Thomas F. Marquis SVP, Managing Director, AMB Property ... f. , Managing Director, AMB Property China ... Case study – Li Fung ... Multi-Story Solutions

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

  • 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

  • 2008 AMB Property Corporation

    The Evolution of LOGISTICS in China

    15 Years Ago LOGISTICS

    hu chn

    Now LOGISTICS

    w lu

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

    Backdoor/Rearservices

    Material flow or circulation of goods

  • 2008 AMB Property Corporation

    Overview # 1 - A High Growth Industry

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

  • 2008 AMB Property Corporation

    Logistics still cost +/- 18% of Chinas 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

    Chinavs.USLogisticsCostasa%ofGDP

    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%ofGDPChinaLogistics%ofGDP

  • 2008 AMB Property Corporation

    Opportunity Consolidation

    Chinas 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 ChinaOceanShipping(Group)Company

    2 ChinaShipping(Group)Company

    3ChinaNationalForeignTradeTransportation(Group)Company(Sinotrans)

    4ChinaNationalMaterialStorageandTransportationCorporation(CMST)

    5 ChinaRailwayExpressCompanyLimited

    6 ChinaRailwayContainerTransportCo.Ltd.

    7 InternationalCargoTransportLimitedofChina

    8 GuangdongNanYue LogisticsCompanyLimited

    9 YuanChengGroupCompanyLimited

    10ShandongInternationalTransportationCorporationMaritime(Group)CompanyLimited

    Top 10 Logistics Provider in China

    13%

    87%

    Top 10 logisticscompanies

    Other logisticscompanies

  • 2008 AMB Property Corporation

    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 3PLs is only about 20% of the total logistics expenditure in China.- In the U.S. 3PLs 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 3PLs used to handle logistics?

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

    Source: China Association of warehouse and storage, 2007

  • 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

  • 2008 AMB Property Corporation

    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

  • 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

  • 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

  • 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%

    Interestfee 14.1%

    Warehousefee 8.7%

    Processingcost 5.9%

    Depreciation 1.8%

    Distributioncost 1.3%

    Packagingcost 1.2%

    Insurancecost 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

  • 2008 AMB Property Corporation 13

    Looking for an Effective Warehousing Strategy

    Infill Location

    International Building Specification

    Multi-Story Solutions

    Value-added Service(Kunshan case study)

  • 2008 AMB Property Corporation 14

    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:

  • 2008 AMB Property Corporation 15

    Case Study AMB Kunshan Bonded Logistics Center #2

  • 2008 AMB Property Corporation 16

    Case Study AMB Kunshan Bonded Logistics Center #3

    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

  • 2008 AMB Property Corporation 17

    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 (3PLs).

    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

  • 2008 AMB Property Corporation 18

    THANK YOU

  • 2008 AMB Property Corporation 19

    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 AMBs filings with the Securities and Exchange Commission, including AMBs annual report on Form 10-K for the year ended December 31, 2006.

    AgendaThe Evolution of LOGISTICS in ChinaOverview # 1 - A High Growth IndustryOverview #2 The High Costs of China LogisticsOpportunity ConsolidationOpportunity Usage of Logistics ProvidersThe Warehousing QuestionChoosing a Warehouse LocationLease vs Own- Logistics Companies Lease vs Own- Retailers/Manufactures China Logistics Cost ComponentsLooking for an Effective Warehousing StrategyCase Study AMB Kunshan Bonded Logistics Center #1Case Study AMB Kunshan Bonded Logistics Center #2Case Study AMB Kunshan Bonded Logistics Center #3AMB Brief