ProLogis European Properties results for the quarter and year ended
31 December 2008
Deleveraging in the face of challenging financial markets
Luxembourg - 10 February 2009 - ProLogis European Properties (Euronext: PEPR), Europe's largest owner of modern distribution facilities, today reports results for the quarter and year ended 31 December 2008.

2008 highlights

Execution of strategic initiatives to address liquidity concerns
Suspension of future dividends for the foreseeable future
Disposal of two-thirds investment and future commitment in ProLogis European Properties Fund II (PEPF II) for €43.7 million, saving PEPR €348 million of future equity commitments and implying a 30% discount to September 2008 NAV and those future commitments
Post year-end agreement to sell the remaining one-third stake for €14.4 million, saving €174 million of future commitments and implying a 28% discount to current NAV and those future commitments
97.3% occupancy at year end through proactive leasing
9.2% valuation decrease on the portfolio since 30 June 2008 (12.8% including foreign exchange adjustments)
Quarter to 31 December 2008 Year to 31 December 2008
EPRA net asset value([1]) per unit of €8.02, a 31.4% decrease compared to 30 September 2008 (€11.69)
EPRA net asset value per unit decreased 36.6%, to €8.02 over the year (2007: €12.65) as a result of portfolio devaluation, the PEPF II sale and currency movements

IFRS net asset value per unit was €7.38 (Q3 2008: €10.84)
IFRS net asset value per unit decreased 37.1% to €7.38 (2007: €11.73)

EPRA earnings(1) decreased to €0.15 per unit (Q4 2007: €0.20 per unit), due to reversal of incentive fee provision, increased interest costs and currency movements
EPRA earnings per unit decreased €0.13 to €0.67 (2007: €0.80), due to a one-off large lease termination fee in 2007, decreased rental income from portfolio changes and currency movements

IFRS loss of €577.0 million, or €3.02 per unit (Q4 2007 earnings: €2.7 million or €0.01 per unit), due to PEPF II disposal, portfolio devaluation and currency movements
IFRS loss of €577.9 million, or €3.03 per unit for the year (2007 earnings: €171.3 million or €0.89 per unit) , due to PEPF II sale, portfolio devaluation and currency movements

22 lease transactions covering 182,300m2, maintaining high portfolio occupancy
82 lease transactions covering 661,700m2, compared to 85 transactions covering 506,800m2 in 2007([2])
Commenting on the results, Peter Cassells, chief executive office of PEPR, said:

"Through this period of market turmoil, we have continued to deliver positive operating performance, benefiting from invaluable customer relationships, broadly spread across reputable names and businesses and ultimately delivering industry-leading occupancy levels across Europe.

"Since announcing our strategic initiatives to improve liquidity and address debt maturities, we have successfully amended our most pressing debt covenant and disposed of our entire investment in PEPF II. The disposal reduces outstanding debt and, more significantly, eliminates our obligation to finance further investments of €522 million in PEPF II over the next 18 months.

"We continue to aggressively take actions to strengthen the balance sheet, improve liquidity through active and open dialogue with our banking partners, complete new leases and renewals and serve our customer base so as to return the best possible long-term performance to our investors."

Guidance

EPRA earnings for the full year 2009 are expected to be between €0.55 and €0.60 per unit, given management assumptions of negligible rental growth, relatively stable occupancy levels and a certain amount of property sales, at the then current market values. In addition, projections have been compiled on the basis of a weak sterling exchange rate and exclude any dividend income from the recently sold investment in PEPF II, although PEPR will continue to incur interest expense on the borrowings associated with the investment.

IFRS losses are expected to be in the range of €0.85 to €0.90 per unit, due largely to projected further portfolio devaluations in June and December 2009.

Distributable cash flow for 2009 is anticipated to be between €0.55 and €0.60 per unit, however PEPR has suspended dividend payments for the foreseeable future and this cash will be used to reduce debt and improve liquidity.

Portfolio revaluation

The entire portfolio was revalued as at 31 December 2008, with net market value decreasing 9.2%, excluding disposals and foreign exchange adjustments, from the previous semi-annual valuation in June 2008. The overall net market value, including the impact of disposals and foreign exchange, decreased 12.8%, to €3,441.7 million from €3,945.3 million at June. The portfolio revaluation movement for the 12 months to December 2008 showed an overall decline of 16.9%, or a fall of 11.3% excluding disposals and foreign exchange adjustments.

The UK produced the largest movement in property values for the six month period, falling 14.8% to £538.2 million (HY 2008: £631.7 million). The reporting of the UK portfolio in euro was further impacted by the significant weakening of sterling in the second half of the year, most notably in the latter two months. The total value of the UK portfolio, including this currency impact, decreased 29.7% to €565.1 million (HY 2008: €803.4 million). By year-end the gross yield[3] on the UK assets increased 140 basis points to 8.7% from 7.3% at the end of June.

All countries on the continent also recorded negative valuation movements, with the continental portfolio showing an overall decline of 8.5%, to €2,875.7 million (HY 2008: €3,141.9 million), driven primarily by adverse yield movements. Central European and Northern European countries experienced similar valuation deficits of 9.3% and 9.4%, respectively, whilst Southern Europe showed greater resilience with a decline of only 7.4%.

The gross yield of the direct portfolio at year-end increased to 8.0% (7.6% net yield[4]) from 7.3% (6.9% net yield) at 30 June 2008.

Portfolio performance

During the fourth quarter, ProLogis, as PEPR's external manager, completed 22 lease transactions covering 182,300 square metres, with rents in line with current market levels. Twelve leases, covering 154,600 square metres, were renewed with existing customers such as Auchan, FIEGE and Geodis. Two leases were expanded, with a French third party logistics provider almost doubling its occupancy in Paris to 8,700 square metres and DHL adding 3,600 square metres to its distribution space at Teresin in Poland.

In addition, eight new leases were signed, covering 15,400 square metres, of which 9,900 square metres was previously vacant, demonstrating PEPR's continued focus on maintaining occupancy during challenging market conditions. As a result of this activity, the portfolio at the end of the year remains highly occupied, at 97.3%.

Of the 19 lease breaks and expiries scheduled for 31 December 2008, covering 119,000 square metres, only six resulted in vacancies after year-end, relating to a total of 21,600 square metres and €1.3 million of annualised rental income.

Furthermore, of the 30 lease breaks or expiries due in the first six months of 2009, covering 243,200 square metres, 84% by value, representing €13.6 million of annualised rental income, will remain in place based on agreements already in place with occupiers.

During 2008, PEPR sold 23,300 square metres of land in Zaandam, north of Amsterdam, for a gross consideration of €4.6 million, a modest premium to NAV. In addition, PEPR sold Zibido DC1, a 12,800 square metre distribution facility near Milan, for a gross consideration of €6.4 million. Including the lease surrender premium received, the total proceeds represented a premium to NAV of over 14%.

In the normal course of business, PEPR would expect to sell €75 to €100 million of property assets per annum, on average. Whilst investment market activity slowed significantly in 2008, there are still several potential purchasers who are interested in acquiring prime logistics assets and PEPR is currently in discussions with a number of these parties.

At 31 December 2008, the portfolio comprised 246 distribution facilities, covering over 5.2 million square metres across 11 countries with an open market value of €3.4 billion. The risk profile remains highly attractive with a diversified customer base and 4.0 years on average to next lease break or 6.1 years to lease expiry. The largest two customers account for only 12.4% of annualised rental income in 37 leases. Third party logistics companies still remain the largest industry grouping among our customer base at a steady 56% of annualised rental income with retailers at less than 14%. A portfolio overview is provided on page 19.