AMB Property Inc (



Q4 2010 Earnings Call

February 03, 2011 1:00 pm ET


Tracy Ward - VP of IR and Corporate Communications

Hamid Moghadam - Chairman and CEO

Thomas Olinger - CFO


Steve Frankel - Green Street Advisors

Sri Nagarajan - FBR Capital Markets

Chris Caton - Morgan Stanley

Suzanne Kim - Credit Suisse

Michael Bilerman - Citi

Ki Bin Kim - Macquerie

Jamie Feldman - Bank of America

Sloan Bohlen - Goldman, Sachs

John Guinee - Stifel

Mitch Germain - JMP Securities

Steve Benyik - Jeffries



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Good afternoon, my name is Regina and I will be your conference operator today. At this time I would like to welcome everyone to the AMB fourth quarter 2010 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (Operator Instructions).

I would now like to turn the conference over to Ms. Tracy Ward, Vice President of Investor Relations and Corporate Communications. Ms. Ward you may begin your conference.

Tracy Ward

Thank you Regina. Good morning, everyone. Thank you for joining us this morning. Before, we begin formal remarks, I'd like to remind you that this call is the property of AMB Property Corporation and is being recorded. Earlier this week, we announced the merger of equals between ProLogis and AMB Property Corporation. Materials regarding the transaction are posted on both companies' websites. In addition, the joint proxy statement will be filed soon and will contain additional information regarding the transaction.

This call will focus on our 2010 financial results, as well as 2011 guidance. Please be aware that statements made during this call that are not historical maybe deemed forward-looking statements. Actual results may differ materially from those indicated by forward-looking statements due to a variety of risks and uncertainty. Please refer to our filings with the Securities and Exchange Commission, including our 2009 10-K, for a detail discussion of these risks.

Acknowledging the fact that this call may be web cast for a period of time, we believe it's important to note that today's call includes time sensitive information that may be accurate, as of today's date February 3


, 2011. The company's supplemental information package was filed earlier today with the SEC on Form 8-K. The filing is posted on AMB website in the Investor Relations section under Financial Information Supplemental Report. Also included in our supplemental information package are the reconciliations from GAAP financial measures to non-GAAP financial measures.

This morning, I will turn the call over to Hamid Moghadam, Chairman and CEO, who will comment on our 2010 and 2011 priorities, the macroeconomic environment and customer sentiment, and Tom Olinger, our Chief Financial Officer, who will review our financial and operating results and provide an update on 2011 guidance, before we open the call to your questions.

Hamid, will you please begin?

Hamid Moghadam

Thanks, Tracy and good morning everyone. We normally also have Gene and Guy here for the Q&A session, but they are not here today, so it's just Tom and yours truly. We finished our year by making excellent progress on our key priorities. First, we improved the utilization of our assets by increasing occupancy in our core operating portfolio to 93.7%. We leased a record 32 million square feet in 2010. We also leased up our legacy developments to 78%. The vacancy in this portfolio is mostly in 10 spaces and they are primarily located in Europe and Japan.

In addition, we had strong activity in our developments starts in China and Brazil, and we are leasing up those projects ahead of schedule. Finally, we monetized $36 million of our land bank through the formation of the new co-investment joint ventures, sales and build-to-suit projects.

Our second priority was to deploy capital profitably into a mix of acquisitions, fund investments and developments, including $340 million in new acquisitions, $300 million of equity investments into our two open-end funds, $100 million of new development starts in Brazil, China and Mexico, and the purchase of an $86 million mezzanine debt position collateralized by Class-A industrial portfolio.

Third, we raised over $780 million in private capital, which was a record deal for us. Investors are moving from the sidelines and decision making is loosening. We continue to see the large global institutions in front of the curve. In fact 90% of the total raise during the year was from outside the U.S. and 70% of it was from new investors.

Importantly, investors are showing a preference for geographically focused funds and specified portfolios. When they are selecting a fund manager, key considerations continue to include a strong alignment of interest through co-investments, deep operating and specter expertise's and strong track record across cycles. We align up well with these requirements.

You may recall, during our third quarter call, we indicated that the fourth quarter would likely be an inflection point in market psychology, dependent on the outcome of the November elections and the strength of the holiday sales, both of which turned out positive from perspective of improved business confidence. The economic recovery is gaining momentum as we expected. Global trade and GDP are near or have surpassed their previous peaks.

Consumption accelerated from the third quarter, growing at 4.4% annualized rate. Real consumption now stands at a full percentage point above its prior peak. Given this strong recovery, we expect the rate of growth to moderate in the coming quarters. Real inventories were up nominally for the quarter, in line with our expectations. We believe inventories were drawn down too much by stronger than anticipated retail sales.

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