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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 September 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 November 1, 2004, there were 82,943,400 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 September 30, 2004 and December 31, 2003 (Restated)     1  
     Consolidated Statements of Operations for the three months and nine months ended September 30, 2004 and 2003 (Restated)     2  
     Consolidated Statements of Cash Flows for the nine months ended September 30, 2004 and 2003 (Restated)     3  
     Consolidated Statement of Stockholders’ Equity for the nine months ended September 30, 2004     4  
     Notes to Consolidated Financial Statements     5  
   Management’s Discussion and Analysis of Financial Condition and Results of Operations     27  
   Quantitative and Qualitative Disclosures About Market Risk     55  
   Controls and Procedures     56  
 PART II. OTHER INFORMATION
   Legal Proceedings     58  
   Unregistered Sales of Equity Securities and Use of Proceeds     58  
   Defaults Upon Senior Securities     58  
   Submission of Matters to a Vote of Security Holders     58  
   Other Information     58  
   Exhibits     58  
 EXHIBIT 10.4
 EXHIBIT 10.5
 EXHIBIT 31.1
 EXHIBIT 32.1

Table of Contents

PART I

 
Item 1. Financial Statements

AMB PROPERTY CORPORATION

CONSOLIDATED BALANCE SHEETS
As of September 30, 2004 and December 31, 2003 (Restated)
                     
September 30, December 31,
2004 2003
(Restated)
(Unaudited, dollars in
thousands)
ASSETS
Investments in real estate:
               
 
Land
  $ 1,527,247     $ 1,403,807  
 
Buildings and improvements
    4,263,195       3,888,272  
 
Construction in progress
    512,087       199,628  
     
     
 
   
Total investments in properties
    6,302,529       5,491,707  
 
Accumulated depreciation and amortization
    (595,438 )     (485,559 )
     
     
 
   
Net investments in properties
    5,707,091       5,006,148  
Investments in unconsolidated joint ventures
    48,601       52,009  
Properties held for contribution, net
    11,854       —  
Properties held for divestiture, net
    59,924       11,751  
     
     
 
   
Net investments in real estate
    5,827,470       5,069,908  
Cash and cash equivalents
    116,378       127,678  
Restricted cash
    57,945       28,985  
Mortgages receivable
    23,068       43,145  
Accounts receivable, net of allowance for doubtful accounts
    102,078       88,452  
Other assets
    94,711       51,391  
     
     
 
   
Total assets
  $ 6,221,650     $ 5,409,559  
     
     
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Debt:
               
 
Secured debt including unamortized premium
  $ 1,617,944     $ 1,363,890  
 
Unsecured senior debt securities
    1,025,000       925,000  
 
Unsecured debt
    9,182       9,628  
 
Unsecured credit facilities
    583,864       275,739  
     
     
 
   
Total debt
    3,235,990       2,574,257  
Dividends payable
    40,898       39,076  
Accounts payable and other liabilities
    237,452       148,019  
     
     
 
   
Total liabilities
    3,514,340       2,761,352  
Commitments and contingencies (Notes 3 and 12) 
                
Minority interests:
               
 
Joint venture partners
    701,639       658,723  
 
Preferred unitholders
    278,378       241,899  
 
Limited partnership unitholders
    88,026       90,448  
     
     
 
   
Total minority interests
    1,068,043       991,070  
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, 82,919,046 and 81,792,913 issued and outstanding, respectively
    829       818  
 
Additional paid-in capital
    1,534,719       1,551,441  
 
Retained earnings
    —       —  
 
Accumulated other comprehensive income
    515       1,505  
     
     
 
   
Total stockholders’ equity
    1,639,267       1,657,137  
     
     
 
   
Total liabilities and stockholders’ equity
  $ 6,221,650     $ 5,409,559  
     
     
 

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 Nine Months Ended September 30, 2004 and 2003 (Restated)
                                       
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2004 2003 2004 2003
(Restated) (Restated)
(Unaudited, dollars in thousands, except share and per
share amounts)
REVENUES
                                
 
Rental revenues
  $ 173,803     $ 145,466     $ 497,000     $ 434,589  
 
Private capital income
    2,726       1,928       8,077       7,844  
     
     
     
     
 
   
Total revenues
    176,529       147,394       505,077       442,433  
     
     
     
     
 
COSTS AND EXPENSES
                                
 
Property operating expenses
    (24,678 )     (21,910 )     (70,963 )     (63,627 )
 
Real estate taxes
    (19,275 )     (17,219 )     (57,617 )     (51,923 )
 
Depreciation and amortization
    (42,099 )     (33,734 )     (120,998 )     (102,847 )
 
Impairment losses
    —       —       —       (5,251 )
 
General and administrative
    (15,747 )     (10,824 )     (45,706 )     (34,834 )
     
     
     
     
 
   
Total costs and expenses
    (101,799 )     (83,687 )     (295,284 )     (258,482 )
     
     
     
     
 
OTHER INCOME AND (EXPENSES)
                                
 
Equity in earnings of unconsolidated joint ventures, net
    603       1,365       3,256       4,222  
 
Interest and other income
    1,295       653       3,283       3,144  
 
Gains from dispositions of real estate
    —       —       —       7,429  
 
Development profits, net of taxes
    1,521       5,512       4,756       5,512  
 
Interest, including amortization
    (40,324 )     (35,562 )     (118,449 )     (107,132 )
     
     
     
     
 
   
Total other income and (expenses), net
    (36,905 )     (28,032 )     (107,154 )     (86,825 )
     
     
     
     
 
     
Income before minority interests and discontinued operations
    37,825       35,675       102,639       97,126  
     
     
     
     
 
 
Minority interests’ share of income:
                               
   
Joint venture partners’ share of operating income
    (10,302 )     (9,546 )     (28,978 )     (24,712 )
   
Joint venture partners’ share of development profits
    (145 )     (3,446 )     (894 )     (3,446 )
   
Preferred unitholders
    (4,942 )     (6,314 )     (14,766 )     (19,073 )
   
Limited partnership unitholders
    (1,012 )     (488 )     (2,618 )     (2,200 )
     
     
     
     
 
     
Total minority interests’ share of income
    (16,401 )     (19,794 )     (47,256 )     (49,431 )
     
     
     
     
 
Income from continuing operations
    21,424       15,881       55,383       47,695  
     
     
     
     
 
Discontinued operations:
                               
 
Income (loss) attributable to discontinued operations, net of minority interests
    175       1,919       (171 )     13,576  
 
Gains from dispositions of real estate, net of minority interests
    10,450       7,888       12,325       39,579  
     
     
     
     
 
   
Total discontinued operations
    10,625       9,807       12,154       53,155  
     
     
     
     
 
 
Net income
    32,049       25,688       67,537       100,850  
 
Preferred stock dividends
    (1,783 )     (1,470 )     (5,349 )     (5,788 )
 
Preferred stock and unit redemption issuance costs
    —       (3,671 )     —       (3,671 )
     
     
     
     
 
   
Net income available to common stockholders
  $ 30,266     $ 20,547     $ 62,188     $ 91,391  
     
     
     
     
 
BASIC INCOME PER COMMON SHARE
                                
 
Income from continuing operations (includes preferred stock dividends)
  $ 0.24     $ 0.13     $ 0.61     $ 0.47  
 
Discontinued operations
    0.13       0.12       0.15       0.66  
     
     
     
     
 
   
Net income available to common stockholders
  $ 0.37     $ 0.25     $ 0.76     $ 1.13  
     
     
     
     
 
DILUTED INCOME PER COMMON SHARE
                                
 
Income from continuing operations (includes preferred stock dividends)
  $ 0.23     $ 0.13     $ 0.59     $ 0.46  
 
Discontinued operations
    0.12       0.12       0.14       0.65  
     
     
     
     
 
   
Net income available to common stockholders
  $ 0.35     $ 0.25     $ 0.73     $ 1.11  
     
     
     
     
 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
                                
 
Basic
    82,193,473       81,096,837       81,996,849       81,072,304  
     
     
     
     
 
 
Diluted
    85,395,787       82,720,130       85,012,460       82,539,800  
     
     
     
     
 

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 Nine Months Ended September 30, 2004 and 2003 (Restated)
                         
2004 2003
(Restated)
(Unaudited, dollars in
thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
                
Net income
  $ 67,537     $ 100,850  
Adjustments to net income:
               
 
Straight-line rents
    (11,251 )     (6,832 )
 
Depreciation and amortization
    120,998       102,847  
 
Impairment losses
    —       5,251