Prologis 10-Q/A 2007 Q1 Quarterly report (amended)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

Form 10-Q/A

Amendment No. 1

(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, 2007
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number:001-14245

AMB Property, L.P.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	94-3285362
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
Pier 1, Bay 1, San Francisco, California (Address of Principal Executive Offices)	94111 (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 a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” inRule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer  o     Accelerated filer  o     Non-accelerated filer  þ

Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act).  Yes o     No þ

AMB PROPERTY, L.P.

INDEX

			Page
PART I.FINANCIALINFORMATION
	Item 1.	Financial Statements (unaudited)
		Consolidated Balance Sheets as of March 31, 2007 and December 31, 2006		1
		Consolidated Statements of Operations for the three months ended March 31, 2007 and 2006		2
		Consolidated Statement of Partners’ Capital for the three months ended March 31, 2007		3
		Consolidated Statements of Cash Flows for the three months ended March 31, 2007 and 2006		4
		Notes to Consolidated Financial Statements		5
PART II.OTHERINFORMATION
	Item 6.	Exhibits		27
EXHIBIT 31.2
EXHIBIT 32.2

This Quarterly Report onForm 10-Q for AMB Property, L.P. for the quarter ended March 31, 2007 is being amended to revise Part I, Item 1 to include in Note 8 of the Notes to Consolidated Financial Statements summarized income statement information for the Operating Partnership’s unconsolidated co-investment joint ventures.

PART I

Item 1.  Financial Statements

AMB PROPERTY, L.P.

CONSOLIDATED BALANCE SHEETS

As of March 31, 2007 and December 31, 2006

	March 31,			December 31,
	2007			2006
	(Unaudited, dollars in thousands)
ASSETS
Investments in real estate:
Land	$	1,346,220		$	1,351,123
Buildings and improvements		4,071,200			4,038,474
Construction in progress		1,360,318			1,186,136
Total investments in properties		6,777,738			6,575,733
Accumulated depreciation and amortization		(829,814	)		(789,693	)
Net investments in properties		5,947,924			5,786,040
Investments in unconsolidated joint ventures		279,422			274,381
Properties held for contribution, net		144,961			154,036
Properties held for divestiture, net		11,227			20,916
Net investments in real estate		6,383,534			6,235,373
Cash and cash equivalents		259,818			174,763
Restricted cash		26,343			21,115
Mortgage and loan receivables		18,711			18,747
Accounts receivable, net of allowance for doubtful accounts of $6,053 and $6,361, respectively		141,647			133,998
Deferred financing costs, net		30,190			20,394
Other assets		116,740			109,122
Total assets	$	6,976,983		$	6,713,512
LIABILITIES AND PARTNERS’ CAPITAL
Debt:
Secured debt	$	1,648,336		$	1,395,354
Unsecured senior debt		1,057,186			1,101,874
Unsecured credit facilities		474,849			852,033
Other debt		86,146			88,154
Total debt		3,266,517			3,437,415
Security deposits		37,274			36,106
Distributions payable		57,500			48,967
Accounts payable and other liabilities		192,598			186,807
Total liabilities		3,553,889			3,709,295
Commitments and contingencies (Note 12)
Minority interests:
Joint venture partners		506,611			555,201
Preferred unitholders		132,912			129,764
Total minority interests		639,523			684,965
Partners’ capital:
General partner, 99,089,842 and 89,433,024 units outstanding, respectively; 2,000,000 Series L preferred units issued and outstanding with a $50,000 liquidation preference, 2,300,000 Series M preferred units issued and outstanding with a $57,500 liquidation preference, 3,000,000 Series O preferred units issued and outstanding with a $75,000 liquidation preference and 2,000,000 Series P preferred units issued and outstanding with a $50,000 liquidation preference		2,623,368			2,166,657
Limited partners, 3,407,360 and 3,450,343 units, respectively; 800,000 Series J preferred units with a $40,000 liquidation preference, 800,000 Series K preferred units with a $40,000 liquidation preference		160,203			152,595
Total partners’ capital		2,783,571			2,319,252
Total liabilities and partners’ capital	$	6,976,983		$	6,713,512

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

1

AMB PROPERTY, L.P.

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months Ended March 31, 2007 and 2006

	For the Three Months
	Ended March 31,
	2007			2006
	(Unaudited, dollars in thousands, except unit and per unit amounts)
REVENUES
Rental revenues	$	162,082		$	171,301
Private capital income		5,925			5,106
Total revenues		168,007			176,407
COSTS AND EXPENSES
Property operating expenses		(25,371	)		(24,300	)
Real estate taxes		(18,876	)		(19,843	)
Depreciation and amortization		(41,029	)		(42,754	)
Impairment losses		(257	)		—
General and administrative		(29,854	)		(23,048	)
Other expenses		(912	)		(537	)
Fund costs		(241	)		(614	)
Total costs and expenses		(116,540	)		(111,096	)
OTHER INCOME AND EXPENSES
Equity in earnings of unconsolidated joint ventures, net		2,113			2,088
Other income		5,507			3,507
Gains from dispositions of real estate interests		136			—
Development profits, net of taxes		12,192			674
Interest expense, including amortization		(33,865	)		(39,153	)
Total other income and expenses, net		(13,917	)		(32,884	)
Income before minority interests, discontinued operations and cumulative effect of change in accounting principle		37,550			32,427
Minority interests’ share of income:
Joint venture partners’ share of income before minority interests and discontinued operations		(7,193	)		(8,539	)
Joint venture partners’ share of development (profits) losses		(12	)		—
Preferred unitholders		(2,242	)		(3,437	)
Total minority interests’ share of income		(9,447	)		(11,976	)
Income from continuing operations before cumulative effect of change in accounting principle		28,103			20,451
Discontinued operations:
Income attributable to discontinued operations, net of minority interests		81			2,359
Gains from dispositions of real estate, net of minority interests		44			7,366
Total discontinued operations		125			9,725
Net income before cumulative effect of change in accounting principle		28,228			30,176
Cumulative effect of change in accounting principle		—			193
Net income		28,228			30,369
Series L, M, O and P preferred unit distributions		(3,952	)		(3,096	)
Series J and K preferred unit distributions		(1,590	)		(1,590	)
Preferred unit redemption discount / issuance costs		—			(1,097	)
Net income available to common unitholders	$	22,686		$	24,586
Income available to common unitholders attributable to:
General partner	$	21,730		$	23,384
Limited partners		956			1,202
Net income available to common unitholders	$	22,686		$	24,586
Basic income per common unit
Income from continuing operations (after preferred unit distributions) before cumulative effect of change in accounting principle	$	0.23		$	0.16
Discontinued operations		—			0.11
Cumulative effect of change in accounting principle		—			—
Net income available to common unitholders	$	0.23		$	0.27
Diluted income per common unit
Income from continuing operations (after preferred unit distributions) before cumulative effect of change in accounting principle	$	0.23		$	0.16
Discontinued operations		—			0.10
Cumulative effect of change in accounting principle		—			—
Net income available to common unitholders	$	0.23		$	0.26
WEIGHTED AVERAGE COMMON UNITS OUTSTANDING
Basic		96,943,042			90,821,246
Diluted		99,776,750			94,567,680

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

2

AMB PROPERTY, L.P.

CONSOLIDATED STATEMENT OF PARTNERS’ CAPITAL

For the Three Months Ended March 31, 2007

	General Partner										Limited Partners
	Preferred Units					Common Units					Preferred Units					Common Units
	Units		Amount			Units		Amount			Units		Amount			Units			Amount			Total
	(Unaudited, dollars in thousands, except unit amounts)
Balance as of December 31, 2006		9,300,000	$	223,417			89,433,024	$	1,943,240			1,600,000	$	77,815			3,450,343		$	74,780		$	2,319,252
Comprehensive income:
Net income		—		3,952			—		21,730			—		1,590			—			956
Unrealized gain on securities and derivatives		—		—			—		(13	)		—		—			—			—
Currency translation adjustment		—		—			—		353			—		—			—			—
Total comprehensive income		—																					28,568
Stock-based compensation amortization and issuance of common limited partnership units in connection with the issuance of restricted stock and options		—		—			29,443		5,108			—		—			—			—			5,108
Issuance of common units		—		—			8,365,800		472,072			—		—			—			—			472,072
Issuance of common limited partnership units in connection with the exercise of stock options		—		—			1,218,592		19,333			—		—			—			—			19,333
Conversion of operating partnership units to common stock		—		—			42,983		2,600			—		—			(42,983	)		(860	)		1,740
Forfeiture of common limited partnership units in connection with the forfeiture of restricted stock		—		—			—		(1,095	)		—		—			—			—			(1,095	)
Reallocation of interests		—		—			—		(13,966	)		—		—			—			9,845			(4,121	)
Distributions		—		(3,952	)		—		(49,411	)		—		(1,590	)		—			(2,333	)		(57,286	)
Balance as of March 31, 2007		9,300,000	$	223,417			99,089,842	$	2,399,951			1,600,000	$	77,815			3,407,360		$	82,388		$	2,783,571

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

3

AMB PROPERTY, L.P.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended March 31, 2007 and 2006

	2007			2006
	(Unaudited, dollars in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	28,228		$	30,369
Adjustments to net income:
Straight-line rents and amortization of lease intangibles		(2,715	)		(5,146	)
Depreciation and amortization		41,029			42,754
Impairment losses		257			—
Stock-based compensation amortization		5,108			4,829
Equity in earnings of unconsolidated joint ventures		(2,113	)		(2,088	)
Operating distributions received from unconsolidated joint ventures		3,712			326
Gains from dispositions of real estate interests		(136	)		—
Development profits, net of taxes		(12,192	)		(674	)
Debt premiums, discounts and finance cost amortization, net		(578	)		2,850
Total minority interests’ share of net income		9,447			11,976
Discontinued operations:
Depreciation and amortization		(4	)		514
Joint venture partners’ share of net income		(65	)		—
Gains from dispositions of real estate, net of minority interests		(44	)		(7,366	)
Cumulative effect of change in accounting principle		—			(193	)
Changes in assets and liabilities:
Accounts receivable and other assets		(15,802	)		271
Accounts payable and other liabilities		1,828			(26,323	)
Net cash provided by operating activities		55,960			52,099
CASH FLOWS FROM INVESTING ACTIVITIES
Change in restricted cash		(5,243	)		9,032
Cash paid for property acquisitions		(18,553	)		(121,197	)
Additions to land, buildings, development costs, building improvements and lease costs		(243,638	)		(218,630	)
Net proceeds from divestiture of real estate		114,107			20,707
Additions to interests in unconsolidated joint ventures		(8,873	)		999
Repayment of mortgage and loan receivables		36			32
Net cash used in investing activities		(162,164	)		(309,057	)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common units net		491,405			29,469
Borrowings on secured debt		446,351			1,631
Payments on secured debt		(198,351	)		(26,778	)
Borrowings on other debt		—			43,086
Payments on other debt		(2,158	)		(420	)
Borrowings on unsecured credit facilities		241,183			284,185
Payments on unsecured credit facilities		(625,083	)		(47,686	)
Payment of financing fees		(10,483	)		(2,997	)
Net proceeds from issuances of senior debt		24,997			—
Payments on senior debt securities		(70,000	)		(25,000	)
Issuance costs on preferred units		—			(217	)
Repurchase of preferred units		(6	)		(77,392	)
Contributions from co-investment partners		1,111			65,859
Distributions paid to partners		(46,421	)		(43,710	)
Distributions to minority interests, including preferred units		(61,572	)		(34,473	)
Net cash provided by financing activities		190,973			165,557
Net effect of exchange rate changes on cash		286			988
Net increase (decrease) in cash and cash equivalents		85,055			(90,413	)
Cash and cash equivalents at beginning of period		174,763			232,881
Cash and cash equivalents at end of period	$	259,818		$	142,468
Supplemental Disclosures of Cash Flow Information
Cash paid for interest, net of capitalized interest	$	34,932		$	29,678
Non-cash transactions:
Acquisition of properties	$	18,109		$	153,355
Assumption of secured debt		—			(28,300	)
Assumption of other assets and liabilities		473			(802	)
Acquisition capital		(29	)		(3,056	)
Net cash paid for property acquisitions	$	18,553		$	121,197
Preferred unit redemption issuance costs	$	—		$	1,097
Contribution of properties to unconsolidated joint ventures, net	$	8,751		$	—

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

4

AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2007

(unaudited)

1.   Organization and Formation of the Company

AMB Property, L.P., a Delaware limited partnership (the “Operating Partnership”), commenced operations shortly before the consummation of AMB Property Corporation’s, a Maryland corporation (the “Company”), initial public offering on November 26, 1997. The Company elected to be taxed as a real estate investment trust (REIT) under Sections 856 through 860 of the Internal Revenue Code of 1986 as amended (the “Code”), commencing with its taxable year ended December 31, 1997, and believes its current organization and method of operation will enable it to maintain its status as a REIT. The Operating Partnership, is engaged in the acquisition, development and operation of industrial properties in key distribution markets throughout North America, Europe and Asia. The Operating Partnership uses the terms “industrial properties” or “industrial buildings” to describe various types of industrial properties in its portfolio and uses these terms interchangeably with the following: logistics facilities, centers or warehouses; distribution facilities, centers or warehouses; High Throughput Distribution^® (HTD^®) facilities; or any combination of these terms. The Operating Partnership uses the term “owned and managed” to describe assets in which it has at least a 10% ownership interest, for which it is the property or asset manager, and which it intends to hold for the long-term. Unless the context otherwise requires, the “Company” means AMB Property Corporation, the Operating Partnership and their other controlled subsidiaries and the “Operating Partnership” means AMB Property, L.P. and its controlled subsidiaries.

As of March 31, 2007, the Company owned an approximate 95.5% general partnership interest in the Operating Partnership, excluding preferred units. The remaining approximate 4.5% common limited partnership interests are owned by non-affiliated investors and certain current and former directors and officers of the Company. As the sole general partner of the Operating Partnership, the Company has full, exclusive and complete responsibility and discretion in the day-to-day management and control of the Operating Partnership. Net operating results of the Operating Partnership are allocated after preferred unit distributions based on the respective partners’ ownership interests. Certain properties are owned by the Operating Partnership through limited partnerships, limited liability companies and other entities. The ownership of such properties through such entities does not materially affect the Operating Partnership’s overall ownership interests in the properties.

The Operating Partnership enters into co-investment joint ventures with institutional investors. Theseco-investment joint ventures provide the Operating Partnership with an additional source of capital and income. As of March 31, 2007, the Operating Partnership had investments in five consolidated and four unconsolidatedco-investment joint ventures. Effective October 1, 2006, the Operating Partnership deconsolidated AMB Institutional Alliance Fund III, L.P., anopen-ended co-investment partnership formed in 2004 with institutional investors, on a prospective basis, due to the re-evaluation of the Operating Partnership’s accounting for its investment in the fund in light of changes to the partnership agreement regarding the general partner’s rights effective October 1, 2006.

AMB Capital Partners, LLC, a Delaware limited liability company (“AMB Capital Partners”), provides real estate investment services to clients on a fee basis. Headlands Realty Corporation, a Maryland corporation, conducts a variety of businesses that include development projects available for sale or contribution to third parties and incremental income programs. IMD Holding Corporation, a Delaware corporation, conducts a variety of businesses that also includes development projects available for sale or contribution to third parties. AMB Capital Partners, Headlands Realty Corporation and IMD Holding Corporation are direct or indirect subsidiaries of the Operating Partnership.

As of March 31, 2007, the Operating Partnership owned or had investments in, on a consolidated basis or through unconsolidated joint ventures, properties and development projects expected to total approximately 128.2 million rentable square feet (11.9 million square meters) and 1,101 buildings in 40 markets within thirteen countries. Additionally, as of March 31, 2007, the Operating Partnership managed, but did not have a significant ownership interest in, industrial and other properties, totaling approximately 1.5 million rentable square feet. The Operating Partnership’s investment strategy generally targets customers whose businesses are tied to global trade,

5

AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

which according to the World Trade Organization, has been growing at a rate more than three times that of world gross domestic product over the past 30 years. To serve the facility needs of these customers, the Operating Partnership seeks to invest in major distribution markets, transportation hubs and gateways that, generally, are tied to global trade, both in the U.S. and internationally.

Of the approximately 128.2 million rentable square feet as of March 31, 2007:

•  on an owned and managed basis, which includes investments held on a consolidated basis or through unconsolidated joint ventures, the Operating Partnership owned or partially owned properties, principally warehouse distribution buildings, encompassing approximately 103.2 million rentable square feet that were 95.2% leased;

•  on an owned and managed basis, which includes investments held on a consolidated basis or through unconsolidated joint ventures, the Operating Partnership had investments in 44 industrial development projects which are expected to total approximately 14.7 million rentable square feet upon completion and one industrial operating property, totaling approximately 0.2 million square feet which is available for sale or contribution;

•  on a consolidated basis, the Operating Partnership owned eleven development projects, totaling approximately 2.7 million rentable square feet that are available for sale or contribution; and

•  through other non-managed unconsolidated joint ventures, the Operating Partnership had investments in 46 industrial operating properties, totaling approximately 7.4 million rentable square feet.

2.   Interim Financial Statements

The consolidated financial statements included herein have been prepared pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Accordingly, certain information and note disclosures normally included in the annual financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted.

In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments of a normal, recurring nature, necessary for a fair presentation of the Operating Partnership’s consolidated financial position and results of operations for the interim periods. The interim results for the three months ended March 31, 2007 are not necessarily indicative of future results. These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Operating Partnership’s Annual Report onForm 10-K for the year ended December 31, 2006.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Investments in Real Estate.  Investments in real estate and leasehold interests 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. The Operating Partnership also regularly reviews the impact of above or below-market leases, in-place leases and lease origination costs for all new acquisitions, and records an intangible asset or liability accordingly. Carrying values for financial reporting purposes are reviewed for impairment on aproperty-by-property basis whenever events or changes in circumstances indicate that the carrying value of a property may not be fully recoverable. Impairment is recognized when estimated expected future cash flows (undiscounted and without interest charges) are less than the carrying value of the property. The estimation of expected future net cash flows is inherently uncertain and relies on assumptions regarding current and future economics and market conditions and the availability of capital. If impairment analysis assumptions change, then an adjustment to the carrying value of

6

AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

the Operating Partnership’s 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 earnings. As a result of leasing activity and the economic environment, the Operating Partnership re-evaluated the carrying value of its investments and recorded an impairment charge of $0.3 million during the three months ended March 31, 2007 on one of its investments.

Reclassifications.  Certain items in the consolidated financial statements for prior periods have been reclassified to conform to current classifications.

Comprehensive Income.  The Operating Partnership reports comprehensive income in its Statement of Partners’ Capital. Comprehensive income was $28.6 million and $30.3 million for the three months ended March 31, 2007 and 2006, respectively.

International Operations.  The U.S. dollar is the functional currency for the Operating Partnership’s subsidiaries operating in the United States and Mexico. The functional currency for the Operating Partnership’s subsidiaries operating outside the United States is generally the local currency of the country in which the entity is located, mitigating the effect of currency exchange gains and losses. The Operating Partnership’s subsidiaries whose functional currency is not the U.S. dollar translate their financial statements into U.S. dollars. Assets and liabilities are translated at the exchange rate in effect as of the financial statement date. The Operating Partnership translates income statement accounts using the average exchange rate for the period and significant nonrecurring transactions using the rate on the transaction date. These gains (losses) are included in accumulated other comprehensive income (loss) as a separate component of partners’ capital.

The Operating Partnership’s international subsidiaries may have transactions denominated in currencies other than their functional currency. In these instances, non-monetary assets and liabilities are reflected at the historical exchange rate, monetary assets and liabilities are remeasured at the exchange rate in effect at the end of the period and income statement accounts are remeasured at the average exchange rate for the period. These gains (losses) are included in the Operating Partnership’s results of operations.

The Operating Partnership also records gains or losses in the income statement when a transaction with a third party, denominated in a currency other than the entity’s functional currency, is settled and the functional currency cash flows realized are more or less than expected based upon the exchange rate in effect when the transaction was initiated.

Goodwill and Intangible Assets.  The Operating Partnership has classified as goodwill the cost in excess of fair value of the net assets of companies acquired in purchase transactions. As prescribed in Statement of Financial Accounting Standards No. 142,Goodwill and Other Intangible Assets, (SFAS 142) goodwill and certain indefinite lived intangible assets, including excess reorganization value and certain trademarks, are no longer amortized, but are subject to at least annual impairment testing. The Operating Partnership tests annually (or more often, if necessary) for impairment under SFAS 142. The Operating Partnership determined that there was no impairment to goodwill and intangible assets during the quarter ended March 31, 2007.

New Accounting Pronouncements.  In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48,Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109, (FIN 48), which clarifies the accounting and disclosure for uncertainty in tax positions, as defined. FIN 48 seeks to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting for income taxes. Adoption of FIN 48 on January 1, 2007 did not have a material effect on the Operating Partnership’s financial statements.

The tax years2002-2006 remain open to examination by the major taxing jurisdictions to which the Operating Partnership are subject.

7

AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

3.   Real Estate Acquisition and Development Activity

Acquisition Activity.  During the three months ended March 31, 2007, on an owned and managed basis, the Operating Partnership acquired eight industrial properties aggregating approximately 1.8 million square feet for a total expected investment of $141.8 million (includes acquisition costs of $137.0 million and estimated acquisition capital of $4.8 million). Of the eight industrial properties acquired, one approximately 0.2 million square foot industrial property for a total expected investment of $20.2 million (includes acquisition costs of $20.1 million and estimated acquisition capital of $0.1 million) was acquired directly by the Operating Partnership and seven industrial properties aggregating approximately 1.6 million square feet for a total expected investment of $121.6 million (includes acquisition costs of $116.9 million and estimated acquisition capital of $4.7 million) were acquired through two of its unconsolidated joint ventures. During the three months ended March 31, 2006, the Operating Partnership acquired six industrial properties, aggregating approximately 2.1 million square feet, for a total expected investment of $153.4 million (includes acquisition costs of $150.3 million and estimated acquisition capital of $3.1 million).

Development Starts.  During the three months ended March 31, 2007, the Operating Partnership initiated five new industrial development projects in North America and Asia with a total expected investment of $190.7 million, aggregating approximately 1.9 million square feet. During the three months ended March 31, 2006, the Operating Partnership initiated seven new industrial development projects in North America and Asia with a total expected investment of $218.8 million, aggregating approximately 2.9 million square feet.

Development Completions.  During the three months ended March 31, 2007, the Operating Partnership completed seven industrial projects with a total investment of $67.8 million, aggregating approximately 0.9 million square feet. One of these completed projects with a total investment of $10.7 million and approximately 0.2 million square feet was placed in operations, two projects with a total investment of $20.7 million and aggregating approximately 0.1 million square feet were sold to third parties, and four projects with a total investment of $36.4 million, aggregating approximately 0.6 million square feet were available for sale or contribution as of March 31, 2007. During the three months ended March 31, 2006, the Operating Partnership completed seven industrial projects with a total investment of $285.3 million, aggregating 2.1 million square feet. Two of these completed projects with a total investment of $25.0 million and aggregating approximately 0.3 million square feet were placed in operations and five buildings with a total investment of $260.3 million, aggregating approximately 1.8 million square feet, were available for sale or contribution as of March 31, 2006.

Development Pipeline.  As of March 31, 2007, the Operating Partnership had 44 industrial projects in its development pipeline, which will total approximately 14.7 million square feet, and will have an aggregate estimated investment of $1.4 billion upon completion. The Operating Partnership has an additional eleven development projects available for sale or contribution totaling approximately 2.7 million square feet, with an aggregate estimated investment of $180.8 million. Additionally, one project totaling $13.0 million and approximately 0.2 million square feet is held by an unconsolidated joint venture. As of March 31, 2007, the Operating Partnership and its joint venture partners had funded an aggregate of $954.6 million and needed to fund an estimated additional $475.7 million in order to complete its development pipeline. The Operating Partnership’s development pipeline currently includes projects expected to be completed through the fourth quarter of 2008. In addition, during the three months ended March 31, 2007, the Operating Partnership acquired 422 acres of land for industrial warehouse development in North America for approximately $40.8 million.

4.  Gains from Dispositions of Real Estate Interests, Development Profits and Discontinued Operations

Development Sales.  During the three months ended March 31, 2007, the Operating Partnership sold two development projects totaling approximately 0.1 million square feet for an aggregate sale price of $24.7 million, resulting in an after-tax gain of $3.3 million. During the three months ended March 31, 2006, the Operating Partnership sold one land parcel, for an aggregate price of $4.7 million, resulting in an after-tax gain of $0.7 million.

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AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Discontinued Operations.  The Operating Partnership reports its property divestitures as discontinued operations separately as prescribed under the provisions of SFAS No. 144,Accounting for the Impairment or Disposal of Long-Lived Assets. During the three months ended March 31, 2007, the Operating Partnership did not divest itself of any industrial properties. During the three months ended March 31, 2006, the Operating Partnership divested itself of three industrial buildings, aggregating approximately 0.3 million square feet, for an aggregate price of $14.7 million, with a resulting net gain of $7.4 million.

Development Contributions.  During the three months ended March 31, 2007, the Operating Partnership contributed one 0.3 million square foot completed development project and one 0.2 million square foot completed development project into AMB Institutional Alliance Fund III, L.P. and AMB-SGP Mexico, LLC, respectively, both unconsolidated joint ventures. In addition, two land parcels were contributed into AMB DFS Fund I, LLC. As a result of these contributions, the Operating Partnership recognized an aggregate after-tax gain of $8.9 million, representing the portion of the Operating Partnership’s interest in the contributed properties acquired by the third-party investors for cash. For the three months ended March 31, 2006, no such contributions were completed by the Operating Partnership.

Gains from Contributions of Real Estate Interests.  During the three months ended March 31, 2007, the Operating Partnership contributed an operating property for approximately $4.6 million, aggregating approximately 0.1 million square feet, into AMB-SGP Mexico, LLC. The Operating Partnership recognized a gain of $0.1 million on the contribution, representing the portion of the Operating Partnership’s interest in the contributed property acquired by the third-party investors for cash. For the three months ended March 31, 2006, no such contributions were completed by the Operating Partnership.

Properties Held for Contribution.  As of March 31, 2007, the Operating Partnership held for contribution to co-investment joint ventures ten industrial projects with an aggregate net book value of $145.0 million, which, when contributed to a joint venture, will reduce the Operating Partnership’s current ownership interest from approximately 89% to an expected range of15-20%.

Properties Held for Divestiture.  As of March 31, 2007, the Operating Partnership held for divestiture two industrial projects with an aggregate net book value of $11.2 million. These properties either are not in the Operating Partnership’s core markets or do not meet its current investment objectives, or are included as part of its development-for-sale program. The divestitures of the properties are subject to negotiation of acceptable terms and other customary conditions. Properties held for divestiture are stated at the lower of cost or estimated fair value less costs to sell.

The following summarizes the condensed results of operations of the properties held for divestiture and sold under SFAS No. 144 (dollars in thousands):

	For the Three Months
	Ended March 31,
	2007			2006
Rental revenues	$	(63	)	$	5,051
Straight-line rents and amortization of lease intangibles		—			154
Property operating expenses		(36	)		(1,456	)
Real estate taxes		(33	)		(627	)
Depreciation and amortization		4			(514	)
Other income and expenses, net		2			4
Interest, including amortization		142			(253	)
Joint venture partners’ share of loss (income)		65			—
Income attributable to discontinued operations	$	81		$	2,359

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AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

As of March 31, 2007 and December 31, 2006, assets and liabilities attributable to properties held for divestiture under the provisions of SFAS No. 144 consisted of the following (dollars in thousands):

	March 31,		December 31,
	2007		2006
Other assets	$	87	$	—
Accounts payable and other liabilities	$	401	$	721

5.   Mortgage and Loan Receivables

Through a wholly-owned subsidiary, the Operating Partnership holds a mortgage loan receivable on AMB Pier One, LLC, an unconsolidated joint venture. The Operating Partnership also holds a loan receivable on a subsidiary of G.Accion S.A. de C.V. (G.Accion), an unconsolidated equity investment. The Operating Partnership’s mortgage and loan receivables at March 31, 2007 and December 31, 2006 consisted of the following (dollars in thousands):

				March 31,		December 31,
Mortgage and Loan Receivables	Market	Maturity		2007		2006		Rate
1.  Pier 1	SF Bay Area		May 2026	$	12,650	$	12,686		13.0	%
2.  G.Accion	Mexico, Various		June 2010		6,061		6,061		10.0	%
Total Mortgage and Loan Receivables				$	18,711	$	18,747

6.   Debt

As of March 31, 2007 and December 31, 2006, debt consisted of the following (dollars in thousands):

	March 31,			December 31,
	2007			2006
Operating Partnership secured debt, varying interest rates from 1.06% to 10.4%, due October 2007 to October 2016 (weighted average interest rate of 4.9% and 5.6% at March 31, 2007 and December 31, 2006, respectively)	$	492,557		$	368,332
Consolidated joint venture secured debt, varying interest rates from 3.5% to 9.4%, due May 2007 to February 2024 (weighted average interest rates of 6.2% and 6.5% at March 31, 2007 and December 31, 2006, respectively)		1,150,275			1,020,678
Unsecured senior debt securities, varying interest rates from 3.5% to 8.0%, due August 2007 to June 2018 (weighted average interest rates of 6.2% and 6.2% at March 31, 2007 and December 31, 2006, respectively and net of unamortized discounts of $10.3 million and $10.6 million respectively)		1,067,491			1,112,491
Other debt, varying interest rates from 5.1% to 7.5%, due June 2007 to November 2015 (weighted average interest rates of 6.7% and 6.6% at March 31, 2007 and December 31, 2006, respectively)		86,146			88,154
Unsecured credit facilities, variable interest rate, due February 2010 and June 2010 (weighted average interest rates of 2.1% and 3.1% at March 31, 2007 and December 31, 2006, respectively)		474,849			852,033
Total debt before unamortized net (discounts)		3,271,318			3,441,688
Unamortized net (discounts)		(4,801	)		(4,273	)
Total consolidated debt	$	3,266,517		$	3,437,415

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AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Secured debt generally requires monthly principal and interest payments. Some of the loans are cross-collateralized by multiple properties. The secured debt is secured by deeds of trust or mortgages on certain properties and is generally non-recourse. As of March 31, 2007 and December 31, 2006, the total gross investment book value of those properties securing the debt was $2.7 billion and $2.6 billion, respectively, including $1.9 billion and $1.9 billion, respectively, in consolidated joint ventures. As of March 31, 2007, $1.3 billion of the secured debt obligations bore interest at fixed rates with a weighted average interest rate of 5.5% while the remaining $307.8 million bore interest at variable rates (with a weighted average interest rate of 5.3%).

On December 8, 2006, the Operating Partnership executed a 228.0 million euros facility agreement (approximately $304.5 million in U.S. dollars, using the exchange rate at March 31, 2007), which provides that certain of The Operating Partnership’s affiliates may borrow either acquisition loans, up to a 100.0 million euros sub-limit (approximately $133.5 million in U.S. dollars, using the exchange rate at March 31, 2007), or secured term loans, in connection with properties located in France, Germany, the Netherlands, the United Kingdom, Italy or Spain. On March 21, 2007, the Operating Partnership increased the facility amount limit from 228.0 million euros to 328.0 million euros (approximately $438.0 million in U.S. dollars, using the exchange rate at March 31, 2007). Drawings under the term facility bear interest at a rate of 65 basis points over EURIBOR and may occur until, and mature on, April 30, 2014. Drawings under the acquisition loan facility bear interest at a rate of 75 basis points over EURIBOR and are repayable within six months of the date of advance, unless extended. The acquisition loan facility is available for drawing until December 8, 2007. The Operating Partnership guarantees the acquisition loan facility and is a carve-out indemnifier in respect of the term loans. These responsibilities can be transferred upon the occurrence of certain events, and the Operating Partnership will be fully discharged from all such obligations upon such transfer. As of March 31, 2007, there were approximately 201.3 million euros in term loans outstanding under the facility (approximately $268.8 million in U.S. dollars, using the exchange rate at March 31, 2007) which is included in the Operating Partnership’s secured debt balance.

As of March 31, 2007, the Operating Partnership had outstanding an aggregate of $1.1 billion in unsecured senior debt securities, which bore a weighted average interest rate of 6.2% and had an average term of 4.8 years. These unsecured senior debt securities include $300.0 million in notes issued in June 1998, $205.0 million of medium-term notes, which were issued under the Operating Partnership’s 2000 medium-term note program, $275.0 million of medium-term notes, which were issued under the Operating Partnership’s 2002 medium-term note program, $175.0 million of medium-term notes, which were issued under the Operating Partnership’s 2006 medium-term note program and approximately $112.5 million of 5.094% Notes Due 2015, which were issued to Teachers Insurance and Annuity Association of America on July 11, 2005 in a private placement, in exchange for the cancelled $100.0 million of notes that were issued in June 1998, resulting in a discount of approximately $12.5 million. The unsecured senior debt securities are subject to various covenants. Management believes that the Operating Partnership was in compliance with its financial covenants as of March 31, 2007.

As of March 31, 2007, the Operating Partnership had $86.1 million outstanding in other debt which bore a weighted average interest rate of 6.7% and had an average term of 5.2 years. Other debt includes a $65.0 million non-recourse credit facility obtained by AMB Partners II, L.P., a subsidiary of the Operating Partnership, which had a $65.0 million balance outstanding as of March 31, 2007. The Operating Partnership also had $21.1 million outstanding in other non-recourse debt.

On June 1, 2006, the Operating Partnership entered into a third amended and restated $550.0 million (includes Euros, Yen or U.S. Dollar denominated borrowings) unsecured revolving credit agreement that replaced its then-existing $500.0 million credit facility, which was to mature on June 1, 2007. The Company is a guarantor of the Operating Partnership’s obligations under the credit facility. The line, which matures on June 1, 2010, carries a one-year extension option and can be increased to up to $700.0 million upon certain conditions. The rate on the borrowings is generally LIBOR plus a margin, based on the Operating Partnership’s long-term debt rating, which was 42.5 basis points as of March 31, 2007, with an annual facility fee of 15 basis points. The four-year credit facility includes a multi-currency component, under which up to $550.0 million can be drawn in U.S. Dollars,

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AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Euros, Yen or British Pounds Sterling. The Operating Partnership uses the credit facility principally for acquisitions, funding development activity and general working capital requirements. As of March 31, 2007, there were no outstanding borrowings and the remaining amount available was $537.5 million, net of outstanding letters of credit of $12.5 million. The credit agreement contains affirmative covenants, including compliance with financial reporting requirements and maintenance of specified financial ratios, and negative covenants, including limitations on the incurrence of liens and limitations on mergers or consolidations. Management believes that the Operating Partnership was in compliance with its financial covenants under this credit agreement at March 31, 2007.

On June 23, 2006, AMB Japan Finance Y.K., a subsidiary of the Operating Partnership and as the initial borrower, entered into an amended and restated revolving credit agreement for a 45.0 billion Yen unsecured revolving credit facility, which, using the exchange rate in effect on March 31, 2007, equaled approximately $381.9 million U.S. dollars. This replaced the 35.0 billion Yen unsecured revolving credit facility executed on June 29, 2004, as previously amended, which using the exchange rate in effect on March 31, 2007, equaled approximately $297.0 million U.S. dollars. The Company and the Operating Partnership guarantee the obligations of AMB Japan Finance Y.K. under the credit facility, as well as the obligations of any other entity in which the Operating Partnership directly or indirectly owns an ownership interest and which is selected from time to time to be a borrower under and pursuant to the credit agreement. The borrowers intend to use the proceeds from the facility to fund the acquisition and development of properties and for other real estate purposes in Japan, China and South Korea. Generally, borrowers under the credit facility have the option to secure all or a portion of the borrowings under the credit facility with certain real estate assets or equity in entities holding such real estate assets. The credit facility matures in June 2010 and has a one-year extension option. The credit facility can be increased to up to 55.0 billion Yen, which, using the exchange rate in effect on March 31, 2007, equaled approximately $466.8 million U.S. dollars. The extension option is subject to the satisfaction of certain conditions and the payment of an extension fee equal to 0.15% of the outstanding commitments under the facility at that time. The rate on the borrowings is generally TIBOR plus a margin, which is based on the credit rating of the Operating Partnership’s long-term debt and was 42.5 basis points as of March 31, 2007. In addition, there is an annual facility fee, payable in quarterly amounts, which is based on the credit rating of the Operating Partnership’s long-term debt, and was 15 basis points of the outstanding commitments under the facility as of March 31, 2007. As of March 31, 2007, the outstanding balance on this credit facility, using the exchange rate in effect on March 31, 2007, was $342.5 million in U.S. dollars. The credit agreement contains affirmative covenants, including financial reporting requirements and maintenance of specified financial ratios, and negative covenants, including limitations on the incurrence of liens and limitations on mergers or consolidations. Management believes that the Operating Partnership and AMB Japan Finance Y.K. were in compliance with their financial covenants under this credit agreement at March 31, 2007.

On June 13, 2006, the Operating Partnership and certain of its consolidated subsidiaries entered into a fourth amended and restated credit agreement for a $250.0 million unsecured revolving credit facility, which replaced the third amended and restated credit agreement for a $250.0 million unsecured credit facility. On February 16, 2006, the third amended and restated credit agreement replaced the then-existing $100.0 million unsecured revolving credit facility that was to mature in June 2008. The Company and the Operating Partnership guarantee the obligations for such subsidiaries and other entities controlled by the Company or the Operating Partnership that are selected by the Operating Partnership from time to time to be borrowers under and pursuant to the credit facility. The four-year credit facility includes a multi-currency component under which up to $250.0 million can be drawn in U.S. dollars, Hong Kong dollars, Singapore dollars, Canadian dollars and Euros. The line, which matures in February 2010 and carries a one-year extension option, can be increased to up to $350.0 million upon certain conditions and the payment of an extension fee equal to 0.15% of the outstanding commitments. The rate on the borrowings is generally LIBOR plus a margin, based on the credit rating of the Operating Partnership’s senior unsecured long-term debt, which was 60 basis points as of March 31, 2007, with an annual facility fee based on the credit rating of the Operating Partnership’s senior unsecured long-term debt. The borrowers intend to use the proceeds from the facility to fund the acquisition and development of properties and general working capital requirements. As of March 31, 2007, the outstanding balance on this credit facility was approximately

12

AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

$132.3 million. The credit agreement contains affirmative covenants, including financial reporting requirements and maintenance of specified financial ratios by the Operating Partnership, and negative covenants, including limitations on the incurrence of liens and limitations on mergers or consolidations. Management believes that the Operating Partnership was in compliance with its financial covenants under this credit agreement at March 31, 2007.

On February 14, 2007, seven subsidiaries of AMB-SGP, L.P., a Delaware limited partnership, which is a subsidiary of the Operating Partnership, entered into a loan agreement for a $305 million secured financing. On the same day, pursuant to the loan agreement the same seven subsidiaries delivered four promissory notes to the two lenders, each of which matures on March 5, 2012. One note has a principal of $160 million and an interest rate that is fixed at 5.29%. The second is a $40 million note with an interest rate of 81 basis points above the one-month LIBOR rate, the third note has a principal of $84 million and a fixed interest rate of 5.90%, and the final note has a principal of $21 million and bears interest at a rate of 135 basis points above the one-month LIBOR rate.

As of March 31, 2007, the scheduled maturities of the Operating Partnership’s total debt, excluding unamortized secured debt premiums and discounts, were as follows (dollars in thousands):

	Operating		Consolidated
	Partnership		Joint Venture		Unsecured
	Secured		Secured		Senior Debt		Credit		Other
	Debt		Debt		Securities		Facilities		Debt		Total
2007	$	12,396	$	45,300	$	55,000	$	—	$	14,215	$	126,911
2008		92,239		73,504		175,000		—		810		341,553
2009		6,234		118,813		100,000		—		873		225,920
2010		72,026		116,182		250,000		474,849		941		913,998
2011		6,335		190,622		75,000		—		1,014		272,971
2012		8,369		449,198		—		—		1,093		458,660
2013		42,682		59,714		175,000		—		65,920		343,316
2014		245,273		4,076		—		—		616		249,965
2015		2,199		18,780		112,491		—		664		134,134
2016		4,804		54,995		—		—		—		59,799
Thereafter		—		19,091		125,000		—		—		144,091
Total	$	492,557	$	1,150,275	$	1,067,491	$	474,849	$	86,146	$	3,271,318

7.   Minority Interests in Consolidated Joint Ventures and Preferred Units

Minority interests in the Operating Partnership represent the limited partnership interests in AMB Property II, L.P., a Delaware limited partnership, and interests held by certain third parties in several real estate joint ventures, aggregating approximately 35.9 million square feet, which are consolidated for financial reporting purposes. Such investments are consolidated because the Operating Partnership exercises significant rights over major operating decisions such as approval of budgets, selection of property managers, asset management, investment activity and changes in financing. These joint venture investments do not meet the variable interest entity criteria under FASB Interpretation No. 46R,Consolidation of Variable Interest Entities.

Effective October 1, 2006, the Operating Partnership deconsolidated AMB Institutional Alliance Fund III, L.P., an open-ended co-investment partnership formed in 2004 with institutional investors, on a prospective basis, due to the re-evaluation of the Operating Partnership’s accounting for its investment in the fund in light of changes to the partnership agreement regarding the general partner’s rights effective October 1, 2006.

The Operating Partnership enters into co-investment joint ventures with institutional investors. The Operating Partnership’s co-investment joint ventures are engaged in the acquisition, ownership, operation, management and,

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AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

in some cases, the renovation, expansion and development of industrial buildings in target markets in North America.

The Operating Partnership’s consolidated co-investment joint ventures’ total investment and property debt at March 31, 2007 and December 31, 2006 (dollars in thousands) were:

		Operating			Total Investment
		Partnership’s			in Real Estate(1)				Property Debt(2)				Other Debt
		Ownership			March 31,		December 31,		March 31,		December 31,		March 31,		December 31,
Co-investment Joint Venture	Joint Venture Partner	Percentage			2007		2006		2007		2006		2007		2006
AMB/Erie, L.P.	Erie Insurance Company and affiliates		50	%	$	52,643	$	52,942	$	20,459	$	20,605	$	—	$	—
AMB Partners II, L.P.	City and County of San Francisco Employees’ Retirement System		20	%		683,952		679,138		322,094		323,532		65,000		65,000
AMB-SGP, L.P.	Industrial JV Pte Ltd(3)		50	%		445,718		444,990		350,073		235,480		—		—
AMB Institutional Alliance Fund II, L.P.	AMB Institutional Alliance REIT II, Inc.(4)		20	%		521,314		519,534		242,050		243,263		—		—
AMB-AMS, L.P.(5)	PMT, SPW and TNO(6)		39	%		153,990		153,563		84,558		78,904		—		—
Total					$	1,857,617	$	1,850,167	$	1,019,234	$	901,784	$	65,000	$	65,000

(1)	The Operating Partnership also had other consolidated joint ventures with total investments in real estate of $585.9 million as of March 31, 2007.
(2)	The Operating Partnership also had other consolidated joint ventures with property debt of $135.1 million as of March 31, 2007.
(3)	A subsidiary of GIC Real Estate Pte. Ltd., the real estate investment subsidiary of the Government of Singapore Investment Corporation.
(4)	Comprised of 14 institutional investors as stockholders and one third-party limited partner as of March 31, 2007.
(5)	AMB-AMS, L.P. is a co-investment partnership with three Dutch pension funds.
(6)	PMT is Stichting Pensioenfonds Metaal en Techniek, SPW is Stichting Pensioenfonds voor de Woningcorporaties and TNO is Stichting Pensioenfonds TNO.

The following table details the minority interests as of March 31, 2007 and December 31, 2006 (dollars in thousands):

	March 31,		December 31,		Redemption/Callable
	2007		2006		Date
Joint Venture Partners	$	506,611	$	555,201		N/A
Held through AMB Property II, L.P.:
Class B Limited Partners		30,435		27,281		N/A
Series D preferred units (liquidation preference of $79,767)		77,678		77,684		February 2012
Series I preferred units (liquidation preference of $25,500)		24,799		24,799		March 2006
Total minority interests	$	639,523	$	684,965

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AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table distinguishes the minority interests’ share of income, including minority interests’ share of development profits, but excluding minority interests’ share of discontinued operations for the three months ended March 31, 2007 and 2006 (dollars in thousands):

	For the Three Months
	Ended March 31,
	2007		2006
Joint Venture Partners’ share of income	$	7,193	$	8,539
Joint Venture Partners’ share of development profits		12		—
Held through AMB Property II, L.P.:
Class B common limited partnership units		133		26
Series D preferred units (liquidation preference of $79,767)		1,599		1,545
Series E preferred units (repurchased in June 2006)		—		214
Series F preferred units (repurchased in September 2006)		—		200
Series H preferred units (repurchased in March 2006)		—		815
Series I preferred units (liquidation preference of $25,500)		510		510
Series N preferred units (repurchased in January 2006)		—		127
Total minority interests’ share of income	$	9,447	$	11,976

The Operating Partnership has consolidated joint ventures that have finite lives under the terms of the partnership agreements. As of March 31, 2007 and December 31, 2006, the aggregate book value of the minority interests in the accompanying consolidated balance sheets was approximately $506.6 million and $555.2 million, respectively, and the Operating Partnership believes that the aggregate settlement value of these interests was approximately $1.0 billion and $1.0 billion, respectively. However, there can be no assurance that the aggregate settlement value of the interests will be as such. The aggregate settlement value is based on the estimated liquidation values of the assets and liabilities and the resulting proceeds that the Operating Partnership would distribute to its joint venture partners upon dissolution, as required under the terms of the respective joint venture agreements. There can be no assurance that the estimated liquidation values of the assets and liabilities and the resulting proceeds that the Operating Partnership distributes upon dissolution will be the same as the actual liquidation values of such assets, liabilities and proceeds distributed upon dissolution. Subsequent changes to the estimated fair values of the assets and liabilities of the consolidated joint ventures will affect the Operating Partnership’s estimate of the aggregate settlement value. The joint venture agreements do not limit the amount to which the minority joint venture partners would be entitled in the event of liquidation of the assets and liabilities and dissolution of the respective joint ventures.

On January 29, 2007, the 7.75% Series D Cumulative Redeemable Preferred Units of AMB Property II, L.P., were transferred from one institutional investor to another institutional investor. In connection with that transfer, AMB Property II, L.P. agreed to amend the terms of the Series D Preferred Units to, among other things, change the rate applicable to the Series D Preferred Units from 7.75% to 7.18% and change the date prior to which the Series D Preferred Units may not be redeemed from May 5, 2004 to February 22, 2012.

Effective January 27, 2006, Robert Pattillo Properties, Inc. exercised its rights under its Put Agreement, dated September 24, 2004, with the Operating Partnership, and sold all 729,582 of its 5.00% Series N Cumulative Redeemable Preferred Limited Partnership Units in one of the Operating Partnership’s subsidiaries, AMB Property II, L.P., to the Operating Partnership for an aggregate price of $36.6 million, including accrued and unpaid distributions. Also on January 27, 2006, AMB Property II, L.P. repurchased all of the 5.00% Series N Cumulative Redeemable Preferred Limited Partnership Units from the Operating Partnership for an aggregate price of $36.6 million and cancelled all of the outstanding series N preferred units as of such date.

15

AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

On March 21, 2006, AMB Property II, L.P., repurchased all 840,000 of its outstanding 8.125% Series H Cumulative Redeemable Preferred Limited Partnership Units from a single institutional investor for an aggregate price of $42.8 million, including accrued and unpaid distributions. In addition, the Operating Partnership recognized a reduction of income available to common unitholders of $1.1 million for the related original issuance costs.

On June 30, 2006, AMB Property II, L.P., repurchased all 220,440 of its outstanding 7.75% Series E Cumulative Redeemable Preferred Limited Partnership Units from a single institutional investor for an aggregate price of $10.9 million, including accrued and unpaid distributions. In addition, the Operating Partnership recognized an increase in income available to common unitholders of $0.1 million for the discount on repurchase, net of original issuance costs.

On September 21, 2006, AMB Property II, L.P., repurchased all 201,139 of its outstanding 7.95% Series F Cumulative Redeemable Preferred Limited Partnership Units from a single institutional investor for an aggregate price of $10.0 million, including accrued and unpaid distributions.

8.   Investments in Unconsolidated Joint Ventures

The Operating Partnership’s unconsolidated joint ventures’ net equity investments at March 31, 2007 and December 31, 2006 (dollars in thousands) were:

							Operating
							Partnership’s
	Square		March 31,		December 31,		Ownership
Unconsolidated Joint Ventures	Feet		2007		2006		Percentage
Co-Investment Joint Ventures
AMB-SGP Mexico, LLC(1)		3,050,915	$	8,495	$	7,601		20	%
AMB Japan Fund I, L.P.(2)		3,951,904		32,184		31,811		20	%
AMB Institutional Alliance Fund III, L.P.(3)		15,746,793		135,914		136,971		21	%
AMB DFS Fund I, LLC(4)		—		16,622		11,700		15	%
Other Industrial Operating Joint Ventures		7,684,931		48,569		47,955		53	%
Other Investment — G. Accion(5)		n/a		37,638		38,343		39	%
Total Unconsolidated Joint Ventures		30,434,543	$	279,422	$	274,381

(1)	AMB-SGP Mexico, LLC, is a co-investment partnership formed in 2004 with Industrial (Mexico) JV Pte. Ltd., a subsidiary of GIC Real Estate Pte. Ltd, the real estate investment subsidiary of the Government of Singapore Investment Corporation. Includes $9.3 million of shareholder loans outstanding at March 31, 2007 between the Operating Partnership and the co-investment partnership.
(2)	AMB Japan Fund I, L.P. is a co-investment partnership formed in 2005 with institutional investors.
(3)	AMB Institutional Alliance Fund III, L.P. is an open-ended co-investment partnership formed in 2004 with institutional investors, which invest through a private REIT. Prior to October 1, 2006, the Operating Partnership accounted for AMB Institutional Alliance Fund III, L.P. as a consolidated joint venture.
(4)	AMB DFS Fund I, LLC is a co-investment partnership formed in 2006 with a subsidiary of GE Real Estate to build and sell properties.
(5)	The Operating Partnership has a 39% unconsolidated equity interest in G.Accion, a Mexican real estate company. G.Accion provides management and development services for industrial, retail, residential and office properties in Mexico.

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AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The table below presents summarized income statement information for the Operating Partnership’s unconsolidated co-investment joint ventures for the three months ended March 31, 2007 and 2006 (dollars in thousands):

	For the Three Months Ended March 31, 2007								For the Three Months Ended March 31, 2006
			Income (loss)								Income (loss)
			From			Net					From			Net
			Continuing			Income					Continuing			Income
Co-Investment Unconsolidated Joint Ventures:	Revenues		Operations			(loss)			Revenues		Operations			(loss)
AMB Institutional Alliance Fund III, L.P.(1)	$	29,480	$	2,912		$	2,927		$	15,653	$	1,835		$	2,095
AMB Japan Fund I, L.P.(2)		10,929		2,192			2,192			2,794		133			133
AMB-SGP Mexico, LLC(3)		4,307		(2,119	)		(2,119	)		3,047		(1,346	)		(1,346	)
AMB DFS Fund I, LLC(4)		—		(39	)		(39	)		—		—			—
Total	$	44,716	$	2,946		$	2,961		$	21,494	$	622		$	882

(1)	AMB Institutional Alliance Fund III, L.P. is an open-ended co-investment partnership formed in 2004 with institutional investors, which invest through a private REIT. Prior to October 1, 2006, the Company accounted for AMB Institutional Alliance Fund III, L.P. as a consolidated joint venture.
(2)	AMB Japan Fund I is a co-investment partnership formed in 2005 with institutional investors. The fund isYen-denominated. U.S. dollar amounts are converted at the average exchange rates in effect during the three months ended March 31, 2007 and 2006.
(3)	AMB-SGP Mexico, LLC, is a co-investment partnership formed in 2004 with Industrial (Mexico) JV Pte. Ltd., a subsidiary of GIC Real Estate Pte. Ltd, the real estate investment subsidiary of the Government of Singapore Investment Corporation.
(4)	AMB DFS Fund I, LLC is a co-investment partnership formed in 2006 with a subsidiary of GE Real Estate to build and sell properties.

On December 30, 2004, the Operating Partnership formed AMB-SGP Mexico, LLC, a joint venture with Industrial (Mexico) JV Pte. Ltd., a subsidiary of GIC Real Estate Pte. Ltd., the real estate investment subsidiary of the Government of Singapore Investment Corporation, in which the Operating Partnership retained an approximate 20% interest. For the three months ended March 31, 2007, the Operating Partnership recognized a gain of approximately $0.1 million from the contribution of one approximately 0.1 million square foot operating property for $4.6 million. This gain is presented in gains from disposition of real estate interests, net, on consolidated statements of operations. In addition, the Operating Partnership recognized development profits from the contribution of one completed development project aggregating approximately 0.2 million square feet with a contribution value of $14.2 million.

On June 30, 2005, the Operating Partnership formed AMB Japan Fund I, L.P., a joint venture with 13 institutional investors, in which the Operating Partnership retained an approximate 20% interest. The 13 institutional investors have committed 49.5 billion Yen (approximately $420.1 million in U.S. dollars, using the exchange rate at March 31, 2007) for an approximate 80% equity interest.

Effective October 1, 2006, the Operating Partnership deconsolidated AMB Institutional Alliance Fund III, L.P., an open-ended co-investment partnership formed in 2004 with institutional investors, on a prospective basis, due to the re-evaluation of the Operating Partnership’s accounting for its investment in the fund in light of changes to the partnership agreement regarding its rights as the general partner effective October 1, 2006. For the three months ended March 31, 2007, the Operating Partnership contributed to such joint venture, one completed development project, aggregating approximately 0.3 million square feet for approximately $41.8 million.

On October 17, 2006, the Operating Partnership formed AMB DFS Fund I, LLC, a merchant development joint venture with GE Real Estate (“GE”), in which the Operating Partnership retained an approximate 15% interest. The

17

AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

joint venture is expected to have total investment capacity of approximately $500.0 million to pursue development-for-sale opportunities primarily in U.S. markets other than those the Operating Partnership identifies as its target markets. GE and the Operating Partnership have committed $425.0 million and $75.0 million of equity, respectively. For the three months ended March 31, 2007, the Operating Partnership recognized development profits from the contribution to this fund of approximately 82 acres of land with a contribution value of approximately $30.3 million.

As a result of the contribution of two completed development projects and approximately 82 acres of land to AMB-SGP Mexico, LLC, AMB Institutional Alliance Fund III, L.P., and AMB DFS Fund I, LLC, the Operating Partnership recognized development profits of approximately $8.9 million, representing the portion of the Operating Partnership’s interest in the contributed properties acquired by the third party investors for cash.

Under the agreements governing the joint ventures, the Operating Partnership and the other parties to the joint ventures may be required to make additional capital contributions and, subject to certain limitations, the joint ventures may incur additional debt.

The Operating Partnership also has a 0.1% unconsolidated equity interest (with an approximate 33% economic interest) in AMB Pier One, LLC, a joint venture related to the 2000 redevelopment of the pier which houses the Operating Partnership’s office space in San Francisco, California. The investment is not consolidated because the Operating Partnership does not exercise control over major operating decisions such as approval of budgets, selection of property managers, investment activity and changes in financing. The Operating Partnership has an option to purchase the remaining equity interest beginning January 1, 2007 and expiring December 31, 2009, based on the fair market value as stipulated in the joint venture agreement. As of March 31, 2007, the Operating Partnership also had an approximate 39.0% unconsolidated equity interest in G.Accion, a Mexican real estate company. G.Accion provides management and development services for industrial, retail, residential and office properties in Mexico. In addition, as of March 31, 2007, a subsidiary of the Operating Partnership also had an approximate 5% interest in IAT Air Cargo Facilities Income Fund (IAT), a Canadian income trust specializing in aviation-related real estate at Canada’s leading international airports. This equity investment of approximately $3.4 million and $2.7 million, respectively, is included in other assets on the consolidated balance sheets as of March 31, 2007 and December 31, 2006.

9.   Partners’ Capital

Holders of common limited partnership units of the Operating Partnership and class B common limited partnership units of AMB Property II, L.P. have the right, commencing generally on or after the first anniversary of the holder becoming a limited partner of the Operating Partnership or AMB Property II, L.P., as applicable (or such other date agreed to by the Operating Partnership or AMB Property II, L.P. and the applicable unit holders), to require the Operating Partnership or AMB Property II, L.P., as applicable, to redeem part or all of their common units or class B common limited partnership units, as applicable, for cash (based upon the fair market value, as defined in the applicable partnership agreement, of an equivalent number of shares of common stock of the Company at the time of redemption) or the Operating Partnership or AMB Property II, L.P. may, in its respective sole and absolute discretion (subject to the limits on ownership and transfer of common stock set forth in the Company’s charter), elect to have the Company exchange those common units or class B common limited partnership units, as applicable, for shares of the Company’s common stock on a one-for-one basis, subject to adjustment in the event of stock splits, stock dividends, issuance of certain rights, certain extraordinary distributions and similar events. With each redemption or exchange of the Operating Partnership’s common units, the Company’s percentage ownership in the Operating Partnership will increase. Common limited partners and class B common limited partners may exercise this redemption right from time to time, in whole or in part, subject to certain limitations. During the three months ended March 31, 2007, the Operating Partnership redeemed 42,983 of its common limited partnership units for an equivalent number of shares of the Company’s common stock.

18

AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

During the three months ended March 31, 2007, AMB Property Corporation issued approximately 8.4 million shares of its common stock for net proceeds of approximately $472.1 million, which were contributed to the Operating Partnership in exchange for the issuance of approximately 8.4 million general partnership units. As a result of the common stock issuance, there was a significant reallocation of partnership interests due to the difference in AMB Property Corporation’s stock price at issuance as compared to the book value per share at the time of issuance. The Company intends to use the proceeds from the offering for general corporate purposes and, over the long term, to expand its global development business.

As of March 31, 2007 the Operating Partnership had outstanding 99,089,842 common general partnership units: 3,407,360 common limited partnership units: 800,000 7.95% Series J Cumulative Redeemable Preferred Partnership Units; 800,000 7.95% Series K Cumulative Redeemable Preferred Partnership Units; 2,000,000 6.5% Series L Cumulative Redeemable Preferred Partnership Units, 2,300,000 6.75% Series M Cumulative Redeemable Preferred Partnership Units; 3,000,000 7.00% Series O Cumulative Redeemable Preferred Partnership Units; and 2,000,000 6.85% Series P Cumulative Redeemable Preferred Partnership Units.

The following table sets forth the distributions paid or payable per unit:

		For the Three Months
		Ended March 31,
Paying Entity	Security	2007		2006
Operating Partnership	Common limited partnership units	$	0.500	$	0.460
Operating Partnership	Series J preferred units	$	0.994	$	0.994
Operating Partnership	Series K preferred units	$	0.994	$	0.994
AMB Property II, L.P.	Class B common limited partnership units	$	0.500	$	0.460
AMB Property II, L.P.	Series D preferred units	$	0.943	$	0.969
AMB Property II, L.P.	Series E preferred units(1)		n/a	$	0.969
AMB Property II, L.P.	Series F preferred units(2)		n/a	$	0.994
AMB Property II, L.P.	Series H preferred units(3)		n/a	$	0.970
AMB Property II, L.P.	Series I preferred units	$	1.000	$	1.000
AMB Property II, L.P.	Series N preferred units(4)		n/a	$	0.215

(1)	In June 2006, AMB Property II, L.P. repurchased all of its outstanding Series E preferred units.
(2)	In September 2006, AMB Property II, L.P. repurchased all of its outstanding Series F preferred units.
(3)	In March 2006, AMB Property II, L.P. repurchased all of its outstanding Series H preferred units.
(4)	The holder of the series N preferred units exercised its put option in January 2006 and sold all of its series N preferred units to the Operating Partnership and AMB Property II, L.P. repurchased all of such units from the Operating Partnership.

In December 2005, AMB Property Corporation’s board of directors approved a new two-year common stock repurchase program for the discretionary repurchase of up to $200.0 million of its common stock. The Company did not repurchase or retire any of its shares of common stock during the three months ended March 31, 2007.

The Company and the Operating Partnership have stock incentive plans that have approximately 2.7 million shares of common stock still available for issuance as either stock options or restricted stock grants, of which 2.0 million are eligible to be used for new grants. The fair value of each option grant was generally estimated at the date of grant using the Black-Scholes option-pricing model. The Operating Partnership uses historical data to estimate option exercise and forfeitures within the valuation model. Expected volatilities are based on historical volatility of the Company’s stock. The risk-free rate for periods within the expected life of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. The fair values of grants issued during the quarters ended

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AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

March 31, 2007 and 2006, were $10.18 and $8.54, respectively. The following assumptions are used for grants during the three months ended March 31, 2007 and 2006, respectively: dividend yields of 3.4% and 3.5%; expected volatility of 18.9% and 17.9%; risk-free interest rates of 4.6% and 4.6%; and expected lives of six years, respectively.

As of March 31, 2007, approximately 6,117,609 options and 686,671 non-vested stock awards were outstanding under the plans. There were 501,058 stock options granted, 1,218,592 options exercised, and 11,882 options forfeited during the three months ended March 31, 2007. There were 255,671 restricted stock awards made during the three months ended March 31, 2007. 179,477 non-vested stock awards vested and 1,072 non-vested stock awards were forfeited during the three months ended March 31, 2007. The related stock option expense was $1.9 million and $2.1 million and the related restricted stock compensation expense was $3.2 million and $2.7 million for the three months ended March 31, 2007 and 2006, respectively. The expense is included in general and administrative expenses in the accompanying consolidated statements of operations.

20

AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

10.   Income Per Unit

When the Company issues common shares upon the exercise of stock options or issues restricted stock, the Operating Partnership issues corresponding general partnership units on a one-for-one basis. The Operating Partnership’s only dilutive securities outstanding for the three months ended March 31, 2007 and 2006 were stock options and shares of restricted stock granted under the Company’s stock incentive plans. The effect on income per unit was to increase weighted average units outstanding. Such dilution was computed using the treasury stock method. The computation of basic and diluted income per common unit is presented below (dollars in thousands, except unit and per unit amounts):

	For the Three Months
	Ended March 31,
	2007			2006
Numerator
Income from continuing operations before cumulative effect of change in accounting principle	$	28,103		$	20,451
Preferred unit distributions		(5,542	)		(4,686	)
Preferred unit redemption discount/issuance costs		—			(1,097	)
Income from continuing operations before cumulative effect of change in accounting principle (after preferred unit distributions)		22,561			14,668
Total discontinued operations		125			9,725
Cumulative effect of change in accounting principle		—			193
Net income available to common unitholders	$	22,686		$	24,586
Denominator
Basic		96,943,042			90,821,246
Stock options and restricted stock dilution(1)		2,833,708			3,746,434
Diluted weighted average common units		99,776,750			94,567,680
Basic income per common unit
Income from continuing operations (after preferred unit distributions) before cumulative effect of change in accounting principle	$	0.23		$	0.16
Discontinued operations		—			0.11
Cumulative effect of change in accounting principle		—			—
Net income available to common unitholders	$	0.23		$	0.27
Diluted income per common unit
Income from continuing operations (after preferred unit distributions) before cumulative effect of change in accounting principle	$	0.23		$	0.16
Discontinued operations		—			0.10
Cumulative effect of change in accounting principle		—			—
Net income available to common unitholders	$	0.23		$	0.26

(1) Excludes anti-dilutive stock options of 302,938 and 325,503 for the three months ended March 31, 2007 and 2006, respectively.

21

AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

11.   Segment Information

The Operating Partnership has two lines of business, real estate operations and Capital Partners. Real estate operations is comprised of various segments while Capital Partners consists of a single segment, on which the Operating Partnership evaluates its performance:

•  Real Estate Operations.  The Operating Partnership operates industrial properties and manages its business by geographic markets. Such 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. The Operating Partnership’s geographic markets for industrial properties are managed separately because each market requires different operating, pricing and leasing strategies. Each market is considered to be an individual operating segment having similar economic characteristics that are combined within the reported segment based upon geographic location. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. The Operating Partnership evaluates performance based upon property net operating income of the combined properties in each segment, which are listed below. In addition, the Operating Partnership’s development business is included under real estate operations. It primarily consists of the Operating Partnership’s development of real estate properties that are subsequently contributed to a property fund in which the Operating Partnership has an ownership interest in and acts as manager, or sold to third parties. The Operating Partnership evaluates performance of the development business by reported operating segment based upon gains generated from the disposition and/or contribution of real estate. The assets of the development business generally include properties under development and land held for development. During the period between the completion of development of a property and the date the property is contributed to an unconsolidated joint venture or sold to a third party, the property and its associated rental income and property operating costs are included in the real estate operations segment because the primary activity associated with the property during that period is leasing. Upon contribution or sale, the resulting gain or loss is included as gains from dispositions of real estate interests or development profits, as appropriate.

•  Capital Partners.  The Operating Partnership through its private capital group and AMB Capital Partners, LLC, provides real estate investment, portfolio management and reporting services to co-investment joint ventures and clients. The private capital income earned consists of acquisition and development fees, asset management fees and priority distributions, and promoted interests and incentive distributions from the Operating Partnership’s co-investment joint ventures and AMB Capital Partners’ clients. The accounting policies of the segment are the same as those described in the summary of significant accounting policies under Note 2, Interim Financial Statements. The Operating Partnership evaluates performance based upon private capital income.

22

AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The segment information for the three months ended March 31, 2007 and as of December 31, 2006, has been reclassified to conform to current presentation.

Summary information for the reportable segments is as follows (dollars in thousands):

	Revenues					Property NOI(2)					Development Gains
	For the Three Months					For the Three Months					For the Three Months
	Ended March 31,					Ended March 31,					Ended March 31,
Segments(1)	2007		2006			2007		2006			2007		2006
North America Markets
Southern California	$	26,418	$	27,415		$	20,789	$	21,817		$	9,004	$	—
No. New Jersey/New York		17,545		19,653			11,699		13,347			—		—
San Francisco Bay Area		21,345		21,554			16,839		16,953			—		—
Chicago		13,514		13,629			9,208		9,324			2,668		—
On-Tarmac		13,460		14,055			7,276		7,869			—		—
South Florida		10,716		9,251			7,236		6,295			478		674
Seattle		9,323		9,354			7,194		7,246			—		—
Non — U.S. Markets
Europe		11,741		6,532			9,361		5,233			—		—
Asia		1,418		8,741			673		7,938			—		—
Total markets		125,480		130,184			90,275		96,022			12,150		674
Other Markets		33,824		41,176			24,713		29,112			42		—
Straight-line rents and amortization of lease intangibles		2,715		5,146			2,715		5,146			—		—
Discontinued operations		63		(5,205	)		132		(3,122	)		—		—
Capital Partners
Private capital income		5,925		5,106			—		—			—		—
Total	$	168,007	$	176,407		$	117,835	$	127,158		$	12,192	$	674

(1)	The markets included are a subset of the Operating Partnership’s regions defined as East, Southwest and West Central in North America, Europe and Asia.
(2)	Property net operating income (“NOI”) is defined as rental revenue, including reimbursements, less property operating expenses, which excludes depreciation, amortization, general and administrative expenses and interest expense. For a reconciliation of NOI to net income, see the table below.

The Operating Partnership considers NOI to be an appropriate supplemental performance measure because NOI reflects the operating performance of the Operating Partnership’s real estate portfolio on a segment basis, and the Operating Partnership uses NOI to make decisions about resource allocations and to assess regional property level performance. However, NOI should not be viewed as an alternative measure of the Operating Partnership’s financial performance since it does not reflect general and administrative expenses, interest expense, depreciation and amortization costs, capital expenditures and leasing costs, or trends in development and construction activities that could materially impact the Operating Partnership’s results from operations. Further, the Operating Partnership’s NOI may not be comparable to that of other real estate companies, as they may use different methodologies for calculating NOI.

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AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table is a reconciliation from NOI to reported net income, a financial measure under accounting principles generally accepted in the U.S., or GAAP (dollars in thousands):

	For the Three Months
	Ended March 31,
	2007			2006
Property NOI	$	117,835		$	127,158
Development profits, net of taxes		12,192			674
Private capital income		5,925			5,106
Depreciation and amortization		(41,029	)		(42,754	)
Impairment losses		(257	)		—
General and administrative		(29,854	)		(23,048	)
Other expenses		(912	)		(537	)
Fund costs		(241	)		(614	)
Equity in earnings of unconsolidated joint ventures		2,113			2,088
Other income		5,507			3,507
Gains from dispositions of real estate interests		136			—
Interest, including amortization		(33,865	)		(39,153	)
Total minority interests’ share of income		(9,447	)		(11,976	)
Total discontinued operations		125			9,725
Cumulative effect of change in accounting principle		—			193
Net income	$	28,228		$	30,369

The Operating Partnership’s total assets by reportable segments were (dollars in thousands):

	Total Assets as of
	March 31, 2007		December 31, 2006
North America Markets
Southern California	$	868,016	$	895,610
No. New Jersey/New York		608,718		607,727
San Francisco Bay Area		701,914		703,660
Chicago		437,020		446,662
On-Tarmac		208,089		210,798
South Florida		363,801		371,603
Seattle		390,745		380,459
Non-U.S. Marktes
Europe		756,650		723,326
Asia		537,124		434,706
Total marktes		4,872,077		4,774,551
Other Markets		1,506,530		1,430,308
Investments in unconsolidated joint ventures		279,422		274,381
Non-segment assets		318,954		234,272
Total assets	$	6,976,983	$	6,713,512

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AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

12.   Commitments and Contingencies

Commitments

Lease Commitments.  The Operating Partnership holds operating ground leases on land parcels at its on-tarmac facilities, leases on office spaces for corporate use, and a leasehold interest that it holds for investment purposes. The remaining lease terms are from one to 55 years. Buildings and improvements subject to ground leases are being amortized ratably over the lesser of the terms of the related leases or 40 years.

Standby Letters of Credit.  As of March 31, 2007, the Operating Partnership had provided approximately $22.6 million in letters of credit, of which $12.5 million were provided under its $550.0 million unsecured credit facility. The letters of credit were required to be issued under certain ground lease provisions, bank guarantees and other commitments.

Guarantees.  Other than parent guarantees associated with the unsecured debt, as of March 31, 2007, the Operating Partnership had outstanding guarantees in the aggregate amount of $70.6 million in connection with certain acquisitions. As of March 31, 2007, the Operating Partnership guaranteed $33.2 million and $83.2 million on outstanding loans on three of its consolidated joint ventures and one of its unconsolidated joint ventures, respectively. In addition, as of March 31, 2007, the Operating Partnership guaranteed $117.8 million on outstanding property debt related to one of its unconsolidated joint ventures.

Performance and Surety Bonds.  As of March 31, 2007, the Operating Partnership had outstanding performance and surety bonds in an aggregate amount of $12.3 million. These bonds were issued in connection with certain of its development projects and were posted to guarantee certain tax obligations and the construction of certain real property improvements and infrastructure, such as grading, sewers and streets. Performance and surety bonds are commonly required by public agencies from real estate developers. Performance and surety bonds are renewable and expire upon the payment of the taxes due or the completion of the improvements and infrastructure.

Promoted Interests and Other Contractual Obligations.  Upon the achievement of certain return thresholds and the occurrence of certain events, the Operating Partnership may be obligated to make payments to certain joint venture partners pursuant to the terms and provisions of their contractual agreements with the Operating Partnership. From time to time in the normal course of the Operating Partnership’s business, the Operating Partnership enters into various contracts with third parties that may obligate it to make payments, pay promotes or perform other obligations upon the occurrence of certain events.

Contingencies

Litigation.  In the normal course of business, from time to time, the Operating Partnership may be involved in legal actions relating to the ownership and operations of its properties. Management does not expect that the liabilities, if any, that may ultimately result from such legal actions will have a material adverse effect on the consolidated financial position, results of operations or cash flows of the Operating Partnership.

Environmental Matters.  The Operating Partnership monitors its properties for the presence of hazardous or toxic substances. The Operating Partnership is not aware of any environmental liability with respect to the properties that would have a material adverse effect on the Operating Partnership’s business, assets or results of operations. However, there can be no assurance that such a material environmental liability does not exist. The existence of any such material environmental liability would have an adverse effect on the Operating Partnership’s results of operations and cash flow. The Operating Partnership carries environmental insurance and believes that the policy terms, conditions, limits and deductibles are adequate and appropriate under the circumstances, given the relative risk of loss, the cost of such coverage and current industry practice.

General Uninsured Losses.  The Operating Partnership carries property and rental loss, liability, flood and terrorism insurance. The Operating Partnership believes that the policy terms, conditions, limits and deductibles are adequate and appropriate under the circumstances, given the relative risk of loss, the cost of such coverage and

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AMB PROPERTY, L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

current industry practice. In addition, certain of the Operating Partnership’s properties are located in areas that are subject to earthquake activity; therefore, the Operating Partnership has obtained limited earthquake insurance on those properties. There are, however, certain types of extraordinary losses, such as those due to acts of war, that may be either uninsurable or not economically insurable. Although the Operating Partnership has obtained coverage for certain acts of terrorism, with policy specifications and insured limits that it believes are commercially reasonable, there can be no assurance that the Operating Partnership will be able to collect under such policies. Should an uninsured loss occur, the Operating Partnership could lose its investment in, and anticipated profits and cash flows from, a property.

Captive Insurance Company.  In December 2001, the Operating Partnership formed a wholly-owned captive insurance company, Arcata National Insurance Ltd. (Arcata), which provides insurance coverage for all or a portion of losses below the deductible under the Operating Partnership’s third-party policies. The captive insurance company is one element of the Operating Partnership’s overall risk management program. The Operating Partnership capitalized Arcata in accordance with the applicable regulatory requirements. Arcata established annual premiums based on projections derived from the past loss experience at the Operating Partnership’s properties. Annually, the Operating Partnership engages an independent third party to perform an actuarial estimate of future projected claims, related deductibles and projected expenses necessary to fund associated risk management programs. Premiums paid to Arcata may be adjusted based on this estimate. Like premiums paid to third-party insurance companies, premiums paid to Arcata may be reimbursed by customers pursuant to specific lease terms. Through this structure, the Operating Partnership believes that it has more comprehensive insurance coverage at an overall lower cost than would otherwise be available in the market.

13.   Subsequent Events

On April 17, 2007, the Operating Partnership redeemed all 800,000 of its outstanding 7.95% Series J Cumulative Redeemable Preferred Limited Partnership Units from a single institutional investor and all 800,000 of its outstanding 7.95% Series K Cumulative Redeemable Preferred Limited Partnership Units from another single institutional investor. The Operating Partnership redeemed the Series J Cumulative Redeemable Preferred Limited Partnership Units for $40.0 million, plus accrued and unpaid distributions through April 16, 2007. The Operating Partnership redeemed the Series K Cumulative Redeemable Preferred Limited Partnership Units for $40.0 million, plus accrued and unpaid distributions through April 16, 2007.

On April 17, 2007, a subsidiary of the Operating Partnership, AMB Property II, L.P., a Delaware limited partnership, repurchased all 510,000 of its outstanding 8.00% Series I Cumulative Redeemable Preferred Limited Partnership Units from a single institutional investor. AMB Property II, L.P. repurchased the units for $25.5 million, plus accrued and unpaid distributions through April 16, 2007, less applicable withholding, on the Series I Cumulative Redeemable Preferred Limited Partnership Units.

The Operating Partnership wrote-off approximately $3.0 million in deferred issuance costs related to the redemption of the Series J and K units and the repurchase of the Series I units.

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PART II

Item 6.   Exhibits

Unless otherwise indicated below, the Commission file number to the exhibit isNo. 001-14245.

Exhibit
Number			Description
	10	.1	Collateral Loan Agreement, dated as of February 14, 2007, by and among The Prudential Insurance Company Of America and Prudential Mortgage Capital Company, LLC, as Lenders, and AMB-SGP California, LLC, AMB-SGP CIF-California, LLC, AMB-SGP CIF-I, LLC, AMB-SGP Docks, LLC, AMB-SGP Georgia, LLC, AMB-SGP CIF-Illinois, L.P. and AMB-SGP TX/IL SUB, LLC as Borrowers (incorporated by reference to Exhibit 10.1 of AMB Property, L.P.’s Current Report onForm 8-K filed on February 21, 2007).
	10	.2	$160,000,000 Amended, Restated and Consolidated Promissory Note (FixedA-1), dated February 14, 2007, by AMB-SGP California, LLC, AMB-SGP CIF-California, LLC, AMB-SGP CIF-I, LLC,AMB-SGP Docks, LLC, AMB-SGP Georgia, LLC, AMB-SGP CIF-Illinois, L.P. and AMB-SGP TX/IL SUB, LLC, as Borrowers, to Prudential Mortgage Capital Company LLC, as Lender (incorporated by reference to Exhibit 10.2 of AMB Property, L.P.’s Current Report onForm 8-K filed on February 21, 2007).
	10	.3	$40,000,000 Amended, Restated and Consolidated Promissory Note (FloatingA-2), dated February 14, 2007, by AMB-SGP California, LLC, AMB-SGP CIF-California, LLC, AMB-SGP CIF-I, LLC,AMB-SGP Docks, LLC, AMB-SGP Georgia, LLC, AMB-SGP CIF-Illinois, L.P. and AMB-SGP TX/IL SUB, LLC, as Borrowers, to The Prudential Insurance Company of America, as Lender (incorporated by reference to Exhibit 10.3 of AMB Property, L.P.’s Current Report onForm 8-K filed on February 21, 2007).
	10	.4	$84,000,000 Amended, Restated and Consolidated Promissory Note (Fixed B-1), dated February 14, 2007, by AMB-SGP California, LLC, AMB-SGP CIF-California, LLC, AMB-SGP CIF-I, LLC,AMB-SGP Docks, LLC, AMB-SGP Georgia, LLC, AMB-SGP CIF-Illinois, L.P. and AMB-SGP TX/IL SUB, LLC, as Borrowers, to The Prudential Insurance Company of America, as Lender (incorporated by reference to Exhibit 10.4 of AMB Property, L.P.’s Current Report onForm 8-K filed on February 21, 2007).
	10	.5	$21,000,000 Amended, Restated and Consolidated Promissory Note (Floating B-2), dated February 14, 2007, by AMB-SGP California, LLC, AMB-SGP CIF-California, LLC, AMB-SGP CIF-I, LLC,AMB-SGP Docks, LLC, AMB-SGP Georgia, LLC, AMB-SGP CIF-Illinois, L.P. and AMB-SGP TX/IL SUB, LLC, as Borrowers, to The Prudential Insurance Company of America, as Lender (incorporated by reference to Exhibit 10.5 of AMB Property, L.P.’s Current Report onForm 8-K filed on February 21, 2007).
	10	.6	Fourteenth Amended and Restated Agreement of Limited Partnership of AMB Property II, L.P., dated February 22, 2007 (incorporated by reference to Exhibit 10.1 of AMB Property, L.P.’s Current Report onForm 8-K filed on February 22, 2007).
	10	.7	Deed of Accession and Amendment, dated March 21, 2007, by and between ING Real Estate Finance NV, AMB European Investments LLC, AMB Property, L.P., SCI AMB Givaudan Distribution Center, AMB Hordijk Distribution Center B.V., ING Bank NV, the Original Lenders and the Entities of AMB (both as defined in the Deed of Accession and Amendment) (incorporated by reference to Exhibit 10.1 of AMB Property, L.P.’s Current Report onForm 8-K filed on March 27, 2007).
	31	.1	Rule 13a-14(a)/15d-14(a) Certifications dated May 9, 2007 (filed with AMB Property, L.P.’s Quarterly Report onForm 10-Q on May 9, 2007).
	31	.2	Rule 13a-14(a)/15d-14(a) Certifications dated October 25, 2007.
	32	.1	18 U.S.C. § 1350 Certifications dated May 9, 2007. The certifications in this exhibit are being furnished solely to accompany this report pursuant to 18 U.S.C. § 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any of our filings, whether made before or after the date hereof, regardless of any general incorporation language in such filing (filed with AMB Property, L.P.’s Quarterly Report onForm 10-Q on May 9, 2007).
	32	.2	18 U.S.C. § 1350 Certifications dated October 25, 2007. The certifications in this exhibit are being furnished solely to accompany this report pursuant to 18 U.S.C. § 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any of our filings, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Amendment No. 1 to the report to be signed on its behalf by the undersigned thereunto duly authorized.

By: AMBProperty, Corporation,
its general partner

By:  /s/  Hamid R. Moghadam

Hamid R. Moghadam

Chairman of the Board, President and

Chief Executive Officer

(Duly Authorized Officer and

Principal Executive Officer)

By:  /s/  Thomas S. Olinger

Thomas S. Olinger

Chief Financial Officer

(Duly Authorized Officer

and Principal Financial Officer)

By:  /s/  Nina A. Tran

Nina A. Tran

Senior Vice President and

Chief Accounting Officer

(Duly Authorized Officer and

Principal Accounting Officer)

Date: October 25, 2007

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