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10-K 1 f06482e10vk.htm FORM 10-K e10vk

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K


(Mark One)
þ		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the fiscal year ended December 31, 2004

or

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-13545

AMB Property Corporation

(Exact name of Registrant as specified in its charter)


Maryland		94-3281941
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)
Pier 1, Bay 1, San Francisco, California (Address of Principal Executive Offices)		94111 (Zip Code)

(415) 394-9000

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:


(Title of Each Class)		(Name of Each Exchange on Which Registered)

Common Stock, $.01 par value		New York Stock Exchange
6¹/2% Series L Cumulative Redeemable Preferred Stock
6³/4% Series M Cumulative Redeemable Preferred Stock

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes þ No o

The aggregate market value of common shares held by non-affiliates of the registrant (based upon the closing sale price on the New York Stock Exchange) on June 30, 2004 was $2,738,107,040.

As of March 1, 2005, there were 83,926,571 shares of the Registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Part III incorporates by reference the registrant’s Proxy Statement for its Annual Meeting of Stockholders which the registrant anticipates will be filed no later than 120 days after the end of its fiscal year pursuant to Regulation 14A.

FORWARD-LOOKING STATEMENTS

Some of the information included in this annual report on Form 10-K contains forward-looking statements, which are made pursuant to the safe-harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause our actual results to differ materially from those in the forward-looking statements, and you should not rely on the forward-looking statements as predictions of future events. The events or circumstances reflected in forward-looking statements might not occur. You can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “pro forma,” “estimates” or “anticipates,” or the negative of these words and phrases, or similar words or phrases. You can also identify forward-looking statements by discussions of strategy, plans or intentions. Forward-looking statements involve numerous risks and uncertainties and you should not rely upon them as predictions of future events. There is no assurance that the events or circumstances reflected in forward-looking statements will occur or be achieved. Forward-looking statements are necessarily dependent on assumptions, data or methods that may be incorrect or imprecise and we may not be able to realize them.

The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:


	•	changes in general economic conditions or in the real estate sector;

	•	non-renewal of leases by customers or renewal at lower than expected rent;

	•	difficulties in identifying properties to acquire and in effecting acquisitions on advantageous terms and the failure of acquisitions to perform as we expect;

	•	risks and uncertainties affecting property development and renovation (including construction delays, cost overruns, our inability to obtain necessary permits and financing);

	•	risks of doing business internationally, including unfamiliarity with new markets and currency risks;

	•	a downturn in California’s economy or real estate conditions;

	•	losses in excess of our insurance coverage;

	•	our failure to divest of properties on advantageous terms or to timely reinvest proceeds from any such divestitures;

	•	unknown liabilities acquired in connection with acquired properties or otherwise;

	•	risks associated with using debt to fund acquisitions and development, including re-financing risks;

	•	our failure to obtain necessary financing;

	•	changes in local, state and federal regulatory requirements;

	•	environmental uncertainties; and

	•	our failure to qualify and maintain our status as a real estate investment trust under the Internal Revenue Code of 1986, as amended.

Our success also depends upon economic trends generally, various market conditions and fluctuations and those other risk factors discussed under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Business Risks” in this report. We caution you not to place undue reliance on forward-looking statements, which reflect our analysis only and speak as of the date of this report or as of the dates indicated in the statements. We assume no obligation to update or supplement forward-looking statements.

PART I


Item 1.	*Business*

General

AMB Property Corporation, a Maryland corporation, acquires, develops and operates primarily industrial properties in key distribution markets throughout North America, Europe and Asia. We commenced operations as a fully integrated real estate company effective with the completion of our initial public offering on November 26, 1997. Our strategy focuses on providing properties for customers who value the efficient movement of goods in the world’s busiest distribution markets: large, supply-constrained locations with close proximity to airports, seaports and major freeway systems. As of December 31, 2004, we owned or managed properties or had renovation and development projects comprised of 1,108 buildings in 38 markets within eight countries totaling 110.7 million square feet (10.3 million square meters).

We operate our business through our subsidiary, AMB Property, L.P., a Delaware limited partnership. We refer to AMB Property, L.P. as the “operating partnership.” As of December 31, 2004, we owned an approximate 94.6% general partnership interest in the operating partnership, excluding preferred units. As the sole general partner of the operating partnership, we have the full, exclusive and complete responsibility for and discretion in its day-to-day management and control.

Our investment strategy generally targets customers whose businesses are tied to global trade, which, according to the World Trade Organization, has grown more than three times the world gross domestic product (GDP) growth rate during the last 20 years. To serve the facilities needs of these customers, we seek to invest in major distribution markets, transportation hubs and gateways, both domestically and internationally. Our investment strategy seeks target markets that are generally characterized by large population densities and typically offer substantial consumer bases, proximity to large clusters of distribution-facility users and significant labor pools. When measured by annualized base rents, 94.2% of our industrial properties are concentrated in our target U.S., on-tarmac and international markets. Of this 94.2%, 65.3% is derived from eight U.S. hub and gateway distribution markets: Atlanta, Chicago, Dallas/ Fort Worth, Los Angeles, Miami, Northern New Jersey/ New York City, the San Francisco Bay Area and Seattle. Other U.S. target markets account for 16.2% of our annualized base rents. Our portfolio of properties located on-tarmac at airports and in international target markets comprised 8.3% and 4.4% of our consolidated annualized base rents, respectively. Much of our portfolio is comprised of industrial buildings in in-fill submarkets. In-fill locations are characterized by supply constraints on the availability of land for competing projects as well as physical, political or economic barriers to new development.

We focus our investment strategy on High Throughput Distribution®, or HTD® facilities, which are buildings designed to facilitate rapid distribution of our customers’ products rather than store them. Our investment focus on HTD assets is based on what we believe to be a global trend toward lower inventory levels and expedited supply chains. HTD facilities generally have a variety of characteristics that allow the rapid transport of goods from point-to-point. Examples of these physical characteristics include numerous dock doors, shallower building depths, fewer columns, large truck courts and more space for trailer parking. We believe that these building characteristics represent an important success factor for time-sensitive customers such as air express, logistics and freight forwarding companies and that these facilities function best when located in convenient proximity to transportation infrastructure such as major airports and seaports.

As of December 31, 2004, we owned and operated (exclusive of properties that we managed for third parties) 984 industrial buildings and four retail and other properties, totaling approximately 90.8 million rentable square feet, located in 33 markets throughout the United States and in France, Germany, Japan, Mexico and the Netherlands. As of December 31, 2004, through our subsidiary, AMB Capital Partners, LLC, we also managed, but did not have an ownership interest in, industrial buildings, totaling approximately 0.4 million rentable square feet. In addition, as of December 31, 2004, we had investments in operating industrial buildings, totaling approximately 10.3 million rentable square feet, through investments in unconsolidated joint ventures. As of December 31, 2004, we also had investments in industrial development

projects, some of which are part of our development-for-sale program, totaling approximately 9.2 million square feet.

During 2004, our property acquisitions totaled $695.2 million, including expected capital expenditures, and we increased our market presence primarily in targeted metropolitan markets including Amsterdam, Chicago, Northern New Jersey, Paris and Tokyo. As of December 31, 2004, we had 25 industrial buildings and one undeveloped land parcel held for divestiture. Our dispositions during 2004 totaled $200.3 million, including assets in markets that no longer fit our investment strategy and properties at valuations that we considered to be at premium levels. While we continue to sell assets, we believe that we have substantially achieved our near-term strategic disposition goals. Additionally, we contributed $71.5 million of operating assets to a private capital joint venture as part of our continuing strategy to increase the proportion of our assets owned in co-investment joint ventures.

We are self-administered and self-managed and expect that we have qualified and will continue to qualify as a real estate investment trust for federal income tax purposes beginning with the year ended December 31, 1997. As a self-administered and self-managed real estate investment trust, our own employees perform our corporate administrative and management functions, rather than relying on an outside manager for these services. We manage our portfolio of properties in a flexible operating model which includes both direct property management and our Strategic Alliance Program® in which we have established relationships with third-party real estate management firms, brokers and developers that provide property-level administrative and management services under our direction.

Our principal executive office is located at Pier 1, Bay 1, San Francisco, California 94111; our telephone number is (415) 394-9000. We also maintain regional offices in Amsterdam, Boston, Chicago, Los Angeles, Shanghai and Tokyo. As of December 31, 2004, we employed 234 individuals, 148 at our San Francisco headquarters, 52 in our Boston office, and the remainder in our other offices. Our website address is www.amb.com. Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are available on our website free of charge as soon as reasonably practicable after we electronically file such material with, or furnish it to, the U.S. Securities and Exchange Commission. Information contained on our website is not and should not be deemed a part of this annual report or any other report or filing filed with the U.S. Securities and Exchange Commission.

Unless the context otherwise requires, the terms “we,” “us” and “our” refer to AMB Property Corporation, AMB Property, L.P. and their other controlled subsidiaries, and the references to AMB Property Corporation include AMB Property, L.P. and their controlled subsidiaries. We refer to AMB Property, L.P. as the “operating partnership.” The following marks are our registered trademarks: AMB®; Development Alliance Partners®; HTD®; High Throughput Distribution®; Management Alliance Program®; Strategic Alliance Partners®; Strategic Alliance Programs®; and UPREIT Alliance Program®.

Operating Strategy

We base our operating strategy on a variety of operational and service offerings, including in-house acquisitions, development, redevelopment, asset management, leasing, finance, accounting and market research. Our strategy is to leverage our expertise across a large customer base and complement our internal management resources with long-standing relationships with entrepreneurial real estate management and development firms in our target markets, which we refer to as our Strategic Alliance Partners®.

We believe that real estate is fundamentally a local business and best operated by local teams in each market comprised of AMB employees, local alliance partners or both. We intend to increase utilization of internal management resources in target markets to achieve both operating efficiencies and to expose our customers to the broadening array of AMB service offerings, including access to multiple locations worldwide and build-to-suit developments. We actively manage our portfolio, whether directly or with an alliance partner, by establishing leasing strategies, negotiating lease terms, pricing, and level and timing of property improvements.

Growth Strategies


	Growth Through Operations

We seek to generate long-term internal growth through rent increases on existing space and renewals on rollover space by working to maintain a high occupancy rate at our properties and controlling expenses by capitalizing on the economies of scale inherent in owning, operating and growing a large, global portfolio. However, during 2004, our average industrial base rental rates decreased by 13.2% from the rent in place at expiration for that space on leases entered into or renewed during the period. This amount excludes expense reimbursements, rental abatements, percentage rents and straight-line rents. Since 2001, as the industrial market weakened, we have focused on maintaining occupancy levels. During 2004, cash-basis same-store net operating income (rental revenues less property operating expenses and real estate taxes for properties included in the same-store pool, which is set annually and excludes properties purchased or developments stabilized after December 31, 2002) decreased by 0.9% on our industrial properties. Since our initial public offering in November 1997, we have experienced average annual increases in industrial base rental rates of 6.9% and maintained an average quarter-end occupancy of 94.9% in our industrial operating portfolio. While we believe that it is important to view real estate as a long-term investment, past results are not necessarily an indication of future performance. See Part IV, Item 15: Note 16 of the “Notes to Consolidated Financial Statements” for detailed segment information, including revenue attributable to each segment, gross investment in each segment and total assets.


	Growth Through Acquisitions and Capital Redeployment

We believe that our significant acquisition experience and our network of property management and acquisition resources will continue to provide opportunities for external growth. We have long-term relationships with third-party local property management firms, which we believe will give us access to additional acquisition opportunities, as such managers frequently market properties on behalf of sellers. We believe that our operating structure also enables us to acquire properties through our UPREIT Alliance Program® in exchange for limited partnership units in the operating partnership or AMB Property II, L.P., thereby enhancing our attractiveness to owners and developers seeking to transfer properties on a tax-deferred basis. Going forward, we believe that our newly-formed open-ended co-investment partnership, AMB Institutional Alliance Fund III, L.P., will serve as our primary source of capital for acquisitions of operating properties within the U.S. In addition, we seek to redeploy capital from non-strategic assets into properties that better fit our current investment focus.

We are generally engaged in various stages of negotiations for a number of acquisitions and dispositions that may include transactions involving individual properties, large multi-property portfolios or other real estate companies. There can be no assurance that we will consummate any of these transactions. Such transactions, if we consummate them, may be material individually or in the aggregate. Sources of capital for acquisitions may include retained cash flow from operations, borrowings under our unsecured credit facilities, other forms of secured or unsecured debt financing, issuances of debt or preferred or common equity securities by us or the operating partnership (including issuances of units in the operating partnership or its subsidiaries), proceeds from divestitures of properties, assumption of debt related to the acquired properties and private capital from our co-investment partners. See Part II, Item 7: “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Summary of Key Transactions in 2004.”


	Growth Through Development

We believe that development, renovation and expansion of well-located, high-quality industrial properties should continue to provide us with attractive investment opportunities at a higher rate of return than we may obtain from the purchase of existing properties. We believe we have the in-house expertise to create value both through new construction and acquisition, conversion and management of value-added properties. Value-added conversion is typically characterized as property with available space or near-term leasing exposure, undeveloped land acquired in connection with other property that provides an opportunity for development or property that is well-located but requires redevelopment or renovation. Both new development and value-

added conversions require significant management attention and capital investment to maximize returns. Completed development properties may be held in our portfolio, sold to third parties or contributed to our co-investment joint ventures. We believe our global market presence and expertise will enable us to continue to generate and capitalize on a diverse range of development opportunities.

We believe that the multidisciplinary backgrounds of our employees should provide us with the skills and experience to capitalize on strategic renovation, expansion and development opportunities. Many of our officers have specific experience in real estate development, both with us and with national development firms, and over the past year, we have expanded our development staff. We pursue development projects directly and in joint ventures with our Development Alliance Partners®, which provides us with the flexibility to pursue development projects independently or in partnerships, depending on market conditions, submarkets or building sites.


	Growth Through Global Expansion

By 2007, we plan to have approximately 15% of our portfolio (based on consolidated annualized base rent) invested in international markets. As of December 31, 2004, our international operating properties comprised 4.4% of our consolidated annualized base rent. Our North American target markets outside of the United States currently include Guadalajara, Mexico City, Monterrey and Toronto. Our European target markets currently include Amsterdam, Brussels, Frankfurt, London, Lyon, Madrid and Paris. Our Asian target markets currently include Beijing, Nagoya, Osaka, the Pearl River Delta, Shanghai, Singapore and Tokyo.

We believe that expansion into target international markets represents a natural extension of our strategy to invest in industrial markets with high population densities, close proximity to large customer clusters and available labor pools, and major distribution centers serving global trade. Our international expansion strategy mirrors our domestic focus on supply-constrained submarkets with political, economic or physical constraints to new development. Our international investments will extend our offering of High Throughput Distribution® facilities for customers who value speed-to-market over storage. Specifically, we are focused on customers whose business is derived from global trade. In addition, our investments target major consumer distribution markets and customers. We believe that our established customer relationships, our contacts in the air cargo and logistics industries, our underwriting of markets and investments and our Strategic Alliance Programs with knowledgeable developers and managers will assist us in competing internationally.

There are many factors that could cause our entry into target markets and future capital allocation to differ from our current expectations, which are discussed in this report under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Business Risks — Risks Associated with Our International Business.” Further, it is possible that our target markets will change over time to reflect experience, market opportunities, customer needs and changes in global distribution patterns. For a discussion of the amount of our revenues attributable to the United States and international markets, please see Part IV, Item 15: Note 16 of the “Notes to Consolidated Financial Statements.”


	Growth Through Co-Investments

We co-invest in properties with private-capital investors through partnerships, limited liability companies or joint ventures. Our co-investment joint ventures are managed by AMB’s private capital group and typically operate under the same investment strategy that we apply to our other operations. Typically we will own a 20-50% interest in our co-investment joint ventures. In general, we control all significant operating and investment decisions of our co-investment entities. We believe that our co-investment program will continue to serve as a source of capital for acquisitions and developments; however, there can be no assurance that it will continue to do so. In addition, our co-investment joint ventures typically allow us to earn acquisition and development fees, asset management fees and priority distributions as well as promoted interests and incentive fees based on the performance of the co-investment joint ventures. As of December 31, 2004, we owned approximately 40.8 million square feet of our properties (36.8% of the total operating and development portfolio) through our co-investment joint ventures.

BUSINESS RISKS

See Part II, Item 7: “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Business Risks” for a complete discussion of the various risks that could adversely affect us, including risks related to our international operations.


Item 2.	*Properties*

INDUSTRIAL PROPERTIES

As of December 31, 2004, we owned 984 industrial buildings aggregating approximately 90.3 million rentable square feet, located in 33 markets throughout the United States and in France, Germany, Japan, Mexico and the Netherlands. Our industrial properties accounted for $552.2 million or 99.3% of our total annualized base rent as of December 31, 2004. Our industrial properties were 94.8% leased to 2,784 customers, the largest of which accounted for no more than 3.4% of our annualized base rent from our industrial properties. See Part IV, Item 15: Note 16 of “Notes to Consolidated Financial Statements” for segment information related to our operations.

Property Characteristics. Our industrial properties, which consist primarily of warehouse distribution facilities suitable for single or multiple customers, are typically comprised of multiple buildings.

The following table identifies type and characteristics of our industrial buildings and each type’s percentage of our total portfolio based on square footage at December 31:


Building Type	Description	2004			2003

Warehouse	Customers typically 15,000-75,000 square feet, single or multi-tenant		41.4	%		40.7	%
Bulk Warehouse	Customers typically over 75,000 square feet, single or multi-tenant		38.9	%		39.3	%
Flex Industrial	Includes assembly or research & development, single or multi-customer		7.1	%		7.3	%
Light Industrial	Smaller customers, 15,000 square feet or less, higher office finish		5.9	%		6.1	%
Trans-Shipment	Unique configurations for truck terminals and cross-docking		2.3	%		2.2	%
Air Cargo	On-tarmac or airport land for transfer of air cargo goods		3.2	%		3.1	%
Office	Single or multi-customer, used strictly for office		1.2	%		1.3	%

Lease Terms. Our industrial properties are typically subject to lease on a “triple net basis,” in which customers pay their proportionate share of real estate taxes, insurance and operating costs, or are subject to leases on a “modified gross basis,” in which customers pay expenses over certain threshold levels. In addition, most of our leases include fixed rental increases or Consumer Price Index rental increases. Lease terms typically range from three to ten years, with an average of six years, excluding renewal options. However, the majority of our industrial leases do not include renewal options.

Overview of Major Target Markets. Our industrial properties are typically located near major airports, key interstate highways, and seaports in major domestic metropolitan areas, such as Atlanta, Chicago, Dallas/ Fort Worth, Los Angeles, Miami, Northern New Jersey/ New York City, the San Francisco Bay Area and Seattle. Our international industrial facilities are located in major distribution markets, including Amsterdam, Frankfurt, Guadalajara, Mexico City, Paris, Singapore and Tokyo.

Within these metropolitan areas, our industrial properties are generally concentrated in locations with limited new construction opportunities within established, relatively large submarkets, which we believe should provide a higher rate of occupancy and rent growth than properties located elsewhere. These in-fill locations are typically near major airports, seaports or convenient to major highways and rail lines, and are

proximate to large and diverse labor pools. There is typically broad demand for industrial space in these centrally located submarkets due to a diverse mix of industries and types of industrial uses, including warehouse distribution, light assembly and manufacturing. We generally avoid locations at the periphery of metropolitan areas where there are fewer constraints to the supply of additional industrial properties.

Industrial Market Operating Statistics(1)

As of December 31, 2004, we held investments in operating properties in 33 markets in our consolidated portfolio and an additional two markets in our unconsolidated portfolio throughout the United States and in France, Germany, Japan, Mexico and the Netherlands. The following table represents properties in which we own a 100% interest or a controlling interest (consolidated), and excludes properties in which we only own a non-controlling interest (unconsolidated) and properties under development:


																													Total
														No. New															U.S. Hub						Total/
								Dallas/			Los			Jersey/			San Francisco									On-			and Gateway			Total Other			Weighted
		Atlanta			Chicago			Ft. Worth			Angeles(2)			New York			Bay Area			Miami			Seattle			Tarmac(3)			Markets			Markets			Average

Number of buildings			45			100			40			150			125			139			49			64			38			750			234			984
Rentable square feet			5,132,333			9,345,110			3,799,444			13,288,870			9,258,334			11,104,642			5,170,909			6,857,569			2,941,345			66,898,556			23,380,247			90,278,803
	% of total rentable square feet		5.7	%		10.4	%		4.2	%		14.7	%		10.3	%		12.3	%		5.7	%		7.6	%		3.2	%		74.1	%		25.9	%		100.0	%
Occupancy percentage			92.4	%		94.2	%		91.8	%		98.3	%		94.5	%		93.8	%		93.1	%		96.7	%		96.3	%		95.0	%		94.2	%		94.8	%
Annualized base rent (000’s)		$	19,062		$	41,483		$	13,258		$	81,890		$	63,590		$	71,966		$	34,495		$	34,916		$	45,848		$	406,508			145,669		$	552,177
	% of total annualized base rent		3.5	%		7.5	%		2.5	%		14.8	%		11.5	%		13.0	%		6.2	%		6.3	%		8.3	%		73.6	%		26.4	%		100.0	%
Number of leases			163			204			119			419			377			407			239			267			250			2,445			892			3,337
Annualized base rent per square foot		$	4.02		$	4.71		$	3.80		$	6.27		$	7.27		$	6.91		$	7.17		$	5.27		$	16.19		$	6.40		$	6.61		$	6.45
Lease expirations as a % of ABR:(4)
	2005		15.6	%		21.9	%		18.1	%		13.8	%		9.4	%		18.5	%		22.2	%		14.6	%		16.4	%		16.1	%		16.9	%		16.3	%
	2006		20.4	%		23.1	%		15.2	%		21.3	%		14.5	%		10.7	%		16.2	%		18.4	%		11.7	%		16.6	%		9.8	%		14.8	%
	2007		13.6	%		25.0	%		14.5	%		14.1	%		14.5	%		16.5	%		22.0	%		18.9	%		5.9	%		16.0	%		16.1	%		16.0	%
Weighted average lease terms:
	Original		5.8 years			5.6 years			5.4 years			6.1 years			6.6 years			5.2 years			6.0 years			5.7 years			8.2 years			6.0 years			6.5 years			6.1 years
	Remaining		3.2 years			2.3 years			3.5 years			3.2 years			3.8 years			2.9 years			3.1 years			3.0 years			4.4 years			3.2 years			3.6 years			3.3 years
Tenant retention:
	Quarter		56.1	%		74.8	%		94.5	%		67.1	%		31.1	%		65.5	%		72.5	%		76.5	%		78.1	%		67.3	%		69.5	%		68.1	%
	Year-to-date		62.6	%		60.1	%		76.6	%		61.7	%		65.9	%		65.3	%		72.0	%		66.7	%		75.4	%		65.4	%		71.4	%		66.8	%
Rent increases on renewals and rollovers:
	Year-to-date		(12.4	)%		(5.9	)%		(13.1	)%		(3.0	)%		(3.9	)%		(43.1	)%		(5.1	)%		(7.8	)%		(2.7	)%		(15.3	)%		(3.6	)%		(13.2	)%
	Same Space SF leased		1,218,861			2,263,609			1,181,607			2,749,944			1,032,006			2,411,216			1,031,103			1,376,509			667,358			13,932,213			3,553,563			17,485,776
Same store cash basis NOI growth:
	Year-to-date		(4.2	)%		1.9	%		0.9	%		2.8	%		(3.1	)%		(9.4	)%		(2.6	)%		3.0	%		5.1	%		(1.8	)%		1.9	%		(0.9	)%
Sq. feet owned in same store pool(5)			4,943,591			7,254,655			3,532,884			11,778,861			6,182,388			10,696,621			4,348,139			4,857,434			2,404,378			55,998,951			18,517,476			74,516,427
Our pro rata share of square feet			2,770,126			6,095,983			2,752,701			8,779,575			5,194,776			8,555,870			4,296,915			3,409,892			2,359,531			44,215,369			19,248,213			63,463,582
Total market square footage(6)			6,066,769			13,893,317			4,708,441			17,320,438			10,793,255			11,563,682			5,791,707			7,033,554			—			77,171,163			33,550,535			110,721,698


(1)	Includes all industrial consolidated operating properties and excludes industrial developments and renovation projects.

(2)	We also own a 19.9 acre parking lot with 2,720 parking spaces and 12 billboard signs in the Los Angeles market immediately adjacent to the Los Angeles International Airport.

(3)	Includes on-tarmac air cargo facilities at 14 airports.


(4)	Annualized base rent is calculated as monthly base rent (cash basis) per the terms of the lease, as of December 31, 2004, multiplied by 12.

(5)	Same store pool excludes properties purchased or developments stabilized after December 31, 2002. Stabilized properties are generally defined as properties that are 90% leased or properties for which we have held a certificate of occupancy or where building has been substantially complete for at least 12 months.

(6)	Total market square footage includes industrial and retail operating properties, development properties, unconsolidated properties (100% of the square footage), properties managed for third parties and reallocation of on-tarmac properties into metro markets.

Industrial Operating Portfolio Overview

As of December 31, 2004, our 984 industrial buildings were diversified across 33 markets throughout the United States and in France, Germany, Japan, Mexico and the Netherlands. The average age of our industrial properties is approximately 20 years (since the property was built or substantially renovated). The following table represents properties in which we own a fee simple or leasehold interest or a controlling interest (consolidated), and excludes properties in which we only own a non-controlling interest (unconsolidated):


						Rentable		% of Total						Annualized		% of Total					Annualized
				Number of		Square		Rentable			Occupancy			Base Rent		Annualized			Number		Base Rent per
				Buildings		Feet		Square Feet			Percentage			(000’s)		Base Rent			of Leases		Square Foot

Domestic Hub Markets					750		66,898,556		74.1	%		95.0	%	$	406,508		73.6	%		2,445	$	6.40
Other Markets
	Domestic Target Markets
		Austin			10		1,656,254		1.8			99.5			11,125		2.0			36		6.75
		Baltimore/ Washington, D.C.			64		4,245,420		4.7			95.9			33,663		6.1			287		8.27
		Boston			36		4,309,262		4.8			93.0			27,781		5.0			100		6.94
		Minneapolis			38		3,942,806		4.4			95.4			17,047		3.1			172		4.53

	Subtotal/ Weighted Average				148		14,153,742		15.7			95.3			89,616		16.2			595		6.64
	Domestic Non-Target Markets
		Charlotte			21		1,317,864		1.5			85.1			5,720		1.0			66		5.10
		Columbus			1		240,000		0.3			90.0			547		0.1			10		2.53
		Houston			1		410,000		0.5			100.0			2,172		0.4			1		5.30
		Memphis			17		1,883,845		2.0			85.9			8,292		1.5			45		5.13
		New Orleans			5		410,839		0.5			96.8			1,998		0.4			50		5.02
		Newport News			1		60,215		0.1			76.8			566		0.1			2		12.24
		Orlando			16		1,424,748		1.6			99.5			7,046		1.3			76		4.97
		Portland			5		676,104		0.6			98.0			3,148		0.6			10		4.75
		San Diego			5		276,167		0.3			91.4			1,955		0.4			20		7.75

	Subtotal/ Weighted Average				72		6,699,782		7.4			91.7			31,444		5.8			280		5.12
	International Target Markets(1)
		Amsterdam, Netherlands			2		302,091		0.3			100.0			3,572		0.6			2		11.82
		Frankfurt, Germany			1		166,917		0.2			100.0			1,587		0.3			1		9.51
		Mexico City, Mexico			1		120,251		0.1			0.0			—		0.0			0		—
		Paris, France			4		1,022,063		1.2			100.0			8,148		1.5			4		7.97
		Tokyo, Japan			6		915,401		1.0			99.2			11,302		2.0			10		12.44

	Subtotal/ Weighted Average				14		2,526,723		2.8			95.0			24,609		4.4			17		10.25

			Total Other Markets		234		23,380,247		25.9			94.2			145,669		26.4			892		6.61

	Total/ Weighted Average				984		90,278,803		100.0	%		94.8	%	$	552,177		100.0	%		3,337	$	6.45


(1)	Annualized base rent for leases denominated in international currencies is translated using the currency exchange rate at December 31, 2004.

Industrial Lease Expirations

The following table summarizes the lease expirations for our industrial properties for leases in place as of December 31, 2004, without giving effect to the exercise of renewal options or termination rights, if any, at or prior to the scheduled expirations:


			Annualized		% of
	Square		Base Rent		Annualized
	Feet(1)		(000’s)(3)		Base Rent

2005(2)		14,200,643	$	94,933		16.3	%
2006		13,835,724		86,126		14.8	%
2007		14,814,005		93,156		16.0	%
2008		12,130,342		74,372		12.8	%
2009		11,265,930		69,045		11.9	%
2010		6,500,185		51,201		8.8	%
2011		3,826,000		30,917		5.3	%
2012		3,301,422		29,505		5.1	%
2013		1,080,898		12,466		2.2	%
2014 and beyond		4,748,401		39,831		6.8	%

Total		85,703,550	$	581,552		100.0	%


(1)	Schedule includes in-place leases and leases with future commencement dates.

(2)	The schedule also includes leases in month-to-month and hold-over status totaling 2.7 million square feet.

(3)	Calculated as monthly base rent at expiration multiplied by 12. Non-U.S. dollar projects are converted to U.S. dollars based on the Bloomberg (Screen FRD) forward exchange rate at expiration.

Customer Information

Largest Property Customers. As of December 31, 2004, our 25 largest industrial property customers by annualized base rent are set forth in the table below:


						Percentage of					Percentage of
						Aggregate					Aggregate
				Aggregate		Leased			Annualized		Annualized
		Number of		Rentable		Square			Base Rent		Base
Customer Name(1)		Leases		Square Feet		Feet(2)			(000’s)(3)		Rent(4)

United States Government(5)(6)			50		1,120,408		1.2	%	$	18,767		3.4	%
FedEx Corporation(5)			24		1,264,178		1.4	%		13,869		2.5	%
Deutsche Post World Net(5)			30		985,081		1.1	%		8,233		1.5	%
Harmonic Inc.			4		285,480		0.3	%		6,424		1.2	%
La Poste			2		854,435		0.9	%		6,121		1.1	%
Worldwide Flight Services(5)			17		358,389		0.4	%		4,225		0.8	%
International Paper Company			7		525,893		0.6	%		4,100		0.7	%
Exel, Inc.			12		480,779		0.5	%		3,817		0.7	%
BAX Global Inc.(5)			8		256,877		0.3	%		3,805		0.7	%
Panalpina, Inc.			8		646,636		0.7	%		3,682		0.7	%
Wells Fargo and Company			7		280,494		0.3	%		3,498		0.6	%
Forward Air Corporation			7		462,714		0.5	%		3,314		0.6	%
County of Los Angeles(7)			11		213,230		0.2	%		3,157		0.6	%
Eagle Global Logistics, L.P.			8		520,243		0.6	%		3,122		0.6	%
Expeditors International			7		666,045		0.7	%		3,093		0.6	%
Ahold NV			7		680,565		0.8	%		2,880		0.5	%
UPS			15		416,496		0.5	%		2,832		0.5	%
Aeroground Inc.			5		208,867		0.2	%		2,741		0.5	%
Nippon Express USA			3		367,707		0.4	%		2,695		0.5	%
United Air Lines Inc.(5)			5		118,825		0.1	%		2,426		0.4	%
Elmhult Limited Partnership			4		661,149		0.7	%		2,318		0.4	%
Intel International B.V.			1		183,892		0.2	%		2,241		0.4	%
Integrated Airline Services(5)			6		233,656		0.3	%		2,229		0.4	%
Applied Materials, Inc.			1		290,557		0.3	%		2,152		0.4	%
Tokyo Nohin Daiko Co Ltd.			1		177,434		0.2	%		2,105		0.4	%

	Total				12,260,030		13.6	%	$	113,846		20.6	%


(1)	Customer(s) may be a subsidiary of or an entity affiliated with the named customer. We also have a lease with Park’N Fly at our Park One property, a parking lot, adjacent to the Los Angeles International Airport with an annualized base rent of $6.7 million, which is not included.

(2)	Computed as aggregate leased square feet divided by the aggregate leased square feet of the industrial and retail properties.

(3)	Annualized base rent is calculated as monthly base rent (cash basis) per the lease, as of December 31, 2004, multiplied by 12.

(4)	Computed as aggregate annualized base rent divided by the aggregate annualized base rent of the industrial and retail and other properties.

(5)	Airport apron rental amounts (but not square footage) are included.

(6)	United States Government includes the United States Postal Service, United States Customs, United States Department of Agriculture and various other U.S. governmental agencies.

(7)	County of Los Angeles includes Child Support Service’s Department, the Fire Department, the District Attorney, the Sheriff’s Department and the Unified School District.

OPERATING AND LEASING STATISTICS

Industrial Operating and Leasing Statistics

The following table summarizes key operating and leasing statistics for all of our industrial properties as of and for the years ended December 31, 2004, 2003 and 2002:


Operating Portfolio(1)				2004			2003			2002

Square feet owned(2)					90,278,803			87,101,412			84,203,022
Occupancy percentage					94.8	%		93.1	%		94.6	%
Weighted average lease terms:
	Original				6.1 years			6.1 years			6.2 years
	Remaining				3.3 years			3.2 years			3.3 years
Tenant retention					66.8	%		65.3	%		74.2	%
Same Space Leasing Activity(3):
	Rent increases (decreases) on renewals and rollovers				(13.2	)%		(10.1	)%		(1.0	)%
	Same space square footage commencing (millions)				17.5			17.3			14.7
Second Generation Leasing Activity(4):
	Tenant improvements and leasing commissions per sq. ft.:
		Renewals		$	1.73		$	1.39		$	1.30
		Re-tenanted			2.70			2.13			2.45

			Weighted average	$	2.27		$	1.77		$	1.90

	Square footage commencing (millions)				22.5			22.7			19.0


(1)	Includes all consolidated industrial operating properties and excludes industrial development and renovation projects. Excludes retail and other properties’ square footage of 0.5 million with occupancy of 71.4% and annualized base rents of $3.8 million as of December 31, 2004.

(2)	In addition to owned square feet as of December 31, 2004, we managed, through our subsidiary, AMB Capital Partners, LLC, 0.4 million additional square feet of industrial and other properties. As of December 31, 2004, we also had investments in 10.3 million square feet of industrial operating properties through our investments in unconsolidated joint ventures.

(3)	Consists of second generation leases renewing or re-tenanting with current and prior lease terms greater than one year.

(4)	Second generation tenant improvements and leasing commissions per square foot are the total cost of tenant improvements, leasing commissions and other leasing costs incurred during leasing of second generation space divided by the total square feet leased. Costs incurred prior to leasing available space are not included until such space is leased. Second generation space excludes newly developed square footage or square footage vacant at acquisition.

Industrial Same Store Operating Statistics

The following table summarizes key operating and leasing statistics for our same store properties as of and for the years ended December 31, 2004, 2003 and 2002:


		2004			2003			2002

Square feet in same store pool(1)			74,516,427			71,985,575			67,998,585
	% of total industrial square feet		82.5	%		82.6	%		80.8	%
Occupancy percentage at period end			95.3	%		93.0	%		94.6	%
Tenant retention			66.4	%		65.1	%		73.3	%
Rent increases (decreases) on renewals and rollovers			(14.7	)%		(10.6	)%		(1.4	)%
	Square feet leased (millions)		16.2			16.2			13.8
Growth % increase (decrease) (excluding straight-line rents):
	Revenues		(0.8	)%		(3.6	)%		3.9	%
	Expenses		(0.5	)%		2.7	%		5.1	%
	Net operating income		(0.9	)%		(5.6	)%		3.5	%
Growth % increase (decrease) (including straight-line rents):
	Revenues		(0.7	)%		(3.8	)%		3.6	%
	Expenses		(0.5	)%		2.7	%		5.1	%
	Net operating income		(0.8	)%		(5.7	)%		3.1	%


(1)	Same store properties are those properties that we owned during both the current and prior year reporting periods, excluding development properties prior to being stabilized (generally defined as properties that are 90% leased or properties for which we have held a certificate of occupancy or building has been substantially complete for at least 12 months).

Retail and Other Property Summary

Our remaining retail and other properties, aggregating approximately 0.5 million square feet, were 71.4% leased and had an annualized base rent of $3.8 million at December 31, 2004.

DEVELOPMENT PROPERTIES

Development Pipeline

The following table sets forth the properties owned by us as of December 31, 2004 which were undergoing renovation, expansion or development. No assurance can be given that any of these projects will be completed on schedule or within budgeted amounts.

Industrial Development and Renovation Deliveries


						Estimated			Estimated
						Square			Total			Our
				Estimated		Feet at			Investment			Ownership
Project		Location	Developer	Stabilization		Stabilization			(000’s)(1)			Percentage

2005 Deliveries
1. Dulles Commerce Center — Bldg 100		Dulles, VA	Seefried Properties		Q1		50,030		$	4,000			20	%
2. Nicholas Warehouse		Elk Grove Village, IL	AMB		Q1		131,728			12,500			100	%
3. Patriot Distribution Center(3)		Mansfield, MA	National Development		Q2		429,897			23,500			20	%
4. Agave Bldg 1(5)		Mexico City, Mexico	G.Accion		Q2		397,210			20,100			90	%
5. Somerville Distribution Center(3)		Somerville, MA	Campanelli		Q2		197,384			17,900			20	%
6. MIA Logistics Center(3)		Miami, FL	AMB		Q2		147,182			10,100			20	%
7. Airport South Bldg 500		Atlanta, GA	Seefried Properties		Q2		116,280			5,600			20	%
8. Sterling Distribution 2(4)		Chino, CA	Majestic Realty		Q2		490,000			17,100			40	%
9. Interstate Crossdock(3)		Teterboro, NJ	AMB		Q3		616,992			53,600			100	%
10. Beacon Lakes 9		Miami, FL	Codina Development		Q3		206,656			10,200			79	%
11. Sterling Distribution 3(4)		Chino, CA	Majestic Realty		Q4		390,000			14,100			50	%
12. Spinnaker Logistics(3)		Redondo Beach, CA	AMB-IAC		Q4		279,431			28,900			39	%
13. Encino Distribution Center(5)		Mexico City, Mexico	G.Accion		Q4		571,267			31,000			90	%
14. Narita Air Cargo 1 — Phase 1 Bldg B(5)		Narita, Japan	AMB Blackpine		Q4		576,842			70,900			100	%
15. AMB West O’Hare Bldg 1		Elk Grove Village, IL	AMB		Q4		189,240			14,400			20	%
16. AMB Amagasaki Distribution Center(5)		Osaka, Japan	AMB Blackpine		Q4		973,037			100,700			100	%

	Total 2005 Deliveries						5,763,176			434,600			76	%

	Leased/ Funded-to-date						48	%	$	274,800	(2)
	Weighted Average Estimated Stabilized Cash Yield(5)									8.7	%
2006 Deliveries
17. Dulles Commerce Center — Bldg 150		Dulles, VA	Seefried Properties		Q1		71,880			5,800			20	%
18. AMB Layline Distribution Center(3)		Torrance, CA	AMB		Q1		250,000			26,300			100	%
19. Nash Logistics Center		El Segundo, CA	AMB — IAC		Q1		75,000			12,000			50	%
20. Narita Air Cargo 1 — Phase 1 Bldg A(5)		Narita, Japan	AMB Blackpine		Q1		108,005			13,300			100	%


							Estimated			Estimated
							Square			Total			Our
					Estimated		Feet at			Investment			Ownership
Project			Location	Developer	Stabilization		Stabilization			(000’s)(1)			Percentage

21. AMB West O’Hare Building 2			Elk Grove Village, IL	AMB		Q1		119,708			8,800			20	%
22. Highway 17 — 50 Broad Street(3)			Carlstadt, NJ	AMB		Q2		120,000			8,700			100	%
23. Highway 17 — 55 Madison Street(3)			Carlstadt, NJ	AMB		Q2		150,446			11,900			100	%
24. AMB Ohta Distribution Center(5)			Tokyo, Japan	AMB Blackpine		Q2		816,866			195,100			100	%
25. Singapore Airport Logistics Center Bldg 2(4)(5)			Changi Airport, Singapore	Boustead Projects PTE		Q2		254,267			11,800			50	%
26. Dulles Commerce Center — Bldg 200			Dulles, VA	Seefried Properties		Q2		97,232			7,300			20	%
27. Beacon Lakes 6			Miami, FL	Codina Development		Q2		203,720			11,100			79	%
28. Northfield Bldg 700			Dallas, TX	Seefried Properties		Q3		108,640 2,375,764			6,000 318,100			20	% 89%
	Total 2006 Deliveries							0	%		$195,900(2)
	Leased/ Funded-to-date
	Weighted Average Estimated Stabilized Cash Yield(5)										7.7	%
2007 Deliveries			Madrid, Spain	Codina/Torimbia		Q2		454,779			31,700			80	%
29. MAD Logistics Center(5)								454,779			31,700			80	%
	Total 2007 Deliveries							0	%		$1,800(2)
	Leased/ Funded-to-date
	Weighted Average Estimated Stabilized Cash Yield(5)										8.3	%
2008 Deliveries
30. AMB Fokker Logistics			Amsterdam,	Delta Group		Q1		313,229			44,300			50	%
		Center 3(5)	Netherlands					313,229			44,300			50	%
	Total 2008 Deliveries							0	%		$17,300(2)
	Leased/ Funded-to-date
	Weighted Average Estimated Stabilized Cash Yield(5)										8.3	%
	Total Scheduled Deliveries(1)							8,906,948			$828,700		80	%

	Leased/ Funded-to-date							31%			$489,800(2)
	Weighted Average Estimated Stabilized Cash Yield(5)										8.3	%

(1)

Represents total estimated cost of renovation, expansion or development, including initial acquisition costs, third-party developer earnouts and associated carry costs. The estimates are based on our current estimates and forecasts and are subject to change. Excludes 1,263 acres of land held for future development representing a potential 22.2 million square feet and other acquisition-related costs totaling $224.8 million. Non-U.S. dollar investments are translated to U.S. dollars using the exchange rate at December 31, 2004.


(2)	Our share of amounts funded to date for 2005, 2006, 2007 and 2008 deliveries was $209.9 million, $173.4 million, $1.5 million and $8.6 million, respectively, for a total of $393.4 million.

(3)	Represents a renovation project.

(4)	Represents projects in unconsolidated joint ventures.

(5)	The yields on international projects are on an after-tax basis.

The following table sets forth completed development projects that we intend to either sell or contribute to co-investment funds as of December 31, 2004:

Completed Development Projects Available for Sale or Contribution(2)


						Estimated
				Estimated		Total			Our
				Square Feet at		Investment			Ownership
Projects(1)		Market	Developer	Completion		(000’s)(3)			Percentage

1. Wilsonville Phase II		Watsonville, OR	Trammell Crow Company		249,625	$	11,000			100%
2. O’Hare Industrial — 701 Hilltop Drive		Itasca, IL	Hamilton Partners		60,810		2,900			100%
3. Central Business Park Bldgs A,C,D		SF Bay Area	Harvest Properties		55,123		5,300			100%
4. Singapore Airport Logistics Center Bldg 1		Changi Airport, Singapore	Boustead Projects PTE		230,432		10,000			50%

Total Available for Sale or Contribution					595,990	$	29,200

	Funded-to-date					$	25,400	(4)


(1)	Represents build-to-suit and speculative development or redevelopment.

(2)	We intend to sell these properties or contribute them into a co-investment joint venture within two years of completion. Non-U.S. dollar investments are translated to U.S. dollars using the exchange rate at December 31, 2004.

(3)	Represents total estimated cost of renovation, expansion or development, including initial acquisition costs, carry and partner earnouts. The estimates are based on our current estimates and forecasts and are subject to change.

(4)	Our share of amounts funded as of December 31, 2004 was $21.0 million.

Properties held through Joint Ventures, Limited Liability Companies and Partnerships


	Consolidated:

As of December 31, 2004, we held interests in joint ventures, limited liability companies and partnerships with institutional investors and other third parties, which we consolidate in our financial statements. Such investments are consolidated because we own a majority interest or, as general partner, exercise significant control over major operating decisions such as acquisition or disposition decisions, approval of budgets, selection of property managers and changes in financing. Under the agreements governing the joint ventures, we and the other party to the joint venture may be required to make additional capital contributions and, subject to certain limitations, the joint ventures may incur additional debt. Such agreements also impose certain restrictions on the transfer of joint venture interests by us or the other party to the joint venture and typically provide certain rights to us or the other party to the joint venture to sell our or their interest in the joint venture to the joint venture or to the other joint-venture partner on terms specified in the agreement. In addition, under certain circumstances, many of the joint ventures include buy/sell provisions. See Part IV, Item 15: Note 9 of the “Notes to Consolidated Financial Statements” for additional details.

The tables that follow summarize our consolidated joint ventures as of December 31, 2004:

Co-investment Consolidated Joint Ventures


			Our											JV Partners’
			Ownership			Number of		Square		Gross Book		Property		Share of
Joint Ventures			Percentage			Buildings		Feet(1)		Value(2)		Debt		Debt

Co-Investment Operating Joint Ventures:
	AMB/ Erie, L.P.(3)			50	%		26		2,502,052	$	134,875	$	50,338	$	25,169
	AMB Institutional Alliance Fund I, L.P.(4)			21	%		100		5,829,368		415,191		223,704		177,313
	AMB Partners II, L.P.(5)			20	%		100		7,599,176		472,442		258,179		207,036
	AMB-SGP, L.P.(6)			50	%		73		8,589,823		418,129		245,454		122,382
	AMB Institutional Alliance Fund II, L.P.(4)			20	%		69		7,531,342		462,114		231,858		182,922
	AMB-AMS, L.P.(7)			39	%		30		1,218,592		74,498		34,977		21,504
	AMB Institutional Alliance Fund III, L.P.(8)			20	%		36		4,459,565		514,142		258,164		203,704

	Total Co-Investment Operating Joint Ventures			27	%		434		37,729,918		2,491,391		1,302,674		940,030
Co-Investment Development Joint Ventures:
	AMB/ Erie, L.P.(3)			50	%		—		—		14,369		—		—
	AMB Institutional Alliance Fund I, L.P.(4)			21	%		—		—		—		—		—
	AMB Partners II, L.P.(5)			20	%		7		841,754		43,758		6,136		4,860
	AMB Institutional Alliance Fund II, L.P.(4)			20	%		2		538,537		30,573		5,940		4,752
	AMB-AMS, L.P.(7)			39	%		1		279,431		25,545		9,429		5,797
	AMB Institutional Alliance Fund III, L.P.(8)			20	%		1		147,182		8,895		—		—

	Total Co-Investment Development Joint Ventures			27	%		11		1,806,904		123,140		21,505		15,409

		Total Co-Investment Consolidated Joint Ventures		27	%		445		39,536,822	$	2,614,531	$	1,324,179	$	955,439


(1)	For development properties, this represents estimated square feet at completion of development for committed phases of development and renovation projects.

(2)	Represents the book value of the property (before accumulated depreciation) owned by the joint venture entity and excludes net other assets as of December 31, 2004. Development book values include uncommitted land.

(3)	AMB/ Erie, L.P. is a co-investment partnership formed in 1998 with the Erie Insurance Company and certain related entities.

(4)	AMB Institutional Alliance Fund I, L.P. and AMB Institutional Alliance Fund II, L.P. are co-investment partnerships with institutional investors, which invest through private real estate investment trusts.

(5)	AMB Partners II, L.P. is a co-investment partnership formed in 2001 with the City and County of San Francisco Employees’ Retirement System.


(6)	AMB-SGP, L.P. is a co-investment partnership formed in 2001 with Industrial JV Pte Ltd, a subsidiary of GIC Real Estate Pte Ltd, a real estate investment subsidiary of the government of Singapore Investment Corporation.

(7)	AMB-AMS, L.P. is a co-investment partnership with three Dutch pension funds advised by Mn Services NV.

(8)	AMB Institutional Alliance Fund III, L.P. is an open-ended co-investment partnership formed in 2004 with institutional investors, which invest through a private real estate investment trust.

Other Consolidated Joint Ventures


				Our					Gross				JV Partners’
				Ownership			Square		Book		Property		Share of
Properties		Market		Percentage			Feet		Value(1)		Debt		Debt

Other Industrial Operating Joint Ventures			Various		92	%		2,403,711	$	218,821	$	49,869	$	2,493
Other Industrial Development Joint Ventures			Various		81	%		2,026,726		122,170		21,104		9,149

	Total Other Industrial Consolidated Joint Ventures				88	%		4,430,437	$	340,991	$	70,973	$	11,642

Retail Joint Ventures:
1. Around Lenox			Atlanta		90	%		125,222	$	22,273	$	8,933	$	893
2. Springs Gate Land			Miami		100	%		—		6,767		—		—

	Total Retail Consolidated Joint Ventures				92	%		125,222	$	29,040	$	8,933	$	893


(1)	Represents the book value of the property (before accumulated depreciation) owned by the joint venture entity and excludes net other assets as of December 31, 2004. Development book values include uncommitted land.


	Unconsolidated Joint Ventures, Mortgage Investments and Other Investment:

As of December 31, 2004, we held interests in 11 equity investment joint ventures that are not consolidated in our financial statements. The management and control over significant aspects of these investments are held by the third-party joint-venture partners and the investments do not meet the variable-interest entity consolidation criteria under FASB Interpretation No. 46R, Consolidation of Variable Interest Entities. In addition, as of December 31, 2004, we held mortgage investments, from which we receive interest income.

Unconsolidated Joint Ventures,

Mortgage Investments and Other Investment


										Our Net		Our			Our
								Square		Equity		Ownership			Share of
Unconsolidated Joint Ventures				Market		Alliance Partner		Feet		Investment		Percentage			Debt

Co-investment Joint Ventures
	1. AMB-SGP Mexico, LLC(1)				Various		N/A		1,256,165	$	9,467		20	%	$	3,214

		Total Co-investment Joint Ventures							1,256,165		9,467					3,214
Other Industrial Operating Joint Ventures
	2. Elk Grove Du Page				Chicago		Hamilton Partners		4,046,721		33,664		56	%		37,826
	3. Pico Rivera				Los Angeles		Majestic Realty		855,600		676		50	%		17,751
	4. Monte Vista Spectrum				Los Angeles		Majestic Realty		576,852		236		50	%		9,302
	5. Industrial Fund I, LLC				Various		Citigroup		2,326,334		3,612		15	%		9,735
	6. Singapore Airport Logistics Center Bldg 1				Singapore		Boustead Projects		230,432		2,633		50	%		2,390
	7. Sterling Distribution Center Bldg 1				Los Angeles		Majestic Realty		1,000,000		550		40	%		13,982

		Total Other Industrial Operating Joint Ventures							9,035,939		41,371		52	%		90,986
Other Industrial Development Joint Ventures(2)
	8. Sterling Distribution Center Bldg 2				Los Angeles		Majestic Realty		490,000		707		40	%		5,327
	9. Sterling Distribution Center Bldg 3				Los Angeles		Majestic Realty		390,000		620		50	%		3,800
	10. Nash Logistics Center				Los Angeles		AMB-IAC		75,000		1,412		50	%		2,502
	11. Singapore Airport Logistics Center Bldg 2				Singapore		Boustead Projects		254,267		1,589		50	%		—

		Total Other Industrial Development Joint Ventures							1,209,267		4,328		48	%		11,629

			Total Unconsolidated Joint Ventures						11,501,371	$	55,166		46	%	$	105,829


										Our
					Mortgage					Ownership
Mortgage Investments	Market		Maturity		Receivable		Rate			Percentage(3)

1. Pier 1(4)		SF Bay Area		May 2026	$	12,938		13.0	%		100	%
2. Platinum Distribution Center		No. New Jersey		November 2006		800		12.0	%		20	%

					$	13,738

Our

Gross

Ownership

Other Investment

Market

Property Type

Investment

Percentage

1. Park One

Los Angeles

Parking Lot

75,497

100


(1)	AMB-SGP Mexico, LLC is an unconsolidated co-investment joint venture formed in 2004 with Industrial (Mexico) JV Pte Ltd, a real estate investment subsidiary of the Government of Singapore Investment Corporation. Includes $8.1 million of shareholder loans outstanding at December 31, 2004 between us and the co-investment partnership and its subsidiaries, $5.0 million of which we expect to replace with third party debt in the second quarter of 2005.

(2)	Square feet for development alliance joint ventures represents estimated square feet at completion of development project.

(3)	Represents our ownership percentage in the mortgage investment.

(4)	We also have a 0.1% unconsolidated equity interest (with a 33% economic interest) in this property and an option to purchase the remaining equity interest beginning January 1, 2007 and expiring December 31, 2009.

Secured Debt

As of December 31, 2004, we had $1.9 billion of secured indebtedness, net of unamortized premiums, secured by deeds of trust or mortgages. As of December 31, 2004, the total gross consolidated investment value of those properties secured by debt was $3.3 billion. Of the $1.9 billion of secured indebtedness, $1.4 billion was joint venture debt secured by properties with a gross investment value of $2.4 billion. For additional details, see Part II, Item 7: “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” and Part IV, Item 15: Note 6 of “Notes to Consolidated Financial Statements” included in this report. We believe that as of December 31, 2004, the fair value of the properties securing the respective obligations in each case exceeded the principal amount of the outstanding obligations.


Item 3.	*Legal Proceedings*

As of December 31, 2004, there were no pending legal proceedings to which we were a party or of which any of our properties was the subject, the adverse determination of which we anticipate would have a material adverse effect upon our financial condition, results of operations and cash flows.


Item 4.	*Submission of Matters to a Vote of Security Holders*

None.

PART II


Item 5.	*Market for Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities*

Our common stock began trading on the New York Stock Exchange on November 21, 1997 under the symbol “AMB.” As of March 1, 2005, there were approximately 475 holders of record of our common stock (excluding shares held through The Depository Trust Company, as nominee). Set forth below are the high and low sales prices per share of our common stock, as reported on the NYSE composite tape, and the distribution per share paid or payable by us during the period from January 1, 2003 through December 31, 2004:


Year		High		Low		Dividend

2003
	1st Quarter	$	28.80	$	25.90	$	0.415
	2nd Quarter		29.14		26.38		0.415
	3rd Quarter		31.00		26.83		0.415
	4th Quarter		33.60		29.91		0.415
2004
	1st Quarter	$	37.21	$	32.77	$	0.425
	2nd Quarter		37.30		28.15		0.425
	3rd Quarter		38.15		33.85		0.425
	4th Quarter		41.35		35.85		0.425

The payment of dividends and other distributions by us is at the discretion of our board of directors and depends on numerous factors, including our cash flow, financial condition and capital requirements, REIT provisions of the Internal Revenue Code and other factors.


Item 6.	*Selected Financial Data*

SELECTED COMPANY FINANCIAL AND OTHER DATA(1)

The following table sets forth selected consolidated historical financial and other data for AMB Property Corporation on a historical basis as of and for the years ended December 31:


			2004			2003			2002			2001			2000

			(Dollars in thousands, except per share amounts)
Operating Data
	Total revenues		$	665,689		$	586,629		$	563,231		$	510,505		$	415,172
	Income before minority interests and discontinued operations			140,094			135,028			138,809			174,890			144,467
	Income from continuing operations			77,840			67,363			82,140			112,284			102,092
	Income from discontinued operations			47,631			61,765			38,979			23,916			19,690
	Net income available to common stockholders			118,340			116,716			113,035			120,100			113,282
	Net income from continuing operations per common share:
		Basic(2)		0.86			0.68			0.89			1.15			1.11
		Diluted(2)		0.83			0.66			0.87			1.13			1.12
	Net income from discontinued operations per common share:
		Basic(2)		0.58			0.76			0.47			0.28			0.24
		Diluted(2)		0.56			0.75			0.46			0.28			0.23
	Net income per common share:
		Basic(2)		1.44			1.44			1.36			1.43			1.35
		Diluted(2)		1.39			1.41			1.33			1.41			1.35
	Dividends declared per common share			1.70			1.66			1.64			1.58			1.48
Other Data
	Funds from operations		$	207,314		$	186,666		$	215,194		$	186,707		$	202,751
	Funds from operations per common share and unit:
		Basic		2.39			2.17			2.44			2.09			2.26
		Diluted		2.30			2.13			2.40			2.07			2.25
	Cash flows provided by (used in):
		Operating activities		294,378			264,463			291,265			288,562			261,175
		Investing activities		(728,431	)		(340,930	)		(246,854	)		(363,152	)		(726,499	)
		Financing activities		409,705			112,022			(28,150	)		127,303			452,370


		2004		2003		2002		2001		2000

		(Dollars in thousands, except per share amounts)
Balance Sheet Data
	Investments in real estate at cost	$	6,526,144	$	5,491,707	$	4,922,782	$	4,527,511	$	4,026,597
	Total assets		6,386,943		5,409,559		4,983,629		4,763,614		4,433,207
	Total consolidated debt		3,257,191		2,574,257		2,235,361		2,143,714		1,843,857
	Our share of total debt(3)		2,395,046		1,954,314		1,691,737		1,655,386		1,681,161
	Stockholders’ equity		1,671,140		1,657,137		1,579,265		1,747,389		1,767,930


(1)	Certain items in the consolidated financial statements for prior periods have been reclassified to conform with current classifications with no effect on net income or stockholders’ equity.

(2)	Basic and diluted net income per weighted average share equals the net income available to common stockholders divided by 82,133,627 and 85,368,626 shares, respectively, for 2004; 81,096,062 and 82,852,528 shares, respectively, for 2003; 83,310,885 and 84,795,987 shares, respectively, for 2002; 84,174,644 and 85,214,066 shares, respectively, for 2001; 83,697,170 and 84,155,306 shares, respectively, for 2000.

(3)	Our share of total debt is the pro rata portion of the total debt based on our percentage of equity interest in each of the consolidated ventures holding the debt. We believe that our share of total debt is a meaningful supplemental measure, which enables both management and investors to analyze our leverage and to compare our leverage to that of other companies. In addition, it allows for a more meaningful comparison of our debt to that of other companies that do not consolidate their joint ventures. Our share of total debt is not intended to reflect our actual liability should there be a default under any or all of such loans or a liquidation of the joint ventures. For a reconciliation of our share of total debt to total consolidated debt, a GAAP financial measure, please see the table of debt maturities and capitalization in Part II, Item 7: “Management Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Capital Resources.”

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

GENERAL

You should read the following discussion and analysis of our consolidated financial condition and results of operations in conjunction with the notes to consolidated financial statements.

We commenced operations as a fully integrated real estate company effective with the completion of our initial public offering on November 26, 1997, and elected to be taxed as a real estate investment trust under Sections 856 through 860 of the Internal Revenue Code of 1986 with our initial tax return for the year ended December 31, 1997. AMB Property Corporation and AMB Property, L.P. were formed shortly before the consummation of our initial public offering.

Management’s Overview

We generate revenue and earnings primarily from rent received from customers under long-term (generally three to ten years) operating leases at our properties, including reimbursements from customers for certain operating costs, and from partnership distributions and fees from our private capital business. We also derive earnings from the strategic disposition of assets and from the disposition of projects under our development-for-sale or contribution program. Our long-term growth is dependent on our ability to maintain and increase occupancy rates or increase rental rates at our properties and our ability to continue to acquire and develop new properties.

National industrial markets improved significantly during 2004 when compared with market conditions in 2003. The positive trend in demand began in the second quarter of 2004 and reversed 14 prior quarters of negatively trending, or rising, space availability. We believe the protracted period of rising availability created a difficult leasing environment; however investor demand for industrial property (as evidenced by our observation of strong national sales volumes and declining acquisition capitalization rates) has remained consistently strong. We believe we capitalized on the demand for acquisition property by accelerating the repositioning of our portfolio through the disposition of non-core properties. We plan to continue selling selected assets on an opportunistic basis but believe we have substantially achieved our repositioning goals. Property dispositions result in reinvestment capacity and trigger gain/loss recognition, but also create near-term earnings dilution if the capital cannot be redeployed effectively. We experienced such near-term dilution in 2004. However, we believe that the repositioning of our portfolio will benefit our stockholders in the long-term. The table below summarizes our leasing activity for 2004 and 2003:


		U.S. Hub and			Total Other			Total/Weighted
Property Data		Gateway Markets(1)			Markets(2)			Average

For the year ended December 31, 2004:
	% of total rentable square feet		74.1	%		25.9	%		100.0	%
	Occupancy percentage at year end		95.0	%		94.2	%		94.8	%
	Same space square footage leased		13,932,213			3,553,563			17,485,776
	Rent increases (decreases) on renewals and rollovers		(15.3	)%		(3.6	)%		(13.2	)%
For the year ended December 31, 2003:
	% of total rentable square feet		75.0	%		25.0	%		100.0	%
	Occupancy percentage at year end		93.5	%		91.9	%		93.1	%
	Same space square footage leased		13,636,050			3,636,967			17,273,017
	Rent increases (decreases) on renewals and rollovers		(12.7	)%		1.7	%		(10.1	)%


(1)	Our U.S. hub and gateway markets include on-tarmac and Atlanta, Chicago, Dallas/ Fort Worth, Los Angeles, Northern New Jersey/ New York City, the San Francisco Bay Area, Miami and Seattle.

(2)	Our total other markets include other domestic target markets, other non-target markets, international target markets and retail.

We observed two positive trends nationally for industrial real estate during the year ended December 31, 2004, supported by data provided by Torto Wheaton Research. First, national industrial space availability declined 70 basis points during the year from 11.6% to 10.9%. This decrease in national industrial space availability occurred in the last three quarters of 2004, reversing the trend of the prior 14 quarters in which national industrial space availability increased on average 36 basis points per quarter. Second, national absorption of industrial space, defined as the net change in occupied stock as measured by square feet of completions less the change in available square feet, totaled approximately 175 million square feet in the year ended December 31, 2004, substantially exceeding the 20 million square feet of space absorbed in 2003 and well above the ten-year historical average of 132 million square feet of space absorbed annually.

In this improved environment, our industrial portfolio’s occupancy levels increased to 94.8% at December 31, 2004 from 93.1% at December 31, 2003, which we believe reflects higher levels of demand for industrial space generally and in our portfolio specifically. During the year ended December 31, 2004, our lease expirations totaled approximately 21.4 million square feet while commencements of new or renewed leases totaled approximately 24.3 million square feet, resulting in an increase in our occupancy level of approximately 170 basis points.

Rents on industrial renewals and rollovers in our portfolio decreased 13.2% during the year ended December 31, 2004 as leases were entered into or renewed at rates consistent with what we believe to be current market levels. We believe this decline in rents on lease renewals and rollovers reflects trends in national industrial space availability. We believe that relatively high levels of national industrial space availability have caused market rents for industrial properties to decline between 10% and 20% from their peak levels in 2001 based on our research data; 47% of the space that rolled over in our portfolio in 2004 had commenced between 1999 and 2001. Rental rates in our portfolio declined at successively lower rates in each of the four quarters during 2004, which we believe indicates a stabilization of market rental rate levels. While the level of rental rate reduction varied by market, we achieved occupancy levels in our portfolio 570 basis points in excess of the national industrial market, as determined by Torto Wheaton Research, by pricing lease renewals and new leases with sensitivity to local market conditions. During periods of decreasing or stabilizing rental rates, we strove to sign leases with shorter terms to prevent locking in lower rent levels for long periods and to be prepared to sign new, longer-term leases during periods of growing rental rates. When we sign leases of shorter duration, we attempt to limit overall leasing costs and capital expenditures by offering different grades of tenant improvement packages, appropriate to the lease term.

We believe that development, renovation and expansion of well-located, high-quality industrial properties should generally continue to provide us with attractive investment opportunities at a higher rate of return than we may obtain from the purchase of existing properties. We believe that our development opportunities in Mexico and Japan are attractive given the current lack of supply of modern distribution facilities in the major metropolitan markets of these countries. Globally, we have increased our development pipeline from a low of $107.0 million at the end of 2002 to approximately $828.7 million at December 31, 2004. In addition to our committed development pipeline, we hold a total of 1,263 acres for future development or sale, of which 1,015 acres, 199 acres, 39 acres and ten acres in North America, Mexico, Asia and Europe, respectively, could support an aggregate of approximately 22.2 million square feet of additional development.

Going forward, we believe that our co-investment program with private-capital investors will continue to serve as a significant source of revenues and capital for acquisitions and developments. Through these co-investment joint ventures, we typically earn acquisition and development fees, asset management fees and priority distributions, as well as promoted interests and incentive distributions based on the performance of the co-investment joint ventures; however, there can be no assurance that we will continue to do so. Through contribution of development properties to our co-investment joint ventures, we expect to recognize value

creation from our development pipeline. As of December 31, 2004, we owned approximately 40.8 million square feet of our properties (36.8% of the total operating and development portfolio) through our co-investment joint ventures. We may make additional investments through these joint ventures or new joint ventures in the future and presently plan to do so.

By 2007, we plan to have approximately 15% of our portfolio (based on consolidated annualized base rent) invested in international markets. Our North American target markets outside of the United States currently include Guadalajara, Mexico City, Monterrey and Toronto. Our European target markets currently include Amsterdam, Brussels, Frankfurt, London, Lyon, Madrid and Paris. Our Asian target markets currently include Beijing, Nagoya, Osaka, the Pearl River Delta, Shanghai, Singapore and Tokyo. It is possible that our target markets will change over time to reflect experience, market opportunities, customer needs and changes in global distribution patterns. As of December 31, 2004, our international operating properties comprised 4.4% of our consolidated annualized base rent.

To maintain our qualification as a real estate investment trust, we must pay dividends to our stockholders aggregating annually at least 90% of our taxable income. As a result, we cannot rely on retained earnings to fund our on-going operations to the same extent that other corporations that are not real estate investment trusts can. We must continue to raise capital in both the debt and equity markets to fund our working capital needs, acquisitions and developments. See “Liquidity and Capital Resources” for a complete discussion of the sources of our capital.

Summary of Key Transactions in 2004

During the year ended December 31, 2004, we completed the following capital deployment transactions:


	•	Acquired 64 buildings in the United States, Mexico, Europe and Asia, aggregating approximately 7.6 million square feet, for $695.2 million, including $261.0 million invested through four of our co-investment joint ventures;

	•	Commenced 19 development projects in the United States, Japan, Mexico and the Netherlands, totaling 6.1 million square feet with an estimated total investment of approximately $648.5 million (using exchange rates in effect at applicable quarter end and year end dates);

	•	Acquired 640 acres of land for industrial warehouse development in various U.S. markets and Mexico City for approximately $68.3 million;

	•	Sold seven land parcels and six development projects available for sale, aggregating approximately 0.3 million square feet, for an aggregate price of $40.4 million; and

	•	Divested ourselves of 21 industrial buildings, two retail centers and one office building, aggregating approximately 3.1 million square feet, for an aggregate price of $200.3 million.

See Part IV, Item 15: Notes 3 and 4 of the “Notes to Consolidated Financial Statements” for a more detailed discussion of our acquisition, development and disposition activity.

During the year ended December 31, 2004, we completed the following capital markets and other financing transactions:


	•	Obtained long-term secured debt financings for our co-investment joint ventures totaling $243.5 million at an average rate of 5.0%;

	•	Obtained $129.2 million of debt (using exchange rates in effect at applicable quarter end dates) with a weighted average interest rate of 4.5% for international acquisitions, net of the financing for the AMB Ohta Distribution Center development;

	•	Completed the early renewal of the operating partnership’s senior unsecured revolving line of credit in the amount of $500.0 million. The three-year credit facility includes a multi-currency component under which up to $250.0 million can be drawn in Yen, Euros or British Pounds Sterling;


	•	Entered into an unsecured revolving credit agreement through AMB Japan Finance Y.K., a subsidiary of the operating partnership, providing for loans or letters of credit in a maximum principal amount outstanding at any time of up to 24 billion Yen (approximately $233.8 million in U.S. dollars using exchange rates in effect on December 31, 2004);

	•	Closed on a 20 billion Yen financing (approximately $195 million U.S. dollars using exchange rates in effect on December 31, 2004) for the AMB Ohta Distribution Center development project in Japan, of which 14 billion Yen ($136 million U.S. dollars using exchange rates in effect on December 31, 2004) has been funded. We locked in the interest rate on 65% of the financing for the full eight-year term at closing. During construction, the fixed rate portion is locked at 1.9% and upon stabilization, the fixed rate will be 2.4%;

	•	Formed AMB Institutional Alliance Fund III, L.P., an open-ended co-investment joint venture, with $136.5 million of equity from co-investment partners to invest in properties in the United States; and

	•	Formed an unconsolidated co-investment joint venture, AMB-SGP Mexico, LLC, with Industrial (Mexico) JV Pte Ltd, a real estate investment subsidiary of the Government of Singapore Investment Corporation, with an equity commitment of $200 million to invest in properties in Mexico, in which we retain a 20% interest. We contributed $71.5 million of operating properties and recently completed development projects in Mexico and when combined with our equity commitment and leverage, the venture has an investment capacity of approximately $715 million. This is our first international co-investment joint venture.

See Part IV, Item 15: Notes 6, 9 and 11 of the “Notes to Consolidated Financial Statements” for a more detailed discussion of our capital markets transactions.

Critical Accounting Policies

Our discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and contingencies as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. We evaluate our assumptions and estimates on an on-going basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:

Investments in Real Estate. Investments in real estate are stated at cost unless circumstances indicate that cost cannot be recovered, in which case the carrying value of the property is reduced to estimated fair value. We also record at acquisition an intangible asset or liability for the value attributable to above or below-market leases, in-place leases and lease origination costs for all acquisitions. Carrying values for financial reporting purposes are reviewed for impairment on a property-by-property basis whenever events or changes in circumstances indicate that the carrying value of a property may not be recoverable. Impairment is recognized when estimated expected future cash flows (undiscounted and without interest charges) are less than the carrying amount of the property. The estimation of expected future net cash flows is inherently uncertain and relies on assumptions regarding current and future market conditions and the availability of capital. Examples of certain situations that could affect future cash flows of a property may include, but are not limited to: significant decreases in occupancy; unforeseen bankruptcy, lease termination and move-out of a major customer; or a significant decrease in annual base rents of that property. If impairment analysis assumptions change, then an adjustment to the carrying amount of our long-lived assets could occur in the future period in which the assumptions change. To the extent that a property is impaired, the excess of the carrying amount of the property over its estimated fair value is charged to earnings.

Revenue Recognition. We record rental revenue from operating leases on a straight-line basis over the term of the leases and maintain an allowance for estimated losses that may result from the inability of our customers to make required payments. If customers fail to make contractual lease payments that are greater than our allowance for doubtful accounts, security deposits and letters of credit, then we may have to recognize additional doubtful account charges in future periods. We monitor the liquidity and creditworthiness of our customers on an on-going basis by reviewing their financial condition periodically as appropriate. Each period we review our outstanding accounts receivable, including straight-line rents, for doubtful accounts and provide allowances as needed. We also record lease termination fees when a customer has executed a definitive termination agreement with us and the payment of the termination fee is not subject to any conditions that must be met or waived before the fee is due to us. If a customer remains in the leased space following the execution of a definitive termination agreement, the applicable termination fees are deferred and recognized over the term of such customer’s occupancy.

Property Dispositions. We report real estate dispositions in three separate categories on our consolidated statements of operations. First, when we divest a portion of our interests in real estate entities or properties, gains from the sale represent the interests acquired by third-party investors for cash. Second, we dispose of value-added conversion projects and build-to-suit and speculative development projects for which we have not generated material operating income prior to sale. The gain or loss recognized from the disposition of these projects is reported net of estimated taxes, when applicable. Lastly, beginning in 2002, SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, required us to separately report as discontinued operations the historical operating results attributable to operating properties sold and the applicable gain or loss on the disposition of the properties. The consolidated statements of operations for prior periods are also adjusted to conform with this classification. There is no impact on our previously reported consolidated financial position, net income or cash flows. In all cases, gains and losses are recognized using the full accrual method of accounting. Gains relating to transactions which do not meet the requirements of the full accrual method of accounting are deferred and recognized when the full accrual method of accounting criteria are met.

Joint Ventures. We hold interests in both consolidated and unconsolidated joint ventures. Our joint venture investments do not meet the variable interest entity criteria under FASB Interpretation No. 46R, Consolidation of Variable Interest Entities. Therefore, we determine consolidation based on standards set forth in EITF 96-16, Investor’s Accounting for an Investee When the Investor Has a Majority of the Voting Interest but the Minority Shareholder or Shareholders Have Certain Approval or Veto Rights, and Statement of Position 78-9, Accounting for Investments in Real Estate Ventures. Based on the guidance set forth in these pronouncements, we consolidate certain joint venture investments because we exercise significant control over major operating decisions, such as approval of budgets, selection of property managers, asset management, investment activity and changes in financing. For joint ventures where we do not exercise significant control over major operating and management decisions, but where we exercise significant influence, we use the equity method of accounting and do not consolidate the joint venture for financial reporting purposes.

Real Estate Investment Trust. As a real estate investment trust, we generally will not be subject to corporate level federal income taxes in the U.S. if we meet minimum distribution, income, asset and shareholder tests. However, some of our subsidiaries may be subject to federal and state taxes. In addition, foreign entities may also be subject to the taxes of the host country. An income tax allocation is required to be estimated on our taxable income arising from our taxable REIT subsidiaries and international entities. A deferred tax component could arise based upon the differences in GAAP versus tax income for items such as depreciation and gain recognition. However, we believe deferred tax is an immaterial component of our consolidated balance sheet.

RESULTS OF OPERATIONS

The analysis below includes changes attributable to same store growth, acquisitions, development activity and divestitures. Same store properties are those that we owned during both the current and prior year reporting periods, excluding development properties prior to being stabilized subsequent to December 31, 2002

(generally defined as properties that are 90% leased or properties for which we have held a certificate of occupancy or where building has been substantially complete for at least 12 months).

As of December 31, 2004, same store industrial properties consisted of properties aggregating approximately 74.5 million square feet. The properties acquired during 2004 consisted of 64 buildings, aggregating approximately 7.6 million square feet. The properties acquired during 2003 consisted of 82 buildings, aggregating approximately 6.5 million square feet. During 2004, property divestitures and contributions consisted of 29 industrial buildings, two retail centers and one office, aggregating approximately 4.4 million square feet. In 2003, property divestitures consisted of 48 industrial buildings and two retail centers, aggregating approximately 5.3 million square feet. Our future financial condition and results of operations, including rental revenues, may be impacted by the acquisition of additional properties and dispositions. Our future revenues and expenses may vary materially from historical results.

For the Years ended December 31, 2004 and 2003 (dollars in millions)


Revenues				2004		2003		$ Change			% Change

Rental revenues
	U.S. industrial:
		Same store		$	531.8	$	535.4	$	(3.6	)		(0.7	)%
		2003 acquisitions			47.8		14.6		33.2			227.4	%
		2004 acquisitions			25.9		—		25.9			—	%
		Development			7.8		7.8		—			—	%
		Other industrial			10.3		6.3		4.0			63.5	%
	International industrial				25.6		6.1		19.5			319.7	%
	Retail				3.6		3.1		0.5			16.1	%

		Total rental revenues			652.8		573.3		79.5			13.9	%
Private capital income					12.9		13.3		(0.4	)		(3.0	)%

			Total revenues	$	665.7	$	586.6	$	79.1			13.5	%

The decrease in U.S. industrial same store rental revenues was primarily driven by decreased rental rates in various markets. Across the portfolio, these and other factors accounted for approximately $6.9 million of the change from the prior year. This decrease was partially offset by a decrease in allowances for doubtful accounts of approximately $3.3 million. Industrial same store occupancy was 95.3% at December 31, 2004 and 93.0% at December 31, 2003. For the year ended December 31, 2004, rents in the same store portfolio decreased 14.7% on industrial renewals and rollovers (cash basis) on 16.2 million square feet leased due to decreases in market rates. The properties acquired during 2003 consisted of 82 buildings, aggregating approximately 6.5 million square feet. The properties acquired during 2004 consisted of 64 buildings, aggregating approximately 7.6 million square feet. Other industrial revenues include rental revenues from divested properties that have been contributed to an unconsolidated joint venture, and accordingly are not classified as discontinued operations in our consolidated financial statements, and development projects that have reached certain levels of operation and are not yet part of the same store operating pool of properties. In 2003 and 2004, we continued to acquire properties in France, Germany, Japan, Mexico and the Netherlands, resulting in increased international industrial revenues. The decrease in private capital income was due to greater incentive fees earned in the prior year.


Costs and Expenses			2004		2003		$ Change			% Change

Property operating costs:
	Rental expenses		$	94.7	$	84.7	$	10.0			11.8	%
	Real estate taxes			73.8		67.3		6.5			9.7	%

		Total property operating costs	$	168.5	$	152.0	$	16.5			10.9	%

Property operating costs
	U.S. industrial:
		Same store	$	141.1	$	141.4	$	(0.3	)		(0.2	)%
		2003 acquisitions		11.0		3.6		7.4			205.6	%
		2004 acquisitions		6.9		—		6.9			—	%
		Development		1.5		3.6		(2.1	)		(58.3	)%
		Other industrial		1.8		1.8		—			—	%
	International industrial			4.9