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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 001-13545
AMB PROPERTY CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MARYLAND 94-3281941
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
PIER 1, BAY 1, SAN FRANCISCO, CALIFORNIA 94111
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(415) 394-9000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
COMMON STOCK, $.01 PAR VALUE NEW YORK STOCK EXCHANGE
8 1/2% SERIES A CUMULATIVE (NAME OF EXCHANGE ON WHICH REGISTERED)
REDEEMABLE PREFERRED STOCK
(TITLE OF CLASS)
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of common shares held by non-affiliates of the
registrant (based upon the closing sale price on the New York Stock Exchange) on
March 20, 2001, was approximately $2,071,869,589.
As of March 20, 2001, there were 84,222,341 shares of the Registrant's
common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates by reference the Registrant's Proxy Statement for its
Annual Meeting of Stockholders which the Registrant anticipates will be filed no
later than 120 days after the end of its fiscal year pursuant to Regulation 14A.
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PART I
ITEM 1. BUSINESS
GENERAL
AMB Property Corporation, a Maryland corporation, is one of the leading
owners and operators of industrial real estate nationwide. As of December 31,
2000, AMB owned, managed, and had renovation and development projects totaling
92 million square feet and 1,005 buildings in 27 metropolitan markets. Of this,
we owned and operated 862 industrial buildings and eight retail centers,
totaling approximately 77.0 million rentable square feet. As of December 31,
2000, these properties were 96.3% leased. As of December 31, 2000, through our
subsidiary, AMB Investment Management, Inc., we also managed industrial
buildings and retail centers, totaling approximately 4.4 million rentable square
feet on behalf of various institutional investors. In addition, we have invested
in 36 industrial buildings, totaling approximately 4.0 million rentable square
feet, through an unconsolidated joint venture.
Through our subsidiary, AMB Property, L.P., a Delaware limited partnership,
we are engaged in the acquisition, ownership, operation, management, renovation,
expansion, and development of primarily industrial properties in target markets
nationwide. We refer to AMB Property, L.P. as the operating partnership. As of
December 31, 2000, we owned an approximate 93.5% general partnership interest in
the operating partnership, excluding preferred units. As the sole general
partner of the operating partnership, we have the full, exclusive, and complete
responsibility and discretion in the day-to-day management and control of the
operating partnership.
Through the operating partnership, we enter into co-investment joint
ventures with institutional investors. These co-investment joint ventures
provide us with an additional source of capital to fund certain acquisitions and
developments and renovation projects and increase our return on invested capital
as a result of certain fees paid to us. As of December 31, 2000, we had
investments in two co-investment joint ventures, which are consolidated for
financial reporting purposes.
The operating partnership is the managing general partner of AMB
Institutional Alliance Fund I, L.P. and, together with one of our other
affiliates, owns, as of December 31, 2000, approximately 21% of the partnership
interests in the Alliance Fund I. The Alliance Fund I is a co-investment
partnership between us and AMB Institutional Alliance REIT I, Inc., a limited
partner of the Alliance Fund I, which includes 15 institutional investors as
stockholders and is engaged in the acquisition, ownership, operation,
management, renovation, expansion, and development of primarily industrial
buildings in target markets nationwide. As of December 31, 2000, the Alliance
Fund I had received equity contributions from third party investors totaling
$169.0 million, which, when combined with anticipated debt financings and our
investment, creates a total planned capitalization of $410.0 million.
We are self-administered and self-managed and expect that we have qualified
and will continue to qualify as a real estate investment trust for federal
income tax purposes beginning with the year ending December 31, 1997. As a
self-administered and self-managed real estate investment trust, our own
employees perform our administrative and management functions, rather than our
relying on an outside manager for these services. The principal executive office
of AMB Property Corporation and the operating partnership is located at Pier 1,
Bay 1, San Francisco, CA 94111, and our telephone number is (415) 394-9000. We
also maintain a regional office in Boston, Massachusetts.
Unless the context otherwise requires, the terms "we," "us," and "our"
refer to AMB Property Corporation, the operating partnership and the other
controlled subsidiaries, and the references to AMB Property Corporation include
the operating partnership and the other controlled subsidiaries. The following
marks are our registered trademarks: AMB(R); Customer Alliance Partners(R);
Customer Alliance Program(R); Development Alliance Partners(R); Development
Alliance Program(R); eSpace(R); Institutional Alliance Partners(R);
Institutional Alliance Program(R); Management Alliance Partners(R); Management
Alliance Program(R); UPREIT Alliance Partners(R); and UPREIT Alliance
Program(R). The following marks are our
1
unregistered trademarks: Broker Alliance Partners(TM); Broker Alliance
Program(TM); HTD(TM); High Throughput Distribution(TM); iSpace(TM); Strategic
Alliance Partners(TM); and Strategic Alliance Programs(TM).
TRANSACTION SUMMARY
During 2000, we invested $730.0 million in operating properties, consisting
of 145 industrial buildings aggregating approximately 10.5 million square feet.
Of this, $185.6 million in operating properties was acquired by the Alliance
Fund I, consisting of 44 industrial buildings aggregating approximately 2.6
million square feet. In 2000, we disposed of one retail center and 25 industrial
buildings and re-invested approximately $175.7 million in 145 industrial
buildings, aggregating approximately 10.5 million rentable square feet.
We had 33 industrial buildings and one retail center that were held for
divestiture as of December 31, 2000. During 2000, we disposed of 25 industrial
buildings and one retail center, aggregating approximately 2.5 million rentable
square feet, for an aggregate price of $175.7 million. Over the next few years,
we intend to dispose of non-strategic assets and redeploy the resulting capital
into properties that better fit our current investment focus.
As of December 31, 2000, we had in our development pipeline 19 industrial
projects, which will total approximately 5.5 million square feet and have a
total estimated investment of $305.9 million upon completion. We also had three
retail projects in our development pipeline, which will total approximately 0.5
million square feet and have a total estimated investment of $76.3 million upon
completion. As of December 31, 2000, we had funded an aggregate of $226.5
million and will need to fund an estimated additional $155.7 million in order to
complete projects currently under construction.
BUSINESS STRATEGIES
Investment Strategy
Our investment strategy is to become a leading provider of High Throughput
Distribution, or HTD, properties located near key passenger and cargo airports,
highway systems, and ports in major metropolitan areas, such as Atlanta,
Chicago, Dallas/Fort Worth, Northern New Jersey/New York City, the San Francisco
Bay Area, Southern California, Miami, and Seattle. Within each of our markets,
we focus our investments in in-fill submarkets. In-fill sub-markets are
characterized by supply constraints on the availability of land for competing
projects.
High Throughput Distribution facilities are designed to serve the
high-speed, high-value freight handling needs of today's supply chain, as
opposed to functioning as long-term storage facilities. We believe that the
rapid growth of the airfreight business and the outsourcing of supply chain
management to third party logistics companies are indicative of the changes that
are occurring in the supply chain and the manner in which goods are distributed.
In addition, we believe that inventory levels as a percentage of final sales are
falling and that goods are moving more rapidly through the supply chain. As a
result, we intend to focus our investment activities primarily on industrial
properties that we believe will benefit from these changes.
Operating Strategy
We are a full-service real estate company with in-house expertise in
acquisitions, development and redevelopment, asset management and leasing,
finance and accounting, and market research. We have long-standing relationships
with many real estate management and development firms across the country, our
Strategic Alliance Partners.
We believe that real estate is fundamentally a local business and that the
most effective way for us to operate is by forging alliances with service
providers in every market. We believe that these collaborations allow us to: 1)
leverage our national presence with the local market expertise of brokers,
developers, and property managers; 2) improve the operating efficiency and
flexibility of our national portfolio; 3) strengthen customer satisfaction and
retention; and 4) provide a continuous pipeline of growth.
2
We believe that our partners give us local market expertise and enormous
flexibility allowing us to focus on our core competencies: developing and
refining our strategic approach to real estate investment and management and
raising private capital to finance growth and enhance returns to shareholders.
FINANCING STRATEGY
To maintain financial flexibility and facilitate the rapid deployment of
capital over market cycles, we intend to operate with a debt-to-total market
capitalization ratio of approximately 45% or less, although our organizational
documents do not limit the amount of indebtedness that we may incur.
Additionally, we intend to continue to structure our balance sheet to maintain
investment-grade ratings. We also intend to keep the majority of our assets
unencumbered to facilitate such ratings. As of December 31, 2000, our
debt-to-total market capitalization ratio was 37.9% and our debt-to-total book
capitalization ratio was 44.6%.
We have a $500 million unsecured revolving credit agreement that currently
bears interest at a rate equal to LIBOR plus 75 basis points. We use available
borrowings under our unsecured credit facility for property acquisitions,
developments, and for general corporate purposes. As of December 31, 2000, the
available borrowings under our unsecured credit facility were $284.0 million
(excluding potential expansion capacity). See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and "Item 14. Note 6 of Notes to Consolidated Financial
Statements" included in this report.
Currently, our principal sources of working capital and funding for
acquisitions, development, expansion, and renovation of our properties include:
1) cash flow from operations; 2) borrowings under our unsecured credit facility;
3) other forms of secured or unsecured debt financing; 4) proceeds from equity
or debt offerings by us or the operating partnership (including issuances of
units in the operating partnership or its subsidiaries); and 5) proceeds from
divestitures of properties. Additionally, our co-investment program will also
serve as a significant source of capital for acquisitions and developments.
GROWTH STRATEGIES
AMB Investment Management
AMB Investment Management, Inc. provides real estate investment management
services on a fee basis to clients. The operating partnership holds all of the
non-voting preferred stock of AMB Investment Management, which represents a 95%
economic interest. All of the common stock of AMB Investment Management, Inc.,
which represents a 5% economic interest, is owned by our current or former
executive officers and a former executive officer of AMB Investment Management,
Inc.. AMB Investment Management, Inc. conducts its operations through AMB
Investment Management Limited Partnership, a Maryland limited partnership, of
which it is the sole general partner. We intend to grow this business through
our co-investment program.
We co-invest with clients of AMB Investment Management, Inc., to the extent
such clients newly commit investment capital, through partnerships, limited
liability companies, or joint ventures. We currently use a co-investment formula
with each client whereby we will own at least a 20% interest in all ventures. We
currently have two co-investments. The first is a separate account co-investment
venture, in which we own a 50% interest, with total gross book value at December
31, 2000, of $214.1 million. The second is a co-investment fund, AMB
Institutional Alliance Fund I, L.P., in which we owned at December 31, 2000, a
21% interest, with total gross book value at December 31, 2000, of $339.5
million. In general, we control all significant operating and investment
decisions of our co-investment entities.
Headlands Realty Corporation
Headlands Realty Corporation conducts a variety of businesses that include
incremental income programs, such as our Customer Assist Program and, to a
limited extent, development projects available for sale to third parties. The
operating partnership holds all of the non-voting preferred stock of Headlands
Realty Corporation, which represents a 95% economic interest. All of the common
stock of Headlands Realty
3
Corporation, which represents a 5% economic interest, is owned by some of our
current and former executive officers and a director of Headlands Realty
Corporation.
Growth Through Operations
We seek to generate internal growth through rent increases on existing
space and renewal on re-tenanted space, by maintaining a high occupancy rate of
our properties and by controlling expenses by capitalizing on the economies of
owning, operating, and growing a large national portfolio. As of December 31,
2000, our industrial properties and retail centers were 96.4% leased and 93.2%
leased, respectively. During the 12 months ended December 31, 2000, we increased
average base rental rates (on a cash basis) by 26.5% from the expiring rent for
that space, on leases entered into or renewed during such period, representing
approximately 12.1 million rentable square feet. Annualized base rent represents
the monthly contractual amount under existing leases at the end of the year,
multiplied by 12. This amount excludes expense reimbursements, rental
abatements, and percentage rents.
Growth Through Acquisitions and Capital Redeployment
We believe that our significant acquisition experience, our alliance-based
operating strategy, and our extensive network of property acquisition sources
will continue to provide opportunities for external growth. We believe that our
relationship with third party local property management firms through our
Management Alliance Program also will create acquisition opportunities as such
managers market properties on behalf of sellers. Our operating structure also
enables us to acquire properties through our UPREIT Alliance Program in exchange
for limited partnership units in the operating partnership, thereby enhancing
our attractiveness to owners and developers seeking to transfer properties on a
tax-deferred basis. In addition to acquisitions, we seek to redeploy capital
from non-strategic assets into properties that better fit our current investment
focus.
We are generally in various stages of negotiations for a number of
acquisitions and dispositions, which may include acquisitions and dispositions
of individual properties, acquisitions of large multi-property portfolios, and
acquisitions of other real estate companies. There can be no assurance that we
will consummate any of these acquisitions. Such transactions, if we consummate
them, may be material individually or in the aggregate. Sources of capital for
acquisitions may include undistributed cash flow from operations, borrowings
under the credit facility, other forms of secured or unsecured debt financing,
issuances of debt or equity securities by us or the operating partnership
(including issuances of units in the operating partnership or its subsidiaries),
proceeds from divestitures of properties, and assumption of debt related to the
acquired properties.
Growth Through Development
We believe that renovation and expansion of value-added properties and
development of well-located, high-quality industrial properties should continue
to provide us with attractive opportunities for increased cash flow and a higher
rate of return than we may obtain from the purchase of fully leased, renovated
properties. Value-added properties are typically characterized as properties
with available space or near-term leasing exposure, undeveloped land acquired in
connection with another property that provides an opportunity for development,
or properties that are well-located but require redevelopment or renovation.
Value-added properties require significant management attention or capital
investment to maximize their return. We have developed the in-house expertise to
create value through acquiring and managing value-added properties and believe
that our national market presence and expertise will enable us to continue to
generate and capitalize on these opportunities. Through our Development Alliance
Program, we have established strategic alliances with national and regional
developers to enhance our development capabilities.
The multidisciplinary backgrounds of our employees provide us with the
skills and experience to capitalize on strategic renovation, expansion, and
development opportunities. Several of our officers have extensive experience in
real estate development, both with us and with national development firms. We
generally pursue development projects in joint ventures with local developers.
This way, we leverage the development skill, access to opportunities, and
capital of such developers, transferring a significant amount of
4
the development risk to them and eliminating the need and expense of an in-house
development staff. Under a typical joint venture agreement with a Development
Alliance Partner, we would fund 95% of the construction costs and our partner
would fund 5%. Upon completion, we generally would purchase our partner's
interest in the joint venture.
As of December 31, 2000, we had committed to invest $278.5 million to
develop an estimated 5.9 million rentable square feet. Approximately $243.4
million of this investment is through our Development Alliance Program. See Item
2. Properties -- "Operating and Leasing Statistics -- Development Pipeline."
5
BUSINESS RISKS
See: "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Business Risks" for a complete discussion of the
various risks that could adversely affect us.
ITEM 2. PROPERTIES
The properties that we owned as of December 31, 2000, are divided into two
operating divisions, consisting of 27 identifiable markets. We have provided
this breakdown for external reporting purposes only. It reflects the key markets
of interest to our stockholders and does not reflect how we are operationally
managed. See "Item 14. Note 14 of Notes to Consolidated Financial Statements"
for segment information related to our operations.
INDUSTRIAL PROPERTIES
At December 31, 2000, we owned 862 industrial buildings aggregating
approximately 75.8 million rentable square feet, located in 27 markets
nationwide. Our industrial properties accounted for $414.3 million, or 96.3%, of
our total annualized base rent at December 31, 2000. Our industrial properties
were 96.4% leased to over 2,850 customers, the largest of which accounted for no
more than 1.3% of our annualized base rent from our industrial properties.
Property Characteristics. Our industrial properties, which consist
primarily of warehouse distribution facilities suitable for single or multiple
customers, are typically comprised of multiple buildings. The following table
identifies characteristics of our typical industrial buildings:
TYPICAL BUILDING TYPICAL RANGE
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Rentable square feet.......................... 100,000 75,000 - 200,000
Clear height.................................. 24 ft 16 - 32 ft.
Building depth................................ 200 ft 120 - 300 ft.
Truck court depth............................. 110 ft 90 - 130 ft.
Loading dock & grade.......................... Dock or Dock & Grade
Parking spaces per 1,000 square feet.......... 1.0 0.5 - 2.0
Doors per 1,000 square feet................... 0.2 0.1 - 2.0
Square footage per tenant..................... 35,000 15,000 - 150,000
Office finish................................. 8% 3% - 20%
Site coverage................................. 40% 35% - 50%
Lease Terms. Our industrial properties are typically subject to lease on a
"triple net basis," in which customers pay their proportionate share of real
estate taxes, insurance, and operating costs, or subject to leases on a
"modified gross basis," in which customers pay expenses over certain threshold
levels. Lease terms typically range from three to ten years, with an average of
six years, excluding renewal options. The majority of the industrial leases do
not include renewal options.
Overview of Major Target Markets. Our industrial properties are located
near key passenger and air cargo airports, key interstate highways, and ports in
major metropolitan areas, such as Atlanta, Chicago, Dallas/Fort Worth, Northern
New Jersey, the San Francisco Bay Area, Southern California, Miami, and Seattle.
We believe our industrial properties' strategic location, transportation network
and infrastructure, and large consumer and manufacturing bases support strong
demand for industrial space. According to statistics published by CB Richard
Ellis/Torto Wheaton Research, the national hub markets listed below are six of
the nation's eight largest warehouse markets and, as of December 31, 2000,
comprised 43.2% of the warehouse inventory of the 47 industrial markets tracked.
According to statistics published by Regional Financial Associates, as of
December 31, 2000, the combined population of these markets was 45.6 million and
the amount of per capita warehouse space was 22.7% above the average for those
47 industrial markets.
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Within these metropolitan areas, our industrial properties are concentrated
in locations with limited new construction opportunities within established,
relatively large submarkets, which we believe should provide a higher rate of
occupancy and rent growth than properties located elsewhere. These in-fill
locations are typically near major passenger and air cargo facilities, seaports
or convenient to major highways and rail lines, and are proximate to a diverse
labor pool. There is typically broad demand for industrial space in these
centrally located submarkets due to a diverse mix of industries and types of
industrial uses, including warehouse distribution, light assembly and
manufacturing. We generally avoid locations at the periphery of metropolitan
areas where there are fewer supply constraints. Small metropolitan areas or
cities without a heavy concentration of warehouse activity typically have few,
if any, supply-constrained locations (those areas typified by significant
population densities, a limited number of existing industrial customers and a
low availability of land which could be developed into competitive space for
additional industrial customers).
INDUSTRIAL MARKET OPERATING STATISTICS
As of December 31, 2000, we operated in six hub markets, in addition to 21
other markets nationwide. The following table represents properties in which we
own a fee simple interest or a controlling interest (consolidated), and excludes
properties in which we only own a non-controlling interest (unconsolidated) and
properties under development.
NO. NEW SAN TOTAL
DALLAS/ JERSEY/ FRANCISCO SOUTHERN HUB
ATLANTA CHICAGO FT. WORTH NEW YORK BAY AREA CALIFORNIA MARKETS
---------- ---------- ---------- ---------- ---------- ---------- -----------
Square feet owned............. 5,140,876 7,497,472 5,933,777 5,985,300 8,771,331 9,553,425 42,882,181
Occupancy Percentage.......... 98.0% 94.6% 92.5% 95.8% 99.8% 96.9% 96.5%
Annualized base rent.......... $ 21,327 $ 29,662 $ 24,597 $ 35,905 $ 76,625 $ 48,840 $ 236,956
Annualized base rent per
square foot.................. $ 4.23 $ 4.18 $ 4.48 $ 6.26 $ 8.75 $ 5.28 $ 5.73
Lease expirations as a
percentage of ABR:
2001......................... 17.5% 14.1% 14.5% 19.5% 11.9% 12.8% 14.0%
2002......................... 17.2% 13.6% 18.8% 9.3% 12.7% 13.1% 13.4%
2003......................... 15.1% 24.9% 20.0% 14.6% 13.1% 15.8% 16.0%
Weighted average lease terms
Original..................... 4.9 years 7.7 years 5.8 years 7.1 years 5.4 years 6.8 years 6.3 years
Remaining.................... 3.2 years 3.9 years 3.3 years 3.7 years 3.3 years 4.0 years 3.6 years
Tenant Retention (Year-to-
date)........................ 67.5% 66.1% 58.9% 67.6% 54.8% 53.8% 60.1%
Rent increases on renewals and
rollovers.................... 6.5% 7.9% 10.3% 13.7% 70.5% 17.7% 32.6%
Same store cash basis NOI
growth....................... 6.1% 5.6% 9.7% 0.2% 22.3% 4.4% 11.3%
Square feet owned in same
store pool................... 3,196,631 6,855,380 4,622,049 2,162,051 6,162,270 4,887,057 27,885,438
TOTAL
OTHER
MARKETS TOTAL
----------- -----------
Square feet owned............. 32,913,808 75,795,989
Occupancy Percentage.......... 96.3% 96.4%
Annualized base rent.......... $ 177,356 $ 414,312
Annualized base rent per
square foot.................. $ 5.60 $ 5.67
Lease expirations as a
percentage of ABR:
2001......................... 19.2% 16.0%
2002......................... 15.7% 14.3%
2003......................... 14.2% 15.3%
Weighted average lease terms
Original..................... 6.6 years 6.4 years
Remaining.................... 3.4 years 3.5 years
Tenant Retention (Year-to-
date)........................ 57.3% 59.0%
Rent increases on renewals and
rollovers.................... 11.6% 25.6%
Same store cash basis NOI
growth....................... 4.7% 8.5%
Square feet owned in same
store pool................... 24,259,912 52,145,350
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(1) We also have a majority ownership interest in 36 industrial buildings
totaling an aggregate of approximately 4.0 million square feet in the
Chicago market through its investment in an unconsolidated joint venture.
(2) Excludes properties purchased or developed after December 31, 1998.
7
INDUSTRIAL PROPERTY SUMMARY
As of December 31, 2000, our 862 industrial buildings were diversified
across 27 markets nationwide. The average age of our industrial properties is 17
years (since the property was built or substantially renovated), which we
believe should result in lower operating costs over the long term. The following
table represents properties in which we own a fee simple interest or a
controlling interest (consolidated), and excludes properties in which we only
own a non-controlling interest (unconsolidated).
PERCENTAGE PERCENTAGE
TOTAL OF TOTAL ANNUALIZED OF TOTAL
NUMBER OF RENTABLE RENTABLE PERCENTAGE BASE RENT ANNUALIZED NUMBER
INDUSTRIAL PROPERTIES BUILDINGS SQUARE FEET SQUARE FEET LEASED (000'S)(1) BASE RENT OF LEASES
--------------------- --------- ----------- ----------- ---------- ---------- ---------- ---------
HUB MARKETS:
Atlanta....................... 48 5,140,876 6.8% 98.0% $ 21,327 5.1% 152
Chicago....................... 82 7,497,472 9.9 94.6 29,662 7.2 176
Dallas/Ft. Worth.............. 71 5,933,777 7.8 92.5 24,597 5.9 242
Northern New Jersey/New York
City........................ 69 5,985,300 7.9 95.8 35,905 8.7 240
San Francisco Bay Area........ 121 8,771,331 11.6 99.8 76,625 18.5 350
Southern California........... 121 9,553,425 12.6 96.9 48,840 11.8 293
--- ---------- ----- ----- -------- ----- -----
Subtotal/Weighted Average... 512 42,882,181 56.6 96.5 236,956 57.2 1,453
OTHER MARKETS:
Austin........................ 8 1,075,316 1.4 100.0 8,588 2.1 28
Baltimore/Washington D.C. .... 63 4,140,720 5.5 98.8 30,920 7.5 297
Boston........................ 40 4,788,548 6.2 99.8 22,172 5.4 65
Charlotte..................... 12 831,974 1.1 99.0 3,894 0.9 34
Cincinnati.................... 6 811,693 1.1 100.0 2,742 0.7 13
Columbus...................... 2 465,433 0.6 100.0 1,410 0.3 2
Dayton........................ 5 125,575 0.2 88.3 792 0.2 9
Houston....................... 26 2,420,513 3.2 91.6 8,298 2.0 126
Jacksonville.................. 1 50,200 0.1 57.9 202 0.0 5
Kansas City................... 2 159,249 0.2 89.4 1,602 0.4 11
Memphis....................... 17 1,883,845 2.5 82.8 8,408 2.0 49
Miami......................... 47 4,342,361 5.7 97.2 32,718 7.9 220
Minneapolis................... 42 4,441,147 5.9 95.8 17,577 4.2 205
Nashville..................... 2 375,317 0.5 100.0 1,074 0.3 5
New Orleans................... 5 411,689 0.5 95.7 1,859 0.4 48
Newport News.................. 1 60,215 0.1 100.0 717 0.2 3
Orlando....................... 19 1,845,494 2.4 94.7 7,093 1.7 80
Philadelphia.................. 1 83,148 0.1 90.8 1,743 0.4 19
Portland...................... 5 676,104 0.9 98.4 2,805 0.7 10
San Diego..................... 5 276,167 0.4 92.1 1,984 0.5 17
Seattle....................... 41 3,649,100 4.8 96.9 20,758 5.0 157
--- ---------- ----- ----- -------- ----- -----
Subtotal/Weighted Average... 350 32,913,808 43.4 96.3 177,356 42.8 1,403
--- ---------- ----- ----- -------- ----- -----
Total/Weighted
Average............... 862 75,795,989 100.0% 96.4% $414,312 100.0% 2,856
=== ========== ===== ===== ======== ===== =====
ANNUALIZED
BASE RENT
PER LEASED
INDUSTRIAL PROPERTIES SQUARE FOOT
--------------------- -----------
HUB MARKETS:
Atlanta....................... $ 4.23
Chicago....................... 4.18
Dallas/Ft. Worth.............. 4.48
Northern New Jersey/New York
City........................ 6.26
San Francisco Bay Area........ 8.75
Southern California........... 5.28
------
Subtotal/Weighted Average... 5.73
OTHER MARKETS:
Austin........................ 7.99
Baltimore/Washington D.C. .... 7.53
Boston........................ 4.64
Charlotte..................... 4.73
Cincinnati.................... 3.38
Columbus...................... 3.03
Dayton........................ 7.14
Houston....................... 3.74
Jacksonville.................. 6.95
Kansas City................... 11.25
Memphis....................... 5.39
Miami......................... 7.75
Minneapolis................... 4.13
Nashville..................... 2.86
New Orleans................... 4.72
Newport News.................. 11.91
Orlando....................... 4.06
Philadelphia.................. 23.09
Portland...................... 4.22
San Diego..................... 7.80
Seattle....................... 5.87
------
Subtotal/Weighted Average... 5.60
------
Total/Weighted
Average............... $ 5.67
======
- ---------------
(1) Annualized base rent represents the monthly contractual amount under
existing leases at December 31, 2000, multiplied by 12. This amount excludes
expense reimbursements and rental abatements.
8
INDUSTRIAL PROPERTY LEASE EXPIRATIONS
The following table summarizes the lease expirations for our industrial
properties for leases in place as of December 31, 2000, without giving effect to
the exercise of renewal options or termination rights, if any, at or prior to
the scheduled expirations.
RENTABLE ANNUALIZED PERCENTAGE OF
SQUARE BASE RENT ANNUALIZED
YEAR OF LEASE EXPIRATION(1) FEET (000S)(2) BASE RENT
--------------------------- ---------- ---------- -------------
2001(3)(4).............................. 12,805,291 $ 74,373 16.0%
2002.................................... 12,525,395 66,209 14.3
2003.................................... 13,027,351 70,840 15.3
2004.................................... 10,180,364 61,426 13.2
2005.................................... 9,515,495 62,256 13.4
2006.................................... 4,555,886 25,398 5.5
2007.................................... 3,439,674 22,604 4.9
2008.................................... 1,968,841 14,812 3.2
2009.................................... 2,798,547 16,122 3.5
2010.................................... 2,721,071 32,038 6.9
Thereafter.............................. 1,865,629 17,683 3.8
---------- -------- -----
Total/Weighted Average........ 75,403,544 $463,761 100.0%
========== ======== =====
- ---------------
(1) Schedule includes executed leases that commence after December 31, 2000.
Schedule excludes leases expiring December 31, 2000.
(2) Calculated as monthly rent at expiration multiplied by 12.
(3) Includes 1,640,579 square feet of month-to-month leases.
(4) Includes leases expiring January 1, 2001, through December 31, 2001.
9
CUSTOMER INFORMATION
Largest Property Customers. Our 25 largest property customers by annualized
base rent are set forth in the table below.
PERCENTAGE OF PERCENTAGE OF
NUMBER AGGREGATE AGGREGATE ANNUALIZED AGGREGATE
OF RENTABLE LEASED BASE RENT ANNUALIZED
INDUSTRIAL CUSTOMER NAME(1) LEASES SQUARE FEET SQUARE FEET(2) (000S) BASE RENT(3)
--------------------------- ------ ----------- -------------- ---------- -------------
Federal Express Corporation.............. 22 464,593 0.6% $ 5,374 1.3%
Webvan Group, Inc........................ 5 1,021,819 1.4 5,080 1.2
Harmonic Inc............................. 3 246,864 0.3 4,253 1.0
International Paper Company.............. 8 443,106 0.6 3,452 0.8
CNF Transportation, Inc.................. 7 536,170 0.7 2,902 0.7
Wells Fargo Bank NA...................... 4 302,290 0.4 2,782 0.7
United States Postal Service............. 7 475,255 0.7 2,107 0.5
Air Express International................ 8 280,659 0.4 2,101 0.5
Ultrabrand Fiber Optics, Inc............. 1 47,417 0.1 1,915 0.5
Alza Corporation......................... 4 129,449 0.2 1,908 0.5
Shaw Industries.......................... 4 399,004 0.5 1,821 0.4
Sage Enterprises......................... 4 245,289 0.3 1,781 0.4
Rite Aid................................. 2 524,840 0.7 1,778 0.4
Home Depot USA, Inc...................... 4 476,026 0.7 1,777 0.4
Tech Data................................ 2 224,019 0.3 1,775 0.4
Adaptive Broadband Corporation........... 1 41,472 0.1 1,742 0.4
Corvis Corporation....................... 4 142,283 0.2 1,703 0.4
FMI International LLC.................... 1 315,000 0.4 1,701 0.4
Dell USA, LP............................. 2 285,000 0.4 1,700 0.4
C&S Wholesale Grocers, Inc............... 4 167,813 0.2 1,634 0.4
Cosmair.................................. 1 303,843 0.4 1,595 0.4
Calvin Klein Jeanswear................... 1 326,500 0.4 1,585 0.4
Boeing Company........................... 4 223,745 0.3 1,536 0.4
Wakefern Food Corporation................ 3 419,901 0.6 1,533 0.4
Boise Cascade Corporation................ 3 400,655 0.6 1,506 0.4
--------- -------
Total/Weighted Average......... 8,443,642 11.0% $57,041 13.3%
========= =======
- ---------------
(1) Tenant(s) may be a subsidiary of or an entity affiliated with the named
customer.
(2) Computed as aggregate rentable square feet divided by the aggregate leased
square feet of our industrial and retail properties.
(3) Computed as annualized base rent divided by the aggregate annualized base
rent of our industrial and retail properties.
10
RETAIL PROPERTIES
At December 31, 2000, we owned eight retail centers aggregating
approximately 1.2 million rentable square feet. Our retail properties accounted
for $15.9 million, or 3.7%, of annualized base rent at December 31, 2000. Our
retail properties were 93.2% leased to over 170 customers. Our retail properties
have an average age of two years since built, expanded, or renovated.
During 2000, we sold one retail center, totaling approximately 0.4 million
rentable square feet. As of December 31, 2000, we had one retail center,
aggregating approximately 0.3 million rentable square feet, which we held for
divestiture.
RETAIL PROPERTY SUMMARY
The following table sets forth the rentable square footage of our retail
centers as of December 31, 2000, and represents properties in which we own a fee
simple interest or a controlling interest (consolidated), and excludes
properties in which we only own a non-controlling interest (unconsolidated).
ANNUALIZED
TOTAL ANNUALIZED BASE RENT
RENTABLE PERCENTAGE BASE RENT NUMBER PER LEASED
RETAIL PROPERTIES SQUARE FEET LEASED (000'S)(1) OF LEASES SQUARE FOOT(2)
----------------- ----------- ---------- ---------- --------- --------------
Around Lenox..................... 121,348 83.1% $ 2,118 15 $21.00
Howard & Western S.C.(4)......... 88,798 74.0 858 8 13.07
Kendall Mall(3)(6)............... 278,759 93.8 4,540 45 17.36
Mazzeo Drive..................... 88,420 100.0 717 1 8.11
Northridge Plaza(3)(4)........... 173,919 92.5 2,226 30 13.84
Palm Aire(3)(4).................. 125,946 95.4 1,537 26 12.80
Springs Gate(3)(5)............... n/a n/a n/a n/a n/a
The Plaza at Delray(3)........... 331,863 99.4 3,916 46 11.87
--------- ----- ------- --- ------
Total/Weighted
Average.............. 1,209,053 93.2% $15,912 171 $14.11
========= ===== ======= === ======
- ---------------
(1) Annualized base rent means the monthly contractual amount under existing
leases at December 31, 2000, multiplied by 12. This amount excludes expense
reimbursements, rental abatements, and percentage rents.
(2) Calculated as total Annualized Base Rent divided by total rentable square
feet actually leased as of December 31, 2000.
(3) We hold an interest in this property through a joint venture interest in a
limited partnership.
(4) This property is being redeveloped. All calculations are based on rentable
square feet existing as of December 31, 2000.
(5) This property consists of land held for future development.
(6) This property is being held for divestiture as of December 31, 2000.
11
OPERATING AND LEASING STATISTICS
TOTAL PORTFOLIO SUMMARY
The following table summarizes key operating and leasing statistics for all
of our properties as of and for the year ended December 31, 2000.
OPERATING AND LEASING STATISTICS(1)
INDUSTRIAL RETAIL TOTAL
----------- ----------- -----------
Square feet owned at December 31, 2000(2)... 75,795,989 1,209,053 77,005,042
Occupancy percentage at December 31,
2000...................................... 96.4% 93.2% 96.3%
Weighted average lease term:
Original.................................. 6.4 years 13.8 years 6.5 years
Remaining................................. 3.5 years 10.1 years 3.6 years
Tenant retention:
-- Year-to-date (13.3 million SF
expired)............................... 59.0% 45.1% 58.9%
Rent increases on renewals and rollovers:
-- Year-to-date (12.1 million SF
leased)................................ 25.6% 202.6% 26.5%
Second generation tenant improvements and
leasing commissions per sq. ft.(3):
-- Year-to-date:
Renewals............................... $ 1.25 $ 0.20 $ 1.24
Re-tenanted............................ 2.27 0.07 2.23
----------- ----------- -----------
Weighted average.................. $ 1.86 $ 0.09 $ 1.84
=========== =========== ===========
Recurring capital expenditures:
-- Year-to-date:
Tenant improvements.................... $ 10,237 $ 1,387 $ 11,624
Lease commissions...................... 17,679 -- 17,679
Building improvements.................. 11,031 239 11,270
----------- ----------- -----------
Total............................. $ 38,947 $ 1,626 $ 40,573
=========== =========== ===========
- ---------------
(1) Includes all consolidated operating properties and excludes industrial
development and renovation projects.
(2) In addition to owned square feet as of December 31, 2000, we manage, through
our subsidiary, AMB Investment Management, Inc., 3.7 million, 0.6 million,
and 0.1 million additional square feet of industrial, retail, and other
properties, respectively. We also have an investment in 4.0 million square
feet of industrial properties through our investment in an unconsolidated
joint venture.
(3) Consists of all leases renewing or re-tenanting with lease terms greater
than one year.
12
SAME STORE SUMMARY
The following table summarizes key operating and leasing statistics for our
same store properties as of and for the year ended December 31, 2000. For an
explanation of our same store properties, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Results of
Operations."
INDUSTRIAL RETAIL TOTAL
---------- ------- ----------
Square feet in same store pool................... 52,145,350 367,179 52,512,529
% of total square feet......................... 68.8% 30.4% 68.2%
Occupancy percentage at December 31, 2000........ 96.8% 95.3% 96.7%
at December 31, 1999........ 96.2% 97.8% 96.2%
Tenant retention:
-- Year-to-date (11.0 million SF expired)...... 59.2% 18.9% 58.9%
Rent increases on renewals and rollovers:
-- Year-to-date (9.8 million SF leased)........ 27.0% 215.0% 28.0%
Cash basis net operating income growth %
increase(1)
-- Year-to-date: Revenues...................... 7.3% 1.7% 7.2%
Expenses..................... 3.5% 3.9% 3.5%
NOI.......................... 8.5% 1.0% 8.4%
- ---------------
(1) Net operating income, or NOI, consists of rental revenues, including
reimbursements and excluding straight-line rents, less property level
operating expenses.
HISTORICAL OCCUPANCY RATES, AVERAGE BASE RENTS, RENT INCREASES, AND TENANT
RETENTION RATES
The following table sets forth weighted average occupancy rates and average
base rents based on square feet leased of our industrial properties and retail
centers as of and for the periods presented. The following table also sets forth
information relating to tenant retention rates and average rent increases (cash
basis) on renewal and re-tenanted space for our industrial properties and retail
properties for the periods presented.
INDUSTRIAL RETAIL TOTAL
---------- ------ -----
OCCUPANCY RATES:
2000.................................................... 96.4% 93.2% 96.3%
1999.................................................... 95.9% 92.4% 95.9%
1998.................................................... 96.0% 94.6% 95.8%
ANNUALIZED BASE RENT PER SQUARE FOOT(1):
2000.................................................... $5.67 $14.12 n/a
1999.................................................... $4.89 $13.19 n/a
1998.................................................... $4.55 $11.98 n/a
RENTAL INCREASES:
2000.................................................... 25.6% 202.6% 26.5%
1999.................................................... 12.9% 6.8% 12.5%
1998.................................................... 14.6% 13.3% 14.3%
TENANT RETENTION RATES:
2000.................................................... 59.0% 45.1% 58.9%
1999.................................................... 72.0% 40.8% 72.0%
1998.................................................... 74.8% 84.1% 75.4%
- ---------------
(1) Annualized base rent per square foot represents the total annualized
contractual base rental revenue for the period divided by the average
occupied square feet leased at December 31.
13
RECURRING TENANT IMPROVEMENTS AND LEASING COMMISSIONS PER SQUARE FOOT LEASED
The table below summarizes for our industrial properties and retail
properties, separately, the recurring tenant improvements and leasing
commissions per square feet leased for the years ended December 31. The
recurring tenant improvements and leasing commissions represent costs incurred
to lease space after the initial lease term of the initial customer, excluding
costs incurred to relocate customers as part of a re-tenanting strategy. The
tenant improvements and leasing commissions set forth below are not necessarily
indicative of future tenant improvements and leasing commissions.
WEIGHTED
2000 1999 1998 AVERAGE
----- ----- ----- --------
INDUSTRIAL PROPERTIES:
Expenditures per renewed square foot leased..... $1.25 $1.22 $0.92 $1.14
Expenditures per re-tenanted square foot
leased....................................... 2.27 2.74 2.08 2.37
----- ----- ----- -----
Weighted average................................ $1.86 $1.64 $1.10 $1.62
===== ===== ===== =====
RETAIL PROPERTIES:
Expenditures per renewed square foot leased..... $0.20 $1.26 $1.34 $1.22
Expenditures per re-tenanted square foot
leased....................................... 0.07 2.55 9.99 2.92
----- ----- ----- -----
Weighted average................................ $0.09 $1.37 $2.64 $1.69
===== ===== ===== =====
TOTAL PROPERTIES:
Expenditures per renewed square foot leased..... $1.24 $1.22 $0.95 $1.14
Expenditures per re-tenanted square foot
leased....................................... 2.23 2.74 2.47 2.38
----- ----- ----- -----
Weighted average................................ $1.84 $1.64 $1.18 $1.62
===== ===== ===== =====
14
DEVELOPMENT PIPELINE
The following table sets forth the properties owned by us as of December
31, 2000, which were undergoing renovation, expansion, or new development. No
assurance can be given that any of such projects will be completed on schedule
or within budgeted amounts.
INDUSTRIAL DEVELOPMENT AND RENOVATION DELIVERIES
(DOLLARS IN THOUSANDS)
ESTIMATED ESTIMATED ESTIMATED OUR
DEVELOPMENT ALLIANCE STABILIZATION TOTAL SQUARE FEET AT OWNERSHIP
PROJECT LOCATION PARTNER(TM) DATE INVESTMENT COMPLETION PERCENTAGE
------- -------- -------------------- ------------- ---------- -------------- ----------
2001 DELIVERIES
1. Pico Rivera (Phase I)...... Majestic Realty
Pico Rivera, CA February $ 24,300 520,000 50%
2. Northbrook Distribution
Center(1).................. Seefried Properties
Suwanee, GA March 5,700 150,000 21%
3. Edgewater Industrial
Center(1).................. None
Oakland, CA March 21,500 397,000 100%
4. DFW II/Air Cargo........... Trammell Crow
Company
Dallas, TX May 18,100 189,000 95%
5. LA Media Tech Center....... Legacy Partners
Los Angeles, CA June 40,800 399,000 49%
6. Port Northwest Industrial Dienna Nelson
Park (PhI)................. Augustine
Houston, TX December 12,400 368,000 100%
7. Portland Air Cargo......... Trammell Crow
Company
Portland, OR December 11,800 160,000 95%
-------- --------- ---
Total 2001 Deliveries....... 134,600 2,183,000 71%
% Pre-leased/
funded-to-date........... 107,700(2) 56%
-------- ---------
2002 DELIVERIES
8. Cabot Business Park National Development
(Lot 1-2)................... of NE
Mansfield, MA January 15,300 118,000 90%
9. Van Nuys (Phase I)......... Trammell Crow
Company
Van Nuys, CA February 34,800 490,000 95%
10. Dulles Airport park
(Phase I)................... Seefried Properties
Dulles, VA February 12,100 168,000 21%
11. Southfield Logistics
Center(1).................. None
Forest Park, GA March 16,800 795,000 21%
12. Carson Town Center, NE..... Mar Ventures
Carson, CA April 11,200 176,000 95%
13. Suwanee Creek
(Phase IV).................. Seefried Properties
Atlanta, GA June 7,700 230,000 100%
14. Monte Vista Spectrum....... Majestic Realty
Chino, CA June 23,200 577,000 50%
15. Dulles Airport park
(Phase II).................. Seefried Properties
Dulles, VA July 5,700 77,000 21%
16. Dulles Airport park
(Phase III)................. Seefried Properties
Dulles, VA November 6,200 84,000 21%
17. Houston Air Cargo.......... Trammell Crow
Company
Houston, TX December 11,400 156,000 19%
-------- --------- ---
Total 2002 Deliveries....... 144,400 2,871,000 61%
% Pre-leased/
funded-to-date........... 47,800(2) 24%
2003 DELIVERIES
18. Carson Town Center,
SE................... Mar Ventures
Carson, CA March 21,500 329,000 95%
19. Dulles Airport park
(Phase IV).................. Seefried Properties
Dulles, VA June 5,400 71,000 21%
-------- --------- ---
Total 2003 Deliveries....... 26,900 400,000
-------- ---------
% Pre-leased/
funded-to-date........... 7,400(2) 0%
-------- ---------
Total Scheduled
Deliveries(3)............. $305,900 5,454,000
% Pre-leased/
funded-to-date........... 162,900(2) 35%
- ---------------
(1) Represents a renovation project.
(2) As of December 31, 2000, our share of such amounts funded to date was $76.5
million, $29.0 million, and $5.9 million, respectively, for a total of
$111.4 million funded to date.
(3) Excludes 250 acres of land and other acquisition-related costs totaling
approximately $23.1 million.
15
RETAIL REDEVELOPMENT DELIVERIES
(DOLLARS IN THOUSANDS)
ESTIMATED ESTIMATED ESTIMATED OUR
DEVELOPMENT STABILIZATION SQUARE FEET AT TOTAL OWNERSHIP
PROJECT(1) LOCATION ALLIANCE PARTNER(TM) DATE COMPLETION INVESTMENT(1) PERCENTAGE
---------- -------- -------------------- ------------- -------------- ------------- ----------
2001 DELIVERIES
1. Northridge.......... Fort Lauderdale, FL Lefmark September 258,000 $ 41,300 100%
2. Around Lenox........ Atlanta, GA Alpine Partners October 121,000 24,900 90%
3. Howard & Western.... Chicago, IL None October 89,000 10,100 100%
------- --------- ---
Total Scheduled
Deliveries..... 468,000 $ 76,300 97%
======= ========= ===
% Pre-leased/
funded-to-date... 84% 63,600(2)
- ---------------
(1) Excludes 39 acres of land and other acquisition costs totaling $13.2
million, which represents future phases of current projects which have not
been committed to, or for which final project planning has not been
completed, and other land inventory.
(2) As of December 31, 2000, our share of amounts funded to date was $61.5
million.
HEADLANDS REALTY CORPORATION(1)
DEVELOPMENT PROJECTS HELD FOR SALE
(DOLLARS IN THOUSANDS)
ESTIMATED ESTIMATED ESTIMATED
DEVELOPMENT STABILIZATION SQUARE FEET AT TOTAL
PROJECT(2) MARKET ALLIANCE PARTNER(TM) DATE COMPLETION INVESTMENT(3)
---------- ------ -------------------- ------------- -------------- -------------
2001 DELIVERIES
1. Cabot Business Park...... Boston National Development April 98,000 $ 8,200
of NE
2. Watertown Business Boston Campanelli August
Park...................... 201,000 41,400
------- -------
Total 2001
Deliveries........ 299,000 49,600
======= =======
% Pre-leased/
funded-to-date.... 100% 23,000
2003 DELIVERIES
3. Carson Town Center SW.... Southern California Mar Ventures March 412,000 20,300
-------
% Pre-leased/
funded-to-date.... 0% 10,500
Total Scheduled
Deliveries........ 711,000 $69,900
======= =======
% Pre-leased/
funded-to-date.... 42% 33,500
HEADLAND'S
OWNERSHIP
PROJECT(2) PERCENTAGE
---------- ----------
2001 DELIVERIES
1. Cabot Business Park...... 100%
2. Watertown Business
Park...................... 95%
---
Total 2001
Deliveries........ 96%
===
% Pre-leased/
funded-to-date....
2003 DELIVERIES
3. Carson Town Center SW.... 95%
% Pre-leased/
funded-to-date....
Total Scheduled
Deliveries........ 96%
===
% Pre-leased/
funded-to-date....
- ---------------
(1) Headlands Realty Corporation is one of our subsidiaries, in which we own a
95% economic interest.
(2) Headlands Realty Corporation currently intends to sell these properties
within two years of completion.
(3) Includes land at market value and development fees and cost reimbursements
that will be paid to us.
PROPERTIES HELD THROUGH JOINT VENTURES, LIMITED LIABILITY COMPANIES AND
PARTNERSHIPS
Consolidated:
As of December 31, 2000, we held interests in joint ventures, limited
liability companies, and partnerships with certain unaffiliated third parties
through, which are consolidated in our consolidated financial statements. In
certain cases such agreements provide that we are a limited partner or that the
other party to the joint venture is principally responsible for day-to-day
management of the property (although in all such cases, we have approval rights
with respect to significant decisions involving the underlying properties).
Under the agreements governing the joint ventures, we and the other party to the
joint venture may be required to make additional capital contributions, and
subject to certain limitations, the joint ventures may incur additional debt.
Such agreements also impose certain restrictions on the transfer of joint
venture interests by us or the other party to the joint venture and provide
certain rights to us or the other party to the joint venture to sell its
interest to the joint venture or to the other join venture partner on terms
specified in the agreement. All of the joint ventures terminate in 2024 or
later, but may end earlier if a joint venture ceases to hold any interest in or
have any obligations relating to the property held by the joint venture.
16
INDUSTRIAL CONSOLIDATED JOINT VENTURES
(DOLLARS IN THOUSANDS)
OUR JV PARTNERS' JV PARTNERS'
OWNERSHIP SQUARE GROSS BOOK SHARE SHARE OF
PROPERTIES PERCENTAGE FEET(1) VALUE(2) DEBT OF DEBT NOI
---------- ---------- ---------- ---------- -------- ------------ ------------
OPERATING PROPERTIES:
SEPARATE ACCOUNT CO-INVESTORS(3)
1. Corporate Park/Hickory Hill............ 50% 858,322 $ 27,697 $ 16,325 $ 8,162 50%
2. Garland Industrial..................... 50 1,020,523 35,304 19,600 9,800 50
3. Jamesburg.............................. 50 821,712 47,656 23,376 11,688 50
4. Minnetonka Industrial.................. 50 515,915 29,301 12,286 6,143 50
5. South Point Business Park.............. 50 343,536 22,043 10,725 5,363 50
-- ---------- -------- -------- -------- --
Subtotal............................. 50 3,560,008 162,001 82,312 41,156 50
ALLIANCE FUND I(4)
6. Concord Industrial Portfolio........... 21 246,098 17,407 10,050 7,940 79
7. Diablo Industrial Park................. 21 294,255 15,318 9,900 7,821 79
8. Gateway Corporate Center............... 21 433,330 41,996 27,000 21,330 79
9. Gateway North.......................... 21 266,476 25,101 14,000 11,060 79
10. Oakland Ridge IV....................... 21 51,664 3,276 -- -- 79
11. Oakland Ridge VI....................... 21 113,169 6,690 -- -- 79
12. DFW International Air Cargo (Phase
I)..................................... 21 232,873 20,149 -- -- 79
13. Bennington Corporate Center............ 21 81,824 10,861 -- -- 79
14. DFW Airfreight Portfolio............... 21 272,795 9,700 -- -- 79
15. JFK Air Cargo Portfolio................ 21 372,885 41,294 19,679 15,546 79
16. Gateway 58............................. 21 123,912 13,203 -- -- 79
17. Seattle Airport Industrial............. 21 41,657 2,580 -- -- 79
18. Atlantic Distribution Center........... 21 180,000 6,239 4,000 3,160 79
19. Beacon Centre.......................... 21 422,566 29,661 17,861 14,110 79
20. TechRidge Corporate Center (Phase I)... 31 340,076 25,411 15,500 10,695 69
21. Harris Business Center................. 21 718,704 45,796 28,000 22,120 79
-- ---------- -------- -------- -------- --
Subtotal............................. 21 4,192,284 314,682 145,990 113,782 79
OTHER JOINT VENTURES
22. North Great SW Industrial Park......... 95 215,000 10,673 -- -- 5
23. North West Crossing Distribution
Center................................. 95 178,000 7,061 -- -- 5
24. Orlando Central Park (Phase I)......... 95 306,000 5,531 -- -- 5
25. South River Park (Phases I and II)..... 95 626,000 28,092 -- -- 5
26. Hamilton Parkway (Nippon Express)...... 73 148,941 6,361 -- -- 27
27. Metric Center.......................... 87 397,440 44,521 -- -- 13
28. Chancellor............................. 90 201,600 6,477 2,796 280 10
29. AFCO Portfolio......................... 95 896,767 97,775 41,131 2,056 5
-- ---------- -------- -------- -------- --
Subtotal............................. 92 2,969,748 206,491 43,927 2,336 8
---------- -------- -------- --------
Total Operating Properties........... 10,722,040 683,174 272,229 157,274
---------- -------- -------- --------
DEVELOPMENT ALLIANCE JOINT VENTURES(5):
ALLIANCE FUND I(6)
30. Southfield Logistics Center............ 21 795,000 14,226 -- -- 79
31. Northbrook Distribution Center......... 21 244,000 5,804 -- -- 79
32. Dulles Airport Park (Phases I-IV)...... 21 400,000 4,411 -- -- 79
33. Houston Air Cargo...................... 26 156,000 394 -- -- 74
-- ---------- -------- -------- -------- --
Subtotal............................. 21 1,595,000 24,835 -- -- 79
OTHER DEVELOPMENT ALLIANCE JOINT VENTURES
34. LA Media Tech Center................... 49 399,000 52,058 19,782 10,089 51
35. Cabot Business Park (Phases I & II).... 90 284,000 23,664 -- -- 10
36. DFW II Air Cargo....................... 95 189,000 12,638 -- -- 5
37. Portland Air Cargo..................... 95 159,500 6,822 -- -- 5
38. Van Nuys (Phase I)..................... 95 490,000 17,582 -- -- 5
39. Carson Town Center, (NE & SE).......... 95 505,000 9,775 -- -- 5
-- ---------- -------- -------- -------- --
Subtotal............................. 74 2,026,500 122,539 19,782 10,089 26
---------- -------- -------- --------
Total Development Alliances.......... 3,621,500 147,374 19,782 10,089
---------- -------- -------- --------
TOTAL INDUSTRIAL CONSOLIDATED JOINT
VENTURES............................. 14,343,540 $830,548 $292,011 $167,363
========== ======== ======== ========
17
- ---------------
(1) For development properties, this represents estimated square feet at
completion of development for committed phases of development and renovation
projects.
(2) Represents the book value of the property (before accumulated depreciation)
owned by the joint venture entity and excludes net other assets.
(3) These properties are owned by a single co-investment partnership between an
institutional investor (50%) and us (50%). The institutional investor is a
client of AMB Investment Management.
(4) Represents properties held by the Alliance Fund I, which is a co-investment
partnership between the Alliance REIT I (79%) and us (21%). The Alliance
REIT I is a client of AMB Investment Management.
(5) Excludes investments in 86.2 acres of land and other pre-development costs
related to future phases of current projects, which have not been committed
to, or for which final planning has not been completed.
(6) Represents a partnership between a Development Alliance Partner (5%) and the
Alliance Fund I (95%), in which we have a 21% interest.
RETAIL CONSOLIDATED JOINT VENTURES
(DOLLARS IN THOUSANDS)
JV PARTNERS' JV PARTNERS'
SQUARE GROSS BOOK SHARE SHARE
PROPERTIES MARKET FEET(1) VALUE(2) DEBT OF DEBT OF NOI
---------- ------- --------- ---------- ------- ------------ ------------
DEVELOPMENT ALLIANCE JOINT VENTURES
1. Around Lenox.......................... Atlanta 120,000 $ 20,391 $10,012 $ 1,000 10%
2. Northridge Plaza...................... Miami 259,000 38,205 -- -- 0%
3. Palm Aire............................. Miami 133,000 19,425 7,145 1,022 0%
4. Springs Gate(4)....................... Miami -- 16,918 -- -- 0%
--------- -------- ------- -------
Subtotal........................ 512,000 94,939 17,157 2,022
OTHER JOINT VENTURES
5. Kendall Mall(3)....................... Miami 278,759 40,862 23,975 9,998 29%
6. Plaza Delray.......................... Miami 331,863 37,925 22,557 4,534 2%
--------- -------- ------- -------
Subtotal........................ 610,622 78,787 46,532 14,532
--------- -------- ------- -------
Total........................... 1,122,622 $173,726 $63,689 $16,554
========= ======== ======= =======
- ---------------
(1) For development properties, this represents estimated square feet at
completion of development project.
(2) Represents the book value of the property (before accumulated depreciation)
owned by the joint venture entity and excludes net other assets.
(3) Included as part of retail properties held for divestiture.
(4) Represents 39 acres of land for future phases of current projects which have
not been committed to, or for which final project planning has not been
completed.
We account for all of the above investments on a consolidated basis for
financial reporting purposes because of our ability to exercise control over
significant aspects of the investment, as well as our significant economic
interest in the investments. See "Item 14. Note 2 of the Notes to Consolidated
Financial Statements."
Unconsolidated:
As of December 31, 2000, we held interests in three equity investment joint
ventures that are unconsolidated in our financial statements. The management and
control over significant aspects of these investments are with the third party
joint venture partner. In addition, as of December 31, 2000, we held two
mortgage investments from which we receive interest income.
18
UNCONSOLIDATED JOINT VENTURES
AND MORTGAGE INVESTMENTS
(DOLLARS IN THOUSANDS)
OUR OUR OUR
TOTAL TOTAL OWNERSHIP SHARE
PROPERTIES MARKET SQUARE FEET INVESTMENT PERCENTAGE OF DEBT
---------- ------------------- ----------- ---------- ---------- -------
OPERATING JOINT VENTURES
1. Elk Grove Du Page....................... Chicago 4,046,721 $59,447 56% $16,333
DEVELOPMENT ALLIANCE JOINT VENTURES(1)
2. Pico Rivera............................. Southern California 850,000 18,806 50% 12,469
3. Monte Vista Spectrum.................... Southern California 576,000 2,179 50% --
--------- ------- -------
Total............................. 5,472,721 $80,432 $28,802
========= ======= =======
MORTGAGE
PROPERTIES MARKET MATURITY RECEIVABLE RATE
---------- ------------------- -------------- ---------- -----
MORTGAGE INVESTMENT
1. Pier 1.......................................... SF Bay Area March 1001 $ 36,969 11.00%
2. Manhattan Village Shopping Center............... Southern California September 2001 79,000 8.75%
--------
Total..................................... $115,969
========
- ---------------
(1) Represents estimated square feet at completion of development project.
SECURED DEBT
As of December 31, 2000, we had $930.4 million of indebtedness, net of
unamortized premiums, secured by deeds of trust on 77 properties. As of December
31, 2000, the total gross investment value of those properties secured by debt
was $2.0 billion. Of the $930.4 million of secured indebtedness, $361.8 was
joint venture debt. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources" and
"Item 14. Note 6 of Notes to Consolidated Financial Statements" included in this
report. We believe that as of December 31, 2000, the value of the properties
securing the respective obligations in each case exceeded the principal amount
of the outstanding obligations.
ITEM 3. LEGAL PROCEEDINGS
In the normal course of business, we are involved in legal actions relating
to the ownership and operations of our properties. We do not expect the
liabilities, if any, that may ultimately result from such legal actions to have
a materially adverse effect on our consolidated financial position, results of
operations, or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
19
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Our common stock began trading on the New York Stock Exchange on November
21, 1997, under the symbol "AMB." Set forth below are the high and low sales
prices per share of our common stock, as reported on the NYSE composite tape,
and the distribution per share paid by us during the period from January 1,
1998, through December 31, 2000.
YEAR HIGH LOW DISTRIBUTION
---- ------ ------ ------------
2000
1st Quarter......................................... $21.50 $19.25 $0.37
2nd Quarter......................................... 23.63 21.25 0.37
3rd Quarter......................................... 24.94 23.00 0.37
4th Quarter......................................... 26.06 23.25 0.37
1999
1st Quarter......................................... 22.94 20.50 0.35
2nd Quarter......................................... 23.50 20.56 0.35
3rd Quarter......................................... 23.00 20.00 0.35
4th Quarter......................................... 21.13 18.13 0.35
1998
1st Quarter......................................... 24.94 23.38 0.34
2nd Quarter......................................... 25.00 22.38 0.34
3rd Quarter......................................... 25.81 22.69 0.34
4th Quarter......................................... 25.00 20.94 0.34
20
ITEM 6. SELECTED FINANCIAL AND OTHER DATA
SELECTED COMPANY AND PREDECESSOR FINANCIAL AND OTHER DATA
The following table sets forth selected consolidated historical financial
and other data for AMB Property Corporation and its predecessor on an historical
basis for the years ended December 31, 2000, 1999, 1998, 1997, and 1996. Prior
to November 26, 1997 (our initial public offering date), AMB Property
Corporation's predecessor provided real estate investment management services to
institutional investors.
AS OF AND FOR THE YEARS ENDED DECEMBER 31,
------------------------------------------------------------------------------------
PRO FORMA(1) HISTORICAL(2) PREDECESSOR(3)
2000 1999 1998 1997 1997 1996
---------- ---------- ---------- ------------ ------------- --------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
OPERATING DATA
Total revenues........................... $ 477,707 $ 448,183 $ 358,887 $ 284,674 $ 56,062 $23,991
Income from operations before minority
Interests.............................. 159,699 158,851 123,750 103,903 18,885 7,140
Net income available to common
stockholders........................... 113,282 167,603 108,954 99,508 18,228 7,003
Net income per common share:
Basic(4)............................... 1.35 1.94 1.27 1.16 1.39 1.38
Diluted(4)............................. 1.35 1.94 1.26 1.15 1.38 1.38
Adjusted net income per share
(diluted)(5)........................... 1.33 1.23 1.26 1.15 1.38 1.38
Dividends per common share............... 1.48 1.40 1.37 1.37 0.13
OTHER DATA
EBITDA(6)................................ $ 349,353 $ 318,319 $ 252,353 $ 195,218
Funds from operations(7)................. 208,651 191,147 170,407 147,409
Cash flows provided by (used in):
Operating activities................... 261,175 190,391 177,180 131,621
Investing activities................... (726,499) 63,732 (793,366) (607,768)
Financing activities................... 452,370 (240,721) 604,202 553,199
BALANCE SHEET DATA
Investments in real estate at cost....... $4,026,597 $3,249,452 $3,369,060 $2,442,999 $ --
Total assets............................. 4,425,626 3,621,550 3,562,885 2,506,255 7,085
Total consolidated debt(8)............... 1,836,276 1,270,037 1,368,196 685,652 --
Our share of total debt.................. 1,681,161 1,168,218 1,348,107 672,945 --
Stockholders' equity..................... 1,767,930 1,829,259 1,765,360 1,668,030 6,300
- ---------------
(1) Pro forma 1997 financial and other data has been prepared as if our
formation transactions, our initial public offering, and certain property
acquisitions and divestitures in 1997 had occurred on January 1, 1997.
(2) The historical 1997 results represent our predecessor's historical financial
and other data for the period January 1, 1997, through November 25, 1997.
The financial and other data of AMB Property Corporation and the properties
acquired in our formation transactions have been included from November 26,
1997 to December 31, 1997.
(3) Represents our predecessor's historical financial and other data for the
year ended December 31, 1996. Our predecessor operated as an investment
manager prior to November 26, 1997.
(4) Basic and diluted net income per share equals the net income available to
common stockholders divided by 83,697,170 and 84,155,306 shares,
respectively, for 2000; 86,271,862 and 86,347,487 shares, respectively, for
1999; 85,876,383 and 86,235,176 shares, respectively, for 1998; and pro
forma net income divided by 85,874,513 and 86,156,556 shares, respectively,
for 1997.
(5) Adjusted net income per share represents net income before gain on property
dispositions, extraordinary items, and other one-time items. One-time items
related to depreciation expense on assets held for sale.
(6) EBITDA is computed as income from operations before divestiture of
properties and minority interests plus interest expense, income taxes, and
depreciation and amortization. We believe that in addition to cash flows and
net income, EBITDA is a useful financial performance measure for assessing
the operating performance of an equity real estate investment trust because,
together with net income and cash flows, EBITDA provides investors with an
additional basis to evaluate the ability of a real estate investment trust
to incur and service debt and to fund acquisitions and other capital
expenditures. Includes an adjustment to reflect our pro rata share of EBITDA
in an unconsolidated joint venture. EBITDA is not a measurement of operating
performance calculated in accordance with accounting principles generally
accepted in the United States and should not be considered as a substitute
for operating income, net income, cash flows from operations, or other
statement of operations or cash flow data prepared in accordance with
accounting principles generally accepted in the United States. EBITDA may
not be indicative of our historical operating results, nor be predictive of
potential future results. While EBITDA is frequently used as a measure of
operations and the ability to meet debt service requirements, it is not
necessarily comparable to other similarly titled captions of other real
estate investment trusts.
(7) Funds from Operations, or FFO, is defined as income from operations before
minority interest, gains or losses from sale of real estate, and
extraordinary losses plus real estate depreciation and adjustment to derive
our pro rata share of the FFO of unconsolidated joint ventures, less
minority interests' pro rata share of the FFO of consolidated joint ventures
and perpetual preferred stock dividends. In accordance with the National
Association of Real Estate Investment Trust White Paper on funds from
operations, we include the effects of straight-line rents in funds from
operations. We believe that funds from operations is an appropriate measure
of performance for an equity real estate investment trust. While funds from
operations 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 accounting principles generally
accepted in the United States and it should not be considered as an
alternative to these indicators in evaluating liquidity or operating
performance. Further, funds from operations as disclosed by other real
estate investment trusts may not be comparable.
(8) Secured debt includes unamortized debt premiums of approximately $9.9
million, $10.1 million, $15.2 million, and $18.3 million as of December 31,
2000, 1999, 1998, and 1997, respectively. See Notes 2 and 6 of the Notes to
Consolidated Financial Statements.
21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
You should read the following discussion and analysis of our consolidated
financial condition and results of operations in conjunction with the Notes to
Consolidated Financial Statements. Statements contained in this discussion that
are not historical facts may be forward-looking statements. 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 involve numerous risks and uncertainties and you
should not rely upon them as predictions of future events. There is no assurance
that the events or circumstances reflected in forward-looking statements will be
achieved or occur. 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.
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 or non-renewal of leases by tenants;
- increased interest rates and operating costs;
- our failure to obtain necessary outside financing;
- difficulties in identifying properties to acquire and in effecting
acquisitions;
- our failure to successfully integrate acquired properties and operations;
- our failure to divest of properties that we have contracted to sell or to
timely reinvest proceeds from any such 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 under the Internal Revenue Code of 1986;
- environmental uncertainties;
- risks related to natural disasters;
- financial market fluctuations;
- risks arising from the California energy shortage;
- changes in real estate and zoning laws; 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 those risk factors discussed in the section entitled "Business
Risks" in this report. We caution you not to place undue reliance on
forward-looking statements, which reflect our analysis only and speak as of the
date of this report or as of the dates indicated in the statements.
GENERAL
We commenced operations as a fully integrated real estate company in
connection with the completion of our initial public offering on November 26,
1997, and elected to be taxed as a real estate investment trust under Sections
856 through 860 of the Internal Revenue Code of 1986 with our initial tax return
for the year ended December 31, 1997. AMB Property Corporation and the operating
partnership were formed shortly before the consummation of our initial public
offering.
22
RESULTS OF OPERATIONS
The analysis below includes changes attributable to acquisitions,
development activity, and divestitures and the changes resulting from properties
that we owned during both the current and prior year reporting periods,
excluding development properties prior to being stabilized (defined as the
earlier of 90% leased or 12 months after receipt of the certificate of
occupancy). We refer to these properties as the same store properties. For the
comparison between 2000 and 1999, the same store properties consisted of
properties aggregating approximately 52.5 million square feet. The properties
acquired in 1999 consisted of 154 buildings, aggregating approximately 8.4
million square feet, and the properties acquired during 2000 consisted of 145
buildings, aggregating approximately 10.5 million square feet. In 1999, property
divestitures consisted of 30 retail centers and 15 industrial buildings,
aggregating approximately 6.6 million square feet, and property divestitures
during 2000 consisted of 25 industrial buildings and one retail center,
aggregating approximately 2.5 million square feet. Our future financial
condition and results of operations, including rental revenues, may be impacted
by the acquisition of additional properties and dispositions. Our future
revenues and expenses may vary materially from their historical rates.
YEARS ENDED DECEMBER 31, 2000 AND 1999 (DOLLARS IN MILLIONS)
RENTAL REVENUES 2000 1999 $ CHANGE % CHANGE
--------------- ------ ------ -------- --------
Same store................................... $314.4 $293.3 $ 21.1 7.2%
1999 acquisitions............................ 85.1 41.0 44.1 107.6%
2000 acquisitions............................ 28.0 -- 28.0 --
Developments................................. 7.0 4.2 2.8 66.7%
Divestitures................................. 19.5 90.4 (70.9) (78.4)%
Straight-line rents.......................... 10.2 10.8 (0.6) (5.6)%
------ ------ ------ -----
Total.............................. $464.2 $439.7 $ 24.5 5.6%
====== ====== ====== =====
The growth in rental revenues in same store properties resulted primarily
from the incremental effect of cash rental rate increases, fixed rent increases
on existing leases, increases in occupancy and reimbursement of expenses,
partially offset by a decrease in straight-line rents. During 2000, the same
store base rents increase on renewals and rollovers (cash basis) was 28.0% on
9.8 million square feet leased.
INVESTMENT MANAGEMENT AND OTHER INCOME 2000 1999 $ CHANGE % CHANGE
-------------------------------------- ----- ---- -------- --------
Equity earnings in unconsolidated joint
ventures...................................... $ 5.2 $4.7 $0.5 10.6%
Investment management and other income.......... 8.3 3.8 4.5 118.4%
----- ---- ---- -----
Total................................. $13.5 $8.5 $5.0 58.8%
===== ==== ==== =====
The $4.5 million increase in investment management and other income was due
primarily to increased Alliance Fund I acquisition fees, interest income, and
development fees, partially offset by the write-down of one of our investments
in other companies.
PROPERTY OPERATING EXPENSES 2000 1999 $ CHANGE % CHANGE
--------------------------- ------ ------ -------- --------
Rental expenses.............................. $ 50.6 $ 51.7 $ (1.1) (2.1)%
Real estate taxes............................ 57.2 56.2 1.0 1.8%
------ ------ ------ -----
Property operating expenses................ $107.8 $107.9 $ (0.1) (0.1)%
====== ====== ====== =====
Same store................................... $ 72.1 $ 69.6 $ 2.5 3.6%
1999 acquisitions............................ 20.4 12.2 8.2 67.2%
2000 acquisitions............................ 7.7 -- 7.7 --
Developments................................. 2.5 1.8 0.7 38.9%
Divestitures................................. 5.1 24.3 (19.2) (79.0)%
------ ------ ------ -----
Total.............................. $107.8 $107.9 $ (0.1) (0.1)%
====== ====== ====== =====
23
The change in same store properties' operating expenses primarily relates
to increases in real estate taxes of $2.0 million for 2000, partially offset by
decreases in insurance of $0.6 million.
OTHER EXPENSES 2000 1999 $ CHANGE % CHANGE
-------------- ------ ------ -------- --------
Interest expense............................. $ 90.3 $ 88.7 $ 1.6 1.8%
Depreciation expense......................... 96.3 67.5 28.8 42.7%
General and administrative expense........... 23.7 25.2 (1.5) (6.0)%
------ ------ ----- ----
Total.............................. $210.3 $181.4 $28.9 15.9%
====== ====== ===== ====
The increase in interest expense was due primarily to the increase in the
outstanding balance under our unsecured credit facility. The increase in
depreciation expense was primarily due to lower than normal depreciation expense
in 1999 and increases in our investments in real estate. Under the required
accounting for assets held for sale, we discontinued depreciation of a
substantial portion of our retail portfolio after we committed to dispose of a
portion of the portfolio in March 1999. The decrease in general and
administrative expenses was due to increased allocations to our investment
management group, partially offset by increased personnel costs.
YEARS ENDED DECEMBER 31, 1999 AND 1998 (DOLLARS IN MILLIONS)
RENTAL REVENUES 1999 1998 $ CHANGE % CHANGE
--------------- ------ ------ -------- --------
Same store................................... $212.9 $206.1 $ 6.8 3.3%
1998 acquisitions............................ 117.8 55.9 61.9 110.7%
1999 acquisitions............................ 35.4 -- 35.4 --
Developments................................. 33.0 28.4 4.6 16.2%
Divestitures................................. 40.6 64.3 (23.7) (36.9)%
------ ------ ------ -----
Total.............................. $439.7 $354.7 $ 85.0 24.0%
====== ====== ====== =====
The growth in rental revenues in same store properties resulted primarily
from the incremental effect of cash rental rate increases, changes in occupancy
rates, and reimbursement of expenses, partially offset by a decrease in
straight-line rents. During 1999, the increase in base rents (cash basis) for
same store properties was 12.7% on 6.8 million square feet leased.
INVESTMENT MANAGEMENT AND OTHER INCOME 1999 1998 $ CHANGE % CHANGE
-------------------------------------- ---- ---- -------- --------
Equity earnings in unconsolidated joint
ventures....................................... $4.7 $2.7 $2.0 74.1%
Investment management and other income........... 3.8 1.5 2.3 153.3%
---- ---- ---- -----
Total.................................. $8.5 $4.2 $4.3 102.4%
==== ==== ==== =====
The $4.3 million increase in investment management and other income was due
primarily to earnings from our equity investment in our unconsolidated joint
ventures, Alliance Fund I acquisition fees, and an increase in interest income
as a result of higher cash balances.
PROPERTY OPERATING EXPENSES AND REAL ESTATE TAXES 1999 1998 $ CHANGE % CHANGE
- ------------------------------------------------- ------ ----- -------- --------
Rental expenses................................ $ 51.7 $40.2 $11.5 28.6%
Real estate taxes.............................. 56.2 48.2 8.0 16.6%
------ ----- ----- -----
Property operating expenses.................. $107.9 $88.4 $19.5 22.1%
====== ===== ===== =====
Same store..................................... $ 50.2 $50.1 $ 0.1 0.2%
1998 acquisitions.............................. 27.3 12.6 14.7 116.7%
1999 acquisitions.............................. 9.3 -- 9.3 --
Developments................................... 9.5 7.9 1.6 20.3%
Divestitures................................... 11.6 17.8 (6.2) (34.8)%
------ ----- ----- -----
Total................................ $107.9 $88.4 $19.5 22.1%
====== ===== ===== =====
24
The change in same store properties' operating expenses primarily relates
to increases in real estate taxes of $1.0 million for 1999, partially offset by
decreases in insurance of $0.9 million. Internal asset management costs of $7.7
million for 1998 were reclassified from property operating expenses to general
and administrative expenses to conform with the 1999 presentation.
OTHER EXPENSES 1999 1998 $ CHANGE % CHANGE
-------------- ------ ------ -------- --------
Interest expense............................. $ 88.7 $ 69.7 $19.0 27.3%
Depreciation expense......................... 67.5 57.4 10.1 17.6%
General and administrative expense........... 25.2 19.6 5.6 28.6%
------ ------ ----- ----
Total.............................. $181.4 $146.7 $34.7 23.7%
====== ====== ===== ====
The increase in interest expense was primarily due to higher interest rates
and a full year of interest expense in 1999 attributable to our $400.0 million
unsecured senior debt securities. The increase in depreciation expense was
primarily due to our real estate acquisitions in 1998 and 1999, partially offset
by the discontinuation of depreciation on held-for-sale retail assets. Internal
management costs of $7.7 million for 1998 were reclassified from property
operating expenses to general and administrative expenses to conform with the
1999 presentation. The increase in general and administrative expenses was
primarily attributable to additional staffing that resulted from growth in our
portfolio and the change in our accounting policy for capitalizing internal
acquisition costs. Effective during the second quarter of 1998, we changed our
policy to expense all internal acquisition costs in accordance with EITF 97-11.
LIQUIDITY AND CAPITAL RESOURCES
We currently expect that our principal sources of working capital and
funding for acquisitions, development, expansion, and renovation of properties
will include cash flow from operations, borrowings under our unsecured credit
facility, other forms of secured or unsecured financing, proceeds from equity or
debt offerings by us or the operating partnership (including issuances of
limited partnership units in the operating partnership or its subsidiaries), and
net proceeds from divestitures of properties. Additionally, our co-investment
program will also serve as a source of capital for acquisitions and
developments. We believe that our sources of working capital and our ability to
access private and public debt and equity capital are adequate for us to meet
our liquidity requirements for the foreseeable future.
Capital Resources
Property Divestitures. In 2000, we sold 25 industrial buildings and one
retail center for an aggregate price of $175.7 million. These divestitures
resulted in an aggregate net gain of $7.0 million. The joint venture that sold
the retail center carries an 8.75% interest only mortgage note receivable in the
principal amount of $79.0 million. This mortgage note has a one-year term and
has a one-year extension option.
Properties Held for Divestiture. We have decided to divest ourselves of 33
industrial buildings and one retail center, which are not in our core markets or
which do not meet our strategic objectives. The divestitures of the properties
are subject to negotiation of acceptable terms and other customary conditions.
As of December 31, 2000, the net carrying value of the properties held for
divestiture was $197.1 million.
Credit Facilities. In May 2000, the operating partnership entered into a
new $500.0 million unsecured revolving credit agreement, which replaced its
previous $500.0 million credit facility, which matured in November 2000. We are
the guarantor of the operating partnership's obligations under the credit
facility. Our credit facility is with Morgan Guaranty Trust Company of New York,
as administrative agent, and a syndicate of 12 other banks. The new credit
facility matures in May 2003, has a one-year extension option, and is subject to
a 15 basis point annual facility fee. The operating partnership has the ability
to increase available borrowings up to $700.0 million by adding additional banks
to the facility or obtaining the agreement of existing banks to increase their
commitments. We use our unsecured credit facility principally for acquisitions
and for general working capital requirements. Borrowings under our credit
facility currently bear interest at LIBOR plus 75 basis points. At December 31,
2000, the outstanding balance on our unsecured credit facility
25
was $216.0 million and it bore interest at a weighted average rate of 7.5%.
Monthly debt service payments on our credit facility are interest only. The
total amount available under our credit facility fluctuates based upon the
borrowing base, as defined in the agreement governing the credit facility. At
December 31, 2000, the remaining amount available under our unsecured credit
facility was $284.0 million (excluding the additional $200.0 million of
potential additional capacity).
In addition, we had an $80.0 million unsecured credit facility held through
our investment in the Alliance Fund I. The debt was secured by the unfunded
capital commitments of the third party investors in the Alliance REIT I, a
limited partner of the Alliance Fund I. Since there are no remaining unfunded
capital commitments, the Alliance Fund I paid off the outstanding balance and
closed this credit facility in the third quarter.
Equity. On September 1, 2000, AMB Property II, L.P., one of our
subsidiaries, issued and sold 840,000 8.125% Series H Cumulative Redeemable
Preferred Limited Partnership Units at a price of $50.00 per unit in a private
placement. Distributions are cumulative from the date of issuance and payable
quarterly in arrears at a rate per unit equal to $4.0625 per annum. The Series H
Preferred Units are redeemable by AMB Property II, L.P. on or after September 1,
2005, subject to certain conditions, for cash at a redemption price equal to
$50.00 per unit, plus accumulated and unpaid distributions thereon, if any, to
the redemption date. The Series H Preferred Units are exchangeable, at specified
times and subject to certain conditions, on a one-for-one basis, for shares of
our Series H Preferred Stock. AMB Property II, L.P. used the net proceeds of
$41.0 million to repay advances from the operating partnership and to make a
loan to the operating partnership. The operating partnership used the funds to
partially repay borrowings under its unsecured credit facility and for general
corporate purposes. The loan bears interest at 8.0% per annum and is payable on
demand.
On August 29, 2000, AMB Property II, L.P. issued and sold 20,000 7.95%
Series G Cumulative Redeemable Preferred Limited Partnership Units at a price of
$50.00 per unit in a private placement. Distributions are cumulative from the
date of issuance and payable quarterly in arrears at a rate per unit equal to
$3.975 per annum. The Series G Preferred Units are redeemable by AMB Property
II, L.P. on or after August 29, 2005, subject to certain conditions, for cash at
a redemption price equal to $50.00 per unit, plus accumulated and unpaid
distributions thereon, if any, to the redemption date. The Series G Preferred
Units are exchangeable, at specified times and subject to certain conditions, on
a one-for-one basis, for shares of our Series G Preferred Stock. AMB Property
II, L.P. used the net proceeds of $1.0 million to repay advances from the
operating partnership. The operating partnership used the funds for general
corporate purposes.
On March 22, 2000, AMB Property II, L.P. issued and sold 397,439 7.95%
Series F Cumulative Redeemable Preferred Limited Partnership Units at a price of
$50.00 per unit in a private placement. Distributions are cumulative from the
date of issuance and payable quarterly in arrears at a rate per unit equal to
$3.975 per annum. The Series F Preferred Units are redeemable by AMB Property
II, L.P. on or after March 22, 2005, subject to certain conditions, for cash at
a redemption price equal to $50.00 per unit, plus accumulated and unpaid
distributions thereon, if any, to the redemption date. The Series F Preferred
Units are exchangeable, at specified times and subject to certain conditions, on
a one-for-one basis, for shares of our Series F Preferred Stock. AMB Property
II, L.P. loaned the net proceeds of $19.6 million to the operating partnership.
The operating partnership used the funds to partially repay borrowings under its
unsecured credit facility and for general corporate purposes. The loan bears
interest at 7.0% per annum and is payable upon demand.
At the time of our initial public offering, 4,237,750 shares of common
stock, known as performance shares, were placed in escrow by certain of our
investors, which were subject to advisory agreements with our predecessor that
included incentive fee provisions. On January 7, 2000, 2,771,824 shares of
common stock were released from escrow to these investors and 1,465,926 shares
of common stock were returned to us and cancelled. The cancelled shares of
common stock represent indirect interests in the operating partnership that were
reallocated from us (thereby decreasing the number of shares of common stock
outstanding) to other unitholders who had an ownership interest in our
predecessor, including certain of our executive officers (thereby increasing the
number of limited partnership units owned by partners other than us). The total
26
number of outstanding partnership units did not change as a result of this
reallocation. This reallocation did not change the amount of fully diluted
shares of common stock and limited partnership units outstanding.
In November 2000, the operating partnership issued an aggregate of 94,771
limited partnership units with an aggregate value of approximately $2.2 million
to three limited partnerships. These limited partnership units were issued in
partial consideration for the acquisition of properties. Holders of the limited
partnership units may redeem part or all of their limited partnership units for
cash or, at our election, exchange their limited partnership units for shares of
our common stock on a one-for-one basis. During 2000, 34,046 limited partnership
units were redeemed for cash and 206,423 limited partnership units were redeemed
for shares of our common stock.
Our board of directors has approved a stock repurchase program for the
repurchase of up to $100.0 million worth of our common stock. During 2000, we
did not repurchase any shares of our common stock. Our stock repurchase program
expires in December 2001.
Debt. At December 31, 2000, the aggregate principal amount of our secured
debt was $930.4 million, excluding unamortized debt premiums of $9.9 million.
The secured debt bears interest at rates varying from 4.0% to 10.4% per annum
(with a weighted average rate of 7.9%) and final maturity dates ranging from
April 2001 to June 2023. All of the secured debt bears interest at fixed rates,
except for two loans with an aggregate principal amount of $29.8 million as of
December 31, 2000, which bear interest at variable rates. As of December 31,
2000, the estimated fair value of the secured debt was $956.1 million.
In 2000, the operating partnership commenced a medium-term note program for
the issuance of up to $400.0 million in principal amount of medium-term notes,
which will be guaranteed by us. As of December 31, 2000, the operating
partnership had issued $280.0 million of medium-term notes under this program
and in January 2001, the operating partnership issued an additional $25.0
million of medium term notes, leaving $95.0 million available for issuance under
this program. In December 2000, the operating partnership issued and sold $150.0
million of the notes under this program to Morgan Stanley Dean Witter and J. P.
Morgan as principals. We have guaranteed the notes, which mature on December 15,
2005, and bear interest at 7.2% per annum. The operating partnership used the
net proceeds of $148.9 million for general corporate purposes, to partially
repay indebtedness, and for the acquisition and development of properties. In
October 2000, the operating partnership issued and sold $75.0 million of the
notes under this program to Morgan Stanley Dean Witter and J. P. Morgan as
principals. We have guaranteed the notes, which mature on November 1, 2010, and
bear interest at 8.0% per annum. The operating partnership used the net proceeds
of $74.5 million for general corporate purposes, to partially repay
indebtedness, and for the acquisition and development of properties. In August
and September 2000, the operating partnership issued and sold $55.0 million of
the notes under this program to Morgan Stanley Dean Witter as principal. We have
guaranteed the notes, which mature on August 20, 2007, and bear interest at
7.925% per annum. The operating partnership used the net proceeds of $54.8
million for general corporate purposes, to partially repay indebtedness, and for
the acquisition and development of properties.
In order to maintain financial flexibility and facilitate the rapid
deployment of capital through market cycles, we presently intend to operate with
a debt-to-total market capitalization ratio of approximately 45% or less.
Additionally, we presently manage our capitalization in order to maintain an
investment grade rating on our senior unsecured debt. In spite of these
policies, our organizational documents do not contain any limitation on the
amount of indebtedness that we may incur. Accordingly, our board of directors
could alter or eliminate these policies.
27
The tables below summarize our debt maturities and capitalization as of
December 31, 2000 (dollars in thousands, except for share and per share
amounts):
DEBT
- -------------------------------------------------------------------------------------------------
OUR JOINT SENIOR
SECURED VENTURE DEBT CREDIT TOTAL
DEBT(1) DEBT(1) SECURITIES FACILITY DEBT
-------- --------- ---------- -------- ----------
2001.............................. $ 14,071 $ 35,087 $ -- $ -- $ 49,158
2002.............................. 29,182 46,044 -- -- 75,226
2003.............................. 72,675 7,134 -- 216,000 295,809
2004.............................. 71,147 20,357 -- -- 91,504
2005.............................. 64,194 30,015 250,000 -- 344,209
2006.............................. 116,022 33,991 -- -- 150,013
2007.............................. 32,181 19,705 55,000 -- 106,886
2008.............................. 106,604 36,011 175,000 -- 317,615
2009.............................. 5,176 25,969 -- -- 31,145
2010.............................. 52,780 65,499 75,000 -- 193,279
2011.............................. 1,311 15,645 -- -- 16,956
Thereafter........................ 3,307 26,311 125,000 -- 154,618
-------- --------- -------- -------- ----------
Subtotal........................ 568,650 361,768 680,000 216,000 1,826,418
Unamortized premiums............ 9,858 -- -- -- 9,858
-------- --------- -------- -------- ----------
Total consolidated
debt.................. 578,508 361,768 680,000 216,000 1,836,276
Our share of unconsolidated joint
venture debt(1)................. -- 28,802 -- -- 28,802
-------- --------- -------- -------- ----------
Total debt.............. 578,508 390,570 680,000 216,000 1,865,078
Joint venture partners' share of
consolidated joint venture
debt............................ -- (183,917) -- -- (183,917)
-------- --------- -------- -------- ----------
Our share of total debt...... $578,508 $ 206,653 $680,000 $216,000 $1,681,161
======== ========= ======== ======== ==========
Weighed average interest rate..... 7.9%(2) 7.4% 7.3% 7.5% 7.6%
Weighed average maturity (in
years).......................... 5.4(2) 9.4 7.4 2.4 6.3
- ---------------
(1) All of the secured debt bears interest at fixed rates, except for two loans
with an aggregate principal amount of $29.8 million, which bear interest at
variable rates (weighted average interest rate of 8.2% at December 31,
2000).
(2) The weighted average interest rate and weighted average maturity for the two
unconsolidated joint venture debts were 7.3% and 4.4 years, respectively.
MARKET EQUITY
- --------------------------------------------------------------------------------------
SHARES/UNITS
SECURITY OUTSTANDING MARKET PRICE MARKET VALUE
-------- ------------ ------------ ------------
Common stock.............................. 84,138,751 $25.81 $2,171,832
Common limited partnership units.......... 5,827,917 25.81 150,433
---------- ----------
Total........................... 89,966,668 $2,322,265
========== ==========
28
PREFERRED STOCK AND UNITS
- ---------------------------------------------------------------------------------
DIVIDEND LIQUIDATION REDEMPTION
SECURITY RATE PREFERENCE PROVISIONS
-------- -------- ----------- --------------
Series A Preferred Stock.............. 8.50% $100,000 July 2003
Series B Preferred Units.............. 8.63 65,000 November 2003
Series C Preferred Units.............. 8.75 110,000 November 2003
Series D Preferred Units.............. 7.75 79,767 May 2004
Series E Preferred Units.............. 7.75 11,022 August 2004
Series F Preferred Units.............. 7.95 19,872 March 2005
Series G Preferred Units.............. 7.95 1,000 August 2005
Series H Preferred Units.............. 8.13 42,000 September 2005
---- --------
Total/Weighted Average.............. 8.36% $428,661
==== ========
CAPITALIZATION RATIOS
- ------------------------------------------------------------------
Total debt-to-total market capitalization................... 40.4%
Our share of total debt-to-total market capitalization...... 37.9%
Total debt plus preferred-to-total market capitalization.... 49.7%
Our share of total debt plus preferred-to-total market
capitalization............................................ 47.6%
Our share of total debt-to-total book capitalization........ 44.6%
Liquidity
As of December 31, 2000, we had approximately $20.4 million in cash and
cash equivalents and $284.0 million of additional available borrowings under our
credit facility. We intend to use: 1) cash from operations; 2) borrowings under
our credit facility; 3) other forms of secured and unsecured financing; 4)
proceeds from any future debt or equity offerings by us or the operating
partnership (including issuances of limited partnership units in the operating
partnership or its subsidiaries); 5) proceeds from divestitures of properties,
and 6) private capital to fund acquisitions, development activities, and capital
expenditures and provide for general working capital requirements.
The following table sets forth the dividend payments that were declared in
2000 and in 1999:
SECURITY PAYING ENTITY 2000 1999
-------- ------------- ----- -----
Common Stock AMB Property Corporation........... $1.48 $1.40
OP Units AMB Property, L.P. ................ $1.48 $1.40
Series A Preferred Stock AMB Property Corporation........... $2.13 $2.13
Series A Preferred Units AMB Property, L.P. ................ $2.13 $2.13
Series B Preferred Units AMB Property, L.P. ................ $4.31 $4.31
Series C Preferred Units AMB Property II, L.P. ............. $4.38 $4.38
Series D Preferred Units AMB Property II, L.P. ............. $3.88 $2.48
Series E Preferred Units AMB Property II, L.P. ............. $3.88 $1.30
Series F Preferred Units AMB Property II, L.P. ............. $3.09 n/a
Series G Preferred Units AMB Property II, L.P. ............. $1.35 n/a
Series H Preferred Units AMB Property II, L.P. ............. $1.30 n/a
For the year ended December 31, 2000, approximately 82% of our common
dividend was classified as ordinary taxable income and approximately 18%
represented capital gains. We had no return of capital. We currently intend to
payout 100% of our taxable income, including capital gains, each year in the
form of dividends and distributions and to have no return of capital for federal
income tax purposes.
The anticipated size of our distributions, using only cash from operations,
will not allow us to retire all of our debt as it comes due. Therefore, we
intend to also repay maturing debt with net proceeds from future debt
29
or equity financings or property divestitures. However, we may not be able to
obtain future financings on favorable terms or at all.
Capital Commitments
In addition to recurring capital expenditures and costs to renew or
re-tenant space, as of December 31, 2000, we are developing and renovating 19
industrial projects representing a total estimated investment of $305.9 million
upon completion and three retail projects representing a total estimated
investment of $76.3 million upon completion. Of this total, $162.9 million had
been funded as of December 31, 2000, and approximately $143.0 million is
estimated to be required to complete current and planned projects. We expect to
fund these expenditures with cash from operations, borrowings under our credit
facility, debt or equity issuances, and net proceeds from property divestitures.
We have no other material capital commitments.
During the year ended December 31, 2000, we invested $730.0 million in 145
operating industrial buildings, aggregating approximately 10.5 million rentable
square feet. We funded these acquisitions and initiated development and
renovation projects through borrowings under our credit facility, cash, debt and
equity issuances, and net proceeds from property divestitures.
30
FUNDS FROM OPERATIONS
In addition to net income and adjusted net income, we believe that funds
from operations, or FFO, as defined by the National Association of Real Estate
Investment Trusts, is an appropriate supplemental measure of performance for an
equity real estate investment trust. While funds from operations 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 accounting principles generally accepted in the United States and it should
not be considered as an alternative to those indicators in evaluating liquidity
or operating performance. Further, funds from operations as disclosed by other
real estate investment trusts may not be comparable.
The following table reflects the calculation of funds from operations for
the fiscal years ended December 31 (dollars in thousands, except share and per
share data):
2000 1999 1998
----------- ----------- -----------
Income from operations before minority
interests.................................. $ 159,699 $ 158,851 $ 123,750
Real estate related depreciation and
amortization:
Total depreciation and amortization........ 96,258 67,505 57,464
Furniture, fixtures, and equipment
depreciation and ground lease
amortization............................ (1,114) (1,002) (463)
FFO attributable to minority interests(1)(2):
Separate account co-investors.............. (4,935) (5,148) (3,828)
Alliance Fund I............................ (7,752) (804) --
Other joint venture partners............... (2,368) (2,230) (2,071)
Adjustments to derive FFO in unconsolidated
joint venture(3):
Our share of net income.................... (5,212) (4,701) (1,750)
Our share of FFO........................... 7,188 6,677 2,739
Series A preferred stock dividends........... (8,500) (8,500) (3,639)
Series B, C, D, E, F, G, & H preferred unit
distributions.............................. (24,613) (19,501) (1,795)
----------- ----------- -----------
FFO(1)....................................... $ 208,651 $ 191,147 $ 170,407
=========== =========== ===========
Weighted average common shares and units:
Basic...................................... 89,566,375 90,792,310 89,493,394
=========== =========== ===========
Diluted(4)................................. 90,024,511 90,867,934 89,852,187
=========== =========== ===========
- ---------------
(1) Funds from operations, or FFO, is defined as income from operations before
minority interest, gains or losses from sale of real estate, and
extraordinary items plus real estate depreciation and adjustment to derive
our pro rata share of the funds from operations of unconsolidated joint
ventures, less minority interests' pro rata share of the funds from
operations of consolidated joint ventures and perpetual preferred stock
dividends. In accordance with the NAREIT White Paper on funds from
operations, we include the effects of straight-line rents in funds from
operations. Further, we do not adjust funds from operations to eliminate the
effects of non-recurring charges.
(2) Represents FFO attributable to minority interest in consolidated joint
ventures for the period presented, which has been computed as minority
interests' share of net income plus minority interests' share of real
estate-related depreciation and amortization of the consolidated joint
ventures for such period. These minority interests are not convertible into
shares of common stock.
(3) Represents our pro rata share of FFO in unconsolidated joint ventures for
the period presented, which has been computed as our share of net income
plus our share of real estate-related depreciation and amortization of the
unconsolidated joint ventures for such period.
(4) Includes the dilutive effect of stock options.
31
BUSINESS RISKS
Our operations involve various risks that could have adverse consequences
to us. These risks include, among others:
GENERAL REAL ESTATE RISKS
THERE ARE FACTORS OUTSIDE OF OUR CONTROL THAT AFFECT THE PERFORMANCE AND VALUE
OF OUR PROPERTIES
Real property investments are subject to varying degrees of risk. The
yields available from equity investments in real estate depend on the amount of
income earned and capital appreciation generated by the related properties as
well as the expenses incurred in connection with the properties. If our
properties do not generate income sufficient to meet operating expenses,
including debt service and capital expenditures, then our ability to pay
dividends to our stockholders could be adversely affected. Income from, and the
value of, our properties may be adversely affected by the general economic
climate, local conditions such as oversupply of industrial space, or a reduction
in demand for industrial space, the attractiveness of our properties to
potential customers, competition from other properties, our ability to provide
adequate maintenance and insurance, and an increase in operating costs. In
addition, revenues from properties and real estate values are also affected by
factors such as the cost of compliance with regulations, the potential for
liability under applicable laws (including changes in tax laws), interest rate
levels, and the availability of financing. Our income would be adversely
affected if a significant number of customers were unable to pay rent or if we
were unable to rent our industrial space on favorable terms. Certain significant
expenditures associated with an investment in real estate (such as mortgage
payments, real estate taxes, and maintenance costs) generally do not decline
when circumstances cause a reduction in income from the property.
WE MAY BE UNABLE TO RENEW LEASES OR RELET SPACE AS LEASES EXPIRE
We are subject to the risks that leases may not be renewed, space may not
be relet, or the terms of renewal or reletting (including the cost of required
renovations) may be less favorable than current lease terms. Leases on a total
of 15.6% of our properties (based on annualized base rent) as of December 31,
2000, will expire on or prior to December 31, 2001. In addition, numerous
properties compete with our properties in attracting customers to lease space,
particularly with respect to retail centers. The number of competitive
commercial properties in a particular area could have a material adverse effect
on our ability to lease space in our properties and on the rents that we are
able to charge. Our financial condition, results of operations, cash flow, and
our ability to pay dividends on, and the market price of, our stock could be
adversely affected if we are unable to promptly relet or renew the leases for
all or a substantial portion of expiring leases, if the rental rates upon
renewal or reletting is significantly lower than expected, or if our reserves
for these purposes prove inadequate.
REAL ESTATE INVESTMENTS ARE ILLIQUID
Because real estate investments are relatively illiquid, our ability to
vary our portfolio promptly in response to economic or other conditions is
limited. The limitations in the Internal Revenue Code and related regulations on
a real estate investment trust holding property for sale may affect our ability
to sell properties without adversely affecting dividends to our stockholders.
The relative illiquidity of our holdings and Internal Revenue Code prohibitions
and related regulations could impede our ability to respond to adverse changes
in the performance of our investments and could adversely affect our financial
condition, results of operations, cash flow, and our ability to pay dividends
on, and the market price of, our stock.
A SIGNIFICANT NUMBER OF OUR PROPERTIES ARE LOCATED IN CALIFORNIA
Our properties located in California as of December 31, 2000, represented
approximately 24.2% of the aggregate square footage of our properties as of
December 31, 2000, and 29.6% of our annualized base rent. Annualized base rent
means the monthly contractual amount under existing leases at December 31, 2000,
multiplied by 12. This amount excludes expense reimbursements and rental
abatements. Our revenue from, and the value of, our properties located in
California may be affected by a number of factors, including local
32
real estate conditions (such as oversupply of or reduced demand for industrial
properties) and the local economic climate. Business layoffs, downsizing,
industry slowdowns, changing demographics, and other factors may adversely
impact the local economic climate. A downturn in either the California economy
or in California real estate conditions could adversely affect our financial
condition, results of operations, cash flow, and our ability to pay dividends
on, and the market price of, our stock. Certain of our properties are also
subject to possible loss from seismic activity.
RISING ENERGY COSTS AND POWER OUTAGES IN CALIFORNIA MAY HAVE AN ADVERSE EFFECT
ON OUR OPERATIONS AND REVENUE
Problems associated with deregulation of the electricity industry in
California have resulted in intermittent service interruptions and significantly
higher costs in some areas. Properties located within municipalities that either
do not produce their own power or have not entered into long-term, fixed-price
contracts may be subject to intermittent service interruptions or significant
rate increases from their utility providers. Most of our properties located in
California are subject to leases that require our tenants to pay all utility
costs. The remainder of our California leases provide that tenants will
reimburse us for utility costs in excess of a base year amount. Although we have
not experienced any material losses resulting from electric deregulation, it is
possible that some of our tenants will not fulfill their lease obligations and
reimburse us for their share of any significant rate increases and that we will
not be able to retain or replace our tenants if energy problems in California
continue.
OUR PROPERTIES ARE CURRENTLY CONCENTRATED IN THE INDUSTRIAL SECTOR
Our properties are currently concentrated predominantly in the industrial
real estate sector. Our concentration in a certain property type may expose us
to the risk of economic downturns in this sector to a greater extent than if our
portfolio also included other property types. As a result of such concentration,
economic downturns in the industrial real estate sector could have an adverse
effect on our financial condition, results of operations, cash flow, and ability
to pay dividends on, and the market price of, our stock.
SOME POTENTIAL LOSSES ARE NOT COVERED BY INSURANCE
We carry comprehensive liability, fire, extended coverage, and rental loss
insurance covering all of our properties, with policy specifications and insured
limits that we believe are adequate and appropriate under the circumstances
given relative risk of loss, the cost of such coverage, and industry practice.
There are, however, certain losses that are not generally insured because it is
not economically feasible to insure against them, including losses due to riots
or acts of war. Certain losses such as losses due to floods or seismic activity
may be insured subject to certain limitations including large deductibles or
co-payments and policy limits. If an uninsured loss or a loss in excess of
insured limits occurs with respect to one or more of our properties, then we
could lose the capital we invested in the properties, as well as the anticipated
future revenue from the properties and, in the case of debt, which is with
recourse to us, we would remain obligated for any mortgage debt or other
financial obligations related to the properties. Moreover, as the general
partner of the operating partnership, we will generally be liable for all of the
operating partnership's unsatisfied obligations other than non-recourse
obligations. Any such liability could adversely affect our financial condition,
results of operations, cash flow, and ability to pay dividends on, and the
market price of, our stock.
A number of our properties are located in areas that are known to be
subject to earthquake activity, including California where, as of December 31,
2000, 247 industrial buildings aggregating approximately 18.6 million rentable
square feet (representing 24.2% of our properties based on aggregate square
footage and 29.6% based on annualized base rent) are located. We carry
replacement cost earthquake insurance on all of our properties located in areas
historically subject to seismic activity, subject to coverage limitations and
deductibles that we believe are commercially reasonable. This insurance coverage
also applies to the properties managed by AMB Investment Management, with a
single aggregate policy limit and deductible applicable to those properties and
our properties. The operating partnership owns 100% of the non-voting preferred
stock of AMB Investment Management. Through an annual analysis prepared by
outside consultants, we evaluate our earthquake insurance coverage in light of
current industry practice and determine the appropriate amount of
33
earthquake insurance to carry. We may incur material losses in excess of
insurance proceeds and we may not be able to continue to obtain insurance at
commercially reasonable rates.
WE ARE SUBJECT TO RISKS AND LIABILITIES IN CONNECTION WITH PROPERTIES OWNED
THROUGH JOINT VENTURES, LIMITED LIABILITY COMPANIES, AND PARTNERSHIPS
As of December 31, 2000, we had ownership interests in 30 joint ventures,
limited liability companies, or partnerships with third parties, as well as
interests in three unconsolidated entities. As of December 31, 2000, we owned
approximately 15.5 million square feet (excluding the three unconsolidated joint
ventures) of our properties through these entities. We may make additional
investments through these ventures in the future and presently plan to do so
with clients of AMB Investment Management, Inc. and certain Development Alliance
Partners, who share certain approval rights over major decisions. Partnership,
limited liability company, or joint venture investments may involve risks such
as the following:
- our partners, co-members, or joint venturers might become bankrupt (in
which event we and any other remaining general partners, members, or
joint venturers would generally remain liable for the liabilities of the
partnership, limited liability company, or joint venture);
- our partners, co-members, or joint venturers might at any time have
economic or other business interests or goals that are inconsistent with
our business interests or goals;
- our partners, co-members, or joint venturers may be in a position to take
action contrary to our instructions, requests, policies, or objectives,
including our current policy with respect to maintaining our
qualification as a real estate investment trust; and
- agreements governing joint ventures, limited liability companies, and
partnerships often contain restrictions on the transfer of a joint
venturer's, member's, or partner's interest or "buy-sell" or other
provisions, which may result in a purchase or sale of the interest at a
disadvantageous time or on disadvantageous terms.
We will, however, generally seek to maintain sufficient control of our
partnerships, limited liability companies, and joint ventures to permit us to
achieve our business objectives. Our organizational documents do not limit the
amount of available funds that we may invest in partnerships, limited liability
companies, or joint ventures. The occurrence of one or more of the events
described above could have an adverse effect on our financial condition, results
of operations, cash flow, and ability to pay dividends on, and the market price
of, our stock.
WE MAY BE UNABLE TO CONSUMMATE ACQUISITIONS ON ADVANTAGEOUS TERMS
We intend to continue to acquire primarily industrial properties.
Acquisitions of properties entail risks that investments will fail to perform in
accordance with expectations. Estimates of the costs of improvements necessary
for us to bring an acquired property up to market standards may prove
inaccurate. In addition, there are general investment risks associated with any
new real estate investment. Further, we anticipate significant competition for
attractive investment opportunities from other major real estate investors with
significant capital including both publicly traded real estate investment trusts
and private institutional investment funds. We expect that future acquisitions
will be financed through a combination of borrowings under our unsecured credit
facility, proceeds from equity or debt offerings by us or the operating
partnership (including issuances of limited partnership units by the operating
partnership or its subsidiaries), and proceeds from property divestitures, which
could have an adverse effect on our cash flow. We may not be able to acquire
additional properties. Our inability to finance any future acquisitions on
favorable terms or the failure of acquisitions to conform with our expectations
or investment criteria, or our failure to timely reinvest the proceeds from
property divestitures could adversely affect our financial condition, results of
operations, cash flow, and ability to pay dividends on, and the market price of,
our stock.
34
WE MAY BE UNABLE TO COMPLETE RENOVATION AND DEVELOPMENT ON ADVANTAGEOUS TERMS
The real estate development business, including the renovation and
rehabilitation of existing properties, involves significant risks. These risks
include the following:
- we may not be able to obtain financing on favorable terms for development
projects and we may not complete construction on schedule or within
budget, resulting in increased debt service expense and construction
costs and delays in leasing such properties and generating cash flow;
- we may not be able to obtain, or we may experience delays in obtaining,
all necessary zoning, land-use, building, occupancy, and other required
governmental permits and authorizations;
- new or renovated properties may perform below anticipated levels,
producing cash flow below budgeted amounts;
- substantial renovation as well as new development activities, regardless
of whether or not they are ultimately successful, typically require a
substantial portion of management's time and attention that could divert
management's time from our day-to-day operations; and
- activities that we finance through construction loans involve the risk
that, upon completion of construction, we may not be able to obtain
permanent financing or we may not be able to obtain permanent financing
on advantageous terms.
These risks could have an adverse effect on our financial condition,
results of operations, cash flow, and ability to pay dividends on, and the
market price of, our stock.
WE MAY BE UNABLE TO COMPLETE DIVESTITURES ON ADVANTAGEOUS TERMS
We intend to dispose of properties from time to time that do not conform
with our current investment strategy or that we have otherwise determined should
be divested, including, as of December 31, 2000, 33 industrial buildings and one
retail center, which are held for divestiture. Our ability to dispose of
properties on advantageous terms is dependent upon factors beyond our control,
including competition from other owners (including other real estate investment
trusts) that are attempting to dispose of industrial and retail properties and
the availability of financing on attractive terms for potential buyers of our
properties. Our inability to dispose of properties on favorable terms or our
inability to redeploy the proceeds of property divestitures in accordance with
our investment strategy could adversely our financial condition, results of
operations, cash flow, and ability to pay dividends on, and the market price of,
our stock.
DEBT FINANCING
WE COULD INCUR MORE DEBT
We operate with a policy of incurring debt, either directly or through our
subsidiaries, only if upon such incurrence our debt-to-total market
capitalization ratio would be approximately 45% or less. The aggregate amount of
indebtedness that we may incur under our policy varies directly with the
valuation of our capital stock and the number of shares of capital stock
outstanding. Accordingly, we would be able to incur additional indebtedness
under our policy as a result of increases in the market price per share of our
common stock or other outstanding classes of capital stock, and future issuance
of shares of our capital stock. In spite of this policy, our organizational
documents do not contain any limitation on the amount of indebtedness that we
may incur. Accordingly, our board of directors could alter or eliminate this
policy. If we change this policy, then we could become more highly leveraged,
resulting in an increase in debt service that could adversely affect our
financial condition, results of operations, cash flow, and ability to pay
dividends on, and the market price of, our stock.
35
SCHEDULED DEBT PAYMENTS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION
We are subject to risks normally associated with debt financing, including
the risks that cash flow will be insufficient to pay dividends to our
stockholders, that we will be unable to refinance existing indebtedness on our
properties (which in all cases will not have been fully amortized at maturity)
and that the terms of refinancing will not be as favorable as the terms of
existing indebtedness.
As of December 31, 2000, we had total debt outstanding of approximately
$1.8 billion including:
- $930.4 million of secured indebtedness (excluding unamortized debt
premiums) with an average maturity of 5.4 years and a weighted average
interest rate of 7.9%;
- $216.0 million outstanding under our unsecured $500.0 million credit
facility with a maturity date of May 2003 and an interest rate of LIBOR
plus 75 basis points (a weighted average interest rate of 7.5% as of
December 31, 2000); and
- $680.0 million aggregate principal amount of unsecured senior debt
securities with maturities between 2005 and 2018 and a weighted average
interest rate of 7.3%.
We guarantee the operating partnership's obligations with respect to the
senior debt securities referenced above. If we are unable to refinance or extend
principal payments due at maturity or pay them with proceeds of other capital
transactions, then we expect that our cash flow will not be sufficient in all
years to pay dividends to our stockholders and to repay all such maturing debt.
Furthermore, if prevailing interest rates or other factors at the time of
refinancing (such as the reluctance of lenders to make commercial real estate
loans) result in higher interest rates upon refinancing, then the interest
expense relating to that refinanced indebtedness would increase. This increased
interest expense would adversely affect our financial condition, results of
operations, cash flow, and ability to pay dividends on, and the market price of,
our stock. In addition, if we mortgage one or more of our properties to secure
payment of indebtedness and we are unable to meet mortgage payments, then the
property could be foreclosed upon or transferred to the mortgagee with a
consequent loss of income and asset value. A foreclosure on one or more of our
properties could adversely affect our financial condition, results of
operations, cash flow, and ability to pay dividends on, and the market price of,
our stock.
RISING INTEREST RATES COULD ADVERSELY AFFECT OUR CASH FLOW
As of December 31, 2000, we had approximately $216.0 million outstanding
under our unsecured credit facility. In addition, we may incur other variable
rate indebtedness in the future. Increases in interest rates on this
indebtedness could increase our interest expense, which would adversely affect
our financial condition, results of operations, cash flow, and ability to pay
dividends on, and the market price of, our stock. Accordingly, we may in the
future engage in transactions to limit our exposure to rising interest rates.
WE ARE DEPENDENT ON EXTERNAL SOURCES OF CAPITAL
In order to qualify as a real estate investment trust under the Internal
Revenue Code, we are required each year to distribute to our stockholders at
least 95% (90% for years beginning on or after January 1, 2001) of our real
estate investment trust taxable income (determined without regard to the
dividends-paid deduction and by excluding any net capital gain) and we are
subject to tax on our income to the extent it is not distributed. Because of
this distribution requirement, we may not be able to fund all future capital
needs, including capital needs in connection with acquisitions, from cash
retained from operations. As a result, to fund capital needs, we rely on third
party sources of capital, which we may not be able to obtain on favorable terms
or at all. Our access to third party sources of capital depends upon a number of
factors, including: 1) general market conditions; 2) the market's perception of
our growth potential; 3) our current and potential future earnings and cash
distributions; and 4) the market price of our capital stock. Additional debt
financing may substantially increase our leverage.
36
WE COULD DEFAULT ON CROSS-COLLATERALIZED AND CROSS-DEFAULTED DEBT
As of December 31, 2000, we had 18 non-recourse secured loans, which are
cross-collateralized by 20 properties. As of December 31, 2000, we had
approximately $240.9 million (not including unamortized debt premium)
outstanding on these loans. If we default on any of these loans, then we will be
required to repay the aggregate of all indebtedness, together with applicable
prepayment charges, to avoid foreclosure on all the cross-collateralized
properties within the applicable pool. Foreclosure on our properties, or our
inability to refinance our loans on favorable terms, could adversely impact our
financial condition, results of operations, cash flow, and ability to pay
dividends on, and the market price of, our stock. In addition, our credit
facility and the senior debt securities of the operating partnership contain
certain cross-default provisions, which are triggered in the event that our
other material indebtedness is in default. These cross-default provisions may
require us to repay or restructure the credit facility and the senior debt
securities in addition to any mortgage or other debt that is in default, which
could adversely affect our financial condition, results of operations, cash
flow, and ability to pay dividends on, and the market price of, our stock.
CONTINGENT OR UNKNOWN LIABILITIES COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION
Our predecessors have been in existence for varying lengths of time up to
18 years. At the time of our formation we acquired the assets of these entities
subject to all of their potential existing liabilities. There may be current
liabilities or future liabilities arising from prior activities that we are not
aware of and therefore have not disclosed in this report. We assumed these
liabilities as the surviving entity in the various merger and contribution
transactions that occurred at the time of our formation. Existing liabilities
for indebtedness generally were taken into account in connection with the
allocation of the operating partnership's limited partnership units or shares of
our common stock in the formation transactions, but no other liabilities were
taken into account for these purposes. We do not have recourse against our
predecessors or any of their respective stockholders or partners or against any
individual account investors with respect to any unknown liabilities. Unknown
liabilities might include the following:
- liabilities for clean-up or remediation of undisclosed environmental
conditions;
- claims of customers, vendors, or other persons dealing with our
predecessors prior to the formation transactions that had not been
asserted prior to the formation transactions;
- accrued but unpaid liabilities incurred in the ordinary course of
business;
- tax liabilities; and
- claims for indemnification by the officers and directors of our
predecessors and others indemnified by these entities.
Certain customers may claim that the formation transactions gave rise to a
right to purchase the premises that they occupy. We do not believe any such
claims would be material and, to date, no such claims have been filed. See
"-- Government Regulations -- We Could Encounter Costly Environmental Problems"
below regarding the possibility of undisclosed environmental conditions
potentially affecting the value of our properties. Undisclosed material
liabilities in connection with the acquisition of properties, entities and
interests in properties, or entities could adversely affect our financial
condition, results of operations, cash flow, and ability to pay dividends on,
and the market price of, our stock.
CONFLICTS OF INTEREST
SOME OF OUR EXECUTIVE OFFICERS ARE INVOLVED IN OTHER REAL ESTATE ACTIVITIES AND
INVESTMENTS
Some of our executive officers own interests in real estate-related
businesses and investments. These interests include minority ownership of
Institutional Housing Partners, L.P., a residential housing finance company, and
ownership of AMB Development, Inc. and AMB Development, L.P., developers that
own property not suitable for ownership by us. AMB Development, Inc. and AMB
Development, L.P. have agreed not to initiate any new development projects
following our initial public offering in November 1997. These entities have also
agreed that they will not make any further investments in industrial properties
other than
37
those currently under development at the time of our initial public offering.
AMB Development, Inc. and AMB Development, L.P. continue to use the name "AMB"
pursuant to royalty-free license arrangements. The continued involvement in
other real estate-related activities by some of our executive officers and
directors could divert management's attention from our day-to-day operations.
Most of our executive officers have entered into non-competition agreements with
us pursuant to which they have agreed not to engage in any activities, directly
or indirectly, in respect of commercial real estate, and not to make any
investment in respect of industrial real estate, other than through ownership of
not more than 5% of the outstanding shares of a public company engaged in such
activities or through the existing investments referred to in this report. State
law may limit our ability to enforce these agreements.
We could also, in the future, subject to the unanimous approval of the
disinterested members of the board of directors with respect to such
transaction, acquire property from executive officers, enter into leases with
executive officers, or engage in other related activities in which the interests
pursued by the executive officers may not be in the best interests of our
stockholders.
CERTAIN OF OUR EXECUTIVE OFFICERS AND DIRECTORS MAY HAVE CONFLICTS OF INTEREST
WITH US IN CONNECTION WITH OTHER PROPERTIES THAT THEY OWN OR CONTROL
As of December 31, 2000, AMB Development, L.P. owns interests in 10 retail
development projects in the U.S., eight of which are single free-standing
Walgreens drugstores and two are Walgreens drugstores plus shop buildings, which
are less than 10,000 feet. In addition, Messrs. Abbey, Moghadam, and Burke, each
a founder and director, own less than 1% interests in two partnerships that own
office buildings in various markets; these interests have negligible value. Luis
A. Belmonte, an executive officer, owns less than a 10% interest, representing
an estimated value of $150,000, in a limited partnership, which owns an office
building located in Oakland, California.
In addition, several of our executive officers individually own:
- less than 1% interests in the stocks of certain publicly-traded real
estate investment trusts;
- certain interests in and rights to developed and undeveloped real
property located outside the United States; and
- certain other de minimus holdings in equity securities of real estate
companies.
Thomas W. Tusher, a member of our board of directors, is a limited partner
in a partnership in which Messrs. Abbey, Moghadam, and Burke are general
partners and which owns a 75% interest in an office building. Mr. Tusher owns a
20% interest in the partnership, valued at approximately $1.2 million. Messrs.
Abbey, Moghadam, and Burke each have a 26.7% interest in the partnership, each
valued at approximately $1.6 million.
We believe that the properties and activities set forth above generally do
not directly compete with any of our properties. However, it is possible that a
property in which an executive officer or director, or an affiliate of an
executive officer or director, has an interest may compete with us in the future
if we were to invest in a property similar in type and in close proximity to
that property. In addition, the continued involvement by our executive officers
and directors in these properties could divert management's attention from our
day-to-day operations. Our policy prohibits us from acquiring any properties
from our executive officers or their affiliates without the approval of the
disinterested members of our board of directors with respect to that
transaction.
OUR ROLE AS GENERAL PARTNER OF THE OPERATING PARTNERSHIP MAY CONFLICT WITH THE
INTERESTS OF STOCKHOLDERS
As the general partner of the operating partnership, we have fiduciary
obligations to the operating partnership's limited partners, the discharge of
which may conflict with the interests of our stockholders. In addition, those
persons holding limited partnership units will have the right to vote as a class
on certain amendments to the partnership agreement of the operating partnership
and individually to approve certain amendments that would adversely affect their
rights. The limited partners may exercise these voting rights in a manner that
conflicts with the interests of our stockholders. In addition, under the terms
of the operating
38
partnership's partnership agreement, holders of limited partnership units will
have certain approval rights with respect to certain transactions that affect
all stockholders but which they may not exercise in a manner that reflects the
interests of all stockholders.
OUR DIRECTORS, EXECUTIVE OFFICERS, AND SIGNIFICANT STOCKHOLDERS COULD ACT IN A
MANNER THAT IS NOT IN THE BEST INTEREST OF ALL STOCKHOLDERS
As of March 20, 2001, our three largest stockholders, Cohen & Steers
Capital Management, Inc. (with respect to various client accounts for which
Cohen & Steers Capital Management, Inc. serves as investment advisor), European
Investors Inc. (with respect to various client accounts for which European
Investors Inc. serves as investment advisor), and Capital Research and
Management Company (with respect to various client accounts for which Capital
Research and Management Company serves as investment advisor) beneficially owned
approximately 18.3% of our outstanding common stock. In addition, our executive
officers and directors beneficially owned approximately 5.1% of our outstanding
common stock as of March 20, 2001, and will have influence on our management and
operation and, as stockholders, will have influence on the outcome of any
matters submitted to a vote of our stockholders. This influence might be
exercised in a manner that is inconsistent with the interests of other
stockholders. Although there is no understanding or arrangement for these
directors, officers, and stockholders and their affiliates to act in concert,
these parties would be in a position to exercise significant influence over our
affairs if they choose to do so.
WE COULD INVEST IN REAL ESTATE MORTGAGES
We may invest in mortgages, and may do so as a strategy for ultimately
acquiring the underlying property. In general, investments in mortgages include
the risks that borrowers may not be able to make debt service payments or pay
principal when due, that the value of the mortgaged property may be less than
the principal amount of the mortgage note secured by the property and that
interest rates payable on the mortgages may be lower than our cost of funds to
acquire these mortgages. In any of these events, our funds from operations and
our ability to pay dividends on, and the market price of, our stock could be
adversely affected.
GOVERNMENT REGULATIONS
Many laws and governmental regulations are applicable to our properties and
changes in these laws and regulations, or their interpretation by agencies and
the courts, occur frequently.
COSTS OF COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT
Under the Americans with Disabilities Act, places of public accommodation
must meet certain federal requirements related to access and use by disabled
persons. Compliance with the Americans with Disabilities Act might require us to
remove structural barriers to handicapped access in certain public areas where
such removal is "readily achievable." If we fail to comply with the Americans
with Disabilities Act, then we might be required to pay fines to the government
or damages to private litigants. The impact of application of the Americans with
Disabilities Act to our properties, including the extent and timing of required
renovations, is uncertain. If we are required to make unanticipated expenditures
to comply with the Americans with Disabilities Act, then our cash flow and the
amounts available for dividends to our stockholders may be adversely affected.
WE COULD ENCOUNTER ENVIRONMENTAL PROBLEMS
Federal, state, and local laws and regulations relating to the protection
of the environment impose liability on a current or previous owner or operator
of real estate for contamination resulting from the presence or discharge of
hazardous or toxic substances or petroleum products at the property. A current
or previous owner may be required to investigate and clean up contamination at
or migrating from a site. These laws typically impose liability and clean-up
responsibility without regard to whether the owner or operator knew of or caused
the presence of the contaminants. Even if more than one person may have been
responsible for the contamination, each person covered by the environmental laws
may be held responsible for all of the clean-up
39
costs incurred. In addition, third parties may sue the owner or operator of a
site for damages based on personal injury, property damage, or other costs,
including investigation and clean-up costs, resulting from environmental
contamination present at or emanating from that site.
Environmental laws also govern the presence, maintenance, and removal of
asbestos. These laws require that owners or operators of buildings containing
asbestos properly manage and maintain the asbestos, that they adequately inform
or train those who may come into contact with asbestos, and that they undertake
special precautions, including removal or other abatement in the event that
asbestos is disturbed during renovation or demolition of a building. These laws
may impose fines and penalties on building owners or operators for failure to
comply with these requirements and may allow third parties to seek recovery from
owners or operators for personal injury associated with exposure to asbestos
fibers. Some of our properties may contain asbestos-containing building
materials.
Some of our properties are leased or have been leased, in part, to owners
and operators of businesses that use, store, or otherwise handle petroleum
products or other hazardous or toxic substances. These operations create a
potential for the release of petroleum products or other hazardous or toxic
substances. Some of our properties are adjacent to or near other properties that
have contained or currently contain petroleum products or other hazardous or
toxic substances. In addition, certain of our properties are on, are adjacent
to, or are near other properties upon which others, including former owners or
tenants of the properties, have engaged or may in the future engage in
activities that may release petroleum products or other hazardous or toxic
substances. From time to time, we may acquire properties, or interests in
properties, with known adverse environmental conditions where we believe that
the environmental liabilities associated with these conditions are quantifiable
and the acquisition will yield a superior risk-adjusted return. Environmental
issues for each property are evaluated and quantified prior to acquisition. The
costs of environmental investigation, clean-up, and monitoring are underwritten
into the cost of the acquisition and appropriate environmental insurance is
obtained for the property. In connection with certain divested properties, we
have agreed to remain responsible for, and to bear the cost of, remediating or
monitoring certain environmental conditions on the properties.
All of our properties were subject to a Phase I or similar environmental
assessments by independent environmental consultants at the time of acquisition.
Phase I assessments are intended to discover and evaluate information regarding
the environmental condition of the surveyed property and surrounding properties
and include an historical review, a public records review, an investigation of
the surveyed site and surrounding properties, and preparation and issuance of a
written report. We may perform additional Phase II testing if recommended by the
independent environmental consultant. Phase II testing may include the
collection and laboratory analysis of soil and groundwater samples, completion
of surveys for asbestos-containing building materials, and any other testing
that the consultant considers prudent in order to test for the presence of
hazardous materials.
None of the environmental assessments of our properties has revealed any
environmental liability that we believe would have a material adverse effect on
our financial condition or results of operations taken as a whole. Furthermore,
we are not aware of any such material environmental liability. Nonetheless, it
is possible that the assessments do not reveal all environmental liabilities and
that there are material environmental liabilities of which we are unaware or
that known environmental conditions may give rise to liabilities that are
materially greater than anticipated. Moreover, the current environmental
condition of our properties may be affected by tenants, the condition of land,
operations in the vicinity of the properties (such as releases from underground
storage tanks), or by third parties unrelated to us. If the costs of compliance
with existing or future environmental laws and regulations exceed our budgets
for these items, then our financial condition, results of operations, cash flow,
and ability to pay dividends on, and the market price of, our stock could be
adversely affected.
OUR FINANCIAL CONDITION COULD BE ADVERSELY AFFECTED IF WE FAIL TO COMPLY WITH
OTHER REGULATIONS
Our properties are also subject to various federal, state, and local
regulatory requirements such as state and local fire and life safety
requirements. If we fail to comply with these requirements, then we might incur
fines by governmental authorities or be required to pay awards of damages to
private litigants. We believe that
40
our properties are currently in substantial compliance with all such regulatory
requirements. However, these requirements may change or new requirements may be
imposed, which could require significant unanticipated expenditures by us. Any
such unanticipated expenditures could have an adverse effect on our financial
condition, results of operations, cash flow, and ability to pay dividends on,
and the market price of, our stock.
FEDERAL INCOME TAX RISKS
OUR FAILURE TO QUALIFY AS A REAL ESTATE INVESTMENT TRUST WOULD HAVE SERIOUS
ADVERSE CONSEQUENCES TO STOCKHOLDERS
We elected to be taxed as a real estate investment trust under Sections 856
through 860 of the Internal Revenue Code commencing with our taxable year ended
December 31, 1997. We currently intend to operate so as to qualify as a real
estate investment trust under the Internal Revenue Code and believe that our
current organization and method of operation comply with the rules and
regulations promulgated under the Internal Revenue Code to enable us to continue
to qualify as a real estate investment trust. However, it is possible that we
have been organized or have operated in a manner that would not allow us to
qualify as a real estate investment trust, or that our future operations could
cause us to fail to qualify. Qualification as a real estate investment trust
requires us to satisfy numerous requirements (some on an annual and quarterly
basis) established under highly technical and complex Internal Revenue Code
provisions for which there are only limited judicial and administrative
interpretations, and involves the determination of various factual matters and
circumstances not entirely within our control. For example, in order to qualify
as a real estate investment trust, we must derive at least 95% of our gross
income in any year from qualifying sources. In addition, we must pay dividends
to stockholders aggregating annually at least 95% (90% for years beginning on or
after January 1, 2001) of our real estate investment trust taxable income
(determined without regard to the dividends paid deduction and by excluding
capital gains) and must satisfy specified asset tests on a quarterly basis.
These provisions and the applicable treasury regulations are more complicated in
our case because we hold our assets in partnership form. Legislation, new
regulations, administrative interpretations, or court decisions could
significantly change the tax laws with respect to qualification as a real estate
investment trust or the federal income tax consequences of such qualification.
However, we are not aware of any pending tax legislation that would adversely
affect our ability to operate as a real estate investment trust.
If we fail to qualify as a real estate investment trust in any taxable
year, then we will be required to pay federal income tax (including any
applicable alternative minimum tax) on our taxable income at regular corporate
rates. Unless we are entitled to relief under certain statutory provisions, we
would be disqualified from treatment as a real estate investment trust for the
four taxable years following the year during which we lost qualification. If we
lose our real estate investment trust status, then our net earnings available
for investment or distribution to stockholders would be significantly reduced
for each of the years involved. In addition, we would no longer be required to
make distributions to our stockholders.
WE MAY INVEST IN HIGHLY SPECULATIVE EARLY-STAGE COMPANIES THAT MAY JEOPARDIZE
OUR STATUS AS A REAL ESTATE INVESTMENT TRUST
We believe that our investments in highly speculative early-stage companies
have been structured so that we currently qualify as a real estate investment
trust under the Internal Revenue Code. However, if the value of these
investments, either individually or in the aggregate, appreciates significantly,
then these investments may adversely affect our ability to continue to qualify
as a real estate investment trust, unless we are able to restructure or dispose
of our holdings on a timely basis. As of December 31, 2000, we had invested
approximately $16.0 million in early-stage companies. See "-- Our Failure to
Qualify as a Real Estate Investment Trust Would Have Serious Adverse
Consequences to Stockholders" and "-- We May Invest in Highly Speculative
Early-Stage Companies in which We May Lose Our Entire Investment."
WE PAY SOME TAXES
Even if we qualify as a real estate investment trust, we will be required
to pay certain state and local taxes on our income and property. In addition, we
will be required to pay federal and state income tax on the net
41
taxable income, if any, from the activities conducted through AMB Investment
Management and Headlands Realty Corporation (which we discuss below under
"-- AMB Investment Management and Headlands Realty Corporation").
CERTAIN PROPERTY TRANSFERS MAY GENERATE PROHIBITED TRANSACTION INCOME
From time to time, we may transfer or otherwise dispose of some of our
properties. Under the Internal Revenue Code, any gain resulting from transfers
of properties that we hold as inventory or primarily for sale to customers in
the ordinary course of business would be treated as income from a prohibited
transaction. We would be required to pay a 100% penalty tax on that income.
Since we acquire properties for investment purposes, we believe that any
transfer or disposal of property by us would not be deemed by the Internal
Revenue Service to be a prohibited transaction with any resulting gain allocable
to us being subject to a 100% penalty tax. However, whether property is held for
investment purposes is a question of fact that depends on all the facts and
circumstances surrounding the particular transaction. The IRS may contend that
certain transfers or disposals of properties by us are prohibited transactions.
While we believe that the IRS would not prevail in any such dispute, if the IRS
successfully argued that a transfer or disposition of property constituted a
prohibited transaction, then we would be required to pay a 100% penalty tax on
any gain allocable to us from the prohibited transaction. In addition, any
income from a prohibited transaction may adversely affect our ability to satisfy
the income tests for qualifications as a real estate investment trust for
federal income tax purposes.
WE ARE DEPENDENT ON OUR KEY PERSONNEL
We depend on the efforts of our executive officers. While we believe that
we could find suitable replacements for these key personnel, the loss of their
services or the limitation of their availability could adversely affect our
financial condition, results of operations, cash flow, and ability to pay
dividends on, and the market price of, our stock. We do not have employment
agreements with any of our executive officers.
WE MAY BE UNABLE TO MANAGE OUR GROWTH
Our business has grown rapidly and continues to grow through property
acquisitions and developments. If we fail to effectively manage our growth, then
our financial condition, results of operations, cash flow, and ability to pay
dividends on, and the market price of, our stock could be adversely affected.
WE MAY INVEST IN HIGHLY SPECULATIVE EARLY-STAGE COMPANIES IN WHICH WE MAY LOSE
OUR ENTIRE INVESTMENT
From time to time, we may invest in highly speculative early-stage
companies that we believe will enhance our understanding of changes occurring in
the movement of goods, which may, in turn, sharpen our real estate investment
focus, create real estate provider relationships with growth companies, and
provide the potential for significant returns on invested capital. We believe
that the amounts of our investments in early-stage companies are immaterial,
both individually and in the aggregate. However, these investments are highly
speculative and it is possible that we may lose our entire investment in an
early-stage company.
AMB INVESTMENT MANAGEMENT, INC. AND HEADLANDS REALTY CORPORATION
WE DO NOT CONTROL THE ACTIVITIES OF AMB INVESTMENT MANAGEMENT, INC. AND
HEADLANDS REALTY CORPORATION
The operating partnership owns 100% of the non-voting preferred stock of
AMB Investment Management, Inc. and Headlands Realty Corporation (representing
approximately 95% of the economic interest in each entity). Some of our current
and former executive officers and a former executive officer of AMB Investment
Management, Inc. own all of the outstanding voting common stock of AMB
Investment Management, Inc. (representing approximately 5% of the economic
interest in AMB Investment Management, Inc.). Some of our current and former
executive officers and a director of Headlands Realty Corporation own all of the
outstanding voting common stock of Headlands Realty Corporation (representing
approximately 5% of the economic interest in Headlands Realty Corporation). The
ownership structure of AMB Investment Management, Inc. and Headlands Realty
Corporation permits us to share in the income of those corporations while
42
allowing us to maintain our status as a real estate investment trust. We receive
substantially all of the economic benefit of the businesses carried on by AMB
Investment Management and Headlands Realty Corporation through the operating
partnership's right to receive dividends. However, we are not able to elect the
directors or officers of AMB Investment Management, Inc. and Headlands Realty
Corporation and, as a result, we do not have the ability to influence their
operation or to require that their boards of directors declare and pay cash
dividends on the non-voting stock of AMB Investment Management, Inc. and
Headlands Realty Corporation held by the operating partnership. The boards of
directors and management of AMB Investment Management, Inc. and Headlands Realty
Corporation might implement business policies or decisions that would not have
been implemented by persons controlled by us and that may be adverse to the
interests of our stockholders or that may adversely impact our financial
condition, results of operations, cash flow, and ability to pay dividends on,
and the market price of, our stock. In addition, AMB Investment Management, Inc.
and Headlands Realty Corporation, as taxable REIT subsidiaries, are subject to
tax on their income, reducing their cash available for distribution to the
operating partnership.
AMB INVESTMENT MANAGEMENT, INC. MAY NOT BE ABLE TO GENERATE SUFFICIENT FEES
Fees earned by AMB Investment Management, Inc. depend on various factors
affecting the ability to attract and retain investment management clients and
the overall returns achieved on managed assets. These factors are beyond our
control. AMB Investment Management, Inc.'s failure to attract investment
management clients or achieve sufficient overall returns on managed assets could
reduce its ability to pay dividends on the stock owned by the operating
partnership and could also limit co-investment opportunities to the operating
partnership. This would limit the operating partnership's ability to generate
rental revenues from such co-investments and use the co-investment program as a
source to finance property acquisitions and leverage acquisition opportunities.
OWNERSHIP OF OUR STOCK
LIMITATIONS IN OUR CHARTER AND BYLAWS COULD PREVENT A CHANGE IN CONTROL
Certain provisions of our charter and bylaws may delay, defer, or prevent a
change in control or other transaction that could provide the holders of our
common stock with the opportunity to realize a premium over the then-prevailing
market price for the common stock. To maintain our qualification as a real
estate investment trust for federal income tax purposes, not more than 50% in
value of our outstanding stock may be owned, actually or constructively, by five
or fewer individuals (as defined in the Internal Revenue Code to include certain
entities) during the last half of a taxable year after the first taxable year
for which a real estate investment trust election is made. Furthermore, after
the first taxable year for which a real estate investment trust election is
made, our common stock must be held by a minimum of 100 persons for at least 335
days of a 12-month taxable year (or a proportionate part of a short tax year).
In addition, if we, or an owner of 10% or more of our stock, actually or
constructively owns 10% or more of one of our tenants (or a tenant of any
partnership in which we are a partner), then the rent received by us (either
directly or through any such partnership) from that tenant will not be
qualifying income for purposes of the real estate investment trust gross income
tests of the Internal Revenue Code. To facilitate maintenance of our
qualification as a real estate investment trust for federal income tax purposes,
we will prohibit the ownership, actually or by virtue of the constructive
ownership provisions of the Internal Revenue Code, by any single person of more
than 9.8% (by value or number of shares, whichever is more restrictive) of the
issued and outstanding shares of our common stock and more than 9.8% (by value
or number of shares, whichever is more restrictive) of the issued and
outstanding shares of our Series A Preferred Stock, and we will also prohibit
the ownership, actually or constructively, of any shares of our other preferred
stock by any single person so that no such person, taking into account all of
our stock so owned by such person, may own in excess of 9.8% of our issued and
outstanding capital stock. We refer to this limitation as the "ownership limit."
Shares acquired or held in violation of the ownership limit will be transferred
to a trust for the benefit of a designated charitable beneficiary. Any person
who acquires shares in violation of the ownership limit will not be entitled to
any dividends on the shares or be entitled to vote the shares or receive any
proceeds from the subsequent sale of the shares in excess of the lesser of the
price paid for the shares or the amount realized from the sale. A transfer of
shares in violation of the
43
above limits may be void under certain circumstances. The ownership limit may
have the effect of delaying, deferring, or preventing a change in control and,
therefore, could adversely affect our stockholders' ability to realize a premium
over the then-prevailing market price for the shares of our common stock in
connection with such transaction.
Our charter authorizes us to issue additional shares of common stock and
Series A Preferred Stock and to issue Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, Series F
Preferred Stock, Series G Preferred Stock, Series H Preferred Stock, Series I
Preferred Stock, and one or more other series or classes of preferred stock and
to establish the preferences, rights, and other terms of any series or class of
preferred stock that we issue. Although our board of directors has no intention
to do so at the present time, it could establish a series or class of preferred
stock that could delay, defer, or prevent a transaction or a change in control
that might involve a premium price for the common stock or otherwise be in the
best interests of our stockholders.
Our charter and bylaws and Maryland law also contain other provisions that
may delay, defer, or prevent a transaction, including a change in control, that
might involve payment of a premium price for the common stock or otherwise be in
the best interests of our stockholders. Those provisions include the following:
- the provision in the charter that directors may be removed only for cause
and only upon a two-thirds vote of stockholders, together with bylaw
provisions authorizing the board of directors to fill vacant
directorships;
- the provision in the charter requiring a two-thirds vote of stockholders
for any amendment of the charter;
- the requirement in the bylaws that the request of the holders of 50% or
more of our common stock is necessary for stockholders to call a special
meeting;
- the requirement of Maryland law that stockholders may only take action by
written consent with the unanimous approval of all stockholders entitled
to vote on the matter in question; and
- the requirement in the bylaws of advance notice by stockholders for the
nomination of directors or proposal of business to be considered at a
meeting of stockholders.
These provisions may impede various actions by stockholders without
approval of our board of directors, which in turn may delay, defer or prevent a
transaction involving a change of control.
WE COULD CHANGE OUR INVESTMENT AND FINANCING POLICIES WITHOUT A VOTE OF
STOCKHOLDERS
Subject to our current investment policy to maintain our qualification as a
real estate investment trust (unless a change is approved by our board of
directors under certain circumstances), our board of directors will determine
our investment and financing policies, our growth strategy and our debt,
capitalization, distribution, and operating policies. Although the board of
directors has no present intention to revise or amend these strategies and
policies, the board of directors may do so at any time without a vote of
stockholders. Accordingly, stockholders will have no control over changes in our
strategies and policies (other than through the election of directors), and any
such changes may not serve the interests of all stockholders and could adversely
affect our financial condition or results of operations, including our ability
to pay dividends to our stockholders.
IF WE ISSUE ADDITIONAL SECURITIES, THEN THE INVESTMENT OF EXISTING STOCKHOLDERS
WILL BE DILUTED
We have authority to issue shares of common stock or other equity or debt
securities in exchange for property or otherwise. Similarly, we may cause the
operating partnership to issue additional limited partnership units in exchange
for property or otherwise. Existing stockholders will have no preemptive right
to acquire any additional securities issued by us or the operating partnership
and any issuance of additional equity securities could result in dilution of an
existing stockholder's investment.
44
THE LARGE NUMBER OF SHARES AVAILABLE FOR FUTURE SALE COULD ADVERSELY AFFECT THE
MARKET PRICE OF OUR COMMON STOCK
We cannot predict the effect, if any, that future sales of shares of our
common stock, or the availability of shares of our common stock for future sale,
will have on its market price. Sales of a substantial number of shares of our
common stock in the public market (or upon exchange of limited partnership units
in the operating partnership) or the perception that such sales (or exchanges)
might occur could adversely affect the market price of our common stock.
All shares of common stock issuable upon the redemption of limited
partnership units in the operating partnership will be deemed to be "restricted
securities" within the meaning of Rule 144 under the Securities Act and may not
be transferred unless registered under the Securities Act or an exemption from
registration is available, including any exemption from registration provided
under Rule 144. In general, upon satisfaction of certain conditions, Rule 144
permits the holder to sell certain amounts of restricted securities one year
following the date of acquisition of the restricted securities from us and,
after two years, permits unlimited sales by persons unaffiliated with us.
Commencing generally on the first anniversary of the date of acquisition of
common limited partnership units (or such other date agreed to by the operating
partnership and the holders of the units), the operating partnership may redeem
common limited partnership units at the request of the holders for cash (based
on the fair market value of an equivalent number of shares of common stock at
the time of redemption) or, at our option, exchange the common limited
partnership units for an equal number of shares of our common stock, subject to
certain antidilution adjustments. The operating partnership had issued and
outstanding 5,827,917 common limited partnership units as of December 31, 2000.
As of December 31, 2000, we had reserved 8,537,368 shares of common stock for
issuance under our Stock Option and Incentive Plan (not including shares that we
have already issued) and, as of December 31, 2000, we had granted to certain
directors, officers and employees options to purchase 5,666,830 shares of common
stock (excluding forfeitures and 128,216 shares that we have issued pursuant to
the exercise of options). As of December 31, 2000, we had granted 311,017
restricted shares of common stock, 1,931 of which have been forfeited. In
addition, we may issue additional shares of common stock and the operating
partnership may issue additional limited partnership units in connection with
the acquisition of properties. In connection with the issuance of common limited
partnership units to other transferors of properties, and in connection with the
issuance of the performance units, we have agreed to file registration
statements covering the issuance of shares of common stock upon the exchange of
the common limited partnership units. We have also filed a registration
statement with respect to the shares of common stock issuable under our Stock
Option and Incentive Plan. These registration statements and registration rights
generally allow shares of common stock covered thereby, including shares of
common stock issuable upon exchange of limited partnership units, including
performance units, or the exercise of options or restricted shares of common
stock, to be transferred or resold without restriction under the Securities Act.
We may also agree to provide registration rights to any other person who may
become an owner of the operating partnership's limited partnership units.
Future sales of the shares of common stock described above could adversely
affect the market price of our common stock. The existence of the operating
partnership's limited partnership units, options, and shares of common stock
reserved for issuance upon exchange of limited partnership units, and the
exercise of options and registration rights referred to above, also may
adversely affect the terms upon which we are able to obtain additional capital
through the sale of equity securities.
VARIOUS MARKET CONDITIONS AFFECT THE PRICE OF OUR STOCK
As with other publicly-traded equity securities, the market price of our
stock will depend upon various market conditions, which may change from time to
time. Among the market conditions that may affect the market price of our stock
are the following:
- the extent of investor interest in us;
- the general reputation of real estate investment trusts and the
attractiveness of their equity securities in comparison to other equity
securities (including securities issued by other real estate-based
companies);
45
- our financial performance; and
- general stock and bond market conditions, including changes in interest
rates on fixed income securities, that may lead prospective purchasers of
our stock to demand a higher annual yield from future dividends. Such an
increase in the required yield from dividends may adversely affect the
market price of our stock.
Other factors such as governmental regulatory action and changes in tax
laws could also have a significant impact on the future market price of our
stock.
EARNINGS AND CASH DIVIDENDS, ASSET VALUE, AND MARKET INTEREST RATES AFFECT THE
PRICE OF OUR STOCK
The market value of the equity securities of a real estate investment trust
generally is based primarily upon the market's perception of the real estate
investment trust's growth potential and its current and potential future
earnings and cash dividends. It is based secondarily upon the real estate market
value of the underlying assets. For that reason, shares of our stock may trade
at prices that are higher or lower than the net asset value per share. To the
extent that we retain operating cash flow for investment purposes, working
capital reserves, or other purposes, these retained funds, while increasing the
value of our underlying assets, may not correspondingly increase the market
price of our stock. Our failure to meet the market's expectation with regard to
future earnings and cash dividends likely would adversely affect the market
price of our stock. Another factor that may influence the price of our stock
will be the distribution yield on the stock (as a percentage of the price of the
stock) relative to market interest rates. An increase in market interest rates
might lead prospective purchasers of our stock to expect a higher distribution
yield, which would adversely affect the market price of the stock. If the market
price of our stock declines significantly, then we might breach certain
covenants with respect to debt obligations, which might adversely affect our
liquidity and ability to make future acquisitions and our ability to pay
dividends to our stockholders.
ITEM 7a. QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposure to market risk includes: 1) the rising interest rates in
connection with our unsecured credit facility and other variable rate
borrowings; and 2) our ability to incur more debt without stockholder approval,
thereby increasing our debt service obligations, which could adversely affect
our cash flows. See "Item 7: Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital
Resources -- Capital Resources -- Market Capitalization."
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See "Item 14. Exhibits, Financial Statement Schedules, and Reports of Form
8-K."
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEMS 10, 11, 12 AND 13.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT, EXECUTIVE COMPENSATION,
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, AND CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 10, Item 11, Item 12, and Item 13 will be
contained in a definitive proxy statement for our Annual Meeting of Stockholders
which we anticipate will be filed no later than 120 days after the end of our
fiscal year pursuant to Regulation 14A and accordingly these items have been
omitted in accordance with General Instruction G(3) to Form 10-K.
46
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) and (2) FINANCIAL STATEMENTS AND SCHEDULES:
The following consolidated financial information is included as a separate
section of this report on Form 10-K.
PAGE
----
Report of Independent Public Accountants.................... F-1
Consolidated Balance Sheets as of December 31, 2000 and F-2
1999......................................................
Consolidated Statements of Operations for the years ended F-3
December 31, 2000, 1999, and 1998.........................
Consolidated Statements of Stockholders' Equity for the F-4
years ended December 31, 2000, 1999, and 1998.............
Consolidated Statements of Cash Flows for the years ended F-5
December 31, 2000, 1999, and 1998.........................
Notes to Consolidated Financial Statements.................. F-6
Schedule III -- Real Estate and Accumulated Depreciation.... S-1
Schedule IV -- Mortgage Loans on Real Estate................ S-8
All other schedules are omitted since the required information is not
present in amounts sufficient to require submission of the schedule or because
the information required is included in the financial statements and notes
thereto.
(a)(3) EXHIBITS:
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.1 Articles of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.1 of the Registrant's Statement on
Form S-11 (No. 333-35915)).
3.2 Certificate of Correction of the Registrant's Articles
Supplementary establishing and fixing the rights and
preferences of the 8 1/2% Series A Cumulative Redeemable
Preferred Stock (incorporated by reference to Exhibit 3.2 of
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1998).
3.3 Articles Supplementary establishing and fixing the rights
and preferences of the 8 5/8% Series B Cumulative Redeemable
Preferred Stock (incorporated by reference to Exhibit 3.1 of
the Registrant's Current Report on Form 8-K filed on January
7, 1999).
3.4 Articles Supplementary establishing and fixing the rights
and preferences of the 8.75% Series C Cumulative Redeemable
Preferred Stock (incorporated by reference to Exhibit 3.2 of
the Registrant's Current Report on Form 8-K filed on January
7, 1999).
3.5 Articles Supplementary establishing and fixing the rights
and preferences of the 7.75% Series D Cumulative Redeemable
Preferred Stock (incorporated by reference to Exhibit 3.1 of
the Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999).
3.6 Articles Supplementary establishing and fixing the rights
and preferences of the 7.75% Series E Cumulative Preferred
Stock (incorporated by reference to Exhibit 3.1 of the
Registrant's Current Report on Form 8-K filed on September
14, 1999).
3.7 Articles Supplementary establishing and fixing the rights
and preferences of the 7.95% Series F Cumulative Redeemable
Preferred Stock (incorporated by reference to Exhibit 3.1 of
the Registrant's Current Report on Form 8-K filed on April
14, 2000).
3.8 Articles Supplementary establishing and fixing the rights
and preferences of the 7.95% Series G Cumulative Redeemable
Preferred Stock (incorporated by reference to Exhibit 3.1 of
the Registrant's Current Report on Form 8-K filed on
September 29, 2000).
47
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.9 Articles Supplementary establishing and fixing the rights
and preferences of the 8.125% Series H Cumulative Redeemable
Preferred Stock (incorporated by reference to Exhibit 3.3 of
the Registrant's Current Report on Form 8-K filed on
September 29, 2000).
3.10 Articles Supplementary establishing and fixing the rights
and preferences of the 8.00% Series I Cumulative Redeemable
Preferred Stock (incorporated by reference to Exhibit 3.1 of
the Registrant's Current Report on Form 8-K filed on March
23, 2001).
3.11 Second Amended and Restated Bylaws of the Registrant.
4.1 Form of Certificate for Common Stock of the Registrant
(incorporated by reference to Exhibit 3.3 of the
Registrant's Registration Statement on Form S-11 (No.
333-35915)).
4.2 Form of Certificate for 8.5% Series A Cumulative Redeemable
Preferred Stock (incorporated by reference to Exhibit 3.5(2)
of Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998.
4.3 Form of Fixed-Rate Medium Term Note, attaching the Form of
Parent Guarantee (incorporated herein by reference as
Exhibit 4.2 of the Registrant's Current Report on Form 8-K/A
filed on November 9, 2000).
4.4 Form of Floating-Rate Medium Term Note, attaching the Form
of Parent Guarantee (incorporated herein by reference as
Exhibit 4.3 of the Registrant's Current Report on Form 8-K/A
filed on November 9, 2000).
4.5 $30,000,000 7.925% Fixed Rate Note No. 1 dated August 18,
2000, attaching the Parent Guarantee dated August 18, 2000.
4.6 $25,000,000 7.925% Fixed Rate Note No. 2 dated September 12,
2000, attaching the Parent Guarantee dated September 12,
2000.
4.7 $50,000,000 8.00% Fixed Rate Note No. 3 dated October 26,
2000, attaching the Parent Guarantee dated October 26, 2000.
4.8 $25,000,000 8.000% Fixed Rate Note No. 4 dated October 26,
2000, attaching the Parent Guarantee dated October 26, 2000.
4.9 $50,000,000 7.20% Fixed Rate Note No. 5 dated December 19,
2000, attaching the Parent Guarantee dated December 19, 2000
(incorporated herein by reference to Exhibit 4.1 of the
Registrant's Current Report on Form 8-K filed on January 8,
2001).
4.10 $50,000,000 7.20% Fixed Rate Note No. 6 dated December 19,
2000, attaching the Parent Guarantee dated December 19, 2000
(incorporated herein by reference to Exhibit 4.2 of the
Registrant's Current Report on Form 8-K filed on January 8,
2001).
4.11 $50,000,000 7.20% Fixed Rate Note No. 7 dated December 19,
2000, attaching the Parent Guarantee dated December 19, 2000
(incorporated herein by reference to Exhibit 4.3 of the
Registrant's Current Report on Form 8-K filed on January 8,
2001).
4.12 Indenture dated as of June 30, 1998, by and among AMB
Property, L.P., the Registrant and State Street Bank and
Trust Company of California, N.A., as trustee (incorporated
by reference to Exhibit 4.1 of the Registrant's Registration
Statement on Form S-11 (No. 333-49163)).
4.13 First Supplemental Indenture dated as of June 30, 1998 by
and among AMB Property, L.P., the Registrant and State
Street Bank and Trust Company of California, N.A., as
trustee (incorporated by reference to Exhibit 4.2 of the
Registrant's Registration Statement Form S-11 (No.
333-49163)).
4.14 Second Supplemental Indenture dated as of June 30, 1998, by
and among AMB Property, L.P., the Registrant and State
Street Bank and Trust Company of California, N.A., as
trustee (incorporated by reference to Exhibit 4.3 of the
Registrant's Registration Statement on Form S-11 (No.
333-49163)).
48
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
4.15 Third Supplemental Indenture dated as of June 30, 1998, by
and among AMB Property, L.P., the Registrant and State
Street Bank and Trust Company of California, N.A., as
trustee (incorporated by reference to Exhibit 4.4 of the
Registrant's Registration Statement on Form S-11 (No.
333-49163)).
4.16 Fourth Supplemental Indenture, by and among AMB Property,
L.P., AMB Property Corporation and State Street Bank and
Trust Company of California, N.A., as trustee (incorporated
herein by reference as Exhibit 4.1 of the Registrant's
Current Report on Form 8-K/A filed on November 9, 2000).
4.17 Specimen of 7.10% Notes due 2008 (included in the First
Supplemental Indenture incorporated by reference as Exhibit
4.2 of the Registrant's Registration Statement on Form S-11
(No. 333-49163)).
4.18 Specimen of 7.50% Notes due 2018 (included in the Second
Supplemental Indenture incorporated by reference as Exhibit
4.3 of the Registrant's Registration Statement on Form S-11
(No. 333-49163)).
4.19 Specimen of 6.90% Reset Put Securities due 2015 (included in
the Third Supplemental Indenture incorporated by reference
as Exhibit 4.4 of the Registrant's Registration Statement on
Form S-11 (No. 333-49163)).
4.20 $25,000,000 6.90% Fixed Rate Note No. 8 dated January 9,
2001, attaching the Parent Guarantee dated January 9, 2001
(incorporated herein by reference to Exhibit 4.1 of the
Registrant's Current Report on Form 8-K filed on January 31,
2001).
10.1 Distribution Agreement dated August 15, 2000 by and among
AMB Property Corporation, AMB Property, L.P., Morgan Stanley
& Co., Incorporated, Banc of America Securities LLC, Banc
One Capital Markets, Inc., Chase Securities, Inc., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan
Securities Inc., and Salomon Smith Barney Inc. (incorporated
herein by reference to Exhibit 1.1 of Registrant's Current
Report on Form 8-K/A filed on November 9, 2000).
10.2 Terms Agreement dated as of December 14, 2000, by and
between Morgan Stanley & Co., Incorporated and J.P. Morgan
Securities Inc. and AMB Property, L.P. (incorporated herein
by reference to Exhibit 1.1 of the Registrant's Current
Report on Form 8-K filed on January 8, 2001).
10.3 Terms Agreement dated as of January 4, 2001, by and between
A.G. Edwards & Sons, Inc. and AMB Property, L.P.
(incorporated herein by reference to Exhibit 1.1 of the
Registrant's Current Report on Form 8-K filed on January 31,
2001).
10.4 Terms Agreement dated as of March 2, 2001, by and among
First Union Securities, Inc., AMB Property, L.P. and AMB
Property Corporation (incorporated by reference to Exhibit
1.1 of Registrants' current report on Form 8-K filed on
March 16, 2001).
10.5 Fourth Amended and Restated Partnership Agreement of Limited
Partnership of AMB Property, L.P. (incorporated herein by
reference as Exhibit 10.1 to the Registrants Current Report
on Form 8-K filed on August 15, 2000).
10.6 First Amendment to the Fourth Amended and Restated Agreement
of Limited Partnership of AMB Property, L.P.
10.7 Form of Registration Rights Agreement among the Registrant
and the persons named therein (incorporated by reference to
Exhibit 10.2 of the Registrant's Registration Statement on
Form S-11 (No. 333-35915)).
10.8 Form of Change in Control and Noncompetition Agreement
between the Registrant and Executive Officers (incorporated
by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1998).
49
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.9 Agreement for Purchase and Exchange entered into as of March
9, 1999, by and among AMB Property, L.P., AMB Property II,
L.P., Long Gate, L.L.C. and BPP Retail, LLC, regarding the
transaction which closed on June 15, 1999 (incorporated by
reference to Exhibit 10.1 of the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999).
10.10 Agreement for Purchase and Exchange entered into as of March
9, 1999, by and among AMB Property, L.P., AMB Property II,
L.P., Long Gate, L.L.C. and BPP Retail, LLC, regarding the
transaction which closed on August 4, 1999 (incorporated by
reference to Exhibit 10.2 of the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999).
10.11 Agreement for Purchase and Exchange entered into as of March
9, 1999, by and among AMB Property, L.P., AMB Property II,
L.P., Long Gate, L.L.C. and BPP Retail, LLC, regarding the
transaction which closed on December 1, 1999 (incorporated
by reference to Exhibit 10.3 of the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999).
10.12 Dividend Reinvestment and Direct Purchase Plan, dated July
9, 1999 (incorporated by reference to Exhibit 10.4 of the
Registrant's Quarterly Report on Report Form 10-Q for the
quarter ended June 30, 1999).
10.13 Second Amended and Restated 1997 Stock Option and Incentive
Plan (incorporated by reference to Exhibit 10.5 of the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999).
10.14 Ninth Amended and Restated Agreement of Limited Partnership
of AMB Property II, L.P., dated March 21, 2001 (incorporated
by reference to Exhibit 10.1 of the Registrant's Current
Report on Form 8-K filed on March 23, 2001).
10.15 Revolving Credit Agreement dated as of May 24, 2000, among
AMB Property, L.P., the banks listed therein, Morgan
Guaranty Trust Company of New York, as Administrative Agent,
Bank of America, N.A., as Syndication Agent, the Chase
Manhattan Bank, as Documentation Agent, J.P. Morgan
Securities Inc. and Banc of America Securities LLC, as Joint
Lead Arrangers and Joint Bookmanagers, Bank one, NA,
Commerzbank Aktiengesellschaft, PNC Bank National
Association and Wachovia Bank, N.A., as Managing Agents and
Banks Trust Company and Dresdner Bank AG, New York and Grand
Cayman Branches, as Co-Agents (incorporated by reference to
Exhibit 10.1 of the Registrant's Current Report on Form 8-K
filed on June 16, 2000).
10.16 Guaranty of Payment made as of May 24, 2000, between AMB
Property Corporation and Morgan Guaranty Trust Company of
New York, as administrative agent for the banks listed on
the signature page of the Revolving Credit Agreement
(incorporated herein by reference to Exhibit 10.2 of the
Registrant's Current Report on Form 8-K filed on June 16,
2000).
10.17 Credit Agreement dated as of September 27, 1999, among AMB
Institutional Alliance Fund I, L.P., AMB Institutional
Alliance REIT I, Inc., the Lenders and issuing parties
thereto, BT Realty Resources, Inc. and Chase Manhattan Bank
(incorporated by reference to Exhibit 10.3 of the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999).
21.1 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.
24.1 Powers of Attorney (included in Part IV of this Form 10-K).
(b) REPORTS ON FORM 8-K:
- The Registrant filed a Current Report on Form 8-K on November 2, 2000, in
connection with the issuance of $75 million of senior unsecured notes by
AMB Property L.P. under its medium-term note program.
- The Registrant filed a Current Report on Form 8-K/A on November 9, 2000,
in connection with the commencement of AMB Property, L.P.'s medium term
note program.
50
- The Registrant filed a Current Report on Form 8-K/A on November 16, 2000,
in connection with the commencement of AMB Property, L.P.'s medium term
note program.
- The Registrant filed a Current Report on Form 8-K on November 30, 2000,
in connection with its 2000 acquisitions.
- The Registrant filed a Current Report on Form 8-K/A on December 14, 2000,
in connection with its 2000 acquisitions.
- The Registrant filed a Current Report on Form 8-K/A on December 19, 2000,
in connection with its 2000 acquisitions.
- The Registrant filed a Current Report on Form 8-K on January 8, 2001, in
connection with the issuance of $150 million of senior unsecured notes by
AMB Property, L.P. under its medium-term note program.
- The Registrant filed a Current Report on Form 8-K on January 29, 2001, in
connection with its 2000 earnings release.
- The Registrant filed a Current Report on Form 8-K on January 31, 2001, in
connection with the issuance of $25 million of senior unsecured notes by
AMB Property, L.P. under its medium-term note program.
- The Registrant filed a Current Report on Form 8-K on March 6, 2001, in
connection with the issuance of $50 million of senior unsecured notes by
AMB Property, L.P. under its medium-term note program.
- The Registrant filed a Current Report on Form 8-K on March 23, 2001, in
connection with the filing by the Registrant of Articles Supplementary
establishing and fixing the rights and preferences of the 8.00% Series I
Cumulative Redeemable Preferred Stock.
(c) EXHIBITS:
See Item 14(a)(3) above.
(d) FINANCIAL STATEMENT SCHEDULES:
See Item 14(a)(1) and (2) above.
51
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on March 27, 2001.
AMB PROPERTY CORPORATION
By: /s/ HAMID R. MOGHADAM
------------------------------------
Hamid R. Moghadam
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and
directors of AMB Property Corporation, hereby severally constitute Hamid R.
Moghadam, W. Blake Baird, David S. Fries, and Michael A. Coke, and each of them
singly, our true and lawful attorneys with full power to them, and each of them
singly, to sign for us and in our names in the capacities indicated below, the
Form 10-K filed herewith and any and all amendments to said Form 10-K, and
generally to do all such things in our names and in our capacities as officers
and directors to enable AMB Property Corporation to comply with the provisions
of the Securities Exchange Act of 1934, and all requirements of the Securities
and Exchange Commission, hereby ratifying and confirming our signatures as they
may be signed by our said attorneys, or any of them, to said Form 10-K and any
and all amendments thereto.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
NAME TITLE DATE
---- ----- ----
/s/ HAMID R. MOGHADAM Chairman of the Board and Chief March 27, 2001
- ------------------------------------- Executive Officer
Hamid R. Moghadam (Principal Executive Officer)
/s/ W. BLAKE BAIRD President March 27, 2001
- -------------------------------------
W. Blake Baird
/s/ DOUGLAS D. ABBEY Director March 27, 2001
- -------------------------------------
Douglas D. Abbey
/s/ T. ROBERT BURKE Director March 27, 2001
- -------------------------------------
T. Robert Burke
/s/ DANIEL H. CASE III Director March 27, 2001
- -------------------------------------
Daniel H. Case III
/s/ DAVID A. COLE Director March 27, 2001
- -------------------------------------
David A. Cole
/s/ LYNN M. SEDWAY Director March 27, 2001
- -------------------------------------
Lynn M. Sedway
/s/ JEFFREY L. SKELTON, PH.D. Director March 27, 2001
- -------------------------------------
Jeffrey L. Skelton, Ph.D.
/s/ THOMAS W. TUSHER Director March 27, 2001
- -------------------------------------
Thomas W. Tusher
/s/ CARYL B. WELBORN, ESQ. Director March 27, 2001
- -------------------------------------
Caryl B. Welborn, Esq
/s/ MICHAEL A. COKE Chief Financial Officer and March 27, 2001
- ------------------------------------- Executive Vice President
Michael A. Coke (Duly Authorized Officer and
Principal Financial and Accounting
Officer)
52
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
of AMB Property Corporation:
We have audited the accompanying consolidated balance sheets of AMB
Property Corporation (a Maryland corporation) and subsidiaries as of December
31, 2000 and 1999, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the three years in the period
ended December 31, 2000. These financial statements and the schedules referred
to below are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedules, based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of AMB Property Corporation and
subsidiaries as of December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2000, in conformity with accounting principles generally accepted
in the United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental Schedules III, Real
Estate and Accumulated Depreciation and IV, Mortgage Loans on Real Estate, are
presented for purposes of complying with the Securities and Exchange
Commission's rules and is not a required part of the basic financial statements.
This information has been subjected to the auditing procedures applied in our
audits of the basic financial statements and, in our opinion, is fairly stated
in all material respects in relation to the basic financial statements taken as
a whole.
ARTHUR ANDERSEN LLP
San Francisco, California
January 22, 2001
F-1
AMB PROPERTY CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2000 AND 1999
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS
2000 1999
---------- ----------
Investments in real estate:
Land...................................................... $ 833,325 $ 714,916
Buildings and improvements................................ 2,915,537 2,349,221
Construction in progress.................................. 277,735 185,315
---------- ----------
Total investments in properties................... 4,026,597 3,249,452
Accumulated depreciation and amortization................. (177,467) (103,558)
---------- ----------
Net investments in properties.......................... 3,849,130 3,145,894
Investment in unconsolidated joint ventures................. 80,432 66,357
Properties held for divestiture, net........................ 197,146 181,201
---------- ----------
Net investments in real estate......................... 4,126,708 3,393,452
Cash and cash equivalents................................... 20,358 33,312
Restricted cash and cash equivalents........................ 22,364 103,707
Mortgage receivables........................................ 115,969 --
Accounts receivable, net of allowance for doubtful accounts
of $7,677 and $7,497, respectively........................ 69,874 35,516
Investments in affiliated companies......................... 35,731 150
Investments in other companies, net......................... 15,965 43,512
Other assets................................................ 18,657 11,901
---------- ----------
Total assets...................................... $4,425,626 $3,621,550
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Debt:
Secured debt.............................................. $ 940,276 $ 707,037
Alliance Fund I unsecured debt............................ -- 80,000
Unsecured senior debt securities.......................... 680,000 400,000
Unsecured credit facility................................. 216,000 83,000
---------- ----------
Total debt........................................ 1,836,276 1,270,037
Other liabilities........................................... 147,042 89,371
---------- ----------
Total liabilities................................. 1,983,318 1,359,408
Commitments and contingencies...............................
Minority interests.......................................... 674,378 432,883
Stockholders' equity:
Series A preferred stock, cumulative, redeemable, $.01 par
value, 100,000,000 shares authorized, 4,000,000 issued
and outstanding, $100,000 liquidation preference....... 96,100 96,100
Common stock $.01 par value, 500,000,000 shares
authorized, 84,138,751 and 85,133,041 issued and
outstanding............................................ 841 851
Additional paid-in capital................................ 1,638,655 1,656,226
Retained earnings......................................... 36,066 47,089
Accumulated other comprehensive income/(loss)............. (3,732) 28,993
---------- ----------
Total stockholders' equity........................ 1,767,930 1,829,259
---------- ----------
Total liabilities and stockholders' equity........ $4,425,626 $3,621,550
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
AMB PROPERTY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
2000 1999 1998
----------- ----------- -----------
REVENUES
Rental revenues................................... $ 464,164 $ 439,658 $ 354,658
Equity in earnings of unconsolidated joint
ventures....................................... 5,212 4,701 1,825
Investment management and other income............ 8,331 3,824 2,404
----------- ----------- -----------
Total revenues............................ 477,707 448,183 358,887
OPERATING EXPENSES
Property operating expenses....................... 50,566 51,739 40,197
Real estate taxes................................. 57,164 56,184 48,218
Interest, including amortization.................. 90,270 88,681 69,670
Depreciation and amortization..................... 96,258 67,505 57,464
General and administrative........................ 23,750 25,223 19,588
----------- ----------- -----------
Total operating expenses.................. 318,008 289,332 235,137
----------- ----------- -----------
Income from operations before minority
interests............................... 159,699 158,851 123,750
Minority interests' share of net income........... (44,961) (34,011) (11,157)
----------- ----------- -----------
Net income before gain from divestiture of real
estate....................................... 114,738 124,840 112,593
Gain from divestiture of real estate.............. 7,044 53,753 --
----------- ----------- -----------
Net income before extraordinary items.......... 121,782 178,593 112,593
Extraordinary items............................... -- (2,490) --
----------- ----------- -----------
Net income..................................... 121,782 176,103 112,593
Series A preferred stock dividends................ (8,500) (8,500) (3,639)
----------- ----------- -----------
Net income available to common stockholders.... $ 113,282 $ 167,603 $ 108,954
=========== =========== ===========
BASIC INCOME PER COMMON SHARE
Before extraordinary items........................ $ 1.35 $ 1.97 $ 1.27
Extraordinary items............................... -- (0.03) --
----------- ----------- -----------
Net income available to common stockholders.... $ 1.35 $ 1.94 $ 1.27
=========== =========== ===========
DILUTED INCOME PER COMMON SHARE
Before extraordinary items........................ $ 1.35 $ 1.97 $ 1.26
Extraordinary items............................... -- (0.03) --
----------- ----------- -----------
Net income available to common stockholders.... $ 1.35 $ 1.94 $ 1.26
=========== =========== ===========
WEIGHED AVERAGE COMMON SHARES OUTSTANDING
Basic............................................. 83,697,170 86,271,862 85,876,383
=========== =========== ===========
Diluted........................................... 84,155,306 86,347,487 86,235,176
=========== =========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
AMB PROPERTY CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
COMMON STOCK ACCUMULATED
SERIES A -------------------- ADDITIONAL OTHER COM-
PREFERRED NUMBER PAID-IN RETAINED PREHENSIVE
STOCK OF SHARES AMOUNT CAPITAL EARNINGS INCOME TOTAL
--------- ---------- ------- ---------- --------- ----------- ----------
AMB PROPERTY CORPORATION
Balance at December 31, 1997............. $ -- 85,874,513 $ 859 $1,667,171 $ -- $ -- $1,668,030
Net income............................. 3,639 -- -- -- 108,954 -- 112,593
Issuance of preferred stock, net of
offering costs....................... 96,100 -- -- -- -- 96,100
Issuance of restricted Stock........... -- 43,007 -- 930 -- 930
Reallocation of limited partners'
interests in Operating Partnership... -- -- -- 7,215 -- 7,215
Dividends.............................. (3,639) -- -- (6,915) (108,954) -- (119,508)
------- ---------- ------- ---------- --------- -------- ----------
Balance at December 31, 1998............. 96,100 85,917,520 859 1,668,401 -- -- 1,765,360
Comprehensive Income:
Net Income............................. 8,500 -- -- -- 167,603 --
Unrealized gains on securities......... -- -- -- -- -- 28,993
Total comprehensive income........... -- -- -- -- -- -- 205,096
Issuance of restricted stock, net...... -- 98,368 1 2,214 -- -- 2,215
Retirement of common stock............. -- (1,443,600) (14) (27,286) -- -- (27,300)
Exercise of stock options.............. -- 25,000 -- 526 -- -- 526
Conversion of Operating Partnership
units................................ -- 535,753 5 11,048 -- -- 11,053
Deferred compensation.................. -- -- -- (3,080) -- -- (3,080)
Deferred compensation amortization..... -- -- -- 952 -- -- 952
Reallocation of Limited Partners'
Interest in Operating Partnership...... -- -- -- 3,451 -- -- 3,451
Dividends.............................. (8,500) -- -- -- (120,514) -- (129,014)
------- ---------- ------- ---------- --------- -------- ----------
Balance at December 31, 1999............. 96,100 85,133,041 851 1,656,226 47,089 28,993 1,829,259
Comprehensive Income:
Net Income............................. 8,500 -- -- -- 113,282 --
Unrealized loss on securities.......... -- -- -- -- -- (32,725)
Total comprehensive income........... -- -- -- -- -- -- 89,057
Issuance of restricted stock, net...... -- 161,996 2 3,268 -- -- 3,270
Retirement of common stock............. -- (1,465,926) (15) (29,303) -- -- (29,318)
Exercise of stock options.............. -- 103,217 1 2,179 -- -- 2,180
Conversion of Operating Partnership
units................................ -- 206,423 2 4,911 -- -- 4,913
Deferred compensation.................. -- -- -- (3,270) -- -- (3,270)
Deferred compensation amortization..... -- -- -- 1,022 -- -- 1,022
Reallocation of limited partners'
interests in Operating Partnership... -- -- -- 3,622 -- -- 3,622
Dividends.............................. (8,500) -- -- -- (124,305) -- (132,805)
------- ---------- ------- ---------- --------- -------- ----------
Balance at December 31, 2000............. $96,100 84,138,751 $ 841 $1,638,655 $ 36,066 $ (3,732) $1,767,930
======= ========== ======= ========== ========= ======== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
AMB PROPERTY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
(IN THOUSANDS)
2000 1999 1998
--------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income.................................................. $ 121,782 $ 176,103 $ 112,593
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 96,258 67,505 57,464
Straight-line rents....................................... (10,203) (10,847) (10,921)
Amortization of debt premiums and financing costs......... (6,055) (3,009) (2,730)
Minority interests' share of net income................... 44,961 34,011 11,157
Gain on divestiture of real estate........................ (7,044) (53,753) --
Non-cash portion of extraordinary items................... -- (6,058) --
Equity in (earnings) loss of AMB Investment Management.... 3,159 875 313
Equity in earnings of unconsolidated joint ventures....... (5,212) (4,701) (1,730)
Changes in assets and liabilities:
Other assets............................................ (34,142) 5,199 (9,377)
Other liabilities....................................... 57,671 (14,934) 20,411
--------- --------- ---------
Net cash provided by operating activities.......... 261,175 190,391 177,180
CASH FLOWS FROM INVESTING ACTIVITIES
Change in restricted cash and cash equivalents.............. (4,002) (98,480) 2,847
Cash paid for property acquisitions......................... (604,872) (399,891) (564,304)
Additions to buildings, development costs, and other first
generation improvements................................... (153,534) (152,643) (125,180)
Additions to second generation building Improvements and
lease costs............................................... (40,573) (27,289) (12,733)
Additions to interests in unconsolidated joint ventures..... (13,158) (7,789) (67,376)
Distributions received from unconsolidated joint ventures... 4,295 3,787 11,451
Net proceeds from divestiture of real estate................ 85,345 746,037 --
Reduction of payable to affiliates in connection with
Formation Transactions.................................... -- -- (38,071)
--------- --------- ---------
Net cash provided by (used in) investing
activities....................................... (726,499) 63,732 (793,366)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock.................................... 2,180 732 --
Borrowings (payments) on unsecured credit facility, net..... 133,000 (151,000) 84,000
Borrowings (payments) on Alliance Fund I credit facility,
net....................................................... (80,000) 80,000 --
Borrowings (payments) on secured debt, net.................. 84,975 (81,289) (20,655)
Payment of financing fees................................... (6,364) (242) (7,704)
Net proceeds from issuance of senior debt securities........ 278,183 -- 399,166
Net proceeds from issuance of Series A preferred stock...... -- -- 96,100
Net proceeds from issuances of preferred units.............. 61,413 88,476 167,993
Contributions from investors in the Alliance Fund I......... 153,872 14,611 --
Dividends paid to common and preferred stockholders......... (130,680) (160,566) (88,236)
Distributions to minority interests, including preferred
units..................................................... (44,209) (31,443) (26,462)
--------- --------- ---------
Net cash provided by (used in) financing
activities....................................... 452,370 (240,721) 604,202
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents........ (12,954) 13,402 (11,984)
Cash and cash equivalents at beginning of period............ 33,312 19,910 31,894
--------- --------- ---------
Cash and cash equivalents at end of period.................. $ 20,358 $ 33,312 $ 19,910
========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest...................................... $ 90,138 $ 89,627 $ 68,209
Non-cash transactions:
Acquisition of properties................................. $ 729,972 $ 471,905 $ 901,284
Assumption of debt........................................ (125,100) (57,480) (221,017)
Minority interest's contribution, including units
issued.................................................. -- (14,534) (115,963)
--------- --------- ---------
Net cash paid...................................... $ 604,872 $ 399,891 $ 564,304
========= ========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
1. ORGANIZATION AND FORMATION OF THE COMPANY
AMB Property Corporation, a Maryland corporation (the "Company"), commenced
operations as a fully integrated real estate company effective with the
completion of its initial public offering on November 26, 1997. The Company
elected to be taxed as a real estate investment trust under Sections 856 through
860 of the Internal Revenue Code of 1986, commencing with its taxable year ended
December 31, 1997, and believes its current organization and method of operation
will enable it to maintain its status as a real estate investment trust. The
Company, through its controlling interest in its subsidiary, AMB Property, L.P.,
a Delaware limited partnership (the "Operating Partnership"), is engaged in the
acquisition, ownership, operation, management, renovation, expansion, and
development of primarily industrial buildings in target markets nationwide.
Unless the context otherwise requires, the "Company" means AMB Property
Corporation, the Operating Partnership, and its other controlled subsidiaries.
As of December 31, 2000, the Company owned an approximate 93.5% general
partner interest in the Operating Partnership, excluding preferred units. The
remaining 6.5% limited partner interest is owned by non-affiliated investors and
certain current and former directors and officers of the Company. For local law
purposes, certain properties are owned through limited partnerships and limited
liability companies. The ownership of such properties through such entities does
not materially affect the Company's overall ownership of the interests in the
properties. As the sole general partner of the Operating Partnership, the
Company has full, exclusive, and complete responsibility and discretion in the
day-to-day management and control of the Operating Partnership. Net operating
results of the Operating Partnership are allocated after preferred unit
distributions based on the respective partners' ownership interests.
Through the Operating Partnership, the Company enters into co-investment
joint ventures with institutional investors. These co-investment joint ventures
provide the Company with an additional source of capital to fund certain
acquisitions and development and renovation projects. As of December 31, 2000,
the Company had investments in two co-investment joint ventures, including AMB
Institutional Alliance Fund I, L.P. ("Alliance Fund I"), which are consolidated
for financial reporting purposes.
AMB Investment Management, Inc., a Maryland corporation ("AMB Investment
Management"), provides real estate investment services on a fee basis to
clients. The Operating Partnership purchased 100% of AMB Investment Management's
non-voting preferred stock (representing a 95% economic interest therein).
Certain current and former executive officers of the Company and a former
executive officer of AMB Investment Management collectively purchased 100% of
AMB Investment Management's voting common stock (representing a 5% economic
interest therein). The Operating Partnership also owns 100% of the non-voting
preferred stock of Headlands Realty Corporation, a Maryland corporation,
(representing a 95% economic interest therein). Certain current and former
executive officers of the Company and a director of Headlands Realty Corporation
collectively own 100% of the voting common stock of Headlands Realty Corporation
(representing a 5% economic interest therein). Headlands Realty Corporation
primarily invests in properties that do not meet the Company's normal investment
strategy, as well as build-to-sell development projects, which are part of the
Company's investment strategy. In addition, it invests in properties and
interests in entities that engage in the management, leasing, and development of
properties and similar activities. The Operating Partnership accounts for its
investments in AMB Investment Management and Headlands Realty Corporation using
the equity method of accounting.
As of December 31, 2000, the Company owned 862 industrial buildings and
eight retail centers, located in 27 markets throughout the United States
(unaudited). The Company's strategy is to become a leading provider of High
Throughput Distribution, or HTD, properties located near key passenger and cargo
airports, highway systems and ports in major metropolitan areas, such as
Atlanta, Chicago, Dallas/Fort Worth, Northern New Jersey/New York City, the San
Francisco Bay Area, Southern California, Miami, and Seattle. As of December 31,
2000, the industrial buildings, principally warehouse distribution buildings,
encompassed
F-6
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
approximately 75.8 million rentable square feet and were 96.4% leased to over
2,850 tenants (unaudited). As of December 31, 2000, the retail centers,
principally grocer-anchored community shopping centers, encompassed
approximately 1.2 million rentable square feet and were 93.2% leased to over 170
tenants (unaudited).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Generally Accepted Accounting Principles. These consolidated financial
statements have been prepared in accordance with accounting principles generally
accepted in the United States using the accrual method of accounting. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Principles of Consolidation. The accompanying consolidated financial
statements include the financial position, results of operations and cash flows
of the Company, its wholly-owned qualified REIT subsidiaries, the Operating
Partnership, and joint ventures (the "Joint Ventures"), in which the Company has
a controlling interest. Third-party equity interests in the Operating
Partnership and the Joint Ventures are reflected as minority interests in the
consolidated financial statements. The Company also has three non-controlling
limited partnership interests in three separate unconsolidated real estate joint
ventures, which are accounted for under the equity method. All significant
intercompany amounts have been eliminated.
Investments in Real Estate. Investments in real estate are stated at cost
unless circumstances indicate that cost cannot be recovered, in which case, the
carrying value of the property is reduced to estimated fair value. Net
realizable value for financial reporting purposes is reviewed for impairment on
a property-by-property basis whenever events or changes in circumstances
indicate that the carrying amount of a property may not be recoverable.
Impairment is recognized when estimated expected future cash flows (undiscounted
and without interest charges) are less than the carrying amount of the property.
The estimation of expected future net cash flows is inherently uncertain and
relies on assumptions regarding current and future economics and market
conditions and the availability of capital. If impairment analysis assumptions
change, then an adjustment to the carrying amount of the Company's long-lived
assets could occur. To the extent that a property is impaired, the excess of the
carrying amount of the property over its estimated fair value is charged to
income. The management of the Company believed that there was no impairment of
the carrying value of its investments in real estate at December 31, 2000.
F-7
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
Depreciation and amortization are calculated using the straight-line method
over the estimated useful lives of the real estate investments. The estimated
lives are as follows:
DEPRECIATION AND
AMORTIZATION EXPENSES
-----------------------------
ESTIMATED LIVES 2000 1999 1998
------------------------- ------- ------- -------
(DOLLARS IN THOUSANDS)
Building costs....................... 40 $67,997 $54,668 $54,417
Buildings and improvements:
Roof/HVAC/parking lots............. 10 2,404 1,106 346
Plumbing/signage................... 7 484 144 26
Painting and other................. 5 6,345 2,546 668
Tenant improvements.................. Term of the related lease 9,165 4,091 782
Lease commissions.................... Term of the related lease 8,641 3,902 761
------- ------- -------
Total real estate
depreciation.................. 95,036 66,457 57,000
Other depreciation and
amortization....................... Various 1,222 1,048 464
------- ------- -------
Total depreciation and
amortization.................. $96,258 $67,505 $57,464
======= ======= =======
The cost of buildings and improvements includes the purchase price of the
property or interest in property including legal fees and acquisition costs.
Project costs directly associated with the development and construction of a
real estate project, which include interest and property taxes, are capitalized
as construction in progress.
Expenditures for maintenance and repairs are charged to operations as
incurred. Significant renovations or betterments that extend the economic useful
life of assets are capitalized.
Reverse Exchanges. Reverse exchanges represent loan agreements with third
parties, whereby the Company loans substantially all funds to the third party to
acquire a real estate investment. The loan is secured by the real estate
investment and title is held by the third party. The Company records the asset
as an investment in real estate and is entitled to record the rental income
associated with the property as the Company retains the risk of loss and the
benefits of the asset.
Concentration of Credit Risk. Other real estate companies compete with the
Company in its real estate markets. This results in competition for tenants to
occupy space. The existence of competing properties could have a material impact
on the Company's ability to lease space and on the amount of rent received. As
of December 31, 2000, the Company did not have any single tenant that accounted
for greater than 1.3% of rental revenues.
Cash and Cash Equivalents. Cash and cash equivalents include cash held in
financial institutions and other highly liquid short-term investments with
original maturities of three months or less.
Restricted Cash and Cash Equivalents. Restricted cash and cash equivalents
include cash held in escrow in connection with property purchases, Section 1031
exchange funds, and capital improvements.
Deferred Financing Costs. Costs incurred in connection with financings are
capitalized and amortized to interest expense on the effective-interest method
over the term of the related loan. As of December 31, 2000 and 1999, deferred
financing fees were $10.7 million and $6.7 million, respectively, net of
accumulated amortization of $4.7 million and $2.2 million, respectively. Such
amounts are included in Other assets on the Consolidated Balance Sheets.
Investments in Other Companies. Certain of the Company's marketable equity
securities are considered available-for-sale investments and are carried at
market value on the Consolidated Balance Sheets. The
F-8
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
difference between cost and market value is recorded as a component of
Accumulated other comprehensive income in Stockholders' Equity. For its
investments in private companies, the Company periodically reviews its
investments and management determines if the value of such investments have been
permanently impaired. Such impairment losses are included in current earnings.
Debt Premiums. Debt premiums represent the excess of the fair value of debt
over the principal value of debt assumed in connection with the initial public
offering and subsequent acquisitions. The debt premiums are being amortized into
interest expense over the term of the related debt instrument using the
effective interest method. As of December 31, 2000 and 1999, the unamortized
debt premium was $9.9 million and $10.1 million, respectively.
Minority Interests. Minority interests in the Company represent the limited
partnership interests in the Operating Partnership and interests held by certain
third parties in 30 joint ventures aggregating approximately 15.5 million square
feet, which are consolidated for financial reporting purposes. Such investments
are consolidated because: 1) the Company owns a majority interest; or 2) the
Company exercises significant control through the ability to control major
operating decisions such as approval of budgets, selection of property managers,
and changes in financing.
In 1999 and 2000, AMB Institutional Alliance REIT I, Inc. (the "Alliance
REIT") issued and sold shares of its capital stock to 15 third-party investors.
The Alliance REIT has elected to be taxed as a REIT under the Code, commencing
with its tax year ending December 31, 1999. The Alliance REIT acquired a limited
partnership interest in the Alliance Fund I, which is engaged in the
acquisition, ownership, operation, management, renovation, and expansion and
development of industrial buildings in target markets nationwide. The Operating
Partnership is the managing general partner of the Alliance Fund I and, together
with an affiliate of the Company, owns approximately 21% of the partnership
interests in the Alliance Fund I at December 31, 2000. The Company consolidates
the Alliance Fund I for financial reporting purposes because the Operating
Partnership is the sole managing general partner of the Alliance Fund I and, as
a result, controls all of its major operating decisions.
F-9
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
The following table distinguishes the components of minority interest as of
and for the year ended December 31, 2000:
MINORITY INTEREST MINORITY INTEREST
LIABILITY SHARE OF NET INCOME
AS OF FOR THE YEAR ENDED
DECEMBER 31, 2000 DECEMBER 31, 2000
----------------- -------------------
(DOLLARS IN THOUSANDS)
Joint venture partners............................ $ 21,077 $ 3,414
Separate account co-investors..................... 49,849 3,029
Alliance Fund I................................... 169,745 5,863
Limited partners in the Operating Partnership..... 115,654 8,042
Series B Preferred Units (liquidation preference
of $65,000)..................................... 62,319 5,608
Held through AMB Property II, L.P.:
Series C Preferred Units (liquidation preference
of $110,000)................................. 105,845 9,624
Series D Preferred Units (liquidation preference
of $79,767).................................. 77,687 6,180
Series E Preferred Units (liquidation preference
of $11,022).................................. 10,789 856
Series F Preferred Units (liquidation preference
of $19,872).................................. 19,534 1,228
Series G Preferred Units (liquidation preference
of $1,000)................................... 957 27
Series H Preferred Units (liquidation preference
of $42,000).................................. 40,922 1,090
-------- -------
$674,378 $44,961
======== =======
Rental Revenues. The Company, as a lessor, retains substantially all of the
benefits and risks of ownership of the properties and accounts for its leases as
operating leases. Rental income is recognized on a straight-line basis over the
term of the leases. Reimbursements from tenants for real estate taxes and other
recoverable operating expenses are recognized as revenue in the period the
applicable expenses are incurred. Differences between estimated and actual
amounts are recognized in the subsequent year.
Investment Management and Other Income. Investment management income
consists primarily of professional fees generated from the Company's equity in
the earnings of AMB Investment Management. Other income consists primarily of
interest income on cash and cash equivalents.
Comprehensive Income. Comprehensive income consists of net income and
unrealized gains and losses on certain investments in equity securities and is
presented in the Consolidated Statement of Stockholders' Equity.
Derivatives. Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities as amended by
Statement No. 138, Accounting for Certain Derivative Instruments and Certain
Hedging Activities, established accounting and reporting standards requiring
that every derivative instrument (including certain derivative instruments
embedded in other contracts) be recorded in the balance sheet as either an asset
or liability measured at its fair value. The Statement, as amended, requires
that changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. The Company will adopt FASB
Statement No. 133 in 2001 and believes that it will not materially impact its
financial position or results of operations as the Company does not utilize
derivative instruments in its operations.
F-10
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
3. TRANSACTIONS WITH AFFILIATES
The Company and AMB Investment Management have an agreement that allows for
the sharing of certain costs and employees. Additionally, the Company provides
AMB Investment Management with certain acquisition-related services. For the
years ended December 31, 2000, 1999, and 1998, the Company allocated $2.8
million, $2.7 million, and $1.8 million, respectively, for shared costs to AMB
Investment Management.
The Company and AMB Investment Management share common office space under
lease obligations. Such lease obligations are charged to the Company and AMB
Investment Management at cost. For the years ended December 31, 2000, 1999, and
1998, the Company paid $1.4 million, $1.3 million, and $1.2 million,
respectively, for occupancy costs related to the lease obligations of the
affiliate.
4. REAL ESTATE ACQUISITION AND DEVELOPMENT ACTIVITY
During 2000, the Company invested $730.0 million in operating properties,
consisting of 145 industrial buildings aggregating approximately 10.5 million
square feet. Of this, $185.6 million was acquired by the Alliance Fund I,
consisting of 44 industrial buildings, aggregating approximately 2.6 million
square feet. The Company also initiated 17 new development projects, aggregating
approximately 4.5 million square feet, with a total estimated cost of $224.0
million upon completion. In 2000, the Company also completed 12 development
projects, aggregating approximately 3.1 million square feet, at a total
aggregate cost of $144.3 million. As of December 31, 2000, the Company had in
its development pipeline 19 industrial projects, which will total approximately
5.5 million square feet and have an aggregate estimated investment of $305.9
million upon completion. It also had three retail projects in its development
pipeline, which will total approximately 0.5 million square feet and have an
aggregate estimated investment of $76.3 million upon completion. As of December
31, 2000, the Company and its Development Alliance Partners have funded an
aggregate of $226.5 million and will need to fund an estimated additional $155.7
million in order to complete projects currently under construction.
During 1999, the Company invested $471.9 million in operating properties,
consisting of 154 industrial buildings, aggregating approximately 8.4 million
square feet. The Company also initiated eight new development projects,
aggregating approximately 1.7 million square feet, with a total estimated cost
of $130.9 million upon completion. In 1999, the Company also completed seven
development projects, aggregating approximately 1.7 million square feet, at a
total aggregate cost of $68.9 million. As of December 31, 1999, the Company had
18 projects, aggregating approximately 4.3 million square feet, in its
development pipeline, with a total estimated cost of $306.4 million upon
completion. The Company funded these acquisitions and development projects
through proceeds from divestitures of properties, borrowings under its unsecured
credit facility, debt and equity financings, and debt assumption.
5. PROPERTY DIVESTITURES AND PROPERTIES HELD FOR DIVESTITURE
Property Divestitures. During 2000, the Company divested itself of 25
industrial buildings and one retail center, aggregating approximately 2.5
million square feet, for an aggregate price of $175.7 million, with a resulting
net gain of $7.0 million. The retail center was located in Los Angeles,
California, aggregated approximately 0.4 million square feet, and sold for $89.0
million. The Company carries an 8.75% mortgage note in the principal amount of
$79.0 million on the retail center sale. The mortgage note matures in September
2001 and has a one-year extension option.
During 1999, the Company divested itself of 15 industrial buildings and 30
retail centers, aggregating approximately 6.6 million square feet, for an
aggregate price of $764.1 million, with a resulting net gain of $53.8 million
and extraordinary losses consisting of prepayment penalties, partially offset by
the related debt premiums, of $2.9 million.
F-11
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
Properties Held for Divestiture. The Company has decided to divest itself
of 33 industrial buildings and one retail center, which are not in its core
markets or which do not meet its strategic objectives. The divestitures of the
properties are subject to negotiation of acceptable terms and other customary
conditions. In connection with the Company's planned divestitures, the Company
evaluated its held-for-sale assets for impairment and reduced their carrying
value by recording an additional $3.5 million in depreciation expense. As of
December 31, 2000, the net carrying value of the properties held for divestiture
was $197.1 million.
The following summarizes the condensed results of operations of the
properties held for divestiture for the years ended December 31:
2000 1999 1998
------- ------- -------
(DOLLARS IN THOUSANDS)
Income................................................ $27,445 $23,752 $14,723
Property operating expenses........................... 5,625 5,288 3,387
------- ------- -------
Net operating income................................ $21,820 $18,464 $11,336
======= ======= =======
6. DEBT
As of December 31, 2000 and 1999, debt consisted of the following:
DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------
(DOLLARS IN THOUSANDS)
Secured debt, varying interest rates from 4.0% to 10.4% due
April 2001 to June 2023.................................. $ 930,418 $ 696,931
Alliance Fund I credit facility............................ -- 80,000
Unsecured senior debt securities, weighted average interest
rate of 7.3%, due December 2005 to June 2018............. 680,000 400,000
Unsecured credit facility, variable interest at LIBOR plus
75 basis points (interest rate of 7.5% at December 31,
2000), due May 2003...................................... 216,000 83,000
---------- ----------
Subtotal.............................................. 1,826,418 1,259,931
Unamortized premiums.................................. 9,858 10,106
---------- ----------
Total consolidated debt.......................... $1,836,276 $1,270,037
========== ==========
Secured debt generally requires monthly principal and interest payments.
The secured debt is secured by deeds of trust on certain properties. As of
December 31, 2000 and 1999, the total gross investment book value of those
properties secured by debt was $2.0 billion and $1.4 billion, respectively. All
of the secured debt bears interest at fixed rates, except for two loans with an
aggregate principal amount of $29.8 million and $10.4 million at December 31,
2000 and 1999, respectively, which bear interest at variable rates (weighted
average interest rate of 8.2% at December 31, 2000). The secured debt has
various financial and non-financial covenants. Management believes that the
Company was in material compliance with these covenants at December 31, 2000.
Additionally, $240.9 million of the secured debt was cross-collateralized at
December 31, 2000. As of December 31, 2000 and 1999, the estimated fair value of
the secured debt was $956.1 million and $684.0 million, respectively. As of
December 31, 2000, the estimated fair value of the unsecured senior debt was
$689.4 million.
In addition, the Alliance Fund I had an $80.0 million unsecured credit
facility. The debt was secured by the unfunded capital commitments of the third
party investors in the Alliance REIT I, a limited partner of the Alliance Fund
I. Since there are no remaining unfunded capital commitments, the Alliance Fund
I paid off
F-12
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
the outstanding balance and closed this credit facility during the third quarter
of 2000. See Note 2 for a discussion of the Alliance Fund I and the Alliance
REIT I.
Interest on the unsecured senior debt securities is payable semi-annually.
The 2015 notes are putable and callable in June 2005. The senior debt securities
are subject to various financial and non-financial covenants. Management
believes that the Company was in material compliance with these covenants at
December 31, 2000.
In 2000, the Operating Partnership commenced a medium-term note program for
the issuance of up to $400.0 million in principal amount of medium-term notes,
which will be guaranteed by the Company. As of December 31, 2000, the Company
had issued $280.0 million of medium-term notes under the program. In December
2000, the Operating Partnership issued and sold $150.0 million of the notes
under this program to Morgan Stanley Dean Witter and J.P. Morgan as principals.
The Company has guaranteed the notes, which mature on December 15, 2005, and
bear interest at 7.2% per annum. The Operating Partnership used the net proceeds
of $148.9 million for general corporate purposes, to partially repay
indebtedness, and for the acquisition and development of properties. In October
2000, the Operating Partnership issued and sold $75.0 million of the notes under
this program to Morgan Stanley Dean Witter and J.P. Morgan as principals. The
Company has guaranteed the notes, which mature on November 1, 2010, and bear
interest at 8.0% per annum. The Operating Partnership used the net proceeds of
$74.5 million for general corporate purposes, to partially repay indebtedness,
and for the acquisition and development of properties. In August and September
2000, the Operating Partnership issued and sold $55.0 million of the notes under
this program to Morgan Stanley Dean Witter as principal. The Company has
guaranteed the notes, which mature on August 20, 2007, and bear interest at
7.925% per annum. The Operating Partnership used the net proceeds of $54.8
million for general corporate purposes, to partially repay indebtedness, and for
the acquisition and development of properties.
In May 2000, the Operating Partnership entered into a new $500.0 million
unsecured revolving credit agreement, which replaced its previous $500.0 million
credit facility, which matured in November 2000. The Company is the guarantor of
the Operating Partnership's obligations under the credit facility. The new
credit facility matures in May 2003, has a one-year extension option, and is
subject to a 15 basis point annual facility fee. The credit facility has various
financial and non-financial covenants. Management believes that the Company and
the Operating Partnership were in material compliance with these covenants at
December 31, 2000. The Operating Partnership has the ability to increase
available borrowings up to $700.0 million by adding additional banks to the
facility or obtaining the agreement of existing banks to increase their
commitments. Monthly debt service payments on the credit facility are interest
only. The total amount available under the credit facility fluctuates based upon
the borrowing base, as defined in the agreement governing the credit facility.
At December 31, 2000, the remaining amount available under the credit facility
was $284.0 million (excluding the additional $200.0 million of potential
additional capacity).
Capitalized interest related to construction projects for the years ended
December 31, 2000, 1999, and 1998, was $15.5 million, $10.9 million, and $7.2
million, respectively.
F-13
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
As of December 31, 2000, the scheduled maturities of the Company's total
debt, excluding unamortized debt premiums, were as follows:
JOINT UNSECURED
VENTURE SENIOR UNSECURED
SECURED SECURED DEBT CREDIT
DEBT DEBT SECURITIES FACILITY TOTAL
-------- -------- ---------- --------- ----------
(DOLLARS IN THOUSANDS)
2001............................. $ 14,071 $ 35,087 $ -- $ -- $ 49,158
2002............................. 29,182 46,044 -- -- 75,226
2003............................. 72,675 7,134 -- 216,000 295,809
2004............................. 71,147 20,357 -- -- 91,504
2005............................. 64,194 30,015 250,000 -- 344,209
2006............................. 116,022 33,991 -- -- 150,013
2007............................. 32,181 19,705 55,000 -- 106,886
2008............................. 106,604 36,011 175,000 -- 317,615
2009............................. 5,176 25,969 -- -- 31,145
2010............................. 52,780 65,499 75,000 -- 193,279
2011............................. 1,311 15,645 -- -- 16,956
Thereafter....................... 3,307 26,311 125,000 -- 154,618
-------- -------- -------- -------- ----------
$568,650 $361,768 $680,000 $216,000 $1,826,418
======== ======== ======== ======== ==========
7. LEASING ACTIVITY
Future minimum rental income due under noncancelable leases with tenants in
effect at December 31, 2000, is as follows:
(DOLLARS IN THOUSANDS)
2001.............................................. $ 414,044
2002.............................................. 353,552
2003.............................................. 287,226
2004.............................................. 229,279
2005.............................................. 162,452
Thereafter........................................ 482,703
----------
$1,929,256
==========
In addition to minimum rental payments, certain tenants pay reimbursements
for their pro rata share of specified operating expenses, which amounted to
$77.9 million, $81.1 million, and $68.1 million for the years ended December 31,
2000, 1999, and 1998, respectively. These amounts are included as rental income
and operating expenses in the accompanying consolidated statements of
operations. Certain of the leases also provide for the payment of additional
rent based on a percentage of the tenant's revenues. For the years ended
December 31, 2000, 1999, and 1998, the Company recognized percentage rent
revenues of $0.8 million, $2.0 million, and $1.9 million, respectively. Some
leases contain options to renew.
F-14
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
8. INCOME TAXES
The Company elected to be taxed as a REIT under the Code, commencing with
its taxable year ended December 31, 1997. To qualify as a REIT, the Company must
meet a number of organizational and operational requirements, including a
requirement that it currently distribute at least 95% of its taxable income to
its stockholders. Effective January 1, 2001, to qualify as a REIT, the Company
must distribute at least 90% of its taxable income to its stockholders. It is
management's current intention to adhere to these requirements and maintain the
Company's REIT status. As a REIT, the Company generally will not be subject to
corporate level federal income tax on net income it distributes currently to its
stockholders. As such, no provision for federal income taxes has been included
in the accompanying consolidated financial statements. If the Company fails to
qualify as a REIT in any taxable year, then it will be subject to federal income
taxes at regular corporate rates (including any applicable alternative minimum
tax) and may not be able to qualify as a REIT for four subsequent taxable years.
Even if the Company qualifies for taxation as a REIT, the Company may be subject
to certain state and local taxes on its income and property and to federal
income and excise taxes on its undistributed taxable income.
The following reconciles net income available to common stockholders to
taxable income available to common stockholders for the years ended December 31:
2000 1999 1998
-------- -------- --------
(DOLLARS IN THOUSANDS)
Net income available to common stockholders........ $113,282 $167,603 $108,954
Add: Book depreciation and amortization.......... 96,258 67,505 57,464
Less: Tax depreciation and amortization.......... (87,338) (69,264) (51,620)
Book/tax difference on gain on divestiture of
real estate................................. 18,788 (15,471) --
Other book/tax differences, net(1)............ (5,723) (12,722) (20,778)
-------- -------- --------
Taxable income available to common stockholders.... $135,267 $137,651 $ 94,020
======== ======== ========
- ---------------
(1) Primarily due to rent and debt premium amortization timing differences.
For income tax purposes, distributions paid to common stockholders consist
of ordinary income, capital gains, or a combination thereof. For the years ended
December 31, 2000 and 1999, the Company elected to distribute all of its taxable
capital gain. Dividends paid per share were taxable as follows:
2000 1999 1998
----- ----- -----
Ordinary income.................... $1.21 82.0% $1.14 74.6% $1.24 100.0%
Capital gains...................... 0.20 13.2% 0.28 18.5% -- 0.00%
Unrecaptured Section 1250 Gain..... 0.07 4.8% 0.11 6.9% -- 0.00%
----- ----- ----- ----- ----- -----
Dividends paid or payable.......... $1.48 100.0% $1.53 100.0% $1.24 100.0%
===== ===== ===== ===== ===== =====
9. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES
The Company has non-controlling limited partnership interests in three
separate unconsolidated equity investment joint ventures. The Company has a
56.1% interest in a joint venture that owns an aggregate of 36 industrial
buildings totaling approximately 4.0 million square feet. The Company also has a
50.0% interest in two other development alliance joint ventures, which it
purchased in September 1999 and September 2000. For the years ended December 31,
2000, 1999, and 1998, the Company's share of net operating income was $8.3
million, $8.0 million, and $1.8 million, respectively, and as of December 31,
2000 and 1999, the Company's share of the unconsolidated joint venture debt was
$28.8 million and $22.7 million, respectively, with a weighted average interest
rate of 7.3% and weighted average maturity of 4.4 years.
F-15
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
10. STOCKHOLDERS' EQUITY
On September 1, 2000, AMB Property II, L.P., one of the Company's
subsidiaries, issued and sold 840,000 8.125% Series H Cumulative Redeemable
Preferred Limited Partnership Units at a price of $50.00 per unit in a private
placement. Distributions are cumulative from the date of issuance and payable
quarterly in arrears at a rate per unit equal to $4.0625 per annum. The Series H
Preferred Units are redeemable by AMB Property II, L.P. on or after September 1,
2005, subject to certain conditions, for cash at a redemption price equal to
$50.00 per unit, plus accumulated and unpaid distributions thereon, if any, to
the redemption date. The Series H Preferred Units are exchangeable, at specified
times and subject to certain conditions, on a one-for-one basis, for shares of
the Company's Series H Preferred Stock. AMB Property II, L.P. used the net
proceeds of $41.0 million to repay advances from the Operating Partnership and
to make a loan to the Operating Partnership. The Operating Partnership used the
funds to partially repay borrowings under its unsecured credit facility and for
general corporate purposes. The loan bears interest at 8.0% per annum and is
payable on demand.
On August 29, 2000, AMB Property II, L.P. issued and sold 20,000 7.95%
Series G Cumulative Redeemable Preferred Limited Partnership Units at a price of
$50.00 per unit in a private placement. Distributions are cumulative from the
date of issuance and payable quarterly in arrears at a rate per unit equal to
$3.975 per annum. The Series G Preferred Units are redeemable by AMB Property
II, L.P. on or after August 29, 2005, subject to certain conditions, for cash at
a redemption price equal to $50.00 per unit, plus accumulated and unpaid
distributions thereon, if any, to the redemption date. The Series G Preferred
Units are exchangeable, at specified times and subject to certain conditions, on
a one-for-one basis, for shares of the Company's Series G Preferred Stock. AMB
Property II, L.P. used the net proceeds of $1.0 million to repay advances from
the Operating Partnership. The Operating Partnership used the funds for general
corporate purposes.
On March 22, 2000, AMB Property II, L.P. issued and sold 397,439 7.95%
Series F Cumulative Redeemable Preferred Limited Partnership Units at a price of
$50.00 per unit in a private placement. Distributions are cumulative from the
date of issuance and payable quarterly in arrears at a rate per unit equal to
$3.975 per annum. The Series F Preferred Units are redeemable by AMB Property
II, L.P. on or after March 22, 2005, subject to certain conditions, for cash at
a redemption price equal to $50.00 per unit, plus accumulated and unpaid
distributions thereon, if any, to the redemption date. The Series F Preferred
Units are exchangeable, at specified times and subject to certain conditions, on
a one-for-one basis, for shares of the Company's Series F Preferred Stock. AMB
Property II, L.P. loaned the net proceeds of $19.6 million to the Operating
Partnership. The Operating Partnership used the funds to partially repay
borrowings under its unsecured credit facility and for general corporate
purposes. The loan bears interest at 7.0% per annum and is payable upon demand.
At the time of the Company's initial public offering, 4,237,750 shares of
common stock, known as performance shares, were placed in escrow by certain of
the Company's investors, which were subject to advisory agreements with the
Company's predecessor that included incentive fee provisions. On January 7,
2000, 2,771,824 shares of common stock were released from escrow to these
investors and 1,465,926 shares of common stock were returned to the Company and
cancelled. The cancelled shares of common stock represent indirect interests in
the Operating Partnership that were reallocated from the Company (thereby
decreasing the number of shares of common stock outstanding) to other
unitholders who had an ownership interest in our predecessor, including certain
of the Company's executive officers, (thereby increasing the number of limited
partnership units owned by partners other than the Company). The total number of
outstanding partnership units did not change as a result of this reallocation.
This reallocation did not change the amount of fully diluted shares of common
stock and limited partnership units outstanding.
F-16
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
In November 2000, the Operating Partnership issued an aggregate of 94,771
limited partnership units with an aggregate value of approximately $2.2 million
to three limited partnerships. These limited partnership units were issued in
partial consideration for the acquisition of properties. Holders of the limited
partnership units may redeem part or all of their limited partnership units for
cash or, at the Company's election, exchange their limited partnership units for
shares of the Company's common stock on a one-for-one basis. During 2000, 34,046
limited partnership units were redeemed for cash and 206,423 limited partnership
units were redeemed for shares of the Company's common stock.
The Company's board of directors has approved a stock repurchase program
for the repurchase of up to $100.0 million worth of its common stock. During
2000, the Company did not repurchase any shares of its common stock. The stock
repurchase program expires in December 2001.
The following table sets forth the dividend payments per share or unit for
the years ended December 31, 2000 and 1999:
SECURITY PAYING ENTITY 2000 1999
-------- ------------- ----- -----
Common Stock Company............................ $1.48 $1.40
OP Units Operating Partnership.............. $1.48 $1.40
Series A Preferred Stock Company............................ $2.13 $2.13
Series A Preferred Units Operating Partnership.............. $2.13 $2.13
Series B Preferred Units Operating Partnership.............. $4.31 $4.31
Series C Preferred Units AMB Property II, L.P. ............. $4.38 $4.38
Series D Preferred Units AMB Property II, L.P. ............. $3.88 $2.48
Series E Preferred Units AMB Property II, L.P. ............. $3.88 $1.30
Series F Preferred Units AMB Property II, L.P. ............. $3.09 n/a
Series G Preferred Units AMB Property II, L.P. ............. $1.35 n/a
Series H Preferred Units AMB Property II, L.P. ............. $1.30 n/a
11. STOCK INCENTIVE PLAN AND 401(k) PLAN
Stock Incentive Plan. In November 1997, the Company established a Stock
Option and Incentive Plan (the "Stock Incentive Plan") for the purpose of
attracting and retaining eligible officers, directors, and employees. The
Company has reserved for issuance 8,950,000 shares of Common Stock under the
Stock Incentive Plan. As of December 31, 2000, the Company had granted
approximately 5,895,000 non-qualified options outstanding granted to certain
directors, officers, and employees. Each option is exchangeable for one share of
the Company's Common Stock. The options have a weighted average exercise price
of $20.83 and the exercise prices range from $18.13 to $26.06. Each option's
exercise price is equal to the Company's market price on the date of grant. The
options had an original ten-year term and generally vest pro rata in annual
installments over a three- or four-year period from the date of grant.
The Company applies APB Opinion No. 25, "Accounting for Stock Issued to
Employees" and related interpretations in accounting for its Stock Incentive
Plan. Opinion 25 measures compensation cost using the intrinsic value based
method of accounting. Under this method, compensation cost is the excess, if
any, of the quoted market price of the stock at the date of grant over the
amount an employee must pay to acquire the stock. Accordingly, no compensation
cost has been recognized for the Company's Stock Incentive Plan as of December
31, 2000.
As permitted by SFAS No. 123, "Accounting Stock-based Compensation," the
Company has not changed the method of accounting for stock options but has
provided the additional required disclosures. Had compensation cost for the
Company's stock-based compensation plans been determined based on the fair
F-17
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
value at the grant dates for awards under those plans consistent with the method
of SFAS No. 123, the Company's pro forma net income available to common
stockholders would have been reduced by $6.3 million, $3.2 million, and $1.8
million and pro forma basic and diluted earnings per share would have been
reduced to $1.28 and $1.27, and $1.92 and $1.92, and $1.25 and $1.24,
respectively, for the years ended December 31, 2000, 1999, and 1998.
The fair value of each option grant was estimated at the date of grant
using the Black-Scholes option-pricing model with the following assumptions used
for grants in 2000, 1999, and 1998, respectively: dividend yields of 6.5%, 7.2%,
and 6.3%; expected volatility of 13.3%, 18.5%, and 23.1%; risk-free interest
rates of 6.1%, 5.4%, and 4.9%; and expected lives of 10 years for each year.
Following is a summary of the option activity for the years ended December
31:
WEIGHTED OPTIONS
SHARES UNDER AVERAGE EXERCISABLE
OPTION (000'S) EXERCISE PRICE AT YEAR END
-------------- -------------- -----------
(DOLLARS IN THOUSANDS)
Outstanding, 12/31/97................................ 3,144 $21.00 --
-----
Granted.............................................. 1,508 21.69
Forfeited............................................ (268) --
---------- ------
Outstanding, 12/31/98................................ 4,384 21.40 622
-----
Granted.............................................. 451 22.24
Exercised............................................ (25) --
Forfeited............................................ (300) --
---------- ------
Outstanding, 12/31/99................................ 4,510 21.44 1,832
-----
Granted.............................................. 1,565 20.86
Exercised............................................ (103) 21.11
Forfeited............................................ (205) 21.21
---------- ------
Outstanding, 12/31/00................................ 5,767 20.83 3,326
========== ====== -----
Remaining average contractual life................... 7.9 years
==========
Fair value of options granted during the year........ $ 1.31
==========
In 2000, 1999, and 1998, under the Stock Incentive Plan, the Company issued
162,299, 100,000, and 43,007 restricted shares, respectively, to certain
officers of the Company as part of the performance pay program and in connection
with employment with the Company. As of December 31, 2000, 1,931 shares of
restricted stock have been forfeited. The 309,087 outstanding restricted shares
are subject to repurchase rights, which generally lapse over a period from three
to five years.
401(k) Plan. In November 1997, the Company established a Section 401(k)
Savings/Retirement Plan (the "401(k) Plan"), which is a continuation of the
401(k) Plan of the predecessor, to cover eligible employees of the Company and
any designated affiliates. During 2000 and 1999, the 401(k) Plan permitted
eligible employees of the Company to defer up to 20% and 10%, respectively, of
their annual compensation, subject to certain limitations imposed by the Code.
The employees' elective deferrals are immediately vested and non-forfeitable
upon contribution to the 401(k) Plan. During 2000 and 1999, the Company matched
the employee contributions to the 401(k) Plan in an amount equal to 50% of the
first 5.5% and 3.5%, respectively, of annual compensation deferred by each
employee. The Company may also make discretionary contributions to the 401(k)
Plan. In 2000 and 1999, the Company accrued $0.3 million and $0.2 million,
respectively, for its 401(k) match. Such amounts were included in Other
liabilities on the Consolidated Balance Sheets.
F-18
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
Deferred Compensation Plan. Effective September 1, 1999, the Company
established a non-qualified deferred compensation plan for officers of the
Company and certain of its affiliates. The plan enables participants to defer
income up to 25% of annual base pay and up to 100% of annual bonuses on a
pre-tax basis. The Company may make discretionary matching contributions to
participant accounts at any time. The Company made no such discretionary
matching contributions in 2000 or 1999. The participant's elective deferrals and
any matching contributions are immediately 100% vested. As of December 31, 2000
and 1999, the total amount of compensation deferred was $1.0 million and $0.2
million, respectively.
12. COMMITMENTS AND CONTINGENCIES
Commitments
Lease Commitments. The Company has entered into operating ground leases on
certain land parcels and a building with periods up to 50 years. Future minimum
rental payments required under non-cancelable operating leases in effect at
December 31, 2000, were as follows:
(DOLLARS IN
THOUSANDS)
2001...................................................... $ 4,948
2002...................................................... 5,012
2003...................................................... 5,052
2004...................................................... 5,217
2005...................................................... 4,828
Thereafter................................................ 133,970
--------
$159,027
========
These operating lease payments are being amortized ratably over the terms
of the related leases.
Contingencies
Litigation. In the normal course of business, from time to time, the
Company is involved in legal actions relating to the ownership and operations of
its properties. In management's opinion, the liabilities, if any, that may
ultimately result from such legal actions are not expected to have a material
adverse effect on the consolidated financial position, results of operations, or
cash flows of the Company.
Environmental Matters. The Company monitors its properties for the presence
of hazardous or toxic substances. The Company is not aware of any environmental
liability with respect to the properties that would have a material adverse
effect on the Company's business, assets, or results of operations. However,
there can be no assurance that such a material environmental liability does not
exist. The existence of any such material environmental liability would have an
adverse effect on the Company's results of operations and cash flow.
General Uninsured Losses. The Company carries property and rental loss,
liability, flood, and environmental insurance. The Company believes that the
policy terms and conditions, limits, and deductibles are adequate and
appropriate under the circumstances, given the relative risk of loss, the cost
of such coverage, and industry practice. In addition, certain of the Company's
properties are located in areas that are subject to earthquake activity;
therefore, the Company has obtained limited earthquake insurance on those
properties. There are, however, certain types of extraordinary losses that may
be either uninsurable or not economically insurable. Should an uninsured loss
occur, the Company could lose its investment in, and anticipated profits and
cash flows from, a property.
Minority Interest Put Option. Pursuant to the Company's partnership
agreement with one of its separate account co-investors, commencing March 31,
1999, and each year thereafter, the Company is required to
F-19
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
provide this co-investor a notice that sets forth the valuation of the
partnership as of the date of valuation. The co-investor then has the right to
require the Company to purchase all of its partnership interest based upon the
valuation in the form of cash, shares of the Company, or partnership units in
the Operating Partnership. The put option was not exercised by the co-investor
in 1999 nor 2000 and the Company does not anticipate that the put option will be
exercised in the coming year.
13. QUARTERLY FINANCIAL DATA
Selected quarterly financial data for 2000 and 1999 is as follows:
QUARTER (UNAUDITED)
------------------------------------------------------
DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31 YEAR
----------- ------------ ----------- ----------- -----------
2000 (DOLLARS IN THOUSANDS)
Revenues........................ $ 132,534 $ 121,371 $ 113,479 $ 110,323 $ 477,707
Income from operations before
minority interest............. 37,344 42,116 39,774 40,465 159,699
Minority interests' share of net
income........................ (12,284) (13,085) (10,183) (9,409) (44,961)
----------- ----------- ----------- ----------- -----------
Net income before gain from
divestiture of real
estate..................... 25,060 29,031 29,591 31,056 114,738
Gain/(loss) from divestiture of
real estate................... 824 5,815 416 (11) 7,044
----------- ----------- ----------- ----------- -----------
Net income.................... 25,884 34,846 30,007 31,045 121,782
Preferred stock dividends....... (2,125) (2,125) (2,125) (2,125) (8,500)
----------- ----------- ----------- ----------- -----------
Net income available to common
stockholders............... $ 23,759 $ 32,721 $ 27,882 $ 28,920 $ 113,282
=========== =========== =========== =========== ===========
NET INCOME PER COMMON SHARE(1)
Basic......................... $ 0.28 $ 0.39 $ 0.33 $ 0.34 $ 1.35
=========== =========== =========== =========== ===========
Diluted....................... $ 0.28 $ 0.39 $ 0.33 $ 0.34 $ 1.35
=========== =========== =========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING
Basic......................... 83,814,658 84,115,613 83,848,883 83,849,157 83,697,170
=========== =========== =========== =========== ===========
Diluted....................... 84,528,547 84,725,109 84,125,277 83,863,198 84,155,306
=========== =========== =========== =========== ===========
F-20
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
QUARTER (UNAUDITED)
------------------------------------------------------
DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31 YEAR
1999 ----------- ------------ ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
Revenues........................ $ 111,450 $ 111,784 $ 115,377 $ 109,572 $ 448,183
Income from operations before
minority interest............. 40,775 42,055 41,446 34,575 158,851
Minority interests' share of net
income........................ (9,644) (9,661) (8,145) (6,561) (34,011)
----------- ----------- ----------- ----------- -----------
Net income before gain from
divestiture of real
estate..................... 31,131 32,394 33,301 28,014 124,840
Gain from divestiture of real
estate........................ 20,696 21,532 11,525 -- 53,753
Extraordinary items............. 366 (1,347) (1,509) -- (2,490)
----------- ----------- ----------- ----------- -----------
Net income.................... 52,193 52,579 43,317 28,014 176,103
Preferred stock dividends....... (2,125) (2,125) (2,125) (2,125) (8,500)
----------- ----------- ----------- ----------- -----------
Net income available to common
stockholders............... $ 50,068 $ 50,454 $ 41,192 $ 25,889 $ 167,603
=========== =========== =========== =========== ===========
BASIC INCOME PER COMMON SHARE(1)
Before extraordinary items.... $ 0.58 $ 0.60 $ 0.50 $ 0.30 $ 1.97
Extraordinary items........... -- (0.02) (0.02) -- (0.03)
----------- ----------- ----------- ----------- -----------
Net income available to
common stockholders...... $ 0.58 $ 0.58 $ 0.48 $ 0.30 $ 1.94
=========== =========== =========== =========== ===========
DILUTED INCOME PER COMMON
SHARE(1)
Before extraordinary items.... $ 0.58 $ 0.60 $ 0.50 $ 0.30 $ 1.97
Extraordinary items........... -- (0.02) (0.02) -- (0.03)
----------- ----------- ----------- ----------- -----------
Net income available to
common stockholders...... $ 0.58 $ 0.58 $ 0.48 $ 0.30 $ 1.94
=========== =========== =========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING
Basic......................... 86,262,815 86,536,918 86,286,613 86,001,104 86,271,862
=========== =========== =========== =========== ===========
Diluted....................... 86,262,815 86,637,633 86,468,820 86,020,680 86,347,487
=========== =========== =========== =========== ===========
- ---------------
(1) The sum of quarterly financial data may vary from the annual data due to
rounding.
F-21
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
14. SEGMENT INFORMATION
The Company has two reportable property segments: industrial and retail.
The industrial properties consist primarily of warehouse distribution facilities
suitable for single or multiple tenants and are typically comprised of multiple
buildings, which are leased to tenants engaged in various types of businesses.
The retail properties are generally leased to one or more anchor tenants, such
as grocery and drug stores, and various retail businesses. The Company evaluates
performance based upon property net operating income of the combined properties
in each segment. The accounting policies of the segments are the same as those
described in the summary of significant accounting policies. The Company manages
these properties separately because each segment requires different operating,
pricing, and leasing strategies. Summary information for the reportable segments
is as follows:
INDUSTRIAL RETAIL TOTAL
PROPERTIES PROPERTIES PROPERTIES
---------- ---------- ----------
(DOLLARS IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31:
Rental revenues:(1)
2000.......................................... $ 436,369 $ 27,795 $ 464,164
1999.......................................... 352,861 86,797 439,658
1998.......................................... 248,134 106,524 354,658
Property net operating income:(1)(2)
2000.......................................... $ 336,933 $ 19,501 $ 356,434
1999.......................................... 269,339 62,396 331,735
1998.......................................... 187,218 79,025 266,243
Gross additions to properties:(3)
2000.......................................... $ 924,756 $ 30,760 $ 955,516
1999.......................................... 820,656 29,173 849,829
1998.......................................... 916,503 9,558 926,061
AT DECEMBER 31:
Investment in properties:(4)
2000.......................................... $3,876,202 $150,395 $4,026,597
1999.......................................... 3,177,283 72,169 3,249,452
1998.......................................... 2,574,940 794,120 3,369,060
- ---------------
(1) Includes straight-line rents of $10.2 million, $10.8 million, and $10.9
million for the years ended December 31, 2000, 1999, and 1998, respectively.
(2) Property net operating income (NOI) is defined as rental revenue, including
reimbursements and straight-line rents, less property level operating
expenses and excluding depreciation, amortization and interest expense.
(3) Represents costs incurred during the year for land, buildings, building
improvements, tenant improvements, leasing costs, and other related real
estate costs. Amounts are before divestitures of $162.5 million and $814.8
million for the years ended December 31, 2000 and 1999, respectively. There
were no property divestitures in 1998.
(4) Excludes net properties held for divestiture of $197.1 million, $181.2
million, and $115.1 million as of December 31, 2000, 1999, and 1998,
respectively. The $197.1 million net properties held for divestiture at
December 31, 2000, included $158.7 million and $38.4 million of industrial
and retail properties, respectively. At December 31, 1999, the Company held
three retail properties for divestiture that it didn't sell in 2000; the
Company held only one of these retail properties for divestiture at December
31, 2000, and classified the remaining two as investments in real estate.
F-22
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
The Company uses property net operating income as an operating performance
measure. The following is a reconciliation between total reportable segment
revenue and property net operating income to consolidated revenues and net
income:
2000 1999 1998
-------- -------- --------
REVENUES
Total rental revenues for reportable segments.............. $464,164 $439,658 $354,658
Investment management and other income..................... 13,543 8,525 4,229
-------- -------- --------
Total consolidated revenues...................... $477,707 $448,183 $358,887
======== ======== ========
NET INCOME
Property net operating income for reportable segments...... $356,434 $331,735 $266,243
Investment management and other income..................... 13,543 8,525 4,229
Less:
Interest expense......................................... 90,270 88,681 69,670
Depreciation and amortization............................ 96,258 67,505 57,464
General and administrative............................... 23,750 25,223 19,588
Minority interests....................................... 44,961 34,011 11,157
-------- -------- --------
Net income before gain from divestiture of real
estate........................................... 114,738 124,840 112,593
Gain from divestiture of real estate....................... 7,044 53,753 --
Extraordinary items........................................ -- (2,490) --
-------- -------- --------
Net income.......................................... $121,782 $176,103 $112,593
======== ======== ========
15. NEW ACCOUNTING PRONOUNCEMENT
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." SAB 101 provides guidance on applying generally accepted accounting
principles to revenue recognition issues in financial statements. The Company
has adopted SAB 101 as required and believes that SAB 101 does not have a
material impact on these consolidated financial statements.
F-23
AMB PROPERTY CORPORATION
SCHEDULE III
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 2000
(IN THOUSANDS, EXCEPT NUMBER OF BUILDINGS/CENTERS)
INITIAL COST TO COMPANY COSTS
----------------------- CAPITALIZED
NO. OF ENCUMBRANCES BUILDING & SUBSEQUENT TO
PROPERTY BLDGS./ CTRS. LOCATION TYPE (1) LAND IMPROVEMENTS ACQUISITION
-------- ------------- -------- ---- ------------ -------- ------------ -------------
Acer Distribution Center........... 1 CA IND $ -- $ 3,146 $ 9,479 $ 912
Activity Distribution Center....... 4 CA IND 5,040 3,736 11,248 469
Addison Business Center............ 1 IL IND -- 1,060 3,278 --
Addison Technology Center.......... 1 TX IND -- 899 2,696 221
Alsip Industrial................... 1 IL IND -- 1,200 3,744 232
Alvarado Business Center........... 5 CA IND -- 7,906 23,757 2,030
AMB Meadowlands Park............... 9 NJ IND -- 5,838 17,923 --
AMB O'Hare Rosemont................ 14 IL IND -- 2,717 8,995 775
Amwiler-Gwinnett Industrial
Portfolio......................... 9 GA IND 13,216 6,641 19,964 1,944
Anaheim Industrial................. 1 CA IND -- 1,457 4,341 330
Ardenwood Corporate Park........... 4 CA IND 9,634 7,321 22,002 477
Artesia Industrial Portfolio....... 27 CA IND 53,309 23,860 71,620 4,830
Atlanta South Business Park........ 9 GA IND -- 8,047 24,180 945
Atlantic Business Center (Formerly
Peachtree North East)............. 3 GA IND -- 2,197 6,592 1,332
Atlantic Distribution Center....... 1 GA IND 4,000 1,519 4,679 --
Beacon Centre...................... 23 FL IND 72,248 31,704 96,681 --
Beacon Centre -- Alliance Fund I... 4 FL IND 17,861 7,229 22,238 --
Beacon Industrial Park............. 8 FL IND 17,275 10,466 31,437 5,264
Belden Avenue...................... 3 IL IND -- 5,019 15,186 289
Beltway Distribution............... 1 VA IND -- 4,800 15,159 1,602
Bennington Corporate Center........ 2 MD IND -- 2,671 8,181 --
Bensenville Industrial Park........ 13 IL IND 39,520 20,799 62,438 4,577
Blue Lagoon Business Park.......... 2 FL IND 11,237 4,945 14,875 317
Boston Industrial Portfolio........ 20 MA IND 20,090 20,351 59,170 11,731
Braemar Business Center............ 2 MA IND -- 1,422 4,613 519
Bridgeview Industrial (Formerly
Lake Michigan Industrial)......... 1 IL IND -- 1,332 3,996 11
Burnsville Business Center......... 1 MN IND -- 932 2,796 614
BWI Air Cargo Centre............... 1 MD IND 3,159 -- 6,367 --
Cabot Business Park................ 17 MA IND -- 17,231 51,726 23,792
Cabot Business Park Land(7)........ 2 MA IND -- 2,024 17,131 --
GROSS AMOUNT CARRIED AT 12/31/00
------------------------------------- YEAR OF
BUILDING & TOTAL ACCUMULATED CONSTRUCTION/ DEPRECIABLE
PROPERTY LAND IMPROVEMENTS COSTS(2)(3) DEPRECIATION ACQUISITION LIFE (YEARS)
-------- -------- ------------ ----------- ------------ ------------- ------------
Acer Distribution Center........... $ 3,146 $ 10,391 $ 13,537 $ 641 1997 5 - 40
Activity Distribution Center....... 3,736 11,717 15,453 732 1997 5 - 40
Addison Business Center............ 1,060 3,228 4,287 203 2000 5 - 40
Addison Technology Center.......... 899 2,917 3,816 181 1998 5 - 40
Alsip Industrial................... 1,200 3,976 5,176 245 1998 5 - 40
Alvarado Business Center........... 7,906 25,787 33,693 1,595 1997 5 - 40
AMB Meadowlands Park............... 5,838 18,002 23,840 1,129 2000 5 - 40
AMB O'Hare Rosemont................ 2,717 9,770 12,487 591 1999 5 - 40
Amwiler-Gwinnett Industrial
Portfolio......................... 6,641 21,907 28,549 1,351 1997 5 - 40
Anaheim Industrial................. 1,457 4,671 6,128 290 1997 5 - 40
Ardenwood Corporate Park........... 7,321 22,479 29,800 1,411 1997 5 - 40
Artesia Industrial Portfolio....... 23,860 76,450 100,310 4,749 1997 5 - 40
Atlanta South Business Park........ 8,047 25,125 33,172 1,570 1997 5 - 40
Atlantic Business Center (Formerly
Peachtree North East)............. 2,197 7,924 10,121 479 1998 5 - 40
Atlantic Distribution Center....... 1,519 4,683 6,202 294 2000 5 - 40
Beacon Centre...................... 31,704 101,174 132,878 6,290 2000 5 - 40
Beacon Centre -- Alliance Fund I... 7,229 22,238 29,467 1,395 2000 5 - 40
Beacon Industrial Park............. 10,466 36,701 47,167 2,233 1997 5 - 40
Belden Avenue...................... 5,019 15,475 20,494 970 1997 5 - 40
Beltway Distribution............... 4,800 16,761 21,561 1,021 1999 5 - 40
Bennington Corporate Center........ 2,671 8,181 10,853 514 2000 5 - 40
Bensenville Industrial Park........ 20,799 67,015 87,814 4,157 1997 5 - 40
Blue Lagoon Business Park.......... 4,945 15,192 20,137 953 1997 5 - 40
Boston Industrial Portfolio........ 22,764 68,488 91,252 4,320 1998 5 - 40
Braemar Business Center............ 1,422 5,132 6,554 310 1998 5 - 40
Bridgeview Industrial (Formerly
Lake Michigan Industrial)......... 1,332 4,007 5,339 253 1997 5 - 40
Burnsville Business Center......... 932 3,410 4,343 206 1998 5 - 40
BWI Air Cargo Centre............... -- 6,367 6,367 301 2000 5 - 40
Cabot Business Park................ 22,240 70,510 92,750 4,391 1998 5 - 40
Cabot Business Park Land(7)........ 2,024 17,131 19,154 907 2000 5 - 40
S-1
AMB PROPERTY CORPORATION
SCHEDULE III
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
INITIAL COST TO COMPANY
-----------------------
NO. OF ENCUMBRANCES BUILDING &
PROPERTY BLDGS./ CTRS. LOCATION TYPE (1) LAND IMPROVEMENTS
-------- ------------- -------- ---- ------------ -------- ------------
Carson Industrial......................... 12 CA IND $ -- $ 4,231 $ 10,418
Cascade Business Center................... 4 OR IND -- 2,825 7,860
Chancellor................................ 1 FL IND 2,776 1,587 4,802
Chancellor Square......................... 3 FL IND 15,903 7,575 22,721
Chartwell Distribution Center............. 1 CA IND -- 2,711 8,191
Chemway Industrial Portfolio.............. 5 NC IND -- 2,875 8,625
Chicago Industrial Portfolio.............. 2 IL IND 3,079 1,574 4,761
Columbia Business Center.................. 9 MD IND 4,408 3,856 11,736
Concord Industrial Portfolio.............. 10 CA IND 10,050 3,719 11,647
Corporate Park/Hickory Hill............... 7 TN IND 16,325 6,789 20,366
Corporate Square Industrial............... 6 MN IND -- 4,024 12,113
Corridor Industrial....................... 1 MD IND 2,461 996 3,019
Crysen Industrial......................... 1 DC IND 3,223 1,425 4,275
D/FW Int'l Air Cargo -- Alliance Fund I... 1 TX IND -- -- 19,683
Dallas Industrial (Formerly Taxas
Industrial Portfolio).................... 18 TX IND -- 7,798 23,433
Dayton Air Cargo Centre................... 5 OH IND 6,845 -- 8,364
Del Amo Industrial Center................. 1 CA IND -- 2,529 7,651
DFW Air Cargo Centre...................... 3 TX IND 6,317 -- 20,632
DFW Airfreight Portfolio.................. 6 TX IND -- 950 8,492
Diablo Industrial Park.................... 14 CA IND 9,900 3,226 10,045
Dock's Corner............................. 1 NJ IND -- 2,050 6,190
Dock's Corner II.......................... 1 NJ IND -- 2,272 6,917
Doolittle Distribution Center............. 1 CA IND -- 2,644 8,014
Dowe Industrial Center.................... 2 CA IND -- 2,665 8,034
Dublin Industrial Portfolio............... 1 CA IND -- 2,980 9,042
East Valley Warehouse..................... 1 WA IND -- 6,813 20,511
Edenvale Business Center.................. 1 MN IND 1,419 919 2,411
Elk Grove Village Industrial.............. 11 IL IND -- 7,713 23,179
Elmwood Business Park..................... 5 LA IND -- 4,163 12,488
Executive Drive........................... 1 IL IND -- 1,399 4,236
Fairway Drive Industrial.................. 4 CA IND -- 3,219 9,677
Garland Industrial........................ 20 TX IND 19,600 8,161 24,484
Gateway 58................................ 3 MD IND -- 3,256 10,592
COSTS GROSS AMOUNT CARRIED AT 12/31/00
CAPITALIZED ------------------------------------- YEAR OF
SUBSEQUENT TO BUILDING & TOTAL ACCUMULATED CONSTRUCTION/
PROPERTY ACQUISITION LAND IMPROVEMENTS COSTS(2)(3) DEPRECIATION ACQUISITION
-------- ------------- -------- ------------ ----------- ------------ -------------
Carson Industrial......................... $ 2,833 $ 4,231 $ 13,252 $ 17,483 $ 828 1999
Cascade Business Center................... 1,863 2,825 9,724 12,549 594 1998
Chancellor................................ 87 1,587 4,890 6,477 307 1997
Chancellor Square......................... 2,209 7,575 24,929 32,504 1,539 1998
Chartwell Distribution Center............. -- 2,711 8,206 10,918 517 2000
Chemway Industrial Portfolio.............. 641 2,875 9,266 12,141 575 1998
Chicago Industrial Portfolio.............. 350 1,574 5,110 6,684 316 1997
Columbia Business Center.................. 811 3,856 12,547 16,403 776 1999
Concord Industrial Portfolio.............. 1,822 3,872 13,316 17,188 814 1999
Corporate Park/Hickory Hill............... 542 6,789 20,908 27,697 1,311 1998
Corporate Square Industrial............... 729 4,024 12,842 16,867 798 1997
Corridor Industrial....................... 108 996 3,127 4,123 195 1999
Crysen Industrial......................... 436 1,425 4,711 6,136 290 1998
D/FW Int'l Air Cargo -- Alliance Fund I... 466 -- 20,149 20,149 954 1999
Dallas Industrial (Formerly Taxas
Industrial Portfolio).................... -- 7,798 26,385 34,183 1,618 1997
Dayton Air Cargo Centre................... -- -- 8,364 8,364 396 2000
Del Amo Industrial Center................. -- 2,529 7,660 10,189 482 2000
DFW Air Cargo Centre...................... -- -- 20,632 20,632 977 2000
DFW Airfreight Portfolio.................. -- 950 8,750 9,700 459 2000
Diablo Industrial Park.................... 1,908 3,653 11,526 15,179 719 1999
Dock's Corner............................. 49,692 5,125 52,807 57,932 2,742 1997
Dock's Corner II.......................... 349 2,272 7,267 9,539 452 1997
Doolittle Distribution Center............. -- 2,644 8,016 10,660 505 2000
Dowe Industrial Center.................... 987 2,665 9,021 11,685 553 1997
Dublin Industrial Portfolio............... -- 2,980 9,042 12,022 569 2000
East Valley Warehouse..................... 1,234 6,813 21,745 28,558 1,352 1999
Edenvale Business Center.................. 647 919 3,058 3,977 188 1998
Elk Grove Village Industrial.............. 1,337 7,713 24,516 32,229 1,526 1997
Elmwood Business Park..................... 696 4,163 13,183 17,346 821 1998
Executive Drive........................... 421 1,399 4,657 6,055 287 1997
Fairway Drive Industrial.................. 5,643 3,219 15,321 18,539 878 1997
Garland Industrial........................ 2,659 8,161 27,143 35,304 1,671 1998
Gateway 58................................ -- 3,256 9,947 13,203 625 2000
DEPRECIABLE
PROPERTY LIFE (YEARS)
-------- ------------
Carson Industrial......................... 5 - 40
Cascade Business Center................... 5 - 40
Chancellor................................ 5 - 40
Chancellor Square......................... 5 - 40
Chartwell Distribution Center............. 5 - 40
Chemway Industrial Portfolio.............. 5 - 40
Chicago Industrial Portfolio.............. 5 - 40
Columbia Business Center.................. 5 - 40
Concord Industrial Portfolio.............. 5 - 40
Corporate Park/Hickory Hill............... 5 - 40
Corporate Square Industrial............... 5 - 40
Corridor Industrial....................... 5 - 40
Crysen Industrial......................... 5 - 40
D/FW Int'l Air Cargo -- Alliance Fund I... 5 - 40
Dallas Industrial (Formerly Taxas
Industrial Portfolio).................... 5 - 40
Dayton Air Cargo Centre................... 5 - 40
Del Amo Industrial Center................. 5 - 40
DFW Air Cargo Centre...................... 5 - 40
DFW Airfreight Portfolio.................. 5 - 40
Diablo Industrial Park.................... 5 - 40
Dock's Corner............................. 5 - 40
Dock's Corner II.......................... 5 - 40
Doolittle Distribution Center............. 5 - 40
Dowe Industrial Center.................... 5 - 40
Dublin Industrial Portfolio............... 5 - 40
East Valley Warehouse..................... 5 - 40
Edenvale Business Center.................. 5 - 40
Elk Grove Village Industrial.............. 5 - 40
Elmwood Business Park..................... 5 - 40
Executive Drive........................... 5 - 40
Fairway Drive Industrial.................. 5 - 40
Garland Industrial........................ 5 - 40
Gateway 58................................ 5 - 40
S-2
AMB PROPERTY CORPORATION
SCHEDULE III
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
INITIAL COST TO COMPANY
-----------------------
NO. OF ENCUMBRANCES BUILDING &
PROPERTY BLDGS./ CTRS. LOCATION TYPE (1) LAND IMPROVEMENTS
-------- ------------- -------- ---- ------------ -------- ------------
Gateway Commerce Center................... 5 MD IND $ -- $ 4,083 $ 12,336
Gateway Corporate Center.................. 9 WA IND 27,000 9,981 32,201
Gateway North............................. 6 WA IND 14,000 5,932 18,941
Greater Dallas Industrial Portfolio....... 9 TX IND -- 9,995 31,451
Greater Houston Industrial Portfolio...... 14 TX IND -- 6,197 18,592
Greenwood Industrial...................... 3 MD IND -- 4,729 14,188
Hamilton Parkway (Formerly Lake Michigan
Industrial).............................. 1 IL IND -- 1,554 4,703
Harris Business Center.................... 10 CA IND -- 13,396 40,408
Harris Business Center -- Alliance Fund
I........................................ 10 CA IND 28,000 11,235 34,326
Harvest Business Park..................... 3 WA IND -- 2,371 7,153
Hawthorne LAX Cargo Center................ 1 CA IND -- 2,775 8,377
Hayward Industrial -- Hathaway............ 2 CA IND -- 4,473 13,546
Hayward Industrial -- Wiegman............. 1 CA IND -- 2,773 8,393
Hempstead Highway Distribution Center..... 2 TX IND -- 1,255 9,087
Hintz Building............................ 1 IL IND -- 420 1,259
Houston Industrial (Formerly Texas
Industrial Portfolio).................... 5 TX IND -- 3,009 9,066
Houston Service Center.................... 3 TX IND -- 3,800 11,401
International Multifoods.................. 1 CA IND -- 1,613 4,879
Itasca Industrial Portfolio............... 6 IL IND -- 6,416 19,289
Jacksonville Air Cargo Centre............. 1 FL IND 3,175 -- 3,255
Jamesburg................................. 3 NJ IND 23,376 11,700 35,101
JFK Air Cargo............................. 20 NY IND -- 15,434 45,660
JFK Air Cargo -- Alliance Fund I.......... 16 NY IND 19,679 10,085 29,748
JFK Airport Park.......................... 1 NY IND -- 2,350 7,251
Junction Industrial Park.................. 4 CA IND -- 7,875 23,975
Kent Centre Corporate Park................ 4 WA IND -- 3,042 9,165
Kingsport Industrial Park................. 7 WA IND 16,813 7,919 23,798
L.A. County Industrial Portfolio.......... 7 CA IND -- 9,671 29,082
Laurelwood Drive.......................... 2 CA IND -- 2,750 8,538
LAX Air Cargo Centre...................... 3 CA IND 8,042 -- 13,445
Lincoln Industrial Center................. 1 TX IND -- 671 2,052
Linden Industrial......................... 1 NJ IND -- 900 2,753
COSTS GROSS AMOUNT CARRIED AT 12/31/00
CAPITALIZED ------------------------------------- YEAR OF
SUBSEQUENT TO BUILDING & TOTAL ACCUMULATED CONSTRUCTION/
PROPERTY ACQUISITION LAND IMPROVEMENTS COSTS(2)(3) DEPRECIATION ACQUISITION
-------- ------------- -------- ------------ ----------- ------------ -------------
Gateway Commerce Center................... $ 800 $ 4,083 $ 13,136 $ 17,219 $ 815 1999
Gateway Corporate Center.................. (19) 9,981 32,182 42,164 1,996 1999
Gateway North............................. (396) 5,932 18,545 24,476 1,159 1999
Greater Dallas Industrial Portfolio....... 7,704 9,995 39,155 49,150 2,327 1997
Greater Houston Industrial Portfolio...... 2,437 6,197 21,029 27,226 1,289 1998
Greenwood Industrial...................... 1,134 4,729 15,321 20,051 949 1998
Hamilton Parkway (Formerly Lake Michigan
Industrial).............................. -- 1,554 4,807 6,361 301 1997
Harris Business Center.................... -- 13,396 40,408 53,804 2,547 2000
Harris Business Center -- Alliance Fund
I........................................ -- 11,235 34,326 45,561 2,157 2000
Harvest Business Park..................... 678 2,371 7,831 10,202 483 1997
Hawthorne LAX Cargo Center................ -- 2,775 8,377 11,152 528 2000
Hayward Industrial -- Hathaway............ -- 4,473 13,546 18,018 853 2000
Hayward Industrial -- Wiegman............. -- 2,773 8,393 11,165 529 2000
Hempstead Highway Distribution Center..... -- 1,255 9,692 10,947 518 2000
Hintz Building............................ 246 420 1,505 1,924 91 1998
Houston Industrial (Formerly Texas
Industrial Portfolio).................... 1,087 3,009 10,153 13,162 623 1997
Houston Service Center.................... 1,962 3,800 13,363 17,163 812 1998
International Multifoods.................. 126 1,613 5,005 6,618 313 1997
Itasca Industrial Portfolio............... 1,939 6,416 21,228 27,644 1,309 1997
Jacksonville Air Cargo Centre............. -- -- 3,255 3,255 154 2000
Jamesburg................................. 870 11,700 35,971 47,672 2,257 1998
JFK Air Cargo............................. -- 15,434 46,337 61,771 2,924 2000
JFK Air Cargo -- Alliance Fund I.......... -- 10,085 30,363 40,448 1,915 2000
JFK Airport Park.......................... -- 2,350 7,313 9,662 457 2000
Junction Industrial Park.................. 920 7,875 24,895 32,770 1,551 1999
Kent Centre Corporate Park................ 681 3,042 9,846 12,888 610 1997
Kingsport Industrial Park................. 1,019 7,919 24,817 32,737 1,550 1997
L.A. County Industrial Portfolio.......... 768 9,671 29,850 39,521 1,871 1997
Laurelwood Drive.......................... 115 2,750 8,653 11,403 540 1997
LAX Air Cargo Centre...................... -- -- 13,445 13,445 636 2000
Lincoln Industrial Center................. 192 671 2,244 2,914 138 1997
Linden Industrial......................... 22 900 2,775 3,675 174 1999
DEPRECIABLE
PROPERTY LIFE (YEARS)
-------- ------------
Gateway Commerce Center................... 5 - 40
Gateway Corporate Center.................. 5 - 40
Gateway North............................. 5 - 40
Greater Dallas Industrial Portfolio....... 5 - 40
Greater Houston Industrial Portfolio...... 5 - 40
Greenwood Industrial...................... 5 - 40
Hamilton Parkway (Formerly Lake Michigan
Industrial).............................. 5 - 40
Harris Business Center.................... 5 - 40
Harris Business Center -- Alliance Fund
I........................................ 5 - 40
Harvest Business Park..................... 5 - 40
Hawthorne LAX Cargo Center................ 5 - 40
Hayward Industrial -- Hathaway............ 5 - 40
Hayward Industrial -- Wiegman............. 5 - 40
Hempstead Highway Distribution Center..... 5 - 40
Hintz Building............................ 5 - 40
Houston Industrial (Formerly Texas
Industrial Portfolio).................... 5 - 40
Houston Service Center.................... 5 - 40
International Multifoods.................. 5 - 40
Itasca Industrial Portfolio............... 5 - 40
Jacksonville Air Cargo Centre............. 5 - 40
Jamesburg................................. 5 - 40
JFK Air Cargo............................. 5 - 40
JFK Air Cargo -- Alliance Fund I.......... 5 - 40
JFK Airport Park.......................... 5 - 40
Junction Industrial Park.................. 5 - 40
Kent Centre Corporate Park................ 5 - 40
Kingsport Industrial Park................. 5 - 40
L.A. County Industrial Portfolio.......... 5 - 40
Laurelwood Drive.......................... 5 - 40
LAX Air Cargo Centre...................... 5 - 40
Lincoln Industrial Center................. 5 - 40
Linden Industrial......................... 5 - 40
S-3
AMB PROPERTY CORPORATION
SCHEDULE III
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
INITIAL COST TO COMPANY
-----------------------
NO. OF ENCUMBRANCES BUILDING &
PROPERTY BLDGS./ CTRS. LOCATION TYPE (1) LAND IMPROVEMENTS
-------- ------------- -------- ---- ------------ -------- ------------
Linder Skokie............................. 1 IL IND $ -- $ 2,938 $ 8,854
Locke Drive............................... 1 MA IND -- 1,074 3,227
Lonestar.................................. 7 TX IND 16,956 7,129 21,428
Los Nietos................................ 4 CA IND -- 2,518 7,624
MCI I Air Cargo Centre.................... 1 MO IND 5,460 -- 7,258
MCI II Air Cargo Centre................... 1 MO IND 9,695 -- 9,726
Meadow Lane 495........................... 1 NJ IND -- 838 2,594
Meadowlands Cross Dock.................... 1 NJ IND -- 1,110 3,485
Meadowridge............................... 3 MD IND -- 3,716 11,147
Melrose Park.............................. 1 IL IND -- 2,936 9,190
Mendota Heights........................... 1 MN IND 668 1,367 4,565
Metric Center............................. 5 TX IND -- 10,968 32,944
Miami Airport Business Center............. 6 FL IND -- 6,400 19,634
Milmont Page Business Center.............. 3 CA IND -- 3,201 9,642
Minneapolis Distribution Portfolio........ 4 MN IND -- 6,227 18,692
Minneapolis Industrial Portfolio IV....... 4 MN IND 7,790 4,938 14,854
Minneapolis Industrial V.................. 7 MN IND 6,017 4,426 13,317
Minnetonka................................ 10 MN IND 12,006 6,794 20,380
Moffett Business Center (MBC
Industrial).............................. 4 CA IND 12,138 5,892 17,716
Moffett Park R&D Portfolio................ 14 CA IND -- 14,807 44,462
Murray Hill Parkway....................... 2 NJ IND -- 1,670 2,568
NDP -- Chicago (Formerly Glen Ellyn Rd. &
Mitel Drive)............................. 3 IL IND -- 1,496 4,487
NDP -- Los Angeles........................ 6 CA IND 10,170 5,948 17,844
NDP -- Seattle............................ 4 WA IND -- 3,888 11,663
Newark Airport............................ 2 NJ IND 3,832 1,755 5,400
Norcross/Brookhollow Portfolio............ 4 GA IND -- 3,721 11,180
Normandie Industrial...................... 1 CA IND -- 2,398 7,491
Northpointe Commerce...................... 2 CA IND -- 1,773 5,358
Northwest Business Center (Formerly
Marietta Industrial)..................... 3 GA IND -- 1,830 5,489
Northwest Crossing Distribution Center.... 2 TX IND -- 745 4,792
Northwest Distribution Center............. 3 WA IND -- 3,533 10,751
Oakland Ridge Industrial Center........... 12 MD IND 7,222 5,571 16,933
COSTS GROSS AMOUNT CARRIED AT 12/31/00
CAPITALIZED ------------------------------------- YEAR OF
SUBSEQUENT TO BUILDING & TOTAL ACCUMULATED CONSTRUCTION/
PROPERTY ACQUISITION LAND IMPROVEMENTS COSTS(2)(3) DEPRECIATION ACQUISITION
-------- ------------- -------- ------------ ----------- ------------ -------------
Linder Skokie............................. $ 1,285 $ 2,938 $ 10,139 $ 13,077 $ 619 1997
Locke Drive............................... 69 1,074 3,295 4,369 207 1998
Lonestar.................................. 583 7,129 22,011 29,140 1,379 1997
Los Nietos................................ 149 2,518 7,772 10,290 487 1999
MCI I Air Cargo Centre.................... -- -- 7,258 7,258 344 2000
MCI II Air Cargo Centre................... -- -- 9,726 9,726 460 2000
Meadow Lane 495........................... 47 838 2,641 3,479 165 1999
Meadowlands Cross Dock.................... -- 1,110 4,160 5,270 249 2000
Meadowridge............................... 115 3,716 11,262 14,978 709 1998
Melrose Park.............................. 478 2,936 9,668 12,604 597 1997
Mendota Heights........................... 1,940 1,367 6,505 7,872 373 1998
Metric Center............................. 609 10,968 33,553 44,521 2,108 1997
Miami Airport Business Center............. 385 6,400 20,018 26,418 1,251 1999
Milmont Page Business Center.............. 397 3,201 10,039 13,240 627 1997
Minneapolis Distribution Portfolio........ 1,206 6,227 19,898 26,125 1,237 1997
Minneapolis Industrial Portfolio IV....... 1,571 4,938 16,425 21,363 1,011 1997
Minneapolis Industrial V.................. 1,372 4,426 14,688 19,114 905 1997
Minnetonka................................ 2,321 6,794 22,702 29,495 1,396 1998
Moffett Business Center (MBC
Industrial).............................. 2,974 5,892 20,691 26,583 1,258 1997
Moffett Park R&D Portfolio................ 6,313 14,805 50,778 65,583 3,105 1997
Murray Hill Parkway....................... 2,859 1,670 5,426 7,096 336 1999
NDP -- Chicago (Formerly Glen Ellyn Rd. &
Mitel Drive)............................. 602 1,496 5,089 6,585 312 1998
NDP -- Los Angeles........................ 1,116 5,948 18,959 24,907 1,179 1998
NDP -- Seattle............................ 584 3,888 12,247 16,134 764 1998
Newark Airport............................ -- 1,755 5,416 7,171 339 2000
Norcross/Brookhollow Portfolio............ 500 3,721 11,680 15,401 729 1997
Normandie Industrial...................... -- 2,398 7,504 9,902 469 2000
Northpointe Commerce...................... 266 1,773 5,625 7,398 350 1997
Northwest Business Center (Formerly
Marietta Industrial)..................... 717 1,830 6,206 8,036 380 1998
Northwest Crossing Distribution Center.... -- 745 4,792 5,537 262 2000
Northwest Distribution Center............. 744 3,533 11,495 15,028 711 1997
Oakland Ridge Industrial Center........... 2,961 5,571 19,894 25,465 1,205 1999
DEPRECIABLE
PROPERTY LIFE (YEARS)
-------- ------------
Linder Skokie............................. 5 - 40
Locke Drive............................... 5 - 40
Lonestar.................................. 5 - 40
Los Nietos................................ 5 - 40
MCI I Air Cargo Centre.................... 5 - 40
MCI II Air Cargo Centre................... 5 - 40
Meadow Lane 495........................... 5 - 40
Meadowlands Cross Dock.................... 5 - 40
Meadowridge............................... 5 - 40
Melrose Park.............................. 5 - 40
Mendota Heights........................... 5 - 40
Metric Center............................. 5 - 40
Miami Airport Business Center............. 5 - 40
Milmont Page Business Center.............. 5 - 40
Minneapolis Distribution Portfolio........ 5 - 40
Minneapolis Industrial Portfolio IV....... 5 - 40
Minneapolis Industrial V.................. 5 - 40
Minnetonka................................ 5 - 40
Moffett Business Center (MBC
Industrial).............................. 5 - 40
Moffett Park R&D Portfolio................ 5 - 40
Murray Hill Parkway....................... 5 - 40
NDP -- Chicago (Formerly Glen Ellyn Rd. &
Mitel Drive)............................. 5 - 40
NDP -- Los Angeles........................ 5 - 40
NDP -- Seattle............................ 5 - 40
Newark Airport............................ 5 - 40
Norcross/Brookhollow Portfolio............ 5 - 40
Normandie Industrial...................... 5 - 40
Northpointe Commerce...................... 5 - 40
Northwest Business Center (Formerly
Marietta Industrial)..................... 5 - 40
Northwest Crossing Distribution Center.... 5 - 40
Northwest Distribution Center............. 5 - 40
Oakland Ridge Industrial Center........... 5 - 40
S-4
AMB PROPERTY CORPORATION
SCHEDULE III
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
INITIAL COST TO COMPANY
-----------------------
NO. OF ENCUMBRANCES BUILDING &
PROPERTY BLDGS./ CTRS. LOCATION TYPE (1) LAND IMPROVEMENTS
-------- ------------- -------- ---- ------------ -------- ------------
O'Hare Industrial Portfolio............... 15 IL IND $ -- $ 7,357 $ 22,112
Orlando Central Park (OCP)................ 2 FL IND -- 1,779 79,082
Pacific Business Center................... 2 CA IND 9,328 5,417 16,291
Pacific Service Center.................... 1 GA IND -- 504 1,511
Pardee Drive.............................. 1 CA IND -- 619 1,924
Parkway Business Center................... 1 MN IND -- 475 1,425
Patuxent.................................. 2 MD IND -- 1,696 5,127
Peninsula Business Center III............. 1 VA IND -- 992 2,976
Penn James Office Warehouse............... 2 MN IND -- 1,991 6,013
Pioneer Alburtis.......................... 5 CA IND -- 2,355 7,163
Porete Avenue Warehouse................... 1 NJ IND 9,205 4,067 12,202
Presidents Drive.......................... 6 FL IND -- 3,687 11,307
Preston Court............................. 1 MD IND -- 2,313 7,192
Riverside Business Center (Formerly North
GSW)..................................... 2 TX IND -- 1,000 8,988
Round Lake Business Center................ 1 MN IND -- 875 2,625
Sand Lake Service Center.................. 6 FL IND -- -- --
Scripps Sorrento.......................... 1 CA IND -- 1,110 3,330
Sea Tac I Air Cargo Centre................ 2 WA IND 5,274 -- 15,594
Sea Tac II Air Cargo Centre............... 1 WA IND -- -- 3,056
Seattle Airport Industrial................ 1 WA IND -- 619 1,923
Shawnee Industrial........................ 1 GA IND -- 7,531 2,026
Silicon Valley R&D Portfolio(*)........... 6 CA IND -- 8,024 24,205
Slauson Distribution Center............... 8 CA IND -- 7,806 23,552
South Bay Industrial...................... 7 CA IND 18,693 14,992 45,016
South Point Business Park................. 7 NC IND 10,725 5,371 16,113
Southfield Industrial Portfolio........... 13 GA IND -- 11,827 35,730
Stadium Business Park..................... 9 CA IND 4,582 3,768 11,345
Sunrise Industrial........................ 4 FL IND 13,593 6,266 18,798
Suwannee Creek Distribution Center(7)..... 3 GA IND -- 2,828 21,553
Sylvan.................................... 1 GA IND -- 1,946 5,905
Systematics............................... 1 CA IND -- 911 2,773
Technology I.............................. 2 MD IND -- 1,657 5,049
Technology II............................. 9 MD IND 2,460 10,206 3,761
COSTS GROSS AMOUNT CARRIED AT 12/31/00
CAPITALIZED ------------------------------------- YEAR OF
SUBSEQUENT TO BUILDING & TOTAL ACCUMULATED CONSTRUCTION/
PROPERTY ACQUISITION LAND IMPROVEMENTS COSTS(2)(3) DEPRECIATION ACQUISITION
-------- ------------- -------- ------------ ----------- ------------ -------------
O'Hare Industrial Portfolio............... $ 1,723 $ 7,357 $ 23,835 $ 31,192 $ 1,477 1997
Orlando Central Park (OCP)................ -- 1,779 9,748 11,527 546 1999
Pacific Business Center................... 742 5,417 17,033 22,450 1,063 1997
Pacific Service Center.................... 549 504 2,060 2,564 121 1998
Pardee Drive.............................. 4 619 1,929 2,547 121 1999
Parkway Business Center................... 395 475 1,820 2,295 109 1998
Patuxent.................................. 373 1,696 5,501 7,196 341 1997
Peninsula Business Center III............. 65 992 3,041 4,033 191 1998
Penn James Office Warehouse............... 681 1,991 6,694 8,684 411 1997
Pioneer Alburtis.......................... 209 2,355 7,372 9,727 460 1999
Porete Avenue Warehouse................... 8,341 4,067 20,543 24,610 1,165 1998
Presidents Drive.......................... 1,025 3,687 12,332 16,020 758 1997
Preston Court............................. 224 2,313 7,416 9,728 461 1997
Riverside Business Center (Formerly North
GSW)..................................... -- 1,000 8,988 9,988 473 1999
Round Lake Business Center................ 343 875 2,968 3,843 182 1998
Sand Lake Service Center.................. 1,172 -- 1,172 1,172 55 1998
Scripps Sorrento.......................... 32 1,110 3,363 4,473 212 1998
Sea Tac I Air Cargo Centre................ -- -- 15,594 15,594 738 2000
Sea Tac II Air Cargo Centre............... -- -- 3,056 3,056 145 2000
Seattle Airport Industrial................ -- 619 1,962 2,580 122 2000
Shawnee Industrial........................ 2,481 9,557 12,038 570 1999
Silicon Valley R&D Portfolio(*)........... 2,975 8,024 27,180 35,205 1,667 1997
Slauson Distribution Center............... -- 7,806 23,552 31,358 1,484 2000
South Bay Industrial...................... 3,393 14,992 48,409 63,402 3,001 1997
South Point Business Park................. 559 5,371 16,672 22,043 1,043 1998
Southfield Industrial Portfolio........... 1,491 11,827 37,221 49,048 2,322 1997
Stadium Business Park..................... 413 3,768 11,758 15,527 735 1997
Sunrise Industrial........................ 304 6,266 19,102 25,368 1,201 1998
Suwannee Creek Distribution Center(7)..... -- 2,828 21,553 24,381 1,154 1999
Sylvan.................................... 33 1,946 5,938 7,884 373 1999
Systematics............................... 40 911 2,813 3,724 176 1997
Technology I.............................. 63 1,657 5,112 6,769 320 1999
Technology II............................. 27,232 10,206 30,993 41,200 1,950 1999
DEPRECIABLE
PROPERTY LIFE (YEARS)
-------- ------------
O'Hare Industrial Portfolio............... 5 - 40
Orlando Central Park (OCP)................ 5 - 40
Pacific Business Center................... 5 - 40
Pacific Service Center.................... 5 - 40
Pardee Drive.............................. 5 - 40
Parkway Business Center................... 5 - 40
Patuxent.................................. 5 - 40
Peninsula Business Center III............. 5 - 40
Penn James Office Warehouse............... 5 - 40
Pioneer Alburtis.......................... 5 - 40
Porete Avenue Warehouse................... 5 - 40
Presidents Drive.......................... 5 - 40
Preston Court............................. 5 - 40
Riverside Business Center (Formerly North
GSW)..................................... 5 - 40
Round Lake Business Center................ 5 - 40
Sand Lake Service Center.................. 5 - 40
Scripps Sorrento.......................... 5 - 40
Sea Tac I Air Cargo Centre................ 5 - 40
Sea Tac II Air Cargo Centre............... 5 - 40
Seattle Airport Industrial................ 5 - 40
Shawnee Industrial........................ 5 - 40
Silicon Valley R&D Portfolio(*)........... 5 - 40
Slauson Distribution Center............... 5 - 40
South Bay Industrial...................... 5 - 40
South Point Business Park................. 5 - 40
Southfield Industrial Portfolio........... 5 - 40
Stadium Business Park..................... 5 - 40
Sunrise Industrial........................ 5 - 40
Suwannee Creek Distribution Center(7)..... 5 - 40
Sylvan.................................... 5 - 40
Systematics............................... 5 - 40
Technology I.............................. 5 - 40
Technology II............................. 5 - 40
S-5
AMB PROPERTY CORPORATION
SCHEDULE III
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
INITIAL COST TO COMPANY
-----------------------
NO. OF ENCUMBRANCES BUILDING &
PROPERTY BLDGS./ CTRS. LOCATION TYPE (1) LAND IMPROVEMENTS
-------- ------------- -------- ---- ------------ -------- ------------
TechRidge Phase IA........................ 3 TX IND $ 15,500 $ 6,348 $ 19,044
The Rotunda............................... 2 MD IND 13,020 4,400 17,736
Torrance Commerce Center.................. 6 CA IND -- 2,045 6,136
Twin Cities............................... 2 MN IND -- 4,873 14,638
Two South Middlesex....................... 1 NJ IND -- 2,247 6,781
Valwood................................... 2 TX IND 3,804 1,983 5,989
Van Nuys Airport Industrial............... 2 CA IND -- 2,481 7,508
Viscount.................................. 1 FL IND -- 984 3,016
Walnut Drive (Formerly East Walnut
Drive)................................... 1 CA IND -- 964 2,918
Weigman Road.............................. 1 CA IND -- 1,563 4,688
West North Carrier........................ 1 TX IND 3,079 1,375 4,165
West Pac Air Cargo Centre................. 1 PA IND -- -- 9,906
Williams & Bouroughs...................... 4 CA IND -- 294 6,981
Willow Park Industrial Portfolio.......... 21 CA IND 23,643 25,590 76,771
Willowlake Industrial Park................ 10 TN IND 29,654 11,997 35,990
Wilmington Avenue Wharehouse.............. 3 CA IND -- 5,561 19,429
Wilsonville............................... 1 OR IND -- 3,407 13,493
Windsor Court............................. 1 IL IND -- 766 2,338
Wood Dale Industrial (Includes Bonnie
Lane).................................... 5 IL IND -- 2,769 8,456
Yosemite Drive............................ 1 CA IND -- 2,350 7,051
Zanker/Charcot Industrial................. 5 CA IND -- 5,282 15,887
Around Lenox.............................. 1 GA RET 10,012 3,462 13,848
Howard and Western........................ 1 IL RET -- 700 2,983
Mazzeo.................................... 1 MA RET 3,716 1,477 4,432
The Plaza at Delray....................... 1 FL RET 22,287 6,968 27,914
--- -------- -------- ----------
Total.............................. 840 $799,509 $817,761 $2,708,489
=== ======== ======== ==========
COSTS GROSS AMOUNT CARRIED AT 12/31/00
CAPITALIZED ------------------------------------- YEAR OF
SUBSEQUENT TO BUILDING & TOTAL ACCUMULATED CONSTRUCTION/
PROPERTY ACQUISITION LAND IMPROVEMENTS COSTS(2)(3) DEPRECIATION ACQUISITION
-------- ------------- -------- ------------ ----------- ------------ -------------
TechRidge Phase IA........................ -- $ 6,348 $ 19,044 $ 25,392 $ 1,202 2000
The Rotunda............................... $ 1,109 4,400 18,845 23,246 1,100 1999
Torrance Commerce Center.................. 393 2,045 6,530 8,575 406 1998
Twin Cities............................... 1,259 4,873 15,897 20,770 983 1997
Two South Middlesex....................... 380 2,247 7,162 9,409 445 1997
Valwood................................... 632 1,983 6,621 8,604 407 1997
Van Nuys Airport Industrial............... -- 2,481 9,496 11,977 567 2000
Viscount.................................. 165 984 3,182 4,165 197 1997
Walnut Drive (Formerly East Walnut
Drive)................................... 41 964 2,959 3,922 186 1997
Weigman Road.............................. 169 1,563 4,857 6,420 304 1997
West North Carrier........................ 184 1,375 4,349 5,724 271 1997
West Pac Air Cargo Centre................. -- -- 9,906 9,906 469 2000
Williams & Bouroughs...................... 2,069 2,294 7,050 9,344 442 1999
Willow Park Industrial Portfolio.......... 6,819 25,590 83,590 109,180 5,168 1998
Willowlake Industrial Park................ 9,675 11,997 45,665 57,662 2,730 1998
Wilmington Avenue Wharehouse.............. -- 5,561 19,429 24,991 1,183 1999
Wilsonville............................... 55 3,407 13,548 16,955 803 1998
Windsor Court............................. 91 766 2,429 3,195 151 1997
Wood Dale Industrial (Includes Bonnie
Lane).................................... 1,023 2,769 9,478 12,247 580 1999
Yosemite Drive............................ 251 2,350 7,301 9,652 457 1997
Zanker/Charcot Industrial................. 724 5,282 16,611 21,894 1,036 1997
Around Lenox.............................. 1,107 3,462 14,955 18,417 872 1998
Howard and Western........................ 44 709 3,019 3,728 176 1999
Mazzeo.................................... 39 1,477 4,470 5,948 282 1998
The Plaza at Delray....................... 783 6,968 28,697 35,666 1,688 1997
-------- -------- ---------- ---------- --------
Total.............................. $277,551 $833,325 $2,915,537 $3,748,862 $177,467
======== ======== ========== ========== ========
DEPRECIABLE
PROPERTY LIFE (YEARS)
-------- ------------
TechRidge Phase IA........................ 5 - 40
The Rotunda............................... 5 - 40
Torrance Commerce Center.................. 5 - 40
Twin Cities............................... 5 - 40
Two South Middlesex....................... 5 - 40
Valwood................................... 5 - 40
Van Nuys Airport Industrial............... 5 - 40
Viscount.................................. 5 - 40
Walnut Drive (Formerly East Walnut
Drive)................................... 5 - 40
Weigman Road.............................. 5 - 40
West North Carrier........................ 5 - 40
West Pac Air Cargo Centre................. 5 - 40
Williams & Bouroughs...................... 5 - 40
Willow Park Industrial Portfolio.......... 5 - 40
Willowlake Industrial Park................ 5 - 40
Wilmington Avenue Wharehouse.............. 5 - 40
Wilsonville............................... 5 - 40
Windsor Court............................. 5 - 40
Wood Dale Industrial (Includes Bonnie
Lane).................................... 5 - 40
Yosemite Drive............................ 5 - 40
Zanker/Charcot Industrial................. 5 - 40
Around Lenox.............................. 5 - 40
Howard and Western........................ 5 - 40
Mazzeo.................................... 5 - 40
The Plaza at Delray....................... 5 - 40
Total..............................
S-6
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
- ---------------
(1) As of December 31, 2000, properties with a gross book value of $173.1
million, serves as collateral for outstanding indebtedness under a secured
debt facility of $73.0 million.
(2) Reconciliation of total cost to Consolidated Balance Sheet caption at
December 31, 2000:
Total per Schedule III(4)................................... $3,748,862
Construction in process(5).................................. 277,735
----------
Total investments in properties................... $4,026,597
==========
(3) As of December 31, 2000, the aggregate cost for federal income tax purposes
of investments in real estate was $3,567,229.
(4) A summary of activity for real estate and accumulated depreciation for the
year ended December 31, 2000, is as follows:
Investment in Real Estate:
Balance at beginning of year.............................. $3,064,137
Acquisition of properties(6).............................. 729,972
Improvements, including properties under
development/redevelopment.............................. 229,395
Divestiture of properties................................. (162,470)
Adjustment for properties held for divestiture............ (112,172)
----------
Balance at end of year.................................... $3,748,862
==========
Accumulated Depreciation:
Balance at beginning of year.............................. $ 103,558
Depreciation expense...................................... 96,258
Adjustment for properties divested........................ (11,429)
Adjustment for properties held for divestiture............ (10,920)
----------
Balance at end of year.................................... $ 177,467
==========
(5) Includes $226.5 million of fundings for projects under development at
December 31, 2000.
(6) Excludes investment of $13.2 million in unconsolidated joint ventures.
S-7
AMB PROPERTY CORPORATION
SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
AS OF DECEMBER 31, 2000
(IN THOUSANDS, EXCEPT PERCENTAGES)
MORTGAGE
DESCRIPTION RATE MATURITY RECEIVABLE
----------- ---- -------- ----------
Construction Loan - Pier 1 (1).............................. 11.00% March 2001 $ 36,969
First Mortgage - Manhattan Village Shopping Center (2)...... 8.75% September 2001 79,000
--------
Total.............................................. $115,969
========
- ---------------
(1) The Company financed the development of office space in an historical San
Francisco landmark that it holds in an unconsolidated joint venture. The
loan is to be replaced with permanent financing in 2001.
(2) During 2000, the Company sold a retail center in California for $89.0
million. The Company carries a mortgage on this retail center sale. This
mortgage has a one-year extension option.
S-8
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.1 Articles of Incorporation of the Registrant (incorporated by
reference to Exhibit 3.1 of the Registrant's Statement on
Form S-11 (No. 333-35915)).
3.2 Certificate of Correction of the Registrant's Articles
Supplementary establishing and fixing the rights and
preferences of the 8 1/2% Series A Cumulative Redeemable
Preferred Stock (incorporated by reference to Exhibit 3.2 of
the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1998).
3.3 Articles Supplementary establishing and fixing the rights
and preferences of the 8 5/8% Series B Cumulative Redeemable
Preferred Stock (incorporated by reference to Exhibit 3.1 of
the Registrant's Current Report on Form 8-K filed on January
7, 1999).
3.4 Articles Supplementary establishing and fixing the rights
and preferences of the 8.75% Series C Cumulative Redeemable
Preferred Stock (incorporated by reference to Exhibit 3.2 of
the Registrant's Current Report on Form 8-K filed on January
7, 1999).
3.5 Articles Supplementary establishing and fixing the rights
and preferences of the 7.75% Series D Cumulative Redeemable
Preferred Stock (incorporated by reference to Exhibit 3.1 of
the Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999).
3.6 Articles Supplementary establishing and fixing the rights
and preferences of the 7.75% Series E Cumulative Preferred
Stock (incorporated by reference to Exhibit 3.1 of the
Registrant's Current Report on Form 8-K filed on September
14, 1999).
3.7 Articles Supplementary establishing and fixing the rights
and preferences of the 7.95% Series F Cumulative Redeemable
Preferred Stock (incorporated by reference to Exhibit 3.1 of
the Registrant's Current Report on Form 8-K filed on April
14, 2000).
3.8 Articles Supplementary establishing and fixing the rights
and preferences of the 7.95% Series G Cumulative Redeemable
Preferred Stock (incorporated by reference to Exhibit 3.1 of
the Registrant's Current Report on Form 8-K filed on
September 29, 2000).
3.9 Articles Supplementary establishing and fixing the rights
and preferences of the 8.125% Series H Cumulative Redeemable
Preferred Stock (incorporated by reference to Exhibit 3.3 of
the Registrant's Current Report on Form 8-K filed on
September 29, 2000).
3.10 Articles Supplementary establishing and fixing the rights
and preferences of the 8.00% Series I Cumulative Redeemable
Preferred Stock (incorporated by reference to Exhibit 3.1 of
the Registrant's Curent Report on Form 8-K filed on March
23, 2001).
3.11 Second Amended and Restated Bylaws of the Registrant.
4.1 Form of Certificate for Common Stock of the Registrant
(incorporated by reference to Exhibit 3.3 of the
Registrant's Registration Statement on Form S-11 (No.
333-35915)).
4.2 Form of Certificate for 8.5% Series A Cumulative Redeemable
Preferred Stock (incorporated by reference to Exhibit 3.5(2)
of Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998.
4.3 Form of Fixed-Rate Medium Term Note, attaching the Form of
Parent Guarantee (incorporated herein by reference as
Exhibit 4.2 of the Registrant's Current Report on Form 8-K/A
filed on November 9, 2000).
4.4 Form of Floating-Rate Medium Term Note, attaching the Form
of Parent Guarantee (incorporated herein by reference as
Exhibit 4.3 of the Registrant's Current Report on Form 8-K/A
filed on November 9, 2000).
S-9
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
4.5 $30,000,000 7.925% Fixed Rate Note No. 1 dated August 18,
2000, attaching the Parent Guarantee dated August 15, 2000.
4.6 $25,000,000 7.925% Fixed Rate Note No. 2 dated September 12,
2000, attaching the Parent Guarantee dated September 12,
2000.
4.7 $50,000,000 8.00% Fixed Rate Note No. 3 dated October 26,
2000, attaching the Parent Guarantee dated October 26, 2000.
4.8 $25,000,000 8.000% Fixed Rate Note No. 4 dated October 26,
2000 attaching the Parent Guarantee dated October 26, 2000.
4.9 $50,000,000 7.20% Fixed Rate Note No. 5 dated December 19,
2000, attaching the Parent Guarantee dated December 19, 2000
(incorporated herein by reference to Exhibit 4.1 of the
Registrant's Current Report on Form 8-K filed on January 8,
2001).
4.10 $50,000,000 7.20% Fixed Rate Note No. 6 dated December 19,
2000, attaching the Parent Guarantee dated December 19, 2000
(incorporated herein by reference to Exhibit 4.2 of the
Registrant's Current Report on Form 8-K filed on January 8,
2001).
4.11 $50,000,000 7.20% Fixed Rate Note No. 7 dated December 19,
2000, attaching the Parent Guarantee dated December 19, 2000
(incorporated herein by reference to Exhibit 4.3 of the
Registrant's Current Report on Form 8-K filed on January 8,
2001).
4.12 Indenture dated as of June 30, 1998 by and among AMB
Property, L.P., the Registrant and State Street Bank and
Trust Company of California, N.A., as trustee (incorporated
by reference to Exhibit 4.1 of the Registrant's Registration
Statement on Form S-11 (No. 333-49163)).
4.13 First Supplemental Indenture dated as of June 30, 1998 by
and among AMB Property, L.P., the Registrant and State
Street Bank and Trust Company of California, N.A., as
trustee (incorporated by reference to Exhibit 4.2 of the
Registrant's Registration Statement Form S-11 (No.
333-49163)).
4.14 Second Supplemental Indenture dated as of June 30, 1998 by
and among AMB Property, L.P., the Registrant and State
Street Bank and Trust Company of California, N.A., as
trustee (incorporated by reference to Exhibit 4.3 of the
Registrant's Registration Statement on Form S-11 (No.
333-49163)).
4.15 Third Supplemental Indenture dated as of June 30, 1998 by
and among AMB Property, L.P., the Registrant and State
Street Bank and Trust Company of California, N.A., as
trustee (incorporated by reference to Exhibit 4.4 of the
Registrant's Registration Statement on Form S-11 (No.
333-49163)).
4.16 Fourth Supplemental Indenture, by and among AMB Property,
L.P., AMB Property Corporation and State Street Bank and
Trust Company of California, N.A., as trustee (incorporated
herein by reference as Exhibit 4.1 of the Registrant's
Current Report on Form 8-K/A filed on November 9, 2000).
4.17 Specimen of 7.10% Notes due 2008 (included in the First
Supplemental Indenture incorporated by reference as Exhibit
4.2 of the Registrant's Registration Statement on Form S-11
(No. 333-49163)).
4.18 Specimen of 7.50% Notes due 2018 (included in the Second
Supplemental Indenture incorporated by reference as Exhibit
4.3 of the Registrant's Registration Statement on Form S-11
(No. 333-49163)).
4.19 Specimen of 6.90% Reset Put Securities due 2015 (included in
the Third Supplemental Indenture incorporated by reference
as Exhibit 4.4 of the Registrant's Registration Statement on
Form S-11 (No. 333-49163)).
4.20 $25,000,000 6.90% Fixed Rate Note No. 8 dated January 9,
2001 attaching the Parent Guarantee dated January 9, 2001
(incorporated herein by reference to Exhibit 4.1 of the
Registrant's Current Report on Form 8-K filed on January 31,
2001).
S-10
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.1 Distribution Agreement dated August 15, 2000 by and among
AMB Property Corporation, AMB Property, L.P., Morgan Stanley
& Co., Incorporated, Banc of America Securities LLC, Banc
One Capital Markets, Inc., Chase Securities, Inc., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan
Securities Inc., and Salomon Smith Barney Inc. (incorporated
herein by reference to Exhibit 1.1 of Registrant's Current
Report on Form 8-K/A filed on November 9, 2000).
10.2 Terms Agreement dated as of December 14, 2000 by and between
Morgan Stanley & Co., Incorporated and J.P. Morgan
Securities Inc. and AMB Property, L.P. (incorporated herein
by reference to Exhibit 1.1 of the Registrant's Current
Report on Form 8-K filed on January 8, 2001).
10.3 Terms Agreement dated as of January 4, 2001 by and between
A.G. Edwards & Sons, Inc. and AMB Property, L.P.
(incorporated herein by reference to Exhibit 1.1 of the
Registrant's Current Report on Form 8-K filed on January 31,
2001).
10.4 Terms Agreement dated as of March 2, 2001 by and among First
Union Securities, Inc., AMB Property, L.P. and AMB Property
Corporation (incorporated by reference to Exhibit 1.1 of
Registrants' current report on Form 8-K filed on March 16,
2001).
10.5 Fourth Amended and Restated Partnership Agreement of Limited
Partnership of AMB Property, L.P. (incorporated herein by
reference as Exhibit 10.1 to the Registrants Current Report
on Form 8-K filed on August 15, 2000).
10.6 First Amendment to the Fourth Amended and Restated Agreement
of Limited Partnership of AMB Property, L.P.
10.7 Form of Registration Rights Agreement among the Registrant
and the persons named therein (incorporated by reference to
Exhibit 10.2 of the Registrant's Registration Statement on
Form S-11 (No. 333-35915)).
10.8 Form of Change in Control and Noncompetition Agreement
between the Registrant and Executive Officers (incorporated
by reference to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1998).
10.9 Agreement for Purchase and Exchange entered into as of March
9, 1999 by and among AMB Property, L.P., AMB Property II,
L.P., Long Gate, L.L.C. and BPP Retail, LLC, regarding the
transaction which closed on June 15, 1999 (incorporated by
reference to Exhibit 10.1 of the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999).
10.10 Agreement for Purchase and Exchange entered into as of March
9, 1999 by and among AMB Property, L.P., AMB Property II,
L.P., Long Gate, L.L.C. and BPP Retail, LLC, regarding the
transaction which closed on August 4, 1999 (incorporated by
reference to Exhibit 10.2 of the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999).
10.11 Agreement for Purchase and Exchange entered into as of March
9, 1999 by and among AMB Property, L.P., AMB Property II,
L.P., Long Gate, L.L.C. and BPP Retail, LLC, regarding the
transaction which closed on December 1, 1999 (incorporated
by reference to Exhibit 10.3 of the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999).
10.12 Dividend Reinvestment and Direct Purchase Plan, dated July
9, 1999 (incorporated by reference to Exhibit 10.4 of the
Registrant's Quarterly Report on Report Form 10-Q for the
quarter ended June 30, 1999).
10.13 Second Amended and Restated 1997 Stock Option and Incentive
Plan (incorporated by reference to Exhibit 10.5 of the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1999).
10.14 Ninth Amended and Restated Agreement of Limited Partnership
of AMB Property II, L.P., dated March 21, 2001 (incorporated
by reference to Exhibit 10.1 of the Registrant's Current
Report on Form 8-K filed on March 23, 2001).
S-11
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.15 Revolving Credit Agreement dated as of May 24, 2000 among
AMB Property, L.P., the banks listed therein, Morgan
Guaranty Trust Company of New York, as Administrative Agent,
Bank of America, N.A., as Syndication Agent, the Chase
Manhattan Bank, as Documentation Agent, J.P. Morgan
Securities Inc. and Banc of America Securities LLC, as Joint
Lead Arrangers and Joint Bookmanagers, Bank one, NA,
Commerzbank Aktiengesellschaft, PNC Bank National
Association and Wachovia Bank, N.A., as Managing Agents and
Banks Trust Company and Dresdner Bank AG, New York and Grand
Cayman Branches, as Co-Agents (incorporated by reference to
Exhibit 10.1 of the Registrant's Current Report on Form 8-K
filed on June 16, 2000).
10.16 Guaranty of Payment made as of May 24, 2000 between AMB
Property Corporation and Morgan Guaranty Trust Company of
New York, as administrative agent for the banks listed on
the signature page of the Revolving Credit Agreement
(incorporated herein by reference to Exhibit 10.2 of the
Registrant's Current Report on Form 8-K filed on June 16,
2000).
10.17 Credit Agreement dated as of September 27, 1999 among AMB
Institutional Alliance Fund I, L.P., AMB Institutional
Alliance REIT I, Inc., the Lenders and issuing parties
thereto, BT Realty Resources, Inc. and Chase Manhattan Bank
(incorporated by reference to Exhibit 10.3 of the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999).
21.1 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.
24.1 Powers of Attorney (included in Part IV of this Form 10-K).
S-12