<PAGE> 1
================================================================================
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 MARCH 31, 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)
<TABLE>
<S> <C>
MARYLAND 94-3281941
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
505 MONTGOMERY ST., SAN FRANCISCO, CALIFORNIA 94111
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
(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 April 30, 1998, there were 85,874,513 shares of the Registrant's
common stock, $0.01 par value per share, outstanding.
================================================================================
<PAGE> 2
AMB PROPERTY CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item Financial Statements
1.
Consolidated Balance Sheets as of December 31, 1997 and 1
March 31, 1998 (unaudited)..................................
Consolidated Statements of Operations for the three months 2
ended March 31, 1997 and 1998 (unaudited)...................
Consolidated Statements of Cash Flows for the three months 3
ended March 31, 1997 and 1998 (unaudited)...................
Consolidated Statement of Stockholders' Equity for the three 4
months ended March 31, 1998 (unaudited).....................
Notes to Consolidated Financial Statements (unaudited)...... 5
Item Management's Discussion and Analysis of Financial Condition 10
2. and Results of Operations...................................
Item Quantitative and Qualitative Disclosures About Market 17
3. Risk........................................................
PART II. OTHER INFORMATION
Item Legal Proceedings........................................... 17
1.
Item Changes in Securities....................................... 17
2.
Item Defaults Upon Senior Securities............................. 17
3.
Item Submission of Matters to a Vote of Security Holders......... 18
4.
Item Other Information........................................... 18
5.
Item Exhibits and Reports on Form 8-K............................ 18
6.
</TABLE>
<PAGE> 3
PART I
ITEM 1. FINANCIAL STATEMENTS
AMB PROPERTY CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1997 AND MARCH 31, 1998
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AMOUNTS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
------------ ----------
<S> <C> <C>
Investments in real estate:
Land and improvements..................................... $ 550,635 $ 618,956
Buildings and improvements................................ 1,822,516 2,045,834
Construction in progress.................................. 69,848 91,092
---------- ----------
Total investments in real estate.................. 2,442,999 2,755,882
Accumulated depreciation and amortization................. (4,153) (15,834)
---------- ----------
Net investments in real estate.................... 2,438,846 2,740,048
Cash and cash equivalents................................... 39,968 28,584
Other assets................................................ 27,441 29,558
---------- ----------
Total assets...................................... $2,506,255 $2,798,190
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Debt:
Secured debt.............................................. 535,652 610,111
Unsecured credit facility................................. 150,000 312,000
---------- ----------
Total debt........................................ 685,652 922,111
Other liabilities........................................... 49,350 81,611
Payable to affiliates....................................... 38,071 --
---------- ----------
Total liabilities................................. 773,073 1,003,722
Commitments and contingencies............................... -- --
Minority interests.......................................... 65,152 123,763
Stockholders' equity:
Preferred stock, $.01 par value, 100,000,000 shares
authorized, none issued or outstanding................. -- --
Common stock, $.01 par value, 500,000,000 shares
authorized, 85,874,513 issued and outstanding.......... 859 859
Additional paid-in capital................................ 1,667,171 1,669,846
Retained earnings......................................... -- --
---------- ----------
Total stockholders' equity........................ 1,668,030 1,670,705
---------- ----------
Total liabilities and stockholders' equity........ $2,506,255 $2,798,190
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
1
<PAGE> 4
AMB PROPERTY CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
---------------------------
1997 1998
----------- ------------
<S> <C> <C>
REVENUES
Rental revenues........................................... $ -- $ 74,602
Investment management and other income.................... 5,112 1,183
---------- -----------
Total revenues.................................... 5,112 75,785
---------- -----------
OPERATING EXPENSES
Property operating expenses............................... -- 10,004
Real estate taxes......................................... -- 10,248
Interest.................................................. -- 11,841
Depreciation and amortization............................. -- 11,786
General and administrative................................ -- 2,718
Investment management expenses............................ 3,873 --
---------- -----------
Total operating expenses.......................... 3,873 46,597
---------- -----------
Income from operations before minority
interests....................................... 1,239 29,188
---------- -----------
Minority interests' share of net income................... -- (1,282)
---------- -----------
Net income available to common stockholders....... $ 1,239 $ 27,906
========== ===========
INCOME PER SHARE OF COMMON STOCK
Basic..................................................... $ 0.24 $ 0.32
========== ===========
Diluted................................................... $ 0.24 $ 0.32
========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic..................................................... 5,079,855 85,874,513
========== ===========
Diluted................................................... 5,079,855 86,284,736
========== ===========
DISTRIBUTIONS DECLARED PER SHARE OF COMMON STOCK............ $ 0.17 $ 0.34
========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE> 5
AMB PROPERTY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1998
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
---------------------
1997 1998
------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income.................................................. $1,239 $ 27,906
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. -- 11,786
Straight-line rents....................................... -- (2,825)
Amortization of debt premiums and financing costs......... -- (669)
Minority interests' share of net income................... -- 1,282
Equity in income of AMB Investment Management............. -- (126)
Changes in assets and liabilities:
Other assets.............................................. 101 (4,512)
Other liabilities......................................... 219 1,978
------ ---------
Net cash provided by operating activities......... 1,559 34,820
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for property acquisitions......................... -- (149,874)
Additions to land and building improvements................. -- (3,648)
Additions to tenant improvements and leasing costs.......... -- (2,862)
Additions to construction in progress....................... -- (5,065)
Reduction of payable to affiliates in connection with
Formation Transactions.................................... -- (38,071)
------ ---------
Net cash used in investing activities............. -- (199,520)
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings on unsecured credit facility..................... -- 162,000
Borrowings on secured debt.................................. -- 1,118
Payments on secured debt.................................... -- (9,429)
Distributions to minority interests......................... -- (373)
Distributions to minority interests of Predecessor.......... (137) --
Distributions to stockholders of Predecessor................ (4,003) --
Principal payment of notes receivable from stockholders of
Predecessor............................................... 328 --
------ ---------
Net cash provided by (used in) financing
activities....................................... (3,812) 153,316
Net decrease in cash and cash equivalents................... (2,253) (11,384)
Cash and cash equivalents at beginning of period............ 3,093 39,968
------ ---------
Cash and cash equivalents at end of period.................. $ 840 $ 28,584
====== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the period for:
Interest.................................................. $ -- $ 13,457
Property acquisitions:
Acquisitions of properties................................ $ -- $ 296,143
Assumption of secured debt................................ -- (83,515)
Minority interests contribution........................... -- (62,754)
------ ---------
Cash paid for property acquisitions....................... $ -- $ 149,874
====== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 6
AMB PROPERTY CORPORATION
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
COMMON STOCK
-------------------- ADDITIONAL
NUMBER PAID-IN RETAINED
OF SHARES AMOUNT CAPITAL EARNINGS TOTAL
---------- ------ ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1997...... 85,874,513 $859 $1,667,171 $ -- $1,668,030
Net income...................... -- -- -- 27,906 27,906
Reallocation of Limited
Partners' interests in
Operating Partnership........ -- -- 4,181 -- 4,181
Distributions declared to AMB
Property Corporation
stockholders................. -- -- (1,506) (27,906) (29,412)
---------- ---- ---------- -------- ----------
BALANCE AT MARCH 31, 1998......... 85,874,513 $859 $1,669,846 $ -- $1,670,705
========== ==== ========== ======== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 7
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE, UNIT, SQUARE FEET AND PERCENTAGE DATA)
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 ownership, operation, management, acquisition, renovation,
expansion and development of industrial properties 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 March 31, 1998, the Company owned an approximate 95.9% general
partner interest in the Operating Partnership. The remaining 4.1% 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 Corporation, 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
<PAGE> 8
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE, UNIT, SQUARE FEET AND PERCENTAGE DATA)
As of March 31, 1998, the Company owned 155 Properties, consisting of 118
industrial properties (the "Industrial Properties") and 37 retail properties
(the "Retail Properties") located in 28 markets throughout the United States.
The Industrial Properties (comprising 415 buildings), principally warehouse
distribution properties, encompass approximately 44.0 million rentable square
feet and, as of March 31, 1998, were 94.6% leased to over 1,000 tenants. The
Retail Properties (comprising 37 centers), principally grocer-anchored community
shopping centers, encompass approximately 6.8 million rentable square feet and,
as of the same date, were 94.6% 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 three months ended March 31,
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 three months ended March 31, 1997 and 1998 is not comparable given the
differences in lines of business between the Company and the Predecessor.
The interim results of the three months ended March 31, 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.
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 March 31, 1998, the unamortized debt premium was $17,542.
As of March 31, 1998, debt, excluding unamortized debt premiums, consists of the
following:
<TABLE>
<S> <C>
Secured debt, varying interest rates from 7.01% to 10.39%,
due November 1998 to January 2014......................... $592,569
Unsecured credit facility, variable interest at LIBOR plus
110 basis points, (6.79% at March 31, 1998) due November
2000...................................................... 312,000
--------
Total Debt........................................ $904,569
========
</TABLE>
6
<PAGE> 9
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE, UNIT, SQUARE FEET AND PERCENTAGE DATA)
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 one loan of $5,623 which
bears a variable interest rate at LIBOR plus 275 basis points, or 8.44% at March
31, 1998, or prime plus 50 basis points at the borrower's option. 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 March 31, 1998, was 8.01%.
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. The Credit Facility has various financial and
non-financial covenants.
Interest capitalized related to construction projects for the three months
ended March 31, 1998, was $1,253. There was no capitalized interest for periods
prior to the Formation Transactions.
The scheduled maturities of the secured debt as of March 31, 1998 are as
follows:
<TABLE>
<S> <C>
1998...................................................... $ 53,712
1999...................................................... 10,965
2000...................................................... 14,427
2001...................................................... 38,582
2002...................................................... 63,675
Thereafter................................................ 411,208
--------
$592,569
========
</TABLE>
The 1998 maturities included $35,000 of secured debt that was assumed in
connection with certain property acquisitions, and which was repaid in full
subsequent to March 31, 1998.
4. MINORITY INTERESTS
Minority interests in the Company represent the limited partnership
interests in the Operating Partnership and interests held by certain third
parties in 11 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 all 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 ("Minority Interest -- Joint Ventures") and the limited
partnership interests' in the Operating Partnership ("Minority
Interest -- Limited Partners") as of March 31, 1998.
<TABLE>
<S> <C>
Minority Interest -- Joint Ventures....................... $ 52,867
Minority Interest -- Limited Partners..................... 70,896
--------
$123,763
========
</TABLE>
5. STOCKHOLDERS' EQUITY
On March 9, 1998, the Company and the Operating Partnership declared a
quarterly cash distribution of $0.3425 per share of common stock, payable on
April 3, 1998, to stockholders and unitholders of record as of March 18, 1998.
7
<PAGE> 10
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE, UNIT, SQUARE FEET AND PERCENTAGE DATA)
6. EARNINGS PER SHARE
For purposes of calculating diluted earnings per share for the three months
ended March 31, 1998, no adjustment to net income available to common
stockholders was necessary, as the Company's only dilutive securities
outstanding for such period were stock options issued under its stock incentive
plan. The effect of the stock options was to increase weighted average shares
outstanding by 410,223 for the three months ended March 31, 1998. Such dilution
was computed using the treasury stock method. The Predecessor had no dilutive
securities outstanding during the three months ended March 31, 1997.
7. PRO FORMA INFORMATION
The following summary unaudited pro forma financial information for the
three months ended March 31, 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. In the opinion of management, 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 present the consolidated results of operations for future periods.
<TABLE>
<CAPTION>
FOR THE THREE
MONTHS ENDED
MARCH 31, 1997
--------------
<S> <C>
Total revenues......................................... $ 68,622
Income from operations before minority interests....... 24,327
Net income available to common stockholders............ 23,342
Income Per Share of Common Stock
Basic................................................ $ 0.27
-----------
Diluted.............................................. $ 0.27
-----------
Weighted Average Common Shares Outstanding
Basic................................................ 85,874,513
===========
Diluted.............................................. 85,874,513
===========
</TABLE>
8
<PAGE> 11
AMB PROPERTY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED, IN THOUSANDS, EXCEPT SHARE, UNIT, SQUARE FEET AND PERCENTAGE DATA)
8. OPERATING PARTNERSHIP
As of March 31, 1998, the Company owned a 95.9% general partner interest in
the Operating Partnership. Therefore, the Company consolidates the Operating
Partnership and records the remaining 4.1% limited partner interests as minority
interests in the consolidated financial statements. The Operating Partnership
commenced operations as a fully integrated real estate company in connection
with the Formation Transactions. The following table sets forth summary
financial information of the Operating Partnership as of and for the period from
December 31, 1997 to March 31, 1998:
<TABLE>
<S> <C>
Investments in real estate, net......................... $ 2,740,048
Total assets............................................ 2,798,190
Debt.................................................... 922,111
Partners' capital....................................... 1,741,601
Revenues................................................ 75,785
Income from operations before minority interest......... 29,188
Net income.............................................. 28,726
Net income per unit:
Basic................................................. $ 0.32
Diluted............................................... $ 0.32
Weighted average units outstanding:
Basic................................................. 88,428,969
Diluted............................................... 88,839,192
</TABLE>
Following is a statement of partners' capital of the Operating Partnership
for the three months ended March 31, 1998:
<TABLE>
<CAPTION>
GENERAL PARTNER LIMITED PARTNERS
------------------------ --------------------
UNITS AMOUNT UNITS AMOUNT TOTAL
---------- ---------- --------- ------- ----------
<S> <C> <C> <C> <C> <C>
DECEMBER 31, 1997............... 85,874,513 $1,668,030 2,542,163 $49,368 $1,717,398
Contributions................. -- -- 1,106,444 25,760 25,760
Net income.................... -- 27,906 -- 820 28,726
Reallocation.................. -- 4,181 -- (4,181) --
Distributions................. -- (29,412) -- (871) (30,283)
---------- ---------- --------- ------- ----------
MARCH 31, 1998.................. 85,874,513 $1,670,705 3,648,607 $70,896 $1,741,601
========== ========== ========= ======= ==========
</TABLE>
9. SUBSEQUENT EVENTS
On April 2, 1998, the Operating Partnership filed a registration statement
with the Securities and Exchange Commission for the issuance of senior unsecured
notes with an aggregate principal amount of $350,000. If such transaction is
consummated, the Company anticipates that it will use the net proceeds from the
issuance to repay borrowings on the Credit Facility and for general working
capital requirements.
In April 1998, the Company repaid approximately $35,000 in assumed debt
related to properties acquired during the quarter ended March 31, 1998.
9
<PAGE> 12
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. Such statements are subject
to certain risks and uncertainties which could cause actual results to differ
materially from those projected. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
hereof.
THE COMPANY
AMB Property Corporation is a fully integrated real estate company engaged
in the ownership, operation, management, acquisition, renovation, expansion and
development of industrial properties and community shopping centers in target
markets nationwide.
INDUSTRIAL AND RETAIL PROPERTIES BY REGION
AS OF MARCH 31, 1998
<TABLE>
<CAPTION>
INDUSTRIAL PROPERTIES RETAIL PROPERTIES TOTAL
------------------------------ --------------------------- ---------------------------------
NUMBER RENTABLE NUMBER RENTABLE NUMBER RENTABLE
OF SQUARE % OF OF SQUARE % OF OF BUILDINGS SQUARE % OF
REGION BUILDINGS FEET TOTAL CENTERS FEET TOTAL AND CENTERS FEET TOTAL
------ --------- ---------- ----- ------- --------- ----- ------------ ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Eastern.............. 68 8,729,347 19.9% 4 1,272,968 18.6% 72 10,002,315 19.7%
Midwestern........... 92 11,199,515 25.5 4 710,833 10.4 96 11,910,348 23.4
Southern............. 114 11,262,975 25.6 12 1,957,051 28.6 126 13,220,026 26.0
Western.............. 141 12,772,141 29.0 17 2,907,986 42.4 158 15,680,127 30.9
--- ---------- ----- --- --------- ----- --- ---------- -----
Total........... 415 43,963,978 100.0% 37 6,848,838 100.0% 452 50,812,816 100.0%
=== ========== ===== === ========= ===== === ========== =====
</TABLE>
During the quarter ended March 31, 1998, the Company invested $296 million
in real estate, consisting of (i) $272 million in operating properties
comprising 56 industrial buildings and two shopping centers, including $37
million of capital provided by Institutional Alliance Partners for their share
of consolidated joint ventures with the Company, (ii) $22 million for the
acquisition of two development projects, and (iii) $2 million of additional
acquisition costs for an existing property. In addition, the Company initiated
development of three development projects with a total estimated cost of $88
million, including the $22 million of acquisition costs included above, bringing
the expected cost of developments in process at March 31, 1998 to $211 million.
INCREASED PRESENCE IN KEY MARKETS
The Company continued to execute its research-based target market strategy
by expanding its presence in key markets nationwide and initiating significant
investments in two newly targeted markets. Major markets targeted by the
Company's research for significant expansion during the quarter included the
following:
- BOSTON: The Company more than tripled its presence in this market through
its $85.7 million investment in 22 industrial buildings comprising 2.9
million square feet in three transactions. Since entering the Boston
market approximately six months ago, the Company has grown its portfolio
to 35 industrial buildings aggregating 4.2 million square feet. The first
quarter acquisitions included a transaction structured through the
Company's UPREIT Alliance Program, allowing the former owner, the
Campanelli Companies, to exchange properties for equity interests in the
Company while retaining management and leasing responsibilities.
- ORLANDO: The Company expanded its portfolio in this market to become a
leading property owner in the broader industrial market with a total of
17 buildings totaling over 1.5 million square feet. During the quarter,
the Company invested $30.3 million to purchase 11 industrial warehouse
buildings totaling 791,386 square feet located in the Orlando Central
Park ("OCP"). The Company is now the largest owner in OCP, the dominant
industrial park in the Orlando market.
10
<PAGE> 13
- NORTHERN NEW JERSEY: The Company expanded in this national distribution
market, increasing its holdings to six buildings aggregating 1.8 million
square feet. Through a co-investment transaction in its Institutional
Alliance Program, the Company invested $23.4 million during the quarter
for a 50% interest in three industrial buildings comprising 821,712
square feet.
- Further investments were made in the Company's existing markets,
including $26.0 million invested in a 290,204 square foot community
shopping center in Seattle, $15.0 million in a 312,106 square foot
industrial investment in Minneapolis, and $6.0 million in a 113,700
square foot industrial investment in Atlanta.
EXPANSION INTO NEW TARGET MARKETS
During the three months ended March 31, 1998, Company research targeted two
new industrial markets where it intends to establish a significant presence:
- PORTLAND: The Company invested $29.3 million in its entry into this key
regional distribution market, acquiring two industrial portfolios
comprising five industrial buildings totaling 676,104 square feet. The
Company, together with its Alliance Partner, Trammell Crow, will manage
and lease the properties. The Company targeted Portland for its strong
economic growth, economic diversification and Pacific Rim location.
- MEMPHIS: The Company invested $13.6 million in its entry to this key
distribution market, with the purchase of a 50% interest in seven
buildings comprising 858,322 square feet through a co-investment with an
Institutional Alliance Partner. The Company targeted Memphis as a growth
market with a prime location in a critical industrial distribution state.
DEVELOPMENT ACTIVITY
- MIAMI: The Company worked with Development Alliance Partner, The LEFMARK
Group, on two community shopping center projects in South Florida. The
first is the planned 248,900 Springs Gate Retail Center, a community
shopping center to be built in Coral Springs and anchored by Regal
Cinema, one of the largest theater chains in the country. The project is
currently 60% pre-leased, and completion is anticipated for May 1999. The
second is the renovation of the 259,400 square foot Northridge Shopping
Center located in North Broward County. The center will be renovated and
re-configured and is expected to be completed in September 2000. The
property is currently 90% leased to tenants, including Walgreens, Publix
and Target.
- DALLAS/FORT WORTH: The Company commenced construction on an $18.3
million, 205,000 square foot air cargo facility at the Dallas/Fort Worth
Airport with its Strategic Alliance Partner, Trammell Crow Company, with
whom the Company will develop and manage the project. This transaction
represents the last parcel of land available on the tarmac for an air
cargo facility, and the property is expected to be 100% pre-leased prior
to completion.
STRATEGIC ALLIANCES
During the quarter, the Company continued to position itself for future
growth through its Strategic Alliance Program. The Company added four new
alliance partners: the Campanelli Companies, a prominent Boston developer, for
the acquisition and development of industrial properties in greater Boston; The
LEFMARK Group, for continued renovation and development of community shopping
centers in South Florida; Trammell Crow Company, for development, management and
leasing of industrial properties in five selected major distribution markets and
near major airports nationwide; and a prominent national insurance company, for
co-investment in retail and industrial properties nationwide.
Through the Company's UPREIT Alliance Program, the Company completed its
first two UPREIT transactions during the quarter, totaling an aggregate of
$100.4 million and adding 3.2 million square feet to the portfolio.
11
<PAGE> 14
RESULTS OF OPERATIONS
OVERVIEW
The discussion below is presented as follows: (i) results of the Company
and its Predecessor for the three months ended March 31, 1998 and 1997, and (ii)
results of the Properties for the three months ended March 31, 1998 and 1997.
COMPANY AND PREDECESSOR RESULTS OF OPERATIONS
COMPANY AND PREDECESSOR -- THREE MONTHS ENDED MARCH 31, 1998 AND 1997
Rental revenues. Rental revenues, including straight-line rents, tenant
reimbursements and other property related income, totaled $74.6 million for the
three months ended March 31, 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 three months
ended March 31, 1997.
Property operating expenses and real estate taxes. Property operating
expenses, including asset management costs and real estate taxes, totaled $20.3
million for the three months ended March 31, 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 three months ended
March 31, 1997.
General and administrative expenses. The Company's general and
administrative expenses were $2.7 million for the three months ended March 31,
1998, as compared to the Predecessor's investment management expenses of $3.9
million for the three months ended March 31, 1997. Investment management
expenses of the Predecessor consisted primarily of salaries and other general
and administrative expenses. The $1.2 million, or 31%, decrease 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.
In addition, the historical results of operations include the results of
Properties acquired after November 26, 1997, from the date of acquisition of
such Properties to December 31, 1997.
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 to prior periods. Therefore, the analysis below
shows (i) changes resulting from Properties that were held during the entire
period for both years being compared (the "Core Portfolio") and (ii) changes
attributable to acquisition and development activity. For the comparison between
the three months ended March 31, 1998 and 1997, the Core Portfolio consists of
the 77 Properties acquired prior to January 1, 1997. 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.
12
<PAGE> 15
Following is a summary of the Properties' historical property operating
income for the three months ended March 31, 1998 and 1997 (in thousands):
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31,
--------------------------
1997 1998
---------- ----------
<S> <C> <C>
Rental revenues.............................. $ 54,871 $ 74,602
Property operating expenses, before
depreciation and amortization.............. (19,439) (20,252)
-------- --------
Property operating income(1)............ $ 35,432 $ 54,350
======== ========
</TABLE>
- ---------------
(1) Property operating income is computed as rental revenues less property
operating expenses, excluding depreciation and amortization, interest
expense and general and administrative expenses.
PROPERTIES -- THREE MONTHS ENDED MARCH 31, 1998 AND 1997
Rental revenues. Rental revenues, including straight-line rents, tenant
reimbursements and other property related income, increased by $19.7 million, or
36%, for the three months ended March 31, 1998, to $74.6 million as compared to
$54.9 million for the three months ended March 31, 1997. Approximately $3.1
million, or 16% of this increase, was attributable to the Core Portfolio, with
the remaining $16.6 million attributable to Properties acquired in 1997 and
1998. The 6% growth in rental revenues in the Core Portfolio resulted primarily
from the incremental effect of rental rate increases, changes in occupancy and
reimbursement of expenses. In 1998, the Company increased average contractual or
base rental rates on the Properties by 16.4% on 52 new and renewing leases
totaling 1.3 million rentable square feet (representing 2.6% of the Properties'
aggregate rentable square footage).
Property operating expenses and real estate taxes. Property operating
expenses, including asset management costs and real estate taxes, increased by
$0.9 million, or 4%, for the three months ended March 31, 1998, to $20.3 million
as compared to $19.4 million for the three months ended March 31, 1997. Core
Portfolio operating expenses decreased by approximately $3.1 million, while
operating expenses attributable to Properties acquired in 1998 and 1997
increased by $4.0 million. The change in Core Portfolio operating expenses and
real estate taxes relates to (i) Core Portfolio real estate taxes and insurance
expense increased by approximately $0.2 million from 1997 to 1998, while (ii)
Core Portfolio other property operating expenses (excluding real estate taxes
and insurance) decreased by approximately $3.3 million from 1997 to 1998. The
large decrease in other property operating expenses is attributable to lower
asset management costs in 1998 as compared to 1997 that resulted 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 the
Properties will include its Credit Facility, permanent secured debt financing,
proceeds from public and private unsecured debt offerings, proceeds from public
and private equity offerings (including issuances of Units) 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 $500.0 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 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
March 31, 1998, the outstanding balance
13
<PAGE> 16
on the Credit Facility was $312.0 million and bore interest at LIBOR plus 110
basis points (6.79% as of such date). Monthly debt service payments on the
Credit Facility are interest only. The Credit Facility matures in November 2000.
See Notes to Consolidated Financial Statements. The total amount available under
the Credit Facility fluctuates based upon the borrowing base, as defined in the
agreement governing the Credit Facility. Currently, the maximum amount available
is approximately $460 million.
Subsequent to March 31, 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
Company's unsecured revolving Credit Facility was reduced by 20 basis points to
LIBOR plus 90 basis points.
In connection with the recent property acquisitions and the Formation
Transactions, the Company has assumed various mortgages and other secured debt.
As of March 31, 1998, the aggregate principal amount of such secured debt was
$592.6 million, excluding unamortized debt premiums of $17.5 million. The
secured debt bears interest at rates varying from 7.01% to 10.39% per annum
(with a weighted average of 8.01%) and final maturity dates ranging from 1998 to
2014.
As of March 31, 1998, the Company's total outstanding debt was
approximately $922.1 million, including unamortized debt premiums of
approximately $17.5 million. See Notes to Consolidated Financial Statements. The
total amount of debt to be repaid in 1998 is approximately $53.7 million,
including normal principal amortization of approximately $5.6 million and $35.0
million of assumed secured debt, which was repaid in full subsequent to March
31, 1998.
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 intends to continue to structure its balance sheet in
order to maintain an investment grade rating on its senior unsecured debt. The
Company intends to keep the majority of its assets unencumbered to facilitate
such rating. As of March 31, 1998, the Company's debt-to-total market
capitalization ratio was approximately 29.9%.
LIQUIDITY
As of March 31, 1998, the Company had approximately $28.6 million in cash
and cash equivalents and $148.0 million of additional available borrowings under
the Credit Facility. Additionally, on April 2, 1998, the Company filed a
registration statement with the Securities and Exchange Commission for the
issuance of senior unsecured notes with an aggregate principal amount of $350.0
million. If such transaction is consummated, the Company intends to use cash
from operations, available borrowings under its Credit Facility and net proceeds
from the anticipated issuance of the senior unsecured notes to fund acquisitions
and capital expenditures and to provide for general working capital
requirements.
On March 9, 1998, the Company and the Operating Partnership declared a
quarterly cash distribution of $0.3425 per common share, payable on April 3,
1998 to stockholders and unitholders of record on March 18, 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 10 projects at a total estimated cost of $211.0 million.
The Company presently expects to fund these expenditures with cash from
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 March 31, 1998, the Company
14
<PAGE> 17
acquired 56 industrial buildings and two retail centers, aggregating 6.9 million
rentable square feet for a total cost of $272.1 million. The acquisitions were
funded through borrowings under the Credit Facility, cash, debt assumption of
approximately $83.5 million, co-investments by Institutional Alliance Partners
of approximately $37.0 million and the issuance of LP Units with a value of
approximately $25.8 million at the date of issuance. The Company expects that
its funds from operations and availability under its Credit Facility will be
sufficient to meet expected capital commitments for the next 12 months.
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.
The following table reflects the calculation of the Company's FFO for the
three months ended March 31, 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.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
------------------------------
1997 (PRO FORMA) 1998
---------------- ----------
(IN THOUSANDS, EXCEPT SHARES)
<S> <C> <C>
Income from operations before minority interests......... $ 24,327 $ 29,188
Real estate related depreciation and amortization:
Total depreciation and amortization.................... 11,766 11,786
Furniture, fixtures and equipment depreciation......... (43) (104)
FFO attributable to minority interests(1)(2)............. (551) (575)
---------- ----------
FFO(1)................................................. $ 35,499 $ 40,295
========== ==========
Weighted average shares and units outstanding
(diluted).............................................. 88,416,676 88,839,192
</TABLE>
- ---------------
(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 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.
15
<PAGE> 18
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.
<TABLE>
<CAPTION>
FOR THE THREE
YEAR ENDED DECEMBER 31, MONTHS ENDED
------------------------ MARCH 31, WEIGHTED
1995 1996 1997 1998 AVERAGE
------ ------ ------ ------------- --------
<S> <C> <C> <C> <C> <C>
INDUSTRIAL PROPERTIES
Retention rate....................... 67.9% 79.2% 69.5% 77.3% 72.9%
Rent increases....................... 4.8% 4.7% 13.0% 14.8%
RETAIL PROPERTIES
Retention rate....................... 63.5% 88.4% 87.8% 87.2% 83.5%
Rent increases....................... 3.2% 5.4% 10.1% 22.0%
</TABLE>
RECURRING TENANT IMPROVEMENTS AND LEASING COMMISSIONS PER SQUARE FEET
LEASED
The table below summarizes for the Industrial Properties and the Retail
Properties, separately, the recurring tenant improvements and leasing
commissions per square feet 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.
<TABLE>
<CAPTION>
FOR THE THREE
YEAR ENDED DECEMBER 31, MONTHS ENDED
------------------------ MARCH 31, WEIGHTED
1995 1996 1997 1998 AVERAGE
------ ------ ------ ------------- --------
<S> <C> <C> <C> <C> <C>
INDUSTRIAL PROPERTIES
Renewals................................ $0.91 $0.93 $1.05 $ 0.76 $0.93
Re-tenanted............................. 1.75 1.97 1.62 1.98 1.77
Weighted average..................... 1.32 1.29 1.30 0.98 1.26
RETAIL PROPERTIES
Renewals................................ $5.53 $4.72 $4.25 $ 1.82 $3.96
Re-tenanted............................. 5.37 6.53 7.92 13.85 7.47
Weighted average..................... 5.46 5.61 6.41 3.25 5.59
</TABLE>
OCCUPANCY AND 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.
<TABLE>
<CAPTION>
FOR THE
THREE
MONTHS
DECEMBER 31, ENDED
-------------------------- MARCH 31,
1995 1996 1997 1998
------ ------ ------ ---------
<S> <C> <C> <C> <C>
INDUSTRIAL PROPERTIES
Occupancy rate at period end................ 97.3% 97.2% 95.7% 94.6%
Average base rent per square foot(1)........ $ 3.43 $ 3.81 $ 4.26 $ 4.29
RETAIL PROPERTIES
Occupancy rate at period end................ 92.4% 92.4% 96.1% 94.6%
Average base rent per square foot(1)........ $10.46 $11.32 $12.05 $11.78
</TABLE>
- ---------------
(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.
16
<PAGE> 19
SELECTED PROPERTY FINANCIAL DATA
The following table sets forth selected property financial data for the
Company's Industrial and Retail Properties as of and for the three months ended
March 31, 1998.
<TABLE>
<CAPTION>
SELECTED PROPERTY FINANCIAL DATA
AS OF AND FOR THE THREE MONTHS
ENDED MARCH 31, 1998
--------------------------------------
INDUSTRIAL RETAIL TOTAL
PROPERTIES PROPERTIES PROPERTIES
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Base rent....................................... $ 38,168 $ 19,189 $ 57,357
Straight-line rents............................. 1,791 1,034 2,825
Expense reimbursements and other income......... 8,706 5,714 14,420
---------- -------- ----------
Total rental revenues................. 48,665 25,937 74,602
Other property operating expenses............... 5,743 4,261 10,004
Real estate taxes............................... 6,866 3,382 10,248
---------- -------- ----------
Total property operating expenses,
before depreciation and
amortization........................ 12,609 7,643 20,252
---------- -------- ----------
Property operating income(1).......... $ 36,056 $ 18,294 $ 54,350
========== ======== ==========
Real estate investments at cost, excluding
construction in progress(2)................... $1,849,540 $815,250 $2,664,790
========== ======== ==========
</TABLE>
- ---------------
(1) Property operating income is computed as rental revenues less property
operating expenses, excluding depreciation and amortization, interest
expense and general and administrative expenses.
(2) Historical cost basis as of March 31, 1998.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
PART II
ITEM 1. LEGAL PROCEEDINGS
As of March 31, 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 would 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 March 31, 1998, the Operating Partnership
issued 1,106,444 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
<PAGE> 20
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
3.1* Articles of Incorporation of the Registrant.
3.2* Bylaws of the Registrant.
3.3* Form of Certificate for Common Stock of the Registrant.
10.1* Amended and Restated Agreement of Limited Partnership of AMB
Property, L.P.
10.2* Form of Registration Rights Agreement among the Registrant
and the persons named therein.
10.3* Amended and Restated Credit Agreement, dated August 8, 1997.
10.4* Form of Employment Agreement between the Registrant and
Executive Officers.
10.5* The 1997 Stock Option and Incentive Plan of the Registrant.
27.1** Financial Data Schedule -- AMB Property Corporation
</TABLE>
- ---------------
* Previously filed as an exhibit to Registration Statement on Form S-11 (No.
333-35915) and incorporated herein by reference.
** Filed herewith.
(b) Reports on Form 8-K:
Form 8-K for the event dated December 31, 1997, was filed January 13, 1998
in connection with the acquisition of property.
18
<PAGE> 21
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
Date: May 14, 1998 By: /s/ HAMID R. MOGHADAM
------------------------------------
Hamid R. Moghadam
President and Chief Executive
Officer,
Director (Principal Executive
Officer)
Date: May 14, 1998 By: /s/ MICHAEL A. COKE
------------------------------------
Michael A. Coke
Director of Financial Management
And Reporting, Chief Accounting
Officer (Principal Accounting
Officer)
19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-Q CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH QUARTERLY REPORT ON FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 28,584
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 58,142
<PP&E> 2,755,882
<DEPRECIATION> 15,834
<TOTAL-ASSETS> 2,798,190
<CURRENT-LIABILITIES> 81,611
<BONDS> 922,111
0
0
<COMMON> 859
<OTHER-SE> 1,669,846
<TOTAL-LIABILITY-AND-EQUITY> 2,798,190
<SALES> 0
<TOTAL-REVENUES> 75,785
<CGS> 0
<TOTAL-COSTS> 20,252
<OTHER-EXPENSES> 11,786
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,841
<INCOME-PRETAX> 29,188
<INCOME-TAX> 0
<INCOME-CONTINUING> 29,188
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27,906
<EPS-PRIMARY> 0.32
<EPS-DILUTED> 0.32
</TABLE>
