- Earnings per share (EPS) for the quarter were $0.33, flat over the second quarter 2000, and $0.82 for the first half of the year, an increase of 20.6% over the first half of 2000 - $16.1 million non-cash charge taken against earnings and funds from operations (FFO) for impairment reserves on all of the company's equity investments in technology and e-commerce companies - $17.8 million of gains on $61.6 million of property dispositions, which was not included in FFO - Adjusted EPS (before gains and extraordinary and one-time items) for the quarter increased 3.1% over the second quarter of 2000 to $0.33, and 3.0% over the first half of 2000 to $0.68 - FFO per share, after non-cash charges of $0.18 per share, decreased 25.9% from the second quarter 2000 to $0.43, and decreased 11.5% from the first half of 2000 to $1.00, after non-cash charges of $0.23 per share - Same store net operating income (NOI) growth was 6.8% for the quarter and 7.6% year-to-date - Raised $159 million of private capital commitments for AMB Institutional Alliance Fund II - Reduced debt by $56 million and repurchased 25,000 shares of common stock at $22.80 per share
SAN FRANCISCO, July 9 /PRNewswire/ -- AMB Property Corporation
Earnings growth for the quarter was positively impacted by $17.8 million, or $0.21 per share, of gains from asset dispositions, partially offset by non-cash charges of $16.1 million, or $0.18 per share, for impairment reserves on all of the company's private equity investments in technology and e-commerce companies, and a $1.4 million, or $0.02 per share, depreciation charge for capitalized lease costs related to leases with Webvan Group, Inc.
Earnings growth was also driven by continued strong operating performance at the company's industrial properties. Same store cash basis net operating income (NOI) growth was 6.8% with a 49.4% increase in same store base rents on lease renewals and rollovers during the quarter, and 71.2% tenant retention at the same store properties. Year-to-date same store NOI growth was 7.6%. Rent increases on renewals and rollovers during the quarter for the entire industrial portfolio were 38.5% and tenant retention was 72.6%. Occupancy was 95.9% at quarter-end, down 0.1% from the end of the first quarter.
Funds from operations (FFO) per fully diluted share were $0.43 for the quarter, a decrease of 25.9% from the first quarter of 2000, and $1.00 for the first half of the year, a decrease of 11.5% from the first half of 2000. Excluding the non-cash charges for impairment reserves, FFO per fully diluted share was $0.61 for the quarter and $1.23 for the first six months, reflecting an increase of 5.2% and 8.8%, respectively. FFO per share for the quarter was driven by $0.06 of internal growth and $0.01 of growth from investment management revenues, offset by a $0.02 increase in general, administrative and other expenses and $0.02 of dilution from property contributions and sales to co-investment joint ventures. Gains on asset dispositions were not included in FFO.
"During 1999 and 2000, AMB made equity investments in eight private technology and e-commerce companies. In order to reflect changes in market conditions, we decided to fully reserve against our remaining net investments in these companies and take the charge against earnings this quarter. We learned a great deal about the impact of technology on our business and that of our customers through these investments. We are disappointed that these equity investments did not meet our financial expectations, but we believe that we have now put these challenges behind us," stated Hamid R. Moghadam, chairman and chief executive officer of AMB.
"Turning to our operating results, the strength of AMB's investment strategy and business model shines during the slower parts of the real estate cycle. Our same store NOI growth remains strong at 7.6% year-to-date with stable occupancy. We continued to outperform the national industrial market supported by the strength of our infill locations, particularly our Bay Area assets. Focusing our investments on industrial distribution facilities in major hub markets and gateway cities reduces our exposure to excess supply and provides AMB with solid operating fundamentals and added opportunities for growth," continued Moghadam.
AMB's investment strategy focuses on High Throughput Distribution(TM) facilities in eight hub markets and gateway cities where the company believes there are significant growth opportunities. At quarter-end, properties in these markets accounted for 71.9% of AMB's annual revenues. Acquisitions during the quarter totaled $71.9 million and 1.0 million square feet. AMB completed and stabilized two industrial development projects during the quarter, totaling 712,411 square feet for a total investment of $42.3 million. The industrial development and renovation pipeline currently stands at $254.2 million and consists of 4.5 million square feet, of which $144.2 million, or 56.7%, has been funded.
Dispositions during the quarter totaled $61.6 million and 1.3 million square feet, and included exiting the Nashville market. "We continue to sharpen our investment focus by opportunistically disposing of assets and redeploying the proceeds into properties that are more aligned with AMB's strategic direction. This quarter, we sold less-strategic assets and assets in non-core markets, recognizing $17.8 million in gain on these sales," said W. Blake Baird, president of AMB.
During the quarter, AMB announced the initial closing of AMB Institutional Alliance Fund II, a multi-investor fund including 10 pension funds, foundations and endowments that have co-invested alongside AMB. The initial closing represented $159 million of third party equity commitments, which amounts to a capitalization of approximately $400 million for Fund II when combined with debt financings and AMB's equity investment. AMB will maintain a minimum equity ownership of 20% of the fund and expects that Fund II will utilize no more than 50% leverage. AMB will receive acquisition fees and priority distributions for portfolio management services, and may receive a promoted interest if certain return thresholds are met.
"We have executed well on expanding our private capital programs by raising $284 million in third party private equity from co-investment partners in the first half of 2001, while keeping our common equity scarce," said Baird. Under a previously announced $100 million stock repurchase program, the company repurchased 25,000 shares of common stock during the quarter at a price of $22.80 per share, bringing the total repurchases under the program to $27.9 million at an average price of $18.98.
During the quarter, AMB reduced its share of total debt outstanding by $56 million, finishing the quarter with no outstanding borrowings on its $500 million unsecured credit facility and over $175 million of cash on its balance sheet. AMB's share of total debt-to-total market capitalization declined from the first quarter of 2001 by 170 basis points to 36.2%. "We have significant financial capacity through both our balance sheet and private capital programs which gives us flexibility to take advantage of market opportunities in coming quarters," stated Guy F. Jaquier, executive vice president and chief investment officer.
AMB named one new senior vice president and five vice presidents, effective July 1, 2001. Andrew Singer was promoted to Senior Vice President - Transactions, Robert Adams was promoted to Vice President - Information Systems, David Buxbaum was promoted to Vice President - Regional Manager, Stephen Lekki was promoted to Vice President - Transactions, Victoria Robinson was promoted to Vice President - Investor Relations, and David Twist was promoted to Vice President - Research. In addition, AMB Investment Management promoted Alison Hill to Vice President - Investment Management. "We are pleased to recognize the success and contributions of these members of our leadership team and congratulate them in their new roles," said Moghadam.
Earlier today, Webvan Group, Inc. announced it has ceased operations in all markets and will pursue an orderly sale of its assets and business. As of June 30, 2001 Webvan had four leases totaling 843,970 square feet with AMB, accounting for $3.6 million of annualized base rent and were current on all obligations as of June 30, 2001. Webvan was AMB's third largest customer at quarter-end and accounted for 0.8% of annualized base rents. As a result of this announcement and other previous announcements, AMB has taken a non-cash charge to depreciation totaling $1.4 million for capitalized lease costs. In addition, AMB wrote-off $1.4 million of straight-line rents receivable during the quarter; this amount did not affect earnings for the quarter because such expense was previously reserved. AMB expects to regain possession of all space and release it to new customers in subsequent quarters.
AMB will hold its second quarter 2001 conference call tomorrow, July 10, 2001 at 2:00 p.m. EDT (11:00 a.m. PDT). Stockholders and interested parties may access a webcast of the call through AMB's website at http://www.amb.com/ or a broadcast of the call by dialing 719-457-2637, reservation code 691846. For those who are not able to listen to the live broadcast, a replay will be available for one week following the call through AMB's website at http://www.amb.com/ or by dialing 719-457-0820, reservation code 691846.
AMB Property Corporation is one of the leading owners and operators of industrial real estate nationwide. As of June 30, 2001, AMB owned, managed and had renovation and development projects totaling 93.7 million square feet and 1,008 buildings in 26 metropolitan markets. AMB targets High Throughput Distribution(TM) properties -- industrial properties located in major distribution markets near airports, seaports and ground transportation systems. These HTD(TM) facilities are built for speed and benefit from barriers to entry due to their supply-constrained locations and proximity to large customer bases. AMB -- A tradition of nontraditional thinking(TM).
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 June 30, March 31, December 31, 2001 2001 2000 Assets Investments in real estate: Total investments in properties $4,361,498 $4,084,799 $4,026,597 Accumulated depreciation (213,923) (202,188) (177,467) Net investments in properties 4,147,575 3,882,611 3,849,130 Investment in unconsolidated joint ventures 83,865 85,317 80,432 Properties held for divestiture, net 96,209 236,746 197,146 Net investments in real estate 4,327,649 4,204,674 4,126,708 Cash and cash equivalents 176,584 152,224 42,722 Mortgage receivables 92,250 121,297 115,969 Accounts receivable, net 68,982 67,482 69,874 Investments in affiliated companies (A) -- 47,285 35,731 Investments in other companies, net (B) -- 15,343 15,965 Other assets 56,700 29,839 18,657 Total assets $4,722,165 $4,638,144 $4,425,626 Liabilities and Stockholders' Equity Secured debt $1,058,247 $1,014,054 $940,276 Unsecured senior debt securities 755,000 755,000 680,000 Unsecured credit facility -- 94,000 216,000 Alliance Fund II credit facility 98,100 -- -- Other liabilities 201,031 177,915 147,042 Total liabilities 2,112,378 2,040,969 1,983,318 Minority interests: Preferred units 342,966 342,911 318,053 Minority interests 476,937 457,372 356,325 Total minority interests 819,903 800,283 674,378 Stockholders' equity: Common stock 1,693,784 1,700,792 1,671,830 Preferred stock 96,100 96,100 96,100 Total stockholders' equity 1,789,884 1,796,892 1,767,930 Total liabilities and stockholders' equity $4,722,165 $4,638,144 $4,425,626 (A) On May 31, 2001 the Company acquired all of the voting stock of Headlands Realty Corporation and its Investment Management Division. The Company began consolidating Headlands Realty Corporation and its Investment Management Division for financial reporting purposes effective May 31, 2001. (B) Net of impairment reserves totaling $23.2 million at June 30, 2001, $7.2 million at March 31, 2001 and $2.5 million at December 31, 2000. Consolidated Statements of Operations (dollars in thousands, except share data) Quarters Ended June 30, Six Months Ended June 30, 2001 2000 2001 2000 Revenues Rental revenues (B) $139,535 $110,597 $275,336 $218,863 Equity in earnings of unconsolidated joint ventures 1,255 1,317 2,729 2,559 Investment management income (A) 1,544 704 3,964 952 Interest and other income 3,692 861 8,831 1,428 Total revenues 146,026 113,479 290,860 223,802 Operating Expenses Property operating 33,640 25,088 66,560 50,061 Interest, including amortization (C) 30,206 20,002 61,758 40,344 Depreciation and amortization 27,323 22,631 54,177 41,823 General, administrative, and other (A) 9,201 5,984 17,384 11,335 Loss on investments in other companies 16,103 -- 20,758 -- Total expenses 116,473 73,705 220,637 143,563 Income from operations 29,553 39,774 70,223 80,239 Minority interests: Preferred units (7,345) (5,962) (14,203) (11,572) Minority interests (9,629) (4,221) (15,768) (8,021) Total minority interests (16,974) (10,183) (29,971) (19,593) Net income before gain from disposition of real estate 12,579 29,591 40,252 60,646 Gain from disposition of real estate, net of minority interests 17,792 416 34,559 405 Net income before extraordinary items 30,371 30,007 74,811 61,051 Extraordinary items (438) -- (438) -- Net income 29,933 30,007 74,373 61,051 Preferred stock dividends (2,125) (2,125) (4,250) (4,250) Net income available to common stockholders $27,808 $27,882 $70,123 $56,801 Net income per common share: Basic $0.33 $0.33 $0.83 $0.68 Diluted $0.33 $0.33 $0.82 $0.68 Weighted average common shares: Basic 84,461,544 83,848,883 84,178,768 83,849,020 Diluted 85,378,727 84,125,277 85,078,751 83,994,238 (A) On May 31, 2001 the Company acquired all of the voting stock of Headlands Realty Corporation and its Investment Management Division. The Company began consolidating Headlands Realty Corporation and its Investment Management Division for financial reporting purposes effective May 31, 2001. (B) Includes straight-line rents of $2,141 and $2,183 for the quarters ended June 30, 2001 and 2000, respectively, and $3,469 and $5,343 for the six months ended June 30, 2001 and 2000, respectively. (C) Net of capitalized interest of $3,616 and $4,179 for the quarters ended June 30, 2001 and 2000, respectively and $7,198 and $7,194 for the six months ended June 30, 2001 and 2000, respectively. Consolidated Statements of Funds from Operations (dollars in thousands, except share data) Quarters Ended Six Months Ended June 30, June 30, 2001 2000 2001 2000 Income from operations $29,553 $39,774 $70,223 $80,239 Real estate related depreciation and amortization: Total depreciation and amortization 27,323 22,631 54,177 41,823 FF& E Depreciation and ground lease amortization (A) (492) (231) (973) (634) FFO attributable to minority interests (B) (8,539) (2,681) (15,726) (5,307) Adjustments to derive FFO from unconsolidated JV's: (C) Company's share of net income (1,255) (1,317) (2,729) (2,559) Company's share of FFO 2,133 1,811 4,253 3,547 Preferred stock dividends (2,125) (2,125) (4,250) (4,250) Preferred units distributions (7,345) (5,962) (14,203) (11,572) Funds from operations $39,253 $51,900 $90,772 $101,287 FFO per common share and unit: Basic $0.44 $0.58 $1.01 $1.13 Diluted (D) $0.43 $0.58 $1.00 $1.13 Weighted average common shares and units:
Basic 89,691,164 89,822,498 89,680,557 89,758,199
Diluted (D) 90,608,347 90,098,892 90,580,540 89,903,417
(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 interests' share of NOI for the quarters ended June 30, 2001 and 2000 was $16,274 and $5,379, respectively, and for the six months ended June 30, 2001 and 2000 was $26,220 and $10,141, respectively. (C) AMB's share of NOI for the quarters ended June 30, 2001 and 2000 was $2,263 and $2,101, respectively, and for the six months ended June 30, 2001 and 2000 was $5,081 and $4,109, respectively. (D) Includes the dilutive effect of stock options.
SOURCE: AMB Properties Corporation
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