AMB PROPERTY LP - 10-K Annual Report

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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, 2001

OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBER 001-13545

AMB PROPERTY, L.P.
(Exact name of Registrant as specified in its charter)

DELAWARE 94-3285362
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)

PIER 1, BAY 1, SAN FRANCISCO, CALIFORNIA 94111
(Address of Principal Executive Offices) (Zip Code)

(415) 394-9000
(Registrant's Telephone Number, Including Area Code)

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. 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 as well as
by having physical, political, or economic barriers to new development. 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 growth of the
airfreight and ocean-going container 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.

As of December 31, 2001, we owned and operated 905 industrial buildings and
seven retail centers, totaling approximately 81.6 million rentable square feet,
located in 26 markets nationwide. As of December 31, 2001, our industrial and
retail properties were 94.5% and 89.3% leased, respectively. As of December 31,
2001, through our subsidiary, AMB Capital Partners, LLC, we also managed
industrial buildings and retail centers, totaling approximately 2.7 million
rentable square feet on behalf of various clients. In addition, we have invested
in 40 industrial buildings, totaling approximately 4.9 million rentable square
feet, through unconsolidated joint ventures.

As of December 31, 2001, we had seven retail centers and three industrial
properties, which were held for divestiture. During 2001, we disposed of 26
industrial buildings and two retail buildings, aggregating approximately 3.2
million rentable square feet, for an aggregate price of $193.4 million. Over the
next few years, we intend to dispose of non-strategic assets and redeploy the
resulting capital into industrial properties in supply constrained markets in
the U.S. and internationally that better fit our current investment focus.

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, 2001, AMB Property Corporation
owned an approximate 94.4% general partnership interest in us, excluding
preferred units. As our sole general partner, AMB Property Corporation has full,
exclusive, and complete responsibility and discretion in our day-to-day
management and control.

AMB Property Corporation is self-administered and self-managed and we
expect that it has qualified and will continue to qualify as a real estate
investment trust for federal income tax purposes beginning with the year ending
December 31, 1997. Because AMB Property Corporation is a self-administered and
self-managed real estate investment trust, our employees perform its
administrative and management functions, rather than it relying on an outside
manager for these services. Our principal executive office 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,
2001, we employed 179 individuals, 134 at our San Francisco headquarters and 45
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 the 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

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Partners(R); and UPREIT Alliance Program(R). The following marks are the
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).

CO-INVESTMENT JOINT VENTURES

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, development projects, and renovation
projects. As of December 31, 2001, we had investments in five co-investment
joint ventures with a gross book value of $1.3 billion, which are consolidated
for financial reporting purposes and which are discussed below. We believe that
our co-investment program will also continue to serve as a source of capital for
acquisitions and developments.

We are the managing general partner of AMB Institutional Alliance Fund I,
L.P. and, together with one of our affiliates, owned, as of December 31, 2001,
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. The Alliance Fund I is engaged in
the acquisition, ownership, operation, management, renovation, expansion, and
development of industrial buildings in target markets nationwide. As of December
31, 2001, 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 capitalization of $378.0 million.

We formed AMB Partners II, L.P. with the City and County of San Francisco
Employees' Retirement System to acquire, develop, and redevelop distribution
facilities nationwide. On February 14, 2001, AMB Partners II received an equity
contribution from CCSFERS of $50.0 million, which, when combined with
anticipated debt financings and our investment, creates a total planned
capitalization of $250.0 million. We are the managing general partner of AMB
Partners II and owned, as of December 31, 2001, 50% of AMB Partners II.

We formed AMB-SGP, L.P. with a subsidiary of GIC Real Estate Pte Ltd., the
real estate investment subsidiary of the Government of Singapore Investment
Corporation, to own and operate, through a private real estate investment trust,
distribution facilities nationwide. On March 23, 2001, AMB-SGP received an
equity contribution from GIC of $75.0 million, which, when combined with
anticipated debt financings and our investment, creates a total planned
capitalization of $335.0 million. We are the managing general partner of AMB-SGP
and owned, as of December 31, 2001, approximately 50.3% of AMB-SGP.

We formed AMB Institutional Alliance Fund II, L.P., in which AMB Alliance
REIT II, Inc. became a partner on June 28, 2001. We are the managing general
partner and, together with one of our affiliates, owned, as of December 31,
2001, approximately 20% of the partnership interests in the Alliance Fund II.
The Alliance Fund II is a co-investment partnership between us and AMB
Institutional Alliance REIT II, Inc., a limited partner of the Alliance Fund II,
which includes 12 institutional investors as stockholders as of December 31,
2001. The Alliance Fund II is engaged in the acquisition, ownership, operation,
management, renovation, expansion, and development of industrial buildings in
target markets nationwide. As of December 31, 2001, the Alliance Fund II had
received equity commitments from third party investors totaling $195.4 million,
which, when combined with anticipated debt financings and our investment,
creates a total planned capitalization of $488.0 million.

We, together with one of our affiliates, own, as of December 31, 2001,
approximately 50% of the partnership interests in AMB/Erie. L.P. or "Erie". Erie
is a co-investment partnership between us and various entities related to Erie
Indemnity Company, and is engaged in the acquisition, ownership, operation,
management, renovation, expansion, and development of industrial buildings in
target markets nationwide. As of December 31, 2001, Erie had received equity
contributions from third party investors totaling $14.0 million, which, when
combined with debt financings and our investment, created a total capitalization
of $129.0 million.
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ACQUISITION AND DEVELOPMENT ACTIVITY

During 2001, we invested $428.3 million in operating properties, consisting
of 65 industrial buildings aggregating approximately 6.8 million square feet,
including the investment of $219.5 million in 36 industrial buildings,
aggregating approximately 3.8 million square feet, for three of our
co-investment joint ventures.

During 2001, we also contributed $539.2 million in operating properties,
consisting of 111 industrial buildings aggregating approximately 10.8 million
square feet, to three of our co-investment joint ventures. During 2001, we
recognized gains of $17.8 million on the contributions, which represents the
portion of the contributed properties acquired by our third-party co-investors.

As of December 31, 2001, we and our co-investment partners had in our
development pipeline: (1) 12 industrial projects, which will total approximately
3.1 million square feet and have a total estimated investment of $154.4 million
upon completion; and (2) two development projects available for sale, which will
total approximately 0.6 million square feet and have an aggregate estimated
investment of $50.0 million upon completion. As of December 31, 2001, we and our
Development Alliance Partners have funded an aggregate of $127.3 million and
will need to fund an estimated additional $77.1 million in order to complete
projects currently under construction.

OPERATING STRATEGY

AMB Property Corporation is 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. AMB
Property Corporation has 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 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.

GROWTH STRATEGIES

GROWTH THROUGH OPERATIONS

We seek to generate internal growth through rent increases on existing
space and renewals on re-tenanted space. We do this by seeking to maintain a
high occupancy rate at our properties and by seeking to control expenses by
capitalizing on the economies of owning, operating, and growing a large national
portfolio. As of December 31, 2001, our industrial properties and retail centers
were 94.5% leased and 89.3% leased, respectively. During 2001, we increased
average industrial base rental rates (on a cash basis) by 20.4% from the
expiring rent for that space, on leases entered into or renewed during the
period. This amount excludes expense reimbursements, rental abatements, and
percentage rents. During 2001, we also increased same-store net operating income
by 6.3% on our industrial properties.

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
relationships 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

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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 transactions. 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 our unsecured credit facility, other forms of secured or unsecured debt
financing, issuances of debt or limited partnership unit offerings (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 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 believe that 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 should provide us with
the skills and experience to capitalize on strategic renovation, expansion, and
development opportunities. Several of the officers of our general partner 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, and we eliminate 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.

GROWTH THROUGH CO-INVESTMENTS

We co-invest with third party partners (some of whom may be clients of AMB
Capital Partners, LLC, to the extent such clients commit new investment
capital), through partnerships, limited liability companies, or joint ventures.
We currently use a co-investment formula with each third party whereby we will
own at least a 20% interest in all ventures. In general, we control all
significant operating and investment decisions of our co-investment entities. We
believe that our co-investment program will continue to serve as a source of
capital for acquisitions and developments; however, there can be no assurance
that it will continue to do so.

GROWTH THROUGH DEVELOPMENTS FOR SALE

We, through a wholly-owned subsidiary, Headlands Realty Corporation,
conduct a variety of businesses that include incremental income programs, such
as our development projects available for sale to third parties. Such
development properties include value-added conversion projects and build-to-sell
projects. During 2001, we completed and sold two value-added conversion projects
for a net gain of $13.2 million. As of December 31, 2001, we were developing two
projects for sale to third parties.

AMB CAPITAL PARTNERS

AMB Capital Partners, LLC provides real estate investment management
services on a fee basis to clients. On December 31, 2001, AMB Investment
Management, Inc. was reorganized through a series of
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related transactions into AMB Capital Partners. On May 31, 2001, we began
consolidating our investment in AMB Investment Management by acquiring 100% of
its common stock for $0.3 million. Prior to May 31, 2001, we owned 100% of AMB
Investment Management's non-voting preferred stock (representing a 95% economic
interest therein) and reflected our investment using the equity method.

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

We operate industrial and retail properties nationwide and manage our
business both by property type and by market. Industrial properties consist
primarily of warehouse distribution facilities suitable for single or multiple
customers and are typically comprised of multiple buildings that are leased to
customers engaged in various types of businesses. As of December 31, 2001, we
operated industrial properties in eight hub and gateway markets in addition to
18 other markets nationwide. As of December 31, 2001, we operated retail
properties in Miami, Atlanta, Chicago, the San Francisco Bay Area, Boston, and
Baltimore. Retail properties are generally leased to one or more anchor
customers, such as grocery and drug stores, and various retail businesses. See
"Item 14. Note 17 of Notes to Consolidated Financial Statements" for segment
information related to our operations.

INDUSTRIAL PROPERTIES

As of December 31, 2001, we owned 905 industrial buildings aggregating
approximately 81.6 million rentable square feet, located in 26 markets
nationwide. Our industrial properties accounted for $494.9 million, or 96.8%, of
our total annualized base rent as of December 31, 2001. Our industrial
properties were 94.5% leased to over 2,900 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 type and characteristics of our industrial buildings:

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 are 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 sea
ports in major metropolitan areas, such as Atlanta, Chicago, Dallas/Fort Worth,
Northern New Jersey, the San Francisco Bay Area, Southern California, Miami, and

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Seattle. We believe our industrial properties' strategic location,
transportation network and infrastructure, and large consumer and manufacturing
bases support strong demand for industrial space.

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.

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INDUSTRIAL MARKET OPERATING STATISTICS

As of December 31, 2001, we operated in eight hub and gateway markets, in
addition to 18 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.

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(1) We also have an ownership interest in 36 industrial buildings totaling 4.0
million square feet in the Chicago market through our investment in an
unconsolidated joint venture.

(2) We also have an ownership interest in 4 industrial buildings totaling 0.9
million square feet in the Southern California market through an
unconsolidated joint venture.

(3) Calculated as monthly rent at expiration multiplied by 12.

(4) Same store pool as of December 31, 2001, excludes properties purchased or
developments stabilized after December 31, 1999.

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INDUSTRIAL PROPERTY SUMMARY

As of December 31, 2001, our 905 industrial buildings were diversified
across 26 markets nationwide. The average age of our industrial properties is 20
years (since the property was built or substantially renovated). 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).

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(1) We also have an ownership interest in 36 industrial buildings totaling 4.0
million square feet in the Chicago market through our investment in an
unconsolidated joint venture.

(2) We also have an ownership interest in 4 industrial buildings totaling 0.9
million square feet in the Southern California market through our investment
in an unconsolidated joint venture.

(3) In addition to owned square feet as of December 31, 2001, we manage, through
our subsidiary, AMB Capital Partners, 2.0 million, 0.6 million, and 0.1
million additional square feet of industrial, retail, and other properties,
respectively.

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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, 2001, without giving effect to
the exercise of renewal options or termination rights, if any, at or prior to
the scheduled expirations.

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(1) Schedule includes executed leases that commence after December 31, 2001.
Schedule excludes leases expiring December 31, 2001.

(2) Calculated as monthly rent at expiration multiplied by 12.

(3) Includes month-to-month leases and hold-over customers.

CUSTOMER INFORMATION

Largest Property Customers. Our 25 largest industrial property customers
by annualized base rent are set forth in the table below.

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(1) Customer(s) may be a subsidiary of or an entity affiliated with the named
customer.

(2) Computed as aggregate leased square feet divided by the aggregate leased
square feet of the industrial and retail properties.

(3) Computed as aggregate annualized base rent divided by the aggregate
annualized base rent of the industrial and retail and other properties.

(4) Apron rental amount (but not square footage) are included.

(5) County of Los Angeles includes Children's Services, the Fire Department, the
District Attorney's Office, the Sheriff, and the Unified School District.

(6) United States Government includes the United States Postal Service (USPS),
U.S. Customs, and the United Stated Department of Agriculture (USDA).

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OPERATING AND LEASING STATISTICS

TOTAL INDUSTRIAL PORTFOLIO SUMMARY

The following table summarizes key operating and leasing statistics for all
of our industrial properties as of and for the years ended December 31, 2001,
2000, and 1999.

INDUSTRIAL OPERATING AND LEASING STATISTICS(1)

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(1) Includes all consolidated operating properties and excludes development and
renovation projects.

(2) In addition to owned square feet as of December 31, 2001, we manage, through
our subsidiary, AMB Capital Partners, 2.7 million additional square feet of
industrial, retail, and other properties. We also have investments in 4.9
million square feet of industrial properties through our investments in
unconsolidated joint ventures.

(3) Consists of all leases renewing or re-tenanting with lease terms greater
than one year.

INDUSTRIAL SAME STORE OPERATING STATISTICS

The following table summarizes key operating and leasing statistics for our
same store properties as of and for the years ended December 31, 2001, 2000, and
1999. For an explanation of our same store properties,

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see "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Results of Operations."

RETAIL PROPERTIES

At December 31, 2001, we owned ten retail centers aggregating approximately
1.3 million rentable square feet. Our retail properties accounted for $16.1
million, or 3.2%, of annualized base rent at December 31, 2001. Our retail
properties were 89.3% leased to over 160 customers. Our retail properties have
an average age of nine years since they were built, expanded, or renovated.

During 2001, we sold two retail properties totaling approximately 0.3
million rentable square feet. As of December 31, 2001, we had seven retail
centers, aggregating approximately 1.3 million rentable square feet, held for
divestiture.

RETAIL PROPERTY SUMMARY

The following table sets forth the rentable square footage of our retail
centers as of December 31, 2001, and represents properties in which we own a fee
simple interest or a controlling interest (consolidated). Around Lenox, Howard &
Western, Mazzeo Drive, Northridge Plaza, Palm Aire, Springsgate, and The Plaza
at Delray are all properties held for divestiture as of December 31, 2001.

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(1) Annualized base rent means the monthly contractual amount under existing
leases at December 31, 2001, 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, 2001.

(3) We hold an interest in this property through a joint venture interest in a
limited partnership.

(4) This property is held for divestiture.

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DEVELOPMENT PIPELINE

The following table sets forth the properties owned by us as of December
31, 2001, 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

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(1) Represents total estimated cost or renovation, expansion, or development,
including initial acquisition costs, debt and equity carry, and partner
earnouts. The estimates are based on our current estimates and forecasts and
are subject to change. Excludes 268 acres of land and other
acquisition-related costs totaling approximately $44.3 million.

(2) As of December 31, 2001, our share of such amounts funded to date was $57.8
million and $8.5 million, respectively, for a total of $66.3 million funded
to date.

(3) Represents a renovation project.

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HEADLANDS REALTY CORPORATION(1)

DEVELOPMENT PROJECTS HELD FOR SALE

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(1) Headlands Realty Corporation is a wholly-owned taxable REIT subsidiary of
AMB Property Corporation, our general partner.

(2) Headlands Realty Corporation intends to sell these properties within two
years of completion.

(3) Represents total estimated cost of renovation, expansion, or development,
including initial acquisition costs, debt and equity carry, and partner
earnouts. The estimates are based on our current estimates and forecasts and
are subject to change.

(4) Represents existing properties or land that Headlands Realty is leasing from
us and is upgrading for sale to a third party.

(5) Represents build-to-suit and speculative development or redevelopment.

(6) As of December 31, 2001, our share of amounts funded to date was $20.5
million.

PROPERTIES HELD THROUGH JOINT VENTURES, LIMITED LIABILITY COMPANIES, AND
PARTNERSHIPS

CONSOLIDATED:

As of December 31, 2001, we held interests in joint ventures, limited
liability companies, and partnerships with third parties, which are consolidated
in our consolidated financial statements. Such investments are consolidated
because: (1) we own a majority interest; or (2) we exercise significant control
over major operating decisions such as approval of budgets, selection of
property managers, and changes in financing. 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. See "Item 14. Note 10 of the Notes to Consolidated Financial
Statements."

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INDUSTRIAL CONSOLIDATED JOINT VENTURES

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(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) A co-investment partnership with GIC Real Estate Pte Ltd., the real estate
investment subsidiary of the government of Singapore Investment Corporation.

(4) Represents a co-investment partnership with a private institutional REIT.

(5) Represents a co-investment partnership with the Erie Insurance Group.

(6) Represents a co-investment partnership with the City and County of San
Francisco Employees' Retirement System.

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RETAIL CONSOLIDATED JOINT VENTURES

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(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 development.

UNCONSOLIDATED AND MORTGAGE INVESTMENTS:

As of December 31, 2001, 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, 2001, we held two
mortgage investments from which we receive interest income.

UNCONSOLIDATED JOINT VENTURES AND
MORTGAGE INVESTMENTS

- ---------------

(1) Square feet for development alliance joint ventures represents estimated
square feet at completion of development project.

(2) We re-negotiated this mortgage and received a $5.0 million pay-down on the
principal balance and increased the interest rate to 9.5% from 8.75% in
2001.

SECURED DEBT

As of December 31, 2001, we had $1.2 billion of indebtedness, net of
unamortized premiums, secured by deeds of trust on 99 properties. As of December
31, 2001, the total gross investment value of those properties secured by debt
was $2.3 billion. Of the $1.2 billion of secured indebtedness, $759.4 million
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 7 of Notes to Consolidated Financial Statements" included in this
report. We believe that as of December 31, 2001, the value of the properties
securing the respective obligations in each case exceeded the principal amount
of the outstanding obligations.

ITEM 3. LEGAL PROCEEDINGS

As of December 31, 2001, there were no pending legal proceedings to which
we are a party or of which any of our properties are the subject, the adverse
determination of which we anticipate would have a material adverse effect on our
financial position or results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

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, 2001, we had outstanding 94,661,445 partnership units,
consisting of 87,592,418 general partnership units (consisting of 83,592,418
common units and 4,000,000 8 1/2% Series A Cumulative Redeemable Preferred
Units) held by AMB Property Corporation and 7,069,027 limited partnership units
(consisting of 4,969,027 common units, 1,300,000 8 5/8% Series B Cumulative
Redeemable Preferred Units, and 800,000 7.95% Series J 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, 2001, there were 84
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,
there was one holder of the 8 5/8% Series B Cumulative Redeemable Units, and
there was one holder of the 7.95% Series J Cumulative Redeemable Units.

During 2001, 223,092 limited partnership units were redeemed for cash and
635,798 limited partnership units were redeemed for shares of AMB Property
Corporation's common stock.

16

Set forth below are the distributions per limited partnership unit paid by
us during the years ended December 31, 2001, 2000 and 1999:

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 as of and for the
years ended December 31, 2001, 2000, 1999, 1998, and 1997.

- ---------------

(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) Our financial and other data 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 available to
common unitholders divided by 88,915,176 and 89,954,598 units, respectively
for 2001; 89,566,375 and 90,024,511 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.

17

(4) EBITDA is computed as income before divestiture of properties, net of
minority interests and impairment charges, 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 a
real estate investment trust 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 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
our 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.
(5) Operating earnings represents income before gains from dispositions of real
estate, net of minority interests and impairment reserves on properties held
for divestiture and operating properties, less minority interests' share of
net income and preferred unit distributions. It excludes the preferred unit
redemption premium. We believe that in addition to cash flows and net
income, operating earnings is a useful financial performance measure for
assessing the operating performance of a real estate investment trust
because, together with net income and cash flows, operating earnings
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. Operating earnings 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. Operating earnings may not be indicative of our historical operating
results nor our potential future results. While operating earnings 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 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 a real estate investment trust. 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 $6.8
million, $9.9 million, $10.1 million, $15.2 million, and $18.3 million as of
December 31, 2001, 2000, 1999, 1998, and 1997, respectively. See Notes 2 and
7 of the notes to consolidated financial statements.

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. Such statements
relate to our future performance and plans, results of operations, capital
expenditures, acquisitions, and operating improvements and costs. 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 occur or be achieved. 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 customers;

- 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);

18

- environmental uncertainties;

- risks related to natural disasters;

- financial market fluctuations;

- changes in real estate and zoning laws;

- increases in real property tax rates; and

- risks of doing business internationally.

Our success also depends upon economic trends generally, including interest
rates, income tax laws, governmental regulation, legislation, population
changes, and those other 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

We generate revenue primarily from rent received from customers at our
properties, including reimbursements from customers for certain operating costs.
In addition, our growth is, in part, dependent on our ability to increase
occupancy rates or increase rental rates at our properties and our ability to
continue the acquisition and development of additional properties. Our income
would be adversely affected if a significant number of customers were unable to
pay rent or if we were unable to rent our industrial space on favorable terms.
Certain significant expenditures associated with an investment in real estate
(such as mortgage payments, real estate taxes, and maintenance costs) generally
do not decline when circumstances cause a reduction in income from the property.
Moreover, as the general partner of the co-investment joint ventures, we
generally will be liable for all of the joint ventures unsatisfied obligations
other than non-recourse obligations. Any such liabilities could adversely affect
our financial condition, results of operations, cash flow, and ability to make
distributions to our unitholders and payments to our noteholders.

CRITICAL ACCOUNTING POLICIES

Our discussion and analysis of financial condition and results of
operations is based on our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
and contingencies as of the date of the financial statements and the reported
amounts of revenues and expenses during the reporting periods. We evaluate our
assumptions and estimates on an on-going basis. We base our estimates on
historical experience and on various other assumptions that we believe to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. We believe the following
critical accounting policies affect our more significant judgments and estimates
used in the preparation of our consolidated financial statements

Investments in Real Estate. Investments in real estate are stated at cost
unless circumstances indicate that cost cannot be recovered, in which case, the
carrying value of the property is reduced to estimated fair value. Carrying
values for financial reporting purposes are reviewed for impairment on a
property-by-property basis whenever events or changes in circumstances indicate
that the carrying value of a property may not be recoverable. Impairment is
recognized when estimated expected future cash flows (undiscounted and without
interest charges) are less than the carrying amount of the property. The
estimation of expected future net cash flows is inherently uncertain and relies
on assumptions regarding current and future market conditions and the
availability of capital. If impairment analysis assumptions change, then an
adjustment to the carrying amount

19

of our long-lived assets could occur in the future period in which the
assumptions change. To the extent that a property is impaired, the excess of the
carrying amount of the property over its estimated fair value is charged to
income. We evaluated our properties held for divestiture and operating
properties for impairment and reduced their carrying value by $18.6 million and
$5.9 million in 2001 and 2000, respectively. We believe that there are no
additional impairments of the carrying values of our investments in real estate
at December 31, 2001.

Investment in Unconsolidated Joint Ventures. We have non-controlling
limited partnership interests in three separate unconsolidated joint ventures.
We account for the joint ventures using the equity method of accounting. We have
a 56.1% interest in a joint venture, which owns an aggregate of 36 industrial
buildings totaling approximately 4.0 million square feet. We also have a 50%
interest in each of two other operating and development alliance joint ventures.
Our net equity investment in these joint ventures is shown as investment in
unconsolidated joint ventures on our consolidated balance sheets.

Investments in Other Companies. Investments in other companies were
accounted for on a cost basis and realized gains and losses were included in
current earnings. For our investments in private companies, we periodically
reviewed our investments to determine if the value of such investments had been
permanently impaired. During 2001, we recognized a loss on our investments in
other companies totaling $20.8 million, including our investment in Webvan
Group, Inc. We had previously recognized gains and losses on our investment in
Webvan Group, Inc. as a component of other comprehensive income. As of December
31, 2001, we had realized a loss on 100% of our investments in other companies.

Rental Revenues. We record rental revenue from long-term operating leases
on a straight-line basis over the term of the leases and maintain an allowance
for estimated losses that may result from the inability of our customers to make
required payments. If customers fail to make contractual lease payments that are
greater than our bad-debt reserves, then we may have to recognize additional bad
debt charges in future periods.

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 (generally defined as
90% leased or 12 months after we receive a certificate of occupancy for the
building). We refer to these properties as the same store properties. For the
comparison between the years ended December 31, 2001 and 2000, the same store
industrial properties consisted of properties aggregating approximately 60.2
million square feet. The properties acquired in 2000 consisted of 145 buildings,
aggregating approximately 10.5 million square feet, and the properties acquired
during 2001 consisted of 65 buildings, aggregating 6.8 million square feet. In
2000, property divestitures consisted of one retail center and 25 industrial
buildings, aggregating approximately 2.5 million square feet, and property
divestitures during 2001 consisted of 24 industrial and two retail buildings,
aggregating approximately 3.2 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 historical rates.

FOR THE YEARS ENDED DECEMBER 31, 2001 AND 2000 (DOLLARS IN MILLIONS)

20

The growth in rental revenues in same store properties resulted primarily
from the incremental effect of cash rental rate increases on renewals and
rollovers, fixed rent increases on existing leases, and reimbursement of
expenses, partially offset by lower average occupancies. During 2001, the same
store rent increases on industrial renewals and rollovers (cash basis) was 23.5%
on 10.0 million square feet leased.

The $6.7 million increase in investment management income was due primarily
to increased asset management and acquisition fees and priority distributions
from our co-investment joint ventures. The $9.8 million increase in interest and
other income was primarily due to interest income from our mortgage note on the
retail center that we sold in 2000 and from interest income resulting from
higher average cash balances.

The increase in same store properties' operating expenses primarily relates
to increases in common area maintenance expenses of $2.3 million, real estate
taxes of $2.5 million, and insurance expense of $0.8 million.

21

The increase in interest expense was primarily due to the issuance of
additional unsecured senior debt securities and an increase in secured debt
balances, partially offset by decreased borrowings on our unsecured credit
facility. The secured debt issuances were primarily for our co-investment joint
ventures' properties. The increase in depreciation expense was due to the
increase in our net investment in real estate. The increase in general and
administrative expenses was primarily due to increased personnel and occupancy
costs. In addition, the consolidation of AMB Investment Management, Inc.
(predecessor-in-interest to AMB Capital Partners, LLC) and Headlands Realty
Corporation on May 31, 2001, resulted in an increase in general and
administrative expenses of $4.9 million.

During 2001, we recognized $20.8 million of losses on investments in other
companies, related to our investment in Webvan Group, Inc. and other
technology-related companies. The loss reflects a 100% write-down of the book
value of the investments.

During 2001, we retired $55.2 million of secured debt prior to maturity
primarily in connection with property divestitures and early prepayments. We
recognized a net extraordinary loss of $0.6 million related to the early
retirement of debt, resulting from prepayment penalties, partially offset by the
write-off of debt premiums.

FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999 (DOLLARS IN MILLIONS)

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.

The $7.0 million increase in investment management and other income was due
primarily to increased acquisition fees from AMB Institutional Alliance Fund I,
L.P., interest income, and development fees.

22

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.

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 AMB Investment
Management, Inc. (predecessor-in-interest to AMB Capital Partners, LLC),
partially offset by increased personnel costs.

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: (1) cash flow from operations; (2) borrowings under our unsecured
credit facility; (3) other forms of secured or unsecured financing; (4) proceeds
from debt or limited partnership unit offerings (including issuances of limited
partnership units by our subsidiaries); and (5) net proceeds from divestitures
of properties. Additionally, we believe that our private capital co-investment
program will also continue to serve as a source of capital for acquisitions and
developments. We believe that our sources of working capital, specifically our
cash flow from operations and borrowings available under our unsecured credit
facility, and our ability to access private and public debt and equity capital,
are adequate for us to meet our liquidity requirements for the foreseeable
future.

CAPITAL RESOURCES

Property Divestitures. In 2001, we divested ourselves of 24 industrial and
two retail buildings for an aggregate price of $193.4 million, with a resulting
net gain of $24.1 million, net of minority interest partners' share.

Properties Held for Divestiture. We have decided to divest ourselves of
three industrial properties and seven retail centers, 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, 2001, the net carrying value of the properties
held for divestiture was $157.2 million.

23

Co-investment Joint Ventures. We consolidate the financial position,
results of operations, and cash flows of our five co-investment joint ventures.
We consolidate these joint ventures for financial reporting purposes because we
are the sole managing general partner and, as a result, control all of the major
operating decisions. Third-party equity interests in the joint ventures are
reflected as minority interests in the consolidated financial statements. As of
December 31, 2001, we owned approximately 26.9 million square feet of our
properties through these entities. We may make additional investments through
these joint ventures or new joint ventures in the future and presently plan to
do so. The inability to obtain new joint venture partners could adversely affect
our financial condition, results of operations, cash flow, and ability to make
distributions to our unitholders and payments to our noteholders.

During 2001, we contributed $539.2 million in operating properties,
consisting of 111 industrial buildings aggregating approximately 10.8 million
square feet, to three of our co-investment joint ventures. We recognized a gain
of $17.8 million related to these contributions, representing the portion of the
contributed properties acquired by the third party co-investors.

We formed AMB Institutional Alliance Fund II, L.P. to acquire, develop, and
redevelop distribution facilities nationwide, in which AMB Institutional
Alliance REIT II, Inc. became a partner on June 28, 2001. As of December 31,
2001, the Alliance Fund II had received total equity commitments from third
party investors of $195.4 million, which, when combined with anticipated debt
financings and our investment, creates a total planned capitalization of $488.6
million. We are the managing general partner of the Alliance Fund II and owned,
as of December 31, 2001, approximately 20% of the co-investment joint venture.

We formed AMB-SGP, L.P. with a subsidiary of GIC Real Estate Pte Ltd., the
real estate investment subsidiary of the Government of Singapore Investment
Corporation, to own and operate, through a private real estate investment trust,
distribution facilities nationwide. On March 23, 2001, AMB-SGP, L.P. received an
equity contribution from GIC of $75.0 million, which, when combined with
anticipated debt financings and our investment, creates a total planned
capitalization of $335.0 million. We are the managing general partner of
AMB-SGP, L.P. and owned, as of December 31, 2001, approximately 50.3% of the
co-investment joint venture.

We formed AMB Partners II, L.P. with the City and County of San Francisco
Employees' Retirement System to acquire, develop, and redevelop distribution
facilities nationwide. On February 14, 2001, Partners II received an equity
contribution from CCSFERS of $50.0 million, which, when combined with
anticipated debt financings and our investment, creates a total planned
capitalization of $250.0 million. We are the managing general partner of
Partners II and owned, as of December 31, 2001, approximately 50% of the
co-investment joint venture.

We, together with one of our affiliates, own, as of December 31, 2001,
approximately 21% of the partnership interests in AMB Institutional Alliance
Fund I, L.P. The Alliance Fund I is a co-investment partnership between us and
AMB Institutional Alliance REIT I, Inc., which includes 15 institutional
investors as stockholders, and is engaged in the acquisition, ownership,
operation, management, renovation, expansion, and development of industrial
buildings in target markets nationwide. As of December 31, 2001, the Alliance
Fund I had received equity contributions from third party investors totaling
$169.0 million, which, when combined with debt financings and our investment,
creates a total capitalization of $378.0 million.

We, together with one of our affiliates, own, as of December 31, 2001,
approximately 50% of the partnership interests in AMB/Erie. L.P. Erie is a
co-investment partnership between us and various entities related to Erie
Indemnity Company, and is engaged in the acquisition, ownership, operation,
management, renovation, expansion, and development of industrial buildings in
target markets nationwide. As of December 31, 2001, Erie had received equity
contributions from third party investors totaling $13.7 million, which, when
combined with debt financings and our investment, created a total capitalization
of $129.0 million.

Credit Facilities. In May 2000, we entered into a $500.0 million unsecured
revolving credit agreement. AMB Property Corporation guarantees our obligations
under the credit facility. The credit facility matures in May 2003, has a
one-year extension option, and is subject to a 15 basis point annual facility
fee, which is based on our credit rating. We have the ability to increase
available borrowings to $700.0 million by adding

24

additional banks to the facility or obtaining the agreement of existing banks to
increase its 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, which is
based on our credit rating. Increases in interest rates on this indebtedness
could increase our interest expense, which would adversely affect our financial
condition, results of operations, cash flow, and ability to make distributions
to our unitholders and payments to our noteholders. Accordingly, in the future,
we may engage in transactions to limit our exposure to rising interest rates. As
of December 31, 2001, there was an outstanding balance of $12.0 million on our
unsecured credit facility. 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, 2001, the remaining amount available under
our unsecured credit facility was $488.0 million (excluding the additional
$200.0 million of potential additional capacity).

In July 2001, the Alliance Fund II obtained a $150.0 million credit
facility from Bank of America N.A. Borrowings currently bear interest at LIBOR
plus 87.5 basis points. As of December 31, 2001, the outstanding balance was
$123.5 million and the remaining amount available was $26.5 million. The credit
facility is secured by the unfunded capital commitments of the third party
investors in the Alliance REIT II and the Alliance Fund II.

Equity. In December 2001, AMB Property II, L.P., one of our affiliates,
repurchased all of its outstanding 2,200,000 8.75% Series C Cumulative
Redeemable Preferred Limited Partnership Units from three institutional
investors. The units were redeemed for an aggregate cost of $115.7 million,
including accrued and unpaid dividends totaling $1.3 million and a premium of
$4.4 million. The Series C Preferred Units had a par value of $110.0 million.

In September 2001, we issued and sold 800,000 7.95% Series J 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. The Series J Preferred Units are redeemable by us
on or after September 21, 2006, 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 J 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 J Preferred
Stock. We used the net proceeds of $38.9 million for general corporate purposes,
which may include the partial repayment of indebtedness or the acquisition or
development of additional properties.

In March 2001, AMB Property II, L.P., one of our affiliates, issued and
sold 510,000 8.00% Series I 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 $4.00 per annum. The Series I Preferred Units are redeemable
by AMB Property II, L.P. on or after March 21, 2006, 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 I 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 I Preferred Stock. AMB Property II, L.P. used the net
proceeds of $24.9 million to repay advances from us and to make a loan to us. We
used the funds to partially repay borrowings under its unsecured credit facility
and for general corporate purposes. The loan bears interest at 8.0% per annum
and is payable on demand.

During 2001, we redeemed 223,092 and 635,798 common limited partnership
units for cash and shares of AMB Property Corporation's common stock,
respectively.

AMB Property Corporation's board of directors approved a stock repurchase
program in 1999 for the repurchase of up to $100.0 million worth of its common
stock. During 2001, AMB Property Corporation repurchased 1,392,600 shares of its
common stock at an average purchase price of $23.62 per share under the program.
Under the program to date, AMB Property Corporation has repurchased 2,836,200
shares of its common stock at an average purchase price of $21.22 per share. AMB
Property Co