AMB Renews Credit Facility - Analyst Blog

AMB Property Corp. (AMB), a leading real estate investment trust (REIT), has recently renewed its unsecured revolving credit facility to strengthen its liquidity. The new facility increases its borrowing capacity from $550 million to $600 million, and extends the maturity of the same to May 2014 (including a one-year extension option).

The four-year credit facility also contains an accordion feature which allows AMB to increase the credit amount up to $800 million. In addition, the revolving credit facility includes a multi-currency component, under which funds can be drawn in U.S. dollars, yen, euros and pound sterling.

AMB has historically maintained a conservative balance sheet and pursues a strategy of financial flexibility that enables it to offer a steady dividend to its shareholders. The new credit facility also optimizes the borrowing capabilities of the company in accordance with the current capital plan.

AMB has witnessed a growing customer interest in new build-to-suit development projects across the globe. In addition, leasing decisions that were earlier postponed due to volatility in the markets are gradually coming off the shelf.

However, the continued troubles in the residential sector are weighing on commercial property operations. This has significantly affected the top-line growth of industrial real estate companies like AMB and ProLogis (PLD). In order to tide over the storm, ProLogis is currently focusing on its core business of owning and managing industrial properties, and has considerably reduced its operating risks through continued lease-up of the development portfolio.

On the other hand, AMB provides industrial distribution warehouse space in some of the busiest distribution markets in the Americas, Europe and Asia that have held up relatively better during the recession. Consequently, AMB is comparatively better equipped than private developers and smaller public companies to weather the macroeconomic challenges.

We maintain our Neutral recommendation on AMB, which presently has a Zacks #3 Rank that translates into a short-term Hold recommendation.