<PAGE> 1
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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)
<TABLE>
<S> <C>
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)
</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 July 31, 1998, there were 85,874,513 shares of the Registrant's
common stock, $0.01 par value per share, outstanding.
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<PAGE> 2
AMB PROPERTY CORPORATION
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
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
</TABLE>
i
<PAGE> 3
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
<TABLE>
<CAPTION>
DECEMBER 31, 1997 JUNE 30, 1998
----------------- -------------
<S> <C> <C>
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
========== ==========
</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 SIX AND THREE MONTHS ENDED JUNE 30, 1997 AND 1998
(UNAUDITED, DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED FOR THE THREE MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- ---------------------------
1997 1998 1997 1998
---------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
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
========== =========== ========== ===========
</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 SIX MONTHS ENDED JUNE 30, 1997 AND 1998
(UNAUDITED, DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30,
------------------------
1997 1998
--------- -----------
<S> <C> <C>
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
======= =========
</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 SIX MONTHS ENDED JUNE 30, 1998
(UNAUDITED, DOLLARS IN THOUSANDS)
<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.............................. -- -- -- 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
========== ==== ========== ======== ==========
</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, 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
<PAGE> 8
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
<PAGE> 9
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:
<TABLE>
<S> <C>
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
==========
</TABLE>
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:
<TABLE>
<S> <C>
1998...................................... $ 16,939
1999...................................... 11,188
2000...................................... 13,192
2001...................................... 38,698
2002...................................... 54,364
Thereafter................................ 441,250
--------
$575,631
========
</TABLE>
7
<PAGE> 10
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:
<TABLE>
<CAPTION>
PRINCIPAL INTEREST
AMOUNT RATE MATURITY
--------- -------- ---------
<S> <C> <C> <C>
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%
======== ====
</TABLE>
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.
<TABLE>
<S> <C>
Minority Interest -- Joint Ventures......................... $ 15,649
Minority Interest -- Institutional Alliance Partners(TM).... 61,031
Minority Interest -- Limited Partners....................... 73,071
--------
$149,751
========
</TABLE>
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
<PAGE> 11
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.
<TABLE>
<CAPTION>
FOR THE SIX FOR THE THREE
MONTHS ENDED MONTHS ENDED
JUNE 30, 1997 JUNE 30, 1997
------------- -------------
<S> <C> <C>
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
=========== ===========
</TABLE>
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
<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. 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
<TABLE>
<CAPTION>
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
------ --------- ---------- ----- ------- --------- ----- ----------- ---------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
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%
=== ========== ===== == ========= ===== === ========== =====
</TABLE>
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
<PAGE> 13
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
<PAGE> 14
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
<PAGE> 15
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
<PAGE> 16
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
<PAGE> 17
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).
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------------------ ------------------------------
1997 (PRO FORMA) 1998 1997 (PRO FORMA) 1998
---------------- ----------- ---------------- -----------
<S> <C> <C> <C> <C>
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
=========== =========== =========== ===========
</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
15
<PAGE> 18
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.
<TABLE>
<CAPTION>
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
------ ------ ------ ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
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%
</TABLE>
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.
<TABLE>
<CAPTION>
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
------ ------ ------ ------------- ------------ --------
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
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<PAGE> 19
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.
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------------- AS OF
1995 1996 1997 JUNE 30, 1998
------ ------ ------ -------------
<S> <C> <C> <C> <C>
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
</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.
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
<PAGE> 20
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:
<TABLE>
<CAPTION>
VOTES AGAINST VOTES BROKER NON-
VOTES FOR OR WITHHELD ABSTAINED VOTES
--------- ------------- --------- -----------
<S> <C> <C> <C> <C>
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 -- --
</TABLE>
ITEM 5. OTHER INFORMATION
None.
18
<PAGE> 21
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<C> <S>
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
</TABLE>
- ---------------
(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
<PAGE> 22
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.
<TABLE>
<S> <C>
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)
</TABLE>
20
<PAGE> 23
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibits Description
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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
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EXHIBIT 3.4
AMB PROPERTY CORPORATION
ARTICLES SUPPLEMENTARY
ESTABLISHING AND FIXING THE RIGHTS AND
PREFERENCES OF 8 1/2% SERIES A PREFERRED STOCK
AMB Property Corporation, a corporation organized and existing under
the laws of the State of Maryland (the "Corporation"), certifies to the State
Department of Assessments and Taxation of Maryland that:
FIRST: Pursuant to the authority expressly vested in the Board of
Directors of the Corporation (sometimes referred to herein as the "Board") by
Article IV of the Articles of Incorporation of the Corporation filed with the
Department on November 24, 1997, which comprises, together with these Articles
Supplementary, the charter (the "Charter") of the Corporation, and Section 2-105
of the Maryland General Corporation Law (the "MGCL"), the Board of Directors of
the Corporation, by resolutions duly adopted on June 19, 1998, adopted
resolutions (i) classifying and designating a separate class of authorized but
unissued Preferred Stock of the Corporation to consist of not more than
10,000,000 shares, (ii) pursuant to the powers contained in the Bylaws of the
Corporation and the MGCL, appointing a Committee (the "Committee") of the Board
of Directors comprised of Hamid R. Moghadam, and (iii) delegating to the
Committee, to the fullest extent permitted by Maryland law and the Charter and
Bylaws of the Corporation, all powers of the Board of Directors with respect to
designating and establishing the preferences, conversion and other rights,
voting powers, restrictions, limitations as to distributions, qualification and
terms and conditions of redemption and other terms and conditions of such class
of Preferred Stock, and determining the number of shares of such class of
Preferred Stock (not in excess of the aforesaid maximum number) to be issued,
and the price and other terms and conditions upon which shares of such series of
Preferred Stock are to be offered, sold and issued.
SECOND: Pursuant to the authority conferred upon the Committee as
aforesaid, the Committee has on July 20, 1998, adopted resolutions classifying
and designating (or confirming the designation and classification of) the
aforesaid class of Preferred Stock as the 8 1/2% Series A Cumulative Redeemable
Preferred Stock, with the preferences, conversions and other rights, voting
powers, restrictions, limitations as to distributions, qualifications and terms
and conditions of redemptions and other terms and conditions of such 8 1/2%
Series A Cumulative Redeemable Preferred Stock (to the extent not set by the
Board of Directors in the resolutions referred to in Article FIRST of these
Articles Supplementary) and establishing 4,600,000 as the number of shares to be
so classified and designated, and authorizing the issuance of up to 4,600,000
shares of 8 1/2% Series A Cumulative Redeemable Preferred Stock.
THIRD: The separate class of Preferred Stock of the Corporation created
by the resolutions duly adopted by the Board of Directors of the Corporation and
by the Committee and
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referred to in Articles FIRST and SECOND of these Articles Supplementary shall
have the designation, number of shares, preferences, conversion and other
rights, voting powers, restrictions and limitations as to dividends,
qualifications, terms and conditions of redemption and other terms and
conditions as follows (and which, upon any restatement of the Charter, may be
made a part of Article IV thereof, with any necessary or appropriate changes to
the numeration or lettering of the sections or subsections hereof):
(1) DESIGNATION AND NUMBER. A class of Preferred Stock, designated the
"8 1/2% Series A Cumulative Redeemable Preferred Stock" (the "Series A Preferred
Stock"), is hereby established. The number of shares of Series A Preferred Stock
shall be 4,600,000 (the "Series A Preferred Shares").
(2) RANK. The Series A Preferred Shares will rank, with respect to
dividend rights and rights upon voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, (a) senior to all classes or
series of Common Stock (as defined in the Charter) and to all equity securities
of the Corporation the terms of which provide that such equity securities shall
rank junior to such Series A Preferred Shares; (b) on a parity with all equity
securities issued by the Corporation other than those referred to in clauses (a)
and (c); and (c) junior to all equity securities issued by the Corporation which
rank senior to the Series A Preferred Shares in accordance with Section 6(d).
The term "equity securities" does not include convertible debt securities.
(3) DIVIDENDS.
(a) Holders of Series A Preferred Shares shall be entitled to receive,
if, when and as authorized by the Board, out of funds legally available for the
payment of dividends, cumulative preferential cash dividends at the rate of 8
1/2% of the $25.00 liquidation preference per annum (equivalent to $2.125 per
annum per share). Such dividends shall accumulate on a daily basis computed on
the basis of a 360-day year consisting of twelve 30-day months and be cumulative
from July 27, 1998 and shall be payable quarterly in equal amounts in arrears on
the 15th day of each January, April, July and October, or, if not a business
day, the next succeeding business day, commencing October 15, 1998 (each a
"Dividend Payment Date"). Dividends shall be payable to holders of record as
they appear in the share records of the Corporation at the close of business on
the applicable record date (each, a "Dividend Record Date"), which shall be the
date designated by the Board for the payment of dividends that is not more than
30 nor less than 10 days prior to the applicable payment date therefor. Any
dividend payable on the Series A Preferred Shares for any partial dividend
period shall be prorated and computed on the basis of a 360-day year consisting
of twelve 30-day months. Notwithstanding any provision to the contrary contained
herein, each outstanding share of Series A Preferred Stock shall be entitled to
receive, and shall receive, a dividend with respect to any Dividend Record Date
equal to the dividend paid with respect to each other share of Series A
Preferred Stock which is outstanding on such date.
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(b) No dividend on the Series A Preferred Shares shall be authorized by
the Board or be paid or set apart for payment by the Corporation at such time as
the terms and provisions of any agreement of the Corporation, including any
agreement relating to its indebtedness, prohibits such authorization, payment or
setting apart for payment or provides that such authorization, payment or
setting apart for payment would constitute a breach thereof, or a default
thereunder, or if such authorization or payment shall be restricted or
prohibited by law.
(c) Notwithstanding anything to the contrary contained herein,
dividends on the Series A Preferred Shares shall accumulate whether or not
restrictions exist in respect thereof, whether or not there are funds legally
available for the payment thereof and whether or not such dividends are
declared. Accumulated but unpaid dividends on the Series A Preferred Shares will
accumulate as of the Dividend Payment Date on which they first become payable or
on the date of redemption, as the case may be.
(d) If any Series A Preferred Shares are outstanding, no full dividends
will be declared or paid or set apart for payment on any other equity securities
of the Corporation of any other class or series ranking, as to distributions or
upon liquidation, dissolution or winding up of the Corporation, on a parity with
or junior to the Series A Preferred Shares unless full cumulative dividends have
been or contemporaneously are declared and paid or declared and a sum sufficient
for the payment thereof set apart for such payment on the Series A Preferred
Shares for all past dividend periods and the then current dividend period. When
dividends are not paid in full (or a sum sufficient for such full payment is not
so set apart) upon the Series A Preferred Shares and any other equity securities
ranking as to dividends on a parity with the Series A Preferred Shares, all
dividends declared upon the Series A Preferred Shares and any other equity
securities of the Corporation ranking as to dividends on a parity with the
Series A Preferred Shares shall be declared pro rata so that the amount of
dividends declared per Series A Preferred Share and each such other equity
securities shall in all cases bear to each other the same ratio that accumulated
dividends per Series A Preferred Share and such other equity securities (which
shall not include any accumulation in respect of unpaid dividends for prior
dividend periods if such other equity securities do not have a cumulative
dividend) bear to each other. No interest, or sum of money in lieu of interest,
shall be payable in respect of any dividend payment or payments on Series A
Preferred Shares which may be in arrears.
(e) Except as provided in the immediately preceding paragraph, unless
full cumulative dividends on the Series A Preferred Shares have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof is set apart for payment for all past dividend periods and the
then current dividend period, no dividends (other than in Common Stock or other
equity securities of the Corporation ranking junior to the Series A Preferred
Shares as to dividends and upon liquidation, dissolution and winding up of the
Corporation) shall be declared or paid or set aside for payment nor shall any
other dividend be declared or made upon the Common Stock or any other equity
securities of the Corporation ranking or upon liquidation, dissolution or
winding up of the Corporation junior to or on a parity with the Series A
Preferred Shares, nor shall any Common Stock or any other equity securities of
the Corporation ranking junior to or on a parity with the Series A Preferred
Shares as to dividends or upon liquidation, dissolution or winding up of the
Corporation be redeemed, purchased or otherwise acquired for any consideration
(or any monies be paid to or made available for a sinking fund for the
redemption of any such securities) by the Corporation (except by conversion into
or exchange for other equity securities of the Corporation ranking junior to the
Series A Preferred Shares as to
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dividends and upon liquidation, dissolution and winding up of the Corporation,
and, except pursuant to Section 7 of this Article Third to ensure the
Corporation's continued status as a REIT or comparable Charter provisions with
respect to other classes or series of the Corporation's stock).
(f) Accumulated but unpaid dividends on the Series A Preferred Shares
will not bear interest and holders of Series A Preferred Shares shall not be
entitled to any dividend in excess of full cumulative dividends as described
above. Any dividend payment made on the Series A Preferred Shares shall first be
credited against the earliest accumulated but unpaid dividend due with respect
to such shares which remains payable.
(g) If, for any taxable year, the Corporation elects to designate as a
"capital gain dividend" (as defined in Section 857 of the Code), any portion
(the "Capital Gains Amount") of the dividends paid or made available for the
year to holders of any class or series of stock of the Corporation, the portion
of the Capital Gains Amount that shall be allocable to holders of the Series A
Preferred Stock shall be the amount that the total dividends (as determined for
Federal income tax purposes) paid or made available to the holders of the Series
A Preferred Stock for the year bears to the aggregate amount of dividends (as
determined for Federal income tax purposes) paid or made available to the
holders of all classes or series of stock of the Corporation for such year.
(4) LIQUIDATION PREFERENCE.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of Series A Preferred
Shares then outstanding shall be entitled to receive out of the assets of the
Corporation legally available for distribution to its stockholders remaining
after payment or provision for payment of all debts and liabilities of the
Corporation, a liquidation preference in cash of $25.00 per share, plus an
amount equal to any accumulated and unpaid dividends to the date of such
payment, before any distribution of assets is made to holders of Common Stock or
any other equity securities of the Corporation that rank junior to the Series A
Preferred Shares as to liquidation rights.
(b) If, upon any such voluntary or involuntary liquidation, dissolution
or winding up of the Corporation, the assets of the Corporation are insufficient
to make full payment to holders of Series A Preferred Shares and the
corresponding amounts payable on all shares of other classes or series of equity
securities of the Corporation ranking on a parity with the Series A Preferred
Shares as to liquidation rights, then the holders of the Series A Preferred
Shares and all other such classes or series of equity securities shall share
ratably in any such distribution of assets in proportion to the full liquidating
distributions to which they would otherwise be respectively entitled.
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(c) Written notice of any such liquidation, dissolution or winding up
of the Corporation, stating the payment date or dates when, and the place or
places where, the amounts distributable in such circumstances shall be payable,
shall be given by first class mail, postage pre-paid, not less than 30 nor more
than 60 days prior to the payment date stated therein, to each record holder of
the Series A Preferred Shares at the respective addresses of such holders as the
same shall appear on the stock transfer records of the Corporation.
(d) After payment of the full amount of the liquidating distributions
to which they are entitled, the holders of Series A Preferred Shares will have
no right or claim to any of the remaining assets of the Corporation.
(e) The consolidation or merger of the Corporation with or into another
entity, a merger of another entity with or into the Corporation, a statutory
share exchange by the Corporation or a sale, lease, transfer or conveyance of
all or substantially all of the Corporation's property or business shall not be
deemed to constitute a liquidation, dissolution or winding up of the
Corporation.
(f) In determining whether a distribution (other than upon voluntary or
involuntary liquidation) by dividend, redemption or other acquisition of shares
of stock of the Corporation or otherwise is permitted under the MGCL, no effect
shall be given to amounts that would be needed, if the Corporation were to be
dissolved at the time of the distribution, to satisfy the preferential rights
upon dissolution of holders of the Series A Preferred Shares whose preferential
rights upon dissolution are superior to those receiving the distribution.
(5) OPTIONAL REDEMPTION.
(a) The Series A Preferred Shares are not redeemable prior to July 27,
2003. To ensure that the Corporation remains a qualified real estate investment
trust ("REIT") for federal income tax purposes, however, the Series A Preferred
Shares shall be subject to the provisions of Section 7 of this Article Third
pursuant to which Series A Preferred Shares owned by a stockholder in excess of
the Ownership Limit (as defined in Section 7 of this Article Third) or certain
other limitations shall automatically be transferred to a Trust for the benefit
of a Charitable Beneficiary (as defined in Section 7 of this Article Third) and
the Corporation shall have the right to purchase such shares, as provided in
Section 7 of this Article Third. On and after July 27, 2003, the Corporation, at
its option, upon giving notice as provided below, may redeem the Series A
Preferred Shares, in whole or from time to time in part, for cash, at a
redemption price of $25.00 per share, plus all accumulated and unpaid dividends
on such Series A Preferred Shares to the date fixed for redemption.
(b) The redemption price of the Series A Preferred Shares (other than
the portion thereof consisting of accumulated and unpaid dividends) is payable
solely from the sale proceeds of other equity securities of the Corporation, and
not from any other source. For purposes of the preceding sentence, "equity
securities" means any equity securities (including Common Stock and Preferred
Stock (as defined in the Charter)), depositary shares in respect of any of the
foregoing,
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interests, participations or other ownership interests (however designated) and
any rights (other than debt securities convertible into or exchangeable for
equity securities) or options to purchase any of the foregoing.
(c) If fewer than all of the outstanding Series A Preferred Shares are
to be redeemed, the shares to be redeemed shall be selected pro rata (as nearly
as practicable without creating fractional shares) or by lot or by any other
equitable method determined by the Corporation. If such redemption is to be by
lot and, as a result of such redemption, any holder of Series A Preferred Shares
would become a holder of a number of Series A Preferred Shares in excess of the
Ownership Limit (or other limitations set forth in Section 7 of this Article
Third) because such holder's Series A Preferred Shares were not redeemed, or
were only redeemed in part, then, except as otherwise provided in the Charter,
the Corporation will redeem the requisite number of Series A Preferred Shares of
such holder such that no holder will hold in excess of the Ownership Limit (or
such other limits) subsequent to such redemption.
(d) Notwithstanding anything to the contrary contained herein, unless
full cumulative dividends on all Series A Preferred Shares shall have been or
contemporaneously are declared and paid or declared and a sum sufficient for the
payment thereof set apart for payment for all past dividend periods and the then
current dividend period, no Series A Preferred Shares shall be redeemed unless
all outstanding Series A Preferred Shares are simultaneously redeemed; provided,
however, that the foregoing shall not prevent the purchase by the Corporation of
Series A Preferred Shares pursuant to Section 7 of this Article Third or
otherwise in order to ensure that the Corporation remains qualified as a REIT
for Federal or state income tax purposes or the purchase or acquisition of
Series A Preferred Shares pursuant to a purchase or exchange offer made on the
same terms to holders of all outstanding Series A Preferred Shares. In addition,
unless full cumulative dividends on all outstanding Series A Preferred Shares
have been or contemporaneously are declared and paid or declared and a sum
sufficient for the payment thereof set apart for payment for all past dividend
periods and the then current dividend period, the Corporation shall not purchase
or otherwise acquire directly or indirectly any Series A Preferred Shares or any
equity securities of the Corporation ranking junior to or on a parity with the
Series A Preferred Shares as to dividends or upon voluntary or involuntary
liquidation, dissolution or winding up of the Corporation (except by conversion
into or exchange for equity securities of the Corporation ranking junior to the
Series A Preferred Shares as to dividends and upon voluntary or involuntary
liquidation, dissolution or winding up of the Corporation and except pursuant to
Section 7 of this Article Third or comparable Charter provisions with respect to
other classes or series of the Corporation's stock).
(e) The holders of shares of Series A Preferred Stock at the close of
business on a Dividend Record Date will be entitled to receive the dividend
payable with respect to the shares of Series A Preferred Stock held on the
corresponding Dividend Payment Date notwithstanding the redemption thereof
between such Dividend Record Date and the corresponding Dividend Payment Date or
the Corporation's default in the payment of the dividend due. Except as provided
herein, the Corporation will make no payment or allowance for unpaid dividends,
whether or not in arrears, on Series A Preferred Shares to be redeemed.
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(f) The following provisions set forth the procedures for Redemption:
(i) Notice of redemption will be given by publication in a
newspaper of general circulation in the City of New York, such publication to be
made once a week for two successive weeks commencing not less than 30 nor more
than 60 days, prior to the redemption date. A similar notice will be mailed by
the Corporation, postage prepaid, not less than 30 nor more than 60 days, prior
to the redemption date, addressed to the respective holders of record of the
Series A Preferred Shares to be redeemed at their respective addresses as they
appear on the share records of the Corporation. No failure to give such notice
or any defect therein or in the mailing thereof shall affect the validity of the
proceedings for the redemption of any Series A Preferred Shares except as to the
holder to whom notice was defective or not given.
(ii) In addition to any information required by law or by the
applicable rules of any exchange upon which the Series A Preferred Shares may be
listed or admitted to trading, such notice shall state: (A) the redemption date;
(B) the redemption price; (C) the number of Series A Preferred Shares to be
redeemed; (D) the place or places where the certificates evidencing shares of
Series A Preferred Shares are to be surrendered for payment of the redemption
price; and (E) that dividends on the Series A Preferred Shares to be redeemed
will cease to accumulate on such redemption date. If fewer than all of the
Series A Preferred Shares held by any holder are to be redeemed, the notice
mailed to such holder shall also specify the number of Series A Preferred Shares
to be redeemed from such holder.
(iii) On or after the redemption date, each holder of Series A
Preferred Shares to be redeemed shall present and surrender the certificates
representing such holder's Series A Preferred Shares to the Corporation at the
place designated in the notice of redemption and shall be entitled to the
redemption price and any accumulated and unpaid dividends payable upon such
redemption upon such surrender and thereupon the redemption price of such shares
(including all accumulated and unpaid dividends up to the redemption date) shall
be paid to or on the order of the person whose name appears on such certificate
representing Series A Preferred Shares as the owner thereof and each surrendered
certificate shall be canceled. If fewer than all the shares represented by any
such certificate representing Series A Preferred Shares are to be redeemed, a
new certificate shall be issued representing the unredeemed shares.
(iv) If notice of redemption of any Series A Preferred Shares
has been given and if the funds necessary for such redemption have been set
aside by the Corporation in trust for the benefit of the holders thereof, then
from and after the redemption date all dividends on such Series A Preferred
Shares shall cease to accumulate and any such Series A Preferred Shares will no
longer be deemed outstanding and all rights of the holders thereof will
terminate, except the right to receive the redemption price (including all
accumulated and unpaid dividends up to the redemption date) and such shares
shall not thereafter be transferred (except with the consent of the Corporation)
on the Corporation's stock transfer records. At its election, the Corporation,
prior to a redemption date, may irrevocably deposit the redemption price
(including accumulated and unpaid dividends to the redemption date) of the
Series A Preferred Shares so called for redemption in trust for the holders
thereof with a bank or trust company, in which case the
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redemption notice to holders of the Series A Preferred Shares to be redeemed
shall (A) state the date of such deposit, (B) specify the office of such bank or
trust company as the place of payment of the redemption price and (C) require
such holders to surrender the certificates representing such shares at such
place on or about the date fixed in such redemption notice (which may not be
later than the redemption date) against payment of the redemption price
(including all accumulated and unpaid dividends to the redemption date). Any
monies so deposited which remain unclaimed by the holders of the Series A
Preferred Shares at the end of two years after the redemption date shall be
returned by such bank or trust company to the Corporation.
(g) Any Series A Preferred Shares that shall at any time have been
redeemed shall, after such redemption, have the status of authorized but
unissued Preferred Stock, without further designation as to series or class
until such shares are once more designated as part of a particular series or
class by the Board.
(6) VOTING RIGHTS.
(a) Holders of the Series A Preferred Shares will not have any voting
rights, except as set forth below.
(b) Whenever dividends on any Series A Preferred Shares shall remain
unpaid for six or more quarterly periods (whether or not consecutive) (a
"Preferred Dividend Default"), the holders of such Series A Preferred Shares
(voting as a single class with all other equity securities of the Corporation
ranking on a parity with the Series A Preferred Shares as to dividends and upon
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation ("Parity Preferred Stock") upon which like voting rights have been
conferred and are exercisable) will be entitled to vote for the election of two
additional directors of the Corporation (the "Preferred Stock Directors"), who
will be elected for a one-year term and until their successors are duly elected
and shall qualify (or until such director's right to hold such office terminates
as provided herein, whichever occurs earlier, subject to such director's earlier
death, disqualification, resignation or removal), at a special meeting called by
the holders of at least 20% of the outstanding Series A Preferred Shares or the
holders of shares of any other class or series of Parity Preferred Stock with
respect to which dividends are so unpaid (unless such request is received less
than 90 days before the date fixed for the next annual or special meeting of
stockholders) or, if the request for a special meeting is received by the
Corporation less than 90 days before the date fixed for the next annual or
special meeting of stockholders, at the next annual or special meeting of
stockholders, and at each subsequent annual meeting until all dividends
accumulated on the Series A Preferred Shares for all past dividend periods and
the dividend for the then current dividend period shall have been fully paid or
declared and a sum sufficient for the payment thereof set aside for payment in
full.
(c) If and when all accumulated dividends and the dividend for the then
current dividend period on the Series A Preferred Shares shall have been paid in
full or declared by the Corporation and set aside for payment in full, the
holders of Series A Preferred Shares shall be divested of the voting rights set
forth in Section 6(b) hereof (subject to revesting in the event of
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each and every Preferred Dividend Default) and, if all accumulated dividends and
the dividend for the then current dividend period have been paid in full or
declared by the Corporation and set aside for payment in full on all other
classes or series of Parity Preferred Stock upon which like voting rights have
been conferred and are exercisable, the term of office of each Preferred Stock
Director so elected shall forthwith terminate. Any Preferred Stock Director
elected by the holders of Series A Preferred Shares and any other such Parity
Preferred Shares may be removed at any time with or without cause by the vote
of, and shall not be removed otherwise than by the vote of, the holders of a
majority of the outstanding Series A Preferred Shares when they only have the
voting rights set forth, or like those set forth, in Section 6(b) hereof and by
the majority vote of the Series A Preferred Shares and all other classes or
series of Parity Preferred Stock upon which like voting rights have been
conferred and are exercisable (voting as a single class) when the Series A
Preferred Shares and such Parity Preferred Stock is entitled to vote thereon. So
long as a Preferred Dividend Default shall continue, any vacancy in the office
of a Preferred Stock Director so elected may be filled by written consent of the
Preferred Stock Director so elected remaining in office, or if none remains in
office, by a vote of the holders of a majority of the outstanding Series A
Preferred Shares when they only have the voting rights set forth, or like those
set forth, in Section 6(b) and by the majority vote of the Series A Preferred
Shares and other classes or series of Parity Preferred Stock upon which like
voting rights have been conferred and are exercisable (voting as a single class)
when the Series A Preferred Shares and such Parity Preferred Stock is entitled
to vote thereon.
(d) So long as any Series A Preferred Shares remain outstanding, the
Corporation shall not, without the affirmative vote or consent of the holders of
at least two-thirds of the Series A Preferred Shares outstanding at the time,
given in person or by proxy, either in writing or at a meeting (such Series A
Preferred Shares voting separately as a class), (i) authorize or create, or
increase the authorized or issued amount of, any class or series of stock
ranking senior to the Series A Preferred Shares with respect to payment of
dividends or the distribution of assets upon voluntary or involuntary
liquidation, dissolution or winding up of the Corporation or reclassify any
authorized shares of the Corporation into any such stock, or create, authorize
or issue any obligation or security convertible into exchangeable or exercisable
for, or evidencing the right to purchase any such stock; or (ii) amend, alter or
repeal the provisions of the Charter (including these Articles Supplementary),
whether by merger or consolidation (each and "Event") or otherwise, so as to
materially and adversely affect any right, preference, privilege or voting power
of the Series A Preferred Shares or the holders thereof; provided, however, that
with respect to the occurrence of any of the Events set forth in (ii) above, so
long as Series A Preferred Shares (or shares issued by a surviving entity in
substitution for the Series A Preferred Shares) remain outstanding with the
terms thereof materially unchanged, taking into account that upon the occurrence
of such an Event, the Corporation may not be the surviving entity, the
occurrence of any such Event shall not be deemed to materially and adversely
affect such rights, preferences, privileges or voting powers of the holders of
the Series A Preferred Shares; and provided further that (x) any increase in the
amount of the authorized Preferred Stock or the creation or issuance of any
other class or series of Preferred Stock or (y) any increase in the amount of
authorized Series A Preferred Shares or any other class or series of Preferred
Stock, in
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each case ranking on a parity with or junior to the Series A Preferred Shares
with respect to payment of dividends or the distribution of assets upon
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, shall not be deemed to materially and adversely affect such rights,
preferences, privileges or voting powers.
(e) The foregoing voting provisions shall not apply if, at or prior to
the time when the act with respect to which such vote would otherwise be
required shall be effected, all outstanding Series A Preferred Shares shall have
been redeemed or called for redemption upon proper notice and sufficient funds
shall have been deposited in trust to effect such redemption.
(7) RESTRICTIONS ON OWNERSHIP AND TRANSFER TO PRESERVE TAX BENEFIT.
(a) Definitions. for the purposes of Section 7 of these Articles
Supplementary, the following terms shall have the following meanings:
"Beneficial Ownership" shall mean ownership of Series A
Preferred Stock by a Person who is or would be treated as an owner of
such Series A Preferred Stock either actually or constructively through
the application of Section 544 of the Code, as modified by Section
856(h)(1)(B) of the Code. The terms "Beneficial Owner," "Beneficially
Owns" and "Beneficially Owned" shall have the correlative meanings.
"Charitable Beneficiary" shall mean one or more beneficiaries
of a Trust, as determined pursuant to Section 7(c)(vi) of these
Articles Supplementary, each of which shall be an organization
described in Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the
Code.
"Code" shall mean the Internal Revenue Code of 1986, as
amended. All section references to the Code shall include any successor
provisions thereof as may be adopted from time to time.
"Constructive Ownership" shall mean ownership of Series A
Preferred Stock by a Person who is or would be treated as an owner of
such Series A Preferred Stock either actually or constructively through
the application of Section 318 of the Code, as modified by Section
856(d)(5) of the Code. The terms "Constructive Owner," "Constructively
Owns" and "Constructively Owned" shall have the correlative meanings.
"IRS" means the United States Internal Revenue Service.
"Market Price" shall mean the last reported sales price
reported on the New York Stock Exchange of the Series A Preferred Stock
on the trading day immediately preceding the relevant date, or if the
Series A Preferred Stock is not then traded on the New York Stock
Exchange, the last reported sales price of the Series A Preferred Stock
on the trading day immediately preceding the relevant
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date as reported on any exchange or quotation system over which the
Series A Preferred Stock may be traded, or if the Series A Preferred
Stock is not then traded over any exchange or quotation system, then
the market price of the Series A Preferred Stock on the relevant date
as determined in good faith by the Board of Directors of the
Corporation.
"MGCL" shall mean the Maryland General Corporation Law, as
amended from time to time, and any successor statute hereafter enacted.
"Ownership Limit" shall mean 9.8% (by value or by number of
shares, whichever is more restrictive) of the outstanding Series A
Preferred Stock of the Corporation.
"Person" shall mean an individual, corporation, partnership,
limited liability company, estate, trust (including a trust qualified
under Section 401(a) or 501(c)(17) of the Code), a portion of a trust
permanently set aside for or to be used exclusively for the purposes
described in Section 642(c) of the Code, association, private
foundation within the meaning of Section 509(a) of the Code, joint
stock company or other entity; but does not include an underwriter
acting in a capacity as such in a public offering of shares of Series A
Preferred Stock provided that the ownership of such shares of Series A
Preferred Stock by such underwriter would not result in the Corporation
being "closely held" within the meaning of Section 856(h) of the Code,
or otherwise result in the Corporation failing to qualify as a REIT.
"Purported Beneficial Transferee" shall mean, with respect to
any purported Transfer (or other event) which results in a transfer to
a Trust, as provided in Section 7(b)(ii) of this these Articles
Supplementary, the Purported Record Transferee, unless the Purported
Record Transferee would have acquired or owned shares of Series A
Preferred Stock for another Person who is the beneficial transferee or
owner of such shares, in which case the Purported Beneficial Transferee
shall be such Person.
"Purported Record Transferee" shall mean, with respect to any
purported Transfer (or other event) which results in a transfer to a
Trust, as provided in Section 7(b)(ii) of these Articles Supplementary,
the record holder of the Series A Preferred Stock if such Transfer had
been valid under Section 7(b)(i) of these Articles Supplementary.
"REIT" shall mean a real estate investment trust under
Sections 856 through 860 of the Code and, for purposes of taxation of
the Corporation under applicable state law, comparable provisions of
the law of such state.
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<PAGE> 12
"Restriction Termination Date" shall mean the first day after
the date hereof on which the Board of Directors of the Corporation
determines that it is no longer in the best interests of the
Corporation to attempt to, or continue to, qualify as a REIT.
"Transfer" shall mean any sale, transfer, gift, assignment,
devise or other disposition of Series A Preferred Stock, (including (i)
the granting of any option or entering into any agreement for the sale,
transfer or other disposition of Series A Preferred Stock or (ii) the
sale, transfer, assignment or other disposition of any securities (or
rights convertible into or exchangeable for Series A Preferred Stock),
whether voluntary or involuntary, whether such transfer has occurred of
record or beneficially or Beneficially or Constructively (including but
not limited to transfers of interests in other entities which result in
changes in Beneficial or Constructive Ownership of Series A Preferred
Stock), and whether such transfer has occurred by operation of law or
otherwise.
"Trust" shall mean each of the trusts provided for in Section
7(c) of these Articles Supplementary.
"Trustee" shall mean any Person unaffiliated with the
Corporation, or a Purported Beneficial Transferee, or a Purported
Record Transferee, that is appointed by the Corporation to serve as
trustee of a Trust.
(b) Restriction on Ownership and Transfers.
(i) Prior to the Restriction Termination Date:
(A) except as provided in Section 7(i) of these
Articles Supplementary, no Person shall Beneficially Own Series A Preferred
Stock in excess of the Ownership Limit;
(B) except as provided in Section 7(i) of these
Articles Supplementary, no Person shall Constructively Own Series A Preferred
Stock in excess of the Ownership Limit;
(C) no Person shall Beneficially or Constructively
Own Series A Preferred Stock which, taking into account any other capital stock
of the Corporation Beneficially or Constructively Owned by such Person, would
result in the Corporation being "closely held" within the meaning of Section
856(h) of the Code, or otherwise failing to qualify as a REIT (including but not
limited to Beneficial or Constructive Ownership that would result in the
Corporation owning (actually or Constructively) an interest in a tenant that is
described in Section 856(d)(2)(B) of the Code if the income derived by the
Corporation (either directly or indirectly through one or more partnerships or
limited liability companies) from such tenant would cause the Corporation to
fail to satisfy any of the gross income requirements of Section 856(c) of the
Code or comparable provisions of state law).
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<PAGE> 13
(ii) If, prior to the Restriction Termination Date, any
Transfer or other event occurs that, if effective, would result in any Person
Beneficially or Constructively Owning Series A Preferred Stock in violation of
Section 7(b)(i) of these Articles Supplementary, (1) then that number of shares
of Series A Preferred Stock that otherwise would cause such Person to violate
Section 7(b)(i) of these Articles Supplementary (rounded up to the nearest whole
share) shall be automatically transferred to a Trust for the benefit of a
Charitable Beneficiary, as described in Section 7(c), effective as of the close
of business on the business day prior to the date of such Transfer or other
event, and such Purported Beneficial Transferee shall thereafter have no rights
in such shares or (2) if, for any reason, the transfer to the Trust described in
clause (1) of this sentence is not automatically effective as provided therein
to prevent any Person from Beneficially or Constructively Owning Series A
Preferred Stock in violation of Section 7(b)(i) of these Articles Supplementary,
then the Transfer of that number of shares of Series A Preferred Stock that
otherwise would cause any Person to violate Section 7(b)(i) shall be void ab
initio, and the Purported Beneficial Transferee shall have no rights in such
shares.
(iii) Notwithstanding any other provisions contained herein,
prior to the Restriction Termination Date, any Transfer of Series A Preferred
Stock that, if effective, would result in the capital stock of the Corporation
being beneficially owned by less than 100 Persons (determined without reference
to any rules of attribution) shall be void ab initio, and the intended
transferee shall acquire no rights in such Series A Preferred Stock.
(c) Transfers of Series A Preferred Stock in Trust.
(i) Upon any purported Transfer or other event described in
Section 7(b)(ii) of these Articles Supplementary, such Series A Preferred Stock
shall be deemed to have been transferred to the Trustee in his capacity as
trustee of a Trust for the exclusive benefit of one or more Charitable
Beneficiaries. Such transfer to the Trustee shall be deemed to be effective as
of the close of business on the business day prior to the purported Transfer or
other event that results in a transfer to the Trust pursuant to Section
7(b)(ii). The Trustee shall be appointed by the Corporation and shall be a
Person unaffiliated with the Corporation, any Purported Beneficial Transferee,
or any Purported Record Transferee. Each Charitable Beneficiary shall be
designated by the Corporation as provided in Section 7(c)(vi) of these Articles
Supplementary.
(ii) Series A Preferred Stock held by the Trustee shall be
issued and outstanding Series A Preferred Stock of the Corporation. The
Purported Beneficial Transferee or Purported Record Transferee shall have no
rights in the shares of Series A Preferred Stock held by the Trustee. The
Purported Beneficial Transferee or Purported Record Transferee shall not benefit
economically from ownership of any shares held in trust by the Trustee, shall
have no rights to dividends and shall not possess any rights to vote or other
rights attributable to the shares of Series A Preferred Stock held in the Trust.
(iii) The Trustee shall have all voting rights and rights to
dividends with respect to Series A Preferred Stock held in the Trust, which
rights shall be exercised for the exclusive
13
<PAGE> 14
benefit of the Charitable Beneficiary. Any dividend or distribution paid prior
to the discovery by the Corporation that shares of Series A Preferred Stock have
been transferred to the Trustee shall be paid to the Trustee upon demand, and
any dividend or distribution declared but unpaid shall be paid when due to the
Trustee with respect to such Series A Preferred Stock. Any dividends or
distributions so paid over to the Trustee shall be held in trust for the
Charitable Beneficiary.
The Purported Record Transferee and Purported Beneficial
Transferee shall have no voting rights with respect to the Series A Preferred
Stock held in the Trust and, subject to Maryland law, effective as of the date
the Series A Preferred Stock has been transferred to the Trustee, the Trustee
shall have the authority (at the Trustee's sole discretion) (i) to rescind as
void any vote cast by a Purported Record Transferee with respect to such Series
A Preferred Stock prior to the discovery by the Corporation that the Series A
Preferred Stock has been transferred to the Trustee and (ii) to recast such vote
in accordance with the desires of the Trustee acting for the benefit of the
Charitable Beneficiary; provided, however, that if the Corporation has already
taken irreversible corporate action, then the Trustee shall not have the
authority to rescind and recast such vote. Notwithstanding any other provision
of these Articles Supplementary to the contrary, until the Corporation has
received notification that the Series A Preferred Stock has been transferred
into a Trust, the Corporation shall be entitled to rely on its share transfer
and other stockholder records for purposes of preparing lists of stockholders
entitled to vote at meetings, determining the validity and authority of proxies
and otherwise conducting votes of stockholders.
(iv) Within 20 days of receiving notice from the Corporation
that shares of Series A Preferred Stock have been transferred to the Trust, the
Trustee of the Trust shall sell the shares of Series A Preferred Stock held in
the Trust to a Person, designated by the Trustee, whose ownership of the shares
of Series A Preferred Stock will not violate the ownership limitations set forth
in Section 7(b)(i). Upon such sale, the interest of the Charitable Beneficiary
in the shares of Series A Preferred Stock sold shall terminate and the Trustee
shall distribute the net proceeds of the sale to the Purported Record Transferee
and to the Charitable Beneficiary as provided in this Section 7(c)(iv). The
Purported Record Transferee shall receive the lesser of (1) the price paid by
the Purported Record Transferee for the shares of Series A Preferred Stock in
the transaction that resulted in such transfer to the Trust (or, if the event
which resulted in the transfer to the Trust did not involve a purchase of such
shares of Series A Preferred Stock at Market Price, the Market Price of such
shares of Series A Preferred Stock on the day of the event which resulted in the
transfer of such shares of Series A Preferred Stock to the Trust) and (2) the
price per share received by the Trustee (net of any commissions and other
expenses of sale) from the sale or other disposition of the shares of Series A
Preferred Stock held in the Trust. Any net sales proceeds in excess of the
amount payable to the Purported Record Transferee shall be immediately paid to
the Charitable Beneficiary together with any dividends or other distributions
thereon. If, prior to the discovery by the Corporation that shares of such
Series A Preferred Stock have been transferred to the Trustee, such shares of
Series A Preferred Stock are sold by a Purported Record Transferee then (i) such
shares of Series A
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<PAGE> 15
Preferred Stock shall be deemed to have been sold on behalf of the Trust and
(ii) to the extent that the Purported Record Transferee received an amount for
such shares of Series A Preferred Stock that exceeds the amount that such
Purported Record Transferee was entitled to receive pursuant to this Section
7(c)(iv), such excess shall be paid to the Trustee upon demand.
(v) Series A Preferred Stock transferred to the Trustee shall
be deemed to have been offered for sale to the Corporation, or its designee, at
a price per share equal to the lesser of (i) the price paid by the Purported
Record Transferee for the shares of Series A Preferred Stock in the transaction
that resulted in such transfer to the Trust (or, if the event which resulted in
the transfer to the Trust did not involve a purchase of such shares of Series A
Preferred Stock at Market Price, the Market Price of such shares of Series A
Preferred Stock on the day of the event which resulted in the transfer of such
shares of Series A Preferred Stock to the Trust) and (ii) the Market Price on
the date the Corporation, or its designee, accepts such offer. The Corporation
shall have the right to accept such offer until the Trustee has sold the shares
of Series A Preferred Stock held in the Trust pursuant to Section 7(c)(iv). Upon
such a sale to the Corporation, the interest of the Charitable Beneficiary in
the shares of Series A Preferred Stock sold shall terminate and the Trustee
shall distribute the net proceeds of the sale to the Purported Record Transferee
and any dividends or other distributions held by the Trustee with respect to
such Series A Preferred Stock shall thereupon be paid to the Charitable
Beneficiary.
(vi) By written notice to the Trustee, the Corporation shall
designate one or more nonprofit organizations to be the Charitable Beneficiary
of the interest in the Trust such that the Series A Preferred Stock held in the
Trust would not violate the restrictions set forth in Section 7(b)(i) in the
hands of such Charitable Beneficiary.
(d) Remedies For Breach. If the Board of Directors or a committee
thereof or other designees if permitted by the MGCL shall at any time determine
in good faith that a Transfer or other event has taken place in violation of
Section 7(b) of these Articles Supplementary or that a Person intends to
acquire, has attempted to acquire or may acquire beneficial ownership
(determined without reference to any rules of attribution), Beneficial Ownership
or Constructive Ownership of any shares of Series A Preferred Stock of the
Corporation in violation of Section 7(b) of these Articles Supplementary, the
Board of Directors or a committee thereof or other designees if permitted by the
MGCL shall take such action as it deems advisable to refuse to give effect or to
prevent such Transfer, including, but not limited to, causing the Corporation to
redeem shares of Series A Preferred Stock, refusing to give effect to such
Transfer on the books of the Corporation or instituting proceedings to enjoin
such Transfer; provided, however, that any Transfers (or, in the case of events
other than a Transfer, ownership or Constructive Ownership or Beneficial
Ownership) in violation of Section 7(b)(i) of these Articles Supplementary,
shall automatically result in the transfer to a Trust as described in Section
7(b)(ii) and any Transfer in violation of Section 7(b)(iii) shall automatically
be void ab initio irrespective of any action (or non-action) by the Board of
Directors.
(e) Notice of Restricted Transfer. Any Person who acquires or attempts
to acquire shares of Series A Preferred Stock in violation of Section 7(b) of
these Articles Supplementary, or any Person who is a Purported Beneficial
Transferee such that an automatic transfer to a Trust
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<PAGE> 16
results under Section 7(b)(ii) of these Articles Supplementary, shall
immediately give written notice to the Corporation of such event and shall
provide to the Corporation such other information as the Corporation may request
in order to determine the effect, if any, of such Transfer or attempted Transfer
on the Corporation's status as a REIT.
(f) Owners Required To Provide Information. Prior to the Restriction
Termination Date each Person who is a beneficial owner or Beneficial Owner or
Constructive Owner of Series A Preferred Stock and each Person (including the
shareholder of record) who is holding Series A Preferred Stock for a beneficial
owner or Beneficial Owner or Constructive Owner shall provide to the Corporation
such information that the Corporation may request, in good faith, in order to
determine the Corporation's status as a REIT.
(g) Remedies Not Limited. Nothing contained in these Articles
Supplementary (but subject to Section 7(l) of these Articles Supplementary)
shall limit the authority of the Board of Directors to take such other action as
it deems necessary or advisable to protect the Corporation and the interests of
its shareholders by preservation of the Corporation's status as a REIT.
(h) Ambiguity. In the case of an ambiguity in the application of any of
the provisions of this Section 7 of these Articles Supplementary, including any
definition contained in Section 7(a), the Board of Directors shall have the
power to determine the application of the provisions of this Section 7 with
respect to any situation based on the facts known to it (subject, however, to
the provisions of Section 7(l) of these Articles Supplementary). In the event
Section 7 requires an action by the Board of Directors and these Articles
Supplementary fail to provide specific guidance with respect to such action, the
Board of Directors shall have the power to determine the action to be taken so
long as such action is not contrary to the provisions of Section 7. Absent a
decision to the contrary by the Board of Directors (which the Board may make in
its sole and absolute discretion), if a Person would have (but for the remedies
set forth in Section 7(b)) acquired Beneficial or Constructive Ownership of
Series A Preferred Stock in violation of Section 7(b)(i), such remedies (as
applicable) shall apply first to the shares of Series A Preferred Stock which,
but for such remedies, would have been actually owned by such Person, and second
to shares of Series A Preferred Stock which, but for such remedies, would have
been Beneficially Owned or Constructively Owned (but not actually owned) by such
Person, pro rata among the Persons who actually own such shares of Series A
Preferred Stock based upon the relative number of the shares of Series A
Preferred Stock held by each such Person.
(i) Exceptions.
(i) Subject to Section 7(b)(i)(C), the Board of Directors, in
its sole discretion, may exempt a Person from the limitation on a Person
Beneficially Owning shares of Series A Preferred Stock in violation of Section
7(b)(i)(A) if the Board of Directors obtains any representations and
undertakings from such Person as are reasonably necessary in the opinion of the
Board of Directors to ascertain that no individual's Beneficial Ownership of
such shares of Series A Preferred Stock will violate Section 7(b)(i)(A) or that
any such violation will not cause the
16
<PAGE> 17
Corporation to fail to qualify as a REIT under the Code, and that any violation
of such representations or undertaking (or other action which is contrary to the
restrictions contained in Section 7(b) of these Articles Supplementary) or
attempted violation will result in such Series A Preferred Stock being
transferred to a Trust in accordance with Section 7(b)(ii) of these Articles
Supplementary.
(ii) Subject to Section 7(b)(i)(C), the Board of Directors, in
its sole discretion, may exempt a Person from the limitation on a Person
Constructively Owning Series A Preferred Stock in violation of Section
7(b)(i)(B), if the Corporation obtains any representations and undertakings from
such Person as are reasonably necessary in the opinion of the Board of Directors
to ascertain that such Person does not and will not own, actually or
Constructively, an interest in a tenant of the Corporation (or a tenant of any
entity owned in whole or in part by the Corporation) that would cause the
Corporation to own, actually or Constructively, more than a 9.8% interest (as
set forth in Section 856(d)(2)(B) of the Code) in such tenant and that any
violation or attempted violation will result in such Series A Preferred Stock
being transferred to a Trust in accordance with Section 7(b)(ii) of these
Articles Supplementary. Notwithstanding the foregoing, the inability of a Person
to make the certification described in this Section 7(i)(ii) shall not prevent
the Board of Directors, in its sole discretion, from exempting such Person from
the limitation on a Person Constructively Owning Series A Preferred Stock in
violation of Section 7(b)(i)(B) if the Board of Directors determines that the
resulting application of Section 856(d)(2)(B) of the Code would affect the
characterization of less than 0.5% of the gross income (as such term is used in
Section 856(c)(2) of the Code) of the Corporation in any taxable year, after
taking into account the effect of this sentence with respect to all other Series
A Preferred Stock to which this sentence applies.
(iii) Prior to granting any exception pursuant to Section 7(i)(i) or
(ii) of these Articles Supplementary, the Board of Directors may require a
ruling from the Internal Revenue Service, or an opinion of counsel, in either
case in form and substance satisfactory to the Board of Directors in its sole
discretion, as it may deem necessary or advisable in order to determine or
ensure the Corporation's status as a REIT.
(j) Legends. Each certificate for Series A Preferred Stock shall bear
substantially the following legends:
CLASS OF STOCK
"THE CORPORATION IS AUTHORIZED TO ISSUE CAPITAL STOCK OF MORE THAN ONE
CLASS, CONSISTING OF COMMON STOCK AND ONE OR MORE CLASSES OF PREFERRED
STOCK. THE BOARD OF DIRECTORS IS AUTHORIZED TO DETERMINE THE
PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS OF ANY CLASS OF PREFERRED
STOCK BEFORE THE ISSUANCE OF SHARES OF SUCH CLASS OF PREFERRED STOCK.
THE CORPORATION WILL FURNISH, WITHOUT CHARGE, TO ANY STOCKHOLDER MAKING
A WRITTEN REQUEST
17
<PAGE> 18
THEREFOR, A COPY OF THE CORPORATION'S CHARTER AND A WRITTEN STATEMENT
OF THE DESIGNATIONS, RELATIVE RIGHTS, PREFERENCES, CONVERSION OR OTHER
RIGHTS, VOTING POWERS, RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS AND
OTHER DISTRIBUTIONS, QUALIFICATIONS AND TERMS AND CONDITIONS OF
REDEMPTION OF THE STOCK OF EACH CLASS WHICH THE CORPORATION HAS THE
AUTHORITY TO ISSUE AND, IF THE CORPORATION IS AUTHORIZED TO ISSUE ANY
PREFERRED OR SPECIAL CLASS IN SERIES, (i) THE DIFFERENCES IN THE
RELATIVE RIGHTS AND PREFERENCES BETWEEN THE SHARES OF EACH SERIES TO
THE EXTENT SET, AND (ii) THE AUTHORITY OF THE BOARD OF DIRECTORS TO SET
SUCH RIGHTS AND PREFERENCES OF SUBSEQUENT SERIES. REQUESTS FOR SUCH
WRITTEN STATEMENT MAY BE DIRECTED TO THE SECRETARY OF THE CORPORATION
AT ITS PRINCIPAL OFFICE."
RESTRICTION ON OWNERSHIP AND TRANSFER
"THE SHARES OF SERIES A PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO RESTRICTIONS ON BENEFICIAL AND CONSTRUCTIVE OWNERSHIP
AND TRANSFER FOR THE PURPOSE OF THE CORPORATION'S MAINTENANCE OF ITS
STATUS AS A REAL ESTATE INVESTMENT TRUST UNDER THE INTERNAL REVENUE
CODE OF 1986, AS AMENDED (THE "CODE"). SUBJECT TO CERTAIN FURTHER
RESTRICTIONS AND EXCEPT AS EXPRESSLY PROVIDED IN THE ARTICLES
SUPPLEMENTARY FOR THE SERIES A PREFERRED STOCK, (i) NO PERSON MAY
BENEFICIALLY OWN SHARES OF THE CORPORATION'S SERIES A PREFERRED STOCK
IN EXCESS OF 9.8% (BY VALUE OR BY NUMBER OF SHARES, WHICHEVER IS MORE
RESTRICTIVE) OF THE OUTSTANDING SERIES A PREFERRED STOCK OF THE
CORPORATION; (ii) NO PERSON MAY CONSTRUCTIVELY OWN SHARES OF THE
CORPORATION'S SERIES A PREFERRED STOCK IN EXCESS OF 9.8% (BY VALUE OR
BY NUMBER OF SHARES, WHICHEVER IS MORE RESTRICTIVE) OF THE OUTSTANDING
SERIES A PREFERRED STOCK OF THE CORPORATION; (iii) NO PERSON MAY
BENEFICIALLY OR CONSTRUCTIVELY OWN SHARES OF THE CORPORATION'S SERIES A
PREFERRED STOCK THAT, TAKING INTO ACCOUNT ANY OTHER CAPITAL STOCK OF
THE CORPORATION BENEFICIALLY OR CONSTRUCTIVELY OWNED BY SUCH PERSON,
WOULD RESULT IN THE CORPORATION BEING "CLOSELY HELD" UNDER SECTION
856(h) OF THE CODE OR OTHERWISE CAUSE THE CORPORATION TO FAIL TO
QUALIFY AS A REIT; AND (iv) NO PERSON MAY TRANSFER SHARES OF SERIES A
PREFERRED STOCK IF SUCH TRANSFER WOULD RESULT IN
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<PAGE> 19
THE CAPITAL STOCK OF THE CORPORATION BEING OWNED BY FEWER THAN 100
PERSONS. ANY PERSON WHO BENEFICIALLY OR CONSTRUCTIVELY OWNS OR ATTEMPTS
TO BENEFICIALLY OR CONSTRUCTIVELY OWN SERIES A PREFERRED STOCK WHICH
CAUSES OR WILL CAUSE A PERSON TO BENEFICIALLY OR CONSTRUCTIVELY OWN
SERIES A PREFERRED STOCK IN EXCESS OF THE ABOVE LIMITATIONS MUST
IMMEDIATELY NOTIFY THE CORPORATION. IF ANY OF THE RESTRICTIONS ON
TRANSFER OR OWNERSHIP ARE VIOLATED, THE SERIES A PREFERRED STOCK
REPRESENTED HEREBY WILL BE AUTOMATICALLY TRANSFERRED TO THE TRUSTEE OF
A TRUST FOR THE BENEFIT OF ONE OR MORE CHARITABLE BENEFICIARIES. IN
ADDITION, THE CORPORATION MAY REDEEM SHARES UPON THE TERMS AND
CONDITIONS SPECIFIED BY THE BOARD OF DIRECTORS IN ITS SOLE DISCRETION
IF THE BOARD OF DIRECTORS DETERMINES THAT OWNERSHIP OR A TRANSFER OR
OTHER EVENT MAY VIOLATE THE RESTRICTIONS DESCRIBED ABOVE. FURTHERMORE,
UPON THE OCCURRENCE OF CERTAIN EVENTS, ATTEMPTED TRANSFERS IN VIOLATION
OF THE RESTRICTIONS DESCRIBED ABOVE MAY BE VOID AB INITIO. ALL TERMS IN
THIS LEGEND WHICH ARE DEFINED IN THE ARTICLES SUPPLEMENTARY FOR THE
SERIES A PREFERRED STOCK SHALL HAVE THE MEANINGS ASCRIBED TO THEM IN
SUCH ARTICLES SUPPLEMENTARY, AS THE SAME MAY BE AMENDED FROM TIME TO
TIME, A COPY OF WHICH, INCLUDING THE RESTRICTIONS ON TRANSFER AND
OWNERSHIP, WILL BE FURNISHED TO EACH HOLDER OF SERIES A PREFERRED STOCK
ON REQUEST AND WITHOUT CHARGE. REQUESTS FOR SUCH A COPY MAY BE DIRECTED
TO THE SECRETARY OF THE CORPORATION AT ITS PRINCIPAL OFFICE."
(k) Severability. If any provision of this Section 7 or any application
of any such provision is determined to be invalid by any Federal or state court
having jurisdiction over the issues, the validity of the remaining provisions
shall not be affected and other applications of such provision shall be affected
only to the extent necessary to comply with the determination of such court.
(l) NYSE. Nothing in this Section 7 shall preclude the settlement of
any transaction entered into through the facilities of the New York Stock
Exchange. The shares of Series A Preferred Stock that are the subject of such
transaction shall continue to be subject to the provisions of this Section 7
after such settlement.
(m) Applicability of Section 7. The provisions set forth in this
Section 7 shall apply to the Series A Preferred Stock notwithstanding any
contrary provisions of the Series A Preferred Stock provided for elsewhere in
these Articles Supplementary.
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<PAGE> 20
(8) CONVERSION. The Series A Preferred Shares are not convertible into
or exchangeable for any other property or securities of the Corporation.
FOURTH: The Series A Preferred Shares have been classified and
designated by the Board under the authority contained in the Charter.
FIFTH: These Articles Supplementary have been approved by the Board in
the manner and by the vote required by law.
SIXTH: These Articles Supplementary shall be effective at the time the
State Department of Assessments and Taxation of Maryland accepts these Articles
Supplementary for record.
SEVENTH: The undersigned President of the Corporation acknowledges
these Articles Supplementary to be the act of the Corporation and, as to all
matters or facts required to be verified under oath, the undersigned President
acknowledges that to the best of his knowledge, information and belief, these
matters and facts are true in all material respects and that this statement is
made under the penalties for perjury.
20
<PAGE> 21
IN WITNESS WHEREOF, the Corporation has caused these Articles
Supplementary to be executed under seal in its name and on its behalf by its
President and attested to by its Secretary on this 20th day of July, 1998.
AMB PROPERTY CORPORATION
By:
----------------------------------
Hamid R. Moghadam
President, Chief Executive Officer
and Director
[SEAL]
ATTEST:
- ------------------------
David S. Fries
Secretary
21
<PAGE> 1
EXHIBIT 10.2
- --------------------------------------------------------------------------------
REVOLVING CREDIT AGREEMENT
dated as of April 16, 1998
Between
AMB PROPERTY, L.P.
and
NATIONSBANK OF TEXAS, N.A.
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE 1. DEFINITIONS ...................................................................... 1
SECTION 1.1 Definitions ............................................................. 1
SECTION 1.2 Accounting Terms and Determinations ..................................... 4
SECTION 1.3 Types of Borrowings ..................................................... 4
SECTION 1.4 Effect of Incorporation by Reference .................................... 4
ARTICLE 2. THE CREDIT ....................................................................... 5
SECTION 2.1 Commitment to Lend ...................................................... 5
SECTION 2.2 Notice of Borrowing ..................................................... 5
SECTION 2.3 [Reserved.] ............................................................. 5
SECTION 2.4 Notes ................................................................... 5
SECTION 2.5 Maturity of Loans ....................................................... 5
SECTION 2.6 Interest Rates .......................................................... 6
SECTION 2.7 Loan Fee ................................................................ 6
SECTION 2.8 Mandatory Expiration .................................................... 6
SECTION 2.9 [Reserved.] ............................................................. 6
SECTION 2.10 Optional Prepayments .................................................... 6
SECTION 2.11 General Provisions as to Payments ....................................... 6
SECTION 2.12 Funding Losses .......................................................... 6
SECTION 2.13 Computation of Interest and Fees ........................................ 6
SECTION 2.14 Use of Proceeds ......................................................... 6
ARTICLE 3. CONDITIONS ....................................................................... 7
SECTION 3.1 Closing ................................................................. 7
SECTION 3.2 Borrowings .............................................................. 9
ARTICLE 4. REPRESENTATIONS AND WARRANTIES ................................................... 10
ARTICLE 5. AFFIRMATIVE AND NEGATIVE COVENANTS ............................................... 11
ARTICLE 6. DEFAULTS ......................................................................... 11
SECTION 6.1 Events of Default ....................................................... 11
SECTION 6.2 Rights and Remedies ..................................................... 11
SECTION 6.3 Notice of Default ....................................................... 12
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE 7. [Reserved].........................................................................12
ARTICLE 8. CHANGE IN CIRCUMSTANCES............................................................12
ARTICLE 9. MISCELLANEOUS......................................................................12
SECTION 9.1 Notices...................................................................12
SECTION 9.2 No Waivers................................................................12
SECTION 9.3 Expenses; Indemnification.................................................12
SECTION 9.4 Set-Offs..................................................................13
SECTION 9.5 Amendments and Waivers....................................................13
SECTION 9.6 Successors and Assigns....................................................13
SECTION 9.7 [Reserved]................................................................13
SECTION 9.8 Governing Law; Submission to Jurisdiction.................................13
SECTION 9.9 Marshaling; Recapture.....................................................14
SECTION 9.10 Counterparts; Integration; Effectiveness..................................14
SECTION 9.11 WAIVER OF JURY TRIAL......................................................14
SECTION 9.12 Survival..................................................................14
SECTION 9.13 Domicile of Loans.........................................................14
SECTION 9.14 Limitation of Liability...................................................14
SECTION 9.15 Recourse..................................................................15
SECTION 9.16 Confidentiality...........................................................15
SECTION 9.17 Effect of Loan Documents on Existing Credit Agreement.....................16
</TABLE>
EXHIBITS
Exhibit A Note
Exhibit B [Reserved]
Exhibit C [Reserved]
Exhibit D [Reserved]
Exhibit E Subsidiary Guaranty
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<PAGE> 4
REVOLVING CREDIT AGREEMENT
THIS REVOLVING CREDIT AGREEMENT is dated as of April 16, 1998 by
and between AMB PROPERTY, L.P., a Delaware limited partnership (the "Borrower"),
and NATIONSBANK OF TEXAS, N.A. ("Lender").
RECITALS
WHEREAS, Borrower and MORGAN GUARANTY TRUST COMPANY OF NEW YORK,
as Agent, COMMERZBANK AKTIENGESELLSCHAFT, LOS ANGELES BRANCH, FLEET NATIONAL
BANK, NATIONSBANK OF TEXAS, N.A. and PNC BANK, NATIONAL ASSOCIATION, as
Co-Agents, and certain other banks entered into that certain revolving credit
facility upon the terms and conditions set forth in that certain Second Amended
and Restated Revolving Credit Agreement, dated as of November 26, 1997 (the
"Existing Credit Agreement"), and
WHEREAS, the Borrower and the Lender wish to enter into a
revolving three month bridge credit facility upon the terms and conditions set
forth in this Revolving Credit Agreement (the "Agreement"), as hereinafter set
forth.
NOW, THEREFORE, in consideration of the mutual agreements,
provisions and covenants contained herein, the parties hereby agree as follows:
AGREEMENT
This Agreement shall be binding upon and inure to the benefit of
the parties hereto, and their respective successors and assigns, and shall be
deemed to be effective as of the date hereof.
ARTICLE 1.
DEFINITIONS
SECTION 1.1 Definitions. Any term capitalized in this Agreement and not
defined herein shall have the definition given to it in Section 1.1 of the
Existing Credit Agreement, subject to the terms of Section 1.4 of this
Agreement. Subject to the terms of Section 1.4, any such definition is hereby
incorporated herein by this reference. The following terms, as used herein,
shall have the following meanings:
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<PAGE> 5
"Agreement" means this Revolving Credit Agreement, as the same
may from time to time hereafter be modified, supplemented or amended, as
permitted herein.
"Applicable Lending Office" means, (i) in the case of Domestic
Loans, Lender's Domestic Lending Office and (ii) in the case of EuroDollar
Loans, Lender's Euro-Dollar Lending Office.
"Applicable Margin" means 1.10% with respect to each
Euro-Dollar Loan and 0.125% with respect to each Base Rate Loan; provided that
from and after the Adjustment Date, the provisions of the definition of
"Applicable Margin" in the Existing Credit Agreement shall be incorporated
herein by reference and shall be applied, as those provisions require, to
increase, and only to increase, the Applicable Margin.
"Closing Date" means April 21, 1998.
"Commitment" means, with respect to this Agreement the amount of
Fifty Million Dollars ($50,000,000).
"Domestic Lending Office" means Lender's office located at its
address set forth on the signature pages hereto or such other office as Lender
may hereafter designate as its Domestic Lending Office by notice to the
Borrower.
"Effective Date" means the date this Agreement becomes effective
in accordance with Section 9.10.
"Euro-Dollar Lending Office" means Lender's office, branch or
affiliate located at its address set forth on the signature pages hereto, or
such other office, branch or affiliate of Lender as it may hereafter designate
as its Euro-Dollar Lending Office by notice to the Borrower.
"General Partner Guaranty" means the Unconditional Guaranty
Agreement of the General Partner dated as of April 16, 1998 delivered to the
Lender in connection with this Agreement.
"Interest Period"
(1) with respect to each Euro-Dollar Borrowing shall have the
meaning given to it in the Existing Credit Agreement except that the Interest
Period shall be the period commencing on the date of such Borrowing and ending
one month thereafter, subject to the provisos set forth in the Existing Credit
Agreement.
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<PAGE> 6
(2) with respect to each Base Rate Borrowing, the period
commencing on the date of such Borrowing and ending 30 days thereafter, subject
to the provisos set forth in the Existing Credit Agreement.
"Loan" means any loan made under the terms of this Agreement.
"Loan Amount" Shall mean the amount of Fifty Million Dollars
($50,000,000).
"Loan Documents" means this Agreement, the Notes, the General
Partner Guaranty and the Subsidiary Guaranties.
"Maturity Date" shall have the meaning set forth in Section 2.8.
"Maximum Loan Amount" means the Loan Amount, as the Loan Amount
may be reduced pursuant to Section 2.10(c).
"Notes" means promissory notes of the Borrower, substantially in
the form of Exhibit A hereto, evidencing the obligation of the Borrower to repay
the Loans, as the same may be amended, supplemented, modified or restated from
time to time, and "Note" means any one of such promissory notes issued
hereunder.
"Obligations" means all obligations, liabilities and
indebtedness of every nature of the Borrower, from time to time owing to Lender
under or in connection with this Agreement or any other Loan Document.
"Origination Fee" means .125% of the total Commitment, due and
payable on the Closing Date.
"Prime Rate" means the rate of interest publicly announced by
Lender in Dallas, Texas from time to time as its Prime Rate.
"Reference Bank" means the principal London offices of Lender.
"Subsidiary Guaranty" shall mean a guaranty, in substantially
the form of Exhibit E attached hereto, executed by each Subsidiary Guarantor.
"Term" has the meaning set forth in Section 2.8.
"Unused Facility" shall mean the amount, calculated daily, by
which the Commitment exceeds the sum of the outstanding principal amount of the
Loans.
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<PAGE> 7
SECTION 1.2 Accounting Terms and Determinations. The provisions of
Section 1.2 of the Existing Credit Agreement are hereby incorporated into this
Agreement by this reference.
SECTION 1.3 Types of Borrowings. The provisions of Section 1.3 of the
Existing Credit Agreement are hereby incorporated into this Agreement by this
reference.
SECTION 1.4 Effect of Incorporation by Reference. For purposes of
application, interpretation, or enforcement of this Agreement, whenever a
provision of this Agreement incorporates a provision of the Existing Credit
Agreement by reference, the incorporated provision shall be read to apply to
this Agreement rather than to the Existing Credit Agreement and the terms used
in the provision so incorporated herein shall be read to apply to this
Agreement. Specifically, but not by way of limitation, when used in any
provision in the Existing Credit Agreement as incorporated herein by reference,
the following terms, as they are incorporated herein by reference and for
purposes of this Agreement, shall have following meanings: "Agreement" means
this Agreement; "Loan" or "Loans" shall mean the Loan or Loans made under the
terms of this Agreement; "Bank," "Banks," "Agent," or "Morgan" shall mean
Lender; "Note" or "Notes" shall mean the Note or Notes evidencing the Loan
referred to in this Agreement; and "Borrower" shall mean Borrower as it is
borrowing under the terms of this Agreement. Any term capitalized in any term of
the Existing Credit Agreement incorporated herein by reference and defined in
this Agreement shall for purposes of this Agreement have the meaning given to it
in this Agreement; any exhibit referred to in any provision of the Existing
Credit Agreement incorporated herein by reference shall be deemed to refer to
any exhibit of the corresponding letter attached to this Agreement; and any
cross-reference to any section of the Existing Credit Agreement made in any
provision of the Existing Credit Agreement incorporated herein by reference
shall be deemed to refer to any provision with the corresponding number in this
Agreement. Any provisions of the Existing Credit Agreement incorporated herein
by reference shall, as they are applied to this Agreement, survive the Existing
Credit Agreement.
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<PAGE> 8
ARTICLE 2.
THE CREDIT
SECTION 2.1 Commitment to Lend. During the Term, Lender agrees, on the
terms and conditions set forth in this Agreement, to make Loans to the Borrower
pursuant to this Section from time to time in amounts such that the aggregate
principal amount of Loans by Lender at any one time outstanding shall not exceed
the amount of the Commitment. The aggregate amount of Loans to be made hereunder
shall not exceed the Maximum Loan Amount. At no time shall there be more than
five Euro-Dollar Loans outstanding. Each Borrowing under this subsection (a)
shall be in an aggregate principal amount of not less than $5,000,000, or an
integral multiple of $1,000,000 in excess thereof (except that any such
Borrowing may be in the aggregate amount available in accordance with Section
3.2(c)). Upon the expiration of the Term, Lender shall have no further
obligation to make loans to Borrower. Within the foregoing limits, the Borrower
may borrow under this Section, repay, or to the extent required by Section 2.9
or permitted by Section 2. 10, prepay Loans and reborrow at any time during the
Term.
SECTION 2.2 Notice of Borrowing. The Borrower shall give Lender notice
(a "Notice of Borrowing") not later than 1:00 p.m. (Dallas, Texas time) (y) one
(1) Domestic Business Day before each Base Rate Borrowing, or (z) three (3)
Euro-Dollar Business Days before each Euro-Dollar Borrowing, as applicable,
specifying those matters set forth in Section 2.2(a) through 2.2(d) of the
Existing Loan Agreement.
SECTION 2.3 [Reserved.]
SECTION 2.4 Notes. The provisions of Section 2.4 of the Existing Credit
Agreement are hereby incorporated into this Agreement by this reference.
SECTION 2.5 Maturity of Loans. Each Loan included in any Borrowing
shall mature, and the principal amount thereof shall be due and payable, on the
last day of the Interest Period applicable to such Borrowing.
SECTION 2.6 Interest Rates. The provisions of Section 2.6(a) through
(d) of the Existing Credit Agreement are hereby incorporated into this Agreement
by this reference; except that any reference to an Interest Period of longer
than for intervals of three months therein shall mean Interest Periods and
Intervals of one month.
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<PAGE> 9
SECTION 2.7 Loan Fee. Borrower shall pay Leader a fee equal to 0.10%
of each Borrowing at the time of and as a condition precedent to each Borrowing.
SECTION 2.8 Mandatory Expiration. The term (the "Term") of the
Commitment shall terminate and expire on the date which is three months after
the Closing Date (or, if such date is not a Domestic Business Day, then the next
succeeding Domestic Business Day) (the "Maturity Date"). Upon the date of the
termination of the Term, any Loans then outstanding (together with accrued
interest thereon) shall be due and payable.
SECTION 2.9 [Reserved.]
SECTION 2.10 Optional Prepayments. The provisions of Section 2.10 of
the Existing Credit Agreement are hereby incorporated into this Agreement by
this reference.
SECTION 2.11 General Provisions as to Payments. The provisions of
Section 2.11 (a) of the Existing Credit Agreement are hereby incorporated into
this Agreement by reference, except that references therein to "New York City"
shall mean Dallas, Texas.
SECTION 2.12 Funding Losses. The provisions of Section 2.12 of the
Existing Credit Agreement are hereby incorporated into this Agreement by
reference.
SECTION 2.13 Computation of Interest and Fees. The provisions of
Section 2.13 of the Existing Credit Agreement are hereby incorporated into this
Agreement by reference.
SECTION 2.14 Use of Proceeds. The provisions of Section 2.14 of the
Existing Credit Agreement are hereby incorporated into this Agreement by
reference.
ARTICLE 3.
CONDITIONS
SECTION 3.1 Closing. The closing hereunder shall occur on the date (the
"Closing Date") when each of the following conditions is satisfied (or waived by
the Lender), each document to be dated the Closing Date unless otherwise
indicated:
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<PAGE> 10
(a) the Borrower shall have executed and delivered to the Lender
a Note dated on or before the Closing Date complying with the provisions of
Section 2.4;
(b) the Borrower and Lender shall have executed and delivered to
the Lender a duly executed original of this Agreement;
(c) the General Partner shall have executed and delivered the
Guaranty and AMB Property II, L.P. and Long Gate LLC shall each have executed
and delivered a Subsidiary Guaranty;
(d) Lender shall have received an enforceability opinion of
Latham & Watkins, New York and California counsel for the Borrower, and opinions
as to the due authority, execution and delivery of the Loan Documents (other
than any Subsidiary Guaranty) by Latham & Watkins and Ballard Spahr Andrews &
Ingersoll, in each case reasonably acceptable to the Lender, and its counsel;
(e) Lender shall have received all documents Lender may
reasonably request relating to the existence of the Borrower, the General
Partner and any Subsidiary Guarantor, the authority for and the validity of this
Agreement and the other Loan Documents, and any other matters relevant hereto,
all in form and substance reasonably satisfactory to the Lender;
(f) Lender shall have received all certificates, agreements and
other documents referred to in this Section 3.1 and Section 3.2, unless
otherwise specified, in sufficient counterparts, satisfactory in form and
substance to the Lender in its sole discretion;
(g) Borrower, the General Partner and each Subsidiary Guarantor
shall have taken all actions required to authorize the execution and delivery of
this Agreement and the other Loan Documents to which it is a party and the
performance thereof by the Borrower, the General Partner and such Subsidiary
Guarantors, as applicable;
(h) [Reserved];
(i) Lender shall have received a Consolidated balance sheet of
the Borrower, the General Partner, and their Consolidated Subsidiaries dated
December 31, 1997 and the related Consolidated statements of the Borrower's
financial position for the fiscal year then ended, audited by Arthur Andersen &
Co., L.L.P.;
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(j) [Reserved];
(k) Lender shall have received for its account (i) the
Origination Fee, (ii) all fees due and payable pursuant to Section 2.7 hereof on
or before the Closing Date, and (ii) the reasonable fees and expenses accrued
through the Closing Date of Sheppard, Mullin, Richter & Hampton LLP;
(1) Lender shall have received copies of all consents, licenses
and approvals, if any, required in connection with the execution, delivery and
performance by the Borrower, the General Partner and any Subsidiary Guarantor,
and the validity and enforceability, of the Loan Documents, or in connection
with any of the transactions contemplated thereby, and such consents, licenses
and approvals shall be in full force and effect in all material respects;
(m) [Reserved];
(n) [Reserved];
(o) [Reserved];
(p) [Reserved];
(q) [Reserved);
(r) Lender shall have received a compliance certificate from
Borrower's chief financial officer or chief accounting officer certifying
compliance with Section 5.9 hereof containing such information as is required by
Section 5.1(c)(i) and (ii);
(s) [Reserved];
(t) (Reserved];
(u) [Reserved]; and
(v) Borrower (or the General Partner, as applicable) shall have
received at least one (1) Investment Grade Rating, from either S&P or Moody's,
or Borrower shall have received the prior written informed consent of Agent and
Banks, consenting to Borrower's entering into this Agreement and incurring the
recourse debt referred to in this Agreement, in compliance with the terms of
Section 5.16 of the Existing Credit Agreement.
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SECTION 3.2 Borrowings. The obligation of Lender to make a Loan on the
occasion of any Borrowing is subject to the satisfaction of the following
conditions:
(a) the Closing Date shall have occurred on or prior to April
30, 1998;
(b) receipt by Lender of a Notice of Borrowing as required by
Section 2.2;
(c) immediately after such Borrowing, the aggregate outstanding
principal amount of the Loans will not exceed the Maximum Loan Amount;
(d) immediately after such Borrowing, the aggregate outstanding
principal amount of the Loans will not exceed the aggregate amount of
the Commitment (as reduced pursuant to Section 2.10(c)).
(e) immediately before and after such Borrowing, no Default or
Event of Default shall have occurred and be continuing both before and
after giving effect to the making of such Loans;
(f) the representations and warranties of the Borrower contained
in this Agreement shall be true and correct in all material respects
on and as of the date of such Borrowing both before and after giving
effect to the making of such Loans;
(g) no law or regulation shall have been adopted, no order,
judgment or decree of any governmental authority shall have been
issued, and no litigation shall be pending or threatened, which does
or, with respect to any threatened litigation, seeks to enjoin,
prohibit or restrain, the making or repayment of the Loans or the
consummation of the transactions contemplated by this Agreement;
(h) no event, act or condition shall have occurred after the
Closing Date which, in the reasonable judgment of the Lender, has had
or is likely to have a Material Adverse Effect;
(i) Lender shall have theretofore received duly and validly
executed Subsidiary Guaranties from each Wholly-Owned Subsidiary that
owns a Borrowing Base Property;
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(j) receipt by Lender of a certificate of the chief financial
officer or the chief accounting officer of the Borrower certifying
that as of the date of such Borrowing, the Borrower is in compliance
with Section 5.9 and containing such information as is required by
Section 5.1(c)(i) and (ii);
(k) receipt by Lender of a certificate of the chief financial
officer or the chief accounting officer of the Borrower certifying
that Borrower shall receive the proceeds of the Loan and will use the
proceeds of such Loan for Approved Uses; and
(1) Lender shall have received for its account all fees due and
payable pursuant to Section 2.7 hereof on account of the Borrowing.
Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Borrower on the date of such Borrowing as to the facts specified in clauses
(c), (d), (e), (f), (g) and (i) of this Section.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
In order to induce the Lender to make the Loan, the Borrower
makes each representation and warranty made in Article 4 of the Existing Credit
Agreement as if it had been made in and as to this Agreement and the Loan
Documents executed in conjunction with this Agreement, and as if it had been
made as of the Closing Date. For that purpose, the provisions of Article 4 of
the Existing Credit Agreement are hereby incorporated into this Agreement by
this reference. Such representations and warranties, shall survive the Closing
Date, the execution and delivery of the other Loan Documents and the making of
the Loans.
ARTICLE 5.
AFFIRMATIVE AND NEGATIVE COVENANTS
The provisions of Article 5 of the Existing Credit Agreement are
hereby incorporated into this Agreement by this reference. The Borrower
covenants and agrees that so long as Lender has any Commitment hereunder or any
Obligations remain unpaid, Borrower will comply with all of the Affirmative and
Negative Covenants of Article 5 of the Existing Credit Agreement as if they had
been made in conjunction with this Agreement.
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ARTICLE 6.
DEFAULTS
SECTION 6.1 Events of Default. The provisions of Section 6.1 of the
Existing Credit Agreement are hereby incorporated into this Agreement by
reference. In addition, to the extent not otherwise provided, any Event of
Default under the Existing Credit Agreement, or by Borrower, General Partner or
any Subsidiary Guarantor under any other debt or obligation, shall be an Event
of Default under this Agreement.
SECTION 6.2 Rights and Remedies. The provisions of Section 6.2 of the
Existing Credit Agreement are hereby incorporated into this Agreement by
reference. Upon the occurrence of any Event of Default described in
Sections 6.1(f) or (g), the Commitment shall immediately terminate and the
unpaid principal amount of, and any and all accrued interest on, the Loan and
any and all accrued fees and other Obligations hereunder shall automatically
become immediately due and payable, with all additional interest from time to
time accrued thereon and without presentation, demand, or protest or other
requirements of any kind (including, without limitation, valuation and
appraisement, diligence, presentment, notice of intent to demand or accelerate
and notice of acceleration), all of which are hereby expressly waived by the
Borrower; and upon the occurrence and during the continuance of any other Event
of Default, the Lender may, by written notice to the Borrower, terminate the
Commitments, and may, in addition to the exercise of all rights and remedies
permitted Lender at law or equity, declare the unpaid principal amount of and
any and all accrued and unpaid interest on the Loans and any and all accrued
fees and other Obligations hereunder to be, and the same shall thereupon be,
immediately due and payable with all additional interest from time to time
accrued thereon and without presentation, demand, or protest or other
requirements of any kind other than as provided in the Loan Documents
(including, without limitation, valuation and appraisement, diligence,
presentment, notice of intent to demand or accelerate and notice of
acceleration), all of which are hereby expressly waived by the Borrower to the
extent permitted by law.
SECTION 6.3 Notices of Default. The provisions of Section 6.3 of the
Existing Credit Agreement are hereby incorporated into this Agreement by
reference.
ARTICLE 7.
(Reserved]
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ARTICLE 8.
CHANGE IN CIRCUMSTANCES
The provisions of Article 8 of the Existing Credit Agreement are
hereby incorporated into this Agreement by reference.
ARTICLE 9.
MISCELLANEOUS
SECTION 9.1 Notices. The provisions of Section 9.1 of the Existing
Credit Agreement are hereby incorporated into this Agreement by reference.
SECTION 9.2 No Waivers. The provisions of Section 9.2 of the Existing
Credit Agreement are hereby incorporated into this Agreement by reference.
SECTION 9.3 Expenses; Indemnification.
(a) The Borrower shall pay (i) all reasonable out-of-pocket
expenses of Lender, including, without limitation, fees and disbursements of
Sheppard, Mullin, Richter & Hampton LLP, counsel for Lender, as well as fees and
disbursements of internal counsel, in connection with the preparation and
administration of this Agreement, the Loan Documents and the documents and
instruments referred to therein, and further modifications of the Facility in
connection therewith, the administration of the Loans, any waiver or consent
hereunder or any amendment or modification hereof or any Default or Event of
Default hereunder, and (ii) if an Event of Default occurs, all reasonable
out-of-pocket expenses incurred by Lender, including fees and disbursements of
counsel for Lender, in connection with the enforcement of the Loan Documents and
the instruments referred to therein and such Event of Default and collection,
bankruptcy, insolvency and other enforcement proceedings resulting therefrom.
(b) The provisions of Section 9.3(b) of the Existing Credit
Agreement are hereby incorporated into this Agreement by reference.
(c) The provisions of Section 9.3(c) of the Existing Credit
Agreement are hereby incorporated into this Agreement by reference.
SECTION 9.4 [Reserved.]
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SECTION 9.5 Amendments and Waivers. Any provision of this Agreement or
the Notes or other Loan Documents may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed by the Borrower and Lender.
SECTION 9.6 Successors and Assigns. The provisions of Section 9.6 of
the Existing Credit Agreement are hereby incorporated into this Agreement by
reference.
SECTION 9.7 [Reserved.]
SECTION 9.8 Governing Law; Submission to Jurisdiction.
(a) THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE RIGHTS
AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE CONSTRUED IN
ACCORDANCE WITH AND BE GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA.
(b) Any legal action or proceeding with respect to this
Agreement or any other Loan Document and any action for enforcement of any
judgment in respect thereof may be brought in the courts of the State of
California or of the United States of America for the Northern District of
California, and, by execution and delivery of this Agreement, the Borrower
hereby accepts for itself and in respect of its property, generally and
unconditionally, the non-exclusive jurisdiction of the aforesaid courts and
appellate courts from any thereof. The Borrower irrevocably consents to the
service of process out of any of the aforementioned courts in any such action or
proceeding by the hand delivery or mailing of copies thereof by registered or
certified mail, postage prepaid, to the Borrower at its address set forth below.
The Borrower hereby irrevocably waives, to the extent permitted by applicable
law, any objection which it may now or hereafter have to the laying of venue of
any of the aforesaid actions or proceedings arising out of or in connection with
this Agreement or any other Loan Document brought in the courts referred to
above and hereby further irrevocably waives, to the extent permitted by
applicable law, and agrees not to plead or claim in any such court that any such
action or proceeding brought in any such court has been brought in an
inconvenient forum. Nothing herein shall affect the right of Lender or any
holder of a Note to serve process in any other manner permitted by law or to
commence legal proceedings or otherwise proceed against the Borrower in any
other jurisdiction.
SECTION 9.9 Marshaling; Recapture. The provisions of Section 9.9 of the
Existing Credit Agreement are hereby incorporated into this Agreement by
reference.
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SECTION 9.10 Counterparts; Integration; Effectiveness. The provisions
of Section 9.10 of the Existing Credit Agreement are hereby incorporated into
this Agreement by reference.
SECTION 9.11 WAIVER OF JURY TRIAL. BORROWER AND LENDER HEREBY
IRREVOCABLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
SECTION 9.12 Survival. The provisions of Section 9.12 of the Existing
Credit Agreement are hereby incorporated into this Agreement by reference.
SECTION 9.13 Domicile of Loans. Lender may transfer and carry the Loans
at, to or for the account of any domestic or foreign branch office, subsidiary
or affiliate of Lender.
SECTION 9.14 Limitation of Liability. No claim may be made by the
Borrower or any other Person against Lender or the affiliates, directors,
officers, employees, attorneys or agent of any of them for any consequential or
punitive damages in respect of any claim for breach of contract or any other
theory of liability arising out of or related to the transactions contemplated
by this Agreement or by the other Loan Documents, or any act, omission or event
occurring in connection therewith; and the Borrower hereby waives, releases and
agrees not to sue upon any claim for any such damages, whether or not accrued
and whether or not known or suspected to exist in its favor.
SECTION 9.15 Recourse. All obligations, covenants and agreements of
Borrower contained in or evidenced by this Agreement, the Notes and any Loan
Document shall be fully recourse to Borrower and each and every asset of
Borrower. Notwithstanding the foregoing, no recourse under or upon any
obligation, covenant, or agreement contained in this Agreement or the Note or
any Loan Document shall be had against any officer, director, limited partner,
shareholder or employee of Borrower or of the General Partner (each, a
"NonRecourse Party") and no such Non-Recourse Party shall be personally liable
for payment of the Loans or other amounts due in respect thereof (all such
liability being expressly waived and released by Lender). In no event shall the
foregoing limitation on recourse with respect to any Non-Recourse Party be
deemed to limit (a) the liability of the General Partner under the General
Partner Guaranty, which shall be fully recourse to the General Partner and each
and every asset of the General Partner or (b) the liability of any Subsidiary
Guarantor under any Subsidiary Guaranty, which shall be fully recourse to each
such Subsidiary Guarantor and each and every asset of each such Subsidiary
Guarantor.
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SECTION 9.16 Confidentiality. Lender and Borrower agree that they shall
maintain confidentiality with regard to nonpublic information concerning the
parties to the Loan Documents obtained pursuant to this Agreement and shall not
disclose the existence or terms of the Loan Documents, provided the parties
shall not be precluded from making disclosure regarding such information: (i)
the parties' counsel, accountants and other professional advisors (who are, in
each case, subject to this confidentiality agreement), (ii) to officers,
directors, employees, agents and partners of the parties who need to know such
information (who are, in each case, subject to this confidentiality agreement),
(iii) in response to a subpoena or order of a court or governmental agency, (iv)
as to Lender, to any entity participating or considering participating in any
credit made under this Agreement, to any affiliate of Lender (including but not
limited to NationsBanc Montgomery Securities, LLC), to any person having
regulatory authority over Lender, and to any other person as necessary or
appropriate in Lender's reasonable judgment, provided, Lender shall, to the
extent applicable, require that any such entity be subject to this Section 9.16,
however, Lender shall have no duty to monitor any such person and shall have no
liability in the event that any such person violates this Section 9.16, (v) in
connection with the enforcement of this Agreement, the Notes or the other Loan
Documents, or (vi) as required by law, GAAP or applicable regulation. In
connection with enforcing its rights pursuant to this Section 9.16, the parties
shall be entitled to the equitable remedies of specific performance and
injunctive relief against the other parties which shall breach the
confidentiality provisions of this Section 9.16.
SECTION 9.17 Effect of Loan Documents on Existing Credit Agreement.
Nothing herein contained shall modify, amend, or alter the terms and conditions
of the Existing Credit Agreement.
-15-
<PAGE> 19
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly Executed by their respective authorized officers as of the
day and year first above written.
AMB PROPERTY, L.P.,
a Delaware limited partnership
By: AMB PROPERTY CORPORATION, a Maryland
corporation, its sole general partner
By: /s/ JOHN T. ROBERTS, JR.
-----------------------------------------
Name: John T. Roberts, Jr.
---------------------------------------
Title: VP Capital Markets, Treasurer
--------------------------------------
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
505 Montgomery Street
San Francisco, CA 94111
Attention: Chief Financial Officer
Facsimile No.: (415) 393-9001
-16-
<PAGE> 20
NATIONSBANK OF TEXAS, N.A.
By: /s/ DONALD H. MOSES
-----------------------------------------
Name: Donald H. Moses
---------------------------------------
Title: Senior Vice President
--------------------------------------
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
DOMESTIC AND EURO-DOLLAR LENDING OFFICE:
NationsBank of Texas, N.A
901 Main Street, 51st Floor
Dallas, Texas 75202-3714
Attention: John Hall
Facsimile: (214) 508-0085
-17-
<PAGE> 21
EXHIBIT A
FORM OF NOTE
NOTE
$_______________ San Francisco, California
___________________, 1998
For value received, AMB Property, L.P., a Delaware limited
partnership (the "Borrower"), promises to pay to the order of NationsBank of
Texas, N.A. (the "Lender"), for the account of its Applicable Lending Office,
the unpaid principal amount of each Loan made by the Lender to the Borrower
pursuant to the Credit Agreement referred to below on the last day of the
Interest Period relating to such Loan. The Borrower promises to pay interest on
the unpaid principal amount of each such Loan on the dates and at the rate or
rates provided for in the Credit Agreement. All such payments of principal and
interest shall be made in lawful money of the United States in Federal or other
immediately available funds at the office of Lender at 901 Main Street, 51st
Floor, Dallas, Texas 75202-3714.
All Loans made by the Lender, the respective types and
maturities thereof and all repayments of the principal thereof shall be recorded
by the Lender and, if the Lender so elects in connection with any transfer or
enforcement hereof, appropriate notations to evidence the foregoing information
with respect to each such Loan then outstanding may be endorsed by the Lender on
the schedule attached hereto, or on a continuation of such schedule attached to
and made a part hereof; provided that the failure of the Lender to make any such
recordation or endorsement shall not affect the obligations of the Borrower
hereunder or under the Credit Agreement.
A-1
<PAGE> 22
This note is one of the Notes referred to in the Revolving
Credit Agreement dated as of April 16, 1998 between the Borrower and NationsBank
of Texas, N.A. (the "Credit Agreement"). Terms defined in the Credit Agreement
are used herein with the same meanings. Reference is made to the Credit
Agreement for provisions for the prepayment hereof and the acceleration of the
maturity hereof.
All obligations, covenants and agreements contained or evidenced
in this Note, shall be fully recourse to Borrower and each and every asset of
Borrower. Notwithstanding the foregoing, no recourse under or upon any
obligation, covenant, or agreement contained in this Note shall be had against
any Non-Recourse Party (as defined in the Credit Agreement) and no such
Non-Recourse Party shall be personally liable for payment of the Loans or other
amounts due in respect thereof (all such liability being expressly waived and
released by Lender). In no event shall the foregoing limitation on recourse with
respect to any Non-Recourse Party be deemed to limit (a) the liability of the
General Partner under the General Partner Guaranty, which shall be fully
recourse to the General Partner and each and every asset of the General Partner
or (b) the liability of any Subsidiary Guarantor under any Subsidiary Guaranty,
which shall be fully recourse to each such Subsidiary Guarantor and each and
every asset of each such Subsidiary Guarantor.
AMB PROPERTY, L.P.
By: AMB PROPERTY CORPORATION, a
Maryland corporation, its sole
general partner
By:
-----------------------------
-----------------------------
[Printed Name and Title]
By:
-----------------------------
-----------------------------
[Printed Name and Title]
A-2
<PAGE> 23
Note (Cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
-------------------------------
Amount of
Amount of Type of Principal Maturity Notation
Date Loan Loan Repaid Date Made By
A-3
<PAGE> 24
EXHIBIT B
(Reserved)
B-1
<PAGE> 25
EXHIBIT C
[Reserved]
C-1
<PAGE> 26
EXHIBIT D
[Reserved]
D-1
<PAGE> 27
EXHIBIT E
SUBSIDIARY GUARANTY
E-1
<PAGE> 28
UNCONDITIONAL GUARANTY AGREEMENT
THIS UNCONDITIONAL GUARANTY AGREEMENT (this "Guaranty"), dated
as of April 16, 1998 is made jointly and severally by AMB PROPERTY II, L.P. and
LONG GATE LLC (each, a "Guarantor" and collectively, the "Guarantors") for the
benefit of NATIONSBANK OF TEXAS, N.A. ("Lender"), and is made with reference to
that certain Revolving Credit Agreement (the "Credit Agreement"), dated as of
April 16, 1998 among AMB Property, L.P. (the "Borrower"), and Lender.
Capitalized terms not otherwise defined in this Guaranty shall
have the meanings ascribed to them in the Credit Agreement.
WITNESSETH:
WHEREAS, pursuant to the terms of the Credit Agreement, Lender
has agreed to make loans (collectively, the "Loan") to the Borrower from time to
time in amounts such that the aggregate principal amount outstanding shall not
exceed Fifty Million Dollars (the "Loan Amount") to be used by the Borrower for
the Approved Uses;
WHEREAS: (i) Guarantors are Wholly-Owned Subsidiaries of the
Borrower that own (or will own) certain Borrowing Base Properties as that term
is defined in the Existing Credit Agreement and Guarantor's will be the direct
and indirect beneficiary of the Borrower's rights and obligations under the
Credit Agreement and (ii) pursuant to the Credit Agreement, it is a condition of
the Loans that the Guarantors execute and deliver this Guaranty; and
WHEREAS, in order to induce Lender to make the Loans to
Borrower, and to satisfy one of the conditions contained in the Credit Agreement
with respect thereto, the Guarantors have agreed to enter into this Guaranty.
NOW THEREFORE, in consideration of the premises and the direct
and indirect benefits to be derived from the making of the Loan by Lender to the
Borrower, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Guarantors hereby agree as
follows:
1. Each Guarantor, on behalf of itself and its successors and
assigns, hereby irrevocably, absolutely, and unconditionally guarantees the full
and punctual
-1-
<PAGE> 29
payment when due, whether at stated maturity or otherwise, of all Obligations
now or hereafter existing under Credit Agreement, the Notes, or under any of the
other Loan Documents (such obligations being the "Guaranteed Obligations"), and
any and all reasonable costs and expenses (including, without limitation,
reasonable attorneys' fees and disbursements) incurred by Lender in enforcing
its rights under this Guaranty.
2. It is agreed that the obligations of each Guarantor hereunder
are primary and this Guaranty shall be enforceable against each Guarantor and
its successors and assigns without the necessity for any suit or proceeding of
any kind or nature whatsoever brought by Lender against the Borrower or its
respective successors or assigns or any other party or against any security for
the payment and performance of the Guaranteed Obligations and, except as set
forth in the Credit Agreement and the Notes, without the necessity of any notice
of non-payment or non-observance or of any notice of acceptance of this Guaranty
or of any notice or demand to which either Guarantor might otherwise be entitled
(including, without limitation, diligence, presentment, notice of maturity,
extension of time, change in nature or form of the Guaranteed Obligations,
acceptance of further security, release of further security, imposition or
agreement arrived at as to the amount of or the terms of the Guaranteed
Obligations, notice of adverse change in the Borrower's financial condition or
the condition of the Borrowing Base Properties and any other fact which might
materially increase the risk to the Guarantors), all of which each Guarantor
hereby expressly waives; and each Guarantor hereby expressly agrees that the
validity of this Guaranty and the obligations of each Guarantor hereunder shall
in no way be terminated, affected, diminished, modified or impaired by reason of
the assertion of or the failure to assert by Lender against the Borrower or its
respective successors or assigns, any of the rights or remedies reserved to
Lender pursuant to the provisions of the Loan Documents. Each Guarantor hereby
agrees that any notice or directive given at any time to Lender which is
inconsistent with the waiver in the immediately preceding sentence shall be void
and may be ignored by Leader, and, in addition, may not be pleaded or
introduced as evidence in any litigation relating to this Guaranty for the
reason that such pleading or introduction would be at variance with the written
terms of this Guaranty, unless Lender has specifically agreed otherwise in a
writing, signed by a duly authorized officer. Each Guarantor specifically
acknowledges and agrees that the foregoing waivers are of the essence of this
transaction and that, but for this Guaranty and such waivers, Lender would not
permit the assumption of the Credit Agreement by, or make the Loan to, the
Borrower.
3. Each Guarantor hereby waives, and covenants and agrees that
it will not at any time insist upon, plead or in any manner whatsoever claim or
take the benefit or advantage of, any and all appraisal, valuation, stay,
extension,
-2-
<PAGE> 30
marshaling-of-assets or redemption laws, or right of homestead or exemption
whether now or at any time hereafter in force, which may delay, prevent or
otherwise affect the performance by any Guarantor of its obligations under, or
the enforcement by Lender of, this Guaranty. Each Guarantor further covenants
and agrees not to set up or claim any defense, counterclaim, offset, set-off or
other objection of any kind to any action, suit or proceeding in law, equity or
otherwise, or to any demand or claim that may be instituted or made by Lender
other than the defense of the actual timely payment and performance by the
Borrower of the Guaranteed Obligations hereunder or any defense to which
Borrower is otherwise entitled. Each Guarantor represents, warrants and agrees
that, as of the date hereof, its obligations under this Guaranty are not subject
to any counterclaims, offsets or defenses against Lender of any kind.
4. The provisions of this Guaranty are for the benefit of Lender
and its successors and permitted assigns, and nothing herein contained shall
impair as between the Borrower and Lender the obligations of the Borrower under
the Loan Documents.
5. This Guaranty shall be a continuing, unconditional and
absolute guaranty and the liability of each Guarantor hereunder shall in no way
be terminated, affected, modified, impaired or diminished by reason of the
happening, from time to time, of any of the following, although without notice
or the further consent of either Guarantor:
(a) any assignment, amendment, modification or waiver of
or change in any of the terms, covenants, conditions or
provisions of any of the Guaranteed Obligations or the Loan
Documents or the invalidity or unenforceability of any of the
foregoing; or
(b) any extension of time that may be granted by Lender
to the Borrower, any guarantor, or their respective successors
or assigns, heirs, executors, administrators or personal
representatives; or
(c) any action which Lender may take or fail to take
under or in respect of any of the Loan Documents or by reason of
any waiver of, or failure to enforce any of the rights,
remedies, powers or privileges available to Lender under this
Guaranty or available to Lender at law, equity or otherwise, or
any action on the part of Lender granting indulgence or
extension in any form whatsoever; or
-3-
<PAGE> 31
(d) any sale, exchange, release, or other disposition of
any property pledged, mortgaged or conveyed, or any property in
which Lender has been granted a lien or security interest to
secure any indebtedness of the Borrower to Lender; or
(e) any release of any person or entity who may be liable
in any manner for the payment and collection of any amounts owed
by the Borrower to Leader (including any guarantor); or
(f) the application of any sums by whomsoever paid or
however realized to any amounts owing by the Borrower to Lender
under the Loan Documents in such manner as Lender shall
determine in its sole discretion; or
(g) the Borrower's or any guarantor's voluntary or
involuntary liquidation, dissolution, sale of all or
substantially all of their respective assets and liabilities,
appointment of a trustee, receiver, liquidator, sequestrator or
conservator for all or any part of the Borrower's or such
guarantor's assets, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition
or readjustment or the commencement of other similar proceedings
affecting the Borrower or any guarantor or any of the assets of
any of them, including, without limitation, (i) the release or
discharge of the Borrower or any guarantor from the payment and
performance of their respective obligations under any of the
Loan Documents by operation of law, or (ii) the impairment,
limitation or modification of the liability of the Borrower or
any guarantor in bankruptcy, or of any remedy for the
enforcement of the Guaranteed Obligations under any of the Loan
Documents, or any guarantor's liability under any guaranty
(including the liability of each Guarantor under this Guaranty),
resulting from the operation of any present or future provisions
of the Bankruptcy Code or other present or future federal, state
or applicable statute or law or from the decision in any court;
or
(h)any improper disposition by the Borrower of the
proceeds of the Loan, it being acknowledged by Guarantors that
Lender shall be entitled to honor any request made by the
Borrower for a disbursement of such proceeds and that Lender
shall have no obligation to see the proper disposition by the
Borrower of such proceeds.
6. Each Guarantor hereby agrees that if at any time all or any
part of any payment at any time received by Lender from the Borrower under any
of the Notes
-4-
<PAGE> 32
or other Loan Documents or any Guarantor under or with respect to this Guaranty
is or must be rescinded or returned by Lender for any reason whatsoever
(including, without limitation, the insolvency, bankruptcy or reorganization of
the Borrower or any Guarantor), then each Guarantor's obligations hereunder
shall, to the extent of the payment rescinded or returned, be deemed to have
continued in existence notwithstanding such previous receipt by Lender, and each
Guarantor's obligations hereunder shall continue to be effective or reinstated,
as the case may be, as to such payment, as though such previous payment to
Lender had never been made. In addition, if any court of competent jurisdiction
determines that the incurrence by either Guarantor of its obligations under this
Guaranty or the payment by either Guarantor of its obligations hereunder is or
would be voidable as a fraudulent transfer or conveyance under section 548 of
the Bankruptcy Code, any analogous state law, or any other law relating to
debtor protection or creditors' rights, the obligation of that Guarantor
hereunder shall automatically be reduced to the maximum amount (if any) of the
obligation that the Guarantor could incur or pay without such incurrence or
payment being subject to avoidance as a fraudulent transfer or conveyance.
7. Until this Guaranty is terminated pursuant to the terms
hereof, the Guarantors (i) shall have no right of subrogation against the
Borrower or any entity comprising same or each other by reason of any payments
or acts of performance by any Guarantor in compliance with the obligations of
each Guarantor hereunder; (ii) hereby waive any right to enforce any remedy
which any Guarantor now or hereafter shall have against the Borrower or any
entity comprising same or each other by reason of any one or more payment or
acts of performance in compliance with the obligations of any Guarantor
hereunder; and (iii) shall subordinate any liability or indebtedness of the
Borrower or any guarantor or any entity comprising same now or hereafter held by
any Guarantor to the obligations of the Borrower under the Loan Documents.
8. Each Guarantor hereby represents and warrants on its own
behalf to Lender with the knowledge that Lender is relying upon the same, as
follows:
(a) as of the date hereof, such Guarantor is a direct
Wholly-Owned Subsidiary of the Borrower and is familiar with the
financial condition of Borrower;
(b) based upon such relationship, such Guarantor has
determined that it is in its best interest to enter into this
Guaranty;
-5-
<PAGE> 33
(c) this Guaranty is necessary and convenient to the
conduct, promotion and attainment of such Guarantor's business,
and is in furtherance of such Guarantor's business purposes;
(d) the benefits to be derived by such Guarantor from the
Borrower's access to funds made possible by the Loan Documents
are at least equal to the obligations of such Guarantor
undertaken pursuant to this Guaranty;
(e) Each Guarantor is solvent and has full partnership or
limited liability company (as applicable) power and legal right
to enter into this Guaranty and to perform its obligations under
the terms hereof and (i) such Guarantor is organized and validly
existing under the laws of the state of its formation and in
each state in which it owns or leases real property except where
the failure to do so in each State in which it owns or leases
real property would not have a Material Adverse Effect on such
Guarantor, (ii) such Guarantor has complied with all provisions
of applicable law in connection with all aspects of this
Guaranty, and (iii) the person executing this Guaranty on behalf
of such Guarantor has all the requisite power and authority to
execute and deliver this Guaranty; and
(f) this Guaranty has been duly executed by each
Guarantor and constitutes the legal, valid and binding
obligation of such Guarantor, enforceable against it in
accordance with its terms except as enforceability may be
limited by applicable insolvency, bankruptcy or other laws
affecting creditors' rights generally or general principles of
equity whether such enforceability is considered in a proceeding
in equity or at law.
9. Each of the Guarantors and Lender acknowledges and agrees
that this Guaranty is a guaranty of payment and not of collection and
enforcement in respect of any Guaranteed Obligations.
10. Subject to the terms and conditions of the Credit Agreement,
and in conjunction therewith, Lender may assign any or all of its rights under
this Guaranty.
11. Each Guarantor agrees, upon the written request of Lender,
to execute and deliver to Lender, from time to time, any modification or
amendment hereto or any additional instruments or documents reasonably
considered necessary by Lender or its counsel to cause this Guaranty to be,
become or remain valid and effective in accordance with its terms or in order to
implement more fully the intent of
-6-
<PAGE> 34
this Guaranty, provided, that, any such modification, amendment, additional
instrument or document shall not increase any Guarantor's obligations or
diminish its rights hereunder.
12. The representations and warranties of the each Guarantor set
forth in this Guaranty shall survive until this Guaranty shall terminate in
accordance with the terms hereof.
13. This Guaranty together with the Credit Agreement and the
other Loan Documents contains the entire agreement among the parties and
supersedes all prior agreements relating to the Loan and may not be modified,
amended, supplemented or discharged except by a written agreement signed by each
Guarantor and Lender.
14. If all or any portion of any provision contained in this
Guaranty shall be determined to be invalid, illegal or unenforceable in any
respect for any reason, such provision or portion thereof shall be deemed
stricken and severed from this Guaranty and the remaining provisions and
portions thereof shall continue in full force and effect.
15. This Guaranty may be executed in counterparts which together
shall constitute the same instrument.
16. In order for any demand, request or notice to the respective
parties hereto to be effective, such demand, request or notice shall be given,
in writing, by delivering the same personally or by nationally recognized
overnight courier service or by mailing, by certified or registered mail,
postage prepaid or by telecopying the same, addressed to such party at the
address set forth below or to such other address as may be identified by any
party in a written notice to the others. Any such demand, request or notice sent
as aforesaid shall be deemed to have been received by the party to whom it is
addressed upon delivery, if personally delivered and on the actual receipt
thereof, if sent by certified or registered mail or by telecopier, and when
transmitted, if sent by telex:
If to the Borrower
or any Guarantor: AMB Property, L.P.
505 Montgomery Street
San Francisco, California 94111
Attention: Chief Financial Officer
-7-
<PAGE> 35
If to Lender: NationsBank of Texas, N.A.
901 Main Street 51st Floor
Dallas, Texas 75202-3714
Attention: John Hall
17. This Guaranty shall be binding upon each Guarantor and its
successors and assigns and shall inure to the benefit of Lender and its
successors and assigns.
18. The failure of Lender to enforce any right or remedy
hereunder, or promptly to enforce any such right or remedy, shall not constitute
a waiver thereof, nor give rise to any estoppel against Lender, nor excuse any
Guarantor from its obligations hereunder. Any waiver of any such right or remedy
to be enforceable against Lender must be expressly set forth in a writing signed
by Lender.
19. (a) THIS GUARANTY AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE
LAWS OF THE STATE OF CALIFORNIA.
(b) Any legal action or proceeding with respect to this
Guaranty and any action for enforcement of any judgment in respect thereof may
be brought in the courts of the State of California or of the United States of
America for the Northern District of California, and, by execution and delivery
of this Guaranty, Guarantor hereby accepts for itself and in respect of its
property, generally and unconditionally, the non-exclusive jurisdiction of the
aforesaid courts and appellate courts from any thereof. Each Guarantor
irrevocably consents to the service of process out of any of the aforementioned
courts in any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, to Guarantor at the address for
notices set forth herein. Guarantor hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with this
Guaranty brought in the courts referred to above and hereby further irrevocably
waives and agrees not to plead or claim in any such court that any such action
or proceeding brought in any such court has been brought in an inconvenient
forum. Nothing herein shall affect the right of Lender to serve process in any
other manner permitted by law or to commence legal proceedings or otherwise
proceed against any Guarantor in any other jurisdiction.
-8-
<PAGE> 36
(c) EACH OF THE GUARANTORS AND LENDER EACH HEREBY WAIVES ITS
RIGHTS TO A JURY TRIAL OF ANY AND ALL CLAIMS OR CAUSES OF ACTION BASED UPON OR
ARISING OUT OF THIS GUARANTY. IT IS HEREBY ACKNOWLEDGED BY EACH GUARANTOR THAT
THE WAIVER OF A JURY TRIAL IS A MATERIAL INDUCEMENT FOR LENDER TO ACCEPT THIS
GUARANTY AND THAT THE LOAN MADE BY LENDER ARE MADE IN RELIANCE UPON SUCH WAIVER.
EACH GUARANTOR FURTHER WARRANTS AND REPRESENTS THAT SUCH WAIVER HAS BEEN
KNOWINGLY AND VOLUNTARILY MADE, FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN
THE EVENT OF LITIGATION, THIS GUARANTY MAY BE FILED BY LENDER IN COURT AS A
WRITTEN CONSENT TO A NON-JURY TRIAL.
(d) Each Guarantor does hereby further covenant and agree
with Lender that each Guarantor may be joined in any action against the Borrower
in connection with the Loan Documents and that recovery may be had against the
Guarantors in such action or in any independent action against either or both of
Guarantors (with respect to the Guaranteed Obligations), without Lender first
pursuing or exhausting any remedy or claim against the Borrower or its
successors or assigns. Each Guarantor also agrees that, in an action brought
with respect to the Guaranteed Obligations in any jurisdiction, it shall be
conclusively bound by the judgment in any such action by Lender (wherever
brought) against the Borrower or its successors or assigns, as if each Guarantor
were a party to such action, even though one or both of Guarantors were not
joined as parties in such action.
(e) Each Guarantor hereby jointly and severally agrees to
pay all expenses (including, without limitation, attorneys' fees and
disbursements) which may be incurred by Lender in connection with the
enforcement of its rights under this Guaranty, whether or not suit is initiated;
provided, however, that such expenses shall be paid by Lender if a final
judgment in favor of both Guarantors (or one Guarantor if only a single
Guarantor was a party to the action in which such judgment was rendered) is
rendered by a court of competent jurisdiction (the "Enforcement Costs").
Moreover, both Guarantors covenant and agree to indemnify and save Lender
harmless of and from, and defend it against, all losses, costs, liabilities,
expenses, damages or claims arising by reason of any Guarantor's failure to
perform its obligations hereunder (the "Indemnification Costs").
20. All obligations, covenants and agreements of the Guarantors
contained in or evidenced by this Guaranty shall be fully recourse (jointly and
severally) to the Guarantors and each and every asset of the Guarantors.
-9-
<PAGE> 37
21. Each of the Guarantors acknowledges and agrees that it has
jointly and severally guaranteed to Lender, the prompt and unconditional payment
of the Guaranteed Obligations, the Enforcement Costs and the Indemnification
Costs. Each Guarantor acknowledges and agrees that Lender, in its sole
discretion, may enforce this Guaranty against either (or both) of the Guarantors
for the entire amount of the Guaranteed Obligations without first or ever making
a demand upon or commencing or pursuing an action against the other Guarantor,
the Borrower or any other guarantor.
22. All of Lender's rights and remedies under each of the Loan
Documents or under this Guaranty are intended to be distinct, separate and
cumulative and no such right or remedy therein or herein mentioned is intended
to be in exclusion of or a waiver of any other right or remedy available to
Lender.
23. This Guaranty shall remain in full force and effect until
the payment in full of all of the Guaranteed Obligations at which time (subject
to Section 6 above) the Guarantors' obligations hereunder shall be deemed fully
discharged, and the Guarantors shall have no further liability under this
Guaranty.
IN WITNESS WHEREOF, the undersigned have caused this Guaranty to
be duly executed and delivered as of the date first set forth above.
GUARANTORS:
AMB PROPERTY II, L.P.
By:
-----------------------------
-----------------------------
[Printed Name and Title]
LONG GATE LLC
By:
-----------------------------
-----------------------------
[Printed Name and Title]
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1
<CASH> 29,167
<SECURITIES> 0
<RECEIVABLES> 36,318
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 65,485
<PP&E> 2,929,724
<DEPRECIATION> 29,252
<TOTAL-ASSETS> 3,033,106
<CURRENT-LIABILITIES> 84,508
<BONDS> 1,129,430
0
0
<COMMON> 1,669,417
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,033,106
<SALES> 0
<TOTAL-REVENUES> 160,799
<CGS> 0
<TOTAL-COSTS> 101,229
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,561
<INCOME-PRETAX> 59,570
<INCOME-TAX> 0
<INCOME-CONTINUING> 59,570
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 55,884
<EPS-PRIMARY> 0.54
<EPS-DILUTED> 0.54
</TABLE>
