From the WSJ Real Estate Archives

Real-Estate Bellwether
Casts Doubt on Future

by Ray A. Smith
From The Wall Street Journal Online
July 17, 2002

AMB Property Corp. reduced its earnings forecast for 2002 and toned down growth projections for the industrial real-estate market, signaling that the sector will take longer than expected to emerge from its slump.

A day after the San Francisco-based industrial real-estate investment trust announced a decline in second-quarter earnings -- the first REIT to report quarterly results -- officials said in a conference call that the momentum they saw in the first quarter had slowed considerably.

"While activity was strong in the first quarter, the experience just wasn't as consistent and robust as we had hoped," said Bruce Freedman, executive vice president and head of real-estate operations at AMB. Occupancy remained unchanged from the end of the first quarter at 94.4%.

AMB lowered its projection for this year's net income to between $1.35 and $1.55 a share, from $1.40 to $1.55 a share.

AMB's net income fell 3.9% in the second quarter, to $26.7 million, or 31 cents a share, from $27.8 million, or 33 cents a share, in the year-earlier quarter. The decline was attributed in part to a decrease in GAAP same-store net operating income, brought on by a slowdown in leasing activity. Same-store net operating income on a cash basis rose 1%, slightly below expectations. Also, the company hasn't redeployed all the capital it raised from the sale of assets over the past six quarters, which has an adverse impact on earnings.

Revenue rose 8.1% in the second quarter, to $157.8 million from $146 million. AMB reported funds from operations, the commonly used measure of REITs' financial performance, of $54.1 million, or 60 cents a share, up from $39.3 million, or 43 cents a share. Analysts had expected AMB to report funds from operations of 62 cents a share.

AMB also lowered its projection for funds from operations this year to between $2.45 and $2.60 a share, from between $2.60 and $2.65 a share. In 2001, funds from operations totaled $2.60 a share, excluding a $20.8 million write-off.

AMB also introduced its projection for 2003 earnings of $1.45 to $1.55 a share and for funds from operations next year of $2.65 to $2.75 a share.

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