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| | 2011 First Quarter Earnings
Conference Call 4/20/2011 | | Reporting Definitions / Supplemental Financial Measures
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Acquisition Costincludes estimated acquisition capital expenditures. Estimated acquisition capital expenditures include immediate building improvements that are taken into consideration when underwriting the purchase of a building or which are incurred to bring a building up to operating standard or to stabilization and incremental building improvements and leasing costs that are incurred in an effort to substantially increase the revenue potential of an existing building.
Adjusted EBITDA, Wholly-owned Adjusted EBITDA and AMB’s share of Adjusted EBITDA.AMB uses adjusted earnings before interest (including the amount of capitalized interest deducted from the determination of development gains), tax, depreciation and amortization, impairment charges, development profits related to real estate impairment losses previously recognized, restructuring charges, merger transaction costs, losses on early extinguishment of debt, stock-based compensation amortization and other non-cash charges, and non-development gains, or adjusted EBITDA, to measure both its operating performance and liquidity. AMB considers adjusted EBITDA to provide investors relevant and useful information because it permits investors to view income from its operations on an unleveraged basis before the effects of tax, non-cash depreciation and amortization expense (including stock-based compensation amortization) or non-development gains. By excluding interest expense, adjusted EBITDA allows investors to measure AMB’s operating performance independent of its capital structure and indebtedness and, therefore, allows for a more meaningful comparison of its operating performance between quarters as well as annual periods and to compare its operating performance to that of other companies, both in the real estate industry and in other industries. AMB considers adjusted EBITDA to be a useful supplemental measure for reviewing its comparative performance with other companies because, by excluding non-cash depreciation and amortization expense, adjusted EBITDA can help the investing public compare the performance of a real estate company to that of companies in other industries. The impairment charges were principally a result of increases in estimated capitalization rates and deterioration in market conditions that adversely impacted values. The development profits related to real estate impairment losses previously recognized reflect adjustments to the cost basis of properties previously impaired used to determine profits on disposition. The restructuring charges reflected costs associated with AMB’s reduction in global headcount and cost structure. The merger transaction costs reflected costs associated with AMB’s potential merger transaction with ProLogis. Debt extinguishment losses generally included the costs of repurchasing debt securities. AMB repurchased certain tranches of senior unsecured debt to manage its debt maturities in response to the current financing environment, resulting in greater debt extinguishment costs. Although difficult to predict, these items may be recurring given the uncertainty of the current economic climate and its adverse effects on the real estate and financial markets. While not infrequent or unusual in nature, certain of these items result from market fluctuations that can have inconsistent effects on AMB’s results of operation. The economics underlying certain of these items reflect market and financing conditions in the short-term but can obscure AMB’s performance and the value of AMB’s long-term investment decisions and strategies. Certain of these items reflect activities that are unusual in nature and have inconsistent effects on AMB’s results of operations. Management believes adjusted EBITDA is significant and useful to both it and its investors. Adjusted EBITDA more appropriately reflects the value and strength of AMB’s business model and its potential performance isolated from the volatility of the current economic environment and unobscured by costs (or gains) resulting from AMB’s management of its financing profile in response to the tightening of the capital markets. As a liquidity measure, AMB believes that adjusted EBITDA helps investors to analyze its ability to meet debt service obligations and to make quarterly preferred share dividends and unit distributions. Management uses adjusted EBITDA when measuring AMB’s operating performance and liquidity; specifically when assessing its operating performance, and comparing that performance to other companies, both in the real estate industry and in other industries, and when evaluating its ability to meet debt service obligations and to make quarterly preferred share dividends and unit distributions. AMB believes investors should consider adjusted EBITDA, in conjunction with net income (the primary measure of AMB’s performance) and the other required GAAP measures of its performance and liquidity, to improve their understanding of AMB’s operating results and liquidity, and to make more meaningful comparisons of its performance between periods and as against other companies. By excluding interest, taxes, depreciation and amortization, impairment charges, development profits related to real estate impairment losses previously recognized, restructuring charges, merger transaction costs, debt extinguishment losses, stock-based compensation amortization and other non-cash charges and non-development gains when assessing AMB’s financial performance, an investor is assessing the earnings generated by AMB’s operations, but not taking into account the eliminated expenses or non-development gains incurred in connection with such operations. As a result, adjusted EBITDA has limitations as an analytical tool and should be used in conjunction with AMB’s required GAAP presentations. Adjusted EBITDA does not reflect AMB’s historical cash expenditures or future cash requirements for working capital, capital expenditures or contractual commitments. Adjusted EBITDA also does not reflect the cash required to make interest and principal payments on AMB’s outstanding debt. While adjusted EBITDA is a relevant and widely used measure of operating performance and liquidity, it does not represent net
income or cash flow from operations as defined by GAAP and it should not be considered as an alternative to those indicators in evaluating operating performance or liquidity. Further, AMB’s computation of adjusted EBITDA may not be comparable to EBITDA reported by other companies. Management compensates for the limitations of adjusted EBITDA by providing investors with financial statements prepared according to U.S. GAAP, along with this detailed discussion of adjusted EBITDA and a reconciliation of adjusted EBITDA to net income (or loss), a U.S. GAAP measurement. AMB defines AMB’s share of adjusted EBITDA to be AMB Property Corporation’s pro rata portion of adjusted EBITDA based on its direct or indirect percentage of equity interests in its joint ventures and other investments. AMB defines wholly-owned adjusted EBITDA to be that portion of adjusted EBITDA, which is solely attributable to assets and activities that are 100% directly or indirectly owned by AMB Property Corporation plus cash distributions from joint venture relationships. AMB includes these distributions as they are an additional source of cash flow available to service AMB’s obligations. AMB believes these supplemental measures are useful by providing investors with more comprehensive disclosure regarding AMB’s performance and its ability to cover its financial obligations on both a wholly owned basis and on a total portfolio basis.
The following table reconciles adjusted EBITDA, wholly-owned adjusted EBITDA and AMB’s share of adjusted EBITDA from net loss for the three months ended March 31, 2011 and 2010 (dollars in thousands):
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| | | March 31, | |
| | | 2011 | | | 2010 | |
Net income (loss) | | $ | 14,322 | | | $ | (620 | ) |
| Depreciation and amortization | | | 54,986 | | | | 47,381 | |
| Restructuring charges | | | — | | | | 2,973 | |
| Merger transaction costs | | | 3,697 | | | | — | |
| Stock-based compensation amortization and other non-cash charges | | | 6,770 | | | | 7,286 | |
| Interest expense, including amortization | | | 34,942 | | | | 32,589 | |
| Total discontinued operations, including gains, excluding development profits | | | (15,414 | ) | | | (840 | ) |
| Adjustment for depreciation on development profits | | | (525 | ) | | | (1,546 | ) |
| Income tax expense | | | 1,418 | | | | 1,293 | |
| Capitalized interest attributable to development properties sold or contributed | | | 518 | | | | 200 | |
| Discontinued operations’ adjusted EBITDA | | | 884 | | | | 2,146 | |
| Less: Equity in earnings of unconsolidated joint ventures, net | | | (7,800 | ) | | | (3,875 | ) |
| Less: Adjusted EBITDA attributable to consolidated joint ventures | | | (25,017 | ) | | | (24,048 | ) |
| Distributions from consolidated and unconsolidated joint ventures | | | 11,284 | | | | 9,942 | |
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Wholly-owned adjusted EBITDA | | | 80,065 | | | | 72,881 | |
| Adjustments to derive adjusted EBITDA from consolidated joint ventures: | | | | | | | | |
| Distributions from consolidated joint ventures to AMB | | | (3,182 | ) | | | (4,675 | ) |
| Adjusted EBITDA attributable to consolidated joint ventures | | | 25,017 | | | | 24,048 | |
| Adjusted EBITDA attributable to noncontrolling interests | | | (13,289 | ) | | | (13,215 | ) |
| Adjustments to derive adjusted EBITDA from unconsolidated joint ventures: | | | | | | | | |
| Distributions from unconsolidated joint ventures to AMB | | | (8,102 | ) | | | (5,267 | ) |
| AMB’s share of FFO, as adjusted | | | 20,881 | | | | 14,453 | |
| AMB’s share of interest expense | | | 13,273 | | | | 12,901 | |
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AMB’s share of adjusted EBITDA | | $ | 114,663 | | | $ | 101,126 | |
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Allocation to participating securities.On the Consolidated Statements of Operations, this represents net income attributable to AMB Property Corporation, net of preferred stock dividends, allocated to outstanding unvested restricted shares. On the Consolidated Statements of Fund from Operations, this represents FFO allocated to outstanding unvested restricted shares. For the three months ended March 31, 2011, there were 1,269 unvested restricted shares outstanding (in thousands). For the three months ended March 31, 2010, there were 1,228 unvested restricted shares outstanding (in thousands).
AMB’s share ofcalculations for certain financial measures represent the pro-rata portion of the applicable financial measure based on AMB’s percentage of equity interest in each of the consolidated and unconsolidated co-investment ventures accounted for in the applicable financial measure. AMB believes that “AMB’s share of” calculations are meaningful and useful supplemental measures, which enable both management and investors to assess the operations, earnings and growth of AMB in light of AMB’s ownership interest in its joint ventures and to compare the applicable measure to that of other companies. In addition, it allows for a more meaningful comparison of the applicable measure to that of other companies that do not consolidate any of their joint ventures. “AMB’s share of” calculations are not intended to reflect actual liability should there be a default under loans or a liquidation of the joint ventures. AMB’s computation of “AMB’s share of” measures may not be comparable to that of other real estate companies, as they may use different methodologies for calculating these measures.
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© 2011 AMB Property Corporation | 23
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| | 2011 First Quarter Earnings
Conference Call 4/20/2011 | | Reporting Definitions / Supplemental Financial Measures
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AMB’s share of Other Balance Sheet Items.AMB believes that balance sheet information based on GAAP provides the most appropriate information about financial position. However, AMB considers balance sheet information reported on an owned and managed basis (such as AMB’s share of cash and cash equivalents and restricted cash, AMB’s share of accounts receivable (net) and other assets, AMB’s share of deferred rents receivable and deferred financing costs (net), and AMB’s share of accounts payable and other liabilities) to be useful supplemental measures to help the investors better understand AMB’s operating performance. See Reporting Definitions for definitions of “owned and managed” and “AMB’s share of.” AMB believes that AMB’s share of balance sheet items on an owned and managed basis helps management and investors make a comprehensive assessment of AMB’s total real estate portfolio and provides a better understanding of AMB’s operating activities. While such information is helpful to the investor, it does not provide balance sheet information as defined by GAAP and is not a true alternative to such GAAP measurements. Further, AMB’s computation of its share of balance sheet items on an owned and managed basis may not be comparable to that of other real estate companies, as they may use different methodologies for calculating these measures.
AMB’s share of total debt.AMB’s share of total debt is the pro rata portion of the total debt based on its percentage of equity interest in each of the consolidated and unconsolidated joint ventures holding the debt. AMB believes that its share of total debt is a meaningful supplemental measure, which enables both management and investors to analyze its leverage and to compare its leverage to that of other companies. In addition, it allows for a more meaningful comparison of its debt to that of other companies that do not consolidate their joint ventures. AMB’s share of total debt is not intended to reflect its actual liability should there be a default under any or all of such loans or a liquidation of the joint ventures. See Capitalization Detail for a reconciliation of total debt and AMB’s share of total debt.
AMB’s share of total debt-to-AMB’s share of total assetsis calculated using the following definitions: AMB’s share of total debt is the pro rata portion of the total debt based on AMB’s percentage of equity interest in each of the consolidated and unconsolidated joint ventures holding the debt. AMB’s share of total assets is the pro rata portion of total gross book value of assets based on AMB’s percentage of equity interest in each of the consolidated and unconsolidated joint ventures holding the assets.
AMB’s share of total debt-to-total market capitalizationis calculated using the following definitions: AMB’s share of total debt is the pro rata portion of the total debt based on AMB’s percentage of equity interest in each of the consolidated and unconsolidated joint ventures holding the debt. AMB’s definition of “total market capitalization” is AMB’s share of total debt plus preferred equity liquidation preferences plus market equity. AMB’s definition of “market equity” is the total number of outstanding shares of AMB’s common stock and common limited partnership units multiplied by the closing price per share of its common stock as of period end.
Annualized base rent (ABR)is calculated as monthly base rent (cash basis) per the terms of the lease, as of period end and including contractual rent escalations, multiplied by 12. If free rent is granted, then the first positive rent value is used. Leases denominated in foreign currencies are translated using the currency exchange rate at period end.
Assets Under Managementis AMB’s estimate of the value of the real estate it wholly owns or manages through its consolidated and unconsolidated co-investment ventures or for clients of AMB Capital Partners. Assets under management is calculated by adding the co-investment venture partner’s or client’s share of the carrying value of its real estate investment to AMB’s share of total market capitalization.
Average occupancy percentagerepresents the daily weighted occupancy of the total rentable square feet leased, including month-to-month leases, divided by total rentable square feet. Space is considered leased when the tenant has either taken physical or economic occupancy.
Carrying valueis the sum of the most recent valuation of real estate investments plus subsequently incurred capital expenditures. Generally, each real estate investment is valued once a year.
Cash-basis NOI.Cash-basis NOI is defined as NOI less straight line rents and amortization of lease intangibles. AMB considers cash-basis NOI to be an appropriate and useful supplemental performance measure because cash basis NOI reflects the operating performance of the real estate portfolio excluding the effects of non-cash adjustments and provides a better measure of actual cash basis rental growth for a year-over-year comparison. However, cash-basis NOI should not be viewed as an alternative measure of financial performance since it does not reflect general and administrative expenses, interest expenses, depreciation and amortization costs, capital expenditures and leasing costs, or trends in development and construction activities that could materially impact results from operations. Further, cash-basis NOI may not be comparable to that of other real estate investment trusts, as they may use different methodologies for calculating cash-basis NOI.
For a reconciliation of NOI from net income for the quarter ended March 31, 2011, refer to the SS NOI definition. The following table reconciles AMB’s share of cash-basis NOI from NOI for the quarter ended March 31, 2011 (dollars in thousands):
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| | | For the Quarter Ended | |
| | | March 31, 2011 | |
| NOI | | $ | 106,023 | |
| Straight-line rents and amortization of lease intangibles | | | (5,972 | ) |
| Consolidated joint venture cash NOI from continuing operations | | | (23,019 | ) |
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| Wholly-owned property cash NOI | | | 77,032 | |
| AMB’s share of consolidated joint venture cash NOI | | | 10,698 | |
| AMB’s share of unconsolidated joint venture cash NOI | | | 31,974 | |
| AMB’s share of transaction adjustments | | | 1,237 | |
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| AMB’s share of cash-basis NOI | | $ | 120,941 | |
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Co-investment Venturesare Joint Ventures with institutional investors, managed by AMB from which AMB receives acquisition fees for third-party acquisitions, portfolio and asset management distributions or fees, as well as incentive distributions or promoted interests.
Co-investment venture operating results.
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| For the Quarter Ended March 31, 2011 |
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| | | AMB’s | | | | | | Property | | (Loss) from | | | | | | | | |
| | | Ownership | | | | | | Operating | | Continuing | | Net | | | | | | FFO, as |
| | | Percentage | | Revenues | | Expenses | | Operations | | Income (Loss) | | Cash NOI | | adjusted |
Unconsolidated Co-investment Ventures | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| AMB U.S. Logistics Fund | | | 33 | % | | $ | 71,051 | | | $ | (22,002 | ) | | $ | 4,034 | | | $ | 4,153 | | | $ | 46,476 | | | $ | 25,769 | |
| AMB Europe Logistics Fund | | | 37 | % | | | 26,369 | | | | (5,708 | ) | | | 3,130 | | | | 3,130 | | | | 19,207 | | | | 11,677 | |
| AMB Japan Fund I | | | 20 | % | | | 29,185 | | | | (6,192 | ) | | | 4,037 | | | | 4,037 | | | | 22,930 | | | | 13,596 | |
| AMB-SGP Mexico | | | 22 | % | | | 8,922 | | | | (1,014 | ) | | | (1,881 | ) (1) | | | (1,881 | ) (1) | | | 7,646 | | | | 824 | (1) |
| AMB DFS Fund I | | | 15 | % | | | 33 | | | | (431 | ) | | | (503 | ) | | | (420 | ) | | | (397 | ) | | | (327 | ) |
| AMB Brazil Logistics Partners Fund I | | | 25 | % | | | — | | | | — | | | | 38 | | | | 38 | | | | — | | | | 38 | |
Consolidated Co-investment Ventures | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| AMB-SGP | | | 50 | % | | | 11,063 | | | | (3,834 | ) | | | (803 | ) | | | (803 | ) | | | 7,030 | | | | 2,735 | |
| AMB Institutional Alliance Fund II | | | 24 | % | | | 12,537 | | | | (3,675 | ) | | | 1,941 | | | | 1,941 | | | | 8,709 | | | | 5,500 | |
| AMB-AMS | | | 39 | % | | | 4,056 | | | | (1,228 | ) | | | 501 | | | | 501 | | | | 2,659 | | | | 1,560 | |
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| (1) | | Includes $3.8 million of interest expense on loans from co-investment venture partners. |
Co-investment venture partner’s share ofcalculations for certain financial measures represent the pro-rata portion of the applicable financial measure based on AMB’s co-investment venture partners’ percentage of equity interest in each of the consolidated or unconsolidated co-investment ventures accounted for in the applicable financial measure.
Co-investment venture partner’s (or co-investor’s) share of debtis the co-investment venture partner’s pro-rata portion of total debt.
Co-investment venture partner’s (or co-investor’s) share of equityis the pro-rata portion of the co-investment venture partner’s share of carrying value less the co-investment venture partner’s share of debt.
Completionis generally defined as properties that have reached Stabilization or properties that have been substantially complete for at least 12 months.
Development activitiesinclude ground-up development, redevelopments, land sales and value-added conversions.
Development marginis calculated as contribution value or disposition price less closing costs, minus estimated total investment, before the impact of cumulative real estate impairment losses, and any deferred rents, taxes or third party promotes before any deferrals on contributions, divided by the estimated total investment, before the impact of cumulative real estate impairment losses.
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© 2011 AMB Property Corporation | 24
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| | 2011 First Quarter Earnings
Conference Call 4/20/2011 | | Reporting Definitions / Supplemental Financial Measures
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Estimated FFO, as adjusted, by Business.Estimated FFO, as adjusted, by Business is FFO, as adjusted generated by AMB’s Real Estate Operations, Development and Private Capital business. Estimated Development and Private Capital FFO, as adjusted, was determined by reducing Development Profits, net of taxes, and Private Capital revenues by their respective estimated share of general and administrative expenses, also defined as overhead. Development’s and Private Capital’s estimated allocation of total general and administrative expenses was based on their respective percentage of actual direct general and administrative expenses incurred. Estimated Real Estate Operations FFO, as adjusted represents total AMB FFO, as adjusted, less estimated FFO, as adjusted, attributable to Development and Private Capital. Management believes estimated FFO, as adjusted, by business line is a useful supplemental measure of its operating performance because it helps the investing public compare the operating performance of AMB’s respective businesses to other companies’ comparable businesses. Further, AMB’s computation of FFO, as adjusted, by business line may not be comparable to that reported by other real estate investment trusts as they may use different methodologies in computing such measures.
Estimated investment capacityis AMB’s estimate of the gross real estate which could be acquired through the use of its equity commitments from co-investment venture partners plus AMB’s funding obligations and estimated debt capitalization.
Estimated total investmentrepresents total estimated cost of development, expansion, including initial acquisition costs, prepaid ground leases, buildings, and associated carry costs. Estimated total investments are based on current forecasts and are subject to change. Non-U.S. Dollar investments are translated to U.S. Dollars using the exchange rate at period end.
Estimated yields on development projectsare calculated from estimated annual cash NOI following occupancy stabilization divided by the estimated total investment. Yields exclude value added conversion projects and are calculated on an after-tax basis for international projects.
Fixed charge coverage.Fixed charge coverage is defined as Adjusted EBITDA divided by fixed charges. Fixed charges consist of interest expense less joint venture partner’s share of interest expense and amortization of finance costs and debt premiums, from continuing and discontinued operations, plus AMB’s share of interest expense from unconsolidated joint venture debt, capitalized interest, preferred unit distributions and preferred stock dividends. AMB uses fixed charge coverage to measure its liquidity. AMB believes fixed charge coverage is relevant and useful to investors because it permits fixed income investors to measure AMB’s ability to meet its interest payments on outstanding debt, make distributions to its preferred unitholders and pay dividends to its preferred shareholders. AMB’s computation of fixed charge coverage may not be comparable to fixed charge coverage reported by other companies.
The following table details the calculation of fixed charges for three months ended March 31, 2011 and 2010 (dollars in thousands):
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| | | For the Quarters Ended | |
| | | March 31, | |
| Fixed charge | | 2011 | | | 2010 | |
| Interest expense, including amortization — continuing operations | | $ | 34,942 | | | $ | 32,589 | |
| Amortization of financing costs and debt premiums — continuing operations | | | (3,437 | ) | | | (3,169 | ) |
| Interest expense, including amortization — discontinued operations | | | (14 | ) | | | 27 | |
| Amortization of financing costs and debt premiums — discontinued operations | | | — | | | | (3 | ) |
| Capitalized interest | | | 9,055 | | | | 9,664 | |
| Preferred stock dividends | | | 3,952 | | | | 3,952 | |
| Less: Fixed charge attributable to consolidated joint ventures | | | (11,781 | ) | | | (12,802 | ) |
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Wholly-owned fixed charge | | | 32,717 | | | | 30,258 | |
| Adjustments to derive fixed charge from consolidated joint ventures: | | | | | | | | |
| Fixed charge attributable to consolidated joint ventures | | | 11,781 | | | | 12,802 | |
| Fixed charge attributable to noncontrolling interests | | | (6,193 | ) | | | (6,899 | ) |
| Adjustments to derive fixed charge from unconsolidated joint ventures: | | | | | | | | |
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| AMB’s share of capitalized interest from unconsolidated joint ventures | | | 130 | | | | 265 | |
| AMB’s share of interest expense from unconsolidated joint ventures | | | 13,273 | | | | 12,901 | |
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Total fixed charge | | $ | 51,708 | | | $ | 49,327 | |
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Funds From Operations, as adjusted (“FFO, as adjusted”), Funds From Operations Per Share and Unit, as adjusted (“FFOPS, as adjusted”), Core FFO, as adjusted, Core FFO Per Share and Unit, as adjusted (“Core FFOPS, as adjusted”) and Funds From Operations, as defined by NAREIT (“FFO, as defined by NAREIT”) (together with FFO, as adjusted, FFOPS, as adjusted, Core FFO, as adjusted, Core FFOPS, as adjusted, and FFO, as defined by NAREIT, the “FFO Measures, as adjusted”).AMB believes that net income, as defined by U.S. GAAP, is the most appropriate earnings measure. However, AMB considers funds from operations, as adjusted (or FFO, as adjusted), FFO per share and unit, as adjusted (or FFOPS, as adjusted), Core FFO, as adjusted, Core FFO per share and unit, as adjusted (or Core FFOPS, as adjusted) and FFO, as defined by NAREIT, to be useful supplemental measures of its operating performance. AMB defines FFOPS, as adjusted, as FFO, as adjusted, per fully diluted weighted average share of AMB’s common stock and operating partnership units. AMB calculates FFO, as adjusted, as net income (or loss) available to common stockholders, calculated in accordance with U.S. GAAP, less gains (or losses) from dispositions of real estate held for investment purposes and real estate-related depreciation, and adjustments to derive AMB’s pro rata share of FFO, as adjusted, of consolidated and unconsolidated joint ventures. AMB defines Core FFOPS, as adjusted as Core FFO, as adjusted per fully diluted weighted share of AMB’s common stock and operating partnership units. AMB calculates Core FFO, as adjusted as FFO, as adjusted excluding AMB’s share of development profits. These calculations also include adjustments for items as described below.
Unless stated otherwise, AMB includes the gains from development, including those from value-added conversion projects, before depreciation recapture, as a component of FFO, as adjusted. AMB believes gains from development should be included in FFO, as adjusted, to more completely reflect the performance of one of our lines of business. AMB believes that value-added conversion dispositions are in substance land sales and as such should be included in FFO, as adjusted, consistent with the real estate investment trust industry’s long standing practice to include gains on the sale of land in funds from operations. However, AMB’s interpretation of FFO, as adjusted, or FFOPS, as adjusted, may not be consistent with the views of others in the real estate investment trust industry, who may consider it to be a divergence from the NAREIT definition, and may not be comparable to funds from operations or funds from operations per share and unit reported by other real estate investment trusts that interpret the current NAREIT definition differently than AMB does. In connection with the formation of a joint venture, AMB may warehouse assets that are acquired with the intent to contribute these assets to the newly formed venture. Some of the properties held for contribution may, under certain circumstances, be required to be depreciated under U.S. GAAP. AMB includes in its calculation of FFO, as adjusted, gains or losses related to the contribution of previously depreciated real estate to joint ventures. Although it is a departure from the current NAREIT definition, AMB believes such calculation of FFO, as adjusted, better reflects the value created as a result of the contributions.
In addition, AMB calculates FFO, as adjusted, to exclude impairment and restructuring charges, merger transaction costs, catastrophic disaster losses, debt extinguishment losses and the preferred unit redemption discount. The impairment charges were principally a result of increases in estimated capitalization rates and deterioration in market conditions that adversely impacted values. The restructuring charges reflected costs associated with AMB’s reduction in global headcount and cost structure. Debt extinguishment losses generally included the costs of repurchasing debt securities. AMB repurchased certain tranches of senior unsecured debt to manage its debt maturities in response to the current financing environment, resulting in greater debt extinguishment costs. The preferred unit redemption discount reflects the gain associated with the discount to liquidation preference in the preferred unit redemption price less costs incurred as a result of the redemption. Although difficult to predict, these items may be recurring given the uncertainty of the current economic climate and its adverse effects on the real estate and financial markets. While not infrequent or unusual in nature, these items result from market fluctuations that can have inconsistent effects on AMB’s results of operations. The economics underlying these items reflect market and financing conditions in the short-term but can obscure AMB’s performance and the value of AMB’s long-term investment decisions and strategies. The merger transaction costs, which reflected costs associated with AMB’s potential merger transaction with ProLogis, represented fluctuations that can have inconsistent effects on AMB’s results of operations. Management believes FFO, as adjusted, is significant and useful to both it and its investors. FFO, as adjusted, more appropriately reflects the value and strength of AMB’s business model and its potential performance isolated from the volatility of the current economic environment or unusual activities and unobscured by costs (or gains) resulting from AMB’s management of its financing profile in response to the tightening of the capital
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© 2011 AMB Property Corporation | 25
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| | 2011 First Quarter Earnings
Conference Call 4/20/2011 | | Reporting Definitions / Supplemental Financial Measures
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markets. However, in addition to the limitations of FFO Measures, as adjusted, generally discussed below, FFO, as adjusted, does not present a comprehensive measure of AMB’s financial condition and operating performance. This measure is a modification of the NAREIT definition of funds from operations and should not be used as an alternative to net income or cash as defined by U.S. GAAP.
AMB believes that the FFO Measures, as adjusted, are meaningful supplemental measures of its operating performance because historical cost accounting for real estate assets in accordance with U.S. GAAP implicitly assumes that the value of real estate assets diminishes predictably over time, as reflected through depreciation and amortization expenses. However, since real estate values have historically risen or fallen with market and other conditions, many industry investors and analysts have considered presentation of operating results for real estate companies that use historical cost accounting to be insufficient. Thus, the FFO Measures, as adjusted, are supplemental measures of operating performance for real estate investment trusts that exclude historical cost depreciation and amortization, among other items, from net income available to common stockholders, as defined by U.S. GAAP. AMB believes that the use of the FFO Measures, as adjusted, combined with the required U.S. GAAP presentations, has been beneficial in improving the understanding of operating results of real estate investment trusts among the investing public and making comparisons of operating results among such companies more meaningful. AMB considers the FFO Measures, as adjusted, to be useful measures for reviewing comparative operating and financial performance because, by excluding gains or losses related to sales of previously depreciated operating real estate assets and real estate depreciation and amortization, the FFO Measures, as adjusted, can help the investing public compare the operating performance of a company’s real estate between periods or as compared to other companies. While funds from operations and funds from operations per share are relevant and widely used measures of operating performance of real estate investment trusts, the FFO Measures, as adjusted, do not represent cash flow from operations or net income as defined by U.S. GAAP and should not be considered as alternatives to those measures in evaluating AMB’s liquidity or operating performance. The FFO Measures, as adjusted, also do not consider the costs associated with capital expenditures related to AMB’s real estate assets nor are the FFO Measures, as adjusted, necessarily indicative of cash available to fund AMB’s future cash requirements. Management compensates for the limitations of the FFO Measures, as adjusted, by providing investors with financial statements prepared according to U.S. GAAP, along with this detailed discussion of the FFO Measures, as adjusted, and a reconciliation of the FFO Measures, as adjusted, to net income available to common stockholders, a U.S. GAAP measurement.
See Consolidated Statements of Funds from Operations, as adjusted for a reconciliation of FFO, as adjusted, from net income (loss) available to common stockholders and a reconciliation of Core FFO, as adjusted from FFO, as adjusted.
The following table reconciles projected Core FFO, as adjusted from projected net income available to common stockholders for the year ended December 31, 2011:
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| | | 2011 | |
| | | Low | | | High | |
| Projected net income available to common stockholders | | $ | 0.04 | | | $ | 0.14 | |
| AMB’s share of projected depreciation and amortization | | | 1.37 | | | | 1.37 | |
| AMB’s share of depreciation on development profits recognized to date | | | 0.00 | | | | 0.00 | |
| AMB’s share of gains on dispositions of operating properties recognized to date | | | (0.09 | ) | | | (0.09 | ) |
| Merger transaction costs | | | 0.02 | | | | 0.02 | |
| Impact of additional dilutive securities, other, rounding | | | (0.03 | ) | | | (0.03 | ) |
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Projected Funds From Operations, as adjusted (FFO, as adjusted) | | $ | 1.31 | | | $ | 1.41 | |
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| AMB’s share of development profits recognized to date | | | (0.01 | ) | | | (0.01 | ) |
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Projected Core FFO, as adjusted(1) | | $ | 1.30 | | | $ | 1.40 | |
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Amounts are expressed per share, except FFO, as adjusted, and Core FFO, as adjusted, which are expressed per share and unit.
(1) As development gains are difficult to predict in the current economic environment, management believes Projected Core FFO, as adjusted is the more appropriate and useful measure to reflect its assessment of AMB’s projected operating performance.
Gross book valuerepresents the book value of the property (before accumulated depreciation), net of impairments, owned by the joint venture and excludes net other assets. Development book values include uncommitted land.
Gross operating marginis calculated as NOI divided by gross revenues (excluding straight-line rents and amortization of lease intangibles, reimbursable capital revenue and lease termination fees) for properties in the pool at period end.
Impairment chargesrepresent the write down of assets due to estimated fair value being lower than carry value.
Interest coverage.Interest coverage is defined as adjusted EBITDA divided by AMB’s share of interest expense which consists of consolidated interest expense less joint venture partner’s share of interest expense, including amortization, from continuing and discontinued operations and AMB’s share of interest expense from unconsolidated joint venture debt. AMB uses interest coverage to measure its liquidity. AMB believes interest coverage is relevant and useful to investors because it permits investors to measure AMB’s ability to meet its interest payments on outstanding debt. AMB’s computation of interest coverage may not be comparable to interest coverage reported by other companies.
The following table details AMB’s share of total interest for the three months ended March 31, 2011 and 2010 (dollars in thousands):
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| | | For the Quarters Ended | |
| | | March 31, | |
| Interest | | 2011 | | | 2010 | |
| Interest expense, including amortization — continuing operations | | $ | 34,942 | | | $ | 32,589 | |
| Interest expense, including amortization — discontinued operations | | | (14 | ) | | | 27 | |
| Joint venture partners’ share of interest expense | | | (5,468 | ) | | | (6,583 | ) |
| AMB’s share of interest expense from unconsolidated joint ventures | | | 13,273 | | | | 12,901 | |
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Total interest | | $ | 42,733 | | | $ | 38,934 | |
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Investment capacityrepresents estimated capacity based on the fund’s current cash and leverage limitations as of the most recent quarter end. The estimated investment capacities of AMB U.S. Logistics Fund and AMB Europe Logistics Fund, as open-end funds, are not limited.
Joint Venturesare all joint ventures, including Co-Investment Ventures, with real estate developers, other real estate operators, or institutional investors where AMB may or may not: have control, act as the manager and/or developer, earn asset management distributions or fees, or earn incentive distributions or promoted interests. In certain cases, AMB might provide development, leasing, property management and/or accounting services for which it may receive market compensation.
Joint venture partner’s shareof calculations for certain financial measures represent the pro-rata portion of the applicable financial measure based on AMB’s joint venture partners’ percentage of equity interest in each of the consolidated or unconsolidated joint ventures accounted for in the applicable financial measure.
Market equityis defined as the total number of outstanding shares of AMB’s common stock and common limited partnership units multiplied by the closing price per share of its common stock at period end.
Net Asset Value (“NAV”).AMB believes NAV is a useful supplemental measure of its operating performance because it enables both management and investors to analyze the fair value of its business. An assessment of the fair value of a business involves estimates and assumptions and can be performed using various methods. AMB has presented certain financial measures related to its business that it believes may be useful to the investing public in calculating its NAV but has not presented any specific methodology nor provided any guidance on assumptions or estimates that should be used in the calculation.
Net Operating Income (“NOI”).See same store net operating income for discussion of NOI and a reconciliation of NOI from net income.
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| | 2011 First Quarter Earnings
Conference Call 4/20/2011 | | Reporting Definitions / Supplemental Financial Measures
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Occupancy percentage at period endrepresents the percentage of total rentable square feet leased, including month-to-month leases, divided by total rentable square feet at period end. Space is considered leased when the tenant has either taken physical or economic occupancy.
Owned and managedis defined by AMB as assets in which AMB has at least a 10% ownership interest, is the property or asset manager, and which it intends to hold for the long-term.
Owned and Managed Supplemental Cash Flow Information.AMB believes that cash flow information based on GAAP provides the most appropriate cash flow information. However, AMB considers cash flow information reported on an owned and managed basis (such as straight-line rents and amortization of lease intangibles, AMB’s share of straight-line rents and amortization of lease intangibles, gross lease termination fees, net lease termination fees, AMB’s share of net lease termination fees, tenant improvements, lease commissions and other lease costs, building improvements, Co-investment partners’ share of capital expenditures and AMB’s share of recurring capital expenditures) to be useful supplemental measures to help the investors better understand AMB’s operating performance and cash flow. See Reporting Definitions for definitions of “owned and managed”, “AMB’s share of” and “Co-investment venture partners’ share of”. AMB believes that owned and managed cash flow information helps management and investors make a comprehensive assessment of the cash flow of AMB’s total real estate portfolio and provides a better understanding of AMB’s operating performance and activities. While owned and managed supplemental cash flow information is helpful to the investor, it does not provide cash flow information as defined by GAAP and are not true alternatives to such GAAP measurements. Further, AMB’s computation of owned and managed supplemental cash flow information may not be comparable to that of other real estate companies, as they may use different methodologies for calculating these measures.
Percent pre-leasedrepresents the executed lease percentage of total square feet as of the reporting date.
Pre-stabilized developmentrepresents assets which have reached Completion but have not yet reached Stabilization.
Preferred, with respect to the capitalization ratios, is defined as preferred equity liquidation preferences.
Redevelopment projectsrepresent those buildings that require significant capital expenditures (generally more than 25% of acquired cost or existing basis) to bring the buildings up to operating standards and stabilization (generally 90% leased).
Recurring capital expendituresrepresents non-incremental building improvements and leasing costs required to maintain current revenues. Recurring capital expenditures do not include estimated acquisition capital expenditures which were taken into consideration when underwriting the purchase of a building or which are incurred to bring a building up to operating standards.
Rent changes on renewals and rolloversare calculated as the difference, weighted by square feet, of the net ABR due the first month of a term commencement and the net ABR due the last month of the former tenant’s term. If free rent is granted, then the first positive full rent value is used as a point of comparison. The rental amounts exclude base stop amounts, holdover rent and premium rent charges. If either the previous or current lease terms are under 12 months, then they are excluded from this calculation. If the lease is first generation or there is no prior lease for comparison, then it is excluded from this calculation.
Same Store Net Operating Income, Cash-basis SS NOI (“SS NOI”) and Net Operating Income (“NOI”). AMB defines NOI as rental revenues, including reimbursements, less property operating expenses. NOI excludes depreciation, amortization, general and administrative expenses, restructuring charges, real estate impairment losses, merger transaction costs, development profits (losses), gains (losses) from sale or contribution of real estate interests, and interest expense. AMB believes that net income, as defined by GAAP, is the most appropriate earnings measure. However, NOI is a useful supplemental measure calculated to help investors understand AMB’s operating performance, excluding the effects of gains (losses), costs and expenses which are not related to the performance of the assets. NOI is widely used by the real estate industry as a useful supplemental measure, which helps investors compare AMB’s operating performance with that of other companies. Real estate impairment losses have been excluded in deriving NOI because AMB does not consider its impairment losses to be a property operating expense. AMB believes that the exclusion of impairment losses from NOI is a common methodology used in the real estate industry. Real estate impairment losses relate to the
changing values of AMB’s assets but do not reflect the current operating performance of the assets with respect to their revenues or expenses. AMB’s real estate impairment losses are non-cash charges which represent the write down in the value of assets when estimated fair value over the holding period is lower than current carrying value. The impairment charges were principally a result of increases in estimated capitalization rates and deterioration in market conditions that adversely impacted underlying real estate values. Therefore, the impairment charges are not related to the current performance of AMB’s real estate operations and should be excluded from its calculation of NOI.
AMB considers SS NOI to be a useful supplemental measure of our operating performance for properties that are considered part of the same store pool. AMB defines Cash-basis SS NOI as NOI on a same store basis excluding straight line rents and amortization of lease intangibles. See definition of “same store pool.” AMB considers SS NOI to be an appropriate and useful supplemental performance measure because it reflects the operating performance of the real estate portfolio excluding effects of non-cash adjustments and provides a better measure of actual cash basis rental growth for a year-over-year comparison. In addition, AMB believes that SS NOI helps investors compare the operating performance of AMB’s real estate as compared to other companies. While SS NOI 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 GAAP and should not be considered as an alternative to those measures in evaluating our liquidity or operating performance. SS NOI also does not reflect general and administrative expenses, interest expenses, real estate impairment losses, merger transaction costs, depreciation and amortization costs, capital expenditures and leasing costs, or trends in development and construction activities that could materially impact our results from operations. Further, AMB’s computation of SS NOI may not be comparable to that of other real estate companies, as they may use different methodologies for calculating SS NOI.
The following table reconciles consolidated cash-basis SS NOI and NOI from net loss for the three months ended March 31, 2011 and 2010 (dollars in thousands):
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| | | For the Quarters Ended | |
| | | March 31, | |
| | | 2011 | | | 2010 | |
| Net income (loss) | | $ | 14,322 | | | $ | (620 | ) |
| Private capital income | | | (7,683 | ) | | | (7,445 | ) |
| Depreciation and amortization | | | 54,986 | | | | 47,381 | |
| General and administrative and fund costs | | | 30,902 | | | | 32,265 | |
| Restructuring charges | | | — | | | | 2,973 | |
| Merger transaction costs | | | 3,697 | | | | — | |
| Total other income and expenses | | | 26,850 | | | | 24,813 | |
| Total discontinued operations | | | (17,051 | ) | | | (840 | ) |
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| NOI | | | 106,023 | | | | 98,527 | |
| Less non same-store NOI | | | (18,888 | ) | | | (11,233 | ) |
Less non cash adjustments(1) | | | (2,279 | ) | | | (2,877 | ) |
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| Cash-basis same-store NOI | | $ | 84,856 | | | $ | 84,417 | |
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| Less lease termination fees | | $ | (393 | ) | | $ | (638 | ) |
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| Cash-basis same-store NOI, excluding lease termination fees | | $ | 84,463 | | | $ | 83,779 | |
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| (1) | | Non-cash adjustments include straight line rents and amortization of lease intangibles for the same store pool only. |
Same store NOI growthis the change in the NOI (excluding straight-line rents and amortization of lease intangibles) of the same store pool from the prior year reporting period to the current year reporting period.
Same store poolincludes all properties that are owned as of the end of both the current and prior year reporting periods and excludes development properties for both the current and prior reporting periods. The same store pool is set annually and excludes properties purchased and developments stabilized after December 31, 2009.
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| | 2011 First Quarter Earnings
Conference Call 4/20/2011 | | Reporting Definitions / Supplemental Financial Measures
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Second generation TIs and LCs per square footare total tenant improvements, lease commissions and other leasing costs incurred during leasing of second generation space divided by the total square feet leased. Costs incurred prior to leasing available space are not included until such space is leased. Second generation space excludes newly developed square footage or square footage vacant at acquisition.
Stabilizationis generally defined as properties that are 90% occupied.
Stabilized cap ratesare calculated as cash NOI or NOI, as applicable, stabilized to market occupancy (generally 95%) divided by total acquisition cost. The total acquisition cost basis includes the initial purchase price, the effects of marking assumed debt to market, lease intangible adjustments, estimated acquisition capital expenditures, and leasing costs necessary to achieve stabilization. AMB defines cash NOI as NOI excluding straight line rents and amortization of lease intangibles.
Tenant retentionis the square footage of all leases rented by existing tenants divided by the square footage of all expiring and rented leases during the reporting period, excluding the square footage of tenants that default or buy-out prior to expiration of their lease, short-term tenants and the square footage of month-to-month leases.
Total market capitalizationis defined by AMB as AMB’s share of total debt plus preferred equity liquidation preferences plus market equity (unless otherwise noted).
Value-added acquisitionsrepresent unstabilized properties which AMB acquires as a part of management’s current belief that the discount in pricing attributed to the operating challenges of the property could provide greater returns, once stabilized, than the returns of stabilized properties, which are not value added acquisitions. Value added acquisitions generally have one or more of the following characteristics: (i) existing vacancy, typically in excess of 20%, (ii) short-term lease rollover, typically during the first two years of ownership, or (iii) significant capital improvement requirements, typically in excess of 20% of the purchase price. AMB excludes value-added acquisitions from its owned and managed and consolidated operating statistics prior to stabilization (generally 90% leased) in order to provide investors with data which it feels better reflects the performance of its core portfolio.
Value-added conversion projectsrepresent the repurposing of industrial properties to a higher and better use, including office, residential, retail, research & development or manufacturing. Activities required to prepare the property for conversion to a higher and better use may include such activities as rezoning, redesigning, reconstructing and retenanting. The sales price of the value-added conversion project is generally based on the underlying land value based on its ultimate use and as such, little to no residual value is ascribed to the industrial building(s).
Wholly-owned fixed charge coverageis defined as wholly-owned adjusted EBITDA divided by wholly-owned fixed charges. AMB believes that wholly-owned fixed charge coverage is useful to certain investors whose focus is to understand AMB’s ability to cover those fixed charges which arise only from obligations which are solely AMB’s with adjusted EBITDA which is solely attributed to 100% owned assets and activities plus cash distributions from joint ventures. See Fixed Charge Coverage.
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| | 2011 First Quarter Earnings
Conference Call 4/20/2011 | | Forward-Looking Statements |
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Some of the information included in this report and the presentations to be held in connection therewith contains forward-looking statements, such as those related to factors regarding positive net absorption, renewal of our lines of credit, future financing activity, ability to access attractive financing globally, our growth opportunities, long term prospects for AMB and industrial real estate, scaled overhead structure, capital required for growth and funding sources, our future debt and JV debt structure and strategies regarding average remaining terms, average rates, floating rates, bond issuances, credit facilities and secured debt, consolidated vs. unconsolidated debt, share of JV debt vs. wholly owned debt, NAV, compound annual growth rate, teams fully engaged in best markets, our buying advantage and investment opportunities available to us (including distressed or strategic transactions), utilization of low yielding assets and acquiring assets in excess of cost of capital, recovery in leading business indicators and fundamentals, including rental rates, occupancy, real estate values, and investor/customer interest, FFO, as adjusted, Core FFO, as adjusted, NOI and earnings generated by increased occupancy, rental rate recovery, lease up of the development portfolio, monetization of land bank and development capability, and the formation of new ventures, capital deployment and other value creating activities, the consummation of asset sales marketed, under contract or LOI, our opportunities and plans (including those regarding our global positioning and future capital deployment), estimated financial and performance results, our projected funds from operations, future assets under management, same store and/or cash net operating income, occupancy, development portfolio lease-up, revenue, G&A, overhead expenses, deployed equity and other financial and operational guidance, our future performance compared to peers and other market indices, rent growth, industrial and other market, GDP and trade growth, market drivers, trends and forecasts, port opportunities, on-tarmac opportunities, hiring, performance and retention of key personnel, leveraging of relationships, continuation and effectiveness of strategic drivers, information regarding our development, value-added conversion, redevelopment and value-added acquisition projects (including stabilization or completion dates, square feet at stabilization or completion, sale or contribution dates, yields from such projects, our share of remaining funding, costs and total investment amounts, scope, location and timing of development starts and other projects, margins, projected gains and returns, sustainability, profitability, demand for projects, targeted value-added conversion and acquisition projects, intent of property use, redevelopment and conversion timelines, entitlement and repositioning potential of land), ability to deliver customer solutions, strength of lender and customer relationships, lease expirations, performance and value-creation of investments and market entry opportunities, real estate valuations, capitalization rates, acquisition capital and volume, scope and build out and monetization potential of land inventory, co-investment venture and other estimated investment capacity, terms of the co-investment ventures, performance, revenues and returns on investment, target leverage, timing and amounts of incentive, asset management, acquisition and other private capital distributions, promotes and fees, private capital demand, amounts of new investment, launching of additional joint ventures, termination of funds, planned gross capitalization, future balance sheet capacity to cover capital requirements, our plans and ability to retire, refinance and issue secured and unsecured debt and maintain fixed charge coverage at certain levels, ability to exercise or maintain credit extensions, our position to maintain a solid financial position, maintain leverage targets and address debt maturities and interest rate changes, which are made pursuant to the safe-harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. Because these forward-looking statements involve numerous risks and uncertainties, there are important factors that could cause our actual results to differ materially from those in the forward-looking statements, and you should not rely on the forward-looking statements as predictions of future events. The events or circumstances reflected in forward-looking statements might not occur. You can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “forecasting,” “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 should not be read as guarantees of future performance or results, and will not necessarily be accurate indicators of whether, or the time at which, such performance or results will be achieved. 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. We caution you not to place undue reliance on forward-looking statements, which reflect our analysis only and speak only as of the date of this report or the dates indicated in the statements. We assume no obligation to update or supplement forward-looking statements. 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: changes in general economic conditions in California, the U.S. or globally (including financial market fluctuations), global trade or in the real estate sector (including risks relating to decreasing real estate valuations and impairment charges); risks associated with using debt to fund the company’s business activities, including refinancing and interest rate risks (including inflation risks); the company’s failure to obtain, renew, or extend necessary financing or access the debt or equity markets; the company’s failure to maintain its current credit agency ratings or comply with its debt covenants; risk related to the proposed merger transaction with ProLogis, including litigation related to the merger, any decreases in the price of ProLogis stock and the risk that, if completed, the merger may not achieve its intended results; risks associated with the ability to consummate the merger and the timing of the closing of the merger; risks related to the company’s obligations in the event of certain defaults under co-investment venture and other debt; risks associated with equity and debt securities financings and issuances (including the risk of dilution); defaults on or non-renewal of leases by customers or renewal at lower than expected rent or failure to lease at all or on expected terms; difficulties in identifying properties, portfolios of properties, or interests in real-estate related entities or platforms to acquire and in effecting acquisitions on advantageous terms and the failure of acquisitions to perform as the company expects; unknown liabilities acquired in connection with the acquired properties, portfolios of properties, or interests in real-estate related entities; the company’s failure to successfully integrate acquired properties and operations; costs or liabilities related to our potential merger transaction with ProLogis; risks and uncertainties affecting property development, redevelopment and value-added conversion (including construction delays, cost overruns, the company’s inability to obtain necessary permits and financing, the company’s inability to lease properties at all or at favorable rents and terms, and public opposition to these activities); the company’s failure to set up additional funds, attract additional investment in existing funds or to contribute properties to its co-investment ventures due to such factors as its inability to acquire, develop, or lease properties that meet the investment criteria of such ventures, or the co-investment ventures’ inability to access debt and equity capital to pay for property contributions or their allocation of available capital to cover other capital requirements; risks and uncertainties relating to the disposition of properties to third parties and the company’s ability to effect such transactions on advantageous terms and to timely reinvest proceeds from any such dispositions; risks of doing business internationally and global expansion, including unfamiliarity with the new markets and currency and hedging risks; risks of changing personnel and roles; risks related to suspending, reducing or changing the company’s dividends; losses in excess of the company’s insurance coverage; changes in local, state and federal laws and regulatory requirements, including changes in real estate, tax and zoning laws; increases in real property tax rates; risks associated with the company’s tax structuring; increases in interest rates and operating costs or greater than expected capital expenditures; environmental uncertainties; risks related to natural disasters; and our failure to qualify and maintain our status as a real estate investment trust. Our success also depends upon economic trends generally, various market conditions and fluctuations and those other risk factors discussed under the heading “Risk Factors” and elsewhere in our most recent annual report on Form 10-K for the year ended December 31, 2010.
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