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21 Jun 2010
Approximately $1.2 Billion of Debt Securities Affected.
New York, June 21, 2010 -- Moody's Investors Service has affirmed AMB Property Corporation's®
Baa1 senior unsecured ratings with a negative outlook. The Baa1
rating reflects its high quality, well-diversified portfolio
of high throughput distribution facilities in major infill and gateway
locations near airports, seaports and ground transportation systems
across the globe. The negative outlook reflects pressure in the
REIT's credit metrics, earnings growth and profitability resulting
primarily from reductions in development sales gains and a fairly significant
reliance on co-investment structures to drive earnings and fund
growth, which slowed materially over the past few years.
The difficult global economic environment and pressure on industrial market
operating fundamentals are also contributing factors.
AMB Property Corporation is one of the largest industrial REITs with approximately
$8.1 billion in gross assets. The REIT's long
term focus is on distribution markets that are tied to global trade and
also includes growing profitable business platforms in Europe and Asia.
As of March 31, 2010, AMB's largest markets were Southern
California (14% of total owned and managed square feet),
Chicago (10%), New York/Northern New Jersey (9%),
San Francisco (8%), and Europe (8%). Approximately
9.6% of AMB's annualized base rents expire in 2010.
AMB is well-diversified with the top ten tenants representing 16%
of annualized base rents. Development represents 4% of total
gross assets at 1Q10 as a result of the management team's prudent decisions
to lower their development starts until there is better clarity on customer
demand and pre-leasing.
AMB issued over $1.1 billion of equity and $500 million
of debt in the past 15 months. AMB maintains a manageable debt
maturity structure and unencumbered asset level of 62.5%.
The company has three lines of credit; originally two were due in
2010 and one was due in 2011 before the REIT extended the 2010 maturities
to 2011. AMB maintains significant levels of liquidity to meet
near term funding needs with approximately 75% available on their
lines of credit ($1.6 billion in capacity) following their
April equity offering, or 56% as of March 31, 2010.
The REIT's fixed charge coverage is 2.2x and net debt/EBITDA
is 7.7x at 1Q10 adjusted to include pro-rata consolidated
joint ventures. Secured debt is 7.5% of gross assets
at 1Q10 adjusted for pro-rata consolidated joint ventures.
AMB's leverage ratios are high for the Baa1 level -- on
a GAAP basis leverage (debt plus preferred/total gross assets) is 42.5%.
The rating outlook will likely return to stable once AMB has demonstrated
greater predictability in increased earnings stability, as well
as maintaining a fixed charge coverage of 2.5x on a sustainable
basis (inclusive of interest expense net of debt amortization costs,
preferred dividends and unit distributions, capitalized interest,
and consolidated pro-rata JV interests) and maintaining net debt/EBITDA
closer to 6x (inclusive of pro-rata JV interests). A downgrade
would result in any deterioration in fixed charge coverage to the lower
2x range (inclusive of interest expense net of debt amortization costs,
preferred dividends and unit distributions, capitalized interest,
consolidated pro-rata JV interests) and a rise in the net debt/EBITDA
ratio beyond current levels. An inability to meet its strategic
plans could also result in a downgrade.
Moody's last rating action with respect to AMB was on November 5,
2008 when Moody's affirmed the senior unsecured ratings at Baa1,
and changed the outlook to negative, from stable.
The following ratings were affirmed, with a negative outlook:
AMB Property, L.P. -- Unsecured debt
at Baa1; unsecured debt shelf at (P)Baa1.
AMB Property Corporation -- Preferred stock at Baa2;
preferred stock shelf at (P)Baa2.
AMB Property Corporation® [NYSE: AMB] headquartered in
San Francisco, California, USA, is an owner and operator
of industrial real estate, focused on major hub and gateway distribution
markets in the Americas, Europe and Asia. As of March 31,
2010, AMB owned, or had investments in, on a consolidated
basis or through unconsolidated joint ventures, properties and development
projects expected to total approximately 155.7 million square feet
(14.5 million square meters) in 48 markets within 15 countries.
At March 31, 2010, AMB had total assets of $6.9
billion and stockholders' equity of $2.9 billion.
The principal methodology used in rating AMB was the Rating Methodology
for REITs and Other Commercial Property Firms, published in January
2006 and available on www.moodys.com in the Rating Methodologies
sub-directory under the Research & Ratings tab. Other
methodologies and factors that may have been considered in the process
of rating AMB can also be found in the Rating Methodologies sub-directory
on Moody's website.
Merrie S. Frankel
VP - Senior Credit Officer
Real Estate Finance
Moody's Investors Service
Real Estate Finance
Moody's Investors Service
Moody's affirms AMB's Baa1 debt rating and negative outlook
No Related Data.
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