The real estate investment trust's net earnings came in $0.04 below the midpoint of its guidance and were half of last year's first-quarter numbers. Looking over the income statement, the loss stems largely from fewer development profits and fewer gains on real estate sales. However, funds from operations (FFO) were in line with last year's results and above the company's midpoint guidance. More importantly, the REIT raised the lower end of its FFO guidance by $0.05 per share, to $2.85 to $3.10 per share for the full year.
Among its 25 largest customers, AMB Property serves the U.S. government, FedEx (NYSE: FDX ) , United Parcel Service (NYSE: UPS ) , and many international shipping companies. However, no tenant makes up more than 3% of base rent, which makes the company very well-diversified.
AMB Property and its competitors in the industrial REIT space, ProLogis (NYSE: PLD ) and First Industrial Realty Trust (NYSE: FR ) , provide investors with a look at industrial real estate performance outside the U.S. through their properties in Canada, Mexico, Europe, and Asia. (This is more the case with ProLogis and AMB Property.) In turn, this provides a bit of a look at the economic activity in some of these locations. After reviewing the conference call transcript, there is evidence that economic activity in Germany is picking up, and that activity in Japan remains strong.
Occupancy for the quarter was 94.7%, down slightly from 95.8% the previous quarter, but close to the company's guidance of 95% for full-year 2006. Breaking it down by U.S. markets, the Los Angeles market is doing very well, as are the Seattle and Miami markets; San Francisco, Atlanta, Chicago, and Dallas all experienced lower rents, with San Francisco providing the worst performance. On the whole, the company believes the U.S. is still doing well and sees the country on the whole as lacking enough space to rent compared with previous peak years.
Financially, AMB Property remains a very strong company. Interest coverage, fixed-charge coverage, and the dividend are well-covered by current operations. Given its growth potential, geographic diversification, and its price-to-FFO multiple of about 16, I'm inclined to dig a bit deeper, then build out an adjusted-funds-from-operations-based discounted cash flow model for the company. The net asset value (NAV) estimates I have seen from reitcafe.com and from reports available with my brokerage account peg the company's NAV at $51 to $57 as well. At the stock's current price of $49.69, that's not stupendously undervalued, but given the diversified growth possibilities, the price is intriguing enough for me to take the time to do my own research.
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