U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (date of earliest event reported): April 11, 2006
AMB PROPERTY CORPORATION
(Exact name of registrant as specified in its charter)
| |
|
|
|
|
| Maryland
|
|
001-13545
|
|
94-3281941 |
|
|
|
|
|
|
(State or other jurisdiction of
incorporation)
|
|
(Commission file number)
|
|
(I.R.S. employer identification
number) |
Pier 1, Bay 1, San Francisco, California 94111
(Address of principal executive offices) (Zip code)
415-394-9000
(Registrants’ telephone number, including area code)
n/a
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions (see General Instruction
A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On April 11, 2006, we issued a press release entitled “AMB Property Corporation Announces First
Quarter Results,” which sets forth disclosure regarding our results of operations for the first
quarter of 2006. A copy of the press release is attached hereto as Exhibit 99.1. This section and
the attached exhibit are provided under Item 2.02 of Form 8-K and are furnished to, but not filed
with, the Securities and Exchange Commission.
ITEM 8.01 OTHER EVENTS
On April 11, 2006, we reported results for the first quarter of 2006.
For the quarter ended March 31, 2006, funds from operations per fully diluted share and unit
(“FFOPS”) was $0.52, as compared to $0.54 for the first quarter of 2005. The current quarter
results are net of a $0.01 per share charge resulting from the repurchase of preferred units and
include $0.01 per share of development profits and $0.06 of net lease termination fees, as compared
to $0.09 per share of development profits and $0.01 of net lease termination fees in the first
quarter of 2005. Quarterly FFOPS exceeded the company’s mid-point of guidance by $0.04 per share
primarily due to better than expected private capital income and lease termination fees, and a
decision to delay certain refinancing transactions.
Net income available to common stockholders per share (“EPS”) for the first quarter of 2006 was
$0.26, as compared to $0.52 for the first quarter of 2005. EPS in the current quarter includes
$0.08 per share of disposition gains, as compared to $0.34 per share in the first quarter of 2005.
Operating Results
Our industrial operating portfolio occupancy was 94.7% at March 31, 2006, down 110 basis points
from December 31, 2005, and 40 basis points from March 31, 2005. Cash-basis same store net
operating income in the first quarter of 2006 increased 0.3% over the same period in 2005 including
the effects of lease termination fees, and increased 1.5% excluding the effects of lease
termination fees for both periods. The increase was due, in part, to a higher average occupancy
rate in the same store portfolio. Rent on lease renewals and rollovers in our operating portfolio
declined 11.5% in the first quarter of 2006, as compared to a 4.3% decline in the prior quarter and
an 8.6% decline in the first quarter of 2005. The decline during the quarter was primarily the
result of lower rents on new leases in the San Francisco Bay Area, our third largest market, which
were down 55.4%. Rents on new leases in our other markets were down 3.3%.
Investment Activity
During the first quarter, new development and renovation starts totaled approximately 2.9 million
square feet in seven projects in North America and Asia representing an estimated total investment
of $219 million. We acquired 2.1 million square feet of distribution facilities in 32 buildings at
a total acquisition cost of approximately $153 million. Seven development and renovation projects
stabilized in North America and Japan totaling 2.1 million square feet, for a total investment of
$285 million. We placed two of the development projects, representing a total
investment of $25 million, into operations, and five of the projects, representing a total
investment of $260 million, are available for sale or contribution to one of our co-investment
funds.
In the first quarter, we completed opportunistic sales of four operating buildings that no longer
fit our strategy. In the aggregate, the four buildings comprise approximately 322,000 square feet
and represent approximately $17 million in gross disposition proceeds. In addition, we generated
gross sale proceeds of approximately $5 million from our development-for-sale business with the
sale of a land parcel in Florida.
Annual Meeting of Stockholders
Our Annual Meeting of Stockholders will be held on Thursday, May 11, 2006 at 2:00 p.m. PDT.
Stockholders are invited to attend the meeting at our corporate headquarters located at Pier 1, Bay
1, in San Francisco, California. The proxy statement, Annual Report to Stockholders, voting
materials and meeting information were mailed on or about March 30, 2006.
Supplemental Earnings Measure
We report funds from operations per fully diluted share and unit in accordance with the standards
established by the National Association of Real Estate Investment Trusts. Included in the footnotes
to our 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 our financial performance and FFOPS’s limitations as a measurement tool. Reconciliation
from net income to funds from operations is provided in the attached tables and published in our
quarterly supplemental analyst package.
About AMB Property Corporation
We are 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 March 31, 2006, we owned, or
had investments in, on a consolidated basis or through unconsolidated joint ventures, properties
and development projects expected to total approximately 118 million square feet (11 million square
meters) and 1,070 buildings in 42 markets within eleven countries. We invest in properties located
predominantly in the infill submarkets of our targeted markets. Our portfolio is comprised of High
Throughput Distribution® facilities—industrial properties built for speed and located near
airports, seaports and ground transportation systems.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
| |
|
|
|
|
|
|
|
|
| |
|
As of |
|
| |
|
March 31, 2006 |
|
|
December 31, 2005 |
|
Assets |
|
|
|
|
|
|
|
|
Investments in real estate: |
|
|
|
|
|
|
|
|
Total investments in properties |
|
$ |
6,913,524 |
|
|
$ |
6,798,294 |
|
Accumulated depreciation |
|
|
(736,760 |
) |
|
|
(697,388 |
) |
|
|
|
|
|
|
|
Net investments in properties |
|
|
6,176,764 |
|
|
|
6,100,906 |
|
Investments in unconsolidated joint ventures |
|
|
118,472 |
|
|
|
118,653 |
|
Properties held for contribution, net |
|
|
266,311 |
|
|
|
32,755 |
|
Properties held for divestiture, net |
|
|
31,201 |
|
|
|
17,936 |
|
|
|
|
|
|
|
|
Net investments in real estate |
|
|
6,592,748 |
|
|
|
6,270,250 |
|
Cash and cash equivalents |
|
|
158,067 |
|
|
|
267,233 |
|
Mortgages and loans receivable |
|
|
21,589 |
|
|
|
21,621 |
|
Accounts receivable, net |
|
|
151,864 |
|
|
|
178,682 |
|
Other assets |
|
|
112,312 |
|
|
|
64,953 |
|
|
|
|
|
|
|
|
Total assets |
|
$ |
7,036,580 |
|
|
$ |
6,802,739 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders’ Equity |
|
|
|
|
|
|
|
|
Secured debt |
|
$ |
1,917,805 |
|
|
$ |
1,912,526 |
|
Unsecured senior debt securities |
|
|
950,937 |
|
|
|
975,000 |
|
Unsecured credit facilities |
|
|
734,110 |
|
|
|
490,072 |
|
Other debt |
|
|
63,543 |
|
|
|
23,963 |
|
Accounts payable and other liabilities |
|
|
249,149 |
|
|
|
263,744 |
|
|
|
|
|
|
|
|
Total liabilities |
|
|
3,915,544 |
|
|
|
3,665,305 |
|
Minority interests: |
|
|
|
|
|
|
|
|
Joint venture partners |
|
|
899,658 |
|
|
|
853,643 |
|
Preferred unitholders |
|
|
200,986 |
|
|
|
278,378 |
|
Limited partnership unitholders |
|
|
87,641 |
|
|
|
89,114 |
|
|
|
|
|
|
|
|
Total minority interests |
|
|
1,188,285 |
|
|
|
1,221,135 |
|
Stockholders’ equity: |
|
|
|
|
|
|
|
|
Common equity |
|
|
1,757,420 |
|
|
|
1,740,751 |
|
Preferred equity |
|
|
175,331 |
|
|
|
175,548 |
|
|
|
|
|
|
|
|
Total stockholders’ equity |
|
|
1,932,751 |
|
|
|
1,916,299 |
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ equity |
|
$ |
7,036,580 |
|
|
$ |
6,802,739 |
|
|
|
|
|
|
|
|
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except share data)
| |
|
|
|
|
|
|
|
|
| |
|
For the Quarters Ended |
|
| |
|
March 31, |
|
| |
|
2006 |
|
|
2005 |
|
Revenues |
|
|
|
|
|
|
|
|
Rental revenues |
|
$ |
176,407 |
|
|
$ |
153,404 |
|
Private capital income |
|
|
5,106 |
|
|
|
3,318 |
|
|
|
|
|
|
|
|
Total revenues |
|
|
181,513 |
|
|
|
156,722 |
|
|
|
|
|
|
|
|
Costs and expenses |
|
|
|
|
|
|
|
|
Property operating costs |
|
|
(45,697 |
) |
|
|
(39,769 |
) |
Depreciation and amortization |
|
|
(43,360 |
) |
|
|
(39,532 |
) |
General and administrative |
|
|
(22,855 |
) |
|
|
(18,544 |
) |
Other expenses (1) |
|
|
(537 |
) |
|
|
(936 |
) |
Fund costs |
|
|
(614 |
) |
|
|
(364 |
) |
|
|
|
|
|
|
|
Total costs and expenses |
|
|
(113,063 |
) |
|
|
(99,145 |
) |
|
|
|
|
|
|
|
Other income and expenses |
|
|
|
|
|
|
|
|
Equity in earnings of unconsolidated joint ventures |
|
|
2,088 |
|
|
|
1,242 |
|
Other income (1) |
|
|
3,063 |
|
|
|
136 |
|
Gains from dispositions of real estate, net |
|
|
— |
|
|
|
1,301 |
|
Development profits, net of taxes |
|
|
674 |
|
|
|
17,949 |
|
Interest expense, including amortization |
|
|
(39,789 |
) |
|
|
(36,874 |
) |
|
|
|
|
|
|
|
Total other income and expenses |
|
|
(33,964 |
) |
|
|
(16,246 |
) |
|
|
|
|
|
|
|
Income from operations before minority interests |
|
|
34,486 |
|
|
|
41,331 |
|
|
|
|
|
|
|
|
Minority interests’ share of income: |
|
|
|
|
|
|
|
|
Joint venture partners’ share of income |
|
|
(8,825 |
) |
|
|
(9,349 |
) |
Joint venture partners’ share of development profits |
|
|
(32 |
) |
|
|
(9,837 |
) |
Preferred unitholders |
|
|
(5,001 |
) |
|
|
(5,368 |
) |
Limited partnership unitholders |
|
|
(805 |
) |
|
|
(295 |
) |
|
|
|
|
|
|
|
Total minority interests’ share of income |
|
|
(14,663 |
) |
|
|
(24,849 |
) |
|
|
|
|
|
|
|
Income from continuing operations |
|
|
19,823 |
|
|
|
16,482 |
|
|
|
|
|
|
|
|
Discontinued operations: |
|
|
|
|
|
|
|
|
Income attributable to discontinued operations, net of minority interests |
|
|
741 |
|
|
|
2,343 |
|
Gain from disposition of real estate, net of minority interests |
|
|
7,013 |
|
|
|
27,942 |
|
|
|
|
|
|
|
|
Total discontinued operations |
|
|
7,754 |
|
|
|
30,285 |
|
|
|
|
|
|
|
|
Net income |
|
|
27,577 |
|
|
|
46,767 |
|
Preferred stock dividends |
|
|
(3,096 |
) |
|
|
(1,783 |
) |
Preferred unit redemption issuance costs |
|
|
(1,097 |
) |
|
|
— |
|
|
|
|
|
|
|
|
Net income available to common stockholders |
|
$ |
23,384 |
|
|
$ |
44,984 |
|
|
|
|
|
|
|
|
Net income per common share (diluted) |
|
$ |
0.26 |
|
|
$ |
0.52 |
|
|
|
|
|
|
|
|
Weighted average common shares (diluted) |
|
|
90,179,329 |
|
|
|
86,516,695 |
|
|
|
|
|
|
|
|
|
|
|
| (1)
|
|
Includes changes in liabilities and assets associated with the Company’s deferred
compensation plan. |
CONSOLIDATED STATEMENTS OF FUNDS FROM OPERATIONS(1)
(dollars in thousands, except share data)
| |
|
|
|
|
|
|
|
|
| |
|
For the Quarters Ended |
|
| |
|
March 31, |
|
| |
|
2006 |
|
|
2005 |
|
Net income |
|
$ |
27,577 |
|
|
$ |
46,767 |
|
Gains from disposition of real estate, net of minority interests |
|
|
(7,013 |
) |
|
|
(29,243 |
) |
Depreciation and amortization: |
|
|
|
|
|
|
|
|
Total depreciation and amortization |
|
|
43,360 |
|
|
|
39,532 |
|
Discontinued operations’ depreciation |
|
|
(92 |
) |
|
|
4,591 |
|
Non-real estate depreciation |
|
|
(1,000 |
) |
|
|
(745 |
) |
Adjustments to derive FFO from consolidated JVs: |
|
|
|
|
|
|
|
|
Joint venture partners’ minority interests (Net income) |
|
|
8,825 |
|
|
|
9,349 |
|
Limited partnership unitholders’ minority interests (Net income) |
|
|
805 |
|
|
|
295 |
|
Limited partnership unitholders’ minority interests (Development profits) |
|
|
32 |
|
|
|
458 |
|
Discontinued operations’ minority interests (Net income) |
|
|
(248 |
) |
|
|
2,386 |
|
FFO attributable to minority interests |
|
|
(20,435 |
) |
|
|
(23,587 |
) |
Adjustments to derive FFO from unconsolidated JVs: |
|
|
|
|
|
|
|
|
AMB’s share of net income |
|
|
(2,088 |
) |
|
|
(1,242 |
) |
AMB’s share of FFO |
|
|
3,209 |
|
|
|
2,747 |
|
Preferred stock dividends |
|
|
(3,096 |
) |
|
|
(1,783 |
) |
Preferred unit redemption issuance costs |
|
|
(1,097 |
) |
|
|
— |
|
|
|
|
|
|
|
|
Funds from operations |
|
$ |
48,739 |
|
|
$ |
49,525 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFO per common share and unit (diluted) |
|
$ |
0.52 |
|
|
$ |
0.54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares and units (diluted) |
|
|
94,567,680 |
|
|
|
91,240,898 |
|
|
|
|
|
|
|
|
|
|
|
| (1) |
|
Funds From Operations (“FFO”). The Company believes that net income, as
defined by 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 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. 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 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 GAAP. The Company believes that the use of FFO, combined with the
required 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 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 the Company’s real estate assets nor is FFO necessarily indicative of cash
available to fund the Company’s 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. |
Forward-Looking Statements
Some of the information included in this report contains forward-looking statements, such as those
related to total expected investments in acquisitions and developments; size and timing of
deliveries and total investments in development projects; and use of private capital funds for
planned investment activity, 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, increased interest rates and operating costs, our failure to obtain necessary
outside financing, re-financing risks, difficulties in identifying properties to acquire and in
effecting acquisitions, our failure to successfully integrate acquired properties and operations,
our failure to divest properties on advantageous terms or to timely reinvest proceeds from any
divestitures, risks and uncertainties affecting property development 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, environmental uncertainties, risks related to natural disasters, changes in general economic
conditions or in the real estate sector, changes in real estate and zoning laws or other local,
state and federal regulatory requirements, a downturn in the U.S., California or the global
economy, risks related to doing
business internationally, 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, various market conditions and
fluctuations and those other risk factors discussed under the heading “Risk Factors” and elsewhere
in our most recent annual report on Form 10-K for the year ended December 31, 2005.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
| |
|
|
| Exhibit |
|
|
| Number |
|
Description |
99.1
|
|
AMB Property Corporation Press Release dated April 11, 2006 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the
registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly
authorized.
| |
|
|
|
|
|
|
|
|
|
|
AMB Property Corporation |
|
|
|
|
|
|
(Registrant) |
|
|
|
|
|
|
|
|
|
Date: April 11, 2006
|
|
By:
|
|
/s/ Tamra D. Browne |
|
|
|
|
|
|
|
|
|
|
|
|
|
Tamra D. Browne
Senior Vice President, General Counsel and
Secretary |
|
|
Exhibits
| |
|
|
| Exhibit |
|
|
| Number |
|
Description |
99.1
|
|
AMB Property Corporation Press Release dated April 11, 2006 |