Good morning, everyone, my name is Abe and I'll be your conference facilitator today. I'd like to welcome everyone to the ProLogis first quarter 2008 financial results conference call. Today's call is being recorded. All lines are currently on 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, Senior Vice President of Investor Relations and Corporate Communications with ProLogis. Please go ahead ma'am.

Thank you Abe. Good morning everyone and welcome to our first quarter 2008 conference call. By now you should all have received an email with a link to our supplemental, but if not, the documents are available on our website at prologis.com under Investor Relations. This morning we'll first hear from Jeff Schwartz, CEO to comment on key accomplishments and our sustainability initiative; Walt Rakowich, President and COO will cover ProLogis's operating and company's performance and global leasing activity; Ted Antenucci, President and CIO will discuss investment activity and Bill Sullivan, CFO will cover financial performance and guidance. Before we begin the call, I'd 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 operate 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 10-K. I'd also like to add that our first quarter results press release and supplement do contain financial measures such as FFO and EBITDA that are non-GAAP measures. And as we've done... sorry, in accordance with Reg G we've provided a reconciliation to those measures. And as we've done in the past, we give a broader range of investors and analysts and opportunities to ask their questions. We will ask you to please limit your questions to one at a time. Jeff, would you please begin?

Yes. Thank you Melissa, and good morning everyone. Our global platform continued to perform well in the first quarter despite uncertainty in the overall US economy. Driven by the expansion of our investment management platform globally, continued solid development margins and importantly, stable results in our property operations throughout the world. Before I touch on each segment, I'd like to share a quick observation. Like many of you, I read the Wall Street Journal and Financial Times Online in the morning, and frankly, the headlines are pretty frightening. But then I talk to our people in Asia and I feel a bit better. Then I talk to our team in Europe and I feel even better. Then I talk to our North American team and they hear that things are still relatively stable. So by mid-morning I feel pretty good about the business. Then I get up the next morning, read the papers and the cycle starts all over again. Despite all the negative headlines, at this point, the current US financial sector crisis is not being reflected in a significant way within the industrial market, nor in our portfolio. Our stabilized occupancies were down about a point compared with the end up last year but basically in line with our 94% plus expectations. Our positive same-store results reflected continued rate growth and year-over-year occupancy increases in the pool. We do expect however, that the US industrial market will soften later this year. Walt will have more related to our expectations for the US market shortly. And while the US and UK has some risk of softer conditions, we are fortunate to have the most globally diverse platform in the industry and are seeing continued strong demand from China, Japan, Central and Western Europe, as well as our new markets…

Thanks, Jeff. I'll start by covering overall operating performance, which remains solid throughout the first quarter, supported by the key growth drivers that Jeff mentioned a few minutes ago. Our first quarter leasing of 26.5 million square feet was down slightly from average levels throughout 2007, but up relative to leasing in the first quarter of last year. Same-store net operating income was up 3.3%, same store rental rate growth was up 6.6%, offset by higher expenses, the majority of which related to property taxes and CAM which were reimbursed through expense recoveries. In addition, we recognized roughly $6 million related to our share of damages from tornadoes that struck Memphis in early February. Our overall stabilized occupancies declined 93 basis points, to 94.6%, with Asia at 98.7, Europe at 92.4, and North America at 94.8%. In the U.S., as Jeff mentioned, we continue to watch for signs of material weakness by closely monitoring delinquencies, bankruptcies and subleased spaced. So far we've not really seen a major diminution in our operating metrics. Bad debt is only running at three-tenths of 1%, and we've had six bankruptcies so far this year versus 26 in all of last year. We are also seeing decent early renewal activity on leases scheduled to turn over later this year, however, our expectation given lower overall activity levels and the deferral of customer expansion plans is that the U.S. market fundamentals will soften a bit further, and occupancies will dip a bit more before they firm up. In the top 30 North American markets, the vacancy rate moved up slightly from 7.8% to 7.9%. First quarter deliveries were 26 million square feet, down sharply from Q4 last year, deliveries of 46 million square feet, but still in excess of net absorption of 21 million square feet.…

Thanks, Walt. The continued global demand that Jeff and Walt described supported starts of the 929 million in the quarter, including those in our CDFS joint ventures. Roughly 46% of this amount was in Europe, 42% in Asia and 12% in North America. Our pipeline of properties under development at the end of the quarter represents about 4.1 billion of total expected investment, combined with completed developments and repositioned acquisitions of $3.7 billion, we have a CDFS pipeline of just over $7.7 billion that was 42.8% leased at quarter end. While this total lease percentage is down slightly, from about 46.3% at year end, it will fluctuate from time-to-time due to the mix of assets in the pipeline. During the quarter, we acquired a major distribution part outside Shanghai that included several vacant buildings, and we broke ground on inventory developments in several new markets in China. This activity which will bolster our leading market position in the long-term has a dampening effect on pipeline occupancy in the near-term. CDFS completed developments and repositioned acquisitions are on average 54% leased, which is a healthy level and supports growth in our investment management platform. As far as starts for remainder of the year, we have scaled back on inventory starts in the U.S. and UK and are therefore more comfortable towards low end of our 4.4 to $4.8 billion range, which represents about $300 million to $400 million increase over last year. We expected North American starts will be down relative to last year with the reduction in US speculative starts partially offset by increased build-to-suit activity and continued growth in our Mexico and Canada businesses. European starts should be slightly higher than in 2007 given growth in Central and Northern Europe. And we expect Asian starts to be higher as…

Thanks, Ted. FFO for the quarter was $1.38 per share, up 10.4% over the prior year principally due to growth in FFO on fees from our property funds and continued healthy development margins. Earnings per share of $0.73 were down slightly relative to last year due to a $0.12 charge in Q1 2008 related to our share of re-measurement and settlement losses on interest rate, derivative contracts entered into by ProLogis's unconsolidated property funds. Looking at property operations, net operating income from our direct owned portfolio was $178 million, slightly lower than last year, due to a higher level of rental expenses, which for Q1 2008 included the $6 million reserves set up for our share of the damages from the tornadoes that struck Memphis in February. Turning to our CDFS business, proceeds from dispositions and contributions of more than $1.4 billion for the quarter are a little ahead of our full year expectation of $4.5 billion to $4.9 billion. FFO from CDFS dispositions was $278 million in Q1 2008 with a post tax post deferral margin of 27.6% from our developed and repositioned assets and 25.4% on a blended basis reflecting roughly $83 million in proceeds from the contribution on properties from acquired property portfolios in Europe and Mexico which were contributive at cost. At March 31st, we have approximately $293 million of assets remaining in our pipeline from the Europe and Mexico acquired property portfolios, all of which we expect will be contributed later this year at cost. As we have said consistently, we believe development is a mid to high teens margin business under the long term. Due to our visibility on embedded margins within our completed or soon-to-be-completed developments and repositioned acquisition, we expect our post tax post deferral margins to be in the range of…

Thank you, Bill. Before I open the call to questions, I would like to leave you with four key takeaways. Number one, while the US maybe slowing, we drive greater than 85% of our incremental growth from outside the US, focused on markets where conditions remain quite healthy. Thus we are well positioned just for continued growth in both FFO and NAV per share. Number two, our U.S. portfolio is in great shape to weather the current downturn, which draw credit quality customers and we are realizing the benefit of a strong build-to-suit business that we focused on and built over the last three years. Number three, with the addition of our new China fund and increased capacity in our Japan fund too we now have over $15 billion of total remaining capacity in our funds, which supports continued growth in our investment management platform. And number four, most importantly, we have an incredibly deep management team that has been cycle-tested. The combination of this team, our global platform, strong balance sheet, investment platform and powerful customer relationships positions us well in these times. Operator, we'll take questions now. Question and Answer

Thank you. [Operator Instructions]. Our first question of the morning, we'll go to Jay Haberman at Goldman Sachs. Please go ahead.

Hey, good morning. I'm here with Sloan as well. I guess a question for Jeff or Walt or Ted, just specifically on the impact of the credit markets and I guess on a global basis, can you talk a bit more, just expanding on decision making process, obviously leasing and then ultimately cap rates and margins, because you are really talking about weakness in the latter half of the year. And I'm just curious on two fronts. Number one is, 3% to 4% same-store NOI growth assumption of the 95% occupancy, as well as, do you consider reducing your starts even below that 4.4 billion sort of low end of the range?

Well, Jay Jon let me start. While we have talked about not seeing a significant... I mean issue in the U.S. market, which scaled our U.S. speculative or inventory starts down dramatically by about 80% to get to that number. That number is somewhat... our total development starts are somewhat mitigated by the build-to-suits we have already signed. Obviously, build-to-suits is business that we focused on, really ever since the Catellus merger. Catellus had some strong, strong talent, and we had the ability to add the talented Catellus staff to the people we already had in ProLogis. We had the capacity to build an extremely counted build-to-suit team three years ago, and the dividends from that are really starting to pay off today, those relationships they developed and the expertise we developed in-house, it takes a while to build that kind of business, but we're reaping the benefits of that today. In the UK, we started exactly zero buildings in the first quarter, but we are seeing some significant build-to-suit activity and that is really helping to drive the business, we expect in the halter half of this year, despite the overall potential for slowdowns in the economy. But we feel good about the way we've allocated capital, we've got some fast-growing regions of world, China, Japan remains strong, Western Europe remains strong, with the exception of the UK and Central Europe is very, very strong, but that's without even layering in the additional growth markets we have in India now, and when you see the kind of market activity in the GCC, it's unbelievable what $100 plus oil does for those markets.

And we'll go next to Jamie Feldman at UBS.

Thank you. I was hoping you could address what you are seeing in terms of appraisals on your properties and the funds in general, maybe if you could go by region?

Jim, why don't I do outside the U.S., and then Walt or Ted will pick up the U.S, and that way we could split this up a little bit and you guys don't have to get tired of hearing me talk the entire time. But in Europe, we have seen some diminution in values clearly on the appraisal side, in the UK. There's many in the UK that think the market has overreacted and will swing back in the latter half of the year. I think that there's probably some semblance of truth to, that if you look at the strength of the covenants 15 to 20 year leases, fully recurring leases and the way that market moved by circa 10, 15% on Class A product, and more than that on lesser quality product, more than any place else in the world moved, there's a significant chance that there will be a correction in that market in the second half of the year. That being said, we are seeing cap rates relatively stable in Western Europe, really no appreciable movement whatsoever. Believe it or not, we've seen some continued compression, very, very slight in Central Europe. We've seen cap rates remain constant in China and in Japan. So overall around the world, it's been relatively stable with the exception of the UK, and I'll let somebody else pick up on the U.S. if they like.

I will hit it, Jamie, this is Walt. As it relates to the US, I would say... well, first of all, you have to remember that what we are really contributing into our funds are newly minted product and so we have not seen that much diminution at all in the appraisals, maybe 5, 10 basis points, but not much, I mean as Jeff said, substantially the same. And of course it's hard to compare it exactly to the same exact asset you had last year, but I would say they are slightly off but not much. And we are really not appraising much Class B product or B or C product because that's not what we are contributing into our funds, but we do have anecdotal evidence that the Class B product is probably off as much, say, 100 basis points, maybe even a little bit more than that, or sort of, if you will, second class product. But overall, I mean for really good product in good markets, pretty much appraisals are holding up from where they were last year.

And we feel real good about the fact we sold at $1 billion that Class B product in the US in '07, '06, and we deployed that capital in markets that we haven't seen cap rate moving and we have seen stock markets which has positioned us well.

Our next question, we'll go to Michael Bilerman at Citi.

Thanks, good morning. Irwin Guzman is on phone with me as well. Ted, I was wondering if you can dive a little bit deeper. You talked about the percentage leased in the CDFS pipeline going down 400 basis points to about 42% and also reducing the starts down towards the lower end of your range, Why shouldn't we be concerned about that, A, impacting, potential margins from not being able to get them leased up in time, so they are going to sit on the balance sheet for longer, but also just not developing as much product as you would had hope to and the pipeline shrinking. Maybe just help me calm some nerves about that.

Okay, Michael. Okay. I'll first start with the starts. You know, we are, I guess, trying to focus everybody on the lower end of our guidance. It's still... we are still guiding to 300 to $400 million increase over last year. We are definitely still growing, but we are trying to be prudent in a few areas of the world where we think it makes sense to be prudent and overall we're still growing our pipeline and we've got great growth opportunities in some of the new markets we just announced deals with. So we are still very bullish in our ability to grow our pipeline. We are just looking at markets that have been stable for us in the future, seeing some softness in those markets and slowing down developments, primarily inventory developments in the U.S. and UK. Those are really the two areas that are... we are anticipating a slowdown in our starts. Relative to the pipeline, we obviously take a hard look at that number. That's something that we are very focused on. The drop in that pipeline percentage leased really comes through China. I mean, we acquired a distribution part outside of Shanghai, it's a great located piece of property, it's a change in use type of opportunity, it's approximately 2.7 million square feet. That added with starting new inventory projects in several new markets in China, but that was basically all of the drop in the CDFS pipeline leasing. So we are comfortable with that, we know where that money is being deployed and we are very focused on growing our position in China. We've got a great leading market position, and we are doing everything we can to capitalize it.

We have demand for all of that space, but if you look at just that 2.7 million square feet that accounted for 50% of the 400 bps, it's part of reallocating our capital with fastest growing parts of the world, being intelligent investors, and taking advantage of the investment management platform that we created.

And, Michael, this is Walt, where are you going to see that if you look on page 18A, so you know in the supplemental, you'll notice that under Asia, properties under development, you see that you've 15.8 million square feet that's 10.7% leased. And then in addition to that, if you see Asia CDFS properties, repositioned acquisitions you will see that's 5.8 million square feet, 34% leased. That's the thing that Jeff and Ted is really referring to, we basically 10 million square feet or so in China that just literally got started and is dragging that number down and we feel terrific about the opportunity of leasing in China today.

And I'll just add my $0.02 on the development starts, I mean, realistically if you think about remaining guidance at 3 or 400 million square feet... $300, $400 million over the last year, and a reduction in U.S. starts relative to just being prudent, you know, you could look at $500, $600 million increase over everything but U.S. Okay? And so I think there is still strong growth going on around the world and we're taking advantage of it.

Our next question will go to David Cohen at Morgan Stanley.

Hey, good morning. Can you guys just talk a little bit about the margins on the development for the remainder of the year if you're sticking with 18% to 20%, and you did 28% in the first quarter, so you'll be around 15% to 17%. You guys are pretty bullish on cap rates holding up. So, can you just talk a little bit about why... talk about the development margins for the remainder of the year at 15% to 17%? Why would they be that much different if cap rates are holding up?

We've said 15 to 17 for the last three years. We underwrite to those margins and so cap... in a stable cap rate environment, I think that you should expect those types of margins. What we've experienced in the past was a declining cap rate environment. And you know, that certainly benefited us in our margins over the past several years. On a... at some point the two things really affect debt is cap rates and rental growth. In some markets we're actually seeing rental growth, so we might do a little bit better on margins because of that. But in a stable cap rate environment, I think that 17% to 20% margin range is --

Long-term is the right range.

Yeah. And you know, I'd just say but we still have close to $300 million of the acquired portfolio further it can go at zero. And we have a much more robust strategy on build-to-suits which typically come in at a little lower margin than the inventory. And so in this environment, you'll see a little decrease in that but we're still focused on sort of 18% to 21%, overall.

Okay.

And the next question goes to Mitch Germain at Bank of America.

Just interested in some of your thoughts on the Mid East markets with regards to demand drivers, infrastructure and I guess the quality in the current stock that's there?

Outstanding, outstanding, outstanding, terrible in that order. So let me... which was... and a completely accurate answer to your question but let's go to a little bit more detail. Demand drivers obviously unbelievable amount of wealth being transferred to the Middle East, in access of $300 billion per year. You have regions like Abu Dhabi with tremendous wealth, relatively small population, a tremendous need for infrastructure. They are getting it right this time around, they are investing in their own country. There is over $250 billion worth of infrastructure projects going on in Abu Dhabi today. That's a country remember with a population of about 1.5 million people, about 400 million citizens. So tremendous, tremendous infrastructure investment. Airports, roads, ports, et cetera and almost no stock whatsoever in the way of logistics, sincerely nothing that's really high quality. Look at opportunities in Saudi Arabia, again tremendous cash flows and much larger population, so it's a bigger overall longer term opportunity for us. Countries like Qatar, people don't realize the amount of wealth in Qatar. Qatar has... will have in 2011 gas revenue equal to the oil revenue received this year by Saudi Arabia. It's just... there is tremendous amount of wealth there, there is tremendous amount of infrastructure investment and it's a tremendous place for us to serve our global customers and to built out a platform.

And we'll go next to Cedrick Lachance at Green Street Advisors.

Thank you. We read them all at capital from joint venture partners outside of the US in recent months. I know you don't necessarily have near-term capital needs in the US, but if you were to try to raise more capital for joint ventures for the US, what do you think would be the reception from your partners? And do you think the terms would change from previous years?

Hi. Cedric in fairness, I think there is some concern about the US still, although we have a tremendous amount of interest from our institutional partners in some things we're looking at in the US. People see it and it looks very interesting is investors outside the US are exceptionally interested in investing in the US because not only do they see values, potential values in some markets, but more significantly they see a significant FX play. The whole country is on sale. All you have to do is go shopping in New York and just seem to see the number of non-US people filling up suitcases to take it back to London or Paris or Tokyo. And you see the same mentality quite frankly in investors that want to invest. At 160 Euro, want to buy assets in the US at today's exchange rates, they think it's a very, very good bargain. So I think there is opportunity to create some value for us by taking advantage of that.

And we'll go next to Paul Morgan at Friedman, Billings, Ramsey.

Good morning. About your comment regarding the multi-billion projects in the US, I'm curious as to whether that's... you're seeing that in certain kind of concentrated markets or regions. And then whether it's taking place because of developers pulling back from spec projects or could it be more kind of construction financing related, and if it's a latter or are you actually seeing anything that you might want to opportunistically take advantage of?

Ted, do you want to start now?

Walt, you go ahead, you start and I'll jump in.

Well yeah let me... I'll start it off Paul, good question. Interestingly enough, we said there was 26 million square feet of deliveries; there is also 26 million square feet of starts in the quarter. Roughly 60% of those starts were in LA, Dallas and Houston. No surprise in Dallas and Houston with oil being where it is and probably no surprise in LA. And so... and there is a lot of markets in that Top 30, probably half of them that have zeros where there are no starts. And we... and so regionally, it's concentrated and our analysis say that we expect for the rest of the year that that 26 million square feet per quarter will actually go down more, okay? And it may go down substantially more because people are really cutting back on spec development. Construction financing, needless to say is not easy to get without a lot of equity today. And yes, we do think there is opportunities because the flip side of that is that we had 21 million square feet of absorption in the first quarter, that's obviously down a little bit from last year but not that much. And the wild card is, will that continue? And if it does, I think we could be seeing a very healthy market condition and I think we'll see a very good uptake in build-to-suit development because there is not a heck of a lot of spec space that's out there. And so that's basically what we see today and that's kind of what we expect to see moving forward for the rest of the year.

Just to add on to that Paul. Walt mentioned 26 million square feet in starts for the first quarter. You know, fourth quarter of last year, the starts were actually quite larger, 46 million square feet. From what we're seeing, a lot of people got building started because they were concerned whether they could actually get financing going into this year and we think that basically people have done what they are going to do.

A lot of their commitments were about to expire.

And they took advantage of those commitments because they didn't think they could get further commitments. Certainly I'm talking to investors around the US and the people that partnered up with a lot of the private developers tech capital has dried up and it's going to be very challenging to get... whether it be equity or debt on speculative developments in the US. And as Walt said, we think that although this quarter is down dramatically from last quarter, we think that it did continue to tail up through the balance of the year.

And we'll go next to Lou Taylor at Deutsche Bank.

Thanks, good morning. Hey Walt, can you talk about your... just your operating margins for the quarter. You had a big jump in operating expenses relative to the growth in revenue this quarter. Can you just talk about that a little bit?

I will, Lou and that's a good question. You will see expenses basically going up in the quarter, somewhere in the neighborhood to $20 million to $22 million which looks very big. But if you look at it, about $11 million of the expense increase was due to taxes, common area maintenance; basically taxes are still a lot higher from increased old property valuations. CAM is higher, snow removal, utilities especially really up. Gas, obviously up. But that $11 million is completely passed through on the revenue side of things, up above. And then the additional... so you got about if you will another $10 million of expenses that is non-recoverable. $6 million of that $10 million was in the tornadoes that hit in Memphis in February, which unfortunately hit about four or five of our buildings. And about $2 million of that is just in our proportionate share of non-recoverable expenses and about 60% of that $2 million is in bad debt. And so if you... and then there is another roughly $1 million which related to '07, we got a tax credit in '07 that we obviously didn't have in this year. So if you really looking at it, the big moving items, $11 million of it is recoverable and $6 million of it is basically tornadoes which is of course out of our control. And so that's really what gives you the delta.

And we'll go next to Chris Haley at Wachovia.

Good morning. Congratulations on the solar deal, first of all.

Thanks, Chris.

Looking at the foreign exchange and the interest rate swap agreements that are taken on by yours and your property funds affiliates, and see these numbers vary quarter-to-quarter, year-over-year, and as your business has become more global, assuming you are trying to mitigate and hedge some of these rate and currency items, first, how should we think about the accounting in this quarter for the re-measurement items, and then a larger perspective, how should we think about the cost of doing business and underwriting these costs into margin and returns?

Well, let me touch on a couple of those. First of all, in the... you are going to see a large gap exposure but not an FFO exposure on some of the interest rate issues and there's a piece of that that is related to one of our funds where we put a hedge in on the treasury at a point last summer where at the time, people thought the tenure was in the low 5s and sort of the consensus opinion of all the people smarter than us said it was going to 6 and it's now at 3.7, and so we are out of the money on that hedge inside the fund, and we've taken a count of --

But in the money as a company.

In the money as a company, I don't know the money on the hedge. We've taken account of some ineffectiveness on that hedge, but unrealized as of yet, and that's what hits GAAP earnings, but not FFO. The FFO impact of that won't be known until we settle those hedges and that comes up over the next 18 months or so. And so, you know, that's just one of those that we put our best foot forward and interest rates on the treasury went the opposite way. And there's another piece of that where in essence, we have a swap agreement on floating-to-fixed inside Japan, we don't get hedge accounting treatment on it. It fluctuates over the life of that hedge, but there never will be, it always comes through unrealized FX movements, and that can be up or down depending on the various markets, but there will never be a realized loss. It all nets to zero at the end. And so that's just one of those where we just don't get the hedge accounting treatment on it. On the FX, we look at hedging on the F X from time-to-time, realistically if you want to look at the exposure on the FX, we basically go through a natural hedge on the majority of our exposure. You know, I sort of target the CDFS opportunities as sort of the unheeded piece of that, and we constantly review that as to whether we should be putting in appropriate hedges or not. Right now, we are basically unhedged on the euro and the yen, and we look at it sort of on a weekly basis, when to put it on. I wouldn't be surprised if we start throwing a few hedges on in the next couple of weeks, just to... with a potentially slightly strengthening dollar.

We'll go next to David Harris of Lehman Brothers.

Good morning. I have a question for Ted on margins. Ted, you talk of mid-teens, mid to high teens as being your margin on inventory development. Where would you peg the number for build-to-suit?

David that it is all over the map depending on whether we do or don't own the land, and where it is located within the U.S. and the world. I think that on the low-end, you could assume 10% and on the... 10 to 15%. If it's land that we've owned for quite a while, that number could certainly be higher. I think at 10 to 15% margin would be fair in most of those developments. I was looking at the first quarter numbers and it was actually on the higher end of that scale. So we were feeling real good about our build-to-suit starts in the US and the margins that we were achieving.

We'll go next to Michael Mueller at JPMorgan.

Hi, I was wondering, can you talk about the stabilized portfolio, particularly the 90 basis point occupancy decline from yearend. Can you cut that up and talk about how much of that was more of a same-store operating decline versus the impact of new developments being added to the pool that weren't necessarily stabilized, and maybe also comment on the type of lease development trends?

Oh, boy. That's a little bit tough, Mike, because I don't have all of that information in front of me, because it is obviously a very big pool, but I think it's needless to say, there's has been a slight slowing frankly of development... excuse me, of leasing in North America and I would say a slowing as we mentioned earlier in the UK, but our retention ratio is roughly 67% for the quarter, and that's kind of in line, we think about the business is 65 to 70%, if we do greater than that, terrific. So I think there's some and of course, there's some diminution just because there has been some bankruptcies that we've had year-to-date, so you are going to have a little bit of that. I think the way we sort of look at it moving into this year is we think that there will be some more, a bit more diminution. I mean when you really think about the business over the 20 and 30 year period of time, you are looking at roughly 92 to 93% leased, so I think it's very difficult to maintain sort of a 95 to 96% overall occupancy level. I wouldn't be surprised if it continues to slip down into the 93, 94% level in that neighborhood. It is hard to say at this point in time, but I think there's probably a little bit more down side to it. Having said that, overall there is activity in the market. There are warm bodies that continue to look, and we are renewing customers, and we feel still pretty good about the overall level of activity.

I think the other part of your question, if I'm not mistaken is some of our new developments impacting that drop in occupancy, and in North America it's remained relatively consistent. I mean we have very few buildings that have been available for over 12 months, which is our typical lease up period in a point in time in which it would hit our pool. So that's actually been remarkably stable. It's something we focus on a lot and we really pretty much have underwriting on leasing and including up to this quarter. And we look forward... we are looking out in the future and keeping close track on it. But as Walt said, overall there's decent activity on everything was going on out there.

Yeah, and overall again we run the business, as Walt said we look at it, you know, 94%-type leased is... we are driving good rental growth. You look at our rental growth in Europe, you look at our extraordinary rental growth in China, good rental growth in Japan and still solid rental growth in the US overall metrics are solid.

I think one other thing. This is a time in the cycle where our relationships go a long way. And our customer relationships have been fantastic, both on the build-to-suit side and in leasing our inventory building. In our global positioning... us being in just about every market now, every major market in the world has continued to strengthen all of our customer relationships and when there's a customer that's looking for space in the U.S. and one of the markets we have gotten inventory buildings, we leverage our relationships to make sure we get a very good look at every opportunity that's out there. I think that's going to help us through what might be a slightly slower year.

Jay Haberman with Goldman Sachs.

Hey, thanks. Just one follow-up here, Bill in your comments, I know you reiterated guidance, but you talked about the higher interest expense running at roughly $85 million in the quarter and part of that, I think was that projects carried on balance sheet longer than expected and I assume that's due to leasing or just the ability or the inability to contribute into the funds, should we be concerned about that trend? And I guess what sort of impact there are you anticipated into your sort of full year assumption?

You know, Jay, I would say realistically when we plan, we sort of try to contribute, create our contributions sort of middle of the quarter and just in Q1 we made our contributions sort of in the second half of March. And in the grand scheme of things, you know some of that was just due to particularly in sort of Mexico and central and eastern Europe. The process of getting various government approvals, to separate assets in different entities and get the titles squared away, et cetera, is just a slightly more cumbersome process. And, so we are on top of it. And, again, we're planning on sort of mid-quarter, it just so happened in the first quarter, a couple of the large contributions went into the second half of March. And so we carried those, but that's not sort of a secular trend.

Increases your rental income increases your interest expense.

It's net to the good.

So it's minor. Right.

It hits different line items.

Operator we have time for two more questions.

Very good, thank you. Our next question, we'll go to David Cohen with Morgan Stanley.

Hey, can you guys just talk about to what degree either or your fund partners have the ability to kind of delay or negotiate the timing of the contribution of the assets to the fund to optimize either pricing or financing?

Everything, David, is structured and must be paid with strict guidelines on the timing in which it must be contributed. The stabilization criteria and there's no ability to lay beyond that on either party's part. We try to do everything to minimize, or eliminate any potential conflicts to create an alignment of interest between us and our partners. And quite frankly, that's why we have repeat partners or repeat investors that have invested with us since 1999, and we've become their strategic... they become strategic to us and us to them. And we are growing that base of investors, and it's a It's a true alignment with no real ability to do that on either size.

And our final question of the morning goes to Lou Taylor at Deutsche Bank.

Hi, thanks. Bill, as your development mix gets further and further outside the US and UK as you look at your debt maturities, is your currency mix of debt going to change either later this year or into next year?

So currency mix going to change, yeah, I mean clearly within the funds, clearly. Within our pipeline, we'll be more focused on Euros because if you look at 2007 and our plans for 2008, clearly Europe is our single largest development start area with Japan following. So we'll be more yen and euro focused on the debt side in 2008 than in prior years. And that's actually a good thing in these credit environments to be borrowing in Euros and Yen and currencies that don't have the financial crisis that we see in US today. But I just want to leave with one thought and it's somewhat repetitive of point number four I went through in the summary to our original comments. But we really believe that the combination of the teams that we built around the world, the high level of expertise, the high level experience there, the global platform we put together, strong balance sheet, investment management platform with over $15 billion in remaining capacity, and the powerful relationships with customers that Ted was talking about will allow both of our operating portfolio and our overall business to outperform in the coming year. We appreciate your time. We look forward to talking to all of you again soon.

Thank you. If you would like to listen to a replay of the call, it is available beginning at noon today Central time, so 1:00 Eastern, through midnight May the 8th. So again, beginning approximately mid at noon today Central time through midnight of May the 8th at the following phone numbers; internationally it would be 719-457-0820 again, 719-457-0820, domestically within the US, 888-203-1112, again 888-203-1112. You will have to punch in the access code or confirmation code which is 9616247, again 9616247. We do appreciate your participation. At this time you may disconnect. Thank you.