- -------------------------------------------------------------------------------
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant To Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event
reported):
December 3, 1998
PROLOGIS TRUST
(Exact name of registrant as specified in its charter)
MARYLAND 01-12846 74-2604728
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
14100 EAST 35TH PLACE 80011
AURORA, COLORADO (Zip Code)
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (303) 375-9292
NOT APPLICABLE
(Former name or former address, if changed since last report)
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<PAGE>
ITEM 5. OTHER EVENTS
This Current Report on Form 8-K is being filed by ProLogis Trust
("ProLogis") to report significant changes in ProLogis' portfolio of industrial
distribution facilities, and contains audited financial information for certain
industrial distribution facilities acquired by ProLogis.
Acquisitions:
The following acquisitions of light industrial and bulk
distribution facilities in ProLogis' target markets were completed by ProLogis
from unrelated parties. ProLogis acquired these facilities because ProLogis'
management believes that these facilities represent excellent opportunities for
long-term above-average growth in rental income and cash flow. Additionally,
ProLogis was able to acquire these facilities at significant discounts to
replacement cost.
On January 14, 1997, ProLogis acquired the Alsip Distribution
Center #1 located in the South Cook County sub-market of the Chicago, Illinois
market. The facility is classified as bulk distribution and consists of 464,818
square feet. The purchase price was approximately $8.5 million and there were no
leases signed on the date of purchase. The building was renovated in 1998 and
was 16% leased at October 31, 1998.
On February 4, 1997, ProLogis acquired the Copans Distribution
Center #1 located in the I-95 North sub-market of the Broward County, Florida
market. The facility is classified as bulk distribution and consists of 68,806
square feet. The purchase price was approximately $2.2 million and was 100%
leased on the date of purchase and at October 31, 1998.
On February 14, 1997, ProLogis acquired the Great Southwest
Distribution Center #1 located in the Great Southwest sub-market of the
Dallas/Ft. Worth market. The facility is classified as bulk distribution and
consists of 45,000 square feet. The purchase price was approximately $1.0
million and there were no leases signed on the date of purchase. The facility
was 100% leased at October 31, 1998.
On February 26, 1997, ProLogis acquired the Brunswick Distribution
Center #1 located in the Route 287/I-95 sub-market of the Northern New Jersey
market. The facility is classified as bulk distribution and consists of 152,265
square feet. The purchase price was approximately $3.8 million. The facility was
88% leased on the date of purchase and was 100% leased at October 31, 1998.
On February 28, 1997, ProLogis acquired the Atlanta NE
Distribution Center #8 located in the Northeast sub-market of the Atlanta,
Georgia market. The facility is classified as bulk distribution and consists of
151,644 square feet. The purchase price was approximately $3.6 million and the
facility was 23% leased on the date of purchase. The facility was 100% leased
at October 31, 1998.
On March 6, 1997, ProLogis acquired the Great Southwest
Distribution Center #13 located in the Great Southwest sub-market of the
Dallas/Ft. Worth market. The facility is classified as bulk distribution and
consists of 50,400 square feet. The purchase price was approximately $1.3
million and there were no signed leases on the date of purchase. The facility
was 100% leased at October 31, 1998.
On March 21, 1997, ProLogis acquired the Addison Distribution
Center #1 located in the Army Trail Corridor sub-market of the Chicago, Illinois
market. The facility is classified as bulk distribution and consists of 135,579
square feet. The purchase price was approximately $4.3 million and the facility
was 33% leased on the date of purchase and was 100% leased at October 31, 1998.
2
<PAGE>
On March 25, 1997, ProLogis acquired the Monterrey Industrial
Center #1 and #2 located in the Apodaca sub-market of the Monterrey, Mexico
market. The facility is classified as bulk distribution and consists of 149,243
square feet. The purchase price was approximately $4.5 million. The facility was
100% leased on the date of purchase and at October 31, 1998.
On May 22, 1997, ProLogis acquired the Kentucky Drive Business
Center #1 - 4 located in the I-75 North sub-market of the Cincinnati, Ohio
market. The facility is classified as light industrial and consists of 172,081
square feet. The purchase price was approximately $3.7 million. The facility was
93% leased on the date of purchase and was 97% leased at October 31, 1998.
On June 2, 1997, ProLogis acquired the Eemhaven Distribution
Center #1 located in the South sub-market of the Rotterdam, Netherlands market.
The facility is classified as bulk distribution and consists of 138,285 square
feet. The purchase price was approximately $7.6 million. The facility was 100%
leased on the date of purchase and at October 31, 1998.
On June 2, 1997, ProLogis acquired the Meadowland Industrial
Center #2 located in the Meadowland sub-market of the Northern New Jersey
market. The facility is classified as bulk distribution and consists of 488,569
square feet. The purchase price was approximately $9.9 million and there were no
signed leases on the date of purchase. The facility has been renovated and was
100% leased at October 31, 1998.
On June 12, 1997, ProLogis acquired the Great Southwest
Distribution Centers #14, #15 and #16 located in the Great Southwest sub-market
of the Dallas/Ft. Worth market. The facility is classified as bulk distribution
and consists of 265,750 square feet. The purchase price was approximately $6.9
million. The facility was 100% leased on the date of purchase and at October
31, 1998.
On June 27, 1997, ProLogis acquired the Elmhurst Distribution
Center #1 and the Woodale Distribution Center located in the Army Trail Corridor
and O'Hare sub-markets of the Chicago, Illinois market. The facilities are
classified as bulk distribution and consist of 180,955 square feet. The purchase
price was approximately $6.5 million. The facilities were 100% leased on the
date of purchase and at October 31, 1998.
On June 27, 1997, ProLogis acquired the Earth City Industrial
Center #1 - 4 located in the Earth City sub-market of the St. Louis, Missouri
market. The facility is classified as bulk distribution and consists of 449,089
square feet. The purchase price was approximately $11.9 million. The facility
was 88% leased on the date of purchase and was 100% leased at October 31, 1998.
On July 10, 1997, ProLogis acquired the Freeport Distribution
Centers #3 and #4 located in the DFW/Freeport North sub-market of the Dallas/Ft.
Worth market. The facility is classified as bulk distribution and consists of
93,314 square feet. The purchase price was approximately $2.4 million and there
were no signed leases on the date of purchase. The facility was 100% leased at
October 31, 1998.
On July 15, 1997, ProLogis acquired the Interstate North Business
Park #1 and #2 located in the North Charlotte sub-market of the Charlotte, North
Carolina market. The facility is classified as light industrial and consists of
148,394 square feet. The purchase price was approximately $3.6 million. The
facility was 91% leased on the date of purchase and was 93% leased at October
31, 1998.
On July 30, 1997, ProLogis acquired the Interstate Mitry Mory
Distribution Center #1 located in the North sub-market of the Paris, France
market. The facility is classified as bulk distribution and consists of 301,994
square feet. The purchase price was approximately $7.2 million. The facility was
100% leased at the date of purchase and at October 31, 1998.
3
<PAGE>
On August 8, 1997, ProLogis acquired the Delp Distribution Center
#7 and #8 located in the Northeast sub-market of the Memphis, Tennessee market.
The facility is classified as bulk distribution and consists of 189,000 square
feet. The purchase price was approximately $2.7 million and there were no signed
leases at the date of purchase. The facility was 100% leased at October 31,
1998.
On August 26, 1997, ProLogis acquired the Piedmont Court
Distribution Center # 1 and #2 located in the Northeast sub-market of the
Atlanta, Georgia market. The facility is classified as bulk distribution and
consists of 256,066 square feet. The purchase price was approximately $5.9
million. The facility was 88% leased at the date of purchase and was 72% leased
at October 31, 1998.
On September 17, 1997, ProLogis acquired the MGI portfolio located
in the Earth City, Hazelwood and Westport sub-markets of the St. Louis, Missouri
market. The facilities are classified as light industrial, bulk distribution and
service center and consist of 536,644 square feet. The purchase price was
approximately $15.0 million. The facilities were 100% leased at the date of
purchase and were 77% leased at October 31, 1998.
On September 22, 1997, ProLogis acquired the Royal Commerce Center
located in the Dallas, Texas market. The facility is classified as light
industrial and bulk distribution and consists of 498,713 square feet. The
purchase price was approximately $13.2 million. The facility was 98% leased at
the date of purchase and was 97% leased at October 31, 1998.
On November 12, 1997, ProLogis acquired the Freeway Distribution
Center #1 - 3 located in the Central Los Angeles sub-market of the Los Angeles
Basin market. The facility is classified as light industrial and bulk
distribution and consists of 568,371 square feet. The purchase price was
approximately $22.0 million. The facility was 100% leased at the date of
purchase and at October 31, 1998.
On December 16, 1997, ProLogis acquired the Bensenville
Distribution Center #1 located in the O'Hare sub-market of the Chicago, Illinois
market. The facility is classified as bulk distribution and consists of 313,102
square feet. The purchase price was approximately $6.3 million. The facility was
44% leased at the date of purchase and at October 31, 1998.
On December 17, 1997, ProLogis acquired the Isle d'Abeau
Distribution Center #1 located in the L'Isle d'Abeau sub-market of the Lyon,
France market. The facility is classified as bulk distribution and consists of
296,720 square feet. The purchase price was approximately $8.3 million. The
facility was 100% leased at the date of purchase and at October 31, 1998.
On December 18, 1997, ProLogis acquired the Elk Grove Distribution
Center #9 located in the O'Hare sub-market of the Chicago, Illinois market. The
facility is classified as bulk distribution and consists of 38,398 square feet.
The purchase price was approximately $936,000 and there were no signed leases at
the date of purchase. The facility was 100% leased at October 31, 1998.
On December 18, 1997, ProLogis acquired the Itasca Distribution
Center #2 located in the O'Hare sub-market of the Chicago, Illinois market. The
facility is classified as bulk distribution and consists of 48,516 square feet.
The purchase price was approximately $1.9 million. The facility was vacant at
the date of purchase and was 86% leased at October 31, 1998.
On December 23, 1997, ProLogis acquired the Brunswick Distribution
Center #2 located in the Route 287/I-95 sub-market of the Northern New Jersey
market. The facility is classified as bulk distribution and consists of 65,907
square feet. The purchase price was approximately $2.0 million. The facility was
100% leased at the date of purchase and at October 31, 1998.
4
<PAGE>
On December 23, 1997, ProLogis acquired the Great Southwest
Distribution Center #17 located in the Great Southwest sub-market of the
Dallas/Ft. Worth market. The facility is classified as bulk distribution and
consists of 60,000 square feet. The purchase price was approximately $1.1
million. The facility was 100% leased on the date of purchase and at October 31,
1998.
On December 30, 1997, ProLogis acquired the Bensenville
Distribution Center #2 located in the O'Hare sub-market of the Chicago, Illinois
market. The facility is classified as bulk distribution and consists of 119,706
square feet. The purchase price was approximately $4.9 million. The facility was
100% leased on the date of purchase and was 80% leased at October 31, 1998.
On January 16, 1998, ProLogis acquired the Westbelt Business
Center #1 and #2 located in the West sub-market of the Columbus, Ohio market.
The facility is classified as light industrial and consists of 136,206 square
feet. The purchase price was approximately $3.1 million. The facility was 87%
leased on the date of purchase and at October 31, 1998.
On March 11, 1998, ProLogis acquired the National Distribution
Center #1 and #2 located in the Route 287/I-95 sub-market of the Northern New
Jersey market. The facility is classified as bulk distribution and consists of
120,000 square feet. The purchase price was approximately $3.4 million. The
facility was 33% leased on the date of purchase and at October 31, 1998.
On April 9, 1998, ProLogis acquired the Raines Distribution Center
#1 located in the Southeast sub-market of the Memphis, Tennessee market. The
facility is classified as bulk distribution and consists of 658,820 square feet.
The purchase price was approximately $10.9 million. The facility was 44% leased
on the date of purchase and was 69% leased at October 31, 1998.
On April 23, 1998, ProLogis acquired the Meadowlands Distribution
Center #4 - 7 located in the Meadowland sub-market of the Northern New Jersey
market. The facility is classified as bulk distribution and consists of 93,297
square feet. The purchase price was approximately $5.4 million. The facility was
43% leased on the date of purchase and at October 31, 1998.
On April 24, 1998, ProLogis acquired the North Park Distribution
Center #2 located in the Northeast sub-market of the Charlotte, North Carolina
market. The facility is classified as bulk distribution and consists of 243,200
square feet. The purchase price was approximately $5.8 million and the facility
was vacant on the date of purchase. The facility was 68% leased at October 31,
1998.
On May 7, 1998, ProLogis acquired the Interchange Distribution
Center #5 through #7 located in the Southeast sub-market of the Nashville,
Tennessee market. The facility is classified as bulk distribution and consists
of 437,552 square feet. The purchase price was approximately $8.0 million. The
facility was 100% leased on the date of purchase and was 29% leased at October
31, 1998.
On May 8, 1998, ProLogis acquired the Alameda Distribution Center
#2 located in the Tempe sub-market of the Phoenix, Arizona market. The facility
is classified as bulk distribution and consists of 96,437 square feet. The
purchase price was approximately $3.0 million. The facility was 55% leased on
the date of purchase and was 27% leased at October 31, 1998.
On May 9, 1998, ProLogis acquired the Longjumeau Distribution
Center #1 located in the Orly Airport sub-market of the Paris, France market.
The facility is classified as bulk distribution and consists of 213,870 square
feet. The purchase price was approximately $8.2 million. The facility was 100%
leased on the date of purchase and at October 31, 1998.
5
<PAGE>
On June 1, 1998, ProLogis acquired the Airpark Distribution Center
#1 through #4 located in the Southside sub-market of the Louisville, Kentucky
market. The facility is classified as bulk distribution and service center and
consists of 640,900 square feet. The purchase price was approximately $10.6
million. The facility was 54% leased on the date of purchase and at October 31,
1998.
On June 2, 1998, ProLogis acquired the Reynosa Industrial Center
#9 located in the Reynosa Industrial Park sub-market of the Reynosa, Mexico
market. The facility is classified as light industrial and consists of 54,364
square feet. The purchase price was approximately $1.2 million. The facility was
100% leased on the date of purchase and at October 31, 1998.
On June 15, 1998, ProLogis acquired the Meadowlands Distribution
Center #8 and #9 located in the Meadowland sub-market of the Northern New Jersey
market. The facility is classified as bulk distribution and consists of 136,890
square feet. The purchase price was approximately $6.4 million. The facility was
26% leased on the date of purchase and was 71% leased at October 31, 1998.
On July 15, 1998, ProLogis acquired the Copans Distribution Center
#2 located in the I-95 North sub-market of the Boward County, Florida market.
The facility is classified as light industrial and consists of 25,300 square
feet. The purchase price was approximately $1.1 million. The facility was 100%
leased on the date of purchase and at October 31, 1998.
On July 29, 1998, ProLogis acquired the Itasca Distribution Center
#3 located in the O'Hare sub-market of the Chicago, Illinois market. The
facility is classified as bulk distribution and consists of 165,762 square feet.
The purchase price was approximately $6.7 million. The facility was 100% leased
at the date of purchase and at October 31, 1998.
On August 5, 1998, ProLogis acquired the Earth City Industrial
Center #8, #9 and #10 located in the Earth City sub-market of the St. Louis,
Missouri market. The facility is classified as bulk distribution and light
industrial and consists of 216,451 square feet. The purchase price was
approximately $5.5 million. The facility was 96% leased at the date of purchase
and at October 31, 1998.
On August 6, 1998, ProLogis acquired the Sabal Park Distribution
Center #11 and #12 located in the Tampa East sub-market of the Tampa, Florida
market. The facility is classified as bulk distribution and light industrial and
consists of 119,554 square feet. The purchase price was approximately $4.6
million. The facility was 80% leased on the date of purchase and at October 31,
1998.
On August 31, 1998, ProLogis acquired the Executive Park
Distribution Center #3 located in the Executive Park sub-market of the Kansas
City, Missouri market. The facility is classified as bulk distribution and
consists of 41,258 square feet. The purchase price was approximately $1.7
million. The facility was 100% leased on the date of purchase and at October 31,
1998.
On October 30, 1998, ProLogis acquired the Oceanie Distribution
Center #1 located in the Orly Airport sub-market of the Paris, France market.
The facility is classified as bulk distribution and consists of 170,771 square
feet. The purchase price was approximately $7.7 million. The facility was 100%
leased on the date of purchase and at October 31, 1998.
6
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
Combined Statement of Revenue and Certain Expenses for Group
G Properties and Notes thereto with Independent Public
Accountants' Report thereon dated November 30, 1998
Combined Statement of Revenue and Certain Expenses for Group
H Properties and Notes thereto with Independent Public
Accountants' Report thereon dated November 30, 1998
(b) Pro Forma Financial Information:
Pro Forma Condensed Consolidated Balance Sheet as of
September 30, 1998 (unaudited)
Pro Forma Condensed Consolidated Statement of Earnings from
Operations for the nine months ended September 30, 1998
(unaudited)
Pro Forma Condensed Consolidated Statement of Earnings from
Operations for the year ended December 31, 1997 (unaudited)
Notes to Pro Forma Condensed Consolidated Financial
Statements
(c) Exhibits:
Exhibit 23 - Consent of Independent Public Accountants
7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
PROLOGIS TRUST
By: /S/ EDWARD F. LONG
---------------------------------
Edward F. Long
VICE PRESIDENT
Date: December 3, 1998 By: /S/ SHARI J. JONES
---------------------------------
Shari J. Jones
VICE PRESIDENT
(PRINCIPAL ACCOUNTING OFFICER)
8
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Trustees and Shareholders
of ProLogis Trust:
We have audited the accompanying combined statement of revenue and
certain expenses of PROLOGIS TRUST GROUP G PROPERTIES (described in Note 1) for
the year ended December 31, 1996. This financial statement is the responsibility
of Group G Properties' management. Our responsibility is to express an opinion
on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying combined statement of revenue and certain
expenses was prepared for the purpose of complying with Rule 3-14 of Regulation
S-X of the Securities and Exchange Commission for inclusion in the Form 8-K of
ProLogis Trust and is not intended to be a complete presentation of the Group G
Properties' combined revenue and certain expenses.
In our opinion, the financial statement referred to above presents
fairly, in all material respects, the combined revenue and certain expenses of
ProLogis Trust Group G Properties for the year ended December 31, 1996, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
November 30, 1998
9
<PAGE>
PROLOGIS TRUST
GROUP G PROPERTIES
COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C>
REVENUE:
Minimum rents $ 7,574
Expense reimbursements 685
--------------
Total revenue 8,259
CERTAIN EXPENSES:
Real estate taxes 1,365
Property operating expenses 776
Insurance 227
Management fees 275
--------------
Total certain expenses 2,643
--------------
REVENUE IN EXCESS OF CERTAIN EXPENSES $ 5,616
==============
</TABLE>
See accompanying notes to combined statement of
revenue and certain expenses.
10
<PAGE>
PROLOGIS TRUST
GROUP G PROPERTIES
NOTES TO COMBINED STATEMENT OF REVENUE
AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1996
1. BASIS OF PRESENTATION:
The accompanying combined statement of revenue and certain expenses for the
year ended December 31, 1996, relates to the operations of the following
properties ("Group G properties") which were acquired from unaffiliated parties
by ProLogis Trust ("ProLogis") between January 1, 1997 and November 12, 1997.
<TABLE>
<CAPTION>
ACQUISITION ACQUISITION
DATE PROPERTY NAME LOCATION COST
----------- ------------- -------- ------------
(In thousands)
<S> <C> <C> <C>
06/12/97 Great Southwest Distribution Centers
#14, #15 and #16 Dallas, TX $ 6,909
06/27/97 Elmhurst Dist. Center #1 and Woodale
Dist. Center Chicago, IL 6,509
06/27/97 Earth City Industrial Center #1-4 St. Louis, MO 11,875
08/26/97 Piedmont Court Distribution Center
#1 and #2 Atlanta, GA 5,898
09/17/97 MGI Portfolio St. Louis, MO 15,023
09/22/97 Royal Commerce Center Dallas, TX 13,165
11/12/97 Freeway Distribution Center #1-3 Los Angeles,CA 22,034
--------
$ 81,413
========
</TABLE>
The Group G Properties have an aggregate net leasable area of 2.8
million square feet and were 85.0% leased as of December 31, 1996.
The accompanying financial statement excludes certain expenses, such as
interest, depreciation and amortization, professional fees and other costs not
directly related to the future operations of the Group G Properties that may not
be comparable to the expenses expected to be incurred by ProLogis in the
proposed future operations of the Group G Properties. Management is not aware of
any material factors relating to these properties which would cause the reported
financial information not to be necessarily indicative of future operating
results.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
11
<PAGE>
PROLOGIS TRUST
GROUP G PROPERTIES
NOTES TO COMBINED STATEMENT OF REVENUE
AND CERTAIN EXPENSES (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1996
2. MORTGAGE NOTES:
In connection with the acquisition of a certain Group G property,
ProLogis assumed existing indebtedness of approximately $8.7 million. This
mortgage note bears interest at 7.75% and is due in installments through October
2010. Approximate principal payments due on the mortgage note on the Group G
property acquired are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1997 (from date of acquisition) $ 97
1998 407
1999 440
2000 475
2001 513
Thereafter 6,759
-----------
$ 8,691
===========
</TABLE>
3. RELATED-PARTY TRANSACTIONS:
Included in management fees is approximately $114,000 paid to
affiliates of the prior owners under property management agreements.
4. FUTURE MINIMUM RENTS RECEIVABLE:
All of the Group G Properties are leased to tenants under agreements
which are classified as operating leases. The leases generally provide for
payment of utilities, property taxes and insurance by the tenant. As of December
31, 1996, minimum lease payments receivable on noncancelable leases with lease
periods greater than one year were as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1997 $ 7,625
1998 6,989
1999 5,018
2000 4,030
2001 3,102
Thereafter 2,673
-----------
$ 29,437
===========
</TABLE>
12
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Trustees and Shareholders
of ProLogis Trust:
We have audited the accompanying combined statement of revenue and
certain expenses of PROLOGIS TRUST GROUP H PROPERTIES (described in Note 1) for
the year ended December 31, 1997. This financial statement is the responsibility
of Group H Properties' management. Our responsibility is to express an opinion
on this financial statement based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statement is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statement. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
The accompanying combined statement of revenue and certain
expenses was prepared for the purpose of complying with Rule 3-14 of Regulation
S-X of the Securities and Exchange Commission for inclusion in the Form 8-K of
ProLogis Trust and is not intended to be a complete presentation of the Group H
Properties' combined revenue and certain expenses.
In our opinion, the financial statement referred to above presents
fairly, in all material respects, the combined revenue and certain expenses of
ProLogis Trust Group H Properties for the year ended December 31, 1997, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
November 30, 1998
13
<PAGE>
PROLOGIS TRUST
GROUP H PROPERTIES
COMBINED STATEMENT OF REVENUE AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997 AND THE PERIOD
FROM JANUARY 1, 1998 TO THE DATES OF ACQUISITION
(IN THOUSANDS)
<TABLE>
<CAPTION>
PERIOD FROM
JANUARY 1,
YEAR ENDED 1998 TO THE
DECEMBER 31, DATES OF
1997 ACQUISITION
(AUDITED) (UNAUDITED)
---------- --------------
<S> <C> <C>
REVENUE:
Minimum rents $ 1,415 $ 830
Expense reimbursements 111 64
--------- ---------
Total revenue 1,526 894
--------- ---------
CERTAIN EXPENSES:
Real estate taxes 293 172
Property operating expenses 79 42
Insurance 30 18
Management fees 45 26
--------- ---------
Total certain expenses 447 258
--------- ---------
REVENUE IN EXCESS OF CERTAIN EXPENSES $ 1,079 $ 636
========= =========
</TABLE>
See accompanying notes to combined statement of
revenue and certain expenses.
14
<PAGE>
PROLOGIS TRUST
GROUP H PROPERTIES
NOTES TO COMBINED STATEMENT OF REVENUE
AND CERTAIN EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1997 AND THE PERIOD
FROM JANUARY 1, 1998 TO THE DATES OF ACQUISITION
1. BASIS OF PRESENTATION:
The accompanying combined statement of revenue and certain expenses for the
year ended December 31, 1997, relates to the operations of the following
properties ("Group H Properties") which were acquired from unaffiliated parties
by ProLogis Trust ("ProLogis") between January 1, 1998 and November 30, 1998.
<TABLE>
<CAPTION>
ACQUISITION ACQUISITION
DATE PROPERTY NAME LOCATION COST
----------- ------------- -------- ------------
(In thousands)
<S> <C> <C> <C>
07/29/98 Itasca Distribution Center #3 Chicago, IL $ 6,727
08/05/98 Earth City Industrial Center #8,
#9 and #10 St. Louis, MO 5,489
--------
$ 12,216
========
</TABLE>
The Group H Properties have an aggregate net leasable area of 382,000
square feet and were 98% leased as of December 31, 1997.
The accompanying financial statement excludes certain expenses, such as
interest, depreciation and amortization, professional fees and other costs not
directly related to the future operations of the Group H Properties that may not
be comparable to the expenses expected to be incurred by ProLogis in the
proposed future operations of the Group H Properties. Management is not aware of
any material factors relating to these properties which would cause the reported
financial information not be necessarily indicative of future operating results.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The accompanying combined statement of revenue and certain expenses for the
period from January 1, 1998 to the dates of acquisition is unaudited. In the
opinion of management, all adjustments necessary for a fair presentation of such
accompanying combined statement of revenue and certain expenses have been
included.
15
<PAGE>
PROLOGIS TRUST
GROUP H PROPERTIES
NOTES TO COMBINED STATEMENT OF REVENUE
AND CERTAIN EXPENSES (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1997 AND FOR THE PERIOD
FROM JANUARY 1, 1998 TO THE DATES OF ACQUISITION
2. MORTGAGE NOTES:
In connection with the acquisition of a certain Group H property,
ProLogis assumed existing indebtedness of approximately $2.3 million. This
mortgage note bears interest at 8.5% and is due in installments through July
2010. Approximate principal payments due on the mortgage note on the Group H
property acquired are as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1998 (from date of acquisition) $ 38
1999 121
2000 132
2001 143
2002 156
Thereafter 1,730
----------
$ 2,320
==========
</TABLE>
3. RELATED-PARTY TRANSACTIONS:
Included in management fees is approximately $35,000 and $26,000 paid
to affiliates of the prior owners under property management agreements for 1997
and 1998, respectively.
4. FUTURE MINIMUM RENTS RECEIVABLE:
All of the Group H Properties are leased to tenants under agreements
which are classified as operating leases. The leases generally provide for
payment of utilities, property taxes and insurance by the tenant. As of December
31, 1997, minimum lease payments receivable on noncancelable leases with lease
periods greater than one year were as follows (in thousands):
<TABLE>
<CAPTION>
<S> <C>
1998 $ 1,406
1999 868
2000 188
2001 110
2002 90
Thereafter 19
-----------
$ 2,681
===========
</TABLE>
16
<PAGE>
PROLOGIS TRUST
PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
The accompanying pro forma condensed consolidated financial statements
for ProLogis reflect the acquisition by ProLogis of certain properties
subsequent to December 31, 1996 as discussed in Item 5 of this Current Report on
Form 8-K. The pro forma condensed consolidated financial statements have been
prepared based upon certain pro forma adjustments to the historical financial
statements of ProLogis.
The accompanying pro forma condensed consolidated balance sheet as of
September 30, 1998 has been prepared as if the facility acquired subsequent to
September 30, 1998 had been acquired as of that date.
The accompanying pro forma condensed consolidated statements of
earnings from operations for the nine months ended September 30, 1998 and the
year ended December 31, 1997 have been prepared as if:
(i) the acquisition of facilities acquired subsequent to December
31, 1996, as discussed in Item 5 of this Current Report on
Form 8-K, had occurred as of January 1, 1997;
(ii) the assumption of certain mortgage debt associated with the
acquisition of certain of the facilities noted in (i) above
had occurred as of January 1, 1997; and,
(iii) the issuance of senior unsecured notes subsequent to December
31, 1996, necessary to fund the pro forma acquisitions noted
in (i) above, had occurred as of January 1, 1997.
The pro forma condensed consolidated financial statements do not purport to
be indicative of the financial position or results of operations which would
actually have been obtained had the transactions described above been completed
on the dates indicated or which may be obtained in the future. The pro forma
condensed consolidated financial statements should be read in conjunction with
the Combined Statements of Revenue and Certain Expenses included herein and the
historical financial statements included in ProLogis' 1997 Annual Report on Form
10-K and Quarterly Report on Form 10-Q for the nine months ended September 30,
1998. In management's opinion, all material adjustments necessary to reflect the
effects of these transactions have been made to the pro forma condensed
consolidated financial statements.
17
<PAGE>
PROLOGIS TRUST
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS -
ASSETS HISTORICAL ACQUISITIONS PRO FORMA
------ ------------- ------------ -------------
<S> <C> <C> <C>
Real estate: $ 3,483,817 $ 7,663 (a) $ 3,491,480
Less accumulated depreciation 231,526 -- 231,526
------------- ------------- -------------
Net real estate investments 3,252,291 7,663 3,259,954
Investment in and advances to unconsolidated subsidiaries 525,138 -- 525,138
Cash and cash equivalents 31,650 (4,138)(b) 27,512
Accounts receivable and other assets 115,049 -- 115,049
------------- ------------- -------------
Total assets $ 3,924,128 $ 3,525 $ 3,927,653
============= ============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Lines of credit $ 159,500 $ -- $ 159,500
Short-term borrowings 150,000 -- 150,000
Mortgage notes and assessment bonds payable 134,534 3,525 (c) 138,059
Long-term debt 958,586 -- 958,586
Accounts payable and other liabilities 155,898 -- 155,898
------------- ------------- -------------
Total liabilities 1,558,518 3,525 1,562,043
------------- ------------- -------------
Minority interest 51,358 -- 51,358
Shareholders' equity:
Series A Preferred Shares 135,000 -- 135,000
Series B Convertible Preferred Shares 194,925 -- 194,925
Series C Preferred Shares 100,000 -- 100,000
Series D Preferred Shares 250,000 -- 250,000
Common Shares of beneficial interest, $.01 par value;
123,091,696 shares historical
and pro forma 1,231 -- 1,231
Additional paid-in capital 1,899,342 -- 1,899,342
Employee share purchase notes (25,660) -- (25,660)
Accumulated other comprehensive income 307 -- 307
Distributions in excess of net earnings (240,893) -- (240,893)
------------- ------------- -------------
Total shareholders' equity 2,314,252 -- 2,314,252
------------- ------------- -------------
Total liabilities and shareholders' equity $ 3,924,128 $ 3,525 $ 3,927,653
============= ============= =============
</TABLE>
The accompanying notes are an integral part of the pro forma
condensed consolidated financial statements.
18
<PAGE>
PROLOGIS TRUST
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
EARNINGS FROM OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
ACQUISITIONS
-----------------------------
PROLOGIS PRO FORMA PROLOGIS
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
Income:
Rental income $ 251,605 $ 4,411 (d) $ -- $ 256,016
Other real estate income 10,542 -- -- 10,542
Income from unconsolidated subsidiaries 1,930 -- -- 1,930
Interest and other income 7,348 -- -- 7,348
------------ ------------ ------------ -----------
Total income 271,425 4,411 -- 275,836
------------ ------------ ------------ -----------
Expenses:
Rental expenses, net of recoveries 20,458 392 (d) 29 (e) 20,879
General and administrative 14,060 -- -- 14,060
Administrative services fee paid to affiliate 1,566 -- -- 1,566
Depreciation and amortization 73,684 -- 1,111 (f) 74,795
Mortgage interest 4,058 -- 643 (g) 4,701
Interest on general debt 48,397 -- 2,276 (h) 50,673
Interest rate hedge expense 27,652 -- -- 27,652
Other 4,096 -- -- 4,096
------------ ------------ ------------ -----------
Total expenses 193,971 392 4,059 198,422
------------ ------------ ------------ -----------
Earnings from operations before minority
interest, excluding gains on dispositions 77,454 4,019 (4,059) 77,414
Minority interest share in net earnings 3,101 -- -- 3,101
------------ ------------ ------------ -----------
Earnings from operations, excluding gains on
dispositions 74,353 4,019 (4,059) 74,313
Less preferred share dividends 35,543 -- -- 35,543
------------ ------------ ------------ -----------
Net earnings from operations attributable to
Common Shares $ 38,810 $ 4,019 $ (4,059) $ 38,770
============ ============ ============ ===========
Weighted average Common Shares
outstanding - basic (i) 121,183 -- -- 121,183
============ ============ ============ ===========
Weighted average Common Shares
outstanding - diluted (i) 121,421 -- -- 121,421
============ ============ ============ ===========
Per share net earnings from operations
attributable to Common Shares:
Basic (i) $ 0.32 -- -- $ 0.32
============ ============ ============ ===========
Diluted (i) $ 0.32 -- -- $ 0.32
============ ============ ============ ===========
</TABLE>
(CONTINUED)
The accompanying notes are an integral part of the pro forma
condensed consolidated financial statements.
19
<PAGE>
PROLOGIS TRUST
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
EARNINGS FROM OPERATIONS (CONTINUED)
NINE MONTHS ENDED SEPTEMBER 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
ACQUISITIONS
-----------------------------
PROLOGIS PRO FORMA PROLOGIS
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
---------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
Reconciliation of net earnings from operations
attributable to Common Shares to funds from
operations attributable to Common Shares:
Net earnings from operations attributable to
Common Shares $ 38,810 $ 4,019 $ (4,059) $ 38,770
Add (Deduct):
Real estate depreciation and amortization 72,902 -- 1,111 74,013
Minority interest 3,101 -- -- 3,101
Non-recurring foreign currency exchange
gain (2,054) -- -- (2,054)
Interest rate hedge expense 27,652 -- -- 27,652
Net foreign exchange gain on remeasurement
of intercompany debt (3,417) -- -- (3,417)
Non-recurring costs 1,452 -- -- 1,452
ProLogis' share of reconciling items of
unconsolidated subsidiaries 32,702 -- -- 32,702
------------- ------------- ------------- -----------
Funds from operations attributable to Common
Shares (j) $ 171,148 $ 4,019 $ (2,948) $ 172,219
============= ============= ============= ===========
Weighted average Common Shares
outstanding - basic (j) 126,253 -- -- 126,253
============= ============= ============= ===========
Weighted average Common Shares
outstanding - diluted (j) 136,647 -- -- 136,647
============= ============= ============= ===========
Cash Flow Summary:
Net cash provided by operating activities $ 174,320 $ 4,019 $ (2,948) $ 175,391
Net cash used in investing activities (915,812) -- 75,247 (840,565)
Net cash provided by financing activities 748,133 -- (75,247) 672,886
</TABLE>
The accompanying notes are an integral part of the pro forma
condensed consolidated financial statements.
20
<PAGE>
PROLOGIS TRUST
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
EARNINGS FROM OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
ACQUISITIONS
------------------------------
PROLOGIS PRO FORMA PROLOGIS
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
------------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
Income:
Rental income $ 284,533 $ 21,461(d) $ -- $ 305,994
Other real estate income 12,291 -- -- 12,291
Income from unconsolidated subsidiaries 3,278 -- -- 3,278
Interest and other income 2,392 -- -- 2,392
------------- ------------- ------------- -----------
Total income 302,494 21,461 -- 323,955
------------- ------------- ------------- -----------
Expenses:
Rental expenses, net of recoveries 27,008 4,175 (d) (131)(e) 31,052
Depreciation and amortization 76,562 -- 5,515 (f) 82,077
Mortgage interest 10,403 -- 1,823 (g) 12,226
General and administrative 5,742 -- -- 5,742
REIT management fee paid to an affiliate 17,791 -- 2,147 (k) 19,938
Administrative services fee paid to an affiliate 1,113 -- -- 1,113
Interest on general debt 42,301 -- 12,676 (h) 54,977
Costs incurred in acquiring management
companies from affiliate 75,376 -- -- 75,376
Foreign exchange loss 6,376 -- -- 6,376
Other 3,891 -- -- 3,891
------------- ------------- ------------- -----------
Total expenses 266,563 4,175 22,030 292,768
------------- ------------- ------------- -----------
Earnings from operations before minority
interest, excluding gains on dispositions 35,931 17,286 (22,030) 31,187
Minority interest share in net earnings 3,560 -- -- 3,560
------------- ------------- ------------- -----------
Earnings from operations, excluding gains
on dispositions 32,371 17,286 (22,030) 27,627
Less preferred share dividends 35,318 -- -- 35,318
------------- ------------- ------------- -----------
Net loss from operations attributable to
Common Shares $ (2,947) $ 17,286 $ (22,030) $ (7,691)
============= ============= ============= ============
Weighted average Common Shares
outstanding - basic (i) 100,729 -- -- 100,729
============= ============= ============= ============
Weighted average Common Shares
outstanding - diluted (i) 100,729 -- -- 100,729
============= ============= ============= ============
Per share loss from operations attributable
to Common Shares:
Basic (i) $ (0.03) -- -- $ (0.08)
============= ============= ============= ============
Diluted (i) $ (0.03) -- -- $ (0.08)
============= ============= ============= ============
</TABLE>
(CONTINUED)
The accompanying notes are an integral part of the pro forma
condensed consolidated financial statements.
21
<PAGE>
PROLOGIS TRUST
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF
EARNINGS FROM OPERATIONS (CONTINUED)
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
ACQUISITIONS
------------------------------
PROLOGIS PRO FORMA PROLOGIS
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
Reconciliation of net loss from operations
attributable to Common Shares to funds from
operations attributable to Common Shares:
Net loss from operations attributable to
Common Shares $ (2,947) $ 17,286 $ (22,030) $ (7,691)
Add (Deduct):
Real estate depreciation and amortization 76,275 -- 5,515 81,790
Minority interest 3,560 -- -- 3,560
Foreign exchange loss on acquisition of
refrigeration affiliate 6,028 -- -- 6,028
Net foreign exchange loss on remeasurement
of intercompany debt 348 -- -- 348
Non-recurring costs 75,376 -- -- 75,376
ProLogis' share of reconciling items of
unconsolidated subsidiaries 2,419 -- -- 2,419
------------- ------------- ------------- -----------
Funds from operations attributable to Common
Shares (j) $ 161,059 $ 17,286 $ (16,515) $ 161,830
============= ============= ============= ===========
Weighted average Common Shares
outstanding - basic (j) 105,919 -- -- 105,919
============= ============= ============= ===========
Weighted average Common Shares
outstanding - diluted (j) 116,371 -- -- 116,371
============= ============= ============= ===========
Cash Flow Summary:
Net cash provided by operating activities $ 192,273 $ 17,286 $ (16,515) $ 193,044
Net cash used in investing activities (570,861) -- (79,385) (650,246)
Net cash provided by financing activities 398,827 -- 79,385 478,212
</TABLE>
The accompanying notes are an integral part of the pro forma condensed
consolidated financial statements.
22
<PAGE>
PROLOGIS TRUST
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND DECEMBER 31, 1997
(UNAUDITED)
(a) Represents the acquisition of the Oceanie Distribution Center #1 in
Paris, France on October 30, 1998. The purchase price of the facility
was $7.7 million and $3.5 million of existing mortgage debt was
assumed.
(b) Represents the use of cash on hand to fund the cash portion of the pro
forma acquisition discussed in footnote (a).
(c) Represents the assumption of mortgage debt associated with the pro
forma acquisition discussed in footnote (a).
(d) Represents historical revenues and certain expenses of the facilities
acquired by ProLogis subsequent to December 31, 1996 as discussed in Item
5 of this Current Report on Form 8-K. The total historical acquisition
adjustment reflects the period from January 1, 1997 to the earlier of the
respective dates of acquisition, December 31, 1997 or September 30, 1998
as applicable (results of operation after the dates of acquisition are
included in ProLogis' historical operating results). Historical
acquisition revenues and certain expenses exclude amounts which would not
be comparable to the proposed future operations of the facilities such as
certain interest expense, interest income, income taxes and depreciation.
(e) Represents the adjustment to historical property management expenses for
the periods indicated to reflect these expenses at the level they would
have been had ProLogis owned the facilities as of January 1, 1997.
(f) Reflects the recognition of depreciation expense associated with the pro
forma acquisitions, discussed in Item 5 of this Current Report on Form
8-K and in footnote (d), for the periods indicated. This depreciation
adjustment is based on ProLogis' purchase cost assuming asset lives of 30
years. Depreciation is computed using a straight-line method.
(g) Reflects the recognition of interest expense on mortgage debt for the
periods indicated as if the debt had been assumed by ProLogis on January
1, 1997. Mortgage debt assumed in conjunction with the acquisition of
certain of the facilities acquired subsequent to December 31, 1996,
discussed in Item 5 of this Current Report on Form 8-K and in footnote
(d), bear interest at fixed rates ranging from 7.75% to 10.60%.
(h) Represents additional interest expense on senior unsecured debt
securities. The adjustment assumes that the issuance of senior unsecured
debt securities necessary to fund pro forma acquisitions, discussed in
Item 5 of this Current Report on Form 8-K and in footnote (d), occurred
on January 1, 1997. The adjustment is based on a weighted average
effective interest rate of 7.05% for the nine months ended September 30,
1998 and 7.17% for the year ended December 31, 1997.
23
<PAGE>
PROLOGIS TRUST
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(i) A reconciliation of the denominator used to calculate basic net earnings
per Common Share to the denominator used to calculate diluted net
earnings per Common Share for the nine months ended September 30, 1998 is
as follows (in thousands, except per Common Share amounts):
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1998
-----------------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
------------- ----------- -------------
<S> <C> <C> <C>
Net earnings from operations attributable to
Common Shares $ 38,810 $ (40) $ 38,770
============= =========== =============
Weighted average Common Shares outstanding - basic 121,183 -- 121,183
Incremental options and warrants 238 -- 238
------------- ----------- -------------
Adjusted weighted-average Common Shares
outstanding - diluted (1) 121,421 -- 121,421
============= =========== =============
Per share net earnings from operations attributable
to Common Shares:
Basic $ 0.32 $ -- $ 0.32
============ =========== ============
Diluted (1) $ 0.32 $ -- $ 0.32
============ =========== ============
<FN>
- ---------------
(1) For the nine months ended September 30, 1998, there were 10,156 weighted
average Series B Preferred Shares and 5,070 limited partnership units
outstanding on an as-converted basis that were not assumed to be
converted into Common Shares for purposes of calculating diluted earnings
per Common Share as the effect was antidilutive.
Because ProLogis has a net loss for the year ended December 31, 1997
(historical and pro forma), the effect of all potentially dilutive Common
Shares is anti-dilutive. Consequently, basic and diluted loss per Common
Share are the same.
</FN>
</TABLE>
(j) Funds from operations represent ProLogis' net earnings (computed in
accordance with generally accepted accounting principles ("GAAP")) before
minority interest, before gains or losses from debt restructuring, before
gains or losses on disposition of depreciated real estate, before gains or
losses from mark to market adjustments resulting from the remeasurement
(based on current foreign currency exchange rates) of intercompany and
other debt of ProLogis' foreign subsidiaries, before deferred tax benefits
and deferred tax expenses of ProLogis' taxable subsidiaries, before
significant non-recurring items that materially distort the comparative
measurement of company performance over time, plus real estate depreciation
and amortization (exclusive of amortization of loan costs), and after
adjustments for unconsolidated subsidiaries calculated to compute their
funds from operations on the same basis as ProLogis. ProLogis believes that
funds from operations is helpful to a reader as a measure of the
performance of an equity real estate investment trust ("REIT") because,
along with cash flow from operating activities, investing activities and
financing activities, it provides a reader with an indication of the
ability of ProLogis to incur and service debt, to make capital expenditures
and to fund other cash needs. The funds from operations measure presented
by ProLogis, while consistent with the National Association of Real Estate
Investment Trusts' definition, will not be comparable to similarly titled
measure of other REITs which do not compute funds from operations in a
manner consistent with ProLogis. Funds from operations is not intended to
represent cash made available to shareholders. Funds from operations should
not be considered as an alternative to net earnings or any other GAAP
measurement of performance as an indicator of ProLogis' operating
performance, or as an alternative to cash flows from operating, investing
or financing activities as a measure of liquidity. 24
<PAGE>
PROLOGIS TRUST
NOTES TO PRO
FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
A reconciliation of the numerator and denominator used to calculate basic
funds from operations per Common Share to the numerator and denominator
used to calculate diluted funds from operations per Common Share for the
periods indicated is as follows (in thousands):
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1998
-----------------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
------------- ----------- -------------
<S> <C> <C> <C>
Funds from operations attributable to
Common Shares - basic $ 171,148 $ 1,071 $ 172,219
Series B preferred share dividends 10,370 -- 10,370
------------- ----------- -------------
Adjusted funds from operations attributable
to Common Shares $ 181,518 $ 1,071 $ 182,589
============= =========== =============
Weighted average Common Shares
outstanding - basic (1) 126,253 -- 126,253
Weighted average conversion of Series B
preferred shares 10,156 -- 10,156
Incremental options and warrants 238 -- 238
------------- ----------- -------------
Adjusted weighted average Common Shares
outstanding - diluted 136,647 -- 136,647
============= =========== =============
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-----------------------------------------------
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
------------- ----------- -------------
<S> <C> <C> <C>
Funds from operations attributable to
Common Shares - basic $ 161,059 $ 771 $ 161,830
Series B preferred share dividends 14,088 -- 14,088
------------- ----------- -------------
Adjusted funds from operations attributable
to Common Shares $ 175,147 $ 771 $ 175,918
============= =========== =============
Weighted average Common Shares
outstanding - basic (1) 105,919 -- 105,919
Weighted average conversion of Series B
preferred shares 10,319 -- 10,319
Incremental options and warrants 133 -- 133
------------- ----------- -------------
Adjusted weighted average Common Shares
outstanding - diluted 116,371 -- 116,371
============= =========== =============
<FN>
- ---------------
(1) For purposes of calculating "basic" funds from operations per Common
Share, ProLogis uses the methodology prescribed by GAAP as adjusted to
assume conversion of all limited partnership units to ProLogis Common
Shares.
</FN>
</TABLE>
(k) Represents the additional REIT management fee that would have been paid
for the period from January 1, 1997 to September 8, 1997 (the period the
REIT management agreement was in effect) resulting from the additional
cash flow, as defined, generated by the pro forma acquisitions discussed
in Item 5 of this Current Report on Form 8-K and in footnote (d).
25
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included in this Form 8-K, into ProLogis Trust's
previously filed Registration Statement File Nos. 33-91366, 33-92490, 333-4961,
333-31421, 333-39797, 333-38515, 333-52867 and 333-26597.
ARTHUR ANDERSEN LLP
Chicago, Illinois
December 3, 1998
26
