[0] S&P Revises Outlook on AMB Property Corp.Business Editors (Editor's Note Editor's Note (foaled in 1993 in Kentucky) is an American thoroughbred Stallion racehorse. He was sired by 1992 U.S. Champion 2 YO Colt Forty Niner, who in turn was a son of Champion sire Mr. Prospector and out of the mare, Beware Of The Cat. Trained by D. : This article was published earlier today with the incorrect headline "S&P Lowers Ratings on Federal Realty Investment Trust.") NEW YORK--(BUSINESS WIRE)--Standard & Poors July 17, 2000-- Standard & Poor's today revised its outlook on AMB AMB Ambient AMB Ambassador AMB Amber AMB Ambulance AMB Associação Médica Brasileira (Brazil) AMB Ambulatory AMB Advanced Memory Buffer (FBDIMM control unit on DRAM) Property Corp. and AMB Property, L.P. to positive from stable. In addition, ratings were affirmed on the company's corporate credit, senior unsecured debt Unsecured debt Debt that does not identify specific assets that the debtholder is entitled to in case of default. , and preferred stock Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. . The outlook revision reflects San Francisco-based AMB's conservative financial policies, good financial flexibility, and demonstrated profitable and timely capital recycling efforts. These strengths are offset by concerns regarding the company's currently minimal equity investments in speculative early stage companies, totaling $14 million; potential exposure to early stage companies in the tenant base, currently about 2% of AMB's revenues; and unseasoned recent investments in relatively more costly high throughput distribution properties, totaling $73 million this quarter within the REIT REIT See: Real Estate Investment Trust REIT See real estate investment trust (REIT). and $41 million within affiliated AMB Institutional Alliance Fund I in which the REIT has a 22% interest. AMB is an owner and operator of primarily industrial real estate nationwide, but focused on six target hub markets, with 780 industrial properties and nine community shopping centers owned as of June 30, 2000. In 1999, the company sold over $724 million in retail assets, primarily to one buyer. AMB redeployed 70% of the all-cash proceeds from these dispositions into industrial property acquisitions and developments, with the remaining 30% primarily being applied toward reducing existing debt. AMB realized about $54 million in gains from property sales in 1999. AMB has invested about $14 million to date, which is less than 0.5% of total assets, in the equity of speculative early stage companies such as WebVan, which is currently AMB's largest tenant at 1.5% of base rents, and Red Envelope A Red envelope or Red packet is a monetary gift which is given in Chinese society during holiday or special occasions. Usage Red envelopes are often presented on social and family occasions such as a Chinese marriage wedding receptions or a holiday such as Chinese . Standard & Poor's views these investments as a modest credit negative at this time, since AMB is generally investing in start-up businesses. AMB's recent property investments include high throughput distribution properties, such as the 1.0 million square foot (sq. ft.) JFK air cargo air cargo: see aviation. portfolio, which tend to be located on, or near, airport tarmacs, shipping ports, and other major distribution points. These properties are likely to be larger and more costly on a per sq. ft. basis than AMB's existing portfolio, however, these infill properties are fungible A description applied to items of which each unit is identical to every other unit, such as in the case of grain, oil, or flour. Fungible goods are those that can readily be estimated and replaced according to weight, measure, and amount. and divisible DIVISIBLE. The susceptibility of being divided. 2. A contract cannot, in general, be divided in such a manner that an action may be brought, or a right accrue, on a part of it. 2 Penna. R. 454. , offsetting some of these concerns. AMB continues to maintain a conservative financial profile, with leverage below 40% and fixed-charge coverage fixed-charge coverage The number of times that a firm's operating income exceeds its fixed payments. Fixed-charge coverage is a measure of a firm's ability to meet contractually fixed payments, with high coverage indicating significant flexibility for making above 2.2 times. The company's financial profile has been strengthened over the past two years by improved profitability. Same-store results have been solid, and modest embedded future rent growth potential exists. The company has good financial flexibility, demonstrated by a moderately encumbered Encumbered A property owned by one party on which a second party reserves the right to make a valid claim, e.g., a bank's holding of a home mortgage encumbers property. property portfolio and its access to private and public capital in what has been a generally capital-constrained environment. The company also has access to an attractively priced, recently renewed $500 million credit facility that remains modestly used. OUTLOOK: POSITIVE Standard & Poor's acknowledges AMB's sound financial policies, demonstrated capital recycling efforts, and access to diverse sources of private and public capital. Future ratings improvement would be driven by demonstrated solid financial performance as the company divests of its remaining retail assets, builds out its development pipeline, and manages new investment initiatives. Seasoning of AMB's recent investments in early stage companies and manageable exposure to early stage tenants would be required for upgrade consideration, along with profitable performance of high throughput distribution properties, a new, and somewhat more costly, product for the company. In addition, Standard & Poor's would look for AMB to maintain an appropriate level of unencumbered assets within its portfolio. -- CreditWire |
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