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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
COMMISSION FILE NUMBER 1-12846
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PROLOGIS TRUST
(Exact name of registrant as specified in its charter)
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<S> <C>
MARYLAND 74-2604728
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
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14100 EAST 35TH PLACE
AURORA, COLORADO 80011
(Address of principal executive offices and zip code)
(303) 375-9292
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
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<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Common Shares of Beneficial Interest, par value $0.01 per
share New York Stock Exchange
Series A Cumulative Redeemable Preferred Shares of
Beneficial Interest, par value $0.01 per share New York Stock Exchange
Series B Cumulative Convertible Redeemable Preferred Shares
of Beneficial Interest, par value $0.01 per share New York Stock Exchange
Series D Cumulative Redeemable Preferred Shares of
Beneficial Interest, par value $0.01 per share New York Stock Exchange
Series E Cumulative Redeemable Preferred Shares of
Beneficial Interest, par value $0.01 per share New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
</TABLE>
Securities Registered Pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
Based on the closing price of the registrant's shares on March 14, 2000,
the aggregate market value of the voting shares held by non-affiliates of the
registrant was $2,030,987,388.
At March 14, 2000, there were outstanding approximately 162,252,057 common
shares of beneficial interest of the registrant.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement for the 2000 annual
meeting of its shareholders are incorporated by reference in Part III of this
report.
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TABLE OF CONTENTS
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ITEM DESCRIPTION PAGE
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PART I
1. Business.................................................... 1
ProLogis Trust............................................ 1
Business Strategy and Operating Segments.................. 3
ProLogis Operating System(TM)............................. 12
Financing Strategy........................................ 13
ProLogis Management....................................... 14
Environmental Matters..................................... 19
Insurance Coverage........................................ 19
2. Properties.................................................. 20
Industrial Distribution Facilities........................ 20
Geographic Distribution................................... 20
Facilities................................................ 22
Consolidated Entities..................................... 26
Unconsolidated Entities................................... 28
3. Legal Proceedings......................................... 29
4. Submission of Matters to a Vote of Security Holders....... 29
PART II
5. Market for the Registrant's Common Equity and Related
Stockholder Matters....................................... 30
Dividend Reinvestment and Share Purchase Plan............. 32
6. Selected Financial Data..................................... 33
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 35
Results of Operations..................................... 36
Environmental Matters..................................... 43
Liquidity and Capital Resources........................... 43
New Tax Legislation....................................... 48
Funds from Operations..................................... 48
Year 2000................................................. 50
Risk Factors.............................................. 51
7A. Quantitative and Qualitative Disclosure About Market Risk... 54
8. Financial Statements and Supplementary Data................. 55
9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure Matters.......................... 55
PART III
10. Directors and Executive Officers of the Registrant.......... 56
11. Executive Compensation...................................... 56
12. Security Ownership of Certain Beneficial Owners and
Management................................................ 56
13. Certain Relationships and Related Transactions.............. 56
PART IV
14. Exhibits, Financial Statement Schedules and Reports on Form
8-K....................................................... 57
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PART I
ITEM 1. BUSINESS
PROLOGIS TRUST
ProLogis Trust ("ProLogis") is a real estate investment trust ("REIT") that
operates a global network of industrial distribution facilities. ProLogis owns
(directly, through consolidated entities or through investments in other real
estate entities accounted for under the equity method) 162.3 million square feet
of industrial distribution facilities operating or under development and 365.9
million cubic feet of temperature-controlled distribution facilities operating
or under development (including 35.5 million cubic feet of dry distribution
space located in temperature-controlled facilities) located throughout North
America and Europe. This network of distribution facilities makes ProLogis the
largest publicly held U.S.-based, global owner and lessor of industrial
distribution and temperature-controlled distribution facilities. The ProLogis
Operating System(TM), comprised of the Market Services Group, the Global
Services Group, the Global Development Group and the Integrated Solutions Group,
utilizes ProLogis' international network of distribution facilities to meet its
customers' distribution space needs globally. ProLogis believes it has
distinguished itself from its competition by developing an organizational
structure and service delivery system built around its customers. ProLogis
believes that its service approach, which combines international scope and
expertise and a strong local presence in each of its target markets, makes it
attractive to its targeted customer base that includes the largest global users
of distribution facilities. ProLogis is organized under Maryland law and has
elected to be taxed as a REIT under the Internal Revenue Code of 1986, as
amended (the "Code").
ProLogis' business strategy is designed to: 1) achieve long-term
sustainable growth in cash flow; 2) reduce the need for ProLogis to issue
additional public debt or public equity capital; and 3) increase the overall
return on equity for shareholders. ProLogis has organized its business into
three operating segments in order to achieve its objectives. For a discussion of
certain financial information regarding each segment see Note 18 and for a
discussion of ProLogis' investments in unconsolidated entities see Note 5 to
ProLogis' Consolidated Financial Statements in Item 8. These three segments are:
- Property Operations -- The long-term ownership, management and leasing of
industrial distribution facilities in North America and Europe, primarily
distribution space that is adaptable for both distribution and light
manufacturing or assembly uses. This segment generates income from rents
and reimbursement of property operating expenses from unaffiliated
customers and earns management fees from entities in which it has an
ownership interest. As of December 31, 1999, in this operating segment
ProLogis owned and operated (directly, through consolidated entities or
through investments in other real estate entities that are accounted for
under the equity method) 148.5 million square feet of industrial
distribution facilities at an investment of $5.4 billion (133.7 million
square feet at an investment of $4.6 billion for properties that are
owned directly by ProLogis and its consolidated entities). Of the total,
137.9 million square feet are located in North America and the remaining
10.6 million square feet are located in Europe. Also, as of December 31,
1999, ProLogis and its consolidated entities owned 2.7 million square
feet of facilities under development with a total budgeted cost of $98.7
million, all located in North America. Upon completion, these facilities
are expected to become a part of ProLogis' operating portfolio.
- Corporate Distribution Facilities Services Business -- Development of
industrial distribution facilities for future sale to unaffiliated
customers or entities in which ProLogis has an ownership interest or for
a development fee for unaffiliated customers in North America and Europe.
In addition, entities in which ProLogis has an ownership interest that
own and operate industrial distribution facilities acquire facilities
from ProLogis or its affiliates that were developed within this operating
segment. ProLogis' investments in these other entities, and fees earned
from these entities, are reflected in ProLogis' property operations
segment. The development activities in this operating segment are
performed directly by ProLogis, by a consolidated entity in which
ProLogis recognizes substantially all of the economic benefits or through
an unconsolidated entity that is accounted for under the equity method in
which ProLogis recognizes substantially all of the economic benefits.
Income from this segment is derived from the profit resulting from the
sale of the facilities developed and from fees paid by customers for the
development of a facility
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on their behalf. As of December 31, 1999, ProLogis had, either directly,
through its consolidated entity or through an unconsolidated entity, 10.2
million square feet of facilities under development with a total budgeted
cost of $543.0 million (8.0 million square feet at a total budgeted
development cost of $325.5 million for properties owned directly by
ProLogis and its consolidated entity). Also as of December 31, 1999,
ProLogis owned or controlled, either directly, through its consolidated
entity or through an unconsolidated entity, 4,832 acres of land for the
future development of approximately 80.1 million square feet of
industrial distribution facilities (3,020 acres of land for the future
development of approximately 51.6 million square feet on properties owned
directly by ProLogis and its consolidated entity). Upon completion, these
facilities are expected to be sold to customers or to entities in which
ProLogis has an ownership interest.
- Temperature-Controlled Distribution Operations -- Operation of
temperature-controlled distribution facilities where fees are earned from
unaffiliated customers for various services associated with a
temperature-controlled distribution environment. Such services include:
1) total supply chain management; 2) management of customer inventory and
related services, (i.e. case picking, sorting, labeling, stenciling,
shrink wrapping and blast freezing); 3) temperature-controlled product
consolidation and transportation services; and 4) third-party logistics
services and facility management for leading grocery retailers. In this
segment, ProLogis recognizes substantially all of the economic benefits
of two companies that are accounted for under the equity method. As of
December 31, 1999, these unconsolidated entities owned or operated 359.9
million cubic feet of temperature-controlled distribution space
(including 35.5 million cubic feet of dry distribution space located in
temperature-controlled facilities) and had 6.1 million cubic feet of
temperature-controlled distribution space under development. Of the total
cubic feet in operation, 167.6 million cubic feet are located in North
America and 192.3 million cubic feet are located in nine European
countries. Of the facilities under development, 4.8 million cubic feet
are located in North America (Atlanta) and 1.3 million cubic feet are
located in Europe (Denmark).
1999 Operating Performance
ProLogis' 12.2% growth in funds from operations (on a per share basis) in
1999 over 1998 was driven by its successful operating and investment strategies.
Total funds from operations increased by $91.8 million from $228.4 million in
1998 to $320.2 million in 1999. The contribution to total funds from operations
by ProLogis' operating segments for 1999 and 1998 is as follows (see also Note
18 to ProLogis' Consolidated Financial Statements in Item 8):
- 70.6% and 78.2% of total funds from operations is attributable to the
property operations segment in 1999 and 1998, respectively;
- 20.3% and 8.1% of total funds from operations is attributable to the
corporate distribution facilities services business segment in 1999 and
1998, respectively; and
- 9.2% and 13.6% of total funds from operations is attributable to the
temperature-controlled distribution operations segment in 1999 and 1998,
respectively.
Funds from operations is a performance measure used by REITs and is defined
and discussed in "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources -- Funds
from Operations".
ProLogis' net operating income (rental revenues less rental expenses)
increased from $317.9 million in 1998 to $458.3 million in 1999. ProLogis
generated earnings from operations of $166.5 million in 1999, an increase of
$58.9 million over 1998. ProLogis' cash flow provided by operating activities
for 1999 was $271.4 million, an increase of $33.1 million over 1998. Net
earnings attributable to Common Shares of $124.0 million in 1999 was nearly two
times greater than the 1998 amount of $62.2 million. See ProLogis' Consolidated
Financial Statements in Item 8.
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BUSINESS STRATEGY AND OPERATING SEGMENTS
Business Strategy
ProLogis was originally formed in 1991 with the objective of building a
distribution and light manufacturing asset base at costs significantly below
replacement cost and a land inventory for the future development of distribution
facilities. Additionally, ProLogis intended to create a national operating
company that would differentiate itself from its competition through its ability
to meet a corporate customer's distribution facility requirements on a national,
regional and local basis. In 1997, ProLogis expanded its property operations
into Mexico and Europe to meet the needs of its targeted national and
international customers as they expanded and reconfigured their distribution
facility requirements globally. To enhance its North American property
operations and service platform, ProLogis completed a merger with Meridian
Industrial Trust Inc. ("Meridian"), a publicly held REIT, in March 1999 (the
"Meridian Merger"). The Meridian Merger added 32.2 million square feet of
operating facilities, 228 acres of land for future development and 15.2 million
cubic feet of temperature-controlled distribution facilities to ProLogis'
holdings. The Meridian Merger is discussed in Note 3 to ProLogis' Consolidated
Financial Statements in Item 8 and in "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Results of
Operations -- Meridian Merger".
Having established its core property operations business, in 1997 and 1998
ProLogis expanded its service platform by acquiring an international
temperature-controlled distribution network. Also, to enhance its corporate
distribution facilities services business, ProLogis acquired an industrial
distribution development company with extensive holdings in the United Kingdom
in August 1998.
To further its objective of increasing cash flows without the need to raise
additional capital through direct public debt and public equity offerings,
ProLogis expanded its operations in Europe through the formation of the ProLogis
European Properties Fund in September 1999 (see Note 5 to ProLogis' Consolidated
Financial Statements in Item 8). The ProLogis European Properties Fund, in which
ProLogis maintains an ownership interest, enables ProLogis to take advantage of
the growth opportunities in the European industrial distribution industry by
accessing over 1.06 billion euros (the currency equivalent of $1.07 billion as
of December 31, 1999 based on currency exchange rates quoted by Reuters) of
third party equity capital that has been committed to the ProLogis European
Properties Fund by a group of institutional investors. Formation of the ProLogis
European Properties Fund enhances the ProLogis Operating System(TM) because the
capital commitments secured through this entity will allow ProLogis to expand
its operating platform in Europe.
Additionally, in the third quarter of 1999, ProLogis sold over $550 million
of real estate assets to a limited liability company in which ProLogis has a 50%
equity interest. The formation of this company and subsequent sale of assets
allowed ProLogis to privately raise additional capital to be used for its
investment activities. See Note 5 to ProLogis' Consolidated Financial Statements
in Item 8.
Also in 1999, ProLogis formed its Integrated Solutions Group (see "--
ProLogis Operating System(TM) -- Integrated Solutions Group") with the objective
of increasing ProLogis' service income thereby growing cash flows in a less
capital intensive manner.
ProLogis' network of distribution facilities has positioned it to become
the global leader in this rapidly consolidating industry. ProLogis' three
operating segments, property operations, corporate distribution facilities
services business and temperature-controlled distribution operations, are
discussed below.
Property Operations Segment
Investments
In the property operations segment, ProLogis owned and operated (directly,
through its consolidated entities or through investments in other real estate
entities accounted for under the equity method) 1,424 industrial distribution
facilities aggregating 148.5 million square feet as of December 31, 1999.
ProLogis' investment strategy with respect to the property operations segment is
to focus its development and acquisition activities primarily on generic
distribution facilities with an average office finish level of less than 10%.
ProLogis' distribution space is adaptable for both distribution and light
manufacturing or assembly uses. ProLogis has invested in selected distribution
markets in North America and Europe where ProLogis believes the distribution
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dynamics are strong and supply and demand factors allow for high occupancy
levels and increasing rental rates. The market characteristics ProLogis
evaluates include: 1) growth in imports and exports that represent favorable
distribution growth prospects for distribution space; 2) markets possessing
long-term cost and quality of labor advantages for domestic and international
manufacturers (such as markets benefitting from the U.S./Mexico twin plant
program); and 3) markets with strong potential for distribution growth,
generally indicated by their proximity to large regional and local population
centers with good access to transportation networks, by cost advantages in terms
of transportation rates and state income and inventory taxes or by a high ratio
of distribution space per capita.
Property operations segment investment activities in 1999 included the
following:
- In March 1999, the Meridian Merger was completed which added 32.2 million
square feet of operating facilities in 25 markets in the United States.
- In August 1999, ProLogis sold 78 operating facilities aggregating 11.5
million square feet, two properties under development and two land
parcels to a limited liability company, ProLogis California I LLC
("ProLogis California"), in which ProLogis has a 50% equity interest.
ProLogis continues to manage the facilities in addition to providing
leasing and development management services to ProLogis California. See
"Item 2. Properties -- Unconsolidated Entities" and Note 5 to ProLogis'
Consolidated Financial Statements in Item 8.
- In September 1999, the ProLogis European Properties Fund began operations
with the acquisition of 12 operating facilities aggregating 2.2 million
square feet. The facilities were acquired from ProLogis and from
Kingspark Group Holdings Limited ("ProLogis Kingspark"), an entity in
which ProLogis owns 100% of the preferred stock (representing
substantially all of the economic benefits). ProLogis Kingspark develops
industrial distribution facilities in the United Kingdom. In December
1999, the ProLogis European Properties Fund acquired six additional
operating facilities aggregating 1.1 million square feet from ProLogis
and ProLogis Kingspark. ProLogis manages the assets of the ProLogis
European Properties Fund and earns fees for these services. ProLogis had
a 19.68% ownership interest in the ProLogis European Properties Fund as
of December 31, 1999. On January 7, 2000, ProLogis contributed 50.1% of
the common stock of one of its wholly owned European entities to the
ProLogis European Properties Fund. As of December 31, 1999, this entity
owned real estate with a net book value of $334.9 million (61 buildings
aggregating 6.8 million square feet) and held secured debt of $142.7
million and unsecured debt of $30.9 million. After this contribution,
ProLogis' ownership in the ProLogis European Properties Fund was
increased to 44.29%. ProLogis is committed to contributing the remaining
49.9% of the common stock of this entity to the ProLogis European
Properties Fund in January 2001. See "Item 2. Properties -- Facilities",
"Item 2. Properties--Unconsolidated Entities" and Note 5 to ProLogis'
Consolidated Financial Statements in Item 8.
- During 1999, ProLogis completed the development of 4.5 million square
feet of facilities at a total budgeted development cost of $179.8 for use
in the property operations segment. As of December 31, 1999, ProLogis had
2.7 million square feet of facilities under development with a total
budgeted development cost of $98.7 million that, upon completion, are
expected to be included in ProLogis' operating portfolio.
- Acquisitions of existing distribution facilities were limited to two
buildings in Mexico aggregating 98,000 square feet.
Operations
The property operations segment generated 85% of ProLogis' total revenues
in 1999 (including amounts recognized under the equity method with respect to
ProLogis' unconsolidated entities). This segment generated 94% of revenues in
both 1998 and 1997 (including amounts recognized under the equity method with
respect to ProLogis' unconsolidated entities). See Note 18 to ProLogis'
Consolidated Financial Statements in Item 8.
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Operational achievements in this operating segment in 1999 included the
following:
- ProLogis' stabilized industrial distribution facilities portfolio of
141.6 million square feet (including facilities directly owned, owned by
consolidated entities or owned by unconsolidated entities) was 96.52%
leased (96.02% occupied) as of December 31, 1999. Also, as of December
31, 1999, ProLogis' total operating portfolio of 148.5 million square
feet (including facilities owned by ProLogis' consolidated and
unconsolidated entities) was 94.95% leased (94.45% occupied). Stabilized
facilities are those in which capital improvements, repositioning, new
management and new marketing programs (or development and marketing, in
the case of newly developed facilities) have been in effect for a
sufficient period of time (but in no case longer than 12 months) to
achieve stabilized occupancy (typically 93%, but ranging from 90% to 95%,
depending on the submarket and product type).
- During 1999, ProLogis, its consolidated and unconsolidated entities
leased 33.2 million square feet of distribution space in 1,122
transactions. Rental rates on both new leases and renewals of leases on
previously leased space increased 15.5% in 1999 and the weighted average
customer retention rate was 68.1% in 1999.
Market Presence
The facilities in the property operations segment that are owned directly
by ProLogis or through its consolidated entities are located in 46 cities in
North America and seven cities in Europe. As of December 31, 1999, no individual
market represents more than 10% of ProLogis' total real estate assets. ProLogis'
largest markets (based on cost) are Dallas/Fort Worth (8.5%), Chicago (6.8%),
Atlanta (6.7%), Paris, France (6.3%), San Francisco (South Bay) (5.11%) and San
Francisco (East Bay) (4.9%). All of the facilities owned by ProLogis California
are located in the Los Angeles market. The 18 facilities owned by the ProLogis
European Properties Fund are located in 13 markets in Europe.
ProLogis has sought to achieve significant market presence through the
development and acquisition of master-planned distribution parks in its target
market cities and selected submarkets of those cities. The target market cities
and submarkets are selected when ProLogis' market research indicates that the
long-term demand for distribution and light manufacturing space is stable to
strong. The primary factors influencing future supply and demand for
distribution facilities in ProLogis' target market cities will be continued job
and population growth, import/export growth, related regional and local company
growth, potential for reconfiguration of existing distribution networks and
quality and cost of labor.
ProLogis defines market presence not only in terms of square feet of
facilities and acres of development land owned, but also by the extent ProLogis
has developed relationships with customers in such markets. ProLogis' operating
strategy is designed to meet the needs of today's distribution space users,
which means providing functional, cost-effective facilities with a comprehensive
level of service. ProLogis aims to shape the future trends of the industry
through innovation, service and product leadership. ProLogis believes that by
being a significant local owner and developer in a given market, it can generate
high relative rental rates and occupancy levels, primarily because it has the
ability to reduce turnover by meeting its customers' needs to either expand or
contract. With its network of industrial distribution facilities and land
positions, ProLogis is able to either relocate customers within its existing
inventory of distribution space or develop new facilities to meet the customer's
needs.
In addition, a strong market presence provides ProLogis with increased
access to potential leasing and corporate distribution facilities services
transactions. ProLogis' experience has been that many members of the industrial
brokerage community and many corporate users are motivated to develop
relationships with the significant owners and developers in a particular market
to facilitate their respective distribution needs. Having the opportunity to
compete for a large percentage of the space requirements in each market is a
crucial factor in achieving ProLogis' operating objectives.
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Competition
In general, there are numerous other industrial facilities located in close
proximity to ProLogis' facilities. The amount of rentable space available in any
market could have a material effect on ProLogis' ability to rent space and on
the rents charged. In addition, in many of ProLogis' submarkets, institutional
investors and owners and developers of industrial facilities (including other
REITs) compete for the acquisition, development and leasing of industrial space.
Many of these entities have substantial resources and experience. Competition
for acquisition of existing distribution facilities and land, both from
institutional capital sources and from other REITs, has increased over the past
several years.
Property Management
ProLogis provides active and effective management to directly serve its
customers at the local level -- a strategy that ProLogis believes will enhance
the long-term economic performance of its facilities and increase cash flow.
ProLogis' property management group seeks to provide exceptional customer
service and attention to customer needs. The group develops and implements
proprietary operating, recruiting and training systems to achieve consistent
levels of performance and professionalism throughout the ProLogis network. Of
facilities directly owned and owned by ProLogis' consolidated and unconsolidated
entities, ProLogis' property management group was managing 96.7% of ProLogis'
North American operating facilities and all of ProLogis' European facilities.
Customers
One of ProLogis' objectives is to develop a customer base in each market
that is diverse in terms of industry concentration and represents a broad
spectrum of international, national, regional and local distribution space users
who have potential for growth in demand for distribution space owned by
ProLogis. As of December 31, 1999, ProLogis (including its consolidated and
unconsolidated entities) had over 3,600 customers in 140.3 million square feet
of occupied industrial distribution space. ProLogis believes that having a large
number of customers with generic space requirements in each submarket reduces
ProLogis' exposure to overall occupancy declines. ProLogis' largest customer
accounted for less than 2% of ProLogis' 1999 rental income (on an annualized
basis) and the annualized base rent for ProLogis' 20 largest customers accounted
for approximately 14% of ProLogis' 1999 rental income (on an annualized basis).
Employees
ProLogis and its consolidated entities directly employ approximately 600
persons in North America and Europe. Of the total, approximately 350 employees
are assigned directly to the property operations segment. ProLogis' other
employees may provide assistance in this segment but are not directly assigned
to property operations. ProLogis believes its relationship with its employees to
be good. ProLogis' employees are not represented by a collective bargaining
agreement.
Seasonal Nature of the Business
The demand for industrial distribution space is not seasonal.
Future Plans
ProLogis' business plan for the property operations segment in North
America calls for development and acquisition of existing distribution
facilities to serve its customers, to enhance ProLogis' market presence in
specific submarkets and to take advantage of opportunities where ProLogis
believes it has the ability to achieve very favorable returns. ProLogis believes
that its current level of investment in this operating segment in North America,
including the facilities currently under development that will be part of the
operating portfolio upon completion, enables it to service its customers at a
high level and increase returns to shareholders.
ProLogis' market research and customer feedback identified strong demand
for distribution space in Europe as cross-border trade increases and many
companies move to consolidate and reconfigure their distribution
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networks. Consolidation and the emergence of dominant regional distribution
centers provide opportunities for ProLogis as a single-source pan-European
provider of distribution facilities. Consequently, ProLogis' business plan for
the property operations segment in Europe emphasizes growth in key distribution
markets through the ProLogis European Properties Fund, primarily from the
development of facilities within ProLogis' corporate distribution facilities
services business segment that will be sold to the ProLogis European Properties
Fund and then managed by ProLogis.
ProLogis intends to self-fund its future investment activities in the
property operations segment through operating cash flow, the disposition of
non-strategic facilities and sales to the ProLogis European Properties Fund. The
non-strategic assets are identified as those facilities that provide ProLogis
with limited opportunities to increase cash flow and returns through increases
in occupancy levels and rental rates. See the discussion of factors that could
effect the future plans of ProLogis and its consolidated and unconsolidated
entities at "Item 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition -- Risk Factors".
Corporate Distribution Facilities Services Business Segment
Investment
ProLogis operates its corporate distribution facilities services business
segment ("CDFS business") in North America directly or through a consolidated
entity in which ProLogis realizes substantially all of the economic benefits,
ProLogis Development Services Incorporated ("ProLogis Development Services")
(see "Item 2. Properties -- ProLogis Development Services"). In Europe
(excluding the United Kingdom), ProLogis directly operates its CDFS business
segment. In the United Kingdom, the CDFS business is operated by ProLogis
Kingspark, an unconsolidated entity in which ProLogis recognizes substantially
all of the economic benefits (see "Item 2. Properties -- Unconsolidated
Entities"). ProLogis' CDFS business is customer-driven in that ProLogis will
develop facilities for customers in locations desired by the customer. ProLogis
will then sell the facility and redeploy the capital into land acquisitions and
development opportunities. ProLogis does not intend to incur capital risk in
this operating segment. In situations where ProLogis' customers need a
specialized facility or need a facility in a market that ProLogis does not
consider to have favorable dynamics, ProLogis will meet the customer's needs on
a fee development basis only.
As of December 31, 1999, the CDFS business segment had 10.2 million square
feet of facilities under development with a total budgeted development cost of
$543.0 million (including 8.0 million square feet with a total budgeted
development cost of $325.5 million owned directly by ProLogis and ProLogis
Development Services). These facilities are being developed with the objective
of selling the facility to a third party or to an entity in which ProLogis has
an ownership interest. To the extent the facilities are sold to entities in
which ProLogis has an ownership interest, ProLogis' interest in the operations
of these facilities will be included in its property operations segment.
ProLogis, ProLogis Development Services and ProLogis Kingspark also earn fees
under development management agreements. During 1999, 2.1 million square feet
were developed under such agreements.
ProLogis, ProLogis Development Services and ProLogis Kingspark have land
positions (land owned or controlled through option, letter of intent,
development rights agreement or contingent contract) aggregating 4,832 acres
with the capacity for developing approximately 80.1 million square feet of
distribution facilities. Of the total land positions, 3,020 acres, with the
capacity for developing approximately 51.6 million square feet of distribution
facilities, are owned or controlled by ProLogis and ProLogis Development
Services. A significant portion of this land will be used within the CDFS
business to develop facilities that will either be sold to third parties or to
entities in which ProLogis has an ownership interest. However, some of the
acreage could be used for future developments of facilities that, when
completed, could be included in ProLogis' operating portfolio.
Investment activities in the CDFS business in 1999 included the following:
- Development starts aggregated 8.0 million square feet at a total budgeted
development cost of $498.6 million. Of these starts, 4.0 million square
feet at a total budgeted development cost of $355.8 million were in
Europe.
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- Development completions aggregated 7.6 million square feet at a total
budgeted development cost of $403.5 million (3.1 million square feet at a
total budgeted development cost of $221.4 million located in Europe).
- Land acquisitions aggregating 938.1 acres in 1999, 724.7 acres in North
America and 213.4 acres in Europe. This land can be used for the
development of approximately 16.4 million square feet of distribution
facilities.
Operations
In 1999, the CDFS business generated $70.5 million of ProLogis' total
revenues as compared to 1998 and 1997 when the CDFS business generated $20.5
million and $12.3 million of total revenues, respectively. As a percentage of
total revenues, this operating segment has grown from 4% in 1997 to over 12% in
1999. In this operating segment, ProLogis recognizes its share of the net
earnings of ProLogis Kingspark under the equity method as a component of its
total revenues ($23.9 million in 1999 and $2.9 million for the period from
acquisition on August 14, 1998 to December 31, 1998). See Note 18 to ProLogis'
Consolidated Financial Statements in Item 8.
The primary source of income in the CDFS business segment is the aggregate
profits from dispositions of facilities. In addition, income in the CDFS
business segment includes development management fees, earned primarily by
ProLogis Kingspark. The CDFS business generated funds from operations of $76.5
million in 1999 ($28.9 million in North America and $47.6 million in Europe). Of
the total European contribution to funds from operations in the CDFS business
segment, ProLogis' share of ProLogis Kingspark's funds from operations was $29.8
million in 1999. In 1998 and 1997, the CDFS business generated funds from
operations of $22.2 million and $12.3 million, respectively. All of the funds
from operations generated by the CDFS business segment were from North America
in 1998 (except for ProLogis' share of ProLogis Kingspark's funds from
operations of $4.9 million) and 1997. Funds from operations is discussed and
defined at "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Funds from Operations".
Operational achievements in the CDFS business in 1999 included the
following:
- ProLogis, ProLogis Development Services and ProLogis Kingspark sold 6.5
million square feet of facilities with net sales proceeds of $512.9
million.
- ProLogis Kingspark had 1.2 million square feet of facilities being
developed on behalf of customers under development management agreements.
Fees earned by ProLogis Kingspark under such agreements were $5.4 million
in 1999.
Market Presence
ProLogis' CDFS business spans substantially all of the property operations
markets. Currently, ProLogis has facilities under development in this operating
segment in 24 markets (including six markets in Europe) and has land positions
in 39 markets (including six markets in Europe).
Competition
There are a number of other local, regional and national developers engaged
in industrial distribution facility development in the same North American
markets that ProLogis conducts business. Competition for land acquisitions, from
both institutional capital sources and other REITs, has increased over the past
several years. The disposition market in North America is competitive and is
driven by the supply of new developments and interest rate levels.
ProLogis believes that there are no other REITs or pan-European real estate
operating companies in direct competition with their operations in Europe.
However, there are a number of local and regional developers in ProLogis' target
markets. The formation of the ProLogis European Properties Fund allows ProLogis
and ProLogis Kingspark to sell the facilities it develops in the CDFS business
to the ProLogis European Properties Fund at independently appraised values (i.e.
95% of appraised value) which minimizes the effects of competition.
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In addition, ProLogis, ProLogis Development Services and ProLogis Kingspark
believe that they have a significant competitive advantage based upon the
strategic locations of their extensive land positions owned or under control.
Also, as the only industrial distribution facilities and services provider
operating on a national, pan-European and global basis, ProLogis believes it has
differentiated itself from many of its competitors.
Customers
ProLogis leverages off its existing customer relationships, primarily
within the property operations segment and utilizes the ProLogis Operating
System(TM) in identifying and marketing its CDFS business. See "-- ProLogis
Operating System(TM)".
Employees
ProLogis and its consolidated entities directly employ approximately 600
persons in North America and Europe. Of the total, approximately 75 employees
perform development activities including activities related to the CDFS business
segment. ProLogis' other employees may provide assistance in this segment but
are not directly assigned to the CDFS business segment. ProLogis believes its
relationship with its employees to be good. ProLogis' employees are not
represented by a collective bargaining agreement.
ProLogis Kingspark employs 55 persons. ProLogis Kingspark's employees do
not participate in a collective bargaining agreement and ProLogis Kingspark
believes its relationship with its employees to be good.
Seasonal Nature of the Business
The demand for the industrial distribution facilities that are developed by
ProLogis' CDFS business is not impacted on a seasonal basis. However, the
development process can be impeded by weather, potentially delaying construction
completions, particularly during the winter months in certain markets.
Future Plans
ProLogis' objective is to utilize the capital generated in the CDFS
business to self-fund future CDFS business activities in North America and
Europe, thereby minimizing the need for ProLogis to raise additional direct
public debt and public equity capital. In addition, proceeds from the
disposition of non-strategic assets in the property operations segment can be
re-invested in higher yielding new development facilities within the CDFS
business segment. ProLogis' research indicates that favorable market conditions
are likely to continue in 2000 directly impacting this operating segment.
Specifically, a limited supply of new state-of-the-art distribution space in
Europe and the reconfiguration of supply chains necessitated by the increase in
e-commerce businesses globally should favorably impact demand for the facilities
and services provided by ProLogis within its CDFS operating segment.
ProLogis believes that significant shareholder value can be achieved by
expanding its service offerings to customers with limited need for ProLogis to
raise additional public debt and public equity capital. ProLogis will continue
to develop facilities for third parties and earn fees for these services in
2000. In addition, ProLogis has expanded the scope of the ProLogis Operating
System(TM) through the formation of the Integrated Solutions Group (see
"-- ProLogis Operating System(TM) -- Integrated Solutions Group"). The
Integrated Solutions Group will provide distribution-related services for
customers including network optimization tools, tax incentive analysis and tax
negotiation consulting, site selection and design consulting services. See the
discussion of factors that could effect the future plans of ProLogis, ProLogis
Development Services and ProLogis Kingspark at "Item 7. Management's Discussion
and Analysis of Results of Operations and Financial Condition -- Risk Factors".
Temperature-Controlled Distribution Operations
Investments
In April 1997, ProLogis expanded its services platform by acquiring CS
Integrated LLC a temperature-controlled-distribution company operating in the
United States. ProLogis recognizes substantially all of the economic benefits of
the entity that owns 100% of CS Integrated LLC (collectively, "CSI"). As of
December 31,
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1999 CSI owned or operated 54 temperature-controlled distribution facilities
aggregating 167.6 million cubic feet (including 35.5 million cubic feet of dry
distribution space located in temperature-controlled facilities) and had 4.8
million cubic feet under development in Atlanta. In January 1998, ProLogis
acquired 100% of the preferred stock of a company in which it recognizes
substantially all of the economic benefits. This company owns, through its
wholly owned subsidiaries, 100% of a temperature-controlled distribution company
headquartered in Sweden, Frigoscandia AB (collectively, "Frigoscandia"). As of
December 31, 1999, Frigoscandia, which operates in nine European countries,
owned or operated 88 temperature-controlled distribution facilities aggregating
192.3 million cubic feet and had 1.3 million cubic feet under development in
Denmark. ProLogis accounts for its investments in CSI and Frigoscandia under the
equity method. See "Item 2. Properties -- Unconsolidated Entities" and Note 5 to
ProLogis' Consolidated Financial Statements in Item 8.
In order to provide value-added supply chain management services to its
customers, CSI and Frigoscandia leverage their existing temperature-controlled
facilities network with information technology investments that increase the
velocity and visibility of inventory and information throughout the entire
supply chain. Additionally, CSI and Frigoscandia have and will continue to
expand their respective temperature-controlled capacity through expansion and
acquisition in selected markets that they believe will enhance their existing
network and provide opportunities for growth in operating profits and cash
flows. Accordingly, CSI added 53.5 million cubic feet of operating capacity in
1999, including 15.2 million cubic feet that was acquired in connection with the
Meridian Merger. The remaining increase resulted from additional capacity in the
retail dedicated segment (see "-- Operations"). Frigoscandia's cubic feet
capacity was constant throughout 1999. However, to better serve its key
customers, improvements and upgrades were made to its primary distribution
service centers in the United Kingdom, Denmark, Sweden and Germany.
During 1999, both CSI and Frigoscandia enhanced and improved their
logistics information technology systems. These systems are being coordinated on
a global basis which, when completed, will enable CSI and Frigoscandia to
maximize synergies within and between the North American operations and the
European operations.
Operations
ProLogis recognizes its share of the net earnings of CSI and Frigoscandia
under the equity method as a component of its total revenues. For 1999,
ProLogis' share of the net earnings of CSI and Frigoscandia was $6.4 million. In
1998 and 1997, ProLogis' share of the net earnings of CSI and Frigoscandia was a
loss of $186,000 and income of $3.3 million, respectively. The income in 1997
consisted entirely of income from CSI. See Note 18 to ProLogis' Consolidated
Financial Statements in Item 8. ProLogis' share of the funds from operations of
CSI and Frigoscandia was $46.1 million in 1999 as compared to $45.7 million in
1998 and $3.3 million in 1997 (CSI only). Funds from operations is discussed and
defined at "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Funds from Operations".
In 1999, CSI increased its non-asset based retail dedicated business
segment, where CSI provides all logistics services (i.e. labor and
transportation) to supermarket retailers in distribution facilities not owned by
CSI. This business segment enables CSI to increase its revenues without
significantly increasing its invested capital.
Market Presence
Market presence in the temperature-controlled distribution industry is
generally defined by the volume available for storage of frozen and chilled
foods in addition to the transportation network in place to serve its customers.
With 54 facilities and 167.6 million cubic feet in operation (including 35.5
million cubic feet of dry distribution space operated in temperature-controlled
facilities), CSI has the third largest temperature-controlled distribution
network in the United States (based on cubic feet in operation). CSI's largest
markets (based on cubic feet in operation) are Phoenix (17.8%), Southeastern
Pennsylvania (15.2%), Atlanta (9.9%), Southern California (7.0%) and Chicago
(6.6%).
Frigoscandia is the largest temperature-controlled distribution company in
Europe with 88 facilities in 12 markets and nine countries, consisting of 192.3
million cubic square feet in operation and 1.3 million cubic
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feet under development. Based on cubic feet in operation, France (36.9%), the
United Kingdom (24.0%) and Germany (14.4%) represent the largest concentrations
within Frigoscandia's service territory.
This strong market presence in both North America and Europe benefits CSI
and Frigoscandia in light of the trend toward industry consolidation. ProLogis
believes that CSI and Frigoscandia are well positioned to provide supply-chain
management services to major food manufacturers and retailers across multiple
markets.
Competition
In North America, CSI competes directly with several national
temperature-controlled distribution companies. However, the primary competition
in many markets is from local and considerably smaller warehouse operators. In
Europe, Frigoscandia has a distinct advantage over its competitors as few other
European temperature-controlled distribution companies have operations in more
than one market (as compared to the 12 markets in which Frigoscandia operates).
Additionally, Frigoscandia is the largest operator of temperature-controlled
distribution facilities in Europe, with a temperature-controlled storage volume
of approximately three times that of its closest competitor. The
temperature-controlled logistics industry has significant barriers to entry due
to its capital-intensive nature.
Customers
CSI has approximately 3,275 customers including some of the nation's
leading supermarket retailers in the United States. Of CSI's total revenues,
approximately 59% were derived from its 20 largest customers. CSI's largest
customer accounted for approximately 33% of total revenues. Frigoscandia has
approximately 6,000 customers and its largest customer accounted for
approximately 9% of total revenues. Frigoscandia's 20 largest customers
accounted for approximately 45% of total revenues.
The objective of the temperature-controlled distribution operations segment
is to develop a customer base with complementary needs to build a highly
effective consolidated supply chain for temperature-controlled foods. In
addition to the marketing efforts designed to meet this objective, CSI and
Frigoscandia have begun coordinated global marketing efforts aimed at leveraging
off their existing customer relationships with multinational companies.
Employees
CSI and Frigoscandia directly employ all employees in the
temperature-controlled distribution operations segment. CSI employs
approximately 3,700 persons in the United States, of whom approximately 41%
participate in collective bargaining agreements. Frigoscandia employs
approximately 2,800 persons in 12 European countries (including three countries
where Frigoscandia provides transportation services but has no temperature-
controlled distribution facilities), of whom approximately 80% participate in
collective bargaining agreements. Both CSI and Frigoscandia believe their
relationships with their employees to be good.
Seasonal Nature of the Business
The temperature-controlled distribution operations segment is seasonal, in
that demand for temperature-controlled distribution facilities is stronger
during the third quarter of the calendar year and is at its lowest level in the
first quarter of the calendar year. The seasonal nature of
temperature-controlled distribution operations coincides with the lower demand
for frozen foods, such as ice cream, during the winter months and the timing of
the harvests of various food crops in the third quarter of the year, which
increases the demand for temperature-controlled storage capacity during that
time.
Future Plans
ProLogis believes that the overall temperature-controlled logistics
industry supply and demand trends are positive and signal continued
consolidation, optimization and globalization. ProLogis views its investments in
CSI and Frigoscandia as one temperature-controlled distribution network
delivering worldwide temperature-controlled logistics solutions to national,
pan-European and global customers. Expansion into new markets in
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North America and Europe will be considered to the extent that such expansion is
necessary to enable CSI and Frigoscandia to expand its services to the major
food manufacturers and retailers that operate across multiple markets and
internationally. These expansions are expected to be principally funded with
internal capital generated from the operations of each company. Strong emphasis
in the year 2000 will be placed on the global marketing of the varied service
offerings that CSI and Frigoscandia can provide to customers who can benefit
from a single-source global temperature-controlled logistics provider.
Additionally, investments in information technology in 2000 will enhance the
operation of both CSI and Frigoscandia by upgrading their warehouse management
systems and labor management systems thereby improving productivity and service
quality. These efforts will provide CSI and Frigoscandia with opportunities to
increase their service offerings, including integrated supply chain management,
transportation services and retail dedicated services without the need for
significant additional capital investments from ProLogis. See the discussion of
factors that could effect the future plans of ProLogis, CSI and Frigoscandia at
"Item 7. Management's Discussion and Analysis of Results of Operations and
Financial Condition -- Risk Factors".
PROLOGIS OPERATING SYSTEM(TM)
The cornerstone of ProLogis' business strategy is the ProLogis Operating
System(TM). The ProLogis Operating System(TM) is comprised of the Market
Services Group, the Global Services Group, the Global Development Group and the
newly formed Integrated Solutions Group. The ProLogis Operating System(TM) is a
customer service delivery system that has been designed to provide substantial
benefits to existing and prospective ProLogis customers, including:
- Relocation Capability. Because user requirements can change frequently,
ProLogis' presence in over 50 North American and European markets permits
ProLogis to accommodate the reconfiguration needs of its customers by
relocating an existing customer within a market or between markets both
nationally and globally.
- Expansion Capability. ProLogis, through its development program, land
inventory and existing facilities, can work effectively with existing and
prospective customers whose growing business needs require them to expand
their distribution facilities. This expansion may result in relocating
the customer to larger ProLogis spaces within a market or in developing a
facility specifically for the customer.
- Development Capability. ProLogis' team of development professionals
builds generic facilities that will appeal to a wide variety of customers
or to specifically meet ProLogis' customers' needs. ProLogis incorporates
the latest technology with respect to building design and building
systems and has developed consistent standards and procedures that it
strictly adheres to in the development of all of its facilities.
- Centrally Coordinated Program. ProLogis provides a single point of
contact for multi-location global users of distribution facilities
through the Global Services Group, whose members are responsible for
building long-term customer relationships and ensuring that all of
ProLogis' services and products are consistent in quality. ProLogis'
experience to date suggests that many major corporate customers are
limiting the number of services providers that they work with to meet
their distribution facility requirements.
The customer focus of the ProLogis Operating System(TM) provides for a
high-quality service level and a single point of contact for distribution
solutions on a global basis and positions ProLogis to build customer
relationships that will generate additional business opportunities.
Market Services Group
The Market Services Group is comprised of five senior officers, 23 market
officers, three country officers in Europe and approximately 315 property
management and leasing employees. ProLogis' market officers have extensive
experience in marketing distribution space and are responsible for understanding
the needs of existing and prospective customers in their respective markets. To
meet such needs, market officers utilize their extensive knowledge of local
market conditions, including the cost and availability of alternative space, and
are supported by their team of property management and leasing professionals. A
key role of the market officers is assisting the
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Global Services Group in identifying ProLogis' customers with multiple market
requirements. ProLogis believes that the market officers' access to national and
international ProLogis resources improves their ability to serve customers in
the local market.
Market officers do not develop projects or borrow or commit capital. Their
focus is strictly on managing the facilities in their markets, creating and
maintaining relationships with distribution space users and industrial brokers,
marketing ProLogis' products and identifying potential acquisition, development
and leasing opportunities in their target market cities.
Global Services Group
The Global Services Group, comprised of 16 employees, is dedicated to
providing service to the largest users of distribution space that ProLogis has
identified as targeted customers, with the primary focus on making ProLogis the
preferred provider of distribution space to these companies. The Global Services
Group is headquartered in Denver and Amsterdam and has regional offices in
Atlanta, Chicago, the Los Angeles metropolitan area and the New York City
metropolitan area. A key function of this group is identifying companies whose
reconfiguration and expansion plans will create future development or multiple
market opportunities to meet these customers' needs. Global Services Group
professionals build long-term relationships with ProLogis' customers and provide
a single point of contact to simplify and streamline the execution of such
customers' distribution space plans. An ancillary benefit of this extensive
contact with customers is the ability to be on the forefront of international
and national distribution and logistics trends.
Global Development Group
The Global Development Group, comprised of 72 employees, focuses
substantial research and development efforts on creating industry-leading
master-planned distribution parks and facilities. Members of the Global
Development Group have extensive experience in the development and construction
of these facilities.
The Global Development Group is comprised principally of architects,
engineers and construction professionals who oversee every aspect of the land
planning and building design processes. These professionals also monitor the
construction process and oversee the performance of third-party general
contractors. The Group's development specialists and project managers operate
regionally to better serve their markets. The project managers supervise each
project with oversight from ProLogis' management, pursuant to uniform standards,
procedures and specifications that have been carefully designed to achieve
consistent quality.
ProLogis believes the depth and breadth of experience within the Global
Development Group enhances the effectiveness of the Global Services Group and
provides the market officers with a distinct competitive advantage for
development opportunities in their respective markets.
Integrated Solutions Group
The Integrated Solutions Group, currently comprised of four employees,
coordinates a menu of value-added customer services including supply chain
optimization, strategic site selection, business location services and design
build/fee development. The Integrated Solutions Group was formed in August 1999
to further develop ProLogis' ability to service all areas of its customer's
distribution needs. ProLogis believes that the offering of these additional
services will allow ProLogis to deepen its customer relationships with
relatively small additional capital requirements.
FINANCING STRATEGY
ProLogis believes that a successful real estate operating company should
have the ability to access the equity and debt markets efficiently and
expeditiously to permit it to capitalize on business opportunities within each
of its operating segments. ProLogis funded its capital requirements in 1999 with
internally generated capital, asset sales, private equity, public debt and other
debt financing transactions. Historically, ProLogis has utilized and will
continue to utilize the borrowing capacity available through its unsecured lines
of credit to finance investment opportunities as they arise pending completion
of asset sales and longer-term debt or equity financing
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arrangements. ProLogis' total debt as a percentage of total undepreciated book
capitalization was 43.0% as of December 31, 1999.
During 1999, the following financing activities were completed:
- ProLogis completed a series of secured debt financing transactions with
aggregate principal of $466.0 million at an average interest rate of
7.34% ($182.0 million of this debt was assumed by ProLogis California
when the company was formed -- see Note 5 to ProLogis' Consolidated
Financial Statements in Item 8).
- ProLogis completed a $500.0 million unsecured public debt offering in
April 1999, at an average interest rate of 6.90%.
- ProLogis' U.S. dollar denominated, short-term borrowing capacity was
increased from $375.0 million to $575.0 million. ProLogis' average
interest rate on the $45.0 million of outstanding borrowings on the U.S.
dollar denominated unsecured lines of credit as of December 31, 1999 was
7.46%.
- A multi-currency line of credit in the currency equivalent of 325.0
million euros (the currency equivalent of $327.3 million as of December
31, 1999 based on currency exchange rates quoted by Reuters) was put in
place. The outstanding borrowings as of December 31, 1999 of 53.3 million
euros (the currency equivalent of $53.7 million as of December 31, 1999
based on currency exchange rates quoted by Reuters) were at a weighted
average interest rate of 4.25%.
- Formation of the ProLogis European Properties Fund which will allow
ProLogis to access over 1.06 billion euros (the currency equivalent of
$1.07 billion as of December 31, 1999 based on currency exchange rates
quoted by Reuters) of third party equity capital committed by a group of
institutional investors. This capital is to be used to fund acquisitions
of industrial distribution facilities in Europe from ProLogis, ProLogis
Kingspark or third parties. Of the total commitment, 182.6 million euros
(the currency equivalent of $184.0 million as of December 31, 1999 based
on currency exchange rates quoted by Reuters) was funded through December
31, 1999.
- In 1999, ProLogis disposed of 20.6 million square feet of facilities: (i)
sales of non-strategic facilities aggregated 2.6 million square feet with
net proceeds of $99.5 million; (ii) facilities sold to ProLogis
California aggregated 11.5 million square feet with total proceeds of
$538.3 million (of which 50% represented third party investment and
portions of the proceeds were received in the form of an equity interest
in ProLogis California, the assumption of $199.3 million of ProLogis debt
by ProLogis California and the issuance of $62.0 million of debt by
ProLogis California); (iii) dispositions of facilities in the CDFS
business segment to third parties aggregated 3.2 million square feet and
net proceeds of $256.4 million; and (iv) sales of facilities from
ProLogis and ProLogis Kingspark to the ProLogis European Properties Fund
aggregated 3.3 million square feet with total proceeds of $256.5 million
(of which $38.4 million was received in the form of an equity interest in
the ProLogis European Properties Fund).
PROLOGIS MANAGEMENT
ProLogis' success depends upon management's ability to provide strategic
and day-to-day management, research, investment analysis, acquisition and due
diligence, development, marketing, asset management, capital markets, asset
disposition, management information systems support and legal and accounting
services. A significant portion of these services are provided internally by
ProLogis' management, while certain other administrative services are
supplemented by or provided by Security Capital Group Incorporated ("Security
Capital"), ProLogis' largest shareholder, pursuant to an administrative services
agreement ("ASA"). The ASA supplements services performed by ProLogis personnel
including, but not limited to, payroll and human resources, cash management,
accounts payable, specified information systems support, research and insurance
services. These services are provided in exchange for a fee based on negotiated
rates for each service provided. Total fees incurred under the ASA were $3.4
million in 1999. The ASA expires on December 31, 2000.
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ProLogis believes that the quality of its management should be assessed in
light of the following factors:
- Management Depth. ProLogis has several senior executives with the
leadership, operational, investment and financial skills and experience
to oversee the entire operation of the company.
- Strategic Vision. ProLogis' management has demonstrated a strategic
vision in determining an operating and investment focus that has provided
favorable initial yields and long-term growth prospects. ProLogis'
business strategy has focused on acquiring (at prices below replacement
cost) and developing an international distribution network and a land
inventory in selected distribution markets where demographic and supply
factors have permitted high relative occupancies at increasing rents.
Through the ProLogis Operating System(TM), ProLogis believes it is the
first international operating company that has been able to address and
service a corporate customer's distribution space requirements on an
international, national, regional and local basis.
- Research Capability. ProLogis divides its target market cities into
numerous submarkets for analysis purposes. ProLogis' management has
emphasized a submarket by submarket research-based approach in
determining appropriate investment opportunities.
- Investment Committee Process. An internal investment committee provides
ProLogis with discipline and guidance to allow ProLogis to achieve its
investment goals. The 12 members of ProLogis' investment committee have
extensive years of experience in the real estate industry. The internal
investment committee evaluates all prospective investments pursuant to
uniform underwriting criteria prior to submission of investment
recommendations to the investment committee of the Board of Trustees (the
"Board").
- Acquisitions Capability/Due Diligence Process/Asset
Optimization. ProLogis has experienced senior personnel who perform
disciplined and thorough due diligence in determining whether potential
investments and divestitures meet ProLogis' long-term objectives.
ProLogis employs 24 professionals performing these functions and has
developed extensive uniform systems and procedures for analysis and due
diligence to ensure that ProLogis maximizes its investment and
divestiture opportunities.
- Development Capability. By internally developing projects, ProLogis has
captured additional value that normally escapes through sales premiums
paid to third party developers. ProLogis has approximately 115 employees
performing development activities (including 43 of ProLogis Kingspark's
employees) with significant development experience. ProLogis has engaged
in substantial development of distribution facilities (50.8 million
square feet at a total investment of $1.9 billion developed since 1991).
- Operating Capability. ProLogis believes that management can substantially
improve operating performance and achieve long-term sustainable growth in
cash flow by actively and effectively managing assets. ProLogis conceived
of and developed the ProLogis Operating System(TM) to effectively operate
ProLogis' business and provide customers with an exceptional level of
coordinated, comprehensive services, including property management,
leasing and development management services. ProLogis also provides
comprehensive asset management services provided to entities in which
ProLogis has an ownership interest.
- Capital Markets Capability. ProLogis has been able to effectively raise
equity and debt capital that has allowed it to achieve strong growth in
cash flows through investment. ProLogis enhances its ability to raise
capital and acquire assets by its ability to effectively communicate
ProLogis' strategy and performance to investors, sellers of property and
the financial media. ProLogis' personnel prepare informational materials
for and conduct periodic meetings with the investment community and
analysts.
Executive Officers and Trustees of ProLogis
Officers and Trustees of ProLogis
*K. Dane Brooksher -- 61 -- Mr. Brooksher was elected as a Trustee in
October 1993. He has been Chairman and Chief Executive Officer of ProLogis since
March 1999 and Co-Chairman and Chief Operating Officer of ProLogis from November
1993 to March 1999. Mr. Brooksher had comparable responsibilities with
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ProLogis' former management company from November 1993 to September 1997. Prior
thereto, Mr. Brooksher was Area Managing Partner and Chicago Office Managing
Partner of KPMG Peat Marwick, independent public accountants, where he served on
the Board of Directors and Management Committee and as International Development
Partner for Belgium and the Netherlands. Mr. Brooksher is also a Director of
Butler Manufacturing Company. Mr. Brooksher's term as Trustee expires in 2002.
*Stephen L. Feinberg -- 55 -- Mr. Feinberg was elected as a Trustee in
January 1993. Since 1970, he has been Chairman of the Board and Chief Executive
Officer of Dorsar Investment Co., Inc., a diversified holding company with
interests in real estate and venture capital. Mr. Feinberg is also a Director of
Security Capital Preferred Growth Incorporated, Continental Transmission
Corporation, Harvill Press Limited, St. John's College, The Santa Fe Institute,
and The Feinberg Foundation, Inc. He was formerly Chairman of the Board of St.
John's College, and a former director of Farrar, Strauss and Gioroux, Inc. (a
private publishing company), Molecular Informatics, Inc., Border Steel Mills,
Inc., Springer Building Materials Corporation, Circle K Corporation, EnerServe
Products, Inc., and Texas Commerce Bank-First State. Mr. Feinberg's term as
Trustee expires in 2001.
Donald P. Jacobs -- 72 --Mr. Jacobs was elected as a Trustee in February
1996. Mr. Jacobs has been a member of the J.L. Kellogg Graduate School of
Management of Northwestern University since 1957, and Dean since 1975. Mr.
Jacobs is a member of the Board of Directors of Commonwealth Edison and its
parent company, Unicom, Hartmarx Corporation, Terex Corporation, and CDW. He was
formerly Chairman of the Public Review Board of Andersen Worldwide. From 1990 to
1992, Mr. Jacobs was Chairman of the Advisory Committee of the Oversight Board
of the Resolution Trust Corporation for the third region; from 1975 to 1979,
Chairman of the Board of AMTRAK; from 1970 to 1971, Co-Staff Director of the
Presidential Commission on Financial Structure and Regulation; from 1963 to
1964, Senior Economist for the Banking and Currency Committee of the U.S. House
of Representatives. Mr. Jacobs' term as Trustee expires in 2001.
*Irving F. Lyons, III -- 50 -- Mr. Lyons was elected as a Trustee in March
1996. He has been President of ProLogis since March 1999 and Chief Investment
Officer from March 1997. Mr. Lyons was Co-Chairman of ProLogis from March 1997
to March 1999 and from December 1993 to March 1997, he was Managing Director.
Mr. Lyons had comparable responsibilities with ProLogis' former management
company from January 1994 to September 1997. Prior thereto, Mr. Lyons was the
Managing Partner of King & Lyons, a San Francisco Bay Area industrial real
estate development and management company, since its inception in 1979. Mr.
Lyons' term as Trustee expires in 2000.
John S. Moody -- 51 -- Mr. Moody was elected a Trustee in March 1999. He
was a director of Meridian Industrial Trust from 1996 to March 1999. Mr. Moody
is a Director and President and Chief Executive Officer of Cornerstone
Properties, Inc., a publicly held REIT that became self-advised in June 1995.
From April 1991 to June 1995, Mr. Moody was President and Chief Executive
Officer of Deutsche Bank Realty Advisors, where he was responsible for a $2
billion real estate portfolio. Deutsche Bank Realty Advisors was a wholly owned
subsidiary of Deutsche Bank AG and acted as the real estate advisor to all
Deutsche Bank-sponsored real estate in North America. Mr. Moody's professional
affiliations include the Association of Foreign Investors in U.S. Real Estate
and the Urban Land Institute. Mr. Moody's term as Trustee expires in 2001.
*William G. Myers -- 72 -- Mr. Myers was elected as a Trustee in January
1995. Mr. Myers is Chief Executive Officer of Ojai Ranch and Investment Company,
Inc., Santa Barbara, California, which he founded in 1963 (agri-business and
other investments). He was formerly a Trustee of Archstone Communities Trust, a
REIT affiliated with Security Capital and a former Director of S.E.E.
International, Itedek, Inc. and Bank of A. Levy. Mr. Myers serves as a Director
of the Library of Congress, James Madison Council; California Historical Society
Foundation; and St. Joseph's Health & Retirement Foundation. He is also a
Director of the Santa Barbara Botanic Gardens, Chalone Wine Group and The Nature
Conservancy and a Trustee of H.C.R.C. Merritt Trusts. Mr. Myers' term as Trustee
expires in 2000.
John E. Robson -- 69 -- Mr. Robson was elected as a Trustee in April 1994.
Since October 1993, Mr. Robson has served as Senior Advisor of Robertson
Stephens, a San Francisco based investment banking firm. From 1989 to 1992, Mr.
Robson served as Deputy Secretary of the United States Treasury. From 1986 to
1989, Mr. Robson was Dean and Professor of Management, Emory University School
of Business Administration. From 1977 to 1985, he served as President and Chief
Executive Officer and as Executive Vice President of
16
<PAGE> 19
G.D. Searle & Co. (pharmaceutical and consumer products). Mr. Robson is
currently a director of Exide Corporation, Monsanto Company and Northrop Grumman
Corporation. Mr. Robson's term as Trustee expires in 2000.
*Kenneth N. Stensby -- 60 -- Mr. Stensby was elected as a Trustee in March
1999. He was a director of Meridian Industrial Trust from 1996 to March 1999.
Mr. Stensby was President and Chief Executive Officer of United Properties, a
large Minneapolis-based diversified real estate company, from 1974 until his
retirement in January 1995. Mr. Stensby is past President of the National
Association of Industrial and Office Parks and was a director of First Asset
Realty Advisors, a pension advisory subsidiary of First Bank of Minneapolis. Mr.
Stensby is currently a director of Corner House. Mr. Stensby's term as Trustee
expires in 2002.
J. Andre Teixeira -- 47 -- Mr. Teixeira was appointed as a Trustee in
February 1999. He is President of Coca-Cola for the Russia/Ukraine Region. He is
also General Manager for Coca-Cola Russia, Ukraine and Belarus. Mr. Teixeira
also serves as Head of Representation for the Coca-Cola Export Corporation,
Moscow. From 1995 to 1998, Mr. Teixeira was Director of the Development Center,
Europe, for Coca-Cola Greater Europe, Director, Brussels Operations, Coca-Cola
Greater Europe, and Managing Director, Coca-Cola Services S.A. Mr. Teixeira was
the Africa Group Account Executive, Development, for Coca-Cola from 1994 to
1995, and Director, Research & Development, Coca-Cola Greater Europe from 1990
to 1995. Mr. Teixeira's term as Trustee expires in 2001.
*Thomas G. Wattles -- 48 -- Mr. Wattles was elected as a Trustee in January
1993. He was a Director of ProLogis' predecessor since its formation in June
1991. Mr. Wattles was Non-Executive Chairman of ProLogis from March 1997 to May
1998. Mr. Wattles was Co-Chairman and Chief Investment Officer of ProLogis from
November 1993 to March 1997, and had comparable responsibilities with ProLogis'
former management company from June 1991 to September 1997. Mr. Wattles is
currently a director of Security Capital, Urban Growth Properties Trust, CWS
Communities Trust and Security Capital-European Realty (all affiliates of
Security Capital). Mr. Wattles' term as Trustee expires in 2002.
Members of ProLogis' investment committee are designated by an asterisk
(*).
Senior Officers
*Jeffrey H. Schwartz -- 40 -- Vice Chairman for International Operations
since June 1999, where he has overall responsibility for all international
investment activities and operations. Mr. Schwartz was Senior Managing Director
and Chief Investment Officer for International Operations of ProLogis from
December 1998 to June 1999. Mr. Schwartz was Managing Director of ProLogis from
December 1994 to December 1998; he had comparable responsibilities with
ProLogis' former management company from October 1994 to September 1997. Prior
thereto, Mr. Schwartz was a founder and managing partner of The Krauss/Schwartz
Company, one of the largest industrial real estate developers in Florida. Mr.
Schwartz has been a Director of Security Capital European Realty since November
1997.
*Walter C. Rakowich -- 42 -- Managing Director and Chief Financial Officer
of ProLogis since December 1998, where he is responsible for worldwide corporate
finance. From December 1997 to December 1998, Mr. Rakowich was Managing Director
of ProLogis. Mr. Rakowich had comparable responsibilities with ProLogis' former
management company from July 1994 to September 1997. Prior thereto, Mr. Rakowich
was a consultant to ProLogis in the area of due diligence and acquisitions from
October 1993 to June 1994.
*John W. Seiple -- 41 -- Managing Director of ProLogis since December 1997,
where he has been Chief Operating Officer for North American operations since
December 1998. From November 1994 to December 1997, Mr. Seiple was Senior Vice
President of ProLogis and from October 1993 to September 1997, he had comparable
responsibilities with ProLogis' former management company.
*Robert J. Watson -- 50 -- Managing Director of ProLogis since January
1993, where he has been the Chief Operating Officer for European operations
since December 1998; he was formerly the Chief Operating Officer for North
American operations. From January 1993 to September 1997, he had comparable
responsibilities with ProLogis' former management company.
17
<PAGE> 20
*Ned K. Anderson -- 53 -- Managing Director of ProLogis since December
1998, where he has responsibility for the Pacific Region of the United States;
from December 1993 to December 1998, Mr. Anderson was Senior Vice President of
ProLogis. Mr. Anderson had comparable responsibilities with ProLogis' former
management company from September 1994 to September 1997. Prior thereto, Mr.
Anderson was a partner at King & Lyons, a San Francisco Bay Area industrial real
estate development and management company.
Paul C. Congleton -- 45 -- Managing Director of ProLogis since September
1999, where he heads the Global Services Group. Mr. Congleton was a Senior Vice
President of ProLogis from December 1998 to September 1999, where he has
responsibility for the Southeast Region. Mr. Congleton was Vice President of
ProLogis from January 1995 to December 1998; from January 1995 to September
1997, he had comparable responsibilities with ProLogis' former management
company. Prior thereto, from October 1990 to December 1994, he was Principal
with Overland Company.
*Steven K. Meyer -- 51 -- Managing Director of ProLogis since December
1998, where he has responsibility for the Central Region of the United States.
Mr. Meyer was Senior Vice President of ProLogis from December 1995 to December
1998. Mr. Meyer had comparable responsibilities with ProLogis' former management
company from September 1994 to September 1997. Prior thereto, from 1990 to July
1994, Mr. Meyer was Executive Vice President with Trammell Crow Company.
Robin P. R. von Weiler -- 43 -- Managing Director and Regional Head of
ProLogis since December 1999, where he is responsible for Northern and Central
Europe. Mr. von Weiler was a Senior Vice President of ProLogis from October 1997
to December 1999, where he was responsible for global services and marketing in
Northern Europe. Prior thereto, from April 1972 to September 1997, he was with
DTZ Zadelhoff V.O.F., where his most recent position was Vice Managing Director,
Real Estate Agent and Corporate Advisor. Mr. von Weiler is a registered Real
Estate Agent and a Member of the Dutch Real Estate Agents Association.
Frank H. Fallon -- 38 -- Senior Vice President of ProLogis since September
1999, where he has responsibility for the Southeast Region of the United States.
From January 1995 to September 1999, Mr. Fallon was Vice President of ProLogis;
from September 1995 to September 1997, he had comparable responsibilities with
ProLogis' former management company. Prior thereto, from March 1987 to December
1994, Mr. Fallon was with Trammell Crow Company
Kent W. Johnson -- 46 -- Senior Vice President of ProLogis since July 1995,
where he heads the Integrated Solutions Group; from July 1995 to September 1997,
he headed the Global Services Group for ProLogis' former management company.
Prior thereto, from March 1994 to June 1995, Mr. Johnson was National Director
for Sequent Computer Systems; from January 1977 to March 1994, he held various
positions with IBM, including National Account Director and Branch Manager.
M. Gordon Keiser, Jr. -- 55 -- Senior Vice President of ProLogis since
October 1995 and Treasurer since December 1998, where he is responsible for
relationships with ProLogis lenders; from October 1995 to September 1997, he had
comparable responsibilities with ProLogis' former management company. Prior
thereto, from August 1988 to October 1995, Mr. Keiser was Senior Vice President
of JMB Realty Corporation, where he was responsible for corporate finance and
capital markets financing. Previously, he was with KPMG Peat Marwick.
Edward F. Long -- 43 -- Senior Vice President and Controller of ProLogis
since December 1998, where he is responsible for worldwide accounting, financial
reporting and financial forecasting. From January 1996 to December 1998, Mr.
Long was Vice President and Controller of ProLogis; from June 1995 to September
1997, he had comparable responsibilities with ProLogis' former management
company. Prior thereto, from December 1990 to June 1995, he was Director of
Financial Services for Coopers & Lybrand in Central Florida and the Carolinas.
Mr. Long is a Certified Public Accountant.
Debra A. McRight -- 40 -- Senior Vice President of ProLogis since December
1999, where she is responsible for national property management operations. From
September 1995 to December 1999, Ms. McRight was Vice President of ProLogis;
from September 1995 to September 1997, she had comparable responsibilities with
ProLogis' former management company. Prior thereto, from June 1989 to February
1995, she was with Paragon Group, Inc.
18
<PAGE> 21
David S. Morze -- 39 -- Senior Vice President of ProLogis since March 1999,
where he has responsibility for the Mid-Atlantic Region of the United States.
Mr. Morze was Vice President of ProLogis from March 1995 to December 1998; from
March 1995 to September 1997, he had comparable responsibilities with ProLogis'
former management company. Prior thereto, from May 1993 to March 1995, Mr. Morze
was employed by the SARES*REGIS GROUP of Northern California, where he was
responsible for marketing and leasing activities in the San Francisco Eastbay
Industrial Market.
Edward S. Nekritz -- 34 -- Senior Vice President of ProLogis since December
1998 and Secretary since March 1999, where he serves as General Counsel and
oversees the provision of all legal services for ProLogis. Mr. Nekritz also
focuses on strategic initiatives and is responsible for the coordination of
ProLogis' international leasing and environmental compliance programs. From
September 1995 to December 1998, Mr. Nekritz was Vice President of ProLogis;
from September 1995 to September 1997, he had comparable responsibilities with
ProLogis' former management company. Prior thereto, from October 1990 to
September 1995, Mr. Nekritz was an attorney with Mayer, Brown & Platt.
John R. Rizzo -- 50 -- Senior Vice President of ProLogis since January
1999, where he supervises development services related to construction
management and corporate distribution facilities. Prior thereto, from 1983 to
January 1999, Mr. Rizzo was with the Perini Corporation, where his most recent
position was Senior Vice President and Chief Operating Officer of Perini
Management Services Incorporated.
ENVIRONMENTAL MATTERS
Under various federal, state and local laws, ordinances and regulations, a
current or previous owner, developer or operator of real estate may be liable
for the costs of removal or remediation of certain hazardous or toxic substances
at, on, under or in its property. The costs of removal or remediation of such
substances could be substantial. Such laws often impose liability without regard
to whether the owner or operator knew of, or was responsible for, the release or
presence of such hazardous substances. The presence of such substances may
adversely affect the owner's ability to sell such real estate or to borrow using
such real estate as collateral. ProLogis has not been notified by any
governmental authority of any non-compliance, liability or other claim in
connection with any of the properties owned or being acquired as of December 31,
1999, and ProLogis is not aware of any environmental condition with respect to
any of its properties that is likely to be material. ProLogis or the predecessor
owners have subjected each of its properties to an environmental assessment
(which does not involve invasive procedures such as soil sampling or ground
water analysis) by independent consultants. While some of these assessments have
led to further investigation and sampling, none of the environmental assessments
has revealed, nor is ProLogis aware of, any environmental liability (including
asbestos-related liability) that ProLogis believes would have a material adverse
effect on its business, financial condition or results of operations. No
assurance can be given, however, that these assessments and investigations
reveal all potential environmental liabilities, that no prior owner or operator
created any material environmental condition not known to ProLogis or the
independent consultants or that future uses or conditions (including, without
limitation, customer actions or changes in applicable environmental laws and
regulations) will not result in unreimbursed costs relating to environmental
liabilities.
INSURANCE COVERAGE
ProLogis and its consolidated and unconsolidated entities currently carry
comprehensive insurance coverage including, liability, fire, flood, earthquake,
environmental, extended coverage and rental loss as appropriate for the markets
where each entities' facilities and business operations are located. The
insurance coverage contains policy specifications and insured limits customarily
carried for similar facilities. ProLogis believes its facilities and the
facilities of its consolidated and unconsolidated entities are adequately
insured; however, an uninsured loss could result in loss of capital investment
and anticipated profits.
19
<PAGE> 22
ITEM 2. PROPERTIES
INDUSTRIAL DISTRIBUTION FACILITIES
ProLogis and its consolidated entities (see -- "Consolidated
Entities -- Partnerships") have invested primarily in generic industrial
distribution facilities with an average office finish level of less than 10%.
Due to the costs associated with retrofitting customer spaces, service center
product has been acquired only on a very limited basis, generally as part of
portfolio acquisitions in which the majority of product being acquired was bulk
distribution. ProLogis' industrial real estate is typically used for storage,
packaging, assembly, distribution and light manufacturing of consumer and
industrial products.
- Distribution. ProLogis' distribution space is adaptable for both bulk
distribution and light manufacturing or assembly uses. Based upon square
footage, ProLogis' operating portfolio was comprised of 88.1% bulk
distribution and 10.5% light manufacturing facilities as of December 31,
1999.
- Service Center and Other. Under ProLogis' definition, service centers are
multi-customer buildings that have a higher percentage of office space
than distribution facilities and only have grade-level loading as opposed
to truck dock loading. As of December 31, 1999, service center product
constituted approximately 1.1% of the square feet in ProLogis' operating
portfolio and other miscellaneous facilities (primarily office
facilities), acquired as part of portfolio acquisitions, constitute 0.3%
of the square feet in ProLogis' operating portfolio.
GEOGRAPHIC DISTRIBUTION
ProLogis and its consolidated entities (see -- "Consolidated
Entities -- Partnerships") have direct ownership of industrial distribution
facilities in North America and Europe. In North America (United States and
Mexico), ProLogis' facilities are located in 25 states and the District of
Columbia and 46 cities (including four cities in Mexico). In Europe, ProLogis'
facilities are located in four countries and seven cities. The table below
demonstrates the geographic distribution of ProLogis' portfolio (operating
facilities and facilities under development). The table excludes land held for
future development which represents less than 5% of ProLogis' total investment,
based on cost as of December 31, 1999 and 1998. The table does not include
facilities that are owned by ProLogis' unconsolidated entities which are
discussed under " -- Unconsolidated Entities".
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
--------------------------- ---------------------------
PERCENTAGE PERCENTAGE
NUMBER OF ASSETS BASED NUMBER OF ASSETS BASED
FACILITIES ON COST(1) FACILITIES ON COST(1)
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
NORTH AMERICAN MARKETS:
Atlanta, Georgia........................ 103 6.20% 104 7.15%
Austin, Texas........................... 33 1.53 37 2.22
Birmingham, Alabama..................... 6 0.69 6 0.96
Charlotte, North Carolina............... 32 2.28 29 2.41
Chattanooga, Tennessee.................. 5 0.30 5 0.43
Chicago, Illinois....................... 64 6.25 40 4.89
Cincinnati, Ohio........................ 46 3.04 43 3.15
Columbus, Ohio.......................... 32 4.43 21 2.10
Dallas/Fort Worth, Texas................ 120 8.31 71 5.07
Denver, Colorado........................ 28 1.82 26 2.46
Detroit, Michigan....................... 21 0.78 4 0.14
East Bay (San Francisco), California.... 54 4.59 44 3.55
El Paso, Texas.......................... 22 1.56 27 2.33
Fort Lauderdale/Miami, Florida.......... 16 1.58 11 1.49
Houston, Texas.......................... 84 4.29 74 4.73
I-95 Corridor, New Jersey............... 35 4.27 21 3.89
Indianapolis, Indiana................... 45 2.85 41 3.15
Juarez, Mexico.......................... 6 0.27 4 0.26
</TABLE>
20
<PAGE> 23
<TABLE>
<CAPTION>
DECEMBER 31, 1999 DECEMBER 31, 1998
--------------------------- ---------------------------
PERCENTAGE PERCENTAGE
NUMBER OF ASSETS BASED NUMBER OF ASSETS BASED
FACILITIES ON COST(1) FACILITIES ON COST(1)
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Kansas City, Kansas/Missouri............ 29 1.14 29 1.57
Las Vegas, Nevada....................... 18 2.18 14 1.50
Los Angeles/Orange County,
California(2)........................ 4 0.95 29 6.38
Louisville, Kentucky.................... 10 1.19 8 0.97
Memphis, Tennessee...................... 40 2.80 25 2.13
Monterrey, Mexico....................... 10 0.90 8 1.04
Nashville, Tennessee.................... 31 1.72 27 1.66
Oklahoma City, Oklahoma................. 6 0.21 6 0.29
Orlando, Florida........................ 23 1.73 17 1.16
Phoenix, Arizona........................ 32 1.63 25 1.32
Portland, Oregon........................ 26 1.42 29 2.11
Reno, Nevada............................ 19 1.50 17 1.29
Reynosa, Mexico......................... 12 0.77 8 0.67
Rio Grande Valley, Texas................ 14 0.49 15 0.85
Salt Lake City, Utah.................... 10 1.16 9 1.46
San Antonio, Texas...................... 47 2.08 46 2.70
San Diego, California................... -- -- 3 0.38
Seattle, Washington..................... 15 1.21 10 1.34
South Bay (San Francisco), California... 72 4.68 70 6.06
St. Louis, Missouri..................... 15 0.95 15 1.13
Tampa, Florida.......................... 62 2.52 62 3.41
Tijuana, Mexico......................... 4 0.42 2 0.26
Tulsa, Oklahoma......................... 9 0.23 10 0.37
Washington D.C./Baltimore, Maryland..... 40 3.05 39 3.98
Other................................... 3 0.13 4 0.32
----- ------ ----- ------
1,303 90.10 1,135 94.73
----- ------ ----- ------
EUROPEAN MARKETS(3)(4)(5):
Amsterdam, Netherlands.................. 1 0.20 4 1.18
Cologne, Germany........................ 1 0.33 -- --
Lille, France........................... 2 0.15 -- --
London, England......................... -- -- 1 0.97
Lyon, France............................ 3 0.50 3 0.62
Paris, France........................... 57 6.36 4 0.82
Rotterdam, Netherlands.................. 3 0.52 2 0.45
Warsaw, Poland.......................... 9 1.84 5 1.23
----- ------ ----- ------
76 9.90 19 5.27
----- ------ ----- ------
Total........................... 1,379(6) 100.00% 1,154(7) 100.00%
===== ====== ===== ======
</TABLE>
- ---------------
(1) Facilities under development are reflected at their total budgeted
development cost, rather than cost incurred to date.
(2) In 1999, does not include 78 buildings owned by ProLogis California, an
unconsolidated entity in which ProLogis has a 50% ownership interest as of
December 31, 1999. See "-- Unconsolidated Entities" for additional
information on these facilities.
(3) In 1999, does not include 18 buildings owned by the ProLogis European
Properties Fund, an unconsolidated entity in which ProLogis has a 19.68%
ownership interest as of December 31, 1999. See "-- Unconsolidated Entities"
for additional information on these facilities.
21
<PAGE> 24
(4) Does not include facilities owned by ProLogis Kingspark (15 operating
facilities and 14 facilities under development as of December 31, 1999 and
15 operating facilities and five facilities under development as of December
31, 1998), an unconsolidated entity in which ProLogis recognizes
substantially all of the economic benefits. See "-- Unconsolidated
Entities".
(5) On January 7, 2000, ProLogis contributed 50.1% of the common stock of one of
its wholly owned European entities to the ProLogis European Properties Fund
and is committed to contributing the remaining 49.9% of the common stock to
the ProLogis European Properties Fund in January 2001. This entity owned 61
facilities (54 facilities in Paris, five facilities in Warsaw, one facility
in Lyon and one facility in Rotterdam) representing approximately 6.9% of
ProLogis' assets (operating facilities and facilities under development).
(6) Includes 51 buildings under development.
(7) Includes 55 buildings under development.
FACILITIES
The information in the following table is as of December 31, 1999 for the
facilities owned by ProLogis and its consolidated entities in North America and
Europe. No individual facility or group of facilities operated as a single
business unit amounted to 10% or more of ProLogis' consolidated total assets as
of December 31, 1999 or generated gross revenue equal to 10% or more of
ProLogis' consolidated gross revenues for the year ended December 31, 1999. The
table does not include facilities that are owned by ProLogis' unconsolidated
entities which are discussed under "-- Unconsolidated Entities".
<TABLE>
<CAPTION>
PERCENTAGE RENTABLE
NO. OF OCCUPANCY SQUARE FOOTAGE INVESTMENT ENCUMBRANCES
BLDGS. (1) (2) (3) (4)
------ ---------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
OPERATING FACILITIES OWNED AS OF
DECEMBER 31, 1999(5):
NORTH AMERICAN MARKETS:
Atlanta, Georgia........... 102 90.63% 10,387,479 $ 309,214,441 $ 39,067,157
Austin, Texas.............. 33 95.09 2,041,409 77,048,515 --
Birmingham, Alabama........ 6 97.87 1,135,278 34,390,764 --
Charlotte, North
Carolina(6).............. 30 95.56 3,802,670 108,347,568 40,805,692
Chattanooga, Tennessee..... 5 100.00 1,147,872 15,154,843 --
Chicago, Illinois(7)....... 64 92.54 8,035,702 313,788,625 46,374,007
Cincinnati, Ohio(8)........ 45 94.05 4,726,802 146,293,557 40,497,330
Columbus, Ohio............. 31 100.00 6,160,622 212,409,143 40,735,793
Dallas/Fort Worth,
Texas(6)(8)(9)........... 118 92.93 12,024,827 389,544,811 68,624,175
Denver, Colorado(6)........ 26 96.99 3,084,301 82,583,116 --
Detroit, Michigan.......... 21 85.76 820,932 39,376,762 --
East Bay (San Francisco),
California(6)(10)........ 53 99.47 5,368,799 223,354,014 15,309,989
El Paso, Texas(6).......... 20 90.41 2,423,983 64,899,270 3,446,843
Fort Lauderdale/Miami,
Florida(7)(8)............ 14 90.03 1,437,058 67,318,075 2,137,690
Houston, Texas............. 84 93.98 7,448,797 215,263,465 47,848,401
I-95 Corridor, New
Jersey(8)................ 32 99.75 4,991,937 190,394,174 28,374,495
Indianapolis, Indiana...... 45 83.29 4,908,137 143,008,379 --
Juarez, Mexico............. 5 100.00 288,786 10,911,576 --
Kansas City,
Kansas/Missouri.......... 29 90.83 1,578,487 57,319,731 13,778,445
Las Vegas, Nevada(9)....... 17 96.76 2,061,291 100,429,463 22,941,817
Los Angeles/Orange County,
California(11)........... 3 100.00 605,548 23,775,360 --
Louisville, Kentucky....... 8 99.95 1,682,788 40,030,408 6,114,170
</TABLE>
22
<PAGE> 25
<TABLE>
<CAPTION>
PERCENTAGE RENTABLE
NO. OF OCCUPANCY SQUARE FOOTAGE INVESTMENT ENCUMBRANCES
BLDGS. (1) (2) (3) (4)
------ ---------- -------------- -------------- ------------
<S> <C> <C> <C> <C> <C>
Memphis, Tennessee......... 39 95.45 5,415,819 130,757,790 15,485,333
Monterrey, Mexico.......... 8 100.00 973,303 38,063,833 --
Nashville, Tennessee....... 29 94.52 3,177,349 75,764,488 --
Oklahoma City, Oklahoma.... 6 96.06 639,942 10,674,408 --
Orlando, Florida(7)(8)..... 23 81.49 2,112,100 86,696,058 12,979,216
Phoenix, Arizona........... 32 99.12 2,446,332 81,821,252 --
Portland, Oregon........... 26 85.07 1,957,295 71,336,274 414,479
Reno, Nevada............... 17 91.85 1,556,786 47,198,323 --
Reynosa, Mexico............ 9 90.03 765,674 25,378,728 --
Rio Grande Valley
(Brownsville), Texas..... 14 94.72 916,746 24,714,456 2,877,600
Salt Lake City, Utah....... 9 100.00 1,890,268 53,008,891 --
San Antonio, Texas(7)...... 46 95.42 3,991,403 98,538,471 --
Seattle, Washington........ 15 98.59 1,390,447 60,910,418 4,985,349
South Bay (San Francisco),
California(10)........... 72 97.21 3,768,371 235,215,326 20,116,111
St. Louis, Missouri(6)..... 15 86.84 1,621,825 47,631,368 9,906,808
Tampa, Florida(7)(8)(10)... 61 91.67 3,358,403 121,270,212 31,932,890
Tijuana, Mexico............ 2 100.00 262,220 9,173,870 --
Tulsa, Oklahoma............ 9 100.00 523,463 11,754,885 --
Washington, D.C./Baltimore,
Maryland(6).............. 38 96.23 3,315,902 138,096,133 37,220,360
Other(7)(8)................ 3 100.00 193,562 6,565,883 468,592
----- ------ ----------- -------------- ------------
Subtotal North America... 1,264 94.12 126,440,715 4,239,427,127 552,442,742
----- ------ ----------- -------------- ------------
EUROPEAN MARKETS(12):
Lille, France.............. 2 52.95 219,112 7,458,220 --
Lyon, France............... 1 100.00 296,720 7,856,904 4,797,421
Paris, France.............. 54 93.46 5,802,889 290,740,988 137,932,339
Rotterdam, Netherlands..... 2 38.84 355,998 15,426,721 --
Warsaw, Poland............. 5 67.03 573,129 39,426,346 --
----- ------ ----------- -------------- ------------
Subtotal Europe(12)...... 64 87.73 7,247,848 360,909,179 142,729,760
----- ------ ----------- -------------- ------------
TOTAL OPERATING
FACILITIES OWNED AS
OF DECEMBER 31,
1999(5)............. 1,328 93.78% 133,688,563 $4,600,336,306 $695,172,502
===== ====== =========== ============== ============
</TABLE>
<TABLE>
<CAPTION>
RENTABLE BUDGETED
SQUARE DEVELOPMENT
NO. OF FOOTAGE INVESTMENT COSTS
BLDGS. (2) (3) (13)
------ ---------- ------------ ------------
<S> <C> <C> <C> <C>
FACILITIES UNDER DEVELOPMENT AS OF
DECEMBER 31, 1999(14)(15):
NORTH AMERICAN MARKETS:
Atlanta, Georgia..................... 1 51,600 1,627,001 $ 2,410,800
Charlotte, North Carolina............ 2 178,000 4,439,919 6,284,890
Cincinnati, Ohio..................... 1 205,920 4,358,008 6,420,453
Columbus, Ohio....................... 1 378,283 5,453,824 10,004,947
Dallas/Fort Worth, Texas............. 2 868,425 6,287,474 28,213,658
Denver, Colorado..................... 2 208,800 4,309,707 9,093,060
</TABLE>
23
<PAGE> 26
<TABLE>
<CAPTION>
RENTABLE BUDGETED
SQUARE DEVELOPMENT
NO. OF FOOTAGE INVESTMENT COSTS
BLDGS. (2) (3) (13)
------ ---------- ------------ ------------
<S> <C> <C> <C> <C>
East Bay (San Francisco),
California......................... 1 200,000 4,922,217 7,141,304
El Paso, Texas....................... 2 426,580 4,064,227 13,650,269
Fort Lauderdale/Miami, Florida....... 2 257,750 7,512,819 11,988,350
I-95 Corridor, New Jersey............ 3 482,720 20,332,955 24,226,111
Juarez, Mexico....................... 1 73,150 2,078,356 2,677,877
Las Vegas, Nevada.................... 1 235,520 1,960,950 8,874,076
Los Angeles/Orange County,
California......................... 1 763,228 7,733,649 24,131,163
Louisville, Kentucky................. 2 693,000 14,601,206 19,844,317
Memphis, Tennessee................... 1 360,000 1,795,590 9,790,347
Monterrey, Mexico.................... 2 194,100 3,555,654 7,164,487
Nashville, Tennessee................. 2 320,400 6,038,536 10,712,190
Reno, Nevada......................... 2 771,131 21,615,462 27,809,659
Reynosa, Mexico...................... 3 375,179 4,938,757 13,152,320
Salt Lake City, Utah................. 1 149,800 3,188,221 5,296,079
San Antonio, Texas................... 1 160,000 4,157,754 5,910,823
Tampa, Florida....................... 1 115,200 1,511,421 5,538,684
Tijuana, Mexico...................... 2 352,900 5,274,105 12,078,985
Washington, D.C./Baltimore,
Maryland........................... 2 303,200 9,057,588 15,188,967
-- ---------- ------------ ------------
Subtotal North America............. 39 8,124,886 150,815,400 287,603,816
-- ---------- ------------ ------------
EUROPEAN MARKETS:
Amsterdam, Netherlands............... 1 160,491 5,033,872 10,250,060
Cologne, Germany..................... 1 222,459 3,090,942 16,747,841
Lyon, France......................... 2 484,110 8,172,399 17,413,191
Paris, France........................ 3 415,360 12,826,942 28,795,925
Rotterdam, Netherlands............... 1 238,406 2,143,225 10,453,111
Warsaw, Poland....................... 4 1,075,321 4,086,456 52,964,592
-- ---------- ------------ ------------
Subtotal Europe.................... 12 2,596,147 35,353,836 136,624,720
-- ---------- ------------ ------------
TOTAL FACILITIES UNDER
DEVELOPMENT AS OF DECEMBER 31,
1999(14)(15).................. 51 10,721,033 $186,169,236 $424,228,536
== ========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
ACREAGE INVESTMENT ENCUMBRANCES
(2) (3) (4)
------- ------------ ------------
<S> <C> <C> <C>
LAND HELD FOR DEVELOPMENT AS OF DECEMBER 31,
1999(16)(17):
NORTH AMERICAN MARKETS:
Atlanta, Georgia................................... 98.8 $ 7,469,303 $ --
Austin, Texas...................................... 27.7 2,141,471 --
Charlotte, North Carolina.......................... 25.3 2,446,431 --
Chicago, Illinois.................................. 172.1 29,555,762 --
Cincinnati, Ohio................................... 53.9 4,174,844 --
Columbus, Ohio..................................... 77.3 2,871,689 --
Dallas/Fort Worth, Texas........................... 77.3 4,433,969 --
Denver, Colorado................................... 15.6 1,405,890 --
Detroit, Michigan.................................. 70.0 2,817,513 --
East Bay (San Francisco), California............... 38.7 5,079,463 --
El Paso, Texas..................................... 122.4 6,494,513 --
Fort Lauderdale/Miami, Florida..................... 5.5 1,219,839 --
Houston, Texas..................................... 64.9 5,289,948 --
I-95 Corridor, New Jersey.......................... 67.9 5,088,853 --
</TABLE>
24
<PAGE> 27
<TABLE>
<CAPTION>
ACREAGE INVESTMENT ENCUMBRANCES
(2) (3) (4)
------- ------------ ------------
<S> <C> <C> <C>
Indianapolis, Indiana.............................. 102.8 7,790,021 --
Juarez, Mexico..................................... 17.7 2,909,424 --
Kansas City, Kansas/Missouri....................... 16.6 1,511,000 --
Las Vegas, Nevada.................................. 76.1 7,341,610 413,038
Los Angeles/Orange County, California.............. 34.7 9,106,360 --
Louisville, Kentucky............................... 18.3 807,775 --
Memphis, Tennessee................................. 26.6 1,975,109 --
Monterrey, Mexico.................................. 3.8 125,607 --
Orlando, Florida................................... 28.1 2,788,623 --
Portland, Oregon................................... 18.0 2,857,201 --
Reno, Nevada....................................... 58.6 8,725,359 --
Reynosa, Mexico.................................... 40.2 2,485,485 --
Rio Grande Valley (Brownsville), Texas............. 14.8 439,288 --
Salt Lake City, Utah............................... 42.5 2,909,424 --
San Antonio, Texas................................. 47.5 4,472,060 --
Seattle, Washington................................ 10.6 1,916,510 --
Tampa, Florida..................................... 56.2 4,030,697 --
Tijuana, Mexico.................................... 14.1 2,869,952 --
Washington, D.C./Baltimore, Maryland............... 39.4 5,673,678 --
------- ------------ --------
Subtotal North America........................... 1,584.0 151,224,671 413,038
------- ------------ --------
EUROPEAN MARKETS:
Amsterdam, Netherlands............................. 17.9 3,517,450 --
Le Havre, France................................... 123.6 1,135,321 --
Milan, Italy....................................... 32.4 1,628,283 --
Paris, France...................................... 5.5 1,626,318 --
Rotterdam, Netherlands............................. 15.1 1,523,571 --
Warsaw, Poland..................................... 19.1 3,040,083 --
------- ------------ --------
Subtotal Europe.................................. 213.6 12,471,026 --
------- ------------ --------
TOTAL LAND HELD FOR DEVELOPMENT AS OF DECEMBER
31, 1999(16)(17)............................ 1,797.6 $163,695,697 $413,038
======= ============ ========
</TABLE>
<TABLE>
<CAPTION>
RENTABLE BUDGETED
SQUARE DEVELOPMENT
NO. OF ACREAGE FOOTAGE INVESTMENT COST ENCUMBRANCES
BLDGS. (2) (2) (3) (13) (4)
------ ------- ----------- -------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
GRAND TOTALS AS OF DECEMBER 31,
1999:
Operating Facilities............ 1,328 n/a 133,688,563 $4,600,336,306 n/a $695,172,502
Facilities Under Development.... 51 n/a 10,721,033 186,169,236 $424,228,536 n/a
Land Held for Development....... n/a 1,797.6 n/a 163,695,697 n/a 413,038
----- ------- ----------- -------------- ------------ ------------
Totals................... 1,379 1,797.6 144,409,596 $4,950,201,239(18) $424,228,536 $695,585,540
===== ======= =========== ============== ============ ============
</TABLE>
- ---------------
(1) Percentage Occupancy is physical occupancy for the facility as of December
31, 1999. Operating facilities as of December 31, 1999 include recently
completed development facilities in initial lease-up (1.3 million square
feet completed in the fourth quarter of 1999) which impacts the overall
occupancy percentage as of December 31, 1999.
(2) Square footage is shown for operating facilities and facilities under
development; acreage is shown for land held for future development and land
subject to fixed price options and rights of first refusal.
(3) ProLogis investment is as of December 31, 1999 and represents ProLogis'
historical cost.
25
<PAGE> 28
(4) Certain facilities are pledged as collateral under ProLogis' mortgage
notes, assessment bonds and securitized debt as of December 31, 1999. See
Schedule III-Real Estate and Accumulated Depreciation to ProLogis'
Consolidated Financial Statements in Item 8 for specific facilities
pledged.
(5) All assets are utilized in the property operations segment. See "Item
1 -- Business -- ProLogis Trust".
(6) Includes facilities owned by ProLogis Limited Partnership-II at 100%. See
-- "Partnerships".
(7) Includes facilities owned by ProLogis Limited Partnership-III at 100%. See
-- "Partnerships".
(8) Includes facilities owned by ProLogis Limited Partnership-IV at 100%. See
-- "Partnerships".
(9) Includes facilities owned by MDN/JSC II Limited Partnership at 100%. See
-- "Partnerships".
(10) Includes facilities owned by ProLogis Limited Partnership-I at 100%. See
-- "Partnerships".
(11) Includes a facility owned by Meridian Realty Partners Limited Partnership
at 100%. See -- "Partnerships".
(12) On January 7, 2000, ProLogis contributed 50.1% of the common stock of one
of its wholly owned European entities to the ProLogis European Properties
Fund and is committed to contributing the remaining 49.9% of the common
stock to the ProLogis European Properties Fund in January 2001. This
European entity owned the following facilities as of December 31, 1999:
<TABLE>
<CAPTION>
RENTABLE
NO. OF SQUARE
LOCATION BLDGS. FOOTAGE INVESTMENT ENCUMBRANCES
- -------- ------ --------- ------------ ------------
<S> <C> <C> <C> <C>
Lyon, France.................. 1 296,720 $ 7,856,904 $ 4,797,421
Paris, France................. 54 5,802,889 290,740,988 137,932,339
Rotterdam, Netherlands........ 1 135,961 6,743,028 --
Warsaw, Poland................ 5 573,129 39,426,346 --
-- --------- ------------ ------------
Total............... 61 6,808,699 $344,767,266 $142,729,760
== ========= ============ ============
</TABLE>
(13) Represents the total budgeted development cost for facilities under
development, which includes the cost of land, fees, permits, payments to
contractors, architectural and engineering fees and interest and property
taxes to be capitalized during construction, rather than costs incurred to
date.
(14) Of the total facilities under development, 2.7 million square feet with a
total budgeted development cost of $98.7 million are expected to be
utilized in the property operations segment. The remaining 8.0 million
square feet with a total budgeted development cost of $325.5 million are
expected to be utilized in the CDFS business segment. See "Item
1 -- Business -- ProLogis Trust".
(15) Includes 1.8 million square feet in the design and permitting stage.
(16) All of the land held for future development is expected to be utilized in
the CDFS business segment. See "Item 1 -- Business -- ProLogis Trust".
(17) Does not include 1,222.1 acres of land controlled under option, letter of
intent or contingent contract.
(18) See Schedule III -- Real Estate and Accumulated Depreciation to ProLogis'
Consolidated Financial Statements in Item 8 for a reconciliation of this
amount to ProLogis' total investment in real estate.
CONSOLIDATED ENTITIES
Partnership
To facilitate certain strategic acquisitions ProLogis formed four
partnerships and, in conjunction with the Meridian Merger, ProLogis acquired
interests in two partnerships (see Notes 3 and 7 to ProLogis' Consolidated
Financial Statements in Item 8). ProLogis holds a majority interest in and
controls all six of these partnerships (collectively, the "Partnerships").
Consequently, the Partnerships are consolidated with the accounts of ProLogis.
Generally, pursuant to the Partnership agreements, ProLogis or one of its wholly
owned entities, is the sole controlling general partner and has full
responsibility for the management and control of the Partnerships. The limited
partners have no authority to transact business for, or, except as described
below, participate in the management decisions of, the Partnerships. However,
any decision to amend certain provisions of the applicable partnership
agreement, to dissolve a Partnership prior to the term set forth in the
applicable partnership agreement
26
<PAGE> 29
or to enter into certain extraordinary transactions would require the consent of
all limited partners. Pursuant to the partnership agreements, ProLogis, or its
wholly owned entity, as the case may be, may not voluntarily withdraw from the
applicable Partnership or transfer or assign its interests in the Partnership
without the consent of all of the limited partners thereto. The limited partners
may freely transfer their Partnership units to affiliates, provided that such
transfer does not cause a termination of the Partnership for federal income tax
purposes and does not cause ProLogis to cease to comply with requirements under
the Code for qualification as a REIT. Each of the Partnership agreements grants
to the limited partners the right to exchange their Partnership units for
ProLogis common shares of beneficial interest, par value $0.01 per share,
("Common Shares"), subject to certain conditions. The six partnerships, which
are part of the property operations segment are as follows:
- ProLogis Limited Partnership-I, which owned approximately $209.6 million
of industrial distribution facilities totaling 3.9 million square feet
located primarily in the San Francisco Bay market as of December 31,
1999, was formed in December 1993. ProLogis had a 68.7% controlling
general partnership interest and there were 4,520,532 limited partnership
units outstanding as of December 31, 1999. These facilities cannot be
sold, prior to the occurrence of certain events, without the consent of
the limited partners thereto, other than in tax deferred exchanges.
- ProLogis Limited Partnership-II, which owned approximately $56.8 million
of industrial distribution facilities totaling 1.9 million square feet
located primarily in the Charlotte, Dallas/Ft. Worth, Denver, El Paso,
St. Louis, Washington D.C./Baltimore and the San Francisco Bay markets as
of December 31, 1999, was formed in May 1994. ProLogis' initial 81.2%
controlling general partnership interest has subsequently been increased
to 97.8% (the ownership interest as of December 31, 1999) due to the
conversion of limited partnership units into Common Shares. There were
90,213 limited partnership units outstanding as of December 31, 1999.
- ProLogis Limited Partnership-III, which owned approximately $51.7 million
of industrial distribution facilities totaling 1.4 million square feet
located primarily in the San Antonio, Orlando, Ft. Lauderdale/ Miami and
Tampa markets as of December 31, 1999, was formed in October 1994.
ProLogis had a 50.4% controlling general partnership interest at
formation, which has subsequently been increased to 88.2% (the ownership
interest as of December 31, 1999) as the result of additional
contributions by ProLogis and the conversion of limited partnership units
into Common Shares. There were 376,347 limited partnership units
outstanding as of December 31, 1999.
- ProLogis Limited Partnership-IV, which owned approximately $94.8 million
of industrial distribution facilities totaling 2.6 million square feet
located primarily in the Cincinnati, Dallas/Ft. Worth, Ft.
Lauderdale/Miami, Orlando and Tampa markets as of December 31, 1999, was
formed in October 1994 through a cash contribution from a wholly owned
subsidiary of ProLogis, ProLogis IV, Inc., and the contribution of
industrial distribution facilities from the limited partner. ProLogis'
initial 96.4% controlling general partnership interest has been increased
to 98.2% (the ownership interest as of December 31, 1999) as the result
of additional contributions by ProLogis. There were 68,612 limited
partnership units outstanding as of December 31, 1999.
- ProLogis Limited Partnership-IV and ProLogis IV, Inc. are legal entities
separate and distinct from ProLogis, its affiliates and each other, and
each has separate assets, liabilities, business functions and operations.
The sole assets of ProLogis IV, Inc. are its general partner advances to
and its interest in ProLogis Limited Partnership-IV. As of December 31,
1999, ProLogis Limited Partnership-IV had outstanding borrowings from
ProLogis IV, Inc. of $0.7 million and ProLogis IV, Inc. had outstanding
borrowings from ProLogis and its affiliates of $0.7 million.
- Meridian Realty Partners, L.P. owned a $10.3 million industrial
distribution facility totaling 255,000 square feet in the Los Angeles
market as of December 31, 1999. ProLogis had an 88.0% controlling general
partnership interest and there were 29,712 limited partnership units
outstanding as of December 31, 1999.
- MDN/JSC II Limited Partnership owned approximately $62.1 million of
industrial distribution facilities totaling 986,000 square feet located
in the Dallas and Las Vegas markets as of December 31, 1999.
27
<PAGE> 30
ProLogis had a 67.4% controlling general partnership interest and there were
453,375 limited partnership units outstanding as of December 31, 1999.
For financial reporting purposes, the assets, liabilities, results of
operations and cash flows of each of the Partnerships are included in ProLogis'
consolidated financial statements, and the interests of the limited partners are
reflected as minority interest.
ProLogis Development Services
ProLogis Development Services, which is part of the CDFS business segment,
develops corporate distribution facilities to meet customer requirements, which
are often sold to customers or third parties. ProLogis Development Services also
contracts on a fee basis to develop distribution facilities for customers or
third parties. ProLogis owns 100% of the preferred stock of ProLogis Development
Services and realizes substantially all economic benefits of its activities.
Because ProLogis advances mortgage loans to ProLogis Development Services to
fund its acquisition, development and construction activities, ProLogis
Development Services is consolidated with ProLogis. ProLogis Development
Services' real estate assets represented 7.5% of ProLogis' total assets (at
cost) as of December 31, 1999. ProLogis Development Services is not a qualified
REIT subsidiary of ProLogis under the Code. Accordingly, ProLogis Development
Services pays federal and state income taxes, as appropriate.
UNCONSOLIDATED ENTITIES
In order to comply with the requirements of the Code to qualify as a REIT,
ProLogis has invested in the nonvoting preferred stock of certain entities that
have ownership interests in companies that produce income that is not REIT
"qualifying" income (i.e., rental income and mortgage interest income) under the
Code. To maintain its qualification as a REIT, ProLogis can collectively invest
in these entities in amounts up to 25% of the fair market value of ProLogis'
total assets, with a maximum per company investment of 5% of the fair market
value of ProLogis' total assets. These investments are accounted for under the
equity method and are discussed in Note 5 to ProLogis' Consolidated Financial
Statements in Item 8. See also "Item 7 -- Management's Discussion and Analysis
of Financial Condition and Results of Operations -- New Tax Legislation".
Summarized information with respect to the real estate assets owned by such
entities and ProLogis' ownership in such entities follows:
Property Operations Segment:
- As of December 31, 1999, ProLogis had a 50% ownership interest in
ProLogis California and a 19.68% ownership interest in the ProLogis
European Properties Fund. These entities owned the following operating
facilities as of December 31, 1999:
<TABLE>
<CAPTION>
RENTABLE
NO. OF SQUARE PERCENTAGE
BLDGS. FOOTAGE OCCUPANCY
------ ---------- ----------
<S> <C> <C> <C>
ProLogis California:
Los Angeles, California.............................. 78 11,500,014 97.92%
== ========== =======
Prologis European Properties Fund:
Amsterdam, Netherlands............................... 4 644,741 99.22%
Gelderland, Netherlands.............................. 1 499,880 100.00%
Lille, France........................................ 1 172,224 100.00%
London/Midands, United Kingdom....................... 8 1,269,348 100.00%
Lyon, France......................................... 2 361,402 100.00%
Rotterdam, Netherlands............................... 1 178,704 100.00%
Yeneo, Netherlands................................... 1 232,384 100.00%
-- ---------- -------
18 3,358,683 99.85%
== ========== =======
</TABLE>
In addition, as of December 31, 1999, ProLogis California had a 272,000
square foot facility under development and 27.2 acres of land for future
development in Los Angeles.
28
<PAGE> 31
On January 7, 2000, ProLogis contributed 50.1% of the common stock of one
of its wholly owned European entities to the ProLogis European Properties
Fund in exchange for an additional equity interest. This entity owns 61
operating facilities aggregating 6.8 million square feet in three
countries (55 of the facilities are located in France). After this
contribution, ProLogis' equity interest in the ProLogis European
Properties Fund increased to 44.29%. ProLogis will account for its
investment in the remaining 49.9% of the common stock in this entity
under the equity method and is committed to contributing this interest to
the ProLogis European Properties Fund in January 2001.
CDFS Business:
- ProLogis recognizes substantially all of the economic benefits of
Kingspark S.A, which owns 100% of ProLogis Kingspark. As of December 31,
1999, ProLogis Kingspark had 15 operating facilities aggregating 550,000
square feet, 14 facilities under development aggregating 2,202,000 square
feet and 844,000 square feet of facilities that it was developing under
development management agreements. In addition, ProLogis Kingspark owned
397 acres and controlled 1,415 acres of land through purchase option,
letter of intent, development rights agreement or contingent contract as
of December 31, 1999. The land owned and controlled by ProLogis Kingspark
has the capacity for the future development of 21.4 million square feet
of facilities. ProLogis Kingspark's facilities and land acreage are
located in 15 cities or counties in the United Kingdom.
Temperature-Controlled Distribution Operations:
- ProLogis recognizes substantially all of the economic benefits of
ProLogis Logistics Incorporated, which owns 100% of CSI Integrated LLC.
As of December 31, 1999, CSI owned or operated 54 facilities totaling
167.6 million cubic feet of temperature controlled distribution
facilities (including 35.5 million cubic feet of dry distribution space
located in temperature-controlled facilities in 28 cities in North
America and had 4.8 million cubic feet under development in Atlanta.
Included in these amounts are operating facilities of Meridian
Refrigerated Inc. ("MRI") which was acquired by ProLogis in conjunction
with the Meridian Merger (see Note 3 to ProLogis' Consolidated Financial
Statements in Item 8). Subsequent to December 31, 1999, ProLogis'
contributed its investment in MRI to CSI.
- ProLogis recognizes substantially all of the economic interest in
Frigoscandia S.A. which owns, through its subsidiaries, 100% of
Frigoscandia AB. Frigoscandia owned or operated 88 facilities totaling
192.3 million of cubic feet of temperature-controlled distribution
facilities in nine countries in Europe as of December 31, 1999. Also as
of December 31, 1999, Frigoscandia had a facility under development in
Denmark, aggregating 1.3 million cubic feet.
ITEM 3. LEGAL PROCEEDINGS
ProLogis from time to time may be a party to a variety of legal proceedings
arising in the ordinary course of its business. Such matters generally are not
expected to have a material adverse effect on ProLogis' business, financial
position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
29
<PAGE> 32
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
ProLogis' Common Shares are listed on the NYSE under the symbol "PLD." The
following table sets forth the high and low sale prices of the Common Shares as
reported in the NYSE Composite Tape, and distributions per Common Share, for the
periods indicated.
<TABLE>
<CAPTION>
HIGH LOW DISTRIBUTION
---- --- ------------
<S> <C> <C> <C>
1998:
First Quarter............................................ $26 3/8 $24 1/4 $0.2850(1)
Second Quarter........................................... 25 15/16 23 0.3183
Third Quarter............................................ 26 20 0.3183
Fourth Quarter........................................... 22 3/4 20 1/16 0.3183
1999:
First Quarter............................................ $22 3/16 $18 5/8 $0.3183(2)
Second Quarter........................................... 22 18 3/4 0.3272
Third Quarter............................................ 20 1/2 17 7/8 0.3272
Fourth Quarter........................................... 20 1/16 16 13/16 0.3272
2000:
First Quarter (through March 14)......................... $18 3/8 $18 1/8 $0.3350(3)
</TABLE>
- ---------------
(1) Declared in the fourth quarter of 1997 and paid in the first quarter of
1998.
(2) Declared in the fourth quarter of 1998 and paid in the first quarter of
1999.
(3) Declared in the fourth quarter of 1999 and paid in the first quarter of
2000.
On March 14, 2000, ProLogis had approximately 162,252,057 Common Shares
outstanding, which were held of record by approximately 11,205 shareholders.
In order to qualify as a REIT under the Code, ProLogis is required to make
distributions (other than capital gain distributions) to its shareholders in
amounts at least equal to (i) the sum of (a) 95% of its "REIT taxable income"
computed without regard to the dividends paid deduction and its net capital
gain) (changed to 90% as a result of the RMA -- see "Item 7, Management's
Discussion and Analysis of Financial Condition and Results of Operations -- New
Tax Legislation") and (b) 95% of the net income (after tax), if any, from
foreclosure property, minus (ii) the sum of certain items of noncash income.
ProLogis' distribution strategy is to distribute what it believes is a
conservative percentage of its cash flow, permitting ProLogis to retain funds
for capital improvements and other investments.
ProLogis announces the following year's projected annual distribution level
after the annual budget review and approval by the Board in December of each
year. At its December 1999 meeting, the Board announced a projected increase in
the annual distribution level for 2000 from $1.30 to $1.34 per Common Share. The
payment of distributions is subject to the discretion of the Board and is
dependent upon the financial condition and operating results of ProLogis and may
be adjusted at the discretion of the Board during the year.
For federal income tax purposes, distributions may consist of ordinary
income, capital gains, non-taxable return of capital or a combination thereof.
Distributions that exceed ProLogis' current and accumulated earnings and profits
(calculated for tax purposes) constitute a return of capital rather than a
distribution and reduce the shareholder's basis in the Common Shares. To the
extent that a distribution exceeds both current and accumulated earnings and
profits and the shareholders basis in the Common Shares, it will generally be
treated as gain from the sale or exchange of that shareholder's Common Shares.
ProLogis annually notifies shareholders of the
30
<PAGE> 33
taxability of distributions paid during the preceding year. The following
summarizes the taxability of distributions paid in 1998 and 1997 on Common
Shares and the estimated taxability for 1999:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Per Common Share:
Ordinary income........................................... $0.84 $1.12 $1.07
Capital gains............................................. 0.35 -- --
Return of capital......................................... 0.11 0.12 --
----- ----- -----
Total............................................. $1.30 $1.24 $1.07
===== ===== =====
</TABLE>
On May 3, 1999, ProLogis paid a common distribution to holders of Meridian
common stock as of March 19, 1999. This distribution, which was declared by the
Meridian Board of Directors prior to the closing of the Meridian Merger, related
to the first quarter of 1999 and aggregated $11.1 million. This liability was
assumed by ProLogis in connection with the Meridian Merger. See Note 3 to
ProLogis' Consolidated Financial Statements in Item 8.
In connection with the 1997 Merger discussed in Note 10 to ProLogis'
Consolidated Financial Statements in Item 8, Security Capital issued warrants to
acquire 3,608,202 shares of Class B common stock of Security Capital pro rata to
holders of Common Shares (other than Security Capital), Series B preferred
shares and limited partnership units. Holders of Common Shares and holders of
limited partnership units received 0.046549 warrants for each Common Share or
unit held and holders of Series B preferred shares received 0.059676 warrants
for each preferred share held. Each warrant was exercisable for one share of
Security Capital Class B common stock at an exercise price of $28.00 per share.
The warrants expired in September 1998. Security Capital issued the warrants as
an incentive to ProLogis' shareholders to vote in favor of the 1997 Merger and
to raise additional equity capital at a relatively low cost, in addition to
other benefits.
In 1999, 1998 and 1997, ProLogis issued an aggregate of 14,000, 20,000 and
105,000 Common Shares, respectively, upon exchange of limited partnership units
in one or more of the Partnerships. The Common Shares were issued in
transactions exempt from registration under Section 4(2) of the Securities Act.
The annual dividends per preferred share are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1999(1) 1998(2) 1997(2)
------- ------- -------
<S> <C> <C> <C>
Series A................................................... $2.35 $2.35 $2.35
Series B................................................... 1.75 1.75 1.75
Series C................................................... 4.27 4.27 4.27
Series D................................................... 1.98 1.42(3) --
Series E................................................... 1.64(4) -- --
</TABLE>
- ---------------
(1) For federal income tax purposes $1.65 of the Series A dividend, $1.23 of the
Series B dividend, $3.00 of the Series C dividend, $1.39 of the Series D
dividend and $1.15 of the Series E dividend are treated as ordinary income.
The remaining portion of each dividend represents capital gains.
(2) For federal income tax purposes these dividends are treated as ordinary
income to the holders.
(3) For the period from date of issuance to December 31, 1998.
(4) For the period from date of issuance to December 31, 1999.
On April 30, 1999, ProLogis paid an aggregate dividend of $1.1 million on
the Series E preferred shares ($0.5469 per share), of which $729,200 related to
Meridian's series D preferred stock that was accrued by Meridian prior to the
closing of the Meridian Merger. See Note 3 to ProLogis' Consolidated Financial
Statements in Item 8.
Pursuant to the terms of its preferred shares, ProLogis is restricted from
declaring or paying any distribution with respect to the Common Shares unless
all cumulative dividends with respect to the preferred shares have been
31
<PAGE> 34
paid and sufficient funds have been set aside for dividends that have been
declared for the then-current dividend period with respect to the preferred
shares.
Under federal income tax rules, ProLogis' earnings and profits are first
allocated to its preferred shares, which increases the portion of the Common
Shares distribution classified as return of capital. The portion of
distributions characterized as return of capital results primarily from the
excess of distributions over earnings and profits primarily because non-cash
charges such as depreciation are not considered in determining distribution
levels. See "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Results of Operations."
ProLogis' tax return for the year ended December 31, 1999 has not been
filed. The taxability information for 1999 is based upon the best available
data. ProLogis' tax returns for prior years have not been examined by the
Internal Revenue Service. Consequently, the taxability of distributions and
dividends is subject to change.
DIVIDEND REINVESTMENT AND SHARE PURCHASE PLAN
In March 1995, ProLogis adopted a Dividend Reinvestment and Share Purchase
Plan (the "1995 Plan"), which commenced in April 1995. The 1995 Plan allowed
holders of Common Shares the opportunity to acquire additional Common Shares by
automatically reinvesting distributions. Holders of Common Shares who do not
participate in the 1995 Plan continue to receive distributions as declared. The
1995 Plan also allowed participating holders of Common Shares to purchase a
limited number of additional Common Shares by making optional cash payments,
without payment of any brokerage commission or service charge. Common Shares are
acquired pursuant to the 1995 Plan at a price equal to 98% of the market price
of such Common Shares, without payment of any brokerage commission or service
charge.
The 1995 Plan was amended in June 1999 by the 1999 Dividend Reinvestment
and Share Purchase plan (the "1999 Plan"). The primary change effective with the
1999 Plan allows persons who are not holders of Common Shares to participate in
the share purchase plan.
32
<PAGE> 35
ITEM 6. SELECTED FINANCIAL DATA
The following tables set forth selected financial data relating to the
historical financial condition and results of operations of ProLogis for the
years indicated (amounts in thousands, except per share data). Such selected
financial data is qualified in its entirety by, and should be read in
conjunction with, "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation" and ProLogis' Consolidated Financial
Statements and notes thereto in Item 8.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
OPERATING DATA:
Rental income....................... $ 491,826 $ 345,046 $ 284,533 $ 227,000 $ 153,879
Other real estate income............ 46,678 17,554 12,291 5,342 2,899
Income from unconsolidated
entities......................... 22,519 2,755 3,278 -- --
Total revenues...................... 567,392 368,107 302,494 233,463 158,503
Rental expenses, including property
management fees paid to affiliate
in 1997, 1996 and 1995........... 33,501 27,120 27,008 26,674 18,460
REIT management fees paid to
affiliate........................ -- -- 17,791 21,472 14,207
General and administrative.......... 38,284 22,893 6,770 1,025 839
Interest rate hedge expense(1)...... 945 26,050 -- -- --
Costs incurred in acquiring
management companies from
affiliate(2)..................... -- -- 75,376 -- --
Earnings from operations (1)(2)..... 166,549 107,617 42,392 82,710 50,991
Gain (loss) on disposition of real
estate........................... 38,994 5,565 7,378 (29) 1,053
Foreign currency hedge income
(expense)........................ -- 2,054 (6,028) -- --
Foreign currency exchange gains
(losses), net.................... (16,818) 2,938 (348) -- --
Income tax expense.................. 1,472 2,164 85 -- --
Cumulative effect of accounting
change........................... 1,440 -- -- -- --
Preferred share dividends........... 56,835 49,098 35,318 25,895 6,698
Net earnings attributable to Common
Shares(1)(2)..................... 123,999 62,231 4,431 53,460 42,015
Common Share cash distributions
paid(3).......................... $ 208,969 $ 151,050 $ 106,556 $ 85,340 $ 64,445
PER SHARE DATA:
Basic and diluted net earnings
attributable to Common
Shares(1)(2)..................... $ 0.81 $ 0.51 $ 0.04 $ 0.63 $ 0.61
Series A preferred share dividends
paid............................. 2.35 2.35 2.35 2.35 1.24
Series B preferred share dividends
paid............................. 1.75 1.75 1.75 1.50 --
Series C preferred share dividends
paid............................. 4.27 4.27 4.27 0.57 --
Series D preferred share dividends
paid............................. 1.98 1.42 -- -- --
Series E preferred share dividends
paid(5).......................... 1.64 -- -- -- --
Common Share distributions declared
and
paid............................. $ 1.30 $ 1.24 $ 1.07 $ 1.01 $ 0.935
Weighted average Common Shares
outstanding:
Basic............................ 152,412 121,721 100,729 84,504 68,924
Diluted.......................... 152,739 122,028 100,869 84,511 74,422
OTHER DATA:
Reconciliation of net earnings to
funds from operations (4):
Net earnings attributable to Common
Shares........................... $ 123,999 $ 62,231 $ 4,431 $ 53,460 $ 42,015
Add (Deduct):
Real estate related depreciation
and amortization............... 150,050 99,514 76,275 59,850 39,767
(Gain) loss on disposition of
non-CDFS business real estate
assets......................... (38,994) (5,565) (7,378) 29 (1,053)
</TABLE>
33
<PAGE> 36
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Foreign currency exchange (gains)
losses, net.................... 16,596 (3,227) 348 -- --
Non-recurring foreign currency
hedge (income) expense......... -- (2,054) 6,028 -- --
Interest rate hedge expense(1)... 945 26,050 -- -- --
Costs incurred in acquiring
management companies from
affiliate(2)................... -- -- 75,376 -- --
Non-recurring items.............. (247) 1,686 -- 225 --
Deferred income tax expense...... -- 1,797 -- -- --
Cumulative effect of accounting
change......................... 1,440 -- -- -- --
ProLogis' share of reconciling
items of unconsolidated
entities:
Real estate related
depreciation and
amortization................ 49,644 36,489 2,419 -- --
Loss on disposal of assets..... 826 179 -- -- --
Foreign currency exchange
losses, net................. 14,650 14,207 -- -- --
Non-recurring items............ (700) -- -- -- --
Deferred income tax expense
(benefit)................... 510 (2,929) -- -- --
Cumulative effect of accounting
change...................... 1,480 -- -- -- --
---------- ----------- ---------- ---------- ----------
Funds from operations attributable
to Common Shares (1)(2)(4)....... $ 320,199 $ 228,378 $ 157,499 $ 113,564 $ 80,729
========== =========== ========== ========== ==========
Weighted average Common Shares
outstanding:
Basic............................ 152,412 121,721 100,729 84,504 68,924
Diluted(6)....................... 167,421 137,153 116,371 89,700 74,422
Net cash provided by operating
activities.......................... $ 271,391 $ 238,253 $ 192,473 $ 136,201 $ 100,154
Net cash used in investing
activities.......................... (34,365) (1,264,722) (571,061) (665,878) (628,795)
Net cash (used in) provided by
financing activities................ $ (230,828) $ 1,064,600 $ 398,827 $ 512,212 $ 529,606
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------
1999 1998 1997 1996 1995
---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
FINANCIAL POSITION:
Real estate owned, at cost.......... $4,811,255 $ 3,476,704 $2,846,591 $2,399,431 $1,767,307
Land held for development........... 163,696 180,796 159,645 109,316 60,363
Investments in and advances to
unconsolidated entities.......... 940,364 733,863 86,139 -- --
Total assets........................ 5,848,040 4,330,729 3,033,953 2,462,306 1,833,972
Lines of credit and short-term
borrowings(7).................... 98,700 494,300 -- 38,600 81,000
Other unsecured debt................ 30,892 -- -- -- --
Senior unsecured debt............... 1,729,630 1,083,641 724,052 524,191 324,527
Mortgage notes, assessment bonds and
securitized debt................. 695,586 227,804 133,028 139,952 145,276
Total liabilities................... 2,832,232 2,023,066 1,003,912 805,933 639,040
Minority interest................... 62,072 51,295 53,304 56,984 58,741
Total shareholders' equity.......... $2,953,736 $ 2,256,368 $1,976,737 $1,599,389 $1,136,191
Number of Common Shares
outstanding...................... 161,825 123,416 117,364 93,677 81,416
</TABLE>
- ---------------
(1) Earnings from operations for 1999 and 1998 reflect $0.9 million and $26.1
million of mark to market adjustments, respectively, associated with two
interest rate hedges that, due to changing market conditions, no longer
qualified for hedge accounting treatment under generally accepted accounting
principles
34
<PAGE> 37
("GAAP"). See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital
Resources -- Derivative Financial Instruments".
(2) Earnings from operations for 1997 reflect the one-time, non-cash charge of
$75.4 million associated with the costs incurred in acquiring ProLogis'
management companies from Security Capital in September 1997. This one-time
charge was not deducted for purposes of calculating funds from operations
due to its non-recurring and non-cash nature. See "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations -- Other Income and Expense
Items -- Costs Incurred in Acquiring Management Companies From Affiliate".
(3) For 1999, includes $11.1 million paid to Meridian Shareholders. See "Item 5.
Market for the Registrant's Common Equity and Related Stockholder Matters".
(4) Funds from operations attributable to Common Shares is discussed and defined
in "Item 7 -- Management's Discussion and Analysis of Financial Conditions
and Results of Operations -- Funds from Operations". Funds from operations
does not represent net income or cash from operating activities in
accordance with GAAP and is not necessarily indicative of cash available to
fund cash needs, which is presented in the Consolidated Statement of Cash
Flows in ProLogis' Consolidated Financial Statements in Item 8. Cash
distributions paid to shareholders are presented above in the "Operating
Data" section. Funds from operations should not be considered as an
alternative to net income 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. ProLogis considers funds from
operations to be a useful supplemental measure of comparative period
operating performance and as a supplemental measure to assist management,
financial analysts, potential investors and shareholders with an indication
of the ability of ProLogis to fund its capital expenditures and investment
activities and to fund other cash needs.
(5) Does not include dividends paid to Meridian shareholders. See "Item 5.
Market for the Registrant's Common Equity and Related Stockholder Matters".
(6) In calculating the weighted average Common Shares for funds from operations
purposes, the weighted average Series B convertible preferred shares and
limited partnership units are considered common stock equivalents. The
weighted average Series B convertible preferred shares included are
9,221,000, 10,055,000 and 10,319,000 for 1999, 1998 and 1997, respectively.
The amount of dividends associated with these preferred shares are
$12,523,000, $13,668,000 and $14,088,000 for 1999, 1998 and 1997,
respectively. There were no outstanding Series B convertible preferred
shares prior to 1996 and the effect of these preferred shares in 1996 was
anti-dilutive. The weighted average limited partnership units included are
5,461,000, 5,070,000, 5,190,000, 5,194,000 and 5,485,000 for 1999, 1998,
1997, 1996 and 1995, respectively. The minority interest share of earnings
associated with these units are $4,979,000, $4,681,000, $3,560,000,
$3,326,000 and $3,331,000 for 1999, 1998, 1997, 1996 and 1995, respectively.
(7) As of March 14, 2000, ProLogis had $38.0 million of borrowings outstanding
under its unsecured U.S. dollar denominated lines of credit resulting in
$537.0 million of borrowing capacity available. As of March 14, 2000,
ProLogis had the currency equivalent of $130.3 million (based on currency
exchange rates quoted by Reuters) on its multi-currency unsecured line of
credit outstanding resulting in the currency equivalent of $184.5 million
(based on currency exchange rates quoted by Reuters) of borrowing capacity
available.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with ProLogis'
Consolidated Financial Statements and the notes thereto included in Item 8 of
this report.
The statements contained in this discussion 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.
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. These statements are not guarantees of
future performance and involve certain risks,
35
<PAGE> 38
uncertainties and assumptions which are difficult to predict. Therefore, actual
outcomes and results may differ materially from what is expressed or forecasted
in such forward-looking statements. Factors which may affect outcomes and
results include: (i) changes in general economic conditions in ProLogis' markets
that could adversely affect demand for ProLogis' facilities and the
creditworthiness of ProLogis' customers, (ii) changes in financial markets,
interest rates and foreign currency exchange rates that could adversely affect
ProLogis' cost of capital and its ability to meet its financial needs and
obligations, (iii) increased or unanticipated competition for distribution
facilities in ProLogis' target markets and (iv) those factors discussed under
"-- Risk Factors".
RESULTS OF OPERATIONS
Net earnings attributable to Common Shares increased by $61.8 million to
$124.0 million for 1999 from $62.2 million for 1998. Net earnings attributable
to Common Shares in 1998 was $57.8 million above the 1997 amount of $4.4
million.
The increase in net earnings attributable to Common Shares in 1999 over
1998 was primarily the result of:
- an increase of $88.5 million in net operating income from property
operations (after deductions for depreciation), primarily the result of
the increased number of distribution facilities in operation in 1999 as
compared to 1998 (the Meridian Merger in March 1999 added 32.2 million
square feet of facilities to ProLogis' operating portfolio. See
"-- Meridian Merger");
- an increase of $29.1 million in other real estate income, primarily
profits earned in the CDFS business from dispositions of facilities
developed;
- an increase of $19.8 million in income from ProLogis' investments in
unconsolidated entities due to: i) recognition of a full year of income
from ProLogis' August 1998 acquisition of ProLogis Kingspark; ii) the
recognition of income from the operations of Garonor S. A. ("ProLogis
Garonor"), a real estate operating company in France that was acquired in
December 1998 and accounted for under the equity method from that date
until June 29, 1999 when ProLogis began consolidating its results in its
consolidated financial statements (see Note 2 to ProLogis' Consolidated
Financial Statements in Item 8); and iii) increased earnings from
ProLogis' temperature-controlled distribution operations which are
recognized under the equity method, primarily due to increases in the
cubic feet in operation in 1999 as compared to 1998;
- a $33.4 million increase in gains recognized on the disposition of
facilities from ProLogis' property operations segment; and
- the recognition of a $26.1 million expense in 1998 as compared to $0.9
million recognized in 1999 from mark to market adjustments related to two
interest rate protection agreements (see "Liquidity and Capital
Resources -- Derivative Financial Instruments").
These increases in net earnings in 1999 were partially offset by:
- an increase of $93.1 million in interest expense due to higher average
debt balances in 1999;
- net foreign currency exchange losses in 1999 of $16.8 million ($11.4
million resulting from remeasurement of intercompany and other debt) as
compared to net foreign currency exchange gains of $2.9 million in 1998;
and
- an increase of $15.4 million in general and administrative expenses, due
to the continued expansion of the organizational infrastructure in Europe
and due to a change in accounting rules which no longer allows costs
associated with start-up activities and organization costs to be
capitalized (see "-- Other Income and Expense Items -- General and
Administrative" and "-- Other Income and Expense Items -- Cumulative
Effect of Accounting Change").
Net earnings attributable to Common Shares in 1998 and 1997 were impacted
by one time charges: a $26.1 million charge in 1998 from mark to market
adjustments related to two interest rate protection agreements (see
"-- Liquidity and Capital Resources -- Derivative Financial Instruments") and a
$75.4 million charge in
36
<PAGE> 39
1997 related to the acquisition of the management companies from Security
Capital (see "-- Other Income and Expense Items -- Costs Incurred in Acquiring
Management Companies From Affiliate"). Without the effects of these one-time
charges, net earnings attributable to Common Shares in each year would have been
$88.3 million in 1998 and $79.8 million in 1997. The resulting increase of $8.5
million in 1998 over 1997 is primarily due to the higher number of distribution
facilities in operation in 1998 as compared to 1997. ProLogis' rental revenues,
rental expenses (including property management fees paid to affiliate in 1997)
and depreciation expense all increased in 1998. This increase was partially
offset by an increase in interest expense associated with the financing of
ProLogis' investment activities in 1998.
Preferred share dividends and weighted average Common Shares outstanding
both increased in 1999 as compared to 1998 and in 1998 as compared to 1997. For
1999, these increases were primarily attributable to the issuance of Common
Shares and Series E preferred shares related to the Meridian Merger (see
"-- Meridian Merger"). For 1998, these increases were the result of additional
equity issued by ProLogis to finance its acquisition and development activities
in that year.
Property Operations
ProLogis owned (directly or through consolidated subsidiaries) 1,328
operating facilities totaling 133.7 million square feet as of December 31, 1999,
1,099 operating facilities totaling 104.5 million square feet as of December 31,
1998 and 1,005 operating facilities totaling 90.8 million square feet as of
December 31, 1997. In addition, as of December 31, 1999 ProLogis California (in
which ProLogis has a 50% ownership interest) owned 78 operating facilities
totaling 11.5 million square feet and the ProLogis European Properties Fund (in
which ProLogis' ownership interest was approximately 19.68% as of December 31,
1999) owned 18 operating facilities totaling 3.3 million square feet.
As of December 31, 1998 ProLogis owned 100% of the preferred stock
(representing substantially all of the economic benefits) of ProLogis Garonor
(which owned 54 operating facilities totaling 5.2 million square feet as of
December 31, 1998). This investment was accounted for under the equity method
from December 29, 1998 (the date of acquisition) until June 29, 1999. On June
29, 1999, ProLogis Garonor became a wholly owned subsidiary of ProLogis and its
results of operations after that date have been consolidated along with
ProLogis' other wholly owned subsidiaries.
37
<PAGE> 40
Under the equity method, ProLogis recognized its share of the net earnings
of the following entities that are part of ProLogis' property operations
segment: (i) ProLogis Garonor from December 29, 1998 to June 29, 1999; (ii)
ProLogis California beginning August 26, 1999; and (iii) the ProLogis European
Properties Fund beginning September 23, 1999. The amounts recognized under the
equity method are based on the net earnings of the unconsolidated entity and
include interest income and interest expense, depreciation and amortization
expenses, general and administrative expenses, income taxes and foreign currency
exchange gains and losses (with respect to ProLogis Garonor and the ProLogis
European Properties Fund). ProLogis' net operating income from the property
operations segment was as follows for 1999, 1998 and 1997 (in thousands) (see
Note 18 to ProLogis' Consolidated Financial Statements in Item 8):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Properties directly owned by ProLogis and its
consolidated entities:
Rental income...................................... $491,826 $345,046 $284,533
Property operating expenses:
Rental expenses, net of recoveries.............. 33,501 27,120 23,187
Property management fees paid to affiliate...... -- -- 3,821
-------- -------- --------
33,501 27,120 27,008
-------- -------- --------
Net operating income....................... 458,325 317,926 257,525
Income from the ProLogis California.................. 3,917 -- --
Income from the ProLogis European Properties Fund.... 820 -- --
Income (loss) from ProLogis Garonor.................. (12,423) 6 --
-------- -------- --------
Total property operations segment.......... $450,639 $317,932 $257,525
======== ======== ========
</TABLE>
Rental income increased by $146.8 million in 1999 as compared to 1998. This
increase is comprised of the following components:
- facilities acquired during 1999 contributed $80.7 million of additional
rental income (primarily due to the Meridian Merger; see "-- Meridian
Merger") in 1999;
- facilities developed during 1999 contributed $17.7 million of additional
rental income in 1999;
- facilities acquired during 1998 contributed $25.0 million of additional
rental income in 1999;
- facilities developed during 1998 contributed $20.1 million of additional
rental income 1999;
- facilities owned and operated as of January 1, 1998 contributed $12.4
million of additional rental income in 1999; and
- facilities that were in operation during 1998 but have subsequently been
disposed of reduced rental income in 1999 by $9.1 million.
Rental income increased by $60.5 million in 1998 as compared to 1997. This
increase is comprised of the following components:
- facilities acquired during 1998 contributed $8.2 million of additional
rental income in 1998;
- facilities developed during 1998 contributed $13.9 million of additional
rental income in 1998;
- facilities acquired during 1997 contributed $17.4 million of additional
rental income in 1998;
- facilities developed during 1997 contributed $18.8 million of additional
rental income in 1998;
- facilities owned and operated as of January 1, 1997 contributed $11.2
million of additional rental income in 1998; and
- facilities that were in operation during 1997 but have subsequently been
disposed of reduced rental income in 1998 by $9.0 million.
38
<PAGE> 41
Rental expenses, including property management fees paid to an affiliate in
1997 and net of recoveries from tenants, increased by $6.4 million in 1999 over
1998 and by $112,000 in 1998 over 1997. The increase in 1999 over 1998 is
primarily attributable to the additional facilities acquired in the Meridian
Merger (see "-- Meridian Merger"). Rental expenses, before recoveries from
tenants and including property management fees paid to an affiliate in 1997,
were 24.7% of rental income for 1999, 24.5% of rental income for 1998 and 25.7%
of rental income for 1997. Total rental expense recoveries were 72.4%, 67.9% and
63.1% of total rental expenses (including property management fee paid to
affiliate in 1997) in 1999, 1998, and 1997, respectively.
ProLogis' share of ProLogis Garonor's loss in 1999 includes the recognition
of a net foreign currency exchange loss of $13.0 million resulting from the
remeasurement of intercompany and other debt.
As a result of the 1997 Merger discussed below under "-- Other Income and
Expense Items -- Costs Incurred in Acquiring Management Companies From
Affiliate" and in Note 10 to ProLogis' Consolidated Financial Statements in Item
8, ProLogis no longer pays a property management fee to its affiliate, Security
Capital. However, ProLogis has recognized the actual personnel and other
operating costs associated with the property management function in rental
expenses since September 9, 1997.
The facilities that ProLogis develops are not always fully leased at the
start of construction. In addition, ProLogis may acquire facilities that are
underleased at the time of acquisition. While these situations will reduce
ProLogis' overall occupancy rate below its stabilized level in the short-term,
they do provide opportunities to increase revenues. The term "stabilized" means
that capital improvements, repositioning, new management and new marketing
programs (or development and marketing, in the case of newly developed
facilities) have been in effect for a sufficient period of time (but in no case
longer than 12 months for facilities acquired by ProLogis and 12 months after
shell completion for facilities developed by ProLogis) to achieve stabilized
occupancy (typically 93%, but ranging from 90% to 95%, depending on the
submarket and product type). ProLogis has been successful in increasing
occupancies on acquired and developed facilities during their initial months of
operation, resulting in an occupancy rate of 96.0% and a leased rate of 96.5%
for stabilized facilities owned by ProLogis and its consolidated and
unconsolidated entities as of December 31, 1999. The average increase in rental
rates for new and renewed leases on previously leased space (21.1 million square
feet) for all facilities including those owned by consolidated and
unconsolidated entities during 1999 was 15.5%.
Corporate Distribution Facilities Services Business
ProLogis recognized income from its CDFS business segment of $70.5 million
in 1999, $20.5 million in 1998 and $12.3 million in 1997 (see Note 18 to
ProLogis' Consolidated Financial Statements in Item 8). Of the total CDFS
business segment income recognized, $23.9 million and $2.9 million represents
ProLogis' 95% share of the net earnings of ProLogis Kingspark for 1999 and 1998,
respectively, recognized under the equity method. ProLogis Kingspark was
acquired on August 14, 1998. The remaining income of $46.6 million in 1999 and
$17.6 million in 1998 and the entire amount of $12.3 million in 1997 was earned
directly by ProLogis and ProLogis Development Services. This income consists
primarily of the profits from the disposition of properties that were developed
in the CDFS business segment and sold to customers or entities in which ProLogis
has an ownership interest.
In 1999, ProLogis and ProLogis Development Services disposed of an
aggregate of 5.4 million square feet of properties in the CDFS business segment
with aggregate net sales proceeds of $357.5 million. In 1998 and 1997, ProLogis
disposed of 2.0 million and 1.9 million square feet of properties, respectively,
with aggregate net sales proceeds of $82.6 million and $82.4 million,
respectively. The CDFS business segment operations have increased in volume in
each year, consequently, ProLogis' income from this segment has increased in
each year.
ProLogis recognizes 95% of the net earnings of ProLogis Kingspark in its
results of operations. The net earnings of the ProLogis Kingspark include
interest income and interest expense (net of capitalized amounts), general and
administrative expenses, income taxes and foreign currency exchange gains and
losses. ProLogis Kingspark's dispositions generated aggregate net sales proceeds
of $155.4 million on the disposition of 1.1 million square feet in 1999 and
$13.8 million on the disposition of land parcels for the period from August 14,
1998 to December 31, 1998. ProLogis Kingspark also earned fees for developing
properties under development management agreements ($5.4 million in 1999 and
$2.6 million for the period from August 14,
39
<PAGE> 42
1998 to December 31, 1998). With the capital invested by ProLogis, ProLogis
Kingspark has been able to increase its level of operations subsequent to August
14, 1998. ProLogis' share of the net earnings of ProLogis Kingspark includes
$7.7 million of current and deferred income tax expense and $1.5 million of net
foreign currency exchange losses for 1999. ProLogis' share of ProLogis
Kingspark's net earnings for the period August 14, 1998 to December 31, 1998
includes $0.2 million of current and deferred income tax expense and $1.0
million of net foreign currency exchange losses.
Temperature-Controlled Distribution Operations
ProLogis recognizes income from the temperature-controlled distribution
operations segment of its business under the equity method. ProLogis' share of
the net earnings of CSI and Frigoscandia was as follows (in thousands) (see Note
18 to ProLogis' Consolidated Financial Statements in Item 8):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1999 1998 1997
------- ------- ------
<S> <C> <C> <C>
CSI..................................................... $10,791 $ 7,349 $3,278
Frigoscandia............................................ (4,364) (7,535) --
------- ------- ------
Total temperature-controlled distribution
operations segment.......................... $ 6,427 $ (186) $3,278
======= ======= ======
</TABLE>
The net earnings of the unconsolidated entities includes interest income
and interest expense, depreciation and amortization expenses, general and
administrative expenses, income taxes and foreign currency exchange gains or
losses (with respect to Frigoscandia). ProLogis recognizes 95% of the net
earnings of each entity in its results of operations.
The increase in ProLogis' share of CSI's net earnings from 1998 to 1999 of
$3.4 million is attributable primarily to the increase in cubic feet capacity in
operation in 1999 over 1998 and to income from retail dedicated services (see
"Item 1. Business -- Business Strategy and Operating
Segments -- Temperature-Controlled Distribution Operations -- Operations"). The
increase in ProLogis' share of CSI's net earnings from 1997 to 1998 of $4.0
million is attributable primarily to the increase in cubic feet capacity in
operation in 1998 over 1997. ProLogis acquired CSI on April 24, 1997 and owned
between 60% and 77.1% until June 12, 1998, at which time ProLogis became CSI's
sole owner.
ProLogis' share of Frigoscandia's net earnings in 1999 and 1998 includes
net foreign currency exchange losses of $1.3 million and $11.4 million,
respectively. In 1999, Frigoscandia's cubic feet capacity remained constant. The
decrease in Frigoscandia's net earnings is attributable primarily to decreased
occupancy levels and lower operating margins in the transportation services
segment.
Other Income and Expense Items
Interest Income
Interest income was $6.4 million in 1999, an increase of $3.6 million over
the interest income recognized in 1998 of $2.8 million. Interest income
increased by $0.4 million in 1998 over 1997. The increases in interest income
are primarily the result of higher average cash balances.
General and Administrative Expense
General and administrative expense, including REIT management fee paid to
affiliate in 1997, was $38.3 million in 1999, $22.9 million in 1998 and $24.6
million in 1997. The increase in general and administrative expense in 1999 over
1998 is primarily related to ProLogis' expanded operational infrastructure in
Europe and also because ProLogis expensed costs related to start-up activities
and organization costs under a new accounting pronouncement in 1999 (see
"-- Cumulative Effect of Accounting Change"). The decrease in general and
administrative expense in 1998 from 1997 is primarily attributable to the cost
savings realized after ProLogis acquired the management companies from Security
Capital in September 1997 (see "-- Costs Incurred in Acquiring Management
Companies from Affiliate").
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Depreciation and Amortization
The increases in depreciation and amortization expense of $51.9 million in
1999 as compared to 1998 and $24.0 million in 1998 as compared to 1997 result
primarily from the increases in operating facilities each year. See "-- Property
Operations".
Interest Expense
Interest expense was $170.7 million in 1999, $77.7 million in 1998 and
$52.7 million in 1997. The increases in each year are primarily the result of
the increase use of debt to finance investment activities in each year,
particularly in 1999 when ProLogis increased its secured debt balances to $695.6
million as of December 31, 1999 (of which $90.1 million was assumed in the
Meridian Merger; see "-- Meridian Merger") from $227.8 million as of December
31, 1998. In addition, ProLogis issued senior unsecured notes in the amounts of
$500.0 million in April 1999, $125.0 million in October 1998, $250.0 million in
July 1998, $100.0 million in February 1997 and $100.0 million in July 1997. In
conjunction with the Meridian Merger, ProLogis assumed $160.0 million of senior
unsecured notes.
Interest expense on lines of credit borrowings increased by $1.4 million in
1999 over 1998 and by $11.3 million in 1998 over 1997 due primarily to a higher
average outstanding balance in each year ($232.8 million in 1999, $174.9 million
in 1998 and $56.9 million in 1997) partially offset by a lower weighted average
daily interest rate (6.13% in 1999, 6.46% in 1998 and 6.75% in 1997). ProLogis
also had $150.0 million of short-term borrowings from September 11, 1998 to
April 26, 1999. See "-- Liquidity and Capital Resources -- Investing and
Financing Activities".
Interest expense recognized on borrowings is offset by interest capitalized
with respect to ProLogis' development activities. Capitalized interest decreased
by $3.2 million to $16.0 million in 1999 from $19.2 million in 1998 and
increased by $0.8 million to $19.2 million in 1998 from $18.4 million in 1997.
Capitalized interest levels are reflective of ProLogis' cost of funds and the
level of development activity in each year.
Interest Rate Hedge Expense
See "-- Liquidity and Capital Resources -- Derivative Financial
Instruments" for a discussion of this expense.
Costs Incurred in Acquiring Management Companies From Affiliate
As a result of the 1997 Merger discussed in Note 10 to ProLogis'
Consolidated Financial Statements in Item 8, ProLogis terminated the REIT
management and property management agreements that were in place while Security
Capital owned the management companies. The employees of the REIT management and
property management companies became employees of ProLogis and ProLogis directly
incurs the personnel and other costs related to these functions. The costs
relating to property management are recorded as rental expenses whereas the
costs associated with managing the corporate entity are recorded as general and
administrative expenses. In connection with this transaction, ProLogis
recognized a one-time expense of $75.4 million, representing the excess of the
purchase price over the net tangible assets acquired.
Upon consummation of the 1997 Merger, ProLogis and Security Capital entered
into the ASA, pursuant to which Security Capital provides ProLogis with certain
administrative and other services as determined by ProLogis (certain services
originally provided under the ASA are now being performed by ProLogis
employees). ProLogis; fees under the ASA were $3.4 million, $3.7 million and
$1.1 million for 1999, 1998 and the period from September 9, 1997 to December
31, 1997, respectively. Of these fees, $0.6 million, $0.7 million and $0.2
million were capitalized for 1999, 1998 and for the period from September 9,
1997 to December 31, 1997, respectively. The ASA expires on December 31, 2000.
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Other Expenses
Other expenses were $4.9 million in 1999, $6.2 million in 1998 and $3.9
million in 1997. Included as "Other Expenses" are land holding costs, the
write-off of previously capitalized pursuit costs and costs associated with the
name change to ProLogis in 1998.
Land holding costs were $2.0 million in 1999, $2.2 million in 1998 and $2.3
million in 1997. Pursuit cost write-offs were $2.9 million in 1999 $2.3 million
in 1998 and $1.6 million in 1997. Non-recurring costs associated with the name
change were $1.7 million in 1998.
Gain on Disposition of Real Estate
In 1999, ProLogis disposed of 2.6 million square feet of operating
facilities to third parties from its property operations segment generating net
sales proceeds of $99.5 million and aggregate gains of $13.4 million. In August
1999, in connection with the formation of ProLogis California, ProLogis disposed
of 78 operating facilities and two facilities under development to ProLogis
California. The net sales proceeds from this disposition were $538.3 million and
ProLogis recognized a gain of $25.6 million on the transaction, which is net of
$25.6 million that did not qualify for income recognition due to ProLogis'
continuing ownership in ProLogis California. ProLogis received an equity
interest in ProLogis California of $148.2 million and ProLogis California
assumed ProLogis' debt of $199.3 million. The remaining proceeds were received
in cash.
ProLogis recognized gains of $5.6 million and $7.4 million from the
dispositions of operating facilities from the property operations segment in
1998 and 1997, respectively. These dispositions aggregated 1.1 million square
feet and net sales proceeds of $26.7 million in 1998 and 1.3 million square feet
and net sales proceeds of $53.0 million in 1997.
Foreign Currency Hedge Income (Expense)
On December 22, 1997, ProLogis entered into two separate contracts to (i)
exchange $373.8 million for 2.9 billion Swedish krona, and (ii) exchange 310.0
million German marks for $175.0 million in anticipation of the January 1998
acquisition and planned European currency denominated financing of Frigoscandia
AB by ProLogis through its unconsolidated entity. The contracts were marked to
market as of December 31, 1997 and ProLogis recognized a net loss of $6.0
million in 1997. Both contracts were settled during the first quarter of 1998 at
a net loss of $4.0 million. Accordingly, ProLogis recognized a net gain of $2.0
million in 1998. These foreign currency exchange hedges were one-time,
non-recurring contracts that fixed the exchange rate between the U.S. dollar and
the Swedish krona and German mark. ProLogis executed these hedges after the
execution of the purchase agreement to acquire Frigoscandia AB, which required
payment in Swedish krona. The contracts were executed exclusively for the
acquisition and financing of Frigoscandia AB and were not entered into to hedge
on-going income in foreign currencies.
Foreign Currency Exchange Gains (Losses)
The foreign currency exchange loss in 1999 consists of a net loss from
remeasurement of intercompany and other debt of $11.4 million, net transaction
losses of $5.3 million (including $45,000 of costs related to foreign currency
put options contracts) and mark to market adjustments on the foreign currency
put option contracts of $47,000. ProLogis recognized a net gain from
remeasurement of intercompany and other debt of $3.2 million and net transaction
losses of $0.3 million in 1998. In 1997, ProLogis recognized a net remeasurement
loss of $0.3 million. No foreign currency exchange transaction gain or loss was
recognized in 1997 due to ProLogis' limited foreign operations in that year.
ProLogis began utilizing foreign currency put options to hedge its foreign
currency exchange risk only in September 1999. See "-- Liquidity and Capital
Resources -- Derivative Financial Instruments".
Income Taxes
ProLogis is taxed as a REIT for federal income tax purposes and is not
required to pay federal income taxes if minimum distribution and income, asset
and shareholder tests are met. ProLogis Development Services is not a
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<PAGE> 45
qualified REIT subsidiary for tax purposes. Accordingly, ProLogis incurs and
pays current federal and state income taxes with respect to the taxable earnings
of ProLogis Development Services. Also, the foreign countries in which ProLogis
operates do not recognize REITs under their respective tax laws. Accordingly,
ProLogis recognizes income taxes as appropriate and in accordance with GAAP with
respect to the taxable earnings of ProLogis Development Services and its foreign
subsidiaries.
In 1998, ProLogis recognized deferred income tax expense of $1.8 million.
In 1999 and 1997, the deferred income tax expense based on each year's temporary
differences has been reduced to zero due to changes in the deferred tax
valuation allowance. The valuation allowance was recognized in previous years to
reflect the estimated realizability of deferred tax assets created by ProLogis'
tax net operating loss carryforwards.
Cumulative Effect of Accounting Change
Through 1998, ProLogis capitalized costs associated with start-up
activities and organization costs and amortized such costs over an appropriate
period, generally five years. Statement of Position ("SOP") 98-5 "Reporting on
the Costs of Start-Up Activities", which requires that costs associated with
organizational, pre-opening, and start-up activities be expensed as incurred,
was adopted by ProLogis on January 1, 1999. Accordingly, ProLogis expensed $1.4
million of unamortized organization and start-up costs as a cumulative effect of
accounting change in the first quarter of 1999. All such costs incurred in 1999
have been expensed (see "-- General and Administrative").
Meridian Merger
On March 30, 1999, Meridian, a publicly traded REIT that owned industrial
distribution facilities in the United States, was merged with and into ProLogis.
In accordance with the terms of the Agreement and Plan of Merger dated as of
November 16, 1998, as amended, the approximately 33.8 million outstanding shares
of Meridian common stock were exchanged (on a 1.1 for one basis) into
approximately 37.2 million ProLogis Common Shares. In addition, the holders of
Meridian common stock received $2.00 in cash per outstanding share,
approximately $67.6 million in total. The holders of Meridian's Series D
cumulative redeemable preferred stock received a new series of ProLogis
cumulative redeemable preferred shares, Series E preferred shares, on a one for
one basis. The Series E preferred shares have a 8.75% annual dividend rate
($2.1875 per share) and an aggregate liquidation value of $50.0 million. The
total purchase price of Meridian was approximately $1.54 billion, which included
the assumption of the outstanding debt and liabilities of Meridian as of March
30, 1999 and the issuance of approximately 1.1 million stock options each to
acquire 1.10 ProLogis Common Shares and $2.00 in cash. The assets acquired from
Meridian included approximately $1.44 billion of real estate assets, an interest
in a refrigerated distribution business of $28.7 million and cash and other
assets aggregating $72.3 million. The transaction was structured as a tax-free
merger and was accounted for under the purchase method.
ENVIRONMENTAL MATTERS
ProLogis did not experience any environmental condition on its facilities
which materially adversely affected its results of operations or financial
position nor is ProLogis aware of any environmental liability that ProLogis
believes would have a material adverse effect on its business, financial
condition or results of operations. See "-- Risk Factors -- Potential
Environmental Liability".
LIQUIDITY AND CAPITAL RESOURCES
Overview
ProLogis considers its liquidity and ability to generate cash from
operations and financing activities to be adequate and expects it to continue to
be adequate to meet its anticipated development, acquisition, operating and debt
service needs as well as its shareholder distribution requirements.
ProLogis' future investing activities within the property operations
segment and the CDFS business segment are expected to consist primarily of
acquiring land for future development and developing distribution facilities.
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<PAGE> 46
Within the temperature-controlled distribution operations segment, ProLogis'
future investing activities are expected to include the expansion of its current
capacity through the acquisition of existing businesses operating in this
industry. ProLogis' future investing activities are expected to be funded with:
- cash generated by operations;
- the proceeds from the sale of non-strategic facilities to third parties;
- the proceeds from the sale of facilities developed to third parties or to
entities in which ProLogis has an ownership interest;
- the proceeds from the sale of facilities to the ProLogis European
Properties Fund;
- other capital generated from the CDFS business segment; and
- utilization of ProLogis' unsecured lines of credit.
In the short-term, borrowings and subsequent repayments on the unsecured
lines of credit will provide ProLogis with adequate liquidity and financial
flexibility to efficiently respond to market opportunities. Within the ProLogis
European Properties Fund, ProLogis has access to 877.7 million euros (the
currency equivalent of $884.0 million as of December 31, 1999 based on currency
exchange rates quoted by Reuters) of third party equity capital in Europe that
has been committed primarily by institutional investors for the period 2000 to
2002. This capital is available to fund acquisitions of ProLogis' completed
stabilized European developments by the ProLogis European Properties Fund, as
well as acquisitions of other facilities from third parties. ProLogis will
continue to evaluate other financing arrangements similar to the ProLogis
European Properties Fund that will provide debt and equity financing to
ProLogis.
As of December 31, 1999, ProLogis had $530.0 million available for
borrowing under its U.S. dollar denominated unsecured lines of credit and the
currency equivalent of $273.6 million (based on currency exchange rates quoted
by Reuters) available for borrowing under its multi-currency unsecured line of
credit. As of March 14, 2000, on a combined basis ProLogis had approximately
$721.5 million of borrowing capacity available (see "-- Credit Facilities").
Another source of future liquidity and financial flexibility is ProLogis'
shelf-registered securities which can be issued in the form of debt securities,
preferred shares, Common Shares, rights to purchase Common Shares and preferred
share purchase rights on an as-needed basis. ProLogis currently has $608.0
million of shelf-registered securities available for issuance, subject to
ProLogis' ability to effect an offering on satisfactory terms.
Cash Operating Activities
Cash provided by operating activities increased by $33.1 million in 1999 as
compared to 1998 ($271.4 million in 1999 and $238.3 million in 1998). Cash
provided by operating activities increased by $45.8 million in 1998 as compared
to 1997 ($238.3 million in 1998 as compared to $192.5 million in 1997). These
increases are primarily the result of the increased number of operating
facilities in each year. See "-- Results of Operations -- Property Operations".
Cash provided by operating activities exceeded the cash distributions paid on
Common Shares in 1999, 1998 and 1997.
Cash Investing and Cash Financing Activities
For the years 1999, 1998 and 1997, ProLogis funded its investment needs
primarily with lines of credit borrowings and short-term borrowings, which were
subsequently repaid with cash flow from operations, proceeds from sales of debt
and equity securities, and proceeds from the dispositions of real estate assets
(from both the property operations segment and the CDFS business segment).
ProLogis' investment activities used approximately $34.4 million, $1.26 billion
and $571.1 million of cash in 1999, 1998 and 1997, respectively. ProLogis'
primary investing activity in 1999 was the Meridian Merger which was financed
primarily with the issuance of equity securities and the assumption of
Meridian's liabilities. ProLogis' financing activities resulted in a decrease in
cash of $230.8 million in 1999 (primarily due to net repayments on ProLogis'
lines of credit) and increases in cash of $1.06 billion and $398.8 million in
1998 and 1997, respectively.
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Investments in real estate (including recurring capital expenditures and
tenant improvements and lease commissions on previously leased space), net of
proceeds from dispositions, provided net cash of $57.7 million in 1999 and used
cash of $607.2 million in 1998 and $485.5 million in 1997. ProLogis' cash
investments in its unconsolidated entities aggregated $141.0 million in 1999,
$657.5 million in 1998 (includes the initial cash outlays for the acquisitions
of Frigoscandia, ProLogis Kingspark and ProLogis Garonor) and $85.6 million in
1997. ProLogis' investment activities in 1999 were substantially self-funding,
primarily due to the significant amount of cash generated from the disposition
of facilities.
ProLogis' primary cash financing activities in 1999 were: (i) the issuance
of $500.0 million of senior unsecured notes; (ii) arranging longer-term secured
debt agreements that generated $462.1 million of funds; (iii) repayments of
borrowings on ProLogis' unsecured lines of credit (net reduction in outstanding
borrowings of $395.6 million in 1999); and (iv) cash payments associated with
the Meridian Merger (paydown of Meridian's outstanding line of credit of $328.4
million and $67.6 million of payments to Meridian shareholders). See "-- Results
of Operations -- Meridian Merger".
ProLogis' primary cash financing activities in 1998 were: (i) the sale of
Series D preferred shares generating net proceeds of $241.5 million; (ii) sales
of Common Shares (net of repurchases of Common Shares under the employee share
purchase plan) generating net proceeds of $130.6 million; (iii) net borrowings
on ProLogis' credit facilities of $494.3 million; (iv) proceeds from short-term
borrowings of $350.0 million ($200 million of which was used primarily to
finance the acquisition of Frigoscandia AB and was repaid on March 31, 1998
after third-party financing was obtained); (v) the issuance of senior unsecured
notes generating net proceeds of $371.5 million; and (vi) net proceeds from a
secured financing of $65.5 million.
ProLogis' primary cash financing activities in 1997 were: (i) sales of
Common Shares (net of repurchases of Common Shares under the employee share
purchase plan) generating net proceeds of $406.1 million; (ii) the issuance of
senior unsecured notes generating net proceeds of $197.8 million; and (iii) net
repayments on ProLogis' lines of credit of $38.6 million.
Common Share cash distributions were $209.0 million (including $11.1
million paid to Meridian shareholders), $151.1 million and $106.6 million in
1999, 1998 and 1997, respectively. Dividends paid on preferred shares were $56.8
million in 1999 (including $0.7 million paid to Meridian shareholder), $49.1
million in 1998 and $35.3 million in 1997. See "-- Distribution and Dividend
Requirements".
Credit Facilities
ProLogis has an unsecured credit agreement with Bank of America, N.A.
("Bank of America"), Commerzbank AG and Chase Bank of Texas, National
Association, as agents for a bank group (the "Lenders") that provides for a
$550.0 million unsecured revolving line of credit. Borrowings bear interest, at
ProLogis' option, at either (a) the greater of the federal funds rate plus 0.5%
and the prime rate, or (b) LIBOR plus 1.00% based upon ProLogis' current senior
debt ratings. ProLogis' borrowings are primarily at the 30-day LIBOR rate plus
1.00% (6.8225% as of December 31, 1999). Additionally, the credit agreement
provides for a facility fee of 0.20% per annum. The line of credit matures on
March 29, 2001 and may be extended for an additional year at ProLogis' option.
As of December 31, 1999, $45.0 million of borrowings were outstanding on the
line of credit and ProLogis was in compliance with all covenants contained in
the credit agreement.
The $550.0 million unsecured line of credit replaced ProLogis' previous
$350.0 million unsecured line of credit that was put into place in August 1998.
ProLogis' entered into the new credit agreement to allow for increased borrowing
capacity following the Meridian Merger.
As of December 31, 1998, ProLogis had an agreement with the Lenders that
provided for a term loan of $150.0 million. The term loan was repaid on April
26, 1999 and the agreement was terminated. ProLogis paid interest at LIBOR plus
1.00% on the term loan borrowings.
In addition, ProLogis has a $25.0 million short-term unsecured
discretionary line of credit with Bank of America that matures on October 1,
2000. By agreement between ProLogis and Bank of America, the rate of interest on
and the maturity date of each advance are determined at the time of each
advance. There were no borrowings outstanding on the line of credit as of
December 31, 1999.
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On December 17, 1999, ProLogis obtained a multi-currency, unsecured
revolving line of credit in the currency equivalent of 325.0 million euros (the
currency equivalent of approximately $327.3 million as of December 31, 1999
based on currency exchange rates quoted by Reuters) through a group of 17 banks,
on whose behalf ABN AMRO Bank, N.V. acted as agent. The line of credit was
obtained for the purpose of funding ProLogis' European development activities.
The interest rate on this four-year revolving line of credit is Euribor plus
0.75% or Sterling LIBOR plus 0.75%, (borrowings outstanding as of December 31,
1999 were at a weighted average interest rate of 4.25%). As of December 31,
1999, there were 53.3 million euros of borrowings (the currency equivalent of
approximately $53.7 million as of December 31, 1999 based on currency exchange
rates quoted by Reuters) were outstanding on the line of credit and ProLogis was
in compliance with all covenants contained in the credit agreement.
Derivative Financial Instruments
ProLogis uses derivative financial instruments as hedges to manage
well-defined risk associated with interest and foreign currency rate
fluctuations on existing or anticipated obligations and transactions. ProLogis
does not use derivative financial instruments for trading purposes.
The primary risks associated with derivative instruments are market risk
and credit risk. Market risk is defined as the potential for loss in the value
of the derivative due to adverse changes in market prices (interest rates or
foreign currency rates). The use of derivative financial instruments allows
ProLogis to manage the risks of increases in interest rates and fluctuations in
foreign currency exchange rates with respect to the effects these fluctuations
would have on ProLogis' income and cash flows.
Credit risk is the risk that one of the parties to a derivative contract
fails to perform or meet their financial obligation under the contract. ProLogis
does not obtain collateral to support financial instruments subject to credit
risk but monitors the credit standing of counterparties. ProLogis does not
anticipate non-performance by any of the counterparties to its derivative
contracts. Should a counterparty fail to perform, however, ProLogis would incur
a financial loss to the extent of the positive fair market value of the
derivative instruments, if any.
As of December 31, 1999, ProLogis had foreign currency put option contracts
outstanding in the notional amount of 23.0 million euros (the currency
equivalent of approximately $23.2 million based on currency exchange rates
quoted by the Reuters) related to its operations in Europe. The outstanding
contracts do not qualify for hedge accounting and were marked to market as of
December 31, 1999. ProLogis recognized an aggregate expense of $92,000 on the
put option contracts including the mark to market adjustment of $47,000. The put
option contracts provide ProLogis with the option to exchange euros for U.S.
dollars at a fixed exchange rate such that if the euro were to depreciate
against the U.S. dollar to predetermined levels (as set by the contract),
ProLogis could exercise its options and mitigate its foreign currency exchange
losses.
ProLogis has interest rate swap agreements related to variable rate
mortgage notes and other unsecured debt in the currency equivalent of
approximately $169.9 million as of December 31, 1999 (based on currency exchange
rates quoted by Reuters). The swap agreements have a combined notional amount of
1.1 billion French francs and fix the Euribor rate at 3.62% through December
2003 on a notional amount in the currency equivalent of approximately $30.9
million as of December 31, 1999, at 3.60% through January 2004 on a notional
amount in the currency equivalent of approximately $118.9 million as of December
31, 1999 and at 3.59% through January 2004 on a notional amount in the currency
equivalent of approximately $20.1 million. In December 1999, a principal paydown
was made on the underlying debt resulting in a notional amount of the swap
agreements in excess of the principal balances. Consequently, swap agreements
with a notional amount of $26.2 million were cancelled in January 2000 at a gain
to ProLogis of $1.4 million. ProLogis contributed 50.1% of the common stock of
the wholly owned entity that holds the debt related to the swap agreements to
the ProLogis European Properties Fund in January 2000. ProLogis is committed to
contributing the remaining 49.9% of the common stock to the ProLogis European
Properties Fund in January 2001.
ProLogis entered into two interest rate protection agreements with a
combined notional amount of $150.0 million in October 1997 in anticipation of
debt offerings to be completed in 1998. During 1998, the interest rate
protection agreements no longer qualified for hedge accounting treatment under
GAAP. Accordingly, ProLogis began marking these agreements to market and for the
year ended December 31, 1998 ProLogis
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recognized a non-cash expense of $26.1 million. These agreements were terminated
in February 1999 at a total cost of $27.0 million (an additional $0.9 million
expense was recognized in 1999). ProLogis used these agreements to set the
interest rate on $200.0 million of secured debt that was obtained in March 1999.
See "-- Results of Operations -- Other Income and Expense Items -- Foreign
Currency Hedge Income (Expense)" for a discussion of foreign currency hedge
contracts entered into in 1997 and terminated in 1998 related to the acquisition
of Frigoscandia.
Commitments
As of December 31, 1999, ProLogis had letters of intent or contingent
contracts, subject to ProLogis' final due diligence, for the acquisition of
140,000 square feet of distribution facilities at an estimated acquisition cost
of $4.0 million. The foregoing transactions are subject to a number of
conditions, and ProLogis cannot predict with certainty that they will be
consummated. In addition, as of December 31, 1999, ProLogis had $424.2 million
of budgeted development costs for developments in process, of which $247.6
million was unfunded.
Frigoscandia AB has a multi-currency, three-year revolving credit agreement
through a consortium of 11 European banks in the currency equivalent of
approximately $186.0 million as of December 31, 1999 based on currency exchange
rates quoted by the Svenska Handelsbanken. The loan bears interest at the
relevant index (LIBOR or Euribor based on the currency borrowed) plus 0.65%.
ProLogis has entered into a guaranty agreement for 25% of the loan balance.
ProLogis Kingspark has a line of credit agreement with a bank in the United
Kingdom. The credit agreement, which provides for borrowings of up to 10.0
million pounds sterling (the currency equivalent of approximately $16.1 million
as of December 31, 1999 based on currency exchange rates quoted by Reuters). The
line of credit, which was increased to 15.0 million pounds sterling in February
2000, has been guaranteed by ProLogis. As of December 31, 1999, no borrowings
were outstanding on the line of credit. However, as of December 31, 1999,
ProLogis Kingspark had the currency equivalent of approximately $7.9 million of
letters of credit outstanding (based on currency exchange rates quoted by
Reuters) that reduce the amount of available borrowings on the line of credit.
Additionally, ProLogis has an agreement whereby it has guaranteed the
performance and obligations of ProLogis Kingspark with respect to an
infrastructure agreement entered into by ProLogis Kingspark related to the
development of a land parcel. As of December 31, 1999, ProLogis had an unfunded
commitment on this guarantee agreement in the currency equivalent of
approximately $9.0 million based on currency exchange rates quoted by Reuters.
Distribution and Dividend Requirements
ProLogis' current distribution policy is to pay quarterly distributions to
shareholders based upon what it considers to be a reasonable percentage of cash
flow and at the level that will allow ProLogis to continue to qualify as a REIT
for tax purposes. Because depreciation is a non-cash expense, cash flow
typically will be greater than earnings from operations and net earnings.
Therefore, annual distributions are expected to be consistently higher than
annual earnings.
Cash distributions paid in 1999, 1998 and 1997 were $1.30 per Common Share,
$1.24 per Common Share and $1.07 per Common Share, respectively. On December 16,
1999, ProLogis declared a distribution of $0.335 per Common Share which was paid
on February 23, 1999. The Board has set a projected annual distribution rate for
2000 of $1.34 per Common Share. The payment of distributions is subject to the
discretion of the Board and is dependent upon the financial condition and
operating results of ProLogis and may be adjusted at the discretion of the Board
during the year.
On May 3, 1999, ProLogis paid a common distribution to holders of Meridian
common stock as of March 19, 1999. This distribution, which was declared by the
Meridian Board of Directors prior to the closing of the Meridian Merger, related
to the first quarter of 1999 and aggregated $11.1 million. This liability was
assumed by ProLogis in connection with the Meridian Merger. ). See " -- Results
of Operations -- Meridian Merger".
47
<PAGE> 50
The annual dividend rates on ProLogis' preferred shares are $2.35 per
Series A preferred share, $1.75 per Series B preferred share, $4.27 per Series C
preferred share, $1.98 per Series D preferred share and $2.19 per series E
preferred share.
On April 30, 1999, ProLogis paid an aggregate dividend of $1.1 million on
the Series E preferred shares ($0.5469 per share) of which $729,200 related to
Meridian's Series D preferred stock and was accrued by Meridian prior to the
closing of the Meridian Merger. See "-- Results of Operations -- Meridian
Merger".
Pursuant to the terms of its preferred shares, ProLogis is restricted from
declaring or paying any distribution with respect to the Common Shares unless
and until all cumulative dividends with respect to the Preferred Shares have
been paid and sufficient funds have been set aside for dividends that have been
declared for the then current dividend period with respect to the Preferred
Shares.
Conversion to the Euro
Effective January 1, 1999, eleven of the fifteen member countries of the
European Monetary Union launched the new monetary unit, the euro, as the single
currency for the member countries of the European Monetary Union. During the
period from January 1, 1999 to January 1, 2002, a transition period will be in
effect during which time the euro will be available for non-cash transactions.
However, transactions can continue to be denominated in the old national
currencies. After January 1, 2002, all transactions must be denominated in the
euro. The targeted exchange rates of the old national currencies to the euro
were determined in May 1998. Conversion to the euro has not had, nor is
management aware of any future effects of the conversion to the euro that will
have, a material impact on its business operations or results of operations.
NEW TAX LEGISLATION
The REIT Modernization Act ("RMA"), which was passed in 1999 and will take
effect on January 1, 2001, modifies certain provisions of the Code with respect
to the taxation of REITs. Primarily, the RMA allows for the creation of Taxable
REIT Subsidiaries ("TRS") which will allow ProLogis and other REITs to own up to
100% of a TRS (previously limited to 10% of the voting stock). Due to the
previous limitations, certain of ProLogis' current taxable subsidiaries (those
entities whose operations generated income that was restricted under the REIT
rules) were formed as entities in which ProLogis owned 100% of the preferred
stock and a third party owned 100% of the voting common stock. Accordingly,
ProLogis accounted for these investments (excluding ProLogis Development
Services which is consolidated) under the equity method rather than
consolidating the investments in its balance sheet and results of operations.
Because ProLogis will be able to own 100% of these entities beginning on January
1, 2001, ProLogis is pursuing the purchase of the common stock of these entities
from the third parties currently owning the stock. See Note 5 to ProLogis'
Consolidated Financial Statements in Item 8.
FUNDS FROM OPERATIONS
Funds from operations attributable to Common Shares increased $91.8 million
to $320.2 million for 1999 from $228.4 million for 1998. Funds from operation
attributable to Common Shares increased $70.9 million from 1997 to 1998.
Funds from operations does not represent net income or cash from operating
activities in accordance with GAAP and is not necessarily indicative of cash
available to fund cash needs, which is presented in the Consolidated Statement
of Cash Flows in ProLogis' Consolidated Financial Statements in Item 8. Funds
from operations should not be considered as an alternative to net income 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.
ProLogis considers funds from operations to be a useful supplemental measure of
comparative period operating performance and as a supplemental measure to assist
management, financial analysts, potential investors and shareholders with an
indication of the ability of ProLogis to fund its capital expenditures and
investment activities and to fund other cash needs.
The funds from operations measure presented by ProLogis will not
necessarily be comparable to similarly titled measures of other REITs because
many REITs, including ProLogis, compute funds from operations in a
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<PAGE> 51
manner different from the definition used by the National Association of Real
Estate Investment Trusts ("NAREIT"). For the three year period ended December
31, 1999 presented below, funds from operations, as published by NAREIT is
defined as net income (computed in accordance with GAAP), excluding gains or
(losses) from debt restructuring and sales of previously depreciated property,
extraordinary or unusual items as defined by GAAP and significant non-recurring
items that materially distort the comparative measurement of company performance
over time, plus depreciation and amortization unique to the real estate
industry, and after adjustments for unconsolidated entities. The adjustments for
unconsolidated entities are computed to reflect their funds from operations on
the same basis.
Funds from operations as used by ProLogis is modified from the NAREIT
definition to exclude: (i) deferred income tax benefits and deferred income tax
expenses of ProLogis' taxable subsidiaries; (ii) foreign currency exchange gains
and losses resulting from debt transactions between ProLogis and its
consolidated and unconsolidated entities; (iii) foreign currency exchange gains
and losses from the remeasurement (based on current foreign currency exchange
rates) of third party debt of ProLogis' foreign consolidated and unconsolidated
entities; and (iv) mark to market adjustments related to derivative financial
instruments utilized to manage ProLogis' foreign currency risks. Additionally,
ProLogis includes gains or losses on the disposition of real estate utilized in
ProLogis' non-CDFS business in funds from operations. These adjustments to the
NAREIT definition are made to reflect ProLogis' funds from operations on a
comparable basis with the other REITs who to not engage in the types of
transactions that give rise to these items.
Funds from operations is as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net earnings attributable to Common Shares.............. $123,999 $ 62,231 $ 4,431
Add (Deduct):
Real estate related depreciation and
amortization..................................... 150,050 99,514 76,275
(Gain) loss on disposition of non-CDFS business
real estate assets............................... (38,994) (5,565) (7,378)
Foreign currency exchange (gains) losses, net(1)... 16,596 (3,227) 348
Non-recurring foreign currency hedge (income)
expense(2)....................................... -- (2,054) 6,028
Interest rate hedge expense(3)..................... 945 26,050 --
Costs incurred in acquiring management companies
from affiliate(4)................................ -- -- 75,376
Non-recurring items(5)............................. (247) 1,686 --
Deferred income tax expense........................ -- 1,797 --
Cumulative effect of accounting change(6).......... 1,440 -- --
ProLogis' share of reconciling items of
unconsolidated entities:
Real estate related depreciation and
amortization.................................. 49,644 36,489 2,419
Loss on disposal of assets....................... 826 179 --
Foreign currency exchange losses, net............ 14,650 14,207 --
Non-recurring items.............................. (700) -- --
Deferred income tax expense (benefit)............ 510 (2,929)
Cumulative effect of accounting change(6)........ 1,480 -- --
-------- -------- --------
Funds from operations attributable to Common Shares... $320,199 $228,378 $157,499
======== ======== ========
</TABLE>
- ---------------
(1) See "-- Results of Operations -- Other Income and Expense Items -- Foreign
Currency Exchange Gain (Losses), Net".
(2) See "-- Results of Operations -- Other Income and Expense Items -- Foreign
Currency Hedge Income (Expense)".
(3) See "-- Liquidity and Capital Resources -- Derivative Financial
Instruments".
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<PAGE> 52
(4) See "-- Results of Operations -- Other Income and Expense Items -- Costs
Incurred in Acquiring Management Companies From Affiliate".
(5) In 1998 represents the costs associated with ProLogis' name change. See
"-- Results of Operations -- Other Income and Expense Items -- Other
Expense".
(6) See "-- Results of Operations -- Other Income and Expense
Items -- Cumulative Effect of Accounting Change".
YEAR 2000
Overview
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Certain computer
programs that have time-sensitive software may recognize a date using "00" as
the year 1900 rather than the year 2000. This could result in a system failure
or miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or engage
in similar business activities.
Prior to December 31, 1999, ProLogis completed a review of all of its
computer systems and applications to determine if these programs were Year 2000
compliant. ProLogis did not identify any computer system or applications that,
upon failure to be Year 2000 compliant, would have had a material adverse impact
on its business or results of operations.
Prior to and after January 1, 2000 ProLogis and its unconsolidated entities
(CSI, Frigoscandia and ProLogis Kingspark) have not experienced any disruptions
in their business operations related to the Year 2000 issue. Accordingly, Year
2000 problems have not materially impacted the financial condition, liquidity or
results of operations of ProLogis and its unconsolidated entities as reported
through December 31, 1999. Further, Year 2000 issues are not expected to
materially impact the financial condition, liquidity or results of operations of
ProLogis and its unconsolidated entities after December 31, 1999. Therefore,
ProLogis and its unconsolidated entities have not recorded any accruals for
contingent losses related to Year 2000 issues.
There can be no assurances that Year 2000 related issues will not still
have a material adverse effect on ProLogis, its business and its financial
condition or on the business and financial condition of ProLogis' unconsolidated
entities. However, ProLogis believes its Year 2000 compliance program has
reduced the level of uncertainty about the Year 2000 impact in areas that are
within its direct control and management of ProLogis believes that the
possibility of any future interruptions of normal operations is remote.
ProLogis' activities with respect to its assessment of Year 2000 compliance
and its remediation efforts have been performed primarily by existing personnel.
ProLogis' historical costs for addressing the Year 2000 issue are not material
and management does not anticipate any future costs associated with the Year
2000 issue. Third-party costs and interim software solutions for Year 2000
issues have not exceeded $250,000. ProLogis does not separately track the
internal costs incurred for Year 2000 compliance issues. Such costs are
principally the related payroll costs of its IT group. Although the cost
associated with the replacement of ProLogis' key property management and core
accounting systems that was completed in 1999 was substantial, the replacements
were made to improve operational efficiency and were not accelerated due to the
Year 2000 issue. ProLogis did not delay any material projects as a result of the
Year 2000 issue. Funds expended to address Year 2000 issues were made from
operating cash flow.
The total costs incurred for Year 2000 remediation was less than $250,000
for CSI, approximately $3.0 million for Frigoscandia and less than $100,000 for
ProLogis Kingspark. No future costs are expected to be incurred.
ProLogis and its unconsolidated entities believe that Year 2000 issues have
not and will not materially effect the their historic spending patterns or cost
relationships. Additionally, ProLogis believes that the revenue patterns of it
and its unconsolidated entities have not and will not be effected by Year 2000
related problems.
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<PAGE> 53
RISK FACTORS
Risks factors include the occurrence of any of the events described below
that could adversely affect ProLogis' ability to achieve its projected returns
on acquisitions and projects under development and could hinder ProLogis'
ability to make expected distributions to equity holders.
ProLogis is Exposed to the General Economic Conditions of the Markets in which
it Owns Property
ProLogis' operating performance depends on the economic conditions of
markets in which its facilities are concentrated. ProLogis' operating
performance could be adversely affected if conditions, such as an oversupply of
space or a reduction in demand for industrial distribution facilities, in
ProLogis' larger markets become less favorable relative to other geographic
areas. Any material oversupply of space or material reduction of demand for
space could adversely effect ProLogis' operating income and the value of the
Common Shares.
ProLogis' Investments Are Subject To Risks Particular To Real Estate
Value of Real Estate Dependent on Numerous Factors
Real property investments are subject to varying degrees of risk. Real
estate values are affected by a number of factors, including:
- changes in the general economic climate;
- local conditions, such as an oversupply of space or a reduction in demand
for real estate in an area;
- the quality and philosophy of management;
- competition from other available space;
- the ability of the owner to provide adequate maintenance and insurance;
- the ability of the owner to control variable operating costs;
- governmental regulations;
- interest rate levels;
- the availability of financing; and
- potential liability under, and changes in, environmental, zoning, and
other laws.
Restrictions on, and Risks of, Unsuccessful Development Activities
ProLogis intends to continue to pursue development activities as
opportunities arise. Such development activities generally require various
government and other approvals. ProLogis may not receive such approvals.
ProLogis will be subject to risks associated with any such development
activities. These risks include:
- the risk that development opportunities explored by ProLogis may be
abandoned;
- the risk that construction costs of a project may exceed original
estimates, possibly making the project less profitable than originally
estimated;
- limited cash flow during the construction period; and
- the risk that occupancy rates and rents of a completed project will not
be sufficient to make the project profitable.
In case of an unsuccessful development project, ProLogis' loss could exceed
its investment in the project.
Tenant Default
ProLogis' income and distributable cash flow would be adversely affected if
a significant number of ProLogis' tenants are unable to meet their obligations
to ProLogis, or if ProLogis is unable to lease, on
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<PAGE> 54
economically favorable terms, a significant amount of space in its industrial
distribution facilities. In the event of default by a significant number of
tenants, ProLogis may experience delays and incur substantial costs in enforcing
its rights as landlords.
Real Estate Investments Are Not As Liquid As Other Types Of Assets
Real estate investments are not as liquid as other types of assets and
therefore may tend to limit the ability of ProLogis to react promptly to changes
in economic or other conditions. In addition, significant expenditures
associated with real estate investments, such as mortgage payments, real estate
taxes and maintenance costs, are generally not reduced when circumstances cause
a reduction in income from the investments. Like other companies qualifying as
REITs under the Code, ProLogis must comply with the safe harbor rules, relating
to the number of properties sold in a year, their tax bases and the cost of
improvements made to the properties, or meet other tests which enable a REIT to
avoid punitive taxation on the sale of assets. Thus, ProLogis' ability to sell
assets at any time to change its asset base may be restricted.
Share Prices May Be Affected By Market Interest Rates
The annual distribution rate on Common Shares as a percentage of its market
price may influence the trading price of such Common Shares. An increase in
market interest rates may lead investors to demand a higher annual distribution
rate, which could adversely affect the market price of such Common Shares. A
decrease in the market price of the Common Shares could reduce ProLogis' ability
to raise additional equity capital in the public markets.
Uninsured Losses May Adversely Affect ProLogis
Some types of losses, such as from acts of war, may be uninsurable, or the
cost of insuring against such losses may not be economically justifiable. If an
uninsured loss occurs, ProLogis could lose both the invested capital in and
anticipated revenues from the affected facility, but would still be obligated to
repay any recourse mortgage indebtedness on the facility.
Potential Environmental Liability
Under various federal, state and local laws, ordinances and regulations, a
current or previous owner, developer or operator of real estate may be liable
for the costs of removal or remediation of hazardous or toxic substances at, on,
under or in its property. The costs of removal or remediation of such substances
could be substantial. Such laws often impose liability without regard to whether
the owner or operator knew of, or was responsible for, the release or presence
of such hazardous substances. The presence of such substances on ProLogis'
properties may adversely affect its ability to sell such properties or to borrow
using such properties as collateral and may also have an adverse affect on
ProLogis' ability to pay distributions to its shareholders.
Debt Financing, Increases in Interest Rates, Financial Covenants and Absence
of Limitations on Debt May Result in Decreased Distribution to Shareholders
Debt Financing
ProLogis is subject to risks normally associated with debt financing,
including the risk that ProLogis' cash flow will be insufficient to meet
required payments or principal and interest and the risk that ProLogis will not
be able to refinance existing indebtedness or that the terms of such
refinancings will not be as favorable as terms of the existing indebtedness.
There can be no assurance that ProLogis will be able to refinance any
indebtedness or otherwise obtain funds by selling assets or raising equity to
make required payments on maturing indebtedness.
Requirements of Credit Facilities; Foreclosures
The terms of ProLogis' indebtedness require ProLogis to comply with a
number of customary financial and other covenants, such as maintaining debt
service coverage and leverage ratios, maintaining insurance coverage, etc. These
covenants may limit ProLogis' flexibility in its operations, and breaches of
these covenants could
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<PAGE> 55
result in defaults under the instruments governing the applicable indebtedness
even if ProLogis has satisfied its payment obligations. If ProLogis is unable to
refinance its indebtedness at maturity or meet its payment obligations, the
amount of cash available for distribution may be adversely affected.
No Limitations on Debt
ProLogis currently has a policy of incurring debt only, if upon such
incurrence, ProLogis' debt-to-book capitalization ratio, as adjusted, would
equal 50% or less. The Board could alter or eliminate this policy without
shareholder approval and would do so if, for example, it were necessary in order
for ProLogis to continue to qualify as a REIT under the Code. If this policy
were changed, ProLogis could become more highly leveraged, resulting in an
increase in debt service that could adversely affect the cash available for
distribution to shareholders.
Failure to Qualify as a REIT Could Adversely Affect Shareholders
ProLogis has elected to be taxed as a REIT under the Code commencing with
its taxable year ended December 31, 1993. To maintain REIT status, ProLogis must
meet a number of highly technical requirements on a continuing basis. Those
requirements seek to ensure, among other things, that the gross income and
investments of a REIT are largely real estate related, that a REIT distributes
substantially all its ordinary taxable income to shareholders on a current basis
and that the REIT's ownership is not overly concentrated. Due to the complex
nature of these rules, the limited available guidance concerning interpretation
of the rules, the importance of ongoing factual determinations and the
possibility of adverse changes in the law, administrative interpretations of the
law and developments at ProLogis, no assurance can be given that ProLogis will
qualify as a REIT for any particular year.
If ProLogis fails to qualify as a REIT, it will be taxed as a regular
corporation, and distributions to shareholders will not be deductible in
computing ProLogis' taxable income. The resulting corporate tax liabilities
could materially reduce the funds available for distribution to ProLogis'
shareholders or for reinvestment. In the absence of REIT status, distributions
to shareholders would no longer be required. Moreover, ProLogis might not be
able to elect to be treated as a REIT for the four taxable years after the year
during which ProLogis ceased to qualify as a REIT. In addition, if ProLogis
later requalified as a REIT, it might be required to pay a full corporate-level
tax on any unrealized gain in its assets as of the date of requalification and
to make distributions to shareholders equal to any earnings accumulated during
the period of non-REIT status.
Potential Adverse Effect of REIT Distribution Requirements
To maintain its qualification as a REIT under the Code, ProLogis must
annually distribute to ProLogis' shareholders at least 95% of its ordinary
taxable income, excluding net capital gains (changed to 90% as a result of the
RMA -- see "-- New Tax Legislation"). This requirement limits ProLogis' ability
to accumulate capital. ProLogis may not have sufficient cash or other liquid
assets to meet the distribution requirements. Difficulties in meeting the
distribution requirements might arise due to competing demands for ProLogis'
funds or to timing differences between tax reporting and cash receipts and
disbursements, because income may have to be reported before cash is received,
because expenses may have to be paid before a deduction is allowed or because
deductions may be disallowed or limited. In those situations, ProLogis might be
required to borrow funds or sell facilities on adverse terms in order to meet
the distribution requirements. If ProLogis fails to make a required
distribution, it would cease to be a REIT.
Currency Risk
ProLogis has pursued and intends to continue to pursue growth opportunities
in international markets and often invests in countries where the U.S. dollar is
not the national currency. As a result, ProLogis is subject to foreign currency
risk due to potential fluctuations in exchange rates between foreign currencies
and the U. S. dollar. For example, a significant depreciation in the value of
the foreign currencies of one or more countries where ProLogis has a significant
investment may materially adversely affect ProLogis' performance. ProLogis
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<PAGE> 56
attempts to mitigate any such effects through the use of foreign currency hedge
contracts, although there can be no assurance that such attempts will be
successful.
Influence of ProLogis' Principal Shareholder May Impact ProLogis' Management
and Operations
ProLogis and Security Capital are parties to a Third Amended and Restated
Investor Agreement, dated as of September 9, 1997. Pursuant to the investor
agreement, Security Capital has the right, so long as it owns between 10% and
25% of the Common Shares, to nominate one person to the Board. So long as
Security Capital owns 25% or more of the Common Shares, Security Capital will be
entitled to nominate a proportionate number of persons to the Board subject to a
maximum of three nominees if the size of the Board does not increase above the
current size of ten trustees. Under the investor agreement, so long as it owns
at least 25% of the Common Shares, Security Capital also has the right of prior
approval with respect to the following matters:
- the issuance of equity securities or securities convertible into equity
securities, other than issuances in connection with option, dividend
reinvestment and similar plans, for less than the fair market value of
such securities;
- the issuance of any preferred shares which would result in the fixed
charge coverage ratio being less than 1.4 to 1.0;
- adopting any employee benefit plans under which Common Shares may be
issued;
- the compensation of senior officers of ProLogis; and
- the incurrence of additional indebtedness which would result in the
interest expense coverage ratio being less than 2.0 to 1.0.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
ProLogis is exposed to market risk from changes in interest rates and
foreign currency exchange rates. On a limited basis, ProLogis uses certain
derivative financial instruments, including interest rate swap agreements and
foreign currency option and forward contracts to reduce its market risk.
ProLogis does not use financial instruments for trading or speculative purposes
and all financial instruments are entered into in accordance with Board approved
policies.
ProLogis has estimated its market risk exposures using sensitivity
analysis. ProLogis has defined its market risk exposure as the potential loss in
future earnings and cash flow with respect to interest rate exposure and future
earnings with respect to foreign currency exchange exposure of its market risk
sensitive instruments assuming a hypothetical 10% adverse change in year end
interest rates and foreign currency exchange rates. The results of the
sensitivity analysis are summarized below. The sensitivity analysis is of
limited predictive value. As a result, ProLogis' ultimate realized gains or
losses with respect to interest and foreign currency exchange rate fluctuations
will depend on the exposures that arise during a future period, hedging
strategies at the time, and the prevailing interest and foreign currency
exchange rates.
Interest Rate Risk
ProLogis' interest rate risk is related primarily to its variable rate
credit facilities. ProLogis' interest rate risk management objective is to limit
the impact of interest rate changes on earnings and cash flows. To achieve its
objective, ProLogis primarily borrows on a fixed rate basis. Therefore,
ProLogis' primary interest rate risk is created by its variable rate unsecured
lines of credit and its variable rate short-term borrowing arrangements.
ProLogis substantially eliminates the interest rate risk generated by longer
term variable rate debt by fixing the interest payments with interest rate swap
agreements. ProLogis had $160.7 million longer-term variable rate debt
outstanding as of December 31, 1999. ProLogis has substantially fixed the
interest payments on this debt with interest rate swap agreements. In addition,
ProLogis has in the past and may in the future, utilize derivative instruments
as hedges in anticipation of future fixed rate debt transactions to manage
interest rate exposure.
During the year ended December 31, 1999, ProLogis had weighted average
outstanding borrowings of $232.8 million on its variable rate unsecured lines of
credit and $47.9 million on its variable rate short-term
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<PAGE> 57
borrowing arrangement. Based on the results of the sensitivity analysis, which
assumed a 10% adverse change in interest rates, the estimated market risk
exposure for interest rate-related financial instruments was approximately $1.7
million on both future earnings and cash flow as of December 31, 1999. The
sensitivity analysis was based on the weighted average outstanding variable rate
borrowings for 1999 and assumed a flat yield curve.
Foreign Currency Risk
ProLogis uses foreign currency forward and option contracts to manage
foreign currency exchange rate risk related to projected net operating income
(operating income net of foreign denominated interest expense) from foreign
entities. Prior to September 1999, ProLogis did not hedge projected net
operating income from foreign entities with derivative contracts because it was
not material relative to ProLogis' total net operating income.
In addition, ProLogis incurs foreign currency risk related to its U.S.
dollar denominated loans to its foreign consolidated subsidiaries. The
remeasurement of intercompany loans results in foreign currency exchange gains
or losses which are recognized by ProLogis. However, ProLogis does not incur an
actual cash gain or loss until the loans are repaid. ProLogis' exposure to
foreign currency exchange rates exists with the following currencies versus the
U.S. dollar: euro, British pound sterling and Swedish krona.
ProLogis' foreign currency exchange sensitivity analysis included foreign
currency forward and options contracts and other financial instruments affected
by foreign currency exchange risk, as well as U.S. dollar denominated loans to
foreign consolidated entities. Based on the results of the sensitivity analysis,
which assumed a 10% adverse change in foreign currency exchange rates, the
estimated 1999 year-end market risk exposure to future earnings was $16.8
million. The sensitivity analysis excluded the impact of the change in foreign
currency exchange rates on the underlying projected net operating income, which
has a high degree of inverse correlation with the derivative instruments used to
hedge it. However, since ProLogis hedges approximately 75% of its projected net
operating income from foreign entities, approximately 25% of the impact to total
net operating income of an adverse movement in foreign exchange rates would not
be offset by derivative instruments.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ProLogis Consolidated Balance Sheets as of December 31, 1999 and 1998, its
Consolidated Statements of Earnings, Shareholders' Equity and Cash Flows for
each of the three years in the period ended December 31, 1999, Notes to
Consolidated Financial Statements and Schedule III -- Real Estate and
Accumulated Depreciation, together with the report of Arthur Andersen LLP,
independent public accountants, are included under Item 14 of this report and
are incorporated herein by reference. Selected quarterly financial data is
presented in Note 14 of Notes to Consolidated Financial Statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE MATTERS
Not applicable.
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<PAGE> 58
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information regarding ProLogis' executive officers, see "Item 1.
Business -- Executive Officers and Trustees" and "-- Senior Officers." The other
information required by this Item 10 is incorporated herein by reference to the
description under the captions "Election of Trustees" and "Section 16(a)
Beneficial Ownership Reporting Compliance" in ProLogis' definitive proxy
statement for its 2000 annual meeting of shareholders ("2000 Proxy Statement").
ITEM 11. EXECUTIVE COMPENSATION
Incorporated herein by reference to the description under the captions
"Executive Compensation," "Compensation Committee Report on Executive
Compensation," "Trustee Compensation" and "Outside Trustee Plan" in the 2000
Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference to the description under the caption
"Principal Shareholders" in the 2000 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference to the description under the caption
"Certain Relationships and Transactions" in the 2000 Proxy Statement.
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<PAGE> 59
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
The following documents are filed as a part of this report:
(a) Financial Statements and Schedules:
1. Financial Statements:
See Index to Consolidated Financial Statements and Schedule III on
page 58 of this report, which is incorporated herein by reference.
2. Financial Statement Schedules:
Schedule III -- Real Estate and Accumulated Depreciation
All other schedules have been omitted since the required information
is presented in the financial statements and the related notes or is
not applicable.
3. Exhibits:
See Index to Exhibits on pages 118 to 122 of this report, which is
incorporated herein by reference.
(b) Reports on Form 8-K: The following reports on Form 8-K were filed
during the last quarter of the period covered by this report:
<TABLE>
<CAPTION>
ITEM FINANCIAL
DATE REPORTED STATEMENTS
- ---- -------- ----------
<S> <C> <C>
None
</TABLE>
(c) Exhibits: The Exhibits required by Item 601 of Regulation S-K are
listed in the Index to Exhibits on pages 118 to 122 of this report, which
is incorporated herein by reference.
57
<PAGE> 60
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE III
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ProLogis Trust:
Report of Independent Public Accountants.................. 59
Consolidated Balance Sheets............................... 60
Consolidated Statements of Earnings....................... 61
Consolidated Statements of Shareholders' Equity........... 62
Consolidated Statements of Cash Flows..................... 63
Notes to Consolidated Financial Statements................ 64
Report of Independent Public Accountants.................. 100
Schedule III -- Real Estate and Accumulated
Depreciation........................................... 101
</TABLE>
58
<PAGE> 61
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Trustees and Shareholders of
ProLogis Trust
We have audited the accompanying consolidated balance sheets of ProLogis
Trust and subsidiaries as of December 31, 1999 and 1998, and the related
consolidated statements of earnings, shareholders' equity, and cash flows for
each of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Trust's management. Our responsibility
is to express an opinion on these financial statements based on our audits. We
did not audit the financial statements of Frigoscandia Holding AB accounted for
under the equity method of accounting, in which the Trust has investments in and
advances to amounting to $196.9 million and $229.9 million as of December 31,
1999 and 1998, respectively, and losses from unconsolidated entity of $2.9
million and $7.6 million in 1999, and 1998, respectively. We did not audit the
financial statements of CS Integrated LLC accounted for under the equity method
of accounting, in which the Trust has an investment in and advances to amounting
to $186.9 million as of December 31, 1999 and earnings from unconsolidated
entity of $9.2 million in 1999. These statements were audited by other auditors
whose reports were furnished to us, and our opinion, insofar as it relates to
the amounts included for these entities is based solely on the reports of the
other auditors.
We conducted our audits 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 statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. 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 audits and the reports of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the reports of the other auditors,
the financial statements referred to above present fairly, in all material
respects, the financial position of ProLogis Trust and subsidiaries as of
December 31, 1999 and 1998, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1999, in
conformity with generally accepted accounting principles.
Arthur Andersen LLP
Chicago, Illinois
March 21, 2000
59
<PAGE> 62
PROLOGIS TRUST
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1999 1998
---------- ----------
<S> <C> <C>
Real estate................................................. $4,974,951 $3,657,500
Less accumulated depreciation............................. 366,703 254,288
---------- ----------
4,608,248 3,403,212
Investments in and advances to unconsolidated entities...... 940,364 733,863
Cash and cash equivalents................................... 69,338 63,140
Accounts and notes receivable............................... 46,998 11,648
Other assets................................................ 183,092 118,866
---------- ----------
Total assets....................................... $5,848,040 $4,330,729
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Lines of credit........................................... $ 98,700 $ 344,300
Short-term borrowings..................................... -- 150,000
Senior unsecured debt..................................... 1,729,630 1,083,641
Other unsecured debt...................................... 30,892 --
Mortgage notes............................................ 657,913 184,964
Assessment bonds.......................................... 10,721 11,281
Securitized debt.......................................... 26,952 31,559
Accounts payable and accrued expenses..................... 117,651 116,378
Construction payable...................................... 23,064 34,025
Amount due to affiliate................................... 221 395
Distributions and dividends payable....................... 54,939 39,283
Other liabilities......................................... 81,549 27,240
---------- ----------
Total liabilities.................................. 2,832,232 2,023,066
---------- ----------
Minority interest........................................... 62,072 51,295
Shareholders' equity:
Series A Preferred Shares; $0.01 par value; 5,400,000
shares issued and outstanding at December 31, 1999 and
1998; stated liquidation preference of $25.00 per
share................................................... 135,000 135,000
Series B Convertible Preferred Shares; $0.01 par value;
7,020,703 shares issued and outstanding at December 31,
1999 and 7,537,600 shares issued and outstanding at
December 31, 1998; stated liquidation preference of
$25.00 per share........................................ 175,518 188,440
Series C Preferred Shares; $0.01 par value; 2,000,000
shares issued and outstanding at December 31, 1999 and
1998; stated liquidation preference of $50.00 per
share................................................... 100,000 100,000
Series D Preferred Shares; $0.01 par value; 10,000,000
shares issued and outstanding at December 31, 1999 and
1998; stated liquidation preference of $25.00 per
share................................................... 250,000 250,000
Series E Preferred Shares; $0.01 par value; 2,000,000
shares issued and outstanding at December 31, 1999;
stated liquidation preference of $25.00 per share....... 50,000 --
Common shares of beneficial interest; $0.01 par value;
161,825,466 shares issued and outstanding at December
31, 1999 and 123,415,711 shares issued and outstanding
at December 31, 1998.................................... 1,618 1,234
Additional paid-in capital.................................. 2,663,350 1,907,232
Employee share purchase notes............................... (22,906) (25,247)
Accumulated other comprehensive income...................... (9,765) 23
Distributions in excess of net earnings..................... (389,079) (300,314)
---------- ----------
Total shareholders' equity......................... 2,953,736 2,256,368
---------- ----------
Total liabilities and shareholders' equity......... $5,848,040 $4,330,729
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
60
<PAGE> 63
PROLOGIS TRUST
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Income:
Rental income............................................. $491,826 $345,046 $284,533
Other real estate income.................................. 46,678 17,554 12,291
Income from unconsolidated entities....................... 22,519 2,755 3,278
Interest.................................................. 6,369 2,752 2,392
-------- -------- --------
Total income....................................... 567,392 368,107 302,494
-------- -------- --------
Expenses:
Rental expenses, net of recoveries $87,907 in 1999,
$57,415 in 1998 and $42,288 in 1997 and including
amounts paid to affiliate of $1,314 in 1999, $984 in
1998 and $280 in 1997................................... 33,501 27,120 23,187
Property management fees paid to affiliate, net of
recoveries of $3,870 in 1997............................ -- -- 3,821
General and administrative, including amounts paid to
affiliate of $1,582 in 1999, $1,992 in 1998 and $657 in
1997.................................................... 38,284 22,893 6,770
REIT management fee paid to affiliate..................... -- -- 17,791
Depreciation and amortization............................. 152,447 100,590 76,562
Interest.................................................. 170,746 77,650 52,704
Interest rate hedge expense............................... 945 26,050 --
Costs incurred in acquiring management companies from
affiliate............................................... -- -- 75,376
Other..................................................... 4,920 6,187 3,891
-------- -------- --------
Total expenses..................................... 400,843 260,490 260,102
-------- -------- --------
Earnings from operations.................................... 166,549 107,617 42,392
Minority interest share in earnings......................... 4,979 4,681 3,560
-------- -------- --------
Earnings before gain on disposition of real estate and
foreign currency exchange gains (losses).................. 161,570 102,936 38,832
Gain on disposition of real estate.......................... 38,994 5,565 7,378
Foreign currency hedge income (expense)..................... -- 2,054 (6,028)
Foreign currency exchange gains (losses), net............... (16,818) 2,938 (348)
-------- -------- --------
Earnings before income taxes................................ 183,746 113,493 39,834
Income tax expense:
Current................................................... 1,472 368 85
Deferred.................................................. -- 1,796 --
-------- -------- --------
Total income taxes................................. 1,472 2,164 85
-------- -------- --------
Earnings before cumulative effect of accounting change...... 182,274 111,329 39,749
Cumulative effect of accounting change...................... 1,440 -- --
-------- -------- --------
Net earnings................................................ 180,834 111,329 39,749
Less preferred share dividends.............................. 56,835 49,098 35,318
-------- -------- --------
Net earnings attributable to Common Shares.................. $123,999 $ 62,231 $ 4,431
======== ======== ========
Weighted average Common Shares outstanding -- Basic......... 152,412 121,721 100,729
======== ======== ========
Weighted average Common Shares outstanding -- Diluted....... 152,739 122,028 100,869
======== ======== ========
Basic per share net earnings attributable to Common Shares:
Earnings before cumulative effect of accounting change.... $ 0.82 $ 0.51 $ 0.04
Cumulative effect of accounting change.................... (0.01) -- --
-------- -------- --------
Net earnings attributable to Common Shares......... $ 0.81 $ 0.51 $ 0.04
======== ======== ========
Diluted per share net earnings attributable to Common
Shares:
Earnings before cumulative effect of accounting change.... $ 0.82 $ 0.51 $ 0.04
Cumulative effect of accounting change.................... (0.01) -- --
-------- -------- --------
Net earnings attributable to Common Shares......... $ 0.81 $ 0.51 $ 0.04
======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
61
<PAGE> 64
PROLOGIS TRUST
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
SERIES A SERIES B SERIES C
PREFERRED PREFERRED PREFERRED
COMMON SHARES SHARES AT SHARES AT SHARES AT
-------------------- AGGREGATE AGGREGATE AGGREGATE
NUMBER PAR LIQUIDATION LIQUIDATION LIQUIDATION
OF SHARES VALUE PREFERENCE PREFERENCE PREFERENCE
--------- -------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1996............................... 93,677 $ 937.0 $135,000 $201,250 $100,000
Net earnings............................................... -- -- -- -- --
Preferred share dividends.................................. -- -- -- -- --
Accumulated other comprehensive income -- foreign currency
translation adjustments.................................. -- -- -- -- --
Comprehensive income attributable to Common Shares......... -- -- -- -- --
Sale of Common Shares...................................... 18,455 184.6 -- -- --
Common Shares issued under employee share purchase plan.... 1,357 13.6 -- -- --
Common Shares issued in 1997 Merger, net of costs.......... 3,692 36.9 -- -- --
Common Shares issued under dividend reinvestment and share
purchase plans........................................... 20 0.2 -- -- --
Limited partnership units converted to Common Shares....... 105 1.0 -- -- --
Series B preferred shares converted to Common Shares....... 63 0.6 -- (1,242) --
Principal payments on employee share purchase notes........ -- -- -- -- --
Retirements of employee share purchase notes............... (5) (0.1) -- -- --
Common Share distributions paid............................ -- -- -- -- --
Common Share distributions accrued......................... -- -- -- -- --
------- -------- -------- -------- --------
Balances at December 31, 1997............................... 117,364 1,173.8 135,000 200,008 100,000
Net earnings............................................... -- -- -- -- --
Preferred share dividends.................................. -- -- -- -- --
Accumulated other comprehensive income -- foreign currency
translation adjustments.................................. -- -- -- -- --
Comprehensive income attributable to Common Shares......... -- -- -- -- --
Sale of Common Shares...................................... 5,494 54.9 -- -- --
Sale of preferred shares................................... -- -- -- -- --
Common Shares issued under dividend reinvestment and share
purchase plans........................................... 18 0.1 -- -- --
Common Shares issued upon exercise of warrants............. 12 0.1 -- -- --
Limited partnership units converted to Common Shares....... 20 0.2 -- -- --
Series B preferred shares converted to Common Shares....... 593 5.9 -- (11,568) --
Principal payments on employee share purchase notes........ -- -- -- -- --
Retirements of employee share purchase notes............... (85) (0.8) -- -- --
Sale of options to unconsolidated entities................. -- -- -- -- --
Stock-based compensation................................... -- -- -- -- --
Common Share distributions paid............................ -- -- -- -- --
Common Share distributions accrued......................... -- -- -- -- --
------- -------- -------- -------- --------
Balances at December 31, 1998............................... 123,416 1,234.2 135,000 188,440 100,000
Net earnings............................................... -- -- -- -- --
Preferred share dividends.................................. -- -- -- -- --
Accumulated other comprehensive income -- foreign currency
translation adjustments.................................. -- -- -- -- --
Comprehensive income attributable to Common Shares......... -- -- -- -- --
Preferred and Common Shares issued in Meridian Merger...... 37,388 373.9 -- -- --
Common Shares issued under dividend reinvestment and share
purchase plans........................................... 344 3.4 -- --
Limited partnership units converted to Common Shares....... 14 0.1 -- -- --
Series B preferred shares converted to Common Shares....... 663 6.6 -- (12,922) --
Principal payments on employee share purchase notes........ -- -- -- -- --
Sale of options to unconsolidated entities................. -- -- -- -- --
Stock-based compensation................................... -- -- -- -- --
Common Share distributions paid............................ -- -- -- -- --
Common Share distributions accrued......................... -- -- -- -- --
------- -------- -------- -------- --------
Balances at December 31, 1999............................... 161,825 $1,618.2 $135,000 $175,518 $100,000
======= ======== ======== ======== ========
<CAPTION>
SERIES D SERIES E
PREFERRED PREFERRED
SHARES AT SHARES AT EMPLOYEE ACCUMULATED
AGGREGATE AGGREGATE ADDITIONAL SHARE OTHER
LIQUIDATION LIQUIDATION PAID-IN PURCHASE COMPREHENSIVE
PREFERENCE PREFERENCE CAPITAL NOTES INCOME
----------- ----------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balances at December 31, 1996............................... $ -- $ -- $1,257,347 $ -- $ --
Net earnings............................................... -- -- -- -- --
Preferred share dividends.................................. -- -- -- -- --
Accumulated other comprehensive income -- foreign currency
translation adjustments.................................. -- -- -- -- (63)
Comprehensive income attributable to Common Shares......... -- -- -- -- --
Sale of Common Shares...................................... -- -- 405,082 -- --
Common Shares issued under employee share purchase plan.... -- -- 28,777 (27,345) --
Common Shares issued in 1997 Merger, net of costs.......... -- -- 79,102 -- --
Common Shares issued under dividend reinvestment and share
purchase plans........................................... -- -- 429 -- --
Limited partnership units converted to Common Shares....... -- -- 1,587 -- --
Series B preferred shares converted to Common Shares....... -- -- 1,241 -- --
Principal payments on employee share purchase notes........ -- -- -- 64 --
Retirements of employee share purchase notes............... -- -- (100) 95 --
Common Share distributions paid............................ -- -- -- -- --
Common Share distributions accrued......................... -- -- -- -- --
-------- -------- ---------- -------- -------
Balances at December 31, 1997............................... -- -- 1,773,465 (27,186) (63)
Net earnings............................................... -- -- -- -- --
Preferred share dividends.................................. -- -- -- -- --
Accumulated other comprehensive income -- foreign currency
translation adjustments.................................. -- -- -- -- 86
Comprehensive income attributable to Common Shares......... -- -- -- -- --
Sale of Common Shares...................................... -- -- 130,279 -- --
Sale of preferred shares................................... 250,000 -- (8,469) -- --
Common Shares issued under dividend reinvestment and share
purchase plans........................................... -- -- 403 -- --
Common Shares issued upon exercise of warrants............. -- -- 118 -- --
Limited partnership units converted to Common Shares....... -- -- 302 -- --
Series B preferred shares converted to Common Shares....... -- -- 11,562 -- --
Principal payments on employee share purchase notes........ -- -- -- 143 --
Retirements of employee share purchase notes............... -- -- (2,039) 1,796 --
Sale of options to unconsolidated entities................. -- -- 1,333 -- --
Stock-based compensation................................... -- -- 278 -- --
Common Share distributions paid............................ -- -- -- -- --
Common Share distributions accrued......................... -- -- -- -- --
-------- -------- ---------- -------- -------
Balances at December 31, 1998............................... 250,000 -- 1,907,232 (25,247) 23
Net earnings............................................... -- -- -- -- --
Preferred share dividends.................................. -- -- -- -- --
Accumulated other comprehensive income -- foreign currency
translation adjustments.................................. -- -- -- -- (9,788)
Comprehensive income attributable to Common Shares......... -- -- -- -- --
Preferred and Common Shares issued in Meridian Merger...... -- 50,000 733,307 -- --
Common Shares issued under dividend reinvestment and share
purchase plans........................................... -- -- 6,327 -- --
Limited partnership units converted to Common Shares....... -- -- 205 -- --
Series B preferred shares converted to Common Shares....... -- -- 12,916 -- --
Principal payments on employee share purchase notes........ -- -- -- 2,341 --
Sale of options to unconsolidated entities................. -- -- 1,226 -- --
Stock-based compensation................................... -- -- 2,137 -- --
Common Share distributions paid............................ -- -- -- -- --
Common Share distributions accrued......................... -- -- -- -- --
-------- -------- ---------- -------- -------
Balances at December 31, 1999............................... $250,000 $ 50,000 $2,663,350 $(22,906) $(9,765)
======== ======== ========== ======== =======
<CAPTION>
DISTRIBUTIONS TOTAL
IN EXCESS OF SHAREHOLDERS'
NET EARNINGS EQUITY
------------- -------------
<S> <C> <C>
Balances at December 31, 1996............................... $ (95,145) $1,599,389
Net earnings............................................... 39,749 39,749
Preferred share dividends.................................. (35,318) (35,318)
Accumulated other comprehensive income -- foreign currency
translation adjustments.................................. -- (63)
----------
Comprehensive income attributable to Common Shares......... -- 4,368
Sale of Common Shares...................................... -- 405,267
Common Shares issued under employee share purchase plan.... -- 1,445
Common Shares issued in 1997 Merger, net of costs.......... -- 79,139
Common Shares issued under dividend reinvestment and share
purchase plans........................................... -- 429
Limited partnership units converted to Common Shares....... -- 1,588
Series B preferred shares converted to Common Shares....... -- --
Principal payments on employee share purchase notes........ -- 64
Retirements of employee share purchase notes............... -- (5)
Common Share distributions paid............................ (81,498) (81,498)
Common Share distributions accrued......................... (33,449) (33,449)
--------- ----------
Balances at December 31, 1997............................... (205,661) 1,976,737
Net earnings............................................... 111,329 111,329
Preferred share dividends.................................. (49,098) (49,098)
Accumulated other comprehensive income -- foreign currency
translation adjustments.................................. -- 86
----------
Comprehensive income attributable to Common Shares......... -- 62,317
Sale of Common Shares...................................... -- 130,334
Sale of preferred shares................................... -- 241,531
Common Shares issued under dividend reinvestment and share
purchase plans........................................... -- 403
Common Shares issued upon exercise of warrants............. -- 118
Limited partnership units converted to Common Shares....... -- 302
Series B preferred shares converted to Common Shares....... -- --
Principal payments on employee share purchase notes........ -- 143
Retirements of employee share purchase notes............... -- (244)
Sale of options to unconsolidated entities................. -- 1,333
Stock-based compensation................................... -- 278
Common Share distributions paid............................ (117,601) (117,601)
Common Share distributions accrued......................... (39,283) (39,283)
--------- ----------
Balances at December 31, 1998............................... (300,314) 2,256,368
Net earnings............................................... 180,834 180,834
Preferred share dividends.................................. (56,835) (56,835)
Accumulated other comprehensive income -- foreign currency
translation adjustments.................................. -- (9,788)
----------
Comprehensive income attributable to Common Shares......... -- 114,211
Preferred and Common Shares issued in Meridian Merger...... -- 783,681
Common Shares issued under dividend reinvestment and share
purchase plans........................................... -- 6,331
Limited partnership units converted to Common Shares....... -- 205
Series B preferred shares converted to Common Shares....... -- --
Principal payments on employee share purchase notes........ -- 2,341
Sale of options to unconsolidated entities................. -- 1,226
Stock-based compensation................................... -- 2,137
Common Share distributions paid............................ (158,554) (158,554)
Common Share distributions accrued......................... (54,210) (54,210)
--------- ----------
Balances at December 31, 1999............................... $(389,079) $2,953,736
========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
62
<PAGE> 65
PROLOGIS TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- ---------
<S> <C> <C> <C>
Operating activities:
Net earnings.............................................. $ 180,834 $ 111,329 $ 39,749
Minority interest share in earnings....................... 4,979 4,681 3,560
Adjustments to reconcile net earnings to net cash provided
by operating activities:
Depreciation and amortization........................... 152,447 100,590 76,562
Gain on disposition of real estate...................... (38,994) (5,565) (7,378)
Straight-lined rents.................................... (9,889) (6,756) (5,435)
Amortization of deferred loan costs..................... 4,440 2,200 1,977
Stock-based compensation................................ 1,657 278 --
(Income) loss from unconsolidated entities.............. (20,948) 11,108 (570)
Deferred income taxes................................... -- 1,796 --
Foreign currency exchange (gains) losses, net............. 11,344 (3,227) 348
Foreign currency hedge (income) expense................... -- (2,054) 6,028
Interest rate hedge expense............................... 945 26,050 --
Costs incurred in acquiring management companies from
affiliate............................................... -- -- 75,376
Increase in accounts receivable and other assets.......... (35,904) (36,824) (24,390)
Increase in accounts payable, accrued expenses and other
liabilities............................................. 20,654 35,390 25,508
Increase (decrease) in amount due to affiliate............ (174) (743) 1,138
----------- ----------- ---------
Net cash provided by operating activities........... 271,391 238,253 192,473
----------- ----------- ---------
Investing activities:
Real estate investments................................... (452,161) (695,764) (601,577)
Tenant improvements and lease commissions on previously
leased space............................................ (19,751) (12,757) (15,539)
Recurring capital expenditures............................ (28,114) (8,038) (5,523)
Proceeds from dispositions of real estate................. 557,736 109,336 137,147
Investments in and advances to unconsolidated entities.... (141,037) (657,499) (85,569)
Cash acquired in Meridian Merger.......................... 48,962 -- --
----------- ----------- ---------
Net cash used in investing activities............... (34,365) (1,264,722) (571,061)
----------- ----------- ---------
Financing activities:
Proceeds from sale of shares, net of expenses............. -- 371,865 405,712
Proceeds from exercised warrants, dividend reinvestment
plan and share purchase plan............................ 6,331 521 429
Repurchase of Common Shares............................... -- (244) (5)
Proceeds from secured financing transactions.............. 466,075 66,000 --
Proceeds from issuance of senior unsecured debt........... 500,000 374,463 199,772
Debt issuance and other transaction costs incurred........ (58,248) (5,848) (3,171)
Distributions paid on Common Shares (includes $11,132 paid
to Meridian shareholders)............................... (208,969) (151,050) (106,556)
Distributions paid to minority interest holders........... (7,251) (6,409) (5,665)
Preferred shares dividends paid (includes $729 paid to
Meridian shareholders).................................. (56,835) (49,098) (35,318)
Principal payments on senior unsecured notes.............. (12,500) (15,000) --
Principal payments received on and retirements of employee
share purchase notes.................................... 2,341 143 64
Payments on derivative financial instruments.............. (27,715) (3,974) 1,894
Payments to Meridian shareholders......................... (67,581) -- --
Proceeds from lines of credit and short-term borrowings... 1,939,845 1,569,225 530,991
Payments on lines of credit and short-term borrowings..... (2,335,445) (1,074,925) (569,591)
Payment on line of credit assumed in Meridian Merger...... (328,400) -- --
Regularly scheduled principal payments on mortgage
notes................................................... (6,560) (5,658) (4,925)
Principal payments on mortgage notes at maturity and
prepayments............................................. (35,916) (5,411) (14,804)
----------- ----------- ---------
Net cash (used in) provided by financing
activities........................................ (230,828) 1,064,600 398,827
----------- ----------- ---------
Net increase in cash and cash equivalents................... 6,198 38,131 20,239
Cash and cash equivalents, beginning of year................ 63,140 25,009 4,770
----------- ----------- ---------
Cash and cash equivalents, end of year...................... $ 69,338 $ 63,140 $ 25,009
=========== =========== =========
</TABLE>
See Note 12 for information on non-cash investing and financing activities.
The accompanying notes are an integral part of these consolidated financial
statements.
63
<PAGE> 66
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. DESCRIPTION OF BUSINESS:
ProLogis Trust ("ProLogis") is a publicly held real estate investment trust
("REIT") that owns and operates a global network of industrial distribution
facilities. The ProLogis Operating System(TM), comprised of the Market Services
Group, the Global Services Group, the Global Development Group and the Customer
Services Group, utilizes ProLogis' international network of distribution
facilities to meet customer expansion and reconfiguration needs globally.
ProLogis believes it has distinguished itself from its competition by developing
an organizational structure and service delivery system built around its
customers. ProLogis has organized its business into three operating segments:
property operations, corporate distribution facilities services business and
temperature-controlled distribution operations. See Note 18.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Financial Presentation
The accounts of ProLogis, its wholly owned subsidiaries and its majority
owned and controlled partnerships are consolidated in the accompanying financial
statements. All material intercompany transactions have been eliminated. Certain
amounts included in the consolidated financial statements for prior years have
been reclassified to conform to the 1999 financial statement presentation.
The preparation of financial statements in conformity with generally
accepted accounting principles ("GAAP") requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
On December 29, 1998, ProLogis invested in Garonor Holdings S.A. ("Garonor
Holdings") by acquiring 100% of its preferred stock. Garonor Holdings, a
Luxembourg company, owns Garonor S.A. ("ProLogis Garonor"), an industrial
distribution real estate operating company in France. Security Capital Group
Incorporated ("Security Capital"), ProLogis' largest shareholder, acquired 100%
of the common stock of Garonor Holdings. ProLogis accounted for its investment
in Garonor Holdings under the equity method. On June 29, 1999, ProLogis acquired
the common stock of Garonor Holdings from Security Capital, resulting in
ProLogis owning all of the outstanding common and preferred stock of Garonor
Holdings. Accordingly, since June 29, 1999 the accounts of Garonor Holdings have
been consolidated in ProLogis' financial statements along with ProLogis' other
wholly owned subsidiaries and majority owned and controlled partnerships. The
results of operations of Garonor Holdings for the period from December 29, 1998
through June 29, 1999 are reflected by ProLogis under the equity method. See
Note 5.
REIT Organization Status
In January 1993, ProLogis was formed as a Maryland REIT and has elected to
be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the
"Code").
REITs are not generally required to pay federal income taxes if minimum
distribution and income, asset and shareholder tests are met. During 1999, 1998
and 1997, ProLogis was in compliance with the REIT requirements. Thus, no
federal income tax provision has been reflected in the accompanying consolidated
financial statements for ProLogis and its wholly owned subsidiaries which are
qualified REIT subsidiaries. The foreign countries that ProLogis operates in do
not recognize REITs under their respective tax laws. Accordingly, ProLogis has
recognized foreign country income taxes in its results of operations, as
applicable.
64
<PAGE> 67
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Real Estate and Depreciation
Real estate is carried at cost, which is not in excess of estimated fair
market value. Costs directly associated with the successful acquisition,
renovation or development of real estate are capitalized. Direct costs
associated with unsuccessful acquisitions are expensed at the time the pursuit
is abandoned.
Depreciation is computed over the estimated useful lives of depreciable
property on a straight-line basis: 10 years for tenant improvements, 30 years
for acquired buildings and 40 years for buildings developed by ProLogis.
ProLogis' management periodically reviews long-lived assets (primarily real
estate) that it owns and operates for impairment whenever events or changes in
circumstances indicate that the carrying amount of such assets may not be
recoverable. In accordance with the provisions of Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of", management's
review involves comparing current and future operating performance of the
assets, the most significant of which is undiscounted operating cash flows, to
the carrying value of the assets. Based on this analysis, a provision for
possible loss is recognized if necessary. In management's opinion, long-lived
assets, primarily real estate assets, are not carried at amounts in excess of
their estimated realizable values. Long-lived assets (primarily real estate) to
be disposed of, if any, are reported at the lower of their carrying amount or
fair value less cost to sell.
ProLogis acquired certain real estate through the formation of partnerships
(as discussed in Note 7) wherein ProLogis contributed cash and the limited
partners contributed real estate in exchange for partnership units which are
ultimately exchangeable for ProLogis common shares of beneficial interest, $0.01
par value ("Common Shares"). In consolidating the partnerships' assets, real
estate cost includes the estimated fair value attributable to the limited
partners' interests as of the acquisition dates.
ProLogis Development Services Incorporated ("ProLogis Development
Services") develops industrial distribution facilities to meet customer
requirements, which are often subsequently sold to customers or third parties.
ProLogis Development Services also contracts on a fee basis to develop
distribution facilities for customers or third parties. ProLogis owns 100% of
the preferred stock of ProLogis Development Services and realizes substantially
all economic benefits of its activities. Because ProLogis advances mortgage
loans to ProLogis Development Services to fund its acquisition, development and
construction activities, ProLogis Development Services is consolidated with
ProLogis. ProLogis Development Services is not a qualified REIT subsidiary of
ProLogis under the Code. Accordingly, provisions for federal income taxes are
recognized, as appropriate.
Capitalization Policy
Renovations and improvements to real estate assets are capitalized and
depreciated over their estimated useful lives. Repairs and maintenance costs are
expensed as incurred to the extent they are not acquisition-related renovation
costs identified during ProLogis' pre-acquisition due diligence.
General and administrative costs incurred for development (including land
acquisitions), renovation and leasing activities that are incremental and
identifiable to a specific activity are capitalized. Prior to April 1, 1998,
ProLogis also capitalized direct and incremental management costs incurred in
connection with the acquisition of existing operating facilities. In accordance
with Emerging Issues Task Force Issue 97-11, "Accounting for Internal Costs
Relating to Real Estate Property Acquisitions", which was effective on April 1,
1998, such costs are no longer capitalized.
Costs capitalized to real estate are depreciated over the estimated useful
lives of the real estate. Costs capitalized related to leasing activities are
included with other assets and are amortized over the lease term. ProLogis'
average lease term is between four and five years.
65
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ProLogis capitalizes interest costs incurred during the land development or
construction period of qualifying projects.
Unconsolidated Entities
ProLogis' investments in certain entities are accounted for under the
equity method. Accordingly, these investments are recognized at ProLogis' cost
as adjusted for ProLogis' proportionate share of the earnings or losses of the
companies, distributions received and other basis adjustments, as appropriate.
ProLogis' proportionate share of the earnings or losses of these companies is
recognized in income. See Note 5.
Cash and Cash Equivalents
ProLogis considers all cash on hand, demand deposits with financial
institutions and short-term, highly liquid investments with original maturities
of three months or less to be cash equivalents.
Costs of Raising Capital
Costs incurred in connection with the issuance of shares are deducted from
shareholders' equity. Costs incurred in connection with the incurrence or
renewal of debt are capitalized, included with other assets, and amortized over
the term of the related loan or the renewal term.
Minority Interest
Minority interest is carried at cost and represents limited partners'
interests in various real estate partnerships controlled by ProLogis. Certain
minority interests are carried at the pro rata share of the estimated fair value
of the real estate contributed as of the acquisition dates, as adjusted for
subsequent earnings, contributions and distributions. Common Shares issued upon
exchange of limited partnership units are accounted for at the cost of the
minority interest surrendered.
Financial Instruments
In the normal course of business, ProLogis uses certain derivative
financial instruments for the purpose of currency exchange rate and interest
rate risk management. To qualify for hedge accounting, the derivative
instruments used for risk management purposes must effectively reduce the risk
exposure that they are designed to hedge. For instruments associated with the
hedge of anticipated transactions, hedge effectiveness criteria also require
that the occurrence of the underlying transactions be probable. Instruments
meeting these hedging criteria are formally designated as hedges at the
inception of the contract. Those risk management instruments not meeting these
criteria are accounted for at fair value with changes in fair value recognized
immediately in net income. See Note 16.
In assessing the fair value of its financial instruments, both derivative
and non-derivative, ProLogis uses a variety of methods and assumptions that are
based on market conditions and risks existing at each balance sheet date.
Primarily, quoted market prices or quotes from brokers or dealers for the same
or similar instruments are used to value marketable securities, long-term
investments and long-term debt. These values represent a general approximation
of possible value and may never actually be realized.
SFAS No. 133, "Accounting for Derivative Instruments and for Hedging
Activities" was issued in June 1998. SFAS No. 133 is effective for fiscal years
beginning after June 15, 2000 and early adoption is allowed. SFAS No. 133
provides comprehensive guidelines for the recognition and measurement of
derivatives and hedging activities and, specifically, requires all derivatives
to be recorded on the balance sheet at fair value as an asset or liability, with
an offset to accumulated other comprehensive income or income. Management is
still evaluating the effects this standard will have on ProLogis' consolidated
financial position, results of operations or
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
financial statement disclosures based on the derivative financial instruments
currently employed by ProLogis. See Note 16.
Foreign Currency Exchange Gains or Losses
ProLogis' consolidated subsidiaries whose functional currency is not the
U.S. dollar translate their financial statements into U.S. dollars. Assets and
liabilities are translated at the exchange rate in effect as of the financial
statement date. Income statement accounts are translated using the average
exchange rate for the period. Gains and losses resulting from the translation
are included in accumulated other comprehensive income as a separate component
of shareholders' equity.
Foreign subsidiaries of ProLogis have certain transactions denominated in
currencies other than their functional currency. In these instances, nonmonetary
assets and liabilities are remeasured at the historical exchange rate, monetary
assets and liabilities are remeasured at the exchange rate in effect at the end
of the period, and income statement accounts are remeasured at the average
exchange rate for the period. Remeasurement gains and losses of such foreign
subsidiaries, resulting primarily from the remeasurement of intercompany loans,
are included in ProLogis' results of operations. ProLogis recognized losses from
remeasurement of $11,436,000 and $348,000 for the years ended December 31, 1999
and 1997, respectively, and a gain from remeasurement of $3,227,000 for the year
ended December 31, 1998.
Transaction gains or losses occur when a transaction, denominated in a
currency other than the functional currency, is settled and the functional
currency cash flows realized are more or less than expected based upon the
exchange rate in effect when the transaction was initiated. Transaction gains
and losses are included in ProLogis' results of operations. ProLogis recognized
net foreign currency exchange transaction losses of $5,335,000 (including
$45,000 related to foreign currency put option contracts-see Note 16) and
$289,000 for the years ended December 31, 1999 and 1998, respectively. ProLogis
did not incur transaction gains or losses in 1997 due to its limited foreign
operations in that year.
During 1999, ProLogis entered into foreign currency put option contracts
related to its operations in Europe. These put option contracts do not qualify
for hedge accounting treatment, therefore, ProLogis recognized net mark to
market losses related to the contracts of $47,000 for 1999. See Note 16.
Revenue Recognition
ProLogis leases its operating facilities under operating leases and
recognizes the total lease payments provided for under the leases on a
straight-line basis over the lease term. A provision for possible loss is made
when collection of receivables is considered doubtful.
Gains or losses on the disposition of real estate are recorded when the
recognition criteria set forth under GAAP have been met, generally at the time
title is transferred and ProLogis has no future obligations under the contract.
Rental Expenses
Rental expenses include costs of on-site and property management personnel,
utilities, repairs and maintenance, property insurance and real estate taxes,
net of amounts recovered from tenants under the terms of the respective leases.
Stock-Based Compensation
ProLogis adopted SFAS No. 123, "Accounting for Stock-Based Compensation",
which allows ProLogis to continue to account for its various stock-based
compensation plans using Accounting Principles Board ("APB") Opinion No. 25,
"Accounting for Stock Issued to Employees", and related interpretations. Under
APB No. 25, if
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the exercise price of the stock options issued equals or exceeds the market
price of the underlying stock on the date of grant, no compensation expense is
recognized. However, certain pro forma earnings per share disclosures are
required and are presented in Note 13.
Comprehensive Income
ProLogis adopted SFAS No. 130, "Reporting Comprehensive Income", on January
1, 1998. SFAS No. 130 establishes standards for the reporting and display of
comprehensive income and its components. Comprehensive income is the total of
net earnings attributable to Common Shares and other comprehensive income.
The adoption of this standard did not have a significant effect on the
consolidated financial position, results of operations or financial statement
disclosures of ProLogis. For the years ended December 31, 1999, 1998 and 1997,
ProLogis had one item of other comprehensive income, the cumulative translation
adjustments account. This account has been recognized as a component of
shareholders' equity. ProLogis displays comprehensive income and its components
in its consolidated statements of shareholders' equity.
Earnings Per Share
SFAS No. 128, "Earnings Per Share" was adopted in 1997. SFAS No. 128
replaced the presentation of primary and fully diluted earnings per share with a
presentation of basic and diluted earnings per share. Diluted earnings per share
reflects the potential dilution that would result if securities or other
contracts to issue Common Shares were exercised or converted to Common Shares or
resulted in the issuance of Common Shares that then shared in earnings. See Note
11.
Cost of Start-Up Activities
Statement of Position ("SOP") 98-5 "Reporting on the Costs of Start-Up
Activities", which requires that costs associated with organization,
pre-opening, and start-up activities be expensed as incurred was adopted by
ProLogis on January 1, 1999. Through December 31, 1998, ProLogis capitalized
costs associated with start-up activities and amortized such costs over an
appropriate period, generally five years. In 1999, ProLogis expensed all
unamortized organization and start-up costs, approximating $1.4 million, as a
cumulative effect of a change in accounting principle. In 1999, such costs
incurred have been expensed.
3. MERIDIAN MERGER
On March 30, 1999, Meridian Industrial Trust, Inc. ("Meridian"), a publicly
traded REIT that owned industrial distribution facilities in the United States,
was merged with and into ProLogis (the "Meridian Merger"). In accordance with
the terms of the Agreement and Plan of Merger dated as of November 16, 1998, as
amended (the "Merger Agreement"), the approximately 33.8 million outstanding
shares of Meridian common stock were exchanged (on a 1.10 for one basis) into
approximately 37.2 million ProLogis Common Shares. In addition, the holders of
Meridian common stock received $2.00 in cash per outstanding share,
approximately $67.6 million in total. The holders of Meridian's Series D
cumulative redeemable preferred stock received a new series of ProLogis
cumulative redeemable preferred shares, Series E preferred shares, on a one for
one basis. The Series E preferred shares have a 8.75% annual dividend rate
($2.1875 per share) and an aggregate liquidation value of $50.0 million. The
total purchase price of Meridian was approximately $1.54 billion, which included
the assumption of the outstanding debt and liabilities of Meridian as of March
30, 1999 and the issuance of approximately 1.1 million stock options each to
acquire 1.1 ProLogis Common Shares and $2.00 in cash. The assets acquired from
Meridian included approximately $1.44 billion of real estate assets, an interest
in a temperature-controlled distribution business of $28.7 million and cash and
other assets aggregating $72.3 million. The transaction was structured as a
tax-free merger and was accounted for under the purchase method.
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following summarized pro forma unaudited information represents the
combined historical operating results of ProLogis and Meridian with the
appropriate purchase accounting adjustments, assuming the Meridian Merger had
occurred on January 1, 1998. The pro forma financial information presented is
not necessarily indicative of what ProLogis' actual operating results would have
been had ProLogis and Meridian constituted a single entity during such periods
(in thousands, except per share amounts):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Rental income............................................... $525,340 $464,034
Earnings from operations.................................... $170,681 $124,928
Earnings attributable to Common Shares before cumulative
effect of accounting change............................... $136,461 $ 78,847
Net earnings attributable to Common Shares.................. $135,021 $ 78,847
Weighted average Common Shares outstanding:
Basic..................................................... 160,705 155,923
Diluted................................................... 161,044 156,680
Basic per share net earnings attributable to Common Shares
before cumulative effect of accounting change............. $ 0.85 $ 0.51
Cumulative effect of accounting change...................... (0.01) --
-------- --------
Basic per share net earnings attributable to Common
Shares.................................................... $ 0.84 $ 0.51
======== ========
Diluted per share net earnings attributable to Common Shares
before cumulative effect of accounting change............. $ 0.85 $ 0.50
Cumulative effect of accounting change...................... (0.01) --
-------- --------
Diluted per share net earnings attributable to Common
Shares.................................................... $ 0.84 $ 0.50
======== ========
</TABLE>
4. REAL ESTATE
Investments in Real Estate
Real estate investments consisting of income producing industrial
distribution facilities, facilities under development and land held for future
development, at cost, are summarized as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
Operating facilities:
Improved land.......................................... $ 736,605(1) $ 517,803(1)
Buildings and improvements............................. 3,871,396(1) 2,731,203(1)
---------- ----------
4,608,001 3,249,006
---------- ----------
Facilities under development (including cost of land).... 186,169(2)(3) 209,670(2)
Land held for development................................ 163,696(4) 180,796(4)
Capitalized preacquisition costs......................... 17,085(5) 18,028(5)
---------- ----------
Total real estate.............................. 4,974,951 3,657,500
Less accumulated depreciation............................ 366,703 254,288
---------- ----------
Net real estate................................ $4,608,248(6) $3,403,212
========== ==========
</TABLE>
- ---------------
(1) As of December 31, 1999 and December 31, 1998, ProLogis had 1,328 and 1,099
operating buildings, respectively, consisting of 133,689,000 and 104,540,000
square feet, respectively.
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(2) Facilities under development consist of 51 buildings aggregating 10,721,000
square feet as of December 31, 1999 and 55 buildings aggregating 8,022,000
square feet as of December 31, 1998.
(3) In addition to the December 31, 1999 construction payable of $23.1 million,
ProLogis had unfunded commitments on its contracts for facilities under
construction totaling $247.6 million.
(4) Land held for future development consisted of 1,798 acres as of December 31,
1999 and 1,673 acres as of December 31, 1998.
(5) Capitalized preacquisition costs include $6,253,000 and $2,199,000 of funds
on deposit with title companies as of December 31, 1999 and December 31,
1998, respectively.
(6) On January 7, 2000, ProLogis contributed 50.1% of the common stock of one of
its wholly owned European entities that owned real estate with a net book
value of $334.9 million as of December 31, 1999 to the ProLogis European
Properties Fund. ProLogis is committed to contributing the remaining 49.9%
of the common stock to the ProLogis European Properties Fund in January
2001. See Note 5.
ProLogis' operating facilities, facilities under development and land held
for future development are located in North America and Europe. No individual
market represents more than 10% of ProLogis' real estate assets.
Operating Lease Agreements
ProLogis leases its facilities to customers under agreements which are
classified as operating leases. The leases generally provide for payment of all
or a portion of utilities, property taxes and insurance by the tenant. As of
December 31, 1999, minimum lease payments on leases with lease periods greater
than one year are as follows (in thousands):
<TABLE>
<S> <C>
2000..................................................... $ 484,346
2001..................................................... 406,946
2002..................................................... 325,825
2003..................................................... 244,484
2004..................................................... 174,656
2005 and thereafter...................................... 544,468
----------
$2,180,725
==========
</TABLE>
ProLogis' largest customer (based on rental income) accounted for 1.81% of
ProLogis' rental income (on a annualized basis) for the year ended December 31,
1999. The annualized base rent for ProLogis' 20 largest customers (based on
rental income) accounted for 13.95% of ProLogis' rental income (on an annualized
basis) for the year ended December 31, 1999.
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. UNCONSOLIDATED ENTITIES:
Investments in and advances to unconsolidated entities are as follows (in
thousands):
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1999 1998
------------ ------------
<S> <C> <C>
Insight(1).................................................. $ 2,442 $ 1,520
-------- --------
ProLogis Logistics:
Investment(2)(3).......................................... 40,210 13,241
Note receivable........................................... 130,135 128,634
Accrued interest and other receivables.................... 22,262 9,146
-------- --------
192,607 151,021
-------- --------
Frigoscandia S.A.:
Investment(2)............................................. (17,396) 2,900
Notes receivable.......................................... 209,314 206,667
Accrued interest and other receivables.................... 22,090 11,998
-------- --------
214,008 221,565
-------- --------
Kingspark S.A.:
Investment(2)............................................. 23,584 22,413
Notes receivable.......................................... 197,611 146,135
Mortgage notes receivable................................. 140,668 52,371
Accrued interest and other receivables.................... 19,908 3,850
-------- --------
381,771 224,769
-------- --------
ProLogis California:
Investment(4)............................................. 121,325 --
Other receivable.......................................... 3,235 --
-------- --------
124,560 --
-------- --------
ProLogis European Properties Fund:
Investment(5)............................................. 32,800 --
Other payables............................................ (7,824) --
-------- --------
24,976 --
-------- --------
Garonor Holdings (6):
Investment(2)............................................. -- 5,508
Note receivable........................................... -- 129,395
Accrued interest receivable............................... -- 85
-------- --------
-- 134,988
-------- --------
Total............................................. $940,364 $733,863
======== ========
</TABLE>
- ---------------
(1) Investment represents ProLogis' investment in the common stock of Insight,
Inc. ("Insight") as adjusted for ProLogis' share of Insight's earnings or
loss.
(2) Investment represents ProLogis' investment in the preferred stock of the
respective companies including acquisition costs, as adjusted for ProLogis'
share of each company's earnings or loss and cumulative translation
adjustments, as appropriate.
(3) Includes $28.7 million representing an equity interest in and notes from
Meridian Refrigerated Incorporated ("MRI") that were acquired as part of the
Meridian Merger (see Note 3). CS Integrated LLC ("CSI"), which is owned by
ProLogis Logistics Services Incorporated ("ProLogis Logistics") also
acquired an equity
71
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
interest in MRI on March 30, 1999. Subsequent to December 31, 1999, ProLogis
contributed its interest in MRI to CSI.
(4) Investment represents ProLogis' equity investment in ProLogis California I
LLC ("ProLogis California"), a limited liability company that began
operations on August 26, 1999, including acquisition costs, as adjusted for
ProLogis' share of the earnings of ProLogis California and for the portion
of the gain from the disposition of properties from ProLogis to ProLogis
California that does not qualify for income recognition due to ProLogis'
continuing ownership in ProLogis California.
(5) The ProLogis European Properties Fund was formed on September 16, 1999 and
began operations on September 23, 1999 with the purchase of facilities from
ProLogis and Kingspark Group Holdings Limited ("ProLogis Kingspark").
Additional facilities were acquired from ProLogis and ProLogis Kingspark in
December 1999. Investment represents ProLogis' equity investment in the
ProLogis European Properties Fund including acquisition costs, as adjusted
for ProLogis' share of the earnings of the ProLogis European Properties Fund
and for the portion of the gain from the disposition of facilities to the
ProLogis European Properties Fund that does not qualify for income
recognition due to ProLogis' continuing ownership in the ProLogis European
Properties Fund.
(6) Garonor Holdings was acquired on December 29, 1998 and was accounted for
under the equity method from that date to June 29, 1999. After June 29,
1999, Garonor Holdings is consolidated with the accounts of ProLogis. See
Note 2.
Insight
As of December 31, 1999, ProLogis Development Services had a 33.3%
ownership interest in Insight, a privately owned logistics optimization
consulting company. ProLogis is not required to make additional investments in
Insight. This investment is accounted for under the equity method. ProLogis
recognized a loss of $78,000 and income of $20,000 from its investment in
Insight for the years ended December 31, 1999 and 1998, respectively. Prior to
July 1, 1998, this investment was accounted for under the cost method.
ProLogis Logistics
ProLogis owns 100% of the preferred stock of ProLogis Logistics. On April
24, 1997, ProLogis Logistics acquired a 60% interest in CSI, a
temperature-controlled distribution company operating in the United States and
Canada. From that date to June 12, 1998, ProLogis Logistics owned, at various
points in time, between 60.0% and 77.1% of CSI. On June 12, 1998, ProLogis
Logistics increased its ownership interest in CSI to 100%. As of December 31,
1999, ProLogis had invested $19.9 million in the preferred stock of ProLogis
Logistics and ProLogis' investment in MRI aggregated $28.7 million. As of
December 31, 1999, CSI owned or operated temperature-controlled distribution
facilities aggregating 172.4 million cubic feet (including 35.5 million cubic
feet of dry distribution space located in temperature-controlled facilities) of
the total, 4.8 million cubic feet was under development. The common stock of
ProLogis Logistics is owned by an unrelated party. ProLogis recognizes 95% of
the economic benefits of the activities of ProLogis Logistics and its
subsidiaries.
As of December 31, 1999, ProLogis had a $130.1 million note receivable from
ProLogis Logistics. The note is unsecured, bears interest at 8.0% per annum and
matures on April 24, 2002.
ProLogis accounts for its investment in ProLogis Logistics under the equity
method. ProLogis recognized income (including interest income on the note
receivable and a management fee payable from CSI through June 1998) from its
investment in ProLogis Logistics of $10.8 million, $7.3 million and $3.3 million
for the years ended December 31, 1999, 1998 and 1997, respectively.
72
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Frigoscandia S.A.
On January 16, 1998, ProLogis invested in Frigoscandia S.A. by acquiring
100% of its preferred stock. Also on January 16, 1998, Frigoscandia S.A., a
Luxembourg company, acquired Frigoscandia AB, a refrigerated distribution
company headquartered in Sweden. Frigoscandia AB is 100% owned by Frigoscandia
Holding AB, which is 100% owned by a wholly owned subsidiary of Frigoscandia
S.A. As of December 31, 1999, Frigoscandia AB, which operates in nine European
countries, owned or operated 193.6 million cubic feet of refrigerated
distribution facilities (including 1.3 million cubic feet under development). As
of December 31, 1999, ProLogis had invested $28.5 million in the preferred stock
of Frigoscandia S.A. The common stock of Frigoscandia S.A. is owned by a limited
liability company, in which unrelated parties own 100% of the voting interests
and Security Capital owns 100% of the non-voting interests. ProLogis recognizes
95% of the economic benefits of the activities of Frigoscandia S.A. and its
subsidiaries.
As of December 31, 1999, ProLogis had the following notes receivable
outstanding:
- $91.5 million unsecured note from Frigoscandia Holding AB; interest at
5.0% per annum; due on demand;
- $87.8 million unsecured note from Frigoscandia S.A.; interest at 5.0% per
annum; $80.0 million due July 15, 2008 with the remainder due on demand;
and
- $30.0 million unsecured, non-interest bearing note from a subsidiary of
Frigoscandia Holding AB; due on demand.
ProLogis accounts for its investment in Frigoscandia S.A. under the equity
method. ProLogis recognized losses of $4.4 million and of $7.5 million for the
years ended December 31, 1999 and 1998, respectively, (including interest income
on the mortgage notes and notes receivable).
Frigoscandia AB has a multi-currency, three-year revolving credit agreement
through a consortium of 11 European banks in the currency equivalent of
approximately $186.0 million as of December 31, 1999. The loan bears interest at
the relevant index (LIBOR or Euribor based on the currency borrowed) rate plus
0.65%. ProLogis has entered into a guaranty agreement for 25% of the loan
balance.
Kingspark S.A.
On August 14, 1998, ProLogis invested in Kingspark Holding S.A. ("Kingspark
S.A.") by acquiring 100% of its preferred stock. Also on August 14, 1998,
Kingspark S.A., a Luxembourg company, acquired an industrial distribution real
estate development company operating in the United Kingdom, ProLogis Kingspark.
As of December 31, 1999, ProLogis Kingspark had 550,000 square feet of operating
facilities, 2,202,000 square feet of facilities under development and 844,000
square feet of facilities that it was developing under development management
agreements. Additionally, as of December 31, 1999, ProLogis Kingspark owned 397
acres and controlled 1,415 acres of land through purchase options, letters of
intent or contingent contracts. The land owned and controlled by ProLogis
Kingspark has the capacity for the future development of 21.4 million square
feet of facilities. As of December 31, 1999, ProLogis had invested $24.0 million
in the preferred stock of Kingspark S.A. The common stock of Kingspark S.A. is
owned by a limited liability company, in which unrelated third parties own 100%
of the voting interests and Security Capital owns 100% of the non-voting
interests. ProLogis recognizes 95% of the economic benefits of the activities of
Kingspark S.A. and its subsidiaries.
ProLogis Kingspark has a loan facility with ProLogis which provides for
borrowings of up to 200 million pounds sterling. This facility is available as a
line of credit, has an interest rate of 8.0% per annum and is due on demand. As
of December 31, 1999, the currency equivalent of $81.2 million of borrowings
were outstanding on
73
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the loan facility. ProLogis also had the following notes and mortgage notes
receivable outstanding as of December 31, 1999:
- $116.4 million unsecured note receivable from Kingspark S.A.; interest at
5.0% per annum; due on demand;
- $75.9 million mortgage note receivable from ProLogis Kingspark; interest
at 8.0% per annum; secured by land parcels; due on demand; and
- $64.8 million of mortgage notes receivable from subsidiaries of Kingspark
S.A.; interest at 7.0% per annum; secured by land parcels; due on demand.
ProLogis accounts for its investment in Kingspark S.A. under the equity
method. ProLogis recognized income of $23.9 million and $2.9 million for the
years ended December 31, 1999 and 1998, respectively, (including interest income
on the mortgage notes and notes receivable and the line of credit) from its
investment in Kingspark S.A. ProLogis' share of Kingspark S.A.'s income for the
year ended December 31, 1999 includes a net gain of $4.5 million from the
disposition of facilities developed by ProLogis Kingspark to the ProLogis
European Properties Fund. The gain recognized is net of $1.1 million which did
not qualify for income recognition by ProLogis due to ProLogis' continuing
ownership in the ProLogis European Properties Fund. The ProLogis European
Properties Fund is discussed below.
ProLogis Kingspark has a line of credit agreement with a bank in the United
Kingdom. The credit agreement, which provides for borrowings of up to 10.0
million pounds sterling (the currency equivalent of approximately $16.1 million
as of December 31, 1999). The line of credit, which was increased to 15.0
million pounds sterling in February 2000, has been guaranteed by ProLogis. As of
December 31, 1999, no borrowings were outstanding on the line of credit.
However, as of December 31, 1999, ProLogis Kingspark had the currency equivalent
of approximately $7.9 million of letters of credit outstanding that reduce the
amount of available borrowings on the line of credit. Additionally, ProLogis has
an agreement whereby it has guaranteed the performance and obligations of
ProLogis Kingspark with respect to an infrastructure agreement entered into by
ProLogis Kingspark related to the development of a land parcel. As of December
31, 1999, ProLogis had an unfunded commitment on this guarantee agreement in the
currency equivalent of approximately $9.0 million.
ProLogis California I LLC
ProLogis California began operations on August 26, 1999 as a limited
liability company whose members are ProLogis and New York State Common
Retirement Fund ("NYSCRF"). ProLogis California acquired 78 operating facilities
aggregating 11.5 million square feet, two facilities under development and two
land parcels from ProLogis, all in the Los Angeles market for $558.2 million and
ProLogis received net cash of $210.0 million. In addition, ProLogis California
assumed $199.25 million of ProLogis' mortgage debt secured by the facilities
acquired. As of December 31, 1999, ProLogis and NYSCRF each had an equity
interest in ProLogis California of $143.1 million. ProLogis received
distributions aggregating $9.7 million in 1999. ProLogis provides property
management, leasing and development management services to ProLogis California
and earns fees for these services.
ProLogis' investment in ProLogis California as of December 31, 1999
consisted of (in millions):
<TABLE>
<S> <C>
Equity interest, net of distributions....................... $143.1
Adjustment to carrying value(1)............................. (26.0)
ProLogis' share of ProLogis California's earnings, excluding
fees earned............................................... 2.9
Other, including acquisition costs.......................... 1.3
------
$121.3
======
</TABLE>
74
<PAGE> 77
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
- ---------------
(1) Reflects the reduction in carrying value for amount of net gain on the
disposition of properties to ProLogis California that does not qualify for
income recognition due to ProLogis' continuing ownership in ProLogis
California.
ProLogis accounts for its investment in ProLogis California under the
equity method and recognized $3.9 million of income for 1999 from its investment
in ProLogis California, including management, leasing and development fees of
$930,000.
ProLogis European Properties Fund
The ProLogis European Properties Fund was formed on September 16, 1999 and
began operations on September 23, 1999 when the ProLogis European Properties
Fund acquired 12 operating facilities aggregating 2.2 million square feet from
ProLogis and ProLogis Kingspark. In December 1999, the ProLogis European
Properties Fund acquired an additional six facilities from ProLogis and ProLogis
Kingspark aggregating 1.1 million square feet. Third parties (19 institutional
investors) have invested 182.6 million euros (the currency equivalent of
approximately $184.0 million as of December 31, 1999) in the ProLogis European
Properties Fund and have committed to fund an additional 877.7 million euros
(the currency equivalent of approximately $884.0 million as of December 31,
1999) through 2002.
The ProLogis European Properties Fund intends to acquire additional
stabilized operating facilities from ProLogis, ProLogis Kingspark and unrelated
parties, including facilities to be developed by ProLogis and ProLogis Kingspark
in the future. Stabilized facilities have been defined for purposes of the
ProLogis European Properties Fund as facilities that meet minimum leasing
criteria and minimum net operating income yields, as defined and established by
agreement for each country. The ProLogis European Properties Fund has the right
to refuse to acquire facilities that ProLogis and ProLogis Kingspark have
developed if they do not meet the established criteria. ProLogis has an
agreement to manage the ProLogis European Properties Fund for a fee pursuant to
a 20-year management agreement.
In October 1999, the ProLogis European Properties Fund entered into an
agreement with two international banks for a three-year 500.0 million euro
revolving credit facility. The facility is secured by certain assets of the
ProLogis European Properties Fund. Borrowings can be denominated in sterling
currencies or the euro, and will bear interest at rates above the relevant index
(LIBOR or Euribor).
ProLogis' investment in the ProLogis European Properties Fund as of
December 31, 1999 consisted of (in millions of U.S. dollars):
<TABLE>
<S> <C>
Equity interest............................................. $38.4
Adjustment to carrying value(1)............................. (6.7)
ProLogis' share of the ProLogis European Properties Fund's
earnings, excluding fees earned........................... 0.5
Other acquisition costs..................................... 0.6
-----
$32.8
=====
</TABLE>
- ---------------
(1) Reflects the reduction in carrying value for amount of net gain on the
disposition of facilities to the ProLogis European Properties Fund that does
not qualify for income recognition due to ProLogis' continuing ownership in
the ProLogis European Properties Fund.
On January 7, 2000, ProLogis increased its equity investment in the
ProLogis European Properties Fund through the contribution of 50.1% of the
common stock of one of its wholly owned European entities, which included
ProLogis Garonor. This entity owned 6.8 million square feet of operating
facilities with a net book value of $334.9 million and held third party debt of
$173.6 million as of December 31, 1999. ProLogis is committed to
75
<PAGE> 78
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
contributing the remaining 49.9% of the common stock to the ProLogis European
Properties Fund in January 2001. ProLogis has also entered into a subscription
agreement to make capital contributions of 109.2 million euros (the currency
equivalent of approximately $110.0 million as of December 31, 1999) to the
ProLogis European Properties Fund through 2002.
ProLogis accounts for its investment in the ProLogis European Properties
Fund under the equity method and recognized $820,000 of income, including
management fees of $269,000 and interest income of $86,000 on a note receivable,
for the year ended December 31, 1999 from its investment in the ProLogis
European Properties Fund.
Summarized Financial Information
Summarized financial information for ProLogis' unconsolidated entities as
of and for the year ended December 31, 1999 is presented below (in millions of
U.S. dollars). The information presented is for the entire entity.
<TABLE>
<CAPTION>
PROLOGIS
PROLOGIS EUROPEAN
LOGISTICS FRIGOSCANDIA KINGSPARK PROLOGIS PROPERTIES
(1)(2) S.A.(1) S.A.(1) CALIFORNIA(3) FUND(4)
--------- ------------ --------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Total assets............................ $351.8 $558.0 $443.7 $563.5 $333.9(5)
Total liabilities(6).................... $340.4 $580.6 $417.6 $271.9 $110.1
Minority interest....................... $ -- $ 1.3 $ -- $ -- $ --
Equity.................................. $ 11.4 $(23.9) $ 26.1 $291.6 $223.8
Revenues................................ $276.0 $426.0 $ 37.4(7) $ 20.2 $ 6.2
Adjusted EBITDA(8)...................... $ 34.9 $ 49.8 $ 30.5 $ 16.8 $ 3.0
Net earnings (loss)(9)(10).............. $ (2.7) $(14.7)(11) $ 4.6(12) $ 5.4 $ 2.5(13)
</TABLE>
- ---------------
(1) ProLogis has a 95% economic interest in each entity as of December 31,
1999.
(2) ProLogis Logistics' balances include MRI, which was acquired on March 30,
1999. See Note 3.
(3) ProLogis has a 50% equity interest as of December 31, 1999. ProLogis
California began operations on August 26, 1999.
(4) ProLogis has a 19.68% equity interest as of December 31, 1999. The ProLogis
European Properties Fund began operations on September 23, 1999.
(5) Includes $7.8 million due from ProLogis.
(6) Includes amounts due to ProLogis of $192.2 million from ProLogis Logistics,
$231.4 million from Frigoscandia S.A., and $358.2 million from Kingspark
S.A. and loans from third parties (including accrued interest) of $102.0
million for ProLogis Logistics, $210.9 million for Frigoscandia S.A.,
$262.9 million for ProLogis California and $88.2 million for the ProLogis
European Properties Fund.
(7) Includes $25.8 million of gains related to the disposition of facilities,
including $5.5 million from the disposition of facilities to the ProLogis
European Properties Fund.
(8) Adjusted EBITDA represents earnings from operations before interest
expense, interest income, current and deferred income taxes, depreciation,
amortization, cumulative effect of accounting changes, non-recurring items
and foreign currency exchange gains and losses.
(9) ProLogis' share of the net earnings (loss) of the respective entities and
interest income on intercompany notes and mortgage notes receivable are
recognized in the Consolidated Statements of Earnings as "Income from
unconsolidated entities".
(10) The net earnings (loss) of each company includes interest expense on
intercompany notes and mortgage notes due to ProLogis, as applicable.
76
<PAGE> 79
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(11) Includes a net foreign currency exchange loss of $1.4 million.
(12) Includes a net foreign currency exchange loss of $1.6 million.
(13) Includes a net foreign currency exchange gain of $1.8 million.
6. BORROWINGS:
Unsecured Lines of Credit
ProLogis has an unsecured credit agreement with Bank of America, N.A.
("Bank of America"), Commerzbank AG and Chase Bank of Texas, National
Association, as agents for a bank group that provides for a $550.0 million
unsecured revolving line of credit. Borrowings bear interest, at ProLogis'
option, at either (a) the greater of the federal funds rate plus 0.5% and the
prime rate, or (b) LIBOR plus 1.00% based upon ProLogis' current senior debt
ratings. ProLogis' borrowings are primarily at the 30-day LIBOR rate plus 1.00%
(6.8225% as of December 31, 1999). Additionally, the credit agreement provides
for a facility fee of 0.20% per annum. The line of credit matures on March 29,
2001 and may be extended for an additional year at ProLogis' option. As of
December 31, 1999, $45.0 million of borrowings were outstanding on the line of
credit and ProLogis was in compliance with all covenants contained in the credit
agreement.
The $550.0 million unsecured line of credit replaced ProLogis' previous
$350.0 million unsecured line of credit that was put into place in August 1998.
ProLogis' entered into the new credit agreement in March 1999 to provide for
increased borrowing capacity following the Meridian Merger. See Note 3.
As of December 31, 1998, ProLogis had an agreement that provided for a term
loan of $150.0 million. The term loan was repaid on April 26, 1999 and the
agreement was terminated. ProLogis paid interest at LIBOR plus 1.00% on the term
loan borrowings.
In addition, ProLogis has a $25.0 million unsecured discretionary line of
credit with Bank of America that matures on October 1, 2000. By agreement
between ProLogis and Bank of America, the rate of interest on and the maturity
date of each advance are determined at the time of each advance. There were no
borrowings outstanding on the line of credit as of December 31, 1999.
On December 17, 1999, ProLogis obtained a multi-currency, unsecured
revolving line of credit in the currency equivalent of 325.0 million euros (the
currency equivalent of approximately $327.3 million as of December 31, 1999)
through a group of 17 banks, on whose behalf ABN AMRO Bank, N.V. acted as agent.
The line of credit was obtained for the purpose of funding ProLogis' European
development activities. The interest rate on this multi-currency, four-year
revolving line of credit is Euribor plus 0.75% or Sterling LIBOR plus 0.75%
(borrowings outstanding as of December 31, 1999 were at a weighted average
interest rate of 4.25%). As of December 31, 1999, the currency equivalent of
approximately $53.7 million of borrowings were outstanding on the line of credit
and ProLogis was in compliance with all covenants contained in the credit
agreement.
A summary of ProLogis' unsecured lines of credit borrowings is as follows
(dollar amounts in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Weighted average daily interest rate................. 6.13% 6.46% 6.75%
Borrowings outstanding as of December 31............. $ 98,700 $344,300 $ --
Weighted average daily borrowings.................... $232,821 $174,901 $ 56,938
Maximum borrowings outstanding at any month end...... $440,100 $344,300 $143,800
Total borrowing capacity on all lines of credit as of
December 31........................................ $902,340 $375,000 $375,000
</TABLE>
77
<PAGE> 80
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Senior Unsecured Notes
ProLogis has issued senior unsecured notes and medium-term unsecured notes
that bear interest at fixed rates, payable semi-annually (the "Notes"). The
Notes are summarized as follows (in thousands of dollars):
<TABLE>
<CAPTION>
PRINCIPAL
OUTSTANDING AT PRINCIPAL
ORIGINAL COUPON MATURITY DECEMBER 31, PAYMENT
DATE OF ISSUANCE PRINCIPAL RATE DATE 1999(1) REQUIREMENT
- ---------------- ---------- ------ -------- -------------- -----------
<S> <C> <C> <C> <C> <C>
May 16, 1995........... $ 17,500 7.250% 05/15/00 $ 17,494 (2)
May 16, 1995........... 17,500 7.300% 05/15/01 17,477 (2)
May 17, 1996........... 50,000 7.250% 05/15/02 37,486 (3)
October 9, 1998........ 125,000 7.000% 10/01/03 125,000 (2)
April 26, 1999......... 250,000 6.700% 04/15/04 249,604 (2)
July 20, 1998.......... 250,000 7.050% 07/15/06 249,555 (2)
November 20, 1997(4)... 135,000 7.250% 11/20/07 134,023 (2)
April 26, 1999......... 250,000 7.100% 04/15/08 249,932 (2)
May 17, 1996........... 100,000 7.950% 05/15/08 99,876 (5)
March 2, 1995.......... 150,000 8.720% 03/01/09 150,000 (6)
May 16, 1995........... 75,000 7.875% 05/15/09 74,757 (7)
November 20, 1997(4)... 25,000 7.300% 11/20/09 24,771 (2)
February 4, 1997....... 100,000 7.810% 02/01/15 100,000 (8)
March 2, 1995.......... 50,000 9.340% 03/01/15 50,000 (9)
May 17, 1996........... 50,000 8.650% 05/15/16 49,870 (10)
July 11, 1997.......... 100,000 7.625% 07/01/17 99,785 (2)
---------- ----------
$1,745,000 $1,729,630
========== ==========
</TABLE>
- ---------------
(1) Amounts are net of applicable unamortized original issue discount.
(2) Principal due at maturity.
(3) Annual principal payments of $12.5 million from 5/15/00 to 5/15/02.
(4) Senior unsecured notes assumed by ProLogis in March 1999 in connection with
the Meridian Merger. See Note 3.
(5) Annual principal payments of $25.0 million from 5/15/05 to 5/15/08.
(6) Annual principal payments of $18.75 million from 3/1/02 to 3/1/09.
(7) Annual principal payments of $9.375 million from 5/15/02 to 5/15/09.
(8) Annual principal payments ranging from $10.0 million to $20.0 million from
2/1/10 to 2/1/15.
(9) Annual principal payments ranging from $5.0 million to $12.5 million from
3/1/10 to 3/1/15.
(10) Annual principal payments ranging from $5.0 million to $12.5 million from
5/15/10 to 5/15/16.
The Notes rank equally with all other unsecured and unsubordinated
indebtedness of ProLogis from time to time outstanding. The Notes are redeemable
at any time at the option of ProLogis. Such redemption and other terms are
governed by the provisions of an indenture agreement or, with respect to the
notes assumed in connection with the Meridian Merger, note purchase agreements.
Under the terms of the indenture agreement and note purchase agreements,
ProLogis must meet certain financial covenants and ProLogis was in compliance
with all such covenants as of December 31, 1999.
78
<PAGE> 81
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Other Unsecured Debt
ProLogis has an unsecured term loan in the amount of 200.0 million French
francs (the currency equivalent of approximately $30.9 million as of December
31, 1999). The loan bears interest at a variable rate (Euribor plus 1.20%) that
has been fixed through maturity at 3.62% through an interest rate swap
agreement. See Note 16. Annual payments are due on the loan commencing in the
year 2001, with the final payment due in 2006. The term loan prohibits
distributions from the entity that holds the debt unless certain principal
reductions are made. ProLogis contributed 50.1% of the common stock of the
wholly owned entity holding this debt to the ProLogis European Properties Fund
on January 7, 2000. ProLogis is committed to contributing the remaining 49.9% of
the common stock to the ProLogis European Properties Fund in January 2001. See
Note 5.
Mortgage Notes, Assessment Bonds and Securitized Debt
Mortgage notes, assessment bonds and securitized debt consisted of the
following as of December 31, 1999 (in thousands):
<TABLE>
<CAPTION>
BALLOON
PERIODIC PAYMENT
INTEREST MATURITY PAYMENT PRINCIPAL DUE AT
DESCRIPTION RATE(1) DATE DATE BALANCE MATURITY
- ----------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
Mortgage notes:
Platte Valley Industrial Center #1... 9.750% 03/01/00 (2) $ 264 $ 256
West One Business Center #1.......... 8.250 09/01/00 (2) 4,327 4,252
Tampa West Distribution Center #20... 9.125 11/30/00 (3) 52 --
Rio Grande Industrial Center #1...... 8.875 09/01/01 (2) 2,878 2,544
Titusville Industrial Center #1...... 10.000 09/01/01 (2) 4,494 4,181
Prudential Insurance(4).............. 8.590 04/01/03 (2) 26,078 23,505
Sullivan 75 Distribution Center #1... 9.960 04/01/04 (2) 1,793 1,663
Charter American Mortgage(4)......... 8.750 08/01/04 (2) 7,180 5,819
West One Business Center #3.......... 9.000 09/01/04 (2) 4,318 3,847
Raines Distribution Center........... 9.500 01/01/05 (2) 5,259 4,402
Prudential Insurance(4)(5)........... 6.850 03/01/05 (6) 53,111 48,850
Consulate Distribution Center
#300(5)........................... 6.970 02/01/06 (2) 3,740 367
Plano Distribution Center #7(5)...... 7.020 04/15/06 (2) 3,785 3,200
Societe Generale(4)(7)............... 4.790(8) 12/29/06 (2) 14,041 5,307
Societe Generale(4)(7)............... 4.800(9) 12/29/06 (2) 115,769 78,235
Connecticut General Life
Insurance(4)...................... 7.080 03/01/07 (2) 148,757 134,431
Vista Del Sol Industrial Center #1 &
2................................. 9.680 08/01/07 (3) 3,446 --
Credit Lyonnais(4)(7)................ 8.600 07/21/08 (3) 12,921 --
State Farm Insurance(4)(5)........... 7.100 11/01/08 (2) 15,467 13,698
Placid Street Distribution Center
#1(5)............................. 7.180 12/01/09 (2) 7,829 5,142
Earth City Industrial Center #4...... 8.500 07/01/10 (3) 1,933 --
GMAC Commercial Mortgage(4).......... 7.750 10/01/10 (3) 7,974 --
Executive Park Distribution Center
#3................................ 8.190 03/01/11 (3) 1,053 --
Cameron Business Center #1(5)........ 7.230 07/01/11 (2) 6,162 4,028
Platte Valley Industrial Center #9... 8.100 04/01/17 (3) 3,248 --
Platte Valley Industrial Center #4... 10.100 11/01/21 (3) 2,034 --
Morgan Guaranty Trust(4)............. 7.584 04/01/24 (10) 200,000 127,187
--------
$657,913
========
Assessment bonds:
City of Wilsonville.................. 6.820% 08/19/04 (3) $ 111 --
</TABLE>
79
<PAGE> 82
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
BALLOON
PERIODIC PAYMENT
INTEREST MATURITY PAYMENT PRINCIPAL DUE AT
DESCRIPTION RATE(1) DATE DATE BALANCE MATURITY
- ----------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C>
City of Kent......................... 5.500 05/01/05 (3) 16 --
City of Kent......................... 7.850 06/20/05 (3) 84 --
City of Portland..................... 8.330 11/17/07 (3) 6 --
City of Kent......................... 7.980 05/20/09 (3) 64 --
City of Fremont...................... 7.000 03/01/11 (3) 9,348 --
City of Las Vegas.................... 8.750 10/01/13 (3) 720 --
City of Kent......................... 6.210 01/15/15 (3) 75 --
City of Portland..................... 7.250 11/07/15 (3) 86 --
City of Portland..................... 7.250 09/15/16 (3) 211 --
--------
$ 10,721
========
Securitized debt:
Tranche A............................ 7.740% 02/01/04 (2) $ 18,995 $ 15,214
Tranche B............................ 9.940 02/01/04 (2) 7,957 7,215
--------
$ 26,952
========
</TABLE>
- ---------------
(1) The weighted average interest rates for mortgage notes, assessment bonds
and securitized debt were 6.99%, 7.13% and 8.39%, respectively as of
December 31, 1999.
(2) Monthly amortization with a balloon payment due at maturity.
(3) Fully amortizing.
(4) Secured by various distribution facilities.
(5) Mortgage note was assumed by ProLogis in connection with the Meridian
Merger. See Note 3. Under purchase accounting, the mortgage note was
recorded at its fair value. Accordingly, a premium or discount was
recognized, where applicable.
(6) Carrying value includes premium, interest only with stated principal amount
due at maturity.
(7) On January 7, 2000, ProLogis contributed 50.1% of the common stock of the
wholly owned entity holding this debt to the ProLogis European Properties
Fund. ProLogis is committed to contributing the remaining 49.9% in January
2001. See Note 5.
(8) Variable rate provided by loan agreement is Euribor plus 1.20%. The Euribor
rate has been fixed through January 2004 at 3.59% through interest rate
swap agreement. See Note 16.
(9) Variable rate provided by loan agreement is Euribor plus 1.20%. The Euribor
rate has been fixed through January 2004 at 3.60% through interest rate
swap agreement. See Note 16.
(10) Monthly interest only payments through May 2005, monthly principal and
interest payments from June 2005 to April 2024 with a balloon payment due
at maturity.
Mortgage notes are secured by real estate with an aggregate undepreciated
cost of $1.21 billion as of December 31, 1999. Assessment bonds are secured by
real estate with an aggregate undepreciated cost of $226.9 million as of
December 31, 1999. Securitized debt is collateralized by real estate with an
aggregate undepreciated cost of $63.4 million as of December 31, 1999.
80
<PAGE> 83
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Long-Term Debt Maturities
Approximate principal payments due on senior unsecured notes, other
unsecured debt, mortgage notes, assessment bonds and securitized debt during
each of the years in the five-year period ending December 31, 2004 and
thereafter are as follows (in thousands):
<TABLE>
<S> <C>
2000.................................................... $ 43,455
2001.................................................... 53,027
2002.................................................... 64,767
2003.................................................... 202,429
2004.................................................... 336,520
2005 and thereafter..................................... 1,758,780
----------
Total principal due........................... 2,458,978
Less: Original issue discount........................... (2,870)
----------
Total carrying value.......................... $2,456,108
==========
</TABLE>
Interest Expense
For 1999, 1998 and 1997, interest expense was $170.7 million, $77.7 million
and $52.7 million, respectively, which is net of capitalized interest of $16.0
million, $19.2 million and $18.4 million, respectively. Amortization of deferred
loan costs included in interest expense was $4.4 million, $2.2 million and $2.0
million for 1999, 1998 and 1997, respectively. The total interest paid in cash
on all outstanding debt was $169.8 million, $83.2 million and $61.3 million
during 1999, 1998 and 1997, respectively.
7. MINORITY INTEREST:
Minority interest represents the limited partners' interests in real estate
partnerships controlled by ProLogis. With respect to each of the partnerships
either ProLogis or a subsidiary of ProLogis is the sole general partner with all
management powers over the business and affairs of the partnership. The limited
partners of each partnership generally do not have the right to participate in
or exercise management control over the business and affairs of the partnership.
With respect to each partnership the general partner may not, without the
written consent of all of the limited partners, take any action that would
prevent such partnership from conducting its business, possess the property of
the partnership, admit an additional partner or subject a limited partner to the
liability of a general partner.
ProLogis sold its 70.0% general partnership interest in Red Mountain Joint
Venture in March 1999 and recognized a gain of $715,000. As of December 31,
1999, ProLogis is the controlling general partner in six partnerships, including
two partnerships (MDN/JSC II Limited Partnership and Meridian Realty Partners,
L.P.) acquired in the Meridian Merger (see Note 3). In each of these
partnerships, the limited partners are entitled to exchange partnership units
for Common Shares (5,055,704 on a one for one basis and 483,087 at a rate of
1.10 Common Share per partnership unit, plus $2.00). Additionally, the limited
partners are entitled to receive preferential cumulative quarterly distributions
per unit equal to the quarterly distributions in respect of Common Shares.
The six partnerships are as follows:
- ProLogis Limited Partnership-I, which owned approximately $209.6 million
of industrial distribution facilities located primarily in the San
Francisco Bay market as of December 31, 1999, was formed in December
1993. ProLogis had a 68.7% controlling general partnership interest and
there were 4,520,532 limited partnership units outstanding as of December
31, 1999. These facilities cannot be sold, prior to the occurrence of
certain events, without the consent of the limited partners thereto,
other than in tax-deferred exchanges.
81
<PAGE> 84
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
- ProLogis Limited Partnership-II, which owned approximately $56.8 million
of industrial distribution facilities located primarily in the Charlotte,
Dallas/Fort Worth, Denver, El Paso, St. Louis, Washington D.C./Baltimore
and the San Francisco Bay markets as of December 31, 1999, was formed in
May 1994. ProLogis' initial 81.2% controlling general partnership
interest has subsequently been increased to 97.8% (the ownership interest
as of December 31, 1999) due to the conversion of limited partnership
units into Common Shares. There were 90,213 limited partnership units
outstanding as of December 31, 1999.
- ProLogis Limited Partnership-III, which owned approximately $51.7 million
of industrial distribution facilities located primarily in the San
Antonio, Orlando, Miami/Ft. Lauderdale and Tampa markets as of December
31, 1999, was formed in October 1994. ProLogis had a 50.4% controlling
general partnership interest at formation, which has subsequently been
increased to 88.2% (the ownership interest as of December 31, 1999) as
the result of additional contributions by ProLogis and the conversion of
limited partnership units into Common Shares. There were 376,347 limited
partnership units outstanding as of December 31, 1999.
- ProLogis Limited Partnership-IV, which owned approximately $94.8 million
of industrial distribution facilities located primarily in the
Cincinnati, Dallas/Fort Worth, Miami/Ft. Lauderdale, Orlando and Tampa
markets as of December 31, 1999, was formed in October 1994 through a
cash contribution from a wholly owned subsidiary of ProLogis, ProLogis
IV, Inc., and the contribution of industrial distribution facilities from
the limited partner. ProLogis' initial 96.4% controlling general
partnership interest has been increased to 98.2% (the ownership interest
as of December 31, 1999) as the result of additional contributions by
ProLogis. There were 68,612 limited partnership units outstanding as of
December 31, 1999.
ProLogis Limited Partnership-IV and ProLogis IV, Inc. are legal entities
separate and distinct from ProLogis, its affiliates and each other, and
each has separate assets, liabilities, business functions and operations.
The sole assets of ProLogis IV, Inc. are its general partner advances to
and its interest in ProLogis Limited Partnership-IV. As of December 31,
1999, ProLogis Limited Partnership-IV had outstanding borrowings from
ProLogis IV, Inc. of $0.7 million and ProLogis IV, Inc. had outstanding
borrowings from ProLogis and its affiliates of $0.7 million.
- Meridian Realty Partners, L.P. owned a $10.3 million industrial
distribution facility located in the Los Angeles market as of December
31, 1999. ProLogis had an 88.0% controlling general partnership interest
and there were 29,712 limited partnership units outstanding as of
December 31, 1999.
- MDN/JSC II Limited Partnership owned approximately $62.1 million of
industrial distribution facilities located in the Dallas and Las Vegas
markets as of December 31, 1999. ProLogis had a 67.4% controlling general
partnership interest and there were 453,375 limited partnership units
outstanding as of December 31, 1999.
For financial reporting purposes, the assets, liabilities, results of
operations and cash flows of each of the six partnerships are included in
ProLogis' consolidated financial statements, and the interests of the limited
partners are reflected as minority interest.
8. SHAREHOLDERS' EQUITY:
Shares Authorized
As of December 31, 1999, 275,000,000 shares were authorized (increased from
230,000,000 shares on June 24, 1999 through a shareholder-approved amendment to
ProLogis' Declaration of Trust). ProLogis' Board of Trustees (the "Board") may
increase the number of authorized shares and may classify or reclassify any
unissued shares of ProLogis stock from time to time by setting or changing the
preferences, conversion or other
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
rights, voting powers, restrictions, limitations as of distributions,
qualifications and terms or conditions of redemption of such shares.
Preferred Shares
As of December 31, 1999, ProLogis had four series of cumulative redeemable
preferred shares of beneficial interest outstanding (Series A, C, D and E) and
one series of cumulative convertible redeemable preferred shares of beneficial
interest outstanding (Series B). Holders of each series of preferred shares
have, subject to certain conditions, limited voting rights. The holders of the
preferred shares are entitled to receive cumulative preferential dividends based
upon each series' respective liquidation preference. Such dividends are payable
quarterly in arrears on the last day of March, June, September and December for
all series of preferred shares, with the exception of Series E, which are
payable quarterly on the last day of January, April, July and October, when, and
if, declared by the Board, out of funds legally available for payment of
dividends. After the respective redemption dates, each series can be redeemed
for a cash redemption price which (other than the portion consisting of accrued
and unpaid dividends) is payable solely out of the sales proceeds of other
capital shares of ProLogis, which may include shares of other series of
preferred shares. With respect to payment of dividends, each series of preferred
shares ranks on parity with ProLogis' other series of preferred shares.
The Series B preferred shares are convertible at any time, unless
previously redeemed, at the option of the holders thereof into Common Shares at
a conversion price of $19.50 per share (equivalent to a conversion rate of 1.282
Common Shares for each Series B preferred share).
ProLogis' preferred shares are summarized as follows:
<TABLE>
<CAPTION>
NUMBER OF SHARES STATED EQUIVALENT BASED OPTIONAL
OUTSTANDING AS OF LIQUIDATION DIVIDEND ON LIQUIDATION REDEMPTION
DECEMBER 31, 1999 PREFERENCE RATE PREFERENCE DATE(1)
----------------- ----------- -------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
Series A............. 5,400,000 $25.00 9.40% $2.35 per share 06/21/00
Series B(2).......... 7,020,703 $25.00 7.00% $1.75 per share 02/21/01
Series C............. 2,000,000 $50.00 8.54% $4.27 per share 11/13/26
Series D............. 10,000,000 $25.00 7.92% $1.98 per share 04/13/03
Series E............. 2,000,000 $25.00 8.75% $2.19 per share 06/30/03
</TABLE>
- ---------------
(1) After this date, the preferred shares can be redeemed at ProLogis' option.
(2) During 1999 and 1998, Series B preferred shares of 516,897 and 462,700,
respectively, were converted into 662,661 and 593,181 Common Shares,
respectively.
Issuance of Common Shares
The purchase agreement of ProLogis Kingspark contained a provision that
allowed for additional contingent consideration, to be settled by the issuance
of Common Shares, upon the achievement of a specified level of earnings by
ProLogis Kingspark. The conditions precedent to the issuance of the Common
Shares were met in 1999. ProLogis recognized a liability of $3.9 million related
to the additional purchase price as of December 31, 1999. In settlement of this
liability, 200,535 Common Shares were issued in February 2000.
Shelf Registration
In June 1999, ProLogis filed a $500.0 million shelf registration statement
with the Securities and Exchange Commission supplementing its existing shelf
registration. The shelf registration allows ProLogis to issue securities in the
form of debt securities, preferred shares, Common Shares, rights to purchase
Common Shares and preferred share purchase rights on an as-needed basis. As of
December 31, 1999, ProLogis had
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
$608.0 million of shelf-registered securities available for issuance, subject to
ProLogis' ability to effect an offering on satisfactory terms.
Ownership Restrictions and Significant Shareholder
For ProLogis to qualify as a REIT under the Code, not more than 50% in
value of its outstanding shares of stock may be owned by five or fewer
individuals at any time during the last half of ProLogis' taxable year.
Therefore, ProLogis' Declaration of Trust restricts beneficial ownership (or
ownership generally attributed to a person under the REIT tax rules) of
ProLogis' outstanding shares by a single person, or persons acting as a group,
to 9.8% of ProLogis' outstanding shares. This provision assists ProLogis in
protecting and preserving its REIT status and protects the interest of
shareholders in takeover transactions by preventing the acquisition of a
substantial block of shares.
Shares owned by a person or group of persons in excess of these limits are
subject to redemption by ProLogis. The provision does not apply where a majority
of the Board, in its sole and absolute discretion, waives such limit after
determining that the status of ProLogis as a REIT for federal income tax
purposes will not be jeopardized or the disqualification of ProLogis as a REIT
is advantageous to the shareholders.
Security Capital is exempt from the ownership restrictions described above.
Security Capital owned 30.8% of the outstanding Common Shares as of December 31,
1999. For tax purposes, Security Capital's ownership is attributed to its
shareholders.
Dividend Reinvestment and Share Purchase Plan
In March 1995, ProLogis adopted a Dividend Reinvestment and Share Purchase
Plan (the "1995 Plan"), which commenced in April 1995. The 1995 Plan allowed
holders of Common Shares the opportunity to acquire additional Common Shares by
automatically reinvesting distributions. Holders of Common Shares who do not
participate in the 1995 Plan continue to receive distributions as declared. The
1995 Plan also allowed participating holders of Common Shares to purchase a
limited number of additional Common Shares by making optional cash payments,
without payment of any brokerage commission or service charge. Common Shares are
acquired pursuant to the 1995 Plan at a price equal to 98% of the market price
of such Common Shares, without payment of any brokerage commission or service
charge.
The 1995 Plan was amended in June 1999 by the 1999 Dividend Reinvestment
and Share Purchase Plan (the "1999 Plan"). The primary change effective with the
1999 Plan allows persons who are not holders of Common Shares to participate in
the share purchase plan.
Shareholder Purchase Rights
On December 7, 1993, the Board declared a dividend of one preferred share
purchase right ("Right") for each outstanding Common Share to be distributed to
all holders of record of the Common Shares on December 31, 1993. Each Right
entitles the registered holder to purchase one-hundredth of a Participating
Preferred Share for an exercise price of $40.00 per one-hundredth of a
Participating Preferred Share, subject to adjustment as provided in the Rights
Agreement. The Rights will generally be exercisable only if a person or group
(other than certain affiliates of ProLogis) acquires 20% or more of the Common
Shares or announces a tender offer for 25% or more of the Common Shares. Under
certain circumstances, upon a shareholder acquisition of 20% or more of the
Common Shares (other than certain affiliates of ProLogis), each Right will
entitle the holder to purchase, at the Right's then-current exercise price, a
number of Common Shares having a market value of twice the Right's exercise
price. The acquisition of ProLogis pursuant to certain mergers or other business
transactions will entitle each holder of a Right to purchase, at the Right's
then-current exercise price, a number of the acquiring company's common shares
having a market value at that time equal to twice the Right's exercise price.
The Rights held by certain 20% shareholders will not be exercisable. The Rights
will expire on
84
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
December 7, 2003, unless the expiration date of the Rights is extended, and the
Rights are subject to redemption at a price of $0.01 per Right under certain
circumstances.
9. DISTRIBUTIONS AND DIVIDENDS:
Common Distributions
ProLogis' annual distribution per Common Share was $1.30 in 1999, $1.24 in
1998 and $1.07 in 1997. For Federal income tax purposes, the following
summarizes the taxability of cash distributions paid on Common Shares in 1998
and 1997 and the estimated taxability for 1999:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Per Common Share:
Ordinary income........................................... $0.84 $1.12 $1.07
Capital gains............................................. 0.35 -- --
Return of capital......................................... 0.11 0.12 --
----- ----- -----
Total............................................. $1.30 $1.24 $1.07
===== ===== =====
</TABLE>
The distribution level for 2000 was set at $1.34 per Common Share by the
Board in December 1999. Additionally, on December 16, 1999, ProLogis declared a
distribution of $0.335 per Common Share payable on February 23, 2000 to
shareholders of record as of February 9, 2000.
On May 3, 1999, ProLogis paid a common distribution to holders of Meridian
common stock as of March 19, 1999. This distribution, which was declared by the
Meridian Board of Directors prior to the closing of the Meridian Merger, related
to the first quarter of 1999 and aggregated $11.1 million. This liability was
assumed by ProLogis in connection with the Meridian Merger. See Note 3.
In connection with the 1997 Merger discussed in Note 10, Security Capital
issued warrants to acquire 3,608,202 shares of Class B common stock of Security
Capital pro rata to holders of Common Shares (other than Security Capital),
Series B preferred shares and limited partnership units. Holders of Common
Shares and holders of limited partnership units received 0.046549 warrants for
each Common Share or unit held and holders of Series B preferred shares received
0.059676 warrants for each preferred share held. Each warrant was exercisable
into one share of Security Capital Class B common stock at an exercise price of
$28.00 per share. The warrants expired in September 1998. Security Capital
issued the warrants as an incentive to ProLogis' shareholders to vote in favor
of the 1997 Merger and to raise additional equity capital at a relatively low
cost, in addition to other benefits.
Preferred Dividends
The annual dividends per preferred share are as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1999(1) 1998(2) 1997(2)
------- ------- -------
<S> <C> <C> <C>
Series A.............................................. $2.35 $2.35 $2.35
Series B.............................................. 1.75 1.75 1.75
Series C.............................................. 4.27 4.27 4.27
Series D.............................................. 1.98 1.42(3) --
Series E.............................................. 1.64(4) -- --
</TABLE>
85
<PAGE> 88
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
- ---------------
(1) For federal income tax purposes $1.65 of the Series A dividend, $1.23 of the
Series B dividend, $3.00 of the Series C dividend, $1.39 of the Series D
dividend and $1.15 of the Series E dividend are treated as ordinary income
to the holders. The remaining portion of each dividend represents capital
gains.
(2) For federal income tax purposes these dividends are treated as ordinary
income to the holders.
(3) For the period from date of issuance to December 31, 1998.
(4) For the period from date of issuance to December 31, 1999.
On April 30, 1999, ProLogis paid an aggregate dividend of $1.1 million on
the Series E preferred shares ($0.5469 per share), of which $729,200 related to
Meridian's series D preferred stock that was accrued by Meridian prior to the
closing of the Meridian Merger. See Note 3.
Pursuant to the terms of its preferred shares, ProLogis is restricted from
declaring or paying any distribution with respect to the Common Shares unless
all cumulative dividends with respect to the preferred shares have been paid and
sufficient funds have been set aside for dividends that have been declared for
the then-current dividend period with respect to the preferred shares.
ProLogis' tax return for the year ended December 31, 1999 has not been
filed. The taxability information for 1999 is based upon the best available
data. ProLogis' tax returns have not been examined by the Internal Revenue
Service. Consequently, the taxability of distributions and dividends is subject
to change.
10. 1997 MERGER TRANSACTION:
On September 8, 1997, ProLogis' shareholders approved an agreement with
Security Capital to exchange Security Capital's REIT management and property
management companies for 3,692,023 Common Shares (the "1997 Merger"). As a
result, ProLogis became an internally managed REIT on September 9, 1997 with
Security Capital remaining as ProLogis' largest shareholder. The $81.9 million
value of the management companies was approved by the independent members of the
Board and a fairness opinion was obtained from a third party financial advisor.
The number of Common Shares issued to Security Capital was based on the average
market price of the Common Shares ($22.175) over the five-day period prior to
the August 6, 1997 record date for determining the ProLogis shareholders
entitled to vote on the 1997 Merger. The market value of the Common Shares
issued to Security Capital on September 9, 1997 was $79.8 million, of which $4.4
million was allocated to the net tangible assets acquired and the $75.4 million
difference was accounted for as the cost incurred in acquiring the management
companies. Because the management companies did not have significant operations
other than the management of ProLogis and ProLogis' assets, the transaction did
not qualify as the acquisition of a business for purposes of applying APB
Opinion No. 16, "Business Combinations". Consequently, the market value of the
Common Shares issued in excess of the fair value of the net tangible assets
acquired was charged to operating income rather than capitalized as goodwill.
As a result of the 1997 Merger, ProLogis terminated the REIT management and
property management agreements that were in place while Security Capital owned
the management companies. All employees of the management companies became
employees of ProLogis and ProLogis directly incurs the personnel and other costs
related to these functions. The costs relating to property management are
recorded as rental expenses whereas the costs associated with managing the
corporate entity are recorded as general and administrative expenses.
86
<PAGE> 89
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. EARNINGS PER COMMON SHARE:
A reconciliation of the denominator used to calculate basic earnings per
Common Share to the denominator used to calculate diluted earnings per Common
Share for the years indicated (in thousands, except per share amounts) is as
follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Net earnings attributable to Common Shares........... $123,999 $ 62,231 $ 4,431
======== ======== ========
Weighted average Common Shares outstanding --
Basic.............................................. 152,412 121,721 100,729
Incremental effect of common stock equivalents and
contingently issuable shares (see Note 8).......... 327 307 140
-------- -------- --------
Adjusted weighted average Common Shares outstanding--
Diluted............................................ 152,739 122,028 100,869
======== ======== ========
Per share net earnings attributable to Common Shares:
Basic.............................................. $ 0.81 $ 0.51 $ 0.04
======== ======== ========
Diluted............................................ $ 0.81 $ 0.51 $ 0.04
======== ======== ========
</TABLE>
For the year ended December 31, 1999, basic and diluted per share net
earnings attributable to Common Shares before the cumulative effect of
accounting change were $0.82. The following convertible securities were not
included in the calculation of diluted net earnings per Common Share as the
effect, on an as-converted basis, was antidilutive (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1999 1998 1997
----- ------ ------
<S> <C> <C> <C>
Series B preferred shares................................... 9,221 10,055 10,319
===== ====== ======
Limited partnership units................................... 5,461 5,070 5,190
===== ====== ======
</TABLE>
12. SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash investing and financing activities for the years ended December
31, 1999, 1998 and 1997 are as follows:
- In connection with the Meridian Merger discussed in Note 3, ProLogis
issued approximately 37.2 million Common Shares and 2.0 million Series E
preferred shares, assumed approximately 1.1 million stock options and
assumed outstanding debt and liabilities of Meridian for an aggregate
purchase price of approximately $1.54 billion in exchange for the assets
of Meridian (including cash balances acquired of $49.0 million).
- ProLogis disposed of properties to ProLogis California as discussed in
Note 5 and received $148.2 million of the proceeds in the form of an
equity interest.
- In connection with the formation of the ProLogis European Properties Fund
as discussed in Note 5, ProLogis received $23.4 million of the proceeds
from its disposition of facilities to the ProLogis European Properties
Fund in the form of an equity interest.
- Series B preferred shares aggregating $12.9 million, $11.6 million and
$1.2 million were converted into Common Shares in 1999, 1998 and 1997,
respectively.
87
<PAGE> 90
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
- Limited partnership units aggregating $205,000, $302,000 and $1,588,000
were converted into Common Shares in 1999, 1998 and 1997, respectively.
- Net foreign currency translation adjustments of $9,788,000, $(86,000) and
$63,000 were recognized in 1999, 1998 and 1997, respectively.
- Mortgage notes in the amount of $39.8 million and $12.8 million were
assumed in connection with the acquisition of real estate in 1998 and
1997, respectively.
- Common Shares in the amount of $1.0 million were issued in connection of
the acquisition of real estate in 1997.
- In connection with the 1997 Merger discussed in Note 10, $79.8 million of
Common Shares were issued in exchange for $4.4 million of net tangible
assets in 1997.
- Employee share purchase notes in the amount of $27.3 million were
received for Common Shares issued under the employee share purchase plan
in 1997. See Note 13.
- Employee share purchase notes in the amount of $1.8 million and $0.1
million were retired in 1998 and 1997, respectively. See Note 13.
13. LONG-TERM COMPENSATION
Long-Term Incentive Plan and Share Option Plan for Outside Trustees
ProLogis has a long-term incentive plan (the "Incentive Plan"), which
includes an employee share purchase plan, a stock option plan, a restricted
share unit plan and a performance share plan. No more than 9,410,000 Common
Shares in the aggregate may be awarded under the Incentive Plan and no
individual may be granted awards with respect to more than 500,000 Common Shares
in any one-year period. The Incentive Plan has a ten-year term. Additionally,
ProLogis has 100,000 Common Shares authorized for issuance under its Share
Option Plan for Outside Trustees (the "Outside Trustees Plan").
Employee Share Purchase Plan
Under the employee share purchase plan certain employees of ProLogis
purchased 1,356,834 Common Shares on September 8, 1997 at a price of $21.21875
per share. ProLogis financed 95% of the total purchase price through ten-year,
recourse notes to the participants aggregating $27.3 million. The loans, which
have been recognized as a deduction from shareholders' equity, bear interest at
the lower of ProLogis' annual dividend yield on Common Shares or 6% per annum.
The loans are secured by the Common Shares purchased. For each Common Share
purchased, participants were granted two options to purchase Common Shares at a
price of $21.21875. As of December 31, 1999, there were 1,154,349 Common Shares
securing the employee share purchase notes.
The outstanding notes receivable at December 31, 1999 of $22,906,000
include $20,277,000 due from officers of ProLogis.
88
<PAGE> 91
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Stock Options
ProLogis has granted stock options under the Incentive Plan and the Outside
Trustees Plan. Stock options outstanding as of December 31, 1999 are as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF EXPIRATION REMAINING
OPTIONS EXERCISE PRICE(1) DATE LIFE
--------- ------------------- ---------- ---------
<S> <C> <C> <C> <C>
Outside Trustees Plan(2)....... 65,000 $16.00-$25.00 2000-2009 6.1 years
Employee stock purchase
plan(3)...................... 2,244,586 $21.21875 2007 7.5 years
Stock option plan(2)(3):
1997 awards.................. 285,321 $21.21875-$23.96875 2007 7.7 years
1998 awards.................. 1,397,879 $20.9375-$24.625 2008 8.7 years
1999 awards.................. 1,459,753 $17.1875-$19.71875 2009 9.7 years
Meridian options(4)............ 1,025,850 $15.125-$23.9375 2004 4.2 years
Options sold to unconsolidated
entities(2).................. 984,819 $18.625-$24.5625 2008-2009 9.2 years
---------
Total................ 7,463,208
=========
</TABLE>
- ---------------
(1) Exercise price was equal to the average of the high and low market price on
the date of grant.
(2) The holders are awarded dividend equivalent units each year of the plan,
except for holders of 30,000 options issued under the Outside Trustees Plan
prior to 1999.
(3) Graded vesting at various rates over periods from one to ten years, subject
to certain conditions.
(4) Options are fully exercisable. Options issued to holders of Meridian options
are exercisable into 1.10 Common Shares plus $2.00. See Note 3.
The weighted average fair value of the stock options issued under the
Incentive Plan to ProLogis' employees, issued under the Outside Trustees Plan
and sold to unconsolidated entities during 1999 was $2.99 per option (excluding
the value of the DEUs to be earned). The activity with respect to ProLogis'
stock option plans for the years ended December 31, 1999, 1998 and 1997 is
presented below.
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE NUMBER OF
NUMBER OF EXERCISE OPTIONS
OPTIONS PRICE EXERCISABLE
--------- -------- -----------
<S> <C> <C> <C>
Balance at December 31, 1996......................... 18,000 $16.56 18,000
Granted............................................ 3,097,012 21.24 710,473
Exercised.......................................... -- -- --
Forfeited.......................................... (11,721) 21.22 --
--------- ------ ---------
Balance at December 31, 1997......................... 3,103,291 21.21 728,473
Granted/Sold....................................... 2,011,392 21.17 504,513
Exercised.......................................... -- -- --
Forfeited.......................................... (251,473) 21.22 --
--------- ------ ---------
Balance at December 31, 1998......................... 4,863,210 21.19 1,232,986
Granted/Sold....................................... 2,066,133 20.41 --
Issued in Meridian Merger (see Note 3)............. 1,025,850 20.13 1,025,850
Exercised.......................................... (4,000) 15.50 (4,000)
Forfeited.......................................... (487,985) 21.02 --
--------- ------ ---------
Balance at December 31, 1999......................... 7,463,208 $20.37 2,254,836
========= ====== =========
</TABLE>
89
<PAGE> 92
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
ProLogis did not recognize compensation expense in 1999, 1998 or 1997
related to stock options granted as the exercise price of all options granted
was equal to the average of the high and low market price on the date of grant.
Had compensation expense for these plans been determined using an option
valuation model as provided in SFAS No. 123, ProLogis net earnings attributable
to Common Shares and net earnings per Common Share would change as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------
1999 1998 1997
-------- ------- ------
<S> <C> <C> <C>
Net earnings attributable to Common Shares:
As reported........................................... $123,999 $62,231 $4,431
Pro forma............................................. 121,767 60,805 4,016
Basic and diluted net earnings per Common Share:
As reported........................................... $ 0.81 $ 0.51 $ 0.04
Pro forma............................................. 0.80 0.50 0.04
</TABLE>
Since stock options vest over several years and additional grants are
likely to be made in future years, the pro forma compensation cost may not be
representative of that to be expected in future years.
The pro forma amounts above were calculated using the Black-Scholes model
and the following assumptions:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Risk-free interest rate........................... 6.58% 4.74% 6.35%
Forecasted dividend yield......................... 6.10% 7.36% 7.36%
Volatility........................................ 23.01% 27.37% 19.20%
Weighted average option life...................... 6.25 years 6.75 years 6.75 years
</TABLE>
Dividend Equivalent Units ("DEUs")
DEUs in the form of Common Shares are awarded at a rate of one Common Share
per DEU on December 31st of each year the stock options are outstanding and are
vested to the same extent the underlying stock options are vested. The DEUs are
valued on the award date based upon the market price of the Common Shares on
that date and ProLogis recognizes that value as compensation expense over the
underlying vesting period of the related stock options. As of December 31, 1999,
there were 171,677 DEUs outstanding. ProLogis recognized compensation expense
related to the DEUs of $103,000 and $5,000 in 1999 and 1998, respectively, net
of amounts capitalized. ProLogis did not incur compensation expense related to
the DEUs in 1997 as the DEUs were awarded on December 31, 1997.
Restricted Share Units
On October 15, 1998, the Board granted 377,500 restricted share units
("RSU") to twelve officers of ProLogis. The RSUs vest 25% per year beginning
December 31, 1999 through December 31, 2002 and earn DEUs in accordance with the
DEU awards under the Incentive Plan. The RSUs are valued on the award date based
upon the market price of Common Shares on that date and ProLogis recognizes that
value as compensation expense over the underlying vesting period. The RSUs
granted in 1998 were valued at $8.0 million, of which ProLogis recognized $1.6
million and $0.3 million of compensation expense in 1999 and 1998, respectively,
net of amounts capitalized.
90
<PAGE> 93
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Performance Share Plan
In September 1999, the Board approved a performance share plan whereby
certain employees can be awarded Common Shares if performance criteria is met.
Common Shares will be awarded on December 31, 2000 based upon the criteria set
for 2000, but will not vest to the employee until December 31, 2002.
401(k) Savings Plan and Trust
ProLogis has a 401(k) Savings Plan and Trust ("401(k) Plan"), that provides
for matching employer contributions in Common Shares of 50 cents for every
dollar contributed by an employee, up to 6% of the employees' annual
compensation (within the statutory compensation limit). The vesting of
contributed Common Shares is based on the employees' years of service, with 20%
vesting each year of service, over a five-year period. Through December 31,
1999, no Common Shares have been issued under the 401(k) Plan as all matching
contributions have been made with Common Shares purchased in the public market.
A total of 190,000 Common Shares have been authorized for issuance under the
401(k) Plan.
Nonqualified Savings Plan
Effective January 1, 1998, ProLogis established the Nonqualified Savings
Plan to provide benefits for a select group of management. The purpose of this
plan is to allow highly compensated employees the opportunity to defer the
receipt and income taxation of a certain portion of their compensation in excess
of the amount permitted under the 401(k) Plan. ProLogis will match the lesser of
(a) 50% of the sum of deferrals under both the 401(k) Plan and this plan, and
(b) 3% of total compensation up to certain levels. The matching account will
vest in the same manner as the 401(k) Plan.
Warrants
During 1998, warrants were exercised into 11,764 Common Shares at an
exercise price of $10.00. There were no outstanding warrants as of December 31,
1999.
91
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
14. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED):
Selected quarterly financial data (in thousands, except for per share
amounts) for 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED,
---------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, TOTAL
--------- -------- ------------- ------------ --------
<S> <C> <C> <C> <C> <C>
1999:
Rental income.......................................... $97,161 $131,251 $135,503 $127,911 $491,826
======= ======== ======== ======== ========
Earnings from operations............................... $25,046 $ 33,290 $ 58,674 $ 49,539 $166,549
Minority interest share in earnings.................... 1,169 1,434 1,139 1,237 4,979
Gain on disposition of real estate..................... 715 -- 25,643 12,636 38,994
Foreign currency exchange gains (losses), net.......... (8,283) (4,012) 5,830 (10,353) (16,818)
Income tax expense (benefit)........................... 374 585 534 (21) 1,472
------- -------- -------- -------- --------
Earnings before cumulative effect in accounting
change............................................... 15,935 27,259 88,474 50,606 182,274
Cumulative effect of accounting change................. 1,440 -- -- -- 1,440
------- -------- -------- -------- --------
Net earnings........................................... 14,495 27,259 88,474 50,606 180,834
Less preferred share dividends......................... 13,445 14,493 14,453 14,444 56,835
------- -------- -------- -------- --------
Net earnings attributable to Common Shares............. $ 1,050 $ 12,766 $ 74,021 $ 36,162 $123,999
======= ======== ======== ======== ========
Per Common Share:
Basic earnings attributable to Common Shares before
cumulative effect of accounting change............. $ 0.02 $ 0.08 $ 0.46 $ 0.22 $ 0.82
Cumulative effect of accounting change............... (0.01) -- -- -- (0.01)
------- -------- -------- -------- --------
Basic net earnings attributable to Common Shares..... $ 0.01 $ 0.08 $ 0.46 $ 0.22 0.81
======= ======== ======== ======== ========
Diluted earnings attributable to Common Shares before
cumulative effect of accounting change............. $ 0.02 $ 0.08 $ 0.44 $ 0.22 $ 0.82
Cumulative effect of accounting change............... (0.01) -- -- -- (0.01)
------- -------- -------- -------- --------
Diluted net earnings attributable to Common Shares... $ 0.01 $ 0.08 $ 0.44 $ 0.22 $ 0.81
======= ======== ======== ======== ========
1998:
Rental income.......................................... $78,565 $ 84,353 $ 88,687 93,441 $345,046
======= ======== ======== ======== ========
Earnings from operations............................... $34,041 $ 35,143 $ 3,132 $ 35,301 $107,617
Minority interest share in earnings.................... 979 1,075 1,047 1,580 4,681
Gain on disposition of real estate..................... 2,066 2,212 -- 1,287 5,565
Foreign currency exchange gains (losses), net.......... 1,607 453 3,277 (345) 4,992
Income tax expense..................................... 190 7 2 1,965 2,164
------- -------- -------- -------- --------
Net earnings........................................... 36,545 36,726 5,360 32,698 111,329
Less preferred share dividends......................... 8,799 13,075 13,669 13,555 49,098
------- -------- -------- -------- --------
Net earnings (loss) attributable to Common Shares...... $27,746 $ 23,651 $ (8,309) $ 19,143 $ 62,231
======= ======== ======== ======== ========
Per Common Share:
Basic net earnings (loss) attributable to Common
Shares............................................. $ 0.24 0.19 $ (0.07) $ 0.16 $ 0.51
======= ======== ======== ======== ========
Diluted net earnings (loss) attributable to Common
Shares............................................. $ 0.23 $ 0.19 $ (0.07) $ 0.16 $ 0.51
======= ======== ======== ======== ========
</TABLE>
15. RELATED PARTY TRANSACTIONS:
ProLogis leases space to Security Capital and certain of its affiliates on
market terms that management believes are no less favorable to ProLogis than
those that could be obtained with unaffiliated third parties.
ProLogis' rental income related to these leases were $756,000, $717,000 and
$1,528,000 for the years ended December 31, 1999, 1998 and 1997, respectively.
As of December 31, 1999, 109,804 square feet were leased to related parties. The
annualized rental revenues for these leases are $746,000.
On September 8, 1997, ProLogis and Security Capital entered into an
administrative services agreement (the "ASA"). Under the ASA, Security Capital
provides ProLogis with certain administrative and other services as
92
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
determined by ProLogis (certain services originally provided under the ASA are
now being performed by ProLogis employees). ProLogis' fees under the ASA were
$3.4 million, $3.7 million and $1.1 million for 1999, 1998 and for the period
from September 9, 1997 to December 31, 1997, respectively. Of these fees, $0.6
million, $0.7 million and $0.2 million were capitalized in 1999, 1998 and for
the period from September 9, 1997 to December 31, 1997, respectively. ProLogis
recognizes the ASA fees related to property management activities as a component
of rental expenses. The ASA expires on December 31, 2000.
During 1999, ProLogis paid investment advisory fees to Security Capital
Markets Group Incorporated, a registered broker-dealer subsidiary of Security
Capital, aggregating $15.6 million. The fees were incurred in connection with
the Meridian Merger ($1.54 billion purchase price -- see Note 3), the formation
of ProLogis California which generated $148.2 million of outside equity capital
to ProLogis (see Note 5) and the formation of the ProLogis European Properties
Fund (the currency equivalent as of December 31, 1999 of over $1 billion of
third party capital invested or committed -- see Note 5).
16. FINANCIAL INSTRUMENTS:
Fair Value of Financial Instruments
The following estimates of the fair value of financial instruments have
been determined by ProLogis using available market information and valuation
methodologies believed to be appropriate for these purposes. Considerable
judgement and a high degree of subjectivity are involved in developing these
estimates and, accordingly, they are not necessarily indicative of amounts
ProLogis would realize upon disposition.
As of December 31, 1999 and 1998, the carrying amounts of certain financial
instruments employed by ProLogis, including cash and cash equivalents, accounts
receivable, accounts payable and accrued expenses were representative of their
fair values because of the short-term maturity of these instruments. Similarly,
the carrying values of the lines of credit and short-term borrowings balances
approximate fair value as of those dates since the interest rate fluctuates
based on published market rates. As of December 31, 1999 and 1998, the fair
values of the senior unsecured debt and the secured debt (including mortgage
notes, assessment bonds and securitized debt) have been estimated based upon
quoted market prices for the same or similar issues or by discounting the future
cash flows using rates currently available for debt with similar terms and
maturities. The differences in the fair value of ProLogis' senior unsecured debt
and secured debt from the carrying value in the table below are the result of
variances in the interest rates available to ProLogis as of December 31, 1999
and 1998, from the interest rates in effect at the dates of issuance. The senior
unsecured debt and many of the secured debt issues contain pre-payment penalties
or yield maintenance provisions which would make the cost of refinancing exceed
the benefit of refinancing at the lower rates.
As of December 31, 1999 and 1998, the fair value of ProLogis' derivative
financial instruments are the amounts at which they could be settled, based on
quoted market prices or estimates obtained from brokers or dealers.
93
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table reflects the carrying amount and estimated fair value
of ProLogis' financial instruments (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------------------
1999 1998
----------------------- -----------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Balance sheet financial instruments:
Senior unsecured debt.............. $1,729,630 $1,656,445 $1,083,641 $1,108,692
Secured debt (fixed rate debt)..... $ 565,776 $ 547,428 $ 227,804 $ 232,809
Derivative financial instruments:
Interest rate contracts............ $ -- $ -- $ (26,050) $ (26,050)
Foreign currency put option
contracts....................... $ 628 $ 628 $ -- $ --
Interest rate swap agreements...... $ -- $ 7,998 $ -- $ --
</TABLE>
Derivative Financial Instruments
ProLogis uses derivative financial instruments as hedges to manage
well-defined risk associated with interest and foreign currency rate
fluctuations on existing or anticipated obligations and transactions. ProLogis
does not use derivative financial instruments for trading purposes.
The primary risks associated with derivative instruments are market risk
and credit risk. Market risk is defined as the potential for loss in the value
of the derivative due to adverse changes in market prices (interest rates or
foreign currency rates). The use of derivative financial instruments allows
ProLogis to manage the risks of increases in interest rates and fluctuations in
foreign currency exchange rates with respect to the effects these fluctuations
would have on ProLogis' income and cash flows.
Credit risk is the risk that one of the parties to a derivative contract
fails to perform or meet their financial obligation under the contract. ProLogis
does not obtain collateral to support financial instruments subject to credit
risk but monitors the credit standing of counterparties. ProLogis does not
anticipate non-performance by any of the counterparties to its derivative
contracts. Should a counterparty fail to perform, however, ProLogis would incur
a financial loss to the extent of the positive fair market value of the
derivative instruments, if any.
The following table summarizes the activity in derivative financial
instruments for the years ended December 31, 1999 and 1998 (in millions):
<TABLE>
<CAPTION>
INTEREST FOREIGN
INTEREST RATE RATE SWAP CURRENCY PUT
CONTRACTS AGREEMENTS OPTIONS (1)
------------- ---------- ------------
<S> <C> <C> <C>
Notional amounts as of December 31, 1997....... $ 75.0(2) $ 75.0(2) $ --
New contracts.................................. -- -- --
Matured or expired contracts................... -- -- --
Terminated contracts........................... -- -- --
------ ------ -----
Notional amounts as of December 31, 1998....... 75.0 $ 75.0 --
------ ------ -----
New contracts.................................. -- 169.9(3) 27.1
Matured or expired contracts................... -- -- (3.9)
Terminated contracts........................... (75.0) (75.0) --
------ ------ -----
Notional amounts as of December 31, 1999....... $ -- $169.9 $23.2
====== ====== =====
</TABLE>
- ---------------
(1) ProLogis entered into foreign currency put option contracts during 1999
related to its operations in Europe. The notional amount as of December 31,
1999 represents the U.S. dollar equivalent related to the put option
contracts with notional amounts of 23.0 million euros. The outstanding
contracts do not qualify for hedge
94
<PAGE> 97
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
accounting treatment and were marked to market as of December 31, 1999.
ProLogis recognized an aggregate expense of $92,000 on the put option
contracts including the mark to market adjustment of $47,000. The put option
contracts provide ProLogis with the option to exchange euros for U.S.
dollars at a fixed exchange rate such that if the euro were to depreciate
against the U.S. dollar to predetermined levels as set by the contracts,
ProLogis could exercise its options and mitigate its foreign currency
exchange losses.
(2) In October 1997, in anticipation of debt offerings in 1998, ProLogis entered
into two interest rate protection agreements which were renewed past the
original termination dates. These agreements were entered into by ProLogis
to fix the interest rate on anticipated financings.
During the third quarter of 1998, ProLogis determined that the interest rate
protection agreements would no longer qualify for hedge accounting treatment
under GAAP based upon the following:
- Due to changing conditions in the public debt markets, it was no
longer considered probable that ProLogis would complete the
anticipated 1998 longer term debt offerings that prompted ProLogis to
enter into these interest rate protection agreements in 1997 (i.e.,
ProLogis would not be exposed to the interest rate risk that these
instruments were intended to hedge); and
- ProLogis determined, through internal analysis and through
communications with independent third parties, that a high degree of
correlation no longer existed between changes in the market values of
these interest rate protection agreements and the "market values" of
the anticipated debt offerings (i.e., the interest rate at which the
debt could be issued by ProLogis under existing market conditions).
Accordingly, ProLogis began marking these agreements to market as of
September 30, 1998. For 1998, ProLogis recognized a non-cash expense
of $26.1 million. These agreements were terminated in February 1999 at
a cost of $27.0 million and were used to set the interest rate
associated with the $200.0 million secured financing transaction with
MGT that was completed in March 1999.
(3) ProLogis has interest rate swap agreements related to variable rate mortgage
notes and other unsecured debt in the currency equivalent of approximately
$169.9 million as of December 31, 1999. The swap agreements have a combined
notional amount of 1.1 billion French francs and fix the Euribor rate at
3.62% through December 2003 on a notional amount in the currency equivalent
of approximately $30.9 million, at 3.60% through January 2004 on a notional
amount in the currency equivalent of approximately $118.9 million and at
3.59% through January 2004 on a notional amount in the currency equivalent
of approximately $20.1 million. In December 1999, a principal paydown was
made on the underlying debt resulting in a notional amount of the swap
agreements in excess of the principal balances. Consequently, swap
agreements with a notional amount in the currency equivalent of
approximately $26.2 million were cancelled in January 2000 at a gain to
ProLogis in the currency equivalent of approximately $1.4 million. ProLogis
contributed 50.1% of the common stock of the wholly owned entity that holds
the debt related to the swap agreements to the ProLogis European Properties
Fund on January 7, 2000. ProLogis is committed to contributing the remaining
49.9% of the common stock to the ProLogis European Properties Fund in
January 2001. See Note 5.
On December 22, 1997, ProLogis entered into two separate contracts to (i)
exchange $373.8 million for 2.9 billion Swedish krona, and (ii) exchange 310.0
million German marks for $175.0 million in anticipation of the January 1998
acquisition and planned European currency denominated financing of Frigoscandia
AB by Frigoscandia S.A., ProLogis' unconsolidated entity. The contracts were
marked to market as of December 31, 1997 and ProLogis recognized a net loss of
$6.0 million in 1997. Both contracts were settled during the first quarter of
1998 at a net loss of $4.0 million. Accordingly, ProLogis recognized a net gain
of $2.0 million in 1998. These foreign currency exchange hedges were one-time,
non-recurring contracts that fixed the exchange rate between the U.S. dollar and
the Swedish krona and German mark. ProLogis executed these hedges after the
95
<PAGE> 98
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
execution of the purchase agreement to acquire Frigoscandia AB, which required
payment in Swedish krona. The contracts were executed exclusively for the
acquisition and financing of Frigoscandia AB and were not entered into to hedge
on-going income in foreign currencies.
17. COMMITMENTS AND CONTINGENCIES:
Environmental Matters
All of the facilities acquired by ProLogis have been subjected to
environmental reviews by ProLogis or predecessor owners. While some of these
assessments have led to further investigation and sampling, none of the
environmental assessments has revealed, nor is ProLogis aware of any
environmental liability (including asbestos related liability) that ProLogis
believes would have a material adverse effect on ProLogis' business, financial
condition or results of operations.
18. BUSINESS SEGMENTS:
ProLogis has three reportable business segments:
- Property operations represents the long-term ownership and leasing of
industrial distribution facilities in North America (a portion of which
is owned through ProLogis California -- See Note 5) and Europe (a portion
of which is owned through Garonor Holdings, a subsidiary that was
recognized under the equity method of accounting until June 29, 1999 and
a portion of which is owned through the ProLogis European Properties
Fund -- See Note 5); each operating facility is considered to be an
individual operating segment having similar economic characteristics
which are combined within the reportable segment based upon geographic
location;
- Corporate distribution facilities services business represents the
development of distribution facilities for future sale to third parties
or entities in which ProLogis has an ownership interest or on a fee basis
for third parties in North America and in Europe (a portion of which is
owned through Kingspark S.A.); the development activities of ProLogis and
Kingspark S.A. are considered to be individual operating segments having
similar economic characteristics which are combined within the reportable
segment based upon geographic location; and
- Temperature-controlled distribution operations represents the operation
of a temperature-controlled distribution and logistics network through
investments in unconsolidated entities in North America (ProLogis
Logistics and MRI) and Europe (Frigoscandia S.A.); each company's
operating facilities are considered to be individual operating segments
having similar economic characteristics which are combined within the
reportable segment based upon geographic location.
Reconciliations of the three reportable segments': (i) income from external
customers to ProLogis' total income; (ii) net operating income from external
customers to ProLogis' earnings from operations (ProLogis' chief operating
decision makers rely primarily on net operating income to make decisions about
allocating resources and assessing segment performance); and (iii) assets to
ProLogis' total assets are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Income:
Property operations:
United States(1)............................ $ 457,592 $ 333,494 $ 283,909
Mexico...................................... 10,503 3,499 624
Europe(2)................................... 16,045 8,059 --
---------- ---------- ----------
Total property operations segment...... 484,140 345,052 284,533
---------- ---------- ----------
</TABLE>
96
<PAGE> 99
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Corporate distribution facilities services
business:
United States............................... 28,783 17,441 12,374
Mexico...................................... -- 133 (83)
Europe(3)(4)................................ 41,673 2,915 --
---------- ---------- ----------
Total corporate distribution facilities
services business segment............ 70,456 20,489 12,291
---------- ---------- ----------
Temperature-controlled distribution operations:
North America(5)............................ 10,791 7,349 3,278
Europe(6)................................... (4,364) (7,535) --
---------- ---------- ----------
Total temperature-controlled
distribution operations segment...... 6,427 (186) 3,278
---------- ---------- ----------
Reconciling items:
Interest income............................. 6,369 2,752 2,392
---------- ---------- ----------
Total income........................... $ 567,392 $ 368,107 $ 302,494
========== ========== ==========
Net operating income:
Property operations:
United States(1)............................ $ 424,633 $ 306,920 $ 256,953
Mexico...................................... 10,569 3,302 572
Europe(2)................................... 15,437 7,710 --
---------- ---------- ----------
Total property operations segment...... 450,639 317,932 257,525
---------- ---------- ----------
Corporate distribution facilities services
business:
United States............................... 28,783 17,441 12,374
Mexico...................................... -- 133 (83)
Europe (3)(4)............................... 41,673 2,915 --
---------- ---------- ----------
Total corporate distribution facilities
services business segment............ 70,456 20,489 12,291
---------- ---------- ----------
Temperature-controlled distribution operations:
North America(5)............................ 10,791 7,349 3,278
Europe(6)................................... (4,364) (7,535) --
---------- ---------- ----------
Total temperature-controlled
distribution operations segment...... 6,427 (186) 3,278
---------- ---------- ----------
Reconciling items:
Interest income............................. 6,369 2,752 2,392
General and administrative expense.......... (38,284) (22,893) (6,770)
REIT management fee paid to affiliate....... -- -- (17,791)
Depreciation and amortization............... (152,447) (100,590) (76,562)
Interest expense............................ (170,746) (77,650) (52,704)
Interest rate hedge expense................. (945) (26,050) --
Costs incurred in acquiring management
companies................................. -- -- (75,376)
Other expenses.............................. (4,920) (6,187) (3,891)
---------- ---------- ----------
Total reconciling items................ (360,973) (230,618) (230,702)
---------- ---------- ----------
Earnings from operations............... $ 166,549 $ 107,617 $ 42,392
========== ========== ==========
</TABLE>
97
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PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Assets:
Property operations:
United States(7)............................ $4,017,702 $3,073,248 $2,787,118
Mexico...................................... 154,701 74,494 27,828
Europe(7)................................... 387,362 309,639 --
---------- ---------- ----------
Total property operations segment...... 4,559,765 3,457,381 2,814,946
---------- ---------- ----------
Corporate distribution facilities services
business:
United States............................... 212,530 149,521 86,415
Mexico...................................... 36,801 16,465 3,522
Europe(7)................................... 432,455 224,769 --
---------- ---------- ----------
Total corporate distribution facilities
services business segment............ 681,786 390,755 89,937
---------- ---------- ----------
Temperature controlled distribution operations:
North America(7)............................ 192,607 151,021 85,639
Europe(7)................................... 214,008 221,566 --
---------- ---------- ----------
Total temperature controlled
distribution operations segment...... 406,615 372,587 85,639
---------- ---------- ----------
Reconciling items:
Cash........................................ 69,338 63,140 25,009
Accounts and notes receivable............... 31,084 1,313 167
Other assets................................ 99,452 45,553 18,255
---------- ---------- ----------
Total reconciling items................ 199,874 110,006 43,431
---------- ---------- ----------
Total assets........................... $5,848,040 $4,330,729 $3,033,953
========== ========== ==========
</TABLE>
- ---------------
(1) Includes an amount recognized under the equity method related to ProLogis'
investment in ProLogis California in 1999 in addition to the operations of
ProLogis that are reported on a consolidated basis. See Note 5 for
summarized financial information of ProLogis California.
(2) Includes amounts recognized under the equity method related to ProLogis'
investments in Garonor Holdings in 1999 and 1998 (including a $13.0 million
net foreign currency exchange loss in 1999) and in the ProLogis European
Properties Fund in 1999 (including a net foreign currency exchange gain of
$0.3 million), in addition to the operations of ProLogis that are reported
on a consolidated basis. See Note 5 for summarized financial information of
the ProLogis European Properties Fund and Note 2 for a discussion of Garonor
Holdings.
(3) Includes amounts recognized under the equity method related to ProLogis'
investment in Kingspark S.A. in 1999 and 1998 (including $1.5 million and
$0.9 million of net foreign currency exchange losses in 1999 and 1998,
respectively. See Note 5 for summarized financial information of Kingspark
S.A.
(4) In 1999, includes $17.3 million of net gain recognized by ProLogis related
to the disposition of facilities to the ProLogis European Properties Fund.
Also, in 1999, includes $4.5 million of net gain recognized under the equity
method related to ProLogis Kingspark's disposition of facilities to the
ProLogis European Properties Fund.
(5) Represents amounts recognized under the equity method related to ProLogis'
investment in ProLogis Logistics in each year. See Note 5 for summarized
financial information of ProLogis Logistics.
98
<PAGE> 101
PROLOGIS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(6) Represents amounts recognized under the equity method related to ProLogis'
investment in Frigoscandia S.A. in 1999 and 1998 (including $1.3 million and
$11.4 million of net foreign currency exchange losses in 1999 and 1998,
respectively). See Note 5 for summarized financial information of
Frigoscandia S.A.
(7) Amounts include investments in unconsolidated entities accounted for under
the equity method. See footnotes (2), (3), (4) and (5) above. See also Note
5 for summarized financial information of the unconsolidated entities as of
and for the year ended December 31, 1999.
99
<PAGE> 102
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Trustees and Shareholders of
ProLogis Trust:
We have audited, in accordance with generally accepted auditing standards,
the financial statements of ProLogis Trust included in this Form 10-K, and have
issued our report thereon dated March 21, 2000. Our audit was made for the
purpose of forming an opinion on those statements taken as a whole. The
supplemental Schedule III -- Real Estate and Accumulated Depreciation ("Schedule
III") is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. The
Schedule III has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
Arthur Andersen, LLP
Chicago, Illinois
March 21, 2000
100
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PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
INITIAL COST TO
PROLOGIS
----------------------- COSTS CAPITALIZED
NO. OF ENCUM- BUILDING & SUBSEQUENT
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION
----------- ------ ------- -------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
OPERATING PROPERTIES
Atlanta, Georgia
Atlanta Airport Distribution
Center........................... 6 $ 3,437 $ -- $ 14,658
Atlanta NE at Sugarloaf............ 4 2,453 -- 16,227
Atlanta NE Distribution Center..... 8 (d) 5,582 3,047 24,237
Atlanta West Distribution Center... 20 6,771 34,785 11,852
Carter-Pacific Business Center..... 3 556 3,151 744
Cedars Distribution Center......... 2 2,915 16,516 157
Cobb Place Distribution Center..... 2 1,579 -- 7,862
International Airport Industrial
Center........................... 9 (e) 2,939 14,146 5,056
LaGrange Distribution Center....... 1 174 986 128
McLarinn Distribution Center....... 1 3,038 17,217 26
Northeast Industrial Center........ 4 1,109 6,283 191
Northmont Industrial Center........ 1 566 3,209 219
Oakcliff Industrial Center......... 3 608 3,446 429
Olympic Industrial Center.......... 2 698 3,956 1,632
Peachtree Commerce Business
Center........................... 4 (e) 707 4,004 756
Peachtree Distribution Center...... 1 302 1,709 48
Piedmont Court Distribution
Center........................... 2 885 5,013 1,064
Plaza Industrial Center............ 1 66 372 86
Pleasantdale Industrial Center..... 2 541 3,184 438
Riverside Distribution Center...... 4 3,063 15,821 2,979
Sullivan 75 Distribution Center.... 3 (f) 728 4,123 1,389
Tradeport Distribution Center...... 3 1,464 4,563 5,509
Weaver Distribution Center......... 2 935 5,182 618
Westfork Industrial Center......... 10 2,483 14,115 918
Zip Industrial Center.............. 4 533 3,023 9
Austin, Texas
Corridor Park Corporate Center..... 6 2,109 1,681 12,883
Montopolis Distribution Center..... 1 580 3,384 669
Rutland Distribution Center........ 2 460 2,617 248
Southpark Corporate Center......... 7 1,946 -- 15,051
Walnut Creek Corporate Center...... 17 3,626 5,649 26,145
Birmingham, Alabama
Oxmoor Distribution Center......... 4 2,398 13,591 902
Perimeter Distribution Center...... 2 2,489 14,109 902
Charlotte, North Carolina
Barringer Industrial Center........ 3 308 1,746 516
Bond Distribution Center........... 2 905 5,126 905
Carowinds Distribution Center...... 1 3,239 18,353 --
Charlotte Commerce Center.......... 10 (d) 4,341 24,954 2,565
Charlotte Distribution Center...... 9 (d) 4,579 -- 24,218
Charlotte Distribution Center
South............................ 1 309 -- 4,094
Interstate North Business Park..... 2 535 3,030 269
Northpark Distribution Center...... 2 (d) 1,183 6,707 468
Chattanooga, Tennessee
Stone Fort Distribution Center..... 4 2,063 11,688 245
Tiftonia Distribution Center....... 1 146 829 184
<CAPTION>
GROSS AMOUNTS AT WHICH CARRIED
AS OF DECEMBER 31, 1999
-------------------------------------- ACCUMULATED DATE OF
BUILDING & TOTAL DEPRECIATION CONSTRUCTION/
DESCRIPTION LAND IMPROVEMENTS (A,B) (C) ACQUISITION
----------- ---------- ------------ ---------- ------------ --------------------
<S> <C> <C> <C> <C> <C>
OPERATING PROPERTIES
Atlanta, Georgia
Atlanta Airport Distribution
Center........................... $ 5,188 $ 12,907 $ 18,095 $ (1,005) 1996,1997,1998
Atlanta NE at Sugarloaf............ 3,613 15,067 18,680 (249) 1999
Atlanta NE Distribution Center..... 6,276 26,590 32,866 (2,761) 1996,1997
Atlanta West Distribution Center... 6,776 46,632 53,408 (7,194) 1994,1996
Carter-Pacific Business Center..... 556 3,895 4,451 (553) 1995
Cedars Distribution Center......... 2,915 16,673 19,588 (396) 1999
Cobb Place Distribution Center..... 2,096 7,345 9,441 (128) 1999
International Airport Industrial
Center........................... 2,972 19,169 22,141 (3,198) 1994,1995
LaGrange Distribution Center....... 174 1,114 1,288 (207) 1994
McLarinn Distribution Center....... 3,038 17,243 20,281 (408) 1999
Northeast Industrial Center........ 1,050 6,533 7,583 (862) 1996
Northmont Industrial Center........ 566 3,428 3,994 (608) 1994
Oakcliff Industrial Center......... 608 3,875 4,483 (614) 1995
Olympic Industrial Center.......... 757 5,529 6,286 (746) 1996
Peachtree Commerce Business
Center........................... 707 4,760 5,467 (889) 1994
Peachtree Distribution Center...... 302 1,757 2,059 (292) 1994
Piedmont Court Distribution
Center........................... 885 6,077 6,962 (526) 1997
Plaza Industrial Center............ 66 458 524 (74) 1995
Pleasantdale Industrial Center..... 541 3,622 4,163 (611) 1995
Riverside Distribution Center...... 3,086 18,777 21,863 (378) 1997,1999
Sullivan 75 Distribution Center.... 728 5,512 6,240 (902) 1994,1995
Tradeport Distribution Center...... 1,479 10,057 11,536 (1,398) 1994,1996
Weaver Distribution Center......... 935 5,800 6,735 (965) 1995
Westfork Industrial Center......... 2,483 15,033 17,516 (2,275) 1995
Zip Industrial Center.............. 485 3,080 3,565 -- 1996
Austin, Texas
Corridor Park Corporate Center..... 2,113 14,560 16,673 (1,877) 1995,1996
Montopolis Distribution Center..... 580 4,053 4,633 (853) 1994
Rutland Distribution Center........ 462 2,863 3,325 (577) 1993
Southpark Corporate Center......... 1,946 15,051 16,997 (2,160) 1994,1995,1996
Walnut Creek Corporate Center...... 3,685 31,735 35,420 (3,182) 1994,1995,1996,1999
Birmingham, Alabama
Oxmoor Distribution Center......... 2,398 14,493 16,891 (2,757) 1994
Perimeter Distribution Center...... 2,490 15,010 17,500 (2,823) 1994
Charlotte, North Carolina
Barringer Industrial Center........ 308 2,262 2,570 (431) 1994
Bond Distribution Center........... 905 6,031 6,936 (1,149) 1994
Carowinds Distribution Center...... 3,239 18,353 21,592 (434) 1999
Charlotte Commerce Center.......... 4,342 27,518 31,860 (5,182) 1994
Charlotte Distribution Center...... 6,096 22,701 28,797 (2,483) 1995,1996,1997,1998
Charlotte Distribution Center
South............................ 1,072 3,331 4,403 (80) 1999
Interstate North Business Park..... 535 3,299 3,834 (315) 1997
Northpark Distribution Center...... 1,184 7,174 8,358 (673) 1994,1998
Chattanooga, Tennessee
Stone Fort Distribution Center..... 2,063 11,933 13,996 (2,096) 1994
Tiftonia Distribution Center....... 146 1,013 1,159 (158) 1995
</TABLE>
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SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
<TABLE>
<CAPTION>
INITIAL COST TO
PROLOGIS
----------------------- COSTS CAPITALIZED
NO. OF ENCUM- BUILDING & SUBSEQUENT
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION
----------- ------ ------- -------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
Chicago, Illinois
Addison Distribution Center........ 1 646 3,662 393
Alsip Distribution Center.......... 2 (f) 2,076 11,766 6,709
Bedford Park Distribution Center... 2 1,115 6,318 11
Bensenville Distribution Center.... 2 1,668 9,448 2,846
Bloomingdale 100 Business Center... 1 940 -- 4,917
Bolingbrook Distribution Center.... 2 4,488 25,435 326
Bridgeview Distribution Center..... 4 1,302 7,378 785
Des Plaines Distribution Center.... 3 2,158 12,232 752
Elk Grove Distribution Center...... 20 (e)(f) 7,755 43,940 4,256
Elmhurst Distribution Center....... 1 713 4,043 94
Glendale Heights Distribution
Center........................... 3 3,844 21,782 177
Glenview Distribution Center....... 2 (e)(f) 1,140 6,459 611
Itasca Distribution Center......... 3 1,613 9,143 279
Lombard Distribution Center........ 1 (f) 1,144 6,485 2
Mitchell Distribution Center....... 1 (e) 1,236 7,004 1,045
North Avenue Distribution Center... 3 3,201 -- 19,994
Northlake Distribution Center...... 1 372 2,106 63
O'Hare Cargo Distribution Center... 2 3,566 -- 14,885
Pleasant Prairie Distribution
Center........................... 1 1,274 7,222 --
Remington Lakes Business Park...... 1 1,023 -- 6,914
Romeoville Distribution Center..... 2 1,080 6,120 --
South Holland Distribution
Center........................... 2 (f) 1,132 6,415 103
Tri-Center Distribution Center..... 3 889 5,038 421
Woodale Distribution Center........ 1 263 1,490 81
Cincinnati, Ohio
Airpark Distribution Center........ 5 (d) 2,986 -- 20,298
Blue Ash/Interstate Distribution
Center........................... 1 144 817 520
Capital Distribution Center I...... 4 (d) 1,750 9,922 1,205
Capital Distribution Center II..... 5 (d) 1,953 11,067 1,789
Capital Industrial Center I........ 10 (d) 1,039 5,885 1,720
Constitution Distribution Center... 1 1,434 8,124 1
Empire Distribution Center......... 3 (d) 529 2,995 495
Kentucky Drive Business Center..... 4 553 3,134 823
Princeton Distribution Center...... 1 816 -- 4,031
Production Distribution Center..... 2 (g) 717 2,717 2,406
Sharonville Distribution Center.... 3 (d) 1,761 -- 11,295
Springdale Commerce Center......... 3 421 2,384 1,025
Union Center Business Park......... 3 2,852 -- 36,686
Columbus, Ohio
Canal Pointe Distribution Center... 1 1,619 9,174 --
Capital Park South Distribution
Center........................... 5 (d) 2,551 -- 29,504
Charter Street Distribution
Center........................... 1 (f) 1,770 10,027 --
Columbus West Industrial Center.... 3 (d) 645 3,655 881
Corporate Park West................ 2 (d) 679 3,849 271
Crosswinds Distribution Center..... 1 (f) 4,046 22,929 --
Fisher Distribution Center......... 1 1,197 6,785 1,550
Foreign Trade Center I............. 6 11,820 66,979 275
International Street Commerce...... 2 455 -- 6,828
McCormick Distribution Center...... 5 1,664 9,429 1,329
<CAPTION>
GROSS AMOUNTS AT WHICH CARRIED
AS OF DECEMBER 31, 1999
-------------------------------------- ACCUMULATED DATE OF
BUILDING & TOTAL DEPRECIATION CONSTRUCTION/
DESCRIPTION LAND IMPROVEMENTS (A,B) (C) ACQUISITION
----------- ---------- ------------ ---------- ------------ --------------------
<S> <C> <C> <C> <C> <C>
Chicago, Illinois
Addison Distribution Center........ 640 4,061 4,701 (457) 1997
Alsip Distribution Center.......... 2,533 18,018 20,551 (1,079) 1998,1999
Bedford Park Distribution Center... 1,115 6,329 7,444 (375) 1996,1999
Bensenville Distribution Center.... 1,667 12,295 13,962 (1,064) 1997,1998
Bloomingdale 100 Business Center... 1,531 4,326 5,857 -- 1999
Bolingbrook Distribution Center.... 4,489 25,760 30,249 (642) 1999
Bridgeview Distribution Center..... 1,303 8,162 9,465 (976) 1996
Des Plaines Distribution Center.... 2,159 12,983 15,142 (1,657) 1995,1996
Elk Grove Distribution Center...... 7,754 48,197 55,951 (3,708) 1995,1996,1997,
1998,1999
Elmhurst Distribution Center....... 713 4,137 4,850 (357) 1997
Glendale Heights Distribution
Center........................... 3,844 21,959 25,803 (556) 1999
Glenview Distribution Center....... 1,138 7,072 8,210 (281) 1996,1999
Itasca Distribution Center......... 1,613 9,422 11,035 (637) 1996,1997,1998
Lombard Distribution Center........ 1,144 6,487 7,631 (154) 1999
Mitchell Distribution Center....... 1,236 8,049 9,285 (967) 1996
North Avenue Distribution Center... 3,948 19,247 23,195 (883) 1997,1998
Northlake Distribution Center...... 372 2,169 2,541 (267) 1996
O'Hare Cargo Distribution Center... 5,924 12,527 18,451 (416) 1997
Pleasant Prairie Distribution
Center........................... 1,274 7,222 8,496 (171) 1999
Remington Lakes Business Park...... 1,193 6,744 7,937 -- 1998
Romeoville Distribution Center..... 1,080 6,120 7,200 (153) 1999
South Holland Distribution
Center........................... 1,132 6,518 7,650 (154) 1999
Tri-Center Distribution Center..... 890 5,458 6,348 (603) 1996
Woodale Distribution Center........ 263 1,571 1,834 (140) 1997
Cincinnati, Ohio
Airpark Distribution Center........ 3,719 19,565 23,284 (1,665) 1996,1998,1999
Blue Ash/Interstate Distribution
Center........................... 144 1,337 1,481 (184) 1995
Capital Distribution Center I...... 1,751 11,126 12,877 (1,853) 1994
Capital Distribution Center II..... 1,953 12,856 14,809 (2,223) 1994
Capital Industrial Center I........ 1,039 7,605 8,644 (1,276) 1994,1995
Constitution Distribution Center... 1,434 8,125 9,559 (192) 1999
Empire Distribution Center......... 529 3,490 4,019 (527) 1995
Kentucky Drive Business Center..... 553 3,957 4,510 (432) 1997
Princeton Distribution Center...... 1,075 3,772 4,847 -- 1997
Production Distribution Center..... 785 5,055 5,840 (548) 1994,1998
Sharonville Distribution Center.... 2,424 10,632 13,056 (524) 1997,1998
Springdale Commerce Center......... 421 3,409 3,830 (487) 1996
Union Center Business Park......... 3,438 36,100 39,538 (121) 1998,1999
Columbus, Ohio
Canal Pointe Distribution Center... 1,619 9,174 10,793 (217) 1999
Capital Park South Distribution
Center........................... 2,615 29,440 32,055 (2,796) 1996,1998,1999
Charter Street Distribution
Center........................... 1,770 10,027 11,797 (237) 1999
Columbus West Industrial Center.... 645 4,536 5,181 (684) 1995
Corporate Park West................ 679 4,120 4,799 (500) 1996
Crosswinds Distribution Center..... 4,046 22,929 26,975 (543) 1999
Fisher Distribution Center......... 1,197 8,335 9,532 (1,308) 1995
Foreign Trade Center I............. 11,853 67,221 79,074 (1,592) 1999
International Street Commerce...... 483 6,800 7,283 (117) 1997,1999
McCormick Distribution Center...... 1,664 10,758 12,422 (1,826) 1994
</TABLE>
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SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
<TABLE>
<CAPTION>
INITIAL COST TO
PROLOGIS
----------------------- COSTS CAPITALIZED
NO. OF ENCUM- BUILDING & SUBSEQUENT
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION
----------- ------ ------- -------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
New World Distribution Center...... 1 207 1,173 681
South Park Distribution Center..... 1 1,069 6,056 --
Westbelt Business Center........... 2 (d) 466 2,635 213
Dallas/Fort Worth, Texas
Carter Industrial Center........... 1 334 -- 2,497
Centerport Distribution Center..... 2 (f) 1,901 10,775 6
Dallas Corporate Center............ 11 (e) 5,714 -- 33,568
Enterprise Distribution Center..... 3 2,719 15,410 --
Franklin Distribution Center....... 2 528 2,991 803
Freeport Distribution Center....... 4 1,393 5,549 4,078
Great Southwest Corporate Center... 3 2,330 -- 11,001
Great Southwest Distribution
Center........................... 32 (e)(f) 16,266 79,396 16,867
Great Southwest Industrial Center
I................................ 2 (e) 308 1,744 267
Lone Star Distribution Center...... 2 967 5,477 243
Metropolitan Distribution Center... 1 201 1,097 723
Northgate Distribution Center...... 10 (f) 4,398 24,924 1,376
Northpark Business Center.......... 2 467 2,648 282
Plano Distribution Center.......... 7 (f) 3,787 21,462 1
Redbird Distribution Center........ 2 1,022 5,796 96
Royal Commerce Center.............. 4 (e) 1,975 11,190 534
Stemmons Distribution Center....... 1 272 1,544 467
Stemmons Industrial Center......... 15 2,244 12,715 2,008
Trinity Mills Distribution
Center........................... 7 (e) 5,322 30,157 1,358
Valwood Distribution Center........ 7 (f) 4,248 24,071 26
Denver, Colorado
Denver Business Center............. 7 2,144 7,486 13,798
Downing Distribution Center........ 1 -- 3,877 48
Havana Distribution Center......... 1 401 2,281 302
Moline Distribution Center......... 1 327 1,850 165
Moncrieff Distribution Center...... 1 314 2,493 428
Pagosa Distribution Center......... 1 406 2,322 412
Peoria Distribution Center......... 2 1,363 -- 9,642
Upland Distribution Center I....... 6 820 5,710 7,977
Upland Distribution Center II...... 6 2,456 13,946 1,355
Detroit, Michigan
H & J Industrial Center............ 4 510 2,890 6
Huron Commerce Center I............ 3 2,014 11,413 160
Metro Distribution Center.......... 4 671 3,801 573
Pontiac Distribution Center........ 1 441 2,497 --
Southfield Commerce Center......... 2 575 3,261 18
Troy Tech II Service Center........ 5 1,142 6,474 9
Westhills Commerce Center I........ 2 454 2,575 54
East Bay (San Francisco), California
Barrington Business Center......... 3 1,714 9,710 125
Central Valley Distribution
Center........................... 3 5,082 28,801 2
Central Valley Industrial Center... 3 7,621 43,184 --
East Bay Industrial Center......... 1 531 3,009 359
Eigenbrodt Way Distribution
Center........................... 1 (f) 393 2,228 114
Hayward Commerce Center............ 4 1,933 10,955 637
Hayward Commerce Park.............. 9 2,764 15,661 1,990
Hayward Distribution Center........ 6 2,906 19,165 1,435
Hayward Industrial Center.......... 13 (f) 4,481 25,393 1,896
<CAPTION>
GROSS AMOUNTS AT WHICH CARRIED
AS OF DECEMBER 31, 1999
-------------------------------------- ACCUMULATED DATE OF
BUILDING & TOTAL DEPRECIATION CONSTRUCTION/
DESCRIPTION LAND IMPROVEMENTS (A,B) (C) ACQUISITION
----------- ---------- ------------ ---------- ------------ --------------------
<S> <C> <C> <C> <C> <C>
New World Distribution Center...... 207 1,854 2,061 (324) 1994
South Park Distribution Center..... 1,069 6,056 7,125 (143) 1999
Westbelt Business Center........... 465 2,849 3,314 (160) 1998
Dallas/Fort Worth, Texas
Carter Industrial Center........... 334 2,497 2,831 (283) 1996
Centerport Distribution Center..... 1,901 10,781 12,682 (255) 1999
Dallas Corporate Center............ 6,012 33,270 39,282 (2,498) 1996,1997,1998,1999
Enterprise Distribution Center..... 2,719 15,410 18,129 (365) 1999
Franklin Distribution Center....... 528 3,794 4,322 (743) 1994
Freeport Distribution Center....... 1,440 9,580 11,020 (708) 1996,1997,1998
Great Southwest Corporate Center... 2,401 10,930 13,331 (235) 1999
Great Southwest Distribution
Center........................... 16,558 95,971 112,529 (4,821) 1994,1995,1996,
1997,1998,1999
Great Southwest Industrial Center
I................................ 308 2,011 2,319 (279) 1995
Lone Star Distribution Center...... 967 5,720 6,687 (706) 1996
Metropolitan Distribution Center... 297 1,724 2,021 (251) 1995
Northgate Distribution Center...... 4,398 26,300 30,698 (2,191) 1994,1996,1999
Northpark Business Center.......... 467 2,930 3,397 (377) 1995,1996
Plano Distribution Center.......... 3,787 21,463 25,250 (508) 1999
Redbird Distribution Center........ 1,023 5,891 6,914 (350) 1994,1999
Royal Commerce Center.............. 1,975 11,724 13,699 (950) 1997
Stemmons Distribution Center....... 272 2,011 2,283 (309) 1995
Stemmons Industrial Center......... 2,244 14,723 16,967 (1,745) 1994,1995,1996,1999
Trinity Mills Distribution
Center........................... 5,322 31,515 36,837 (1,894) 1996,1999
Valwood Distribution Center........ 4,248 24,097 28,345 (571) 1999
Denver, Colorado
Denver Business Center............. 2,243 21,185 23,428 (2,466) 1992,1994,1996,
1998,1999
Downing Distribution Center........ -- 3,925 3,925 (50) 1999
Havana Distribution Center......... 401 2,583 2,984 (557) 1993
Moline Distribution Center......... 327 2,015 2,342 (397) 1994
Moncrieff Distribution Center...... 314 2,921 3,235 (678) 1992
Pagosa Distribution Center......... 406 2,734 3,140 (644) 1993
Peoria Distribution Center......... 1,635 9,370 11,005 (234) 1999
Upland Distribution Center I....... 821 13,686 14,507 (2,749) 1992,1994,1995
Upland Distribution Center II...... 2,489 15,268 17,757 (3,174) 1993,1994
Detroit, Michigan
H & J Industrial Center............ 510 2,896 3,406 (69) 1999
Huron Commerce Center I............ 2,014 11,573 13,587 (270) 1999
Metro Distribution Center.......... 671 4,374 5,045 -- 1996
Pontiac Distribution Center........ 441 2,497 2,938 (59) 1999
Southfield Commerce Center......... 575 3,279 3,854 (78) 1999
Troy Tech II Service Center........ 1,142 6,483 7,625 (154) 1999
Westhills Commerce Center I........ 454 2,629 3,083 (62) 1999
East Bay (San Francisco), California
Barrington Business Center......... 1,714 9,835 11,549 (233) 1999
Central Valley Distribution
Center........................... 5,082 28,803 33,885 (682) 1999
Central Valley Industrial Center... 7,621 43,184 50,805 (1,022) 1999
East Bay Industrial Center......... 531 3,368 3,899 (604) 1994
Eigenbrodt Way Distribution
Center........................... 393 2,342 2,735 (475) 1993
Hayward Commerce Center............ 1,933 11,592 13,525 (2,314) 1993
Hayward Commerce Park.............. 2,764 17,651 20,415 (3,521) 1994
Hayward Distribution Center........ 3,327 20,179 23,506 (3,981) 1993
Hayward Industrial Center.......... 4,481 27,289 31,770 (5,495) 1993
</TABLE>
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SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
<TABLE>
<CAPTION>
INITIAL COST TO
PROLOGIS
----------------------- COSTS CAPITALIZED
NO. OF ENCUM- BUILDING & SUBSEQUENT
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION
----------- ------ ------- -------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
Patterson Pass Business Center..... 7 3,340 4,885 13,322
San Leandro Distribution Center.... 3 1,387 7,862 468
El Paso, Texas
Billy the Kid Distribution
Center........................... 1 273 1,547 533
Broadbent Industrial Center........ 3 676 5,183 996
Goodyear Distribution Center....... 1 511 2,899 66
Northwestern Corporate Center...... 6 1,552 -- 16,467
Vista Corporate Center............. 4 1,945 -- 10,890
Vista Del Sol Industrial Center.... 5 (f) 1,245 -- 20,117
Fort Lauderdale/Miami, Florida
Airport West Distribution Center... 2 1,253 3,825 3,244
CenterPort Distribution Center..... 4 3,300 12,989 3,564
Copans Distribution Center......... 2 504 2,857 296
North Andrews Distribution
Center........................... 1 (g) 698 3,956 97
Port Lauderdale Distribution
Center........................... 5 4,874 6,654 19,208
Houston, Texas
Brittmore Distribution Center...... 2 1,713 9,708 633
Crosstimbers Distribution Center... 1 359 2,035 442
Hempstead Distribution Center...... 3 1,013 5,740 744
I-10 Central Distribution Center... 2 181 1,023 239
I-10 Central Service Center........ 1 58 330 111
Jersey Village Corporate Center.... 1 1,536 -- 12,505
Perimeter Distribution Center...... 2 744 4,216 10
Pine Forest Business Center........ 18 (e) 4,859 27,557 2,852
Pine North Distribution Center..... 2 789 4,469 230
Pine Timbers Distribution Center... 2 2,570 14,566 915
Pinemont Distribution Center....... 2 590 3,342 216
Post Oak Business Center........... 15 (e) 3,005 15,378 3,430
Post Oak Distribution Center....... 7 (e) 2,115 12,017 3,068
South Loop Distribution Center..... 5 1,051 5,964 1,724
Southwest Freeway Industrial
Center........................... 1 84 476 166
West by Northwest Industrial
Center........................... 18 4,749 8,382 40,308
White Street Distribution Center... 1 469 2,656 288
World Houston...................... 1 425 -- 3,210
I-95 Corridor, New Jersey
Amerisource Distribution Center.... 1 1,406 7,969 1
Bellmawr Distribution Center....... 1 226 1,278 54
Brunswick Distribution Center...... 2 870 4,928 1,515
Clearview Distribution Center...... 1 2,232 12,648 375
Cranbury Business Park............. 3 4,015 -- 29,513
Kilmer Distribution Center......... 4 (d) 2,526 14,313 683
Kraft Distribution Center.......... 2 6,092 34,519 --
Meadowland Industrial Center....... 8 (d) 5,676 32,167 11,851
Mt. Laurel Distribution Center..... 3 877 4,968 18
National Distribution Center....... 2 513 2,908 1,040
Newark Distribution Center......... 1 260 1,472 2
Pennsauken Distribution Center..... 4 522 2,957 4
Indianapolis, Indiana
Airport Business Center............ 2 847 4,801 1,427
Eastside Distribution Center....... 3 1,418 8,032 345
<CAPTION>
GROSS AMOUNTS AT WHICH CARRIED
AS OF DECEMBER 31, 1999
-------------------------------------- ACCUMULATED DATE OF
BUILDING & TOTAL DEPRECIATION CONSTRUCTION/
DESCRIPTION LAND IMPROVEMENTS (A,B) (C) ACQUISITION
----------- ---------- ------------ ---------- ------------ --------------------
<S> <C> <C> <C> <C> <C>
Patterson Pass Business Center..... 3,698 17,849 21,547 (1,794) 1993,1997,1998
San Leandro Distribution Center.... 1,387 8,330 9,717 (1,682) 1993
El Paso, Texas
Billy the Kid Distribution
Center........................... 273 2,080 2,353 (379) 1994
Broadbent Industrial Center........ 676 6,179 6,855 (1,319) 1993
Goodyear Distribution Center....... 511 2,965 3,476 (613) 1994
Northwestern Corporate Center...... 2,205 15,814 18,019 (2,048) 1992,1993,1994,
1997,1998
Vista Corporate Center............. 1,946 10,889 12,835 (1,563) 1994,1995,1996
Vista Del Sol Industrial Center.... 2,637 18,725 21,362 (1,822) 1995,1997,1998
Fort Lauderdale/Miami, Florida
Airport West Distribution Center... 1,974 6,348 8,322 (608) 1995,1998
CenterPort Distribution Center..... 3,515 16,338 19,853 (378) 1999
Copans Distribution Center......... 504 3,153 3,657 (305) 1997,1998
North Andrews Distribution
Center........................... 698 4,053 4,751 (699) 1994
Port Lauderdale Distribution
Center........................... 6,531 24,205 30,736 (1,881) 1995,1997,1998
Houston, Texas
Brittmore Distribution Center...... 1,713 10,341 12,054 (253) 1999
Crosstimbers Distribution Center... 359 2,477 2,836 (471) 1994
Hempstead Distribution Center...... 1,013 6,484 7,497 (1,250) 1994
I-10 Central Distribution Center... 181 1,262 1,443 (245) 1994
I-10 Central Service Center........ 58 441 499 (90) 1994
Jersey Village Corporate Center.... 2,063 11,978 14,041 -- 1999
Perimeter Distribution Center...... 744 4,226 4,970 (100) 1999
Pine Forest Business Center........ 4,859 30,409 35,268 (4,936) 1993,1994,1995
Pine North Distribution Center..... 789 4,699 5,488 (111) 1999
Pine Timbers Distribution Center... 2,570 15,481 18,051 (372) 1999
Pinemont Distribution Center....... 590 3,558 4,148 (83) 1999
Post Oak Business Center........... 3,005 18,808 21,813 (3,779) 1993,1994,1996
Post Oak Distribution Center....... 2,115 15,085 17,200 (3,092) 1993,1994
South Loop Distribution Center..... 1,052 7,687 8,739 (1,402) 1994
Southwest Freeway Industrial
Center........................... 84 642 726 (114) 1994
West by Northwest Industrial
Center........................... 5,135 48,304 53,439 (4,895) 1993,1994,1995,1996,
1997,1998,1999
White Street Distribution Center... 469 2,944 3,413 (476) 1995
World Houston...................... 508 3,127 3,635 -- 1999
I-95 Corridor, New Jersey
Amerisource Distribution Center.... 1,406 7,970 9,376 (189) 1999
Bellmawr Distribution Center....... 226 1,332 1,558 (32) 1999
Brunswick Distribution Center...... 870 6,443 7,313 (805) 1997
Clearview Distribution Center...... 2,232 13,023 15,255 (1,379) 1996
Cranbury Business Park............. 7,376 26,152 33,528 (947) 1998,1999
Kilmer Distribution Center......... 2,526 14,996 17,522 (1,675) 1996
Kraft Distribution Center.......... 6,092 34,519 40,611 (817) 1999
Meadowland Industrial Center....... 5,677 44,017 49,694 (4,641) 1996,1998
Mt. Laurel Distribution Center..... 877 4,986 5,863 (118) 1999
National Distribution Center....... 513 3,948 4,461 (278) 1998
Newark Distribution Center......... 260 1,474 1,734 (35) 1999
Pennsauken Distribution Center..... 522 2,961 3,483 (70) 1999
Indianapolis, Indiana
Airport Business Center............ 904 6,171 7,075 (140) 1999
Eastside Distribution Center....... 1,418 8,377 9,795 (542) 1995,1999
</TABLE>
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SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
<TABLE>
<CAPTION>
INITIAL COST TO
PROLOGIS
----------------------- COSTS CAPITALIZED
NO. OF ENCUM- BUILDING & SUBSEQUENT
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION
----------- ------ ------- -------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
North by Northeast Distribution
Center........................... 1 1,058 -- 6,135
North Plainfield Park Distribution
Center........................... 1 849 -- 7,370
Park 100 Industrial Center......... 25 10,733 60,828 5,438
Park Fletcher Distribution
Center........................... 9 2,687 15,224 2,924
Plainfield Park Distribution
Center........................... 1 885 -- 8,512
Shadeland Industrial Center........ 3 428 2,431 635
Juarez, Mexico
Salvacar Industrial Center......... 4 1,685 -- 8,236
Los Aztecas Industrial Center...... 1 148 837 5
Kansas City, Kansas/Missouri
44th Street Business Center........ 1 143 813 383
Congleton Distribution Center...... 3 518 2,937 419
Executive Park Distribution
Center........................... 1 (f) 258 1,463 51
Lamar Distribution Center.......... 1 323 1,829 638
Macon Bedford Distribution
Center........................... 1 304 1,725 473
Platte Valley Industrial Center.... 11 (f) 3,867 20,017 6,886
Riverside Distribution Center...... 5 (f) 533 3,024 835
Riverside Industrial Center........ 5 (f) 1,012 5,736 789
Terrace & Lackman Distribution
Center........................... 1 285 1,615 444
Las Vegas, Nevada
Black Mountain Distribution
Center........................... 2 1,108 -- 6,892
Cameron Business Center............ 1 (f) 2,228 12,625 --
Hughes Airport Center.............. 1 876 -- 3,274
Las Vegas Corporate Center......... 7 (h) 4,157 -- 21,729
Placid Street Distribution
Center........................... 1 (f) 2,579 14,615 --
South Arville Center............... 1 1,966 11,140 --
West One Business Center........... 4 (f) 2,468 13,985 787
Lille, France
Lille Business Park................ 1 90 510 123
Lille Distribution Center.......... 1 1,143 5,592 --
Los Angeles/Orange County,
California
Camarillo Distribution Center...... 1 926 5,246 4,371
Chatsworth Distribution Center..... 1 241 1,364 1,312
Inland Empire Distribution
Center........................... 1 889 5,037 4,390
Louisville, Kentucky
Airpark Commerce Center............ 4 1,583 8,971 2,851
Louisville Distribution Center..... 2 680 3,402 4,525
Riverport Distribution Center...... 2 (f) 2,262 10,682 5,073
Lyon, France
L'Isle d'Abeau Distribution
Center........................... 1 (f) 1,240 6,617 --
Memphis, Tennessee
Airport Distribution Center........ 20 7,066 40,041 6,211
Delp Distribution Center........... 10 (f) 4,827 27,354 3,174
Fred Jones Distribution Center..... 1 125 707 111
Olive Branch Distribution Center... 2 (f) 2,786 15,787 58
Raines Distribution Center......... 1 (f) 1,635 9,264 2,868
Southwide Industrial Center........ 4 696 3,943 75
Willow Lake Distribution Center.... 1 (f) 604 3,425 --
<CAPTION>
GROSS AMOUNTS AT WHICH CARRIED
AS OF DECEMBER 31, 1999
-------------------------------------- ACCUMULATED DATE OF
BUILDING & TOTAL DEPRECIATION CONSTRUCTION/
DESCRIPTION LAND IMPROVEMENTS (A,B) (C) ACQUISITION
----------- ---------- ------------ ---------- ------------ --------------------
<S> <C> <C> <C> <C> <C>
North by Northeast Distribution
Center........................... 1,059 6,134 7,193 (1,063) 1995
North Plainfield Park Distribution
Center........................... 1,330 6,889 8,219 (1) 1999
Park 100 Industrial Center......... 10,628 66,371 76,999 (9,203) 1994,1995,1999
Park Fletcher Distribution
Center........................... 2,776 18,059 20,835 (2,425) 1994,1995,1996
Plainfield Park Distribution
Center........................... 1,389 8,008 9,397 -- 1997
Shadeland Industrial Center........ 429 3,065 3,494 (478) 1995
Juarez, Mexico
Salvacar Industrial Center......... 2,811 7,110 9,921 (358) 1998,1999
Los Aztecas Industrial Center...... 148 842 990 (3) 1999
Kansas City, Kansas/Missouri
44th Street Business Center........ 143 1,196 1,339 (150) 1996
Congleton Distribution Center...... 518 3,356 3,874 (607) 1994
Executive Park Distribution
Center........................... 258 1,514 1,772 (72) 1998
Lamar Distribution Center.......... 323 2,467 2,790 (483) 1994
Macon Bedford Distribution
Center........................... 304 2,198 2,502 (299) 1996
Platte Valley Industrial Center.... 4,002 26,768 30,770 (4,024) 1994,1997
Riverside Distribution Center...... 534 3,858 4,392 (715) 1994
Riverside Industrial Center........ 1,012 6,525 7,537 (1,099) 1994
Terrace & Lackman Distribution
Center........................... 285 2,059 2,344 (392) 1994
Las Vegas, Nevada
Black Mountain Distribution
Center........................... 1,206 6,794 8,000 (578) 1997
Cameron Business Center............ 2,228 12,625 14,853 (299) 1999
Hughes Airport Center.............. 910 3,240 4,150 (614) 1994
Las Vegas Corporate Center......... 4,763 21,123 25,886 (2,753) 1994,1995,1996,1997
Placid Street Distribution
Center........................... 2,579 14,615 17,194 (346) 1999
South Arville Center............... 1,966 11,140 13,106 (264) 1999
West One Business Center........... 2,468 14,772 17,240 (1,667) 1996
Lille, France
Lille Business Park................ 108 615 723 (22) 1999
Lille Distribution Center.......... 1,143 5,592 6,735 (12) 1999
Los Angeles/Orange County,
California
Camarillo Distribution Center...... 1,491 9,052 10,543 (223) 1999
Chatsworth Distribution Center..... 438 2,479 2,917 (62) 1999
Inland Empire Distribution
Center........................... 1,546 8,770 10,316 (220) 1999
Louisville, Kentucky
Airpark Commerce Center............ 1,583 11,822 13,405 (721) 1998,1999
Louisville Distribution Center..... 689 7,918 8,607 (703) 1995,1998
Riverport Distribution Center...... 2,378 15,639 18,017 (255) 1999
Lyon, France
L'Isle d'Abeau Distribution
Center........................... 1,240 6,617 7,857 (462) 1997
Memphis, Tennessee
Airport Distribution Center........ 7,066 46,252 53,318 (4,547) 1995,1996,1999
Delp Distribution Center........... 4,827 30,528 35,355 (2,811) 1995,1997,1999
Fred Jones Distribution Center..... 125 818 943 (144) 1994
Olive Branch Distribution Center... 2,786 15,845 18,631 (377) 1999
Raines Distribution Center......... 1,635 12,132 13,767 (990) 1998
Southwide Industrial Center........ 696 4,018 4,714 (95) 1999
Willow Lake Distribution Center.... 604 3,425 4,029 (81) 1999
</TABLE>
105
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SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
<TABLE>
<CAPTION>
INITIAL COST TO
PROLOGIS
----------------------- COSTS CAPITALIZED
NO. OF ENCUM- BUILDING & SUBSEQUENT
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION
----------- ------ ------- -------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
Monterrey, Mexico
Monterrey Industrial Park.......... 7 4,353 3,785 22,213
Ojo de Agua Industrial Center...... 1 983 -- 6,731
Nashville, Tennessee
Bakertown Distribution Center...... 2 463 2,626 226
I-40 Industrial Center............. 4 1,687 9,564 371
Interchange City Distribution
Center........................... 7 3,524 12,585 10,236
Nashville/I-24 Distribution
Center........................... 1 380 -- 7,809
Space Park South Distribution
Center........................... 15 3,499 19,830 2,963
Oklahoma City, Oklahoma
Melcat Distribution Center......... 1 240 1,363 465
Meridian Business Center........... 2 195 1,109 655
Oklahoma Distribution Center....... 3 893 5,082 673
Orlando, Florida
33rd Street Industrial Center...... 9 (f)(g) 1,980 11,237 1,128
Chancellor Distribution Center..... 1 380 2,156 1,105
Consulate Distribution Center...... 5 (f) 5,482 31,062 948
La Quinta Distribution Center...... 1 354 2,006 661
Orlando Central Park............... 3 1,378 -- 9,084
Orlando Corporate Center........... 2 1,081 -- 6,525
Princeton Oaks Distribution
Center........................... 1 (f) 1,223 6,930 --
Titusville Industrial Center....... 1 (f) 283 1,603 91
Paris, France
Annecy Distribution Center......... 1 (f) 313 1,052 280
Aulnay Distribution Center......... 28 (f) 55,417 117,082 35,331
Aulnay Office Complex.............. 9 (f) 2,174 4,485 1,364
Aulnay-Balladines.................. 1 (f) 275 568 172
Cergy-Pontoise..................... 5 (f) 6,257 13,325 4,050
Epone Distribution Center.......... 1 457 1,586 1,397
Longjumeau Distribution Center..... 1 (f) 1,160 6,592 --
Mitry Mory Distribution Center..... 1 (f) 1,083 6,137 379
Oceanie Distribution Center........ 1 323 5,866 404
Senart Distribution Center......... 3 (f) 4,233 8,885 2,687
Vitrolles Distribution Center...... 3 (f) 1,949 4,197 1,259
Phoenix, Arizona
24th Street Industrial Center...... 2 503 2,852 396
Alameda Distribution Center........ 2 820 4,977 795
Black Canyon Business Center....... 3 704 3,990 11
Brookridge Distribution Center..... 1 1,592 9,022 --
Hohokam 10 Industrial Center....... 6 4,237 7,348 11,371
I-10 West Business Center.......... 3 263 1,525 262
Kyrene Commons Distribution
Center........................... 4 2,361 8,294 2,697
Kyrene Commons South Distribution
Center........................... 2 1,096 -- 5,035
Martin Van Buren Distribution
Center........................... 6 572 3,285 728
Papago Distribution Center......... 1 420 2,383 165
Pima Distribution Center........... 1 306 1,742 239
Watkins Distribution Center........ 1 242 1,375 214
<CAPTION>
GROSS AMOUNTS AT WHICH CARRIED
AS OF DECEMBER 31, 1999
-------------------------------------- ACCUMULATED DATE OF
BUILDING & TOTAL DEPRECIATION CONSTRUCTION/
DESCRIPTION LAND IMPROVEMENTS (A,B) (C) ACQUISITION
----------- ---------- ------------ ---------- ------------ --------------------
<S> <C> <C> <C> <C> <C>
Monterrey, Mexico
Monterrey Industrial Park.......... 7,143 23,208 30,351 (1,061) 1997,1998,1999
Ojo de Agua Industrial Center...... 1,880 5,834 7,714 (176) 1998
Nashville, Tennessee
Bakertown Distribution Center...... 463 2,852 3,315 (397) 1995
I-40 Industrial Center............. 1,688 9,934 11,622 (772) 1995,1996,1999
Interchange City Distribution
Center........................... 4,279 22,066 26,345 (2,161) 1994,1995,1996,
1997,1998
Nashville/I-24 Distribution
Center........................... 1,659 6,530 8,189 -- 1999
Space Park South Distribution
Center........................... 3,499 22,793 26,292 (4,024) 1994
Oklahoma City, Oklahoma
Melcat Distribution Center......... 240 1,828 2,068 (323) 1994
Meridian Business Center........... 196 1,763 1,959 (306) 1994
Oklahoma Distribution Center....... 893 5,755 6,648 (1,251) 1993
Orlando, Florida
33rd Street Industrial Center...... 1,980 12,365 14,345 (1,813) 1994,1995,1996
Chancellor Distribution Center..... 380 3,261 3,641 (486) 1994
Consulate Distribution Center...... 5,482 32,010 37,492 (756) 1999
La Quinta Distribution Center...... 354 2,667 3,021 (410) 1994
Orlando Central Park............... 1,871 8,591 10,462 (526) 1997,1998
Orlando Corporate Center........... 1,477 6,129 7,606 (155) 1999
Princeton Oaks Distribution
Center........................... 1,223 6,930 8,153 (164) 1999
Titusville Industrial Center....... 283 1,694 1,977 (289) 1994
Paris, France
Annecy Distribution Center......... 377 1,268 1,645 (58) 1999
Aulnay Distribution Center......... 66,767 141,063 207,830 (4,402) 1999
Aulnay Office Complex.............. 2,619 5,404 8,023 (173) 1999
Aulnay-Balladines.................. 331 684 1,015 (22) 1999
Cergy-Pontoise..................... 7,538 16,094 23,632 (573) 1999
Epone Distribution Center.......... 463 2,977 3,440 (108) 1998
Longjumeau Distribution Center..... 1,160 6,592 7,752 (363) 1998
Mitry Mory Distribution Center..... 1,134 6,465 7,599 (528) 1997
Oceanie Distribution Center........ 602 5,991 6,593 (234) 1998
Senart Distribution Center......... 5,100 10,705 15,805 (373) 1999
Vitrolles Distribution Center...... 2,348 5,057 7,405 (508) 1999
Phoenix, Arizona
24th Street Industrial Center...... 503 3,248 3,751 (653) 1994
Alameda Distribution Center........ 820 5,772 6,592 (875) 1992,1998
Black Canyon Business Center....... 704 4,001 4,705 (95) 1999
Brookridge Distribution Center..... 1,592 9,022 10,614 (214) 1999
Hohokam 10 Industrial Center....... 4,237 18,719 22,956 (1,739) 1996,1999
I-10 West Business Center.......... 263 1,787 2,050 (381) 1993
Kyrene Commons Distribution
Center........................... 2,385 10,967 13,352 (914) 1992,1998,1999
Kyrene Commons South Distribution
Center........................... 1,163 4,968 6,131 (222) 1998
Martin Van Buren Distribution
Center........................... 572 4,013 4,585 (766) 1993,1994
Papago Distribution Center......... 420 2,548 2,968 (483) 1994
Pima Distribution Center........... 306 1,981 2,287 (405) 1993
Watkins Distribution Center........ 243 1,588 1,831 (267) 1995
</TABLE>
106
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SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
<TABLE>
<CAPTION>
INITIAL COST TO
PROLOGIS
----------------------- COSTS CAPITALIZED
NO. OF ENCUM- BUILDING & SUBSEQUENT
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION
----------- ------ ------- -------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
Portland, Oregon
Argyle Distribution Center......... 3 946 5,388 567
Columbia Distribution Center....... 2 550 3,121 256
Jennifer Distribution Center....... 2 1,712 -- 7,426
PDX Corporate Center East.......... 6 (h) 3,288 -- 20,348
PDX Corporate Center North......... 7 (h) 2,405 -- 10,653
Wilsonville Corporate Center....... 6 (h) 2,963 -- 11,712
Reno, Nevada
Golden Valley Distribution
Center........................... 2 560 -- 10,067
Meredith Kleppe Business Center.... 5 1,573 8,949 1,299
Pacific Industrial Center.......... 4 2,501 -- 10,630
Packer Way Business Center......... 3 458 2,604 685
Packer Way Distribution Center..... 2 506 2,879 474
Spice Island Distribution Center... 1 435 2,466 1,112
Reynosa, Mexico
Colonial Industrial Center......... 1 278 1,574 3
Del Norte Industrial Center........ 2 809 -- 6,253
Reynosa Industrial Center.......... 6 2,035 1,038 13,390
Rio Grande Valley, Texas
Rio Grande Distribution Center..... 5 (f) 527 2,987 755
Rio Grande Industrial Center....... 8 (f) 2,188 12,399 1,890
Valley Industrial Center........... 1 230 -- 3,739
Rotterdam, Netherlands
DistriPark Maasvlakte.............. 1 -- -- 8,684
Eamhaven Industrial Park........... 1 -- 6,149 594
Salt Lake City, Utah
Centennial Distribution Center..... 2 1,149 -- 8,216
Clearfield Distribution Center..... 2 2,500 14,165 646
Crossroads Corporate Center........ 2 1,260 -- 9,055
Salt Lake International
Distribution Center.............. 3 1,892 2,792 11,334
San Antonio, Texas
10711 Distribution Center.......... 2 582 3,301 518
Coliseum Distribution Center....... 2 1,102 2,380 10,378
Distribution Drive Center.......... 1 473 2,680 634
Downtown Distribution Center....... 1 241 1,364 244
I-10 Central Distribution Center... 1 223 1,275 216
I-35 Business Center............... 4 663 3,773 837
Landmark One Distribution Center... 1 341 1,933 389
Macro Distribution Center.......... 1 225 1,282 227
Perrin Creek Corporate Center...... 6 1,547 -- 9,879
San Antonio Distribution Center
I................................ 13 2,154 12,247 3,077
San Antonio Distribution Center
II............................... 3 945 -- 5,769
San Antonio Distribution Center
III.............................. 8 2,539 9,684 7,307
Tri-County Distribution Center..... 1 496 -- 5,838
Woodlake Distribution Center....... 2 248 1,405 122
Seattle, Washington
Andover East Business Center....... 2 535 3,033 255
Fife Corporate Center.............. 3 4,059 -- 10,274
Kent Corporate Center.............. 2 (h) 2,882 1,987 8,502
Park at Woodinville A.............. 5 (f) 1,905 10,797 195
Van Doren's Distribution Center.... 3 (h) 3,663 -- 12,823
<CAPTION>
GROSS AMOUNTS AT WHICH CARRIED
AS OF DECEMBER 31, 1999
-------------------------------------- ACCUMULATED DATE OF
BUILDING & TOTAL DEPRECIATION CONSTRUCTION/
DESCRIPTION LAND IMPROVEMENTS (A,B) (C) ACQUISITION
----------- ---------- ------------ ---------- ------------ --------------------
<S> <C> <C> <C> <C> <C>
Portland, Oregon
Argyle Distribution Center......... 946 5,955 6,901 (1,210) 1993
Columbia Distribution Center....... 551 3,376 3,927 (581) 1994
Jennifer Distribution Center....... 2,289 6,849 9,138 (350) 1998,1999
PDX Corporate Center East.......... 4,470 19,166 23,636 (1,187) 1997,1998,1999
PDX Corporate Center North......... 2,542 10,516 13,058 (1,554) 1995,1996
Wilsonville Corporate Center....... 2,964 11,711 14,675 (1,731) 1995,1996
Reno, Nevada
Golden Valley Distribution
Center........................... 2,035 8,592 10,627 (837) 1996,1998
Meredith Kleppe Business Center.... 1,573 10,248 11,821 (2,084) 1993
Pacific Industrial Center.......... 2,501 10,630 13,131 (1,598) 1994,1995
Packer Way Business Center......... 458 3,289 3,747 (666) 1993
Packer Way Distribution Center..... 506 3,353 3,859 (709) 1993
Spice Island Distribution Center... 435 3,578 4,013 (379) 1996
Reynosa, Mexico
Colonial Industrial Center......... 278 1,577 1,855 (7) 1999
Del Norte Industrial Center........ 1,065 5,997 7,062 (176) 1998
Reynosa Industrial Center.......... 2,070 14,393 16,463 (576) 1997,1998,1999
Rio Grande Valley, Texas
Rio Grande Distribution Center..... 527 3,742 4,269 (573) 1995
Rio Grande Industrial Center....... 2,188 14,289 16,477 (2,248) 1995
Valley Industrial Center........... 363 3,606 3,969 (237) 1997
Rotterdam, Netherlands
DistriPark Maasvlakte.............. -- 8,684 8,684 -- 1999
Eamhaven Industrial Park........... -- 6,743 6,743 (75) 1997
Salt Lake City, Utah
Centennial Distribution Center..... 1,149 8,216 9,365 (1,127) 1995
Clearfield Distribution Center..... 2,481 14,830 17,311 (2,051) 1995
Crossroads Corporate Center........ 1,392 8,923 10,315 -- 1998,1999
Salt Lake International
Distribution Center.............. 1,973 14,045 16,018 (1,462) 1994,1996,1999
San Antonio, Texas
10711 Distribution Center.......... 582 3,819 4,401 (787) 1994
Coliseum Distribution Center....... 1,613 12,247 13,860 (2,142) 1994,1995
Distribution Drive Center.......... 473 3,314 3,787 (795) 1992
Downtown Distribution Center....... 241 1,608 1,849 (334) 1994
I-10 Central Distribution Center... 240 1,474 1,714 (377) 1992
I-35 Business Center............... 663 4,610 5,273 (996) 1993
Landmark One Distribution Center... 341 2,322 2,663 (409) 1994
Macro Distribution Center.......... 225 1,509 1,734 (354) 1993
Perrin Creek Corporate Center...... 1,634 9,792 11,426 (1,130) 1995,1996
San Antonio Distribution Center
I................................ 2,154 15,324 17,478 (3,743) 1992,1993,1994
San Antonio Distribution Center
II............................... 885 5,829 6,714 (1,099) 1994
San Antonio Distribution Center
III.............................. 2,720 16,810 19,530 (1,662) 1996,1998,1999
Tri-County Distribution Center..... 680 5,654 6,334 -- 1997
Woodlake Distribution Center....... 248 1,527 1,775 (292) 1994
Seattle, Washington
Andover East Business Center....... 535 3,288 3,823 (594) 1994
Fife Corporate Center.............. 4,209 10,124 14,333 (1,075) 1996
Kent Corporate Center.............. 3,216 10,155 13,371 (1,696) 1995
Park at Woodinville A.............. 1,905 10,992 12,897 (257) 1999
Van Doren's Distribution Center.... 4,108 12,378 16,486 (997) 1995,1997,1999
</TABLE>
107
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SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
<TABLE>
<CAPTION>
INITIAL COST TO
PROLOGIS
----------------------- COSTS CAPITALIZED
NO. OF ENCUM- BUILDING & SUBSEQUENT
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION
----------- ------ ------- -------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
South Bay (San Francisco),
California
Bayside Business Center............ 2 (h) 2,088 -- 4,446
Bayside Corporate Center........... 7 (h) 4,365 -- 15,729
Bayside Plaza I.................... 12 (h) 5,212 18,008 875
Bayside Plaza II................... 2 (h) 634 -- 2,826
Gateway Corporate Center........... 11 (f)(h) 7,575 24,746 4,438
Mowry Business Center.............. 4 5,933 -- 18,163
North First Distribution Center.... 1 1,171 6,638 38
Overlook Distribution Center....... 1 1,552 8,794 --
Shoreline Business Center.......... 8 (h) 4,328 16,101 489
Shoreline Business Center II....... 2 (h) 922 -- 4,643
Spinnaker Business Center.......... 12 (h) 7,043 25,220 1,282
Thornton Business Center........... 5 (f) 3,988 11,706 6,278
Trimble Distribution Center........ 5 2,836 16,067 1,082
St. Louis, Missouri
Earth City Industrial Center....... 10 (f) 5,750 19,144 11,801
Hazelwood Distribution Center...... 2 (f) 830 4,707 82
Westport Distribution Center....... 3 (f) 761 4,310 247
Tampa, Florida
Adamo Distribution Center.......... 1 105 595 334
Clearwater Distribution Center..... 2 (g) 92 524 88
Commerce Park Distribution
Center........................... 4 811 4,597 708
Eastwood Distribution Center....... 1 (g) 122 690 95
Joe's Creek Distribution Center.... 2 (g) 161 909 134
Lakeland Distribution Center....... 1 938 5,313 578
Orchid Lake Industrial Center...... 1 41 235 12
Plant City Distribution Center..... 1 (g) 206 1,169 125
Sabal Park Distribution Center..... 7 (d) 2,449 6,224 11,308
Silo Bend Distribution Center...... 4 (g) 2,887 16,358 976
Silo Bend Industrial Center........ 1 (g) 525 2,975 363
St. Petersburg Service Center...... 1 35 197 22
Tampa East Distribution Center..... 11 (g) 2,700 15,302 2,463
Tampa East Industrial Center....... 2 (g) 332 1,880 329
Tampa West Distribution Center..... 15 (f)(g) 3,273 18,659 2,480
Tampa West Industrial Center....... 4 (g) 437 471 5,647
Tampa West Service Center.......... 3 (g) 613 3,472 312
Tijuana, Mexico
Tijuana Industrial Center.......... 2 2,389 -- 6,784
Tulsa, Oklahoma
52nd Street Distribution Center.... 1 340 1,924 207
70th East Distribution Center...... 1 129 733 316
Expressway Distribution Center..... 4 573 3,280 736
Henshaw Distribution Center........ 3 500 2,829 187
Warsaw, Poland
Blonie Industrial Park............. 1 1,378 -- 7,602
Warsaw Industrial Center........... 4 2,668 24,586 3,192
Washington, D.C./Baltimore, Maryland
Airport Commons Distribution
Center........................... 2 (d) 2,320 -- 9,244
Ardmore Distribution Center........ 3 1,431 8,110 649
Ardmore Industrial Center.......... 2 984 5,581 784
Concorde Industrial Center......... 4 (d) 1,538 8,717 920
De Soto Business Park.............. 5 1,774 10,055 3,648
<CAPTION>
GROSS AMOUNTS AT WHICH CARRIED
AS OF DECEMBER 31, 1999
-------------------------------------- ACCUMULATED DATE OF
BUILDING & TOTAL DEPRECIATION CONSTRUCTION/
DESCRIPTION LAND IMPROVEMENTS (A,B) (C) ACQUISITION
----------- ---------- ------------ ---------- ------------ --------------------
<S> <C> <C> <C> <C> <C>
South Bay (San Francisco),
California
Bayside Business Center............ 2,088 4,446 6,534 (566) 1996
Bayside Corporate Center........... 4,365 15,729 20,094 (2,862) 1995,1996
Bayside Plaza I.................... 5,216 18,879 24,095 (3,815) 1993
Bayside Plaza II................... 634 2,826 3,460 (824) 1994
Gateway Corporate Center........... 7,575 29,184 36,759 (6,159) 1993,1996
Mowry Business Center.............. 7,815 16,281 24,096 (919) 1997,1998
North First Distribution Center.... 1,171 6,676 7,847 (159) 1999
Overlook Distribution Center....... 1,552 8,794 10,346 (208) 1999
Shoreline Business Center.......... 4,328 16,590 20,918 (3,369) 1993
Shoreline Business Center II....... 922 4,643 5,565 (1,046) 1995
Spinnaker Business Center.......... 7,043 26,502 33,545 (5,415) 1993
Thornton Business Center........... 3,989 17,983 21,972 (3,062) 1993,1996
Trimble Distribution Center........ 2,836 17,149 19,985 (3,386) 1994
St. Louis, Missouri
Earth City Industrial Center....... 5,886 30,809 36,695 (1,917) 1997,1998,1999
Hazelwood Distribution Center...... 831 4,788 5,619 (192) 1997,1999
Westport Distribution Center....... 761 4,557 5,318 (359) 1997
Tampa, Florida
Adamo Distribution Center.......... 105 929 1,034 (104) 1995
Clearwater Distribution Center..... 92 612 704 (106) 1994
Commerce Park Distribution
Center........................... 811 5,305 6,116 (880) 1994
Eastwood Distribution Center....... 122 785 907 (139) 1994
Joe's Creek Distribution Center.... 160 1,044 1,204 (188) 1994
Lakeland Distribution Center....... 938 5,891 6,829 (1,084) 1994
Orchid Lake Industrial Center...... 41 247 288 (43) 1994
Plant City Distribution Center..... 206 1,294 1,500 (215) 1994
Sabal Park Distribution Center..... 2,678 17,303 19,981 (1,068) 1996,1997,1998
Silo Bend Distribution Center...... 2,887 17,334 20,221 (2,869) 1994
Silo Bend Industrial Center........ 525 3,338 3,863 (569) 1994
St. Petersburg Service Center...... 35 219 254 (37) 1994
Tampa East Distribution Center..... 2,700 17,765 20,465 (3,004) 1994
Tampa East Industrial Center....... 332 2,209 2,541 (362) 1994
Tampa West Distribution Center..... 3,319 21,093 24,412 (3,570) 1994,1995
Tampa West Industrial Center....... 717 5,838 6,555 (583) 1994,1996,1998
Tampa West Service Center.......... 613 3,784 4,397 (635) 1994
Tijuana, Mexico
Tijuana Industrial Center.......... 3,121 6,052 9,173 (179) 1999
Tulsa, Oklahoma
52nd Street Distribution Center.... 340 2,131 2,471 (393) 1994
70th East Distribution Center...... 129 1,049 1,178 (167) 1994
Expressway Distribution Center..... 573 4,016 4,589 (910) 1993
Henshaw Distribution Center........ 499 3,017 3,516 (538) 1994
Warsaw, Poland
Blonie Industrial Park............. 1,450 7,530 8,980 -- 1999
Warsaw Industrial Center........... 824 29,622 30,446 (1,549) 1998
Washington, D.C./Baltimore, Maryland
Airport Commons Distribution
Center........................... 2,360 9,204 11,564 (906) 1997
Ardmore Distribution Center........ 1,431 8,759 10,190 (1,460) 1994
Ardmore Industrial Center.......... 985 6,364 7,349 (1,032) 1994
Concorde Industrial Center......... 1,538 9,637 11,175 (1,469) 1995
De Soto Business Park.............. 1,774 13,703 15,477 (2,005) 1996
</TABLE>
108
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SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
<TABLE>
<CAPTION>
INITIAL COST TO
PROLOGIS
----------------------- COSTS CAPITALIZED
NO. OF ENCUM- BUILDING & SUBSEQUENT
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION
----------- ------ ------- -------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
Eisenhower Industrial Center....... 3 (d) 1,240 7,025 1,535
Fleet Distribution Center.......... 8 (d) 3,198 18,121 1,345
Gateway Distribution Center........ 3 774 -- 7,293
Hampton Central Distribution
Center........................... 3 3,067 -- 16,804
Meadowridge Distribution Center.... 1 (d) 1,757 -- 5,675
Patapsco Distribution Center....... 1 270 1,528 1,074
Sunnyside Industrial Center........ 3 1,541 8,733 1,360
Other............................... 3 (g) 994 5,664 8
----- -------- ---------- ----------
Total Operating Properties... 1,328 $676,530 $2,577,782 $1,346,024
----- -------- ---------- ----------
FACILITIES UNDER DEVELOPMENT
Amsterdam, Netherlands
Schiphol Distribution Center....... 3,269 -- 1,765
Atlanta, Georgia
Atlanta NE at Sugarloaf............ 203 -- 1,424
Charlotte, North Carolina
Charlotte Distribution Center...... 895 -- 3,545
Cincinnati, Ohio
Union Center Commerce Park......... 681 -- 3,677
Cologne, Germany
Cologne Eifeltor Distribution
Center........................... 2,443 -- 648
Columbus, Ohio
Capital Park South Distribution
Center........................... 2,203 -- 3,251
Dallas/Fort Worth, Texas
Arlington Corporate Center......... 1,906 -- 639
Freeport Corporate Center.......... 2,173 -- 1,569
Denver, Colorado
Upland Distribution Center......... 1,128 -- 3,182
East Bay (San Francisco), California
Patterson Pass Business Center..... 1,277 -- 3,645
El Paso, Texas
Northwestern Corporate Center...... 84 -- 327
Vista Del Sol Industrial Center
III.............................. 1,365 -- 2,288
Fort Lauderdale/Miami, Florida
Port Lauderdale Distribution
Center........................... 2,509 -- 5,004
I-95 Corridor, New Jersey
Cranbury Business Park............. 1,496 -- 10,465
Meadowland Industrial Center....... 1,600 -- 6,772
Juarez, Mexico
Salvacar Industrial Center......... 490 -- 1,588
Las Vegas, Nevada
Las Vegas Corporate Center......... 1,053 -- 908
Los Angeles/Orange County,
California
Milliken Distribution Center....... 5,963 -- 1,771
Louisville, Kentucky
Airpark Commerce Center............ 700 -- 4,359
Riverport Distribution Center...... 842 -- 8,701
Lyon, France
Isle d'Abeau Distribution Center... 739 -- 7,433
<CAPTION>
GROSS AMOUNTS AT WHICH CARRIED
AS OF DECEMBER 31, 1999
-------------------------------------- ACCUMULATED DATE OF
BUILDING & TOTAL DEPRECIATION CONSTRUCTION/
DESCRIPTION LAND IMPROVEMENTS (A,B) (C) ACQUISITION
----------- ---------- ------------ ---------- ------------ --------------------
<S> <C> <C> <C> <C> <C>
Eisenhower Industrial Center....... 1,240 8,560 9,800 (1,485) 1994
Fleet Distribution Center.......... 3,198 19,466 22,664 (2,625) 1996
Gateway Distribution Center........ 1,410 6,657 8,067 (277) 1998
Hampton Central Distribution
Center........................... 4,619 15,252 19,871 (930) 1996,1997,1999
Meadowridge Distribution Center.... 1,897 5,535 7,432 (303) 1998
Patapsco Distribution Center....... 270 2,602 2,872 (373) 1995
Sunnyside Industrial Center........ 1,541 10,093 11,634 (1,724) 1994
Other............................... 994 5,672 6,666 (383) 1994,1999
---------- ---------- ---------- ---------
Total Operating Properties... $ 736,604 $3,863,732 $4,600,336 $(366,703)
---------- ---------- ---------- ---------
FACILITIES UNDER DEVELOPMENT
Amsterdam, Netherlands
Schiphol Distribution Center....... 5,034 -- 5,034 -- 1998
Atlanta, Georgia
Atlanta NE at Sugarloaf............ 1,627 -- 1,627 -- 1998
Charlotte, North Carolina
Charlotte Distribution Center...... 4,440 -- 4,440 -- 1996
Cincinnati, Ohio
Union Center Commerce Park......... 4,358 -- 4,358 -- 1997
Cologne, Germany
Cologne Eifeltor Distribution
Center........................... 3,091 -- 3,091 -- 1998
Columbus, Ohio
Capital Park South Distribution
Center........................... 5,454 -- 5,454 -- 1996
Dallas/Fort Worth, Texas
Arlington Corporate Center......... 2,545 -- 2,545 -- 1999
Freeport Corporate Center.......... 3,742 -- 3,742 -- 1997
Denver, Colorado
Upland Distribution Center......... 4,310 -- 4,310 -- 1994
East Bay (San Francisco), California
Patterson Pass Business Center..... 4,922 -- 4,922 -- 1999
El Paso, Texas
Northwestern Corporate Center...... 411 -- 411 -- 1991
Vista Del Sol Industrial Center
III.............................. 3,653 -- 3,653 -- 1999
Fort Lauderdale/Miami, Florida
Port Lauderdale Distribution
Center........................... 7,513 -- 7,513 -- 1998
I-95 Corridor, New Jersey
Cranbury Business Park............. 11,961 -- 11,961 -- 1997
Meadowland Industrial Center....... 8,372 -- 8,372 -- 1997
Juarez, Mexico
Salvacar Industrial Center......... 2,078 -- 2,078 -- 1997
Las Vegas, Nevada
Las Vegas Corporate Center......... 1,961 -- 1,961 -- 1995
Los Angeles/Orange County,
California
Milliken Distribution Center....... 7,734 -- 7,734 -- 1998
Louisville, Kentucky
Airpark Commerce Center............ 5,059 -- 5,059 -- 1998
Riverport Distribution Center...... 9,543 -- 9,543 -- 1998
Lyon, France
Isle d'Abeau Distribution Center... 8,172 -- 8,172 -- 1998
</TABLE>
109
<PAGE> 112
PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
<TABLE>
<CAPTION>
INITIAL COST TO
PROLOGIS
----------------------- COSTS CAPITALIZED
NO. OF ENCUM- BUILDING & SUBSEQUENT
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION
----------- ------ ------- -------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
Memphis, Tennessee
Memphis Industrial Park............ 655 -- 1,141
Monterrey, Mexico
Monterrey Industrial Park.......... 867 -- 2,689
Nashville, Tennessee
Nashville/I-24 Distribution
Center........................... 396 -- 5,643
Paris, France
Aulnay Distribution Center......... 4,474 -- 6,647
Senart Distribution Center......... 1,515 -- 190
Reno, Nevada
Damonte Ranch Distribution
Center........................... 4,579 -- 17,036
Reynosa, Mexico
Colonial Industrial Center......... 666 -- 42
Del Norte Industrial Center II..... 675 -- 567
Reynosa Industrial Center III...... 401 -- 2,588
Rotterdam, Netherlands
Moerdijk Distribution Center....... 1,469 -- 674
Salt Lake City, Utah
Crossroads Corporate Center........ 642 -- 2,546
San Antonio, Texas
Tri-County Distribution Center..... 672 -- 3,486
Tampa, Florida
Sabal Park Distribution Center..... 728 -- 783
Tijuana, Mexico
Tijuana Industrial Center.......... 3,216 -- 2,058
Warsaw, Poland
Teresin Distribution Center........ 4,086 -- --
Washington D.C./Baltimore, Maryland
Meadowridge Distribution Center.... 2,995 -- 6,063
-------- ---------- ----------
Total Facilities Under
Development................. 61,055 -- 125,114
-------- ---------- ----------
LAND HELD FOR DEVELOPMENT
Amsterdam, Netherlands
Tilburg Distribution Center........ 3,000 517
Atlanta, Georgia
Atlanta NE at Sugarloaf............ 90 -- 37
Atlanta West Distribution Center... 713 -- 39
Breckenridge Distribution Center... 5,378 -- 9
Riverside Distribution Center...... 1,107 -- 96
Austin, Texas
Corridor Park Corporate Center..... 1,289 -- 89
Southpark Corporate Center......... 525 -- 63
Walnut Creek Corporate Center...... 135 -- 40
Charlotte, North Carolina
Charlotte Distribution Center
South............................ 666 -- 1,429
Interstate North Business Park..... 343 -- 8
<CAPTION>
GROSS AMOUNTS AT WHICH CARRIED
AS OF DECEMBER 31, 1999
-------------------------------------- ACCUMULATED DATE OF
BUILDING & TOTAL DEPRECIATION CONSTRUCTION/
DESCRIPTION LAND IMPROVEMENTS (A,B) (C) ACQUISITION
----------- ---------- ------------ ---------- ------------ --------------------
<S> <C> <C> <C> <C> <C>
Memphis, Tennessee
Memphis Industrial Park............ 1,796 -- 1,796 -- 1997
Monterrey, Mexico
Monterrey Industrial Park.......... 3,556 -- 3,556 -- 1998
Nashville, Tennessee
Nashville/I-24 Distribution
Center........................... 6,039 -- 6,039 -- 1996
Paris, France
Aulnay Distribution Center......... 11,121 -- 11,121 -- 1999
Senart Distribution Center......... 1,705 -- 1,705 -- 1999
Reno, Nevada
Damonte Ranch Distribution
Center........................... 21,615 -- 21,615 -- 1998
Reynosa, Mexico
Colonial Industrial Center......... 708 -- 708 -- 1999
Del Norte Industrial Center II..... 1,242 -- 1,242 -- 1998
Reynosa Industrial Center III...... 2,989 -- 2,989 -- 1998
Rotterdam, Netherlands
Moerdijk Distribution Center....... 2,143 -- 2,143 -- 1998
Salt Lake City, Utah
Crossroads Corporate Center........ 3,188 -- 3,188 -- 1996
San Antonio, Texas
Tri-County Distribution Center..... 4,158 -- 4,158 -- 1999
Tampa, Florida
Sabal Park Distribution Center..... 1,511 -- 1,511 -- 1997
Tijuana, Mexico
Tijuana Industrial Center.......... 5,274 -- 5,274 -- 1998
Warsaw, Poland
Teresin Distribution Center........ 4,086 -- 4,086 -- 1999
Washington D.C./Baltimore, Maryland
Meadowridge Distribution Center.... 9,058 -- 9,058 -- 1996
---------- ---------- ---------- ---------
Total Facilities Under
Development................. 186,169 -- 186,169 --
---------- ---------- ---------- ---------
LAND HELD FOR DEVELOPMENT
Amsterdam, Netherlands
Tilburg Distribution Center........ 3,517 3,517 -- 1999
Atlanta, Georgia
Atlanta NE at Sugarloaf............ 127 -- 127 -- 1998
Atlanta West Distribution Center... 752 -- 752 -- 1994
Breckenridge Distribution Center... 5,387 -- 5,387 -- 1997,1998
Riverside Distribution Center...... 1,203 -- 1,203 -- 1996
Austin, Texas
Corridor Park Corporate Center..... 1,378 -- 1,378 -- 1994
Southpark Corporate Center......... 588 -- 588 -- 1996
Walnut Creek Corporate Center...... 175 -- 175 -- 1994,1996
Charlotte, North Carolina
Charlotte Distribution Center
South............................ 2,095 -- 2,095 -- 1997
Interstate North Business Park..... 351 -- 351 -- 1997
</TABLE>
110
<PAGE> 113
PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
<TABLE>
<CAPTION>
INITIAL COST TO
PROLOGIS
----------------------- COSTS CAPITALIZED
NO. OF ENCUM- BUILDING & SUBSEQUENT
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION
----------- ------ ------- -------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
Chicago, Illinois
Bloomingdale 100 Business Center... 4,857 -- 2,879
Bolingbrook Distribution Center.... 4,621 -- 95
O'Hare Cargo Distribution Center... 8,949 -- 4,615
Remington Lakes Business Park...... 3,236 -- 304
Cincinnati, Ohio
Airpark International Distribution
Center........................... 1,771 -- 461
Union Center Commerce Park......... 1,595 -- 348
Columbus, Ohio
Capital Park South Distribution
Center........................... 2,735 -- 28
International Street Commerce
Center........................... 101 -- 8
Dallas/Fort Worth, Texas
Freeport Corporate Center.......... 1,705 -- 10
Great Southwest Industrial Center
I................................ 492 -- 52
Plano Distribution Center.......... 1,165 -- --
Royal Lane Distribution Center..... 1,010 -- --
Denver, Colorado
Denver Business Center Land........ 856 -- --
Upland Distribution Center I....... 519 -- 31
Detroit, Michigan
Huron Commerce Center I............ 2,801 -- 17
East Bay (San Francisco), California
Patterson Pass Business Center..... 5,079 -- --
El Paso, Texas
Northwestern Corporate Center...... 2,545 -- 1,170
Vista Corporate Center............. 351 -- 123
Vista Del Sol Industrial Center.... 1,727 -- 273
Vista Del Sol Industrial Center
III.............................. 306 -- --
Fort Lauderdale/Miami, Florida
Center Port Land................... 1,006 -- 214
Houston, Texas
Jersey Village Corporate Center.... 3,217 -- 1,045
West by Northwest Industrial
Center........................... 812 -- 216
I-95 Corridor, New Jersey
Cranbury Business Park............. 4,895 -- 194
Indianapolis, Indiana
Airport Business Center............ 4,056 -- 100
Lebanon Commerce Park Land......... 827 -- 666
North by Northeast Distribution
Center........................... 437 -- 54
Plainfield Park Distribution
Center........................... 1,082 -- 568
Juarez, Mexico
Los Aztecas Industrial Center...... 669 -- --
Salvacar Industrial Park........... 1,993 -- 247
Kansas City, Missouri
Executive Park..................... 1,267 -- 244
<CAPTION>
GROSS AMOUNTS AT WHICH CARRIED
AS OF DECEMBER 31, 1999
-------------------------------------- ACCUMULATED DATE OF
BUILDING & TOTAL DEPRECIATION CONSTRUCTION/
DESCRIPTION LAND IMPROVEMENTS (A,B) (C) ACQUISITION
----------- ---------- ------------ ---------- ------------ --------------------
<S> <C> <C> <C> <C> <C>
Chicago, Illinois
Bloomingdale 100 Business Center... 7,736 -- 7,736 -- 1997
Bolingbrook Distribution Center.... 4,716 -- 4,716 -- 1999
O'Hare Cargo Distribution Center... 13,564 -- 13,564 -- 1996,1997
Remington Lakes Business Park...... 3,540 -- 3,540 -- 1997
Cincinnati, Ohio
Airpark International Distribution
Center........................... 2,232 -- 2,232 -- 1999
Union Center Commerce Park......... 1,943 -- 1,943 -- 1997
Columbus, Ohio
Capital Park South Distribution
Center........................... 2,763 -- 2,763 -- 1994,1995,1996,
1997,1998,1999
International Street Commerce
Center........................... 109 -- 109 -- 1996
Dallas/Fort Worth, Texas
Freeport Corporate Center.......... 1,715 -- 1,715 -- 1999
Great Southwest Industrial Center
I................................ 544 -- 544 -- 1996
Plano Distribution Center.......... 1,165 -- 1,165 -- 1999
Royal Lane Distribution Center..... 1,010 -- 1,010 -- 1997
Denver, Colorado
Denver Business Center Land........ 856 -- 856 -- 1998
Upland Distribution Center I....... 550 -- 550 -- 1994,1997
Detroit, Michigan
Huron Commerce Center I............ 2,818 -- 2,818 -- 1999
East Bay (San Francisco), California
Patterson Pass Business Center..... 5,079 -- 5,079 -- 1999
El Paso, Texas
Northwestern Corporate Center...... 3,715 -- 3,715 -- 1991,1992
Vista Corporate Center............. 474 -- 474 -- 1993
Vista Del Sol Industrial Center.... 2,000 -- 2,000 -- 1994,1996
Vista Del Sol Industrial Center
III.............................. 306 -- 306 -- 1999
Fort Lauderdale/Miami, Florida
Center Port Land................... 1,220 -- 1,220 -- 1998
Houston, Texas
Jersey Village Corporate Center.... 4,262 -- 4,262 -- 1997
West by Northwest Industrial
Center........................... 1,028 -- 1,028 -- 1993
I-95 Corridor, New Jersey
Cranbury Business Park............. 5,089 -- 5,089 -- 1997,1999
Indianapolis, Indiana
Airport Business Center............ 4,156 -- 4,156 -- 1999
Lebanon Commerce Park Land......... 1,493 -- 1,493 -- 1998
North by Northeast Distribution
Center........................... 491 -- 491 -- 1994
Plainfield Park Distribution
Center........................... 1,650 -- 1,650 -- 1996
Juarez, Mexico
Los Aztecas Industrial Center...... 669 -- 669 -- 1999
Salvacar Industrial Park........... 2,240 -- 2,240 -- 1997
Kansas City, Missouri
Executive Park..................... 1,511 -- 1,511 -- 1998
</TABLE>
111
<PAGE> 114
PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
<TABLE>
<CAPTION>
INITIAL COST TO
PROLOGIS
----------------------- COSTS CAPITALIZED
NO. OF ENCUM- BUILDING & SUBSEQUENT
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION
----------- ------ ------- -------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
Las Vegas, Nevada
Black Mountain Distribution
Center........................... 2,845 -- 164
Hughes Airport Center.............. 263 -- 11
Las Vegas Corporate Center......... (h) 4,015 -- 44
Le Havre, France
Le Havre........................... 1,135 -- --
Los Angeles/Orange County,
California
Anaheim Industrial Center.......... 3,103 -- 3
Magnolia Business Center........... 4,232 -- 27
Ontario Distribution Center........ 1,565 -- 176
Louisville, Kentucky
Riverport Distribution Center...... 780 -- 28
Memphis, Tennessee
Memphis Industrial Park............ 1,000 -- 975
Milan, Italy
Piacenza Distribution Center....... 394 -- 1,234
Monterrey, Mexico
Monterrey Industrial Park.......... 126 -- --
Orlando, Florida
Orlando Central Park............... 2,152 -- 637
Paris, France
Annecy Distribution Center......... -- -- 216
Aulnay Distribution Center......... 1,170 -- 240
Portland, Oregon
Jennifer Distribution Center....... 2,139 -- 718
Reno, Nevada
Damonte Ranch...................... 5,949 -- 1,827
Golden Valley Distribution
Center........................... 347 -- 602
Reynosa, Mexico
Del Norte Industrial Center II..... 643 -- --
Reynosa Industrial Center III...... 1,449 -- --
Reynosa Industrial Park............ 362 -- 31
Rio Grande Valley, Texas
Rio Grande Distribution Center..... 429 -- 10
Rotterdam, Netherlands
DistriPark Maasvlakte.............. -- -- 16
Moerdijk Distribution Center....... 1,057 -- 451
Salt Lake City, Utah
Centennial Distribution Center..... 824 -- 105
Clearfield Industrial Center....... 125 -- 14
Salt Lake International
Distribution Center.............. 746 -- 1,096
San Antonio, Texas
Coliseum Distribution Center....... 611 -- 335
Landmark........................... 127 -- 5
Perrin Creek Corporate Center...... 2,637 -- 243
San Antonio Distribution Center
III.............................. 458 -- 56
Seattle, Washington
Port of Tacoma..................... 1,539 -- 378
<CAPTION>
GROSS AMOUNTS AT WHICH CARRIED
AS OF DECEMBER 31, 1999
-------------------------------------- ACCUMULATED DATE OF
BUILDING & TOTAL DEPRECIATION CONSTRUCTION/
DESCRIPTION LAND IMPROVEMENTS (A,B) (C) ACQUISITION
----------- ---------- ------------ ---------- ------------ --------------------
<S> <C> <C> <C> <C> <C>
Las Vegas, Nevada
Black Mountain Distribution
Center........................... 3,009 -- 3,009 -- 1995,1996
Hughes Airport Center.............. 274 -- 274 -- 1997
Las Vegas Corporate Center......... 4,059 -- 4,059 -- 1993,1995,1997
Le Havre, France
Le Havre........................... 1,135 -- 1,135 -- 1999
Los Angeles/Orange County,
California
Anaheim Industrial Center.......... 3,106 -- 3,106 -- 1999
Magnolia Business Center........... 4,259 -- 4,259 -- 1999
Ontario Distribution Center........ 1,741 -- 1,741 -- 1999
Louisville, Kentucky
Riverport Distribution Center...... 808 -- 808 -- 1998,1999
Memphis, Tennessee
Memphis Industrial Park............ 1,975 -- 1,975 -- 1997
Milan, Italy
Piacenza Distribution Center....... 1,628 -- 1,628 -- 1999
Monterrey, Mexico
Monterrey Industrial Park.......... 126 -- 126 -- 1998
Orlando, Florida
Orlando Central Park............... 2,789 -- 2,789 -- 1996
Paris, France
Annecy Distribution Center......... -- -- -- -- 1999
Aulnay Distribution Center......... 1,410 -- 1,410 -- 1999
Portland, Oregon
Jennifer Distribution Center....... 2,857 -- 2,857 -- 1997
Reno, Nevada
Damonte Ranch...................... 7,776 -- 7,776 -- 1998
Golden Valley Distribution
Center........................... 949 -- 949 -- 1995
Reynosa, Mexico
Del Norte Industrial Center II..... 643 -- 643 -- 1999
Reynosa Industrial Center III...... 1,449 -- 1,449 -- 1998
Reynosa Industrial Park............ 393 -- 393 -- 1999
Rio Grande Valley, Texas
Rio Grande Distribution Center..... 439 -- 439 -- 1995
Rotterdam, Netherlands
DistriPark Maasvlakte.............. -- -- -- -- 1999
Moerdijk Distribution Center....... 1,508 -- 1,508 -- 1999
Salt Lake City, Utah
Centennial Distribution Center..... 929 -- 929 -- 1996
Clearfield Industrial Center....... 139 -- 139 -- 1997
Salt Lake International
Distribution Center.............. 1,842 -- 1,842 -- 1994,1995
San Antonio, Texas
Coliseum Distribution Center....... 946 -- 946 -- 1994
Landmark........................... 132 -- 132 -- 1997
Perrin Creek Corporate Center...... 2,880 -- 2,880 -- 1996
San Antonio Distribution Center
III.............................. 514 -- 514 -- 1996
Seattle, Washington
Port of Tacoma..................... 1,917 -- 1,917 -- 1998
</TABLE>
112
<PAGE> 115
PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
<TABLE>
<CAPTION>
INITIAL COST TO
PROLOGIS
----------------------- COSTS CAPITALIZED
NO. OF ENCUM- BUILDING & SUBSEQUENT
DESCRIPTION BLDGS. BRANCES LAND IMPROVEMENTS TO ACQUISITION
----------- ------ ------- -------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
Tampa, Florida
Sabal Park Distribution Center..... 1,170 -- 150
Tampa East Distribution Center..... 2,711 -- --
Tijuana, Mexico
Tijuana Industrial Center.......... 2,736 -- 134
Warsaw, Poland
Blonie Industrial Park............. 1,118 -- 1,922
Washington, D.C./Baltimore, Maryland
Meadowridge Distribution Center.... 865 -- 289
Troy Hill Distribution Center...... 4,483 -- 37
-------- ---------- ----------
Total Land Held for
Development................. 135,233 -- 28,463
-------- ---------- ----------
GRAND TOTAL........................ $872,818 $2,577,782 $1,499,601
======== ========== ==========
<CAPTION>
GROSS AMOUNTS AT WHICH CARRIED
AS OF DECEMBER 31, 1999
-------------------------------------- ACCUMULATED DATE OF
BUILDING & TOTAL DEPRECIATION CONSTRUCTION/
DESCRIPTION LAND IMPROVEMENTS (A,B) (C) ACQUISITION
----------- ---------- ------------ ---------- ------------ --------------------
<S> <C> <C> <C> <C> <C>
Tampa, Florida
Sabal Park Distribution Center..... 1,320 -- 1,320 -- 1995,1997
Tampa East Distribution Center..... 2,711 -- 2,711 -- 1994
Tijuana, Mexico
Tijuana Industrial Center.......... 2,870 -- 2,870 -- 1998
Warsaw, Poland
Blonie Industrial Park............. 3,040 -- 3,040 -- 1998
Washington, D.C./Baltimore, Maryland
Meadowridge Distribution Center.... 1,154 -- 1,154 -- 1996
Troy Hill Distribution Center...... 4,520 -- 4,520 -- 1999
---------- ---------- ---------- ---------
Total Land Held for
Development................. 163,696 -- 163,696 --
---------- ---------- ---------- ---------
GRAND TOTAL........................ $1,086,469 $3,863,732 $4,950,201 $(366,703)
========== ========== ========== =========
</TABLE>
(a) Reconciliation of total cost to real estate balance sheet caption as of
December 31, 1999 (in thousands):
<TABLE>
<S> <C>
Total per Schedule III...................................... $4,950,201
Minority interest in real estate company.................... 7,665
Capitalized preacquisition costs............................ 17,085
----------
Total real estate................................. $4,974,951(i)
==========
</TABLE>
(b) The aggregate cost for federal income tax purposes was approximately
$3,870,487,908.
(c) Buildings are depreciated over their estimated useful lives (30 years for
acquisitions, 40 years for developments).
(d) $335,688,418 of these facilities will secure $200,000,000 of mortgage notes.
(e) $210,096,463 of these facilities secure $148,757,098 of mortgage notes.
(f) $666,638,421 of these facilities secure $309,155,427 of mortgage notes.
(g) $63,387,124 of these facilities secure $26,951,687 of securitized debt.
(h) $226,928,339 of these facilities secure $10,721,327 of assessment bonds.
(i) A summary of activity for real estate and accumulated depreciation as of
December 31, 1999 is as follows (in thousands):
113
<PAGE> 116
PROLOGIS TRUST
SCHEDULE III -- REAL ESTATE AND ACCUMULATED DEPRECIATION -- (CONTINUED)
<TABLE>
<S> <C>
Real estate
Balance at beginning of year.............................. $3,657,500
Additions, including development completions.............. 2,196,374
Dispositions.............................................. (848,844)
Change in construction in progress balance................ (29,135)
Change in capitalized preacquisition costs balance........ (944)
----------
Balance at end of year.................................... $4,974,951
==========
Accumulated depreciation
Balance at beginning of year.............................. $ 254,288
Depreciation expense...................................... 134,055
Accumulated depreciation associated with dispositions..... (21,640)
----------
Balance at end of year.................................... $ 366,703
==========
</TABLE>
114
<PAGE> 117
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of ProLogis Trust, a Maryland
real estate investment trust, and the undersigned Trustees and officers of
ProLogis Trust, hereby constitutes and appoints K. Dane Brooksher, Walter C.
Rakowich, Edward F. Long and Edward S. Nekritz, or his true and lawful attorneys
in fact and agents, for it or him and in its or his name, place and stead, in
any and all capacities, with full power to act alone, to sign any and all
amendments to this report, and to file each such amendment to this report, with
all exhibits thereto, and any and all documents in connection therewith, with
the Securities and Exchange Commission, hereby granting unto and
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform any and all acts and things requisite and necessary to be done in an
about the premises, as fully to all intents and purposes as it or he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them may lawfully do or cause to be done
by virtue hereof.
115
<PAGE> 118
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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/ K. DANE BROOKSHER
----------------------------------
K. Dane Brooksher
Chairman, Chief Executive Officer
Date: March 21, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ K. DANE BROOKSHER Chairman, Chief Executive March 21, 2000
- ----------------------------------------------------- Officer and Trustee
K. Dane Brooksher
/s/ IRVING F. LYONS III President, Chief Investment March 21, 2000
- ----------------------------------------------------- Officer and Trustee
Irving F. Lyons III
/s/ WALTER C. RAKOWICH Managing Director and Chief March 21, 2000
- ----------------------------------------------------- Financial Officer (Principal
Walter C. Rakowich Financial Officer)
/s/ EDWARD F. LONG Senior Vice President and March 21, 2000
- ----------------------------------------------------- Controller
Edward F. Long
/s/ SHARI J. JONES Vice President (Principal March 21, 2000
- ----------------------------------------------------- Accounting Officer)
Shari J. Jones
/s/ STEPHEN L. FEINBERG Trustee March 21, 2000
- -----------------------------------------------------
Stephen L. Feinberg
/s/ DONALD P. JACOBS Trustee March 21, 2000
- -----------------------------------------------------
Donald P. Jacobs
/s/ JOHN S. MOODY Trustee March 21, 2000
- -----------------------------------------------------
John S. Moody
/s/ WILLIAM G. MYERS Trustee March 21, 2000
- -----------------------------------------------------
William G. Myers
/s/ JOHN E. ROBSON Trustee March 21, 2000
- -----------------------------------------------------
John E. Robson
/s/ KENNETH N. STENSBY Trustee March 21, 2000
- -----------------------------------------------------
Kenneth N. Stensby
</TABLE>
116
<PAGE> 119
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ J. ANDRE TEIXEIRA Trustee March 21, 2000
- -----------------------------------------------------
J. Andre Teixeira
/s/ THOMAS G. WATTLES Trustee March 21, 2000
- -----------------------------------------------------
Thomas G. Wattles
</TABLE>
117
<PAGE> 120
INDEX TO EXHIBITS
Certain of the following documents are filed herewith. Certain other of the
following documents have been previously filed with the Securities and Exchange
Commission and, pursuant to Rule 12b-32, are incorporated herein by reference.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3.1 -- Articles of Amendment and Restatement of Declaration of
Trust of ProLogis (incorporated by reference to exhibit
4.1 to ProLogis' quarterly report on Form 10-Q for the
quarter ended June 30, 1999)
3.2 -- Amended and Restated Bylaws of ProLogis (incorporated by
reference to exhibit 3.2 to ProLogis' quarterly report on
Form 10-Q for the quarter ended June 30, 1999)
4.1 -- Rights Agreement, dated as of December 31, 1993, between
ProLogis and State Street Bank and Trust Company, as
Rights Agent, including form of Rights Certificate
(incorporated by reference to exhibit 4.4 to ProLogis'
registration statement No. 33-78080).
4.2 -- First Amendment to Rights Amendment, dated as of February
15, 1995, between ProLogis, State Street Bank and Trust
Company and The First National Bank of Boston, as
successor Rights Agent (incorporated by reference to
exhibit 3.1 to ProLogis' Form 10-Q for the quarter ended
September 30, 1995).
4.3 -- Second Amendment to Rights Agreement, dated as of June
22, 1995, between ProLogis State Street Bank and Trust
Company and The First National Bank of Boston
(incorporated by reference to Exhibit 3.1 to ProLogis'
Form 10-Q for the quarter ended September 30, 1995).
4.4 -- Form of share certificate for Common Shares of Beneficial
Interest of ProLogis (incorporated by reference to
exhibit 4.4 to ProLogis' registration statement No.
33-73382).
4.5 -- Form of share certificate for Series A Cumulative
Redeemable Preferred Shares of Beneficial Interest of
ProLogis (incorporated by reference to exhibit 4.7 to
ProLogis' Form 8-A registration statement relating to
such shares).
4.6 -- 8.72% Note due March 1, 2009 (incorporated by reference
to exhibit 4.7 to ProLogis' Form 10-K for the year ended
December 31, 1994).
4.7 -- Form of share certificate for Series B Cumulative
Convertible Redeemable Preferred Shares of Beneficial
Interest of ProLogis (incorporated by reference to
exhibit 4.8 to ProLogis' Form 8-A registration statement
relating to such shares).
4.8 -- Form of share certificate for Series C Cumulative
Redeemable Preferred Shares of Beneficial Interest of
ProLogis (incorporated by reference to exhibit 4.8 to
ProLogis' Form 10-K for the year ended December 31,
1996).
4.9 -- 9.34% Note due March 1, 2015 (incorporated by reference
to exhibit 4.8 to ProLogis' Form 10-K for the year ended
December 31, 1994).
4.10 -- 7.875% Note due May 15, 2009 (incorporated by reference
to exhibit 4.4 to ProLogis' Form 8-K dated May 9, 1995).
4.11 -- 7.30% Note due May 15, 2001 (incorporated by reference to
exhibit 4.3 to ProLogis' Form 8-K dated May 9, 1995).
4.12 -- 7.25% Note due May 15, 2000 (incorporated by reference to
exhibit 4.2 to ProLogis' Form 8-K dated May 9, 1995).
4.13 -- 7.125% Note due May 15, 1998 (incorporated by reference
to exhibit 4.1 to ProLogis' Form 8-K dated May 9, 1995).
</TABLE>
118
<PAGE> 121
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
4.14 -- 7.25% Note due May 15, 2002 (incorporated by reference to
exhibit 4.1 to ProLogis' Form 10-Q for the quarter ended
June 30, 1996).
4.15 -- 7.95% Note due May 15, 2008 (incorporated by reference to
exhibit 4.2 to ProLogis' Form 10-Q for the quarter ended
June 30, 1996).
4.16 -- 8.65% Note due May 15, 2016 (incorporated by reference to
exhibit 4.3 to ProLogis' Form 10-Q for the quarter ended
June 30, 1996).
4.17 -- 7.81% Medium-Term Notes, Series A, due February 1, 2015
(incorporated by reference to exhibit 4.17 to ProLogis'
Form 10-K for the year ended December 31, 1996).
4.18 -- Indenture, dated as of March 1, 1995, between ProLogis
and State Street Bank and Trust Company, as Trustee
(incorporated by reference to exhibit 4.9 to ProLogis'
Form 10-K for the year ended December 31, 1994).
4.19 -- Collateral Trust Indenture, dated as of July 22, 1993,
between Krauss/Schwartz Properties, Ltd. and NationsBank
of Virginia, N.A., as Trustee (incorporated by reference
to exhibit 4.10 to ProLogis' Form 10-K for the year ended
December 31, 1994).
4.20 -- First Supplemental Collateral Trust Indenture, dated as
of October 28, 1994, among ProLogis Limited
Partnership-IV, Krauss/Schwartz Properties, Ltd., and
NationsBank of Virginia, N.A., as Trustee (incorporated
by reference to exhibit 10.6 to ProLogis' Form 10-Q for
the quarter ended September 30, 1994).
4.21 -- Form of share certificate for Series D Cumulative
Redeemable Preferred Shares of Beneficial Interest of
ProLogis (incorporated by reference to exhibit 4.21 of
ProLogis' Registration Statement No. 69001).
4.22 -- Form of share certificate for Series E Cumulative
Redeemable Preferred Shares of Beneficial Interest of
ProLogis (incorporated by reference to exhibit 4.22 of
ProLogis' Registration Statement No. 69001).
4.23 -- 7.625% Note due July 1, 2017 (incorporated by reference
to exhibit 4 to ProLogis' Form 8-K dated July 11, 1997).
4.24 -- Form of 7.05% Promissory Note due July 15, 2006.
4.25 -- 7.00% Promissory Note due October 1, 2003.
4.26 -- Form of 6.70% Promissory Note due April 15, 2004.
4.27 -- Form of 7.10% Promissory Note due April 15, 2008.
10.1 -- Agreement of Limited Partnership of ProLogis Limited
Partnership-I, dated as of December 22, 1993, by and
among ProLogis, as general partner, and the limited
partners set forth therein (incorporated by reference to
exhibit 10.4 to ProLogis' Registration Statement No.
33-73382).
10.2 -- Amended and Restated Agreement of Limited Partnership of
ProLogis Limited Partnership-II, dated as of February 15,
1994, among ProLogis as general partner, and the limited
partners set forth therein (incorporated by reference to
exhibit 10.12 to ProLogis' Registration Statement No.
33-78080).
10.3 -- Third Amended and Restated Investor Agreement, dated as
of September 9, 1997, between ProLogis and SC Group
Incorporated (incorporated by reference to exhibit 10.3
to Security Capital Group Incorporated's Form 10-Q for
the quarter ended September 30, 1997).
</TABLE>
119
<PAGE> 122
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.4 -- Form of Indemnification Agreement entered into between
ProLogis and its Trustees and executive officers
(incorporated by reference to exhibit 10.16 to ProLogis'
Registration Statement No. 33-73382).
10.5 -- Indemnification Agreements between ProLogis and each of
its independent Trustees (incorporated by reference to
exhibit 10.16 to ProLogis' Form 10-K for the year ended
December 31, 1995).
10.6 -- Declaration of Trust for the benefit of ProLogis'
independent Trustees (incorporated by reference to
exhibit 10.17 to ProLogis' Form 10-K for the year ended
December 31, 1995).
10.7 -- Share Option Plan for Outside Trustees (incorporated by
reference to exhibit 10.18 to ProLogis' Form 10-Q for the
quarter ended June 30, 1994).
10.8 -- 1999 Dividend Reinvestment and Share Purchase Plan
(incorporated by reference to the Prospectus contained in
Registration Statement No. 333-75893).
10.9 -- Amended and Restated Agreement of Limited Partnership of
ProLogis Limited Partnership-III, dated as of October 28,
1994, by and among ProLogis, as general partner, and the
limited partners set forth therein (incorporated by
reference to exhibit 10.3 to ProLogis' Form 10-Q for the
quarter ended September 30, 1994).
10.10 -- Amended and Restated Agreement of Limited Partnership of
ProLogis Limited Partnership-IV, dated as of October 28,
1994, by and among ProLogis IV, Inc., as general partner,
and the limited partners set forth therein (incorporated
by reference to exhibit 10.4 to ProLogis' Form 10-Q for
the quarter ended September 30, 1994).
10.11 -- Option Agreement and Consent, dated October 24, 1994, by
and between ProLogis and Farm Bureau Life Insurance
Company (incorporated by reference to exhibit 10.7 to
ProLogis' Form 10-Q for the quarter ended September 30,
1994).
10.12 -- Form of Secured Promissory Note and Pledge Agreement
relating to Share Purchase Program (incorporated by
reference to exhibit 10.17 to ProLogis' Form 10-K for the
year end December 31, 1998).
10.13 -- Loan Agreement, dated as of December 23, 1998, between
ProLogis and Connecticut General Life Insurance Company
(incorporated by reference to exhibit 10.19 to ProLogis'
Form 10-K for the year ended December 31, 1998).
10.14 -- Tranche A Promissory Note, dated as of February 22, 1999,
between ProLogis and Teachers Insurance and Annuity
Association of America (incorporated by reference to
exhibit 10.20 to ProLogis' Form 10-K for the year ended
December 31, 1998).
10.15 -- Tranche B Promissory Note, dated as of February 22, 1999,
between ProLogis and Teachers Insurance and Annuity
Association of America (incorporated by reference to
exhibit 10.21 to ProLogis' Form 10-K for the year ended
December 31, 1998).
10.16 -- Stock Purchase Agreement among Meridian, Harris Trust &
Savings Bank, as Trustee for Ameritech Pension Trust, and
OTR, on behalf of and as nominee for the State Teachers
Retirement Board of Ohio, dated as of December 29, 1995
(incorporated by reference to Meridian's Registration
Statement No. 333-00018).
10.17 -- Amended and Restated Loan Administration Agreement
between The Prudential Insurance Company of America and
Meridian, IndTennco Limited Partnership, Metro-Sierra
Limited Partnership, and Progress Center/Alabama Limited
Partnership, dated as of February 23, 1996 (incorporated
by reference to exhibit 10.24 to Meridian's Form 10-K for
1996).
</TABLE>
120
<PAGE> 123
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
10.18 -- Note Purchase Agreement among Meridian and The Travelers
Insurance Company (I/N/O TRAL & CO.), United Services
Automobile Association (I/N/O SALKELD & CO.), The
Variable Annuity Life Insurance Company, The United
States Life Insurance Company in the City of New York,
All American Life Insurance Company, The Old Line Life
Insurance Company of America, The Lincoln National Life
Insurance Company, Lincoln Life & Annuity Company of New
York, First Penn-Pacific Life Insurance Company (I/N/O
CUDD & CO), Lincoln National Health & Casualty Insurance
Company, Allied Life Insurance Company "B" (I/N/O GERLACH
& CO), sons of Norway (I/N/O VAR & CO), Aid Association
for Lutherans (I/N/O NIMER & CO), Metropolitan Life
Insurance Company, National Life Insurance Company, Life
Insurance Company of the Southwest, Keyport Life
Insurance Company (I/N/O BOST & CO), Union Central Life
Insurance Company (I/N/O HARE & CO), and Pan-American
Life Insurance Company, dated November 15, 1997
(incorporated by reference to exhibit 10.66 to Meridian's
Form 10-K for the year ended December 31, 1997).
10.19 -- Credit Agreement among ProLogis Trust, NationsBank, N.A.,
Commerzbank Aktien Gesellschaft, New York Branch, Chase
Bank of Texas, National Association and Lenders Named
Herein, dated as of March 29, 1999 (incorporated by
reference to exhibit 10.1 to ProLogis Form 8-K dated
April 16, 1999).
10.20 -- Term Loan Agreement among ProLogis Trust, NationsBank,
N.A., Commerzbank Aktien Gesellschaft, New York Branch,
Chase Bank of Texas, National Association and Lenders
Named Herein, dated as of March 29, 1999 (incorporated by
reference to exhibit 10.2 to ProLogis Form 8-K dated
April 16, 1999).
10.21 -- Mortgage Note dated as of March 29, 1999 between ProLogis
Trust and Pro-Industrial Funding Company, Inc.
(incorporated by reference to exhibit 10.1 to ProLogis
Form 8-K dated May 17, 1999).
10.22 -- Agreement of Limited Partnership of Meridian Realty
Partners, L.P. (incorporated by reference to exhibit 99.1
to ProLogis' Registration Statement No. 333-86081).
10.23 -- ProLogis Trust 1997 Long-Term Incentive Plan (as Amended
and Restated Effective as of October 20, 1999)
(incorporated by reference to exhibit 10.1 to ProLogis
Form 8-K dated November 15, 1999).
10.24 -- Multi-Currency Revolving Credit Facility Agreement among
PLD Europe Finance B.V. and PLD U.K. Finance B.V. as
Original Borrowers, ProLogis Trust as guarantor, ABN AMRO
Bank N.V. as Arranger and Societe Generale as
Co-Arranger, ABN AMRO Bank N.S. as Agent and Issuing Bank
as Banks as defined herein, dated December 17, 1999.
10.25 -- Form of Executive Protection Agreements entered into
between ProLogis and K. Dane Brooksher and Irving F.
Lyons III, dated as of June 24, 1999.
10.26 -- Form of Executive Protection Agreements entered into
between ProLogis and Walter C. Rakowich, Jeffrey H.
Schwartz, Robert J. Watson and John W. Seiple, dated as
of June 24, 1999.
12.1 -- Statement re: Computation of Ratio of Earnings to Fixed
Charges.
12.2 -- Statement re: Computation of Ratio of Earnings to
Combined Fixed Charges and Preferred Share Dividends.
21.1 -- Subsidiaries of ProLogis.
23.1 -- Consent of Arthur Andersen LLP.
23.2 -- Consent of KPMG -- Stockholm, Sweden.
</TABLE>
121
<PAGE> 124
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
23.3 -- Report of KPMG -- Stockholm, Sweden.
23.4 -- Consent of KPMG -- New York, New York.
23.5 -- Report of KPMG -- New York, New York.
24.1 -- Power of Attorney (included at page 115).
27 -- Financial Data Schedule.
</TABLE>
122
<PAGE> 1
Exhibit 4.24
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Company (as
defined below) or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
REGISTERED PRINCIPAL AMOUNT
No.: 2 $__________
CUSIP No.: 743410 AA0
PROLOGIS TRUST
7.05% NOTE DUE 2006
PROLOGIS TRUST, a real estate investment trust organized and existing
under the laws of the State of Maryland (hereinafter called the "Company," which
term shall include any successor under the Indenture hereinafter referred to),
for value received, hereby promises to pay to CEDE & CO., or registered assigns,
upon presentation, the principal sum of __________DOLLARS on July 15, 2006 and
to pay interest on the outstanding principal amount thereon from July 20, 1998
or from the most recent Interest Payment Date to which interest has been paid or
duly provided for, semi-annually in arrears on January 15 and July 15 in each
year, commencing on January 15, 1999, at the rate of 7.05% per annum, until the
entire principal hereof is paid or made available for payment. The interest so
payable, and punctually paid or duly provided for on any Interest Payment Date
will, as provided in the Indenture, be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest which shall be the January
1 or July 1 (whether or not a Business Day), as the case may be, next preceding
such Interest Payment Date. Any such interest not so punctually paid or duly
provided for shall forthwith cease to be payable to the Holder on such Regular
Record Date, and may either be paid to the Person in whose name this Security
(or one or more Predecessor Securities) is registered at the close of business
on a Special Record Date for the payment of such Defaulted Interest to be fixed
by the Trustee, notice whereof shall be given to Holders of Securities of this
series not more than 15 days and not less than 10 days prior to such Special
Record Date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in the Indenture. Payment of the
<PAGE> 2
principal of, Make-Whole Amount, if any, on, and interest on this Security will
be made at the office or agency of the Company maintained for that purpose in
the City of Boston, Commonwealth of Massachusetts, or elsewhere as provided in
the Indenture, in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts;
provided, however, that at the option of the Company payment of interest may be
made by (i) check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register or (ii) transfer to an account of
the Person entitled thereto located inside the United States.
Each Security of this series is one of a duly authorized issue of
securities of the Company (herein called the "Securities"), issued and to be
issued in one or more series under an Indenture, dated as of March 1, 1995
(herein called the "Indenture"), between the Company and State Street Bank and
Trust Company (herein called the "Trustee," which term includes any successor
trustee under the Indenture with respect to the series of which this Security is
a part), to which Indenture and all indentures supplemental thereto reference is
hereby made for a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Company, the Trustee and the Holders of
the Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Security is one of the series designated on
the first page hereof, limited in aggregate principal amount to $250,000,000.
Securities of this series may be redeemed at any time at the option of
the Company, in whole or in part, at a redemption price equal to the sum of (i)
the principal amount of the Securities being redeemed plus accrued interest
thereon to the Redemption Date and (ii) the Make-Whole Amount, if any, with
respect to such Securities.
The following definitions apply with respect to any redemption of the
Securities of this series at the option of the Company:
"Make-Whole Amount" means, in connection with any optional
redemption or accelerated payment of any Security, the excess, if any, of (i)
the aggregate present value as of the date of such redemption or accelerated
payment of each dollar of principal being redeemed or paid and the amount of
interest (exclusive of interest accrued to the date of redemption or accelerated
payment) that would have been payable in respect of such dollar if such
redemption or accelerated payment had not been made, determined by discounting,
on a semiannual basis, such principal and interest at the Reinvestment Rate
(determined on the third Business Day preceding the date such notice of
redemption is given or declaration of acceleration is made) from the respective
dates on which such principal and interest would have been payable if such
redemption or accelerated payment had not been made, over (ii) the aggregate
principal amount of the Securities being redeemed or paid.
"Reinvestment Rate" means .25% (one-quarter of one percent)
plus the arithmetic mean of the yields under the respective headings "This Week"
and "Last
2
<PAGE> 3
Week" published in the Statistical Release under the caption "Treasury Constant
Maturities" for the maturity (rounded to the nearest month) corresponding to the
remaining life to maturity, as of the payment date of the principal being
redeemed or paid. If no maturity exactly corresponds to such maturity, yields
for the two published maturities most closely corresponding to such maturity
shall be calculated pursuant to the immediately preceding sentence and the
Reinvestment Rate shall be interpolated or extrapolated from such yields on a
straight-line basis, rounding in each of such relevant periods to the nearest
month. For the purposes of calculating the Reinvestment Rate, the most recent
Statistical Release published prior to the date of determination of the
Make-Whole Amount shall be used.
"Statistical Release" means the statistical release designated
"H.15(519)" or any successor publication which is published weekly by the
Federal Reserve System and which establishes yields on actively traded United
States government securities adjusted to constant maturities, or, if such
statistical release is not published at the time of any determination under the
Indenture, then such other reasonably comparable index which shall be designated
by the Company.
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness of the Company on this Security and (b) certain restrictive
covenants and the related defaults and Events of Default applicable to the
Company, in each case, upon compliance by the Company with certain conditions
set forth in the Indenture, which provisions apply to this Security.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of, and the Make-Whole Amount, if any,
on, the Securities of this series may be declared due and payable in the manner
and with the effect provided in the Indenture.
As provided in and subject to the provisions of the Indenture, unless
the principal of all of the Securities of this series at the time Outstanding
shall already have become due and payable, the Holder of this Security shall not
have the right to institute any proceeding with respect to the Indenture or for
the appointment of a receiver or trustee or for any other remedy thereunder,
unless such Holder shall have previously given the Trustee written notice of a
continuing Event of Default with respect to the Securities of this series, the
Holders of not less than 25% in principal amount of the Securities of this
series at the time Outstanding shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default as Trustee and offered
the Trustee reasonable indemnity and the Trustee shall not have received from
the Holders of a majority in principal amount of Securities of this series at
the time Outstanding a direction inconsistent with such request, and the Trustee
shall have failed to institute any such proceeding for 60 days after receipt of
such notice, request and offer of indemnity. The foregoing shall not apply to
any
3
<PAGE> 4
suit instituted by the Holder of this Security for the enforcement of any
payment of principal hereof or any interest on or after the respective due dates
expressed herein.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series of Securities then Outstanding affected
thereby. The Indenture also contains provisions permitting the Holders of
specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such series,
to waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of, Make-Whole Amount, if
any, on, and interest on this Security at the times, place and rate, and in the
coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any Place of Payment where the principal of,
Make-Whole Amount, if any, on, and interest on this Security are payable duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Securities of this series, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities of this series are issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
4
<PAGE> 5
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
No recourse under or upon any obligation, covenant or agreement
contained in the Indenture or in this Security, or because of any indebtedness
evidenced thereby, shall be had against any promoter, as such, or against any
past, present or future shareholder, officer or trustee, as such, of the Company
or of any successor, either directly or through the Company or any successor,
under any rule of law, statute or constitutional provision or by the enforcement
of any assessment or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance of this Security
by the Holder thereof and as part of the consideration for the issue of the
Securities of this series.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
THE INDENTURE AND THE SECURITIES, INCLUDING THIS SECURITY, SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused "CUSIP" numbers to be
printed on the Securities of this series as a convenience to the Holders of such
Securities. No representation is made as to the correctness or accuracy of such
CUSIP numbers as printed on the Securities, and reliance may be placed only on
the other identification numbers printed hereon.
[This space intentionally left blank.]
5
<PAGE> 6
Unless the certificate of authentication hereon has been executed by or
on behalf of the Trustee by manual signature, this Security shall not be
entitled to any benefit under the Indenture or be valid or obligatory for any
purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the undersigned officer.
PROLOGIS TRUST
By:
---------------------------------
Name: Jeffrey A. Klopf
Title: Secretary
Attest
By:
-------------------------------------------
Name: Lucinda G. Marker
Title: Assistant Secretary
Dated: July ___, 1998
TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
BY:
-------------------------------------------
Authorized Officer
6
<PAGE> 7
================================================================================
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto
PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
=============================================
=============================================
- --------------------------------------------------------------------------------
(Please Print or Typewrite Name and Address including
Zip Code of Assignee)
- --------------------------------------------------------------------------------
the within Security of ProLogis Trust and hereby does irrevocably
constitute and appoint
- ---------------------------------------------------------------------- Attorney
to transfer said Security on the books of the within named Company with full
power of substitution in the premises.
Dated:
----------------------- ----------------------------------------
-----------------------------------
NOTICE: The signature to this assignment must correspond with the name as it
appears on the first page of the within Security in every particular, without
alteration or enlargement or any change whatever.
================================================================================
7
<PAGE> 1
Exhibit 4.25
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Company (as
defined below) or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
REGISTERED PRINCIPAL AMOUNT
No.: 1 $125,000,000
CUSIP No.: 743410AB8
PROLOGIS TRUST
7.00% NOTE DUE 2003
PROLOGIS TRUST, a real estate investment trust organized and existing
under the laws of the State of Maryland (hereinafter called the "Company," which
term shall include any successor under the Indenture hereinafter referred to),
for value received, hereby promises to pay to CEDE & CO., or registered assigns,
upon presentation, the principal sum of ONE HUNDRED TWENTY FIVE MILLION DOLLARS
on October 1, 2003 and to pay interest on the outstanding principal amount
thereon from October 9, 1998 or from the most recent Interest Payment Date to
which interest has been paid or duly provided for, semi-annually in arrears on
April 1 and October 1 in each year, commencing on April 1, 1999, at the rate of
7.00% per annum, until the entire principal hereof is paid or made available for
payment. The interest so payable, and punctually paid or duly provided for on
any Interest Payment Date will, as provided in the Indenture, be paid to the
Person in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such interest
which shall be the March 15 or September 15 (whether or not a Business Day), as
the case may be, next preceding such Interest Payment Date. Any such interest
not so punctually paid or duly provided for shall forthwith cease to be payable
to the Holder on such Regular Record Date, and may either be paid to the Person
in whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on a Special Record Date for the payment of
such Defaulted Interest to be fixed by the Trustee, notice whereof shall be
given to Holders of Securities of this series not more than 15 days and not less
than 10 days prior to such
<PAGE> 2
Special Record Date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities may be listed, and upon such notice as may be required by such
exchange, all as more fully provided in the Indenture. Payment of the principal
of, Make-Whole Amount, if any, on, and interest on this Security will be made at
the office or agency of the Company maintained for that purpose in the City of
Boston, Commonwealth of Massachusetts, or elsewhere as provided in the
Indenture, in such coin or currency of the United States of America as at the
time of payment is legal tender for payment of public and private debts;
provided, however, that at the option of the Company payment of interest may be
made by (i) check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register or (ii) transfer to an account of
the Person entitled thereto located inside the United States.
Each Security of this series is one of a duly authorized issue of
securities of the Company (herein called the "Securities"), issued and to be
issued in one or more series under an Indenture, dated as of March 1, 1995
(herein called the "Indenture"), between the Company and State Street Bank and
Trust Company (herein called the "Trustee," which term includes any successor
trustee under the Indenture with respect to the series of which this Security is
a part), to which Indenture and all indentures supplemental thereto reference is
hereby made for a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Company, the Trustee and the Holders of
the Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Security is one of the series designated on
the first page hereof, limited in aggregate principal amount to $125,000,000.
Securities of this series may be redeemed at any time at the option of
the Company, in whole or in part, at a redemption price equal to the sum of (i)
the principal amount of the Securities being redeemed plus accrued interest
thereon to the Redemption Date and (ii) the Make-Whole Amount, if any, with
respect to such Securities.
The following definitions apply with respect to any redemption of the
Securities of this series at the option of the Company:
"Make-Whole Amount" means, in connection with any optional
redemption or accelerated payment of any Security, the excess, if any, of (i)
the aggregate present value as of the date of such redemption or accelerated
payment of each dollar of principal being redeemed or paid and the amount of
interest (exclusive of interest accrued to the date of redemption or accelerated
payment) that would have been payable in respect of such dollar if such
redemption or accelerated payment had not been made, determined by discounting,
on a semiannual basis, such principal and interest at the Reinvestment Rate
(determined on the third Business Day preceding the date such notice of
redemption is given or declaration of acceleration is made) from the respective
dates on which such principal and interest
2
<PAGE> 3
would have been payable if such redemption or accelerated payment had not been
made, over (ii) the aggregate principal amount of the Securities being redeemed
or paid.
"Reinvestment Rate" means .25% (one-quarter of one percent)
plus the arithmetic mean of the yields under the respective headings "This Week"
and "Last Week" published in the Statistical Release under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the remaining life to maturity, as of the payment date of the
principal being redeemed or paid. If no maturity exactly corresponds to such
maturity, yields for the two published maturities most closely corresponding to
such maturity shall be calculated pursuant to the immediately preceding sentence
and the Reinvestment Rate shall be interpolated or extrapolated from such yields
on a straight-line basis, rounding in each of such relevant periods to the
nearest month. For the purposes of calculating the Reinvestment Rate, the most
recent Statistical Release published prior to the date of determination of the
Make-Whole Amount shall be used.
"Statistical Release" means the statistical release designated
"H.15(519)" or any successor publication which is published weekly by the
Federal Reserve System and which establishes yields on actively traded United
States government securities adjusted to constant maturities, or, if such
statistical release is not published at the time of any determination under the
Indenture, then such other reasonably comparable index which shall be designated
by the Company.
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness of the Company on this Security and (b) certain restrictive
covenants and the related defaults and Events of Default applicable to the
Company, in each case, upon compliance by the Company with certain conditions
set forth in the Indenture, which provisions apply to this Security.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of, and the Make-Whole Amount, if any,
on, the Securities of this series may be declared due and payable in the manner
and with the effect provided in the Indenture.
As provided in and subject to the provisions of the Indenture, unless
the principal of all of the Securities of this series at the time Outstanding
shall already have become due and payable, the Holder of this Security shall not
have the right to institute any proceeding with respect to the Indenture or for
the appointment of a receiver or trustee or for any other remedy thereunder,
unless such Holder shall have previously given the Trustee written notice of a
continuing Event of Default with respect to the Securities of this series, the
Holders of not less than 25% in principal amount of the Securities of this
series at the time Outstanding shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default as Trustee and offered
the Trustee reasonable indemnity
3
<PAGE> 4
and the Trustee shall not have received from the Holders of a majority in
principal amount of Securities of this series at the time Outstanding a
direction inconsistent with such request, and the Trustee shall have failed to
institute any such proceeding for 60 days after receipt of such notice, request
and offer of indemnity. The foregoing shall not apply to any suit instituted by
the Holder of this Security for the enforcement of any payment of principal
hereof or any interest on or after the respective due dates expressed herein.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series of Securities then Outstanding affected
thereby. The Indenture also contains provisions permitting the Holders of
specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such series,
to waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of, Make-Whole Amount, if
any, on, and interest on this Security at the times, place and rate, and in the
coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any Place of Payment where the principal of,
Make-Whole Amount, if any, on, and interest on this Security are payable duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Securities of this series, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities of this series are issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series of a different authorized denomination, as
requested by the Holder surrendering the same.
4
<PAGE> 5
No service charge shall be made for any such registration of transfer or
exchange, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
No recourse under or upon any obligation, covenant or agreement
contained in the Indenture or in this Security, or because of any indebtedness
evidenced thereby, shall be had against any promoter, as such, or against any
past, present or future shareholder, officer or trustee, as such, of the Company
or of any successor, either directly or through the Company or any successor,
under any rule of law, statute or constitutional provision or by the enforcement
of any assessment or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance of this Security
by the Holder thereof and as part of the consideration for the issue of the
Securities of this series.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
THE INDENTURE AND THE SECURITIES, INCLUDING THIS SECURITY, SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused "CUSIP" numbers to be
printed on the Securities of this series as a convenience to the Holders of such
Securities. No representation is made as to the correctness or accuracy of such
CUSIP numbers as printed on the Securities, and reliance may be placed only on
the other identification numbers printed hereon.
[This space intentionally left blank.]
5
<PAGE> 6
Unless the certificate of authentication hereon has been executed by or
on behalf of the Trustee by manual signature, this Security shall not be
entitled to any benefit under the Indenture or be valid or obligatory for any
purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the undersigned officer.
PROLOGIS TRUST
By:
-----------------------------------
Name: Jeffrey A. Klopf
Title: Secretary
Attest
By:
-------------------------------------
Name: Lucinda G. Marker
Title: Assistant Secretary
Dated: October ___, 1998
TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
BY:
-----------------------------------------
Authorized Officer
<PAGE> 7
================================================================================
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto
PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
=============================================
=============================================
- --------------------------------------------------------------------------------
(Please Print or Typewrite Name and Address including
Zip Code of Assignee)
- --------------------------------------------------------------------------------
the within Security of ProLogis Trust and hereby does irrevocably constitute and
appoint
- ---------------------------------------------------------------------- Attorney
to transfer said Security on the books of the within named Company with full
power of substitution in the premises.
Dated:
----------------------- ----------------------------------------
-----------------------------------
NOTICE: The signature to this assignment must correspond with the name as it
appears on the first page of the within Security in every particular, without
alteration or enlargement or any change whatever.
================================================================================
7
<PAGE> 1
Exhibit 4.26
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Company (as
defined below) or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
REGISTERED PRINCIPAL AMOUNT
No.: __ $__________
CUSIP No.: 743410 AC 6
PROLOGIS TRUST
6.70% NOTE DUE 2004
PROLOGIS TRUST, a real estate investment trust organized and existing
under the laws of the State of Maryland (hereinafter called the "Company," which
term shall include any successor under the Indenture hereinafter referred to),
for value received, hereby promises to pay to CEDE & CO., or registered assigns,
upon presentation, the principal sum of __________ DOLLARS on April 15, 2004 and
to pay interest on the outstanding principal amount thereon from April 26, 1999
or from the most recent Interest Payment Date to which interest has been paid or
duly provided for, semi-annually in arrears on April 15 and October 15 in each
year, commencing on October 15, 1999, at the rate of 6.70% per annum, until the
entire principal hereof is paid or made available for payment. The interest so
payable, and punctually paid or duly provided for on any Interest Payment Date
will, as provided in the Indenture, be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest which shall be the April 1
or October 1 (whether or not a Business Day), as the case may be, next preceding
such Interest Payment Date. Any such interest not so punctually paid or duly
provided for shall forthwith cease to be payable to the Holder on such Regular
Record Date, and may either be paid to the Person in whose name this Security
(or one or more Predecessor Securities) is registered at the close of business
on a Special Record Date for the payment of such Defaulted Interest to be fixed
by the Trustee, notice whereof shall be given to Holders of Securities of this
series not more than 15 days and not less than 10 days prior to such Special
Record Date, or may be paid at
<PAGE> 2
any time in any other lawful manner not inconsistent with the requirements of
any securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, all as more fully provided in the
Indenture. Payment of the principal of, Make-Whole Amount, if any, on, and
interest on this Security will be made at the office or agency of the Company
maintained for that purpose in the City of Boston, Commonwealth of
Massachusetts, or elsewhere as provided in the Indenture, in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided, however, that at the
option of the Company payment of interest may be made by (i) check mailed to the
address of the Person entitled thereto as such address shall appear in the
Security Register or (ii) transfer to an account of the Person entitled thereto
located inside the United States.
Each Security of this series is one of a duly authorized issue of
securities of the Company (herein called the "Securities"), issued and to be
issued in one or more series under an Indenture, dated as of March 1, 1995
(herein called the "Indenture"), between the Company and State Street Bank and
Trust Company (herein called the "Trustee," which term includes any successor
trustee under the Indenture with respect to the series of which this Security is
a part), to which Indenture and all indentures supplemental thereto reference is
hereby made for a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Company, the Trustee and the Holders of
the Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Security is one of the series designated on
the first page hereof, limited in aggregate principal amount to $250,000,000.
Securities of this series may be redeemed at any time at the option of
the Company, in whole or in part, at a redemption price equal to the sum of (i)
the principal amount of the Securities being redeemed plus accrued interest
thereon to the Redemption Date and (ii) the Make-Whole Amount, if any, with
respect to such Securities.
The following definitions apply with respect to any redemption of the
Securities of this series at the option of the Company:
"Make-Whole Amount" means, in connection with any optional
redemption or accelerated payment of any Security, the excess, if any, of (i)
the aggregate present value as of the date of such redemption or accelerated
payment of each dollar of principal being redeemed or paid and the amount of
interest (exclusive of interest accrued to the date of redemption or accelerated
payment) that would have been payable in respect of such dollar if such
redemption or accelerated payment had not been made, determined by discounting,
on a semiannual basis, such principal and interest at the Reinvestment Rate
(determined on the third Business Day preceding the date such notice of
redemption is given or declaration of acceleration is made) from the respective
dates on which such principal and interest would have been payable if such
redemption or accelerated payment had not been made, over (ii) the aggregate
principal amount of the Securities being redeemed or paid.
2
<PAGE> 3
"Reinvestment Rate" means 0.25% (one-quarter of one percent)
plus the arithmetic mean of the yields under the respective headings "This Week"
and "Last Week" published in the Statistical Release under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the remaining life to maturity, as of the payment date of the
principal being redeemed or paid. If no maturity exactly corresponds to such
maturity, yields for the two published maturities most closely corresponding to
such maturity shall be calculated pursuant to the immediately preceding sentence
and the Reinvestment Rate shall be interpolated or extrapolated from such yields
on a straight-line basis, rounding in each of such relevant periods to the
nearest month. For the purposes of calculating the Reinvestment Rate, the most
recent Statistical Release published prior to the date of determination of the
Make-Whole Amount shall be used.
"Statistical Release" means the statistical release designated
"H.15(519)" or any successor publication which is published weekly by the
Federal Reserve System and which establishes yields on actively traded United
States government securities adjusted to constant maturities, or, if such
statistical release is not published at the time of any determination under the
Indenture, then such other reasonably comparable index which shall be designated
by the Company.
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness of the Company on this Security and (b) certain restrictive
covenants and the related defaults and Events of Default applicable to the
Company, in each case, upon compliance by the Company with certain conditions
set forth in the Indenture, which provisions apply to this Security.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of, and the Make-Whole Amount, if any,
on, the Securities of this series may be declared due and payable in the manner
and with the effect provided in the Indenture.
As provided in and subject to the provisions of the Indenture, unless
the principal of all of the Securities of this series at the time Outstanding
shall already have become due and payable, the Holder of this Security shall not
have the right to institute any proceeding with respect to the Indenture or for
the appointment of a receiver or trustee or for any other remedy thereunder,
unless such Holder shall have previously given the Trustee written notice of a
continuing Event of Default with respect to the Securities of this series, the
Holders of not less than 25% in principal amount of the Securities of this
series at the time Outstanding shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default as Trustee and offered
the Trustee reasonable indemnity and the Trustee shall not have received from
the Holders of a majority in principal amount of Securities of this series at
the time Outstanding a direction inconsistent with such request, and the Trustee
shall have failed to institute any such proceeding for 60 days after
3
<PAGE> 4
receipt of such notice, request and offer of indemnity. The foregoing shall not
apply to any suit instituted by the Holder of this Security for the enforcement
of any payment of principal hereof or any interest on or after the respective
due dates expressed herein.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series of Securities then Outstanding affected
thereby. The Indenture also contains provisions permitting the Holders of
specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such series,
to waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of, Make-Whole Amount, if
any, on, and interest on this Security at the times, place and rate, and in the
coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any Place of Payment where the principal of,
Make-Whole Amount, if any, on, and interest on this Security are payable duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Securities of this series, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities of this series are issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
4
<PAGE> 5
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
No recourse under or upon any obligation, covenant or agreement
contained in the Indenture or in this Security, or because of any indebtedness
evidenced thereby, shall be had against any promoter, as such, or against any
past, present or future shareholder, officer or trustee, as such, of the Company
or of any successor, either directly or through the Company or any successor,
under any rule of law, statute or constitutional provision or by the enforcement
of any assessment or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance of this Security
by the Holder thereof and as part of the consideration for the issue of the
Securities of this series.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
THE INDENTURE AND THE SECURITIES, INCLUDING THIS SECURITY, SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused "CUSIP" numbers to be
printed on the Securities of this series as a convenience to the Holders of such
Securities. No representation is made as to the correctness or accuracy of such
CUSIP numbers as printed on the Securities, and reliance may be placed only on
the other identification numbers printed hereon.
[This space intentionally left blank.]
5
<PAGE> 6
Unless the certificate of authentication hereon has been executed by or
on behalf of the Trustee by manual signature, this Security shall not be
entitled to any benefit under the Indenture or be valid or obligatory for any
purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the undersigned officer.
PROLOGIS TRUST
By:
------------------------------------
Name: K. Dane Brooksher
Title: Chairman and Chief Executive Officer
Attest
By:
--------------------------------------
Name: Jerri L. Jenkins
Title: Assistant Secretary
Dated: April 26, 1999
TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
By:
-------------------------------------
Authorized Officer
<PAGE> 7
================================================================================
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto
PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
=============================================
=============================================
- --------------------------------------------------------------------------------
(Please Print or Typewrite Name and Address including
Zip Code of Assignee)
- --------------------------------------------------------------------------------
the within Security of ProLogis Trust and hereby does irrevocably constitute and
appoint
- ---------------------------------------------------------------------- Attorney
to transfer said Security on the books of the within named Company with full
power of substitution in the premises.
Dated:
----------------------- ----------------------------------------
-----------------------------------
NOTICE: The signature to this assignment must correspond with the name as it
appears on the first page of the within Security in every particular, without
alteration or enlargement or any change whatever.
================================================================================
7
<PAGE> 1
Exhibit 4.27
Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Company (as
defined below) or its agent for registration of transfer, exchange, or payment,
and any certificate issued is registered in the name of Cede & Co. or in such
other name as is requested by an authorized representative of DTC (and any
payment is made to Cede & Co. or to such other entity as is requested by an
authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered
owner hereof, Cede & Co., has an interest herein.
REGISTERED PRINCIPAL AMOUNT
No.: __ $__________
CUSIP No.: 743410 AD 4
PROLOGIS TRUST
7.10% NOTE DUE 2008
PROLOGIS TRUST, a real estate investment trust organized and existing
under the laws of the State of Maryland (hereinafter called the "Company," which
term shall include any successor under the Indenture hereinafter referred to),
for value received, hereby promises to pay to CEDE & CO., or registered assigns,
upon presentation, the principal sum of __________ DOLLARS on April 15, 2008 and
to pay interest on the outstanding principal amount thereon from April 26, 1999
or from the most recent Interest Payment Date to which interest has been paid or
duly provided for, semi-annually in arrears on April 15 and October 15 in each
year, commencing on October 15, 1999, at the rate of 7.10% per annum, until the
entire principal hereof is paid or made available for payment. The interest so
payable, and punctually paid or duly provided for on any Interest Payment Date
will, as provided in the Indenture, be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the close of
business on the Regular Record Date for such interest which shall be the April 1
or October 1 (whether or not a Business Day), as the case may be, next preceding
such Interest Payment Date. Any such interest not so punctually paid or duly
provided for shall forthwith cease to be payable to the Holder on such Regular
Record Date, and may either be paid to the Person in whose name this Security
(or one or more Predecessor Securities) is registered at the close of business
on a Special Record Date for the payment of such Defaulted Interest to be fixed
by the Trustee, notice whereof shall be given to Holders of Securities of this
series not more than 15 days and not less than 10 days prior to such Special
Record Date, or may be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Securities may be listed, and upon such notice as may be
<PAGE> 2
required by such exchange, all as more fully provided in the Indenture. Payment
of the principal of, Make-Whole Amount, if any, on, and interest on this
Security will be made at the office or agency of the Company maintained for that
purpose in the City of Boston, Commonwealth of Massachusetts, or elsewhere as
provided in the Indenture, in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts; provided, however, that at the option of the Company payment of
interest may be made by (i) check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register or (ii) transfer
to an account of the Person entitled thereto located inside the United States.
Each Security of this series is one of a duly authorized issue of
securities of the Company (herein called the "Securities"), issued and to be
issued in one or more series under an Indenture, dated as of March 1, 1995
(herein called the "Indenture"), between the Company and State Street Bank and
Trust Company (herein called the "Trustee," which term includes any successor
trustee under the Indenture with respect to the series of which this Security is
a part), to which Indenture and all indentures supplemental thereto reference is
hereby made for a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Company, the Trustee and the Holders of
the Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered. This Security is one of the series designated on
the first page hereof, limited in aggregate principal amount to $250,000,000.
Securities of this series may be redeemed at any time at the option of
the Company, in whole or in part, at a redemption price equal to the sum of (i)
the principal amount of the Securities being redeemed plus accrued interest
thereon to the Redemption Date and (ii) the Make-Whole Amount, if any, with
respect to such Securities.
The following definitions apply with respect to any redemption of the
Securities of this series at the option of the Company:
"Make-Whole Amount" means, in connection with any optional
redemption or accelerated payment of any Security, the excess, if any, of (i)
the aggregate present value as of the date of such redemption or accelerated
payment of each dollar of principal being redeemed or paid and the amount of
interest (exclusive of interest accrued to the date of redemption or accelerated
payment) that would have been payable in respect of such dollar if such
redemption or accelerated payment had not been made, determined by discounting,
on a semiannual basis, such principal and interest at the Reinvestment Rate
(determined on the third Business Day preceding the date such notice of
redemption is given or declaration of acceleration is made) from the respective
dates on which such principal and interest would have been payable if such
redemption or accelerated payment had not been made, over (ii) the aggregate
principal amount of the Securities being redeemed or paid.
2
<PAGE> 3
"Reinvestment Rate" means 0.25% (one-quarter of one percent)
plus the arithmetic mean of the yields under the respective headings "This Week"
and "Last Week" published in the Statistical Release under the caption "Treasury
Constant Maturities" for the maturity (rounded to the nearest month)
corresponding to the remaining life to maturity, as of the payment date of the
principal being redeemed or paid. If no maturity exactly corresponds to such
maturity, yields for the two published maturities most closely corresponding to
such maturity shall be calculated pursuant to the immediately preceding sentence
and the Reinvestment Rate shall be interpolated or extrapolated from such yields
on a straight-line basis, rounding in each of such relevant periods to the
nearest month. For the purposes of calculating the Reinvestment Rate, the most
recent Statistical Release published prior to the date of determination of the
Make-Whole Amount shall be used.
"Statistical Release" means the statistical release designated
"H.15(519)" or any successor publication which is published weekly by the
Federal Reserve System and which establishes yields on actively traded United
States government securities adjusted to constant maturities, or, if such
statistical release is not published at the time of any determination under the
Indenture, then such other reasonably comparable index which shall be designated
by the Company.
The Indenture contains provisions for defeasance at any time of (a) the
entire indebtedness of the Company on this Security and (b) certain restrictive
covenants and the related defaults and Events of Default applicable to the
Company, in each case, upon compliance by the Company with certain conditions
set forth in the Indenture, which provisions apply to this Security.
If an Event of Default with respect to Securities of this series shall
occur and be continuing, the principal of, and the Make-Whole Amount, if any,
on, the Securities of this series may be declared due and payable in the manner
and with the effect provided in the Indenture.
As provided in and subject to the provisions of the Indenture, unless
the principal of all of the Securities of this series at the time Outstanding
shall already have become due and payable, the Holder of this Security shall not
have the right to institute any proceeding with respect to the Indenture or for
the appointment of a receiver or trustee or for any other remedy thereunder,
unless such Holder shall have previously given the Trustee written notice of a
continuing Event of Default with respect to the Securities of this series, the
Holders of not less than 25% in principal amount of the Securities of this
series at the time Outstanding shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default as Trustee and offered
the Trustee reasonable indemnity and the Trustee shall not have received from
the Holders of a majority in principal amount of Securities of this series at
the time Outstanding a direction inconsistent with such request, and the Trustee
shall have failed to institute any such proceeding for 60 days after receipt of
such notice, request and offer of indemnity. The foregoing shall not apply to
any
3
<PAGE> 4
suit instituted by the Holder of this Security for the enforcement of any
payment of principal hereof or any interest on or after the respective due dates
expressed herein.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the Holders of the Securities of each series to be
affected under the Indenture at any time by the Company and the Trustee with the
consent of the Holders of not less than a majority in principal amount of the
Outstanding Securities of each series of Securities then Outstanding affected
thereby. The Indenture also contains provisions permitting the Holders of
specified percentages in principal amount of the Securities of each series at
the time Outstanding, on behalf of the Holders of all Securities of such series,
to waive compliance by the Company with certain provisions of the Indenture and
certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the Holder of this Security shall be conclusive and binding
upon such Holder and upon all future Holders of this Security and of any
Security issued upon the registration of transfer hereof or in exchange herefor
or in lieu hereof, whether or not notation of such consent or waiver is made
upon this Security.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of, Make-Whole Amount, if
any, on, and interest on this Security at the times, place and rate, and in the
coin or currency, herein prescribed.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
office or agency of the Company in any Place of Payment where the principal of,
Make-Whole Amount, if any, on, and interest on this Security are payable duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Securities of this series, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.
The Securities of this series are issuable only in registered form
without coupons in denominations of $1,000 and any integral multiple thereof. As
provided in the Indenture and subject to certain limitations therein set forth,
Securities of this series are exchangeable for a like aggregate principal amount
of Securities of this series of a different authorized denomination, as
requested by the Holder surrendering the same.
No service charge shall be made for any such registration of transfer
or exchange, but the Company may require payment of a sum sufficient to cover
any tax or other governmental charge payable in connection therewith.
4
<PAGE> 5
Prior to due presentment of this Security for registration of transfer,
the Company, the Trustee and any agent of the Company or the Trustee may treat
the Person in whose name this Security is registered as the owner hereof for all
purposes, whether or not this Security be overdue, and neither the Company, the
Trustee nor any such agent shall be affected by notice to the contrary.
No recourse under or upon any obligation, covenant or agreement
contained in the Indenture or in this Security, or because of any indebtedness
evidenced thereby, shall be had against any promoter, as such, or against any
past, present or future shareholder, officer or trustee, as such, of the Company
or of any successor, either directly or through the Company or any successor,
under any rule of law, statute or constitutional provision or by the enforcement
of any assessment or by any legal or equitable proceeding or otherwise, all such
liability being expressly waived and released by the acceptance of this Security
by the Holder thereof and as part of the consideration for the issue of the
Securities of this series.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
THE INDENTURE AND THE SECURITIES, INCLUDING THIS SECURITY, SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused "CUSIP" numbers to be
printed on the Securities of this series as a convenience to the Holders of such
Securities. No representation is made as to the correctness or accuracy of such
CUSIP numbers as printed on the Securities, and reliance may be placed only on
the other identification numbers printed hereon.
[This space intentionally left blank.]
5
<PAGE> 6
Unless the certificate of authentication hereon has been executed by or
on behalf of the Trustee by manual signature, this Security shall not be
entitled to any benefit under the Indenture or be valid or obligatory for any
purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed by the undersigned officer.
PROLOGIS TRUST
By:
---------------------------------
Name: K. Dane Brooksher
Title: Chairman and Chief Executive Officer
Attest
By:
------------------------------------
Name: Jerri L. Jenkins
Title: Assistant Secretary
Dated: April 26, 1999
TRUSTEE'S CERTIFICATE OF AUTHENTICATION:
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY, as Trustee
BY:
-----------------------------------
Authorized Officer
6
<PAGE> 7
================================================================================
ASSIGNMENT FORM
FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto
PLEASE INSERT SOCIAL
SECURITY OR OTHER IDENTIFYING
NUMBER OF ASSIGNEE
=============================================
=============================================
- --------------------------------------------------------------------------------
(Please Print or Typewrite Name and Address including
Zip Code of Assignee)
- --------------------------------------------------------------------------------
the within Security of ProLogis Trust and hereby does irrevocably constitute and
appoint
- ---------------------------------------------------------------------- Attorney
to transfer said Security on the books of the within named Company with full
power of substitution in the premises.
Dated:
----------------------- ----------------------------------------
-----------------------------------
NOTICE: The signature to this assignment must correspond with the name as it
appears on the first page of the within Security in every particular, without
alteration or enlargement or any change whatever.
================================================================================
7
<PAGE> 1
EXHIBIT 10.24
EXECUTION COPY
PLD EUROPE FINANCE B.V.
and
PLD UK FINANCE B.V.
as Original Borrowers
PROLOGIS TRUST
as Guarantor
ABN AMRO BANK N.V.
as Arranger
and
SOCIETE GENERALE
as Co-Arranger
ABN AMRO BANK N.V.
as Agent
ABN AMRO BANK N.V.
as L/C Issuing Bank
and
THE BANKS
(as defined herein)
-------------------------------------------------
EURO 325,000,000
MULTICURRENCY REVOLVING CREDIT FACILITY AGREEMENT
-------------------------------------------------
CLIFFORD CHANCE
<PAGE> 2
CONTENTS
<TABLE>
<CAPTION>
CLAUSE PAGE
<S> <C> <C>
1. DEFINITIONS AND INTERPRETATION...................................................... 1
2. THE FACILITY........................................................................ 17
3. UTILISATION OF THE FACILITY......................................................... 18
4. PAYMENT AND CALCULATION OF INTEREST................................................. 22
5. LETTER OF CREDIT COMMISSION AND L/C ISSUING BANK FEE................................ 22
6. MARKET DISRUPTION AND ALTERNATIVE INTEREST RATES.................................... 24
7. NOTIFICATION........................................................................ 25
8. REPAYMENT........................................................................... 26
9. BORROWERS' LIABILITIES IN RELATION TO LETTERS OF CREDIT............................. 27
10. CANCELLATION, VOLUNTARY PREPAYMENT AND EXTENSION.................................... 29
11. TAXES............................................................................... 31
12. TAX RECEIPTS........................................................................ 33
13. INCREASED COSTS..................................................................... 34
14. ILLEGALITY.......................................................................... 36
15. MITIGATION.......................................................................... 36
16. REPRESENTATIONS..................................................................... 37
17. FINANCIAL INFORMATION............................................................... 43
18. FINANCIAL CONDITION................................................................. 45
19. COVENANTS........................................................................... 50
20. EVENTS OF DEFAULT................................................................... 54
21. GUARANTEE AND INDEMNITY............................................................. 59
22. COMMITMENT COMMISSION AND FEES...................................................... 61
23. COSTS AND EXPENSES.................................................................. 62
24. DEFAULT INTEREST AND BREAK COSTS.................................................... 63
25. GUARANTOR'S INDEMNITIES............................................................. 64
26. CURRENCY OF ACCOUNT AND PAYMENT..................................................... 65
27. PAYMENTS............................................................................ 66
28. SET-OFF............................................................................. 68
29. SHARING............................................................................. 68
30. THE AGENT, THE ARRANGERS, THE BANKS AND THE L/C ISSUING BANK........................ 69
31. THE BANKS AND THE L/C ISSUING BANK.................................................. 74
32. ASSIGNMENTS AND TRANSFERS........................................................... 75
33. CALCULATIONS AND EVIDENCE OF DEBT................................................... 78
34. ADDITIONAL BORROWERS................................................................ 80
35. REMEDIES AND WAIVERS, PARTIAL INVALIDITY............................................ 80
36. NOTICES............................................................................. 81
37. COUNTERPARTS........................................................................ 82
38. AMENDMENTS.......................................................................... 82
39. GOVERNING LAW....................................................................... 83
40. JURISDICTION........................................................................ 83
</TABLE>
2
<PAGE> 3
THE SCHEDULES
<TABLE>
<S> <C> <C>
Schedule 1 : The Banks
Schedule 2 : Form of Transfer Certificate
Schedule 3 : Part A - Initial Conditions Precedent
Part B - Additional Conditions Precedent
Schedule 4 : Notice of Drawdown
Schedule 5 : Form of Compliance Certificate
Schedule 6 : Consolidated and Unconsolidated Affiliates
Schedule 7 : Form of Borrower Accession Agreement
Schedule 8 : Mandatory Costs
</TABLE>
3
<PAGE> 4
THIS AGREEMENT is made on 17 December 1999
BETWEEN
(1) PLD EUROPE FINANCE B.V. ("PLD EUROPE") and PLD UK FINANCE B.V. ("PLD
UK") (each an "ORIGINAL BORROWER", together the "ORIGINAL BORROWERS");
(2) PROLOGIS TRUST (the "GUARANTOR");
(3) ABN AMRO BANK N.V. (the "ARRANGER") and SOCIETE GENERALE (the
"CO-ARRANGER") as arranger and co-arranger of the Facility;
(4) ABN AMRO BANK N.V. as agent for the Banks (the "AGENT");
(5) ABN AMRO BANK N.V. as letter of credit issuing bank (the "L/C ISSUING
BANK"); and
(6) THE BANKS (as defined below).
IT IS AGREED as follows.
1. DEFINITIONS AND INTERPRETATION
1.1 DEFINITIONS
In this Agreement:
"ADDITIONAL BORROWER" means any wholly-owned subsidiary of the
Guarantor which becomes a Borrower pursuant to and in accordance with
the provisions of Clause 34 (Additional Borrowers).
"ADVANCE" means an advance made or to be made by the Banks hereunder
pursuant to Clause 3 (Utilisation of the Facility).
"APPLICABLE MARGIN" and "L/C COMMISSION RATE" means, at any time, the
percentage rate per annum set out in the table below alongside the S&P
Rating, the Moody's Rating and the D&P Rating (or, if only two Ratings
are available, alongside the two Ratings which are available) which is
applicable to the Guarantor at such time. In the event of a split
Rating, the applicable margin will be determined by reference to the
lower of the higher two Ratings (or, if only two Ratings are available,
the lower Rating):
<TABLE>
<CAPTION>
S&P Rating Moody's Rating D&P Rating Applicable Margin/
L/C Commission Rate
<S> <C> <C> <C>
BBB+ Baa1 BBB+ 0.75 per cent.
BBB Baa2 BBB 0.85 per cent.
BBB- Baa3 BBB- 0.95 per cent.
</TABLE>
"AUTHORISED SIGNATORY" means, in relation to an Obligor or proposed
Obligor, any person
<PAGE> 5
who is duly authorised (in such manner as may be reasonably acceptable
to the Agent) and in respect of whom the Agent has received a
certificate signed by a director or another Authorised Signatory of
such Obligor or proposed Obligor setting out the name and signature of
such person and confirming such person's authority to act.
"AVAILABLE COMMITMENT" means, in relation to a Bank at any time and
save as otherwise provided herein, its Commitment at such time LESS the
aggregate of its portions of the Euro Amounts of the Outstandings at
such time PROVIDED THAT such amount shall not be less than zero.
"AVAILABLE FACILITY" means, at any time, the aggregate amount of the
Available Commitments adjusted, in the case of any proposed
utilisation, so as to take into account:
(a) any reduction in the Commitment of a Bank pursuant to the
terms hereof;
(b) the Euro Amount of any Advance and/or Letter of Credit which,
pursuant to any other utilisation, is to be made and/or
issued; and
(c) the Euro Amount of any Advance and/or Letter of Credit which
is due to be repaid or expire,
on or before the proposed Utilisation Date relating to such
utilisation.
"BANK" means any financial institution:
(a) named in Schedule 1 (The Banks); or
(b) which has become a party hereto in accordance with Clause 32.4
(Assignments by Banks) or Clause 32.5 (Transfers by Banks),
and which has not ceased to be a party hereto in accordance with the
terms hereof.
"BORROWERS" means the Original Borrowers and each Additional Borrower,
(and "BORROWER" means any one of them).
"BORROWER ACCESSION AGREEMENT" means an accession agreement entered
into by an Additional Borrower pursuant to Clause 34 (Additional
Borrowers) substantially in the form set out in Schedule 7 (Form of
Borrower Accession Agreement).
"BUSINESS DAY" means a day (other than a Saturday or Sunday) (a) on
which banks generally are open for business in Amsterdam and Brussels,
(b) in relation to a payment of or a rate fixing relating to euros,
which is a TARGET Day and (c) in relation to a date for the payment or
purchase of any sum denominated in an Optional Currency, on which banks
generally are open for business in London and the principal financial
centre of the country of such Optional Currency.
2
<PAGE> 6
"CASH COLLATERAL" means, in relation to any Letter of Credit or L/C
Proportion of a Letter of Credit, a deposit in such interest-bearing
account or accounts as the Agent may specify, such deposit and account
to be secured in favour of, and on terms and conditions acceptable to,
the Agent.
"CHANGE OF CONTROL" means a person or group of persons acting together
with a common purpose becoming entitled to exercise, directly or
indirectly, the majority of the voting rights attaching to the ordinary
issued share capital of a Borrower or the Guarantor where such person
or group of persons was not previously so entitled.
"COMMITMENT" means, in relation to a Bank at any time and save as
otherwise provided herein, the amount set opposite its name in Schedule
1 (The Banks), or in the case of a Transferee, the amount set out in
the schedule to the relevant transfer certificate as being transferred
to that Transferee, as transferred (in whole or part), reduced, varied,
cancelled or terminated under this Agreement.
"COMPLIANCE CERTIFICATE" means a certificate substantially in the form
set out in Schedule 5 (Form of Compliance Certificate).
"COMPUTER SYSTEM" means any business critical computer hardware or
software or any computer equipment operated by electronic means.
"CONSOLIDATED AFFILIATE" means, with respect to the Guarantor, any
person in whom any member of the Group holds an equity or ownership
interest and whose financial results would be consolidated under GAAP
with the financial results of the Guarantor on the consolidated
financial statements of the Guarantor (and "CONSOLIDATED AFFILIATES"
means all of them).
"D&P" means Duff & Phelps Credit Rating Co.
"DISPUTE" means any dispute referred to in Clause 40 (Jurisdiction).
"DISTRIBUTION" means, with respect to any Stock of any person, (a) the
retirement, redemption, purchase, or other acquisition for value of
such Stock by such person, (b) the declaration or payment of any
dividend on or with respect to such Stock by such person, (c) any loan
or advance by that person to, or other investment by that person in,
the holder of any of such Stock, or (d) any other payment by that
person with respect to such Stock.
"EMU" means Economic and Monetary Union as contemplated in the Treaty
establishing the European Community (signed in Rome on 25 March 1957)
and amended by the Treaty on European Union (signed in Maastricht on 7
February 1992), as amended from time to time.
"ENCUMBRANCE" means (a) a mortgage, charge, pledge, lien or other
encumbrance securing
3
<PAGE> 7
any obligation of any person or (b) any other type of preferential
arrangement (including any title transfer and retention arrangement)
having a similar effect.
"ENVIRONMENTAL CLAIM" means any claim or proceedings by any person
pursuant to any Environmental Law.
"ENVIRONMENTAL LAW" means any applicable law in any jurisdiction in
which any member of the Group conducts business which relates to the
pollution or protection of the environment or harm to or the protection
of human health.
"ENVIRONMENTAL PERMITS" means any permit, licence, consent, approval
and other authorisation and the filing of any notification, report or
assessment required under any Environmental Law for the operation of
the business of any member of the Group conducted on or from the
properties owned or used by the relevant member of the Group.
"ERISA" means the United States Employee Retirement Income Security Act
of 1974 (as amended) and the rules and regulations promulgated
thereunder.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) which, together with the Guarantor, is treated as a
single employer under Section 414(b) or (c) of the United States
Internal Revenue Code of 1986, as amended, and the rules and
regulations promulgated thereunder.
"EURIBOR" means, in relation to any amount to be advanced to or owing
by an Obligor hereunder on which interest for a given period is to
accrue:
(a) the percentage rate per annum equal to the offered quotation
which appears on the page of the Telerate Screen which
displays the rate of the Banking Federation of the European
Union for the euro (being currently page "248") for such
period at or about 11.00 a.m. (Brussels time) on the Quotation
Date for such period or, if such page or such service shall
cease to be available, such other page or such other service
for the purpose of displaying an average rate of the Banking
Federation of the European Union as the Agent, after
consultation with the Banks and the Guarantor, shall select;
or
(b) if no quotation for the euro for the relevant period is
displayed and the Agent has not selected an alternative
service on which a quotation is displayed, the arithmetic mean
(rounded upwards to four decimal places) of the rates (as
notified to the Agent) at which each of the Reference Banks
was offering to prime banks in the European Interbank Market
deposits in euro of an equivalent amount for such period at or
about 11.00 a.m. (Brussels time) on the Quotation Date for
such period.
"EURO AMOUNT" means:
4
<PAGE> 8
(a) in relation to any Advance, its Original Euro Amount as
reduced by the proportion (if any) of such Advance which has
been repaid;
(b) in relation to any Letter of Credit, if such Letter of Credit
is denominated in euro, the maximum actual and contingent
liability of the L/C Issuing Bank thereunder or in respect
thereof; and
(c) in relation to any Letter of Credit, if such Letter of Credit
is denominated in an Optional Currency, the equivalent in euro
of the maximum actual and contingent liability of the L/C
Issuing Bank thereunder or in respect thereof, calculated as
at the later of the date which falls (i) two Business Days
before its issue date or any renewal date or (ii) on the most
recent L/C Valuation Date; and
(d) in relation to the Outstandings, the aggregate of the Euro
Amounts of each outstanding Advance and Letter of Credit.
"EVENT OF DEFAULT" means any circumstance described as such in Clause
20 (Events of Default).
"EXPIRY DATE" means, in relation to any Letter of Credit, the date on
which the maximum aggregate liability thereunder is to be reduced to
zero.
"EXTENDED MATURITY DATE" means the day which falls twelve months after
the Final Maturity Date.
"FACILITY" means the multicurrency revolving credit facility granted to
the Borrowers in this Agreement.
"FACILITY DOCUMENTS" means this Agreement, each Borrower Accession
Agreement and any other agreement or document, deed, notice or
certificate entered into or executed by any of the Obligors pursuant to
the terms hereof or thereof or otherwise in connection herewith or
therewith together with all amendments and supplements to any of the
foregoing (and "FACILITY DOCUMENT" shall be construed accordingly).
"FACILITY OFFICE" means, in relation to the Agent, the office
identified with its signature below or such other office as it may
select by notice and, in relation to any Bank, the office notified by
it to the Agent in writing prior to the date hereof (or, in the case of
a Transferee, at the end of the Transfer Certificate to which it is a
party as Transferee) or such other office as it may from time to time
select by notice to the Agent.
"FINAL MATURITY DATE" means the day which falls 48 months after the
date hereof.
"FINANCE PARTIES" means the Agent, the Arrangers, the L/C Issuing Bank
and the Banks.
5
<PAGE> 9
"FINANCIAL INDEBTEDNESS" means (without double counting) any
indebtedness for or in respect of:
(a) Indebtedness for Borrowed Money;
(b) any documentary credit facility;
(c) any interest rate swap, currency swap, forward foreign
exchange transaction, cap, floor, collar or option transaction
(but excluding, for the avoidance of doubt, any cap or foreign
exchange option transaction where no indebtedness is
outstanding in relation thereto) or any other treasury
transaction or any combination thereof or any other
transaction entered into in connection with protection against
or benefit from fluctuation in any rate or price (and the
amount of the Financial Indebtedness in relation to all such
transactions shall be the net amount calculated by reference
to the mark-to-market valuations of all such transactions at
the relevant time); and
(d) any guarantee, indemnity, bond, standby letter of credit or
similar instrument for any of the items referred to in
paragraphs (a) to (c) above.
"GAAP" has the meaning given to it in Clause 18.2 (Financial
Definitions).
"GROUP" means the Guarantor and its Consolidated Affiliates.
"INDEBTEDNESS FOR BORROWED MONEY" means (without double counting) any
indebtedness for or in respect of:
(a) moneys borrowed;
(b) any amount raised by acceptance under any acceptance credit
facility;
(c) any amount raised pursuant to any note purchase facility or
the issue of bonds, notes, debentures, loan stock or any
similar instrument;
(d) any amount raised pursuant to any issue of shares which are
expressed to be redeemable before the Final Maturity Date (or,
if the Final Maturity Date is extended in accordance with the
provisions hereof, the Extended Maturity Date);
(e) the amount of any liability in respect of any lease or hire
purchase contract which would, in accordance with generally
accepted accounting principles in the relevant jurisdiction,
be treated as a finance or capital lease;
(f) the amount of any liability in respect of any advance or
deferred purchase agreement if one of the primary reasons for
entering into such agreement is to raise finance;
6
<PAGE> 10
(g) receivables sold or discounted (other than on a non-recourse
basis);
(h) any agreement or option to re-acquire an asset if one of the
primary reasons for entering into such agreement or option is
to raise finance;
(i) any amount raised under any other transaction (including any
forward sale or purchase agreement) having the commercial
effect of a borrowing; and
(j) the amount of any liability in respect of any guarantee or
indemnity for any of the items referred to in paragraphs (a)
to (i) above.
"INFORMATION MEMORANDUM" means the document concerning the Obligors
which, at their request and on their behalf, was prepared in relation
to this transaction and distributed by the Arrangers to selected banks
during November 1999.
"INSTRUCTING GROUP" means, save as otherwise provided herein:
(a) whilst there are no Outstandings, a Bank or Banks whose
Commitments amount (or, if each Bank's Commitment has been
reduced to zero, did immediately before such reduction to
zero, amount) in aggregate to more than sixty-six and two
thirds per cent. of the Total Commitments; and
(b) whilst there are Outstandings, a Bank or Banks to whom in
aggregate more than sixty-six and two thirds per cent. of the
Outstandings is owed.
"I.R.C." means the United States Internal Revenue Code of 1986, as
amended.
"L/C AMOUNT" means:
(a) each sum paid or due and payable by the L/C Issuing Bank to
the beneficiary of a Letter of Credit pursuant to the terms of
such Letter of Credit; and
(b) all liabilities, costs (including, without limitation, any
costs incurred in funding any amount which falls due from the
L/C Issuing Bank under a Letter of Credit), claims, losses and
expenses which the L/C Issuing Bank incurs or sustains in
connection with a Letter of Credit,
in each case which has not been reimbursed pursuant to Clause 9
(Borrowers' Liabilities in relation to Letters of Credit).
"L/C COMMISSION RATE" shall have the meaning given thereto in the
definition of "Applicable Margin".
7
<PAGE> 11
"L/C ISSUING BANK" means ABN AMRO Bank N.V. or such bank as may be
appointed as such by the Agent after consultation with the Guarantor.
"L/C PROPORTION" means, in relation to a Bank in respect of any Letter
of Credit and save as otherwise provided herein, the proportion
(expressed as a percentage) borne by such Bank's Available Commitment
to the Available Facility immediately prior to the issue of such Letter
of Credit.
"L/C VALUATION DATE" means the first Business Day which falls six
months after the date hereof and each day falling at six monthly
intervals thereafter.
"LETTER OF CREDIT" means a letter of credit issued or to be issued by
the L/C Issuing Bank pursuant to Clause 3 (Utilisation of the Facility)
in a form which is acceptable to the Agent and the relevant L/C Issuing
Bank.
"LIBOR" means, in relation to any amount denominated in an Optional
Currency owed by an Obligor hereunder on which interest for a given
period is to accrue:
(a) the percentage rate per annum equal to the offered quotation
which appears on the page of the Telerate Screen which
displays an average British Bankers Association Interest
Settlement Rate for the currency of the relevant amount (being
currently "3740" or, as the case may be, "3750") for such
period at or about 11.00 a.m. (London time) on the Quotation
Date for such period or, if such page or such service shall
cease to be available, such other page or such other service
for the purpose of displaying an average British Bankers
Association Interest Settlement Rate for such currency as the
Agent, after consultation with the Banks and the Guarantor,
shall select; or
(b) if no quotation for the relevant currency and the relevant
period is displayed and the Agent has not selected an
alternative service on which a quotation is displayed, the
arithmetic mean (rounded upwards to four decimal places) of
the rates (as notified to the Agent) at which each of the
London Reference Banks was offering to prime banks in the
London Interbank Market deposits in the currency of such
amount and for such period at or about 11.00 a.m. (London
time) on the Quotation Date for such period.
"MANDATORY COSTS RATE" means the rate determined in accordance with
Schedule 8 (Mandatory Costs).
"MATERIAL ADVERSE EFFECT" means any (a) material impairment of the
ability of the Guarantor to perform any of its payment or other
material obligations under any Facility Document or (b) material and
adverse effect on the financial condition of the Group taken as a
whole.
"MOODY'S" means Moody's Investor Service, Inc.
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"NATIONSBANK FACILITY AGREEMENT" means the facility agreement dated as
of 29 March 1999 and made between the Guarantor as borrower and
NationsBank, N.A., as administrative agent, Commerzbank
Aktiengesellschaft, New York Branch, as syndication agent, Chase Bank
of Texas, National Association as documentation agent and the financial
institutions named therein as lenders, as amended on 19 May 1999,
pursuant to which the lenders referred to therein agreed to make
available to the Guarantor a US$550,000,000 facility in accordance with
the terms thereof.
"NOTICE OF DRAWDOWN" means a notice substantially in the form set out
in the Schedule 4 (Notice of Drawdown).
"OBLIGORS" means the Borrowers and the Guarantor (and "OBLIGOR" means
any one of them).
"ORIGINAL BORROWERS" means PLD Europe and PLD UK.
"OPTIONAL CURRENCY" means sterling and any currency (except euro) which
is freely transferable and freely convertible into euro, which is
available to banks in the European Interbank Market and which has been
previously approved in writing by the Agent (acting on the instructions
of all the Banks) as an optional currency for the purposes of any
utilisation at least three Business Days prior to delivery of the
Notice of Drawdown for such Advance.
"ORIGINAL EURO AMOUNT" means, in relation to an Advance or Letter of
Credit, the amount thereof requested in the Notice of Drawdown relating
thereto (as the same may be reduced pursuant to Clause 3.9 (Reduction
of Available Commitment)) or, if such Advance or Letter of Credit is
denominated in an Optional Currency, the equivalent of such amount (as
the same may be so reduced) in euro, calculated as at the date of such
Notice of Drawdown.
"ORIGINAL FINANCIAL STATEMENTS" means:
(a) in relation to the Guarantor, its audited consolidated
financial statements for its financial year ended 31 December
1998;
(b) in relation to each Original Borrower, its opening balance
sheet as at 31 October 1999 delivered to the Agent pursuant to
Clause 2.3 (Conditions Precedent); and
(c) in relation to each Additional Borrower, any financial
statements in relation to such Additional Borrower required to
be delivered pursuant to Schedule 3, Part B (Additional
Conditions Precedent).
"OUTSTANDINGS" means, at any time, the aggregate of the Euro Amounts of
each outstanding Advance and the Euro Amounts of the maximum actual and
contingent liabilities of the Banks in respect of each outstanding
Letter of Credit.
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"PARTICIPATING MEMBER STATE" means any member state of the European
Union which has adopted the euro as its lawful currency at the relevant
time.
"PENSION PLAN" means an employee pension or benefit plan covered by
Title IV of ERISA or any other applicable pension laws established or
maintained by any member of the Group and any other ERISA Affiliate.
"PERMITTED DISTRIBUTIONS" means, for the Guarantor for any fiscal year
of the Guarantor, an amount not to exceed the greater of (a)
ninety-five per cent. (95%) of Funds from Operations (as defined in
Clause 18.2 (Financial Definitions)) for such fiscal year and (b) one
hundred per cent. (100%) of real estate investment trust taxable income
(as determined under 857 of the I.R.C.) but determined (i) without
regard to the deduction for dividends paid, (ii) by excluding any net
capital gain and (iii) by subtracting any "excess noncash income" as
defined in I.R.C. 857(e) for such fiscal year.
"PERMITTED ENCUMBRANCE" means:
(a) any netting or set-off arrangement entered into by any member
of the Group in the normal course of its banking arrangements
for the purpose of netting debit and credit balances, or any
set-off arrangement which arises by operation of law as a
result of any member of the Group opening a bank account;
(b) any title transfer or retention of title arrangement entered
into by any member of the Group in the normal course of its
trading activities on the counterparty's standard or usual
terms;
(c) any lien arising by operation of law and in the normal course
of business;
(d) any Encumbrance over goods and documents of title to goods
arising out of letter of credit transactions entered into in
the ordinary course of business;
(e) any Encumbrance resulting from the subordination by a member
of the Group of indebtedness due to it from other members of
the Group or any third parties;
(f) any Encumbrance made to secure payment of workers compensation
(or to participate in any fund in connection with workers
compensation insurance), unemployment insurance, pensions or
social security programs;
(g) any lien or other Encumbrance for taxes not yet due and
payable or which are being contested in good faith by
appropriate proceedings diligently conducted and for which
reserves in accordance with generally accepted accounting
principles or otherwise reasonably acceptable to the Agent
have been provided;
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(h) any Encumbrance securing assessments or charges payable to a
property owner association or similar entity, which
assessments are not yet due and payable or are being contested
in good faith by appropriate proceedings diligently conducted,
and for which reserves in accordance with generally accepted
accounting principles or otherwise reasonably acceptable to
the Agent have been provided;
(i) any Encumbrance granted to a member of the Group by any other
member of the Group; and
(j) any other Encumbrance in respect of Properties or other assets
securing Indebtedness (as defined in Clause 18.2 (Financial
Definitions)) (where such Encumbrance is not otherwise
permitted pursuant to any of paragraphs (a) to (i) above)
where the aggregate Indebtedness (as so defined) secured by
such Encumbrance, when aggregated with the aggregate of all
other Indebtedness (as so defined) secured by any other such
Encumbrance not otherwise permitted pursuant to any of
paragraphs (a) to (i) above, does not exceed an amount equal
to 25% of Total Assets (as defined in Clause 18.2 (Financial
Definitions)) of the Guarantor (determined on a consolidated
basis).
"POTENTIAL EVENT OF DEFAULT" means any event which could reasonably be
expected to become (with the passage of time, the giving of notice, the
making of any determination hereunder or any combination thereof) an
Event of Default.
"PROPERTY" means any and all real property owned by any member of the
Group or any Unconsolidated Affiliate.
"PROPORTION" means, in relation to a Bank:
(a) whilst no Advance or Letter of Credit is outstanding, the
proportion borne by its Commitment to the Total Commitments
(or, if the Total Commitments are then zero, by its Commitment
to the Total Commitments immediately prior to their reduction
to zero); or
(b) whilst at least one Advance or Letter of Credit is
outstanding, the proportion borne by its share of the Euro
Amount of the Outstandings to the Euro Amount of the
Outstandings.
"QUALIFYING LENDER" means any bank in respect of which the relevant
Borrower will not be obliged to make any withholding or deduction on
account of tax from payments of interest made to such bank under the
law of the Relevant Jurisdiction of that Borrower.
"QUOTATION DATE" means, in relation to any period for which an interest
rate is to be determined hereunder, the day on which quotations would
ordinarily be given by prime
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banks in the European Interbank Market (or, if the currency in relation
to which such rate is to be determined is an Optional Currency, the
London Interbank Market) for deposits in the currency in relation to
which such rate is to be determined for delivery on the first day of
that period, PROVIDED THAT, if, for any such period, quotations would
ordinarily be given on more than one date, the Quotation Date for that
period shall be the last of those dates.
"RATING" means the most recent credit rating of the Guarantor, as
announced from time to time by S&P, Moody's or, as the case may be,
D&P, which is assigned to any class of senior, unsecured liability
securities (having a maturity date falling not less than 12 months
after the date of issue) issued by the Guarantor as to which no letter
of credit, guaranty, or third party credit support is in place,
regardless of whether all or any part of such liability has been issued
at the time such announcement is made.
"REIT" means an entity which is a real estate investment trust under
I.R.C. "856-859 or any successor laws thereto.
"REFERENCE BANKS" means, the principal London offices of ABN AMRO Bank
N.V. Societe Generale and Bank of America, N.A. or such banks as may be
appointed as such by the Agent after consultation with the Guarantor.
"REFRIGERATED WAREHOUSE BUSINESS" means all operations and assets
invested in by the Group related to refrigerated storage and
distribution of goods from temperature-controlled facilities.
"RELEVANT JURISDICTION" means:
(a) in relation to the Guarantor, the State of Maryland, United
States of America;
(b) in relation to each Original Borrower, The Netherlands; and
(c) in relation to each other Obligor and each other member of the
Group, its jurisdiction of incorporation.
"REPAYMENT DATE" means, in relation to an Advance, the last day of the
Term thereof.
"REPEATED REPRESENTATIONS" means each of the representations set out in
Clause 16.1 (Status) to Clause 16.29 (No Event of Default) other than
Clause 16.4 (to the extent only that it relates to execution of the
Facility Documents), Clause 16.14 (Information Memorandum), Clause
16.17 (No Filing or Stamp Taxes), Clause 16.19 (No Deduction or
Withholding) and Clause 16.29 (No Event of Default) (to the extent that
it refers to a Potential Event of Default).
"ROLLOVER ADVANCE" means an Advance which is used to refinance a
maturing Advance and which is in the same or lesser amount and the same
currency as such maturing Advance and is to be drawn on the day such
maturing Advance is to be repaid.
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"S&P" means Standard & Poor's Rating Group, a division of McGraw Hill,
Inc., a New York corporation;
"STOCK" means all shares, options, warrants, general or limited
partnership interests, membership interests, or other ownership
interests (regardless of how designated) of or in a corporation,
partnership, limited liability company, trust or other entity, whether
voting or non-voting, including common stock, preferred stock, or any
other "equity security" (as such term is defined in Rule 3a11-1 of the
General Rules and Regulations promulgated by the United States
Securities and Exchange Commission under the United States Securities
Exchange Act of 1934, as amended).
"SUBSEQUENT PARTICIPANT" means a member state of the European Union
which adopts the euro as its lawful currency after 1 January 1999.
"SYNDICATION DATE" means the day specified by the Arrangers as the day
on which primary syndication of the Facility is completed.
"TARGET" means Trans-European Automated Real-time Gross settlement
Express Transfer system.
"TARGET DAY" means a day on which payments in euros are settled in the
TARGET system.
"TERM" means, save as otherwise provided herein:
(a) in relation to any Advance, the period for which such Advance
is borrowed as specified in the Notice of Drawdown relating
thereto;
(b) in relation to any Letter of Credit, the period from its
Utilisation Date until its Expiry Date; and
(c) in relation to an Unpaid Sum, any of those periods mentioned
in Clause 24.1 (Default Interest Periods).
"TOTAL COMMITMENTS" means, at any time, the aggregate of the Banks'
Commitments.
"TRANSFER CERTIFICATE" means a certificate substantially in the form
set out in Schedule 2 (Form of Transfer Certificate) signed by a Bank
and a Transferee under which:
(a) such Bank seeks to procure the transfer to such Transferee of
all or a part of such Bank's rights, benefits and obligations
hereunder upon and subject to the terms and conditions set out
in Clause 31.3 (Assignments and Transfers by Banks); and
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<PAGE> 17
(b) such Transferee undertakes to perform the obligations it will
assume as a result of delivery of such certificate to the
Agent as contemplated in Clause 31.6 (Transfers by Banks).
"TRANSFER DATE" means, in relation to any Transfer Certificate, the
date for the making of the transfer as specified in such Transfer
Certificate.
"TRANSFEREE" means a person to which a Bank seeks to transfer by
novation all or part of such Bank's rights, benefits and obligations
hereunder.
"UNCONSOLIDATED AFFILIATE" means any person in whom any member of the
Group holds Stock and whose financial results would not be consolidated
under GAAP with the financial results of the Group on the consolidated
financial statements of the Group other than (i) the ProLogis European
Properties Fund, (ii) ProLogis California I LLC and (iii) (with the
prior written consent of an Instructing Group) any other such person
(such consent not to be unreasonably withheld or delayed where ProLogis
can demonstrate to the reasonable satisfaction of an Instructing Group
that the Group does not own all or substantially all of the economic
interest in such person).
"UNPAID SUM" means the unpaid balance of any of the sums referred to in
Clause 24.1 (Default Interest Periods).
"UTILISATION DATE" means, in relation to an Advance, the date on which
it is to be made and, in relation to a Letter of Credit, the date on
which it is to be issued.
"YEAR 2000 COMPLIANT" means, in relation to any Computer System, that
any reference to or use of a date on or after 31 December 1999 in the
operation of that Computer System will not have a material adverse
effect on the use of that Computer System.
1.2 INTERPRETATION
Any reference in this Agreement to:
an "ARRANGER", the "L/C ISSUING BANK", the "AGENT" or any "BANK" shall
be construed so as to include its and any subsequent successors and
permitted transferees in accordance with their respective interests;
an "ARRANGER" or the "ARRANGERS" includes a reference to each of ABN
AMRO Bank N.V. as Arranger and Societe Generale as Co-Arranger;
"CONTINUING", in relation to an Event of Default, shall be construed as
a reference to an Event of Default which has not been remedied or
waived in accordance with the terms hereof and, in relation to a
Potential Event of Default, one which has not been remedied within the
relevant grace period or waived in accordance with the terms hereof
and, in the case of late delivery of a document or withdrawal of a
claim whose existence constituted an Event of Default, that Event of
Default is not continuing once delivery or withdrawal has occurred.
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<PAGE> 18
a "DISPOSAL" shall be construed so as to include (without limitation)
the sale, lease or transfer of any revenues or assets of any member of
the Group.
the "EQUIVALENT" on any date in one currency (the "FIRST CURRENCY") of
an amount denominated in another currency (the "SECOND CURRENCY") is a
reference to the amount of the first currency which could be purchased
with the amount of the second currency at the spot rate of exchange
quoted by the Agent at or about 11.00 a.m. on such date for the
purchase of the first currency with the second currency;
a "HOLDING COMPANY" of a company or corporation shall be construed as a
reference to any company or corporation of which the first-mentioned
company or corporation is a subsidiary;
"INDEBTEDNESS" shall be construed so as to include any obligation
(whether incurred as principal or as surety) for the payment or
repayment of money, whether present or future, actual or contingent;
a "LAW" shall be construed as any law (including common or customary
law), statute, constitution, decree, judgment, treaty, regulation,
directive, bye-law, order or any other legislative measure of any
government, supranational, local government, statutory or regulatory
body or court;
a "MONTH" is a reference to a period starting on one day in a calendar
month and ending on the numerically corresponding day in the next
succeeding calendar month save that:
(a) if any such numerically corresponding day is not a Business
Day, such period shall end on the immediately succeeding
Business Day to occur in that next succeeding calendar month
or, if none, it shall end on the immediately preceding
Business Day; and
(b) if there is no numerically corresponding day in that next
succeeding calendar month, that period shall end on the last
Business Day in that next succeeding calendar month,
(and references to "MONTHS" shall be construed accordingly);
a Bank's "PARTICIPATION" in relation to a Letter of Credit shall be
construed as a reference to the rights and obligations of such Bank in
relation to such Letter of Credit as such rights are expressly set out
in this Agreement;
a "PERSON" shall be construed as a reference to any person, firm,
company, corporation, government, state or agency of a state or any
association or partnership (whether or not having separate legal
personality) of two or more of the foregoing;
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"REPAY" (or any derivative form thereof) shall, subject to any contrary
indication, be construed to include "PREPAY" (or, as the case may be,
the corresponding derivative form thereof);
a "SUBSIDIARY" of a company or corporation (other than the Guarantor)
shall be construed as a reference to any company or corporation:
(a) which is controlled, directly or indirectly, by the
first-mentioned company or corporation;
(b) more than half the issued share capital of which is
beneficially owned, directly or indirectly, by the
first-mentioned company or corporation; or
(c) which is a subsidiary of another subsidiary of the
first-mentioned company or corporation
and, for these purposes, a company or corporation shall be treated as
being controlled by another if that other company or corporation is
able to direct its affairs and/or to control the composition of its
board of directors or equivalent body;
a "SUCCESSOR" shall be construed so as to include an assignee or
successor in title of such party and any person who under the laws of
its jurisdiction of incorporation or domicile has assumed the rights
and obligations of such party under this Agreement or to which, under
such laws, such rights and obligations have been transferred;
"TAX" means any tax, assessment or other governmental charge or levy
imposed upon any person, its income, or any of its properties,
franchises or assets;
"VAT" shall be construed as a reference to value added tax including
any similar tax which may be imposed in place thereof from time to
time;
a "WHOLLY-OWNED SUBSIDIARY" of a company or corporation shall be
construed as a reference to any company or corporation which has no
other members except that other company or corporation and that other
company's or corporation's wholly-owned subsidiaries or persons acting
on behalf of that other company or corporation or its wholly-owned
subsidiaries; and
the "WINDING-UP", "DISSOLUTION" or "ADMINISTRATION" of a company or
corporation shall be construed so as to include any equivalent or
analogous proceedings under the law of the jurisdiction in which such
company or corporation is incorporated or any jurisdiction in which
such company or corporation carries on business.
1.3 CURRENCY SYMBOLS AND DEFINITIONS
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1.3.1 "EURO" and "EUR" denote the single currency of the
European Union as constituted by the Treaty on European
Union and as referred to in EMU Legislation.
1.3.2 "STERLING" denotes lawful currency of the United Kingdom.
1.4 AGREEMENTS AND STATUTES
Any reference in this Agreement to:
1.4.1 this Agreement or any other agreement or document shall be
construed as a reference to this Agreement or, as the case may
be, such other agreement or document as the same may have
been, or may from time to time be, amended, varied, novated or
supplemented; and
1.4.2 a statute or treaty shall be construed as a reference to such
statute or treaty as the same may have been, or may from time
to time be, amended or, in the case of a statute, re-enacted.
1.5 HEADINGS
Clause and Schedule headings are for ease of reference only.
1.6 TIME
Any reference in this Agreement to a time of day shall, unless a
contrary indication appears, be a reference to Amsterdam time.
2. THE FACILITY
2.1 GRANT OF THE FACILITY
The Banks grant to the Borrowers, upon the terms and subject to the
conditions hereof, a multicurrency revolving credit and letter of
credit facility in an aggregate amount of EUR 300,000,000 or its
equivalent from time to time in Optional Currencies.
2.2 PURPOSE AND APPLICATION
The Facility is intended for the purpose of financing and refinancing
indebtedness incurred for the purpose of acquiring and developing land
or acquiring land tracts for later development and for working capital
purposes (in any such case, predominantly in Western Europe) and,
accordingly, each Borrower shall apply all amounts raised by it
hereunder in or towards satisfaction of such purposes and none of the
Finance Parties shall be obliged to concern themselves with such
application.
2.3 CONDITIONS PRECEDENT
Save as the Banks may otherwise agree, none of the Borrowers may
deliver any Notice of Drawdown unless the Agent has confirmed to the
Guarantor and the Banks that it has received all of the documents and
other evidence listed in Schedule 3 (Conditions
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Precedent) and that each is, in form and substance, satisfactory to the
Agent.
2.4 BANKS' OBLIGATIONS SEVERAL
The obligations of each Bank and the L/C Issuing Bank are several and
the failure by a Bank or the L/C Issuing Bank to perform its
obligations hereunder shall not affect the obligations of an Obligor
towards any other party hereto nor shall any other party be liable for
the failure by such Bank or the L/C Issuing Bank to perform its
obligations hereunder.
2.5 BANKS' RIGHTS SEVERAL
The rights of each Bank are several and any debt arising hereunder at
any time from an Obligor to any of the other parties hereto shall be a
separate and independent debt. Each such party shall be entitled to
protect and enforce its individual rights arising out of this Agreement
independently of any other party (so that it shall not be necessary for
any party hereto to be joined as an additional party in any proceedings
for this purpose).
3. UTILISATION OF THE FACILITY
3.1 DELIVERY OF NOTICE OF DRAWDOWN
Any Borrower may from time to time request the making of an Advance or
the issuing of a Letter of Credit by delivering to the Agent by not
later than 10.00 a.m. on the third Business Day before the proposed
Utilisation Date a completed Notice of Drawdown therefor, receipt of
which shall oblige the Borrowers to borrow the amount therein requested
on the date therein stated upon the terms and subject to the conditions
contained therein.
3.2 DRAWDOWN DETAILS
Each Notice of Drawdown delivered to the Agent pursuant to Clause 3.1
(Delivery of Notice of Drawdown) shall specify:
3.2.1 whether the utilisation is to be by way of Advance or Letter
of Credit;
3.2.2 the proposed Utilisation Date, which shall be a Business Day
falling one month (or, with the prior consent of the Agent,
one week) or more before the Final Maturity Date (or, if the
Banks have granted an extension to the Facility pursuant to
Clause 10.8 (Extension), the Extended Maturity Date) and which
shall be at least four Business Days after the date upon which
the Facility was previously utilised;
3.2.3 the currency of denomination of the utilisation requested,
which shall be euro or an Optional Currency, PROVIDED THAT, if
a Borrower selects an Optional Currency, such Borrower may
also select euro to apply if its first selection becomes
ineffective pursuant to Clause 3.3 (Conditions for Drawing in
an Optional Currency);
3.2.4 (in the case of an Advance) the proposed Euro amount of the
Advance
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requested, which shall be (a) (if less than the Available
Facility) a minimum amount of EUR 2,000,000 and an integral
multiple of EUR 1,000,000 (or, if the Advance is to be
denominated in an Optional Currency, such comparable and
convenient amount thereof as the Agent may from time to time
specify) or (b) equal to the amount of the Available Facility;
3.2.5 (in the case of a Letter of Credit) the proposed Euro Amount
of such Letter of Credit, which shall be, when aggregated with
the Euro Amount of Outstandings in respect of all other
Letters of Credit at such time, less than or equal to EUR
10,000,000 and less than or equal to the Available Facility;
3.2.6 (in the case of an Advance) the proposed Term of the Advance
requested, which shall be a period of one, three or six months
or such other period as the Agent may agree (PROVIDED THAT
prior to the Syndication Date only periods of one month or
such other period specified by the Arranger may be requested)
ending on or before the Final Maturity Date (or, if the Banks
have granted an extension to the Facility pursuant to Clause
10.8 (Extension), the Extended Maturity Date);
3.2.7 (in the case of a Letter of Credit) the proposed Term of the
Letter of Credit requested, which shall be a period not
exceeding twelve months, ending on or before the Final
Maturity Date (or, if the Banks have granted an extension to
the Facility pursuant to Clause 10.8 (Extension) the Extended
Maturity Date);
3.2.8 (in the case of a Letter of Credit) each of the L/C Issuing
Bank and the Agent has approved (i) the terms of the Letter of
Credit, (ii) (save where the purpose of such Letter of Credit
falls within the purposes described in Clause 2.2 (Purpose and
Application)) the purpose of its issue and (iii) the identity
of the beneficiary; and
3.2.9 (in the case of an Advance) the account to which the proceeds
of the proposed drawdown are to be paid.
3.3 CONDITIONS FOR DRAWING IN AN OPTIONAL CURRENCY
If a Borrower requests that an Advance or Letter of Credit be
denominated in an Optional Currency (other than sterling) but:
3.3.1 no later than 10.00 a.m. on the Quotation Date for such
Advance (or, in the case of a Letter of Credit, two Business
Days prior to the proposed Utilisation Date), the Agent
notifies such Borrower and the Banks that the Agent is of the
opinion that it is not feasible for such Advance or Letter of
Credit to be denominated in such Optional Currency; or
3.3.2 to give effect to such request would cause the Outstandings to
be denominated in more than 4 Optional Currencies,
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then, unless such Borrower and the Banks otherwise agree, such Advance
or Letter of Credit shall be made in euro (in the case of PLD Europe
and each Additional Borrower) or sterling (in the case of PLD UK) in an
amount equal to the Original Euro Amount relating to such Notice of
Drawdown.
3.4 DRAWDOWN CONDITIONS
If a Borrower requests an Advance or Letter of Credit in accordance
with this Clause 3 and, on the proposed date for the making of such
Advance or issue of such Letter of Credit:
3.4.1 (save in relation to a Rollover Advance or a Letter of Credit)
if either of the events mentioned in sub-clauses 6.1.1 and
6.1.2 of Clause 6.1 (Market Disruption) shall have occurred
but each of the Banks is able to obtain match funding in the
relevant interbank market in relation to such Advance;
3.4.2 the Original Euro Amount of such Advance or Letter of Credit
does not exceed the Available Facility and (in the case of a
Letter of Credit) EUR 10,000,000 when aggregated with the Euro
Amount of all other Outstandings relating to Letters of
Credit;
3.4.3 there would not, immediately after the making of such Advance,
be more than 10 Advances outstanding; and
3.4.4 on and as of the proposed Utilisation Date (i) no Event of
Default or (save in relation to a Rollover Advance) Potential
Event of Default is continuing and (ii) the Repeated
Representations are true in all material respects,
then, save as otherwise provided herein, such Advance will be made or
such Letter of Credit will be issued (as the case may be) in accordance
with this Agreement.
3.5 COMPLETION OF LETTERS OF CREDIT
The L/C Issuing Bank is authorised to issue any Letter of Credit
pursuant to Clause 3.2 (Utilisation Conditions) by:
3.5.1 completing the issue date and the proposed Expiry Date of such
Letter of Credit; and
3.5.2 executing and delivering such Letter of Credit to the relevant
recipient on the Utilisation Date.
3.6 RENEWAL OF A LETTER OF CREDIT
3.6.1 Not less than three Business Days before the Expiry Date of a
Letter of Credit,
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the Borrower which requested such Letter of Credit may, by
written notice to the Agent, request that the Term of such
Letter of Credit be extended.
3.6.2 The Finance Parties shall treat such request in the same way
as a Notice of Drawdown for a Letter of Credit save that the
conditions set out in Clause 3.1 (Delivery of Notice of
Drawdown) shall not apply.
3.6.3 The terms of each renewed Letter of Credit shall be the same
as those of the relevant Letter of Credit immediately prior to
its renewal, save that its Term shall commence on the date
which was the Expiry Date of such Letter of Credit immediately
prior to its renewal and shall end on the proposed Expiry Date
specified in such request.
3.6.4 The L/C Issuing Bank is authorised to amend any such Letter of
Credit pursuant to such request if the conditions set out in
this Agreement have been complied with.
3.7 EACH BANK'S PARTICIPATION
Save as otherwise provided herein, each Bank will participate through
its Facility Office in each Advance made or Letter of Credit issued
pursuant to this Clause 3 in the proportion borne by its Available
Commitment to the Available Facility immediately prior to the making of
that Advance or the issue of that Letter of Credit.
3.8 RESTRICTIONS ON PARTICIPATION IN LETTERS OF CREDIT
If at any time prior to the issue of a Letter of Credit any Bank is
prohibited by law or pursuant to any request from or requirement of any
central bank or other fiscal, monetary or other authority (being, in
the case of a request or requirement, a request or requirement of a
type with which such Bank is accustomed or expected to comply) from
having any right or obligation under this Agreement in respect of such
Letter of Credit, such Bank shall notify the Agent on or before the
Business Day prior to the proposed Utilisation Date and:
3.8.1 the maximum actual and contingent liabilities of the L/C
Issuing Bank under such Letter of Credit shall be reduced by
an amount equal to what would have been the amount of such
Bank's L/C Proportion of such Letter of Credit if such
prohibition had not occurred;
3.8.2 the L/C Proportion of such Bank in relation to such Letter of
Credit shall be nil; and
3.8.3 such Bank's Available Commitment shall be reduced by an amount
equal to what would have been the amount of such Bank's L/C
Proportion of such Letter of Credit if such prohibition had
not occurred.
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3.9 REDUCTION OF AVAILABLE COMMITMENT
If a Bank's Commitment is reduced in accordance with the terms hereof
after the Agent has received the Notice of Drawdown pursuant to this
Clause 3 or a request for an extension of the Term of a Letter of
Credit pursuant to Clause 3.6 (Renewal of a Letter of Credit) and such
reduction was not taken into account in the Available Facility, then
the amount of that Advance or Letter of Credit shall be reduced
accordingly.
4. PAYMENT AND CALCULATION OF INTEREST
4.1 PAYMENT OF INTEREST
On the Repayment Date relating to each Advance (and, if the Term of
such Advance exceeds six months, on the expiry of each period of six
months during such Term) the Borrowers shall pay accrued interest on
that Advance.
4.2 CALCULATION OF INTEREST
The rate of interest applicable to an Advance from time to time during
its Term shall be the rate per annum which is the sum of (i) the
Applicable Margin at such time, (ii) (in relation to that portion of
such Advance made available by any Bank whose Facility Office for such
purpose is situated in England or, as the case may be, a Participating
Member State) the Mandatory Costs Rate in respect thereof at such time
and (iii) EURIBOR (or, if the currency in which such Advance is
denominated is an Optional Currency, LIBOR) on the Quotation Date
therefor.
5. LETTER OF CREDIT COMMISSION AND L/C ISSUING BANK FEE
5.1 LETTER OF CREDIT COMMISSION
Each Borrower which has requested a Letter of Credit shall, in respect
of each Letter of Credit requested by it, pay to the Agent for the
account of each Bank (for distribution in proportion to each Bank's L/C
Proportion of such Letter of Credit) a letter of credit commission in
the currency in which the relevant Letter of Credit is denominated at
the L/C Commission Rate (calculated as specified in the remaining
provisions of this Clause 5.1) on the maximum actual and contingent
liabilities of the L/C Issuing Bank under the relevant Letter of
Credit. Such letter of credit commission shall be paid in advance in
respect of each successive period of three months (or such shorter
period as shall end on the relevant Expiry Date) which begins during
the Term of the relevant Letter of Credit, the first such payment to be
made on the Utilisation Date for such Letter of Credit and thereafter
on the first day of each such period and to be calculated on the basis
of the L/C Commission Rate prevailing on the relevant Utilisation Date
or, as the case may be, the first day of such period. If, during any
such period (a "RELEVANT PERIOD") in respect of which any such payment
has been made, the L/C Commission Rate increases or decreases then:
5.1.1 (in the case of an increase in the L/C Commission Rate) the
relevant Borrower shall pay to the Agent for the account of
each Bank (for distribution in
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proportion to each Bank's L/C Proportion of the relevant
Letter of Credit) additional letter of credit commission (in
the currency in which the relevant Letter of Credit is
denominated and on the maximum actual and contingent
liabilities of the L/C Issuing Bank thereunder), such
additional letter of credit commission to be calculated on the
basis of the percentage rate per annum equal to the difference
between the L/C Commission Rate immediately prior to such
increase and the L/C Commission Rate immediately after such
increase and to be payable in respect of the remainder of the
relevant period after such increase; and
5.1.2 (in the case of a decrease in the L/C Commission Rate) each
Bank (in proportion to its L/C Proportion of the relevant
Letter of Credit) shall rebate to the relevant Borrower
through the Agent a portion of the commitment commission
previously paid in respect of the relevant period, such rebate
to be paid in the currency in which the relevant Letter of
Credit is denominated and in respect of the remainder of the
relevant period after such decrease and to be calculated on
the basis of the maximum actual and contingent liabilities of
the L/C Issuing Bank under the relevant Letter of Credit and
the percentage rate per annum equal to the difference between
the L/C Commission Rate immediately prior to such decrease and
the L/C Commission Rate immediately after such decrease.
Any such additional letter of credit commission or rebate shall be paid
by the relevant Borrower or, as the case may be, the Banks on the last
day of the relevant period.
5.2 L/C ISSUING BANK FEE
Each Borrower which has requested a Letter of Credit shall, in respect
of each Letter of Credit, pay to the L/C Issuing Bank a fee in euro in
the amounts and at the times agreed between such L/C Issuing Bank and
such Borrower.
5.3 CANCELLATION REBATES
If a Letter of Credit is prematurely cancelled or returned to the L/C
Issuing Bank and:
5.3.1 the L/C Issuing Bank is satisfied that as of the relevant date
of cancellation or return (the "CANCELLATION/RETURN DATE") the
L/C Issuing Bank has no further actual or contingent
liabilities in respect of such Letter of Credit;
5.3.2 letter of credit commitment commission has previously been
paid by the relevant Borrower pursuant to Clause 5.1 (Letter
of Credit Commission) in respect of such Letter of Credit and
in respect of the period after the relevant
Cancellation/Return Date; and
5.3.3 the relevant Cancellation/Return Date falls during the first
or the second month after the date (the "PAYMENT DATE") on
which letter of credit commission was most recently paid in
relation to the relevant Letter of Credit pursuant to Clause
5.1 (Letter of Credit Commission),
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then the L/C Issuing Bank shall (through the Agent) notify each Bank
accordingly and each Bank shall (in proportion to its L/C Proportion of
the relevant Letter of Credit and on the tenth Business Day after the
relevant Cancellation/Return Date) rebate to the relevant Borrower in
the currency in which the relevant Letter of Credit is denominated the
letter of credit commission previously paid in respect of such Letter
of Credit which relates to the period after the last day of (a) the
first month after the relevant Payment Date (if the relevant
Cancellation/Return Date falls during the first month after the
Relevant Payment Date) or (b) the second month after the relevant
Payment Date (if the relevant Cancellation/Return Date falls during the
second month after the relevant Payment Date). No rebate shall be
required to be made by any Bank pursuant to this Clause 5.3 in any
other circumstances.
6. MARKET DISRUPTION AND ALTERNATIVE INTEREST RATES
6.1 MARKET DISRUPTION
If, in relation to any Advance or Unpaid Sum:
6.1.1 EURIBOR (or, as the case may be, LIBOR) is to be determined by
reference to Reference Banks and at or about 11.00 a.m. on the
Quotation Date for the relevant Term none or only one of the
Reference Banks supplies a rate for the purpose of determining
EURIBOR (or, as the case may be, LIBOR) for the relevant Term;
or
6.1.2 before the close of business in Brussels (or, as the case may
be, London) on the Quotation Date for such Advance or Unpaid
Sum the Agent has been notified by a Bank or each of a group
of Banks to whom in aggregate thirty-five per cent. or more of
such Advance if made would be owed (or such Unpaid Sum is
owed) that the EURIBOR (or, as the case may be, LIBOR) rate
does not accurately reflect the cost of funding its
participation in such Advance or Unpaid Sum,
then the Agent shall promptly notify the other parties hereto in
writing of such event and, notwithstanding anything to the contrary in
this Agreement, Clause 6.2 (Substitute Term and Interest Rate) shall
apply to such Advance or Unpaid Sum. If sub-clauses 6.1.1 or 6.1.2
applies to a proposed Advance, such Advance (other than a Rollover
Advance) shall not be made if any Bank is unable to obtain match
funding in the relevant interbank market in relation to such Advance.
6.2 SUBSTITUTE TERM AND INTEREST RATE
If sub-clause 6.1.1 of Clause 6.1 (Market Disruption) applies to a
Rollover Advance or an Advance which is not prevented from being made
by the operation of Clause 6.1, the duration of the relevant Term shall
be one month or, if less, such that it shall end on the Final Maturity
Date (or, if the Banks have granted an extension to the Facility
pursuant to
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Clause 10.8 (Extension), the Extended Maturity Date). If either
sub-clause 6.1.1 or 6.1.2 of Clause 6.1 (Market Disruption) applies to
a Rollover Advance, an Advance which is not prevented from being made
by the operation of Clause 6.1 or an Unpaid Sum, the rate of interest
applicable to such Rollover Advance, Advance or Unpaid Sum during the
relevant Term shall (subject to any agreement reached pursuant to
Clause 6.3 (Alternative Rate)) be the rate per annum which is the sum
of:
6.2.1 the Applicable Margin at such time;
6.2.2 (in relation to a portion of an Advance which has been
provided by a Bank whose Facility Office for such purpose is
situated in England, or as the case may be, a Participating
Member State) the Mandatory Costs Rate in respect thereof at
such time; and
6.2.3 the rate per annum determined by the Agent to be the
arithmetic mean (rounded upwards to four decimal places) of
the rates notified by each Bank to the Agent before the last
day of such Term to be those which express as a percentage
rate per annum the cost to each Bank of funding from whatever
sources it may reasonably select its portion of such Rollover
Advance, Advance or Unpaid Sum during such Term.
6.3 ALTERNATIVE RATE
If (a) either of those events mentioned in sub-clauses 6.1.1 and 6.1.2
of Clause 6.1 (Market Disruption) occurs in relation to an Advance or
Unpaid Sum or (b) by reason of circumstances affecting the European
Interbank Market (or, in the case of any Advances denominated in an
Optional Currency, the London Interbank Market) during any period of
three consecutive Business Days, EURIBOR (or, as the case may be,
LIBOR) is not available for euro to prime banks in the European
Interbank Market (or, in the case of any Advances denominated in an
Optional Currency, the London Interbank Market), then if the Agent or
the Borrowers so require, the Agent and the Borrowers shall enter into
negotiations with a view to agreeing a substitute basis (i) for
determining the rates of interest from time to time applicable to the
Advances and Unpaid Sums and/or (ii) upon which the Advances and Unpaid
Sums may be maintained (whether in euro or some other currency)
thereafter and any such substitute basis that is agreed shall take
effect in accordance with its terms and be binding on each party
hereto, PROVIDED THAT the Agent may not agree any such substitute basis
without the prior consent of each Bank.
7. NOTIFICATION
7.1 ADVANCES AND LETTERS OF CREDIT
Not less than three Business Days before an Advance is to be made or a
Letter of Credit is to be issued, the Agent shall notify each Bank of
the proposed Euro Amount of the relevant Advance or Letter of Credit,
its proposed Term, whether or not such Advance or Letter of Credit is
to be denominated in an Optional Currency (and, if so, the amount of
such
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Advance or Letter of Credit in the relevant Optional Currency) and the
aggregate principal amount of the relevant Advance or Letter of Credit
allocated to such Bank pursuant to this Agreement and, in relation to a
Letter of Credit, the name of the proposed beneficiary.
7.2 INTEREST RATE DETERMINATION
The Agent shall promptly notify the relevant Borrower and the Banks of
each determination of LIBOR or, as the case may be, EURIBOR, the
Applicable Margin and the Mandatory Costs Rate.
7.3 DEMANDS UNDER LETTERS OF CREDIT
If a demand is made under a Letter of Credit or the L/C Issuing Bank
incurs in connection with a Letter of Credit any other liability, cost,
claim, loss or expense which is to be reimbursed pursuant to this
Agreement, the L/C Issuing Bank shall promptly notify the Agent of the
amount of such demand or such liability, cost, claim, loss or expense
and the Letter of Credit to which it relates and the Agent shall
promptly make demand upon the Borrowers in accordance with this
Agreement and notify the Banks.
7.4 CHANGES TO CURRENCY OR INTEREST RATES
The Agent shall promptly notify the relevant Borrower and the Banks of
any change (a) to the proposed currency of an Advance occasioned by the
operation of Clause 3.3 (Conditions for Drawing in an Optional
Currency) or (b) in interest rate or Term occasioned by the operation
of Clause 6 (Market Disruption and Alternative Interest Rates).
8. REPAYMENT AND MANDATORY PREPAYMENT
8.1 REPAYMENT
Each Borrower shall repay each Advance made to it in full on the
Repayment Date relating thereto. Any Advance repaid before the Final
Maturity Date shall remain available for drawing on the terms of
conditions of this Agreement.
8.2 MANDATORY PREPAYMENT
8.2.1 If, at any time, an Obligor receives notice that any two of
the three Ratings of the Guarantor set out below (or, if only
two Ratings are available, either such Rating) has fallen
below the grade indicated alongside it:
(a) S&P BBB-
(b) Moody's Baa3
(c) D&P BBB-
then such Obliger shall inform the Agent thereof and the
Borrowers shall, on the day which falls 30 days after the date
upon which the last of the relevant
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rating agencies to publish the relevant Rating has published
its formal announcement of such Rating and subject to Clause
24.4 (Break Costs), prepay the whole of the amount of the
outstanding Advances together with accrued interest thereon
and all other amounts owing to the Finance Parties under the
Facility Documents and provide Cash Collateral for each Letter
of Credit in an amount specified by the Agent (such amount not
to exceed the maximum actual and contingent liability of the
L/C Issuing Bank in relation to such Letter of Credit) and in
the currency of each such Letter of Credit. Each Obligor shall
promptly notify the Agent of any announcement made by any such
rating agency of a change in Rating by it.
8.2.2 If there is a Change of Control of the Guarantor, the
Borrowers shall, upon the written request of the Agent (acting
on the instructions of one or more Banks) received by the
Guarantor no later than 30 days after the occurrence of such
Change of Control, prepay such amount of the Advances as is
owed to the Bank or Banks so instructing the Agent to request
prepayment, together with accrued interest thereon and all
other amounts owing to such Bank or Banks under the Facility
Documents and provide Cash Collateral for each such Bank's
portion of each Letter of Credit in an amount specified by the
Agent (such amount not to exceed a proportion of the maximum
actual and contingent liability of the L/C Issuing Bank in
relation to such Letter of Credit equal to such Bank's L/C
Proportion in relation to such Letter of Credit) and in the
currency of each such Letter of Credit, in each case by no
later then 120 days after the occurrence of such Change of
Control (but without prejudice, for the avoidance of doubt, to
the rights of the Agent and the Banks if an Event of Default
occurs during such 120 day period). The Guarantor shall
promptly notify the Agent in the event that there is a Change
of Control of the Guarantor.
9. BORROWERS' LIABILITIES IN RELATION TO LETTERS OF CREDIT
9.1 BORROWERS' INDEMNITY TO L/C ISSUING BANK
Each Borrower which has requested a Letter of Credit shall irrevocably
and unconditionally as a primary obligation indemnify (on demand of the
Agent) the L/C Issuing Bank against:
9.1.1 any sum paid or due and payable by the L/C Issuing Bank under
such Letter of Credit; and
9.1.2 all liabilities, costs (including, without limitation, any
costs incurred in funding any amount which falls due from the
L/C Issuing Bank under or in connection with any such Letter
of Credit), claims, losses and expenses which the L/C Issuing
Bank may at any time incur or sustain in connection with or
arising out of any such Letter of Credit.
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9.2 BORROWERS' INDEMNITY TO BANKS
Each Borrower which has requested a Letter of Credit shall irrevocably
and unconditionally as a primary obligation indemnify (on demand of the
Agent) each Bank against:
9.2.1 any sum paid or due and payable by such Bank (whether under
Clause 31.1 (Banks' Indemnity) or otherwise) in connection
with such Letter of Credit; and
9.2.2 all liabilities, costs (including, without limitation, any
costs incurred in funding any amount which falls due from such
Bank in connection with such Letter of Credit), claims, losses
and expenses which such Bank may at any time incur or sustain
in connection with any Letter of Credit.
9.3 PRESERVATION OF RIGHTS
Neither the obligations of the Borrowers set out in this Clause 9 nor
the rights, powers and remedies conferred on the L/C Issuing Bank or
any Bank by this Agreement or by law shall be discharged, impaired or
otherwise affected by:
9.3.1 the winding-up, dissolution, administration or re-organisation
of the L/C Issuing Bank, any Bank or any other person or any
change in its status, function, control or ownership;
9.3.2 any of the obligations of the L/C Issuing Bank, any Bank or
any other person hereunder or under any Letter of Credit or
under any other security taken in respect of any Obligor's
obligations hereunder or otherwise in connection with a Letter
of Credit being or becoming illegal, invalid, unenforceable or
ineffective in any respect;
9.3.3 time or other indulgence being granted or agreed to be granted
to the L/C Issuing Bank, any Bank or any other person in
respect of its obligations hereunder or under or in connection
with a Letter of Credit or under any such other security;
9.3.4 any amendment to, or any variation, waiver or release of, any
obligation of the L/C Issuing Bank, any Bank or any other
person under a Letter of Credit or this Agreement;
9.3.5 any other act, event or omission which, but for this Clause 9,
might operate to discharge, impair or otherwise affect any of
the obligations of the relevant Borrower set out in this
Clause 9 or any of the rights, powers or remedies conferred
upon the L/C Issuing Bank or any Bank by this Agreement or by
law.
The obligations of each Borrower set out in this Clause 9 shall be in
addition to and independent of every other security which the L/C
Issuing Bank or any Bank may at any time hold in respect of such
Obligor's obligations hereunder.
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9.4 SETTLEMENT CONDITIONAL
Any settlement or discharge between a Borrower and the L/C Issuing Bank
or any Bank shall be conditional upon no security or payment to the L/C
Issuing Bank or such Bank by such Borrower, or any other person on
behalf of such Borrower, being avoided or reduced by virtue of any laws
relating to bankruptcy, insolvency, liquidation or similar laws of
general application and, if any such security or payment is so avoided
or reduced, the L/C Issuing Bank or such Bank shall be entitled to
recover the value or amount of such security or payment from such
Borrower subsequently as if such settlement or discharge had not
occurred.
9.5 RIGHT TO MAKE PAYMENTS UNDER LETTERS OF CREDIT
The L/C Issuing Bank shall (without prejudice to the obligations of the
Obligors hereunder in respect of any Letter of Credit) notify the
relevant Borrower as soon as reasonably practicable upon receipt of any
demand under a Letter of Credit and shall be entitled to make any
payment in accordance with the terms of the relevant Letter of Credit
without any reference to or further authority from the relevant
Borrower or any other investigation or enquiry. Each Borrower
irrevocably authorises the L/C Issuing Bank to comply with any demand
under a Letter of Credit which is valid on its face.
10. CANCELLATION, VOLUNTARY PREPAYMENT AND EXTENSION
10.1 CANCELLATION
The Guarantor may, by giving to the Agent not less than five Business
Days' prior written notice to that effect, cancel the whole or any part
(being a minimum amount of EUR 5,000,000 and an integral multiple of
EUR 1,000,000) of the Available Facility. Any such cancellation shall
reduce the Available Commitment and Commitment of each Bank rateably.
10.2 VOLUNTARY PREPAYMENT
Subject to Clause 24.4 (Break Costs) a Borrower may, by giving to the
Agent not less than five Business Days prior written notice to that
effect, prepay the whole or any part of an Advance (being an amount
such that the Euro Amount of such Advance will be reduced by a minimum
amount of EUR 5,000,000 (or, if less, the amount of the Advance) and
integral multiple of EUR 1,000,000).
10.3 CANCELLATION OF LETTERS OF CREDIT
Any Borrower which has requested a Letter of Credit may give the Agent
not less than five Business Days' prior notice of its intention to
procure that the relevant L/C Issuing Bank's liability under such
Letter of Credit is reduced to zero (whereupon it shall do so).
10.4 NOTICE OF CANCELLATION OR VOLUNTARY PREPAYMENT
Any notice of cancellation or prepayment given by the Guarantor
pursuant to Clause 10.1 (Cancellation) or by a Borrower pursuant to
Clause 10.2 (Voluntary Prepayment) or 10.3
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(Cancellation of Letters of Credit) shall be irrevocable and shall
specify the date upon which such cancellation or prepayment is to be
made and the amount of such cancellation or prepayment.
10.5 CANCELLATION OF A BANK'S COMMITMENT
If:
10.5.1 any sum payable to any Bank by an Obligor is required to be
increased pursuant to Clause 11.1 (Tax Gross-up); or
10.5.2 any Bank claims indemnification from an Obligor under Clause
11.2 (Tax Indemnity) or Clause 13.1 (Increased Costs),
the Guarantor may, whilst such circumstance continues, by not less than
ten Business Days' prior notice to the Agent (which notice shall be
irrevocable), cancel such Bank's Commitment whereupon such Bank shall
cease to be obliged to participate in further Advances and its
Commitment shall be reduced to zero.
10.6 PREPAYMENT OF A BANK'S COMMITMENT
If the Guarantor gives notice pursuant to Clause 10.5 (Cancellation of
a Bank's Commitment), each Borrower shall, at the time such notice
expires and subject to Clause 24.4 (Break Costs), prepay the relevant
Bank's portion of all outstanding Advances together with accrued
interest thereon and all other amounts owing to such Bank hereunder and
provide Cash Collateral for such Bank's portion of each Letter of
Credit in an amount specified by the Agent (such amount not to exceed a
proportion of the maximum actual and contingent liability of the L/C
Issuing Bank in relation to such Letter of Credit equal to such Bank's
L/C Proportion in relation to such Letter of Credit) and in the
currency of each such Letter of Credit.
10.7 NO OTHER REPAYMENTS
None of the Borrowers shall repay or cancel all or any part of the
Outstandings except at the times and in the manner expressly provided
herein.
10.8 EXTENSION
The Guarantor may request an extension of the Facility for one period
of twelve months, such period to commence on the Final Maturity Date
and to end on the Extended Maturity Date in accordance with the
procedure set out below.
10.8.1 The Guarantor shall no later than 60 days prior to the Final
Maturity Date request by notice in writing to the Agent that
the Facility be extended to the Extended Maturity Date.
10.8.2 The Agent shall, forthwith upon receipt of a request made
pursuant to sub-clause 10.8.1 above, advise each of the Banks
of such a request, and each of the Banks shall, no later than
25 Business Days prior to the Final Maturity
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Date, notify the Agent in writing that either (i) it approves
of the extension of the Facility to the Extended Maturity Date
or (ii) it does not approve of such extension. Any Bank which
fails to notify the Agent of its approval or otherwise of the
extension of the Facility as aforesaid shall be deemed not to
approve of such extension. The Agent shall notify the
Guarantor of each Bank's decision no later than 20 Business
Days prior to the Final Maturity Date.
10.8.3 Nothing contained in this Clause 10.8 shall oblige a Bank to
approve of an extension of the Facility to the Extended
Maturity Date. In considering whether or not to approve of
such an extension, each Bank shall make its own independent
appraisal of the creditworthiness of each Obligor and its own
independent investigation and assessment into the financial
condition and affairs of each Obligor.
10.8.4 If any Bank does not approve or is deemed not to approve of
the extension of the Facility then, on the Final Maturity
Date, the Borrowers shall repay to such Bank such Bank's
portion of the outstanding Advances together with all other
amounts then owing by the Borrowers to such Bank and provide
Cash Collateral for such Bank's portion of each Letter of
Credit in an amount specified by the Agent (such amount not to
exceed a proportion of the maximum actual and contingent
liability of the L/C Issuing Bank in relation to such Letter
of Credit equal to such Bank's L/C Proportion in relation to
such Letter of Credit) and in the currency of each such Letter
of Credit.
10.8.5 If any Bank does not approve or is deemed not to approve of
the extension of the Facility to the Extended Maturity Date
then the Agent shall promptly notify the other Banks thereof.
10.8.6 Notwithstanding any other provision of this Clause 10.8, if a
Bank or group of Banks to whom in aggregate more than fifty
per cent of the Outstandings is owed does not approve of an
extension to the Final Maturity Date then the extension shall
not be made and the Borrowers shall repay all amounts
outstanding under the Facility Documents on or prior to the
Final Maturity Date in accordance with the terms hereof.
11. TAXES
11.1 TAX GROSS-UP
All payments to be made by an Obligor to any Finance Party hereunder
shall be made free and clear of and without deduction for or on account
of tax unless such Obligor is required to make such a payment subject
to the deduction or withholding of tax, in which case the sum payable
by such Obligor (in respect of which such deduction or withholding is
required to be made) shall be increased to the extent necessary to
ensure that such Finance Party
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receives a sum net of any deduction or withholding equal to the sum
which it would have received had no such deduction or withholding been
made or required to be made.
11.2 TAX INDEMNITY
Without prejudice to Clause 11.1 (Tax Gross-up), if any Finance Party
is required to make any payment of or on account of tax on or in
relation to any sum received or receivable hereunder (including any sum
deemed for purposes of tax to be received or receivable by such Finance
Party whether or not actually received or receivable) or if any
liability in respect of any such payment is asserted, imposed, levied
or assessed against any Finance Party, the Borrowers shall, within 7
Business Days of written demand of the Agent, indemnify the Finance
Party which suffers a loss or liability as a result against such
payment or liability, together with any interest, penalties, and
out-of-pocket costs and expenses payable or incurred in connection
therewith (unless such interest, penalties, costs or expenses arose due
to the acts or default of the Finance Party not complying with any tax
notice or assessment in a timely manner), PROVIDED THAT this Clause
11.2 shall not apply to:
11.2.1 any tax imposed on and calculated by reference to the net
income actually received or receivable as net income by such
Finance Party (but, for the avoidance of doubt, not including
any sum deemed for purposes of tax to be received or
receivable by such Finance Party but not actually receivable)
by the jurisdiction in which such Finance Party is
incorporated; or
11.2.2 any tax imposed on and calculated by reference to the net
income of the Facility Office of such Finance Party actually
received or receivable by such Finance Party (but, for the
avoidance of doubt, not including any sum deemed for purposes
of tax to be received or receivable as net income by such
Finance Party but not actually receivable) by the jurisdiction
in which its Facility Office is located.
11.3 BANKS' TAX STATUS CONFIRMATION
Each Bank confirms in favour of the Agent and each Borrower (on the
date hereof or, in the case of a Bank which becomes a party hereto
pursuant to a transfer or assignment, on the date on which the relevant
transfer or assignment becomes effective) that it is Qualifying Lender
and each Bank shall promptly notify the Agent and each Borrower if
there is any change in its position from that set out above.
11.4 CLAIMS BY BANKS
Any Finance Party intending to make a claim pursuant to Clause 11.2
(Tax Indemnity) shall promptly notify the Agent of the event giving
rise to the claim, whereupon the Agent shall notify the relevant
Obligor thereof in writing.
11.5 EXCEPTIONS TO TAX GROSS-UP AND TAX INDEMNITY
11.5.1 Each Finance Party will promptly on request by a Borrower take
all reasonable
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steps (if any) required to be taken to establish entitlement
to exemption for any Borrower from withholding under any
applicable double tax treaty, including satisfying any
reasonable information, reporting or other requirement and
completion and filing of relevant forms, claims, declarations
and similar documents and shall provide the relevant Borrower
with copies of all forms, claims, declarations and similar
documents filed for such purpose.
11.5.2 No additional amounts shall be payable to a Bank or the Agent
under Clause 11.1 (Tax Gross-up) or 11.2 (Tax Indemnity) in
respect of any payment from a Borrower if the Bank or Agent to
whom the relevant payment is to be made has failed (otherwise
than due to circumstances beyond its control) to comply with
its obligations under Clause 11.5.1 (unless such failure
results from the failure of a Borrower to comply with its
obligations under the relevant treaty).
11.5.3 If a Bank ceases to be a Qualifying Lender (except as a result
of the introduction of, change in, or change in the
interpretation or application of any law occurring after the
date of this Agreement), then no Obligor shall be liable to
pay any amount under Clauses 11.1 or 11.2 in excess of the
amount which it would have been obliged to pay if that Bank
had remained a Qualifying Lender.
12. TAX RECEIPTS
12.1 NOTIFICATION OF REQUIREMENT TO DEDUCT TAX
If, at any time, an Obligor is required by law to make any deduction or
withholding from any sum payable by it hereunder (or if thereafter
there is any change in the rates at which or the manner in which such
deductions or withholdings are calculated), such Obligor shall promptly
notify the Agent.
12.2 EVIDENCE OF PAYMENT OF TAX
If an Obligor makes any payment hereunder in respect of which it is
required to make any deduction or withholding, it shall pay the full
amount required to be deducted or withheld to the relevant taxation or
other authority within the time allowed for such payment under
applicable law and shall deliver to the Agent for each Bank, within
thirty days after it has made such payment to the applicable authority,
an original receipt (or a certified copy thereof) issued by such
authority evidencing the payment to such authority of all amounts so
required to be deducted or withheld in respect of that Bank's share of
such payment.
12.3 TAX CREDIT PAYMENT
If an additional payment is made under Clause 11 (Taxes) by an Obligor
for the benefit of any Finance Party and such Finance Party, in its
sole discretion, determines that it has obtained (and has derived full
use and benefit from) a credit against, a relief or remission for, or
repayment of, any tax, then, if and to the extent that such Finance
Party, in its sole opinion, determines that:
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12.3.1 such credit, relief, remission or repayment is in respect of
or calculated with reference to the additional payment made
pursuant to Clause 11 (Taxes); and
12.3.2 its tax affairs for its tax year in respect of which such
credit, relief, remission or repayment was obtained have been
finally settled,
such Finance Party shall, to the extent that it can do so without
prejudice to the retention of the amount of such credit, relief,
remission or repayment, pay to such Obligor such amount as such Finance
Party shall, in its sole opinion, determine to be the amount which will
leave such Finance Party (after such payment) in no worse after-tax
position than it would have been in had the additional payment in
question not been required to be made by such Obligor.
12.4 TAX CREDIT CLAWBACK
If any Finance Party makes any payment to an Obligor pursuant to Clause
12.3 (Tax Credit Payment) and such Finance Party subsequently
determines, in its sole opinion, that the credit, relief, remission or
repayment in respect of which such payment was made was not available
or has been withdrawn or that it was unable to use such credit, relief,
remission or repayment in full, such Obligor shall reimburse such
Finance Party such amount as such Finance Party determines, in its sole
opinion, is necessary to place it in the same after-tax position as it
would have been in if such credit, relief, remission or repayment had
been obtained and fully used and retained by such Finance Party.
12.5 TAX AND OTHER AFFAIRS
No provision of this Agreement shall interfere with the right of any
Finance Party to arrange its tax or any other affairs in whatever
manner it thinks fit, oblige any Finance Party to claim any credit,
relief, remission or repayment in respect of any payment under Clause
11.1 (Tax Gross-up) in priority to any other credit, relief, remission
or repayment available to it nor oblige any Finance Party to disclose
any information relating to its tax or other affairs or any
computations in respect thereof.
13. INCREASED COSTS
13.1 INCREASED COSTS
If, by reason of (a) any change in law or in its interpretation or
administration and/or (b) compliance with any request or requirement
relating to the maintenance of capital or any other request from or
requirement of any central bank or other fiscal, monetary or other
authority (any such change in law, or in its interpretation or
administration, and any such request or requirement, an "INCREASED COST
TRIGGER EVENT"):
13.1.1 a Bank or the L/C Issuing Bank or any holding company of such
Bank or the L/C Issuing Bank is unable to obtain the rate of
return on its capital which it would have been able to obtain
but for such Bank's or the L/C Issuing Bank's
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entering into or assuming or maintaining a commitment, issuing
or performing its obligations under the Facility Documents or
any Letter of Credit;
13.1.2 a Bank or the L/C Issuing Bank or any holding company of such
Bank or the L/C Issuing Bank incurs a cost as a result of such
Bank's or the L/C Issuing Bank's entering into or assuming or
maintaining a commitment, issuing or performing its
obligations under the Facility Documents or any Letter of
Credit; or
13.1.3 there is any increase in the cost to a Bank or the L/C Issuing
Bank or any holding company of such Bank or the L/C Issuing
Bank of funding or maintaining such Bank's or the L/C Issuing
Bank's share of the Advances or, any Unpaid Sum or any Letter
of Credit,
then the Borrowers shall, from time to time within 7 Business Days of
written demand of the Agent, pay to the Agent for the account of that
Bank or the L/C Issuing Bank amounts sufficient to indemnify that Bank
or the L/C Issuing Bank or to enable that Bank or the L/C Issuing Bank
to indemnify its holding company from and against, as the case may be,
(i) such reduction in the rate of return of capital, (ii) such cost or
(iii) such increased cost.
13.2 INCREASED COSTS CLAIMS
A Bank or the L/C Issuing Bank intending to make a claim pursuant to
Clause 13.1 (Increased Costs) shall notify the Agent of the claim and
give reasonable details of the circumstances and event giving rise to
such claim and of its calculation of the amount claimed, whereupon the
Agent shall notify the Borrowers thereof in writing providing such
details of the claim PROVIDED THAT nothing in this Clause shall oblige
any Bank to disclose any information which it considers, acting
reasonably to be confidential.
13.3 EXCLUSIONS TO INCREASED COSTS
Notwithstanding the foregoing provisions of this Clause 13, no Bank or
L/C Issuing Bank shall be entitled to make any claim under this Clause
13 in respect of:
13.3.1 any cost, increased cost or liability as referred to in Clause
13.1 (Increased Costs) to the extent the same is compensated
by the Mandatory Costs Rate; or
13.3.2 any cost, increased cost or liability compensated by Clause 11
(Taxes); or
13.3.3 any cost, increased cost or liability resulting from any
Increased Cost Trigger Event except where such Bank or, as the
case may be, the L/C Issuing Bank can demonstrate that such
Increased Cost Trigger Event occurs, or is made or imposed,
after the date of this Agreement;
13.3.4 any cost, increased cost or liability resulting from a failure
by a Bank to comply with any requests from or requirement of
any central bank or fiscal or monetary authority (whether or
not having force
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of law, but if not having force of law being a request of a
nature with which banks generally are accustomed or expected
to comply); or
13.3.5 any cost, increased cost or liability arising more than 90
days prior to the receipt by the Borrowers of a written notice
under Clause 13.2 (Increased Costs Claims).
14. ILLEGALITY
If, at any time, it is or will become unlawful for a Bank or the L/C
Issuing Bank to make, fund, issue, participate in or allow to remain
outstanding all or part of its share of the Advances or Letters of
Credit, then that Bank or the L/C Issuing Bank shall, promptly after
becoming aware of the same, deliver to the Guarantor through the Agent
a written notice to that effect and:
14.1.1 such Bank or the L/C Issuing Bank shall not thereafter be
obliged to participate in any Advance or Letter of Credit (or,
in the case of the L/C Issuing Bank, to issue any Letter of
Credit) and the amount of its Commitment shall be immediately
reduced to zero; and
14.1.2 if the Agent on behalf of such Bank or the L/C Issuing Bank so
requires, the Guarantor shall on such date as the Agent shall
have specified in order to comply with the relevant law:
(a) repay such Bank's share of any outstanding Advances
together with accrued interest thereon and all other
amounts owing to such Bank hereunder; and
(b) provide Cash Collateral for such Bank's portion of
each Letter of Credit in an amount specified by the
Agent (such amount not to exceed a proportion of the
maximum actual and contingent liability of the L/C
Issuing Bank in relation to such Letter of Credit
equal to such Bank's L/C Proportion in relation to
such Letter of Credit) and in the currency of such
Letter of Credit.
15. MITIGATION
If, in respect of any Bank, circumstances arise which would or would
upon the giving of notice result in:
15.1.1 an increase in any sum payable to it or for its account
pursuant to Clause 11.1 Tax Gross-up);
15.1.2 a claim for indemnification pursuant to Clause 11.2 (Tax
Indemnity) or Clause 13.1 (Increased Costs); or
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15.1.3 the reduction of its Available Commitment to zero or any
repayment to be made by the Guarantor pursuant to Clause 14
(Illegality),
then, without in any way limiting, reducing or otherwise qualifying the
rights of such Bank or the obligations of the Obligors under any of the
Clauses referred to in sub-clauses 15.1.1, 15.1.2 and 15.1.3 such Bank
shall promptly upon becoming aware of such circumstances notify the
Agent thereof and, in consultation with the Agent and the Guarantor and
to the extent that it can do so lawfully and without prejudice to its
own position, take reasonable steps (including a change of location of
its Facility Office or the transfer of its rights, benefits and
obligations hereunder to another financial institution acceptable to
the Guarantor and willing to participate in the Facility) to mitigate
the effects of such circumstances, PROVIDED THAT such Bank shall be
under no obligation to take any such action if, in the opinion of such
Bank, to do so might have an adverse effect upon its business,
operations or financial condition (other than any minor costs and
expenses of an administrative nature).
16. REPRESENTATIONS
Each Obligor makes the representations and warranties set out in Clause
16.1 (Status) to Clause 16.29 (No Event of Default) (with respect to
itself) and acknowledges that the Finance Parties have entered into the
Facility Documents in reliance on those representations and warranties.
16.1 STATUS
It is a corporation (or, in the case of the Guarantor, a Maryland real
estate investment) duly organised, validly existing and (to the extent
such concept is recognised) in good standing under the laws of its
Relevant Jurisdiction.
16.2 GOVERNING LAW AND JUDGMENTS
In any proceedings taken in its Relevant Jurisdiction in relation to
the Facility Documents, the choice of English law as the governing law
of the Facility Documents and any judgment obtained in England will be
recognised and enforced.
16.3 BINDING OBLIGATIONS
Subject to the legal (but not factual) qualifications contained in the
legal opinions delivered pursuant to Clause 2.3 (Conditions Precedent),
the obligations expressed to be assumed by it in the Facility Documents
to which it is a party are legal and valid obligations binding on it
and enforceable against it in accordance with the terms thereof,
subject to general principles of equity, bankruptcy, insolvency or
other similar laws affecting the enforcement of creditors' rights and,
in the case of the Guarantor, applicable United States Debtor Relief
Laws including, without limitation, the United States Bankruptcy Code.
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16.4 EXECUTION OF FACILITY DOCUMENTS
Its execution of the Facility Documents to which it is a party and its
exercise of its rights and performance of its obligations hereunder do
not and will not:
16.4.1 conflict with any agreement, mortgage, bond or other
instrument or treaty to which it is a party or which is
binding upon it or any of its assets;
16.4.2 conflict with its constitutive documents (and, in the case of
the Guarantor, its declaration of trust); or
16.4.3 conflict with any applicable law (including, in the case of
the Guarantor, any applicable trust law),
except, in any such case, where violation of any of the foregoing could
not reasonably be expected to have a Material Adverse Effect.
It has the power (including, in the case of the Guarantor, trust power)
to enter into the Facility Documents to which it is a party and all
corporate, trust and other action required to authorise the execution
by it thereof and the performance of its obligations thereunder has
been duly taken.
16.5 NO WINDING-UP
No member of the Group nor any Unconsolidated Affiliate (the total
assets of which, when aggregated with the total assets of any other
member of the Group or Unconsolidated Affiliate in relation to which
any of the events referred to in this Clause 16.5 applies, exceed 5% of
Total Assets (as defined in Clause 18.2 (Financial Definitions)) of the
Guarantor (determined on a consolidated basis) and no Obligor has taken
any corporate action nor have any other steps been taken or legal
proceedings been started or (to the best of its knowledge and belief)
threatened against any such member of the Group, any such
Unconsolidated Affiliate or any Obligor for its winding-up,
dissolution, liquidation, administration or re-organisation (whether by
voluntary arrangement, scheme of arrangement or otherwise) or the
appointment of a receiver, administrator, administrative receiver,
conservator, custodian, trustee or similar officer of it or of any or
all of its assets or revenues.
16.6 NO MATERIAL DEFAULTS
No member of the Group is in breach of or in default under any
agreement to which it is a party or which is binding on it or any of
its assets to an extent or in a manner which could reasonably be
expected to have a Material Adverse Effect.
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16.7 NO MATERIAL PROCEEDINGS
Except as disclosed to and accepted by the Agent prior to the date
hereof, no action or administrative proceeding of or before any court
or agency has been started nor (to the best of its knowledge and
belief) does there exist a genuine threat thereof against any member of
the Group which is reasonably likely to be determined adversely against
such member of the Group and which, if so adversely determined, is
reasonably likely to have a Material Adverse Effect. Except as
disclosed to and accepted by the Agent prior to the date hereof, no
outstanding and unpaid judgment exists against any member of the Group
which could reasonably be expected to have a Material Adverse Effect.
16.8 TAXES
16.8.1 All of the tax returns of the Group required to be filed have
been filed (or extensions have been granted) before
delinquency, except for returns for which the failure to file
could not reasonably be expected to have a Material Adverse
Effect, and all taxes imposed upon each member of the Group
have been paid in accordance with Clause 19.20 (Taxes).
16.8.2 As of the date hereof, no United States federal income tax
returns of the "affiliated group" (as defined in the I.R.C.
and the rules and regulations promulgated thereunder) of which
the Guarantor is a member have been examined and closed. The
members of such affiliated group have filed all United States
Federal income tax returns and all other material tax returns
which are required to be filed by them and have paid all taxes
due pursuant to such returns or pursuant to any assessment
received by any of them. The charges, accruals and reserves on
the books of the Guarantor in respect of taxes or other
governmental charges are, in the opinion of the Guarantor,
adequate.
16.8.3 The Guarantor qualifies as a REIT.
16.9 PENSION PLANS
16.9.1 Except as disclosed in the Original Financial Statements of
the Guarantor and except to the extent that any such
termination, liability, penalty, or fine would not (either
individually or in the aggregate) reasonably be expected to
have a Material Adverse Effect (a) no steps have been taken to
terminate any Pension Plan and no contribution failure has
occurred with respect to any Pension Plan sufficient to give
rise to an Encumbrance under any applicable pension laws
(including, without limitation, ERISA), (b) no condition
exists or event or transaction has occurred with respect to
any Pension Plan which could reasonably be expected to result
in the incurrence by the Guarantor or any ERISA Affiliate of
any material liability with respect to any contribution
thereto, fine, or penalty, and (c) neither the Guarantor nor
any ERISA Affiliate has any material contingent liability with
respect to any post retirement benefit under a Pension Plan.
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16.9.2 EXEMPTION FROM ERISA: PLAN ASSETS
The assets of the Guarantor are not "plan assets" (as defined
in 29. C.F.R. para 2510.3-101 (a) (1) (or any successor
regulation)) of any Pension Plan.
16.9.3 PENSION PLANS
All Pension Plans applied within the Group comply with all
material provisions of applicable law and employ reasonable
actuarial assumptions. No member of the Group has any
liability in respect of any Pension Plan (save as permitted in
accordance with ERISA) and there are no circumstances which
may give rise to such liability.
16.10 GOVERNMENT REGULATIONS
No member of the Group is subject to regulation under the United States
Investment Company Act of 1940, as amended, or the United States Public
Utility Holding Company Act of 1939, as amended.
16.11 AUDITED FINANCIAL STATEMENTs
The most recent financial statements of each Borrower (audited if
required in accordance with the provisions of Clause 17.2 (Borrower's
Annual Statements) and the most recent audited consolidated financial
statements of the Guarantor:
16.11.1 were prepared in accordance with accounting principles
generally accepted in:
(a) in the case of the Original Borrowers, the
Netherlands, and the United States of America;
(b) in the case of the Guarantor, the United States of
America; and
(c) in the case of each Additional Borrower, its Relevant
Jurisdiction;
16.11.2 disclose all material liabilities (contingent or
otherwise) and all unrealised or anticipated losses of
(in the case of each Borrower) each Borrower and (in the
case of the Guarantor) the Group on a consolidated basis;
and
16.11.3 save as disclosed therein, give a true and fair view of
the financial condition and operations of each Borrower
or, as the case may be, the Group during the relevant
financial year.
16.12 NO MATERIAL ADVERSE CHANGE
Since the date as at which the most recent financial statements
(audited, if applicable)) of each Borrower and the most recent audited
consolidated financial statements of the Guarantor were stated to be
prepared, there has been no change in the business or financial
condition of such Borrower or, as the case may be, the Group which
could reasonably be expected to have a Material Adverse Effect.
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16.13 WRITTEN INFORMATION
All written factual information (other than the Information Memorandum
but including any information supplied in relation to the preparation
of any due diligence reports by or on behalf of the Arrangers prior to
the date hereof) supplied to the Agent in connection with this
Agreement is true and accurate in all material respects as at the date
it was given and is not misleading in any material respect.
16.14 INFORMATION MEMORANDUM
The factual information contained in the Information Memorandum is true
and accurate in all material respects as at the date of the Information
Memorandum, the financial projections contained therein have been
prepared on the basis of recent historical information and on the basis
of reasonable assumptions and nothing has occurred or been omitted that
renders the information contained in the Information Memorandum untrue
or misleading in any material respect.
16.15 VALIDITY AND ADMISSIBILITY IN EVIDENCE
All acts, conditions and things required to be done, fulfilled and
performed in order (a) to enable it lawfully to enter into, exercise
its rights under and perform and comply with the obligations expressed
to be assumed by it in the Facility Documents, (b) to ensure that the
obligations expressed to be assumed by it in the Facility Documents are
legal, valid, binding and enforceable and (c) to make the Facility
Documents admissible in evidence in its Relevant Jurisdiction have been
(or, by the latest time permitted by applicable law, will be) done,
fulfilled and performed.
16.16 CLAIMS PARI PASSU
Under the laws of its Relevant Jurisdiction in force at the date
hereof, the claims of the Finance Parties against it under the Facility
Documents will rank at least pari passu with the claims of all its
other unsecured and unsubordinated creditors save those whose claims
are preferred solely by any bankruptcy, insolvency, liquidation or
other similar laws of general application.
16.17 NO FILING OR STAMP TAXES
Under the laws of its Relevant Jurisdiction in force at the date
hereof, it is not necessary that:
16.17.1 the Facility Documents be filed, recorded or enrolled with any
court or other authority; or
16.17.2 any stamp, registration or similar tax be paid on or in
relation to the Facility Documents.
16.18 ENCUMBRANCES
Save for Permitted Encumbrances, no Encumbrance exists over all or any
of the present or future revenues or assets of any member of the Group.
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16.19 NO DEDUCTION OR WITHHOLDING
Under the laws of its Relevant Jurisdiction in force at the date
hereof, it will not be required to make any deduction or withholding
from any payment it may make hereunder.
16.20 ENVIRONMENTAL COMPLIANCE
Except as otherwise disclosed to and accepted by the Agent prior to the
date hereof, each member of the Group has duly performed and observed
in all material respects all Environmental Law, Environmental Permits
and all other material covenants, conditions, restrictions or
agreements directly or indirectly concerned with any contamination,
pollution or waste or the release or discharge of any toxic or
hazardous substance in connection with any real property which is or
was at any time owned, leased or occupied by any member of the Group or
on which any member of the Group has conducted any activity where
failure to do so could reasonably be expected to have a Material
Adverse Effect.
16.21 ENVIRONMENTAL CLAIMS
Except as otherwise disclosed to and accepted by the Agent prior to the
date hereof, no Environmental Claim has been commenced or (to the best
of the Obligors' knowledge and belief) has been threatened in writing
against any member of the Group where such claim is reasonably likely
to be determined against such member of the Group and, if so
determined, could reasonably be expected to have a Material Adverse
Effect.
16.22 NO IMMUNITY
In any proceedings taken in its Relevant Jurisdiction in relation to
the Facility Documents it will not be entitled to claim for itself or
any material part of its assets immunity from suit, execution,
attachment or other legal process.
16.23 OWNERSHIP OF THE BORROWERS
Each Borrower is a wholly-owned subsidiary of the Guarantor.
16.24 YEAR 2000 COMPLIANT
The Guarantor has undertaken a review of all of its Computer Systems to
determine that they are Year 2000 Compliant and has not identified any
Computer System which, upon failure to be Year 2000 Compliant, would
have a material adverse impact on its business or the results of its
operations.
16.25 TRANSACTIONS WITH AFFILIATES
No member of the Group, nor any Unconsolidated Affiliate is a party to
any material transaction with any other member of the Group or
Unconsolidated Affiliate which has not been entered into on arm's
length terms or otherwise in the reasonable commercial interests of the
Group taken as a whole.
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16.26 REAL PROPERTY AND OTHER ASSETS
Each member of the Group has good and marketable title (or the
equivalent of good and marketable title in jurisdictions that do not
use such terminology) to all property (including all Property) owned by
it and to all of its revenues and assets and enjoys such possession
under all leases of property (including Property) or assets leased by
it as is necessary for the proper use and operation of such property
(including Property) or assets.
16.27 COMPLIANCE WITH APPLICABLE LAWS
Each member of the Group has complied with all applicable laws and
regulations of material importance in relation to its business and
operations, failure to comply with which would have a Material Adverse
Effect.
16.28 CONSENTS
All consents, licenses and other approvals necessary and material for
the conduct of each member of the Group's business have been or will be
obtained as and when required.
16.29 NO EVENT OF DEFAULT
No Event of Default or Potential Event of Default has occurred which is
continuing.
16.30 REPETITION OF REPRESENTATIONS
The Repeated Representations shall be deemed to be repeated by each
Obligor by reference to the facts and circumstances then existing on
each date on which an Advance is or is to be made or a Letter of Credit
is to be issued or its Term extended, and Clause 16.14 (Information
Memorandum) shall be deemed to be made on the date that the Information
Memorandum is approved by the Borrowers and the Guarantor and on the
Syndication Date.
17. FINANCIAL INFORMATION
17.1 GUARANTOR'S ANNUAL STATEMENTS
The Guarantor shall, as soon as the same become available but in any
event within 120 days after the end of each of its financial years,
deliver to the Agent, in sufficient copies for the Banks, the audited
consolidated financial statements of the Group for such financial year,
audited by an internationally recognised firm of independent auditors
licensed to practise in its Relevant Jurisdiction.
17.2 BORROWER'S ANNUAL STATEMENTS
Each Borrower shall, if so requested by any Bank through the Agent and
as soon as the same becomes available but in any event within 180 days
after the end of the relevant financial year of such Borrower, deliver
to the Agent its financial statements (audited by an internationally
recognised firm of independent auditors licensed to practise in its
Relevant Jurisdiction if such Borrower is required by applicable law to
produce audited financial statements) for such financial year.
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17.3 SEMI-ANNUAL STATEMENTS
The Guarantor shall (and each Borrower shall, if so requested by any
Bank through the Agent) as soon as the same become available, but in
any event within 90 days after the end of each half of each of its
financial years, deliver to the Agent in sufficient copies for the
Banks its financial statements (or, in the case of the Guarantor, the
consolidated financial statements of the Group) for such period.
17.4 QUARTERLY STATEMENTS
The Guarantor shall (and each Borrower shall, if so requested by any
Bank through the Agent) as soon as the same become available but in any
event within 50 days after the end of each quarter of each of its
financial years deliver to the Agent in sufficient copies for the Banks
its financial statements (or, in the case of the Guarantor, its
consolidated financial statements) for such period.
17.5 REQUIREMENTS AS TO FINANCIAL STATEMENTS
Each Obligor shall ensure that each set of financial statements
delivered by it pursuant to this Clause 17 is:
17.5.1 in the case of the Guarantor, prepared in accordance with
GAAP; and
17.5.2 certified by an Authorised Signatory of such Obligor as giving
a true and fair view of its financial condition (or, in the
case of financial statements of the Guarantor, the financial
condition of the Group) as at the end of the period to which
those financial statements relate and of the results of its
(or, as the case may be, the Group's) operations during such
period.
17.6 COMPLIANCE CERTIFICATES
The Guarantor shall ensure that each set of financial statements
delivered by it pursuant to Clause 17.1 (Guarantor's Annual Statements)
and Clause 17.3 (Semi-annual Statements) is accompanied by a Compliance
Certificate signed by its auditors (in the case of a Compliance
Certificate delivered with the Group's annual consolidated financial
statements) or by a duly authorised senior financial officer (in the
case of a Compliance Certificate delivered with any semi-annual
financial statements).
17.7 INFORMATION TO SHAREHOLDERS
The Guarantor, shall promptly after mailing or delivery thereof,
deliver to the Agent in sufficient copies for the Banks, copies of all
filings with the Securities Exchange Commission.
17.8 OTHER FINANCIAL INFORMATION
Each Obligor shall from time to time on the request of the Agent,
furnish the Agent with such information about its (or, as the case may
be, the Group's) business and financial condition as the Agent may
reasonably require.
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17.9 ACCOUNTING POLICIES
The Guarantor shall ensure that each set of financial statements of the
Guarantor delivered pursuant to this Clause 17 is prepared using
accounting policies, principles and reference periods consistent with
those applied in the preparation of its Original Financial Statements
unless, in relation to any such set of financial statements, the
Guarantor notifies the Agent that there have been one or more changes
in any such accounting policies, principles or reference periods and
the Guarantor provides:
17.9.1 a description of the changes and the adjustments which would
be required to be made to those financial statements (in
reasonable detail and to the extent that such changes and
adjustments are relevant for the purpose of calculating the
financial ratios contained in Clause 18.1 (Financial
Conditions)) in order to cause them to use the accounting
policies, principles and reference periods upon which the
immediately preceding financial statements of the Guarantor
delivered to the Agent for the purposes of this Agreement were
prepared; and
17.9.2 (if any such description of changes and adjustments is
provided to the Agent pursuant to Clause 17.9.1) such
additional information, in reasonable detail, as may be
reasonably requested by the Agent in order to enable the Agent
to calculate the financial ratios contained in Clause 18.1
(Financial Conditions) on the basis of such changes and
adjustments when taken in conjunction with any other
description of changes and adjustments previously provided to
the Agent pursuant to Clause 17.9.1 (but without, for the
avoidance of doubt, imposing any obligation on the Guarantor
to maintain parallel accounting records for the purpose of
calculating the financial ratios contained in Clause 18.1
(Financial Conditions) in the event of any relevant changes in
accounting policies, principles or reference periods),
and any reference in this Agreement to those financial statements shall
be construed as a reference to those financial statements as adjusted
on the basis of each of the changes and adjustments referred to in
Clause 17.9.1.
18. FINANCIAL CONDITION
18.1 FINANCIAL CONDITION
The Guarantor shall ensure that the financial condition of the Group,
shall be such that:
18.1.1 TOTAL DEBT/TANGIBLE NET WORTH
The ratio of Total Debt to Tangible Net Worth at any time
shall not exceed 1.00: 1.00.
18.1.2 INTEREST EXPENSE COVERAGE RATIO
The Interest Expense Coverage Ratio at any time shall not be
less than 2.00: 1.00.
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18.1.3 FIXED CHARGE COVERAGE RATIO
The Fixed Charge Coverage Ratio at any time shall not be less
than 1.75: 1.00.
18.1.4 SECURED DEBT/TOTAL ASSETS
The ratio of Secured Debt to Total Assets at any time shall be
less than 1.00: 4.00.
18.2 FINANCIAL DEFINITIONS
In this Agreement the following terms have the following meanings.
"ACTUAL CAPITAL EXPENDITURES" means any expenditures by a person that
are properly classified in the relevant financial statements of such
person in accordance with GAAP as a capital asset for (a) tenant
improvements and capitalised lease commissions on previously leased
space, and (b) recurring capital expenditures relating to any Property.
"AFFILIATE" of a person means any other individual or entity who
directly or indirectly controls, or is controlled by, or is under
common control with, that person. For purposes of this definition
"control," "controlled by," and "under common control with" mean
possession, directly or indirectly, of power to direct (or cause the
direction of) management or policies (whether through ownership of
voting securities or other ownership interests, by contract, or
otherwise).
"CAPITAL EXPENDITURES" means an amount equal to the sum of (a) in the
case of Properties that are not Refrigerated Warehouse Properties, the
greater of (1) Actual Capital Expenditures with respect to such
Properties during the four (4) financial quarters ending on the date of
determination, and (ii) the product of (A) the sum of the total square
footage with respect to all completed industrial space in all such
Properties as of the last day of each of the immediately preceding five
(5) calendar quarters, divided by five (5), and (B) $0.15, and (b) in
the case of Properties that are Refrigerated Warehouse Properties, the
greater of (i) Actual Capital Expenditures with respect to such
Properties during the four (4) financial quarters ending on the date of
determination, and (ii) the product of (A) the sum of the total cubic
footage with respect to all completed space in all such Properties as
of the last day of each of the immediately preceding five (5) calendar
quarters, divided by five (5), and (B) $0.06.
"CAPITAL LEASE" means any capital lease or sublease that has been (or
under GAAP should be) capitalized on a balance sheet.
"COMPANIES" means, without duplication, the Guarantor and each of its
Consolidated Affiliates, and "COMPANY" means any one of the Companies.
"DEBT SERVICE" means, for any person for any period, the sum of all
regularly scheduled principal payments (other than Excluded Debt
Service) and all Interest Expense that are
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paid or payable during such period in respect of all Indebtedness of
such person (excluding the payment or amortization of Interest Expense
consisting of fees and expenses paid upon the incurrence of
Indebtedness and paid in cash with the proceeds of such Indebtedness).
"DISQUALIFIED STOCK" means any person's Stock which by its terms (or by
the terms of any Stock into which it is convertible or for which it is
exchangeable or exercisable) (a) matures or is subject to mandatory
redemption, pursuant to a sinking fund obligation or otherwise, (b) is
convertible into or exchangeable or exercisable for a Liability or
Disqualified Stock during the term of this Agreement, (c) is redeemable
during the term of this Agreement at the option of the holder of such
Stock, or (d) otherwise requires any mandatory payments by any Company,
in each case on or before the Final Maturity Date; PROVIDED THAT
"Disqualified Stock" shall not include any preferred Stock solely
because such Stock requires the payment of Distributions with respect
to such Stock prior to the payment of Distributions with respect to any
other class of Stock.
"EXCLUDED DEBT SERVICE" means, for any period, any regularly scheduled
principal payments on (a) any Indebtedness which pays such Indebtedness
in full, but only to the extent the amount of such final payment is
greater than the scheduled principal payment immediately preceding such
final payment, and (b) any Indebtedness that is rated at least Baa3 and
BBB-, as the case may be, by at least two (2) of Moody's, S&P, and D&P
and issued prior to September 30 1999.
"FIXED CHARGE COVERAGE RATIO" means as of any date, the ratio of (a)
(i) Funds from Operations, plus (ii) Interest Expense, minus (iii)
Capital Expenditures, to (b) the sum of (i) Debt Service in respect of
all Indebtedness, plus (ii) Distributions of any kind or character or
other proceeds paid or payable with respect to Disqualified Stock, in
each case for the Companies and for the four (4) financial quarters
ending on the date of determination.
"FUNDS FROM OPERATIONS" means for the Guarantor for any period, net
earnings (before Distributions in respect of preferred Stock) plus
depreciation and amortization (exclusive of amortization of financing
costs), all as determined in accordance with GAAP; PROVIDED THAT there
shall not be included in such calculation (a) any proceeds of any
insurance policy other than rental or business interruption insurance
received by such person (b) any gain or loss which is classified as
"extraordinary" in accordance with GAAP, (c) any capital gains and
taxes on capital gains in each case exclusive of such amounts
recognized in accordance with GAAP that are attributable to bona fide
sales to third parties (including the ProLogis European Properties
Fund, to the extent of any third party interests therein) by ProLogis
Services, Kings Park Holding S.A., and International Consolidated
Affiliates of Properties developed by such persons with the intention
of reselling such Properties to third parties and not holding such
ProLogis Properties as an Investment, (d) any non-recurring and
non-cash event that is excluded from the Guarantor's reported Funds
from Operations in its quarterly 10-Q and annual 10-K Financial
Statements, (e) any tax expense which is classified as "deferred" in
accordance with GAAP, (f) any tax income which is classified as a tax
benefit in accordance with GAAP, (g) any foreign exchange gain or loss
which is the result of a period ending "mark to market" of intercompany
or third-party loans or hedges (for
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currency or interest rate swaps) in accordance with GAAP, and (h) gains
or losses from sales of depreciated Properties of the Guarantor. The
Funds from Operations contribution from Unconsolidated Affiliates shall
be (i) included only to the extent that such amounts have been, or are
not prohibited on the last day of the applicable period of
determination from being distributed (directly or indirectly) to a
Company and (ii) calculated on the same basis as this definition. Funds
from Operations shall be calculated as if all minority interests in
Consolidated Affiliates have been converted into Stock of the
Guarantor.
"GAAP" means generally accepted accounting principles of the Accounting
Principles Board of the American Institute of Certified Public
Accountants and the Financial Accounting Standards Board that are
applicable on the date of this Agreement.
"HEDGING AGREEMENTS" means any and all agreements, devices, or
arrangements designed to protect at least one of the parties thereto
from fluctuations of interest rates, exchange rates, or forward rates
applicable to such party's assets, liabilities, or exchange
transactions, including, without limitation, dollar-denominated or
cross-currency interest rate exchange agreements, forward currency
exchange agreements, interest rate cap, swap, or collar protection
agreements, and forward rate currency or interest rate options, as the
same may be amended or modified and in effect from time to time, and
any and all cancellations, buybacks, reversals, terminations, or
assignments of the foregoing.
"INDEBTEDNESS" means, for any person, all Liabilities (without
duplication) of such person that are (a) Liabilities for borrowed money
of such person, (b) evidenced by bonds, debentures, notes, or similar
instruments of such person, (c) obligations to pay the deferred
purchase price of assets, services, or Stock except (i) accounts
payables, (ii) obligations incurred in the ordinary course of business
to pay the purchase price of Stock so long as such obligations are paid
within customary settlement terms, and (iii) obligations to purchase
Stock (other than Stock of the Guarantor or any of its Affiliates)
pursuant to subscription or Stock purchase agreements in the ordinary
course of business, (d) secured by an Encumbrance existing on any
property of such person or any interest of such person therein, whether
or not such Liability shall have been assumed by such person, (e)
Capital Leases, (f) a guaranty, endorsement, or other contingent
obligation of such person (other than (i) endorsement in the ordinary
course of business of negotiable instruments or documents for deposit
or collection, and (ii) indemnification obligations and purchase price
adjustments pursuant to acquisition agreements entered into in the
ordinary course of business), and (g) accounts payable, accrued
expenses, net obligations arising under Hedging Agreements, and other
Liabilities not included in the calculation of (a) through (f) above
which in the aggregate are in excess of five percent (5%) of the amount
of Total Assets of such person determined in accordance with GAAP plus
the amount of any accumulated depreciation with respect to such assets,
as of the date of determination.
"INTEREST EXPENSE" means, for any person for any period, all interest
expense on such person's Indebtedness (whether direct, indirect, or
contingent, and including interest on all convertible Liabilities)
determined in accordance with GAAP.
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"INTEREST EXPENSE COVERAGE RATIO" means, as of any date, the ratio of
(a) the sum of (i) Funds from Operations, plus (ii) Interest Expense to
(b) the sum of (i) Interest Expense (excluding the payment or
amortisation of Interest Expense consisting of fees and expenses paid
upon the incurrence of Indebtedness and paid in cash with the proceeds
of such Indebtedness), plus (ii) Distributions of any kind or character
or other proceeds paid or payable with respect to any Disqualified
Stock, in each case for each member of the Group and for the four (4)
financial quarters ending on the date of determination.
"INTERNATIONAL CONSOLIDATED AFFILIATES" means each Consolidated
Affiliate of a Borrower that is not organised under the laws of a state
located in the United States and "INTERNATIONAL CONSOLIDATED AFFILIATE"
means any one of the International Consolidated Affiliates.
"INVESTMENT" in any person means any investment, whether by means of
Stock purchase, loan, advance, extension of credit, capital
contribution, or otherwise, in or to such person, the guarantee of any
Liabilities of such person, or the subordination of any claim against
such person to other Liabilities of such person.
"LIABILITIES" means (without duplication), for any person, (a) any
obligations required by GAAP to be classified upon such person's
balance sheet as liabilities, (b) any liabilities secured (or for which
the holder of the Liability has an existing Right, contingent or
otherwise, to be so secured) by any Encumbrance existing on property
owned or acquired by that person, (c) any obligations that have been
(or under GAAP should be) capitalised for financial reporting purposes,
and (d) any guarantees, endorsements, and other contingent obligations
with respect to Liabilities or obligations of others, and "LIABILITY"
means any of the Liabilities.
"REFRIGERATED WAREHOUSE PROPERTIES" means each Property that is a
temperature-controlled facility and "Refrigerated Warehouse Property"
means any one of the Refrigerated Warehouse Properties.
"RIGHTS" means rights, remedies, powers, privileges, and benefits.
"SECURED DEBT" means, for any person, Indebtedness of such person
secured by any Encumbrances (other than those referred to in paragraphs
(a) to (i) inclusive in the definition of Permitted Encumbrances) in
any of such person's Properties or other assets.
"TANGIBLE NET WORTH" means for any person as of any date, (a) Total
Assets less (to the extent included therein) the book value of all
assets that would be treated as intangible assets under GAAP (including
goodwill, trademarks, trade names, copyrights, patents, deferred
charges, and unamortized debt discount and expense), minus (b) all
Liabilities of such person minus (c) the amount determined in
accordance with GAAP attributable to any minority interests in
Consolidated Affiliates of such person.
"TOTAL ASSETS" means for any person at any time (a) such person's total
assets determined in
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accordance with GAAP, plus (b) accumulated depreciation with respect to
such assets.
"TOTAL DEBT" means at any time in relation to any person, Indebtedness
at such time of such person;
18.3 FINANCIAL TESTING
The financial covenants set out in Clause 18.1 (Financial Condition)
shall be tested by reference to each of the financial statements and
each Compliance Certificate delivered pursuant to Clause 17 (Financial
Information).
18.4 ACCOUNTING TERMS
All accounting expressions which are not otherwise defined herein shall
be construed in accordance with GAAP applicable on the date of this
Agreement.
19. COVENANTS
19.1 MAINTENANCE OF LEGAL VALIDITY
Each Obligor shall obtain, comply with the terms of and do all that is
necessary to maintain in full force and effect all authorisations,
approvals, licences and consents required in or by the laws of its
Relevant Jurisdiction to enable it lawfully to enter into and perform
its obligations under the Facility Documents and to ensure the
legality, validity, enforceability or admissibility in evidence of the
Facility Documents in its jurisdiction of incorporation.
19.2 INSURANCE
The Guarantor shall maintain insurances on and in relation to the
business and assets of each member of the Group with reputable
underwriters or insurance companies against such risks and to such
extent as is usual for companies carrying on a business such as that
carried on by each such member of the Group.
19.3 ENVIRONMENTAL COMPLIANCE
Each Obligor shall, and the Guarantor shall ensure that each other
member of the Group shall, comply in all material respects with all
Environmental Laws and obtain and maintain any Environmental Permits
and take all reasonable steps in anticipation of known or expected
future changes to or obligations under the same, breach of which (or
failure to obtain, maintain or take which) could reasonably be expected
to have a Material Adverse Effect.
19.4 ENVIRONMENTAL CLAIMS
Each Obligor shall inform the Agent in writing (and the Guarantor shall
ensure that each other member of the Group shall inform the Guarantor)
as soon as reasonably practicable upon becoming aware of the same if
any Environmental Claim has been commenced or (to the best of such
Obligor's, or such other member of the Group's, knowledge and belief)
is genuinely threatened or threatened in writing against any member of
the Group or of any facts or circumstances which will or are reasonably
likely to result in any Environmental Claim being commenced or
threatened against any member of the Group in any case where such
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claim would be reasonably likely to be determined against such member
of the Group and if so determined would be reasonably likely to have a
Material Adverse Effect.
19.5 NOTIFICATION OF EVENTS OF DEFAULT
Each Obligor shall promptly inform the Agent of the occurrence of any
Event of Default or Potential Event of Default and, upon receipt of a
written request to that effect from the Agent, confirm to the Agent
that, save as previously notified to the Agent or as notified in such
confirmation, no Event of Default or Potential Event of Default has
occurred.
19.6 CLAIMS PARI PASSU
Each Obligor shall ensure that at all times the claims of the Finance
Parties against it under the Facility Documents rank at least pari
passu with the claims of all its other unsecured and unsubordinated
creditors save those whose claims are preferred by any bankruptcy,
insolvency, liquidation or other similar laws of general application.
19.7 NEGATIVE PLEDGE
None of the Borrowers (nor, if any Borrower on-lends any amount
borrowed by it hereunder, any other member of the Group to which such
amount is on-lent) shall create or permit to subsist any Encumbrance
over all or any of its present or future revenues or assets (other than
Permitted Encumbrances falling within paragraphs (a) to (i) of the
definition of "Permitted Encumbrance"). The Guarantor shall not and
shall ensure that no other member of the Group shall create or permit
to subsist any Encumbrance over all or any of its present or future
revenues or assets other than Permitted Encumbrances.
19.8 LOANS, GUARANTEES AND INVESTMENTS
The Guarantor shall ensure that:
19.8.1 no member of the Group shall acquire any shares or other
equity interest in any person otherwise than on arm's length
terms or in the reasonable commercial interests of the Group
taken as a whole;and
19.8.2 no member of the Group shall make any loans or grant any
credit to, or give any guarantee or indemnity (except as
required or permitted pursuant to the Facility Documents) in
respect of the obligations of any person which is not a member
of, the Group or which is not an Unconsolidated Affiliate or
otherwise voluntarily assume any liability, whether actual or
contingent, in respect of any obligation of any other person
which is not a member of the Group or which is not an
Unconsolidated Affiliate other than (a) loans to tenants of
Properties in relation to tenant improvements on such
Properties in the ordinary course of business or (b) any such
loan, credit, guarantee or indemnity not otherwise permitted
pursuant to (a) above where the aggregate amount of such loan
or credit or the maximum amount which could be claimed under
such guarantee or indemnity (when aggregated with the
aggregate amount of each other such loan or credit and the
maximum amount which could be claimed under each other such
guarantee or indemnity which is not otherwise permitted
pursuant to (a) above) does not exceed EUR 15,000,000 or its
equivalent. For the avoidance of doubt, this Clause 19.8.2
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shall not apply to (i) the guarantee of up to French Francs
210,000,000 dated as of 29 December 1998 granted by the
Guarantor in favour of certain financial institutions party to
an acquisition facility agreement dated 29 December 1998
between ProLogis France III SAS, ProLogis France II SARL, such
financial institutions as lenders and Credit Immobilier
General as agent for such lenders or (ii) the guarantee of up
to French Francs 100,000,000 dated as of 5 March 1999 granted
by the Guarantor in favour of certain financial institutions
party to a secured term loan agreement dated as of 29 December
1998 (as amended on 5 March 1999) between Garonor S.A., such
financial institutions as lenders, Credit Immobilier General
as agent for such lenders and Societe Generale as security
agent.
19.9 DISPOSALS
The Guarantor shall not and shall ensure that no other member of the
Group shall sell, assign, lease, transfer, or otherwise dispose of any
of their assets, other than to a member of the Group, and except for
(a) sales, leases, or other dispositions of assets that are obsolete or
have negligible fair market value, (b) sales of equipment for a fair
and adequate consideration (but if replacement equipment is necessary
for the proper operation of the business of the seller, the seller must
promptly replace the sold equipment), (c) sale or other disposal of
assets relating to the Refrigerated Warehouse Business and (d) sales or
other transfers of Property during any twelve (12) month period having
a fair market value of not more than twenty percent (20%) of the fair
market value of all Properties of the Group prior to such sale or
transfer.
19.10 MERGERS
None of the Obligors shall, and the Guarantor shall ensure that no
other member of the Group (the total assets of which, when aggregated
with the total assets of any other member of the Group to which this
Clause 19.10 applies, exceed 5% of Total Assets (as defined in Clause
18.2 (Financial Definitions)) of the Guarantor (determined on a
consolidated basis) shall, without the prior written consent of an
Instructing Group, merge or consolidate with any other person, enter
into any demerger transaction or participate in any other type of
corporate reconstruction save where any of the foregoing does not (i)
result in a Change of Control or (ii) materially and adversely affect
any Obligor's ability to comply with its obligations under the Facility
Documents.
19.11 DIVIDENDS AND DISTRIBUTIONS
The Guarantor shall not declare, make, or pay any Distributions, other
than (a) Permitted Distributions and (b) Distributions declared, made,
or paid by the Guarantor wholly in the form of its Stock.
19.12 SYNDICATION
Each Obligor shall, and the Guarantor shall ensure that each other
member of the Group shall, provide reasonable assistance to the
Arrangers in the preparation of the Information Memorandum and the
primary syndication of the Facility (including, without limitation, by
making management available for the purpose of making presentations to,
or meeting, potential lending institutions) and will comply with all
reasonable requests for information
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from potential syndicate members prior to the Syndication Date.
19.13 YEAR 2000 COMPLIANT
Each Obligor shall use all reasonable endeavours to procure that all
Computer Systems used within the Group which are of material importance
to the business and operations of the Group are (or will by no later
than 31 December 1999 be) Year 2000 Compliant.
19.14 ARM'S LENGTH TERMS
No member of the Group nor any Unconsolidated Affiliate shall enter
into any arrangement or contract with any other member of the Group or
Unconsolidated Affiliate otherwise than on arm's length terms or on
terms which are in the reasonable commercial interests of the Group
taken as a whole.
19.15 FINANCIAL INDEBTEDNESS
The Guarantor shall ensure that none of the Borrowers (and if any
Borrower on-lends any amounts borrowed hereunder to any other member of
the Group, the relevant member of the Group to which amounts are
on-lent) shall incur any Financial Indebtedness other than Financial
Indebtedness (a) incurred pursuant to this Agreement or (b) incurred in
circumstances permitted by Clause 19.14 (Arm's Length Terms).
19.16 AFFILIATES LIST
The Guarantor shall provide the Agent semi-annually in arrears (and
otherwise on the reasonable request of any Bank through the Agent) with
a written list of all Consolidated Affiliates and Unconsolidated
Affiliates existing at such time. The Consolidated Affiliates and
Unconsolidated Affiliates on the date hereof are set out in Schedule 6
(Consolidated and Unconsolidated Affiliates).
19.17 RATING
Promptly upon receipt of notice thereof, and in any event within five
Business Days after any change in the Rating of the Guarantor (as
announced from time to time by any of S&P, Moody's and D&P), the
Guarantor shall give written notice of such change to the Agent.
19.18 MAINTENANCE OF RECORDS
Each Obligor shall maintain such books and such records as may from
time to time be required by the laws of its Relevant Jurisdiction or
which are usual for companies carrying on a business such as that
carried on by such Obligor.
19.19 MAINTENANCE OF PROPERTY
Each Obligor shall take all reasonable steps to ensure that at all
times it implements and maintains a repair programme so that any and
all property (including any Property) which is owned or controlled by
such Obligor is maintained in accordance with good industry practice.
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19.20 TAXES
The Guarantor shall, and shall ensure that each member of the Group
shall:
19.20.1 promptly pay when due any and all taxes (other than property
and franchise taxes); and
19.20.2 (in relation to any and all property and franchise taxes)
promptly pay the same when due or (in circumstances where
there is no material risk of any levy or execution of any
Encumbrance on the assets or revenues in relation to which
such taxes are imposed prior to or during the 30 day period
referred to below and no material risk of attachment or
similar process in relation to such assets or revenues prior
to or during the 30 day period referred to below and PROVIDED
THAT in such circumstances the aggregate amount of such taxes
does not exceed EUR 10,000,000 or its equivalent) within 30
days of receipt of notice by the relevant member of the Group
that such taxes are due and payable.
This Clause 19.20 shall not apply to taxes which are being contested in
good faith by lawful proceedings diligently conducted, against which
reserve or other provision required by generally accepted accounting
practices in the Relevant Jurisdiction of the relevant member of the
Group have been made, and in respect of which levy and execution of any
Encumbrance have been and continue to be stayed.
19.21 MAINTENANCE OF RATINGS
The Guarantor shall ensure that it at all times maintains a credit
rating of the type described in the definition of "RATING" from at
least two of S&P, Moody's and D&P.
19.22 MAINTENANCE OF REIT STATUS
The Guarantor shall take all action necessary (as and when required in
accordance with applicable law) to remain qualified as a REIT.
20. EVENTS OF DEFAULT
Each of Clause 20.1 (Failure to Pay) to Clause 20.18 (Material Adverse
Change) describes circumstances which constitute an Event of Default
for the purposes of this Agreement.
20.1 FAILURE TO PAY
Any Obligor fails to pay any sum due from it under the Facility
Documents within 4 Business Days of such failure to pay.
20.2 MISREPRESENTATION
Any material representation or material statement made or deemed to be
made by an Obligor in the Facility Documents or in any notice or other
document, certificate or statement
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delivered by it pursuant hereto or in connection herewith is or proves
to have been incorrect or misleading in any material respect when made
or deemed to be made unless the underlying circumstances are capable of
remedy and are remedied within 10 Business Days of that date.
20.3 SPECIFIC COVENANTS
An Obligor fails duly to perform or comply with any of the obligations
expressed to be assumed by it in Clause 17 (Financial Information),
Clause 19.9 (Disposals), Clause 19.10 (Mergers), Clause 19.11
(Dividends and Distributions) or Clause 19.15 (Financial Indebtedness).
20.4 FINANCIAL CONDITION
At any time any of the requirements of Clause 18.1 (Financial
Condition) is not satisfied.
20.5 OTHER OBLIGATIONS
An Obligor fails duly to perform or comply with any other obligation
expressed to be assumed by it in the Facility Documents and such
failure, if capable of remedy, is not remedied within thirty days after
the earlier of (i) such Obligor obtaining knowledge thereof and (ii)
the Agent giving notice thereof to such Obligor
20.6 CROSS DEFAULT
Any Financial Indebtedness of any member of the Group or any
Unconsolidated Affiliate is not paid when due, any Financial
Indebtedness of any member of the Group or any Unconsolidated Affiliate
is declared to be or otherwise becomes due and payable prior to its
specified maturity by reason of a default, event of default or
termination event (however described), any commitment for any Financial
Indebtedness of any member of the Group or any Unconsolidated Affiliate
is cancelled or suspended by a creditor of any such member of the Group
or such Unconsolidated Affiliate by reason of a default, event of
default or termination event (however described) or any creditor of any
member of the Group or any Unconsolidated Affiliate becomes entitled to
declare any Financial Indebtedness of any such member of the Group or
such Unconsolidated Affiliate due and payable prior to its specified
maturity by reason of a default, event of default or termination event
(however described), PROVIDED THAT
20.6.1 it shall not constitute an Event of Default if the aggregate
amount (or its equivalent in euro) of all such Financial
Indebtedness is less than EUR 15,000,000; and
20.6.2 (if any creditor of any member of the Group or any
Unconsolidated Affiliate becomes entitled to declare any
Financial Indebtedness of any such member of the Group or such
Unconsolidated Affiliate due and payable prior to its
specified maturity by reason of a default, event of default or
termination event (however described)), the same shall not
constitute an Event of Default until the expiry of 30 days
after the first date on which such entitlement arose PROVIDED
THAT such entitlement did not arise as a result of such member
of the Group's or such Unconsolidated Affiliate's failure to
pay any Financial Indebtedness when due and PROVIDED FURTHER
THAT, for the avoidance of doubt, this Clause 20.6.2 is
subject to and without prejudice to the preceding provisions
of this
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Clause 20.6 in relation to the occurrence of an Event of
Default if the relevant Financial Indebtedness (which the
relevant creditor has become entitled to declare due and
payable prior to its specified maturity by reason of a
default, event of default or termination event (however
described)) is declared to be or otherwise becomes due and
payable prior to its specified maturity by reason of a
default, event of default or termination event (however
described) during such 30 day period.
20.7 INSOLVENCY AND RESCHEDULING
Any member of the Group or any Unconsolidated Affiliate (the total
assets of which, when aggregated with the total assets of any other
member of the Group or Unconsolidated Affiliate to which this Clause
applies, exceed 5% of Total Assets (as defined in Clause 18.2
(Financial Definitions)) of the Guarantor (on a consolidated basis) is
unable to pay its debts as they fall due, commences negotiations with
any one or more of its creditors with a view to the general
readjustment or rescheduling of its indebtedness or makes a general
assignment for the benefit of or a composition with its creditors.
20.8 WINDING-UP
Any member of the Group or any Unconsolidated Affiliate (the total
assets of which, when aggregated with the total assets of any other
member of the Group or Unconsolidated Affiliate to which this Clause
applies, exceed 5% of Total Assets (as defined in Clause 18.2
(Financial Definitions)) of the Guarantor (on a consolidated basis)
takes any corporate action or other steps are taken or legal
proceedings are started (which are not frivolous or vexatious) for its
winding-up, dissolution, liquidation, administration or re-organisation
(whether by way of voluntary arrangement, scheme of arrangement or
otherwise except for any such action taken for the purposes of a
reconstruction or amalgamation whilst solvent on terms previously
approved by the Agent, such approval not to be unreasonably withheld or
delayed in the case of a member of the Group which is not an Obligor)
or for the appointment of a liquidator, receiver, administrator,
administrative receiver, conservator, custodian, trustee or similar
officer of it or of any or all of its revenues and assets.
20.9 EXECUTION OR DISTRESS
Any execution or distress is levied against (and is not discharged or
paid out within 10 days), or an encumbrancer takes possession of, the
whole or any part of, the property, undertaking or assets of any member
of the Group or any event occurs which under the laws of any
jurisdiction has a similar or analogous effect in each case PROVIDED
THAT it shall not be an Event of Default under this Clause unless the
aggregate amount of assets which are the subject of any such action as
aforesaid exceeds EUR 30,000,000 or its equivalent.
20.10 FAILURE TO COMPLY WITH FINAL JUDGMENT
Any member of the Group fails to comply with or pay any sum due from it
under, any final judgment or any final order made or given by any court
of competent jurisdiction PROVIDED THAT it shall not be an Event of
Default under this Clause unless the aggregate of all such sums exceeds
EUR 30,000,000 or its equivalent.
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20.11 GOVERNMENTAL INTERVENTION
By or under the authority of any government, (a) the management of any
member of the Group or any Unconsolidated Affiliate (the total assets
of which, when aggregated with the total assets of any other member of
the Group or any Unconsolidated Affiliate to which this Clause applies,
exceed 5% of Total Assets (as defined in Clause 18.2 (Financial
Definitions)) of the Guarantor (on a consolidated basis) is wholly or
partially displaced or the authority of any such member of the Group or
any such Unconsolidated Affiliate in the conduct of its business is
wholly or partially curtailed or (b) all or a majority of the issued
shares of any such member of the Group or any such Unconsolidated
Affiliate or the whole or any part (the book value of which is twenty
per cent. or more of the book value of the whole) of its revenues or
assets is seized, nationalised, expropriated or compulsorily acquired.
20.12 OWNERSHIP OF THE BORROWERS
Any Borrower ceases to be (directly or indirectly) a wholly-owned
subsidiary of the Guarantor PROVIDED THAT with the prior consent of an
Instructing Group, any change in the ownership of a Borrower shall be
permitted to the extent that such change (i) does not result in a
Change of Control and (ii) is not likely (in the opinion of an
Instructing Group) to adversely affect any Obligor's ability to comply
with its obligations under any of the Facility Documents.
20.13 STATUS OF THE GUARANTOR
The Guarantor ceases to be a REIT.
20.14 THE GROUP'S BUSINESS
Save with the consent of an Instructing Group, the Group taken as a
whole ceases to carry on or changes a material part of, the business
(other than the Refrigerated Warehouse Business) it carries on at the
date hereof or enters into any unrelated business which results in any
material change to the nature of such business (save that the cessation
of the Refrigerated Warehouse Business shall not be an Event of
Default).
20.15 REPUDIATION
An Obligor repudiates any Facility Document or does or causes to be
done any act or thing evidencing an intention to repudiate any Facility
Document.
20.16 ILLEGALITY
At any time it is or becomes unlawful for an Obligor to perform or
comply with any or all of its material obligations hereunder or any of
the material obligations of an Obligor hereunder are not or cease to be
legal, valid, binding and enforceable (where for this purpose the
guarantee of the Guarantor contained in this Agreement is, for the
avoidance of doubt, material).
20.17 QUALIFICATION TO FINANCIAL STATEMENTS
The external auditors of the Group make a qualification in their audit
opinion in relation to the consolidated financial statements of the
Group required to be delivered pursuant to Clause 17.1 (Guarantor's
Annual Statements) which, in the reasonable opinion of an Instructing
Group, is reasonably likely to have a Material Adverse Effect.
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20.18 MATERIAL ADVERSE CHANGE
Any event or circumstance occurs which an Instructing Group reasonably
believes is reasonably likely to have a Material Adverse Effect.
20.19 ACCELERATION AND CANCELLATION
Upon the occurrence of an Event of Default and at any time thereafter
whilst it is continuing, the Agent may (and, if so instructed by an
Instructing Group, shall) by notice to the Borrowers:
20.19.1 declare all or any part of the Advances to be immediately due
and payable (whereupon the same shall become so payable
together with accrued interest thereon and any other sums then
owed by the Borrowers hereunder) or declare all or any part of
the Advances to be due and payable on demand of the Agent;
and/or
20.19.2 require each Borrower which has requested a Letter of Credit
to procure that the liabilities of each of the Banks and the
L/C Issuing Bank under each Letter of Credit are promptly
reduced to zero and/or provide Cash Collateral for each Letter
of Credit in an amount specified by the Agent (such amount not
to exceed the maximum actual and contingent liability of the
L/C Issuing Bank in relation to such Letter of Credit) and in
the currency of such Letter of Credit (whereupon such Borrower
shall do so); and/or
20.19.3 declare that the Facility shall be cancelled, whereupon the
same shall be cancelled and the Commitment of each Bank shall
be reduced to zero.
20.20 ADVANCES DUE ON DEMAND
If, pursuant to Clause 20.19 (Acceleration and Cancellation), the Agent
declares all or any part of the Advances to be due and payable on
demand of the Agent, then, and at any time thereafter whilst an Event
of Default is continuing, the Agent may (and, if so instructed by an
Instructing Group, shall) by notice to the Borrowers:
20.20.1 require repayment of all or such part of the Advances and any
other payment due hereunder on such date as it may specify in
such notice (whereupon the same shall become due and payable
on the date specified together with accrued interest thereon
and any other sums then owed by the Borrowers hereunder) or
withdraw its declaration with effect from such date as it may
specify; and
20.20.2 declare that the Facility shall be cancelled, whereupon the
same shall be cancelled and the Commitment of each Bank
reduced to zero.
20.21 LENGTH OF TERMS
If, pursuant to Clause 20.19 (Acceleration and Cancellation), the Agent
declares the Advances to be due and payable on demand of the Agent, the
Term in respect of any such
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Advance shall, if the Agent subsequently demands payment before the
scheduled Repayment Date in respect of such Advance, be deemed (except
for the purposes of Clause 24.4 (Break Costs) to be of such length that
it ends on the date that such demand is made.
21. GUARANTEE AND INDEMNITY
21.1 GUARANTEE
The Guarantor irrevocably and unconditionally guarantees to each
Finance Party the due and punctual observance and performance of all
the terms, conditions and covenants on the part of each Borrower
contained in the Facility Documents and agrees to pay from time to time
on demand any and every sum or sums of money which each such Borrower
is at any time liable to pay to any Finance Party under or pursuant to
the Facility Documents and which has become due and payable but has not
been paid at the time such demand is made.
21.2 INDEMNITY
The Guarantor irrevocably and unconditionally agrees as a primary
obligation to indemnify each Finance Party from time to time on demand
from and against any loss incurred by any Finance Party as a result of
any of the obligations the Borrowers (or any of them) under or pursuant
to the Facility Documents being or becoming void, voidable,
unenforceable or ineffective as against the Borrowers (or any of them)
for any reason whatsoever, whether or not known to any Finance Party or
any other person, the amount of such loss being the amount which the
person or persons suffering it would otherwise have been entitled to
recover from the Borrowers (or any of them).
21.3 ADDITIONAL SECURITY
The obligations of the Guarantor herein contained shall be in addition
to and independent of every other security (if any) which any Finance
Party may at any time hold in respect of any of the Obligors'
obligations under the Facility Documents.
21.4 CONTINUING OBLIGATIONS
The obligations of the Guarantor herein contained shall constitute and
be continuing obligations notwithstanding any settlement of account or
other matter or thing whatsoever and shall not be considered satisfied
by any intermediate payment or satisfaction of all or any of the
obligations of Borrowers (or any of them) under the Facility Documents
and shall continue in full force and effect until final payment in full
of all amounts owing by the Borrowers (or any of them) under the
Facility Documents and total satisfaction of all the Borrowers' actual
and contingent obligations thereunder.
21.5 OBLIGATIONS NOT DISCHARGED
Neither the obligations of the Guarantor herein contained nor the
rights, powers and remedies conferred in respect of the Guarantor upon
any Finance Party by this Agreement or by law shall be discharged,
impaired or otherwise affected by:
21.5.1 the bankruptcy, insolvency, winding-up, dissolution,
liquidation, administration
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or re-organisation of any Borrower or any other person or any
change in its status, function, control or ownership;
21.5.2 any of the obligations of any Borrower or any other person
under the Facility Documents or under any other security taken
in respect of any of its obligations under the Facility
Documents being or becoming illegal, invalid, unenforceable or
ineffective in any respect;
21.5.3 time or other indulgence being granted or agreed to be granted
to any Borrower in respect of its obligations under the
Facility Documents or under any such other security;
21.5.4 any amendment to, or any variation, waiver or release of, any
obligation of any Borrower under the Facility Documents or
under any such other security;
21.5.5 any failure to take, or fully to take, any security
contemplated hereby or otherwise agreed to be taken in respect
of any Borrower's obligations under the Facility Documents;
21.5.6 any failure to realise or fully to realise the value of, or
any release, discharge, exchange or substitution of, any
security taken in respect of any Borrower's obligations under
the Facility Documents; or
21.5.7 any other act, event or omission which, but for this Clause
21.5, might operate to discharge, impair or otherwise affect
any of the obligations of the Guarantor herein contained in
the Facility Documents or any of the rights, powers or
remedies conferred upon any of the Finance Parties by the
Facility Documents or by law.
21.6 SETTLEMENT CONDITIONAL
Any settlement or discharge between the Guarantor and any of the
Finance Parties shall be conditional upon no security or payment to any
Finance Party by an Obligor or any other person on behalf of an Obligor
being avoided or reduced by virtue of any laws relating to bankruptcy,
insolvency, liquidation or similar laws of general application and, if
any such security or payment is so avoided or reduced, each Finance
Party shall be entitled to recover the value or amount of such security
or payment from the Guarantor subsequently as if such settlement or
discharge had not occurred.
21.7 EXERCISE OF RIGHTS
No Finance Party shall be obliged before exercising any of the rights,
powers or remedies conferred upon them in respect of the Guarantor by
this Agreement or by law to:
21.7.1 take any action or obtain judgment in any court against any
Borrower;
21.7.2 make or file any claim or proof in a winding-up or dissolution
of any Borrower; or
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21.7.3 enforce or seek to enforce any other security taken in respect
of any of the obligations of any Borrower hereunder.
21.8 DEFERRAL OF GUARANTOR'S RIGHTS
The Guarantor agrees that, so long as any amounts are or may be owed by
any Borrower hereunder or any Borrower is under any actual or
contingent obligations under the Facility Documents, the Guarantor
shall not exercise any rights which the Guarantor may at any time have
by reason of performance by it of its obligations under the Facility
Documents to:
21.8.1 be indemnified by the Borrowers; and/or
21.8.2 claim any contribution from any other guarantor of any
Borrower's obligations under the Facility Documents; and/or
21.8.3 take the benefit (in whole or in part and whether by way of
subrogation or otherwise) of any rights of the Finance Parties
under the Facility Documents or of any other security taken
pursuant to, or in connection with, the Facility Documents by
all or any of the Finance Parties.
21.9 SUSPENSE ACCOUNTS
All moneys received, recovered or realised by a Bank by virtue of
Clause 21.1 (Guarantee) or Clause 21.2 (Indemnity) may, in that Bank's
discretion, be credited to an interest bearing suspense or impersonal
account and may be held in such account for such reasonable time as the
Bank thinks fit pending the application from time to time (as such Bank
may think fit) of such moneys in or towards the payment and discharge
of any amounts owing by an Obligor to such Bank under the Facility
Documents.
22. COMMITMENT COMMISSION AND FEES
22.1 COMMITMENT COMMISSION
The Guarantor shall pay to the Agent for account of each Bank a
commitment commission on the amount of such Bank's Available Commitment
from day to day during the period beginning on the date hereof and
ending on the Final Maturity Date (or, if the Banks have granted an
extension to the Facility pursuant to Clause 10.8 (Extension), the
Extended Maturity Date), such commitment commission to be calculated at
the rate per annum which is 50 per cent. of the Applicable Margin and
payable in arrear on the last day of each successive period of three
months which ends during such period and on the Final Maturity Date
(or, if the Banks have granted an extension to the Facility pursuant to
Clause 10.8 (Extension), the Extended Maturity Date).
22.2 ARRANGEMENT FEE
The Guarantor shall pay to the Arrangers the fees specified in the
letter of even date herewith from the Arrangers to the Guarantor at the
times, and in the amounts, specified in such letter.
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22.3 AGENCY FEE
The Guarantor shall pay to the Agent for its own account the agency
fees specified in the letter of even date herewith from the Agent to
the Guarantor at the times, and in the amounts, specified in such
letter.
23. COSTS AND EXPENSES
23.1 TRANSACTION EXPENSES
The Guarantor shall, from time to time within 30 days of demand of the
Agent, reimburse each of the Agent and each of the Arrangers for all
reasonable costs and expenses (including legal fees) together with any
VAT thereon incurred by it in connection with the negotiation,
preparation and execution of this Agreement, any other document
referred to in this Agreement and the completion of the transactions
herein contemplated.
23.2 PRESERVATION AND ENFORCEMENT OF RIGHTS
The Guarantor shall, from time to time within 7 days of demand of the
Agent, reimburse the Finance Parties for all costs and expenses
(including legal fees) on a full indemnity basis together with any VAT
thereon incurred in or in connection with the preservation and/or
enforcement of any of the rights of the Finance Parties under this
Agreement and any other document referred to in this Agreement
(including, without limitation, any costs and expenses relating to any
investigation (with reasonable cause) as to whether or not an Event of
Default might have occurred or any steps necessary or desirable in
connection with any proposal for remedying or otherwise resolving an
Event of Default or Potential Event of Default).
23.3 STAMP TAXES
The Guarantor shall pay all stamp, registration and other taxes to
which this Agreement, any other document referred to in this Agreement
or any judgment given in connection therewith is or at any time may be
subject and shall, within 21 days of written demand of the Agent,
indemnify the Finance Parties against any reasonable liabilities,
costs, claims and expenses resulting directly from any failure to pay
or any delay in paying any such tax.
23.4 COSTS
If an Obligor requests any amendment, waiver or consent then the
Guarantor shall, within 30 days of demand by the Agent, reimburse the
Finance Parties for all reasonable costs and expenses (including legal
fees) together with any VAT thereon incurred by such person in
responding to or complying with such request.
23.5 BANKS' LIABILITIES FOR COSTS
If the Guarantor fails to perform any of its obligations under this
Clause 23, each Bank shall, in its Proportion, indemnify each of the
Agent and the Arrangers against any loss incurred by any of them as a
result of such failure.
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24. DEFAULT INTEREST AND BREAK COSTS
24.1 DEFAULT INTEREST PERIODS
If any sum due and payable by an Obligor hereunder is not paid on the
due date therefor in accordance with Clause 27 (Payments) or if any sum
due and payable by an Obligor under any judgment of any court in
connection herewith is not paid on the date of such judgment, the
period beginning on such due date or, as the case may be, the date of
such judgment and ending on the date upon which the obligation of such
Obligor to pay such sum is discharged shall be divided into successive
periods, each of which (other than the first) shall start on the last
day of the preceding such period and the duration of each of which
shall (except as otherwise provided in this Clause 24) be selected by
the Agent.
24.2 DEFAULT INTEREST
Each Finance Party's portion of an Unpaid Sum shall bear interest
during each Term in respect thereof at the rate per annum which is 1.5
per cent. per annum above the percentage rate which would apply to an
Advance in the amount and currency of such Unpaid Sum and for the same
Term (but assuming for this purpose that "EURIBOR" shall be replaced by
a reference to the rate per annum, as notified by such Finance Party to
the Agent, which represents the cost to such Finance Party of funding
from whatever sources it may select its portion of such Unpaid Sum
during such Term), PROVIDED THAT if such Unpaid Sum relates to an
Advance which became due and payable on a day other than the last day
of the Term thereof:
24.2.1 the first such Term applicable to such Unpaid Sum shall be of
a duration equal to the unexpired portion of the current Term
relating to that Advance; and
24.2.2 the percentage rate of interest applicable thereto from time
to time during such period shall be that which exceeds by 1.5
per cent. the rate which would have been applicable to it had
it not so fallen due save that the Applicable Margin shall be,
or be deemed to be, the highest rate specified in the
definition thereof.
24.3 PAYMENT OF DEFAULT INTEREST
Any interest which shall have accrued under Clause 24.2 (Default
Interest) in respect of an Unpaid Sum shall be due and payable and
shall be paid by the Obligor owing such Unpaid Sum on the last day of
its Term or on such other dates as the Agent may specify by notice to
such Obligor.
24.4 BREAK COSTS
If any Bank or the Agent on its behalf receives or recovers all or any
part of an Advance or Unpaid Sum otherwise than on the last day of the
Term thereof, the Borrowers shall pay to the Agent on demand for
account of such Bank an amount equal to the amount (if any) by which
(a) the additional interest which would have been payable on the amount
so received or recovered had it been received or recovered on the last
day of the Term thereof (excluding any element of interest representing
the Applicable Margin) exceeds (b) the amount of interest
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which in the opinion of the Agent would have been payable to the Agent
on the last day of the Term thereof in respect of a deposit in the
currency of the amount so received or recovered equal to the amount so
received or recovered placed by it with a prime bank in Amsterdam (or,
in the case of amounts denominated in an Optional Currency, London) for
a period starting on the first Business Day following the date of such
receipt or recovery and ending on the last day of the Term thereof.
25. GUARANTOR'S INDEMNITIES
25.1 GUARANTOR'S INDEMNITY
The Guarantor undertakes to indemnify:
25.1.1 each Finance Party against any cost, claim, loss, expense
(including legal fees) or liability together with any VAT
thereon, whether or not reasonably foreseeable, which it may
sustain or incur as a consequence of the occurrence of any
Event of Default or any default by any Obligor in the
performance of any of the obligations expressed to be assumed
by it in the Facility Documents;
25.1.2 the Agent against any reasonable cost or loss it may suffer or
incur as a result of its entering into, or performing, any
foreign exchange contract for the purposes of Clause 27
(Payments);
25.1.3 each Bank against any reasonable cost or loss it may suffer
under Clause 23.5 (Banks' Liabilities for Costs) or Clause
30.5 (Indemnification);
25.1.4 each Bank or the L/C Issuing Bank against any reasonable cost
or loss it may suffer or incur as a result of either:
(a) its funding or making arrangements to fund its
portion of an Advance requested by any Borrower
hereunder but not made; or
(b) its issuing or making arrangements to issue a Letter
of Credit requested by any Borrower hereunder but not
issued,
by reason of the operation of any one or more of the
provisions hereof; and
25.1.5 each Bank against any reasonable loss it may suffer or incur
as a result of its funding its portion of any Advance which is
denominated in euro or sterling by reason of Clause 3.3
(Conditions for Drawing in an Optional Currency).
25.2 CURRENCY INDEMNITY
If any sum (a "SUM") due from an Obligor under this Agreement or any
order, judgment given or made in relation hereto has to be converted
from the currency (the "FIRST CURRENCY") in which such Sum is payable
into another currency (the "SECOND CURRENCY") for the purpose of:
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25.2.1 making or filing a claim or proof against such Obligor;
25.2.2 obtaining an order, judgment in any court or other tribunal;
or
25.2.3 enforcing any order, judgment given or made in relation
hereto,
the Guarantor shall indemnify each person to whom such Sum is due from
and against any reasonable loss suffered or incurred as a result of any
discrepancy between (a) the rate of exchange used for such purpose to
convert such Sum from the First Currency into the Second Currency and
(b) the rate or rates of exchange available to such person at the time
of receipt of such Sum.
26. CURRENCY OF ACCOUNT AND PAYMENT
26.1 CURRENCY OF ACCOUNT
The euro is the currency of account and payment for each and every sum
at any time due from an Obligor hereunder, PROVIDED THAT:
26.1.1 each repayment of an Advance or Unpaid Sum or a part thereof
shall be made in the currency in which such Advance or Unpaid
Sum is denominated at the time of that repayment;
26.1.2 each payment in respect of a Letter of Credit (including any
Cash Collateral in respect of a Letter of Credit) shall be
made in the currency in which such Letter of Credit is
denominated;
26.1.3 each payment of interest shall be made in the currency in
which the sum in respect of which such interest is payable is
denominated;
26.1.4 each payment in respect of costs and expenses shall be made in
the currency in which the same were incurred;
26.1.5 each payment pursuant to Clause 11.2 (Tax Indemnity) or Clause
13.1 (Increased Costs) shall be made in the currency specified
by the party claiming thereunder; and
26.1.6 any amount expressed to be payable in a currency other than
euros shall be paid in that other currency.
If, after the date of this Agreement, a member state becomes a
Subsequent Participant, all obligations under this Agreement (including
any obligation in respect of any Bank's Available Commitment) to make a
payment in its national currency unit shall be
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redenominated into euro on the date on which it becomes a Subsequent
Participant (but otherwise in accordance with EMU Legislation).
27. PAYMENTS
27.1 PAYMENTS TO THE AGENT
On each date on which this Agreement requires an amount to be paid by
an Obligor or a Bank, such Obligor or, as the case may be, such Bank
shall make the same available to the Agent:
27.1.1 (in relation to any amount other than an amount denominated in
euro) for value on the due date at such time and in such funds
and to such account with such bank as the Agent shall specify
from time to time; and
27.1.2 (in relation to euro) in immediately available, freely
transferable, cleared funds to a bank account nominated by the
Agent for this purpose from time to time.
27.2 PAYMENTS BY THE AGENT
Save as otherwise provided herein, each payment received by the Agent
pursuant to Clause 27.1 (Payments to the Agent) shall:
27.2.1 in the case of a payment received for the account of any
Borrower, be made available by the Agent to such Borrower by
application:
(a) first, in or towards payment (on the date, and in the
currency and funds, of receipt) of any amount then
due from such Borrower hereunder to the person from
whom the amount was so received or in or towards the
purchase of any amount of any currency to be so
applied; and
(b) secondly, in or towards payment (on the date, and in
the currency and funds, of receipt) to such account
with such bank in the principal financial centre of
the country of the currency of such payment as such
Borrower shall have previously notified to the Agent
for this purpose; and
27.2.2 in the case of any other payment, be made available by the
Agent to the person entitled to receive such payment in
accordance with this Agreement (in the case of a Bank, for the
account of the Facility Office) for value the same day by
transfer to such account of such person with such bank in the
principal financial centre of the country of the currency of
such payment as such person shall have previously notified to
the Agent.
27.3 PAYMENTS BY THE AGENT TO THE BANKS
Any amount payable by the Agent to the Banks under this Agreement in
the currency of a Participating Member State shall be paid in the euro
unit.
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27.4 NO SET-OFF
Subject only to Clause 27.2 (Payments by the Agent), all payments
required to be made by an Obligor hereunder shall be calculated without
reference to any set-off or counterclaim and shall be made free and
clear of and without any deduction for or on account of any set-off or
counterclaim.
27.5 CLAWBACK
Where a sum is to be paid hereunder to the Agent for account of another
person, the Agent shall not be obliged to make the same available to
that other person or to enter into or perform any exchange contract in
connection therewith until it has been able to establish to its
satisfaction that it has actually received such sum, but if it does so
and it proves to be the case that it had not actually received such
sum, then the person to whom such sum or the proceeds of such exchange
contract was so made available shall on request refund the same to the
Agent together with an amount sufficient to indemnify the Agent against
any reasonable cost or loss it may have suffered or incurred by reason
of its having paid out such sum or the proceeds of such exchange
contract prior to its having received such sum.
27.6 PARTIAL PAYMENTS
If and whenever a payment is made by an Obligor hereunder the Agent may
apply the amount received towards the obligations of the Obligors under
this Agreement in the following order:
27.6.1 FIRST, in or towards payment of any unpaid costs and expenses
of each of the Agent and the Arrangers;
27.6.2 SECONDLY, in or towards payment pro rata to the amounts owed
to each of the Banks and the L/C Issuing Bank of any fee
payable to any Bank or the L/C Issuing Bank hereunder due but
unpaid;
27.6.3 THIRDLY, in or towards payment of any demand made by the L/C
Issuing Bank in respect of a payment made or to be made by it
under a Letter of Credit due but unpaid;
27.6.4 FOURTHLY, in or towards payment pro rata to the amounts owed
to each of the Banks of any accrued interest and letter of
credit commission due but unpaid;
27.6.5 FIFTHLY, in or towards payment pro rata to the amounts owed to
each of the Banks of any principal due but unpaid; and
27.6.6 SIXTHLY, in or towards payment pro rata to the amounts owed to
each of the Banks of any other sum due but unpaid.
27.7 VARIATION OF PARTIAL PAYMENTS
The order of payments set out in Clause 27.6 (Partial Payments) shall
override any
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appropriation made by the Obligor to which the partial payment relates
but the order set out in sub-clauses 27.6.2, 27.6.3, 27.6.4 and 27.6.5
of Clause 27.6 (Partial Payments) may be varied if agreed by all the
Banks.
28. SET-OFF
28.1 CONTRACTUAL SET-OFF
Each Obligor authorises each Bank and the L/C Issuing Bank, after the
occurrence of an Event of Default which is continuing, to apply any
credit balance to which such Obligor is entitled on any account of such
Obligor with such Bank or the L/C Issuing Bank in satisfaction of any
sum due and payable from such Obligor to such Bank or the L/C Issuing
Bank hereunder but unpaid. For this purpose, each Bank and the L/C
Issuing Bank is authorised to purchase with the moneys standing to the
credit of any such account such other currencies as may be necessary to
effect such application.
28.2 SET-OFF NOT MANDATORY
None of the Banks or the L/C Issuing Bank shall be obliged to exercise
any right given to it by Clause 28.1 (Contractual Set-off).
29. SHARING
29.1 PAYMENTS TO BANKS
If a Bank (a "RECOVERING BANK") applies any receipt or recovery from an
Obligor to a payment due under this Agreement and such amount is
received or recovered other than in accordance with Clause 27
(Payments), then such Recovering Bank shall:
29.1.1 notify the Agent of such receipt or recovery;
29.1.2 at the request of the Agent, promptly pay to the Agent an
amount (the "SHARING PAYMENT") equal to such receipt or
recovery less any amount which the Agent determines may be
retained by such Recovering Bank as its share of any payment
to be made in accordance with Clause 27.6 (Partial Payments).
29.2 REDISTRIBUTION OF PAYMENTS
The Agent shall treat the Sharing Payment as if it had been paid by the
relevant Obligor and distribute it between the Finance Parties (other
than the Recovering Bank) in accordance with Clause 27.6 (Partial
Payments).
29.3 RECOVERING BANK'S RIGHTS
The Recovering Bank will be subrogated into the rights of the parties
which have shared in a redistribution pursuant to Clause 29.2
(Redistribution of Payments) in respect of the Sharing Payment (and the
relevant Obligor shall be liable to the Recovering Bank in an amount
equal to the Sharing Payment).
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29.4 REPAYABLE RECOVERIES
If any part of the Sharing Payment received or recovered by a
Recovering Bank becomes repayable and is repaid by such Recovering
Bank, then:
29.4.1 each party which has received a share of such Sharing Payment
pursuant to Clause 29.2 (Redistribution of Payments) shall,
upon request of the Agent, pay to the Agent for account of
such Recovering Bank an amount equal to its share of such
Sharing Payment; and
29.4.2 such Recovering Bank's rights of subrogation in respect of any
reimbursement shall be cancelled and the relevant Obligor will
be liable to the reimbursing party for the amount so
reimbursed.
29.5 EXCEPTION
This Clause 29 shall not apply if the Recovering Bank would not, after
making any payment pursuant hereto, have a valid and enforceable claim
against the relevant Obligor
29.6 RECOVERIES THROUGH LEGAL PROCEEDINGS
If any Bank intends to commence any action in any court it shall give
prior notice to the Agent and the other Banks. If any Bank shall
commence any action in any court to enforce its rights hereunder and,
as a result thereof or in connection therewith, receives any amount,
then such Bank shall not be required to share any portion of such
amount with any Bank which has the legal right to, but does not, join
in such action or commence and diligently prosecute a separate action
to enforce its rights in another court.
30. THE AGENT, THE ARRANGERS, THE BANKS AND THE L/C ISSUING BANK
30.1 APPOINTMENT OF THE AGENT
Each of the Arrangers, the Banks and the L/C Issuing Bank hereby
appoints the Agent to act as its agent in connection with the Facility
Documents and authorises the Agent to exercise such rights, powers,
authorities and discretions as are specifically delegated to the Agent
by the terms hereof together with all such rights, powers, authorities
and discretions as are reasonably incidental thereto.
30.2 AGENT'S DISCRETIONS
The Agent may:
30.2.1 assume, unless it has, in its capacity as agent for the Banks,
received notice to the contrary from any other party to the
Facility Documents, that (a) any representation made or deemed
to be made by an Obligor in connection with the Facility
Documents is true, (b) no Event of Default or Potential Event
of Default has occurred, (c) no Obligor is in breach of or
default under its obligations under the Facility Documents and
(d) any right, power, authority or discretion vested therein
upon an Instructing Group, the Banks,
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the L/C Issuing Bank or any other person or group of persons
has not been exercised;
30.2.2 assume that the Facility Office of each Bank is that notified
to it by such Bank in writing prior to the date hereof (or, in
the case of a Transferee, at the end of the Transfer
Certificate to which it is a party as Transferee) until it has
received from such Bank a notice designating some other office
of such Bank to replace its Facility Office and act upon any
such notice until the same is superseded by a further such
notice;
30.2.3 engage and pay for the advice or services of any lawyers,
accountants, surveyors or other experts whose advice or
services may to it seem necessary, expedient or desirable and
rely upon any advice so obtained;
30.2.4 rely as to any matters of fact which might reasonably be
expected to be within the knowledge of an Obligor upon a
certificate signed by or on behalf of such Obligor;
30.2.5 rely upon any communication or document believed by it to be
genuine;
30.2.6 refrain from exercising any right, power or discretion vested
in it as agent under the Facility Documents unless and until
instructed by an Instructing Group as to whether or not such
right, power or discretion is to be exercised and, if it is to
be exercised, as to the manner in which it should be
exercised; and
30.2.7 refrain from acting in accordance with any instructions of an
Instructing Group to begin any legal action or proceeding
arising out of or in connection with the Facility Documents
until it shall have received such security as it may require
(whether by way of payment in advance or otherwise) for all
costs, claims, losses, expenses (including legal fees) and
liabilities together with any VAT thereon which it will or may
expend or incur in complying with such instructions.
30.3 AGENT'S OBLIGATIONS
The Agent shall:
30.3.1 promptly inform each Bank and, where appropriate, the L/C
Issuing Bank of the contents of any notice or document
received by it in its capacity as Agent from an Obligor under
the Facility Documents;
30.3.2 promptly notify each Bank and, where appropriate, the L/C
Issuing Bank of the occurrence of any Event of Default or any
default by an Obligor in the due performance of or compliance
with its obligations under the Facility Documents of which the
Agent has notice from any other party to the Facility
Documents;
30.3.3 save as otherwise provided herein, act as agent under the
Facility Documents in accordance with any instructions given
to it by an Instructing Group, which instructions shall be
binding on the Arrangers, the L/C Issuing Bank and the Banks;
and
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30.3.4 if so instructed by an Instructing Group, refrain from
exercising any right, power or discretion vested in it as
agent under the Facility Documents.
The Agent's duties under the Facility Documents are solely mechanical
and administrative in nature.
30.4 EXCLUDED OBLIGATIONS
Notwithstanding anything to the contrary expressed or implied in the
Facility Documents, neither the Agent nor any of the Arrangers shall:
30.4.1 be bound to enquire as to (a) whether or not any
representation made or deemed to be made by an Obligor in
connection with the Facility Documents is true, (b) the
occurrence or otherwise of any Event of Default or Potential
Event of Default, (c) the performance by an Obligor of its
obligations under the Facility Documents or (d) any breach of
or default by an Obligor of or under its obligations under the
Facility Documents;
30.4.2 be bound to account to any Bank or the L/C Issuing Bank for
any sum or the profit element of any sum received by it for
its own account;
30.4.3 be bound to disclose to any other person any information
relating to any member of the Group or any Unconsolidated
Affiliate if (a) such person, on providing such information
expressly stated to the Agent or, as the case may be, the
Arrangers, that such information was confidential or (b) such
disclosure would or might in its opinion constitute a breach
of any law or be otherwise actionable at the suit of any
person;
30.4.4 be under any obligations other than those for which express
provision is made in the Facility Documents; or
30.4.5 be or be deemed to be a fiduciary for any other party to the
Facility Documents.
30.5 INDEMNIFICATION
Each Bank shall, in its Proportion, from time to time on demand by the
Agent, indemnify the Agent, against any and all costs, claims, losses,
expenses (including legal fees) and liabilities together with any VAT
thereon which the Agent may incur, otherwise than by reason of its own
gross negligence or wilful misconduct, in acting in its capacity as
agent under the Facility Documents (other than any which have been
reimbursed by the Guarantors pursuant to Clause 25.1 (Guarantor's
Indemnity)).
30.6 EXCLUSION OF LIABILITIES
Except in the case of gross negligence or wilful default, none of the
Agent and the Arrangers accepts any responsibility:
30.6.1 for the adequacy, accuracy and/or completeness of the
Information
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Memorandum or any other information supplied by the Agent or
the Arrangers, by any member of the Group or any
Unconsolidated Affiliate or by any other person in connection
with the Facility Documents, the transactions contemplated in
the Facility Documents or any other agreement, arrangement or
document entered into, made or executed in anticipation of,
pursuant to or in connection with the Facility Documents;
30.6.2 for the legality, validity, effectiveness, adequacy or
enforceability of any of the Facility Documents or any other
agreement, arrangement or document entered into, made or
executed in anticipation of, pursuant to or in connection with
the Facility Documents; or
30.6.3 for the exercise of, or the failure to exercise, any
judgement, discretion or power given to any of them by or in
connection with the Facility Documents or any other agreement,
arrangement or document entered into, made or executed in
anticipation of, pursuant to or in connection with the
Facility Documents.
Accordingly, none of the Agent and the Arrangers shall be under any
liability in respect of such matters, save in the case of gross
negligence or wilful misconduct.
30.7 NO ACTIONS
Each of the Banks and the L/C Issuing Bank agrees that it will not
assert or seek to assert against any director, officer or employee of
the Agent or any Arranger any claim it might have against any of them
in respect of the matters referred to in Clause 30.6 (Exclusion of
Liabilities).
30.8 BUSINESS WITH THE GROUP
The Agent and each of the Arrangers may accept deposits from, lend
money to and generally engage in any kind of banking or other business
with any member of the Group.
30.9 RESIGNATION
The Agent may not resign its appointment under the Facility Documents.
30.10 REMOVAL OF AGENT
An Instructing Group may remove the Agent from its role as agent under
the Facility Documents by giving notice to that effect to each of the
other parties hereto. Such removal shall take effect only when a
successor to the Agent is appointed in accordance with the terms
hereof.
30.11 SUCCESSOR AGENT
If the Agent is removed pursuant to Clause 30.10 (Removal of Agent),
then any reputable and experienced bank or other financial institution
may be appointed as a successor to the Agent by an Instructing Group
(after consultation with the Guarantor) before such removal takes
effect. Such removal shall not take effect until an Instructing Group
has received in form and substance satisfactory to it such documents,
legal opinions and other evidence it requires in order to be satisfied
that the interests of the Banks under the Facility Documents are not
thereby prejudiced.
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30.12 RIGHTS AND OBLIGATIONS
If a successor to the Agent is appointed under the provisions of Clause
30.11 (Successor Agent), then (a) the departing Agent shall be
discharged from any further obligations under the Facility Documents
but shall remain entitled to the benefit of the provisions of this
Clause 30 and (b) its successor and each of the other parties to the
Facility Documents shall have the same rights and obligations amongst
themselves as they would have had if such successor had been a party to
the Facility Documents.
30.13 OWN RESPONSIBILITY
It is understood and agreed by each Bank and the L/C Issuing Bank that
at all times it has itself been, and will continue to be, solely
responsible for making its own independent appraisal of and
investigation into all risks arising under or in connection with the
Facility Documents including, but not limited to:
30.13.1 the financial condition, creditworthiness, condition, affairs,
status and nature of each member of the Group and each
Unconsolidated Affiliate;
30.13.2 the legality, validity, effectiveness, adequacy and
enforceability of the Facility Documents and any other
agreement, arrangement or document entered into, made or
executed in anticipation of, pursuant to or in connection with
the Facility Documents;
30.13.3 whether such Bank has recourse, and the nature and extent of
that recourse, against an Obligor or any other person or any
of their respective assets under or in connection with the
Facility Documents, the transactions contemplated in the
Facility Documents or any other agreement, arrangement or
document entered into, made or executed in anticipation of,
pursuant to or in connection with the Facility Documents; and
30.13.4 the adequacy, accuracy and/or completeness of the Information
Memorandum and any other information provided by the Agent or
the Arrangers, an Obligor, or by any other person in
connection with the Facility Documents, the transactions
contemplated therein or any other agreement, arrangement or
document entered into, made or executed in anticipation of,
pursuant to or in connection with the Facility Documents.
Accordingly, each Bank and the L/C Issuing Bank acknowledges to the
Agent and the Arrangers that it has not relied on and will not
hereafter rely on the Agent and the Arrangers or any of them in respect
of any of these matters.
30.14 BANK'S MANDATORY COST DETAILS
Each Bank will supply the Agent with such information and in such
detail as the Agent may require in order to calculate the Mandatory
Costs Rate in accordance with Schedule 10 (Mandatory Costs).
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30.15 AGENCY DIVISION SEPARATE
In acting as agent under the Facility Documents for the Banks, the
Agent shall be regarded as acting through its agency division which
shall be treated as a separate entity from any other of its divisions
or departments and, notwithstanding the foregoing provisions of this
Clause 30, any information received by some other division or
department of the Agent may be treated as confidential and shall not be
regarded as having been given to the Agent's agency division.
31.31. THE BANKS AND THE L/C ISSUING BANK
31.1 BANK'S INDEMNITY
If any Borrower fails to comply with its obligations under Clause 9.1
(Borrowers' Indemnity to L/C Issuing Bank) the Agent shall make demand
on each Bank for its share of the relevant L/C Amount and, subject to
Clause 31.2 (Direct Participation)), each Bank shall indemnify the L/C
Issuing Bank for such Bank's L/C Proportion of each L/C Amount.
31.2 DIRECT PARTICIPATION
If any Bank is not permitted (by its constitutional documents or any
applicable law) to comply with Clause 31.1 (Bank's Indemnity) then such
Bank will not be obliged to comply with Clause 31.1 (Bank's Indemnity)
and shall instead be deemed to have taken, on the date such Letter of
Credit is issued (or if later, on the date such L/C Participation is
transferred or assigned to such Bank in accordance with the terms of
this Agreement), an undivided interest and participation in such Letter
of Credit in an amount equal to such Bank's L/C Proportion of such
Letter of Credit. On receipt of a demand made by the Agent in
accordance with Clause 31.1 (Bank's Indemnity), each such Bank shall
pay to the Agent (for the account of the L/C Issuing Bank) its L/C
Proportion of any L/C Amount.
31.3 OBLIGATIONS NOT DISCHARGED
Neither the obligations of each Bank in this Clause 31 nor the rights,
powers and remedies conferred upon the L/C Issuing Bank by this
Agreement or by law shall be discharged, impaired or otherwise affected
by:
31.3.1 the winding-up, dissolution, administration or re-organisation
of the L/C Issuing Bank, any Obligor or any other person or
any change in its status, function, control or ownership;
31.3.2 any of the obligations of the L/C Issuing Bank, any Borrower
or any other person under the Facility Documents, under a
Letter of Credit or under any other security taken in respect
of its obligations under the Facility Documents or under a
Letter of Credit being or becoming illegal, invalid,
unenforceable or ineffective in any respect;
31.3.3 time or other indulgence being granted or agreed to be granted
to the L/C Issuing Bank, any Borrower or any other person in
respect of its obligations under the
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Facility Documents, under a Letter of Credit or under any such
other security;
31.3.4 any amendment to, or any variation, waiver or release of, any
obligation of the L/C Issuing Bank, any Borrower or any other
person under the Facility Documents, under a Letter of Credit
or under any such other security; and
31.3.5 any other act, event or omission which, but for this Clause
31.3, might operate to discharge, impair or otherwise affect
any of the obligations of each Bank herein contained or any of
the rights, powers or remedies conferred upon the L/C Issuing
Bank by this Agreement or by law.
The obligations of each Bank herein contained shall be in addition to
and independent of every other security which the L/C Issuing Bank may
at any time hold in respect of any Letter of Credit.
31.4 SETTLEMENT CONDITIONAL
Any settlement or discharge between a Bank and the L/C Issuing Bank
shall be conditional upon no security or payment to any L/C Issuing
Bank by a Bank or any other person on behalf of a Bank being avoided or
reduced by virtue of any laws relating to bankruptcy, insolvency,
liquidation or similar laws of general application and, if any such
security or payment is so avoided or reduced, the L/C Issuing Bank
shall be entitled to recover the value or amount of such security or
payment from such Bank subsequently as if such settlement or discharge
had not occurred.
31.5 EXERCISE OF RIGHTS
The L/C Issuing Bank shall not be obliged before exercising any of the
rights, powers or remedies conferred upon it in respect of any Bank by
this Agreement or by law:
31.5.1 to take any action or obtain judgment in any court against any
Obligor;
31.5.2 to make or file any claim or proof in a winding-up or
dissolution of any Obligor; or
31.5.3 to enforce or seek to enforce any other security taken in
respect of any of the obligations of any Obligor under the
Facility Documents.
32. ASSIGNMENTS AND TRANSFERS
32.1 BINDING AGREEMENT
This Agreement shall be binding upon and enure to the benefit of each
party hereto and its or any subsequent successors and Transferees.
32.2 NO ASSIGNMENTS AND TRANSFERS BY THE OBLIGORS
No Obligor shall be entitled to assign or transfer all or any of its
rights, benefits and obligations hereunder.
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32.3 ASSIGNMENTS AND TRANSFERS BY BANKS
Subject to obtaining the prior written consent of the Guarantor (not to
be unreasonably withheld or delayed) and the L/C Issuing Bank (not to
be unreasonably withheld or delayed having regard, inter alia, to the
L/C Issuing Bank's internal policies and guidelines, commercial
position and affairs at the relevant time), any Bank may, at any time,
assign all or any of its rights and benefits under the Facility
Documents or transfer in accordance with Clause 32.5 (Transfers by
Banks) all or any of its rights, benefits and obligations hereunder to
a bank or financial institution, PROVIDED THAT (a) the Guarantor's
consent shall not be required if such assignment or transfer is to any
subsidiary or holding company, or to any subsidiary of any holding
company, of such Bank, (b) neither the Guarantor's nor the L/C Issuing
Bank's consent shall be required if such assignment or transfer is to
any other Bank and (c) if such assignment or transfer is of part only
of such Bank's rights, benefits and/or obligations hereunder, such
assignment or transfer is in a minimum amount of EUR 10,000,000 or the
equivalent thereof.
32.4 ASSIGNMENTS BY BANKS
If any Bank assigns all or any of its rights and benefits under the
Facility Documents in accordance with Clause 32.3 (Assignments and
Transfers by Banks), then, unless and until the assignee has delivered
a notice to the Agent confirming in favour of the Agent, the Arrangers,
the L/C Issuing Bank and the other Banks that it shall be under the
same obligations towards each of them as it would have been under if it
had been an original party hereto as a Bank (whereupon such assignee
shall become a party hereto as a "Bank"), the Agent, the Arrangers, the
L/C Issuing Bank and the other Banks shall not be obliged to recognise
such assignee as having the rights against each of them which it would
have had if it had been such a party hereto.
32.5 TRANSFERS BY BANKS
If any Bank wishes to transfer all or any of its rights, benefits
and/or obligations hereunder as contemplated in Clause 32.3
(Assignments and Transfers by Banks), then such transfer may be
effected by the delivery to the Agent of a duly completed Transfer
Certificate executed by such Bank and the relevant Transferee in which
event, on the later of the Transfer Date specified in such Transfer
Certificate and the fifth Business Day after (or such earlier Business
Day endorsed by the Agent on such Transfer Certificate falling on or
after) the date of delivery of such Transfer Certificate to the Agent:
32.5.1 to the extent that in such Transfer Certificate the Bank party
thereto seeks to transfer by novation its rights, benefits and
obligations hereunder, each of the Obligors and such Bank
shall be released from further obligations towards one another
hereunder and their respective rights against one another
shall be cancelled (such rights and obligations being referred
to in this Clause 32.5 as "DISCHARGED RIGHTS AND
OBLIGATIONS");
32.5.2 each of the Obligors and the Transferee party thereto shall
assume obligations
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towards one another and/or acquire rights against one another
which differ from such discharged rights and obligations only
insofar as such Obligor and such Transferee have assumed
and/or acquired the same in place of such Obligor and such
Bank;
32.5.3 the Agent, the Arrangers, such Transferee, the L/C Issuing
Bank and the other Banks shall acquire the same rights and
benefits and assume the same obligations between themselves as
they would have acquired and assumed had such Transferee been
an original party hereto as a Bank with the rights, benefits
and/or obligations acquired or assumed by it as a result of
such transfer and to that extent the Agent, the Arrangers, the
L/C Issuing Bank and the relevant Bank shall each be released
from further obligations to each other hereunder; and
32.5.4 such Transferee shall become a party hereto as a "Bank".
32.6 ASSIGNMENT AND TRANSFER FEES
On the date upon which an assignment takes effect pursuant to Clause
32.5 (Assignments by Banks) or a transfer takes effect pursuant to
Clause 32.6 (Transfers by Banks) the relevant assignee or Transferee
shall pay to the Agent for its own account a fee of EUR 1,500 (but not,
for the avoidance of doubt, any further fee solely in relation to such
assignment or transfer).
32.7 DISCLOSURE OF INFORMATION
Any Bank may disclose to any person:
32.7.1 to (or through) whom such Bank assigns or transfers (or may
potentially assign or transfer) all or any of its rights,
benefits and obligations hereunder;
32.7.2 with (or through) whom such Bank enters into (or may
potentially enter into) any sub-participation in relation to,
or any other transaction under which payments are to be made
by reference to, this Agreement or any Obligor; or
32.7.3 to whom information may be required to be disclosed by any
applicable law,
such information about any Obligor, the Group, any Unconsolidated
Affiliate and the Facility Documents as such Bank shall consider
appropriate (PROVIDED THAT (in the case of sub-clauses 32.7.1 and
32.7.2) such person enters into a confidentiality agreement in relation
to such information on terms reasonably acceptable to such Bank).
32.8 NOTIFICATION
On the last Business Day of each calendar month, the Agent shall notify
the Guarantor and the Banks of any assignment or transfer completed
during such calendar month pursuant to this Clause 32 (Assignments and
Transfers).
32.9 LIMITATION
If any Bank assigns or transfers all or any of its rights benefits
and/or obligations
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hereunder pursuant to this clause 32 no Obligor shall be obliged to
make any additional payment to the relevant assignee or Transferee
pursuant to Clause 11 (Taxes) or make any payment by way of
indemnification under Clause 13 (Increased Costs) in excess of the
additional payment it would have been required to make pursuant to
Clause 11 (Taxes) or in excess of the amount it would have been obliged
to pay by way of indemnification under Clause 13 (Increased Costs) in
the absence of such assignment or transfer.
33. CALCULATIONS AND EVIDENCE OF DEBT
33.1 BASIS OF ACCRUAL
Interest, letter of credit commission and commitment commission shall
accrue from day to day and shall be calculated on the basis of a year
of 360 days (or, in the case of any Advance or Letter of Credit
denominated in sterling, 365 days or, in any case where market practice
differs, in accordance with market practice) and the actual number of
days elapsed.
33.2 PROPORTIONATE REDUCTIONS
Any repayment of an Advance denominated in an Optional Currency shall
reduce the amount of such Advance by the amount of such Optional
Currency repaid and shall reduce the Euro Amount of such Advance
proportionately.
33.3 QUOTATIONS
If on any occasion a Reference Bank or Bank fails to supply the Agent
with a quotation required of it under the foregoing provisions of this
Agreement, the rate for which such quotation was required shall be
determined from those quotations which are supplied to the Agent,
PROVIDED THAT, in relation to determining EURIBOR or, as the case may
be, LIBOR, this Clause 33.3 shall not apply if only one Reference Bank
supplies a quotation.
33.4 EVIDENCE OF DEBT
Each Bank shall maintain in accordance with its usual practice accounts
evidencing the amounts from time to time lent by and owing to it
hereunder.
33.5 CONTROL ACCOUNTS
The Agent shall maintain on its books a control account or accounts in
which shall be recorded (a) the amount and the Euro Amount of any
Advance or Unpaid Sum and the face amount and the Euro Amount of any
Letter of Credit issued and each Bank's share therein, (b) the amount
of all principal, interest and other sums due or to become due from an
Obligor and each Bank's share therein and (c) the amount of any sum
received or recovered by the Agent hereunder and each Bank's share
therein.
33.6 PRIMA FACIE EVIDENCE
In any legal action or proceeding arising out of or in connection with
this Agreement, the entries made in the accounts maintained pursuant to
Clause 33.4 (Evidence of Debt) and Clause 33.5 (Control Accounts) shall
be prima facie evidence in the absence of manifest error of the
existence and amounts of the specified obligations of the Obligors.
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33.7 ROUNDING AND OTHER CONSEQUENTIAL CHANGES
33.7.1 Without prejudice and in addition to any method of conversion
or rounding prescribed by any EMU Legislation and without
prejudice to (a) the liabilities for indebtedness of any
Obligor to the Banks under or pursuant to the Facility
Documents or (b) the Bank's Commitments, any reference in the
Facility Documents to a minimum amount (or an integral
multiple thereof) in a national currency of a Subsequent
Participant to be paid to or by the Agent shall, immediately
upon it becoming a Subsequent Participant, be replaced by a
reference to such reasonably comparable and convenient amount
(or an integral multiple thereof) in the euro unit as the
Agent may specify.
30.7.2 Save as expressly provided in this Clause 30.7, the Facility
Documents shall be subject to such reasonable changes of
construction as the Agent and the Borrowers may agree at the
relevant time to be appropriate to reflect the adoption of the
euro in any Participating Member State and any relevant market
conventions or practices relating to the euro.
33.8 CERTIFICATES OF BANKS
A certificate of a Bank as to (a) the amount by which a sum payable to
it hereunder is to be increased under Clause 11.1 (Tax Gross-up), (b)
the amount for the time being required to indemnify it against any such
cost, payment or liability as is mentioned in Clause 11.2 (Tax
Indemnity) or Clause 13.1 (Increased Costs) or (c) the amount of any
credit, relief, remission or repayment as is mentioned in Clause 12.3
(Tax Credit Payment) or Clause 12.4 (Tax Credit Clawback) shall, in the
absence of manifest error, be prima facie evidence of the existence and
amounts of the specified obligations of the Obligors.
33.9 AGENT'S CERTIFICATES
A certificate of the Agent as to the amount at any time due from any
Borrower hereunder or the amount which, but for any of the obligations
of any Borrower hereunder being or becoming void, voidable,
unenforceable or ineffective, at any time would have been due from any
Borrower hereunder shall, in the absence of manifest error, be
conclusive for the purposes of Clause 21 (Guarantee and Indemnity).
33.10 LETTERS OF CREDIT
A certificate of the L/C Issuing Bank as to the amount paid out by such
L/C Issuing Bank in respect of any Letter of Credit shall, save for
manifest error, be prima facie evidence of the payment of such amounts
in any legal action or proceedings arising in connection therewith.
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34. ADDITIONAL BORROWERS
34.1 REQUEST FOR ADDITIONAL BORROWER
The Guarantor may request that any of its Consolidated Affiliates
having as its Relevant Jurisdiction a European country become an
Additional Borrower by delivering to the Agent a Borrower Accession
Memorandum duly executed by the Guarantor and such subsidiary, together
with the documents and other evidence listed in Part B of Schedule 3
(Additional Conditions Precedent) in relation to such Consolidated
Affiliate.
34.2 BORROWER CONDITIONS PRECEDENT
A company, in respect of which the Guarantor has delivered a Borrower
Accession Agreement to the Agent, shall become an Additional Borrower
and assume all the rights, benefits and obligations of a Borrower as if
it had been an Original Borrower on the date on which the Agent
notifies the Guarantor that:
34.2.1 each Bank gives its consent (not to be unreasonably withheld
or delayed PROVIDED THAT it shall not be unreasonable if any
Bank withholds or delays such consent as a result of
application of taxation matters or its internal credit
policies) to the request in respect of such Consolidated
Affiliate; and
34.2.2 the Agent has received, in form and substance satisfactory to
it, all documents and other evidence listed in Part B of
Schedule 3 (Additional Conditions Precedent) in relation to
such subsidiary,
unless on such date an Event of Default or Potential Event of Default
is continuing or would occur as a result of such Consolidated Affiliate
becoming an Additional Borrower.
34.3 RESIGNATION OF A BORROWER
If at any time a Borrower is under no actual or contingent obligation
under or pursuant to any Facility Documents, the Guarantor may request
that such Borrower shall cease to be a Borrower by delivering to the
Agent a resignation notice. Such resignation notice shall be accepted
by the Agent on the date on which it notifies the Guarantor that it is
satisfied that such Borrower is under no actual or continent obligation
under or pursuant to any Facility Document and such Borrower shall
immediately cease to be a Borrower and shall have no further rights,
benefits or obligations under the Facility Documents save for those
which arose prior to such date.
35. REMEDIES AND WAIVERS, PARTIAL INVALIDITY
35.1 REMEDIES AND WAIVERS
No failure to exercise, nor any delay in exercising, on the part of any
Finance Party, any right or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right or
remedy prevent any further or other exercise thereof or the exercise of
any other right or remedy. The rights and remedies herein provided are
cumulative and not exclusive of any rights or remedies provided by law.
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35.2 PARTIAL INVALIDITY
If, at any time, any provision hereof is or becomes illegal, invalid or
unenforceable in any respect under the law of any jurisdiction, neither
the legality, validity or enforceability of the remaining provisions
hereof nor the legality, validity or enforceability of such provision
under the law of any other jurisdiction shall in any way be affected or
impaired thereby.
36. NOTICES
36.1 COMMUNICATIONS IN WRITING
Each communication to be made hereunder shall be made in writing and,
unless otherwise stated, shall be made by fax or letter.
36.2 ADDRESSES
Any communication or document to be made or delivered pursuant to this
Agreement shall (unless the recipient of such communication or document
has, by fifteen days' written notice to the Agent, specified another
address or fax number) be made or delivered to the address or fax
number:
36.2.1 in the case of the Original Borrowers, the Guarantor and the
Agent, identified with its name below; and
36.2.2 in the case of each Bank or the L/C Issuing Bank, notified in
writing to the Agent prior to the date hereof (or, in the case
of a Transferee, at the end of the Transfer Certificate to
which it is a party as Transferee);
36.2.3 in the case of each Additional Borrower, in the relevant
Borrower Accession Agreement,
PROVIDED THAT (save in the case of a Bank with two Facility Offices)
not more than one address may be specified by each party pursuant to
this Clause 36.2 at any time.
36.3 DELIVERY
Any communication or document to be made or delivered by one person to
another pursuant to the Facility Documents shall:
36.3.1 if by way of fax, be deemed to have been received when
transmission has been completed; and
36.3.2 if by way of letter, be deemed to have been delivered when
left at the relevant address or,
PROVIDED THAT any communication or document to be made or delivered to
the Agent shall be effective only when received and then only if the
same is expressly marked for the
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attention of the department or officer identified with the Agent's
signature below (or such other department or officer as the Agent shall
from time to time specify for this purpose).
36.4 NOTIFICATION OF CHANGES
Promptly upon receipt of notification of a change of address or fax
number pursuant to Clause 36.2 (Addresses) or changing its own address
or fax number, the Agent shall notify the other parties hereto of such
change.
36.5 ENGLISH LANGUAGE
Each communication and document made or delivered by one party to
another pursuant to this Agreement shall be in the English language or
accompanied by a translation thereof into English certified (by an
officer of the person making or delivering the same) as being a true
and accurate translation thereof.
37. COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one and the same instrument.
38. AMENDMENTS
38.1 AMENDMENTS
If the Agent has the prior consent of an Instructing Group, the Agent
and the Obligors may from time to time agree in writing to amend the
Facility Documents or to waive, prospectively or retrospectively, any
of the requirements of the Facility Documents and any amendments or
waivers so agreed shall be binding on all the Finance Parties and the
Obligors, PROVIDED THAT no such waiver or amendment shall subject any
party hereto to any new or additional obligations without the consent
of such party.
38.2 AMENDMENTS REQUIRING THE CONSENT OF ALL THE BANKS
An amendment or waiver which relates to:
38.2.1 Clause 29 (Sharing) or this Clause 38;
38.2.2 reducing the proportion of any amount received or recovered in
respect of any amount due from the Borrowers hereunder to
which any Bank is entitled;
38.2.3 a change in the principal amount of or currency of any Advance
or Letter of Credit, or extending the term of the Facility or
the Term of any Advance or Letter of Credit;
38.2.4 a reduction in the Applicable Margin or the L/C Commission
Rate or a change in the amount or currency of any payment of
interest, fees or any other amount payable
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hereunder to any Finance Party or deferral of the date for
payment thereof;
38.2.5 Clause 18 (Financial Condition) or Clause 19.7 (Negative
Pledge);
38.2.6 the conditions set out in sub-clause 3.4.4 of Clause 3.4
(Drawdown Conditions) if an Event of Default or Potential
Event of Default which relates to a Repeated Representation,
Clause 18.1 (Financial Condition) or Clause 19.7 (Negative
Pledge) is continuing;
38.2.7 the definition of Event of Default, Instructing Group or
Potential Event of Default;
38.2.8 any provision which contemplates the need for the consent or
approval of all the Banks;or
38.2.9 any release of the Guarantor from any of its obligations under
Clause 21 (Guarantee and Indemnity),
shall not be made without the prior consent of all the Banks.
38.3 EXCEPTIONS
Notwithstanding any other provisions hereof, neither the Agent nor the
L/C Issuing Bank shall be obliged to agree to any such amendment or
waiver if the same would:
38.3.1 (in respect of the Agent only) amend or waive this Clause 38,
Clause 23 (Costs and Expenses) or Clause 30 (The Agent, the
Arrangers, the Banks and the L/C Issuing Bank); or
38.3.2 otherwise amend or waive any of the Agent's rights or the L/C
Issuing Bank's rights hereunder or subject the Agent or the
L/C Issuing Bank or the Arrangers to any additional
obligations hereunder.
39. GOVERNING LAW
This Agreement shall be governed by, and construed in accordance with,
English law.
40. JURISDICTION
40.1 ENGLISH COURTS
Each of the parties hereto irrevocably agrees for the benefit of each
of the Finance Parties that the courts of England shall have
jurisdiction to hear and determine any suit, action or proceedings, and
to settle any disputes, which may arise out or in connection with this
Agreement (respectively "PROCEEDINGS" and "DISPUTES") and, for such
purposes, irrevocably submits to the jurisdiction of such courts.
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40.2 NEW YORK COURTS
Each of the parties hereto irrevocably agrees that the courts of the
State of New York and the courts of the United States of America, in
each case sitting in the County of New York, shall have jurisdiction to
hear and determine any Proceedings and to settle any Disputes and, for
such purposes, irrevocably submits to the jurisdiction of such courts.
40.3 WAIVER OF JURY TRIAL
Each of the parties hereto irrevocably waives, to the extent permitted
by applicable law, trial by jury in any litigation in any court with
respect to, in connection with, or arising out of this Agreement or the
validity, protection, interpretation, or enforcement hereof.
40.4 CONVENIENT FORUM
The parties agree that the courts of England and the courts of New York
are the most appropriate and convenient courts to settle Disputes
between them and, accordingly, that they will not argue to the
contrary.
40.5 NON-EXCLUSIVE JURISDICTION
This Clause 40 is for the benefit of the Finance Parties only. As a
result and notwithstanding Clause 40.1 (English Courts) and Clause 40.2
(New York Courts), it does not prevent any Finance Party from taking
proceedings relating to a Dispute ("PROCEEDINGS") in any other courts
with jurisdiction. To the extent allowed by law, the Finance Parties
may take concurrent Proceedings in any number of jurisdictions.
40.6 SERVICE OF PROCESS
Each Obligor agrees that the documents which start any Proceedings and
any other documents required to be served in relation to those
Proceedings may be served on it:
40.6.1 in the case of the Original Borrowers, on ProLogis
Developments Limited at Kingspark House, 1 Monkspath Hall
Road, Solihull, West Midlands B90 4FY, England, or, if
different, its registered office;
40.6.2 in the case of the Guarantor, on ProLogis Developments Limited
at Kingspark House, 1 Monkspath Hall Road, Solihull, West
Midlands B90 4FY, England, or, if different, its registered
office; and
40.6.3 in the case of each Additional Borrower, on the person and at
the address specified in the relevant Borrower Accession
Agreement.
If the appointment of the person mentioned in this Clause 40.6 ceases
to be effective, the relevant Obligor shall immediately appoint another
person in England for service of process on its behalf in England. If
an Obligor fails to do so (and such failure continues for a period of
not less than fourteen days), the Agent shall be entitled to appoint
such a person by notice to such Obligor. Nothing contained herein shall
restrict the right to serve process in any other
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<PAGE> 88
manner allowed by law. This Clause 40.6 applies to Proceedings in
England and to Proceedings elsewhere.
AS WITNESS the hands of the duly authorised representatives of the parties
hereto the day and year first before written.
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<PAGE> 89
SCHEDULE 1
THE BANKS
<TABLE>
<CAPTION>
BANK COMMITMENT (EUR)
<S> <C>
ABN AMRO Bank N.V. 25,500,000
Societe Generale 25,500,000
Credit Local de France 25,000,000
Fortis Bank (Nederland) N.V. 25,000,000
AIB International Finance 18,000,000
Bank of America, N.A. 18,000,000
Bankhaus Lobbecke & Co. 18,000,000
Barclays Bank PLC 18,000,000
Credit Commercial de France 18,000,000
Credit Communal de Belgique S.A. 18,000,000
Credit Foncier de France 18,000,000
Credit Lyonnais 18,000,000
Den Danske Bank Aktieselskab 18,000,000
Dresdner Bank Luxembourg S.A. 18,000,000
Landesbank Rheinland-Pfalz International S.A. 18,000,000
Vereins- und Westbank AG 16,000,000
Banque Artesia Nederland N.V. 10,000,000
</TABLE>
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<PAGE> 90
SCHEDULE 2
FORM OF TRANSFER CERTIFICATE
To:
TRANSFER CERTIFICATE
relating to the agreement (as from time to time amended, varied, novated or
supplemented, the "Facility Agreement") dated 17 December 1999 whereby a EUR
325,000,000 multicurrency revolving credit facility was made available to PLD
Europe Finance B.V. and PLD UK Finance B.V. as original borrowers under the
guarantee of ProLogis Trust by a group of banks on whose behalf ABN AMRO Bank
N.V. acted as agent in connection therewith.
1. Terms defined in the Facility Agreement shall, subject to any contrary
indication, have the same meanings herein. The terms Bank and
Transferee are defined in the schedule hereto.
2. The Bank (a) confirms that the details in the schedule hereto under the
heading "BANK'S COMMITMENT", "LETTERS OF CREDIT" or "ADVANCE(S)"
accurately summarises its Commitment and/or, as the case may be, its
participation in, and the Term and Repayment Date of, one or more
existing Advances or Letters of Credit and (b) requests the Transferee
to accept and procure the transfer by novation to the Transferee of the
portion specified in the schedule hereto of, as the case may be, its
Commitment and/or its participation in such Advance(s) and/or Letters
of Credit by counter-signing and delivering this Transfer Certificate
to the Agent at its address for the service of notices specified in the
Facility Agreement.
3. The Transferee hereby requests the Agent to accept this Transfer
Certificate as being delivered to the Agent pursuant to and for the
purposes of Clause 31.6 (Transfers by Banks) of the Facility Agreement
so as to take effect in accordance with the terms thereof on the
Transfer Date or on such later date as may be determined in accordance
with the terms thereof.
4. The Transferee confirms that it has received a copy of the Facility
Agreement together with such other information as it has required in
connection with this transaction and that it has not relied and will
not hereafter rely on the Bank to check or enquire on its behalf into
the legality, validity, effectiveness, adequacy, accuracy or
completeness of any such information and further agrees that it has not
relied and will not rely on the Bank to assess or keep under review on
its behalf the financial condition, creditworthiness, condition,
affairs, status or nature of the Obligors.
5. The Transferee hereby undertakes with the Bank and each of the other
parties to the
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<PAGE> 91
Facility Agreement that it will perform in accordance with their terms
all those obligations which by the terms of the Facility Agreement will
be assumed by it after delivery of this Transfer Certificate to the
Agent and satisfaction of the conditions (if any) subject to which this
Transfer Certificate is expressed to take effect.
6. The Bank makes no representation or warranty and assumes no
responsibility with respect to the legality, validity, effectiveness,
adequacy or enforceability of the Facility Agreement or any document
relating thereto and assumes no responsibility for the financial
condition of the Obligors or for the performance and observance by the
Obligors of any of its obligations under the Facility Agreement or any
document relating thereto and any and all such conditions and
warranties, whether express or implied by law or otherwise, are hereby
excluded.
7. The Bank hereby gives notice that nothing herein or in the Facility
Agreement (or any document relating thereto) shall oblige the Bank to
(a) accept a re-transfer from the Transferee of the whole or any part
of its rights, benefits and/or obligations under the Facility Agreement
transferred pursuant hereto or (b) support any losses directly or
indirectly sustained or incurred by the Transferee for any reason
whatsoever including the non-performance by an Obligor or any other
party to the Facility Agreement (or any document relating thereto) of
its obligations under any such document. The Transferee hereby
acknowledges the absence of any such obligation as is referred to in
(a) or (b).
8. This Transfer Certificate and the rights, benefits and obligations of
the parties hereunder shall be governed by and construed in accordance
with English law.
THE SCHEDULE
1. Bank:
2. Transferee:
3. Transfer Date:
4. Commitment:
Bank's Commitment Portion Transferred
5. Advance(s):
Amount of Term and
Bank's Participation Repayment Date Portion Transferred
6. Letter(s) of Credit Term and
Bank's L/C Participation Expiry Date Portion Transferred
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<PAGE> 92
[Transferor Bank] [Transferee Bank]
By: By:
Date: Date:
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<PAGE> 93
SCHEDULE 3
PART A
INITIAL CONDITIONS PRECEDENT
1. In relation to each Original Borrower and the Guarantor (each an
"ORIGINAL OBLIGOR")
(a) a copy, certified as at the date of this Agreement a true and
up-to-date copy by an Authorised Signatory of such Original
Obligor, of the constitutional documents of such Original
Obligor;
(b) a copy, certified as at the date of this Agreement a true and
up-to-date copy by an Authorised Signatory of such Original
Obligor, of a board resolution of such Original Obligor
approving the execution, delivery and performance of this
Agreement and the terms and conditions hereof and authorising
a named person or persons to sign this Agreement and any
documents to be delivered by such Original Obligor pursuant
hereto;
(c) a certificate of an Authorised Signatory of such Original
Obligor setting out the names and signatures of the persons
authorised to sign, on behalf of such Original Obligor, this
Agreement and any documents to be delivered by such Original
Obligor pursuant hereto; and
(d) a certificate of an Authorised Signatory of such Original
Obligor confirming that utilisation of the Facility would not
breach any restriction of its borrowing powers.
2. A copy, certified a true copy by or on behalf of each Original
Borrower, of each such law, decree, consent, licence, approval,
registration or declaration as is, in the opinion of counsel to the
Banks, necessary to render this Agreement legal, valid, binding and
enforceable, to make this Agreement admissible in evidence in each
Original Obligor's Relevant Jurisdiction and to enable each of the
Original Obligors to perform its obligations hereunder.
3. An opinion of the Banks' US Counsel satisfactory in form and substance
to the Agent.
4. An opinion of the Banks' Netherlands Counsel satisfactory in form and
substance to the Agent.
5. An opinion of Clifford Chance, solicitors to the Agent, in
substantially the form distributed to the Banks prior to the signing of
this Agreement.
6. Evidence that the fees, costs and expenses required to be paid by the
Guarantor pursuant to Clause 22.2 (Arrangement Fee), Clause 22.3
(Agency Fee) and Clause 23.3 (Stamp Taxes) (if any) have been paid or
(in relation to the fees referred to in Clause 22.2
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<PAGE> 94
(Arrangement Fee) and Clause 22.3 (Agency Fee)) will be paid in
accordance with the terms set out in the relevant fee letters relating
thereto and evidence that the costs and expenses required to be paid by
the Guarantor pursuant to Clause 23.1 (Transaction Expenses) have been
or will be paid..
7. A copy, certified a true copy by an Authorised Signatory of each
Original Obligor, of the Original Financial Statements of such Original
Obligor.
8. Evidence that ProLogis Kingspark Developments Limited has agreed to act
as the agent of the Original Obligors for the service of process in
England.
9. Evidence, in form and substance satisfactory to the Agent, that the
Guarantor is in compliance with the financial covenants contained in
Clause 18 (Financial Conditions) of this Agreement (such evidence to be
constituted by a statement from a duly Authorised Signatory of the
Guarantor as to such compliance as at 30 September, 1999) and Section 9
(Financial Covenants) of the NationsBank Facility Agreement (such
evidence to be constituted by a copy of the most recent compliance
certificate delivered pursuant to the NationsBanks Facility Agreement).
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<PAGE> 95
SCHEDULE 3
PART B
ADDITIONAL CONDITIONS PRECEDENT
1. A copy, certified as at the date of the relevant Borrower Accession
Agreement a true and up-to-date copy by an Authorised Signatory of the
proposed Additional Borrower, of the constitutional documents of such
proposed Additional Borrower.
2. A copy, certified as at the date of the relevant Borrower Accession
Agreement a true and up-to-date copy by an Authorised Signatory of the
proposed Additional Borrower, of a board resolution of such proposed
Additional Borrower such proposed Additional Borrower to this Agreement
and the performance of its obligations under the Facility Documents and
authorising a named person or persons to sign such Borrower Accession
Agreement, any other Facility Document and any other documents to be
delivered by such proposed Additional Borrower pursuant thereto.
3. A certificate of an Authorised Signatory of the proposed Additional
Obligor setting out the names and signatures of the person or persons
authorised to sign, on behalf of such proposed Additional Obligor, the
Borrower Accession Agreement, any other Facility Documents and any
other documents to be delivered by such proposed Additional Borrower
pursuant thereto.
4. A certificate of an Authorised Signatory of the proposed Additional
Borrower confirming that the utilisation of the Facility and the
granting of a guarantee and indemnity pursuant to the terms of the
Facility Agreement would not breach any restriction of its memorandum
of association.
5. If the proposed Additional Borrower is incorporated in a jurisdiction
other than England and Wales or The Netherlands, a copy, certified a
true copy by or on behalf of the proposed Additional Borrower, of each
such law, decree, consent, licence, approval, registration or
declaration as is, in the opinion of counsel to the Banks, necessary to
render the relevant Borrower Accession Agreement legal, valid, binding
and enforceable, to make such Accession Memorandum admissible in
evidence in the proposed Additional Borrower's jurisdiction of
incorporation and to enable the proposed Additional Borrower to perform
its obligations thereunder and under the other Facility Documents.
6. A copy, certified a true copy by an Authorised Signatory of the
proposed Additional Borrower, of its most recent Financial Statements,
if available.
7. If the proposed Additional Borrower is incorporated in a jurisdiction
other than England and Wales or The Netherlands, an opinion of the
Banks' local counsel in such Additional Borrower's Relevant
Jurisdiction in form and substance satisfactory to the Agent.
8. If the proposed Additional Borrower is incorporated in England and
Wales, a letter from
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the Guarantor to the Agent (attaching supporting advice from the
Guarantor's English solicitors) confirming that such proposed
Additional Borrower is not prohibited by section 151 of the Companies
Act 1985 from entering into the Facility Documents and performing its
obligations thereunder.
9. An opinion of Clifford Chance, solicitors to the Agent, in form and
substance satisfactory to the Agent.
10. If the proposed Additional Borrower is incorporated in a jurisdiction
other than England and Wales, evidence that the process agent specified
in the relevant Borrower Accession Agreement has agreed to act as its
agent for the service of process in England.
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SCHEDULE 4
NOTICE OF DRAWDOWN
From: [Name of Borrower]
To: ABN AMRO Bank N.V.
Dated:
Dear Sirs,
1. We refer to the agreement (the "Facility Agreement") dated 17 December
1999 and made between PLD Europe Finance B.V. and PLD UK Finance B.V.
as original borrowers under the guarantee of ProLogis Trust, ABN AMRO
Bank N.V. and Societe Generale as arranger and co-arranger, ABN AMRO
Bank N.V. as facility agent and the financial institutions named
therein as banks. Terms defined in the Facility Agreement shall have
the same meaning in this notice.
2. This notice is irrevocable.
3. We hereby give you notice that, pursuant to the Facility Agreement and
upon the terms and subject to the conditions contained therein, we wish
[an Advance to be made to us] [a Letter of Credit to be issued] as
follows:
(a) Currency and Amount:
(b) Utilisation Date:
(c) Term:
[4. If it is not possible, pursuant to Clause 3.3 (Conditions for Drawing
in an Optional Currency) of the Facility Agreement, for the [Advance to
be made] [Letter of Credit to be issued] in the currency specified, we
would wish the [Advance[ [Letter of Credit] to be denominated in euro
or sterling.]
[5.] We confirm that, at the date hereof, the Repeated Representations are
true in all material respects and no Event of Default, or Potential
Event of Default is continuing.
[6.] [The proceeds of this drawdown should be credited to [insert account
details]. [The Letter of Credit should be issued in favour of [name of
recipient] in the form attached and delivered to the recipient at
[address of recipient]. The purpose of its issue is [ ].]
Yours faithfully
---------------------------------------
Authorised Signatory
for and on behalf of [Name of Borrower]
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SCHEDULE 5
FORM OF COMPLIANCE CERTIFICATE
To: ABN AMRO Bank N.V.
Date:
Dear Sirs,
We refer to an agreement (the "Facility Agreement" dated 17 December, 1999 and
made between PLD Europe Finance B.V. and PLD UK Finance B.V. as original
borrowers, ProLogis Trust as guarantor, ABN AMRO Bank N.V. and Societe Generale
as arranger and co-arranger, ABN AMRO Bank N.V. as facility agent and the
financial institutions defined therein as Banks.
Terms defined in the Facility Agreement shall bear the same meaning herein.
We confirm that:
[Insert details of financial covenants]
[Signed:
---------------------------- ------------------------------
Director Director
OR
- -----------------------------------
for and on behalf of
[name of auditors of the Guarantor]
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SCHEDULE 6
CONSOLIDATED AND UNCONSOLIDATED AFFILIATES
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SCHEDULE 7
FORM OF BORROWER ACCESSION AGREEMENT
To: ABN AMRO Bank N.V.
From: [New Borrower]
and
ProLogis Trust
Dated:
Dear Sirs,
1. We refer to a EURO 325,000,000 multicurrency revolving credit facility
agreement (the "FACILITY AGREEMENT") dated 17 December, 1999 and made
between PLD Europe Finance B.V. and PLD UK Finance B.V. as original
borrowers (the "ORIGINAL BORROWERS") under the guarantee of ProLogis
Trust (the "GUARANTOR"), ABN AMRO Bank N.V. and Societe Generale as
arranger and co-arranger, ABN AMRO Bank N.V. as facility agent and the
Banks (as defined in the Facility Agreement).
2. Terms defined in the Facility Agreement shall bear the same meanings
herein.
3. Each of the Guarantor and each Borrower requests that [Subsidiary]
become an Additional Borrower pursuant to Clause 34 (Additional
Borrowers) of the Facility Agreement.
4. [Subsidiary] is a company duly organised under the laws of [name of
relevant jurisdiction].
5. [Subsidiary] confirms that it has received from the Guarantor or, as
the case may be, a Borrower a true and up-to-date copy of the Facility
Agreement and a list of the Borrowers as at the date hereof.
6. [Subsidiary] undertakes, upon its becoming a Borrower, to perform all
the obligations expressed to be undertaken under the Facility Agreement
by a Borrower and agrees that it shall be bound by the Facility
Agreement in all respects as if it had been an original party thereto
as a Borrower.
7. Each of the Guarantor and the Borrowers:
(a) repeats the Repeated Representations; and
(b) confirms that no Event of Default or Potential Event of
Default is continuing or
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would occur as a result of [Subsidiary] becoming an Additional
Borrower.
8. [Subsidiary] makes the representations and warranties set out in Clause
16 (Representations) of the Facility Agreement.
9. [Subsidiary's] administrative details are as follows:
Address:
Fax No.:
[10. PROCESS AGENT*
[Subsidiary] agrees that the documents which start any Proceedings and
any other documents required to be served in relation to those
Proceedings may be served on it at [address of Subsidiary's place of
business in England] or at any address in Great Britain at which
process may be served on it in accordance with Part XXIII of the
Companies Act 1985] / [on [name of process agent in England] at
[address of process agent] or, if different, its registered office.] If
[[Subsidiary] ceases to have a place of business in Great Britain]/
[the appointment of the person mentioned above ceases to be effective],
[Subsidiary] shall immediately appoint another person in England to
accept service of process on its behalf in England. Nothing contained
herein shall restrict the right to serve process in any other manner
allowed by law. This applies to Proceedings in England and to
Proceedings elsewhere.]
11. This Agreement shall be governed by English law.
[Guarantor] [Borrowers]
By: By:
------------------------- ----------------------------
[Subsidiary]
By:
-------------------------
* This clause is required only if the acceding Borrower is not incorporated in
England or Wales.
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SCHEDULE 8
MANDATORY COSTS
1. The Mandatory Cost Rate is an addition to the interest rate to
compensate Banks for the cost of compliance with (a) the requirements
of the Bank of England and/or the Financial Services Authority (or, in
either case, any other authority which replaces all or any of its
functions) or (b) the requirements of the European Central Bank.
2. On the first day of each Term (or as soon as possible thereafter) the
Agent shall calculate, as a percentage rate, a rate (the "ADDITIONAL
COSTS RATE") for each Bank, in accordance with the formulae set out in
paragraph 4 below. The Mandatory Cost Rate will be calculated by the
Agent as a weighted average of the Banks' additional costs rates
(weighted in proportion to the percentage participation of each Bank in
the relevant Advance) and will be expressed as a percentage rate per
annum.
3. The additional costs rate for any Bank lending from a Facility Office
in a Participating Member State will be the percentage notified by that
Bank to the Agent as a cost of complying with the minimum reserve
requirements of the European Central Bank.
4. The additional cost rate for any Bank lending from a Facility Office in
England will be calculated by the Agent as follows:
(a) in relation to sterling Advances:
AB + C (B - D) + E x 0.01 per cent. per annum
-------------------------
100-(A+C)
(b) in relation to Advances in any currency other than sterling:
E x 0.01 per cent. per annum
--------
300
Where:
A is the percentage of eligible liabilities (assuming these to
be in excess of any stated minimum) which that Bank is from
time to time required to maintain as an interest free cash
ratio deposit with the Bank of England to comply with cash
ratio requirements.
B is the percentage rate of interest (excluding the Applicable
Margin and the Mandatory Cost Rate) payable for the relevant
Term on the Advance.
C is the percentage (if any) of eligible liabilities which that
Bank is required from
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time to time to maintain as interest bearing special deposits
with the Bank of England.
D is the percentage rate per annum payable by the Bank of
England to the Agent on interest bearing special deposits.
E is the rate of charge payable by the Bank to the Financial
Services Authority pursuant to the Fee Regulations (but, for
this purpose, ignoring any minimum fee requirement pursuant to
the Fee Regulations) and expressed in pounds per ,1,000,000 of
the Fee Base of that Bank.
5. For the purposes of this Schedule:
(a) "ELIGIBLE LIABILITIES" and "SPECIAL DEPOSITS" have the
meanings given to them from time to time under or pursuant to
the Bank of England Act 1998 or (as may be appropriate) by the
Bank of England;
(b) "FEE REGULATIONS" means the Banking Supervision (Fees)
Regulations 1999 or such other law as may be in force from
time to time in respect of the payment of fees for banking
supervision; and
(c) "FEE BASE" has the meaning given to it, and will be calculated
in accordance with, the Fee Regulations.
6. In application of the above formulae, A, B, C and D will be included in
the formulae as percentages (i.e. 5 per cent. will be included in the
formula as 5 and not as 0.05). A negative result obtained by
subtracting D from B shall be taken as zero. The resulting figures
shall be rounded to four decimal places.
7. Each Bank shall supply any information required by the Agent for the
purpose of calculating the above formulae. In particular, but without
limitation, each Bank shall supply the following information in writing
on or prior to the date on which it becomes a Bank:
(a) its jurisdiction of incorporation and the jurisdiction of its
Facility Office; and
(b) such other information that the Agent may reasonably require
for such purpose.
Each Bank shall promptly notify the Agent in writing of any change to
the information provided by it pursuant to this paragraph.
8. The percentages or rates of charge of each Bank for the purpose of A, C
and E above shall be determined by the Agent based upon the information
supplied to it pursuant to paragraph 6 above and on the assumption
that, unless a Bank notifies the Agent to the
100
<PAGE> 104
contrary, each Bank's obligations in relation to cash ratio deposits,
special deposits and the Fee Regulations are the same as those of a
typical bank from its jurisdiction of incorporation with a Facility
Office in the same jurisdiction as its Facility Office.
The Agent shall have no liability to any person if such determination
results in an additional costs rate which over or under compensates any
Bank and shall be entitled to assume that the information provided by
any Bank pursuant to paragraph 6 above is true and correct in all
respects.
9. The Agent shall distribute the additional amounts received pursuant to
the Mandatory Cost Rate to the Banks on the basis of the additional
costs rate for each Bank, in accordance with the above formulae and
based on the information provided by each Bank pursuant to paragraph 6
above.
10. Any determination by the Agent pursuant to this Schedule in relation to
a formula, the Mandatory Cost Rate, an additional costs rate or any
amount payable to a Bank shall, in the absence of manifest error, be
conclusive and binding on all parties hereto.
11. The Agent may from time to time, after consultation with the Guarantor
and the Banks, determine and notify to all parties any amendments or
variations which are required to be made to any of the formulae set out
above in order to comply with any change in law or any requirements
from time to time imposed by the Bank of England or the Financial
Services Authority (or, in either case, any other authority which
replaces all or any of its functions) and any such determination shall,
in the absence of manifest error, be conclusive and binding on all
parties hereto.
101
<PAGE> 105
SIGNATURES
THE ORIGINAL BORROWERS
PLD UK FINANCE B.V.
By:
Address: Capronilaan 25 -27
1119 NP Schipol-Rijk
Amsterdam
The Netherlands
Tel: +31 20 6555 6666
Fax: +31 20 6555 6655
PLD EUROPE FINANCE B.V.
By:
Address: Capronilaan 25 -27
1119 NP Schipol-Rijk
Amsterdam
The Netherlands
Tel: +31 20 6555 6666
Fax: +31 20 6555 6655
THE GUARANTOR
PROLOGIS TRUST
By:
Address: 14100 East 35th Place
Aurora
Colorado 80011
U.S.
Tel: + 1 303 375 9292
Fax: + 1 303 375 1607
102
<PAGE> 106
THE ARRANGER AND CO-ARRANGER
ABN AMRO BANK N.V.
By:
Address: Gustav Mahlerlaan 10
P O Box 283
1000 EA Amsterdam
The Netherlands
Tel: +31 20 629 2889
Fax: +31 20 628 7716
Attention: Armstrong Okobia
Agency Services PACHQ4131
SOCIETE GENERALE
By:
Address: Les Miroir Batiment D-La Defence 3
92978 Paris La Defense Cedex
France
Tel: +331 4214 9507
Fax: +331 4214 9112
Attention: Bertrand Descours / Remi Prache
Real Estate FINT/IMM/DIM
103
<PAGE> 107
THE AGENT
ABN AMRO BANK N.V.
By:
Address: Gustav Mahlerlaan 10
P O Box 283
1000 EA Amsterdam
The Netherlands
Tel: +31 20 629 2889
Fax: +31 20 628 7716
Attention: Armstrong Okobia
Agency Services HQ4131
THE BANKS
ABN AMRO BANK N.V.
By:
Address: Gustav Mahlerlaan 10
P O Box 283
1000 EA Amsterdam
The Netherlands
Tel: +31 20 629 2889
Fax: +31 20 628 7716
Attention: Armstrong Okobia
Agency Services HQ4131
104
<PAGE> 108
AIB INTERNATIONAL FINANCE
By:
CREDIT MATTERS
Address: AIB International Centre
IFSC
Dublin
Ireland
Tel: +353 1 641 7920
Fax: +353 1 608 9258
Attention: Brian McGirr
OPERATIONAL MATTERS
Address: Business Support
Bankscentre, Ballsbridge
Dublin 4
Ireland
Tel: +352 1 6600311
Fax: +353 1 6603529
BANK OF AMERICA, N.A.
By:
CREDIT MATTERS
Address: SDG Group
901 Main Street
51st Floor
Dallas, Texas
75202 USA
Tel: +1 214 209 0276
Fax: +1 214 209 0085
Attention: Will Bowers
105
<PAGE> 109
OPERATIONAL MATTERS
Address: SDG Administration
901 Main Street
51st Floor
Dallas, Texas
75202 USA
Tel: +1 214 209 3712
Fax: +1 214 209 1571
Attention: Sheri Starbuck
BANQUE ARTESIA NEDERLAND N.V.
By:
Address: Corporate Banking
Jansbinnensingel 20
P O Box 1008
6801 BA Arnhem
The Netherlands
Tel: +31 26 353 0353
Fax: +31 26 443 7423
CREDIT MATTERS
Attention: E.P. Veerman
OPERATIONAL MATTERS
Attention: T Vogt
106
<PAGE> 110
BANKHAUS LOBBECKE & CO.
By:
Address: Global Capital Markets
Fasanenstrasse 76-77
D-10623 Berlin
Germany
Fax: +49 30 88 421 138
CREDIT MATTERS
Attention: Diego Viviani / Margherita Martelli
Tel: +49 30 88 421 131
OPERATIONAL MATTERS
Attention: Dagmar Hofmann
Tel: +49 30 88421 136
BARCLAYS BANK PLC
By:
CREDIT MATTERS
Address: Corporate Banking
WTC Strawinskylaan 1353
1077 XX Amsterdam
The Netherlands
Tel: +31 20 575 3308
Fax: +31 20 575 3309
Attention: Victor van der Linden
107
<PAGE> 111
OPERATIONAL MATTERS
Address: Global Services Unit, Barclays Capital
5 the North Colonnade
Canary Wharf
London E14 4BB
U.K.
Tel: +44 207 773 6427
Fax: +44 207 773 6812
Attention: Ian Stewart
CREDIT COMMERCIAL DE FRANCE
By:
Address: Direction des Affaires Immobilieres
103 Champs Elysees
75008 Paris
France
Tel: +331 4070 7251
Fax: +331 4070 7870
108
<PAGE> 112
CREDIT MATTERS
Attention: Annie Guerbois / Yves Lalouette
OPERATIONAL MATTERS
Attention: Annie Guerbois
CREDIT COMMUNALE DE BELGIQUE S.A.
By:
Address: Boulevard Pacheco 44
1000 Brussels
Belgium
Tel: +32 2 222
Fax: +32 2 222 2416
CREDIT MATTERS
Attention: Geert Junuis / Dieter Baelden
Investment Banking PA3/2
OPERATIONAL MATTERS
Attention: Guido de Ryck/ Marc Petiav
Back Office Treasury and Capital Markets
CREDIT FONCIER DE FRANCE
By:
Address: Finance Structures
10 Rue de Capucines
BP65 75050 Paris Ledex 01
France
Fax: +331 4244 9870
109
<PAGE> 113
CREDIT MATTERS
Attention: Maurcie Boukabza / Phillipe Lestang
Tel: +331 4244 8992
OPERATIONAL MATTERS
Attention: Catherine Vuillemenot
Tel: +31 1 42 44 32 79
CREDIT LOCAL DE FRANCE
By:
Address: 7/11 Quai Andre Citroen
BP 1002 75901 Paris Ledex 15
France
CREDIT MATTERS
Attention: Olivier Katan / Jacqueline Cappe
Project and Structured Finance Department
Tel: +331 4392 7320
Fax: +331 4392 7400
OPERATIONAL MATTERS
Attention: Benedicte Achard / Fabienne Mattioni
Back Office / CRPB2 "Production Bancaire"
Tel: +331 4392 8359
Fax: +331 4392 8369
110
<PAGE> 114
CREDIT LYONNAIS
By:
Address: Agence Centrale Enterprise
46 Rue Notre Dames des Victoires
75002 Paris
France
Fax: +33 1 42 95 3995
CREDIT MATTERS
Attention: Dominique Fournier
Tel: +33 1 4295 0639
OPERATIONAL MATTERS
Attention: Sandra Ktorza
Tel: +33 1 4295 0169
DEN DANKSE BANK AKTIESELSKAB
By:
Address: 75 King William Street
London
EC4N 7DT
Tel: +207 410 8000
Fax: +207 410 8001
CREDIT MATTERS
Attention: Martin Wilse/Peter Hughes
111
<PAGE> 115
ADMINISTRATION MATTERS
Attention: Alain Laviolette
Corporate Loans Administration
DRESDNER BANK LUXEMBOURG S.A.
By:
Address: 26 Rue du Marche-aux-Herbes
L-2097 Luxembourg
Luxembourg
CREDIT MATTERS
Tel: +352 4760 227
Fax: +352 4760 824
Attention: Klaus Diederich
OPERATIONAL MATTERS
Tel: +352 4760 413/423
Fax: +352 4760 565
Attention: Marianne Degregori/Bruno Bohlinger
FORTIS BANK (NEDERLAND) N.V.
By:
Address: Amsterdam Corporate
Nachtwachtlaan 20
Postbus 58
1000 AB
Fax: +31 20 514 6151
112
<PAGE> 116
CREDIT MATTERS
Attention: Willem Calame
Tel: +31 20 514 6244
OPERATIONAL MATTERS
Attention: Peter Nooteboom
Tel: +31 20 514 6116
LANDESBANK RHEINLAND-PFALZ INTERNATIONAL S.A.
By:
CREDIT AND OPERATIONAL MATTERS
Address: Corporate and Structured Finance
10-12 Boulevard Roosevelt
L2450 Luxembourg
Tel: +352 4759 21 333
Fax: +352 4759 21 340
Attention: Lisa Backes
113
<PAGE> 117
SOCIETE GENERALE
By:
CREDIT MATTERS
Address: Les Miroir Batiment D-La Defence 3
92978 Paris La Defense Cedex
France
Attention: Betrand Discours/Remi Prache
Real Estate - FINT/IMM/DIM
Tel: +33 1 4214 9507
Fax: +33 1 4214 9112
OPERATIONAL MATTERS
Attention: Danielle Batoche/ Eric Hoube
FINT/IMM/FIN/CIG
Tel: +33 1 42 14 3593
Fax: +33 1 42 14 6142
VEREINS- UND WESTBANK AG
By:
Address: Alterwall 22
20457 Hamburg
Germany
Fax: +49 40 36 92 1796
CREDIT MATTERS
Attention: Birgit Gotthavelt-Senk
Tel: +49 40 3692 2373
OPERATIONAL MATTERS
Attention: Uwe Ottenberg
Tel: +49 40 3692 3147
114
<PAGE> 1
EXHIBIT 10.25
EXECUTIVE PROTECTION AGREEMENT
This Agreement entered into as of the 24th day of June, 1999 (the
"Effective Date") by and between ProLogis Trust, a Maryland real estate
investment trust (the "Trust"), and (the "Executive"),
-----------------------
WITNESSETH THAT:
WHEREAS, the Trust wishes to assure itself of the continuity of the
Executive's services in the event of a change in control of the Trust; and
WHEREAS, the Trust and the Executive accordingly desire to enter into
this Agreement on the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, it is hereby agreed by and between the parties as follows:
1. Term of Agreement. The "Term" of this Agreement shall commence
on the Effective Date and shall continue through December 31, 2001; provided,
however, that on such date and on each December 31 thereafter, the Term of this
Agreement shall automatically be extended for one additional year unless, not
later than the preceding October 1, either party shall have given notice that
such party does not wish to extend the Term; and provided further that if a
Change in Control (as defined in paragraph 3 below) shall have occurred during
the original or any extended Term of this Agreement, the Term of this Agreement
shall continue until the end of the twenty-fourth calendar month after the
calendar month in which such Change in Control occurs, at which time it will
expire.
2. Employment After a Change in Control. If the Executive is in
the employ of the Trust on the date of a Change in Control, the Trust hereby
agrees to continue the Executive in its employ for the period commencing on the
date of the Change in Control and ending on the last day of the Term of this
Agreement. During the period of employment described in the foregoing provisions
of this paragraph 2 (the "Employment Period"), the Executive shall hold such
position with the Trust and exercise such authority and perform such executive
duties as are commensurate with his position, authority and duties immediately
prior to the Employment Period. The Executive agrees that during the Employment
Period he shall devote his full business time exclusively to the executive
duties described herein and perform such duties faithfully and efficiently;
provided, however, that nothing in this Agreement shall prevent the Executive
from voluntarily resigning from employment upon no less than 15 days' advance
written notice to the Trust under circumstances that do not constitute a
Termination (as defined in paragraph 5).
3. Change in Control. For purposes of this Agreement, a "Change
in Control" means the happening of any of the following:
<PAGE> 2
(a) The shareholders of the Trust approve a definitive agreement
to merge the Trust into or consolidate the Trust with another entity,
sell or otherwise dispose of all or substantially all of its assets or
adopt a plan of liquidation, provided, however, that a Change in
Control shall not be deemed to have occurred by reason of a
transaction, or a substantially concurrent or otherwise related series
of transactions, upon the completion of which 50% or more of the
beneficial ownership of the voting power of the Trust, the surviving
corporation or corporation directly or indirectly controlling the Trust
or the surviving corporation, as the case may be, is held by the same
persons (as defined below) (although not necessarily in the same
proportion) as held the beneficial ownership of the voting power of the
Trust immediately prior to the transaction or the substantially
concurrent or otherwise related series of transactions, except that
upon the completion thereof, employees or employee benefit plans of the
Trust may be a new holder of such beneficial ownership; provided,
further, that any transaction described in this paragraph (a) with an
"Affiliate" of the Trust (as defined in the Securities Exchange Act of
1934, as amended (the "Exchange Act")) shall not be treated as a Change
in Control.
(b) The "beneficial ownership" (as defined in Rule 13d-3 under the
Exchange Act) of securities representing 50% or more of the combined
voting power of the Trust is acquired, other than from the Trust, by
any "person" as defined in Sections 13(d) and 14(d) of the Exchange Act
(other than any trustee or other fiduciary holding securities under an
employee benefit or other similar stock plan of the Trust); provided,
that any purchase by Security Capital Group Incorporated or any of its
Affiliates of securities representing 50% or more of the combined
voting power of the Trust shall not be treated as a Change in Control.
(c) At any time during any period of two consecutive years,
individuals who at the beginning of such period were members of the
Board of Trustees of the Trust cease for any reason to constitute at
least a majority thereof (unless the election, or the nomination for
election by the Trust's shareholders, of each new trustee was approved
by a vote of at least two-thirds of the trustees still in office at the
time of such election or nomination who were trustees at the beginning
of such period).
(d) The SCGI Affiliates in a single transaction, or in
substantially concurrent transactions or otherwise related series of
transactions, transfer all or a portion of their interests in the
Trust; provided that the interest so transferred represents 20% or more
of the total beneficial ownership of the voting power of the Trust; and
further provided that the transfer of such 20% or greater interest is
to a corporation, partnership, joint venture, or other entity (or a
group of any such entities that are under common control) that are not
SCGI Affiliates (regardless of whether any Rights are transferred in
connection with the transaction).
(e) The SCGI Affiliates transfer any Rights to any person who is
not an SCGI Affiliate.
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<PAGE> 3
For purposes of this Agreement, the following terms shall be defined as
indicated:
(i) The term "Beneficial Owner" shall mean beneficial owner as defined in
Rule 13d-3 under the Exchange Act.
(ii) Entities shall be treated as being under "common control" during any
period in which they are "affiliates" of each other as that term is
defined in the Exchange Act.
(iii) The term "person" shall be as defined in Sections 13(d) and 14(d) of
the Exchange Act, but shall exclude any trustee or other fiduciary
holding securities under an employee benefit or other similar stock
plan of the Trust.
(iv) The term "ProLogis Affiliate" shall mean ProLogis Trust and any of its
"affiliates" as that term is defined in the Exchange Act.
(v) The term "Rights" shall mean (i) any rights of Security Capital Group
Incorporated set forth in Section 5 of the Third Amended and Restated
Investor Agreement, dated as of September 9, 1997 between ProLogis
Trust and Security Capital Group Incorporated, as such agreement may be
amended and in effect from time to time; and (ii) any rights of
Security Capital Group Incorporated as an Excluded Holder under the
provisions of Article II of ProLogis Trust's Amended and Restated
Declaration of Trust, as amended and supplemented and in effect from
time to time.
(vi) The term "SCGI Affiliate" shall mean Security Capital Group
Incorporated and any of its "affiliates" as that term is defined in the
Exchange Act.
4. Compensation During the Employment Period. During the
Employment Period, the Executive shall be compensated as follows:
(a) He shall receive an annual salary which is not less than his
annual salary immediately prior to the Employment Period.
(b) He shall be entitled to participate in annual cash-based
incentive compensation plans which, in the aggregate, provide bonus
opportunities which are not materially less favorable to the Executive
than the greater of (i) the opportunities provided by the Trust for
executives with comparable levels of responsibility as in effect from
time to time; and (ii) the opportunities provided to the Executive
under all such plans in which he was participating prior to the
Employment Period.
(c) He shall be eligible to participate in other incentive
compensation plans and other employee benefit plans on a basis not
materially less favorable to the Executive than that applicable to
other executives of the Trust with comparable levels of responsibility
as in effect from time to time.
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<PAGE> 4
5. Termination. For purposes of this Agreement, the term
"Termination" shall mean termination of the employment of the Executive by the
Trust during the Employment Period (i) by the Trust, for any reason other than
death, Disability, or Cause, or (ii) by Constructive Discharge of the Executive
(as these terms are described below). For purposes of this Agreement:
(a) The Executive shall be considered to have a "Disability"
during the period in which he is unable, by reason of a medically
determinable physical or mental impairment, to engage in the material
and substantial duties of his regular occupation, and such condition is
expected to be permanent, as determined by the Board of Trustees.
(b) For purposes of this Agreement, "Cause" shall mean, in the
reasonable judgment of the Board of Trustees (i) the willful and
continued failure by the Executive to substantially perform his duties
with the Trust or any subsidiary after written notification by the
Trust or subsidiary, (ii) the willful engaging by the Executive in
conduct which is demonstrably injurious to the Trust or any subsidiary,
monetarily or otherwise, or (iii) the engaging by the Executive in
egregious misconduct involving serious moral turpitude. For purposes
hereof, no act, or failure to act, on the Executive's part shall be
deemed "willful" unless done, or omitted to be done, by the Executive
not in good faith and without reasonable belief that such action was in
the best interest of the Trust or subsidiary.
(c) If, after a Change in Control, the Executive:
(i) provides written notice to the Trust of the
occurrence of Good Reason (as defined below) within a
reasonable time after the Executive has knowledge of the
circumstances constituting Good Reason, which notice shall
specifically identifies the circumstances which the Executive
believes constitute Good Reason;
(ii) the Trust fails to notify the Executive of the
Trust's intended method of correction within a reasonable
period of time after the Trust receives the notice, or the
Trust fails to correct the circumstances within a reasonable
time after such notice; and
(iii) the Executive resigns within a reasonable time after
receiving the Trust's response, if such notice does not
indicate an intention to correct such circumstances, or within
a reasonable time after the Trust fails to correct such
circumstances;
then the Executive shall be considered to have been subject to a
"Constructive Discharge" by the Trust. For purposes of this Agreement,
"Good Reason" shall mean, without the Executive's express written
consent (and except in consequence of a prior termination of the
Executive's employment), the occurrence of any of the following
circumstances:
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<PAGE> 5
(I) a substantial adverse alteration in the nature of the
Executive's status or responsibilities from those in effect immediately
prior to the Employment Period;
(II) failure to provide salary and other compensation and benefits
in accordance with paragraph 4; or
(III) the failure of the Trust to obtain a satisfactory agreement
from any successor to assume and agree to perform this Agreement as
contemplated in paragraph 16.
If the Executive becomes employed by the entity into which the Trust merged, or
the purchaser of substantially all of the assets of the Trust, or a successor to
such entity or purchaser, the Executive shall not be treated as having
terminated employment for purposes of this Agreement until such time as the
Executive terminates employment with the merged entity or purchaser (or
successor), as applicable. If the Executive is transferred to employment with a
subsidiary of the Trust (regardless of whether before, on, or after a Change in
Control), such transfer shall not constitute a termination of employment for
purposes of this Agreement, provided that the subsidiary agrees to assume this
Agreement and be substituted for the Trust under this Agreement (provided that
the subsidiary shall not be substituted for the Trust for purposes of defining
the term "Change in Control").
6. Severance Benefits. Subject to the provisions of paragraphs 7
and 8 below, in the event of a Termination described in paragraph 5, in lieu of
the amount otherwise payable under paragraph 4:
(a) The Executive shall be entitled to the bonus(es) payable for
the performance period(s) in which the date of the Executive's
Termination occurs, with payment based on achievement of a target level
of performance for the entire period (regardless of actual performance
for the period); provided, however, that the amount of the bonus shall
be subject to a pro-rata reduction to reflect the portion of the
applicable performance period following the date of termination.
Payment under this paragraph (a) shall be made at the regularly
scheduled time for payment of such amounts to active employees.
(b) As of the date of Termination, the Executive shall be fully
vested in all benefits accrued through the date of Termination under
the ProLogis Trust Nonqualified Savings Plan, and all such benefits
shall be payable in a lump sum not later than 10 days after the date of
Termination.
(c) Any options to purchase stock of the Trust that are held by
the Executive on the date of Termination shall vest and become
immediately exercisable on such date.
(d) The Executive shall continue to receive medical insurance and
life insurance coverage in accordance with paragraph 4(c) above for a
period of period of 36 months after the date of Termination.
-5-
<PAGE> 6
(e) The Executive shall be entitled to a lump sum payment in cash
no later than ten business days after the date of Termination equal to
the sum of:
(i) an amount equal to three times the Executive's annual
salary rate in effect immediately prior to the Employment
Period; and
(ii) an amount equal to three times times the Executive's
target level of the annual bonus for the fiscal year in which
the date of Termination occurs.
(f) The Trust shall, for a period not to exceed twelve months,
provide for standard outplacement services by any one qualified
outplacement agency selected by the Trust.
Except as may be otherwise specifically provided in an amendment of this
paragraph 6 adopted in accordance with paragraph 15, the Executive's rights
under this paragraph 6 shall be in lieu of any benefits with respect to a
termination following a Change in Control that may be otherwise payable to or on
behalf of the Executive pursuant to the terms of any severance pay arrangement
of the Trust or any subsidiary or any other, similar arrangement of the Trust or
any subsidiary providing benefits upon involuntary termination of employment.
7. Make-Whole Payments. The following shall apply with respect to
amounts to or on behalf of the Executive:
(a) Subject to the following provisions of this paragraph 7, if
any payment or benefit to which the Executive is entitled from the
Trust, any affiliate, or trusts established by the Trust or by any
affiliate (a "Payment") is subject to any tax under section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), or any similar
federal or state law (an "Excise Tax"), the Trust shall pay to the
Executive an additional amount (the "Make Whole-Amount") which is equal
to (i) the amount of the Excise Tax, plus (ii) the aggregate amount of
any interest, penalties, fines or additions to any tax which are
imposed in connection with the imposition of such Excise Tax, plus
(iii) all income, excise and other applicable taxes imposed on the
Executive under the laws of any Federal, state or local government or
taxing authority by reason of the payments required under clause (i)
and clause (ii) and this clause (iii).
(b) For purposes of determining the Make-Whole Amount, the
Executive shall be deemed to be taxed at the highest marginal rate
under all applicable local, state, federal and foreign income tax laws
for the year in which the Make-Whole Amount is paid. The Make-Whole
Amount payable with respect to an Excise Tax shall be paid by the Trust
coincident with the Payment with respect to which such Excise Tax
relates.
(c) All calculations under this paragraph 7 shall be made
initially by the Trust and the Trust shall provide prompt written
notice thereof to the Executive to enable the Executive to timely file
all applicable tax returns. Upon request of the Executive, the Trust
shall provide the Executive with sufficient tax and compensation data
to enable the Executive
-6-
<PAGE> 7
or his tax advisor to independently make the calculations described in
paragraph (b) above and the Trust shall reimburse the Executive for
reasonable fees and expenses incurred for any such verification.
(d) If the Executive gives written notice to the Trust of any
objection to the results of the Trust's calculations within 60 days of
the Executive's receipt of written notice thereof, the dispute shall be
referred for determination to tax counsel selected by the independent
auditors of the Trust ("Tax Counsel"). The Trust shall pay all fees and
expenses of such Tax Counsel. Pending such determination by Tax
Counsel, the Trust shall pay the Executive the Make-Whole Amount as
determined by it in good faith. The Trust shall pay the Executive any
additional amount determined by Tax Counsel to be due under this
paragraph 7 (together with interest thereon at a rate equal to 120% of
the Federal short-term rate determined under section 1274(d) of the
Code) promptly after such determination.
(e) The determination by Tax Counsel shall be conclusive and
binding upon all parties unless the Internal Revenue Service, a court
of competent jurisdiction, or such other duly empowered governmental
body or agency (a "Tax Authority") determines that the Executive owes a
greater or lesser amount of Excise Tax with respect to any Payment than
the amount determined by Tax Counsel.
(f) If a Taxing Authority makes a claim against the Executive
which, if successful, would require the Trust to make a payment under
this paragraph 7, the Executive agrees to contest the claim on request
of the Trust subject to the following conditions:
(i) The Executive shall notify the Trust of any such
claim within 10 days of becoming aware thereof. In the event that the
Trust desires the claim to be contested, it shall promptly (but in no
event more than 30 days after the notice from the Executive or such
shorter time as the Taxing Authority may specify for responding to such
claim) request the Executive to contest the claim. The Executive shall
not make any payment of any tax which is the subject of the claim
before the Executive has given the notice or during the 30-day period
thereafter unless the Executive receives written instructions from the
Trust to make such payment together with an advance of funds sufficient
to make the requested payment plus any amounts payable under this
paragraph 7 determined as if such advance were an Excise Tax, in which
case the Executive will act promptly in accordance with such
instructions.
(ii) If the Trust so requests, the Executive will contest
the claim by either paying the tax claimed and suing for a refund in
the appropriate court or contesting the claim in the United States Tax
Court or other appropriate court, as directed by the Trust; provided,
however, that any request by the Trust for the Executive to pay the tax
shall be accompanied by an advance from the Trust to the Executive of
funds sufficient to make the requested payment plus any amounts payable
under this paragraph 7 determined as if such advance were an Excise
Tax. If directed by the Trust in writing the Executive will
-7-
<PAGE> 8
take all action necessary to compromise or settle the claim, but in no
event will the Executive compromise or settle the claim or cease to
contest the claim without the written consent of the Trust; provided,
however, that the Executive may take any such action if the Executive
waives in writing his right to a payment under this paragraph 7 for any
amounts payable in connection with such claim. The Executive agrees to
cooperate in good faith with the Trust in contesting the claim and to
comply with any reasonable request from the Trust concerning the
contest of the claim, including the pursuit of administrative remedies,
the appropriate forum for any judicial proceedings, and the legal basis
for contesting the claim. Upon request of the Trust, the Executive
shall take appropriate appeals of any judgment or decision that would
require the Trust to make a payment under this paragraph 7. Provided
that the Executive is in compliance with the provisions of this
paragraph (ii), the Trust shall be liable for and indemnify the
Executive against any loss in connection with, and all costs and
expenses, including attorneys' fees, which may be incurred as a result
of, contesting the claim, and shall provide to the Executive within 30
days after each written request therefor by the Executive cash advances
or reimbursement for all such costs and expenses actually incurred or
reasonably expected to be incurred by the Executive as a result of
contesting the claim.
(iii) Should a Tax Authority finally determine that an
additional Excise Tax is owed, then the Trust shall pay an additional
Make-Up Amount to the Executive in a manner consistent with this
paragraph 7 with respect to any additional Excise Tax and any assessed
interest, fines, or penalties. If any Excise Tax as calculated by the
Trust or Tax Counsel, as the case may be, is finally determined by a
Tax Authority to exceed the amount required to be paid under applicable
law, then the Executive shall repay such excess to the Trust within 30
days of such determination; provided that such repayment shall be
reduced by the amount of any taxes paid by the Executive on such excess
which is not offset by the tax benefit attributable to the repayment.
8. Withholding. All payments to the Executive under this
Agreement will be subject to all applicable withholding of state and federal
taxes.
9. Arbitration of All Disputes. Any controversy or claim arising
out of or relating to this Agreement or the breach thereof shall be settled by
arbitration in Denver, Colorado, in accordance with the laws of the State of
Colorado, by three arbitrators appointed by the parties. If the parties cannot
agree on the appointment of the arbitrators, one shall be appointed by the Trust
and one by the Executive and the third shall be appointed by the first two
arbitrators. If the first two arbitrators cannot agree on the appointment of a
third arbitrator, then the third arbitrator shall be appointed by the Chief
Judge of the United States Court of Appeals for the Tenth Circuit. The
arbitration shall be conducted in accordance with the rules of the American
Arbitration Association, except with respect to the selection of arbitrators
which shall be as provided in this paragraph 9. Judgment upon the award rendered
by the arbitrators may be entered in any court having jurisdiction thereof.
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10. Legal and Enforcement Costs. This paragraph 10 shall apply if
it becomes necessary or desirable for the Executive to retain legal counsel or
incur other costs and expenses in connection with either enforcing any and all
of his rights under this Agreement or defending against any allegations of
breach of this Agreement by the Trust:
(a) The Executive shall be entitled to recover from the Trust
reasonable attorneys' fees, costs and expenses incurred by him in
connection with such enforcement or defense.
(b) Payments required under this paragraph 10 shall be made by the
Trust to the Executive (or directly to the Executive's attorney)
promptly following submission to the Trust of appropriate documentation
evidencing the incurrence of such attorneys' fees, costs, and expenses.
(c) The Executive shall be entitled to select his legal counsel;
provided, however, that such right of selection shall not affect the
requirement that any costs and expenses reimbursable under this
paragraph 10 be reasonable.
(d) The Executive's rights to payments under this paragraph 10
shall not be affected by the final outcome of any dispute with the
Trust; provided, however, that to the extent that the arbitrators shall
determine that under the circumstances recovery by the Executive of all
or a part of any such fees and costs and expenses would be unjust or
inappropriate, the Executive shall not be entitled to such recovery;
and to the extent that such amount have been recovered by the Executive
previously, the Executive shall repay such amounts to the Trust.
11. Mitigation and Set-Off. The Executive shall not be required to
mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise. The Trust shall not be entitled to set off
against the amounts payable to the Executive under this Agreement any amounts
owed to the Trust by the Executive, any amounts earned by the Executive in other
employment after termination of his employment with the Trust, or any amounts
which might have been earned by the Executive in other employment had he sought
such other employment.
12. Notices. Notices and all other communications provided for in
this Agreement shall be in writing and shall be delivered personally or sent by
registered or certified mail, return receipt requested, postage prepaid
(provided that international mail shall be sent via overnight or two-day
delivery), or sent by facsimile or prepaid overnight courier to the parties at
the addresses set forth below (or such other addresses as shall be specified by
the parties by like notice). Such notices, demands, claims and other
communications shall be deemed given:
(a) in the case of delivery by overnight service with guaranteed
next day delivery, the next day or the day designated for delivery;
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(b) in the case of certified or registered U.S. mail, five days
after deposit in the U.S. mail; or
(c) in the case of facsimile, the date upon which the transmitting
party received confirmation of receipt by facsimile, telephone or
otherwise;
provided, however, that in no event shall any such communications be deemed to
be given later than the date they are actually received. Communications that are
to be delivered by the U.S. mail or by overnight service or two-day delivery
service to the Executive shall be to the last address he has filed in writing
with the Trust, and such deliveries to the Trust shall be to the following
address:
ProLogis Trust
14100 East 35th Place
Aurora, Colorado 80011
All notices to the Trust shall be directed to the attention of the Chief
Financial Officer of the Trust, with a copy to the Secretary of the Trust.
13. Non-Alienation. The Executive shall not have any right to
pledge, hypothecate, anticipate or in any way create a lien upon any amounts
provided under this Agreement; and no benefits payable hereunder shall be
assignable in anticipation of payment either by voluntary or involuntary acts,
or by operation of law. Nothing in this paragraph 13 shall limit the Executive's
rights or powers to dispose of his property by will or limit any rights or
powers which his executor or administrator would otherwise have.
14. Governing Law. The provisions of this Agreement shall be
construed in accordance with the laws of the State of Colorado, without
application of conflict of laws provisions thereunder.
15. Amendment. This Agreement may be amended or canceled by mutual
agreement of the parties in writing without the consent of any other person and,
so long as the Executive lives, no person, other than the parties hereto, shall
have any rights under or interest in this Agreement or the subject matter
hereof.
16. Successors to the Trust. This Agreement shall be binding upon
and inure to the benefit of the Trust and any successor of the Trust. The Trust
will require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Trust to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Trust would be required to
perform it if no succession had taken place.
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<PAGE> 11
17. Severability. In the event that any provision or portion of
this Agreement shall be determined to be invalid or unenforceable for any
reason, the remaining provisions of this Agreement shall be unaffected thereby
and shall remain in full force and effect.
18. Counterparts. This Agreement may be executed in two or more
counterparts, any one of which shall be deemed the original without reference to
the others.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and,
pursuant to the authorization from its Board of Trustees, the Trust has caused
these presents to be executed in its name and on its behalf, all as of the
Effective Date.
EXECUTIVE
----------------------------------------
PROLOGIS TRUST
----------------------------------------
K. Dane Brooksher
Chairman and Chief Executive Officer
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<PAGE> 1
EXHIBIT 10.26
EXECUTIVE PROTECTION AGREEMENT
This Agreement entered into as of the 24th day of June, 1999 (the
"Effective Date") by and between ProLogis Trust, a Maryland real estate
investment trust (the "Trust"), and (the "Executive"),
WITNESSETH THAT:
WHEREAS, the Trust wishes to assure itself of the continuity of the
Executive's services in the event of a change in control of the Trust; and
WHEREAS, the Trust and the Executive accordingly desire to enter into
this Agreement on the terms and conditions set forth below;
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, it is hereby agreed by and between the parties as follows:
1. Term of Agreement. The "Term" of this Agreement shall commence on
the Effective Date and shall continue through December 31, 2001; provided,
however, that on such date and on each December 31 thereafter, the Term of this
Agreement shall automatically be extended for one additional year unless, not
later than the preceding October 1, either party shall have given notice that
such party does not wish to extend the Term; and provided further that if a
Change in Control (as defined in paragraph 3 below) shall have occurred during
the original or any extended Term of this Agreement, the Term of this Agreement
shall continue until the end of the twenty-fourth calendar month after the
calendar month in which such Change in Control occurs, at which time it will
expire.
2. Employment After a Change in Control. If the Executive is in the
employ of the Trust on the date of a Change in Control, the Trust hereby agrees
to continue the Executive in its employ for the period commencing on the date of
the Change in Control and ending on the last day of the Term of this Agreement.
During the period of employment described in the foregoing provisions of this
paragraph 2 (the "Employment Period"), the Executive shall hold such position
with the Trust and exercise such authority and perform such executive duties as
are commensurate with his position, authority and duties immediately prior to
the Employment Period. The Executive agrees that during the Employment Period he
shall devote his full business time exclusively to the executive duties
described herein and perform such duties faithfully and efficiently; provided,
however, that nothing in this Agreement shall prevent the Executive from
voluntarily resigning from employment upon no less than 15 days' advance written
notice to the Trust under circumstances that do not constitute a Termination (as
defined in paragraph 5).
3. Change in Control. For purposes of this Agreement, a "Change in
Control" means the happening of any of the following:
<PAGE> 2
(a) The shareholders of the Trust approve a definitive agreement to
merge the Trust into or consolidate the Trust with another entity, sell
or otherwise dispose of all or substantially all of its assets or adopt
a plan of liquidation, provided, however, that a Change in Control
shall not be deemed to have occurred by reason of a transaction, or a
substantially concurrent or otherwise related series of transactions,
upon the completion of which 50% or more of the beneficial ownership of
the voting power of the Trust, the surviving corporation or corporation
directly or indirectly controlling the Trust or the surviving
corporation, as the case may be, is held by the same persons (as
defined below) (although not necessarily in the same proportion) as
held the beneficial ownership of the voting power of the Trust
immediately prior to the transaction or the substantially concurrent or
otherwise related series of transactions, except that upon the
completion thereof, employees or employee benefit plans of the Trust
may be a new holder of such beneficial ownership; provided, further,
that any transaction described in this paragraph (a) with an
"Affiliate" of the Trust (as defined in the Securities Exchange Act of
1934, as amended (the "Exchange Act")) shall not be treated as a Change
in Control.
(b) The "beneficial ownership" (as defined in Rule 13d-3 under the
Exchange Act) of securities representing 50% or more of the combined
voting power of the Trust is acquired, other than from the Trust, by
any "person" as defined in Sections 13(d) and 14(d) of the Exchange Act
(other than any trustee or other fiduciary holding securities under an
employee benefit or other similar stock plan of the Trust); provided,
that any purchase by Security Capital Group Incorporated or any of its
Affiliates of securities representing 50% or more of the combined
voting power of the Trust shall not be treated as a Change in Control.
(c) At any time during any period of two consecutive years, individuals
who at the beginning of such period were members of the Board of
Trustees of the Trust cease for any reason to constitute at least a
majority thereof (unless the election, or the nomination for election
by the Trust's shareholders, of each new trustee was approved by a vote
of at least two-thirds of the trustees still in office at the time of
such election or nomination who were trustees at the beginning of such
period).
(d) The SCGI Affiliates in a single transaction, or in substantially
concurrent transactions or otherwise related series of transactions,
transfer all or a portion of their interests in the Trust; provided
that the interest so transferred represents 20% or more of the total
beneficial ownership of the voting power of the Trust; and further
provided that the transfer of such 20% or greater interest is to a
corporation, partnership, joint venture, or other entity (or a group of
any such entities that are under common control) that are not SCGI
Affiliates (regardless of whether any Rights are transferred in
connection with the transaction).
(e) The SCGI Affiliates transfer any Rights to any person who is not an
SCGI Affiliate.
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<PAGE> 3
For purposes of this Agreement, the following terms shall be defined as
indicated:
(i) The term "Beneficial Owner" shall mean beneficial owner as defined in
Rule 13d-3 under the Exchange Act.
(ii) Entities shall be treated as being under "common control" during any
period in which they are "affiliates" of each other as that term is
defined in the Exchange Act.
(iii) The term "person" shall be as defined in Sections 13(d) and 14(d) of
the Exchange Act, but shall exclude any trustee or other fiduciary
holding securities under an employee benefit or other similar stock
plan of the Trust.
(iv) The term "ProLogis Affiliate" shall mean ProLogis Trust and any of its
"affiliates" as that term is defined in the Exchange Act.
(v) The term "Rights" shall mean (i) any rights of Security Capital Group
Incorporated set forth in Section 5 of the Third Amended and Restated
Investor Agreement, dated as of September 9, 1997 between ProLogis
Trust and Security Capital Group Incorporated, as such agreement may be
amended and in effect from time to time; and (ii) any rights of
Security Capital Group Incorporated as an Excluded Holder under the
provisions of Article II of ProLogis Trust's Amended and Restated
Declaration of Trust, as amended and supplemented and in effect from
time to time.
(vi) The term "SCGI Affiliate" shall mean Security Capital Group
Incorporated and any of its "affiliates" as that term is defined in the
Exchange Act.
4. Compensation During the Employment Period. During the Employment
Period, the Executive shall be compensated as follows:
(a) He shall receive an annual salary which is not less than his annual
salary immediately prior to the Employment Period.
(b) He shall be entitled to participate in annual cash-based incentive
compensation plans which, in the aggregate, provide bonus opportunities
which are not materially less favorable to the Executive than the
greater of (i) the opportunities provided by the Trust for executives
with comparable levels of responsibility as in effect from time to
time; and (ii) the opportunities provided to the Executive under all
such plans in which he was participating prior to the Employment
Period.
(c) He shall be eligible to participate in other incentive compensation
plans and other employee benefit plans on a basis not materially less
favorable to the Executive than that applicable to other executives of
the Trust with comparable levels of responsibility as in effect from
time to time.
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<PAGE> 4
5. Termination. For purposes of this Agreement, the term "Termination"
shall mean termination of the employment of the Executive by the Trust during
the Employment Period (I) by the Trust, for any reason other than death,
Disability, or Cause, or (II) by Constructive Discharge of the Executive (as
these terms are described below). For purposes of this Agreement:
(a) The Executive shall be considered to have a "Disability" during the
period in which he is unable, by reason of a medically determinable
physical or mental impairment, to engage in the material and
substantial duties of his regular occupation, and such condition is
expected to be permanent, as determined by the Chief Executive Officer
of the Trust.
(b) For purposes of this Agreement, "Cause" shall mean, in the
reasonable judgment of the Chief Executive Officer of the Trust (i) the
willful and continued failure by the Executive to substantially perform
his duties with the Trust or any subsidiary after written notification
by the Trust or subsidiary, (ii) the willful engaging by the Executive
in conduct which is demonstrably injurious to the Trust or any
subsidiary, monetarily or otherwise, or (iii) the engaging by the
Executive in egregious misconduct involving serious moral turpitude.
For purposes hereof, no act, or failure to act, on the Executive's part
shall be deemed "willful" unless done, or omitted to be done, by the
Executive not in good faith and without reasonable belief that such
action was in the best interest of the Trust or subsidiary.
(c) If, after a Change in Control, the Executive:
(i) provides written notice to the Trust of the occurrence of
Good Reason (as defined below) within a reasonable time after
the Executive has knowledge of the circumstances constituting
Good Reason, which notice shall specifically identifies the
circumstances which the Executive believes constitute Good
Reason;
(ii) the Trust fails to notify the Executive of the Trust's
intended method of correction within a reasonable period of
time after the Trust receives the notice, or the Trust fails
to correct the circumstances within a reasonable time after
such notice; and
(iii) the Executive resigns within a reasonable time after
receiving the Trust's response, if such notice does not
indicate an intention to correct such circumstances, or within
a reasonable time after the Trust fails to correct such
circumstances;
then the Executive shall be considered to have been subject to a
"Constructive Discharge" by the Trust. For purposes of this Agreement,
"Good Reason" shall mean, without the Executive's express written
consent (and except in consequence of a prior termination of the
Executive's employment), the occurrence of any of the following
circumstances:
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<PAGE> 5
(I) a substantial adverse alteration in the nature of the
Executive's status or responsibilities from those in effect immediately
prior to the Employment Period;
(II) failure to provide salary and other compensation and
benefits in accordance with paragraph 4; or
(III) the failure of the Trust to obtain a satisfactory
agreement from any successor to assume and agree to perform this
Agreement as contemplated in paragraph 16.
If the Executive becomes employed by the entity into which the Trust merged, or
the purchaser of substantially all of the assets of the Trust, or a successor to
such entity or purchaser, the Executive shall not be treated as having
terminated employment for purposes of this Agreement until such time as the
Executive terminates employment with the merged entity or purchaser (or
successor), as applicable. If the Executive is transferred to employment with a
subsidiary of the Trust (regardless of whether before, on, or after a Change in
Control), such transfer shall not constitute a termination of employment for
purposes of this Agreement, provided that the subsidiary agrees to assume this
Agreement and be substituted for the Trust under this Agreement (provided that
the subsidiary shall not be substituted for the Trust for purposes of defining
the term "Change in Control").
6. Severance Benefits. Subject to the provisions of paragraphs 7 and 8
below, in the event of a Termination described in paragraph 5, in lieu of the
amount otherwise payable under paragraph 4:
(a) The Executive shall be entitled to the bonus(es) payable for the
performance period(s) in which the date of the Executive's Termination
occurs, with payment based on achievement of a target level of
performance for the entire period (regardless of actual performance for
the period); provided, however, that the amount of the bonus shall be
subject to a pro-rata reduction to reflect the portion of the
applicable performance period following the date of termination.
Payment under this paragraph (a) shall be made at the regularly
scheduled time for payment of such amounts to active employees.
(b) As of the date of Termination, the Executive shall be fully vested
in all benefits accrued through the date of Termination under the
ProLogis Trust Nonqualified Savings Plan, and all such benefits shall
be payable in a lump sum not later than 10 days after the date of
Termination.
(c) Any options to purchase stock of the Trust that are held by the
Executive on the date of Termination shall vest and become immediately
exercisable on such date.
(d) The Executive shall continue to receive medical insurance and life
insurance coverage in accordance with paragraph 4(c) above for a period
of period of 24 months after the date of Termination.
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<PAGE> 6
(e) The Executive shall be entitled to a lump sum payment in cash no
later than ten business days after the date of Termination equal to the
sum of:
(i) an amount equal to two times the Executive's annual salary
rate in effect immediately prior to the Employment Period; and
(ii) an amount equal to two times times the Executive's target
level of the annual bonus for the fiscal year in which the
date of Termination occurs.
(f) The Trust shall, for a period not to exceed twelve months, provide
for standard outplacement services by any one qualified outplacement
agency selected by the Trust.
Except as may be otherwise specifically provided in an amendment of this
paragraph 6 adopted in accordance with paragraph 15, the Executive's rights
under this paragraph 6 shall be in lieu of any benefits with respect to a
termination following a Change in Control that may be otherwise payable to or on
behalf of the Executive pursuant to the terms of any severance pay arrangement
of the Trust or any subsidiary or any other, similar arrangement of the Trust or
any subsidiary providing benefits upon involuntary termination of employment.
7. Make-Whole Payments. The following shall apply with respect to
amounts to or on behalf of the Executive:
(a) Subject to the following provisions of this paragraph 7, if any
payment or benefit to which the Executive is entitled from the Trust,
any affiliate, or trusts established by the Trust or by any affiliate
(a "Payment") is subject to any tax under section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code"), or any similar federal
or state law (an "Excise Tax"), the Trust shall pay to the Executive an
additional amount (the "Make Whole-Amount") which is equal to (i) the
amount of the Excise Tax, plus (ii) the aggregate amount of any
interest, penalties, fines or additions to any tax which are imposed in
connection with the imposition of such Excise Tax, plus (iii) all
income, excise and other applicable taxes imposed on the Executive
under the laws of any Federal, state or local government or taxing
authority by reason of the payments required under clause (i) and
clause (ii) and this clause (iii).
(b) For purposes of determining the Make-Whole Amount, the Executive
shall be deemed to be taxed at the highest marginal rate under all
applicable local, state, federal and foreign income tax laws for the
year in which the Make-Whole Amount is paid. The Make-Whole Amount
payable with respect to an Excise Tax shall be paid by the Trust
coincident with the Payment with respect to which such Excise Tax
relates.
(c) All calculations under this paragraph 7 shall be made initially by
the Trust and the Trust shall provide prompt written notice thereof to
the Executive to enable the Executive to timely file all applicable tax
returns. Upon request of the Executive, the Trust shall
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<PAGE> 7
provide the Executive with sufficient tax and compensation data to
enable the Executive or his tax advisor to independently make the
calculations described in paragraph (b) above and the Trust shall
reimburse the Executive for reasonable fees and expenses incurred for
any such verification.
(d) If the Executive gives written notice to the Trust of any objection
to the results of the Trust's calculations within 60 days of the
Executive's receipt of written notice thereof, the dispute shall be
referred for determination to tax counsel selected by the independent
auditors of the Trust ("Tax Counsel"). The Trust shall pay all fees and
expenses of such Tax Counsel. Pending such determination by Tax
Counsel, the Trust shall pay the Executive the Make-Whole Amount as
determined by it in good faith. The Trust shall pay the Executive any
additional amount determined by Tax Counsel to be due under this
paragraph 7 (together with interest thereon at a rate equal to 120% of
the Federal short-term rate determined under section 1274(d) of the
Code) promptly after such determination.
(e) The determination by Tax Counsel shall be conclusive and binding
upon all parties unless the Internal Revenue Service, a court of
competent jurisdiction, or such other duly empowered governmental body
or agency (a "Tax Authority") determines that the Executive owes a
greater or lesser amount of Excise Tax with respect to any Payment than
the amount determined by Tax Counsel.
(f) If a Taxing Authority makes a claim against the Executive which, if
successful, would require the Trust to make a payment under this
paragraph 7, the Executive agrees to contest the claim on request of
the Trust subject to the following conditions:
(i) The Executive shall notify the Trust of any such claim
within 10 days of becoming aware thereof. In the event that the Trust
desires the claim to be contested, it shall promptly (but in no event
more than 30 days after the notice from the Executive or such shorter
time as the Taxing Authority may specify for responding to such claim)
request the Executive to contest the claim. The Executive shall not
make any payment of any tax which is the subject of the claim before
the Executive has given the notice or during the 30-day period
thereafter unless the Executive receives written instructions from the
Trust to make such payment together with an advance of funds sufficient
to make the requested payment plus any amounts payable under this
paragraph 7 determined as if such advance were an Excise Tax, in which
case the Executive will act promptly in accordance with such
instructions.
(ii) If the Trust so requests, the Executive will contest the
claim by either paying the tax claimed and suing for a refund in the
appropriate court or contesting the claim in the United States Tax
Court or other appropriate court, as directed by the Trust; provided,
however, that any request by the Trust for the Executive to pay the tax
shall be accompanied by an advance from the Trust to the Executive of
funds sufficient to make the requested payment plus any amounts payable
under this paragraph 7 determined as if
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<PAGE> 8
such advance were an Excise Tax. If directed by the Trust in writing
the Executive will take all action necessary to compromise or settle
the claim, but in no event will the Executive compromise or settle the
claim or cease to contest the claim without the written consent of the
Trust; provided, however, that the Executive may take any such action
if the Executive waives in writing his right to a payment under this
paragraph 7 for any amounts payable in connection with such claim. The
Executive agrees to cooperate in good faith with the Trust in
contesting the claim and to comply with any reasonable request from the
Trust concerning the contest of the claim, including the pursuit of
administrative remedies, the appropriate forum for any judicial
proceedings, and the legal basis for contesting the claim. Upon request
of the Trust, the Executive shall take appropriate appeals of any
judgment or decision that would require the Trust to make a payment
under this paragraph 7. Provided that the Executive is in compliance
with the provisions of this paragraph (ii), the Trust shall be liable
for and indemnify the Executive against any loss in connection with,
and all costs and expenses, including attorneys' fees, which may be
incurred as a result of, contesting the claim, and shall provide to the
Executive within 30 days after each written request therefor by the
Executive cash advances or reimbursement for all such costs and
expenses actually incurred or reasonably expected to be incurred by the
Executive as a result of contesting the claim.
(iii) Should a Tax Authority finally determine that an
additional Excise Tax is owed, then the Trust shall pay an additional
Make-Up Amount to the Executive in a manner consistent with this
paragraph 7 with respect to any additional Excise Tax and any assessed
interest, fines, or penalties. If any Excise Tax as calculated by the
Trust or Tax Counsel, as the case may be, is finally determined by a
Tax Authority to exceed the amount required to be paid under applicable
law, then the Executive shall repay such excess to the Trust within 30
days of such determination; provided that such repayment shall be
reduced by the amount of any taxes paid by the Executive on such excess
which is not offset by the tax benefit attributable to the repayment.
(g) Notwithstanding the foregoing provisions of this paragraph 7:
(i) If (I) any Payments otherwise due to or on behalf of the
Executive (determined without regard to paragraph 7(a)) are subject to
an Excise Tax, and (II) a reduction in such Payments otherwise subject
to the Excise Tax to an amount that is not less than 90% of the Value
of the Payments otherwise subject to the Excise Tax would result in no
Excise Tax being imposed with respect to any Payments, then:
(A) the Payments to which the Executive is or will
become entitled under this Agreement or otherwise from the
Trust shall be reduced to the extent required to avoid
incurring the Excise Tax; and
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<PAGE> 9
(B) no payments shall be made to the Executive under
paragraph 7(a). The "Value" of the Payments described in
clause (II) above shall be determined by the Trust in good
faith as of the date on which the applicable change in control
is deemed to occur for purposes of section 280G of the Code.
(ii) If reductions are required in the Executive's Payments in
accordance with paragraph (i) above, the Executive shall be entitled to
select the order in which payments and benefits are to be reduced. Upon
request of the Executive, the Trust shall provide the Executive with
sufficient tax and compensation data to enable the Executive or his tax
advisor to independently make the calculations described in paragraph
(i) above and the Trust shall reimburse the Executive for reasonable
fees and expenses incurred for any such verification.
(iii) If the Executive gives written notice to the Trust of
any objection to the results of the Trust's calculations under this
paragraph (g) within 60 days of the Executive's receipt of written
notice thereof, the dispute shall be referred for determination to Tax
Counsel. The Trust shall pay all fees and expenses of such Tax Counsel.
Pending such determination by Tax Counsel, the determination by the
Trust shall be binding on all parties. If the Tax Counsel determines
that this paragraph (g), and the reductions described in this paragraph
(g), are inapplicable, the Trust shall pay the Executive any additional
amount determined by Tax Counsel to be due under this paragraph 7
(together with interest thereon at a rate equal to 120% of the Federal
short-term rate determined under section 1274(d) of the Code) promptly
after such determination.
8. Withholding. All payments to the Executive under this Agreement will
be subject to all applicable withholding of state and federal taxes.
9. Arbitration of All Disputes. Any controversy or claim arising out of
or relating to this Agreement or the breach thereof shall be settled by
arbitration in Denver, Colorado, in accordance with the laws of the State of
Colorado, by three arbitrators appointed by the parties. If the parties cannot
agree on the appointment of the arbitrators, one shall be appointed by the Trust
and one by the Executive and the third shall be appointed by the first two
arbitrators. If the first two arbitrators cannot agree on the appointment of a
third arbitrator, then the third arbitrator shall be appointed by the Chief
Judge of the United States Court of Appeals for the Tenth Circuit. The
arbitration shall be conducted in accordance with the rules of the American
Arbitration Association, except with respect to the selection of arbitrators
which shall be as provided in this paragraph 9. Judgment upon the award rendered
by the arbitrators may be entered in any court having jurisdiction thereof.
10. Legal and Enforcement Costs. This paragraph 10 shall apply if it
becomes necessary or desirable for the Executive to retain legal counsel or
incur other costs and expenses in connection with either enforcing any and all
of his rights under this Agreement or defending against any allegations of
breach of this Agreement by the Trust:
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<PAGE> 10
(a) The Executive shall be entitled to recover from the Trust
reasonable attorneys' fees, costs and expenses incurred by him in
connection with such enforcement or defense.
(b) Payments required under this paragraph 10 shall be made by the
Trust to the Executive (or directly to the Executive's attorney)
promptly following submission to the Trust of appropriate documentation
evidencing the incurrence of such attorneys' fees, costs, and expenses.
(c) The Executive shall be entitled to select his legal counsel;
provided, however, that such right of selection shall not affect the
requirement that any costs and expenses reimbursable under this
paragraph 10 be reasonable.
(d) The Executive's rights to payments under this paragraph 10 shall
not be affected by the final outcome of any dispute with the Trust;
provided, however, that to the extent that the arbitrators shall
determine that under the circumstances recovery by the Executive of all
or a part of any such fees and costs and expenses would be unjust or
inappropriate, the Executive shall not be entitled to such recovery;
and to the extent that such amount have been recovered by the Executive
previously, the Executive shall repay such amounts to the Trust.
11. Mitigation and Set-Off. The Executive shall not be required to
mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise. The Trust shall not be entitled to set off
against the amounts payable to the Executive under this Agreement any amounts
owed to the Trust by the Executive, any amounts earned by the Executive in other
employment after termination of his employment with the Trust, or any amounts
which might have been earned by the Executive in other employment had he sought
such other employment.
12. Notices. Notices and all other communications provided for in this
Agreement shall be in writing and shall be delivered personally or sent by
registered or certified mail, return receipt requested, postage prepaid
(provided that international mail shall be sent via overnight or two-day
delivery), or sent by facsimile or prepaid overnight courier to the parties at
the addresses set forth below (or such other addresses as shall be specified by
the parties by like notice). Such notices, demands, claims and other
communications shall be deemed given:
(a) in the case of delivery by overnight service with guaranteed next
day delivery, the next day or the day designated for delivery;
(b) in the case of certified or registered U.S. mail, five days after
deposit in the U.S. mail; or
(c) in the case of facsimile, the date upon which the transmitting
party received confirmation of receipt by facsimile, telephone or
otherwise;
-10-
<PAGE> 11
provided, however, that in no event shall any such communications be deemed to
be given later than the date they are actually received. Communications that are
to be delivered by the U.S. mail or by overnight service or two-day delivery
service to the Executive shall be to the last address he has filed in writing
with the Trust, and such deliveries to the Trust shall be to the following
address:
ProLogis Trust
14100 East 35th Place
Aurora, Colorado 80011
All notices to the Trust shall be directed to the attention of the Chief
Financial Officer of the Trust, with a copy to the Secretary of the Trust.
13. Non-Alienation. The Executive shall not have any right to pledge,
hypothecate, anticipate or in any way create a lien upon any amounts provided
under this Agreement; and no benefits payable hereunder shall be assignable in
anticipation of payment either by voluntary or involuntary acts, or by operation
of law. Nothing in this paragraph 13 shall limit the Executive's rights or
powers to dispose of his property by will or limit any rights or powers which
his executor or administrator would otherwise have.
14. Governing Law. The provisions of this Agreement shall be construed
in accordance with the laws of the State of Colorado, without application of
conflict of laws provisions thereunder.
15. Amendment. This Agreement may be amended or canceled by mutual
agreement of the parties in writing without the consent of any other person and,
so long as the Executive lives, no person, other than the parties hereto, shall
have any rights under or interest in this Agreement or the subject matter
hereof.
16. Successors to the Trust. This Agreement shall be binding upon and
inure to the benefit of the Trust and any successor of the Trust. The Trust will
require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or
assets of the Trust to expressly assume and agree to perform this Agreement in
the same manner and to the same extent that the Trust would be required to
perform it if no succession had taken place.
17. Severability. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect.
18. Counterparts. This Agreement may be executed in two or more
counterparts, any one of which shall be deemed the original without reference to
the others.
-11-
<PAGE> 12
IN WITNESS WHEREOF, the Executive has hereunto set his hand and,
pursuant to the authorization from its Board of Trustees, the Trust has caused
these presents to be executed in its name and on its behalf, all as of the
Effective Date.
EXECUTIVE
------------------------------------
PROLOGIS TRUST
------------------------------------
K. Dane Brooksher
Chairman and Chief Executive Officer
-12-
<PAGE> 1
EXHIBIT 12.1
PROLOGIS TRUST
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Earnings from Operations $161,570 $102,936 $ 38,832 $ 79,384 $ 47,660
Add:
Interest Expense 170,746 77,650 52,704 38,819 32,005
-------- -------- -------- -------- --------
Earnings, as Adjusted $332,316 $180,586 $ 91,536 $118,203 $ 79,665
======== ======== ======== ======== ========
Fixed Charges:
Interest Expense $170,746 $ 77,650 $ 52,704 $ 38,819 $ 32,005
Capitalized Interest 15,980 19,173 18,365 16,138 8,599
-------- -------- -------- -------- --------
Total Fixed Charges $186,726 $ 96,823 $ 71,069 $ 54,957 $ 40,604
======== ======== ======== ======== ========
Ratio of Earnings, as Adjusted
to Fixed Charges 1.8 1.9 1.3 2.2 2.0
======== ======== ======== ======== ========
</TABLE>
<PAGE> 1
EXHIBIT 12.2
PROLOGIS TRUST
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED SHARE DIVIDENDS
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Earnings from Operations $161,570 $102,936 $ 38,832 $ 79,384 $ 47,660
Add:
Interest Expense 170,746 77,650 52,704 38,819 32,005
-------- -------- -------- -------- --------
Earnings, as Adjusted $332,316 $180,586 $ 91,536 $118,203 $ 79,665
======== ======== ======== ======== ========
Combined Fixed Charges and
Preferred Share Dividends:
Interest Expense $170,746 $ 77,650 $ 52,704 $ 38,819 $ 32,005
Capitalized Interest 15,980 19,173 18,365 16,138 8,599
-------- -------- -------- -------- --------
Total Fixed Charges 186,726 96,823 71,069 54,957 40,604
Preferred Share Dividends 56,835 49,098 35,318 25,895 6,698
-------- -------- -------- -------- --------
Combined Fixed Charges and
Preferred Share Dividends $243,561 $145,921 $106,387 $ 80,852 $ 47,302
======== ======== ======== ======== ========
Ratio of Earnings, as Adjusted
to Combined Fixed Charges
and Preferred Shae Dividends 1.4 1.2 (a) 1.5 1.7
======== ======== ======== ======== ========
</TABLE>
(a) Due to a one-time, non-recurring, non-cash charge of $75.4 million relating
to the costs incurred in acquiring the management companies from a related
party, earnings were insufficient to cover combined fixed charges and
preferred share dividends for the year ended December 31, 1997 by $14.9
million.
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF
PROLOGIS TRUST ET. AL.
<TABLE>
<CAPTION>
JURISDICTION OF
NAME OF ENTITY ORGANIZATION
- -------------- ------------
<S> <C>
SUBSIDIARIES ENGAGED IN INDUSTRIAL DISTRIBUTION FACILITIES OPERATIONS
AND DEVELOPMENT:
ProLogis Development Services Incorporated Delaware
ProLogis Limited Partnership-I Delaware
ProLogis Limited Partnership-II Delaware
ProLogis Limited Partnership-III Delaware
ProLogis Limited Partnership-IV Delaware
ProLogis-IV, Inc. Delaware
ProLogis-Alabama (1) Incorporated Maryland
ProLogis-Alabama (2) Incorporated Maryland
ProLogis Alabama Trust Alabama
ProLogis-North Carolina (1) Incorporated Maryland
ProLogis-North Carolina (2) Incorporated Maryland
ProLogis-North Carolina Limited Partnership Delaware
ProLogis Houston Holdings Inc. Delaware
ProLogis-Kansas City (1) Incorporated Delaware
Meridian Ohio Limited Partnership Delaware
MDN/JSC Limited Partnership California
Meridian-Argent VI, Ltd. Texas
Meridian Realty Partners, L.P. Delaware
MDN/JSC-II Limited Partnership California
Meridian-Penn Inc. California
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
International Industrial Investments Incorporated Maryland
and eight subsidiaries in foreign countries
PLD International Incorporated Delaware
and four subsidiaries in foreign countries
ProLogis-France Developments Incorporated Delaware
and twenty-seven subsidiaries in foreign countries
ProLogis Developments Sarl Luxembourg
and forty-eight subsidiaries in foreign countries
Garonor Holdings S.A. Luxembourg
ProLogis Mexico Trust Maryland
ProLogis-DS Mexico Incorporated Maryland
PLDS de Mexico S.A. de C.V. Mexico
ProLogis California I LLC (50% ownership interest) Delaware
MIT-JPM Limited Partnership (11% ownership interest) Delaware
ProLogis European Properties Fund (19.68% ownership interest) Luxembourg
SUBSIDIARIES ENGAGED IN PROVIDING MANAGEMENT SERVICES:
ProLogis Management Services Incorporated Delaware
ProLogis BV and three subsidiaries in foreign countries Luxembourg
ProLogis Management Incorporated Delaware
ProLogis de Mexico S.A. de C.V. Mexico
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
reports included in this Form 10-K, into the Trust's previously filed
Registration Statement File Nos. 33-91366, 33-92490, 333-4961, 333-31421,
333-38515, 333-52867, 333-26597, 333-74917, 333-75893, 333-79813, 333-69001,
333-86081 and 333-95737.
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 15, 2000
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants of Frigoscandia Holding AB, we hereby consent
to the use of our report dated January 24, 2000 included in the ProLogis Trust's
Form 10-K for the year ended December 31, 1999. It should be noted that we have
not audited any financial statements of the company subsequent to December 31,
1999 or performed any audit procedures subsequent to the date of our report.
Stockholm, March 20, 2000
KPMG
<PAGE> 1
EXHIBIT 23.3
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
AUDIT REPORT
To the general meeting of the shareholders of Frigoscandia Holding AB
Corporate identity number 556542-7704
We have audited the annual accounts, the consolidated accounts, the accounting
records and the administration of the board of directors and the managing
director of Frigoscandia Holding AB for the year 1999. These accounts and the
administration of the company are the responsibility of the board of directors
and the managing director. Our responsibility is to express an opinion on the
annual accounts, the consolidated accounts and the administration based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards
in Sweden. Those standards require that we plan and perform the audit to obtain
reasonable assurance that the annual accounts and the consolidated accounts are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the accounts. An audit also
includes assessing the accounting principles used and their application by the
board of directors and the managing director, as well as evaluating the overall
presentation of information in the annual accounts and the consolidated
accounts. As in basis for our opinion concerning discharge from liability, we
examined significant decisions, actions taken and circumstances of the company
in order to be able to determine the liability, if any, to the company of any
board member or the managing director. We also examined whether any board member
or the managing director has, in any other way, acted in contravention of the
Companies Act, the Annual Accounts Act or the Articles of Association. We
believe that our audit provides a reasonable basis for our opinion set out
below.
The annual accounts and the consolidated accounts have been prepared in
accordance with the Annual Accounts Act and, thereby, give a true and fair view
of the company's and the group's financial position and results of operations in
accordance with generally accepted accounting principles in Sweden.
We recommend to the general meeting of the shareholders that the income
statements and balance sheets of the parent company and the group be adopted,
that the profit for the parent company be dealt with in accordance with the
proposal in the administration report and that the members of the board of
directors and the managing director be discharged from liability for the
financial year.
Stockholm, 24 January 2000
KPMG
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the use of our report dated January 24, 2000, except as to the
fourth paragraph of note 4 which is as of March 21, 2000, relating to the
consolidated balance sheets of CS Integrated LLC and subsidiaries as of December
31, 1999 and 1998 and the related consolidated statements of income, changes in
members' equity, and cash flows for the years ended included in the ProLogis
Trust's Form 10-K for the year ended December 31, 1999.
KPMG LLP
New York, New York
March 21, 2000
<PAGE> 1
EXHIBIT 23.5
INDEPENDENT AUDITORS' REPORT
The Management of
CS Integrated LLC and Subsidiaries
We have audited the accompanying consolidated balance sheets of CS Integrated
LLC (a Limited Liability Company) and subsidiaries as of December 31, 1999 and
1998, and the related consolidated statements of income, changes in members'
equity, and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. 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 audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of CS Integrated LLC
and subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for the years then ended, in conformity with
generally accepted accounting principles.
KPMG LLP
January 24, 2000, except as to the
fourth paragraph of note 4 which is
as of March 21, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 69,338
<SECURITIES> 0
<RECEIVABLES> 987,362
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 4,974,951
<DEPRECIATION> 366,703
<TOTAL-ASSETS> 5,848,040
<CURRENT-LIABILITIES> 0
<BONDS> 2,456,108
0
710,518
<COMMON> 1,618
<OTHER-SE> 2,241,600
<TOTAL-LIABILITY-AND-EQUITY> 5,848,040
<SALES> 491,826
<TOTAL-REVENUES> 567,392
<CGS> 0
<TOTAL-COSTS> 33,501
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 170,746
<INCOME-PRETAX> 126,911
<INCOME-TAX> 1,472
<INCOME-CONTINUING> 125,439
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 1,440
<NET-INCOME> 123,999
<EPS-BASIC> 0.81
<EPS-DILUTED> 0.81
</TABLE>
