Thomas F. Marquis SVP, Managing Director, AMB Property ...industrycome.com/zhuanti/ibc/thomas f. marquis.pdf · SVP, Managing Director, AMB Property China ... Case study – Li &

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Thomas F. MarquisSVP, Managing Director, AMB Property ChinaIndustrial PropertiesDecember 9th

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© 2008 AMB Property Corporation

Agenda

A Logistics Overview

The Logistics Opportunity

A Strategy for Warehousing

An Argument for Lease v Own

Case Study

AMB Property Corporation Brief

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The Evolution of “LOGISTICS” in China

15 Years Ago LOGISTICS

后勤hòu chín

Now LOGISTICS

物流wù líu

Conclusion: As a whole, even though the word has seen re-defined, China’s logistics industry is still young, ill-equipped and widely inexperienced.

Backdoor/Rearservices

Material flow or circulation of goods

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Overview # 1 - A High Growth Industry

▪ Driven by manufacturing and retail strength, China’s logistics industry has enjoyed above 13.5% annual growth since 2002, so it has great potential.

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▪ Logistics still cost +/- 18% of China’s GDP

▪ much higher than developed nations such as the U.S. where costs are +/- 9% of GDP.

Source: CSCMP, (Council of Supply Chain Management Professionals), 19th Annual State of Logistics Report - July 2008Li & Fung Research Center, China's Logistics Industry, 2007-08, July 2008

Overview #2 – The High Costs of China Logistics

China vs. USLogistics Cost as a % of GDP

8.5 8.69.5 9.9 10.1

18.8 18.6 18.3 18.418.9

7.0

9.0

11.0

13.0

15.0

17.0

19.0

21.0

2003 2004 2005 2006 2007

% GDP

U.S. Logistics % of GDPChina Logistics % of GDP

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Opportunity – Consolidation

▪ China’s logistics industry is still highly fragmented- The top 10 logistics providers combined only own about 13% of the total Chinese Logistics market

Logistics Companies Market Share

Source: Li & Fung Research Center, China's Logistics Industry, 2007-08, July 2008

Rank Name

1 China Ocean Shipping (Group) Company

2 China Shipping (Group) Company

3China National Foreign Trade Transportation (Group) Company (Sinotrans)

4China National Material Storage and Transportation Corporation (CMST)

5 China Railway Express Company Limited

6 China Railway Container Transport Co. Ltd.

7 International Cargo Transport Limited of China

8 Guangdong Nan Yue Logistics Company Limited

9 Yuan Cheng Group Company Limited

10Shandong International Transportation Corporation Maritime (Group) Company Limited

Top 10 Logistics Provider in China

13%

87%

Top 10 logisticscompanies

Other logisticscompanies

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Opportunity – Usage of Logistics Providers

▪ Outsourcing of logistics services, including warehousing is still very immature in China- Local companies do not see the value in buying 3PL services- The share of 3PL’s is only about 20% of the total logistics expenditure in China.- In the U.S. 3PL’s have a 57% share and 80% in Japan.

57%

80%

22%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

China US Japan

How often are 3PL’s used to handle logistics?

Estimated increase rate: 16%-25% per year from 2002-2012 in China

Source: China Association of warehouse and storage, 2007

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The Warehousing Question

What are your key factors for choosing a warehouse location?Please raise your hand:

A. Labor costsB. Proximity to airportsC. Proximity to portsD. Proximity to inter modalE. Warehousing space costs F. Access to marketsG. Access to suppliersH. Transport infrastructureI . Availability of qualified labor

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Choosing a Warehouse Location

Key Factors for Choosing a Warehouse Location

SCORE

■ Transport infrastructure and access to markets should drivelocation decisions

Source: JLL/Supply Chain Council Research

3 3.2 3.4 3.6 3.8 4

Transport Infrastructure

Access to Markets

Access to Suppliers

Proximity to Ports

Proximity to Inter Modal

Warehousing Space Costs

Availability of Qualified Labour

Proximity to Airports

Labour Costs

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© 2008 AMB Property Corporation10

Lease vs Own- Logistics Companies

▪ Strong preference for leasing existing facilities rather than design and build or ownership- Eighty percent of logistics companies prefer to lease rather than own their warehousing facilities. (JLL/CSCC research)

China Warehousing: Leasing v Ownership Preferences

Source: JLL/Supply Chain Council

20%

80%

OwnershipLeasing

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Lease vs Own- Retailers/Manufactures

▪ Case study – Li & FungCritical Statistics of Li & Fung:

- 100 year old company- $8.7 billion gross revenues 2007- Apparel, toys, consumer items- 9,000 suppliers, 70 Offices, 40 Countries- Does not own a single factory

▪ Strengths of leasing-Minimize investment in entire chain (capital as well as inventory)-True “Lean” supply chain - focus on core business-Very flexible and nimble – especially when the market is not stable

▪ Leasing- a trend for retailers/ manufactures

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© 2008 AMB Property Corporation 12

China Logistics Cost Components

Source: Li & Fung Research Center, China's Logistics Industry, 2007-08, July 2008

China Logistics Cost Components 2007

Transportation 54%

Admin 13%

Interest fee 14.1%

Warehouse fee 8.7%

Processing cost 5.9%

Depreciation 1.8%

Distribution cost 1.3%

Packaging cost 1.2%

Insurance cost 0.3%

54%

13%

14.1%

8.7%

5.9%

1.2%1.8% 0.3%1.3%

TransportationAdminInterest feeWarehouse feeProcessing costDepreciationDistribution costPackaging costInsurance cost

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Looking for an Effective Warehousing Strategy

■ Infill Location

■ International Building Specification

■ Multi-Story Solutions

■ Value-added Service(Kunshan case study)

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Case Study – AMB Kunshan Bonded Logistics Center #1

• Location: Kunshan Export Processing Zone • Site Area: 60 mu• NRA: 20,150 sq.m• Completion: June 2008• Occupancy: 100%• Tenants:

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■ New Role in Customs Supervised Area-Bridge betweencustomers and government

- Joint Promotion with local government- Joint Presentation to end customer- Customs Policies application and consulting

■ Customs Function- VAT refund- Duty Free Storage- Bonded Testing & Maintenance Center- Trading and Exhibition- Monthly Customs Entry- Bonded Processing- Simple Processing & Packaging

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AMB Brief

AMB is a leading global industrial and logistic infrastructure provider committed to offering logistic facility solutions to manufacturers and third party logistic providers (3PL’s).

Geographically diversified with a presence in 15 countries, 49 markets and 34 offices throughout Americas, Europe and Asia

Platform totaling 158.4 million square feet with operating assets and development projects▪ $16.8 billion of assets under management(1)

▪ Current development pipeline more than $2.1 billion(1)

▪ 55% of development pipeline is outside of the U.S.

Serve approximately 2,800 customers.

(1) As of September 30, 2008

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THANK YOU

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This document contains forward-looking statements such as the size, completion and total investment in development projects which are made pursuant to the safe-harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. Forward-looking statements involve numerous risks and uncertainties and should not be relied upon as predictions of future events. The events or circumstances reflected in our forward-looking statements might not occur. We assume no obligation to update or supplement forward-looking statements. For further information on factors that could impact AMB and the statements contained herein, reference should be made to AMB’s filings with the Securities and Exchange Commission, including AMB’s annual report on Form 10-K for the year ended December 31, 2006.

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Thomas F. Marquis SVP, Managing Director, AMB Property ...industrycome.com/zhuanti/ibc/thomas f. marquis.pdf · SVP, Managing Director, AMB Property China ... Case study – Li &