This excerpt taken from the AMB 10-K filed Feb 22, 2010.
General Business Risks
The companys performance and value are impacted by the local economic conditions of and the risks associated with doing business in California.
As of December 31, 2009, the companys industrial properties located in California represented 22.6% of the aggregate square footage of its industrial operating properties and 21.0% of its industrial annualized base rent, on an owned and managed basis. The companys revenue from, and the value of, its properties located in California may be affected by local real estate conditions (such as an 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 Californias economic climate. Because of the number of properties the company has located in California, a downturn in Californias economy or real estate conditions could adversely affect the companys financial condition, results of operations, cash flow and ability to pay cash dividends to its stockholders and the market price of its stock.
The company faces risks associated with short-term liquid investments.
The company continues to have significant cash balances that it invests in a variety of short-term investments that are intended to preserve principal value and maintain a high degree of liquidity while providing current income. From time to time, these investments may include (either directly or indirectly):
Investments in these securities and funds are not insured against loss of principal. Under certain circumstances the company may be required to redeem all or part of its investment, and its right to redeem some or all of its investment may be delayed or suspended. In addition, there is no guarantee that the companys investments in these securities or funds will be redeemable at par value. A decline in the value of the companys investment or a delay or suspension of its right to redeem may have an adverse effect on the companys results of operations or financial condition.
The company may experience losses that its insurance does not cover.
The company carries commercial liability, property and rental loss insurance covering all the properties that it owns and manages in types and amounts that it believes are adequate and appropriate given the relative risks applicable to the property, the cost of coverage and industry practice. Certain losses, such as those due to terrorism, windstorms, floods or seismic activity, may be insured subject to certain limitations, including large deductibles or co-payments and policy limits. Although the company has obtained coverage for certain acts of terrorism, with policy specifications and insured limits that the company considers commercially reasonable given the cost and availability of such coverage, the company cannot be certain that it will be able to renew coverage on comparable terms or collect under such policies. In addition, there are other types of losses, such as those from riots, bio-terrorism or acts of war, that are not generally insured in the companys industry because it is not economically feasible to do so. The company may incur material losses in excess of insurance proceeds and it may not be able to continue to obtain insurance at commercially reasonable rates. Given current market conditions, there can also be no assurance that the insurance companies providing the companys coverage will not fail or have difficulty meeting their coverage obligations to the company. Furthermore, the company cannot assure you that its insurance companies will be able to continue to offer products with sufficient coverage at commercially reasonable rates. If the company experiences a loss that is uninsured or that exceeds its insured limits with respect to one or more of its properties or if the companys insurance companies fail to meet their coverage commitments to it in the event of an insured loss, then the company could lose the capital invested in the damaged properties, as well as the anticipated future revenue from those properties and, if there is recourse debt, then the company would remain obligated for any mortgage debt or other financial obligations related to the properties. Moreover, as the general partner of the operating partnership, the parent company generally will be liable for all of the operating partnerships unsatisfied recourse obligations, including any obligations incurred by the operating partnership as the general partner of co-investment ventures. Any such losses or higher insurance costs could adversely affect the companys financial condition, results of operations, cash flow and ability to pay cash dividends to the parent companys stockholders and distributions to the operating partnerships unitholders and the market price of the parent companys stock.
A number of the companys properties are located in areas that are known to be subject to earthquake activity. U.S. properties located in active seismic areas include properties in the San Francisco Bay Area, Los Angeles, and Seattle. The companys largest concentration of such properties is in California where, on an owned and managed basis, as of December 31, 2009, the company had 280 industrial buildings, aggregating approximately 30.0 million square feet and representing 22.6% of its industrial operating properties based on aggregate square footage and 21.0% based on industrial annualized base rent, on an owned and managed basis. International properties located in active seismic areas include Tokyo and Osaka, Japan and Mexico City, Mexico. The company carries earthquake insurance on all of its properties located in areas historically subject to seismic activity, subject to coverage limitations and deductibles that it believes are commercially reasonable. The company evaluates its earthquake insurance coverage annually in light of current industry practice through an analysis prepared by outside consultants.
A number of the companys properties are located in areas that are known to be subject to hurricane and/or flood risk. The company carries hurricane and flood hazard insurance on all of its properties located in areas historically subject to such activity, subject to coverage limitations and deductibles that it believes are commercially reasonable. The company evaluates its insurance coverage annually in light of current industry practice through an analysis prepared by outside consultants.
Contingent or unknown liabilities could adversely affect the companys financial condition.
The company has acquired and may in the future acquire properties subject to liabilities and without any recourse, or with only limited recourse, with respect to unknown liabilities. As a result, if a liability were asserted against the company based upon ownership of any of these entities or properties, then the company might have to pay substantial sums to settle it, which could adversely affect its cash flow. Contingent or unknown liabilities with respect to entities or properties acquired might include: