Launch of ProLogis European Properties (PEPR) Initial Public Offering

11/09/2006

NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION INTO OR IN THE UNITED STATES
NEITHER THIS ANNOUNCEMENT NOR ANY ACCOMPANYING ANNOUNCEMENT IS AN OFFER OF SECURITIES FOR SALE IN THE UNITED STATES. SECURITIES MAY NOT BE OFFERED OR SOLD IN THE UNITED STATES ABSENT REGISTRATION OR AN EXEMPTION FROM REGISTRATION. THE SECURITIES WHICH WOULD BE ISSUED IN AN INITIAL PUBLIC OFFERING HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 (THE SECURITIES ACT), OR THE SECURITIES ACT OF ANY STATE OR OTHER JURISDICTION OF THE UNITED STATES AND ANY SECURITIES ISSUED AS PART OF AN INITIAL PUBLIC OFFERING MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS (WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT) WITHOUT REGISTRATION OR AN EXEMPTION THEREFROM (SUBJECT TO CERTAIN CONDITIONS).

11 September, 2006 – Luxembourg – ProLogis European Properties (PEPR), an externally managed real-estate fund owning a portfolio, in excess of 5 million square metres, of high quality distribution facilities in 11 European countries, today confirmed that it is proceeding with its Initial Public Offering (IPO) of ordinary units by certain selling unitholders on Euronext Amsterdam N.V.’s Eurolist by Euronext, as previously announced on 29 August 2006, and announced the availability of a prospectus in connection with the IPO.

 

The highlights of the IPO are:

• The IPO consists of a public offer of Ordinary Units in The Netherlands and an offer of ordinary units to certain institutional and other sophisticated investors outside the US and to persons who are both “qualified institutional buyers” and “qualified purchasers” in the US
• The indicative price range is between €14.35 and €14.85 per ordinary unit resulting in an expected equity market capitalisation of PEPR following the IPO of between €2.7 billion and €2.8 billion
• The selling unitholders are offering up to approximately 49.7 million ordinary units in aggregate (assuming no exercise of the over-allotment option granted by selling unitholders). PEPR will not receive any proceeds from the sale of the ordinary units in the IPO. The net proceeds of the sale of ordinary units pursuant to the IPO will be paid to the selling unitholders. ProLogis, which will hold a 24% ownership stake in PEPR and owns PEPR's management company, will not be selling any units in the IPO
• Following admission, approximately 188.7 million ordinary units in PEPR are expected to be listed on Eurolist by Euronext, all of which will be denominated in Euro
• The selling unitholders have granted to the underwriters an over-allotment option exercisable within 30 calendar days after the settlement date, pursuant to which the underwriters may require such selling unitholders to sell up to approximately 6.1 million additional ordinary units at the offer price
• PEPR expects to announce the final offer price on or around 22 September 2006 with listing and trading of the ordinary units on Euronext Amsterdam on an “as-if-and-when-issued basis”, under the ticker symbol “PEPR”, to commence before the end of September 2006

Deutsche Bank and Morgan Stanley are acting as joint global coordinators and joint book-runners for the IPO. ABN AMRO Rothschild and JPMorgan are acting as co-lead managers with Kempen & Co. acting as co-manager. Macquarie Capital Partners is financial adviser to ProLogis, owner of PEPR’s management company and a leading global provider of distribution facilities and services.

Robert J. Watson, who will be CEO of PEPR upon completion of the IPO, commented: “We are delighted to be in a position to offer units in PEPR to investors through an IPO and listing on Euronext Amsterdam. We believe that our high-quality portfolio, experienced management and proven track record make PEPR an exciting investment opportunity. We look forward to seeking to deliver attractive returns to our new and existing unitholders as we continue to invest in ProLogis’ pipeline of assets as well as in future ProLogis Private Equity Funds and ProLogis Joint Ventures.”

Contacts
M:Communications
Sarah Hamilton +44 20 7153 1538 / +44 7836 295 291
hamilton@mcomgroup.com

Ed Orlebar +44 20 7153 1523 / +44 7738 724 630
orlebar@mcomgroup.com

 

About ProLogis European Properties (PEPR)

Introduction
ProLogis European Properties, or PEPR, was established in 1999 and is an externally managed real estate investment fund organised as a Luxembourg closed-ended fonds commun de placement and regulated in Luxembourg by the Commission du Surveillance du Secteur Financier. PEPR owns a portfolio of high quality distribution facilities located in 25 submarkets within 11 European countries. It is managed by a subsidiary of ProLogis, a U.S. based real estate investment trust that operates a global network of industrial distribution properties and is a leading provider of distribution facilities and distribution services in North America, Europe and Asia.

As at 30 June 2006, PEPR owned 281 distribution facilities comprising 5.4 million square metres of leasable space. PEPR’s most significant customers are logistics service providers. PEPR also services a broad range of customers in the retail and manufacturing sectors. As at 30 June 2006, the portfolio had an overall occupancy rate of 97.3 per cent and was independently valued by Jones Lang LaSalle Limited and DTZ Zadelhoff at approximately €4.2 billion (net of purchaser’s costs).

Investment objective and policy
PEPR’s investment objective is to generate capital appreciation and a high level of distributable current income for its unitholders through active management of direct investments in Distribution Facilities and by investing in ProLogis Private Equity Funds and ProLogis Joint Ventures. PEPR’s right to invest in future ProLogis Private Equity Funds and ProLogis Joint Ventures will provide an opportunity for future external growth and indirect access to the ProLogis pipeline of European distribution facilities. PEPR aims to structure its investments in a tax-efficient manner, whilst using efficient financing to optimise the portfolio yield and to deliver stable returns to unitholders.

Investment highlights

Stable Cash Flow
Based on current occupancy rates and leases in place, PEPR expects that the portfolio will continue to generate a consistent level of distributable cash flow for unitholders. Actual cash distributions made to unitholders in the first six months of 2006 totalled €80.3 million and cash distributions in the year ended 31 December 2005 amounted to €131.1 million (€117.4 million of which was distributed to the ordinary unitholders). The key factors supporting PEPR’s ability to generate stable cash flow are as follows:

• Historically high occupancy rates. Occupancy of the portfolio has averaged over 96 per cent. since December 2000 and, as at 30 June 2006, was 97.3 per cent.
• Favourable lease terms. As at 30 June 2006, PEPR’s average lease term to lease expiry across the portfolio is 7.4 years. PEPR aims to use staggered lease maturities to avoid having multiple leases at one site or in a single market become subject to renewal or termination at the same time.
• Portfolio size and geographical diversity. The management company believes the portfolio represents the largest single network of non-end-user owned distribution space in Europe.
• Debt financing strategy. PEPR has primarily used commercial mortgage-backed securities (CMBS) transactions to raise efficient debt financing. It has been and going forward will be PEPR’s policy to hedge its exposure to changes in interest rates by swapping floating rate interest payments under its financing arrangements to fixed-rate payments.

High-Quality Portfolio
The Management Company believes that PEPR’s distribution facilities are generally high-quality, state-of-the-art facilities. The Management Company believes PEPR is well positioned to take advantage of market opportunities offered by current trends in the European distribution logistics market given the scale of the portfolio. These trends include the re-engineering and optimisation by companies of their supply chains in response to increased integration in the EU, customer demands for flexible space and growth in the emerging economies of Central and Eastern Europe.

Strong and Diversified Customer Base
PEPR’s 402 customers (as at 30 June 2006), include some of the largest and most established users of Distribution Facilities in Europe. As at 30 June 2006, 56 per cent. of PEPR’s customers (by annualised rental income) were third-party logistics companies, 14 per cent. were retailers and 13 per cent. were manufacturers. As at 30 June 2006, no one customer accounted for more than 6.9 per cent. and no one country accounted for more than 33 per cent. of PEPR’s annualised rental income. As at 30 June 2006, of PEPR’s top 50 customers, 83 per cent. of those that are credit rated or whose parent companies are credit rated (and 30 per cent. of all top 50 customers) had corporate or parent company credit ratings of “investment grade” by either S&P or Moody’s.

Highly Experienced Manager
ProLogis is a leading provider of distribution facilities and distribution services in North America, Europe and Asia, with strengths in property and asset management, investment discipline, global customer relationships, property development and technical and structural innovation. ProLogis entered the European market in 1997, and has established a strong local market presence since that time. As at 30 June 2006, ProLogis had 268 full-time employees in Europe, including a team of 32 market, country and regional officers operating out of 14 offices in 12 countries across Europe. ProLogis uses its expertise, resources and local knowledge on behalf of PEPR to seek the best lease terms available in particular markets and manage costs effectively.

ProLogis has also been at the forefront of developing innovative and effective investment and financing structures for distribution facilities. In managing PEPR, the management company has been innovative in cross collateral multi-jurisdictional CMBS issuances to reduce the cash-flow impact of variable interest rates and amortising loans, which have also enabled PEPR to manage the cost of debt financing. This experience will be important in managing PEPR’s future financing and refinancing activities.

Any purchase or any subscription of or any application for securities of PEPR under the offering should only be made on the basis of information contained in the prospectus to be issued in connection with the offering. The prospectus contains certain detailed information about PEPR and its management, as well as financial statements and other financial data.

The statements contained in this announcement that are not historical facts are forward-looking statements and are based on current expectations, estimates and projections about PEPR, the industry in which it operates and the markets in which PEPR’s properties compete. Such statements are based on certain assumptions made by the management company and on information provided to the management company by third parties, which information may not be reliable. Projected or forecasted results and actual results will differ and such differences may be material. As a result, this information should not be relied upon by the recipient and should not be communicated to third parties as being passed upon by PEPR or its management company.

Save as required by law, PEPR expressly undertakes no obligation to publicly update or review any forward-looking statements contained in this announcement, whether as a result of new information, future developments or otherwise. From a UK law perspective, PEPR is an unregulated collective investment scheme whose promotion is restricted by sections 238 and 240 of the Financial Services and Markets Act 2000. This announcement is being communicated in the UK only to persons in the business of disseminating information pursuant to section 20 of the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001, as amended, and section 47 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005. No other persons should act on or rely on this announcement.

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