SAN FRANCISCO, July 16 /PRNewswire-FirstCall/ -- AMB Property
Corporation(R) (NYSE:AMB), a leading global developer and owner of
industrial real estate, today reported results for the second
quarter and first six months of 2008. Funds from operations per
fully diluted share and unit ("FFOPS") was $1.06 for the second
quarter of 2008, as compared to $0.74 for the same quarter in 2007.
The second quarter results included $0.32 per share of scheduled
incentive distributions from the company's private capital
business. FFOPS for the six months ended June 30, 2008 was $1.71,
as compared to $1.32 for the same period in 2007. Net income
available to common stockholders per fully diluted share ("EPS")
for the second quarter of 2008 was $0.73. This compares to $1.10
for the same quarter in 2007, which included the gain on the
contribution of operating properties to AMB's Europe Fund I, formed
in June 2007. EPS for the six months ended June 30, 2008 was $1.12,
as compared to $1.35 for the same period in 2007. Owned and Managed
Portfolio Operating Results AMB's operating portfolio was 95.2%
occupied at June 30, 2008, up 40 basis points from March 31, 2008.
Cash-basis same store net operating income ("SSNOI") increased 3.3%
in the second quarter and 5.4% in the first six months of 2008,
over the same periods in 2007. When the effects of lease
termination fees are excluded from this metric, the increases were
3.7% for the quarter and 5.5% for the first six months. For the
trailing four quarters ended June 30, 2008, average rents on lease
renewals and rollovers in AMB's operating portfolio increased 4.3%,
following an average increase of 4.2% for the trailing four
quarters ended March 31, 2008. "Higher energy prices and the
dislocation in the credit markets are creating a challenging
environment for industrial demand in the U.S. and Europe; however,
our portfolio continues to perform well despite the downturn -- a
testament to our strategic focus on major supply-constrained
markets essential to global trade," said Hamid R. Moghadam, AMB's
chairman & CEO. "While it's too soon to predict the long-term
impact of rising transportation costs on distribution networks,
year-to-date leasing velocity in our portfolio and dialogue with
our customers indicate that our infill locations in major
metropolitan areas should continue to outperform the broader
market." Investment Activity During the quarter, the company
commenced development on 3.3 million square feet in the Americas,
Europe and Asia, with an estimated total investment of $248
million. At quarter end, AMB's development pipeline, which included
investments held through unconsolidated joint ventures, totaled
approximately 17.3 million square feet globally, with an estimated
total investment of $1.6 billion. The company's development
business includes contributions of stabilized properties to
affiliated private capital co-investment ventures or sale of
projects to third parties. During the second quarter, AMB
contributed or sold 1.9 million square feet in the Americas and
Asia, including contributions to three of its co-investment
ventures, for an aggregate contribution value and disposition price
of approximately $221 million. During the quarter, AMB acquired 1.5
million square feet of industrial distribution space for an
aggregate acquisition cost of approximately $146 million. The
acquisitions expanded AMB's presence in target markets in the
Americas and Europe, including the Port of Hamburg, which is
continental Europe's second largest port and where AMB is a leading
private owner of port-related distribution space. Private Capital
Subsequent to quarter end, AMB and the City and County of San
Francisco Employees' Retirement System contributed their interests
in AMB Partners II, a co-investment venture comprising 10.3 million
square feet of U.S. industrial property, to AMB Institutional
Alliance Fund III in exchange for partnership interests in Fund
III. "This transaction represents an opportunity for our partner to
transfer its investment to our flagship U.S. fund, with the
benefits of the fund's open-end structure. As well, the fund is
acquiring a portfolio of high-quality and known assets in its
target markets, thereby solidifying its position as a premier
vehicle for investing in industrial real estate in the U.S.,"
commented John T. Roberts, Jr., president of AMB's private capital
business. Financing Activities Demonstrating the strength of the
company's balance sheet and its financial flexibility, AMB
Property, L.P. issued $325 million of senior unsecured notes during
the second quarter 2008. The coupon on the notes is 6.30% with an
effective rate of 6.06%, as a result of a treasury lock. At June
30, 2008, AMB's share of total debt to total market capitalization
was 42.1%. 2008 Guidance The company confirms its previous full
year 2008 FFO guidance of $3.85 to $4.05 per share. Full year EPS
guidance is $2.55 to $2.75 per share. Company Officer Promotions
and Additions During the quarter, the company announced the
following officer promotions, effective July 1, 2008: Will
O'Donnell was promoted to senior vice president; and Nick Chung,
Irene Duran, Mike Fangman, Adrian Fernandez, Erin Marenghi, Rita
McLean, Greydie Sargent, Brian Scruggs, Nancy Schultz, Satoshi
Takeda, Leo Wang, Tracy Ward, David Yu, and Bob Vereschagin were
promoted to vice president. In addition, John Drake and Mark
Gschwind joined the company during the quarter as vice president.
Supplemental Earnings Measure 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 the company'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,
2006. In deriving SSNOI, the company defines NOI as rental
revenues, including reimbursements, less property operating
expenses, both of which are calculated in accordance with GAAP.
Property operating expenses exclude depreciation, amortization,
general and administrative expenses and interest expense. The
company defines SSNOI to also exclude straight-line rents and
amortization of lease intangibles. 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 the company'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
second quarter 2008 results on Wednesday, July 16, 2008 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 52517905. A webcast can be accessed through
a link titled "Q2 2008 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,
July 16, 2008 until 8:00 PM EDT on Friday, August 15, 2008. 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 52517905. 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 in the Americas, Europe and Asia. As of June
30, 2008, AMB owned, or had investments in, on a consolidated basis
or through unconsolidated joint ventures, properties and
development projects expected to total approximately 155.5 million
square feet (14.5 million square meters) in 47 markets within 15
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 continued
demand for our product, status of key operating metrics, our
ability to capitalize on trends and realize growth, effectiveness
of our strategies, performance of our portfolio, occupancy levels,
rent growth, SSNOI growth, our development projects (including
completion, timing of stabilization, our ability to lease such
projects, square feet at stabilization or completion, costs and
total investment amounts), our ability to accomplish future
business plans, strength of our balance sheet, our ability to
access credit markets and enter into credit and financing
agreements and to meet our forecasts (including our FFO and EPS
guidance) 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 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 or renewal at lower than expected
rent, increased interest rates and operating costs or greater than
expected capital expenditures, 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, redevelopment,
value-added conversion 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, inflation
risks, 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, risks of opening offices
globally, risks of changing personnel and roles, 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, 2007. CONSOLIDATED STATEMENTS OF OPERATIONS (in
thousands, except per share data) For the Quarters For the Six
Months ended June 30, ended June 30, 2008 2007 2008 2007 Revenues
Rental revenues $167,886 $158,883 $334,430 $316,947 Private capital
revenues(1) 41,413 8,518 51,336 14,443 Total revenues 209,299
167,401 385,766 331,390 Costs and expenses Property operating costs
(48,108) (42,568) (94,208) (86,121) Depreciation and amortization
(40,841) (40,173) (82,462) (80,564) General and administrative
(33,794) (30,260) (68,947) (60,114) Fund costs (384) (277) (606)
(518) Impairment losses - - - (257) Other expenses (1,422) (1,139)
(1,330) (2,051) Total costs and expenses (124,549) (114,417)
(247,553) (229,625) Other income and expenses Development gains,
net of taxes 30,402 28,996 48,222 41,188 Gains from sale or
contribution of real estate interests, net - 74,707 19,967 74,843
Equity in earnings of unconsolidated co-investment ventures 6,059
1,748 8,987 3,861 Other income 1,909 6,472 6,345 11,979 Interest
expense, including amortization (36,555) (33,151) (67,514) (67,490)
Total other income and expenses 1,815 78,772 16,007 64,381 Income
from operations before minority interests 86,565 131,756 154,220
166,146 Minority interests' share of income Co-investment venture
partners' share of income (6,103) (7,912) (25,047) (14,904)
Co-investment venture partners' and limited partnership
unitholders' share of development gains (1,371) (2,574) (6,113)
(3,136) Preferred unitholders (1,432) (1,480) (2,864) (5,179)
Limited partnership unitholders (1,740) (3,928) (2,719) (4,321)
Total minority interests' share of income (10,646) (15,894)
(36,743) (27,540) Income from continuing operations 75,919 115,862
117,477 138,606 Discontinued operations Income attributable to
discontinued operations, net of minority interests 297 2,023 272
4,926 Gains from disposition of real estate, net of minority
interests 803 384 2,202 419 Total discontinued operations 1,100
2,407 2,474 5,345 Net income 77,019 118,269 119,951 143,951
Preferred stock dividends (3,952) (3,952) (7,904) (7,904) Preferred
unit redemption (issuance costs) discount - (2,927) - (2,927) Net
income available to common stockholders $73,067 $111,390 $112,047
$133,120 Net income per common share (diluted) $0.73 $1.10 $1.12
$1.35 Weighted average common shares (diluted) 99,432 101,361
99,666 98,305 (1) Includes incentive and promote distributions for
2008 of $33.0 million for AMB Institutional Alliance Fund III
received during the quarter ended June 30, 2008 and $1.0 million
for the dissolution of AMB Erie co-investment venture received
during the quarter ended March 31, 2008. CONSOLIDATED STATEMENTS OF
FUNDS FROM OPERATIONS(1) (in thousands, except per share data) For
the Quarters For the Six Months ended June 30, ended June 30, 2008
2007 2008 2007 Net income available to common stockholders $73,067
$111,390 $112,047 $133,120 Gains from sale or contribution of real
estate, net of minority interests (803) (75,091) (22,169) (75,262)
Depreciation and amortization Total depreciation and amortization
40,841 40,173 82,462 80,564 Discontinued operations' depreciation
51 1,314 103 1,948 Non-real estate depreciation (2,155) (1,401)
(3,789) (2,578) Adjustments to derive FFO from consolidated
co-investment ventures Co-investment venture partners' minority
interests (Net income) 6,103 7,912 25,047 14,904 Limited
partnership unitholders' minority interests (Net income) 1,740
3,928 2,719 4,321 Limited partnership unitholders' minority
interests (Development profits) 1,175 1,251 1,704 1,801
Discontinued operations' minority interests (Net income) 9 253 396
526 FFO attributable to minority interests (16,417) (15,312)
(32,993) (31,616) Adjustments to derive FFO from unconsolidated
co-investment ventures AMB's share of net income (6,059) (1,748)
(8,987) (3,861) AMB's share of FFO 12,276 5,805 21,138 11,480 Funds
from operations $109,828 $78,474 $177,678 $135,347 FFO per common
share and unit (diluted) $1.06 $0.74 $1.71 $1.32 Weighted average
common shares and units (diluted) 103,405 105,807 103,641 102,866
(1) Funds From Operations ("FFO") and Funds From Operations Per
Share and Unit ("FFOPS"). AMB believes that net income, as defined
by U.S. GAAP, is the most appropriate earnings measure. However,
AMB considers funds from operations, or FFO, and FFO per share and
unit, or FFOPS, to be useful supplemental measures of its operating
performance. AMB defines FFOPS as FFO per fully diluted weighted
average share of AMB's common stock and operating partnership
units. AMB calculates FFO as net income, calculated in accordance
with U.S. GAAP, less gains (or losses) from dispositions of real
estate held for investment purposes and real estate-related
depreciation, and adjustments to derive AMB's pro rata share of FFO
of consolidated and unconsolidated joint ventures. AMB does not
adjust FFO to eliminate the effects of non-recurring charges. AMB
includes the gains from development, including those from value
added conversion projects, before depreciation recapture, as a
component of FFO. AMB believes that value-added conversion
dispositions are in substance land sales and as such should be
included in FFO, consistent with the real estate investment trust
industry's long standing practice to include gains on the sale of
land in FFO. However, AMB's interpretation of FFO or FFOPS may not
be consistent with the views of others in the real estate
investment trust industry, who may consider it to be a divergence
from the National Association of Real Estate Investment Trusts'
(NAREIT) definition, and may not be comparable to FFO or FFOPS
reported by other real estate investment trusts that interpret the
current NAREIT definition differently than AMB does. In connection
with the formation of a co-investment venture, AMB may warehouse
assets that are acquired with the intent to contribute these assets
to the newly formed venture. Some of the properties held for
contribution may, under certain circumstances, be required to be
depreciated under U.S. GAAP. If this circumstance arises, AMB
intends to include in its calculation of FFO gains or losses
related to the contribution of previously depreciated real estate
to joint ventures. Although such a change, if instituted, will be a
departure from the current NAREIT definition, AMB believes such
calculation of FFO will better reflect the value created as a
result of the contributions. To date, AMB has not included gains or
losses from the contribution of previously depreciated warehoused
assets in FFO. AMB believes that FFO and FFOPS are meaningful
supplemental measures of its operating performance because
historical cost accounting for real estate assets in accordance
with U.S. 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
U.S. GAAP. AMB believes that the use of FFO and FFOPS, combined
with the required U.S. 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. AMB
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
U.S. GAAP and should not be considered as alternatives to those
measures in evaluating AMB's liquidity or operating performance.
FFO and FFOPS also do not consider the costs associated with
capital expenditures related to AMB's real estate assets nor are
FFO or FFOPS necessarily indicative of cash available to fund AMB's
future cash requirements. The following table reconciles projected
FFO from projected net income for the year ended December 31, 2008:
2008 Low High Projected net income $2.55 $2.75 AMB's share of
projected depreciation and amortization 1.49 1.51 AMB's share of
projected gains on disposition of operating properties (0.12)
(0.14) Impact of additional dilutive securities, other, rounding
(0.07) (0.07) Projected Funds From Operations (FFO) $3.85 $4.05
Amounts are expressed per share, except FFO which is expressed per
share and unit. CONSOLIDATED BALANCE SHEETS(1) (dollars in
thousands) As of June 30, 2008 December 31, 2007 Assets Investments
in real estate Total investments in properties $6,101,579
$6,709,545 Accumulated depreciation (894,230) (916,686) Net
investments in properties 5,207,349 5,792,859 Investments in
unconsolidated co-investment ventures 373,202 356,194 Properties
held for contribution, net(2) 1,442,708 488,339 Properties held for
divestiture, net 85,040 40,513 Net investments in real estate
7,108,299 6,677,905 Cash and cash equivalents and restricted cash
378,526 250,416 Accounts receivable, net 224,390 184,270 Other
assets 215,577 149,812 Total assets $7,926,792 $7,262,403
Liabilities and stockholders' equity Secured debt $1,481,422
$1,471,087 Unsecured senior debt 1,153,270 1,003,123 Unsecured
credit facilities 916,485 876,105 Other debt 568,498 144,529
Accounts payable and other liabilities 384,040 306,196 Total
liabilities 4,503,715 3,801,040 Minority interests Co-investment
venture partners 532,173 517,572 Preferred unitholders 77,561
77,561 Limited partnership unitholders 100,748 102,278 Total
minority interests 710,482 697,411 Stockholders' equity Common
equity 2,489,183 2,540,540 Preferred equity 223,412 223,412 Total
stockholders' equity 2,712,595 2,763,952 Total liabilities and
stockholders' equity $7,926,792 $7,262,403 (1) During the quarter
ended June 30, 2008, AMB acquired an additional 19% interest in G.
Accion, a Mexican real estate company, increasing its ownership to
58%. As a result of the increase in ownership, AMB began
consolidating G. Accion during the quarter. Properties held for
divestiture, total assets and total liabilities include $27,680,
$146,092 and $93,257, respectively, related to G. Accion as of June
30, 2008. (2) June 30, 2008 balance includes $628 million of net
investments from AMB Partners II that will be contributed to AMB
Institutional Alliance Fund III in the third quarter of 2008.
DATASOURCE: AMB Property Corporation CONTACT: Margan S. Mitchell,
Vice President, Corporate Communications, +1-415-733-9477, fax,
+1-415-477-2177, , or Rachel E.M. Bennett, Director, Media,
+1-415-733-9532, fax, +1-415-477-2063, , or Tracy A. Ward, Vice
President, Investor Relations, +1-415-733-9565, fax,
+1-415-477-2044, , all of AMB Property Corporation Web site:
http://www.amb.com/
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