AMB Property Corporation(R)
Funds from operations per fully diluted share and unit ("FFOPS") was $0.99 for the third quarter of 2007, as compared to $0.72 for the same quarter in 2006. FFOPS for the year-to-date period was $2.31, as compared to $2.10 for the same period in 2006. The FFOPS results exceeded the high end of the company's previous guidance for the third quarter by $0.21 per share, primarily as a result of better-than-expected profitability on development projects contributed to the company's private capital funds and strong core operating performance.
Net income available to common stockholders per fully diluted share and unit ("EPS") was $0.69 for the third quarter of 2007, as compared to $0.33 for the same quarter in 2006. EPS for the year-to-date period was $2.04 as compared to $1.39 for the same period in 2006.
Operating Results
AMB's industrial operating portfolio occupancy was 95.5% at September 30, 2007, as compared to 96.1% at June 30, 2007 and 95.9% at September 30, 2006. Average occupancy during the quarter was up 50 basis points to 95.4%, from 94.9% for the same period in 2006. Benefiting from rising rents in many of the company's markets and the increase in average portfolio occupancy, cash-basis same store net operating income increased 5.3% in the third quarter and 5.8% in the first three quarters, over the same periods in 2006. In the third quarter of 2007, rents on lease renewals and rollovers in AMB's operating portfolio increased 8.9%, as compared to increases of 2.0% in the prior quarter and 9.9% in the third quarter of 2006.
"The strength of global trade is driving steady demand and solid valuations for distribution real estate in strategic supply chain markets around the world," said Hamid R. Moghadam, AMB's chairman and CEO. "AMB's quarterly financial results reflect this strength with both better-than-projected development profits and portfolio operating performance. We continue to see compelling opportunities to expand our global development platform by serving the needs of key customers to reconfigure or consolidate their distribution networks."
Investment Activity
New development starts in the quarter totaled approximately 2.8 million square feet in 11 projects in North America and Europe, with an estimated total investment of $233 million. At quarter end, AMB's industrial development pipeline totaled approximately 16.8 million square feet in 47 projects, globally, and four value-added conversion projects in North America, with an estimated total investment of $1.6 billion scheduled for delivery through 2009. Also during the quarter, the company made AMB Moffett Business Center Industrial, a value-added conversion project, available for sale.
The company's development business includes contributions of stabilized properties to affiliated private capital funds or sale of projects to third parties. During the third quarter, AMB contributed four development projects totaling 1.3 million square feet. Additionally, AMB sold three projects: a 42,600 square foot development; a land parcel; and a value-added conversion project -- AMB Osgood Industrial. Aggregate gross proceeds from these seven projects totaled $245 million.
"AMB's long-term focus on investing in high-demand infill locations in major markets is providing a unique opportunity to create incremental value for our shareholders through the repurposing of selected properties to higher and better uses," Mr. Moghadam added. AMB announced at its September 18, 2007 Investor Forum in New York City that it projects $30-50 million of potential gains, annually, from its value-added conversion business over the next several years.
Expanding the company's presence in several target markets in North America, Europe and Asia, AMB acquired 1.5 million square feet of industrial distribution space in nine properties at a total acquisition cost of $116 million, $98 million of which was acquired for three of the company's private capital funds: AMB Institutional Alliance Fund III, AMB Japan Fund I and AMB Europe Fund I.
Subsequent to the quarter, AMB announced the expansion of its global platform into the United Kingdom with the acquisition of a 320,000 square foot development property strategically located in a supply-constrained London submarket.
Share Repurchase
During the third quarter, the company repurchased 1,069,038 shares of its common stock for an aggregate price of $53.3 million, or at a weighted average price of $49.87 per share. Approximately $147 million of capacity remains under the company's current stock repurchase program.
Addition of Company Officers
During the quarter, five officers joined the company: Anthony Bourke joined the Private Capital group as senior vice president, business development; Hardy Milsch joined the Southwest Region as vice president, leasing & development, Mexico; David Nix joined the East Region as vice president, acquisitions; Tim Nolan joined the Global Customer Development team as a vice president; and Mary Paeng joined the Private Capital group as vice president, business development.
Commenting on these recent hires, Mr. Moghadam said, "With a focus on attracting and retaining the top talent in the industry, we welcome these new officers to our global team, each of whom brings to AMB a high level of ability and a rich background of experience applicable to their new role. We're pleased to have them onboard."
Supplemental Earnings Measures
Included in the footnotes to the company's attached financial statements is a discussion of why management believes FFOPS is a useful supplemental measure of operating performance, ways in which investors might use FFOPS when assessing the company's financial performance and FFOPS's limitations as a measurement tool. Reconciliation from net income to funds from operations and FFOPS is provided in the attached tables and published in AMB's quarterly supplemental analyst package, available on the company's website at http://www.amb.com/.
The company believes that net income, as defined by GAAP, is the most appropriate earnings measure. However, the company considers cash-basis same store net operating income (SSNOI) to be a useful supplemental measure of its operating performance. Properties that are considered part of the same store pool include all properties that were owned as of the end of both the current and prior year reporting periods and exclude development properties for both the current and prior reporting periods. The same store pool is set annually and excludes properties purchased and developments stabilized after December 31, 2005. In deriving SSNOI, the company defines NOI as rental revenues (as calculated in accordance with GAAP), including reimbursements, less straight-line rents, amortization of lease intangibles, and property operating expenses, which excludes depreciation, amortization, general and administrative expenses and interest expense. The company considers SSNOI to be an appropriate and useful supplemental performance measure because it reflects the operating performance of the real estate portfolio excluding effects of non-cash adjustments and provides a better measure of actual cash basis rental growth for a year-over-year comparison. In addition, the company believes that SSNOI helps the investing public compare the company's operating performance with that of other companies. While SSNOI is a relevant and widely used measure of operating performance of real estate investment trusts, it does not represent cash flow from operations or net income as defined by GAAP and should not be considered as an alternative to those measures in evaluating AMB's liquidity or operating performance. SSNOI also does not reflect general and administrative expenses, interest expense, depreciation and amortization costs, capital expenditures and leasing costs, or trends in development and construction activities that could materially impact its results from operations. Further, the company's computation of SSNOI may not be comparable to that of other real estate companies, as they may use different methodologies for calculating SSNOI. Reconciliation from net income to SSNOI is published in the company's quarterly supplemental analyst package, available on the company's website at http://www.amb.com/.
"Owned and managed" is defined by the company as assets in which the company has at least a 10% ownership interest, is the property or asset manager, and which it intends to hold for the long-term.
Conference Call and Supplemental Information
The company will host a conference call to discuss its third quarter 2007 results on Wednesday, October 17, 2007 at 1:00 PM EDT. Stockholders and interested parties may listen to a live broadcast of the conference call by dialing 877 447 8218 (from the U.S. and Canada) or +1 706 643 7823 (from all other countries) and using reservation code 18459848. A webcast can be accessed through a link titled "Q3 2007 Earnings Conference Call" located on the home page of the company's website at http://www.amb.com/.
If you are unable to listen to the live conference call, a telephone and webcast replay will be available after 3:00 PM EDT on Wednesday, October 17, 2007 until 8:00 PM EST on Friday, November 16, 2007. The telephone replay can be accessed by dialing 800 642 1687 (from the U.S. and Canada) or +1 706 645 9291 (from all other countries) and using reservation code 18459848. The webcast replay can be accessed through the link on the company's website at http://www.amb.com/.
AMB Property Corporation.(R) Local partner to global trade.(TM)
AMB Property Corporation(R) is a leading global developer and owner of industrial real estate, focused on major hub and gateway distribution markets throughout North America, Europe and Asia. As of September 30, 2007, AMB owned, or had investments in, on a consolidated basis or through unconsolidated joint ventures, properties and development projects expected to total approximately 140.8 million square feet (13.1 million square meters) in 44 markets within 13 countries. AMB invests in properties located predominantly in the infill submarkets of its targeted markets. The company's portfolio is comprised 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 at +1 415 394 9000.
Some of the information included in this press release contains forward-looking statements, such as those related to demand for our product, occupancy levels, rental rate growth, increasing valuations, our development, value-added conversion, redevelopment and renovation projects (including completion, timing of stabilization, our ability to lease such projects, square feet at stabilization or completion, costs and total investment amounts, and projected gains), our ability to grow our private capital business (including contributions to such funds), returns on invested capital and source of investment opportunities, and our ability to accomplish future business plans (such as expansion into additional markets and of our platform generally) and to meet our forecasts and business goals, which are made pursuant to the safe-harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause our actual results to differ materially from those in the forward-looking statements, and you should not rely on the forward-looking statements as predictions of future events. The events or circumstances reflected in forward-looking statements might not occur. You can identify forward-looking statements by the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," "seeks," "approximately," "intends," "plans," "pro forma," "estimates" or "anticipates" or the negative of these words and phrases or similar words or phrases. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Forward-looking statements are necessarily dependent on assumptions, data or methods that may be incorrect or imprecise and we may not be able to realize them. We caution you not to place undue reliance on forward-looking statements, which reflect our analysis only and speak only as of the date of this press release or the dates indicated in the statements. We assume no obligation to update or supplement forward-looking statements. The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements: defaults on or non-renewal of leases by tenants, increased interest rates and operating costs, our failure to obtain necessary outside financing, re-financing risks, risks related to our obligations in the event of certain defaults under joint venture and other debt, risks related to debt and equity security financings (including dilution risk), difficulties in identifying properties to acquire and in effecting acquisitions, our failure to successfully integrate acquired properties and operations, our failure to divest properties we have contracted to sell or to timely reinvest proceeds from any divestitures, risks and uncertainties affecting property development and construction (including construction delays, cost overruns, our inability to obtain necessary permits and public opposition to these activities), our failure to qualify and maintain our status as a real estate investment trust, risks related to our tax structuring, failure to maintain our current credit agency ratings, environmental uncertainties, risks related to natural disasters, financial market fluctuations, changes in general economic conditions or in the real estate sector, changes in real estate and zoning laws, a downturn in the U.S., California or global economy, risks related to doing business internationally and global expansion, losses in excess of our insurance coverage, unknown liabilities acquired in connection with acquired properties or otherwise and increases in real property tax rates. Our success also depends upon economic trends generally, including interest rates, income tax laws, governmental regulation, legislation, population changes and certain other matters discussed under the heading "Risk Factors" and elsewhere in our annual report on Form 10-K for the year ended December 31, 2006 and our quarterly report on Form 10-Q for the quarter ended June 30, 2007.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
As of
September 30, 2007 December 31, 2006
Assets
Investments in real estate:
Total investments in properties $6,548,426 $6,575,733
Accumulated depreciation (884,336) (789,693)
Net investments in properties 5,664,090 5,786,040
Investments in unconsolidated joint
ventures 360,272 274,381
Properties held for contribution,
net 258,568 154,036
Properties held for divestiture,
net 63,733 20,916
Net investments in real estate 6,346,663 6,235,373
Cash and cash equivalents and
restricted cash 400,011 195,878
Accounts receivable, net 159,269 133,998
Other assets 157,235 148,263
Total assets $7,063,178 $6,713,512
Liabilities and stockholders' equity
Secured debt $1,364,557 $1,395,354
Unsecured senior debt 1,002,810 1,101,874
Unsecured credit facilities 818,325 852,033
Other debt 145,104 88,154
Accounts payable and other liabilities 333,034 271,880
Total liabilities 3,663,830 3,709,295
Minority interests:
Joint venture partners 516,948 555,201
Preferred unitholders 77,561 180,298
Limited partnership unitholders 103,773 102,061
Total minority interests 698,282 837,560
Stockholders' equity:
Common equity 2,477,654 1,943,240
Preferred equity 223,412 223,417
Total stockholders' equity 2,701,066 2,166,657
Total liabilities and
stockholders' equity $7,063,178 $6,713,512
CONSOLIDATED STATEMENTS OF OPERATIONS(1)
(dollars in thousands, except share data)
For the Quarters Ended For the Nine Months
September 30, Ended September 30,
2007 2006 2007 2006
Revenues
Rental revenues (1) $158,740 $172,845 $477,823 $510,038
Private capital income 7,564 7,490 22,007 17,539
Total revenues 166,304 180,335 499,830 527,577
Costs and expenses
Property operating costs
(1) (43,028) (44,540) (129,926) (131,671)
Depreciation and
amortization (40,865) (46,914) (122,433) (133,514)
Impairment losses - - (257) (5,394)
General and
administrative (35,145) (25,641) (95,259) (73,638)
Other expenses (2) (944) (893) (2,995) (1,134)
Fund costs (261) (495) (779) (1,588)
Total costs and
expenses (120,243) (118,483) (351,649) (346,939)
Other income and expenses
Equity in earnings of
unconsolidated joint
ventures (3) 3,425 2,239 7,286 12,605
Other income (2) 7,956 2,911 20,012 8,716
Gains from sale or
contribution of real
estate interests, net - - 74,843 -
Development profits, net
of taxes 48,298 23,517 89,486 69,889
Interest expense,
including amortization (28,896) (43,966) (96,394) (127,487)
Total other income and
expenses 30,783 (15,299) 95,233 (36,277)
Income from
operations before
minority interests 76,844 46,553 243,414 144,361
Minority interests' share
of income:
Joint venture partners'
share of income (5,889) (12,014) (21,149) (29,310)
Joint venture partners'
and limited
partnership
unitholders' share of
development profits (2,115) (1,150) (5,196) (2,735)
Preferred unitholders (1,431) (3,791) (6,610) (12,816)
Limited partnership
unitholders (614) 17 (4,998) (994)
Total minority
interests' share of
income (10,049) (16,938) (37,953) (45,855)
Income from
continuing
operations 66,795 29,615 205,461 98,506
Discontinued operations:
Income attributable to
discontinued
operations, net of
minority interests 2,403 3,559 7,271 13,476
Gains from disposition
of real estate, net of
minority interests 3,912 213 4,329 24,335
Total discontinued
operations 6,315 3,772 11,600 37,811
Net income 73,110 33,387 217,061 136,317
Preferred stock dividends (3,952) (3,440) (11,856) (9,631)
Preferred unit redemption
(issuance costs) discount (3) 16 (2,930) (1,004)
Net income available to
common stockholders $69,155 $29,963 $202,275 $125,682
Net income per common
share (diluted) $0.69 $0.33 $2.04 $1.39
Weighted average common
shares (diluted) 100,914,340 91,058,029 99,311,137 90,458,810
(1) Effective October 1, 2006, AMB deconsolidated AMB Alliance Fund III on
a prospective basis. Pro forma rental revenues for the quarter and
nine months ended September 30, 2006 would have been $152,772 and
$456,396, respectively, if AMB Institutional Alliance Fund III had
been deconsolidated as of January 1, 2006. Pro forma property
operating costs for the quarter and nine months ended September 30,
2006 would have been $40,298 and $118,974, respectively, if AMB
Institutional Alliance Fund III had been deconsolidated as of January
1, 2006.
(2) Includes changes in liabilities and assets associated with AMB's
deferred compensation plan.
(3) There were no gains on sale of operating properties for the quarters
ended September 30, 2007 and 2006. Includes gains on sale of operating
properties of $0.0 million and $8.3 million, for the nine months ended
September 30, 2007 and 2006, respectively.
CONSOLIDATED STATEMENTS OF FUNDS FROM OPERATIONS(1)
(dollars in thousands, except share data)
For the Quarters Ended For the Nine Months Ended
September 30, September 30,
2007 2006 2007 2006
Net income available to
common stockholders $69,155 $29,963 $202,275 $125,682
Gains from sale or
contribution of real
estate, net of minority
interests (3,912) (213) (79,172) (24,335)
Depreciation and
amortization:
Total depreciation and
amortization 40,865 46,914 122,433 133,514
Discontinued operations'
depreciation 117 1,810 1,061 2,916
Non-real estate
depreciation (1,387) (1,001) (3,965) (3,069)
Adjustments to derive
FFO from consolidated
JVs:
Joint venture partners'
minority interests (Net
income) 5,889 12,014 21,149 29,310
Limited partnership
unitholders' minority
interests (Net income
(loss)) 614 (17) 4,998 994
Limited partnership
unitholders' minority
interests (Development
profits) 2,115 1,086 3,861 3,260
Discontinued operations'
minority interests (Net
income) 107 410 267 1,032
FFO attributable to
minority interests (15,731) (24,471) (47,347) (66,654)
Adjustments to derive
FFO from unconsolidated
JVs:
AMB's share of net
income (3,425) (2,239) (7,286) (12,605)
AMB's share of FFO 9,828 4,030 21,308 9,335
Funds from operations $104,235 $68,286 $239,582 $199,380
FFO per common share
and unit (diluted) $0.99 $0.72 $2.31 $2.10
Weighted average
common share and
unit (diluted) 105,109,868 95,117,597 103,777,347 94,734,736
Estimated FFO by
business line (1)
Capital Partners FFO
per common share and
unit (diluted) (1) $0.03 $0.04 $0.10 $0.09
% of reported FFO 3.0% 5.6% 4.3% 4.3%
Development FFO per
common share and unit
(diluted) (1) $0.43 $0.21 $0.79 $0.69
% of reported FFO 43.4% 29.3% 34.2% 32.8%
Real estate operations
FFO per common share
and unit (diluted) (1) $0.53 $0.47 $1.42 $1.32
% of reported FFO 53.6% 65.1% 61.5% 62.9%
Total FFO per common
share and unit
(diluted) $0.99 $0.72 $2.31 $2.10
(1) Funds From Operations ("FFO") and Funds From Operations Per Share and
Unit ("FFOPS"). The Company believes that net income, as defined by
GAAP, is the most appropriate earnings measure. However, the Company
considers funds from operations, or FFO, and FFO per share and unit,
or FFOPS, to be useful supplemental measures of its operating
performance. Currently and historically, the Company calculates FFO as
defined by NAREIT as net income, calculated in accordance with GAAP,
less gains (or losses) from dispositions of real estate held for
investment purposes and real estate-related depreciation, and
adjustments to derive the Company's pro rata share of FFO of
consolidated and unconsolidated joint ventures. However, if the
circumstance arises, the Company intends to include in its calculation
of FFO gains or losses related to sales of previously depreciated real
estate held for contribution to our joint ventures. Although such a
change, if instituted, will be a departure from the current NAREIT
definition, the Company believes such calculation of FFO will better
reflect the value created as a result of the contributions. The
Company defines FFOPS as FFO per fully diluted weighted average share
of company common stock and operating partnership unit. The Company
does not adjust FFO to eliminate the effects of non-recurring charges.
The Company believes that FFO and FFOPS are meaningful supplemental
measures of its operating performance because historical cost
accounting for real estate assets in accordance with GAAP implicitly
assumes that the value of real estate assets diminishes predictably
over time, as reflected through depreciation and amortization
expenses. However, since real estate values have historically risen or
fallen with market and other conditions, many industry investors and
analysts have considered presentation of operating results for real
estate companies that use historical cost accounting to be
insufficient. Thus, FFO and FFOPS are supplemental measures of
operating performance for real estate investment trusts that exclude
historical cost depreciation and amortization, among other items, from
net income, as defined by GAAP. The Company believes that the use of
FFO and FFOPS, combined with the required GAAP presentations, has been
beneficial in improving the understanding of operating results of real
estate investment trusts among the investing public and making
comparisons of operating results among such companies more meaningful.
The Company considers FFO and FFOPS to be useful measures for
reviewing comparative operating and financial performance because, by
excluding gains or losses related to sales of previously depreciated
operating real estate assets and real estate depreciation and
amortization, FFO and FFOPS can help the investing public compare the
operating performance of a company's real estate between periods or as
compared to other companies. While FFO and FFOPS are relevant and
widely used measures of operating performance of real estate
investment trusts, these measures do not represent cash flow from
operations or net income as defined by GAAP and should not be
considered as alternatives to those measures in evaluating the
Company's liquidity or operating performance. FFO and FFOPS also do
not consider the costs associated with capital expenditures related to
the Company's real estate assets nor are FFO or FFOPS necessarily
indicative of cash available to fund the Company's future cash
requirements. Further, the Company's computation of FFO or FFOPS may
not be comparable to FFO or FFOPS reported by other real estate
investment trusts that do not define FFO or FFOPS in accordance with
the current NAREIT definition or that interpret the current NAREIT
definition differently than the Company does. Estimated FFO by
Business Line is FFO generated by the Company's Capital Partners,
development and real estate operations business lines. Estimated
Capital Partners and Development FFO was determined by reducing
Capital Partner Income and Development Profits, net of taxes by their
respective estimated share of general and administrative expenses.
Capital Partners and Developments estimated allocation of total
general and administrative expenses was based on their respective
percentage of actual direct general and administrative expenses
incurred. Estimated Real Estate Operations FFO represents total
Company FFO less estimated FFO attributable to Capital Partners and
Development. Management believes estimated FFO by business line is a
useful supplemental measure of its operating performance because it
helps the investing public compare the operating performance of a
company's respective business lines to other companies' comparable
business lines. Further, AMB's computation of FFO by business line may
not be comparable to that reported by other real estate investment
trusts as they may use different methodologies in computing such
measures.
First Call Analyst:
FCMN Contact:
SOURCE: AMB Property Corporation
CONTACT: Margan S. Mitchell, Vice President, Corporate Communications of
AMB Property Corporation, +1-415-733-9477, fax, +1-415-477-2177,
Web site: http://www.amb.com/
