AMB Property swings to Q1 earnings of US$7.8M from loss of US$4.4M a year ago; company says it raised more third-party equity in quarter than it ever has in a full year

Cindy Allen

SAN FRANCISCO , April 21, 2011 (press release) – AMB Property Corporation® (NYSE: AMB), a leading owner, operator and developer of global industrial real estate, today reported results for the first quarter of 2011. Core FFO per fully diluted share and unit, as adjusted, was $0.32 for the first quarter of 2011 as compared to $0.29 the same period in 2010. Core FFO, as adjusted, excludes the recognition of development gains of $1.1 million and merger costs of $3.7 million. Funds from operations, as adjusted, per fully diluted share and unit, was $0.33 for the first quarter of 2011 as compared to $0.31 the same period in 2010. FFO, as adjusted, includes development gains but excludes merger transaction costs.

Net income available to common stockholders per fully diluted share ("EPS") for the first quarter of 2011 was $0.05, as compared to a loss of $(0.03) for the same quarter in 2010.

"The global economic recovery is continuing to gain strength as we anticipated," said Hamid R. Moghadam, chairman and CEO. "Global consumption, production and trade are past previous peak levels today and we expect U.S. inventory growth to accelerate this year. With emerging markets already ahead of the curve, we believe a broader improvement of operating fundamentals will lead to an increase in demand for logistics space globally."

Owned and Managed Portfolio Operating Results

AMB's operating portfolio was 92.8 percent occupied as of March 31, 2011, with an average occupancy rate of 92.4 percent for the quarter. Cash-basis same store net operating income ("SS NOI") increased by 0.2 percent for the first quarter as compared to (5.1) percent for the same period in 2010. Average rent on renewals and rollovers in AMB's operating portfolio decreased 12.6 percent for the trailing four quarters ended March 31, 2011.

Leasing Activity

During the first quarter, the company leased a total of 8.9 million square feet (826,800 square meters) of its operating portfolio. This volume of leasing represents the highest first quarter in its 27-year history. The company leased 469,000 square feet (40,500 square meters) of its development portfolio in the first quarter 2011.

Private Capital Activity

During the first quarter, the company raised a record $1.1 billion in new third party equity, including:

$566 million (400 million euros using the March 31, 2011 exchange rate) raised for AMB Europe Logistics Joint Venture, focused on core investments; and
$500 million raised for AMB China Logistics Venture I, a development joint venture.


"AMB raised more third party equity in the first quarter alone than we have ever done in a full year. Private capital will continue to be an important driver of the business, and today we have $3.2 billion of capital in our various partnerships and ventures available for future deployment," said Guy F. Jaquier, president, Europe & Asia president; Private Capital. "Large global institutions are seeking general partners with a commitment to aligning interests through co-investment, deep operating and sector expertise, and a strong track record across cycles. We line up well with these requirements."

Subsequent to quarter end, the company raised $87.6 million of third-party equity in AMB U.S. Logistics Fund.

Capital Deployment

During the first quarter, the company deployed approximately $323 million of capital, which included:

$300 million of new development starts in Japan, Brazil, China, and Germany;
Approximately $23 million in acquisitions at a stabilized capitalization rate of 6.2 percent, comprised of two properties totaling approximately 308,300 square feet (28,640 square meters); and
Dispositions totaling approximately $78 million in the first quarter.


Subsequent to quarter end, $168 million of assets were contributed by AMB to AMB's China Logistics Venture I Fund comprising approximately 2.6 million square feet (241,000 square meters) of operating and properties under development with a build out potential of 2.4 million square feet (227,000 square meters).

Also subsequent to quarter end, the company acquired its partner's 50 percent interest in its AMB-SGP Joint Venture.

Liquidity

As of March 31, 2011, the company's liquidity was more than $1.4 billion, consisting of approximately $1.2 billion of availability on its lines of credit and approximately $204 million of unrestricted cash and cash equivalents.

Japan Update

All of the company's facilities in Japan are fully operational. With the exception of its facility in Sendai, damages were largely superficial and repairs have been substantially completed. AMB's portion, including its share of the Japan Fund, of uninsured losses associated with the earthquake is approximately $2.7 million. AMB is providing displaced customers and relief agencies with temporary space to support recovery efforts. AMB made a donation to the Red Cross International Response Fund for relief and recovery efforts and is also encouraging employees to contribute to the rescue efforts with the company matching these contributions.

FFO Guidance

The company maintains its previous full-year 2011 Core FFO, as adjusted, guidance of $1.30 to $1.40 per share, which excludes the recognition of gains from development activities and excludes any impact of costs associated with the proposed merger with ProLogis.

Conference Call Information

The company will host a conference call to discuss first quarter 2011 results on Wednesday, April 20 at 10:00 AM PDT / 1:00 PM EDT. Stockholders and interested parties may listen to a live broadcast of the conference call by dialing 877 256 7020 (from the U.S. and Canada) or +1 706 643 7823 (from all other countries) and using reservation code 54105336. A webcast can be accessed through the company's website at www.amb.com in the Investor Relations section.

If you are unable to listen to the live conference call, a telephone and webcast replay will be available through the company's website at www.amb.com in the Investor Relations section until 5:00 PM PDT / 8:00 PM EDT / on Friday, May 20, 2011 at 800 642 1687 (from the U.S. and Canada) or +1 706 645 9291 (from all other countries) with the reservation code 54105336. The webcast and podcast will be available for the same time period and can be accessed through the company's website at www.amb.com in the Investor Relations section.

Supplemental Earnings Measures

Included in the footnotes to the company's attached financial statements is a discussion of why management believes FFO, as adjusted, FFOPS, as adjusted, Core FFO, as adjusted, and Core FFOPS, as adjusted and FFO, as defined by NAREIT (the "FFO Measures, as adjusted"), are useful supplemental measures of operating performance, ways in which investors might use the FFO Measures, as adjusted when assessing the company's financial performance and the limitations of the FFO Measures, as adjusted, as a measurement tool. Reconciliation from net income (loss) available to common stockholders to the FFO Measures, as adjusted are provided in the attached tables and published in the company's quarterly supplemental analyst package, available on the company's website at www.amb.com.

AMB defines net operating income ("NOI") as rental revenues, including reimbursements, less property operating expenses. NOI excludes depreciation, amortization, general and administrative expenses, restructuring charges, real estate impairment losses, merger transaction costs, development profits (losses), gains (losses) from sale or contribution of real estate interests, and interest expense. AMB believes that net income, as defined by GAAP, is the most appropriate earnings measure. However, NOI is a useful supplemental measure calculated to help investors understand AMB's operating performance, excluding the effects of gains (losses), costs and expenses which are not related to the performance of the assets. NOI is widely used by the real estate industry as a useful supplemental measure, which helps investors compare AMB's operating performance with that of other companies. Real estate impairment losses have been excluded in deriving NOI because AMB does not consider its impairment losses to be a property operating expense. AMB believes that the exclusion of impairment losses from NOI is a common methodology used in the real estate industry. Real estate impairment losses relate to the changing values of AMB's assets but do not reflect the current operating performance of the assets with respect to their revenues or expenses. AMB's real estate impairment losses are non-cash charges which represent the write down in the value of assets when estimated fair value over the holding period is lower than current carrying value. The impairment charges were principally a result of increases in estimated capitalization rates and deterioration in market conditions that adversely impacted underlying real estate values. Therefore, the impairment charges are not related to the current performance of AMB's real estate operations and should be excluded from its calculation of NOI.

AMB considers cash-basis same store net operating income ("SS NOI") to be a useful supplemental measure of our operating performance for properties that are considered part of the same store pool. AMB defines SS NOI as NOI on a same store basis excluding straight line rents and amortization of lease intangibles. Same store pool includes all properties that are owned as of the end of both the current and prior year reporting periods and excludes 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, 2009. AMB considers SS NOI 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, AMB believes that SS NOI helps investors compare the operating performance of AMB's real estate as compared to other companies. While SS NOI 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 our liquidity or operating performance. SS NOI also does not reflect general and administrative expenses, interest expenses, real estate impairment losses, merger transaction costs, depreciation and amortization costs, capital expenditures and leasing costs, or trends in development and construction activities that could materially impact our results from operations. Further, AMB's computation of SS NOI may not be comparable to that of other real estate companies, as they may use different methodologies for calculating SS NOI. A reconciliation from net income (loss) to SS NOI is provided below (dollars in thousands) and published in AMB's quarterly supplemental analyst package, available on AMB's website at www.amb.com.

Industry Intelligence Editor's Note: In an omitted table, the company reported Q1 earnings of US$7.8 million, versus a loss of US$4.4 million a year ago.

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