Good morning. My name is Sarah and I will be the conference facilitator today. I would like to welcome everyone to the ProLogis Q1 2010. Today’s call is being recorded. All lines are currently in a listen-only mode to prevent any background noise. After the speakers’ presentation, there will be a question-and-answer session. (Operator Instructions) At this time, I would like to turn the conference over to Ms. Melissa Marsden, Managing Director of Investor Relations and Corporate Communications with ProLogis. Please go ahead, ma'am.

Good morning everyone and welcome to our first quarter 2010 conference call. By now you should all have received an email with a link to our supplemental and if not, this document is available on our website at prologis.com under Investor Relations. This morning we will hear from Walt Rakowich, CEO, to comment on the market environment and then Bill Sullivan, CFO, will cover results and guidance. Additionally, we are joined today by Ted Antenucci, President and Chief Investment Officer and Chuck Sullivan, Head of Global Operations. Before we begin prepared remarks, I would like to quickly state that this conference call will contain forward-looking statements under federal securities laws. These statements are based on current expectations, estimates and projections about the market and the industry in which ProLogis operates as well as management’s beliefs and assumptions. Forward-looking statements are not guarantees of performance and actual operating results may be affected by a variety of factors. For a list of those factors, please refer to the forward-looking statements notice in our SEC filings. I would also like to add that our first quarter results press release and supplemental do contain financial measures such as FFO and EBITDA that are non-GAAP measures. In accordance with Reg G, we have provided a reconciliation to those measures. And as we have done in the past, to give a broader range of investors and analysts an opportunity to ask their questions, we will ask you to please limit your questions to one at a time. Walt, would you please begin?

Thank you, Melissa and good morning everyone. This morning I will try to keep my comments brief and talk about business fundamentals and progress towards our key focus areas with the objective of leaving more time for Q&A. Bill will have more on our financial results, balance sheet and guidance for the remainder of 2010. Overall I would say that Q1 deals a bit like Q4 last year. We hear great things about the recovery and we believe it will have a positive impact on our performance but industrial tends to lag the overall economy and we are not seeing it just yet. Right now our business deals like the tale of two cities. On the one hand, the operating environment is still soft, although it feels like it has hit bottom. Our operational results for the quarter beared this out. Rental rates were down by about the same amount as in Q4 and the lease percentage in our total industrial operating portfolio was flat compared to Q4. This reflects a slightly more than expected drop in leasing within our investment management and core direct-owned portfolios offset by a better than expected 500 basis point increase in the lease percentage of our completed development. Now on the other hand, values have risen, buyers are plentiful and there is rising activity and optimism in the market. In addition, there is virtually no new supply and our development business is picking up abroad very nicely. Many of our customers are talking expansion for the second half of this year, we will see. It certain feels like brighter days are ahead and if history were to repeat itself, fundamentals should improve by the third or fourth quarter as inventory levels rise in accordance with a growing global economy. Overall our FFO per share…

Thanks, Walt. Similar to Walt, I am going to try to keep my commentary relatively brief and just hit the key points. I am going to cover three aspects of the company's financial position this morning; first, the summary of our Q1 results; second, our guidance for the year with some brief insight into the things that we expect will impact the next three quarters; and lastly, some comments on our balance sheet and fund debt initiatives. We reported $0.01 per share in FFO for Q1 2010. Negatively impacting our reported results was approximately $53 million or $0.12 per share in charges associated with our bond and convert buybacks in Q1 as well as a loss on settlement of a derivative in one of our fronts. After adding back these charges, we effectively generated $0.13 per share in FFO for the quarter, which was about $0.01 below our internal expectations. Of the $0.13, $0.02 per share is gain related and $0.11 represents core FFO. The core FFO was $0.01 below our internal expectation principally due to the strength of the dollar versus the euro and lower expected occupancies. There were also a variety of expenses incurred in Q1 that will be non recurring, including a one-time tax charge and increased rental expenses associated with the harsh winter. Relative to full year FFO guidance, our original guidance for 2010 was a range of $0.74 to $0.78 per share. We have decided to expand the range of our guidance to $0.70 to $0.78 per share to take into account the dilutive effects from the debt issuance in March. The revised guidance still excludes the charge of $0.12 in the first quarter related to the buyback and other capital markets activity. Relative to our core FFO, we are lowering our estimates to a…

Thanks, Bill. So before I open it up for Q&A, let me just leave you with one final thought. We understand what we have to do and we continue to make progress in doing it. It’s dangerous to get too focused on where the market is today. We know we have to address today’s market but we are optimistic that it will improve. Our mission in the meantime is to stay focused on our near term objectives. They are converting non-income producing assets into income producing assets, creating NAV through accretive development which helped to accomplish the first as it relates to land and continuing to strengthen our balance sheet. As I said before, our successful execution of these three objectives will drive substantial value in the future. We look forward to giving you an update on our progress next quarter. Thank you. Operator, we are ready to open up the line.

(Operator Instructions) Your first question comes from Ross Nussbaum of UBS. Your line is now open.

Guys, can you talk a little bit about the dividend with respect to some of the commentary you gave on the source of the earnings as we think forward? Bill, I thought I heard you say that from a guidance perspective, there is an incremental positive of $0.05 to $0.07 a share now in the guidance from the drop in cap rates that’s occurred over the last couple of months. And I guess I'm just trying to think about that relative to what I will think about is income generated off of the core assets versus development gains and how that relates to sustainability of the dividends given the FFO and the AFFO that you are expected to generate.

Let me see if I can try to simplify that from my perspective. I think we have communicated constantly over the last 12 or 15 months. We have a large portion of non-income producing assets on the balance sheet, the way of our land bank and the unleashed portion in our development pipeline. And we are working hard, we have made fabulous progress associated with that. And at that conclusion of those monetization and leasing efforts, our core FFO is going to well exceed what’s necessary to fund the dividend. The gains associated with various transaction activities from a basic REIT level are intended to be distributed to shareholders. And so, generating the AFFO through a combination of core and gains is just fine by us right now. And so, as we look out – there is nothing in our radar that would adjust the dividend negatively given the activity that we have going and over the next 18 months or so, we believe that the core FFO in and of itself will more than amply cover the dividend.

Your next question comes from Jamie Feldman of Banc of America Merrill Lynch. Your line is now open.

Thank you very much and good morning. I was hoping you guys could give a little more color on just conviction on how we will see a back half recovery. Maybe talk a little bit more about the conversations you're having with tenants and then in terms of lead time, I mean if you're having discussions now, how long before you actually see leases and actually see cash flow flowing through to the bottom line.

Let me – it might be a combination of us, Jamie, taking that. I think we are reasonably positive based on discussions that we had with customers. We do survey our customers on a quarterly basis. And late last year, they were telling us that they felt that they would be expanding by the second half of the year and interestingly enough when we talked to them again, they are pretty much saying the same thing. So we feel pretty convicted about the other thing that we see is if you look at the fact that we are starting $250 million of development, and last year we started $330 million of development, I mentioned that this is almost like a tale of two cities, on one hand in the core portfolio, it’s basically flat to down slightly. On the other hand, you have got this lack of supply that's in the market and you do have customers that are sort of snooping around and starting to sign build-to-suit type transactions and I think that that clearly just by looking at the development and the fact that we just signed another $125 million by the – between the end of the quarter and that this sort of last three weeks. I think it’s a pretty good indication that there is activity. If you talk to brokerage firms and one in particular who we talk with prior to the conference call, they will tell you that their book overall of business is up somewhere in the neighborhood of 10% to 20%. Now the interesting thing is that that’s activity and not necessarily net absorption. But activity nine times out of 10 does lead to net absorption. So whoever you talk to out in the market, they are feeling a lot better but the truth to matter is that we tend to lag six months to maybe nine months behind. First, the companies create sales and then they increase inventories generally speaking. So we will see but we are feeling a lot better about what we are seeing out there. And I don’t know, Chuck or Ted, if you guys want to add to that.

Thanks, Walt. Jamie, they are also not – a year ago, they were talking about potentially contracting in a variety of facilities. We are not having those conversations any more. Additionally when we do these surveys, we ask them what capacity that they are at in their supply chain. A year ago, you would have heard that in the mid 80s. We are starting to hear that in the high 80s to 90s and they don’t ever want to go much above 93% to 94% because it creates inefficiency. So you are starting to see – that their activity level is being based upon what they anticipate which are the sales that Walt talked about, global economy improving and activity levels have risen over the last year.

Your next question comes from Steve Sakwa of ISI Group. Your line is now open.

Okay. Thanks. I guess I just wanted to kind of go back to the pace of leasing. It looks like, in the lease and the direct-owned portfolio on page 1.5, things kind of tailed off pretty dramatically here in the first quarter. Can you guys just help me think about what kind of pace of activity do you need to see to really start moving the needle here on the occupancy front?

I will take the leasing in Q1 and the direct for example, we went back and looked at it historically and Q1 for a variety of reasons, most of them anecdotal always seems to be a lower quarter and actually were splitting out direct and core and as you took investment management back a few quarters in the Q1, you would find a similar trend excepting this quarter. You speak to customers and many of them have a retail component in their supply chain and they are not highly focused on leasing warehouse base in the fourth quarter and that spills over into Q1. You do see some trending up of restocking both short and long-term for back to school and the holidays, but that trending upward usually is a Q2 through Q4 occurrence.

Let me give you the supplies on one hand and then I think the upside on the other hand is I would say that we were probably – surprised at the drop in investment management because we were starting from 93.5% number and that – given the market conditions we did expect to come down and I think we guided there, okay. What surprised us a little bit was the 30 basis point drop in the core. Candidly what surprised us on the upside was that the development went from 62 to 67. And I would have – I would have said it’s probably more like 3% to 4% but 5% will take it. You are not going to see the cash flow coming through from that development until another couple of quarters from that leasing because you do a least but they don’t start paying the rent for another three to six months after you do the TI's and the like. So the upside is if you look at that direct-owned portfolio in page 1.5, it’s now at 83.7, it was at 78.8 nine months ago, that's progress. Obviously that's driven by the development. Overall the quarter stayed about the same. And so, we think we bottomed out from an occupancy perspective generally speaking plus or minus could we see it go up or down 30 basis points or so in any quarter, 40 basis points, sure and we saw that in the first quarter and it disappointed us. That said it’s not completely out of line and we believe we are bumping along the bottom, we think we are making progress overall in the development. And hopefully brighter days are ahead and that we are hearing good things in the market but we will talk about it after it happens as opposed to before it happens.

Your next question comes from Sloan Bohlen of Goldman Sachs. Your line is now open.

Walt, just a question. We heard a kind of a quote yesterday on a potential banner year for private capital raising. Can you maybe comment on what you guys are seeing out there, and whether that changes your perspective on your guidance for asset dispositions or even potential new fund vehicles?

Yes, that's a great question. Sloan, there is no question that there is a lot of private capital out there today. And candidly it sort of surprised me. I wouldn’t assess six months ago that it would be as active as it is. We have had some discussions with some partners of ours that we have done business with globally and there is – as I say, there is no shortage of capital today which is the good news. We started the year and it’s in our plan thinking that we would be disposing of certain assets in the U.S. outright and then potentially putting together a fund and/or joint venture towards the end of this year. That is still in our plan and we continue to have very, very preliminary discussions with some of our partners about it. I would tell you that I have zero concerns at this point in time that we would get that done, absolutely zero given what we see out in the market. It’s really more a question of our timing because our timing is – really needs to be lined up somewhat with our developments. And so we have signed 250 million of starts this quarter. We think we will sign 700 to 800 this year but you sign it but you don’t start the development and actually start spending money substantially until five six months after the leases are signed. And so, we are trying to think about how do somewhat coincide those sales of that joint venture with our actual developments in progress and that's why it sort of pushed it back towards the end of this year in our mind. But there is absolutely no shortage to capital. The other thing I would say is I believe this time around that capital sources will gravitate more and more to operators that have co-investment. And when I say operators, I am talking about best in class operators and there isn’t any question in my mind and I don’t think anybody on the phone that we are a best-in-class operator in the industrial business. So we think that we have got a very attractive story relative to the capital. And when it comes time to raise it, we don’t think there will be an issue at all.

Your next question comes from Ki Bin Kim of Macquarie. Your line is now open.

Just two quick questions. First on page 1.5, did you guys change the way you report occupancy because it looks like the labels and the numbers are slightly different than last quarter. And second, if you can give an update on the marketing efforts on the Eaton Vance portfolio. And also specifically looks like you guys split up the portfolio fund six through 10 and you guys split up to like six through eight and eight through 10 for reporting purposes. And what the rationale was behind that?

Let me take the first part of that, Kee. The organization on page 1.5 changed slightly and really what's it’s focused on is the fact we have a core direct-owned portfolio and we have a core completed development portfolio. And our – as we have said for the better part of last six or nine months, that development – completed development portfolio is really going to become part of our core portfolio and becomes more so every day was we continue to lease up and complete those properties. And this is sort of an evolving effort to have you focused on what’s the leasing in the overall core wholly-owned portfolio and again that will improve as we lease up the development side of that. But at a point relatively soon they merge, they become sort of one portfolio and we will track that. And so we wanted to just sort of lay that out and make sure that people are focused on that but also for the time being, split it out so that you can continue to track the progress. Ted, you want to add to Eaton Vance?

Yes, Ki, this is Ted. We marketed on behalf of – upon Eaton Vance’s request two of the funds and got offers and then ultimately, us and Eaton Vance were not satisfied with the offers, portfolios were not highly occupied and they weren’t attractive in this particular environment. People are definitely paying top dollar for -- Class A assets are 100% leased in this portfolio at this point in time, didn’t meet that criteria. So we have chosen to pull those off the market. There are three other funds and I believe Eaton Vance is interested in marketing those and I think there will probably be more to follow on that.

And Ki Bin to your question, you recall in Q4, we wrote off our investments in two of those funds. So we have removed them from our numbers if you – if you were to put them back into the investment management portfolio, the occupancy would have declined by 57 bps. The total operating portfolio would have declined by 28 bps.

Your next question comes from Michael Bilerman of Citi. Your line is now open.

Thank you. Bill, maybe you can give a little bit more granularity on the ramp in core FFO. I know you tried to give some of the details; but if you look at the $0.11 in core without the development gain this quarter and your guidance of $0.55 to $0.60, you get to a quarterly run rate in the last three quarters of $0.15 to $0.16. That's almost $75 million to $100 million of annualized FFO. And I'm just trying to get a sense of what are the big things, I can't imagine that's all capitalized G&A and capitalized interest that's driving that. So maybe you can walk us through some of the big components of really going from $0.11 and it sounds like second quarter is going to be more flattish, up to almost $0.16, $0.17, $0.18 by the end of the year, just given your share count, it's a lot of dollars in FFO. And really what changed relative to mid-March when you had your bond offering where you said you were comfortable with your core FFO guidance and now you've decreased it pretty meaningfully down from $0.60 to down to $0.55 to $0.50?

Michael, let me try to address it in two parts. First of all, let me touch the second part relative to the core FFO guidance. The bond offerings had a dilutive effect and that's the biggest single piece of the decline and that's again associated with the fact that we – at the end of the day we have reduced our line of credit, which is our cheapest form of borrowing as a result of those. I think we have done a great job from a risk management standpoint of pushing out maturities and basically aligning our line of credit that are with what is active development portfolio. And others have gone longer in that regard and there is a risk element associated with that. But a couple of things that sort of popped out in March well past the offerings, we are really – the winter expenses that flow through both the fund portfolios, and our core portfolios sort of gave us a little bit of surprise there and it’s a one-time charge from our perspective. And there is a chance, we are digging into it that some or all of that maybe more recoverable than we – than we are planning right now. And that’s a good thing. We also took a tax charge of about $5 million, that is a one-time item. And so, when you start getting at that, you got about $0.06 right there. So there is a variety of things that impacted our perspective relative to the overall year’s guidance. But the other side of it is that we believe our development activity will – the $700 million to $800 million that we guided to will definitely come to fruition, we are well along in that regard. However the occurrence of those development costs…

Your next question comes from Brendan Maiorana of Wells Fargo. Your line is now open. Brendan Maiorana – Wells Fargo Thanks, good morning. I just wanted to revisit the land monetization, which you guys had in the quarter, which was good. It appeared that most of the land as it relates to development starts was from Japan, and the land as a percentage of the overall development cost was pretty high, at around 35%. I'm wondering if you can just give us an outlook on how you think you'll be able to monetize land with your North American land and your European land over the next year or two or three. And what a reasonable percentage of total development costs your land is likely to be?

Hi Brendan, this is Ted. I will do best I can at addressing that. It always gets to be a challenge to try and talk about percentages of land when you are looking at it globally because every part of the world, land is a different component and costs more in many parts of the world than in others and therefore is a much higher percentage in some areas and lower in other areas. Japan happens to be a market that has a very – land rates are very, very high. The UK would fall into that category, some markets within the U.S. would fall into that category. So I think we use on average approximately 25% of the – for non-Japan transactions. And I think we feel very good about the activity level we have both on build-to-suits and in land sales. I mean it’s encouraging, we are very focused on getting our land bank down. The Japan deals are great opportunity for us, so are the other development deals that we signed. I think we feel like we are definitely on the right track toward meeting our goals for this year and beyond.

And Brendan, I would say this. I believe it’s one our website, we did a presentation a month or two ago where we laid out the fact that we – our goal is not to take our land to zero, okay. Our goal is to take our land to somewhere in the neighborhood, to let’s say $600 million to $1 billion and you get there. We believe that on a run rate basis we can develop somewhere in the neighborhood of $1.2 billion to $1.5 billion per year. Now we are not going to hit that this year because it’s a transition year. But I think when we finally get to a recovered economy, it’s there. So if you think about land at 25% to 30% of overall value, and you need to carry at least two years to two and half years at land, you get to those kinds of numbers. So our view is we want to take our $2.5 billion today down to -- I am just -- roughly the midpoint of that would be $800 million. And we think that that's about a two and a half to three year process to do that. In other words, we are going to working off excess land. Over the next two to three years, we will probably be working off more land than we buy. We won’t be buying zero because in certain markets you may be at no land and in other markets you might have some excess land. But you are working off more land than you are buying and ultimately you are working down to that sort of $800 million, $1 billion, whatever that number is. And then getting, at that point in time you got land where you want it. And that should create also additional upside in our earnings because whether or not you sell the land which you would pay down debt or do something with the capital that would generate a return or you put it into production at some return on invested capital, either way you are getting a return on it and therefore monetizing it. And so that's our real goal and objective long-term. And one other point, we guided this year to $350 million to $400 million. Obviously we monetized the $138 million in the first quarter. We feel very, very good about hitting the $350 million to $400 million at this point.

Your next question comes from Michael Mueller of JPMorgan. Your line is now open.

Yes, hi, Bill. Just want to go back to the comments about the run rate and the ramp up, I think you said there was $0.06 of one-time items if you would factor in the $5 million tax charge plus the winter expenses. That implies, the winter expenses on a one-time basis were $20 million, $25 million something like that. Is that correct? And then secondly, you keep mentioning the capitalized cost and capitalized overhead. If we're starting with the $42 million G&A expense in the first quarter, I mean how significant of sequential changes are we going to see to that G&A expense that will help you go from the $0.11 in Q2 up to $0.17 in Q3 or so?

I don't know, is this business – Michael, I am not sure, I follow up the beginning of your numbers there because the cost that we are talking about relative to the winter cost, et cetera are nowhere near $20 million. In terms of sort of Q1 big picture items, there is about $5 million of taxes that are sort of one-time. There’s probably versus an historic run rate, an increase in interest cost both in the funds and on the balance sheet as a result of the activities that we have undertaken. There was – interestingly enough on – and I think Michael Bilerman may have said a few minutes ago, these costs sort of are more meaningful these days, but I mean as an example we have payroll taxes in the first quarter where you pay the lion’s share of FICA in the first quarter and that’s not a run rate going forward. And so, there is whole host of things that factor into sort of a first quarter lower FFO and that for us was exaggerated a little bit by some of the one-time cost and it was offset by some benefits that we saw in the first quarter as well. But we feel pretty good about the ramp up through the rest of the year and again, you are not going to see a big piece of that in the second quarter because in fact, we have – to put things in perspective, I think we have a 163 buildings in our completed development portfolio. And we typically capitalize costs associated with those until they reach what we call stabilization, which is either they are 93% leased or they are completed for more than 12 months. And in the first quarter, we had 17 buildings as a subset of that in which we were still capitalizing various costs; 14 of those 17 buildings roll off into the stabilized category in Q2. And so, we will see a decrease in Q2 and Q3 of capitalized costs associated with the roll off of that and you won't pick it up again until Q4 when we start really incurring the lion’s share of the cost associated with the incremental build-to-suit development etcetera that we have started. I think that answers the question.

Your next question comes from Steven Frankel of Green Street Advisors. Your line is now open.

Thank you, and good morning. I have a couple of different questions. First of all, we've seen some of your peers go out and raise equity in the public markets recently to take advantage of the recent rally, get some fire power and/or delever. Can you guys update us on the ATM? I know you guys have one of those you announced recently and your thoughts on an equity raise? Secondly, in Europe conditions there weakened materially during the quarter. We saw occupancy fall more 100 bps for PEPR, and almost 200 bps for the other fund PEPR 2. How does that enter into your guys’ calculus on starting build-to-suits? And why start build-to-suits if you have so much supply in your current high quality portfolio in Europe?

I will take the second piece. First of let me say this, Steve, good question. I think will take the second piece of it and then I will let Bill take the first. You start build-to-suits because companies want it not because you want them. I mean what’s happening is that companies are looking for a certain size in a certain location. Nine times out of 10 on one or two pieces of land that makes sense to them. And you might have an existing building that's out there but the fact is that it maybe – it may not fit them, they needed a 100,000 square feet and you got 80,000, they can – that particular building just may not fit them or maybe they want 100 with an additional 30 of expansion. And so what you are – what you are finding is that they are less and less of those choices and you don't have developers building those choices on a speculative basis. And so, while the market doesn't appear to be growing per se in terms of additional occupancy, it is certainly – there are companies that are in need of space that just isn't out there. And so we have got really one or two choices, you can either ignore it or in our case you have got land that needs to be monetized over time. You can hop on it and do it. And there aren't that many companies out there that have the capital today to build these buildings. And so, we think it’s an opportunity and again, I think you will see as you look at our quarterly numbers throughout the year, I think you are going to see that we will do a substantial amount of that build-to-suit business which is indicative of the fact that the market is there. There are just people that need it. Why do it? In addition to that, frankly the construction cost today are somewhere in the neighborhood of 20% down from where they were two years ago. And so, you have always people that are floating around in the market saying, “Well, boy, we are buying these assets at a 20% to 30% discount to replacement cost.” And they are fooling themselves to a certain degree because replacement cost had changed and now it may be back to where it was in 2007 in a couple of years but the fact is that replacement cost are much lower today. And I would much rather build a new building preleased on a long-term basis with a great customer and monetize land at 20% below where I could build a building than be out there knocking our heads against everybody else in the market that in 20 other buyers that are looking to buy something that creates no value on the long-term basis. That's why we are developing today and I think ultimately you will find the demand is there to meet it.

I just want to caution you, I mean there has been a drop in occupancy in Europe, it’s going from 96.27 to 94.74 is – I mean 94.74 is a phenomenal occupancy level in any circumstance, this is one of the toughest markets any of us have ever seen. I think that’s a fully occupied market at 94.74. That is not to say that might drop a little bit more but the overall occupancy levels in our portfolio in Europe are fantastic at this point and we have a team out there that’s doing a great job with new buildings leased.

Bill, ATM.

Yes, just relative to the ATM, the ATM program is something we have had in place for many, many, many years and we have used it intermittently. And so, as you get near the end, we used it in the fall and just to tab in earlier this year, to about $28 million. And as you get near the end, we reload that program. We thought an opportune time to do that was when were in the midst of following the covert offering and entering into the blackout period for the earnings where we are in a period where we technically couldn’t sell anything for about 60 day period. Just to take the heat off the market, then Kim we are going to go up and sell a bunch of stock. The practical reality is that if we choose to raise equity of any size, we will do it in an open market transaction. But the ATM offers us the opportunity that if circumstances arise where you can take advantage of something and use $50 million or $75 million here and there. That program is available to this and I believe that we would use it. So the main message there is if we were going to do an offering or raise equity of any size, we do it through the normal process in open market.

And Steve, I want to make one of the point to back to the development, which I didn't make before but I am glad you raised the question. I made a comment in my comment, I should say prepared comments that we think that between the third quarter and the fourth quarter that we have created somewhere in the neighborhood of $60 million of NAV with our land in its book basis and that's on basically five deals if you look at our starts in Q4 and our starts in Q1. And I think the interesting thing is that we believe today that were we to sell these starts, we would create something there in the neighborhood of $16 million. We would be roughly at 20% to 21% margin on our cost with our land in at book bases. And that really is indicative of what's happened to cap rates in the last year. And again, I would rather build it at much higher yields than be knocking our heads out there to buy it on the buy side. I think that's the way to create NAV.

Your next question comes from David Vick of Stifel Nicolaus. Your line is now open.

Good morning. It’s Josh Barber here with Dave. In light of some your comments about Europe, I was just wondering why PEPR II had taken such a large write-up. It was written up by almost 50% in the quarter. Was that really just cap rate compression so much in the last three months?

I think in PEPR II and candidly I think any weaker share is the exact same number off by a couple of pennies or by euros. I don’t know if you said up or down, but if it moved down, that would be because of the euro exchange rate going down between Q4 and Q1, but the actual NAV per share between the fourth and first quarter, I think is really close. I am not sure I understand -- why don't we take that question if we could offline and we will be happy to get back to you on it.

Your next question comes from George Auerbach [ph] of ISI. Your line is now open.

Can you provide some color on the economics of the dispositions and developments in Q1 and also with regards to future dispositions, are you still guiding to roughly $1.4 billion in sales this year and what kind of pricing should we expect?

Yes, George, I can. Essentially there was $172 million or $171 million of dispositions in the first quarter. You got to back out $47 million of that was in land, which we’ve sort of spoken to. Of the rest of it, 95% of that was in two buildings, okay. One was the narrow Marischino contribution to JLS in Tokyo and that was $88 million, that was at 5.9% cap rate. And the other one was a building that was in New Jersey, Port Reading that we did a build-to-suit on, that we had a prearranged agreement – an agreement with our North American fund, which we cut last year to contribute it when it was done in at an 8.25% yield and I would say that 8.25% on new buildings today would probably be somewhere in 7.25% to 7.5% range worst case. And so, there is value, obviously that the funds got and because we had cut the deal last year, the cap is 8.25%. But 5.9% I think is very characteristic of the Tokyo market today and then when you add land to that, you come up to 95% of the $172 million.

And let me just – because we have pulled up some of the data. In response to the last question, the euro at March 31st for asset value purposes was at 134 and it was 144 at year end. And so, that difference accounts for 100% of the decline in the NAV (left to).

And George, one of the question – one of the things, I’m sorry, I missed your second part of your question, we are still guiding, we are not changing at this point our overall disposition guidance for the year.

Your next question comes from Shane Buckner [ph] of Wells Capital Management. Your line is now open.

Yes, you had mentioned earlier NAV accretion based on current cap rates. I was wondering if you could just talk about your internal view where cap rates may go with a recovery. Are you making decisions about your portfolio based on an improvement in cap rates? Or do you expect the recovery to increase in interest rates and cap rates stay flat? Just trying to get an idea of how you think about it as you're making decisions on your portfolio and development activity.

Shane, I don’t think – it’s hard to say, obviously, but I don’t know that I would be a proponent to say that cap rates are coming down from where they are today. I think cap rates are where they are and obviously they have come down substantially in the last 12 months. And so, it would be – I think it would be crazy. Even though I think there will be more capital in the market, I am not sure I would believe that cap rates are coming down substantially, the flip side to that is because of the amount of capital in the market, I am not sure that they are going up either much in the next year. And so, how are we planning our portfolio around that? Well, one of the things that we talked about is that we were going to sell some assets throughout the year predominantly in the U.S. and trade those dollars into development assets where we think we can create NAV. And I still believe today that that is the right thing to do because there isn’t as much competition to build existing buildings. We have a land bank that we need to monetize and we have got the people in the place in customer relationships. So we are best positioned to do that. So why would you gravitate your core competency and in doing so, sell assets that – whether it’s a feeding frenzy. And so, we continue to have that in the back of our minds candidly we are less anxious to do it immediately because the developments will ramp up more towards the end of the year and selling assets substantially in advance to the cash flow needed for those development is significantly dilutive. And so, we are going to try to time that a little bit better but it really hasn't changed our overall view of how we go about our business right now.

I think the business model that we currently have also doesn't have – I mean we certainly have NAV risk relative to cap rates but our business model is not built around cap rates anymore. I mean we are not building buildings to sell them. Cap rates are going to go up and down, rents are going to go up and down Respectively are going to develop properties at a return that's higher than our weighted cost of funds and play for cash flow. And we think that opportunity is out there especially within developments on land that we own.

Operator, we have time for one more question.

Your last question comes from Ross Nussbaum. Your line is now open.

Hi, guys. Just a follow-up on my first question because I heard a couple of different messages I wanted you to clarify. Bill, I thought I heard you say at the beginning that you're comfortable at least for the time being having part of the dividend covered through development sale gains until you start generating more operating income off of the development assets. Yet, at the same time, I'm hearing that the business model isn't predicated upon cap rate changes. And I guess those two statements really stand out to me in the sense that wouldn't we all feel more comfortable if the dividend were being covered simply by operating cash flows going forward and development gains weren't part of that at all?

Yes, I think we don't feel. I don't think there is anybody on this call wouldn’t feel more comfortable if the dividend were currently being covered on a pure operating cash flow. But the fact of the matter is that until we monetize the land and lease up the vacant space, we are going to take advantage of the gains that we see out there and use that and maintain our dividend, and to distribute the funds to shareholders as REITs are supposed to do. And so, you are 100% right, Ross. And I hesitate to chuckle on it, but it’s – I know the question is probably deeper but it’s an obvious answer. Yes, we would all prefer that covered and it’s straight out of operating cash flow and core cash flow. I don't whether you wanted to –

No, Ross, the only thing I would add to that is if you have got $175 million of additional FFO and simply leasing up your development pipe line, moving up your occupancies a little bit and that's not with regard to monetizing land and the upside associated with. I don’t think that you are really that far off at this point in time and we have no – we got no intention at this point in time of reducing the dividend. So, operator, I think we are done at this point.

Okay, and I turn the call back to you if you have any closing remarks.

None here.

Well, thank you everybody for participating in today’s ProLogis Q1 2010 conference call. You may now disconnect.