ProLogis European Properties : Results for the quarter and half year ended 30 June 2012

26 juli 2012 News release Results for the quarter and half year ended 30 June 2012 PEPR liquidation in progress EPRA NAV at €6.43 per ordinary unit Luxembourg - 26 July 2012 - ProLogis European Properties (Euronext: PEPR), one of Europe's largest owners of modern distribution facilities, today reports results for the quarter and half year ended 30 June 2012. Highlights * Commenced 60-day wind-up of PEPR, as approved by the Commission de Surveillance du Secteur Financier and ratified by all Unitholders at the 2012 AGM * 19 lease transactions completed covering 166,000m(2), including 38,100m(2) of new or expanded leases (HY 2012: 60 leases transactions, totalling 706,900m(2)) * 93.2% portfolio occupancy (Q1 2012: 93.6%), in line with expectation Quarter to 30 June 2012 Half year to 30 June 2012 * Adjusted EPRA[1] earnings of €0.11 * Adjusted EPRA earnings of  €0.22 per ordinary unit (Q2 2011: €0.09) per ordinary unit (HY 2011: €0.19) * IFRS loss €0.04 of per ordinary * IFRS loss €0.15 per ordinary unit unit (Q2 2011: €0.04 loss) (HY 2011: €0.02 earnings) * Generated distributable cash flow * Generated distributable cash flow per ordinary unit of €0.11 (Q2 per ordinary unit of €0.22 (HY 2011: €0.08) 2011: €0.18) * EPRA net asset value at €6.43 per * EPRA net asset value at €6.43 per ordinary unit (Q1 2012: €6.46) ordinary unit (YE 2011: €6.50) * IFRS net asset value at €5.76 per * IFRS net asset value at €5.76 per ordinary unit (Q1 2012: €5.77) ordinary unit (YE 2011: €5.77) Commenting on the results, Peter Cassells, chief executive officer of PEPR, said: "We continue to report improving financial results during the second quarter and half year, with an increase in both adjusted EPRA earnings and distributable cash flow as a result of sustained operating performance, despite continued macro-economic uncertainty. "The overall pan-European market outlook continues to hold relatively firm, with property yields, rents and lease incentives in most markets remaining stable. However, the ongoing economic uncertainty has led to a further decrease in our portfolio value which has contributed to the decline in EPRA NAV over the quarter and half year to €6.43 per ordinary unit. "Following the approval to wind-up PEPR, the management company is currently well-advanced with the liquidation. As such, on 27 August 2012, all preferred units will be redeemed at par plus accrued dividends and ordinary unitholders will receive a distribution equivalent to EPRA NAV less costs associated with the wind-up. The preferred units will be cancelled and the ordinary units will subsequently be delisted from the Euronext Amsterdam and Luxembourg stock exchanges. "As a result of the process we are following to liquidate PEPR, we are pleased to be able to deliver a substantial value uplift of some 33% for our investors since the end of 2010 compared to the EPRA/NAREIT Europe Index which remained broadly flat over the same period. This is testament to the quality of our portfolio and the determination of the management company and PEPR Board to optimise value for all investors." Wind-up of PEPR PEPR held its Annual General Meeting ("AGM") for Unitholders on 27 June 2012. At this meeting, a resolution to wind-up PEPR and to appoint its Management Company as liquidator was proposed. This proposal was approved by the Commission de Surveillance du Secteur Financier and passed by 100% of unitholders present or represented at the AGM. The liquidation process commenced on 27 June 2012, full details are available on the PEPR website (www.prologis-ep.com). On 27 August 2012, Ordinary Unitholders will receive distributions equal to EPRA NAV per ordinary unit as at that date less a provision for estimated wind-up costs ("Residual EPRA NAV"). The ex-distribution date is 22 August 2012 and the record date is 24 August 2012. Using 30 June 2012 EPRA NAV of €6.43 per ordinary unit for illustrative purposes and assuming costs associated with the winding-up process amount to €2.0 million, Residual EPRA NAV is estimated to be €6.42 per ordinary unit. The Residual EPRA NAV distributed on 27 August 2012 may be different from that estimated as at 30 June 2012. The 30 June 2012 financial statements and the 27 August 2012 Residual EPRA NAV will be independently audited. The distribution of any remaining value in PEPR (expected to be less than €0.01 per ordinary unit) will be made to ordinary unitholders as soon as practicable after the 27 August 2012, but no later than 15 November 2014. Preferred units will be redeemed at par (€5.93 per unit) plus accrued dividends on 27 August 2012. The ex-dividend date is 22 August 2012 and the record date is 24 August 2012. The preferred units will then be cancelled. Portfolio revaluation The entire portfolio was independently revalued at 30 June 2012, with market value decreasing by 1.3%, excluding foreign exchange adjustments, from the valuation carried out at 31 March 2012. The overall portfolio value, taking into account the positive impact of foreign exchange movements, decreased by 0.9% to €2,461.6 million compared to €2,483.1 million at 31 March 2012. The net initial yield(()[2]())of the portfolio at 30 June 2012 increased to 7.8% compared to 7.6% at 31 March 2012. For the half year 2012, PEPR's portfolio market value decreased by 2.4%, excluding foreign exchange adjustments and disposals (completed and held for sale). For the twelve months to 30 June 2012, PEPR's portfolio market value decreased by 2.6%, excluding foreign exchange adjustments and disposals (completed and held for sale). Portfolio performance Total leasing activity slowed during the second quarter, 19 lease transactions covering 166,000 square metres were completed. Within this number, customer demand for new or additional space remained stable compared to the first quarter, with three new leases, totalling 33,000 square metres, and four lease expansions (adding 5,100 square metres to existing customers' operations) completed. The retention rate for the quarter was 70% with 12 lease renewals, covering 127,900 square metres, signed with customers including L'Oreal in Czech Republic, DHL in France and Samsung in Poland. Despite this activity, portfolio occupancy decreased by the end of the quarter to 93.2% from 93.6%, primarily due to the anticipated move-out of three large customers in France, Poland and the UK, totalling 53,500 square metres or 1.2% of the portfolio. Second quarter leasing transactions were concluded with an average of 2.2 years to lease break or 2.5 years to lease expiry and resulted in a weighted average rental decline of 2.7% over the previous rental levels for this space. The majority of leasing transactions resulted in negative rental growth, particularly in Central Europe, however PEPR has generated rental growth on leases completed in supply constrained markets such Barcelona in Spain, Hanover in Germany and Prague in Czech Republic. Two assets in Poland remain on track to be sold to Hines Global REIT before the end of the year in a second phase of the sales transaction completed in the first quarter. These assets are shown as "assets held for sale". At 30 June 2012, the portfolio excluding assets held for sale comprised 210 distribution facilities covering 4.5 million square metres across 11 European countries with a market value of €2.5 billion. The portfolio risk profile remains attractive, with above market average occupancy of 93.2% and a diversified customer base. On average the portfolio has 3.1 years to lease break or 5.1 years to lease expiry. An overview of the portfolio is shown on page 14. Financial results Earnings PEPR recorded an IFRS loss for Q2 2012 of €6.4 million (Q2 2011: €4.8 million loss). The difference is primarily due to €14.0 million higher valuation declines recorded in Q2 2012, €5.2 million lower rental income and a provision of €1.3 million for costs associated with the PEPR wind-up. These factors were offset by €7.6 million lower finance costs, a €4.6 million decrease in the charge for taxation and a €2.1 million profit on disposal. In addition Q2 2011 included €2.9 million of professional advisory fees related to the Prologis tender offer. Adjusted EPRA earnings for ordinary unitholders, which provide a better guide to underlying business performance, increased to €22.6 million in Q2 2012 (Q2 2011: €16.6 million). The improvement is mainly related to lower financing and operating costs offset by a reduction in rental income. For HY 2012, PEPR recorded an IFRS loss of €27.7 million (HY 2011: €7.6 million earnings), primarily due to a €42.5 million higher decline in portfolio value, a €15.3 million loss on property disposals, a €9.1 million reduction in rental income and a €1.5 million provision for wind-up costs. These factors were offset by a €9.9 million deferred income tax benefit compared to a €6.4 million deferred income tax charge and a €15.3 million reduction in operating and finance expenses, including the advisory fees mentioned above. Adjusted EPRA earnings for ordinary unitholders for HY 2012 increased to €44.5 million (HY 2011: €36.1 million) mainly due to a €13.9 million reduction in operating and finance expenses and a €2.8 million lower tax charge, offset by €9.1 million lower total revenue. A reconciliation between IFRS and EPRA earnings is shown on page 10. Total revenue Q2 2012 rental and other property income fell to €53.6 million (Q2 2010: €58.8 million), given the loss of €5.8 million of rental income related to asset sales, partially offset by a €0.9 million increase in UK and Swedish income when measured in euro. HY 2012 rental and other property income decreased to €110.2 million (HY 2011: €119.3 million), primarily as a result of €8.6 million of lost rental income from disposals, partially offset by a €1.1 million increase in UK and Swedish sourced income when measured in euro. Operating expenses The cost of rental activities decreased to €5.5 million in Q2 2012 (Q2 2011: €6.5 million) given a €0.7 million decline in property related costs.  In addition, property management fees fell by €0.4 million in as these fees are correlated to the gross market value of the portfolio. For HY 2012, cost of rental activities decreased to €10.9 million (HY 2011: €13.1 million) given a €1.0 million saving of UK property tax related to empty buildings and maintenance costs, a €0.5 million lower bad debt expense and a €0.5 million decline in property management fees. Fund expenses fell in Q2 2012 to €2.9 million (Q2 2011: €5.0 million), primarily as a result of €2.9 million of professional advisory fees incurred in 2011 in responding to the Prologis tender offer. In addition, professional and fund management fees declined by €0.4 million and €0.1 million respectively for the quarter. These factors were offset by a €1.3 million provision for costs associated with the wind-up. Fund expenses for HY 2012 decreased to €5.2 million (HY 2011: €7.6 million), primarily due to the advisory fees mentioned above, a €0.8 million saving in professional fees and a €0.2 million decline in fund management fees, offset by €1.5 million of PEPR wind-up costs. Loss on disposal of investment property The €2.1 million gain on disposal of investment property in Q2 2012, relates to final adjustments to the sale of 18 assets in three portfolio transactions for a total of €253.0 million agreed towards the end of Q1 2012. The €15.3 million net loss on disposal of investment property in HY 2012 relates to disposals in Q1 2012. All transactions were completed in line with 31 December 2011 external valuations, however the loss on disposal includes a €19.6 million allocation from equity of unrealised historical currency translation adjustments associated with the UK portion of the disposals. Debt structure and finance cost Total outstanding debt as at 30 June 2012 is €1,162.6 million, a €3.2 million increase since 31 March 2012 (€1,159.4 million) as the contractual amortisation on the Landesbank Berlin bank loan and the syndicated bank loan was offset by the strengthening of sterling over the quarter. Loan-to-value ratio remains conservative at 44.5% (Q1 2012: 44.1%). PEPR has no outstanding debt maturities in 2012. The weighted average interest rate for HY 2012 decreased to 5.3% (HY 2011: 5.4%) given the 1.75% reduction in the rate payable on the €500 million Eurobond on 23 October 2011 following PEPR's return to an investment grade credit rating, offset by the repayment of PEPR's floating rate debt. At 30 June 2012, 100% of debt was at fixed rates of interest with only the undrawn €50 million revolving credit facility at floating rates of interest, currently at 225 basis points over Euribor or Libor. Net finance expense for HY 2012 decreased to €39.2 million (HY 2011: €49.6 million), primarily due to an €11.1 million saving in interest expense related to the lower Eurobond interest mentioned above, the €334.1 million reduction in debt between both periods and a lower weighted average interest rate. In addition, PEPR recorded a €0.7 million foreign currency gain in HY 2012 (HY 2011: €0.7 million loss). These factors were offset by a €2.1 million increase in amortisation charges given the early repayment of debt between both periods. At 30 June 2012, PEPR was in compliance with all financial debt covenants within its credit facilities. Tax For HY 2012, PEPR recorded a €1.3 million overall tax benefit (HY 2011: €15.0 million tax charge), given a €9.9 million deferred income tax benefit. The deferred income tax benefit is a result of the decline in portfolio value. The current income tax expense remained at €8.6 million (HY 2011: €8.6 million), representing an effective tax rate of 15.1% (HY 2011: 16.9%), using EPRA earnings before taxation as a proxy for taxable income. Distributable cash flow and distributions For HY 2012, PEPR generated €44.7 million, or €0.22 per unit of distributable cash flow for ordinary unitholders (HY 2011: €33.6 million or €0.18 per unit). PEPR will continue to retain distributable cash flow. PEPR will pay a preferred dividend distribution to holders of its Class A(1) convertible preferred units on 3 August 2012. The €0.157392 per unit distribution relates to the period from 1 April 2012 to 30 June 2012. The ex- dividend date is 30 July 2012 and the record date is 1 August 2012. Net asset value IFRS NAV per ordinary unit decreased to €5.76 at 30 June compared to €5.77 at both 31 March 2012 and at 31 December 2011. The €0.17 per ordinary unit impact of the portfolio devaluation and the preferred dividend of €0.01 per ordinary unit were offset by €0.12 per unit of earnings (including a deferred income tax benefit of €0.01 per unit), a €0.02 positive movement in the fair value of interest rate hedges and a gain on disposals of €0.01 per unit. EPRA NAV per ordinary unit, which makes adjustments for deferred income tax and the fair value of financial instruments, decreased to €6.43 at 30 June compared to €6.46 at 31 March 2012 and €6.50 at 31 December 2011. A reconciliation between IFRS and EPRA NAV is shown on page 11. Number of units in issue During Q2 2012, 1,650 preferred units were converted into ordinary units. As at 30 June, there are 10,296,860 preferred units and 206,249,090 ordinary units in issue. For further information, please contact: Investor relations Media ProLogis European Properties M:Communications Jennifer Crooke Charlotte McMullen +44 207 518 8708 +44 207 920 2349 jcrooke@prologis.com mcmullen@mcomgroup.com Financial statements and portfolio information The audited interim condensed consolidated financial statements for the six months ended 30 June 2012 will be available on the PEPR website, www.prologis- ep.com, on or before 29 August 2012. The financial statements have been produced in accordance with International Financial Reporting Standards, using the liquidation basis. There has been no significant impact on the valuation of assets or liabilities. Please click here for PDF version of the release: http://hugin.info/139145/R/1629674/522016.pdf This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients. The owner of this announcement warrants that: (i) the releases contained herein are protected by copyright and other applicable laws; and (ii) they are solely responsible for the content, accuracy and originality of the information contained therein. Source: ProLogis European Properties via Thomson Reuters ONE [HUG#1629674]