- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ------------------------ FORM 10-Q ------------------------ (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998 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 (I.R.S. EMPLOYER IDENTIFICATION NO.) INCORPORATION OR ORGANIZATION) 505 MONTGOMERY ST., SAN FRANCISCO, CALIFORNIA 94111 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(415) 394-9000 (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) ------------------------ 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 [ ] As of July 31, 1998, there were 85,874,513 shares of the Registrant's common stock, $0.01 par value per share, outstanding. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- AMB PROPERTY CORPORATION INDEX
PAGE ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets as of December 31, 1997 and June 30, 1998 (unaudited)................. 1 Consolidated Statements of Operations for the six and three months ended June 30, 1997 and 1998 (unaudited)........................................ 2 Consolidated Statements of Cash Flows for the six months ended June 30, 1997 and 1998 (unaudited)........................................ 3 Consolidated Statement of Stockholders' Equity for the six months ended June 30, 1998 (unaudited)........................................ 4 Notes to Consolidated Financial Statements (unaudited)........................................ 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 10 Item 3. Quantitative and Qualitative Disclosures About Market Risk............................................ PART II. OTHER INFORMATION Item 1. Legal Proceedings................................. 17 Item 2. Changes in Securities............................. 17 Item 3. Defaults Upon Senior Securities................... 17 Item 4. Submission of Matters to a Vote of Security Holders................................................ 18 Item 5. Other Information................................. 18 Item 6. Exhibits and Reports on Form 8-K.................. 19
i PART I ITEM 1. FINANCIAL STATEMENTS AMB PROPERTY CORPORATION CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1997 AND JUNE 30, 1998 (UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) ASSETS
DECEMBER 31, 1997 JUNE 30, 1998 ----------------- ------------- Investments in real estate: Land...................................................... $ 550,635 $ 654,926 Buildings and improvements................................ 1,822,516 2,163,452 Construction in progress.................................. 69,848 111,346 ---------- ---------- Total investments in properties................... 2,442,999 2,929,724 Accumulated depreciation and amortization................. (4,153) (29,252) ---------- ---------- Net investments in properties..................... 2,438,846 2,900,472 Investment in unconsolidated joint venture................ -- 67,149 ---------- ---------- Net investments in real estate.................... 2,438,846 2,967,621 Cash and cash equivalents................................... 39,968 29,167 Other assets................................................ 27,441 36,318 ---------- ---------- Total assets...................................... $2,506,255 $3,033,106 ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY Debt: Unsecured credit facilities............................... $ 150,000 $ 137,000 Senior debt securities.................................... -- 400,000 Secured debt.............................................. 535,652 592,430 ---------- ---------- Total debt........................................ 685,652 1,129,430 Other liabilities........................................... 49,350 84,508 Payable to affiliates....................................... 38,071 -- ---------- ---------- Total liabilities................................. 773,073 1,213,938 Commitments and contingencies............................... -- -- Minority interests.......................................... 65,152 149,751 Stockholders' equity: Common stock, $0.01 par value, 500,000,000 shares authorized, 85,874,513 issued and outstanding.......... 859 859 Additional paid-in capital................................ 1,667,171 1,668,558 Retained earnings......................................... -- -- ---------- ---------- Total stockholders' equity........................ 1,668,030 1,669,417 ---------- ---------- Total liabilities and stockholders' equity........ $2,506,255 $3,033,106 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. 1 AMB PROPERTY CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 1997 AND 1998 (UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FOR THE SIX MONTHS ENDED FOR THE THREE MONTHS ENDED JUNE 30, JUNE 30, ------------------------- --------------------------- 1997 1998 1997 1998 ---------- ----------- ----------- ------------ REVENUES Rental revenues....................... $ -- $ 159,003 $ -- $ 84,401 Investment management and other income............................. 11,083 1,796 5,971 613 ---------- ----------- ---------- ----------- Total revenues................ 11,083 160,799 5,971 85,014 OPERATING EXPENSES Property operating expenses........... -- 21,231 -- 11,227 Real estate taxes..................... -- 21,273 -- 11,025 General and administrative............ -- 5,862 -- 3,144 Interest, including amortization...... -- 27,561 -- 15,720 Depreciation and amortization......... -- 25,302 -- 13,516 Investment management expenses........ 8,319 -- 4,446 -- ---------- ----------- ---------- ----------- Total operating expenses...... 8,319 101,229 4,446 54,632 ---------- ----------- ---------- ----------- Income from operations before minority interests.......... 2,764 59,570 1,525 30,382 Minority interests' share of net income............................. -- (3,686) -- (2,404) ---------- ----------- ---------- ----------- Net income available to common stockholders................ $ 2,764 $ 55,884 $ 1,525 $ 27,978 ========== =========== ========== =========== INCOME PER SHARE OF COMMON STOCK Basic................................. $ 0.54 $ 0.65 $ 0.30 $ 0.33 ========== =========== ========== =========== Diluted............................... $ 0.54 $ 0.65 $ 0.30 $ 0.32 ========== =========== ========== =========== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING Basic................................. 5,079,855 85,874,513 5,079,855 85,874,513 ========== =========== ========== =========== Diluted............................... 5,079,855 86,222,175 5,079,855 86,253,456 ========== =========== ========== ===========
The accompanying notes are an integral part of these consolidated financial statements. 2 AMB PROPERTY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1998 (UNAUDITED, DOLLARS IN THOUSANDS)
FOR THE SIX MONTHS ENDED JUNE 30, ------------------------ 1997 1998 --------- ----------- CASH FLOWS FROM OPERATING ACTIVITIES Net income.................................................. $ 2,764 $ 55,884 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization............................. -- 25,302 Straight-line rents....................................... -- (5,489) Amortization of debt premiums and financing costs......... -- (1,274) Minority interests' share of net income................... -- 3,686 Equity in income of AMB Investment Management............. -- 95 Changes in assets and liabilities: Other assets.............................................. 236 (6,958) Other liabilities......................................... 2,816 4,474 ------- --------- Net cash provided by operating activities.............. 5,816 75,720 CASH FLOWS FROM INVESTING ACTIVITIES Cash paid for property acquisitions......................... -- (246,213) Additions to land and building improvements................. -- (16,922) Additions to tenant improvements and leasing costs.......... -- (4,965) Additions to construction in progress....................... -- (25,319) Acquisition of interest in unconsolidated joint venture..... -- (67,149) Reduction of payable to affiliates in connection with Formation Transactions.................................... -- (38,071) ------- --------- Net cash used in investing activities.................. -- (398,639) CASH FLOWS FROM FINANCING ACTIVITIES Borrowings on unsecured credit facilities................... -- 382,000 Borrowings on secured debt.................................. -- 16,914 Payments on unsecured credit facilities..................... -- (395,000) Payments on secured debt.................................... -- (59,545) Proceeds from issuance of senior debt securities............ -- 399,166 Dividends paid to shareholders.............................. -- (29,413) Distributions to minority interests......................... -- (2,004) Deferred offering costs..................................... (2,291) -- Distributions to stockholders of Predecessor................ (5,754) -- Principal payment of notes receivable from stockholders of Predecessor............................................... 363 -- ------- --------- Net cash provided by (used in) financing activities.... (7,682) 312,118 Net decrease in cash and cash equivalents................... (1,866) (10,801) Cash and cash equivalents at beginning of period............ 2,783 39,968 ------- --------- Cash and cash equivalents at end of period.................. $ 917 $ 29,167 ======= ========= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the period for: Interest.................................................. $ -- $ 26,583 ======= ========= Property acquisitions: Acquisitions of properties................................ $ -- $ 434,353 Assumption of secured debt................................ -- (99,623) Minority interests' contribution.......................... -- (88,517) ------- --------- Cash paid for property acquisitions....................... $ -- $ 246,213 ======= =========
The accompanying notes are an integral part of these consolidated financial statements. 3 AMB PROPERTY CORPORATION CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED, DOLLARS IN THOUSANDS)
COMMON STOCK ------------------- ADDITIONAL NUMBER PAID-IN RETAINED OF SHARES AMOUNT CAPITAL EARNINGS TOTAL ---------- ------ ---------- -------- ---------- BALANCE AT DECEMBER 31, 1997.............. 85,874,513 $859 $1,667,171 $ -- $1,668,030 Net income.............................. -- -- -- 55,884 55,884 Reallocation of Limited Partners' interests in Operating Partnership... -- -- 4,328 -- 4,328 Distributions declared to AMB Property Corporation stockholders............. -- -- (2,941) (55,884) (58,825) ---------- ---- ---------- -------- ---------- BALANCE AT JUNE 30, 1998.................. 85,874,513 $859 $1,668,558 $ -- $1,669,417 ========== ==== ========== ======== ==========
The accompanying notes are an integral part of these consolidated financial statements. 4 AMB PROPERTY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND UNIT AMOUNTS) 1. ORGANIZATION AND FORMATION 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 (the "IPO") on November 26, 1997. The Company expects to be taxed as a real estate investment trust ("REIT") under Sections 856 through 860 of the Internal Revenue Code of 1986 (the "Code"), as amended. 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 industrial buildings and community shopping centers in target markets nationwide. Unless the context otherwise requires, the "Company" means AMB Property Corporation, the Operating Partnership and its other controlled subsidiaries. The Company and the Operating Partnership were formed shortly before consummation of the IPO. AMB Institutional Realty Advisors, Inc., a California corporation and registered investment advisor (the "Predecessor") formed AMB Property Corporation, a wholly owned subsidiary, and merged with and into the Company (the "Merger") in exchange for 4,746,616 shares of the Company's Common Stock. In addition, the Company and the Operating Partnership acquired, through a series of mergers and other transactions, 31.8 million rentable square feet of industrial property and 6.3 million rentable square feet of retail property in exchange for 65,022,185 shares of the Company's Common Stock, 2,542,163 limited partner interests ("LP Units") in the Operating Partnership, the assumption of debt and, to a limited extent, cash. The net assets of the Predecessor and the properties acquired with Common Stock were contributed to the Operating Partnership in exchange for 69,768,801 units. The purchase method of accounting was applied to the acquisition of the properties. Collectively, the Merger and the other formation transactions described above are referred to as the "Formation Transactions." On November 26, 1997, the Company completed its IPO of 16,100,000 shares of Common Stock, $0.01 par value per share (the "Common Stock") for $21.00 per share, resulting in gross offering proceeds of approximately $338,100. Net of underwriters' commission and offering costs aggregating $38,068, the Company received approximately $300,032 in proceeds from the IPO. The net proceeds of the IPO were used to repay indebtedness, to purchase interests from certain investors who elected not to receive shares or units in connection with the Formation Transactions, to fund property acquisitions, and for general corporate working capital requirements. As of June 30, 1998, the Company owned an approximate 95.8% general partner interest in the Operating Partnership. The remaining 4.2% limited partner interest is owned by nonaffiliated investors. For local law purposes, properties in certain states are owned through limited partnerships and limited liability companies owned 99% by the Operating Partnership and 1% by a wholly owned subsidiary of the Company. 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 the full, exclusive and complete responsibility and discretion in the day-to-day management and control of the Operating Partnership. In connection with the Formation Transactions, the Operating Partnership formed AMB Investment Management, Inc., a Maryland corporation ("AMB Investment Management"). The Operating Partnership purchased 100% of AMB Investment Management's non-voting preferred stock (representing a 95% economic interest therein). Certain executive officers of the Company collectively purchased 100% of the Investment Management Subsidiary's voting common stock (representing a 5% economic interest therein). The Operating Partnership accounts for its investment in AMB Investment Management using the equity method of accounting. AMB Investment Management was formed to succeed to the Predecessor's investment management business of providing real estate investment management services on a fee basis to clients. 5 AMB PROPERTY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND UNIT AMOUNTS) As of June 30, 1998, the Company owned 500 industrial buildings and retail centers, consisting of 463 industrial buildings (the "Industrial Properties") and 37 retail centers (the "Retail Properties") located in 28 markets throughout the United States. The Industrial Properties, principally warehouse distribution buildings, encompass approximately 47.7 million rentable square feet and, as of June 30, 1998, were 95.1% leased to over 1,200 tenants. The Retail Properties, principally grocer-anchored community shopping centers, encompass approximately 6.8 million rentable square feet and, as of the same date, were 95.0% leased to over 900 tenants. The Industrial Properties and the Retail Properties collectively are referred to as the "Properties." 2. INTERIM FINANCIAL STATEMENTS The consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and note disclosures normally included in the annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The consolidated financial statements for prior periods have been reclassified to conform to current classifications with no effect on results of operations. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments, of a normal recurring nature, necessary for a fair presentation of the Company's consolidated financial position and results of operations for the interim periods. The interim financial information for the six months and for the three months ended June 30, 1997, represents the results of the Predecessor, an investment manager. The Predecessor's revenues consisted primarily of fees earned in connection with real estate investment management services. As such, information presented for the six months and for the three months ended June 30, 1997 and 1998 is not comparable given the differences in lines of business between the Company and the Predecessor. The interim results of the six and three months ended June 30, 1997 and 1998 are not necessarily indicative of the results expected for the entire year. These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1997. The preparation of financial statements in conformity with generally accepted accounting principles 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. 6 AMB PROPERTY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND UNIT AMOUNTS) 3. DEBT In connection with the Formation Transactions, the Company assumed certain secured debt with an aggregate principal value of $517,031 and a fair value of $535,613. The difference between the principal value and the fair value was recorded as a debt premium. The debt premium is being amortized into interest expense over the term of the related debt instruments using the effective interest method. As of June 30, 1998, the unamortized debt premium was $16,799. As of June 30, 1998, debt, excluding unamortized debt premiums, consists of the following: Unsecured credit facilities, variable interest at LIBOR plus 90 basis points (6.59% at June 30, 1998), $50,000 due July 1998, remainder due November 2000......................... $ 137,000 Senior debt securities, weighted average interest rate of 7.18%, due June 2008, June 2015 and June 2018............. 400,000 Secured debt, varying interest rates from 4.00% to 10.38% due November 1998 to January 2014......................... 575,631 ---------- Total Debt........................................ $1,112,631 ==========
Secured debt generally requires monthly principal and interest payments. The secured debt is secured by deeds of trust on certain Properties. All of the secured debt bears interest at fixed rates, except for two loans totaling $9,173 which bear interest at variable rates. The secured debt has various financial and non-financial covenants. Additionally, certain of the secured debt is cross-collateralized. The weighted-average fixed interest rate on secured debt at June 30, 1998, was 7.91%. The Company has a $500,000 unsecured revolving credit agreement (the "Credit Facility") with Morgan Guaranty Trust Company of New York as agent, and a syndicate of twelve other banks. The Credit Facility has a term of three years, and is subject to a fee that accrues on the daily average undrawn funds, which varies between 15 and 25 basis points of the undrawn funds based on the Company's credit rating (15 basis points at June 30, 1998). The Credit Facility has various financial and non-financial covenants. In addition, in April 1998, the Company obtained a $50,000 unsecured acquisition facility from NationsBank, bearing interest at LIBOR plus 90 basis points (6.59% at June 30, 1998). The $50,000 unsecured acquisition facility was repaid in July 1998. Capitalized interest related to construction projects for the six and three months ended June 30, 1998, was $3,098 and $1,845, respectively. There was no capitalized interest for periods prior to the Formation Transactions. The scheduled maturities of the secured debt as of June 30, 1998 are as follows: 1998...................................... $ 16,939 1999...................................... 11,188 2000...................................... 13,192 2001...................................... 38,698 2002...................................... 54,364 Thereafter................................ 441,250 -------- $575,631 ========
7 AMB PROPERTY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND UNIT AMOUNTS) In June 1998, the Company issued $400,000 aggregate principal amount of unsecured notes ("Senior Debt Securities") in an underwritten public offering, the net proceeds of which were used to repay amounts outstanding under the unsecured credit facilities. As of June 30, 1998, the Senior Debt Securities consisted of the following:
PRINCIPAL INTEREST AMOUNT RATE MATURITY --------- -------- --------- 2008 Notes...................................... $175,000 7.10% June 2008 2015 Notes -- Putable/Callable 2005............. 100,000 6.90 June 2015 2018 Notes...................................... 125,000 7.50 June 2018 -------- ---- Total/Weighted Average................ $400,000 7.18% ======== ====
Interest on the Senior Debt Securities is payable semiannually in each June and December commencing December 1998. The 2015 notes are putable and callable in June 2005. 4. MINORITY INTERESTS Minority interests in the Company represent the limited partnership interests in the Operating Partnership and interests held by certain third parties (some of which are Institutional Alliance Partners(TM)) in 14 real estate joint ventures that are consolidated for financial reporting purposes. Such investments are consolidated because (i) the Company owns a majority interest, or (ii) the Company holds significant control over the entity through a 50% or greater ownership interest combined with the ability to control major operating decisions such as approval of budgets, selection of property managers and changes in financing. The following table sets forth the minority interest ownership held by certain joint ventures, Institutional Alliance Partners(TM) and the limited partners' interests in the Operating Partnership as of June 30, 1998. Minority Interest -- Joint Ventures......................... $ 15,649 Minority Interest -- Institutional Alliance Partners(TM).... 61,031 Minority Interest -- Limited Partners....................... 73,071 -------- $149,751 ========
5. STOCKHOLDERS' EQUITY On June 19, 1998, the Company and the Operating Partnership declared a quarterly cash distribution of $0.3425 per share of common stock and operating partnership unit, payable on July 9, 1998, to stockholders and unitholders of record as of June 30, 1998. 6. EARNINGS PER SHARE The Company's only dilutive securities outstanding for the six and three months ended June 30, 1998 were stock options issued under its stock incentive plan. The effect of the stock options was to increase weighted average shares outstanding by 347,662 and 378,943 shares for the six and three months ended June 30, 1998, respectively. Such dilution was computed using the treasury stock method. The Predecessor had no dilutive securities outstanding during the six months ended June 30, 1997. 8 AMB PROPERTY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND UNIT AMOUNTS) 7. PRO FORMA INFORMATION The following summary unaudited pro forma financial information for the six and three months ended June 30, 1997 has been prepared as if the Formation Transactions, the IPO (as described in Note 1) and property acquisitions and dispositions during the year ended December 31, 1997 had occurred on January 1, 1997. The pro forma financial information does not purport to present the consolidated results that would have occurred if the aforementioned transactions had been consummated on January 1, 1997, nor does it purport to be indicative of the consolidated results of operations for future periods.
FOR THE SIX FOR THE THREE MONTHS ENDED MONTHS ENDED JUNE 30, 1997 JUNE 30, 1997 ------------- ------------- Total revenues.................................... $ 139,232 $ 70,610 Income from operations before minority interests....................................... 49,809 25,482 Net income available to common stockholders....... 47,109 23,767 Income Per Share of Common Stock Basic........................................... $ 0.55 $ 0.28 =========== =========== Diluted......................................... $ 0.55 $ 0.28 =========== =========== Weighted Average Common Shares Outstanding Basic........................................... 85,874,513 85,874,513 =========== =========== Diluted......................................... 85,874,513 85,874,513 =========== ===========
8. SUBSEQUENT EVENTS On July 27, 1998, the Company sold 4,000,000 shares of 8.5% Series A cumulative redeemable preferred stock for $100,000 in an underwritten public offering. The net proceeds of $96,850 from the offering were used to repay borrowings under the Credit Facility, for property acquisitions and for other general corporate purposes. 9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of the consolidated financial condition and results of operations should be read in conjunction with the Notes to Consolidated Financial Statements. Statements contained herein which are not historical facts may be forward looking statements. Forward-looking statements can be identified 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 thereof or other variations thereof or comparable terminology, or by discussions of strategy, plans or intentions. Forward-looking statements involve numerous risks and uncertainties and should not be relied upon as predictions of future events, and there can be no assurance that the events or circumstances reflected in such forward-looking statements will be achieved or occur. 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, increased interest rates and operating costs, failure to obtain necessary outside financing, difficulties in identifying properties to acquire and in effecting acquisitions, failure to successfully integrate acquired properties and operations, risks and uncertainties affecting property development and construction (including, without limitation, construction delays, cost overruns, inability to obtain necessary permits and public opposition to such activities), the Company's failure to qualify and maintain its status as a real estate investment trust under the Internal Revenue Code of 1986, as amended, environmental uncertainties, risks related to natural disasters, financial market fluctuations, changes in real estate and zoning laws and increases in real property tax rates. The success of the Company 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 -- Business Risks" in the Company's Annual Report on Form 10-K for fiscal year ended December 31, 1997. Readers are cautioned not to place undue reliance on forward-looking statements, which reflect management's analysis only and speak only as of the date hereof. THE COMPANY The Company is a fully integrated real estate company engaged in the ownership, operation, management, acquisition, renovation, expansion and development of industrial buildings and community shopping centers in target markets nationwide. INDUSTRIAL AND RETAIL PROPERTIES BY REGION AS OF JUNE 30, 1998
INDUSTRIAL PROPERTIES RETAIL PROPERTIES TOTAL ------------------------------ --------------------------- -------------------------------- NUMBER RENTABLE NUMBER RENTABLE NUMBER OF RENTABLE OF SQUARE % OF OF SQUARE % OF BUILDINGS SQUARE % OF REGION BUILDINGS FEET TOTAL CENTERS FEET TOTAL AND CENTERS FEET TOTAL ------ --------- ---------- ----- ------- --------- ----- ----------- ---------- ----- Eastern....................... 77 9,864,840 20.7% 4 1,272,968 18.6% 81 11,137,808 20.4% Midwestern.................... 103 11,868,394 24.9 4 710,833 10.4 107 12,579,227 23.1 Southern...................... 142 13,169,885 27.6 12 1,957,051 28.6 154 15,126,936 27.7 Western....................... 141 12,772,141 26.8 17 2,907,986 42.4 158 15,680,127 28.8 --- ---------- ----- -- --------- ----- --- ---------- ----- Total..................... 463 47,675,260 100.0% 37 6,848,838 100.0% 500 54,524,098 100.0% === ========== ===== == ========= ===== === ========== =====
ACQUISITION AND DEVELOPMENT ACTIVITY During the second quarter, the Company invested $180.4 million in operating properties, consisting of 48 industrial buildings aggregating 3.7 million square feet, including $29.7 million for the Company's share of co-investments with its Institutional Alliance Partners(TM) and $62.0 million of properties purchased from its Institutional Alliance Partners(TM). The Company initiated five new development projects during the quarter, with a total estimated cost of $81.4 million upon completion in projects aggregating 1.6 million square feet. As of June 30, 1998, the Company had 13 industrial projects under development with a total estimated investment of $227.1 million upon completion in 5.2 million square feet, and three retail projects under development representing an estimated investment of $81.5 million upon completion in 654,400 square feet. 10 At June 30, 1998, the Company owned and operated a total of 500 industrial buildings and retail centers totaling 54.5 million square feet in 28 markets nationwide. In addition, the Company operated 4.6 million square feet of property on behalf of investment management clients. INCREASED PRESENCE IN KEY MARKETS The Company continued to execute its research-based target market strategy by selectively expanding its presence in key markets nationwide. DALLAS: The Company increased its presence in this major distribution market by 27% to 4.8 million square feet with the addition of 1.0 million square feet of existing industrial space. In addition, the Company currently has three development projects underway in the Dallas/Fort Worth market, including two initiated in the second quarter and the 205,000 square foot air cargo facility on the tarmac of the Dallas/Forth Worth Airport which was initiated in the first quarter of 1998 and is 100% pre-leased. NORTHERN NEW JERSEY: The Company increased its portfolio in this active distribution market by 35% with the addition of 626,500 square feet in a new industrial development project with Development Alliance Partner(TM) Trammell Crow. BALTIMORE/WASHINGTON, D.C.: The Company doubled its presence in this key distribution market with the addition of 963,100 square feet in seven industrial buildings. The Company now owns 1.9 million square feet in this market. Further investments in existing properties in excess of 400,000 square feet were made in existing Company markets, including Minneapolis (516,000 square feet), Atlanta (469,100 square feet), and Houston (418,700 square feet). STRATEGIC ALLIANCE PROGRAMS(TM) The Company has been a leader in systematically forming alliances with local and regional real estate experts through its Stategic Alliance Programs(TM). DEVELOPMENT ALLIANCE PROGRAM(TM): The Company's strategy for its Development Alliance Program(TM) is to enhance its development capability by forming alliances with development firms with a strong local presence and expertise. During the second quarter, the Company initiated two development projects with Development Alliance Partner(TM) Trammell Crow: a $29.0 million investment in a 626,500 square foot project adjacent to the New Jersey Turnpike and a $17.3 million investment in a 443,200 square foot project in Orlando Central Park (the dominant industrial park in Orlando). The Company added two new Development Alliance Partners(TM) during the quarter: Gale & Wentworth, one of New Jersey's most prominent real estate organizations, who will source, develop, and manage industrial projects in New Jersey; and National Development of New England, one of the premier commercial developers in New England, with whom the Company initiated a 415,000 square foot industrial project during the quarter. UPREIT ALLIANCE PROGRAM(TM): Through its UPREIT Alliance Program(TM), the Company issues operating partnership units in exchange for properties, thus providing additional growth for the portfolio. The Company expanded its UPREIT Alliance Program(TM) in the second quarter through the acquisition of a 153,600 square foot industrial property in Alsip, Illinois (a submarket of Chicago) and a 269,800 square foot property in Atlanta. The Company believes that UPREIT Alliance Partners(TM), who can benefit from a tax advantaged transaction structure, have been, and will continue to be, an attractive source of new acquisitions. INSTITUTIONAL ALLIANCE PROGRAM(TM): The Company's strategy for its Institutional Alliance Program(TM) is to form institutional alliances through the co-investment program of AMB Investment Management to provide access to private capital, including during those times when the public markets are less attractive. Two acquisitions were made through this program during the second quarter, with a total acquisition cost of $59.4 million, of which $29.7 million was co-invested by the Company: a 1,019,200 square foot 11 industrial warehouse portfolio in Dallas/Fort Worth and a 516,000 square foot portfolio in Minneapolis. The Company's long-standing relationships with institutional investors is also a source of new acquisitions. During the quarter, the Company invested $62.0 million in industrial properties totaling 1.6 million square feet through such relationships. During the quarter, the Company initiated a comprehensive branding program intended to support the expansion of the Strategic Alliance Programs(TM) and to establish consistency for all customers and users of AMB services. The Company intends to continue its program of managing its relationships with local vendors to take advantage of the economies of scale of a nationwide portfolio. RESULTS OF OPERATIONS OVERVIEW Because of the significant impact of the Formation Transactions and the IPO on the Company's results of operations, the discussion below is presented as follows: (i) results of the Company and its Predecessor for the six and three months ended June 30, 1998 and 1997, and (ii) results of the Properties for the six and three months ended June 30, 1998 and 1997. Because the Company commenced its operations as a REIT in connection with the IPO in November 1997, a separate discussion of the historical operations of the Properties for the comparative periods prior to the IPO is presented below. COMPANY AND PREDECESSOR RESULTS OF OPERATIONS Company and Predecessor -- Six and Three Months Ended June 30, 1998 and 1997 Rental revenues. Rental revenues, including straight-line rents, tenant reimbursements and other property related income, totaled $160.8 and $85.0 million for the six and three months ended June 30, 1998. The Predecessor's revenues consisted primarily of fees earned in connection with real estate management services. As such, no such rental revenues existed for the Predecessor for the six and three months ended June 30, 1997. Property operating expenses and real estate taxes. Property operating expenses, including asset management costs and real estate taxes, totaled $42.5 and $22.3 million for the six and three months ended June 30, 1998. The Predecessor's expenses consisted primarily of salaries and other general and administrative costs. As such, no such property operating expenses existed during the six and three months ended June 30, 1997. General and administrative expenses. The Company's general and administrative expenses were $5.9 and $3.1 million for the six and three months ended June 30, 1998, as compared to the Predecessor's investment management expenses of $8.3 and $4.4 million for the six and three months ended June 30, 1997. Investment management expenses of the Predecessor consisted primarily of salaries and other general and administrative expenses. The $2.4 million, or 29%, and $1.3 million, or 30%, decreases, respectively, in general and administrative expenses is attributable to the change in the operations of the Company from an investment manager to a fully integrated real estate company, and the formation of AMB Investment Management. In connection with the Formation Transactions, AMB Investment Management assumed employment and other related costs of certain employees who transferred from the Predecessor to AMB Investment Management for the purpose of carrying on the investment management business. PROPERTIES RESULTS OF OPERATIONS The historical results of operations of the Properties for periods prior to November 26, 1997 include Properties that were managed by the Predecessor and exclude the results of four properties that were contributed to the Company in the Formation Transactions that were not previously managed by the Predecessor. The historical property financial data presented herein show significant increases in revenues and expenses principally attributable to substantial portfolio growth. As a result, the Company does not believe the year-to-year financial data are comparable. Therefore, the analysis below shows (i) changes resulting from Properties that were owned as of January 1, 1997, excluding development projects (the "Same Store 12 Properties"), and (ii) changes attributable to acquisition and development activity during 1997 and 1998. For the comparison between the six and three month periods ended June 30, 1998 and 1997, the Same Store Properties consist of properties aggregating 30.4 million square feet. The Company's future financial condition and results of operations, including rental revenues, may be impacted by the acquisition of additional properties. No assurance can be given that the past trends of revenues, expenses or income of the Company will continue in the future at their historical rates, and any variation therefrom may be material. Properties -- Six and Three Months Ended June 30, 1998 and 1997 Rental revenues. Rental revenues, including straight-line rents, tenant reimbursements and other property related income, increased by $49.5 and $28.5 million, or 44% and 50%, for the six and three months ended June 30, 1998, to $160.8 and $85.0 million, respectively, as compared with the same periods in 1997. Approximately $7.0 and $3.5 million, or 14% and 12% of this increase, was attributable to Same Store Properties, with the remaining $42.5 and $25.0 million attributable to Properties acquired in 1997 and 1998, respectively. The growth in rental revenues in Same Store Properties resulted primarily from the incremental effect of rental rate increases, changes in occupancy and reimbursement of expenses. During the trailing 12 months ended June 30, 1998, such increase in average base rents (cash basis) was 12.1% on 7.0 million square feet leased. Property operating expenses and real estate taxes. Property operating expenses, including asset management costs and real estate taxes, increased by $8.2 and $4.6 million, or 24% and 26%, for the six and three months ended June 30, 1998, respectively, to $42.5 and $22.3 million as compared with the same periods in 1997. Same Store Properties operating expenses decreased by approximately $0.6 and $0.2 million for the six and three months ended June 30, 1998, respectively, while operating expenses attributable to Properties acquired in 1998 and 1997 added $8.8 and $4.8 million, respectively. The change in Same Store Properties operating expenses and real estate taxes relates to increases in Same Store Properties real estate taxes and insurance expense of approximately $0.2 and $0.1 million for the six and three months ended June 30, 1998, respectively, offset by decreases in Same Store Properties other property operating expenses (excluding real estate taxes and insurance) of approximately $0.8 and $0.3 million for the six and three months ended June 30, 1998, respectively. The decrease in other property operating expenses is attributable to lower asset management costs in 1998 as compared to 1997 resulting from the change in ownership structure. LIQUIDITY AND CAPITAL RESOURCES The Company expects that its principal sources of working capital and funding for acquisitions, development, expansion and renovation of Properties will include borrowings under the Credit Facility, other forms of secured or unsecured financing, proceeds from equity or debt offerings by the Company or the Operating Partnership (including issuances of Units in the Operating Partnership) and cash flows provided by operations. Management believes that its sources of working capital and its ability to access private and public debt and equity capital are adequate to continue to meet liquidity requirements for the foreseeable future. Capital Resources The Company has a $500 million unsecured revolving credit agreement with Morgan Guaranty Trust Company of New York, as agent, and a syndicate of twelve other banks. The Credit Facility has a term of three years and is subject to a fee that accrues on the daily average undrawn funds, which varies between 15 and 25 basis points (currently 15 basis points) of the undrawn funds based on the Company's credit rating. The Company uses the Credit Facility principally for acquisitions and for general working capital requirements. Borrowings under the Credit Facility bear interest at LIBOR plus 90 to 120 basis points (currently LIBOR plus 90 basis points), depending on the Company's debt rating at the time of such borrowings. As of June 30, 1998, the outstanding balance on the Credit Facility was $87.0 million and bore interest at LIBOR plus 90 basis points (6.59% as of such date). Monthly debt service payments on the Credit Facility are interest only. The Credit Facility matures in November 2000. The total amount available under the Credit Facility fluctuates based upon the borrowing base, as defined in the agreement governing the Credit Facility. At June 30, 1998, the maximum amount available under the Credit Facility was approximately $413.0 million. In 13 addition, in April 1998, the Company obtained a $50.0 unsecured acquisition facility from NationsBank, bearing interest at LIBOR plus 90 basis points (6.59% at June 30, 1998). The $50.0 unsecured acquisition facility was repaid in July 1998. In April 1998, the Company received credit ratings for its unsecured debt of Baa1 from Moody's Investors Service, BBB from Standard & Poor's Corporation and BBB+ from Duff & Phelps Credit Rating Co. As a result of the receipt of the investment-grade credit ratings, the interest rate on the Credit Facility was reduced by 20 basis points to the current rate of LIBOR plus 90 basis points. In June 1998, the Company issued $400,000 aggregate principal amount of unsecured notes ("Senior Debt Securities") in an underwritten public offering, the net proceeds of which were used to repay amounts outstanding under the Credit Facility. The Senior Debt Securities mature in June 2008, June 2015 and June 2018 and bear interest at a weighted average rate of 7.18%, which is payable in June and December of each year, commencing in December 1998. The 2015 notes are putable and callable in June 2005. In connection with the Formation Transactions and property acquisitions consummated subsequent thereto, the Company has assumed various mortgages and other secured debt. As of June 30, 1998, the aggregate principal amount of such secured debt was $575.6 million, excluding unamortized debt premiums of $16.8 million. The secured debt bears interest at rates varying from 4.00% to 10.38% per annum (with a weighted average of 7.91%) and final maturity dates ranging from November 1998 to January 2014. As of June 30, 1998, the Company's total outstanding debt was approximately $1.1 billion, including unamortized debt premiums of approximately $16.8 million. See Notes to Consolidated Financial Statements. The total amount of debt to be repaid during the remainder of 1998 is approximately $16.9 million, including scheduled principal amortization of approximately $3.3 million. In order to maintain financial flexibility and facilitate the rapid deployment of capital through market cycles, the Company presently intends to operate with a debt-to-total market capitalization ratio of less than 45%. Additionally, the Company presently intends to continue to structure its balance sheet in order to maintain an investment grade rating on its senior unsecured debt. As of June 30, 1998, the Company's debt-to-total market capitalization ratio was approximately 34.2%. Liquidity As of June 30, 1998, the Company had approximately $29.2 million in cash and cash equivalents and $413.0 million of additional available borrowings under the Credit Facility. Additionally, on July 20, 1998, the Company sold $100 million of Series A preferred stock in an underwritten public offering, the net proceeds of which were used to repay outstanding borrowings on its Credit Facility. The Company intends to use cash from operations and available borrowings under its Credit Facility as well as net proceeds from future debt or equity offerings, if any, to fund property acquisitions, development activities, and capital expenditures and to provide for general working capital requirements. On June 19, 1998, the Company and the Operating Partnership declared a quarterly cash distribution of $0.3425 per common share and operating partnership unit, payable on July 9, 1998 to stockholders and unitholders of record on June 30, 1998. The anticipated size of the Company's distributions, using only cash from operations, will not allow it to retire all of its debt as it comes due. Therefore, the Company intends to also repay maturing debt with net proceeds from future debt and/or equity financings. No assurance can be given, however, that future financings will be available to the Company or that the terms of any such financings will be favorable from the Company's perspective. Capital Commitments In addition to recurring capital expenditures and costs to renew or re-tenant space, the Company is currently in the process of renovating, expanding or developing 16 projects at a total estimated cost of $308.6 million upon completion. The Company presently expects to fund these expenditures with cash from 14 operations, borrowings under the Credit Facility or debt or equity issuances. Other than these capital items, the Company has no material capital commitments. During the period from January 1, 1998 to June 30, 1998, the Company invested $415.5 million in 104 industrial buildings, aggregating 10.2 million rentable square feet. The acquisitions were funded through borrowings under the Credit Facility, cash, debt assumption of approximately $99.6 million, co-investments by Institutional Alliance Partners(TM) of approximately $60.3 million and the issuance of LP Units with a value of approximately $28.2 million at the date of issuance. The Company expects that its funds from operations and borrowings under its Credit Facility will be sufficient to meet expected capital commitments for the next 12 months. YEAR 2000 COMPLIANCE Many computer programs have been written using two digits rather than four to define the applicable year. Computer programs that have time-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This "year 2000 issue" could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices or engage in similar normal business activities. The Company's current financial systems adequately provide for a four-digit year and management believes the year 2000 issue will not materially affect its business operations or financial condition. Additionally, the Company does not expect that the year 2000 issue will materially affect its operations due to problems encountered by its suppliers, customers and lenders. FUNDS FROM OPERATIONS Management believes that Funds from Operations ("FFO"), as defined by NAREIT, is an appropriate measure of performance for an equity REIT. While FFO is a relevant and widely used measure of operating performance of REITs, it does not represent cash flow from operations or net income as defined by GAAP, and it should not be considered as an alternative to those indicators in evaluating liquidity or operating performance. Further, FFO as disclosed by other REITs may not be comparable. The following table reflects the calculation of the Company's FFO for the six and three months ended June 30, 1997 and 1998. The 1997 FFO was prepared on a pro forma basis (giving effect to the completion of the Formation Transactions, the IPO, and certain 1997 property acquisitions and dispositions) as if they had occurred on January 1, 1997 (dollars in thousands).
FOR THE THREE MONTHS FOR THE SIX MONTHS ENDED JUNE 30, ENDED JUNE 30, ------------------------------ ------------------------------ 1997 (PRO FORMA) 1998 1997 (PRO FORMA) 1998 ---------------- ----------- ---------------- ----------- Income from operations before minority interests................. $ 25,482 $ 30,382 $ 49,809 $ 59,570 Real estate related depreciation and amortization: Total depreciation and amortization.................... 11,472 13,516 23,238 25,302 Furniture, fixtures and equipment depreciation.................... (43) (111) (86) (215) FFO attributable to minority interests(1)(2).................... (400) (1,513) (951) (2,088) ----------- ----------- ----------- ----------- FFO(1)............................. $ 36,511 $ 42,274 $ 72,010 $ 82,569 =========== =========== =========== =========== Weighted average shares and units outstanding (diluted).............. 88,416,676 89,886,673 88,416,676 89,362,932 =========== =========== =========== ===========
- --------------- (1) The White Paper on Funds from Operations approved by the Board of Governors of the National Association of Real Estate Investment Trusts ("NAREIT") in March 1995 (the "White Paper") defines Funds from Operations as net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from debt restructuring and sales of properties, plus real estate related depreciation and 15 amortization. Management considers FFO an appropriate measure of performance of an equity REIT because it is predicated on cash flow analyses. The Company computes FFO in accordance with standards established by the White Paper, which may differ from the methodology for calculating FFO utilized by other REITs and, accordingly, may not be comparable to such other REITs. FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as an indicator of financial performance or to cash flow from operating activities (determined in accordance with GAAP) as a measure of liquidity, nor is it indicative of funds available to fund cash needs, including the ability to make distributions. (2) Represents FFO attributable to minority interests 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. Such minority interests are not convertible into shares of Common Stock. TENANT RETENTION RATES AND RENT INCREASES The following table sets forth information relating to tenant retention rates and rent increases on renewal and re-tenanted space for the Industrial Properties and the Retail Properties for the periods presented.
FOR THE THREE FOR THE SIX YEARS ENDED DECEMBER 31, MONTHS ENDED MONTHS ENDED -------------------------- JUNE 30, JUNE 30, WEIGHTED 1995 1996 1997 1998 1998 AVERAGE ------ ------ ------ ------------- ------------ -------- INDUSTRIAL PROPERTIES Retention rate.................. 67.9% 79.2% 69.5% 88.1% 82.5% 74.7% Rent increases.................. 4.8% 4.7% 13.0% 21.2% 13.6% 11.4% RETAIL PROPERTIES Retention rate.................. 63.5% 88.4% 87.8% 82.8% 84.7% 83.3% Rent increases.................. 3.2% 5.4% 10.1% 20.3% 23.2% 15.9%
RECURRING TENANT IMPROVEMENTS AND LEASING COMMISSIONS PER SQUARE FOOT LEASED The table below summarizes for the Industrial Properties and the Retail Properties, separately, the recurring tenant improvements and leasing commissions per square foot leased for the periods presented. The recurring tenant improvements and leasing commissions represent costs incurred to lease space after the initial lease term of the initial tenant, excluding costs incurred to relocate tenants 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.
FOR THE THREE FOR THE SIX YEARS ENDED DECEMBER 31, MONTHS ENDED MONTHS ENDED -------------------------- JUNE 30, JUNE 30, WEIGHTED 1995 1996 1997 1998 1998 AVERAGE ------ ------ ------ ------------- ------------ -------- INDUSTRIAL PROPERTIES Expenditures per renewed square foot leased........ $0.91 $0.93 $1.05 $0.69 $0.72 $0.89 Expenditures per re-tenanted square foot leased........ 1.75 1.97 1.62 2.69 2.32 1.82 Weighted average.......... 1.32 1.29 1.30 1.00 0.99 1.23 RETAIL PROPERTIES Expenditures per renewed square foot leased........ $5.53 $4.72 $4.25 $1.19 $1.55 $3.52 Expenditures per re-tenanted square foot leased........ 5.37 6.53 7.92 2.00 4.50 7.10 Weighted average.......... 5.46 5.61 6.41 1.25 1.78 5.04
16 OCCUPANCY AND AVERAGE BASE RENT The table below sets forth weighted average occupancy rates and average base rent per square foot, based on square feet leased, of the Industrial Properties and the Retail Properties for the periods presented.
AS OF DECEMBER 31, -------------------------- AS OF 1995 1996 1997 JUNE 30, 1998 ------ ------ ------ ------------- INDUSTRIAL PROPERTIES Occupancy rate at period end........................ 97.3% 97.2% 95.7% 95.1% Average base rent per square foot(1)................ $ 3.43 $ 3.81 $ 4.26 $ 4.38 RETAIL PROPERTIES Occupancy rate at period end........................ 92.4% 92.4% 96.1% 95.0% Average base rent per square foot(1)................ $10.46 $11.32 $11.98 $11.85
- --------------- (1) Average base rent per square foot represents the total annualized contractual base rental revenue for the period divided by the average occupied square feet during the period. ITEM 1. LEGAL PROCEEDINGS As of June 30, 1998, there were no pending legal proceedings to which the Company is a party or of which any of its Properties is the subject, the adverse determination of which in the view of management would be anticipated to have a material adverse effect upon the Company's financial condition and results of operations. ITEM 2. CHANGES IN SECURITIES During the three months ended June 30, 1998, the Operating Partnership issued 99,395 limited partner interests ("LP Units") in consideration for the acquisition of certain properties. Holders of the LP Units may redeem part or all of their LP Units for cash, or at the election of the Company, exchange such LP Units for shares of Common Stock on a one-for-one basis. This redemption/exchange right may not be exercised prior to April 1999. The issuance of LP Units in connection with the aforementioned acquisitions constituted private placements of securities which were exempt from the registration requirement of the Securities Act of 1933, as amended, pursuant to Section 4 (2) and Rule 506 of Regulation D promulgated thereunder. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. 17 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held its Annual Meeting of Stockholders on May 15, 1998. The stockholders voted to elect nine directors to the Company's Board of Directors to serve until the next annual meeting of stockholders and until their successors are duly elected and qualify. The stockholders' votes with respect to the election of directors were as follows:
VOTES AGAINST VOTES BROKER NON- VOTES FOR OR WITHHELD ABSTAINED VOTES --------- ------------- --------- ----------- Douglas D. Abby 59,475,853 21,110 -- -- Hamid R. Moghadam 59,475,853 21,110 -- -- T. Robert Burke 59,476,053 20,910 -- -- Daniel H. Case, III 59,209,564 287,399 -- -- Robert H. Edelstein, Ph.D. 59,476,053 20,910 -- -- Lynn M. Sedway 59,475,753 25,210 -- -- Jeffrey L. Skelton, Ph.D. 59,471,053 25,910 -- -- Thomas W. Tusher 59,475,753 21,210 -- -- Caryl B. Welborn, Esq. 59,475,753 21,210 -- --
ITEM 5. OTHER INFORMATION None. 18 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits:
EXHIBIT NUMBER DESCRIPTION ------- ----------- 3.1(1) Articles of Incorporation of the Registrant. 3.2(1) Bylaws of the Registrant. 3.3(1) Form of Certificate for Common Stock of the Registrant. 3.4(4) Articles Supplementary establishing and fixing the rights and preferences of the 8.5% Series A Cumulative Redeemable Preferred Stock. 3.5(2) Form of Certificate for the 8.5% Series A Cumulative Redeemable Preferred Stock of the Registrant. 4.1(3) Indenture by and among the Registrant, the Operating Partnership and State Street Bank and Trust Company of California, N.A., as trustee. 4.2(3) First Supplemental Indenture, by and among the Operating Partnership, the Registrant and State Street Bank and Trust Company of California, N.A., as trustee; Second Supplemental Indenture, by and among the Operating Partnership, the Registrant and State Street Bank and Trust Company of California, N.A., as trustee; and Third Supplemental Indenture, by and among the Operating Partnership, the Registrant and State Street Bank and Trust Company of California, N.A., as trustee. 4.3(3) Specimen of 7.10% Notes due 2008. 4.4(3) Specimen of 7.50% Notes due 2018. 4.5(3) Specimen of 6.90% Reset Put Securities due 2015. 10.1(2) Form of Second Amended and Restated Agreement of Limited Partnership of AMB Property, L.P. 10.2(4) Amended Credit Agreement between AMB Property, L.P. and NationsBank of Texas, N.A. dated April 16, 1998 deleting subsidiary guarantees. 27.1(4) Financial Data Schedule -- AMB Property Corporation
- --------------- (1) Previously filed as an exhibit to Registration Statement on Form S-11 (No. 333.35915) and incorporated herein by reference. (2) Previously filed as an exhibit to Registration Statement on Form S-11 (No. 333.58107) and incorporated herein by reference. (3) Previously filed as an exhibit to Registration Statement on Form S-11 (No. 333.49163) and incorporated herein by reference. (4) Filed herewith. (b) Reports on Form 8-K: Form 8-K for the event dated June 30, 1998, was filed July 9, 1998 in connection with the issuance of $400 million principal amount of senior debt securities. 19 SIGNATURES Pursuant to the requirements 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. AMB PROPERTY CORPORATION Registrant Date August 14, 1998 By: /s/ HAMID R. MOGHADAM ---------------------------------------------------- Hamid R. Moghadam President and Chief Executive Officer, Director (Principal Executive Officer) Date August 14, 1998 And: /s/ S. DAVIS CARNIGLIA --------------------------------------------------- S. Davis Carniglia Chief Financial Officer, Managing Director (Principal Financial Officer) Date August 14, 1998 And: /s/ MICHAEL A. COKE --------------------------------------------------- Michael A. Coke Director of Financial Management And Reporting, Chief Accounting Officer (Principal Accounting Officer)
20 EXHIBIT INDEX
Exhibits Description - -------- ----------- 3.4 Articles Supplementary establishing and fixing the rights and preferences of the 8.5% Series A Cumulative Redeemable Preferred Stock. 10.2 Amended Credit Agreement between AMB Property, L.P. and NationsBank of Texas, N.A. dated April 16, 1998 deleting subsidiary guarantees. 27.1 Financial Data Schedule