AMB Property Corporation , a leading owner and operator of industrial real estate, today reported second quarter 2002 results. Earnings per share were $0.31 for the quarter, reflecting a 6.1% decrease over the same period in 2001. The Company's industrial portfolio continued to outperform the national industrial market: AMB's industrial assets, located predominantly in infill submarkets of major hub and gateway distribution markets, were 94.4% leased as of June 30, 2002, unchanged from the prior quarter end. The Company also began expensing stock options on its income statement rather than the typical dislcosure in the footnotes to financial statements.

Performance & Operating Highlights

AMB reported earnings per share (EPS) for the second quarter of $0.31, which included $0.03 per share of gains on dispositions of real estate. Second quarter 2002 EPS reflects a 6.1% decrease from second quarter 2001 EPS of $0.33, which included $0.02 per share of net gains from real estate dispositions and non-cash charges for impairment reserves for the Company's private equity investments which were fully written off in 2001. EPS for the first half of 2002 was $0.65, including $0.03 per share of gains on dispositions of real estate, reflecting a 20.7% decrease over EPS for the first half of 2001 of $0.82, which included $0.16 per share of net gains.

Industrial occupancy remained unchanged from the end of the first quarter at 94.4%, down 10 bps from year-end 2001 and down 140 bps from second quarter 2001. The Company grew same store cash basis net operating income by 1.0%, slightly below expectations, while same store GAAP basis net operating income was down 0.5%. The primary drivers of the decrease in 2002 earnings from 2001 earnings were: lower net gains, slightly lower same store GAAP net operating income and net disposition activity over the last six quarters as a result of the Company's focus on long term results. Tenant retention for the quarter was 75.1%, while rents on renewals and rollovers declined by 0.4% as the Company continued to focus on occupancy.

"Our results for the first six months reflect solid progress in a difficult operating environment. Of note, the last of the spaces vacated by bankrupt tenant Webvan Group, Inc. in 2001 was leased during the quarter, reflecting a better than anticipated lease-up time which highlights the strong demand for infill product even in a difficult market environment. However, leasing activity across the portfolio was not as strong as we expected it to be in the second quarter," commented Chairman and CEO, Hamid R. Moghadam. Mr. Moghadam continued, "Nonetheless, we continue to expect national occupancies in industrial real estate to improve in the second half of this year with rent growth to follow in 2003. As we have stated before, improvements in the industrial market will take some time to positively impact our earnings. We now expect same store growth for the year will be between 1-2%, below our prior expectation of 2.5%."

Investment Activity

Acquisitions during the quarter totaled five transactions with an aggregate value of $121.9 million and 2.0 million square feet. The Company expanded its on-tarmac presence with the purchase of the leasehold interest in a 285,000 square foot air cargo distribution center at Washington Dulles International Airport for a total acquisition price of $41.9 million. The facility, with over 500,000 square feet of aircraft ramp, is leased to FedEx, United Airlines, Air France and Lufthansa.

AMB and Mexico-based Strategic Alliance Partner (TM) G. Accion jointly closed their first investment during the second quarter to develop a distribution center for the Mexico operations of a major, international consumer products company. AMB's first international project, scheduled for completion in December 2002, is located in the San Martin Obispo Industrial Park within the Cuautitlan submarket of Mexico City.

"We are pleased to announce our first project in Mexico which better allows us to serve our targeted global customers," said W. Blake Baird, President. "Mexico is a logical place to begin our international expansion efforts because of its large domestic and international export markets, its growth in manufacturing and proximity to the United States. Cuautitlan is a preferred submarket for international distribution companies because of its proximity to the 22 million residents of Mexico City and the NAFTA highway, linking Mexico to the U.S.," further explained Mr. Baird.

AMB completed and stabilized three industrial development projects during the quarter, totaling 343,000 square feet for a total estimated investment of $15.8 million. The industrial development and renovation pipeline currently stands at $163.6 million and consists of 3.5 million square feet, of which $102.3 million, or 63%, has been funded and 69% is preleased.

During the quarter, the Company sold one industrial building totaling 484,000 square feet for a price of $12.1 million. In addition, the Company sold $76.9 million of industrial assets, totaling 1.9 million square feet, to the AMB-SGP joint venture, the Company's co-investment partnership with an affiliate of GIC Real Estate, the real estate investment subsidiary of the Government of Singapore.

Mr. Baird summarized, "While our full-year acquisition volume is on track, it will be more back-end loaded than we originally anticipated. Given the transaction environment, our disposition activity including contributions to joint ventures, will more likely than not exceed our previous expectations. This combination will lead to some short term dilution in favor of longer term results."

Accounting for Stock Options

During the quarter, AMB began expensing the fair value of options granted under the Company's stock option plan. The Company will record the expense over the option vesting period, using the fair value at the date of grant. The accounting treatment has been adopted on a prospective basis and is applied to all options granted on January 1, 2002 or later. The Company currently anticipates the 2002 full-year expense to be $0.01 per share.

"We use options to attract and compensate talented employees and directors and further align their interest with our shareholders. Consistent with our goal of ever improving disclosure and transparency, we feel the cost of stock options is better reflected on our income statement, rather than the typical footnote disclosure," explained Mr. Moghadam.

Governance

Daniel H. Case III, Chairman of JP Morgan H&Q and an AMB Director, passed away on Wednesday, June 26, 2002 after a 15-month battle with brain cancer. AMB recognizes with gratitude Mr. Case's contributions as a member of AMB's Board of Directors since the Company's IPO in 1997. The Board will seek to fill his position with an independent director of equal knowledge, insight and enthusiasm but does not expect to find this person easily or quickly.

Mr. Moghadam stated, "Dan's contributions to AMB were unique and substantial. As a leader, he represented all those personal and professional values to which we can only aspire. His insights, judgment and integrity were unparalleled; we will miss him greatly. Our deepest sympathies are with his family." AMB has made a contribution in Dan's honor to ABC2, a non-profit organization dedicated to accelerating the discovery of a cure for brain cancer which was founded by Dan, his brother Steve and their families.

Beginning this quarter, AMB is voluntarily adopting the new SEC financial statement certification requirements. Hamid R. Moghadam, W. Blake Baird and Michael A. Coke will certify the Company's financial statements.

Supplemental Reporting Measure

AMB reported second quarter 2002 Funds from Operations (FFO) of $0.60 per share, representing a 39.5% increase over second quarter 2001 FFO of $0.43 per share, which included non-cash charges for impairment reserves of $0.18 per share. FFO per share for the first half of 2002 was $1.21, up 21.0% from the first half of 2001 of $1.00, which included non-cash charges of $0.23 per share. In accordance with the standards established by NAREIT, gains and losses from asset dispositions held for investment are not included in FFO.

Conference Call

AMB will host a conference call to discuss its second quarter 2002 results tomorrow at 11:00 AM PDT/ 2:00 PM EDT. Stockholders and interested parties may listen to a live broadcast of the call by dialing 719-457-2645 and using reservation code 137677. The conference call can also be accessed through the Internet on AMB's website at http://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 July 23, 2002 via telephone by dialing 719-457-0820 with reservation code 137677 and until August 5, 2002 on the Company's website.

AMB Property Corporation is a leading owner and operator of industrial real estate in North America. As of June 30, 2002 AMB owned, managed and had renovation and development projects totaling 96.6 million square feet and 1,037 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 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.

This press release contains forward-looking statements about business strategy, future leasing activities, acquisition opportunities and future plans, which are made pursuant to the safe-harbor provisions of Section 21E of the Securities Exchange Act of 1934. Forward-looking statements involve numerous risks and uncertainties and should not be relied upon as predictions of future events. The events or circumstances reflected in our forward-looking statements might not occur. In particular, a number of factors could cause AMB's actual results to differ materially from those anticipated, including, among other things, defaults on or non-renewal of leases by tenants, increased interest rates and operating costs, AMB's failure to obtain necessary outside financing, difficulties in identifying properties to acquire and in effecting acquisitions, AMB's failure to successfully integrate acquired properties and operations, AMB's failure to timely reinvest proceeds from any such dispositions, risks and uncertainties affecting property development and construction (including construction delays, cost overruns, AMB's inability to obtain necessary permits and public opposition to these activities), AMB's failure to qualify and maintain its status as a real estate investment trust under the Internal Revenue Code, environmental uncertainties, risks related to natural disasters, financial market fluctuations, changes in real estate and zoning laws, risks of doing business internationally and increases in real property tax rates. AMB's success also depends upon economic trends generally, including interest rates, income tax laws, governmental regulation, legislation and population changes. For further information on these and other factors that could impact AMB and the statements contained herein, reference should be made to AMB's filings with the Securities and Exchange Commission, including AMB's quarterly report on Form 10-Q for the quarter ended March 31, 2002.

                       Consolidated Balance Sheets
                            (dollars in thousands)


                                           As of
                                          June 30,   March 31,  December 31,
                                            2002        2002        2001
  Assets
  Investments in real estate:
    Total investments in properties      $4,732,321  $4,566,951  $4,530,711
    Accumulated depreciation               (311,058)   (289,701)   (265,653)
      Net investments in properties       4,421,263   4,277,250   4,265,058
    Investment in unconsolidated joint
     ventures                                64,083      71,137      71,097
    Properties held for divestiture, net    133,934     139,370     157,174
      Net investments in real estate      4,619,280   4,487,757   4,493,329
  Cash and cash equivalents                 119,287      99,492      81,732
  Mortgage receivables                       87,175      87,214      87,214
  Accounts receivable, net                   80,366      75,399      70,794
  Other assets                               31,172      31,261      27,824
       Total assets                      $4,937,280  $4,781,123  $4,760,893

  Liabilities and Stockholders' Equity
  Secured debt                           $1,352,218  $1,229,433  $1,220,164
  Unsecured senior debt securities          800,000     800,000     780,000
  Unsecured credit facility                      --          --      12,000
  Alliance Fund II credit facility           52,000     116,000     123,500
  Other liabilities                         162,629     155,568     138,601
      Total liabilities                   2,366,847   2,301,001   2,274,265
  Minority interests:
    Preferred units                         315,847     275,987     275,987
    Minority interests                      508,577     455,428     458,299
      Total minority interests              824,424     731,415     734,286
  Stockholders' equity:
    Common stock                          1,649,909   1,652,607   1,656,242
    Preferred stock                          96,100      96,100      96,100
      Total stockholders' equity          1,746,009   1,748,707   1,752,342
       Total liabilities and
        stockholders' equity             $4,937,280  $4,781,123  $4,760,893


                    Consolidated Statements of Operations
                  (dollars in thousands, except share data)


                            For the Quarters Ended  For the Six Months Ended
                                     June 30,                June 30,
                                2002         2001         2002        2001
  Revenues
  Rental revenues (A)          $149,741    $139,535    $301,982    $275,336
  Equity in earnings of
   unconsolidated joint
   ventures                       1,638       1,255       3,121       2,729
  Investment management
   income                         3,114       1,544       5,702       3,964
  Interest and other income       3,330       3,692       7,312       8,831
    Total revenues              157,823     146,026     318,117     290,860
  Expenses
  Property operating             36,843      33,640      73,912      66,560
  Interest, including
   amortization (B)              37,217      30,206      73,268      61,758
  Depreciation and
   amortization                  31,972      27,323      61,647      54,177
  General, administrative,
   and other (C)                 10,762       9,201      21,831      17,384
  Loss on investments in
   other companies                   --      16,103          --      20,758
    Total expenses              116,794     116,473     230,658     220,637
       Income before
        minority interests
        and gains                41,029      29,553      87,459      70,223
  Minority interests' share
   of income:
    Preferred units              (6,510)     (7,345)    (12,367)    (14,203)
    Minority interests           (8,869)     (9,629)    (18,635)    (15,768)
       Total minority
        interests               (15,379)    (16,974)    (31,002)    (29,971)
  Gains from disposition of
   real estate, net of
   minority interests             2,768      17,792       2,480      34,559
       Net income before
        discontinued
        operations and
        extraordinary items      28,418      30,371      58,937      74,811
  Discontinued operations           484          --         484          --
  Extraordinary items (early
   debt extinguishments)            (52)       (438)       (268)       (438)
       Net income                28,850      29,933      59,153      74,373
  Preferred stock dividends      (2,125)     (2,125)     (4,250)     (4,250)
  Net income available to
   common stockholders          $26,725     $27,808     $54,903     $70,123
  Net income per common
   share:
    Basic                         $0.32       $0.33       $0.66       $0.83
    Diluted                       $0.31       $0.33       $0.65       $0.82
  Weighted average common
   shares:
    Basic                    83,710,208  84,461,544  83,626,889  84,178,768
    Diluted                  85,529,416  85,378,727  85,120,197  85,078,751


  (A) Includes straight-line rents of $2,786 and $2,141 for the quarters
  ended June 30, 2002 and 2001, respectively, and $6,747 and $3,466 for the
  six months ended June 30, 2002 and 2001, respectively.
  (B) Net of capitalized interest of $1,633 and $3,616 for the quarters
  ended June 30, 2002 and 2001, respectively, and $3,424 and $7,198 for the
  six months ended June 30, 2002 and 2001, respectively.
  (C) Includes share-based plans expense of $0.2 million for the quarter
  ended June 30, 2002, and $0.4 million for the six months ended
  June 30, 2002, related to the adoption of SFAS 123.


               Consolidated Statements of Funds from Operations
                  (dollars in thousands, except share data)


                           For the Quarters Ended  For the Six Months Ended
                                     June 30,                June 30,
                                 2002        2001        2002        2001

  Income before minority
   interests and gains          $41,029     $29,553     $87,459     $70,223

  Real estate related
   depreciation and
   amortization:
    Total depreciation and
     amortization                31,972      27,323      61,647      54,177
    FF& E depreciation and
     ground lease
     amortization (A)              (519)       (492)     (1,193)       (973)
  Discontinued operations           484          --         484          --
  FFO attributable to
   minority interests (B)       (11,274)     (8,539)    (24,118)    (15,726)

  Adjustments to derive FFO
   from unconsolidated JV's:
   (C)
    Company's share of net
     income                      (1,638)     (1,255)     (3,121)     (2,729)
    Company's share of FFO        2,700       2,133       4,829       4,253
  Preferred stock dividends      (2,125)     (2,125)     (4,250)     (4,250)
  Preferred units
   distributions                 (6,510)     (7,345)    (12,367)    (14,203)

  Funds from operations         $54,119     $39,253    $109,370     $90,772

  FFO per common share and
   unit:
    Basic                         $0.61       $0.44       $1.23       $1.01
    Diluted                       $0.60       $0.43       $1.21       $1.00

  Weighted average common
   shares and units:
    Basic                    88,643,124  89,691,164  88,562,012  89,680,557
    Diluted                  90,462,332  90,608,347  90,055,320  90,580,540


  (A) 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.
  (B) Represents FFO attributable to minority interests in consolidated
  joint ventures whose interests are not exchangeable into common stock.
  The minority interest's share of cash basis NOI was $19,657 and $16,274
  for the quarters ended June 30, 2002 and 2001, respectively, and $39,392
  and $26,220 for the six months ended June 30, 2002 and 2001, respectively.
  (C) AMB's share of NOI was $3,063 and $2,263 for the quarters ended June
  30, 2002 and 2001, and $5,707 and $5,801 for the six months ended June 30,
  2002, and 2001, respectively.

 

SOURCE: AMB Property Corporation

CONTACT: investors/analysts, Michael A. Coke or Michelle C. Wells,
877-285-3111, or fax, +1-415-394-9001, or [email protected], or media, Sara J. Butz,
Marketing & Corporate Communications, +1-415-733-9478, or fax,
+1-415-394-9001, or [email protected], all of AMB Property Corporation

Media contact & resources

Jennifer Nelson

VP, Head of Global Corporate Communications
+1 (415) 733 9409
[email protected]
San Francisco, California USA

Corporate Profile

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