Building on this momentum, in February 2007,
we acquired the industrial development business
of Parkridge, one of our top competitors in Europe.
As a result, we now have access to strategic land
positions on which we can develop an additional
$3 billion of properties in Central Europe and the
United Kingdom. The transaction extends our leadership
position as Europe’s largest provider of distribution
facilities and enhances our organization
through the addition of some of Europe’s top real
estate professionals.
DIVERSE INCOME SOURCES
Our property fund business continues
to be an important source of growth for the company. With more than
$12 billion of properties under management, our funds provide a
steady, growing source of fee income as well as our share of each
fund’s earnings. In 2006, we recognized cumulative incentive fees
of $131 million due to strong performance within our property funds.
Most of this amount was related to the successful initial public
offering of ProLogis European Properties (PEPR) in September. The
success of the offering reflects the quality of our European portfolio
and market leading position we have established since we entered
Europe in 1997.
Additionally, we achieved meaningful
improvement in our property operations business last year. We leased
over 100 million square feet of space – a record amount – and this
strong leasing activity is
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continuing into 2007. At the end of 2006, growth
in rental rates and net operating income in our same-store pool
were at their highest levels since the second quarter of 2002, driven
by occupancies that have recovered and remained stable at approximately
95 percent.
BUILDING ON BALANCE
We remain exceptionally well situated
as we continue to build on our business platform and global franchise.
We have a solid financial position and expansive pipeline of opportunities.
Strong market conditions and the continued vitality of global customer
demand support our confidence in our ability to generate future
growth in all our business segments. Importantly, our talented global
team has the experience and relationships necessary to continue
to capture an increasing share of the industrial business in key
logistics markets.
We thank you for your continued support
as we explore new ways to leverage the strength of our business
and our colleagues’ demonstrated ability to deliver value for our
customers and shareholders.
Jeffrey H. Schwartz
Chief Executive Officer
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