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SAN FRANCISCO-AMB Property Corp. passed some worthwhile milestones during the third quarter, which saw its earnings increase by 9.8%. Occupancy in its 120-million-sf industrial portfolio is at its highest level since the third quarter of 2001 and rents on renewals entered positive territory for the first time since the first quarter of 2002, according to its earnings report this week.
The locally headquartered REIT reported portfolio occupancy of 95.9%, a 50 basis point improvement from the end of the second quarter and a 130 basis point improvement from the third quarter of 2005. More significantly, it reported that rents on lease renewal and rollover in its operating portfolio increased 9.9% during the quarter. Rents declined in the second quarter by 0.9% and by 7.5% during the third quarter of 2005.
AMB acquired 1.3 million sf during the quarter in 10 distribution buildings at a total cost of $115.6 million. The acquisitions expanded its presence in Chicago, Los Angeles, Minneapolis, Seattle, and Queretaro, Mexico.
AMB stabilized and completed nine development projects in North America, Europe and Asia during the third quarter. Two projects totaling approximately 181,000 sf and costing $13 million were placed in operations while seven projects totaling 2.7 million sf and costing $199 million were made available for sale or contribution to one of its funds.
Eight new development and renovation projects were started during the quarter. The projects will cost $251 million and add 2.8 million sf to AMB's portfolio. All told, the company has 13.4 million sf of projects in the pipeline slated for delivery through 2008. This year's deliveries are 66% preleased or under contract for sale.
Subsequent to the end of the third quarter, AMB entered into a merchant development joint venture with GE Real Estate. The joint venture will have total equity of approximately $500 million--with GE contributing 85% of the total--to pursue development-for-sale opportunities in US markets other than those it identifies as its target markets.
AMB will earn development fees from the projects and is entitled to 45% of the development project profits realized by the venture over a 7.25% un-leveraged internal rate of return. The company says it expects to contribute several of its land holdings into the venture in the fourth quarter.
AMB earned $29.96 million or $0.33 per share in the third quarter, compared with $27.29 million, or $0.31 per share, in the same period one year ago. Funds from operations for the third quarter rose 47% from one year ago to $68.29 million, or $0.72 per share, $0.06 ahead of consensus estimates from analysts. Third-quarter revenue rose 16.8% from one year ago to $180.21 million.
The company's stock closed down 9 cents, or 0.16%, at $57.30 on Tuesday, then jumped $0.70 on Wednesday to close at $58 on trading that was twice its average volume.
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