AMB Property's New Brazil Fund - Analyst Blog

AMB Property Corp. (AMB), a leading real estate investment trust (REIT), has recently formed AMB Brazil Logistics Partners Fund I, L.P. to develop, acquire, own, operate and manage logistics properties in Brazil focusing primarily on Sao Paulo and Rio de Janeiro markets. The strategic move is aimed to capitalize on the economic growth of Brazil that has led to a spurt in demand for high-quality logistics facilities.

The overall equity commitment in the fund is approximately $422 million and includes a 50% investment from AMB. Initially, the fund acquired approximately 639,300 square feet of development properties (88% pre-leased) and 205 acres in Sao Paulo and Rio de Janeiro with an estimated build-out potential of 3.6 million square feet of space. The fund will participate in the development program in the region that was previously established by AMB with Cyrela Commercial Properties S.A., a Brazil-based holding company involved in the real estate sector.

AMB is a leading industrial real estate company, with a strong portfolio of warehouses and distribution facilities in some of the busiest distribution markets in the world. It operates as a vertically integrated company and enjoys large economies of scale through an extensive knowledge of domestic and international industrial real estate markets. AMB's properties are located in supply-constrained infill markets in close proximity to airports, seaports and ground transportation facilities, which enable a swift distribution of customers' products.

AMB has two lines of businesses – real estate operations, which involve the long-term ownership and operations of industrial properties, and private capital, which offers investors the opportunity to co-invest across geographies and risk spectrums. The company earns acquisition, development, and asset management fees in addition to priority distributions and promoted interest from the private capital business. Year-to-date, AMB have added over $630 million in new, third-party equity to its private capital vehicles in the U.S., Latin America and Europe.

We maintain our ‘Neutral' recommendation on AMB, which presently has a Zacks #3 Rank that translates into a short-term 'Hold' recommendation and indicates that the stock is expected to perform in line with the overall U.S. equity market for the next 1−3 months. We also have a ‘Neutral' rating and a Zacks #4 Rank (short-term ‘Sell') for ProLogis (PLD), a competitor of AMB.