AMB Property Corporation
AMB's industrial assets, located predominantly in infill submarkets of major hub and gateway distribution markets, were 94.4% leased as of September 30, 2002, unchanged from June 30, 2002. The Company's same store cash basis net operating income increased 0.2% for the quarter. Year-to-date tenant retention was 73.7%, while rents on renewals and rollovers increased by a modest 0.1% as the Company continued to focus on occupancy. Year-to-date same store cash basis net operating income increased 1.1%.
"AMB's quarterly and year-to-date results are consistent with our expectations in a difficult operating environment. We believe the industrial market is in the early stages of a slow recovery. We are seeing evidence of increasing cargo volumes and a modest up-tick in leasing activity -- signs we believe will lead to positive absorption in time. Historically, positive absorption and constrained new supply lead to growth in occupancy and, subsequently, to growth in rents. However, it will take time for the recovery, which is slower than we originally envisioned, to positively impact our results," noted Chairman and CEO, Hamid R. Moghadam.
Investment Activity
During the third quarter, AMB acquired eight industrial facilities for a total investment of $89.2 million and disposed of six properties for a cumulative price of $33.6 million. During the quarter, AMB completed and stabilized five industrial development projects, totaling 937,000 square feet for a total investment of $50.4 million. The industrial development and renovation pipeline currently stands at $128.1 million and consists of 2.9 million square feet, of which $98.6 million, or 77.0%, has been funded and 53% is preleased.
The Company significantly advanced its on-tarmac strategy in the quarter with the acquisition of two on-tarmac cargo facilities at John F. Kennedy International Airport. The buildings combined have more than 426,500 rentable square feet, 61 truck doors with immediate ramp access and two parking spots for wide body planes. The acquisition brings AMB's on-tarmac presence to 12 domestic airports; on-tarmac real estate now accounts for over 7% of the Company's annualized base rents.
AMB's President, W. Blake Baird, summarized, "In our view, the domestic transaction environment for industrial real estate increasingly favors sellers over buyers. As a result, we plan to accelerate our dispositions of non- strategic assets and more quickly reduce our presence in non-target markets in the U.S. We now expect to exceed our previously announced disposition guidance, including net contributions to joint ventures, of $200 million for 2002. Our anticipated disposition activity, combined with more modest acquisition volumes, should result in net real estate sales over the next several quarters. The ensuing liquidity will dilute our short-term results but should contribute to stronger long-term results once deployed into either more strategic industrial assets or share repurchases."
Furthering the Company's international expansion plan, AMB has formed a strategic alliance with Boustead Projects, the real estate development subsidiary of the multi-national Boustead Singapore Ltd., that will initially focus on distribution facilities in the eastern Singapore submarket of Changi Airport and in Jurong, the industrial heart of Singapore. Further, AMB is aligning with SIRIUS L'Immobilier D'Enterprise, one of the largest owners of airport-adjacent industrial buildings at France's Charles de Gaulle Roissy International Airport (CDG), to focus on projects at or near CDG airport.
Mr. Moghadam commented, "Our operating model is based on partnering with the best local entrepreneurs in each market. Combining our customer relationships and investment expertise with our partners' local operating expertise, we expect to meet our customers' needs and provide solid returns to our investors. Singapore and Paris are both integral links in the global supply chain and we are delighted to be forming strategic alliances with Boustead and SIRIUS. We expect to announce additional alliances in other international target markets in future quarters."
Mr. Baird added, "Our international expansion is proceeding with significant traction. As we said in January this year, we are seeking investment opportunities in three Mexican distribution markets and eight large international airport markets. The first phase of our previously announced Mexico City development project with Strategic Alliance Partner(R) G. Accion was delivered in September to the customer on time and on budget. We hope to announce additional capital deployment in Mexico over the next few quarters. Dialogue with our global customers indicates strong interest in our target locations; we are currently working on potential development opportunities adjacent to Changi Airport in Singapore and potential acquisition and development opportunities near Charles de Gaulle in Paris with our respective alliance partners."
Other investment activity in the quarter included the repurchase of $11.4 million of the Company's common stock and $7.1 million of preferred units. In total, 433,200 shares of common stock were purchased at an average price of $26.41 per share under the Company's current share repurchase plan, leaving $88.6 million of common stock repurchase capacity under the plan. AMB's preferred unit repurchases included 130,000 of its Series F units and all of its outstanding Series G units.
Supplemental Reporting Measure
AMB reported third quarter 2002 Funds from Operations (FFO) of $0.58 per share, representing a 7.9% decrease over third quarter 2001 FFO of $0.63 per share. Year-to-date FFO per share was $1.79, up 9.1% from the same period in 2001 of $1.64. Both the current quarter and third quarter 2001 include $0.01 per share of gains on developments held for sale projects; 2001 year-to-date FFO included a $0.23 write-off of the Company's investments in technology related companies.
Conference Call
AMB will host a conference call to discuss its third quarter 2002 results Tuesday, October 8, 2002 at 11:00 AM PDT/ 2:00 PM EDT. Stockholders and interested parties may listen to a live broadcast of the call by dialing (719) 457-2727 and using reservation code 392057. The conference call can also be accessed through the Internet on AMB's website at www.amb.com; please visit the website at least fifteen minutes early to register, download and install any necessary audio software. For those who are not able to listen to the live broadcast, replays will be available shortly after the call until October 29, 2002 via telephone by dialing 719-457-0820 with reservation code 392057 and until October 29, 2002 on the Company's website.
AMB Property Corporation is a leading owner and operator of industrial real estate in North America. As of September 30, 2002 AMB owned, managed and had renovation and development projects totaling 97.2 million square feet (9.0 million square meters) and 1,032 buildings in 27 markets. AMB invests in industrial properties located predominantly in infill submarkets of major hub and gateway distribution markets. The Company's portfolio is comprised largely of High Throughput Distribution(R) facilities - industrial properties built for speed and located near airports, seaports and ground transportation systems.
AMB's press releases are available on the Company website at http://www.amb.com/ or by contacting the Investor Relations department toll- free at 877-285-3111.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
As of
September 30, June 30, March 31, December 31,
2002 2002 2002 2001
Assets
Investments in real estate:
Total investments in
properties $4,883,497 $4,732,321 $4,566,951 $4,530,711
Accumulated depreciation (344,949) (311,058) (289,701) (265,653)
Net investments in
properties 4,538,548 4,421,263 4,277,250 4,265,058
Investment in
unconsolidated joint
ventures 64,822 64,083 71,137 71,097
Properties held for
divestiture, net 105,613 133,934 139,370 157,174
Net investments in
real estate 4,708,983 4,619,280 4,487,757 4,493,329
Cash and cash equivalents 90,840 119,287 99,492 81,732
Mortgage receivables 13,155 87,175 87,214 87,214
Accounts receivable, net 81,003 80,366 75,399 70,794
Other assets, including
discontinued operations 48,608 39,390 39,392 35,874
Total assets $4,942,589 $4,945,498 $4,789,254 $4,768,943
Liabilities and
Stockholders' Equity
Secured debt $1,305,320 $1,360,436 $1,237,564 $1,228,214
Unsecured senior debt
securities 800,000 800,000 800,000 780,000
Unsecured debt 10,319 -- -- --
Unsecured credit facility 12,000 -- -- 12,000
Alliance Fund II credit
facility 72,500 52,000 116,000 123,500
Other liabilities,
including discontinued
operations 189,076 162,629 155,568 138,601
Total liabilities 2,389,215 2,375,065 2,309,132 2,282,315
Minority interests:
Preferred units 308,388 315,847 275,987 275,987
Minority interests 506,533 508,577 455,428 458,299
Total minority
interests 814,921 824,424 731,415 734,286
Stockholders' equity:
Common stock 1,642,459 1,649,909 1,652,607 1,656,242
Preferred stock 95,994 96,100 96,100 96,100
Total stockholders'
equity 1,738,453 1,746,009 1,748,707 1,752,342
Total liabilities and
stockholders' equity $4,942,589 $4,945,498 $4,789,254 $4,768,943
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands)
For the Nine Months
For the Quarters Ended Ended
September 30, September 30,
2002 2001 2002 2001
Revenues
Rental revenues $158,283 $145,140 $459,505 $418,519
Equity in earnings of
unconsolidated joint
ventures 1,322 1,636 4,443 4,365
Private capital income 2,766 2,340 8,468 8,022
Interest and other income 2,609 5,392 9,921 12,505
Total revenues 164,980 154,508 482,337 443,411
Expenses
Property operating 40,658 35,151 114,440 101,222
Interest, including
amortization 38,661 32,842 112,044 94,314
Depreciation and
amortization 33,749 28,835 95,186 82,758
General administrative and
other (1) (2) 12,376 8,796 34,207 26,180
Loss on investments in
other companies -- -- -- 20,758
Total expenses 125,444 105,624 355,877 325,232
Income before
minority interests
and gains 39,536 48,884 126,460 118,179
Minority interests' share
of income:
Preferred units (6,403) (7,423) (18,770) (21,626)
Minority interests (10,863) (10,556) (29,498) (26,324)
Total minority
interests (17,266) (17,979) (48,268) (47,950)
Net income before
discontinued
operations, gains,
and extraordinary
items 22,270 30,905 78,192 70,229
Discontinued operations,
gains, and extraordinary
items:
Discontinued operations 330 471 1,349 1,399
Gains on developments
held for sale 618 1,341 618 1,341
Gains/(losses) from
disposition of real
estate, net of minority
interests (3) 3,944 (1,227) 6,424 33,332
Extraordinary items (88) 87 (356) (351)
Total discontinued
operations, gains,
and extraordinary
items 4,804 672 8,035 35,721
Net income 27,074 31,577 86,227 105,950
Preferred stock dividends (2,123) (2,125) (6,373) (6,375)
Preferred unit redemption
discount 412 -- 412 --
Net income available to
common stockholders $25,363 $29,452 $80,266 $99,575
Net income per common
share (diluted) $0.30 $0.34 $0.94 $1.17
Weighted average common
shares (diluted) 85,527,829 85,644,840 85,360,210 85,097,692
(1) Includes share-based plans expense of $0.3 million and $0.7 million
for the quarter and nine months ended September 30, 2002,
respectively, related to the adoption of SFAS 123.
(2) Prior to May 31, 2001, G&A did not include expenses incurred by two
unconsolidated preferred stock subsidiaries, Headlands Realty
Corporation and AMB Capital Partners. Adjusted G&A for the nine months
ended September 30, 2001, would have been $29,713 had the subsidiaries
been consolidated beginning January 1, 2001.
(3) Includes unrealized losses on assets held for sale of $10.0 million
for the quarter and nine months ended September 30, 2001.
CONSOLIDATED STATEMENTS OF FUNDS FROM OPERATIONS
(dollars in thousands, except share data)
For the Nine Months
For the Quarters Ended Ended
September 30, September 30,
2002 2001 2002 2001
Income before minority
interests and gains $39,536 $48,884 $126,460 $118,179
Gains on developments held
for sale 618 1,341 618 1,341
Total depreciation and
amortization 33,749 28,835 95,186 82,758
FF& E depreciation, ground
lease amortization, and
other (1) (815) (483) (1,742) (1,456)
Discontinued operations'
FFO 405 597 1,634 1,779
FFO attributable to
minority interests (13,635) (13,393) (37,753) (29,119)
Adjustments to derive FFO
from unconsolidated JVs:
AMB's share of net income (1,322) (1,636) (4,443) (4,365)
AMB's share of FFO 2,048 2,235 6,611 6,488
Preferred stock dividends (2,123) (2,125) (6,373) (6,375)
Preferred units
distributions (6,403) (7,423) (18,770) (21,626)
Funds from operations $52,058 $56,832 $161,428 $147,604
FFO per common share and
unit (diluted) $0.58 $0.63 $1.79 $1.64
Weighted average common
shares and units
(diluted) 90,379,023 90,799,887 90,239,149 90,263,046
(1) Ground lease amortization represents the amortization of the Company's
investments in ground leased properties, for which the Company does
not have a purchase option.
SOURCE: AMB Property Corporation
CONTACT: Investors/Analysts, Michelle C. Wells, Investor Relations,
877-285-3111, or
+1-415-733-9478, or
+1-415-394-9001
Web site: http://www.amb.com/
