SAN FRANCISCO, Oct. 16 /PRNewswire-FirstCall/ -- AMB Property
Corporation(R) (NYSE:AMB), a leading global developer and owner of
industrial real estate, today reported results for the third
quarter and first nine months of 2008. Funds from operations per
fully diluted share and unit ("FFOPS") was $0.70 for the third
quarter of 2008, as compared to $0.99 for the same quarter in 2007.
The year-over-year variance is primarily related to timing of gains
on contribution of development properties to the company's private
capital co-investment ventures. FFOPS for the nine months ended
September 30, 2008 was $2.41, as compared to $2.31 for the same
period in 2007. Net income available to common stockholders per
fully diluted share ("EPS") for the third quarter of 2008 was
$0.24, as compared to $0.69 for the same quarter in 2007. EPS for
the nine months ended September 30, 2008 was $1.37, as compared to
$2.04 for the same period in 2007. Owned and Managed Portfolio
Operating Results AMB's operating portfolio was 95.4 percent
occupied at September 30, 2008, up 20 basis points from June 30,
2008. Cash-basis same store net operating income ("SSNOI"), without
the effects of lease termination fees, increased 3.5 percent in the
third quarter and 4.9 percent in the first nine months of 2008,
over the same periods in 2007. For the trailing four quarters ended
September 30, 2008, average rent change on renewals and rollovers
in AMB's operating portfolio increased 4.1 percent, following an
average increase of 4.3 percent for the trailing four quarters
ended June 30, 2008. "We continue to run AMB for the long term. Our
operating fundamentals remained solid through the third quarter as
a result of our long-established focus on the best markets around
the globe," said Hamid R. Moghadam, AMB's chairman & CEO. "The
environment became more challenging at the beginning of the fourth
quarter, so it may be difficult to keep this pace of growth into
2009. However, we are confident that AMB's strategy, people and
portfolio will outperform on a relative basis, even in a more
difficult economic environment. We remain focused on sound
execution and long-term value preservation." Investment Activity
During the quarter, the company commenced development on 1.6
million square feet in the Americas and Europe, with an estimated
total investment of $132 million. At quarter end, AMB's development
pipeline, which included investments held through unconsolidated
joint ventures, totaled approximately 17.8 million square feet
globally, with an estimated total investment of $1.5 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 third quarter, AMB
contributed or sold 2.2 million square feet in the Americas and
Asia, including contributions to three of its co-investment
ventures, for an aggregate value of approximately $192 million.
Also during the quarter, AMB acquired 1.6 million square feet of
industrial distribution space for an aggregate acquisition cost of
approximately $140 million. Property and land acquisitions during
the quarter expanded AMB's presence in target markets in the
Americas and Asia, including Beijing and Guangzhou, which were
market entries for AMB. "Given the current turbulence, lack of
clarity on pricing and availability of capital we intend to be
increasingly selective with our capital deployment decisions. We
plan to start projects only where the market demand is sound and
where profit expectations justify the risks. As such, we expect the
pace of development starts to slow considerably from our previous
outlook," Mr. Moghadam added. Financing Activities "The instability
in the credit markets, which have become more volatile over the
past few weeks, has made financing transactions increasingly
difficult," said Thomas S. Olinger, AMB's chief financial officer.
"While the timing, availability and pricing have become
unpredictable, our balance sheet remains strong and we have the
capacity to continue to support our business." During the quarter,
AMB closed a $230 million, two-year secured term loan priced at
LIBOR plus 130 basis points. The loan includes a one-year
extension, which can be exercised at the company's option.
Additionally, AMB closed on $768 million in property level
financings in the U.S., Europe and Japan. 2008 Guidance Due to the
change in the timing of certain transactions, caused primarily by
the turmoil in financing markets, the company is lowering its full
year 2008 FFO guidance to $3.05 to $3.10 per share. Full year EPS
guidance has also been lowered to $1.58 to $1.63 per share. The
company will provide details of its revised outlook for 2009 during
their third quarter earnings conference call. Organizational Update
As previously announced in the quarter, AMB acquired the remaining
42 percent equity interest in G. Accion, S.A. de C.V. ("G. Accion")
that it had not previously owned. G. Accion is now a wholly owned
subsidiary and has been renamed AMB Property Mexico. This newly
unified platform will continue to develop, lease, acquire and
operate industrial real estate in Mexico. During the quarter, 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. 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 percent 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 2008 results on Thursday, October 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 64987472. A webcast can be accessed through
a link titled "Q3 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 Thursday,
October 16, 2008 until 8:00 PM EST on Friday, November 14, 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 64987472. 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 September 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
158.4 million square feet (14.7 million square meters) in 49
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 contribute properties to and acquire properties in
our private capital co-investment ventures, 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 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 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 (1) (in
thousands, except share and per share data) For the For the
Quarters ended Nine Months ended September 30, September 30, 2008
2007 2008 2007 Revenues Rental revenues $152,993 $157,805 $487,071
$474,752 Private capital revenues(2) 9,502 7,564 60,838 22,007
Total revenues 162,495 165,369 547,909 496,759 Costs and expenses
Property operating costs (44,157) (42,664) (138,375) (128,785)
Depreciation and amortization (46,985) (40,628) (129,493) (121,641)
General and administrative (34,415) (35,145) (103,361) (95,259)
Fund costs (312) (261) (919) (779) Impairment losses - - - (257)
Other expenses(3) 1,088 (944) 1,926 (2,995) Total costs and
expenses (124,781) (119,642) (370,222) (349,716) Other income and
expenses Development gains, net of taxes 28,026 48,298 76,248
89,486 Gains from sale or contribution of real estate interests,
net - - 19,967 74,843 Equity in earnings of unconsolidated
co-investment ventures 5,372 3,425 14,359 7,286 Other income(3)
(4,229) 7,956 (51) 20,012 Interest expense, including amortization
(32,319) (29,326) (100,955) (97,486) Total other income and
expenses (3,150) 30,353 9,568 94,141 Income from operations before
minority interests 34,564 76,080 187,255 241,184 Minority
interests' share of income Co-investment venture partners' share of
income (4,194) (5,890) (29,393) (21,088) Co-investment venture
partners' and limited partnership unitholders' share of development
gains (1,090) (2,115) (7,204) (5,196) Preferred unitholders (1,431)
(1,431) (4,295) (6,610) Limited partnership unitholders 137 (581)
(2,518) (4,903) Total minority interests' share of income (6,578)
(10,017) (43,410) (37,797) Income from continuing operations 27,986
66,063 143,845 203,387 Discontinued operations Income attributable
to discontinued operations, net of minority interests 177 3,135
2,066 9,345 Gains from disposition of real estate, net of minority
interests (12) 3,912 2,191 4,329 Total discontinued operations 165
7,047 4,257 13,674 Net income 28,151 73,110 148,102 217,061
Preferred stock dividends (3,952) (3,952) (11,856) (11,856)
Preferred unit redemption (issuance costs) discount - (3) - (2,930)
Net income available to common stockholders $24,199 $69,155
$136,246 $202,275 Net income per common share (diluted) $0.24 $0.69
$1.37 $2.04 Weighted average common shares (diluted) 98,952 100,914
99,457 99,311 (1) On July 1, 2008, the partners of AMB Partners II
(previously, a consolidated co-investment venture) contributed
their interests in AMB Partners II to AMB Institutional Alliance
Fund III in exchange for interests in AMB Institutional Alliance
Fund III, an unconsolidated co-investment venture. (2) 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 of $1.0 million for the dissolution of AMB
Erie co-investment venture received during the quarter ended March
31, 2008. (3) Includes changes in liabilities and assets associated
with AMB's deferred compensation plan. CONSOLIDATED STATEMENTS OF
FUNDS FROM OPERATIONS(1) (in thousands, except share and per share
data) For the For the Quarters ended Nine Months ended September
30, September 30, 2008 2007 2008 2007 Net income available to
common stockholders $24,199 $69,155 $136,246 $202,275 Gains
(losses) from sale or contribution of real estate, net of minority
interests 12 (3,912) (22,158) (79,172) Depreciation and
amortization Total depreciation and amortization 46,985 40,628
129,493 121,641 Discontinued operations' depreciation 4 354 61
1,853 Non-real estate depreciation (1,997) (1,387) (5,786) (3,965)
Adjustments to derive FFO from consolidated co-investment ventures
Co-investment venture partners' minority interests (Net income)
4,194 5,890 29,393 21,088 Limited partnership unitholders' minority
interests (Net income) (137) 581 2,518 4,903 Limited partnership
unitholders' minority interests (Development profits) 1,090 2,115
2,795 3,861 Discontinued operations' minority interests (Net
income) 8 139 316 423 FFO attributable to minority interests
(8,819) (15,731) (41,812) (47,347) Adjustments to derive FFO from
unconsolidated co-investment ventures AMB's share of net income
(5,372) (3,425) (14,359) (7,286) AMB's share of FFO 11,589 9,828
32,727 21,308 Funds from operations $71,756 $104,235 $249,434
$239,582 FFO per common share and unit (diluted) $0.70 $0.99 $2.41
$2.31 Weighted average common shares and units (diluted) 102,922
105,110 103,430 103,777 (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
$1.58 $1.63 AMB's share of projected depreciation and amortization
1.60 1.60 AMB's share of projected gains on disposition of
operating properties (0.07) (0.07) Impact of additional dilutive
securities, other, rounding (0.06) (0.06) Projected Funds From
Operations (FFO) $3.05 $3.10 Amounts are expressed per share,
except FFO which is expressed per share and unit. CONSOLIDATED
BALANCE SHEETS (1)(2) (dollars in thousands) As of September 30,
December 31, 2008 2007 Assets Investments in real estate Total
investments in properties $6,315,790 $6,709,545 Accumulated
depreciation (928,831) (916,686) Net investments in properties
5,386,959 5,792,859 Investments in unconsolidated co- investment
ventures 433,649 356,194 Properties held for contribution, net
693,805 488,339 Properties held for divestiture, net 81,347 40,513
Net investments in real estate 6,595,760 6,677,905 Cash and cash
equivalents and restricted cash 309,547 250,416 Accounts
receivable, net 163,118 184,270 Other assets 249,393 149,812 Total
assets $7,317,818 $7,262,403 Liabilities and stockholders' equity
Secured debt $1,384,409 $1,471,087 Unsecured senior debt 1,153,582
1,003,123 Unsecured credit facilities 816,875 876,105 Other debt
403,357 144,529 Accounts payable and other liabilities 411,050
306,196 Total liabilities 4,169,273 3,801,040 Minority interests
Co-investment venture partners 282,083 517,572 Preferred
unitholders 77,561 77,561 Limited partnership unitholders 92,614
102,278 Total minority interests 452,258 697,411 Stockholders'
equity Common equity 2,472,875 2,540,540 Preferred equity 223,412
223,412 Total stockholders' equity 2,696,287 2,763,952 Total
liabilities and stockholders' equity $7,317,818 $7,262,403 (1)
During the quarter ended September 30, 2008, AMB acquired the
remaining equity interest (approximately 42%) in G. Accion, a
Mexican real estate company. Total assets and total liabilities
include $223,829 and $174,217, respectively, related to G. Accion
as of September 30, 2008. (2) On July 1, 2008, the partners of AMB
Partners II (previously, a consolidated co-investment venture)
contributed their interests in AMB Partners II to AMB Institutional
Alliance Fund III in exchange for interests in AMB Institutional
Alliance Fund III, an unconsolidated co-investment venture.
DATASOURCE: AMB Property Corporation CONTACT: Tracy A. Ward, Vice
President, Investor Relations, +1-415-733-9565, fax,
+1-415-477-2044, , or Rachel E.M. Bennett, Director, Media &
Public Relations, +1-415-733-9532, fax, +1-415-477-2063, , both of
AMB Property Corporation Web site: http://www.amb.com/
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