sustainability

2006 SUSTAINABILITY REPORTEXECUTIVE INTRODUCTION

Jeffrey H. Schwartz, CEO, and Walter C. Rakowich, President
and COO, share their thoughts on the importance of sustainability
and corporate responsibility to ProLogis
been unproductively developed and/or is considered
to have a low landscape value. We are also involved inurban redevelopment, the creation of master-planned,
mixed-use developments at the site of former airports
and military bases.
In recent years, several of our sustainability-related
efforts have been publicly recognized, certified or rewarded:• Our global headquarters facility in Denver, Colorado,
received a prestigious Leadership in Energy andEnvironmental Design (LEED) certification from the
U.S. Green Building Council.
Jeffrey H. Schwartz, Walter C. Rakowich• ProLogis Park Chanteloup in France was recognizedwith a 2005 Logistics Innovation Award. The park’s

Sustainability has long been central to our way of doing
business at ProLogis. We see it as a multi-faceted businessapproach that underpins the entirety of our activities

state-of-the-art design features one of the largest solar
panel installations in France.
• ProLogis Parc Maishima II in Japan is the firstand is a part of our corporate culture. From implementing

distribution facility in Osaka to have received rating

leading-edge, environmentally friendly features in ourissuer CASBEE’s second-highest “A” rating, recognizing

distribution facilities, to acting responsibly on behalf ofthe facility’s superior sustainable features and design.

our shareholders, to supporting local efforts to improve• ProLogis was a 2006 recipient of the “Leader in the Light”

our communities, we strive to create sustainable value

award. This competition, sponsored by the National

for all our stakeholders.

Association of Real Estate Investment Trusts (NAREIT),

We seek to lead by example and are proud to havelaunched numerous pilot projects around the world

honors member companies that have demonstrated
superior and sustained energy use practices.

that have given us world-class expertise in sustainable
warehouse design. For example, we are implementing an

It is our hope that the many sustainability-related efforts

interior lighting retrofit program in the United States that

we are undertaking will serve to guide and inspire both

can reduce electricity usage by up to 75%. In the United

US and global real estate development efforts and will

Kingdom, we have begun development at a new distribu-

further help to sustain the environment for many genera-tion park that will evaluate a number of cutting-edge,

tions to come.

environmentally friendly building materials and construction methods. And in Japan, we recently completed anindustrial facility in Osaka that utilizes a new pavement
technology for neutralizing vehicle carbon emissions.
ProLogis is active in brownfield redevelopment, acomplex process that involves cleaning up and developing

Jeffrey H. Schwartz

Walter C. Rakowich

contaminated land as well as redeveloping land that has

Chief Executive Officer

President and Chief Operating Officer

PROLOGIS SUSTAINABILITY

missionOur mission with regard to sustainability is straightforward:
to be the leading global provider of sustainable distribution
facilities and to create an optimal balance between shareholder
value, the environment and corporate social responsibility.

To ProLogis, sustainability is a business approach thatC O R P O R AT E S O C I A L R E S P O N S I B I L I T Y

recognizes economic, environmental and social objectives.

Corporate social responsibility is a core value of our

It defines who we are and how we operate.

company. Through our partnerships, corporate giving,

We strive to retain the trust and support of ourcommunity outreach, employee involvement and educa-

shareholders, customers, employees and the communi-tion we are committed to building healthy and productive

ties in which we operate and to manage our business inrelationships with our employees, business partners anda way that benefits all of our stakeholders.

the local communities in which we do business around

This inaugural sustainability report outlines thethe world.

activities we are undertaking, refining and monitoringin order to make this mission a reality.

REPORT GUIDEThis report is global in scope and covers ProLogis’
ENVIRONMENTAL PERFORMANCE

activities in North America, Europe and Asia for the full

ProLogis is committed to continuously improving theyear ended December 31, 2006 unless otherwise noted.

environmental performance of our global portfolio. ThroughWe have engaged a third-party assurance provider tostate-of-the-art design and construction, innovative cus-

assist us in expanding the scope and level of detail wetomer programs, active engagement with suppliers andinclude in future sustainability reports, as well as devel-

benchmarking our performance, we strive to be the worldoping and refining data collection methodologies.

leader in environmental best practice in our industry.

We incorporate the October 2006 G3 Guidelines asreleased by the Global Reporting Initiative (GRI) as a

SUSTAINING PROFITABLE GROWTH

general framework for this report. GRI is an international,

ProLogis is committed to leveraging its global leadership

multi-stakeholder network through which a recognized

position to sustain profitable growth. We strive to maintainsustainability reporting framework has been developed.

industry-leading long-term financial performance throughOur approach to this publication is to report on theour diversified business model, the world’s largest global

most significant sustainability impacts that arise fromplatform of distribution facilities and strong relationships

our business activities, over which we have the greatest

with the companies we serve.

degree of control or influence. We intend to improve

P R O L O G I S S U S TA I N A B I L I T Y R E P O RT

3

our understanding of those sustainability issues that are
most material to our business and our stakeholders toensure that our reporting remains relevant and useful.
This report has been externally assured and

GRI Profile Indicators
Indicator

Description

1.1
p2Statement from the CEO and President/COO
about the relevance of sustainability to ProLogis
and its strategy

2.1
p5

Name of organization

2.2 – 2.4
p5

Primary products and services; operational
structure, location of headquarters

2.5
Back coverCountries of operation

2.6
10-K; proxy

Nature of ownership; legal form

2.7
p5;
back coverMarkets served (including geographic breakdown,
sectors served and types of customers/beneficiaries)

GRI-checked as meeting the requirements for GRI’s
Application Level “C+”. We include reportable information
for the Profile and GRI indicators shown below. We plan
to report our progress and improvement in these key
measures in future reports as our data collection andmeasurement systems are expanded.

GRI Content Index
EC1
p10

Direct economic value generated & distributed

EC2
p12

Financial implications and other risks and opportunities
due to climate change

EN4
p7

Indirect energy consumption by primary source

EN6
p6

Use of energy-efficient or renewable energy initiatives
to achieve reductions in energy required

EN16
p7

Greenhouse gas emissions

LA1
p15

Total workforce by employment type, contract and region

LA2
p15

Total number and rate of employee turnover by age
group, gender and region

HR4
p14

Total number of incidents of discrimination and actions taken

SO7
p14

Total number of legal actions for anti-competitive behavior,anti-trust, and monopoly practices and their outcome

PR5
p15

Customer satisfaction measurement

I N D E P E N D E N T A S S U R A N C E S T AT E M E N T S U P P L E M E N T

This 2006 Prologis Sustainability Report has been subjected

2.8
Scale of organization: employees, sales,
p5,14; 10-K capital and products
2.9
n/a

Significant changes during reporting period
relating to size, structure or ownership

2.10
p2

Awards received in the reporting period

3.1 – 3.3
p3

Reporting period, cycle and date of most recent
previous report

3.4
Back coverContact point for questions regarding this report

3.5 – 3.7
p3

Process for defining report content; boundaryand limitations of report

3.8
n/a

Basis for reporting on joint ventures, subsidiaries
and other entities that can significantly affectcomparability from period to period

3.10 – 3.11
n/aRe-statements or significant changes fromprevious reports

3.12
p4

GRI Standard Disclosures table

4.1 – 4.4
p10 – 11Governance structure; indication if chair is also
executive officer; independence of members; mechanism
for direction to the highest governance body

4.14
p5

List of stakeholder groups engaged by the organization

4.15
p5

Basis for identification and selection of stakeholders
with whom to engage

to independent assurance by csrnetwork. In conducting
the assurance, csrnetwork evaluated the Materiality,
Completeness and Responsiveness of the Report in linewith the guidelines of the AA1000 Assurance Standard
as well as the requirements for reporting at the C+ level
for the Global Reporting Initiative G3 guidelines. The fulldraft of this assurance statement, including the scopeof the assurance process, responsibilities, findings andrecommendations, can be found at:
http://ir.prologis.com/investors/sustainability.cfm.

csr network ltd
U.K. April 2007

4

P R O L O G I S S U S TA I N A B I L I T Y R E P O RT

Company Overview

FUND MANAGEMENT

Our fund management segment represents the long-term

ProLogis is the world’s largest owner, manager andinvestment management of unconsolidated property

developer of distribution facilities, with operations infunds, and the properties they own, with the objective

20 countries spanning three continents.

of generating a high level of returns to us and our fundThe company has $26.7 billion of assets owned,

partners. Along with the income recognized under the

managed and under development, comprising 422 mil-equity method from our investments in the property

lion square feet (39.2 million square meters) in 2,466

funds, we include fees and incentives earned for services

properties as of December 31, 2006. ProLogis’ customers

performed on behalf of the property funds (primarily

include manufacturers, retailers, transportation compa-

property management and asset management services)nies, third-party logistics providers and other enterprises

and interest earned on advances to the property funds,

with large-scale distribution needs. Headquartered in

if any, in this segment.

Denver, Colorado, ProLogis employs more than 1,250
people worldwide.

CDFS BUSINESSWe are organized under Maryland law and have elected

Our CDFS business segment primarily encompasses

to be taxed as a REIT under the Internal Revenue Code ofour development of properties that generally are either

1986, as amended. Our European headquarters are locatedcontributed to a property fund or sold to third parties.

in the Grand Duchy of Luxembourg with our European

Additionally, we acquire properties with the intent tocustomer service headquarters located in Amsterdam,

rehabilitate and/or reposition the property in the CDFS

the Netherlands. Our regional offices in Asia are locatedbusiness segment prior to being contributed to a property

in TTokyo, Japan, and Shanghai, China.

fund. We engage in commercial mixed-use development

Our business is currently organized into threereportable business segments: (1) property operations,(2) fund management and (3) CDFS business.

activities generally with the intention of selling theland or completed projects to third parties.
Additionally, we have land positions, including land
owned by the CDFS joint ventures and land controlled

P R O P E R T Y O P E R AT I O N S

through contracts or options, for future development

Our property operations segment represents theof industrial distribution properties or other commer-

direct long-term ownership of industrial distribution

cial development.

and retail properties.
KEY STAKEHOLDER ENGAGEMENTWe define our key stakeholders as any person or groupof people who may affect, or be affected by, ProLogis’
operations. We communicate openly and engage in good
Composition of Revenue

faith with our stakeholders, and we encourage honest(in millions)feedback from them. These stakeholders include customers,
422

377

investors, planners, non-governmental organizations,
suppliers, employees and the communities in which we
operate. Our engagement takes various forms including

298$1,834$1,869$2,464(in millions)

Total Square Feet Owned,
Managed and Under Development

opinion surveys, investor meetings, one-on-one meetingsand industry forums.

04

05

06

04

05

06

CDFS
Fund Management
Property Operations

P R O L O G I S S U S TA I N A B I L I T Y R E P O RT

5

ENVIRONMENTAL PERFORMANCE

environmental
ProLogis is committed to continuously improving the environmental
performance of our global portfolio.Through state-of-the-art designand construction, innovative customer programs, active engagementwith suppliers and benchmarking our performance, we strive tobe the world leader in environmental best practice in our industry.

As global warming has become a top public policy issue
around the world, governments have begun enacting
environmental standards for real estate development.

• Solar and wind power that provide alternative energy systems, especially photovoltaic solar cells and wind turbines• Low-usage water systems that utilize treated “gray”

Our customers around the globe also are being required

water and recycled rainwater, resulting in lower waterto address many of the same issues, resulting in the

consumption at facilities

management of these issues becoming a new imperativein industrial real estate today.

• Special landscaping that can help to minimize water
consumption and reduce net carbon emissions

SUSTAINABLE DESIGN

Our new developments are increasingly combining multi-

ProLogis has moved decisively in response to theseple sustainability-related features. For example, ProLogis

trends and has taken a leadership role in piloting aannounced in February 2007 that it will develop a 530,000

number of sustainability initiatives around the world.

square-foot industrial facility in the Midlands area of the

We are exploring several sustainable warehouse

United Kingdom for leading supermarket chain Sainsbury’s.

design features:

The facility will utilize a variety of technologies and• Recycled and locally sourced construction materials

environmental features designed to significantly reducethat reduce environmental impact• Skylights and clerestory windows that increase naturallight, thereby lowering electricity usage and improving
work environments for warehouse personnel• T5 and T8 energy-efficient fluorescent lights that offer
significantly improved energy performance over traditional
metal halide systems• High-reflectance, white thermoplastic polyolefin (TPO)
roofing that offers the same performance as traditional

on-site energy consumption and carbon emissions:• Solar walls that generate heat from sunlight• Wall-mounted photovoltaic panels thatgenerate electricity• An on-site power plant that reuses the heatproduced by air conditioning• An on-site recycling facility• Energy-efficient lighting systems• Air-tight exterior building construction

black EPDM rubber roofing at essentially the same cost
but with less load on the building’s cooling system

In 2007, we intend to develop minimum design standards• Air-tight building construction that reduces air leakage,for new global developments that will meet or exceed thethereby permanently lowering costs for heating andrequirements for environmental certification from major

air conditioning

global rating systems such as LEED, CASBEE and BREEAM.

6P R O L O G I S S U S TA I N A B I L I T Y R E P O RT

HEITMAN ARCHITECTS INCORPORATED

We have established the following company-widetargets, which we intend to achieve by 2010:• Install renewable energy sources that have a combined
generation capacity of over 25 million KWh per year
• Reduce the use of potable water for landscape irrigation
by 50% in accordance with LEED methodology• Utilize 20% recycled content, based on cost, on all
new product• Divert 75% of construction debris from disposal in
landfills and incinerators on all new projects
PROLOGIS LIGHTING RETROFIT PROGRAM(NORTH AMERICA)

Energy-efficient T8 Fluorescent Lighting
Anixter International Facility (Chicago, IL – US)

In 2006, ProLogis began testing the benefits of replacing
standard metal halide lights with high-efficiency T5 andC H I C A G O C L I M AT E E X C H A N G E ( C C X )T8 fluorescent lights at select customer facilities. Although

ProLogis has joined the Chicago Climate Exchange, thethe initial investment can sometimes be more costly,

world’s first and North America’s only voluntary, legally

suppliers estimate that a customer can fully recoup its

binding greenhouse gas emissions reduction, registry

investment in a fluorescent lighting system in 12 – 36

and trading program.

months. (Actual payback period will depend upon theMembership in the exchange requires ProLogis tocost of electricity, hours per day of electricity usage andcompletely offset the “carbon footprint” associated withthe availability of cost-offsetting, energy-savings incentive

its business operations in the US1 In addition, theprograms.) In addition, T5 and T8 lights are rust-free,company can also earn tradable credits when it builds

dust- and moisture-resistant, and easy to clean.

warehouses that reduce energy consumption through

ProLogis outfitted approximately 2.5 million square

new technology and high-quality design.

feet of combined new and existing space with high-effi-

ProLogis offices are powered by electricity and, inciency lights during 2006. Our experience so far has

some cases, natural gas. The emissions associated withshown that electricity consumption may be reduced byelectricity consumption are considered indirect, as theup to 75% with these fluorescent lighting systems.

power is not generated on site. Emissions due to the con-

Due to the overwhelming success of this program, we

sumption of natural gas are considered direct because thathave now made T5/T8 lights available in all new buildings

resource is consumed on site. The measurement of ourin North America. These actions are consistent with ourenergy usage and the resulting greenhouse gas emissions isobjective of providing innovative, cost-effective sustain-

part of our commitment to sustainability reporting. ProLogis

able solutions to our customers.

pledges to have carbon neutral US operations from 2006
through 2010.1 We will achieve this through a combination“ProLogis is to be commended for becoming
the first real estate company in the world toof organic reductions and offset procurement. In addition,
we aim to expand our carbon footprint measurement andcarbon-neutral status globally.

join CCX. Like our other member companies,
ProLogis is a leader in its sector, and also

US Carbon Footprinta leader in the global effort to address theElectricity/Indirect Energy Consumption (KWh)challenge of climate change.”

Natural Gas (Therms)
1

7,616,478
49,571

Carbon Footprint (metric tons of CO2)

8,387

RICHARD SANDOR
Chairmanr
and CEO of the Chicago Climate Exchange

1 US operations include electricity and natural gas usage at ProLogisrofffices as wellas emissions associated with travel via plane, automobile, commuter rail, intercity
rail and bus.
Note: These figures are based upon actual utility bills and travel reports wherer exact data wasavailable and based upon squarer footage and estimations where
not available. Sources of emissions factors used in the calculation are the US
EPA, World Resources Institute and the Chicago Climate Exchange.

P R O L O G I S S U S TA I N A B I L I T Y R E P O RT

7

BROWNFIELD REDEVELOPMENT

Through our merger with Catellus Development

Hercules, California, is one such development. This

Corporation in 2005, ProLogis has acquired substantial

206-acre community, located on the site of former oil

expertise in brownfield development. This complex process

and asphalt refineries, includes single and multi-family

involves the cleanup and development or redevelopment

homes, a school, office buildings, 14 acres of publicof land that contains, or potentially contains, hazardous

parks and open space. Remediation efforts involved soil

substances, contaminants or pollutants. Ultimate devel-

and ground decontamination and clean-up to Regional

opment of such land offers several benefits to varied

Water Quality Control Board standards.

stakeholders. First, development of former brownfield sites
takes development pressure off greenfield development.

PROLOGIS WORLD HEADQUARTERS

In addition, the local environment is improved as

In February 2006, ProLogis formally opened its global

indigenous wildlife returns to formerly uninhabitable

headquarters facility in Denver, Colorado. The five-story

surroundings. Finally, the economic well-being of thebuilding comprises more than 89,000 square feet of

local community is enhanced as an increased tax basespace and can accommodate up to 325 people.

enables the local government to provide additional
public services to its constituents.

The building features a number of state-of-the-art
technologies designed to improve energy efficiency andmitigate impacts on the environment. Among them: an

ProLogis Park Sideway (United Kingdom)

ProLogis Park 294 (US)ProLogis Park Sideway is being developed on

In 2004, ProLogis completed a 460,000

the site of a former coal mine. Designed as a ‘test bed’ forsquare-foot facility for Anixter International in the Chicago area.

leading sustainable warehouse design features, the park will be

ProLogis and Anixter worked together to incorporate multiple

remarkable for the sheer number of environmentally friendly

sustainable technologies into the facility’s design. The facility,

technologies on one site.

which has recently received LEED certification, includes the

The park is expected to achieve at least a 32% reduction

following environmentally friendly features:in carbon dioxide emissions, as compared to normal logistics• An advanced energy-control system

spaces. An independent consultant will measure and publicly• Low maintenance landscaping

release the results. Features will include:• Energy-efficient lighting and skylights• Exterior building fabrics that decrease air leakage• Recycled building materials• Enhanced skylights that increase natural light• Reversible exhaust fans

• High-efficiency lighting• Roof-mounted solar panels, heat-absorbent solar walls
and solar thermal hot water systems• Wind turbines• Landscaping designed to offset the development’s carbon
dioxide emissions• Irrigation systems that use gray water and recycled rainwater

ProLogis Park Sideway, artist’s rendering (United Kingdom)

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P R O L O G I S S U S TA I N A B I L I T Y R E P O RT

Anixter International Facility at ProLogis Park 294 (Chicago, IL – US)illumination system that harvests sunlight during the day
and reduces power consumption; energy-efficient glass;high-reflectance roofing material; a landscape irrigation
system that uses reclaimed gray water; and recharging
stations for electric vehicles.
The cost premium to incorporate sustainable and green
building features and technologies in the design andconstruction of the facility was less than 3% of the total
project budget. As a result of this investment, we havealready seen returns in terms of increased energy efficiency,
employee productivity and pride in ownership. For instance,
the lighting control system alone cuts electrical usage by

ProLogis World Headquarters (Denver, Colorado)

30%. We believe the corporate headquarters is nearly 40%
more energy efficient than a similar building would be(USGBC), an independent, non-profit association dedi-

without such sustainable attributes.

cated to sustainable building design and construction. As

ProLogis’ headquarters recently received a prestigiousof December 31, 2006, ours was the only private sector

LEED certification from the U.S. Green Building Councilcommercial facility in Denver with LEED certification.

ProLogis Park Chanteloup (France)

ProLogis Parc Maishima II (Japan)

ProLogis Park Chanteloup is an award-winning,

ProLogis Parc Maishima II is a 608,000

10-facility, 2.7 million square-foot industrial park locatedsquare-foot facility located in Osaka, Japan.

approximately 19 miles (30 kilometers) south of Paris.

Completed in the fourth quarter of 2006, this building is

The park, which opened in 2005, is one of the largest

notable for being the only distribution facility in Osaka to haveprivate sector logistics parks in Southern Europe. It received

received an “A” (its second highest on a scale of five) rating

a 2005 Logistics Innovation Award at Europe’s Internationalby CASBEE Osaka. CASBEE, which stands for Comprehensive

Week of Transportation and Logistics Conference.

Assessment System for Building Environmental Efficiency,

On-site amenities include conference facilities, a staff
restaurant, childcare center and a jogging/bicycle track.
The facilities also possess several environmentally friendly

is a national rating system that assesses the environmental
performance of sustainability-promoting buildings.
ProLogis Parc Maishima II can restrain and reduce carbon

features including:

dioxide and greenhouse gas emissions by way of its standout• photovoltaic solar panels that generate electricity

environmental preservation features, including:• recharging stations for electric vehicles• An energy-efficient, occupancy sensor lighting system• a rainwater harvesting system that supplies water for• Ice thermal storage and an air-conditioning system thatpark landscaping

makes ice at night, stores it in non-corrosive tanks,and uses it to cool the building the following day

Solar Panels at ProLogis Park Chanteloup (Moissy-Cramayel, France)

ProLogis Parc Maishima II (Osaka, Japan)

P R O L O G I S S U S TA I N A B I L I T Y R E P O RT

9

ECONOMIC PERFORMANCE

economic

Our business model enables us to grow by accessing and

ProLogis has distributed over $1.9 billion in common

managing a variety of capital sources around the globe.

dividends to investors since January 1, 2000. We have

Our fund management business is a powerful engine ofincreased our dividend every year, from $1.34 per share

growth with more than $12.2 billion of industrial assets

in 2000 to an expected $1.84 per share in 2007, repre-

under management. Our equity partners get access tosenting a compounded annual growth rate of over 4.6%.

ProLogis’ high-quality portfolio through our contribution

In the five years ending December 31, 2006, ProLogisof properties and benefit from professional management

common shares provided a total return (price appreciationand our strong ties with global customers. ProLogis has

plus reinvested dividends) of approximately 253% tothe opportunity to establish relationships with equity part-

investors, compared with 35% for the S&P 500 andners around the world, aligning our interests with theirs.

39% for the Dow Jones Industrial Average.

In addition, our fund management business enables us

ProLogis remains committed to furthering meaningful

to expand with less of our overall capital invested, since

corporate governance practices and maintaining a business

we retain a 10 to 25% interest in the funds. In this way,environment of uncompromising integrity. We continue to

we leverage our operating system and achieve higher

enhance these objectives through our governance policies

returns on invested capital.

and compliance with the Sarbanes-Oxley Act of 2002

We are a globally diversified company. As of
December 31, 2006, over 40% of our total investments

and the rules of the New York Stock Exchange (“NYSE”).
Our board of trustees comprises 12 members who are

represent activity undertaken outside North America.

elected annually. We require that a majority of our board

This diversification helps mitigate the impact of economic

be independent under listing standards adopted by the

downturn in any one region of the world and helps support

NYSE. To determine whether a trustee is independent,

sustained economic growth.

the board must affirmatively determine that there is no
direct or indirect material relationship between thecompany and the trustee.

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P R O L O G I S S U S TA I N A B I L I T Y R E P O RT

Our independent trustees, meaning those who are not

C O R P O R AT E G O V E R N A N C E Q U O T I E N T ( C G Q )officers or employees of ProLogis, meet in regular executive

Institutional Shareholder Services (ISS) assigned ProLogis

sessions without management present. The chair of thesean Industry Corporate Governance Quotient ® (CGQ ®) rating

executive sessions is the Chairman of the Board.

of 92.3 in March 2007. ISS’ CGQ is the most widely

You may communicate with any of the trustees,

recognized third-party measure of corporate governance.

individually or as a group, by writing to them c/o Edward

ISS analysts use publicly available information such as

S. Nekritz, Secretary, ProLogis, 4545 Airport Way, Denver,public disclosure documents and company websites toColorado 80239. All communications should prominently

objectively measure and rate the quality of a company’s

indicate on the outside of the envelope that they arecorporate governance program. US companies are ranked

intended for the full board, for outside trustees only, or

using 65 different variables across eight categories: board

for any particular group or member of the board.

of directors, charter and bylaw provisions, executive and

The ProLogis Board is responsible for reviewing anddirector compensation, audit, anti-takeover provisions, stock

approving strategic plans, corporate actions and financial

ownership, progressive practices and director education.

objectives. At present, the Chairman of the Board is
not an officer of the company.

DOMINI 400 SOCIAL INDEXProLogis was added to the Domini 400 Social Index

We have made several shareholder-friendly changes
to our corporate governance practices in recent years.

(DSI) in May 2006. The DSI is a stock index comprising

We eliminated the so-called “poison pill” in December

equities subject to multiple social screens. It is a widely

2003 by way of a Shareholder Rights Plan. We also

recognized benchmark for measuring the impact of social

shifted from plurality to majority voting in 2006. Finally,

screening on financial returns and the performance

we declassified our board in 2005, which paved the wayof socially screened portfolios.

for annual re-election of all trustees beginning in 2006.

$26.0 Billion Total
Market Capitalization(per share)(as of December 31, 2006)

1%

$1.24

$1.30

$1.34

$1.38

$1.42

$1.44

$1.46

$1.48

96

97

98

99

00

01

02

03

04

05

06

$1.84

$1.07
$1.51

95

$1.60

$2.71

$2.43

$2.41

$2.39

$2.35

$2.21

$1.01
$1.30

$2.02

$0.94
$1.13

$1.80

$3.70

$3.90*

Continuous Dividend Growth and
Growth in Funds From Operations (FFO)

39%

60%

07

Dividend

EquityFunds From Operations, as Adjusted

Debt*Midpoint of company guidancePreferreds

P R O L O G I S S U S TA I N A B I L I T Y R E P O RT

11

“ProLogis is an example of a company that iswalking the talk. LEED certification is a highway of its LEED certification process. At the same time,over 4,900 additional buildings were waiting in thequeue for LEED ratings, reflecting the swell in demand

standard that will deliver what is promised:

for buildings being constructed with environmental

an environmentally friendly, safe and healthy

considerations in mind.2

environment for ProLogis employees, as well

We believe that environmentally friendly facilities will
become increasingly sought after by tenants and thatas for the community at large.”

facilities without green features face economic risk or,

RICK FEDRIZZI

potentially, ultimate obsolescence. Research already

CEO & Founding Chairman, U.S. Green Building Councilshows that green buildings generate significant economic
benefits. According to a McGraw-Hill 2006 SmartMarket
Report, green buildings command 3% higher rental rates,

FUTURE OPPORTUNITIES

realize an average increase of 7.5% in building value,

The past year has seen the subject of climate changedeliver 3.5% higher occupancy rates and improve return

move into the mainstream. The Intergovernmental Panelon investment by an average 6.6%.3

on Climate Change’s recently released report reiterated

By increasingly utilizing environmentally friendly

three broad points over which scientists are now generally

features in our new developments and retro-fitting existingin agreement: the evidence that Earth is warming isfacilities, ProLogis is creating a class of environmentallyunequivocal; this warming is in large part human-caused,superior facilities that will be made available to ournamely by our emission of greenhouse gases; and there

customers going forward. These premium facilities should

will be serious ramifications of global warming on thehelp sustain ProLogis’ economic value for the long term.

1

Earth’s environment.

Simultaneously, so-called “green buildings” are1 Interg
rgoverrnmental Panel on Climate Change, “Summarry for Policymakers,”

Februaryr 5, 2007.

going mainstream as well. The USGBC had, as of

2 Charles Lockwood, “As Green as the Grass Outside,” Barron’s, December 25, 2006.

December 2006, certified 669 buildings as green by

3 McGraw-Hill Construction, Green Building SmartMarket Report, 2006.

Total Assets Owned,
Managed and Under Development

Total Investments by Region

10%

$15.9

25%

EuropeAsia

12

P R O L O G I S S U S TA I N A B I L I T Y R E P O RT

06

93

94

95

96

97

98

01

02

$11.7

00

$10.3

$7.2

99

$8.6

05

$7.9

04
North America

$3.1

58%

$0.4

65%

$2.5

61%

$5.2

28%

$1.8

31%

14%

$1.2

8%

$22.1

$26.7

(in billions)

03

04

05

06

SOCIAL PERFORMANCE

socialCorporate social responsibility is a core value of our company. Throughour partnerships, corporate giving, community outreach, employee
involvement and education, we are committed to building healthy andproductive relationships with our employees, business partners andthe local communities in which we do business around the world.

C O M M U N I T Y I N V O LV E M E N T

charities. Some of the organizations we helped include:

ProLogis is proud to invest in the communities in which• Eight different

we operate. We contribute our time, our expertise and• Five food banks

elementary schools• The Salvation Army

our financial support in numerous ways around the globe,• The Humane Society• Junior Achievement

all with the goal of making a positive difference to people• Race for the Cure

• Two children’s hospitals

and organizations in need.
We intend to further develop our company-wide• Toys for Tots

• Habitat for Humanity• YMCA• Boys and Girls Clubs

community investment strategy in 2007 and to begin

of America

to measure our financial investments as a percentage

EUROPE

of company profits.

In Amsterdam, ProLogis is proud to provide financial

We also plan to create, in 2007, a company-wide

support for scientific research at Emma Children’s Hospital.

volunteer program that provides each ProLogis employee

We also support breast cancer research, education andwith two paid days each year that may be used for com-advocacy through our support of the Women’s Club ofmunity volunteer efforts.

The Hague’s Pink Gala.
In the United Kingdom, we support or sponsor a variety

T H E P R O L O G I S F O U N D AT I O N

of community organizations and efforts, including a youth

The ProLogis Foundation was established with the goal

football (soccer) league in the West Midlands, a child-of providing financial support to institutions of higher

protection charity, the Parkinson’s Disease Society, andeducation and charitable organizations across North

DebRA, a charity that works with children who suffer

America. In 2006, ProLogis donated $5 million to thefrom an incurable skin condition.

Foundation to help support its efforts.

In Central Europe, ProLogis sponsors a numberof educational organizations and community programs

NORTH AMERICA

in support of children and young adults. We supported

In 2006, approximately 300 of our North American

the Lech Walesa Institute’s educational foundation and aemployees in 17 different North American offices took

youth music festival in Poland. We have provided financialpart in a variety of activities benefiting over 50 different

support for the construction of children’s sports fields
in Romania, the Czech Republic and Poland, and havesponsored special events for hungry and poor children
in Poland. Separately, we provided financial support for
construction of a public bridge in Romania in 2006.

P R O L O G I S S U S TA I N A B I L I T Y R E P O RT

13

In Japan, ProLogis recently completed improvements
to a public park and bus facility near ProLogis Parc
Amagasaki. ProLogis Japan received a letter of appreciation from the City of Amagasaki for its services andmonetary contribution.
EMPLOYMENT PRACTICESProLogis affirms the company’s commitment to Equal
Employment Opportunity (“EEO”). We believe that ourassociates are our most important assets. We seek to hire
and retain superior associates by committing to excellent
Ground-breaking Ceremony for the ProLogis Hope School
Wang Pu, China (January 2007)

employment standards. We further encourage our associates
to enhance their skills and abilities in order to reach
their full potential.
To further their professional development, associates

ASIA

have access to ProLogis University, an educational program

Many schools in rural China are located in remotethat includes a series of annual motivational meetings

mountain areas and lack basic infrastructure such aswhere learning and networking abilities abound. Functional

electricity and running water. Some school buildings

department training sessions are also conducted by theeven lack windows or closeable doors. It is not unusualMarketing, Development, Accounting and Property

for students to walk two to three hours simply to getManagement groups.

to school. Therefore, many students live in dormitories

Currently, ProLogis Human Resources associates withat school during the week and finance their lodging

hiring responsibility typically attend at least one diversity-

expenses by growing and selling fruits and vegetables.

related career fair each year.

ProLogis China has established a program whereby

T the extent required by federal, state and local laws,To

we will donate 1 RMB toward construction of an ele-

ProLogis will recruit, hire, train, promote and compensate

mentary school in rural China for each square metercandidates for employment and our current associates(10.76 square feet) of ProLogis-completed development

without regard to race, color, age, religion, sex, nationalin that country.

origin, disability or sexual orientation. All other personnel

Working with the local Salvation Army on our first suchactions, including, but not limited to, disciplinary action

project, ProLogis has committed to build and finance anand fringe benefits programs, will be based on the

expansion to an elementary school in Southern China,

same principles.

located in the town of Wang Pu, Wuzhou City in Guangxi

ProLogis follows all relevant federal and state laws

Province. The new school, to be called the ProLogis Hopeapplicable to individuals with disabilities, Vietnam-era andSchool, will take on students from neighboring villages

disabled veterans, and endeavors to maintain guidelines

whose schools were destroyed by severe rainstorms in 2006.

and practices that meet the standards required by law.

ProLogis will finance construction of a 1,000 square meter

We plan to establish a worldwide sustainability employee

facility that will include 10 classrooms, a staff office,education and awareness program during 2007 and be in

restrooms and dormitory facilities. We will also supply

a position to report on its progress in next year’s report.

the school with desks, blackboards, school supplies andlibrary books. After construction is completed aroundE M P L O Y M E N T S TAT I S T I C S

August 2007, we will continue our personal involvement

On December 31, 2006, ProLogis had 1,263 employees

by offering our ProLogis China employees the opportunity

plus 54 contract or temporary workers, for a total global

to schedule two-week visits to the school, during which

work force of 1,317. During 2006, 173 employees left thethey may interact with and teach the students. These

organization due to dismissal, retirement or resignation,

visits will also be funded by ProLogis.

representing a global employee turnover rate of 13.7%.

14

P R O L O G I S S U S TA I N A B I L I T Y R E P O RT

Of the 173, 50.9% were male and 49.1% were female.

rate their general experience with ProLogis personnel

Further employment statistics may be found below.

and contractors, as well as to rate the condition of theirDuring 2006, ProLogis was not party to any legal

ProLogis facilities.

actions for anti-competitive behavior, anti-trust and/or

The percentage of responding customers offering

monopoly practices. The company had two incidents

a reply of “good” or “excellent” in our 2006 survey isof discrimination raised during the year. Of the two,

depicted in the following chart.

one was dismissed for lack of substance and the otherwas settled at no fault out of court.

North America 2006 Customer Survey Results
Percentage of Respondents Awarding Ratings of 4 and 5;
Ratings of 4 and 5 equate to “good” and “excellent”

C U S T O M E R S AT I S FA C T I O N

We continuously strive to be our customers’ industrial
property business partner of choice. Our business strategy

Leasing89%
Property Management
89%

incorporates the proprietary ProLogis Operating System,®
a customer-focused leasing and property management
philosophy that allows us to provide superior customer

Maintenance86%
General Experience
85%

service at the local level.
Our property managers spend a significant amount

Facilities
77%

of time interacting with customers, understanding andanticipating their needs. We seek to exceed customers’

Since we first began surveying our customers in 1995,

high expectations with regards to levels of service. This

we have instituted various programs designed in response

superior service is reflected in our high levels of customer

to survey results. We initiated and maintain a vendor

retention and customer satisfaction, which in turn benefit

education program in order to communicate our high

ProLogis shareholders economically through low turnover

service standard to ProLogis vendors. We have also

and other customer receivable costs.

implemented internal programs that put property man-satisfaction surveys every two years. Written surveys are

Our goal is to maintain a rating above 85% in each of the

conducted in-house. We ask customers to rate theirareas of leasing, property management, maintenance and

ProLogis personal contacts in areas of leasing, property

general experience in the 2008 survey and to continue

management and maintenance. They are also asked toour practice of providing superior customer service.

Global Employment by Type 1

Employees by Region

Employee Turnover by Region789

agers in front of customers on an almost daily basis.

1,241

We conduct substantial North American customer

13%

15%

13%

13%
14%

54

22

3%

6%

8%

185

7%

289

13%

14%

14%

18%

20%

27%

Employee Turnover by Age 2

50+

40 – 49

Full Time

North America

North America

North America

Part Time

EuropeEuropeEuropeContract/Temporary

Asia

Asia

Asia

30 – 39

20 – 29

1

Contract/Temporary workers are not ProLogis employees
2Percentage of employees per age group who terminated their employment with ProLogis in 2006

P R O L O G I S S U S TA I N A B I L I T Y R E P O RT

15

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