AMB Expanding China Holdings

I must say that I was extremely pleased to see that AMB is growing its China portfolio. As a believer in the enormous potential value that China's real estate industry holds for experienced American developers and real estate asset managers, I trust that our country's top firms will derive enormous profits from China in the future. On Saturday, the Shanghai Daily reported that,

"AMB Property Corporation, a world leading developer and owner of industrial real estate, announced yesterday that it had acquired approximately 133,100 square meters of land in the Xiuzhou Logistics Park in Jiaxing of Zhejiang Province. The company said it planned to build a 74,612-square-meter distribution center on the site, its latest effort to expand its distribution network throughout the country...AMB announced earlier it planned to operate US$1 billion to US$1.5 billion worth of assets in China by 2010. It currently runs a portfolio of approximately 185,882 square meters of distribution spaces in Shanghai, Kunshan and Ningbo. ProLogis, a United States developer, owner and manager of distribution facilities, has also recently expanded its footprint in the city through land acquisition in the same logistics park." [1]

If you look at AMB's past, China is a natural fit for them because they tend to raise their money privately. That matches well with the value-based investing that long-term investor industrial real estate investors are looking for in China. As Moghadam says, AMB, " 'has never raised money on Wall Street beyond our IPO.' Since its initial public offering, AMB has gone in the opposite direction of most REITs by retiring more than 6 million shares of stock through buybacks." [2]

AMB raises most of its cash through private capital - institutions and other funds that look for a leading industrial real estate firm to offer predictable returns on prime industrial complexes. What's amazing about AMB because it is an industrial REIT, its fortunes are barely connected at all to those of the general residential real estate market. In fact, its 2007 earnings of $2.96 per share were nearly triple 2006 earnings and almost double 2005 earnings. [3] Hence, while the residential market was still booming in the US, AMB was going through a bit of a slump. Likewise, while the residential market began to tank, AMB's profits grew nicely.

AMB is also a company to take note of because its approach. This move into Jiaxing, along the Yangtze River Delta, should signal to investors that the company now has its feet wet in China after investing in Shanghai, Kunshan, and Ningbo. Therefore, it will feel comfortable going after properties that need greater managerial expertise to derive value out of them in order to really position its investments in China to derive significant profit margins.







[1] by Cao Qian 29 March 2008 Copyright 2008 Shanghai Daily Information Company
[2] Bergmann, Paul, Maverick Real Estate Investing, Copyright 2004 by Literary Productions
[3] Standard and Poors, March 30th, 2008