Industrial Uptick Drives Optimism at AMB

"For the first time since mid-2008, we find that our large global customers are talking about growth," Moghadam said in his introduction to the company's earnings conference call with financial analysts. AMB's customers "appear to have conviction in their forecast and they tell us they are budgeting for moderate increases in 2010," Moghadam said. This is a significant change from the focus on cost management that dominated customers' thinking in 2009, he said.

Moghadam also cited a list of statistics about leading logistics industry indicators that are a major factor in AMB's increased optimism. He pointed to an 8% rise in global industrial production since its trough in June, a rebound of more than 16% in container traffic at US ports year-over-year in December and international air cargo volumes up 24% year-over-year in December as global trade improves.

While AMB is "optimistic about what is happening with leading indicators," Moghadam cautioned that "It is important to remember that it will take some time for the recovery to translate into new demand for industrial real estate."

Moghadam pointed out that the rise in air cargo business is a good sign because air cargo is "the proverbial canary in the coal mine of the logistics business." He explained that, "Air cargo is the direct beneficiary of emergency shipments made in response to inventories that were too tightly managed during the downturn." Now as the economy recovers retailers and manufacturers have had to rush shipments via air as sales outpaced their conservative expectations, the AMB chief said.

The US logistics market "continues to be challenging," with 2009 posting the worst performance on record for industrial net absorption at a negative 265 million square feet, Moghadam pointed out. Nonetheless, the negative trend "decelerated over the course of the year slowing to a minus 38 million square feet in the fourth quarter," he said, which was slightly better than the company's expectations.

With new construction dropping to an all-time low of 71 million square feet in 2009, and with the positive indicators at work, Moghadam said that AMB's research "calls for net absorption in the US to turn positive in the third quarter." He said the company's confidence in the recovery is bolstered by what it is seeing and hearing from customers. "Their outlook, which began improving in the second quarter, has taken on a new level of optimism in the last two months," the AMB chairman said, with customers expressing increased confidence, improved profitability and high growth expectations for 2010.

AMB's FFO for the fourth quarter was $43.76 million and 29 cents per share, compared with negative FFO of $169.8 million and $1.68 per share in the fourth quarter of 2008. Its full-year FFO for 2009 was $99.28 million and 72 cents per share, compared to $79.2 million and 77 cents per share in 2008.

The company's net loss was $7.57 million and five cents per share in the fourth quarter, compared to a loss of $201.36 million and $2.06 per share in the fourth quarter of 2008. Its full-year net loss was $50.08 million and 37 cents per share, compared with $66.45 million and 68 cents per share in 2008.