1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
------------------------
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
OR
[ ] 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 94-385362
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
PIER 1, BAY 1, SAN FRANCISCO, CALIFORNIA 94111
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
(415) 394-9000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
State the aggregate market value of the voting stock held by non-affiliates
of the Registrant: None. No market for the Registrant's partnership units exists
and, therefore, a market value for such units cannot be determined.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates by reference AMB Property Corporation's Proxy
Statement for its Annual Meeting of Stockholders which the Registrant
anticipates will be filed no later than 120 days after the end of its fiscal
year pursuant to Regulation 14A.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2
PART I
ITEM 1. BUSINESS
GENERAL
AMB Property, L.P., a Delaware limited partnership, is one of the leading
owners and operators of industrial real estate nationwide. As of December 31,
2000, we owned, managed, and had renovation and development projects totaling 92
million square feet and 1,005 buildings in 27 metropolitan markets. Of this, we
owned and operated 862 industrial buildings and eight retail centers, totaling
approximately 77.0 million rentable square feet. As of December 31, 2000, these
properties were 96.3% leased. As of December 31, 2000, through our subsidiary,
AMB Investment Management, Inc., we also managed industrial buildings and retail
centers, totaling approximately 4.4 million rentable square feet on behalf of
various institutional investors. In addition, we have invested in 36 industrial
buildings, totaling approximately 4.0 million rentable square feet, through an
unconsolidated joint venture.
We are engaged in the acquisition, ownership, operation, management,
renovation, expansion, and development of primarily industrial properties in
target markets nationwide. As of December 31, 2000, AMB Property Corporation
owned an approximate 93.5% general partnership interest in us, excluding
preferred units. As our sole general partner, AMB Property Corporation has the
full, exclusive, and complete responsibility and discretion in the day-to-day
management and control of us.
We enter into co-investment joint ventures with institutional investors.
These co-investment joint ventures provide us with an additional source of
capital to fund certain acquisitions and developments and renovation projects
and increase our return on invested capital as a result of certain fees paid to
us. As of December 31, 2000, we had investments in two co-investment joint
ventures, which are consolidated for financial reporting purposes.
We are the managing general partner of AMB Institutional Alliance Fund I,
L.P. and, together with one of our other affiliates, own, as of December 31,
2000, approximately 21% of the partnership interests in the Alliance Fund I. The
Alliance Fund I is a co-investment partnership between us and AMB Institutional
Alliance REIT I, Inc., a limited partner of the Alliance Fund I, which includes
15 institutional investors as stockholders and is engaged in the acquisition,
ownership, operation, management, renovation, expansion, and development of
primarily industrial buildings in target markets nationwide. As of December 31,
2000, the Alliance Fund I had received equity contributions from third party
investors totaling $169.0 million, which, when combined with anticipated debt
financings and our investment, creates a total planned capitalization of $410.0
million.
The principal executive office of AMB Property, L.P. and AMB Property
Corporation is located at Pier 1, Bay 1, San Francisco, CA 94111, and our
telephone number is (415) 394-9000. We also maintain a regional office in
Boston, Massachusetts. As of December 31, 2000, we employed 174 individuals, 133
at our San Francisco headquarters and 41 in our Boston office.
Unless the context otherwise requires, the terms "we," "us," and "our"
refer to AMB Property, L.P. and our controlled subsidiaries. The following marks
are registered trademarks of AMB Property Corporation, our general partner:
AMB(R); Customer Alliance Partners(R); Customer Alliance Program(R); Development
Alliance Partners(R); Development Alliance Program(R); eSpace(R); Institutional
Alliance Partners(R); Institutional Alliance Program(R); Management Alliance
Partners(R); Management Alliance Program(R); UPREIT Alliance Partners(R); and
UPREIT Alliance Program(R). The following marks are unregistered trademarks of
AMB Property Corporation, our general partner: Broker Alliance Partners(TM);
Broker Alliance Program(TM); HTD(TM); High Throughput Distribution(TM);
iSpace(TM); Strategic Alliance Partners(TM); and Strategic Alliance
Programs(TM).
TRANSACTION SUMMARY
During 2000, we invested $730.0 million in operating properties, consisting
of 145 industrial buildings aggregating approximately 10.5 million square feet.
Of this, $185.6 million in operating properties was acquired by the Alliance
Fund I, consisting of 44 industrial buildings aggregating approximately 2.6
million
1
3
square feet. In 2000, we disposed of one retail center and 25 industrial
buildings and re-invested approximately $175.7 million in 145 industrial
buildings, aggregating approximately 10.5 million rentable square feet.
We had 33 industrial buildings and one retail center that were held for
divestiture as of December 31, 2000. During 2000, we disposed of 25 industrial
buildings and one retail center, aggregating approximately 2.5 million rentable
square feet, for an aggregate price of $175.7 million. Over the next few years,
we intend to dispose of non-strategic assets and redeploy the resulting capital
into properties that better fit our current investment focus.
As of December 31, 2000, we had in our development pipeline 19 industrial
projects, which will total approximately 5.5 million square feet and have a
total estimated investment of $305.9 million upon completion. We also had three
retail projects in our development pipeline, which will total approximately 0.5
million square feet and have a total estimated investment of $76.3 million upon
completion. As of December 31, 2000, we had funded an aggregate of $226.5
million and will need to fund an estimated additional $155.7 million in order to
complete projects currently under construction.
BUSINESS STRATEGIES
Investment Strategy
Our investment strategy is to become a leading provider of High Throughput
Distribution, or HTD, properties located near key passenger and cargo airports,
highway systems, and ports in major metropolitan areas, such as Atlanta,
Chicago, Dallas/Fort Worth, Northern New Jersey/New York City, the San Francisco
Bay Area, Southern California, Miami, and Seattle. Within each of our markets,
we focus our investments in in-fill submarkets. In-fill sub-markets are
characterized by supply constraints on the availability of land for competing
projects.
High Throughput Distribution facilities are designed to serve the
high-speed, high-value freight handling needs of today's supply chain, as
opposed to functioning as long-term storage facilities. We believe that the
rapid growth of the airfreight business and the outsourcing of supply chain
management to third party logistics companies are indicative of the changes that
are occurring in the supply chain and the manner in which goods are distributed.
In addition, we believe that inventory levels as a percentage of final sales are
falling and that goods are moving more rapidly through the supply chain. As a
result, we intend to focus our investment activities primarily on industrial
properties that we believe will benefit from these changes.
Operating Strategy
We are a full-service real estate company with in-house expertise in
acquisitions, development and redevelopment, asset management and leasing,
finance and accounting, and market research. We have long-standing relationships
with many real estate management and development firms across the country, our
Strategic Alliance Partners.
We believe that real estate is fundamentally a local business and that the
most effective way for us to operate is by forging alliances with service
providers in every market. We believe that these collaborations allow us to: 1)
leverage our national presence with the local market expertise of brokers,
developers, and property managers; 2) improve the operating efficiency and
flexibility of our national portfolio; 3) strengthen customer satisfaction and
retention; and 4) provide a continuous pipeline of growth.
We believe that our partners give us local market expertise and enormous
flexibility allowing us to focus on our core competencies: developing and
refining our strategic approach to real estate investment and management and
raising private capital to finance growth and enhance returns.
FINANCING STRATEGY
To maintain financial flexibility and facilitate the rapid deployment of
capital over market cycles, we intend to operate with a debt-to-total market
capitalization ratio of approximately 45% or less, although our organizational
documents do not limit the amount of indebtedness that we may incur.
Additionally, we intend
2
4
to continue to structure our balance sheet to maintain investment-grade ratings.
We also intend to keep the majority of our assets unencumbered to facilitate
such ratings. As of December 31, 2000, our debt-to-total market capitalization
ratio was 37.9% and our debt-to-total book capitalization ratio was 44.6%.
We have a $500 million unsecured revolving credit agreement that currently
bears interest at a rate equal to LIBOR plus 75 basis points. We use available
borrowings under our unsecured credit facility for property acquisitions,
developments, and for general corporate purposes. As of December 31, 2000, the
available borrowings under our unsecured credit facility were $284.0 million
(excluding potential expansion capacity). See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources" and "Item 14. Note 6 of Notes to Consolidated Financial
Statements" included in this report.
Currently, our principal sources of working capital and funding for
acquisitions, development, expansion, and renovation of our properties include:
1) cash flow from operations; 2) borrowings under our unsecured credit facility;
3) other forms of secured or unsecured debt financing; 4) proceeds from debt or
limited partnership unit offerings (including issuances of units by our
subsidiaries); and 5) proceeds from divestitures of properties. Additionally,
our co-investment program will also serve as a significant source of capital for
acquisitions and developments.
GROWTH STRATEGIES
AMB Investment Management
AMB Investment Management, Inc. provides real estate investment management
services on a fee basis to clients. We hold all of the non-voting preferred
stock of AMB Investment Management, which represents a 95% economic interest.
All of the common stock of AMB Investment Management, Inc., which represents a
5% economic interest, is owned by our general partner's current or former
executive officers and a former executive officer of AMB Investment Management,
Inc.. AMB Investment Management, Inc. conducts its operations through AMB
Investment Management Limited Partnership, a Maryland limited partnership, of
which it is the sole general partner. We intend to grow this business through
our co-investment program.
We co-invest with clients of AMB Investment Management, Inc., to the extent
such clients newly commit investment capital, through partnerships, limited
liability companies, or joint ventures. We currently use a co-investment formula
with each client whereby we will own at least a 20% interest in all ventures. We
currently have two co-investments. The first is a separate account co-investment
venture, in which we own a 50% interest, with total gross book value at December
31, 2000, of $214.1 million. The second is a co-investment fund, AMB
Institutional Alliance Fund I, L.P., in which we owned at December 31, 2000, a
21% interest, with total gross book value at December 31, 2000, of $339.5
million. In general, we control all significant operating and investment
decisions of our co-investment entities.
Headlands Realty Corporation
Headlands Realty Corporation conducts a variety of businesses that include
incremental income programs, such as our Customer Assist Program and, to a
limited extent, development projects available for sale to third parties. We
hold all of the non-voting preferred stock of Headlands Realty Corporation,
which represents a 95% economic interest. All of the common stock of Headlands
Realty Corporation, which represents a 5% economic interest, is owned by some of
our general partner's current and former executive officers and a director of
Headlands Realty Corporation.
Growth Through Operations
We seek to generate internal growth through rent increases on existing
space and renewal on re-tenanted space, by maintaining a high occupancy rate of
our properties and by controlling expenses by capitalizing on the economies of
owning, operating, and growing a large national portfolio. As of December 31,
2000, our industrial properties and retail centers were 96.4% leased and 93.2%
leased, respectively. During the 12 months ended December 31, 2000, we increased
average base rental rates (on a cash basis) by 26.5% from
3
5
the expiring rent for that space, on leases entered into or renewed during such
period, representing approximately 12.1 million rentable square feet. Annualized
base rent represents the monthly contractual amount under existing leases at the
end of the year, multiplied by 12. This amount excludes expense reimbursements,
rental abatements, and percentage rents.
Growth Through Acquisitions and Capital Redeployment
We believe that our significant acquisition experience, our alliance-based
operating strategy, and our extensive network of property acquisition sources
will continue to provide opportunities for external growth. We believe that our
relationship with third party local property management firms through our
Management Alliance Program also will create acquisition opportunities as such
managers market properties on behalf of sellers. Our operating structure also
enables us to acquire properties through our UPREIT Alliance Program in exchange
for our limited partnership units, thereby enhancing our attractiveness to
owners and developers seeking to transfer properties on a tax-deferred basis. In
addition to acquisitions, we seek to redeploy capital from non-strategic assets
into properties that better fit our current investment focus.
We are generally in various stages of negotiations for a number of
acquisitions and dispositions, which may include acquisitions and dispositions
of individual properties, acquisitions of large multi-property portfolios, and
acquisitions of other real estate companies. There can be no assurance that we
will consummate any of these acquisitions. Such transactions, if we consummate
them, may be material individually or in the aggregate. Sources of capital for
acquisitions may include undistributed cash flow from operations, borrowings
under the credit facility, other forms of secured or unsecured debt financing,
issuances of debt or limited partnership units (including issuances of limited
partnership units by our subsidiaries), proceeds from divestitures of
properties, and assumption of debt related to the acquired properties.
Growth Through Development
We believe that renovation and expansion of value-added properties and
development of well-located, high-quality industrial properties should continue
to provide us with attractive opportunities for increased cash flow and a higher
rate of return than we may obtain from the purchase of fully leased, renovated
properties. Value-added properties are typically characterized as properties
with available space or near-term leasing exposure, undeveloped land acquired in
connection with another property that provides an opportunity for development,
or properties that are well-located but require redevelopment or renovation.
Value-added properties require significant management attention or capital
investment to maximize their return. We have developed the in-house expertise to
create value through acquiring and managing value-added properties and believe
that our national market presence and expertise will enable us to continue to
generate and capitalize on these opportunities. Through our Development Alliance
Program, we have established strategic alliances with national and regional
developers to enhance our development capabilities.
The multidisciplinary backgrounds of our employees provide us with the
skills and experience to capitalize on strategic renovation, expansion, and
development opportunities. Several of our general partner's officers have
extensive experience in real estate development, both with us and with national
development firms. We generally pursue development projects in joint ventures
with local developers. This way, we leverage the development skill, access to
opportunities, and capital of such developers, transferring a significant amount
of the development risk to them and eliminating the need and expense of an
in-house development staff. Under a typical joint venture agreement with a
Development Alliance Partner, we would fund 95% of the construction costs and
our partner would fund 5%. Upon completion, we generally would purchase our
partner's interest in the joint venture.
As of December 31, 2000, we had committed to invest $278.5 million to
develop an estimated 5.9 million rentable square feet. Approximately $243.4
million of this investment is through our Development Alliance Program. See Item
2. Properties -- "Operating and Leasing Statistics -- Development Pipeline."
4
6
BUSINESS RISKS
See: "Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Business Risks" for a complete discussion of the
various risks that could adversely affect us.
ITEM 2. PROPERTIES
The properties that we owned as of December 31, 2000, are divided into two
operating divisions, consisting of 27 identifiable markets. We have provided
this breakdown for external reporting purposes only. It reflects the key markets
of interest to our investors and does not reflect how we are operationally
managed. See "Item 14. Note 14 of Notes to Consolidated Financial Statements"
for segment information related to our operations.
INDUSTRIAL PROPERTIES
At December 31, 2000, we owned 862 industrial buildings aggregating
approximately 75.8 million rentable square feet, located in 27 markets
nationwide. Our industrial properties accounted for $414.3 million, or 96.3%, of
our total annualized base rent at December 31, 2000. Our industrial properties
were 96.4% leased to over 2,850 customers, the largest of which accounted for no
more than 1.3% of our annualized base rent from our industrial properties.
Property Characteristics. Our industrial properties, which consist
primarily of warehouse distribution facilities suitable for single or multiple
customers, are typically comprised of multiple buildings. The following table
identifies characteristics of our typical industrial buildings:
TYPICAL BUILDING TYPICAL RANGE
-------------------- ----------------
Rentable square feet.......................... 100,000 75,000 - 200,000
Clear height.................................. 24 ft 16 - 32 ft.
Building depth................................ 200 ft 120 - 300 ft.
Truck court depth............................. 110 ft 90 - 130 ft.
Loading dock & grade.......................... Dock or Dock & Grade
Parking spaces per 1,000 square feet.......... 1.0 0.5 - 2.0
Doors per 1,000 square feet................... 0.2 0.1 - 2.0
Square footage per tenant..................... 35,000 15,000 - 150,000
Office finish................................. 8% 3% - 20%
Site coverage................................. 40% 35% - 50%
Lease Terms. Our industrial properties are typically subject to lease on a
"triple net basis," in which customers pay their proportionate share of real
estate taxes, insurance, and operating costs, or subject to leases on a
"modified gross basis," in which customers pay expenses over certain threshold
levels. Lease terms typically range from three to ten years, with an average of
six years, excluding renewal options. The majority of the industrial leases do
not include renewal options.
Overview of Major Target Markets. Our industrial properties are located
near key passenger and air cargo airports, key interstate highways, and ports in
major metropolitan areas, such as Atlanta, Chicago, Dallas/Fort Worth, Northern
New Jersey, the San Francisco Bay Area, Southern California, Miami, and Seattle.
We believe our industrial properties' strategic location, transportation network
and infrastructure, and large consumer and manufacturing bases support strong
demand for industrial space. According to statistics published by CB Richard
Ellis/Torto Wheaton Research, the national hub markets listed below are six of
the nation's eight largest warehouse markets and, as of December 31, 2000,
comprised 43.2% of the warehouse inventory of the 47 industrial markets tracked.
According to statistics published by Regional Financial Associates, as of
December 31, 2000, the combined population of these markets was 45.6 million and
the amount of per capita warehouse space was 22.7% above the average for those
47 industrial markets.
5
7
Within these metropolitan areas, our industrial properties are concentrated
in locations with limited new construction opportunities within established,
relatively large submarkets, which we believe should provide a higher rate of
occupancy and rent growth than properties located elsewhere. These in-fill
locations are typically near major passenger and air cargo facilities, seaports
or convenient to major highways and rail lines, and are proximate to a diverse
labor pool. There is typically broad demand for industrial space in these
centrally located submarkets due to a diverse mix of industries and types of
industrial uses, including warehouse distribution, light assembly and
manufacturing. We generally avoid locations at the periphery of metropolitan
areas where there are fewer supply constraints. Small metropolitan areas or
cities without a heavy concentration of warehouse activity typically have few,
if any, supply-constrained locations (those areas typified by significant
population densities, a limited number of existing industrial customers and a
low availability of land which could be developed into competitive space for
additional industrial customers).
INDUSTRIAL MARKET OPERATING STATISTICS
As of December 31, 2000, we operated in six hub markets, in addition to 21
other markets nationwide. The following table represents properties in which we
own a fee simple interest or a controlling interest (consolidated), and excludes
properties in which we only own a non-controlling interest (unconsolidated) and
properties under development.
NO. NEW SAN TOTAL
DALLAS/ JERSEY/ FRANCISCO SOUTHERN HUB
ATLANTA CHICAGO(1) FT. WORTH NEW YORK BAY AREA CALIFORNIA MARKETS
---------- ---------- ---------- ---------- ---------- ---------- -----------
Square feet owned............ 5,140,876 7,497,472 5,933,777 5,985,300 8,771,331 9,553,425 42,882,181
Occupancy Percentage......... 98.0% 94.6% 92.5% 95.8% 99.8% 96.9% 96.5%
Annualized base rent......... $ 21,327 $ 29,662 $ 24,597 $ 35,905 $ 76,625 $ 48,840 $ 236,956
Annualized base rent per
square foot................. $ 4.23 $ 4.18 $ 4.48 $ 6.26 $ 8.75 $ 5.28 $ 5.73
Lease expirations as a
percentage of ABR:
2001........................ 17.5% 14.1% 14.5% 19.5% 11.9% 12.8% 14.0%
2002........................ 17.2% 13.6% 18.8% 9.3% 12.7% 13.1% 13.4%
2003........................ 15.1% 24.9% 20.0% 14.6% 13.1% 15.8% 16.0%
Weighted average lease terms
Original.................... 4.9 years 7.7 years 5.8 years 7.1 years 5.4 years 6.8 years 6.3 years
Remaining................... 3.2 years 3.9 years 3.3 years 3.7 years 3.3 years 4.0 years 3.6 years
Tenant Retention (Year-to-
date)....................... 67.5% 66.1% 58.9% 67.6% 54.8% 53.8% 60.1%
Rent increases on renewals
and rollovers............... 6.5% 7.9% 10.3% 13.7% 70.5% 17.7% 32.6%
Same store cash basis NOI
growth...................... 6.1% 5.6% 9.7% 0.2% 22.3% 4.4% 11.3%
Square feet owned in same
store pool(2)............... 3,196,631 6,855,380 4,622,049 2,162,051 6,162,270 4,887,057 27,885,438
TOTAL
OTHER
MARKETS TOTAL
----------- -----------
Square feet owned............ 32,913,808 75,795,989
Occupancy Percentage......... 96.3% 96.4%
Annualized base rent......... $ 177,356 $ 414,312
Annualized base rent per
square foot................. $ 5.60 $ 5.67
Lease expirations as a
percentage of ABR:
2001........................ 19.2% 16.0%
2002........................ 15.7% 14.3%
2003........................ 14.2% 15.3%
Weighted average lease terms
Original.................... 6.6 years 6.4 years
Remaining................... 3.4 years 3.5 years
Tenant Retention (Year-to-
date)....................... 57.3% 59.0%
Rent increases on renewals
and rollovers............... 11.6% 25.6%
Same store cash basis NOI
growth...................... 4.7% 8.5%
Square feet owned in same
store pool(2)............... 24,259,912 52,145,350
- ---------------
(1) We also have a majority ownership interest in 36 industrial buildings
totaling an aggregate of approximately 4.0 million square feet in the
Chicago market through its investment in an unconsolidated joint venture.
(2) Excludes properties purchased or developed after December 31, 1998.
6
8
INDUSTRIAL PROPERTY SUMMARY
As of December 31, 2000, our 862 industrial buildings were diversified
across 27 markets nationwide. The average age of our industrial properties is 17
years (since the property was built or substantially renovated), which we
believe should result in lower operating costs over the long term. The following
table represents properties in which we own a fee simple interest or a
controlling interest (consolidated), and excludes properties in which we only
own a non-controlling interest (unconsolidated).
PERCENTAGE PERCENTAGE
TOTAL OF TOTAL ANNUALIZED OF TOTAL
NUMBER OF RENTABLE RENTABLE PERCENTAGE BASE RENT ANNUALIZED NUMBER
INDUSTRIAL PROPERTIES BUILDINGS SQUARE FEET SQUARE FEET LEASED (000'S)(1) BASE RENT OF LEASES
--------------------- --------- ----------- ----------- ---------- ---------- ---------- ---------
HUB MARKETS:
Atlanta....................... 48 5,140,876 6.8% 98.0% $ 21,327 5.1% 152
Chicago....................... 82 7,497,472 9.9 94.6 29,662 7.2 176
Dallas/Ft. Worth.............. 71 5,933,777 7.8 92.5 24,597 5.9 242
Northern New Jersey/New York
City........................ 69 5,985,300 7.9 95.8 35,905 8.7 240
San Francisco Bay Area........ 121 8,771,331 11.6 99.8 76,625 18.5 350
Southern California........... 121 9,553,425 12.6 96.9 48,840 11.8 293
--- ---------- ----- ----- -------- ----- -----
Subtotal/Weighted Average... 512 42,882,181 56.6 96.5 236,956 57.2 1,453
OTHER MARKETS:
Austin........................ 8 1,075,316 1.4 100.0 8,588 2.1 28
Baltimore/Washington D.C. .... 63 4,140,720 5.5 98.8 30,920 7.5 297
Boston........................ 40 4,788,548 6.2 99.8 22,172 5.4 65
Charlotte..................... 12 831,974 1.1 99.0 3,894 0.9 34
Cincinnati.................... 6 811,693 1.1 100.0 2,742 0.7 13
Columbus...................... 2 465,433 0.6 100.0 1,410 0.3 2
Dayton........................ 5 125,575 0.2 88.3 792 0.2 9
Houston....................... 26 2,420,513 3.2 91.6 8,298 2.0 126
Jacksonville.................. 1 50,200 0.1 57.9 202 0.0 5
Kansas City................... 2 159,249 0.2 89.4 1,602 0.4 11
Memphis....................... 17 1,883,845 2.5 82.8 8,408 2.0 49
Miami......................... 47 4,342,361 5.7 97.2 32,718 7.9 220
Minneapolis................... 42 4,441,147 5.9 95.8 17,577 4.2 205
Nashville..................... 2 375,317 0.5 100.0 1,074 0.3 5
New Orleans................... 5 411,689 0.5 95.7 1,859 0.4 48
Newport News.................. 1 60,215 0.1 100.0 717 0.2 3
Orlando....................... 19 1,845,494 2.4 94.7 7,093 1.7 80
Philadelphia.................. 1 83,148 0.1 90.8 1,743 0.4 19
Portland...................... 5 676,104 0.9 98.4 2,805 0.7 10
San Diego..................... 5 276,167 0.4 92.1 1,984 0.5 17
Seattle....................... 41 3,649,100 4.8 96.9 20,758 5.0 157
--- ---------- ----- ----- -------- ----- -----
Subtotal/Weighted Average... 350 32,913,808 43.4 96.3 177,356 42.8 1,403
--- ---------- ----- ----- -------- ----- -----
Total/Weighted
Average............... 862 75,795,989 100.0% 96.4% $414,312 100.0% 2,856
=== ========== ===== ===== ======== ===== =====
ANNUALIZED
BASE RENT
PER LEASED
INDUSTRIAL PROPERTIES SQUARE FOOT
--------------------- -----------
HUB MARKETS:
Atlanta....................... $ 4.23
Chicago....................... 4.18
Dallas/Ft. Worth.............. 4.48
Northern New Jersey/New York
City........................ 6.26
San Francisco Bay Area........ 8.75
Southern California........... 5.28
------
Subtotal/Weighted Average... 5.73
OTHER MARKETS:
Austin........................ 7.99
Baltimore/Washington D.C. .... 7.53
Boston........................ 4.64
Charlotte..................... 4.73
Cincinnati.................... 3.38
Columbus...................... 3.03
Dayton........................ 7.14
Houston....................... 3.74
Jacksonville.................. 6.95
Kansas City................... 11.25
Memphis....................... 5.39
Miami......................... 7.75
Minneapolis................... 4.13
Nashville..................... 2.86
New Orleans................... 4.72
Newport News.................. 11.91
Orlando....................... 4.06
Philadelphia.................. 23.09
Portland...................... 4.22
San Diego..................... 7.80
Seattle....................... 5.87
------
Subtotal/Weighted Average... 5.60
------
Total/Weighted
Average............... $ 5.67
======
- ---------------
(1) Annualized base rent represents the monthly contractual amount under
existing leases at December 31, 2000, multiplied by 12. This amount excludes
expense reimbursements and rental abatements.
7
9
INDUSTRIAL PROPERTY LEASE EXPIRATIONS
The following table summarizes the lease expirations for our industrial
properties for leases in place as of December 31, 2000, without giving effect to
the exercise of renewal options or termination rights, if any, at or prior to
the scheduled expirations.
RENTABLE ANNUALIZED PERCENTAGE OF
SQUARE BASE RENT ANNUALIZED
YEAR OF LEASE EXPIRATION(1) FEET (000S)(2) BASE RENT
--------------------------- ---------- ---------- -------------
2001(3)(4).............................. 12,805,291 $ 74,373 16.0%
2002.................................... 12,525,395 66,209 14.3
2003.................................... 13,027,351 70,840 15.3
2004.................................... 10,180,364 61,426 13.2
2005.................................... 9,515,495 62,256 13.4
2006.................................... 4,555,886 25,398 5.5
2007.................................... 3,439,674 22,604 4.9
2008.................................... 1,968,841 14,812 3.2
2009.................................... 2,798,547 16,122 3.5
2010.................................... 2,721,071 32,038 6.9
Thereafter.............................. 1,865,629 17,683 3.8
---------- -------- -----
Total/Weighted Average........ 75,403,544 $463,761 100.0%
========== ======== =====
- ---------------
(1) Schedule includes executed leases that commence after December 31, 2000.
Schedule excludes leases expiring December 31, 2000.
(2) Calculated as monthly rent at expiration multiplied by 12.
(3) Includes 1,640,579 square feet of month-to-month leases.
(4) Includes leases expiring January 1, 2001, through December 31, 2001.
8
10
CUSTOMER INFORMATION
Largest Property Customers. Our 25 largest property customers by annualized
base rent are set forth in the table below.
PERCENTAGE OF PERCENTAGE OF
NUMBER AGGREGATE AGGREGATE ANNUALIZED AGGREGATE
OF RENTABLE LEASED BASE RENT ANNUALIZED
INDUSTRIAL CUSTOMER NAME(1) LEASES SQUARE FEET SQUARE FEET(2) (000S) BASE RENT(3)
--------------------------- ------ ----------- -------------- ---------- -------------
Federal Express Corporation.............. 22 464,593 0.6% $ 5,374 1.3%
Webvan Group, Inc........................ 5 1,021,819 1.4 5,080 1.2
Harmonic Inc............................. 3 246,864 0.3 4,253 1.0
International Paper Company.............. 8 443,106 0.6 3,452 0.8
CNF Transportation, Inc.................. 7 536,170 0.7 2,902 0.7
Wells Fargo Bank NA...................... 4 302,290 0.4 2,782 0.7
United States Postal Service............. 7 475,255 0.7 2,107 0.5
Air Express International................ 8 280,659 0.4 2,101 0.5
Ultrabrand Fiber Optics, Inc............. 1 47,417 0.1 1,915 0.5
Alza Corporation......................... 4 129,449 0.2 1,908 0.5
Shaw Industries.......................... 4 399,004 0.5 1,821 0.4
Sage Enterprises......................... 4 245,289 0.3 1,781 0.4
Rite Aid................................. 2 524,840 0.7 1,778 0.4
Home Depot USA, Inc...................... 4 476,026 0.7 1,777 0.4
Tech Data................................ 2 224,019 0.3 1,775 0.4
Adaptive Broadband Corporation........... 1 41,472 0.1 1,742 0.4
Corvis Corporation....................... 4 142,283 0.2 1,703 0.4
FMI International LLC.................... 1 315,000 0.4 1,701 0.4
Dell USA, LP............................. 2 285,000 0.4 1,700 0.4
C&S Wholesale Grocers, Inc............... 4 167,813 0.2 1,634 0.4
Cosmair.................................. 1 303,843 0.4 1,595 0.4
Calvin Klein Jeanswear................... 1 326,500 0.4 1,585 0.4
Boeing Company........................... 4 223,745 0.3 1,536 0.4
Wakefern Food Corporation................ 3 419,901 0.6 1,533 0.4
Boise Cascade Corporation................ 3 400,655 0.6 1,506 0.4
--------- -------
Total/Weighted Average......... 8,443,642 11.0% $57,041 13.3%
========= =======
- ---------------
(1) Tenant(s) may be a subsidiary of or an entity affiliated with the named
customer.
(2) Computed as aggregate rentable square feet divided by the aggregate leased
square feet of our industrial and retail properties.
(3) Computed as annualized base rent divided by the aggregate annualized base
rent of our industrial and retail properties.
9
11
RETAIL PROPERTIES
At December 31, 2000, we owned eight retail centers aggregating
approximately 1.2 million rentable square feet. Our retail properties accounted
for $15.9 million, or 3.7%, of annualized base rent at December 31, 2000. Our
retail properties were 93.2% leased to over 170 customers. Our retail properties
have an average age of two years since built, expanded, or renovated.
During 2000, we sold one retail center, totaling approximately 0.4 million
rentable square feet. As of December 31, 2000, we had one retail center,
aggregating approximately 0.3 million rentable square feet, which we held for
divestiture.
RETAIL PROPERTY SUMMARY
The following table sets forth the rentable square footage of our retail
centers as of December 31, 2000, and represents properties in which we own a fee
simple interest or a controlling interest (consolidated), and excludes
properties in which we only own a non-controlling interest (unconsolidated).
ANNUALIZED
TOTAL ANNUALIZED BASE RENT
RENTABLE PERCENTAGE BASE RENT NUMBER PER LEASED
RETAIL PROPERTIES SQUARE FEET LEASED (000'S)(1) OF LEASES SQUARE FOOT(2)
----------------- ----------- ---------- ---------- --------- --------------
Around Lenox..................... 121,348 83.1% $ 2,118 15 $21.00
Howard & Western S.C.(4)......... 88,798 74.0 858 8 13.07
Kendall Mall(3)(6)............... 278,759 93.8 4,540 45 17.36
Mazzeo Drive..................... 88,420 100.0 717 1 8.11
Northridge Plaza(3)(4)........... 173,919 92.5 2,226 30 13.84
Palm Aire(3)(4).................. 125,946 95.4 1,537 26 12.80
Springs Gate(3)(5)............... n/a n/a n/a n/a n/a
The Plaza at Delray(3)........... 331,863 99.4 3,916 46 11.87
--------- ----- ------- --- ------
Total/Weighted
Average.............. 1,209,053 93.2% $15,912 171 $14.11
========= ===== ======= === ======
- ---------------
(1) Annualized base rent means the monthly contractual amount under existing
leases at December 31, 2000, multiplied by 12. This amount excludes expense
reimbursements, rental abatements, and percentage rents.
(2) Calculated as total Annualized Base Rent divided by total rentable square
feet actually leased as of December 31, 2000.
(3) We hold an interest in this property through a joint venture interest in a
limited partnership.
(4) This property is being redeveloped. All calculations are based on rentable
square feet existing as of December 31, 2000.
(5) This property consists of land held for future development.
(6) This property is being held for divestiture as of December 31, 2000.
10
12
OPERATING AND LEASING STATISTICS
TOTAL PORTFOLIO SUMMARY
The following table summarizes key operating and leasing statistics for all
of our properties as of and for the year ended December 31, 2000.
OPERATING AND LEASING STATISTICS(1)
INDUSTRIAL RETAIL TOTAL
----------- ----------- -----------
Square feet owned at December 31, 2000(2)... 75,795,989 1,209,053 77,005,042
Occupancy percentage at December 31,
2000...................................... 96.4% 93.2% 96.3%
Weighted average lease term:
Original.................................. 6.4 years 13.8 years 6.5 years
Remaining................................. 3.5 years 10.1 years 3.6 years
Tenant retention:
-- Year-to-date (13.3 million SF
expired)............................... 59.0% 45.1% 58.9%
Rent increases on renewals and rollovers:
-- Year-to-date (12.1 million SF
leased)................................ 25.6% 202.6% 26.5%
Second generation tenant improvements and
leasing commissions per sq. ft.(3):
-- Year-to-date:
Renewals............................... $ 1.25 $ 0.20 $ 1.24
Re-tenanted............................ 2.27 0.07 2.23
----------- ----------- -----------
Weighted average.................. $ 1.86 $ 0.09 $ 1.84
=========== =========== ===========
Recurring capital expenditures:
-- Year-to-date:
Tenant improvements.................... $ 10,237 $ 1,387 $ 11,624
Lease commissions...................... 17,679 -- 17,679
Building improvements.................. 11,031 239 11,270
----------- ----------- -----------
Total............................. $ 38,947 $ 1,626 $ 40,573
=========== =========== ===========
- ---------------
(1) Includes all consolidated operating properties and excludes industrial
development and renovation projects.
(2) In addition to owned square feet as of December 31, 2000, we manage, through
our subsidiary, AMB Investment Management, Inc., 3.7 million, 0.6 million,
and 0.1 million additional square feet of industrial, retail, and other
properties, respectively. We also have an investment in 4.0 million square
feet of industrial properties through our investment in an unconsolidated
joint venture.
(3) Consists of all leases renewing or re-tenanting with lease terms greater
than one year.
11
13
SAME STORE SUMMARY
The following table summarizes key operating and leasing statistics for our
same store properties as of and for the year ended December 31, 2000. For an
explanation of our same store properties, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Results of
Operations."
INDUSTRIAL RETAIL TOTAL
---------- ------- ----------
Square feet in same store pool................... 52,145,350 367,179 52,512,529
% of total square feet......................... 68.8% 30.4% 68.2%
Occupancy percentage at December 31, 2000........ 96.8% 95.3% 96.7%
at December 31, 1999..... 96.2% 97.8% 96.2%
Tenant retention:
-- Year-to-date (11.0 million SF expired)...... 59.2% 18.9% 58.9%
Rent increases on renewals and rollovers:
-- Year-to-date (9.8 million SF leased)........ 27.0% 215.0% 28.0%
Cash basis net operating income growth %
increase(1)
-- Year-to-date: Revenues...................... 7.3% 1.7% 7.2%
Expenses..................... 3.5% 3.9% 3.5%
NOI.......................... 8.5% 1.0% 8.4%
- ---------------
(1) Net operating income, or NOI, consists of rental revenues, including
reimbursements and excluding straight-line rents, less property level
operating expenses.
HISTORICAL OCCUPANCY RATES, AVERAGE BASE RENTS, RENT INCREASES, AND TENANT
RETENTION RATES
The following table sets forth weighted average occupancy rates and average
base rents based on square feet leased of our industrial properties and retail
centers as of and for the periods presented. The following table also sets forth
information relating to tenant retention rates and average rent increases (cash
basis) on renewal and re-tenanted space for our industrial properties and retail
properties for the periods presented.
INDUSTRIAL RETAIL TOTAL
---------- ------ -----
OCCUPANCY RATES:
2000.................................................... 96.4% 93.2% 96.3%
1999.................................................... 95.9% 92.4% 95.9%
1998.................................................... 96.0% 94.6% 95.8%
ANNUALIZED BASE RENT PER SQUARE FOOT(1):
2000.................................................... $5.67 $14.12 N/A
1999.................................................... $4.89 $13.19 n/a
1998.................................................... $4.55 $11.98 n/a
RENTAL INCREASES:
2000.................................................... 25.6% 202.6% 26.5%
1999.................................................... 12.9% 6.8% 12.5%
1998.................................................... 14.6% 13.3% 14.3%
TENANT RETENTION RATES:
2000.................................................... 59.0% 45.1% 58.9%
1999.................................................... 72.0% 40.8% 72.0%
1998.................................................... 74.8% 84.1% 75.4%
- ---------------
(1) Annualized base rent per square foot represents the total annualized
contractual base rental revenue for the period divided by the average
occupied square feet leased at December 31.
12
14
RECURRING TENANT IMPROVEMENTS AND LEASING COMMISSIONS PER SQUARE FOOT LEASED
The table below summarizes for our industrial properties and retail
properties, separately, the recurring tenant improvements and leasing
commissions per square feet leased for the years ended December 31. The
recurring tenant improvements and leasing commissions represent costs incurred
to lease space after the initial lease term of the initial customer, excluding
costs incurred to relocate customers as part of a re-tenanting strategy. The
tenant improvements and leasing commissions set forth below are not necessarily
indicative of future tenant improvements and leasing commissions.
WEIGHTED
2000 1999 1998 AVERAGE
----- ----- ----- --------
INDUSTRIAL PROPERTIES:
Expenditures per renewed square foot leased..... $1.25 $1.22 $0.92 $1.14
Expenditures per re-tenanted square foot
leased....................................... 2.27 2.74 2.08 2.37
----- ----- ----- -----
Weighted average................................ $1.86 $1.64 $1.10 $1.62
===== ===== ===== =====
RETAIL PROPERTIES:
Expenditures per renewed square foot leased..... $0.20 $1.26 $1.34 $1.22
Expenditures per re-tenanted square foot
leased....................................... 0.07 2.55 9.99 2.92
----- ----- ----- -----
Weighted average................................ $0.09 $1.37 $2.64 $1.69
===== ===== ===== =====
TOTAL PROPERTIES:
Expenditures per renewed square foot leased..... $1.24 $1.22 $0.95 $1.14
Expenditures per re-tenanted square foot
leased....................................... 2.23 2.74 2.47 2.38
----- ----- ----- -----
Weighted average................................ $1.84 $1.64 $1.18 $1.62
===== ===== ===== =====
13
15
DEVELOPMENT PIPELINE
The following table sets forth the properties owned by us as of December
31, 2000, which were undergoing renovation, expansion, or new development. No
assurance can be given that any of such projects will be completed on schedule
or within budgeted amounts.
INDUSTRIAL DEVELOPMENT AND RENOVATION DELIVERIES
(DOLLARS IN THOUSANDS)
ESTIMATED ESTIMATED ESTIMATED
DEVELOPMENT ALLIANCE STABILIZATION TOTAL SQUARE FEET AT
PROJECT LOCATION PARTNER(TM) DATE INVESTMENT COMPLETION
------- -------- -------------------- ------------- ---------- --------------
2001 DELIVERIES
1. Pico Rivera (Phase I)......... Pico Rivera, CA Majestic Realty February $ 24,300 520,000
2. Northbrook Distribution
Center(1)..................... Suwanee, GA Seefried Properties March 5,700 150,000
3. Edgewater Industrial
Center(1)..................... Oakland, CA None March 21,500 397,000
4. DFW II/Air Cargo.............. Dallas, TX Trammell Crow May 18,100 189,000
Company
5. LA Media Tech Center.......... Los Angeles, CA Legacy Partners June 40,800 399,000
6. Port Northwest Industrial Park Dienna Nelson
(PhI)......................... Houston, TX Augustine December 12,400 368,000
7. Portland Air Cargo............ Portland, OR Trammell Crow December 11,800 160,000
Company
-------- ---------
Total 2001 Deliveries......... 134,600 2,183,000
% Pre-leased/
funded-to-date.......... 107,700(2) 56%
-------- ---------
2002 DELIVERIES
8. Cabot Business Park National Development
(Lot 1-2)..................... Mansfield, MA of NE January 15,300 118,000
9. Van Nuys (Phase I)............ Van Nuys, CA Trammell Crow February 34,800 490,000
Company
10. Dulles Airport park
(Phase I)..................... Dulles, VA Seefried Properties February 12,100 168,000
11. Southfield Logistics
Center(1)..................... Forest Park, GA None March 16,800 795,000
12. Carson Town Center, NE........ Carson, CA Mar Ventures April 11,200 176,000
13. Suwanee Creek
(Phase IV).................... Atlanta, GA Seefried Properties June 7,700 230,000
14. Monte Vista Spectrum.......... Chino, CA Majestic Realty June 23,200 577,000
15. Dulles Airport park
(Phase II).................... Dulles, VA Seefried Properties July 5,700 77,000
16. Dulles Airport park
(Phase III)................... Dulles, VA Seefried Properties November 6,200 84,000
17. Houston Air Cargo............. Houston, TX Trammell Crow December 11,400 156,000
Company
-------- ---------
Total 2002 Deliveries......... 144,400 2,871,000
% Pre-leased/
funded-to-date.......... 47,800(2) 24%
2003 DELIVERIES
18. Carson Town Center, SE........ Carson, CA Mar Ventures March 21,500 329,000
19. Dulles Airport park
(Phase IV).................... Dulles, VA Seefried Properties June 5,400 71,000
-------- ---------
Total 2003 Deliveries......... 26,900 400,000
-------- ---------
% Pre-leased/
funded-to-date.......... 7,400(2) 0%
-------- ---------
Total Scheduled
Deliveries(3)............. $305,900 5,454,000
% Pre-leased/
funded-to-date.......... 162,900(2) 35%
OUR
OWNERSHIP
PERCENTAGE
----------
200
1. 50%
2.
21%
3.
100%
4. 95%
5. 49%
6.
100%
7. 95%
---
71%
200
8.
90%
9. 95%
10.
21%
11.
21%
12. 95%
13.
100%
14. 50%
15.
21%
16.
21%
17. 19%
---
61%
200
18. 95%
19.
21%
---
80%
- ---------------
(1) Represents a renovation project.
(2) As of December 31, 2000, our share of such amounts funded to date was $76.5
million, $29.0 million, and $5.9 million, respectively, for a total of
$111.4 million funded to date.
(3) Excludes 250 acres of land and other acquisition-related costs totaling
approximately $23.1 million.
14
16
RETAIL REDEVELOPMENT DELIVERIES
(DOLLARS IN THOUSANDS)
ESTIMATED ESTIMATED ESTIMATED OUR
DEVELOPMENT STABILIZATION SQUARE FEET AT TOTAL OWNERSHIP
PROJECT(1) LOCATION ALLIANCE PARTNER(TM) DATE COMPLETION INVESTMENT(1) PERCENTAGE
---------- -------- -------------------- ------------- -------------- ------------- ----------
2001 DELIVERIES
1. Northridge.......... Fort Lauderdale, FL Lefmark September 258,000 $ 41,300 100%
2. Around Lenox........ Atlanta, GA Alpine Partners October 121,000 24,900 90%
3. Howard & Western.... Chicago, IL None October 89,000 10,100 100%
------- --------- ---
Total Scheduled
Deliveries..... 468,000 $ 76,300 97%
======= ========= ===
% Pre-leased/
funded-to-date... 84% 63,600(2)
- ---------------
(1) Excludes 39 acres of land and other acquisition costs totaling $13.2
million, which represents future phases of current projects which have not
been committed to, or for which final project planning has not been
completed, and other land inventory.
(2) As of December 31, 2000, our share of amounts funded to date was $61.5
million.
HEADLANDS REALTY CORPORATION(1)
DEVELOPMENT PROJECTS HELD FOR SALE
(DOLLARS IN THOUSANDS)
ESTIMATED ESTIMATED ESTIMATED
DEVELOPMENT STABILIZATION SQUARE FEET AT TOTAL
PROJECT(2) MARKET ALLIANCE PARTNER(TM) DATE COMPLETION INVESTMENT(3)
---------- ------ -------------------- ------------- -------------- -------------
2001 DELIVERIES
1. Cabot Business Park...... Boston National Development April 98,000 $ 8,200
of NE
2. Watertown Business Boston Campanelli August
Park...................... 201,000 41,400
------- -------
Total 2001
Deliveries........ 299,000 49,600
======= =======
% Pre-leased/
funded-to-date.... 100% 23,000
2003 DELIVERIES
3. Carson Town Center SW.... Southern California Mar Ventures March 412,000 20,300
-------
% Pre-leased/
funded-to-date.... 0% 10,500
Total Scheduled
Deliveries........ 711,000 $69,900
======= =======
% Pre-leased/
funded-to-date.... 42% 33,500
HEADLAND'S
OWNERSHIP
PROJECT(2) PERCENTAGE
---------- ----------
2001 DELIVERIES
1. Cabot Business Park...... 100%
2. Watertown Business
Park...................... 95%
---
Total 2001
Deliveries........ 96%
===
% Pre-leased/
funded-to-date....
2003 DELIVERIES
3. Carson Town Center SW.... 95%
% Pre-leased/
funded-to-date....
Total Scheduled
Deliveries........ 96%
===
% Pre-leased/
funded-to-date....
- ---------------
(1) Headlands Realty Corporation is one of our subsidiaries, in which we own a
95% economic interest.
(2) Headlands Realty Corporation currently intends to sell these properties
within two years of completion.
(3) Includes land at market value and development fees and cost reimbursements
that will be paid to us.
PROPERTIES HELD THROUGH JOINT VENTURES, LIMITED LIABILITY COMPANIES AND
PARTNERSHIPS
Consolidated:
As of December 31, 2000, we held interests in joint ventures, limited
liability companies, and partnerships with certain unaffiliated third parties
through, which are consolidated in our consolidated financial statements. In
certain cases such agreements provide that we are a limited partner or that the
other party to the joint venture is principally responsible for day-to-day
management of the property (although in all such cases, we have approval rights
with respect to significant decisions involving the underlying properties).
Under the agreements governing the joint ventures, we and the other party to the
joint venture may be required to make additional capital contributions, and
subject to certain limitations, the joint ventures may incur additional debt.
Such agreements also impose certain restrictions on the transfer of joint
venture interests by us or the other party to the joint venture and provide
certain rights to us or the other party to the joint venture to sell its
interest to the joint venture or to the other joint venture partner on terms
specified in the agreement. All of the joint ventures terminate in 2024 or
later, but may end earlier if a joint venture ceases to hold any interest in or
have any obligations relating to the property held by the joint venture.
15
17
INDUSTRIAL CONSOLIDATED JOINT VENTURES
(DOLLARS IN THOUSANDS)
OUR JV PARTNERS' JV PARTNERS'
OWNERSHIP SQUARE GROSS BOOK SHARE SHARE OF
PROPERTIES PERCENTAGE FEET(1) VALUE(2) DEBT OF DEBT NOI
---------- ---------- ---------- ---------- -------- ------------ ------------
OPERATING PROPERTIES:
SEPARATE ACCOUNT CO-INVESTORS(3)
1. Corporate Park/Hickory Hill............ 50% 858,322 $ 27,697 $ 16,325 $ 8,162 50%
2. Garland Industrial..................... 50 1,020,523 35,304 19,600 9,800 50
3. Jamesburg.............................. 50 821,712 47,656 23,376 11,688 50
4. Minnetonka Industrial.................. 50 515,915 29,301 12,286 6,143 50
5. South Point Business Park.............. 50 343,536 22,043 10,725 5,363 50
-- ---------- -------- -------- -------- --
Subtotal............................. 50 3,560,008 162,001 82,312 41,156 50
ALLIANCE FUND I(4)
6. Concord Industrial Portfolio........... 21 246,098 17,407 10,050 7,940 79
7. Diablo Industrial Park................. 21 294,255 15,318 9,900 7,821 79
8. Gateway Corporate Center............... 21 433,330 41,996 27,000 21,330 79
9. Gateway North.......................... 21 266,476 25,101 14,000 11,060 79
10. Oakland Ridge IV....................... 21 51,664 3,276 -- -- 79
11. Oakland Ridge VI....................... 21 113,169 6,690 -- -- 79
12. DFW International Air Cargo (Phase
I)....................................... 21 232,873 20,149 -- -- 79
13. Bennington Corporate Center............ 21 81,824 10,861 -- -- 79
14. DFW Airfreight Portfolio............... 21 272,795 9,700 -- -- 79
15. JFK Air Cargo Portfolio................ 21 372,885 41,294 19,679 15,546 79
16. Gateway 58............................. 21 123,912 13,203 -- -- 79
17. Seattle Airport Industrial............. 21 41,657 2,580 -- -- 79
18. Atlantic Distribution Center........... 21 180,000 6,239 4,000 3,160 79
19. Beacon Centre.......................... 21 422,566 29,661 17,861 14,110 79
20. TechRidge Corporate Center (Phase I)... 31 340,076 25,411 15,500 10,695 69
21. Harris Business Center................. 21 718,704 45,796 28,000 22,120 79
-- ---------- -------- -------- -------- --
Subtotal............................. 21 4,192,284 314,682 145,990 113,782 79
OTHER JOINT VENTURES
22. North Great SW Industrial Park......... 95 215,000 10,673 -- -- 5
23. North West Crossing Distribution
Center................................... 95 178,000 7,061 -- -- 5
24. Orlando Central Park (Phase I)......... 95 306,000 5,531 -- -- 5
25. South River Park (Phases I and II)..... 95 626,000 28,092 -- -- 5
26. Hamilton Parkway (Nippon Express)...... 73 148,941 6,361 -- -- 27
27. Metric Center.......................... 87 397,440 44,521 -- -- 13
28. Chancellor............................. 90 201,600 6,477 2,796 280 10
29. AFCO Portfolio......................... 95 896,767 97,775 41,131 2,056 5
-- ---------- -------- -------- -------- --
Subtotal............................. 92 2,969,748 206,491 43,927 2,336 8
---------- -------- -------- --------
Total Operating Properties........... 10,722,040 683,174 272,229 157,274
---------- -------- -------- --------
DEVELOPMENT ALLIANCE JOINT VENTURES(5):
ALLIANCE FUND I(6)
30. Southfield Logistics Center............ 21 795,000 14,226 -- -- 79
31. Northbrook Distribution Center......... 21 244,000 5,804 -- -- 79
32. Dulles Airport Park (Phases I-IV)...... 21 400,000 4,411 -- -- 79
33. Houston Air Cargo...................... 26 156,000 394 -- -- 74
-- ---------- -------- -------- -------- --
Subtotal............................. 21 1,595,000 24,835 -- -- 79
OTHER DEVELOPMENT ALLIANCE JOINT VENTURES
34. LA Media Tech Center................... 49 399,000 52,058 19,782 10,089 51
35. Cabot Business Park (Phases I & II).... 90 284,000 23,664 -- -- 10
36. DFW II Air Cargo....................... 95 189,000 12,638 -- -- 5
37. Portland Air Cargo..................... 95 159,500 6,822 -- -- 5
38. Van Nuys (Phase I)..................... 95 490,000 17,582 -- -- 5
39. Carson Town Center, (NE & SE).......... 95 505,000 9,775 -- -- 5
-- ---------- -------- -------- -------- --
Subtotal............................. 74 2,026,500 122,539 19,782 10,089 26
---------- -------- -------- --------
Total Development Alliances.......... 3,621,500 147,374 19,782 10,089
---------- -------- -------- --------
TOTAL INDUSTRIAL CONSOLIDATED JOINT
VENTURES............................. 14,343,540 $830,548 $292,011 $167,363
========== ======== ======== ========
16
18
- ---------------
(1) For development properties, this represents estimated square feet at
completion of development for committed phases of development and renovation
projects.
(2) Represents the book value of the property (before accumulated depreciation)
owned by the joint venture entity and excludes net other assets.
(3) These properties are owned by a single co-investment partnership between an
institutional investor (50%) and us (50%). The institutional investor is a
client of AMB Investment Management.
(4) Represents properties held by the Alliance Fund I, which is a co-investment
partnership between the Alliance REIT I (79%) and us (21%). The Alliance
REIT I is a client of AMB Investment Management.
(5) Excludes investments in 86.2 acres of land and other pre-development costs
related to future phases of current projects, which have not been committed
to, or for which final planning has not been completed.
(6) Represents a partnership between a Development Alliance Partner (5%) and the
Alliance Fund I (95%), in which we have a 21% interest.
RETAIL CONSOLIDATED JOINT VENTURES
(DOLLARS IN THOUSANDS)
JV PARTNERS' JV PARTNERS'
SQUARE GROSS BOOK SHARE SHARE
PROPERTIES MARKET FEET(1) VALUE(2) DEBT OF DEBT OF NOI
---------- ------- --------- ---------- ------- ------------ ------------
DEVELOPMENT ALLIANCE JOINT VENTURES
1. Around Lenox.......................... Atlanta 120,000 $ 20,391 $10,012 $ 1,000 10%
2. Northridge Plaza...................... Miami 259,000 38,205 -- -- 0%
3. Palm Aire............................. Miami 133,000 19,425 7,145 1,022 0%
4. Springs Gate(4)....................... Miami -- 16,918 -- -- 0%
--------- -------- ------- -------
Subtotal........................ 512,000 94,939 17,157 2,022
OTHER JOINT VENTURES
5. Kendall Mall(3)....................... Miami 278,759 40,862 23,975 9,998 29%
6. Plaza Delray.......................... Miami 331,863 37,925 22,557 4,534 2%
--------- -------- ------- -------
Subtotal........................ 610,622 78,787 46,532 14,532
--------- -------- ------- -------
Total........................... 1,122,622 $173,726 $63,689 $16,554
========= ======== ======= =======
- ---------------
(1) For development properties, this represents estimated square feet at
completion of development project.
(2) Represents the book value of the property (before accumulated depreciation)
owned by the joint venture entity and excludes net other assets.
(3) Included as part of retail properties held for divestiture.
(4) Represents 39 acres of land for future phases of current projects which have
not been committed to, or for which final project planning has not been
completed.
We account for all of the above investments on a consolidated basis for
financial reporting purposes because of our ability to exercise control over
significant aspects of the investment, as well as our significant economic
interest in the investments. See "Item 14. Note 2 of the Notes to Consolidated
Financial Statements."
Unconsolidated:
As of December 31, 2000, we held interests in three equity investment joint
ventures that are unconsolidated in our financial statements. The management and
control over significant aspects of these investments are with the third party
joint venture partner. In addition, as of December 31, 2000, we held two
mortgage investments from which we receive interest income.
17
19
UNCONSOLIDATED JOINT VENTURES
AND MORTGAGE INVESTMENTS
(DOLLARS IN THOUSANDS)
OUR OUR OUR
TOTAL TOTAL OWNERSHIP SHARE
PROPERTIES MARKET SQUARE FEET INVESTMENT PERCENTAGE OF DEBT
---------- ------------------- ----------- ---------- ---------- -------
OPERATING JOINT VENTURES
1. Elk Grove Du Page....................... Chicago 4,046,721 $59,447 56% $16,333
DEVELOPMENT ALLIANCE JOINT VENTURES(1)
2. Pico Rivera............................. Southern California 850,000 18,806 50% 12,469
3. Monte Vista Spectrum.................... Southern California 576,000 2,179 50% --
--------- ------- -------
Total............................. 5,472,721 $80,432 $28,802
========= ======= =======
MORTGAGE
PROPERTIES MARKET MATURITY RECEIVABLE RATE
---------- ------------------- -------------- ---------- -----
MORTGAGE INVESTMENT
1. Pier 1.......................................... SF Bay Area March 2001 $ 36,969 11.00%
2. Manhattan Village Shopping Center............... Southern California September 2001 79,000 8.75%
--------
Total..................................... $115,969
========
- ---------------
(1) Represents estimated square feet at completion of development project.
SECURED DEBT
As of December 31, 2000, we had $930.4 million of indebtedness, net of
unamortized premiums, secured by deeds of trust on 77 properties. As of December
31, 2000, the total gross investment value of those properties secured by debt
was $2.0 billion. Of the $930.4 million of secured indebtedness, $361.8 was
joint venture debt. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources" and
"Item 14. Note 6 of Notes to Consolidated Financial Statements" included in this
report. We believe that as of December 31, 2000, the value of the properties
securing the respective obligations in each case exceeded the principal amount
of the outstanding obligations.
ITEM 3. LEGAL PROCEEDINGS
In the normal course of business, we are involved in legal actions relating
to the ownership and operations of our properties. We do not expect the
liabilities, if any, that may ultimately result from such legal actions to have
a materially adverse effect on our consolidated financial position, results of
operations, or cash flows.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
18
20
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
There is no established public trading market for our partnership units. As
of December 31, 2000, we had outstanding 95,037,257 partnership units,
consisting of 87,909,340 general partnership units (consisting of 83,909,340
common units and 4,000,000 8 1/2% Series A Cumulative Redeemable Preferred
Units) held by AMB Property Corporation and 7,127,917 limited partnership units
(consisting of 5,827,917 common units and 1,300,000 8 5/8% Series B Cumulative
Redeemable Preferred Units). Subject to certain terms and conditions, the
limited partnership units are redeemable by the holders or, at the option of AMB
Property Corporation, exchangeable on a one-for-one basis for shares of the
common stock of AMB Property Corporation. As of December 31, 2000, there were 87
holders of our common partnership units (including AMB Property Corporation's
general partnership interest). As of the same date, AMB Property Corporation was
the only holder of the 8 1/2% Series A Cumulative Redeemable Preferred Units and
there was one holder of the 8 5/8% Series B Cumulative Redeemable Units.
In November 2000, we issued an aggregate of 94,771 limited partnership
common units with an aggregate value of approximately $2.2 million to three
limited partnerships. The issuance of limited partnership units in connection
with the acquisitions discussed above constituted private placements of
securities which were exempt from the registration requirements of the
Securities Act of 1933 pursuant to Section 4(2) and Rule 506 of Regulation D.
During 2000, 34,046 limited partnership units were redeemed for cash and 206,423
limited partnership units were redeemed for shares of AMB Property Corporation's
common stock.
Set forth below are the distributions per limited partnership unit paid by
us during the years ended December 31, 2000, 1999 and 1998:
YEAR DISTRIBUTION
---- ------------
2000
1st Quarter............................................... $0.37
2nd Quarter............................................... 0.37
3rd Quarter............................................... 0.37
4th Quarter............................................... 0.37
1999
1st Quarter............................................... 0.35
2nd Quarter............................................... 0.35
3rd Quarter............................................... 0.35
4th Quarter............................................... 0.35
1998
1st Quarter............................................... 0.34
2nd Quarter............................................... 0.34
3rd Quarter............................................... 0.34
4th Quarter............................................... 0.34
19
21
ITEM 6. SELECTED FINANCIAL AND OTHER DATA
SELECTED OPERATING PARTNERSHIP FINANCIAL AND OTHER DATA
The following table sets forth selected consolidated historical financial
and other data for AMB Property, L.P. on an historical basis for the years ended
December 31, 2000, 1999, 1998, and 1997.
AS OF AND FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------------------------------------
PRO FORMA(1) HISTORICAL(2)
2000 1999 1998 1997 1997
---------- ---------- ---------- ------------ -------------
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
OPERATING DATA
Total revenues.............................. $ 477,707 $ 448,183 $ 358,887 $ 284,674 $ 27,110
Income from operations before minority
interests................................. 159,699 158,851 123,750 103,903 9,291
Net income available to common
unitholders............................... 121,324 176,392 113,838 102,606 9,174
Net income per common unit:
Basic(3).................................. 1.35 1.94 1.27 1.16 0.10
Diluted(3)................................ 1.35 1.94 1.26 1.16 0.10
Adjusted net income per unit (diluted)(4)... 1.33 1.23 1.26 1.16 0.10
Distributions per common unit............... 1.48 1.40 1.37 1.37
OTHER DATA
EBITDA(5)................................... $ 349,353 $ 318,319 $ 252,353 $ 195,218
Funds from operations(6).................... 208,651 191,147 170,407 147,409
Cash flows provided by (used in):
Operating activities...................... 261,175 190,391 177,180 131,621
Investing activities...................... (726,499) 63,732 (793,366) (607,768)
Financing activities...................... 452,370 (240,721) 604,202 553,199
BALANCE SHEET DATA
Investments in real estate at cost.......... $4,026,597 $3,249,452 $3,369,060 $2,442,999
Total assets................................ 4,425,626 3,621,550 3,562,885 2,506,255
Total consolidated debt(7).................. 1,836,276 1,270,037 1,368,196 685,652
Our share of total debt..................... 1,681,161 1,168,218 1,348,107 672,945
Partners' capital........................... 1,945,903 1,983,549 1,914,257 1,717,398
- ---------------
(1) Pro forma 1997 financial and other data has been prepared as if our
formation transactions, our general partner's initial public offering, and
certain property acquisitions and divestitures in 1997 had occurred on
January 1, 1997.
(2) The historical 1997 results represent our predecessor's historical financial
and other data for the period January 1, 1997, through November 25, 1997.
The financial and other data of AMB Property Corporation and the properties
acquired in our formation transactions have been included from November 26,
1997 to December 31, 1997.
(3) Basic and diluted net income per unit equals the net income divided by
89,566,375 and 90,624,511 units, respectively, for 2000; 90,792,310 and
90,867,934 units, respectively, for 1999; 89,493,394 and 89,852,187 units,
respectively, for 1998; and pro forma net income divided by 88,416,676 and
88,698,719 units, respectively, for 1997.
(4) Adjusted net income per share represents net income before gain on property
dispositions, extraordinary items, and other one-time items. One-time items
related to depreciation expense on assets held for sale.
(5) EBITDA is computed as income from operations before divestiture of
properties and minority interests plus interest expense, income taxes, and
depreciation and amortization. We believe that in addition to cash flows and
net income, EBITDA is a useful financial performance measure for assessing
the operating performance of an equity real estate investment trust, such as
our general partner, because, together with net income and cash flows,
EBITDA provides investors with an additional basis to evaluate the ability
of a real estate investment trust to incur and service debt and to fund
acquisitions and other capital expenditures. Includes an adjustment to
reflect our pro rata share of EBITDA in an unconsolidated joint venture.
EBITDA is not a measurement of operating performance calculated in
accordance with accounting principles generally accepted in the United
States and should not be considered as a substitute for operating income,
net income, cash flows from operations, or other statement of operations or
cash flow data prepared in accordance with accounting principles generally
accepted in the United States. EBITDA may not be indicative of our
historical operating results, nor be predictive of potential future results.
While EBITDA is frequently used as a measure of operations and the ability
to meet debt service requirements, it is not necessarily comparable to other
similarly titled captions of other real estate investment trusts.
(6) Funds from Operations, or FFO, is defined as income from operations before
minority interest, gains or losses from sale of real estate, and
extraordinary losses plus real estate depreciation and adjustment to derive
our pro rata share of the FFO of unconsolidated joint ventures, less
minority interests' pro rata share of the FFO of consolidated joint ventures
and perpetual preferred unit distributions. In accordance with the National
Association of Real Estate Investment Trust White Paper on funds from
operations, we include the effects of straight-line rents in funds from
operations. We believe that funds from operations is an appropriate measure
of performance for an equity real estate investment trust, such as our
general partner. While funds from operations is a relevant and widely used
measure of operating performance of real estate investment trusts, it does
not represent cash flow from operations or net income as defined by
accounting principles generally accepted in the United States and it should
not be considered as an alternative to these indicators in evaluating
liquidity or operating performance. Further, funds from operations as
disclosed by other real estate investment trusts may not be comparable.
(7) Secured debt includes unamortized debt premiums of approximately $9.9
million, $10.1 million, $15.2 million, and $18.3 million as of December 31,
2000, 1999, 1998, and 1997, respectively. See Notes 2 and 6 of the Notes to
Consolidated Financial Statements.
20
22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
You should read the following discussion and analysis of our consolidated
financial condition and results of operations in conjunction with the Notes to
Consolidated Financial Statements. Statements contained in this discussion that
are not historical facts may be forward-looking statements. You can identify
forward-looking statements by the use of forward-looking terminology such as
"believes," "expects," "may," "will," "should," "seeks," "approximately,"
"intends," "plans," "pro forma," "estimates", or "anticipates' or the negative
of these words and phrases or similar words or phrases. You can also identify
forward-looking statements by discussions of strategy, plans, or intentions.
Forward-looking statements involve numerous risks and uncertainties and you
should not rely upon them as predictions of future events. There is no assurance
that the events or circumstances reflected in forward-looking statements will be
achieved or occur. Forward-looking statements are necessarily dependent on
assumptions, data, or methods that may be incorrect or imprecise and we may not
be able to realize them.
The following factors, among others, could cause actual results and future
events to differ materially from those set forth or contemplated in the
forward-looking statements:
- defaults or non-renewal of leases by tenants;
- increased interest rates and operating costs;
- our failure to obtain necessary outside financing;
- difficulties in identifying properties to acquire and in effecting
acquisitions;
- our failure to successfully integrate acquired properties and operations;
- our failure to divest of properties that we have contracted to sell or to
timely reinvest proceeds from any such divestitures;
- risks and uncertainties affecting property development and construction
(including construction delays, cost overruns, our inability to obtain
necessary permits, and public opposition to these activities);
- environmental uncertainties;
- risks related to natural disasters;
- financial market fluctuations;
- risks arising from the California energy shortage;
- changes in real estate and zoning laws; and
- increases in real property tax rates.
Our success also depends upon economic trends generally, including interest
rates, income tax laws, governmental regulation, legislation, population
changes, and those risk factors discussed in the section entitled "Business
Risks" in this report. We caution you not to place undue reliance on
forward-looking statements, which reflect our analysis only and speak as of the
date of this report or as of the dates indicated in the statements.
GENERAL
We commenced operations in November 1997, shortly before the consummation
of AMB Property Corporation's initial public offering.
RESULTS OF OPERATIONS
The analysis below includes changes attributable to acquisitions,
development activity, and divestitures and the changes resulting from properties
that we owned during both the current and prior year reporting periods,
excluding development properties prior to being stabilized (defined as the
earlier of 90% leased or
21
23
12 months after receipt of the certificate of occupancy). We refer to these
properties as the same store properties. For the comparison between 2000 and
1999, the same store properties consisted of properties aggregating
approximately 52.5 million square feet. The properties acquired in 1999
consisted of 154 buildings, aggregating approximately 8.4 million square feet,
and the properties acquired during 2000 consisted of 145 buildings, aggregating
approximately 10.5 million square feet. In 1999, property divestitures consisted
of 30 retail centers and 15 industrial buildings, aggregating approximately 6.6
million square feet, and property divestitures during 2000 consisted of 25
industrial buildings and one retail center, aggregating approximately 2.5
million square feet. Our future financial condition and results of operations,
including rental revenues, may be impacted by the acquisition of additional
properties and dispositions. Our future revenues and expenses may vary
materially from their historical rates.
YEARS ENDED DECEMBER 31, 2000 AND 1999 (DOLLARS IN MILLIONS)
RENTAL REVENUES 2000 1999 $ CHANGE % CHANGE
--------------- ------ ------ -------- --------
Same store................................... $314.4 $293.3 $ 21.1 7.2%
1999 acquisitions............................ 85.1 41.0 44.1 107.6%
2000 acquisitions............................ 28.0 -- 28.0 --
Developments................................. 7.0 4.2 2.8 66.7%
Divestitures................................. 19.5 90.4 (70.9) (78.4)%
Straight-line rents.......................... 10.2 10.8 (0.6) (5.6)%
------ ------ ------ -----
Total.............................. $464.2 $439.7 $ 24.5 5.6%
====== ====== ====== =====
The growth in rental revenues in same store properties resulted primarily
from the incremental effect of cash rental rate increases, fixed rent increases
on existing leases, increases in occupancy and reimbursement of expenses,
partially offset by a decrease in straight-line rents. During 2000, the same
store base rents increase on renewals and rollovers (cash basis) was 28.0% on
9.8 million square feet leased.
INVESTMENT MANAGEMENT AND OTHER INCOME 2000 1999 $ CHANGE % CHANGE
-------------------------------------- ----- ---- -------- --------
Equity earnings in unconsolidated joint
ventures...................................... $ 5.2 $4.7 $0.5 10.6%
Investment management and other income.......... 8.3 3.8 4.5 118.4%
----- ---- ---- -----
Total................................. $13.5 $8.5 $5.0 58.8%
===== ==== ==== =====
The $4.5 million increase in investment management and other income was due
primarily to increased Alliance Fund I acquisition fees, interest income, and
development fees, partially offset by the write-down of one of our investments
in other companies.
PROPERTY OPERATING EXPENSES 2000 1999 $ CHANGE % CHANGE
--------------------------- ------ ------ -------- --------
Rental expenses.............................. $ 50.6 $ 51.7 $ (1.1) (2.1)%
Real estate taxes............................ 57.2 56.2 1.0 1.8%
------ ------ ------ -----
Property operating expenses................ $107.8 $107.9 $ (0.1) (0.1)%
====== ====== ====== =====
Same store................................... $ 72.1 $ 69.6 $ 2.5 3.6%
1999 acquisitions............................ 20.4 12.2 8.2 67.2%
2000 acquisitions............................ 7.7 -- 7.7 --
Developments................................. 2.5 1.8 0.7 38.9%
Divestitures................................. 5.1 24.3 (19.2) (79.0)%
------ ------ ------ -----
Total.............................. $107.8 $107.9 $ (0.1) (0.1)%
====== ====== ====== =====
22
24
The change in same store properties' operating expenses primarily relates
to increases in real estate taxes of $2.0 million for 2000, partially offset by
decreases in insurance of $0.6 million.
OTHER EXPENSES 2000 1999 $ CHANGE % CHANGE
-------------- ------ ------ -------- --------
Interest expense............................. $ 90.3 $ 88.7 $ 1.6 1.8%
Depreciation expense......................... 96.3 67.5 28.8 42.7%
General and administrative expense........... 23.7 25.2 (1.5) (6.0)%
------ ------ ----- ----
Total.............................. $210.3 $181.4 $28.9 15.9%
====== ====== ===== ====
The increase in interest expense was due primarily to the increase in the
outstanding balance under our unsecured credit facility. The increase in
depreciation expense was primarily due to lower than normal depreciation expense
in 1999 and increases in our investments in real estate. Under the required
accounting for assets held for sale, we discontinued depreciation of a
substantial portion of our retail portfolio after we committed to dispose of a
portion of the portfolio in March 1999. The decrease in general and
administrative expenses was due to increased allocations to our investment
management group, partially offset by increased personnel costs.
YEARS ENDED DECEMBER 31, 1999 AND 1998 (DOLLARS IN MILLIONS)
RENTAL REVENUES 1999 1998 $ CHANGE % CHANGE
--------------- ------ ------ -------- --------
Same store................................... $212.9 $206.1 $ 6.8 3.3%
1998 acquisitions............................ 117.8 55.9 61.9 110.7%
1999 acquisitions............................ 35.4 -- 35.4 --
Developments................................. 33.0 28.4 4.6 16.2%
Divestitures................................. 40.6 64.3 (23.7) (36.9)%
------ ------ ------ -----
Total.............................. $439.7 $354.7 $ 85.0 24.0%
====== ====== ====== =====
The growth in rental revenues in same store properties resulted primarily
from the incremental effect of cash rental rate increases, changes in occupancy
rates, and reimbursement of expenses, partially offset by a decrease in
straight-line rents. During 1999, the increase in base rents (cash basis) for
same store properties was 12.7% on 6.8 million square feet leased.
INVESTMENT MANAGEMENT AND OTHER INCOME 1999 1998 $ CHANGE % CHANGE
-------------------------------------- ---- ---- -------- --------
Equity earnings in unconsolidated joint
ventures....................................... $4.7 $2.7 $2.0 74.1%
Investment management and other income........... 3.8 1.5 2.3 153.3%
---- ---- ---- -----
Total.................................. $8.5 $4.2 $4.3 102.4%
==== ==== ==== =====
The $4.3 million increase in investment management and other income was due
primarily to earnings from our equity investment in our unconsolidated joint
ventures, Alliance Fund I acquisition fees, and an increase in interest income
as a result of higher cash balances.
PROPERTY OPERATING EXPENSES AND REAL ESTATE TAXES 1999 1998 $ CHANGE % CHANGE
- ------------------------------------------------- ------ ----- -------- --------
Rental expenses................................ $ 51.7 $40.2 $11.5 28.6%
Real estate taxes.............................. 56.2 48.2 8.0 16.6%
------ ----- ----- -----
Property operating expenses.................. $107.9 $88.4 $19.5 22.1%
====== ===== ===== =====
Same store..................................... $ 50.2 $50.1 $ 0.1 0.2%
1998 acquisitions.............................. 27.3 12.6 14.7 116.7%
1999 acquisitions.............................. 9.3 -- 9.3 --
Developments................................... 9.5 7.9 1.6 20.3%
Divestitures................................... 11.6 17.8 (6.2) (34.8)%
------ ----- ----- -----
Total................................ $107.9 $88.4 $19.5 22.1%
====== ===== ===== =====
23
25
The change in same store properties' operating expenses primarily relates
to increases in real estate taxes of $1.0 million for 1999, partially offset by
decreases in insurance of $0.9 million. Internal asset management costs of $7.7
million for 1998 were reclassified from property operating expenses to general
and administrative expenses to conform with the 1999 presentation.
OTHER EXPENSES 1999 1998 $ CHANGE % CHANGE
-------------- ------ ------ -------- --------
Interest expense............................. $ 88.7 $ 69.7 $19.0 27.3%
Depreciation expense......................... 67.5 57.4 10.1 17.6%
General and administrative expense........... 25.2 19.6 5.6 28.6%
------ ------ ----- ----
Total.............................. $181.4 $146.7 $34.7 23.7%
====== ====== ===== ====
The increase in interest expense was primarily due to higher interest rates
and a full year of interest expense in 1999 attributable to our $400.0 million
unsecured senior debt securities. The increase in depreciation expense was
primarily due to our real estate acquisitions in 1998 and 1999, partially offset
by the discontinuation of depreciation on held-for-sale retail assets. Internal
management costs of $7.7 million for 1998 were reclassified from property
operating expenses to general and administrative expenses to conform with the
1999 presentation. The increase in general and administrative expenses was
primarily attributable to additional staffing that resulted from growth in our
portfolio and the change in our accounting policy for capitalizing internal
acquisition costs. Effective during the second quarter of 1998, we changed our
policy to expense all internal acquisition costs in accordance with EITF 97-11.
LIQUIDITY AND CAPITAL RESOURCES
We currently expect that our principal sources of working capital and
funding for acquisitions, development, expansion, and renovation of properties
will include cash flow from operations, borrowings under our unsecured credit
facility, other forms of secured or unsecured financing, proceeds from debt or
limited partnership unit offerings (including issuances of limited partnership
units by our subsidiaries), and net proceeds from divestitures of properties.
Additionally, our co-investment program will also serve as a source of capital
for acquisitions and developments. We believe that our sources of working
capital and our ability to access equity and private and public debt are
adequate for us to meet our liquidity requirements for the foreseeable future.
Capital Resources
Property Divestitures. In 2000, we sold 25 industrial buildings and one
retail center for an aggregate price of $175.7 million. These divestitures
resulted in an aggregate net gain of $7.0 million. The joint venture that sold
the retail center carries an 8.75% interest only mortgage note receivable in the
principal amount of $79.0 million. This mortgage note has a one-year term and
has a one-year extension option.
Properties Held for Divestiture. We have decided to divest ourselves of 33
industrial buildings and one retail center, which are not in our core markets or
which do not meet our strategic objectives. The divestitures of the properties
are subject to negotiation of acceptable terms and other customary conditions.
As of December 31, 2000, the net carrying value of the properties held for
divestiture was $197.1 million.
Credit Facilities. In May 2000, we entered into a new $500.0 million
unsecured revolving credit agreement, which replaced our previous $500.0 million
credit facility, which matured in November 2000. AMB Property Corporation
guarantees our obligations under the credit facility. Our credit facility is
with Morgan Guaranty Trust Company of New York, as administrative agent, and a
syndicate of 12 other banks. The new credit facility matures in May 2003, has a
one-year extension option, and is subject to a 15 basis point annual facility
fee. We have the ability to increase available borrowings up to $700.0 million
by adding additional banks to the facility or obtaining the agreement of
existing banks to increase their commitments. We use our unsecured credit
facility principally for acquisitions and for general working capital
requirements. Borrowings under our credit facility currently bear interest at
LIBOR plus 75 basis points. At December 31, 2000, the outstanding balance on our
unsecured credit facility was $216.0 million and it bore interest at a
24
26
weighted average rate of 7.5%. Monthly debt service payments on our credit
facility are interest only. The total amount available under our credit facility
fluctuates based upon the borrowing base, as defined in the agreement governing
the credit facility. At December 31, 2000, the remaining amount available under
our unsecured credit facility was $284.0 million (excluding the additional
$200.0 million of potential additional capacity).
In addition, we had an $80.0 million unsecured credit facility held through
our investment in the Alliance Fund I. The debt was secured by the unfunded
capital commitments of the third party investors in the Alliance REIT I, a
limited partner of the Alliance Fund I. Since there are no remaining unfunded
capital commitments, the Alliance Fund I paid off the outstanding balance and
closed this credit facility in the third quarter.
Partners' Capital. On September 1, 2000, AMB Property II, L.P., one of our
subsidiaries, issued and sold 840,000 8.125% Series H Cumulative Redeemable
Preferred Limited Partnership Units at a price of $50.00 per unit in a private
placement. Distributions are cumulative from the date of issuance and payable
quarterly in arrears at a rate per unit equal to $4.0625 per annum. The Series H
Preferred Units are redeemable by AMB Property II, L.P. on or after September 1,
2005, subject to certain conditions, for cash at a redemption price equal to
$50.00 per unit, plus accumulated and unpaid distributions thereon, if any, to
the redemption date. The Series H Preferred Units are exchangeable, at specified
times and subject to certain conditions, on a one-for-one basis, for shares of
AMB Property Corporation's Series H Preferred Stock. AMB Property II, L.P. used
the net proceeds of $41.0 million to repay advances from us and to make a loan
to us. We used the funds to partially repay borrowings under our unsecured
credit facility and for general corporate purposes. The loan bears interest at
8.0% per annum and is payable on demand.
On August 29, 2000, AMB Property II, L.P. issued and sold 20,000 7.95%
Series G Cumulative Redeemable Preferred Limited Partnership Units at a price of
$50.00 per unit in a private placement. Distributions are cumulative from the
date of issuance and payable quarterly in arrears at a rate per unit equal to
$3.975 per annum. The Series G Preferred Units are redeemable by AMB Property
II, L.P. on or after August 29, 2005, subject to certain conditions, for cash at
a redemption price equal to $50.00 per unit, plus accumulated and unpaid
distributions thereon, if any, to the redemption date. The Series G Preferred
Units are exchangeable, at specified times and subject to certain conditions, on
a one-for-one basis, for shares of AMB Property Corporation's Series G Preferred
Stock. AMB Property II, L.P. used the net proceeds of $1.0 million to repay
advances from us. We used the funds for general corporate purposes.
On March 22, 2000, AMB Property II, L.P. issued and sold 397,439 7.95%
Series F Cumulative Redeemable Preferred Limited Partnership Units at a price of
$50.00 per unit in a private placement. Distributions are cumulative from the
date of issuance and payable quarterly in arrears at a rate per unit equal to
$3.975 per annum. The Series F Preferred Units are redeemable by AMB Property
II, L.P. on or after March 22, 2005, subject to certain conditions, for cash at
a redemption price equal to $50.00 per unit, plus accumulated and unpaid
distributions thereon, if any, to the redemption date. The Series F Preferred
Units are exchangeable, at specified times and subject to certain conditions, on
a one-for-one basis, for shares of AMB Property Corporation's Series F Preferred
Stock. AMB Property II, L.P. loaned the net proceeds of $19.6 million to us. We
used the funds to partially repay borrowings under our unsecured credit facility
and for general corporate purposes. The loan bears interest at 7.0% per annum
and is payable upon demand.
At the time of AMB Property Corporation's initial public offering,
4,237,750 shares of common stock, known as performance shares, were placed in
escrow by certain of AMB Property Corporation's investors, which were subject to
advisory agreements with our general partner's predecessor that included
incentive fee provisions. On January 7, 2000, 2,771,824 shares of common stock
were released from escrow to these investors and 1,465,926 shares of common
stock were returned to AMB Property Corporation and cancelled. The cancelled
shares of common stock represent indirect interests in us that were reallocated
from AMB Property Corporation (thereby decreasing the number of shares of common
stock outstanding) to other unitholders who had an ownership interest in our
general partner's predecessor, including certain of AMB Property Corporation's
executive officers (thereby increasing the number of limited partnership units
owned by partners other than AMB Property Corporation). The total number of
outstanding partnership units did not
25
27
change as a result of this reallocation. This reallocation did not change the
amount of fully diluted shares of common stock and limited partnership units
outstanding.
In November 2000, we issued an aggregate of 94,771 limited partnership
units with an aggregate value of approximately $2.2 million to three limited
partnerships. These limited partnership units were issued in partial
consideration for the acquisition of properties. Holders of the limited
partnership units may redeem part or all of their limited partnership units for
cash or, at our election, exchange their limited partnership units for shares of
our common stock on a one-for-one basis. During 2000, 34,046 limited partnership
units were redeemed for cash and 206,423 limited partnership units were redeemed
for shares of AMB Property Corporation's common stock.
Our general partner's board of directors has approved a stock repurchase
program for the repurchase of up to $100.0 million worth of AMB Property
Corporation's common stock. During 2000, AMB Property Corporation did not
repurchase any shares of its common stock. Its stock repurchase program expires
in December 2001.
Debt. At December 31, 2000, the aggregate principal amount of our secured
debt was $930.4 million, excluding unamortized debt premiums of $9.9 million.
The secured debt bears interest at rates varying from 4.0% to 10.4% per annum
(with a weighted average rate of 7.9%) and final maturity dates ranging from
April 2001 to June 2023. All of the secured debt bears interest at fixed rates,
except for two loans with an aggregate principal amount of $29.8 million as of
December 31, 2000, which bear interest at variable rates. As of December 31,
2000, the estimated fair value of the secured debt was $956.1 million.
In 2000, we commenced a medium-term note program for the issuance of up to
$400.0 million in principal amount of medium-term notes, which will be
guaranteed by AMB Property Corporation. As of December 31, 2000, we had issued
$280.0 million of medium-term notes under this program and in January 2001, we
issued an additional $25.0 million of medium term notes, leaving $95.0 million
available for issuance under this program. In December 2000, we issued and sold
$150.0 million of the notes under this program to Morgan Stanley Dean Witter and
J. P. Morgan as principals. AMB Property Corporation has guaranteed the notes,
which mature on December 15, 2005, and bear interest at 7.2% per annum. We used
the net proceeds of $148.9 million for general corporate purposes, to partially
repay indebtedness, and for the acquisition and development of properties. In
October 2000, we issued and sold $75.0 million of the notes under this program
to Morgan Stanley Dean Witter and J. P. Morgan as principals. AMB Property
Corporation has guaranteed the notes, which mature on November 1, 2010, and bear
interest at 8.0% per annum. We used the net proceeds of $74.5 million for
general corporate purposes, to partially repay indebtedness, and for the
acquisition and development of properties. In August and September 2000, we
issued and sold $55.0 million of the notes under this program to Morgan Stanley
Dean Witter as principal. AMB Property Corporation has guaranteed the notes,
which mature on August 20, 2007, and bear interest at 7.925% per annum. We used
the net proceeds of $54.8 million for general corporate purposes, to partially
repay indebtedness, and for the acquisition and development of properties.
In order to maintain financial flexibility and facilitate the rapid
deployment of capital through market cycles, we presently intend to operate with
a debt-to-total market capitalization ratio of approximately 45% or less.
Additionally, we presently manage our capitalization in order to maintain an
investment grade rating on our senior unsecured debt. In spite of these
policies, our general partner's organizational documents do not contain any
limitation on the amount of indebtedness that we may incur. Accordingly, our
general partner's board of directors could alter or eliminate these policies.
26
28
The tables below summarize our debt maturities and capitalization as of
December 31, 2000 (dollars in thousands, except for unit and per unit amounts):
DEBT
- -------------------------------------------------------------------------------------------------
OUR JOINT SENIOR
SECURED VENTURE DEBT CREDIT TOTAL
DEBT(1) DEBT(1) SECURITIES FACILITY DEBT
-------- --------- ---------- -------- ----------
2001.............................. $ 14,071 $ 35,087 $ -- $ -- $ 49,158
2002.............................. 29,182 46,044 -- -- 75,226
2003.............................. 72,675 7,134 -- 216,000 295,809
2004.............................. 71,147 20,357 -- -- 91,504
2005.............................. 64,194 30,015 250,000 -- 344,209
2006.............................. 116,022 33,991 -- -- 150,013
2007.............................. 32,181 19,705 55,000 -- 106,886
2008.............................. 106,604 36,011 175,000 -- 317,615
2009.............................. 5,176 25,969 -- -- 31,145
2010.............................. 52,780 65,499 75,000 -- 193,279
2011.............................. 1,311 15,645 -- -- 16,956
Thereafter........................ 3,307 26,311 125,000 -- 154,618
-------- --------- -------- -------- ----------
Subtotal........................ 568,650 361,768 680,000 216,000 1,826,418
Unamortized premiums............ 9,858 -- -- -- 9,858
-------- --------- -------- -------- ----------
Total consolidated
debt.................. 578,508 361,768 680,000 216,000 1,836,276
Our share of unconsolidated joint
venture debt(1)................. -- 28,802 -- -- 28,802
-------- --------- -------- -------- ----------
Total debt.............. 578,508 390,570 680,000 216,000 1,865,078
Joint venture partners' share of
consolidated joint venture
debt............................ -- (183,917) -- -- (183,917)
-------- --------- -------- -------- ----------
Our share of total debt...... $578,508 $ 206,653 $680,000 $216,000 $1,681,161
======== ========= ======== ======== ==========
Weighed average interest rate..... 7.9%(2) 7.4% 7.3% 7.5% 7.6%
Weighed average maturity (in
years).......................... 5.4(2) 9.4 7.4 2.4 6.3
- ---------------
(1) All of the secured debt bears interest at fixed rates, except for two loans
with an aggregate principal amount of $29.8 million, which bear interest at
variable rates (weighted average interest rate of 8.2% at December 31,
2000).
(2) The weighted average interest rate and weighted average maturity for the two
unconsolidated joint venture debts were 7.3% and 4.4 years, respectively.
MARKET EQUITY
- --------------------------------------------------------------------------------------
UNITS
SECURITY OUTSTANDING MARKET PRICE MARKET VALUE
-------- ------------ ------------ ------------
Common general partnership units.......... 84,138,751 $25.81 $2,171,832
Common limited partnership units.......... 5,827,917 25.81 150,433
---------- ----------
Total........................... 89,966,668 $2,322,265
========== ==========
27
29
PREFERRED UNITS
- -----------------------------------------------------------------------------------
DISTRIBUTION LIQUIDATION REDEMPTION
SECURITY RATE PREFERENCE PROVISIONS
-------- ------------ ----------- --------------
Series A Preferred Units............ 8.50% $100,000 July 2003
Series B Preferred Units............ 8.63 65,000 November 2003
Series C Preferred Units............ 8.75 110,000 November 2003
Series D Preferred Units............ 7.75 79,767 May 2004
Series E Preferred Units............ 7.75 11,022 August 2004
Series F Preferred Units............ 7.95 19,872 March 2005
Series G Preferred Units............ 7.95 1,000 August 2005
Series H Preferred Units............ 8.13 42,000 September 2005
---- --------
Total/Weighted Average............ 8.36% $428,661
==== ========
CAPITALIZATION RATIOS
- ------------------------------------------------------------------
Total debt-to-total market capitalization................... 40.4%
Our share of total debt-to-total market capitalization...... 37.9%
Total debt plus preferred-to-total market capitalization.... 49.7%
Our share of total debt plus preferred-to-total market
capitalization............................................ 47.6%
Our share of total debt-to-total book capitalization........ 44.6%
Liquidity
As of December 31, 2000, we had approximately $20.4 million in cash and
cash equivalents and $284.0 million of additional available borrowings under our
credit facility. We intend to use: 1) cash from operations; 2) borrowings under
our credit facility; 3) other forms of secured and unsecured financing; 4)
proceeds from any future debt or limited partnership offerings (including
issuances of limited partnership units by our subsidiaries); 5) proceeds from
divestitures of properties, and 6) private capital to fund acquisitions,
development activities, and capital expenditures and provide for general working
capital requirements.
The following table sets forth the distribution payments that were declared
in 2000 and in 1999:
SECURITY PAYING ENTITY 2000 1999
-------- ------------- ----- -----
Common Units AMB Property, L.P. ................ $1.48 $1.40
Series A Preferred Units AMB Property, L.P. ................ $2.13 $2.13
Series B Preferred Units AMB Property, L.P. ................ $4.31 $4.31
Series C Preferred Units AMB Property II, L.P. ............. $4.38 $4.38
Series D Preferred Units AMB Property II, L.P. ............. $3.88 $2.48
Series E Preferred Units AMB Property II, L.P. ............. $3.88 $1.30
Series F Preferred Units AMB Property II, L.P. ............. $3.09 n/a
Series G Preferred Units AMB Property II, L.P. ............. $1.35 n/a
Series H Preferred Units AMB Property II, L.P. ............. $1.30 n/a
The anticipated size of our distributions, using only cash from operations,
will not allow us to retire all of our debt as it comes due. Therefore, we
intend to also repay maturing debt with net proceeds from future debt or equity
financings or property divestitures. However, we may not be able to obtain
future financings on favorable terms or at all.
Capital Commitments
In addition to recurring capital expenditures and costs to renew or
re-tenant space, as of December 31, 2000, we are developing and renovating 19
industrial projects representing a total estimated investment of $305.9 million
upon completion and three retail projects representing a total estimated
investment of $76.3 million upon completion. Of this total, $162.9 million had
been funded as of December 31, 2000, and
28
30
approximately $143.0 million is estimated to be required to complete current and
planned projects. We expect to fund these expenditures with cash from
operations, borrowings under our credit facility, debt or equity issuances, and
net proceeds from property divestitures. We have no other material capital
commitments.
During the year ended December 31, 2000, we invested $730.0 million in 145
operating industrial buildings, aggregating approximately 10.5 million rentable
square feet. We funded these acquisitions and initiated development and
renovation projects through borrowings under our credit facility, cash, debt and
equity issuances, and net proceeds from property divestitures.
29
31
FUNDS FROM OPERATIONS
In addition to net income and adjusted net income, we believe that funds
from operations, or FFO, as defined by the National Association of Real Estate
Investment Trusts, is an appropriate supplemental measure of performance for an
equity real estate investment trust. While funds from operations is a relevant
and widely used measure of operating performance of real estate investment
trusts, such as our general partner, it does not represent cash flow from
operations or net income as defined by accounting principles generally accepted
in the United States and it should not be considered as an alternative to those
indicators in evaluating liquidity or operating performance. Further, funds from
operations as disclosed by other real estate investment trusts may not be
comparable.
The following table reflects the calculation of funds from operations for
the fiscal years ended December 31 (dollars in thousands, except unit data):
2000 1999 1998
----------- ----------- -----------
Income from operations before minority
interests.................................. $ 159,699 $ 158,851 $ 123,750
Real estate related depreciation and
amortization:
Total depreciation and amortization........ 96,258 67,505 57,464
Furniture, fixtures, and equipment
depreciation and ground lease
amortization............................ (1,114) (1,002) (463)
FFO attributable to minority interests(1)(2):
Separate account co-investors.............. (4,935) (5,148) (3,828)
Alliance Fund I............................ (7,752) (804) --
Other joint venture partners............... (2,368) (2,230) (2,071)
Series C, D, E, F, G & H preferred units..... (19,005) (13,893) (1,016)
Adjustments to derive FFO in unconsolidated
joint venture(3):
Our share of net income.................... (5,212) (4,701) (1,750)
Our share of FFO........................... 7,188 6,677 2,739
Series A preferred unit distributions........ (8,500) (8,500) (3,639)
Series B preferred unit distributions........ (5,608) (5,608) (779)
----------- ----------- -----------
FFO(1)....................................... $ 208,651 $ 191,147 $ 170,407
=========== =========== ===========
Weighted average common units:
Basic...................................... 89,566,375 90,792,310 89,493,394
=========== =========== ===========
Diluted(4)................................. 90,024,511 90,867,934 89,852,187
=========== =========== ===========
- ---------------
(1) Funds from operations, or FFO, is defined as income from operations before
minority interest, gains or losses from sale of real estate, and
extraordinary items plus real estate depreciation and adjustment to derive
our pro rata share of the funds from operations of unconsolidated joint
ventures, less minority interests' pro rata share of the funds from
operations of consolidated joint ventures and perpetual preferred unit
distributions. In accordance with the NAREIT White Paper on funds from
operations, we include the effects of straight-line rents in funds from
operations. Further, we do not adjust funds from operations to eliminate the
effects of non-recurring charges.
(2) Represents FFO attributable to minority interest in consolidated joint
ventures for the period presented, which has been computed as minority
interests' share of net income plus minority interests' share of real
estate-related depreciation and amortization of the consolidated joint
ventures for such period. These minority interests are not convertible into
shares of AMB Property Corporation's common stock. In addition, the amount
includes minority interests held by the Series C, D, E, F, G, and H
preferred unitholders.
(3) Represents our pro rata share of FFO in unconsolidated joint ventures for
the period presented, which has been computed as our share of net income
plus our share of real estate-related depreciation and amortization of the
unconsolidated joint ventures for such period.
(4) Includes the dilutive effect of stock options for the purchase of shares of
AMB Property Corporation's common stock, which has the effect of increasing
weighted average general limited partnership units outstanding.
30
32
BUSINESS RISKS
Our operations involve various risks that could have adverse consequences
to us. These risks include, among others:
GENERAL REAL ESTATE RISKS
THERE ARE FACTORS OUTSIDE OF OUR CONTROL THAT AFFECT THE PERFORMANCE AND VALUE
OF OUR PROPERTIES
Real property investments are subject to varying degrees of risk. The
yields available from equity investments in real estate depend on the amount of
income earned and capital appreciation generated by the related properties as
well as the expenses incurred in connection with the properties. If our
properties do not generate income sufficient to meet operating expenses,
including debt service and capital expenditures, then our ability to make
distributions to our unitholders and payments to our noteholders could be
adversely affected. Income from, and the value of, our properties may be
adversely affected by the general economic climate, local conditions such as
oversupply of industrial space, or a reduction in demand for industrial space,
the attractiveness of our properties to potential customers, competition from
other properties, our ability to provide adequate maintenance and insurance, and
an increase in operating costs. In addition, revenues from properties and real
estate values are also affected by factors such as the cost of compliance with
regulations, the potential for liability under applicable laws (including
changes in tax laws), interest rate levels, and the availability of financing.
Our income would be adversely affected if a significant number of customers were
unable to pay rent or if we were unable to rent our industrial space on
favorable terms. Certain significant expenditures associated with an investment
in real estate (such as mortgage payments, real estate taxes, and maintenance
costs) generally do not decline when circumstances cause a reduction in income
from the property.
WE MAY BE UNABLE TO RENEW LEASES OR RELET SPACE AS LEASES EXPIRE
We are subject to the risks that leases may not be renewed, space may not
be relet, or the terms of renewal or reletting (including the cost of required
renovations) may be less favorable than current lease terms. Leases on a total
of 15.6% of our properties (based on annualized base rent) as of December 31,
2000, will expire on or prior to December 31, 2001. In addition, numerous
properties compete with our properties in attracting customers to lease space,
particularly with respect to retail centers. The number of competitive
commercial properties in a particular area could have a material adverse effect
on our ability to lease space in our properties and on the rents that we are
able to charge. Our financial condition, results of operations, cash flow, and
our ability to make distributions to our unitholders and payments to our
noteholders could be adversely affected if we are unable to promptly relet or
renew the leases for all or a substantial portion of expiring leases, if the
rental rates upon renewal or reletting is significantly lower than expected, or
if our reserves for these purposes prove inadequate.
REAL ESTATE INVESTMENTS ARE ILLIQUID
Because real estate investments are relatively illiquid, our ability to
vary our portfolio promptly in response to economic or other conditions is
limited. The limitations in the Internal Revenue Code and related regulations on
a real estate investment trust holding property for sale, which limitations are
applicable to us as a subsidiary of AMB Property Corporation, may affect our
ability to sell properties without adversely affecting distributions to our
unitholders or payments to our noteholders. The relative illiquidity of our
holdings and Internal Revenue Code prohibitions and related regulations could
impede our ability to respond to adverse changes in the performance of our
investments and could adversely affect our financial condition, results of
operations, cash flow, and our ability to make distributions to our unitholders
and payments to our noteholders.
A SIGNIFICANT NUMBER OF OUR PROPERTIES ARE LOCATED IN CALIFORNIA
Our properties located in California as of December 31, 2000, represented
approximately 24.2% of the aggregate square footage of our properties as of
December 31, 2000, and 29.6% of our annualized base rent. Annualized base rent
means the monthly contractual amount under existing leases at December 31, 2000,
31
33
multiplied by 12. This amount excludes expense reimbursements and rental
abatements. Our revenue from, and the value of, our properties located in
California may be affected by a number of factors, including local real estate
conditions (such as oversupply of or reduced demand for industrial properties)
and the local economic climate. Business layoffs, downsizing, industry
slowdowns, changing demographics, and other factors may adversely impact the
local economic climate. A downturn in either the California economy or in
California real estate conditions could adversely affect our financial
condition, results of operations, cash flow, and our ability to make
distributions to our unitholders and payments to our noteholders. Certain of our
properties are also subject to possible loss from seismic activity.
RISING ENERGY COSTS AND POWER OUTAGES IN CALIFORNIA MAY HAVE AN ADVERSE EFFECT
ON OUR OPERATIONS AND REVENUE
Problems associated with deregulation of the electricity industry in
California have resulted in intermittent service interruptions and significantly
higher costs in some areas. Properties located within municipalities that either
do not produce their own power or have not entered into long-term, fixed-price
contracts may be subject to intermittent service interruptions or significant
rate increases from their utility providers. Most of our properties located in
California are subject to leases that require our tenants to pay all utility
costs. The remainder of our California leases provide that tenants will
reimburse us for utility costs in excess of a base year amount. Although we have
not experienced any material losses resulting from electric deregulation, it is
possible that some of our tenants will not fulfill their lease obligations and
reimburse us for their share of any significant rate increases and that we will
not be able to retain or replace our tenants if energy problems in California
continue.
OUR PROPERTIES ARE CURRENTLY CONCENTRATED IN THE INDUSTRIAL SECTOR
Our properties are currently concentrated predominantly in the industrial
real estate sector. Our concentration in a certain property type may expose us
to the risk of economic downturns in this sector to a greater extent than if our
portfolio also included other property types. As a result of such concentration,
economic downturns in the industrial real estate sector could have an adverse
effect on our financial condition, results of operations, cash flow, and ability
to make distributions to our unitholders and payments to our noteholders.
SOME POTENTIAL LOSSES ARE NOT COVERED BY INSURANCE
We carry comprehensive liability, fire, extended coverage, and rental loss
insurance covering all of our properties, with policy specifications and insured
limits that we believe are adequate and appropriate under the circumstances
given relative risk of loss, the cost of such coverage, and industry practice.
There are, however, certain losses that are not generally insured because it is
not economically feasible to insure against them, including losses due to riots
or acts of war. Certain losses such as losses due to floods or seismic activity
may be insured subject to certain limitations including large deductibles or
co-payments and policy limits. If an uninsured loss or a loss in excess of
insured limits occurs with respect to one or more of our properties, then we
could lose the capital we invested in the properties, as well as the anticipated
future revenue from the properties and, in the case of debt, which is with
recourse to us, we would remain obligated for any mortgage debt or other
financial obligations related to the properties. Any such liability could
adversely affect our financial condition, results of operations, cash flow, and
ability to make distributions to our unitholders and payments to our
noteholders.
A number of our properties are located in areas that are known to be
subject to earthquake activity, including California where, as of December 31,
2000, 247 industrial buildings aggregating approximately 18.6 million rentable
square feet (representing 24.2% of our properties based on aggregate square
footage and 29.6% based on annualized base rent) are located. We carry
replacement cost earthquake insurance on all of our properties located in areas
historically subject to seismic activity, subject to coverage limitations and
deductibles that we believe are commercially reasonable. This insurance coverage
also applies to the properties managed by AMB Investment Management, with a
single aggregate policy limit and deductible applicable to those properties and
our properties. We own 100% of the non-voting preferred stock of AMB Investment
32
34
Management. Through an annual analysis prepared by outside consultants, we
evaluate our earthquake insurance coverage in light of current industry practice
and determine the appropriate amount of earthquake insurance to carry. We may
incur material losses in excess of insurance proceeds and we may not be able to
continue to obtain insurance at commercially reasonable rates.
WE ARE SUBJECT TO RISKS AND LIABILITIES IN CONNECTION WITH PROPERTIES OWNED
THROUGH JOINT VENTURES, LIMITED LIABILITY COMPANIES, AND PARTNERSHIPS
As of December 31, 2000, we had ownership interests in 30 joint ventures,
limited liability companies, or partnerships with third parties, as well as
interests in three unconsolidated entities. As of December 31, 2000, we owned
approximately 15.5 million square feet (excluding the three unconsolidated joint
ventures) of our properties through these entities. We may make additional
investments through these ventures in the future and presently plan to do so
with clients of AMB Investment Management, Inc. and certain Development Alliance
Partners, who share certain approval rights over major decisions. Partnership,
limited liability company, or joint venture investments may involve risks such
as the following:
- our partners, co-members, or joint venturers might become bankrupt (in
which event we and any other remaining general partners, members, or
joint venturers would generally remain liable for the liabilities of the
partnership, limited liability company, or joint venture);
- our partners, co-members, or joint venturers might at any time have
economic or other business interests or goals that are inconsistent with
our business interests or goals;
- our partners, co-members, or joint venturers may be in a position to take
action contrary to our instructions, requests, policies, or objectives;
and
- agreements governing joint ventures, limited liability companies, and
partnerships often contain restrictions on the transfer of a joint
venturer's, member's, or partner's interest or "buy-sell" or other
provisions, which may result in a purchase or sale of the interest at a
disadvantageous time or on disadvantageous terms.
We will, however, generally seek to maintain sufficient control of our
partnerships, limited liability companies, and joint ventures to permit us to
achieve our business objectives. Our organizational documents do not limit the
amount of available funds that we may invest in partnerships, limited liability
companies, or joint ventures. The occurrence of one or more of the events
described above could have an adverse effect on our financial condition, results
of operations, cash flow, and ability to make distributions to our unitholders
and payments to our noteholders.
WE MAY BE UNABLE TO CONSUMMATE ACQUISITIONS ON ADVANTAGEOUS TERMS
We intend to continue to acquire primarily industrial properties.
Acquisitions of properties entail risks that investments will fail to perform in
accordance with expectations. Estimates of the costs of improvements necessary
for us to bring an acquired property up to market standards may prove
inaccurate. In addition, there are general investment risks associated with any
new real estate investment. Further, we anticipate significant competition for
attractive investment opportunities from other major real estate investors with
significant capital including both publicly traded real estate investment trusts
and private institutional investment funds. We expect that future acquisitions
will be financed through a combination of borrowings under our unsecured credit
facility, proceeds from debt or limited partnership unit offerings (including
issuances of limited partnership units by our subsidiaries), and proceeds from
property divestitures, which could have an adverse effect on our cash flow. We
may not be able to acquire additional properties. Our inability to finance any
future acquisitions on favorable terms or the failure of acquisitions to conform
with our expectations or investment criteria, or our failure to timely reinvest
the proceeds from property divestitures could adversely affect our financial
condition, results of operations, cash flow, and ability to make distributions
to our unitholders and payments to our noteholders.
33
35
WE MAY BE UNABLE TO COMPLETE RENOVATION AND DEVELOPMENT ON ADVANTAGEOUS TERMS
The real estate development business, including the renovation and
rehabilitation of existing properties, involves significant risks. These risks
include the following:
- we may not be able to obtain financing on favorable terms for development
projects and we may not complete construction on schedule or within
budget, resulting in increased debt service expense and construction
costs and delays in leasing such properties and generating cash flow;
- we may not be able to obtain, or we may experience delays in obtaining,
all necessary zoning, land-use, building, occupancy, and other required
governmental permits and authorizations;
- new or renovated properties may perform below anticipated levels,
producing cash flow below budgeted amounts;
- substantial renovation as well as new development activities, regardless
of whether or not they are ultimately successful, typically require a
substantial portion of management's time and attention that could divert
management's time from our day-to-day operations; and
- activities that we finance through construction loans involve the risk
that, upon completion of construction, we may not be able to obtain
permanent financing or we may not be able to obtain permanent financing
on advantageous terms.
These risks could have an adverse effect on our financial condition,
results of operations, cash flow, and ability to make distributions to our
unitholders and payments to our noteholders.
WE MAY BE UNABLE TO COMPLETE DIVESTITURES ON ADVANTAGEOUS TERMS
We intend to dispose of properties from time to time that do not conform
with our current investment strategy or that we have otherwise determined should
be divested, including, as of December 31, 2000, 33 industrial buildings and one
retail center, which are held for divestiture. Our ability to dispose of
properties on advantageous terms is dependent upon factors beyond our control,
including competition from other owners (including other real estate investment
trusts) that are attempting to dispose of industrial and retail properties and
the availability of financing on attractive terms for potential buyers of our
properties. Our inability to dispose of properties on favorable terms or our
inability to redeploy the proceeds of property divestitures in accordance with
our investment strategy could adversely our financial condition, results of
operations, cash flow, and ability to make distributions to our unitholders and
payments to our noteholders.
DEBT FINANCING
WE COULD INCUR MORE DEBT
We and AMB Property Corporation operate with a policy of incurring debt,
either directly or through our subsidiaries, only if upon such incurrence our
debt-to-total market capitalization ratio would be approximately 45% or less.
The aggregate amount of indebtedness that we may incur under our policy varies
directly with the valuation of AMB Property Corporation's capital stock and the
number of shares of capital stock outstanding. Accordingly, we would be able to
incur additional indebtedness under our policy as a result of increases in the
market price per share of AMB Property Corporation's common stock or other
outstanding classes of capital stock, and future issuance of shares of our
capital stock. In spite of this policy, neither our nor AMB Property
Corporation's organizational documents do not contain any limitation on the
amount of indebtedness that they may incur. Accordingly, AMB Property
Corporation's board of directors could alter or eliminate this policy. If this
policy changes, then we could become more highly leveraged, resulting in an
increase in debt service that could adversely affect our financial condition,
results of operations, cash flow, and ability to make distributions to our
unitholders and payments to our noteholders.
34
36
SCHEDULED DEBT PAYMENTS COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION
We are subject to risks normally associated with debt financing, including
the risks that cash flow will be insufficient to make distributions to our
unitholders and payments to our noteholders, that we will be unable to refinance
existing indebtedness on our properties (which in all cases will not have been
fully amortized at maturity) and that the terms of refinancing will not be as
favorable as the terms of existing indebtedness.
As of December 31, 2000, we had total debt outstanding of approximately
$1.8 billion including:
- $930.4 million of secured indebtedness (excluding unamortized debt
premiums) with an average maturity of 5.4 years and a weighted average
interest rate of 7.9%;
- $216.0 million outstanding under our unsecured $500.0 million credit
facility with a maturity date of May 2003 and an interest rate of LIBOR
plus 75 basis points (a weighted average interest rate of 7.5% as of
December 31, 2000); and
- $680.0 million aggregate principal amount of unsecured senior debt
securities with maturities between 2005 and 2018 and a weighted average
interest rate of 7.3%.
If we are unable to refinance or extend principal payments due at maturity
or pay them with proceeds of other capital transactions, then we expect that our
cash flow will not be sufficient in all years to make distributions to our
unitholders and payments to our noteholders and to repay all such maturing debt.
Furthermore, if prevailing interest rates or other factors at the time of
refinancing (such as the reluctance of lenders to make commercial real estate
loans) result in higher interest rates upon refinancing, then the interest
expense relating to that refinanced indebtedness would increase. This increased
interest expense would adversely affect our financial condition, results of
operations, cash flow, and ability to make distributions to our unitholders and
payments to our noteholders. In addition, if we mortgage one or more of our
properties to secure payment of indebtedness and we are unable to meet mortgage
payments, then the property could be foreclosed upon or transferred to the
mortgagee with a consequent loss of income and asset value. A foreclosure on one
or more of our properties could adversely affect our financial condition,
results of operations, cash flow, and ability to make distributions to our
unitholders and payments to our noteholders.
RISING INTEREST RATES COULD ADVERSELY AFFECT OUR CASH FLOW
As of December 31, 2000, we had approximately $216.0 million outstanding
under our unsecured credit facility. In addition, we may incur other variable
rate indebtedness in the future. Increases in interest rates on this
indebtedness could increase our interest expense, which would adversely affect
our financial condition, results of operations, cash flow, and ability to make
distributions to our unitholders and payments to our noteholders. Accordingly,
we may in the future engage in transactions to limit our exposure to rising
interest rates.
WE ARE DEPENDENT ON EXTERNAL SOURCES OF CAPITAL
To fund capital needs, we rely on third party sources of capital, which we
may not be able to obtain on favorable terms or at all. Our access to third
party sources of capital depends upon a number of factors, including: 1) general
market conditions; 2) the market's perception of our growth potential; 3) our
current and potential future earnings and cash distributions; and 4) the market
price of AMB Property Corporation's capital stock. Additional debt financing may
substantially increase our leverage.
WE COULD DEFAULT ON CROSS-COLLATERALIZED AND CROSS-DEFAULTED DEBT
As of December 31, 2000, we had 18 non-recourse secured loans, which are
cross-collateralized by 20 properties. As of December 31, 2000, we had
approximately $240.9 million (not including unamortized debt premium)
outstanding on these loans. If we default on any of these loans, then we will be
required to repay the aggregate of all indebtedness, together with applicable
prepayment charges, to avoid foreclosure on all the cross-collateralized
properties within the applicable pool. Foreclosure on our properties, or our
inability to refinance our loans on favorable terms, could adversely impact our
financial condition, results of operations,
35
37
cash flow, and ability to make distributions to our unitholders and payments to
our noteholders. In addition, our credit facility and our senior debt securities
contain certain cross-default provisions, which are triggered in the event that
our other material indebtedness is in default. These cross-default provisions
may require us to repay or restructure the credit facility and the senior debt
securities in addition to any mortgage or other debt that is in default, which
could adversely affect our financial condition, results of operations, cash
flow, and ability to make distributions to our unitholders and payments to our
noteholders.
CONTINGENT OR UNKNOWN LIABILITIES COULD ADVERSELY AFFECT OUR FINANCIAL CONDITION
Our predecessors have been in existence for varying lengths of time up to
18 years. At the time of our formation we acquired the assets of these entities
subject to all of their potential existing liabilities. There may be current
liabilities or future liabilities arising from prior activities that we are not
aware of and therefore have not disclosed in this report. AMB Property
Corporation assumed these liabilities as the surviving entity in the various
merger and contribution transactions that occurred at the time of our formation.
Existing liabilities for indebtedness generally were taken into account in
connection with the allocation of our limited partnership units or shares of AMB
Property Corporation's common stock in the formation transactions, but no other
liabilities were taken into account for these purposes. We do not have recourse
against AMB Property Corporation's predecessors or any of their respective
stockholders or partners or against any individual account investors with
respect to any unknown liabilities. Unknown liabilities might include the
following:
- liabilities for clean-up or remediation of undisclosed environmental
conditions;
- claims of customers, vendors, or other persons dealing with AMB Property
Corporation's predecessors prior to the formation transactions that had
not been asserted prior to the formation transactions;
- accrued but unpaid liabilities incurred in the ordinary course of
business;
- tax liabilities; and
- claims for indemnification by the officers and directors of AMB Property
Corporation's predecessors and others indemnified by these entities.
Certain customers may claim that the formation transactions gave rise to a
right to purchase the premises that they occupy. We do not believe any such
claims would be material and, to date, no such claims have been filed. See
"-- Government Regulations -- We Could Encounter Costly Environmental Problems"
below regarding the possibility of undisclosed environmental conditions
potentially affecting the value of our properties. Undisclosed material
liabilities in connection with the acquisition of properties, entities and
interests in properties, or entities could adversely affect our financial
condition, results of operations, cash flow, and ability to make distributions
our unitholders and payments to our noteholders.
CONFLICTS OF INTEREST
SOME OF AMB PROPERTY CORPORATION'S EXECUTIVE OFFICERS ARE INVOLVED IN OTHER REAL
ESTATE ACTIVITIES AND INVESTMENTS
Some of AMB Property Corporation's executive officers own interests in real
estate-related businesses and investments. These interests include minority
ownership of Institutional Housing Partners, L.P., a residential housing finance
company, and ownership of AMB Development, Inc. and AMB Development, L.P.,
developers that own property not suitable for ownership by us. AMB Development,
Inc. and AMB Development, L.P. have agreed not to initiate any new development
projects following AMB Property Corporation's initial public offering in
November 1997. These entities have also agreed that they will not make any
further investments in industrial properties other than those currently under
development at the time of AMB Property Corporation's initial public offering.
AMB Development, Inc. and AMB Development, L.P. continue to use the name "AMB"
pursuant to royalty-free license arrangements. The continued involvement in
other real estate-related activities by some of AMB Property Corporation's
executive officers and directors could divert management's attention from our
day-to-day operations. Most of AMB Property Corporation's executive officers
have entered into non-competition agreements with AMB Property Corporation
pursuant to
36
38
which they have agreed not to engage in any activities, directly or indirectly,
in respect of commercial real estate, and not to make any investment in respect
of industrial real estate, other than through ownership of not more than 5% of
the outstanding shares of a public company engaged in such activities or through
the existing investments referred to in this report. State law may limit our
ability to enforce these agreements.
We could also, in the future, subject to the unanimous approval of the
disinterested members of AMB Property Corporation's board of directors with
respect to such transaction, acquire property from executive officers, enter
into leases with executive officers, or engage in other related activities in
which the interests pursued by AMB Property Corporation's executive officers may
not be in the best interests of our unitholders or noteholders.
CERTAIN OF AMB PROPERTY CORPORATION'S EXECUTIVE OFFICERS AND DIRECTORS MAY HAVE
CONFLICTS OF INTEREST WITH US IN CONNECTION WITH OTHER PROPERTIES THAT THEY OWN
OR CONTROL
As of December 31, 2000, AMB Development, L.P. owns interests in 10 retail
development projects in the U.S., eight of which are single free-standing
Walgreens drugstores and two are Walgreens drugstores plus shop buildings, which
are less than 10,000 feet. In addition, Messrs. Abbey, Moghadam, and Burke, each
a founder and director of AMB Property Corporation, own less than 1% interests
in two partnerships that own office buildings in various markets; these
interests have negligible value. Luis A. Belmonte, an executive officer of AMB
Property Corporation, owns less than a 10% interest, representing an estimated
value of $150,000, in a limited partnership, which owns an office building
located in Oakland, California.
In addition, several of AMB Property Corporation's executive officers
individually own:
- less than 1% interests in the stocks of certain publicly-traded real
estate investment trusts;
- certain interests in and rights to developed and undeveloped real
property located outside the United States; and
- certain other de minimus holdings in equity securities of real estate
companies.
Thomas W. Tusher, a member of AMB Property Corporation's board of
directors, is a limited partner in a partnership in which Messrs. Abbey,
Moghadam, and Burke are general partners and which owns a 75% interest in an
office building. Mr. Tusher owns a 20% interest in the partnership, valued at
approximately $1.2 million. Messrs. Abbey, Moghadam, and Burke each have a 26.7%
interest in the partnership, each valued at approximately $1.6 million.
We believe that the properties and activities set forth above generally do
not directly compete with any of our properties. However, it is possible that a
property in which an executive officer or director of AMB Property Corporation,
or an affiliate of an executive officer or director of AMB Property Corporation,
has an interest may compete with us in the future if we were to invest in a
property similar in type and in close proximity to that property. In addition,
the continued involvement of AMB Property Corporation's executive officers and
directors in these properties could divert management's attention from our
day-to-day operations. Our policy prohibits us from acquiring any properties
from AMB Property Corporation's executive officers or their affiliates without
the approval of the disinterested members of AMB Property Corporation's board of
directors with respect to that transaction.
AMB PROPERTY CORPORATION'S DIRECTORS, EXECUTIVE OFFICERS, AND SIGNIFICANT
STOCKHOLDERS COULD ACT IN A MANNER THAT IS NOT IN THE BEST INTEREST OF OUR
LIMITED PARTNERS OR NOTEHOLDERS
As of March 20, 2001, AMB Property Corporation's three largest
stockholders, Cohen & Steers Capital Management, Inc. (with respect to various
client accounts for which Cohen & Steers Capital Management, Inc. serves as
investment advisor), European Investors Inc. (with respect to various client
accounts for which European Investors Inc. serves as investment advisor), and
Capital Research and Management Company (with respect to various client accounts
for which Capital Research and Management Company serves as investment advisor)
beneficially owned approximately 18.3% of AMB Property Corporation's outstanding
common stock. In addition, AMB Property Corporation's executive officers and
directors beneficially owned
37
39
approximately 5.1% of AMB Property Corporation's outstanding common stock as of
March 20, 2001, and will have influence on AMB Property Corporation's and our
management and operation and, as stockholders of AMB Property Corporation, will
have influence on the outcome of any matters submitted to a vote of AMB Property
Corporation's stockholders. This influence might be exercised in a manner that
is inconsistent with the interests of our limited partners and our noteholders.
Although there is no understanding or arrangement for these directors, officers,
and stockholders and their affiliates to act in concert, these parties would be
in a position to exercise significant influence over our affairs if they choose
to do so.
WE COULD INVEST IN REAL ESTATE MORTGAGES
We may invest in mortgages, and may do so as a strategy for ultimately
acquiring the underlying property. In general, investments in mortgages include
the risks that borrowers may not be able to make debt service payments or pay
principal when due, that the value of the mortgaged property may be less than
the principal amount of the mortgage note secured by the property and that
interest rates payable on the mortgages may be lower than our cost of funds to
acquire these mortgages. In any of these events, our funds from operations and
our ability to make distributions to our unitholders and payments to our
noteholders could be adversely affected.
GOVERNMENT REGULATIONS
Many laws and governmental regulations are applicable to our properties and
changes in these laws and regulations, or their interpretation by agencies and
the courts, occur frequently.
COSTS OF COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT
Under the Americans with Disabilities Act, places of public accommodation
must meet certain federal requirements related to access and use by disabled
persons. Compliance with the Americans with Disabilities Act might require us to
remove structural barriers to handicapped access in certain public areas where
such removal is "readily achievable." If we fail to comply with the Americans
with Disabilities Act, then we might be required to pay fines to the government
or damages to private litigants. The impact of application of the Americans with
Disabilities Act to our properties, including the extent and timing of required
renovations, is uncertain. If we are required to make unanticipated expenditures
to comply with the Americans with Disabilities Act, then our cash flow and the
amounts available for distributions to our unitholders and payments to our
noteholders may be adversely affected.
WE COULD ENCOUNTER ENVIRONMENTAL PROBLEMS
Federal, state, and local laws and regulations relating to the protection
of the environment impose liability on a current or previous owner or operator
of real estate for contamination resulting from the presence or discharge of
hazardous or toxic substances or petroleum products at the property. A current
or previous owner may be required to investigate and clean up contamination at
or migrating from a site. These laws typically impose liability and clean-up
responsibility without regard to whether the owner or operator knew of or caused
the presence of the contaminants. Even if more than one person may have been
responsible for the contamination, each person covered by the environmental laws
may be held responsible for all of the clean-up costs incurred. In addition,
third parties may sue the owner or operator of a site for damages based on
personal injury, property damage, or other costs, including investigation and
clean-up costs, resulting from environmental contamination present at or
emanating from that site.
Environmental laws also govern the presence, maintenance, and removal of
asbestos. These laws require that owners or operators of buildings containing
asbestos properly manage and maintain the asbestos, that they adequately inform
or train those who may come into contact with asbestos, and that they undertake
special precautions, including removal or other abatement in the event that
asbestos is disturbed during renovation or demolition of a building. These laws
may impose fines and penalties on building owners or operators for failure to
comply with these requirements and may allow third parties to seek recovery from
owners or operators for
38
40
personal injury associated with exposure to asbestos fibers. Some of our
properties may contain asbestos-containing building materials.
Some of our properties are leased or have been leased, in part, to owners
and operators of businesses that use, store, or otherwise handle petroleum
products or other hazardous or toxic substances. These operations create a
potential for the release of petroleum products or other hazardous or toxic
substances. Some of our properties are adjacent to or near other properties that
have contained or currently contain petroleum products or other hazardous or
toxic substances. In addition, certain of our properties are on, are adjacent
to, or are near other properties upon which others, including former owners or
tenants of the properties, have engaged or may in the future engage in
activities that may release petroleum products or other hazardous or toxic
substances. From time to time, we may acquire properties, or interests in
properties, with known adverse environmental conditions where we believe that
the environmental liabilities associated with these conditions are quantifiable
and the acquisition will yield a superior risk-adjusted return. Environmental
issues for each property are evaluated and quantified prior to acquisition. The
costs of environmental investigation, clean-up, and monitoring are underwritten
into the cost of the acquisition and appropriate environmental insurance is
obtained for the property. In connection with certain divested properties, we
have agreed to remain responsible for, and to bear the cost of, remediating or
monitoring certain environmental conditions on the properties.
All of our properties were subject to a Phase I or similar environmental
assessments by independent environmental consultants at the time of acquisition.
Phase I assessments are intended to discover and evaluate information regarding
the environmental condition of the surveyed property and surrounding properties
and include an historical review, a public records review, an investigation of
the surveyed site and surrounding properties, and preparation and issuance of a
written report. We may perform additional Phase II testing if recommended by the
independent environmental consultant. Phase II testing may include the
collection and laboratory analysis of soil and groundwater samples, completion
of surveys for asbestos-containing building materials, and any other testing
that the consultant considers prudent in order to test for the presence of
hazardous materials.
None of the environmental assessments of our properties has revealed any
environmental liability that we believe would have a material adverse effect on
our financial condition or results of operations taken as a whole. Furthermore,
we are not aware of any such material environmental liability. Nonetheless, it
is possible that the assessments do not reveal all environmental liabilities and
that there are material environmental liabilities of which we are unaware or
that known environmental conditions may give rise to liabilities that are
materially greater than anticipated. Moreover, the current environmental
condition of our properties may be affected by tenants, the condition of land,
operations in the vicinity of the properties (such as releases from underground
storage tanks), or by third parties unrelated to us. If the costs of compliance
with existing or future environmental laws and regulations exceed our budgets
for these items, then our financial condition, results of operations, cash flow,
and ability to make distributions to our unitholders and payments to our
noteholders could be adversely affected.
OUR FINANCIAL CONDITION COULD BE ADVERSELY AFFECTED IF WE FAIL TO COMPLY WITH
OTHER REGULATIONS
Our properties are also subject to various federal, state, and local
regulatory requirements such as state and local fire and life safety
requirements. If we fail to comply with these requirements, then we might incur
fines by governmental authorities or be required to pay awards of damages to
private litigants. We believe that our properties are currently in substantial
compliance with all such regulatory requirements. However, these requirements
may change or new requirements may be imposed, which could require significant
unanticipated expenditures by us. Any such unanticipated expenditures could have
an adverse effect on our financial condition, results of operations, cash flow,
and ability to make distributions to our unitholders and payments to our
noteholders.
39
41
FEDERAL INCOME TAX RISKS
CERTAIN PROPERTY TRANSFERS MAY GENERATE PROHIBITED TRANSACTION INCOME
From time to time, we may transfer or otherwise dispose of some of our
properties. Under the Internal Revenue Code, any gain resulting from transfers
of properties that we hold as inventory or primarily for sale to customers in
the ordinary course of business would be treated as income from a prohibited
transaction. We would be required to pay a 100% penalty tax on that income.
Since we acquire properties for investment purposes, we believe that any
transfer or disposal of property by us would not be deemed by the Internal
Revenue Service to be a prohibited transaction with any resulting gain allocable
to us being subject to a 100% penalty tax. However, whether property is held for
investment purposes is a question of fact that depends on all the facts and
circumstances surrounding the particular transaction. The IRS may contend that
certain transfers or disposals of properties by us are prohibited transactions.
While we believe that the IRS would not prevail in any such dispute, if the IRS
successfully argued that a transfer or disposition of property constituted a
prohibited transaction, then we would be required to pay a 100% penalty tax on
any gain allocable to us from the prohibited transaction.
WE ARE DEPENDENT ON OUR KEY PERSONNEL
We depend on the efforts of the executive officers of our general partner.
While we believe that AMB Property Corporation could find suitable replacements
for these key personnel, the loss of their services or the limitation of their
availability could adversely affect our financial condition, results of
operations, cash flow, and ability to make distributions to our unitholders and
payments to our noteholders. AMB Property Corporation does not have employment
agreements with any of its executive officers.
WE MAY BE UNABLE TO MANAGE OUR GROWTH
Our business has grown rapidly and continues to grow through property
acquisitions and developments. If we fail to effectively manage our growth, then
our financial condition, results of operations, cash flow, and ability to make
distributions to our unitholders and payments to our noteholders could be
adversely affected.
WE MAY INVEST IN HIGHLY SPECULATIVE EARLY-STAGE COMPANIES IN WHICH WE MAY LOSE
OUR ENTIRE INVESTMENT
From time to time, we may invest in highly speculative early-stage
companies that we believe will enhance our understanding of changes occurring in
the movement of goods, which may, in turn, sharpen our real estate investment
focus, create real estate provider relationships with growth companies, and
provide the potential for significant returns on invested capital. We believe
that the amounts of our investments in early-stage companies are immaterial,
both individually and in the aggregate. However, these investments are highly
speculative and it is possible that we may lose our entire investment in an
early-stage company.
AMB INVESTMENT MANAGEMENT, INC. AND HEADLANDS REALTY CORPORATION
WE DO NOT CONTROL THE ACTIVITIES OF AMB INVESTMENT MANAGEMENT, INC. AND
HEADLANDS REALTY CORPORATION
We own 100% of the non-voting preferred stock of AMB Investment Management,
Inc. and Headlands Realty Corporation (representing approximately 95% of the
economic interest in each entity). Some of AMB Property Corporation's current
and former executive officers and a former executive officer of AMB Investment
Management, Inc. own all of the outstanding voting common stock of AMB
Investment Management, Inc. (representing approximately 5% of the economic
interest in AMB Investment Management, Inc.). Some of AMB Property Corporation's
current and former executive officers and a director of Headlands Realty
Corporation own all of the outstanding voting common stock of Headlands Realty
Corporation (representing approximately 5% of the economic interest in Headlands
Realty Corporation). The ownership structure of AMB Investment Management, Inc.
and Headlands Realty Corporation permits us to share in the income of those
corporations while allowing AMB Property Corporation to maintain its status as a
real estate investment trust. We receive substantially all of the economic
benefit of the businesses carried on by AMB Investment Management and Headlands
Realty Corporation through our right to receive dividends. However, we are not
40
42
able to elect the directors or officers of AMB Investment Management, Inc. and
Headlands Realty Corporation and, as a result, we do not have the ability to
influence their operation or to require that their boards of directors declare
and pay cash dividends on the non-voting stock of AMB Investment Management,
Inc. and Headlands Realty Corporation held by us. The boards of directors and
management of AMB Investment Management, Inc. and Headlands Realty Corporation
might implement business policies or decisions that would not have been
implemented by persons controlled by us and that may be adverse to the interests
of our unitholders and noteholders or that may adversely impact our financial
condition, results of operations, cash flow, and ability to make distributions
to our unitholders and payments to our noteholders. In addition, AMB Investment
Management, Inc. and Headlands Realty Corporation, as taxable REIT subsidiaries,
are subject to tax on their income, reducing their cash available for
distribution to us.
AMB INVESTMENT MANAGEMENT, INC. MAY NOT BE ABLE TO GENERATE SUFFICIENT FEES
Fees earned by AMB Investment Management, Inc. depend on various factors
affecting the ability to attract and retain investment management clients and
the overall returns achieved on managed assets. These factors are beyond our
control. AMB Investment Management, Inc.'s failure to attract investment
management clients or achieve sufficient overall returns on managed assets could
reduce its ability to pay dividends on the stock owned by us and could also
limit co-investment opportunities to us. This would limit our ability to
generate rental revenues from such co-investments and use the co-investment
program as a source to finance property acquisitions and leverage acquisition
opportunities.
ITEM 7a. QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our exposure to market risk includes: 1) the rising interest rates in
connection with our unsecured credit facility and other variable rate
borrowings; and 2) our ability to incur more debt without unitholder or
noteholder approval, thereby increasing our debt service obligations, which
could adversely affect our cash flows. See "Item 7: Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Liquidity and
Capital Resources -- Capital Resources -- Market Capitalization."
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See "Item 14. Exhibits, Financial Statement Schedules, and Reports of Form
8-K."
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEMS 10, 11, 12 AND 13.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT, EXECUTIVE COMPENSATION,
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT, AND CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 10, Item 11, Item 12, and Item 13 will be
contained in a definitive proxy statement for AMB Property Corporation's Annual
Meeting of Stockholders, which we anticipate will be filed no later than 120
days after the end of AMB Property Corporation's fiscal year pursuant to
Regulation 14A and accordingly these items have been omitted in accordance with
General Instruction G(3) to Form 10-K.
41
43
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) and (2) FINANCIAL STATEMENTS AND SCHEDULES:
The following consolidated financial information is included as a separate
section of this report on Form 10-K.
PAGE
----
Report of Independent Public Accountants.................... F-1
Consolidated Balance Sheets as of December 31, 2000 and F-2
1999......................................................
Consolidated Statements of Operations for the years ended F-3
December 31, 2000, 1999, and 1998.........................
Consolidated Statements of Partners' Capital for the years F-4
ended December 31, 2000, 1999, and 1998...................
Consolidated Statements of Cash Flows for the years ended F-5
December 31, 2000, 1999, and 1998.........................
Notes to Consolidated Financial Statements.................. F-6
Schedule III -- Real Estate and Accumulated Depreciation.... S-1
Schedule IV -- Mortgage Loans on Real Estate................ S-8
All other schedules are omitted since the required information is not
present in amounts sufficient to require submission of the schedule or because
the information required is included in the financial statements and notes
thereto.
(a)(3) EXHIBITS:
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.1 Fourth Amended and Restated Partnership Agreement of Limited
Partnership of AMB Property, L.P. (incorporated herein by
reference as Exhibit 10.1 to the Registrants Current Report
on Form 8-K filed on August 15, 2000).
3.2 First Amendment to the Fourth Amended and Restated Agreement
of Limited Partnership of AMB Property, L.P.
4.1 Indenture dated as of June 30, 1998, by and among AMB
Property, L.P., the Registrant and State Street Bank and
Trust Company of California, N.A., as trustee (incorporated
by reference to Exhibit 4.1 of the Registrant's Registration
Statement on Form S-11 (No. 333-49163)).
4.2 First Supplemental Indenture dated as of June 30, 1998 by
and among AMB Property, L.P., the Registrant and State
Street Bank and Trust Company of California, N.A., as
trustee (incorporated by reference to Exhibit 4.2 of the
Registrant's Registration Statement Form S-11 (No.
333-49163)).
4.3 Second Supplemental Indenture dated as of June 30, 1998, by
and among AMB Property, L.P., the Registrant and State
Street Bank and Trust Company of California, N.A., as
trustee (incorporated by reference to Exhibit 4.3 of the
Registrant's Registration Statement on Form S-11 (No.
333-49163)).
4.4 Third Supplemental Indenture dated as of June 30, 1998, by
and among AMB Property, L.P., the Registrant and State
Street Bank and Trust Company of California, N.A., as
trustee (incorporated by reference to Exhibit 4.4 of the
Registrant's Registration Statement on Form S-11 (No.
333-49163)).
4.5 Fourth Supplemental Indenture, by and among AMB Property,
L.P., AMB Property Corporation and State Street Bank and
Trust Company of California, N.A., as trustee (incorporated
herein by reference as Exhibit 4.1 of the Registrant's
Current Report on Form 8-K/A filed on November 9, 2000).
42
44
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
4.6 $30,000,000 7.925% Fixed Rate Note No. 1 dated August 18,
2000, attaching the Parent Guarantee dated August 18, 2000.
4.7 $25,000,000 7.925% Fixed Rate Note No. 2 dated September 12,
2000, attaching the Parent Guarantee dated September 12,
2000.
4.8 $50,000,000 8.00% Fixed Rate Note No. 3 dated October 26,
2000, attaching the Parent Guarantee dated October 26, 2000.
4.9 $25,000,000 8.000% Fixed Rate Note No. 4 dated October 26,
2000, attaching the Parent Guarantee dated October 26, 2000.
4.10 $50,000,000 7.20% Fixed Rate Note No. 5 dated December 19,
2000, attaching the Parent Guarantee dated December 19, 2000
(incorporated herein by reference to Exhibit 4.1 of the
Registrant's Current Report on Form 8-K filed on January 8,
2001).
4.11 $50,000,000 7.20% Fixed Rate Note No. 6 dated December 19,
2000, attaching the Parent Guarantee dated December 19, 2000
(incorporated herein by reference to Exhibit 4.2 of the
Registrant's Current Report on Form 8-K filed on January 8,
2001).
4.12 $50,000,000 7.20% Fixed Rate Note No. 7 dated December 19,
2000, attaching the Parent Guarantee dated December 19, 2000
(incorporated herein by reference to Exhibit 4.3 of the
Registrant's Current Report on Form 8-K filed on January 8,
2001).
4.13 Specimen of 7.10% Notes due 2008 (included in the First
Supplemental Indenture incorporated by reference as Exhibit
4.2 of the Registrant's Registration Statement on Form S-11
(No. 333-49163)).
4.14 Specimen of 7.50% Notes due 2018 (included in the Second
Supplemental Indenture incorporated by reference as Exhibit
4.3 of the Registrant's Registration Statement on Form S-11
(No. 333-49163)).
4.15 Specimen of 6.90% Reset Put Securities due 2015 (included in
the Third Supplemental Indenture incorporated by reference
as Exhibit 4.4 of the Registrant's Registration Statement on
Form S-11 (No. 333-49163)).
4.16 $25,000,000 6.90% Fixed Rate Note No. 8 dated January 9,
2001, attaching the Parent Guarantee dated January 9, 2001
(incorporated herein by reference to Exhibit 4.1 of the
Registrant's Current Report on Form 8-K filed on January 31,
2001).
10.1 Distribution Agreement dated August 15, 2000, by and among
Registrant, AMB Property Corporation, Morgan Stanley & Co.,
Incorporated, Banc of America Securities LLC, Banc One
Capital Markets, Inc., Chase Securities, Inc., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan
Securities Inc., and Salomon Smith Barney Inc. (incorporated
herein by reference to Exhibit 1.1 of Registrant's Current
Report on Form 8-K/A filed on November 9, 2000).
10.2 Terms Agreement dated as of December 14, 2000, by and
between Morgan Stanley & Co., Incorporated and J.P. Morgan
Securities Inc. and Registrant (incorporated herein by
reference to Exhibit 1.1 of the Registrant's Current Report
on Form 8-K filed on January 8, 2001).
10.3 Terms Agreement dated as of January 4, 2001, by and between
A.G. Edwards & Sons, Inc. and Registrant (incorporated
herein by reference to Exhibit 1.1 of the Registrant's
Current Report on Form 8-K filed on January 31, 2001).
10.4 Terms Agreement dated as of March 2, 2001, by and among
First Union Securities, Inc., Registrant and AMB Property
Corporation (incorporated by reference to Exhibit 1.1 of
Registrants' current report on Form 8-K filed on March 16,
2001).
10.5 Form of Change in Control and Noncompetition Agreement
between AMB Property Corporation and Executive Officers
(incorporated by reference to AMB Property Corporation's
Annual Report on Form 10-K for the year ended December 31,
1998).
43
45
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.6 Agreement for Purchase and Exchange entered into as of March
9, 1999, by and among Registrant, AMB Property II, L.P.,
Long Gate, L.L.C. and BPP Retail, LLC, regarding the
transaction which closed on June 15, 1999 (incorporated by
reference to Exhibit 10.1 of the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999).
10.7 Agreement for Purchase and Exchange entered into as of March
9, 1999, by and among Registrant, AMB Property II, L.P.,
Long Gate, L.L.C. and BPP Retail, LLC, regarding the
transaction which closed on August 4, 1999 (incorporated by
reference to Exhibit 10.2 of the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999).
10.8 Agreement for Purchase and Exchange entered into as of March
9, 1999, by and among Registrant, AMB Property II, L.P.,
Long Gate, L.L.C. and BPP Retail, LLC, regarding the
transaction which closed on December 1, 1999 (incorporated
by reference to Exhibit 10.3 of the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999).
10.9 Second Amended and Restated 1997 Stock Option and Incentive
Plan of AMB Property Corporation (incorporated by reference
to Exhibit 10.5 of AMB Property Corporation's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999).
10.10 Ninth Amended and Restated Agreement of Limited Partnership
of AMB Property II, L.P., dated March 21, 2001 (incorporated
by reference to Exhibit 10.1 of the Registrant's Current
Report on Form 8-K filed on March 23, 2001).
10.11 Revolving Credit Agreement dated as of May 24, 2000, among
Registrant, the banks listed therein, Morgan Guaranty Trust
Company of New York, as Administrative Agent, Bank of
America, N.A., as Syndication Agent, the Chase Manhattan
Bank, as Documentation Agent, J.P. Morgan Securities Inc.
and Banc of America Securities LLC, as Joint Lead Arrangers
and Joint Bookmanagers, Bank one, NA, Commerzbank
Aktiengesellschaft, PNC Bank National Association and
Wachovia Bank, N.A., as Managing Agents and Banks Trust
Company and Dresdner Bank AG, New York and Grand Cayman
Branches, as Co-Agents (incorporated by reference to Exhibit
10.1 of the Registrant's Current Report on Form 8-K filed on
June 16, 2000).
10.12 Guaranty of Payment made as of May 24, 2000, between AMB
Property Corporation and Morgan Guaranty Trust Company of
New York, as administrative agent for the banks listed on
the signature page of the Revolving Credit Agreement
(incorporated herein by reference to Exhibit 10.2 of the
Registrant's Current Report on Form 8-K filed on June 16,
2000).
10.13 Credit Agreement dated as of September 27, 1999, among AMB
Institutional Alliance Fund I, L.P., AMB Institutional
Alliance REIT I, Inc., the Lenders and issuing parties
thereto, BT Realty Resources, Inc. and Chase Manhattan Bank
(incorporated by reference to Exhibit 10.3 of the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999).
21.1 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.
24.1 Powers of Attorney (included in Part IV of this Form 10-K).
(b) REPORTS ON FORM 8-K:
- The Registrant filed a Current Report on Form 8-K on November 2, 2000, in
connection with the issuance of $75 million of senior unsecured notes by
it under its medium-term note program.
- The Registrant filed a Current Report on Form 8-K/A on November 9, 2000,
in connection with the commencement of its medium term note program.
- The Registrant filed a Current Report on Form 8-K/A on November 16, 2000,
in connection with the commencement of its medium term note program.
- The Registrant filed a Current Report on Form 8-K on November 30, 2000,
in connection with its 2000 acquisitions.
44
46
- The Registrant filed a Current Report on Form 8-K/A on December 14, 2000,
in connection with its 2000 acquisitions.
- The Registrant filed a Current Report on Form 8-K/A on December 19, 2000,
in connection with its 2000 acquisitions.
- The Registrant filed a Current Report on Form 8-K on January 8, 2001, in
connection with the issuance of $150 million of senior unsecured notes by
it under its medium-term note program.
- The Registrant filed a Current Report on Form 8-K on January 31, 2001, in
connection with the issuance of $25 million of senior unsecured notes by
it under its medium-term note program.
- The Registrant filed a Current Report on Form 8-K on March 16, 2001, in
connection with the issuance of $50 million of senior unsecured notes by
it under its medium-term note program.
- The Registrant filed a Current Report on Form 8-K on March 23, 2001, in
connection with the filing by AMB Property Corporation of Articles
Supplementary establishing and fixing the rights and preferences of the
8.00% Series I Cumulative Redeemable Preferred Stock.
(c) EXHIBITS:
See Item 14(a)(3) above.
(d) FINANCIAL STATEMENT SCHEDULES:
See Item 14(a)(1) and (2) above.
45
47
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on March 30, 2001.
AMB PROPERTY, L.P.
By AMB Property Corporation,
its General Partner
By: /s/ HAMID R. MOGHADAM
------------------------------------
Hamid R. Moghadam
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and
directors of AMB Property Corporation, the general partner of AMB Property,
L.P., hereby severally constitute Hamid R. Moghadam, W. Blake Baird, David S.
Fries, and Michael A. Coke, and each of them singly, our true and lawful
attorneys with full power to them, and each of them singly, to sign for us and
in our names in the capacities indicated below, the Form 10-K filed herewith and
any and all amendments to said Form 10-K, and generally to do all such things in
our names and in our capacities as officers and directors of the general partner
of AMB Property, L.P. to enable AMB Property, L.P. to comply with the provisions
of the Securities Exchange Act of 1934, and all requirements of the Securities
and Exchange Commission, hereby ratifying and confirming our signatures as they
may be signed by our said attorneys, or any of them, to said Form 10-K and any
and all amendments thereto.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities as officers or directors of its general partner
and on the dates indicated.
NAME TITLE DATE
---- ----- ----
/s/ HAMID R. MOGHADAM Chairman of the Board and Chief March 30, 2001
- ------------------------------------- Executive Officer
Hamid R. Moghadam (Principal Executive Officer)
/s/ W. BLAKE BAIRD President March 30, 2001
- -------------------------------------
W. Blake Baird
/s/ DOUGLAS D. ABBEY Director March 30, 2001
- -------------------------------------
Douglas D. Abbey
/s/ T. ROBERT BURKE Director March 30, 2001
- -------------------------------------
T. Robert Burke
/s/ DANIEL H. CASE III Director March 30, 2001
- -------------------------------------
Daniel H. Case III
/s/ DAVID A. COLE Director March 30, 2001
- -------------------------------------
David A. Cole
/s/ LYNN M. SEDWAY Director March 30, 2001
- -------------------------------------
Lynn M. Sedway
/s/ JEFFREY L. SKELTON, PH.D. Director March 30, 2001
- -------------------------------------
Jeffrey L. Skelton, Ph.D.
/s/ THOMAS W. TUSHER Director March 30, 2001
- -------------------------------------
Thomas W. Tusher
/s/ CARYL B. WELBORN, ESQ. Director March 30, 2001
- -------------------------------------
Caryl B. Welborn, Esq
/s/ MICHAEL A. COKE Chief Financial Officer and March 30, 2001
- ------------------------------------- Executive Vice President
Michael A. Coke (Duly Authorized Officer and
Principal Financial and Accounting
Officer)
46
48
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the General Partner
of AMB Property, L.P.:
We have audited the accompanying consolidated balance sheets of AMB
Property, L.P. (a Delaware limited partnership) and subsidiaries as of December
31, 2000 and 1999, and the related consolidated statements of operations,
partners' capital, and cash flows for each of the three years in the period
ended December 31, 2000. These financial statements and the schedules referred
to below are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedules, based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of AMB Property, L.P. and
subsidiaries as of December 31, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 2000, in conformity with accounting principles generally accepted
in the United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental Schedules III, Real
Estate and Accumulated Depreciation and IV, Mortgage Loans on Real Estate, are
presented for purposes of complying with the Securities and Exchange
Commission's rules and are not a required part of the basic financial
statements. This information has been subjected to the auditing procedures
applied in our audits of the basic financial statements and, in our opinion, is
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
ARTHUR ANDERSEN LLP
San Francisco, California
January 22, 2001
F-1
49
AMB PROPERTY, L.P.
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2000 AND 1999
(IN THOUSANDS, EXCEPT UNIT AMOUNTS)
ASSETS
2000 1999
---------- ----------
Investments in real estate:
Land...................................................... $ 833,325 $ 714,916
Buildings and improvements................................ 2,915,537 2,349,221
Construction in progress.................................. 277,735 185,315
---------- ----------
Total investments in properties................... 4,026,597 3,249,452
Accumulated depreciation and amortization................. (177,467) (103,558)
---------- ----------
Net investments in properties.......................... 3,849,130 3,145,894
Investment in unconsolidated joint ventures................. 80,432 66,357
Properties held for divestiture, net........................ 197,146 181,201
---------- ----------
Net investments in real estate......................... 4,126,708 3,393,452
Cash and cash equivalents................................... 20,358 33,312
Restricted cash and cash equivalents........................ 22,364 103,707
Mortgage receivables........................................ 115,969 --
Accounts receivable, net of allowance for doubtful accounts
of $7,677 and $7,497, respectively........................ 69,874 35,516
Investments in affiliated companies......................... 35,731 150
Investments in other companies, net......................... 15,965 43,512
Other assets................................................ 18,657 11,901
---------- ----------
Total assets...................................... $4,425,626 $3,621,550
========== ==========
LIABILITIES AND PARTNERS' CAPITAL
Debt:
Secured debt.............................................. $ 940,276 $ 707,037
Alliance Fund I unsecured debt............................ -- 80,000
Unsecured senior debt securities.......................... 680,000 400,000
Unsecured credit facility................................. 216,000 83,000
---------- ----------
Total debt........................................ 1,836,276 1,270,037
Other liabilities........................................... 147,042 89,371
---------- ----------
Total liabilities................................. 1,983,318 1,359,408
Commitments and contingencies (Note 12).....................
Minority interests.......................................... 496,405 278,593
Partners' capital:
General Partner, 83,909,340 and 84,903,630 units
outstanding, respectively, and 4,000,000 Series A
preferred units with a $100,000 liquidation
preference............................................. 1,767,930 1,829,259
Limited Partners, 5,827,917 and 4,507,689 units
outstanding, respectively, and 1,300,000 Series B
preferred units with a $65,000 liquidation
preference............................................. 177,973 154,290
---------- ----------
Total partners' capital........................... 1,945,903 1,983,549
---------- ----------
Total liabilities and partners' capital........... $4,425,626 $3,621,550
========== ==========
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
50
AMB PROPERTY, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
(IN THOUSANDS, EXCEPT UNIT AND PER UNIT AMOUNTS)
2000 1999 1998
----------- ----------- -----------
REVENUES
Rental revenues................................... $ 464,164 $ 439,658 $ 354,658
Equity in earnings of unconsolidated joint
ventures....................................... 5,212 4,701 1,825
Investment management and other income............ 8,331 3,824 2,404
----------- ----------- -----------
Total revenues............................ 477,707 448,183 358,887
OPERATING EXPENSES
Property operating expenses....................... 50,566 51,739 40,197
Real estate taxes................................. 57,164 56,184 48,218
Interest, including amortization.................. 90,270 88,681 69,670
Depreciation and amortization..................... 96,258 67,505 57,464
General and administrative........................ 23,750 25,223 19,588
----------- ----------- -----------
Total operating expenses.................. 318,008 289,332 235,137
----------- ----------- -----------
Income from operations before minority
interests............................... 159,699 158,851 123,750
Minority interests' share of net income........... (31,311) (19,614) (5,494)
----------- ----------- -----------
Net income before gain from divestiture of real
estate....................................... 128,388 139,237 118,256
Gain from divestiture of real estate.............. 7,044 53,753 --
----------- ----------- -----------
Net income before extraordinary items.......... 135,432 192,990 118,256
Extraordinary items............................... -- (2,490) --
----------- ----------- -----------
Net income..................................... 135,432 190,500 118,256
----------- ----------- -----------
Series A preferred unit distributions............. (8,500) (8,500) (3,639)
Series B preferred unit distributions............. (5,608) (5,608) (779)
----------- ----------- -----------
Net income available to common unitholders..... $ 121,324 $ 176,392 $ 113,838
=========== =========== ===========
Income available to common unitholders attributable
to
General partner................................... $ 113,282 $ 167,603 $ 108,954
Limited partners.................................. 8,042 8,789 4,884
----------- ----------- -----------
$ 121,324 $ 176,392 $ 113,838
=========== =========== ===========
BASIC INCOME PER COMMON UNIT
Before extraordinary items........................ $ 1.35 $ 1.97 $ 1.27
Extraordinary items............................... -- (0.03) --
----------- ----------- -----------
Net income available to common unitholders..... $ 1.35 $ 1.94 $ 1.27
=========== =========== ===========
DILUTED INCOME PER COMMON UNIT
Before extraordinary items........................ $ 1.35 $ 1.97 $ 1.26
Extraordinary items............................... -- (0.03) --
----------- ----------- -----------
Net income available to common unitholders..... $ 1.35 $ 1.94 $ 1.26
=========== =========== ===========
WEIGHED AVERAGE COMMON UNITS OUTSTANDING
Basic............................................. 89,566,375 90,792,310 89,493,394
=========== =========== ===========
Diluted........................................... 90,024,511 90,867,934 89,852,187
=========== =========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
51
AMB PROPERTY, L.P.
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
(IN THOUSANDS, EXCEPT UNIT AMOUNTS)
GENERAL PARTNER LIMITED PARTNERS
--------------------------------------------- ------------------------------------------
PREFERRED UNITS COMMON UNITS PREFERRED UNITS COMMON UNITS
------------------- ----------------------- ------------------- --------------------
UNITS AMOUNT UNITS AMOUNT UNITS AMOUNT UNITS AMOUNT
--------- ------- ---------- ---------- --------- ------- --------- --------
Balance at December 31, 1997......... -- $ -- 85,645,102 $1,668,030 -- $ -- 2,542,163 $ 49,368
Contributions........................ 4,000,000 96,100 43,007 930 1,300,000 62,190 1,905,676 44,619
Net income........................... -- 3,639 -- 108,954 -- 779 -- 4,884
Reallocation of interests............ -- -- -- 7,215 -- -- -- (7,215)
Distributions........................ -- (3,639) -- (115,869) -- (779) -- (4,949)
--------- ------- ---------- ---------- --------- ------- --------- --------
Balance at December 31, 1998......... 4,000,000 96,100 85,688,109 1,669,260 1,300,000 62,190 4,447,839 86,707
Comprehensive income:
Net income......................... -- 8,500 -- 167,603 -- 5,608 -- 8,789
Unrealized gain on securities...... -- -- -- 28,993 -- -- -- 5,048
Total comprehensive income.......
Contributions........................ -- -- -- -- -- -- 595,603 14,094
Issuance of common limited
partnership units in connection
with issuance of restricted
stock.............................. -- -- 98,368 2,215 -- -- -- --
Retirement of common limited
partnership units in connection
with retirement of common stock.... -- -- (1,443,600) (27,300) -- -- --
Issuance of common limited
partnership units in connection
with issuance of stock options..... -- -- 25,000 526 -- -- -- --
Conversion of operating partnership
units.............................. -- -- 535,753 11,053 -- -- (535,753) (12,761)
Deferred compensation................ -- -- -- (3,080) -- -- -- --
Deferred compensation amortization... -- -- -- 952 -- -- -- --
Reallocation of interests............ -- -- -- 3,451 -- -- -- (3,451)
Distributions........................ -- (8,500) -- (120,514) -- (5,608) -- (6,326)
--------- ------- ---------- ---------- --------- ------- --------- --------
Balance at December 31, 1999......... 4,000,000 96,100 84,903,630 1,733,159 1,300,000 62,190 4,507,689 92,100
Comprehensive income:
Net Income......................... -- 8,500 -- 113,282 -- 5,608 -- 8,042
Unrealized loss on securities...... -- -- -- (32,725) -- -- -- (2,275)
Total comprehensive income.......
Contributions........................ -- -- -- -- -- -- 94,771 2,228
Issuance of common limited
partnership units in connection
with issuance of restricted
stock.............................. -- -- 161,996 3,270 -- -- -- --
Issuance of common limited
partnership units in connection
with issuance of stock options..... -- -- 103,217 2,180 -- -- -- --
Conversion of operating partnership
units to common stock.............. -- -- 206,423 4,913 -- -- (206,423) (4,153)
Conversion of operating partnership
units to cash...................... -- -- -- -- -- -- (34,046) (681)
Reallocation of operating partnership
units in connection with
cancellation of common stock....... -- -- (1,465,926) (29,318) -- -- 1,465,926 29,318
Deferred compensation................ -- -- -- (3,270) -- -- -- --
Deferred compensation amortization... -- -- -- 1,022 -- -- -- --
Reallocation of interests and
other.............................. -- -- -- 3,622 -- -- -- (237)
Distributions........................ -- (8,500) -- (124,305) -- (5,479) -- (8,688)
--------- ------- ---------- ---------- --------- ------- --------- --------
Balance at December 31, 2000......... 4,000,000 $96,100 83,909,340 $1,671,830 1,300,000 $62,319 5,827,917 $115,654
========= ======= ========== ========== ========= ======= ========= ========
TOTAL
----------
Balance at December 31, 1997......... $1,717,398
Contributions........................ 203,839
Net income........................... 118,256
Reallocation of interests............ --
Distributions........................ (125,236)
----------
Balance at December 31, 1998......... 1,914,257
Comprehensive income:
Net income.........................
Unrealized gain on securities......
Total comprehensive income....... 224,541
Contributions........................ 14,094
Issuance of common limited
partnership units in connection
with issuance of restricted
stock.............................. 2,215
Retirement of common limited
partnership units in connection
with retirement of common stock.... (27,300)
Issuance of common limited
partnership units in connection
with issuance of stock options..... 526
Conversion of operating partnership
units.............................. (1,708)
Deferred compensation................ (3,080)
Deferred compensation amortization... 952
Reallocation of interests............ --
Distributions........................ (140,948)
----------
Balance at December 31, 1999......... 1,983,549
Comprehensive income:
Net Income.........................
Unrealized loss on securities......
Total comprehensive income....... 100,432
Contributions........................ 2,228
Issuance of common limited
partnership units in connection
with issuance of restricted
stock.............................. 3,270
Issuance of common limited
partnership units in connection
with issuance of stock options..... 2,180
Conversion of operating partnership
units to common stock.............. 760
Conversion of operating partnership
units to cash...................... (681)
Reallocation of operating partnership
units in connection with
cancellation of common stock....... --
Deferred compensation................ (3,270)
Deferred compensation amortization... 1,022
Reallocation of interests and
other.............................. 3,385
Distributions........................ (146,972)
----------
Balance at December 31, 2000......... $1,945,903
==========
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
52
AMB PROPERTY, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000, 1999, AND 1998
(IN THOUSANDS)
2000 1999 1998
--------- --------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income.................................................. $ 135,432 $ 190,500 $ 118,256
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................. 96,258 67,505 57,464
Straight-line rents....................................... (10,203) (10,847) (10,921)
Amortization of debt premiums and financing costs......... (6,055) (3,009) (2,730)
Minority interests' share of net income................... 31,311 19,614 5,494
Gain on divestiture of real estate........................ (7,044) (53,753) --
Non-cash portion of extraordinary items................... -- (6,058) --
Equity in (earnings) loss of AMB Investment Management.... 3,159 875 313
Equity in earnings of unconsolidated joint ventures....... (5,212) (4,701) (1,730)
Changes in assets and liabilities:
Other assets............................................ (34,142) 5,199 (9,377)
Other liabilities....................................... 57,671 (14,934) 20,411
--------- --------- ---------
Net cash provided by operating activities.......... 261,175 190,391 177,180
CASH FLOWS FROM INVESTING ACTIVITIES
Change in restricted cash and cash equivalents.............. (4,002) (98,480) 2,847
Cash paid for property acquisitions......................... (604,872) (399,891) (564,304)
Additions to buildings, development costs, and other first
generation improvements................................... (153,534) (152,643) (125,180)
Additions to second generation building improvements and
lease costs............................................... (40,573) (27,289) (12,733)
Additions to interests in unconsolidated joint ventures..... (13,158) (7,789) (67,376)
Distributions received from unconsolidated joint ventures... 4,295 3,787 11,451
Net proceeds from divestiture of real estate................ 85,345 746,037 --
Reduction of payable to affiliates in connection with
Formation Transactions.................................... -- -- (38,071)
--------- --------- ---------
Net cash provided by (used in) investing
activities....................................... (726,499) 63,732 (793,366)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common units.................................... 2,180 732 --
Borrowings (payments) on unsecured credit facility, net..... 133,000 (151,000) 84,000
Borrowings (payments) on Alliance Fund I credit facility,
net....................................................... (80,000) 80,000 --
Borrowings (payments) on secured debt, net.................. 84,975 (81,289) (20,655)
Payment of financing fees................................... (6,364) (242) (7,704)
Net proceeds from issuance of senior debt securities........ 278,183 -- 399,166
Net proceeds from issuance of Series A preferred units...... -- -- 96,100
Net proceeds from issuances of preferred units.............. 61,413 88,476 167,993
Contributions from investors in the Alliance Fund I......... 153,872 14,611 --
Distributions paid to common and preferred unitholders...... (136,288) (165,551) (91,593)
Distributions to limited partners and minority interests.... (38,601) (26,458) (23,036)
--------- --------- ---------
Net cash provided by (used in) financing
activities....................................... 452,370 (240,721) 604,202
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents........ (12,954) 13,402 (11,984)
Cash and cash equivalents at beginning of period............ 33,312 19,910 31,894
--------- --------- ---------
Cash and cash equivalents at end of period.................. $ 20,358 $ 33,312 $ 19,910
========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest...................................... $ 90,138 $ 89,627 $ 68,209
Non-cash transactions:
Acquisition of properties................................. $ 729,972 $ 471,905 $ 901,284
Assumption of debt........................................ (125,100) (57,480) (221,017)
Minority interest's contribution, including units
issued.................................................. -- (14,534) (115,963)
--------- --------- ---------
Net cash paid...................................... $ 604,872 $ 399,891 $ 564,304
========= ========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
53
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
1. ORGANIZATION AND FORMATION OF THE COMPANY
AMB Property Corporation, a Maryland corporation (the "Company"), commenced
operations as a fully integrated real estate company effective with the
completion of its initial public offering on November 26, 1997. The Company
elected to be taxed as a real estate investment trust under Sections 856 through
860 of the Internal Revenue Code of 1986, 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 real estate investment trust. The
Company, through its controlling interest in its subsidiary, AMB Property, L.P.,
a Delaware limited partnership (the "Operating Partnership"), is engaged in the
acquisition, ownership, operation, management, renovation, expansion, and
development of primarily industrial buildings in target markets nationwide.
Unless the context otherwise requires, the "Company" means AMB Property
Corporation, the Operating Partnership, and its other controlled subsidiaries
and the "Operating Partnership" means AMB Property, L.P. and its other
controlled subsidiaries.
As of December 31, 2000, the Company owned an approximate 93.5% general
partner interest in the Operating Partnership, excluding preferred units. The
remaining 6.5% limited partner interest is owned by non-affiliated investors and
certain current and former directors and officers of the Company. For local law
purposes, certain properties are owned through limited partnerships and limited
liability companies. The ownership of such properties through such entities does
not materially affect the Company's overall ownership of the interests in the
properties. 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.
The Operating Partnership enters into co-investment joint ventures with
institutional investors. These co-investment joint ventures provide the
Operating Partnership with an additional source of capital to fund certain
acquisitions and development and renovation projects. As of December 31, 2000,
the Operating Partnership had investments in two co-investment joint ventures,
including AMB Institutional Alliance Fund I, L.P. ("Alliance Fund I"), which are
consolidated for financial reporting purposes.
AMB Investment Management, Inc., a Maryland corporation ("AMB Investment
Management"), provides real estate investment services on a fee basis to
clients. The Operating Partnership purchased 100% of AMB Investment Management's
non-voting preferred stock (representing a 95% economic interest therein).
Certain current and former executive officers of the Company and a former
executive officer of AMB Investment Management collectively purchased 100% of
AMB Investment Management's voting common stock (representing a 5% economic
interest therein). The Operating Partnership also owns 100% of the non-voting
preferred stock of Headlands Realty Corporation, a Maryland corporation,
(representing a 95% economic interest therein). Certain current and former
executive officers of the Company and a director of Headlands Realty Corporation
collectively own 100% of the voting common stock of Headlands Realty Corporation
(representing a 5% economic interest therein). Headlands Realty Corporation
primarily invests in properties that do not meet the Company's normal investment
strategy, as well as build-to-sell development projects, which are part of the
Company's investment strategy. In addition, it invests in properties and
interests in entities that engage in the management, leasing, and development of
properties and similar activities. The Operating Partnership accounts for its
investments in AMB Investment Management and Headlands Realty Corporation using
the equity method of accounting.
As of December 31, 2000, the Operating Partnership owned 862 industrial
buildings and eight retail centers, located in 27 markets throughout the United
States (unaudited). The Operating Partnership's strategy is to become a leading
provider of High Throughput Distribution, or HTD, properties located near key
passenger and cargo airports, highway systems and ports in major metropolitan
areas, such as Atlanta, Chicago, Dallas/Fort Worth, Northern New Jersey/New York
City, the San Francisco Bay Area, Southern
F-6
54
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
California, Miami, and Seattle. As of December 31, 2000, the industrial
buildings, principally warehouse distribution buildings, encompassed
approximately 75.8 million rentable square feet and were 96.4% leased to over
2,850 tenants (unaudited). As of December 31, 2000, the retail centers,
principally grocer-anchored community shopping centers, encompassed
approximately 1.2 million rentable square feet and were 93.2% leased to over 170
tenants (unaudited).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Generally Accepted Accounting Principles. These consolidated financial
statements have been prepared in accordance with accounting principles generally
accepted in the United States using the accrual method of accounting. 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 and
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.
Principles of Consolidation. The accompanying consolidated financial
statements include the financial position, results of operations and cash flows
of the Operating Partnership, its subsidiaries, and joint ventures (the "Joint
Ventures"), in which it has a controlling interest. Third-party equity interests
in the Operating Partnership and the Joint Ventures are reflected as minority
interests in the consolidated financial statements. The Operating Partnership
also has three non-controlling limited partnership interests in three separate
unconsolidated real estate joint ventures, which are accounted for under the
equity method. All significant intercompany amounts have been eliminated.
Investments in Real Estate. Investments in real estate are stated at cost
unless circumstances indicate that cost cannot be recovered, in which case, the
carrying value of the property is reduced to estimated fair value. Net
realizable value for financial reporting purposes is reviewed for impairment on
a property-by-property basis whenever events or changes in circumstances
indicate that the carrying amount of a property may not be recoverable.
Impairment is recognized when estimated expected future cash flows (undiscounted
and without interest charges) are less than the carrying amount of the property.
The estimation of expected future net cash flows is inherently uncertain and
relies on assumptions regarding current and future economics and market
conditions and the availability of capital. If impairment analysis assumptions
change, then an adjustment to the carrying amount of the Operating Partnership's
long-lived assets could occur. To the extent that a property is impaired, the
excess of the carrying amount of the property over its estimated fair value is
charged to income. The management of the Operating Partnership believed that
there was no impairment of the carrying value of its investments in real estate
at December 31, 2000.
F-7
55
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
Depreciation and amortization are calculated using the straight-line method
over the estimated useful lives of the real estate investments. The estimated
lives are as follows:
DEPRECIATION AND
AMORTIZATION EXPENSES
-----------------------------
ESTIMATED LIVES 2000 1999 1998
------------------------- ------- ------- -------
(DOLLARS IN THOUSANDS)
Building costs....................... 40 $67,997 $54,668 $54,417
Buildings and improvements:
Roof/HVAC/parking lots............. 10 2,404 1,106 346
Plumbing/signage................... 7 484 144 26
Painting and other................. 5 6,345 2,546 668
Tenant improvements.................. Term of the related lease 9,165 4,091 782
Lease commissions.................... Term of the related lease 8,641 3,902 761
------- ------- -------
Total real estate
depreciation.................. 95,036 66,457 57,000
Other depreciation and
amortization....................... Various 1,222 1,048 464
------- ------- -------
Total depreciation and
amortization.................. $96,258 $67,505 $57,464
======= ======= =======
The cost of buildings and improvements includes the purchase price of the
property or interest in property including legal fees and acquisition costs.
Project costs directly associated with the development and construction of a
real estate project, which include interest and property taxes, are capitalized
as construction in progress.
Expenditures for maintenance and repairs are charged to operations as
incurred. Significant renovations or betterments that extend the economic useful
life of assets are capitalized.
Reverse Exchanges. Reverse exchanges represent loan agreements with third
parties, whereby the Operating Partnership loans substantially all funds to the
third party to acquire a real estate investment. The loan is secured by the real
estate investment and title is held by the third party. The Operating
Partnership records the asset as an investment in real estate and is entitled to
record the rental income associated with the property as the Operating
Partnership retains the risk of loss and the benefits of the asset.
Concentration of Credit Risk. Other real estate companies compete with the
Operating Partnership in its real estate markets. This results in competition
for tenants to occupy space. The existence of competing properties could have a
material impact on the Operating Partnership's ability to lease space and on the
amount of rent received. As of December 31, 2000, the Operating Partnership did
not have any single tenant that accounted for greater than 1.3% of rental
revenues.
Cash and Cash Equivalents. Cash and cash equivalents include cash held in
financial institutions and other highly liquid short-term investments with
original maturities of three months or less.
Restricted Cash and Cash Equivalents. Restricted cash and cash equivalents
include cash held in escrow in connection with property purchases, Section 1031
exchange funds, and capital improvements.
Deferred Financing Costs. Costs incurred in connection with financings are
capitalized and amortized to interest expense on the effective-interest method
over the term of the related loan. As of December 31, 2000 and 1999, deferred
financing fees were $10.7 million and $6.7 million, respectively, net of
accumulated amortization of $4.7 million and $2.2 million, respectively. Such
amounts are included in Other assets on the Consolidated Balance Sheets.
Investments in Other Companies. Certain of the Operating Partnership's
marketable equity securities are considered available-for-sale investments and
are carried at market value on the Consolidated Balance
F-8
56
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
Sheets. The difference between cost and market value is recorded as a component
of Accumulated other comprehensive income in Partners' Capital. For its
investments in private companies, the Operating Partnership periodically reviews
its investments and management determines if the value of such investments have
been permanently impaired. Such impairment losses are included in current
earnings.
Debt Premiums. Debt premiums represent the excess of the fair value of debt
over the principal value of debt assumed in connection with AMB Property
Corporation's initial public offering and subsequent acquisitions. The debt
premiums are being amortized into interest expense over the term of the related
debt instrument using the effective interest method. As of December 31, 2000 and
1999, the unamortized debt premium was $9.9 million and $10.1 million,
respectively.
Minority Interests. Minority interests in the Operating Partnership
represent the limited partnership interests in a subsidiary of the Operating
Partnership and interests held by certain third parties in 30 joint ventures
aggregating approximately 15.5 million square feet, which are consolidated for
financial reporting purposes. Such investments are consolidated because: 1) the
Operating Partnership owns a majority interest; or 2) the Operating Partnership
exercises significant control through the ability to control major operating
decisions such as approval of budgets, selection of property managers, and
changes in financing.
In 1999 and 2000, AMB Institutional Alliance REIT I, Inc. (the "Alliance
REIT") issued and sold shares of its capital stock to 15 third-party investors.
The Alliance REIT has elected to be taxed as a REIT under the Code, commencing
with its tax year ending December 31, 1999. The Alliance REIT acquired a limited
partnership interest in the Alliance Fund I, which is engaged in the
acquisition, ownership, operation, management, renovation, and expansion and
development of industrial buildings in target markets nationwide. The Operating
Partnership is the managing general partner of the Alliance Fund I and, together
with an affiliate of the Operating Partnership, owns approximately 21% of the
partnership interests in the Alliance Fund I at December 31, 2000. The Operating
Partnership consolidates the Alliance Fund I for financial reporting purposes
because it is the sole managing general partner of the Alliance Fund I and, as a
result, controls all of its major operating decisions.
F-9
57
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
The following table distinguishes the components of minority interest as of
and for the year ended December 31, 2000:
MINORITY INTEREST MINORITY INTEREST
LIABILITY SHARE OF NET INCOME
AS OF FOR THE YEAR ENDED
DECEMBER 31, 2000 DECEMBER 31, 2000
----------------- -------------------
(DOLLARS IN THOUSANDS)
Joint venture partners............................ $ 21,077 $ 3,414
Separate account co-investors..................... 49,849 3,029
Alliance Fund I................................... 169,745 5,863
Held through AMB Property II, L.P.:
Series C Preferred Units (liquidation preference
of $110,000)................................. 105,845 9,624
Series D Preferred Units (liquidation preference
of $79,767).................................. 77,687 6,180
Series E Preferred Units (liquidation preference
of $11,022).................................. 10,789 856
Series F Preferred Units (liquidation preference
of $19,872).................................. 19,534 1,228
Series G Preferred Units (liquidation preference
of $1,000)................................... 957 27
Series H Preferred Units (liquidation preference
of $42,000).................................. 40,922 1,090
-------- -------
$496,405 $31,311
======== =======
Rental Revenues. The Operating Partnership, as a lessor, retains
substantially all of the benefits and risks of ownership of the properties and
accounts for its leases as operating leases. Rental income is recognized on a
straight-line basis over the term of the leases. Reimbursements from tenants for
real estate taxes and other recoverable operating expenses are recognized as
revenue in the period the applicable expenses are incurred. Differences between
estimated and actual amounts are recognized in the subsequent year.
Investment Management and Other Income. Investment management income
consists primarily of professional fees generated from the Operating
Partnership's equity in the earnings of AMB Investment Management. Other income
consists primarily of interest income on cash and cash equivalents.
Comprehensive Income. Comprehensive income consists of net income and
unrealized gains and losses on certain investments in equity securities and is
presented in the Consolidated Statement of Partners' Capital.
Derivatives. Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities as amended by
Statement No. 138, Accounting for Certain Derivative Instruments and Certain
Hedging Activities, established accounting and reporting standards requiring
that every derivative instrument (including certain derivative instruments
embedded in other contracts) be recorded in the balance sheet as either an asset
or liability measured at its fair value. The Statement, as amended, requires
that changes in the derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met. The Operating Partnership
will adopt FASB Statement No. 133 in 2001 and believes that it will not
materially impact its financial position or results of operations as the
Operating Partnership does not utilize derivative instruments in its operations.
F-10
58
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
3. TRANSACTIONS WITH AFFILIATES
The Operating Partnership and AMB Investment Management have an agreement
that allows for the sharing of certain costs and employees. Additionally, the
Operating Partnership provides AMB Investment Management with certain
acquisition-related services. For the years ended December 31, 2000, 1999, and
1998, the Operating Partnership allocated $2.8 million, $2.7 million, and $1.8
million, respectively, for shared costs to AMB Investment Management.
The Operating Partnership and AMB Investment Management share common office
space under lease obligations. Such lease obligations are charged to the
Operating Partnership and AMB Investment Management at cost. For the years ended
December 31, 2000, 1999, and 1998, the Operating Partnership paid $1.4 million,
$1.3 million, and $1.2 million, respectively, for occupancy costs related to the
lease obligations of the affiliate.
4. REAL ESTATE ACQUISITION AND DEVELOPMENT ACTIVITY
During 2000, the Operating Partnership invested $730.0 million in operating
properties, consisting of 145 industrial buildings aggregating approximately
10.5 million square feet. Of this, $185.6 million was acquired by the Alliance
Fund I, consisting of 44 industrial buildings, aggregating approximately 2.6
million square feet. The Operating Partnership also initiated 17 new development
projects, aggregating approximately 4.5 million square feet, with a total
estimated cost of $224.0 million upon completion. In 2000, the Operating
Partnership also completed 12 development projects, aggregating approximately
3.1 million square feet, at a total aggregate cost of $144.3 million. As of
December 31, 2000, the Operating Partnership had in its development pipeline 19
industrial projects, which will total approximately 5.5 million square feet and
have an aggregate estimated investment of $305.9 million upon completion. It
also had three retail projects in its development pipeline, which will total
approximately 0.5 million square feet and have an aggregate estimated investment
of $76.3 million upon completion. As of December 31, 2000, the Operating
Partnership and its Development Alliance Partners have funded an aggregate of
$226.5 million and will need to fund an estimated additional $155.7 million in
order to complete projects currently under construction.
During 1999, the Operating Partnership invested $471.9 million in operating
properties, consisting of 154 industrial buildings, aggregating approximately
8.4 million square feet. The Operating Partnership also initiated eight new
development projects, aggregating approximately 1.7 million square feet, with a
total estimated cost of $130.9 million upon completion. In 1999, the Operating
Partnership also completed seven development projects, aggregating approximately
1.7 million square feet, at a total aggregate cost of $68.9 million. As of
December 31, 1999, the Operating Partnership had 18 projects, aggregating
approximately 4.3 million square feet, in its development pipeline, with a total
estimated cost of $306.4 million upon completion. The Operating Partnership
funded these acquisitions and development projects through proceeds from
divestitures of properties, borrowings under its unsecured credit facility, debt
and equity financings, and debt assumption.
5. PROPERTY DIVESTITURES AND PROPERTIES HELD FOR DIVESTITURE
Property Divestitures. During 2000, the Operating Partnership divested
itself of 25 industrial buildings and one retail center, aggregating
approximately 2.5 million square feet, for an aggregate price of $175.7 million,
with a resulting net gain of $7.0 million. The retail center was located in Los
Angeles, California, aggregated approximately 0.4 million square feet, and sold
for $89.0 million. The Operating Partnership carries an 8.75% mortgage note in
the principal amount of $79.0 million on the retail center sale. The mortgage
note matures in September 2001 and has a one-year extension option.
F-11
59
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
During 1999, the Operating Partnership divested itself of 15 industrial
buildings and 30 retail centers, aggregating approximately 6.6 million square
feet, for an aggregate price of $764.1 million, with a resulting net gain of
$53.8 million and extraordinary losses consisting of prepayment penalties,
partially offset by the related debt premiums, of $2.9 million.
Properties Held for Divestiture. The Operating Partnership has decided to
divest itself of 33 industrial buildings and one retail center, which are not in
its core markets or which do not meet its strategic objectives. The divestitures
of the properties are subject to negotiation of acceptable terms and other
customary conditions. In connection with the Operating Partnership's planned
divestitures, the Operating Partnership evaluated its held-for-sale assets for
impairment and reduced their carrying value by recording an additional $3.5
million in depreciation expense. As of December 31, 2000, the net carrying value
of the properties held for divestiture was $197.1 million.
The following summarizes the condensed results of operations of the
properties held for divestiture for the years ended December 31:
2000 1999 1998
------- ------- -------
(DOLLARS IN THOUSANDS)
Income................................................ $27,445 $23,752 $14,723
Property operating expenses........................... 5,625 5,288 3,387
------- ------- -------
Net operating income................................ $21,820 $18,464 $11,336
======= ======= =======
6. DEBT
As of December 31, 2000 and 1999, debt consisted of the following:
DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------
(DOLLARS IN THOUSANDS)
Secured debt, varying interest rates from 4.0% to 10.4% due
April 2001 to June 2023.................................. $ 930,418 $ 696,931
Alliance Fund I credit facility............................ -- 80,000
Unsecured senior debt securities, weighted average interest
rate of 7.3%, due December 2005 to June 2018............. 680,000 400,000
Unsecured credit facility, variable interest at LIBOR plus
75 basis points (interest rate of 7.5% at December 31,
2000), due May 2003...................................... 216,000 83,000
---------- ----------
Subtotal.............................................. 1,826,418 1,259,931
Unamortized premiums.................................. 9,858 10,106
---------- ----------
Total consolidated debt.......................... $1,836,276 $1,270,037
========== ==========
Secured debt generally requires monthly principal and interest payments.
The secured debt is secured by deeds of trust on certain properties. As of
December 31, 2000 and 1999, the total gross investment book value of those
properties secured by debt was $2.0 billion and $1.4 billion, respectively. All
of the secured debt bears interest at fixed rates, except for two loans with an
aggregate principal amount of $29.8 million and $10.4 million at December 31,
2000 and 1999, respectively, which bear interest at variable rates (weighted
average interest rate of 8.2% at December 31, 2000). The secured debt has
various financial and non-financial covenants. Management believes that the
Operating Partnership was in material compliance with these covenants at
December 31, 2000. Additionally, $240.9 million of the secured debt was
cross-collateralized at December 31, 2000. As of December 31, 2000 and 1999, the
estimated fair value of the secured debt was
F-12
60
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
$956.1 million and $684.0 million, respectively. As of December 31, 2000, the
estimated fair value of the unsecured senior debt was $689.4 million.
In addition, the Alliance Fund I had an $80.0 million unsecured credit
facility. The debt was secured by the unfunded capital commitments of the third
party investors in the Alliance REIT I, a limited partner of the Alliance Fund
I. Since there are no remaining unfunded capital commitments, the Alliance Fund
I paid off the outstanding balance and closed this credit facility during the
third quarter of 2000. See Note 2 for a discussion of the Alliance Fund I and
the Alliance REIT I.
Interest on the unsecured senior debt securities is payable semi-annually.
The 2015 notes are putable and callable in June 2005. The senior debt securities
are subject to various financial and non-financial covenants. Management
believes that the Operating Partnership was in material compliance with these
covenants at December 31, 2000.
In 2000, the Operating Partnership commenced a medium-term note program for
the issuance of up to $400.0 million in principal amount of medium-term notes,
which will be guaranteed by AMB Property Corporation. As of December 31, 2000,
the Operating Partnership had issued $280.0 million of medium-term notes under
the program. In December 2000, the Operating Partnership issued and sold $150.0
million of the notes under this program to Morgan Stanley Dean Witter and J.P.
Morgan as principals. AMB Property Corporation has guaranteed the notes, which
mature on December 15, 2005, and bear interest at 7.2% per annum. The Operating
Partnership used the net proceeds of $148.9 million for general corporate
purposes, to partially repay indebtedness, and for the acquisition and
development of properties. In October 2000, the Operating Partnership issued and
sold $75.0 million of the notes under this program to Morgan Stanley Dean Witter
and J.P. Morgan as principals. AMB Property Corporation has guaranteed the
notes, which mature on November 1, 2010, and bear interest at 8.0% per annum.
The Operating Partnership used the net proceeds of $74.5 million for general
corporate purposes, to partially repay indebtedness, and for the acquisition and
development of properties. In August and September 2000, the Operating
Partnership issued and sold $55.0 million of the notes under this program to
Morgan Stanley Dean Witter as principal. AMB Property Corporation has guaranteed
the notes, which mature on August 20, 2007, and bear interest at 7.925% per
annum. The Operating Partnership used the net proceeds of $54.8 million for
general corporate purposes, to partially repay indebtedness, and for the
acquisition and development of properties.
In May 2000, the Operating Partnership entered into a new $500.0 million
unsecured revolving credit agreement, which replaced its previous $500.0 million
credit facility, which matured in November 2000. AMB Property Corporation is the
guarantor of the Operating Partnership's obligations under the credit facility.
The new credit facility matures in May 2003, has a one-year extension option,
and is subject to a 15 basis point annual facility fee. The credit facility has
various financial and non-financial covenants. Management believes that the
Operating Partnership was in material compliance with these covenants at
December 31, 2000. The Operating Partnership has the ability to increase
available borrowings up to $700.0 million by adding additional banks to the
facility or obtaining the agreement of existing banks to increase their
commitments. Monthly debt service payments on the credit facility are interest
only. The total amount available under the credit facility fluctuates based upon
the borrowing base, as defined in the agreement governing the credit facility.
At December 31, 2000, the remaining amount available under the credit facility
was $284.0 million (excluding the additional $200.0 million of potential
additional capacity).
Capitalized interest related to construction projects for the years ended
December 31, 2000, 1999, and 1998, was $15.5 million, $10.9 million, and $7.2
million, respectively.
F-13
61
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
As of December 31, 2000, the scheduled maturities of the Operating
Partnership's total debt, excluding unamortized debt premiums, were as follows:
JOINT UNSECURED
VENTURE SENIOR UNSECURED
SECURED SECURED DEBT CREDIT
DEBT DEBT SECURITIES FACILITY TOTAL
-------- -------- ---------- --------- ----------
(DOLLARS IN THOUSANDS)
2001............................. $ 14,071 $ 35,087 $ -- $ -- $ 49,158
2002............................. 29,182 46,044 -- -- 75,226
2003............................. 72,675 7,134 -- 216,000 295,809
2004............................. 71,147 20,357 -- -- 91,504
2005............................. 64,194 30,015 250,000 -- 344,209
2006............................. 116,022 33,991 -- -- 150,013
2007............................. 32,181 19,705 55,000 -- 106,886
2008............................. 106,604 36,011 175,000 -- 317,615
2009............................. 5,176 25,969 -- -- 31,145
2010............................. 52,780 65,499 75,000 -- 193,279
2011............................. 1,311 15,645 -- -- 16,956
Thereafter....................... 3,307 26,311 125,000 -- 154,618
-------- -------- -------- -------- ----------
$568,650 $361,768 $680,000 $216,000 $1,826,418
======== ======== ======== ======== ==========
7. LEASING ACTIVITY
Future minimum rental income due under noncancelable leases with tenants in
effect at December 31, 2000, is as follows:
(DOLLARS IN THOUSANDS)
2001.............................................. $ 414,044
2002.............................................. 353,552
2003.............................................. 287,226
2004.............................................. 229,279
2005.............................................. 162,452
Thereafter........................................ 482,703
----------
$1,929,256
==========
In addition to minimum rental payments, certain tenants pay reimbursements
for their pro rata share of specified operating expenses, which amounted to
$77.9 million, $81.1 million, and $68.1 million for the years ended December 31,
2000, 1999, and 1998, respectively. These amounts are included as rental income
and operating expenses in the accompanying consolidated statements of
operations. Certain of the leases also provide for the payment of additional
rent based on a percentage of the tenant's revenues. For the years ended
December 31, 2000, 1999, and 1998, the Operating Partnership recognized
percentage rent revenues of $0.8 million, $2.0 million, and $1.9 million,
respectively. Some leases contain options to renew.
F-14
62
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
8. INCOME TAXES
As a partnership, the allocated share of income of the Operating
Partnership is included in the income tax returns of the partners. Accordingly,
no accounting for income taxes is required in the accompanying consolidated
financial statements. State and local taxes are not material.
The following reconciles net income available to common unitholders to
taxable income available to common unitholders for the years ended December 31:
2000 1999 1998
-------- -------- --------
(DOLLARS IN THOUSANDS)
Net income available to common unitholders......... $121,324 $176,392 $113,838
Add: Book depreciation and amortization.......... 96,258 67,505 57,464
Less: Tax depreciation and amortization.......... (87,338) (69,264) (51,620)
Book/tax difference on gain on divestiture of
real estate................................. 18,788 (15,471) --
Other book/tax differences, net(1)............ (11,055) (12,012) (18,064)
-------- -------- --------
Taxable income available to common unitholders..... $137,977 $147,150 $101,618
======== ======== ========
- ---------------
(1) Primarily due to rent and debt premium amortization timing differences.
9. INVESTMENT IN UNCONSOLIDATED JOINT VENTURES
The Operating Partnership has non-controlling limited partnership interests
in three separate unconsolidated equity investment joint ventures. The Operating
Partnership has a 56.1% interest in a joint venture that owns an aggregate of 36
industrial buildings totaling approximately 4.0 million square feet. The
Operating Partnership also has a 50.0% interest in two other development
alliance joint ventures, which it purchased in September 1999 and September
2000. For the years ended December 31, 2000, 1999, and 1998, the Operating
Partnership's share of net operating income was $8.3 million, $8.0 million, and
$1.8 million, respectively, and as of December 31, 2000 and 1999, the Operating
Partnership's share of the unconsolidated joint venture debt was $28.8 million
and $22.7 million, respectively, with a weighted average interest rate of 7.3%
and weighted average maturity of 4.4 years.
F-15
63
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
10. PARTNERS' CAPITAL
On September 1, 2000, AMB Property II, L.P., one of the Operating
Partnership's subsidiaries, issued and sold 840,000 8.125% Series H Cumulative
Redeemable Preferred Limited Partnership Units at a price of $50.00 per unit in
a private placement. Distributions are cumulative from the date of issuance and
payable quarterly in arrears at a rate per unit equal to $4.0625 per annum. The
Series H Preferred Units are redeemable by AMB Property II, L.P. on or after
September 1, 2005, subject to certain conditions, for cash at a redemption price
equal to $50.00 per unit, plus accumulated and unpaid distributions thereon, if
any, to the redemption date. The Series H Preferred Units are exchangeable, at
specified times and subject to certain conditions, on a one-for-one basis, for
shares of the Company's Series H Preferred Stock. AMB Property II, L.P. used the
net proceeds of $41.0 million to repay advances from the Operating Partnership
and to make a loan to the Operating Partnership. The Operating Partnership used
the funds to partially repay borrowings under its unsecured credit facility and
for general corporate purposes. The loan bears interest at 8.0% per annum and is
payable on demand.
On August 29, 2000, AMB Property II, L.P. issued and sold 20,000 7.95%
Series G Cumulative Redeemable Preferred Limited Partnership Units at a price of
$50.00 per unit in a private placement. Distributions are cumulative from the
date of issuance and payable quarterly in arrears at a rate per unit equal to
$3.975 per annum. The Series G Preferred Units are redeemable by AMB Property
II, L.P. on or after August 29, 2005, subject to certain conditions, for cash at
a redemption price equal to $50.00 per unit, plus accumulated and unpaid
distributions thereon, if any, to the redemption date. The Series G Preferred
Units are exchangeable, at specified times and subject to certain conditions, on
a one-for-one basis, for shares of the Company's Series G Preferred Stock. AMB
Property II, L.P. used the net proceeds of $1.0 million to repay advances from
the Operating Partnership. The Operating Partnership used the funds for general
corporate purposes.
On March 22, 2000, AMB Property II, L.P. issued and sold 397,439 7.95%
Series F Cumulative Redeemable Preferred Limited Partnership Units at a price of
$50.00 per unit in a private placement. Distributions are cumulative from the
date of issuance and payable quarterly in arrears at a rate per unit equal to
$3.975 per annum. The Series F Preferred Units are redeemable by AMB Property
II, L.P. on or after March 22, 2005, subject to certain conditions, for cash at
a redemption price equal to $50.00 per unit, plus accumulated and unpaid
distributions thereon, if any, to the redemption date. The Series F Preferred
Units are exchangeable, at specified times and subject to certain conditions, on
a one-for-one basis, for shares of the Company's Series F Preferred Stock. AMB
Property II, L.P. loaned the net proceeds of $19.6 million to the Operating
Partnership. The Operating Partnership used the funds to partially repay
borrowings under its unsecured credit facility and for general corporate
purposes. The loan bears interest at 7.0% per annum and is payable upon demand.
At the time of the Company's initial public offering, 4,237,750 shares of
common stock, known as performance shares, were placed in escrow by certain of
the Company's investors, which were subject to advisory agreements with the
Company's predecessor that included incentive fee provisions. On January 7,
2000, 2,771,824 shares of common stock were released from escrow to these
investors and 1,465,926 shares of common stock were returned to the Company and
cancelled. The cancelled shares of common stock represent indirect interests in
the Operating Partnership that were reallocated from the Company (thereby
decreasing the number of shares of common stock outstanding) to other
unitholders who had an ownership interest in our predecessor, including certain
of the Company's executive officers, (thereby increasing the number of limited
partnership units owned by partners other than the Company). The total number of
outstanding partnership units did not change as a result of this reallocation.
This reallocation did not change the amount of fully diluted shares of common
stock and limited partnership units outstanding.
F-16
64
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
In November 2000, the Operating Partnership issued an aggregate of 94,771
limited partnership units with an aggregate value of approximately $2.2 million
to three limited partnerships. These limited partnership units were issued in
partial consideration for the acquisition of properties. Holders of the limited
partnership units may redeem part or all of their limited partnership units for
cash or, at AMB Property Corporation's election, exchange their limited
partnership units for shares of the AMB Property Corporation's common stock on a
one-for-one basis. During 2000, 34,046 limited partnership units were redeemed
for cash and 206,423 limited partnership units were redeemed for shares of the
AMB Property Corporation's common stock.
The Company's board of directors has approved a stock repurchase program
for the repurchase of up to $100.0 million worth of its common stock. During
2000, the Company did not repurchase any shares of its common stock. The stock
repurchase program expires in December 2001.
The following table sets forth the distributions per unit for the years
ended December 31, 2000 and 1999:
SECURITY PAYING ENTITY 2000 1999
-------- ------------- ----- -----
Common Units Operating Partnership.............. $1.48 $1.40
Series A Preferred Units Operating Partnership.............. $2.13 $2.13
Series B Preferred Units Operating Partnership.............. $4.31 $4.31
Series C Preferred Units AMB Property II, L.P. ............. $4.38 $4.38
Series D Preferred Units AMB Property II, L.P. ............. $3.88 $2.48
Series E Preferred Units AMB Property II, L.P. ............. $3.88 $1.30
Series F Preferred Units AMB Property II, L.P. ............. $3.09 n/a
Series G Preferred Units AMB Property II, L.P. ............. $1.35 n/a
Series H Preferred Units AMB Property II, L.P. ............. $1.30 n/a
11. STOCK INCENTIVE PLAN AND 401(K) PLAN
Stock Incentive Plan. In November 1997, the Company established a Stock
Option and Incentive Plan (the "Stock Incentive Plan") for the purpose of
attracting and retaining eligible officers, directors, and employees. The
Company has reserved for issuance 8,950,000 shares of Common Stock under the
Stock Incentive Plan. As of December 31, 2000, the Company had granted
approximately 5,895,000 non-qualified options outstanding granted to certain
directors, officers, and employees. Each option is exchangeable for one share of
the Company's Common Stock. The options have a weighted average exercise price
of $20.83 and the exercise prices range from $18.13 to $26.06. Each option's
exercise price is equal to the Company's market price on the date of grant. The
options had an original ten-year term and generally vest pro rata in annual
installments over a three- or four-year period from the date of grant.
The Operating Partnership applies APB Opinion No. 25, "Accounting for Stock
Issued to Employees" and related interpretations in accounting for its Stock
Incentive Plan. Opinion 25 measures compensation cost using the intrinsic value
based method of accounting. Under this method, compensation cost is the excess,
if any, of the quoted market price of the stock at the date of grant over the
amount an employee must pay to acquire the stock. Accordingly, no compensation
cost has been recognized for the Company's Stock Incentive Plan as of December
31, 2000.
As permitted by SFAS No. 123, "Accounting Stock-based Compensation," the
Operating Partnership has not changed the method of accounting for stock options
but has provided the additional required disclosures. Had compensation cost for
the Operating Partnership's stock-based compensation plans been determined based
on the fair value at the grant dates for awards under those plans consistent
with the method of SFAS No. 123, the Operating Partnership's pro forma net
income available to common unitholders would
F-17
65
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
have been reduced by $6.3 million, $3.2 million, and $1.8 million and pro forma
basic and diluted earnings per unit would have been reduced to $1.28 and $1.27,
and $1.92 and $1.92, and $1.25 and $1.24, respectively, for the years ended
December 31, 2000, 1999, and 1998.
The fair value of each option grant was estimated at the date of grant
using the Black-Scholes option-pricing model with the following assumptions used
for grants in 2000, 1999, and 1998, respectively: dividend yields of 6.5%, 7.2%,
and 6.3%; expected volatility of 13.3%, 18.5%, and 23.1%; risk-free interest
rates of 6.1%, 5.4%, and 4.9%; and expected lives of 10 years for each year.
Following is a summary of the option activity for the years ended December
31:
WEIGHTED OPTIONS
SHARES UNDER AVERAGE EXERCISABLE
OPTION (000'S) EXERCISE PRICE AT YEAR END
-------------- -------------- -----------
(DOLLARS IN THOUSANDS)
Outstanding, 12/31/97................................ 3,144 $21.00 --
-----
Granted.............................................. 1,508 21.69
Forfeited............................................ (268) --
---------- ------
Outstanding, 12/31/98................................ 4,384 21.40 622
-----
Granted.............................................. 451 22.24
Exercised............................................ (25) --
Forfeited............................................ (300) --
---------- ------
Outstanding, 12/31/99................................ 4,510 21.44 1,832
-----
Granted.............................................. 1,565 20.86
Exercised............................................ (103) 21.11
Forfeited............................................ (205) 21.21
---------- ------
Outstanding, 12/31/00................................ 5,767 20.83 3,326
========== ====== -----
Remaining average contractual life................... 7.9 years
==========
Fair value of options granted during the year........ $ 1.31
==========
In 2000, 1999, and 1998, under the Stock Incentive Plan, the Company issued
162,299, 100,000, and 43,007 restricted shares, respectively, to certain
officers of the Company as part of the performance pay program and in connection
with employment with the Company. As of December 31, 2000, 1,931 shares of
restricted stock have been forfeited. The 309,087 outstanding restricted shares
are subject to repurchase rights, which generally lapse over a period from three
to five years.
401(k) Plan. In November 1997, the Operating Partnership established a
Section 401(k) Savings/ Retirement Plan (the "401(k) Plan"), which is a
continuation of the 401(k) Plan of the predecessor, to cover eligible employees
of the Operating Partnership and any designated affiliates. During 2000 and
1999, the 401(k) Plan permitted eligible employees of the Operating Partnership
to defer up to 20% and 10%, respectively, of their annual compensation, subject
to certain limitations imposed by the Code. The employees' elective deferrals
are immediately vested and non-forfeitable upon contribution to the 401(k) Plan.
During 2000 and 1999, the Operating Partnership matched the employee
contributions to the 401(k) Plan in an amount equal to 50% of the first 5.5% and
3.5%, respectively, of annual compensation deferred by each employee. The
Operating Partnership may also make discretionary contributions to the 401(k)
Plan. In 2000 and 1999, the Operating Partnership accrued $0.3 million and $0.2
million, respectively, for its 401(k) match. Such amounts were included in Other
liabilities on the Consolidated Balance Sheets.
Deferred Compensation Plan. Effective September 1, 1999, the Operating
Partnership established a non-qualified deferred compensation plan for officers
of the Company and certain of its affiliates. The plan
F-18
66
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
enables participants to defer income up to 25% of annual base pay and up to 100%
of annual bonuses on a pre-tax basis. The Operating Partnership may make
discretionary matching contributions to participant accounts at any time. The
Operating Partnership made no such discretionary matching contributions in 2000
or 1999. The participant's elective deferrals and any matching contributions are
immediately 100% vested. As of December 31, 2000 and 1999, the total amount of
compensation deferred was $1.0 million and $0.2 million, respectively.
12. COMMITMENTS AND CONTINGENCIES
Commitments
Lease Commitments. The Operating Partnership has entered into operating
ground leases on certain land parcels and a building with periods up to 50
years. Future minimum rental payments required under non-cancelable operating
leases in effect at December 31, 2000, were as follows:
(DOLLARS IN
THOUSANDS)
2001...................................................... $ 4,948
2002...................................................... 5,012
2003...................................................... 5,052
2004...................................................... 5,217
2005...................................................... 4,828
Thereafter................................................ 133,970
--------
$159,027
========
These operating lease payments are being amortized ratably over the terms
of the related leases.
Contingencies
Litigation. In the normal course of business, from time to time, the
Operating Partnership is involved in legal actions relating to the ownership and
operations of its properties. In management's opinion, the liabilities, if any,
that may ultimately result from such legal actions are not expected to 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.
General Uninsured Losses. The Operating Partnership carries property and
rental loss, liability, flood, and environmental insurance. The Operating
Partnership believes that the policy terms and conditions, limits, and
deductibles are adequate and appropriate under the circumstances, given the
relative risk of loss, the cost of such coverage, and 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 that may be either uninsurable or
not economically insurable. Should an uninsured loss occur, the Operating
Partnership could lose its investment in, and anticipated profits and cash flows
from, a property.
Minority Interest Put Option. Pursuant to the Operating Partnership's
partnership agreement with one of its separate account co-investors, commencing
March 31, 1999, and each year thereafter, the Operating
F-19
67
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
Partnership is required to provide this co-investor a notice that sets forth the
valuation of the partnership as of the date of valuation. The co-investor then
has the right to require the Operating Partnership to purchase all of its
partnership interest based upon the valuation in the form of cash, shares of AMB
Property Corporation, or partnership units in the Operating Partnership. The put
option was not exercised by the co-investor in 1999 nor 2000 and the Operating
Partnership does not anticipate that the put option will be exercised in the
coming year.
13. QUARTERLY FINANCIAL DATA
Selected quarterly financial data for 2000 and 1999 is as follows:
QUARTER (UNAUDITED)
------------------------------------------------------
DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31 YEAR
----------- ------------ ----------- ----------- -----------
2000 (DOLLARS IN THOUSANDS)
Revenues........................ $ 132,534 $ 121,371 $ 113,479 $ 110,323 $ 477,707
Income from operations before
minority interest............. 37,344 42,116 39,774 40,465 159,699
Minority interests' share of net
income........................ (9,172) (9,208) (6,866) (6,065) (31,311)
----------- ----------- ----------- ----------- -----------
Net income before gain from
divestiture of real
estate..................... 28,172 32,908 32,908 34,400 128,388
Gain/(loss) from divestiture of
real estate................... 824 5,815 416 (11) 7,044
----------- ----------- ----------- ----------- -----------
Net income.................... 28,996 38,723 32,324 34,389 135,432
Series A preferred unit
distributions................. (2,125) (2,125) (2,125) (2,125) (8,500)
Series B preferred unit
distributions................. (1,402) (1,402) (1,402) (1,402) (5,608)
----------- ----------- ----------- ----------- -----------
Net income available to common
unitholders................ $ 25,469 $ 35,196 $ 29,797 $ 30,862 $ 121,324
=========== =========== =========== =========== ===========
NET INCOME PER COMMON UNIT(1)
Basic......................... $ 0.28 $ 0.39 $ 0.33 $ 0.34 $ 1.35
=========== =========== =========== =========== ===========
Diluted....................... $ 0.28 $ 0.39 $ 0.33 $ 0.34 $ 1.35
=========== =========== =========== =========== ===========
WEIGHTED AVERAGE COMMON UNIT
OUTSTANDING
Basic......................... 89,619,042 89,898,511 89,827,498 89,693,900 89,566,375
=========== =========== =========== =========== ===========
Diluted....................... 90,332,931 90,508,007 90,098,892 89,707,941 90,024,511
=========== =========== =========== =========== ===========
F-20
68
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
QUARTER (UNAUDITED)
------------------------------------------------------
DECEMBER 31 SEPTEMBER 30 JUNE 30 MARCH 31 YEAR
1999 ----------- ------------ ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
Revenues........................ $ 111,450 $ 111,784 $ 115,377 $ 109,572 $ 448,183
Income from operations before
minority interest............. 40,775 42,055 41,446 34,575 158,851
Minority interests' share of net
income........................ (5,612) (5,621) (4,560) (3,821) (19,614)
----------- ----------- ----------- ----------- -----------
Net income before gain from
divestiture of real
estate..................... 35,163 36,434 36,886 30,754 139,237
Gain from divestiture of real
estate........................ 20,696 21,532 11,525 -- 53,753
Extraordinary items............. 366 (1,347) (1,509) -- (2,490)
----------- ----------- ----------- ----------- -----------
Net income.................... 56,225 56,619 46,902 30,754 190,500
Series A preferred unit
distributions................. (2,125) (2,125) (2,125) (2,125) (8,500)
Series B preferred unit
distributions................. (1,402) (1,402) (1,402) (1,402) (5,608)
----------- ----------- ----------- ----------- -----------
Net income available to common
unitholders................ $ 52,698 $ 53,092 $ 43,375 $ 27,227 $ 176,392
=========== =========== =========== =========== ===========
BASIC INCOME PER COMMON UNIT(1)
Before extraordinary items.... $ 0.58 $ 0.60 $ 0.50 $ 0.30 $ 1.97
Extraordinary items........... -- (0.02) (0.02) -- (0.03)
----------- ----------- ----------- ----------- -----------
Net income available to
common unitholders....... $ 0.58 $ 0.58 $ 0.48 $ 0.30 $ 1.94
=========== =========== =========== =========== ===========
DILUTED INCOME PER COMMON
UNIT(1)
Before extraordinary items.... $ 0.58 $ 0.60 $ 0.50 $ 0.30 $ 1.97
Extraordinary items........... -- (0.02) (0.02) -- (0.03)
----------- ----------- ----------- ----------- -----------
Net income available to
common unitholders....... $ 0.58 $ 0.58 $ 0.48 $ 0.30 $ 1.94
=========== =========== =========== =========== ===========
WEIGHTED AVERAGE UNITS
OUTSTANDING
Basic......................... 90,779,163 91,078,726 90,861,822 90,499,529 90,792,310
=========== =========== =========== =========== ===========
Diluted....................... 90,779,163 91,179,441 91,044,028 90,469,105 90,867,934
=========== =========== =========== =========== ===========
- ---------------
(1) The sum of quarterly financial data may vary from the annual data due to
rounding.
F-21
69
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
14. SEGMENT INFORMATION
The Operating Partnership has two reportable property segments: industrial
and retail. The industrial properties consist primarily of warehouse
distribution facilities suitable for single or multiple tenants and are
typically comprised of multiple buildings, which are leased to tenants engaged
in various types of businesses. The retail properties are generally leased to
one or more anchor tenants, such as grocery and drug stores, and various retail
businesses. The Operating Partnership evaluates performance based upon property
net operating income of the combined properties in each segment. The accounting
policies of the segments are the same as those described in the summary of
significant accounting policies. The Operating Partnership manages these
properties separately because each segment requires different operating,
pricing, and leasing strategies. Summary information for the reportable segments
is as follows:
INDUSTRIAL RETAIL TOTAL
PROPERTIES PROPERTIES PROPERTIES
---------- ---------- ----------
(DOLLARS IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31:
Rental revenues:(1)
2000.......................................... $ 436,369 $ 27,795 $ 464,164
1999.......................................... 352,861 86,797 439,658
1998.......................................... 248,134 106,524 354,658
Property net operating income:(1)(2)
2000.......................................... $ 336,933 $ 19,501 $ 356,434
1999.......................................... 269,339 62,396 331,735
1998.......................................... 187,218 79,025 266,243
Gross additions to properties:(3)
2000.......................................... $ 924,756 $ 30,760 $ 955,516
1999.......................................... 820,656 29,173 849,829
1998.......................................... 916,503 9,558 926,061
AT DECEMBER 31:
Investment in properties:(4)
2000.......................................... $3,876,202 $150,395 $4,026,597
1999.......................................... 3,177,283 72,169 3,249,452
1998.......................................... 2,574,940 794,120 3,369,060
- ---------------
(1) Includes straight-line rents of $10.2 million, $10.8 million, and $10.9
million for the years ended December 31, 2000, 1999, and 1998, respectively.
(2) Property net operating income (NOI) is defined as rental revenue, including
reimbursements and straight-line rents, less property level operating
expenses and excluding depreciation, amortization and interest expense.
(3) Represents costs incurred during the year for land, buildings, building
improvements, tenant improvements, leasing costs, and other related real
estate costs. Amounts are before divestitures of $162.5 million and $814.8
million for the years ended December 31, 2000 and 1999, respectively. There
were no property divestitures in 1998.
(4) Excludes net properties held for divestiture of $197.1 million, $181.2
million, and $115.1 million as of December 31, 2000, 1999, and 1998,
respectively. The $197.1 million net properties held for divestiture at
December 31, 2000, included $158.7 million and $38.4 million of industrial
and retail properties, respectively. At December 31, 1999, the Operating
Partnership held three retail properties for divestiture that it didn't sell
in 2000; the Operating Partnership held only one of these retail properties
for divestiture at December 31, 2000, and classified the remaining two as
investments in real estate.
F-22
70
AMB PROPERTY, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 2000 AND 1999
The Operating Partnership uses property net operating income as an
operating performance measure. The following is a reconciliation between total
reportable segment revenue and property net operating income to consolidated
revenues and net income:
2000 1999 1998
-------- -------- --------
REVENUES
Total rental revenues for reportable segments.............. $464,164 $439,658 $354,658
Investment management and other income..................... 13,543 8,525 4,229
-------- -------- --------
Total consolidated revenues...................... $477,707 $448,183 $358,887
======== ======== ========
NET INCOME
Property net operating income for reportable segments...... $356,434 $331,735 $266,243
Investment management and other income..................... 13,543 8,525 4,229
Less:
Interest expense......................................... 90,270 88,681 69,670
Depreciation and amortization............................ 96,258 67,505 57,464
General and administrative............................... 23,750 25,223 19,588
Minority interests....................................... 31,311 19,614 5,494
-------- -------- --------
Net income before gain from divestiture of real
estate........................................... 128,388 139,237 118,256
Gain from divestiture of real estate....................... 7,044 53,753 --
Extraordinary items........................................ -- (2,490) --
-------- -------- --------
Net income.......................................... $135,432 $190,500 $118,256
======== ======== ========
15. NEW ACCOUNTING PRONOUNCEMENT
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial
Statements." SAB 101 provides guidance on applying generally accepted accounting
principles to revenue recognition issues in financial statements. The Operating
Partnership has adopted SAB 101 as required and believes that SAB 101 does not
have a material impact on these consolidated financial statements.
F-23
71
AMB PROPERTY, L.P.
SCHEDULE III
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 2000
(IN THOUSANDS, EXCEPT NUMBER OF BUILDINGS/CENTERS)
INITIAL COST COSTS
----------------------- CAPITALIZED
NO. OF ENCUMBRANCES BUILDING & SUBSEQUENT TO
PROPERTY BLDGS./ CTRS. LOCATION TYPE (1) LAND IMPROVEMENTS ACQUISITION
-------- ------------- -------- ---- ------------ -------- ------------ -------------
Acer Distribution Center............. 1 CA IND $ -- $ 3,146 $ 9,479 $ 912
Activity Distribution Center......... 4 CA IND 5,040 3,736 11,248 469
Addison Business Center.............. 1 IL IND -- 1,060 3,278 --
Addison Technology Center............ 1 TX IND -- 899 2,696 221
Alsip Industrial..................... 1 IL IND -- 1,200 3,744 232
Alvarado Business Center............. 5 CA IND -- 7,906 23,757 2,030
AMB Meadowlands Park................. 9 NJ IND -- 5,838 17,923 --
AMB O'Hare Rosemont.................. 14 IL IND -- 2,717 8,995 775
Amwiler-Gwinnett Industrial
Portfolio........................... 9 GA IND 13,216 6,641 19,964 1,944
Anaheim Industrial................... 1 CA IND -- 1,457 4,341 330
Ardenwood Corporate Park............. 4 CA IND 9,634 7,321 22,002 477
Artesia Industrial Portfolio......... 27 CA IND 53,309 23,860 71,620 4,830
Atlanta South Business Park.......... 9 GA IND -- 8,047 24,180 945
Atlantic Business Center (Formerly
Peachtree North East)............... 3 GA IND -- 2,197 6,592 1,332
Atlantic Distribution Center......... 1 GA IND 4,000 1,519 4,679 --
Beacon Centre........................ 23 FL IND 72,248 31,704 96,681 --
Beacon Centre -- Alliance Fund I..... 4 FL IND 17,861 7,229 22,238 --
Beacon Industrial Park............... 8 FL IND 17,275 10,466 31,437 5,264
Belden Avenue........................ 3 IL IND -- 5,019 15,186 289
Beltway Distribution................. 1 VA IND -- 4,800 15,159 1,602
Bennington Corporate Center.......... 2 MD IND -- 2,671 8,181 --
Bensenville Industrial Park.......... 13 IL IND 39,520 20,799 62,438 4,577
Blue Lagoon Business Park............ 2 FL IND 11,237 4,945 14,875 317
Boston Industrial Portfolio.......... 20 MA IND 20,090 20,351 59,170 11,731
Braemar Business Center.............. 2 MA IND -- 1,422 4,613 519
Bridgeview Industrial (Formerly Lake
Michigan Industrial)................ 1 IL IND -- 1,332 3,996 11
Burnsville Business Center........... 1 MN IND -- 932 2,796 614
BWI Air Cargo Centre................. 1 MD IND 3,159 -- 6,367 --
Cabot Business Park.................. 17 MA IND -- 17,231 51,726 23,792
Cabot Business Park Land(7).......... 2 MA IND -- 2,024 17,131 --
GROSS AMOUNT CARRIED AT 12/31/00
------------------------------------- YEAR OF
BUILDING & TOTAL ACCUMULATED CONSTRUCTION/ DEPRECIABLE
PROPERTY LAND IMPROVEMENTS COSTS(2)(3) DEPRECIATION ACQUISITION LIFE (YEARS)
-------- -------- ------------ ----------- ------------ ------------- ------------
Acer Distribution Center............. $ 3,146 $ 10,391 $ 13,537 $ 641 1997 5 - 40
Activity Distribution Center......... 3,736 11,717 15,453 732 1997 5 - 40
Addison Business Center.............. 1,060 3,228 4,287 203 2000 5 - 40
Addison Technology Center............ 899 2,917 3,816 181 1998 5 - 40
Alsip Industrial..................... 1,200 3,976 5,176 245 1998 5 - 40
Alvarado Business Center............. 7,906 25,787 33,693 1,595 1997 5 - 40
AMB Meadowlands Park................. 5,838 18,002 23,840 1,129 2000 5 - 40
AMB O'Hare Rosemont.................. 2,717 9,770 12,487 591 1999 5 - 40
Amwiler-Gwinnett Industrial
Portfolio........................... 6,641 21,907 28,549 1,351 1997 5 - 40
Anaheim Industrial................... 1,457 4,671 6,128 290 1997 5 - 40
Ardenwood Corporate Park............. 7,321 22,479 29,800 1,411 1997 5 - 40
Artesia Industrial Portfolio......... 23,860 76,450 100,310 4,749 1997 5 - 40
Atlanta South Business Park.......... 8,047 25,125 33,172 1,570 1997 5 - 40
Atlantic Business Center (Formerly
Peachtree North East)............... 2,197 7,924 10,121 479 1998 5 - 40
Atlantic Distribution Center......... 1,519 4,683 6,202 294 2000 5 - 40
Beacon Centre........................ 31,704 101,174 132,878 6,290 2000 5 - 40
Beacon Centre -- Alliance Fund I..... 7,229 22,238 29,467 1,395 2000 5 - 40
Beacon Industrial Park............... 10,466 36,701 47,167 2,233 1997 5 - 40
Belden Avenue........................ 5,019 15,475 20,494 970 1997 5 - 40
Beltway Distribution................. 4,800 16,761 21,561 1,021 1999 5 - 40
Bennington Corporate Center.......... 2,671 8,181 10,853 514 2000 5 - 40
Bensenville Industrial Park.......... 20,799 67,015 87,814 4,157 1997 5 - 40
Blue Lagoon Business Park............ 4,945 15,192 20,137 953 1997 5 - 40
Boston Industrial Portfolio.......... 22,764 68,488 91,252 4,320 1998 5 - 40
Braemar Business Center.............. 1,422 5,132 6,554 310 1998 5 - 40
Bridgeview Industrial (Formerly Lake
Michigan Industrial)................ 1,332 4,007 5,339 253 1997 5 - 40
Burnsville Business Center........... 932 3,410 4,343 206 1998 5 - 40
BWI Air Cargo Centre................. -- 6,367 6,367 301 2000 5 - 40
Cabot Business Park.................. 22,240 70,510 92,750 4,391 1998 5 - 40
Cabot Business Park Land(7).......... 2,024 17,131 19,154 907 2000 5 - 40
S-1
72
AMB PROPERTY, L.P.
SCHEDULE III
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
INITIAL COST COSTS
----------------------- CAPITALIZED
NO. OF ENCUMBRANCES BUILDING & SUBSEQUENT TO
PROPERTY BLDGS./ CTRS. LOCATION TYPE (1) LAND IMPROVEMENTS ACQUISITION
-------- ------------- -------- ---- ------------ -------- ------------ -------------
Carson Industrial.................... 12 CA IND $ -- $ 4,231 $ 10,418 $ 2,833
Cascade Business Center.............. 4 OR IND -- 2,825 7,860 1,863
Chancellor........................... 1 FL IND 2,776 1,587 4,802 87
Chancellor Square.................... 3 FL IND 15,903 7,575 22,721 2,209
Chartwell Distribution Center........ 1 CA IND -- 2,711 8,191 --
Chemway Industrial Portfolio......... 5 NC IND -- 2,875 8,625 641
Chicago Industrial Portfolio......... 2 IL IND 3,079 1,574 4,761 350
Columbia Business Center............. 9 MD IND 4,408 3,856 11,736 811
Concord Industrial Portfolio......... 10 CA IND 10,050 3,719 11,647 1,822
Corporate Park/Hickory Hill.......... 7 TN IND 16,325 6,789 20,366 542
Corporate Square Industrial.......... 6 MN IND -- 4,024 12,113 729
Corridor Industrial.................. 1 MD IND 2,461 996 3,019 108
Crysen Industrial.................... 1 DC IND 3,223 1,425 4,275 436
D/FW Int'l Air Cargo -- Alliance Fund
I................................... 1 TX IND -- -- 19,683 466
Dallas Industrial (Formerly Texas
Industrial Portfolio)............... 18 TX IND -- 7,798 23,433 --
Dayton Air Cargo Centre.............. 5 OH IND 6,845 -- 8,364 --
Del Amo Industrial Center............ 1 CA IND -- 2,529 7,651 --
DFW Air Cargo Centre................. 3 TX IND 6,317 -- 20,632 --
DFW Airfreight Portfolio............. 6 TX IND -- 950 8,492 --
Diablo Industrial Park............... 14 CA IND 9,900 3,226 10,045 1,908
Dock's Corner........................ 1 NJ IND -- 2,050 6,190 49,692
Dock's Corner II..................... 1 NJ IND -- 2,272 6,917 349
Doolittle Distribution Center........ 1 CA IND -- 2,644 8,014 --
Dowe Industrial Center............... 2 CA IND -- 2,665 8,034 987
Dublin Industrial Portfolio.......... 1 CA IND -- 2,980 9,042 --
East Valley Warehouse................ 1 WA IND -- 6,813 20,511 1,234
Edenvale Business Center............. 1 MN IND 1,419 919 2,411 647
Elk Grove Village Industrial......... 11 IL IND -- 7,713 23,179 1,337
Elmwood Business Park................ 5 LA IND -- 4,163 12,488 696
Executive Drive...................... 1 IL IND -- 1,399 4,236 421
Fairway Drive Industrial............. 4 CA IND -- 3,219 9,677 5,643
Garland Industrial................... 20 TX IND 19,600 8,161 24,484 2,659
Gateway 58........................... 3 MD IND -- 3,256 10,592 --
GROSS AMOUNT CARRIED AT 12/31/00
------------------------------------- YEAR OF
BUILDING & TOTAL ACCUMULATED CONSTRUCTION/ DEPRECIABLE
PROPERTY LAND IMPROVEMENTS COSTS(2)(3) DEPRECIATION ACQUISITION LIFE (YEARS)
-------- -------- ------------ ----------- ------------ ------------- ------------
Carson Industrial.................... $ 4,231 $ 13,252 $ 17,483 $ 828 1999 5 - 40
Cascade Business Center.............. 2,825 9,724 12,549 594 1998 5 - 40
Chancellor........................... 1,587 4,890 6,477 307 1997 5 - 40
Chancellor Square.................... 7,575 24,929 32,504 1,539 1998 5 - 40
Chartwell Distribution Center........ 2,711 8,206 10,918 517 2000 5 - 40
Chemway Industrial Portfolio......... 2,875 9,266 12,141 575 1998 5 - 40
Chicago Industrial Portfolio......... 1,574 5,110 6,684 316 1997 5 - 40
Columbia Business Center............. 3,856 12,547 16,403 776 1999 5 - 40
Concord Industrial Portfolio......... 3,872 13,316 17,188 814 1999 5 - 40
Corporate Park/Hickory Hill.......... 6,789 20,908 27,697 1,311 1998 5 - 40
Corporate Square Industrial.......... 4,024 12,842 16,867 798 1997 5 - 40
Corridor Industrial.................. 996 3,127 4,123 195 1999 5 - 40
Crysen Industrial.................... 1,425 4,711 6,136 290 1998 5 - 40
D/FW Int'l Air Cargo -- Alliance Fund
I................................... -- 20,149 20,149 954 1999 5 - 40
Dallas Industrial (Formerly Texas
Industrial Portfolio)............... 7,798 26,385 34,183 1,618 1997 5 - 40
Dayton Air Cargo Centre.............. -- 8,364 8,364 396 2000 5 - 40
Del Amo Industrial Center............ 2,529 7,660 10,189 482 2000 5 - 40
DFW Air Cargo Centre................. -- 20,632 20,632 977 2000 5 - 40
DFW Airfreight Portfolio............. 950 8,750 9,700 459 2000 5 - 40
Diablo Industrial Park............... 3,653 11,526 15,179 719 1999 5 - 40
Dock's Corner........................ 5,125 52,807 57,932 2,742 1997 5 - 40
Dock's Corner II..................... 2,272 7,267 9,539 452 1997 5 - 40
Doolittle Distribution Center........ 2,644 8,016 10,660 505 2000 5 - 40
Dowe Industrial Center............... 2,665 9,021 11,685 553 1997 5 - 40
Dublin Industrial Portfolio.......... 2,980 9,042 12,022 569 2000 5 - 40
East Valley Warehouse................ 6,813 21,745 28,558 1,352 1999 5 - 40
Edenvale Business Center............. 919 3,058 3,977 188 1998 5 - 40
Elk Grove Village Industrial......... 7,713 24,516 32,229 1,526 1997 5 - 40
Elmwood Business Park................ 4,163 13,183 17,346 821 1998 5 - 40
Executive Drive...................... 1,399 4,657 6,055 287 1997 5 - 40
Fairway Drive Industrial............. 3,219 15,321 18,539 878 1997 5 - 40
Garland Industrial................... 8,161 27,143 35,304 1,671 1998 5 - 40
Gateway 58........................... 3,256 9,947 13,203 625 2000 5 - 40
S-2
73
AMB PROPERTY, L.P.
SCHEDULE III
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
INITIAL COST COSTS
----------------------- CAPITALIZED
NO. OF ENCUMBRANCES BUILDING & SUBSEQUENT TO
PROPERTY BLDGS./ CTRS. LOCATION TYPE (1) LAND IMPROVEMENTS ACQUISITION
-------- ------------- -------- ---- ------------ -------- ------------ -------------
Gateway Commerce Center.............. 5 MD IND $ -- $ 4,083 $ 12,336 $ 800
Gateway Corporate Center............. 9 WA IND 27,000 9,981 32,201 (19)
Gateway North........................ 6 WA IND 14,000 5,932 18,941 (396)
Greater Dallas Industrial
Portfolio........................... 9 TX IND -- 9,995 31,451 7,704
Greater Houston Industrial
Portfolio........................... 14 TX IND -- 6,197 18,592 2,437
Greenwood Industrial................. 3 MD IND -- 4,729 14,188 1,134
Hamilton Parkway (Formerly Lake
Michigan Industrial)................ 1 IL IND -- 1,554 4,703 --
Harris Business Center............... 10 CA IND -- 13,396 40,408 --
Harris Business Center -- Alliance
Fund I.............................. 10 CA IND 28,000 11,235 34,326 --
Harvest Business Park................ 3 WA IND -- 2,371 7,153 678
Hawthorne LAX Cargo Center........... 1 CA IND -- 2,775 8,377 --
Hayward Industrial -- Hathaway....... 2 CA IND -- 4,473 13,546 --
Hayward Industrial -- Wiegman........ 1 CA IND -- 2,773 8,393 --
Hempstead Highway Distribution
Center.............................. 2 TX IND -- 1,255 9,087 --
Hintz Building....................... 1 IL IND -- 420 1,259 246
Houston Industrial (Formerly Texas
Industrial Portfolio)............... 5 TX IND -- 3,009 9,066 1,087
Houston Service Center............... 3 TX IND -- 3,800 11,401 1,962
International Multifoods............. 1 CA IND -- 1,613 4,879 126
Itasca Industrial Portfolio.......... 6 IL IND -- 6,416 19,289 1,939
Jacksonville Air Cargo Centre........ 1 FL IND 3,175 -- 3,255 --
Jamesburg............................ 3 NJ IND 23,376 11,700 35,101 870
JFK Air Cargo........................ 20 NY IND -- 15,434 45,660 --
JFK Air Cargo -- Alliance Fund I..... 16 NY IND 19,679 10,085 29,748 --
JFK Airport Park..................... 1 NY IND -- 2,350 7,251 --
Junction Industrial Park............. 4 CA IND -- 7,875 23,975 920
Kent Centre Corporate Park........... 4 WA IND -- 3,042 9,165 681
Kingsport Industrial Park............ 7 WA IND 16,813 7,919 23,798 1,019
L.A. County Industrial Portfolio..... 7 CA IND -- 9,671 29,082 768
Laurelwood Drive..................... 2 CA IND -- 2,750 8,538 115
LAX Air Cargo Centre................. 3 CA IND 8,042 -- 13,445 --
Lincoln Industrial Center............ 1 TX IND -- 671 2,052 192
Linden Industrial.................... 1 NJ IND -- 900 2,753 22
GROSS AMOUNT CARRIED AT 12/31/00
------------------------------------- YEAR OF
BUILDING & TOTAL ACCUMULATED CONSTRUCTION/ DEPRECIABLE
PROPERTY LAND IMPROVEMENTS COSTS(2)(3) DEPRECIATION ACQUISITION LIFE (YEARS)
-------- -------- ------------ ----------- ------------ ------------- ------------
Gateway Commerce Center.............. $ 4,083 $ 13,136 $ 17,219 $ 815 1999 5 - 40
Gateway Corporate Center............. 9,981 32,182 42,164 1,996 1999 5 - 40
Gateway North........................ 5,932 18,545 24,476 1,159 1999 5 - 40
Greater Dallas Industrial
Portfolio........................... 9,995 39,155 49,150 2,327 1997 5 - 40
Greater Houston Industrial
Portfolio........................... 6,197 21,029 27,226 1,289 1998 5 - 40
Greenwood Industrial................. 4,729 15,321 20,051 949 1998 5 - 40
Hamilton Parkway (Formerly Lake
Michigan Industrial)................ 1,554 4,807 6,361 301 1997 5 - 40
Harris Business Center............... 13,396 40,408 53,804 2,547 2000 5 - 40
Harris Business Center -- Alliance
Fund I.............................. 11,235 34,326 45,561 2,157 2000 5 - 40
Harvest Business Park................ 2,371 7,831 10,202 483 1997 5 - 40
Hawthorne LAX Cargo Center........... 2,775 8,377 11,152 528 2000 5 - 40
Hayward Industrial -- Hathaway....... 4,473 13,546 18,018 853 2000 5 - 40
Hayward Industrial -- Wiegman........ 2,773 8,393 11,165 529 2000 5 - 40
Hempstead Highway Distribution
Center.............................. 1,255 9,692 10,947 518 2000 5 - 40
Hintz Building....................... 420 1,505 1,924 91 1998 5 - 40
Houston Industrial (Formerly Texas
Industrial Portfolio)............... 3,009 10,153 13,162 623 1997 5 - 40
Houston Service Center............... 3,800 13,363 17,163 812 1998 5 - 40
International Multifoods............. 1,613 5,005 6,618 313 1997 5 - 40
Itasca Industrial Portfolio.......... 6,416 21,228 27,644 1,309 1997 5 - 40
Jacksonville Air Cargo Centre........ -- 3,255 3,255 154 2000 5 - 40
Jamesburg............................ 11,700 35,971 47,672 2,257 1998 5 - 40
JFK Air Cargo........................ 15,434 46,337 61,771 2,924 2000 5 - 40
JFK Air Cargo -- Alliance Fund I..... 10,085 30,363 40,448 1,915 2000 5 - 40
JFK Airport Park..................... 2,350 7,313 9,662 457 2000 5 - 40
Junction Industrial Park............. 7,875 24,895 32,770 1,551 1999 5 - 40
Kent Centre Corporate Park........... 3,042 9,846 12,888 610 1997 5 - 40
Kingsport Industrial Park............ 7,919 24,817 32,737 1,550 1997 5 - 40
L.A. County Industrial Portfolio..... 9,671 29,850 39,521 1,871 1997 5 - 40
Laurelwood Drive..................... 2,750 8,653 11,403 540 1997 5 - 40
LAX Air Cargo Centre................. -- 13,445 13,445 636 2000 5 - 40
Lincoln Industrial Center............ 671 2,244 2,914 138 1997 5 - 40
Linden Industrial.................... 900 2,775 3,675 174 1999 5 - 40
S-3
74
AMB PROPERTY, L.P.
SCHEDULE III
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
INITIAL COST COSTS
----------------------- CAPITALIZED
NO. OF ENCUMBRANCES BUILDING & SUBSEQUENT TO
PROPERTY BLDGS./ CTRS. LOCATION TYPE (1) LAND IMPROVEMENTS ACQUISITION
-------- ------------- -------- ---- ------------ -------- ------------ -------------
Linder Skokie........................ 1 IL IND $ -- $ 2,938 $ 8,854 $ 1,285
Locke Drive.......................... 1 MA IND -- 1,074 3,227 69
Lonestar............................. 7 TX IND 16,956 7,129 21,428 583
Los Nietos........................... 4 CA IND -- 2,518 7,624 149
MCI I Air Cargo Centre............... 1 MO IND 5,460 -- 7,258 --
MCI II Air Cargo Centre.............. 1 MO IND 9,695 -- 9,726 --
Meadow Lane 495...................... 1 NJ IND -- 838 2,594 47
Meadowlands Cross Dock............... 1 NJ IND -- 1,110 3,485 --
Meadowridge.......................... 3 MD IND -- 3,716 11,147 115
Melrose Park......................... 1 IL IND -- 2,936 9,190 478
Mendota Heights...................... 1 MN IND 668 1,367 4,565 1,940
Metric Center........................ 5 TX IND -- 10,968 32,944 609
Miami Airport Business Center........ 6 FL IND -- 6,400 19,634 385
Milmont Page Business Center......... 3 CA IND -- 3,201 9,642 397
Minneapolis Distribution Portfolio... 4 MN IND -- 6,227 18,692 1,206
Minneapolis Industrial Portfolio
IV.................................. 4 MN IND 7,790 4,938 14,854 1,571
Minneapolis Industrial V............. 7 MN IND 6,017 4,426 13,317 1,372
Minnetonka........................... 10 MN IND 12,006 6,794 20,380 2,321
Moffett Business Center (MBC
Industrial)......................... 4 CA IND 12,138 5,892 17,716 2,974
Moffett Park R&D Portfolio........... 14 CA IND -- 14,807 44,462 6,313
Murray Hill Parkway.................. 2 NJ IND -- 1,670 2,568 2,859
NDP -- Chicago (Formerly Glen Ellyn
Rd. & Mitel Drive).................. 3 IL IND -- 1,496 4,487 602
NDP -- Los Angeles................... 6 CA IND 10,170 5,948 17,844 1,116
NDP -- Seattle....................... 4 WA IND -- 3,888 11,663 584
Newark Airport....................... 2 NJ IND 3,832 1,755 5,400 --
Norcross/Brookhollow Portfolio....... 4 GA IND -- 3,721 11,180 500
Normandie Industrial................. 1 CA IND -- 2,398 7,491 --
Northpointe Commerce................. 2 CA IND -- 1,773 5,358 266
Northwest Business Center (Formerly
Marietta Industrial)................ 3 GA IND -- 1,830 5,489 717
Northwest Crossing Distribution
Center.............................. 2 TX IND -- 745 4,792 --
Northwest Distribution Center........ 3 WA IND -- 3,533 10,751 744
Oakland Ridge Industrial Center...... 12 MD IND 7,222 5,571 16,933 2,961
GROSS AMOUNT CARRIED AT 12/31/00
------------------------------------- YEAR OF
BUILDING & TOTAL ACCUMULATED CONSTRUCTION/ DEPRECIABLE
PROPERTY LAND IMPROVEMENTS COSTS(2)(3) DEPRECIATION ACQUISITION LIFE (YEARS)
-------- -------- ------------ ----------- ------------ ------------- ------------
Linder Skokie........................ $ 2,938 $ 10,139 $ 13,077 $ 619 1997 5 - 40
Locke Drive.......................... 1,074 3,295 4,369 207 1998 5 - 40
Lonestar............................. 7,129 22,011 29,140 1,379 1997 5 - 40
Los Nietos........................... 2,518 7,772 10,290 487 1999 5 - 40
MCI I Air Cargo Centre............... -- 7,258 7,258 344 2000 5 - 40
MCI II Air Cargo Centre.............. -- 9,726 9,726 460 2000 5 - 40
Meadow Lane 495...................... 838 2,641 3,479 165 1999 5 - 40
Meadowlands Cross Dock............... 1,110 4,160 5,270 249 2000 5 - 40
Meadowridge.......................... 3,716 11,262 14,978 709 1998 5 - 40
Melrose Park......................... 2,936 9,668 12,604 597 1997 5 - 40
Mendota Heights...................... 1,367 6,505 7,872 373 1998 5 - 40
Metric Center........................ 10,968 33,553 44,521 2,108 1997 5 - 40
Miami Airport Business Center........ 6,400 20,018 26,418 1,251 1999 5 - 40
Milmont Page Business Center......... 3,201 10,039 13,240 627 1997 5 - 40
Minneapolis Distribution Portfolio... 6,227 19,898 26,125 1,237 1997 5 - 40
Minneapolis Industrial Portfolio
IV.................................. 4,938 16,425 21,363 1,011 1997 5 - 40
Minneapolis Industrial V............. 4,426 14,688 19,114 905 1997 5 - 40
Minnetonka........................... 6,794 22,702 29,495 1,396 1998 5 - 40
Moffett Business Center (MBC
Industrial)......................... 5,892 20,691 26,583 1,258 1997 5 - 40
Moffett Park R&D Portfolio........... 14,805 50,778 65,583 3,105 1997 5 - 40
Murray Hill Parkway.................. 1,670 5,426 7,096 336 1999 5 - 40
NDP -- Chicago (Formerly Glen Ellyn
Rd. & Mitel Drive).................. 1,496 5,089 6,585 312 1998 5 - 40
NDP -- Los Angeles................... 5,948 18,959 24,907 1,179 1998 5 - 40
NDP -- Seattle....................... 3,888 12,247 16,134 764 1998 5 - 40
Newark Airport....................... 1,755 5,416 7,171 339 2000 5 - 40
Norcross/Brookhollow Portfolio....... 3,721 11,680 15,401 729 1997 5 - 40
Normandie Industrial................. 2,398 7,504 9,902 469 2000 5 - 40
Northpointe Commerce................. 1,773 5,625 7,398 350 1997 5 - 40
Northwest Business Center (Formerly
Marietta Industrial)................ 1,830 6,206 8,036 380 1998 5 - 40
Northwest Crossing Distribution
Center.............................. 745 4,792 5,537 262 2000 5 - 40
Northwest Distribution Center........ 3,533 11,495 15,028 711 1997 5 - 40
Oakland Ridge Industrial Center...... 5,571 19,894 25,465 1,205 1999 5 - 40
S-4
75
AMB PROPERTY, L.P.
SCHEDULE III
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
INITIAL COST COSTS
----------------------- CAPITALIZED
NO. OF ENCUMBRANCES BUILDING & SUBSEQUENT TO
PROPERTY BLDGS./ CTRS. LOCATION TYPE (1) LAND IMPROVEMENTS ACQUISITION
-------- ------------- -------- ---- ------------ -------- ------------ -------------
O'Hare Industrial Portfolio.......... 15 IL IND $ -- $ 7,357 $ 22,112 $ 1,723
Orlando Central Park (OCP)........... 2 FL IND -- 1,779 79,082 --
Pacific Business Center.............. 2 CA IND 9,328 5,417 16,291 742
Pacific Service Center............... 1 GA IND -- 504 1,511 549
Pardee Drive......................... 1 CA IND -- 619 1,924 4
Parkway Business Center.............. 1 MN IND -- 475 1,425 395
Patuxent............................. 2 MD IND -- 1,696 5,127 373
Peninsula Business Center III........ 1 VA IND -- 992 2,976 65
Penn James Office Warehouse.......... 2 MN IND -- 1,991 6,013 681
Pioneer Alburtis..................... 5 CA IND -- 2,355 7,163 209
Porete Avenue Warehouse.............. 1 NJ IND 9,205 4,067 12,202 8,341
Presidents Drive..................... 6 FL IND -- 3,687 11,307 1,025
Preston Court........................ 1 MD IND -- 2,313 7,192 224
Riverside Business Center (Formerly
North GSW).......................... 2 TX IND -- 1,000 8,988 --
Round Lake Business Center........... 1 MN IND -- 875 2,625 343
Sand Lake Service Center............. 6 FL IND -- -- -- 1,172
Scripps Sorrento..................... 1 CA IND -- 1,110 3,330 32
Sea Tac I Air Cargo Centre........... 2 WA IND 5,274 -- 15,594 --
Sea Tac II Air Cargo Centre.......... 1 WA IND -- -- 3,056 --
Seattle Airport Industrial........... 1 WA IND -- 619 1,923 --
Shawnee Industrial................... 1 GA IND -- 7,531 2,026 2,481
Silicon Valley R&D Portfolio(*)...... 6 CA IND -- 8,024 24,205 2,975
Slauson Distribution Center.......... 8 CA IND -- 7,806 23,552 --
South Bay Industrial................. 7 CA IND 18,693 14,992 45,016 3,393
South Point Business Park............ 7 NC IND 10,725 5,371 16,113 559
Southfield Industrial Portfolio...... 13 GA IND -- 11,827 35,730 1,491
Stadium Business Park................ 9 CA IND 4,582 3,768 11,345 413
Sunrise Industrial................... 4 FL IND 13,593 6,266 18,798 304
Suwannee Creek Distribution
Center(7)........................... 3 GA IND -- 2,828 21,553 --
Sylvan............................... 1 GA IND -- 1,946 5,905 33
Systematics.......................... 1 CA IND -- 911 2,773 40
Technology I......................... 2 MD IND -- 1,657 5,049 63
Technology II........................ 9 MD IND 2,460 10,206 3,761 27,232
GROSS AMOUNT CARRIED AT 12/31/00
------------------------------------- YEAR OF
BUILDING & TOTAL ACCUMULATED CONSTRUCTION/ DEPRECIABLE
PROPERTY LAND IMPROVEMENTS COSTS(2)(3) DEPRECIATION ACQUISITION LIFE (YEARS)
-------- -------- ------------ ----------- ------------ ------------- ------------
O'Hare Industrial Portfolio.......... $ 7,357 $ 23,835 $ 31,192 $ 1,477 1997 5 - 40
Orlando Central Park (OCP)........... 1,779 9,748 11,527 546 1999 5 - 40
Pacific Business Center.............. 5,417 17,033 22,450 1,063 1997 5 - 40
Pacific Service Center............... 504 2,060 2,564 121 1998 5 - 40
Pardee Drive......................... 619 1,929 2,547 121 1999 5 - 40
Parkway Business Center.............. 475 1,820 2,295 109 1998 5 - 40
Patuxent............................. 1,696 5,501 7,196 341 1997 5 - 40
Peninsula Business Center III........ 992 3,041 4,033 191 1998 5 - 40
Penn James Office Warehouse.......... 1,991 6,694 8,684 411 1997 5 - 40
Pioneer Alburtis..................... 2,355 7,372 9,727 460 1999 5 - 40
Porete Avenue Warehouse.............. 4,067 20,543 24,610 1,165 1998 5 - 40
Presidents Drive..................... 3,687 12,332 16,020 758 1997 5 - 40
Preston Court........................ 2,313 7,416 9,728 461 1997 5 - 40
Riverside Business Center (Formerly
North GSW).......................... 1,000 8,988 9,988 473 1999 5 - 40
Round Lake Business Center........... 875 2,968 3,843 182 1998 5 - 40
Sand Lake Service Center............. -- 1,172 1,172 55 1998 5 - 40
Scripps Sorrento..................... 1,110 3,363 4,473 212 1998 5 - 40
Sea Tac I Air Cargo Centre........... -- 15,594 15,594 738 2000 5 - 40
Sea Tac II Air Cargo Centre.......... -- 3,056 3,056 145 2000 5 - 40
Seattle Airport Industrial........... 619 1,962 2,580 122 2000 5 - 40
Shawnee Industrial................... 9,557 12,038 570 1999 5 - 40
Silicon Valley R&D Portfolio(*)...... 8,024 27,180 35,205 1,667 1997 5 - 40
Slauson Distribution Center.......... 7,806 23,552 31,358 1,484 2000 5 - 40
South Bay Industrial................. 14,992 48,409 63,402 3,001 1997 5 - 40
South Point Business Park............ 5,371 16,672 22,043 1,043 1998 5 - 40
Southfield Industrial Portfolio...... 11,827 37,221 49,048 2,322 1997 5 - 40
Stadium Business Park................ 3,768 11,758 15,527 735 1997 5 - 40
Sunrise Industrial................... 6,266 19,102 25,368 1,201 1998 5 - 40
Suwannee Creek Distribution
Center(7)........................... 2,828 21,553 24,381 1,154 1999 5 - 40
Sylvan............................... 1,946 5,938 7,884 373 1999 5 - 40
Systematics.......................... 911 2,813 3,724 176 1997 5 - 40
Technology I......................... 1,657 5,112 6,769 320 1999 5 - 40
Technology II........................ 10,206 30,993 41,200 1,950 1999 5 - 40
S-5
76
AMB PROPERTY, L.P.
SCHEDULE III
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
INITIAL COST COSTS
----------------------- CAPITALIZED
NO. OF ENCUMBRANCES BUILDING & SUBSEQUENT TO
PROPERTY BLDGS./ CTRS. LOCATION TYPE (1) LAND IMPROVEMENTS ACQUISITION
-------- ------------- -------- ---- ------------ -------- ------------ -------------
TechRidge Phase IA................... 3 TX IND $ 15,500 $ 6,348 $ 19,044 --
The Rotunda.......................... 2 MD IND 13,020 4,400 17,736 $ 1,109
Torrance Commerce Center............. 6 CA IND -- 2,045 6,136 393
Twin Cities.......................... 2 MN IND -- 4,873 14,638 1,259
Two South Middlesex.................. 1 NJ IND -- 2,247 6,781 380
Valwood.............................. 2 TX IND 3,804 1,983 5,989 632
Van Nuys Airport Industrial.......... 2 CA IND -- 2,481 7,508 --
Viscount............................. 1 FL IND -- 984 3,016 165
Walnut Drive (Formerly East Walnut
Drive).............................. 1 CA IND -- 964 2,918 41
Weigman Road......................... 1 CA IND -- 1,563 4,688 169
West North Carrier................... 1 TX IND 3,079 1,375 4,165 184
West Pac Air Cargo Centre............ 1 PA IND -- -- 9,906 --
Williams & Bouroughs................. 4 CA IND -- 294 6,981 2,069
Willow Park Industrial Portfolio..... 21 CA IND 23,643 25,590 76,771 6,819
Willowlake Industrial Park........... 10 TN IND 29,654 11,997 35,990 9,675
Wilmington Avenue Wharehouse......... 3 CA IND -- 5,561 19,429 --
Wilsonville.......................... 1 OR IND -- 3,407 13,493 55
Windsor Court........................ 1 IL IND -- 766 2,338 91
Wood Dale Industrial (Includes Bonnie
Lane)............................... 5 IL IND -- 2,769 8,456 1,023
Yosemite Drive....................... 1 CA IND -- 2,350 7,051 251
Zanker/Charcot Industrial............ 5 CA IND -- 5,282 15,887 724
Around Lenox......................... 1 GA RET 10,012 3,462 13,848 1,107
Howard and Western................... 1 IL RET -- 700 2,983 44
Mazzeo............................... 1 MA RET 3,716 1,477 4,432 39
The Plaza at Delray.................. 1 FL RET 22,287 6,968 27,914 783
--- -------- -------- ---------- --------
Total......................... 840 $799,509 $817,761 $2,708,489 $277,551
=== ======== ======== ========== ========
GROSS AMOUNT CARRIED AT 12/31/00
------------------------------------- YEAR OF
BUILDING & TOTAL ACCUMULATED CONSTRUCTION/ DEPRECIABLE
PROPERTY LAND IMPROVEMENTS COSTS(2)(3) DEPRECIATION ACQUISITION LIFE (YEARS)
-------- -------- ------------ ----------- ------------ ------------- ------------
TechRidge Phase IA................... $ 6,348 $ 19,044 $ 25,392 $ 1,202 2000 5 - 40
The Rotunda.......................... 4,400 18,845 23,246 1,100 1999 5 - 40
Torrance Commerce Center............. 2,045 6,530 8,575 406 1998 5 - 40
Twin Cities.......................... 4,873 15,897 20,770 983 1997 5 - 40
Two South Middlesex.................. 2,247 7,162 9,409 445 1997 5 - 40
Valwood.............................. 1,983 6,621 8,604 407 1997 5 - 40
Van Nuys Airport Industrial.......... 2,481 9,496 11,977 567 2000 5 - 40
Viscount............................. 984 3,182 4,165 197 1997 5 - 40
Walnut Drive (Formerly East Walnut
Drive).............................. 964 2,959 3,922 186 1997 5 - 40
Weigman Road......................... 1,563 4,857 6,420 304 1997 5 - 40
West North Carrier................... 1,375 4,349 5,724 271 1997 5 - 40
West Pac Air Cargo Centre............ -- 9,906 9,906 469 2000 5 - 40
Williams & Bouroughs................. 2,294 7,050 9,344 442 1999 5 - 40
Willow Park Industrial Portfolio..... 25,590 83,590 109,180 5,168 1998 5 - 40
Willowlake Industrial Park........... 11,997 45,665 57,662 2,730 1998 5 - 40
Wilmington Avenue Wharehouse......... 5,561 19,429 24,991 1,183 1999 5 - 40
Wilsonville.......................... 3,407 13,548 16,955 803 1998 5 - 40
Windsor Court........................ 766 2,429 3,195 151 1997 5 - 40
Wood Dale Industrial (Includes Bonnie
Lane)............................... 2,769 9,478 12,247 580 1999 5 - 40
Yosemite Drive....................... 2,350 7,301 9,652 457 1997 5 - 40
Zanker/Charcot Industrial............ 5,282 16,611 21,894 1,036 1997 5 - 40
Around Lenox......................... 3,462 14,955 18,417 872 1998 5 - 40
Howard and Western................... 709 3,019 3,728 176 1999 5 - 40
Mazzeo............................... 1,477 4,470 5,948 282 1998 5 - 40
The Plaza at Delray.................. 6,968 28,697 35,666 1,688 1997 5 - 40
-------- ---------- ---------- --------
Total......................... $833,325 $2,915,537 $3,748,862 $177,467
======== ========== ========== ========
S-6
77
AMB PROPERTY, L.P.
SCHEDULE III
CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
DECEMBER 31, 2000 AND 1999
- ---------------
(1) As of December 31, 2000, properties with a gross book value of $173.1
million, serves as collateral for outstanding indebtedness under a secured
debt facility of $73.0 million.
(2) Reconciliation of total cost to Consolidated Balance Sheet caption at
December 31, 2000:
Total per Schedule III(4)................................... $3,748,862
Construction in process(5).................................. 277,735
----------
Total investments in properties................... $4,026,597
==========
(3) As of December 31, 2000, the aggregate cost for federal income tax purposes
of investments in real estate was $3,567,229.
(4) A summary of activity for real estate and accumulated depreciation for the
year ended December 31, 2000, is as follows:
Investment in Real Estate:
Balance at beginning of year.............................. $3,064,137
Acquisition of properties(6).............................. 729,972
Improvements, including properties under
development/redevelopment.............................. 229,395
Divestiture of properties................................. (162,470)
Adjustment for properties held for divestiture............ (112,172)
----------
Balance at end of year.................................... $3,748,862
==========
Accumulated Depreciation:
Balance at beginning of year.............................. $ 103,558
Depreciation expense...................................... 96,258
Adjustment for properties divested........................ (11,429)
Adjustment for properties held for divestiture............ (10,920)
----------
Balance at end of year.................................... $ 177,467
==========
(5) Includes $226.5 million of fundings for projects under development at
December 31, 2000.
(6) Excludes investment of $13.2 million in unconsolidated joint ventures.
S-7
78
AMB PROPERTY, L.P.
SCHEDULE IV
MORTGAGE LOANS ON REAL ESTATE
AS OF DECEMBER 31, 2000
(IN THOUSANDS, EXCEPT PERCENTAGES)
MORTGAGE
DESCRIPTION RATE MATURITY RECEIVABLE
----------- ---- -------- ----------
Construction Loan - Pier 1 (1).............................. 11.00% March 2001 $ 36,969
First Mortgage - Manhattan Village Shopping Center (2)...... 8.75% September 2001 79,000
--------
Total.............................................. $115,969
========
- ---------------
(1) The Operating Partnership financed the development of office space in an
historical San Francisco landmark that it holds in an unconsolidated joint
venture. The loan is to be replaced with permanent financing in 2001.
(2) During 2000, the Operating Partnership sold a retail center in California
for $89.0 million. The Operating Partnership carries a mortgage on this
retail center sale. This mortgage has a one-year extension option.
S-8
79
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
3.1 Fourth Amended and Restated Partnership Agreement of Limited
Partnership of AMB Property, L.P. (incorporated herein by
reference as Exhibit 10.1 to the Registrants Current Report
on Form 8-K filed on August 15, 2000).
3.2 First Amendment to the Fourth Amended and Restated Agreement
of Limited Partnership of AMB Property, L.P.
4.1 Indenture dated as of June 30, 1998, by and among AMB
Property, L.P., the Registrant and State Street Bank and
Trust Company of California, N.A., as trustee (incorporated
by reference to Exhibit 4.1 of the Registrant's Registration
Statement on Form S-11 (No. 333-49163)).
4.2 First Supplemental Indenture dated as of June 30, 1998 by
and among AMB Property, L.P., the Registrant and State
Street Bank and Trust Company of California, N.A., as
trustee (incorporated by reference to Exhibit 4.2 of the
Registrant's Registration Statement Form S-11 (No.
333-49163)).
4.3 Second Supplemental Indenture dated as of June 30, 1998, by
and among AMB Property, L.P., the Registrant and State
Street Bank and Trust Company of California, N.A., as
trustee (incorporated by reference to Exhibit 4.3 of the
Registrant's Registration Statement on Form S-11 (No.
333-49163)).
4.4 Third Supplemental Indenture dated as of June 30, 1998, by
and among AMB Property, L.P., the Registrant and State
Street Bank and Trust Company of California, N.A., as
trustee (incorporated by reference to Exhibit 4.4 of the
Registrant's Registration Statement on Form S-11 (No.
333-49163)).
4.5 Fourth Supplemental Indenture, by and among AMB Property,
L.P., AMB Property Corporation and State Street Bank and
Trust Company of California, N.A., as trustee (incorporated
herein by reference as Exhibit 4.1 of the Registrant's
Current Report on Form 8-K/A filed on November 9, 2000).
4.6 $30,000,000 7.925% Fixed Rate Note No. 1 dated August 18,
2000, attaching the Parent Guarantee dated August 18, 2000.
4.7 $25,000,000 7.925% Fixed Rate Note No. 2 dated September 12,
2000, attaching the Parent Guarantee dated September 12,
2000.
4.8 $50,000,000 8.00% Fixed Rate Note No. 3 dated October 26,
2000, attaching the Parent Guarantee dated October 26, 2000.
4.9 $25,000,000 8.000% Fixed Rate Note No. 4 dated October 26,
2000, attaching the Parent Guarantee dated October 26, 2000.
4.10 $50,000,000 7.20% Fixed Rate Note No. 5 dated December 19,
2000, attaching the Parent Guarantee dated December 19, 2000
(incorporated herein by reference to Exhibit 4.1 of the
Registrant's Current Report on Form 8-K filed on January 8,
2001).
4.11 $50,000,000 7.20% Fixed Rate Note No. 6 dated December 19,
2000, attaching the Parent Guarantee dated December 19, 2000
(incorporated herein by reference to Exhibit 4.2 of the
Registrant's Current Report on Form 8-K filed on January 8,
2001).
4.12 $50,000,000 7.20% Fixed Rate Note No. 7 dated December 19,
2000, attaching the Parent Guarantee dated December 19, 2000
(incorporated herein by reference to Exhibit 4.3 of the
Registrant's Current Report on Form 8-K filed on January 8,
2001).
4.13 Specimen of 7.10% Notes due 2008 (included in the First
Supplemental Indenture incorporated by reference as Exhibit
4.2 of the Registrant's Registration Statement on Form S-11
(No. 333-49163)).
4.14 Specimen of 7.50% Notes due 2018 (included in the Second
Supplemental Indenture incorporated by reference as Exhibit
4.3 of the Registrant's Registration Statement on Form S-11
(No. 333-49163)).
S-9
80
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
4.15 Specimen of 6.90% Reset Put Securities due 2015 (included in
the Third Supplemental Indenture incorporated by reference
as Exhibit 4.4 of the Registrant's Registration Statement on
Form S-11 (No. 333-49163)).
4.16 $25,000,000 6.90% Fixed Rate Note No. 8 dated January 9,
2001, attaching the Parent Guarantee dated January 9, 2001
(incorporated herein by reference to Exhibit 4.1 of the
Registrant's Current Report on Form 8-K filed on January 31,
2001).
10.1 Distribution Agreement dated August 15, 2000, by and among
Registrant, AMB Property Corporation, Morgan Stanley & Co.,
Incorporated, Banc of America Securities LLC, Banc One
Capital Markets, Inc., Chase Securities, Inc., Merrill
Lynch, Pierce, Fenner & Smith Incorporated, J.P. Morgan
Securities Inc., and Salomon Smith Barney Inc. (incorporated
herein by reference to Exhibit 1.1 of Registrant's Current
Report on Form 8-K/A filed on November 9, 2000).
10.2 Terms Agreement dated as of December 14, 2000, by and
between Morgan Stanley & Co., Incorporated and J.P. Morgan
Securities Inc. and Registrant (incorporated herein by
reference to Exhibit 1.1 of the Registrant's Current Report
on Form 8-K filed on January 8, 2001).
10.3 Terms Agreement dated as of January 4, 2001, by and between
A.G. Edwards & Sons, Inc. and Registrant (incorporated
herein by reference to Exhibit 1.1 of the Registrant's
Current Report on Form 8-K filed on January 31, 2001).
10.4 Terms Agreement dated as of March 2, 2001, by and among
First Union Securities, Inc., Registrant and AMB Property
Corporation (incorporated by reference to Exhibit 1.1 of
Registrants' current report on Form 8-K filed on March 16,
2001).
10.5 Form of Change in Control and Noncompetition Agreement
between AMB Property Corporation and Executive Officers
(incorporated by reference to AMB Property Corporation's
Annual Report on Form 10-K for the year ended December 31,
1998).
10.6 Agreement for Purchase and Exchange entered into as of March
9, 1999, by and among Registrant, AMB Property II, L.P.,
Long Gate, L.L.C. and BPP Retail, LLC, regarding the
transaction which closed on June 15, 1999 (incorporated by
reference to Exhibit 10.1 of the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999).
10.7 Agreement for Purchase and Exchange entered into as of March
9, 1999, by and among Registrant, AMB Property II, L.P.,
Long Gate, L.L.C. and BPP Retail, LLC, regarding the
transaction which closed on August 4, 1999 (incorporated by
reference to Exhibit 10.2 of the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999).
10.8 Agreement for Purchase and Exchange entered into as of March
9, 1999, by and among Registrant, AMB Property II, L.P.,
Long Gate, L.L.C. and BPP Retail, LLC, regarding the
transaction which closed on December 1, 1999 (incorporated
by reference to Exhibit 10.3 of the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999).
10.9 Second Amended and Restated 1997 Stock Option and Incentive
Plan of AMB Property Corporation (incorporated by reference
to Exhibit 10.5 of AMB Property Corporation's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1999).
10.10 Ninth Amended and Restated Agreement of Limited Partnership
of AMB Property II, L.P., dated March 21, 2001 (incorporated
by reference to Exhibit 10.1 of the Registrant's Current
Report on Form 8-K filed on March 23, 2001).
S-10
81
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
10.11 Revolving Credit Agreement dated as of May 24, 2000, among
Registrant, the banks listed therein, Morgan Guaranty Trust
Company of New York, as Administrative Agent, Bank of
America, N.A., as Syndication Agent, the Chase Manhattan
Bank, as Documentation Agent, J.P. Morgan Securities Inc.
and Banc of America Securities LLC, as Joint Lead Arrangers
and Joint Bookmanagers, Bank one, NA, Commerzbank
Aktiengesellschaft, PNC Bank National Association and
Wachovia Bank, N.A., as Managing Agents and Banks Trust
Company and Dresdner Bank AG, New York and Grand Cayman
Branches, as Co-Agents (incorporated by reference to Exhibit
10.1 of the Registrant's Current Report on Form 8-K filed on
June 16, 2000).
10.12 Guaranty of Payment made as of May 24, 2000, between AMB
Property Corporation and Morgan Guaranty Trust Company of
New York, as administrative agent for the banks listed on
the signature page of the Revolving Credit Agreement
(incorporated herein by reference to Exhibit 10.2 of the
Registrant's Current Report on Form 8-K filed on June 16,
2000).
10.13 Credit Agreement dated as of September 27, 1999, among AMB
Institutional Alliance Fund I, L.P., AMB Institutional
Alliance REIT I, Inc., the Lenders and issuing parties
thereto, BT Realty Resources, Inc. and Chase Manhattan Bank
(incorporated by reference to Exhibit 10.3 of the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999).
21.1 Subsidiaries of the Registrant.
23.1 Consent of Arthur Andersen LLP.
24.1 Powers of Attorney (included in Part IV of this Form 10-K).
S-11