AMB Property Corporation has reported first quarter 2005 earnings per share (EPS) of $0.52, exceeding the company's guidance of $0.39 to $0.41 for the quarter.
The better-than-expected EPS results are associated with increased average occupancy in the operating portfolio; higher-than-expected gains on sales of operating properties; and earlier-than-expected net gains from the company's development and land sales programs.
First quarter 2005 EPS increased 206% from EPS of $0.17 in the same period of 2004, due primarily to net development profits and net gains on sales of operating properties.
Operating Results
AMB's industrial operating portfolio occupancy increased to 95.1% at March 31, 2005, up 30 basis points from December 31, 2004, and up 240 basis points from March 31, 2004. By comparison, preliminary data from Torto Wheaton Research (TWR) indicate that national industrial occupancy at the end of the first quarter approximated 89.1%, unchanged from the prior quarter and an increase of 70 basis points from March 31, 2004.
The change in the company's cash-basis same store net operating income in the first quarter of 2005 was -0.1% compared with 0.4% last quarter and -3.1% in the first quarter of 2004. Rents on lease renewals and rollovers continued their sequential improvement declining 8.6% in the first quarter 2005, compared with declines of 12.4% in the prior quarter and 14.7% in the first quarter of 2004.
Hamid R. Moghadam, chairman and CEO, said, "The improved economic environment, and in particular the growth of global trade, continues to drive industrial space absorption and the performance of AMB's portfolio. Our operating portfolio has now produced improving occupancy for three consecutive quarters and, for the first time in more than three years, has exceeded the 95% level. We are now achieving directional improvements in rents and same- store performance in the majority of our markets and believe shareholders will benefit from AMB's ability to capitalize on improving industrial fundamentals."
Investment Activity
The company began seven new development and redevelopment projects during first quarter 2005 in Los Angeles, Miami and Amsterdam. The projects include 817,000 square feet of planned distribution facilities and a 17.6 acre value- added conversion of an industrial site for alternative development. The estimated total investment in all seven projects is $90 million. AMB's industrial development and renovation pipeline now totals 35 projects of approximately 9.6 million square feet globally with an estimated total investment of $881 million, a record for the company. Pipeline deliveries are scheduled from second quarter 2005 through the first quarter of 2008. The pipeline is 67% funded; deliveries slated through the end of 2005 are more than 50% pre-leased.
AMB placed two industrial development projects into operations in the first quarter of 2005. The buildings, held as part of the company's investment portfolio, total 181,800 square feet and were completed for a total investment of approximately $16.8 million. The buildings are located near Dulles and O'Hare international airports and are fully leased.
The company's development activity includes dispositions of completed properties and land. During first quarter 2005, AMB sold one completed development and two land parcels generating $8.6 million of net cash gains.
During the first quarter, AMB acquired 817,000 square feet of distribution facilities in six buildings with a total acquisition cost of approximately $77.8 million. The properties expand AMB's on- and near-airport holdings in Miami, Chicago and New York.
Additional acquisition activity in the quarter included the purchase of an approximate 43% interest in G. Accion, one of Mexico's largest real estate companies, for $46.1 million. AMB and G. Accion began working together on the development of industrial properties in Mexico in early 2002. Since then, AMB's activity in Mexico City and Guadalajara has included approximately 3.1 million square fee
