AMB Property Corp. (AMB), a leading real estate investment trust (REIT), reported third quarter 2010 recurring fund from operations (FFO) of 32 cents per share compared with 71 cents in the year-earlier quarter. Fund from operations, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and other non-cash expenses to net income.
The third quarter 2010 recurring FFO beat the Zacks Consensus Estimate by 2 cents. The year-over-year decrease in quarterly FFO was primarily due to higher development profits recognized in the third quarter of 2009. Total revenues during the quarter were $158.7 million compared to $153.6 million in the year-ago quarter. Total revenues for third quarter 2010 were marginally ahead of the Zacks Consensus Estimate of $158 million.
During the quarter, AMB commenced leases spanning approximately 8.1 million square feet in its global operating portfolio, compared with 9.9 million square feet in the year-ago quarter. The company also leased 1.7 million square feet of space in its worldwide development portfolio during third quarter 2010.
Operating portfolio occupancy increased 80 bps sequentially from the second quarter to 92.6% at the end of the third quarter 2010. The average occupancy during the quarter was 91.7%. Occupancy in the operating portfolio was 91.0% at the end of third quarter 2009, while the average occupancy was 90.4%.
Same-store net operating income (cash basis), without the effect of lease termination fees, decreased 3.0% during the quarter compared with the year-ago period primarily due to increased free rents. Average rent change on lease renewals and rollovers in the operating portfolio of the company decreased 11.8% on trailing four-quarter basis.
During the quarter, AMB acquired 5 properties worth $110.9 million across the globe. New development starts in the quarter totaled approximately 920,500 square feet in Brazil and China, with an estimated total investment of $70 million. The company also sold five properties during the quarter for $39.4 million at a stabilized cap rate of 7.7%.
AMB completed $1.4 billion of new financings during the quarter, including $566 million of wholly-owned debt and $789 million for its co-investment ventures in Europe, Japan, and the U.S. Currently, the company is also negotiating $1.6 billion worth of capital markets transactions, including the renewal of its two lines of credit, a corporate term-loan and $415 million of refinancing for its U.S. Logistics Fund.
At the end of the third quarter 2010, the company’s share of total debt to total assets was 41.0%, with approximately $1.7 billion of liquidity (including $1.5 billion available under its credit facility and $200 million of cash and cash equivalents). In the year-ago period, AMB’s share of total debt to total assets was 43.0% with $1.3 billion of liquidity (including $1.1 billion available under its credit facility and $201 million of cash and cash equivalents).
For full year 2010, AMB reiterated its earlier recurring FFO guidance in the range of $1.20 to $1.26 per share. We maintain our Neutral rating on AMB, which presently has a Zacks #3 Rank that translates into a short-term Hold recommendation.
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