PEPR maintains solid operating performance

and continues to reduce debt

Luxembourg - 22 July 2010 - ProLogis European Properties (Euronext: PEPR), one of Europe's largest owners of modern distribution facilities, today reports results for the second quarter and six months ended 30 June 2010.

Highlights

0.3% increase in the portfolio value since 31 December 2009 resulting from a valuation decrease of 1.1% more than offset by an improvement in foreign exchange rates

EPRA[1] net asset value per ordinary unit up by 2.0% to €6.27 since end 2009, reflecting stabilising portfolio values and a further quarter of retained earnings; IFRS net asset value per ordinary unit up to €5.99 from €5.97 at end 2009

Maintained high level of portfolio occupancy at 93.7%, comfortably above the market average

Further progress on refinancing and deleveraging initiatives:


all Commercial Mortgage-Backed Securities ("CMBS") fully repaid

no significant debt maturities until December 2012

in advanced discussions on new revolving credit facility

Continued improvement of loan-to-value ratio: to 53.3% from 53.7% in March and 55.0% at end 2009

Revised guidance: EPRA earnings and distributable cash flow per ordinary unit in the range of €0.40 to €0.44 due to slower forecasted growth in occupier demand than previously anticipated

Quarter to 30 June 2010
Six months to 30 June 2010

EPRA earnings €0.11 per ordinary unit (Q2 2009: €0.16 per ordinary unit)
EPRA earnings €0.21 per ordinary unit (HY 2009: €0.32 per ordinary unit)

IFRS loss €0.07 per ordinary unit (Q2 2009 €1.40 loss per ordinary unit)
IFRS earnings €0.04 per ordinary unit (HY 2009: €1.24 loss per ordinary unit)

EPRA net asset value €6.27 per ordinary unit (Q1 2010: €6.26 per ordinary unit)
EPRA net asset value €6.27 per ordinary unit (YE 2009: €6.15 per ordinary unit)

IFRS net asset value €5.99 per ordinary unit of (Q1 2010: €6.01 per ordinary unit)
IFRS net asset value €5.99 per ordinary unit (YE 2009: €5.97 per ordinary unit)

31 lease transactions covering 249,500m2, compared to 18 transactions covering 219,600m2 in Q2 2009
62 lease transactions covering 701,800m2, compared to 34 transactions covering 397,900m2 in HY 2009


Commenting on the results, Peter Cassells, chief executive officer of PEPR, said: "We have delivered solid operating performance and financial results during what continues to be a challenging market environment. These results are testament to the quality of PEPR's pan-European portfolio, established customer relationships and the expertise of its management teams.

"The first half of the year was dominated by significant leasing activity as we continue to prioritise for portfolio occupancy as a key objective. As a result of this activity, we have maintained our occupancy levels at a high 93.7%, well above the industry average, while at the same time removing some of the risks surrounding future lease expiries, especially in weaker markets."

Chief Executive's review

Continued uncertainty over the pace and scale of economic recovery in Europe as well as the introduction of austerity measures in a number of EU member countries has hindered improvements in occupier market conditions and as a result the rental markets remain soft. We believe that a patchy economic recovery will lead to a gradual absorption of existing vacancy; this has been borne out by the volume of leasing transactions witnessed in the UK over the last six months as it begins to emerge from the recent economic crises. However, we now do not anticipate any material improvement in market conditions across the greater region until 2011.

Despite these challenges, we are pleased to report an increase in net asset value per ordinary unit due to the stabilisation of property values across the majority of markets, combined with the strengthening of sterling in the first half of the year and the continued retention of earnings. Interestingly, property values within all our markets moved within a tight band of plus or minus 2% since year-end 2009, potentially signalling the trough of European portfolio values.

Our reported earnings for the second quarter and half year are broadly in line with our expectations. However, we expect the slowdown in the pace of recovery in Europe generally will impact our second half portfolio performance more than previously anticipated, accordingly we are revising our full-year guidance for both EPRA earnings and distributable cash flow to between €0.40 and €0.44 per ordinary unit from between €0.45 and €0.50 per ordinary unit.

During the second half of 2010, we will strive to improve further our financial metrics, continuing to reduce leverage and seeking a return to an investment grade credit rating over time. In addition, we will ensure that we remain well placed to capture the benefits of any improvements in occupier demand, maintaining high portfolio occupancy through consistently strong leasing performance and driving cash flow from the portfolio through proactive asset management and exemplary customer service.

Market outlook

The market outlook continues to be challenging, with improvements seen in the first quarter faltering during the latter part of the second quarter amidst concerns over sovereign debt defaults. As a result, the pan-European economic recovery remains slow and intermittent with some evidence of strengthening in a few markets.

Economic commentators are still forecasting continued slow but positive real GDP growth of between zero and 1% a year in 2010 and 2011, with only a modest risk of a double-dip recession. The strengthening of global currencies against the Euro may be a positive development in driving exports and manufacturing in some countries, especially Germany and France, which could consequently lead to an increase in demand for warehouse space across the region.

While the investment markets have seen improving levels of activity resulting in a marked reduction in cap rates on prime product with long leases, occupational demand remains soft with limited net absorption of distribution space. Market activity continues to be dominated by consolidation, particularly within the third-party logistics sector, and reconfiguration of customer supply chains. Customers continue to request greater flexibility in lease terms, resulting in ongoing pressure on net effective rents, especially in areas with excess existing stock. However, the majority of core European markets have seen rents and incentives stabilise and indicators point to the worst of the decline in values being over. Management nonetheless expect the occupier markets to remain soft for the remainder of 2010.

Portfolio revaluation

The entire portfolio was independently revalued at 30 June 2010, with net market value decreasing 1.1% from the valuation carried out at 31 December 2009 prior to the effect of foreign exchange translations. Including the impact of foreign exchange, the overall net market value increased 0.3% to €2,847.2 million as compared to €2,839.2 million at year end 2009.

Continental European assets recorded an overall valuation decline of 1.4% from €2,345.7 million to €2,312.2 million over the six months to June 2010, including movements in the Swedish krona exchange rate. Excluding this currency effect, continental European asset values fell 1.65% over the same period. Property values in Northern Europe and Central Europe fell 2.05% and 1.95% respectively, whilst Southern Europe suffered a more modest decline of 1.4%. These valuations demonstrate a marked slowdown in the rate of portfolio value decline from the 6.2% fall suffered in the second half of 2009 and the 9.2% decline in the first half of 2009, driven by a reduction in cap rates across most markets offset by further softening of rental values and a repricing of shorter dated income across the portfolio.

The UK witnessed a slight increase in values in the six months to June 2010, increasing 1.2% to £444.5 million from £439.2 million at the end of 2009, driven by improving market sentiment and strong demand from institutions, UK retail funds and overseas investors. The strengthening of the sterling exchange rate during the first half of 2010 took the total value of the UK portfolio up 8.4% in euro terms, to €535.0 million from €493.5 million at end 2009.

The net initial yield[2] of the portfolio at 30 June 2010 decreased to 7.7% from 8.4% at 31 December 2009, taking into account the slight decline in value and lower annualised in-place rental income.

Portfolio performance

ProLogis (NYSE: PLD), PEPR's external manager, has maintained strong leasing momentum during the second quarter, with 31 lease transactions covering 249,500 square metres being completed. Five leases, covering 41,900 square metres, were new leases in Czech Republic, France, Germany and Poland. A further eight leases were expansions, adding 9,800 square metres to existing customers' supply chains. The remaining 18 transactions were lease renewals with customers such as Carrefour, FM Logistics, Geodis, Iron Mountain and John Lewis.

These transactions resulted in a weighted average rental decline of 7.7% over the expiring rental level, in line with management expectations given market rental decreases of between 5-20% across Europe. The level of over-renting inherent in the portfolio has reduced to 3.4% at 30 June 2010.

Of the 36 lease breaks and expiries during the first six months, covering 356,900 square metres, 12 were exercised representing 146,000 square metres. This resulted in a customer retention rate of 65% by rental value for the half-year, at the top end of PEPR's historical average customer retention rate. It is likely that PEPR's customer retention rate and portfolio occupancy will deteriorate in the third quarter before staging a recovery in the final quarter and into 2011 given the continued weakness in the occupational markets.

The second quarter of the year saw two instances of customer defaults on leases totalling 7,100 square metres, or less than 0.1% of annualised rental income. PEPR remains focused on monitoring customer performance to minimise future risk. Total accounts receivable from customers for half-year 2010 decreased to €46.4 million, from €48.9 million at 31 March 2010 and from €46.9 million at 31 December 2010. At the end of June 2010, PEPR held a €2.7 million provision for bad and doubtful debts (HY 2009: €1.4 million).

At 30 June 2010, the portfolio comprised 232 distribution facilities, covering 4.9 million square metres across 11 European countries with a net market value of €2.8 billion. The portfolio risk profile remains attractive, with high occupancy of 93.7%, a diversified customer base, and on average 3.4 years to next lease break or 5.4 years to lease expiry. An overview of the portfolio is provided on page 23 of the full statement attached.