AMB Stays Neutral - Analyst Blog

We maintain our ‘Neutral' recommendation on AMB Property Corp. (AMB), a real estate investment trust (REIT) that acquires, develops, operates and manages industrial real estate in North America, Asia and Europe.

AMB provides industrial distribution warehouse space in some of the busiest distribution markets of the world. The majority of the company's portfolio comprises high throughput distribution (HTD), which provides multiple options for quick movement and the distribution of goods to the customer. HTD properties are warehouses or other industrial properties that are located near airports, seaports, and ground transportation facilities, which enable rapid distribution of customers' products. These HTD centers are typically located in areas characterized by global ports in supply-constrained, in-fill markets, which enable the company to gain a significant pricing advantage.

AMB 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 has two lines of businesses – real estate operations, which involve the long-term ownership and operations of industrial properties, and private capital, which provide portfolio management and reporting services to JV partners. The company earns acquisition, development, and asset management fees in addition to priority distributions and promoted interest from the private capital business.

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, 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).

We presently have a Zacks #3 Rank for AMB, which 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.