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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q

     
(Mark One)
   
 
þ
  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
    For the quarterly period ended March 31, 2004
 
OR
 
o
   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
Commission File Number: 001-13545

AMB Property Corporation

(Exact name of Registrant as Specified in Its Charter)
     
Maryland   94-3281941
(State or Other Jurisdiction of
Incorporation or Organization)		   (I.R.S. Employer
Identification No.)
 
Pier 1, Bay 1, San Francisco, California   94111
(Address of Principal Executive Offices)   (Zip Code)

(415) 394-9000

(Registrant’s Telephone Number, Including Area Code)

          Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          No o.

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

          As of April 30, 2004, there were 82,611,558 shares of the Registrant’s common stock, $0.01 par value per share, outstanding.

AMB PROPERTY CORPORATION

INDEX

             
Page
 PART I. FINANCIAL INFORMATION
   Financial Statements (unaudited)        
     Consolidated Balance Sheets as of March 31, 2004, and December 31, 2003     1  
     Consolidated Statements of Operations for the three months ended March 31, 2004 and 2003     2  
     Consolidated Statements of Cash Flows for the three months ended March 31, 2004 and 2003     3  
     Consolidated Statement of Stockholders’ Equity for the three months ended March 31, 2004     4  
     Notes to Consolidated Financial Statements     5  
   Management’s Discussion and Analysis of Financial Condition and Results of Operations     21  
   Quantitative and Qualitative Disclosures About Market Risk     44  
   Controls and Procedures     45  
 PART II. OTHER INFORMATION
   Legal Proceedings     47  
   Changes in Securities and Use of Proceeds     47  
   Defaults Upon Senior Securities     47  
   Submission of Matters to a Vote of Security Holders     47  
   Other Information     47  
   Exhibits and Reports on Form 8-K     47  
 Exhibit 31.1
 Exhibit 32.1

Table of Contents

PART I

 
Item 1. Financial Statements

AMB PROPERTY CORPORATION

CONSOLIDATED BALANCE SHEETS

As of March 31, 2004 and December 31, 2003
                       
March 31, December 31,
2004 2003
(Unaudited, dollars in
thousands)
ASSETS
Investments in real estate:
               
 
Land
  $ 1,408,936     $ 1,403,807  
 
Buildings and improvements
    4,039,142       3,888,272  
 
Construction in progress
    282,576       199,628  
     
     
 
   
Total investments in properties
    5,730,654       5,491,707  
 
Accumulated depreciation and amortization
    (511,611 )     (474,452 )
     
     
 
   
Net investments in properties
    5,219,043       5,017,255  
Investments in unconsolidated joint ventures
    54,006       52,009  
Properties held for divestiture, net
    9,628       11,751  
     
     
 
     
Net investments in real estate
    5,282,677       5,081,015  
Cash and cash equivalents
    123,747       127,678  
Restricted cash
    27,156       28,985  
Mortgages receivable
    23,620       43,145  
Accounts receivable, net of allowance for doubtful accounts
    92,081       88,452  
Other assets
    69,669       51,391  
     
     
 
   
Total assets
  $ 5,618,950     $ 5,420,666  
     
     
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Debt:
               
 
Secured debt
  $ 1,457,630     $ 1,363,890  
 
Unsecured senior debt securities
    1,025,000       925,000  
 
Unsecured debt
    9,482       9,628  
 
Unsecured credit facility
    261,369       275,739  
     
     
 
   
Total debt
    2,753,481       2,574,257  
Dividends payable
    40,813       39,076  
Accounts payable and other liabilities
    167,801       148,019  
     
     
 
   
Total liabilities
    2,962,095       2,761,352  
Commitments and contingencies (Note 12)
               
Minority interests:
               
 
Joint venture partners
    663,087       659,487  
 
Preferred unitholders
    241,873       241,899  
 
Limited partnership unitholders
    89,688       91,029  
     
     
 
   
Total minority interests
    994,648       992,415  
Stockholders’ equity:
               
 
Series L preferred stock, cumulative, redeemable, $.01 par value, 2,300,000 shares authorized and 2,000,000 issued and outstanding, $50,000 liquidation preference
    48,017       48,018  
 
Series M preferred stock, cumulative, redeemable, $.01 par value, 2,300,000 shares authorized and 2,300,000 issued and outstanding, $57,500 liquidation preference
    55,195       55,355  
 
Common stock $.01 par value, 500,000,000 shares authorized, 82,595,709 and 81,792,913 issued and outstanding, respectively
    826       818  
 
Additional paid-in capital
    1,557,629       1,561,203  
 
Retained earnings
    —       —  
 
Accumulated other comprehensive income
    540       1,505  
     
     
 
   
Total stockholders’ equity
    1,662,207       1,666,899  
     
     
 
   
Total liabilities and stockholders’ equity
  $ 5,618,950     $ 5,420,666  
     
     
 

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

1

Table of Contents

AMB PROPERTY CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended March 31, 2004 and 2003
                       
For the Three Months Ended
March 31,
2004 2003
(Unaudited, dollars in
thousands, except share and per
share amounts)
REVENUES
                
 
Rental revenues
  $ 163,812     $ 148,523  
 
Private capital income
    2,429       2,361  
     
     
 
   
Total revenues
    166,241       150,884  
     
     
 
COSTS AND EXPENSES
                
 
Property operating expenses
    (24,045 )     (21,715 )
 
Real estate taxes
    (19,427 )     (17,941 )
 
Depreciation and amortization
    (38,234 )     (34,433 )
 
General and administrative
    (15,036 )     (12,186 )
     
     
 
   
Total costs and expenses
    (96,742 )     (86,275 )
     
     
 
OTHER INCOME AND EXPENSES
                
 
Equity in earnings of unconsolidated joint ventures, net
    1,709       1,235  
 
Interest and other income
    1,665       1,393  
 
Gains from dispositions of real estate
    —       7,429  
 
Interest, including amortization
    (39,425 )     (35,914 )
     
     
 
   
Total other income and expenses
    (36,051 )     (25,857 )
     
     
 
     
Income before minority interests and discontinued operations
    33,448       38,752  
     
     
 
 
Minority interests’ share of income:
               
   
Joint venture partners’ share of operating income
    (9,229 )     (7,636 )
   
Preferred unitholders
    (4,912 )     (6,380 )
   
Limited partnership unitholders
    (955 )     (1,328 )
     
     
 
     
Total minority interests’ share of income
    (15,096 )     (15,344 )
     
     
 
Income from continuing operations
    18,352       23,408  
     
     
 
Discontinued operations:
               
 
(Loss) Income attributable to discontinued operations, net of minority interests
    (246 )     7,941  
 
(Loss) Gains from dispositions of real estate, net of minority interests
    (286 )     28,029  
     
     
 
   
Total discontinued operations
    (532 )     35,970  
     
     
 
Net income
    17,820       59,378  
Preferred stock dividends
    (1,783 )     (2,123 )
     
     
 
   
Net income available to common stockholders
  $ 16,037     $ 57,255  
     
     
 
BASIC INCOME PER COMMON SHARE
                
 
Income from continuing operations (includes preferred stock dividends)
  $ 0.20     $ 0.26  
 
Discontinued operations
    —       0.45  
     
     
 
Net income available to common stockholders
  $ 0.20     $ 0.71  
     
     
 
DILUTED INCOME PER COMMON SHARE
                
 
Income from continuing operations (includes preferred stock dividends)
  $ 0.19     $ 0.26  
 
Discontinued operations
    —       0.43  
     
     
 
   
Net income available to common stockholders
  $ 0.19     $ 0.69  
     
     
 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
                
 
Basic
    81,691,434       81,097,725  
     
     
 
 
Diluted
    84,861,965       82,514,156  
     
     
 

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

2

Table of Contents

AMB PROPERTY CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended March 31, 2004 and 2003
                         
2004 2003
(Unaudited, dollars in
thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
                
Net income
  $ 17,820     $ 59,378  
Adjustments to net income:
               
 
Straight-line rents
    (3,963 )     (2,380 )
 
Depreciation and amortization
    38,234       34,433  
 
Stock-based compensation amortization
    2,557       1,941  
 
Recognition of below market leases
    (205 )     —  
 
Equity in earnings of unconsolidated joint ventures
    (1,709 )     (1,235 )
 
Gains from dispositions of real estate
    —       (7,429 )
 
Debt premiums, discounts and finance cost amortization, net
    339       (99 )
 
Total minority interests’ share of net income
    15,096       15,344  
 
Discontinued operations:
               
   
Depreciation and amortization
    17       740  
   
Joint venture partners’ share of net income
    (1 )     145  
   
Limited partnership unitholders’ share of net income
    (15 )     459  
   
Loss (Gains) from dispositions of real estate, net of minority interests
    286       (28,029 )
 
Changes in assets and liabilities:
               
   
Accounts receivable and other assets
    (2,456 )     (2,570 )
   
Accounts payable and other liabilities
    1,259       6,107  
     
     
 
     
Net cash provided by operating activities
    67,259       76,805  
     
     
 
CASH FLOWS FROM INVESTING ACTIVITIES
                
Change in restricted cash
    3,616       12,767  
Cash paid for property acquisitions
    (60,899 )     (10,494 )
Additions to land, buildings, development costs and other first generation improvements
    (97,702 )     (56,058 )
Additions to second generation building improvements and lease costs
    (15,650 )     (10,880 )
Net proceeds from divestiture of real estate
    4,731       200,522  
Additions to interests in unconsolidated joint ventures
    (814 )     (809 )
Distributions received from unconsolidated joint ventures
    568       2,116  
Repayment of mortgage receivable
    19,525       —  
     
     
 
     
Net cash (used in) provided by investing activities
    (146,625 )     137,164  
     
     
 
CASH FLOWS FROM FINANCING ACTIVITIES
                
Issuance of common stock, proceeds from stock option exercises
    12,048       1,179  
Repurchase and retirement of common and preferred stock
    —       (20,562 )
Borrowings on secured debt
    29,953       7,913  
Payments on secured debt
    (8,735 )     (40,688 )
Payments on unsecured debt
    (146 )     —  
Borrowings on unsecured credit facility
    94,684       112,464  
Payments on unsecured credit facility
    (111,063 )     (190,000 )
Borrowings on Alliance Fund II credit facility
    —       6,000  
Payment of financing fees
    (199 )     (36 )
Net proceeds from issuances of senior debt securities
    99,390       —  
Issuance costs on preferred stock or units
    (161 )     —  
Contributions from co-investment partners
    3,890       7,039  
Dividends paid to common and preferred stockholders
    (35,149 )     (37,728 )
Distributions to minority interests, including preferred units
    (10,759 )     (14,089 )
     
     
 
     
Net cash provided by (used in) financing activities
    73,753       (168,508 )
     
     
 
       
Effect of exchange rate changes on cash
    1,682       —