AMB Sees Occupancy, Rates Fall through Q1

SAN FRANCISCO-AMB Property Corp. on Wednesday reported a 72% drop in earnings per share for the first quarter. The locally headquartered industrial REIT also reported declining occupancies and rental rates.The locally based company reported first quarter EPS of $0.19, which compares to EPS of $0.69 for the first quarter of 2003, which included $0.53 per share of net gains on dispositions of real estate and net lease termination fees. The company’s industrial operating portfolio was 92.7% leased as of the end of March, compared with 93.1% at the start of the year. Cash-basis same store net operating income decreased 3.1% compared with a decline of 14.5% last quarter, driven by lower average same store occupancies and rental rate declines. Rents on lease renewals and rollovers decreased by 14.7% during the quarter, compared with 15.7% last quarter.AMB chairman/CEO Hamid R. Moghadam says he continues to see the fundamentals in place for a recovery in industrial real estate. “The Industrial Production index has not only returned to levels last seen in December 2000, it has grown steadily over the last six monthly reporting periods,” he says. “The inventory-to-sales ratio is at an historic low, and total business inventories have begun to expand, pointing to an increase in demand for industrial space as businesses meet restocking requirements.”The company’s first quarter Funds From Operations Per Share, reported in accordance with NAREIT standards, was $0.53, at the high end of the company’s guidance, compared with $0.60 in the same period of 2003. FFOPS for the first quarter included less than $0.01 per share in net lease termination fees compared to $0.08 per share in the first quarter of 2003.Acquisitions during the first quarter totaled 1.3 million sf in seven buildings at a cost of $134.2 million. Properties in Boston and Los Angeles accounted for 72% of the combined investments. Development starts totaled 1.8 million sf in six projects with an expected total investment of $152 million. Japan and Mexico account for 74% of its new development work. The acquisitions included 32 acres of land for industrial warehouse development immediately adjacent to Japan’s Narita International Airport, the world’s second busiest airport for cargo volume. AMB and Tokyo- based AMB BlackPine have broken ground on Phase I of AMB Narita Air Cargo Center I, the first 685,000 sf of a planned 1.7-million-sf logistics park. At completion, the seven-building multistory project is expected to be Japan’s largest dedicated air cargo logistics park. Phase I contains two buildings of two and four stories for an expected investment of $82.5 million. AMB also added to its operating properties in Japan in the first quarter, acquiring the two-building, 250,800-sf Funabashi Distribution Center in metro Tokyo for $21.8 million. The buildings are fully leased to Japanese logistics firms Tokyo Air Cargo and SBS. AMB made its first acquisitions in the Tokyo market in the fourth quarter of 2003.On the development side in Mexico, AMB and its Mexico City-based partner G.Accion began construction in the first quarter on the 571,300-sf Encino Distribution Center in the San Martin Obispo Industrial Park in Mexico City. The joint venture has completed 1.1 million sf of developments in the park that are fully leased or have been sold to users. In January, AMB and G.Accion acquired the 120,300-sf Coltongo Distribution Center near the Mexico City Airport for a total investment of $4.8 million in a sale/leaseback transaction with Kraft Foods de Mexico. AMB also has closed on $289 million of its previously announced $481-million acquisition of the International Airport Centers portfolio–a 37-building, 3.4-million-sf portfolio of airport-adjacent facilities at seven U.S. international airports. The balance of the portfolio is scheduled to close by third quarter 2004. As of March 31, AMB owned, managed and had renovation and development projects totaling 104.5 million sf and 1,070 buildings in 36 markets in seven countries.