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SAN FRANCISCO-AMB Property Corp. said Tuesday it lost $122.3 million in the first three months of the year—down from a profit of $39 million in the same 2008 period–due to $182 million in write-downs related to development assets, operating assets and land holdings. The locally headquartered global industrial REIT also reported declining occupancy, smaller rent gains on renewals and rollovers, and negative same-store NOI growth.

The good news for the company lies in its balance sheet, which the company has been shoring up with asset sales, common stock offering, refinancings and note buybacks. The company has reduced borrowings under its credit facility by 60% to $381 million and has $1.2 billion of available credit. In addition, AMB has repaid, refinanced or extended approximately $751 million of its other debt during the first quarter.

The company still has $626 million of debt maturing through 2012 but has launched a cash tender offer for $250 million of that tied to bonds maturing in 2010. In a conference call with investors company executives said the company’s balance sheet is now positioned to meet all capital needs into 2013.

With regard to dispositions, the company completed contributions and sales totaling approximately $304 million during the quarter, and an additional $87 million in sales subsequent to the end of the quarter. The company has been achieving an approximate 8.5% stabilized capitalization rate for its asset sales in the US, and executives told analysts it expects that percentage to hold steady. An additional $219 million of assets are under contract and another $51 million is under letters of interest. Buyers have included private equity, life companies, users and 1031 exchange buyers, executives told analysts.

Of the $182 million in write-downs approximately $119 million was related to assets under development and available for sale while $56 million was related to land and $7 million was related to operating assets. Cumulative write-downs over the past two quarters total $377 million. The write downs represent a 50% decline from peak values and do not include the previously expected profit that will no longer occur, executives told analysts.

Leasing activity during the first quarter totaled one million square feet for its development pipeline and 5.6 million square feet in its operating portfolio. Occupancy fell to 92.2% by the end of March from 95.1% at the start of the year and 94.8% at the end of March 2008. The reduction was the result of a few expected large lease expirations, executives told analysts. The rent gain on renewals and rollovers was 2.2% overall and 1.5% on a same-store basis, down from 3.1%and 2.7%, respectively, in the prior quarter. AMB executives told analysts on Tuesday morning that they expected to operating environment to continue to deteriorate before beginning to stabilize in the fourth quarter.

Nationally, industrial occupancy declined to 90.4% at the end of March 2009 from 91% at the end of December 2008 as unoccupied space grew by 50 million square feet, according to Colliers International. Major markets contributing to this give-back included Los Angeles, Chicago, Phoenix and San Jose. Only nine of the 56 industrial markets surveyed showed positive absorption during the first quarter.

Sam-store NOI growth was hard to come by in the first quarter. Only three of AMB’s US markets posted year-to-date same-store NOI growth; Seattle posted 5.1% NOI growth and San Francisco and Southern California each produced 2% NOI growth. Same-store NOI in its remaining markets declined by between 2.2% (Chicago) and 9.2% (New Jersey/New York). Internationally, weighted average same-store NOI fell 6.7% Europe and fell 3.7% in Mexico while it grew 13.1% in Japan and 4.5% in China.

On the development front, the company commenced two previously committed build-to-suit developments in Paris, France and Monterrey, Mexico, totaling 464,000 square feet during the quarter. Its pipeline totals 11.8 million square feet scheduled for delivery through 2010. The estimated total investment before the recognition of impairment charges is $984 million, with the company’s share projected to come in at $135 million. The development pipeline was approximately 31% leased as of March 31, with approximately seven million square feet of leasing remaining in order to stabilize the pipeline.

AMB says it is in the preliminary stages of putting together its second China fund. The fund will have development capabilities. The goal for the estimated net IRR to investors is in the mid-teens, executives told analysts.

AMB’s CEO is Hamid Moghadam, a 52-year-old MIT-trained engineer who helped launch of AMB’s predecessor companies in 1983 and currently sits on the board of trustees at Stanford University. AMB’s annual meeting is next Thursday (May 7) at its Pier 1 head office in San Francisco.

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