QUOTE AND NEWS
DailyFinance  Dec 17  Comment 
Redtail Metals Corp. (TSX-V: RTZ)(“Redtail”) and Northern Tiger Resources Inc. (TSX-V: NTR) (“Northern Tiger”) are pleased to announce they have agreed with Americas Bullion Royalty Corp. (TSX: AMB) (“AMB”) to...
Business Times - Malaysia  Jul 29  Comment 
Permodalan Nasional Bhd Structured Investment Fund (PNB SIF) reached its maturity date on July 5, Amanah Mutual Bhd (AMB) announced today. AMB will redeem the full invested amount to unit holders based on the last net asset value (NAV) of...
Business Times - Malaysia  Jun 1  Comment 
KUALA LUMPUR: Amanah Mutual Bhd (AMB) has announced a gross distribution of 3.88 sen per unit for AMB Dividend Trust Fund and 2.50 sen per unit for AMB Dana Yakin for the financial year ended April 30, 2012. AMB said the Dividend Trust Fund has...
TheStreet.com  Jun 3  Comment 
NEW YORK (TheStreet) -- ProLogis and AMB Property, industrial real estate investment trusts, completed their merger, forming one REIT called ProLogis. The newly combined company began trading Friday on the New York Stock Exchange. >>...
Market Intelligence Center  Jun 3  Comment 
AMB Property (NYSE:AMB) closed Thursday's volatile trading session at $34.07. In the past year, the stock has hit a 52-week low of $22.05 and 52-week high of $37.44. AMB Property stock has been showing support around $32.64 and resistance in the...




 
TOP CONTRIBUTORS

AMB Property Corporation (NYSE: AMB) leases 155 M square feet of warehouse space worldwide--about the area of a medium-sized town in America--to multinational tenants like FedEx, UPS, Nippon Express, and the United States government, as well as to nearly three thousand smaller companies spread across 47 markets in the Americas, Asia, and Europe.[1] In addition to its REIT business, the company also has a money management business. Although only responsible for 5% of AMB's revenue, its investment advisory business provides a steady source of funding for its real estate acquisitions and development projects.[2] The company earned $633 million in revenue but incurred a net loss of $50 million in 2009.[3]

AMB builds many of its properties next to key transport centers like airports ("on-tarmac" property) and major sea/river ports. The company also has international exposure, which allows it to attract large multinational customers who are willing to pay a premium for a more comprehensive international offering.

Because many of AMB's tenants have longer triple-net leases (avg. 6 years) where they must pay for some or all of their utilities, building insurance, and real estate tax fees, AMB has a degree of protection from rising costs.[4]

Company Overview

AMB is a real estate investment trust that owns and leases real estate to a wide pool of tenants. It also engages in property resell and real estate management for third parties, as well as private capital activtities like independent/institutional money management and joint ventures.

Business Segments

  • Rental (95% of Revenue) is AMB's primary development/operation/resell business. 89% of its holdings are warehouses and bulk warehouses, with a remainder composed of variable-use industrial buildings and transit/shipment/air cargo sites. AMB's tenant pool is widely distributed, protecting the company somewhat from income loss through individual customers' credit woes and inability to pay. Revenue by building type are as follows:[5]
    • Warehouse - 55.3% of net sales
    • Bulk Warehouse - 34.8% of net sales
    • Flex Industrial - 3.6% of net sales
    • Light Industrial - 2.3% of net sales
    • Air Cargo - 2.4% of net sales
    • Trans-Shipment - 1.0% of net sales
    • Office - 0.6% of net sales
  • Private Capital (5% of Revenue) includes subsidiary companies involved in co-investment ventures, money management for third party investors, and partnerships with institutional investors. While this segment contributes relatively little to AMB's total yearly earnings, these operations are important in generating capital that can be redeployed for real estate maintenance and development.

You keep it up now, unedsrtand? Really good to know.

Trends and Forces

Rising costs in US market brings mixed effects

A prolonged slump of the domestic economy affects all industrial REITs as their tenant companies feel the squeeze of a weak market on all levels of the consumer chain, and the opposite holds true for economic golden years. But with AMB, the relationship is more complex than a simple strong-market-strong-company one. Rising real estate prices raise the value of AMB's properties, but the company's long triple-net leases (see Company Overview above) prevent it from immediately translating this into base rent increases; high real estate prices also adversely affect the company's acquisition/development power and hence growth levels.

Meanwhile, a slumping real estate market is not necessarily bad for AMB. Industrial REITs have surged at a time when others in the real estate market have struggled and ABM is no exception. Because a market downturn means that fewer new industrial buildings are in construction, demand increases and AMB can raise its lease rates. The weak dollar that often comes along with a slumping housing market can also increase export profits for global manufacturers--the kind of company that makes up much of AMB's tenant base.

With 87% of revenues coming from domestic rentals and real estate activity, AMB remains closely tied to the US's overall economic health, despite some hedging effects from its triple-net leases. Particularly important is California, which by itself accounts for almost a third of AMB's total yearly revenues. In 2009, the company's revenue fell 8.6% due to the weak economic environment.[3]

Global trade growth increases demand for transport-friendly industrial property

AMB's focus on clients with multinational, transportation-centric needs means it inevitably ends up with tenants who are highly exposed to trading changes in the global market. Thus, trade volume increases involving the Americas, Europe, and Asia all play to AMB's growing international strength. No matter which direction trade increases in, more volume means more products to be stored and distributed, and more demand for the infill storage/distribution properties AMB provides. At the same time, AMB opportunity for raising profit also exposes it to the volatility of the international market-- Peter Slatin of Forbes/Slatin Real Estate writes that "increasingly globally oriented industrial REITs will feel the impact of changing worldwide trade patterns almost immediately." As it develops its overseas reach, AMB faces increasingly stiff competition from both fellow global REIT behemoths and the many foreign small-scale real estate companies that already populate the markets AMB is eyeing.

Environmental problems increase operating costs, decrease port property demand/profitability

Coastal hurricanes can hurt AMB's operations by damaging property and shutting down the transportation infrastructure its clients depend on. South Florida alone makes up 5% of AMB's total owned/operated square footage, and much of the company's remaining real estate is located along the exposed coastlines of important US ports and shipping centers.

Greening REITS

Because of rising energy costs, many businesses are searching for more energy-efficient properties. While the concept of a "green REIT" has been tossed around for some time in the commercial REIT community, industrial REITs and their customers are only just beginning to join the trend. As one of the earliest converts to the green trend among industrial REITs, AMB stands to gain from the lower utility costs its green buildings offer clients--especially attractive for triple-net lease tenants who must pay the warehouse utility bills themselves. While the greening process itself requires extra investment, noted experts in the field like Jerry Yudelman, who chairs the US Green Building Council, have observed that "greening" costs decrease as companies accrue experience with conversion and new green development. In addition to the decreased operating costs and increased building values, rents, and occupancy rates green buildings are also subject to lower insurance rates and tax credits. Still, AMB is far from the only player in the green REIT game--close competitor ProLogis was another early investor in energy-efficient buildings, and more than two thirds of the US' 300 REITs are pursuing or planning to pursue green upgrades.

Competition

One of the larger industrial REITs, AMB is well-placed in both the US and global market. Its two-part business plan--money management and joint venture in addition to its core real estate/rental business--gives it an extra edge that no major competitors except ProLogis have. A large customer base makes it stable for an REIT--not so exposed to tenant inability to pay--and its high-quality properties in major urban and shipping centers protect it from the rapid devaluation that suburban industrial properties face in market downturns. Its strong global presence makes it an attractive choice for large multinational companies with a need for transit-ready properties including a variety of industrial building types. AMB is also noted for early and continued investment in energy-efficient, environmentally friendly technologies and development. Still, AMB faces very real all-around competition in the form of ProLogis, and must compete with numerous smaller and more specialized REITs and private real estate firms, especially in the US.

  • ProLogis (PLD): Another global industrial REIT focused high-traffic, infill areas, behemoth ProLogis matches (or outmatches) AMB stride for stride. As a bigger company, ProLogis can apply more far capital brawn to the real estate muscling found at transportation and industry hot spots around the world. Like AMB, ProLogis has a fund management and joint-venture business that it uses to generate capital for its real estate development and maintenance activities, and it too came early to what seems to be an increasingly lucrative green REIT trend.
  • First Industrial Realty Trust (FR): First Industrial focuses on supply-chain properties within the contiguous United States. The company is a medium-sized competitor with lower profit margins and slightly lower-quality properties than AMB. While First Industrial shares AMB's advantage of a large customer base, its tenant companies are distributed less evenly. Despite these relative weaknesses, FR is still a competitor for the shifting US industrial market.
  • Duke Realty Corporation (DRE) is another USA-only REIT with medium-to-low profit margins compared to AMB. Despite its sizeable 135 M sq ft of leasable space, Duke's division between commercial/healthcare and industrial real estate (with a lean towards commercial) makes its competition with AMB less direct.
  • DCT Industrial Trust has significant presence in high-throughput, easy-access industrial holdings. DCT is smaller than AMB and has lower margins, though, with no self-generating source of development capital, putting it at a disadvantage.

In addition to these primary all-around or US competitors, AMB also faces pressure from smaller, more specialized industrial REITs like Kilroy Realty Corporation (KRC).

There are also countless private real estate firms like CenterPoint Properties that are also engaged in transportation-focused industrial real estate activity. Foreign companies like Alexandria Real Estate Equities (ARE) are also increasingly direct competitors for AMB as the company continues its global expansion.

References

  1. AMB 2009 10-K "The Company" pg. 7
  2. AMB 2009 10-K "Primary Sources of Revenue and Earnings" pg. 8
  3. 3.0 3.1
  4. AMB 2009 10-K "Industrial Properties" pg. 32
  5. AMB 2009 10-K "Property Characteristics" pg. 32
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