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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q
     
(Mark One)
   
 
þ
  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
    For the quarterly period ended June 30, 2004
 
OR
 
o
   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)
     
Maryland   94-3281941
(State or Other Jurisdiction of Incorporation or Organization)   (I.R.S. Employer
Identification No.)
 
Pier 1, Bay 1, San Francisco, California   94111
(Address of Principal Executive Offices)   (Zip Code)

(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 þ          No o.

          Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).     Yes þ          No o

          As of July 30, 2004, there were 82,669,221 shares of the Registrant’s common stock, $0.01 par value per share, outstanding.

AMB PROPERTY CORPORATION

INDEX

             
Page
 PART I. FINANCIAL INFORMATION
   Financial Statements (unaudited)        
     Consolidated Balance Sheets as of June 30, 2004 and December 31, 2003     1  
     Consolidated Statements of Operations for the three months and six months ended June 30, 2004 and 2003     2  
     Consolidated Statements of Cash Flows for the six months ended June 30, 2004 and 2003     3  
     Consolidated Statement of Stockholders’ Equity for the six months ended June 30, 2004     4  
     Notes to Consolidated Financial Statements     5  
   Management’s Discussion and Analysis of Financial Condition and Results of Operations     22  
   Quantitative and Qualitative Disclosures About Market Risk     49  
   Controls and Procedures     50  
 
 PART II. OTHER INFORMATION
   Legal Proceedings     51  
   Changes in Securities and Use of Proceeds     51  
   Defaults Upon Senior Securities     51  
   Submission of Matters to a Vote of Security Holders     51  
   Other Information     52  
   Exhibits and Reports on Form 8-K     52  
 EXHIBIT 31.1
 EXHIBIT 32.1

Table of Contents

PART I

 
Item 1. Financial Statements

AMB PROPERTY CORPORATION

CONSOLIDATED BALANCE SHEETS
As of June 30, 2004 and December 31, 2003
                       
June 30, December 31,
2004 2003
(Unaudited, dollars in
thousands)
ASSETS
Investments in real estate:
               
 
Land
  $ 1,511,583     $ 1,403,807  
 
Buildings and improvements
    4,278,652       3,888,272  
 
Construction in progress
    272,216       199,628  
     
     
 
   
Total investments in properties
    6,062,451       5,491,707  
 
Accumulated depreciation and amortization
    (546,881 )     (474,452 )
     
     
 
   
Net investments in properties
    5,515,570       5,017,255  
Investments in unconsolidated joint ventures
    52,579       52,009  
Properties held for divestiture, net
    39,246       11,751  
     
     
 
   
Net investments in real estate
    5,607,395       5,081,015  
Cash and cash equivalents
    116,757       127,678  
Restricted cash
    29,379       28,985  
Mortgages receivable
    23,594       43,145  
Accounts receivable, net of allowance for doubtful accounts
    96,524       88,452  
Other assets
    76,958       51,391  
     
     
 
   
Total assets
  $ 5,950,607     $ 5,420,666  
     
     
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Debt:
               
 
Secured debt including unamortized premium
  $ 1,552,084     $ 1,363,890  
 
Unsecured senior debt securities
    1,025,000       925,000  
 
Unsecured debt
    9,334       9,628  
 
Unsecured credit facilities
    428,502       275,739  
     
     
 
   
Total debt
    3,014,920       2,574,257  
Dividends payable
    40,739       39,076  
Accounts payable and other liabilities
    215,835       148,019  
     
     
 
   
Total liabilities
    3,271,494       2,761,352  
Commitments and contingencies (Notes 3 and 12)
               
Minority interests:
               
 
Joint venture partners
    699,521       659,487  
 
Preferred unitholders
    241,899       241,899  
 
Limited partnership unitholders
    88,917       91,029  
     
     
 
   
Total minority interests
    1,030,337       992,415  
Stockholders’ equity:
               
 
Series L preferred stock, cumulative, redeemable, $.01 par value, 2,300,000 shares authorized and 2,000,000 issued and outstanding, $50,000 liquidation preference
    48,017       48,018  
 
Series M preferred stock, cumulative, redeemable, $.01 par value, 2,300,000 shares authorized, issued and outstanding, $57,500 liquidation preference
    55,187       55,355  
 
Common stock $.01 par value, 500,000,000 shares authorized, 82,645,787 and 81,792,913 issued and outstanding, respectively
    826       818  
 
Additional paid-in capital
    1,544,147       1,561,203  
 
Retained earnings
    —       —  
 
Accumulated other comprehensive income
    599       1,505  
     
     
 
   
Total stockholders’ equity
    1,648,776       1,666,899  
     
     
 
     
Total liabilities and stockholders’ equity
  $ 5,950,607     $ 5,420,666  
     
     
 

The accompanying notes are an integral part of these consolidated financial statements.

1

Table of Contents

AMB PROPERTY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three and Six Months Ended June 30, 2004 and 2003
                                       
For the Three Months Ended For the Six Months Ended
June 30, June 30,
2004 2003 2004 2003
(Unaudited, dollars in thousands, except share and
per share amounts)
REVENUES
                                
 
Rental revenues
  $ 162,704     $ 145,433     $ 326,300     $ 293,215  
 
Private capital income
    2,922       3,555       5,351       5,916  
     
     
     
     
 
   
Total revenues
    165,626       148,988       331,651       299,131  
     
     
     
     
 
COSTS AND EXPENSES
                                
 
Property operating expenses
    (23,204 )     (20,681 )     (47,092 )     (42,260 )
 
Real estate taxes
    (19,559 )     (17,372 )     (38,889 )     (35,233 )
 
Depreciation and amortization
    (38,880 )     (38,150 )     (76,487 )     (71,500 )
 
General and administrative
    (15,081 )     (12,122 )     (29,959 )     (24,010 )
     
     
     
     
 
   
Total costs and expenses
    (96,724 )     (88,325 )     (192,427 )     (173,003 )
     
     
     
     
 
OTHER INCOME AND EXPENSES
                                
 
Equity in earnings of unconsolidated joint ventures, net
    944       1,622       2,653       2,857  
 
Interest and other income
    486       1,384       1,992       2,491  
 
Gains from dispositions of real estate
    —       —       —       7,429  
 
Development profits, net of taxes
    3,235       —       3,235       —  
 
Interest, including amortization
    (39,961 )     (36,242 )     (79,784 )     (72,157 )
     
     
     
     
 
   
Total other income and expenses, net
    (35,296 )     (33,236 )     (71,904 )     (59,380 )
     
     
     
     
 
     
Income before minority interests and discontinued operations
    33,606       27,427       67,320       66,748  
     
     
     
     
 
 
Minority interests’ share of income:
                               
   
Joint venture partners’ share of operating income
    (9,379 )     (8,242 )     (18,335 )     (15,779 )
   
Joint venture partners’ share of development profits
    (749 )     —       (749 )     —  
   
Preferred unitholders
    (4,912 )     (6,379 )     (9,824 )     (12,759 )
   
Limited partnership unitholders
    (777 )     (601 )     (1,761 )     (1,967 )
     
     
     
     
 
   
Total minority interests’ share of income
    (15,817 )     (15,222 )     (30,669 )     (30,505 )
     
     
     
     
 
Income from continuing operations
    17,789       12,205       36,651       36,243  
     
     
     
     
 
Discontinued operations:
                               
 
Income (loss) attributable to discontinued operations, net of minority interests
    253       2,259       (503 )     9,570  
 
Gains from dispositions of real estate, net of minority interests
    2,161       3,662       1,875       31,691  
     
     
     
     
 
   
Total discontinued operations
    2,414       5,921       1,372       41,261  
     
     
     
     
 
Net income
    20,203       18,126       38,023       77,504  
 
Preferred stock dividends
    (1,783 )     (2,195 )     (3,566 )     (4,318 )
     
     
     
     
 
   
Net income available to common stockholders
  $ 18,420     $ 15,931     $ 34,457     $ 73,186  
     
     
     
     
 
BASIC INCOME PER COMMON SHARE
                                
 
Income from continuing operations (includes preferred stock dividends)
  $ 0.20     $ 0.12     $ 0.40     $ 0.39  
 
Discontinued operations
    0.02       0.08       0.02       0.51  
     
     
     
     
 
   
Net income available to common stockholders
  $ 0.22     $ 0.20     $ 0.42     $ 0.90  
     
     
     
     
 
DILUTED INCOME PER COMMON SHARE
                                
 
Income from continuing operations (includes preferred stock dividends)
  $ 0.19     $ 0.12     $ 0.38     $ 0.39  
 
Discontinued operations
    0.03       0.07       0.03       0.50  
     
     
     
     
 
   
Net income available to common stockholders
  $ 0.22     $ 0.19     $ 0.41     $ 0.89  
     
     
     
     
 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
                                
 
Basic
    82,071,604       81,015,506       81,898,537       81,060,038  
     
     
     
     
 
 
Diluted
    84,535,762       82,465,984       84,765,719       82,520,038  
     
     
     
     
 

The accompanying notes are an integral part of these consolidated financial statements.

2

Table of Contents

AMB PROPERTY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended June 30, 2004 and 2003
                         
2004 2003
(Unaudited, dollars in
thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
                
Net income
  $ 38,023     $ 77,504  
Adjustments to net income:
               
 
Straight-line rents
    (8,658 )     (4,253 )
 
Depreciation and amortization
    76,487       71,500  
 
Stock-based compensation amortization
    5,476       3,979  
 
Recognition of below market leases
    (448 )     —  
 
Equity in earnings of unconsolidated joint ventures
    (2,653 )     (2,857 )
 
Gains from dispositions of real estate
    —       (7,429 )
 
Development profits, net of taxes
    (3,235 )     —  
 
Debt premiums, discounts and finance cost amortization, net
    (726 )     728  
 
Total minority interests’ share of net income
   <