AMB Renews Yen Credit Facility - Analyst Blog

AMB Property Corp. (AMB), a leading real estate investment trust (REIT), has recently renewed its yen-denominated unsecured revolving credit facility to strengthen its liquidity. The facility is scheduled to mature in March 2014 and has a one-year extension option.

The credit facility contains an accordion feature which allows AMB to add Singapore dollars and/or Hong Kong dollars to it, upon the agreement of the participating banks. The borrowing capacity of the revolving credit facility can also be increased from 45 billion yen to 65 billion yen by the addition of other banks or increasing the commitments of the existing banks.

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 well 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.