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Slide 1: 1Q09 Update Walt Rakowich, Chief Executive Officer Bill Sullivan, Chief Financial Officer April 30, 2009
Slide 2: Forward Looking Statement 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 “Item 1A. Risk Factors” of ProLogis’ Annual Report on Form 10-K for the year ended December 31, 2008. ProLogis undertakes no duty to update any forward-looking statements appearing in this presentation. 1
Slide 3: Key Takeaways We are making great progress on our financial goals Operating property performance down but within expectations Our development pipeline is leasing up and represents a powerful tool for future earnings growth 2
Slide 4: A Great Global Business ProLogis associates around the globe serve 4,500+ customers in 18 countries ASIA 11 msf 2 countries NORTH AMERICA 349 msf 3 countries EUROPE 128 msf 13 countries 33
Slide 5: With High Quality, State-of-the-Art Facilities Cincinnati, OH ProLogis Parc Centrair Fontana, CA Norrkoping, Sweden Lyon, France ProLogis Park Yongin II ProLogis Park Osaka II West Midland, UK Houston, TX ProLogis Park Deokpyung 4
Slide 6: Overview Focus and progress Operating fundamentals Financial review Summary / Recap 5
Slide 7: Focus and Progress The Roadmap to Recovery as outlined on November 13 Preserve capital Simplify and communicate De-risk the operations De-lever the balance sheet 6
Slide 8: Preserving Capital Actions taken in November 2008 to preserve capital Eliminated virtually all development starts and new land acquisitions Shut down approximately $580M of developments in progress Reduced annual dividend $290M annual cash savings Initiated right sizing of G&A Achieved $100M annual cash savings from gross G&A 7
Slide 9: Simplifying and Communicating Eliminated CDFS segment Simplified financial reporting Increased communications with shareholders, rating agencies and bankers Stepped up employee communications programs 8
Slide 10: De-risking the Operations Reduced development portfolio by $3.2B (40%+) since 9/30/08 Reduced “at-risk” (unleased) portion of development portfolio by approximately $1.8B Renegotiated equity agreements with fund partners Terminated land purchase agreements where possible Closed operations in GCC, India and Brazil Reorganized management team to enhance operational controls Retained global development properties to: Enhance geographic diversity Reduce average age of direct-owned portfolio 9
Slide 11: De-leveraging the Balance Sheet From 10/1/08 through 3/31/09 Completed fund contributions of $1.4B ($1.1B net of co-investment) Completed sale of China and fund interests in Japan for $1.3B Put $1B of US assets on the market for sale Repurchased $358M of bonds/converts at 32.5% discount to par value 10
Slide 12: De-leveraging from 10/1/08 to 3/31/09 Deleveraging since 9/30/08 (Millions) Sources Fund contributions, net of co-investment Reduction in debt through bond / convertible debt buybacks Asia and asset sales Change in FX ABP14 Discount adjustment Uses Funding of under development properties CAPEX / TI / LCs Acquisitions / other Debt at 9/30/08 Amount of debt reduction Debt at 3/31/09 $1,129 116 1,429 64 296 $3,034 $892 44 328 $1,264 $11,098 1,770 $9,328 11
Slide 13: Activity Since 3/31/09 Raised $1.1B in follow-on equity offering Repurchased bonds and converts at discount, de-levered by $112M Rate locked on $344M of new secured on-balance sheet financing Closed on contributions/sales of $170M Sold ProLogis Park Misato II ($128M) Contributed additional €32M ($42M) to PEPF II Closed on $50M of 3rd party sales 12
Slide 14: Overview Focus and progress Operating fundamentals Financing activities Summary / Recap 13
Slide 15: Operating Fundamentals Operating portfolio Development portfolio Overall industrial market conditions Risks and opportunities 14
Slide 16: Operating Portfolio Leasing Performance 4Q08 Direct Core, Non-development Portfolio % Leased Investment Management Portfolio % Leased Total* % Leased 92.2% 96.0% 1Q09* 90.5% 94.5% 94.7% 93.0% *1Q09 reflects sale of Japan Funds, which resulted in a 30 bps reduction in total % leased 15
Slide 17: Operating Portfolio Performance Metrics 1Q08* Direct Core Portfolio Average Tenant Retention Turnover Costs per sf Leasing Activity (msf) Investment Management Portfolio Average Tenant Retention Turnover Costs per sf Leasing Activity (msf) 55.6% $0.91 18.1 2Q08* 87.9% $1.09 23.1 3Q08* 77.6% $1.41 18.4 4Q08 88.0% $0.79 17.2 1Q09** 74.4% $0.84 13.7 60.4% $1.24 10.8 85.2% $0.61 10.1 80.2% $1.20 12.2 92.8% $1.11 11.6 68.5% $0.77 9.3 *Reported as stabilized leased percentage on Direct Investment **1Q09 reflects sale of Japan Funds 16
Slide 18: Same Store Performance Analysis Operating Portfolio Same Store Net Operating Income Average leasing Rent Growth (1.85%) (1.84%) (4.19%) Operating and Development Portfolio 0.78% 0.16% (4.17%) 17
Slide 19: Operations Review Operating portfolio Development portfolio Overall industrial market conditions Risks and opportunities 18
Slide 20: Development Portfolio Total pipeline and leasing Billions % Leased $10 $8 $6 50% 45% 40% $4 $2 $0 12/31/07 3/31/08 6/30/08 9/30/08 12/31/2008 3/31/2009 $7.4 $7.6 $8.4 $8.2 $5.1 35% $4.8 30% Pipeline TEI Leasing Percentage Development portfolio at 12/31/08 of $5.1B was 46.4% leased as of 3/31/08 Up 500 bps 19
Slide 21: Targeted Development Leasing MSF Total development pipeline at 12/31/08 Overall target leasing based on 93% occupancy Leased at 3/31/09 (before contributions) Target SF remaining to be leased 60.4 56.2 28.1 28.1 20
Slide 22: Task at Hand MSF 7 Historical Leasing in Development Pipeline Average Inventory leasing of 4.5 msf per quarter 6.6 6 5 4.8 4.0 4.2 3.2 4 3 2 1 0 1Q08 2Q08 3Q08 4Q08 1Q09 28 msf targeted to be leased in development portfolio 21
Slide 23: Operations Review Operating portfolio Development portfolio Overall industrial market conditions Risks and opportunities 22
Slide 24: Industrial Market Conditions Current Conditions Operating fundamentals mirroring economic conditions – continuing to weaken Occupancies are declining Absorption is negative Some shadow/sub-lease space creeping into the markets Uncertainty leading to lengthy negotiations Customers continue to balance relocation costs with downsizing Limited new development activity worldwide Near to Longer-term Conditions Significant obsolescence and ownership shifts will continue to drive demand abroad Demand in the US will improve as GDP growth returns 23
Slide 25: Declining Absorption in Top 30 US Markets Net Industrial Absorption 2006 – 1Q09 158 150 131.5 MSF 200 100 50 23.9 0 15.8 13.1 2.8 -7.8 -18.8 -50 2006 2007 2008 1Q08 2Q08 3Q08 4Q08 1Q09 24
Slide 26: 25 Years of Positive Absorption Net Industrial Absorption 1983 - 2008 MSF 200 150 100 50 0 19 89 19 95 19 85 19 97 19 99 19 83 19 87 19 91 20 01 20 03 19 93 20 05 20 07 25
Slide 27: Declining Occupancies in Top 30 US Industrial Markets 95% Historic Occupancy Quarterly 2000-1Q 2009 93% 90% 88% 85% 1999-Q4 2000-Q4 2001-Q4 2002-Q4 2003-Q4 2004-Q4 2005-Q4 2006-Q4 2007-Q4 2008-Q4 26
Slide 28: National Occupancies Have Stayed Above 89% Over 25 Years Top 30 Market Average Occupancy 1983 thru 1Q 2009* 95% 90% 85% *All numbers as of 12/31 except 1Q09 1Q 09 19 85 19 91 19 97 19 83 19 89 19 95 20 01 20 05 20 03 19 87 19 93 19 99 20 07 27
Slide 29: Overall Supply Exceeds Absorption MSF Deliveries and Absorption of Warehouses 2006 – 1Q09 145 158 147 200 150 100 50 0 -18.8 -50 -100 06 20 07 20 08 20 9 Q0 1 133 140 24 24.8 Deliveries Absorption 28
Slide 30: Supply Equals a 25 Year Low Deliveries of Warehouse 1983 – 2009P MSF 180 160 140 120 100 80 60 40 20 0 83 9 85 9 87 9 89 9 91 9 93 9 95 9 97 9 99 0 01 0 03 0 05 0 07 09P 1 1 1 1 19 1 1 2 2 2 2 1 1 20 1% 0% 1982 1984 1986 1988 2% 4% 3% 6% 5% Deliveries as a % of Existing Stock 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 29
Slide 31: Development Starts Are Even Lower MSF New Starts – Top 30 Markets 146 128 128 160 120 98 90 75 80 102 81 64 40 2 0 2000 2001 2002 2003 2004 BTS 2005 2006 Inventory 30 2007 2008 1Q09
Slide 32: Demand Drivers US / Canada / UK 1. GDP growth 2. Growing product obsolescence Western Europe / Japan 1. Shift from ownership to leasing of facilities 2. Very high product obsolescence / supply chain reconfiguration 3. Economic growth Central Europe / Mexico 1. New companies expanding into market 2. Increased domestic consumption 3. Lack of existing product 31
Slide 33: Operations Review Operating portfolio Development portfolio Overall industrial market conditions Risks and opportunities 32
Slide 34: Risks and Opportunities Near-term Risks Overall market conditions may deteriorate further or faster than expected Lease up in development slower than budgeted Near-term Opportunities Income from $2.6B of currently un-leased development New fund formations Long-term Opportunities Sustainability of key demand drivers will re-emerge Global platform allows us to capture a more significant share of global demand Monetization of $2.5B of land 33
Slide 35: Overview Focus and progress Operating fundamentals Financial review Summary / Recap 34
Slide 36: Financial Review Review of 1Q09 results / FY 2009 guidance Financing activities / debt maturities review Contributions / dispositions 35
Slide 37: 1Q Financial Results FFO per share, including significant non-cash items Our share of losses on derivative activity recognized by the funds Net gains related to disposed assets – China operations Gain on early extinguishment of debt FFO per share, excluding significant non-cash items Gross CDFS gains CDFS-related taxes Net CDFS gains Realized FX loss on VAT recapture RIF related expenses Core FFO per share 3/31/09 $0.90 0.04 (0.01) (0.07) $0.86 $0.67 0.08 ($0.59) 0.03 0.02 $0.32 3/31/08 (1) $1.34 ---$1.34 $1.04 0.02 ($1.02) --$0.32 1) Reflects ($0.04/sh) retroactive impact of ABP-14 36
Slide 38: Updated 2009 Guidance Millions, unless per share data FFO, excluding significant non-cash items Wtd. Avg. shares o/s FFO/share, excluding significant non-cash items Impact of April Equity Issuance Reduction in Interest Expense Revised 2009 FFO, excluding significant non-cash items Revised weighted average shares outstanding Revised 2009 FFO/share, excl significant non-cash items Low $495 268 $1.85 26 $521 398 $1.31 High $550 268 $2.05 40 $590 398 $1.48 37
Slide 39: Pro Forma Run-rate FFO Millions, unless per share data Low $1.31 398 $521 160 $361 440 $0.82 High $1.48 398 $590 160 $430 440 $0.98 Revised 2009 FFO/share, excl significant non-cash items Revised weighted average shares outstanding Revised 2009 FFO, excluding significant non-cash items Net gain from sale of Japan funds Annual pro forma run-rate FFO Revised weighted average shares outstanding Annual pro forma run-rate FFO/share Potential upside from further lease up of development portfolio and other growth initiatives 38
Slide 40: Financial Review Review of 1Q09 results Financing activities / debt maturities review Contributions / Dispositions 39
Slide 41: Financing Activities Since 3/31/09 Equity follow-on offering completed $1.1B net proceeds Funds to be used to de-lever Bond tenders / repurchases completed €42.65M ($58.3M) retired on 2011 Eurobonds for €32M ($43.7M), ($14.6M de-levering) $225.0M of convertible bonds retired for $128.4M ($96.6M de-levering) Three US secured debt packages ($344M in total) in documentation Term sheet in negotiation on $45M Japan secured TMK bond financing 40
Slide 42: Impact of New Equity – Sources and Uses $ in Million Sources China and Japan sales – closed Fund contributions / asset sales, net of PLD co-investment FX and other Proceeds from new Secured Debt – rate locked Proceeds from Equity Offering Total Sources $ in Million Anticipated Uses (1) Development pipeline Acquisitions / other Repayment of Senior Notes and Convertible Notes (2) Total Uses Line of Credit (Pay Down) / Draw Line of Credit Balance (2) Cumulative Funding Excess/(Shortfall) Assuming LOC Fully Drawn Unencumbered Asset Pool (3) Funding Gap as a % of Unencumbered Asset Pool $14,260 $3,218 4Q08 1Q09 $1,345 97 219 2Q-4Q $ -1,350 -344 1,107 $2,801 2009 ($485) (250) (456) ($1,191) ($1,610) $311 $0 $11,950 0% 2010 ($85) -(220) ($305) $305 $616 $0 $11,950 0% 2011 --($446) ($446) $446 $1,062 $0 $11,950 0% 2012 --($1,703) ($1,703) $1,438 $2,500 ($226) $11,950 1.9% $1,661 1Q09 ($315) -(49) ($364) ($1,297) $1,921 Additional sources of capital not currently accounted for include additional asset sales or contributions beyond 2009, earnings from on-balance sheet property development lease-up, and new secured financing against unencumbered assets (1) (2) (3) Assumes secured debt is refinanced at balance upon maturity. Includes buyback of €42.7M ($58.3M) face of 2011 Eurobonds at a price of ~75% of face value (exchange rate as of 3/31/09). Includes buyback of $225M face of 2012 and 2013 convertible senior notes at a price of 57% of face value. Excludes convertible debt of $1.1B, which is not redeemable for cash until January 2013. After Q1, 2009, unencumbered asset pool reduced by asset sales, gross contributions to funds, and new secured debt assumed to be applied on properties at 50% LTV. 41
Slide 43: Balance Sheet Debt Maturities at 3/31/09 Billions $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $0.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Thereafter Unsecured Senior Notes Convertible Bonds Secured Debt GLOC Other 42
Slide 44: Balance Sheet Debt Maturities - 2009 Millions Outstanding at 12/31 $250 $25 $64 3/31 $250 $25 $36M Maturity Type Activity in Progress To be repaid through secured debt financings: locked at 6.5% - $100M 5-year interest-only, in documentation, rate - $122M 10-year interest-only, in documentation, rate Aug - 09 Floating Rate Note Nov – 09 Meridian Notes Various Other unsecured notes, secured debt and scheduled principal payments locked at 7.55% locked at 7.55% - $122M 10-year interest-only, in documentation, rate - $45M 3-year TMK bond financing under negotiation $339 $311 43
Slide 45: Balance Sheet Debt Maturities - 2010 Millions Outstanding at 12/31 $190 $60 3/31 $190 $60 Maturity Type Refinancing Game Plan To be refinanced through 2009 excess secured debt proceeds, incremental secured financings or balance sheet liquidity Nov–10 Fixed rate debt issue Various Other unsecured notes, secured debt and scheduled principal payments Global Line Multi-Currency Line $2,618 600 $3,218 $1,324 597 $1,921 In discussion w/ lead banks on line recast, w/ targeted 2012 maturity and $2.5B capacity $3,468 $2,171 44
Slide 46: Fund Debt Maturities at 3/31/09 Billions $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $0.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Thereafter PEPR PEPF II California NA I NA VI-X NA XI NAIF NAIF II NAIF III Mexico Korea 45
Slide 47: Fund Debt Maturities - 2009 Millions Outstanding at 12/31 $491 $176 3/31 $459 $0 4/30 $0 $0 Fund PEPR CA Maturity Activity in Progress July Repaid €336M ($491M) CMBS and crystallized a €40M economic gain on FX derivative Aug - Closed on $120M 10-year refinance at 7.5% coupon, extended $56M for 1 year - Closed on 4/29/09 on $138M 5-year refinance $138 $411 $46 $15 $167 $1,444 (1) 1 $138 $411 $46 $15 $0 $1,071 (1) $0 $411 $46 $15 $0 $472 NAIF II at 7.25% coupon July Tentative agreement reached on 5-year extension, to be documented in May NA XI NAIF III Aug In discussion w/ existing lender on refinance June To be repaid from cash flow / partner capital Extended facility for 3 years with partial pay down Does not include regularly scheduled principal amortization payments of approximately $2M for 2009. 46
Slide 48: Fund Debt Maturities - 2010 Millions Outstanding at (1) 12/31 $221 $801 3/31 $206 $749 Fund PEPR Maturity March May Type Hypo RE CMBS III & IV Refinancing Game Plan Term sheet executed for 3-yr extension with partial pay down. Indicative fixed rate coupon of 5.1% To be repaid from cash flow, asset sales, FX hedge and secured financings In discussions with lead banks on 2-yr extension with partial reductions in commitment In discussions with banks on 2-yr extension with partial reduction in commitment. Actively pursuing secured financings: - Term sheet executed for 10-yr £49 financing. Indicative fixed rate coupon of 6.0% - Term sheet executed for 5-yr €48 financing. Indicative fixed rate coupon of 6.4% - Term sheet executed for 3-yr €130 financing. Indicative fixed rate coupon of 5.0% Financial packages out to Life Cos Evaluating refinancing strategy Evaluating refinancing strategy Line paid down to $0 from equity funding Financial packages out to Life Cos $439 $1,240 $1,384 $692 $1,647 $1,162 PEPF II Dec May Bank Lines Warehouse -$131 $10 $32 $27 $111 $3,156 1 $56 $131 $10 $32 -$111 $3,149 CA NA I NA XI NAIF NAIF II March Dec Feb Aug July Various Life Co loan Life Co loan Life Co loan Warehouse l Life Co loans Does not include regularly scheduled principal amortization payments of approximately $4M for 2010. 47
Slide 49: Financial Review Review of 1Q09 results Financing activities / debt maturities review Contributions / dispositions 48
Slide 50: 2009 Asset Sales/Contributions $1.5B to $1.7B of gross asset contributions / sales expected in 2009 $900M - $950M of assets to be contributed / sold to third-party funds $725M of contributions to PEPF II targeted for 2009 $131M of contributions closed in March 2009 $538M of development pipeline was >93% leased at 3/31/09 $42M of contributions closed in April 2009 $75M of contributions to Mexico Industrial Fund targeted for 2009 $47M of development pipeline is >93% leased $128M (¥12.6B) sale of ProLogis Park Misato II to GIC RE, closed in April $650M - $700M of asset sales targeted for 2009 $5 million closed in Q1 80%+ of remainder at 3/31 under contract or LOI $50 million closed in April 49
Slide 51: Investment Management Equity Capacity Active Funds with Additional Contributions Expected in 2009 Europe Mexico Total Unfunded 3rd Party Equity at 4/30 $1,010 247 $1,257 Remaining Targeted 2009 Contributions at 4/30/09 $552 75 $627 50
Slide 52: Pro forma Leverage 12/31/08 Leverage Analysis Total Debt* Total Un-depreciated Book Assets Total Debt as a % of Book Assets $10,909 $20,835 52.4% 3/31/09 Leverage Analysis $9,435 $18,989 49.7% Equity Offering Effect ($1,100) April Debt Buy Back Effect ($112) Pro Forma Leverage Analysis $8,223 $18,989 43.3% * Total Debt represents interest-bearing debt, and includes $198M and $109M of debt included in discontinued ops at 12/31/08 and 3/31/09, respectively, and 12/31/08 total debt reflects the adjustment for convertible debt. 51
Slide 53: Overview Focus and progress Operating fundamentals Financing activities Summary / Recap 52
Slide 54: Key Takeaways We are making great progress on our financial goals Operating property performance down but within expectations Our development pipeline is leasing up and represents a powerful tool for future earnings growth We have a great global business with terrific assets, high-quality customers and some of the most talented people in the industry 53
Slide 55: Cincinnati, OH ProLogis Parc Centrair Fontana, CA Norrkoping, Sweden Lyon, France ProLogis Park Yongin II ProLogis Park Osaka II West Midland, UK Houston, TX ProLogis Park Deokpyung 54