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AMB Property Corp. Reports Operating Results (10-Q)

November 06, 2012 | About:

AMB Property Corp. (AMB) filed Quarterly Report for the period ended 2012-09-30.

Amb Property Corp. has a market cap of $4.33 billion; its shares were traded at around $0 with a P/E ratio of 17.4. The dividend yield of Amb Property Corp. stocks is 4.4%.

Highlight of Business Operations:

Global trade volumes remain well above their pre-crisis peak, and while revised slightly down, the International Monetary Fund forecasts growth of over 3% for this year and 4.5% for 2013. Consumption in the United States is strong with retail sales coming in at over 5.4% year-over-year and online sales growing three times faster. The National Retail Federation forecasts a year-over-year increase of 4.1% for all holiday sales, which compares favorably to the ten-year average increase of 3.5%. Real inventories have also increased at an average annual rate of 2.5% for the first nine months of 2012. Inventories are the only major economic indicator of demand for industrial real estate that remains below peak, by about 3%. We think there is significant opportunity for growth in inventories as consumer confidence improves.

The net operating income of the Real Estate Operations segment consisted of rental income and rental expenses from industrial properties that we own and consolidate and is impacted by our capital deployment activities. The size and percentage of occupancy of our consolidated operating portfolio fluctuates due to the timing of acquisitions, development activity and contributions. Such fluctuations affect the net operating income we recognize in this segment in a particular period. Also included in this segment is revenue from land we own and lease to customers under ground leases and development management and other income, offset by acquisition costs and land holding costs. The net operating income from the Real Estate Operations segment for the nine months ended September 30, excluding amounts presented as Discontinued Operations in our Consolidated Financial Statements in Item 1, was as follows (in thousands):

We recognized net earnings from unconsolidated entities of $20.4 million and $56.0 million for the nine months ended September 30, 2012 and 2011, respectively. These earnings relate to our investments in unconsolidated entities that are accounted for under the equity method. The earnings decreased in 2012 from 2011 due to the consolidation of PEPR, NAIF II and Prologis California, previously accounted for under the equity method. This decrease was partially offset by earnings from investments acquired through the Merger. In the second quarter of 2012, we recorded a loss of $5.0 million for our share of a loss on the early extinguishment of debt in Prologis North American Industrial Fund III. In the third quarter of 2011, we recognized a gain of $13.9 million representing our share of the gain on the disposal of 13 properties in another co-investment venture in the Americas. The earnings we recognize are impacted by: (i) variances in revenues and expenses of the entity; (ii) the size and occupancy rate of the portfolio of properties owned by the entity; (iii) our ownership interest in the entity; and (iv) fluctuations in foreign currency exchange rates used to translate our share of net earnings to U.S. dollar, if applicable. We manage the majority of the properties in which we have an ownership interest as part of our total owned and managed portfolio. See discussion of our portfolio results in the section, Portfolio Information. See also Note 4 to our Consolidated Financial Statements in Item I for further breakdown of our share of net earnings recognized.

Our weighted average effective borrowing costs (including amortization of deferred loan costs) was 4.6% and 5.6% for the nine months ended September 30, 2012 and 2011, respectively. Our future interest expense, both gross interest and the portion capitalized, will vary depending on, among other things, the level of our development activities. As a result of the Merger and PEPR Acquisition, we increased our debt from $6.4 billion at March 31, 2011 to $12.1 billion at June 30, 2011, which was reduced by $1.1 billion with proceeds from a June 2011 equity issuance. During the remainder of the year, we reduced our debt to $11.4 billion at December 31, 2011. Our debt increased to $12.6 billion as of September 30, 2012, principally from the Q1 Venture Acquisitions ($1.4 billion), partially offset by repayments with proceeds from sales and contributions of properties. One of our strategic objectives is to reduce our debt with proceeds from property dispositions. See Notes 2 and 7 to our Consolidated Financial Statements in Item 1 and Liquidity and Capital Resources for further discussion of our debt and borrowing costs.

In connection with the Merger and the exchange offer discussed in Note 7 to our Consolidated Financial Statements in Item 1, our convertible senior notes became exchangeable senior notes issued by the Operating Partnership that are exchangeable into common stock of the REIT. As a result, the accounting for the exchangeable senior notes changed, which required us to separate the fair value of the derivative instrument (exchange feature) from the debt instrument and account for it separately as a derivative. We adjust the derivative instrument at each reporting period to fair value with the resulting adjustment being recorded in earnings. We recognized an unrealized loss of $6.7 million and $19.1 million for the three and nine months ended September 30, 2012, respectively. We recognized an unrealized gain of $61.0 million and $51.3 million for the three and nine months ended September 30, 2011, respectively.

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