AMB Property Corporation(R)
Funds from operations per fully diluted share and unit ("FFOPS") was $0.72 for the third quarter of 2006, as compared to $0.50 for the same quarter in 2005. FFOPS for the year-to-date period was $2.10, as compared to $1.59 for the same period in 2005. The quarter and year-to-date FFOPS results exceeded the high end of the company's previous guidance by $0.08 per share, primarily as a result of better than expected profitability on development projects sold or contributed during the quarter.
Net income available to common stockholders per fully diluted share and unit ("EPS") was $0.33 for the third quarter of 2006, as compared to $0.31 for the same quarter in 2005. EPS for the year-to-date period was $1.39 as compared to $1.27 for the same period in 2005.
Operating Results
AMB's industrial operating portfolio occupancy was 95.9% at September 30, 2006, up 50 basis points from June 30, 2006, and 130 basis points from September 30, 2005. Benefiting from occupancy gains and rising rents in many of the company's markets, cash-basis same store net operating income in the third quarter of 2006 increased 5.8% over the same period in 2005. When the effects of lease termination fees are excluded from this metric, the increase was 5.5%. In the third quarter, rents on lease renewal and rollover in AMB's operating portfolio increased 9.9%, as compared to declines of 0.9% in the prior quarter and 7.6% in the third quarter of 2005.
Hamid R. Moghadam, AMB chairman and CEO, said, "Our performance in the third quarter was solid. Occupancy reached its highest level since the third quarter of 2001, and rents on renewals entered positive territory for the first time since the first quarter of 2002. We're pleased with the continued demand for industrial product, especially in our Asia markets, and preliminary data provided by Torto Wheaton Research indicates positive absorption and availability figures for industrial space in the U.S. during the third quarter. While there are signs of moderating growth in both the U.S. and Europe, we believe that our portfolio is well positioned and, at this time, there is sustained customer demand for our industrial facilities globally."
Investment Activity
New development and renovation starts in the quarter totaled approximately 2.8 million square feet in eight projects in North America, Europe and Asia, with an estimated total investment of $251.2 million. AMB's industrial development and renovation pipeline totals approximately 13.4 million square feet in 45 projects globally, with an estimated total investment of $1.2 billion scheduled for delivery through 2008. Deliveries slated through the end of 2006 are 66% preleased or under contract for sale.
During the third quarter, AMB stabilized and completed nine development projects in North America, Europe and Asia. Two projects totaling approximately 181,000 square feet and representing an aggregate investment of $13.0 million were placed in operations, and seven projects totaling approximately 2.7 million square feet and representing an aggregate investment of $199.1 million were made available for sale or contribution.
The company's development business includes contribution of stabilized properties to affiliated private capital funds or sale of projects to third parties. During the third quarter, AMB contributed AMB Narita Distribution Center 1, Buildings A & B, comprising 668,000 square feet in Tokyo, to its Japan Fund I. The company sold three development properties to third parties consisting of a 699,000 square foot industrial facility in Los Angeles and two industrial buildings totaling approximately 67,000 square feet in Miami.
During the third quarter, AMB acquired approximately 1.3 million square feet of distribution facilities in ten buildings at a total acquisition cost of $115.6 million. The acquisitions expanded the company's presence in the target markets of Chicago, Los Angeles, Minneapolis and Seattle, and included entry into the company's fourth Mexico target market, Queretaro, the country's most geographically central distribution hub.
AMB's president, W. Blake Baird, commented, "Our global development business is providing quality distribution facilities for our customers, attractive investments for our private capital business, and meaningful profits for our shareholders. At quarter end, our pipeline of committed developments stood at $1.2 billion, the highest in our history, with 45 projects in nine countries on three continents."
In the third quarter, AMB completed an opportunistic sale of one operating building that no longer fits the company's strategy. The 74,000 square foot building represented approximately $5.2 million in gross disposition proceeds.
Development Joint Venture Formed
Subsequent to quarter end, AMB entered into a merchant development joint venture with GE Real Estate. The joint venture will have total investment capacity of approximately $500 million to pursue development-for-sale opportunities in U.S. markets other than those AMB identifies as its target markets. GE and AMB have committed $425 million and $75 million of equity, respectively. AMB will earn development fees and is entitled to 45% of the development project profits realized by the venture over a 7.25% unleveraged internal rate of return. AMB expects to contribute several of its land holdings into the venture in the fourth quarter.
Addition of Company Officers
During the quarter, three officers joined the company: Dale Valicenti joined the Boston office as senior vice president, director of acquisitions; John Morgan joined the Atlanta office as vice president, development; and Francois Rispe joined in Paris as vice president, director of project development.
Supplemental Earnings Measures
AMB reports funds from operations per fully diluted share and unit in accordance with the standards established by the National Association of Real Estate Investment Trusts. 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 is provided in the attached tables and published in AMB's quarterly supplemental analyst package, available on the company's website at www.amb.com.
The company believes that net income, as defined by GAAP, is the most appropriate earnings measure. However, the company considers 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, 2004. In deriving SSNOI, the company defines NOI as rental revenues (as calculated in accordance with GAAP), including reimbursements, less straight-line rents, property operating expenses and real estate taxes. The company excludes straight-line rents in calculating SSNOI because the company believes it 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 our liquidity or operating performance. SSNOI also does not reflect general and administrative expenses, interest expenses, 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 www.amb.com.
Conference Call and Supplemental Information
The company will host a conference call to discuss the quarterly results on Wednesday, October 18, 2006 at 1:00 p.m. EDT/10:00 a.m. PDT. 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 entering reservation code 6774681. A webcast can be accessed through a link titled "Q3 2006 Earnings Conference Call" located on the home page of the company's website at www.amb.com. A telephone and webcast replay will be available after 12:00 p.m. PDT on Wednesday, October 18, 2006 until 5:00 p.m. PST on Thursday, November 16, 2006. The telephone replay can be accessed by dialing 800 642 1687 (U.S. and Canada) or +1 706 645 9291 (all other countries), with the reservation code 6774681 or by webcast through the link on the company's website at www.amb.com.
In addition, the company will post a summary of the guidance given on the call and a supplement detailing the components of net asset value to the Investor Information portion of its website on Tuesday, October 24, 2006 by 5:00 p.m. PDT.
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, 2006, AMB owned, or had investments in, on a consolidated basis or through unconsolidated joint ventures, properties and development projects expected to total approximately 124.8 million square feet (11.6 million square meters) and 1,109 buildings in 42 markets within 11 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 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 total expected investments in acquisitions and developments; size and timing of deliveries and total investments in development projects; and use of private capital funds for planned investment activity, 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 report 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, difficulties in identifying properties to acquire and in effecting acquisitions, our failure to successfully integrate acquired properties and operations, our failure to divest properties on advantageous terms 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, environmental uncertainties, risks related to natural disasters, changes in general economic conditions or in the real estate sector, changes in real estate and zoning laws or other local, state and federal regulatory requirements, a downturn in the U.S., California, or the global economy, risks related to doing business internationally, 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, various market conditions and fluctuations and those other risk factors discussed under the heading "Risk Factors" and elsewhere in our most recent annual report on Form 10-K for the year ended December 31, 2005.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
As of
September 30, June 30, March 31, December 31,
2006 2006 2006 2005
Assets
Investments in real
estate:
Total investments in
properties $7,553,031 $7,376,322 $6,913,524 $6,798,294
Accumulated depreciation (821,545) (774,528) (736,760) (697,388)
Net investments in
properties 6,731,486 6,601,794 6,176,764 6,100,906
Investments in
unconsolidated joint
ventures 116,856 123,107 118,472 118,653
Properties held for
contribution, net 184,365 71,981 266,311 32,755
Properties held for
divestiture, net 63,402 46,857 31,201 17,936
Net investments in
real estate 7,096,109 6,843,739 6,592,748 6,270,250
Cash and cash equivalents 184,230 231,912 168,007 267,233
Mortgages and loans
receivable 18,782 18,816 21,589 21,621
Accounts receivable, net 143,594 127,528 148,907 178,682
Other assets 135,646 114,371 112,312 64,953
Total assets $7,578,361 $7,336,366 $7,043,563 $6,802,739
Liabilities and
stockholders' equity
Secured debt $1,874,887 $1,829,968 $1,917,805 $1,912,526
Unsecured senior debt 1,226,561 1,051,249 950,937 975,000
Unsecured credit
facilities 801,656 904,452 734,110 490,072
Other debt 79,894 88,217 63,543 23,963
Accounts payable and other
liabilities 297,358 254,223 249,149 263,744
Total liabilities 4,280,356 4,128,109 3,915,544 3,665,305
Minority interests:
Joint venture partners 977,452 950,209 899,658 853,643
Preferred unitholders 180,298 190,198 200,986 278,378
Limited partnership
unitholders 79,733 89,705 87,973 89,114
Total minority
interests 1,237,483 1,230,112 1,188,617 1,221,135
Stockholders' equity:
Common equity 1,836,928 1,802,814 1,764,071 1,740,751
Preferred equity 223,594 175,331 175,331 175,548
Total stockholders'
equity 2,060,522 1,978,145 1,939,402 1,916,299
Total liabilities and
stockholders'
equity $7,578,361 $7,336,366 $7,043,563 $6,802,739
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except share data)
For the Quarters For the Nine Months
Ended Ended
September 30, September 30,
2006 2005 2006 2005
Revenues
Rental revenues $180,205 $154,312 $531,439 $461,516
Private capital income (1) 7,490 5,764 17,539 12,520
Total revenues 187,695 160,076 548,978 474,036
Costs and expenses
Property operating costs (45,992) (39,842) (135,888) (119,344)
Depreciation and
amortization (48,761) (40,494) (136,160) (121,279)
Impairment losses - - (5,394) -
General and administrative (25,851) (16,815) (73,850) (54,876)
Other expenses (2) (893) (2,925) (1,134) (3,663)
Fund costs (495) (329) (1,588) (1,073)
Total costs and expenses (121,992) (100,405) (354,014) (300,235)
Other income and expenses
Equity in earnings of
unconsolidated joint
ventures (3) 2,239 1,529 12,605 9,959
Other income (2) 2,643 2,964 7,641 4,769
Gains from dispositions of
real estate, net - - - 18,923
Development profits, net
of taxes 23,517 398 69,889 20,322
Interest expense,
including amortization (44,535) (37,305) (129,627) (111,320)
Total other income and
expenses (16,136) (32,414) (39,492) (57,347)
Income from
operations before
minority interests 49,567 27,257 155,472 116,454
Minority interests' share
of income:
Joint venture partners'
share of income (12,317) (8,806) (30,145) (27,039)
Joint venture partners'
and limited partnership
unitholders' share of
development profits (1,150) (21) (2,735) (10,136)
Preferred unitholders (3,791) (5,368) (12,816) (16,104)
Limited partnership
unitholders (108) (528) (1,469) (1,505)
Total minority
interests' share of
income (17,366) (14,723) (47,165) (54,784)
Income from
continuing
operations 32,201 12,534 108,307 61,670
Discontinued operations:
Income attributable to
discontinued
operations, net of
minority interests 973 2,204 3,675 7,281
Gain from disposition of
real estate, net of
minority interests 213 14,330 24,335 47,673
Total discontinued
operations 1,186 16,534 28,010 54,954
Net income 33,387 29,068 136,317 116,624
Preferred stock dividends (3,440) (1,783) (9,631) (5,349)
Preferred unit redemption
discount/(issuance costs) 16 - (1,004) -
Net income available to
common stockholders $29,963 $27,285 $125,682 $111,275
Net income per common
share (diluted) $0.33 $0.31 $1.39 $1.27
Weighted average common
shares (diluted) 91,058,029 88,373,479 90,458,810 87,424,751
(1) Includes incentive distributions for 2006 of $2.1 million from the
sale of AMB Institutional Alliance Fund I in 2005 which had been
deferred.
(2) Includes changes in liabilities and assets associated with the
Company's deferred compensation plan.
(3) Includes gains on sale of operating properties of $0.0 million, $8.3
million, $0.1 million and $5.1 million, respectively, for the three
and nine months ended September 30, 2006 and 2005.
CONSOLIDATED STATEMENTS OF FUNDS FROM OPERATIONS (1)
(dollars in thousands, except share data)
For the Quarters For the Nine Months
Ended Ended
September 30, September 30,
2006 2005 2006 2005
Net income $33,387 $29,068 $136,317 $116,624
Gains from disposition of
real estate, net of
minority interests (213) (14,330) (24,335) (66,596)
Depreciation and
amortization:
Total depreciation and
amortization 48,761 40,494 136,160 121,279
Discontinued operations'
depreciation (37) 4,216 270 12,483
Non-real estate
depreciation (1,001) (892) (3,069) (2,439)
Adjustments to derive FFO
from consolidated JVs:
Joint venture partners'
minority interests (Net
income) 12,317 8,806 30,145 27,039
Limited partnership
unitholders' minority
interests (Net income) 108 528 1,469 1,505
Limited partnership
unitholders' minority
interests (Development
profits) 1,086 16 3,260 568
Discontinued operations'
minority interests (Net
income) (18) 2,226 (278) 6,850
FFO attributable to
minority interests (24,471) (24,944) (66,654) (72,634)
Adjustments to derive FFO
from unconsolidated JVs:
AMB's share of net
income (2,239) (1,529) (12,605) (9,959)
AMB's share of FFO 4,030 4,592 9,335 11,808
AMB's share of
development profits,
net - - - 5,441
Preferred stock dividends (3,440) (1,783) (9,631) (5,349)
Preferred unit redemption
discount (issuance costs) 16 - (1,004) -
Funds from operations $68,286 $46,468 $199,380 $146,620
FFO per common share
and unit (diluted) $0.72 $0.50 $2.10 $1.59
Weighted average
common shares and
units (diluted) 95,117,597 93,034,016 94,734,736 92,121,224
(1) Funds From Operations ("FFO"). 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, as defined by NAREIT, to be a useful supplemental measure of its operating performance. FFO is defined 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. Further, the Company does not adjust FFO to eliminate the effects of non-recurring charges. The Company believes that FFO, as defined by NAREIT, is a meaningful supplemental measure 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, NAREIT created FFO as a supplemental measure of operating performance for real estate investment trusts that excludes historical cost depreciation and amortization, among other items, from net income, as defined by GAAP. The Company believes that the use of FFO, 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 to be a useful measure 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 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 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 the Company's liquidity or operating performance. FFO also does not consider the costs associated with capital expenditures related to the Company's real estate assets nor is FFO necessarily indicative of cash available to fund the Company's future cash requirements. Further, the Company's computation of FFO may not be comparable to FFO reported by other real estate investment trusts that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than the Company does.
First Call Analyst:
FCMN Contact: [email protected]
SOURCE: AMB Property Corporation
CONTACT: Margan S. Mitchell, Vice President, Corporate Communications of
AMB Property Corporation, +1-415-733-9477, or fax, +1-415-477-2177, or
Web site: http://www.amb.com/
