	—	$	6,662		100.0%			$	2,051	$	2,051

Under construction:
Americas		3		624		19,908		34,568		54,476		3.4%				4,977		13,597
Europe		2		284		3,516		12,756		16,272		100.0%				1,044		4,833
Asia		4		1,572		38,211		41,266		79,477		4.2%				5,732		11,922

Total under construction		9		2,480		61,635		88,590		150,225		15.0%				11,753		30,352


Total unconsolidated development portfolio		10		2,565	$	68,297	$	88,590	$	156,887		17.8%		10.2%	$	13,804	$	32,403


Combined:
Completed and under construction:
Americas		14		3,117	$	117,455	$	94,461	$	211,916		22.7%			$	97,913	$	166,426
Europe		13		3,258		139,541		129,378		268,919		81.5%				137,069		257,480
Asia		11		6,237		444,951		367,412		812,363		23.4%				412,472		744,808

Total development portfolio		38		12,612	$	701,947	$	591,251	$	1,293,198		38.2%		7.6%	$	647,454	$	1,168,714


			Prologis
	TEI		Share		%

Build to Suit	$	325,536	$	313,536		27%
Speculative		967,662		855,178		73%

	$	1,293,198	$	1,168,714		100%


(square feet and total expected investment in thousands)
	Q2 2011 (A)						YTD 2011 (A)
	Consolidated		Unconsolidated		Total		Consolidated		Unconsolidated		Total
Americas
Square Feet		607		22		629		607		624		1,231
Total expected investment	$	49,652	$	719	$	50,371	$	49,652	$	58,759	$	108,411
Cost per square foot	$	82	$	33	$	80	$	82	$	94	$	88
Leased % at start		57.0%		100.0%		58.5%		57.0%		3.4%		29.9%

Europe
Square Feet		413		284		697		1,941		284		2,225
Total expected investment	$	34,011	$	16,272	$	50,283	$	167,403	$	16,272	$	183,675
Cost per square foot	$	82	$	57	$	72	$	86	$	57	$	83
Leased % at start		54.5%		100.0%		73.0%		63.9%		100.0%		68.5%

Asia
Square Feet		1,447		—		1,447		3,668		—		3,668
Total expected investment	$	216,350		—	$	216,350	$	424,094		—	$	424,094
Cost per square foot	$	150		—	$	150	$	116		—	$	116
Leased % at start		14.9%		—		14.9%		5.9%		—		5.9%

Total
Square Feet		2,467		306		2,773		6,216		908		7,124
Total expected investment	$	300,013	$	16,991	$	317,004	$	641,149	$	75,031	$	716,180
Cost per square foot	$	122	$	56	$	114	$	103	$	83	$	101
Leased % at start		31.9%		100.0%		39.4%		29.0%		33.6%		29.6%


(A)		Amounts include legacy AMB and Prologis for all periods.


Land- by Market	Acres		% of Total		Investment		% of Total
Consolidated portfolio					(in thousands)
Global markets
Central		1,192		10.9%	$	93,082		4.6%
East		1,912		17.5%		342,370		16.8%
Northwest		151		1.4%		14,862		0.7%
Southwest		809		7.4%		129,680		6.4%

U.S. total		4,064		37.2%		579,994		28.5%
Canada		230		2.1%		95,233		4.7%
Latin America		621		5.7%		167,532		8.2%

Americas total		4,915		45.0%		842,759		41.4%
Northern Europe		327		3.0%		140,666		7.0%
Southern Europe		496		4.5%		94,126		4.6%
Central and Eastern Europe		904		8.3%		128,784		6.3%
United Kingdom		1,123		10.3%		282,522		13.9%

Europe total		2,850		26.1%		646,098		31.8%
Japan		70		0.7%		167,475		8.2%

Asia total		70		0.7%		167,475		8.2%


Total global markets		7,835		71.8%		1,656,332		81.4%


Regional and other markets
Americas		2,097		19.2%		163,425		8.0%
Europe		966		8.8%		174,901		8.6%
Asia		23		0.2%		39,067		2.0%

Total regional and other markets		3,086		28.2%		377,393		18.6%



Total consolidated land portfolio		10,921		100.0%	$	2,033,725		100.0%



Consolidated
Americas		7,012		64.2%	$	1,006,184		49.4%
Europe		3,816		34.9%		820,999		40.4%
Asia		93		0.9%		206,542		10.2%

Total consolidated		10,921		100.0%		2,033,725		100.0%

Unconsolidated investees
Americas		318		100.0%		47,231		100.0%

Total unconsolidated investees		318		100.0%		47,231		100.0%



Grand total combined land portfolio(A)		11,239			$	2,080,956

(A) This table does not include the acres and value associated with our land use rights in China, which are valued at $12.1 million and $9.0 million in our consolidated and unconsolidated portfolio, respectively.

Fund Summary


		Ownership
Property/Co-Investment Venture (A)	Date Established	Percentage	Geographic Focus	Investment Type	Term

ProLogis California	August 1999	50%	US	Unconsolidated	Open end
ProLogis North American Properties Fund I	June 2000	41%	US	Unconsolidated	January 2013
Prologis Institutional Alliance Fund II	June 2001	24%	US	Consolidated	December 2014 (estimated)
ProLogis North American Properties Fund XI	February 2003	20%	US	Unconsolidated	December 2023
Prologis AMS	June 2004	39%	US	Consolidated	December 2012, extendable 4 years
Prologis Targeted U.S. Logistics Fund	October 2004	31%	US	Unconsolidated	Open end
Prologis SGP Mexico, LLC	December 2004	22%	Mexico	Unconsolidated	December 2016; extendable 5 years
ProLogis North American Industrial Fund	March 2006	23%	US/Canada	Unconsolidated	Open end
Prologis DFS Fund I	October 2006	15%	US	Unconsolidated	Upon final sale
ProLogis North American Industrial Fund III	July 2007	20%	US	Unconsolidated	July 2015
ProLogis Mexico Industrial Fund	August 2007	20%	Mexico	Unconsolidated	August 2017; extendable 5 years
ProLogis North American Industrial Fund II	August 2007	37%	US/Mexico	Unconsolidated	August 2017
Prologis Mexico Fondo Logistico	July 2010	20%	Mexico	Consolidated	July 2020
Prologis Brazil Logistics Partners Fund I (B)	December 2010	50%	Brazil	Unconsolidated	December 2017; extendable 2 years

Prologis Japan Fund 1	June 2005	20%	Japan	Unconsolidated	June 2013; extendable 2 years
ProLogis Korea Fund	August 2007	20%	Korea	Unconsolidated	August 2022
Prologis China Logistics Venture 1	March 2011	15%	China	Unconsolidated	March 2018

ProLogis European Properties	September 1999	93%	Europe	Consolidated	Open end
Prologis Targeted Europe Logistics Fund	June 2007	37%	Europe	Unconsolidated	Open end
ProLogis European Properties Fund II	August 2007	30%	Europe	Unconsolidated	Open end
Prologis Europe Logistics Venture 1	February 2011	15%	Europe	Unconsolidated	Perpetual

(dollars in thousands)

Condensed Balance Sheet of the Unconsolidated Property Funds, Combined (C)


	As of June 30, 2011
	Americas			Europe			Asia			Total
Operating industrial properties, before depreciation	$	12,582,740		$	6,275,247		$	2,184,544		$	21,042,531
Accumulated depreciation		(1,126,124	)		(292,718	)		(11,640	)		(1,430,482	)
Properties under development and land		21,736			3,516			38,211			63,463
Other assets		67,139			288,353			976,362			1,331,854

Total assets	$	11,545,491		$	6,274,398		$	3,187,477		$	21,007,366


Third party debt	$	6,023,165		$	2,257,188		$	979,477		$	9,259,830
Other liabilities		441,081			405,941			127,536			974,558

Total liabilities	$	6,464,246		$	2,663,129		$	1,107,013		$	10,234,388


Weighted average ownership		29.25	%		31.32	%		19.64	%		28.46	%


(A)		Legal name changes have not been made for all entities at this time.

(B)		Our effective ownership percentage is 25%, as our investments included in a consolidated entity that is 50% owned.

(C)		Includes the unconsolidated property funds presented above based on the total entity not our share.

(dollars in thousands)


	For the Three Months Ended June 30, 2011
	Americas			Europe			Asia			Total


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

Rental income	$	195,054		$	169,385		$	15,112		$	379,551

Rental expenses		(47,838	)		(38,464	)		(5,962	)		(92,264	)

Net operating income from properties		147,216			130,921			9,150			287,287

Other income (expense) net, including G&A		(5,841	)		(9,564	)		(218	)		(15,623	)

Interest expense		(79,053	)		(46,478	)		(3,489	)		(129,020	)

Current income tax expense		(478	)		(4,581	)		(429	)		(5,488	)


FFO of the property funds		61,844			70,298			5,014			137,156

Real estate related depreciation and amortization		(77,341	)		(49,559	)		(1,403	)		(128,303	)

Deferred tax benefit (expense) and other income, net		150			(3,471	)		(73	)		(3,394	)


Net earnings (loss) of the property funds	$	(15,347	)	$	17,268		$	3,538		$	5,459


Prologis’ Share of FFO and Net Earnings (Loss) of the Unconsolidated Property Funds, Combined (A)
Prologis’ share of the property fund’s FFO	$	20,169		$	23,118		$	1,105		$	44,392

Interest and preferred dividend income		1,580			1,480			18			3,078

Fees paid to Prologis		13,573			13,806			2,343			29,722


FFO recognized by Prologis	$	35,322		$	38,404		$	3,466		$	77,192


Prologis’ share of the property fund’s net earnings	$	424		$	4,200		$	942		$	5,566

Interest and preferred dividend income		1,580			1,480			18			3,078

Fees paid to Prologis		13,573			13,806			2,343			29,722


Net earnings recognized by Prologis	$	15,577		$	19,486		$	3,303		$	38,366


(A)		Includes the unconsolidated property funds listed on the previous page, including the AMB funds from merger date going forward and also the results of PEPR up to the date of consolidation.

(B)		Represents the entire entity, not our proportionate share


	Prologis
	Unsecured												Secured						Consolidated			Total			Unconsolidated						Prologis
	Senior			Convertible			Credit			Other			Mortgage						Investees			Consolidated			Investees			Total			Share of
Maturity	Debt			Debt			Facilities			Debt			Debt			Total			Debt			Debt			Fund Debt			Debt			Total Debt
(in millions)
2011	$	25		$	—		$	—		$	—		$	27		$	52		$	95		$	147		$	382		$	529		$	200
2012		76			593			—			156			168			993			832			1,825			1,120			2,945			1,975
2013		376			528			—			1			111			1,016			686			1,702			1,560			3,262			1,973
2014		373			—			187			1			291			852			1,219			2,071			1,582			3,653			2,531
2015		286			460			614			219			177			1,756			19			1,775			1,112			2,887			2,114
2016		641			—			—			1			257			899			41			940			1,055			1,995			1,218
2017		700			—			—			1			77			778			—			778			737			1,515			972
2018		900			—			—			1			141			1,042			1			1,043			650			1,693			1,206
2019		647			—			—			1			251			899			1			900			172			1,072			975
2020		685			—			—			1			6			692			1			693			403			1,096			802
Thereafter		—			—			—			11			149			160			2			162			476			638			309

Subtotal	$	4,709		$	1,581		$	801		$	393		$	1,655		$	9,139		$	2,897		$	12,036		$	9,249		$	21,285		$	14,275
Unamortized net (discounts) premiums		94			(105	)		2			9			27			27			57			84			11			95			89

Subtotal	$	4,803		$	1,476		$	803		$	402		$	1,682		$	9,166		$	2,954		$	12,120		$	9,260		$	21,380		$	14,364
Noncontrolling interests’ share of debt		—			—			—			—			—			—			(439	)		(439	)		(6,577	)		(7,016	)		—

Prologis share of debt	$	4,803		$	1,476		$	803		$	402		$	1,682		$	9,166		$	2,515		$	11,681		$	2,683		$	14,364		$	14,364
Weighted average interest rate (A)		5.7	%		4.9	%		2.2	%		2.5	%		4.7	%		5.0	%		4.7	%		4.9	%		5.1	%		5.0	%		5.0	%
Weighted average remaining maturity in years		6.0			2.0			3.6			3.8			5.6			5.0			2.2			4.3			4.1			4.2			4.3


Market Equity							Preferred Shares						Line of Credit Availability (in millions)
Security	Shares		Price		Value			Dividend			Liquidation		Aggregate lender commitments			$2,212
	(in thousands)				(in thousands)		Preferred Shares	Rate			Preference			Less:
Common Stock		458,872	$	35.84	$	16,445,966					(in thousands)		Borrowings outstanding			801
Partnership Units		3,362	$	35.84		120,494	Series L		6.50	%	$	50,000		Outstanding Letters of credit		95

Total		462,234			$	16,566,460	Series M		6.75	%		57,500	Current availability		$	1,316

							Series O		7.00	%		75,000
							Series P		6.85	%		50,000
							Series Q		8.54	%		100,000
							Series R		6.75	%		125,000
							Series S		6.75	%		125,000

									7.08	%	$	582,500

(A) Interest rate is based on the effective rate and weighted based on borrowings outstanding.

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

Consolidated


			Investment		Inv. Bal.		Pro Forma			Annualized			Percent
	Square Feet		Balance		per Sq. Ft.		NOI(A)			NOI(A)			Leased
Operating properties:
Core > 75% leased		256,888	$	19,831,889	$	77	$	322,857		$	1,291,428			98.4	%
Core < 75% leased		45,427		2,797,966		62		(B	)		(B	)		39.4	%
Land subject to ground leases and other				321,588				2,282			9,128

Total operating properties		302,315	$	22,951,443	$	75								89.5	%


													Pro Forma Annualized NOI
	Sq. Ft.		Investment Balance		TEI		TEI per Sq. Ft.			Pro Forma NOI			Pro Forma Annualized NOI

Prestabilized:
Americas		1,335	$	61,370	$	62,980	$	47		$	1,008		$	4,032
Europe		115		11,078		11,354		99			225			900
Asia				—		—		—			—			—

Total prestabilized		1,450	$	72,448	$	74,334	$	51		$	1,233		$	4,932


Properties under development
Build-to-suit:
Americas		346	$	12,611	$	35,391	$	102		$	1,265		$	5,060
Europe		2,033		102,953		169,088		83			3,395			13,580
Asia		738		53,732		100,768		137			1,650			6,600

Total build-to-suit		3,117		169,296		305,247		98			6,310			25,240

Speculative:
Americas		726		16,904		52,406		72			1,175			4,700
Europe		827		21,994		72,205		87			1,438			5,752
Asia		3,927		353,008		632,118		161			10,702			42,808

Total speculative		5,480		391,906		756,729		138			13,315			53,260


Total properties under development		8,597	$	561,202	$	1,061,976	$	124		$	19,625		$	78,500

Investment

Second

Balance

Quarter 2011

Year-to-Date

Land

2,033,725

Development management and other income

8,920

13,239


(A)		Includes an adjustment for acquisitions made during the quarter, including the AMB merger and PEPR acquisition to reflect NOI for a full quarter.

(B)		Includes operating expense for the unleased portion and therefore is not applicable for estimating NAV. Investment balance per square foot is provided.

(in thousands)

Private Capital


							Prologis Share		Prologis Share
	Investment				Prologis Share		Annualized		Debt, Net of
	Balance		Square Feet		NOI		NOI		Other Net Assets

Prologis interest in unconsolidated property fund/co-investment ventures:
Americas	$	1,588,381		191,323	$	73,329	$	293,316	$	(2,408,499	)
Europe	$	720,933		63,105	$	29,783	$	119,132	$	(781,587	)
Asia	$	297,376		9,873	$	4,933	$	19,732	$	(158,122	)


	Actual Second
	Quarter 2011			Annualized

Private capital fees	$	32,311		$	129,244
Private capital expenses		(11,596	)		(46,384	)

	$	20,715		$	82,860

Other


	June 30, 2011
Other assets
Cash and cash equivalents	$	260,893
Restricted cash		68,390
Deposits, prepaid assets and other tangible assets		932,837
Accounts receivable		197,475
Notes receivable backed by real estate		359,228
Investments in and advances to other unconsolidated investees		405,454
Assets held for sale, net of liabilities		169,756

Total other assets	$	2,394,033


Liabilities, noncontrolling interests and preferred equity
Debt	$	12,119,952
Premium on debt, net		(84,610	)

Total debt		12,035,342
Other liabilities, payables, and accrued expenses		1,942,300
Noncontrolling interests		725,067
Preferred shares		582,200

Total liabilities, noncontrolling interests and preferred shares	$	15,284,909

Total common shares and convertible limited partnership units outstanding		462,234

Franchise value
Operating platform
Value of Private capital future promotes
Development platform

Please refer to our annual and quarterly financial statements filed with the Securities and Exchange Commission on Forms 10-K and 10-Q and other public reports 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 2011 presentation.

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. Our intent is to hold and use these properties; however, depending on market and other conditions, we may contribute or sell these properties to property funds, co-investment ventures 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. We may develop the land or sell to third parties, depending on market conditions, customer demand and other factors. The private capital segment represents primarily the management of unconsolidated property funds and joint ventures and the properties they own.

On June 3, 2011, AMB Property Corporation (“AMB”) and ProLogis combined through a merger of equals (the “Merger”). As a result of the Merger, each outstanding share of ProLogis common shares was converted into 0.4464 shares of AMB common stock, with cash paid in lieu of fractional shares. At the time of the Merger, AMB changed its name to Prologis, Inc. After consideration of all applicable factors pursuant to the business combination accounting rules, the Merger resulted in a reverse acquisition in which AMB was considered the “legal acquirer” because AMB issued its common stock to ProLogis shareholders and ProLogis was considered the “accounting acquirer” due to various factors including that former ProLogis shareholders hold the largest portion of the voting rights in the merged entity and ProLogis appointees represent the majority of the Board of Directors. As such, the historical results of ProLogis are included for the full period and AMB results are included from the date of the Merger going forward.

In April 2011, we purchased 11.1 million ordinary units of ProLogis European Properties (“PEPR”), increasing our ownership interest to approximately 39%, and launched a mandatory tender offer to acquire any or all of the outstanding ordinary units and convertible preferred units of PEPR that we did not own at that time. On May 25, 2011, we settled on our mandatory tender offer. Pursuant to the tender offer and open-market purchases made during the tender period, we acquired an additional 96.5 million ordinary units and 2.7 million convertible preferred units of PEPR for an aggregate purchase price of approximately €615.5 million. We funded the aggregate purchases through borrowings under our existing credit facilities and a new €500 million bridge facility, which was subsequently repaid with proceeds received from our June equity offering.

After completion of the tender offer, we began consolidating PEPR. In addition, in accordance with the accounting rules for business combinations, we marked our equity investment in PEPR to fair value, which resulted in the recognition of a gain of €59.6 million ($85.9 million). Following the tender offer, and including purchases through June 30, 2011, we owned approximately 92.3% of the voting ordinary units of PEPR and 94.6% of the convertible preferred units as of June 30, 2011.

We have preliminarily allocated the aggregate purchase price related to the Merger of $5.8 billion and for PEPR of €1.1 billion ($1.6 billion) as set forth below. The preliminary allocations are based on our preliminary valuations, estimates and assumptions and are subject to change.


(amounts in thousands)	Merger			PEPR			Total

Investments in real estate properties	$	8,103,716		$	4,456,304		$	12,560,020
Investments in and advances to unconsolidated investees		1,632,179			—			1,632,179
Cash, accounts receivable and other assets		736,432			100,677			837,109
Debt		(3,646,719	)		(2,240,764	)		(5,887,483	)
Accounts payable, accrued expenses and other liabilities		(434,072	)		(555,628	)		(989,700	)
Noncontrolling interests		(535,087	)		(133,651	)		(668,738	)
APIC (Stock Options)		(62,395	)		—			(62,395	)

Total purchase price	$	5,794,054		$	1,626,938		$	7,420,992

Assets Held For Sale and Discontinued Operations. As of June 30, 2011, we had 7 land parcels and 8 operating properties that met the criteria as held for sale. The amounts included in Assets Held for Sale include real estate investment balances and the related assets and liabilities for each property.

During the six months ended June 30, 2011, we disposed of 38 non-development properties aggregating 2.8 million square feet to third parties, including 31 properties aggregating 1.3 million square feet that were included in Assets Held for Sale at December 31, 2010. During all of 2010, we disposed of land subject to ground leases and 205 properties aggregating 25.4 million square feet to third parties, 2 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 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 (in thousands):


	Three Months Ended June 30,						Six Months Ended June 30,
	2011			2010			2011			2010

Rental income	$	2,959		$	42,044		$	12,913		$	85,332
Rental expenses		12			(11,306	)		(3,368	)		(22,968	)
Depreciation and amortization		(19	)		(10,616	)		(475	)		(21,790	)


Income attributable to disposed properties and assets held for sale	$	2,952		$	20,122		$	9,070		$	40,574

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.

Assets Under Management (“AUM”) represents the estimated value of the real estate we own or manage through our consolidated and unconsolidated investees. We calculate AUM by adding the noncontrolling interests share of the estimated fair value of the real estate investment to our share of total market capitalization.

Calculation of Per Share Amounts are as follows (in thousands, except per share amounts):


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010
Net earnings (loss)
Net earnings (loss)	$	(151,471	)	$	(23,150	)	$	(198,087	)	$	(114,279	)

Weighted average common shares outstanding — Basic (a)		307,756			212,840			281,384			212,441

Weighted average common shares outstanding — Diluted (a)		307,756			212,840			281,384			212,441


Net earnings (loss) per share — Basic	$	(0.49	)	$	(0.11	)	$	(0.70	)	$	(0.54	)

Net earnings (loss) per share — Diluted	$	(0.49	)	$	(0.11	)	$	(0.70	)	$	(0.54	)

FFO, as defined by Prologis
FFO, as defined by Prologis	$	8,195		$	67,844		$	70,341		$	74,961
Noncontrolling interest attributable to convertible limited partnership units		—			—			136			—

FFO — Diluted, as defined by Prologis	$	8,195		$	67,844		$	70,477		$	74,961


Weighted average common shares outstanding — Basic (a)		307,756			212,840			281,384			212,441
Incremental weighted average effect of conversion of limited partnership units		—			—			807			—
Incremental weighted average effect of stock awards		750			1,284			709			1,359

Weighted average common shares outstanding — Diluted (a)		308,506			214,124			282,900			213,800

FFO per share — Diluted, as defined by Prologis	$	0.03		$	0.32		$	0.25		$	0.35

Core FFO
Core FFO	$	109,662		$	60,334		$	184,069		$	112,674
Noncontrolling interest attributable to convertible limited partnership units		68			—			136			—

Core FFO — Diluted	$	109,730		$	60,334		$	184,205		$	112,674

Weighted average common shares outstanding — Basic (a)		307,756			212,840			281,384			212,441
Incremental weighted average effect of conversion of limited partnership units		1,269			—			807			—
Incremental weighted average effect of stock awards		750			1,284			709			1,359

Weighted average common shares outstanding — Diluted (a)		309,775			214,124			282,900			213,800

Core FFO per share — Diluted	$	0.35		$	0.28		$	0.65		$	0.53


(a)		The historical ProLogis shares outstanding have been adjusted by the Merger exchange ratio of 0.4464. These amounts include the assumed issuance of 254.8 million shares as of the Merger date and the issuance of 34.5 million shares in connection with the June equity offering. We received net proceeds from the equity offering of $1.1 billion, which were used to repay outstanding borrowings on the bridge facility and on credit facilities.

Core EBITDA, As Adjusted. We use Core EBITDA, as adjusted to measure both our operating performance and liquidity. We calculate Core EBITDA, as adjusted beginning with consolidated net earnings/loss and removing the affect of interest, income taxes, depreciation and amortization, impairment charges, gains or losses from the acquisition or disposition of investments in real estate, gains or losses on early extinguishment of debt and derivative contracts (including cash charges), similar adjustments we make to our Core FFO (see definition below), and other non-cash charges (such as stock based compensation amortization and 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.

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 acquisition or disposition of investments in real estate, items that affect comparability, and other significant non-cash items. In 2011, we adjusted Core EBITDA to include a proforma adjustment to reflect a full period of NOI on the operating properties we acquired through the Merger and PEPR acquisition and to exclude Merger, Acquisition and Other Integration Expenses and costs associated with the hurricane and tsunami that occurred in first quarter 2011 in Japan. By excluding interest expense, adjusted EBITDA allows investors to measure 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. 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 our 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, we believe that Core EBITDA, as adjusted helps investors to analyze our ability to meet interest payment obligations and to make quarterly preferred share dividends. 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, core EBITDA, as adjusted 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 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 GAAP measurement.

Estimated Investment Capacity is our estimate of the gross real estate, which could be acquired through the use of the equity commitments from our property fund or co-investment venture partners, plus our funding obligations and estimated debt capitalization.

FFO; FFO, as defined by Prologis; FFO, excluding significant non-cash items; Core FFO (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 the 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.

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 and development properties, as well as our proportionate share of the gains and losses from dispositions recognized by our unconsolidated investees, 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, as defined by Prologis

To arrive at FFO, as defined by Prologis, 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)		foreign currency exchange gains and losses resulting from 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.

We calculate FFO, as defined by Prologis for our unconsolidated investees on the same basis as we calculate our FFO, as defined by Prologis.

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, as defined by Prologis, 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, as defined by Prologis, 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 allowed us to better evaluate our operating performance during that unprecedented economic time. Beginning in 2011, we no longer use FFO, excluding significant non-cash items.

Core FFO

Core FFO includes FFO, as defined by Prologis, adjusted to remove gains (losses) on acquisitions or dispositions of investments in real estate that are included in FFO, as defined by Prologis. If we recognize impairment charges due to the expected disposition of investments in real estate, we exclude those impairment charges. We may also adjust for certain other significant items that affect comparability as noted in the reconciliation. In 2011, we have adjusted to exclude Merger, Acquisitions and Other Integration Expenses and losses for the hurricanes and tsunamis in March 2011 in Japan.

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 acquisitions and dispositions or impairment charges related to expected dispositions represent changes in the value of the properties. By excluding these gains and losses, FFO does not capture realized changes in the value of acquired or disposed properties arising from changes in market conditions.

•		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.

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.

General and Administrative Expenses (“G&A”) consisted of the following (in thousands):


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2011			2010			2011			2010

Gross G&A expense	$	82,060		$	63,577		$	148,604		$	130,733
Reported as rental expense		(5,154	)		(4,831	)		(10,065	)		(9,833	)
Reported as private capital management expenses		(11,596	)		(9,931	)		(22,148	)		(20,250	)
Capitalized amounts		(13,470	)		(9,894	)		(25,368	)		(19,723	)

Net G&A	$	51,840		$	38,921		$	91,023		$	80,927

Global Markets comprise the largest, most liquid markets benefiting from demand tied to global trade. These markets are defined by large population centers with high consumption per capita and typically feature major seaports, airports, and other transportation infrastructure tied to global trade. While initial returns might be lower, global markets tend to outperform overall markets in terms of growth and total return.

Impairment of Other Assets. During the three months ended June 30, 2011, we recognized impairment charges related to two of our investments in property funds, as we believed the decline in value of our investments to be other than temporary and due to a pending sale of our interest to our fund partner.

Interest Expense consisted of the following (in thousands):


	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2010			2011			2010			2011

Gross interest expense	$	112,701		$	113,225		$	201,759		$	218,234
Amortization of (premium)/discount, net		5,069			12,198			12,908			27,532
Amortization of deferred loan costs		7,765			7,435			12,761			13,917

Interest expense before capitalization.		125,535			132,858			227,428			259,683
Capitalized amounts		(12,476	)		(13,938	)		(23,807	)		(30,784	)

Net interest expense	$	113,059		$	118,920		$	203,621		$	228,899

Market Equity is defined as the total number of outstanding shares of our common stock and common limited partnership units multiplied by the closing price per share of our common stock at period end.

Merger, Acquisition and Other Integration Expenses. In connection with the Merger, we have incurred and expect to incur additional significant transaction, integration, and transitional costs. These costs include investment banker advisory fees; legal, tax, accounting and valuation fees; termination and severance costs (both cash and stock based compensation awards) for terminated and transitional employees; system conversion; and other integration costs. Certain of these costs were obligations of AMB and were expensed prior to the closing of the Merger by AMB. The remainder of the costs will be expensed by us as incurred, which in some cases will be through the end of 2012. At the time of the merger, we cancelled our existing credit facilities and wrote-off the remaining unamortized deferred loan costs associated with such facilities, which is included. In addition, we have included costs associated with the acquisition of a controlling interest in PEPR and reduction in workforce charges associated with dispositions made or expected to be made in 2011. The following is a breakdown of the costs incurred during the three and six months ended June 30, 2011 (in thousands):


	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2011		2011

Professional Fees	$	39,308	$	41,489
Termination, severance and employee costs		30,530		34,337
Office closure, travel and other costs		22,345		22,345
Write-off of deferred loan costs		10,869		10,869

Total	$	103,052	$	109,040

Net Asset Value (“NAV”). We consider NAV to be a useful supplemental measure of our operating performance because it enables both management and investors to estimate the fair value of a business. The assessment of the fair value of a particular segment of our business is subjective in that it involves estimates and can be calculated 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 NAV but have not presented any specific methodology nor provided any guidance on the assumptions or estimates that should be used in the calculation.

The components of NAV do not consider the potential changes in rental and fee income streams or the franchise value associated with our global operating platform, private capital platform, or development platform.

Pro forma NOI for our operating properties is adjusted to reflect the NOI for properties that were acquired during the quarter for a full quarter. Pro forma NOI for our properties under development is based on current total expected investment and an estimated stabilized yield.

Net Gains on Acquisitions and Dispositions of Investments in Real Estate includes the gains we recognized from the consolidation of PEPR and the acquisition of a controlling interest in a joint venture in Japan.

Net Operating Income (“NOI”) represents rental income less rental expenses.

Operating Portfolio includes stabilized operating industrial properties we own or that are owned by an unconsolidated investee accounted for by the equity method of accounting and we manage.

Operating Segments — Direct Owned represents the direct long-term ownership of industrial properties, including land and the development of properties.

Operating Segments — Private Capital represents the management of unconsolidated property funds and joint ventures and the properties they own.

Pre-stabilized Development represents properties that are complete but have not yet reached Stabilization.

Regional Markets, similar to global markets, also benefit from large-population centers and demand. They are located at key crossroads in the supply chain and/or near economic centers for leading national or global industries. The company‘s assets reflect the highest quality class-A product in that market and are often less supply- constrained and focus on delivering bulk goods to customers.

Rental Income includes the following (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2011		2010		2011		2010

Rental income	$	224,697	$	137,020	$	372,543	$	272,880
Rental expense recoveries		59,211		41,760		104,052		83,213
Straight-lined rents		10,762		9,425		23,493		19,742

	$	294,670	$	188,205	$	500,088	$	375,835

Same Store. We evaluate the operating performance of the industrial 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 all consolidated properties owned by us, and properties owned by property funds and joint ventures that are managed by us and in which we have an equity interest (referred to as “unconsolidated investees”), in our same store analysis. We have defined the same store portfolio, for the quarter ended June 30, 2011, as those operating properties that were in operation at January 1, 2010 and have been in operation throughout the full periods in both 2011 and 2010 either by ProLogis or AMB. 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 operating 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 Average Occupancy represents the change in the average occupied percentage for all periods presented.

Same Store Rental Expense represents 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 companies provide property management services to each property (generally, the fee is based on a percentage of revenues).

Same Store Rental Rate Growth represents the change in effective rental rates (average rate over the lease term) on new leases signed during the period as compared with the previous effective rental rates in that same space.

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 (as computed under GAAP) 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.

Turnover Costs represent the costs incurred in connection with the signup of a lease, including leasing commissions and tenant improvements. Tenant improvements include costs 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) and, for a lease renewal with the same tenant.

Stabilization is generally defined as properties for which development has been completed for one year or are 90% occupied. Upon stabilization, a property is moved into our operating portfolio.

Tenant Retention is the square footage of all leases rented by existing tenants divided by the square footage of all expiring and rented leases during the reporting period, excluding the square footage of tenants that default or buy-out prior to expiration of their lease, short-term tenants and the square footage of month-to-month leases.

Total Estimated Investment (“TEI”) represents total estimated cost of development or expansion, including land, development and leasing costs. TEI is based on current projections and is subject to change. Non-U.S. Dollar investments are translated to U.S. Dollars using the exchange rate at period end or the date of development start for purposes of calculating development starts in any period.

Total Market Capitalization is defined by as our share of total debt plus the liquidation preference of the preferred shares and the market equity.

Attached files

Prologis, Inc. Reports

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