According to Germain's and McElroy's report, the solid resultsunderscore the company's quality portfolio concentrations inhigh-growth and supply-constrained logistics markets. Theresearchers believe AMB should continue to benefit from healthyglobal industrial fundamentals driven by the reconfiguration of thesupply chain and product obsolescence. In general, BofA Securitiesmarket-weights the industrial sector based on an "overweight" toglobal industrial REITs and "underweight" to US industrial. "Webelieve global trade trends will lead to better-than-expecteddemand in markets that are directly linked to the globaldistribution network," Germain and McElroy state in the report.


Germain and McElroy further say the REIT's solid portfolioconcentrations moderate any risk of slowing demand. They contendAMB's portfolio is less susceptible to slowing industrialfundamentals because the company derives over 70% of its rents fromkey port and airport markets. In addition, AMB's growing globalplatform, with about 70% of new development starts and acquisitionsprojected to be outside the US, should mitigate some of the effectsof a potential US slowdown. The company expects to grow itsdevelopment platform to $1.6 billion by 2010, with about 70% of newdevelopment outside the US. AMB's private capital platform, whichcurrently manages over $7.6 billion , is expected to raise capitalfor a Canada and non-Japan Asia fund over the next 12 months.


For '08, AMB projects total capital deployment of more than $2.1billion, comprising $850 million of acquisitions and $1.3 billionof development starts. The analysts emphasize that the REIT hasadequate capital to fund this plan, with limited near-term debtmaturities, $600 million available on its credit facility, $300million of cash on hand and a co-investment platform with over $2.5billion of capacity available. It also continues to enjoy a healthyinterest rate for secured debt from life companies. Additionally,AMB expects to see a positive earnings contribution from itsvalue-add conversion platform; which readies land entitled forindustrial development to higher use.


According to the two analystst, AMB's valuation remains"compelling," with shares trading at a discount of 11% to forwardnet asset value (FW NAV) and 9% to discount cash flow (DCF).Furthermore, AMB is currently trading at 17 times adjusted fundsfrom operations (AFFO) for '08, which represents a modest 7%premium relative to its industrial peers, versus a historicalpremium of about 20%. Despite the buy recommendation, Germain andMcElroy tweaked earlier estimates of profitability due to AMBmanagement's more cautious outlook on US industrial fundamentalsand the tempering of rent and occupancy assumptions. As a result,they reduced their '08 estimate of funds from operations per shareby $0.02 to $3.99.

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