Prologis

1
Prologis

• Analyst Jimmy Capetola
• December 6, 2007

2
About Prologis

• Operates as a real estate investment trust in the
  United States.
• It owns, operates, and develops industrial
  distribution properties in North America, Europe,
  and Asia.
• 2,525 industrial properties in 103 markets and 20
  countries across Asia, Europe and North America.

3
Assets
4
Geographic Presence
5
Segments

• Operates in three segments
• Property Operations
• Fund Management
• Corporate Distribution Facilities Services
  (CDFS).

6
Property Operations

• Segment represents the direct long-term
  ownership, management and leasing of industrial
  distribution and retail properties
• Property operations segment consisted of 1,473
  operating properties aggregating to 204.7 million
  square feet in North America, Europe, and Asia.
• Out of this 1,432 properties aggregating to 185.6
  million square feet are industrial distribution
  properties
• 29 are retail properties aggregating to 1.1
  million square feet.

7
Property Operations Cont

• Earns rent from long-term operating leases
  including reimbursements of certain operating
  costs in industrial distribution and retail
  properties that the company owns directly in
  North America, Europe, and Asia.
• Segment operations are located in 39 markets in
  North America
• 22 markets in eleven countries in Europe, and six
  markets in four countries in Asia.

8
Fund Management

• Provides investment management services for
  unconsolidated property funds and other
  properties.
• Segment represents the long-term investment
  management of unconsolidated property funds, and
  the properties that the company own
• Also manages the properties owned by the property
  funds in its property operations segment
  utilizing the leasing and property management
  experience and the ProLogis Operating System.

9
Fund Management Cont

• ProLogis has investments in and advances to 13
  property funds totaling 981.8 million with
  ownership interests ranging from 11.3 to 50.0.
• Property funds own, on a combined basis, 843
  distribution properties with a total entity
  investment in operating properties of 12.3
  billion.
• Properties are located in 37 markets in North
  America, 27 markets in 11 countries in Europe,
  and 3 markets in Japan.

10
Fund Management Cont

• ProLogis manages 17 property funds, which
  combined own more than 18 billion of
  high-quality industrial real estate assets all
  over the world
• Major investors in our private fund entities
  include pension funds, insurance companies and
  other large institutional investors.
• ProLogis also manages one publicly traded fund,
  ProLogis European Properties (EuronextPEPR).

11
Corporate Distribution Facilities Services (CDFS)

• Primarily engages in the development,
  rehabilitation and repositioning of properties to
  the property funds and also dispositions of the
  property to third parties
• 114 distribution and retail properties
  aggregating 30.0 million square feet under
  development with a total expected completion cost
  2.2 billion.

12
Corporate Distribution Facilities Services (CDFS)
Cont

• By the end of 2006, the company directly held
  6,204 acres of land for future development with a
  current investment of 1.4 billion.
• properties under development is present in 23
  markets in North America (18 markets in the US,
  four markets in Mexico, and one in Canada), and
  19 markets in 11 countries in Europe, and in 6
  markets in three countries in Asia.

13
Sustainability- Joining the Green Movement

• New developments include environmentally friendly
  features such as recycled materials, energy
  efficient lighting and use of solar and wind
  power
• In February 2007, Prologis became the first
  global real estate company to join the Chicago
  Climate Exchange
• Firs global real estate company to issue a
  sustainability report in accordance with the
  standards set by the Global Reporting Initiative

14
More Info

• It has a strategic cooperation agreement with
  China National Materials Storage Transportation
  Co. and Zhongchu Development Stock Co., Ltd. to
  develop logistics and storage markets.
• 10-K

15
Management

• Jeffery Schwartz
• Chairman and CEO
• Walter C Rakowich
• President and Chief Operating Officer
• K Dane Brooksher
• Director

16
MAJOR PRODUCTS AND SERVICES

• Real estate services
• Supply chain solutions
• Online services

17
Strengths

• Large scale operations
• Diversified geographical spread
• A lot of business from foreign countries
• Not impacted by sub-prime crisis
• Strong financial performance

18
Weaknesses

• Declining revenues from Asia
• Sluggish performance of CDFS business
• Comparatively weak returns

19
Opportunities

• Growing REIT Market
• Acquisition of Parkridge industrial development
  business

20
Threats

• Economic slowdown in US and Eurozone
• Intense competition
• Environmental regulations

21
Some Competitors

• Duke Realty Corporation
• Lexington Corporate Properties Trust
• Developers Diversified Realty Corp
• Vornado
• New Century Financial Corporation
• Pacific Management
• Pennsylvania R.E.I.T.

22
Increases

• Revenues of 2,463.9 million during the fiscal
  year ended December 2006, an increase of 34.4
  over 2005
• Operating profit of the company was 764.8
  million during fiscal year 2006, an increase of
  77.9 over 2005
• The net profit was 849 million in fiscal year
  2006, as compared to the net profit of 370.7
  million in 2005.

23
Recent Headlines

• ProLogis Leases 125,000 Square Feet in Mexico to
  GE Commercial Materials
• Industrial REITs On The Rise (Forbes, Dec. 3rd)
  "With soaring exports, a weak dollar, and a
  scarcity of warehouse and port space, industrial
  REITs have surged at a time when others in the
  real estate market have struggled. The big kids
  on the block are AMB Property (AMB), First
  Industrial Real Estate Trust (FRPRC), and
  ProLogis (PLD)...

24
Headlines Cont

• Catellus to Develop 156,000-Square-Foot Office
  Headquarters for Seton Family of Hospitals at
  Mueller Airport Project in Texas (December 3,
  2007)
• ProLogis Leases 424,000 Square Feet to DHL in the
  Czech Republic (November 29, 2007)
• ProLogis Begins Construction on First Facility in
  Middle East for Jordan-Based transportation
  company- Aramex
• Construction is expected to be completed in the
  second half of next year

25
Insiders

• Insider Transactions

26
General Information

• Ticker PLD
• Current Price 64.18
• Beta 0.97 (Reuters) 1.63 (Yahoo)
• Industry Financial
• Sector Industrial REITs
• Large Cap
• IPO in 1994
• PLD's return vs. Industry

27
(No Transcript)
28
Valuation Ratios
29
Time Series Analysis
30
One Year Chart
31
Stock Movements

• On February 12, 2007, ProLogis announced that it
  had acquired the industrial development business
  of Parkridge Holdings Limited for approximately
  135 million
• In August ProLogis increases outlook as earnings
  rise
• In September the Fed cut rates which helped to
  boost REIT stock prices
• From March 2007-November 2007 Uncertainties
  about housing market crisis could explain the
  fluctuations in stock price

32
Five Year Chart
33
One Year Chart with Competitors
34
Future Growth

• Superior global platform with unparalleled land
  positions across 20 countries and 105 markets and
  continually seeking new opportunities
• 2.8 billion development pipeline supports growth
  through 2007 and beyond
• 13 years of dividend growth, including a
  projected 15 increase in 2007

35
Industry/ PLD Outlook

• Industrial REITs are on the rise
• Business operations from international segments
• Industrial REITs have little exposure to credit
  crisis
• PLD as well as its competitors are up
  approximately 4 on the day as of December 5th
• As long as economy is doing well so will PLD

36
Stock Prices

• Current Price 67.02
• 4.77 day change (12/05/07)
• 52 week range 51.64 - 73.35
• Below 52-Week High 8.63
• 1-year target estimate 72.55

37
Intrinsic Value- 3 Stage DDM

• Inputs
• Outside estimate of growth 10.6
• Payout ratio in stable phase 59.04
• Outputs
• Discount rate 8.8
• High growth rate 11.88
• Intrinsic Value 86.21
• Margin of safety of 15 73.28 - 99.14

38
Analyst Recommendation

• Buy 65 shares at 67.02
• 5.4 of portfolio
• Buy 60 shares at 67.02
• 4.99 of portfolio
• Buy 50 shares at 67.02
• 4.16 of portfolio