U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (date of earliest event reported): April 18, 2005
AMB PROPERTY CORPORATION
(Exact name of registrant as specified in its charter)
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001-13545
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94-3281941 |
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(State or other jurisdiction of
incorporation)
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(Commission file number)
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(I.R.S. employer identification
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Pier 1, Bay 1, San Francisco, California 94111
(Address of principal executive offices) (Zip code)
415-394-9000
(Registrants’ telephone number, including area code)
n/a
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions (see General Instruction
A.2. below):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
TABLE OF CONTENTS
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On April 18, 2005, we issued a press release entitled “AMB Property Corporation Announces First
Quarter 2005 Results,” which sets forth disclosure regarding our results of operations for the
first quarter of 2005. A copy of the press release is attached hereto as Exhibit 99.1. This
section and the attached exhibit are provided under Item 2.02 of Form 8-K and are furnished to, but
not filed with, the Securities and Exchange Commission.
ITEM 8.01 OTHER EVENTS.
On April 18, 2005, we reported our first quarter 2005 earnings per share of $0.52, exceeding our
guidance of $0.39 to $0.41 for the quarter.
The better than expected earnings per share results are associated with increased average occupancy
in the operating portfolio; higher than expected gains on sales of operating properties; and
earlier than expected net gains from our development and land sales programs.
First quarter 2005 earnings per share increased 206% from earnings per share of $0.17 in the same
period of 2004, due primarily to net development profits and net gains on sales of operating
properties.
Operating Results
Our industrial operating portfolio occupancy increased to 95.1% at March 31, 2005, up 30 basis
points from December 31, 2004, and up 240 basis points from March 31, 2004. By comparison,
preliminary data from Torto Wheaton Research indicates that national industrial occupancy at the
end of the first quarter approximated 89.1%, unchanged from the prior quarter and an increase of 70
basis points from March 31, 2004.
The change in our cash-basis same store net operating income in the first quarter of 2005 was -0.1%
compared with 0.4% last quarter and
- -3.1% in the first quarter of 2004. Rents on lease renewals and
rollovers continued their sequential improvement declining 8.6% in the first quarter 2005, compared
with declines of 12.4% in the prior quarter and 14.7% in the first quarter of 2004.
Investment Activity
We began seven new development and redevelopment projects during first quarter 2005 in Los Angeles,
Miami and Amsterdam. The projects include 817,000 square feet of planned distribution facilities
and a 17.6 acre value-added conversion of an industrial site for alternative development. The
estimated total investment in all seven projects is $90 million. Our industrial development and
renovation pipeline now totals 35 projects of approximately 9.6 million square feet globally with
an estimated total investment of $881 million, a record for us. Pipeline deliveries are scheduled
from second quarter 2005
through the first quarter of 2008. The pipeline is 67% funded; deliveries slated through the end of
2005 are more than 50% pre-leased.
We placed two industrial development projects into operations in the first quarter of 2005. The
buildings, held as part of our investment portfolio, total 181,800 square feet and were completed
for a total investment of approximately $16.8 million. The buildings are located near Dulles and
O’Hare international airports and are fully leased.
Our development activity includes dispositions of completed properties and land. During first
quarter 2005, we sold one completed development and two land parcels generating $8.6 million of net
cash gains.
During the first quarter, we acquired 817,000 square feet of distribution facilities in six
buildings with a total acquisition cost of approximately $77.8 million. The properties expand our
on- and near-airport holdings in Miami, Chicago and New York.
Additional acquisition activity in the quarter included the purchase of an approximate 43% interest
in G. Accion, one of Mexico’s largest real estate companies, for
$46.1 million. We and G. Accion
began working together on the development of industrial properties in Mexico in early 2002. Since
then, our activity in Mexico City and Guadalajara has included approximately 3.1 million square
feet of acquisition and development.
Subsequent to the quarter’s close, we entered the Toronto market with the acquisition of a 33-acre
parcel and an option to purchase another 15 acres adjacent to the Trans Canada Highway. The
combined parcels will support development of 1 million square feet of logistics and distribution
facilities. We plan to begin the first facility containing 375,000 square feet immediately.
We continue to refine our portfolio through opportunistic sales of operating properties. First
quarter 2005 dispositions included 24 buildings, comprising 1.5 million square feet, for total
proceeds of $142.1 million.
Private Capital Financing
AMB Institutional Alliance Fund III, our open-end commingled fund, added $44 million of third party
equity in first quarter 2005. The fund had subsequent equity closings following quarter end of an
additional $30 million. AMB Institutional Alliance Fund III, which had its initial closing in the
fourth quarter of 2004, has thus far raised $210.5 million in third party equity. The fund invests
in operating and renovation properties in the U.S. and had investments in real estate of $543.1
million at March 31, 2005.
Addition of Company Officer
We have hired distribution industry and real estate specialist Alfred Vos as senior vice president
to direct our development business in Europe. Vos has 10 years of pan-European development and
operations experience and was most recently executive vice
president and general manager of The Facility Group in Europe, providing planning, engineering and
construction management services for the distribution and logistics sectors. Vos will be based in
our European headquarters in Amsterdam and will report to Mo Barzegar, our chief investment officer
for Europe.
Supplemental Earnings Measure
We report funds from operations per fully diluted share and unit (FFOPS) in accordance with the
standards established by NAREIT. First quarter 2005 FFOPS was $0.54, exceeding our guidance of
$0.46 to $0.48 per share due primarily to the timing of profits from land sales which were
originally anticipated to occur later in the year ($0.05), and better than expected average
occupancies in the operating portfolio ($0.02). FFOPS in the first quarter of 2004 was $0.53.
Included in the footnotes to our attached financial statements is a discussion of why management
believes FFO is a useful supplemental measure of operating performance, of ways in which investors
might use FFO when assessing our financial performance, and of FFO’s limitations as a measurement
tool. A reconciliation from net income to funds from operations is provided in the attached tables
and published in our quarterly supplemental analyst package, available on our website at
www.amb.com.
We are an owner and operator of industrial real estate, focused on major hub and gateway
distribution markets throughout North America, Europe and Asia. As of March 31, 2005 we owned,
managed and had renovation and development projects totaling 110.3 million square feet (10.3
million square meters) and 1,085 buildings in 38 markets within eight countries. We invest in
properties located predominantly in the infill submarkets of our targeted markets. Our portfolio is
comprised of High Throughput Distribution® facilities — industrial properties built for
speed and located near airports, seaports and ground transportation systems.
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
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As of |
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March 31, 2005 |
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December 31, 2004 |
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Assets |
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Investments in real estate: |
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Total investments in properties |
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$ |
6,608,737 |
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$ |
6,526,144 |
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Accumulated depreciation |
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(652,085 |
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(615,646 |
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Net investments in properties |
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5,956,652 |
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5,910,498 |
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Investment in unconsolidated joint ventures |
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105,127 |
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55,166 |
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Properties held for divestiture, net |
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49,455 |
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87,340 |
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Net investments in real estate |
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6,111,234 |
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6,053,004 |
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Cash and cash equivalents |
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215,068 |
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146,593 |
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Mortgages and loans receivable |
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21,710 |
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13,738 |
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Accounts receivable, net |
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135,768 |
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109,028 |
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Other assets |
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71,304 |
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64,580 |
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Total assets |
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$ |
6,555,084 |
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$ |
6,386,943 |
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Liabilities and Stockholders’ Equity |
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Secured debt |
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$ |
1,915,702 |
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$ |
1,892,524 |
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Unsecured senior debt securities |
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1,003,940 |
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1,003,940 |
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Unsecured debt |
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8,869 |
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9,028 |
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Unsecured credit facilities |
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422,616 |
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351,699 |
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Accounts payable and other liabilities |
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258,159 |
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262,286 |
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Total liabilities |
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3,609,286 |
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3,519,477 |
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Minority interests: |
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Joint venture partners |
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884,188 |
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828,622 |
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Preferred unitholders |
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278,378 |
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278,378 |
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Limited partnership unitholders |
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89,377 |
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89,326 |
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Total minority interests |
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1,251,943 |
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1,196,326 |
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Stockholders’ equity: |
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Common stock |
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1,590,651 |
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1,567,936 |
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Preferred stock |
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103,204 |
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103,204 |
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Total stockholders’ equity |
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1,693,855 |
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1,671,140 |
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Total liabilities and stockholders’ equity |
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$ |
6,555,084 |
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$ |
6,386,943 |
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CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except share data)
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For the Quarters Ended |
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March 31, |
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2005 |
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2004 |
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Revenues |
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Rental revenues |
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$ |
169,056 |
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$ |
155,208 |
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Private capital income |
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3,318 |
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2,429 |
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Total revenues |
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172,374 |
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157,637 |
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Costs and expenses |
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Property operating costs |
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(44,429 |
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(40,977 |
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Depreciation and amortization |
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(43,485 |
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(37,255 |
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General and administrative |
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(18,799 |
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(14,567 |
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Fund costs |
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(364 |
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(309 |
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Total costs and expenses |
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(107,077 |
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(93,108 |
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Operating income |
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65,297 |
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64,529 |
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Other income and expenses |
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Equity in earnings of unconsolidated joint ventures |
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1,242 |
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1,709 |
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Other income and expenses, net |
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(566 |
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1,481 |
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Gains from dispositions of real estate |
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1,301 |
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— |
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Development profits, net of taxes |
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17,949 |
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— |
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Interest expense, including amortization |
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(40,896 |
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(39,018 |
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Total other income and expenses |
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(20,970 |
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(35,828 |
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Income before minority interests and discontinued operations |
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44,327 |
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28,701 |
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Minority interests’ share of income: |
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Joint venture partners’ share of income |
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(11,284 |
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(8,585 |
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Joint venture partners’ share of development profits |
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(9,837 |
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— |
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Preferred unitholders |
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(5,368 |
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(4,912 |
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Limited partnership unitholders |
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(352 |
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(731 |
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Total minority interests’ share of income |
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(26,841 |
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(14,228 |
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Income from continuing operations |
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17,486 |
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14,473 |
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Discontinued operations: |
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Income attributable to discontinued operations, net of minority interests |
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1,339 |
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2,395 |
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Gain (loss) from disposition of real estate, net of minority interests |
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27,942 |
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(286 |
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Total discontinued operations |
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29,281 |
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2,109 |
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Net income |
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46,767 |
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16,582 |
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Preferred stock dividends |
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(1,783 |
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(1,783 |
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Net income available to common stockholders |
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$ |
44,984 |
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$ |
14,799 |
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Net income per common share (diluted) |
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$ |
0.52 |
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$ |
0.17 |
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Weighted average common shares (diluted) |
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86,516,695 |
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84,861,965 |
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CONSOLIDATED STATEMENTS OF FUNDS FROM OPERATIONS(1)
(dollars in thousands, except share data)
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For the Quarters Ended |
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March 31, |
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2005 |
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2004 |
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Net income |
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$ |
46,767 |
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$ |
16,582 |
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Gain (loss) from disposition of real estate, net of minority interests |
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(29,243 |
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286 |
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Depreciation and amortization: |
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Total depreciation and amortization |
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43,485 |
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37,255 |
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Discontinued operations’ depreciation |
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638 |
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2,393 |
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Non-real estate depreciation |
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(745 |
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(175 |
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Adjustments to derive FFO from consolidated JVs: |
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Joint venture partners’ minority interests (Net income) |
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11,284 |
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8,585 |
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Limited partnership unitholders’ minority interests (Net income) |
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352 |
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731 |
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Limited partnership unitholders’ minority interests (Development profits) |
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458 |
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— |
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Discontinued operations’ minority interests (Net income) |
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394 |
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693 |
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FFO attributable to minority interests |
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(23,587 |
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(17,861 |
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Adjustments to derive FFO from unconsolidated JVs: |
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AMB’s share of net income |
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(1,242 |
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(1,709 |
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AMB’s share of FFO |
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2,747 |
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2,493 |
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Preferred stock dividends |
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(1,783 |
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(1,783 |
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Funds from operations |
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$ |
49,525 |
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$ |
47,490 |
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FFO per common share and unit (diluted) |
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$ |
0.54 |
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$ |
0.53 |
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Weighted average common shares and units (diluted) |
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91,240,898 |
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89,617,834 |
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(1) Funds From Operations (“FFO”). The Company believes that net income,
as defined by GAAP, is the most appropriate earnings measure. However, the Company considers funds
from operations, or FFO, as defined by NAREIT, to be a useful supplemental measure of its operating
performance. FFO is defined as net income, calculated in accordance with GAAP, less gains (or
losses) from dispositions of real estate held for investment purposes and real estate-related
depreciation, and adjustments to derive the Company’s pro rata share of FFO of consolidated and
unconsolidated joint ventures. Further, the Company does not adjust FFO to eliminate the effects of
non-recurring charges. The Company believes that FFO, as defined by NAREIT, is a meaningful
supplemental measure of its operating performance because historical cost accounting for real
estate assets in accordance with GAAP implicitly assumes that the value of real estate assets
diminishes predictably over time, as reflected through depreciation and amortization expenses.
However, since real estate values have historically risen or fallen with market and other
conditions, many industry investors and analysts have considered presentation of operating results
for real estate companies that use historical cost accounting to be insufficient. Thus, NAREIT
created FFO as a supplemental measure of operating performance for
real estate investment trusts that excludes historical cost depreciation and amortization, among other items, from net income, as
defined by GAAP. The Company believes that the use of FFO, combined with the required GAAP
presentations, has been beneficial in improving the understanding of operating results of real
estate investment trusts among the investing public and making comparisons of operating results
among such companies more meaningful. The Company considers FFO to be a useful measure for
reviewing comparative operating and financial performance because, by excluding gains or losses
related to sales of previously depreciated operating real estate assets and real estate
depreciation and amortization, FFO can help the investing public compare the operating performance
of a company’s real estate between periods or as compared to other companies. While FFO is a
relevant and widely used measure of operating performance of real estate investment trusts, it does
not represent cash flow from operations or net income as defined by GAAP and should not be
considered as an alternative to those measures in evaluating the Company’s liquidity or operating
performance. FFO also does not consider the costs associated with capital expenditures related to
the Company’s real estate assets nor is FFO necessarily indicative of cash available to fund the
Company’s future cash requirements. Further, the Company’s computation of FFO may not be
comparable to FFO reported by other real estate investment trusts that do not define the term in
accordance with the current NAREIT definition or that interpret the current NAREIT definition
differently than the Company does.
Forward Looking Statements
Some of the information included in this report contains forward-looking statements, such as those
related to our investment strategies, the total expected investment in acquisitions; size and
timing of deliveries and total investment in development projects; goals regarding amount of
non-U.S. investment; and use of private capital funds for planned investment activity which are
made pursuant to the safe-harbor provisions of Section 21E of the Securities Exchange Act of 1934,
as amended, and Section 27A of the Securities Act of 1933, as amended. Because these
forward-looking statements involve risks and uncertainties, there are important factors that could
cause our actual results to differ materially from those in the forward-looking statements, and you
should not rely on the forward-looking statements as predictions of future events. The events or circumstances
reflected in forward-looking statements might not occur. You can identify forward-looking
statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,”
“should,” “seeks,” “approximately,” “intends,” “plans,” “pro forma,” “estimates” or “anticipates”
or the negative of these words and phrases or similar words or phrases. You can also identify
forward-looking statements by discussions of strategy, plans or intentions. Forward-looking
statements are necessarily dependent on assumptions, data or methods that may be incorrect or
imprecise and we may not be able to realize them. We caution you not to place undue reliance on
forward-looking statements, which reflect our analysis only and speak only as of the date of this
report or the dates indicated in the statements. We assume no obligation to update or supplement
forward-looking statements. The following factors, among others, could cause actual results and
future events to differ materially from those set forth or contemplated in the forward-looking
statements: defaults on or non-renewal of leases by tenants, increased interest rates and operating
costs, our failure to obtain necessary outside financing, difficulties in identifying properties to
acquire and in effecting acquisitions, our failure to successfully integrate acquired properties
and operations, our failure to divest properties we have contracted to sell or to timely reinvest
proceeds from any divestitures, risks and uncertainties affecting property development and
construction (including construction delays, cost overruns, our inability to obtain necessary
permits and public opposition to these activities), our failure to qualify and maintain our status
as a real estate investment trust, environmental uncertainties, risks related to natural disasters,
financial market fluctuations, changes in real estate and zoning laws, risks related to doing
business internationally and increases in real property tax rates. Our success also depends upon
economic trends generally, including interest rates, income tax laws, governmental regulation,
legislation, population changes and certain other matters discussed under the heading “Management’s
Discussion and Analysis of Financial Condition and Results of Operations - Business Risks”
and elsewhere in our annual report on Form 10-K for the year ended December 31, 2004.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits:
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| Exhibit |
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| Number |
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Description |
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99.1 |
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AMB Property Corporation Press Release dated April 18, 2005. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the
registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly
authorized.
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AMB Property Corporation
(Registrant)
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| Date: April 19, 2005 |
By: |
/s/ Tamra D. Browne
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Tamra D. Browne |
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Senior Vice President, General
Counsel and Secretary |
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Exhibits
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| Exhibit |
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| Number |
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Description |
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99.1 |
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AMB Property Corporation Press Release dated April 18, 2005. |
