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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 001-14245
AMB PROPERTY, L.P.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 94-385362
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
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)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
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 [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
State the aggregate market value of the voting stock held by non-affiliates
of the Registrant: None. No market for the Registrant's partnership units exists
and, therefore, a market value for such units cannot be determined.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates by reference AMB Property Corporation's Proxy
Statement for its Annual Meeting of Stockholders which the Registrant
anticipates will be filed no later than 120 days after the end of its fiscal
year pursuant to Regulation 14A.
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PART I
ITEM 1. BUSINESS
GENERAL
AMB Property, L.P., a Delaware limited partnership, is one of the leading
owners and operators of industrial real estate nationwide. As of December 31,
2000, we owned, managed, and had renovation and development projects totaling 92
million square feet and 1,005 buildings in 27 metropolitan markets. Of this, we
owned and operated 862 industrial buildings and eight retail centers, totaling
approximately 77.0 million rentable square feet. As of December 31, 2000, these
properties were 96.3% leased. As of December 31, 2000, through our subsidiary,
AMB Investment Management, Inc., we also managed industrial buildings and retail
centers, totaling approximately 4.4 million rentable square feet on behalf of
various institutional investors. In addition, we have invested in 36 industrial
buildings, totaling approximately 4.0 million rentable square feet, through an
unconsolidated joint venture.
We are engaged in the acquisition, ownership, operation, management,
renovation, expansion, and development of primarily industrial properties in
target markets nationwide. As of December 31, 2000, AMB Property Corporation
owned an approximate 93.5% general partnership interest in us, excluding
preferred units. As our sole general partner, AMB Property Corporation has the
full, exclusive, and complete responsibility and discretion in the day-to-day
management and control of us.
We enter into co-investment joint ventures with institutional investors.
These co-investment joint ventures provide us with an additional source of
capital to fund certain acquisitions and developments and renovation projects
and increase our return on invested capital as a result of certain fees paid to
us. As of December 31, 2000, we had investments in two co-investment joint
ventures, which are consolidated for financial reporting purposes.
We are the managing general partner of AMB Institutional Alliance Fund I,
L.P. and, together with one of our other affiliates, own, as of December 31,
2000, approximately 21% of the partnership interests in the Alliance Fund I. The
Alliance Fund I is a co-investment partnership between us and AMB Institutional
Alliance REIT I, Inc., a limited partner of the Alliance Fund I, which includes
15 institutional investors as stockholders and is engaged in the acquisition,
ownership, operation, management, renovation, expansion, and development of
primarily industrial buildings in target markets nationwide. As of December 31,
2000, the Alliance Fund I had received equity contributions from third party
investors totaling $169.0 million, which, when combined with anticipated debt
financings and our investment, creates a total planned capitalization of $410.0
million.
The principal executive office of AMB Property, L.P. and AMB Property
Corporation is located at Pier 1, Bay 1, San Francisco, CA 94111, and our
telephone number is (415) 394-9000. We also maintain a regional office in
Boston, Massachusetts. As of December 31, 2000, we employed 174 individuals, 133
at our San Francisco headquarters and 41 in our Boston office.
Unless the context otherwise requires, the terms "we," "us," and "our"
refer to AMB Property, L.P. and our controlled subsidiaries. The following marks
are registered trademarks of AMB Property Corporation, our general partner:
AMB(R); Customer Alliance Partners(R); Customer Alliance Program(R); Development
Alliance Partners(R); Development Alliance Program(R); eSpace(R); Institutional
Alliance Partners(R); Institutional Alliance Program(R); Management Alliance
Partners(R); Management Alliance Program(R); UPREIT Alliance Partners(R); and
UPREIT Alliance Program(R). The following marks are unregistered trademarks of
AMB Property Corporation, our general partner: Broker Alliance Partners(TM);
Broker Alliance Program(TM); HTD(TM); High Throughput Distribution(TM);
iSpace(TM); Strategic Alliance Partners(TM); and Strategic Alliance
Programs(TM).
TRANSACTION SUMMARY
During 2000, we invested $730.0 million in operating properties, consisting
of 145 industrial buildings aggregating approximately 10.5 million square feet.
Of this, $185.6 million in operating properties was acquired by the Alliance
Fund I, consisting of 44 industrial buildings aggregating approximately 2.6
million
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square feet. In 2000, we disposed of one retail center and 25 industrial
buildings and re-invested approximately $175.7 million in 145 industrial
buildings, aggregating approximately 10.5 million rentable square feet.
We had 33 industrial buildings and one retail center that were held for
divestiture as of December 31, 2000. During 2000, we disposed of 25 industrial
buildings and one retail center, aggregating approximately 2.5 million rentable
square feet, for an aggregate price of $175.7 million. Over the next few years,
we intend to dispose of non-strategic assets and redeploy the resulting capital
into properties that better fit our current investment focus.
As of December 31, 2000, we had in our development pipeline 19 industrial
projects, which will total approximately 5.5 million square feet and have a
total estimated investment of $305.9 million upon completion. We also had three
retail projects in our development pipeline, which will total approximately 0.5
million square feet and have a total estimated investment of $76.3 million upon
completion. As of December 31, 2000, we had funded an aggregate of $226.5
million and will need to fund an estimated additional $155.7 million in order to
complete projects currently under construction.
BUSINESS STRATEGIES
Investment Strategy
Our investment strategy is to become a leading provider of High Throughput
Distribution, or HTD, properties located near key passenger and cargo airports,
highway systems, and ports in major metropolitan areas, such as Atlanta,
Chicago, Dallas/Fort Worth, Northern New Jersey/New York City, the San Francisco
Bay Area, Southern California, Miami, and Seattle. Within each of our markets,
we focus our investments in in-fill submarkets. In-fill sub-markets are
characterized by supply constraints on the availability of land for competing
projects.
High Throughput Distribution facilities are designed to serve the
high-speed, high-value freight handling needs of today's supply chain, as
opposed to functioning as long-term storage facilities. We believe that the
rapid growth of the airfreight business and the outsourcing of supply chain
management to third party logistics companies are indicative of the changes that
are occurring in the supply chain and the manner in which goods are distributed.
In addition, we believe that inventory levels as a percentage of final sales are
falling and that goods are moving more rapidly through the supply chain. As a
result, we intend to focus our investment activities primarily on industrial
properties that we believe will benefit from these changes.
Operating Strategy
We are a full-service real estate company with in-house expertise in
acquisitions, development and redevelopment, asset management and leasing,
finance and accounting, and market research. We have long-standing relationships
with many real estate management and development firms across the country, our
Strategic Alliance Partners.
We believe that real estate is fundamentally a local business and that the
most effective way for us to operate is by forging alliances with service
providers in every market. We believe that these collaborations allow us to: 1)
leverage our national presence with the local market expertise of brokers,
developers, and property managers; 2) improve the operating efficiency and
flexibility of our national portfolio; 3) strengthen customer satisfaction and
retention; and 4) provide a continuous pipeline of growth.
We believe that our partners give us local market expertise and enormous
flexibility allowing us to focus on our core competencies: developing and
refining our strategic approach to real estate investment and management and
raising private capital to finance growth and enhance returns.
FINANCING STRATEGY
To maintain financial flexibility and facilitate the rapid deployment of
capital over market cycles, we intend to operate with a debt-to-total market
capitalization ratio of approximately 45% or less, although our organizational
documents do not limit the amount of indebtedness that we may incur.
Additionally, we intend
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to continue to structure our balance sheet to maintain investment-grade ratings.
We also intend to keep the majority of our assets unencumbered to facilitate
such ratings. As of December 31, 2000, our debt-to-total market capitalization
ratio was 37.9% and our debt-to-total book capitalization ratio was 44.6%.
We have a $500 million unsecured revolving credit agreement that currently
bears interest at a rate equal to LIBOR plus 75 basis points. We use available
borrowings under our unsecured credit facility for property acquisitions,
developments, and for general corporate purposes. As of December 31, 2000, the
available borrowings under our unsecured credit facility were $284.0 million
(excluding potential expansion capacity). See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and "Item 14. Note 6 of Notes to Consolidated Financial
Statements" included in this report.
Currently, our principal sources of working capital and funding for
acquisitions, development, expansion, and renovation of our properties include:
1) cash flow from operations; 2) borrowings under our unsecured credit facility;
3) other forms of secured or unsecured debt financing; 4) proceeds from debt or
limited partnership unit offerings (including issuances of units by our
subsidiaries); and 5) proceeds from divestitures of properties. Additionally,
our co-investment program will also serve as a significant source of capital for
acquisitions and developments.
GROWTH STRATEGIES
AMB Investment Management
AMB Investment Management, Inc. provides real estate investment management
services on a fee basis to clients. We hold all of the non-voting preferred
stock of AMB Investment Management, which represents a 95% economic interest.
All of the common stock of AMB Investment Management, Inc., which represents a
5% economic interest, is owned by our general partner's current or former
executive officers and a former executive officer of AMB Investment Management,
Inc.. AMB Investment Management, Inc. conducts its operations through AMB
Investment Management Limited Partnership, a Maryland limited partnership, of
which it is the sole general partner. We intend to grow this business through
our co-investment program.
We co-invest with clients of AMB Investment Management, Inc., to the extent
such clients newly commit investment capital, through partnerships, limited
liability companies, or joint ventures. We currently use a co-investment formula
with each client whereby we will own at least a 20% interest in all ventures. We
currently have two co-investments. The first is a separate account co-investment
venture, in which we own a 50% interest, with total gross book value at December
31, 2000, of $214.1 million. The second is a co-investment fund, AMB
Institutional Alliance Fund I, L.P., in which we owned at December 31, 2000, a
21% interest, with total gross book value at December 31, 2000, of $339.5
million. In general, we control all significant operating and investment
decisions of our co-investment entities.
Headlands Realty Corporation
Headlands Realty Corporation conducts a variety of businesses that include
incremental income programs, such as our Customer Assist Program and, to a
limited extent, development projects available for sale to third parties. We
hold all of the non-voting preferred stock of Headlands Realty Corporation,
which represents a 95% economic interest. All of the common stock of Headlands
Realty Corporation, which represents a 5% economic interest, is owned by some of
our general partner's current and former executive officers and a director of
Headlands Realty Corporation.
Growth Through Operations
We seek to generate internal growth through rent increases on existing
space and renewal on re-tenanted space, by maintaining a high occupancy rate of
our properties and by controlling expenses by capitalizing on the economies of
owning, operating, and growing a large national portfolio. As of December 31,
2000, our industrial properties and retail centers were 96.4% leased and 93.2%
leased, respectively. During the 12 months ended December 31, 2000, we increased
average base rental rates (on a cash basis) by 26.5% from
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the expiring rent for that space, on leases entered into or renewed during such
period, representing approximately 12.1 million rentable square feet. Annualized
base rent represents the monthly contractual amount under existing leases at the
end of the year, multiplied by 12. This amount excludes expense reimbursements,
rental abatements, and percentage rents.
Growth Through Acquisitions and Capital Redeployment
We believe that our significant acquisition experience, our alliance-based
operating strategy, and our extensive network of property acquisition sources
will continue to provide opportunities for external growth. We believe that our
relationship with third party local property management firms through our
Management Alliance Program also will create acquisition opportunities as such
managers market properties on behalf of sellers. Our operating structure also
enables us to acquire properties through our UPREIT Alliance Program in exchange
for our limited partnership units, thereby enhancing our attractiveness to
owners and developers seeking to transfer properties on a tax-deferred basis. In
addition to acquisitions, we seek to redeploy capital from non-strategic assets
into properties that better fit our current investment focus.
We are generally in various stages of negotiations for a number of
acquisitions and dispositions, which may include acquisitions and dispositions
of individual properties, acquisitions of large multi-property portfolios, and
acquisitions of other real estate companies. There can be no assurance that we
will consummate any of these acquisitions. Such transactions, if we consummate
them, may be material individually or in the aggregate. Sources of capital for
acquisitions may include undistributed cash flow from operations, borrowings
under the credit facility, other forms of secured or unsecured debt financing,
issuances of debt or limited partnership units (including issuances of limited
partnership units by our subsidiaries), proceeds from divestitures of
properties, and assumption of debt related to the acquired properties.
Growth Through Development
We believe that renovation and expansion of value-added properties and
development of well-located, high-quality industrial properties should continue
to provide us with attractive opportunities for increased cash flow and a higher
rate of return than we may obtain from the purchase of fully leased, renovated
properties. Value-added properties are typically characterized as properties
with available space or near-term leasing exposure, undeveloped land acquired in
connection with another property that provides an opportunity for development,
or properties that are well-located but require redevelopment or renovation.
Value-added properties require significant management attention or capital
investment to maximize their return. We have developed the in-house expertise to
create value through acquiring and managing value-added properties and believe
that our national market presence and expertise will enable us to continue to
generate and capitalize on these opportunities. Through our Development Alliance
Program, we have established strategic alliances with national and regional
developers to enhance our development capabilities.
The multidisciplinary backgrounds of our employees provide us with the
skills and experience to capitalize on strategic renovation, expansion, and
development opportunities. Several of our general partner's officers have
extensive experience in real estate development, both with us and with national
development firms. We generally pursue development projects in joint ventures
with local developers. This way, we leverage the development skill, access to
opportunities, and capital of such developers, transferring a significant amount
of the development risk to them and eliminating the need and expense of an
in-house development staff. Under a typical joint venture agreement with a
Development Alliance Partner, we would fund 95% of the construction costs and
our partner would fund 5%. Upon completion, we generally would purchase our
partner's interest in the joint venture.
As of December 31, 2000, we had committed to invest $278.5 million to
develop an estimated 5.9 million rentable square feet. Approximately $243.4
million of this investment is through our Development Alliance Program. See Item
2. Properties -- "Operating and Leasing Statistics -- Development Pipeline."
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BUSINESS RISKS
See: "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Business Risks" for a complete discussion of the
various risks that could adversely affect us.
ITEM 2. PROPERTIES
The properties that we owned as of December 31, 2000, are divided into two
operating divisions, consisting of 27 identifiable markets. We have provided
this breakdown for external reporting purposes only. It reflects the key markets
of interest to our investors and does not reflect how we are operationally
managed. See "Item 14. Note 14 of Notes to Consolidated Financial Statements"
for segment information related to our operations.
INDUSTRIAL PROPERTIES
At December 31, 2000, we owned 862 industrial buildings aggregating
approximately 75.8 million rentable square feet, located in 27 markets
nationwide. Our industrial properties accounted for $414.3 million, or 96.3%, of
our total annualized base rent at December 31, 2000. Our industrial properties
were 96.4% leased to over 2,850 customers, the largest of which accounted for no
more than 1.3% of our annualized base rent from our industrial properties.
Property Characteristics. Our industrial properties, which consist
primarily of warehouse distribution facilities suitable for single or multiple
customers, are typically comprised of multiple buildings. The following table
identifies characteristics of our typical industrial buildings:
TYPICAL BUILDING TYPICAL RANGE
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Rentable square feet.......................... 100,000 75,000 - 200,000
Clear height.................................. 24 ft 16 - 32 ft.
Building depth................................ 200 ft 120 - 300 ft.
Truck court depth............................. 110 ft 90 - 130 ft.
Loading dock & grade.......................... Dock or Dock & Grade
Parking spaces per 1,000 square feet.......... 1.0 0.5 - 2.0
Doors per 1,000 square feet................... 0.2 0.1 - 2.0
Square footage per tenant..................... 35,000 15,000 - 150,000
Office finish................................. 8% 3% - 20%
Site coverage................................. 40% 35% - 50%
Lease Terms. Our industrial properties are typically subject to lease on a
"triple net basis," in which customers pay their proportionate share of real
estate taxes, insurance, and operating costs, or subject to leases on a
"modified gross basis," in which customers pay expenses over certain threshold
levels. Lease terms typically range from three to ten years, with an average of
six years, excluding renewal options. The majority of the industrial leases do
not include renewal options.
Overview of Major Target Markets. Our industrial properties are located
near key passenger and air cargo airports, key interstate highways, and ports in
major metropolitan areas, such as Atlanta, Chicago, Dallas/Fort Worth, Northern
New Jersey, the San Francisco Bay Area, Southern California, Miami, and Seattle.
We believe our industrial properties' strategic location, transportation network
and infrastructure, and large consumer and manufacturing bases support strong
demand for industrial space. According to statistics published by CB Richard
Ellis/Torto Wheaton Research, the national hub markets listed below are six of
the nation's eight largest warehouse markets and, as of December 31, 2000,
comprised 43.2% of the warehouse inventory of the 47 industrial markets tracked.
According to statistics published by Regional Financial Associates, as of
December 31, 2000, the combined population of these markets was 45.6 million and
the amount of per capita warehouse space was 22.7% above the average for those
47 industrial markets.
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Within these metropolitan areas, our industrial properties are concentrated
in locations with limited new construction opportunities within established,
relatively large submarkets, which we believe should provide a higher rate of
occupancy and rent growth than properties located elsewhere. These in-fill
locations are typically near major passenger and air cargo facilities, seaports
or convenient to major highways and rail lines, and are proximate to a diverse
labor pool. There is typically broad demand for industrial space in these
centrally located submarkets due to a diverse mix of industries and types of
industrial uses, including warehouse distribution, light assembly and
manufacturing. We generally avoid locations at the periphery of metropolitan
areas where there are fewer supply constraints. Small metropolitan areas or
cities without a heavy concentration of warehouse activity typically have few,
if any, supply-constrained locations (those areas typified by significant
population densities, a limited number of existing industrial customers and a
low availability of land which could be developed into competitive space for
additional industrial customers).
INDUSTRIAL MARKET OPERATING STATISTICS
As of December 31, 2000, we operated in six hub markets, in addition to 21
other markets nationwide. The following table represents properties in which we
own a fee simple interest or a controlling interest (consolidated), and excludes
properties in which we only own a non-controlling interest (unconsolidated) and
properties under development.
NO. NEW SAN TOTAL
DALLAS/ JERSEY/ FRANCISCO SOUTHERN HUB
ATLANTA CHICAGO(1) FT. WORTH NEW YORK BAY AREA CALIFORNIA MARKETS
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Square feet owned............ 5,140,876 7,497,472 5,933,777 5,985,300 8,771,331 9,553,425 42,882,181
Occupancy Percentage......... 98.0% 94.6% 92.5% 95.8% 99.8% 96.9% 96.5%
Annualized base rent......... $ 21,327 $ 29,662 $ 24,597 $ 35,905 $ 76,625 $ 48,840 $ 236,956
Annualized base rent per
square foot................. $ 4.23 $ 4.18 $ 4.48 $ 6.26 $ 8.75 $ 5.28 $ 5.73
Lease expirations as a
percentage of ABR:
2001........................ 17.5% 14.1% 14.5% 19.5% 11.9% 12.8% 14.0%
2002........................ 17.2% 13.6% 18.8% 9.3% 12.7% 13.1% 13.4%
2003........................ 15.1% 24.9% 20.0% 14.6% 13.1% 15.8% 16.0%
Weighted average lease terms
Original.................... 4.9 years 7.7 years 5.8 years 7.1 years 5.4 years 6.8 years 6.3 years
Remaining................... 3.2 years 3.9 years 3.3 years 3.7 years 3.3 years 4.0 years 3.6 years
Tenant Retention (Year-to-
date)....................... 67.5% 66.1% 58.9% 67.6% 54.8% 53.8% 60.1%
Rent increases on renewals
and rollovers............... 6.5% 7.9% 10.3% 13.7% 70.5% 17.7% 32.6%
Same store cash basis NOI
growth...................... 6.1% 5.6% 9.7% 0.2% 22.3% 4.4% 11.3%
Square feet owned in same
store pool(2)............... 3,196,631 6,855,380 4,622,049 2,162,051 6,162,270 4,887,057 27,885,438
TOTAL
OTHER
MARKETS TOTAL
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Square feet owned............ 32,913,808 75,795,989
Occupancy Percentage......... 96.3% 96.4%
Annualized base rent......... $ 177,356 $ 414,312
Annualized base rent per
square foot................. $ 5.60 $ 5.67
Lease expirations as a
percentage of ABR:
2001........................ 19.2% 16.0%
2002........................ 15.7% 14.3%
2003........................ 14.2% 15.3%
Weighted average lease terms
Original.................... 6.6 years 6.4 years
Remaining................... 3.4 years 3.5 years
Tenant Retention (Year-to-
date)....................... 57.3% 59.0%
Rent increases on renewals
and rollovers............... 11.6% 25.6%
Same store cash basis NOI
growth...................... 4.7% 8.5%
Square feet owned in same
store pool(2)............... 24,259,912 52,145,350
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(1) We also have a majority ownership interest in 36 industrial buildings
totaling an aggregate of approximately 4.0 million square feet in the
Chicago market through its investment in an unconsolidated joint venture.
(2) Excludes properties purchased or developed after December 31, 1998.
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INDUSTRIAL PROPERTY SUMMARY
As of December 31, 2000, our 862 industrial buildings were diversified
across 27 markets nationwide. The average age of our industrial properties is 17
years (since the property was built or substantially renovated), which we
believe should result in lower operating costs over the long term. The following
table represents properties in which we own a fee simple interest or a
controlling interest (consolidated), and excludes properties in which we only
own a non-controlling interest (unconsolidated).
PERCENTAGE PERCENTAGE
TOTAL OF TOTAL ANNUALIZED OF TOTAL
NUMBER OF RENTABLE RENTABLE PERCENTAGE BASE RENT ANNUALIZED NUMBER
INDUSTRIAL PROPERTIES BUILDINGS SQUARE FEET SQUARE FEET LEASED (000'S)(1) BASE RENT OF LEASES
--------------------- --------- ----------- ----------- ---------- ---------- ---------- ---------
HUB MARKETS:
Atlanta....................... 48 5,140,876 6.8% 98.0% $ 21,327 5.1% 152
Chicago....................... 82 7,497,472 9.9 94.6 29,662 7.2 176
Dallas/Ft. Worth.............. 71 5,933,777 7.8 92.5 24,597 5.9 242
Northern New Jersey/New York
City........................ 69 5,985,300 7.9 95.8 35,905 8.7 240
San Francisco Bay Area........ 121 8,771,331 11.6 99.8 76,625 18.5 350
Southern California........... 121 9,553,425 12.6 96.9 48,840 11.8 293
--- ---------- ----- ----- -------- ----- -----
Subtotal/Weighted Average... 512 42,882,181 56.6 96.5 236,956 57.2 1,453
OTHER MARKETS:
Austin........................ 8 1,075,316 1.4 100.0 8,588 2.1 28
Baltimore/Washington D.C. .... 63 4,140,720 5.5 98.8 30,920 7.5 297
Boston........................ 40 4,788,548 6.2 99.8 22,172 5.4 65
Charlotte..................... 12 831,974 1.1 99.0 3,894 0.9 34
Cincinnati.................... 6 811,693 1.1 100.0 2,742 0.7 13
Columbus...................... 2 465,433 0.6 100.0 1,410 0.3 2
Dayton........................ 5 125,575 0.2 88.3 792 0.2 9
Houston....................... 26 2,420,513 3.2 91.6 8,298 2.0 126
Jacksonville.................. 1 50,200 0.1 57.9 202 0.0 5
Kansas City................... 2 159,249 0.2 89.4 1,602 0.4 11
Memphis....................... 17 1,883,845 2.5 82.8 8,408 2.0 49
Miami......................... 47 4,342,361 5.7 97.2 32,718 7.9 220
Minneapolis................... 42 4,441,147 5.9 95.8 17,577 4.2 205
Nashville..................... 2 375,317 0.5 100.0 1,074 0.3 5
New Orleans................... 5 411,689 0.5 95.7 1,859 0.4 48
Newport News.................. 1 60,215 0.1 100.0 717 0.2 3
Orlando....................... 19 1,845,494 2.4 94.7 7,093 1.7 80
Philadelphia.................. 1 83,148 0.1 90.8 1,743 0.4 19
Portland...................... 5 676,104 0.9 98.4 2,805 0.7 10
San Diego..................... 5 276,167 0.4 92.1 1,984 0.5 17
Seattle....................... 41 3,649,100 4.8 96.9 20,758 5.0 157
--- ---------- ----- ----- -------- ----- -----
Subtotal/Weighted Average... 350 32,913,808 43.4 96.3 177,356 42.8 1,403
--- ---------- ----- ----- -------- ----- -----
Total/Weighted
Average............... 862 75,795,989 100.0% 96.4% $414,312 100.0% 2,856
=== ========== ===== ===== ======== ===== =====
ANNUALIZED
BASE RENT
PER LEASED
INDUSTRIAL PROPERTIES SQUARE FOOT
--------------------- -----------
HUB MARKETS:
Atlanta....................... $ 4.23
Chicago....................... 4.18
Dallas/Ft. Worth.............. 4.48
Northern New Jersey/New York
City........................ 6.26
San Francisco Bay Area........ 8.75
Southern California........... 5.28
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Subtotal/Weighted Average... 5.73
OTHER MARKETS:
Austin........................ 7.99
Baltimore/Washington D.C. .... 7.53
Boston........................ 4.64
Charlotte..................... 4.73
Cincinnati.................... 3.38
Columbus...................... 3.03
Dayton........................ 7.14
Houston....................... 3.74
Jacksonville.................. 6.95
Kansas City................... 11.25
Memphis....................... 5.39
Miami......................... 7.75
Minneapolis................... 4.13
Nashville..................... 2.86
New Orleans................... 4.72
Newport News.................. 11.91
Orlando....................... 4.06
Philadelphia.................. 23.09
Portland...................... 4.22
San Diego..................... 7.80
Seattle....................... 5.87
------
Subtotal/Weighted Average... 5.60
------
Total/Weighted
Average............... $ 5.67
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(1) Annualized base rent represents the monthly contractual amount under
existing leases at December 31, 2000, multiplied by 12. This amount excludes
expense reimbursements and rental abatements.
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INDUSTRIAL PROPERTY LEASE EXPIRATIONS
The following table summarizes the lease expirations for our industrial
properties for leases in place as of December 31, 2000, without giving effect to
the exercise of renewal options or termination rights, if any, at or prior to
the scheduled expirations.
RENTABLE ANNUALIZED PERCENTAGE OF
SQUARE BASE RENT ANNUALIZED
YEAR OF LEASE EXPIRATION(1) FEET (000S)(2) BASE RENT
--------------------------- ---------- ---------- -------------
2001(3)(4).............................. 12,805,291 $ 74,373 16.0%
2002.................................... 12,525,395 66,209 14.3
2003.................................... 13,027,351 70,840 15.3
2004.................................... 10,180,364 61,426 13.2
2005.................................... 9,515,495 62,256 13.4
2006.................................... 4,555,886 25,398 5.5
2007.................................... 3,439,674 22,604 4.9
2008.................................... 1,968,841 14,812 3.2
2009.................................... 2,798,547 16,122 3.5
2010.................................... 2,721,071 32,038 6.9
Thereafter.............................. 1,865,629 17,683 3.8
---------- -------- -----
Total/Weighted Average........ 75,403,544 $463,761 100.0%
========== ======== =====
- ---------------
(1) Schedule includes executed leases that commence after December 31, 2000.
Schedule excludes leases expiring December 31, 2000.
(2) Calculated as monthly rent at expiration multiplied by 12.
(3) Includes 1,640,579 square feet of month-to-month leases.
(4) Includes leases expiring January 1, 2001, through December 31, 2001.
8
10
CUSTOMER INFORMATION
Largest Property Customers. Our 25 largest property customers by annualized
base rent are set forth in the table below.
PERCENTAGE OF PERCENTAGE OF
NUMBER AGGREGATE AGGREGATE ANNUALIZED AGGREGATE
OF RENTABLE LEASED BASE RENT ANNUALIZED
INDUSTRIAL CUSTOMER NAME(1) LEASES SQUARE FEET SQUARE FEET(2) (000S) BASE RENT(3)
--------------------------- ------ ----------- -------------- ---------- -------------
Federal Express Corporation.............. 22 464,593 0.6% $ 5,374 1.3%
Webvan Group, Inc........................ 5 1,021,819 1.4 5,080 1.2
Harmonic Inc............................. 3 246,864 0.3 4,253 1.0
International Paper Company.............. 8 443,106 0.6 3,452 0.8
CNF Transportation, Inc.................. 7 536,170 0.7 2,902 0.7
Wells Fargo Bank NA...................... 4 302,290 0.4 2,782 0.7
United States Postal Service............. 7 475,255 0.7 2,107 0.5
Air Express International................ 8 280,659 0.4 2,101 0.5
Ultrabrand Fiber Optics, Inc............. 1 47,417 0.1 1,915 0.5
Alza Corporation......................... 4 129,449 0.2 1,908 0.5
Shaw Industries.......................... 4 399,004 0.5 1,821 0.4
Sage Enterprises......................... 4 245,289 0.3 1,781 0.4
Rite Aid................................. 2 524,840 0.7 1,778 0.4
Home Depot USA, Inc...................... 4 476,026 0.7 1,777 0.4
Tech Data................................ 2 224,019 0.3 1,775 0.4
Adaptive Broadband Corporation........... 1 41,472 0.1 1,742 0.4
Corvis Corporation....................... 4 142,283 0.2 1,703 0.4
FMI International LLC.................... 1 315,000 0.4 1,701 0.4
Dell USA, LP............................. 2 285,000 0.4 1,700 0.4
C&S Wholesale Grocers, Inc............... 4 167,813 0.2 1,634 0.4
Cosmair.................................. 1 303,843 0.4 1,595 0.4
Calvin Klein Jeanswear................... 1 326,500 0.4 1,585 0.4
Boeing Company........................... 4 223,745 0.3 1,536 0.4
Wakefern Food Corporation................ 3 419,901 0.6 1,533 0.4
Boise Cascade Corporation................ 3 400,655 0.6 1,506 0.4
--------- -------
Total/Weighted Average......... 8,443,642 11.0% $57,041 13.3%
========= =======
- ---------------
(1) Tenant(s) may be a subsidiary of or an entity affiliated with the named
customer.
(2) Computed as aggregate rentable square feet divided by the aggregate leased
square feet of our industrial and retail properties.
(3) Computed as annualized base rent divided by the aggregate annualized base
rent of our industrial and retail properties.
9
11
RETAIL PROPERTIES
At December 31, 2000, we owned eight retail centers aggregating
approximately 1.2 million rentable square feet. Our retail properties accounted
for $15.9 million, or 3.7%, of annualized base rent at December 31, 2000. Our
retail properties were 93.2% leased to over 170 customers. Our retail properties
have an average age of two years since built, expanded, or renovated.
During 2000, we sold one retail center, totaling approximately 0.4 million
rentable square feet. As of December 31, 2000, we had one retail center,
aggregating approximately 0.3 million rentable square feet, which we held for
divestiture.
RETAIL PROPERTY SUMMARY
The following table sets forth the rentable square footage of our retail
centers as of December 31, 2000, and represents properties in which we own a fee
simple interest or a controlling interest (consolidated), and excludes
properties in which we only own a non-controlling interest (unconsolidated).
ANNUALIZED
TOTAL ANNUALIZED BASE RENT
RENTABLE PERCENTAGE BASE RENT NUMBER PER LEASED
RETAIL PROPERTIES SQUARE FEET LEASED (000'S)(1) OF LEASES SQUARE FOOT(2)
----------------- ----------- ---------- ---------- --------- --------------
Around Lenox..................... 121,348 83.1% $ 2,118 15 $21.00
Howard & Western S.C.(4)......... 88,798 74.0 858 8 13.07
Kendall Mall(3)(6)............... 278,759 93.8 4,540 45 17.36
Mazzeo Drive..................... 88,420 100.0 717 1 8.11
Northridge Plaza(3)(4)........... 173,919 92.5 2,226 30 13.84
Palm Aire(3)(4).................. 125,946 95.4 1,537 26 12.80
Springs Gate(3)(5)............... n/a n/a n/a n/a n/a
The Plaza at Delray(3)........... 331,863 99.4 3,916 46 11.87
--------- ----- ------- --- ------
Total/Weighted
Average.............. 1,209,053 93.2% $15,912 171 $14.11
========= ===== ======= === ======
- ---------------
(1) Annualized base rent means the monthly contractual amount under existing
leases at December 31, 2000, multiplied by 12. This amount excludes expense
reimbursements, rental abatements, and percentage rents.
(2) Calculated as total Annualized Base Rent divided by total rentable square
feet actually leased as of December 31, 2000.
(3) We hold an interest in this property through a joint venture interest in a
limited partnership.
(4) This property is being redeveloped. All calculations are based on rentable
square feet existing as of December 31, 2000.
(5) This property consists of land held for future development.
(6) This property is being held for divestiture as of December 31, 2000.
10
12
OPERATING AND LEASING STATISTICS
TOTAL PORTFOLIO SUMMARY
The following table summarizes key operating and leasing statistics for all
of our properties as of and for the year ended December 31, 2000.
OPERATING AND LEASING STATISTICS(1)
INDUSTRIAL RETAIL TOTAL
----------- ----------- -----------
Square feet owned at December 31, 2000(2)... 75,795,989 1,209,053 77,005,042
Occupancy percentage at December 31,
2000...................................... 96.4% 93.2% 96.3%
Weighted average lease term:
Original.................................. 6.4 years 13.8 years 6.5 years
Remaining................................. 3.5 years 10.1 years 3.6 years
Tenant retention:
-- Year-to-date (13.3 million SF
expired)............................... 59.0% 45.1% 58.9%
Rent increases on renewals and rollovers:
-- Year-to-date (12.1 million SF
leased)................................ 25.6% 202.6% 26.5%
Second generation tenant improvements and
leasing commissions per sq. ft.(3):
-- Year-to-date:
Renewals............................... $ 1.25 $ 0.20 $ 1.24
Re-tenanted............................ 2.27 0.07 2.23
----------- ----------- -----------
Weighted average.................. $ 1.86 $ 0.09 $ 1.84
=========== =========== ===========
Recurring capital expenditures:
-- Year-to-date:
Tenant improvements.................... $ 10,237 $ 1,387 $ 11,624
Lease commissions...................... 17,679 -- 17,679
Building improvements.................. 11,031 239 11,270
----------- ----------- -----------
Total............................. $ 38,947 $ 1,626 $ 40,573
=========== =========== ===========
- ---------------
(1) Includes all consolidated operating properties and excludes industrial
development and renovation projects.
(2) In addition to owned square feet as of December 31, 2000, we manage, through
our subsidiary, AMB Investment Management, Inc., 3.7 million, 0.6 million,
and 0.1 million additional square feet of industrial, retail, and other
properties, respectively. We also have an investment in 4.0 million square
feet of industrial properties through our investment in an unconsolidated
joint venture.
(3) Consists of all leases renewing or re-tenanting with lease terms greater
than one year.
11
13
SAME STORE SUMMARY
The following table summarizes key operating and leasing statistics for our
same store properties as of and for the year ended December 31, 2000. For an
explanation of our same store properties, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Results of
Operations."
INDUSTRIAL RETAIL TOTAL
---------- ------- ----------
Square feet in same store pool................... 52,145,350 367,179 52,512,529
% of total square feet......................... 68.8% 30.4% 68.2%
Occupancy percentage at December 31, 2000........ 96.8% 95.3% 96.7%
at December 31, 1999..... 96.2% 97.8% 96.2%
Tenant retention:
-- Year-to-date (11.0 million SF expired)...... 59.2% 18.9% 58.9%
Rent increases on renewals and rollovers:
-- Year-to-date (9.8 million SF leased)........ 27.0% 215.0% 28.0%
Cash basis net operating income growth %
increase(1)
-- Year-to-date: Revenues...................... 7.3% 1.7% 7.2%
Expenses..................... 3.5% 3.9% 3.5%
NOI.......................... 8.5% 1.0% 8.4%
- ---------------
(1) Net operating income, or NOI, consists of rental revenues, including
reimbursements and excluding straight-line rents, less property level
operating expenses.
HISTORICAL OCCUPANCY RATES, AVERAGE BASE RENTS, RENT INCREASES, AND TENANT
RETENTION RATES
The following table sets forth weighted average occupancy rates and average
base rents based on square feet leased of our industrial properties and retail
centers as of and for the periods presented. The following table also sets forth
information relating to tenant retention rates and average rent increases (cash
basis) on renewal and re-tenanted space for our industrial properties and retail
properties for the periods presented.
INDUSTRIAL RETAIL TOTAL
---------- ------ -----
OCCUPANCY RATES:
2000.................................................... 96.4% 93.2% 96.3%
1999.................................................... 95.9% 92.4% 95.9%
1998.................................................... 96.0% 94.6% 95.8%
ANNUALIZED BASE RENT PER SQUARE FOOT(1):
2000.................................................... $5.67 $14.12 N/A
1999.................................................... $4.89 $13.19 n/a
1998.................................................... $4.55 $11.98 n/a
RENTAL INCREASES:
2000.................................................... 25.6% 202.6% 26.5%
1999.................................................... 12.9% 6.8% 12.5%
1998.................................................... 14.6% 13.3% 14.3%
TENANT RETENTION RATES:
2000.................................................... 59.0% 45.1% 58.9%
1999.................................................... 72.0% 40.8% 72.0%
1998.................................................... 74.8% 84.1% 75.4%
- ---------------
(1) Annualized base rent per square foot represents the total annualized
contractual base rental revenue for the period divided by the average
occupied square feet leased at December 31.
12
14
RECURRING TENANT IMPROVEMENTS AND LEASING COMMISSIONS PER SQUARE FOOT LEASED
The table below summarizes for our industrial properties and retail
properties, separately, the recurring tenant improvements and leasing
commissions per square feet leased for the years ended December 31. The
recurring tenant improvements and leasing commissions represent costs incurred
to lease space after the initial lease term of the initial customer, excluding
costs incurred to relocate customers 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.
WEIGHTED
2000 1999 1998 AVERAGE
----- ----- ----- --------
INDUSTRIAL PROPERTIES:
Expenditures per renewed square foot leased..... $1.25 $1.22 $0.92 $1.14
Expenditures per re-tenanted square foot
leased....................................... 2.27 2.74 2.08 2.37
----- ----- ----- -----
Weighted average................................ $1.86 $1.64 $1.10 $1.62
===== ===== ===== =====
RETAIL PROPERTIES:
Expenditures per renewed square foot leased..... $0.20 $1.26 $1.34 $1.22
Expenditures per re-tenanted square foot
leased....................................... 0.07 2.55 9.99 2.92
----- ----- ----- -----
Weighted average................................ $0.09 $1.37 $2.64 $1.69
===== ===== ===== =====
TOTAL PROPERTIES:
Expenditures per renewed square foot leased..... $1.24 $1.22 $0.95 $1.14
Expenditures per re-tenanted square foot
leased....................................... 2.23 2.74 2.47 2.38
----- ----- ----- -----
Weighted average................................ $1.84 $1.64 $1.18 $1.62
===== ===== ===== =====
13
15
DEVELOPMENT PIPELINE
The following table sets forth the properties owned by us as of December
31, 2000, which were undergoing renovation, expansion, or new development. No
assurance can be given that any of such projects will be completed on schedule
or within budgeted amounts.
INDUSTRIAL DEVELOPMENT AND RENOVATION DELIVERIES
(DOLLARS IN THOUSANDS)
ESTIMATED ESTIMATED ESTIMATED
DEVELOPMENT ALLIANCE STABILIZATION TOTAL SQUARE FEET AT
PROJECT LOCATION PARTNER(TM) DATE INVESTMENT COMPLETION
------- -------- -------------------- ------------- ---------- --------------
2001 DELIVERIES
1. Pico Rivera (Phase I)......... Pico Rivera, CA Majestic Realty February $ 24,300 520,000
2. Northbrook Distribution
Center(1)..................... Suwanee, GA Seefried Properties March 5,700 150,000
3. Edgewater Industrial
Center(1)..................... Oakland, CA None March 21,500 397,000
4. DFW II/Air Cargo.............. Dallas, TX Trammell Crow May 18,100 189,000
Company
5. LA Media Tech Center.......... Los Angeles, CA Legacy Partners June 40,800 399,000
6. Port Northwest Industrial Park Dienna Nelson
(PhI)......................... Houston, TX Augustine December 12,400 368,000
7. Portland Air Cargo............ Portland, OR Trammell Crow December 11,800 160,000
Company
-------- ---------
Total 2001 Deliveries......... 134,600 2,183,000
% Pre-leased/
funded-to-date.......... 107,700(2) 56%
-------- ---------
2002 DELIVERIES
8. Cabot Business Park National Development
(Lot 1-2)..................... Mansfield, MA of NE January 15,300 118,000
9. Van Nuys (Phase I)............ Van Nuys, CA Trammell Crow February 34,800 490,000
Company
10. Dulles Airport park
(Phase I)..................... Dulles, VA Seefried Properties February 12,100 168,000
11. Southfield Logistics
Center(1)..................... Forest Park, GA None March 16,800 795,000
12. Carson Town Center, NE........ Carson, CA Mar Ventures April 11,200 176,000
13. Suwanee Creek
(Phase IV).................... Atlanta, GA Seefried Properties June 7,700 230,000
14. Monte Vista Spectrum.......... Chino, CA Majestic Realty June 23,200 577,000
15. Dulles Airport park
(Phase II).................... Dulles, VA Seefried Properties July 5,700 77,000
16. Dulles Airport park
(Phase III)................... Dulles, VA Seefried Properties November 6,200 84,000
17. Houston Air Cargo............. Houston, TX Trammell Crow December 11,400 156,000
Company
-------- ---------
Total 2002 Deliveries......... 144,400 2,871,000
% Pre-leased/
funded-to-date.......... 47,800(2) 24%
2003 DELIVERIES
18. Carson Town Center, SE........ Carson, CA Mar Ventures March 21,500 329,000
19. Dulles Airport park
(Phase IV).................... Dulles, VA Seefried Properties June 5,400 71,000
-------- ---------
Total 2003 Deliveries......... 26,900 400,000
-------- ---------
% Pre-leased/
funded-to-date.......... 7,400(2) 0%
-------- ---------
Total Scheduled
Deliveries(3)............. $305,900 5,454,000
% Pre-leased/
funded-to-date.......... 162,900(2) 35%
OUR
OWNERSHIP
PERCENTAGE
----------
200
1. 50%
2.
21%
3.
100%
4. 95%
5. 49%
6.
100%
7. 95%
---
71%
200
8.
90%
9. 95%
10.
21%
11.
21%
12. 95%
13.
100%
14. 50%
15.
21%
16.
21%
17. 19%
---
61%
200
18. 95%
19.
21%
---
80%
- ---------------
(1) Represents a renovation project.
(2) As of December 31, 2000, our share of such amounts funded to date was $76.5
million, $29.0 million, and $5.9 million, respectively, for a total of
$111.4 million funded to date.
(3) Excludes 250 acres of land and other acquisition-related costs totaling
approximately $23.1 million.
14
16
RETAIL REDEVELOPMENT DELIVERIES
(DOLLARS IN THOUSANDS)
ESTIMATED ESTIMATED ESTIMATED OUR
DEVELOPMENT STABILIZATION SQUARE FEET AT TOTAL OWNERSHIP
PROJECT(1) LOCATION ALLIANCE PARTNER(TM) DATE COMPLETION INVESTMENT(1) PERCENTAGE
---------- -------- -------------------- ------------- -------------- ------------- ----------
2001 DELIVERIES
1. Northridge.......... Fort Lauderdale, FL Lefmark September 258,000 $ 41,300 100%
2. Around Lenox........ Atlanta, GA Alpine Partners October 121,000 24,900 90%
3. Howard & Western.... Chicago, IL None October 89,000 10,100 100%
------- --------- ---
Total Scheduled
Deliveries..... 468,000 $ 76,300 97%
======= ========= ===
% Pre-leased/
funded-to-date... 84% 63,600(2)
- ---------------
(1) Excludes 39 acres of land and other acquisition costs totaling $13.2
million, which represents future phases of current projects which have not
been committed to, or for which final project planning has not been
completed, and other land inventory.
(2) As of December 31, 2000, our share of amounts funded to date was $61.5
million.
HEADLANDS REALTY CORPORATION(1)
DEVELOPMENT PROJECTS HELD FOR SALE
(DOLLARS IN THOUSANDS)
ESTIMATED ESTIMATED ESTIMATED
DEVELOPMENT STABILIZATION SQUARE FEET AT TOTAL
PROJECT(2) MARKET ALLIANCE PARTNER(TM) DATE COMPLETION INVESTMENT(3)
---------- ------ -------------------- ------------- -------------- -------------
2001 DELIVERIES
1. Cabot Business Park...... Boston National Development April 98,000 $ 8,200
of NE
2. Watertown Business Boston Campanelli August
Park...................... 201,000 41,400
------- -------
Total 2001
Deliveries........ 299,000 49,600
======= =======
% Pre-leased/
funded-to-date.... 100% 23,000
2003 DELIVERIES
3. Carson Town Center SW.... Southern California Mar Ventures March 412,000 20,300
-------
% Pre-leased/
funded-to-date.... 0% 10,500
Total Scheduled
Deliveries........ 711,000 $69,900
======= =======
% Pre-leased/
funded-to-date.... 42% 33,500
HEADLAND'S
OWNERSHIP
PROJECT(2) PERCENTAGE
---------- ----------
2001 DELIVERIES
1. Cabot Business Park...... 100%
2. Watertown Business
Park...................... 95%
---
Total 2001
Deliveries........ 96%
===
% Pre-leased/
funded-to-date....
2003 DELIVERIES
3. Carson Town Center SW.... 95%
% Pre-leased/
funded-to-date....
Total Scheduled
Deliveries........ 96%
===
% Pre-leased/
funded-to-date....
- ---------------
(1) Headlands Realty Corporation is one of our subsidiaries, in which we own a
95% economic interest.
(2) Headlands Realty Corporation currently intends to sell these properties
within two years of completion.
(3) Includes land at market value and development fees and cost reimbursements
that will be paid to us.
PROPERTIES HELD THROUGH JOINT VENTURES, LIMITED LIABILITY COMPANIES AND
PARTNERSHIPS
Consolidated:
As of December 31, 2000, we held interests in joint ventures, limited
liability companies, and partnerships with certain unaffiliated third parties
through, which are consolidated in our consolidated financial statements. In
certain cases such agreements provide that we are a limited partner or that the
other party to the joint venture is principally responsible for day-to-day
management of the property (although in all such cases, we have approval rights
with respect to significant decisions involving the underlying properties).
Under the agreements governing the joint ventures, we and the other party to the
joint venture may be required to make additional capital contributions, and
subject to certain limitations, the joint ventures may incur additional debt.
Such agreements also impose certain restrictions on the transfer of joint
venture interests by us or the other party to the joint venture and provide
certain rights to us or the other party to the joint venture to sell its
interest to the joint venture or to the other joint venture partner on terms
specified in the agreement. All of the joint ventures terminate in 2024 or
later, but may end earlier if a joint venture ceases to hold any interest in or
have any obligations relating to the property held by the joint venture.
15
17
INDUSTRIAL CONSOLIDATED JOINT VENTURES
(DOLLARS IN THOUSANDS)
OUR JV PARTNERS' JV PARTNERS'
OWNERSHIP SQUARE GROSS BOOK SHARE SHARE OF
PROPERTIES PERCENTAGE FEET(1) VALUE(2) DEBT OF DEBT NOI
---------- ---------- ---------- ---------- -------- ------------ ------------
OPERATING PROPERTIES:
SEPARATE ACCOUNT CO-INVESTORS(3)
1. Corporate Park/Hickory Hill............ 50% 858,322 $ 27,697 $ 16,325 $ 8,162 50%
2. Garland Industrial..................... 50 1,020,523 35,304 19,600 9,800 50
3. Jamesburg.............................. 50 821,712 47,656 23,376 11,688 50
4. Minnetonka Industrial.................. 50 515,915 29,301 12,286 6,143 50
5. South Point Business Park.............. 50 343,536 22,043 10,725 5,363 50
-- ---------- -------- -------- -------- --
Subtotal............................. 50 3,560,008 162,001 82,312 41,156 50
ALLIANCE FUND I(4)
6. Concord Industrial Portfolio........... 21 246,098 17,407 10,050 7,940 79
7. Diablo Industrial Park................. 21 294,255 15,318 9,900 7,821 79
8. Gateway Corporate Center............... 21 433,330 41,996 27,000 21,330 79
9. Gateway North.......................... 21 266,476 25,101 14,000 11,060 79
10. Oakland Ridge IV....................... 21 51,664 3,276 -- -- 79
11. Oakland Ridge VI....................... 21 113,169 6,690 -- -- 79
12. DFW International Air Cargo (Phase
I)....................................... 21 232,873 20,149 -- -- 79
13. Bennington Corporate Center............ 21 81,824 10,861 -- -- 79
14. DFW Airfreight Portfolio............... 21 272,795 9,700 -- -- 79
15. JFK Air Cargo Portfolio................ 21 372,885 41,294 19,679 15,546 79
16. Gateway 58............................. 21 123,912 13,203 -- -- 79
17. Seattle Airport Industrial............. 21 41,657 2,580 -- -- 79
18. Atlantic Distribution Center........... 21 180,000 6,239 4,000 3,160 79
19. Beacon Centre.......................... 21 422,566 29,661 17,861 14,110 79
20. TechRidge Corporate Center (Phase I)... 31 340,076 25,411 15,500 10,695 69
21. Harris Business Center................. 21 718,704 45,796 28,000 22,120 79
-- ---------- -------- -------- -------- --
Subtotal............................. 21 4,192,284 314,682 145,990 113,782 79
OTHER JOINT VENTURES
22. North Great SW Industrial Park......... 95 215,000 10,673 -- -- 5
23. North West Crossing Distribution
Center................................... 95 178,000 7,061 -- -- 5
24. Orlando Central Park (Phase I)......... 95 306,000 5,531 -- -- 5
25. South River Park (Phases I and II)..... 95 626,000 28,092 -- -- 5
26. Hamilton Parkway (Nippon Express)...... 73 148,941 6,361 -- -- 27
27. Metric Center.......................... 87 397,440 44,521 -- -- 13
28. Chancellor............................. 90 201,600 6,477 2,796 280 10
29. AFCO Portfolio......................... 95 896,767 97,775 41,131 2,056 5
-- ---------- -------- -------- -------- --
Subtotal............................. 92 2,969,748 206,491 43,927 2,336 8
---------- -------- -------- --------
Total Operating Properties........... 10,722,040 683,174 272,229 157,274
---------- -------- -------- --------
DEVELOPMENT ALLIANCE JOINT VENTURES(5):
ALLIANCE FUND I(6)
30. Southfield Logistics Center............ 21 795,000 14,226 -- -- 79
31. Northbrook Distribution Center......... 21 244,000 5,804 -- -- 79
32. Dulles Airport Park (Phases I-IV)...... 21 400,000 4,411 -- -- 79
33. Houston Air Cargo...................... 26 156,000 394 -- -- 74
-- ---------- -------- -------- -------- --
Subtotal............................. 21 1,595,000 24,835 -- -- 79
OTHER DEVELOPMENT ALLIANCE JOINT VENTURES
34. LA Media Tech Center................... 49 399,000 52,058 19,782 10,089 51
35. Cabot Business Park (Phases I & II).... 90 284,000 23,664 -- -- 10
36. DFW II Air Cargo....................... 95 189,000 12,638 -- -- 5
37. Portland Air Cargo..................... 95 159,500 6,822 -- -- 5
38. Van Nuys (Phase I)..................... 95 490,000 17,582 -- -- 5
39. Carson Town Center, (NE & SE).......... 95 505,000 9,775 -- -- 5
-- ---------- -------- -------- -------- --
Subtotal............................. 74 2,026,500 122,539 19,782 10,089 26
---------- -------- -------- --------
Total Development Alliances.......... 3,621,500 147,374 19,782 10,089
---------- -------- -------- --------
TOTAL INDUSTRIAL CONSOLIDATED JOINT
VENTURES............................. 14,343,540 $830,548 $292,011 $167,363
========== ======== ======== ========
16
18
- ---------------
(1) For development properties, this represents estimated square feet at
completion of development for committed phases of development and renovation
projects.
(2) Represents the book value of the property (before accumulated depreciation)
owned by the joint venture entity and excludes net other assets.
(3) These properties are owned by a single co-investment partnership between an
institutional investor (50%) and us (50%). The institutional investor is a
client of AMB Investment Management.
(4) Represents properties held by the Alliance Fund I, which is a co-investment
partnership between the Alliance REIT I (79%) and us (21%). The Alliance
REIT I is a client of AMB Investment Management.
(5) Excludes investments in 86.2 acres of land and other pre-development costs
related to future phases of current projects, which have not been committed
to, or for which final planning has not been completed.
(6) Represents a partnership between a Development Alliance Partner (5%) and the
Alliance Fund I (95%), in which we have a 21% interest.
RETAIL CONSOLIDATED JOINT VENTURES
(DOLLARS IN THOUSANDS)
JV PARTNERS' JV PARTNERS'
SQUARE GROSS BOOK SHARE SHARE
PROPERTIES MARKET FEET(1) VALUE(2) DEBT OF DEBT OF NOI
---------- ------- --------- ---------- ------- ------------ ------------
DEVELOPMENT ALLIANCE JOINT VENTURES
1. Around Lenox.......................... Atlanta 120,000 $ 20,391 $10,012 $ 1,000 10%
2. Northridge Plaza...................... Miami 259,000 38,205 -- -- 0%
3. Palm Aire............................. Miami 133,000 19,425 7,145 1,022 0%
4. Springs Gate(4)....................... Miami -- 16,918 -- -- 0%
--------- -------- ------- -------
Subtotal........................ 512,000 94,939 17,157 2,022
OTHER JOINT VENTURES
5. Kendall Mall(3)....................... Miami 278,759 40,862 23,975 9,998 29%
6. Plaza Delray.......................... Miami 331,863 37,925 22,557 4,534 2%
--------- -------- ------- -------
Subtotal........................ 610,622 78,787 46,532 14,532
--------- -------- ------- -------
Total........................... 1,122,622 $173,726 $63,689 $16,554
========= ======== ======= =======
- ---------------
(1) For development properties, this represents estimated square feet at
completion of development project.
(2) Represents the book value of the property (before accumulated depreciation)
owned by the joint venture entity and excludes net other assets.
(3) Included as part of retail properties held for divestiture.
(4) Represents 39 acres of land for future phases of current projects which have
not been committed to, or for which final project planning has not been
completed.
We account for all of the above investments on a consolidated basis for
financial reporting purposes because of our ability to exercise control over
significant aspects of the investment, as well as our significant economic
interest in the investments. See "Item 14. Note 2 of the Notes to Consolidated
Financial Statements."
Unconsolidated:
As of December 31, 2000, we held interests in three equity investment joint
ventures that are unconsolidated in our financial statements. The management and
control over significant aspects of these investments are with the third party
joint venture partner. In addition, as of December 31, 2000, we held two
mortgage investments from which we receive interest income.
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UNCONSOLIDATED JOINT VENTURES
AND MORTGAGE INVESTMENTS
(DOLLARS IN THOUSANDS)
OUR OUR OUR
TOTAL TOTAL OWNERSHIP SHARE
PROPERTIES MARKET SQUARE FEET INVESTMENT PERCENTAGE OF DEBT
---------- ------------------- ----------- ---------- ---------- -------
OPERATING JOINT VENTURES
1. Elk Grove Du Page....................... Chicago 4,046,721 $59,447 56% $16,333
DEVELOPMENT ALLIANCE JOINT VENTURES(1)
2. Pico Rivera............................. Southern California 850,000 18,806 50% 12,469
3. Monte Vista Spectrum.................... Southern California 576,000 2,179 50% --
--------- ------- -------
Total............................. 5,472,721 $80,432 $28,802
========= ======= =======
MORTGAGE
PROPERTIES MARKET MATURITY RECEIVABLE RATE
---------- ------------------- -------------- ---------- -----
MORTGAGE INVESTMENT
1. Pier 1.......................................... SF Bay Area March 2001 $ 36,969 11.00%
2. Manhattan Village Shopping Center............... Southern California September 2001 79,000 8.75%
--------
Total..................................... $115,969
========
- ---------------
(1) Represents estimated square feet at completion of development project.
SECURED DEBT
As of December 31, 2000, we had $930.4 million of indebtedness, net of
unamortized premiums, secured by deeds of trust on 77 properties. As of December
31, 2000, the total gross investment value of those properties secured by debt
was $2.0 billion. Of the $930.4 million of secured indebtedness, $361.8 was
joint venture debt. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources" and
"Item 14. Note 6 of Notes to Consolidated Financial Statements" included in this
report. We believe that as of December 31, 2000, the value of the properties
securing the respective obligations in each case exceeded the principal amount
of the outstanding obligations.
ITEM 3. LEGAL PROCEEDINGS
In the normal course of business, we are involved in legal actions relating
to the ownership and operations of our properties. We do not expect the
liabilities, if any, that may ultimately result from such legal actions to have
a materially adverse effect on our consolidated financial position, results of
operations, or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
There is no established public trading market for our partnership units. As
of December 31, 2000, we had outstanding 95,037,257 partnership units,
consisting of 87,909,340 general partnership units (consisting of 83,909,340
common units and 4,000,000 8 1/2% Series A Cumulative Redeemable Preferred
Units) held by AMB Property Corporation and 7,127,917 limited partnership units
(consisting of 5,827,917 common units and 1,300,000 8 5/8% Series B Cumulative
Redeemable Preferred Units). Subject to certain terms and conditions, the
limited partnership units are redeemable by the holders or, at the option of AMB
Property Corporation, exchangeable on a one-for-one basis for shares of the
common stock of AMB Property Corporation. As of December 31, 2000, there were 87
holders of our common partnership units (including AMB Property Corporation's
general partnership interest). As of the same date, AMB Property Corporation was
the only holder of the 8 1/2% Series A Cumulative Redeemable Preferred Units and
there was one holder of the 8 5/8% Series B Cumulative Redeemable Units.
In November 2000, we issued an aggregate of 94,771 limited partnership
common units with an aggregate value of approximately $2.2 million to three
limited partnerships. The issuance of limited partnership units in connection
with the acquisitions discussed above constituted private placements of
securities which were exempt from the registration requirements of the
Securities Act of 1933 pursuant to Section 4(2) and Rule 506 of Regulation D.
During 2000, 34,046 limited partnership units were redeemed for cash and 206,423
limited partnership units were redeemed for shares of AMB Property Corporation's
common stock.
Set forth below are the distributions per limited partnership unit paid by
us during the years ended December 31, 2000, 1999 and 1998:
YEAR DISTRIBUTION
---- ------------
2000
1st Quarter............................................... $0.37
2nd Quarter............................................... 0.37
3rd Quarter............................................... 0.37
4th Quarter............................................... 0.37
1999
1st Quarter............................................... 0.35
2nd Quarter............................................... 0.35
3rd Quarter............................................... 0.35
4th Quarter............................................... 0.35
1998
1st Quarter............................................... 0.34
2nd Quarter............................................... 0.34
3rd Quarter............................................... 0.34
4th Quarter............................................... 0.34
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ITEM 6. SELECTED FINANCIAL AND OTHER DATA
SELECTED OPERATING PARTNERSHIP FINANCIAL AND OTHER DATA
The following table sets forth selected consolidated historical financial
and other data for AMB Property, L.P. on an historical basis for the years ended
December 31, 2000, 1999, 1998, and 1997.
AS OF AND FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------
PRO FORMA(1) HISTORICAL(2)
2000 1999 1998 1997 1997
---------- ---------- ---------- ------------ -------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
OPERATING DATA
Total revenues.............................. $ 477,707 $ 448,183 $ 358,887 $ 284,674 $ 27,110
Income from operations before minority
interests................................. 159,699 158,851 123,750 103,903 9,291
Net income available to common
unitholders............................... 121,324 176,392 113,838 102,606 9,174
Net income per common unit:
Basic(3).................................. 1.35 1.94 1.27 1.16 0.10
Diluted(3)................................ 1.35 1.94 1.26 1.16 0.10
Adjusted net income per unit (diluted)(4)... 1.33 1.23 1.26 1.16 0.10
Distributions per common unit............... 1.48 1.40 1.37 1.37
OTHER DATA
EBITDA(5)................................... $ 349,353 $ 318,319 $ 252,353 $ 195,218
Funds from operations(6).................... 208,651 191,147 170,407 147,409
Cash flows provided by (used in):
Operating activities...................... 261,175 190,391 177,180 131,621
Investing activities...................... (726,499) 63,732 (793,366) (607,768)
Financing activities...................... 452,370 (240,721) 604,202 553,199
BALANCE SHEET DATA
Investments in real estate at cost.......... $4,026,597 $3,249,452 $3,369,060 $2,442,999
Total assets................................ 4,425,626 3,621,550 3,562,885 2,506,255
Total consolidated debt(7).................. 1,836,276 1,270,037 1,368,196 685,652
Our share of total debt..................... 1,681,161 1,168,218 1,348,107 672,945
Partners' capital........................... 1,945,903 1,983,549 1,914,257 1,717,398
- ---------------
(1) Pro forma 1997 financial and other data has been prepared as if our
formation transactions, our general partner's initial public offering, and
certain property acquisitions and divestitures in 1997 had occurred on
January 1, 1997.
(2) The historical 1997 results represent our predecessor's historical financial
and other data for the period January 1, 1997, through November 25, 1997.
The financial and other data of AMB Property Corporation and the properties
acquired in our formation transactions have been included from November 26,
1997 to December 31, 1997.
(3) Basic and diluted net income per unit equals the net income divided by
89,566,375 and 90,624,511 units, respectively, for 2000; 90,792,310 and
90,867,934 units, respectively, for 1999; 89,493,394 and 89,852,187 units,
respectively, for 1998; and pro forma net income divided by 88,416,676 and
88,698,719 units, respectively, for 1997.
(4) Adjusted net income per share represents net income before gain on property
dispositions, extraordinary items, and other one-time items. One-time items
related to depreciation expense on assets held for sale.
(5) EBITDA is computed as income from operations before divestiture of
properties and minority interests plus interest expense, income taxes, and
depreciation and amortization. We believe that in addition to cash flows and
net income, EBITDA is a useful financial performance measure for assessing
the operating performance of an equity real estate investment trust, such as
our general partner, because, together with net income and cash flows,
EBITDA provides investors with an additional basis to evaluate the ability
of a real estate investment trust to incur and service debt and to fund
acquisitions and other capital expenditures. Includes an adjustment to
reflect our pro rata share of EBITDA in an unconsolidated joint venture.
EBITDA is not a measurement of operating performance calculated in
accordance with accounting principles generally accepted in the United
States and should not be considered as a substitute for operating income,
net income, cash flows from operations, or other statement of operations or
cash flow data prepared in accordance with accounting principles generally
accepted in the United States. EBITDA may not be indicative of our
historical operating results, nor be predictive of potential future results.
While EBITDA is frequently used as a measure of operations and the ability
to meet debt service requirements, it is not necessarily comparable to other
similarly titled captions of other real estate investment trusts.
(6) Funds from Operations, or FFO, is defined as income from operations before
minority interest, gains or losses from sale of real estate, and
extraordinary losses plus real estate depreciation and adjustment to derive
our pro rata share of the FFO of unconsolidated joint ventures, less
minority interests' pro rata share of the FFO of consolidated joint ventures
and perpetual preferred unit distributions. In accordance with the National
Association of Real Estate Investment Trust White Paper on funds from
operations, we include the effects of straight-line rents in funds from
operations. We believe that funds from operations is an appropriate measure
of performance for an equity real estate investment trust, such as our
general partner. While funds from operations is a relevant and widely used
measure of operating performance of real estate investment trusts, it does
not represent cash flow from operations or net income as defined by
accounting principles generally accepted in the United States and it should
not be considered as an alternative to these indicators in evaluating
liquidity or operating performance. Further, funds from operations as
disclosed by other real estate investment trusts may not be comparable.
(7) Secured debt includes unamortized debt premiums of approximately $9.9
million, $10.1 million, $15.2 million, and $18.3 million as of December 31,
2000, 1999, 1998, and 1997, respectively. See Notes 2 and 6 of the Notes to
Consolidated Financial Statements.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
You should read the following discussion and analysis of our consolidated
financial condition and results of operations in conjunction with the Notes to
Consolidated Financial Statements. Statements contained in this discussion that
are not historical facts may be forward-looking statements. You can identify
forward-looking statements 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
of these words and phrases or similar words or phrases. You can also identify
forward-looking statements by discussions of strategy, plans, or intentions.
Forward-looking statements involve numerous risks and uncertainties and you
should not rely upon them as predictions of future events. There is no assurance
that the events or circumstances reflected in forward-looking statements will be
achieved or occur. Forward-looking statements are necessarily dependent on
assumptions, data, or methods that may be incorrect or imprecise and we may not
be able to realize them.
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 by tenants;
- increased interest rates and operating costs;
- our failure to obtain necessary outside financing;
- difficulties in identifying properties to acquire and in effecting
acquisitions;
- our failure to successfully integrate acquired properties and operations;
- our failure to divest of properties that we have contracted to sell or to
timely reinvest proceeds from any such divestitures;
- risks and uncertainties affecting property development and construction
(including construction delays, cost overruns, our inability to obtain
necessary permits, and public opposition to these activities);
- environmental uncertainties;
- risks related to natural disasters;
- financial market fluctuations;
- risks arising from the California energy shortage;
- changes in real estate and zoning laws; and
- increases in real property tax rates.
Our success 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
Risks" in this report. We caution you not to place undue reliance on
forward-looking statements, which reflect our analysis only and speak as of the
date of this report or as of the dates indicated in the statements.
GENERAL
We commenced operations in November 1997, shortly before the consummation
of AMB Property Corporation's initial public offering.
RESULTS OF OPERATIONS
The analysis below includes changes attributable to acquisitions,
development activity, and divestitures and the changes resulting from properties
that we owned during both the current and prior year reporting periods,
excluding development properties prior to being stabilized (defined as the
earlier of 90% leased or
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12 months after receipt of the certificate of occupancy). We refer to these
properties as the same store properties. For the comparison between 2000 and
1999, the same store properties consisted of properties aggregating
approximately 52.5 million square feet. The properties acquired in 1999
consisted of 154 buildings, aggregating approximately 8.4 million square feet,
and the properties acquired during 2000 consisted of 145 buildings, aggregating
approximately 10.5 million square feet. In 1999, property divestitures consisted
of 30 retail centers and 15 industrial buildings, aggregating approximately 6.6
million square feet, and property divestitures during 2000 consisted of 25
industrial buildings and one retail center, aggregating approximately 2.5
million square feet. Our future financial condition and results of operations,
including rental revenues, may be impacted by the acquisition of additional
properties and dispositions. Our future revenues and expenses may vary
materially from their historical rates.
YEARS ENDED DECEMBER 31, 2000 AND 1999 (DOLLARS IN MILLIONS)
RENTAL REVENUES 2000 1999 $ CHANGE % CHANGE
--------------- ------ ------ -------- --------
Same store................................... $314.4 $293.3 $ 21.1 7.2%
1999 acquisitions............................ 85.1 41.0 44.1 107.6%
2000 acquisitions............................ 28.0 -- 28.0 --
Developments................................. 7.0 4.2 2.8 66.7%
Divestitures................................. 19.5 90.4 (70.9) (78.4)%
Straight-line rents.......................... 10.2 10.8 (0.6) (5.6)%
------ ------ ------ -----
Total.............................. $464.2 $439.7 $ 24.5 5.6%
====== ====== ====== =====
The growth in rental revenues in same store properties resulted primarily
from the incremental effect of cash rental rate increases, fixed rent increases
on existing leases, increases in occupancy and reimbursement of expenses,
partially offset by a decrease in straight-line rents. During 2000, the same
store base rents increase on renewals and rollovers (cash basis) was 28.0% on
9.8 million square feet leased.
INVESTMENT MANAGEMENT AND OTHER INCOME 2000 1999 $ CHANGE % CHANGE
-------------------------------------- ----- ---- -------- --------
Equity earnings in unconsolidated joint
ventures...................................... $ 5.2 $4.7 $0.5 10.6%
Investment management and other income.......... 8.3 3.8 4.5 118.4%
----- ---- ---- -----
Total................................. $13.5 $8.5 $5.0 58.8%
===== ==== ==== =====
The $4.5 million increase in investment management and other income was due
primarily to increased Alliance Fund I acquisition fees, interest income, and
development fees, partially offset by the write-down of one of our investments
in other companies.
PROPERTY OPERATING EXPENSES 2000 1999 $ CHANGE % CHANGE
--------------------------- ------ ------ -------- --------
Rental expenses.............................. $ 50.6 $ 51.7 $ (1.1) (2.1)%
Real estate taxes............................ 57.2 56.2 1.0 1.8%
------ ------ ------ -----
Property operating expenses................ $107.8 $107.9 $ (0.1) (0.1)%
====== ====== ====== =====
Same store................................... $ 72.1 $ 69.6 $ 2.5 3.6%
1999 acquisitions............................ 20.4 12.2 8.2 67.2%
2000 acquisitions............................ 7.7 -- 7.7 --
Developments................................. 2.5 1.8 0.7 38.9%
Divestitures................................. 5.1 24.3 (19.2) (79.0)%
------ ------ ------ -----
Total.............................. $107.8 $107.9 $ (0.1) (0.1)%
====== ====== ====== =====
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The change in same store properties' operating expenses primarily relates
to increases in real estate taxes of $2.0 million for 2000, partially offset by
decreases in insurance of $0.6 million.
OTHER EXPENSES 2000 1999 $ CHANGE % CHANGE
-------------- ------ ------ -------- --------
Interest expense............................. $ 90.3 $ 88.7 $ 1.6 1.8%
Depreciation expense......................... 96.3 67.5 28.8 42.7%
General and administrative expense........... 23.7 25.2 (1.5) (6.0)%
------ ------ ----- ----
Total.............................. $210.3 $181.4 $28.9 15.9%
====== ====== ===== ====
The increase in interest expense was due primarily to the increase in the
outstanding balance under our unsecured credit facility. The increase in
depreciation expense was primarily due to lower than normal depreciation expense
in 1999 and increases in our investments in real estate. Under the required
accounting for assets held for sale, we discontinued depreciation of a
substantial portion of our retail portfolio after we committed to dispose of a
portion of the portfolio in March 1999. The decrease in general and
administrative expenses was due to increased allocations to our investment
management group, partially offset by increased personnel costs.
YEARS ENDED DECEMBER 31, 1999 AND 1998 (DOLLARS IN MILLIONS)
RENTAL REVENUES 1999 1998 $ CHANGE % CHANGE
--------------- ------ ------ -------- --------
Same store................................... $212.9 $206.1 $ 6.8 3.3%
1998 acquisitions............................ 117.8 55.9 61.9 110.7%
1999 acquisitions............................ 35.4 -- 35.4 --
Developments................................. 33.0 28.4 4.6 16.2%
Divestitures................................. 40.6 64.3 (23.7) (36.9)%
------ ------ ------ -----
Total.............................. $439.7 $354.7 $ 85.0 24.0%
====== ====== ====== =====
The growth in rental revenues in same store properties resulted primarily
from the incremental effect of cash rental rate increases, changes in occupancy
rates, and reimbursement of expenses, partially offset by a decrease in
straight-line rents. During 1999, the increase in base rents (cash basis) for
same store properties was 12.7% on 6.8 million square feet leased.
INVESTMENT MANAGEMENT AND OTHER INCOME 1999 1998 $ CHANGE % CHANGE
-------------------------------------- ---- ---- -------- --------
Equity earnings in unconsolidated joint
ventures....................................... $4.7 $2.7 $2.0 74.1%
Investment management and other income........... 3.8 1.5 2.3 153.3%
---- ---- ---- -----
Total.................................. $8.5 $4.2 $4.3 102.4%
==== ==== ==== =====
The $4.3 million increase in investment management and other income was due
primarily to earnings from our equity investment in our unconsolidated joint
ventures, Alliance Fund I acquisition fees, and an increase in interest income
as a result of higher cash balances.
PROPERTY OPERATING EXPENSES AND REAL ESTATE TAXES 1999 1998 $ CHANGE % CHANGE
- ------------------------------------------------- ------ ----- -------- --------
Rental expenses................................ $ 51.7 $40.2 $11.5 28.6%
Real estate taxes.............................. 56.2 48.2 8.0 16.6%
------ ----- ----- -----
Property operating expenses.................. $107.9 $88.4 $19.5 22.1%
====== ===== ===== =====
Same store..................................... $ 50.2 $50.1 $ 0.1 0.2%
1998 acquisitions.............................. 27.3 12.6 14.7 116.7%
1999 acquisitions.............................. 9.3 -- 9.3 --
Developments................................... 9.5 7.9 1.6 20.3%
Divestitures................................... 11.6 17.8 (6.2) (34.8)%
------ ----- ----- -----
Total................................ $107.9 $88.4 $19.5 22.1%
====== ===== ===== =====
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The change in same store properties' operating expenses primarily relates
to increases in real estate taxes of $1.0 million for 1999, partially offset by
decreases in insurance of $0.9 million. Internal asset management costs of $7.7
million for 1998 were reclassified from property operating expenses to general
and administrative expenses to conform with the 1999 presentation.
OTHER EXPENSES 1999 1998 $ CHANGE % CHANGE
-------------- ------ ------ -------- --------
Interest expense............................. $ 88.7 $ 69.7 $19.0 27.3%
Depreciation expense......................... 67.5 57.4 10.1 17.6%
General and administrative expense........... 25.2 19.6 5.6 28.6%
------ ------ ----- ----
Total.............................. $181.4 $146.7 $34.7 23.7%
====== ====== ===== ====
The increase in interest expense was primarily due to higher interest rates
and a full year of interest expense in 1999 attributable to our $400.0 million
unsecured senior debt securities. The increase in depreciation expense was
primarily due to our real estate acquisitions in 1998 and 1999, partially offset
by the discontinuation of depreciation on held-for-sale retail assets. Internal
management costs of $7.7 million for 1998 were reclassified from property
operating expenses to general and administrative expenses to conform with the
1999 presentation. The increase in general and administrative expenses was
primarily attributable to additional staffing that resulted from growth in our
portfolio and the change in our accounting policy for capitalizing internal
acquisition costs. Effective during the second quarter of 1998, we changed our
policy to expense all internal acquisition costs in accordance with EITF 97-11.
LIQUIDITY AND CAPITAL RESOURCES
We currently expect that our principal sources of working capital and
funding for acquisitions, development, expansion, and renovation of properties
will include cash flow from operations, borrowings under our unsecured credit
facility, other forms of secured or unsecured financing, proceeds from debt or
limited partnership unit offerings (including issuances of limited partnership
units by our subsidiaries), and net proceeds from divestitures of properties.
Additionally, our co-investment program will also serve as a source of capital
for acquisitions and developments. We believe that our sources of working
capital and our ability to access equity and private and public debt are
adequate for us to meet our liquidity requirements for the foreseeable future.
Capital Resources
Property Divestitures. In 2000, we sold 25 industrial buildings and one
retail center for an aggregate price of $175.7 million. These divestitures
resulted in an aggregate net gain of $7.0 million. The joint venture that sold
the retail center carries an 8.75% interest only mortgage note receivable in the
principal amount of $79.0 million. This mortgage note has a one-year term and
has a one-year extension option.
Properties Held for Divestiture. We have decided to divest ourselves of 33
industrial buildings and one retail center, which are not in our core markets or
which do not meet our strategic objectives. The divestitures of the properties
are subject to negotiation of acceptable terms and other customary conditions.
As of December 31, 2000, the net carrying value of the properties held for
divestiture was $197.1 million.
Credit Facilities. In May 2000, we entered into a new $500.0 million
unsecured revolving credit agreement, which replaced our previous $500.0 million
credit facility, which matured in November 2000. AMB Property Corporation
guarantees our obligations under the credit facility. Our credit facility is
with Morgan Guaranty Trust Company of New York, as administrative agent, and a
syndicate of 12 other banks. The new credit facility matures in May 2003, has a
one-year extension option, and is subject to a 15 basis point annual facility
fee. We have the ability to increase available borrowings up to $700.0 million
by adding additional banks to the facility or obtaining the agreement of
existing banks to increase their commitments. We use our unsecured credit
facility principally for acquisitions and for general working capital
requirements. Borrowings under our credit facility currently bear interest at
LIBOR plus 75 basis points. At December 31, 2000, the outstanding balance on our
unsecured credit facility was $216.0 million and it bore interest at a
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26
weighted average rate of 7.5%. Monthly debt service payments on our credit
facility are interest only. The total amount available under our credit facility
fluctuates based upon the borrowing base, as defined in the agreement governing
the credit facility. At December 31, 2000, the remaining amount available under
our unsecured credit facility was $284.0 million (excluding the additional
$200.0 million of potential additional capacity).
In addition, we had an $80.0 million unsecured credit facility held through
our investment in the Alliance Fund I. The debt was secured by the unfunded
capital commitments of the third party investors in the Alliance REIT I, a
limited partner of the Alliance Fund I. Since there are no remaining unfunded
capital commitments, the Alliance Fund I paid off the outstanding balance and
closed this credit facility in the third quarter.
Partners' Capital. On September 1, 2000, AMB Property II, L.P., one of our
subsidiaries, issued and sold 840,000 8.125% Series H Cumulative Redeemable
Preferred Limited Partnership Units at a price of $50.00 per unit in a private
placement. Distributions are cumulative from the date of issuance and payable
quarterly in arrears at a rate per unit equal to $4.0625 per annum. The Series H
Preferred Units are redeemable by AMB Property II, L.P. on or after September 1,
2005, subject to certain conditions, for cash at a redemption price equal to
$50.00 per unit, plus accumulated and unpaid distributions thereon, if any, to
the redemption date. The Series H Preferred Units are exchangeable, at specified
times and subject to certain conditions, on a one-for-one basis, for shares of
AMB Property Corporation's Series H Preferred Stock. AMB Property II, L.P. used
the net proceeds of $41.0 million to repay advances from us and to make a loan
to us. We used the funds to partially repay borrowings under our unsecured
credit facility and for general corporate purposes. The loan bears interest at
8.0% per annum and is payable on demand.
On August 29, 2000, AMB Property II, L.P. issued and sold 20,000 7.95%
Series G Cumulative Redeemable Preferred Limited Partnership Units at a price of
$50.00 per unit in a private placement. Distributions are cumulative from the
date of issuance and payable quarterly in arrears at a rate per unit equal to
$3.975 per annum. The Series G Preferred Units are redeemable by AMB Property
II, L.P. on or after August 29, 2005, subject to certain conditions, for cash at
a redemption price equal to $50.00 per unit, plus accumulated and unpaid
distributions thereon, if any, to the redemption date. The Series G Preferred
Units are exchangeable, at specified times and subject to certain conditions, on
a one-for-one basis, for shares of AMB Property Corporation's Series G Preferred
Stock. AMB Property II, L.P. used the net proceeds of $1.0 million to repay
advances from us. We used the funds for general corporate purposes.
On March 22, 2000, AMB Property II, L.P. issued and sold 397,439 7.95%
Series F Cumulative Redeemable Preferred Limited Partnership Units at a price of
$50.00 per unit in a private placement. Distributions are cumulative from the
date of issuance and payable quarterly in arrears at a rate per unit equal to
$3.975 per annum. The Series F Preferred Units are redeemable by AMB Property
II, L.P. on or after March 22, 2005, subject to certain conditions, for cash at
a redemption price equal to $50.00 per unit, plus accumulated and unpaid
distributions thereon, if any, to the redemption date. The Series F Preferred
Units are exchangeable, at specified times and subject to certain conditions, on
a one-for-one basis, for shares of AMB Property Corporation's Series F Preferred
Stock. AMB Property II, L.P. loaned the net proceeds of $19.6 million to us. We
used the funds to partially repay borrowings under our unsecured credit facility
and for general corporate purposes. The loan bears interest at 7.0% per annum
and is payable upon demand.
At the time of AMB Property Corporation's initial public offering,
4,237,750 shar