AMB Property Corporation Announces Third Quarter 2003 Results SAN
FRANCISCO, Oct. 28 /PRNewswire-FirstCall/ -- AMB Property
Corporation , a leading owner and operator of industrial real
estate, today reported that earnings per share (EPS) in the third
quarter 2003, excluding the effects of SFAS 150, were $0.26,
including $0.10 per share of gains on disposition of real estate,
compared with EPS of $0.30 for the same period in 2002, which
included $0.04 in gains. For the year-to-date, excluding the
effects of SFAS 150, EPS was $1.15, including $0.57 per share of
gains on disposition of real estate, up from $0.94 per share for
the year-to-date 2002, which included $0.07 of gains. The third
quarter and year-to-date EPS numbers include a $0.04 charge
consistent with the SEC's July 31, 2003 statement that costs
associated with redemption of preferred stock should be factored
into the calculation of net income per share (EITF Issue D-42).
Absent this required accounting change, EPS in the quarter of $0.31
was at the top end of the company's prior guidance of $0.29 to
$0.31 per share. The Financial Accounting Standards Board (FASB) is
scheduled to review the application of SFAS 150 with respect to
minority interests in finite-lived entities at its meeting on
Wednesday, October 29, 2003. Any action taken by the FASB could
have an impact on the manner and timing in which AMB and other
companies are required to account for minority interests in certain
consolidated joint ventures. If the FASB elects to implement SFAS
150 in its current form, AMB will adopt SFAS 150 and present its
financial statements, including the effects of SFAS 150 in its
Quarterly Report on Form 10-Q for the quarter ended September 30,
2003. A presentation of the liability amounts that would be
required under SFAS 150, as well as the impact on the periods
reported, is presented in the tables attached to this press
release. Occupancy in the company's industrial operating portfolio
increased 50 basis points over the prior quarter reaching 92.0% at
September 30, 2003, compared with 94.4% at September 30, 2002.
Cash-basis same store net operating income decreased 7.7% in the
quarter and decreased 2.2% year-to- date, reflecting the impact of
lower occupancy and rental rate levels from the year-ago period.
Hamid R. Moghadam, chairman and CEO, said, "We are encouraged by
the first meaningful occupancy increase in our portfolio in almost
two years and our continued ability to outperform the national
industrial real estate market in both up and down cycles. While
market rents remain below in-place rents in many markets, improving
occupancy is a welcome signal. We believe the stage is set for
increased demand for industrial space. Fiscal and monetary
stimulus, strong consumer spending combined with historically low
inventory levels and reported increases in corporate profits are
positive indicators for the kind of capital spending and industrial
production that result in positive industrial space absorption."
Investment Activities During the third quarter, AMB continued to be
an opportunistic seller of non-strategic assets selling one 332,900
square foot retail asset in Miami for $56.7 million and nine
industrial buildings in various markets totaling 483,600 square
feet for $45.5 million. The stabilized cash capitalization rate for
these dispositions averaged 7.9%. "While we were once again net
sellers in the third quarter, and are net sellers year-to-date
through September, we are seeing better capital deployment
opportunities," stated W. Blake Baird, AMB's president. "In
addition to the $481 million IAC acquisition announced earlier this
month, our committed development pipeline has roughly doubled this
year to over $200 million, with international developments
accounting for approximately one-third of the pipeline. Looking
forward, we are particularly excited about development
opportunities in Mexico and Japan," added Baird. The company
acquired 13 buildings totaling 839,300 square feet for a total
investment of $57.4 million, adding to its market presence in
Chicago, Miami, Northern New Jersey and to its on-tarmac holdings
during the third quarter. AMB began development of two new projects
in Mexico City and the LA Basin in the third quarter totaling an
approximate 1.6 million square feet for an estimated investment of
$67.5 million. AMB's committed industrial development and
renovation pipeline through 2005 currently stands at $207.5 million
and consists of an expected 4.0 million square feet. AMB continues
to create profits from development projects available for sale.
During the third quarter, three such projects were sold generating
a net cash gain to AMB of $2.2 million. The company's build-to-sell
program now includes a planned 603,200 square feet in four
projects, consisting of both build-to-suit and speculative
developments with an estimated total investment of $41.6 million.
Financing Activities During the quarter, AMB redeemed all 3,995,800
of its outstanding shares of 8.5% Series A Cumulative Redeemable
Preferred Stock (NYSE:AMB-A). The preferred redemption price was
$25.0826 per share, which was equal to the original issuance price
of $25.00 per share plus accumulated and unpaid dividends through
the redemption date of July 28, 2003. Also during the quarter, AMB
obtained long-term secured debt financing on behalf of three of its
co-investment joint ventures, totaling $137 million at an average
rate of 4.5% and a weighted average maturity of approximately eight
years. Eugene F. Reilly Joins Senior Management Team On October 7,
2003, AMB announced that Gene Reilly joined the company as
executive vice president, North American Development. "Gene is an
outstanding addition to our team and brings a wealth of
target-market industrial development expertise to AMB," said Hamid
Moghadam. "In the last 20 years, he has been a leader in the
development, acquisition, disposition, financing and leasing of
more than $1 billion of industrial properties. We look forward to
his leadership as we develop properties to serve our customers and
create value for our stockholders." Working from AMB's Boston
office, Reilly is responsible for all of the company's development
activities in North America and is a member of AMB's investment
committee. Supplemental Reporting Measure AMB reports funds from
operations per fully diluted share and unit (FFOPS) in accordance
with the standards established by NAREIT as a supplemental earnings
measure. Third quarter 2003 FFOPS before the impact of required
accounting changes was $0.52, compared with $0.58 in the same
period of 2002, above the company's guidance of $0.50 to $0.51 per
share. Including required accounting changes for preferred stock
redemption costs of $0.04 per share, which are required under EITF
Issue D-42, FFOPS in the quarter was $0.48, compared with $0.58 in
2002. Similarly, FFOPS for the nine months ended September 30, 2003
before required accounting changes was $1.65 compared with $1.78
for the same period in 2002. FFOPS for the year-to-date inclusive
of changes in accounting for impairment losses and offering costs
for preferred stock redemptions totaling $0.10 per share was $1.54,
compared with $1.79 for the same period in 2002. These numbers
exclude any changes to the definition of FFO that NAREIT may
implement in connection with SFAS 150. Previously, in accordance
with NAREIT's FFO implementation guidance, the company excluded
unrealized impairment losses on real estate investment either held
for sale or for long-term investment. Recently, NAREIT issued
guidance that such losses should no longer be added back for
purposes of calculating FFO. In the footnotes to the attached
financial statements, AMB provides a discussion of why management
believes FFO is a useful measure of operating performance; of ways
in which investors might use FFO when assessing the financial
performance of the company; and of FFO's limitations as a
measurement tool. A 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 http://www.amb.com/. Conference Call and
Supplemental Information The company will host a conference call to
discuss its third quarter 2003 results on October 29, 2003 at 10:00
a.m. PST/1:00 p.m. EST. Stockholders and interested parties may
listen to a live broadcast of the conference call by dialing
+1-913-981-5545 and using reservation code 513253 or by webcast
through a link on 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 5:00 PM PST on
Wednesday, October 29, 2003. The telephone replay will be available
until 5:00 PM PST on Wednesday, November 19, 2003 and can be
accessed by dialing +1-719-457-0820 and using reservation code
513253. The webcast can be accessed through a link on the company's
website at http://www.amb.com/ and will be available until 5:00 PM
PST on Wednesday, November 19, 2003. 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, November 4, 2003 by
5:00 PM PST. AMB Property Corporation is a leading owner and
operator of industrial real estate, focused on major hub and
gateway distribution markets throughout North America, Europe and
Asia. As of September 30, 2003 AMB owned, managed and had
renovation and development projects totaling 96.9 million square
feet (9.0 million square meters) and 1,004 buildings in 32 markets.
AMB invests in industrial properties located predominantly in the
infill submarkets of its targeted markets. The company's portfolio
is comprised largely 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 +1-877-285-3111.
This document contains forward-looking statements about business
strategy 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. We assume no obligation
to update or supplement forward-looking statements. In particular,
a number of factors could cause AMB's actual results to differ
materially from those anticipated, including, among other things,
changes in general economic conditions or in the real estate
sector; non-renewal of leases by customers or renewal at lower than
expected rent; a downturn in California's economy or real estate
conditions; we experience losses in excess of our insurance
coverage; difficulties in identifying properties to acquire and in
effecting acquisitions on advantageous terms and the failure of
acquisitions to perform as we expect; our failure to divest of
properties on advantageous terms or to timely reinvest proceeds
from any such divestitures; risks and uncertainties affecting
property development and renovation (including construction delays,
cost overruns, our inability to obtain necessary permits and
financings); unknown liabilities acquired from our predecessors or
in connections with acquired properties; risks of doing business
internationally, including unfamiliarity with new markets and
currency risks; risks associated with using debt to fund
acquisitions and development, including re-financing risks; our
failure to obtain necessary outside financing; changes in local,
state and federal regulatory requirements; environmental
uncertainties; and our failure to qualify and maintain our status
as a real estate investment trust under the Internal Revenue Code
of 1986. AMB's success also depends upon economic trends generally,
various market conditions and fluctuations. 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 June 30, 2003. The
quarterly financial data contained herein is unaudited and the
historical financial information is not necessarily indicative of
future results. Consolidated Balance Sheets (dollars in thousands)
As of Sept. 30 June 30, March 31, December 31, 2003 2003 2003 2002
Assets Investments in real estate: Total investments in properties
$5,094,573 $5,016,014 $4,869,741 $4,925,982 Accumulated
depreciation (442,755) (412,990) (382,900) (362,540) Net
investments in properties 4,651,818 4,603,024 4,486,841 4,563,442
Investment in unconsolidated joint ventures 56,159 68,566 67,754
64,428 Properties held for divestiture, net 20,467 73,000 59,742
107,871 Net investments in real estate 4,728,444 4,744,590
4,614,337 4,735,741 Cash and cash equivalents 152,432 91,161
149,908 117,214 Mortgage receivable 13,066 13,097 13,112 13,133
Accounts receivable, net80,927 83,116 76,056 74,207 Other assets
70,208 44,300 51,909 52,199 Total assets $5,045,077 $4,976,264
$4,905,322 $4,992,494 Liabilities and Stockholders' Equity Secured
debt $1,312,105 $1,215,135 $1,250,528 $1,284,675 Unsecured senior
debt securities 800,000 800,000 800,000 800,000 Unsecured debt
9,772 9,909 10,050 10,186 Alliance Fund II credit facility -- --
51,500 45,500 Unsecured credit facility 91,335 19,420 17,464 95,000
Accounts payable and other liabilities 179,558 167,621 188,050
181,716 Total liabilities 2,392,770 2,212,085 2,317,592 2,417,077
Minority interests: Joint venture partners 644,413 640,095 497,760
488,524 Preferred unitholders 305,197 308,369 308,369 308,369
Limited partnership unitholders 88,553 93,209 94,500 94,374 Total
minority interests 1,038,163 1,041,673 900,629 891,267
Stockholders' equity: Common stock 1,565,923 1,578,087 1,591,107
1,588,156 Preferred stock 48,221 144,419 95,994 95,994 Total
stockholders' equity 1,614,144 1,722,506 1,687,101 1,684,150 Total
liabilities and stockholders' equity $5,045,077 $4,976,264
$4,905,322 $4,992,494 Consolidated Statement of Operations (dollars
in thousands, except share data) For the Quarters Ended For the
Nine Months Ended September 30, September 30, 2003 2002 2003 2002
Revenues Rental revenues $148,239 $146,926 $450,912 $425,915
Private capital income 1,928 2,766 7,844 8,468 Total revenues
150,167 149,692 458,756 434,383 Costs and expenses Property
operating costs (40,020) (37,629) (118,228) (105,646) Depreciation
and amortization (32,584) (31,446) (99,269) (88,650) Impairment
losses -- -- (5,251) -- General and administrative (10,843)
(12,376) (35,187) (34,207) Total costs and expenses (83,447)
(81,451) (257,935) (228,503) Operating income 66,720 68,241 200,821
205,880 Other income and expenses Equity in earnings of
unconsolidated joint ventures 1,365 1,322 4,222 4,443 Interest and
other income 701 2,609 3,643 9,921 Gains from dispositions of real
estate -- -- 7,429 2,480 Merchant development profits, net of
minority interests and taxes 2,181 618 2,181 618 Interest,
including amortization (35,867) (37,501) (107,963) (109,133) Total
other income and expenses (31,620) (32,952) (90,488) (91,671)
Income before minority interests and discontinued operations 35,100
35,289 110,333 114,209 Minority interests' share of income: Joint
venture partners (9,809) (8,771) (26,410) (23,104) Preferred
unitholders (6,314) (6,403) (19,073) (18,770) Limited partnership
unitholders (740) (942) (3,093) (3,622) Total minority interests
share of income (16,863) (16,116) (48,576) (45,496) Income from
continuing operations 18,237 19,173 61,757 68,713 Discontinued
operations: Income attributable to discontinued operations, net of
minority interests 828 4,167 3,151 13,780 Gains from dispositions
of real estate, net of minority interests 7,888 3,734 39,549 3,734
Total discontinued operations 8,716 7,901 42,700 17,514 Net income
26,953 27,074 104,457 86,227 Preferred stock dividends (1,470)
(2,123) (5,788) (6,373) Preferred stock and unit redemption
discount/ (issuance costs) (3,671) 412 (3,671) 412 Net income
available to common stockholders $21,812 $25,363 $94,998 $80,266
Net income per common share (diluted) $0.26 $0.30 $1.15 $0.94
Weighted average common shares (diluted) 82,720,130 85,527,829
82,539,800 85,360,210 Consolidated Statements of Funds from
Operations (D) (dollars in thousands, except share data) For the
Quarters Ended For the Nine Months Ended September 30, September
30, 2003 2002(A) 2003 2002 (A) Net income $26,953 $27,074 $104,457
$86,227 Gains from dispositions of real estate, net of minority
interests (7,888) (3,734) (46,978) (6,214) Real estate related
depreciation and amortization: Total depreciation and amortization
32,584 31,446 99,269 88,650 Discontinued operations' depreciation
339 2,378 1,910 6,821 FF& E depreciation (170) (179) (548)
(526) Ground lease amortization(B) -- (781) -- (1,471) Adjustments
to derive FFO from consolidated JVs: Joint venture partners'
minority interests 9,809 8,771 26,410 23,104 Limited partnership
unitholders' minority interests 740 942 3,093 3,622 Discontinued
operations' minority interests 883 940 1,096 2,562 FFO attributable
to minority interests (17,345) (13,635) (47,847) (37,753)
Adjustments to derive FFO from unconsolidated JVs: AMB's share of
net income (1,365) (1,322) (4,222) (4,443) AMB's share of FFO 2,345
2,193 7,620 6,866 Preferred stock dividends (1,470) (2,123) (5,788)
(6,373) Preferred stock and unit redemption discount/ (issuance
costs) (3,671) 412 (3,671) 412 Funds from operations $41,744
$52,382 $134,801 $161,484 FFO per common share and unit (diluted)
$0.48 $0.58 $1.54 $1.79 FFO per common share and unit (excluding
impairment losses and preferred stock redemption issuance costs)(C)
$0.52 $0.58 $1.65 $1.78 Weighted average common shares and units
(diluted) 87,399,544 90,379,023 87,342,075 90,239,149 (A) FFO for
the quarter and nine months ended September 30, 2002, was adjusted
for the retroactive adoption of SFAS No. 145 for the treatment of
extraordinary items, resulting in a reduction of $0.1 million and
$0.4 million, respectively, from previously reported FFO. (B) In
the quarter ended June 30, 2003, and effective January 1, 2003, the
Company discontinued its practice of deducting amortization of
investments in leasehold interests from FFO as such an adjustment
is not provided for in NAREIT's FFO definition. As a result, FFO
for the nine months ended September 30, 2003, includes an
adjustment of $0.9 million to reflect the change. Had the Company
not made the change, reported FFO per share for the quarter and
nine months ended September 30, 2003, would have been $0.47 and
$1.51, respectively. Had the Company made the change effective
January 1, 2002, reported FFO per share for the quarter and nine
months ended September 30, 2002, would have been $0.59 and $1.81,
respectively. (C)In the quarter ended September 30, 2003, and
effective January 1, 2003, the Company no longer adds back
impairment losses when computing FFO in accordance with NAREIT's
FFO definition. As a result, FFO for the nine months ended
September 30, 2003, includes an adjustment of $5.3 million to
reflect the change. In addition, in the quarter ended September 30,
2003, and effective January 1, 2002, the Company adopted EITF D-42
and began including preferred stock and unit redemption discounts
and issuance cost write-offs in FFO. As a result, FFO for the nine
months ended September 30, 2002, includes an adjustment of $0.4
million to reflect the change. (D)The Company believes that net
income, as defined by U.S. 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 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 the
Company's pro rata share of FFO of consolidated and unconsolidated
joint ventures. In accordance with the NAREIT White Paper on FFO,
the Company includes in FFO the effects of straight-line rents.
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 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, 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 U.S. GAAP. The Company believes that
the use of FFO, 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. 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 U.S. 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
its real estate assets nor is FFO necessarily indicative of cash
available to fund its 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.
SFAS 150 Summary Financial Information (A) (dollars in thousands,
except share data) Without Effect of With SFAS 150 FAS 150 SFAS 150
adoption adoption adoption Consolidated Balance Sheet Data (as of
September 30, 2003) Total assets $5,045,077 $-- $5,045,077 Total
liabilities 2,392,770 661,369 3,054,139 Total minority interests
1,038,163 (644,413) 393,750 Total stockholders' equity $1,614,144
$(16,956) $1,597,188 Consolidated Statement of Operations (for the
quarter ended September 30, 2003) Net income before cumulative
effect of accounting change $26,953 $(949) (B) $26,004 Cumulative
effect of accounting change: SFAS 150 minority interests' change in
value -- (16,007) (16,007) Net income $26,953 $(16,956) $9,997 Net
income available to common stockholders $21,812 $(16,956) $4,856
Net income per common share (diluted) $0.26 $(0.20) $0.06 Funds
from operations $41,744 $(13,802) $27,942 FFO per common share and
unit (diluted) $0.48 $(0.16) $0.32 (A) The Financial Accounting
Standards Board (FASB) is scheduled to review the application of
SFAS 150, Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity, with respect to
minority interests in finite-lived entities at its meeting on
October 29, 2003. Any action taken by the FASB could have an impact
on the manner and timing in which AMB and other companies are
required to account for minority interests in certain consolidated
joint ventures. If the FASB elects to implement SFAS 150 in its
current form, AMB will adopt SFAS 150 and present its financial
statements including the effects of SFAS 150 in its third-quarter
filing with the SEC on form 10-Q. (B) Net of minority interests'
share of merchant development profits and gains on dispositions of
real estate. DATASOURCE: AMB Property Corporation CONTACT: Lauren
L. Barr of AMB, +1-415-733-9477, or fax, +1-415-394-9001, or Web
site: http://www.amb.com/
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