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Yangshan, which opened in 2005, will be the
largest container port in the world when fully developed. It is
set to become a crucial node in the global supply chain and will
help process the steadily increasing flow of goods between China
and western markets. Over the course of the last year, I and other
ProLogis management team members have been to Yangshan several times
to visit the facilities we are developing at our exclusive distribution
park just off the bridge on the mainland. On every trip, I am struck
by how quickly global trade and logistics outsourcing have changed
our industry and how important it has been for ProLogis to build
a global platform over the past 10 years.
The same trends are clearly evident at other
ProLogis developments all over the world. In Japan, demand for space
at our distribution parks in Tokyo, Osaka and other key markets
has been truly exceptional, as companies embrace outsourcing of
logistics. East of the Los Angeles/Long Beach port complex, our
25 million square-foot stabilized portfolio in the Inland Empire
was fully occupied at year end. In Central Europe, we have seen
robust demand from third-party logistics companies looking to serve
markets in Western Europe as well as growing domestic consumption.
GEOGRAPHIC BALANCE
When Walt Rakowich and I first joined
ProLogis in 1994, we owned less than $1.0 billion of industrial
properties – all in the United States. By the end of 2006, our assets
owned, managed and under development exceeded $26 billion, with
more than 40 percent in Europe and Asia.
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Today, the breadth and balance of our operations
are among our most important strategic advantages and are key drivers
of our financial performance. In 2006, we recorded 36 percent growth
in funds from operations per share, driven by strong performance
in all three of our business segments. We achieved record gains
from our global development activity, solid increases in property
fund income and fees and continued improvement in property operations.
Our diverse global platform, strategic land
positions and strong customer relationships support future growth
in our development, or CDFS, business. Our $2.5 billion of new development
in 2006 was well balanced across North America, Europe and Asia.
Based on continued strength in customer demand, we plan to increase
development starts in 2007 by roughly 20 to 30 percent. This development,
led by Ted Antenucci and our talented teams throughout the world,
also will be distributed fairly evenly across the three continents,
thereby minimizing our exposure to any single national or regional
economy.
INVESTING FOR THE FUTURE
During the year, we enhanced our future
development opportunities through several key transactions. These
included an acquisition of land and properties in Mexico City and
Guadalajara that gave us a strong market leadership position in
Mexico; completion of nearly 5.3 million square feet of new distribution
centers to serve growing demand in Japan; and new land reservation
agreements in China that enable development of up to 32 million
square feet in key coastal and inland logistics markets.
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