ProLogis European Properties launches fully underwritten convertible preferred equity offering and updates on progress with deleveraging initiatives

Monday, 16. November 2009 09:10
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the Netherlands.

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contained in this press release.

News release

ProLogis European Properties launches fully underwritten convertible
preferred equity offering and updates on progress with deleveraging
initiatives

Luxembourg - 16 November 2009 - ProLogis European Properties
(Euronext: PEPR), one of Europe's largest owners of modern
distribution facilities, announced today that it continues to make
significant progress with its deleveraging activities and has updated
its Q3 2009 financial results following the recently completed
portfolio revaluation required as part of these initiatives.

"It has been over a year since the start of the financial crisis and
I am pleased to say that PEPR has acted decisively to create and
implement an action plan to steer the business through this
challenging environment," said Peter Cassells, chief executive
officer of PEPR. "Our primary objectives were to address ¤1.3 billion
of debt maturities in 2009 and 2010, to reduce balance sheet risk and
to increase the business' financial flexibility. We have made
significant progress on all these initiatives and whilst there is
still some work to do, we are confident that we have placed the
business on a more secure footing for the future."

Deleveraging initiatives

Convertible preferred equity

Today, PEPR announced a fully underwritten offering to existing
investors of ¤61 million of new equity in the form of perpetual
convertible preferred equity. PEPR intends to use net proceeds from
the offering to reduce outstanding debt and for general corporate
purposes.

The Preferred Units will be offered at ¤5.93, a price which is equal
to the revised net asset value per ordinary unit as at 30 September
2009. Existing ordinary unitholders will be allocated one
preferential subscription right ("PSR") for each ordinary unit held
and will be able to subscribe for two Preferred Units in exchange for
37 PSRs during the 30-day subscription period and payment of the
Preferred Unit subscription price. The Preferred Units will initially
pay an annual dividend of 10.5%, payable quarterly, which may be
deferred for prudent amortisation of debt.

The Preferred Units may be converted into PEPR ordinary units at the
discretion of holders at any time and may be redeemed at the issuer's
discretion after seven years or within 24 months if there is a change
of legal form of PEPR and if certain conditions are met. Automatic
conversion occurs after seven years if certain conditions are met.

A prospectus is available on the PEPR website, www.prologis-ep.com.

Morgan Stanley is acting as financial advisor, sole bookrunner and
underwriter for the offer. An affiliate of ProLogis (NYSE: PLD) has
committed to a sub-underwriting arrangement for the entire amount of
any unsubscribed PSRs.

Covenant amendments

On 13 November 2009, PEPR received the majority approval required
from its banking group to amend certain covenants within its ¤900
million senior unsecured credit facility. The consolidated tangible
net worth covenant will be reduced to ¤1.0 billion from ¤1.1 billion
currently, upon completion of the convertible preferred equity raise
for at least ¤60 million. In addition, a further equity raise of at
least ¤60 million would reduce the consolidated tangible net worth
covenant to ¤900 million, providing PEPR with additional headroom to
withstand further deterioration in the value of its portfolio. The
amendment also removes the restriction on PEPR to make preferred
dividend payments, provided these payments do not exceed 50% of
distributable cash flow.

Suspension of dividends

The PEPR Board suspended dividend payments with immediate effect in
December 2008, thereby improving liquidity within the business as
well as deleveraging the business. Since that date, PEPR has
utilised the ¤118.2 million of operational cash flow retained within
the business to reduce outstanding debt.

Disposals

In December 2008 and February 2009, PEPR sold its investment and
associated future funding obligations in ProLogis European Properties
Fund II ('PEPF II) for gross proceeds of ¤58.1 million. Whilst these
disposals were achieved at a discount to book value, they were
completed quickly, in an extremely challenging market environment,
and more importantly eliminated PEPR's commitment to invest a further
¤522 million in PEPF II before August 2010.

As part of its deleveraging plans, PEPR targeted ¤200 million of
asset sales during 2009 and has completed two portfolio disposals
providing over ¤187 million of net proceeds. In May 2009, PEPR agreed
to dispose of a portfolio of nine stand-alone distribution facilities
in Germany and The Netherlands. Net proceeds of ¤114.5 million have
been received, with a further ¤3 million held in escrow which is
expected to be received during the fourth quarter once agreed closing
conditions are met. In addition, in June 2009, PEPR disposed of five
distribution facilities in the UK, generating net proceeds of £63.1
million. Given the progress made with other deleveraging initiatives,
PEPR does not intend to dispose of additional assets as a means of
reducing outstanding debt at this point in time. Any future disposals
will be part of PEPR's proactive asset management programme.

Debt refinancing and repayment

During 2009, PEPR has refinanced or extended ¤269 million of secured
debt, reducing short-term debt maturities, creating a balanced
maturity profile and decreasing overall balance sheet risk:

* ¤126.0 million three-year extension of a secured loan agreement
with Deutsche Pfandbriefbank AG, from original expiry of March
2010 to March 2013.
* £86.1 million (¤95.0 million) new four-year loan agreement with
Eurohypo AG, secured on UK assets, maturing in July 2013.
* ¤48.0 million new five-year loan agreement with a German
landesbank, split into two tranches -SEK 332.5 million
(approximately ¤32.5 million) and ¤15.5 million. The loan is
secured on Swedish distribution facilities and matures in October
2014.


There are six other financing packages totalling over ¤630 million in
various stages of review, approval and documentation. PEPR is focused
on closing these expediently to eliminate remaining 2010 maturities
and as such has repaid ¤359.1 million of the remaining CMBS debt on 5
November, releasing ¤482.9 million of associated secured assets into
the unsecured asset pool.

Through a combination of retained dividends, asset sales, new
financing packages and a ¤244.0 million drawdown under its unsecured
credit facility, PEPR has repaid ¤818.6 million of debt maturing in
2009 and 2010:

* ¤25.1 million pay down of Deutsche Pfandbriefbank AG secured loan
principal as part of three-year extension.
* ¤793.5 million repayment of Commercial Mortgage Backed
Securities, reducing the principal outstanding on these
securities to ¤90.6 million from ¤884.1 million at the end of
2008.


As a result, total debt still outstanding in 2010 has been reduced to
¤634 million, the majority of which matures in December. Proceeds
from the offering, completion of new financings, operational cash
flow and potential further equity issuances will be more than
sufficient to meet these maturities and overall working capital
requirements.

Portfolio revaluation

As part of the offering of convertible preferred units, PEPR revalued
the entire portfolio as at 30 September 2009. Net market value
decreased 4.1%, excluding foreign exchange adjustments, from the
previous valuation in June 2009. The overall net market value,
including the foreign exchange impact, decreased 5.0%, to ¤2,843.7
million from ¤2,994.1 million at 30 June 2009.

All markets recorded negative valuation movements over the three
months to September 2009, with property values in continental Europe
falling 4.9% compared to the UK which remained roughly flat. Central
Europe suffered the largest decline of 7.2%, to ¤445.6 million,
whilst property values in Northern Europe and Southern Europe fell
3.3%, to ¤605.3 million, and 4.8%, to ¤1,334.4 million, respectively.

As anticipated, the UK market has shown distinct signs of
stabilisation, with the PEPR portfolio recording a decline of only
0.3% to £415.7 million from £416.8 million at 30 June 2009. The
reporting of the UK portfolio in euro was impacted by the weakening
of sterling in the third quarter of the year. The total value of the
UK portfolio, including this currency impact, decreased 6.7% to
¤458.6 million (HY 2009: ¤492.1 million).

The gross yield[1] of the direct portfolio at 30 September 2009
increased to 9.1% (8.5% net yield[2]) from 8.8% (8.3% net yield) at
30 June 2009.

An overview of the portfolio is provided on page 5.

Summary of impact of portfolio revaluation on financial results

The ¤124.1 million unrealised portfolio value decline for the third
quarter increases IFRS losses for the nine months to 30 September
2009 to ¤318.1 million, or ¤1.67 per unit, from ¤211.3 million, or
¤1.11 per unit, reported on 22 October 2009.

IFRS net asset value decreased by ¤105.3 million, or ¤0.55 per unit,
to ¤5.93 per unit as compared to ¤6.48 per unit reported in October
and EPRA net asset value fell to ¤6.74 per unit, from ¤6.82 per unit
reported previously.


+---------------------------------------------------------------------------------------------------------------------+
|KEY FINANCIAL METRICS |
|---------------------------------------------------------------------------------------------------------------------|
| |
|---------------------------------------------------------------------------------------------------------------------|
|(Unless otherwise stated, amounts are expressed in thousands of euros) |
|---------------------------------------------------------------------------------------------------------------------|
| Year ended | | | Nine months ended |
|--------------+---+-------------------------------------+------------------------------------------------------------|
| 31 Dec. 2008 | | | 30 Sept. 2009 | | 30 Sept. 2009 | | 30 Sept. 2008 |
|--------------+---+-------------------------------------+------------------+---+-----------------+---+---------------|
| | | | Post revaluation | | Pre revaluation | | |
|--------------+---+-------------------------------------+------------------+---+-----------------+---+---------------|
| | | | | | | | |
|--------------+---+-------------------------------------+------------------+---+-----------------+---+---------------|
| ¤(3.03)| |IFRS earnings/(losses) per unit | ¤(1.67)| | ¤(1.11)| | ¤(0.01)|
|--------------+---+-------------------------------------+------------------+---+-----------------+---+---------------|
| ¤0.67| |EPRA earnings per unit | ¤0.46| | ¤0.46| | ¤0.52|
|--------------+---+-------------------------------------+------------------+---+-----------------+---+---------------|
| | | | | | | | |
|--------------+---+-------------------------------------+------------------+---+-----------------+---+---------------|
| ¤0.72| |Distributable cash flow per unit[3] | ¤0.46| | ¤0.46| | ¤0.57|
|--------------+---+-------------------------------------+------------------+---+-----------------+---+---------------|
| | | | | | | | |
|--------------+---+-------------------------------------+------------------+---+-----------------+---+---------------|
| ¤7.38| |IFRS net asset value per unit | ¤5.93| | ¤6.48| | ¤6.48|
|--------------+---+-------------------------------------+------------------+---+-----------------+---+---------------|
| ¤8.02| |EPRA net asset value per unit | ¤6.74| | ¤6.82| | ¤11.73|
+---------------------------------------------------------------------------------------------------------------------+



+--------------------------------------------------------------------------------------------------------------------+
|SUMMARY OF FINANCIAL DEBT COVENANTS |
|--------------------------------------------------------------------------------------------------------------------|
| |
|--------------------------------------------------------------------------------------------------------------------|
| | Limit | | 30 Sept. 2009 | | 30 Sept. 2009 |
|--------------------------------------------------+--------------------+---+------------------+---+-----------------|
| | | | Post revaluation | | Pre revaluation |
|--------------------------------------------------+--------------------+---+------------------+---+-----------------|
|Unsecured debt: | | | | | |
|--------------------------------------------------+--------------------+---+------------------+---+-----------------|
|¤900m unsecured facility | | | | | |
|--------------------------------------------------+--------------------+---+------------------+---+-----------------|
|Leverage |less than 60% | | 57%| | 55%|
|--------------------------------------------------+--------------------+---+------------------+---+-----------------|
|Fixed charge coverage |at least 1.5x | | 2.1x| | 2.1x|
|--------------------------------------------------+--------------------+---+------------------+---+-----------------|
|Unencumbered interest coverage |at least 1.5x | | 2.0x| | 2.0x|
|--------------------------------------------------+--------------------+---+------------------+---+-----------------|
|Net Worth (excluding intangible assets) |at least ¤1.1bn[4] | | ¤1.2bn| | ¤1.3bn|
|--------------------------------------------------+--------------------+---+------------------+---+-----------------|
|Unsecured debt as % of unsecured assets |less than 65% | | 59%| | 57%|
|--------------------------------------------------+--------------------+---+------------------+---+-----------------|
| | | | | | |
|--------------------------------------------------+--------------------+---+------------------+---+-----------------|
|¤500m 2014 Eurobond | | | | | |
|--------------------------------------------------+--------------------+---+------------------+---+-----------------|
|Secured debt as % of total assets |less than 40% | | 22%| | 21%|
|--------------------------------------------------+--------------------+---+------------------+---+-----------------|
| | | | | | |
|--------------------------------------------------+--------------------+---+------------------+---+-----------------|
|Fonds commun de placement structure: | | | | | |
|--------------------------------------------------+--------------------+---+------------------+---+-----------------|
|Loan to value (total debt as percentage of gross | | | | | |
|portfolio value) |less than 60%[5] | | 58.1%| | 55.7%|
|--------------------------------------------------+--------------------+---+------------------+---+-----------------|
| | | | | | |
+--------------------------------------------------------------------------------------------------------------------+


Consolidated financial statements for the nine months ended 30
September 2009 are available on the PEPR website,
www.prologis-ep.com.



PORTFOLIO OVERVIEW
AS AT 30 SEPTEMBER 2009
Average
number Average
of Number
% Annu- Gross Gross Average years of
Number Market % of alised port- port- age to years
of value of total rental folio folio Occu- of Number next to
facili- ('MV') total Leasable leasable income ERV yield yield pancy facili- of lease lease
ties [6] MV area area [7] [8] [9] [10] level ties leases break expiry
Current 100%
¤ ¤ ¤ occu- occu-
million 000m² million million pancy pancy years

France 61 823 29% 1,590.6 32% 75.8 69.1 9.2% 9.3% 99.0% 8.3 73 2.5 5.7
Italy 18 261 9% 522.7 11% 24.6 21.5 9.4% 9.8% 96.1% 9.3 18 5.2 5.7
Spain 13 251 9% 309.5 6% 20.3 20.3 8.1% 8.1% 99.8% 6.8 21 3.5 5.0
Southern 92 1,335 47% 2,422.8 49% 120.7 110.9 9.0% 9.2% 98.5% 8.1 112 3.2 5.6

Belgium 5 51 1% 98.3 2% 4.4 4.1 8.6% 8.6% 100.0% 5.3 5 3.3 9.1
Germany 20 223 8% 328.0 7% 20.2 19.3 9.1% 9.3% 98.0% 5.3 41 2.5 3.5
Nether-
lands 20 242 9% 378.5 8% 23.4 21.8 9.7% 10.4% 94.0% 9.3 33 2.1 3.8
Sweden 4 88 3% 130.4 2% 7.7 6.6 8.7% 8.7% 100.0% 14.6 4 8.0 9.4
Northern 49 604 21% 935.2 19% 55.7 51.8 9.2% 9.6% 96.9% 8.2 83 3.1 4.9

Czech
Republic 12 93 3% 180.4 4% 8.1 7.8 8.7% 10.3% 84.7% 6.5 31 2.2 2.4
Hungary 14 100 4% 182.1 4% 9.2 8.1 9.2% 10.2% 88.8% 6.4 33 2.6 4.8
Poland 26 253 9% 494.5 10% 22.3 21.2 8.8% 9.5% 92.5% 7.3 77 2.6 3.1
Central 52 446 16% 857.0 18% 39.6 37.1 8.9% 9.8% 90.1% 6.7 141 2.5 3.3

UK 39 459 16% 705.0 14% 44.0 40.3 9.6% 9.7% 95.6% 7.7 37 4.9 8.0
TOTAL 232 2,844 100% 4,920.0 100% 260.0 240.1 9.1% 9.8% 96.3% 7.9 373 3.4 5.5

Vacant space (at ERV per m²) 8.3
248.4


[1] Annualised rental income expressed as a percentage of net market
value i.e. before deduction of purchasers' costs
[2] Annualised rental income expressed as a percentage of gross
market value i.e. before deduction of purchasers' costs
[3] In December 2008, PEPR suspended future dividend payments. Q4
2008 and all subsequent quarters' distributable cash flow has
therefore been retained in the business
[4] To be reduced to ¤1.0 billion upon completion of the convertible
equity raise for at least ¤60 million
[5] Can be exceeded up to 65% for a maximum of six months
[6] An independent revaluation of the portfolio was conducted as at
30 September 2009. In accordance with IFRS fair value accounting,
valuations are reported net i.e. after deduction of purchasers' costs
[7] Annualised rental income means the estimate of annual income
based on the gross rental income for leases in place as at the latest
valuation date based on rates effective at that date and on the
assumption that rental income from such leases will continue to be
received for the whole of the financial year. It does not take into
account lease terminations, renewals, replacement of customers or
other changes in rent levels in existing leases
[8] ERV refers to the Estimated Rental Value calculated by the
independent third-party appraisers as at the latest valuation date
[9] Annualised rental income on occupied portfolio expressed as a
percentage of open market value
[10] Annualised rental income on occupied portfolio plus ERV on
vacant space expressed as a percentage of open market value

-Ends-
For further information, please contact:

Investor relations
ProLogis European Properties
Jennifer van der Eem
+44 207 518 8708
jvandereem@prologis.com

Media
M:Communications
Ed Orlebar / Charlotte McMullen
+44 20 7920 2323 or 7920 2349
orlebar@mcomgroup.com / mcmullen@mcomgroup.com

About ProLogis European Properties (PEPR)

ProLogis European Properties, or PEPR, is one of the largest
pan-European owners of high quality distribution and logistics
facilities. PEPR was established in 1999 as a closed-end, real estate
investment fund, externally managed by a subsidiary of ProLogis, a
leading global provider of industrial distribution facilities. In
September 2006, PEPR was listed on Euronext Amsterdam.

As at 30 September 2009, PEPR has a portfolio of 232 buildings,
covering 4.9 million square metres in 11 European countries, with a
market value of ¤2.8 billion. The portfolio has an occupancy level of
96.3% and an average of 3.4 years to the next lease break or 5.5
years to lease expiry.

Notice

This document does not constitute an offer to sell, or the
solicitation of an offer to acquire or subscribe for, securities of
PEPR in the United States, Australia, Canada, Japan, their
territories and possessions, or any other jurisdiction in which such
offer or sale of securities would be unlawful.

The securities of PEPR have not been and will not be registered under
the US Securities Act of 1933, as amended (the "Securities Act").
Accordingly, the securities of PEPR may not be offered or sold in the
United States absent registration or an applicable exemption from
registration under the Securities Act. No public offering of the
securities of PEPR is being made in the United States.

No communication or information relating to any offer or sale of
securities of PEPR may be disseminated to the public in jurisdictions
where prior registration or approval is required for that purpose. No
action will be taken that would permit an offer of securities of PEPR
in any jurisdiction where action for that purpose is required, other
than in the Grand-Duchy of Luxembourg or The Netherlands.

The release, publication or distribution of this announcement in
certain jurisdictions may be restricted by law and therefore persons
in such jurisdictions into which this announcement is released,
published or distributed, should inform themselves about, and observe
such restrictions.

This announcement does not constitute a prospectus. Any offer to
acquire securities pursuant to a proposed offering will be made, and
any investor should make his investment, solely on the basis of
information that is contained in the prospectus that is made
generally available in the Grand-Duchy of Luxembourg and The
Netherlands in connection with such offering. Copies of the
prospectus may be obtained at no cost through the website of the
Luxembourg Stock Exchange and the website of PEPR.

Morgan Stanley & Co. International plc is acting for ProLogis
European Properties and for no-one else in connection with the offer
of preferred units and will not be responsible to anyone other that
ProLogis European Properties for providing the protections afforded
to customers of Morgan Stanley & Co, International nor for providing
advice to any other person in relation to the offer or any other
matter referred to herein.


This announcement was originally distributed by Hugin. The issuer is
solely responsible for the content of this announcement.

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